LEWIS v. CONTINENTAL BANK CORP.
Legal provision: 101 Stat. 554
IN THE SUPREME COURT OF THE UNITED STATES
GERALD A. LEWIS, ETC., Appellant v. CONTINENTAL BANK CORPORATION, ET AL.
November 28, 1989
The above-entitled matter came on for oral argument before the Supreme Court of the United States at 10:52 a.m.
MR. ARTHUR E. WILMARTH, JR., ESQ, Washington, D.C.; on behalf of the Appellant.
MR. ANDREW L. GORDON, ESQ., Miami, Florida; on behalf of the Appellees.
CHIEF JUSTICE REHNQUIST: We will hear argument next in Number 87-1955, Gerald Lewis versus Continental Bank Corporation.
Mr. Wilmarth, you may proceed whenever you're ready.
ORAL ARGUMENT OF ARTHUR E. WILMARTH, JR. ON BEHALF OF THE APPELLANT
MR. WILMARTH: Thank you, Mr. Chief Justice, and may it please the Court:
This is an appeal by Gerald A. Lewis, Comptroller of the State of Florida and head of the Florida Department of Banking and Finance, from a decision of the United States Court of Appeals for the Eleventh Circuit. This case arose out of an application filed by Appellee Continental Bank Corporation to establish a state chartered industrial savings bank, to which I will refer as an ISB, in Miami, Florida.
The court of appeals struck down three Florida statutes which prohibited Continental from opening the proposed ISB based on the Commerce Clause. The court of appeals also granted attorneys fees on appeal to Continental, apparently based on 42 U.S.C. Sections 1983 and 1988. Appellant Lewis maintains that the decision below should be reversed for three reasons.
First, this case has become moot by reason of a 1987 amendment to the Federal Bank Holding Company Act. Second, Section 664.02 of the Florida statutes, which prohibits the issuance of any further ISB charters to any person, represents a non-discriminatory exercise of Florida's authority over the chartering of local banking institutions. The statute is therefore lawful under the Commerce Clause. And, as the court of appeals found, the statute would thereby moot the case by precluding any relief to Continental. Third, Continental's claims under the dormant Commerce Clause do not vindicate any right secured by the Constitution that is cognizable under 42 U.S.C. 1983. Accordingly, Continental cannot recover attorneys fees under Section 1988.
I will first, very briefly, touch on the mootness issue. It is undisputed, as shown by the briefs, that Continental cannot now open the ISB for which it applied, which was an FDIC insured ISB. In 1987 Congress amended the Bank Holding Company Act and expanded the definition of bank to include all FDIC insured institutions.
Continental is an Illinois bank holding company. Under the Douglas Amendment, Continental cannot acquire a bank in Florida, unless Florida gives specific authorization for Illinois bank holding companies to do so. Again, it is undisputed that Florida has not permitted Illinois bank holding companies to acquire banks in Florida.
QUESTION: Mr. Wilmarth, suppose instead of filing an application for a particular bank, as they had done, the plaintiffs here had brought a, simply brought a declaratory judgment action prior to filing that application, it being clear that the application would be denied under the law in question, and asserted that the law in question was unconstitutional? Would that declaratory judgment action properly lie?
MR. WILMARTH: I do not believe so, Justice Scalia, because there would have been both a standing problem, in my view, and perhaps a rightness problem. If they had no application pending under the statute, or in fact could not show to this Court's satisfaction or the trial court's satisfaction that they intended to open an ISB under the statute, then obviously it would be merely a hypothetical, speculative case, and would be asking only for an advisory opinion, which is not within just issuability grounds. And that is really the situation that we have --
QUESTION: Under the amended federal act, what is left of this case?
MR. WILMARTH: The only thing that is left, Justice White, is whether or not Continental now actually intends to go forward and open an uninsured industrial savings bank. They cannot open an FDIC insured bank. They have had numerous opportunities to do so. They have never made an unequivocal, absolute commitment that they will apply for an ISB that is uninsured if they win this case. They have --
QUESTION: Do you know if there are a lot of institutions that accept deposits that aren't insured?
MR. WILMARTH: I think we have said in our opening brief that in our banking institutions today, less than one half of one percent of deposits are uninsured. That everyone understands that federal deposit insurance is --
QUESTION: That may be one reason there hasn't been some unequivocal announcement.
MR. WILMARTH: I think that is right, Your Honor. In fact, as we mentioned, Continental has been the subject of the largest FDIC bailout in history. It is highly unlikely, in our view, that they could convince the public, or would try to convince the public, to put uninsured deposits on account in one of their subsidiaries. I think the public would justifiably be very skeptical about doing so. But in the absence of an unequivocal --
QUESTION: But does that make the case moot really?
MR. WILMARTH: I -- Yes, it is our position that that makes the case moot, and that the decision of the court of appeals should be vacated and remanded on the grounds of mootness.
QUESTION: Well, of course, in cases like that Granite Rock case from California, there was no absolute assurance that the mining interests were going to continue. They just said well, if economic conditions are such that we can, we would like to continue. And that is very much like the kind of allegation the bank is making here.
MR. WILMARTH: I would like to distinguish that, if I could, Justice O'Connor, because I thought your opinion in that case was very helpful. You said that the mining company in that case said we have valuable mining claims here, and we intend to pursue them, so long as that is economically viable. In other words, unless it becomes economically unviable, we will pursue them. Continental is exactly the opposite. Continental says well, if we win this case, and if we then decide that perhaps we could succeed in an operation, we will apply. I think that is a very different kind of commitment. They are not saying, yes, we will go ahead unless we find out later that it is just not viable. They certainly have not said that.
QUESTION: Well, I thought their statement was pretty much to the effect that they do intend to file for this uninsured permit or license, provided the economic circumstances justify it.
