ROBERT L. CLARKE, COMPTROLLER OF THE CURRENCY, PETITIONER V. SECURITIES INDUSTRY ASSOCIATION No. 85-971 In the Supreme Court of the United States October Term, 1985 The Solicitor General, on behalf of the Comptroller of the Currency, petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the District of Columbia Circuit in this case. Petition for a Writ of Certiorari to the United States Court of Appeals for the District of Columbia Circuit TABLE OF CONTENTS Opinions below Jurisdiction Statutory provisions involved Statement Reasons for granting the petition Conclusion Appendix A Appendix B Appendix C Appendix D Appendix E Appendix F OPINIONS BELOW The opinion of the court of appeals (App., infra, 1a-3a) is reported at 758 F.2d 739. The order and opinion of the court of appeals respecting denial of the suggestion for rehearing en banc (App., infra, 4a-9a) is reported at 765 F.2d 1196. The opinion of the district court (App., infra, 10a-29a) is reported at 577 F.Supp. 252. JURISDICTION The judgment of the court of appeals (App., infra, 48a-49a) was entered on April 12, 1985. A petition for rehearing was denied on July 12, 1985 (App., infra, 4a-9a). On October 1, 1985, the Chief Justice extended the time for filing a petition for a writ of certiorari to November 9, 1985. On November 1, 1985, the Chief Justice further extended the time for filing to and including December 9, 1985. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATUTORY PROVISIONS INVOLVED 12 U.S.C. 36(c) provides: The conditions upon which a national banking association may retain or establish and operate a branch or branches are the following: A national banking association may, with the approval of the Comptroller of the Currency, establish and operate new branches: (1) Within the limits of the city, town or village in which said association is situated, if such establishment and operation are at the time expressly authorized to State banks by the law of the State in question; and (2) at any point within the State in which said association is situated, if such establishment and operation are at the time authorized to State banks by the statute law of the State in question by language specifically granting such authority affirmatively and not merely by implication or recognition, and subject to the restrictions as to location imposed by the law of the State on State banks. 12 U.S.C. 36(f) provides: The term 'branch' as used in this section shall be held to include any branch bank, branch office, branch agency, additional office, or any branch place of business located in any State or Territory of the United States or in the District of Columbia at which deposits are received, or checks paid, or money lent. 12 U.S.C. 81 provides: The general business of each national banking association shall be transacted in the place specified in its organization certificate and in the branch or branches, if any, established or maintained by it in accordance with the provisions of section 36 of this title. QUESTIONS PRESENTED 1. Whether offices of national banks that offer only discount brokerage services are "branches" within the meaning of Section 7(f) of the McFadden Act, 12 U.S.C. 36(f). 2. Whether an association of securities brokers, underwriters, and investment bankers has standing to challenge the application of the McFadden Act's branching limitations to national banks. STATEMENT 1. Section 7(c) of the McFadden Act (the Act) (12 U.S.C. 36(c)) authorizes any national bank to establish branch offices in the state in which it is located. It may only do so, however, to the extent that "such establishment and operation are at the time authorized to State banks by the statute law of the State in question." 12 U.S.C. 36(c)(2). See generally First National Bank of Logan v. Walker Bank & Trust Co., 385 U.S. 252, 253 (1966). /1/ By its terms, this geographical limitation applies only to the operation of national bank "branches," which are defined by Section 7(f) of the Act (12 U.S.C. 36(f)) "to include any branch bank, branch office, branch agency, additional office, or any branch place of business * * * at which deposits are received, or checks paid, or money lent." b. In 1982, two national banks, Union Planters National Bank of Memphis (Union Planters) and Security Pacific National Bank of Los Angeles (Security Pacific), applied to the Comptroller of the Currency for permission to open offices that would offer discount brokerage services to the public. /2/ Security Pacific's application stated that these services initially would be offered at Security Pacific's established branch offices throughout California, and eventually would be provided at nonbranch offices in California and other states. App., infra, 11a. Union Planters' application stated that it planned to acquire Brenner Steed & Associates, Inc. (Brenner Steed), an existing discount brokerage firm, and that it intended to offer Brenner Steed's services at selected Union Planters branches in Tennessee, as well as at locations in six other states. Id. at 10a-11a. On August 26, 1982, the Comptroller approved Security Pacific's application, concluding that bank offices offering only discount brokerage services are not "branches" within the meaning of the