Supreme Court to Hear At Least One National Bank Act Preemption Case

The Supreme Court this afternoon released a short miscellaneous order in which it granted certiorari in Cantero v. Bank of America.

The case presents the question of whether state laws requiring the payment of interest on certain mortgage escrow accounts are preempted by the National Bank Act. In the decision below that will now be reviewed, the Second Circuit held unanimously that the National Bank Act does preempt New York state law, at least with respect to the mortgages at issue.

Links to previous posts on this with more background are set out at the end of this post, but for now here are four quick notes on why I think this is worth following, even if you do not particularly care about mortgage escrow accounts.

1. By agreeing to take the case, the Supreme Court, somewhat unusually, declined to follow the recommendation of the Solicitor General, who in August recommended against the Court taking up the case.

2. The Solicitor General’s brief in August also showcased apparent disagreement within the Biden Administration on this issue.

   1. In an amicus brief filed in the Second Circuit, the Office of the Comptroller of the Currency under Acting Comptroller Hsu in 2021 adopted the traditional OCC position in favor of relatively broad National Bank Act preemption.

   2. The Solicitor General August’s 2023 brief, in contrast, said that the OCC’s interpretation of the law is incorrect, and that in fact a narrower view of National Bank Act preemption “better reflects the text, structure, and history of the statute.”

   3. The Biden Administration’s 2023 position, according to a response filed by the plaintiff consumers in Cantero, “represents a sea change in the federal government’s position on NBA preemption.”

3. In addition to its discussion of Cantero at its conference today, the Supreme Court was also scheduled to discuss a case called Flagstar Bank v. Kivett.

   1. In Flagstar Bank, the Ninth Circuit (relying on earlier case called Lusnak) reached the opposite conclusion to the Second Circuit in Cantero, holding that the National Bank Act does not preempt state laws requiring the payment of interest on certain mortgage escrow accounts.

   2. The Court’s order this afternoon does not act either way on the Flagstar Bank case, so we will have to wait until Monday’s order list (or later) to learn whether the court will immediately take up that case as well.

   3. The Solicitor General’s August 2023 brief had asserted that both Cantero and Flagstar Bank were poor vehicles for the Court’s review, but as a fallback position said that if the Court was determined to take one of the cases, it should agree to hear Flagstar Bank. At least as of right now, the Court has done the opposite.

4. One of the reasons the Solicitor General said the Court could pass on hearing these cases is that “only 13” states have interest-on-escrow laws. That is true, but a decision here is likely to have implications for National Bank Act preemption analysis more generally. Perhaps especially so because this will be the first time since Dodd-Frank became law that a National Bank Act preemption question has come before the Supreme Court.

The next step is briefing on the merits, probably starting in late November.

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For previous coverage on this blog:

• Will the Supreme Court Again Consider Preemption Under the National Bank Act? (December 26, 2022)

• Biden Administration Embraces Narrower View of National Bank Act Preemption (August 31, 2023)

• National Bank and Plaintiffs Respond to Biden Administration’s Position on National Bank Act Preemption (September 14, 2023)