Lewis v. Bt Inv. Managers - 447 U.S. 27, 100 S. Ct. 2009 (1980)

Rule:

The Commerce Clause, U.S. Const. art. 1, § 8, cl. 3, grants to Congress the power to regulate Commerce among the several States. Although the Commerce Clause thus speaks in terms of powers bestowed upon Congress, the Court long has recognized that it also limits the power of the States to erect barriers against interstate trade. This limitation upon state power, of course, is by no means absolute. In the absence of conflicting federal legislation, the States retain authority under their general police powers to regulate matters of legitimate local concern, even though interstate commerce may be affected.

Facts:

A bank holding company incorporated and maintaining its principal place of business in New York sought approval from the Board of Governors of the Federal Reserve System to operate an investment management subsidiary in Florida. The Board rejected the application on the ground that it would conflict with a Florida statute prohibiting a bank, trust company, or bank holding company whose operations are principally conducted outside the state from owning or controlling a business within that state that sells investment advisory services (59 Fed Res Bull 364). The holding company and its subsidiary subsequently filed an action seeking declaratory and injunctive relief in the United States District Court for the Northern District of Florida, alleging, among other things, that the statute violated the commerce clause of the United States Constitution (Art I, 8, cl 3) and that the commerce clause was also violated as a result of the joint operation of the statute with another Florida statute which prohibited all corporations except state-chartered banks and national banks having their operations in the state from performing specified fiduciary functions. A three-judge court was convened and ultimately held that the challenged portions of the two statutes violated the commerce clause and that the federal Bank Holding Company Act of 1956 (12 USCS 1841 et seq.) did not foster or permit the types of discrimination against out-of-state bank holding companies reflected in the Florida statutes (461 F Supp 1187).

Issue:

Was the Florida statute prohibiting out-of-state banks, trusts, and bank holding companies from owning business within state providing investment advisory services violative of commerce clause?

Answer:

Yes

Conclusion:

The United States Supreme Court affirmed and held that (1) the provisions of the Florida statute prohibiting the out-of-state ownership of investment advisory services directly burdened interstate commerce in a manner that contravened the implicit limitation on state power of the commerce clause, the discrimination against affected business organizations not being evenhanded, and the statute was not authorized by the Bank Holding Company Act, and (2) the constitutionality under the commerce clause of the state statute prohibiting the performance of specified fiduciary functions by corporations other than state-chartered and national banks was not properly before the Supreme Court, since on appeal the argument over the constitutionality of the statute focused not on the concatenation of the two statutes, but on the power of a state under the commerce clause to require local incorporation as a condition of doing business in the local market, the District Court did not address the constitutionality of the statute standing alone, it was not clear that there was a case or controversy with respect to the validity of the separate requirements imposed by the statute, and the amendment, in the interim, of 3(d) of the Bank Holding Company Act (12 USCS 1842(d)) apparently to prohibit the bank holding company from establishing a Florida trust subsidiary raised new questions, both jurisdictional and substantive, that should be addressed in the first instance by the District Court.