0:00

We'll hear argument next in Case 22529, Kentaro v. Bank of

0:02

America. Mr. Taylor. Mr.

0:06

Chief Justice, and may it please the Court, Section

0:09

25B pre-empts a State consumer

0:11

financial law only if, as

0:14

relevant here, it prevents or significantly

0:16

interferes with the exercise of a

0:19

national bank's powers. Bank

0:21

of America argues, and the Second

0:23

Circuit held, that this statute pre-empts

0:25

any law that controls or otherwise

0:27

hinders the exercise of a national

0:29

bank's powers, regardless of

0:31

whether the law has any significant

0:33

effect on such powers. This

0:36

test conflicts with the statute for

0:38

four reasons. First, Section

0:41

25B's definition of State consumer financial

0:43

law is incompatible with a control

0:45

test because it would require that

0:48

every such law be preempted, nullifying

0:50

the statute, and erecting the very

0:53

field-preemption regime that the statute bids.

0:56

Bank of America's only retort is

0:58

to concede that State fair lending laws

1:00

aren't categorically preempted, a concession

1:03

it doesn't explain, and that

1:05

disproves its own test. Second,

1:08

the control test ignores Section 25B's

1:10

express codification of Barnett banks

1:13

prevents or significantly interferes with standard,

1:15

and in particular the word significantly,

1:17

which Bank of America reads out

1:19

of the statute. Third, a

1:22

control test can't be squared with

1:24

Section 25B's provisions for OCC

1:26

preemption determinations, which

1:28

must assess the impact of a State

1:30

law and be based on substantial evidence.

1:32

These requirements would make no sense if

1:35

a control test were the law. Finally,

1:37

and perhaps most fundamentally, adopting

1:39

a control test would require

1:41

reading virtually all of Section

1:44

25B to have no real-world

1:46

effect. With no plausible

1:48

textual argument, Bank of America turns

1:50

to policy claiming that its test

1:52

is needed to avoid mayhem, but

1:55

Congress disagreed, and Section 25B has

1:57

a solution to this concern. SEC

2:00

can make the preemption determinations contemplated by

2:02

the statute, that it has thus far

2:04

failed to respect the statute's commands, grants

2:07

no license to this court to do

2:09

the same. I welcome the court's questions.

2:12

I'd be interested in you giving

2:15

us your explanation as

2:18

to how Barnett

2:20

Bank gives us

2:22

guidance as to how

2:24

to interpret, prevent, or significantly interfere.

2:27

Sure, Justice Thomas. So Barnett

2:29

Bank uses the prevents

2:32

or significantly interferes with standard as a

2:34

kind of distillation of the rule that

2:36

emerges from this court's cases. Now of

2:38

course the conflict that was issued in

2:40

Barnett Bank was a stark conflict. It

2:42

involved a state statute that said banks

2:45

may not do X and a federal statute

2:47

that said national banks may do X and

2:49

this court was able to resolve that as

2:52

a clear conflict. But it didn't give

2:54

much guidance itself in terms of what

2:56

significant interferes with means but

2:58

it did articulate that as the standard

3:00

that emerges from this court's cases and

3:02

the first case that it cited was

3:04

this court's decision in Anderson and Anderson

3:06

involved a Kentucky cheat law and

3:09

the court in that case there was a

3:11

preemption challenge that was brought to that statute

3:13

by the national bank and the court in

3:15

that case said that's not a discriminatory statute.

3:17

It was the first question the court asked.

3:19

It doesn't conflict with any statutory text and

3:21

so we examine the law's practical effect

3:23

and in examining the law's practical effect

3:25

it distinguished a prior decision from this

3:27

court that reached the opposite outcome and

3:29

the only way to explain that pair

3:31

of cases is that the court examines the

3:34

practical effect. And so I think the

3:36

one thing that we know of the

3:38

prevents or significantly interferes with standard and

3:40

what it means is that it requires

3:42

an examination at a minimum of

3:44

the practical effect of the statute and

3:47

that's clear from the ordinary meaning of

3:49

the phrase and it's confirmed by the

3:51

surrounding text in section 25B including the

3:54

provision that requires that the OCC examine

3:56

the law's impact based on substantial evidence

3:58

and periodically review. Exactly does

4:00

it mean to examine the practical effect? Why

4:04

don't you talk about this law and

4:06

say how an analysis of that kind

4:08

would work with respect to this law

4:10

and then maybe say anything more general

4:12

you want because it seems to provide

4:15

no guidance at all to courts as

4:17

to what they have to do. I

4:19

will answer that question directly, but I will say

4:22

that because of the way that Bank of America

4:24

has argued the case and the way that the

4:26

Second Circuit decided the case, the only question that

4:28

this Court has to confront is whether the control

4:30

test is codified as part of Section

4:32

25B or whether instead courts must look

4:34

to the practical effect of the law.

4:37

I appreciate that, but one thing that

4:39

we should think about at least in

4:41

considering whether the practical effect test that

4:43

you are suggesting is the one that

4:46

is codified and is the appropriate one

4:48

is what would that mean? What

4:51

would it look like? Then

4:53

we can consider whether that is

4:56

what Congress had in mind.

4:58

It might look like the

5:01

showing that the National Bank made in Franklin National

5:03

Bank, for example, and I would recommend that you

5:05

look at the trial court decision in that case.

5:07

That case involved a federal statute

5:09

that granted to National Bank the authority to

5:12

accept savings deposits. New York had

5:15

a statute that didn't prohibit National

5:17

Banks from accepting savings deposits,

5:20

but disabled them from using the word savings

5:22

in their business operation

5:24

and in their advertisements or

5:27

any equivalent thereof and reserved

5:30

to certain state institutions the

5:32

privilege to use that word. What

5:35

the National Bank said in that case,

5:37

it identified real world evidence showing the

5:39

tremendous extent to which that law served

5:42

as an obstacle to attempting

5:44

to accept savings

5:47

deposits and its business operations. The

5:50

trial court in that case found what is

5:52

effectively significant interference. By the time that case

5:55

got to this court, this court,

5:57

although it resolved the question before

6:00

against statutory construction grounds emphasizing

6:02

the statute, the federal statute's use of

6:04

the word savings, I think it had

6:06

confidence based on the record before it

6:09

that that word mattered

6:11

in the real world. And if

6:13

that standard had been used here,

6:15

what would that have meant? What

6:18

evidence would the parties have put on

6:20

and how would the court have addressed

6:22

the issue? So the legal question

6:24

would be whether there's significant interference and we think

6:26

that looks to the practical effect and Bank of

6:28

America would have to identify what the practical effect

6:31

is. I think it would be particularly easy

6:33

for it to do so here because we have a statute that's

6:35

been on the books for 50 years. State

6:37

banks have been complying with it. Most

6:39

federal banks, it's my understanding, have been

6:41

complying with it and indeed there was

6:43

a preemption challenge that was immediately brought

6:45

and it failed and presumably national banks

6:47

were complying with it after that. And

6:49

so they could look at the data

6:51

showing the extent to which this minimum

6:53

interest requirement has caused banks to not

6:56

offer mortgage escrow services, which would

6:58

be the relevant power to consumers.

7:03

And I think it would just be a question of degree

7:05

at that point and I would concede that it's not a

7:07

bright line test. Congress didn't want a

7:09

bright line test. It had before

7:12

it various proposals that would have been

7:14

a bright line test including field preemption,

7:16

that's administrable, but we know that Congress

7:18

didn't want that. And on the other

7:20

hand, the Department of the Treasury submitted

7:22

a proposal that would have made preemption

7:24

determinations turn entirely on whether the law

7:26

is discriminatory. That's also administrable, but

7:28

in the judgment of Congress that didn't go

7:31

far enough to provide protection to the bank. Banks

7:34

and Congress wanted to give banks as

7:36

an accommodation the opportunity in a case-by-case

7:38

basis to show that there's a significant

7:40

interference. And that's the scheme that... I'm

7:43

going to ask about Franklin because I

7:45

think Franklin's a critical case here because

7:47

it's identified in Barnett, identified in Waters.

7:52

And in figuring out, as Justice Kagan

7:54

and Justice Thomas says, what significantly interferes

7:56

means, I think one way to do is

7:59

look at... look at the

8:01

precedent applying it. So Barnett,

8:03

you look at that first, but Barnett

8:05

really rests heavily on Franklin. We

8:07

know Franklin is correctly decided

8:10

under the statute. Do you agree with that?

8:12

Agree with that entirely. Okay. So then the

8:14

question, I think, one way to look at

8:16

it, you tell me why this is wrong,

8:18

is does this kind of state

8:20

law at issue here significantly

8:22

interfere more than

8:24

the law did in Franklin? Is that a good way

8:27

to look at it? You could put it

8:29

that way, yes. Okay. And doesn't

8:31

a law that interferes with

8:33

the pricing of the

8:35

product, almost by

8:37

definition, interfere more with

8:40

the operations of the bank than

8:42

something that affects advertising? I

8:44

don't think so, Justice Cavanaugh. The question

8:47

isn't whether it would

8:49

cost money to the bank to comply with the

8:51

statute. The question rather... Let

8:54

me stop you right there. Why

8:56

not? That sounds like significant interference

8:58

when it's affecting how much it's

9:00

almost putting a tax on

9:03

the bank

9:05

to sell the product,

9:07

which strikes me as a much more

9:09

significant interference than simply saying

9:12

you can't use the word savings

9:14

in your advertising, which was

9:16

the issue in Franklin. Well,

9:18

if the test for preemption turned entirely

9:20

on compliance costs, then a whole bunch

9:22

of generally applicable laws that my friend

9:24

on the other side concedes are

9:27

not preempted would nevertheless be preempted if

9:29

it costs money to the bank to comply with

9:31

those. So I don't think compliance costs alone are

9:33

enough. I think what you need instead is what

9:35

this court said in Barnett Bank, which is it's

9:37

not enough that there just be significant interference with

9:41

profits. The question

9:43

is whether there's a significant interference with a

9:45

power that Congress explicitly granted. So the focus

9:48

is on what... But how did that happen

9:50

in Franklin? Franklin, they

9:52

could do... the bank could do everything

9:54

that it previously did. It just couldn't

9:57

use the word savings in its advertisement,

9:59

which didn't matter. prevented from exercising its

10:02

power. That's right, but as I was explaining to Justice

10:04

Kagan earlier, if you take a look at the record

10:06

in that case, that case shows that

10:08

a factual showing can be made and was

10:10

made in that case, and I would commend

10:12

the trial court's decision there because I think

10:15

it's illuminating for this question. And

10:17

everyone in the case seemed to understand, coming on the

10:19

heels of Anderson, that there was gonna be some kind

10:21

of a practical showing. And this court

10:23

noted the large record showing the real world consequences

10:25

of the law in its opinion. And

10:28

there was all kinds of, there was testimony, there

10:31

was consumer polling, there was law sales, there

10:33

was significant amount of data showing the degree

10:35

to which this prohibition had

10:37

a real world effect. Isn't

10:40

it true that the New York Court of

10:42

Appeals, when it upheld the law, said

10:45

that it had no, quote, seriously

10:48

harmful effects on national banks? That

10:51

may have been what it said,

10:53

but if you look at the trial court's finding

10:55

in the case, the trial court found that based

10:57

on the evidence that I was discussing with Justice

10:59

Kagan on the law,

11:01

quote, certainly restricts national banks tremendously in

11:03

obtaining savings deposits. And that's effectively a

11:05

finding of significant interference. I mean, the

11:08

law said they couldn't use savings in

11:10

their advertising, but they could use a

11:14

comparable phrase like special

11:16

interest account. And

11:19

so if any

11:21

interference that's greater than the interference

11:23

there is

11:25

enough, that wouldn't

11:29

be, I don't see how you can win

11:31

under that. Two responses, Justice Alito. If

11:34

you look at the testimony in

11:36

that case, it was clear

11:38

that consumers had no idea what interest

11:40

bearing account meant. I mean, the word

11:42

savings actually mattered to their purchasing decisions,

11:44

and it had a real world effect.

11:46

And that was a law that was

11:49

discriminatory and put the national banks at

11:51

a serious competitive disadvantage, vis-a-vis state banks.

11:53

And of course, under this statute, a

11:55

discriminatory law would be preempted for

11:59

independent reasons. And so the way

12:01

that this statute is designed is that non-discrimination

12:03

is the most important

12:06

principle that runs through the statute.

12:08

And if a law is non-discriminatory,

12:10

then I think we can assume

12:12

that the hostility that states

12:14

have traditionally shown to national banks are not

12:16

gonna be reflected in their laws because we're

12:18

only gonna be talking about laws that involve

12:20

restrictions that states are willing to impose on

12:22

their own banks and they're not gonna devour

12:24

their own. And so-

12:26

Do you think that the significant interference test

12:29

should be applied on a bank by bank

12:31

basis or on an industry basis? No, it's

12:33

not bank by bank. That's not how it

12:36

works. Now, if you look at the statute,

12:38

it's clear that when the OCC makes preemption

12:40

determinations, think it does so on a law

12:42

by law basis, not a bank by bank

12:44

basis. And even there in consultation with the

12:47

CFPB, it can make preemption determinations. It'll be

12:49

on that law and reach substantively equivalent laws.

