Bank One Chicago, N.A. v. Midwest Bank & Trust Company

PETITIONER: Bank One Chicago, N.A.
RESPONDENT: Midwest Bank & Trust Company
LOCATION: Seminole Tribe

DOCKET NO.: 94-1175
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 516 US 264 (1996)
ARGUED: Nov 28, 1995
DECIDED: Jan 17, 1996

Jeffrey P. Minear - Argued the cause for the United States as amicus curiae, supporting the petitioner, urging reversal
Robert G. Epsteen - Argued the cause for the respondent
Robert A. Long, Jr. - Argued the cause for the petitioner

Facts of the case

The Expedited Funds Availability Act requires banks to make deposited funds available for withdrawal within specified time periods. The act provides for administrative enforcement and civil liability. After a BankOne Chicago customer deposited a check drawn on a Midwest Bank and Trust account, the check was forwarded, but returned unpaid because BankOne's endorsement stamp was illegible. Subsequently, when the check was resubmitted, the account did not have sufficient funds to cover the withdrawal. Bank One then sued Midwest Bank for failing to meet its obligations prescribed by the Board of Governors of the Federal Reserve System (Board) pursuant to the act. The District Court entered summary judgment for BankOne. The Court of Appeals, vacating the lower court's decision, ordered the action dismissed for lack of subject-matter jurisdiction. The appellate court held that the act authorizes original federal-court jurisdiction only when a "person other than [a] depository institution" sues a "depository institution," or when a depositor sues a bank.


Does the Expedited Funds Availability Act provide for federal-court jurisdiction only in suits between customers and banks?

Media for Bank One Chicago, N.A. v. Midwest Bank & Trust Company

Audio Transcription for Oral Argument - November 28, 1995 in Bank One Chicago, N.A. v. Midwest Bank & Trust Company

William H. Rehnquist:

We'll hear argument first this morning in Number 94-1175, Bank One Chicago v. Midwest Bank & Trust Company.

Mr. Long.

Robert A. Long, Jr.:

Mr. Chief Justice, and may it please the Court:

The issue in this case is whether Federal courts have jurisdiction to decide interbank claims for damages under the Expedited Funds Availability Act and its implementing regulations.

In the civil liability section of the act, which is codified at 12 United States Code, section 4010, Congress provided in subsection (d) that any action under this section may be brought in Federal court or State court.

In subsection (f) of Section 4010, Congress provided for liability under this subsection for damages for violation of rules governing the interbank check payment system promulgated by the Federal Reserve Board.

The natural reading of this statutory language is that banks have an action under subsection (f) for violations of the check-processing rules, and Federal courts have jurisdiction to decide such actions under subsection (d).

Congress placed subsection (f) in the civil liability section of the statute, section 4010 provides that depositor claims under subsection (a) maybe brought in Federal court, and there is simply no indication that Congress intended interbank claims to be adjudicated in a different forum.


Sandra Day O'Connor:

Mr. Long, is there any possibility that Congress intended the regulations promulgated under subsection (f) to be enforced under the Uniform Commercial Code some way?

Robert A. Long, Jr.:

--We think that's not a possible interpretation here.

First of all, it's not consistent with the language of the statute, which says, liability under this subsection, that is, liability under Federal law rather than liability under State law.

Also, it would be highly unusual for Congress to provide for liability for damages under a Federal statute for a violation of Federal standards and rules, and yet not provide for a Federal cause of action.

It would be particularly unusual in this context, where Congress clearly provided that depositors have a cause of action in Federal court sometimes for very small claims, for claims of as little as 100, and the much larger interbank claims we think ought to be treated the same.

Antonin Scalia:

Mr. Long, would it make any substantive difference whether Federal courts had jurisdiction under section 4010 immediately, or whether they had it only indirectly under section 1331 of title 28?

Robert A. Long, Jr.:

I think the short answer is no.

Those are two routes to the same conclusion that Federal courts have jurisdiction.

Anthony M. Kennedy:

I take it, in line with your answer to Justice O'Connor, the board has promulgated regulations that require that the checks be honored with diligence and in good faith.

Those, I take it, are Federal standards to be interpreted as a matter of Federal common law.

Robert A. Long, Jr.:

Yes, Justice Kennedy, they're Federal standards, and they really are a substantial change in this area.

When Congress passed this act, it federalized to a substantial extent an area that had been an area of State law, and the Federal standards that the Federal Reserve Board has adopted under Regulation CC do impose significant new obligations on banks, including a duty of expeditious return of checks.

Anthony M. Kennedy:

If the board had determined that it should be the one to determine what is good faith, and that it should adjudicate these claims, could it have set up an adjudicative mechanism under the existing statute, or do you think additional authority would be required for that?

Robert A. Long, Jr.:

I think additional authority would be required.

Under this Court's decision in Coit v. FSLIC Courts are not quick to imply agency authority to adjudicate private claims for damages, particularly in a context, and we're in that context here--

Anthony M. Kennedy:

And there's no statutory mechanism for review, for judicial review of any such administrative--

Robert A. Long, Jr.:

--That's right.

Congress said nothing about what procedure should be followed, said nothing about judicial review, and in other areas where the Federal Reserve does have enforcement authority and adjudicatory authority, Congress was quite careful... this is in 12 U.S.C. section 1818... to spell out the procedural requirements and to provide for judicial review.

Antonin Scalia:

--Well, we have an Administrative Procedure Act which does all of that.

I mean, most agencies that conduct both adjudication and rule-making don't have special provisions.

That's not a real obstacle, is it?