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Powell v. The Huntington National Bank

United States District Court, S.D. West Virginia, Charleston Division

December 28, 2016

JEREMY A. POWELL, et al., Plaintiffs,
v.
THE HUNTINGTON NATIONAL BANK, Defendant.

          MEMORANDUM OPINION AND ORDER

          THOMAS E. JOHNSTON UNITED STATES DISTRICT JUDGE.

         Pending before the Court is Defendant Huntington National Bank's (“Huntington”) Motion for Summary Judgment. (ECF No. 117.) For the reasons provided below, the Court GRANTS the motion.[1]

         I. BACKGROUND

         Plaintiffs Jeremy A. Powell and Tina M. Powell bring this action against Huntington, alleging causes of action arising out of a home loan that Plaintiffs acquired through the bank. (See ECF No. 1-1 at 4, ¶ 1.) Plaintiffs filed their Complaint in the Circuit Court of Kanawha County, West Virginia, on October 15, 2013. (Id.) The Complaint alleges that this is a class action pursuant to West Virginia Rule of Civil Procedure 23 and that the matter is brought “on his [sic] own behalf and on behalf of a class of West Virginia consumers who have had unlawful late fees charged to their home loan accounts.” (Id. at 5-6, ¶¶ 12-16.) According to the Complaint, Huntington illegally assessed late fees in violation of the terms of Plaintiffs' mortgage loan contract and in violation of the West Virginia Consumer Credit and Protection Act (“WVCCPA”), (see Id. at 7- 8, ¶¶ 17-22), and misrepresented the amount of a claim in violation of the WVCCPA. (See Id. at 8, ¶¶ 23-24.) It is not in dispute that Huntington charged Plaintiffs multiple late fees. (See Id. at 5, ¶¶ 8-11; ECF No. 118 at 4-5.)

         Plaintiffs allege that Huntington “agreed to only charge Plaintiffs one late fee for each missed payment.” (ECF No. 1-1 at 5, ¶ 7.) However, Plaintiffs state that “Huntington regularly assessed late fees for months in which a payment was timely made within the period stated in Plaintiffs' Note.” (Id. ¶ 8.) Plaintiffs assert as an example that while they “made a full payment on October 8, 2012, within the contractual period set forth in [their] Note, Huntington assessed Plaintiffs a late fee on October 17, 2012, ” and that “on November 5, 2012, Plaintiffs made another full payment, which included a $15.00 late fee . . . Nevertheless, on November 19, 2012, Huntington assessed Plaintiffs another late fee.” (Id. ¶¶ 9-10.) Plaintiffs contend that “Huntington regularly and systematically assesse[d] late fees in this manner.” (Id. ¶ 11.)

         On December 13, 2013, Huntington timely removed the state case to this Court pursuant to 28 U.S.C. § 1441, and Huntington's answer to the Complaint was filed the same day. (ECF Nos. 1, 3.) This Court found that it has diversity jurisdiction over this case in its previous memorandum opinion issued September 26, 2014. (See ECF No. 57 at 12-13.) Huntington filed this Motion for Summary Judgment and memorandum in support of its motion on April 25, 2016. (ECF Nos. 117, 118.) In accordance with this Court's order amending the schedule on July 13, 2016, (ECF No. 129), Plaintiffs responded to Huntington's motion on August 3, 2016, (ECF No. 139), and Huntington filed a reply memorandum in support of its motion on August 24, 2016. (ECF No. 144.) The motion is fully briefed and ripe for adjudication.

         II. STANDARD OF REVIEW

         Summary judgment is proper where the pleadings, depositions, and affidavits in the record show that there is “no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). If there exist factual issues that properly can be resolved only by a trier of fact because they may reasonably be determined in favor of either party, summary judgment is inappropriate. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). See also Pulliam Inc. Co., Inc. v. Cameo Props., 810 F.2d 1282, 1286 (4th Cir. 1987). The moving party bears the burden of showing that there is no genuine issue of material fact and that he or she is entitled to judgment as a matter of law. Celotex Corp., 477 U.S. at 322-23. Summary judgment is appropriate when the nonmoving party has the burden of proof on an essential element of his case and does not make, after adequate time for discovery, a showing sufficient to establish that element. Id.

