NATIONAL CITY BANK OF INDIANA; National City Mortgage Company; First Franklin Financial Corporation, Plaintiffs-Appellees, v. Charles W. TURNBAUGH, in his official capacity as Commissioner of Financial Regulation, Maryland Department of Labor, Licensing and Regulation, Defendant-Appellant.
No. 05-1647.
United States Court of Appeals, Fourth Circuit.
Argued: May 25, 2006. Decided: Aug. 10, 2006.
463 F.3d 325
The Office of the Comptroller of the Currency, Amicus Supporting Appellees.
Before WIDENER and DUNCAN, Circuit Judges, and JOSEPH R. GOODWIN, United States District Judge for the Southern District of West Virginia, sitting by designation.
Affirmed by published opinion. Judge GOODWIN wrote the opinion, in which Judge WIDENER and Judge DUNCAN joined.
OPINION
GOODWIN, District Judge:
The issue before us is whether the National Bank Act (“NBA“),
I.
This dispute arose when the Commissioner, acting pursuant to Maryland law, attempted to exercise visitorial powers and to limit prepayment penalties on adjustable rate mortgage (“ARM“) loans originated by operating subsidiaries of a national bank.1
National City Bank of Indiana wholly owns and operates National City Mortgage Company and First Franklin Financial Corporation as operating subsidiaries. National City Mortgage and First Franklin both previously engaged in residential lending in Maryland.2
The Maryland Mortgage Lender Law (“MMLL“),
In June and July 2004, two consumers filed complaints with the Commissioner contesting prepayment penalties assessed by First Franklin. After the Commissioner notified First Franklin of the complaints, National City Bank and its operating subsidiaries filed an action for declaratory and injunctive relief to prevent the Commissioner‘s enforcement. The bank claimed that the regulations promulgated by the OCC under the NBA exempt the bank‘s wholly-owned subsidiaries, to the same extent that it exempts the bank itself, from state regulation of its banking activities. Because the OCC regulations are valid exercises of the agency‘s congressionally delegated authority, the bank argued, they preempt the conflicting Maryland law. The parties filed cross-motions for summary judgment. The district court granted the plaintiffs’ summary judgment motion, denied the defendant‘s motion, and permanently enjoined the Commissioner from enforcing the Maryland laws against the operating subsidiaries.
II.
We review a grant of summary judgment de novo, viewing the facts in the light most favorable to the nonmoving party. Spriggs v. Diamond Auto Glass, 242 F.3d 179, 183 (4th Cir.2001). A moving party is entitled to summary judgment if the evidence shows that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law.
III.
We first summarize the relevant federal statutory and regulatory framework and then consider preemption.
A.
Congress enacted the NBA in 1864 “to facilitate ... a ‘national banking system.‘” Marquette Nat‘l Bank of Minneapolis v. First of Omaha Serv. Corp., 439 U.S. 299, 314-15 (1978) (quoting Cong. Globe, 38th Cong., 1st Sess., 1451 (1864)). In relevant part, the NBA establishes nationally chartered banks and vests these banks with certain powers.
The OCC has the “primary responsibility for surveillance of the ‘business of banking’ authorized by [the NBA].” NationsBank of N.C., N.A. v. Variable Annuity Life Ins. Co., 513 U.S. 251, 256 (1995). To carry out this responsibility, the OCC promulgates regulations and defines the “‘incidental powers’ of national banks beyond those specifically enumerated in the statute.” Wachovia Bank, N.A. v. Burke, 414 F.3d 305, 312 (2d Cir.2005); see also
Our analysis focuses on three federal statutes and the regulations issued by the OCC to enforce them. First, Congress gives national banks general authority to “exercise all such incidental powers as shall be necessary to carry on the business of banking.”
Third, “No national bank shall be subject to any visitorial powers except as authorized by federal law....”
B.
When the federal government acts within the scope of its authority, federal law preempts inconsistent state law. M‘Culloch v. Maryland, 4 Wheat. 316, 17 U.S. 316, 436 (1819).3 To determine whether preemption exists, courts look to congressional intent. Fid. Fed. Sav. & Loan Assoc. v. de la Cuesta, 458 U.S. 141, 152 (1982). Preemption “is compelled whether Congress’ command is explicitly stated in the statute‘s language or implicitly contained in its structure and purpose.” Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977).
The Commissioner contends the OCC exceeded its delegated authority by promulgating regulations that limit a state‘s power to regulate national banks’ operating subsidiaries. The Commissioner claims that a presumption against preemption exists and therefore the OCC‘s regulations do not preempt the Maryland laws. The district court found that a presumption against preemption does not exist, the Maryland statutes conflict with federal law, and the regulations are entitled to Chevron deference.4 The district court accordingly found that federal law preempts the Maryland statutes. We agree.
1.
The Commissioner claims that the extensive history of state regulation of non-bank, state-chartered mortgage subsidiaries creates a presumption against preemption. Courts generally apply a presumption against preemption in fields the states traditionally regulate. Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947). However, “an ‘assumption’ of nonpreemption is not triggered when [a] State regulates in an area where there has been a history of significant federal presence.” United States v. Locke, 529 U.S. 89, 108 (2000) (citing Rice, 331 U.S. at 230). The regulation of federally chartered banks is indisputably such an area. Wachovia Bank, N.A. v. Watters, 431 F.3d 556, 560 n. 3 (6th Cir.2005); Bank of Am. v. San Francisco, 309 F.3d 551, 558 (9th Cir.2002) (“Congress has legislated in the field of banking from the days of M‘Cul-loch v. Maryland, ... creating an extensive federal statutory and regulatory scheme.“). Further, the “grants of both enumerated and incidental powers to national banks” are “not normally limited by, but rather ordinarily pre-empt [], contrary state law.” Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25, 32 (1996) (emphasis added). The pertinent regulations define the scope of the national banks’ authority to conduct business through operating subsidiaries; undoubtedly these issues involve the “incidental powers” of national banks. A presumption against preemption, therefore, does not exist.
