Greenwood Trust Co. v. Com. of Mass.
| Decision Date | 03 June 1992 |
| Docket Number | 92-1065 and 92-1150,Nos. 91-2205,s. 91-2205 |
| Parties | GREENWOOD TRUST COMPANY, Plaintiff, Appellant, v. COMMONWEALTH OF MASSACHUSETTS, et al., Defendants, Appellees. . Heard |
| Court | U.S. Court of Appeals — First Circuit |
Arthur R. Miller, with whom Andrew F. Lane, Gilbert R. Hoy, Jr., Warner & Stackpole, Burt M. Rublin, Wolf, Block, Schorr and Solis-Cohen, Alan R. Feldman, and Sullivan & Worcester were on brief, for plaintiff, appellant.
Ernest L. Sarason, Jr. and William T. Matlack, Asst. Attys. Gen., with whom Scott Harshbarger, Atty. Gen., and Sarah Wald, Sp. Asst. Atty. Gen., were on brief, for defendants, appellees.
Frank Max Salinger and Robert E. McKew on brief for American Financial Services Ass'n, amicus curiae.
Arnold M. Lerman, Christopher R. Lipsett, John B. Bellinger, III, Kenneth L. Chernof, and Wilmer, Cutler & Pickering on brief for Bank of America, et al., amici curiae.
John J. Gill, Michael F. Crotty, and Irving D. Warden on brief for American Bankers Ass'n, amicus curiae.
Ralph J. Rohner, Marcia Z. Sullivan, and Steven I. Zeisel on brief for Consumer Bankers Ass'n, amicus curiae.
L. Richard Fischer, Robert M. Kurucza, Steven S. Rosenthal, James A. Huizinga, and Morrison & Foerster on brief for Visa U.S.A., Inc. and Mastercard Intern. Inc., amici curiae.
Alfred J.T. Byrne, General Counsel, Douglas H. Jones, Sr. Deputy General Counsel, Thomas A. Schulz, Asst. General Counsel, Colleen B. Bombardier, Sr. Counsel, and Lisa M. Miller, Counsel, on brief for F.D.I.C., amicus curiae.
Marsha Kramarck, Deputy Atty. Gen., on brief for Delaware State Bank Com'r, amicus curiae.
Richard P. Eckman, Daniel I. Prywes, Joseph L. Lakshmanan, and Pepper, Hamilton & Scheetz on brief for Delaware Bankers Ass'n, amicus curiae.
Lee Fisher, Atty. Gen. (Ohio) and Kathleen McDonald O'Malley, Chief Counsel, Office of Atty. Gen., on brief for States of Ohio, Ariz., Ill., La., Nev., S.D. and Utah, amici curiae.
Bonnie J. Campbell, Atty. Gen. (Iowa), and Peter R. Kochenburger, Asst. Atty. Gen., on brief for States of Ark., Colo., Conn., Hawaii, Idaho, Iowa, Kan., Ky., Maine, Minn., N.J., N.C., Pa., R.I., S.C., Tex., Vt., W.Va. and the District of Columbia, amici curiae.
Michael M. Malakoff, Ellen Doyle, Malakoff, Doyle & Finberg, Nicholas E. Chimicles, Michael D. Donovan, Robin Resnick and Greenfield & Chimicles on brief for Bankcard Holders of America, et al., amici curiae.
James C. Sturdevant, Kim E. Card, Sturdevant & Sturdevant, and Gail Hillebrand on brief for Consumer Action and Consumers Union, amici curiae.
Albert Endsley, Steven W. Hamm, and Philip S. Porter on brief for National Ass'n of Consumer Credit Administrators and American Conference of Uniform Consumer Credit Code States, amici curiae.
Before SELYA, Circuit Judge, LAY, * Senior Circuit Judge, and PIERAS, ** District Judge.
This train wreck of a case arises out of a headlong collision between a state consumer-protection law and a federal banking law. It brings into sharp focus the tensions inherent in our federalist system while presenting a novel legal question: can a federally insured bank, chartered in Delaware, charge its Massachusetts credit-card customers a late fee on delinquent accounts, notwithstanding a Massachusetts statute explicitly prohibiting the practice? The district court answered this question in the negative, enforcing the state statute and granting partial summary judgment in appellees' favor. Because we believe that the lower court was on the wrong track, we reverse. Federal law has the right of way in this area.
The pertinent facts are largely undisputed. Plaintiff-appellant Greenwood Trust Company (Greenwood) is a Delaware banking corporation. Its deposits are insured by the Federal Deposit Insurance Corporation. Through a wholly owned subsidiary, Greenwood offers an open end credit card--the Discover Card--to customers nationwide. More than one hundred thousand of its cardholders live in Massachusetts.
