LIBOTSII SUPREME COURT, U.S. WASHINGTON^ £>.C. 20543
OFFICIAL TRANSCRIPT PROCEEDINGS BEFORE
THE SUPREME COURT OF THE UNITED STATES
DKT/CASE NO. «*-3«3
-r-t-r-1 r NORTHEAST BANCORP, INC., ET AL. , Petitioners V. IllLt- BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, ET AL. PLACE Washington, D. C.
DATE April 15, 1985 PAGES 1-51
(202) 628-9300 1 IN THE SUPREME COURT OF THE UNITED STATES
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3 NORTHEAST BANCORP, INC., ET AL., 4 Petitioners 5 v. No. 84-363 6 BOARD OF GOVERNORS OF THE : 7 FEDERAL RESERVE SYSTEM, : ET AL. : 8 ------x 9 Washington, D.C. 10 Monday, April 15, 1985 11 The above-entitled matter Came on for oral 12 argument before the Supreme Court of the United States 13 at 11:05 a.m. 14 APPEARANCES: 15 STEPHEN M. SHAPIRO, ESQ., Chicago, Illinois; on behalf 16 of the Petitioners.
17 REX E. LEE, ESQ., Solicitor General of the United States, Department of Justice, Washington, D.C.; on behalf of 18 the federal Respondent.
19 LAURENCE HENRY TRIBE, ESQ., Cambridge, Massachusetts; on behalf of Respondents Bank of New England Corporation, 20 e t a 1.
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ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 CONTENTS
2 ORAL ARGUMENT PAGE
3 STEPHEN M. SHAPIRO, ESQ., on behalf of the Petitioners 3 4 REX E. LEE, ESQ., 5 on behalf of the federal Respondent 28
6 LAURENCE HENRY TRIBE, ESQ., on behalf of Respondents Bank of New England 7 Corporation, et al. 38
8 STEPHEN M. SHAPIRO, ESQ., on behalf of the Petitioners — rebuttal 49 9
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ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 PROCEEDINGS
2 CHIEF JUSTICE BURGER: Mr. Shapiro, I think
3 you may proceed whenever you're ready.
4 ORAL ARGUMENT OF STEPHEN M. SHAPIRO, ESQ.,
5 ON BEHALF OF THE PETITIONERS
6 MR. SHAPIRO: Thank you, Mr. Chief Justice,
7 and may it please the Court:
8 At issue in this case is the constitutionality
9 of regional banking laws enacted by the states of
10 Connecticut and Massachusetts which permit New England
11 bank holding companies to enter those states and engage
12 in full service commercial banking, but which withhold
13 that same right from bank holding companies located in
14 other sister states.
15 The first question presented is whether the
16 Douglas Amendment to the Bank Holding Company Act
17 immunizes the statutes from scrutiny under the Commerce
18 Clause of the Constitution.
19 The second question is whether these laws are
20 part of an agreement among the states which requires
21 Congress' approval under the Compact Clause of the
22 Constitution. And after briefly describing these
23 statutes, I'd like to address all of these questions.
24 The Massachusetts and Connecticut laws permit
25 companies from six designated New England states to 3
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 enter those states and engage in full service commercial
2 banking if the other New England state extends
3 reciprocity to Connecticut and Massachusetts. These
4 regional laws operate in combination with another
5 regional law enacted by the state of Rhode Island, and
6 together they set up a multistate common market which
7 permits some companies to come in and denies that same
8 right to other companies based solely on the location or
9 the state origin of those other companies. Thus, some
10 companies in some states get important competitive
11 benefits which are withheld from other companies based
12 solely on geography or state of origin.
13 Now, these statutes in New England were
14 designed to permit regional expansion of bank holding
15 companies in New England while excluding companies from
16 the neighboring state of New York, regardless of their
17 proximity to New England and regardless of their size.
18 By the same token, companies that are in New England
19 such as petitioner Northeast Bancorp, are unable to
20 merger with banks located directly across the New York
21 border.
22 The practical impact of these laws can be
23 illustrated with a simple example. Before passage of
24 these laws, companies in Massachusetts and in New York
25 competed on an equal basis for business in Connecticut. 4
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 Each could offer full service commercial banking in its
2 home state, but neither could offer full service 3 commercial banking in the state of Connecticut. 4 Now, however, Massachusetts companies can have
5 full service banks both in their own home state and in
6 the state of Connecticut, while their direct competitors
7 in the state of New York are still limited to their one
8 home state . 9 As the Court is aware, these regionally
10 discriminatory laws are not an isolated phenomenon. New
11 York is flanked by the New England laws on the east, and
12 directly to the south its neighbors are in the process
13 of forming another exclusionary market, the Mid-Atlantic 14 market. And there is a similar combination of states in
15 the southeast which also excludes the state of New 16 York. We are thus witnessing a partitioning of the 17 entire East Coast into exclusive banking zones, and as
18 the Court is aware, some other — some 20 other states
19 are in the process of considering regionally exclusive
20 banking laws which would divide the countries into other
21 regions throughout the entire nation.
22 Now, as the Solicitor General and the Board 23 have acknowledged and the other respondents do not
24 dispute, these laws would violate the Commerce Clause
25 unless approved by Congress. As this Court stated in 5
ALDERSON REPORTING COMPANY, INC.
20 f ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 the Eisenberg Farm case, and I quote, "The United States
2 could not exist as a nation if each of them were to have
3 the power to discriminate as against sister states with
4 respect to admitting articles of commerce. And when
5 combinations of states jointly impose this kind of
6 discrimination in unison, the danger of injury and
7 divisiveness and retaliation is even greater.
8 Now, where there is this kind of a threat to
9 the core purposes of the Commerce Clause, this Court's
10 decisions require proof that Congress unmistakably gave
11 its consent to otherwise invalid state legislation. And
12 that, we say, is a burden which respondents cannot
13 sustain in this proceeding.
14 The Solicitor General on the one hand has made
15 the argument that the plain language of the Douglas
16 Amendment permits this kind of discrimination among
17 sister states. But all that the Douglas Amendment says
18 is that the Board may not approve an acquisition unless
19 there is a state law in existence which permits the
20 acquisition. It doesn't say a single word about the
21 various kinds of laws which a state might adopt, and it
22 certainly doesn't say that a state in lifting the
23 federal ban is free to pick and choose among sister
24 states or to join into a regional confederation which
25 sets up a preferential trade zone for some states and 6
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 excludes the others.
2 QUESTION: But doesn't the very paucity of
3 language, Mr. Shapiro, suggest that the states were
4 given very wide latitude; that all Congress was
5 interested in was state approval?
6 MR. SHAPIRO: To the contrary, Your Honor.
7 When Congress defers to the states in this manner with
8 general language of this sort, the Court has made it
9 quite clear that the presumption is that Congress means
10 to defer to constitutionally valid state law; and when
11 it refers to state law in these very general terms, the
12 negative ingredients of the dormant Commerce Clause are
13 part and parcel of the state law to which Congress has
« 14 deferred.
