IN RE: Corestates Trust ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
10-27-1994
IN RE: Corestates Trust
Precedential or Non-Precedential:
Docket 93-2039
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"IN RE: Corestates Trust" (1994). 1994 Decisions. Paper 170.
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_________________
No. 93-2039
_________________
IN RE: CORESTATES TRUST FEE LITIGATION
CORNELIA TODD HARRISON BYRD;
HOWARD W. HARRISON, III
Individually and on behalf of
all others similarly situated
v.
CORESTATES BANK, N.A.
Howard W. Harrison, III and James D. Robins*,
Appellants
* Pursuant to FRAP 12(a)
____________________________________________________
On Appeal From the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 92-cv-05526)
____________________________________________________
Argued: May 20, 1994
Before: BECKER, LEWIS, Circuit Judges
and IRENAS, District Judge*
(Filed October 27, l994 )
MARGUERITE R. GOODMAN (Argued)
One Old Gulph Center
111 Old Gulph Road
Wynnewood, PA 19096
*
. The Honorable Joseph E. Irenas, United States District Judge
for the District of New Jersey, sitting by designation.
Attorney for Appellants
GREGORY M. HARVEY (Argued)
KAREN PIESLAK POHLMANN
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103
Attorneys for Appellee
___________________________
OPINION OF THE COURT
___________________________
BECKER, Circuit Judge.
Plaintiffs Howard W. Harrison, III and James D. Robins,
beneficiaries of fiduciary accounts administered by defendant
Corestates Bank, N.A. ("Corestates"), commenced this action in
the District Court for the Eastern District of Pennsylvania on
their own behalf and on behalf of all those similarly situated.
Plaintiffs allege breach of contract and fiduciary duty by
Corestates and correspondingly seek refund of allegedly
unreasonable trust fees and removal of Corestates as trustee.
Jurisdiction was premised on both diversity of citizenship, 28
U.S.C. § 1332, and the putative existence of a federal question
based upon violations of the banking laws, 12 U.S.C. § 92a and
applicable regulations.
The district court dismissed the diversity claim for lack of
subject matter jurisdiction, Fed. R. Civ. P. 12(b)(1), concluding
that neither the plaintiffs' claim for punitive damages nor their
allegation that the defendants had mismanaged a trust res worth
more than $50,000 sufficiently augmented their otherwise minimal
claims to satisfy the amount in controversy requirement of the
diversity statute. The court dismissed the federal statutory
claim, concluding that no private right of action exists for
violations of 12 U.S.C. § 92a. The plaintiffs appealed the
district court's order of dismissal, but we agree with the
district court in both respects, and hence we will affirm.
I. FACTS AND PROCEDURAL HISTORY
Corestates functions as a trustee for a multitude of trusts,
managing and investing principal and/or income in exchange for
fees. In order to maximize the return on the trust funds,
Corestates "sweeps" the fiduciary accounts on a daily basis;
"sweeping" refers to the automated collection of idle cash from
customer accounts for purposes of temporary collective
investment. Corestates transfers the uninvested cash from each
account to a temporary collective investment fund. At relevant
times, Corestates has charged sweep fees of 60 basis points ($.60
for every $100 of invested cash) for the "service" of sweeping.
App. at 33a. In addition, Corestates has imposed an annual
regulatory compliance charge of $600 for trusts with principal in
excess of $50,000 ($300 for those with less than $50,000 of
principal). App. at 19a.
The plaintiffs are beneficiaries of trusts administered by
Corestates which are subject to these fees. They allege that
Corestate's imposition of the fees constitutes a breach of
contract and a breach of fiduciary duty under applicable
Pennsylvania law. More specifically, plaintiffs allege
Corestates has violated 20 Pa. C.S.A. § 7315.1(b), which permits
a Pennsylvania fiduciary to make only a "reasonable charge for
services rendered in making [a] temporary investment." Harrison
seeks compensatory damages of $2,474.88 ($1,874.88 of sweep fees
plus the $600 regulatory compliance fee). Robins seeks
compensatory damages of $713.97 ($113.97 of sweep fees plus the
$600 regulatory compliance fee). App. at 45a. Because these
amounts are far less than the $50,000 required for diversity
jurisdiction, plaintiffs assert that the jurisdictional amount is
achieved either (1) via their claim for punitive damages; and/or
(2) because the value of the trust res, which they allege the
trustees have been mismanaging, exceeds the jurisdictional
amount. Although plaintiffs have also brought this action "on
behalf of all those similarly situated," they have not sought
(and therefore have not obtained) class action certification.
