Hempstead Bank v. Smith

Under New York state law, a branch bank could be authorized if it was found, after inquiry, that the public convenience would be promoted by opening a branch bank. In other words, a branch bank could not be established in New York State unless the regulatory authority made a finding that the community would not be adversely affected and that the public would be better served. In 1974, Chase Manhattan Bank (Chase) (defendant) sought to establish a branch bank in Locust Valley. The Locust Valley area had a population of about 10,000, with little room for further residential development. The average annual income of the area was about $20,000. Chase applied to the United States Comptroller of the Currency, James Smith (defendant) for approval to establish a branch bank in Locust Valley. Hempstead Bank (Hempstead) (plaintiff) and Nassau Trust Company filed protests with the comptroller. Hempstead argued that projected population growth was minimal, so the community was already sufficiently serviced by the existing banks in Locust Valley. Hempstead also noted that deposits and loans had remained flat or declined over the last several years. Nevertheless, the comptroller approved Chase’s application on the unanimous recommendation of several parties with little in-depth investigation into the economic effect of opening a new branch bank in the area. The comptroller found that the Chase branch would add competition to the area, the branch would extend Chase’s service area, and the area was sufficiently affluent based on average income to support the new Chase branch without adversely affecting conditions in the area. The comptroller approved Chase’s application for a new branch. Subsequently, Hempstead sued the comptroller and Chase, seeking that the comptroller’s approval be declared null and void. The district court granted summary judgment in favor of the comptroller. Hempstead appealed.