12:51

And so- Is that a question of, a

12:54

pure question of law? Is it a

12:56

mixed question? Is it a question of fact? The

13:00

ultimate preemption determination-

13:02

Now, the question of whether it significantly

13:04

interferes, is that a question of fact?

13:06

It's a legal question for a court.

13:09

But it, because it takes account

13:11

of the practical effects of the law, you

13:13

have to know what those effects are. And

13:15

it's gonna be, if the OCC hasn't identified

13:17

the effects, then it's gonna

13:19

be incumbent on the bank if there's no

13:21

statute on point and we're talking about a

13:23

non-discriminatory law to explain what those

13:25

effects are. And then the fight is not gonna

13:27

be about necessarily the effects of the law, but

13:29

about whether that rises to the level of significant-

13:33

Well, the burden would be on the plaintiff

13:35

challenging it, wouldn't it? Well,

13:38

this is, I mean, if the plaintiff is a national

13:41

bank challenging the law, then yes, the burden would be

13:43

on the national bank. Conversely, if

13:45

the bird, as

13:47

in this case, preemption

13:50

is raised as an affirmative defense, then the burden

13:52

would still be on the national bank. How

13:55

do you envision this trial taking place?

13:57

So a district judge, let's

13:59

say- in the Southern District of

14:01

New York, Eastern District of New

14:03

York, wherever, is going to have

14:06

a trial to determine the

14:08

effect of this on all national

14:10

banks up reading

14:12

in New York. And

14:16

is that going to involve extensive

14:19

discovery? Would it

14:21

involve testimony by experts?

14:25

If the court makes a

14:27

decision, what standard of review is

14:29

going to be applied

14:33

by the Second Circuit? So

14:35

we don't think that there are going to be a

14:38

bunch of mini trials to determine

14:40

the preemption question. And I'll just say as a

14:42

predicate to my response, Justice Alito, I think it's

14:44

fairly unlikely that a lot of the hypothetical laws

14:46

that you see at the back of the Red

14:48

Brief will ever come to pass because of the

14:51

nondiscrimination principle that I was talking about. Well, I

14:53

understand that. But you say

14:55

in your brief, either in your opening brief or

14:57

your reply brief, I

14:59

think it's in your reply brief, you say this

15:02

may not even require any evidence. This

15:05

question could be decided without evidence.

15:08

Really? Well, it's a factual

15:10

question. At least it's a heavily factual question. How's

15:12

it going to be decided without evidence? Well, you'd

15:15

have to know what the effects are. So that

15:17

would require some evidence

15:19

in the typical case. But if it's clear

15:21

from the face of the statute, if it's

15:23

just obviously punitive and it's past the point

15:25

of reasonable people being able to disagree as

15:27

to whether there's significant interference,

15:29

then I think that could be decided as a

15:31

matter of economic logic, which is consistent with what

15:34

this Court has done in other... The

15:36

matter of economic logic? There's

15:39

economic logic that tells you whether

15:41

something substantially affects the

15:44

operation of a commercial enterprise?

15:47

If you

15:49

looked at page 15 of our

15:51

reply brief, we identify some cases

15:53

involving preemption regimes that affect entire

15:55

industries, airline industry, motor

15:58

care industry, you know, ERISA, you name it. and

16:00

prescription drugs, and it is

16:02

often the case in those

16:04

contexts that there is a

16:07

factual showing that

16:10

needs to be made, and sometimes this

16:12

court, included in the Morales decision, for

16:14

example, has resolved the preemption question, even

16:17

though it turns on significant effect based on

16:19

economic logic. Now, I think it would be

16:22

difficult to do that for the ordinary case,

16:24

because we can presume that states aren't going

16:26

to inflict, obviously, punitive

16:29

restrictions on their own banks, and so,

16:31

and this law would be an example

16:33

of that, but if a state were crazy enough to

16:35

do that. I don't

16:38

think Franklin did this, what you're

16:40

talking about, and

16:42

the Supreme Court in Franklin. No,

16:45

that's right. And Franklin, I think, is kind

16:47

of our North Star here, at least

16:49

as I've unpacked the

16:51

case. But I think Franklin, you

16:53

could either read it as being a case about

16:55

significant interference based on the record, as I pointed

16:57

out, or I think what this court said is

16:59

it just engaged in statutory interpretation. It said,

17:02

we've got a federal statute that says national

17:05

banks make sense savings deposits, and the

17:07

word savings matters, it's the label that

17:09

Congress used for these accounts, and states

17:11

can't pose a serious practical

17:14

impediment to that by saying you can't use

17:16

that same label. And so, that case could

17:18

be understood on statutory construction grounds based on

17:20

the express statutory power that was granted by

17:23

the statute, and we have nothing like that

17:25

here. Thank you, counsel. Justice Thomas, any further?

17:28

Justice Alito. Well, the way you just described

17:30

Franklin sounds, you know, awful lot like what

17:32

the Second Circuit did here. No,

17:36

they said that the

17:38

national bank has a certain power, and

17:42

the state conditions

17:44

the exercise of

17:47

that national power on compliance with the

17:49

state requirement, and that's enough to prove

17:52

that there's preemption. That's what I just understood you

17:54

to say. Justice

17:56

Alito, my understanding was-

17:58

I must have, maybe I- I misunderstood

18:00

you. So maybe I was simply trying

18:03

to clarify that Franklin National Bank could

18:05

be understood based on specific statutory text

18:07

that is nothing like any statutory text

18:09

that Bank of America has identified. I

18:11

thought you were saying, and again correct

18:14

me if I misunderstood you, but it's

18:16

important to my thinking about this, that

18:19

the issue that Franklin Bank can

18:21

be understood as deciding this issue

18:23

without examining the empirical question of

18:26

the extent to which there

18:29

was an impact on the operation of

18:31

the bank. I thought that's what you said. I

18:33

guess I would put a little bit differently then,

18:35

Justice Alito. I think that the Court, in its

18:37

opinion, it notes the

18:39

record that had been amassed on this

18:41

question as to the practical consequences of

18:43

the law, and I think that record

18:45

gave it some comfort and confirmed why

18:47

it was significant that Congress would have

18:50

used the statutory term savings, but ultimately

18:52

its opinion rests on a statutory

18:54

analysis of the word savings

18:56

and a specific statutory interpretation

18:58

that would present a

19:01

sort of – you could think of it as

19:03

being a conflict in that sense, and it's nothing

19:05

like the kind of conflict that we have here.

19:07

All right. Thank you. Thank you.

19:10

Justice Sun-Lior. The government asks us

19:12

to vacate and remand and let the Second

19:14

Circuit apply whatever we say is the correct

19:16

test. You're asking us to reverse.

19:20

What's the difference and why don't we

19:22

do what the U.S. is recommending? We

19:25

would be happy with the vacator, and I

19:27

think it's the most modest way for this Court to decide

19:30

the question before it. The reason why we're

19:32

asking for reversal is we think that as

19:35

long as there's a requirement that the

19:37

practical effect of the law be examined,

19:39

that Bank of America has failed to

19:41

make that showing, and since

19:44

it's failed to make that showing, then its motion

19:46

to dismiss should be denied, and it can make

19:48

the showing at a later stage of litigation or

19:50

put in some declarations or something and seek summary

19:53

judgment if it thinks it can meet the statutory

19:56

statute. I don't know whether or not that's right.

19:58

I mean, if statute doesn't speak in terms of practical – It

20:01

talks about preventing or significantly

20:03

interfering with

20:05

the exercise of a national bank

20:07

power. So I do

20:09

think that there is a difference

20:12

between practical effect and that language. Well,

20:14

I think that language in ordinarily parlance

20:16

could only be understood to say that

20:18

to be able to answer that question,

20:20

you've got to know what the practical

20:22

effect of the law is. And

20:25

you don't have to necessarily know what the degree

20:27

is. I mean, that people can disagree about that.

20:29

But at a minimum, you've got to

20:32

take some account of what the practical effect

20:34

is. And once you recognize that... So you're... At

20:37

what point you mentioned

20:40

earlier that the OCC could

20:43

decide some of these prevention issues?

20:46

Because under your take of this law

20:48

now, that

20:51

national banks, all state laws

20:53

would apparently apply to national

20:55

banks, unless and until

20:57

those banks obtain final judgments

20:59

of preemption state by state,

21:01

correct? I think

21:04

that is correct. Now, the

21:06

other side's saying that's an

21:08

alarming unpredictability. And some of

21:10

my colleagues are concerned about

21:13

that. Why don't you address that

21:15

straight on? But you mentioned

21:17

in your opening that you thought the OCC could

21:19

do it. Well, the OCC has done it here.

21:22

There's a question of whether they've applied the

21:24

right standard in doing it. Yeah. But

21:27

they have done it. Well,

21:30

the statute, they haven't done it consistent with

21:32

the procedures set up by the statute. And

21:34

I don't even think Bank of America is

21:36

arguing they've done it consistent with the procedures

21:38

set up by the statute. But if... I

21:41

think it would be appropriate for a court on remand

21:43

to look at what the OCC has said about the

21:46

effect of this law. You'll

21:48

find that there's not much there in either the

21:50

2011 rulemaking or the 2004 rulemaking

21:52

or in the amicus brief that the OCC submitted

21:55

below. But we think that it

21:57

would be appropriate for a court to consider that as part

21:59

of the analysis. But I would

22:01

also just, I appreciate the

22:03

other side's concern about the practical

22:05

consequences of reading

22:09

the statute for what it says. And I would

22:11

just say a couple of things. One is that

22:13

I think you could, in your opinion, remind

22:16

lower courts that this is not the only

22:18

path to preemption. There's the requirement that

22:20

the law be non-discriminatory, and there's still the

22:23

requirement that it not pose a square conflict

22:25

of the sort that it was an issue

22:27

in Barnett Bank, which covers the significant

22:32

interference. Point to

22:34

Anderson and Franklin as we've been discussing. But the

22:36

OCC has a role to play there too. And

22:38

the OCC does have expertise, and to the extent

22:40

that it thinks a particular state law is

22:43

very troubling and poses a significant interference, it

22:45

can endeavor to explain why in a rulemaking

22:47

consistent with the statute, and courts can look

22:49

at that, and to the extent that it's

22:51

persuasive, they can defer to it, and that

22:53

gives the banks the kind of predictability

22:57

that they crave. Whether we like

22:59

the case-by-case approach, the

23:02

statute requires it. I think I would

23:04

have expected you to say that to someone.

23:08

We certainly think that you should read the statute and apply it

23:10

as written. Mrs.

23:12

Kagan. It could be an

23:14

example of a non-discriminatory state

23:16

law that would be

23:19

preempted as a significant interference.

23:21

I don't know that I can answer that question in

23:23

the abstract, but I mean, well, I guess I can.

23:26

But the OCC would be an example. So

23:28

even if that's non-discriminatory, it poses a clear

23:30

conflict because it's a total conflict. So

23:33

you separated that out as a case that poses

23:35

a clear conflict. What is the category of that

23:37

case? Are there cases that

23:39

fall in other categories that might pass

23:42

the significant interference test? I

23:44

guess what I'm asking about is,

23:47

you say of Bank America's test that

23:49

it would preempt everything, but

23:51

one could say about your test that

23:53

it would preempt basically nothing, as long

23:56

as a statute was indeed

23:58

non-discriminatory. And indeed, that

24:00

was the Treasury Department's proposal

24:03

that preemption would just turn on whether a

24:06

state law was discriminatory. And if it wasn't discriminatory,

24:08

then it wouldn't be preempted. And we know Congress

24:10

didn't select that regime. So it's got to do

24:13

some work beyond non-discrimination. I'd just bring that up

24:15

to point out that we know that ease of

24:17

administration wasn't top of mind. Yeah, so what's the

24:19

work? Give me some statutes. So the

24:21

statute says prevents or significantly interferes with. We think

24:23

the word prevents is how you take care of

24:26

a case like Barnett Bank. It just, if it's

24:28

a square conflict, it prevents the exercise of the

24:30

power granted by Congress. That can be resolved just

24:33

with legal briefing. But if

24:35

you're at the point of substantial or

24:37

significant interference, rather, that's a question of

24:39

degree. And it's very difficult to answer

24:41

that on the abstract. I'd want to know whether

24:44

there's a federal, what the federal statutory scheme,

24:46

what the regulatory scheme is, what the

24:48

OCC has said about it, what the practical

24:50

on the ground impact is. And it's

24:52

ultimately a judgment call. It's a question

24:54

of degree. And I think you

24:57

might know a lot about state bank and

24:59

statutes. Is there any state banking statute out

25:01

there that you think presents a hard question?

25:05

Nothing comes immediately to mind.

