The Supreme Court yesterday took an important step toward resolving the growing uncertainty over the scope of National Bank Act preemption. In an order issued October 5, the Court invited the Solicitor General to file briefs expressing the views of the United States in three cases involving state laws requiring national banks to pay interest on mortgage escrow accounts: Cantero v. Bank of America, N.A., No. 25-1313; Citizens Bank, N.A. v. Conti, No. 25-1004; and Flagstar Bank, N.A. v. Kivett, No. 25-1350. The Court’s order does not mean that it has granted certiorari. But asking the Solicitor General for the views of the United States in all three cases is a strong indication that the Court is seriously considering whether to revisit the important preemption issue it addressed just two years ago in Cantero.
The Three Cases
As we discussed in our recent post concerning the Second Circuit’s decision the Supreme Court’s 2024 Cantero decision rejected the Second Circuit’s categorical approach to National Bank Act preemption and instructed courts to determine whether a state law “prevents or significantly interferes” with the exercise of a national bank’s powers under the framework established in Barnett Bank.
On remand, however, the Second Circuit reached the opposite result from the First Circuit in Conti. The Second Circuit held that New York’s requirement that banks pay 2% interest on mortgage escrow balances is preempted, while the First Circuit held that Rhode Island’s similar requirement is not. The Second Circuit expressly disagreed with the First Circuit’s reasoning.
That has produced a direct circuit conflict over how the Supreme Court opinions in Cantero and Barnett Bank should be applied.
The Ninth Circuit’s Kivett decision presents another variation on the issue. The Ninth Circuit held that California’s escrow-interest law was not preempted, but did so largely because it regarded itself as bound by pre-Cantero circuit precedent. As a result, Kivett presents somewhat different issues from Cantero and Conti and may be a less clean vehicle for resolving the post-Cantero question.
Indeed, the petitioners in both Cantero and Conti have argued that Kivett is not the ideal vehicle for resolving the issue because of the unusual procedural and historical circumstances surrounding that case.
Why Today’s Order Matters
The Court’s invitation to the Solicitor General is important for several reasons.
First, the Court has now asked for the views of the United States in all three cases. That gives the Solicitor General an opportunity to address not merely whether one particular petition should be granted, but how the Court should approach the broader conflict among the circuits and which case, if any, provides the best vehicle for resolving it.
Second, the Solicitor General’s views could be particularly important because the federal government’s position on National Bank Act preemption has itself been evolving. The OCC has recently taken a strong position in favor of preemption of state interest-on-escrow laws. In May, the OCC finalized rules declaring that federal law preempts a number of state laws restricting national banks’ discretion concerning interest paid on escrow balances. Those rules have themselves been challenged by a coalition of states in a separate lawsuit pending in the United States District Court for the District of Oregon. Yesterday, the OCC filed a series of motions in that Court: to Change or Transfer Venue, to Dismiss for Failure to State a Claim, to Dismiss for Lack of Jurisdiction, and to Dismiss for Lack of Venue. We will soon be publishing a separate blog about those motions.
The Solicitor General’s forthcoming briefs may therefore provide an important indication of how the Department of Justice views the OCC’s current position in light of the Supreme Court’s decision in Cantero and the requirements of Dodd-Frank. (When Cantero was originally under consideration for review, the Supreme Court asked for the Solicitor General’s views and the Solicitor General argued for a case-by-case approach and a practical assessment of the degree to which state law impedes the exercise of national bank powers. That was a different Solicitor General appointed by President Biden. That happened when there was also a different Comptroller of the Currency, also appointed by President Biden.)
Third, the Court’s action comes after the Second Circuit’s May 5 decision in Cantero created an unmistakable conflict with the First Circuit. The Supreme Court therefore now has before it precisely the sort of disagreement among the lower courts that ordinarily makes an issue particularly suitable for Supreme Court review.
What Happens Next?
The Solicitor General will now prepare briefs addressing the Court’s request. The Court will then consider the government’s views before deciding whether to grant certiorari in one or more of the cases.
The Court’s invitation does not guarantee that certiorari will be granted. Nevertheless, today’s order materially increases the prospect of Supreme Court review.
That possibility is especially significant because the Court would be reviewing the issue for the second time in a relatively short period. In 2024, the Court rejected the Second Circuit’s categorical approach and required a practical assessment of the “nature and degree” of the interference caused by state law. The Second Circuit’s subsequent decision on remand, together with the First Circuit’s contrary approach in Conti, has now presented the Court with a more fully developed disagreement over how that standard should operate.
Will the Solicitor General Follow the OCC?
The obvious question is what position the Solicitor General will take. Will the government simply endorse the OCC’s position that state interest-on-mortgage-escrow laws are preempted? We would not assume so.
The OCC’s position is certainly significant. When the Second Circuit decided Cantero in May, the OCC’s preemption determination was still only proposed. The majority nevertheless considered the proposed determination persuasive. The situation has changed materially since then. On May 15, the OCC issued a final preemption determination concluding that the National Bank Act preempts New York’s interest-on-escrow law and 13 substantively equivalent state laws. At the same time, the OCC finalized a rule expressly recognizing that the terms and conditions of mortgage escrow accounts, including whether and to what extent a bank pays interest, are matters within a national bank’s business discretion.
Indeed, the OCC expressly commended the Second Circuit’s Cantero decision and noted that the Second Circuit had relied upon the proposed version of the rules that the OCC subsequently finalized.
