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No. 13-CV-169

KARL KENNEDY AND LISA KENNEDY, APPELLANTS,

v.

CITY FIRST BANK OF D.C., N.A., APPELLEE.

Appeal from the Superior Court

of the District of Columbia

(CAB-9965-11)

(Hon. Laura A. Cordero, Trial Judge)

(Submitted January 23, 2014 Decided April 3, 2014)

Richard J. Bianco was on the brief for appellants.

Kenneth M. Misken was on the brief for appellee.

Before WASHINGTON, Chief Judge, BLACKBURNE-RIGSBY, Associate Judge, 

and FARRELL, Senior Judge.

FARRELL, Senior Judge: Appellants Karl Kennedy and Lisa Kennedy appeal 

from the trial court‟s denial of their motion to vacate the default judgment the court 

had entered in favor of appellee, City First Bank of D.C., N.A. (“City First”). 

Appellants claim error by the court in concluding that City First could properly 

bring its underlying suit against appellants in Superior Court because the restriction 

on the right to sue contained in D.C. Code § 29-105.02 (2012 Repl.) is preempted 
2

by The National Bank Act, 12 U.S.C. § 24 (2008) (the “NBA”). Appellants cite 

additional error in the trial court‟s application of the factors listed in Walker v. 

Smith, 499 A.2d 446, 449 (D.C. 1985), to be considered in ruling on a request to 

vacate a default judgment. We affirm.

I.

On December 20, 2011, City First filed a complaint in Superior Court to 

enforce appellants‟ guaranty obligations that required them to assume 

responsibility for any debt owned under a loan made by City First to Wines & 

Spirits Expo, LLC (“Wines & Spirits”), a D.C. limited liability company owned by 

appellants‟ Delaware limited liability company, The Kennedy Group, LLC. 

Wines & Spirits had defaulted on the loan and filed a bankruptcy petition, leading 

to the sale of its assets from which City First had received $475,000. On 

December 20, 2011, City First filed a complaint in Superior Court to recover the 

deficiency from appellants. On May 16, 2012, City First was granted a default 

judgment when appellants failed to file any responsive pleadings. More than five 

months later, on November 2, 2012, appellants filed a motion to vacate the default 

judgment, which the trial court denied. 
3

II.

City First is a national banking association organized and existing under 

federal law. It is not registered to do business in the District of Columbia. 

Appellants therefore claim that the trial court erred in ruling that City First could 

lawfully bring suit in Superior Court, because D.C. Code § 29-105.02 bars a 

“foreign filing entity” from maintaining an action in the District of Columbia 

“unless it is registered to do business in the District.” D.C. Code § 29-105.02 (b).

1

The trial court ruled that the NBA preempts the application of § 29-105.02 to an 

entity such as City First that exists under the auspices of the federal statute.

2

 

1 Appellants accordingly argue that, in moving to set aside the default 

judgment, they were relieved of having to file “a verified answer [to the complaint] 

setting up a defense sufficient if proved to bar the claim in whole or in part,” 

because they “assert[ed] a lack of subject-matter . . . jurisdiction.” Super. Ct. Civ. 

R. 55 (c). 

2

12 U.S.C. § 24 provides in relevant part:

Upon duly making and filing articles of association and 

an organization certificate a national banking association 

shall become, as from the date of the execution of its 

organization certificate, a body corporate, and as such, 

and in the name designated in the organization certificate, 

it shall have power . . . [t]o sue and be sued, complain 

(continued...)
4

Although the trial court was plainly right, the issue is one of first impression in this 

jurisdiction, and as a question of law we decide it de novo. See Plummer v. United 

States, 43 A.3d 260, 273 (D.C. 2012). 

Courts have identified several ways in which, under the Supremacy Clause, 

U.S. CONST. art. VI., cl. 2., federal law may preempt state law, expressly or 

impliedly. See Murray v. Motorola, Inc., 982 A.2d 764, 771-72 (D.C. 2009); In re 

Couse, 850 A.2d 304, 308 (D.C. 2004). One way is “by implied or conflict 

preemption,” which operates “where compliance with both federal and state 

regulations is a physical impossibility . . . or where state law stands as an obstacle 

to the accomplishment and execution of the full purposes and objecti[ves] of 

Congress.” Couse, 850 A.2d at 308 (internal quotation marks omitted). That form 

of preemption is controlling here. 

“[N]ational banks are subject to state laws, unless those laws infringe the 

national banking laws or impose an undue burden on the performance of the banks‟ 

 

(...continued)

and defend, in any court of law and equity, as fully as 

natural persons.

12 U.S.C. § 24 (2008).
5

functions.” Anderson Nat’l Bank v. Luckett, 321 U.S. 233, 248 (1944); see Watters 

v. Wachovia Bank, N.A., 550 U.S. 1, 11 (2007) (“[W]e have repeatedly made clear 

that federal control shields national banking from unduly burdensome . . . state 

regulation.”). The Supreme Court has “interpret[ed] grants of both enumerated and 

incidental „powers‟ to national banks as grants of authority . . . ordinarily preempting . . . contrary state law.” Watters at 12 (quoting Barnett Bank of Marion 

Cnty. v. Nelson, 517 U.S. 25, 32 (1996)). 

