DATA PROCESSING SERVICE v. CAMP
Legal provision: Article 3, Section 2, Paragraph 1: Case or Controversy Requirement
Argument of Bert M. Gross
Chief Justice Warren E. Burger: Number 85, Association of Data Processing Service Organizations against Camp.
Mr. Gross, you may proceed whenever you’re ready.
Mr. Bert M. Gross: Mr. Chief Justice and may it please the Court.
In the present case, this Court is called upon to resolve a direct conflict between the Courts of Appeals for the Eighth Circuit and the First Circuit regarding a threshold question of standing to sue.
Now, this case arose in the District Court for the District of Minnesota and it was dismissed upon motion and before trial on the grounds that the petitioners lack standing to maintain this litigation.
This ruling was affirmed by the Court of Appeals for the Eighth Circuit and about the same time, a substantially identical case arose in Rhode Island and the Court of Appeals for the First Circuit reached a precisely opposite result that petitioners in that case do have standing to maintain this particular type of litigation.
This case arose from the Eighth Circuit.
The First Circuit case is presently pending on petition for certiorari.
The facts in this case are limited to the complaint because the case was dismissed on motion prior to trial or pretrial.
The petitioners were the plaintiffs and they are the Association of Data Processing Service Organizations, which is a trade association of businesses engaged in rendering data processing services to the general business community.
The other petitioner is Data Systems Incorporated, a Minnesota corporation, a member of the association, which is referred to as ADAPSO and Data Systems is engaged in rendering data processing services in the Minnesota.
Respondents are the American National Bank and Trust Company of St. Paul, a National Bank and the Comptroller of the Currency.
The facts alleged that Data System was engaged in the data processing business in Minnesota and that the American National Bank was similarly engaged in the data processing business.
And as a matter of fact, the Data Systems had agreed to perform certain services for particular customer, it later turned out that the customer began doing business with the American National Bank.
There is no question about that.
The complaint alleged that the action of the American National Bank in performing data processing services was unlawful and that it violated the powers given National Banks under the National Banking Laws.
The complaint asked for declaratory relief that the bank’s action was unlawful.
It asked for injunctive relief and it asked for damages.
The complaint also asked for declaratory relief that the Comptroller of the Currency was acting unlawfully when he authorized National Banks to engage in the general data processing business.
The Comptroller’s authorization is found on page 2 of petitioner’s brief and it’s in a paragraph of the Comptroller’s Manual for National Banks, which states as follows.
“Incidental to its banking services, a national bank may make available its data processing equipment or perform data processing services on such equipment for other banks and bank customers.
The last three words that if the banks assume authority to do this fatal activity.
Now, in our brief --
Justice Byron R. White: They might have had it without that regulation.
Mr. Bert M. Gross: If they have --
Justice Byron R. White: Let’s assume that it just started out doing it.
Mr. Bert M. Gross: If they have authority under the acts of Congress Your Honor, they would not need the specific authorization.
Justice Byron R. White: So the question is the statutes?
Mr. Bert M. Gross: That’s correct, the question is statutory authority.
In our brief, we raise the general question of standing to sue.
We have discussed the so-called the legal right theory, the requirement that a plaintiff must have a legal right to have standing to maintain an action of this nature.
This rule was probably most prominently announced in the case of Tennessee Electric Power versus TVA in 306 United States’ reports, but this was not the issue that divided the Courts of Appeals where the First and the Eighth Circuit and I would turn to that narrow issue which did divide the Circuits and that’s he question of statutory aid to standing.
The rule generally maybe stated that that if a competitor can show that a statute was intended to protect his competitive or economic interest then he has standing to complain of unlawful competition.
And we believe that the statute is applicable in this case, and that statute is the Bank Service Corporation Act.
That’s found in 12 United States Code, Section 1864 -- the relevant portion is quoted in our brief at page 2.
This is a 1962 statute.
It is therefore extremely important to examine the legislative purpose of the Bank Service Corporation Act to decide the scope or the protection before the data processing industry.
The basic purpose of the act is undoubted, it was to allow smaller banks to achieve more effective competition against larger banks by joining together to invest in bank service corporations subsidiaries.
Two or more banks that can now join together to form a bank service corporation which will render data processing services for the banks such things as sorting checks and reconciling statements that sort of thing.
Prior to 1962, it was felt that banks could not invest in corporations of this type.
