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Idaho v. Clarke

filed: June 4, 1993.

STATE OF IDAHO, DEPARTMENT OF FINANCE, PLAINTIFF-APPELLANT,
v.
ROBERT C. CLARKE, IN HIS CAPACITY AS THE COMPTROLLER OF THE CURRENCY; U.S. BANCORP, AN OREGON CORPORATION; FIRST NATIONAL BANK, AKA U.S. BANK OF IDAHO, N.A., DEFENDANTS-APPELLEES. STATE OF IDAHO, DEPARTMENT OF FINANCE, PETITIONER, V. FEDERAL RESERVE SYSTEM, RESPONDENT. U.S. BANCORP, INTERVENOR.



Petition for Review of a Federal Reserve Board Determination. Appeal from the United States District Court for the District of Idaho. D.C. No. CV-92-80-HLR. Harold L. Ryan, District Judge, Presiding.

Before: Thomas Tang, Harry Pregerson, and Arthur L. Alarcon, Circuit Judges. Opinion by Judge Tang.

Author: Tang

TANG, Circuit Judge:

In these cases, the State of Idaho seeks review of two related decisions, one judicial, one administrative. Both appeals concern the efforts of a bank holding company to relocate one of its existing banking subsidiaries from one state to another. The effect of the two decisions which we review is to permit the relocation. We uphold the rulings of both the district court and the Board of Governors of the Federal Reserve System ("Board").

I. FACTS

U.S. Bancorp is an Oregon-based bank holding company with banking subsidiaries in several western states. Over Idaho's objections, U.S. Bancorp moved one of its Washington state subsidiaries, First National Bank in Spokane ("First National"), to Idaho, where the holding company previously lacked a banking subsidiary. Before relocating First National, two applications were submitted to the federal government, one to the Comptroller of the Currency, and one to the Board. A description of each application follows.

A. Comptroller Application

To relocate, First National applied to the Comptroller pursuant to 12 U.S.C. § 30. This statute required First National, as a national banking association, to obtain the Comptroller's approval before moving its main office. Section 30 authorizes the Comptroller to permit the relocation of a banking association's main office so long as the move is no greater than 30 miles. On its face, the statute permits relocations without regard to state lines.*fn1

There is no dispute here that First National's move from Spokane, Washington to Couer d'Alene, Idaho was within the 30 mile limit permitted by section 30. Following submission of First National's application, the Comptroller approved the interstate relocation.

Idaho challenged this decision by suing the Comptroller, U.S. Bancorp, and First National in federal district court. In a published decision, the district court dismissed Idaho's case for lack of subject matter jurisdiction. Idaho v. Clarke, 786 F. Supp. 885, 890 (D. Idaho 1992). Relying on Whitney Nat'l Bank v. Bank of New Orleans & Trust Co., 379 U.S. 411, 13 L. Ed. 2d 386, 85 S. Ct. 551 (1965), the district court held that Idaho could not attack the Comptroller's decision because the second application submitted to the federal government raised similar issues and judicial review of a decision on the latter application was available in the court of appeals. Clarke, 786 F. Supp. at 888-90. Idaho timely appeals the dismissal of its action against the Comptroller.

B. Board Application

The second application to relocate First National was submitted to the Board by the bank's parent company, U.S. Bancorp. As a bank holding company, many of U.S. Bancorp's activities are regulated by the Bank Holding Company Act of 1956, as amended, 12 U.S.C. §§ 1841-1850 ("BHCA" or "Act"). Pursuant to this statute, the Board promulgated in 1985 a regulation, 12 C.F.R. § 225.144, rescinded 57 FR 9973 (1992), requiring that bank holding companies obtain Board approval to relocate banking subsidiaries into a state other than one in which the parent company is located. U.S. Bancorp filed an application pursuant to this regulation because, as an Oregon bank holding company, it sought to relocate the First National subsidiary into Idaho.*fn2

Idaho filed an objection to U.S. Bancorp's application and the Board deferred action pending decision in a case before the United States Court of Appeals for the District of Columbia Circuit. That court eventually rendered its opinion in Synovus Fin. Corp. v. Board of Governors, 293 U.S. App. D.C. 70, 952 F.2d 426 (D.C. Cir. 1991), which substantially curtailed the Board's jurisdiction over interstate subsidiary relocations such as First National's. Following the decision in Synovus, the Board rescinded the regulation pursuant to which U.S. Bancorp had submitted its application. 57 FR 9973 (1992). The Board then notified U.S. Bancorp that its application was unnecessary.