That does not mean, however, that the Solicitor General necessarily will adopt the OCC’s position wholesale. The Supreme Court has asked for the views of the United States, not merely the views of the OCC. The Solicitor General will presumably consider the OCC’s final determination, but it also will have to address the Supreme Court’s own analysis in Cantero, Barnett Bank, and the other preemption decisions cited by the parties, as well as the conflicting approaches taken by the Second and First Circuits.
There is another reason not to assume that the government’s brief will simply track the OCC. The Court’s 2024 Cantero decision emphasized that preemption depends upon the “nature and degree” of the state law’s interference with the national bank’s exercise of its federally granted powers. The Solicitor General therefore may conclude that the OCC’s final determination is entitled to substantial consideration but does not itself resolve the judicial question presented by the certiorari petitions. (As a technical matter, the Solicitor General will be looking to Section 1044(b)(5) of Dodd-Frank, which prescribes how courts should review OCC preemption determinations, rather than to the similar approach adopted by Loper Bright.)
Our expectation, however, is that the Solicitor General will give the OCC’s final determination considerable weight. The government now has the benefit of an OCC determination that was finalized after notice and comment and that specifically addresses the very state law at issue in Cantero. Moreover, the OCC’s determination is consistent with the Second Circuit’s ultimate conclusion that New York’s law is preempted.
Will the Solicitor General Endorse Cert?
The more difficult question is whether the Solicitor General will recommend that the Supreme Court grant certiorari.
We would expect the government to recognize that the Second Circuit and First Circuit have adopted materially different approaches to the Supreme Court’s Cantero framework and to endorse a grant of certiorari in one or both cases. It seems less likely that the government will support a grant of certiorari in Kivett, since the Ninth Circuit reached a non-preemption result without undertaking the same comparative analysis that the Second and First Circuits undertook.
In our view, the most interesting possibility is that the Solicitor General could recommend review while also urging the Court to provide additional guidance concerning the proper application of Barnett Bank and Cantero. If that occurs, the government’s brief could be almost as important as the Court’s eventual decision to grant or deny certiorari.
One thing is clear: the OCC’s final preemption determination substantially changes the landscape from the one that existed when the Supreme Court decided Cantero in 2024. Whether that development makes another Supreme Court decision unnecessary, or instead makes Supreme Court review more important, is likely to be one of the central questions addressed by the Solicitor General.
Why This Matters Beyond Escrow Interest
The ultimate significance of these cases extends well beyond mortgage escrow accounts.
Before and after the Supreme Court’s 2024 decision in Cantero, we have counseled numerous national banks concerning the difficult question of which state laws apply to their activities. The challenge has been that Cantero rejected both an overly broad categorical approach to preemption and an approach that would effectively permit every generally applicable state law to regulate national banks without regard to the federal powers Congress has granted them.
Until the Supreme Court provides additional guidance, national banks must navigate that uncertainty on a state-by-state and law-by-law basis. Yesterday’s Supreme Court order makes clear that the Court recognizes the need to address the uncertainty created by the post-Cantero decisions. Whether the Court ultimately grants review, and, if so, which case becomes the vehicle, will be an important development not only for mortgage lenders, but for the broader relationship between national banks and state consumer financial laws.
The Supreme Court’s Order Will Significantly Extend the Timeline
There is an important procedural consequence to the Supreme Court’s October 5 order that should not be overlooked. The Court has not established a deadline for the Solicitor General to file its briefs in Cantero, Conti, and Kivett. That is typical when the Court asks the Solicitor General for the views of the United States. The Court’s guidance expressly states that there ordinarily is no formal due date for a CVSG brief.
There is therefore no reason to expect the Solicitor General’s briefs immediately. Based on the timing of recent CVSG matters, it could take several months before the government files its briefs. And the clock does not stop there.
Once the Solicitor General files its brief, the Supreme Court’s Clerk’s Office will place the case on the next appropriate conference list that is at least 14 days after the filing of the government’s briefs.That 14-day period is designed to give the parties an opportunity to file supplemental briefs responding to the Solicitor General’s views.
The cases will then go to a Justices’ conference at which the Court will decide whether to grant certiorari. If the Court grants review, the Court will subsequently establish a merits briefing schedule, followed by oral argument and, ultimately, a decision. If the Court takes more than one of these cases, it could consolidate them for briefing and argument or otherwise coordinate their consideration.
This procedure has an important practical consequence. Although the Supreme Court’s invitation to the Solicitor General substantially increases the prospect that the Court will address the post-Cantero preemption controversy, it also significantly prolongs the timeline for obtaining a definitive answer.
The petitions were already fully briefed and had been distributed for the Court’s September 28 conference. Indeed, the Cantero docket shows that the parties had completed the petition-stage briefing, including the petitioners’ reply, before the Court issued its October 5 CVSG order. The Court therefore could have acted on the petitions at that stage and invited the Solicitor General to file a brief on the merits and even participate in the oral argument. Instead, it has inserted another layer of briefing and consideration before deciding whether to grant certiorari.
If the Solicitor General takes several months to file its briefs, followed by the required period for supplemental briefing and a subsequent conference, the Court may not decide whether to grant certiorari until well into the 2026–27 Term. If certiorari is then granted, merits briefing and oral argument would follow, making it quite possible that the ultimate Supreme Court decision would not come until the end of the Supreme Court’s term in late June or early July or thereafter.
Thus, while yesterday’s order is an important indication that the Supreme Court is seriously considering these cases, it also means that national banks, state regulators, courts, and other interested parties will likely have to live with the current uncertainty over the scope of National Bank Act preemption for considerably longer.
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