RADZANOWER v. TOUCHE ROSS & CO.
Legal provision: Securities Act of 1933, the Securities and Exchange Act of 1934, or the Williams Act
Argument of Ira Jay Sands
Chief Justice Warren E. Burger: We will hear arguments next in Radzanower against Touche and Ross.
Mr. Sands you may proceed whenever you are ready.
Mr. Ira Jay Sands: Thank you sir.
Mr. Chief Justice and Mr. Justices of the Court, we have a very simple factual situation here, in which a National Bank is one of a number of defendants under a 1934 Act, securities action a 10 (b) (5) claim.
And, we go back to a widely known dispute in this nation, in which we find the Third Circuit now, recently aligned against all of the other Circuits, as to whether in a securities related 10 (b) (5) action, the plaintiff must divide his case and must sue the National Bank in the particular district in which that National Bank was established or whether under the wide venue provisions of the 34 Act, a plaintiff may join the National Bank, together with the other defendants in the district in which the violations took place or as the 34 Act permits, where the defendants maybe located or found.
It is our position, that in the Second Circuit, where this action commenced, under the Bruns, Nordeman case, this situation is jelled and a divided or bifurcated litigation will be required.
It is our position sir, however, that that is erroneous and that the 1864 National Bank Act was not necessarily repealed by implication or otherwise by the 1934 Act, but that the venue provision of the 1864 Act was broadened, was extended in the one instance in connection with a 1934 Securities Act violation.
Now, to lightly touch upon ancient history in these hollowed --
Justice William H. Rehnquist: Mr. Sands, you say in one instance and you are talking of course about the 34 Act, but 15 U.S.C. 77 V, the 33 Act, and the Interstate Land Sales Regulation, there are certainly are other Acts giving general venue for specific courses of action, which would be effective by a decision in this case, are there not?
Mr. Ira Jay Sands: Your Honor, we of course, are concerned with a 34 Act and a 33 Act, which were overlaid as well.
However, Your Honor is correct, when any Act states that the defendants maybe sued in a venue where they maybe found or where transaction took place.
I would agree Mr. Justice Rehnquist that the argument I am professing for the 34 Act would apply if the language were similar.
Now, going back to Ancient history of these hallowed halls, we know that a National Bank is an arm of the American government.
The cases are -- the law had not been cited for the lack of pilling on additional material.
The First National Bank was organized in the late 1700s as an arm of the government and it could not be sued as the government cannot be sued without its consent.
Now, until the 1863, as modified by the 1864 Act, one could not sue a National Bank, which was set-up to administer currency, which was set-up to administer the fiscal policies of the United States, except as specifically permitted by the Congress, by the sovereign.
Justice William H. Rehnquist: I thought that there were no National Banks until 1863, before that it was the Bank of the United States?
Mr. Ira Jay Sands: Your Honor, my understanding is that there were national chattered banks prior to 1863, but the 1863 legislation, which then found itself amended in 1864 was an all encompassing scheme for the institution and the using the broad scale operation of national banks, but the first bank we find out in the brief of the SEC as amicus in their footnote --
Justice William H. Rehnquist: Well, the point may not be important to your argument, but I did not mean to have you spend a real good time on it.
Mr. Ira Jay Sands: My recollection is not precise as to the thing in the SEC's amicus brief, but it is in the footnote that the First Bank was called Bank of the United States and then we had a lapse of its charter some ten years or so later and then later another bank was set-up to administer the fiscal policy of the United States called the First Bank of the United States or First National Bank of United States.
And, the 1863, 1864 legislation was all encompassing, a schematic to operate national banks.
Now, we take the position that this was permission by the sovereign to be sued to have one of its instrumentalities sue and the sovereign determined where it can be sued.
It can be sued in the district in which it was constituted.
Now, we take no issue at that until 1933-34.
In 1933 and 1934 of course, we find as it is commonly called the Roosevelt Legislation concerning the 33 Act, and the 34 Act, the so-called remedial statutes concerning banks and the like and we find that we have a number of cases of Bell against Hood, SEC against Joyner (ph), the remedial statutes.
We go all the way down to Affiliated Youth case, which was decided only recently, SEC against Capital Gains Bureau, the idea that the remedial statutes be broadly and non-restrictively interpreted.
Justice Harry A. Blackmun: Mr. Sands is there anything in the legislative history that shows that Congress actually considered national banks at the time of the enactment of the Securities Acts?
Mr. Ira Jay Sands: Mr. Justice Blackmun I say yes, emphatically yes.
The national banks in 33 and 34 were under consideration.
There is a senate report, which is referred to in our briefs.
The SEC has referred to that.
The Control has referred to it, as well, as we did.
The problems of national banks were divided in our analysis in two parts.
