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20H
FEDERAL RESERVE BOARD
WASHINGTON
t
ADDRESS OFFICIAL CORRESPONDENCE. TO
THE FEDERAL RESERVE BOARD
X-4694
October 13, 1926.
}
SUBJECT:
Topic for Governors' Conference.
Dear Sir:
At the last Conference of Governors it was voted that the
Counsel of the several Federal reserve banks be asked to prepare an
opinian on the advisability of seeking an amendment to the law to restore to Federal courts jurisdiction over suits by and against Federal reserve banks, and that all of these opinions when prepared should
be forwarded to the Governor of the Federal Reserve Board. Accordingly several of the Counsel to the Federal reserve banks have forwarded
to the Governor of the Board opinions on this question. Counsel to
~ some of the other Federal reserve ba1iks have expressed their opinions
in letters addressed to the Board's General Counsel.
,;
In order that the Board may have an expression of the views
of the Governors on this question in the light of the opinions rendered by the several couu1sel, the Board has voted to place this topic upon the program for the forthcoming Conference of Governors. For your
information in this connection there ure enclosed herewith a copy of
a memorandum on this subject prepared by Counsel to the Federal Reserve Board and also copies of the opinions which have boon rendered
by counsel for the Federal reserve baru.:s. There are also enclosed a
letter received by the Board from Mr. De•.vey, Assistant Secretary of
the Treasury, asking that the Federal Land Banks and the Joint StoCk
Land Banks be included in any request for legislation of this kind,
and a copy of the Board's reply thereto.
Very truly yours,
Walter L. Eddy
Secretary.
Enclosures
FOR GOVERNORS OF ALL F. R. BANKS
209
1\fi'.arch 9, 1926.
·,
To:
Federal Reserve Board
From: }f.r. Wyatt - General Cou...1sel.
Subject: Tonic :for Governors' Conference - .Advisaoility of sec~:in.:; a.':l.end,nent to restore to Federal courts
jurisdiction over suits b_y and agai~1s t
Federal reserve banks.
It is respectfully reco:nmendcd that the above sub,ject be placed
on the :program for dis cuss.ion at the forthco:ninf.:· Cbve:::-nors 1 Conference and that ceries of this memorandura be sent imrnediately to the
Governors of all ]·edera.l .~esorV•3 banks i!l order that they may study the
subject a.nd consult with their couxlSel prior to the Cor..ference.
Prior to the Act oi Feoru.s.ry 13, 1~25, the Federal courts had
jurisdiction of suits iJl'Oll{)1t by or ar::;uinst Federal roserve bru1ks which
involved as much as $3,(;00, bvcause of tho fact that they were Federal
cornorations. Aaerica~1_;g9:;~1l-( ~nd Trust Corrro~ v. Federal Reserve Bank
of Atla:1t~b 256 U.·S. 5~50.
.A s-.Iit brought by or agdnst a Federal
reserve ballJ!::, thore:r'ore, whic:b. involved as LWJ.ch as $3,000 could be
bro-:J.ght originally in a U~1i ted Statos District Court, and a suit
broU(::ht against a Federal reserve b~-c in a State court could be re.noved to a United Statos District Court if i t iavolved as mu.ch as
$3,000.
The Act of Fc~brtl&r~' 13, 1925, however, w~·,ich was :cecommcndod by the .ArnoricaL :Bnr Lssocintion and by the Supreme Court of the
U:1itod. States and wh~ch d.e[~lt nrimarily with the a~mellate jurisdiction of the Fe<ieral COUl'tS, contained the follOVli:1g.provision:
"SEC. 12. That no district court shc."ill have
jurisdiction of a:"~' action or suit b:r or a,:,ai:u;t
any corporation unon the ground that it \O:as i:J.cor.porated by or Ullder an Act of Cor..e:;rczs: Provid.od,
tlmt this section sh.'l.ll not apply to any su.i t, De~
tion, or proc6edL1g brought by or agaL1st a cJ:.:~_?or
ation incorporated by or uru:ler an .b.ct of Co~~.g:~~osr;
wherein the Govor:1ment of the United States is tho
ow:1e;r of mCJre than one-half of its capital stock. 11
•
This amendment has the offe~t of dcprivi:~ Federal courts of
jurisdi ctio:1 of all suits by or ekaj.:;;.st Federal reserve banks u~1less
the pleadings of the plo.L1tiff o1' t~ci.r f'J.cos o.ctually raise so.ne
question necessarily i:wol'tirig tke Jntqlr,etatbn of the Co:1sti tution
of tho Unitod States or SQLlO Fedo:,.,~,l st.":tu.to. It, is :10t sufficic!lt
for the nloadi~J€S ef L.: d.:::fe:.J.d.~nt to rr-dsA a Federal questio:!.
Morcovz;r, :B\::c1orn.J.
rbs.c;rv;~ ·ba::~ks can~:ot
get into the Federal
-2-
X- ±551
2a~l...()
1
courts 0'1 the grow.1o of ..::ivcrsity of citize~lshi:o, because the
Supre:ne Court has :neld t.i.wt o. Federal cornoro.tion is ::ot a citize:1
of any State.
:Banl:ers irr~1.1st Corrm::my v. Texo.s and Pacific Railway,
241 U.S. 295.
The Fode;.·c.l reserve ·oanks, therefore, rove not even
us :nuc~1 ri~:i1ts in the Federal courts as ht.we natio:.:al panks.
Soctic::. 24(16) of the Judicial Code sncJcifi cally provides that, for jurisdi ctio:1c.l purpos os, na tio:1;;1l ba:1.\.s shall be deemed citizens of tho
States in Yihich they are locc.tod and this e~mbles them to· bring
suits in tJ.-:.e ?cdcrnl courts or remove suits brought ogo.inst then to
tho ]'odoral courts on the grounis of diversity of citizenship where
the ot::er parties are citizens cf States other tha:J. tha.t in which
the head office of the natione..l bank: is loreted.
There is no l&\V,
however, givi:1g Federal reserve "t.anks a similar status.
The present f'li tu.atio~'l is of serious disadvantage to the
Federal reserve oan.;rs, because they ca:1 sue or be sued in the Federal courts only when the initial plead.L'l{:;s s ho·.., on t.'l:eir fac€s
that the suits necessarily involve the co:1st:uctio~1 of the Constitution of the United States or. of some Federal statute; a:1d suits
brought against them in the Sto:te courts can be removed. to the ]'ederal courts only whe:1 the nleQ.di::.gs of th~1.£4_:1ti.ffi. shm7 on their
faces t:i.~1at the suits necessarily LJ.volve t~1e construction of the
Co:1stitutioa of t;le Udted. St:::.tes or some :B'oder:ll statute, and this
is rarely the casu. It is :aot sufficie:J.t for the Federal :reserve
ba~1k to plead in d.efence some provision of the Federal Reserve Act
or some Regulation of the i'edoral Reserve :Board (e.g., Regu1-'1tion
J upon which they rely for protectio.Il in collecting chocks.)
Moreover, cou:1scl for a number of the Federal res~rvo bx:ks advise me
that they frequ<:c1tly fi:1d both the judges and the juries in the
State courts to be u:-:treaso:mbly prejudiced against, and hostile to,
th.e Federal reserve banks; so that it is very difficu.lt for them to
get a fair tria.l in the State courts. For these reasoclS, cou:1sel for
most of the Fed.eral resP-rve banks feel :~,-ery stro:.1gly that the Federal Reserve Sys tom should seek an Qmendment to th~ Judicial Code restoring the jurisdiction of Federal co-;.J.rts over suits by a.:.1d against
Federal reserve b~~ks.
I have not brought this question up before, becruse I ;ms
advised i::-;.fonnn.lly that a bill pl!Obably would be introduced at
this session of Congress to amend the Judicial Code in several pnrticula:rs and I had ho:ned that it woulQ. be possi blc to have a provision restorillg; the Federal jl.U' isdiGt ion over s1.li ts by and a.gai:::.st
Federal reserve bar;.~ incornorated i:. such a general st~tute.
This
I believe would be 'much better tha tJ ~~k for special legislation
L1 a sepo.rate ste.tuto benef:i;ting tiJ,.e Fe<iert:J. r~;.s0rve banks alone.
I c.rn now advised, hovrever, th'lt the dcnnnd for a further ame:adment
to the Judicia.l Cod& which rra:s e;;t:TlOCted. to d.evclon has not yet develo~ed u:1d that thel'c seems to b~; n.tJ ...nr.r.•wpcd
fo~· :!melt lwslation
j"/ ..
X-4551
211_
at the nresent session of Consress. It becornas important to co.:sider. the!'efore, ,.,hether the Fetleral :r;es':~rv-o banks should seek to obtc.:.L1 the enactme:1t of a S1?ecia.l statute rastori:1g the jurisdiction of
the Federal courts over suj. ts brought b,s' and agai:1s t t~em.
There are a. number of ways in which the present situation
could be improved by a special a:7lend.rnent to the law:
1.
