author: Justice Powell Justice Brennan,

text:
    DAVIS et al. v. SCHERER
    No. 83-490.
    Argued April 16, 1984
    Decided June 28, 1984

      Powell, J., delivered the opinion of the Court, in which Burger, C. J., and White, Rehnquist, and O’Connor, JJ., joined. Brennan, J., filed an opinion concurring in part and dissenting in part, in which Marshall, Blackmun, and Stevens, JJ., joined, post, p. 197.

      Mitchell D. Franks argued the cause for appellants. With him on the briefs were Jim Smith, Attorney General of Florida, and Vicki Gordon Kaufman, Bruce A. Minnick, and Pamela Lutton-Shields, Assistant Attorneys General.

      Richard G. Wilkins argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Lee, Acting Assistant Attorney General Willard, Deputy Solicitor General Getter, Barbara L. Herwig, and John F. Cordes.

      Bruce S. Rogow argued the cause and filed a brief for appellee.

         Michael S. Heifer, Burt Neubome, and Charles S. Sims filed a brief for the American Civil Liberties Union as amicus curiae urging affirmance.

   Justice Powell

delivered the opinion of the Court.

Appellants in this case challenge the holding of the Court of Appeals that a state official loses his qualified immunity from suit for deprivation of federal constitutional rights if he is found to have violated the clear command of a state administrative regulation.

I

The present controversy arose when appellee Gregory Scherer, who was employed by the Florida Highway Patrol as a radio-teletype operator, applied for permission from the Patrol to work as well for the Escambia County Sheriff’s Office as a reserve deputy. To avoid conflicts of interest, an order of the Florida Department of Highway Safety and Motor Vehicles required that proposed outside employment of Patrol members be approved by the Department. A letter from appellee’s troop commander, Capt. K. S. Sconiers, dated September 1, 1977, granted appellee permission to accept the part-time work. The letter noted that permission would be rescinded “should [the] employment interfere . . . with your duties with [the] department.” 543 F. Supp. 4, 8 (ND Fla. 1981). Later that month, Capt. Sconiers informed appellee by memorandum that permission to accept the employment was revoked. As Capt. Sconiers explained at trial, his superiors in the Highway Patrol had determined that appellee’s reserve deputy duties could conflict with his duties at the Highway Patrol.

Appellee continued to work at the second job, despite the revocation of permission. Oral discussions and an exchange of letters among appellee and his superiors ensued. Sgt. Clark, appellee’s immediate superior, advised appellee that he was violating instructions; appellee explained that he had invested too much money in uniforms to give up his part-time work. Lt. Wiggins, the next highest officer in the chain of command, then orally and by memorandum ordered appellee to quit his part-time job. Appellee explained to Lt. Wiggins that he saw no conflict between the two jobs and would not quit his second job.

Sgt. Clark and Lt. Wiggins had submitted memoranda to Capt. Sconiers that described appellee’s continued employment and their conversations with appellee. Appellee also wrote to Capt. Sconiers explaining that he saw no reason to resign his outside employment. So advised, Capt. Sconiers recommended to Col. J. E. Beach, director of the Florida Highway Patrol, that appellee be suspended for three days for violation of the dual-employment policy. Capt. Sconiers submitted a number of documents, including his own letters approving appellee’s request and rescinding the approval; ap-pellee’s letter of request and subsequent letter explaining his refusal to quit his job; and the memoranda of Sgt. Clark and Lt. Wiggins. On the basis of these documents, Col. Beach on October 24, 1977, ordered that appellee’s employment with the Florida Highway Patrol be terminated.

On November 10, 1977, appellee filed an appeal with the Florida Career Service Commission. Before the Commission had heard appellee’s administrative appeal from his dismissal, appellee and the Department settled the dispute. The settlement reinstated appellee with backpay. But friction between appellee and his superiors continued, and in January 1979, after appellee was suspended from the Patrol, he resigned “to avoid further harassment and to remove a cloud over his employability.” Id., at 11.

Appellee then filed the present suit against appellants in the United States District Court for the Northern District of Florida, seeking relief under 42 U. S. C. § 1983. Appellee’s complaint alleged that appellants in 1977 had violated the Due Process Clause of the Fourteenth Amendment by discharging appellee from his job without a formal pre-termination or a prompt post-termination hearing. Appel-lee requested a declaration that his rights had been violated and an award of money damages.

The District Court granted the requested relief for violation of appellee’s Fourteenth Amendment rights. The court found that appellee had a property interest in his job and that the procedures followed by appellants to discharge appellee were constitutionally “inadequate” under the Fourteenth Amendment. Id., at 14. Further, the court declared unconstitutional Florida’s statutory provisions governing removal of state employees, Fla. Stat. §110.061 (1977). Finally, the District Court concluded that appellants had forfeited their qualified immunity from suit under §1983 because appellee’s “due process rights were clearly established at the time of his October 24, 1977, dismissal.” Id., at 16.

Five days after entry of the District Court’s order, the Court of Appeals for the Fifth Circuit decided Weisbrod v. Donigan, 651 F. 2d 334 (1981). The Court of Appeals there held that Florida officials in 1978 had-violated no well-established due process rights in discharging a permanent state employee without a pretermination or a prompt post-termination hearing. On motion for reconsideration, the District Court found that Weisbrod required it to vacate its prior holding that appellants had forfeited their immunity by violating appellee’s clearly established constitutional rights. The court nevertheless reaffirmed its award of monetary damages. It reasoned that proof that an official had violated clearly established constitutional rights was not the “sole way” to overcome the official’s claim of qualified immunity. Applying the “totality of the circumstances” test of Scheuer v. Rhodes, 416 U. S. 232, 247-248 (1974), the District Court held that “if an official violates his agency’s explicit regulations, which have the force of state law, [that] is evidence that his conduct is unreasonable.” 543 F. Supp., at 19. In this respect, the court noted that the personnel regulations of the Florida Highway Patrol clearly required “a complete investigation of the charge and an opportunity [for the employee] to respond in writing.” Id., at 20. The District Court concluded that appellants in discharging appellee had “followed procedures contrary to the department’s rules and regulations”; therefore, appellants were “not entitled to qualified immunity because their belief in the legality of the challenged conduct was unreasonable.” Ibid. The court explicitly relied upon the official violation of the personnel regulation, stating that “[i]f [the] departmental order had not been adopted . . . prior to [appellee’s] dismissal, no damages of any kind could be awarded.” Ibid. The District Court’s order amending the judgment did not discuss the issue whether appellants violated appellee’s federal constitutional rights. On that issue, the District Court relied upon its previous opinion; the court did not indicate that the personnel regulation was relevant to its analysis of appellee’s rights under the Due Process Clause.

The District Court also amended its judgment declaring the Florida civil service statute unconstitutional. The State’s motion for reconsideration had informed the court that the statute had been repealed by the Florida Legislature. The District Court therefore declared unconstitutional the provisions of the newly enacted civil service statute, Fla. Stat., ch. 110 (1982 and Supp. 1983), insofar as “they fail to provide a prompt post-termination hearing.” Id., at 21.

The Court of Appeals affirmed on the basis of the District Court’s opinion. Scherer v. Graham, 710 F. 2d 838 (CA11 1983). We noted probable jurisdiction, 464 U. S. 1017 (1983), to consider whether the Court of Appeals properly had declared the Florida statute unconstitutional and denied appellants’ claim of qualified immunity. Appellants do not seek review of the District Court’s finding that appellee’s constitutional rights were violated. As appellee now concedes that the District Court lacked jurisdiction to adjudicate the constitutionality of the Florida statute enacted in 1981, we consider only the issue of qualified immunity. We reverse.

