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November 29, 1983


The opinion of the court was delivered by: CARTER

CARTER, District Judge

The Federal Deposit Insurance Corporation ("FDIC") is seeking to recover $2,230,531.78 in assessment payments that it asserts the European American Bank & Trust Co. ("EAB") owes it pursuant to the statutes relating to federal deposit insurance. The case is before this Court on FDIC's motion for summary judgment on its complaint and on the counter-claim asserted by EAB.

 The dispute between the parties involves the treatment, under the Federal Deposit Insurance Act, ("FDI Act"), 12 U.S.C. §§ 1811 et seq., of payments released through an electronic fund transfer system known as "CHIPS" (Clearing House Interpayment System). The FDIC maintains that EAB understated the amount of deposits it had from January, 1976 to October, 1981, and therefore, underpaid its assessment payments because it incorrectly excluded CHIPS transactions in calculating the deposits it held during that period. EAB contends that the CHIPS system is outside the scope of the FDI Act's definition of deposit, 12 U.S.C. § 1811 (1) (1)-(5), and that even if CHIPS payments give rise to an assessable deposit, the FDIC calculated the assessment improperly.

 EAB opposes FDIC's motion for summary judgment on the ground that resolution of the issues presented requires further factual development of the record. Certainly this case calls for application of the law to novel circumstances, but those are adequately set out. The only material questions EAB highlights in opposing the FDIC's motion are questions of law, which the Court can and does address here.


 CHIPS was established in 1970 to process an increasing volume of international and domestic fund transfers. Run by the New York Clearing House Association ("NYCHA"), a voluntary association of banks, the computerized system carries out the daily exchange of funds among NYCHA members and facilitates settlement of balances resulting from such exchanges. Each day some $200 billion is exchanged through the CHIPS system, including 90 percent of all international interbank transfers involving United States banks.

 Exchanges in the CHIPS system are accomplished by a series of electronic computer impulses. A transfer of funds by one participant to another through the CHIPS system is known as a "release"; the receipt of such an impulse by one participant from another is called a "receive". During the period with which this lawsuit is concerned, the time prior to October 1, 1981, all release and receive messages were recorded on a central computer for a given day at a fixed time on that day, although the money involved was not actually transferred until settlement, *fn1" which occurred the following day. When, on a given day, a CHIPS participant transferred more money through release messages to another CHIPS participant than it obtained in receive messages from the other CHIPS participant, the excess of the monetary value of the messages released over that of the messages received was known as "net" on a bank-by-bank basis. When a CHIPS participant released more money to all other CHIPS participants on a given day than it received from all other participants, the excess of all releases by that participant over all receives was known as the bank's "net-net balance", or simply its "net-net".

 Under the FDI Act, banks are required to make semi-annual assessment payments, which are analagous to insurance premiums, based on the amount of deposits that they hold. Under its system of assessing banks, the FDIC initially accepts a bank's certified statement of its deposits and assessment payments. Only later does the FDIC audit the bank to verify the validity of both the bank's certified statement of its deposits and the bank's assessment payment. During one such audit, the FDIC discovered the EAB's alleged understatement of its deposits and the concomitant underpayment of its assessment.

 EAB has been a member of the NYCHA and a settling participant since January 16, 1979; from November 1, 1971 through January 15, 1979, EAB was a non-settling participant. *fn2" Apparently, for several years, in the assessment periods before 1978-79, EAB reported as an assessable deposit the net-net amount it was required to pay in settlement of its obligation to the CHIPS system. In 1978-79, EAB determined that it would change its treatment of CHIPS transactions, and effective with the statement for the period ending June 30, 1979, it began excluding these from its calculation of deposits that were subject to FDIC assessment.