15 QUESTION: Well, Mr Shapiro, I suppose the
16 McCarran-Ferguson Act doesn't really make it
17 unmistakably clear that states can adopt reciprocal
18 discriminatory taxes, and yet, the Court upheld that
19 power in cases like Western and Southern.
20 MR. SHAPIRO: That's a very important
21 question, and the distinction is between night and day;
22 and let me explain that.
23 In the McCarran-Ferguson Act, the statute
24 explicitly says not only that the states may regulate,
25 but that the silence of Congress shall not be deemed to 7
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 be any barrier to regulation or taxation of insurance
2 within the state. And the legislative history, of
3 course, was that this was an area that traditionally had
4 not been treated as part of commerce. And then in 1944
5 this Court changed the construction on that question,
6 and all of a sudden state laws across the country were
7 exposed to Commerce Clause challenge.
8 Congress acted within one year to pass this
9 law which expressly stated that it was lifting the
10 negative implications of the dormant Commerce Clause.
11 So you have unmistakable language, and you have
12 unmistakable language in the legislative history. And
13 we say there is nothing remotely resembling that in the
14 Douglas Amendment.
15 Now, our brothers, the private respondents,
16 have made the somewhat different argument here on the
17 authorization point, that Congress' division of the
18 banking industry along state lines is such a splintering
19 or such a balkanization that the states should be free
20 to pick and choose among sister states and set up their
21 own regional lines. But this also is directly in the
22 teeth of recent decisions of this court.
23 In the Bacchus case, decided only last term,
24 federal law had balkanized the entire industry along
25 state lines, had given the states plenary power to 8
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 permit or not permit the importation of liquor, and yet
2 that was not sufficient to displace the requirements of
3 the Commerce Clause with respect to discriminatory state
4 taxation.
5 QUESTION: Well, Mr. Shapiro, suppose it were
6 perfectly clear, that the Douglas Amemdment was
7 perfectly clear to the effect that the state may pick
8 and choose? You wouldn't have any constitutional
9 argument then, would you?
10 MR. SHAPIRO: Well, if the Douglas Amendment
11 such as S. 2851, the bill that was considered by
12 Congress, said that a state may pick and choose among
13 sister states, there would be no Commerce Clause issue.
14 If a group of states tried to do it jointly without
15 Congress' approval, there would be a compact issue.
16 QUESTION: But that would be only -- that
17 would be the only remaining issue would be --
18 MR. SHAPIRO: That is correct.
19 QUESTION: So doesn't this case just turn on
20 what Congress intended?
21 MR. SHAPIRO: It turns on the specific
22 language of the Douglas Amendment.
23 QUESTION: How do you ever get to any
24 constitutional issue other than the compact issue?
25 MR. SHAPIRO: The Commerce Clause issue does 9
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 turn on the meaning of the Douglas Amendment, that's
2 quite correct.
3 QUESTION: And if they intended it to give the
4 states the right to pick and choose, there isn't any
5 Commerce —
6 MR. SHAPIRO: That's correct. It's an issue
7 of intent.
8 QUESTION: But if they didn't — if they
9 didn't intend to reach that, then what?
10 MR. SHAPIRO: If they didn't intend to permit
11 the states to pick and choose and to gang up against
12 their sister states, then there is a black letter
13 violation of the Commerce Clause.
14 Now, the reason for not inferring
15 authorization —
16 QUESTION: Well, I suppose, Mr. Shapiro, you
17 had an equal protection claim below which you dropped.
18 MR. SHAPIRO: We have reinserted that issue —
19 QUESTION: After reading Metropolitan Life.
20 MR. SHAPIRO: That is correct.
21 (Laughter.)
22 MR. SHAPIRO: Your Honor is quite right.
23 QUESTION: I wonder if you think that having
24 read that case that you think the Massachusetts and
25 Connecticut statutes could surive an equal protection 10
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 challenge under that doctrine?
2 MR. SHAPIRO: We think for the reasons that we
3 explained in our supplemental brief that they clearly do
4 not, and we have suggested that the Court may wish to
5 consider this issue. It's, of course, a discretionary
6 proposition. But if the Court agrees with us on either
7 the Commerce Clause or the Compact Clause, there is no
8 reason to reach equal protection. Should it disagree
9 with us on the first two issues, we would suggest that
10 it is appropriate to turn to equal protection, the
11 reason being that states across the country are now
12 considering statutes of this sort, and many, many
13 transactions will turn on the validity of these laws.
14 That is why we've raised this equal protection issue in
15 light of Metropolitan Life as a discretionary matter for
16 the Court.
17 Now, to return to authorization, the reason
18 for not inferring authorization from Congress'
19 regulatory pattern, the balkanization by Congress, is a
20 compelling one that goes to the very structure of our
21 system of government. When Congress regulates a market,
22 it acts to protect all affected interests and all
23 affected states. But when a group of states imposes its
24 own discriminatory system, there is a real danger that
25 unrepresented interests will suffer serious harm without 11
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 any means to protect themselves. And the Court, we say,
2 should be especially cautious about inferring
3 authorization for regional discrimination from this
4 Douglas Amendment.
5 The Douglas Amendments preserves the equal
6 status of each state, and it rests on historical state
7 boundaries, not on newly conceived regional lines.
8 QUESTION: Let me go back there. Suppose that
9 we agree that the Douglas Amendment didn't intend to
10 give the states powers to pick and choose. Well, then,
11 the Douglas Amendment said no acquisitions by
12 out-of-state banks; isn't that right?
13 MR. SHAPIRO: That's correct.
14 QUESTION: Unless the state agrees.
15 MR. SHAPIRO: That is correct.
16 QUESTION: Well, if these agreements by the
17 state are not the kind of agreements the Douglas
18 Amendment purported to permit, then why shouldn't the
19 ban — why shouldn't the ban against out-of-state
20 acquisitions take over? Neither New York banks nor New
21 England banks could make out-of-state acquisitions.
22 MR. SHAPIRO: The ban would certainly be back
23 in place unless and until —
24 QUESTION: How would you ever reach a Commerce
25 Clause issue? 12
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 MR. SHAPIRO: Unless end until the state
2 enacted a constitutional statute lifting the ban, there
3 would be no acquisition.
4 QUESTION: So why wouldn't — if we agreed
5 with you that Congress didn't intend to let the states
6 pick and choose, then these states have not given the
7 right kind of consent.
8 MR. SHAPIRO: Well, these states --
9 QUESTION: They haven't given any consent.
10 MR. SHAPIRO: These states have enacted laws
11 that purport to give consent, but they're
12 unconstitutional laws that have no blessing from the
13 Douglas Amendment.
14 QUESTION: Well, they're not the kind that
15 Congress anticipated.
16 MR. SHAPIRO: That's correct.
17 QUESTION: They didn't intend to permit states
18 to act in this Way, in which event there's no way to
19 avoid the general ban.
20 MR. SHAPIRO: That's correct. There is —
21 QUESTION: Well, then how do you ever reach a
22 constitutional issue?
