WACHOVIA BANK, N.A. аnd Wachovia Mortgage Corporation, Plaintiffs-Appellees,
v.
John P. BURKE, in his official capacity as Banking Commissioner of the State of Connecticut, Defendant-Appellant.
Docket No. 04-3770-CV.
United States Court of Appeals, Second Circuit.
Argued: May 31, 2005.
Decided: July 11, 2005.
COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED Daniel L. Fitzmaurice, Day, Berry & Howard (Jason S. Weathers, on the brief), Hartford, CT, for Plaintiffs-Appellees.
Mark F. Kohler, Assistant Attorney General for the State of Connecticut (Richard Blumenthal, Attorney General, on the brief), Hartford, CT, for Defendant-Appellant.
William L. Brauch, Assistant Attorney General of the State of Iowa (Thomas J. Miller, Attorney General of Iowa, on the brief), Des Moines, IA, for the Attorneys General of 40 Amici States and Conference of State Bank Supervisors as amici curiae in support of Appellant.
Douglas B. Jordan, Counsel for the Office of the Comptroller of the Currency (Daniel P. Stipano, Acting Chief Counsel; Horace G. Sneed, Director of Litigation, on the brief), Washington, D.C., for the Office of the Comptroller of the Currency as amicus curiae in support of Appellees.
Frederick C. Schafrick, Goodwin Procter LLP (Thomas M. Hefferon, Goodwin Procter LLP; Joseph M. Kolar, Jeremiah S. Buckley, Buckley Kolar LLP, on the brief), Washington, D.C., for the American Bankers Association, America's Community Bankers, Consumer Bankers Association, Consumer Mortgage Coalition, and Financial Services Roundtable as amici curiae in support of Appellees.
Before: McLAUGHLIN, STRAUB, and HALL, Circuit Judges.
STRAUB, Circuit Judge.
Defendant-Appellant John P. Burke, in his official capacity as Banking Commissioner of the State of Connecticut ("the Commissioner"), appeals from a decision of the United States District Court for the District of Connecticut (Janet C. Hall, Judge) granting summary judgment in favor of Plaintiffs-Appellees Wachovia Bank, N.A. ("Wachovia Bank"), a nationally chartered bank, and its wholly owned, state-chartered subsidiary Wachovia Mortgage Corporation ("Wachovia Mortgage") (together "Wachovia"). The plaintiffs brought an action for declaratory and injunctive relief to prevent enforcement of certain Connecticut banking laws against Wachovia Mortgage on the ground that the state laws arе preempted by the National Bank Act ("NBA"), 12 U.S.C. § 21 et seq., and regulations issued by the Office of the Comptroller of the Currency ("OCC"). The plaintiffs also asserted claims under 42 U.S.C. § 1983 for violation of rights allegedly provided by the NBA. On cross-motions for summary judgment, the District Court found that OCC regulations preempt the application of the state laws to Wachovia Mortgage. Wachovia Bank, N.A. v. Burke,
The precise preemption issue is whether the NBA and OCC regulations preempt state banking laws concerning operating subsidiaries of nationally chartered banks. No court of appeals has addressed this issue, although several district courts have done so and have reached the same conclusion as the District Court in this case. We agree with the finding of preemption in this case. The NBA grants powers to national banks, including "incidental powers" necessary to carry on the business of banking, see 12 U.S.C. § 24 (Seventh), and it provides that national banks, in the exercise of their powers, shall be free from state "visitorial" power, see 12 U.S.C. § 484. The OCC, meanwhile, has issued regulations allowing national banks to conduct business through an operating subsidiary, see 12 C.F.R. § 5.34(e), and providing that "State laws apply to national bank operating subsidiaries to the same extent that those laws apply to the parent national bank," 12 C.F.R. § 7.4006. These regulations define a national bank's "incidental powers" to include conducting business through an operating subsidiary, and they preempt state visitorial power over operating subsidiaries to enable national banks to exercise this incidental power. We defer to these regulations because they are reasonable and within the OCC's authority under the NBA.
We must, however, reverse the District Court's holding with respect to Wachovia Bank's claim under 42 U.S.C. § 1983. Although the key provision, 12 U.S.C. § 484, prevents states from infringing on the power of national banks, the NBA focuses on national banks as federal instrumentalities empowered as part of a national banking system to the benеfit of the national economy as a whole. There is no clear intent to benefit national banks as private entities with individual rights, and the powers granted to national banks simply operate to establish federal regulatory authority vis-à-vis the states.
