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UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
IN THE MATTER OF
TRANSAMERICA CORPORATION
BRIEF OF COUNSEL FOR THE BOARD
J. LEONARD TOWNSEND,
Solicitor.
G. KOVLAND CHASE,
Of Counsel.
UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SI STEM
IN THE MATTER OF
TRANSAMERICA CORPORATION
BRIEF OF COUNSEL FOR THE BOARD
There are now before the Board four motions for decision.
They are;
( l ) Motion to dismiss for alleged lack of jurisdiction;
(2) Motion to dismiss for alleged lack of due process of law; (3) Motion to dismiss for alleged improper venue, alleged insufficiency of
the allegations of the complaint and alleged failure to comply with the
Administrative Procedure Act; and {U) Motion to disqualify Governor
Clayton,
dum.
We shall discuss these motions in that order in this memoran-
In doing so we shall refer herein to the two briefs filed by
counsel for respondent as follows;
Br. 1 to refer to the brief filed
herein on the date of oral argument, and Br. 2 to refer to the one
filed on December 27th.
MOTION TO DISMISS FOR AjJJEGED LACK OF JXTRISDICTipN
At the oral argument we demonstrated why each of the seven
grounds stated in support of this motion is without merit. (R. 87-114)
Here we shall confine our discussion to the two principal grounds which
have been argued at length in respondent's briefs.
Br. 1 in its entire-
ty, and more than a quarter of Br. 2 (pp. 42-57) have been devoted to
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showing (a) that commercial banks are not "engaged in commerce" within
the meaning of Section 7, and (b) that in any event the Board lacks authority to enforce Section 7 against Transamerica because Transamerica
is not itself a bank, banking association or trust comparer*
ARGUMENT THAT COMMERCIAL BANKS ABE NOT "ENGAGED IN COMMERCE"
More space by far is devoted to this argument in respondents
briefs than to any other.
A host of reasons are suggested why the
Board should conclude that commercial banks are not "engaged in commerce" within the meaning of Section 7 and hence why Transamerica
should be permitted to continue unchecked in its march to absolute monopoly of commercial banking in the west.
As we shall show, none of
the reasons urged in support of the argument is sound.
Before doing so,
however, we wish to stress the fact that there is no reason why the
Board should consider arty of them at this time.
This is a motion to dismiss for lack of jurisdiction.
For the
purposes of the motion the jurisdiction of the Board must be determined
from the allegations of the complaint.
The situation in this respect is
no different from that which obtains when the question of jurisdiction
is raised before a District Court.
In such a case the District Court1 s
jurisdiction is to be "determined by the allegations of the b i l l , and
usually i f the b i l l or declaration makes a claim that i f well founded
is within the jurisdiction of the Court i t is within that jurisdiction
whether well founded or not."
273 (1923).
Bart v. Keith Exchange. 262 U. S. 271,
Cf. Utah Fuel Co. v. Coal Commission. 306 U. S. 56, 60
(1938).
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In the instant case Paragraph 4 of the Board1 s complaint specifically and unequivocally charges that "Each of the banks so acauired
and now operated and controlled ty respondent is engaged in interstate
commerce within the purview of Section 7 of the Act of Congress approved
October 15, 1914 (Clayton Act)."
This allegation, like a l l of the
others in the complaint, must be proved during the hearing.
For the
purposes of this motion, however, i t must be taken as true.
Cf. Utah
Fuel Co. v. Coal Commission, supra.
I t follows, therefore, that unless
the Board can say, without awaiting proof of the allegation and wholly
upon its own recognition of judicially noticeable facts, that the allegation is not susceptible of proof and is frivolous, the motion to dismiss on this ground should be denied.
Cf. Hart v. Keith Exchange, supra.
This is not to argue that i f , upon the completed record, the Board finds
insufficient evidence to support the allegations of the complaint, i t
could not then find that the Transamerica banks are not "engaged in commerce" .
I t is to argue, however, that unless, as indicated above, there
be judicially recognizable matter which precludes any possibility in
this case that proof could be forthcoming to demonstrate that the banks
which Transamerica has acquired in violation of Section 7 are "engaged
in commerce", the Boardfs jurisdiction is clear to afford counsel an
opportunity to produce that proof.
Counsel for respondent have not pointed to any facts respecting the business of commercial banks, judicially recognizable by this
Board, which require the conclusion that banking can never be "commerce".
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Indeed, aside from the grudging admission contained in Br. 1 (p. 9)
that "banks make incidental use of interstate transportation and communication facilities", and the statement made in oral argument that
the activities of banks "unquestionably have an effect upon commerce"
(R. 71-72), counsel for respondent have not discussed the factual aspects of commercial banking at a l l .
Of course the obvious reason for
counsel1s failure to develop this most crucial aspect of the matter
(while developing, in most meticulous detail, their purely technical
points) is that to have done so would have been to show that, far from
not constituting "commerce", the eveiyday activities of commercial
banks are inextricably woven into and constitute an integral part of
interstate commerce in its most basic sense.
In his oral argument counsel for respondent challenged the
Board to make use of what i t "knows" about the operations of banks in
deciding this question.
He stated that:
"this Board knows, as a
matter of fact, that banks are not engaged in commerce as that phrase
is used in the Clayton Act." (R. 71)
Repeatedly in Br. 2 counsel ad-
vert to what the Board "knows" in arguing various of their points.
We,
too, suggest that the Board draw upon its great wealth of expert knowledge in the banking field to assist i t to a proper conclusion, and we
can suggest facts which the Board "knows" and of which we think i t may
properly take judicial notice.
As one of the three federal bank supervisory agencies the
Board "knows" that the two principal activities of a commercial bank are
the acceptance of deposits subject to check and the making of loans and
investments.
I t "knows" that both of these activities involve constant
"commercial intercourse" between such bank and others engaged in similar
activities in a l l of the U3 states.
Thus, every commercial bank holds
itself out to accept for deposit both currency and checks.
The Board of
coturse "knows" that the number of checks issued each year which clear
through the Federal Reserve System exceeds two billions (Annual Rept..
Board. 194-7, p. 69)> and that this number is probably more than doubled
by those which are cleared or paid through other means.
Currency of
course is rarely used in effecting either the intrastate or interstate
transfer of funds; "currency payments probably comprise not over 10 per
cent of total money payments in this countiy".
Banking Studies, p. 304.
On the other hand, the volume of check payments are annually well over
a t r i l l i o n dollars.
Federal Reserve Bulletin, November 1948, p# 1382.
