Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 1 of 31

JS 44 (Rev. 12/07)

CIVIL COVER SHEET

The 1S-44 civil cover she:e:t and tht: infonnation contained herein ne:ither ro::place nor suppkment the: filing and sc:rvice of pleadings or other papers as ro::quired by law. except as provided by local rules of court. This fonn. approved by the Judicial Conference of the United States in September 1974. is required for the use of the Clerk of Court lor the purpose of initiating the civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.)

1. (a) PLAl;-JTlFF
USAA FEDERAL SAVINGS BANK
(b) County of Resident of First Listed Plaintiff (EXCEPT TN U.S. PLAINTIFF CASES)

(c) Attorneys (Firm Name. Address. and Telephone Number) Martin C. Bryce. Jr., Ballard Spahr LLP. 1735 Market St.. 51" Fir., Pbila. PA 19103
II. BASIS OF JURISDICTION (Place an "X" in One Box Only)

01 U.S. Government
Plaintiff

[8]3 Federal Queslion (U S. Government Not a Party)

DEFENDANTS
PENNSYLVANIA HVMAN REL\TIONS COMMISSION
County of Residence of First Listed _ _ _ _ __ (IN U.s PLAINTIFF CASES ONLY)
NOTE: IN LAND CONDEMNATION CASES. USE THE LOCATION OF THE LAND (NYOLYED.
Attorneys (If Known) linknown

Ill. C'ITIZENSHIP OF PRINCIPAL PARTIES (Place an "X" in One Box for Plaintiff

(For Diversily Cases Only)
PTF

DEF

and One Box for Defendanl) PTF

Citizen of This State

01

01 Incorporated or Principal Place

04

of Business rn This State

DEF
04

02 U.S. Government
Defendant

04 DiversilY

Citizen of Another Stale

02

(Indicate Citizenship of Parties

in Item III)

Citizen or Subject of a

03

Foreie.ll CountrY

IV. NATlIRE OF St!lT (Place an "X" in One Box OnlY)

CONTRACT

TORTS

FORFEITUREIPENALTY

0110 lnsurance Ot2O M.arine 0130 Millef' Act 0140 Negotiable Instrument 0150 ReGOl,lery of Overpayment
&Enforcement of Judgment 0151 Medicare Act 0 152 Reco'o'ery of Defaulted
Student loans (Excl Veterans) 0 153 Recovery of Overpayment or Veteran's Benefit, 0160 Stockholders' Suio. 0190 Other Contract 0 195 Contract Pro-duct LiabIlity 01% Franchise
REAL PROPERTY 0210 La.nd CondemnatKm 0220 Foreclosure 0230 Rent Lease & Ejectment 0240 Tons lO land 0245 Tort Product Liability 0290 All Other Real Property

PERSONAL INJURY
0310 Airpmne 0315 Airplane Product
o liability J20 Assault, Libel &
o Slander J)O Federal Empklyers'
o Liability }40 ~tarme 0345 Marine Product
Li:tblJity
o }50 Motor Vehk:le o }55 Motor VehICle
Product Liahllity 0360 Other Personal
Injury
CIVIL RIGHTS
o0441 Voting 442 Employment 0443 HousingJ
Accommodations
o0444 Welfare 445 Amer w/DisabtlitlM-
o Employment 446 Amer .....JDisabilitie1Other (') 440 Other Civil Rights

PERSONAL INJURY
0362 Persona1lnjury~ M~d. Malpractice-
0365 Personal InjuryProduct LiabIlity
0368 Asbestos Personal Injury Product Liability
PERSONAL PROPERTY
o0370 Otn.r Fraud J71 Truth in Lending 0380 Other Personal
Property Damage 0385 Property Damage
Product Lia.bility
PRISONER PlTlTlONS 0510 Motions to Vacate
Sentence
o Habeu Corpus 5}0 Genera) 0535 Death Penalty 0540 Mandamus &Other 0550 Civil Rights 0555 Prison Condition

06tO Agricu[tur~ 0620 Other Food & Drug 0625 Drug Related Seizure
o of Propony 21 USC 6}0 Liquor Laws 0640 R R. & Truck 0650 Airline Regs 0660 Occupabonal SafclylHeahh 0690 Other
o L~BOR 7tO Fair labor Standards Act
o0710 uborlMgmt. Relations 7JO LaborlMgmt Reporting &. Disclosure Act 0740 Railway Labor Act 0790 Other Labor Litigation 0791 Empl. Ret. Inc.
SeoJrity Act
IMMIGRATION 0462 Naturalization Application 0463 Habe"" ColJlU'-
Alien Detainee 0465 Other Immigration Actions

02 03

Incorporated alld Principal Place Of Business in Another State
Foreign Nation

05 05 06 06

BANKRllPTCY
o0422 Appeal 423 Individual 28 USC 157
o PROPERTY RIGHTS 820 Copyrights
o0830 Patent 840 Tr!demark
SOCHL SEClIRln' 0&61 HIA(IJ9511)
o0862 Black Lun. (923) S6l DIWClDI\VW
o(405(G»
864 ssm T,.le XVI
0765 RSI (405(g))
o FEDERAL TA.X SlilTS 810 Ta'\es (U $ Plaintiff
o or Defendant) 871 IRS~·Third fJimv 2& USC 7604

OTHER STAHITES
0400 Slate Reapportionment 0410 A.ntitrust 04)0 Banks and Banking 0450 CommercefJCC Ratesletc 0460 Depoflnioon 0470 Racketeer InOuenced and
Corrupt Organizations 0480 Consumer Credit 0490 C.ble/Sat TV 0810 Selective Service 0850 SecurittesiCommoditiesl
E)(change 0875 Customer Challenge
12USC3410 12]890 Other Statutory Actions 0891 Agricukural Acts
osn E-cooomic Stabilization ,~t
0893 Envn-onmental MatteJ'5 0894 Energy Allocation Act 0895 Freedom of
Informatwn Act 0900 Appeal of Fee
DeterminAtion Under Equal Acce!s to Justice 0950 Constitutionality of State Statutes

V. ORIGIN

(PLACE AN "X" IN ONE BOX ONLY)

o I Original
Proceedmg

o 2 Removed from
State Court

o J Remanded from
Appellate Court

o 4 Rtinstaled or
Reopened

VI. CALISE OF ALIION (Cite the U S Ci... d S!atul~ under which you are filing alld wnt brief statement of(ause Do 00{ ctte JUrisdictIOnal ~~atute'i unles~ diversity)

Transferred from
o another district 5 ,;pecify)

o b Muttidlstrtc(
LltiQ"HfOR

o 7

Appeal to Ol!;(rict Jud~e from MagIStrate Judllment

Complaint for Inunctive and Declaratory Relief pursuant to 12 U.S.c. §§ J461 and J2 U.S.c. § 1983

VII. REQUESTED IN COMPLAINT

0 CHECK IF THIS IS A CLASS ACTION
UNDER F Rep 23

DEMAND llllSpKifitd damages
Preliminary/Permanent

CHECK YES only tf demanded in complaint:

JURY DEMAND:

a y""

Cil No

Injunction

DATE

SIGNATURE Of A AHORNEY Of RECORD

FOR OFfiCE liSE ONLY R£CEIPT'

AMOUNT

AHLYI~G IFP

JUDGE

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 2 of 31

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

CASE MANAGEMENT TRACK DESIGNATION FORM

USAA FEDERAL SAVINGS BANK

CIVIL ACTION

v.

PENNSYLVANIA HUMAN RELATIONS COMMISSION

NO.

In accordance with the Civil Justice Expense and Delay Reduction Plan of this court, counsel for plaintiff shall complete a Case Management Track Designation Form in all civil cases at the time of filing the complaint and serve a copy on all defendants. (See § 1:03 of the plan set forth on the reverse side of this form.) In the event that a defendant does not agree with the plaintiff regarding said designation, that defendant shall, with its first appearance, submit to the clerk of court and serve on the plaintiff and all other parties, a Case Management Track Designation Form specifying the track to which that defendant believes the case should be assigned.

SELECT ONE OF THE FOLLOWING CASE MANAGEMENT TRACKS:

(a) Habeas Corpus - Cases brought under 28 U.S.C. § 2241 through § 2255.

( )

(b) Social Security - Cases requesting review of a decision of the Secretary of Health and

Human Services denying plaintiff Social Security Benefits.

( )

(c) Arbitration - Cases required to be designated for arbitration under Local Civil Rule 53.2. ()

(d) Asbestos - Cases involving claims for personal injury or property damage from exposure

to asbestos.

f )

(e) Special Management - Cases that do not fall into tracks (a) through (d) that are

commonly referred to as complex and that need special or intense management by the

court. (See reverse side of this form for a detailed explanation of special

management cases.)

( )

(f) Standard Management - Cases that do not fall into anyone of the other tracks.

Date /
dIS'- tf~ t/- f;{ 38
Telephone
(Civ. 660) 10102

FAX Number

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 3 of 31

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA - DESIGNATION FORM 1& be used by counsel to indicate Ihe category oflhe ca.e for Ihe purpose of assignment 10 appropriate calendar.
AddrcssofPlaintiff: 10750 McDermott Freeway. San Antonio, TX 78288

AddrcssofDdcndant; Human Relations Commission, Phila. Regional Office, 110 N. 8th St •• Ste. 501

.

Philadelphia, PA 1910Z

Place of Accldent,lncident or Transacuon:---

Pennsylvania

(Use Reverse Side For Additiorwl Space)

Docs this civil action involve a nongovernmental corporate party with any parent corporation and any publicly held corporation owning 10"1. or more of ils stock?

(Attach two copies oflhc Disclosure Stalement Form in accordance with Fcd.R.Civ.P. 7.1(a»

YesD NoD

Does this case involve multidisnict litigation possibilities?

YesO

RELATED CASE, IF ANY: Case Number: _ _ _ _ _ _ _ _ _ _ _ Judge _ _ _ _ _ _ _ _ _ _ _ _ _ _ Date Terminated: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __

Civil cases are deemed related when yes is answered to any of the following questions:

I. Is this case related to property included in an earlier numbered suit pending or within one year previously renninated aClion in this court?

YesO NoJ!5l

2. Does this case involve the same issue of fact or grow out of the same transaction as a prior suit pending or within one year previously terminated

action in this court?

YesD N$J

3. Does this case involve the validity or infringement of a patent already in suit or any earlier numbered ease pending or within one year previously

terminated action in this court?

YcsD No I}J

4. Is this case a second or successive habeas corpus, social security appeal, or pro se civil rights case filed by the same individual? YesD

No'JI

CIVIL: (Place t/ in ONE CATEGORY ONLY)
A Federal Question Cases:
I. 0 Indemnity Contract, Marine Contract, and All Other Contracts

B. Di»ersity Jurisdiction Cases:
I. 0 Insurance Contract and Other Contracts

2. 0 FELA

2. 0 Airplane Personal Injury

3. 0 Jones Act-Personal Injury

3. 0 Assault, Defamation

4. 0 Antitrust

4. 0 Marine Personal Injury

5. 0 Patent

5. 0 Motor Vehicle Personal Injury

6. 0 Labor-Management Relations

6. 0 Other Personal Injury (Please

specify)

7. " Civil Rights 8. 0 Habeas Corpus

7. 0 Products Liability 8. 0 Products Liability - Asbestos

9. 0 Securities Act{s) Cases

9. 0 All other Diversity Cases

10.0 Social Security Review Cases
II. JlAll other Federal Question Cases

(please specify)

(Please specify)

ARBITRATION CERTIFICATION

(Check Appropriate Category)

I.

' counsel of record do hereby certify:

o Pursuant to Local Civil Rule 53,2, Section 3(c)(2), thaI to lhe best of my knowledge and belief, the damages recoverable in Ihis civil action case exceed the sum of

S150,()()().OO e~clusive of interest and cos~;
a Relief other than monetary damages is soUghL

DATE:

Attorney-at-law

Auorneyl.D.1I

NOTE: A trial de novo WIll be a trial by JUry only if there has been comphance with F.R.CP. 38.

