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    United States Court of Appeals, Eighth Circuit

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    The First American Bank & Trust Company sued the North Dakota State Banking Board to prevent a hearing regarding its solvency and practices, alleging the Board was biased. The district court denied an injunction and dismissed the case, citing abstention. On appeal, the Eighth Circuit vacated the dismissal, finding the case presented appropriate circumstances for abstention rather than a decision on the merits, since the issues were now before the state courts. The case was remanded with instructions to modify the judgment to reflect abstention.

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    United States Court of Appeals, Eighth Circuit

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    The First American Bank & Trust Company sued the North Dakota State Banking Board to prevent a hearing regarding its solvency and practices, alleging the Board was biased. The district court denied an injunction and dismissed the case, citing abstention. On appeal, the Eighth Circuit vacated the dismissal, finding the case presented appropriate circumstances for abstention rather than a decision on the merits, since the issues were now before the state courts. The case was remanded with instructions to modify the judgment to reflect abstention.

    Original Description:

    Filed: 1973-02-27 Precedential Status: Precedential Citations: 474 F.2d 933 Docket: 72-1596

    Original Title

    First American Bank & Trust Company v. G. W. Ellwein, Commissioner, State Examiner and Chairman of the State Banking Board, Department of Banking and Financial Institutions of the State of North Dakota, 474 F.2d 933, 1st Cir. (1973)

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    The First American Bank & Trust Company sued the North Dakota State Banking Board to prevent a hearing regarding its solvency and practices, alleging the Board was biased. The district court denied an injunction and dismissed the case, citing abstention. On appeal, the Eighth Circuit vacated the dismissal, finding the case presented appropriate circumstances for abstention rather than a decision on the merits, since the issues were now before the state courts. The case was remanded with instructions to modify the judgment to reflect abstention.

    Copyright:

    Public Domain
    Download as PDF or read online from Scribd
    Download as pdf
    30 views4 pages

    United States Court of Appeals, Eighth Circuit

    Uploaded by

    Scribd Government Docs
    The First American Bank & Trust Company sued the North Dakota State Banking Board to prevent a hearing regarding its solvency and practices, alleging the Board was biased. The district court denied an injunction and dismissed the case, citing abstention. On appeal, the Eighth Circuit vacated the dismissal, finding the case presented appropriate circumstances for abstention rather than a decision on the merits, since the issues were now before the state courts. The case was remanded with instructions to modify the judgment to reflect abstention.

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    of 4

    474 F.

    2d 933

    FIRST AMERICAN BANK & TRUST COMPANY et al.,


    Plaintiffs-Appellants,
    v.
    G. W. ELLWEIN, Commissioner, State Examiner and
    Chairman of
    the State Banking Board, Department of Banking and
    Financial Institutions of the State of
    North Dakota, et al.,
    Defendants-Appellees.
    No. 72-1596.

    United States Court of Appeals,


    Eighth Circuit.
    Submitted Jan. 12, 1973.
    Decided Feb. 27, 1973.

    Frederick E. Saefke, Jr., Bismarck, N. D., for plaintiffs-appellants.


    Frank F. Jestrab, Bjella & Jestrab, Williston, N. D., for defendantsappellees.
    Before MATTHES, Chief Judge, BRIGHT, Circuit Judge, and TALBOT
    SMITH, Senior District Judge.*
    PER CURIAM.

    First American Bank & Trust Co. (First American) instituted this action
    pursuant to 15 U.S.C. Secs. 4, 15, and 26 (antitrust laws) seeking injunctive and
    other relief against the North Dakota State Banking Board to prevent the Board
    from holding a hearing and making findings concerning appellant's solvency
    and banking practices. First American alleged that the Board could not afford
    the plaintiff a fair hearing because Board members are competitors of the
    plaintiff and because they had made statements indicating prejudgment of the
    case. The district court denied preliminary injunctive relief on the grounds that
    this was an appropriate case for abstention. The court then granted a motion for

    summary judgment for the defendant-Board and dismissed the action on the
    merits, apparently on grounds that: (1) the Sherman Act did not provide for an
    action against the state; (2) no jurisdictional basis had been stated for
    consideration of plaintiff's claim of a denial of constitutional rights; (3) the
    question was moot because the Board had already heard the matter; and (4) a
    final judgment would conflict with the court's abstention on the question of
    temporary injunctive relief. The court concluded:
    I2 could leave it to the plaintiffs to amend their pleading to recite a proper
    jurisdictional basis, and to enunciate a relevant prayer for relief, but it appears that
    the business of the Court, and the best way to approach any further problems which
    may develop is by dismissal of this action on its merits.
    3

    On this appeal First American urges that the district court should have
    exercised jurisdiction under 42 U.S.C. Sec. 1983 and 28 U.S.C. Sec. 1343,
    although plaintiff failed to rely on these statutes in its complaint. First
    American argues that the complaint on its face alleges facts which make out a
    violation of its right to due process of law.

    As we construe the plaintiff's briefs, the precise question sought to be presented


    and resolved on this appeal is whether or not the district court had jurisdiction
    to hear the case on its merits. For reasons stated below, we believe the case in
    its present posture presents an appropriate situation for abstention rather than
    dismissal on the merits and thus direct that the judgment dismissing the action
    on its merits be vacated.