In addition, plaintiffs contend that Corestate's imposition
of the above mentioned fees constitutes a violation of
regulations promulgated pursuant to 12 U.S.C. § 92a. More
specifically, plaintiffs contend that a federal private right of
action exists for Corestates' alleged regulatory violations. As
we have noted, the district court was unpersuaded on both of
plaintiffs' theories, and dismissed the case. This appeal
followed.
The existence vel non of subject matter jurisdiction is a
legal issue over which we exercise plenary review. York Bank &
Trust Co. v. Federal Savings & Loan Ins. Corp., 851 F.2d 637, 638
(3d Cir. 1988), cert. denied 488 U.S. 1005 (1989). So is the
existence of a private right of action. See Unger v. National
Residents Matching Program, 928 F.2d 1392, 1394 (3d Cir. 1991).
In making these legal determinations, all facts alleged in the
complaint and all reasonable inferences that can be drawn from
them must be accepted as true. See Markowitz v. Northeast Land
Co., 906 F.2d 100, 103 (3d Cir. 1990).
II. JURISDICTIONAL AMOUNT
Diversity jurisdiction requires an amount in controversy
exclusive of interest and costs in excess of $50,000. 28 U.S.C.
§ 1332(a). In determining whether the jurisdictional amount has
been has been properly alleged:
[T]he sum claimed by the plaintiff controls if the
claim is apparently made in good faith. It must appear
to a legal certainty that the claim is really for less
than the jurisdictional amount to justify dismissal. .
. . But if, from the face of the pleadings, it is
apparent, to a legal certainty, that the plaintiff
cannot recover the amount claimed, or if, from the
proofs, the court is satisfied to a like certainty that
the plaintiff never was entitled to recover that
amount, and that his claim was therefore colorable for
the purpose of conferring jurisdiction, the suit will
be dismissed.
St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288-
89, 58 S. Ct. 586, 590 (1938) (citations omitted). Even in
diversity-based class actions, the Supreme Court has held that
class members may not aggregate their claims in order to reach
the requisite amount in controversy, Snyder v. Harris 394 U.S.
332, 338, 89 S. Ct. 1053, 1057 (1969), and that each member of
the class must claim at least the jurisdictional amount, Zahn v.
International Paper Co., 414 U.S. 291, 301, 94 S. Ct. 505, 512
(1973). A fortiori, the plaintiffs may not aggregate their
claims in an action pursued on behalf of "those similarly
situated."
A. Punitive Damages
Whether a sufficient amount in controversy exists to
establish federal diversity jurisdiction depends, in part, on
whether punitive damages are recoverable under Pennsylvania law.
Unfortunately, we lack the benefit of direct guidance from the
Pennsylvania Supreme Court in this area. Therefore this court
must attempt to "predict the position which that court would take
in resolving this dispute." Robertson v. Allied Signal, Inc.,
914 F.2d 360, 364 (3d Cir. 1990).
In Packard v. Provident Nat'l Bank, 994 F.2d 1039 (3d Cir.
1993), cert. denied, 114 S. Ct. 440 (1993), we were presented
with the identical question of Pennsylvania law -- whether the
imposition of unreasonable sweep fees by a bank acting as a
trustee can result in the imposition of punitive damages. The
district court in Packard found that sweep fees, imposed at a
lower rate then presented here, were unreasonable and in
violation of applicable Pennsylvania laws, grounding diversity
jurisdiction on an award of punitive damages in the amount of
$75,000. Upp v. Mellon Bank N.A., 799 F. Supp. 540 (E.D. Pa.
1992). On appeal, predicting what the Pennsylvania Supreme Court
would do, we concluded that "punitive damages simply cannot be
recovered against a trustee under Pennsylvania law." Id. at
1048. We are bound by the holding of this previous panel "in the
absence of a clear statement by the Pennsylvania Supreme Court to
the contrary or other persuasive evidence of a change in
Pennsylvania law." Smith v. Calgon Carbon Corp., 917 F.2d 1338,
1343 (3d Cir. 1990), cert. denied 499 U.S. 966 (1991); see also
Third Circuit Internal Operating Procedure 9.1 (requiring that no
subsequent panel of this court overrule the holding of a prior
panel contained in a published opinion so as to avoid an intra-
circuit conflict of precedent).