 EAB now claims that it was justified in excluding CHIPS transactions from assessable deposits because such transactions were not received or held by EAB until the time of settlement on the next business day, and that, unlike what EAB termed, "ordinary deposits", the transactions contributed nothing to the earning power of EAB. According to EAB, prior to October 1, 1981, it was the usual practice among the customers of CHIPS participating banks to instruct that CHIPS transfers be made on one business day ("Day 1") but to "cover" those payments with good funds only on the next business day ("Day 2"). *fn3" Thus, the bank's payment message, or release, would often precede by one day, the actual transfer of funds to the bank by its customer. Since EAB did not actually hold the funds reflected in the CHIPS message, it claims it could not make use of them overnight for investment purposes.

 The FDIC's theory as to why CHIPS transactions should be included as assessable deposits focuses on EAB's method of accounting with respect to CHIPS transactions. On the day when EAB issued a release message through CHIPS, it debited the account of the customer who requested that the transfer be made, and credited an account called "Due From CHIPS". *fn4" This credit, the FDIC maintains, was equivalent to a deposit since the release message for which settlement had not yet been made represented an irrevocable and unpaid obligation to pay the CHIPS participant to which the payment message had been sent.

 The FDIC also claims that it has been accepting CHIPS assessments by participant banks from the time of CHIPS establishment in 1970. It states that it has been doing so on a net bank-by-bank basis only, although from 1977 to 1979, it contemplated changing the assessment system so that all CHIPS releases (rather than just the excess of releases over receives), would be considered assessable deposits. During that period the NYCHA carried on discussions with the FDIC, which culminated, to some extent, in a letter sent to the FDIC from Sullivan & Cromwell, counsel for the then 11 member NYCHA. The letter stated that "the FDIC assessment base should include no more than the net amount of CHIPS payments on a bank-by-bank basis...." Plaintiff's Exh. 19. That same week the 11 members of the NYCHA submitted letters to the FDIC concurring in the opinion of the association's counsel.Plaintiff's Exh. 21. On April 20, 1979, the FDIC wrote the NYCHA that "our Legal Division has decided that it is proper for the Association members to report, for assessment purposes, only the "net" amount of transfers through CHIPS on a bank-by-bank basis." Plaintiff's Exh. 23.

 EAB says it was not party to the discussions of what the proper basis for assessment should be since it was not a member of the NYCHA until January 16, 1979. Nevertheless, EAB sent representatives to the meetings where the assessment issue was discussed. In addition, although EAB claims it was not informed of the FDIC's decision to continue to make assessments on a net bank-by-bank basis, the NYCHA circulated the April letter from the FDIC, explaining the FDIC's decision, to all NYCHA members, including EAB.


 1. The Standard of Review

 The first question confronting the Court is what is the proper standard of review of the agency's action. In a recent case, Federal Election Commission v. Democratic Senatorial Campaign Commission, 454 U.S. 27, 39, 70 L. Ed. 2d 23, 102 S. Ct. 38 (1981), the Supreme Court provided the answer.The Court wrote that a reviewing Court's role

 was not to interpret the statute as it thought best but rather the narrower inquiry into whether the Commission's construction was "sufficiently reasonable" to be accepted by a reviewing Court.... To satisfy this standard it is not necessary for a court to find that the agency's construction was the only reasonable one or even the reading the court would have reached if the question initially had arisen in a judicial proceeding.

 Moreover, the FDIC's decision warrants deference for several additional reasons. "First, the [FDIC] is 'the type of agency to which deference should presumptively be afforded' because of the scope of its authority." A.G. Becker Inc. v. Board of Governors, 224 U.S. App. D.C. 21, 693 F.2d 136, 140 (D.C. Cir. 1982) (emphasis in original). Second, deference is due the FDIC because of "its expert knowledge of commercial banking." Id. (emphasis in the original). Third, recognizing that the relevant statute was passed before the advant of computerized banking, the Court should respect the agency's efforts to adapt statutory language to new developments. "[W]e cannot assume that Congress intended the [definition of deposit] to comprise a set of rigid and unchanging categories." Id. Statutory definition "leave[s] the agency with the ...

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