Independent Bankers Ass'n of New York State, Inc. v. Marine Midland Bank, N.A.
| Decision Date | 27 February 1985 |
| Docket Number | Nos. 189,D,222,s. 189 |
| Citation | 757 F.2d 453 |
| Parties | , 1 Fed.R.Serv.3d 1045 INDEPENDENT BANKERS ASSOCIATION OF NEW YORK STATE, INC., the Canandaigua National Bank and Trust Company, Plaintiffs-Appellees, Cross-Appellants, v. MARINE MIDLAND BANK, N.A., Wegmans Food Markets, Inc., Defendants, Marine Midland Bank, N.A., Defendant-Appellant, Wegmans Food Markets, Inc., Defendant-Cross-Appellee. ocket 84-7424, 84-7448. |
| Court | U.S. Court of Appeals — Second Circuit |
Paul K. Stecker, Buffalo, N.Y. (Phillips, Lytle, Hitchcock, Blaine & Huber, Allen R. Bivens, Buffalo, N.Y., of counsel), for defendant-appellant Marine Midland Bank, N.A.
Michael R. Wolford, Rochester, N.Y. (Nixon, Hargrave, Devans & Doyle, John R. Tyler, Jr., Paul S. Speranza, Jr., Rochester, N.Y., of counsel), for defendant-cross-appellee, Wegmans Food Markets, Inc.
Kevin S. Cooman, Rochester, N.Y. (Greisberger, Zicari, McConville, Cooman & Morin, P.C., Richard A. Dollinger, Rochester, N.Y., of counsel), for plaintiffs-appellees and cross-appellants, Independent Bankers Ass'n of New York State, Inc. and The Canandaigua Nat. Bank and Trust Co.
William Hughes Mulligan, Vaughn C. Williams, Lawrence J. Block, Skadden, Arps, Slate, Meagher & Flom, New York City, of counsel, for Mastercard Intern., Inc., amicus curiae.
Richard K. Willard, Acting Asst. Atty. Gen., Civ. Div., U.S. Dept. of Justice, Washington, D.C., L. Robert Griffin, Ronald R. Glancz, Eugene M. Katz, Office of Comptroller of the Currency, Attys., Washington, D.C., Richard M. Ashton, Carl V. Howard, Attys., Bd. of Governors of the Federal Reserve System, Washington, D.C., Robert N. Davenport, Madeline J. Rivlin, Attys., Federal Reserve Bank of New York, New York City, of counsel, for the Comptroller of the Currency and Bd. of Governors of the Federal Reserve System, amici curiae.
David Crump, Professor of Law, South Texas College of Law, Houston, Tex., Roger Boyle, Robert Steven Anderson, Boyle, Vogeler & Haimes, New York City, of counsel, for The Legal Foundation of America, amicus curiae.
Paul A. Allen, Vice President & General Counsel, Plus System, Inc., Denver, Colo., Donald I. Baker, Sutherland, Asbill & Brennan, Washington, D.C., of counsel, for Plus System, Inc., amicus curiae.
Roland E. Brandel, Steven S. Rosenthal, Philip D. Bartz, Morrison & Foerster, Washington, D.C., Drew V. Tidwell, Marcia Sullivan, Consumer Bankers Ass'n, Arlington, Va., of counsel, for Consumer Bankers Ass'n and The California Bankers Clearing House Ass'n, amici curiae.
Stanton R. Koppel, Visa U.S.A. Inc., San Francisco, Cal., John D. Hawke, Jr., James R. McAlee, Mark J. Spooner, Mark P. Gergen, Arnold & Porter, Washington, D.C., of counsel, for Visa U.S.A. Inc., amicus curiae.
Noel H. Nation, P.A., Maura J. Abeln, Marianne Hurd, Steel, Hector & Davis, Miami, Fla., of counsel, for Florida Interchange Group, Inc., Georgia Interchange Network, Inc., Mid Atlantic Exchange, Inc., Money Station, Inc., EFT Group, Inc., amici curiae.
Henry M. Polmer, Lucinda O. McConathy, G. Michael Epperson, Bell, Boyd & Lloyd, Washington, D.C., of counsel, for Electronic Funds Transfer Ass'n, amicus curiae.
Before FEINBERG, Chief Judge and NEWMAN and PRATT, Circuit Judges.
Defendant Marine Midland Bank, N.A. (Marine) appeals from a judgment of the United States District Court for the Western District of New York, Michael A. Telesca, J., enjoining it from using an automated teller machine (ATM) owned and operated by Wegmans Food Markets Inc. (Wegmans) and located in Wegmans' store in Canandaigua, New York. 583 F.Supp. 1042 (W.D.N.Y.1984). The judgment was entered on a motion for summary judgment in a suit brought by plaintiffs Independent Bankers Association of New York State, Inc. (Bankers Association) and the Canandaigua National Bank and Trust Company. The district court held that Marine's use of the ATM constituted unauthorized branch banking under applicable federal law. Plaintiffs cross-appeal from the court's dismissal of their pendent claim; the court held that defendant Wegmans' ownership and operation of the ATM did not violate state banking law. For reasons stated below, we reverse on the federal claim and dismiss the pendent state claim.