.A."'l amendment might be sow~ht either to the Judicial Code or ~o the Federal Reserve Act providing that, for jurisdictional p:.u·poses, Federe.l reserve 'be.n:::s shall be deemed to 'be
ci tizons of th;; States i:1 wJlicil their head. offices are located,
thus placinG tl1em upo:1 an 0 qu.ali ty wi tll na ti onnl banks cmd enabling
them to get L1to t:1e JfcdoraJ. courts on the g;ro'U.:..1d of diversity of
citizenship whe:·• t:-:e othor party is a citizen of a differe:J.t State
from tLa.t in which the head office of the Federal reserve bank is
located. I:.:.asmuch es this would only give the Faderal reserve banks
such privileges as 1-:atione.l banks and. any ordinary citizen or corpar atio::.1 would r.a.ve it ought to be co;np::~ratively easy to get such
a:1 amendment; but such an amendment would. grant only partial relief.
2.
k'l a.:nendi·nent might be sought chanbing that proof Sectior.. 4 of the Federal Reserve Act which authorizes Federal res3rve banks 11 to sue a::d· be sued, complain and defend, in any
court of law or equity" so as to authorize them 11 to sue and be sued,
coi~)laiu and defend, in any U11ited States District Court. 11
This
·would be simila:c to a urovision contained in tr1e charter of the :Ba.nk
of the United. Statos which was held by the S1:..preme Court to be suffieient to co1:.fer 'tJ..poa the Federal circuit courts jurisdiction of
suits by a1:d against the J3ank of the United States.
Osborn v. United
States Bank, 9 Wheat. (22 U.S. ) 737.
VlSlc:1
3.
A.'1 amendme:1t might '!:le sought to the o.bove quoted
provision of the Act of Febr~ry 13, 1925, d.an[;irlg tLe provise to
reaa somewhat as follows:
11 Pr·ovided that this sec tio:1 shall n~t apply to
suit, action, or proceedi~g broD€Dt by or against a
Federal L3.nd J3a:.'1k, Joint Stock Lend Ea;,:k, Federal reserve
bank o:r any corporation i:1eorpora.ted. by or. under a:1 Act
of Congress wherein the Gove,rr.unent of the United States
is free ow~er of r::ere than Jn,;l-r.JJ.lf of its capital stock."
~~Y
Such a:1 amendme:1t 7tould sirrqly extend t.he proviso to cever a fevr
specific classes of COI1lo:ratic:1s, t:i::e r:ajority of the stock of which
is ::1ot Oi7l1ed l\T the Gove:r:.::.rr,ent but in whieh the Gover:1II1e~1t obvious ...
ly hc,s an interest c-.:nci viilich obviously ought to be protected to the
same exte:.1t as cor:?oratio;:s in 'l1hich the 3-overnm.ent msrely ov·ns onen
half of the capital stock. This I believe would be the best kind of
X-4551
-4-
a.r1 amendme:1t to seek ·if a;ly special lei;islation is sought.
It
could be supported by u:1a.:..1.swerable logic; and, b~r including the
Joint Stock Land :Banks, the Federal Land. Banks and possibly some
other Federal corporations whose position is ~~alogous to that of
Federal reserve ba..'"lks, it 111ight be possible to obtain additional
supp1rt for the bill and to avoid t~e appearance of seeldng special
privileges for Federal reserve banks.
The principle whic."l-J. led Congres~ to excl J.de from the
provisio~s of Section 12 of t~e Act of February 13, 1925, any
Federal eo~~oratio~ ~herein the Government of the United States
is the ovmer of more than oJe-half of its capital stockwould seem
to epply v.ri th eq~al force to Federal z·esei"'re ba11ks for the following
reasons:
1. Although none of tho sto~~ of Federal reserve b~~s
is owned bY, the United States Government, ~1e Government has a
reversimw.·ry interest in the slU·plus of the Federal reserve banks,
Tihich amou..'"lts to approximately twice as rmch 3S the capital of the
Federal reserve ba~s.
2. The Federal reserve bal'lks have taken over the fnnctions of the sub-treasuries and perform ;nany very important services as depositaries a;.1d fiscal agents of the Gover:::unent.
While Federal reserve ba::ilr..s are private corp ora. tio~1.s,
they are corporations created for public &ld semigovernme~tal purposes and are under the supervision of a. :Board
com:pose<i of officers of the United States.
3.
~evertheless
4. They were creat'Jd. and actually fu:1ction as important
instramentalities of the Federal Government, acting net o:J.ly as
deposi tarios a..J.d fiscal age:1ts and performi:i(; tl:,e functions
previously :performed 0y the sub-treasuries but a.cti ·~16 also as the
:n.edia through which the great bulk of our C'llrre::1.cy is issued.
5. All the 11et earnL1gs of the Federal reserve banks 1
after providing for expenses, limited divide~iis, ruld the surpl~s
a'l:'..thorized by the Act, go to the Governme.."1.t as a fra:1chise tax; so
that the Gover11111ent has a;.::. actual interest in the protection of Fed:oral reserve ba:'fr'..s against losses :res·~lting from u:1fair treat:ne:;.it ia
the State co~rts.
The above merely indicates some of the grom1ds tl:'..a t might
be urged as bri:1ginc; the Federal rr..:serve ban..~s wi t~1in the principles
of the proviso to Section 12 of the Act of February 13, 1925. · It
is believed that if these were am.plified a.."ld SU')?ported by stnti s~ics
showing the volu.1ne of Gover:11-nental operations performed by the Federal reserve banks i:1 t~2cir capacities as depositaries 1 fiscal
agents and sub~treasuries of the Goverr~e~t, ru1 u~answerablc arg-u.me:1t could be bu.il t u:n in suo~ort of S"llch an amendment •
•:.
.J,;.
'
212
X--4551
I::. vicm of tiu: rcluctar:co of t~1c FcG.cral courts
to have tl1cir jur isc:ictio~~ o:.~la::."g(;cl a~1d i:1 viow of t:1c ?l'ejudice
ex is tL1r; .:::.gains t FeC:.erul rcs..:.;rvw oc.:1'.cs in 11.1a:1y qUD.rtors, hovrcver,
it is c close qo.estio~.l ·.:'r.wt~1.er it woulci. to d.esira.ole or expedie::J.t
to attempt to seek a S~;'lecio.l a:ne::-;.dme:J.t for tr.e relief of tho ?oderal reserve ban.l:s eve:1 o:.1 this obviously sou::J.d basis. It is for
this rec.so~1 that I believe it 11ighJ.y desirable to have this su·oject
discussed ut le::.1cth by the G0vernors of all Federal reserve ba:llcs
L1 co:J.ju,'1ction ~7ith the Eoord bufore a:1y attempt is m.'lde to obtnin lcgislatio"l·
It hns :!.lso ·uee:l s~sbested th;;;.t an ame~1dment should be
sou.;:;ht o:x:e;:'lptin;::; Feuero.l reserve banks fron the :process of attach.-rnel1t and go.r~1iS~l."no;.1t before fLml jude;Den. t i!l a:-.y case, :::.s
:mtio:1al ba.."l.ks nre il·:JW e:x:errmtod under the urovisions of Section
5242 of the Revised Statute~.
I h.ave not"' give:1 r.Il.:tch thought to
this question, because I believe the other qu.estiol1 discussed
above is fnr more importa..'1.t and should be dealt with first; "but
it would seem ob~rious tlmt if Congress has seen fit to exempt natio:1al banks from the process of attnciu::ent a~1d i;araisr.l. tne1:t pendin~
the re::1di tion of final judgment!!!, it should c.lso exempt :federal re-serve banks, which are ~mch more inportant from a public standpoint and which "!)erform. tmch Dore i1:1porta:1t functions as ins trumentn.li ties of the Gover:::;r:1ent.
For the fl.'. rther information of the
:Soard, I E>.ttach a cop;y of a letter frorJ Judge Uelond, Counsel to tho
Federal Reserve :Sank of lLi::1aeapolis suggestint: a:~ a::1endr.1ent along
this li•1e.
In view of tl:e si:ort ti~. io rer:.1a1n1ng before the Governors 1
Confere~1ce, i t is resrectfully rocomr:1end.ed th:?.t a eopy of this
memo1·e.ndum n..'"'ld the attached letter from Judge Ucla.'1d be sent direct
to t!1e Governors of each Fod.eral reserve bank a.t tho eo.rliest
possibJe date and that a c::;py be sent to the Secretary of the GoYernors' Conference rti th advice that the :Soard r..o.a -..rotod to add this
topic to t':le program for discilSsion at the fort~1co:~1L,~: Gover:wrs 1
Conference and has already sent copies of this :·:1er:1oran.du.:J direct
to the Federal reserve banks i!1 order to save ti:::e.
B.espe ctfully
Walter \'lyatt
Ger;.eral Cou:1sol.
Copy of letter
attached.
WW
S.AD
(COPY)
X-4551-a
FEDERAL RESERV"..8 EJu'f"l{
OF MII~:E.APOLIS
21.4
Fe'orua;>y 2S, 1926.
Mr.
W~lter Wyatt,
General Com1sel,
Federal Reserve Board,
Washington, D.C.
