Opinion ID: 751919
Heading Depth: 3
Heading Rank: 3

Heading: Federal Reserve Bank v. Commissioner of Corps.

Text: 44 & Taxation 45 Federal Reserve Bank involved a declaratory judgment action brought in federal court by the Federal Reserve Bank of Boston, which sought to avoid Massachusetts sales tax on materials used to construct its new building. The First Circuit's decision allowed the bank to contest the tax in federal court without the United States as co-plaintiff. The court began by accepting the bank's status as a federal instrumentality, framing the case in terms of what it deemed the proper issue: 46 [T]he 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 [the bank] differently from instrumentalities [not eligible for an exemption from the TIA] like savings and loan associations.... Is [the bank] privileged, like the United States itself, to maintain this proceeding? 47 Federal Reserve Bank, 499 F.2d at 62. The First Circuit noted that in answering the question of whether an entity could use the instrumentality exception without the participation of the government, we must accept the absence of any bright line to facilitate analysis; each instrumentality must be examined in light of its governmental role and the wishes of Congress as expressed in relevant legislation. Id. at 64. 48 The court decided that the bank was a federal instrumentality eligible for the Department of Employment exception, citing several factors in favor of its conclusion. First, the court noted that the bank performed significant governmental functions, serving primarily as a fiscal arm[ ] of the federal government, and thus a state tax affecting the bank would call[ ] directly into question the sovereign interest of the United States. Id. at 62, 63. Second, the bank had the benefit of a special jurisdictional statute giving it access to the federal courts; the court stated that [s]uch a clearly expressed strong federal interest in litigating all reserve bank business in the federal courts further tips the scale away from the general hostility to interfering with [state taxation]. Id. at 63. Third, the bank occupied a special place in the governmental structure outside the executive chain of command, id., which militated against forcing the bank to acquire the Attorney General's approval before going to court. Thus, the court concluded, the bank could proceed in a federal forum under the same exception ... available to the United States were it a named plaintiff. Id. at 64. 49 4. Are the Judges Eligible for the Exception? 50 We conclude that the defendants' situation more closely resembles that of the Native American tribes in Moe and the bank in Federal Reserve Bank than the PCAs in Farm Credit Services. The Farm Credit Services Court was concerned that PCAs are basically commercial lenders, whose interests are not coterminous with those of the Government any more than most commercial interests. Farm Credit Servs., 520 U.S. at ----, 117 S.Ct. at 1782. In contrast, the Federal Reserve Bank court concluded that 51 [w]hile savings and loan associations may ... be analogized to private corporations, federal reserve banks, ... are plainly and predominantly fiscal arms of the federal government. Their interests seem indistinguishable from those of the sovereign.... 52 Federal Reserve Bank, 499 F.2d at 62. Likewise, the Moe Court assumed that the Native American tribes at issue in that case had interests closely aligned with those of the United States, at least as far as taxation was concerned. See Moe, 425 U.S. at 471, 473-74, 96 S.Ct. at 1640, 1641-42. 53 As one of the three branches of the federal government, the federal judiciary's interests are congruent with, if not identical to, those of the United States. We held in our prior en banc opinion that [w]hen performing federal judicial duties, a federal judge performs the functions of government itself, and cannot realistically be viewed as a separate entity from the federal court. Acker, 92 F.3d at 1572 (internal quotation and citation omitted). In interpreting the statute regarding the duties of the Attorney General, the Supreme Court rejected the argument that cases in which the United States is interested are solely those cases in which the interests of the executive branch are at stake. United States v. Providence Journal Co., 485 U.S. 693, 701, 108 S.Ct. 1502, 1507-08 (1988). The Court stated: It seems to be elementary ... that the three branches are but co-ordinate parts of one government.... [W]e shall not assume that [Congress] intended ... to exclude the judicial branch when it referred to the 'interest of the United States.'  Id. (internal quotation and citation omitted). 54 Another factor present in this case as well as in Moe and Federal Reserve Bank, but notably absent from Farm Credit Services, is the existence of a special jurisdictional statute. 10 Both Moe and Federal Reserve Bank concluded that special jurisdictional statutes, without more, were insufficient to override the TIA, but were evidence of congressional intent that the entities in question be allowed to stand in the place of the United States in federal court. While we have refused to read § 1442 as a blanket exemption to the TIA, we likewise find in the statute a congressional intent that federal officers' access to the federal courts [will] be at least in some respects as broad as that of the United States. Moe, 425 U.S. at 473, 96 S.Ct. at 1641. As Congress recently noted, [section 1442] fulfills Congress' intent that questions concerning the exercise of Federal authority, the scope of Federal immunity and Federal-State conflicts be adjudicated in Federal court. S.REP. NO. 104-366 at 31 (1996), reprinted in 1996 U.S.C.C.A.N. 4202, 4210. The United States can only act through its agents and officers; when those officers remove a case to federal court under § 1442 they are in effect appearing in court for the United States. The case before us directly implicates the congressional concerns addressed by § 1442, and [s]uch a clearly expressed strong federal interest in litigating [such cases] in the federal courts further tips the scale away from the general hostility to interfering with a state taxing scheme. Federal Reserve Bank, 499 F.2d at 63. 55 Finally, important structural concerns militate against us requiring the defendants to acquire the support of the United States in this case. Much like the federal reserve banks, the federal judiciary operates outside of the executive chain of command, Id. There are good reasons not to insist that the federal judiciary acquire the support of the Attorney General in order to assert Supremacy Clause immunity, not the least of which is the ever-present possibility of conflict between the executive and judicial branches. The federal instrumentality exception represents a judicial finding of Congress' implied intent in enacting the TIA; refusing to apply the exception in this case would be equivalent to a finding that Congress intended to put the judicial branch at the mercy of the executive. 56 Like the Native American tribes in Moe and the bank in Federal Reserve Bank, the defendants in this case have interests closely aligned with those of the United States, enjoy the benefits of a jurisdictional statute giving them special access to the federal courts, and occupy a place in the structure of our government that justifies allowing them to assert their tax immunity in federal court without first going hat-in-hand to the Attorney General. Having examined this case in light of [the judges'] governmental role and the wishes of Congress as expressed in relevant legislation, Federal Reserve Bank, 499 F.2d at 64, we hold that Judges Acker and Clemon are eligible for the Department of Employment exception, and therefore, that the district court had jurisdiction to hear the case.