Marine is a federally chartered bank. Wegmans owns a chain of grocery stores, including 31 at which it has installed an ATM. Wegmans made these electronic banking services available in order to attract customers and support a high-volume grocery business. In January 1983, Marine entered into an agreement with Wegmans that permitted Marine depositors to use the ATM located in the Wegmans Canandaigua store. Canandaigua has a population of approximately 11,000, and is the principal office of plaintiff Canandaigua National Bank.
The ATM in the Canandaigua store has Wegmans' logo on it, is under Wegmans' control and is a shared ATM, that is, it may be used by many financial institutions. Marine's account-holders may use the ATM to make deposits and cash withdrawals, obtain cash advances against credit cards, transfer funds between accounts, pay bills and obtain account balance information.
Wegmans is obligated under the agreement with Marine to load the machine with cash, provide deposit envelopes and other customer forms, issue transaction receipts, unload and deliver deposit containers and provide security, insurance and maintenance services.
To use the machine, a customer inserts an encoded plastic card and enters a personal identification number on the machine's keyboard. The customer then enters the desired transaction and amount. Deposits are placed in envelopes marked "Wegmans Electronic Teller Deposit/Payment Envelope" and dropped through a slot in the machine into a secured deposit box maintained by Wegmans. The customer receives a receipt marked "Electronic Teller Wegmans," which reflects the amount indicated on the keyboard. Account withdrawals must first be approved electronically, and cash is then disbursed by the machine.
Marine, Wegmans and several financial institutions are members of a shared ATM network known as HarMoney. HarMoney's members share the use of central computer processing facilities--a "switch"--owned by Marine. Customers of the member institutions can use other members' ATM's to transact business with their own institutions. Wegmans also belongs to another shared ATM network, Metroteller, which has 45 financial institution members in New York and other states. The crediting and debiting of the accounts of customers who use the Wegmans machine occurs through a series of transactions involving the relevant switch.
Plaintiff Bankers Association is a non-profit association of over 90 member banks, including plaintiff Canandaigua National Bank. Plaintiffs brought suit in the Western District in September 1983, alleging that Marine's use of Wegmans' ATM constituted branch banking under the McFadden Act, 12 U.S.C. Sec. 36(f), and thus violated section 36(c) of the Act, which incorporates by reference the restriction on branch banking contained in New York Banking Law Sec. 105. This section prohibits a bank from opening a branch in any community with a population of 50,000 or less that is the principal office of another bank (home office protection). Plaintiffs included a second, pendent state claim against Wegmans, alleging that it was conducting a banking business, although not authorized to do so, in violation of New York Banking Law Sec. 131.1. Plaintiffs sought declaratory and injunctive relief.
Wegmans moved to dismiss the pendent state claim for lack of subject matter jurisdiction. In an opinion reported at 575 F.Supp. 1425 (W.D.N.Y.1983), the district court denied the motion, holding that the facts alleged were sufficient to confer pendent jurisdiction. Plaintiffs and defendant Marine each moved for summary judgment; in April 1984, the district court granted plaintiffs' motion on the federal claim. The court permanently enjoined Marine from utilizing the Wegmans ATM in Canandaigua for Marine bank account and credit card account transactions; the court held that such use constituted unlawful branch banking under the applicable provisions of the McFadden Act. On the pendent state claim, the court granted summary judgment for Wegmans on the ground that Marine was doing the banking, and Wegmans, at most, was "acting as an agent for a bank, and not as a banking institution itself." 583 F.Supp. at 1049. This appeal by Marine and cross-appeal by plaintiffs followed.
Analysis of the issues before us requires a description of the statutory scheme. The McFadden Act authorizes national banking associations to "establish and operate new branches" to the extent permissible for state banks under state law. 12 U.S.C. Sec. 36(c). The term "branch" is defined by the Act
to include any branch bank, branch office, branch agency, additional office, or any branch place of business ... at which deposits are received, or checks paid, or money lent.
12 U.S.C. Sec. 36(f). 1 Such branches may be established "with the approval of the Comptroller of the Currency ... at any point within the State in which said [banking] association is situated," 12 U.S.C. Sec. 36(c)(2). The relevant state law incorporated by reference in this case permits banks to "open and occupy one or more branch offices" within the state, but, as already indicated, the state law also provides for home office protection. New York Banking Law Sec. 105. 2 It is this restriction that Marine violated, according to the district court, by establishing its "branch" in Canandaigua through use of the Wegmans ATM.
The McFadden Act was an amendment to the National Bank Act, which was enacted in 1864 and governs the establishment and operation of federally chartered banks. The McFadden Act was passed in 1927, and amended in 1933, as part of a Congressional effort to strengthen national banks and enable them to...
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