Appeal from the Circuit Court of the 14th Judicial Circuit Whiteside County, Illinois, No. 93-L-28, Honorable Dan A. Dunagan, Judge, Presiding.
M. Todd Melton (argued), of Ludens, Potter Burch, of Morrison, for appellant.
Bernard J. Natale (argued), of Rockford, for appellees.
Paul D. Young took out two promissory notes with Smith Trust and Savings Bank; his parents, Lauren and M. Jeanette Young (Youngs) co-signed the notes. When Paul and his wife (children) failed to repay the notes, the bank filed a complaint in state court. The children subsequently filed for bankruptcy and removed the bank's complaint to the bankruptcy court. The bankruptcy court remanded the cause of action against the Youngs to state court since it was not part of the "core" bankruptcy proceedings. The bank then consented to the dismissal of its claims against the children, but pursued its claim against the Youngs as co-signers. The Youngs filed a motion to dismiss in state court, claiming that the order dismissing the bank's complaint against the children wasres judicata. The trial court granted the motion, and the bank appeals. We affirm.
Charles W. Brown, Jr. and Paul Young owned Erie Ag Service, a business partnership. The business was financed with individual lines of credit taken out by each partner at the bank; Paul's notes were co-signed by his parents. In 1989, Erie Ag Service filed for bankruptcy reorganization, and the court approved a reorganization plan. After the plan failed, creditors were allowed to pursue their claims in state court.
Peoples Bank filed a complaint based on the promissory notes, and confessions of judgment were taken against both partners in the business. The children and the Youngs opened the judgment and filed affirmative defenses.
The bank filed for foreclosure on Brown's property and attempted to join the children and the Youngs in the proceedings. However, the children and the Youngs refused to participate and filed a motion to dismiss, which was granted. The trial court later directed that the foreclosure proceeds be applied to Brown's debt since no other parties were involved in the case. The bank later filed a motion to bar the children and the Youngs from asserting any affirmative defenses in this case due to their refusal to participate in the foreclosure proceedings. The trial court denied the motion.
Later, the children filed for personal bankruptcy under Chapter 11 and requested that the bank's complaint against them and the Youngs be removed to the United States bankruptcy court. The bankruptcy court remanded the case against the Youngs to state court under the doctrines of mandatory and discretionary abstention because it lacked jurisdiction over "non-core" proceedings. The bank then consented to the dismissal of its case in the bankruptcy court, instead choosing to pursue its complaint solely against the Youngs in state court. It is undisputed that, under Federal Rule 41(b) (Fed.R.Civ.P. 41(b)), the order of dismissal acts as a judgment on the merits as to the bank's claims in the bankruptcy court.
The Youngs filed a motion to dismiss the state court action, alleging that the dismissal of the children by the bankruptcy court constituted res judicata. The trial court granted the motion. The bank's motion to reconsider was denied. We affirm.
This appeal presents us with the narrow issue of whether the dismissal of a cause of action on the merits by a bankruptcy court precludes the pursuit of the same cause in state court against an accommodation maker that was not a party to the bankruptcy action. Because a motion to dismiss presents a question of law, we review the trial court's ruling de novo. See Lucas v. Lakin, 175 Ill.2d 166, 171, 676 N.E.2d 637, 640 (1997).
The bank argues that its complaint against the Youngs is not barred by res judicata because the limited scope of the bankruptcy court's jurisdiction does not reach non-core proceedings.
To support a finding of res judicata, there must be: (1) a final judgment on the merits by a court of competent jurisdiction; (2) identity of the causes of action; and (3) identity of the parties or their privies. See River Park v. City of Highland Park, 184 Ill.2d 290, 302, 703 N.E.2d 883, [ 702 Ill.2d 883] 889 (1998). The issue presented to us involves only one element ofres judicata: whether the bankruptcy court was a "court of competent jurisdiction."
It is well-established that bankruptcy courts do not possess the same powers as Article III courts. In Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 87, 73 L.Ed.2d 598, 625, 102 S.Ct. 2858, ___ (1982), the United States Supreme Court held that the Bankruptcy Reform Act of 1978 was unconstitutional because it gave Article III powers to bankruptcy courts. Following this decision, Congress passed the Bankruptcy Amendments and Federal Judgeship Act of 1984, which gave federal district courts jurisdiction over bankruptcy matters. Pursuant to this act, district courts may refer cases "`arising under title 11 or arising in or related to a case under title 11'" to bankruptcy courts in that district. Sarno v. Thermen, 239 Ill. App.3d 1034, 1045, 608 N.E.2d 11, 19 (1992) (quoting 28 U.S.C. § 157(a) (1988)). However, this delegation of power is not unlimited; only certain types of cases can be finally decided by bankruptcy courts. "`[B]ankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11, * * *, and may enter appropriate orders and judgments * * *.'" CoreStates Bank, N.A. v. Huls America, Inc., 176 F.3d 187, 195 (3rd Cir. 1999) (quoting 28 U.S.C. § 157(b)(1) (1988)). A "core" proceeding affects the ultimate distribution of the assets of the debtor and either: (1) involves a substantive right granted by title 11 or (2) could only occur in the context of a bankruptcy. Sarno, 239 Ill. App.3d at 1046, 608 N.E.2d at 19; CoreStates, 176 F.3d at 195.
Bankruptcy judges may also hear "non-core" proceedings that are "`otherwise related to a case under title 11.'" Sarno, 239 Ill. App.3d at 1046, 608 N.E.2d at 19 (quoting 28 U.S.C. § 157(c)(1) (1988)). A "non-core" proceeding is one which could have been brought in a federal or state trial court if a bankruptcy petition had not been filed. Sarno, 239 Ill. App.3d at 1046, 608 N.E.2d at 19. However, when hearing non-core cases bankruptcy courts may not enter final judgments; they may only offer proposed findings of fact and recommendations of law to federal district court judges. CoreStates, 176 F.3d at 196. Because bankruptcy courts' non-core decisions lack finality, actions involving claims that could have been raised as non-core issues in bankruptcy proceedings are not barred by res judicata. See Sarno, 239 Ill. App.3d at 1046, 608 N.E.2d at 19; Barnett v. Stern, 909 F.2d 973, 979 (7th Cir. 1990).
The bank relies on Sarno to argue that the dismissal of its bankruptcy complaint against the children is not res judicata as to any state claim. It contends that since the bankruptcy court abstained from taking jurisdiction over the Youngs as a non-core proceeding, the state court may hear the bank's case against them without res judicata implications. See Sarno, 239 Ill. App.3d at 1046, 608 N.E.2d at 19.
In Sarno, a corporation and one of its shareholders filed a state law conspiracy claim alleging that the corporation's creditors had filed a frivolous involuntary bankruptcy petition. Even though the shareholder's claim addressed the same wrongful filing, the appellate court found that it was not barred by res judicata because the claim would not have been a core proceeding in the bankruptcy court since it concerned allegations of conspiracy arising under state law. Sarno, 239 Ill. App.3d at 1047, 608 N.E.2d at 20. Furthermore, the damages sought by the corporation and by the shareholder represented two distinctly different types of injuries. Sarno, 239 Ill. App.3d at 1048, 608 N.E.2d at 20.