         When determining whether there is an issue for trial, the Court must view all evidence in the light most favorable to the nonmoving party. Mellen v. Brunting, 327 F.3d 355, 363 (4th Cir. 2003). “[T]he issue of material fact required by Rule 56[a] to be present to entitle a party to proceed to trial is not required to be resolved conclusively in favor of the party asserting its existence; rather, all that is required is that sufficient evidence supporting the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial.” Anderson, 477 U.S. at 248-49. The nonmoving party may not rest on the pleadings alone and must show that specific material facts exist by offering more than a mere “scintilla of evidence” in support of his or her position. Id. at 252. Summary judgment is also appropriate when the inquiry involves a pure question of law. Taft v. Vines, 70 F.3d 304, 316 (4th Cir. 1995), vacated en banc on different grounds, 83 F.3d 681 (4th Cir. 1996).

         III. DISCUSSION

         Huntington moves for summary judgment, arguing that for the alleged causes of action to be viable, “Plaintiffs must prove that Huntington was required, but failed, to apply Plaintiffs' October 2012 payment ‘first to current installments, then to delinquent installments.'” (ECF No. 118 at 7 (quoting W.Va. Code § 46A-3-112(3)). It is not disputed that Huntington is a national banking association organized under the National Bank Act (“NBA”). (See ECF No. 1-1 at 5, ¶ 3; ECF No. 3 at 1, ¶ 3.) Huntington claims that Plaintiffs' claims fail as a matter of law because the state law provision at issue, section 46A-3-112(3) of the WVCCPA, is preempted by the NBA. (See ECF No. 118 at 8.) Huntington attempts to prove this by arguing, first, that NBA § 85 preempts Plaintiffs' challenge to the late fees, (see Id. at 8-17), and, second, that the NBA and regulations issued by the Office of the Comptroller of the Currency (“OCC”) preempt Plaintiffs' challenge to the way in which Huntington posts payments to borrowers' accounts. Each of these two counts is addressed below.

         The United States Constitution's Supremacy Clause makes federal law “the supreme law of the land . . . anything in the Constitution or laws of any State to the contrary notwithstanding.” U.S. Const. art. VI, cl. 2. “As a result, federal statutes and regulations properly enacted and promulgated can nullify conflicting state or local actions.” Coll. Loan Corp. v. SLM Corp., 396 F.3d 588, 595 (4th Cir. 2005). Such state or local laws may be preempted under the Supremacy Clause in three ways-by express preemption, field preemption, or conflict preemption. See Watkins v. Wells Fargo Home Mortg., 631 F.Supp.2d 776, 783 (S.D. W.Va. 2008) (citing Anderson v. Sara Lee Corp., 508 F.3d 181, 191 (4th Cir. 2007) (internal citation omitted)). Express preemption occurs when “Congress expressly declares its intent to preempt state law.” Pinney v. Nokia, Inc., 402 F.3d 430, 453 (4th Cir. 2005). Field preemption takes place when “Congress ‘occupies the field' regulating so pervasively that there is no room left for the states to supplement federal law.” Watkins, 631 F.Supp.2d at 783 (citing Anderson, 508 F.3d at 191 (internal citation omitted)). Lastly, conflict preemption “occurs when state law actually conflicts with federal law.” Anderson, 508 F.3d at 191.

