Clearing House Association, L.L.C. v. Cuomo

510 F.3d 105

The CLEARING HOUSE ASSOCIATION, L.L.C., Plaintiff-Appellee Office of the Comptroller of the Currency, Plaintiff-Counter-Defendant-Appellee, v. Andrew M. CUOMO,^* in his Official Capacity as Attorney General for the State of New York, Defendant-Counter-Claimant-Appellant.

Docket No. 05-5996-cv (L).

Docket No. 05-6001-cv (CON).

United States Court of Appeals, Second Circuit.

Argued: December 4, 2006.

Decided: December 4, 2007.

Caitlin Halligan, Solicitor General (Dieter Snell, Deputy Attorney General; Michelle Aronowitz, Deputy Solicitor General; Richard Dearing, Julie Loughran, Shaifali Puri, Assistant Solicitors General, of counsel), New York, NY, for Andrew M. Cuomo, Attorney General of the State of New York, Defendant-Counter-Claimant-Appellant.

Robinson B. Lacy (H. Rodgin Cohen, Adam R. Brebner, Keith Levenberg, on the brief), Sullivan & Cromwell, LLP, New York, NY, for Plaintiff-Appellee The Clearing House Association, L.L.C.

Douglas B. Jordan (Julie L. Williams, Daniel P. Stipano, Horace G. Sneed, on the brief), Washington, DC, for Plaintiff-Counter-Defendant-Appellee Office of the Comptroller of the Currency.

Before: CARDAMONE and B.D. PARKER, Circuit Judges, and KOELTL District Judge.^**

Judge CARDAMONE concurs in part and dissents in part in a separate opinion.

B.D. PARKER, Jr., Circuit Judge:

The National Bank Act ("NBA" or "Act") authorizes national banks to engage in a broad range of business activities, and also limits the exercise of "visitorial powers" over such banks.¹ The Office of the Comptroller of the Currency ("OCC") is the agency Congress has entrusted to implement the NBA and to oversee the national banks' exercise of their powers. This appeal concerns the residual authority of state officials in regards to laws pertaining to real estate lending, one of the banking activities governed by the NBA and OCC regulations.

I

In 2005, the New York State Attorney General began investigating evidence of possible racial discrimination in the residential real estate lending practices of several national banks and their operating subsidiaries. The Attorney General's investigation was prompted by data that the federal Home Mortgage Disclosure Act ("HMDA") requires lenders to make public. See 12 U.S.C. §§ 2801-10. The Attorney General observed that recent HMDA data appeared to indicate that a significantly higher percentage of high-interest home mortgage loans are issued to African-American and Hispanic borrowers than to white borrowers.

On the basis of these apparent racial disparities, the Attorney General sent "letters of inquiry" to mortgage lenders implicated by the data, including several national banks and their operating subsidiaries.² The letters stated that such disparities "are troubling on their face, and unless legally justified may violate federal and state anti-discrimination laws such as the Equal Credit Opportunity Act and its state counterpart, New York State Executive Law § 296-a."³ "In lieu of issuing a formal subpoena," the letters requested that lenders voluntarily produce certain non-public information regarding their mortgage policies and practices, as well as data concerning loans related to real property in New York State.

Soon afterwards, the OCC sued to enjoin the Attorney General's investigative and enforcement efforts. A recently promulgated OCC regulation expansively interpreted the NBA's visitorial powers provision, 12 U.S.C. § 484, to preclude state officials from enforcing national banks' compliance with state or federal laws that concern activities authorized or permitted under the NBA. See 12 C.F.R § 7.4000(a)(2)(iv). On the strength of this regulation, the agency took the position that any efforts by the Attorney General to investigate or to enforce provisions of the Equal Credit Opportunity Act and New York State Executive Law § 296-a against national banks or their operating subsidiaries were an unlawful exercise of visitorial powers.

The Clearing House Association ("Clearing House")—a consortium of national banks, including several that received letters of inquiry from the Attorney General—filed a similar complaint, seeking to enjoin the Attorney General from "investigating, requesting or issuing subpoenas for information concerning, or taking any other action to enforce federal and state discrimination-in-lending laws" against its national bank members and their operating subsidiaries.

The Attorney General counterclaimed, arguing that the OCC's regulation was unlawful and should be set aside under the Administrative Procedure Act ("APA"), 5 U.S.C. § 706.⁴ In his Answer, the Attorney General asserted that racial disparities reflected in the HMDA data "established a prima facie case, under the federal Fair Housing Act," 42 U.S.C. § 3605(a), as well as under New York State Executive Law § 296-a. The Attorney General contended that his investigation was not a prohibited exercise of visitorial powers, and that the OCC was not acting aggressively in this area. Alternatively, the Attorney General contended that he was empowered, as parens patriae, to sue under the Fair Housing Act ("FHA"), and that even if such a suit were considered a "visitation" it would come within § 484(a)'s exception for "visitorial powers ... authorized by Federal law."

