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X-6838 COPY March 13, 1931. Mr. M. G. Wallace, Counsel, Federal Reserve Bank of Richmond, Richmond, Virginia. My dear Mr. Wallace: Please accept my thanks for your l e t t e r of March 10th with further reference to the 6ase of Skinner and Company v. Federal Reserve Bank of Richmond. As I advised you during our conference on March 11th, the Comptroller's Office received a l e t t e r on that date from the Receiver of the First National Bank of Greenville wherein the Receiver said that the committee which i s obtaining the signatures of depositors of the First National Bank of Greenville to the agreement "freezing the deposits" of that bank i s making good progress and confidently expects to have a l l of the depositors signed up within a very short time. The Receiver, therefore, hopes that a State bank w i l l soon be organized to take over a l l of the a s s e t s and assume a l l of the l i a b i l i t i e s of the F i r s t National Bank of Greenville; and, of course, i f t h i s i s done the Skinner case w i l l be dismissed. The Receiver advises further that they have encountered some d i f f i c u l t i e s with regard to the amount at which the building and f i x t u r e s of the First National Bank of Greenville are to be taken over by the new State bank which i s . b e i n g organized to succeed i t ; but i t i s hoped that t h i s may be worked out i n some way. I b e l i e v e that we agreed during our conference on March 11th that i t would be undesirable to f i l e further pleadings i n t h i s case or to r e t a i n special counsel on a system b a s i s i n connection with the case pending the outcome of the e f f o r t s described above; and that, therefore, you w i l l communicate with counsel for the p l a i n t i f f s and ascertain whether i t w i l l not be p o s s i b l e to obtain an extension of time within which to f i l e your answer or other pleadings since that would seem to be to the i n t e r e s t of a l l p a r t i e s . I shall appreciate i t i f you w i l l k i n d l y l e t me know as soon as possible the outcome of your negotiations with counsel for the p l a i n t i f f . With a l l best regards, I am Cordially yours, (•S.J WW-ssui Walter Wyatt, General Counsel. X-6838-i COPY fEDEEAt BBSEBVE BAH OP RICHMOND March 10, 1931 Federal Reserve Board, Washington, D. C. Attention: Mr. Walter ffyatt, General Counsel. Dear Mr. Wyatt: I have been informed "by ray associate that the s t a t e court has entered an order removing the action of W. I. Skinner and Company v. Federal Reserve Bank of Richmond, et a l s , to the United States D i s t r i c t Court for the Eastern D i s t r i c t of North Carolina i n the Washington Division. I am not advised as to whether or not the p l a i n t i f f s w i l l make a motion to remand or not. I have asked my associate to docket t h i s case on the chancery s i d e ot the federal court as i t has at l e a s t one aspect of a suit i n dhancery, and the decisions of the federal court seem to e s t a b l i s h that a case whith has some aspects of a suit i n chancery should be primarily treated as a suit i n chancery subject to the right of any party to ask f o r a d i v i s i o n of the controversy and for a t r i a l at law upon any controversy whiish i s i n substahtie ah action at law. It occurs to me that i n so far as the action i s grounded upon the negligence of t h i s bank i t ib an action of law, but i n so far as the p l a i n t i f f seeks to e s t a b l i s h a l i e n upon the reserve balance or the c o l l a t e r a l i n our hands i t i s a suit i n chancery. You w i l l r e c a l l that I suggested to you that i t might be poss i b l e to deal with t h i s case on a demurrer or a motion to dismiss. After considering the matter more c a r e f u l l y , I have come to the conclusion that a demurrer or motion to dismiss could not be Sustained. In so far as the action i s one for negligence the p l a i n t i f f a l l e g e s that we surrendered these checks to a bank knowing that i t Was insolvent. I am afraid that i t would be going a l i t t l e too far to expect a court to hold that the surrender of checks to a bank known to be insolvent was not negligent. In the other branch of the case i t i s alleged that we were directed to charge the amount of these checks to the reserve balance of the f a i l e d bank and that the balance was s u f f i c i e n t . While t h i s allegation" i s , I b e l i e v e , not true, i t would, of course, be treated as true on any proceeding i n the nature of a demurrer, and I doubt i f we could sustain the proposition that a Federal reserve bank was not obliged to charge checks against a balance i n i t s hands i f the balance was s u f f i c i e n t and the authority to charge was received before notice of closing was received. For the reasons stated above I am now inclined to think that i t would be best to answer the complaint i n t h i s case and to try the matter <f-v> < ' 4 , • $ « • X*~6838-a Mr. Walter Wyatt, Federal Reserve Board, Washington, D • C ^ -»2** March. 