Ajello v. Hartford Federal Savings & Loan Ass'n

MEMORANDUM ON MOTION TO STAY The instant motion asserts that the matter being investigated by the plaintiff is now being considered by the federal home loan bank board for the purpose of regulation under federal law, that, in so regulating the activity in question, the federal agency has primary jurisdiction over the subject matter, and that therefore this court should defer to such jurisdiction by staying any further action in the premises. The doctrine of primary jurisdiction was developed to guide a court in determining whether it should postpone the exercise of its own jurisdiction *Page 200 until after an administrative agency has ruled on some issue arising in the litigation before the court. "`Primary jurisdiction' . . . applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views."United States v. Western Pac. Ry. Co., 352 U.S. 59,63-64. The traditional justification for the invocation of the doctrine has been the recognized need for harmonizing the functions of administrative agencies and the courts. See Pan American World Airways,Inc. v. United States, 371 U.S. 296; Far East Conference v. United States, 342 U.S. 570, 574. The doctrine was acknowledged as being essential to effective economic regulation when challenges were launched against the interstate commerce commission's rate-setting powers. The Supreme Court realized that "without previous action by the Commission, power might be exerted by courts and juries generally to determine the reasonableness of an established rate . . . [and] it would follow that unless all courts reached an identical conclusion a uniform standard of rates in the future would be impossible." Texas P. Ry. Co. v. Abilene CottonOil Co., 204 U.S. 426, 440. Without application of the doctrine, members of regulated industries would find themselves subject to two masters, one commanding conformity to the regulatory statutes and regulations and the other enforcing the antitrust laws. The doctrine of primary jurisdiction was accordingly developed to secure preliminary rulings by administrative agencies on matters involving regulated trade. *Page 201 As our state Supreme Court recently enunciated, however, the mere existence of a "special regulatory scheme for particular aspects of an industry does not, without more, render the more general provisions of the antitrust laws wholly inapplicable to that industry." Mazzola v. Southern New EnglandTelephone Co., 169 Conn. 344, 350. Consequently, a court in such circumstances "need not stay its hand on an antitrust controversy and await action by the agency involved simply because the defendant in an antitrust suit is subject to regulation by a public administrative body." Ibid. The court in Mazzola pointed to two criteria to be utilized in determining whether the doctrine of primary jurisdiction should be recognized in an antitrust action: (1) Does the administrative agency to which the defendant would refer the matter have the power to exempt certain regulated activities from the applicable antitrust laws? (2) Do specific administrative procedures exist empowering the plaintiff to raise before the agency factual issues of decisive importance to the resolution of the antitrust issues in question? An examination of the federal Home Owners' Loan Act of 1933; 48 Stat. 128; 12 U.S.C. § 1461-1468 (1970); reveals no express or implied power delegated to the home loan bank board to exempt federal savings and loan associations from the more general provisions of the federal antitrust laws. More importantly, the act is devoid of any reference, or hint thereof, to state antitrust laws. It is plain that the home loan bank board, although it supervises the activities of all chartered federal savings and loan associations, is not empowered to determine questions involving alleged violations of state antitrust laws. *Page 202 That the home loan bank board does not function as the exclusive master of all the business of federal savings and loan associations is reflected in the case law. In Beverly Hills Federal Savings Loan Assn. v. Federal Home Loan Bank Board, 371 F. Sup. 306, the court ruled that Congress has not preempted the field of regulating federal savings and loan associations so that the absence of specific regulations does not mean that such conduct is lawful. The court in Larwood Co. v. San Diego Federal Savings Loan Assn., 185 Cal.App.2d 450, held that it was not necessary that a borrower from a federally chartered savings and loan association seek redress through the administrative processes of the federal home loan bank board to determine if a controversy lay within its jurisdiction in order to maintain an action in state court against the association for recovery of alleged usurious interest claimed to have been paid. In Daurelle v. Traders Federal Savings Loan Assn. of Parkersburg, 143 W. Va. 674, it was ruled that the doctrine which requires exhaustion of administrative remedies is inapplicable where no administrative remedy is provided by law. It is that consideration which raises the second major criterion by which to judge the applicability of the doctrine of primary jurisdiction. The Connecticut Supreme Court in Mazzola, supra, 351, concluded that the "rule is that a court should generally refer an antitrust controversy to an appropriate agency in cases where action thereon by that agency will result in a determination of the defendant's liability under the antitrust laws." (Italics supplied.) In that case the public utilities commission had no procedure available to the plaintiff entitling him to have the antitrust issue adjudicated by the agency. Accordingly, the doctrine of primary jurisdiction was held to be inapposite. The court noted that, in the federal cases wherein *Page 203 the doctrine was successfully invoked, the referring courts "attached great significance to the fact that specific procedures existed empowering the plaintiffs to raise before the commission factual issues of decisive importance to the resolution of the antitrust suits in question." Id., 371. For example, the Federal Shipping Act, Interstate Commerce Act, and Civil Aeronautics Act all provide for the filing of complaints against members of the regulated industry. The Home Owners' Loan Act does not so provide. Consequently, as in the Mazzola case, even if the administrative agency were in an advantageous position to determine a decisive factual issue concerning the defendant's antitrust liability, there exists no procedure entitling the plaintiff to have that issue adjudicated. The statute merely provides the board with the discretionary power to investigate alleged violations of pertinent federal regulations governing savings and loan associations.12 U.S.C. § 1464 (d)(2)(A) (1970). the defendant contends that it finds itself "in the anomalous position of being investigated by the Connecticut Attorney General about matters currently being considered by the Federal Home Loan Bank Board." While it is true that the board has proposed certain amendments to already existing regulations governing the retention of attorneys by loan or mortgage applicants, there is absolutely no evidence that the board is considering antitrust violations. In fact, the existing insurance regulation, 12 C.F.R. § 563.35 (1975), prohibits federal savings and loan associations from granting a loan on condition that the borrower contract with a particular attorney for legal services, including title examination, escrow, and abstract services. The proposed amendments would require a home borrower to be advised in writing of his right to select *Page 204 his own legal counsel and would prohibit the lender from charging the borrower with its own legal costs. This court fails to comprehend how those proposals place the defendant in an "anomalous position" for they have no direct relationship to the inquiry being conducted by Connecticut's attorney general into possible violations, past or present, of Connecticut antitrust laws. That the defendant may have violated federal regulations or will be regulated more intensively is irrelevant to the instant investigation. It should be observed that, not only substantively but also procedurally, invocation of the doctrine of primary jurisdiction is inappropriate. No antitrust action has been instituted by the attorney general against any defendant insofar as the instant case is concerned. There are no decisive factual issues to be determined by either the court or an administrative agency; the present litigation involves only the investigatory powers of the state attorney general. If this court were to defer to the federal home loan bank board's primary jurisdiction at this point, it would be in essence asserting that one of the bank board's functions is to perform the investigatory work of state antitrust enforcement officials. The proposition is without support or merit. Accordingly, this court will not postpone the exercise of its own jurisdiction pursuant to the invitation by the defendant that the doctrine of primary jurisdiction be invoked. The motion to stay petition is denied.