25:09

But I think you could imagine if a state

25:11

were to say, you can't have

25:13

mortgage escrow accounts. Well, of course, that would,

25:15

as applied to the covered accounts, you

25:18

would pose a square conflict with the

25:20

federal statute. But if you totally disabled

25:22

states, national banks, from being able to

25:24

exercise a particular power, that's

25:28

a prevents case. But the question of significant

25:30

interference is necessarily one of degree. And

25:32

it's tough to know in the abstract

25:35

exactly when it would be satisfied. I need to know

25:38

what the actual on the

25:40

ground impact is and the

25:42

extent to which that significantly interfered

25:44

with the national banks exercises the particular

25:47

power issue in the case is confirmed

25:49

by Congress. Justice Gorsuch? Justice

25:51

Cameron? I think you said it's a judgment

25:53

call on a matter of degree. Would a

25:56

10% state

25:58

law, would that be significant interference? So

26:00

if it's non-discriminatory, I'm assuming for the purpose

26:02

of the hypothetical it would be non-discriminatory, although

26:04

I think requiring that it be non-discriminatory makes

26:06

it particularly unlikely that a state would ever

26:08

do something like that. But indulging the hypothetical,

26:11

then it would be exactly where we are

26:13

now. It's a question of significant interference and

26:15

it would be a question of degree. Judgment

26:17

call for whom? I guess for us, for the

26:19

nine of us to just decide? Well the question

26:22

as to what significant interference means is

26:25

ultimately a legal question and it turns

26:27

on what the actual practical on the

26:29

ground impact is and if the bank in

26:31

that scenario could say, look. With the judgment call,

26:33

who's the, we're making the judgment call or the

26:35

court's view? Ultimately it would be a legal question

26:37

and Justice Lidl, you asked earlier about the standard

26:39

of review. That would be de novo, I mean

26:41

to the extent that it rested on factual findings,

26:43

you know, that would be a different standard. But

26:45

the ultimate legal question of significant interference is for

26:47

a court and ultimately, you know, subject to review

26:49

by this court. And I guess I'm going to

26:51

go back to Franklin then and say, well, we're

26:53

not just doing this, we're not totally at sea

26:56

when we have to do this under your approach.

26:59

Franklin says some limits on

27:01

your advertising and how you describe

27:03

your product, that is significant

27:05

interference. And you agree that that's correct?

27:09

I think that's a way to understand that case

27:11

and so if you wanted to give guidance to

27:13

lower courts, you could use Franklin National Bank as

27:15

an example just as the Barnet Bank court did

27:17

in its opinion. And I guess here, I mean,

27:20

maybe this is for remander for us, but telling

27:23

a bank not how you

27:25

describe your product and your advertising, but you actually

27:27

have to pay money that you

27:30

wouldn't otherwise pay,

27:32

I mean, that's much more

27:34

direct interference with the operations of the

27:36

bank. It seems to me maybe

27:39

you have an explanation. Well, then Bank of America,

27:41

it has, you know, would be able to try

27:43

to carry its burden of establishing that standard.

27:45

Isn't that just, I mean, do you need a

27:47

trial? It's just common sense, isn't it? Tell

27:50

someone you have to pay out large

27:53

sums of money collectively rather

27:56

than how you describe your product and

27:58

your advertising. Isn't one more significant? and

28:00

interference than the other at the prices. I'll

28:02

take the Franklin side of that question first,

28:04

if I may. So just to be clear

28:06

about the law in Franklin, it went well

28:09

beyond advertising, and it disabled banks from even

28:11

being able to use the word savings on

28:14

their deposit slips anywhere in their bank

28:16

offices. It just eradicated the word

28:18

or any of its equivalents from the

28:20

premises of the bank. And I think

28:23

what made, you might think

28:25

about that as posing a First Amendment problem

28:27

today. It was also a discriminatory law that

28:29

gave certain state institutions the ability to use

28:31

that word. And so it posed a number

28:33

of distinct problems, but I think ultimately too,

28:35

it posed a conflict with

28:38

the text of the federal statute

28:40

because the state in that scenario

28:42

thought to significantly interfere with the

28:44

exercise and express statutory power of

28:46

the Congress. The advertising was not

28:48

an express power. The advertising, the

28:50

court made clear, was an incidental

28:52

power. Right, but the power that

28:54

I think, ultimately the court focused on, was

28:56

the express power to accept savings deposits, and

28:58

in particular the use of the word savings,

29:01

I think, was critical to the court's analysis.

29:03

Right, and here the express power is the

29:05

lending, and the incidental

29:07

power is the escrow accounts, correct?

29:10

The way that Bank of America articulates the

29:12

power, we're not disputing their articulation of the

29:14

power for purposes of this court's

29:17

decision, is the power to

29:19

offer mortgage escrow accounts to

29:21

consumers. So

29:24

the question is, to the extent to which the

29:26

law significantly interferes with that power. And

29:29

do you still think McCulloch versus Maryland was correctly

29:31

decided? Yeah, we have no issue with McCulloch, and

29:33

I think we want to answer that question. Why

29:36

is that correctly decided and that's different? So

29:38

we point to this in our brief,

29:40

but there are a couple of key

29:42

distinctions. So that case involved a tax,

29:44

a discriminatory tax, on the

29:47

Second Bank of the United States. And

29:49

I think at that time, the Second Bank

29:51

of the United States functioned more like the

29:53

Federal Reserve Bank, and it had

29:55

a really public facing component. And

29:57

it doesn't, modern national.

30:00

banks don't really resemble the Second Bank of

30:02

the United States. And the laws

30:04

that we have, in this case,

30:06

are not discriminatory laws. And in any

30:08

event, it's a question of preemption, and

30:10

it's ultimately Congress that lays down the

30:12

standard, and the standard is prevents or

30:14

significantly interferes with. Thank you. Justice

30:17

Barrett. Counsel, you're drawing a

30:19

distinction, which I also saw in your

30:22

brief between express powers and incidental

30:25

powers. Can you just explain to

30:27

me why that matters? And I'll tell you kind

30:29

of where I'm going with it or why I'm

30:31

thinking about it. It almost sounds to me, and

30:33

correct me if I'm wrong, that you're saying that

30:35

if a power is expressed, that

30:38

something more like a control test might

30:40

apply just as a matter of economic

30:42

logic, say. But that if

30:45

it's incidental, and you would characterize this

30:47

one, I gather as incidental that we

30:49

get into this more fact-specific inquiry. Am

30:52

I understanding your position? I think you're right

30:54

to point out that we do underscore the

30:56

fact that this is an incidental power, so

30:58

that Congress hasn't said anything specific on the

31:00

subject. And indeed, it's a kind of second

31:02

order incidental power that is an issue, which

31:04

is not just the ability to have the

31:06

accounts, but then to set the interest rate.

31:09

And so I think the reason why

31:11

we're focusing on that is preemption questions typically turn on

31:13

what Congress says in the text of the statute. And

31:15

so you want to look at the text of

31:17

the statute. And this court in Barnett Bank, right

31:20

before the sentence that articulates the

31:22

standard as prevents or significantly interferes

31:25

with, says that the relevant power is

31:27

the power that quote, Congress explicitly granted.

31:29

Now, what's interesting here is the National

31:31

Bank Act actually expressly grants incidental powers.

31:34

And so there is an express grant of

31:37

authority to National Bank to engage

31:40

in incidental powers. But the

31:42

ultimate question I think has to

31:44

focus on what Congress has said in the text

31:46

of the statute. Well, I mean,

31:48

I do agree with that. But you've characterized

31:50

Barnett Bank a couple times as kind of

31:52

an express conflict. But Barnett Bank goes

31:55

out of its way to say we don't have

31:57

an irreconcilable conflict there. It

32:00

wasn't the kind of situation where you

32:02

had the federal statute saying, you know, do

32:04

X, the state statute saying not X. And

32:07

so it was about significant interference, and I

32:09

don't read Barnet Bank to be applying

32:11

this kind of fact-specific inquiry that you're

32:13

talking about. So is the difference really just

32:15

that the statute said something express? Well,

32:19

so in Barnet Bank, you're right that

32:21

there was an impossibility preemption. So it

32:23

wasn't impossible for the bank to both

32:25

comply with the federal statute and the

32:27

state statute. The court did say

32:29

that there was an express conflict based on the

32:31

text of the statute. And so

32:33

it really, the irony is Barnet Bank

32:35

announced the standard which it distilled from

32:37

this court's cases, but it really didn't

32:39

have occasion to flesh out the contours

32:41

of what significant interference means because it

32:43

involved a complete prohibition. And so, but

32:45

the court left no indication in its opinion

32:48

that if the law and issue in that

32:50

case were less than a complete prohibition, that

32:52

it would automatically be preempted under the

32:54

control test. To the contrary, even the

32:57

bank in Barnet Bank, at oral argument,

32:59

conceded that a whole bunch of state

33:01

regulations would be appropriate as

33:03

to the regulation of insurance, including ensuring that

33:07

agents of insurance are licensed

33:09

at the state level. And so I think

33:11

I don't read this court's opinion to suggest

33:14

that practical effects aren't relevant. To

33:16

the contrary, I think by using significant interference,

33:18

the court understood that practical effects would matter,

33:21

and what it was trying to capture as

33:23

law is that even if they didn't completely

33:25

prohibit the exercise of the National Bank's powers,

33:27

they would do something that would raise the

33:29

same kind of concern in practical effect. And

33:31

the first case the court cited after it

33:33

announced that standard was Anderson, which can only

33:35

be understood as turning on the practical effect

33:37

of the law. Thanks.

33:40

Justice Jackson? So I see the

33:42

standard significantly interferes in

33:44

the actual text of the

33:46

statute, and I'm trying

33:49

to understand whether this really

33:51

is sort of an unusual

33:53

or unworkable assignment for the

33:55

courts. So can you help

33:57

me to sort of contemplate? how,

34:02

if at all, this

34:04

significantly interfered standard is

34:06

any different from,

34:08

you know, similar

34:10

standards in other statutes. So last

34:13

term in Roth,

34:15

we looked at a statute that

34:17

asks whether religious accommodation would

34:19

impose a, quote, undue

34:22

hardship on the conduct

34:24

of the employer's business. So

34:27

Roth imposes a, quote, substantial

34:29

burden test. So isn't this

34:32

sort of in the nature

34:34

of statutory standards of this kind

34:36

and the court looks at them and

34:38

we make a decision? Absolutely, Justice Chalkman.

34:40

That's correct. All right. And

34:42

then with respect to the arduous

34:44

nature of this and sort of,

34:46

you know, what has

34:48

to be proven, I guess I'm wondering, doesn't

34:52

what is necessary to

34:54

be established to meet this standard depend

34:56

on the reason that the bank says

34:59

the statutory standard is being

35:01

met in a particular case. So, you know,

35:03

the bank says we are pointing

35:05

to this preemption provision and we

35:07

say that it's, that

35:10

what is going on here with

35:12

this state law significantly interferes with

35:14

our powers and then I

35:16

guess they go on to say how,

35:18

how is that happening? So when they

35:21

say this significantly interferes with my powers

35:23

because it directly conflicts with

35:25

what the statute says about

35:27

our authority, which is what I

35:29

understood was happening in, you know,

35:31

Barnett, Ripbank and Franklin, then

35:34

I guess the court doesn't have to have a bunch

35:36

of depositions or anything. They're doing sort of

35:38

a statutory analysis. Is that right? That's right.

35:41

All right. And when they

35:43

say instead this significantly interferes with

35:45

my power because it imposes an

35:47

undue burden, I

35:50

suppose the bank would then be charged by

35:52

the court with proving that.

35:55

How burdensome is this? What, what, give me

35:57

evidence says the court. Am I right about

35:59

that? Correct. And so similarly,

36:01

if it significantly interferes, if they say

36:03

it's a significant interference, again, we're in

36:06

the realm of evidence. And

36:08

we're doing this on a case-by-case basis because that's what the

36:11

statute says you have to do. Correct.

36:13

All right. Thank you. Thank

36:16

you, counsel. Mr. Stewart. Thank

36:18

you, Mr. Chief Justice, and may it

36:20

please the Court. I'd like to make

36:23

three quick points before taking questions. The

36:25

first is that the Court shouldn't assume

36:27

that the word significantly either in the

36:30

opinion of the Court in

36:32

Barnett Bank or in the statute itself

36:34

is devoid of significance. If Congress wanted

36:36

a statute that said state law is

36:38

preempted when it forces the bank to

36:40

deviate in any way from what it

36:42

would otherwise do, it wouldn't have used

36:44

the word significantly. It would have used

36:46

another formulation. Second, in Franklin National Bank,

36:48

the Court didn't suggest that all

36:50

state law restrictions on national bank

36:53

advertising were preempted. It emphasized that

36:55

the word savings was the very

36:57

word that Congress had used in

37:00

the statutes to describe the product

37:02

at issue and that

37:04

it was the very word that

37:06

in consumers' minds was most closely

37:08

linked to the product. And as

37:10

Mr. Taylor explained, at trial, the

37:13

bank in that case presented extensive

37:15

evidence that it would be

37:17

hindered in its ability to obtain

37:19

savings accounts if it couldn't use that word. And

37:22

last I'd say the Court should look

37:24

not only at Franklin, the case the

37:26

Court cited in Barnett Bank as an

37:28

example of a preempted statute, but also

37:30

at Anderson National Bank. And Anderson National

37:32

Bank involved a state abandoned deposit law.

37:35

It authorized the state to take over

37:37

the deposit, force the bank to turn

37:39

over a deposit to

37:41

the state upon proof that the account

37:43

had been inactive for a specified

37:46

period of time. And it's hard to imagine a

37:48

more direct interference with the bank's

37:50

ability to do business than telling the bank,

37:52

you would prefer to hold the money and

37:54

earn income on it, but we require you

37:57

to turn it over to us. for

38:00

various reasons that this would not

38:02

substantially interfere with the way the

38:04

bank did business. I welcome the

38:06

court's questions. Mr.

