General Electric Credit Corp. v. James Talcott, Inc.

• Citation: 271 F. Supp. 699
• Decision Date: 23 February 1966
• Docket Number: No. 64 Civ. 3680.,64 Civ. 3680.
• Parties: GENERAL ELECTRIC CREDIT CORPORATION, Plaintiff, v. JAMES TALCOTT, INC., and Franklin National Bank, Defendants.
• Court: U.S. District Court — Southern District of New York

271 F. Supp. 699

GENERAL ELECTRIC CREDIT CORPORATION, Plaintiff, v. JAMES TALCOTT, INC., and Franklin National Bank, Defendants.

No. 64 Civ. 3680.

United States District Court S. D. New York.

February 23, 1966.

Bernstein, Seawell & Kaplan, New York City, for plaintiff.

Hahan, Hessen, Margolis & Ryan, New York City, for defendant James Talcott, Inc. Kaye, Scholer, Fierman, Hays & Handler, New York City, for defendant Franklin Nat. Bank.

OPINION

TENNEY, District Judge.

Plaintiff General Electric Credit Corporation (hereinafter sometimes referred to as "Credit") has filed a complaint against defendants James Talcott, Inc. (hereinafter sometimes referred to as "Talcott") and the Franklin National Bank (hereinafter sometimes referred to as the "Bank") for alleged violations of Section 12(2) of the Securities Act, 15 U.S.C. § 77l(2) and Section 18(a) of the Exchange Act, 15 U.S.C. § 78r(a).¹

Credit alleges that Talcott and the Bank controlled certain corporations and that Talcott and the Bank knowingly made misrepresentations in reports filed with the Securities and Exchange Commission and by other means concerning the financial condition of said controlled corporations and failed to disclose that these corporations were insolvent. It is further alleged that relying upon these representations, plaintiff Credit purchased certain securities of the controlled corporation and now seeks damages allegedly sustained as a result of the said misrepresentations of defendant Talcott and the Bank.

The Bank moves herein, pursuant to Rule 12(b) (3) of the Federal Rules of Civil Procedure, to sever and dismiss the action against it on the ground that, as a national bank organized under the National Bank Act, it may be sued only in the judicial district in which it was established, as provided in Section 94 of Title 12 of the United States Code. The Bank alleges that its charter recites its establishment in the Eastern District of New York, and, therefore, that venue in this Court is improper. The Bank maintains its executive offices and three branch offices in the Southern District and the offers and sales in this action allegedly took place in this district. Plaintiff Credit and defendant Talcott both have their principal offices in the Southern District.

Plaintiff opposes the instant motion on the ground that the venue provisions of the Securities Acts, Section 22(a) of the Securities Act, 15 U.S.C. § 77v(a) and Section 27 of the Exchange Act, 15 U.S.C. § 78aa, are controlling in actions brought under these Acts. Subsequent to oral argument the Securities and Exchange Commission (hereinafter referred to as "Commission") and the United States of America, on behalf of the Comptroller of the Currency (hereinafter referred to as "Comptroller"), filed briefs as amici curiae with permission of the Court and limited solely to the question of venue. The Commission and the Comptroller take contrary positions— the former contending that the venue provisions of the Securities Acts should control and the motion be denied, and the latter contending that the venue provisions of the National Bank Act are controlling and that the motion should be granted. It does not appear that there are any cases involving a direct conflict between the venue provision of the National Bank Act and that of another special federal venue statute. Accordingly, this case is one of first impression.²

The statutes involved read as follows:

Section 94 of Title 12 of the United States Code, the pertinent provision of the Bank Act, provides:

Actions and proceedings against any association under this chapter may be had in any district or Territorial court of the United States held within the district in which such association may be established, or in any state, county, or municipal court in the county or city in which said association is located having jurisdiction in similar cases.

Section 77v(a) of Title 15 of the United States Code, the pertinent provision of the Securities Act, provides:

The district courts of the United States, and the United States courts of any Territory, shall have jurisdiction of offenses and violations under this subchapter and under the rules and regulations promulgated by the Commission in respect thereto, and, concurrent with State and Territorial courts, of all suits in equity and actions at law brought to enforce any liability or duty created by this subchapter. Any such suit or action may be brought in the district wherein the defendant is found or is an inhabitant or transacts business, or in the district where the offer or sale took place, if the defendant participated therein, and process in such cases may be served in any other district of which the defendant is an inhabitant or wherever the defendant may be found. Judgments and decrees so rendered shall be subject to review as provided in sections 225 and 347 of Title 28. No case arising under this subchapter and brought in any State court of competent jurisdiction shall be removed to any court of the United States. No costs shall be assessed for or against the Commission in any proceeding under the subchapter brought by or against it in the Supreme Court or such other courts.