The Pennsylvania Supreme Court has not addressed the issue
since that time (nor has the Pennsylvania Superior Court).
Calgon does not allow us to examine this issue anew, but
instead requires us to determine whether opinions of inferior
state courts subsequent to Packard represent persuasive evidence
of a change in Pennsylvania law. In determining that punitive
damages were not available, the Packard court relied in part on
Freedman Estate, 1 Fid. Rep. 2d 60 (O.C. Allegheny Co. 1980) (en
banc), which held that punitive damages were not available
against a trustee. Plaintiffs contend that two later trial court
opinions -- Lemke Trust 13 Fid. Rep. 2d 328 (O.C. Dauphin Cty.
1993) and Korman Corp. v. Franklin Town Corp., 34 D & C 3d 495
(C.C.P. Phila. Cty. 1984) (both holding, contrary to the opinion
in Freedman Estate, that punitive damages were available against
a trustee) -- which were not considered by Packard1 constitute
persuasive evidence of a change in Pennsylvania law.
We find that these cases do not represent a change in
Pennsylvania law, and certainly not a sufficient evidence of a
change to satisfy Calgon. See Calgon, 917 F.2d at 1343. In
Calgon this court refused to overrule a prior panel's prediction
that the employment-at-will doctrine existed in Pennsylvania
notwithstanding two subsequent direct statements to the contrary
by members of the Pennsylvania Supreme Court, one in dicta, and
the other in a concurrence by Chief Justice Nix. Id. (requiring
instead a "clear statement by the Pennsylvania Supreme Court to
the contrary"). Given the absence in our case of such persuasive
evidence of a change in Pennsylvania law, we find that punitive
damages are not available against Corestates. Thus plaintiffs'
claim for punitive damages does not establish an amount in
controversy in excess of $50,000.
1
. The Lemke decision arose after Packard, while the Korman
case, decided before Packard, was apparently not called to the
attention of the Packard panel.
B. Value of the Trust Res
Plaintiffs seek removal of Corestates as trustee pursuant to
20 Pa.C.S.A. § § 3173, 7121 which allow removal in the case of a
breach of fiduciary duty. They submit that their request to
enjoin Corestates from charging excessive fees in the future
places the corpus of their trusts, each in excess of $50,000,2
into controversy. They distinguish our opinion in Packard since
in that action injunctive relief against the future imposition of
allegedly excessive fees was not sought.
In injunctive actions, it is settled that the amount in
controversy is measured by the value of the right sought to be
protected by the equitable relief. See Smith v. Adams, 130 U.S.
167, 175, 9 S. Ct. 566, 569 (1889); Spock v. David, 469 F.2d
1047, 1052 (3rd Cir. 1972) ("In cases where there is no adequate
remedy at law, the measure of jurisdiction is the value of the
right sought to be protected by injunctive relief."), rev'd on
other grounds Greer v. Spock, 424 U.S. 828 (1976). In other
words, "it is the value to plaintiff to conduct his business or
personal affairs free from the activity sought to be enjoined
that is the yardstick for measuring the amount in controversy."
14A C. Wright et al. Federal Practice and Procedure, § 3708 at
143-44 (2d ed. 1985) (citations omitted).
2
. Harrison's trust is valued at $902,844, Robin's at $98,741.
App. at 50a.
The Supreme Court applied this principle in McNutt v.
General Motors Acceptance Corp., 298 U.S. 178, 56 S. Ct. 780
(1936), where the plaintiff sought to enjoin the enforcement of
an allegedly unconstitutional regulation of its business. The
Court held that the amount in controversy was not, as the
plaintiffs contended, the entire value of the business, but
instead the value of the right to be free of the particular
regulation, which "may be measured by the loss, if any, which
would follow the enforcement of the rules prescribed." Id. at
181, 56 S. Ct. at 781.