BACKGROUND
The following facts are not in dispute. Connecticut has enacted a series of banking laws with enforcement power delegated to the Commissioner. As explained by the District Court, six Connecticut banking statutes are at issue in this case. Two statutes require state licenses for first and secondary mortgage lenders. See Conn. Gen.Stat. §§ 36a-486(a), 36a-511(a). Two statutes require mortgage lenders to maintain certain records and to make them available for inspection by the Commissioner. See id. §§ 36a-493, 36a-516. And two involve the Commissioner's power to enforce the law through proceedings and the issuance of cease and desist orders. See id. §§ 36a-50, 36a-52. A national bank is exempted from the licensing requirements but a subsidiary of national bank expressly is not exempted. See, e.g., id. §§ 36a-486, 36a-487(1).
Wachovia Bank is a national banking association organized under the NBA. Wachovia Mortgage is a North Carolina corporation that was initially engaged in making first mortgage loans and has been licensed in Connecticut to do so since 1987. On January 1, 2003, Wachovia Mortgage became a wholly owned subsidiary of Wachovia Bank and surrendered its mortgage licenses with the Commissioner. On February 24, 2003, the Commissioner issued a Notice of Intent to Issue a Cease and Desist Order against Wachovia Mortgage for engaging in the first mortgage lending business in Connecticut without a license. Pursuant to a stipulation with the Commissioner, dated March 31, 2003, Wachovia Mortgage agreed to apply for re-licensing while reserving its right to seek legal action. Wachovia Mortgage also applied for a license to engage in secondary mortgage lending.
On April 25, 2003, Wachovia Mortgage and Wachovia Bank filed suit in the United States District Court for the District of Connecticut, requesting declaratory and injunctive relief on the ground that the NBA and OCC regulations preempt the state laws' application in this case. The plaintiffs also brought claims under 42 U.S.C. § 1983 for abridgement of rights allegedly provided by federal law.
Upon cross-motions for summary judgment, the District Court found that the Connecticut banking statutes conflict with, and are preempted by, the NBA and OCC regulations — 12 C.F.R. § 7.4006 in particular. Applying the Chevron doctrine, the District Court found first that Congress has not spoken on the precise issue of "whether state law should apply to a subsidiary of a national bank in the same way as it applies to the national bank itself." The court further found that section 7.4006 was a reasonable regulation designed to prevent state laws from inhibiting a national bank's ability to conduct banking through a subsidiary, as authorized under 12 U.S.C. § 24 (Seventh).
With respect to the § 1983 claims, the District Court found that the NBA, through 12 U.S.C. § 24 (Seventh) and § 484, provides national banks with the "right" to be free from state regulation. The District Court thus granted summary judgment in favor of Wachovia Bank on its § 1983 claim. The court, however, found that Congress did not provide "rights" to operating subsidiaries, and it granted summary judgment to the Commissioner on Wachovia Mortgage's § 1983 claim.
The District Court entered a declaratory judgment in favor of the plaintiffs on the preemption issue and in favor of Wachovia Bank on its § 1983 claim, and it closed the case.1 The Commissioner timely appealed and now challenges the preemption and § 1983 rulings. Wachovia Mortgage does not challenge the dismissal of its § 1983 claim.2
DISCUSSION
We review de novo a district court's decision to grant summary judgment. See Green Mountain R.R. Corp. v. Vermont,
No court of appeals has addressed whether the OCC regulations preempt state regulation of operating subsidiaries. Three district courts have reached this precise issue and have found preemption based on essentially the same reasoning used by the District Court in this case. See Nat'l City Bank of Ind. v. Turnbaugh,
We first lay out the statutory and regulatory framework before addressing the preemption and § 1983 issues in turn.
I. The Federal Statutory and Regulatory Framework
In 1864, Congress enacted the NBA4 "to facilitate . . . a national banking system." Marquette Nat'l Bank of Minneapolis v. First of Omaha Serv. Corp.,
The OCC is the federal agency entrusted with the "primary responsibility for surveillance of `the business of banking' authorized by § 24 Sevеnth." NationsBank of N.C., N.A. v. Variable Annuity Life Ins. Co.,
Pertinent to this case, the OCC promulgated 12 C.F.R. § 5.34, which provides that a "national bank may conduct in an operating subsidiary activities that are permissible for a national bank to engage in directly either as part of, or incidental to, the business of banking." 12 C.F.R. § 5.34(e)(1). Section 5.34 establishes federal licensing requirements and examination procedures for operating subsidiaries and provides that an "operating subsidiary conducts activities authorized under this section pursuant to the same authorization, terms and conditions that apply to the conduct of such activities by its parent national bank." Id. § 5.34(e)(3). This rule reflects the OCC's determination that a national bank's use of an operating subsidiary is an appropriate incidental power authorized under 12 U.S.C. § 24 (Seventh). See Rules, Policies, and Procedures for Corporate Activities, 61 Fed.Reg. 60,342, 60,348-55 (Nov. 27, 1996) (announcing comprehensive revisions to section 5.34); see also Financial and Operating Subsidiaries, 65 Fed.Reg. 12,905 (Mar. 10, 2000) (codifying section 5.34 substantially in its current form).