My dear Wyatt:
Congress being now in session I v~nture to s1:g•r,est t:'le
ii11!Jortance of an ar;·~endmer:t to the Fed.er~,l ::teserve Act cxe:;Ipting
F.~deral reserve ba.nks from the :pr.)cess of att::..c:b...;nent and. garnis::Went,
tl1e same as Natio::1al ba:1b::s. In tJ:lis, tlw ~7bt:b District, I have
been vexed a good deal by o. sJ.i t staded age.inst this bank in a
north Da:.rota stat_, court, wi t'h r;arnishme1;. t as basis of jurisdiction,
and, of course, for jud6f:1eut in rem in case of no a:npeara.11ce on the
part of ·~t,he delend::.nt. Wi t~1ou.t s;::.cl1 an a.'Ilendrnent as that suggested,
it seerr:s"' to me there can scarcely be a11y limit to a:moyance of that
sort, for :L1 the absence of a clear provision in the act exem;?ting
Federal :::-eservo banks f:::·om attachment and garnisl1rr.ent a claim that
they are exeriT?t by Lilj·lication ca'1not be maintained so clearly as to
have the State eo·c.rts sustain it.
The Federal rese>:ve banks are also much concerned in having
the Act of February 13, 1925 with respeCt to the jurisdiction of the
district courts of t~1e United States a11ended, for, as you lmow,
Section 12 providos that incorporation tmder an act of Con;;:;ress is
no longer to give those co·Jrts jurisdiction, and tl1':3 Federo.l reserve
banks havbg not ·been given tho status of citize!lshi:P of .my state,
the SPJUe as national ba'lks, the present situation seems to be that
a Federal reserve ba:ak can neith2r sue in a Federo1 court or have
a suit against it re~noved from a State to a Federal court unless the
s:J.i t arises 1mder the Constitution or Laws of the United States, aside
from that of bein5 a Federal corporation. It is of co·J.rse emtirely
unnecessAry to point out to you the practical importance of giving
Fede1~a1 reserve banks the righ'0 to l i tigato tl1eir con troversi,es in the
Federal courts.
·
You:rs very truly,
A. Ueland
A. u"ELAJTD
Czmnsel.
P.S. As to a Feder.::l reserve ot:n~-c being able to rem::>ve a suit against
it from a State to .::.. :federal co11.rt on the g;round that the suit
arises under t:::1e C:)nsti tution or Laws of the United States, please
rernem0er the rule that t:1is can;:wt be done unless the fact of the
suit a:i.'isii:Jg under the Consh t:J.tion or Laws of the United States
ap:Jt:l8IJ on ''the face of the 6omplaint.
This is hardly ever the case.
c
0 p
215
y
•
i'
7.-r.:573
Mr. Gc orr:e J • Sea.y,t .,.Governor
~ddition.:l
Topics for
Gov.-:-rnor 1 a Contorenoe.
1.ty dear f:c.vc:r nr;r Soay;
ot
I hAve o~'.r :i'ull '. roo.d the ..letter
tbe· ~deral Reserve
B
.. oo.rd, •·..· :4li58, o.nd 'the let~rr of ;Jt. 17b.lte.i" flyntt{.J:-4551, whi9h
is atti.dllod.
··
·
)
Mr. \l~tt ho.s di~t.•:.sscd so thOro~hl.l the. present situation thllt additional discus&> ion is lt;.rg~ly aUper.f'luous •. As .he ·
·states at th8 present til.oo ,.i'Odcr~ Rceorvc a,.n11l+may not bring suits
in, or rGmOW suits. to Federal Courts upen ;tho ground that the ..
ba.n!.:s o.ro cltiaons ot d.$.tfotent Stntos from that . o£ othor po.rtic a
to tho .suit... ;~.lao the banks U.O.y not, a.a formerlJ, . brill& f1Uits in~
· or rel!love suits. to Fe®~ CO\U''tts. ~on the. ground that any 8ttit
c..gr.inst the It'ede:ra.l R~IGr'tO a·- ~B qno. arising under the laws of
the United. States • 'fho rosul t ia. Ji'Qd<lral Court• rll.l 11:owr .Mve
jurisdiction, of lltiption oonocrning 1fcderal Roservo Banks,
unles.s tho suit, .tJf'· a.otion, na brought by tho plaintiff snows tho.t
a quostion imolvi.~ the oonet:ruetion ct tho oOMtitution ot tho
laws 'ot the UnitoQ. Stntos is involved. This :woUld exclude us from
tho Fcdoru.l Cou.rta in noa.rly nll usual litiga·Uon.
z·thoro'Ughly a.greo tho.t it vro.ul~ bo ~ll to sock some .•.
ronondmcnt of tht
of. Con&···r(.;.ss, and. I... •. '." ino. U.ned .to ·.think that
tho third om.nndnlonl auggcstcd by Mr. Wyntt \10ttld be tho best.
A••.·
It tho first amcndtncnt suggested by lfr. WyQ.tt bG o.doptod•
Fcdcrul Rt;Jsol"(o Barnk,a .could onJ:y romO'IIc s·nft$ to FederAl. Courts·
when tho suit wo.a bro:ught in a()ilte State othqr than thtJ,t in which
the main oftioo of the bnnk was looa.tcd• ·
It t.ho socond slJggOatj.on were a.doptcd, the n.mcndmont
,rould a.uthorizo Fo4oro.l Resono Bo.nk.a to institut~ auita in tho
llietr:l.ot C<>urta o£ .the Unite.4 ~tAtoa, nnd wo\U_d authorize other
persons to bring au1ts ~!..inst tb<lm in tb.c District Courts of the
Unitod sta:i;,cs. ·. Itc woUld scqm.1 .koWo-.or, tho.t tho. s.ootion must be
construed to uwnfl' either thtlt f()40to.l RoscM~ . . . may not sue
or bt> sued in. o.ny State Cot.trt, F .e:lae that tbeyJ'Do.y sue in an¥.
State Court or in tho Distriot 'Court ot the United States • . It the
former construction be adop~d., it will a01mJWhat. embarrass the
,
ba.w ; beofl.uae .Proceedings in ~dera.l courta. are as a rule more
·expensive than they t+re i9 St~e Courts, antl it vtill be. inconvenient to lao o~oll.od to •Ps9tt to e. FGderGl qourt 'W'henover we
found it neeoaaa~7 'bf.\J·'J)rirlg a~t to oolle(t't; o. note,. er tor other
alight
·tM. ~ mlcht ~~ o.nd ~ au~d in the l~triot
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Federal Reserve Bank of St. Louis
:o•,;
1~.
2t6·'
Goorgo J. Soay, Governor.
f
The third runcnd!J.ont \vould morely ·rest oro 'the status which
·axistad prior to tho ""ct o:.L ,ii'cbruary l3th1 which it sot>trlS to mo
wns fair, both to the b.:l.n.L:; u.nd to other persona, aa it permitted
us to remove suits in whic>. t:1c amount in controversy exceeded
~s,ooo.oo, but did not pcnuit us to bring) or remove suits, to tho
Federal Court if the umouitt wore less •
Ur. r;yatt a.nd Judge Ueland in his letter of.' February 23rd
raise other oloaoly rcln.tod but somowho.t different questions which
to my mind o.re pcrho.ps of grcato:r importance' than the quoatioJ1 of
FcdorQJ. jurisdl.otiott • that it to 8af tho quoetion of tbc looo.tion,
or domicile, or a J'edGral Reaorw .Bo.nk. The Federal RoaoMro Act is
not specific upon this point, and it soou. to mo tbat a. Fc.dcrol
Reserve Bank might bo regarded as d~cilcd only ia tbo place in which
its hc.1.1.d off.'ioc, or in a.nt event, whore some bra.nch is located, or
cl so it mir;ht be rogvd.od ae in contemplation of lo.w domiciled
throughout its District.
h-
Judge UQla.nd points out that his oppononts have ueuc.lly
procaod.od against
upon the thoft'J that a 11\'idoral Rotol"Ve Bank
wo.s not doing buaineaa in o.ny Sta.t.D1 o:*:oopt that in Vlhieh. its head
office, or som.o Branch. ·as loeatcd. OR .tho othot- hu.r:ul-~: in acverlll
suits brought a.gaiaat ·this 'bo.nk our opponents M'V'O t~n tho groUnd
th.c.t o. Fodora.l Roso:rvo Be.nk-w&;s.in contomplat~on of lo.w· present in
avery Sto.tc of ita Diatriot., e.nd. subject to suits in such S~ttl in the
samo iilllnncr as a corpOZ"a.tion duly domiciled therein. .In ot}t.er words,
tho suit& mentioned by Judge Ueland proceed upon the thoory tho.t :the
Fodctlll Reserve Bank: is o. f'oroign oorporo.tion o.nd not domieilqd
throughout its District. Tho suits c.guin.st us proceed upon tho theory
tlw.t we c.rc quna i ... dolll.Ostic oo:rporatio·ns in ovary State ot our District.
The suits u.ga.inst' u• ht.\vo not 'boon prossed to ~ tina.l jWilplont, bUt
are now pending. Tho l~r Courts b.Q.yo hold tha.t we 1'4Vre doing business
in every Sto.te in our District. It is impouiblo to predict. tho final
outcoUUJ of these nui·t.s, til\ it socm,J to 1110 tbo.t oithor Jud&o Ueland, or
myself 1n.ust lose. It socm.s to nw thAt a Federal. RosoMC Banlt is· either
doing business in ·every Stn.to 1n its J)istriQt,. and) th(}rotoro •.
subject to px:-occs!: in such Stflto as a ,.oorporo.tion doing busincsa
theroin1 or else it is not doing b~uti!loas il) that Sto.te, and, there•
foro., subjcc·t to attu.ehmont as a non-resident.