While some support would appear to exist for plaintiffs'
contention that the entire corpus of a trust is placed in
controversy where a breach of fiduciary duty is alleged, see
Urbano v. Board of Managers of New Jersey State Prison, 415 F.2d
247, 249 n.8 (3d Cir. 1969) ("Although we do not decide the
issue, there is support for the proposition that where a breach
of fiduciary duty is alleged, the corpus of the trust is the
amount in controversy."), cert. denied 397 U.S. 948 (1970), it is
the logic of McNutt that we find applicable to this case. In
McNutt the Supreme Court made clear that the amount in
controversy in an injunctive action is measured by the value to
plaintiff to conduct his business or personal affairs free from
the activity sought to be enjoined. The value to the plaintiffs
in this action therefore is the cost to them of the continued
imposition of the allegedly excessive sweep fees. The cost of
these fees to date has not exceeded $2500. The plaintiffs are
unable to set forth any calculation establishing that the
continued imposition of such fees would bring a sum in excess of
the jurisdictional amount into controversy.
In reserving the question of the measurement of the amount
in controversy in the case of an allegation of a fiduciary
breach, the Urbano panel was apparently concerned with an alleged
fiduciary breach that could place the entire corpus of a trust in
jeopardy. In Urbano, prison inmates alleged a fiduciary breach
on the part of prison officials in the administration of trust
funds on behalf of the inmates, asserting that the officials were
using the trust money for their own benefit. Urbano 415 F.2d at
249. Given these allegations, the prisoners apparently could
have successfully alleged that the continued fiduciary breach on
the part of prison officials placed the entire trust corpus into
jeopardy. The Urbano panel never reached this question because
it instead dismissed the case on the basis of abstention.
Urbano, 415 F.2d at 250. In contrast, plaintiffs in the case at
bar have failed to allege in any way a breach of fiduciary duty
which threatens an amount of the trust corpus in excess of
$50,000. Unlike Urbano, plaintiffs do not seek protection from
any alleged conduct on the part of Corestates which threatens the
entire trust corpus. Plaintiffs only seek protection from the
continued imposition of sweep fees, which alone do not threaten
an amount in excess of $50,000 per plaintiff.
In addition to contending that Corestates' future actions
somehow threaten the entire trust corpus, the plaintiffs argue
that title to the entire trust is in controversy by the mere
equitable request for removal of the trustee. The plaintiffs
contend that, because a trustee holds legal title to the trust
corpus, a request for removal of a trustee is equivalent to a
suit brought to determine title to property. We disagree.
Corestates, while vested of legal title, does not claim ownership
of the entrusted funds. See Restatement (Second) of Trusts § 2
comment (d) (1959) ("The term 'title,' unlike 'ownership' is a
colorless word; to say without more that a person has title to
certain property does not indicate whether he holds such property
for his own benefit or as trustee."). The cases cited by the
plaintiffs all involve situations where the real equitable
ownership of property was at stake, not mere legal title. See,
e.g., Sanchez v. Taylor, 377 F.2d 733 (10th Cir. 1967) (holding
that in a suit seeking a declaration of title the amount in
controversy is governed by the value of the property). Since the
equitable ownership of trust property is not at issue, we
conclude that plaintiffs' injunctive request does not place the
jurisdictional amount into controversy.
In sum we conclude that plaintiffs' requested injunctive
relief does not, to a legal certainty, place an amount in excess
of $50,000 into controversy. The mere request for removal of a
trustee does not place the entire trust corpus into controversy;
instead plaintiffs must seek by way of an injunction protection
from an activity which threatens in excess of $50,000 of the
trust corpus. Plaintiffs have failed to allege any such conduct
on the part of Corestates.
III. DOES AN IMPLIED RIGHT OF ACTION EXIST FOR
VIOLATIONS OF REGULATIONS PROMULGATED
PURSUANT TO 12 U.S.C. § 92a?
Section 92a provides that the "Comptroller of the Currency
shall be authorized and empowered to grant by special permit to
national banks applying therefor, when not in contravention of
State or local law, the right to act as trustee. . . ." 12
U.S.C. § 92a. Plaintiffs have pled violations of regulations
promulgated pursuant to § 92a, namely 12 C.F.R. § 9.15 which
allegedly requires a bank to charge a reasonable fee when
sweeping, and 12 C.F.R. § 9.18(b)(12) which places limits on the
amount a bank can charge to a collective investment fund.