Of this staggering amount the Board "knows" that a very great amount is
cleared through the Federal Reserve System and involve payments effected
across state l i n e s M
1/ About half of the dollar amount of check payments handled through
the Federal Reserve Banks involve interdistrict transactions. Of
this total the amount of interstate transactions is considerably
higher because a l l of the Federal Reserve Districts embrace more
than one state. Furthermore, the total of check payments which involve interstate transactions carried on through correspondent banks
throughout the country would likewise greatly increase the total of
such interstate payments effected through the commercial banking
system*
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The Board "knows" that when a commercial bank accepts for
deposit checks drawn on other banks, both within and outside the state
of deposit, the acceptance of such checks instantly sets in motion a
chain of events which is not completed until such checks have actuallybeen collected or returned to the receiving bank, in which event they
are charged back against the account of the customer who deposited them;
that this process of collection involves the daily transportation of
such checks by means of the instrumentalities of interstate commerce;
that i t likewise involves the daily transfer between banks across state
lines of the funds represented by such checks, also via the instrumentalities of interstate commerce; and that the same process of transportation and transmission of funds is emplqyed in reverse when checks come
from without the state which are drawn upon the bank of deposit •
The Board !fknow^ that, as an adjunct to its commercial deposit
business, the average commercial bank accepts for collection maturing
bonds and coupons payable outside the state, as well as b i l l s of exchange
and drafts (frequently with b i l l s of lading attached) covering the interstate transportation and sale of goods; that they sell or cash traveler's
checks; that th^y obtain for customers information concerning, and arrange the purchase and sale of, securities listed on the various stock
exchanges throughout the country
in various cities•
as well as those sold "over-the-counter"
A l l of these transactions, like those attendant upon
the bankfs activities in accepting commercial deposits, involve the
interstate transfer of funds and intelligence through the means of interstate transportation and communication*
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The other principal activity of a commercial bank is that of
making loans and investments.
The Board "knows" that the average com-
mercial bank makes loans, among others, to persons and companies which
are daily engaged in the manufacture, production, sale or purchase of
goods destined to move in the channels of interstate commerce, and that
such goods in many instances could not be manufactured, produced, bought
or sold i f such loans were not made.
Consequently, the making of such
loans is the very foundation upon which the structure of much of the
nation1 s commerce is built.
They are as essential to the consummation
of the ultimate interstate transactions in a l l types of goods as are the
rails and rolling stock of a railroad in physically transporting the
same.
On the investment side of the bankfs operations, the Board
"knows" that every such bank invests considerable portions of its funds
in United States Government securities, in securities of states and
municipalities located in various parts of the country, as well as in
eligible securities of corporations located throughout the United States.
I t "knows" that the purchase and sale of these securities likewise involve the constant interstate movement of intelligence, funds and the
physical securities which are the subject of purchase and sale by the
bank.
So that here are other examples of daily commercial intercourse
between banks and others located in different states.
The above examples are but a few which demonstrate the essent i a l l y interstate character of the commercial banking business, a l l of
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which the Board "knows" as a result of its more than thirty years1 experience in supervising the member banks of the Federal Reserve System.
They show that eveiy commercial bank, whether large or small, could not
open its doors for a single day and confine its operations to purely
intrastate activities.
To argue that these facts support any other
theory than that a l l commercial banks are "engaged in commerce" would,
we submit, be utterly inconsistent with reality.
And this observation
seems doubly apposite when we consider those facts in the light of the
definition of "commerce" given in 1824 by Chief Justice Marshall in
Gibbons v. Ogden» 9 Wheat. 1, 189-190:
f i c , but i t is something more:
"Commerce undoubtedly is traf-
I t is intercourse.
I t describes the
commercial intercourse between nations, and parts of nations, in a l l of
its branches . . . "
Or, as was pointed out by the Court over a hundred
years later, "for more than a century i t has been judicially recognized
that in a broad sense [commerce] embraces every phase of commercial and
business activity and intercourse."
Jordan v. Tashiro. 278 U. S. 123,
127-128.
This brings us to a final and conclusive reason why what the
Board "knows" requires that i t fully anticipate that proof can and w i l l
be produced in this proceeding to show that banks are "engaged in commerce".
I t is that the banking business of one of the Transamerica banks
has already been judicially declared to be "commerce".
In N. L. R. B.
Bank of America N. T. & S. A.. 130 F. (2d) 624, 626 (cert, denied
318 U. S. 792), the Circuit Court of Appeals for the Ninth Circuit, in
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speaking of the activities of the Bank of America, made the following
statement:
"But apart from the undeniable effect of respondent1s operations upon commerce among the states and with foreign nations, i t
is itself directly and every hour of the business day engaged in
interstate activities not describable otherwise than as commerce.
To mention but a few of many examples, i t sends to banks elsewhere
notes, b i l l s , coupons, and drafts for collection, a very large
percentage of which latter are drafts covering bill-of-lading
shipments of commodities to points outside of California or to
foreign countries. I t makes telegraphic transfers of money in
huge sums to places in other states. And i t receives like transfers of money from banks outside the borders of California. Like
the news association held to be within the reach of the Act in
Associated Press v. N. L• R. B., 301 U. S. 103, 128, 129, 57 S. Ct.
650, 81 L. Ed. 953, respondents operations 1 involve the constant
use of channels of interstate and foreign communication.9 These
activities 1amount to commercial intercourse and such intercourse
is commerce within the meaning of the Constitution,1 Associated
Press v. N. L. R. B., supra, 301 U. S. at page 128, 57 S* Ct. at
page 654, 81 L. Ed. 953* And see Electric Bond & Share Co. v.
Securities and Ebcchange Commission, 303 U. S. 419, 432, 433, 58 S.
Ct. 678, 82 L. Ed. 936, 115 A. L. R. 105} Gibbons v. Ogden, 9 Wheat.
1, 189, 229, 230, 6 L. Ed. 23."2/
On the basis of the considerations outlined above, we submit
(1) that the allegation in the complaint that the Transamerica banks are
engaged in commerce must be taken as true for the purpose of deciding
this ground of respondent's motion, and (2) that, in any event, what the
Board "knows" about the commercial banking business establishes the
2/ In Br. 2 (p. 46) counsel for respondent attack the excerpt as mere
dictum. But reference to the statute under which the jurisdiction
of the N. L. R. B. attached shows that the Act applies to labor
disputes "affecting commerce" and that the expression "affecting
commerce" is defined in the Act as meaning "in commerce, or burdening or obstructing commerce * * *" (underscoring ours) I t follows,
therefore, that the passage quoted rises above the quality of mere
dictum; i t is directly responsive to the definition contained in
the Act i t s e l f .
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interstate character of that business.
Either one or both of these
propositions is sufficient to dispose of respondents argument that commercial banks are exempt from the prohibitions of Section 7.
