Synovus Financial Corp. v. Board of Governors of Federal Reserve System

Decision Date27 March 1992
Docket NumberNo. 89-1394,89-1394
Citation952 F.2d 426
Parties, 60 USLW 2421 SYNOVUS FINANCIAL CORPORATION, Petitioner, v. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Respondent, SouthTrust Corporation, Intervenor.
CourtU.S. Court of Appeals — District of Columbia Circuit

Petition for Review of an Order of the Federal Reserve system.

Griffin B. Bell and James D. Miller, with whom Deborah J. Andrews and Marcus B. Calhoun, Jr., were on the brief, for petitioner.

Richard M. Ashton, Associate Gen. Counsel, Federal Reserve System, with whom Stuart M. Gerson, Asst. Atty. Gen., U.S. Dept. of Justice, James V. Mattingly, Jr., Gen. Counsel, and Katherine H. Wheatley, Senior Atty., Federal Reserve System, were on the brief, for respondent.

Hobart A. McWhorter, Jr., with whom J. David Dresher, Robert C. Eager, Paul Blankenstein, and Patricia T. Mandt, and Theodore J. Boutrous, Jr., were on the brief, for intervenor.

Amelia Waller Baker, Staff Atty., was on the brief for amicus curiae, State of Ga., urging reversal.

Before: SILBERMAN, HENDERSON, and RANDOLPH, Circuit Judges.

Opinion for the court filed by Circuit Judge KAREN LeCRAFT HENDERSOn.

Dissenting opinion filed by Circuit Judge SILBERMAN.


SouthTrust Corporation (SouthTrust), a multi-state bank holding company based in Alabama, relocated the main office of a subsidiary bank from Alabama to Georgia. Before doing so, SouthTrust obtained approval from both the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board (Board). Synovus Financial Corporation (Synovus), a Georgia bank holding company, appeals the Board's approval and claims that the Board misinterpreted Georgia's banking laws. SouthTrust has intervened, nominally in support of the Board, to challenge the Board's authority over interstate relocations. We agree with SouthTrust that the Board is without such authority; therefore, we vacate its decision without reaching the issues Synovus raises.


This case began when SouthTrust attempted to move the main office of one of its subsidiary banks across a river, to a location less than ten miles away. That bank, SouthTrust National Bank (STNB), was located in Phenix City, Alabama, and sought to move to Columbus, Georgia. The two cities, separated only by the Chattahoochee River, form a single metropolitan area as well as a single banking community. See Federal Reserve Board Order Approving Acquisition of a Bank and Establishment of a De Novo Bank (May 22, 1989), Joint Appendix (JA) 1, 3 n. 13; Decision of the Comptroller of the Currency on the Application of SouthTrust National Bank, Phenix City, Alabama, to Relocate its Main Office to Columbus, Georgia (Feb. 21, 1989), JA 125. In conjunction with the relocation, STNB planned to retain its Alabama branch offices and to establish a new branch office in Phenix City, whence its main office was moving.

SouthTrust's first step was to file an application with the OCC. JA 6. The application initially met with protest from the Department of Banking and Finance of the State of Georgia (Georgia), which maintained that the relocation contravened Georgia law. In response to this protest, SouthTrust withdrew its proposals to retain STNB's Alabama branches as STNB branches and to establish a new branch in Phenix City. In turn, Georgia withdrew its protest. See OCC Decision, JA 125. The OCC then granted SouthTrust's application to relocate STNB in Georgia as a separate bank while SouthTrust continued to operate STNB's former Alabama branches. In reaching its decision, the OCC explained that section 30(b) of the McFadden Act, 12 U.S.C. § 30(b), expressly governs main office relocations and that, by amendment, section 30 allows relocations within a thirty-mile radius whether or not the relocation crosses state lines. 1 JA 127-30.

At the same time SouthTrust sought the OCC's approval, the Board demanded that SouthTrust seek its approval as well. The Board asserted that the Douglas Amendment to section 3 of the Bank Holding Company Act (BHC Act), 12 U.S.C. § 1842(d)--which requires the Board to disapprove the "acquisition" by a bank holding company or its subsidiary of an out-of-state bank when state law does not allow it--also requires, by implication, the Board to prohibit the "relocation" of a bank across state lines if state law does not allow it. 2 See 12 C.F.R. § 223.144. SouthTrust initially resisted the Board, claiming that the Douglas Amendment does not apply to relocations. JA 42 (letter dated Aug. 18, 1987). But when the Board informed SouthTrust that it considered SouthTrust's failure to file an application a violation of the Bank Holding Company Act, JA 45 (letter dated Sept. 20, 1988), SouthTrust filed an application under protest, JA 46 (protest letter and application, dated Nov. 3 and 4, 1988, respectively). Several months later, SouthTrust submitted a second application to the Board, this time requesting permission to acquire the SouthTrust Bank of Russell County, a de novo bank located in Phenix City. JA 153 (application dated Mar. 3, 1989). This national bank was intended to replace STNB in Phenix City and was to be kept entirely separate from STNB in Georgia. See Board Order, JA 3 n. 11.

