Alert January 13, 2009

OCC Issues Interpretive Letters and Files Memorandum in Federal Court Concerning Preemption of State Laws

Interpretive Letters.  In interpretive letter #1103 (“Letter 1103”) and interpretive letter #1106 (“Letter 1106” and together with Letter 1103, the “Letters”), the OCC concluded that 12 U.S.C. § 92a (“Section 92a”) and Part 9 of the OCC’s regulations preempt state laws that impose preconditions on national banks exercising fiduciary powers.  Section 92a authorizes the OCC to permit national banks to act as, among other things, trustees, executors, administrators, registrars of stocks and bonds, guardians of estates “or in any other fiduciary capacity” allowed for state banks, trust companies or other corporations that compete with national banks under the law of the state where the national bank is located.  Prior to the issuance of the Letters, several states sought to limit the activities of certain unnamed national banks that offer fiduciary services.

In Letter 1103, a national bank sought to provide fiduciary services in North Carolina through its offices in other states, as authorized by OCC regulations.  North Carolina law, however, requires that institutions providing trust services within the state obtain a license and maintain a trust office in the state.  In concluding that Section 92a preempts North Carolina’s requirements, Letter 1103 reasoned that Section 92a imposes no limitations on where a national bank may market its fiduciary services.  Because the OCC’s regulations expressly provide that a national bank may act as a fiduciary in any state, the OCC’s regulations preempt the preconditions imposed by North Carolina authorities.

As described in Letter 1106, Georgia and South Carolina sought to limit the fiduciary services offered by a national bank for customers and property located in Georgia and South Carolina, notwithstanding that the national bank was not located in either state.  In addition, Florida sought to require a national bank to provide pledges or deposits in excess of requirements under applicable OCC regulations.  In Letter 1106, the OCC concluded that Section 92a and Part 9 of the OCC’s regulations permit a national bank to act as a fiduciary in Georgia and South Carolina notwithstanding state laws restricting its ability to do so.  Letter 1106 also states that a national bank need not comply with Florida deposit requirements mandating deposit levels in excess of federal law.

Preemption Memorandum.  The OCC also filed a memorandum amicus curiae in a lawsuit pending in the U.S. District Court for the Northern District of Ohio (Cleveland v. Deutsche Bank Trust Co., N.D. Ohio, No. 1:08-cv-00139), requesting that the court dismiss the state cause of action.  The action, commenced by the City of Cleveland, claims that lenders, investment banks and related companies are subject to liability under state law for their role in subprime lending and “securitization.”  In its memorandum amicus curiae, the OCC claims that the Supremacy Clause of the United States Constitution preempts state law claims against the national bank.  The case is currently pending.