.
/
J
It is difficult to (ocido •rllieh ot those two nltor~ti~
would be most a.dvnnta.geo\1.8 to tho. Federal .Rea<irfo Bank.
It. ~aro .
d~iciled throurhout our District, and liable to suit ill .....,. State,
we ar.e liable t.o the ooneto.nt anno~noe of suits in r~- pla.oea,
orill the expense llnd ineoft'Yenience ot tald.ng depositio,6f. or Ma4inc
wi~ssea to testi..f:l in •\lob pl$.0. but on ·the othet' 'band, • will
probably be entitled to· thO' sto.tutea. of limitations. :Jlnd oer\a.in other
ronwdiol ato.tutee which· only q.pply to residents of. o. ~··
~r.
George J.
Sc~y,
21.7
Governor.
It ~h<- r.ourta hold tbn'l. vro ..1re not doing business in a.ny
pl"'ce o:::cept \T~1cro '\TO hD."7'u an oi'.:C'ice, we a.ro, I think., lit1.blo to
a.ttt..c.lulanJ,. in other Sta.tt;s. ?bore o.ppoo.rs to be nothing in tho
r'edcra.l Hcserve Act which extends to Fcdora.l Reserve llo.nl:s tho protection which lbtioml b~l.nks hr.vo r.ga.inst a.tta.ohlllcmts b•:.:C'ore c.
ju~nt.
fhilo a. parson with a. clc.im a.t,:;o.inst us mo.y nt>t .·.lwnys bo
t'.blc to a.ttu.ch money., or propcri;y1 bclongiuz to us in thG h.~nds of a.
member ba.1lk, thoy could usunlly do so, nm! t.V<.n though tho pror>crty
a.tt..lchcd belonged to sane mombor b:-.nk, a.s, for examplo, checks sent for
oollootion, still we could by thu c-.tt~.chmont be pla.ood in o. position
whoro we should bo compelled to givo ~roa.-t. inconvonioncc to our ~mbor ·
bunks, .or ~lsc submit to ntta.ohncnt.
As you will notice oit~!(.r dt.cisioll vrhich mo.y bo mndc ~dor tho
prosont la.w would b.xvc mny dis•l.dvant<~t,;os a.nd some a.dw.ntc~gosto tho
Fedcra.l Rosorvo Ba.nks. If' it tiCrc rossiblo to !-.nvc a. sta.tute pa.sscd
providiug tha.t Fodorol Roaorv\3 Bc-.nka should be considered doing business only in tho pla.ccs in which tacir head offices, or brenohcs., were
loca.tcd., a.nd should not b\: subject to c::tccut;ion ~>r c.ttrchmcnt bci'orc
finh.l judgment, the dif'f'ic•uti<.s o.nd czponso a.ttendant upon litigation
of' Fcdcra.l no servo Bnnks 1ro\\:a.d b.::. grcc.;.tly di."linishod.
However., I C''lll :.;~>·Jr nttc.ntion to tho fa.ct thr.t the :1bovo
mentioned provi~ion w!11.ch ~,·u.ld -rotc.ct us would mo~n tb..:.t uny porcon
~Tho undertook to brine;: c. s11it :~.:5.nst us would be com.:?c::llcd to submit
t,o t.'lc c...:r·msc a.nd incouvc.:u.:;nc. uh:i.ch now fc.lls upon us, t:'ld it would
ust.~lly l'li.Ca.n the.~ c. OJ.embcr buul.:~ or o'Jher person with c. SJll{'ll cl~im
o.st.inst tho F~dcro.l Reserve: Bc.n!c rpould be compelled to r.ba.ndon it.
rat~cr than to proDocut~ it to judgmc1~, ~nd it Qicht be thr~ such a.
condition -:.1ould lc.o..d to such fric·~ion .\nd ill-fc~.oline; t:tn.t it '\'10\Jld be
bettor for us to stt\~ld ·tile expense .'.lld t:o-oublc of suH:.. tha.n to S(.Ck a.
provision which woul.~ rclicvo us of ·~his troublo but cc.:-t it.upon ~hose
who ha.d1 or ~~ugh\~ \hey ha.d good claims u.g~.o.inst us.
I roma.in
Vr.ry tru!.y yours,
I
U. G.
MGW:IB
~ ·:l.llacc..,
Counsel.
2:tH
(COPY)
FEDERAL RESERVE BANK
OF ~lEW YORK
X-4694-a
Ma.rch 12, 1926
Walter Wyatt, Esq.,
General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Wyatt:
I l1ave r~ccivod your letter of 1hrch 10, with the encloSU+c, relative to amendments to Federal legislation in regard to
the jurisdiction of ~~o Federal courts over suits by and against
Federal reserve bru:lks and exa1rption of reserve banks from the process of attachment and garnishment before final judgment in a11.y
case.
I hcve advised Governor Strong that I think legislation
along these lines is highly desirable and that I think an amendment in substantially tho form of the amendment which you propose
in paragraph 3 of page 3 of your memorandum to the Board will afford relief, so far as tho question of Federal jurisdiction is concerned. I have also a&vised the Governor that I thi:lk that perhaps
a decision as to what form of relief to ask of Congress and in what
mmmer and a·t; what time it shall be brought up can best be reached
by the Governors' Confel'ence after reviewing the legislative needs
of the System and after possj.blc inquiry of members of Congress and
of others, if there arc any, interested in procuring amendments to
the Federal Judicial Code. I do not feel it is possible for me to
say more along the lines of procedure at the present time.
With kind regards,
Very truly yours,
(Signed) L. R. Mason
L. R. Mason
General Counsel.
(COPY)
Williams & Si:Udor
Attorneys at Law
Philadelphia
2:1.9
X-4694-b
April 30, 1926
Hon. George W. Norris, Governor,
Federal Reserve Bank,
925 Chestnut Street, Philadelphia.
Dear Governor Norris:
I am writing in reply to your letter of the 19th inst. requesting v.n opinion on 11 tho advisability of seeking a.."'l amendment to tho law
in order to resto~to Federal courts jurisdiction over suits by ana against
Federal Reserve Banks. 11 I note that this request is bei11g made to counsel
for the several Federal Reserve Banks pursunnt to resohttion adopted ut the
recent Conference of Governors.
I wrote you on March 12, 1926, after receiving a memorandum on
this subject from 1~. Wyatt, Counsel for the Federal Reserve Board, informally expressing my view that such an amendment would be very desirable and
thnt the best form it could take would bo the third of three suggestions
made bY. Mr. Wyatt in the memorru1dum referred to. Since the receipt of your
letter of the 19th inst. I have had an opportunity to consider more carefully the decisions bearing on the supject in connection with the legislation
establishing and limiting the jurisdiction of Federal courts. The result
of this further consideration of the subject has merely been to strengthen
tho view previously expressed to you.
I think that there would be obvious disadvru1tage in ~~ending
either tho Judicial Code or tha Federal Reserve A.ct, to provide t~~t for
jurisdictional purposes the Federal Reserve Banks shall be deemed to be citizens of the states in which their principal offices are located. It would
seem that merely to amend Section 4 of the Federal Reserve Act, which authorizes Federal Reserve Banks 11 to suo and l:.e sued, complain and defend, in
any court of law or equ.i ty 11 so as to authorize them to sue und be sued, complain and defend in any United States District Court is still less to be desired. The objections to these first two suggestions in Mr. Wyatt's memorandum are, I think, sufficiently indicated by him to render further discussion on my part unnecessary.
The Act of February 13, 1925, which has had the effect of depr1Vlng Federal Courts of jurisdiction in a suit by or against a Federal Reserve Bank, unless the initial pleading on the part of the plaintiff actually raises a. question necessarily involvi:Jg the interpretation of the Constitution of the United States or some Foderal Statute, provides i~ Section 12
as follows:
11 T'.aat no district court shall have jurisdiction of
any action or suit by or against any corporation upon the ground that it was i~corporated by or under
2~0
X-4694-b
-2-
an ...~ct of Co~~.gross: Provided, that tJ:1is sectiou
shall not ap:9ly to ony suit, actio:'l or proceodL1g
brought by or against a c0rporatio:.1 incorpore.ted by
or ~~der ru1 Act of Congress wherein the Government
of the United Stntes is the 0'7ner of more than o:::.ehalf of its ca:pi tal stock. 11
Tho aL.1en&nent suggested by li.II'. Wyatt, -:.vhich a-ppears to ne the
most desirable under all t::le circumsta::J.ces, is to change the -proviso in this
section to read as follows:
"Provided that this section shall r-ot apply to any
suit, actio:1, or proceeding brought by or against
a Federal Land Bank, Joint Stock Land Bank, Federal
reserve ba~~ or any corporation incorporated by or
under a~ Act of Congress wherein the Goverw~ent of
the United States is the owner of noro than o~1e-half
of its capital stock."
