Opinion Recap: Cuomo v. The Clearing House Assâ€™n, L.L.C.
on Jun 30, 2009 at 6:12 pm
Please note that Howe & Russell filed an amicus brief in this case on behalf of the Lawyersâ€™ Committee for Civil Rights Under Law, National Fair Housing Alliance, and NAACP Legal Defense and Educational Fund, Inc. in support of the petitioner.
In 2005, the New York Attorney General began an investigation into the lending practices of several national banks that he believed, based on publicly available data, had issued a disproportionate number of high-interest loans to minority borrowers. The Office of the Comptroller of the Currency (OCC) and a banking trade group went to federal court to enjoin the Attorney Generalâ€™s investigation, arguing that a 2004 regulation promulgated by the OCC prohibited states from enforcing their own fair lending laws. Both the district court and the Second Circuit agreed with the OCC, and the New York Attorney General sought Supreme Court review.
Yesterday the Supreme Court, by a vote of five to four, largely rejected the OCCâ€™s argument. At issue in the case is a provision of the National Bank Act which â€“ as relevant here â€“ provides that national banks shall not â€œbe subject to any visitorial powers except as authorized by Federal law [or] vested in the courts of justice.â€ In 2004, the OCC adopted a regulation to implement the National Bank Act that prohibited states from â€œexercis[ing] visitorial powers with respect to national banks, such as conducting examinations, inspecting or requiring the production of books or records of national banks, or prosecuting enforcement actions.â€ However, the regulation did provide that â€œproduction of a bankâ€™s records . . . may be required under normal judicial procedures.â€
Writing for an unusual line-up that included Justices Stevens, Souter, Ginsburg, and Breyer, Justice Scalia acknowledged â€œsome ambiguityâ€ in the meaning of â€œvisitorial powers.â€ But such uncertainty, he continued, â€œdoes not expand Chevron deference to cover virtually any interpretation of the National Bank Act.â€ Surveying the Supreme Courtâ€™s jurisprudence, the Court deemed it clear that a stateâ€™s â€œâ€˜visitorial powersâ€™ and â€œits power to enforce the law are two different things,â€ and the National Bank Act â€œpre-empts only the former.â€ The Court also questioned the consequences that would arise from the OCCâ€™s interpretation of the NBA: although some state laws regulating banks would remain in effect, states would be precluded from enforcing those laws. By contrast, the Court noted, allowing state attorneys general to enforce state laws in court (but not exercise visitorial powers) â€œwould preserve a regime of exclusive administrative oversight by the Comptroller while honoring in fact rather than merely in theory Congressâ€™s decision not to pre-empt substantive state law.â€ Moreover, the Court notes, judicial law-enforcement proceedings are subject to greater constraints and thus will limit the likelihood of â€œfishing expeditionsâ€ by state officials.
Having concluded that the OCCâ€™s regulation was not consistent with the statute insofar as it precluded states from bringing suit to enforce state laws against national banks, the Court then turned to the OCCâ€™s interpretation of its regulation, which purported to limit the scope of the regulation by conceding that states could still regulate national banks in some respects, such as â€œcontracts, debt collection, acquisition and transfer of property, and taxation, zoning, criminal, and tort law.â€ The exceptions that the OCC would carve out, the Court explained, â€œcannot be reconciled with the regulationâ€™s almost categorical prohibition in 12 CFR Â§7.4000(a)(1) of â€˜prosecuting enforcement actions.â€™â€
Returning to the facts of the case before it, the Court concluded that because the Attorney General had requested information in lieu of a subpoena â€“ rather than, for example, filing a lawsuit or obtaining a search warrant â€“ it would affirm the decision below â€œas applied to the threatened issuance of executive subpoenas,â€ but it vacated the decision insofar as it barred judicial law-enforcement actions.
Justice Thomas wrote a decision, joined by the Chief Justice and Justices Kennedy and Alito, concurring in part and dissenting in part. He would have held that (1) the phrase â€œvisitorial powersâ€ is ambiguous; (2) the OCCâ€™s interpretation of that phrase â€œfits comfortably within this broad dictionary definition of visitationâ€; and (3) the Attorney Generalâ€™s request for information to enforce state fair lending laws constituted an effort to exercise such powers. In the dissentersâ€™ view, the Attorney Generalâ€™s â€œfederalism-based objections to Chevron deference ultimately turn on a single proposition: It is doubtful that Congress pre-empted state enforcement of state laws but not the underlying state laws themselves.â€ Even if that were true, however, the dissenters counter that â€œit is not this Courtâ€™s task to decide whether the statutory scheme established by Congress is unusual or even â€˜[b]izarre.â€™ The Court must decide only whether the construction adopted by the agency is unambiguously foreclosed by the statuteâ€™s text.â€
As a result of the Courtâ€™s decision, state attorneys general throughout the country may now seek to enforce their statesâ€™ fair lending laws against national banks, creating a scenario in which banks could potentially be subject to conflicting laws in different states. However, while the Court held that states could enforce their laws by bringing lawsuits, states may â€“ without the kind of â€œvisitorial powersâ€ that could provide them with information regarding banking practices â€“ face some obstacles in obtaining the information that they need to bring such suits.