38:09

Stewart, is

38:12

there a difference in the treatment

38:14

of incidental powers versus

38:16

the express power you mentioned

38:18

in Franklin? I don't think

38:20

generally. Incidental

38:23

powers are powers, as you know,

38:25

that are not enumerated in the

38:27

statute and interference with an incidental

38:31

power can cause indirect harm

38:35

to the bank's ability to exercise the express

38:38

power. I would point out that

38:41

the court in Barnett Bank, in

38:43

the sentence immediately preceding the one

38:45

that we've been focused on, said

38:47

the prior cases, the ones that

38:49

have found preemption, take the view

38:51

that normally Congress would not want

38:53

states to forbid or to impair

38:55

significantly the exercise of a power

38:57

that Congress explicitly granted.

39:00

It was focusing on express powers there,

39:03

and it was saying even with respect

39:05

to express powers, the impairment

39:07

has to be significant. The

39:11

control test doesn't apply to express powers.

39:13

I don't think there's a meaningful difference.

39:15

Counsel, do you agree with your friend

39:17

that determining whether something is significant would

39:20

be something you can do without trial

39:23

evidence? Certainly if the

39:25

OCC were doing it, it would have

39:27

kind of a pre-existing body of information

39:29

about the way the national banks operate,

39:31

and it might be able to draw

39:33

on that font

39:36

of experience in determining whether restrictions

39:38

that might seem innocuous to a

39:40

layperson could in fact predictably have

39:42

a significant adverse effect on the

39:45

bank's business. I think Mr. Taylor

39:47

was also alluding to the court's

39:49

decision in Morales, which involved the

39:51

Airline Deregulation Act, in which the

39:54

court explained how the

39:56

state false advertising law would

39:59

impair the airlines' ability to engage

40:01

in the pricing practices that they wanted

40:03

to engage in. And the court didn't

40:05

make quite clear exactly where the information

40:07

about the pricing practices came from, but

40:09

it didn't appear to come from a

40:11

trial record. So there may be kind

40:13

of sources of information other than trial

40:15

evidence that would allow the court of

40:17

the – I'm sorry. Mr.

40:19

Stewart, that raises a question for me,

40:21

because like the Chief Justice, I was

40:23

wondering, you know, what could the OCC

40:25

do here? And you alluded to that.

40:28

It's interesting. I'm not sure what

40:31

to make of this, but in the

40:33

13 years or so since Dodd-Frank, we

40:36

don't have an OCCA rule on escrow

40:38

accounts except for the one issued in

40:40

2011, immediately after Dodd-Frank,

40:44

in which it reaffirmed its

40:47

rule banning, as I understand

40:49

it, any regulation by states

40:51

on escrow accounts under an

40:53

obstruct or impair standard that

40:55

predated Dodd-Frank that purported

40:57

to ratify what it had done before

41:00

under the old law. And

41:03

as I took it from a couple of cryptic

41:05

footnotes in your brief, you're

41:07

not asking us to defer to that regulation.

41:10

In fact, you seem to suggest that it's

41:12

inconsistent with the law and entitled to

41:14

no respect. Why hasn't the OCC

41:17

done something here under the law that

41:19

actually exists? Well, the OCC

41:21

did file an amicus brief in the Second

41:23

Circuit taking – The other way.

41:26

Right. And so that

41:28

was what they did. Now I would –

41:30

And you seem to have disavowed everything the

41:32

OCC has done since Dodd-Frank. What

41:35

do we do with that? Well, I

41:37

think there are substantial indications in the

41:39

text and history of Dodd-Frank that although

41:41

Congress intended to codify

41:44

the Barnett Bank standard, it intended to

41:46

revise or overturn the way that the

41:48

OCC had been making – And then

41:50

the OCC said, maybe you thought so,

41:52

but we promulgated it before

41:55

Dodd-Frank, so you're stuck with it. And

41:57

now you're saying, nah, that's not right. Is

42:00

the OCC going to actually do some of this work

42:02

at some point? As

42:04

far as I'm aware, the OCC has

42:06

never issued a case-by-case preemption

42:09

determination. I don't know

42:11

what the reason is, but I would say

42:14

if you imagine the OCC trying to do

42:16

a case-by-case preemption determination with respect to the

42:18

New York law at issue here, the

42:21

most straightforward way to do it would

42:23

simply be to say, we have a

42:25

regulation that says states can't regulate mortgage

42:27

escrow accounts. This is a regulation of

42:29

mortgage escrow accounts, therefore it's preempted. And

42:31

if the OCC tried to do it

42:34

that way, it would run into the

42:36

provisions of Dodd-Frank that say when the

42:38

OCC does these determinations, it considers the

42:41

impact of the state law. In fact,

42:43

we have exactly the regulation you say

42:45

if they did this. They did it.

42:48

They said there are no escrow regulations

42:50

that are permissible under state law.

42:52

They're all preempted. But you're not

42:54

defending that regulation. You're disavowing it. You're going

42:56

to have to flip-flop positions on it. And

42:58

I'm asking, is the OCC ever

43:00

going to get around to doing that which Dodd-Frank

43:03

directs it to do? Well, I

43:05

think I would say Dodd-Frank authorizes

43:07

but doesn't direct it to do this.

43:09

Now, if the petitioner's

43:11

position in this case prevails,

43:14

and if the court holds that

43:16

some inquiry into practical impacts is

43:18

necessary with respect to the individual

43:20

state law, then it's

43:22

very possible that the OCC will

43:25

start making these case-by-case determinations. Because

43:27

independent of legal expertise, the OCC

43:29

has expertise in the way that

43:31

national banks operate and can bring

43:34

that expertise to bear in determining...

43:37

If it has expertise, why are you

43:39

disagreeing with its longstanding position? I think

43:41

the two or three reasons. The

43:44

first is that, as

43:47

I say, we think that the text of

43:49

Dodd-Frank manifests a disapproval by

43:51

Congress of the way that OCC

43:53

had been doing these determinations. The

43:56

text says case-by-case determinations, and it's

43:58

really the opposite. of an OCC

44:00

rule that says here are many

44:02

categories of state laws that

44:04

can't be enforced at all. Even though the

44:06

key members said otherwise. They

44:09

were not the key members. They were two

44:11

members of the Senate who had drafted the

44:13

Senate version of the preemption. I shouldn't have

44:16

used the, but key members. I shouldn't have

44:18

used the word the. They

44:21

had drafted the Senate version of the preemption

44:23

provision, and the Senate version

44:25

contained a general reference to the

44:28

legal standard in Barnett Bank, but

44:30

didn't use the phrase prevents or

44:32

significantly interferes with. And

44:34

then the House bill had

44:37

framed the preemption standard as does the

44:39

state law prevent. I interrupted you. Keep going

44:41

with why you change positions. So once the

44:43

year of reading the text in history. That

44:46

they indicate that Congress wanted the OCC

44:48

to redo this. I think the second

44:50

thing that we would say is

44:53

the way in which OCC's view is

44:55

currently manifested is in the 2011 regulations.

44:59

But Congress said the way that

45:02

OCC is supposed

45:04

to do preemption determinations going forward

45:06

is through case by case determinations.

45:08

And historically it's been a requirement

45:11

for deference that the agency act

45:13

through the procedural mechanism that Congress

45:15

specified. The third thing is Congress

45:17

said even when the OCC does

45:19

case by case determinations, it only

45:21

gets Skidmore deference. It doesn't use

45:23

the word Skidmore, but it basically

45:25

tracks language from Skidmore. And then

45:27

it says nothing in

45:29

the proceeding sub-paragraph alters

45:32

the deference that OCC gets for

45:34

any other type of determination. And

45:36

so it seemed clear that Congress

45:38

was happy with the way that OCC

45:40

had been doing things in all respects

45:42

other than preemption, but not with

45:45

the way it had been doing. Stuart,

45:49

do you have a view on whether

45:51

this New York statute constitutes a significant

45:53

interference with national bank empowers? We

45:56

don't have a concluded view. Certainly

45:58

as Mr. Taylor points out, this

46:00

is... something that state banks have

46:02

been complying with, apparently without material

46:04

impairment. I

46:07

think it would depend in part

46:09

on evidence or a factual showing

46:12

about what rate of interest

46:14

can the banks use on the money in

46:16

the escrow account because- Can I

46:18

interpret that, may I? Sure. Can

46:20

I interpret that as suggesting that you're

46:22

skeptical, that it's a significant interference? Yes.

46:25

Okay. Justice Thomas, anything

46:28

for Justice Alito? Well,

46:30

suppose the OCC doesn't act

46:34

and suppose a bank says that requiring

46:36

us to pay 2% interest

46:39

or whatever rate of interest is involved

46:42

in the particular case costs us this amount

46:44

of money and if we have to pay

46:46

this additional amount of money in

46:49

interest, then we're not going to be

46:51

able to, we're not

46:53

going to continue to do this or that. How

46:57

would a court determine whether that is significant?

47:00

I mean, I think it, I would come

47:03

harken back to the point that Justice Jackson was

47:05

making that there are

47:07

many standards in the law that require this sort,

47:09

and they're imprecise, but I think the court would

47:11

ask how significant is

47:14

the other thing that the bank says it wouldn't

47:16

be able to do? Well, I mean, the most

47:18

of those, I can't remember the whole list, most

47:20

of those did not involve economic

47:23

determinations. I

47:26

mean, certainly as Mr. Taylor points out, it

47:28

can't be sufficient that a state

47:30

law would require the bank to

47:32

spend some amount of money on

47:34

something. I'd point

47:37

out, in fact, that federal

47:40

law, can you

47:42

quantify significant interference? I

47:44

just don't, you know, maybe this ruling

47:47

the way you want us to rule will not

47:49

cause any problems at all, but I'd appreciate it

47:51

if you would talk about the

47:53

argument that this will cause a

47:55

lot of problems. There's the imprecision

47:57

of the significant interference standard. It

48:00

does seem to have a very strong factual

48:03

component. I

48:07

find it hard to understand how an

48:10

empirical question like that can be

48:12

decided without evidence, which

48:17

would require discovery and perhaps testimony

48:20

by experts, it would require individual

48:22

district court judges to make the

48:25

kind of, I mean, certainly when

48:27

the OCC does this, they can

48:29

call on a lot of economic

48:31

expertise and knowledge of the banking

48:33

industry. Every district judge in the

48:36

country is potentially gonna

48:38

have to make the same

48:40

kind of determination. And

48:42

then there's the problem that these cases

48:45

are gonna be decided on an

48:47

individual record. So suppose these petitioners

48:49

lose on this record,

48:52

would that ban others who

48:55

have non-interest bearing accounts with the

48:57

Bank of America from being, bringing

48:59

suit and saying we can compile

49:02

a better record. And then you

49:04

have questions about the same issue

49:07

being decided in different circuits.

49:10

What if other states have required

49:12

2% interest and the

49:15

second circuit says one thing and the

49:17

fifth circuit or the 10th circuit or

49:19

whatever says something else. And then you

49:21

have issues of collateral estoppel. It does

49:24

seem like a complicated situation, you

49:27

are able to assess the whole thing. So

49:29

just explain why this would not

49:32

cause practical nightmares. I

49:35

guess for two reasons. The first is

49:37

that administration of standards like this is

49:40

routine in the law and the banks

49:42

obviously have access to a lot of

49:44

information that I don't have access to

49:47

about the ways in which particular state

49:49

laws would affect their operations. The

49:52

Flagstar-Amicus brief has a fairly

49:55

intricate argument about how these

49:57

sorts of laws would impair its ability to secure.

50:00

curatize loans and so forth.

50:02

But the second thing I would say, and

50:04

Mr. Taylor alluded to this, is we also

50:07

have non-discrimination as a backstop. And

50:09

that gets rid of the horribles,

50:11

that gets rid of the extreme

50:13

cases. In some instances, taxation, for

50:15

instance, under current federal law,

50:18

states can tax national banks so long

50:20

as they do it on a non-discriminatory

50:22

basis. The court in Barnett Bank pointed

50:24

out that national banks can

50:26

operate branches only to the extent

50:28

that it's permissible for state. I

50:30

understand that, but all you've said about the

50:32

question when you put non-discrimination off the table

50:34

because that's not what's at issue. All you've

50:36

said is that there are other

50:39

statutes that impose a similar burden

50:41

on the court. And I mean,

50:43

the one I remember from Justice

50:45

Jackson's question is the undue burden

50:48

standard in Title VII. That's

50:51

quite a bit different. What's the, do you have

50:53

any that are closer to this? A

50:56

lot of economic determination? I

50:59

don't really, other than the ones that

51:01

Mr. Taylor was alluding to that are

51:03

involved cases citing in his reply brief,

51:05

who are often under statutes like the

51:08

Airline Deregulation Act. There's a core of

51:10

things that are clearly preempted, but then

51:12

when you decide where does the boundary

51:15

of preemption lie, you're looking at practical

51:17

impacts. And it involves- Thank you. But-

51:20

Justice Sotomayor? Questions.

51:25

I understand my

51:27

colleagues, some of my colleagues' concerns

51:29

about this case by case approach.

