January 2009
On January 28, 2009, Arnold & Porter LLP's financial institutions litigation practice group secured another major victory for Bank of America. In Miller v. Bank of America, N.A. (U.S.A.), the California Court of Appeal affirmed on federal preemption grounds the trial court's judgment in favor of Bank of America, N.A. (U.S.A.), now known as FIA Card Services, N.A. (Bank). The decision is the first published California state appellate decision in recent history to find a state law preempted as applied to national banks.
The operative amended complaint was brought by four California credit cardholders on behalf of themselves and all other similarly situated California credit cardholders of the Bank. The Plaintiffs complained that they were charged interest and late fees when they paid credit card bills with a weekend or holiday due date on the next succeeding business day. They maintained that the state "holiday statutes" prohibited the Bank from charging late fees or interest on credit card payments posted on the first day after a covered holiday, when the late fees or interest would not have been due had the payments been posted on the weekend or holiday due date.
The complaint asserted three causes of action under the California Unfair Competition Law for unlawful conduct based upon the Bank's alleged violation of the state "holiday statutes," and sought an injunction preventing the Bank from charging late fees and interest in violation of the state "holiday statutes" and restitution of the interest and late charges allegedly unlawfully collected from the Plaintiffs and the members of the putative class. The trial court entered judgment in favor of the Bank upon sustaining without leave to amend the Bank's demurrer to the amended complaint, holding the state "holiday statutes" were preempted as to national banks by regulations promulgated by the Office of the Comptroller of the Currency (OCC). Plaintiffs appealed, and after full briefing, the matter was argued to the state appellate court in December 2008.
The Court accepted the central argument Arnold & Porter made that the inevitable effect of Plaintiffs' claims was to use state law to force a change in the due date for credit card payments, from the actual weekend or holiday due date set by the Bank to the first succeeding business day. The Court found that such an effect of state law, as applied to national banks, constituted impermissible interference with a national bank's schedule for repayment of principal and interest and payments due, and that the state law is therefore preempted as applied to national banks.
The Arnold & Porter team was led by Laurence Hutt and included Howard Cayne and Nancy Perkins, in both the Washington, DC and Los Angeles offices.