So the basic purpose was to authorize National Banks to join together in this function.
Now, the question that properly came up as to the extent that bank service corporations could engage in the general data processing of business.
And the compromise or result reach by the House of Representatives which have the bill initially was to permit bank service corporations subsidiaries to perform the services for a non-bank customers to the extent of one-half of their total activities, but not to exceed one-half of their total activities could be performed for a non-bank customers.
When the Bill got to the Senate, certain senators were not satisfied with even this restriction and a minority report was issued by the Senate Banking and Currency Commission or Committee.
Senators Proxmire, Neuberger and Douglas issued the report criticizing the one-half limitation as being excessive, that’s found on our brief on page 33.
Excerpts from that report, I’ll read the Court one sentence and this is the basic point of the minority report.
They stated that adequate justification has not been demonstrated for extending this exemption to permit banks to engage in the business of data processing which this Bill permits up to 50% of the total activity of a bank service corporation.
Senator Proxmire went further.
He introduced an amendment on the Florida Senate to prohibit bank service corporations totally from engaging in data processing services for non-bank customers.
And there could be no question as to the reasons for Senator Proxmire’s amendment.
He was perfectly clear on the reasons and they were to protect the data processing industry.
On page 35 of our brief, we have quoted from certain remarks of Senator Proxmire and I’ll read a few sentences so that the Court can see exactly what the senator was driving at with his amendment.
He stated that banks have customer lists and they can offer their customers for instance for service of handling their receivables which would give the banks a substantial advantage over other legitimate long established business providing this kind of service.
A number of these businesses have informed me and other senators that this kind of competition would be very unfair.
It would be unfair because the banks could use their own personnel charged merely the out-of-pocket cost and the unfair competition could drive businesses now offering this kind of service to the (Inaudible).
These are the reasons why I offered this amendment with the adoption of the amendment, I think we are in a position to have a bill that provides what the banks really want, what the members of the committee feel is justified and at the same time safeguard legitimate business enterprises which might otherwise be put out of business.
The Proxmire Amendment passed and the Bank Service Corporation Act is presently enacted in the law states as follows: no bank service corporation may engage in any activity other than the performance of bank services for banks.
We believe that this case requires in unique fashion and interpretation of the scope of the so-called statutory aid to standing a doctrine.
In previous cases, courts have been faced with the question of whether a statute was designed to protect the competitive interest.
If the statute was designed to protect the competitive interest, then the court held that the protected competitor had standing to maintain his litigation on the merits.
On the other hand, if the statute for constitutional provision was not so designed and was not intended to offer protection to competitive interest, then the competitors were held not to have standing.
Or in this case, we have a situation that is not occurred before to the best of our research and the respondents cited no cases showing a situation where there is an undoubted congressional purpose to protect a competitive interest, but from a source of competition which is slightly different although closely related to the actual source of competition.
Here, we’re dealing with competition by a National Banks themselves.
The statute according to its words was -- says that no bank service corporations subsidiary shall engage in data processing activities.
So, we have the situation where it appears to us that respondents are arguing this file.
Assume that Bank A and Bank B get together to form a subsidiary Bank Service Corporation Act.
That corporation begins to engage in activities, which appear to be data processing for the general business community.
In that situation, we must assume that a competitor like the petitioner has standing.
However, assume that Bank A and Bank B instead of forming a subsidiary corporation decide on their own individually to offer the same type of data processing services.
The respondent says, “There is no standing because there is no statutory aid to standing.”
Justice Byron R. White: Under your view of the standing issue, would you, would be not reach the merits namely the question of the authority that comptroller to authorize?
Mr. Bert M. Gross: No Your Honor, not in this situation.
Justice Byron R. White: A case should go back to the Court of Appeals.
Mr. Bert M. Gross: A case would go back for trial.
Now, we can assume that even further where the bank service corporation access that have two banks get together to form the subsidiary on one bank leaves and withdraws that the other bank -- the other individual bank may carry on with the bank service corporation.
So, we have a situation of one bank having a bank service corporation subsidiary which if it engages in data processing activities now the petitioners can attack.
And yet, if the parent corporation engages in the self same activities, there is no standing according to the respondents.
We feel that this is an effort by the banks and by the Comptroller of the Currency to adopt the very broad and expensive interpretation of the restrictive doctrine of standing.
And we feel that they are pushing the doctrine of standing beyond any reasonable purpose.