51:32

But I go back to the text, which is

51:34

the text permits the states to do this and

51:38

says unless, and it's the unless

51:40

that's creating this problem, but the

51:42

presumption is that there's no preemption,

51:44

correct? That's correct. And the point

51:46

I was making about discrimination is,

51:48

even if you assume kind of

51:51

the worst case scenario, that this

51:53

all becomes so complicated that banks

51:55

decide it's just not worth trying

51:57

to establish preemption under prevention significantly

51:59

interferes. are still left

52:01

with substantial protection against discriminatory laws,

52:03

which in other aspects ... Can

52:06

we go to inherent

52:09

injustice, Kavanaugh's earlier

52:11

question of

52:13

co-counsel, and

52:15

he said you're costing

52:18

the banks money, and

52:20

that's a greater burden than it was

52:22

in Franklin. Now,

52:24

you point out Anderson, which it costs

52:26

them money too. So

52:29

do you have an

52:32

argument as to why his saying

52:34

that Franklin sets a sort of maximum

52:37

or a minimum is a

52:39

wrong way to look at this? Well, Franklin didn't

52:41

cost the bank money in the sense of forcing

52:43

it to make outlays, but it cost the bank

52:45

money in the sense of making

52:48

it more difficult for the bank to

52:50

attract customers and thereby earn money

52:52

on the accounts. That is, the bank

52:54

officers testified it was more difficult to

52:57

get consumers to sign up for savings

52:59

accounts if you couldn't use the word

53:01

savings in your pitch. They

53:03

had consumer surveys that showed that

53:05

consumers were more likely to

53:07

recognize the word savings. No, I understand that.

53:10

And so I think it would be,

53:13

for these purposes, an artificial distinction to

53:15

draw a line between state laws that

53:17

require the state to lay out money

53:20

and state laws that simply make it

53:22

more difficult for the state to earn

53:24

money. Well, that's an answer why it's not

53:26

a significant interference or how do you

53:28

measure that when it's costing

53:30

the bank money? I mean, one thing you

53:33

would want to look at is to what

53:35

extent could the bank earn money on the

53:37

escrow account and what

53:40

relationship would that potential earning have

53:43

to the interest it was required to pay out? Because

53:46

when people defend the use of escrow

53:49

accounts in this setting, it's never on

53:51

the ground that it's a good way

53:53

for banks to earn a little money.

53:55

It's on the ground that it protects

53:57

the bank's collateral against the possibility of

53:59

failure. failure to pay taxes, failure to

54:02

maintain insurance, and escrow accounts are very

54:04

useful for those purposes. So in essence,

54:07

you're almost saying this would be an easy

54:09

case to prove. If they can earn 5%,

54:11

then they just have to give up two.

54:14

There's no substantial interference. That

54:18

would certainly be right. I think the

54:20

more difficult. If they can't earn any

54:22

money on this money, and

54:25

they have to pay out, that might be. Yes,

54:27

then you're at least trying

54:30

to determine whether that mandatory

54:32

outlay is significant. Okay.

54:35

Justice Kagan. Mr. Seward, it might be that

54:37

you have text on your side, but before

54:39

we get to that question, I

54:41

guess I'm interested in many of the inquiries

54:44

that Justice Alito was making, and I'll just

54:46

come at it a slightly different way. Yes,

54:49

significant tests are common in the

54:52

law, but they're not really common

54:54

in preemption inquiries. We don't

54:56

really see a whole lot of

54:58

preemption inquiries where we have to

55:00

do this question of like, how

55:02

much is too much? And

55:04

one reason we don't is

55:08

you need an answer that applies everywhere

55:10

and for all time. I mean, significant

55:12

effects. You could have a no significant effect

55:15

now, and then 10 years from now, you're

55:17

in a different economic environment, and you could

55:19

have a significant effect. And does that mean

55:21

it would be a kind of on-off switch,

55:24

like one day the law applies, and the

55:26

next day 10 years

55:28

later it doesn't? So add to

55:30

Justice Alito's question about maybe

55:33

different parties would present different records.

55:35

Maybe different states would have the

55:37

exact same law, but the economic

55:39

circumstances in those two states would

55:41

be very different. So it looks

55:43

as though the federal law preempts

55:45

one state law and doesn't preempt

55:47

the other state law. It seems

55:49

an odd kind of inquiry for

55:51

a preemption question. I guess

55:54

the first thing I would say is, and I'd point

55:56

the court to the cases cited at the back end

55:58

of Mr. Taylor's reply. that

56:00

talk about statutes like the Airline

56:02

Deregulation Act, which preempts state laws

56:05

relating to rates, routes, and services.

56:07

And if you have a state

56:09

law that specifies what rates or

56:11

routes or services the airline can

56:13

use, that's an easy case. That's

56:16

preempted without regard to practical impacts.

56:18

But the Court has also recognized

56:20

sometimes states will regulate something else,

56:22

but the regulation of something else

56:24

will have a predictable spillover effect

56:27

on the airline's ability to pursue

56:30

the rates, routes, and services that they

56:32

want. And it's in those cases at

56:34

the border of preemption where the courts

56:36

have been forced into pragmatic inquiries. And

56:38

as I say, the second point I

56:40

would make about the text is there

56:43

were other formulations Congress could have chosen.

56:45

Some statutes refer to... Yeah, I guess

56:47

you're not giving me a whole lot

56:49

of comfort in this about how peculiar

56:51

this would be, that we could have

56:53

different rules in different states. We

56:56

could have different rules depending on

56:59

the time that the challenge is brought.

57:02

I think that's A, something that

57:04

Congress signed up for, but B, it's

57:06

really a benefit to the banks. That

57:08

is, if Congress had prized

57:11

ease of administration above all else,

57:13

it could simply have rested on

57:15

the anti-discrimination prong, as it has

57:17

with respect to other aspects of

57:20

national bank operations. And by adding

57:25

prong B of the preemption standard,

57:27

Congress is giving an additional opportunity to

57:29

the banks to say, even though the

57:32

states are doing this to their own

57:34

state chartered banks as well, it will

57:36

significantly impair our operations. They can invoke

57:38

it or not invoke it as they

57:40

want, but it's an additional opportunity for

57:42

the banks. Thank you.

57:45

Justice Gorsuch? Justice Cavanaugh?

57:48

In Barnett, the statutory text directs us

57:50

to Barnett, so I've been trying to

57:52

parse Barnett even more than usual. And

57:55

I have a question about the two paragraphs

57:57

after the articulation of the standard. the

58:00

court in Barnett said, where

58:03

Congress is not expressly conditioned

58:05

to the grant of power upon

58:07

a grant of state permission, the

58:09

court has ordinarily found that no

58:11

such condition applies,

58:15

then says in Franklin National Bank, the

58:17

court made this point explicit. The

58:22

federal statute before us, as in Franklin National

58:24

Bank explicitly grants the National

58:26

Bank an authorization permission or power,

58:28

it contains no indication that Congress

58:30

intended to subject that power to

58:32

local restriction. What do you,

58:34

how do you interpret those? I'm

58:37

sorry, I have the pages here, but can you,

58:41

say, well, I'll say the last

58:43

sentence again. And as in Franklin

58:45

National Bank, it contains no indication

58:47

that Congress intended to subject that

58:49

power to local restriction. Thus,

58:52

I'll give you one more sentence. Thus,

58:54

the court's discussion in Franklin, the holding

58:56

of that case and the other precedent

58:59

we've cited above strongly argue for a

59:01

similar interpretation here, a broad

59:03

interpretation of the word may that does

59:05

not condition federal permission upon that of

59:07

the state. Yes, I think the court

59:09

there was referring to one

59:11

of the arguments that Florida made in the

59:13

case. And as Mr. Taylor was pointing out

59:16

that the conflict in Franklin was very stark.

59:18

The federal statute said, national

59:20

banks may sell insurance in small towns.

59:22

The state statute said that you

59:25

can't. And perhaps out of desperation,

59:27

the state argued that, well, when

59:29

the federal statute says national banks

59:31

may sell insurance in

59:33

small towns, it only means they may

59:35

do this if state law allows it.

59:37

And the court said, that's not the

59:39

way we usually understand federal

59:42

authorizations to work. That

59:44

ordinarily, if the

59:47

national bank act says you can do something

59:49

and state law says you can't, the federal

59:51

statute controls. Two more

59:54

questions, apologies. If

59:56

you follow up on what Justice Gorsuch said, Dodd-Frank

59:59

does... explicitly require

1:00:01

payment of interest for certain kinds of

1:00:04

escrow accounts. Given

1:00:07

the OCC history and

1:00:10

Congress's involvement, Congress explicitly requiring

1:00:12

that for certain kinds would

1:00:14

suggest something

1:00:16

else for these. How

1:00:19

do you respond to that? The

1:00:21

statute says that for these

1:00:23

mandatory accounts, accounts that are mandated

1:00:25

by TILA, the

1:00:28

bank must pay interest under

1:00:30

applicable state or federal law.

1:00:33

There's a question about what applicable means.

1:00:35

Certainly with respect to applicable federal law,

1:00:37

it would mean you'd have to point

1:00:40

to some other federal statute that required

1:00:42

interest to be paid on the escrow

1:00:44

accounts. I think one

1:00:47

natural reading of that provision would be

1:00:49

it doesn't establish a special rule for

1:00:51

TILA mandated accounts. It

1:00:54

just says if you would be

1:00:56

required to pay interest on this account

1:00:58

were it voluntarily created, you have to do

1:01:00

it at the same time. Last question. You

1:01:02

said earlier I think the

1:01:05

banks could do this without material

1:01:07

impairment. I think you predicted that. Yes.

1:01:10

We certainly have not seen anything up

1:01:12

to this point that suggests that a

1:01:15

bank could not pay this rate.

1:01:18

It's higher costs therefore decreasing the

1:01:20

availability of credit or higher rates

1:01:22

that they charge. Is that material

1:01:25

impairment or not and how do we assess

1:01:28

that? Certainly out of pocket expense in and

1:01:30

of itself wouldn't be sufficient but they would

1:01:32

have to not just assert but make a

1:01:34

showing that this would be

1:01:36

a deterrent to their meaningful

1:01:39

practical deterrent to their offering other services.

1:01:42

Thank you. Justice Barrett.

1:01:44

Mr. Surratt, do you understand case

1:01:46

by case basis to refer to

1:01:48

bank by bank basis or to

1:01:50

statute by statute basis? Statute by

1:01:52

statute basis and the statute says

1:01:55

the OCC can extend its inquiry

1:01:57

beyond the specific state statute. a

1:02:00

substantively equivalent state law. In

1:02:03

our view, reinforces the sense

1:02:06

that it's statute by statute, not case

1:02:08

by case, but date by

1:02:10

date. Do you think that this language,

1:02:12

case by case, and just looking in the statute,

1:02:14

do you think it is designed to

1:02:16

say something about how courts conduct the

1:02:19

preemption inquiry as in this

1:02:21

case because it was brought by court versus the

1:02:23

control of the currency? Because I'm just looking at

1:02:25

the way that it's structured.

1:02:28

It says any

1:02:31

preemption determination under this paragraph may be made

1:02:33

by a court, or by regulation or order

1:02:35

of the control of the currency on a

1:02:38

case by case basis, and then all of

1:02:40

the subsequent references to case by case basis

1:02:43

refer to the OCC determination. And

1:02:46

I'm just asking, should I make anything of that? The

1:02:49

two things you should make of it are, first,

1:02:51

yes, it is directed just to the OCC, and

1:02:54

it seems to have been a

1:02:56

reaction to the 2004 OCC regulations,

1:02:58

which declared broad categories

1:03:01

of state law to be off the

1:03:03

table. Yes. And Congress

1:03:05

was saying, don't do it that way. Focus

1:03:08

on the impacts of a particular state law.

1:03:10

Totally agree, which is how I read it. So

1:03:13

I'm wondering how much it just seems to

1:03:15

me, I'll try to get to the point

1:03:17

of why I'm wondering about it. It seems

1:03:19

like that phrase, case by case basis, itself

1:03:21

sounds fact laden, like we're making factual determinations

1:03:23

on a case by case basis, but if

1:03:25

that language, case by case basis, was designed

1:03:27

to stop the OCC from doing what you're

1:03:29

saying, does it really

1:03:31

care that implication here? Well, I mean, under

1:03:34

Article III case or controversy principles, the

1:03:36

courts are already going to be subject

1:03:39

to this. By case by case basis.

1:03:41

Case by case basis, and the most

1:03:43

relevant language in that provision is that

1:03:45

in making a case by case determination,

1:03:47

the OCC must consider the impact of

1:03:50

the particular state law, and that seems

1:03:52

clearly to refer to the practical impact.

1:03:54

And if that's part of the substantive

1:03:56

inquiry, then even though the same case

1:03:58

by case requirement wouldn't apply to a

1:04:01

court, the court should consider impact as well.

1:04:03

So do you think the court then is

1:04:05

bound even though B3 is

1:04:07

referring to the Comptroller, do

1:04:10

you think the court should be implying the exact same

1:04:13

standard? I mean the

1:04:15

court is certainly bound by the same substantive

1:04:17

standard. If you look at B1. Well

1:04:19

B1, A, B and C of course, but

1:04:21

I took you to be referring to three

1:04:24

case by case basis definition

1:04:26

moving forward. No, I wouldn't. Again,

1:04:29

the court will be naturally looking at

1:04:31

a particular state law just because that's

1:04:33

what courts do. Congress didn't have to

1:04:35

worry that courts would kind

1:04:37

of announce broad lists of things that

1:04:39

couldn't be regulated. And so the court

1:04:42

should still consider the impact, the practical

1:04:44

impact, but it's not otherwise bound

1:04:46

by the procedural requirements. Of course.