23 MR. SHAPIRO: Well, the Commerce Clause
24 contains a rule of constitutional law that is of
25 assistance to the Court in construing what the Douglas 13
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 Amendment means, what it admits to allow.
2 QUESTION: If the Douglas Amendment had said
3 bank holding companies may not acquire banks from out of
4 state except that states may consent to do that, but we
5 do not intend to give the states the power to pick and
6 choose, and if they try to pick and choose, it shall not
7 be deemed consent for purposes of this amendment.
8 MR. SHAPIRO: Well, that's --
9 QUESTION: Why isn't that really what you're
10 arguing?
11 MR. SHAPIRO: It's very close to what we're
12 arguing, but our position I suppose is slightly
13 different in this sense. The states are free to enact
14 statutes of any kind that they want to. They have
15 general legislative power. And the question under the
16 Douglas Amendment is if they have enacted a valid
17 statute, that lifts the ban. Now, if these statutes are
18 unconstitutional under Commerce Clause principles, the
19 question is whether Congress has permitted this
20 exceptional result. And we say that --
21 QUESTION: Well, all right. Assume we agreed
22 with you that they're unconstitutional. They they
23 haven't given the constitutional consent. There is no
24 consent in existence.
25 MR. SHAPIRO: That is correct. 14
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 QUESTION: So neither the New York banks or
2 anybody else could — may acquire an out-of-state bank.
3 MR. SHAPIRO: That is quite correct. These
4 orders of the Board would have to be reversed in that
5 instance, ana these transactions could not proceed, and
6 my clients would be spared the competitive injury that
7 they now stand to suffer.
8 QUESTION: Well, I'm suggesting that if we
9 agreed with you, we'd never need to talk about the
10 Commerce Clause.
11 MR. SHAPIRO: We're not far apart, Your
12 Honor. I believe that the Commerce Clause contains a
13 rule of interpretation that is relevant to the statutory
14 issue. That's the only difference between us. The
15 Wunnicke case and Sporhase and others have said that the
16 Commerce Clause means that you have to have unmistakable
17 evidence of consent to permit this kind of
18 discrimination, and we say that our brothers can't find
19 that unmistakable consent.
20 Now, they tried to find this unmistakable
21 consent from the legislative history, and the Court has
22 warned against reliance on fragments from the
23 legislative history to reach issues such as consent.
24 But there is no question that this legislative history
25 does refer to state discretion and to state policy and 15
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 certainly supports the view that the states may lift the
2 federal ban. But it doesn't say a single word about the
3 right of the states to pick and choose among sister
4 states or to enter into multistate exclusive banking
5 federations, and it doesn't say a single word about
6 relinquishing the protection of the Commerce Clause.
7 Now, respondents also have made the argument
8 here that the Board was entitled to deference when it
9 addressed the issue of authorization, but the Board made
10 specific findings about its own statute which we say
11 completely undercut respondent's submissions.
12 The Board found that the Douglas Amendment
13 "does not appear on its face to authorize discrimination
14 based on state location," and that the legislative
15 history contains "no discussion of the power of the
16 states to discriminate against potential out of state
17 interests."
18 Now, the Board did say, of course, that the
19 Douglas Amendment is a renunciation of all federal
20 interest in the subject of interstate bank
21 acquisitions. But with great respect to my friends at
22 the Board, this is certainly an erroenous overstatement.
23 Federal law prescribes a host of statutory
24 criteria and policies applicable to interstate bank
25 acquisitions. In this very case the Board had to look 16
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 at competition, potential competition, managerial
2 resources, service to the community and other standards
3 prescribed by Congress.
4 And besides this, even if there were a total
5 retreat from the field by the federal government, which
6 there certainly isn't, it would be beside the point
7 because when Congress retreats and defers to state law,
8 it is deferring to valid state law consistent with the
9 principles of the Commerce Clause, as this Court has
10 said repeatealy in recent terms.
11 QUESTION: Well, Mr. Shapiro, do you think the
12 statement of the Board that Congress has just been
13 silent with respect to this pick and choose business,
14 that doesn't necessarily destroy the deference that's
15 due the Board, because the Board nevertheless though it
16 was consistent with the statute to do what it did.
17 MR. SHAPIRO: Well, the Board --
18 QUESTION: Isn't that right?
19 MR. SHAPIRO: We don't think so, Your Honor,
20 because —
21 QUESTION: You mean they said we were acting
22 contrary to the statute?
23 MR. SHAPIRO: They said they were waiting for
24 judicial clarification. They did not know how to
25 analyze this in light of existing — 17
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 QUESTION: But nevertheless, they felt there
2 wes room under the statute to do what they did.
3 MR. SHAPIRO: Yes.
4 QUESTION: Or they wouldn't have done it.
5 MR. SHAPIRO: And the rationale was this
6 renunciation theory which, with great respect, is
7 totally in error. There is no renunciation of federal —
8 QUESTION: Well, I know, but they nevertheless
9 thought that the statute permitted what they were doing.
10 MR. SHAPIRO: On this theory of renunciation.
11 QUESTION: Well, I don't — on the theory of
12 silence. That Congress didn't forbid us, forbid our
13 interpreting the statute in this manner.
14 MR. SHAPIRO: But silence --
15 QUESTION: And why shouldn't — and they left
16 that up to us.
17 MR. SHAPIRO: Silence, under this Court's
18 opinions, is certainly not sufficient. The unmistakable
19 intent on Congress' part to permit this extraordinary
20 result, a result which this Court has said is
21 destructive to the very fabric of the Union. States
22 picking and choosing among sister states, provoking
23 retaliation —
24 QUESTION: I would think you'd have to concede
25 that you have the problem of convincing us that there's 18
ALDERSON REPORTING COMPANY, INC.
20 f ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 only one construction permissible under this statute
2 with respect to picking and choosing.
3 MR. SHAPIRO: Yes. The silence —
4 QUESTION: I mean the Board could have decided
5 it the other way, too.
6 MR. SHAPIRO: The silence of the statute on
7 the issue of picking and choosing means that there is no
8 unmistakable intent that Congress meant to permit
9 something like this, completely destructive of
10 principles that the Founding Fathers were concerned
11 about. This is provocative of trade warfare among
12 states. It is inconsistent with the idea that the
13 states are equals in our sovereign system, sovereign
14 states of equal status.
15 Now, if Congress meant to permit this
16 extraordinary result, isn't it amazing that it didn't
17 say a word to illuminate this for courts —
18 QUESTION: Mr. Shapiro, may I question right
19 there?
20 MR. SHAPIRO: — and for the other Congressmen
21 who voted on it, and for the President who signed this
22 1 aw.
23 QUESTION: There are really two conditions in
24 the state statutes here: one, that the other, the
25 acquiring bank be in New England, and secondly that they 19
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 have a reciprocal provision.
2 What if they just had the latter, would that
3 comply with the statute?