10, 1931 on evidence. As you know,! i t was agreed, I "believe, that Mr. Baker would "be consulted i n t h i s case before any d e f i n i t e action was taken. I am therefore writing you my views i n order that yoti may either take the matter up with Mr. Baker or l e t me know whether or not you wish me to do so. My a s s o c i a t e did not give the exact date upon which the removal was ordered, "but stated that he was advised of i t on March 7th. I assume that the removal occurred one or two days "before that; consequently, our answer should he f i l e d sometime "between now and the f i r s t of April. I have no further news with respect to the probability of the completion of the plans for the organization of a new "bank, i n Greenville. Very truly yours, (S) MOW R M. G. Wallace, Counsel. 346 X-6838-1) COPY SAU FRANCISCO FEB. 13 ffyatt Washn. In view of Wallace's past experience i n North Carolina and i n view of prime importance of obtaining clear cut decision upholding Regulation J , Series 1930, as well as i n view of the a l l e g a t i o n contained i n the Skinner complaint charging reserve bank with actual or constructive notice of insolvency of drawee I "believe that t h i s l i t i g a t i o n should be handled as a system matter. Agnew *'•*' /% €i>L± 4 X-6838-c : COPY FEDERAL HBdBHVS BAifiC OF MIHMAPOLIS February 18, 1931. Mr. Walter Wyatt General Counsel Federal Beserve Board Washington, D. C. Skinner & Co. vs. Federal Reserve Bank* of Richmond et a l . My dear Mr. Wyatt: I cannot see how i n t h i s case the Malloy case can be s u c c e s s f u l l y invoked against Regulation J as- amended, and therefore wired you as I did on the 13th. But now that I have your l e t t e r s of the 13th and 16th with quotations of what some counsel of other Federal reserve hanks say about employing System Counsel, I l a i d the matter t h i s morning before Gov. Geery, Deputy Gov. Yaeger and Mr. Mitchell, the Chairman of the Board, and they authorized me. to say t h a t , as far as t h i s Bank i s concerned, they are w i l l i n g to leave i t to the Federal Reserve Board whether or not to r e t a i n System Counsel, and that i f the Board decides to r e t a i n such counsel and the other 11 Federal reserve banks agree to contribute to that expense pro rata on the basis of t h e i r respect i v e capital and surplus, this Bank w i l l also contribute on that b a s i s . Yours very t r u l y , (Signed) A. Ueland Counsel. AU/MG 3 4 8 X-6838-d COPY Law Offices WILLIAMS, 3KJTTAIU & SINCLAIR PHILADELPHIA February 13, 1931. Walter Wyatt, Esq., General Counsel, Federal Reserve Board, Washington, D. C. Dear Mr. Wyatt : I write i n reply to your wire of the 12th and your l e t t e r of the 7th, concerning the Skinner case. As i s usual, we shall be very glad to accede to any suggestions made by a majority of the Counsel. Our usual statement i n matters of t h i s kind must be repeated, namely, that our lack of l i t i g a t i o n i n t h i s d i s t r i c t makes i t d i f f i c u l t for us to give points of view other than those that are purely academic. Certainly, i t i s evident from Mr. Wallace's l e t t e r , as well as from the b i l l of complaint , that the v a l i d i t y of the amended Regulation J w i l l be an i s s u e . If p o s s i b l e , our view i s that i t would be desirable to have such an issue presented i n a Federal Court. However, Mr. Wallace and counsel for the receiver of the closed bank would be i n a better p o s i t i o n to decide t h i s question i n view of their knowledge of the practical s i t u a t i o n . The opinion of Mr. Justice Holmes in the Early case appears to us to be based primarily upon the contract between the parties as evidenced by the provisions of Regulation J and the Check Collection Circular issued by the Richmond Bank pursuant thereto. It would seem, to follow that i f the Regulations have been changed and the Circular modified accordingly, the conclusion should be i n accord with the changed Regulations and Circular, unless i t should be held that the Federal Reserve Board has exceeded i t s power i n amending the Regulation i n the manner recommended by the conference of Counsel. If you and the other Counsel f e e l that the case should be a System matter at i t s inception we shall be very glad to cooperate. Yours sincerely, (Sgd.) John S. Sinclair for Williams, B r i t t a i n and Sinclair GRL
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