To contest the Board's decision, Idaho properly filed a petition for review with this court. See 12 U.S.C. § 1848. In essence, the State argues that the Synovus decision is incorrect. U.S. Bancorp has intervened in the proceeding. Meanwhile, First National has relocated and initiated operations as U.S. Bank of Idaho.

These appeals of judicial and administrative decisions have been argued together and we now decide them in one opinion because they are interrelated. We turn our attention first to the Board's decision.

II. REVIEW OF BOARD DECISION

A. Standard of Review

Upon review of Board decisions, we may "require the Board to take such action with regard to the matter" as we deem proper. 12 U.S.C. § 1848. Normally, however, we "must accord great weight" to the Board's interpretations of the BHCA, although "there is no requirement that the courts must defer to an administrative interpretation when there are compelling indications that the administrative interpretation is wrong." Patagonia Corp. v. Board of Governors, 517 F.2d 803, 812 (9th Cir. 1975). Regarding factual matters, the Board's findings, "if supported by substantial evidence, shall be conclusive." 12 U.S.C. § 1848.

Where an agency takes a position that is inconsistent with its previous views, the courts may owe less deference to the agency's position. See, e.g., Pauley v. Bethenergy Mines, Inc., 115 L. Ed. 2d 604, 111 S. Ct. 2524, 2535 (1991) ("the case for judicial deference is less compelling with respect to agency positions that are inconsistent with previously held views"); Seldovia Native Ass'n v. Lujan, 904 F.2d 1335, 1345 (9th Cir. 1990). Nevertheless, if the agency is able to show both that its new position is reasonable and that a reasonable rationale existed for the change, its new position remains entitled to some weight. Id. at 1345-46.

By rescinding its relocation regulation, the Board has effectively changed its interpretation of the BHCA. A change in agency interpretation of a statute made to conform with a judicial decision can provide a reasonable rationale for the change. See Flagstaff Medical Ctr. v. Sullivan, 962 F.2d 879, 886-87 (9th Cir. 1992). In changing its position regarding the need for approval of interstate subsidiary relocations, the Board pointed to the D.C. Circuit's Synovus decision. 57 FR 9973 (1992), rescinding 12 C.F.R. § 225.144. Relying on Synovus, the Board decided that it would not require "an application for Board approval under the [BHCA] for the relocation of a national bank owned by a bank holding company except in situations in which the Board has found an evasion of the [BHCA]." 57 FR 9973 (1992). Further, in permitting U.S. Bancorp to withdraw its application, the Board stated:

After review of the Board's policy statement and the court's decision in Synovus, the Board has determined to rescind its policy statement and not to require the filing of an application for Board approval under the [BHCA] for relocations of national banks except in situations in which the Board has found an evasion of the [BHCA]. Accordingly, the Board has determined that no application is required in this case.

In Synovus, the D.C. Circuit limited Board jurisdiction over interstate subsidiary relocations. The court acknowledged the Board's authority to prevent statutory "evasions," see 952 F.2d at 437, but generally concluded that "the Douglas Amendment does not grant the Board authority over relocations," id. at 434. The decision thus provides a reasonable ground not only for the Board's change in position but also for the new position itself such that the agency's current statutory interpretation is entitled to judicial deference. Accordingly, we must abide by the Board's decision dismissing U.S. Bancorp's application unless there are compelling indications that the Synovus decision is wrong or that the Board applied its new interpretation of the BHCA in a manner contrary to law. See Patagonia, 517 F.2d at 812; cf. United States v. Gwaltney, 790 F.2d 1378, 1388 n.4 (9th Cir. 1986) (intercircuit conflicts are to be avoided), cert. denied, 479 U.S. 1104, 94 L. Ed. 2d 187, 107 S. Ct. 1337 (1987).*fn3

B. Relevant BHCA Provisions

Section 3(a) of the BHCA, as amended, 12 U.S.C. § 1842(a), sets forth five actions for which a bank holding company must seek Board approval. Three of these actions are relevant here. First, the holding company must seek approval "for any action to be taken that causes a bank to become a subsidiary of [the] bank holding company." Id. § 1842(a)(2). Second, approval is necessary if a bank holding company wishes to acquire more than a five percent interest in a bank. Id. § 1842(a)(3). Finally, the Board must approve the acquisition by a ...


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