1:04:48

So it just seems to me then that the court,

1:04:52

I guess what I'm saying is I'm not

1:04:54

sure how much of the talk about case

1:04:56

by case basis does for this question of

1:04:58

whether this is primary or legal or factual

1:05:00

inquiry for a court. I

1:05:05

would agree that the ultimate inquiry has

1:05:08

both factual and legal components. That is

1:05:10

you have to know the facts, but

1:05:12

you also have to make a legal

1:05:14

determination, do these facts amount to significant

1:05:16

interference. Thanks. Justice Jackson.

1:05:19

Going back to Justice Alito's

1:05:21

questions, is there a

1:05:23

reason why national banks can't

1:05:26

be subjected to the same kinds of

1:05:28

evidentiary standards that other plaintiffs

1:05:30

have to satisfy when they're making legal

1:05:32

claims? No. I mean, national

1:05:34

banks and because we are talking about not

1:05:37

the effect that this would have on somebody

1:05:39

else, but the effect it would have on

1:05:41

the national banks themselves, not only do they

1:05:43

have the wherewithal to satisfy these requirements, but

1:05:45

they're in the best position to have the

1:05:48

relevant information. And they have the wherewithal in

1:05:50

part because there's nothing that prevents national banks

1:05:52

from hiring lawyers and gathering

1:05:54

evidence and presenting them to the court, right?

1:05:56

Right. And is there

1:05:59

something about economic? economic questions that are not

1:06:01

within the competency of the court? No.

1:06:04

And I would ... I'm sorry. I

1:06:07

mean, doesn't the court litigate issues in

1:06:09

the realm of economic regulation all the

1:06:11

time? Sure. And

1:06:13

so I guess I'm wondering, is the

1:06:16

showing here

1:06:19

really any different than the other

1:06:21

standards that I'm talking about? So

1:06:23

for example, I mentioned the

1:06:25

undue burden standard in the Title VII

1:06:27

scenario. I mean, it would seem to

1:06:29

me that the showing that a company

1:06:31

employer would have to make

1:06:33

in Title VII regarding undue

1:06:36

burden on its business when accommodating

1:06:38

religious employers is really no different

1:06:40

in kind ... religious employees, excuse

1:06:42

me, is really no different in

1:06:44

kind than the kind

1:06:46

of thing a national bank would have

1:06:48

to show if it says this is

1:06:50

substantially interfering with my powers. All right.

1:06:54

So let

1:06:57

me ask you about how often

1:06:59

such a showing would have to

1:07:01

necessarily be made. Did I understand

1:07:03

you to say that the preemption

1:07:05

determination always requires an

1:07:07

evidentiary showing? I think

1:07:09

you kind of discussed that, but aren't

1:07:11

there circumstances in which a big evidentiary

1:07:13

showing wouldn't be necessary? Yes.

1:07:16

I mean, there certainly could be

1:07:18

cases in which the nature of the

1:07:20

restriction was ... has such

1:07:22

an obvious impact on the bank that you

1:07:24

wouldn't need at least any

1:07:26

... An obvious impact, for

1:07:29

example, like it's directly conflicting

1:07:31

with what Congress says about

1:07:33

the bank's powers. That would

1:07:35

be one example. Another example would

1:07:37

just be like charging a ... the

1:07:39

bank has to pay 15% or 20% interest rate.

1:07:43

Now, as Mr. Taylor pointed out, that's not going

1:07:45

to happen in the real world because states

1:07:47

are not going to impose restrictions on ...

1:07:49

like that on their own state charter banks. And

1:07:52

so the nondiscrimination requirement will take

1:07:55

off the table a lot of the most extreme ... This

1:07:58

isn't going to ... the big evidentiary showing problem is not going to happen. to happen

1:08:00

in every case in which the bank is

1:08:02

making a claim about preemption. That's correct. And

1:08:04

I'd also point out the bank, to

1:08:07

the extent at least it is worried about enforcement

1:08:09

by state officials, it doesn't have to wait

1:08:12

to be sued. That is, Barnett Bank was

1:08:14

a case in which the bank went into

1:08:16

court itself and sought a declaratory judgment of

1:08:18

preemption and that would be available. Bringing its

1:08:20

evidence and its lawyers and that sort of

1:08:22

thing. Yes. Finally,

1:08:24

with respect to Justice Kagan's question,

1:08:26

I guess I'm wondering what, if

1:08:29

anything we can do about

1:08:32

the oddity of the standard in this

1:08:34

context. It's in the statute. And

1:08:37

so I don't know whether we can just

1:08:39

read the statute to say something other than

1:08:41

it says because we think this is odd

1:08:44

to have it here. I

1:08:46

mean, we certainly agree that

1:08:48

you can read the statutory language in

1:08:50

light of the Barnett Bank opinion because

1:08:53

both because the statute... That tells you

1:08:55

you're supposed to do that. Both

1:08:58

by drawing specific language from Barnett

1:09:00

Bank and by including a separate

1:09:02

citation to Barnett Bank itself. But

1:09:05

I don't think the court can get

1:09:07

away from the fact that Congress

1:09:09

chose this particular formulation as its

1:09:11

distillation of the Barnett Bank opinion.

1:09:14

And that's because, as you said in the beginning,

1:09:17

significantly affect mean-sensing.

1:09:21

That Congress has actually used another formulation

1:09:24

if it just wants preemption

1:09:26

regarding any law that relates

1:09:28

to this. They say that

1:09:30

in ERISA, for example, it

1:09:32

says it's preempted if it

1:09:34

relates. Yes. And so that's easy

1:09:36

to apply, but here they didn't say that. And

1:09:40

some preemption provisions say a

1:09:43

state can't enforce a law that is

1:09:45

different from or in addition to the

1:09:47

requirements of federal law, meaning a state

1:09:49

can attach additional consequences to conduct that

1:09:51

already violates federal law but can't go

1:09:54

beyond that. And it didn't choose anything

1:09:56

like that here. Thank you. Thank

1:09:58

you, counsel. Thank you. Ms. Watt. Thank

1:10:02

you, Mr. Chief Justice, and may it please the Court. New

1:10:05

York law significantly interferes with the

1:10:07

exercise of national banking powers in

1:10:09

two respects. First, the law

1:10:11

controls the interest rate on mortgage accounts,

1:10:14

and second, a patchwork of 50 of

1:10:16

these state laws would unduly burden national

1:10:18

banks, destroying their uniform federal character. Now,

1:10:21

the other side posits that significantly interferes

1:10:24

requires factual proof that a state law

1:10:26

would hinder a banking power

1:10:28

to some unspecified degree. But

1:10:31

significantly interferes can be

1:10:33

both quantitative and qualitative. And

1:10:36

a state law that dictates the attributes of

1:10:38

a banking product interferes

1:10:41

with national banking power in a

1:10:43

qualitative effect, just as a court's

1:10:47

telling prosecutors what charges to bring

1:10:50

would significantly interfere with executive power.

1:10:54

The Barnett Bank uses the term significantly

1:10:56

interferes in a qualitative sense. Barnett Bank

1:10:58

reasons that state laws

1:11:00

are preempted absent any indication

1:11:02

that Congress intended to

1:11:05

subject the banking power to local

1:11:07

conditions. And here we know

1:11:09

Congress intended the opposite. First,

1:11:11

Congress, excuse me, federal law

1:11:13

comprehensively regulates state mortgage escrow

1:11:15

accounts in order to protect

1:11:17

consumers without requiring any interest.

1:11:20

And second, Congress speaks expressly when

1:11:22

it contemplates state interest laws. It

1:11:25

did so for state usury laws, and

1:11:27

Dodd-Frank itself requires interest on certain

1:11:30

mortgage escrow loans, but not

1:11:32

petitioners. It is

1:11:34

unfathomable that Congress intended the other side's

1:11:37

test. They never told you what

1:11:39

interest rate would be too much, what

1:11:41

to do when market forces change, and how

1:11:43

courts should proceed bank by bank. But

1:11:46

national banks need to know their regulatory obligations

1:11:48

ahead of time. It would

1:11:50

create seismic uncertainty if the laws of

1:11:52

50 states could apply to every banking

1:11:55

product and service, and not just

1:11:57

every feature of a mortgage, but

1:11:59

everything from from interest rates on

1:12:01

savings and checking accounts to ATM

1:12:03

fees to credit card reward programs.

1:12:05

Congress surely intended a preemption standard

1:12:08

that preserves the stability and predictability

1:12:10

that undergirds a safe and sound

1:12:12

banking system. Welcome questions.

1:12:15

Ms. Blatt, do we

1:12:17

treat express

1:12:20

banking powers the same as incidental

1:12:22

banking powers? It would seem that

1:12:24

you would have to somehow

1:12:30

have a way to fathom what

1:12:32

these incidental powers are. Right.

1:12:34

No. There's enumerated powers in

1:12:37

the 7th of 12 U.S.C.

1:12:39

24 and incidental powers

1:12:41

are defined as necessary powers to the

1:12:43

business of banking. I can't

1:12:45

think of them more. The only enumerated ones

1:12:47

are basically lend money, take deposits, and then

1:12:49

make real estate loans in 371. What

1:12:53

interest you charge is so fundamental to

1:12:55

a banking product and the banking power

1:12:57

that it would seem absurd to say

1:12:59

a state could dictate the interest rate on

1:13:01

something like a savings account just because that's

1:13:03

an incidental power. I agree with

1:13:05

you on that. In

1:13:08

Franklin, though, I think it was statutory.

1:13:11

It was expressed. But what

1:13:13

I'm more interested in is the

1:13:15

creation of an escrow account than

1:13:18

interest rate on the

1:13:20

escrow account, which is not sort

1:13:23

of the something the bank would normally

1:13:25

have to do. That's

1:13:28

correct. I mean, 13 state laws

1:13:30

require it since 1973. I

1:13:33

guess we've had the Real Estate Settlement Practice

1:13:35

Act that never required interest.

1:13:38

It's got 40,000 words

1:13:40

of regulation, 17 interpretive statements,

1:13:42

and 10 appendices regulating escrow accounts

1:13:44

and federal law. None of

1:13:47

it requires interest. I think the other side

1:13:49

would think states now could make amendments to

1:13:51

every single one of those requirements. Somehow,

1:13:54

banks would have to run and get declaratory

1:13:56

judgment as to each and every requirement

1:13:58

just on escrows. cascade that

1:14:00

across everything a bank does, it

1:14:03

is mind-boggling. It is mind-boggling how

1:14:05

many products and services national banks

1:14:07

do. And I'm not sure why

1:14:09

we're talking about God and the airlines in a national

1:14:11

banking case when we have 150 years

1:14:14

of precedent that culminates in Barnett

1:14:16

Bank. And you have 30 words

1:14:18

of text. You basically have Congress writing you

1:14:20

a love letter saying, we really like your Barnett

1:14:22

Bank decision. And then it

1:14:24

talks about the significant prevents or

1:14:26

significantly interfere. Barnett Bank

1:14:28

itself five times cites Franklin and

1:14:30

five times says what we mean by that

1:14:33

is we look to see if there's some

1:14:35

indication that Congress wanted to subject the power

1:14:39

of national banks to local conditions. I'm

1:14:41

sorry. There

1:14:44

are a meek eye in the logic

1:14:46

of the Second Circuit law would suggest

1:14:48

in your test, in the Second Circuit's

1:14:51

test, that no state consumer

1:14:54

law would be permitted. There's

1:14:57

an express permission for state consumer

1:14:59

laws. So which ones

1:15:01

are you going to say are OK?

1:15:05

All of them cost the

1:15:07

bank money, whether it's giving

1:15:09

a disclosure form or

1:15:11

a notice form, everything costs

1:15:14

money. So what's

1:15:16

incidental that

1:15:19

somehow wouldn't be preempted under the

1:15:21

Second Circuit test? Sure. Let

1:15:24

me tell you. The definition of state

1:15:26

consumer financial law versus the law that's

1:15:28

preempted under our test focuses on what

1:15:30

is being controlled. It's not simply is

1:15:32

state regulating. Of course, states are regulating.

1:15:34

But what is being controlled? Is it

1:15:36

the national banking power or is it

1:15:38

the financial transaction, in the words of

1:15:40

that definition with the consumer? And

1:15:43

when a state dictates- I'm sorry. What's

1:15:46

not controlling the financial transaction with

1:15:48

the consumer here? I'm going to give

1:15:50

you both the definition and a laundry list

1:15:52

of state law. The definition is this. When

1:15:55

the state dictates the attribute of the product

1:15:57

and service as opposed to the interaction with

1:15:59

the consumer. is preempted. And

1:16:01

under that definition, you

1:16:04

have banking specific laws that aren't

1:16:06

preempted, like laws that prohibit racial

1:16:08

discrimination and whatnot. You have laws

1:16:11

that prohibit fraud by banks. And

1:16:13

most importantly, you have the banking

1:16:15

specific cheat law in Anderson. That's

1:16:17

their leading case, and yet I

1:16:19

think it's our best case. The

1:16:21

court said that the only state

1:16:23

that what the state did, the

1:16:25

banking specific law, that it only

1:16:27

changed the identity of the account

1:16:29

holder who had the lawful right to demand

1:16:31

payment, i.e. the deposit account. But then five times

1:16:34

in the opinion, the court said, you are not,

1:16:36

the state law is not, and I'm going to

1:16:38

quote because they sit and rely on it, not

1:16:41

an unlawful encroachment on the rights and

1:16:43

privileges of national banks. It's not infringing

1:16:45

or interfering with any authorized function of

1:16:47

the bank. It's not a denial of

1:16:49

its privileges as a federal instrumentality and

1:16:52

so on. The other categories of laws

1:16:54

that are not preempted that meet the

1:16:56

definition of state consumer financial law are

1:16:58

all generally applicable laws that regulate

1:17:00

the manner and terms

1:17:02

of the financial transaction with the consumer.