Though not specifically referred to in your letter, or in the
Resolution adopted by the Conference of Governors, I should perhaps add that
it w~~ld seew to ne ir~ortant in connection with the a~en~~ont particularly
referred to that a further a.;~Iendi·J.ent should be sought to relieve Federal Reserve Ba11ks as National ~~~Y~ are now relieved under the provisions of Section 5242 of the Revised Statutes fron being subject to the process of attac..rn:lent an.d gar~1isbJ.1ent before final judgr:1ent in any case. It would seen
even ;:10re appropriate that the Federal Reserve :Ba"1J.cs should have _the benefit
of such exenption than National Banks, Even without the bcmefi t of this statutory exeoption the status of a na.tiona.l bank as a ci tize:1 of the state in
which it is located would place it in a bettor position in this respect than
a Federal Reserve Bank. The disadvantages would in :.-cy- ,j1:'.dt;uent very clearly
outweigh the advantages of establishi::1g by legislation e.:r.ch Federal Reserve
:Ba:.1k as a citizen of the state in which its principal office is located or
as a ci tize~1 of each of the states wi thi~l its district., Reasons for localizing ordinary co:x.1urcial banks do not apply to F·odernl Reserve Banks. The
govcrn;Jental functions of Federal Reserve Ba::J::s arc such t:b...r.t if for no other
reason I should consider it desirable that their status as corporations of
the United States and ::1ot of any state or states should continue. I should
therefore thi~~. especially if an O.l:le:-.dl:tcnt such as suggested above can be
enacted to restore the ju:ds<iiction of tile Federal courts that there should
be an n..~end..-:1ent to the Federal Reserve Act in effect exectpting Federal Reserve Banks fro~-:1 the process of attach::;ent and go.rnislment before fino.l judgnent.
I w.tderst~:mcl th~J.t it is :1ot necessary for your purposes for me
n.t this tir.:~e to further elo.burato the viC\7S I have expressed, but I shall be
glad to do so later should you so desire.
Very truly yours,
(Signed) Parker S. Williams.
(COPY)
FEDERAL RESERVE BANK
OF .ATWTTA
April 10, 1926
Mr. Walter Wyatt,
Go'1crn.l Counsel,
?e<lcral Reserv~ Board,
WashL1gto~1, D. C.
Dear Mr. 't7ya t t:
It has not boon possible heretofor& to give tho proper c~nsi
deration to your ;:ae,Jorandum addressed to tho Federal Reserve Board with reference to the acivisabili ty of obtaining an am.cndue:;::.t to the law which would
restore to the Federal Courts jurisdiction of suits by and against Federal
Reserve Banks. We l1av·o today, however, been able to give consideration
thereto, as well as to the r.1or.;orandur"1 prc~pared by !vir. Wallace on the sa-Je
subject.
We believe ·thc.t en a;:~or:.draO::lt of the kind suggested in subdivision three of your semorandur:.1 shoulC:. be sought. Your suggeution No. 1
woulcl, at best, give only partial relief and, u~1less there be s01:19 determi:1ed OJ???Osi tion to a:1 amondr.10:1t similar to your third suggestion, it might be
as easy to ob.tain the one type of a.":lendment as the other.
As a practical sattor, we would suggest tr~t you try to ascertain the reason which iwpolled the American Ear Association and the Supreme
Court to subr:1it for the consideration of Congress the _provision which was embodied in Section 12 of tho Act of February 13, 1925. We recall that i~ former correspondence yo·u quoted someone in the office of t~1e Department of
Justice who told you that Section 12 was not e:1acted with a:1y particular
tho11ght of the Federal Reserve Banks, but that on the other 2:lm-.d those who
suggested the enactment had in mind other Federal corport1tious. At the time
it occurred to us that it was possible that the primary purpose of the enactmont vms to keep the Federal Farm Land Banks and Joint S·tock La::1d Ba~'lks from
utilizL1g the Federal Courts in foreclosure procoedings. If in fact this wE•.s
the purpose sought to be accornplisi.1ed,. then an attempt to gain relief for
the :Reserve Banks might be handicapped rather tha;;1 helped by coupling the Reserve Banlcs with Federal Lo.:.1d Banks and ,Toint Stoclc ki'ld Banks in the proposed a.D.endmen t.
We r.1eroly sw;gest tho above for your consideration.
We also thi:'ll-c it would be desirable to secure legislatio:J. which
;1oulcl exe::wt the Rescr:c Ba~iJ-cg f1·w1 the lov;y· of attachments or executions until after fino.l judgnent.
We have never had a case in \7hich suit bus been brought against
the Atlu..11 to. :&'ink by e. t taC:hnon t, o.nd, therefore, :have :1ever studied the qu.es
-2-
X-4694-c
tioa of attachr:J.onts against Reserve Ban1cs with any particular care. As to
·,·:hethor or not the right of attach~:1ont would obtain in a particular State
noulct, it seens to us, depend o:::1tiroly upon the poculiar statu tor;>~ proviDions of such State. In Georgia, for exa.~lc, one ground for attach:::1ent is
that 11 the debtor resides out of the State". This provision has been constru.ed as referring to actual reside:::1ce as distil'lguished from constructive or legal residence or political douicile. In fact our Court in one case l1as quoted with approval the following la.."'lguage: 11 It is tho question of actual residence and not of do::.1icile oerely; o.nG. this is a fact to be determL.1ed by tho
ordin..'lry a.1c. obvious indicia of residence. 11
In another c'J.se tho Supre;·.1e Court of Georgia has said: 11 The
mere fo.ct that a non-reside~•t r.1ay be found and served does not prevent a creditor from exercising his right to sue by attachr.1ent. 11
Obviously the statutes of the different States roy vary, but,so
far as our observation goes, the usual attachm.ent statute is sijjilar to the
one which is of force in this State.
In Georgia, a..'1.d in r.wst States, the rule seems to be that a
foreign corporation, even th~~gh it does business in the State, is regarded
as a 11 no:1-resident 11 • In Georgia, for instance, the statute specifically provides, 11 Attachments may issue against incorporations not incorporated by the
laws of this Sto.te, who are transacting business within the State, under the
same rules and regulations as are by this Code prescribed in relation to issuing attachments and garnishments in other cases. 11
Manifestly, a Federal Reserve Ba!lk is not t=L foreign corporation
within the meaning of those st.:1tutes. As to whether or not it would be subject to attachment under a statute similar to tho Georgia stav~te would seem
to depend upon the determination of the question of nhother or not it has a
11 rosidence 11 in the ordinary sense.
If so • then it woulc. properly be regarded
as being a non-reside:J.t of States other thc'lll the State of its reside;.1ce. The
case of Bacon vs. Federal Reserve Bank of San Fra.:1cisco, if pro:,;>erly reasoned,
would seen to establish the proposition thc~t a Federal Reserve Bank has a. dol"!licile or habitat, to wit: the locality where its principal office is located. Our best judgrJent is that a Federal Reserve Bank should properly be regarded as a resident of the State wherein is located its principal office a~d,
therefore, a non-resident of the other States. Although strong reasons sight
be urged to the contrary, a:id the question is a new one, so far as our investigation goes, we believe thnt under a statute like the Georgia statute a
Federal Reserve :Eanl;: would be liable to attach':lent in any State whereof it is
a non-resident; and that this would be true although the Reserve :Bank is a cit;zen of. no particular State and. may be said to have a field for the prosecuhon of lts corporate t:tctivities coincidc!lt with the boundaries of the United States, exce:pt in so far as its operations r:JEJ.y be cirCUJ::J.scribed by the statute of its creation.
·
We are further of the opinion that a Reserve Bank 1nay be sued
-3in ordi:::J.ary actions at co::T.1on lm1 or ia equ.i ty in any Sta.tc wherein service
may be validly perfected upon it in nccord.nncc v;i th the s to. tu tes of such
Sta.te, unless, of course, such statutes purport to authorize service upon
persons or by modes which rrould violate the general co:1sti tutio:1al guo.ra:1ties.
Vic aro of the opinio:J. that a Federal Boserve Ba.:1.1-: is suable at law or in equity in the Courts of a State wherein service ~y be properly perfected u~on a
l:ra::ch, provided the statutes of the State provide for such service. Wo do
not think, however, that a nesorve :aa"ik: couJ.d be broB.ght into Court by ordinary :>recess issuing fror:1 tho Court of a SteGe wharcin there is no office or
place of business upon \Vhich service could be had. Mr. Wallace in his mcmora:1du:.:1 r0fers to tho fact thnt in several su.i ts brought against the Richmond
Ban..'~{ the position has bec~1. tvkon tl:at 11 a Federal· Reserve Bank wao, in contemplation of law, present in every State of its District and subject to suits
in such States in the s.~.1c ::1£l.::ner as a col'i)Cra tion duly dozn ciled therein. 11
We assu.-ae that service of rn.·ocoss in the s~i ts referred to v;as made on the
officers in charge of a branch office, or that service was otherwise properly
perfected. AssUI:ling that there we.s no questio:1 as to service~ it would seom
to us that the position tc..1.kon by tho plaintiffs ia those cct.sos was logical
and correct.