4 MR. SHAPIRO: The reciprocity provision is one
5 of dubious constitutionality, of course, under this
6 Court's decision, its decisions. Reciprocity has to be
7 analyzed under a rule of reason approach, not a per se
8 approach of the sort that we say is applicable here.
9 Our position about these laws is that they
10 have to stand on their own two feet. They get no
11 blessing from the Douglas Amendment. They have to
12 satisfy all of the traditional requirements of the
13 Commerce Clause. Whether a reciprocity statute would
14 pass constitutional muster is a close question. It
15 would depend on all the circumstances, the purpose of
16 the reciprocity requirement, its effect in the market,
17 and the availability of alternatives.
18 QUESTION: But your argument would be that if
19 that — if we thought that violated the Constitution
20 apart from the statute, the statute would not save that
21 either.
22 MR. SHAPIRO: That's quite correct.
23 Now, the Government's argument about deference
24 to the Board is especially puzzling here, because the
25 Board declined to sign the Government's brief. And it's 20
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 apparent that the Board disagrees with the Government's
2 literal meaning analysis because it said on the face of
3 the statute it sees no such literal meaning.
4 Now, since the Government thinks that
5 deference to the Board is so important, I'm sure Mr. Lee
6 intends to explain to the Court what the Board's views
7 are, why they disagree with the Government's brief, and
8 wherein the disagreement lies, because after all, one
9 who invokes the rule of deference should at least
10 explain what the agency thinks about the submission
11 presented to this Court.
12 Now, I have one final point about the
13 authorization issue. In 1983 and in 1984 Congress
14 considered bills that would permit regional banking laws
15 and regional multistate compacts. Those bills were not
16 enacted, and at the end of the last Congress, the House
17 and the Senate disagreed in the most fundamental terms
18 about the shape that legislation should take in this
19 area.
20 The chairman of the House Judiciary Committee
21 expressed serious reservations about the whole concept
22 of regional banking and its economic implications for
23 the nation. Congress is again considering regional
24 banking proposals and is expected to start hearings this
25 spring. 21
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 Now, if the Court were to hold here that
2 Congress approved these state laws sub silentio 30 years
3 ago, that would largely moot the policy debate before
4 Congress. Before Congress would have a chance to finish
5 its hearings on its this subject, numerous acquisitions
6 would be consummated under existing state regional
7 banking laws.
8 We submit to the Court with great deference
9 that it is the better part of wisdom in this situation
10 to adhere to the established principle that state laws
11 violative of the Commerce Clause are not sustainable
12 unless and until Congress gives its unmistakable intent
13 and its unmistakable approval. Congress has not yet
14 given that unmistakable consent, and it may never do so.
15 QUESTION: Is this an argument, Mr. Shapiro,
16 that we should do nothing until Congress has acted?
17 MR. SHAPIRO: It's the reverse, Your Honor.
18 The argument is that the burden of persuading Congress
19 is on those who would impose violations of the
20 Constitution and the harmful effects on our economy.
21 They have to wait for Congress to say yes.
22 The wisdom of the constitutional scheme is
23 that before potentially harmful arrangements like this
24 are implemented by states, that Congress has to give its
25 approval, not afterwards after the injury has been 22
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 done. And we think there is a real risk of substantial
2 injury from these discriminatory state laws in terms of
3 retai1iation, discord and divisiveness among the sister
4 states which hitherto have been co-equal sister states
5 in our system.
6 QUESTION: Well, suppose we don't agree with
7 you?
8 MR. SHAPIRO: On the Commerce Clause issue?
9 QUESTION: Yes.
10 MR. SHAPIRO: The second issue in that event
11 would be the Compact Clause issue, and the question, of
12 course, is whether this amounts to a compact or an
13 agreement among the states which requires Congress'
14 approval.
15 Now, there is no contention that Congress has
16 given its consent to a multistate compact in this case.
17 QUESTION: Well, just what is it that you say
18 Connecticut and Massachusetts have agreed to?
19 MR. SHAPIRO: This Court's opinions establish
20 that reciprocal statutes can constitute compacts or
21 agreements if they have the effects that the Founding
22 Fathers were concerned about. And this, we say, has
23 exactly the effects that the Founding Fathers were
24 concerned about — the danger of divisiveness, regional
25 combinations oppressing commerce in other parts of the 23
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 country. This has precisely the impact that the
2 Constitution --
3 QUESTION: But there are various kinds of
4 reciprocal statutes on many different subjects on the
5 books, are there not?
6 MR. SHAPIRO: That's quite true, Your Honor,
7 and what is unique --
8 QUESTION: And you think all of those are
9 suspect.
10 MR. SHAPIRO: We do not. What is unique about
11 this multistate arrangement is that it allows some to
12 come in and doesn't allow other sister states to come
13 in. It confers powerful competitive benefits in some
14 states, withholds those same benefits from direct rival
15 institutions in other states just because of where
16 they're located.
17 Now, there is not a compact like this, to our
18 knowledge, that has ever been considered, and certainly
19 Congress has never approved a compact like this. The
20 closest cousin --
21 QUESTION: Maybe it isn't a compact. You keep
22 saying this is a compact. Isn't that one of the issues?
23 MR. SHAPIRO: We say not only is it a compact
24 because of the reciprocal nature of the statutes, but
25 also because of the joint action in adopting these 24
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 statutes.
2 Now, when Senator Brennan proposed this
3 multistate arrangement, he rode circuit in Rhode Island
4 and in Connecticut and urged the establishment of a real
5 New England system, and he thereafter testified before
6 the legislatures.
7 When the Connecticut bill was prepared, it was
8 submitted to the banking commissioner in the state of
9 Massachusetts for his approval, and when the bill
10 returned to the floor in Connecticut, on seven separate
11 occasions the Connecticut legislators called it a
12 compact or an agreement. These are the words of the
13 legislators who adopted this provision.
14 QUESTION: Well, what if Connecticut, Mr.
15 Shapiro, had simply adopted a statute that said we will
16 allow out-of-state banks to come in so long as the state
17 in which the bank is incorporated allows our bank to
18 come in — just simple reciprocity without the New
19 England regional aspect?
20 MR. SHAPIRO: We Say a simple reciprocity
21 statute does not have to go to Congress because it's not
22 — although it could be characterized as a multistate
23 agreement under the Multistate Tax case, it wouldn't
24 have those deleterious effects on the Union and the
25 equality of the states in the Union that requires 25
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 Congress' approval. Only certain compacts have to go to
2 Congress, and the one you've described that would be
3 open to everybody would not have to go to Congress.
4 Now, of course this is the real question in
5 this case: why is it the kind of compact that has to go
6 to Congress? Now, the test has been articulated in
7 slightly different ways in past decisions of the Court,
8 and ultimately the issue is one of potential impact on
9 our federal structure. And as the Court stated in
10 Florida v. Georgia, the provision is obviously intended
11 to guard the rights and the interests of the other
12 sovereign states and to prevent any compact or agreement
13 between any two states which might affect injuriously
14 the interests of the others.
