S.D.N.Y.: Contract, consumer claims against bank not preempted

A New York federal district court held that contract and consumer law claims against a national are not preempted by the National Bank Act (NBA).

Although recognizing that the NBA broadly preempts state laws that specifically target the activities of national banks, the court followed recent precedents holding that this preemptive principle does not apply to consumer state statutes and common law principles that apply generally to all businesses. This case exemplified how consumers can continue to assert basic consumer protections against the banking industry, so long as they rely on generally applicable laws rather than laws that deal specifically with financial services. Baldanzi v. WFC Holdings Corp. dba Wells Fargo Bank, 2008 WL 4924987 (S.D.N.Y. Nov. 14, 2008) (No. 07-cv-9551). The judge was Laura Taylor Swain (Clinton).

 

          Plaintiff brought a putative class action against Wells Fargo, claiming that they improperly charged interest on co-op apartment financing that accrued after the principal had been paid and the loans terminated. The court noted recent decisions finding broad NBA preemption of state laws related to banking, lending, and gift cards that specifically regulated the activities of national banks or their subsidiaries. Pacific Capital Bank, N.A. v. Connecticut, 542 F.3d 341 (2d Cir. 2008); Clearing House Ass'n. v. Cuomo, 510 F.3d 105 (2d Cir.2007); SPGGC v. Blumenthal, 505 F.3d 183 (2d Cir.2007); Watters v. Wachovia Bank, 550 U.S. 1 (2007) (summary here).

 

            However, Watters recognized that “federally chartered banks are subject to state laws of general application in their daily business to the extent such laws do not conflict with the letter or general purpose of the NBA,” and that “contracts made by national banks are governed and construed by State laws.” The district court pointed to pre- and post-Watters decisions permitting claims based on general contract law and consumer laws that did not specifically target the financial industry. E.g., Jefferson v. Chase Home Finance, 2008 WL 1883484 (N.D. Cal. 2008); Levitansky v. FIA Card Services, 492 F.Supp.2d 758 (N .D. Ohio 2007); see also Binnetti v. Wash. Mutual Bank, 446 F.Supp.2d 217 (S.D.N.Y.2006) (similar result under Home Owners Loan Act). In accord with these cases, the court reasoned that Baldanzi’s claims

seek only to enforce the terms of contracts into which Defendant entered, to test Defendant's conduct of its business by the same standards applied to other business enterprises, and to recover gains allegedly obtained unjustly. They do not seek to impose any limitations on the Defendant's exercise of its national banking power and thus invoke laws that would only affect that power incidentally, if at all.

Accordingly, the court refused to dismiss the case.