    The brief factual background, as related in the complaint and as stipulated to at


    oral argument, discloses that the appellant engages in trust company business
    under 1 N.D.Cent.Code Ch. 6-05. In a meeting held May 26, 1972, the State
    Banking Board authorized the State Examiner to commence a proceeding
    before the Board to determine the solvency of First American and to develop
    other matters concerning First American's banking practices. With this
    authorization, the State Examiner proceeded under the North Dakota
    Administrative Agencies Practice Act, 5 N.D.Cent.Code Ch. 28-32.1

    First American asserts that due to the alleged prejudice and prejudgment of the
    Board, it has been denied the opportunity to present its case to a "fair and
    unbiased" tribunal.2

    At oral argument, the parties stipulated that as of December 11, 1972, the State
    Banking Board had already heard the matter and had made a determination of

    insolvency and ordered a receiver appointed. The parties also stipulated that the
    Board's order had been stayed by the District Court of Burleigh County pending
    resolution of an appeal to that court. As indicated by the stipulation, North
    Dakota permits appeals from administrative agencies to the state courts of
    general jurisdiction and then to the state supreme court.3
    8

    Assuming, arguendo, that the federal district court might have exercised
    jurisdiction on grounds that the Board under the circumstances alleged was
    incapable of affording appellant a fair hearing in conformity with the Due
    Process Clause of the Fourteenth Amendment, the circumstances presented to
    the district court and to us on appeal demonstrate a classic case in which federal
    courts should stay their hands under the doctrine of abstention. The matters
    presented to the federal court are now in the state courts, and their
    determination of the "fairness of the hearing" issue may well eliminate the need
    for any consideration of constitutional issues by the federal judiciary.4

    In Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943),
    the Supreme Court said:

    10
    Although
    a federal equity court does have jurisdiction of a particular proceeding, it
    may, in its sound discretion, whether its jurisdiction is invoked on the ground of
    diversity of citizenship or otherwise, "refuse to enforce or protect legal rights, the
    exercise of which may be prejudicial to the public interest"; for it "is in the public
    interest that federal courts of equity should exercise their discretionary power with
    proper regard for the rightful independence of state governments in carrying out
    their domestic policy." [Id. at 317-318, 63 S.Ct. at 1099 (footnotes omitted).]
    11

    This holding was reaffirmed in Alabama Public Service Commission v.


    Southern Railway Co., 341 U.S. 341, 71 S.Ct. 762, 95 L.Ed. 1002 (1951):

    12 adequate state court review of an administrative order based upon predominantly


    As
    local factors is available to appellee, intervention of a federal court is not necessary
    for the protection of federal rights. Equitable relief may be granted only when the
    District Court, in its sound discretion exercised with the "scrupulous regard for the
    rightful independence of state governments which should at all times actuate the
    federal courts," is convinced that the asserted federal right cannot be preserved
    except by granting the "extraordinary relief of an injunction in the federal courts."
    Considering that "[f]ew public interests have a higher claim upon the discretion of a
    federal chancellor than the avoidance of needless friction with state policies," the
    usual rule of comity must govern the exercise of equitable jurisdiction by the District
    Court in this case. Whatever rights appellee may have are to be pursued through the
    state courts. Burford v. Sun Oil Co., 319 U.S. 315, [63 S.Ct. 1098, 87 L.Ed. 1424]

    (1943); Railroad Commission of Texas v. Rowan & Nichols Oil Co., 311 U.S. 570,
    577, [61 S.Ct. 343, 346, 85 L.Ed. 358] (1941); Railroad Commission of Texas v.
    Rowan & Nichols Oil Co., 310 U.S. 573, [60 S.Ct. 1021, 84 L.Ed. 1368], as
    amended, 311 U.S. 614, 615, [61 S.Ct. 66, 85 L.Ed. 390] (1940). [Id. at 349-350, 71
    S.Ct. at 768-769 (footnotes omitted).]
    13

    As already mentioned, the federal district court denied preliminary relief on


    grounds of abstention but the final judgment in form dismissed the action on
    the merits. It is obviously inappropriate to make a determination on the merits
    while applying the abstention doctrine. Accordingly, while approving the
    action of the district court, we remand this case to the district court for the
    purpose of modifying the judgment to reflect abstention from action rather than
    decision on the merits and to recite that "jurisdiction should not be exercised in
    this case as a matter of sound equitable discretion." Alabama Public Service
    Commission, supra, at 350, 71 S.Ct. at 769.

    Eastern District of Michigan, sitting by designation

    A dispute concerning the Examiner's authority and the application of the state's
    statutes governing administrative procedure, has been previously litigated in the
    state supreme court in an action related to the present controversy. First
    American Bank & Trust Company v. Ellwein, 198 N.W.2d 84 (N.D.1972)

    The complaint also seeks to declare 1 N.D.Cent.Code Sec. 6-01-03


    unconstitutional. That section pertains to the composition of the State Banking
    Board. Appellant did not request that a three-judge court be convened and does
    not press the issue of the constitutionality of the statute before this court

    5 N.D.Cent.Code Secs. 28-32-15 and 28-32-21

    At oral argument the parties conceded that the question of the competency of
    the Board and its right to proceed under the circumstances has been preserved
    in the record of the administrative hearing and can be presented to the North
    Dakota courts

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