The terms and conditions applicable to use of the Discover Card are spelled out in a Cardmember Agreement. The Agreement stipulates, inter alia, that the holder must make a minimum monthly payment, calculated by reference to the credit-card balance outstanding from time to time, on or before a designated due date. Failure to make this payment in a timeous fashion constitutes a default. If the default is not cured within twenty days, a ten-dollar late charge is automatically assessed.
On October 27, 1989, the Commonwealth of Massachusetts advised Greenwood that its imposition of late charges under such circumstances contravened state law. The Commonwealth threatened to take legal action. Greenwood promptly launched a preemptive strike, filing a complaint for declaratory and injunctive relief in the United States District Court for the District of Massachusetts. 1 The Commonwealth denied that federal law preempted the Massachusetts statute. It also counterclaimed, seeking to bar Greenwood from assessing late charges and to collect restitutionary damages, together with civil penalties, referable to Greenwood's defiance of state law.
The district court adjudicated the parties' competing claims on cross-motions for summary judgment. Discerning no federal preemption, the court ruled that Massachusetts law applied. Since the court interpreted that law to forbid Greenwood's imposition of late charges upon cardholders who lived in Massachusetts, it denied Greenwood's motion and granted partial summary judgment in the Commonwealth's favor. Greenwood Trust Co. v. Massachusetts, 776 F.Supp. 21 (D.Mass.1991). The district court certified its rulings for interlocutory appeal under 28 U.S.C. § 1292(b) (1988). In light of the pivotal importance and broad commercial consequence of the questions presented, we accepted the certification. (As an aside, we remark that our belief as to the importance of the questions presented has been validated to some degree by the outpouring of amicus briefs, some favoring appellant's position and some opposing it.) These appeals ensued. 2
Two statutes lay at the heart of the dispute between these protagonists: the state law that prohibits the imposition of late fees by credit-card issuers, viz., Mass.Gen.L ch. 140, § 114B (1991) (Section 114B), and the federal law which arguably preempts the state statute, viz., Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDA), Pub.L. No. 96-221, 94 Stat. 132 (1980) (). This case demands that we determine whether section 114B's immovable prohibition survives section 521's irresistible preemptive sweep.
The Massachusetts statute is straightforward. It provides that: "No creditor shall impose a delinquency charge, late charge, or similar charge on loans made pursuant to ... an open end credit plan." Mass.Gen.L. ch. 140, § 114B.
On the other hand, section 521 is equally uncompromising:
In order to prevent discrimination against State-chartered insured depository institutions, including insured savings banks, ... with respect to interest rates, ... such State bank[s] ... may, notwithstanding any State constitution or statute which is hereby preempted for the purposes of this section, take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, or other evidence of debt, interest at a rate of not more than 1 per centum in excess of the discount rate on ninety-day commercial paper in effect at the Federal Reserve bank in the Federal Reserve district where such State bank ... is located or at the rate allowed by the laws of the State, territory, or district where the bank is located, whichever may be greater.
12 U.S.C. § 1831d(a) (1988 & Supp.1990).
In Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 6 L.Ed. 23 (1824), Chief Justice Marshall declared that, under the rubric of the Supremacy Clause, 3 state laws which "interfere with, or are contrary to the laws of Congress, made in pursuance of the constitution," are preempted and, therefore, invalid. Id. 22 U.S. (9 Wheat.) at 211. This verity remains firmly embedded in our modern jurisprudence. See, e.g., Wisconsin Pub. Intervenor v. Mortier, --- U.S. ----, ----, 111 S.Ct. 2476, 2481, 115 L.Ed.2d 532 (1991); Hillsborough County v. Automated Medical Labs., Inc., 471 U.S. 707, 712, 105 S.Ct. 2371, 2374, 85 L.Ed.2d 714 (1985); Securities Indus. Ass'n v. Connolly, 883 F.2d 1114, 1117 (1st Cir.1989), cert. denied, 495 U.S. 956, 110 S.Ct. 2559, 109 L.Ed.2d 742 (1990).
In placing constitutional theory into practice, the Court has generally distinguished between express and implied preemption. Express preemption occurs "when Congress has 'unmistakably ... ordained' that its enactments alone are to regulate a [subject, and] state laws regulating that [subject] must fall." Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 1309, 51 L.Ed.2d 604 (1977) (quoting Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963)). In such instances, the only remaining question is whether a particular state statute intrudes into the federal pale. See Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 299, 108 S.Ct. 1145, 1150, 99 L.Ed.2d 316 (1988); Cable Television Ass'n v. Finneran, 954 F.2d 91, 98 (2d Cir.1992).
Implied preemption comes in a wide variety of sizes and shapes. Indeed, we have said that "[t]he concept ... has a certain protean quality, which renders pigeonholing difficult." French v. Pan Am Express, Inc., 869 F.2d 1, 2 (1st Cir.1989). Implied preemption can occur when Congress constructs a scheme of federal regulation "so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it"; or when an "Act of Congress ......
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