One; the necessity to protect the investors and the deposits.
We all remember the run on the Bank of United States.
Justice Harry A. Blackmun: Direct my question, however, to the venue provisions?
Mr. Ira Jay Sands: Yes sir.
There is nothing precise Mr. Justice Blackmun that we have been able to locate, which indicated that the Congress considered the venue provision of national banks at that time.
We can only reason from our incisiveness, which we hope is accurate.
In that there is decisional law, which indicates that Congress knows every statute on the subject when it legislates.
Congress did set-up the Glass-Steagall Act to concern itself basically with protection of depositors, protection of the bank itself in that regard.
Congress set-up the 33 and 34 Act in which it did not set forth any exceptions, whatever, to the venue provision with regard to any actions concerning the 33 and 34 Act.
There is no legislative history that the precise question was ever discussed.
It is merely by inference.
Now, our position is that there is no reason for implied repeal, although the facts as they approach would give us the effect of the implied repeal, if we would like to, but judicially we are constrained to say that both may exist together if that is possible.
Now, our interpretation of these Acts would leave both fully intact in securities matters, the plaintiff and the commission would have its choice of venue, in non-securities matters or except as Mr. Justice Rehnquist aptly pointed out in other matters where there maybe specific statutory language, one would have to follow the Bank Act of 64.
Now, Congress did exempt in the 33 and 34 Act when it is so desired.
There were certain definite exemptions in Levin against Great Western Sugar Company, which was a District Court of New Jersey case which started the Third Circuit run of matters that indicated that there was a wider venue than did the Second Circuit.
The judge said, “A quick examination of the 33 and 34 Acts reveal that on a number of the cases the legislative draftsman found fit to exempt national banks and their securities from provisions of the act.”
And then, he cites 15 U.S.C. 77 (c), 15 U.S.C. 77 (l),” etcetera.
It becomes clear that the legislative draftsman knew about national banks, when writing the securities acts and knew how to exempt them from provisions of the acts, when they chose to do so.
It would be a new usurpation of legislative prerogatives for this Court to impute an exception to the 34 Act in view of the background just described.
Now, the Chicago Bank as amicus in its brief admits that there are exceptions for United States Banks, for National Banks and for the United States government from the registration requirements of the 3 (a) (2) of the 33 Act.
The Controller admits that as well on page 6 and again on page 16.
In this Court, in Carnation against Pacific Conference in 1965, quoted United States against Borden, which is 308 US to this effect, “If Congress had desire to grant any further immunity, Congress doubtless would have said so.”
The courts have in addition carved out additional immunities from the 1864 venue.
For instance, this Court in 1968, in Great American Insurance against United States carved down an exception for a claim being filed by a national bank in the Court of Claims and said that the national bank must go to another district where the Court of Claims were sitting in a particular matter, in order to file its claim and the national bank there said, “But you are taking us out of the district that the 1964 Act required.”
This Court said, “No, if you are filing the claim under the Court of Claims Act you must go to that district, where that matter is now pending.”
In transfers under the JPML, which happen all the time, the JPML has consistently said to national banks, “You must follow along the case.
You are not protected in any manner by the 1864 venue to have a separate bifurcated pre-trial in your own district.
You must follow the case and of course, you come back later on after the pre-trial is concluded” and we have that in such cases Pittsburgh and Lake Erie Railroad, Great Western Ranches, Len Turner (ph).
We have that in Westec.
Now, we have another rule, which has been followed by the District Courts, I have not found authority that it has come up here and that is concerning the impleaded third party, where a national bank is impleaded as a third party and then says, “Wait, I can only be sued in my own District.”
The District Courts, the Circuit Courts, we have a Fifth Circuit, Lone Star Package against Baltimore and Ohio Railroad said and there were others, said, “No, if you are a third party impleaded defendant, you must go to the district, where the action is being litigated.”
Basically, the reasoning behind that I believe has been judicial economy.
We can just visualize the number of different bifurcated trials that would result if the banks had that cloak of immunity.
Now, I do not, in fact I insist that the Congress did not in 1864 give the banks a cloak of immunity, but the Congress as the sovereign in 1863 and 1864 opened the field, opened the wall of sovereign immunity and gave us permission to sue national banks at that time.
And then, in 1934 the Congress again opened the wall of immunity, because of the overriding concern for the populous involved in the securities frauds.
So, it is not a question by which our national banks have for 30 years impressed the lower Courts that they are protected, that there is immunity, that the statute was made for their protection.
I say no.
I say the 1864 statute was made to permit the banks to be sued, not to protect the banks from all suits.
The 1934 statute was enacted to permit banks to be sued a little more widely in a more practical sense.