1:17:04

So there's lots of, every state law

1:17:07

has a law of majority when you

1:17:09

can buy a mortgage. It's usually 18.

1:17:11

Alabama is 21. All

1:17:13

states have laws about when the statute of fraud

1:17:15

kicks in on what type of contracts. It's

1:17:18

not like I'm here making something up. The

1:17:21

National Bank Act was passed in 1864. In

1:17:25

1870, your first case that said

1:17:27

state law has room to play

1:17:29

on the dual banking system said

1:17:31

state contract law controls, and then

1:17:33

you've had case after case making

1:17:36

a dividing line between protecting the

1:17:38

banking power at issue, these federally

1:17:40

authorized confers powers, and

1:17:43

on the one hand, and state law where

1:17:45

it can creep in when you're talking about

1:17:47

the interaction and transactions with consumers. But

1:17:50

aren't the National Bank

1:17:52

interacting with consumers pursuant to

1:17:54

their power? So why don't

1:17:57

those two categories collapse? You

1:18:00

said they didn't. You said there's no federal

1:18:03

common law of contracts. There's no federal law

1:18:05

of torts. States in the

1:18:07

court said in their daily lives banks

1:18:09

can be regulated more by states than

1:18:12

the federal law because the states have

1:18:14

to supply state contract law, tort law.

1:18:17

All right. Well, speaking of what we said, you mentioned the

1:18:19

Anderson case. I read that case to be

1:18:21

about whether or not state

1:18:25

laws, quote, impose an undue burden

1:18:27

on the performance of the bank's

1:18:29

functions. So, I mean, yes,

1:18:31

you picked out some language that suggests that

1:18:33

this is about sort of

1:18:35

power at some level of generality, but

1:18:37

it seemed to me that this was

1:18:40

about whether the law issue in

1:18:42

that case was, quote, so burdensome,

1:18:44

end quote, as to be

1:18:46

inapplicable. It wasn't about the nature. It was

1:18:48

about, as people have said, the degree. I

1:18:50

think you're absolutely correct. And Anderson, and when

1:18:52

it contrasts the California case, is talking about

1:18:54

an undue burden because it didn't affect the

1:18:57

power and what the court said, and that's

1:18:59

why we have two tests. We have a

1:19:01

fallback test. One is if

1:19:03

it affects the national banking power and

1:19:05

controls the attribute of the product, preempted,

1:19:07

preempted, preempted. There is a second undue

1:19:10

burden test that looks at the practical

1:19:12

impact, but the delta between the two

1:19:14

sides is we think that can be

1:19:16

as a matter of law and looks

1:19:18

at a patchwork across 50 states.

1:19:21

The California case said it was preempted

1:19:23

without any factual record. In

1:19:25

Anderson, it said it wasn't

1:19:28

preempted with any factual record. They say with

1:19:30

no case, not one case, in 150 years

1:19:32

of precedent where this court looked to a

1:19:35

factual record. They're relying on some trial court

1:19:37

record. That's their best case when

1:19:39

the Supreme Court didn't even talk about it. I

1:19:41

think that pretty much tells you all you need

1:19:43

to know whether Congress intended a factual

1:19:46

record for banking preemption. Now, on

1:19:48

the OCC, I think there are three

1:19:50

reasons why it is just

1:19:52

simply implausible that by codifying Barnett Bank,

1:19:55

Congress tended to overrule it or somehow upset

1:19:57

it. The first is that what

1:19:59

I already said. You mentioned the 30 words of text that

1:20:02

says you need to follow Barnett Bank. The

1:20:04

second is there is a specific

1:20:06

provision in 25 BC, we rely

1:20:08

on it, the OCC relies on

1:20:10

it, that says OCC must follow

1:20:12

the legal standard of Barnett Bank

1:20:15

without any reference to the prevents

1:20:17

or significantly interferes. They

1:20:19

can't possibly mean two separate things. Congress

1:20:21

told OCC to follow Barnett Bank, not

1:20:23

to look at significant effect. The

1:20:26

third reason we think it's just completely doubly

1:20:28

bizarre and backwards that you would take Congress

1:20:30

being mad at the OCC and

1:20:33

imposing procedural requirements is somehow they

1:20:35

intended to impose a new

1:20:37

substantive standard on courts. When they weren't mad

1:20:39

at you, they weren't mad at courts and

1:20:41

impose a standard that no one's ever heard

1:20:43

of or applied before that you would go

1:20:45

fact by fact, fact by fact, law by

1:20:47

law, bank by bank. He

1:20:49

did a little fancy footwork when you said would this proceed bank

1:20:52

by bank. He answered by saying well that would be the OCC.

1:20:55

He never told you what would happen with

1:20:57

Justice Alito's question about what would happen if

1:20:59

Bank of America couldn't prove it,

1:21:01

but another national bank, Citibank,

1:21:03

could do it. There's

1:21:06

no answer to that. In terms of

1:21:08

the impact, the notion

1:21:10

that Mr.

1:21:13

Stewart speaking on behalf of not of the OCC but

1:21:15

the Justice Department, that you just have to look

1:21:18

at the records of the bank. The

1:21:20

biggest problem with something like interest rates, which

1:21:22

makes this a very easy case, is

1:21:24

today 2% is four times

1:21:27

the national savings. At the time of

1:21:29

Mr. Contaros, it was 33% times the

1:21:31

national savings rate. Excuse me,

1:21:33

that's Mr. Himes. At the time

1:21:35

of Mr. Contaros, it's 10 times. I

1:21:38

don't know what you think. Maybe

1:21:40

you should let the courts know. Let's look at ATM fees.

1:21:43

Four dollars sounds, I don't know, maybe $1.50. Then

1:21:46

we can go to credit card reward programs. We'd have

1:21:48

to have a consumer survey. I think I'd like 2%

1:21:51

back on my credit card, but maybe states say it

1:21:53

has to be 4%. I

1:21:56

just don't even know how they would do

1:21:58

this in terms of what the impact is. Banks

1:22:01

are in the business of money, so the

1:22:03

impact is not just the potential

1:22:06

for confusion and duplication and inconsistency and

1:22:08

the sheer 50 state regulators that you

1:22:10

would have to contend with and the

1:22:13

laws are constantly changing, but most things

1:22:15

with banks, if you take it out of one hand, it

1:22:18

comes out another. When

1:22:20

Congress studied this in 1973, they said- I'm

1:22:22

just glad I thought all the national banks were

1:22:24

pretty much the same in terms of their

1:22:28

powers. But we were talking about what

1:22:30

a state law is doing to the

1:22:32

national bank power, so it's not at

1:22:35

the level of a particular bank. And

1:22:38

any of the banks could make the argument,

1:22:40

and once they do, it would come up

1:22:42

to the Supreme Court and we would decide

1:22:44

ultimately, right? Well, that's this case. The Second

1:22:46

Circuit said a mortgage escrow account is a

1:22:49

direct assault on national bank powers. I

1:22:51

guess I just don't understand why it's so hard. I don't think it is hard. No, no, no.

1:22:54

What I'm saying is you're making the argument that it is

1:22:56

really going to be very challenging for

1:22:58

banks if we rule against

1:23:00

you in this case, and I don't understand why

1:23:03

that's the case. Well, you have since

1:23:05

the Reagan administration, a former OCC controller

1:23:07

telling you it would create seismic sea

1:23:09

change and uncertainty. So that's the view

1:23:11

of controllers from Reagan to all the

1:23:13

way with Biden officials. You haven't even

1:23:15

heard from the OCC, which regulates the

1:23:17

national banking system. That alone should scare

1:23:19

you tremendously, that you don't even have

1:23:21

the OCC up here. In terms of

1:23:24

how hard it would be, I don't

1:23:26

think I've heard a satisfactory answer on

1:23:28

what interest rate would be too much

1:23:30

and how national banks could make that

1:23:32

showing. But take just interest rates on

1:23:34

savings accounts. I don't even

1:23:36

know what the banks would say. They would say, well, we

1:23:38

can do it. We'll have to... No,

1:23:40

you have to say something is your burden. You

1:23:43

have the burden in the law to show this substantially interferes.

1:23:46

If your answer is, I don't know

1:23:48

what we would show, then I guess

1:23:50

you lose. What if 150

1:23:52

years of case law is relevant and Barnett Bank

1:23:54

codified it? Because in no case

1:23:56

has a bank, the Supreme Court ever say,

1:23:59

well, where's your... Franklin

1:24:01

itself is the best case on point. And

1:24:03

both, and I also think it's significant that the

1:24:06

court in Waters, that's the Supreme Court.

1:24:08

I mean, that's actually you.

1:24:10

You read Barnett Bank and had

1:24:12

the most sweeping language you could

1:24:14

possibly have about what Barnett Bank

1:24:16

meant. And it said states cannot

1:24:18

control banks, period. That's

1:24:20

the Supreme Court at that

1:24:22

interpretive Barnett Bank. So, you

1:24:25

know, and that's why I think OTC has always

1:24:27

taken this position. I'm going to give you

1:24:29

my full context because I looked at it.

1:24:32

It says the states can exercise

1:24:34

no control over national banks nor

1:24:37

in any way affect their operation,

1:24:40

except insofar as Congress

1:24:42

may see proper to permit. For

1:24:44

sure. And that's what the whole

1:24:46

issue is, how far do Congress permit here?

1:24:49

Well, two Solicitor Generals said in brief

1:24:51

before you what I said. So

1:24:53

I'm happy standing on OSG's view and

1:24:55

across several administrations about what Barnett Bank

1:24:58

means. I'm fine with

1:25:00

that. The state statutes have to

1:25:02

be non-discriminatory. Correct. So,

1:25:05

you know, one way you could look at this is if

1:25:07

a state statute is non-discriminatory, how

1:25:09

much damage could it really be

1:25:11

doing? And I think that's

1:25:13

part of the problem, which is what the Franklin

1:25:16

case illustrates and what this case illustrates is the

1:25:18

plaintiffs will always say, well, you applied it to

1:25:20

your state banks, so what's the problem? That's

1:25:23

the question. The problem... I mean, it seems as

1:25:25

though there should be a kind of presumption that

1:25:27

if the state is doing it for the state

1:25:29

banks, it's not really interfering

1:25:31

with bank powers in a way that

1:25:33

we should care about. There might be

1:25:35

exceptions to that, and that's what the

1:25:39

language is designed to accomplish.

1:25:42

You know, to pick the exceptions to

1:25:44

that where something has gone kerflui, such

1:25:46

that even a non-discriminatory

1:25:48

law does something special to

1:25:50

national banks. So two responses.

1:25:53

I think Franklin would have come out the other way, because

1:25:56

there was the New York Court

1:25:58

of Appeals said... there's

1:26:00

not a sufficient showing. But more importantly, and this

1:26:03

I think goes to the congressional design of the

1:26:05

National Bank Act, is that they're supposed to be,

1:26:07

you know, why have your name Bank of America

1:26:09

if you look like Bank of Ocean City or

1:26:11

Bank of Hawaii? You're supposed to be able to

1:26:13

walk into Bank of America and get one product

1:26:16

and not have 50 products and 50 states

1:26:18

and every time a state says change your

1:26:21

escrow, you have to change another aspect alone

1:26:23

on the origination. I totally get that

1:26:25

impulse that national banks don't want to

1:26:27

have to deal with patchwork, state

1:26:30

laws. But the presumption,

1:26:32

the baseline, that Congress said is

1:26:34

it's not preempted unless

1:26:37

discrimination or you can

1:26:39

prove significant impact. So

1:26:43

we can't take that argument very seriously

1:26:45

that it's just too much of an

1:26:47

impairment on national banks. They

1:26:49

have to deal with reality that we live in

1:26:51

a federal system with 50 states. Yeah,

1:26:53

I mean, it just seems like you're kind of reading the

1:26:55

provision. I mean, upside down you could read Barnett Bank the

1:26:57

same way and say this is... You could say upside down,

1:27:00

but that's what the statute said. You could

1:27:02

say 150 years of case law says states

1:27:04

can regulate unless there's a... Unless what Congress

1:27:07

said, right? I agree. And

1:27:09

I think that the court said it's preempted

1:27:11

under Barnett Bank if it prevents or significantly

1:27:13

interferes. And then you go to Barnett Bank

1:27:15

and it tells you, I think five times

1:27:18

that we read it in light of Franklin.

1:27:20

You mentioned earlier that you thought state

1:27:23

lending laws with respect to

1:27:25

race, religion and others are not preempted. Why?