MR. WILMARTH: Yes, that is in fact the statement. But it is my view that that is sort of saying we don't absolutely commit at this time to go ahead, but we may go ahead in the future if we decide that that is economically viable.
QUESTION: Is there anything that has prevented Continental from applying in the past?
MR. WILMARTH: Not to my knowledge, Your Honor. The application has been stayed by the Florida administrative authorities pending this Court, but we do not know of anything that would have prevented them from filing an amended application if they had desired to do so. I am not aware of any administrative bar.
If I might, I would then proceed to the Commerce Clause issue. It is our belief that Section 664.02 is entirely non-discriminatory both on its face and in its impact. The statute is neutral on its face. It simply says that no one can now obtain an ISB charter, that Comptroller Lewis is barred from granting any more charters. Now, the court of appeals found this was discriminatory but we should examine what that finding was resting upon. The court of appeals said we find that non-southeastern bank holding companies, that cannot enter Florida under the Douglas Amendment and cannot acquire full service banks, would wish to acquire ISBs because they can't acquire full service banks.
We find that southeastern bank holding companies probably wouldn't be interested in opening an ISB, because they can acquire a full service bank. What that really amounts to is, they are saying a non-southeastern bank holding company cannot acquire a full service bank. A southeastern bank holding company can. But, of course, that is the Douglas Amendment. The Douglas Amendment establishes that discrimination, and in Northeast Bancorp this Court found that that discrimination was entirely authorized by Congress under the Commerce Clause.
Section 60, 60 -- I am sorry, 664.02, has no independent discriminatory impact. If the Douglas Amendment did not exist, there would be no case, because --
QUESTION: Well, do we, in determining whether there is a discriminatory effect, do we look at the statute independently of the Douglas Amendment, or in tandem with it?
MR. WILMARTH: What I would say the test might be, Justice O'Connor, is does this statute add any discrimination that does not already exist by virtue of the Douglas Amendment. It is our view that it does not, because it equally withdraws ISB charters from everyone. It does not add any discrimination, any differential treatment.
QUESTION: Well, how do you get around that Lewis case against --
MR. WILMARTH: I think --
QUESTION: -- BT --
MR. WILMARTH: BT Investment.
QUESTION: -- Investment which held that plugging a loophole in the Douglas Amendment violated the Commerce Clause.
MR. WILMARTH: I think that was a different case in this respect. In BT Investment, Florida said that we are barring only out-of-state bank holding companies from acquiring investment advisory subsidiaries. We are going to permit Florida bank holding companies to continue buying these things or establishing them. So there you had a discriminatory statute on its face and in its impact, because they said we're only applying this statute to out-of-state bank holding companies. Here, Lewis said, yes, we find, and the statutory legislative history on page 31 of the joint appendix shows, that Lewis -- I am sorry, the state legislature, understood that these ISBs were being applied for by Bank of America, Citicorp, and Continental, for the very purpose of circumventing the Douglas Amendment, for circumventing restrictions on interstate banking. And the Florida legislature made a principle decision that they did not want to see their regional banking program and the Douglas Amendment undermined by these non-bank banks.
QUESTION: What did you do about your ISBs that were already in existence?
MR. WILMARTH: Uh, we grandfathered the three existing ISBs --
QUESTION: Doesn't, isn't that a, sort of a substantial consideration? You say you have treated everybody the same. Well, you haven't. You've got ISBs operating in Florida.
MR. WILMARTH: Not any longer, I would point out, Justice White. They have now all converted into other types of institutions. There were three small institutions. We would think this case is similar to Minnesota versus Clover Leaf Creamery or New Orleans versus Dukes.
QUESTION: What would you say if they hadn't been converted to some other type of institution?
MR. WILMARTH: Well, I would still take the same position that Clover Leaf Creamery said that a state legislature does not have to strike at all evils at once. That there the state legislature decided to withdraw --
QUESTION: Well, it wouldn't be striking at an evil, it would be --
MR. WILMARTH: Well, with respect --
QUESTION: -- preserving a, preserving a local preference.
MR. WILMARTH: With respect, I think, as far as Lewis was concerned, this was a very dangerous development, because this meant that Florida could no longer preserve a competitive and unconcentrated banking environment that would be responsive to the needs of its local consumers and businesses. And it is interesting, I think, in retrospect, that Congress actually agreed with Florida and in 1987 plugged the non-bank bank loop-hole, finding that, exactly the same thing, that the non-bank banks were undermining the states' abilities to choose under the Douglas Amendment.
QUESTION: But suppose the statute said in its preamble, in order to prevent states from outside the, banks from outside the southeast region, from establishing ISBs in the State of Florida, and to protect the existing competitive environment within the State of Florida, we hereby enact the following. Any, any difference in that case?
MR. WILMARTH: I think that is essentially, as I understand the policies that are clearly either stated or implicit on joint appendix 31, that Florida is saying we just passed a regional banking program last month. We want to preserve this first experimental step toward full interstate banking. We don't want to see it undermined by forces outside our control. Congress has given us control over our banking structure, and so we are making a choice that we are going to withdraw this charter option from everyone, in-state as well as out-of-state. That is the cost of plugging the loophole. In other words, Florida --
QUESTION: Well, answer my question. Suppose that were in the preamble. Would the case be the same?
MR. WILMARTH: I, I believe so. I don't think there, I think that would be the same, in my view, that the, I think the legislative history, plus the implied knowledge of legislature, what they had done a month before, seems to me to amount to what you have just said. That we have decided that we are going to maintain our regional banking program by not letting non-southeastern people in to open non-bank banks, and we find that the reason we are doing this is to preserve a competitive, unconcentrated banking environment.
We cited in our main brief that their regional banking statute had been based on very extensive studies and reports to the Governor and to the state legislature. And those were the purposes articulated in those staff reports, that what Florida is doing by establishing a regional banking program is to preserve a competitive, unconcentrated banking environment, and to provide for the credit needs of local businesses and consumers.