However,
we do not mean by this to suggest that there are not ready answers to
the many technical contentions made on behalf of respondent to the effact that banking is not commerce within the meaning of Section 7.
Those
contentions may a l l be easily answered, and we turn now to a brief discussion of them.
We have already demonstrated the fallacy of counsel f s contention (unsupported by any factual discussion) that the commercial banking
business is not conducted across state lines. (Br. 1, p. 16)
Most of
their remaining contentions on this point seem directly patterned upon
arguments made — and rejected — in the case of United States v.
Southeastern Underwriters Association^ 322 U. S. 533 (1944), in which
the Supreme Court recently decided that the business of insurance, as
presently conducted, is
Act.
wcommerceM
and within the reach of the Sherman
In fact, an examination of the dissenting opinions in that case
convinces us that respondent's arguments have been extracted in their
entirety from such opinions.
The f i r s t of these is the argument that
banking was not thought of as commerce at the time of the enactment of
the Clayton Act and that Congress, therefore, did not intend to include
banking within the prohibitions of Section 7.
In support of this posi-
tion counsel refer to a statement contained in a book written by an
economist in 1931 who is quoted as saying "The banking business is not
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c o m m e r c e T h e y also refer to one Supreme Court decision which,
although not involving the business of banking, nevertheless by analogyis said to demonstrate that banking was not regarded as "commerce" ty
U
that Court at the time of the enactment of the Clayton Act.
These
points are augmented at considerable length in Br. 2, p. 42, et seq.
Examination of the Underwriters case shows that these identical contentions were made against a finding that the business of insurance is commerce,
In that case, however, counsel for the underwriters were able to
make a much more convincing showing in support of their factual allegation.
There, as a dissenting opinion pointed out, counsel were able to
present an "unbroken line of decisions of the [Supreme] Court beginning
2 / Br. 1, p. 7, Cartinhour, "Branch, Group, and Chain Banking", p. 172.
The author1 s statement that "the banking business is not commerce11
is followed immediately by a further statement which elucidates his
reasons for that conclusion. He said: " I t is well established that
the element of transportation is essential to commerce or constitutes commerce i t s e l f . I t is also essential that the subject of
transportation be a commodity." As we have shown above, however,
the business of banking does to an overwhelming extent involve the
element of interstate transportation, and the Supreme Court has long
since rejected the idea that the subject of transportation must be a
"commodity", as Cartinhour uses that term. See Caminetti v. Pnited
States, 2^2 U. S. 470 (transportation of a woman); Brooks v. United
States, 267 U. S. 432 (transportation of a stolen automobile);
Pensacola Telegraph Co. v. Western Union Telegraph Co.. 96 U. S. 1
(transportation of intelligence).
U
Nathan v. Louisiana, 8 Howard (49 U. S.) 73 (1815) • This case held
that a state might legally require a license tax on the occupation
of a foreign exchange broker. Its reasoning, and that of the insurance cases which followed i t , were of course overruled in the
Underwriters case. See also the destructive analysis of Nathan v.
Louisiana in Gavit, "The Commerce Clause of the United States Constitution", p. 131> et seq.
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with Paul v. Virginia seventy-five years ago and extending down to the
present time" specifically holding the business of insurance not to be
commerce and, hence, subject to state regulation.
Furthermore, those
determinations had been made in cases in which insurance companies were
parties and where the insurance business was talked about by name.
Yet,
the majority of the Court rejected them as controlling precedents and
held the business of insurance to be within the reach of the Sherman Act.
In so doing i t stated, inter alia, as follows:
"Appellees argue that the Congress knew, as doubtless some of
its members did, that this Court had prior to 1890 said that insurance was not commerce and was subject to state regulation, and that
therefore we should read the Act as though i t expressly exempted
that business. But neither by reports nor by statements of the
b i l l f s sponsors or others was any purpose to exempt insurance companies revealed. And we f a i l to find in the legislative history of
the Act an expression of a clear and unequivocal desire of Congress
to legislate only within that area previously declared by this
Court to be within the federal power. Cf. Helvering v. Griffiths.
318 U. S. 371; Parker v. Motor Boat Sales. 314 U. S. 244* We have
been shown not one piece of reliable evidence that the Congress
of 1890 intended to freeze the proscription of the Sherman Act
within the mold of then current judicial decisions defining the commerce power. On the contrary, a l l the acceptable evidence points
the other way. That Congress wanted to go to the utmost extent of
its Constitutional power in restraining trust and monopoly agreements such as the indictment here charges admits of l i t t l e , i f any,
doubt. The purpose was to use that power to make of ours, so far
as Congress could under our dual system, a competitive business
econoiqy."
Counsel also refer to a number of cases which have been decided since 1914 and which are alleged to hold that banking is not "commerce".
I t is enough for the purposes of this reply simply to point out
that none of those cases involved the business of commercial banking,
and that, contrary to counsel1s bald assertion (Br. 2, p. 43), none of
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them hold that "a national bank is not engaged in commerce".
Consequent-
ly i t can hardly be said that they overcome the effect of the ruling of
the Ninth Circuit Court of Appeals in N. L. R. B. v. Bank of America,
supra, that the Bank of America "is itself directly and every hour of the
business day engaged in interstate activities not describable otherwise
than as commerce".
Another of respondent's principal contentions, likewise made
and rejected in the Underwriters case, is that o f f i c i a l action by the
Board and the conduct of Congress since the enactment of the Clayton Act
in 1914 demonstrate that both the Board and Congress have consistently
remained of the opinion that the business of banking is not commerce.
Thus, respondent points to an opinion of the Board's General Counsel published in 1933 which suggests that Congress might legitimately cause the
creation of a unified banking system to protect interstate commerce but
that such conclusion was "not based upon the theory that the banking business is itself interstate commerce."
Again, counsel point to a number of
statements made before Congress by Board representatives seeking bank
holding company legislation that the Board lacked authority to control the
acquisition of banks by bank holding companies.
5/
They also point to
j>/ Nothing in these statements is in any sense contradictory of the power
now asserted. The statements to Congress must be interpreted i n the
setting in which they were made. So considered they show that the
Board was seeking a revision of existing bank holding company legislation, and the statements made were made concerning the deficiencies of
that purely supervisory legislation. Furthermore, the transcript of
the hearings conducted by the House Committee on Banking and Currency
shows that, when appearing before that group on July 16, 1947, Mr.
Eccles pointed out that the antitrust statutes might provide a method
for dealing with bank holding companies which had expanded beyond lawful limits. He said: "I think, as a last resort, that is possibly a
way to get at i t . And I think that may be done and could be done,
either "by the Board or by the Attorney General."