I certify that, to my knowledge, the within cale It nol elated to any case now pendIng or wltbln one year previously terminated action In tbls court
except at noled ..bove.
i. . DATE: -£:/;/.::;L.L/... I_O_ _
Attorney I.D#
ely. 609 (6/08)

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 4 of 31

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

USAA Federal Savings Bank, Plaintiff.
v.

Civil Action No.: _ _ _ _ __

Pennsylvania Human Relations Commission Defendant.

VERIFIED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

Plaintiff, USAA Federal Savings Bank (hereinafter "USAA FSB"), brings this Complaint against Defendant, the Pennsylvania Human Relations Commission (hereinafter "PHRC"), and avers as follows:
1. Plaintiff brings this action to require the PHRC to comply with federal law. Specifically, as detailed below, the PHRC seeks to conduct an investigation of and exercise rights of visitation over USAA FSB by issuing subpoenas and demanding that USAA FSB produce documents as it investigates whether USAA FBS' s procedures for approving, rejecting or granting loans violate Pennsylvania law. USAA FSB is a federal savings association created under the federal Homeowners' Loan Act ("HOLA"), 12 U.S.c. §§ 1461, et seq., and is subject to the exclusive supervision and regulation of the Office of Thrift Supervision ("OTS") under the HOLA.
PARTIES 2. Plaintiff USAA FSB is chartered as a federal savings association and is exclusively regulated by the OTS. Its principal place of business is in San Antonio, Texas. 3. Defendant PHRC is the agency of the Commonwealth of Pennsylvania created by state statute to investigate complaints of unlawful discrimination filed pursuant to the

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Pennsylvania Human Relations Act ("PHRA"), 43 P.S. § § 951, et seq. The PHRC maintains offices in Philadelphia, Pennsylvania.
JURISDICTION AND VENUE 4. This action is brought under the HOLA, the Supremacy Clause of the United States Constitution, and 42 U.S.c. § 1983. The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331, because it arises under the Constitution and laws of the United States. In addition, jurisdiction is proper under 28 U.S.C. § 1343(a)(3), because Defendant, under color of state law, seeks to deprive Plaintiff of its federal constitutional rights. This Court is authorized to issue a declaratory judgment pursuant to 28 U.S.C. §§ 2201 and 2202. 5. Venue in this district is proper under 28 U.S.C. § 1391(b)(l), because the Defendant resides in this district.
FACTUAL ALLEGATIONS HOLA and OTS Regulations 6. As a federal savings association, USAA FSB provides its customers with a broad range of banking services and products, including deposit and loan products. 7. Federal savings associations, such as Plaintiff USAA FSB, are chartered pursuant to the HOLA, and, with certain limited exceptions not relevant hereto, are regulated and subject to examination exclusively by the OTS. See 12 C.F.R. § 560.2. Indeed, the OTS has expressly "occupied the field" with respect to the regulation of federal thrifts such as USAA
FSB: Occupation of field. Pursuant to sections 4(a) and 5(a) of the HOLA, OTS is authorized to promulgate regulations that preempt state laws affecting the operations of federal savings associations when deemed appropriate to facilitate the safe and sound operation of federal savings associations, to enable federal savings associations to conduct their operations in accordance with the best practices of thrift institutions in the United States, or to further

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other purposes of the HOLA. To enhance safety and soundness and to enable federal savings associations to conduct their operations in accordance with best practices (by efficiently delivering low-cost credit to the public free from undue regulatory duplication and burden), OTS hereby occupies the entire field of lending regulation for federal savings associations. 12 C.F.R. § 560.2(a). 8. OTS regulations explicitly provide for the preemption of state and local laws relating to the "[p]rocessing, origination, servicing, sale or purchase of, or investment or participation in, mortgages." 12 C.F.R. § 560.2(b)(1O). 9. The regulation and oversight of federally chartered savings associations by OTS under the HOLA has consistently been held by the courts to be pervasive and to create "field preemption" precluding any state regulation of federally chartered savings associations with respect to, among other subjects, their lending and deposit taking activities and operations, and any investigations thereof. See, e.g., Silvas v. E*Trade Mortgage Corp., 514 F.3d 1001 (9th Cir. 2(08); State Fann Bank v. Reardon, 539 F.3d 336 (6th Cir. 2(08). 10. In light of this field preemption, and given the need for uniformity and freedom from regulatory duplication and state-by-state variations, state laws (including those of Pennsylvania and those governing the PHRC) purporting to regulate the operations or provide for the regulation of federal savings associations are preempted by federal law and are invalid under the Supremacy Clause of the United States Constitution. 11. Moreover, only the OTS has the authority to exercise visitorial powers by examining federal savings banks. Under section 5(a) of the HOLA, the OTS is exclusively authorized to "provide for the ... examination, operation, and regulation" of federal savings banks. 12 U.S.C. § 1464(a). States have no additional authority to monitor, examine, or inquire into the operations of a federal savings bank. See, e.g., id.; 12 C.F.R. § 545.2; Fidelity Fed. Sav.

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Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 7 of 31
& Loan Assoc. v. de fa Cuesta, 458 U.S. 141,161 (1982); OTS Op. Chief Counsel (January 18, 1996). The operative OTS regulation expressly provides: "The regulations in this Part 545 are promulgated pursuant to the plenary and exclusive authority of the Office to regulate all aspects of the operations of Federal savings associations, as set forth in section 5(a) of the Act. This exercise of the Office's authority is preemptive of any state law purporting to address the subject of the operations of a Federal savings association." 12 C.F.R. § 545.2.
The PHRC Regulatory Scheme 12. The PHRC is specifically empowered "[t]o initiate, receive, investigate and pass upon complaints charging unlawful discriminatory practices." 43 Pa. S. § 957(f); id. § 959(a). After a complaint is filed, "the Commission shall make a prompt investigation in connection therewith." /d. § 959(b)(1). In connection with its investigation, the Commission is specifically empowered to subpoena witnesses and require the production of documents. [d. § 957(g)(1). 13. A respondent against whom a complaint is filed must file a written, verified answer to the complaint within 30 days of service of the complaint. 43 Pa. S. § 959(b)(3). Thereafter, the Commission both encourages the settlement of the matter and conducts its investigation. /d. § 959(b)(4). If the matter does not settle, a hearing officer must determine whether or not "probable cause exists for crediting the allegations of the complaint." [d. § 959(c). If no probable cause is found, the Commission will dismiss the matter although the complainant may object to said dismissal. [d. "If it shall be determined after such investigation that probable cause exists for crediting the allegations of the complaint, the Commission shall immediately endeavor to eliminate the unlawful discriminatory practice complained of by

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conference, conciliation and persuasion." !d. § 959(d). If the matter thereafter remains unresolved, the Commission will set a fact-fmding hearing. [d.
14. USAA FSB has been, and is being threatened to be, subjected to these and other regulatory requirements by Defendant PHRC.
15. These requirements unduly burden, interfere with, and create an obstacle to USAA FSB's exercise of its full rights and powers under its federal charter by subjecting USAA FSB to duplicative and potentially conflicting regulation.
16. Subjecting USAA FSB to the application of the PHRA and the oversight of the PHRC would subject it to additional operational requirements when said requirements are expressly preempted by the OTS. See 12 C.F.R. § 560.2(a) & (b)(1).
17. Compliance with the PHRC's investigatory demands also would require USAA FSB to incur repetitive, undue burdens and expenses to ascertain and to comply with diverse state requirements in order to perform its authorized activities and exercise its federally authorized powers on a nationwide basis.
18. Through its investigation and demand for documents, the PHRC is impermissibly and unlawfully attempting to exercise visitorial powers that state agencies are prohibited from exercising, with respect to federal savings associations.
The Present Controversy 19. On May 5, 2009, Ms. Madelene Jacob ("Jacob") was conditionally approved by USAA FSB for a cash out refmance with respect to an investment property located in Norristown, PA. 20. Upon her application, USAA FSB advised Ms. Jacob of the general guidelines for her loan request, which included: a maximum Loan-to-Value ("LTV") ratio of

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70%, a Oebt-to-Income (HOTI") ratio of 55%, and a minimum of six months in available reserves.
21. After review of Ms. Jacob's financial information, including tax returns and bank statements, USAA FSB detennined that Ms. Jacob did not possess sufficient reserves and that her OTI was above 55%. As a result, USAA FSB denied Ms. Jacob's loan request. USAA FSB notified Ms. Jacob of the denial and of the reasons the loan was denied. Ms. Jacob was not denied a loan for any other reason, including her race or gender.
22. Ms. Jacob proceeded to file a complaint with the PHRC in June 2009, without specifically asserting any basis for her allegation that USAA FSB discriminated against her when USAA FSB denied the cash out refmancing loan on her investment property. A copy of Ms. Jacob's Complaint is attached hereto as Exhibit A.
23. In response to her Complaint, USAA FSB filed a Response and Position Statement ("Response") with the PHRC. USAA FSB's Response set forth the reasons why Ms. Jacob's unsubstantiated claims should be rejected unequivocally.
24. The first reason asserted was that USAA FSB is a federally chartered savings bank regulated and supervised by the OTS, and as a result, it is not subject to any state laws or state agency supervision or action, including that of the PHRC.
25. The second reason stated was that, even if USAA FSB were subject to the supervision of the PHRC, USAA FSB did not discriminate against Ms. Jacob for any reason whatsoever, nor did it treat Ms. Jacob less favorably than any other USAA FSB customer. On the contrary, the facts demonstrate that USAA FSB treated Ms. Jacob fairly, objectively, and equitably.

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26. Despite the absence of any evidence of discrimination on the part of USAA FSB, USAA FSB's denial of any discrimination, and the fact that the PHRC has no authority over USAA FSB, the PHRC requested the following documents from USAA FSB: 1) from January 2009 to present, any/all documents for individuals receiving conditional loan approval during this time frame, including age, national origin and source of income information, 2) any/all documents for all individuals who received conditional loan approval and were denied during the same time frame, including reason for denial and age, national origin and source of information, and 3) any/all documents of individuals who were conditionally approved for loans and subsequently approved for loans, including age, national origin and source of income information. The PHRC did not geographically limit the scope of its request. A copy of the PHRC April 29,2010 correspondence is attached hereto as Exhibit B.
27. In its April 29, 2010 correspondence, the PHRC indicated that the requested documents were needed to "continue the investigation."
28. The document request was extremely broad in scope, essentially requiring the entire loan file for all loans concerning every applicant and/or borrower from January 2009 to the present, including the personal, private information of every such customer and confidential business information regarding USAA FSB's operations.
29. On May 28,2010, USAA FSB responded to the April 29, 2010 document request, reiterating that it was not subject to the PHRC's supervision, and that the document request could implicate a voluminous amount of documents which would be highly burdensome for USAA FSB to produce. Furthermore, such a request could potentially compromise the confidential and private information of USAA FSB's customers. A copy of the May 28, 2010 USAA FSB correspondence is attached hereto as Exhibit C.

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Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 11 of 31
30. On August 12,2010, the PHRC responded to USAA FSB, issuing a modified data and document request. The request asked for the following documents: 1) Ms. Jacob's entire loan file; and 2) all documents contained in the entire loan file of a random sampling of fifty (50) refinance loan applicants, during the time period from January 1,2009 to December 31. 2009. A copy of the August 12, 2010 PHRC correspondence is attached hereto as Exhibit D.
31. The request is still extremely overbroad in scope, as USAA FSB has already established that no discrimination occurred with respect to Ms. Jacob's loan.
32. On August 26,2010, the PHRC sent a letter to USAA FSB, indicating that the documents requested were "deemed essential to this investigation." To the extent USAA FSB did not produce these documents, the PHRC said it would recommend that the PHRC's legal staff "initiate subpoena procedures to secure the data and documents." A copy of the August 26,2010 PHRC correspondence is attached hereto as Exhibit E.
33. Since this date, the PHRC has repeatedly threatened USAA FSB that it would immediately issue subpoenas should it not receive the requested documents.
34. Subsequently, the PHRC served USAA FSB with a subpoena, seeking the production of the following documents by December 14, 2010: 1) Ms. Jacob's entire loan file, including but not limited to all credit reports USAA FSB obtained for Ms. Jacob and all financial records submitted by Ms. Jacob to USAA FSB; and 2) all documents contained in the entire loan file of a random sampling of fifty (50) refinance loan applicants, during the time period from January 1, 2009 to December 31,2009. A copy of the subpoena is attached hereto as Exhibit F.

