Kennedy C. Scott v. Federal Reserve Bank of Kansas City

Citations: 406 F.3d 532; 62 Fed. R. Serv. 3d 89; 2005 U.S. App. LEXIS 7273; 95 Fair Empl. Prac. Cas. (BNA) 1038; 2005 WL 975665Docket: 04-2357

Court: Court of Appeals for the Eighth Circuit; April 28, 2005; Federal Appellate Court

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Kennedy C. Scott appealed the district court's summary judgment in his Title VII discrimination case against the Federal Reserve Bank of Kansas City. The Bank moved to dismiss the appeal due to a jurisdictional issue, as Scott filed his notice of appeal fifty-five days after the judgment—beyond the thirty-day limit established by Fed. R. App. P. 4(a)(1)(A). The court held that, while parties have sixty days to appeal when the United States government is involved (Fed. R. App. P. 4(a)(1)(B)), the Federal Reserve Bank is not considered a federal agency for these purposes. 

Scott argued that the Bank is a federal agency because it was created by federal law, is exempt from state taxes, and plays a crucial role in the Federal Reserve system. He cited a determination by the Missouri Commission on Human Rights indicating the Bank is part of the federal government. In contrast, the Bank contended it operates independently from the federal government, is owned by commercial banks, and its employees are not federal employees. The court examined the definition of "agency" under 28 U.S.C. 451 and noted that it includes any U.S. department or establishment, but emphasized that the Federal Reserve Banks do not fit this classification. Ultimately, the appeal was dismissed as untimely.

The Bank is not classified as an "independent establishment" under Title 28, inferred to mean an independent entity within the executive branch, as evidenced by its operational structure. It operates as a private entity governed by its own board of directors, separate from the Federal Reserve Board of Governors, thereby lacking the characteristics of government corporations or independent establishments. The Bank is also not deemed a federal agency based on any proprietary interest of the United States, as it is solely owned by commercial banks in its district, with no U.S. stock ownership. While the United States may have a fiscal relationship with the Bank and receive its profits, this does not equate to a proprietary interest. The distinction is made that federal instrumentalities, like the Bank, do not achieve federal agency status, as clarified in various legal precedents. Consequently, the Bank is characterized as a federally-created instrumentality without the U.S. holding proprietary interests, nor is it considered part of the federal government’s departments or agencies.

The court considers whether a Federal Reserve Bank qualifies as a federal agency under Rule 4, noting that it has not previously addressed this issue. Other circuits have explored similar questions regarding agency status under 28 U.S.C. 451, but not specifically in relation to Rule 4. The Ninth Circuit's decision in In Re Hoag Ranches is referenced for its six-factor test to determine agency status, which includes: 1) the extent of government functions performed, 2) the government's involvement scope, 3) financing sources, 4) proprietary interests, 5) statutory references as an agency, and 6) treatment as a government branch in other statutes.

Applying these factors to the Bank indicates it is not a federal agency. Firstly, while the Bank performs limited governmental functions, such as issuing currency and managing government securities, it lacks the authority to create regulations with the force of law, a power retained solely by the Board of Governors. Secondly, the government's involvement is limited since the Bank is managed by a nine-member board and its employees are not considered government employees. The Bank operates independently, can sue or be sued, and its employees do not participate in the Civil Service Retirement System or receive government worker's compensation. Lastly, the Bank does not receive direct government financing; it operates independently through funds derived from member banks purchasing stock in the Federal Reserve system. Overall, these factors suggest that, despite its role in federal fiscal policy, the Bank operates with minimal government involvement.

Persons other than the government hold proprietary interests in Federal Reserve Banks, which are not classified as wholly-owned or mixed-ownership corporations under federal law. Individual commercial member banks own stock in these banks and elect a majority of their board of directors. Federal Reserve Banks transfer all revenue exceeding expenses to the U.S. Treasury and provide additional benefits through a surplus account managed by the Treasury, which can be used to bolster the gold reserve or reduce the national bond debt. While no statute classifies Federal Reserve Banks as federal agencies, they serve as government fiscal agents, as recognized in various legal contexts. However, case law, including a Second Circuit ruling, indicates that acting as an agent does not automatically categorize an entity as a federal agency. Courts have occasionally treated Federal Reserve Banks as federal agencies, particularly regarding fiscal policy and the Service Contract Act. Conversely, they have been ruled not to be part of the federal government in contexts such as the Federal Tort Claims Act and specific employment discrimination statutes. Claims that their tax-exempt status as federal instrumentalities designates them as federal agencies are weakened by the absence of explicit congressional designation within the codification of this status.

Rule 4's rationale for allowing additional time for government agencies to decide on appeals does not apply to the Federal Reserve Bank. Unlike government entities that require coordination among multiple departments, the Bank only consults its private counsel regarding legal actions. Therefore, it does not need the extended timeframe typically afforded by Rule 4, which is designed for federal agencies. Based on the definition of an agency in Title 28, the Hoag analysis, and the limited applicability of Rule 4 to the banks, the Federal Reserve Bank of Kansas City is determined not to be a federal agency. Consequently, the motion to dismiss the appeal is granted. Notably, while some entities, like the Federal Deposit Insurance Corporation, are classified as federal agencies by Congress, the Federal Reserve Bank does not share this status.