If the suits brought by attach1nont against the Mi~1neapolis :Sank,
mentioned in Judge Ueland!s Jetter, wore instituted in States other than the
State of the residel'lCe of t-ho Minnea-polis Bank, and if the revelant statutes
authorized attachn1ent ))rocecdings against non-residents, then it appec.rs to
us that the attach.nents \70ro probably :properly sued out. Nor do we see any
essential inconsistency between the right to maintain attact~~ent suits, as
related by JuJ.ge Uclancl, f.md tho right to sue the Reserve :Sank at co~;1rnon law,
as r~s been done in the case of the Ric~~mnd Eank.
The Atlanta }3~t;,il:e has been sued onco i:1 a St.'lto Court in Louisia.r,a, service having be,::n ~·:lade u:,>on the New 01·leans :r.ranc:1, n1:d we reached the
'conclusion in that case t~at jurisdiction h'ld been obtebed e.g~:d:1st the :Bank
by the State CoUI·t. Were a."l attachme:1t to be brought; against the Atlc.nta
Jan.:.c in Mississippi, for exouple, where there is no bn:mch 1:1pon the officers
of 11hich service could be had, we ·believe that '.7e wouJ.d o.dvise the Bank to
tdo;.o the necessary steps to dissolve the attacbnent ana. to ;;roceed to defend
tl:e case on the ::1eri ts, assTh-ning, of course, th0.t })ro:perty ~1ad been 11 caught"
by the attachuent.
We are not entirely clear on the proposition as to whether a
Reserve :Wank wou.ld be regarded az a non-roside~1t of a State in which a branch
office is located, and, of co1.trse, the ri 1:;ht to attach L1 such case would be
determinable by :;>nrtic:.1J.c.r statutes. ...~s D. gonerD.l proposition, however, ue
incline to tho boliof tlmt a llcserve :ar..k resides in the State where its
principal office is lo.::nt~~~ a1d that it is a r;.on-resident of other States.
We arc, of cou.rse, doalin::; o::.J.y with the ques·tio:J. of resicle~ as (listinguished fron c:i. tizenshi:)•
Our interest in the ~~estion under consideration has i~1rigued
us into writing a letter of "J.npardonable length. ire stand rr-;ady to assist
-4you in overy way possi blc in secu.ri•1C en onendmo:1t to the law, which will e:;.1a0le Federal Reserve Bo.nl:s again to invoke t.l1.o jurisdiction of tho Federal
Courts, as rrell as an e:::w.ctue:1t of a statute '.':hich c7ould. j?revent atta.chr.1ents
a.;?~ai:1s t the assets and pror>orty of Reserve 3aj:ili:s bl advance of :final j1.l.dgr:tc~1 t.
with regards,
~e
ere
Yours very truly,
(Si(nod) ?..a:.1dolph & Parker,
General Counsel.
(COPY)
OF CHICAGO
X-4694-d
April 14, 1926
J. J. McDougal, Esq.,
Gover::•or,
Federal Reserve :~u.":.'.: of Cnicac;o,
Chic~o. Illinois.
My
da~r
Governor:
I a..-:1 advised by Mr. Dillard that &t- tb.o::raccnt conference of the Governors of the twelve Federal Reserve Banks held
L1 Washington, a. resolution was passed to the effect that the
counsel of the several Federal Reserve BaPJ:s be asked to prepare an opinion on the advisability of seeking an a~endment
to the law in order to restore to Federal Courts jurisdiction
ovor suits by m1d against Federal Reserve ]auks, and that all
of thesc3 opinio:~.s, whe:..1 prepared, should be forwarded. to the
Governor of the Federal Reserve Board.
Prior to that conforonce, I had roceived from ~~. Wyatt,
counsel for tho Federal Reserve :Board, a copy of his r;"!emorandurn
of date March 9, 1926, to the Federal Reserve :oard on this subject; and -u.nder date of March 12, 1926, I '1!rote you (3x:pressing
my views; and I beg to refer you to that lett:)r read in connection with Mr. Wyatt's r:1ernorandurn, of which you have c011Y, for a~1
ex-pression of my views on the subJect. I clo not believe I cm1
add. anything to what I there said; and a copy of that letter may
be attached to this letter and for~arded to the Governor of the
Federal lle!'orvo ]oard, as my response to t1l0 resolutio:l.
Very truly yours,
(Signed) Chas. 1. Powell
COUl1SCl
(COPY)
FED~ui.L r~SE:L.VE
::lill'!K
OF CHICAGO
Cho.s. L. Pa\'7oll,
Cou:J.sel,
Continental & Co~rcial
:a:~~
:ldg.
X-4694-o
March 12, 1926
Mr. J.•1. MCDougal, Governor
FodGral nesorve Ja:~ of Chicago,
Chicago, Illinois.
My dear
Gover~or:
Ro: Topic for Gover~ors' Co~fercnce - advisability of seekiD6 a~endmcnt to restore to Federal
courts jurisdiction over suits by and against Fedoral Reserve ~anks.
I ara in receipt of a letter from la. Walter Wyatt, Counsel for the
Federal Res~rve ~oard, enclosing for my information copy of a meoor~~duc
of date March 9th on tho above subject passed by him to the Federal Reserve Board.
In Mr. Wyatt's letter he suggested that I discnss this subject briefly with you before your departure for the conference ru1d that I write hiw
expressing oy views to him on the matter covered thereby.
I assume that you have seen Mr. Wyatt's memorandum and there is no
necessity for me to rehearse the oatters discussed by him.
I
I can only say to you that I deem the matter of very great importa.."lce.
ty the Amenw~ent to the Judiciary Act of February 13, 19251 the Federal Reserve Eanks are in effect shut out of the Federal courts. They are
thus left absolutely at the mercy of the state courts, except in the very
limited cases where a right is asserted under the Consti~tion of the United States or some Federal Sta~te. However it arises and whatever may be
the cause thereof, prejudice is apt to result to the Federal Reserve ~~s
by being driven to rely on the state courts.
Aside from this catter of jurisdiction which is thoroughly dis~ssed
in Mr. Wyatt's meoorandur:l, he also discu.sses therein 11 tho r:JD.tter of a.tta.chmellts and garnishments against Federal Reserve Bank:s 11 m'l.d that subject, too,
is of vital importance, except that I do not believe tho ruatter of gar~ish
ment of a Federal Reserve ~atik as a debtor of some other bu1~ or individual
is of iq>ortanco. The ioporta."'lt thing is that Federal Reserve Danks be
free from a writ of attac~ent under which its property can be tied up by
garnishment or otherwise. Our own bank was very seriously inconvenienced
by a. writ of attachment ta~en out in a state court in Iona. ;n1ereby funds
to the omaunt of four or five thousand dollars ~elonging to the Federal
Reserve I3a.nk were tied up by neans ·of a c;arnishment of an Iowa. ba:'.k which
had possessio~ of the Federal Reserve ~1ds.
-2Section 5242 of tho I\cvisod Stutut'-'s, being a part of t>w £l"atiom:1.l
expressly 1jrovidos wi tl:.. rcforo:J.co to National :anks us follm7G:
~a.1k .Act
nttachL'1c:J.t, injunctiou or execution shall be issuod ~wainst
such association (a lJatio:1al :o.:1k) or its property beforo final judgnent in any suit, action or proceeding in any state,
county or r.m.nicilJD.l court. 11
11 No
The ::mtter of frcodo;:.1 fr01:1 attuchrno:J.t by which its pro11crty cv.:1 be
tied up and tho no.ttor of cxCL1ption fron a writ of inj~J.ction by whicil its
opcr.::;.tio11.S ca~1 be b. torf0red wi tr1 are of 1:1ore vi tal ir:rporto.nce to the Federal Reserve :a:lks as ;:;.o·.1 constituted than to l'Jutional :Janks w~1ich arc
givc:1 this exm:rptio:u by statute.
Tho above quoted lun{;,"Uo.ge was discussed 'cy tl1e Supreme Court of tho
United States in Pacific National ::o.!1k Y. !Hxter, .124 U. S. 721, a.nd the
law was upheld and a reason for tho law, if ULJ.Y were noccsso.:ry to be given,
was fou:1d to be in the para:":lount interest of the United. States in such institutions.
It will be seen that this soctio"1 t7i tt reference to lTo.tionc.l ::a.nks
also prohibits injunctions--a prohijition r:ru.ch uore ir.l[lortant to Federal
Reserve :Ja;.lks and to the Govorr.r.J.ont tlnn s1..;.ch pro.hibi tion is ay)~Jlico.ble to
Na. ti onal J:anks.
