Office of Comptroller of Currency v. Spitzer

396 F.Supp.2d 383

OFFICE OF THE COMPTROLLER OF THE CURRENCY, Plaintiff, v. Eliot SPITZER, in his official capacity as Attorney General for the State of New York, Defendant.

No. 05 Civ. 5636(SHS).

United States District Court, S.D. New York.

October 12, 2005.

Douglas B. Jordan, Yvette Rivera, Office of the Comptroller of the Currency, Washington, DC, for Plaintiff, Office of the Comptroller of the Currency.

Matthew Byron Colangelo, NAACP Legal Defense & Educational Fund, Inc., New York, NY, for Movant, NAACP Legal Defense & Educational Fund, Inc.

Lars Franklin Nance, N.C. Dept. of Justice, Raleigh, NC, for Movant, N.C. Attorney General Roy Cooper.

Heidi Sarah Wicker, Schwartz & Ballen LLP, Washington, DC, for National Ass'n of Realtors and New York State Ass'n of Realtors, Inc., Amicus.

Dannis David Parker, New York State Dept. of Law (EPB), Albany, NY, for Eliot Spitzer in his official capacity as Attorney General for State of New York.

OPINION AND ORDER

STEIN, District Judge.

This is an action by the Office of the Comptroller of the Currency (the "OCC") seeking declaratory and injunctive relief barring the Attorney General of the State of New York from infringing on the OCC's exclusive visitorial authority over national banks and their operating subsidiaries.¹ The OCC is the federal agency with primary responsibility for supervising national banks. This litigation was prompted by the Attorney General's investigation into whether the residential mortgage lending practices of several national banks doing business in New York was racially discriminatory. The OCC does not challenge the applicability of the state's anti-discrimination law to national banks' lending practices, nor does it question whether national banks must comply with state fair lending laws. Rather, this action addresses only the question of whether the Attorney General of the State of New York may enforce those laws against national banks.

The OCC contends that the Attorney General's assertion of authority pursuant to state law to conduct his investigation and enforce relevant laws is in conflict with, and thus preempted by, section 484 of the National Bank Act, 12 U.S.C. § 484(a), and the OCC's implementing regulation codified at 12 C.F.R. § 7.4000, which gives the OCC exclusive authority to investigate national banks and prosecute enforcement actions to compel their compliance with state and federal laws regulating the content or conduct of federally authorized banking activities. The Attorney General challenges the validity of the OCC's interpretation of section 484, and claims that even if the OCC's regulation is valid, he is authorized to enforce fair lending laws against national banks pursuant to the federal Fair Housing Act, 42 U.S.C. §§ 3601 et seq. The Attorney General also asserts a counterclaim pursuant to the Administrative Procedure Act, 5 U.S.C. §§ 706(2)(A) and (C), that seeks an order setting aside 12 C.F.R. § 7.4000 insofar as it prohibits states from enforcing non-preempted state laws against national banks and their operating subsidiaries.

As explained more fully below, this Court finds that the OCC acted within its statutory authority in promulgating 12 C.F.R § 7.4000; the regulation, as recently amended, reflects a permissible construction of section 484 of the National Bank Act; and the regulation is therefore entitled to deference and, pursuant to the U.S. Supreme Court's decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), is to be given "controlling weight." Id. at 844, 104 S.Ct. 2778. The Court also finds that the Attorney General's assertion of visitorial authority impermissibly interferes with the OCC's supervisory role. Accordingly, the OCC's application for declaratory and injunctive relief pursuant to Rule 65 of the Federal Rules of Civil Procedure is granted and the Attorney General is permanently enjoined from issuing subpoenas or demanding inspection of the books and records of any national banks in connection with his investigation into residential lending practices; from instituting any enforcement actions to compel compliance with the Attorney General's already existing informational demands; and from instituting actions in the courts of justice against national banks to enforce state fair lending laws.