II

In the present posture of this case, the District Court’s decision that appellants violated appellee’s rights under the Fourteenth Amendment is undisputed. This finding of the District Court—based entirely upon federal constitutional law—resolves the merits of appellee’s underlying claim for relief under § 1983. It does not, however, decide the issue of damages. Even defendants who violate constitutional rights enjoy a qualified immunity that protects them from liability for damages unless it is further demonstrated that their conduct was unreasonable under the applicable standard. The precise standard for determining when an official may assert the qualified immunity defense has been clarified by recent cases, see Wood v. Strickland, 420 U. S. 308 (1975); Butz v. Economou, 438 U. S. 478 (1978); Harlow v. Fitzgerald, 457 U. S. 800 (1982). The present case requires us to consider the application of the standard where the official’s conduct violated a state regulation as well as a provision of the Federal Constitution.

The District Court’s analysis of appellants’ qualified immunity, written before our decision in Harlow v. Fitzgerald, supra, rests upon the “totality of the circumstances” surrounding appellee’s separation from his job. This Court applied that standard in Scheuer v. Rhodes, 416 U. S., at 247-248. As subsequent cases recognized, Wood v. Strickland, supra, at 322, the “totality of the circumstances” test comprised two separate inquiries: an inquiry into the objective reasonableness of the defendant official’s conduct in light of the governing law, and an inquiry into the official’s subjective state of mind. Harlow v. Fitzgerald, supra, rejected the inquiry into state of mind in favor of a wholly objective standard. Under Harlow, officials “are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.” 457 U. S., at 818. Whether an official may prevail in his qualified immunity defense depends upon the “objective reasonableness of [his] conduct as measured by reference to clearly established law.” Ibid.(footnote deleted). No other “circumstances” are relevant to the issue of qualified immunity.

Appellee suggests, however, that the District Court judgment can be reconciled with Harlow in two ways. First, appellee urges that the record evinces a violation of constitutional rights that were clearly established. Second, in appellee’s view, the District Court correctly found that, absent a violation of clearly established constitutional rights, appellants’ violation of the state administrative regulation— although irrelevant to the merits of appellee’s underlying constitutional claim — was decisive of the qualified immunity question. In our view, neither submission is consistent with our prior cases.

A

Appellee contends that the District Court’s reliance in its qualified immunity analysis upon the state regulation was “superfluous,” Brief for Appellee 19, because the federal constitutional right to a pretermination or a prompt post-termination hearing was well established in the Fifth Circuit at the time of the conduct in question. As the District Court recognized in rejecting appellee’s contention, Weisbrod v. Donigan, 651 F. 2d 334 (CA5 1981), is authoritative precedent to the contrary. The Court of Appeals in that case found that the State had violated no clearly established due process right when it discharged a civil service employee without any pretermination hearing.

Nor was it unreasonable in this case, under Fourteenth Amendment due process principles, for the Department to conclude that appellee had been provided with the fundamentals of due process. As stated above, the District Court found that appellee was informed several times of the Department’s objection to his second employment and took advantage of several opportunities to present his reasons for believing that he should be permitted to retain his part-time employment despite the contrary rules of the Patrol. Appel-lee’s statement of reasons and other relevant information were before the senior official who made the decision to discharge appellee. And Florida law provided for a full evi-dentiary hearing after termination. We conclude that the District Court correctly held that appellee has demonstrated no violation of his clearly established constitutional rights.

B

Appellee’s second ground for affirmance in substance is that upon which the District Court relied. Appellee submits that appellants, by failing to comply with a clear state regulation, forfeited their qualified immunity from suit for violation of federal constitutional rights.

Appellee makes no claim that the appellants’ violation of the state regulation either is itself actionable under § 1983 or bears upon the claim of constitutional right that appellee asserts under §1983. And appellee also recognizes that Harlow v. Fitzgerald makes immunity available only to officials whose conduct conforms to a standard of “objective legal reasonableness.” 457 U. S., at 819. Nonetheless, in appel-lee’s view, official conduct that contravenes a statute or regulation is not “objectively reasonable” because officials fairly may be expected to conform their conduct to such legal norms. Appellee also argues that the lawfulness of official conduct under such a statute or regulation may be determined early in the lawsuit on motion for summary judgment. Appellee urges therefore that a defendant official’s violation of a clear statute or regulation, although not itself the basis of suit, should deprive the official of qualified immunity from damages for violation of other statutory or constitutional provisions.

On its face, appellee’s reasoning is not without some force. We decline, however, to adopt it. Even before Harlow, our cases had made clear that, under the “objective” component of the good-faith immunity test, “an official would not be held liable in damages under § 1983 unless the constitutional right he was alleged to have violated was ‘clearly established’ at the time of the violation.” Butz v. Economou, 438 U. S., at 498 (emphasis added); accord, Procunier v. Navarette, 434 U. S. 555, 562 (1978). Officials sued for constitutional violations do not lose their qualified immunity merely because their conduct violates some statutory or administrative provision.

We acknowledge of course that officials should conform their conduct to applicable statutes and regulations. For that reason, it is an appealing proposition that the violation of such provisions is a circumstance relevant to the official’s claim of qualified immunity. But in determining what circumstances a court may consider in deciding claims of qualified immunity, we choose “between the evils inevitable in any available alternative.” Harlow v. Fitzgerald, 457 U. S., at 813-814. Appellee’s submission, if adopted, would disrupt the balance that our cases strike between the interests in vindication of citizens’ constitutional rights and in public officials’ effective performance of their duties. The qualified immunity doctrine recognizes that officials can act without fear of harassing litigation only if they reasonably can anticipate when their conduct may give rise to liability for damages and only if unjustified lawsuits are quickly terminated. See Butz v. Economou, supra, at 506-507; Harlow v. Fitzgerald, supra, at 814, 818-819. Yet, under appellee’s submission, officials would be liable in an indeterminate amount for violation of any constitutional right — one that was not clearly defined or perhaps not even foreshadowed at the time of the alleged violation — merely because their official conduct also violated some statute or regulation. And, in § 1983 suits, the issue whether an official enjoyed qualified immunity then might depend upon the meaning or purpose of a state administrative regulation, questions that federal judges often may be unable to resolve on summary judgment.

Appellee proposes that his new rule for qualified immunity be limited by requiring that plaintiffs allege clear violation of a statute or regulation that advanced important interests or was designed to protect constitutional rights. Yet, once the door is opened to such inquiries, it is difficult to limit their scope in any principled manner. Federal judges would be granted large discretion to extract from various statutory and administrative codes those provisions that seem to them sufficiently clear or important to warrant denial of qualified immunity. And such judgments fairly could be made only after an extensive inquiry into whether the official in the circumstances of his decision should have appreciated the applicability and importance of the rule at issue. It would become more difficult, not only for officials to anticipate the possible legal consequences of their conduct, but also for trial courts to decide even frivolous suits without protracted litigation.

Nor is it always fair, or sound policy, to demand official compliance with statute and regulation on pain of money damages. Such officials as police officers or prison wardens, to say nothing of higher level executives who enjoy only qualified immunity, routinely make close decisions in the exercise of the broad authority that necessarily is delegated to them. These officials are subject to a plethora of rules, “often so voluminous, ambiguous, and contradictory, and in such flux that officials can only comply with or enforce them selectively.” See P. Schuck, Suing Government 66 (1983). In these circumstances, officials should not err always on the side of caution. “[Officials with a broad range of duties and authority must often act swiftly and firmly at the risk that action deferred will be futile or constitute virtual abdication of office.” Scheuer v. Rhodes, 416 U. S., at 246.

I — I I — < H — I

A plaintiff who seeks damages for violation of constitutional or statutory rights may overcome the defendant official’s qualified immunity only by showing that those rights were clearly established at the time of the conduct at issue. As appellee has made no such showing, the judgment of the Court of Appeals is reversed, and the case is remanded for proceedings consistent with this opinion.