In 2001, shortly after making pertinent revisions to 12 C.F.R. § 5.34, the OCC promulgated 12 C.F.R. § 7.4006, which declares: "Unless otherwise provided by Federal law or OCC regulation, State laws apply to national bank operating subsidiaries to the same extent that those laws apply to the parent national bank." See generally Investment Securities; Bank Activities and Operations; Leasing, 66 Fed.Reg. 34,791 (July 2, 2001) (announcing final rule). The OCC stated that the new rule "clarified" the applicability of state law to operating subsidiaries and explained the basis for the rule as follows:
The majority of commenters who addressed this issue supported the proposal. Many of these commenters said that it is a permissible exercise of the authority granted by the National Bank Act for national banks to create operating subsidiaries that exercise both direct and incidental powers under 12 U.S.C. Section 24(Seventh). These commenters noted that operating subsidiaries have long been authorized for national banks and provide national banks with a convenient alternative to conduct activities that the bank could conduct directly. Further, they agreed that operating subsidiaries are, in essence, incorporated departments or divisions of the bank and, accordingly, should not be treated differently than their parent banks under State laws.
Id. at 34,788 (reiterating commenters' view as the basis for the rule); see also Investment Securities; Bank Activities and Operations; Leasing, 66 Fed.Reg. 8178, 8181 (Jan. 30, 2001) (providing same reasoning in Notice of Proposed Rulemaking). The OCC noted that sеction 7.4006 does not itself preempt any particular state law. See 66 Fed.Reg. at 34,790. But the implication is that state laws effecting visitorial power over national bank operating subsidiaries — through licensing requirements, for example — would be preempted, just as they are preempted as applied to national banks. See id. at 34,788.
A similar interplay of statutes and regulations exists specifically with respect to national banks' real estate lending powers. Pursuant to 12 U.S.C. § 371, national banks may "arrange, purchase or sell loans or extensions of credit secured by liens on interests in real estate, subject to section 1828(o) of this title and such restrictions and requirements as the Comptroller of the Currency may prescribe by regulation or order." 12 U.S.C. § 371(a). Under the authority of § 371(a), the OCC promulgated part 34 of title 12 of the Code of Federal Regulations "to set forth standards for real estate-related lending and associated activities by national banks." 12 C.F.R. § 34.1(a). Part 34 "applies to national banks and their operating subsidiaries as рrovided in 12 CFR 5.34." Id. § 34.1(b). Section 34.3 contains the general rule authorizing national banks' real estate lending activities while section 34.4 addresses preemption:
Except where made applicable by Federal law, state laws that obstruct, impair, or condition a national bank's ability to fully exercise its Federally authorized real estate lending powers do not apply to national banks. Specifically, a national bank may make real estate loans under 12 U.S.C. 371 and [12 C.F.R.] § 34.3 without regard to state law limitations.
Id. § 34.4(a). Licensing requirements are specifically listed as a prohibited state limitation. Id. § 34.4(a)(1). As the OCC indicated when promulgating 12 C.F.R. § 7.4006, the combined effect of 12 C.F.R. § 34.1(b) and § 34.4 is that state regulation of real estate lending by national bank operating subsidiaries may be preempted. See 66 Fed.Reg. at 34,788 n. 14.5
II. Preemption
The preemption doctrine is rooted in the Supremacy Clause of the Constitution. Fid. Fed. Sav. & Loan Ass'n v. de la Cuesta,
"Federal regulations have no less pre-emptive effect than federal statutes." Id. Federal courts have recognized that the OCC may issue regulations with preemptive effect. See, e.g., Wells Fargo Bank of Tex.,
Preemption is always a matter of congressional intent. de la Cuesta,
There is typically a presumption against preemption in areas of regulation that are traditionally allocated to states and are of particular local concern. See Flagg v. Yonkers Sav. & Loan Ass'n,
Given these principles, the Commissioner incorrectly attempts to frame the issue as whether Congress has expressly and clearly manifested an intent to preempt state visitorial power over operating subsidiaries. The focus, rather, is on the reasonableness of the OCC's exercise of its regulatory authority. See de la Cuesta,
A. Whether Congress Has Addressed the Issue; Whether the Regulations Are Within the OCC's Authority Under the Statutory Scheme
The District Court properly identified the precise question as whether Congress has addressed the manner in which state law should apply to a national bank operating subsidiary. As the District Court recognized, 12 U.S.C. § 484 is the anchor for preemption in providing that "[n]o national bank shall be subject to any visitorial powers except as authorized by Federal law." Section 484 does not address a national bank's operating subsidiary, and the Commissioner argues that, based on this omission, Congress intended not to preempt state laws concerning operating subsidiaries. The Commissioner also argues that operating subsidiaries are national bank "affiliates," as provided in 12 U.S.C. § 221a, and that other statutes governing affiliates evince an intent not to provide the OCC or federal government with exclusive visitorial power. The District Court properly rejected these arguments.