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Congressional appearances of Board representatives seeking an amendment
to Section 7 of the Clayton Act to include prohibitions against the acquisition of assets in addition to those respecting the acquisition of
stocks already contained in the A c t . ^
So, too, they quote an excerpt
from "Branch, Chain and Group Banking", published by the Board in 1941,
that:
"The Board had no means other than conditions of membership through
which to control the acquisitions of bank stocks by corporations", (p. 132)
With respect
to the Congressional attitude counsel adverts to
the fact that in the years following the enactment of the Clayton Act
Congress "repeatedly vested jurisdiction with respect to the expansion of
national banks in the Comptroller of the Currency rather than in the
Reserve Board"; that in the Banking Act of 1933 only state member banks
are subjected to the limitation of Section 5136 of the Revised Statutes
relating to investments by banks; and that Section 23 of the Banking Act
of 1933 authorized the Comptroller to approve additional branches for
national banks but in so doing prescribed no limitations having to do
6/ Here, too, counsel have distorted the meaning of such appearances.
Since the decisions of Federal Trade Commission v. Western Meat Co.,
272 U. S. 554 (1926), and Arrow-Hart & Hegeman v. Federal Trade
Commission. 291 U. S. 587 (1934), the prohibitions of Section 7 had
been held not to apply to acquisitions of assets. The Federal Trade
Commission had tried for a number of years to secure an amendment
which would place assets in the same category as stocks. As originally presented, their amendment would have applied only in those
situations subject to the Commissions jurisdiction. The purpose of
the Board f s appearances was to extend that amendment to the banking
field, a move that plainly implies that the Board f e l t i t had j u r i s diction under Section 7 respecting acquisition of bank stocks having
the prohibited effect.
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with the effect of the establishment of such branches upon competition.
And there is more to the same general effect in Br. 2, p. 47, et seq.
The short answer to each of these points is that when similar
arguments of a far more persuasive nature were presented in the
Underwriters case, they were rejected ty the Supreme Court.
There, in
addition to the "unbroken line" of cases, above referred to, in which
the Supreme Court itself had specifically and unequivocally declared the
business of insurance not to be commerce, the Courtfs attention was also
called to the fact that, after the enactment of the Sherman Act, a
number of proposals were made to the Congress and rejected by i t , which
were predicated upon the express assumption that the Sherman Act did not
reach the business of insurance.
Thus, as pointed out in the dissenting
opinion of Chief Justice Stone:
"In 1904 and again in 1905 President Roosevelt urged 'that the
Congress carefully consider whether the power of the Bureau of Corporations cannot constitutionally be extended to cover interstate
transactions in insurance.1 The American Bar Association, executives of leading insurance companies, and others joined in the request. Numerous b i l l s providing for federal regulation of various
aspects of the insurance business were introduced between 1902 and
1906 but the judiciary committees of both House and Senate concluded that the regulation of the business of marine, f i r e and l i f e
insurance was beyond Congressional power. Sen. Rep. No. 4406, 59th
Cong., 1st Sess.j H. R. Rep. No. 2491, 59th Cong., 1st Sess., 12-25.
The House committee stated that fthe question as to whether or not
insurance is commerce has passed beyond the realm of argument, because the Supreme Court of the United States has said many times for
a great number of years that insurance is not commerce.1 (p. 13.)
"And when in 1914, one year after the decision in New York
Life Ins. Co. v. Deer Lodge County, supra. Congress by the Clayton
Act, 38 Stat. 730, amended the Sherman Act and defined the term
'commerce1 as used in that Act, i t gave no indication that i t
questioned or desired this Court to overrule the decision of the
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Deer Lodge case and those preceding i t . On the contrary Mr. Webb,
who was in charge of the b i l l in the House of Representatives,
stated that insurance companies are not reached as the Supreme
Court has held that their contracts or policies are not interstate
commerce.1 51 Cong. Rec. 9390."
See also notes 6, 7, 3, 9 and 10 to Justice Stone's opinion.
Just as the majority of the Court in effect overruled the contention that the Court's pronouncements prior to the enactment of the
Sherman Act were conclusive on the question of whether the business of
insurance was covered by that Act, so also did i t reject the notion that
these many manifestations of Congress1 attitude were conclusive in establishing that the business of insurance was outside the proscriptions
of the Sherman Act.
In so doing the majority stated:
"Appellees further argue that, quite apart from what the
Sherman Act meant in 1890, the succeeding Congresses have accepted
and approved the decisions of this Court that the business of insurance is not commerce. They call attention to the fact that at
various times since 1890 Congress has refused to enact legislation
providing for federal regulation of the insurance business, and
that several resolutions proposing to amend the Constitution specifically to authorize federal regulation of insurance have failed
of passage. In addition they emphasize that, although the Sherman
Act has been amended several times, no amendments have been adopted
which specifically bring insurance within the Act's proscription.
The Government, for its part, points to evidence that various members of Congress during the period 1900-1914 considered there were
'trusts 1 in the insurance business, and expressed the view that the
insurance business should be subject to the antitrust laws. I t
also points out that in the Merchant Marine Act of 1920 Congress
specifically exempted certain conduct of marine insurance companies
from the 1 antitrust 1 laws.
"The most that can be said of a l l this evidence considered together is that i t is inconclusive as to any point here relevant. By
no means does i t show that the Congress of 1890 specifically intended
to exempt insurance companies from the all-inclusive scope of the
Sherman Act. Nor can we attach significance to the omission of
Congress to include i n its amendments to the Act an express statement
that the Act covered insurance. From the beginning Congress has used
-16-
language broad enough to include a l l businesses, and never has
amended the Act to define these businesses with particularity.
And the fact that several Congresses since 1890 have failed to
enact proposed legislation providing for more or less comprehensive federal regulation of insurance does not even remotely
suggest that any Congress has held the view that insurance alone,
of a l l businesses, should be permitted to enter into combinations for the purpose of destroying competition by coercive and
intimidatory practices."
With regard to the official acts and opinions of the Board,
which are alleged to show that the Board has consistently been of the
opinion that the business of banking is not commerce, l i t t l e need be
said.
I f neither the manifestations by Congress, both at and after the
enactment of the Sherman Act, showing its opinion to be that insurance
is not commerce, nor the long line of previous decisions holding to the
same specific effect, were held to be controlling by the Supreme Court
in determining the reach of the Sherman Act, then surely the opinion of
the Board, even i f entertained and expressed, that the business of banking is not commerce would hardly be held to be controlling in determining the reach of the Clayton Act.
Presumably, counsel's reference to
these matters is premised on the theoxy that they constitute administrative interpretation, which casts some weight in the scales for determining the extent of the Board's jurisdiction.