It is so ordered.

Justice Brennan,

with whom Justice Marshall, Justice Blackmun, and Justice Stevens join, concurring in part and dissenting in part.

In Harlow v. Fitzgerald, 457 U. S. 800 (1982), the Court decided that Government officials seeking to establish qualified immunity must show that the acts or omissions violating the plaintiff’s rights were objectively reasonable — specifically, that the conduct at issue did not “violate clearly established statutory or constitutional rights of which a reasonable person would have known.” Id., at 818. The Court today does not purport to change that standard. Yet it holds that, despite discharging a civil service employee in 1977 without meaningful notice and an opportunity to be heard, appellants are entitled to immunity from a suit for damages. The Court reaches this decision essentially by ignoring both the facts of this case and the law relevant to appellants’ conduct at the time of the events at issue. In my view, appellants plainly violated appellee’s clearly established rights and the Court’s conclusion to the contrary seriously dilutes Harlow’s careful effort to preserve the availability of damages actions against governmental officials as a critical “avenue for vindication of constitutional guarantees.” Id., at 814. Accordingly, I dissent from that portion of the judgment reversing the award of damages.

In order to determine whether a defendant has violated a plaintiff’s clearly established rights, it would seem necessary to make two inquiries, both of which are well within a court’s familiar province: (1) which particular act or omission of the defendant violated the plaintiff’s federal rights, and (2) whether governing case or statutory law would have given a reasonable official cause to know, at the time of the relevant events, that those acts or omissions violated the plaintiff’s rights. The Court, however, asks neither question. Its brief treatment of the issue includes no reference to the District Court’s findings of fact with respect to the conduct at issue here. This is not surprising since those findings— which were affirmed summarily by the Court of Appeals and which appellants do not claim to be clearly erroneous — demonstrate that appellee was never informed that he might be fired for violating regulations against dual employment. Nor did appellee ever have an opportunity to persuade the relevant decisionmaker that he should not be disciplined.

The regulation appellee was ultimately fired for violating required only that Patrol members receive prior approval of outside employment, in order to avoid conflicts of interest with regular duties. 543 F. Supp. 4, 8 (ND Fla. 1981). Upon request, appellee obtained approval from his troop commander for part-time work as a security guard on a movie set. Some three weeks later, the commander revoked the approval and there followed an exchange of memos between appellee’s immediate superiors and the commander indicating that appellee did not wish to relinquish the part-time job. Apparently without informing appellee, the commander then recommended to the director of the Highway Patrol, Col. Beach, that appellee be suspended for three days and, nearly a week later, an intermediate superior ordered appellee to terminate his outside employment. On the same day, appel-lee wrote to the commander, stating that he did not believe his outside work caused any conflict of interest. Although some officials in the Department suggested to each other ways in which appellee’s work might create a conflict, “[n]o one ever identified the conflict to plaintiff; [and the superior who had ordered appellee to terminate the job] testified he didn’t know what the conflict was.” Ibid. Meanwhile, Beach, the official with authority to terminate appellee, received copies of the various letters that had been exchanged and, without informing appellee or soliciting his views, decided to discharge him. As the District Court summarized:

“By certified letter dated October 24, 1977 and received by plaintiff on October 25, 1977, Scherer was terminated from his FHP employment effective October 20, 1977. At no time prior to the letter of termination was the plaintiff given notice in writing of a proposed discharge or an opportunity to respond verbally or in writing to the official charged with making the termination decision, the defendant Beach. At no time prior to October 25, 1977, was the plaintiff notified of any right that he might have to respond to Col. Beach’s letter of dismissal.” Id., at 8-9.

The District Court further found that two other Highway Patrol employees in appellee’s troop had been given approval to engage in the very same secondary employment for which appellee was fired, and their approval “was never revoked.” Id., at 8, n. 1. Moreover, after being terminated, appellee successfully argued before a Florida administrative officer that the regulation prohibiting dual employment had not been validly adopted and was therefore void. Id., at 9. In short, although appellee was warned not to continue the second employment, he had no reason to believe prior to being fired that retention of the second job constituted grounds for termination, and indeed he had several reasons for believing otherwise. Nor did he have any opportunity to challenge, before the relevant decisionmaker, either his termination or the underlying conclusion that his retention of the second job created a conflict of interest.

By failing to warn appellee that his conduct could result in deprivation of his protected property interest in his Highway Patrol job and by denying him an opportunity to challenge that deprivation, appellants violated the most fundamental requirements of due process of law — meaningful notice and a reasonable opportunity to be heard. Contrary to the Court’s conclusion, these requirements were “clearly established” long before October 25, 1977, the date on which appellee learned he was fired. As long ago as 1914, the Court emphasized that “[t]he fundamental requisite of due process of law is the opportunity to be heard.” Grannis v. Ordean, 234 U. S. 385, 394. In 1925, the Court explained that a government failure to afford reasonable notice of the kinds of conduct that will result in deprivations of liberty and property “violates the first essential of due process of law.” Connally v. General Construction Co., 269 U. S. 385, 391. And in several decisions in the 1950’s, the Court concluded that public employees have interests in maintaining their jobs that cannot be abridged without due process. E. g., Slochower v. Board of Education, 350 U. S. 551 (1956); Wieman v. Updegraff, 344 U. S. 183 (1952); see Board of Regents v. Roth, 408 U. S. 564, 576-577 (1972).

In January 1972, nearly six years prior to appellee’s termination, the Court reaffirmed that

“[bjefore a person is deprived of a protected interest, he must be afforded opportunity for some kind of a hearing, ‘except for extraordinary situations where some valid governmental interest is at stake that justifies postponing the hearing until af ter the event. ’ Boddie v. Connecticut, 401 U. S. 371, 379. ‘While “[m]any controversies have raged about... the Due Process Clause,”... it is fundamental that except in emergency situations (and this is not one) due process requires that when a State seeks to terminate [a protected] interest ... , it must afford “notice and opportunity for hearing appropriate to the nature of the case” before the termination becomes effective.’ Bell v. Burson, 402 U. S. 535, 542. For the rare and extraordinary situations in which we have held that deprivation of a protected interest need not not be preceded by opportunity for some kind of hearing, see, e. g., Central Union Trust Co. v. Garvan, 254 U. S. 554, 566; Phillips v. Commissioner, 283 U. S. 589, 597; Ewing v. Mytinger & Casselberry, Inc., 339 U. S. 594.” Board of Regents v. Roth, supra, at 570, n. 7.

Similarly, in 1974, based on an exhaustive review of our cases, Justice White explained that “where there is a legitimate entitlement to a job, as when a person is given employment subject to his meeting certain specific conditions, due process requires, in order to insure against arbitrariness by the State in the administration of its law, that a person be given notice and a hearing before he is Anally discharged.” Arnett v. Kennedy, 416 U. S. 134, 185 (concurring in part and dissenting in part). See id., at 170 (opinion of Powell, J.,); id., at 203 (Douglas, J., dissenting); id., at 212-227 (Marshall, J., dissenting). And finally, in February 1976, more than a year and a half prior to appellee’s termination, Justice Powell summarized for the Court fundamental legal principles whose sources could be traced to cases from the 19th century:

“Procedural due process imposes constraints on governmental decisions which deprive individuals of liberty’ or 'property’ interests within the meaning of the Due Process Clause of the Fifth or Fourteenth Amendment. . . . This Court consistently has held that some form of hearing is required before an individual is finally deprived of a property interest. Wolff v. McDonnell, 418 U. S. 539, 557-558 (1974). See, e. g., Phillips v. Commissioner, 283 U. S. 589, 596-597 (1931). See also Dent v. West Virginia, 129 U. S. 114, 124-125 (1889). The ‘right to be heard before being condemned to suffer grievous loss of any kind, even though it may not involve the stigma and hardships of a criminal conviction, is a principle basic to our society.’ Joint Anti-Fascist Comm. v. McGrath, 341 U. S. 123, 168 (1951) (Frankfurter, J., concurring). The fundamental requirement of due process is the opportunity to be heard ‘at a meaningful time and in a meaningful manner.’ Armstrong v. Manzo, 380 U. S. 545, 552 (1965). See Grannis v. Ordean, 234 U. S. 385, 394 (1914).” Mathews v. Eldridge, 424 U. S. 319, 332-333 (1976).