15 Now, by setting up a regional common market in
16 which favored states are invited in while disfavored
17 states are kept out, we say that there has been
18 established a treaty of commercial privileges of exactly
19 the kind that this Court is condemned in Virginia v.
20 Tennessee. It said agreements among states that confer
21 special privileges on those states that are withheld
22 from the others have to go to Congress for its approval.
23 QUESTION: Mr. Shapiro, can I interrupt you?
24 We got a lot of reading material in this case, and I
25 must confess in that which I have been able to read I 26
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 didn't find something you mentioned earlier, that the
2 Government brief was not signed by the Federal Reserve
3 Board?
4 MR. SHAPIRO: That is correct. The Board's --
5 QUESTION: Where does that appear in the
6 papers?
7 MR. SHAPIRO: On the face of the paper you'll
8 see the Department of Justice's names, but you'll see no
9 representative from the Board listed.
10 QUESTION: But there's no comment on that in
11 any of the papers.
12 MR. SHAPIRO: No comment on that. And I'm
13 sure Mr. Lee will explain the background of that.
14 QUESTION: Well, doesn't the -- the Solicitor
15 General does have authority to represent the Board.
16 MR. SHAPIRO: Yes, he does. In every case, to
17 my knowledge, where he's done so, the Board has signed
18 that brief. They didn't do it here.
19 If the Court please, I'd like to reserve —
20 QUESTION: Well, you don't suggest that in
21 every case where the Government is up here and there's
22 an agency involved that an agency's name is on the brief?
23 MR. SHAPIRO: Not in every case, but with the
24 Board that is indeed the practice.
25 QUESTION: Well, how do we know that? 27
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 MR. SHAPIRO: Mr. Lee can confirm this. That
2 is my own experience having worked in that office.
3 QUESTION: Well, what if he doesn't?
4 (Laughter . )
5 MR. SHAPIRO: The Court can see for itself in
6 the disagreement.
7 CHIEF JUSTICE BURGER: You'll deal with that
8 on rebuttal if we allow you any rebuttal time.
9 MR. SHAPIRO: Thank you very much.
10 CHIEF JUSTICE BURGER: Mr. Solicitor General.
11 ORAL ARGUMENT OF REX E. LEE, ESQ.,
12 ON BEHALF OF THE FEDERAL RESPONDENT
13 MR. LEE: Mr. Chief Justice, and may it please
14 the Court:
15 Let me clarify first of all that this brief I
16 have in my hand is filed on behalf of the federal
17 respondent in this case, the Federal Reserve Board.
18 There is in this record some indication that
19 the Chairman of the Federal Reserve Board and one other
20 member of the Board have some qualms about the policy,
21 the soundness of the policy that has been reflected in
22 the three orders that are at issue in this case. And
23 also, as the Board's opinion reflects, there is some
24 confusion at the Board concerning the constitutional
25 issue. 28
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 We simply submit these things. First of all,
2 the fact that in the face of their policy concerns --
3 and that's on page A-l-99 of the Appendix to the
4 Certiorari Petition -- and in the face of those
5 constitutional concerns that the Board would still
6 conclude unequivocally that these statutes are covered
7 by the Douglas Amendment, makes all the stronger the
8 conclusion that this is an instance in which the Board
9 has lent its expertise to the particular item, the only
10 item on which the Board's expertise -- on which the
11 Board is entitled to expertise. It is not on the
12 constitutional issue. It is rather on the statutory
13 interpretation issue.
14 The position of the Government is as stated,
15 and insofar as the position of the Board is concerned,
16 this doesn't need to be stated, but it is in the brief
17 that the three orders of the Federal Reserve Board at
18 issue in this case which set forth its position, and
19 that's the position. What the Board did is what we as
20 the Government are defending in this particular instance.
21 The only Commerce Clause issue in this case is
22 identical to the statutory question, and the key to
23 decision is how much burden-lifting flexibilty did 24 Congress intend to allow the states and did Congress
25 allow the states to exercise. 29
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 Now, the petitioners contend that the states 2 were limited to a choice between two polar extremes.
3 They could either leave this Congress' total ban in 4 place, or they could lift it completely; but they had no
5 middle ground alternative. And we profoundly disagree. 6 In our view it is very clear that what 7 Congress intended to do and what Congress did do was to
8 permit each individual state to tailor its own
9 commerce-enhancing package to its own needs to identify
10 that point along the regulatory spectrum between
11 complete prohibition, complete permissiveness that best
12 comports with that state's policy.
13 It is a view that is solidly supported by all
14 three of the traditional guides to statutory
15 interpretation. Most important, that's what the statute
16 say s .
17 Now, the petitioners complain that Congress
18 did not speak with sufficient clarity, but I submit that
19 that argument only confuses clarity with specificity.
20 The Douglas Amendment could not be more clear. It could
21 not be expressed. And within any reasonable view of the 22 ordinary meaning of the language, the applications that
23 the Board approved in this case were specifically
24 authorized by the statute laws of the state in which the
25 bank was located. 30
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 What the petitioners are really contending, 2 therefore, is that Congress is constitutionally required
3 not only to speak with clarity, but also to spell out 4 the details of the circumstances under which the states
5 may act.
6 It is an argument which would interpret the
7 Commerce Clause as a significant limitation on Congress'
8 power to regulate commerce, because Congress really had
9 two policy options available to it. On the one hand, it
10 could have, as it did, delegate to the states the power
11 to do — enact general — it could have delegated a
12 rather general power to the states to enact. On the
13 other hand. Congress could have specifically spelled out
14 the details of the kinds of statutory authority that the
15 states were to have. And in choosing between those two,
16 the choice between those two was a significant policy
17 alternative available to Congress.
18 What the petitioners are really saying is that
19 the Commerce Clause limited Congress limited Congress to
20 only one of those two alternatives. It is an argument
21 that is squarely rejected by the McCarran-Ferguson Act
22 cases. It is true in McCarran-Ferguson that there also
23 Congress dealt in very general language. "The business
24 of insurance shall be subject to the laws of the several
25 states." 31
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 And the fact that Congress in another section
2 said and we really mean it, does not alter the fact that
3 Congress did not specifically authorize the states to
4 enact, for example, retaliatory laws such as were
5 involved in Western and Southern. And this Court in
6 Western and Southern specifically noted -- and I quote
7 -- "that the unequivocal language of the Act suggests no
8 exception." And that also specifically describes the
9 circumstance here.
10 Congress elected to impose the specificity
11 requirement on the states. It was the states that were
12 required to be specific. It did not elect to impose
13 that obligation on itself.
14 This approach, I submit, of leaving important
15 segments of banking policy for resolution by the states
16 is hardly a new approach to American banking, and the
17 distinctive aspect of American banking is highly
18 relevant to the constitutional issue, because it's
19 relevant to the statutory interpretation issue for at
20 least 150 years. Ever since the death of the Second
21 National Bank in 1836, the cornerstone of American
22 banking, in stark contrast to the rest of the world, has
23 been localized control.
