FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

AMERICAN BANKERS ASSOCIATION; 

THE FINANCIAL SERVICES

ROUNDTABLE; CONSUMER BANKERS

ASSOCIATION,

Plaintiffs-Appellees,

v.

BILL LOCKYER, Attorney General; No. 05-17163

JOHN GARAMENDI, D.C. No.  Defendants-Appellants, CV-04-00778-

and MCE/KJM

WILLIAM P. WOOD; HOWARD

GOULD, Commissioner of the

Department of Financial

Institutions of the State of

California,

Defendants. 

12275
AMERICAN BANKERS ASSOCIATION; 

THE FINANCIAL SERVICES

ROUNDTABLE; CONSUMER BANKERS

ASSOCIATION,

Plaintiffs-Appellants, No. 05-17206

v. D.C. No.  CV-04-00778- BILL LOCKYER, Attorney General;

JOHN GARAMENDI; WILLIAM P. MCE/KJM

WOOD; HOWARD GOULD, OPINION

Commissioner of the Department

of Financial Institutions of the

State of California,

Defendants-Appellees. 

Appeal from the United States District Court

for the Eastern District of California

Morrison C. England, District Judge, Presiding

Argued and Submitted

June 9, 2008—San Francisco, California

Filed September 4, 2008

Before: J. Clifford Wallace and Susan P. Graber,

Circuit Judges, and David A. Ezra,* District Judge.

Opinion by Judge Graber;

Dissent by Judge Wallace

*The Honorable David A. Ezra, United States District Judge for the

District of Hawaii, sitting by designation. 

12276 AMERICAN BANKERS ASSOCIATION v. LOCKYER
COUNSEL

Catherine Z. Ysrael and Michele R. Van Gelderen, Deputy

Attorneys General, State of California, Los Angeles, California, for the defendants-appellants/cross-appellees. 

E. Edward Bruce and Keith A. Noreika, Covington & Burling, Washington, D.C., for the plaintiffs-appellees/crossappellants. 

AMERICAN BANKERS ASSOCIATION v. LOCKYER 12279
OPINION

GRABER, Circuit Judge: 

This case comes before us for the second time. See Am.

Bankers Ass’n v. Gould, 412 F.3d 1081 (9th Cir. 2005). In

2003, the California State Legislature enacted the California

Financial Information Privacy Act (“SB1”), Cal. Fin. Code

§§ 4050-4060, “for financial institutions to provide their consumers notice and meaningful choice about how consumers’

nonpublic personal information is shared or sold by their

financial institutions,” id. § 4051(a). Plaintiffs American

Bankers Association, The Financial Services Roundtable, and

Consumer Bankers Association filed suit, alleging that the

federal Fair Credit Reporting Act (“FCRA”), 15 U.S.C.

§§ 1681-1681x, preempted SB1’s regulation of information

sharing between financial institutions and their affiliates. 

Previously, we held that the affiliate-sharing preemption

clause of the FCRA, 15 U.S.C. § 1681t(b)(2),1 preempted the

affiliate-sharing provision of SB1, Cal. Fin. Code § 4053(b)(1),2

1FCRA, 15 U.S.C. § 1681t(b)(2) provides: 

No requirement or prohibition may be imposed under the laws of any

State— 

. . . . 

(2) with respect to the exchange of information among persons affiliated by common ownership or common corporate control, except that this

paragraph shall not apply with respect to [a statute not relevant to this

appeal.] 

2SB1 section 4053(b)(1) reads, in relevant part: 

A financial institution shall not disclose to, or share a consumer’s nonpublic personal information with, an affiliate unless the

financial institution has clearly and conspicuously notified the

consumer annually in writing . . . that the nonpublic personal

information may be disclosed to an affiliate of the financial institution and the consumer has not directed that the nonpublic personal information not be disclosed. 

12280 AMERICAN BANKERS ASSOCIATION v. LOCKYER
“insofar as [SB1] attempts to regulate the communication

between affiliates of ‘information,’ as that term is used in [15

U.S.C.] § 1681a(d)(1),” Am. Bankers Ass’n, 412 F.3d at 1087,

which defines “consumer report” information under the FCRA.3

We remanded to “determine whether, applying this restricted

meaning of ‘information,’ any portion of the affiliate-sharing

provisions of SB1 survives preemption and, if so, whether it

is severable from the portion that does not.” Id.

On remand, the district court held that no portion of section

4053(b)(1) survives preemption and that, even if a portion did

survive, the court lacked the power to sever the preempted

applications. Accordingly, the court enjoined enforcement of

section 4053(b)(1) “to the extent [that it is] preempted by 15

U.S.C. [§] 1681t(b)(2),” which, the court ruled, meant the

statute in its entirety. On de novo review, Silvas v. E*Trade

Mortgage Corp., 514 F.3d 1001, 1004 (9th Cir. 2008) (preemption); Ariz. Libertarian Party, Inc. v. Bayless, 351 F.3d

1277, 1283 (9th Cir. 2003) ( per curiam) (severability), we

As part of the notification process, “consumer[s] shall be provided a reasonable opportunity prior to disclosure of nonpublic personal information

to direct that nonpublic personal information not be disclosed.” Cal. Fin.