QUESTION: But at the time they did not have the right to protect their regional banking scheme from, from ISBs.
MR. WILMARTH: Well, that, that of course was in 1984, and it is our view that the Commerce Clause did not prevent them from taking a non-discriminatory step toward withdrawing the option from everyone. That that is really equivalent, I think, to what the Maryland legislature did in Exxon Corp. versus Governor of Maryland, or in a sense what Minnesota Clo --
QUESTION: Well, that, that may be a valid argument, but it seems to me it doesn't respond to Justice Kennedy's point, that the motivation was perfectly okay.
MR. WILMARTH: Well --
QUESTION: You're, you're -- because the motivation wasn't perfectly okay if they did not have a right to preserve their regional, their regional system, against a particular type of bank.
MR. WILMARTH: Well, I think that the way I would respond to that, Justice Scalia, is that the Douglas Amendment did allow them to choose a regional approach.
QUESTION: Yes, but didn't, but didn't allow them to insulate it against one type of bank, which may have been a mistake, but that was the federal law.
MR. WILMARTH: Well, our --
QUESTION: And you are saying that their motivation was we want to insulate it even against this kind of bank. And, now maybe what they did was objectively okay, but that's a different question. We are just talking about whether the motivation is on its face a thoroughly federally justified motivation. I suggest it isn't.
MR. WILMARTH: I see. Well, I think that, to the extent that legislators are presumed to know the law, one could certainly presume that they understood that the Commerce Clause allowed for non-discriminatory exercises of authority over chartering. That that has not been -- for example, Section 7 of the Bank Holding Company Act as interpreted in BT Investment, said that the states could legitimately enact regulations of bank holding companies and subsidiaries on a non-discriminatory, even-handed basis. They were more restrictive than federal law. And, for example, there have been cases holding that you can deny an entire type of non-banking subsidiary to bank holding companies, so long as you do it even-handedly. That is, that is not discrimination.
QUESTION: But the question is whether you are doing it even-handedly, when you grandfather in the existing local institutions.
MR. WILMARTH: Well, again I would say there that it seems to me in two cases, the Clover Leaf Creamery and the Dukes case, that you allowed very limited grandfathering, where you found that the limited, the grandfathering of the paperboard, the pulp, the pulp type of paperboard milk cartons in Minnesota, did not strike you as inherently discriminatory, or the preservation of the three push cart vendors in New Orleans did not strike you as, inherently as discriminatory.
QUESTION: Well, that wasn't a Commerce Clause case. That was an equal protection case.
MR. WILMARTH: Yes, Dukes was. Clover Leaf Creamery was both, equal protection and Commerce Clause. I also would say that I don't understand that in any of your cases you have found, that even if you found a discriminatory intent, that that was the case. That in all the cases that I have read, for example, Philadelphia versus New Jersey, Lewis versus BT Investment, and other cases, Hunt versus Washington Apple Advertising Commission, where you thought there was some indication of protectionist intent, you always went further and said well, the main test is what is the impact of the statute. Is the statute discriminatory in its impact?
And, for the reasons I have suggested, this statute is not discriminatory in its impact. It had an even-handed impact upon both in-state and out-of-state holding companies, because, apart from the Douglas Amendment, there would be no, there would be no argument of discriminatory treatment here. The statute itself withdraws the option equally.
If I might then proceed at this time to the Section 1983 issue. We take the position that both the plain language and the evident purposes of both the Commerce Clause and the 1983 establish that the claim of violation of the dormant Commerce Clause does not vindicate any right secured by the Constitution, which, of course, is the predicate for finding a Section 1983 remedy.
Preliminarily I would say that we have also shown that, of course, 1983 fees would not be available here unless Continental actually obtained some meaningful relief. And if you find the case to be moot, based upon the federal law change I have mentioned, or if you find it to be moot because Section 664.02 is valid and therefore prohibits the granting of the charter, then, in that case, Continental has obtained no relief here, and under the case such as Hewitt versus Helms and your Garland case last term, there would be no relief, and therefore no fees.
But going to the merits of the 1983 issue, the Commerce Clause itself does not guarantee or grant any rights to market participants. The Commerce Clause says that Congress shall have power to regulate commerce among the states. There is no mention of any rights granting or rights guaranteeing provision in that constitutional provision. It is very different from other provisions, such as the privileges -
QUESTION: That is a good argument against the dormant Commerce Clause, but that argument has been made and lost. We, for many years, have said that that provision not only confers power upon Congress, but, in and of itself, prevents people from, prevents states from doing certain things, which means it, in and of itself, gives individuals the right not to have states do certain things. Doesn't that follow? It seems to me it does.
MR. WILMARTH: Justice Scalia, the way we approach the dormant Commerce Clause is that it does prohibit state discrimination against interstate commerce, but it does so as an allocation of power between the federal and state governments. It denies to the states the power to discriminate. But, of course, as you have recognized in cases such as Northeast Bancorp, Congress can restore the power to discriminate.
QUESTION: But then I guess only the federal government can sue when a state violates it.
MR. WILMARTH: Well, no, we take the position --
QUESTION: But that's not the case. Private individuals can sue and say you have violated this allocation of power.
MR. WILMARTH: Yes, we acknowledge that Continental certainly has standing to complain of a violation of the Commerce Clause, so that this is a case arising under the federal Constitution within 1331, and they have standing as a party aggrieved. But that is different --
QUESTION: How can you have standing to assert a right that is not yours? Isn't that rather strange?
MR. WILMARTH: Well, I think in, for example cases such as Clarke versus Securities Industry Association, you have said that an indirect beneficiary of a statute, for example, can assert a claim, even though they are not the direct beneficiary.