Act, and therefore are not subject to the Act's geographical restrictions on the locations where national bank offices may operate. /3/ The Comptroller first noted that the term "branch" is "statutorily defined to include" any place "'at which deposits are received, or checks paid, or money lent.'" App., infra, 39a, quoting 12 U.S.C. 36(f). He then determined that Security Pacific's discount brokerage offices would not receive deposits, pay checks, or make loans (App., infra., 39a-43a), and thus would not fall within the statutory definition. Although this conclusion sufficed to establish that the operation of discount brokerage offices away from chartered branches would not run afoul of the Act, the Comptroller went on to address the question whether those offices nevertheless "could be found by a court to be branches within the meaning of the McFadden Act" under any reading of the statute (App., infra, 43a). He concluded that they could not. Even if the Act were read to provide that some bank offices that do not perform any of the three services enumerated in Section 36(f) are branches, the Comptroller explained, those services "should at the very least" involve "dealings with the public requiring a specialized banking or similar license" (App., infra, 43a-44a). Discount brokerage operations do not fall into this category. Indeed, the Comptroller explained that it would be inconsistent with the settled practice in the banking industry to find that securities brokerage activities constitute a branch banking function, because a substantial "number of banks currently operat(e) U.S. government or municipal securities dealer offices that transact business with the public at non-branch locations on both an intra-state and interstate basis." Id. at 45a. /4/ 2. In response to the Comptroller's decisions, respondent, a trade association representing securities brokers, underwriters, and investment bankers (see App., infra, 10a), brought this action in United States District Court for the District of Columbia. Among other things, /5/ respondent contended that bank discount brokerage offices are branches within the meaning of Section 36(f) and thus are subject to the geographical restrictions imposed by Section 36(c). Respondent therefore argued that discount brokerage services may be offered by national banks only at their central offices or at licensed branches. In relevant part, the district court ruled for respondent. The court first held that respondent had standing to challenge the Comptroller's implementation of the Act. Although the court acknowledged that the Act was passed "to equalize competition between state and national banks" (App., infra, 20a), it nevertheless held that respondent's claim fell "within the zone of interests protected by the McFadden Act" (id. at 23a). /6/ Relying on Arnold Tours, Inc. v. Camp, 400 U.S. 45 (1970) and Association of Data Processing Service Organizations v. Camp, 397 U.S. 150 (1970), which had held that bank competitors may challenge the implementation of the Bank Service Corporation Act (12 U.S.C. 1861-1867), the district court reasoned that there is no need for "any explicit expression in the statute or its legislative history for the court to find that (respondent) is within the (Act's) zone of interests" (App., infra, 23a). And the court found that the Act, read in conjunction with the National Bank Act of 1964, "evince(d) the intent of Congress to curb the scope of national banks' activities" (App., infra, 24a). If national banks succeed in avoiding these curbs, the court held, respondent's members will be injured "just as" the bank competitors in Arnold Tours and Data Processing Organizations had been harmed. On the merits, the district court -- while acknowledging that the Comptroller's views are entitled to deference (App., infra, 25a) -- rejected the Comptroller's argument that the Act's branching restrictions apply only to offices that perform at least one of the three activities enumerated in the statutory definition. The court noted that Representative McFadden, in post-enactment remarks, described the term "branch" to include a bank office that "transact(s) any business carried on at the main (bank) office" (id. at 26a, quoting 68 Cong. Rec. 5816 (1927) (emphasis omitted)). And the district court read this Court's holding in First National Bank in Plant City v. Dickinson, 396 U.S. 122 (1969), as requiring "a broader, more flexible interpretation * * * of the statute than that followed by the Comptroller" (App., infra, 26a). The district court therefore ruled that the "brokerage business * * * is within the category of 'general business' which national banks may conduct at their main office and, as such, is subject to the branching restrictions" (id. at 28a). The court accordingly invalidated the Comptroller's ruling to the extent that it permitted Union Planters and Security Pacific to offer discount brokerage services at nonbranch locations. In a brief per curiam opinion, the court of appeals affirmed the district court's ruling, "generally for the reasons stated" by the district court (App., infra, 2a). Judge Scalia dissented from the McFadden Act aspect of this holding, /7/ arguing that the district court had "conflate(d) the constitutional requirement of injury in fact and the separate requirement that 'Congress (have) intended to place the plaintiffs within the zone of interests protected or regulated by the statute'" (App., infra, 3a, quoting Glass Packaging Institute v. Regan, 737 F.2d 1083, 1090 (D.C. Cir. 1984)). In Judge Scalia's view, only "state banks and possibly federal banks" are within that zone (App., infra, 3a). He therefore would have dismissed respondent's claims under the Act for lack of jurisdiction. The Comptroller's petition for rehearing en banc /8/ was denied (App., infra, 4a-5a) over a dissent by Judge Scalia, joined by Judges Bork and Starr. Judge Scalia repeated his criticism of the court's holding on standing, finding it "uncontroverted that (the Act's) purpose was to establish competitive equality between state and federal banks * * *. Thus, state banks (and state banking commissions) are obviously within the zone of interests protected by the statute -- but the brokerage houses suing in the present case are no more within it than are businesses competing for the parking spaces that an unlawful branch may occupy" (App., infra, 6a). In these circumstances, Judge Scalia reasoned that the court's ruling "entirely reduces the 'zone of interest' inquiry under the McFadden Act to an inquiry into 'injury in fact'" (id. at 6a-7a). Judge Scalia also took issue with the court's holding on the merits. He noted that discount brokerage services are not one of the activities enumerated in Section 36(f). And he found this Court's ruling in Plant City, which described the Section 36(f) definition as "'suggest(ing) a calculated indefiniteness'" (App., infra, 8a, quoting 396 U.S. at 135 (emphasis omitted)), to be "virtually dispositive in favor of the Comptroller" (App., infra, 8a (emphasis in original)), since such a definition "presents precisely the situation in which (the court's) deference to the agency should be at its height" (ibid.). REASONS FOR GRANTING THE PETITION Despite the brevity of its opinion -- and its failure to offer any reasons in support of its ruling -- the court of appeals' McFadden Act holding will have an immediate and substantial effect on the Nation's banking industry, as well as on competition in the offering of broker's services. In addition to the two involved in this case, the Comptroller currently is considering more than 60 applications from national banks for permission to engage in the discount brokerage business. Under the ruling below, the Comptroller will be required to deny these applicants permission to conduct discount brokerage operations away from licensed bank branches. Because discount brokers charge low commissions and depend for their profits on a high volume of business (cf. Securities Industry Ass'n v. Board of Governors, No. 83-614 (June 28, 1984), slip op. 1 n.2; App., infra, 11a), the court of appeals' holding raises substantial practical barriers to the ability of national banks to compete with brokerage houses that are not subject to geographical limitations. And given the increasing competition in the financial services industry (see, e.g., J. Hawke, Commentaries on Banking Regulation 245-279 (1985)), this development is of considerable significance to national banks. The court of appeals' ruling also creates anomalous and disruptive distinctions within the banking industry. Under this Court's decision in Securities Industry Ass'n v. Board of Governors, supra, bank holding companies may offer discount brokerage services that are not subject to geographic restrictions. /9/ But that ruling cannot benefit the smaller and medium-sized national banks that are not affiliated with holding companies -- and which are thus doubly disadvantaged by the decision below. /10/ The importance of the court of appeals' decision is compounded by what can be expected to be its nationwide effect. The Comptroller may always be sued in the District of Columbia. See 28 U.S.C. 1391(e). And given the precedent established by the decision below (as well as the vigilance of respondent in protecting its members' interests), it is unlikely that a conflict in the circuits ever will develop on the question presented here. Indeed, after this action was filed, respondent brought another suit in the United States District Court for the District of Columbia that challenges, among other things, the Comptroller's decision to permit a national bank to offer brokerage and investment advice services at nonbranch locations. Securities Industry Ass'n v. Conover, No. 83-3581 (D.D.C.). /11/ In these circumstances, review of the decision below plainly is warranted. 