2.
We now turn to whether conflict preemption exists. Our first step in a conflict preemption analysis is to determine whether a conflict exists between the federal and state laws. College Loan Corp. v. SLM Corp., 396 F.3d 588, 595-96 (4th Cir.2005) (explaining that conflict preemption exists when a state law conflicts with federal law). The parties agree that the Maryland banking laws conflict with the OCC regulations. This case therefore involves conflict preemption unless the OCC “exceeded its authority or acted arbitrarily.” See de la Cuesta, 458 U.S. at 153-54 (finding an administrator‘s “judgments are subject to judicial review only to determine whether he has exceeded his statutory authority or acted arbitrarily“).
3.
The framework set forth in Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984), determines whether the OCC exceeded its authority or acted arbitrarily. Wells Fargo Bank N.A. v. Boutris, 419 F.3d 949, 958 (9th Cir.2005); Wachovia Bank v. Burke, 414 F.3d at 315; Wachovia Bank v. Watters, 431 F.3d at 560.
Two questions control the Chevron analysis. First, “whether Congress has directly spoken to the precise question at issue.” Chevron, 467 U.S. at 842. If Congress‘s intent is clear, “that is the end of the matter.... [But] if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency‘s answer is based on a permissible construction of the statute.” Id. at 842-43. If there is ambiguity, we “give great weight to any reasonable construction” of the statute. Clarke v. Secs. Indus. Ass‘n, 479 U.S. 388, 403 (1987).
i.
Congress has not spoken directly about whether the OCC has the authority to regulate operating subsidiaries. The Commissioner claims Congress‘s omission of references to “non-bank state-chartered” entities in the NBA is evidence that regulation of operating subsidiaries is beyond the scope of the OCC‘s authority. The Ninth Circuit in Wells Fargo succinctly explains why the Commissioner‘s argument fails:
While this silence might have been significant to the court were it to interpret the statute de novo, it does not answer the question asked by the first step of Chevron—namely, whether Congress has “unambiguously expressed [its] intent.” We agree. The absence of any reference to operating subsidiaries in the Bank Act does not unambiguously provide that national banks may not create and perform banking functions through such entities.
ii.
We next ask whether the OCC‘s regulations are based on a permissible construction of the NBA. Chevron, 467 U.S. at 843. If the OCC‘s interpretation is reasonable, we defer to its construction of the statute. Id. at 844-45.
The Commissioner principally contends the OCC‘s regulations are unreasonable interpretations of the NBA. As explained, the NBA is silent on whether the OCC may regulate national banks’ operating subsidiaries. When statutes are silent, “agencies [generally] have authority to fill gaps.” Nat‘l Cable & Telecomm. Ass‘n v. Gulf Power Co., 534 U.S. 327, 339 (2002). Further, in cases of statutory silence, we “must defer, under Chevron, to [an agency‘s interpretation of its governing statute], so long as that interpretation is permissible in light of the statutory text and reasonable.” Ohio Valley Envtl. Coal. v. Bulen, 429 F.3d 493, 498 (4th Cir.2005).
The NBA allows national banks to “exercise ... all such incidental powers as shall be necessary to carry on the business of banking.”
We find the OCC‘s regulation of operating subsidiaries does not exceed the limitations contemplated in NationsBank. “Allowing national banks to create, control, and delegate banking functions to operating subsidiaries provides some assistance to banks in performing their authorized activities.” Wells Fargo, 419 F.3d at 960. Further,
We also find that
When national banks are unable to operate under uniform, consistent, and predictable standards, their business suffers, which negatively affects their safety and soundness. The application of multiple, often unpredictable, different state or local restrictions and requirements prevents them from operating in the manner authorized under Federal law, is costly and burdensome,
interferes with their ability to plan their business and manage their risks, and subjects them to uncertain liabilities and potential exposure. In some cases, this deters them from making certain products available in certain jurisdictions. The OCC therefore is issuing this final rule in furtherance of its responsibility to enable national banks to operate to the full extent of their powers under Federal law, without interference from inconsistent state laws, consistent with the national character of the national banking system, and in furtherance of their safe and sound operations.
Bank Activities and Operations; Real Estate Lending and Appraisals, 69 Fed.Reg. 1904 (Jan. 13, 2004); see also Wachovia Bank v. Burke, 414 F.3d at 320-21 (quoting the same). We adopt this reasoning.
Accordingly, we find that the federal regulations at issue are reasonable interpretations of the NBA and are entitled to Chevron deference.
IV.
We join the Second, Sixth, and Ninth Circuits in finding the OCC did not exceed its delegated authority. Wachovia Bank v. Burke, 414 F.3d at 318-21; Wachovia Bank v. Watters, 431 F.3d at 562-63; Wells Fargo, 419 F.3d at 961-62. Accordingly, we affirm the district court‘s grant of summary judgment to the plaintiffs/appellees.
AFFIRMED
JOSEPH R. GOODWIN
UNITED STATES DISTRICT JUDGE