But the plain fact of the
matter is that the Board has never interpreted its authority to enforce
Section 7, and none of the references made by counsel can be so construed.
Hence, the situation here is different from that which obtained in Federal
Trade Commission v. Bunte Bros. Inc.. 312 U. S. 349, 352, cited by respondent, wherein the court, after stating that "Authority actually granted by
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Congress of course cannot evaporate through lack of administrative
exercise", went on to say "the want of assertion of power hy those who
presumably would be alert to exercise i t , is equally significant in determining whether such power was actually conferred."
In that case the
majority interpreted the failure of the Federal Trade Commission for
over thirty years to assert jurisdiction to prevent unfair trade practices of a wholly intrastate character as evidence of its lack of such
power.
Inasmuch as the Commission had conducted hundreds of hearings
over the l i f e of that statute, not one of which had attacked practices
not of an interstate character, its continued failure so to do might
legitimately be considered relevant in determining the scope of the power
7/
actually conferred upon the Commission.-'
But the situation there pre-
sented was vastly different from that presented here.
As stated above,
the Board has never attempted to interpret its powers to enforce Section 7 of the Clayton Act, and the reason for this is obvious.
Until now
no situation has developed in the commercial banking field which calls
for the exercise of such power.
I t was not until Transamerica attained
the percentage of control which the complaint alleges i t now possesses
2 / But see the dissenting opinion of Justice Douglas (312 U. S. 359)
wherein i t was pointed out that the failure of the Commission to
assert jurisdiction was not "relevant" to the question of the extent of the power granted. He said: "Mere nonuse does not subtract from power which has been granted. The host of practical
reasons which may defer exhaustion of administrative powers lies
in the realm of policy. From that delay we can hardly infer that
the need did not or does not exist."
-18-
over the banking offices, deposits and credit in the five States of
California, Oregon, Washington, Arizona and Nevada that the need for
resort to these powers became apparent.
Obviously the Board's failure
to assert power to enforce Section 7 under these circumstances can have
no significance.
The f i n a l principal contention urged in respondent's briefs
on this point is that the interlocking directorate provisions of Section 8 of the Clayton Act establish a Congressional intent to exempt
banks from the prohibitions of Section 7.
The argument is that when
Congress legislated to outlaw interlocking directorates among banks, i t
did so only with respect to those banks which had been chartered by the
Federal Government.
This, they say, indicates that Congress deemed i t -
self without power to prohibit the same result in state banks.
There-
fore, i t is argued that Congress could not have intended to reach state
banks in enacting Section 7.
There are a number of answers to this argument.
The f i r s t is
that there is conclusive evidence that Congress in enacting Section 7
intended to reach a l l banks.
When the b i l l was being considered by the
Senate, after having been passed by the House, an amendment was offered
by Senator Cummins to what is now Section 7 of the b i l l , which amendment
contained the following exemption:
"Provided. That this section shall
not apply to banks, banking institutions, or common carriers". (Congressional Record, Vol. 51, p. 14473, August 31 > 1914)
This amendment was
debated at some length and finally rejected by the Senate (p. 14476).
It
is interesting to note that in the course of the debate Senator Poindexter,
-19-
in opposing the amendment proposed by Senator Cummins, made the following statement:
"I am also opposed, Mr. President, to weakening the prohibition of corporate stock ownership of competing companies by making
an exception of so-called investment companies. The Senator mentions insurance companies and he mentions savings banks. Among the
abuses of monopoly in recent years have been the control of banks
and the control of insurance companies as investing agencies fcy
those persons who were forming a monopoly."
Having thus considered and rejected an amendment which would specifically
have exempted banks (without classification as between state or federal),
i t can hardly be said that in enacting the section Congress intended that
they should be exempted nevertheless.
Even i f we did not have the light which the rejection of Senator Cummins1 amendment sheds upon the question, however, there s t i l l remains the fact that, in limiting the application of Section 8 to federally chartered banks, Congress did no more than indicate a doubt as to
its power to interfere with the internal affairs of state banks.
But
this does not indicate a positive intent on the part of Congress to exempt
from the sweeping language of Section 7 ai$r persons or companies legitimately embraced by such language.
sive in its terms:
The language of Section 7 is all-inclu-
"No corporation shall acquire, directly or indirectly,
the whole or any part of the stock or other share capital of two or more
corporations engaged in commerce" having the prohibited effect.
more comprehensive is difficult to conceive.
"Language
On its face i t shows a
carefully studied attempt to bring within the Act every person engaged in
business whose activities might restrain or monopolize commercial intercourse among the states."
United States v. Southeastern Underwriters
-20-
Association, supra, p. 553.
"That Congress wanted to go to the utmost
extent of its Constitutional power in restraining . . . monopoly . • .
such as the [complaint] here charges admits of l i t t l e , i f any, doubt."
I d . , p. 558.
A final word on this subject.
Vhile not necessary for present
purposes counsel for the Board want to make i t plain that they also
feel that the "affectation" doctrine is applicable here.
In other words,
they are satisfied that a showing that the banks dominated by Transamerica substantially "affect" commerce or that a monopoly of such banks
would similarly "affect" commerce renders such banks "engaged in commerce" within the meaning of Section 7.
upon the following reasoning:
to the Sherman Act.
This contention is predicated
The "affectation" doctrine is applicable
(See extended discussion of the evolution of this
doctrine and its application in Sherman Act cases contained in Mandeville
Farms v. Sugar Co.. 334 U. S. 219, 229-235.)
Under that Act, then, a
monopoly of commercial banking could be reached and dissolved, because
even counsel for respondent admit that banks "unquestionably have an
effect upon commerce". (R. 71-72)
The purpose of the Clayton Act was
"only to supplement" the Sherman Act and "to arrest the creation of
trusts, conspiracies, and monopolies in their incipiency and before consummation". (Senate Rept* 698, 63rd Cong., 2nd Sess.)
I t would therefore
be an anomaly to suggest that, while a banking monopoly as a f a i t
accompli is within the reach of the Sherman Act because banks "affect"
commerce, an incipient banking monopoly is not within the reach of the
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Clayton Act because banks are not "engaged in commerce11 •
The evident
Congressional purpose vas that the two acts should be given a similar
construction so that they could provide effective and complementary
means for dealing at various stages with the same evils,
ARGUMENT THAT BOARD LACKS JURISDICTION BECAUSE TRANSAMERICA IS NOT A BANK
Respondent argues that, even i f Section 7 be construed as applying to banks, the Boardfs authority under Section 11 to enforce compliance therewith is limited only to "banks, banking associations, and
trust companies".
Therefore, i t is argued, the Board has no authority
to enforce Section 7 against Transamerica because Transamerica is not a
"bank, banking association or trust company".
