Cuomo v. Clearing House Assn., L. L. C.

PETITIONER:Andrew M. Cuomo, Attorney General of New York
RESPONDENT:The Clearing House Association, L.L.C., et al.
LOCATION: New York Attorney General’s Office

DOCKET NO.: 08-453
DECIDED BY: Roberts Court (2009)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 557 US (2009)
GRANTED: Jan 16, 2009
ARGUED: Apr 28, 2009
DECIDED: Jun 29, 2009

Barbara D. Underwood – argued the cause for the petitioner
Malcolm L. Stewart – Deputy Solicitor General, Department of Justice, argued the cause for respondent Office of the Comptroller General of the Currency
Seth P. Waxman – argued the cause for the respondent The Clearing House Association

Facts of the case

In 2005, the New York State Attorney General began investigating possible racial discrimination in the real estate lending practices of several national banks. The Attorney General requested that the implicated banks turn over certain non-public information to aid the investigation. The Clearing House Association (CHA), a consortium of national banks including several involved in the investigation, filed a lawsuit in a New York federal district court to prevent the Attorney General from continuing his investigation. The CHA argued that the Office of the Comptroller of the Currency (OCC), the federal agency charged with overseeing national banks, was appropriately responsible for regulating the banks’ compliance with activities that fall under the National Bank Act (NBA) and therefore precluded state officials like the Attorney General from doing so. In response, the Attorney General argued that the Federal Housing Act (FHA) provided an exception to the OCC’s sole stewardship of the NBA and therefore authorized his investigation. The district court granted the CHA’s request for an injunction and stopped the Attorney General’s investigation.

On appeal, the U.S. Court of Appeals for the Second Circuit sustained the injunction against the Attorney General’s investigation, but used the decision in a separate case, filed by the OCC and utilizing different arguments, to do so. Here, the court of appeals held that the district court lacked jurisdiction to decide the FHA claim. It reasoned that since the Attorney General had not yet filed any lawsuits against the banks under investigation, the issue of whether the FHA provided an exception to the enforcement of the NBA was not ripe for adjudication.


Are state officials precluded from regulating and enforcing banking activities governed by the National Bank Act and the Office of the Comptroller of the Currency’s regulations?

Media for Cuomo v. Clearing House Assn., L. L. C.

Audio Transcription for Oral Argument – April 28, 2009 in Cuomo v. Clearing House Assn., L. L. C.

Audio Transcription for Opinion Announcement – June 29, 2009 in Cuomo v. Clearing House Assn., L. L. C.

John G. Roberts, Jr.:

Justice Scalia has the opinion of the Court this morning in case 08-453, Cuomo versus the Clearing House Association.

Antonin Scalia:

This case is here on writ of certiorari to the United States Court of Appeals for the Second Circuit.

In 2005, Eliot Spitzer, then Attorney General of New York and predecessor in office to Andrew Cuomo, the petitioner here, sent several national banks what was called a “request in lieu of subpoena” for certain non-public information about their lending practices.

The threatened subpoena was not a judicial subpoena but a subpoena that New York Executive Law allowed the Attorney General to issue on his own authority in connection with his investigation of business practices.

In this case, the banks compliance with New York’s fair lending laws.

The respondents in this case, the Comptroller of the Currency and a trade association of national banks brought suit to enjoin the state attorney general from issuing subpoenas or taking any other action to enforce the State’s fair-lending laws against national banks.

The District Court issued the requested injunction and the Second Circuit affirmed.

The Comptroller of the Currency is the executive law officer charged with administration of the National Bank Act.

That legislation passed in 1864 provides that “No national bank shall be subject to any visitorial powers except as authorized by Federal law or vested in the courts of justice.”

The Comptroller promulgated a regulation interpreting this statutory term visitorial powers to prohibit States from “conducting examinations, inspecting or requiring the production of books or records of national banks, or prosecuting enforcement actions.”

It is a familiar principle of judicial review that we give deference so-called Chevron deference, named after the case that adopted that principle, to agency regulations that provide a reasonable interpretation of ambiguous statutory provisions.

But that deference is not boundless.

An agency cannot go beyond what is ambiguous and contradict the clear text of the statute.

Petitioner contends that that is what the Comptroller has done here with respect to the meaning of visitorial powers.

We agree.

Specifically, we think the Comptroller of the Comptroller’s regulation ignores the distinction between visitorial and non-visitorial powers.

When the National Bank Act was passed, visitorial powers were understood to refer to the power of the State as sovereign to supervise and control corporations.

The State as visitor could inspect corporate books and records at any time for any reason.

The visitorial power was exercised largely through use of the now outdated prerogative writs such as mandamus and quo warranto.

State law enforcement in the courts however was understood to represent the exercise of a different power, separate from the power of visitation.

Unlike the visitorial power, it comes with judicial restraints such as the requirement in civil cases that the States survived a motion to dismiss and the availability of judicial supervision of discovery.

This distinction between visitorial powers and law enforcement powers is reflected in the National Bank Act exclusion from preemption of powers “vested in the courts of justice”.

The regulations prohibition of prosecuting enforcement actions, therefore goes beyond what the National Bank Act provides.

The strange effects of the Comptroller’s regulation also cast doubt upon its validity or agreed that some state laws are left in place by the National Bank Act.

But the Comptroller’s regulation purports to preempt all enforcement of even valid state laws.

The bark of state law remains, but its bite does not.

This is a strange result.

As we noted in a similar context in a 1924 case, “To demonstrate the binding quality of a statute but deny the power of enforcement involves a fallacy made apparent by the mere statement of the proposition, for such power is essentially inherent in the very conception of law.”

The Comptroller attempts to remedy this problem or at least to narrow it by saying in the statement of basis and purpose that a company promulgation of his regulation that the prohibition of state enforcement does not apply to such matters as “taxation, zoning, criminal and tort law” which establish “the legal infrastructure that surrounds and supports the ability of national banks to do business”.

This distinction between implementation of infrastructure and enforcement of other laws finds no basis in the statute or even in the text of the regulation.

Antonin Scalia:

In sum, the Comptroller was not unreasonable in interpreting the National Bank Act’s prohibition on state exercise of visitorial powers to include “conducting examinations and inspecting or requiring the production of books or records of national banks”.

But exceeded the balance of reasonable interpretation by prohibiting the States from “prosecuting enforcement actions” against national banks.

We therefore uphold the injunction as applied to the New York Attorney General’s threatened issuance of an executive subpoena but vacate its application to the bringing of judicial enforcement actions.

The judgment of the Court of Appeals is affirmed in part and reversed in part.

Justice Thomas has filed an opinion concurring in part and dissenting in part in which the Chief Justice, Justice Kennedy and Justice Alito have joined.