Following a trial on the merits, the United States District Court for the Southern District of New York (Stein, J.) deferred to the OCC's interpretation of the statute, under Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), and concluded that the Attorney General's investigation was prohibited. Office of the Comptroller of the Currency v. Spitzer, 396 F.Supp.2d 383 (S.D.N.Y.2005) ("OCC v. Spitzer"). In a separate opinion, the court agreed with Clearing House that the FHA does not create an exception authorizing the exercise of visitorial powers otherwise prohibited under § 484(a). Clearing House Ass'n, L.L. C. v. Spitzer, 394 F.Supp.2d 620 (S.D.N.Y.2005) ("Clearing House v. Spitzer"). Accordingly, in both cases the court issued the declaratory and injunctive relief sought by the OCC and Clearing House.

We affirm the district court's judgment in OCC v. Spitzer. We affirm in part and vacate in part the district court's separate judgment in Clearing House v. Spitzer. We affirm that part of the Clearing House judgment granting Clearing House the injunctive relief provided in OCC v. Spitzer. We vacate, however, that part of the Clearing House judgment granting permanent injunctive relief against the Attorney General's enforcement of the FHA. We hold that the district court lacked jurisdiction to decide the FHA claim, and we remand the case to the district court with instructions to dismiss that claim.

II

The NBA provides for the creation of national banks, and authorizes them to exercise certain enumerated powers, as well as "all such incidental powers as shall be necessary to carry on the business of banking." 12 U.S.C. § 24 Seventh. The OCC is the federal agency primarily responsible for overseeing "the business of banking" under the statute. NationsBank of N.C., N.A. v. Variable Annuity Life Ins. Co., 513 U.S. 251, 256, 115 S.Ct. 810, 130 L.Ed.2d 740 (1995). To that end, the OCC has been granted broad authority by Congress "to prescribe rules and regulations to carry out the responsibilities of the office." 12 U.S.C. § 93a. This includes the authority "to define the `incidental powers' of national banks beyond those specifically enumerated in the statute." Wachovia Bank, N.A. v. Burke, 414 F.3d 305, 312 (2d Cir.2005); see also NationsBank, 513 U.S. at 257-59, 115 S.Ct. 810.

Section 484 provides, in part, that "[n]o national bank shall be subject to any visitorial powers except as authorized by Federal law [or] vested in the courts of justice." 12 U.S.C. § 484(a). The Supreme Court has defined visitation as "the act of a superior or superintending officer, who visits a corporation to examine into its manner to conducting business, and enforce an observance of its laws and regulations." Guthrie v. Harkness, 199 U.S. 148, 158, 26 S.Ct. 4, 50 L.Ed. 130 (1905) (internal quotation marks omitted). We recently observed that the purpose of the visitorial powers restriction is to "prevent inconsistent or intrusive state regulation from impairing the national system." Burke, 414 F.3d at 311; see also Watters v. Wachovia Bank, N.A., ___ U.S. ___, 127 S.Ct. 1559, 1568, 167 L.Ed.2d 389 (2007).

In 1996, the OCC adopted a regulation clarifying that, under § 484(a), "the exercise of visitorial powers over national banks is vested solely in the OCC." 12 C.F.R. § 7.4000 (1997); 61 Fed.Reg. 4862, 4869 (Feb. 9, 1996) (final rule). The OCC revised this regulation in 1999 "to clarify the extent of the OCC's visitorial powers" and to "codif[y] the definition of visitorial powers and illustrate[ ] what vistitorial powers include by providing a non-exclusive list of these powers." 64 Fed.Reg. 60092, 60094 (Nov. 4, 1999) (final rule). The previous version of the rule had indicated that "[s]tate officials have no authority to conduct examinations or to inspect or require the production of books or records of national banks, except for the limited purpose[s]" specified in § 484(b).⁵ 12 C.F.R. § 7.4000 (1997). The revised rule added "prosecuting enforcement actions" against such banks as an example of prohibited state visitorial powers. See 64 Fed. Reg. at 60100.

In its present form, Section 7.4000 lists several examples of prohibited visitations, including "(i) Examination of a bank; (ii) Inspection of a bank's books and records; (iii) Regulation and supervision of activities authorized or permitted pursuant to federal banking law; and (iv) Enforcing compliance with any applicable federal or state laws concerning those activities." 12 C.F.R. § 7.4000(a)(2) (emphasis added).

The regulation also addresses the exceptions included in § 484(a) for visitorial powers ...