The rules of standing have the effect of preventing an inquiry into the merits of litigation.
And we feel that rules that have this effect of preventing reaching the merits should be rather narrowly and restrictively interpreted and in close cases, the doubt should be resolve in favor of reaching the merits particularly where the merits are important and the merits are important and not this type of bank case is important to the banks.
It’s important to petitioners and it has important implications.
Justice Byron R. White: What bearing do you think the Flast case has?
Mr. Bert M. Gross: Your Honor, I feel that Flast v. Cohen shows a philosophy of standing that would grant standing in this case.
The facts of course in the situation are different but Flast versus Cohen has a philosophy of inquiring into the personal interest of the petitioner.
It inquires into the concrete adverseness of the parties whether the case is informed in appropriate form for judicial resolution rather than seeking to find some undefined legal right.
If you look at the factual adverse interest, if you look at the type of case, if you look at our case through the view Flast and Cohen there clearly is standing.
These people are adverse under any test, petitioners have been harmed undeniably at this juncture of the case they have been harmed.
They alleged they’ve been harmed and their complaint was dismissed before trial.
The case is appropriate for a judicial treatment, we ask for the interpretation of a statute of Congress.
We think the competitors in this situation are the best persons to try the merits to this litigation and probably the only persons, we feel that the merits it’s unlikely that the merits will ever be reach if a competitor does not bring this type of litigation.
So, we feel that under Flast versus Cohen, we do have standing, we have adversity, we have this personal state, we have a concrete case, and in addition, we have important issues on the merits and finally we have a statute of Congress where Congress clearly was trying to protect the data processing industry from a type of National Bank competition.
This is what the First Circuit felt was sufficient for standing and this is what we believe this sufficient for standing.
Justice Potter Stewart: Well, suppose there are some trial cases of the court that would have been decided differently under your theory?
Mr. Bert M. Gross: Not under the narrow scope of statutory aid to standing Your Honor under the broad --
Justice Potter Stewart: You mean they -- we must -- for you to win, must we buy the bank service corporation approach?
Mr. Bert M. Gross: No, we have two basic issues Your Honor.
Justice Potter Stewart: You’re saying that it isn’t enough for standing just to show an economic injury?
Mr. Bert M. Gross: I think it is if you overrule about three to four cases of this Court.
Justice Potter Stewart: Are you urging that we do that?
Mr. Bert M. Gross: Yes, Your Honor and in our brief we have set forth that rather extensively.
And we don’t believe that Tennessee Electric Power is an adequate type of case and adequate determination of this issue.
We think it should be a bond.
Justice Potter Stewart: But accepting those cases, you still think you have pending in this case?
Mr. Bert M. Gross: Yes, following Tennessee Electric Power, we think we have standing under the doctrine of statutory aid to standing.
Justice Potter Stewart: When the statutory aid is under the bank service corporation?
Mr. Bert M. Gross: That is correct.
Justice Potter Stewart: That’s the only source?
Mr. Bert M. Gross: That’s the only statute we rely on, Your Honor.
Argument of Unk
Unk: What you say is there is enough (Inaudible) Bank Service Corporation Act is a separate act, is it not the measurable (Inaudible)?
Rebuttal of Bert M. Gross
Mr. Bert M. Gross: That is correct Your Honor.
We feel that the Administrative Procedure Act bears on this issue too -- in part.
Now, the judicial review provisions of the APA are familiar.
It reads that a person suffering legal wrong because of agency action or adversely affected or agreed by agency action within the meaning of a relevant statute is entitled to judicial review there.
We feel that the Bank Service Corporation Act is a relevant statute under the APA and we think that reading the APA in conjunction with the Bank Service Corporation Act there certainly is standing.
The Bank Service Corporation Act is relevant because it bears on this problem, it was an undoubted congressional, a response or effort to protect data processors.
For this reason, we feel it is relevant.
Justice Byron R. White: Does the First Circuit decision follow the decision of the Eighth?
Mr. Bert M. Gross: The First Circuit was after the Eight Circuit, yes.
Justice Byron R. White: It was after?
Mr. Bert M. Gross: Yes, it was Your Honor.
Justice Byron R. White: The argument you’re now making is addressed with the Eighth Circuit?
Mr. Bert M. Gross: It was Your Honor.
It was addressed in our brief and further prominently displayed.
It was not argued --
Justice Byron R. White: Today you dismissed it simply by saying under those circumstances.