D.C. Code § 29-105.02 (b), as explained, prohibits “a foreign filing entity” 

from “maintain[ing] an action or proceeding in the District unless it is registered to 

do business in the District.” The statute defines “„foreign,‟ with respect to an 

entity, [to] mean an entity governed as to its internal affairs by the law of a 

jurisdiction other than the District,” a definition inclusive of all national banks. 

D.C. Code § 29-101.02 (14).3 The NBA, by contrast, permits a national banking 

association “[t]o sue . . . in any court of law and equity” provided it has made and 

filed the necessary “articles of association and an organization certificate.” Note 2, 

 

3

 The United States District Court for the District of Columbia has opined 

that national banks are foreign corporations for purposes of service of process 

under Title 29 of the D.C. Code. See Busby v. Capital One, N.A., 932 F. Supp. 2d 

114, 128-29 (D.D.C. 2013) (finding that appellant “correctly [] alleged that Capital 

One is a foreign corporation”) appeal dismissed. 13-7065, 2013 WL 3357830 

(D.C. Cir. June 13, 2013).
6

supra. Jurisdictions with similar state statutes have concluded either that those 

statutes conflicted with and were preempted by the NBA, or that there is no 

conflict preemption because the statutes by their terms do not treat national banks 

as “foreign corporations.” Compare In re Hibernia Nat’l Bank, 21 S.W.3d 908, 

909-910 (Tex. App. 2000) (NBA preempts application of a Texas statute that 

would “infringe upon [federally granted rights] because it would require a foreign 

bank to obtain a certificate of authority before it could maintain a suit in [Texas]”), 

with Steward v. Atl. Nat’l Bank of Boston, 27 F.2d 224, 228 (9th Cir. 1928) 

(Arizona statute requiring registration for “foreign corporations” to “carry on, do 

or transact any business” in Arizona does not apply to national banks, which are 

not foreign corporations under the Arizona statute); Indiana Nat’l Bank v. Roberts, 

326 So. 2d 802, 802-03 (Miss. 1976) (same); State Nat’l Bank of Connecticut v. 

Laura, 256 N.Y.S. 2d 1004, 1006 (Co. Ct. 1965) (national banks are “moneyed 

corporations” excepted from the requirements of the state statute, but if “[c]ontrary 

construction [were] to be given to these statutes, in the case of a national banking

corporation, such statutes would be clearly unconstitutional”). 

No purpose would be served by straining to except national banks from the 

class of “foreign filing entit[ies]” as defined by the District‟s statute. 

Therefore, § 29-105.02 (b) conflicts with and is preempted by the NBA, because 
7

national banks fall within the local statute‟s definition of a “foreign filing entity,” 

which infringes on compliant national banks‟ ability to maintain suits in the 

District “as fully as natural persons,” in accordance with the NBA. Indeed, the 

intent naturally inferable from the NBA‟s language is to relieve national banks 

from having to meet manifold, and potentially divergent, registration requirements

in the fifty states. The trial court did not err, therefore, in concluding that it had 

subject matter jurisdiction over City First‟s suit.

4

III.

Appellant‟s remaining claim of error may be dealt with quickly. “When 

reviewing the denial of a motion to vacate a default judgment, we consider the 

particular facts of the case to determine „whether the movant had actual notice of 

the proceeding, acted promptly after learning of the default judgment, proceeded in 

good faith, and presented a prima facie adequate defense, and also whether the 

non-moving party would be prejudiced.‟” Venison v. Robinson, 756 A.2d 906, 910 

 

4 We reject appellants‟ argument that meaning should be attributed to the 

fact that “Congress did not undertake any action to disapprove of the [District‟s 

statute].” “[W]e resist reading congressional intent into congressional inaction.” 

DePierre v. United States, 131 S. Ct. 2225, 2236 n.13 (2011) (quoting Kimbrough 

v. United States, 552 U.S. 85, 106 (2007)); see In re McBride, 602 A.2d 626, 637 

(D.C. 1992) (“Congressional inaction should not be our guide.”). 
8

(D.C. 2000) (quoting Mewborn v. U.S. Life Credit Corp., 473 A.2d 389, 391 (D.C.

1984)); see also Walker, 499 A.2d at 449. The record demonstrates that appellants 

had actual notice of the claim by February 2012, but failed to act promptly –

indeed, “demonstrate[ed] a complete lack of good faith,” as the trial court found –

by not contacting opposing counsel or filing any pleadings with the court until four 

months after the default judgment was entered.

5

 Further, as the court concluded, 

appellants were estopped from presenting their various claims of misrepresentation 

as “a prima facie adequate defense,” because in the Wines & Spirits bankruptcy 

case they had conceded that City First held a valid and properly perfected secured 

claim, one legitimate in all respects. See generally Porter Novelli v. Bender, 817 

A.2d 185, 188 (D.C. 2003). Finally, the court reasoned that because City First 

“has been diligent in prosecuting its case and given that [appellants] had actual 

notice, . . . remained silent through every step of the litigation as it progressed, . . . 

[and] lacked good faith and failed to act promptly, granting [their] Motion to 

Vacate would be unduly prejudicial to [City First].” 

 

5

The trial court credited appellees‟ assertion that appellants had “engaged 

in similar [dilatory] conduct in their bankruptcy proceedings where they failed to 

appear before the court.” 
9

In sum, the trial court adequately assessed the relevant facts and did not 

abuse its discretion, see Clark v Moler, 418 A.2d 1039, 1041 (D.C. 1980), in 

finding that the Walker factors strongly supported denial of the motion to vacate.

 Affirmed.