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FIRST CLAIM FOR RELIEF (For Declaratory and Injunctive Relief Pursuant to 42 U.S.C. § 1983 and the HOLA) 35. Plaintiffs incorporate by reference the averments contained in paragraphs 1 through 33 above as set forth in full herein. 36. Under the ROLA, Congress authorized the OTS to "provide for the ... examination, operation, and regulation" of federal savings associations "giving primary consideration of the best practices of thrift institutions in the United States." 12 U.S.c. § 1464(a). 37. The OTS has promulgated comprehensive regulations governing the operations of federal savings associations. 12 C.F.R. pts. 545,555,557 & 560. These regulations are promulgated pursuant to "the plenary and exclusive authority of COTS] to regulate all aspects of the operations of Federal savings associations ... and [t]his exercise of the rOTS's] authority is preemptive of any state law purporting to address the subject of the operations of a Federal savings loan association." 12 C.F.R. § 545.2. 38. With respect to USAA FSB's lending activities, the OTS "occupies the entire field of lending regulation for federal savings associations. OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, federal savings associations may extend credit as authorized under federal law, including this part, without regard to state laws purporting to regulate or otherwise affect their credit activities...." 12 C.F.R. § 560.2(a). 39. State law, including the PHRA is preempted by HOLA and the OTS's regulations. Indeed, the Supreme Court has explained: "[T]he statutory language suggests that Congress expressly contemplated, and approved, the [OTS]'s promulgation of regulations

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superseding state law. [It] would have been difficult for Congress to give the rOTS] a broader mandate." Fidelity Fed. Say. & Loan Assoc. v. de fa Cuesta, supra., at 161.
40. Only the OTS has the authority to exercise visitorial powers by examining or otherwise investigating federal savings banks such as USAA FSB. See, e.g., 12 U.S.C. § 1464(a); 12 c.F.R. § 545.2; Fidelity Fed. Say. & Loan Assoc. v. de fa Cuesta, supra.
41. The PHRC is attempting to exercise visitorial powers over USAA FSB through its "investigation" of alleged discrimination. Through the application of the PHRA and its investigatory powers, the PHRC seeks to investigate and examine the lending activities of USAA FSB to determine if any violations of state law have occurred. By attempting to conduct such an investigation of a federal savings association, the PHRC impermissibly and unlawfully attempts to exercise visitorial powers that state agencies are prohibited from exercising by federal law.
42. Under federal law, including the United States Constitution (Supremacy Clause), the HOLA, and the regulations duly promulgated thereunder, a federal savings association has the right to be free from the application of state law and from unlawful attempts to exercise visitorial powers over it.
43. The PHRC is attempting to enforce the PHRA, and the subpoenas purported to be issued by the PHRC would be pursuant to the PHRA, a Pennsylvania statute. Accordingly, the PHRC is purporting to act under color of state law.
44. Unless enjoined by order of this Court, the PHRC is attempting to subject USAA FSB to the application of state law and threatens to seek issuance and enforcement of subpoenas against USAA FSB and to investigate USAA FSB, in violation of 42 U.S.c. § 1983. The PHRC. under color of state law, is attempting to exercise visitorial powers over USAA FSB,

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and is obstructing and conditioning USAA FSB's exercise of incidental and enumerated powers under the HOLA.
45. Such violation of federal law by the PHRC will inflict irreparable harm on USAA FSB and will violate their legal rights under federal law.
46. USAA FSB has no adequate remedy at law. 47. Accordingly, USAA FSB prays that this Court, preliminarily and pennanently, issue an injunction requiring the PHRC and its agents to cease and desist from all attempts to investigate USAA FSB or apply Pennsylvania law against USAA FSB.
PRAYER FOR RELIEF WHEREFORE, Plaintiff USAA FSB prays for relief as follows: A. Entry of a declaratory judgment that the PHRC and its agents may not, consistent with the United States Constitution, the HOLA, and 42 U.S.C. § 1983, apply the PHRA or other Pennsylvania laws to USAA FSB, pursue any subpoenas or any applications compelling compliance with any subpoenas or investigate USAA FSB. B. Since USAA FSB has no adequate remedy at law and is threatened with irreparable injury, issuance of temporary, preliminary and pennanent injunctions, requiring the PHRC and its agents to cease and desist from all attempts to investigate USAA FSB or apply Pennsylvania law against USAA FSB. C. Costs incurred in maintaining this suit; D. Reasonable attorneys' fees and other expenses incurred in maintaining this suit pursuant to 42 U.S.c. § 1988; and

DMEAST #12949582 v5

11

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 15 of 31

E. Such other and further relief as this Court may deem just and proper.

Respectfully Submitted,

Date: December 13,2010

Alan S. Kaplinsky (Attome 1.D. No. 2446) Martin C. Bryce, Jr. (Attorney 1.0. No. 59409) Tejal K. Mehta (Attorney 1.D. No. 208090) BALLARD SPAHR LLP 1735 Market Street, 51st Floor Philadelphia, PA 19103-7599 (215) 665-8500
Attorneys for Plaintiff USAA Federal Savings Bank

DMEAST #12949562 v5

12

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 16 of 31
EXHIBIT A

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 17 of 31

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Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 20 of 31
EXHIBITB

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 21 of 31

Chairperson STEPHEN A. GLASSMAN Vtc. Cha1rperson RAQUEL O. YIENGST s.crwtary DANIELD. YUN Asststant Secretary REV. DR. JAMES EARL GARMON, SR.
EXlllCuttve D1Nctor HOMER C. FlOYD ~ID1Nctor CAAlENE M. NEAL

COMMONWEALTH OF PENNSYLVANIA
Hu...... RetMtons Commission
PhttadetpIda rt.gtonal 0fIk.
uo NortIa .... Stnet, SUIte 50s
Phttadelph1a. PA 19107 (215) 560-2496 vote. (215) 56~3599TTY WWW.phI.c..tate.pa.US

Comm\sl\onen
ISMAa. ARCElAY M. JOEL BOl.STEIN J. WHYATT MONDESlRE S. KWEIUN NASSAR GERALD S. ROBINSON SYlVIA A. WATERS DANIEL L WOODALL, lR.

April 29. 2010

Martin Bryce, Jr. Ballard Spahr 1753 Market Street Philadelphia PA 19103
RE: Madelene F. Jacob v USAA Federal Savings Bank PHRC Case No. 200900936
Dear Mr. Bryce:
A review of the file in the above docketed charge indicates that the following data is needed to continue the investigation. Please provide by May 10,2010.
• From January 2009 to present, any/all documents for individuals receiving conditional loan approval during this time frame. Please include age, national origin and source of income.
• Any/all documents for all individuals who received conditional loan approval and were denied during the same time frame. Please include reason for denial as well as age, national origin and source of income.
• Any/all documents of individuals who were conditionally approved for loans and subsequently approved for loans. Please include age. national origin and source of income.
Please note that in all of the above requests for data, actual documents are being requested. Please do not provide a list or summary.
If you have any questions. please call me at 215-965-7738.
Sincerely.
(O~
Donald Moody Human Relations representative

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 22 of 31
EXHIBIT C

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 23 of 31
Ballard SpaJrr -

'711 ~brke( Slrect, \ lSI Floor PhiladdphiJ, rA '9'01-7199 rEL lI\.66j.8\oo
fAX ~'1.96,*.8999
www.balllrdsp.hr.com

Martin C. B~e. Jr. Direct: 215.864.8238 Fax: 215.864.8999
b~e@baJlatdspahr.com

May 28, 2010
By U.S. Mail and Hand Delivery
Mr. Donald Moody
Human Relations Commission Philadelphia Regional Office 110 North 8th Street. Suite 501 Philadelphia, PA 19107
Re: Madelene F. Jacob v. USAAFederal Savings Bank
Case No. 200900936
Dear Mr. Moody:
Please allow this correspondence to serve as a response to your letters dated April 29, 2010 and May 19,2010. requesting the production of any and all documents concerning persons who after January 2009 were conditionally approved, subsequently rejected or subsequently granted loans from USAA Federal Savings Bank ("USAA FSB").
BACKGROUND
In June 2009, Complainant Madelene Jacob filed a Pennsylvania Human Relations Commission ("PHRC") Complaint alleging, without specifically asserting the basis for the discrimination. that USAA FSB discriminated against her when USAA FSB denied a cash out refinancing loan on her investment property. In response to her Complaint, USAA FSB filed a Response and Position Statement ("Response") with the PHRC. USAA FSB's Response set forth the reasons why Ms. Jacob's unsubstantiated claims should be unequivocally rejected. These reasons are summarized as the following:
1) USAA FSB is a federally chartered savings bank regulated and supervised by the Office ofThrift Supervision ("OTS''), and as a result, it is not subject to any state agency supervision or action. including that ofthe PHRC.
2) Even ifUSAA FSB were subject to the supervision of the PHRC, USAA FSB did not discriminate against Ms. Jacob for any reason whatsoever, nor did it treat Ms. Iacob less favorably than any other USAA FSB customer. On the contrary, the facts demonstrate that USAA FSB treated Ms. Jacob fairly, objectively and equitably.
In support of its Response, USAA FSB produced the operative documents in Ms. Jacob's loan file
DMEAST'I22(6321 .1
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Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 24 of 31
Mr. Donald Moody May 28,2010 Page 2
and thereby demonstrated that Ms. Jacob was not discriminated against in any way. Rather, USAA FSB's Response and the supporting loan documentation demonstrated Ms. Jacob's loan was denied on the basis ofUSAA FSB's uniform underwriting guidelines. Specifically, Ms. Jacob did not have sufficient funds in reserve, and her Debt-to-Income ratio was simply too high. REQUESTED DOCUMENTS Despite having demonstrated that Ms. Jacob has attempted to manufacture frivolous accusations of discrimination from a perfectly legitimate interaction, the PHRC has now requested the following documents from USAA FSB:
1) From January 2009 to present, any/all documents for individuals receiving conditional loan approval during this time frame, including age, national origin and source ofincome information.
2) Any/all documents for all individuals who received conditional loan approval and were denied during the same time frame, including reason for denial and age, national origin and source of information.
3) Any/all documents of individuals who were conditionally approved for loans and subsequently approved for loans, including age, national origin and source of income information.
In effect, PHRC has requested the entire loan file for ruI loans concerning every such borrower from
January 2009 to the present. 1bis request may implicate a voluminous number of loans for the 2009 to present time period. Such a request is highly burdensome and simply not relevant to Ms. Jacob's claim of discrimination. In addition, under the circumstances, the PHRC's request is highly intrusive, as the requested loan files contain confidential and private information ofUSAA FSB's customers. Accordingly, we will not produce any oftbese documents at this time. We nevertheless remain willing to consider a less intrusive means of discovery narrowly limited to whether this matter should even continue to proceed against USAA FSB. We look forward to hearing from you.
MCB/gpa
DMEAST .1246828-4 vi

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 25 of 31
EXHIBITD

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 26 of 31

Chairperson STtPHEH A. GLASSMAN
vtc. ChaIrperson RAQUEL O. YJ£NGST
Sec..tary OANIEL D. YUH Antstant SecrwbIry REV. DR. JAMES EARL GARMON, SA. Eacuttw DInIctor HOMER C. RDYD RegIanat Otrector CARLENE M. NEAL
Martin Bryce, Jr. Ballard Spahr 1753 Market Street Philadelphia PA 19103

COMMONWEALTH OF
Human Retattons

ePoE.N..N..S.Y.sLtoVnANIA

PIItlacIeIpIM RegIonal 0f'IIc.

uo North 8tIa Street, SUIte 50t

PhtIadetphIa, PA 19107

(215) 560-2496 yok.