See also Goss v. Lopez, 419 U. S. 565 (1975); Perry v. Sindermann, 408 U. S. 593 (1972); Fuentes v. Shevin, 407 U. S. 67 (1972); Stanley v. Illinois, 405 U. S. 645 (1972); Connell v. Higginbotham, 403 U. S. 207 (1971) (per curiam); Wisconsin v. Constantineau, 400 U. S. 433 (1971); Goldberg v. Kelly, 397 U. S. 254 (1970); Sniadach v. Family Finance Corp., 395 U. S. 337 (1969).

If there were any ambiguity in the repeated pronouncements of this Court, appellants had several other reasons to know that their failure to afford appellee meaningful pre-termination notice and hearing violated due process. Two years prior to appellee’s discharge, the Florida Attorney General explained in an official opinion that “[c]areer service . employees who have attained permanent status in the career service system have acquired a property interest in their public positions and emoluments thereof — such as job security and seniority which they may not be deprived of without due process of law.” Fla. Op. Atty. Gen. 075-94, p. 161 (1975). And more than a year before the events at issue here, in a case involving the Jacksonville, Fla., City Civil Service Board, the Court of Appeals for the Fifth Circuit left no doubt as to what it thought “clearly established” law required:

“Where a governmental employer chooses to postpone the opportunity of a nonprobationary employee to secure a full-evidentiary hearing until after dismissal, risk reducing procedures must be accorded. These must include prior to termination, written notice of the reasons for termination and an effective opportunity to rebut those reasons. Effective rebuttal must give the employee the right to respond in writing to the charges made and to respond orally before the official charged with the responsibility of making the termination decision.” Thurston v. Dekle, 531 F. 2d 1264, 1273 (1976), vacated and remanded on other grounds, 438 U. S. 901 (1978).

Finally, some two months prior to appellee’s discharge, the Florida Highway Patrol issued a regulation undoubtedly intended to conform administrative practice with decisions like Thurston. The regulation, which has the force of statutory law, see 543 F. Supp., at 20, provides in pertinent part:

“Upon receiving a report of ... a violation of Department or Division rules and regulations . . . the Director shall order a complete investigation to determine the true facts concerning the circumstances surrounding the alleged offense. The completed investigation report will also contain a written statement made by the employee against whom the complaint was made. If after a thorough study of all information concerning the violation, the Director decides that a . . . dismissal will be in order, he will present the employee in writing with the reason or reasons for such actions.” General Order No. 43, §1.C (Sept. 1, 1977), quoted in 543 F. Supp., at 19-20.

The Court ignores most of this evidence demonstrating the objective unreasonableness of appellants’ conduct. Instead, the Court relies first on Weisbrod v. Donigan, 651 F. 2d 334 (CA5 1981) (per curiam), as “authoritative precedent” for the proposition that appellee’s right to pretermination notice and a hearing was not “well established in the Fifth Circuit at the time of the conduct in question.” Ante, at 192. In Weis-brod, the Court of Appeals simply declared — without citation to any of the cases just discussed, including its own decision in Thurston — that “the record indicates defendants did not act in disregard of any well-settled constitutional rights” and that “Weisbrod offers no authority indicating the failure to hold a pretermination hearing and the delay in the process of her administrative appeal were clear violations of her constitutional rights.” 651 F. 2d, at 336. It is unclear from the court’s brief per curiam opinion whether Weisbrod — unlike appellee in this case — was informed prior to discharge that her conduct constituted grounds for termination. See id., at 335. In any event, the Court of Appeals’ dubious and cursory ipse dixit in Weisbrod, rendered four years after the conduct at issue in this case, is hardly persuasive, much less controlling, authority for this Court’s decision that appellee’s rights were not clearly established in 1977.

The other basis for the Court’s rejection of appellee’s claim is an assertion that it was not “unreasonable in this case, under Fourteenth Amendment principles, for the Department to conclude that appellee had been provided with the fundamentals of due process.” Ante, at 192. The Court seeks to support this statement by relying on the fact that appellee had been told to discontinue his second job and that he “took advantage of several opportunities to present his reasons for believing that he should be permitted to retain his part-time employment. . . .” Ibid. Appellee did not, however, have an opportunity to present his reasons for retaining his civil service job with the Florida Highway Patrol — the employment in which he had a protected property interest. See 543 F. Supp., at 12. Indeed, he was, according to the District Court, never told that his Highway Patrol job was in jeopardy, and he never had a chance to try to persuade the relevant decisionmaker that the second job did not create a conflict of interest. The Court concedes that our decisions by 1978 had required notice and “ ‘some kind of a hearing’. . . prior to discharge of an employee who had a constitutionally protected property interest in his employment.” Ante, at 192, n. 10. In this case, appellee received no meaningful notice and no kind of hearing before the official who fired him.

In sum, I believe that appellants’ actions “violate[d] clearly established statutory or constitutional rights of which a reasonable person would have known,” Harlow, 457 U. S., at 818, and I would therefore affirm the District Court’s award of damages.

       One memorandum reported to Capt. Sconiers that appellee had continued to work at his second job; a second had been addressed by Lt. Wiggins to appellee; other memoranda summarized Lt. Wiggins’ and Sgt. Clark’s discussions with appellee.

       Appellant Ralph Davis was Executive Director of the Department of Highway Safety and Motor Vehicles at the time of appellee’s discharge from employment. Appellant Chester Blakemore succeeded Davis to that position and is a party only in his official capacity. Appellant Col. J. Eldridge Beach is Director of the Florida Highway Patrol, a division of the Department of Highway Safety and Motor Vehicles; as noted above, he held that position at the time of appellee’s discharge.

       The complaint also alleged that appellants, in violation of the Fourteenth Amendment, had coerced appellee to accept an inadequate settlement and had infringed upon appellee’s right of privacy guaranteed by the First and Ninth Amendments.

       The District Court rejected appellee’s other constitutional claims.

       The District Court relied in part on the reasoning of Williams v. Treen, 671 F. 2d 892 (CA5 1982), cert. denied, 459 U. S. 1126 (1983), that had held that official conduct in violation of an explicit and clearly established state regulation was per se unreasonable. 671 F. 2d, at 899.

       These regulations specified in pertinent part:
      “Upon receiving a report of... a violation of Department or Division rules and regulations . . . , the Director shall order a complete investigation to determine the true facts concerning the circumstances surrounding the alleged offense. The completed investigation report will also contain a written statement made by the employee against whom the complaint was made. If after a thorough study of all information concerning the violation, the Director decides that a . . . dismissal will be in order, he will present the employee in writing with the reason or reasons for such actions.” General Order No. 43, §1.C (Sept. 1, 1977), quoted in 543 F. Supp., at 19-20.