(Br. 1, pp. 31-34* Br. 2,
pp. 55a-57)
The answer to this contention is obvious.
Each of the enforce-
ment agencies mentioned in Section 11 is under a duty to police the particular field in which i t has peculiar competence, and each must enforce
the Act where "applicable" to a particular "character of commerce".
The
Boardfs function is to enforce the Act where "applicable to banks, banking associations, and trust companies".
or "having relevance".
"Applicable" means "pertinent"
(Webster1s Collegiate Dictionary and Webster1s
New International Dictionary, 2nd Ed.)
I t follows therefore that, under
the plain language of Section 11, the Board has to enforce Section 7
whenever the violation of that section is one "having relevance" to the
"character of commerce" engaged in ty "banks, banking associations, and
trust companies".
And this has been the construction placed upon Section 11 by
the Circuit Court of Appeals for the Seventh Circuit in the only case
-22-
raising the question which respondent raises.
In Fruit Growers' Express
Incorporated v. Federal Trade Commission. 274 Fed. 205 (1921), the Trade
Commission asserted jurisdiction under Section 11 to determine whether
Fruit Growers1 Express had violated Section 3 of the Clayton Act in entering into a certain contract with a railroad by which the latter was
required exclusively to use equipment owned by the former in the transportation of fruits and vegetables.
The Court held that, even though
Fruit Growers1 Express was not a common carrier, the Commission was without jurisdiction because the subject matter of the controversy involved
common carriers, and that jurisdiction to enforce the Act in such cases
was placed in the Interstate Commerce Commission.
The Court said:
"The words 'where applicable to common carriers,' in section 11
of the Clayton Act, must mean that where the facts involve common
carriers, or the business of common carriers, then the jurisdiction
is solely in the Interstate Commerce Commission. The action complained of involved common carriers and tended to veiy greatly affect their business. Respondent was therefore without jurisdiction."
But respondent argues that for the Act to be given this construction would mean that i f Transamerica made prohibited acquisitions of
stock in railroad companies, radio companies, airplane lines, and other
corporations, i t would be subject to separate actions under Section 11 by
the Interstate Commerce Commission, the Federal Communications Commission,
the Civil Aeronautics Board and the Federal Trade Commission.
Such is precisely our contention, and we submit that i t is the
only one consistent with the plainly expressed intent of the statute.
-23-
MOTION TO DISMISS FOR ALLEGED LACK OF DUE PROCESS
This motion is based entirely upon the admitted fact that
the Board does not possess the power of subpoena.
From this factual
premise respondent s-rgues that i t cannot obtain a fair t r i a l in the
present proceeding and that, i f Section 11 be construed to authorize
the Board to proceed in spite of its lack of subpoena power, such Section is unconstitutional because violative of the due process clause of
the Fifth Amendment.
Here again we wish to preface our reply to respondents arguments by suggesting that for the Board now to consider and decide this
motion would be premature.
I t has long been settled law that the due
process requirements of the Constitution do not require any particular
form or method of administrative procedure.
Those requirements are met
i f respondent "has reasonable notice and reasonable opportunity to be
heard and to present [ i t s ] claim or defence, due regard being had to
the nature of the proceedings and the character of the rights which may
be affected by i t . "
Hurwitz v. North, 271 U. S. 40, 42 (1926).
Morgan v. United States. 304 U. S. 1 (1938).
Cf.
Until the hearings have
been completed herein i t obviously w i l l be impossible to t e l l whether
respondent has had a "reasonable opportunity to be heard".
At that
time i t may well appear that the absence of subpoena power in the Board
has not in any vay interfered with that opportunity.
course, respondent's present contention becomes moot.
In such event, of
Only i f the record
then shows that the lack of compulsory process has prevented respondent
-24-
from adequately defending itself against the charges of the complaint
does the need arise for the Board to determine whether, in spite of
this defect, respondent has been accorded its f u l l rights under the
Fifth Amendment*
In the light of these observations counsel for the
Board respectfully suggest that respondents motion be denied at this
time, without prejudice to respondents right to renew the same upon
the termination of the hearings.
This suggestion aside, however, the fact remains that the
Supreme Court already has decided that the right of subpoena is not an
indispensable element of procedural due process in an administrative
action.
In Low Vah Suey v, Backus. 225 U. S. 460 (1912), this question
was decided in unequivocal language•
The Court said:
"It is next averred that the Secretary of Commerce and Labor
and the Commissioner of Immigration refused to take the necessary
steps to enforce the attendance of witnesses to testify on behalf
of the petitioner, although i t is said that the immigration o f f i cers did use their power to procure witnesses to testify against
herj and that had such witnesses as she wished been produced, she
says, upon information and belief, that the testimony in the
record would have been such as to require a different order by the
Secretary cf Commerce and Labor, and sufficient to prevent the
issuing of the order of deportation. The statute does not give
authority to issue process to compel the attendance of witnesses.
I t does not appear from the record that any witnesses offered on
behalf of the petitioner were not heard or that anything was done
to prevent the production of such witnesses, and the nature and
character of the proposed testimony offered is not set forth.
This objection was urged in the Yeung How v. North case, and the
lack of power to compel witnesses by the immigration officer was
alleged as depriving the appellant of due process of law. This
court dismissed the case upon reference to other cases which indicate its view that no constitutional right was thereby taken from
the petitioner. The former cases have sustained the right to provide for such hearing, and nothing was done to prevent the production of such witnesses as the petitioner might have seen f i t to
produce. (Underscoring supplied)
-25-
And this ruling has its exemplification in another and vitally
important branch of the government.
As we pointed out at the oral argu-
ment, the Post Office Department, without enjoying the subpoena power,
has conducted approximately a hundred hearings a year for almost threequarters of a century to determine whether "fraud orders" should issue
against the respondents in such cases barring their further use of the
mails in carrying on their businesses.
In a l l that time, during which
such proceedings have been held reviewable in the courts (see School of
Magnetic Healing v. McAnnulty, 187 U. S. 94 (1902), and cases cited in
39 U. S. C. A. 259, note 10), no court has held that the Postmaster's
lack of subpoena power deprived the respondents in such hearings of due
process of law.
However, there is authority to the contrary.
In
McTaggart Supply Co. v. Hannegan (Civil Action No. 3254-47) a proceeding
was commenced in the District Court of the United States for the District
of Columbia to secure judicial reversal of an order of the Postmaster
denying mailing privileges to the p l a i n t i f f .
In its suit plaintiff a l -
leged, inter alia, that i t had been denied a f a i r t r i a l because unable to
secure the attendance of a certain person "whose testimony would show
that the therapeutic effects of [ p l a i n t i f f ' s ] Compound were not misrepresented in any way."