Mr. Bert M. Gross: In a footnote, Your Honor.
So, we feel that under the Bank Service Corporation Act and under the Administrative Procedure Act not along by the Administrative Procedure Act, but that act read in conjunction with the Bank Service Corporation Act.
There are certainly is enough congressional protection afforded to data processors to give them standing to reach the merits of this case.
Chief Justice Warren E. Burger: Mr. Rosenthal.
Argument of Alan S. Rosenthal
Mr. Alan S. Rosenthal: Mr. Chief Justice and may it please the Court.
Over a period of almost 90 years beginning with its decision in 1882 when Railroad Company against Ellerman.
This Court has consistently in here to rule that where as is concededly the case here.
There is no special statutory provision for judicial review.
The complainant seeking to attack governmental action which does no more than increase competition against him or show that he possesses a legally protective right to be free from that competition, now the court has further made it clear that it is also true in this case.
No such legally protected right is conferred by license or franchise.
The plaintiff must be able to demonstrate that as this Court put it just two terms ago in Hardin against Kentucky Utilities.
The particular statutory provision invoked reflects a legislative purpose to protect the competitive interest.
If but only if such a purpose appears to again call it from Hardin, the injured competitor has standing to require compliance with that provision.
Now, notwithstanding the present reliance petitioners upon the Bank Service Corporation Act to which I will turn in a few minutes.
The fact remains that its complaint invoked only the incidental powers clause of the National Bank Act.
Provision of 12 U.S.C. 247 which authorizes National Banks to exercise “such incidental powers shall be necessary to carry on the business of banking.”
Specifically, as petitioner’s complaint reflects their attack upon the Comptroller’s ruling that National Banks may provide data processing services to other banks and bank customers was based exclusively on the proposition that such services do not come within the purview of the incidental powers clause.
Justice John M. Harlan: Is that pleading the argument to a fatal argument, is that a fatal thing likewise?
Mr. Alan S. Rosenthal: Well, I think it is fatal Mr. Justice Harlan from this point of view for the reason that they cannot as they do not assert that the conduct which they are seeking to enjoin violates any statute but the National Bank Act.
Justice John M. Harlan: Yes, well of course as far as the pleading issue is concerned, the Court of Appeals did notice it in the footnote rule against?
Mr. Alan S. Rosenthal: That’s right.
Justice John M. Harlan: But they didn’t rely on the pleading defect.
Mr. Alan S. Rosenthal: No, it is the matter Your Honor of a pleading defect.
The point is that their complaint alleges a violation of the National Bank Act for the good and sufficient reason that that is the only Act.
Justice John M. Harlan: Which you’re saying?
Mr. Alan S. Rosenthal: Which they could claim have been violated, it wasn’t that any inadvertent failure to allege a violation of the Bank Service Corporation Act.
Justice John M. Harlan: What you’re saying is it’s a change of theory or the -- what do you call the additional theory that came to counsel’s mind after the (Inaudible)?
Mr. Alan S. Rosenthal: Well, what I'm saying Your Honor is that they seek to base their claim of standing upon a statute which they cannot claim has been violated.
That’s essentially what it comes down to and not only --
Justice John M. Harlan: If your basic provision on standing is right on your brief is that you got to reach the merits of this case now to give you standing?
Mr. Alan S. Rosenthal: No, Your Honor, that is not our position.
Justice John M. Harlan: Why not?
Mr. Alan S. Rosenthal: Our position is that they lack standing irrespective of whether the National Bank Act precludes banks from engaging in the activity which they seek to enjoin.
Our position rests upon this proposition that even if it could be said on the merits that Section 247 precludes the activity of which they complain, the fact remains that Section 247 was not enacted to protect any competitive interest of these petitioners or any other potential competitors of National Banks.
And that for this reason under the federal standing doctrine, Ellerman, Tennessee Power v. TVA, the Hardin case is the last expression of the court that they lack standing that they would only have standing if they could show not merely that the statute was violated but then it was intended to protect a competitive interest over theirs.
Justice John M. Harlan: Well, who could adopt the statute under -- who could raise this question?
Mr. Alan S. Rosenthal: I would think in the circumstances -- present circumstances, the action on the part of a bank in violation of the act could be challenged by bank’s supervisory authorities.
It is possible that with respect to some provisions of the National Bank Act which might have been designed to protect possibly the solvency of banks that their depositors or customers might have a standing -- or shareholders.