(215) 560-3599nY

www.phrc.stat..pa.us

August 12,2010

Commlsston«s
JSMAB. ARCELAY
M. lOEI. BOlSTEIN J. WHYATT MONDESIAE S. KWEJUH NASSAR GERAlD S. ROBINSON SYlVIA A. WATERS DANIEl. L WOOOAL1., JR.

RE: Madelene F. Jacob v USAA Federal Savings Bank PHRC Case No. 200900936

Dear Martin Bryce, Jr.:
I am writing to issue a modified data and document request in lieu of a subpoena request. This modification is being issued in the hopes that this condensed request will enable the Respondent to comply without the use of Commission subpoena powers. Please provide the following data and document request on or before 8/2312010:
(1) A copy of any and/or all documents contained in the Complainant's entire loan file; and
(2) A copy of any and/or all documents contained in the entire loan files of a random sampling of fifty (50) refinance loan applicants, during the time period from January 1, 2009 to December 31, 2009. Please limit your response to those loans issued in the same general geographical area as the Complainant.
Thank. you in advance for your prompt response. If you should have any questions, I can be reached at (215) 965-7738.
~)im)U;~eololtdJY IMF Human Relations Representative II

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 27 of 31
EXHIBITE

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10

ChU'plrson STEPHEN A. GlASSMAN Vic. Chalrpenon RAQUEl O. YI£NGST
$ecreblry
DANIELD. YUN Assistant Secrwtary R£V. DR. JAMES EARl GARMON. SA. EJllCutM 0lnIc:tDr HOMER C. FlOYD RegIonal DlrKtar CARLENE M. NEAl.

COMMONWEALTH OF PENNSYLVANIA H....... Relalton. eommtssion PtatIacI.cpIda Regtonal Oftke
110 North 8th StrMt, sutt. sot Ph~tPA sgs07
(2tS) 560-2496 voke
(uS) s60-3sGGTTY www.phrc.. . .te.pa.us

Page 28 of 31
Commlssklnerl
ISMA£L ARCELAY M. JOB. BOLSTEIN 1. WHYATT MONDESIR! S. KWEnlN NASSAR GERALD S. R08INSON SYLVIA A. WATERS
DANIEL L WOODAU,lR.

August 26, 2010

Martin Bryce, Jr. Ballard Spahr 1753 Market Street Philadelphia PA 19103
RE: Madelene F. Jacob v USAA Federal Savings Bank Case No. 200900936
Dear Martin Bryce, Jr.:
To date, the data and documents requested in my letter dated August 12,2010 (Please see attached letter) ~ave ~ot been received. The items are deemed essential to this investigation.
The Pennsylvania Human Relations Act authorizes the Pennsylvania Human Relations Commission (PHRC) to use subpoena powers. Pennsylvania Courts have upheld the
Commission's authority to issue a subpoena both to secure documents and testimony. Hopefully,
in this particular investigation, the use of a subpoena will not be necessary.
If the items requested are not received on or~fore September 7, 2010l I will recommend that the Commission's legal staff initiate subpoena procedures to secure the data and documents.
Sincerely,

Donald Moody Human Relations Representative (215)965-7738

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 29 of 31
EXHIBITF

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 30 of 31

COMMONWEALTH OF PENNSYLVANIA PENNSYLVANIA HUMAN RELATIONS COMMISSION
SUBPOENA

Madelene F. Jacob,
COMPLAINANT
Versus
USAA Federal Savings Banl4
RESPONDENT
TO: CUSTODIAN OF RECORDS Martin Bryce, Jr.

CASE NUMBER: 200900936
ADDRESS: Ballard Spahr 1753 Market Street Philadelphia, PA 19103

Or Proper Custodian of Record
r::l YOU ARE COMMANDED to produce and permit inspection aqd copying the documents or objects ~ listed in ATIACHMENT "A" hereto on or before DCc."",,\o~~\41 '2-0,0 • Inlieuof
appearance the docwnents subpoenaed may be sent via First Class mail to tOe address below on or before the due date for production of the documents.
PHRC Philadelphia Regional Office 110 North 8th Street, Suite 501 Philadelphia, PA 19107

D YOU ARE COMMANDED to appear before the Pennsylvania Human Relations Commission at the place. date. and time specified below to testify in the above case.

PLACE OF TESTIMONY

DATE AND TIME

D YOU ARE COMMANDED to appear at the place, date, and time specified below to testify at the taking of a deposition in the above case.

PLACEOFDEPOS~ON

. DATEANDTIME

D YOU ARE COMMANDED to permit inspection of the following premises at the date and time

specified below.

.

PREMISES

DATE AND TIME

PENNSYLVANlA HUMAN RELAnONS COMMISSIONER:

Qoo;lL· ~~~. p - BY:

r woooit OAM£,1, L,.

LL I 'JR

I

DATE:

(0r/1'1,/10

Case 2:10-cv-07220-TJS Document 1 Filed 12/13/10 Page 31 of 31

COMMONWEALTH OF PENNSYLVANIA PENNSYLVANIA HUMAN RELAnONS COMMISSION

Madelene F. Jacob,
COMPLAINANT
Versus
USAA Federal Savings Bank. RESPONDENT

CASE NUMBER: 200900936

ATTACHMENT "A"
1. A copy of aDY and! or all documents contained in the Complainant's entire loan file, including but Dot limited to all credit reports Respondent obtained for Complainant, aD financial records Complainant submitted to RespondeDt and all requests for documentation Respondent sent to Complainant; and
2. A copy of any aDd/or all documents contained in the entire loan file for a random sampling of fifty (50) refinance loan applicants, during the time period from January 1, 2009 to December 31,2009, limited to the same geDeral geographical area as the Complainant, including but not limited to all credit reports Respondent obtained for each applicant, all financial records each applicant submitted to Respondent and all requests for documentation Respondent sent to each applicant.

 
 Case 2:10-cv-07220-TJS Document 17 Filed 04/28/11 Page 1 of 13

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA

USAA FEDERAL SAVINGS BANK,

:

Plaintiff,

:

:

v.

:

:

PENNSYLVANIA HUMAN RELATIONS :

COMMISSION,

:

Defendant.

:

_____________________________________ :

CIVIL ACTION No. 10-7220

STATEMENT OF INTEREST OF THE UNITED STATES I. INTEREST OF THE UNITED STATES
The United States respectfully submits this Statement of Interest, pursuant to 28 U.S.C. § 517, in support of the Pennsylvania Human Relations Commission‟s (PHRC) Motion for Summary Judgment seeking dismissal of the lawsuit and in opposition to USAA Federal Savings Bank‟s (USAA) Motion for Summary Judgment. In this case, USAA seeks to enjoin PHRC from investigating a housing discrimination complaint filed with, and referred to, PHRC by the United States Department of Housing and Urban Development (HUD) alleging that USAA engaged in discriminatory lending on the basis of national origin in violation of the federal Fair Housing Act (FHA), 42 U.S.C. § 3601 et seq. HUD and the United States Department of Justice are primarily responsible for enforcing the FHA. Among the enforcement authorities granted to HUD, the FHA provides that HUD refer complaints of discrimination, including fair lending complaints, to state and local agencies certified by HUD to have laws and enforcement procedures that are substantially equivalent to the federal law. 42 U.S.C. § 3610(f). PHRC is such a HUD-certified state agency. Accordingly, the United States has a substantial interest in

Case 2:10-cv-07220-TJS Document 17 Filed 04/28/11 Page 2 of 13
ensuring that the resolution of this case upholds the procedures for fair lending enforcement provided by the FHA.
II. STATEMENT OF FACTS A. Parties Plaintiff, USAA, is a federal savings bank chartered pursuant to the Home Owners‟ Loan Act, 12 U.S.C. § 1461 et seq., and regulated by the federal Office of Thrift Supervision (OTS). Compl. ¶ 2. USAA originates mortgage loans secured by residential real estate located in Pennsylvania. Compl. ¶ 19. USAA filed suit on December 12, 2010 seeking injunctive and declarative relief protecting it from the need to comply with any investigation or subpoena by PHRC. Compl. ¶ 47. Defendant, PHRC, is an agency of the Commonwealth of Pennsylvania certified by HUD pursuant to 42 U.S.C. § 3610(f) as a substantially equivalent state agency. See Notice of Certification and Funding of State and Local Fair Housing Enforcement Agencies Under the Fair Housing Assistance Program, 73 Fed. Reg. 15535 (Mar. 24, 2008) (listing substantially equivalent agencies including Pennsylvania Human Relations Commission); Fair Housing Assistance Program (FHAP) Agencies, http://www.hud.gov/offices/fheo/partners/FHAP/ agencies.cfm (same); see also Mitchell v. Cellone, 389 F.3d 86, 91 (3d Cir. 2004) (recognizing PHRC is a certified state agency under § 3610(f)). HUD regulations require that, in order for PHRC to maintain its substantial equivalence certification, HUD conduct a periodic review and determine that the Pennsylvania Human Rights Act provides substantially the same protections against discrimination and substantially the same administrative adjudicatory procedures provided under the FHA. See, e.g., 24 C.F.R. § 115.204(a) (listing numerous substantive provisions needed for substantial equivalence); see also id. §§ 115.208, 115.210-.211 (requiring
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Case 2:10-cv-07220-TJS Document 17 Filed 04/28/11 Page 3 of 13
PHRC to satisfy HUD on the continued adequacy of its performance and the continued equivalency of the Pennsylvania Human Rights Act).
The parties filed cross motions for summary judgment on April 1, 2011. The parties‟ responses to the motions are due on April 29, 2011.
B. The FHA Complaint In June 2009, Madelene Jacob filed a complaint form with HUD pursuant to 42 U.S.C. § 3610(a). Compl. Ex. A. Ms. Jacob alleged that USAA violated the FHA – specifically the ban on discriminatory lending contained in 42 U.S.C. § 3605 – by unfairly denying her attempt to refinance a mortgage secured by residential property she owns in Norristown, Pennsylvania because of her Egyptian national origin. See Compl. Ex. A. The complaint was processed by the Philadelphia Regional Office of HUD‟s Office of Fair Housing and Equal Opportunity (FHEO) because it involved an allegation of housing discrimination occurring in Pennsylvania. See Fair Housing Regional Offices, http://www.hud.gov/offices/fheo/aboutfheo/fhhubs.cfm; see generally Program Offices: Fair Housing / Equal Opportunity, http://portal.hud.gov/hudportal/HUD?src= /program_offices/fair_housing_equal_opp (providing general information about FHEO and HUD‟s FHA enforcement system). HUD‟s Philadelphia Regional Office assigned file number 03-09-0511-8 to the complaint. See Defendant‟s Ex. B. HUD then referred Ms. Jacob‟s complaint to PHRC on August 12, 2009, pursuant to HUD‟s authority to refer HUD-filed FHA complaints to substantially equivalent state and local agencies for processing under 42 U.S.C. § 3610(f). See Defendant‟s Ex. B. HUD informed PHRC, at the time it referred the complaint, that HUD would advise USAA and Ms. Jacob that it was referring the investigation to PHRC. See id.; see also 42 U.S.C. § 3610(f)(1) (specifying
-3-

Case 2:10-cv-07220-TJS Document 17 Filed 04/28/11 Page 4 of 13
that HUD refers a complaint to a substantially equivalent state or local agency “before taking any action with respect to such complaint”).
PHRC commenced an investigation of Ms. Jacob‟s referred lending discrimination complaint. USAA answered the complaint by informing PHRC that it did not treat Ms. Jacob less favorably than other customers. Compl. ¶ 25. PHRC sent a letter to USAA in April 2010 requesting it provide specific documents to substantiate this defense. Compl. Ex. B. USAA objected to the breadth of documents requested, Compl. Ex. C, and PHRC narrowed its document request in an August 2010 letter, Compl. Ex. D. USAA then ceased communications with PHRC, which led PHRC, later in August 2010, to send a second letter encouraging a response to the narrower set of requests and noting PHRC‟s ability to subpoena USAA‟s records if USAA did not provide them voluntarily. Compl. Ex. E. PHRC formally subpoenaed the narrower set of records on October 18, 2010, with a response due December 14, 2010. Compl. Ex. F. USAA never responded to the subpoena, and instead filed this case on December 12, 2010.
III. ARGUMENT The Fair Housing Act, 42 U.S.C. § 3610(f), expressly authorizes a state agency to investigate a housing discrimination complaint filed with HUD in the manner that PHRC has followed in this case. USAA‟s request for injunctive and declaratory relief to shut down PHRC‟s investigation of Ms. Jacob‟s lending discrimination complaint is premised on the argument that a different federal law – the Home Owners‟ Loan Act and its implementing regulations – forbid PHRC from conducting such an investigation pursuant to state law. Because PHRC is acting pursuant to authority explicitly granted to it by federal law, USAA‟s preemption claim fails as a matter of law. Therefore, this Court should grant PHRC‟s motion for summary
-4-