QUESTION: Well, that's right. Because that indirect beneficiary is a beneficiary and has a right.
MR. WILMARTH: Well, again, we think that the notion of right as used in 1983 is a very, is a particular meaning of right. And that is, does this person have a constitutionally guaranteed right to engage in interstate commerce. And really, in four cases this Court has said the contrary. That in Clover Leaf, Exxon, and CTS, this Court has said that the Commerce Clause protects the market. It does not protect particular participants in that market. That it protects the national interest in having economic uniformity and an absence of commercial hostility among the states. But it does not protect individual participants, because Congress, for example as in the Glass-Steagall Act, can entirely prohibit interstate commerce, or, as in the case of the Douglas Amendment, it can delegate to the states the opportunity to restrict interstate commerce. So this is not a right of the same kind as the Equal Protection Clause or the Due Process Clause.
I think it was put most strongly in the Metropolitan Life Insurance case, upon which Continental relies. In that case Justice Powell said that the interstate -- I am sorry, the Commerce Clause and the Equal Protection Clause perform different functions. The Commerce Clause protects interstate commerce. The Equal Protection Clause protects persons from unconstitutional discrimination by the states. And that is really the heart of our argument. The clause itself is not a grant or guarantee of any constitutional right to engage in interstate commerce, and therefore it is important to draw a distinction between 1983, which says any right secured by the Constitution, and, for example, Section 1331, which says any right arising under the Constitution.
QUESTION: Why would you say that 1983 doesn't authorize a suit for, by a private party, based on the Commerce Clause?
MR. WILMARTH: It is our view that first of all Continental would have to show that they have a constitutionally guaranteed right to engage in interstate commerce. And that is certainly contrary to this Court's decisions.
QUESTION: Well, why should it be able to bring any suit at all? I thought you said that they can bring a suit.
MR. WILMARTH: Oh. They could bring a suit, they have standing to bring a suit under the federal question statute, 1331 --
QUESTION: Well, why? Why? Based on what? The Commerce Clause?
MR. WILMARTH: Well, again, this would be --
QUESTION: Based on the Commerce Clause?
MR. WILMARTH: Right. Yes, on the dormant Commerce Clause. This Court's decisions have given them --
QUESTION: You mean they could, it wouldn't be subject automatically to dismissal for failure to state the cause of action?
MR. WILMARTH: No. No, it is our view that this Court, in cases since Ex parte Young, have said that there is an implied federal action for prospective injunctive relief to prevent a violation of the Constitution, and that, for example in Hunt, a three judge --
QUESTION: You mean you can bring, you can bring a federal, you can say the federal cause of action directly under the Commerce Clause?
MR. WILMARTH: Yes.
QUESTION: But you cannot state one under a 1983.
MR. WILMARTH: That is our position.
QUESTION: That is -- and why not under a 1983?
MR. WILMARTH: Because, to find the 1983 you must find that this is, they are vindicating their rights secured by the Constitution --
QUESTION: Oh I know, but you say that, if you just allege, if you just proceed under 1331, you can sustain, you can not be subject to automatic dismissal.
MR. WILMARTH: Yes. Because, again --
QUESTION: Because you have got a right.
MR. WILMARTH: Well, that you --
QUESTION: A guaranteed constitutional right.
MR. WILMARTH: No, I don't believe that is the case. I think what you were saying is the state has violated a provision of the Constitution, and we are aggrieved by that violation. We do have economic interests that are being adversely affected. And Ex parte Young says --
QUESTION: And that the plaintiff has been hurt.
MR. WILMARTH: Yes. We agree that they are adversely effected.
QUESTION: The plaintiff has been hurt, and he has a right not to be hurt.
MR. WILMARTH: Well, that he has a right -- I am sorry. He has an entitlement to sue --
QUESTION: And an entitlement to, in that suit, to damages, I suppose. Or do you say he can only have injunctive relief?
MR. WILMARTH: Under Ex parte Young he only has prospective injunctive relief against the state. That, he also has attorneys fees under the Hutto versus Finney decision, but he has nothing more. And he, of course, sued Lewis in his official capacity, so under Will versus Michigan he would not have damages.
Lastly I would say that the legislative history of 1983 is completely barren of any suggestion that Commerce Clause actions were to be included within this rights secured by the Constitution. That Continental has shown no legislative history that suggests that, and the one piece of legislative history, Representative Shellabarger's comment --
QUESTION: It doesn't refer to statutes specifically either.
MR. WILMARTH: That was added later, you are right, Justice White.
QUESTION: It was not added in the statute, it was --
QUESTION: Added in this Court, yes, over some dissent.
MR. WILMARTH: But, Representative Shellabarger said there are two types of constitutional provisions. There are those that allocate powers between the state and the federal government, and there are those that secure particular rights to individuals. And he made reference to the Supreme Court's case of Prigg versus Pennsylvania, which we may have referred to, I am neglecting, in our brief. But, in Prigg versus Pennsylvania the Court said that under the Fugitive Slave Clause, a slave holder had a right that he could vindicate under the Constitution. Now, Shellabarger seemed to draw a distinction between those types of constitutionally guaranteed rights, which he said would be vindicatable under the Civil Rights Act of 19 -- 1871, and the allocation of powers provisions, which he certainly implied would not be included within 1983.
I would like to preserve the remainder of my time for rebuttal, please.
QUESTION: Thank you, Mr. Wilmarth. Mr. Gordon. I hope sometime, Mr. Gordon, you will tell us exactly what the position of your client is with respect to pursuing an application in Florida now.
ORAL ARGUMENT OF ANDREW L. GORDON ON BEHALF OF THE APPELLEES
MR. GORDON: Mr. Chief Justice, and may it please the Court:
I would like to start with that. First of all, what the department is doing here is raising two separate mootness claims. One is a claim that we have some sort of compulsion to update our application. There is a second mootness claim that has to do with the present inability to obtain FDIC insurance. And there is sort of a pea and shell game going on here between those two mootness claims, and what I would like to do is address the two of them separately.