In this case, the bank filed the same complaint and sought the same damages against both the children and the Youngs. The bankruptcy court dismissed the complaint against the children because the bank chose not to prosecute it. Pursuant to Federal Rule 41(b) (Fed.R.Civ.P. 41(b)), this resulted in a judgment on the merits of the issue of whether the debt was owed. In Sarno, the claims against the creditors had not been asserted in the bankruptcy court. In this case, the only claim (a simple debt collection on the notes) was pursued in the bankruptcy court against the children and in state court against the Youngs as co-singers. Under these circumstances, Sarno is distinguishable.
The common law doctrine of res judicata is vital to our system of justice because it provides for the finality of rulings by barring the relitigation of claims or defenses that had been or could have been brought in a prior case. In re National Industrial Chemical Co., 237 B.R. 437, 441 (Bankr.N.D.Ill. July 13, 1999). It encompasses both the concepts of claim preclusion and issue preclusion, although the latter is often referred to as collateral estoppel. Osborne v. Kelly, 207 Ill. App.3d 488, 490-91, 565 N.E.2d 1340, 1342 (1991). It is based in public policy considerations of fairness, finality, and judicial efficiency. Osborne, 207 Ill. App.3d at 491, 565 N.E.2d at 1342. In res judicata, any issues that were raised, or could have been raised, in the prior proceeding are barred; thus, it precludes the plaintiff's entire cause of action. See Bennett v. Gordon, 282 Ill. App.3d 378, 382, 668 N.E.2d 109, 112 (1996). Collateral estoppel bars only those issues that have actually been litigated.Osborne, 207 Ill. App.3d at 491, 565 N.E.2d at 1342. For purposes of our analysis, the concepts underlying both of these doctrines are applicable.
The Youngs urge this court to adopt a simple application ofres judicata to the facts of this case. However, the limited jurisdiction of bankruptcy courts precludes such an analysis. This case presents the question of whether a bankruptcy court can do indirectly what it lacks jurisdiction to do directly, that is, cut off the liability of an accommodation maker.
The United States Supreme Court in Myers v. International Trust Co., 263 U.S. 64, 72-73, 68 L.Ed. 165, 169, 44 S.Ct. 86, 88 (1923), applied the principles of res judicata to decisions of a court of limited jurisdiction. The Court held that a bankruptcy court's determination that the debtor's statements were not false precluded the relitigation of this issue in another court, despite the bankruptcy court's limited jurisdiction. In that case, the lender-bank had brought a deceit action in state court, alleging by that the defendant-debtor had made false statements on loan documents. In its holding, the Court found that the bank's state court allegations were the same as its claims opposing confirmation of a bankruptcy petition for composition. In the instant case, the bank also filed the same cause of action in both its state and bankruptcy court complaints.
Similarly, in Edgar v. United States, 171 F. Supp. 243, 246 (Ct. Cl. 1959), the court found that differences in the relief sought by a plaintiff who had filed a complaint in the federal district court seeking mandamus and in the court of claims seeking monetary damages did not preclude the application of res judicata when the issues presented in both complaints were identical. The court reasoned that "although the [federal district court] is one of limited jurisdiction, if it has authority to determine the issue within the scope of its jurisdiction, all other courts are estopped from subsequently relitigating the same issue. The nature of the relief sought in the first action never controls the application of the rule of estoppel by judgment." Edgar, 171 F. Supp. at 247-48.
In the instant case, it is undisputed that the bankruptcy court had the authority to render a final judgment on the bank's complaint. The issue and relief sought in both cases were the same. Although the bankruptcy court's jurisdiction was limited, it had the power to decide the issue and the request for relief presented to it. See Edgar, 171 F. Supp. at 247-48. Since the bankruptcy court was a "court of competent jurisdiction," the elements of res judicata have been established. The judgment of the bankruptcy court precludes the action in the state court.
We recognize that this is a very harsh result. The bank has never had an opportunity to fully litigate the merits of its claim on the notes. Yet, we can find no other answer to this conundrum. The effect of the Rule 41(b) (Fed.R.Civ.P. 41(b)) dismissal bars the bank's state law claim against the Youngs.
Since the bank's complaint against the Youngs was properly dismissed by the trial court, we need not address the other issue argued by the parties.
SLATER, P.J., and HOLDRIDGE, J., concur.


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Author: Successor Corporate Liability in Products Liability Cases, “Effective Assistance of Counsel,” Criminal Procedure Overview, 61 Denver Law Journal 303, 1984.
Standing Member, Criminal Justice Panel, District of Colorado, Appointed by Chief Judge Matsch, January, 1996.
Hale v. Morris, 725 P P.2d 26 ) Colo.App., Mar 27, 1986 (NO. 84CA0276); U.S. v. Jackson, 248 F.3d 1028, 2001 DJCAR 2210 (10th Cir.(Colo.), Apr 30, 2001) (NO.99-1475); U.S. v. Bustillos-Munoz, 235 F.3d 505, 2001 CJ C.A.R. 164 (10th Cir.(Colo.), Dec 15, 2000); U.S. v. Young, 45 F.3d 1405 (10th Cir.(Colo.), Jan 19, 1995) (NO. 93-1343); Merrit v. Hawk, 153, F.Supp.2d 1216 (D.Colo., Jun 29, 2001) (NO.CIV.A.95-Z-2653); U.S. v. Perez, 902 F.Supp. 1318 (D.Colo., Oct 12, 1995) (NO.CIC.A. 95-CR-19-S); U.S. v. Reece, 797 F.Supp.843 (D.Colo., Jun 24, 1992) (NO.CRIM. A. 91-CR-276).

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While the Acquisition Policy Statement is not as burdensome to PEFs as would have been the case under the Proposed Guidelines,3 as discussed in our prior Memorandum of July 15, 2009,4 it nonetheless imposes burdens on PEFs that will not apply to other investors in banks or thrifts. Accordingly, PEFs should give substantial consideration to structuring an acquisition in a manner that avoids application of the Acquisition Policy Statement. It appears to be possible to avoid application of the policy if a private capital investor partners with an established bank or thrift that has (i) a “strong majority” interest” in the acquisition transaction, and (ii) a “successful history” operating insured depository institutions (which we shall term the “Experienced Partner Exemption”). It will be desirable to consult early in acquisition planning with the FDIC and other bank regulators to determine whether the private capital investor will be able to benefit from the Experienced Partner Exemption.
The Acquisition Policy Statement was adopted against a background of increasing numbers of banks failures eroding the FDIC’s Deposit Insurance Fund (“DIF”). As of August 31, 84 banks have failed this year. The DIF has shrunk by 75% from its level in January 2009. In addition, the FDIC is about to collect a special assessment from banks to replenish the DIF, and is already discussing the need for a second special assessment. Thus, on the one hand, the regulators would clearly like to bring new capital into the banking industry; on the other hand, it appears that new capital will not be treated equally with old capital.
Chairman Bair noted that PEF buyers lacked “a buyer’s balance sheet” and suggested that their opacity could put the FDIC at significant risk, especially in light of FDIC loss-sharing arrangements with certain buyers.7 She also asserted that PEFs were notorious for a short-term mindset with respect to their investments, and that such an approach might have an adverse long-term impact on the prospects of the target institution and the banking industry generally. In any event, the general view expressed by those voting in favor of the Acquisition Policy Statement was that the FDIC had struck a proper balance among competing public interests.
(b) applicants for insurance in the case of de novo charters issued in connection with the resolution of failed insured depository institutions (hereinafter “Investors”). This covers investors in a company acquired to facilitate bidding and, of course, applies to investors in firms using a shelf charter to acquire liabilities of a failed bank or thrift.