Case 2:10-cv-07220-TJS Document 17 Filed 04/28/11 Page 5 of 13
judgment seeking dismissal of the lawsuit, and it should deny USAA‟s motion for summary judgment. See Emp’rs Res. Mgmt. Co. v. James, 853 F. Supp. 920, 921 (E.D. Va. 1994) (granting state‟s motion for summary judgment and denying plaintiff‟s motion for summary judgment upon making the determination that a challenged law was not preempted); see also NBT Bank, Nat’l Ass’n v. First Nat’l Cmty. Bank, 393 F.3d 404, 418 (3d Cir. 2004) (holding summary judgment was proper when legal claim failed as a matter of law).
A. The FHA Enforcement Structure The FHA establishes procedures whereby victims of housing discrimination1 can obtain meaningful relief through administrative investigation and adjudication of their complaints. See Mitchell, 389 F.3d at 90-91 (describing Congress as envisioning that the process commenced by victims of housing discrimination filing administrative complaints under 42 U.S.C. § 3610 would be “the primary means of enforcing FHA claims”). As an integral part of this administrative process, Congress created a system by which the federal government shares responsibility with state and local governments to investigate HUD-filed complaints alleging violations of the FHA. See H.R. Rep. No. 100-711, at 35 (House Committee Report to the Fair Housing Amendments Act of 1988 noting “the valuable role state and local agencies play in the [FHA] enforcement process”). Specifically, the FHA provides that when the Secretary of HUD receives a complaint filed pursuant to 42 U.S.C. § 3610(a) alleging a discriminatory housing practice in violation of the FHA, HUD shall refer it for investigation and resolution to the state or local agency with jurisdiction over the location where the practice is alleged to have occurred, if the state or local agency has been certified by HUD to enforce rights, and provide a process and remedies, that are 1 Lending secured by residential real estate is one of the housing-related transactions covered by the FHA. 42 U.S.C. § 3605(b)(1)(B).
-5-

Case 2:10-cv-07220-TJS Document 17 Filed 04/28/11 Page 6 of 13
“substantially equivalent” to those provided under the FHA. 42 U.S.C. § 3610(f)(1).2 Certifications of substantial equivalence are made by the Secretary of HUD, who has delegated that authority to the Assistant Secretary for Fair Housing and Equal Opportunity. Currently, HUD has certified substantially equivalent agencies that cover all or parts of 39 states and the District of Columbia. See Fair Housing Assistance Program (FHAP) Agencies, http:// www.hud.gov/offices/fheo/partners/FHAP/agencies.cfm.
To be certified, a state or local agency must demonstrate that it administers a law that, in comparison to the FHA: (1) protects substantially equivalent substantive rights; (2) follows substantially equivalent procedures; (3) has substantially equivalent remedies; and (4) makes available judicial review of the agency‟s action. 42 U.S.C. § 3610(f)(3)(A); see also 24 C.F.R. §§ 115.201, 115.204, 115.206. The FHA regulations provide that a certified state agency will apply its own substantially equivalent state law in investigating and adjudicating the complaint, 24 C.F.R. § 115.204, and require – as a condition of certification as substantially equivalent to the FHA – that such state laws grant subpoena power to the certified agency to aid in its investigations, id. § 115.204(a)(2), (b)(1)(ii). Consistent with the certification requirements, Pennsylvania statutory provisions governing PHRC‟s investigation of fair housing complaints explicitly incorporate provisions of the FHA. See 43 Pa. Cons. Stat. § 959(b)(2)-(3), (c), (d.1), (h) (requiring that various PHRC procedures must follow those “required by the Fair Housing Act”).
2 In certain circumstances, HUD can itself investigate housing discrimination complaints involving jurisdictions that are covered by certified state or local substantially equivalent agencies. See, e.g., 42 U.S.C. § 3610(f)(2).
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B. HOLA Does Not Preclude PHRC’s Investigation Under the FHA USAA seeks to enjoin PHRC‟s investigation by arguing that the Home Owners‟ Loan Act‟s (HOLA) broad grant to OTS of regulatory control over banks chartered under that law precludes investigations into those banks by state agencies authorized by state law. See 12 U.S.C. § 1464(a) (“In order to provide thrift institutions for the deposit of funds and for the extension of credit for homes and other goods and services, the Director [of OTS] is authorized, under such regulations as the Director may prescribe . . . to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as Federal savings associations (including Federal savings banks) . . . .”). Specifically, USAA claims that PHRC‟s use of subpoena power is 1) prohibited by regulations specifying that HOLA preempts certain “state laws affecting the operations of federal savings associations,” 12 C.F.R. § 560.2; see also id. § 545.2 (declaring OTS‟s exercise of authority “is preemptive of any state law purporting to address the subject of the operations of a Federal savings association”), or 2) a form of state-authorized “visitation” banned by HOLA. Because the state investigation is authorized by federal law, however, it is not preempted. Under the FHA‟s statutory structure, PHRC‟s role in investigating fair lending complaints is established by federal law. 42 U.S.C. § 3610(f). Congress provided that complaints alleging violations of the federal FHA filed with HUD are processed by state and local agencies that HUD has certified as administering housing discrimination law substantially equivalent to the FHA. HUD certified PHRC as one such agency after determining that the Pennsylvania Human Rights Act is substantially equivalent to the FHA. Indeed, PHRC‟s exercise of the subpoena power granted to it by the Pennsylvania Human Rights Act, which USAA identifies as its fundamental objection to PHRC‟s investigation, USAA Br. 7, is specifically required by federal
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law. 24 C.F.R. § 115.204(a)(2), (b)(1)(ii). Therefore, the fact that PHRC is a state agency
enforcing the Pennsylvania Human Rights Act is not controlling despite USAA‟s focus on it,
USAA Br. 5-6, because the federal FHA authorizes and mandates that precise arrangement.
1. HOLA’s Preemption Provisions Do Not Apply to an Investigation Procedure Established by Federal Law
Rather than being preempted, the FHA‟s anti-discrimination provisions work together
with the HOLA preemption regulations, which provide that federal savings associations must
only “extend credit as authorized under federal law.” 12 C.F.R. § 560.2. Neither the HOLA
regulations nor the caselaw interpreting the preemptive effect of HOLA on state laws includes
any suggestion that its preemption extends to federal law mandates. Because USAA‟s
preemption argument relies solely on these inapplicable regulations and cases decided thereunder, USAA Br. 16-20, this argument fails as a matter of law.3
The preemption claimed by USAA would directly conflict with the system that Congress
has established for state-federal cooperation in enforcing the FHA. Preemption occurs where the
Supremacy Clause dictates that federal law trumps state law. On the other hand, it is well
established that a conflict between two federal statutory schemes should be avoided whenever
possible. See, e.g., Conn. Nat’l Bank v. Germain, 503 U.S. 249, 254 (“[S]o long as there is no
„positive repugnancy‟ between two laws, a court must give effect to both.” (citation omitted)).
3 Because HOLA clearly does not preempt PHRC‟s federal-law-authorized investigation, the Court need not decide whether HOLA, outside of the context of a HUD-certified state or local agency‟s lending discrimination investigation, preempts state lending discrimination laws or investigations of compliance with such laws by state or local agencies. Compare PHRC Br. 1020, with USAA Br. 16-20. This question will be clarified by a new federal statute that takes effect in July. See Consumer Financial Protection Act of 2010, Pub. L. No. 111-203, §§ 1046(a), 1047(b), 1048, 124 Stat. 1955, 2017-18 (to be codified at 12 U.S.C. § 1465); Designated Transfer Date, 75 Fed. Reg. 57252 (Sept. 20, 2010) (setting July 21, 2011 as the date upon which the amendment becomes effective). The new statute expressly provides that HOLA does not create field preemption, superseding the regulations and caselaw USAA relies upon in seeking summary judgment. See Consumer Financial Protection Act of 2010, § 1046(a), 124 Stat. at 2017 (to be codified at 12 U.S.C. § 1465(b)).
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In this case the conflict is easily avoided – and HOLA is harmonized with the FHA – by interpreting HOLA not to preclude state fair housing investigations authorized by federal law. This is consistent with the basic principle of statutory construction that the specific provisions of the federal FHA establishing mechanisms for conducting investigations should take precedence over the general provision of HOLA on supervision of federal savings associations. See, e.g., Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384 (1992) (“[I]t is a commonplace of statutory construction that the specific governs the general . . . .”). These principles apply in this case because every level – rights, remedies, and procedure – of the PHRC enforcement scheme is determined by federal law.
It is clear from the plain language of the FHA that PHRC legally can investigate Ms. Jacob‟s lending discrimination allegation concerning USAA, and nothing in HOLA or its regulations contradicts this statutory mandate. In addition, administrative interpretations of the relevant statutes confirm PHRC‟s authority. In 2006, HUD published its official position that federally chartered financial institutions, such as federal savings associations, are subject to the FHA‟s scheme of investigation by HUD-certified substantially equivalent state and local agencies:
[I]t is HUD‟s statement of policy that state and local fair housing enforcement agencies who are administering fair housing laws that HUD has certified as substantially equivalent to the Federal Fair Housing Act have the authority to enforce those statues and ordinances against any respondent, including a national bank, within their jurisdiction. Authority of Agencies in the Fair Housing Assistance Program To Investigate Allegations of Discrimination in Lending Compliance, 71 Fed. Reg. 33138 (June 7, 2006) (emphasis added). This guidance adds further support to the otherwise clear federal statutory mandate giving PHRC authority to investigate USAA for lending discrimination, because HUD‟s interpretations of the
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FHA are owed substantial deference. See Trafficante v. Metro. Life Ins. Co., 409 U.S. 205, 210 (1972) (holding HUD‟s interpretation of the FHA “is entitled to great weight”). Although the OTS does not have interpretative authority over the FHA, it also has acknowledged implicitly that the FHA‟s scheme for fair housing investigations by HUD-certified substantially equivalent state and local agencies is relevant to a state or local agency‟s ability to investigate federal savings associations. See OTS, Letter Re: Preemption of Certain Lending-Related Provisions in the Code of Montgomery County, Maryland, 2006 WL 6195027, at *3 n.15 (Mar. 7, 2006) (drawing attention to the fact that the investigation authorized by a local ordinance, which OTS opined was preempted, would not be conducted by a HUD-certified agency).
2. PHRC’s Investigation Is Not Barred by the Supreme Court Decision in Cuomo The Supreme Court‟s holding in Cuomo v. Clearing House Ass’n, 129 S. Ct. 2710 (2009), that the National Bank Act precluded the New York State Attorney General from exercising “visitorial powers” over national banks, does not support USAA‟s claim for an injunction. The State Attorney General‟s fair lending investigation of national banks was allowed to proceed, but the Court held that exercise of state subpoena power would constitute prohibited visitation. See id. at 2721-22. Cuomo has no application here because, among other things, unlike the New York Attorney General‟s investigation, PHRC‟s investigation is authorized by federal law. The National Bank Act, at issue in Cuomo, provides that “[n]o national bank shall be subject to any visitorial powers except as authorized by Federal law . . . .” 12 U.S.C. § 484(a) (emphasis added); see also 12 C.F.R. § 7.4000(a) (“State officials may not exercise visitorial powers with respect to national banks . . . except in limited circumstances authorized by federal law.” (emphasis added)). Consistent with this language, the Supreme Court noted that the
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prohibition on visitation does not “preclude law enforcement by federal agencies.” Cuomo, 129 S. Ct. at 2717. Therefore, even if Cuomo‟s holding could be applied to banks chartered pursuant to HOLA,4 PHRC‟s investigation of USAA would not be subject to Cuomo‟s restrictions because PHRC‟s investigation is “authorized by federal law” – namely the FHA.
Indeed, USAA‟s visitorial powers argument acknowledges that the FHA authorizes HUD and the Department of Justice to investigate USAA‟s lending practices for discrimination. USAA Br. 15-16. This same power to investigate federally chartered banks must similarly apply to the other entity – state agencies certified to enforce substantially equivalent state laws – that the FHA explicitly authorizes to investigate housing discrimination complaints. Compare 42 U.S.C. §§ 3610-3612 (authorizing investigation and enforcement by HUD), and id. § 3614 (authorizing enforcement by the Department of Justice), with id. § 3610(f) (authorizing investigative referrals to certified state and local agencies). USAA‟s view that enough federal regulators have power to investigate its fair lending practices, USAA Br. 12-16, does not allow it to second-guess Congress‟s decision in the FHA that it is appropriate to empower state agencies like PHRC to enforce prohibitions against housing and lending discrimination.
USAA‟s visitorial powers argument also ignores key factual distinctions between this case and Cuomo. In Cuomo, the New York State Attorney General‟s Office was not a state agency certified by HUD as substantially equivalent, and it was not conducting an FHA investigation referred by HUD. See Clearing House Ass’n v. Spitzer, 394 F. Supp. 2d 620, 628 (S.D.N.Y. 2005). Therefore, the New York State Attorney General‟s fair lending investigation
4 Notably, despite its extensive discussion of the term “visitation,” USAA does not cite any authority that applies the term to determining the propriety of an investigation conducted against a bank chartered pursuant to HOLA. See USAA Br. 12. Because Cuomo does not prevent a HUD-certified substantial equivalent state agency like PHRC from conducting a FHA fair lending investigation referred by HUD, the Court need not decide what relevance Cuomo‟s holding would have to banks chartered pursuant to HOLA.
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did not implicate the banking law provision that allows state officials to exercise visitorial powers authorized by federal law, and the Supreme Court‟s holding has no bearing on a fair lending investigation like PHRC‟s that is so authorized by the FHA.5
IV. CONCLUSION PHRC, as a state agency certified by HUD to enforce a state fair housing law substantially equivalent to the FHA, is authorized by the federal Fair Housing Act to investigate Ms. Jacob‟s lending discrimination complaint as a matter of law. PHRC‟s motion for summary judgment dismissing USAA‟s lawsuit should be granted, and USAA‟s motion for summary judgment should be denied.

