Alert June 30, 2009

U.S. Supreme Court Rules That States May Enforce Certain State Banking Laws Against National Banks Through Judicial Enforcement Actions

The U.S. Supreme Court ruled that a state may enforce certain of its banking laws against national banks through judicial enforcement proceedings, but not through non-judicial requests for information. The New York Attorney General’s Office had requested certain non-public information from national banks through letters "in lieu of subpoena" in connection with a fair lending investigation. The banks obtained an injunction from the district court prohibiting the AG from enforcing state fair lending laws either through subpoenas or judicial proceedings, on the grounds that federal law preempts such enforcement, and the Second Circuit affirmed. The Court disagreed as to the AG’s use of judicial proceedings, rejecting the OCC’s argument that a state's "visitorial powers" included "prosecuting enforcement actions." The Court held that, under common law, visitorial powers encompassed a state’s ability to engage in administrative oversight of corporations, but did not extend to judicial enforcement activities. As such, the Court overturned that portion of the injunction which prevented the AG from bringing a judicial action to enforce certain New York state laws against national banks. The Court also found, however, that the threat of non-judicial enforcement through the use of executive subpoenas did fall within the definition of "visitorial powers," and thus upheld that portion of the injunction. Click here for Cuomo v. Clearing House Association, L.L.C., No. 08-453 (U.S. June 29, 2009)