Despite comments requesting greater precision in the definition of “private capital investor,” the FDIC left the definition vague, giving the agency greater scope of authority to determine the definition by interpretation. The Acquisition Policy Statement indicates that, “the requirements it imposes on investors only apply to investors that agree to its terms,” which would seem to suggest that in practice the application of the Acquisition Policy Statement will be open to discussion on a case-by-case basis with potential investors. Nevertheless, the FDIC may have the view that any “private capital investor” that voluntarily bids on a failed bank or thrift after adoption of the Acquisition Policy Statement is implicitly agreeing to be bound by the terms of the policy.
The Acquisition Policy Statement would not apply to new investors partnering with existing banks or thrifts that have a “strong majority interest” in the acquired bank or thrift and a history of successful operation. The regulatory concern embodied in the Acquisition Policy Statement is clearly with new entrants to the banking industry. Indeed, the Vice Chairman of the FDIC expressly suggested that PEFs should partner with existing banks and thrifts, and the Acquisition Policy Statement expressly states that “[s]uch partnerships are strongly encouraged.” However, the Acquisition Policy Statement is ambiguous as to whether, for instance, a PEF minority investment paired with an existing investor that had a 51% majority interest would be subject to the Acquisition Policy Statement.
One also has to ask whether a “private capital investor” in a bank that acquires a failed bank would be caught up in the Acquisition Policy Statement literally as a “private investor in a company proposing to assume liabilities” of a failed bank or whether that investor is exempt as being deemed to have partnered with the bank in which it has invested. It is conceivable that the answer might even turn on whether the acquiring bank in which the investor took a direct interest has an established record for successful operation or has itself had problems.
In order to exclude de minimis investments from its scope, the Acquisition Policy Statement, by its terms, does not apply to investors with five percent or less of the total “voting power” of the acquired bank or thrift or holding company provided there is no evidence of concerted action. That said, the Acquisition Policy Statement does not set forth what constitutes evidence of concerted action, and leaves uncertainty as to whether the mere existence of an organizer who solicits several less-than-five percent investors would be sufficient to give rise to “concerted action” and loss of the de minimis exemption.
An acquirer subject to the Acquisition Policy Statement may apply, after seven years, to be released from the requirements of the policy if the bank it has acquired has continuously maintained a CAMELS 1 or 2 rating.9 It would seem unlikely, however, that the successor to a failed bank or thrift would on the acquisition date be awarded the highest ratings immediately (and then could sustain that rating for seven years).10 In a more likely scenario, it would take some time for the acquired bank to achieve the rating, meaning that the Acquisition Policy Statement could apply to an acquisition for materially longer than seven years after the acquisition date.
The Proposed Guidelines would have imposed eight basic requirements on a PEF buying a failed bank, including the source of strength commitment to maintain the bank’s capital levels.11 These requirements would likely have very materially discouraged investment by PEFs into the banking system. Three aspects of the Proposed Guidelines received the greatest attention from commenters: the heightened capital requirement, the source of strength commitment, and the cross-guarantee provision. These three requirements have been moderated somewhat in the Acquisition Policy Statement, primarily due to the reasons outlined below.
The Proposed Guidelines included a requirement that a failed bank acquired by a PEF maintain a 15% Tier 1 leverage ratio.12 That would have been triple the high-end range for well-capitalized banks and double the industry average. It would have put such a bank at a competitive disadvantage, reduced returns, and, some argue, encouraged risk-taking.
The Proposed Guidelines would have required a “private capital investor” to serve as a source of financial and managerial strength to the acquired bank and to require holding companies in which a “private capital investor” had invested to sell equity or issue debt that qualified as capital. This vague requirement could have imposed unlimited liability on a “private capital investor” and made it difficult for it to raise funds. It is instructive to note that a PEF’s organizational documents often limit the extent to which the PEF may provide capital support or make follow-on investments in its portfolio companies – thus it often would not have been possible for the PEF to comply with any source of strength requirement. The source of strength commitment has been eliminated from the Acquisition Policy Statement.
The Proposed Guidelines also would have required a PEF that has majority interests in more than one bank or thrift to pledge to the FDIC its interest in each bank or thrift to guarantee the FDIC against loss caused by the failure of any such bank or thrift. This would have imposed a risk that most PEF investors would have declined to accept. The cross-guarantee provision has been reduced in scope to a cross-support provision, as described in Section IV.C below.
As indicated, the Acquisition Policy Statement drops the source of strength commitment.
Extensions of credit18 by the bank to its investors and to “affiliates”19 of those investors would be prohibited.20 “Private capital investors” must regularly report to the bank the identity of all such affiliates to enable the bank or thrift to identify those affiliates and avoid extensions of credit to them.
The Acquisition Policy Statement indicates that the FDIC would not approve ownership structures in which a “private capital investor” (or its sponsor) establishes multiple investment vehicles funded and apparently controlled by the “private capital investors” (or their sponsors) to acquire a bank or thrift. Apparently, the FDIC considers such structures to be evasions of bank holding company laws and regulations and is concerned that they separate ownership from control.
Generally, “private capital investors” from “secrecy law jurisdictions” are not permitted to bid for a failed bank. A “secrecy law jurisdiction” is one that, inter alia, precludes U.S. bank regulators (i) from garnering sufficient information to ensure compliance with U.S. laws or (ii) from obtaining information on the competence, experience, and financial condition of the investors and related parties.21 A country that permits off shore entities to operate shell companies would also be considered a “secrecy law jurisdiction.” This could affect a PEF with a large base of non-U.S. investors. An exception is provided for the case of an investor from a secrecy law jurisdiction that is a subsidiary of a company that is subject to comprehensive consolidated supervision recognized by the Federal Reserve Board that consents to a number of promises of cooperation.
Ownership in the failed bank must be maintained for three years, as in the Proposed Guidelines. A new exception in the Acquisition Policy Statement permits the “private capital investor” to sell its interest in the acquired institution before the end of the three year commitment period where the “private capital investor” is a mutual fund.22 The three year requirement would seem to bar acquiring a failed bank, turning it around, and taking it public to raise capital within three years.
“Private capital investors,” and their investors as well, would be required to disclose information to the FDIC as the FDIC deems necessary. Such information would include information about the size of the capital funds, diversification, return profile, marketing documents, management team, and business model. Such disclosures would remain confidential.
1 See Final Statement of Policy on Qualifications for Failed Bank Acquisitions, available at http://www.fdic.gov/news/board/Aug26no2.pdf. The Acquisition Policy Statement was approved on August 26, 2009.
2 Ordinarily, when a bank fails, the FDIC tries to sell its assets and deposit liabilities – these transactions are generally referred to as “Purchase and Assumption,” or “P & A” transactions by the FDIC. See, e.g., Purchase and Assumption Agreement, Whole Bank, Among FDIC, Receiver of Washington Mutual Bank, Henderson, NV, FDIC, and JPMorgan Chase Bank, N.A. (September 25, 2009), available at http://www.fdic.gov/about/freedom/Washington_Mutual_P_and_A.pdf. To acquire deposit liabilities, a buyer needs to have a bank or thrift charter authorizing it to take deposits. For those deposits to be insured by the FDIC, the buyer either must be itself a bank or thrift with FDIC insurance or it must apply to the FDIC for deposit insurance. If a parent company will “control” the bank or thrift taking the deposits, the controlling company must receive prior approval from the Board of Governors of the Federal Reserve System (as to a bank) or the Office of Thrift Supervision (as to a thrift). Any non-company (such as an individual) acquiring “control” of a bank or thrift requires the prior approval of the primary federal regulator of the bank or thrift.