Respectfully submitted,

ZANE D. MEMEGER United States Attorney
/s/ Michael S. Blume MICHAEL S. BLUME Assistant United States Attorney 615 Chestnut Street, Suite 1250 Philadelphia, PA 19106 Email: michael.blume@usdoj.gov Telephone: 215-861-8376 Fax: 215-861-8618

THOMAS E. PEREZ Assistant Attorney General Civil Rights Division
STEVEN H. ROSENBAUM Chief
DONNA M. MURPHY Principal Deputy Chief
DANIEL P. MOSTELLER Trial Attorney U.S. Department of Justice Civil Rights Division Housing and Civil Enforcement Section 950 Pennsylvania Ave. NW - NWB Washington, D.C. 20530 Email: Daniel.Mosteller@usdoj.gov Telephone: 202-305-0053 Fax: 202-514-1116

5 Consistent with the position set forth here, the United States argued in Cuomo that HUDcertified state and local substantially equivalent agencies have the power to investigate national banks for lending discrimination. See Brief for the Federal Respondent at 36 n.5, Cuomo, 129 S. Ct. 2710 (2009) (No. 08-453), 2009 WL 815241.

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CERTIFICATE OF SERVICE
I, Michael Blume, hereby certify that on this 28th day of April, 2011, the foregoing
Statement of Interest of the United States has been filed electronically and is available for
viewing and downloading from the ECF system. I further certify that I caused a true and correct
copy of same to be served upon the following counsel for Plaintiff and Defendant via electronic
filing:
Martin C. Bryce, Jr. Ballard Spahr, LLP 1735 Market Street, 51st Floor Philadelphia, PA 19103-7599 Bryce@ballardspahr.com
Charles Lewis Nier Pennsylvania Human Relations Commission 110 North Eighth Street, Suite 501 Philadelphia, PA 19107 cnier@state.pa.us

Date: April 28, 2011

/s/ Michael S. Blume Michael S. Blume

 
 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

USAA FEDERAL SAVINGS BANK :

:

v.

:

:

PENNSYLVANIA HUMAN

:

RELATIONS COMMISSION

:

CIVIL ACTION NO. 10-7220

MEMORANDUM OPINION

Savage, J.

August 23, 2011

In a case of first impression, we are asked to decide whether a state agency,

pursuant to a delegation from a federal agency mandated by federal law, can investigate

a federally created savings and loan institution under state antidiscrimination laws. The

question is whether the state agency is preempted from enforcing state antidiscrimination

laws even though it is doing so pursuant to a federal statute. The case presents an

apparent conflict between one federal statute and a regulation issued by a federal agency

acting with the authority granted by another federal statute.

USAA Federal Savings Bank (“USAA”) brought this action seeking a declaration that

it is not subject to the Pennsylvania Human Relations Act’s antidiscrimination laws and the Pennsylvania Human Relations Commission (“PHRC”)1 cannot investigate it for violations

of Pennsylvania law. It requests an injunction barring the PHRC from investigating it. It

contends that the state antidiscrimination statute is preempted by federal law. According

to USAA, as a federal savings and loan institution subject to the exclusive oversight and

regulation of the Office of Thrift Supervision (“OTS”), it has no obligation to submit to and

cooperate with the PHRC’s investigation into an allegation that it discriminated against a

1 The PHRC is the state agency charged with enforcing Pennsylvania’s antidiscrimination laws. See PHRA v. Alto-Reste Park Cemetery Assoc., 306 A.2d 881, 887 (Pa. 1973).

loan applicant on the basis of her national origin when it denied her loan application. USAA also contends that the PHRC’s investigation is an impermissible exercise of “visitorial powers” in violation of federal law.
The PHRC counters that Pennsylvania’s antidiscrimination laws are not preempted because the Fair Housing Act (“FHA”), 42 U.S.C. §§ 3601-3631, specifically authorizes state agencies operating under housing regulations “substantially equivalent” to federal law to investigate and prosecute claims of discrimination. It also contends that the OTS regulations do not preempt state antidiscrimination laws and the PHRC’s investigation is not visitorial. Therefore, according to the PHRC, USAA is obligated to comply with its investigation of the complaint which a federal agency referred to it pursuant to federal law.
We conclude that the PHRC’s investigation pursuant to the Pennsylvania Human Relations Act (“PHRA”) is not preempted by federal law. On the contrary, it was mandated by federal law. Given this conclusion, there is no impermissible exercise of visitorial power. Therefore, USAA’s motion for judgment will be denied and the PHRC’s motion will be granted.2
Background In May of 2009, Madeline Jacob applied to USAA for a loan to refinance a residential investment property. USAA denied her application, claiming that her debt-toincome ratio was too high and that she did not possess sufficient cash reserves. Jacob then filed a complaint with the United States Department of Housing and Urban
2 Summary judgment is appropriate if “there is no genuine issue as to any material fact and . . . the m ovant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). At a pretrial conference, the parties agreed that the m aterial facts are not in dispute. Because the action m ay be decided as a m atter of law, they were ordered to file cross-motions for summary judgment.
2

Development (“HUD”), alleging that USAA had discriminated against her on the basis of her national origin. Pursuant to the FHA, HUD referred the complaint to the PHRC.
Upon referral from HUD, the PHRC began an investigation into Jacob’s discrimination complaint and requested documents from USAA. After USAA refused to voluntarily produce the documents, the PHRC issued a subpoena.3 In response, USAA filed this action seeking a declaratory judgment that it was not obligated to comply with the PHRC’s investigation.
Preemption Federal preemption of a state law exists in three situations: express preemption, field preemption, and conflict preemption. Holk v. Snapple Beverage Corp., 575 F.3d 329, 334 (3d Cir. 2009) (citing Hillsborough County, Fla. v. Automated Med. Labs., Inc., 471 U.S. 707, 713 (1985)). Express preemption occurs when a Congressional statute or agency regulation4 has expressly stated that state law is preempted. Altria Group Inc. v. Good, 555 U.S. 70, 76 (2008); Farina v. Nokia, Inc., 625 F.3d 97, 115 (3d Cir. 2010). Field preemption applies when a federal statute or regulations promulgated under it are so pervasive that they completely occupy a field, leaving no room for additional state regulation. Hillsborough County, 471 U.S. at 713; Farina, 625 F.3d 115. Conflict preemption arises when either compliance with both state and federal requirements is
3 On August 12, 2010, the PHRC subpoenaed Jacob’s loan file and 50 random ly selected files for applicants who subm itted loan applications between January 1, 2009 and Decem ber 31, 2009. It requested these documents pursuant to its authority under § 957(g)(1) of the PHRA., which grants the PHRC the authority to “subpoena witnesses . . . [and] require the production for exam ination of any books and papers relating to any matter under investigation.” 43 P.S. § 957(g)(1).
4 W here Congress has delegated the authority to regulate a particular field to an administrative agency, the agency’s regulations issued pursuant to that authority have as m uch preem ptive force as the federal statute. Holk, 575 F.3d at 339-40.
3

impossible or the state law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Holk, 575 F.3d at 339 (citations omitted).
USAA contends that express preemption applies.5 It argues that exercising its authority under the Home Owners’ Loan Act, 12 U.S.C. § 1461 et seq. (2011) (“HOLA”), the OTS has promulgated regulations that expressly preempt state laws related to the lending and operational activities of federal savings banks. It cites OTS regulations that specifically declare that it is occupying the entire field of lending regulations for federal savings associations. See 12 C.F. R. § 560.2(a).
HOLA was enacted by Congress to provide emergency relief for home mortgage debt and as a “radical and comprehensive response to the inadequacies of the existing state systems.” Fidelity Fed. S&L Ass’n v. de la Cuesta, 458 U.S. 141, 159-60 (1982) (internal quotations and citations omitted). When it created federal savings and loan associations in HOLA, Congress granted the OTS6 authority to promulgate regulations with respect to the “organization, incorporation, examination, operation, and regulation” of federal savings and loan institutions. 12 U.S.C. § 1464(a)(1). In enacting this legislation, Congress “expressly contemplated, and approved, the [OTS]’s promulgation of regulations superseding state law.” de la Cuesta, 458 U.S. at 161-62 (internal citations omitted).
Pursuant to this Congressional authority, the OTS has promulgated regulations that preempt “any state law purporting to address the subject of the operations of a Federal
5 In its m otion, USAA argued that both express and field preem ption were in play. At oral argum ent, it agreed that only express preemption was the issue.
6 Regulatory authority for federal savings and loan institutions was initially vested in the Federal Hom e Loan Bank Board (“Bank Board”). However, in 1989 Congress replaced the Bank Board with the OTS. 12 U.S.C. § 1437, §§ 1441a, 1821.
4