First, the Commissioner's argument concerning § 484 fails to account for how preemption actually arises in this case. The OCC does not purport to define the term "national bank," as used in § 484, to include an "operating subsidiary." Instead, the OCC has interpreted a national bank's "incidental powers" under 12 U.S.C. § 24 (Seventh) to include the power to conduct the business of banking through an operating subsidiary. See 12 C.F.R. § 5.34. The OCC then promulgated 12 C.F.R. § 7.4006 to codify its belief that states should not be able to obstruct this power by imposing regulations on the subsidiary that could not be imposed on the parent bank. It is undisputed that, as a general matter, the "`business of banking' is not limited to the enumerated powers in § 24 Seventh and that the Comptroller therefore has discretion to authorize activities beyond those specifically enumerated." NationsBank of N.C., N.A. v. Variable Annuity Life Ins. Co.,
The Commissioner's second argument concerning "affiliates" is more nuanced but fares no better. As the Commissioner explains, the Banking Act of 1933 (the "Glass-Steagall Act") enacted 12 U.S.C. § 221a(b), codifying the term "affiliate" to "include any corporation, business, trust, association, or similar organization" that is directly or indirectly controlled by a "member bank." See Banking Act of 1933, ch. 89, § 2(b), 48 Stat. 162, 162.7 The Glass-Steagall Act also enacted 12 U.S.C. §§ 161(c) and 481, giving the OCC what the Commissioner characterizes as "non-exclusive regulatory authority" over national bank affiliates. The Commissioner argues that a subsidiary like Wachovia Mortgage falls within the definition of an "affiliate" in 12 U.S.C. § 221a(b), that Congress declined to give the OCC exclusive visitorial authority over affiliates, and that Congress thus evinced an intent not to preempt state laws over operating subsidiaries.
As the District Court observed, however, the definition of "affiliates" plainly covers a category of entities much broader than operating subsidiaries, and operating subsidiaries do not fit neatly into these provisions of the Glass-Steagall Act. The Glass-Steagall Act arose out of Congress's belief "that commercial bank involvement in underwriting and securities speculation had unduly placed bank assets at risk and had contributed to the widespread bank closings that occurred during the Great Depression." Sec. Indus. Ass'n v. Bd. of Gov'rs of the Fed. Reserve Sys.,
Moreover, it was not until the 1960s that the OCC first recognized national banks' use of a "subsidiary operations corporation" to conduct "functions or activities ... that a national bank is authorized to carry on." Acquisition of Controlling Stock Interest in Subsidiary Operations Corporation, 31 Fed.Reg. 11,441, 11,459 (Aug. 31, 1966). That regulation reflected the OCC's interpretation of national banks' powers under 12 U.S.C. § 24 (Seventh) in light of the "ever-changing and growing" business of banking that had "developed rapidly during recent years" and that called for more flexibility in national banks' ability to structure their banking activities. 31 Fed.Reg. at 11,460.
With the passage in 1999 of the Gramm-Leach-Bliley Act ("GLBA"), Pub.L. No. 106-102, 113 Stat. 1338, Congress, at least implicitly, recognized the unique role of operating subsidiaries. In enacting 12 U.S.C. § 24a, the GLBA authorized national banks to control "financial subsidiaries" pursuant to certain conditions and requirements, but it excluded from the definition of "financial subsidiary" a subsidiary "that engages solely in activities that national banks are permitted to engage in directly and are conducted subject to the same terms and conditions that govеrn the conduct of such activities by national banks." 12 U.S.C. § 24a(g)(3)(A). The GLBA's legislative history expressly recognizes the use of operating subsidiaries as provided by the OCC:
For at least 30 years, national banks have been authorized to invest in operating subsidiaries that are engaged only in activities that national banks engage in directly. For example, national banks are authorized directly to make mortgage loans and engage in related mortgage banking activities. Many banks choose to conduct these activities through subsidiary corporations. Nothing in this legislation is intended to affect the authority of national banks to engage in bank permissible activities through subsidiary corporations.
