439 U.S. 299 (1978), 77-1265, Marquette National Bank of Minneapolis v. First of Omaha Service Corp.
|Docket Nº:||No. 77-1265|
|Citation:||439 U.S. 299, 99 S.Ct. 540, 58 L.Ed.2d 534|
|Party Name:||Marquette National Bank of Minneapolis v. First of Omaha Service Corp.|
|Case Date:||December 18, 1978|
|Court:||United States Supreme Court|
Argued October 31, 1978
CERTIORARI TO THE SUPREME COURT OF MINNESOTA
The First National Bank of Omaha (Omaha Bank) is a national banking association chartered in Nebraska; it is enrolled in the BankAmericard plan, and solicits for that plan in Minnesota. Omaha Bank charges its Minnesota cardholders interest on their unpaid balances at a rate permitted by Nebraska law, but in excess of that permitted by Minnesota law. The Marquette National Bank of Minneapolis (Marquette), a Minnesota-chartered national banking association enrolled in the BankAmericard plan, brought suit in Minnesota against Omaha Bank and its subsidiary, respondent First of Omaha Service Corp., inter alia, to enjoin the operation of Omaha Bank's BankAmericard program in Minnesota until such time as it complied with the Minnesota usury law. Rejecting respondent's contention that Minnesota's usury law was preempted by the National Bank Act provision codified as 12 U.S.C. § 85, which authorizes a national banking association "to charge on any loan" interest at the rate allowed by the laws of the State "where the bank is located," the state trial court granted Marquette's motion for partial summary judgment. The Minnesota Supreme Court reversed.
Held: Section 85 permits Omaha Bank to charge its Minnesota BankAmericard customers the higher interest rate that is sanctioned by Nebraska law. Pp. 307-319.
(a) As a national bank, Omaha Bank is a federal instrumentality whose interest rate for its BankAmericard program is governed by federal law, and under § 85, a national bank may charge interest "on any loan" at the rate allowed by the laws of the State where the bank is "located." P. 308.
(b) Apart from its BankAmericard program, Omaha Bank is located in Nebraska, where it is chartered. P. 309.
(c) Omaha Bank cannot be deprived of its Nebraska location merely because under the BankAmericard program it extends credit to residents of another State, for it is in Nebraska that credit is extended by the Bank's honoring sales drafts of Minnesota customers, unpaid-balance
finance charges are assessed, payments are received, and credit cards are issued. Pp. 310-312.
(d) Nor does the statutory location of the bank change because the credit cards can be used to purchase goods and services outside Nebraska. Pp. 312-313.
(e) Congress, in enacting the National Bank Act of 1864, intended to facilitate a "national banking system," whose interstate nature was fully recognized, and there was no intention to exempt interstate loans from the reach of the predecessor of 12 U.S.C. § 85. Pp. 313-318.
(f) Though the "exportation" of interest rates, such as occurred here, may impair the ability of States to maintain effective usury laws, such impairment has always been implicit in the National Bank Act, and any correction of that situation would have to be achieved legislatively. Pp. 318-319.
262 N.W.2d 358, affirmed. BRENNAN, J., delivered the opinion for a unanimous Court.
BRENNAN, J., lead opinion
MR. JUSTICE BRENNAN delivered the opinion of the Court.
The question for decision is whether the National Bank Act, Rev.Stat. § 5197, as amended, 12 U.S. C § 5,1 authorizes a national bank based in one State to charge its out-of-state credit-card customers an interest rate on unpaid balances allowed by its home State, when that rate is greater than that permitted by the State of the bank's nonresident customers. The Minnesota Supreme Court held that the bank is allowed by § 85 to charge the higher rate. 262 N.W.2d 358 (1977). We affirm.
The First National Bank of Omaha (Omaha Bank) is a national banking association with its charter address in Omaha, Neb.2 Omaha Bank is a card-issuing member in the BankAmericard plan. This plan enables cardholders to purchase goods and services from participating merchants and to
obtain cash advances from participating banks throughout the United States and the world. Omaha Bank has systematically sought to enroll in its BankAmericard program the residents, merchants, and banks of the nearby State of Minnesota. The solicitation of Minnesota merchants and banks is carried on by respondent First of Omaha Service Corp. (Omaha Service Corp.), a wholly owned subsidiary of Omaha Bank. Minnesota residents are obligated to pay Omaha Bank interest on the outstanding balances of their BankAmericards. Nebraska law permits Omaha Bank to charge interest on the unpaid balances of cardholder accounts at a rate of 18% per year on the first $999.99, and 12% per year on amounts of $1,000 and over.3 Minnesota law, however, fixes the permissible annual interest on such accounts at 12%.4 To compensate
for [99 S.Ct. 543] the reduced interest, Minnesota law permits banks to charge annual fees of up to $15 for the privilege of using a bank credit card.5
The instant case began when petitioner Marquette National Bank of Minneapolis (Marquette),6 itself a national banking association enrolled in the BankAmericard plan,7 brought suit in the District Court of Hennepin County, Minn., to enjoin Omaha Bank and Omaha Service Corp. from soliciting in Minnesota for Omaha Bank's BankAmericard program until such time as that program complied with Minnesota law.8 Marquette claimed to be losing customers to Omaha Bank because, unlike the Nebraska bank, Marquette was forced by the low rate of interest permissible under Minnesota law to charge a $10 annual fee for the use of its credit cards. App. 7a-15a, 45a-48a.