       The Florida civil service statute now in force replaced the statute under which appellee’s employment was terminated. As the current state statute was never applied to appellee, he lacks standing to question its constitutionality. Cf. Golden v. Zwickler, 394 U. S. 103 (1969).
      Appellee’s concession does not deprive the Court of appellate jurisdiction over the remaining issue in the case. In cases where the Court of Appeals has declared a state statute unconstitutional, this Court may decide the “Federal questions presented,” 28 U. S. C. §1254(2). Cf. Flournoy v. Wiener, 321 U. S. 253, 263 (1944); Leroy v. Great Western United Corp., 443 U. S. 173 (1979). Under § 1254(2), the Court retains discretion to decline to consider those issues in the case not related to the declaration that the state statute is invalid. In the present casé, however, we choose to consider the important question whether the District Court and the Court of Appeals properly denied appellants’ good-faith immunity from suit.

       As we discuss below, it is contested whether these constitutional rights were clearly established at the time of appellants’ conduct.

       We see no reason to doubt, as does the partial dissent, that the Court of Appeals in Weisbrod had full knowledge of its own precedents and correctly construed them.

       As the partial dissent explains at some length, the decisions of this Court by 1978 had required “some kind of a hearing,” Board of Regents v. Roth, 408 U. S. 564, 570, n. 7 (1972), prior to discharge of an employee who had a constitutionally protected property interest in his employment. But the Court had not determined what kind of a hearing must be provided. Such a determination would require a careful balancing of the competing interests — of the employee and the State — implicated in the official decision at issue. See Mathews v. Eldridge, 424 U. S. 319, 335 (1976). As the Court had considered circumstances in which no hearing at all had been provided prior to termination, Perry v. Sindermann, 408 U. S. 593 (1972), or in which the requirements of due process were met, Board of Regents v. Roth, supra; Arnett v. Kennedy, 416 U. S. 134 (1974); Bishop v. Wood, 426 U. S. 341 (1976); Codd v. Velger, 429 U. S. 624 (1977), there had been no occasion to specify any minimally acceptable procedures for termination of employment. The partial dissent cites no case establishing that appellee was entitled to more elaborate notice, or a more formal opportunity to respond, than he in fact received.

       State law may bear upon a claim under the Due Process Clause when the property interests protected by the Fourteenth Amendment are created by state law. See Board of Regents v. Roth, supra, at 577. Appellee’s property interest in his job under Florida law is undisputed. Appellee does not contend here that the procedural rules in state law govern the constitutional analysis of what process was due to him under the Fourteenth Amendment.

         In Harlow, the Court acknowledged that officials may lose their immunity by violating “clearly established statutory . . . rights.” 457 U. S., at 818. This is the case where the plaintiff seeks to recover damages for violation of those statutory rights, as in Harlow itself, see id., at 820, n. 36, and as in many §1983 suits, see, e. g., Maine v. Thiboutot, 448 U. S. 1 (1980) (holding that § 1983 creates cause of action against state officials for violating federal statutes). For the reasons that we discuss, officials sued for violations of rights conferred by a statute or regulation, like officials sued for violation of constitutional rights, do not forfeit their immunity by violating some other statute or regulation. Rather, these officials become liable for damages only to the extent that there is a clear violation of the statutory rights that give rise to the cause of action for damages. And if a statute or regulation does give rise to a cause of action for damages, clear violation of the statute or regulation forfeits immunity only with respect to damages caused by that violation. In the present case, as we have noted, there is no claim that the state regulation itself or the laws that authorized its promulgation create a cause of action for damages or provide the basis for an action brought under § 1983.

        Harlow was a suit against federal, not state, officials. But our cases have recognized that the same qualified immunity rules apply in suits against state officers under § 1983 and in suits against federal officers under Bivens v. Six Unknown Federal Narcotics Agents, 403 U. S. 388 (1971). See Butz v. Economou, 438 U. S., at 504. Neither federal nor state officials lose their immunity by violating the clear command of a statute or regulation — of federal or of state law — unless that statute or regulation provides the basis for the cause of action sued upon.

       Officials would be required not only to know the applicable regulations, but also to understand the intent with which each regulation was adopted. Such an understanding often eludes even trained lawyers with full access to the relevant legislative or administrative materials. It is unfair and impracticable to require such an understanding of public officials generally.

       Appellee urges as well that appellants’ violation of the personnel regulation constituted breach of their “ministerial” duty — established by the regulation — to follow various procedures before terminating appellee’s employment. Although the decision to discharge an employee clearly is discretionary, appellee reasons that the Highway Patrol regulation deprived appellants of all discretion in determining what procedures were to be followed prior to discharge. Under this view, the Harlow standard is inapposite because this Court’s doctrine grants qualified immunity to officials in the performance of discretionary, but not ministerial, functions.
      Appellee’s contention mistakes the scope of the “ministerial duty” exception to qualified immunity in two respects. First, as we have discussed, breaeh of a legal duty created by the personnel regulation would forfeit official immunity only if that breach itself gave rise to the appellee’s cause of action for damages. This principle equally applies whether the regulation created discretionary or ministerial duties. Even if the personnel regulation did create a ministerial duty, appellee makes no claim that he is entitled to damages simply because the regulation was violated. See supra, at 193-194, and n. 12.
      In any event, the rules that purportedly established appellants’ “ministerial” duties in the present ease left to appellants a substantial measure of discretion. Cf. Amy v. The Supervisors, 11 Wall. 136, 138 (1871); Kendall v. Stokes, 3 How. 87, 98 (1845). Appellants were to determine, for example, what constituted a “complete investigation” and a “thorough study of all information” sufficient to justify a decision to terminate ap-pellee’s employment. See n. 6, supra. And the District Court’s finding that appellants ignored a clear legal command does not bear on the “ministerial” nature of appellants’ duties. A law that fails to specify the precise action that the official must take in each instance creates only discretionary authority; and that authority remains discretionary however egregiously it is abused. Cf. Kendall v. Stokes, supra.

       agree that the District Court erred in declaring the new Florida civil service statute unconstitutional, see ante, at 189, and therefore concur in that portion of the judgment vacating paragraph 2 of the District Court’s amended order. See 543 F. Supp. 4, 21 (ND Fla. 1981).

       Because I believe appellants were not entitled to qualified immunity under the standards set forth in Harlow v. Fitzgerald, 457 U. S. 800 (1982), I need not consider whether, as appellee contends, violation of the department regulation would defeat immunity for violating federal rights of which the officials had no reasonable knowledge. It seems plain to me, however, that the existence of the regulation is relevant to the Harlow analysis. Regardless of whether this Court or the Court of Appeals now thinks appellee’s right to pretermination notice and hearing was not “clearly established” in 1977, the presence of a clear-cut regulation obviously intended to safeguard public employees’ constitutional rights certainly suggests that appellants had reason to believe they were depriving appellee of due process. Cf. Harlow, supra, at 821 (Brennan, J., concurring). Such an objective basis of knowledge provides at least as reliable a measure of the reasonableness of official action as does a court’s post hoc parsing of cases. See 457 U. S., at 815-819.


source: Caselaw Access Project

author: Justice Powell

license: Public Domain

text:
    SECURITIES INDUSTRY ASSOCIATION v. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM et al.
    No. 83-614.
    Argued April 24, 1984
    Decided June 28, 1984

      Powell, J., delivered the opinion for a unanimous Court.

      James B. Weidner argued the cause for petitioner. With him on the briefs were John M. Liftin, David A. Schulz, William J. Fitzpatrick, and Donald J. Crawford.

      Carter G. Phillips argued the cause for respondents. With him on the brief for the federal respondents were Solicitor General Lee and Deputy Solicitor General Claiborne. Arnold M. Lerman, Andrea Timko Sallet, and H. Helmut Coring filed a brief for respondent BankAmerica Corp.

      Briefs of amici curiae urging affirmance were filed for the American Bankers Association et al. by Robert S. Rifkind; and for the Legal Foundation of America by David Crump.

   Justice Powell

delivered the opinion of the Court.