Code § 4053(d)(3). SB1 exempts certain closely affiliated institutions

from these requirements. Id. § 4053(c)(1)-(3). 

3FCRA § 1681a(d)(1) provides: 

The term “consumer report” means any written, oral, or other

communication of any information by a consumer reporting

agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used

or collected in whole or in part for the purpose of serving as a

factor in establishing the consumer’s eligibility for— 

(A) credit or insurance to be used primarily for personal,

family, or household purposes; 

(B) employment purposes; or 

(C) any other purpose authorized under [§ 1681b]. 

AMERICAN BANKERS ASSOCIATION v. LOCKYER 12281
reverse and remand. We hold that section 4053(b)(1) has nonpreempted applications and that California law requires that

we reform section 4053(b)(1) to sever its preempted applications. 

As a preliminary matter, Plaintiffs argue that, under our

prior mandate, no “portion” of section 4053(b)(1) survives

preemption because no physically distinct segment of the statute “applies only to information that falls outside the FCRA

preemption clause.” We reject such a hyper-technical reading

of our mandate. The previous panel was aware of, and indeed

quoted from, the text of SB1 regulating “ ‘nonpublic personal

information.’ ” Am. Bankers Ass’n, 412 F.3d at 1085 (quoting

Cal. Fin. Code § 4053(b)(1)). If the question were whether a

physically distinct segment of the statute could be severed, the

previous panel never would have remanded the case, because

the answer is obvious. The panel would have held that, striking “nonpublic personal information” from the statute, no part

of the statute survives preemption. But the panel did not so

hold. Instead, the panel remanded to determine whether the

statute survives beyond “the extent that it applies” to consumer report information as defined by the FCRA. Id. at

1087. In other words, we remanded to determine whether SB1

section 4053(b)(1) applies to non-consumer report information and, if so, whether California law allows its application

to consumer report information to be severed from the statute.

[1] Plaintiffs concede that SB1 has non-preempted applications.4

 Consequently, the only remand question now in dispute

is whether California law allows us to sever the preempted

applications from the statute by narrowing the statute’s reach.

[2] Under California law, “[w]hen faced with a question of

4

In their briefing to this court, Plaintiffs stated: “Every such ‘portion’

of [section] 4053(b)(1) imposes restrictions and prohibitions on affiliatesharing of ‘nonpublic personal information,’ which indisputably includes

both federally protected and unprotected information.” 

12282 AMERICAN BANKERS ASSOCIATION v. LOCKYER
whether to reform a state statute, the function of a federal

court is to divine, to the best of its ability, how the state’s

highest court would resolve that state law issue.” Kopp v. Fair

Political Practices Comm’n, 905 P.2d 1248, 1259 (Cal.

1995). We must revise the statute “if we conclude that the

Legislature’s intent clearly would be furthered by application

of the revised version rather than by the alternative of invalidation.” People v. Sandoval, 161 P.3d 1146, 1158 (Cal.

2007); see also Ayotte v. Planned Parenthood of N. New

England, 546 U.S. 320, 329 (2006) (“[T]he normal rule is that

partial, rather than facial, invalidation is the required course,

such that a statute may be declared invalid to the extent that

it reaches too far, but otherwise left intact.” (internal quotation marks and ellipsis omitted)). Specifically, judicial reformation or rewriting of a statute is appropriate “when (i) doing

so closely effectuates policy judgments clearly articulated by

the enacting body, and (ii) the enacting body would have preferred such a reformed version of the statute over the invalid

and unenforceable statute.” Kopp, 905 P.2d at 1259. 

[3] Thus, this appeal turns on whether narrowing section

4053(b)(1) to exclude the regulation of consumer report information would effectuate the intent of the California Legislature and whether the Legislature would have preferred the

narrowed statute to no statute at all. 

[4] As part of SB1, the Legislature included “Legislative

intent” and “Legislative findings” provisions. Cal. Fin. Code

§§ 4051, 4051.5. The Legislature stated that, in enacting SB1,

it “intends for financial institutions to provide their consumers

notice and meaningful choice about how consumers’ nonpublic personal information is shared or sold by their financial

institutions.” Id. § 4051(a). The Legislature also stated that its

intent in passing SB1 was “[t]o further achieve . . . control for

California consumers by providing consumers with the ability

to prevent the sharing of financial information among affiliated companies through a simple opt-out mechanism via a

clear and understandable notice provided to the consumer.”

AMERICAN BANKERS ASSOCIATION v. LOCKYER 12283
Id. § 4051.5(b)(3). A narrowed version of section 4053(b)(1)

would effectuate those statements of intent because it still

would enable consumers “to prevent the sharing of financial

information”—their non-consumer report financial information. 