QUESTION: Well, you agree that the application that you now have on file is not very consistent with the federal law?
MR. GORDON: What we agree is that --
QUESTION: That particular application --
MR. GORDON: The application speaks for itself.
QUESTION: Florida does not have to grant that application under the present federal law.
MR. GORDON: Well, if we are going to be --
QUESTION: Is that right or not?
MR. GORDON: If we are going to be technical --
QUESTION: Is that right or not?
MR. GORDON: I would disagree with that. If we are going to be technical, what the application states is that we will seek FDIC insurance to the extent permitted by law. In this particular case, as a result, you know, nine years later, the extent is no extent. So, being technical, we are not going to be able to get FDIC insurance. There is nothing in this record which should indicate that the FDIC will ever grant insurance for an entity that would thereby become illegal. There is no reason to believe that we would ever apply --
QUESTION: So you say, you say that your application really amounts to an application to, for an uninsured, to establish a bank that would receive uninsured deposits.
MR. GORDON: What I think is really going on here is that this is an application that was filed nine years ago, and circumstances have changed. And I really would address Mr. Scalia's comment or question about our ability to simply independently file a declaratory judgment.
Let me first, let me just specifically address the lack of insurance. We have unequivocally stated in our brief, page 20 of our brief, that we do not believe that the lack of FDIC insurance is any obstacle here to our application. We believe that we can go forward and have a profitable, successful industrial savings bank without FDIC insurance. What we have as support, obviously there is no direct record support here since this is an issue which arose after the trial court, we cited to the court statistics showing that there are hundreds and hundreds and billions of dollars of uninsured deposits in this country.
Mr. Wilmarth referred to special circumstances regarding Continental Bank that, because of Continental's status that it would be unable to have uninsured deposits. Continental has an Edge Act bank. Edge Act banks, under federal law, are not permitted to have FDIC insurance.
QUESTION: Mr. Gordon, the issue isn't whether you can. I mean, I can too, but -- you know, establish a bank without insurance. But I don't have standing to sue. The issue isn't whether you can, but whether you intend to.
MR. GORDON: That's --
QUESTION: And all you have brought before us is an application that on its face indicates an intent to establish a bank with the insurance. Now, why do we have any special reason to believe that this matters to you anymore, except for the attorneys fees that are at stake here?
MR. GORDON: Justice, that is the second part of what I am wanting to address in terms of the fact that we have not filed another application. Since 1984 Florida law has prohibited us from filing an application, or prohibited the grant of an application. I suppose we could have put one in the mail, and it would have just been sent back. There is, this application proceeding has been stayed on motion by the department since 1982.
We are representing here that we intend to go forward with our ISB application. Continental has a present intention to go forward with ISB applications. Continental actually is considering going in more than one location in Florida. The reservation that we have stated in our brief is limited to solely the following circumstance, that we cannot predict what the case will be six months from now, nine months from now, two years from now. The department is seeking remand for further factual development --
QUESTION: You mean the case in the sense of strictly economic considerations, that a business would take into consideration.
MR. GORDON: That is correct. We, at the present time, know of no consideration that would preclude us from going forward.
QUESTION: Why haven't you filed an amendment to your application?
MR. GORDON: Under Florida law, what is required in an application is a whole series of different items. For example, we have to precisely designate the location of the facility. We have to include a copy of the lease. We have to enter into that lease, or have a lease option. I submit, for example, that mootness does not require us for nine years to pay rent solely to keep a live application. Under the application procedure we have to designate who our officers are going to be. They have to be kept available, as soon as the application is approved, to go in and open the business. That is an obvious impossibility here with this kind of litigation that lasts this long amount of time.
QUESTION: I don't understand. Do you have that -- have you done that for the current application?
MR. GORDON: That was all done in the current application.
QUESTION: So why can't you just amend that provision and use the same locations and the same facilities? That's what I don't --
MR. GORDON: Well, it's just nine years later, and there are changes. We can amend, but I guess what I am saying is that there is also a substantial amount of that application that is time sensitive. In other words, that application, within six months or nine months or a year of being amended, would itself become stale. People leave the bank, there would be new officers, we end up going to a different location. What the department essentially is saying here is that we have the obligation once a year to update our application. And what our contention is is that there is no decision of this Court that has ever required that for nine years we have to continue to maintain a current application to test the validity of an absolute prohibition against going in --
QUESTION: Yes, but -- but, Mr. Gordon, there is another thing that normally is done in litigation. You have said this in your brief, in pages 19 and 20. Have you filed any kind of a formal pleading or is there any evidence, anything in the record that supports what you are saying?
MR. GORDON: We would be happy to submit an affidavit.
QUESTION: Well, I am not asking you what you are be happy to do. I am asking you whether you did amend your pleadings --
MR. GORDON: No, no, Sir.
QUESTION: -- in any way, saying that you intend to go forward with the modified application. That is normally the way a lawyer makes the record he needs to avoid mootness, not by saying things in his brief.
MR. GORDON: Justice, the litigation here was not directed at the contents of the application. They simply refused to accept our application. So there is nothing in our complaint that isn't still applicable. What we are seeking here is simply the right to have them accept our application for processing. The contents of the application, in a technical way, are really irrelevant to the right that Continental is seeking to obtain here, and that is to have an application by an out-of-state bank holding company considered on the merits, irrespective of the location or the headquarters of the applicant. And that --
QUESTION: Well, I suppose that if the state had just, when the federal law was amended, if the state had just dismissed your application, the case would be moot unless you filed an amendment.
MR. GORDON: Or we in some other way demonstrated our intention to go forward. Because what we have here is an absolute prohibition by state law against the issuance of a charter. And what we are seeking to do here is obtain the right to go forward in the face of that absolute prohibition.