3 See Proposed Statement of Policy on Qualifications for Failed Bank Acquisitions 74 Fed. Reg. 32932 (July 9, 2009); FDIC Board Approves Proposed Policy Statement on Qualifications for Failed Bank Acquisitions, PR-112-2009 (July 2, 2009), available at http://www.fdic.gov/news/news/press/2009/pr09112.html.
4 Our previous Memorandum on Private Equity Investments in Troubled Banks is available at http://www.cadwalader.com/assets/client_friend/071409PEInvestmentsInTroubledBanks.pdf.
5 The Director of OTS, along with the Comptroller of the Currency, who directs the Office of the Comptroller of the Currency (“OCC”), sit on the Board of Directors of the FDIC alongside the FDIC Chairman, FDIC Vice Chairman, and FDIC Director. See generally, 12 U.S.C. § 1812(a).
See also Section IV.H of this memorandum as to whether certain other aspects of the Acquisition Policy Statement might be in conflict with existing FDIC policy.
7 Loss sharing is a means for the FDIC essentially to delay payment of the “sweetener” that induces an acquiring institution to take over the failed institution. Loss sharing has been structured variously as: (i) a “put” option permitting the acquirer to return riskier assets to the FDIC within a specified timeframe; and (ii) arrangements whereby the FDIC absorbs a portion of losses on specified pools of assets. See generally Managing the Crisis: The FDIC and RTC Experience Ch. 7 (FDIC 1997), available at http://www.fdic.gov/bank/historical/managing/history1-07.pdf.
9 CAMELS ratings are the confidential composite ratings given by regulators to a bank after they have examined the bank’s capital, asset quality, management, earnings, liquidity, and sensitivity to market risk, on a 1 to 5 scale, 1 being highest.
10 See our comment in footnote 13 below regarding the extent to which de novo banks are subject to more frequent examination than seasoned banks and required to maintain heightened capital levels.
11 These eight requirements are discussed in greater detail in our earlier memo on Private Equity Investments in Troubled Banks. See supra note 4.
12 A leverage ratio requires an amount to be held as a simple flat percentage of a bank’s total assets, whereas the common equity ratio is a percentage of risk-based assets. Requiring a high leverage ratio effectively penalizes banks holding large amounts of relatively riskless liquid assets, such as cash or Treasuries.
13 The FDIC has recently issued new guidance that extends from three years to seven years the “de novo period” during which a newly chartered banking institution must maintain heightened capital levels. See Enhanced Supervisory Procedures for Newly Insured FDIC- Supervised Institutions FIL-50-2009 (August 28, 2009), available at http://www.fdic.gov/news/news/financial/2009/fil09050.html.
14 Tier 1 common equity is Tier 1 capital minus perpetual preferred stock, minority interests, and certain restricted core capital elements. See 12 C.F.R. § 325.2(v).
15 The term “well capitalized” is defined at 12 C.F.R. § 325.103(b)(1) to mean having (1) a total risk-based capital ratio of ten percent (10%) or more, (2) a Tier 1 risk-based capital ratio of six percent (6%) or more, (3) a leverage ratio of five percent (5%) or more, and (4) no capital directive from the regulators. The remaining four capitalization categories are: adequately capitalized; undercapitalized; significantly undercapitalized; and critically undercapitalized. 12 U.S.C. § 1831o(b).
16 12 U.S.C. § 1831o(b); 12 C.F.R. § 325.103. See supra note 4. The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), Pub. L. No. 102-242, 105 Stat. 2236, mandated that banking regulators take “prompt corrective action” when an institution’s capitalization rating falls below the top two capitalization categories. PCA may include an increase in the monitoring of the institution, requiring the institution to raise more capital, requiring the institution to merge with a more highly capitalized institution, or closure of the institution. The PCA provisions are intended to bring about the resolution of a depository institution at the lowest possible overall cost to the DIF.
17 The cross-support requirement derives from the FDIC’s authority to assess commonly controlled insured financial institutions for a failure within the group. 12 U.S.C. § 1815(c)(5). Such assessments are intended to recover from affiliated institutions the cost to the DIF of the failure of an affiliated bank. This authority is meant to deter a bank from shifting assets among affiliates in anticipation of the failure of an institution within a single group. Ironically, the FDIC’s exercise of cross-guaranty authority has in the past itself caused the failure of banks – e.g., Southeast Bank of West Florida, a sister bank of Southeast Bank, N.A. (closed on September 19, 1991), was assessed for the failure of Southeast Bank, N.A., and thereafter failed.
18 The term “extension of credit” is defined as in Federal Reserve Regulation W, 12 C.F.R. 223.3(o).
19 While affiliate transaction statutes and regulations to which most banks are subject define the term “affiliate” to mean 25% or more ownership of a class of voting securities, the Final Policy Statement defines “affiliate” to include any firm in which the investor directly or indirectly owns 10% of the equity and has maintained that ownership for at least 30 days.
20 Conventional restrictions on transactions between banks and their affiliates do not completely prohibit such transactions, but rather limit them, impose special collateral requirements, and require them to be on non-preferential terms and conditions.
22 The carve out of an exception for mutual funds is a clear acknowledgement of the broad scope of the definition of “private capital investor.” The mutual fund carve-out is available to open-ended investment companies registered under the Investment Company Act of 1940 that issue redeemable securities that allow investors to redeem on demand.
23 12 U.S.C. § 1823(c)(4); 12 C.F.R. 360.1. FDICIA amended the Federal Deposit Insurance Act (“FDIA”), Pub. L. No. 81-797, 64 Stat. 873, to require least cost resolution. The only exception to the “least cost resolution” requirement is where a systemic risk to the financial system exists. 12 U.S.C. § 1821(c)(4)(G). Of course, it would be a stretch for the FDIC to argue that permitting PEF entry into the banking industry would cause a “systemic risk,” and thus that excluding PEFs from bidding on failed institutions is justifiable regardless of the increased cost to the DIF.
24 Cf. 12 U.S.C. § 1823(k)(5), which prohibits the FDIC from providing assistance to a failing depository institution when management of the institution (i) has failed to manage the institution in compliance with rules and regulations and (ii) has engaged in certain abusive practices with respect to the institution.


Pending before this Court is the Defendant's Motion for Reconsideration of Order of Detention and for De Novo Hearing. Doc. 22. The Court has thoroughly reviewed the Defendant's Motion, the Government's Response, and the transcript of the detention hearing of Defendant Ottey conducted by United States Magistrate Judge Robert C. Mitchell. The Motion for Reconsideration (appeal) is now ripe for disposition. In light of Defendant's important liberty interest, the Court's review has been expedited.
The United States Court of Court of Appeals for the Third Circuit has determined that the appropriate standard of review is de novo. United States v. Delker, 757 F.2d 1390, 1394 (3d Cir. 1985). Even though the new Bail Reform Act, 18 U.S.C. §3141, et seq, does not specifically grant de novo review to the District Court, the United States Court of Appeals for the Third Circuit has found that, “nothing in the new Act suggests that Congress intended to change that practice.” United States v. Delker, 757 F.2d at 1394. Finally, at the evidentiary level, de novo review does not require an additional or independent evidentiary hearing by the District Court, and the Court may incorporate the transcript of the proceedings before the Magistrate Judge including any exhibits admitted therein. United States v. Chagra, 850 F.Supp. 354, 357 (W.D.Pa 1994).