This case presents the question whether the Federal Reserve Board has statutory authority under § 4(c)(8) of the Bank Holding Company Act of 1956, 12 U. S. C. § 1843(c)(8), to authorize a bank holding company to acquire a nonbanking affiliate engaged principally in retail securities brokerage.

HH

BankAmerica Corp. (BAC) is a bank holding company within the meaning of the Bank Holding Company Act. In March 1982, BAC applied to the Federal Reserve Board (Board) for approval under § 4(c)(8) of the Act to acquire 100 percent of the voting shares of The Charles Schwab Corp., a company that engages through its wholly owned subsidiary, Charles Schwab & Co. (Schwab), in retail discount brokerage. The Board ordered that formal public hearings be held before an Administrative Law Judge (ALJ) to consider the application. The Securities Industry Association (SIA), a national trade association of securities brokers, and petitioner here, opposed BAC’s application and participated in those hearings. After six days of hearings, the ALJ recommended that BAC’s application be approved. After reviewing the evidentiary record, the Board adopted, with modifications, the findings and conclusions of the ALJ and authorized BAC to acquire Schwab. 69 Fed. Res. Bull. 105 (1983). SIA petitioned the Court of Appeals for the Second Circuit for judicial review under 12 U. S. C. § 1848.

The Court of Appeals held that the Board had acted within its statutory authority in authorizing BAC’s acquisition of Schwab under § 4(c)(8) of the BHC Act. The court accordingly affirmed the Board’s order. 716 F. 2d 92 (1983). We granted SIA’s petition for certiorari, 465 U. S. 1004 (1984), and now affirm.

II

Section 4 of the Bank Holding Company Act (BHC Act) prohibits the acquisition by bank holding companies of the voting shares of nonbanking entities unless the acquisition is specifically exempted. The principal exemption to that prohibition is found in § 4(c)(8). That provision authorizes bank holding companies, with prior Board approval, to engage in nonbanking activities that the Board determines are “so closely related to banking ... as to be a proper incident thereto.” 12 U. S. C. § 1843(c)(8).

Application of the § 4(c)(8) exception requires the Board to make two separate determinations. First, the Board must determine whether the proposed activity is “closely related” to banking. If it is, the Board may amend its regulations to include the activity as a permissible nonbanking activity. Next, the Board must determine on a case-by-case basis whether allowing the applicant bank holding company to engage in the activity reasonably may be expected to produce public benefits that outweigh any potential adverse effects. H. R. Conf. Rep. No. 91-1747, pp. 16-18 (1970).

A

In this case, the Board held that the securities brokerage services offered by Schwab were “closely related” to banking within the meaning of § 4(c)(8). Relying on record evidence and its own banking expertise, the Board articulated the ways in which the brokerage activities provided by Schwab were similar to banking. The Board found that banks currently offer, as an accommodation to their customers, brokerage services that are virtually identical to the services offered by Schwab. 69 Fed. Res. Bull., at 107. Moreover, the Board cited a 1977 study by the Securities and Exchange Commission that found that

“bank trust department trading desks, at least at the largest banks, perform the same functions, utilize the same execution techniques, employ personnel with the same general training and expertise, and use the same facilities . . . that brokers do.” Ibid.

Finally, the Board concluded that the use by banks of “sophisticated techniques and resources” to execute purchase and sell orders for the account of their customers was sufficiently widespread to justify a finding that banks generally are equipped to offer the type of retail brokerage services provided by Schwab. Id., at 108. On the basis of these findings, the Board held that a securities brokerage business that is “essentially confined to the purchase and sale of securities for the account of third parties, and without the provision of investment advice to the purchaser or seller” is “closely related” to banking within the meaning of § 4(e)(8) of the BHC Act. Id., at 117.

B

The Board next determined that the public benefits likely to result from BAC’s acquisition of Schwab outweighed the possible adverse effects. Specifically, the Board identified as public benefits the increased competition and the increased convenience and efficiencies that the acquisition would bring to the retail brokerage business. Id., at 109-110. As to possible adverse effects, the Board determined that the proposed acquisition would not result in the undue concentration of resources, decreased competition, or unfair competitive prices. Id., at 110-114.

Finally, the Board concluded that BAC’s acquisition of Schwab was not prohibited by the Glass-Steagall Act. Id., at 114-116. The Board observed that the proposed acquisition would make Schwab an affiliate of BAC’s banking subsidiary and thus subject to the provisions of the Glass-Steagall Act. It held, however, that Schwab was “not engaged principally in any of the activities prohibited to member bank affiliates by the Glass-Steagall Act,” and thus concluded that the acquisition was “consistent with the letter and spirit of that act.” Id., at 114.

SIA challenges the Board’s order in this case on two grounds. First, it argues that the Board may not approve an activity as “closely related” to banking unless it finds that the activity will facilitate other banking operations. Second, it argues that §20 of the Glass-Steagall Act, 12 U. S. C. § 377, prohibits a bank holding company from owning any entity that is engaged principally in retail securities brokerage and thus that the Board lacked statutory authority under § 4(c)(8) to approve BAC’s acquisition of Schwab.

H-H I — I

A

There is no express requirement in § 4(c)(8) that a proposed activity must facilitate other banking operations before it may be found to be “closely related” to banking. Indeed, the relevant statutory language does not specify any factors that the Board must consider in making that determination. The general nature of the statutory language, therefore, suggests that Congress vested the Board with considerable discretion to consider and weigh a variety of factors in determining whether an activity is “closely related” to banking. In this case, the Board concluded that Schwab’s brokerage services were “closely related” to banking because it found that the services were “operationally and functionally very similar to the types of brokerage services that are generally provided by banks and that banking organizations are particularly well equipped to provide such services.” 69 Fed. Res. Bull., at 107. The Board acted well within its discretion in ruling on such factors. Moreover, the Board’s factual findings are substantially supported by the record.

Banks long have arranged the purchase and sale of securities as an accommodation, to their customers. Congress expressly endorsed this traditional banking service in 1933. Section 16 of the Glass-Steagall Act authorizes banks to continue the practice of “purchasing and selling . . . securities and stock without recourse, solely upon the order, and for the account of, customers, and in no case for [their] own accounts].” 12 U. S. C. §24 Seventh. The Board found that in substance the brokerage services that Schwab performs for its customers are not significantly different from those that banks, under the authority of § 16, have been performing for their own customers for years. See 69 Fed. Res. Bull., at 107-109. Moreover, the amendment to Regulation Y, added by the Board in 1983 to reflect its decision in this case, expressly limits the securities brokerage services in which a bank may engage “to buying and selling securities solely as agent for the account of customers” and does not authorize “securities underwriting or dealing or investment advice or research services.” 48 Fed. Reg. 37006 (1983).

Congress has committed to the Board the primary responsibility for administering the BHC Act. Accordingly, the Board’s determination of what activities are “closely related” to banking within the meaning of § 4(c)(8) “is entitled to the greatest deference. ” Board of Governors of Federal Reserve System v. Investment Company Institute, 450 U. S. 46, 56 (1981) (ICI). In this case, the Board has articulated with commendable thoroughness the ways in which banking activities are similar to the brokerage activities at issue here. The standard the Board used to determine that Schwab’s brokerage business is “closely related” to banking is reasonable and supported by a normal reading of the statutory language of § 4(c)(8). The factual findings to which this standard was applied are substantially supported by the record. The Court of Appeals, therefore, properly deferred to the Board’s determination in this case.

B

The Board expressly considered and rejected SIA’s argument that BAC’s acquisition of Schwab violates the Glass-Steagall Act. That Act comprises four sections of the Banking Act of 1933. Only one of those four sections is applicable here. That provision, §20, as set forth in 12 U. S. C. § 377, provides in relevant part:

“[N]o member bank shall be affiliated in any manner described in subsection (b) of section 221a of this title with any corporation, association, business trust, or other similar organization engaged principally in the issue, flotation, underwriting, public sale, or distribution at wholesale or retail or through syndicate participation of stocks, bonds, debentures, notes, or other securities ...” (emphasis added).