S.Rep. No. 106-44, at 8 (1999).8 Similarly, 12 U.S.C. §§ 371c and 371c-1 provide distinct treatment to operating subsidiaries by restricting bank transactions with affiliates but excluding subsidiaries from the definition of "affiliate" for those provisions.
Even if operating subsidiaries can fall under the definition of "affiliate" for some purposes, there is still no manifest congressional intent to preclude the OCC regulаtions in this case. The Commissioner relies on 12 U.S.C. §§ 161(c) and 481, arguing that they grant the OCC non-exclusive regulatory power over affiliates and that, by implication, do not allow the OCC to preempt state visitorial power over any affiliate. But §§ 161(c) and 481 simply provide, respectively, that national bank affiliates shall report to the OCC and that the OCC shall examine affiliates to disclose the relations between the national bank and the affiliate.9 These provisions do not speak broadly to the allocation of visitorial power between the federal and state governments. They primarily reflect Congress's concern with national banks' engaging in non-commercial bank business and do not address or contemplate national banks' later-emerging power to engaging in the business of banking through operating subsidiaries. These provisions thus do not address whether state laws regarding operating subsidiaries may be preempted as interfering with national banks' incidental powers under 12 U.S.C. § 24 (Seventh) and 12 C.F.R. § 5.34.
Overall, the history of the banking laws indicates that operating subsidiaries have been treated distinctly by Congress and the OCC, and no statute speaks directly to the scope of federal versus state power over them. Particularly with the passage of the GLBA, it appears that Congress has intentionally left open a gap concerning the treatment of national bank operating subsidiaries. The OCC has the authority to fill that gap by defining a national bank's incidental powers to include conducting the business of banking — business that the national bank itself could conduct directly — through an operating subsidiary. See 12 C.F.R. §§ 5.34. Having so defined a national bank's power to conduct business through an operating subsidiary, the OCC further has the authority to preempt states law concerning operating subsidiaries to the same extent that those laws would be preempted with respect to the parent national bank. See 12 C.F.R. §§ 7.4006, 34.1, 34.4.
B. The Reasonableness of the OCC's Regulations
Having concluded that Congress has not addressed the precise issue in this case and that the OCC generally has the authority to promulgate the regulations at issue, we must defer to the regulations if they reflect a reasonable construction of the statutory scheme. See NationsBank,
1. The Rationale Underlying 12 C.F.R. § 7.4006
The Commissioner focuses on and attacks a particular rationale expressed for 12 C.F.R. § 7.4006: that "operating subsidiaries are, in essence, incorporated departments or divisions of the bank and, accordingly, should not be treated differently than their parent banks." 66 Fed.Reg. at 34,788. The Commissioner argues that this rationale unreasonably disregards the corporate separateness of a parent bank and improperly allows national banks to take advantage of the legal benefits of conducting business through a subsidiary while remaining free from state regulation аs if the subsidiary were itself part of the parent national bank.
We disagree. There is nothing unreasonable about the OCC's rationale. The OCC is not disregarding any principle of corporate separateness; it is recognizing that "[f]or decades national banks have been authorized to use the operating subsidiary as a convenient and useful corporate form for conducting activities that the parent bank could conduct directly." 66 Fed.Reg. at 34,788. Section 7.4006 reflects the OCC's policy judgment that national banks' use of operating subsidiaries as separately structured corporate entities is desirable and that it should not be hindered by state regulations.
This rationale is developed more fully in the Federal Register entries concerning 12 C.F.R. § 5.34. For example, the OCC has noted that "the use of a separate subsidiary structure can enhance the safety and soundness of conducting new activities by distinguishing the subsidiary's activities from those of the parent bank (as a legal matter) and allowing more focused management and monitoring of its operations." Rules, Policies and Procedures for Corporate Activities, 61 Fed.Reg. 60,342, 60,354 (Nov. 27, 1996); see also Financial Subsidiaries and Operating Subsidiaries, 65 Fed.Reg. 12,905, 12,908-09 (Mar. 10, 2000). This rationale for permitting national banks to conduct business through operating subsidiaries dates back to 1966, when the OCC explained: "The use of controlled subsidiary corporations provides national banks with additional options in structuring their businesses. National banks may desire to exercise such option for many reasons, including controlling operations costs, improving effectiveness of supervision ... or separating particular operations of the bank from other operations." Acquisition of Controlling Stock Interest in Subsidiary Operations Corporation, 31 Fed.Reg. 11,441, 11,460 (Aug. 31, 1966). Thus, the OCC has long maintained that an operating subsidiary is legally distinct from the parent bank but is connected to the parent bank's ability to conduct business in a safe and sound manner. The OCC's well-explained policy judgment is reasonable and entitled to deference.
