Opinion ID: 3033121
Heading Depth: 4
Heading Rank: 2

Heading: Licensing Authority Under the Bank Act

Text: WFHMI and, particularly, the OCC also argue that California’s state real-estate lending licensing requirements are preempted as applied to national bank operating subsidiaries. The state law requirements here at issue are codified in sections 50120-50130 of the California Finance Code, part of the CRMLA.19 Although the licensing requirements as a whole are too exhaustive to recount here, the most significant provisions are section 50121, which imposes four conditions on the 19 We focus here on the CRMLA licensing requirements. The CFLL licensing requirements, which, as noted above, are relevant only where the CRMLA does not apply, see ante at 10461 n.5, are codified at CAL. FIN. CODE §§ 22100-22112. WELLS FARGO BANK v. BOUTRIS 10479 granting of a license,20 and section 50125(a), which empowers the Commissioner to refuse to issue a license if “[t]he applicant is not in material compliance with a provision of [the CRMLA] or an order or rule of the commissioner.” In light of the foregoing discussion, one might expect that the proper route to evaluating whether the state law provisions can apply to national bank operating subsidiaries would be to apply the same analysis we applied to the visitorial preemption issue: If state licensing requirements are preempted as applied to national banks, then § 7.4006 precludes applying those requirements to operating subsidiaries. As it turns out, this straightforward approach does not work as applied to licensing requirements. 20 Specifically, the provision authorizes the Commissioner to issue a license only after: (a) The filing with the commissioner of a complete and verified application for licensure. (b) The filing as an exhibit to the application of a listing of material judgments filed against, and bankruptcy petitions filed by, the applicant for the preceding five years, and the disposition thereof. (c) The payment of a nonrefundable investigation fee of one hundred dollars ($100), plus the cost of fingerprint processing and clearance, and an application filing fee of nine hundred dollars ($900). (d) An investigation of the statements required by [California Financial Code §] 50124 based upon which the commissioner is able to issue findings that the financial responsibility, criminal records (verified by fingerprint, at the discretion of the commissioner), experience, character, and general fitness of the applicant and of the partners or members thereof, if the applicant is a partnership or association, and of the principal officers and directors thereof, if the license applicant is a corporation, support a finding that the business will be operated honestly, fairly, and in accordance with the requirements of this division. CAL. FIN. CODE § 50121. 10480 WELLS FARGO BANK v. BOUTRIS Licensing is one mode of regulation as to which there is no ready parallel between national banks and their operating subsidiaries. The California licensing requirements at issue here, for example, do not apply to national banks. See CAL. FIN. CODE § 50003(g)(1) (exempting from the CRMLA’s licensing requirements “[a]ny bank . . . doing business under the authority of or in accordance with a license, certificate, or charter issued by the United States”); see also id. § 22050(a) (providing that the CFLL’s licensing requirements do not apply to “any person doing business under any law of this state or the United States relating to banks”). That California saw fit to exempt national banks from its mortgage-lending licensing requirements despite their prevalent activity in that area of business may well reflect the state’s own conclusion — almost certainly a correct one — that the chartering of national banks by the federal government is an exclusive function, inconsistent with state licensing requirements unless they are federally authorized.21 Operating subsidiaries, however, are not directly chartered by the federal government; instead, they are incorporated under a state’s law — WFHMI in California; NCMC in Ohio. This chartering distinction is the one irreducible difference between national banks and their operating subsidiaries, and precludes the direct transfer of the banks’ immunity from state entry barriers, such as licensing requirements, to their operating subsidiaries. We are convinced, however, by the OCC’s alternative argument — that California’s attempt to license operating subsidiaries is field-preempted by the OCC’s own licensing regulations.22 21 The Bank Act itself refers to the charter as the “organization certificate,” which is created by the bank according to the terms of 12 U.S.C. §§ 21-23, and approved by the Comptroller pursuant to the procedures set forth in 12 U.S.C. §§ 26-27. 