24 The number of commercial banks in the United
25 States is somewhere between 14,000 and 15,000. The same 32
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 number in Canada, by contrast, is 11, and the United
2 Kingdom is 36. It is a tradition that imposes some
3 efficiency costs, but it also provides some benefits.
4 As this Court observed in Philadelphia National Bank and
5 in the Phillipsburg Bank case, that is the cornerstone
6 of American banking tradition. The local banker, the
7 banker who makes the loan decision, is a person who
8 lives in the local community, and as the Court observed
9 in Phillipsburg, often makes loans on the basis of what
10 he knows about the character of the individual.
11 Many persons' banking needs are best met by a
12 continuation of that kind of a scheme, by a banker who
13 is a member of the local community and who knows local
14 people and local needs and can respond to them on a
15 personal, individualized basis.
16 Now, by contrast, other persons' needs, to be
17 sure, are best served by the broader range of services
18 that can be offered only by larger banks located in
19 metropolitan areas; and the mix of those needs will
20 necessarily vary from place to place and from state to
21 s tate.
22 The central feature of the Douglas Amendment
23 is that it permits each state to work out its own mix;
24 that is, to maintain localized control over banking to
25 the extent that localized control is in that state's 33
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 best interest. And in this case Massachusetts and
2 Connecticut have simply exercised that leeway by opting
3 neither for total localized banking, nor for complete,
4 uninhibited interstate banking, but a middle ground
5 alternative between the two.
6 In the face of interstate banking as a very
7 real possibility as a future prospect, it was certainly
8 rational for these two states to prepare themselves for
9 it by experimenting with a regional banking middle
10 ground, an experiment which would at lesser costs
11 acquaint them with some of the problems associated with
12 departures from the local banking model that they know
13 best, and at the same time would better inform their
14 later decision whether interstate banking or anything
15 other than the local banking approach would best serve
16 their people's needs. That's what the Douglas Amendment
17 provides for the states, and that's what they have —
18 that's what they have taken advantage of.
19 The legislative history is brief, and it
20 clearly confirms that Congress meant what it said. I
21 disagree with Mr. Shapiro. These are not just
22 fragments. Well, they're fragments in the sense that
23 they're brief, but they're not fragments in the sense
24 that — the legislative history here is entitled to a
25 good deal more deference than is usually given to 34
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 comments made on the floor, because since the Douglas
2 Amendment was only a floor amendment, the comments made
3 on the floor are the only legislative history. That's
4 all there is. There's only about seven or eight pages
5 of it, and it can be fairly briefly read.
6 And the overwhelming conclusion that one comes
7 away with when reading that legislative history is that
8 the states were to be in charge and that Senator Douglas
9 and other supporters of the legislation were well aware
10 of this tradition of local banking, and that's what they
11 meant to preserve.
12 QUESTION: Mr. Lee, I suppose you would agree,
13 though, that a state couldn't attach an unconstitutional
14 condition to the consent. It couldn't say, for example,
15 provided that the bank is owned by Republicans, or
16 Mormons or something like that.
17 MR. LEE: Of course, of course.
18 QUESTION: So there is some limit on the
19 state's —
20 MR. LEE: Of course there is. And that's the
21 distinction that needs to be drawn. This
22 unconstitutional limitation pertains to something other
23 than the Commerce Clause itself, because Congress
24 clearly does have the authority to shape the extent to
25 which the states may enhance commerce — the movement of 35
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 goods and services across interstate commerce.
2 But insofar as the Commerce Clause is
3 concerned, the argument that what Congress intended to
4 do was to authorize only otherwise valid state laws
5 simply ignores the thrust of the Commerce Clause, and
6 any attempt to structure a separate constitutional
7 argument insofar as the Commerce Clause is concerned
8 from the Douglas Amendment itself is --
9 QUESTION: What if it said something like
10 provided that the acquiring bank doesn't charge interest
11 rates that are different from those that prevail in our
12 state or something like that? Could there be any
13 condition all that might affect the way the bank did
14 business?
15 MR. LEE: Well, I think it would once again
16 come back to whether that was or was not a
17 commerce-related concern, and that's also, Justice
18 Stevens, why Mr. Shapiro's attempted distinction between
19 this restriction, this geographic restriction and the
20 reciprocity restriction or the grandfathering provisions
21 or any others just won't wash.
22 Because in any event what you have when one of
23 the states lifts the burden to an extent but not total,
24 you have left in place a scheme under which there is a
25 segment of state business that is available to 36
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 in-staters but is unavailable to out-of-staters, and
2 that's what under this Court's precedents is a per se
3 violation of the Commerce Clause.
4 Now, finally, Justice White is absolutely
5 right that the petitioners have the burden of showing
6 that their view is the only permissible one, because the
7 agency charged with the implementation of this statute
8 has consistently entered orders approving acquisitions
9 in all cases where state statutes specifically permit
10 the particular type of interstate acquisition before the
11 Board. And that includes not just these geographic
12 limitations but also the substantive limitations where
13 someone can come in from outside but can only engage in
14 the credit card business, for example.
15 The fact that the members — that the Board
16 may not have understood that its interpretation of the
17 Douglas Amendment in this unique constitutional setting
18 also determines the constitutional question is
19 immaterial. It has interpreted the Douglas Amendment,
20 and our defense before this Court is a defense of the
21 orders that the Court entered. And the Court not only
22 through it orders but also through its opinions made it
23 very clear that notwithstanding its policy misgivings,
24 notwithstanding its constitutional misgivings, concluded
25 that these orders fell squarely within the scope of what 37
ALDERSON REPORTING COMPANY, INC.
20 F ST„ N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 Congress intended the states to be able to do under the
2 Douglas Amendment.
3 QUESTION: Well, if they do, they're certainly
4 can't be any Commerce --
5 MR. LEE: That is absolutely correct, Justice
6 White. And it is equally clear --
7 QUESTION: How can the Board — how can the
8 Board have some constitutional doubts; that if it really
9 thinks Congress intended to do this, what's left of the
10
11 MR. LEE: Because they didn't understand this
12 Court's decisions in Western and Southern and in
13 Prudential Insurance v. Benjamin.
14 If the Court has no further questions, I have
15 nothing further.
16 CHIEF JUSTICE BURGER: Mr. Tribe.
17 ORAL ARGUMENT OF LAURENCE HENRY TRIBE, ESQ.,
18 ON BEHALF OF RESPONDENTS BANK OF NEW ENGLAND
19 CORPORATION, ET AL.
20 MR. TRIBE: Mr. Chief Justice, and may it
21 please the Court:
22 I would like, if I might, to first clear away
23 what I think is some confusion about the Compact Clause,
24 because I don't think it really belongs in this case.
25 When Justice O'Connor asked Mr. Shapiro what 38
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 exactly have Massachusetts and Connecticut agreed to,
2 and there was a pause, and then we were told, well,
3 they've agreed to reciprocity.
4 Notice, this Court has held, of course, in
5 Beaux v. Barrett, 1953 that reciprocity alone doesn't
6 make something the kind of compact Congress need
7 approve.