Where the record reflects probable cause to believe the defendant has committed a crime of violence or an offense for which the maximum term of imprisonment is ten years or more is prescribed by the Controlled Substances Act, 21 U.S.C. § 801, et seq., the Bail Reform Act creates a rebuttable presumption that no condition or combination of conditions will reasonably assure the safety of any other person in the community. 18 U.S.C. § 3142(e); United States v. Perry, 788 F.2d 100, 106 (3d. Cir. 1986). A defendant may rebut the presumption by presenting “some credible evidence” that he will not pose a threat to the community upon his release. United States v. Carbone, 793 F.2d 559, 560 (3d Cir. 1986) (to rebut the presumption “[t]he defendant must produce some credible evidence forming a basis for his contention that he will appear and will not pose a threat to the community.”) citing United States v. Jessup, 757 F.2d 378 (1st Cir. 1985); United States v. Giampa, 755 F.Supp. 665, 668 (W.D. Pa. 1990). United States v. Turner, 2008 WL 4186212 *1 (W.D. Pa. 2008).
(4) the nature and seriousness of the danger posed by the person's release.


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These cases are two of many that highlight the changing standard for eminent domain in the United States. The power of eminent domain, the authority of local, state, and federal governments to forcibly seize private property, is not today the same power it was one hundred years ago. It is not, in fact, the power it was 20 or even ten years ago. The acceptable uses of eminent domain are now much broader and, therefore, its power much greater—a direct result of the expansion of the standard of “public use,” the most important benchmark for a government’s use of the legal maneuver. The term is derived from the language of the Fifth Amendment, which states that no private property shall “be taken for public use, without just compensation.” The latter has long been interpreted to mean that while a government can force the sale of land, it must compensate the owner at market price. The former, “public use,” is vastly more complicated, and its evolving interpretation is one of the most influential factors in the expansion of eminent domain. In the fertile ground of legal ambiguity, eminent domain has expanded gradually to become the immense power it is today – wielded, by figures like Mayor McLaughlin in Richmond, and President Bollinger at Columbia, in ever more creative and risky ways.
The power of eminent domain is the authority to acquire private property through forced seizure—albeit with important limitations—as opposed to a voluntary exchange. It is set forth in the Fifth Amendment: “no person shall… be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” This section, called the takings clause, renders the power of eminent domain indubitable, but each individual case—that is, the powers’ limitations—may be called into question. As cities, however, New York and Richmond did not always have the right to use this power. Until the passage of the Fourteenth Amendment in 1868, eminent domain applied only to the federal government. However, in Chicago, Burlington, & Quincy Railroad Co. v. City of Chicago (1897), the Supreme Court held that the due process clause in the Fourteenth Amendment gave this power, among others, to the states.
But that power came with limitations. The first is “just compensation,” which is considered in most cases the equivalent of “fair market price.” This price may or may not equal the value of the property to the actual owner—a point of great contention in many eminent domain cases. There is, however, general agreement in legal literature that “just compensation” undercompensates the homeowner. In theory, “just compensation” should render the homeowner indifferent to the sale, but by definition eminent domain is only invoked when the owner has refused to sell. As Susette Kelo said when forced to sell her home to the city of New London in 2002, “[it has been] home to my parents and my family for a hundred years. Simply put, there is nowhere else I would rather be.” Our inability to calculate personal meaning alludes to the most important factor we must acknowledge: An eminent domain transaction is a forced seizure, and it must be limited to situations in which the public need for the property warrants such an action.
The requirement of “public use” is the second important limitation on the use of eminent domain, preventing a government from confiscating land with no clear benefit to the community. However, the Fifth Amendment does not describe precisely what is meant by “public use.” It is this ambiguity that has been the fertile ground for eminent domain’s growth over the last hundred years. The most basic public uses are those that can literally be used by the public. In Chicago, Burlington, & Quincy Railroad Co. v. City of Chicago (1897), the city government of Chicago successfully widened a public street, appropriating private land and property owned by the Chicago, Burlington, & Quincy Railroad Company. In Kohl v. United States (1875), the federal government seized land to build a post office, customs building, and other government offices.
As the roles of government expanded during the first half of the twentieth century, this simplistic understanding of “public use” gradually began to grow. In 1954, the Supreme Court decided in Berman v. Parker (1954) that “public use” could be interpreted as “public purpose,” meaning that the actual institution or property created need not be used by the public, so long as its creation served the public interest. In Berman, the District of Columbia Redevelopment Land Agency had used the power of eminent domain to take a blighted neighborhood area. One aspect of the case would later become immensely important: the commission’s decision to transfer the property to a private company to assist in the redevelopment plans. This became precedent in the seminal Kelo v. City of New London case in 2005, arguably the most radical expansion of eminent domain to date.
In 2000, the city of New London, Connecticut sought to condemn a property privately owned by Susette Kelo as part of a “comprehensive redevelopment plan,” intending to sell the property to a developer for the sole purpose of generating municipal revenue. In a historic 5-4 ruling, the Supreme Court sided with the city of New London, with a slim majority opinion solidifying the view that “public use” could simply be economic development for the local government or direct community. Justice John Paul Stevens wrote the majority opinion on behalf of the Court’s liberal wing, while Justice Kennedy wrote a concurring opinion that, while not binding on lower courts, outlined a more exacting and nuanced approach. A court considering an eminent domain case, Kennedy argued, should inquire whether the development in question is “of primary benefit to the developer and private business which may eventually locate in the plan area… and in that regard, only of incidental benefit to the city.” The court should consider whether the parties “show awareness of depressed economic condition and evidence corroborating the validity of this concern,” he said, as well as the “substantial commitment of public funds.” Furthermore, the government must have considered a variety of development options and have chosen a private developer from a group of applicants, to avoid preferential treatment and pressure.
The problem, in the view of the opposing four Justices, is one of precedent. In her dissenting opinion, Justice Sandra Day O’Connor describes the issues associated with confusing “public use” with vague “public benefit.” She writes: “under the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded.” By this she means all private property may be given to a new — also private — owner at the discretion of the government.
In 2003, Columbia University began an immense expansion project into the Manhattanville neighborhood, north of the university’s Morningside Heights campus. To do so, the University involved itself in a lengthy and complex series of legal maneuvers, utilizing the City of New York’s power of eminent domain. In many ways, Columbia’s efforts fall in line with the legacy of Kelo v. New London, playing the role of a traditional private entity and justifying its expansion by facilitating economic growth and development in the area: Columbia University, private developer. In the post-Kelo world of eminent domain limitations—or lack thereof—the institution’s development goals themselves fall under the umbrella of “public use” in the sense that many would find the economic development inherent in Columbia’s expansion to be in the public interest. In other ways, however, the University goes further, arguing that it offers additional community benefits as an institution of higher education—a public interest beyond mere economic development and thus another basis for claiming its actions represent “public use.” Columbia’s most compelling claim is the educational and civic good it provides to the community, rather than any assertion of economic benefit to the neighborhood—to which, in fact, it may be a detriment.
