Court Opinion

ID: 9600796
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:31:22.282558+00
Date Added: 2024-06-11T09:39:42.046247
License: Public Domain

COLE, Circuit Judge,
dissenting.
The majority concludes that the National Bank Act, (“NBA”), and the regulation promulgated under it that allows national banks to collect fees for account services, 12 C.F.R. § 7.4002(a), preempt Ohio’s garnishment law, ORC § 2716.13(B) and § 2716.21(D). I disagree. The garnishment law at issue is a law of general applicability that only incidentally affects *286national banks, with negligible effect on their ability to perform their business. Both Supreme Court precedent and the plain language of the OCC regulation’s savings clause strongly suggest that preemption is inappropriate here.
A. Supreme Court precedent clearly weighs against preemption
The majority opinion rests on several cases that it claims support a finding of preemption, but it does not discuss the substance of those cases, nor does it address the two Supreme Court decisions on which Monroe Retail principally relies. The cases cited by the majority do not weigh in favor of preemption here because those cases involved much more significant intrusions into the business of national banks — intrusions that bear little resemblance to the Ohio statute before us. On the other hand, the cases cited by Monroe Retail dealt with state statutes similar to Ohio’s garnishment law, and both held those statutes not to be preempted by national banking laws.
The majority relies on Watters v. Wachovia Bank, N.A., 550 U.S. 1, 21, 127 S.Ct. 1559, 167 L.Ed.2d 389 (2007), in which the Court held that state regulators could not exercise corporate visitorial powers, such as the right to inspect books and records, over national banks’ operating subsidiai'ies. The state conceded that the NBA preempts state visitorial powers over the national banks themselves, but claimed that the same was not true of bank subsidiaries (specifically at issue were subsidiaries in the mortgage-lending business). Id. at 15, 127 S.Ct. 1559. The Court disagreed and held that the NBA preempted the state from exercising its visitorial powers over the subsidiaries: “[S]tate regulators cannot interfere with the ‘business of banking’ by subjecting national banks or their OCC-licensed operating subsidiaries to multiple audits and surveillance under rival oversight regimes.” Id. at 21, 127 S.Ct. 1559. Thus, the intrusion into the business of banking at issue in Watters — “multiple audits [by state regulators] and surveillance under rival oversight regimes” — was far more significant than Ohio’s garnishment law.
The majority also relies on Barnett Bank of Marion County, N.A. v. Nelson, but there, the state law at issue prohibited most national banks from selling insurance in small towns in the state. 517 U.S. 25, 29, 116 S.Ct. 1103, 134 L.Ed.2d 237 (1996) (“[T]he State Statute says, in essence, that banks cannot sell insurance in Florida— except that an unaffiliated small town bank (ie., a bank that is not affiliated with a bank holding company) may sell insurance in a small town.”). However, a federal statute gave national banks that very power. Id. at 28, 116 S.Ct. 1103 (describing the Act of Sept. 7, 1916, 39 Stat. 753, as amended, 12 U.S.C. § 92, which provides that certain national banks may sell insurance in small towns). Accordingly, the Court found that the state statute “ ‘st[ood] as an obstacle to the accomplishment’ of one of the Federal Statute’s purposes,” and was therefore preempted. Id. at 31, 116 S.Ct. 1103 (quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941)). The Court clarified:
In defining the pre-emptive scope of statutes and regulations granting a power to national banks, [our past] cases take the view that normally Congress would not want States to forbid, or to impair significantly, the exercise of a power that Congress explicitly granted. To say this is not to deprive States of the power to regulate national banks, where (unlike here) doing so does not prevent or significantly interfere with the national bank’s exercise of its powers.
*287Id. at 33, 116 S.Ct. 1103 (emphasis added). As with Watters, the state statute in Barnett, which barred national banks from engaging in a whole sector of business, was of a completely different nature from the garnishment statute before us. See also Franklin Nat’l Bank v. New York, 347 U.S. 373, 377-78, 74 S.Ct. 550, 98 L.Ed. 767 (1954) (holding that federal statutes authorizing national banks to receive savings deposits preempted New York law barring non-state-chartered banks from using the word “savings” in advertising, since the law interfered with the banks’ “right to let the public know about” a business in which federal law permitted them to engage).
The majority also relies on a prior ease from this Circuit, Association of Banks in Insurance, Inc. v. Duryee, in which the state law at issue was an Ohio statute allowing the superintendent of insurance to deny or revoke an insurance license upon determining that the insurer’s “principal purpose” has been to sell insurance to certain categories of customers. 270 F.3d 397, 406-08 (6th Cir.2001). The statute was enacted as a consumer protection measure to “prevent an unfair advantage in the placing of insurance and the licensing of persons who were not intending to do a general insurance business, but simply to supplement their primary business.” Id. at 408 (internal quotations omitted). The Duryee court noted that this state law would implicate many national bank customers and that to comply with the law, a national bank would “have to limit its business with many if not most of its customers until it could generate sufficient business outside this restricted customer base to stay below the” maximum allowable percentage of certain types of customers. Id. at 409. The court found the Ohio statute to be preempted because it “significantly interfere^]” with national banks’ ability to exercise their power to sell insurance. Id. at 410. It was in this context that the court rejected the state’s argument that a state statute must “effectively thwart” national banks’ powers to be preempted. (See Maj. Op. 283.) Again, however, this statute, which dictated the parties to whom national banks could sell insurance and threatened revocation of national banks’ insurance licenses depending on the composition of their customers, rose to a much higher level of interference with national banks’ business functions than Ohio’s garnishment law does.
