Before proceeding to the merits, the Court addresses the motion of the Richmond Bank to dismiss for lack of personal jurisdiction. Fed.R.Civ.P. 12(b) (2). The Bank argues that it is in effect a foreign banking corporation with only minimal contacts with the District of Columbia and that its allegedly illegal acts have no nexus with the District. As authority, the Bank relies on the District of Columbia Long-Arm Statute,
which confers jurisdiction upon this Court over persons outside the District of Columbia when they have transacted business within it.
The Court, however, is not confined by the jurisdictional limits of the Long-Arm Statute. In concluding as it does on the merits that the Richmond Bank is an agency of the United States for purposes of the Service Contract Act, the Court has jurisdiction over the Bank as a federal agency located within the District of Columbia. The Richmond Bank's federal reserve district encompasses the District, and the Bank provides regular currency, coin, and check collection services for its member commercial banks located here. In discharging those responsibilities, the Bank's agents and employees are constantly within the District. Nor does the Court's exercise of jurisdiction over the Bank offend traditional notions of fair play and substantial justice. International Shoe v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945). And, as the Supreme Court observed, a court in considering whether a corporation's contacts are sufficient for jurisdiction should consider an "estimate of the inconveniences" to it of a trial away from home. Id. at 317, 66 S. Ct. 154. Defending in this jurisdiction cannot unduly inconvenience the Bank located in Richmond, Virginia, a distance slightly in excess of 100 miles from Washington, D.C. The notion that the Bank is neither found nor does business here is untenable.
At the outset, the Court notes the long-standing relationship between the Federal Reserve Banks and the federal government and its economy. The Reserve Banks are corporate instrumentalities of the federal government established by the Federal Reserve Act of 1913, 12 U.S.C. § 221 Et seq. They assist the Federal Reserve Board in regulating the nation's banking system and are operated in furtherance of the nation's fiscal policy.
Unlike private commercial banks, the Reserve Banks do not provide general checking, savings, or lending services to the public. They also differ from private banks in working for the public interest rather than private profit and in ownership. Federal Reserve Banks are directly owned by their member banks which purchase and hold, as a requirement of membership, a given amount of stock in the Banks. Annual dividends are set by law at a stated percent of the Federal Reserve Bank's paid in capital stock, with excess earnings going to the United States Treasury. The Reserve Banks hold the legal reserves of member banks, issue currency, facilitate check clearance and collection, and supervise member banks.
In concluding that the Service Contract Act applies to the Richmond Bank, the Court relies on 1) previous judicial precedents which have found the Federal Reserve Banks to be federal agencies or instrumentalities; 2) an opinion issued by the Attorney General on September 26, 1978, concluding that the Reserve Banks are covered by the Act; and 3) the general remedial nature and purposes of the Act.
There is ample judicial authority for treating the Banks as governmental entities with regard to their governmental functions. The Banks themselves have resorted to the courts to assert their governmental character when it has been in their interest to do so. In Federal Reserve Bank of Boston v. Commissioner of C. & T., 499 F.2d 60 (1st Cir. 1974), After remand, 520 F.2d 221 (1st Cir. 1975), the Boston Reserve Bank sought and was granted relief from a state sales tax on materials used in construction of the Boston Federal Bank building under 12 U.S.C. § 531, which exempts the Reserve Banks from federal, state, and local taxes except for those on real estate. In seeking relief, the Boston Bank had emphasized the public purposes (reduction of the bonded indebtedness of the United States) served by the revenues generated from its renting excess space in the Bank building to private persons. In holding that the Bank should not pay the state tax, the First Circuit stated:
the present case does not turn on whether federal reserve banks are instrumentalities. Plainly they are. The question is whether there is any reason to treat them differently from instrumentalities like savings and loan associations.