This opinion says nothing about whether it is better public policy to vest visitorial powers over national banks in state attorneys general as well as in the OCC. That is a matter for the legislative and executive branches of government to determine. What this opinion does conclude is that the federal statutes, regulations and decisional authority as they now exist compel the conclusion that the New York State Attorney General may not exercise visitorial powers over national banks in connection with an investigation into the banks' residential lending practices.

Table of Contents
  I.  Background .............................................................................387
      A.  Procedural Background ..............................................................387
      B.  Factual Background .................................................................387
 II.  Subject Matter Jurisdiction ............................................................388
III.  The National Banking Statutory and Regulatory Scheme....................................389
 IV.  Discussion .............................................................................390
      A.  The Chevron Framework ..............................................................391
      B.  No Clear Statement Is Required .....................................................391
      C.  Congress Has Not Unambiguously Addressed the Precise Questions at
            Issue ............................................................................393
          1.  The Statutory Text Does Not Unambiguously Contravene the OCC's
                Construction of Section 484 ..................................................393
          2.  First National Bank in St. Louis v. Missouri Does Not Preclude the
                OCC's Assertion of Exclusive Authority to Enforce State Laws
                Regulating National Banks' Authorized Banking Activities .....................394
      D.  The OCC Acted Within Its Authority In Promulgating 12 C.F.R. § 7.4000 .........398
      E.  Section 7.4000 Does Not Represent Merely the OCC's Attempt to Distill
            Statutory Terms and Judicial Precedent............................................398
      F.  Section 7.4000 Reflects a Permissible Construction of the Statute...................399
          1.  The OCC's Interpretation of "Visitation" is Consistent with the Historical
                Understanding of that Term ...................................................400
          2.  Section 7.4000 Interprets Visitorial Powers in a Manner Consistent
                With the Purposes Animating the Enactment of the National Bank
                Act ..........................................................................401
          3.  National Fair Lending Policy as Expressed in the Fair Housing Act
                Does Not Require a Narrower Interpretation of the OCC's Exclusive
                Visitorial Powers ............................................................403
      G.  The OCC's Interpretation of the Courts of Justice Exception Is Also a
            Permissible Construction of the Statute ..........................................404
          1.  The OCC Reasonably Reconsidered Its Earlier Position Reflected in
                First Union National Bank v. Burke ...........................................404
          2.  The OCC's Interpretation of the Courts of Justice Exception is Consistent
                with the Statutory Text and the Purpose Underlying the National
                Bank Act .....................................................................405
  V.  The Attorney General's Administrative Procedure Act Counterclaim.........................406
 VI.  Conclusion ..............................................................................407

I. Background

A. Procedural Background

On June 16, 2005, the OCC commenced this action by filing a complaint and motion for a preliminary injunction. On the same day, The Clearing House Association, L.L.C. filed a separate complaint and motion for a temporary restraining order and preliminary injunction seeking a similar order enjoining the Attorney General's investigation and asserting the same grounds for relief. See The Clearing House Association, L.L.C. v. Spitzer, No. 05 Civ. 5629(SHS). Following oral argument four days later, this Court denied the plaintiff's request for a temporary restraining order in The Clearing House Association, L.L.C. v. Spitzer, No. 05 Civ. 5629(SHS). The two actions were accepted as related, and the Court subsequently set a coordinated briefing schedule and consolidated the trials on the merits with the hearings on the preliminary injunction applications pursuant to Rule 65(a)(2) of the Federal Rules of Civil Procedure. (Order, dated July 5, 2005). The trial on the merits was held in both actions on September 7, 2005, at which time argument was heard and affidavits and other exhibits were admitted into evidence. (Transcript, dated Sept. 7, 2005, at 36-37).²

B. Factual Background

This action arises in response to the Attorney General's investigation into the residential mortgage lending practices of a number of banks doing business in New York State, including several national banks and their operating subsidiaries. The Attorney General's inquiry began with a review of data made available pursuant to the federal Home Mortgage Disclosure Act, 12 U.S.C. §§ 2801 — 2810, which requires residential real estate lenders to compile certain information regarding their mortgage lending activities...