Marquette named as defendants Omaha Bank, Omaha Service Corp., which is organized under the laws of Nebraska but qualified to do business and doing business in Minnesota,9 and the Credit Bureau of St. Paul, Inc., a corporation organized under the laws of Minnesota having its principal [99 S.Ct. 544] office
in St. Paul, Minn. Omaha Service Corp. participates in Omaha Bank's BankAmericard program by entering into agreements with banks and merchants necessary to the operation of the BankAmericard scheme. Id. at 30a. At the time Marquette filed its complaint, Omaha Service Corp. had not yet entered into any such agreements in Minnesota, although it intended to do so. Id. at 30a, 92a, 94a. For its services, Omaha Service Corp. receives a fee from Omaha Bank, but it does not itself extend credit or receive interest.10 Id. at 94a, 97a-110a. It was alleged that the Credit Bureau of St. Paul, Inc., solicited prospective cardholders for Omaha Bank's BankAmericard program in Minnesota. Id. at 9a, 30a.
The defendants sought to remove Marquette's action to Federal District Court. See 12 U.S.C. § 94.11 Marquette responded by dismissing without prejudice its action against Omaha Bank, see Fed.Rule Civ.Proc. 41(a)(1)(i), and the District Court, citing Gully v. First Nat. Bank, 299 U.S. 109 (1936), remanded the case to the District Court of Hennepin County. Marquette Nat. Bank v. First Nat. Bank of Omaha, 422 F.Supp. 1346 (Minn.1976). Marquette thereupon moved for partial summary judgment to have Omaha Bank's BankAmericard program declared in violation of the Minnesota usury statute, Minn.Stat. § 48.185 (1978),12 and permanently to enjoin the remaining defendants from engaging in
any activity in connection with the offering or operation of that program in further violation of Minnesota law. Defendants argued that the National Bank Act, Rev.Stat. § 5197, as amended, 12 U.S.C. § 85,13 preempted Minn.Stat. § 48.185 and enforcement of that statute against Omaha Bank's BankAmericard program. Upon being notified of this challenge to Minn.Stat. § 48.185, the Attorney General of the State of Minnesota14 intervened as a party plaintiff and joined in Marquette's prayer for a declaratory judgment and permanent injunction.
The District Court of Hennepin County granted plaintiffs' motion for partial summary judgment, holding in an unreported opinion that
nothing contained in the National Bank Act, 12 U.S.C. § 85, precludes or preempts the application and enforcement of Minnesota Statutes, § 48.185 to the First National Bank of Omaha's BankAmericard program as solicited and operated in the State of Minnesota.
App. 139a-140a. The court enjoined Omaha Service Corp., "as agent of the First National Bank of Omaha," from
engaging in any solicitation of residents of the State of Minnesota or other activity in connection with the offering or operation of a bank credit card program in the State of Minnesota in violation of Minnesota Statutes, § 48.185.15
Id. at 140a-141a.
On appeal, the Minnesota Supreme Court reversed. Noting that Marquette's dismissal of Omaha Bank was a procedural device that removed the case from the jurisdiction of the federal courts of the Eighth Circuit, and noting that a recent decision of the Court of Appeals for the Eighth Circuit had made it plain that, in its judgment, the usury laws of Nebraska, rather than Minnesota, should govern the operation of Omaha Bank's BankAmericard program in Minnesota, [99 S.Ct. 545] see Fisher v.
First Nat. Bank of Omaha, 548 F.2d 255 (1977),16 the Minnesota Supreme Court concluded that it would be "inappropriate for this court to permit the use of procedural devices to obtain a result inconsistent with the existing doctrine in the Eighth Circuit." 22 N.W.2d at 365.17 Plaintiffs filed timely petitions for writs of certiorari,18 which we granted, 436 U.S. 916 (1978), in order to decide the appropriate application of 12 U.S.C. § 85.
In the present posture of this case, Omaha Bank is no longer a party defendant. The federal...
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