2. Whether Seсtion 7.4006 Simply Reflects the OCC's View of Case Law
The Commissioner's next argument arises out of the OCC's discussion of an Executive Order that requires certain notice-and-comment procedures for agency regulations with federalism implications and preemptive effect. See Exec. Order No. 13132, 64 Fed.Reg. 43,255 (Aug. 4, 1999). In addressing whether the Executive Order applied to the promulgation of 12 C.F.R. § 7.4006, the OCC explained that the proposed changes
do not affect the OCC's intention to address questions of preemption on a case-by-case basis, according to preemption principles derived from the United States Constitution, as interpreted through judicial precedent. Section 7.4006 generally provides that national bank operating subsidiaries are subject to State law to the extent State law applies to their parent bank. The section itself does not effect preemption of State law; it reflects the conclusion we believe a federal court would reach, even in the absence of thе regulation, pursuant to the Supremacy Clause and applicable Federal judicial precedent.
66 Fed.Reg. at 34,790. The Commissioner seizes on the last sentence in arguing that 12 C.F.R. § 7.4006 merely reflects the OCC's view of what courts would hold, and he contends that courts are not required to defer to an agency's interpretation of case law. To this extent, the Commissioner cites New York New York, LLC v. NLRB,
In this case, however, the OCC's codification of section 7.4006, at its core, reflects a policy judgment about national banks' use of operating subsidiaries. Section 7.4006 "clarified" that state laws apply to operating subsidiaries to the same extent that they apply to the parent national bаnk, and the clarification reflects the OCC's view that preemption already existed based on the combination of federal statutes (12 U.S.C. §§ 24 (Seventh), 371, and 484) and preexisting regulations (12 C.F.R. §§ 5.34, 34.1(b), and 34.4). See 66 Fed.Reg. at 34,788 & n. 14. The body of the discussion on section 7.4006 plainly indicates the OCC's position that national banks should be able to "use the operating subsidiary as a convenient and useful corporate form for conducting activities" without substantial restrictions imposed by states. See id. at 34,788. The discussion is also replete with language indicating a policy determination based on "safety and soundness" considerations rather than any pure interpretation of law. See id. at 34,789.
Even if the policy determination were not manifest in section 7.4006, it is extensively developed in the OCC's recent revision of 12 C.F.R. part 34, which was designed to demarcate more clearly what state laws are and are not preempted with respect to real estate lending activities. See Bank Activities and Operations; Real Estate Lending and Appraisals, 69 Fed.Reg. 1904 (Jan. 13, 2004).10 There the OCC explained that 12 U.S.C. § 24 (Seventh) provides a "flexible grant of authority" to national banks to further "Congress's long-range goals in establishing the national banking system." Id. at 1907. The OCC noted that achievement of these goals requires national banks "whose powers are dynamic and capable of evolving" because "the financial services marketplace has undergone profound changes" in recent years. Id. The OCC specifically observed that "[c]hanges in applicable law also have contributed to the expansion of markets for national banks and their operating subsidiaries." See id. The OCC found, however, that "national banks' ability to conduct operations to the full extent authorized by Federal law has been curtailed as a result" of increasing state efforts to regulate bank activities. Id. at 1908. As an example, the OCC pointed to its recent ruling that the Georgia Fair Lending Act ("GFLA") was preempted from applying to national banks and their operating subsidiaries. See id. (citing Preemption Determination and Order, 68 Fed.Reg. 46264-02 (Aug. 5, 2003)). The OCC stated that "the GFLA caused secondary market participants to cease purchasing certain Georgia mortgages and many mortgage lenders to stop making mortgage loans in Georgia. National banks have also been forced to withdraw from some products and markets in other states as a result of the impact of state and local restrictions on their activities." Id.
Overall, the OCC concluded:
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 furtherancе 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.
Id. (footnote omitted). This reasoning is consistent with, and is fairly imputed to, the OCC's statements concerning the other regulations in this case. Even if this reasoning could not be imputed to 12 C.F.R. § 7.4006, 12 C.F.R. §§ 34.1(b) and 34.4 independently support a finding of preemption in this case.