Now, there is no reason why both of these interesting statutes may not live together, may not be supplementary, may not each be fully effective, they certainly can co-exist.
We found that in the Robertson case 422 U.S., where we had two Acts, which permitted to co-exist.
This Court has frequently admonished the lower Courts to attempt to prevent conflict in statutes, achieve the aim of the 1934 Act of Merrill Lynch against Ware, not many years ago.
We have been admonished to interpret statutes by practical experience and practical experience certainly would permit the banks to be sued in a securities-related matter, in the same district where everyone else is Aaron Boyle against United States in ‘72.
Now, even going back to these interesting old cases, such as Red Rock against Henry, unless the Acts are completely repugnant keep them both alive and we have a long line of decisions.
In Wilmot against Mudge, which is 103 U.S. back in 1880, this Court said that both statutes can be said to have their own spheres of operation, if both can stand by any reasonable construction, that construction must be adapted, the basic tenant of law in this nation.
We have an interesting case 1846 Beals against Hale and there this Court discussed a parliamentary example, where parliament said that a particular crime was punishable at Assizes Court and then, parliament subsequently allowed another Court to have jurisdiction.
This Court stated that examples like that, you must reconcile them, they both must exist and the government in a particular situation like that would have a choice of either forum.
Now, in the Posadas case, Posadas against National City Bank, which my learned brother has attempted to interpret against us, this Court said in 1936 that we must seek to interpret the new statute as a continuation of the old statute whenever possible.
There certainly has been no statement in any statute or in any interpretation by this Court that a previous Act may not be enlarged, that a venue may not be enlarged.
The United States both carries against U.S., 400 U.S. 351 in 1971, which concerned seamen wages and the old law was that the shipping commissioners would determine any problem of seaman's wages.
Then, came a modern law, which set-up the Labor Management Relations Act, a very modern procedure, but it did not repeal the old.
This Court held that the old Act was a very literal one; the new Act was a progressive one.
However, that did not permit this Court and did not permit a Court to abrogate or repeal the old Act and that they both would exist as two separate possible methods of procedure by the seaman, who was injured in his financial rights.
Now, we do have our decisions of this Court, which insist that the power to enforce, implies the power to make effective the right of recovery afforded by the 34 Act or by remedial statutes, a case against Borac (ph), which cites with approval, Bell against Hood, 1946, may I quote this shortly.
“It is well settled that where legal rights have been invaded and a federal statute provides for a general right to sue for such invasion, Federal Courts may use any available remedy to make good the wrong done.”
Justice Potter Stewart: What is you say is, just before you proceed if I may interrupt you, it has been your submission up to now that these two statues can co-exist without -- can compatibly and continually co-exist.
Have I understood you correctly, have I?
Mr. Ira Jay Sands: That is my strongest argument.
I feel strongly about that.
I have also placed my leg on the other point that even if they cannot co-exist.
Justice Potter Stewart: If one only looked only at the text of the venue provision of the National Bank Act, the 1864 Act, your argument will have a very great deal of (Inaudible) I think, because it simple provides that actions and proceedings against any banking association maybe be brought, but we have Langdeau case and the Michigan case, which construed that language in that statute to say that this is exclusive, it is not permissive, that it is exclusive and I do not really follow you when you said that these two venue statutes can co-exist.
I do not mean that you will loose your case if they cannot, but the Security Exchange Commission, for example tells us that these two venue statutes are in hopeless and irreconcilable conflict?
Mr. Ira Jay Sands: I cannot --
Justice Potter Stewart: You obviously disagree, because you say they can both co-exist?
Mr. Ira Jay Sands: I do not fully agree with my very learned brother at the SEC and I have told him that.
I think he has taken a strong viewpoint, they cannot co-exist.
It is my position sir that the cases, which you mentioned refer not to two special federal venue statutes.
Justice Potter Stewart: No, but they did construe the venue provision of the National Bank Act.
Mr. Ira Jay Sands: Yes sir, but they construed vis-à-vis a State Act.
They did not construe vis-à-vis an equally significant federal statute.
The 1864 statute did not say that no future Act may further enlarge venue and the 1934 Act did further enlarge venue.
The case which Your Honor has cited, construed the question of permissiveness with regard to state venue and there, there is no question in mind.
I do not know of a single decision reasonably interpreted, which would permit any state statute to enlarge the 1864 venue provisions, but Congress is Congress.
Congress is in effect a continuing body from the day of the founding fathers to this day.
Congress may change its mind.
Congress may enlarge what has previously had restricted.
Justice Potter Stewart: There is no question to the fact that Congress could have amended the National Bank Act venue provision.
It could have repealed it.
It could have done a variety of things to it, but everybody agrees, I gather that there is nothing -- Congress has certainly done nothing explicit with respect to the 1864 Act?