1. a. Although the court of appeals' holding that discount brokerage services may be offered by national banks only at chartered branches will have a substantial and immediate effect on the banking industry, that ruling cannot be reconciled with the Act. Section 36(f) (emphasis added) specifically defines the term "branch * * * to include any branch bank, branch office, branch agency, additional office or any branch place of business * * * at which deposits are received, or checks paid, or money lent." As the Comptroller explained in detail (App., infra, 39a-43a), discount brokerage offices perform none of these functions -- and therefore cannot be deemed branches. Because the statute uses the word "include" the courts below evidently reasoned that the three enumerated functions that characterize a branch -- receiving deposits, paying checks, and making loans -- were intended by Congress only to be illustrative (see App., infra, 26a-27a). Given the structure of the statutory definition, however, the approach taken below plainly is a misreading of Section 36(f): "(t)he term 'include * * * does not relate to the activities involved but refers to the places at which the specified activities of receiving deposits, paying checks and lending money are carried out. The places may include branch banks, branch offices, branch agencies, additional offices, mobile trucks, (and) electronic devices." Continental Illinois National Bank v. Illinois ex rel. Lignoul, No. 76-C-2209 (N.D. Ill. Nov. 9, 1976), slip op. 17-18 (emphasis added) (reprinted in Gov't C.A. Br. Addendum C). The statutory language thus should have been dispositive. b. The courts below nevertheless reasoned that the Act's legislative history justified their refusal to apply a "literal reading of the statute" (App., infra, 25a). In fact, however, the legislative background, to the extent that it sheds any light at all on the issue here, supports the conclusion that bank offices are subject to the Act's branching restrictions only when they perform one of the three functions enumerated in Section 36(f). During debate on the Act, both proponents and opponents of branch banking expressed concern that national banks might obtain monopoly control over capital and credit, thus driving smaller state banks out of business. See, e.g., 66 Cong. Rec. 1628-1629 (1925) (remarks of Rep. Stevenson); id. at 1633 (remarks of Rep. Williams); id. at 4437 (remarks of Sen. Reed). It is, of course, through the receiving of deposits, cashing of checks, and making of loans that the money supply and credit are controlled; not surprisingly, then, the congressional discussion about the appropriate scope of restrictions on branching referred only to bank offices that performed these functions. See, e.g., 66 Cong. Rec. 1628 (1925) (remarks of Rep. Stevenson); id. at 1633 (remarks of Rep. Williams); id. at 4433 (remarks of Sen. Shipstead); id. at 4527 (remarks of Sen. Heflin). /12/ At the same time, the legislative background makes plain that the omission of brokerage operations from the functions enumerated in Section 36(f) could not have been an oversight. At the time of the Act's enactment in 1927, "(i)t (was) a matter of common knowledge that national banks (had) been engaged in the investment-securities business * * * for a number of years." H.R. Rep. 83, 69th Cong., 1st Sess. 2 (1926); see 66 Cong. Rec. 1585-1586 (1925) (remarks of Rep. McFadden). Congress also was aware that these securities activities were conducted "to a very large extent throughout the country." 67 Cong. Rec. 8351 (1926) (remarks of Sen. Pepper). Indeed, in the same legislative package in which it defined the term "branch," Congress specifically authorized national banks to buy and sell investment securities. See ch. 191, Section 2, 44 Stat. 1226; S. Rep. 473, 69th Cong., 1st Sess. 7 (1926). Had Congress intended these activities to be carried out only at chartered branches, it presumably would have said so. Cf. St. Louis County National Bank v. Mercantile Trust Co., 548 F.2d 716, 721 (8th Cir. 1976) (Henley, J., dissenting), cert. denied, 433 U.S. 909 (1977). c. The courts below also felt free to disregard the Comptroller's construction of Section 36(f) because they found it inconsistent with this Court's statement in First National Bank in Plant City v. Dickinson, 396 U.S. 122 (1969) (see App., infra, 26a-27a) that (a)lthough the definition (in Section 36(f)) may not be a model of precision, in part due to its circular aspect, it defines the minimum content of the term 'branch'; by use of the word 'include' the definition suggests a calculated indefiniteness with respect to the outer limits of the term. However, the term 'branch bank' at the very least includes any place for receiving deposits or paying checks or lending money apart from the chartered premises; it may include more. 396 U.S. at 135; emphasis in original. The Court in Plant City then held that two off-premises banking services owned and operated by a national bank -- an armored car messenger service that received cash and checks for deposit and a stationary receptacle for customer deposits (see id. at 125-129) -- were branches within the meaning of Section 36(f) because they "received * * * deposit(s)" (id. at 137). On close examination, it is plain that the Comptroller's analysis here is entirely consistent with Plant City. To the extent that the language quoted above leaves open the possibility that branches may include bank offices that do not perform one of the three enumerated functions, the Court expressly declined to resolve the issue; its opinion was explicitly "confine(d) * * * to the question of whether deposits were received" at the challenged off-premises facilities (396 U.S. at 135). Indeed, if the Court had meant to hold that all bank offices are branches, its extensive