Lewis v. Bt Investment Managers, Inc., 447 U.S. 27 (1980)

Lewis v. BT Investment Managers, Inc.

No. 79-45

Argued January 15, 1980
Decided June 9, 1980
447 U.S. 27

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF FLORIDA

Syllabus

A Florida statute (§ 659.141(1)) prohibits out-of-state banks, bank holding companies, and trust companies from owning or controlling a business within the State that sells investment advisory services. Another statute (§ 660.10) prohibits all corporations except state-chartered banks and trust companies and national banks located in Florida from performing certain trust and fiduciary functions. Appellee out-of-state bank holding company’s proposal to operate appellee investment management subsidiary in Florida was rejected by the Board of Governors of the Federal Reserve System on the ground that it was prohibited by § 659.141(1). Appellees then brought suit in Federal District Court for declaratory and injunctive relief, alleging, inter alia, that § 659.141(1) violates the Commerce Clause and that the joint operation of that section with § 660.10 constitutes a similar violation, since, but for the existence of such statutes, authority would be sought to establish a subsidiary trust company in Florida. The District Court held that the statutes violate the Commerce Clause, because in combination they discriminate against out-of-state bank holding companies and are "parochial legislation" that "must be deemed per se unconstitutional." The court also held that the federal Bank Holding Company Act of 1956 does not foster or permit the types of discrimination against out-of-state bank holding companies reflected in the Florida statutes. The court granted declaratory relief against both statutes, but enjoined only the enforcement of § 659.141(1).

Held:

1. Section 659.141(1) directly burdens interstate commerce in a manner that contravenes the Commerce Clause’s implicit limitation on state power. Pp. 37-49.

(a) While banking and related financial activities are of profound local concern, it does not follow that these same activities lack important interstate attributes that establish Congress’ power to regulate commerce and that also support constitutional limitations on the powers of the States. Such limitations clearly apply in this case. Pp. 38-39.

(b) The District Court properly concluded that § 659.141(1) is "parochial" in the sense that it overtly prevents foreign enterprises from competing in local markets. Under that section, discrimination against affected business organizations is not evenhanded, because only banks, bank holding companies, and trust companies with principal operations outside Florida are prohibited from operating investment subsidiaries or giving investment advice within the State. It follows that § 659.141(1) discriminates among affected business entities according to the extent of their contacts with the local economy. Exxon Corp. v. Governor of Maryland, 437 U.S. 117, distinguished. And the disparate treatment of out-of-state bank holding companies cannot be justified as an incidental burden necessitated by legitimate local concerns, such as discouraging economic concentration or protecting the citizenry against fraud, or by an asserted interest in promoting local control over financial institutions. Pp. 39-44.

(c) Neither § 3(d) of the Bank Holding Company Act -- which prohibits bank holding companies from acquiring banking subsidiaries in other States without local authorization -- nor § 7 of that Act -- which reserves to the States a general power to enact regulations applicable to bank holding companies -- authorizes a State to prohibit out-of-state holding companies from acquiring local investment subsidiaries. The only authority § 3(d) grants to the States is the authority to permit expansion of banking across state lines where it would be otherwise federally prohibited. Moreover, the Act’s structure reveals that § 3(d) applies only to holding company acquisitions of banks. Section 7 was intended to preserve existing state regulations of bank holding companies and to define the extent of the Act’s preemptive effect on state law, and there is nothing in § 7’s language or legislative history to indicate that it was also intended to extend to the States new powers to regulate banking that they would not have possessed absent federal legislation. Section 7 applies only to state legislation that operates within the boundaries marked by the Commerce Clause. Pp. 44-49.

2. Since the constitutionality of § 660.10 was neither fully placed in issue nor fully determined by the District Court’s decision, the validity of that section’s limitation on the types of corporations that may perform trust responsibilities is not properly before this Court at this stage of the proceedings; hence, the District Court’s judgment with respect to § 660.10 is vacated, and the case is remanded for further proceedings. Moreover, the amendment, in the interim, of § 3(d) of the Bank Holding Company Act so as apparently to prohibit appellee bank holding company from establishing a Florida trust subsidiary raises new jurisdictional and substantive questions that should be addressed in the first instance by the District Court. Pp. 50-53.

461 F.Supp. 1187, affirmed in part, vacated in part, and remanded.

BLACKMUN, J., delivered the opinion for a unanimous Court.