Plaintiffs contend that a cause of action exists for violations
of § 92a and corresponding regulations by way of the private
right of action which has been implied into 12 U.S.C. § 93(a) for
violations of the National Bank Act. See Chesbrough v. Woodward,
244 U.S. 72, 37 S. Ct. 579 (1916). Alternatively, plaintiffs
maintain that a private right of action exists independently
under § 92a.
We do not write on tabula rasa. The First and the Fifth
Circuits have already written - and divided - on the question
whether a private implied right of action exists for violations
of § 92a and accompanying regulations. In B.C. Recreational
Indus. v. First Nat'l Bank, 639 F.2d 828, 833 n.10 (1st Cir.
1981), the First Circuit posited in dicta that an implied right
of action could be found to exist through § 93 "for violations of
the National Bank Act, including § 92a(a)." The B.C. Indus.
court failed to fully consider, however, whether § 92a was in
fact enacted as part of the National Bank Act. In Blaney v.
Florida Nat'l Bank, 357 F.2d 27 (5th Cir. 1966), the Fifth
Circuit, in a more detailed analysis, concluded that a private
right of action did not exist for violations of § 92a. The
Blaney court failed to consider, however, the possibility that a
private right of action could exist through § 93(a). As will be
seen, the relationship of § 92a to § 93(a) and the National Bank
Act is dispositive.
A. Can a Private Cause of Action Exist Through § 93(a) for
a Violation of § 92a Regulations?
The plaintiffs maintain that a cause of action exists for
violations of § 92a and corresponding regulations by way of the
private right of action which has been implied into § 93(a). See
Chesbrough v. Woodward, 244 U.S. at 78, 37 S. Ct. at 582 (finding
an implied private cause of action under the predecessor to §
93(a)). Section 93(a) provides in pertinent part that if "the
directors of any national banking association shall knowingly
violate or knowingly permit . . . [a] violat[ion] . . . [of] any
of the provisions of title 62 of the Revised Statutes [the
National Bank Act] . . . [such] director . . . shall be held
liable. . . ." 12 U.S.C. § 93(a).
The implied right of action under § 93(a), first established
by the Supreme Court in Chesbrough, has been recognized and
applied to various provisions of the National Bank Act. See
Morast v. Lance, 807 F.2d 926, 932 (11th Cir. 1987); Durante
Bros. & Sons, Inc. v. Flushing Nat'l Bank, 755 F.2d 239, 243 (2d
Cir. 1985); Marx v. Centran Corp., 747 F.2d 1536, 1540 (6th Cir.
1984), cert. denied 471 U.S. 1125 (1985); Harmsen v. Smith, 542
F.2d 496, 499-500 (9th Cir. 1976), cert. denied 464 U.S. 822
(1983). It should be noted, however, that the implied private
right of action recognized in Chesbrough relates only to § 93(a),
given that until 1978, Section 93 of the National Bank Act
consisted only of the paragraph which is now § 93(a). Whether an
implied right of action exists for an alleged violation of § 92a
via the implied right of § 93(a) will depend upon whether § 92a
was enacted as part of the National Bank Act.3 Section 92a was
enacted on September 28, 1962 as Public Law 87-722 in order to
transfer regulatory authority over the fiduciary operations of
national banks from the Federal Reserve Board to the Comptroller
3
. If we were to determine that § 92a were part of the National
Bank Act, it is unclear whether a private right of action could
exist through § 93(a) for violations of regulations promulgated
under § 92a. Since we determine that no private right of action
exists for violations of § 92a, we need not address this
question.
of the Currency, repealing § 11(k) of the Federal Reserve Act
(which was codified at 12 U.S.C. § 248). See Public Law 87-722,
76 Stat. 668 (enacting § 92a while repealing § 11(k) of the
Federal Reserve Act and explicitly amending two sections of the
Internal Revenue Code). While designated by the editors of the
U.S. Code as 12 U.S.C. § 92a, the enacting legislation and
accompanying legislative history did not amend, repeal or even
mention the National Bank Act. The fact that the legislation
specifically amends two sections of the Internal Revenue Code,
underscores the lack of Congressional intention that § 92a
function as an amendment to the National Bank Act.