Justice Byron R. White: Or shareholders in any event, wouldn’t they?
Mr. Alan S. Rosenthal: I would think so if the shareholder again could establish as I think he would very like to be able to in many instances at least that the provision which was being violated by the bank was intended to ensure the solvency of the bank.
Additionally, if Your Honor pleases, any time that the Congress sees fit to insert in this statute a person aggrieved provision.
Review would be available at the behest of people who would qualify as persons aggrieved.
The Congress has not chosen to close these petitioners with the status of essentially private attorneys general.
Justice Hugo L. Black: Your position makes it very hard doesn’t it for anyone to attack except in government agent.
Mr. Alan S. Rosenthal: Your Honor, there are areas -- many areas in which the superintendence of compliance with statutory mandates rest with the Congress itself.
Justice Hugo L. Black: Well, then what do you say to the question that I asked you, doesn’t it make it almost impossible?
Mr. Alan S. Rosenthal: I would think in this instance --
Justice Hugo L. Black: Anybody could challenge it except the bank officers of the superintendent of banks himself?
Mr. Alan S. Rosenthal: I would think Your Honor with respect to this particular provision there are few individuals would have standing to attack the provision.
Chief Justice Warren E. Burger: With the stockholders --
With the stockholders, the bank stockholders?
Mr. Alan S. Rosenthal: Yes, stockholders well might but certainly --
Chief Justice Warren E. Burger: On the basis of ultra vires or somewhere to analyze?
Mr. Alan S. Rosenthal: Yes, I would think it’s quite possible the stockholders would but in the realm of competitors, the realm of individuals such as these petitioners who are complaining of competitive activity in the part of the banks.
Their remedy lies with the Congress to which they have gone repeatedly.
But before and after, the passage of the Bank Service Corporation --
Chief Justice Warren E. Burger: Well then are you telling us that that’s the way Congress wants it?
Mr. Alan S. Rosenthal: That’s precisely what I'm suggesting to the Court that the -- again the ADAPSO itself has been before the Congress.
It has sought after the Bank Service Corporation Act was passed to have Congress specifically preclude data processing service activities on the part of banks except as they related to the internal operations of the bank.
They have also called the Congress’ attention, the absence of a judicial review provision and the necessity for such a provision.
And to this point those pleas have fallen on deaf ears.
Now, we say it is quite appropriate for the Congress to decide whereas here there is no legally protective right of the petitioners being invaded appropriate to the Congress to decide, the extent to which it wishes to deputize these petitioners or any other class as private attorney’s general to enforce what they say is the public interest and compliance with the National Bank Act.
Justice Hugo L. Black: May I ask you a question, again, assuming that they are right and that Congress has made it unlawful for these banks to do exactly what they have charge for duty and did it in order to protect competitors, is it your position that nobody cannot challenge it except the bank examiner?
Mr. Alan S. Rosenthal: No, Your Honor.
It’s my -- if Congress had done this for the protection of competitors then under the established standing doctrine, the latest decision being Your Honor’s decision --
Justice Hugo L. Black: That’s their argument in Hardin.
Mr. Alan S. Rosenthal: In Hardin, but we insist if the Court pleases that the restriction which they seek to enforce -- the restriction of the National Bank Act was not intended to protect a competitive interest and indeed they don’t argue to the contrary, they have never suggested either on the lower courts or in this Court that the purpose of the --
Justice Hugo L. Black: I misunderstood the argument here.
Mr. Alan S. Rosenthal: No, their contention is that in the Bank Service Corporation Act specifically with relation to Section 4 of that Act that Congress manifested an intent to protect data processors from the kind of competition of which their complaining.
Justice Hugo L. Black: Assume that that’s true, let’s assume it was passed for that purpose, is it still your -- and it maybe said, I'm not saying it’s not.
I want to get just how far it goes.
It’s still your argument notwithstanding express as that of Congress to give this kind of competitors a protection that none of them can raise it?
Mr. Alan S. Rosenthal: No, that’s not my argument Your Honor.
If the Bank Service Corporation Act in this legislative history manifested a congressional intent to protect data processing service companies from competition on the part of National Banks, then I would certainly agree that under the teachings of this Court is recently again in the Hardin case standing what exist.
What we say is that the -- there isn’t a job or syllable in the legislative history of the Bank Service Corporation Act to indicate any congressional intent to protect the bank service corporations from the competition of which they are complaining here.