The mootness issue here obviously is essential to our case. And if there are any questions regarding the nature of Continental's intentions, you know, I would be happy and be pleased to expand on what I have just said.
QUESTION: There have been questions on this for a long time. I share Justice Stevens' perplexity. This mootness issue didn't just pop up yesterday. It has been here for a long time, and it would have been very easy to have some clear assurance in the record that the bank is serious about going into business here, of course subject to, you know, inter -- subsequent change in economic conditions. But there isn't any assurance in the record except, except an application that indicates an intent to go ahead with an insured bank.
MR. GORDON: Justice Scalia, this issue --
QUESTION: And that is no longer possible.
MR. GORDON: This issue arose in the court of appeals after complete briefing and argument, I guess about a week before the court of appeals decision.
QUESTION: And you won on that issue.
MR. GORDON: And we prevailed both, we prevailed both --
QUESTION: Initially and on moot.
MR. GORDON: Correct.
QUESTION: The court of appeals said it was not moot.
MR. GORDON: Correct.
QUESTION: Because they accepted your --
MR. GORDON: Essentially, yes, Sir. But, again, just so that the record is completely clear, any reservation that we are making here is simply the reservation that we made as a matter of common sense by any business that is going to be asked to spend an awful lot of money to put together an application, invest millions of dollars in banks in more than one location, at an unknown point in the future. We, I submit, meet every criteria of the test that this Court looked at in Granite Rock. It's not dissimilar to the kind of thing that was in Super Tire, where there were employers who were going to face a future problem with unemployment compensation in labor law.
QUESTION: Mr. Wilmarth, just so I am clear about it, is your representation to this Court that Continental currently proposes to open a bank?
MR. GORDON: Yes, Sir.
QUESTION: That that is its current intention.
MR. GORDON: Yes, Sir.
QUESTION: But simply that that intention may change in the future because of economic --
MR. GORDON: For reasons that are unknown at this time.
QUESTION: Okay. But it is your representation that it is your client's current intention to go forward.
MR. GORDON: Yes, Sir.
QUESTION: With an uninsured ISB.
MR. GORDON: Yes, Sir. We simply -- the things that we can check include the lack of FDIC insurance. FDIC insurance is something that we, Continental can talk to its marketing people, and is able to determine, to the extent that it can do so at the present time, that FDIC insurance is not a problem. FDIC insurance is not what is causing any reservation by Continental. That we are saying unequivocally, also.
QUESTION: Well, if we were satisfied that without such insurance that it would be absurd, as a practical matter, to even consider opening it, do we take that into account in determining whether this case is moot?
MR. GORDON: Justice, the additional point I think that I would like to note here is that there is an application procedure. And that application procedure is to determine whether the proposed applicant has a reasonable promise of successful operation. That is the statutory criteria. The application process itself will decide whether we can operate. And that is what we are seeking to have. We are seeking to have an application process that is free of the discrimination which has existed now for nine years.
Let me turn to the Commerce Clause issue. This Court repeatedly has held that discriminatory motive or discriminatory effect is sufficient to invalidate protectionist state action. I would cite to the Court both the Bacchus case and the Minnesota versus Clover Leaf Creamery. Mr. Wilmarth --
QUESTION: Discriminatory intent, which has no adverse impact?
MR. GORDON: The Court's decisions can be read to say that. I think in this case we have both effect and intent. But, let me just begin at least with intent. In Clover Leaf Creamery, this Court said, in finding that there was no discriminatory intent, that it was going to rely on the statements of the legislature. And what we have here is a flat statement by the legislature that this statute was enacted for the purpose of depriving Continental of an effective means of gaining access to Florida deposits. That is the quote from the legislative history. There is no doubt here as to the motive of the legislature. There is a history here that goes back 17 years as to the motive of the legislature.
In 1980, in the Lewis case, this Court held unconstitutional Florida's prohibitions against the acquisition of non-banking subsidiaries by out-of-state bank holding companies. The Florida legislature, three weeks later, reenacted the statute, verbatim. The acts of the Florida legislature here are nothing more than acts of defiance of this Court.
The legislature further, when we received a preliminary injunction in this case, proceeded to impose a moratorium. After the moratorium expired and we received summary judgment, the department came up with an administrative policy. Their administrative policy was that Continental had to act as a "bank" under the bank holding company act, and thus be barred under the Douglas Amendment. That administrative policy itself was illegal under Florida's very strict adherence to the doctrine of improper delegation of legislative authority. The Florida APA follows that very strictly, much more so than the federal APA.
It further had a problem, the department's policy, because we took the deposition of the director of the Division of Banking. He didn't know this policy existed. We finally showed him the pleading filed in this case to show that the policy existed. He was unable to say when it was formed. He was unable to say what its scope was. He was unable to give any details regarding how this policy came into being, how it operated, or how it would effect Continental.
Following that deposition, which I submit made it fairly clear to all the parties that this administrative policy wasn't going to prevent Continental from going forward, is when the Florida legislature enacted the 1984 statute which is being challenged here, which completely barred any out-of-state -- excuse me, which completely barred any ISB chartering authority in the future. That statute, as the Court has noted, grandfathered the existing Florida ISBs. It further had its, unlike the rest of the banking legislation, had its effective date accelerated. It, as I said earlier, in its legislative history makes clear that it was expressly directed at Continental's application, and was enacted because Continental obtained summary judgment in this case.
QUESTION: Mr. Gordon, you say that the statute, the Florida statute in 1984 grandfathered existing Florida ISBs. Were there any other ISBs that could have been grandfathered, but weren't?
MR. GORDON: No. They grandfathered the existing ISBs.
QUESTION: So they grandfathered all the ISBs that were.