8 The key point is they're complaining of the
9 proposed exclusion of New York. There isn't any
10 suggestion in this case that there is a reciprocal
11 agreement to exclude New York. Reciprocity means you
12 let us in, we'll let you in. But there's no basis
13 whatever for arguing that there is an exclusionary
14 agreement in this case, and there's been no response
15 whatever by the petitioners to our argument that indeed
16 as long ago as 1896, this Court expressly ruled that no
17 approval by Congress is needed under the Compact Clause
18 where legislation on the part of two or more states
19 reciprocally permits corporate entities to enter one
20 ano the r.
21 I think the Compact Clause is a nonissue here,
22 and I think Justice White is surely correct that the
23 whole question is what power did Congress delegate to
24 the states.
25 Now, as Justice Rehnquist indicates, the 39
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 paucity of language about restrictions here cuts only
2 one way, and this Court in Justice Brennan's opinion in
3 Western and Southern I think made clear which way it
4 cuts. When there are no limitations placed in an
5 open-ended grant of authority to the states, that means
6 that Congress meant what it said.
7 Now, that is absolutely clear here where
8 Congress could readily have imposed limitations and
9 indeed impose one, namely that the burden lifting action
10 by the states, tailoring their own commerce-enhancing
11 package, as General Lee puts it so well, that that step
12 must be taken by state statute. And moreover, quite
13 apart from the unambiguous language here, I would Soy
14 far clearer and far more explicit than the statement
15 about the implications of silence in the
16 McCarran-Ferguson Act, we have here a case where the
17 legislative history, far from fragmentary, is literally
18 overwhelming.
19 The sponsors, Douglas and Paine, spoke about
20 leaving it to the states' discretion. The floor manager
21 of the bill, Roberston, said that if you believe in
22 states' rights, you've got to go this way because if you
23 accept the House version of the bill, you don't give the
24 states leeway. The opponents of the bill made the
25 argument that Mr. Shapiro is making here: that it is 40
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 discriminatory. Senator Brucher opposed the bill on the
2 grounds that it gave states new powers to restrict bank
3 holding companies that entered. That's on page 674 of
4 the Joint Appendix of the Second Circuit.
5 It seems to me that in this case in
6 particular, the statements of a legislator who sponsored
7 the bill are entitled to special weight. The
8 petitioners in their brief cite language from this
9 Court's opinion in Chrysler v. Brown, saying that what a
10 legislator says may not be decisive. But more recently,
11 this Court in Northhaven against Bell made quite clear
12 in Justice Blackmun's opinion for the Court that
13 although that's sometimes true, the remarks of a Senator
14 who is the sponsor of the language ultimately enacted
15 are, in this Court's words, "an authoritative guide to
16 the statute's construction" when the matter comes up on
17 the floor.
18 So it seems to me clear that if, as Justice
19 White asks, there is only one construction permissible,
20 I think I know what it is, and that is Congress meant
21 what it said. The States could lift selectively. And I
22 think, conversely, if more than one construction is
23 permissible, there ought to be deference to the
24 expertise of the Board on the meaning of the statute
25 that it has uniformly administered. 41
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 But I do want to turn to the image that
2 petitioners would deploy in this Court to somehow make
3 it appear as though what the states are doing here or
4 what they are authorized to do does entail something
5 like Justice Stevens' concern «about an unconstitutional
6 condition, a kind of gerrymander, picking and choosing
7 perhaps among various states, as though Massachusetts
8 and Connecticut through their statutes brandished the
9 slogan "We hate New York."
10 Nothing of that sort is going on here.
11 There's a decision to respect the historic cultural and
12 economic boundaries of the region, the New England
13 region, hardly an artifact of anyone's imagination.
14 QUESTION: But, Mr. Tribe, would the case be
15 any different in your view if they thought that there
16 was particularly dangerous competition from, say,
17 California and New York, and so we'll let every state
18 except those two in?
19 MR. TRIBE: Justice Stevens, I think it would
20 be no different. The question would be this --
21 QUESTION: Just New York, every state except
22 New York.
23 MR. TRIBE: I think the question in that case
24 would be is there a rational basis for singling out New
25 York by name or New York and California by name, just as 42
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 i n
2 QUESTION: Well, the reason is we don't like
3 New York.
4 MR. TRIBE: Well, if the reason is we don't
5 like New Yorkers, pure and simple --
6 QUESTION: -- in particular.
7 MR. TRIBE: Then it looks pretty bad. It
8 looks like I guess the Merino case where this Court said
9 that just because you don't like a certain group, that's
10 not a good enough reason.
11 But here, interestingly, both the Board and
12 the Second Circuit on an ample record found that that
13 Wos not the reason. The reason rather Was a
14 well-calculated decision to foster a limited experiment
15 preserving diversity and stability in a system at one
16 and the same time responsive to local needs and yet
17 likely to build up enough indigenous entities to resist
18 the coming onslaught.
19 QUESTION: But you seem to be arguing there 20 that the reasons were sufficient; in other words, that
21 there was a justification for discrimination. And I'm
22 asking you, supposing you had a case in which there's no
23 apparent justification, no legislative history. They
24 just took in everybody except New York. Would that be a
25 different case? 43
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 MR. TRIBE: I guess, Justice Stevens, that
2 would surely be a harder case, but I would say that it
3 would require new law -- 4 QUESTION: Why would it be harder?
5 MR. TRIBE: Well, I suppose it would be harder
6 because I can imagine this Court saying that like
7 persons, states are subject to a norm of equality, and
8 that if states by name are treated differently by other
9 states, there must at least be a rational basis for the
10 difference .
11 QUESTION: Even when Congress says it's okay?
12 MR. TRIBE: I think when Congress says it's
13 okay, Central Roeig suggests that that's decisive, and I
14 think though harder, we would still win the case.
15 QUESTION: See, that's what puzzles me. Has
16 Congress said it's okay? If it has, why can't they do
17 it for 49 states and not the last? If they haven't,
18 then don't we have to look at reasons?
19 MR. TRIBE: Well, if Congress has said it's
20 okay, there still is a Fifth Amendment problem, I
21 suppose, with the validity of what Congress did. But
22 the point is whichever way we go on that, there's no
23 doubt in this record that they had good reasons. The
24 Federal Reserve Board in the Second Circuit found there
25 was a rational relationship, and that's easy to see — 44
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 QUESTION: Would there be a potentially bigger
2 problem in the instance posed by virtue of the Equal
3 Protection Clause analysis of Metropolitan Life?
4 MR. TRIBE: Well, I would think if
5 Metropolitan Life were extended into a truly destructive
6 engine for all laws of this kind, there might be a
7 problem. But if you view Metropolitan Life, as I tend
8 to, just as holding that when your whole purpose is just
9 to benefit the home team at the expense of outsiders,
10 that that is not per se legitimate. Then that would
11 cause no problem here, because if anything,
12 Massachusetts and Connecticut gave up a home team
13 advantage in order to preserve regional benefits.
