Supreme Court Lets Decision Stand Permitting State Review of Mergers

By Gourevitch, David | American Banker, June 10, 1986 | Go to article overview

Supreme Court Lets Decision Stand Permitting State Review of Mergers


Gourevitch, David, American Banker


Supreme Court Lets Decision Stand Permitting State Review of Mergers

WASHINGTON -- The Supreme Court on Monday let stand a lower court ruling allowing a New Jersey state court to review certain national bank mergers.

The justices refused without comment to review a U.S. Third Circuit Court of Appeals decision on the planned merger of the First Fidelity Bancorp., Newark, and the National Bank and Trust Company of Gloucester County, Woodbury, N.J.

Separately, the Supreme Court upheld the Securities and Exchange Commission in a lawsuit involving the Drysdale Government Securities case against a principal who had been charged with fraud in connection with the formation of the now-defunct bond trading firm.

In the New Jersey case, the Third Circuit in February said a state superior court could review national bank mergers in cases where the transaction has at least some of the legal attributes of an acquisition.

The case hinged on a New Jersey law banning bank acquisitions in which the surviving institution would hold more than 20% of the state's commercial bank deposits. The statute also contained an exception for banks that combined in mergers, as opposed to acquisitions.

Citing the law, five New Jersey banks sued in May 1985 to block the merger of First Fidelity and National Bank and Trust. The suit contended the the two banks combined would hold more than the state-mandated ceiling on deposits.

In July 1985, U.S. District Court Judge Maryanne Trump Barry said that neither state law nor state agencies have authority to review national bank mergers, and she dismissed the suit. On appeal, the Third Circuit reversed Judge Barry's decision and sent the case back to state court.

In its ruling, the appeals court indicated that New Jersey banking regulators retained some degree of jurisdiction over the merger, according to a brief by state Assistant Attorney General James Ciancia.

While the case was pending before the Third Circuit, the Comptroller of the Currency approved the merger. …

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Supreme Court Lets Decision Stand Permitting State Review of Mergers
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