A bank holding company’s subsidiaries are bank affiliates within the meaning of § 20. 12 U. S. C. § 221a(b). Section 20, therefore, prohibits BAC’s proposed acquisition if Schwab is “engaged principally” in any of the activities listed therein.

SI A concedes that Schwab is not engaged in the “issue, flotation, underwriting, ... or distribution” of securities. It argues, however, that the term “public sale” of securities as used in § 20 applies to Schwab’s brokerage business. The Board rejected this argument, holding that “Schwab is not engaged principally in any of the activities prohibited to member bank affiliates by the Glass-Steagall Act.” 69 Fed. Res. Bull., at 114. The Board has broad power to regulate and supervise bank holding companies and banks that are members of the Federal Reserve System. In this respect, the Board has primary responsibility for implementing the Glass-Steagall Act, and we accord substantial deference to the Board’s interpretation of that Act whenever its interpretation provides a reasonable construction of the statutory language and is consistent with legislative intent. ICI, supra, at 68; Investment Company Institute v. Camp, 401 U. S. 617, 626-627 (1971).

“Public sale” is used in conjunction with the terms “issue,” “flotation,” “underwriting,” and “distribution” of securities. None of these terms has any relevance to the brokerage business at issue in this case. Schwab does not engage in issuing or floating the sale of securities, and the terms “underwriting” and “distribution” traditionally apply to a function distinctly different from that of a securities broker. An underwriter normally acts as principal whereas a broker executes orders for the purchase or sale of securities solely as agent. Under the “familiar principle of statutory construction that words grouped in a list should be given related meaning,” Third National Bank v. Impac, Ltd., 432 U. S. 312, 322 (1977) (footnote omitted), the term “public sale” in § 20 should be read to refer to the underwriting activity described by the terms that surround it, and to exclude the type of retail brokerage business in which Schwab principally is engaged.

This reading of the statute is further supported by the Board’s longstanding interpretation of identical language found in §32 of the Glass-Steagall Act, 12 U. S. C. §78. That section prohibits interlocking management or employment between banks and any entity “primarily engaged in the issue, flotation, underwriting, public sale, or distribution, at wholesale or retail, or through syndicate participation” of securities. 12 U. S. C. §78 (emphasis added). In January 1936, the Board interpreted the list of prohibited activities described in § 32 to exclude the kind of brokerage activities at issue here. Specifically, the Board ruled that

“[a] broker who is engaged solely in executing orders for the purchase and sale of securities on behalf of others in the open market is not engaged in the business referred to in section 32.” 22 Fed. Res. Bull. 51, n. 1 (1936).

Because §§32 and 20 contain identical language, were enacted for similar purposes, and are part of the same statute, the long-accepted interpretation of the term “public sale” to exclude brokerage services such as those offered by Schwab should apply as well to § 20. The Board’s interpretation of the disputed term is supported by the plain language of the statute. It is also entirely consistent with legislative intent.

The legislative history demonstrates that Congress enacted § 20 to prohibit the affiliation of commercial banks with entities that were engaged principally in “activities such as underwriting.” ICI, 450 U. S., at 64; see Camp, supra, at 630-634. In 1933, Congress believed that the heavy involvement of commercial banks in underwriting and securities speculation had precipitated “the widespread bank closings that occurred during the Great Depression.” ICI, supra, at 61. One of the most serious threats to sound commercial banking perceived by Congress was the existence of “bank affiliates” that “devote themselves in many cases to perilous underwriting operations, stock speculation, and maintaining a market for the banks’ own stock often largely with the resources of the parent bank.” S. Rep. No. 77, 73d Cong., 1st Sess., 10 (1933).

Congressional concern over the underwriting activities of bank affiliates included both the fear that bank funds would be lost in speculative investments and the suspicion that the more “subtle hazards” associated with underwriting would encourage unsound banking practices. See Camp, 401 U. S., at 630. None of the more “subtle hazards” of underwriting identified in Camp is implicated by the brokerage activities at issue here. Because Schwab trades only as agent, its assets are not subject to the vagaries of the securities markets. Moreover, Schwab’s profits depend solely on the volume of shares it trades and not on the purchase or sale of particular securities. Thus, BAC has no “salesman’s stake” in the securities Schwab trades. It cannot increase Schwab’s profitability by having its bank affiliate extend credit to issuers of particular securities, nor by encouraging the bank affiliate improperly to favor particular securities in the management of depositors’ assets. Finally, the fact that § 16 of the Glass-Steagall Act allows banks to engage directly in the kind of brokerage services at issue here, to accommodate its customers, suggests that the activity was not the sort that concerned Congress in its effort to secure the Nation’s banks from the risks of the securities market.

In sum, we see no reason to disturb the Board’s determination that “the business of purchasing or selling securities upon the unsolicited order of, and as agent for, a particular customer does not constitute the ‘public sale’ of securities for purposes of section 20.” 69 Fed. Res. Bull., at 114. This interpretation of the Glass-Steagall Act is reasonable, consistent with the plain language of the statute and its legislative history, and deserves the deference normally accorded the Board’s construction of the banking laws.

<

The Board determined in this case that a securities brokerage business that is essentially limited to the purchase and sale of securities for the account of customers, and without provision of investment advice to purchaser or seller, is “closely related” to banking. We hold that the Board’s determination is consistent with the language and policies of the BHC Act. We also hold that the Board’s determination that the Glass-Steagall Act permits bank holding companies to acquire firms engaged in such a brokerage business is reasonable and supported by the plain language and legislative history of the Act. We therefore affirm the judgment of the Court of Appeals.

It is so ordered.

       BAC operates one subsidiary bank, Bank of America. That bank is a member of the Federal Reserve System, and the parties inform us that it is the largest commercial bank in the United States.

       Schwab is known as a “discount” broker because of the low commissions it charges. Schwab can afford to charge lower commissions than full-service brokerage firms because it does not provide investment advice or analysis, but merely executes the purchase and sell orders placed by its customers.

       In addition to BAC, the Justice Department participated in the hearing as a proponent of the proposed acquisition.

       Section 4(c)(8) provides that the general ban on the ownership by a bank holding company of shares in any company other than a bank shall not apply to:
      “(8) shares of any company the activities of which the Board after due notice and opportunity for hearing has determined (by order or regulation) to be so closely related to banking or managing or controlling banks as to be a proper incident thereto .... In determining whether a particular activity is a proper incident to banking or managing or controlling banks the Board shall consider whether its performance by an affiliate of a holding company can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices.” 12 U. S. V. § 1843(c)(8).

       In making this determination, the Board generally has followed the guidelines announced in National Courier Assn. v. Board of Governors, 170 U. S. App. D. C. 301, 516 F. 2d 1229 (1975). That case held that an activity is “closely related” to banking within the meaning of § 4(c)(8) if any one of the following is demonstrated:
      “1. Banks generally have in fact provided the proposed services.
      “2. Banks generally provide services that are operationally or functionally so similar to the proposed services as to equip them particularly well to provide the proposed service.

        “3. Banks generally provide services that are so integrally related to the proposed services as to require their provision in a specialized form.” Id., at 313, 516 F. 2d, at 1237.
      The Board has recognized, however, that the National Courier guidelines do not provide the exclusive basis for finding that an activity is “closely related” to banking, and has stated that it will consider “any . . . factor that an applicant may advance to demonstrate a reasonable or close connection or relationship of the activity to banking.” 49 Fed. Reg. 806 (1984). 6

       See 12 CFR § 225 (1983) (“Regulation Y”). Section 225.4 of Regulation Y contains a list of those activities already determined by the Board to be “closely related” to banking.