Mr. Ira Jay Sands: Explicit it did not, implicit we believe they did.
Implicit -- I am sorry I did not mean to interrupt you sir.
Justice Potter Stewart: No, go on.
Mr. Ira Jay Sands: Implicit we believe they did for the precise reason that the 34 Act was an all encompassing method of operations with regard to security, something quite new in this nation.
The exception was not put in there.
I have mentioned that the 34 Act did accept, precisely accept certain activities vis-à-vis securities of national banks, specifically except National Banks, United State Government Securities and similar and I read Judge Bloomfeld’s opinion, language in the District of Connecticut in which he said they knew how, a little sarcastic as I read it, and interesting in his emphasis, they knew how to except if they wish to except.
There was no exception.
There could be now exception to a state statue which attempted to broaden the 1864 law or accept from the 1864 law.
I therefore, I differed with my brother at the SEC in their amicus brief, when I said that the 34 statute is a supplementary to the 64 statute.
Justice William H. Rehnquist: Why did you abandon your waiver argument?
Mr. Ira Jay Sands: I have not sir.
Justice William H. Rehnquist: I thought maybe you have?
Mr. Ira Jay Sands: No sir, I have not.
I feel that waiver is a hard road to hold --
Justice William H. Rehnquist: I notice you did not cite the Nearble case 308 U.S. where this Court held that there had been a waiver by a corporate defendant of a right to be sued under the statute, by filing of a consent to service of process, not too different from that in our case?
Mr. Ira Jay Sands: No sir, we did not cite that case.
There have been situations where waiver has taken place.
Justice Byron R. White: You did not -- you have not raised the waiver issue in your petition for certiorari, right?
Mr. Ira Jay Sands: We did sir.
I believe we raised it in the petition for cert and we have raised in each one of our briefs.
We have not, however, hammered hard upon it.
I feel that waiver is our weakest argument in this regard.
Justice Byron R. White: Do you think your question presented -- subsumes the waiver issue?
You present one question, should not there be important once brought a serious conflict by declaring the more liberal venue provisions of Securities Act prevail over the stringent national bank Act, that is the question that you presented?
Mr. Ira Jay Sands: Yes sir.
Justice Byron R. White: Does that include waiver?
Mr. Ira Jay Sands: No sir.
Justice Byron R. White: What is the end of the waiver question?
Mr. Ira Jay Sands: No, the two questions, which I did present in our brief, I include the second as a waiver and I have said sir without a question that the waiver is the weakest of the two arguments.
Justice Byron R. White: We did not add certiorari on that question, because it was not presented?
Mr. Ira Jay Sands: I am perfectly content Your Honor to hold firm on the question of both statutes living together or in the alternative.
Justice Byron R. White: Your argument is is quite error somehow?
Mr. Ira Jay Sands: No, I do not sir.
Justice Harry A. Blackmun: (Inaudible) the waiver not in the question presented, but you talked about it elsewhere --
Mr. Ira Jay Sands: In the body sir.
Justice Harry A. Blackmun: You gave much greater emphasis to it in the District Court than you have here in your brief?
Mr. Ira Jay Sands: Your Honor, Mr. Gatley (ph) who argued in the District Court and in the Circuit Court was met with the dilemma.
There is no question as you said to Judge Mulligan, there is no question about that the law of the Second Circuit is very clear, the Bruns, Nordeman case and when Mr. Gatley presented orally the Third Circuit decision and the Judge Mulligan said, “Do you wish us to reverse ourselves?”
Mr. Gatley’s language in effect was a polite suggestion that in view of the fact that the retired Chief Judge had previously reluctantly affirmed in the Bruns’ case that he politely was suggesting that perhaps you might reconsider it.
In view of the fact that you now have a peg to hang your hat on, the waiver question.
The reluctance was something that we were hoping would cause the panel to change.
The panel is very quick to affirm.
Mr. Gatley held in his hand a Xerox copy of the Third Circuit of the Ronson against Liquifin decision and I believe if I recall correctly you read a passage from it.
The waiver was the peg to hang ones hat upon and we could not expect the District Court to reverse the Circuit by a frontal attack upon the propriety of the 1864 statute, either as implied repeal, which I still maintain is our second leg or the cooperation between the two of the supplementary effect, the either or situation.
Justices Black and Douglas, may they rest in peace, did have this interesting concurrence in the Michigan National Bank case in which they spoke, they tried to get around it by claiming that there was a waiver situation, because the bank came across the state line to do business and conferred its self in the new state.
The problem that we do have with our adversaries is that historically they have taken the position that the National Bank Act of 64 is mandatory and we insist it is mandatory only against a state conflicting decision.
It is not mandatory against another special venue provision.