After the Board asserted that STNB's "relocation" was an "acquisition" within the meaning of the Douglas Amendment, Georgia followed suit and requested SouthTrust to file an application with Georgia under its banking law regulating "acquisitions." JA 44 (letter dated Aug. 26, 1987); Addendum D to SouthTrust Brief, A-26 (letter dated Sept. 20, 1988). When the Board formally requested Georgia to explain the meaning of section 7-1-621(d)(2) of the Georgia Code which controls the "acquisition" of a Georgia bank by an out-of-state bank holding company, JA 58 (letter dated Nov. 16, 1988), however, Georgia conceded that "Georgia law is silent on the issue of the interstate relocation of a banking subsidiary of a bank holding company," JA 70 (letter dated Dec. 6, 1988). Further, Georgia explained that section 7-1-621(d)(2) permits an out-of-state bank to "acquire" a Georgia bank only if (i) "the out-of-state bank holding company is located in another state within the 'Southern Region' "; (ii) the out-of-state bank's home state "provides reciprocal privileges to bank holding companies located in Georgia"; and (iii) "the Georgia bank has been in existence and continuously operated as a bank for a period of five (5) years or more." JA 70 (citing Ga.Code Ann. § 7-1-621). 3 Georgia then concluded: "[T]he fact that Georgia law does not expressly authorize the proposed interstate relocation raises serious questions about whether the transaction violates Georgia policy and federal law." JA 71.

Contrary to Georgia's position, the Board, in its final order, concluded that "the Georgia statute permitting regional bank holding companies to 'acquire ... a Georgia bank' would encompass the relocation of [STNB], as proposed here." JA 2. The Board then determined that the "acquisition" complied with Georgia law which in relevant part provides:

(d) ... no Georgia bank holding company or Southern Region bank holding company may:

* * * * * *

(2) Directly or indirectly acquire a Georgia bank unless such bank has been in existence for five years or more prior to the date of application to the commissioner for approval of such acquisition.

Ga.Code Ann. § 7-1-621. According to the Board:

[STNB] does not currently qualify as "a Georgia bank" under Georgia law because [STNB] operates in Alabama. Under Georgia law, a Georgia bank is defined as a bank having offices only in Georgia. The proposed relocation, however, is an action that would cause [STNB] to maintain offices only in Georgia. As a result of that action, SouthTrust would acquire a Georgia bank within the meaning of the Georgia regional banking statute. Accordingly, the Board believes that Georgia law specifically authorizes this method of acquiring a Georgia bank for purposes of the Douglas Amendment.

JA 2 (footnotes omitted). Thus, in sum, the Board concluded that Georgia law expressly authorizes relocations to Georgia and that Georgia law would permit the relocation in this case. The Board also summarily rejected SouthTrust's contention that the Douglas Amendment does not grant the Board authority over relocations. JA 1-2.

In concluding that Georgia law permits STNB's relocation, the Board specifically conditioned its approval on STNB's receipt of "any necessary approvals from the Georgia Commissioner of Banking and Finance under the Georgia interstate banking statute." JA 3. Georgia then alerted SouthTrust to the conditional nature of the Board's order and informed it that Georgia had not yet issued any approval. JA 212 (letter dated Jun. 2, 1989). Georgia further advised that "[s]uch action would now appear necessary ... in light of the [Board's] characterization of the proposal as an 'acquisition.' " Id. SouthTrust, however, failed to submit an application to Georgia and began preparations for the relocation of STNB to Georgia.

Georgia continued to insist that the Board's decision was erroneous. In August 1989, Georgia informed SouthTrust:

We continue to believe that the silence of Georgia law on the matter of interstate relocations effectively prohibits such relocations by a bank holding company subsidiary as a matter of federal law.

Exhibit A to Synovus Brief at 2a (letter dated Aug. 3, 1989). Georgia concluded that the Board, in determining whether the requirements of the Douglas Amendment had been satisfied, wrongly interpreted Georgia law. Id. Georgia then addressed a letter to the Board, reaffirming this view. Exhibit B to Synovus Brief (letter dated Sept. 21, 1989). In particular, Georgia emphasized that SouthTrust did not "acquire" a Georgia bank as allowed by...

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