1:27:29

So the case... On your view,

1:27:31

if states don't get a role

1:27:33

and you really Barnett Bank should

1:27:35

be inverting statute and the presumption

1:27:37

is national banks operate free of

1:27:39

state control, that

1:27:42

would seem to soon those laws too. Yeah. So

1:27:45

no for this fundamental reason and that

1:27:47

is that states have... I'm

1:27:49

sorry, national banks have no power whatsoever

1:27:52

to discriminate on the basis of race

1:27:54

or to commit fraud. And this court

1:27:56

in the 1924 case at First National

1:27:58

Bank versus Missouri... said, when

1:28:00

it said that state law that bans

1:28:03

national banks from having bank branches,

1:28:06

the court said it can't preempt it

1:28:08

because there's no either, no express

1:28:11

power or even implied power to do branches.

1:28:13

So I think the OCC has correctly taken

1:28:15

the view since 2004 that there is no,

1:28:17

there's simply

1:28:20

no power to do branches. So if I understand- Go,

1:28:22

please. If I understand your test

1:28:25

correctly, you're looking to see whether

1:28:27

a state is conditioning the exercise

1:28:30

of a national bank power. And

1:28:32

for sure, that's what fair lending laws

1:28:34

do. It says, you

1:28:37

can't make the loan decisions that

1:28:39

you want to make except conditional

1:28:42

on your satisfying sub-state law.

1:28:46

A lot of state laws can be explained

1:28:48

in just that way. And that's, I think

1:28:50

that that's the test you use in your brief. Yeah,

1:28:53

but- Fair lending laws are a condition on

1:28:55

a national bank's power. So is a law

1:28:57

that says you can't lend a mortgage to

1:28:59

a two-year-old. That's conditioning the bank's power on

1:29:03

making sure the person is 18. But

1:29:05

those laws aren't preempted. And I think the useful

1:29:07

dividing line is, are you changing the

1:29:09

attributes of the product of service? Absolutely

1:29:12

you are. You're saying

1:29:14

you have to lend to people you don't want

1:29:16

to lend to. But that's the same

1:29:18

way with a four-year-old. But if I could just get-

1:29:20

A four-year-old, a 24-year-old, whatever. And

1:29:23

just a second, counsel. You're going to be

1:29:25

a patchwork of states and the different judgments.

1:29:28

And you're going to disagree with some of them. And

1:29:31

all of them have to do with the core

1:29:33

banking powers of who you may lend to, who

1:29:35

you may open an account for, what interest you can

1:29:37

charge, and all of that. And

1:29:40

it seems to me, not to

1:29:42

put too fine a point on it, there's a bit

1:29:44

of wanting your cake and eating it too here. No,

1:29:47

because we're happy with, again, your precedent. Your

1:29:49

precedent has been very careful to make sure

1:29:51

that states can go right up to the

1:29:53

line. And I think Anderson says that. You

1:29:55

can talk about, you know, you

1:29:57

can interact with the account holder.

1:30:00

the bank and things like contract law, age

1:30:02

requirement, statute of frauds. And if I can

1:30:04

get back to discriminatory lending, banks don't have

1:30:06

any power to discriminate on the basis of

1:30:08

race, gender, sex, sexual orientation, but they sure

1:30:11

have to discriminate on the basis of income

1:30:13

status. So yes, if the state law said

1:30:15

you can't discriminate on the basis of income,

1:30:17

that's going to preempt it because there's a

1:30:19

federal duty to mitigating at risk. But

1:30:23

this is, again, and the same way with

1:30:25

fraud. I don't think fair lending

1:30:28

laws, state lending laws to prohibit fraud and

1:30:30

lending are preempted either. They just

1:30:32

have never been. You can discriminate on the basis of income

1:30:34

but not race. How about

1:30:36

redlining neighborhoods and things like that?

1:30:39

Disparate impact is, I mean, that's extremely heavily

1:30:41

regulated by federal law. But I'm

1:30:43

asking about non-discriminatory state laws,

1:30:45

then what? I

1:30:47

don't think any states have argued, sorry,

1:30:49

federal, national banks have argued disparate impact

1:30:51

laws are preempted because they are so- But

1:30:54

under your test, why wouldn't they? Well,

1:30:57

I mean, we can talk about the theory

1:31:00

behind disparate impact probably, but I think it's

1:31:02

one of those areas on how you consider,

1:31:04

how you look at disparate impact. You might

1:31:06

argue those are

1:31:08

preempted under your test. I don't

1:31:10

think so, but even if they did, it's

1:31:12

still the line that we're drawing is the

1:31:14

line this court has drawn, I think,

1:31:17

since Anderson. And

1:31:19

before that, that if you're not changing

1:31:22

the attribute, and I don't think it

1:31:24

changes the loan attribute to say, is

1:31:27

the person black or white or green, it's still

1:31:29

a loan with the same interest rate, the same

1:31:31

term. If you say state law says, I don't

1:31:33

want national banks paying less than 2% or

1:31:35

3% or 4% on savings accounts

1:31:38

or no mortgage loans that are under

1:31:41

29 months and 10 months, it's just

1:31:43

the product. That is literally the product. And I

1:31:45

think we talked about the credit cards and the

1:31:48

ATM fees, how much cash you can withdraw.

1:31:51

How much cash you can withdraw has nothing to

1:31:53

do with the consumer walking in. It literally is

1:31:55

the core banking service itself. And

1:31:57

this has been the workable standard. This has been

1:31:59

the settled expectations. and whether or not you have

1:32:01

to pay interest on the escrow account does or

1:32:03

does not have something to do with the consumer

1:32:06

walking in? Nothing. It's the nature

1:32:08

of the product. It's the interest rate on the loan.

1:32:10

It's no different than there's plenty of state laws that

1:32:12

control, you know, things like the term of the loan,

1:32:15

what's the maximum amount you can take out

1:32:17

on a mortgage loan. Those are all preempted,

1:32:20

yet states regulate that for state banks. This has

1:32:22

been, I mean, again, we've talked about the OCC.

1:32:26

This has been the law since 1983

1:32:28

for all real estate, but for things

1:32:30

like escrow, the escrow regulation came in

1:32:32

in 2004. So

1:32:34

national banks but for the Ninth Circuit, which

1:32:36

I think covers two state escrow laws, national

1:32:38

banks don't comply with state escrow laws unless they want

1:32:40

to because it's one

1:32:42

of the features they want to do to attract consumers.

1:32:45

In terms of how much money, I mean, these are very small dollar

1:32:47

amounts. Bank of America

1:32:49

put in its brief and it had evidence in the LOSNAC. I

1:32:51

think it's the LOSNAC I pronounced it. It

1:32:54

doesn't earn interest on these accounts and it costs

1:32:56

a lot of money to maintain them. So I

1:32:58

don't think it's so much that it's, again,

1:33:01

I don't know what the factual showing would

1:33:03

be, but I do know the other side

1:33:05

would just say New York banks comply with

1:33:07

it. So it's never going to be preempted. I'm

1:33:10

just trying to understand the sense of this distinction

1:33:12

you're making. And I didn't realize that you were

1:33:14

making this distinction. So I'm making this up on

1:33:16

the fly. But suppose there

1:33:18

were a state that said something like before

1:33:22

a loan can be denied, a person

1:33:24

has a right to see the bank president.

1:33:28

And that's very, it's actually

1:33:30

really super inconvenient

1:33:33

for the bank. That

1:33:35

would fall on your yes, a state can do that side

1:33:37

of the line. I think it

1:33:39

would probably fall on the no that the state can't.

1:33:41

It depends on how broad you interpret the sort of

1:33:43

the services associated with it. I

1:33:46

will say that there are state laws that regulate how the

1:33:48

banking statement has to look, what kind of receipts you have

1:33:50

to have. If you knew

1:33:52

the amount of federal regulations that are just so

1:33:55

exhaustive on this, that if banks had to comply

1:33:57

with 50 different kinds of patchwork of any

1:33:59

kind of debt, every law on that, but

1:34:01

sort of seeing who the bank, meeting

1:34:03

the bank president seems to be similar

1:34:05

on, you know, how the bank, how

1:34:07

the banking statement has to look. Yeah,

1:34:09

it's just suggestive of the

1:34:11

idea that it's hard to make

1:34:13

this distinction between what concerns your transaction with

1:34:16

a customer and what concerns your banking product,

1:34:18

which is what I thought you were saying.

1:34:20

I think it's very easy when you have

1:34:22

an interest rate. I think a harder one

1:34:25

is like the Anderson versus California. Well, so

1:34:27

it works for this case, but you're

1:34:29

asking us to do something that applies to

1:34:31

every kind of case. But it works for

1:34:33

every case that's been addressed by OCC's regulations

1:34:35

since the 2000s. I

1:34:38

mean, this is not, OCC goes through a

1:34:40

laundry list of preempted types of preempted. They

1:34:42

all go to the banking product. They

1:34:45

go to the mortgage loan. Well, the government

1:34:47

has disallowed that regulation and

1:34:49

said it's inconsistent with the statute. So I don't

1:34:51

know how much traction that gets you. I think

1:34:53

you just heard, you might as well have heard

1:34:55

from the Forest Service. I mean, they literally went

1:34:57

against the- I think we heard from the Solicitor

1:34:59

General of the United States on behalf of the

1:35:01

federal government. Contracting two other Solicitor Generals

1:35:04

and saying they didn't even consult with OCC. With all due

1:35:06

respect, this is a- Where is this

1:35:08

line that you've been talking about in your brief?

1:35:10

Can you direct me to it? I think the

1:35:12

line is- I didn't see it. I

1:35:15

think that's fair on the product. We may have only

1:35:18

mentioned the product thing once. The

1:35:20

main test is the control test at the Second Circuit

1:35:22

applied. Yeah, it's totally different than the control

1:35:24

test, isn't it? That's what

1:35:26

you're asking us to adopt. And wouldn't it, this

1:35:29

product versus consumer test

1:35:32

itself generate a lot of litigation

1:35:34

over border cases? I don't

1:35:36

think that when we tried to talk about

1:35:38

the difference with the definition of state consumer

1:35:41

financial law, we talked about- this is where

1:35:43

it gets very close. We talked about there's

1:35:45

a difference between controlling the banking power and

1:35:47

controlling the financial transaction with the consumer. And

1:35:49

I just think the explanation to that just

1:35:52

looks to the product. It's not in your brief. And

1:35:55

if I think it's different from the lower court opinion, what

1:35:57

are we supposed to do? And then you stick with our brief.

1:36:01

It's not in your brief. Stick

1:36:03

with our brief. Don't, don't, you didn't hear anything I

1:36:05

said. Well your brief, the first time

1:36:08

I've heard that. I

1:36:12

mean the problem is that your brief doesn't explain

1:36:14

fair lending laws. And in a

1:36:16

way what you're trying to do is

1:36:18

to gerrymander a world in which fair

1:36:20

lending laws, which everybody thinks kind of

1:36:22

have to apply to national banks, apply

1:36:25

to national banks, but nothing else does.

1:36:27

Yeah, and I don't think it's gerrymandering unless

1:36:29

you think the OCC has gerrymandered. I mean

1:36:31

you've had to have a workable rule since

1:36:33

states have had, excuse me, since national banks

1:36:35

have had real estate lending power since 1983.

1:36:39

And this has been the workable rule. The

1:36:41

OCC has carded off the loan. But

1:36:45

it is said at the same time, and it wrote to

1:36:47

Barney Frank in 2004, but we're going to put

1:36:49

fair lending laws to the side. Now there might

1:36:51

be some fair lending laws that might be problematic

1:36:54

when they run up to the duty to mitigate

1:36:56

risk. But generally banks just

1:36:58

don't have the power to discriminate or

1:37:00

commit fraud. And if

1:37:02

you can't ever answer a question at

1:37:04

oral argument in the brief, then I'm not sure why we

1:37:06

have an oral argument. It's pretty

1:37:08

central. It's

1:37:11

not an incidental question. It's

1:37:13

what's preempted. And your

1:37:16

brief says everything's preempted, controlled. I

1:37:18

think so. And now you're saying,

1:37:20

there's this new distinction that we've

1:37:23

somehow distilled from our cases that

1:37:25

heretofore nobody has mentioned. So the

1:37:27

amount of non-preempted laws is the exact same

1:37:29

in the brief. The fair lending and all

1:37:31

generally applicable laws that go to how you

1:37:34

form contracts. The only one I add, and Anderson,

1:37:37

the only one I added is the fraud laws.

1:37:39

I don't think those are in the briefs, but

1:37:41

I think they follow. So if you don't want

1:37:43

to consider the fraud laws, that's fine. But the

1:37:46

basic distinction dividing line, we spent

1:37:48

pages and pages saying this court has recognized

1:37:50

all the laws that aren't preempted, starting with

1:37:52

state contract laws. Thank

1:37:56

you, counsel, Justice Thomas. Justice Alito. Well,

1:38:00

I share the

1:38:03

difficulty that's been expressed in

1:38:05

understanding the difference between a state

1:38:08

law that affects a

1:38:11

national bank's exercise of the banking

1:38:13

power and a state law that

1:38:15

regulates the way

1:38:17

in which the bank exercises

1:38:22

that power in dealing

1:38:25

with its customers. Is

1:38:28

there some other way to express

1:38:30

this? Is

1:38:32

there something else if we look at the