Moreover, later enactments refer to § 92a not as part of the
National Bank Act, but as the Act of September 28, 1962. See Act
of March 31, 1980, Pub L. 96-221, Title VII § 704, 94 Stat. 187
(1980) (codified as 12 U.S.C. § 92(a)(k)); Garn-St. Germain
Depository Institutions Act of 1982, Pub. L. 97-320, Title IV §
424(g), 96 Stat. 1523 (1982) (codified as an amendment to 12
U.S.C. § 93(b)) (referring to "the provisions of Title 62 of the
Revised Statutes [the National Banking Act] or any of the
provisions of section 92a of this title" (emphasis added)). For
these reasons, we find that § 92a was not enacted as part of the
National Bank Act, and hence we conclude that no private cause of
action exists through § 93(a) for a violation of § 92a
regulations.
B. No Implied Right of Action Exists under § 92a.
Since § 92a was not enacted as part of the National Bank
Act, a private right of action can only exist for violations of
regulations promulgated under § 92a if a right of action can be
implied under § 92a pursuant to the Supreme Court's four factor
test of Cort v. Ash, 422 U.S. 66, 95 S. Ct. 2080 (1975). In
deciding whether an implied right of action exists for a
violation of regulations, we must first determine "whether the
statute under which the rule was promulgated properly permits the
implication of a private right of action . . . under Cort v. Ash
and its progeny." Angelastro v. Prudential-Bache Securities,
Inc., 764 F.2d 939, 947 (3d Cir. 1985), cert. denied 474 U.S. 935
(1985).4 Obviously, the regulations cannot themselves aid in
answering the question whether a private right of action exists
under the enabling statute. See Smith v. Dearborn Financial
Services, Inc., 982 F.2d 976, 979 (6th Cir. 1993); Marshall v.
Gibson's Products, Inc., 584 F.2d 668, 677-78 & n. 16 (5th Cir.
1978) (holding that an implied private cause of action can be
implied only from a statute and not from regulations, since the
authority to create federal jurisdiction lies solely with
Congress).
4
. In order to imply a private cause of action for a regulatory
violation, we would also have to conclude both that (1) the
regulation was properly within the scope of the enabling statute,
and (2) the private right of action would further the purpose of
the enabling statute. Angelastro, 764 F.2d at 947.
Under Cort v. Ash we are required to examine four factors in
determining whether to imply a private right of action under a
federal statute: (1) whether plaintiffs are part of the class for
whose especial benefit the statute was enacted; (2) whether there
was any indication of Congressional intent to deny or create a
private remedy; (3) whether implication of a private remedy is
consistent with the underlying purpose of the statute; and (4)
whether the matter is traditionally one relegated to the states.
Cort v. Ash, 422 U.S. at 78, 95 S. Ct. at 2088. Courts that
have already considered the matter, have concluded that "it is
doubtful that plaintiffs could meet the test of Cort v. Ash" in
establishing an implied private right of action under § 92a.
B.C. Indus., 639 F.2d at 833 n.10; Thompson v. Kerr, 555 F. Supp.
1090, 1098 (S.D. Ohio 1982).
Supreme Court precedent has established that the second Cort
v. Ash factor, legislative intent, is entitled to the greatest
weight in the calculus. Touche Ross & Co. v. Redington, 442 U.S.
560, 575, 99 S. Ct. 2479, 2489 (1979). Specifically, a lack of
evidence of legislative intent to create a private right of
action, either express of by implication, can by itself provide
the answer that a private right of action should not be implied.
See Touche, 442 U.S. at 571-76, 99 S. Ct. at 2486-89 ("[I]mplying
a private right of action on the basis of congressional silence
is a hazardous enterprise, at best.").
The legislative history accompanying § 92a and its
predecessor is void of any indication that Congress intended to
create a private remedy. No court had ever recognized a private
right of action under the predecessor statute to § 92a,5 and in
enacting § 92a, Congress explicitly stated that "[n]o change
would be made from the substantive provisions of section 11(k)
[the predecessor statute of the Federal Reserve Act] other than
the transfer of authority, so that there is no alteration of
existing law regarding national banks acting in fiduciary
capacities." 87th Congress, 2d Sess., S Rep. No. 2039, 1962 U.S.
Code Cong. & Ad. Rep. 2735; see also Investment Co. Institute v.
