Originally published June 29, 2009
Keywords: Cuomo, Clearing House Association, National Bank Act, NBA, home mortgage, fair-lending laws, lending practices, OCC, OCC regulation
Today the Supreme Court issued a decision, described below, of interest to the business community.
Cuomo v. Clearing House Association, L.L.C., No. 08-453 (previously discussed in the January 16, 2009 Docket Report)
In a 5-4 decision authored by Justice Scalia, the Supreme Court held today that the National Bank Act ("NBA"), 12 U.S.C. § 484(a), does not prohibit states from enforcing generally applicable state laws against national banks, but does prohibit states from issuing investigative subpoenas to such banks.
The case arose out of the New York State Attorney General's investigation of the home mortgage industry for violations of the state's fair-lending laws. After the Attorney General requested that certain banks share non-public information about their lending practices "in lieu of a subpoena," the federal Office of the Comptroller of the Currency ("OCC") and a banking trade group successfully sued to enjoin the information request. The district court issued an injunction that prohibited the Attorney General from enforcing state fair-lending laws through demands for records or judicial proceedings. The Second Circuit affirmed. In its decision today, the Supreme Court affirmed in part and reversed in part.
Section 484(a) of the NBA provides that "[n]o national bank shall be subject to any visitorial powers except as authorized by Federal law." An OCC regulation interprets the term "visitorial powers" to include—and thus to have the effect of proscribing—state "enforcement actions." 12 C.F.R. § 7.4000(a)(1). The Court acknowledged that the term "visitorial powers" is ambiguous, and that the OCC's interpretation is therefore due deference if it is reasonable. But—relying on contemporary understanding of the term's meaning at the time the NBA was adopted, subsequent judicial decisions, practical consequences, and otherwise inexplicable exceptions acknowledged by the OCC itself—the Court held that the OCC had unreasonably interpreted the term to reach state judicial enforcement actions. At the same time, however, the Court concluded that OCC had reasonably interpreted the term to include, and thus proscribe, state administrative oversight actions. Accordingly, distinguishing between "sovereign-as-supervisor" and "sovereign-as-law-enforcer," the Court vacated the injunction to the extent it prohibited the state attorney general from suing to enforce the state's fair-lending laws, but sustained the injunction to the extent it barred the state from issuing administrative subpoenas.
Justice Thomas, joined by the Chief Justice and Justices Kennedy
and Alito, dissented as to the partial vacatur. The
dissenters believed that the OCC's regulation provided a
reasonable interpretation of the ambiguous phrase "visitorial
powers" and that it was therefore entitled to deference.
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