       When a bank holding company applies for approval to engage in an activity already listed in Regulation Y, the application generally will be acted on by a Reserve Bank under delegated authority from the Board. 49 Fed. Reg. 815 (1984). In acting on the application, the Reserve Bank need determine only that the public benefits that are likely to result from the applicant’s proposal will outweigh the possible adverse effects. If, as in this case, an application involves a currently unlisted activity, it must be considered by the Board itself. In that case, the Board must make both of the determinations described above before approving the application.

       The Board conceded that banks, unlike retail brokers, use an intervening broker to execute orders for the purchase and sale of securities traded on an exchange. The Board found, however, that banks often execute purchase and sell orders for securities that are not traded on an exchange without an intervening broker. To this extent they perform the same services as a retail broker. 69 Fed. Res. Bull., at 107.

       The Board, after notice and comment, subsequently amended Regulation Y to include the securities brokerage business at issue here in the list of permissible nonbanking activities. See 48 Fed. Reg. 7746 (1983) (proposed amendment published for comment); 48 Fed. Reg. 37003 (1983) (final regulation amending 12 CFR § 225.4). The final amendment to Regulation Y added as a permissible nonbanking activity:
      “(15) providing securities brokerage services, related securities credit activities pursuant to the Board’s Regulation T (12 CFR Part 220), and incidental activities such as offering custodial services, individual retirement accounts, and cash management services, provided that the securities brokerage services are restricted to buying and selling securities solely as agent for the account of customers and do not include securities underwriting or dealing or investment advice or research services.” 48 Fed. Reg. 37006 (1983) (emphasis in original).

       The Glass-Steagall Act was enacted as part of the Banking Act of 1933. 11

       In proceedings before the Court of Appeals, SIA apparently challenged the Board’s public benefit analysis as well. See 716 F. 2d 92, 103-104 (CA2 1983). SIA, however, has not advanced that argument here.

       SIA argues that the legislative history of the 1970 amendment to § 4(c)(8) establishes that Congress expressly rejected a “functionally related” standard, and that the Board exceeded its statutory authority by relying on that standard here. This argument is without merit. In 1970, the initial versions of both the House and Senate bills changed the “closely related” test of § 4(c)(8) to a “functionally related” test. S. Rep. No. 91-1084, p. 25 (1970); H. R. Rep. No. 91-387, p. 1 (1969). The Conference Committee, however, retained the “closely related” language of the prior Act in the final version of the bill. H. R. Conf. Rep. No. 91-1747, p. 5 (1970). As we observed in Board of Governors of Federal Reserve System v. Investment Company Institute, 450 U. S. 46, 73 (1981), the significance of this legislative history is unclear. It is, however, clear that the 1970 amendment broadened rather than restricted the Board’s discretion to determine whether nonbanking activities are significantly related to banking. See id., at 72-76. Thus, there is no indication that Congress intended to preclude consideration by the Board of the functional relationship of nonbanking activities to banking in determining whether those activities may qualify for the § 4(c)(8) exemption.
      Moreover, it is not clear that the Board in this case applied the “functionally related” test arguably rejected by Congress in 1970. The Board found that Schwab’s brokerage business was both “operationally and functionally very similar to” traditional banking services and that banks were well equipped to provide those services. 69 Fed. Res. Bull., at 107.

       See S. Rep. No. 77, 73d Cong., 1st Sess., 16 (1933) (explaining that § 16 was intended to permit banks “to purchase and sell investment securities for their customers to the same extent as heretofore”).

       See n. 9, supra. Schwab also provides some incidental services to its customers such as margin lending, custodial accounts, and appropriate account maintenance. The Board also approved these as “closely related” to banking when offered incident to the approved brokerage services. See 69 Fed. Res. Bull, at 108-109. SIA has not challenged the Board’s conclusions with respect to these incidental services.

       Those four sections are §§ 16, 20, 21, and 32, codified respectively at 12 U. S. C. §§ 24, 377, 378, and 78.

       Such deference is appropriate where, as here, the Board expressly addressed the application of the Glass-Steagall Act to the proposed regulatory action and determined that the proposed action implicated none of the concerns that led to the enactment of that Act. See ICI, 450 U. S., at 68. In Camp, on the other hand, we gave less deference to regulatory action that was taken without any “expressly articulated position at the administrative level as to the meaning and impact of the provisions of [the Glass-Steagall Act].” 401 U. S., at 627. We held in Camp that agency action taken “without opinion or accompanying statement” was “hardly tantamount to an administrative interpretation” of the Glass-Steagall Act, and was not due the deference normally accorded such regulatory action. Id., at 627-628.

       In the typical distribution of securities, an underwriter purchases securities from an issuer, frequently in association with other underwriters. The distribution of these securities to the public may be effected by the underwriters alone, or in conjunction with a group of dealers who also purchase and sell the particular issue of securities as principals. Underwriters also may distribute securities under a “best efforts” agreement pursuant to which large blocks of specific issues of securities are offered to the public by the investment banker as agent for the issuer. A “best efforts” distribution is not technically an underwriting. 1 L. Loss, Securities Regulations 172 (2d ed. 1961). Because Schwab’s brokerage business involves none of these distribution plans, we need not consider whether a “best efforts” distribution is prohibited under § 20.

       Most securities firms engage in all aspects of the securities business, acting at various times as underwriters, dealers, or brokers. As underwriter and dealer, the firm buys and sells securities on its own account thereby assuming all risk of loss. As broker, the firm buys and sells securities as an agent for the account of customers. In these transactions, it is the customer, rather than the securities firm, who bears the risk of loss. Schwab is different from most securities firms in that it engages solely in the brokerage business and does not participate in underwriting or dealing in securities.

       Section 32 provides in relevant part:
      “No officer, director, or employee of any corporation or unincorporated association, no partner or employee of any partnership, and no individual, primarily engaged in the issue, flotation, underwriting, public sale, or distribution, at wholesale or retail, or through syndicated participation, of stocks, bonds, or other similar securities, shall serve the same time as an officer, director, or employee of any member bank....” 12 U. S. C. § 78.

       SIA argues that the phrase in § 16 that allows banks to engage in “purchasing and selling . . . securities and stock, without recourse, solely upon the order, and for the account of, customers” is essentially equivalent to the term in § 20 that prohibits the “public sale” of securities. This argument is unpersuasive. There is no basis for assuming that the dissimilar phrases found in §§16 and 20 are coterminous. The permissive phrase found in § 16 accurately describes securities brokerage and clearly distinguishes that activity from the activities of “dealing in, underwriting and purchasing for its own account investment securities” that are prohibited elsewhere in that section. Section 20 also prohibits bank affiliates from engaging in these latter activities. The description of securities brokerage found in § 16, however, appears nowhere in § 20.
      Moreover, § 16 applies only to banks, not to bank holding companies, and is not applicable here. Thus, we have no occasion to determine whether § 16 would permit banks to engage in brokerage activity on the behalf of the general public as well as for their own customers.

       See Hearings pursuant to S. 71 before a Subcommittee of the Senate Committee on Banking and Currency, 71st Cong., 3d Sess., 1052-1068 (1931).

       We held in that case:
      “The legislative history of the Glass-Steagall Act shows that Congress also had in mind and repeatedly focused on the more subtle hazards that arise when a commercial bank goes beyond the business of acting as fiduciary or managing agent and enters the investment banking business either directly or by establishing an affiliate to hold and sell particular investments.” 401 U. S., at 630.

       See Camp, 401 U. S., at 631-634 (identifying the “subtle hazards” of affiliation with underwriting firms). All these “subtle hazards” are attributable to the promotional pressures that arise from affiliation with entities that purchase and sell particular investments on their own account.