Section 78aa of Title 15, the pertinent provision of the Exchange Act, provides:

The district courts of the United States, and the United States courts of any Territory or other place subject to the jurisdiction of the United States shall have exclusive jurisdiction of violations of this chapter or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by this chapter or the rules and regulations thereunder. Any criminal proceeding may be brought in the district wherein any act or transaction constituting the violation occurred. Any suit or action to enforce any liability or duty created by this chapter or rules and regulations thereunder, or to enjoin any violation of such chapter or rules and regulations, may be brought in any such district or in the district wherein the defendant is found or is an inhabitant or transacts business, and process in such cases may be served in any other district of which the defendant is an inhabitant or wherever the defendant may be found. Judgments and decrees so rendered shall be subject to review as provided in sections 225 and 347 of Title 28. No costs shall be assessed for or against the Commission in any proceeding under this chapter brought by or against it in the Supreme Court or such other courts.

It would appear settled, at least insofar as the nisi prius court is concerned that a national bank is "established", within the meaning of Section 94 of Title 12, only in the federal district encompassing the location specified in its charter³—Leonardi v. Chase Nat. Bank, 81 F.2d 19, 22 (2d Cir.), cert. denied, 298 U.S. 677, 56 S.Ct. 941, 80 L.Ed. 1398 (1936) (as between the Eastern and Southern Districts of New York); Buffum v. Chase Nat. Bank, 192 F.2d 58 (7th Cir. 1951), cert. denied, 342 U.S. 944, 72 S.Ct. 558, 96 L.Ed. 702 (1952) (as between the Southern District of New York and the Northern District of Illinois); International Refugee Org. v. Bank of America Nat. Trust & Sav. Ass'n, 86 F.Supp. 884, 886 (S.D.N.Y. 1949) (as between the North District of California Southern Division, and the Southern District of New York.) Nor does that fact that the national bank has branches in another district affect this rule.⁴ Accordingly, unless Congress has, by subsequent legislation, enlarged or altered the restrictive provisions of Section 94, defendant Franklin's position is well taken.

In the first place, it should be noted that Section 94 has been held not to have been superseded by the general venue statute, Section 1391 of Title 28 of the United States Code. Buffum v. Chase Nat. Bank (supra, 192 F.2d at 61); International Refugee Org. v. Bank of America Nat. Trust & Sav. Ass'n (supra, 86 F.Supp. at 886). However, Section 1391 is clearly a general venue statute whereas the venue provision of the National Bank Act (12 U.S.C. § 94) is, at least in one respect, a special venue statute since it deals only with corporations of a particular class, i. e., national banks.⁵

Accordingly, the question presented is whether the special venue provisions of the Securities and Exchange Acts (see SEC v. Briggs, 234 F.Supp. 618 (N.D.Ohio 1964); SEC v. Wimer, 75 F.Supp. 955 (W.D.Pa.1948)) expand and accordingly repeal in part the venue provisions of the National Bank Act. As stated in SEC v. Wimer (supra 75 F. Supp. at 961)—"Special Venue Statutes are those statutes which Congress has legislated with reference to a particular kind of action, and has decreed that certain actions might be brought in forums, in some of which the action could not be brought, but for such legislation." (Emphasis added.)⁶ Thus it was held in the last two cases cited above that the special venue provisions of the Securities and Exchange Acts are not limited by the general venue statute or by the doctrine of "forum non conveniens."

It cannot be seriously disputed that plaintiff and the Commission are arguing for a repeal by implication of Section 94. Although not so worded, Section 94, by judicial construction over the years, forbids suit in any district other than where the national bank is "established". Plaintiff would place such venue "in the district wherein the defendant is found or is an inhabitant or transacts business, or in the district where the offer or sale took place, if the defendant participated therein," (Section 77v(a)) or "in the district wherein any act or transaction constituting the violation occurred." (Section 78aa)

In determining whether there has been a repeal by implication, the Court is guided by certain rules of long standing.

(1) "It is a cardinal principle of construction that repeals by implication are not favored" (United States v. Borden Co., 308 U.S. 188, 198, 60 S. Ct. 182, 188, ...