Notwithstanding this allegation the District Court
entered summary judgment in favor of the Postmaster General.^
(This case
is unreported.)
8/ See also the learned discussion of this whole question by the
Supreme Court of Kansas in Brinkley v. Bassig. 289 Pac. 64 (1930).
-26-
Counsel for respondent attempt to avoid the ruling in the
Low Vah Suey case and the presumption which flows from the long established practice of the Post Office Department fcy arguing that those two
types of situations require the application of different legal considerations from those applicable here.
Thus, in discussing the Low Wah Suey
case respondent states that there the Supreme Court was dealing with the
alien problem, a problem which they describe as "predicated upon purely
political considerations", and that "proceedings for the exclusion of
aliens . . .
are in no sense comparable to the antitrust laws and the
quasi-judicial functions of administrative agencies . . . "
pp. 36-37)
(Br. 2,
In speaking of the fraud order hearings of the Post Office
Department respondent states that such hearings do not affect "a property
right" and that "such proceedings are clearly not analogous to a quasijudicial administrative proceeding to impose a penalty fcy requiring a
divestment of property".
(Br. 2, p. 39)
But these statements f a l l far short of establishing the d i f ference which respondent must prove i f i t is to avoid the controlling
effect of the decision in Low Wah Suey or the presumption arising from
the long established practice of the Post Office Department.
Indeed the
only proof which could help respondent in this respect would be to show
that the Fifth Amendment casts no protection about aliens or those who
use the mails; otherwise, we submit, such persons and respondent stand
on identical legal footing so far as the requirements of procedural due
process are concerned.
That respondent made no attempt to meet this
-27-
burden is not surprising when we consider that the authorities are a l l
the other way.
The Supreme Court has ruled that an alien is entitled
to a l l of the safeguards of due process in a proceeding looking to his
deportation.
Thus, he is entitled to notice (Tisi v. Tod, 264 U. S. 131,
9/
134), a fair hearing (Bridges v. Wixon. 326 U. S. 135, 154;^ Chin Yow
v. United States, 208 U. S. 8, 12), and an order supported by some evidence (Vajtauer v. Commissioner, 273 U. S. 103, 106; Zakonaite v. Wolfe,
226 U. S. 272, 274).
And the same is true of fraud order hearings be-
cause the Supreme Court has said that even the Congressional power over
the mails must be exercised in a manner "consistent with the rights of
the people as reserved
10/ by the Constitution." Burton v. United States,
202 U. S. 344, 371.—
Or, as more fully stated by the Court in Pike v.
Walker. 121 F. (2d) 37, 39 (App. D. C., 1941):
"It would be going a long way, therefore, to say that in the management of the Post Office the people have no definite rights reserved
2 / A s stated by the Court in this case:
"Here the liberty of an individual is at stake. Highly incriminating statements are used against him—statements which were
unsworn and which under the governing regulations are inadmissible.
We are dealing here with procedural requirements prescribed for the
protection of the alien. Though deportation is not technically a
criminal proceeding, i t visits a great hardship on the individual
and deprives him of the right to stay and live and work in this
land of freedom. That deportation is a penalty—at times a most
serious one—cannot be doubted. Meticulous care must be exercised
lest the procedure by which he is deprived of that liberty not
meet the essential standards of fairness."
10/ See also the much quoted dissenting opinion of Justice Brandeis in
Milwaukee Publishing Co. v. Burleson. 255 U. S. 407, 430, wherein
he said that the power of Congress over the postal system, "like
a l l of its other powers, is subject to the limitations of the B i l l
of Rights".
-28-
by the First and Fifth Amendments of the Constitution, and i f
they have, i t would follow that in administering the laws established to protect the mail and the regulations thereunder the
duty of the Postmaster General would be,—to use the language of
Justice Brandeis in the Burleson case, supra,—that:
w t In
making the determination he must, like a court or a
juiy, form a judgment whether certain conditions prescribed by
Congress exist, on controverted facts or by applying the law.
The function is a strictly judicial one, although exercised in
administering an executive office. And i t is not a function which
either involves or permits the exercise of discretionary power1—
which is to say, that his authority is governed by the Acts of
Congress which confer i t , and by the law of the land."
See also Hannegan v. Esquire. 327 U. S. 1^6, 156 (1945); Jones
v. Securities and Exchange Commission. 79 F. (2d) 617, 620 (C.C.A. 2nd,
1935); Jarvis v. Shackelton Inhaler Co.. 136 F. (2d) 116 (C.C.A. 6th,
1943).
The cases cited by respondent are not in point.
ruling in one of them is actually misstated i n its brief.
In fact, the
In Br. 2,
p. 33* counsel state that, in Bethlehem Steel Co. v. N. L. R. B.. 120
F. (2d) 641 (App. D. C., 1941),
f , It
was claimed that the National Labor
Relations Board had violated the Fifth Amendment in refusing to issue
subpoenas on behalf of the appellant unless he f i r s t disclosed the exact
nature of the testimony he sought to produce and the facts sought to be
proved t h e r e b y T h e i r brief then goes on to say that:
wIn
holding that
the appellant was entitled to subpoena, free of any condition precedent.
the court stated"^/ and then follows an extended quote purportedly taken
11/ Underscoring supplied
-29-
from the Court1 s opinion in the case.
Reference to the report will
show, however, that the Court in fact rejected appellants contention
respecting its right to subpoenas and ruled that i t was not deprived
of due process.
(See p. 651)
The excerpt quoted by respondent is taken
from the dissenting opinion of Judge Stephens, not from the opinion of
the Court.
Perhaps this obvious mistake accounts for the charge which
follows respondents misleading version of this case that:
"Counsel
for the Board did not cite such a case in saying appellant [respondent?]
had no constitutional right to compulsoiy process."
(Br. 2, p. 33)
Another case cited by respondent is that of Inland Steel Co.
v. N. L. R. B., 109 F. (2d) 9 (C.C.A. 7th, 1940).
That case dealt with
a situation where the administrative agency had the statutory power of
subpoena and discriminated in its use of that power by requiring the
Steel Company to meet onerous conditions before that Company could obtain
a subpoena — conditions which the opinion points out did not apply to
agency counsel.
We agree with the conclusion of the Court that under
these conditions the hearing was unfairly conducted.
But the decision
is of no help in determining whether the absence of the subpoena power
vitiates an agency proceeding.
Nor do we derive any assistance in this
inquiry from the case of Anniston Manufacturing Co. v. Davis. 301 U. S.
337 (1937), also cited by respondent.