Camp, 401 U.S. 617, 621-22, 91 S. Ct. 1091, 1094 (1971) ("In 1962
Congress transferred jurisdiction over most of the trust
activities of national banks from the Board of Governors of the
Federal Reserve System to the Comptroller of the Currency,
without modifying any provision of substantive law."). Given
that no private cause of action existed under § 92a's predecessor
and Congress expressly intended not to change the substantive
law, we conclude that Congress did not intend to create a private
cause of action when it enacted § 92a.
An evaluation of the remaining three Cort v. Ash factors
also leads us to decline to recognize a private right of action.
5
. The predecessor statute, 12 U.S.C. § 248 (formerly § 11(k))
vested the authority to regulate the fiduciary operations of
national banks with the Federal Reserve System's Board of
Governors.
First, no indication exists that plaintiffs are part of a class
for whose especial benefit the statute was enacted. Congress
enacted the predecessor to § 92a merely to place national banks
on equal footing with state banks in the performance of trust
functions. Blaney, 357 F.2d at 30 ("This is obvious from the
most cursory reading of . . . 12 U.S.C. § 92a."). Given this
purpose, it appears that the statute was not enacted for the
benefit of any particular identified class, other than arguably
national banks.
Under the third Cort v. Ash factor we ask whether the
implication of a private remedy is consistent with the underlying
purpose of the statute -- to place national banks on equal
footing with state banks in the performance of trust functions.
In the enacting legislation (in what is now § 92a(k)), Congress
created a detailed remedial provision. This section provides
that in the event the Comptroller determines that a national bank
unlawfully exercised the granted fiduciary powers, the
Comptroller should, following specified procedures (i.e. by
providing notice and a hearing), revoke the trust powers granted
by statute. 12 U.S.C. § 92a(k)(1). If the bank's fiduciary
powers were revoked subject to these procedures, the bank could
then obtain direct judicial review by a federal appellate court.
12 U.S.C. § 92a(k)(2); 12 U.S.C. § 1818(h). We find that this
carefully reticulated enforcement mechanism would not be enhanced
by the implication of a private right of action. More
specifically, the Congressional grant of enforcement power to the
Comptroller, head of the federal agency created and empowered by
Congress to develop and exercise expertise in this area,6 would
not be furthered by allowing a court, as opposed to the
Comptroller, to make the initial determination whether a bank had
engaged in conduct inconsistent with the statute.
Under the fourth and final Cort factor we must ask whether
the matter is one traditionally relegated to the states. One is
hard pressed to imagine an area of law more traditionally a
province of state law, than the law of trust and estates.
Implying a private right of action under § 92a could effectively
federalize a not insignificant portion of state trust and estate
law, and burden federal courts with numerous cases involving
disputes between trust beneficaries and national banks, a most
untoward result. We do not believe that Congress could have
intended such a result by its enactment of § 92a.7
6
. See Central Nat'l Bank v. United States Dept. of Treasury,
912 F.2d 897, 905 (7th Cir. 1990) ("[B]anks are his [the
Comptroller's] wards, and his only wards.").
7
. Because we find that no private right of action exists for
violations of § 92a, we need not address the validity of
Corestate's claim that, in the area of trusts and estates, the
federal court should abstain out of deference to the state
Orphans Court's expertise. See Ryan v. First Pennsylvania
Banking & Trust Co., 519 F.2d 572, 575 (3d Cir. 1975); Reichman
v. Pittsburgh Nat'l Bank, 465 F.2d 16, 18 (3d Cir. 1972).
However like the Fifth Circuit in Blaney, our decision is
reinforced by the understanding that the law of trusts and
estates is a primary matter of state concern. Blaney, 357 F.2d
at 30.
In sum, all four Cort v. Ash factors militate against the
plaintiffs' position. Accordingly, we conclude that no private
right of action should be implied under § 92a.
IV. CONCLUSION
We will affirm the district court's order granting
Corestate's motion to dismiss for failure to state a claim as to
purported federal claims and for lack of subject matter
jurisdiction as to all remaining claims. Additionally, the
district court's order denying plaintiffs motion to enjoin
commencement of trust accountings in Pennsylvania Orphans' Court,
which the plaintiffs have also appealed, will likewise be
affirmed.
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