However, there are those who refute the claim that the area was blighted in the first place, which, if true, would undermine the university’s argument and the court’s finding. In response to an article by the Columbia Daily Spectator editorial board, in which they asserted that the neighborhood “once consisted mostly of vacant warehouses and manufacturing facilities, and where long blocks with few residences made for unsafe streets,” community activist Tom Kappner questioned Columbia’s assertion that the area was vacant, pointing out that vacancies became much more prevalent after Columbia threatened property owners with eminent domain.
Despite this resistance, Columbia acquired all but two properties through voluntary negotiation; for the two in question, though, the legal struggles were seen as a personal affront. Gurnam Singh, owner of two gas stations on 125th Street, and Nicholas Sprayregen, owner of four buildings used for his “Tuck-It-Away” moving and storage business, had no desire to move their businesses nor sell them to the University. Speaking to The New York Times in September of 2008, Singh’s wife, Parminder Kaur, vocalized the emotional element of the family’s argument: “I don’t want to sell [the stations] for any amount of money. This business is like part of my family. Money is not everything. You don’t sell your children.” With emotions running high, negative feelings came to the surface. “[Philip Silverman, a Columbia official,] is treating me like, ‘this Indian family – we don’t know anything,’” Singh told the Times. Columbia rejected the characterization.
Suing together, Singh and Sprayregen claimed that Columbia failed to meet the standard of public use. The New York State Supreme Court found in favor of the property owners, but the decision was decidedly reversed by the Court of Appeals. The appeals court not only found ameliorating blight a public use, but also determined that the civic good of supporting education and research could be in turn supported by the use of eminent domain. In this case, the justification fell into two bins, the first economic development and the second civic good. Columbia argued—and the court held—that each bin could independently have satisfied the standard of public use.
In 2002, University President Lee Bollinger gave his inauguration speech, saying “To fulfill our responsibility and our aspirations, Columbia must expand significantly over the next decade.” Expand it did. But former Columbia Daily Spectator Manhattanville beat chief, Theodora Raymond-Sidel, has a different perspective on the relationship of Manhattanville to what President Bollinger called Columbia’s “responsibility and aspirations.” “There’s an obvious moral quandary here,” she said. “In doing this, Columbia is shirking its responsibility to the community; President Bollinger is referring instead to the responsibility of Columbia to serve its own interests.” Raymond-Sidel emphasized, “with Manhattanville, Columbia is acting against the ideals we espouse as a university.” The question then is: What responsibility does Columbia serve through the Manhattanville development? Who is served by way of this development? A different answer to these questions came to the fore in Richmond, California.
Given these new and evolving legislative constraints, as well as the ever-tenuous financial situation of many small towns and their residents post-2008, some governments began to get creative, pushing the limits set by Kelo in other ways. Among the most notable are Richmond and Oakland, California. On July 30, 2013, Richmond became the first city in the United States to use eminent domain in an effort to stop foreclosures, a move closely watched by bankers, politicians, and homeowners across the country.
The program itself involves a significant amount of legal and financial maneuvering. Consider the hypothetical: a home mortgaged at $500,000 is now worth only $200,000, and the tenant, a resident of Richmond also fallen on hard times, is woefully behind on mortgage payments. The city would buy the mortgage—forcibly, using eminent domain and offering just compensation—from the bank for $160,000, or about 80 percent of the home’s current value. The city would then bring down the homeowner’s debt to a more manageable $190,000, and permit the homeowner to refinance through a city-sponsored government program. Once the mortgage is repaid—hopefully within a reasonable and agreed-upon amount of time—the city receives the difference.
Banks and other financial institutions claim such a move would be “unprecedented and unconstitutional.” Opponents include big players like the Securities Industry and Financial Markets Association, the American Bankers Association, the National Association of Realtors, and other large investors. Together, this group submitted an opposition paper in which they wrote, “Such a novel use of the eminent domain powers is unprecedented and would, in our view, not survive the multiple legal challenges that would ensue.” Other threats follow: “it will be much harder to get a loan.” With the banks’ legal rain looming, Richmond officials stood their ground. “We’re not willing to back down on this,” Richmond mayor Gayle McLaughlin told The New York Times. “They can put forward as much pressure as they would like but I’m very committed to this program and I’m very committed to the well-being of our neighborhoods.” The name the council chose for the program illuminates the idea behind it: Richmond Cares. When Mayor McLaughlin’s city began its program, it set a controversial and uncertain example for other cities experiencing similar economic issues.
Mayor McLaughlin speaks to the desperation of her city. According to the first of several New York Times articles written on the subject, roughly half of all homeowners with mortgages in Richmond are “underwater, meaning they owe more — in some cases three or four times as much more — than their home is currently worth.” Furthermore, there is little incentive for many of these homeowners to continue trying to keep up with their payments, since the value on their house has dropped precipitously over the last decade. In similar positions — and considering similar solutions — are cities such as Irvington, New Jersey, which passed a resolution in support of the method in July 2013; North Las Vegas, which heard debate on the subject in August 2013; El Monte, California, and Seattle, Washington; Oakland, California.
On November 5, 2013, Oakland residents Rebecca Kaplan and Desley Brooks put forward two resolutions that praised Richmond. Margaretta Lin, special projects director in the Oakland Community and Economic Development Department, gave a report on extant programs in Oakland to help homeowners at risk of foreclosure. At the same meeting, Mayor Jean Quan cited Oakland’s history of helping residents remain in their homes. But in our telephone interview, Lin described Oakland’s actions as only “support and solidarity for the city of Richmond” and that it was primarily for the acknowledgement of the difficulties of foreclosure; “there was no council action that endorsed the use of eminent domain itself.” She further emphasized that the Oakland Council had “not seriously considered” the measure.
Seriously or not, and although neither plan has yet come to fruition, both Richmond and Oakland have considered uses of eminent domain that would have been wildly untenable pre-Kelo. The definition of “public use” has moved from that which could be literally used by the public, to a “public purpose,” to, in the words of Justice O’Connor, “any way that the legislature deems beneficial to the public.” This case, using eminent domain to buy mortgages, necessitates the understanding that eminent domain applies to non-tangible property and the assertion that “public use” extends to the prevention of foreclosures and keeping residents in their homes.
These two case studies — Manhattanville, New York, and Oakland, California — each demonstrate creative interpretations of eminent domain. Set forth in the Fifth Amendment and limited by the standards of “public use” and “just compensation,” the power of eminent domain has grown to encompass much more than was originally established—what was once used for public parks and spaces is now experimented with for mortgages. In Manhattanville, New York, the city used the power of eminent domain to forcibly purchase two properties in order to sell them to Columbia University. Here, “public use” was considered by the court to be both economic development and the educational and community benefits that come with the expansion of an institution of higher education. In Oakland, California, the town weighed using the power of eminent domain to purchase mortgages on houses in foreclosure. Here, “public use” would be keeping people in their homes who would otherwise suffer significant financial damage. In each, the term refers to a different community benefit—and both are not uncontroversial. These cases are based on the expansion that became most pronounced in Kelo v. New London, but the evolution had begun long before and will likely continue long into the future.


Perry H. Piper (argued and briefed), Federal Defender Services of Eastern Tennessee, Inc., Chattanooga, Tennessee, for Defendant-Appellant.
Gregg L. Sullivan (argued and briefed), Asst. U.S. Attorney, Office of the U.S. Attorney, Chattanooga, Tennessee, for Plaintiff-Appellee.