Now, a perfect example, although we have not found case law in this Court on two special venue statutes, is the jurisdiction question.
Chief Justice Warren E. Burger: (Inaudible) counsel.
Mr. Ira Jay Sands: I am sorry sir.
May I close with one sentence, sir?
Chief Justice Warren E. Burger: (Inaudible)
Mr. Ira Jay Sands: Thank you.
I would suggest, I will urge that any doubts be resolve in favor of lessening the burden of duplicative litigation.
We have the Amel (ph) against United States case, which came from the Court of Claims, a multi party wage claim and this Court said, “One form eliminates any problem with transferring venue from several District Courts to one locale.
If we are here misconstruing the intent of Congress --”
Chief Justice Warren E. Burger: Is that in your brief?
Mr. Ira Jay Sands: No sir.
Chief Justice Warren E. Burger: Go on, finish it.
Mr. Ira Jay Sands: It can easily set the matter to rest by new congressional explicit language.
Thank you sir.
Chief Justice Warren E. Burger: Mr. Gates.
Argument of Samuel E. Gates
Mr. Samuel E. Gates: Mr. Chief Justice may it please the Court.
I am here appearing for the respondent First National Bank of Boston only.
At the outset I would like to set the record straight in the posture of this case.
Before the lower courts, the only issue raised by petitioner in this case was one of waiver.
The allegations of this complaint, a charge that there has been a violation of Section 10 (b), the New York State statute and the common law and that arose out of the latest issue and some false misleading statements by TelePrompter Inc, which have been developed as a result as a formal complaint and investigation by the SEC, where upon a class action was brought in the Southern District of New York.
The plaintiff purported to bring the action under the venue provisions of Section 27 of the Exchange Act.
That complaint does not allege that the bank which was the agent bank in a $150 million credit loan agreement had anything to do with the latest issue of the false statements.
It does not allege that the bank purchased and sold TelePrompter stock or that made any profit out of any of the transactions complained off.
The basis of jurisdiction and the cause of action against the bank, as I see it and I am not sure that I am right is that the bank is a alleged to have aided and abet the other defendants.
And, it reached this fiduciary obligations to the investing public, because it did not disclose to the SEC, to the New York Stock Exchange and the public generally some information which it had learned as a lending bank and which is alleged to be inconsistent with the statements issued by the TelePrompter.
Where upon, relying upon this Court’s decisions in Langdeau and Robertson, which makes mandatory the application of Section 94, we moved under as Rule 12 and Section 94 to dismiss for lack of proper venue.
At this point Your Honors, may I say, I want to make our position perfectly clear.
We are not saying that the Exchange Act does not apply to a national bank.
We are saying only that the venue must be laid in the District where the bank is established.
Whatever rights the petitioner may have here, he can pursue in the District of Massachusetts.
Now, petitioner has conceded that the bank is established in Boston and indeed as it has been since 1864, right after the National Banking Act was put into effect.
And, he conceded in his affidavit, which appears at page 77 (a) of the appendix, that under normal circumstances, Section 94 of the National Bank Act would prevent a bank foreign to this meaningless Southern District from being sued in the Southern District, but they argued because the bank had qualified under Section 131 (3) of the New York Banking law to engage in a limited fiduciary capacity in its activities in New York that constituted an in test waiver.
Now, this was the issue which was before the District Court.
The District Court found as a fact that there have been no waiver.
Petitioner appealed to the Second Circuit, again on the issue of waiver.
Justice William H. Rehnquist: Was Nearble (ph) argued to the District Court?
Mr. Samuel E. Gates: It was not your Honor; it was not cited in any of the briefs.
At no time in the District Court or in the Court of Appeals, in any of this record until you get to the oral argument before the Second Circuit is there ever a reference to the fact that there might be some conflict between Section 27 and Section 94.
There is not one word of implied repeal or repeal by implication.
Only when it got to oral argument was the Ronson case, decided by the Third Circuit in 1973 ever mentioned.
And then, when it was mentioned by counsel for the petitioner, he did not urge that as a basis for an implied repeal.
He did not rely upon it on that basis at all.
Now, petitioner has agreed and answered the questions from Mr. Justice White that is effect he has abandoned his argument of waiver.
I submit Your Honors please that one has only to look at the question which appears on page 3 of the petition for Certiorari to see that there is a single question positive and that question --
Justice Byron R. White: Are you implying that that question is not properly here either?
Mr. Samuel E. Gates: Well, yes I am Your Honor.
Justice Byron R. White: Well, you made this very argument in your opposition for the petition for Certiorari.
Mr. Samuel E. Gates: That is correct.
Justice Byron R. White: And we granted the petition with that single question in it?