MR. GORDON: There were a number of applications pending, and those applications by out-of-state bank holding companies effectively were cut off.
QUESTION: Yes, but when you are talking about grandfathering, your argument could be read to suggest that they grandfathered the Florida ISBs, but that there were others similarly situated that weren't.
MR. GORDON: No --
QUESTION: But, there were only Florida ISBs, and they were grandfathered. Is that what it amounted to?
MR. GORDON: Yes, Sir. I may have been imprecise in some language.
QUESTION: And they're no longer in existence either.
MR. GORDON: The department has offered them bank charters and they apparently have all accepted. In addition to motive, which I submit here is, the record is overwhelming, despite the denials by the department, the effects here are also plain. What we have here is an absolute prohibition against engaging in business. This Court has never required, in circumstances of an absolute prohibition, that there be some specific record evidence of an effect, for the reason that it is impossible to show effect when there is a complete prohibition against engaging in the interstate commerce.
QUESTION: Well, in that respect, do you challenge the constitutional validity of 658.74 and 664.07, which say that only a bank or an ISB may provide these banking services? I mean, isn't that really what causes the discrimination that concerns you here?
MR. GORDON: No, Sir. The -- we have two areas here. We have the Section 3(d), as to which Congress has authorized discrimination. We have Section 4(c)(8) subsidiaries as to which Congress has not authorized subsidiary -- excuse me, have not authorized discrimination, as this Court held in Lewis, in Lewis one. There are all sorts of different kinds of Section 4(c)(8) subsidiaries which engage in many of the same activities that Section 3(d) banks engage in. But this is what Congress decided. This was the line that Congress drew.
QUESTION: Well, but -- but given the Florida scheme, wouldn't it make just as much sense for you to be attacking as unconstitutional because of a violation of the Commerce Clause, the Florida provisions which say that only a bank can engage in certain kinds of services? I mean, that is really the nub of the problem, isn't it?
MR. GORDON: It -- there is probably no shortage of Florida statutes that are unconstitutional, or that could be attacked from the constitutional basis. So long, though, as the entity is a Section 3(d) entity, we have no complaint. Congress has drawn that line. And Congress, instead of drawing the line, you know, in terms of a market, has drawn the line in terms of a particular corporate structure.
QUESTION: Well, I take it that Florida could permit these banking services to be rendered by non-bank institutions if it chose, quite without regard to the federal legislation. Or am I incorrect about that?
MR. GORDON: Florida certainly would have freedom to have financial services delivered in any number of ways.
QUESTION: Well, why isn't that the unconstitutional statute here, rather than the statute which concerns chartering of ISBs?
MR. GORDON: Well, I am not sure I understand your question, Justice.
QUESTION: Well, you want to engage in banking services. That's -- you don't want an ISB, you don't care really about an ISB. You want to engage in these ancillary banking services. Isn't that the point?
MR. GORDON: Well, but Congress has drawn a line, and we -- you know, Congress's power over interstate commerce is plenary, and it has drawn the line as to Section 3(d) banks. And so long as the statute is applicable --
QUESTION: But it isn't Congress. It is the Florida statute which says that only a bank can offer these services. That is the only reason you want the ISB. So, isn't that really the causative statute which denies you the right to engage in business that you choose, that you are seeking?
MR. GORDON: Justice, I suppose that we could have a argument in a particular factual context, which I don't know that we have here, where a statute of that sort might be unconstitutional, if it had the purpose and effect of discriminating against interstate commerce. I am not sure that the Florida statute, as presently written, there either could be a factual record that could support that, or, you know, that there would be those sorts of effects.
Let me turn to the -- let me, I guess, give one more response there. I think that what the department is trying to do here is to take the aura of Section 3(d) and transport it, or transpose it, into other kinds of activities that are Section 4(c)(8). And what they have done is take the same argument that was rejected by this Court in Lewis, and dressed it up in different clothes in this case. In Lewis, what, in the first Lewis case, what the department tried to say was that Section 3(d), by its nature, in order to be effective, constituted congressional authorization for discrimination as to Section 4(c)(8).
QUESTION: Well, Mr. Gordon, could Florida just say, have said, as an initial proposition, we are not going to have ISBs in Florida. Period.
MR. GORDON: Before all this came up?
MR. GORDON: Certainly.
QUESTION: Well, in effect that is what they are saying now.
MR. GORDON: Well, the distinction --
QUESTION: How can, how do you have a right to compel them to charter a certain kind of corporation?
MR. GORDON: There are a number of responses. First of all, there is just a right way to do things and a wrong way to do things. And what the state has done here is act with discriminatory intent and discriminatory effect. And that is what the Constitution prohibits. They could, on a different record, they might be able to do entirely the same thing.
The -- Justice Holmes once remarked that even a dog can distinguish between being stumbled over and being kicked. There is a difference between when there is a discriminatory motive, and when it is being done for appropriate, proper, regulatory reasons.
QUESTION: You are saying, in effect, that a discriminatory motive will invalidate an enactment which, so far as impact is concerned, is perfectly permissible under the Commerce Clause?
MR. GORDON: Well, this Court --
QUESTION: I know, I mean what is your position? And then tell me, if you will, well what supports it.
MR. GORDON: The normal presumption is that statutes will have the effects intended by the legislature. So looking to discriminatory motive, and finding that sufficient, is simply another way of saying that this Court will assume that legislation will have the effects that are intended by the legislature. And that, I submit, is an appropriate way to protect the interests in national union, which are the foundation --
QUESTION: What is -- what do you think is your best case from this Court that says discriminatory intent alone, without any consideration of impact, violates the Commerce Clause?
MR. GORDON: Well, Bacchus and Minnesota versus Clover Leaf Creamery. They both -- Minnesota says that. Bacchus is more along those lines.
QUESTION: Not quite.
MR. GORDON: What?
QUESTION: Not quite.