22 The substantive limits of the Bank Act’s express preemption provisions do not preclude the possibility of implicit preemption. “[T]he incluWELLS FARGO BANK v. BOUTRIS 10481 [15] The OCC regulations establish a comprehensive and finely calibrated scheme for the creation of operating subsidiaries. Denominated “Licensing Requirements,” see 12 C.F.R. § 5.34(b), these regulations prescribe the specific circumstances in which a national bank needs formal approval from the OCC to establish operating subsidiaries. A national bank must ordinarily “submit an application to, and receive approval from, the OCC,” before it acquires or establishes any operating subsidiary. See id. § 5.34(e)(5) (i)(A). “The application must include a complete description of the bank’s investment in the subsidiary, the proposed activities of the subsidiary, the organizational structure and management of the subsidiary, the relations between the bank and the subsidiary, and other information necessary to adequately describe the proposal.” Id. In some circumstances, national banks can create or acquire an operating subsidiary without OCC approval, although notice to the OCC is required: Under 12 C.F.R. § 5.34(e) (5)(iv), operating subsidiaries can be established by a “well capitalized” and “well managed” national bank (as defined by 12 C.F.R. § 5.34(d)(2)-(3)) solely by providing notice to the OCC, so long as the activity falls within one of twenty-five categories specifically delineated in 12 C.F.R. § 5.34(e)(5)(v). No notice is required, however, for a well-capitalized bank to establish an operating subsidiary, if the new subsidiary is conducting activities already approved for an earlier operating subsidiary of the same bank; those activities are legally permissible for the subsidiary; and the new subsidiary abides by any conditions the OCC imposed on the activities of prior operating subsidiaries of that bank. See id. § 5.34(e)(5)(vi). If sion of an express preemption provision in a statute does not by itself obviate implied preemption . . . .” Allarcom Pay Television, Ltd. v. Gen. Instrument Corp., 69 F.3d 381, 387 (9th Cir. 1995); see also Ass’n of Banks in Ins., Inc. v. Duryee, 270 F.3d 397, 404 (6th Cir. 2001) (citing Anderson Nat’l Bank v. Luckett, 321 U.S. 233 (1944)). 10482 WELLS FARGO BANK v. BOUTRIS the bank, however, “controls the subsidiary but owns 50 percent or less of the voting (or similar type of controlling) interest of the subsidiary,” then an application and OCC approval are always necessary, and the exceptions noted above are inapplicable. See id. § 5.34(e)(5)(i)(B). The OCC thus has a role in either pre-approving or later reviewing the creation of an operating subsidiary in most instances. That the OCC has chosen to require formal agency approval in certain cases but not in others, to require notice in certain cases but not in others, and to specify the content of the application or notice in great detail indicates to us that § 5.34 manifests the OCC’s intent to regulate pervasively the field of licensing operating subsidiaries. Allowing certain national banks to create certain classes of operating subsidiaries without case-by-case approval is itself a regulatory decision. Where such a decision not to regulate represents, as in § 5.34, a considered determination that no regulation is appropriate, that choice preempts contrary state law imposing governing standards. See, e.g., Lodge 76, Int’l Ass’n of Machinists & Aerospace Workers v. Wis. Employment Relations Comm’n, 427 U.S. 132, 140 (1976) (holding that, by regulating certain forms of economic pressure used during labor disputes but not others, Congress expressed a clear intent to leave other economic weapons free from federal or state regulation). Such field preemption can occur when an agency, acting pursuant to its delegated authority, promulgates regulations that evidence a clear intent to occupy a specific field. See, e.g., R.J. Reynolds Tobacco Co. v. Durham County, N.C., 479 U.S. 130, 149 (1986) (“[W]here, as in this case, Congress has entrusted an agency with the task of promulgating regulations to carry out the purposes of a statute, as part of the pre-emption analysis we must consider whether the regulations evidence a desire to occupy a field completely.” (citation omitted)). [16] As we emphasized earlier, Congress and the OCC, acting pursuant to congressional authority, have left some room WELLS FARGO BANK v. BOUTRIS 10483 for substantive regulation by the states in the field of banking. In the specific context of licensing requirements for operating subsidiaries authorized only to conduct those activities that their parent national banks may conduct, however, the OCC’s regulations “evidence a desire to occupy a field completely.”23 Id. A state’s attempt to require advance licensing before an operating subsidiary may engage in the activities covered by the Bank Act, including real estate lending, runs headlong into the OCC’s finely nuanced licensing scheme. [17] We hold that California’s real-estate lending licensing requirements as applied to operating subsidiaries of national banks are field-preempted by 12 C.F.R. § 5.34.