Mr. Samuel E. Gates: I am well aware that this Court has the right to --
Justice Byron R. White: (Voice Overlap) we nevertheless, we had this very argument --
Mr. Samuel E. Gates: I understand that Justice White that you have that, but I suggest that on this record and I say with no disrespect, that Certiorari was improperly granted.
It was not passed upon by the District Court or the Circuit Court and as I understand Certiorari, a matter is brought here for your review.
Justice Byron R. White: If you have any doubt how the Court of Appeals for the Second Circuit would have decided the issue that is now stated that was stated in the petition for Certiorari?
Mr. Samuel E. Gates: None whatsoever as I read the opinion of Chief Judge Henry Friendly in Bruns against Nordeman, followed by the decision of Clyde (ph) against Power (ph), I can see no possibility that Second taking it for a review and as a matter a fact, the Ninth Circuit both in 1970 and 1972 had precisely this issue --
Justice Byron R. White: Are you suggesting we ought to send this case -- to dismiss for petition for cert as improperly granted or vacated and remand so that the Second Circuit may tell us what the answer to this question is in the Second Circuit?
Mr. Samuel E. Gates: I think it would presumptuous Mr. Justice White for me to tell you what this Court ought to do and I would therefore refrain from responding, but let me answer it this way.
At the time of the argument, before the Second Circuit, Judge Mulligan, who was the presiding judge turned to Mr. Gatley (ph) and said, “Counsel, are you suggesting that this court reconsider or overrule its decision in Bruns against Nordeman and Mr. Gatley responded in the negative that he was not asking that that be done.
I submit that on the law as developed in this area.
Going back a great many years, but referring specifically to your opinion Mr. Justice White in Langdeau followed by Robertson and the cases that have followed subsequent to that, that there is no need to repeal, particularly when you say the subsidy provision of the Act can be applied.
Granted there maybe some inconvenience, granted there may be some hardship, but in this case, I submit that the hardship is much, much less than it was in Michigan National Bank against Robertson and if we are going to decide that repeal by implication is to be determined by the hardship, it would concrete of the decisions that have come down from this Court in the past.
Let me move from this question of fact that I have some doubt of whether I should be here today, I know I am, let me try to deal with this question of implied repeal a little bit.
This Court has not directly passed on the question which the petitioner posits here today.
I am frank to say that there is such a shift in position that occurs with respect to this petition that I am not sure just what I am called upon to respond to.
In the Lower Courts we were talking about waiver.
The petitioner for certiorari talks about the broader provisions of the Securities law prevailing over the narrow provisions of the Banking Act or can they co-exist and then in the reply brief we get a completely different --
Chief Justice Warren E. Burger: We will resume there at 1 o' clock. Mr. Gates.
Mr. Samuel E. Gates: Thank you Mr. Chief Justice.
Chief Justice Warren E. Burger: Mr. Gates you may pick up where you left off.
Mr. Samuel E. Gates: Mr. Chief Justice, and may it please the Court.
I think when we recessed at the luncheon recess that I was about to say that in Bruns, Nordeman, then Chief Judge Friendly relying upon this Court’s decisions in Borden, Robertson and Langdeau found that there were no basis for implied repeal.
Mr. Sands this morning in his brief said and attempted to differentiate at least Langdaeu and Robertson on the grounds that they only have state statutes involved.
Now, that precise question was presented to Judge Friendly at the Second Circuit and what I think was a very careful analysis, he rejected that argument, saying in these words, “It would indeed strain language to say that the same verbs are merely permissive with respect to suites in federal courts, although prohibitory as to actions in state courts.”
Now, clearly Section 27 --
Justice John Paul Stevens: But did he not go on and say that they were foreclosed in that Circuit by an earlier decision too?
Mr. Samuel E. Gates: That is not my recollection --
Justice John Paul Stevens: I think that were two points that he made.
Mr. Samuel E. Gates: I will stand corrected if I am in error.
Clearly Section 27 does not by its express terms repeal Section 94, nor did Congress say as petitioner has asserted in his reply brief that enacting the 34 Act and I quote, “Congress intended that a National Bank in the Securities’ case could be sued in certain, specified additional Act districts.”
Petitioner admittedly get no help from the legislative history.
He has acknowledged this morning that he can make only an implicit argument.
What he argues that the two statues can co-exist, but the principal thrust of his opening argument seems to be that the implied repeal of Section 94 can be found, because the broad public interest at the time of the enactment of Securities Act required it.
The 1934 Congress was consumer concerned that the 1934 Act was meant to supersede any earlier conflicting statutes.
But suffice, we are able to ascertain nothing supports these assertions except the (Inaudible) of counsel.
But they go even farther at page 16 of the opening brief and they say, “Congress' silence evidences its intent in 1934 to impose the venue provisions of the 1934 Act on all concerned.”