consideration of the question whether the facilities at issue received deposits would have been unnecessary. See id. at 135-138. Insofar as the Plant City dictum is relevant at all, then, it should be deemed "virtually dispositive in favor of the Comptroller" (App., infra, 8a (Scalia, J., dissenting) (emphasis omitted)). As Judge Scalia noted, a statute "containing a 'calculated indefiniteness' presents precisely the situation in which (a court's) deference to the agency should be at its height" (ibid.). See generally Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., No. 82-1005 (June 25, 1984), slip op. 5-7; Board of Governors v. Investment Company Institute, 450 U.S. 46, 56 & n.21 (1981). And the "Comptroller's conclusion that discount brokerage houses do not fall within the range of indefiniteness -- or indeed that the range includes only the enumerated functions -- cannot by any means be considered unreasonable" (App., infra, 8a-9a (emphasis in original)). The deference due the Comptroller is reinforced by the fact that the court of appeals' novel reading of the statute would disrupt long-settled practice in the banking industry. For many years, the Comptroller has permitted national banks to operate loan production offices, government and municipal securities offices, trust offices, and similar operations -- which do not carry on any of the three functions enumerated in Section 36(f) -- on an interstate basis, without regard to the Act's branching limitations. See App., infra, 44a. See generally 12 C.F.R. 7.7380; Whitehead, Regional Forces for Interstate Banking, Red. Res. Bank of Atlanta Economic Review 4 (May 1983). The decisions below cannot be reconciled with this established practice. In these circumstances, "the longstanding administrative construction of the statute should 'not be disturbed except for cogent reasons'" of a sort that plainly have not been advanced here. Zenith Radio Corp. v. United States, 437 U.S. 443, 457-458 (1978), quoting McLaren v. Fleischer, 256 U.S. 477, 481 (1921). Cf. Securities Industry Ass'n v. Board of Governors, No. 82-1766 (June 28, 1984), slip op. 21-22. d. Finally, even if the three functions enumerated in Section 36(f) are not the only ones that characterize branches, the courts below erred in holding that all operations undertaken by banks -- including non-banking operations such as discount brokerage -- must be conducted at branches. The three functions enumerated in Section 36(f), if not wholly dispositive, must have at least some bearing on the definition of the term "branch"; their inclusion in the statute otherwise would have been wholly superfluous. /13/ And what those functions have in common, of course, is each one's status as a "basic bank(ing) service()" (Plant City, 396 U.S. at 137). As a result, courts have characterized the test of a branch as whether the office at issue performs "routine banking function(s)" (Illinois ex rel. Lignoul v. Continental Illinois National Bank & Trust Co., 536 F.2d 176, 178 (7th Cir.), cert. denied, 429 U.S. 871 (1976)) or "traditional banking transaction(s)." Colorado ex rel. State Banking Board v. First National Bank of Fort Collins, 540 F.2d 497, 500 (10th Cir. 1976), cert. denied, 429 U.S. 1091 (1977). See also Independent Bankers Association of America v. Smith, 534 F.2d 921, 943 (D.C. Cir.), cert. denied 429 U.S. 862 (1976). Against this background, as the Comptroller explained, even the broadest reading of Section 36(f) must "at the very least be limited to those dealings with the public requiring a specialized banking or similar license" (App., infra, 43a-44a). /14/ This distinction between basic bank services and the more peripheral activities that are performed by banks has been recognized in other contexts by Congress and the Court. In 12 U.S.C. (Supp. II) 24 Seventh, for example, Congress specifically defined the "business of banking" to include "discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; * * * receiving deposits; * * * buying and selling exchange, coin, and bullion; * * * loaning money on personal security; and * * * obtaining, issuing, and circulating notes." The brokerage business is not included on this list of traditional bank activities. To the contrary, the next sentence of 12 U.S.C. (Supp. II) 24 Seventh authorizes national banks to undertake, to a limited extent, the "business of dealing in securities and stock." Similarly, this Court has upheld the right of bank holding companies to acquire discount brokerage firms under the Bank Holding Company Act (12 U.S.C. 1841 et seq.) because discount brokerage is a "nonbanking activity 'closely related to banking.'" Securities Industry Ass'n v. Board of Governors, slip op. 2, quoting 12 U.S.C. 1843(c)(8) (emphasis added). Cf. Merchants' Bank v. State Bank, 77 U.S. 604, 651 (1871); Lowry National Bank, 29 Op. Att'y Gen. 81, 87-88 (1911). There is thus little doubt that discount brokerage is not a traditional banking service. It could not seriously be suggested, for example, that Brenner Steed prior to its acquisition by Union Planters -- or, for that matter, that respondent's members -- engaged in the banking business by offering brokerage services. And the character of Brenner Steed's operations was not altered by the acquisition. In these circumstances, the Comptroller's careful distinction between traditional bank services and discount brokerage operations (App., infra, 43a-44a) should have been respected by the courts below. 