Thursday, May 19, 2011

FYI: 11th Cir Applies Dodd-Frank Preemption Amendments, Holds State-Law Check Cashing Fee Preempted

Referencing the preemption amendments of the Dodd-Frank Act, the United
States Court of Appeals for the Eleventh Circuit recently held that a
so-called "par value" statute was preempted by the National Bank Act
("NBA"), 12 U.S.C. § 21 et seq., and the regulations promulgated by the
Office of the Comptroller of the Currency ("OCC"). A copy of the opinion
is attached.

The plaintiff sought to cash a check at Defendant JPMorgan Chase Bank
("Chase") which was drawn on a Chase account. Chase charged Plaintiff, a
non-Chase customer, a $6.00 check cashing service fee. The plaintiff
filed a class action against Chase alleging that the check-cashing service
fee violated Fla. Stat. § 655.85, and that Chase had been unjustly
enriched. Chase filed a motion to dismiss arguing, among other things,
that the plaintiff's claims were preempted by the NBA.

The district court granted Chase's motion, dismissing both of Plaintiff's
claims as preempted by the NBA, and the plaintiff appealed. The Eleventh
Circuit affirmed on all counts.

Fla. Stat. § 655.85 "specifically prohibits a bank from 'settl[ing] any
check drawn on it otherwise than at par.'" However, the NBA allows banks
to "exercise . . . all such incidental powers as shall be necessary to
carry on the business of banking; by discounting and negotiating
promissory notes, drafts, bills of exchange, and other evidences of debt."
In addition, the OCC promulgated a regulation providing that "a national
bank may 'charge its customers non-interest charges and fees, including
deposit account service charges.'" See 12 C.F.R. § 7.4002(a). The OCC
interprets "customer" to include "any person who presents check for

Based upon the OCC's regulation, and relying on the reasoning of the Fifth
Circuit in Wells Fargo Bank of Tex. N.A. v. James, 321 F.3d 488 (5th Cir.
2003), the Court held that Section 655.85 was preempted by the NBA through
the regulations promulgated by the OCC. The Court reasoned that "Congress
clearly intended that the OCC be empowered to regulate banking and
banking-related activities. It is not unreasonable [for the OCC] to define
'customer' as any person presenting a check for payment. And finally,
there is a clear conflict here: the OCC specifically authorizes banks to
charge fees to non-account-holders presenting checks for payment. The
state's prohibition on charging fees to nonaccount-holders, which reduces
the bank's fee options by 50%, is in substantial conflict with federal
authorization to charge such fees."

Finally, because Plaintiff's "unjust enrichment claim relies on identical
facts as her claim under Fla. Stat. § 655.85," the Court held the unjust
enrichment claim preempted by the NBA as well.

Although the parties did not mention the Dodd-Frank amendments, and
although the conduct at issue occurred in 2009, the Court held that the
preemption standard as amended by the Dodd-Frank Act was conflict
preemption, and applied the OCC's regulation as written, holding "[i]t is
not unreasonable to define 'customer' as any person presenting a check for

As you may recall, Section 5136(b) of the Dodd–Frank Act amended the NBA
to state the following: "State consumer financial laws are preempted, only
if … in accordance with the legal standard for preemption in the decision
of the Supreme Court of the United States in Barnett Bank of Marion
County, N. A. v. Nelson, Florida Insurance Commissioner, et al., 517 U.S.
25 (1996), the State consumer financial law prevents or significantly
interferes with the exercise by the national bank of its powers . . . ."
See 12 U.S.C. § 25b(1). In Barnett, the Supreme Court "found the
controlling question to be whether the state statute 'forbid[s], or . . .
impair[s] significantly, the exercise of a power that Congress explicitly

Thus, the Eleventh Circuit held, "it is clear that under the Dodd-Frank
Act, the proper preemption test … [is] the test for conflict preemption."

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874

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