savings association.” 12 C.F.R. § 545.2. Through its regulations, the OTS has made clear that it intends its regulations to occupy the entire field of lending for federal savings associations. 12 C.F.R. § 560.2 (1996) (“To enhance safety and soundness and to enable federal savings associations to conduct their operations in accordance with best practices . . . OTS hereby occupies the entire field of lending regulation for federal savings associations.”).
USAA contends that the HOLA and the OTS regulations preempt the PHRC’s investigation. The PHRC counters that this case does not involve preemption because, pursuant to the FHA, it is required by Congress to investigate Jacob’s discrimination complaint.7
The FHA makes it unlawful “for any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction . . . because of race, color, religion, sex, handicap, familial status, or national origin.” 42 U.S.C. § 3605(a). Pursuant to the FHA, HUD is responsible for investigating charges of housing discrimination. The FHA permits the Secretary of HUD to certify local agencies which have local fair-housing laws that are “substantially equivalent” to federal laws. 42 U.S.C. § 3610 (f)(3). Once an agency is certified, the Secretary “shall refer . . . complaint[s] to that certified agency before taking any action with respect to such complaint[s].” § 3610(f)(1).8 Certified local agencies are
7 The United States filed a statem ent of interest, arguing that the PHRC’s investigation is not preem pted because it is m andated by Congress. (Document No. 17).
8 Pursuant to the FHA, after referral is made to a state agency, HUD is not permitted to take any further action with respect to the com plaint unless: “(A) the certified agency has failed to com m ence proceedings with respect to the complaint before the end of the 30th day after the date of such referral; (B) the certified agency, having so com m enced such proceedings, fails to carry forward such proceedings with
5

responsible for investigating and, if necessary, prosecuting housing discrimination claims. Mitchell v. Cellone, 389 F.3d 86, 90 (3d Cir. 2004).
There is no dispute that Jacob filed her discrimination complaint with HUD; HUD referred the complaint to the PHRC; and the PHRC has been certified by HUD as a local agency with fair-housing laws “substantially equivalent” to federal laws.
USAA acknowledges that the FHA permits HUD to refer complaints filed with it to certified state agencies. Nevertheless, it contends that because the OTS has preempted the field of lending regulations for federal savings banks, there can be no referral where it would subject federal savings banks to investigation and enforcement under state law. Thus, USAA argues that it is not subject to the PHRA.
Contrary to USAA’s contention, there is no preemption. In these circumstances, the PHRC’s investigation is not an exercise of state power. Rather, it is an exercise of federal power which has been delegated to the state. The PHRC is not acting on its own. It is acting pursuant to a congressional mandate. Because the PHRC’s investigation into Jacob’s discrimination complaint is specifically authorized and required by federal law, it is not subject to federal preemption.
To hold otherwise would render the FHA antidiscrimination provision a nullity and unenforceable where a federal savings and loan institution discriminated. It would frustrate the antidiscrimination enforcement scheme intended by Congress. Indeed, USAA concedes that HUD itself could do what it argues the PHRC cannot. In other words, one federal agency (HUD) could investigate and enforce a federal antidiscrimination statute
reasonable promptness; or (C) the Secretary determines that the certified agency no longer qualifies for certification under this subsection with respect to the relevant jurisdiction.” 42 U.S.C. § 3610(f)(2).
6

(FHA) where the charge is made against an entity subject to regulation by another federal
agency (OTS). Here, HUD has delegated its responsibility to investigate the complaint to
the state agency as required by statute.
USAA argues that the PHRC’s investigation into Jacob’s complaint is preempted by
OTS regulations. Given that we conclude there is no preemption, it is not necessary to
reach this argument. Nevertheless, for completeness sake, we shall explain why USAA’s
argument fails.
The OTS addresses preemption of state laws regulating federal savings institutions
in § 560.2 of its regulations. Regulation 560.2(a) states:
Pursuant to sections 4(a) and 5(a) of HOLA . . . OTS is authorized to promulgate regulations that preempt state laws affecting the operations of federal savings associations when deemed appropriate to facilitate the safe and sound operation of federal savings associations, to enable federal savings associations to conduct their operations in accordance with the best practices of thrift institutions in the United States, or to further other purposes of the HOLA. To enhance safety and soundness and to enable federal savings associations to conduct their operations in accordance with best practices (by efficiently delivering low-cost credit to the public free from undue regulatory duplication and burden), OTS hereby occupies the entire field of lending regulation for federal savings associations. OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, federal savings associations may extend credit as authorized under federal law, including this part, without regard to state laws purporting to regulate or otherwise affect their credit activities, except as to the extent provided in paragraph (c) of this section or § 560.110 of this part. 12 C.F.R. § 560.2(a) (emphasis added).
The OTS instructs how to perform the § 560.2 preemption analysis. It
provides:
[T]he first step will be to determine whether the type of law in question is listed in paragraph (b) [of § 560.2]. If so, the analysis will end there; the law is preempted. If the law is not covered by paragraph (b), the next question is whether the law affects lending. If it does, then, in accordance with
7

paragraph (a), the presumption arises that the law is preempted. This presumption can be reversed only if the law can clearly be shown to fit within the confines of paragraph (c). For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption. 61 Fed. Reg. 50951-01, 50965-67 (Sept. 30, 1996). Paragraph (b) of § 560.2 contains a non-exclusive list of state laws that are specifically preempted. Regulation 560.2(c) provides that state laws involving real property that “only incidentally affect the lending operations of Federal savings associations” are not preempted. 12 C.F.R. § 560.2(c). USAA contends that the PHRA is a state law that is specifically preempted under § 560.2(b). It cites § 560.2(b)(10), which includes among preempted state laws those involving “origination, servicing, sale or purchase of, or investment or participation in, mortgages.” § 560.2(b)(10). The PHRC counters that the PHRA does not regulate USAA’s ability to process, originate or service mortgages and only has an incidental effect on its credit activities. It does not target federal savings associations. The PHRA is a state statute prohibiting discrimination in employment, housing and public accommodation. 43 P.S. § 951 et seq. Under the statute, it is illegal to “[r]efuse to lend money . . . or otherwise withhold financing of any housing accommodation or commercial property from any person because of the race, color, familial status, age, religious creed, ancestry, sex, national origin, handicap or disability of any person.” 43 P.S. § 955(h)(2). In certifying the PHRA, HUD has acknowledged that the statute is substantially equivalent to federal law. Regulation 560.2(b)(10) has been interpreted to apply only to state laws “directed at federal savings associations’ mortgage lending operations.” Fidelity Nat’l Info. Solutions, Inc. v. Sinclair, No. 02-6928, 2004 WL 764834, at *13 (E.D. Pa. March 31, 2004) (citations
8

omitted). “Nothing in HOLA . . . or OTS[ ] regulations indicates that [the] preemption focus was on anything other than state laws specifically targeting federal savings associations.” Id.
The PHRA does not impose upon federal savings institutions anything more than federal law does. Other than prohibiting discrimination as the FHA does, nothing in the statute imposes restrictions on federal savings banks’ ability to process, originate or service loans. Moreover, because USAA is already prohibited from discriminating against applicants on the basis of race, color, familial status, age, religion, sex, national origin and disability pursuant to the FHA9 and the ECOA,10 compliance with the PHRA does not create any additional burden on its lending operations. See, e.g., McAnaney v. Astoria Fin. Corp, 665 F. Supp. 2d 132, 166 (E.D. NY 2009) (“[B]ecause federal thrifts are presumed to act with their borrowers in a truthful manner, Indiana’s general prohibition on deception should have no measurable impact on their lending operations.”) (quoting Opinion of OTS Chief Counsel, P-96-14, Dec. 24, 1996, available at, 1996 WL 7667462, at *6). At most, the PHRA only incidentally effects federal savings banks’ lending operations. Thus, we conclude it does not fall within the definition of a state law that is preempted by § 560.2(b)(10).
Even if the PHRA did affect lending operations and would otherwise be preempted by § 560.2, the OTS regulations cannot prohibit a certified state agency from investigating and enforcing discrimination complaints referred to it by HUD. Although the OTS
9 The FHA prohibits discrim ination based on race, color, religion, sex, handicap, fam ilial status, or national origin. 42 U.S.C. § 3605(b).
10 The ECOA prohibits discrim ination based on race, color, religion, national origin, sex, m arital status, or age. 15 U.S.C. §§ 1691-1691f.
9

regulations were promulgated in accordance with authority granted to it by HOLA, that authority does not “transform the regulation into an Act of Congress, nor allow it to prevail over contrary provisions of duly enacted statutes.” See In re Nautilis Motor Tanker Co., Ltd., 85 F.3d 105, 112 (3d Cir. 1996). It is “axiomatic that federal regulations can not ‘trump’ or repeal Acts of Congress.” Id. at 111 (quoting McComb v. Wambaugh, 934 F.2d 474, 381 (3d Cir. 1991)).
There is no question that USAA is subject to the FHA. See 61 Fed. Reg. 50951, 50965 (Sept. 30, 1996) (“interests of borrowers are protected by the elaborate network of federal borrower-protection statutes applicable to federal thrifts, including . . . the Fair Housing Act.”).11 Nor is there a dispute that the FHA requires HUD to refer housing complaints to certified state agencies for investigation and prosecution. Thus, to the extent that OTS regulations would prohibit certified state agencies from investigating and prosecuting federal savings institutions, the regulations run afoul of the FHA’s enforcement scheme established by Congress.
Because the OTS regulations cannot “trump” an act of Congress, we conclude that certified state agencies are permitted to investigate and prosecute federal savings and loan institutions as mandated by the FHA. To the extent, if at all, the OTS regulations conflict with this mandate, they cannot preempt the carrying out of federally mandated enforcement by the states.
Because the PHRA’s antidiscrimination laws do not fall within the category of preempted state regulation listed in § 560.2(b) and only, if at all, incidentally effect lending
11 USAA also concedes that it is subject to, am ong other federal statues, the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. §§ 1691-1691f. See, 61 Fed. Reg. 50951, 50965.
10

activity, they are not preempted by OTS regulations. Even if we were to conclude that the PHRA is among the preempted state laws listed in § 560.2(b), they are still not enforceable because the OTS regulations conflict with the enforcement scheme of the FHA created by Congress.
Visitorial Powers USAA contends that the PHRC’s investigating Jacob’s complaint pursuant to the enforcement provisions of the PHRA is an impermissible exercise of visitorial powers. It argues that because it is a federal banking institution subject to the exclusive authority of the OTS, the PHRC may not compel its compliance with state regulations. Because the PHRA is not preempted by HOLA or OTS regulations and the PHRC’s investigation is an exercise of delegated federal power, the PHRC enforcement of the state statute is not an exercise of visitorial powers. See Cuomo v. The Clearing House Ass’c., L.L.C., 129 S.Ct. 2710, 2718 (2009) (“[I]f a state statute is valid as to national banks, the corollary that it is obligatory and enforceable necessarily results.”) (emphasis in original) (internal quotations and citations omitted). Unless it can investigate the complaint against USAA, the PHRC cannot fulfill its federal mandate. Thus, we determine that the PHRC’s investigation is not an impermissible exercise of visitorial powers.
Conclusion Because the FHA mandates that HUD refer investigations of housing discrimination to state enforcement agencies with “substantially equivalent” laws, the PHRC’s investigation of Jacob’s complaint against USAA is not preempted by federal law. The OTS regulations do not override this congressional mandate. Therefore, we shall deny USAA’s motion and grant PHRC’s motion.
11

 
 Case 2:10-cv-07220-TJS Document 23 Filed 08/23/11 Page 1 of 1

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

USAA FEDERAL SAVINGS BANK :

:

v.

:

:

PENNSYLVANIA HUMAN

:

RELATIONS COMMISSION

:

CIVIL ACTION NO. 10-7220

ORDER

AND NOW, this 23rd day of August, 2011, upon consideration of the cross-motions

for summary judgment (Document Nos. 15 and 16) and after oral argument, it is

ORDERED as follows:

1. The plaintiff’s motion for summary judgment is DENIED;

2. The defendant’s motion for summary judgment is GRANTED;

3. No later than August 30, 2011, the parties shall submit a proposed order

consistent with the memorandum opinion accompanying this Order. If the parties cannot

agree on a proposed order, they shall file separate proposed orders accompanied by

explanations not to exceed three pages.

/s/ Timothy J. Savage TIMOTHY J. SAVAGE, J.

 
 Case 2:10-cv-07220-TJS Document 26 Filed 08/31/11 Page 1 of 1

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

USAA FEDERAL SAVINGS BANK :

:

v.

