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I f FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD X-6712 September 18, 1930. Dear S i r ; I n view of the very i n t e r e s t i n g j u r i s d i c t i o n a l question involved, I r e s p e c t f u l l y i n v i t e your a t t e n t i o n to the d e c i s i o n of the United S t a t e s C i r c u i t Court of Appeals i n the case of Omaha n a t i o n a l Bank v . Federal Reserve Bank of Kansas City e t a l , 26 Federal (2nd) 884. Mr. Leedy has w r i t t e n me as follows with r e f e r e n c e to t h i s case: "In t h i s case the Federal Reserve Bank of Kansas City i s v i r t u a l l y i n the p o s i t i o n of a s t a k e h o l d e r . The Omaha National Bank i s seeking to recover the sum of $60,000.00 from the Wyoming n a t i o n a l Bank of Casper, Wyoming, and to e s t a b l i s h an e q u i t a b l e t i t l e to, or l i e n upon, a c r e d i t on the books of our Omaha Branch i n favor of the Wyoming n a t i o n a l Bank i n t h a t amount. The s u i t a r i s e s out of the following f a c t s : On J u l y 7, 1924, the F i r s t National Bank of Cheyenne was i n a f a i l i n g c o n d i t i o n . I t had a dep o s i t balance with the Omaha National Bank i n excess of $60,000.00, but the same l a r g e l y r e p r e s e n t e d u n c o l l e c t e d funds. On t h a t day the F i r s t National Bank of Cheyenne telegraphed the Omaha National Bank to charge i t s account with $60,000.00, and to t r a n s f e r t h a t amount t o the c r c d i t of the Wyoming National Bank of Casper on the books of our Omaha Branch. This wire was r e ceived too l a t e f o r handling on J u l y 7, but a t the opening of b u s i n e s s on J u l y 8, the Omaha National Bank charged the account of the F i r s t National Bank of Casper a s r e q u e s t e d , and d i r e c t e d our Omah% Branch to charge i t s account with a l i k e sum, and to c r e d i t the amount $o the Wyoming National Bank. This was done. On J u l y 9, 1924, the F i r s t National Bank of Cheyenne suspended b u s i n e s s , and i t s a f f a i r s were l a t e r p l a c e d i n the p o s s e s s i o n of a r e c e i v e r . Certain stockholders of the F i r s t National Bank of Cheyenne were a l s o stockholders of the Wyoming National Bank, and up to a s h o r t time b e f o r e i t s suspension the F i r s t National Bank was l a r g e l y indebted to the Wyoming National Bank. During a p e r i o d of t h i r t y days immediately p r i o r to the f a i l u r e , the F i r s t National Bank p a i d l a r g e amounts to the Wyoming National Bank, making withdrawals from i t s other correspondents f o r the p u r pose , and a t the time of the suspension the indebtedness was almost, i f not e n t i r e l y p a i d , i f the $60,000.00 t r a n s f e r i s allowed to s t a n d , " I t i s the contention of the Omaha National Bank t h a t a conspiracy e x i s t e d between the o f f i c e r s of the F i r s t National Bank and the Wyoming Nat i o n a l Bank to l i q u i d a t e the indebtedness due the Wyoming National Bank a t the expense of the Omaha National Bank. As the m a t t e r stands the Omaha Nat i o n a l Bank has a c t u a l l y s u f f e r e d a l o s s , f o r the u n c o l l e c t e d items a g a i n s t 170 - 2 - X-6712 which the t r a n s f e r was made were never c o l l e c t e d by i t . On account of the a l l e g e d conspiracy and f r a u d the r i g h t i s claimed to r e s c i n d the t r a n s a c t i o n and to recover the amount of the c r e d i t . "Pending the outcome of the l i t i g a t i o n an i n j u n c t i o n was i s s u e d a g a i n s t our Omaha Branch r e s t r a i n i n g any d i s p o s i t i o n of the c r e d i t , and of course i t has since been h e l d i n t a c t . "The s o l e question i n the case, so f a r as we are concerned, i s whether the United S t a t e s D i s t r i c t Court for the D i s t r i c t of Nebraska has j u r i s d i c t i o n of the a c t i o n . J u r i s d i c t i o n , i f i t e x i s t s , i s founded on Sect i o n 57 of the J u d i c i a l Code. I f the c r e d i t balance on the books of the Omaha Branch c o n s t i t u t e s a r e s w i t h i n the meaning of t h a t Section, and i f tho Federal Reserve Bank of Kansas City i s not such a p a r t y to the l i t i g a t i o n as to r e q u i r e the oxistenco of some one of the s t a t u t o r y grounds of j u r i s d i c t i o n as between i t and the complainant, the a c t i o n i s p r o p e r l y maint a i n a b l e i n the D i s t r i c t Court f o r Nebraska; otherwise n o t . I f the court . has j u r i s d i c t i o n we can s u f f e r no p o s s i b l e l o s s , b u t i f i t i s without j u r i s d i c t i o n and the funds should be awarded to the Omaha National Bank, and we should pay the same t o t h a t bank under the c o u r t ' s decree, I am not s a t i s f i e d t h a t i f the Wyoming National Bank should a f t e r w a r d s b r i n g a s u i t a g a i n s t u s f o r the amount so p a i d , t h a t the decree would operate as a bar to such a s u i t . "The D i s t r i c t Court i n 1928 s u s t a i n e d a motion of the Wyoming Nati o n a l Bank to dismiss the b i l l f o r want of j u r i s d i c t i o n . An appeal was taken from t h a t r u l i n g , and i t was reversed by the United S t a t e s C i r c u i t Court of Appeals. The opinion on t h a t appeal i s r e p o r t e d i n 26 Fed. (2nd) 884, and f o r your ready r e f e r e n c e I am sending you a copy of the same herewith* "Die case was t r i e d on i t s merits in J u l y of l a s t year and r e s u l t ed i n a judgment f o r the Omaha National Bank, but f o r a l e s s amount than i t sought to recover. Both of the r e a l p a r t i e s p e r f e c t e d an appeal, and i n order to p r e s e r v e the j u r i s d i c t i o n a l question we a l s o appealed. The case i s now s e t f o r h e a r i n g i n the United S t a t e s C i r c u i t Court of Appeals a t Omaha f o r October 1 3 t h . "The records and b r i e f s have been prepared and f i l e d , and I am sending you a copy of each of them." I have requested Mr. leedy to f u r n i s h me with enough copies of h i s b r i e f i n t h i s ease to enable me to f u r n i s h copies to Counsel f o r a l l Federal r e s e r v e banks i f Mr. Leedy has s u f f i c i e n t copies a v a i l a b l e . Very t r u l y y o u r s , Walter Wyatt, General Counsel
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