Abie State Bank v. Bryan

Background

A group of Nebraska state banks, led by the Abie State Bank, sued in 1928 to stop special assessments levied under the State’s Bank Guaranty Law. The banks argued that extra charges taken to make up losses in failed banks left going banks with confiscatory burdens and violated the Fourteenth Amendment’s protection against taking property without due process. The District Court agreed and enjoined collection; the Nebraska Supreme Court reversed that injunction. Many depositors intervened in support of the assessments.

Reasoning

The central question was whether the special assessments had become so oppressive that they were an unconstitutional taking. The Court reviewed the financial facts the state court relied on — the reduction in number of banks, the totals of capital and deficits, the large aggregate claims against the guaranty fund, and years of advertising and acceptance of the guaranty plan by bankers — and rejected the argument that prior acceptance estopped the banks from later challenging the law. The Court also considered intervening state legislation of March 1930 that repealed the statutory basis for the challenged special assessment, created a “depositors’ final settlement fund,” and limited future annual assessments to two-tenths of one percent for ten years. Taking that change into account, the Court concluded the modified scheme was not confiscatory and affirmed the state court’s judgment denying an injunction.

Real world impact

The decision lets Nebraska keep the challenged assessments as part of a settlement fund and approves the State’s 1930 plan to reduce and limit future assessments over a ten-year period. Banks retain the right to challenge assessments shown to be confiscatory despite earlier compliance.