3. Conclusion on the Reasonableness of the OCC Regulations
For the reasons explained above, the OCC regulations reflect a consistent and well-reasoned approach to preempting state regulation of operating subsidiaries so as to avoid interference with national banks' exercise of their powers under 12 U.S.C. § 24 (Seventh) and their ability to use operating subsidiaries in the dynamic market of banking and real estate lending. While the Commissioner and Attorneys General Amici raise legitimate concerns about states' interest in protecting consumers and about the OCC's ability to regulate operating subsidiaries effectively, the OCC has responded to these concerns in its rulemaking. See, e.g., 61 Fed.Reg. at 60,354-55 (justifying 1996 revisions to 12 C.F.R. § 5.34). The states' proper recourse at this point is to Congress. We must defer to the OCC's authorized and reasonable implementation of the NBA.
III. Wachovia Bank's Claims Under 42 U.S.C. § 1983
The next issue is whether the NBA provides Wachovia Bank with federal rights enforceable under 42 U.S.C. § 1983. A violation of the Supremacy Clause is distinct from, and does not necessarily give rise to, a violation of federal rights actionable under § 1983. See Golden State Transit Corp. v. City of Los Angeles,
In Blessing v. Freestone, the Supreme Court explained that we "have traditionally looked at three factors" to determine whether a statute gives rise to a federal right:
First, Congress must have intended that the provision in question benefit the plaintiff. Second, the plaintiff must demonstrate that the right assertedly protected by the statute is not so vague and amorphous that its enforcement would strain judicial competence. Third, the statute must unambiguously impose a binding obligation on the States. In other words, the provision giving rise to the asserted right must be couched in mandatory, rather than precatory, terms.
Moreover, the concurrence in Gonzaga University noted that the "statute books are too many, the laws too diverse, and their purposes too complex, for any single formula to offer more than general guidance." Id. at 291,
In this case, the District Court applied the Blessing factors and found that the NBA intended to create federal rights for national banks. As to the first factor, the District Court found that 12 U.S.C. § 484(a) — which makes national banks free from state visitorial authority — was written with "an unmistakable focus on the benefitted class" similar to the provisions of anti-discrimination statutes. The District Court further found that the right is sufficiently concrete for judicial enforcement and that the provision is phrased in mandatory, rather than precatory language. For the reasons explained below, however, the Distriсt Court's analysis fails to account for the unique role of national banks in the statutory scheme of the NBA. When viewed as a whole and in light of its history, it is plain that the NBA addresses the allocation of federal versus state regulatory power and does not provide national banks with rights enforceable under § 1983.
While the provisions at issue — 12 U.S.C. §§ 24 (Seventh), 371, and 484 — may focus on national banks, the structure and history of the provisions indicate that Congress did not intend to provide national banks with individual rights as private entities. As the Supreme Court explained in 1927: "National banks are not merely private moneyed institutions, but agencies of the United States created under its laws to promote its fiscal policies." First Nat. Bank of Hartford, Wis. v. City of Hartford,
has in view the erection of a system extending throughout the country, and independent, so far as powers conferred are concerned, of state legislation which ... might impose limitations.... Having due regard to the national character and purposes of that system, we cannot concur in the suggestions that national banks, in respect to the powers conferred upon them, are to be viewed as solely organized and operated for private gain.
Moreover, while Blessing dealt with Congress's exercise of its spending power, see Blessing,
In contrast, the issue in this case plainly involves a Garmon-related rule of preemption directed at "whether state or federal regulations should apply to certain conduct." Id. at 112,
In addition, despite the fact that the NBA's pertinent provisions are long-standing — 12 U.S.C. § 24 (Seventh) traces back to 1864 and § 484 traces back to 1913 — there is no indication of any other court finding that the NBA creates federal rights for banks. The only court of appeals to address the issue found that the NBA does not allow for actions under § 1983. See First Nat'l Bank of Omaha v. Marquette Nat'l Bank of Minneapolis,
Finding that Wachovia Bank has rights enforceable under § 1983 would likely allow national banks to pursue § 1983 claims whenever preemption exists by virtue of the NBA and OCC regulations. Such a finding is inappropriate in light of the complex regulatory framework and the ever-changing nature of the industry and the powers exercised by national banks. See, e.g., Investment Securities, Bank Activities and Operations; Leasing, 66 Fed.Reg. 34,784, 34,790 (July 2, 2001) (addressing 12 C.F.R. § 7.4006 and expressing the OCC's intention to address preemption on a case-by-case basis). Allowing § 1983 claims in this context could also mean that § 1983 claims — and the potential for damages and attorneys' fees — may arise out of any number of regulatory statutes with preemptive effect and could have widespread repercussions for the balance of federal and state regulatory authority in general. Given the status of national banks as federal instrumentalities and the fеderal government's pervasive regulation of such banks, it is plain that the NBA involves a preemption scheme — a scheme to allocate power between the federal and state governments — and that there is no clear intent to provide national banks with federal rights enforceable under § 1983.