14 And it's interesting that even after
15 Metropolitan Life —
16 QUESTION: In order to preserve a regional
17 home team.
18 (Laughter.)
19 MR. TRIBE: Well, I suppose.
20 QUESTION: IAAA competition, not the major
21 leagues.
22 MR. TRIBE: They were holding a regional meet,
23 and they weren't ready yet to invite the big leagues in.
24 QUESTION: Well, Mr. Tribe, could Connecticut
25 say we'll let in New York banks, but only some New York 45
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 banks? 2 MR. TRIBE: And if they picked and choosed in 3 -- picked end chose in a wholly arbitrary, irrational 4 way?
5 QUESTION: Whatever way they pick -- 6 MR. TRIBE: I guess there would be potential 7 equal protection problems. 8 QUESTION: Has Congress allowed them to do 9 that? 10 QUESTION: They couldn't.
11 MR. TRIBE: I think that under the Equal
12 Protection Clause in Shapiro Congress couldn't delegate
13 to them the power invidiously to pick and choose. But
14 even after Metropolitan Life, which in this twelfth hour
15 attempt they might want to resurrect, even after
16 Metropolitan Life, the point is that there is no
17 challenge whatever by the petitioners to the findings
18 either of the Board or of the Second Circuit that there
19 was a reasonable basis for the line drawn, if that were
20 an issue in the case. And if Justice Stevens'
21 suggestion is right and that is not an issue, then a
22 fortiori theres' no question that need be decided,
23 especially since it is clear that Congress delegated
24 this power.
25 But there is a question that is raised by 46
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 petitioners. They say isn't it amazing that Congress 2 didn't say so if it wanted the states to have this
3 latitude. It's not at all amazing. On the contrary, 4 there are several fundamental answers as to why this
5 Court ought not to depart from its precedents in
6 Prudential v. Benjamin and Western and Southern and
7 demand specificity and a kind of laundry list, as well
8 as clarity of Congress.
9 For one thing, there's an historical reason.
10 Congress in 1956, as the petitioners have never denied,
11 was expressly told some bankers believe that regional
12 approaches are a good idea. And as we explain in our
13 brief at pages 21 to 22, the only reason Congress then
14 didn't mandate that solution was not disagreement with
15 its potential wisdom, but a sense that it would override
16 state discretion excessively to force that approach upon
17 the states.
18 In addition, there are practical
19 considerations. As this Court held less than three
20 weeks ago in Town of Halley, the way legislatures work
21 and the Way that statutes are written makes it
22 unrealistic to expect a legislature to catalog.
23 There is finally, and I think most
24 importantly, a reason of principle, and that is this.
25 If Congress is to be the ultimate protector of the 47
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 states as autonomous laboratories, especially after this
2 Court’s decision in Garcia, we're to look to Congress,
3 then when Congress chooses to protect the autonomy of
4 the states as laboratories, not by telling them which
5 formulas they may experiment with and which they may
6 not, but by leaving it to them subject to an
7 unconstitutional conditions doctrine, for this Court to
8 deny effect to that explicit, substantive congressional
9 judgment would at one and the same time deal a blow to
10 natural legislative supremacy and to the sovereignty and
11 autonomy of the states as laboratories in the interest,
12 so far as I Can tell, of an aesthetic concern that all
13 states are created equal, even when, as in this Case,
14 limiting the region to New England has the effect of
15 excluding 53 of the nation's 54 largest bank holding
16 companies.
17 Now, we can imagine no purpose to be served by
18 suddenly declaring this perfectly reasonable step by the
19 states of Massachusetts and Connecticut to be outside
20 the reach of the very broad authorization delegated by
21 Congress. And if there were any doubt about the proper
22 reading of the statute, deferring to the statutory
23 reading that the Board has given in the face of its own
24 policy misgivings is surely the answer. And if one says
25 why shouldn't we let Congress resolve it, I thin the 48
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 answer to that is clear. Congress did in 1956.
2 Thank you .
3 CHIEF JUSTICE BURGER: Do you have anything
4 further, Mr. Shapiro? You have four minutes remaining.
5 ORAL ARGUMENT OF STEPHEN M. SHAPIRO, ESQ.,
6 ON BEHALF OF THE PETITIONERS -- REBUTTAL
7 MR. SHAPIRO: Mr. Chief Justice, and may it
8 please the Court:
9 Counsel's remark about our position being a
10 mere aesthetic concern about the equal status of the
11 states in the Union ought to be the starting point for
12 my rebuttal. This isn't a mere aesthetic concern. As
13 the Court said in the Eisenberg case, we could not exist
14 as a nation if states could pick and choose among sister
15 states, and a fortiori, when groups of states join
16 together to boycott other states and effectively injure
17 their economies, this goes to the very core of the
18 concerns of the Founding Fathers that made us one nation
19 of co-equal and indestructible states.
20 Now, respondents' position is that Congress
21 meant to approve this. It meant to approve the ganging
22 up. It meant to approve the picking and choosing. It
23 meant to set aside the protections of the Commerce
24 Clause without a single word to that effect.
25 The Court should not mistake what's being 49
ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 asked for hero. This is a giant step beyond what 2 Congress ever considered, what Congress ever stated in 3 the history or in the statute. And it is the better 4 part of wisdom, we say, to leave this issue to Congress,
5 which is now considering whether this is good or bad for 6 the United States of America. And if we're all patient,
7 we think Congress will come to a sensible resolution
8 considering the interests of all concerned.
9 QUESTION: However we decide the case, we're
10 leaving it to Congress.
11 MR. SHAPIRO: Yes, but in the interim serious
12 harm could be done to commercial interests in boycotted
13 states like the state of New York. That's why this
14 Court's decisions say go to Congress first if you're
15 going to depart from constitutional precepts. And we
16 submit that that is the appropriate course here. Let
17 Congress resolve these policy questions.
18 QUESTION: You are renewing your Equal
19 Protection Clause argument here.
20 MR. SHAPIRO: We are, sir. Yes, sir.
21 QUESTION: Which is wholly aside from Commerce. 22 MR. SHAPIRO: Wholly aside from Commerce and
23 wholly aside from Compact.
24 Thank you very much.
25 CHIEF JUSTICE BURGER: Thank you, gentlemen. 50
ALDERSON REPORTING COMPANY, INC.
20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 1 The case is submitted.
2 (Whereupon, at 11:58 a.m., the case in the
3 above-entitled matter was submitted.)
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ALDERSON REPORTING COMPANY, INC. 20 F ST., N.W., WASHINGTON, D.C. 20001 (202) 628-9300 CERTIFICATION.
Vlderson Reporting Company, Inc., hereby certifies that the' attached pages represents an accurate transcription of electronic sound recording of the oral argument before the Supreme Court of The United States in the Matter of:. ^84-363 - NORTHEAST BANCORP, INC., ET AL. , Petitioners V.
BOARD OF GOVERNORS OF THE FEDERAL RESERVE everr,., or ,, and: that these attached, pages constitutes the original transcript of the proceedings for the records of the court.
BY
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