Now, the legislative --
Justice Hugo L. Black: Let me ask you the question of my brother Harlan asked you a little bit ago, if that’s the case, aren’t you saying that we have to look at this Act in order to see whether that was its purpose to decide standing?
Mr. Alan S. Rosenthal: The only extent that you have to look to the Bank Service Corporation Act begin in response to Mr. Justice Harlan, I suggest that we did not need to reach the merits of this controversy because the merits are of course are in terms of an alleged violation of the National Bank Act.
And it’s not necessary to reach that question whether or not the National Bank Act has been violated in order to decide standing.
Now, with respect to the Bank Service Corporation Act, the only thing that is required is to examine this legislative history and to determine whether the Congress was intending by that Act to any extent to protect a competitive interest of data processing service companies against National Bank competition.
Justice John M. Harlan: Now, supposing this would arose under the Bank Service Act, is your question standing?
Mr. Alan S. Rosenthal: If this was an attack upon a Bank Service Corporation Activity, I think the standing question would be much closer.
I say that --
Justice John M. Harlan: Well, it would be fairly against you?
Mr. Alan S. Rosenthal: I don’t think so Your Honor for this reason.
Justice John M. Harlan: Why not?
Mr. Alan S. Rosenthal: Because the only statement in the entire legislative history of the Bank Service Corporation Act which manifested any concern for the protection of data processors was the statement on the floor by Senator Proxmire.
Now, this Court has questioned before --
Justice John M. Harlan: What about the provision itself?
Mr. Alan S. Rosenthal: Well, the provision itself could have been for many different reasons.
In the congressional mind, the provision itself might have been a gain because of the feeling that Bank Service Corporations in the general public interest without relation to any specific competitive rule should not be engaging in activities other than the providing of Bank Services to banks.
There’s no way of really telling what of many possible approaches there might have been, but this much is clear.
We’re dealing with National Banks here, Congress in connection with the Bank Service Corporation Act both banking and currency committees, both the Committee in the House and the Committee in the Senate were specifically apprised of the fact that National Banks were engaged in this activity.
Now, if there was some concern --
Justice Hugo L. Black: Was it hard for you to tell a man who doesn’t know all about bank services what bank services precisely what bank services involved?
The banking service company, what is it?
Mr. Alan S. Rosenthal: What is the Bank Service Corporation itself?
Justice Hugo L. Black: How they do it again?
Or exceed who the competitors are?
Mr. Alan S. Rosenthal: Well, there’s no bank service corporation involved in the present case Your Honor.
Justice Hugo L. Black: But it’s a bank.
It’s right it’s a bank.
What are the bank services that are being performed that they object to?
Mr. Alan S. Rosenthal: The bank services -- well, what they seek to enjoin as being outside of the scope of 247 is the providing of Data Processing Services to customers of the bank.
Justice Hugo L. Black: What are the data processing?
Mr. Alan S. Rosenthal: With what kind of services?
Justice Hugo L. Black: Yes.
Mr. Alan S. Rosenthal: Well, they would include for example putting a company’s payroll through a computer.
It’s the kind of record in the bookkeeping type of services which today are provided in most up-to-date business establishments signed an automated basis.
Justice Hugo L. Black: That’s precisely what’s involved.
Mr. Alan S. Rosenthal: That’s correct, that is correct.
But the -- getting back if I may just for minute of the legislative history of the Bank Service Corporation Act is unreasonable to assume that had there been this concern that petitioners insist existing regarding competition on the part of banks themselves -- the National Banks in particular with data processing service companies, that Section 4 would not have been cast as it is solely in terms of bank service corporations but what have embraced banks as well.
An important fact, Section 5 of the Act does deal with banks in a completely of course unrelated context.
Now, we see and think it is very difficult for petitioners to seriously argue here.
Even though the statute which they claim is being violated, the only statute National Bank Act was not intended for their protection and I admit this, implicitly at least, that they have standing to complain violations of the National Bank Act on the basis of a statute which is on its face does not apply to Bank Service Corporations.
Circumstances where the Congress that both congressional committees were informed the banks were engaging in this activity and not only does the Act not refer to banks in this context, but there wasn’t one single suggestion and the committee reports of either committee that this was an activity which should be legislated the case.
Justice John M. Harlan: What was the original motive for that that led to the bank services?