We can find no case from this or any other court, which supports the thesis that silence, will support implied repeal.
However, as Mr. Sands has acknowledged this morning, the SEC in its brief makes a completely different argument, saying that the adherence to the decisions of the Second and Ninth Circuits would frustrate the policy of the ‘34 Act and would have an adverse effect upon the enforcement activities of the commission.
I would remind this Court that the 1934 Act has been in effect for 42 years, yet the commission in its brief does not cite a single instance where a resort by a National Bank to the provisions of Section 94 as evinced upon or interfered or adversely affected the Commission’s enforcement activities.
The sole justification advanced in support of this thesis is that the Commission may be unable some day to join some National Bank in some unidentified future enforcement procedures.
An argument was made just ten years ago, before the Southern District of New York in an action entitled General Electric Credit Corporation against (Inaudible), where the Commission again filed an amicus brief.
The Department of Justice representing the Controller of Currency took an opposite point of view.
Judge Tanny made a very careful survey of the situation and he came to the conclusion that there was nothing to support the conclusion of implied repeal.
Now, in somewhat different context, but I submit a similar situation, Mr. Justice White in writing for this Court said in Mercantile National Bank, that this was a problem for Congress to consider.
It was not a problem for this Court.
One would have thought had been in fact an interference with the Commission's enforcement activities during the last 40 years that they would have gone to Congress and sought help.
They have not been reluctant to do so in the past, but they have not done so here.
Whatever maybe the speculative views of petitioner as to the intentions of Congress or whatever the SEC believes are the controlling policy considerations.
We have been unable to find any support in any decisions from this Court, which will sustain an argument for implied repeal.
To the contrary, this Court consistently taken the view that absent a waiver by a bank, the Section 94 mandates that all transitory actions shall be brought only in the district where the bank is established.
In order to sustain implied repeal, there are two cardinal precepts as we read the cases, which must be undertaken and established by the petitioners.
One; there must be a clear and manifest intent to repeal and two; there must be a positive repugnance or an irreconcilable conflict.
We find neither of those present in this situation.
There is nothing to support in our judgment, clear and manifest intent to repeal.
In an effort to buttress the arguments of the petitioner and its own arguments, the SEC in its brief refers to the report of Senator Fletcher of the Senate banking and currency committee and says that this sustains the position.
I submit that the Fletcher report is completely irrelevant to this arguments.
It was not submitted to the Senate of the United States until after the 34 Act had become law and it made no recommendations of any kind with respect to immediate legislation.
Now, certainly at the time that the 1934 Act was adopted, Congress was aware and this is conceded by petitioner, of the special status which Congress has granted to national banks, going back to 1864.
Justice William H. Rehnquist: Mr. Gates would it had been sufficient in your view, dealing with the repeal intent, if somebody had got up on the floor of Congress and said that the 34 Act venue provision is broad and we mean it to apply just in its literal language?
Mr. Samuel E. Gates: It would have been very considerable assistance Mr. Justice Rehnquist, if we had found something like that, but we have found nothing of that in nature to indicate that there was any real consideration given to this particular issue.
It is quite true that the Congress was concerned about abuses which have been developing and existed in the Securities industry, but they were also well aware of the special status of national banks.
Justice William H. Rehnquist: But, if it would have been sufficient instead of get on the floor and say that why is not even more impressive that they used broad, general language in the statute itself?
Mr. Samuel E. Gates: Well, I suppose one can make that argument, I do not happen to subscribe to it, based upon the decisions which have emanated from this Court, but certainly, conceptually one can make that argument and I would be lacking in candor if I did not acknowledge it.
But, I cannot believe that simply by enacting Section 27 and by silence that it can be properly construed that Congress intended to amend or repeal Section 94, but to petitioner it seems to me at more difficult burden in sustaining implied repeal in that he must show positive repugnance or irreconcilable conflict between the two statutes.
And, I submit that petitioner has made no attempt at such a showing.
In his reply brief at page 3, he concedes that implied repeal is more difficult to establish, than what he terms co-existence.
I think it might have been might be a little accurate if he had said it was impossible, under these circumstances to establish implied repeal.
And then, on the next page of his reply brief, that is on page 4, under the heading, the two venue statutes are supplementary and not in conflict.
He apparently abandons any effort at showing repugnance and he characterizes this as the major point of his argument.
He said this morning there is no reason why they cannot co-exist, a position which is diametrically opposed to that of the SEC, which pep the entire brief that it submitted as amicus in establishing that there was repugnance and a direct conflict.
I submit that when petitioner is talking about harmonization of the two statues that you can make them each effective in its own sphere.
He is engaged in, if I may use a colloquialism, kidding himself.