         The only type of preemption at issue in this case is conflict preemption. Express preemption and field preemption do not apply to the activities of national banks because the language of the NBA does not provide for express preemption, and the United States Supreme Court, the relevant federal regulations, and the OCC itself, “envision some role, even if a limited one, for state regulation of national banks.” See, e.g., Watkins, 631 F.Supp.2d at 784. “Even where Congress has not completely displaced state regulation in a specific area, state law is nullified to the extent that it actually conflicts with federal law.” Hillsborough Cty. v. Automated Med. Labs., Inc., 471 U.S. 707, 713 (1985). While a conflict between state and federal law does not need to be direct, a finding that two laws directly conflict indicates the need to engage in a conflict preemption analysis. See City of Charleston v. A Fisherman's Best, Inc., 310 F.3d 155, 169 (4th Cir. 2002).

         This Court determined in its memorandum opinion issued September 26, 2014, that Plaintiffs' claims were not completely preempted by the NBA. (See ECF No. 57 at 5-12.) Huntington argues in its motion that while the Court found Plaintiffs' claims not to be completely preempted for purposes of finding a basis for removal, the Court may still find that the same claims are not cognizable due to ordinary preemption. (See ECF No. 118 at 8-17.) As a matter of law, Huntington is correct. The linguistic resemblance between complete preemption and ordinary or conflict preemption does not signify a similarly close jurisprudential relationship. See Lontz v. Tharp, 413 F.3d 435, 440 (4th Cir. 2005); Richards v. Appalachian Power Co., 836 F.Supp.2d 436, 440 (S.D. W.Va. 2011). The complete preemption doctrine and ordinary preemption defense are “starkly different.” See King v. Homeside Lending, Inc., No. 2:03-cv-2134, 2007 WL 1009383, at *6 (S.D. W.Va. Mar. 30, 2007) (citations omitted). “Complete preemption is a ‘jurisdictional doctrine, ' while ordinary preemption simply declares the primacy of federal law . . . .” Id. (citing Sonoco Prods. Co. v. Physicians Health Plan, Inc., 338 F.3d 366, 370-71 (4th Cir. 2003)). See also C.S. v. United Bank, Inc., No. 2:08-cv-921, 2009 WL 777643, at *5 (S.D. W.Va. Mar. 20, 2009). Ordinary preemption is a “defense to the allegations, ” see Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987), and is more easily determinable than complete preemption, especially given that complete preemption must be concluded on the face of the pleadings without the benefit of supporting evidence. See Lontz, 413 F.3d at 441 (“[T]he Supreme Court has made clear that it is ‘reluctant' to find complete preemption . . . The Court has, in fact, found complete preemption in only three statutes.” (citations omitted)); see also Smithson v. Smithson, No. 1:15-cv-0583, 2015 WL 2359569, at *3 (S.D. W.Va. May 15, 2015) (“The presumption, in other words, is against finding complete preemption.” (citation omitted)). “[D]efendants seeking removal under the doctrine of complete preemption bear a significant burden . . . And as we must construe removal strictly, reasonable doubts must be resolved against the complete preemption basis for it.” Lontz, 413 F.3d at 441 (citing Md. Stadium Auth. v. Ellerbe Becket Inc., 407 F.3d 255, 260 (4th Cir. 2005)). Several district court opinions support the notion that “the [NBA] does not completely preempt all claims concerning national banks[, ] but rather, preemption is limited to certain types of claims such as usury . . . .” See, e.g., Booth v. Old Nat'l Bank, 900 F.Supp. 836, 841 (N.D. W.Va. 1995). Thus, despite this Court's determination that Plaintiffs' claims are not completely preempted by NBA §§ 85, 86, the possibility that those claims are ordinarily preempted still remains.

         A. Preemption by National Bank Act § 85

         Congress enacted the NBA “to facilitate . . . a national banking system.” Marquette Nat'l Bank of Minneapolis v. First of Omaha Serv. Corp., 439 U.S. 299, 315 (1978) (internal quotation omitted). Section 85 of the NBA states, in relevant part, that “[a]ny association may . . . charge on any loan . . . interest at the rate allowed by the laws of the State . . . where the bank is located . . . .” 12 U.S.C. § 85. The WVCCPA, at section 46A-3-112, promulgates the following:

(3) No delinquency charge may be collected on an installment which is paid in full within ten days after its scheduled or deferred installment due date, even though an earlier maturing installment or a delinquency or deferral charge on an earlier installment may not have been paid in full. For purposes of this subsection, payments shall be applied first to current installments, then to delinquent installments and then to delinquency and other charges.