I ao of the vicv,r thDt i:1 aay o..ttor.1pted ameno.t:1ont to the Judicio.ry
Act \"Ti th reference to ju.risci.ictivn thoro should be included an effort to
obtain a 11rovision. of t~1e lc.w prohi'biti::J.g the issuance of an attachr.1ent or
inju.J.ction acains t a. Fedcre.l ~1oservc :a:;:ik or its property prior to final
Olld{;;T.10l1 t
•
Tho third si1f;gostion r.mdo i)y Mr. Wyatt on pc.r;e 3 of his t1enorandun.
is in qy juQgnont the sinplost ru1d Dost effoctivc way to promlre an amendment to the Judiciary Act touching the r.:ntter of jurisdictioa; and how best
to call the othor r:1atter to the atte::.;tion of Congress and procure legislation I have not had tioe to fully consider. The desired rcs·:J.l t could. be
brought about by ar..1en.ding the language in section 4 of the Foc.cral ~osor·ro
Act w·:1ich now 1•eads
11 to suo and be sued, coc'l"lain and defend in any court of lm1
or equi ty11
so as to oalce it road
to suo and be sued, co.:.:rplo.in and defend in any ccurt of law
or equity; out :.10 o.ttc..ch:~1e:1t or i:1ju':1ction shall co issued
against such bank: or its prope1·ty before fi21al juclg;:wnt in
any suit, action or ]!l'oceedinr; in o.ny state, cou:1ty or ::mnici:;?al court. n
11
-3-
The foroi::oiac: is u. noro sue;c;estion o.s to ho~< the Act could bo o.::J.ondod to cover this 70int; but the vital thing is that it shrr~ld be anendod
n.:1c-:. tho rr....'1nor of bringi::lg about the ar.1endr1ent can bettor be considered by
cx-:~orts ,1-long that line tha11. by no.
Yours very truly,
.
(Sicned) Ohas. L. Po~1ell,
Counsel.
X-4694-f
FEDERAL
RESERVE
BANK
229
0 F
ST.
LOUIS
April 29, 1926.
Mr. Walter Wyatt,
General Counsel,
Federal Reserve Board,
Washington, D. c.
Dear Mr. Wyatt:
I have been so til3d up in court proceedings
since the recej.pt of your letter of March 31 as to preclude
mo from giving Mr. Wallace's letter serious consideration until tho present timo.
As suggested in;~ letter to you under date
of March 16, I believe tho most:'successful way to tackle the
proposition would bo to try and PaVe tho ju~isdiction restored as ncar as possible to wnat it was prior to the
jurisdictional amendment, Fo~y 13, 1925.
I believe tho third plan suggested in your
letter of March 9, addressed to the Federal Reserve Board, is
best sui ted to bring about this rosul t with tho least opposition, since it is plainly apparent that by tho Feb. 13, 1925,
amendment, Congress desired to exclude from tho effect of the
amendment corporations in which the Uni tad Ste.tos :1ad a substantial fi~~cial interest; and while the United States does
not own any of the stock of the Federal Reserve :Banks, its
receipts from the excess earnings and its reversionary
interest in the Reserve ba..'liks brings these broik:s clearly
within the intent of the Act, as .revised·.
The same thing,
to a lesser degree, might be said to apply to Federal Land
Jhnk:s and Joint Stock Land :Bal1kso
Under these circumstances, we would not be
aSking for any class legislation especially favorable to the
Federal Reserve Bonks, but wo·..Ud sinrply be asking that the
Act bo so omondcd as to carry out wh.t1.t was in rea.li ty intended by Co::g:oss uhen corporations, organized under the
United States, in y;hich the Government owns an interest,
wore exempted fron the provisions of the amendment.
The suggestion :ma.de by Judge Uhland as to
placing tho Fodorol Reserve BarJts on the same footing as
National ba."1ks in the matter of suits by attachment is likewise important. In this District so far this method has not
'·f!.)
2 cH.
1:··469t,;,-.f
been used against us. I con soo, however, tho pitfalls it
offers to a successful defense of suits against Federal
Reserve Ba.."1ks, and while the jurisdictional runendmcnt
sought will not help us in attachment suits in cases where
the amount is loss th8l1 $3,000.00, I still believe that
it would not be best to bring tho two matters up under the
sru:ne amendment since tho jurisdictional aoendment sought
would only place the Reserve Banks in the class intended
by the February 13, 1925 amendment as being corporations
in which the United States Government had a fintmcial
interest; whereas the attachment runendment would be open
to the clam that we were seeking class legislation favorable to Federal Reserve Bruiks.
After securing the onondoont restoring the
jurisdiction, we could then take up the matter of suits by
a.ttachr.1ont and probably have the Fede:;-al Reserve Act so
anendod so as to place suits of this nature on the sene
plane as those againot nationo.l banks. In this, I think
we would h~vc an absolutely logical position.
· With kindest regards, I om
Very truly your-s,
(signed) Jas. G. };:cConkcy
Counsel.
JCMcC/GP
X-4694:-g
]'L}m;RAL ID:SERVE BANK OF MINNEAPOLIS
lUnth District
kpril 6, 1926.
Mr. Walter Wyatt
General Counsel
Federal Reserve :Soo.rO.
Washington D. C.
My dear Mr. Wyatt:
I think that the
siL~lest
way for rectifying the present
situation as respects tho right of tho Federal reserve banks to litigate
cases in the ]'ederol courts would be to get Section 12 of the .Act of
February 13, 1925 amended so as to read:
11 1!0
district court shall have jurisdiction of
any action or suit by or against any corporation,
bank, upon the ground that
it was incorporated by or under an .Act of Cor~ess:
provided, &c."
~xcept ~ F~deral ~~e
This, it seems to me, TIOuld leave the Federal reserve batiks
)lith respect to jurisdiction just as they i7cro bcforo, TJ.Dmcly, that
they could bring suits in the district courts of tho
~nited
States alld
remove suits to those courts from State courts in all cases involving
the requisite amount in controversy.
If, in addition to this, an
~~eJdment
was made to the
Federal Reserve Act to the effect that no property of a Federal reserve
bank should bo snbjoct to attachment or garnishment, I think tho prosent difficul tics of tl10 Fcd.oral reserve banks in nm.ttors of litigation
would be removed.
-
2
-
4694-g.
This in answer to your letter of MarCh 31st with copy of
the letter of
1~.
G. Wallace to Mr. George J. Seny, Go·.rernor of
March 19th.
Yours ver;r tn:ly,
(signed) A. Ueland
(COPY)
:E":3DlD:ul.L I\.ES :El~VE :·. JlTIC
OF I\•.;:.55..:-\S CITY
. .:..pril 26th,
X-4694-h
U26.
Hon. ~alter ~yatt,
Go:ntJral Counsel,
Federal Reser•re :::oard,
Washington, D. C.
My dear Mr. 7lyc. t t :
I a.rn very sorr;:r t::w t o·.1 uccom1t of absence frorJ. the offi co I have
not sooaer had the o;:nortJ.ni ty to ro!JlY to your letter, transmi tti~1g copy
of letter addressed by Mr. Wallace to Governor Soay, of the Federal Reserve Dank of E.ichno:~.d, with reference to tho character of relief which
should be atter.ptod to l)O obtained frm-:1 Congress affecti:Jg the jurisdiction of Fedorn.l District Courts in suits broueht by and ae:ainst the Federal Reserve La1iks~
I thorouchly agree coth 1.ith you and Mr. Wallace that the oost effective legislatio:l which could "bo obtai!1Cd would be to restore the jurisdiction of the district courts as tho sa..-:1e existed prior to the aL1<ndmo;.1t of Februa.r·y 13, 1925. If the jurisdiction could be so restored, I
foel t:b...c"J.t ne would have all t~1e relief v1hich v1e could reo.so~1o.bly e:xr)ect,
unless, in additio:1, wo shoul<l be ;:Jade exempt from o.ttach.-ne:1t, prior to
final judgnent, as ~ntional bre1ks are.
I :have h::ui conuidoro.tlc dot'.'bt, howcYer, as to whether 0...'1 a."l'loadment
of this kind could. be obtai;,1ed. fro::-1 Congress, a:1d for t:b.o.t reaso11 have
felt that we should only atteL~t to obtain such legislation as would place
us on a parity with natio:i.lal ba:1ks, which, of course, vro-u.J.cl mea.a that v;e
would be declared residents of the eto.tos in which tho soverw.l bo.nl{;S
naintain their heo.d offices.
At the time that Governor :nilcy discusr;ed the cro.estio:J. with r;1c before the recent conference of covernors, I expressed theso views to hiu,
but endeavored to rnake it :rlain that if thoro a·9penred an~r liklihood. of
an effort being successful to restore the forr.:.tcr jurisdic'cio::l, I felt tho.t
the so..-·oo should by all nea:1s be dono.
I know that you arc in a much 1;et tor position to judge 'iiha t :-.1ight
be expected from Congress alo:lf' thoso lines tl".an a:1y of us who are distru1t
froo Washington, and if ~on feel, as I assuD.c you do, that tho full relief, as L1rlicntod, r.~iE:;ht 1:c <'J'bto.incd., I o.::; heartily i~1 fc..vor of rol<i11g
the effort to c;ct it. It :.1i-:~:1t be ::oll, in any cvo:1t, to ;:J1ll-\:c tl:.e c.ttei:mt, and thc:.1 if i·t is u:1succossful to ask for tho lesser relief. The
o:1ly objection t::> that proccclurc, of cousc, '17ould 'Jc that ·ao ;:1ir;ht be delayed in obtai:1inr; tho logislatim:, ;;ut in view of the for roaching effect
of tho cha.l'l{':e in o.ll the futuro 1i tigation, that delay wo-u.ld 'oo noc;lif:able.
X-4694-h
-2-
I shall be :·;roa.tl;T i~1torestod i:1 hco.ring ·.1hnt dctcr~.1i:1utio:.;. you finally roo.ch, o.:1d shall IJ.J!l'l'Ociato it if you will advise 1:10 'N~Wll ~"ou ln,ro
co>.lO to l3uch co:1clusior..