2. The courts below also erred for a second, independent reason, in holding that respondent has standing to challenge the Comptroller's decision. While respondent may have suffered injury in fact (see App., infra, 23a), its claim plainly does not "fall within 'the zone of interests to be protected or regulated by the statute * * * in question.'" Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 475 (1982), quoting Association of Data Processing Service Organizations v. Camp, 397 U.S. 150, 153 (1970). And as this Court repeatedly has explained, satisfaction of the zone of interests requirement is a prerequisite to standing. /15/ It is beyond dispute that the enactment of the Act "was a response to the competitive tensions inherent in a dual banking structure where state and national banks coexist in the same area," and was designed to guarantee "that neither system have advantages over the other in the use of branch banking." Plant City, 396 U.S. at 131. Prior to passage of the Act in 1927, national banks were prohibited from establishing branches. See First National Bank of Logan v. Walker Bank & Trust Co., 385 U.S. 252, 257 (1966); First National Bank v. Missouri, 263 U.S. 640, 656 (1924). State banks, however, could branch as permitted by the laws of the individual states, a situation that placed national banks at a "considerable disadvantage." H.R. Rep. 83, 69th Cong., 1st Sess. 6 (1926). See Walker Bank, 385 U.S. at 257; 66 Cong. Rec. 1646 (1925) (remarks of Rep. McFadden). By allowing national banks to branch, the Act thus "protect(ed) national banks from the unrestrained branch bank competition of state banks. Plant City, 396 U.S. at 131; see Walker Bank, 385 U.S. at 257-258. At the same time, Congress protected state banks by permitting national banks to branch only "in those cities where State banks are allowed to have (branches) under State laws" (H.R. Rep. 83, supra, at 7). The Act thus adopted what Congress and this Court repeatedly have characterized as a policy of "competitive equality" between national and state banks. See Plant City, 396 U.S. at 131-134, 136, 138; Walker Bank, 385 U.S. at 258, 261. /16/ Against this background, the courts below relied on Data Processing Organizations and Arnold Tours to hold that respondent's claim falls within the zone of interests protected by the Act. But that reliance was misplaced. Those cases stand only for the proposition that, in the face of congressional silence about who is to benefit from given legislative action, the zone test is satisfied when "Congress ha(s) arguably legislated against the competition that the (plaintiff seeks) to challenge." Investment Co. Institute, 401 U.S. at 620. See Arnold Tours, 400 U.S. at 46; Data Processing Organizations, 397 U.S. at 155-156. Here, in contrast, there is no doubt that Congress had only one type of competitive injury in mind when it passed the Act -- the type that national and state banks might inflict upon each other. Compare Barlow v. Collins, 397 U.S. 159, 164-165 (1970). /17/ In such circumstances, there is no basis for inferring that Congress wished to afford other persons protection from the normal competition of the marketplace. Cf. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977). Instead, "(w)here Congress has * * * clearly defined the class to be protected, the zone test * * * prevent(s) groups outside of the class from usurping the legislative entitlement." Leaf Tobacco Exporters Ass'n v. Block, 749 F.2d 1106, 1115 (4th Cir. 1984). See Bank Stationers Ass'n v. Board of Governors, 704 F.2d 1233, 1235-1236 (11th Cir. 1983); In re Swearingen Aviation Corp., 605 F.2d 125, 127 (4th Cir. 1979); Rodeway Inns of America, Inc. v. Frank, 541 F.2d 759, 766 (8th Cir. 1976), cert. denied, 430 U.S. 945 (1977); Jaffe, Standing Again, 84 Harv. L. Rev. 634 (1971). It is thus the claims only of state and national banks that fall within the zone of interests protected by the Act. See App., infra, 3a, 6a (Scalia, J., dissenting). /18/ That the courts below reached a contrary conclusion is a consequence of what repeatedly has been characterized as "confusion and divergent approaches among lower federal courts" relating to the proper application of the zone test. Copper & Brass Fabricators Council, Inc. v. Dep't of the Treasury, 679 F.2d 951, 954 (D.C. Cir. 1982) (Ginsburg, J., concurring in the result). See Leaf Tobacco Exporters Ass'n, 749 F.2d at 1110; Note, A Defense of the 'Zone of Interests' Standing Test, 1983 Duke L.J. 447, 453-454. As the District of Columbia Circuit itself has recognized, "'the most common pattern'" for courts to follow in zone of interest cases -- and certainly the pattern that was followed below -- "'is to announce in conclusory terms that the zone standard has or has not been satisfied.'" Copper & Brass Fabricators, 679 F.2d at 954 (Ginsburg, J., concurring in the result), quoting Tax Analysts & Advocates v. Blumenthal, 566 F.2d 130, 139 (D.C. Cir. 1977), cert. denied, 434 U.S. 1086 (1978). This