MR. GORDON: There is at least language in both decisions that lend themselves to that. Certainly there has been many suggestions that discriminatory motive, discriminatory intent, is the focus of this Court's Commerce Clause doctrine and juris prudence.
QUESTION: We probe the heart of the states, that is what this is really about.
MR. GORDON: Well, the state has announced --
QUESTION: Evil states, we punish them, whether they do harm or not. We want to stop bad motivations out there.
MR. GORDON: Well --
QUESTION: That doesn't seem -- I never knew we did that.
MR. GORDON: It turns on whether, you know, we assume that legislatures are competent, and that legislation will have the effects that they desire. And this legislation certainly has had the effect of keeping out-of-state bank holding companies out of the State of Florida now for, as to this particular issue, for nine years.
Let me turn, finally, to the attorneys fee issue. First of all, as we set forth in our brief, there is, at least in this record, a substantial basis to assume that attorneys fees were imposed as sanctions. There is obviously complete silence on the part of the eleventh circuit as to why they imposed attorneys fees, but there is more than enough, particularly in a situation where the state does not even bother responding to a motion for attorneys fees, to assume that attorneys fees here are proper.
QUESTION: Did you cite alternate bases for the award of attorneys fees on your request to the court of appeals?
MR. GORDON: Yes, Sir. Justice Kennedy, my feeling that this is an award for sanctions basically relates to events at oral argument, where the eleventh circuit expressed its displeasure with the litigation. There is nothing in particular in the record that shows just what it is that the eleventh circuit was doing.
But turning to the core 1983 issue, 1988 issue, our position, very briefly, is that there is nothing in the legislative history which has sufficient clarity to restrict the plain statutory language in 1983. 1983 provides a cause of action for any deprivation of any right, privilege or immunity. That language is as broad as Congress could imagine. It is, the language itself is broader than the language contained in the Fourteenth Amendment. The Fourteenth Amendment contains no reference to rights, solely to privileges and immunities.
The legislative history has been exhaustively analyzed by this Court. I don't think I need to go through it, but this Court, in a number of decisions, has made clear that there is nothing in that legislative history that justifies extending less than all of the rights conferred by the Constitution on litigants in federal courts.
If the Court has no further questions.
QUESTION: I have just one for you. I am sorry to trouble you with it again, but I thought you gave me a categorical answer last time, but then you went on to say the bank has not yet considered the effects of inability to get insurance or what not?
MR. GORDON: No, Sir. I didn't mean to in any way qualify what I said.
QUESTION: The bank has considered its inability to get insurance by reason of the new legislation, and nonetheless has made the determination to proceed with this application.
MR. GORDON: Right. As to that issue, the bank presently can evaluate, presumably there is not going to be a lot of difference between the inability to have insurance now and the inability to have insurance a year from now, or two years from now. It is a number of other economic possibilities that you just, you can't predict what is going to happen.
QUESTION: Thank you, Mr. Gordon. Mr. Wilmarth, you have four minutes remaining.
REBUTTAL ARGUMENT OF ARTHUR E. WILMARTH, JR. ON BEHALF OF THE APPELLANT
MR. WILMARTH: Thank you, Mr. Chief Justice. First, with regard to the assertion that the court of appeals could have based attorneys fees on a sanction for bad faith conduct, as we indicated in our reply brief at page 5, footnote 9, the Roadway Express versus Piper case makes clear that in the absence of a finding of bad faith conduct by the court of appeals, or by the district court, there can be no upholding of attorneys fees based on a sanction. And Continental has admitted that there was no finding by the court of appeals of bad faith conduct, nor was there any finding by the district court of bad faith conduct. In fact, the district court denied attorneys fees on that basis.
Continental's motion for attorneys fees was simply a two sentence motion which incorporated its earlier appellate brief, and Lewis had replied to that appellate brief. So the motion added nothing, rather than just incorporating.
With the question about whether unconstitutional motivation is enough to strike down a state statute, or indeed a federal statute, I think there are two decisions of this Court that are relevant. Palmer versus Thompson in 403 U.S. 217, which was an equal protection case, and the United States versus O'Brien, 391 U.S. 367, which was a First Amendment case involving a congressional statute about burning draft cards. And in both cases this Court said that there, it was disinclined to strike down a statute based only on allegations of unconstitutional motivation, because it is often very hard to determine exactly what motivates each and every legislature. So I think that those cases really repudiate the notion that unconstitutional motivation, without any showing of unconstitutional impact, is enough.
I think that the questions of Justice O'Connor and Justice Kennedy indicated what we have been expressing, which is that there is no showing that Florida was obliged to open loopholes in the Douglas Amendment, that Florida was somehow constitutionally required to open loopholes so the Douglas Amendment wouldn't bite upon out-of-state bank holding companies. And if that is true, and the United States indicated that they agreed with that position in their jurisdictional brief at page 17, then we say for the same reason it can't be a violation of the Commerce Clause for Florida even-handedly to withdraw a chartering option from everyone. That that is the price they paid for taking that option away.
Lastly, with regard to the question of 1983 versus the federal question statute 1331, we have cited Bowman versus Chicago and Northwestern Railway Company, an 1885 case, on page 46 of our principal brief. And, I think that that case, when carefully read, indicates that the Court was there confronted with a Commerce Clause claim, and the Court found that that claim might be one arising under the Constitution, but it did not involve any right secured by the Constitution. That was a case only ten years after the federal question statute was passed, only 14 years after 1983 was passed. So I think the Court, at that time, understood the distinction between the broad arising under language and the more narrow secured, rights secured by language.
If there are no other questions, I will conclude the argument.
CHIEF JUSTICE REHNQUIST: Thank you, Mr. Wilmarth. The case is submitted.
(Whereupon, at 11:50 a.m., the case in the above-entitled matter was submitted.)