W.Va. Code § 46A-3-112(3). The Supreme Court held in Smiley v. Citibank (S.D.), N.A. that the word “interest” within § 85 included late-payment fees as provided for by OCC regulations. See 517 U.S. 735, 745-47 (1996); see also 12 C.F.R. § 7.4001 (“The term ‘interest' as used in 12 U.S.C. [§] 85 includes . . . late fees . . . .”). The Court concluded that the OCC regulation defining “interest” is entitled to deference and is a reasonable interpretation of § 85 as required by the Court's previous decision in Chevron. See 517 U.S. at 741, 744-45; see also Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842-845 (1984). Thus, a state law that conflicts with a national bank's decision regarding what late fee rate to charge-given that the rate is acceptable under the laws of the state where the bank is located-will be preempted.

         Huntington argues that § 85 “authorizes [it] to charge a late fee in any month when the borrowers remained delinquent on their mortgage repayment obligations.” (ECF No. 118 at 8.) Huntington relies on the Ohio Consumer Sales Practices Act in support of the proposition that “there are no restrictions on a bank's power to charge a borrower a late fee when the borrower remains behind on his or her mortgage repayment obligations.” (See Id. at 9.) If a borrower remains behind on loan payments, Huntington states that it has the ability to determine “how a payment should be applied to an outstanding mortgage account balance” according to its internal “posting policy.”[2] (See ECF No. 117-1 at 10, ¶¶ 38-39 (McKee Aff.).) Huntington continues to argue that because Ohio law does not restrict in any way its ability to charge late fees, the WVCCPA provision at issue cannot stand because it “attempt[s] to ban Huntington from charging late fees.” (ECF No. 118 at 10. See ECF No. 117-1 at 4, ¶ 9 (“[I]n servicing the Powells' mortgage, Huntington applied federal law and looked to the laws of the state of Ohio . . . to determine what interest charges (including late fees) could permissibly be assessed to the Powells under Section 85 and the Powells' Note and their Deed of Trust.”).) See also W.Va. Code § 46A-3-112(3). It cites the Supreme Court's decisions in Smiley and Marquette National Bank of Minneapolis v. First of Omaha Service Corp., 439 U.S. 299 (1978), as well as the Fourth Circuit's decision in Discover Bank v. Vaden, 489 F.3d 594 (4th Cir. 2007), to support the proposition that § 85 preempts the WVCCPA provision seeking to control the assessment of certain late fees. (See ECF No. 118 at 10-14.) While Huntington recognizes Plaintiffs' claim that this case is about incorrectly charged late fees as opposed to the amount or rate of the fees, its memorandum alleges that “[§] 85 authorizes national banks to export the entire law of its home state relating to interest charges, not just the portions of that law that relate to the amount of interest permitted.” (Id. at 14 (citations omitted) (emphasis in original).)

         Plaintiffs object to an interpretation of § 85 that allows Huntington to “‘export' all of their ‘home state's laws regarding the permissibility of interest charges into other states.'” (ECF No. 139 at 12 (quoting ECF No. 118 at 8) (emphasis in original).) They argue that § 85 is explicit in allowing national banks to export only laws addressing interest rates. (See id.) Plaintiffs cite this Court's September 26, 2014, opinion and reiterate that Plaintiffs “do not challenge interest rates, ” and because the claims are not usury claims, they are not preempted by § 85. (See Id. at 12-13 (citing ECF No. 57 at 8-9).) Plaintiffs also refute Huntington's use of Smiley, Marquette, ...


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