CONCLUSION
The District Court's entry of a declaratory judgment in favor of the plaintiffs on the basis of preemption is AFFIRMED. With respect to Wachovia Bank's claim under 42 U.S.C. § 1983, the District Court's grant of summary judgment in favor of Wachovia Bank is REVERSED, the denial of the Commissioner's motion for summary judgment is VACATED, and the case is REMANDED to the District Court with instructions to enter partial summary judgment in favor of the Commissioner.
Each party shall bear its own costs.
Notes:
Notes
The District Court did not grant Wachovia Bank any relief on its § 1983 claim apart from the declaratory relief that flowed from the preemption claim. Wachovia Bank did not obtain attorneys' fees pursuant to 42 U.S.C. § 1988
We have received threeamicus curiae briefs. In support of the appellant, the Attorneys General of Forty States and the Conference of State Bank Supervisors ("Attorneys General Amici") reiterate the Commissioner's arguments and emphasize states' interests in regulating subsidiaries to protect consumers from unscrupulous lending practices. In support of the appellees, the OCC filed a brief that parallels Wachovia's argument. Also supporting Wachovia, the American Bankers Association and other national trade associations ("ABA Amici") filed a brief focusing on the reasonableness of the OCC's policy judgment in effecting preemption.
The same district judge who decidedBoutris issued essentially the same ruling in a later case involving the preemption of California law regarding operating subsidiaries. See Nat'l City Bank of Ind. v. Boutris,
Act of June 3, 1864, ch. 106, 13 Stat. 99. The Act of June 3, 1864 was re-titled the National Bank Act by the Act of June 20, 1874, ch. 343, § 1, 18 Stat. 123, 123 (codified at 12 U.S.C. § 38)
That footnote states: "Several commenters also requested that the final rule [12 C.F.R. § 7.4006] include, as an example, the express statement that 12 CFR 34 (Real Estate Lending and Appraisals) applies to operating subsidiaries. Inclusion of this statement in new § 7.4006 is unnecessary, however, because current § 34.1(b) already prоvides that part 34 applies to national banks and their operating subsidiaries." 66 Fed.Reg. at 34,788 n. 14
Other courts addressing NBA preemption issues have not appliedChevron but have adopted a similar approach requiring deference to a reasonable regulation issued within the OCC's authority. See Bank of Am.,
Neither party has questioned that the Chevron framework generally applies in this case. In any event, the analysis would be the same even if we did not apply Chevron itself. Under de la Cuesta, which addressed preemptive regulations in a decision prior to Chevron, we would review the OCC regulations "only to determine whether [the agency] has exceeded [its] statutory authority or acted arbitrarily," and we would enforce the regulations unless they are unreasonable or inconsistent with the statutory scheme. de la Cuesta,
There is no contention that Wachovia Bank is not a "membеr bank," which includes any "national bank, State bank, or bank or trust company which has become a member of one of the Federal reserve banks." 12 U.S.C. § 221
In 1996, prior to the GLBA, the OCC promulgated 12 C.F.R. §§ 5.34 and 34.1(b) to allow national banks to conduct business through operating subsidiaries pursuant to the same authorization, terms, and conditions that apply to the parent national bank. The OCC understood the GLBA as affirming its regulation of operating subsidiaries and promptly revised 12 C.F.R. § 5.34 "to make conforming changes and streamline procedures for banks that engage in activities through operating subsidiaries."See Financial Subsidiaries and Operating Subsidiaries, 65 Fed.Reg. 12,905, 12,905 (Mar. 10, 2000). In 2001, the OCC promulgated 12 C.F.R. § 7.4006 and cited the GLBA's recognition of operating subsidiaries as a basis for that rule. See Investment Securities, Bank Activities and Operations; Leasing, 66 Fed.Reg. 34,784, 34,788 (July 2, 2001).
Both provisions were part of the Glass-Steagall Act §§ 27-28,
Since 1996, 12 C.F.R. § 34.1(b) has stated that part 34 "applies to national banks and their operating subsidiaries as provided in 12 CFR § 5.34," and 12 C.F.R. § 34.4 has discussed the applicability of state law to national banks' real-estate lending powers