situation has prompted at least one appellate judge to suggest that "(c)larification from the (Supreme) Court would facilitate the expeditious, even handed disposition of standing controversies by lower courts." Copper & Brass Fabricators, 679 F.2d at 955 (Ginsburg, J., concurring in the result). Given the clear error of the holding below, the Court might appropriately use this case to provide such clarification. /19/ CONCLUSION The petition for a writ of certiorari should be granted. Respectfully submitted. EUGENE M. KATZ MARK L. LEEMON Attorneys Office of the Comptroller of the Currency CHARLES FRIED Solicitor General RICHARD K. WILLARD Assistant Attorney General LAWRENCE G. WALLACE Deputy Solicitor General CHARLES A. ROTHFELD Assistant to the Solicitor General ANTHONY J. STEINMEYER NICHOLAS S. ZEPPOS Attorneys DECEMBER 1985 /1/ In addition, national banks may branch within their home city "if such establishment and operation (of branches) are at the time expressly authorized to State banks by the law of the State in question." 12 U.S.C. 36(c)(1). /2/ Discount brokers execute trades on behalf of their customers but do not offer investment advice. As a result, the commissions they charge are substantially lower than those charged by full-service brokers. See Securities Industry Ass'n v. Board of Governors, No. 83-614 (June 28, 1984), slip op. 1 n.2. /3/ The Comptroller also found that Security Pacific's provision of discount brokerage services was not barred by the Glass-Steagall Act (12 U.S.C. (& Supp. II) 24; 12 U.S.C. 78, 377, 378). App., infra, 31a-39a. /4/ Shortly after issuing this opinion, the Comptroller approved without comment Union Planters' application to acquire Brenner Steed (App., infra, 47a). /5/ Respondent also contended that the Glass-Steagall Act entirely prohibits national banks from offering discount brokerage services (see note 3, supra). This contention was rejected by the district court (App., infra, 13a-20a). /6/ The court also found that respondent had demonstrated that it will suffer actual harm from the Comptroller's ruling because respondent "alleged that its members' profits will suffer if national banks are allowed to operate brokerage subsidiaries in competition with them" (App., infra, 23a). /7/ The court of appeals unanimously affirmed the district court's holding that the Glass-Steagall Act does not prohibit national banks from offering discount brokerage services, noting that the district court's ruling on this point was bolstered by Securities Industry Ass'n v. Board of Governors, No. 83-614 (June 28, 1984) (App., infra 28a). The Glass-Steagall Act aspect of the holding below is challenged by respondent's pending petition for a writ of certiorari, No. 85-392. /8/ Security Pacific intervened and filed its own petition for rehearing en banc. /9/ Brokerage businesses owned by holding companies may be operated on a nationwide basis: those businesses are not "banks" under the Bank Holding Company Act (see 12 U.S.C. 1841(c)), and thus are not subject to the limitations on interstate banking operations imposed by that Act. 12 U.S.C. 1842(c); Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 47-48 & n.13 (1980). See generally Northeast Bancorp, Inc. v. Board of Governors, No. 84-363 (Apr. 15, 1985), slip op. 2. /10/ Even bank holding companies that are permitted to operate discount brokerage businesses as nonbanking subsidiaries (rather than as wholly owned subsidiaries of a national bank) do so at a disadvantage; while bank subsidiaries may be funded with bank funds, holding company subsidiaries may not be funded in that manner. Thus Security Pacific, although owned by a holding company, in this case is seeking permission to operate its brokerage business as a banking subsidiary. /11/ The district court has stayed proceedings in that case pending disposition of the certiorari petitions filed here. /12/ The district court's analysis of the legislative history was limited to consideration of a single post-enactment statement by Rep. McFadden, to the effect that "'(a)ny place outside of or away from the main office where the bank carries on its business of receiving deposits, paying checks, lending money, or transacting any business carried on at its main office is a branch * * *'" (App., infra, 26a, quoting 68 Cong. Rec. 5816 (1927) (remarks of Rep. McFadden) (emphasis added by the court)). But the district court's reliance on this statement -- which was inserted into the record 10 days after passage of the Act, while Congress was in adjournment -- disregarded this Court's "oft-repeated warning that (post-enactment statements) form a hazardous basis for inferring" the intent of Congress. Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 117 (1980). See Regional Rail Reorganization Act Cases, 419 U.S. 102, 132 (1974); Mohasco Corp. v. Silver, 447 U.S. 807, 823 (1980). And there are especially compelling reasons here to be skeptical of Representative McFadden's statement. While the branching statute bears his name, Representative McFadden was in fact a fervent opponent of branch banking, who would have required state banks to relinquish statewide branches and imposed significant limitations on branching by national banks. See 67 Cong. Rec. 2829, 2832 (1926) (remarks of Rep. McFadden). He thus had a clear interest in adding to the legislative record a broad definition of "branch." Indeed, Rep. McFadden's post-enactment remarks primarily demonstrate how easy it would have been for Congress to have adopted an all-encompassing definition of branch had it wished to do so. /13/ The district court thus erred in suggesting (App., infra, 28a) that 12 U.S.C. 81 -- which provides that "(t)he general business of each national banking association shall be transacted in (its main office) and in the branch or branches, if any, established or maintained by it in accordance with the provisions of section 36 of this title" -- confines all aspects of a bank's business to its main office or its branches. Such a reading renders Section 36(f) superfluous, and disregards Section 81's incorporation by reference of Section 36. In fact, Section 81 simply limits the places at which a bank may carry on its "general business," rather than the places at which it may conduct any of its business. See Lowry National Bank, 29 Op. Att'y Gen. 81, 87-88 (1911) (the "cases clearly indicate * * * a vital distinction between a mere agency for the transaction of a particular business and a branch bank wherein is carried on a general banking business"). /14/ Although several courts have used broad language in describing the definition of "branch," to our knowledge only one court has held that a bank office performing a function other than one of the three enumerated in Section 36(f) is a branch. St. Louis County National Bank v. Mercantile Trust Co., 548 F.2d 716 (8th Cir. 1976), cert. denied, 433 U.S. 909 (1977). In St. Louis County National Bank, a divided panel of the Eighth Circuit held that bank trust offices are subject to branching restrictions. While we believe that this decision was incorrect, it has an arguable basis in the fact that trust offices -- unlike discount brokerage offices -- do require the issuance of a special banking license from the Comptroller. See 12 U.S.C. 92a; 548 F.2d at 719-720. /15/ See Allen v. Wright, No. 81-757 (July 3, 1984); Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 100 n.6 (1979); Boston Stock Exchange v. State Tax Comm'n, 429 U.S. 318, 320-321 n.3 (1977); Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 39 n.19 (1976); Schlesinger v. Reservists Committee to Stop the War, 418 U.S. 208, 227 n.16 (1974); United States v. Students Challenging Regulatory Agency Procedures (SCRAP), 412 U.S. 669, 686 n.13 (1973); Sierra Club v. Morton, 405 U.S. 727, 733 & n.5 (1972); Investment Co. Institute v. Camp, 401 U.S. 617, 620 (1971); Arnold Tours, Inc. v. Camp, 400 U.S. 45, 46 (1970); Barlow v. Collins, 397 U.S. 159 (1970). /16/ As originally adopted, the Act permitted national banks to branch only in those cities where the bank had its main office. See 44 Stat. 1226. In 1933, Congress amended the Act to permit national banks (as well as state banks that were members of the Federal Reserve System) to branch statewide, if such branching was permitted to state banks by state law. See Ch. 89, Section 23, 48 Stat. 189; Walker Bank, 385 U.S. at 259-260. This amendment "further strengthened the policy of competitive equality." Plant City, 396 U.S. at 132. See 77 Cong. Rec. 5896 (1933) (remarks of Rep. Luce). /17/ This case differs from Data Processing Organizations and Arnold Tours in another respect as well. Had the claims of the plaintiffs in either of those cases been held to be outside the zone of interests, judicial review of the agency action would have been effectively precluded. Here, in contrast, state banks (and perhaps other national banks) may challenge the Comptroller's national bank branching decisions. /18/ Respondent is not an appropriate party to advance the claims of state banks. See generally Warth v. Seldin, 422 U.S. 490, 499 (1975). And because no state bank challenged the Comptroller's action, the record below contains no evidence bearing on what, if any, competitive effect the Comptroller's decision will have on such banks. To the extent that respondent seeks to advance the interests of state banks, then, its claims do not arise "in a concrete factual context conducive to a realistic appreciation of the consequences of judicial action." Valley Forge, 454 U.S. at 472. Similarly, although respondent had standing to raise (see notes 5, 7, supra) its Glass-Steagall Act claim (see Investment Co. Institute, 401 U.S. at 620), it cannot "'borrow' the arguable regulatory or protective intent embodied in one (statute), and apply it to a (statute) where that intent is not evident in order to satisfy the zone test." Tax Analysts & Advocates v. Blumenthal, 566 F.2d 130, 141 (D.C. Cir. 1977), cert. denied, 434 U.S. 1086 (1978). Cf. Warth, 422 U.S. at 500. /19/ In light, however, of the importance of dispelling the cloud cast by the decision below on widespread practices in the banking industry, the Court may wish to grant certiorari limited to the substantive McFadden Act issue. Respondent's failure to fit within the zone presents only a statutory question; there obviously is adequate adversity of interest in this case to satisfy the requirements of Article III of the Constitution. APPENDIX