Thus, the cases cited by the majority offer limited guidance because they entail far more significant intrusions into the business of national banks than the statute before us. The majority does not mention two cases raised by Monroe Retail in which the Supreme Court declined to find preemption with respect to state statutes similar to the one at issue here. Those decisions held that such statutes are not preempted because they do not significantly impair national banks’ functions.
In Anderson National Bank v. Luckett, 321 U.S. 233, 236, 64 S.Ct. 599, 88 L.Ed. 692 (1944), the Supreme Court found that a state law directing banks, both state and national, to “turn over to the state, deposits which have remained inactive and unclaimed for a specified period” was not preempted by national banking laws. The Court stated: “This Court has often pointed out that national 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’ functions.” Id. at 248, 64 S.Ct. 599. With respect to the requirement that banks, including national banks, turn over abandoned funds, the Court stated: “It has never been suggested that non-discriminatory laws of this type are so burdensome as to be inapplicable to the accounts of depositors in national banks.” Id. (empha*288sis added). We are not at liberty to ignore the holding of this binding authority. I doubt the majority would contend that if the state law at issue in Luckett had also specified that banks were required to turn over all of the abandoned property, without first deducting an “abandoned-property-turnover fee,” like the one at issue in the present case, the Luckett Court would have changed course and deemed the state law to be preempted. Luckett was cited by the Supreme Court several months ago, and there is no indication that it is no longer good law. See Cuomo v. Clearing House Ass’n, L.L. C., — U.S. -, 129 S.Ct. 2710, 2721-22, 174 L.Ed.2d 464 (2009). In light of Luckett, I fail to see how we can fairly hold that Ohio’s garnishment law is preempted.
The Supreme Court engaged in similar analysis and reached the same result in McClellan v. Chipman, 164 U.S. 347, 358, 17 S.Ct. 85, 41 L.Ed. 461 (1896). In that case, a national bank argued that a federal statute that allowed national banks to accept real property in satisfaction of a debt preempted a state statute that forbade preferential transfers of property to creditors on the eve of insolvency. The Court rejected this argument, stating:
[There is nothing] in the statutes of the State of Massachusetts, here considered, which in any way impairs the efficiency of national banks or frustrates the purpose for which they were created. No function of such banks is destroyed or hampered by allowing the banks to exercise the power to take real estate, provided only they do so under the same conditions and restrictions to which all the other citizens of the State are subjected, one of which limitations arises from the provisions of the state law which in case of insolvency seeks to forbid preferences between creditors.
Id. This case, too, presents a much more analogous state law to the one under our consideration than any of the cases upon which the majority relies, further demonstrating that preemption should not apply here.
The above cases stand for the following proposition: a non-discriminating state law of general applicability that has an incidental effect on national banks but does not “frustrate[] the purpose for which they were created,” McClellan, 164 U.S. at 358, 17 S.Ct. 85, “impose an undue burden on the performance of [their] functions,” Luckett, 321 U.S. at 248, 64 S.Ct. 599, or “prevent or significantly interfere with the [ ] exercise of [their] powers,” Barnett, 517 U.S. at 33, 116 S.Ct. 1103, is not preempted by federal banking laws.
In its conclusion that Ohio’s garnishment law does, in fact, rise to the level of such a significant burden for national banks, the majority begs the central question when it states that the garnishment law “ ‘significantly interfere^]’ ... with the Banks’ ability to collect their service fees.” No one disputes that. In fact, it does not just significantly interfere with their ability to collect garnishment fees — it forbids it. But the same was true of the law in McClellan, which forbade national banks from receiving preferences in violation of state law, and the law in Luckett, which forbade national banks from retaining abandoned funds claimed by the state. The real question — the one for which the majority has no persuasive answer — is how a restriction on national banks’ ability to charge account service fees when turning over garnished funds to the rightful owner imposes an undue burden or significantly interferes with the banks’ ability to function in their business as national banks. Clearly it does not. The only examples of hardship to which the majority points are the Banks’ ability “to complete other *289transactions” and to “balance their accounts.” These hardships are illusory: if the banks do not deduct a service fee on garnished funds, their concern about the order in which they deduct it disappears. And the Banks’ inability to immediately “freeze” the garnished accounts because they “must first undertake a number of procedures to assess what funds are available to be garnished” is no cause for worry- — no one is challenging their right to assess what funds are available, which bears no relation to their right to deduct some of the garnished funds for themselves.
B. The plain language of the savings clause weighs against preemption
The Ohio garnishment statute fits within an explicit exception to preemption. See 12 C.F.R. § 7.4007(c). This savings clause lists a number of other areas of bodies of state law that, in addition to “rights to collect debts,” are not preempted: contracts, torts, criminal law, acquisition and transfer of property, taxation, and zoning. All of these are laws of general applicability that incidentally affect, but do not target, national banks. The garnishment law at issue affects not only national banks, but state banks, employers, trustees — any entity that might be subject to a garnishment action. As the majority recognizes, and for the reasons stated in the majority’s opinion, the banks’ (and the OCC opinion letter’s) argument that the savings clause refers only to banks’ rights to collect debts is highly implausible.
C. Conclusion
For the foregoing reasons, I believe the NBA does not preempt Ohio’s garnishment law — a law of general applicability that, judging by the Supreme Court’s jurisprudence, does not represent the kind of serious infringement on national banks’ ability to function that would justify preemption. Therefore, I respectfully dissent.