That case simply held, inter alia,
that an administrative hearing which embraced the elaborate procedure
set out in the statute (see pp. 343-344) f u l f i l l e d the requirements of
due process.
Here again, however, there was no suggestion that the
-30-
absence of the subpoena power would have nullified the proceeding.
And
this same observation is sufficient to dispose of respondent's reference
to vom Baur, Federal Administrative Law, Vol. 1, Sec. 306.
MOTION TO DISMISS FOR ALLEGED IMPROPER VENUE
We do not deem i t necessary to discuss this motion at length.
In their brief (Br. 2, pp. 4.0-41) counsel for respondent have not attempted to meet our contentions, made at the oral argument (R. 123-131)
that Section 12 was intended only to liberalize the jurisdiction of the
courts under the antitrust laws and was not intended to restrict the
jurisdiction of administrative agencies.
We then demonstrated that, at
the time Section 12 was written into the Act, there was no section at
a l l placing jurisdiction in administrative agencies to enforce any
part of the Act; on the other hand, there were at that time a number of
sections in the b i l l a l l of which referred to court actions, in some of
which the word "proceeding" was used interchangeably with "suit" and
"action".
Furthermore, as we also pointed out at the oral argument,
settled administrative interpretation sustains our contention, for the
Federal Trade Commission, which has conducted approximately five hundred
proceedings under the Clayton Act, has uniformly ordered each hearing
to be commenced in Washington, regardless of the domicile of the corporate
respondent.
And finally, this construction is in harmony with the plain
purpose of Section 5 of the Administrative Procedure Act which states
-31-
that:
f, In
fixing the . . . places for hearings, due regard shall be had
for the convenience and necessity of the parties or their representatives,"
This plainly "includes an agency party as veil as a private party".
Senate Rept. 752, 79th Cong., 1st Sess.
MOTION TO DISQUALIFY" GOVERNOR CLAYTON
More than thirty pages of respondent's Br. 2 is written in relation to this motion.
Not one line, however, is devoted to discussing
the only question which the motion raises, namely, whether the affidavits
of L. M. Giannini and Sam H. Husbands allege facts which demonstrate the
existence of personal bias in Governor Clayton.
repeat, is a l l that is now before the Board.
Yet, that question, we
Counsel's failure to dis-
cuss i t , therefore, is at least suggestive of their own lack of conviction
that the remote occurrences mentioned in the Giannini affidavit could so
far influence the present judgment of Governor Clayton that he could not
render an impartial decision on the facts of this case.
On this subject
we adhere to our statement made at the oral argument that the charge that
Governor Clayton is personally biased, made upon the basis of so flimsy a
12/
set of circumstances as is disclosed by this record, is absurd.—'
Further-
more, we submit, the allegations of the Giannini affidavit, that the entire
Board has in effect stultified itself as a result of the alleged bias of
Governor Clayton (see statements on page
and particularly the last para-
graph on page 5 of the affidavit), appear to have been so incontinently and
irresponsibly made as to convince any reasonable man that l i t t l e weight
should be accorded the other accusations and conclusions which that a f f i davit contains.
12/ For the type of evidence needed to establish personal bias see In the~~
Matter of Segal and Smith. 5 F. C. C. 1, cited in respondent's Br. 2.
-32-
As suggested above, however, the contentions which are labored at such length in respondent's brief are irrelevant to the motion.
Aside from urging that the Board has the inherent power to disqualify
a member for personal bias in a particular case, which we admit, they
a l l relate to matters which need not be considered unless and until
the Board has, in fact, disqualified Governor Clayton.
Thus, i t is
argued that i f the Board disqualifies Governor Clayton, the Board is required to reconsider a l l of its actions to date in this proceeding, including the issuance of the complaint. (Br. 2, pp. 3-6)
In replying to
this contention i t is enough to say that, while the Board can, of
course, "reconsider" any of its actions herein at any time prior to the
date when the record is filed in the Circuit Court of Appeals, i t does
not follow that a legal duty to do so would arise i f the Board grants
respondent's motion.
In issuing its complaint the Board did not act in
a quasi-judicial capacity.
I t decided nothing in so acting.
I t simply
ordered that a record be made for the purpose of enabling i t later to
decide whether, upon the basis of a l l the facts appearing in such record,
its remedial powers under Section 11 of the Clayton Act should be called
into play.
This fact distinguishes the situation here from that appear-
ing in Berkshire Knitting Mills v. H. L. R. B.. 121 F. (2d) 235 (C. C. A
3rd, 1941), cited in respondent's brief, where the National Labor Relations Board, acting as a quasi-judicial body, had actually decided the
case, a disqualified member having participated in the decision.
Respondent's remaining argument is even more remote.
I t is
that i f the Board disqualifies Governor Clayton, and i f i t reconsiders
-33-
its action in issuing the complaint, i t should then take into account
a long l i s t of legal principles which i t is alleged would require the
Board to conclude to withdraw the complaint. (Br. 2, pp. 6-31)
Without
replying to each of the many points made in support of this contention
i t is sufficient for present purposes to point out that, even assuming
the correctness of the abstract legal principles stated, their application to the present case could not be demonstrated until the record has
been completed, at which time the facts respecting the development and
growth of the Transamerica-controlled banking empire w i l l have been made
to appear.
No amount of reconsideration, however, could possibly change
the basic facts which were developed in the Board's preliminary investigation and which have been summarized in its complaint.
They show that
for over forty years, ever since A. P. Giannini caused the Bank of Italy
to be formed in 1904., he has used f i r s t one company and then another to
acquire existing competitive commercial banking institutions in California, Oregon, Washington, Arizona and Nevada; that Transamerica is but
the latest of these companies to be fitted into this pattern of bank
expansion by buying out competitors; that through this process almost 600
independent banking offices have been acquired over the years, of which
approximately 250 have been acquired by Transamerica since its organization ty A. P. Giannini in 1928; that only 46 banks now remain of a l l of
the banks which have been so acquired, the rest either having been converted into branches of the principal banks in the Transamerica group
or eliminated; and that Transamerica now controls approximately AO per
-34-
cent of a l l of the banking offices in the five states mentioned above
and 38 per cent of a l l of the commercial deposits in that area.
These
facts, i f true, establish a pattern of activity which is clearly in
violation of both the spirit and letter of the Clayton Act.
Certainly
they constitute "reason to believeM that the Act has been violated and
require the issuance of a complaint.
I f and when proved at the hear-
ings, they would plainly require the issuance of an order pursuant to
Section 11 directing Transamerica to divest itself of the bank stocks
which i t holds in violation of law.
Respectfully submitted,
J. LEONARD TOVNSENB,
Solicitor.
G. ROWLAND CHASE
Of Counsel.
-35-
@FedFRASER