FYI: MI App Ct Says NBA Preemption May Extend to Third-Party Agents

A Michigan appellate court recently held that Michigan state statutes, as well as common law, may be preempted by the National Bank Act ("NBA"), even where the alleged violation of those laws is committed by a third-party agent of a national bank.  A copy of the opinion is attached.

 

Plaintiff-borrowers sought damages from ABN AMRO based upon the alleged violations of Michigan state law by ABN AMRO's alleged agent, Concept One Mortgage Corporation ("Concept One").  Plaintiffs alleged that, among other things, Concept One failed to comply with state licensing and registration laws, and that ABN AMRO benefited from fraudulent statements made by Concept One while initiating and processing mortgage applications with the Plaintiffs. 

 

The lower court granted ABN AMRO's motion for summary disposition, holding that Plaintiffs' claims were preempted by the NBA, and the Court of Appeals affirmed.

 

The Court first addressed whether ABN AMRO was entitled to preemption under the NBA, despite the alleged misconduct being committed by a third-party agent.  Interpreting the NBA's implementing regulations, specifically 12 CFR § 34.4, the Court relied on the reasoning of the Sixth Circuit and focused "on the exercise of defendant's power, granted by federal law, to make real estate transactions" and "not on defendant's corporate or agency structure."  Concept One's actions were "done in furtherance of" ABN AMRO's power to make real estate loans, and ABN AMRO's "use of Concept One's services was specifically authorized by" regulation 12 CFR § 7.1004.  Accordingly, ABN AMRO was entitled to whatever preemptive protection might be afforded to it under the NBA.

 

The Court next addressed whether Plaintiffs' claims were actually preempted under the NBA.  As you may recall, 12 CFR § 34.4 allows national banks to "make real estate loans without regard to state law limitations concerning…licensing or registration or the processing or origination of mortgages."  Therefore, Plaintiffs' licensing and registration claims were "expressly and directly preempted" by the NBA. 

 

The Court also held Plaintiffs' common law claims preempted under the NBA.  12 CFR §34.4 does allow national banks to be subject to certain common law claims, but "only if such claims merely 'incidentally effect the exercise of defendant's real estate lending powers.'"  Again relying on the Sixth Circuit, the Court held that Plaintiffs' claims, if successfully pursued, would "have far more than an 'incidental' affect on [ABN AMRO's] exercise of the real estate lending powers granted under the federal scheme."

 

Let me know if you have any questions.  Thanks.

 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

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RWutscher@kw-llp.com

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