[5] Those statements by the Legislature also demonstrate

that it would have preferred a narrowed version of section

4053(b)(1) to no version at all. The Legislature enacted SB1

to protect consumers’ financial information by giving consumers notice of, and control over, disclosure of that information. A narrowed version would advance this purpose with

respect to financial affiliates, albeit to a lesser extent than the

Legislature originally expected. By contrast, wholesale invalidation would not protect at all the sharing of consumer information with affiliates. 

[6] In addition, the Legislature included a severability

clause in its enactment of SB1: “The provisions of this division shall be severable, and if any phrase, clause, sentence, or

provision is declared to be invalid or is preempted by federal

law or regulation, the validity of the remainder of this division

shall not be affected thereby.” Cal. Fin. Code § 4059 (emphasis added). Plaintiffs argue that the severability clause does

not state that preempted applications should be severed from

the statute. We are not persuaded that the omission of that

word indicates a legislative preference that we strike down the

entire statute. In addition to the aforementioned statements of

intent to provide consumers with choice and control over the

disclosure of their financial information, the Legislature also

explicitly declared an intent “[t]o adopt to the maximum

extent feasible . . . definitions consistent with federal law.”

Cal. Fin. Code § 4051.5(b)(5) (emphasis added). Moreover,

the California Supreme Court has eschewed, as a matter of

semantics, the distinction between severing a phrase from a

statute and severing an application. See Sandoval, 161 P.3d

at 1158-59 n.7 (“In Kopp, . . . we rejected any distinction

between cases in which the court simply placed a saving con12284 AMERICAN BANKERS ASSOCIATION v. LOCKYER
struction on the statutory language, thereby constricting the

reach of the statute, and a case in which the court found it

necessary to disregard language and to substitute reformed

language. This distinction suggests a difference of degree, not

kind. In practical effect, in all of these cases, we rewrote each

statute . . . .” (internal quotation marks, emphases, and ellipses

omitted)). Our prior opinion held “nonpublic personal information” to be preempted by federal law as applied to consumer report information. In other words, we declared a

portion of the “phrase” to be preempted; under the severability clause, “the validity of the remainder . . . shall not be

affected thereby.” Cal. Fin. Code § 4059. 

[7] For the foregoing reasons, we narrow the affiliatesharing provision of SB1, Cal. Fin. Code § 4053(b)(1), to

exclude the regulation of consumer report information as

defined by the FCRA, 15 U.S.C. § 1681a(d)(1). 

REVERSED and REMANDED. 

WALLACE, Circuit Judge, dissenting:

I agree with the majority that section 4053(b) has nonpreempted applications. However, I disagree that California

law permits us to reform section 4053(b) to sever its preempted applications. I would allow the California Legislature

to reform section 4053(b) to conform to federal law, if it

chooses to do so. 

It may be true, as the majority argues, that the Legislature

in passing SB1 was concerned with protecting non-preempted

consumer information. However, it does not follow by logic

or otherwise that the patched-up version of SB1 proposed by

the majority would “effectuate[ ] policy judgments clearly

articulated” by the Legislature, or that the Legislature would

necessarily “prefer[ ] such a reformed version of the statute

AMERICAN BANKERS ASSOCIATION v. LOCKYER 12285
[over] invalidation of the statute.” Kopp v. Fair Political

Practices Comm’n, 905 P.2d 1248, 1290 (Cal. 1995) (emphasis added). Our very best indicator of the Legislature’s intent

— the statute itself — suggests that the Legislature would disfavor our interference. 

As the majority acknowledges, the statute’s own severability clause does not state that preempted applications should be

severed; on the contrary, it provides only that “if any phrase,

clause, sentence, or provision is declared to be invalid or is

preempted by federal law or regulation, the validity of the

remainder of this division shall not be affected thereby.” Cal.

Fin. Code § 4059. Clearly, a “phrase, clause, sentence, or provision” can be severed, but the statute itself does not provide

for the more complicated exercise of severing applications

adopted by the majority. The majority states that this is a

“hyper-technical” reading of the severability clause; I disagree. There is certainly a difference between striking portions or language from a statute, which is what severing a

“phrase, clause, sentence, or provision” would do, and leaving

intact the language but giving it a different meaning, which is

what the majority’s severing an application does. Then what

prevents us from following the clear language of the statute?

We should; that is why I dissent. 

Following the important principle of Separation of Powers

leads me to the same result. SB1 was a fiercely-negotiated

statute that underwent a long process of revisions before it

was finally passed. Had the Legislature wanted to provide for

the majority’s severance-of-applications theory, it could have

done so. It has done so in the past. See Walnut Creek Manor,

Inc. v. Fair Employment & Housing Comm’n, 814 P.2d 704,

717 n.13 (Cal. 1991). It did not do so when it passed SB1. 

I would therefore affirm the district court’s holding that,

even if a portion of section 4053(b)(1) survives preemption,

this court lacks the power to sever the preempted applications.

12286 AMERICAN BANKERS ASSOCIATION v. LOCKYER