Mr. Alan S. Rosenthal: The motivation for the Act?
It was considered in 1962 both by the Comptroller of the Currency and The Federal Reserve Board that a bank was precluded, absolutely precluded from owning stock in another corporation.
The purpose of the Bank Service Corporation Act was to enable banks to invest to these bank service corporations so that banks particularly small ones could combine to obtain the advantage of among other things automated facilities which individually they could not have purchased.
The whole basis of the --
Justice John M. Harlan: The whole motivation of the --
Justice Potter Stewart: Excuse me, I don’t mean to interrupt you.
Mr. Alan S. Rosenthal: Well, the motivation of the act indeed was to provide assistance to banks not to impose any kind of restrictions that were not already there.
And I think that Representative Malter who is a senior member of the Banking of Currency Committee really admonished against the kind of approach which the petitioners advance here and the quotation which appears in the amicus curiae brief of the American Bank Association on page 12.
I won’t read the quote, but he specifically indicates that he wants to make it abundantly clear that this Bill was not intended to go outside the very language appearing in the Bill and he goes on to say that it will not interfere with any authority now invested in banks and that it simply sets up a new means by which individual banks can acquire these additional services.
Now, it was in part in parcel of the conferral of this benefit upon banks if this restriction was put in which was -- limits the bank service corporation to performing bank services for banks.
Justice Potter Stewart: Now, what was the motivation to that Section 4 to narrow my brother Harlan’s question a little bit?
I have in mind the -- what Judge Bailey Aldrich says about its motivation.
I haven’t independently looked at the legislative history but he says it’s very clear to him that that motivation came from the National Society of Public Accountants who were afraid of the competition (Voice Overlap)
Mr. Alan S. Rosenthal: It may have been that it was initially spearheaded by that rule, but I think Your Honor pleases that the actual motivation of the congressional adoption of this provision was to just get that Bank Service Corporation Act through, it’s a form of compromise that --
Justice Potter Stewart: But your compromising was what interest on the other side?
Mr. Alan S. Rosenthal: Well, I don’t think that there is any indication of beyond the Senator Proxmire of an interest in data processing service companies.
But even so the interest was reflected only in the context of the activities of the bank service corporation itself.
Now, I wish to stress again that as said out in some length in the amicus brief of the American Bank Association there have been several bills for the Congress since 1962 in which they -- there has been in connection with which there has been a request usually spearheaded by ADAPSO that there be a prohibition directly impose on banks with respect to data processing service activities.
Chief Justice Warren E. Burger: Has any committee report of the Congress said in substance what Congressman Malter said in the quote that you referred to?
Mr. Alan S. Rosenthal: Well, I think that the thrust of the committee reports, I don’t recall Mr. Chief Justice whether there is a specific statement in the committee reports to that effect.
But the whole thrust of the reports of the two Houses, the majority views particularly I wish to stress that the petitioner is here from the statement which I quote from the supplemental minority views that they according from a minority view and even there it doesn’t go in really to the matter of protection competitors but simply solvency.
But the whole thrust really the majority views of the two committees is that this is an Act which is designed to legislate in the area of bank service corporations and not in any other area.
And we think that it is really is not appropriate basis for carrying over this statute into another area and allowing it to be used as a statutory aid standing to question activity under a statute which was not intended to protect the competitor who has bring the challenge.
Justice Potter Stewart: Mr. Rosenthal, as I understood you in an answer to a question by Mr. Justice Harlan, you said that if the facts of this case were that a bank service corporation was performing these services for a hardware store directly that these petitioners would still not have standing?
Mr. Alan S. Rosenthal: No, Your Honor, I suggested that possibility.
Well, I meant to say was that that would be a much closer case.
There, if they well might be found to have standing.
And on the other hand, there’s an argument at least that they would lack standing.
It was not a gain I wish to stress it’s a completely different situation than the one which is before the Court here where they are not invoking as the basis of complaint of the legality of that Act, some other statute.
Now, I would only add have if the Court pleases that for the reasons that are detailed in our brief, we do not believe that there is any reason why this Court should suggest -- excuse me, should adopt the alternative suggestion of petitioners that the rule of Ellerman, Tennessee Power, and Hardin be discarded.
We think that that rule does not as petitioners suggest -- would suggest we think the rule does not leave the public interest unprotected.