He asserts that each special statutes is a special grant by Congress to a forum and that more than one statutes applies, a plaintiff has the benefit of both and he can make his choice, that is of Section 27 or Section 94.
With respect that I suggest that if that were the law, and in the situation there would be no need for us to be here today.
I would suggest also that even if he is correct, the fact that he may make the choice does not mean that he is going to be able to stay in that forum, because Section 1404 (a) of the judicial code is still in the books.
It my well be that a defendant can invoke the provisions of that Section.
I submit that petitioner is really not asking for harmonization.
He is asking for an exception, an implied repeal Section 94, where Securities Act law violations are charged and he would equate such exception to that exception recognized by this Court with respect to purely local actions in Cassey against Adams (ph).
As I have indicated and as Mr. Sands agrees, the Commission that is not on the Court with petitioner's view is that the two statutes can co-exist.
Rather he argues that the two venues statutes are in direct and irreconcilable conflict and the Section 27 supersedes Section 94.
It says that they are repugnant in both their policies and their practical effects.
However, he does concede that if Section 94 prevails then bank can be sued only in Boston.
It seems to me that by making such concession, it is an overt admission that the Exchange Act can be made to work against the bank in Boston.
Now, in attempting to establish repugnance, the Commission relies on two cases decided by this Court only last June.
Gordon against New York Stock Exchange and United States against NASD.
He argues that Section 94 has been impliedly repealed by Section 27, because such repeal is necessary in this case to make the federal record choice scheme work in the Securities industry.
In that regard, it seems to me that the Commission overlooks Silver against the New York Stock Exchange, which says that if there is repeal by implication, it will be granted only to the extent necessary to make the act work and then, only to the minimum.
But, those two cases if the Court please, I submit are distinguishable.
In each of those cases the requirements of implied repeal had been clearly satisfied.
In order to make the regulatory scheme work as envisioned by Congress with respect to fixed rate commissions and with respect to the sales and distribution of mutual funds, this Court held that the anti-trust laws have to give way.
There was no way to reconcile the restrictive agreements, which were developed in the Securities industry with the anti-trust laws, the scheme that been envisaged by Congress.
But, there is nothing in the case at Bar, which makes these holdings opposite.
As I said earlier the substantive provisions of this law can work in Boston as well as they can in New York.
The bank is not immune from the terms of the securities laws nor is it exempt from potential liability that violates the terms.
We say only that the issue whether it violated the term should be determined in the District of Massachusetts rather in the District of New York.
Justice Byron R. White: Has there been some case in this Court construing the word located in Section 94?
Mr. Samuel E. Gates: There is Mr. Justice White, but I am frank to tell you the name of it escapes me.
Justice Byron R. White: Do you think it is actually been decided here that located means the place of its incorporation?
Mr. Samuel E. Gates: No, Your Honor.
Justice Byron R. White: What does it means then?
Mr. Samuel E. Gates: I understand that located equates itself to what I would term what might be the principal place of business, if you talk about it in terms of general corporate law.
Whereas established which is the word which is used with respect to a national bank, being sued in a federal context I understand it means the place where its charter says that it is established, the home office.
Justice Byron R. White: But, it says that the or in any state county or municipal court in the county or city in which the said association is located?
Mr. Samuel E. Gates: That is correct Mr. Justice White, but as I interpret the statute, as I have understood from the decisions from this and other courts, the word locate relates itself to actions, which are brought in state courts and that is where the bank must be located.
Whereas you are talking about actions in the federal court, the word establish is used.
Justice Byron R. White: What if this action has been brought under state law in a state court?
Mr. Samuel E. Gates: Well, then under you Honor’s decision in Langdeau I do not think we have any problem.[Laughter]
Justice Byron R. White: Well, I know, but that case did not focus on location, did it?
Mr. Samuel E. Gates: Well, there were 145 defendants in that action of which two were national banks and in an opinion written by Your Honor you said that they had to be go to another (Voice Overlap).
Justice Byron R. White: The big issue in Langdeau is whether it was exclusive, whether that venue provision was -- whether the word may must --
Mr. Samuel E. Gates: That is quite true.
Justice Byron R. White: And, it did not really go to the question what the meaning of located was?
Mr. Samuel E. Gates: That is also correct.
Justice Byron R. White: Well, so again I ask you, do you know of any cases that construes it?
Mr. Samuel E. Gates: I have to tell you I do not.
Justice Byron R. White: Okay, thank you.
Mr. Samuel E. Gates: Thank you, Mr. Justice White.
Chief Justice Warren E. Burger: (Inaudible)
Mr. Samuel E. Gates: It has -- I am sorry Your Honor, thank you very much.
Chief Justice Warren E. Burger: Thank you gentlemen.
The case is submitted.