17i th bos t porso:ml rccards, I am
Very truly yotu-s,
(Signed) Ii. G. Leedy.
X-4694-1
FEDERAL
OF
RESERVE
SAN
BANK
FRANCISCO
April 28, 1926.
Walter Wyatt, Esq.,
Gonere~ Counsel,
Fodero..l Reserve :Board,
Washington, D. c.
Dear Mr. Wyatt:
I have read with a great deal of interest your able
and comprehensive memorandum to the Federal Reserve Board (X-4551,
MarCh 9, 1926), upon the advisability of seeking legislation to
restore to the Federal courts jurisdiction over b~its by and against
Federal reserve bariks.
I believe that at the Governors' Conference it was
determined to refer this matter to counsel for the several banks,
with tho idea of getting their expressions of opinion thereon.
I cDn add nothing in the wa:y of argument to that which
you hnvo alroo.dy placed before tho Board. I am very strongly of tho
opinion that legislation of some Character, restoring federal jurisdiction in suits by ~~d against Federal reserve bo.nks should be sought.
In tho litigation which I have conducted for this bank in the T\voifth
Fodoral Reserve District since tho amendment of the Judicial Code, I
have on several occasions found myself at a serious disadvantage by
reason of being required to either bring the action or defend it
before a state court.
It is undoubtedly true that in the groat majority
of cases federal judges are better qualified and federal juries are
of a higher character than those encountered in tho state courts.
Access to tho Federal Court tends to dissipate local prejudice which
so often exists in relation to the Federal reserve ~~ks and gives us
o.n appellate right to tho United States Circuit Court of AppoB.ls and,
in some instar-ces, to tho Supramo Court of tho United States. Those
are advantages of a very real character which should not be overlooked.
I am also of the opinion that the best and most expeditious method of obtaining the remedy which we desire is through an
amend~ent to Sec. 12 of the Act of Feb. 13, 1925, and I believe that
tho amendment quoted on page 3 of your mC'Jnjrand.um would fulfill every
necessary purpose.
This method of approach has the advantage of not
appearing to be o.n effort on tho pa.rt of tho Federal reserve banks to ·
obto.in special logislati0n in their behalf and simply servos to extend
tho proviso so that it will cover the Federal Reserve Batik and other
similar or analogous institutions. I sincerely trust that legislation
of this cho.racter mny be obtained at the present session.
-
2 -
X-4694-i
I have also roaJ and stu.J.icd with interest the r.J.cmora..1'ldUI:l prepared by ll.r. Wollacc for the Federal Reserve :Sank of Richnand (X-4573, .March 19, 1926).
I havo alw~s boon decidedly of tho opinion that a
:B'edorol reserve bank should be considered as 11 doing business" in
every state within tho reserve district in which it is located. This
district oobrncos all of six states and part of another state. In
each of these states, ox.copt two, \"W ei thor n..'"lintain branch offices
or field agents.
Of course in WashinGton, Oregon and Ut~~, whore
we have branch offices, it wot:..ld seem useless to are;uo that we arc
not doing business in t~oso stat~s. In Idaho we maintain a nunber
of field agents engaged in the liquidat:i.on of paper inherited by us
from failed banko a:J.d. it 11ould scE;11n equally .!utile for us to co:1tcnd
hl1at in that state we oro not doi~~ business. In C~lifornia we oaintain the head office il1. one branch ·a."'ld of course thoro is no question
as to jurisdiction there.
Ariza~ ru1.d Nevada are the only states ~n
this district in v:hich we do not ~intain either branch offices or
field abents. We are,however, dailY trar.sacting business with many
bank3 in both of these states and I would be extremely embarrassed
were I forced to contend that even in these states we are not technically "doing business 11 as that term is legally used. In fact it seems
to me that this contention on our part might serve as a boomerang,
both on account of the attach"".lent statutes and on account of the fact
that if in one case it is contended as a defense that we are not
legally 11 doing business" within the state it might be contended in
another case l:ihat we have no right of action id thin tho stA.te until we
had complied with tho laws relating to foreign corporationis; the appointment of resident agents upon whom process mi&~t bo served, the
payment of statutory fees and compliance with other fb:.fii!alitios required of foreign corporationso
Of course you are familiar ni th the decision of the
District Court of the Eastern District of Kentucky in the matter of
Farmers and Merchants J3rulk of Catlettsburg v. F'edoro.l Reserve :Sank of
Clevela.nd, 566 Fed. 286.
In that case Judge Cochran 'WrOte a very
exhaustive (I might sny ex.lk'lusting) opinion covering 46 pages, in which
practically all of the authorities rolatinb to this subject were revio~od and a1~lyzod.
I have always agreed with the conclusion reached
by Judge Cochran that tho employrJJ.ont by tho Focteral Reserve :Banlt of
Cleveland of even an isolate~ a£ent for the purpose of collecting cheCks
drawn on a state bar;~:, constituted doing business within the state to
a degree which would render the Reserve bextit subject to suit in such
state.
The qu.es t:':.on of 11 doing business" was also touched
upon in the case of Bacon v. Federal Reserve Bank of San Francisco, 289
Fed. 513. There, of course, the primary question was whether or not the·
Federal Reserve :Sank of San Francisco was an 11 inhabitant 11 of the State
~
3 ...
of Washington within the meaning of Soc.. 51 of t...~o Judicial Code ilnd
the court determined that this bank was an ·''inha.bitant 11 only of the
federal Judicial District within which its head office is located.
This conclus~on, to my mind, does not confliat with the question of
the situs of tho Federal reserve banks for the purpose Of suit in
J3tate courts.
Aside from the strictly legal question involved, it
seams to me that morally the Federal reserve bnriks should be subject
to suit in any state embraced within the Federal Rosorvo Disttict
in which they arc doing business. It would seem to me highly
inequitable to require tho holder of a small claim against a Fed":"
oral reserve batik to employ non-resident counsel a.ndperl1aps
travel many hundred miles for tho purpose of enforcing tho claim.
I think that the Federal reserve btinks should be suable in any
state over which they rospectively:have jurisdiction,.
.
Lastly, I am thoroughly in accord with the suggestion
by Judge Ueland in his letter addressed to you under date of
Feb. 23, 1926 (X-4551-a)..
I have never been embarrassed by
!.k~ving a litigant atta~t attachment or garnishment ~inst the
Federal Reserve Eank.of San Francisco.
Claims filed against us
have always been e.llowed to go to judgment before· o.r:JY attempt has
boon made to collect~ I can uoll realize, however, tho ambarrassment which Judge Ueland has suffored by reason of the garnishment
isgued in the case to Which he refers. I think it is not only fair
but necessary to a proper administration of the affairs of the
Federal reserve banks that legislation be passed exempting such
banks from the process of attachment or gnrnishr.lent until final
judgment is rendered. SuCh legislation sca~s to oo to co oore
essential in the case of Federal reserve lk~s tb£u1 in the case
of National bariks which, by statute, a:re e;iven a locaJ. situs.
~de
If I can assist you in any wo:y in preparing further
oaoora.nda or briefs on these subjects, please cor~and oe.
Very truly yours,
(s~.gned)
Albert
c. Agnew.
Counsel,.
X-4694-j
September 24 1 1926
Hon. C. S. Dewey,
.Assistant Secretary of the TreMury,
Washi:1gton, D. C.
My dear Mr. Dowoy:
In reply to your letter of Sel)tCi::lbcr 20th
you are advised that tho Federal ::U.eservo :oard bas under consideration tho qu.ostion of reco::conding to
Congress leGislation permitting Fedora.l nesorvo ]anks
to sue a~d oo sued in the Federal cotu·ts; but the
I:·oard has not yet decided whethor to reco:['T.lend such legislation. If the Loard does decide to reco~nond such
legislation it will be very clad to include the Federal Land IJanks a.ncl Jcint Stock Land !ianks in such request
and will bo Jleasod to have the cooperation of tho
Treasury Departr.1ont and. tho Farr.1 Loan Doard in co:moctio:J. with such legislation.
Very truly yours
(Sicned) D.
n.
Crissinger
D. R. Crissinger
Governor
(COPY)
DEI?JillTMEJJT
\7ashil1t;ton
Ti:"~EASU'IlY
X-4694-k
s~!tenbor
20, 1926
lif:y dear Governor:
I understand that yaur Doa.rd hn.s undor consideration tho question of legislation permitting Federal
Reserve 13a.n.'lts to. sue B.J.J.d be sued .in Fedcrnl Courts.
In considering this situation, tho Treasury
fools that Federal Land Jo.n..1cs and Joint Stoclt: Land :Oo.nks
are in the same catc~ory as Federal Reserve Danks and asks
t:b..o.t these banks bo h1cluded in m1y req-J.est for legisla-'
tion which you iTJD.Y r.nko along these lines, pfo"7.i-doC. , of
course, tr!D.t in your opinion their inclusion would not
oilitato asainst tho successfUl passaco of tho bill.
Very truly yours,
(Signed) C. S. Dewey,
C. S. D.i'.!{i£JY,
Assistant Secretary of t'1e Treasury
Honorable D. R. Crissinger,
Governor, Federal Rosorve noard,
Uashin~ton, D. C.
@FedFRASER