The appellant stands convicted of one count of the November 15, 1996, robbery of a branch of the AmSouth Bank in Chattanooga, Tennessee (18 U.S.C. § 2113), two counts of kidnapping (18 U.S.C. § 1201), and two counts of using and carrying a firearm during and in relation to the bank robbery and kidnappings (18 U.S.C. §§ 924(c) and 2).
Burnette and his partner and co-defendant, James Travis White, entered the home of Sue Chambers, the branch manager of the bank, in the evening preceding the bank robbery. At gunpoint, they gained control of Mrs. Chambers' husband, David, her 26-year-old son, Christopher, and finally Mrs. Chambers herself as she returned home. Eventually, they separated Mrs. Chambers from her husband and son and held the two hostage to the demands of Burnette and White that, to insure the safe release of her husband and son, Mrs. Chambers must enter the bank the following morning and bring Burnette funds of the bank. Mrs. Chambers complied; with the assistance of a fellow employee, she entered the bank before it opened for business and thereafter delivered to Burnette over $183,000.00 recovered from the bank's vault.
On December 2, 1996, White confessed to the bank robbery and kidnappings. The next day, Burnette was arrested with incriminating items of evidence in his possession.
The kidnapping convictions rest on the fact that White, while in control of David and Christopher Chambers during the time that followed their capture and while they were being held hostage to the demand that Mrs. Chambers loot the vault of the AmSouth Bank, drove his captives across state lines, thus creating the federal jurisdictional basis for the two kidnapping charges under 18 U.S.C. § 1201.
Whoever, in committing any offense defined in this section, or in avoiding or attempting to avoid apprehension for the commission of such offense, or in freeing himself or attempting to free himself from arrest or confinement for such offense, kills any person, or forces any person to accompany him without the consent of such person, shall be imprisoned not less than ten years, or if death results shall be punished by death or life imprisonment.
At the close of the government's case, Burnette moved for a dismissal of the kidnapping counts on two grounds. First, he cited the now-vacated opinion of the Eighth Circuit in Embrey v. Hershberger, 106 F.3d 805 (8th Cir.1997) for the proposition that the kidnapping conduct was fully integrated into the bank robbery charge.2 Second, he contended that he was entitled to an acquittal because it was not "reasonably foreseeable" that his partner would transport the Chambers men across state lines. On appeal, Burnette continues to advance the proposition that the provisions of § 2113(e) negate the kidnapping convictions because the kidnappings were an integral part of the bank robbery. We disagree. Our analysis follows.
The defendant's argument that the kidnapping of the Chambers men, as hostages to the success of the bank robbery, is subsumed in § 2113 is rooted in the existing case law of this Circuit and anchored in the holding of Prince v. United States, 352 U.S. 322, 77 S.Ct. 403, 1 L.Ed.2d 370 (1957), to the effect that only one sentence is permissible for federal bank robbery even though the defendant's conduct may violate more than one subsection of § 2113. See United States v. Hunter, 538 F.2d 1239 (6th Cir.1976);3 United States v. Moore, 688 F.2d 433 (6th Cir.1982).4 Building on that line of cases and the provisions of § 2113(e), the defendant argues that § 2113 with its various subsections constitutes the sole source of punishment for all conduct embraced by any of its subsections, including an act of kidnapping. Before a further exploration of the defendant's argument, we pause to note that the bank robbery statute ( § 2113) and the federal kidnapping statute ( § 1201) each contain an element of the offense that the other does not. The federal kidnapping statute requires that the victim be transported across state lines and the federal bank robbery statute requires the predicate offense of robbery of a federally-insured bank.
The practice disapproved in Prince of pyramiding penalties under the Federal Bank Robbery Act is not at issue here. The kidnapping charge against appellant Dotson is not grounded in the Federal Bank Robbery Act at all but rather in an entirely separate statute which makes it a federal offense to transport a kidnapped person in interstate commerce. 18 U.S.C. § 1201. Intimating no opinion as to the correctness of the Sixth Circuit's result in Hunter, we hold simply that the rule of Prince against aggregating penalties under the Federal Bank Robbery Act does not preclude imposition of the sentence in the instant case for a kidnapping conviction obtained under a statutory provision outside the Bank Robbery Act.
Dotson, 546 F.2d at 1153.
Against that background, the defendant advances the opinion expressed by Judge Lay in a split decision in Embrey v. Hershberger, 106 F.3d 805 (8th Cir.1997). The Embrey action was brought under the provisions of 28 U.S.C. § 2255. Embrey forced a banker to withdraw monies from his bank and then fled across a state line, taking the banker as a hostage. As in this case, Embrey was successfully prosecuted for violation of both § 2113 and § 1201. Judge Lay's opinion held that the kidnapping conviction was subsumed in the bank robbery. The case was remanded with instructions to the district court to vacate the conviction and sentence under § 1201. The respondent-appellee petitioned for rehearing en banc, which was granted.5 The en banc court concluded, contrary to the position of the majority in the three-judge panel decision, that Embrey had failed to make a showing of actual innocence that would warrant consideration of the merits of Embrey's successive motion to vacate his sentence, and thus affirmed the judgment of the district court and dismissed the petition for habeas relief. 131 F.3d 739 (8th Cir.1997), cert. denied, --- U.S. ----, 119 S.Ct. 78, 142 L.Ed.2d 61 (1998). In so ruling, the en banc court, with Judge Lay dissenting, declined to express a view on Embrey's underlying legal theory. Id. at 740.
In his lengthy analysis, set forth as the majority opinion for the three-judge panel and again in a dissent from the en banc majority opinion, Judge Lay contended that Congress intended for the Federal Bank Robbery Act to be the comprehensive and exclusive remedial provision for bank robbery prosecution. He cited United States v. Leek, 665 F.2d 383 (D.C.Cir.1981) as authority for that proposition. We decline to adopt Judge Lay's reasoning.
In Leek, the bank robber charged under § 2113 was also charged and convicted under the District of Columbia Code for assault with a dangerous weapon used during the bank robbery; he was given consecutive sentences. The Leek court followed its earlier precedent of United States v. Canty, 469 F.2d 114 (D.C.Cir.1972) in holding "that fragmentation of a single course of conduct to enable use of a local statute to multiply convictions and enhance punishment is impermissible. We reiterate that the Federal Bank Robbery Act is carefully designed, matching maximum penalties with specific offenses." Leek, 665 F.2d at 388.
The Leek court then discounted the Blockburger test for application to the case at hand, repeating as indicated in Canty, supra, that "congressional intent, as ultimately discerned, is controlling." Leek, 665 F.2d at 388.
To make its point based on Supreme Court precedent, the Leek court then referred to Simpson v. United States, 435 U.S. 6, 11-12, 98 S.Ct. 909, 55 L.Ed.2d 70 (1978), which nullified the sentencing application of an earlier version of 18 U.S.C. § 924 that had called for an enhancement of a sentence where a firearm was used in a federal bank robbery setting. The Simpson Court opined that the congressional intent demonstrated that the enhancement provisions of § 924 were not intended to apply to prosecutions under the Federal Bank Robbery Act.6 Simpson, 435 U.S. at 12-13, 98 S.Ct. 909.
In his initial opinion in Embrey, and after concluding that the decision in Albernaz v. United States, 450 U.S. 333, 101 S.Ct. 1137, 67 L.Ed.2d 275 (1981) directed that the Blockburger analysis is controlling only where there is no indication of contrary legislative intent, Judge Lay declared: "Here we deem it patent that Congress intended the FBRA to be the comprehensive and exclusive remedial provision for federal bank robbery prosecutions." Embrey, 106 F.3d at 810 (citing Leek, 665 F.2d at 387).
