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INDEPENDENT BANKERS ASSN. OF NEW YORK STATE

April 6, 1984

INDEPENDENT BANKERS ASSOCIATION OF NEW YORK STATE, INC. and The Canandaigua National Bank and Trust Company, Plaintiffs,
v.
MARINE MIDLAND BANK, N.A. and Wegman's Food Markets, Inc., Defendants.



The opinion of the court was delivered by: TELESCA

MEMORANDUM DECISION and ORDER

TELESCA, District Judge.

 This Court is faced with the dilemma of interpreting the legislative intent of a 1927 federal banking statute in an effort to determine if the "computer banking" at issue in this case would have been considered "branch banking" by the Congress when it passed the McFadden Act more than 50 years ago. As a part of this endeavor, separate State and Federal statutory schemes must be blended together with the hopeful and improbably result that such joint construction will lead to "competitive equality" between banking institutions of both sovereigns. Recognizing from the outset that a perfect solution may not be within the power of the judiciary and may better be left to the legislative branch, and based upon the reasons set forth below, I hold that defendant Marine Midland Bank's activities violate the McFadden Act and must be enjoined.

 PROCEDURAL BACKGROUND

 Plaintiffs, the Independent Bankers Association of New York State, Inc. (IBA-NYS), a non-profit corporation consisting of some 96 member banking institutions, and the Canandaigua National Bank and Trust Company, a federally chartered banking association and a member of IBA-NYS with its home office located in the City of Canandaigua, have brought this action seeking declaratory and injunctive relief against Marine Midland Bank, N.A. (Marine) a federally chartered banking association and Wegman's Food Markets, Inc. (Wegman's), a supermarket chain with numerous outlets including one located in the City of Canandaigua, New York. The complaint alleges that the automated teller machine (ATM) located at the Wegman's Canandaigua store and its utilization by Marine constitutes branch banking in violation of the McFadden Act, 21 U.S.C. Section 36(c) and illegal banking by Wegman's, in violation of New York Banking Law Section 131.1.

 In lieu of answering the complaint, Wegman's moved to dismiss the pendant state claim alleged against it on the ground that subject matter jurisdiction was lacking. This Court denied Wegman's motion and held that a District Court does, under proper circumstances, possess so-called "pendant party" jurisdiction under Article III of the Constitution, and that the facts alleged in the complaint provided a sufficient context to exercise such jurisdiction. Independent Bankers Association of New York State, et al. v. Marine Midland Bank, et al., 575 F. Supp. 1425 (W.D.N.Y. 1983).

 Plaintiffs now move for summary judgment on both the federal and state claims, and Marine has cross-moved for summary judgment.

 FACTS

 All parties concede that the relevant facts are not in dispute. In the summer of 1983 Wegman's installed an ATM in its Canandaigua, New York supermarket. *fn1" Shortly thereafter, Wegman's entered into a contract with Marine to tie the Canandaigua Wegman's ATM into the HarMoney computer network. Customers of a HarMoney member financial institution (of which Marine is one) may, by placing an identification card issued by a member bank into the ATM, make contact with their bank for the purpose of making deposits, withdrawals, balance inquiries or obtaining a cash advance on a credit card account.

 Under this arrangement, Wegman's retains ownership of the ARM and is responsible for loading the machine with cash, and issuing the receipts. Wegman's has no access to the secured container in which deposits are automatically placed and is not responsible for any discrepancies between the amount displayed on the transaction slip and the amount actually deposited.Marine itself is responsible for emptying the deposit container each day. When a customer uses the ATM for a withdrawal, (or a cash advance from a credit card account) the ATM dispenses cash provided by Wegman's, but only after electronic approval has been received (through the computer network) from Marine. Accordingly, the ATM and its owner Wegman's will not dispense funds to a customer in excess of the amount in his Marine bank account.

 Once the transaction is approved by Marine (which occurs while the customer waits), the customer's acccount is debited and Wegman's account is credited in the identical amount. Wegman's account is also credited at that time with a transaction fee paid by Marine for each transaction made by one of its customers through the Wegman's ATM.

 It is against this factual background that the statutory framework must be imposed.

 DISCUSSION

 THE CLAIM AGAINST MARINE

 I.

 In the early 1920's this country experienced increasing tension between banks chartered by the federal government and those chartered by the states. Much of this tension was caused by the proliferation of bank branching at that time by state banking institutions. The concern was that state banks were being granted a competitive advantage under state banking laws to the detriment of the federal banks. In response to this ...


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