:

:

PENNSYLVANIA HUMAN

:

RELATIONS COMMISSION

:

CIVIL ACTION NO. 10-7220

ORDER

AND NOW, this 31st day of August, 2011, upon consideration of the cross-motions

for summary judgment, the responses to the motions, the Statement of Interest of the

United States, and after oral argument, it is ORDERED as follows:

1. USAA Federal Savings Bank’s Motion for Summary Judgment (Document

No. 16) is DENIED;

2. Pennsylvania Human Relation Commission’s Motion to Dismiss (Document

No. 9), later treated as a motion for summary judgment (Document No. 11), is GRANTED;

3. The plaintiff’s requests for declaratory judgment and injunctive relief are

DENIED; and,

4. This action is DISMISSED.

/s/Timothy J. Savage TIMOTHY J. SAVAGE, J.

 
 Case: 2:10-cv-7220 As of: 09/20/2012 05:41 PM EDT 1 of 4
CLOSED,STANDARD
United States District Court Eastern District of Pennsylvania (Philadelphia) CIVIL DOCKET FOR CASE #: 2:10−cv−07220−TJS

USAA FEDERAL SAVINGS BANK v. PENNSYLVANIA HUMAN RELATIONS COMMISSION Assigned to: HONORABLE TIMOTHY J. SAVAGE Cause: 12:1461 Homeowners Loan Act
Plaintiff

Date Filed: 12/13/2010 Date Terminated: 08/31/2011 Jury Demand: None Nature of Suit: 440 Civil Rights: Other Jurisdiction: Federal Question

USAA FEDERAL SAVINGS BANK

represented by MARTIN C. BRYCE , JR. BALLARD SPAHR ANDREWS AND INGERSOLL, L.L.P. 1735 MARKET STREET 51ST FLOOR PHILADELPHIA, PA 19103 215−864−8238 Fax: 215−864−9511 Email: Bryce@ballardspahr.com LEAD ATTORNEY ATTORNEY TO BE NOTICED

TEJAL K. MEHTA BALLARD SPAHR LLP 1735 MARKET STREET 51ST FL PHILADELPHIA, PA 19103−7599 215/864−8232 Email: mehtat@ballardspahr.com ATTORNEY TO BE NOTICED

V.
Defendant
PENNSYLVANIA HUMAN RELATIONS COMMISSION

represented by CHARLES LEWIS NIER PA HUMAN RELATIONS COMMISSION 110 NORTH EIGTH STREET, SUITE 501 PHILADELPHIA, PA 19107 215−965−7712 Fax: 215−560−3682 Email: cnier@state.pa.us LEAD ATTORNEY ATTORNEY TO BE NOTICED
BARRY N. KRAMER PA OFFICE OF ATTY GENERAL 21 SOUTH 12TH STREET THIRD FLOOR PHILADELPHIA, PA 19107 215−560−1581 Fax: 215−560−1031 Email: bkramer@attorneygeneral.gov ATTORNEY TO BE NOTICED
RYAN ALLEN HANCOCK PENNSYLVANIA HUMAN RELATIONS COMMISSION 711 STATE OFFICE BLDG 7TH FL

Case: 2:10-cv-7220 As of: 09/20/2012 05:41 PM EDT 2 of 4

1400 SPRING GARDEN ST. PHILADELPHIA, PA 19130 215−965−7711 Email: rhancock@state.pa.us ATTORNEY TO BE NOTICED

Interested Party UNITED STATES OF AMERICA

represented by MICHAEL S. BLUME UNITED STATES ATTY'S OFFICE 615 CHESTNUT STREET SUITE 1250 PHILADELPHIA, PA 19106−4476 215−861−8376 Email: michael.blume@usdoj.gov ATTORNEY TO BE NOTICED

Date Filed 12/13/2010
12/13/2010 12/17/2010 01/10/2011 01/10/2011
01/24/2011 02/04/2011 02/07/2011 02/07/2011 02/07/2011 02/10/2011
02/10/2011

# Docket Text
1 VERIFIED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF against PENNSYLVANIA HUMAN RELATIONS COMMISSION ( Filing fee $ 350 receipt number 034369.), filed by USAA FEDERAL SAVINGS BANK.(ks, ) (Entered: 12/14/2010)
Summons Issued as to PENNSYLVANIA HUMAN RELATIONS COMMISSION. GIVEN To: Counsel on 12/14/10 (ks, ) (Entered: 12/14/2010)
2 NOTICE by USAA FEDERAL SAVINGS BANK Corporate Disclosure Statement Pursuant to FRCP 7.1 (BRYCE, MARTIN) (Entered: 12/17/2010)
3 NOTICE of Appearance by BARRY N. KRAMER on behalf of PENNSYLVANIA HUMAN RELATIONS COMMISSION with Cert of Service(KRAMER, BARRY) (Entered: 01/10/2011)
4 ORDER THAT A PRETRIAL CONFERENCE IS SET FOR 2/9/11 AT 2:00 PM IN COURTROOM BEFORE HONORABLE TIMOTHY J. SAVAGE. SIGNED BY HONORABLE TIMOTHY J. SAVAGE ON 1/10/11. 1/11/11 ENTERED AND COPIES E−MAILED.(fdc) (Entered: 01/11/2011)
5 NOTICE by USAA FEDERAL SAVINGS BANK Initial Disclosures Pursuant to Rule 26 (BRYCE, MARTIN) (Entered: 01/24/2011)
6 Report Of Rule 26(f) Conference by USAA FEDERAL SAVINGS BANK. (BRYCE, MARTIN) (Entered: 02/04/2011)
7 NOTICE of Appearance by RYAN ALLEN HANCOCK on behalf of PENNSYLVANIA HUMAN RELATIONS COMMISSION (HANCOCK, RYAN) (Entered: 02/07/2011)
8 NOTICE of Appearance by CHARLES LEWIS NIER on behalf of PENNSYLVANIA HUMAN RELATIONS COMMISSION (NIER, CHARLES) (Entered: 02/07/2011)
9 MOTION to Dismiss Complaint filed by PENNSYLVANIA HUMAN RELATIONS COMMISSION.Memorandum, Cert of Service. (Attachments: # 1 Exhibit Ex. A−B)(KRAMER, BARRY) (Entered: 02/07/2011)
10 SCHEDULING ORDER. ORDER THAT THE PARTIES SHALL FILE AND SERVE CROSS−MOTIONS FOR SUMMARY JUDGMENT NO LATER THAN 4/1/11. SIGNED BY HONORABLE TIMOTHY J. SAVAGE ON 2/9/11. 2/10/11 ENTERED AND COPIES E−MAILED.(fdc) (Entered: 02/10/2011)
11 ORDER THAT PENNSYLVANIA HUMAN RELATIONS COMMISSION'S MOTION TO DISMISS SHALL BE TREATED AS A MOTION FOR SUMMARY JUDGMENT. SIGNED BY HONORABLE TIMOTHY J. SAVAGE ON 2/10/11. 2/10/11 ENTERED AND COPIES E−MAILED.(fdc) (Entered: 02/10/2011)

Case: 2:10-cv-7220 As of: 09/20/2012 05:41 PM EDT 3 of 4

02/16/2011 03/30/2011 03/31/2011 04/01/2011 04/01/2011 04/28/2011 04/29/2011
04/29/2011 08/03/2011
08/10/2011 08/23/2011 08/23/2011
08/29/2011 08/29/2011 08/31/2011

12 NOTICE of Appearance by TEJAL K. MEHTA on behalf of USAA FEDERAL SAVINGS BANK with Certificate of Service(MEHTA, TEJAL) (Entered: 02/16/2011)
13 NOTICE by USAA FEDERAL SAVINGS BANK of Stipulation for Extension of Time (MEHTA, TEJAL) (FILED IN ERROR BY ATTORNEY; COPY FORWARDED TO CLERK/JUDGE FOR APPROVAL) Modified on 3/31/2011 (nd, ). (Entered: 03/30/2011)
14 ORDER THAT THE STIPULATION FOR EXTENSION OF TIME IS NOT APPROVED. SIGNED BY HONORABLE TIMOTHY J. SAVAGE ON 3/30/11. 3/31/11 ENTERED AND COPIES E−MAILED.(fdc) (Entered: 03/31/2011)
15 MOTION for Summary Judgment filed by PENNSYLVANIA HUMAN RELATIONS COMMISSION.Cert of Service.(KRAMER, BARRY) (Entered: 04/01/2011)
16 MOTION for Summary Judgment filed by USAA FEDERAL SAVINGS BANK.Brief, Certificate of Service. (Attachments: # 1 Text of Proposed Order, # 2 Plaintiff's Statement of Undisputed Material Facts)(BRYCE, MARTIN) (Entered: 04/01/2011)
17 Statement Of Interest Of The United States, Certificate of Service by UNITED STATES OF AMERICA. (BLUME, MICHAEL) (Entered: 04/28/2011)
18 RESPONSE in Support re 16 MOTION for Summary Judgment, 15 MOTION for Summary Judgment, 9 MOTION to Dismiss Complaint filed by PENNSYLVANIA HUMAN RELATIONS COMMISSION. (Attachments: # 1 Supplement Respo0nse to USAA Statement of Facts)(KRAMER, BARRY) (Entered: 04/29/2011)
19 RESPONSE in Support re 16 MOTION for Summary Judgment filed by USAA FEDERAL SAVINGS BANK. (Attachments: # 1 Response to PHRC Statement of Facts)(BRYCE, MARTIN) (Entered: 04/29/2011)
20 ORDER THAT THE ORAL ARGUMENT WILL BE HEARD ON WEDNESDAY, 8/10/11 AT 11:30 AM IN COURTROOM 9A BEFORE HONORABLE TIMOTHY J. SAVAGE. SIGNED BY HONORABLE TIMOTHY J. SAVAGE ON 8/3/11. 8/3/11 ENTERED AND COPIES E−MAILED.(fdc) (Entered: 08/03/2011)
21 Minute Entry for proceedings held before HONORABLE TIMOTHY J. SAVAGE: Oral Argument held on 8/10/11. (fdc) (Entered: 08/11/2011)
22 MEMORANDUM AND OPINION. SIGNED BY HONORABLE TIMOTHY J. SAVAGE ON 8/23/11. 8/24/11 ENTERED AND COPIES E−MAILED.(fdc) (Entered: 08/24/2011)
23 MEMORANDUM AND ORDER THAT PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT IS DENIED; DEFENDANT'S MOTION FOR SUMMARY JUDGMENT IS GRANTED. NO LATER THAN 8/30/11, THE PARTIES SHALL SUBMIT A PROPOSED ORDER CONSISTENT WITH THE MEMORANDUM OPINION ACCOMPANYING THIS ORDER. SIGNED BY HONORABLE TIMOTHY J. SAVAGE ON 8/23/11. 8/24/11 ENTERED AND COPIES E−MAILED.(fdc) (Entered: 08/24/2011)
24 Statement of Explanation and proposed Order by PENNSYLVANIA HUMAN RELATIONS COMMISSION, Certificate of Service. (KRAMER, BARRY) (COPY FORWARDED TO JUDGE) Modified on 8/30/2011 (lisad, ). (Entered: 08/29/2011)
25 Statement of Explanation and Proposed Order by USAA FEDERAL SAVINGS BANK, Certificate of Service. (Attachments: # 1 Text of Proposed Order)(BRYCE, MARTIN) (COPY FORWARDED TO JUDGE) Modified on 8/30/2011 (lisad, ). (Entered: 08/29/2011)
26 ORDER THAT USAA FEDERAL SAVINGS BANK'S MOTION FOR SUMMARY JUDGMENT IS DENIED; THE PA. HUMAN RELATIONS COMMISSION'S MOTION TO DISMISS, LATER TREATED AS A MOTION

Case: 2:10-cv-7220 As of: 09/20/2012 05:41 PM EDT 4 of 4
FOR SUMMARY JUDGMENT, IS GRANTED. THE PLAINTIFF'S REQUESTS FOR DECLARATORY JUDGMENT AND INJUNCTIVE RELIEF ARE DENIED; AND, THIS ACTION IS DISMISSED. SIGNED BY HONORABLE TIMOTHY J. SAVAGE ON 8/31/11.8/31/11 ENTERED AND COPIES E−MAILED.(fdc) (Entered: 08/31/2011)