[t]he federal bank robbery statute establishes a comprehensive scheme ... a continuum running from entry with intent to rob, to robbery by force and violence, to robbery with the aid of a dangerous weapon, to robbery resulting in death or kidnapping ... increas[ing] the penalty as the offense becomes more aggravated.
Leek, 665 F.2d at 387 (quoting United States v. Canty, 469 F.2d 114, 127 (D.C.Cir.1972)).
There is no gap in federal law. Extortionate conduct is prosecutable either under the bank robbery provision or the Hobbs Act, both of which carry the same maximum prison term (20 years). However, clarification as to which should be the applicable statute is desirable.
The Justice Department believes that the natural and appropriate vehicle for prosecuting extortionate activity involving the obtaining of bank monies is 18 U.S.C. 2113(a), rather than the Hobbs Act, which has the purpose of safeguarding the channels of interstate and foreign commerce from the adverse effects of robbery and extortion. The Committee concurs. Accordingly, section 51 amends 18 U.S.C. 2113(a) expressly to cover crimes of extortion directed at federally insured banks. The Committee intends to overrule those cases holding that only the Hobbs Act applies, and those cases holding that both the Hobbs Act and the [sic] 18 U.S.C. 2113(a) apply, in order to make 18 U.S.C. 2113(a) the exclusive provision for prosecuting bank extortion.
Criminal Law and Proc. Tech. Amends. Act of 1986, H.R.Rep. No. 99-797, at 32-33 (1986) reprinted in 1986 U.S.C.C.A.N. 6138, 6155-56.
Embrey v. Hershberger, 131 F.3d 739, 749 (8th Cir.1997) (en banc) (Lay, J., dissenting).
Inherent in the analysis of Judge Lay, upon which the defendant relies, is the proposition that the reference in § 2113(e) to "forc[ing] any person to accompany him without the consent of such person" is the statutory equivalent of the kidnapping of a person that involves transportation across state lines. We fail to see anything in the congressional history that would require such conclusion. Further, different rationales underlie the two statutes. Kidnappings during a bank robbery are bad because they threaten the safety of those unlucky enough to cross the path of bank robbers, while kidnappings that cross state lines are bad because the federal government has an interest in the safety of those who move in interstate commerce. As a consequence, we reject the proposition that the kidnapping convictions are subsumed for sentencing purposes, including the application of the enhancement provisions of 18 U.S.C. § 924(c), into the bank robbery conviction. Put simply, we follow United States v. Dotson, supra.
Burnette's second challenge to his kidnapping convictions focuses on his contention that the jury instructions should have included a requirement that the government prove that the interstate transportation of the Chambers men by White was "reasonably foreseeable" to Burnette. The district court correctly refused to give the instruction. Interstate transportation of the kidnapping victim is a jurisdictional requirement with respect to a violation charged under 18 U.S.C. § 1201, but the government has no obligation to prove that the defendants purposely engaged in such transportation. See United States v. Welch, 10 F.3d 573, 574 (8th Cir.1993). The appellant's argument relies on Matthews v. United States, 449 F.2d 985 (D.C.Cir.1971), but that decision pre-dates the 1972 amendment to § 1201. Section 1201 previously punished "[w]hoever knowingly transports [a kidnap victim] in interstate or foreign commerce[.]" Since the 1972 amendment, knowledge of interstate transportation is not an element of the offense: interstate transportation now serves merely as a jurisdictional basis for the federal prosecution of kidnapping.
Burnette next claims that it was error for the court to give consecutive sentences for the § 924(c) convictions, resulting in five years for the first conviction and twenty years for the second conviction. The fourth count, charging a § 924(c) violation, used the bank robbery charged in Count One as the predicate offense and the fifth count, charging a § 924(c) violation, cited the kidnapping counts charged in Counts Two and Three as the predicate offenses.
Burnette's appellate purpose in attacking the separate kidnapping convictions is to undermine the consecutive sentence of twenty years imposed for the second § 924(c) conviction.7 It is now firmly established that the imposition of separate consecutive sentences for multiple § 924(c) violations occurring during the same criminal episode are lawful. See, e.g., United States v. Casiano, 113 F.3d 420, 424-26 (3d Cir.1997); United States v. Floyd, 81 F.3d 1517, 1526-27 (10th Cir.1996); United States v. Andrews, 75 F.3d 552, 557-58 (9th Cir.1996); United States v. Camps, 32 F.3d 102, 106-109 (4th Cir.1994). Moreover, the defendant's reliance on United States v. Johnson, 25 F.3d 1335 (6th Cir.1994) (en banc) is misplaced.
In Johnson, the defendant was charged and convicted for possession with intent to distribute two controlled substances (cocaine and dilaudid--one count each) discovered simultaneously during the execution of a search warrant at the defendant's residence. He was also charged and convicted in two counts of § 924(c) violations. A fifth count charged him as a felon in possession of a firearm in violation of 18 U.S.C. § 922(g)(1). On the two convictions for possession with intent to distribute and on the felon-in-possession conviction, the defendant was sentenced to 51 months for each, to run concurrently. The sentence on the two § 924(c) convictions was for the mandatory minimum five years per count, consecutive to each other and consecutive to the 51-month sentence imposed on the other three counts.
The Johnson court reasoned that, "a sensible construction dictates that possession of one or more firearms in conjunction with predicate offenses involving simultaneous possession of different controlled substances should constitute only one offense under § 924(c)(1)[.]" Johnson, 25 F.3d at 1338. Thus, the second § 924(c) conviction and sentence was vacated.
The facts in this case, from the standpoint of the required predicate offenses, more closely mirror United States v. Nabors, 901 F.2d 1351, 1358 (6th Cir.1990). In Nabors, officers executing a search warrant in a search for narcotics were confronted by the defendant, who shot an ATF agent as entry was attempted. The defendant was charged and convicted of two § 924(c) violations, as the predicate offenses included possession of cocaine with intent to distribute and assault on a federal officer. The consecutive sentences for the § 924(c) violations were affirmed. In our case, the kidnapping occurred significantly before, and independent of, the actual bank robbery, rather than being in any way simultaneous. In sum, the second consecutive sentence of twenty years for Burnette was lawfully imposed.
We find no error in the convictions or the sentence. Judgment AFFIRMED.


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Electromagnetically induced transparency (EIT), a typical quantum interference effect, has been extensively investigated in coherent atomic gases. In recent years, it has been recognized that the plasmonic analog of atomic EIT, called plasmon-induced transparency (PIT), is a fruitful platform for the study of EIT-like propagation and interaction of plasmonic polaritons. Many proposals have been presented for realizing PIT in various metamaterials, which possess many unique characters, including the suppression of absorption of electromagnetic radiation, the reduction of propagation velocity, etc. Especially, nonlinear PIT metamaterials, obtained usually by embedding nonlinear elements into meta-atoms, can be used to acquire an enhanced Kerr effect resulted from the resonant coupling between radiation and the meta-atoms and to actively manipulate structural and dynamical properties of plasmonic metamaterials. In this article, we review recent research progress in nonlinear PIT metamaterials, and elucidate their interesting properties and promising applications. In particular, we give a detailed description on the propagation and interaction of nonlinear plasmonic polaritons in metamaterials via PIT, which are promising for chip-scale applications in information processing and transmission.
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