We think what it does do is leave it to the Congress inappropriately so to determine where superintendence of the administrative action should be when those circumstances where the claimant can point to the invasion of no legally protected right.
We think that fundamentally what the role of the Court is -- the proper role of the Court is the -- that of a guardian of legally protected rights and interests.
We think that outside of that realm, it is perfectly appropriate for Congress to make the decision as to whether it wishes the courts to extend judicial review to those who’s like these petitioners it can claim solely aggrieved in the fact.
Justice John M. Harlan: Mr. Rosenthal, do you think Flast v. Cohen (Inaudible)?
Mr. Alan S. Rosenthal: Flast and Cohen Mr. Justice Harlan, we believe to be fully consistent with the standing cases upon which we rely.
In Flast and Cohen -- against Cohen, this Court held that in so far as the Article 3 requirement of the case of controversy is concerned that it was enough that there be a substantial personal state.
But the Court there was confronted with a situation where there was obviously a legal right involved as the Court construed the First Amendment.
They -- that individual has a right legally protect the constitutionally protected right to be free from having his tax moneys expended for in the furtherance of a religious purpose.
And I would only add that in just last June, this Court in Jenkins versus McKeithen, as the opinion of Mr. Justice Marshall specifically indicated referring to Flast against Cohen that something more than adversary interest is necessary to confer standing.
There must be an addition, some connection between the official action challenge and some legally protected interest party challenging that action.
And while Mr. Justice Marshall’s opinion again was for himself and two other justices as we read the concurring and dissenting opinions, there was no disagreement on this interpretation of Flast.
And we would submit if the Court pleases that in this case, petitioners have not established requisite connection between the official action which they challenged the action of the Comptroller interpreting the National Bank Act and some legally protected interest which they possess.
And as so far as the National Bank Act is concerned as they admit themselves competitors have no legally protected interest.
For these reasons, we respectfully submit that the judgment of court below should be affirmed.
Chief Justice Warren E. Burger: Thank you Mr. Rosenthal.
Mr. Gross, you have I think about 10 minutes left.
Rebuttal of Bert M. Gross
Mr. Bert M. Gross: Thank you.
If the Court please, we cannot agree that assuming that we have standing to challenge the action of a wholly-owned subsidiary of a National Bank that we do not have standing to challenge the identical activity of the National Bank itself.
We think that that cuts the doctrine of standing too fine.
As far as the legislative purpose of the Bank Service Corporation Act, the respondents have stated that we only have Senator Proxmire statements as to the purpose for Section 4.
But of course Senator Proxmire introduced this Section, he explicitly stated his reasons for doing so on and it was passed.
There is another statement which we have quoted in the footnote on our brief at page 35 and this is from Senator Bush.
Senator Bush said, “I join with the Senator that is Senator Proxmire in supporting the Bill.
I think the Senator’s amendment is well taken.
I think it is advisable to try the situation out at the bank level before we authorize banks to go into competition with other service organizations in providing the type of service kind contemplated here.”
Chief Justice Warren E. Burger: There you’re getting at the merits, aren’t you?
Mr. Bert M. Gross: No, Senator Bush is saying that again that we should not authorize banks to go into competition.
We’re presenting this only for a statement of the interest that was trying to be protected that they were trying to protect the competitive interest.
And this is what gives the standing, it is the congressional intent or purpose to protect competitive interest which gives the standing and we do not go into the merits at this time.
As far as reaching the merits of the case and the question of whether or not the merits will ever be reached and who can reach the merits if we cannot.
We frankly do not think that the Comptroller of the Currency is the -- is an adequate person to reach the merits to this situation.
Number one, he has already decided that the banks do have authority under the statute.
Secondly, and in a broader sense, there have been recently in the Court of Appeals six cases regarding entry by a National Banks into various areas of business endeavor which have not previously been considered traditional banking areas.
From these six cases, four cases of the Court of Appeals held standing, two they held no standing.
Of the three cases that actually reached the merits, two of the three held that bank action was illegal and all these cases, this action was authorized by the Comptroller of the Currency.
So, on the merits the Comptroller is banning one out of three and the legality of bank actions and on these grounds, we think that judicial review is needed and this is a traditional function of the courts to decide the question of statutory interpretation.
For these reasons, we repeat that we feel we do have standing in this case.
Chief Justice Warren E. Burger: Thank you Mr. Gross, thank you Mr. Rosenthal for your submissions.
The case is submitted.