## Facts

- Federal law requires depository institutions to maintain reserves, including as noninterest-bearing deposits at Federal Reserve Banks.
- The Federal Reserve uses reserve balances in carrying out monetary policy and invests funds; after expenses and dividends, statutory provisions require remittance of surplus earnings to the U.S. Treasury.
- Texas State Bank maintained required reserve deposits at a Federal Reserve Bank.
- The bank alleged that earnings attributable to its mandated reserves were its private property and that directing those earnings to the Treasury constituted a taking without just compensation.
- The bank did not challenge the legality of the reserve requirement itself, only the allocation of earnings generated from reserve balances.

## Issues

1. Whether the Court of Federal Claims had Tucker Act jurisdiction over the bank’s takings claim, or whether jurisdiction was barred by the non-appropriated funds instrumentality (NAFI) doctrine based on the Federal Reserve’s role.
2. Whether a depository institution has a cognizable property interest in earnings generated from required, noninterest-bearing reserve deposits such that remittance of those earnings to the Treasury is a compensable taking under the Fifth Amendment.

## Decision

- The Federal Circuit reversed the jurisdictional dismissal, holding the Court of Federal Claims had Tucker Act jurisdiction because the claim was asserted against the United States rather than the Federal Reserve Board as a NAFI.
- The Federal Circuit nonetheless affirmed dismissal of the action on the merits because the bank failed to allege a valid takings claim.
- The court concluded Texas State Bank had not shown a cognizable property interest in the earnings generated from required reserve balances.

## Legal Principles

- Tucker Act jurisdiction is not defeated by the NAFI doctrine when the gravamen of the claim alleges a taking by the United States; the proper inquiry is whether the claim seeks money from the United States for alleged governmental action.
- A Fifth Amendment takings claim requires a legally cognizable property interest in the asset allegedly taken.
- Where a statutory scheme assigns earnings from Federal Reserve operations to the Federal Reserve/Treasury, member or depository banks do not have a compensable property right in earnings generated from required reserve balances.

## Conclusion

The Federal Circuit held the Court of Federal Claims had jurisdiction to hear the takings claim, but affirmed dismissal because the bank lacked a protected property interest in earnings derived from mandatory Federal Reserve reserve deposits, defeating any claim for just compensation.


Tex. State Bank v. United States, 423 F.3d 1370 (Fed. Cir. 2005)