Opinion ID: 548444
Heading Depth: 3
Heading Rank: 1

Heading: Legitimate State Interests

Text: 41 Valley cites four legitimate state interests supporting SB 404: regulating banking, increasing ATM deployment, facilitating tourism, and promoting competition. 17 Plus claims that each of these interests is pretextual. 42 States have a legitimate interest in regulating banking. Lewis v. BT Inv. Managers, Inc., 447 U.S. 27, 38, 100 S.Ct. 2009, 2016, 64 L.Ed.2d 702 (1980); Sears, Roebuck & Co. v. Brown, 806 F.2d 399, 409 (2d Cir.1986). The D.C. Circuit has held that in at least one banking context national banks must adhere to state rules: they must obey state branch banking rules in establishing off-premises electronic terminals. Independent Bankers Ass'n v. Smith, 534 F.2d 921 (D.C.Cir.1976). Congress specifically has declined to restrict state regulation in the ATM context. Congress intended the Electronic Fund Transfer Act, 15 U.S.C. Secs. 1693-1693r, 43 to eliminate minute deviations in State EFT [electronic funds transfer] laws and thereby foster the development of national standards, while also permitting the States to enact legislation affording greater consumer protection. While annulling all State EFT laws would produce the benefit of uniform EFT standards in all 50 States, the committee rejected this approach because it would contravene Congress' longstanding policy of deferring to those States which choose to provide more stringent consumer safeguards. 44 S.Rep. No. 915, 95th Cong., 2d Sess. 18, reprinted in 1978 U.S.Code Cong. & Admin.News 9273, 9403, 9420. A bill proposing to preempt state regulation of shared ATMs never reached the floor. See S. 2293, 95th Cong., 1st Sess., 123 Cong.Rec. 37,234-36 (1977). 45 Nevada, like other states, has actively regulated banking within its borders. 18 Its ATM statute is consistent with that approach and promotes a legitimate interest in accord with congressional policy on respecting state banking regulation. 46 The limited legislative history suggests the other purposes for SB 404: enabling Nevada banks to deploy more ATM machines in remote areas of Nevada and at off-premises sites for consumer convenience, 19 to benefit Nevada's gaming and tourism industries through the increased customer convenience, 20 and to promote competition among ATMs. 21 Nevada has sought in other banking regulation as well to expand customer access to banking services, see Nev.Rev.Stat. Sec. 660.025 (1989) (authorizing use of banking service centers), permissible under a state's regulatory power over banking. We have held that Nevada's promotion of tourism is a legitimate state objective under an equal protection analysis. Morris v. Hotel Riviera, Inc., 704 F.2d 1113, 1114 (9th Cir.1983). Nevada has also sought in other legislation to promote competition, Nev.Rev.Stat. Sec. 598A.030 (1989) (Unfair Trade Practice Act), a legitimate state regulatory object, Giboney v. Empire Storage & Ice Co., 336 U.S. 490, 495, 69 S.Ct. 684, 687, 93 L.Ed. 834 (1949). 47 SB 404 advances these legitimate state interests. The increased revenue from the transaction fees will compensate for lower volume at off-premises sites and promote additional deployment of machines. Greater deployment will benefit Nevada residents in the more remote areas of Nevada's geographical expanse and also tourists who want access to cash at all hours of the day. Although the transaction fee will probably result in a higher cost to the consumer per transaction, competition among banks, theoretically at least, will keep the cost down. ATMs from different banks already appear side by side in some casinos. The cost to the consumer of withdrawing money from ATMs, considering the added convenience of more machines, may be lower than other alternatives. That 96% of consumers responding to a Valley-conducted survey were willing to pay the added transaction fee indicates they consider the added convenience worth the added cost. Plus offered no evidence indicating otherwise. 48 Plus charges that the purposes given for SB 404 are pretextual. It claims that the bill was enacted only to permit Valley to escape Plus's no-transaction-fee rule. The burden is on Plus to support its claim. 49 Plus asserts that statements plucked out of the legislative history, showing the legislators' concern that Valley's own customers not have to pay the transaction fee, unveil Nevada's pretext. The relevant statements are from testimony by Jon Joseph, a Valley officer: 50 I also would like to emphasize that there is absolutely no charge at any of our branch locations for our customers or any other customer that belongs to any network.... [A]nyone, whether they're a member of Plus or the Star network out of California or American Express or Discover or any other network, if they come to one of our branches will not pay the charge. 51 Oral Testimony of Jon Joseph, Assembly Commerce Comm., at 2 (June 7, 1989). Referring to Plus's rejection of Valley's study indicating that consumers were willing to pay the transaction fee, Joseph said: 52 The second thing we heard from all these out-of-state banks is that Nevada is different. You can't prove anything by tests in Nevada because people in Nevada aren't typical consumers. Well to that we say bunk. It's their customers in our casinos paying the charge and, you know, maybe we are a little bit different; maybe we have the ability to market this here because our principal industry, gaming, requires cash as its inventory. Without cash in those casinos, you don't have gaming play. And so we feel that we need to have the right to price for this service on an open market basis. 53 Id. at 3. Plus interprets this statement as referring to non-Nevada residents while ignoring its context--Joseph was pointing out that the people responding to Valley's survey were not just Nevada residents. The committee chairman, responding to a committee member's complaint about being charged a foreign fee (not a transaction fee), stated: 54 I did talk to [a Valley officer] earlier and they are willing to submit a letter to the Committee assuring us that they do not plan on charging their customers for the use of these machines. 55 Id. at 4. 56 Although these statements are minor when read in the context of Joseph's much more extensive remarks, they do indicate that Nevada legislators did not want to hurt their own constituents with SB 404. The legislators show less concern for out-of-staters. This predictable concern for Nevada residents does not rebut the evenhandedness of the legislation's plain language. 57 Plus argues also that if Nevada really wanted to encourage more ATM deployment rather than helping banks take the tourists' money, it would have written SB 404 differently. Plus says that SB 404 does not ensure greater ATM deployment because it does not require Nevada banks to spend the transaction fees on ATM deployment. Plus's accusation is true of many statutes intended to make funds available for specific purposes. Plus also argues that the legislature could have required the bank to impose a specific charge on all ATMs or all off-premises ATMs. Even if the statute be not immaculately tailored to the legislature's stated goals, however, poor drafting does not necessarily indicate pretext. Unwise legislation does not constitute a commerce clause violation. CTS Corp., 481 U.S. at 92, 107 S.Ct. at 1651; Exxon Corp., 437 U.S. at 126, 98 S.Ct. at 2214. It is enough that SB 404 is rationally related to Nevada's purposes in enacting it. 58 Finally, Plus claims that a legislative history composed mostly of a Valley officer's testimony shows pretext. That a private entity agrees with the state's legitimate purposes and even provided the impetus for the legislation does not necessarily make the purposes pretextual. Nevada's claimed interests in passing the Act are legitimate and are actually promoted by the Act's terms. The record contains no evidence in support of Plus's allegation that the legislature was pursuing other illicit, underlying interests in passing SB 404.