Minnesota ex rel. Hatch v. Fleet Mortg.
| Decision Date | 21 December 2001 |
| Docket Number | No. CIV. 01-48 ADM/AJB.,CIV. 01-48 ADM/AJB. |
| Citation | 181 F.Supp.2d 995 |
| Parties | State of MINNESOTA, by its Attorney General, Mike HATCH, Plaintiff, v. FLEET MORTGAGE CORPORATION, a South Carolina corporation, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Prentiss Cox, Esq., Assistant Attorney General, St. Paul, MN, appeared for and on behalf of Plaintiff.
Andrew L. Sandler, Esq., Gary DiBianco, Esq., Skadden Arps, Slate, Meagher & Flom, Washington, DC, Alan H. Maclin, Esq., Briggs and Morgan, St. Paul, MN, and Matthew D. Forsgren, Esq., Briggs and Morgan, Minneapolis, MN, appeared for and on behalf of Defendant.
John F. Daly, Esq., Federal Trade Commission, Washington, DC, appeared as Amicus Curiae on behalf of Plaintiff.
Frederick G. Petrick, Jr., Esq., Office of the Comptroller of the Currency, Washington, DC, Amicus Curiae on behalf of Defendant.
On October 2, 2001, the Motion to Dismiss for Lack of Subject Matter Jurisdiction [Doc. No. 42] of Defendant Fleet Mortgage Corporation ("FMC") was argued before the undersigned United States District Judge. For the reasons set forth below, the Motion to Dismiss is denied.
The State of Minnesota (the "State") brings suit against FMC under the Telemarketing Sales Rule, 16 C.F.R. §§ 310.1-310.7 ("TSR"). State attorneys general may enforce the TSR pursuant to 15 U.S.C. § 6103(a) against entities regulated by the Federal Trade Commission ("FTC"). For the Court to have subject matter jurisdiction, the FTC must have authority over FMC under § 133 of the Gramm-Leach-Bliley Act ("GLBA").
Both parties agree that the FTC has jurisdiction over non-banks, but no authority to enforce the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 41 et seq., against banks as a result of the bank exclusion language of 15 U.S.C. § 45(a)(2).1 Thus, under 15 U.S.C. § 6105(a), the TSR does not apply to regulate the activities of entities such as banks which are beyond the jurisdiction of the FTC Act. Fleet National Bank is a federally-chartered national bank, and FMC is a subsidiary of Fleet National Bank.2 DiBianco Decl., Exs. 1-4. The function of FMC is to "engage solely in mortgage loan servicing." Id., Ex. 2.
At issue is the bank/non-bank status of FMC. The State claims FMC is a non-bank, and seeks to assert FTC authority over FMC as non-bank subsidiary of a national bank. It argues that under § 133 of the GLBA, the TSR applies to FMC because FMC is "not itself a bank." The GLBA explains the dichotomy as follows:
Section 133. CLARIFICATION OF STATUS OF SUBSIDIARIES AND AFFILIATES
(a) Clarification of Federal Trade Commission Jurisdiction. — Any person that ... is controlled directly or indirectly by ... any bank ... ([as] defined in section 3 of the Federal Deposit Insurance Act) and is not itself a bank ... shall not be deemed to be a bank ... for purposes of any provisions applied by the Federal Trade Commission under the Federal Trade Commission Act.
GLBA, Pub.L. No. 106-102, 1113 Stat. 1383, Title I, § 133(a) (1999). The Federal Deposit Insurance Act defines a "bank" as "any national bank, State bank, District Bank, and any Federal branch and insured branch." 12 U.S.C. § 1813(a)(1)(A). This definition does not include national bank operating subsidiaries, and thus the State asserts that FMC is not itself a bank.3
FMC argues that as a national bank operating subsidiary, it does not qualify as a "non-bank." As such, FMC claims it is a bank, by virtue of being "effectively an incorporated department" of a bank. Def. Mem. in Supp. at 4. FMC suggests this status establishes that it is not, and never was, a FTC regulated entity. The argument is that banks and their operating subsidiaries are expressly excluded from coverage under the TSR, because the FTC Act prohibits FTC jurisdiction over "national banks" subject to the jurisdiction of the Office of the Comptroller of the Currency (the "OCC").4 FMC insists that the OCC regulatory scheme makes no distinction between operating subsidiaries and their parent national banks, causing them to fall effectively within the definition of a "bank." Def. Mem. in Supp. at 4, 7; Def. Resp. to FTC Mem. at 5. FMC urges the Court to defer to the OCC to determine the proper definition of "bank," rather than relying on the definition referenced in the text of § 133.
FMC also asserts that allowing the TSR to apply to FMC would expand FTC jurisdiction contrary to the intent of Congress.5 FMC avers that the FTC is barred from enforcing the TSR against entities previously under the jurisdiction of the OCC, and suggests that such OCC jurisdiction over bank operating subsidiaries has been, and must continue to be, exclusive. Def. Mem. in Supp. at 11. FMC suggests that the purpose of § 133 was merely to preserve the pre-existing jurisdiction of the FTC.6 FMC argues that the limited purpose of § 133 is to allow the FTC to retain jurisdiction over "non-bank businesses" that previously could not have been owned by banks, and that it was not intended to expand FTC authority to operating subsidiaries engaging in banking activities.
The State contends that the language of § 133 creates an understandable and easily-administered bright-line rule setting forth which entities the FTC has authority over, viz., any entity "not itself a bank." It reasons that to otherwise read into § 133 a distinction between "traditional" subsidiaries and newly delineated subsidiaries not engaging in banking activities would confuse the issue and subvert the intended goal of Congress in choosing the language it did. The Court agrees.
In interpreting the GLBA, the Court is guided by the principle that "[i]f the plain language of the statute is unambiguous, that language is conclusive absent clear legislative intent to the contrary." United States v. McAllister, 225 F.3d 982, 986 (8th Cir.2000) (quoting United States v. S.A., 129 F.3d 995, 998 (8th Cir.1997), cert. denied, 523 U.S. 1011, 118 S.Ct. 1200, 140 L.Ed.2d 329 (1998)) (internal citations omitted). Thus, if the intent of Congress can be discerned from the language of the statute, "the judicial inquiry must end." Id. Upon a finding that the statutory terms are unambiguous, further judicial inquiry is only called for in rare and exceptional circumstances where the application of the statute as written will produce a result demonstrably at odds with the intent of Congress. See Demarest v. Manspeaker, 498 U.S. 184, 190, 111 S.Ct. 599, 112 L.Ed.2d 608 (1991).
The language used in § 133 is not ambiguous. On a careful reading of the language, a clear meaning is attributable to the words used. Section 133 specifies that any entity controlled by a bank that is not itself a bank "shall not be deemed to be a bank." GLBA, § 133(a). FMC's argument hinges on a judicial interpretation that an operating subsidiary that is not itself a bank is "indistinguishable" from its parent bank as an "incorporated department." Def. Mem. in Supp. at 4. This is precisely what the plain language of § 133 dictates must not be done for purposes of provisions applied by the FTC under the FTC Act.
FMC's argument why it should be so deemed rests on the notion that operating subsidiaries somehow fall within the definition of a "bank." In support of FMC's argument, the OCC, as amicus, also argues that the properly understood definition of a "bank" should be the one created by the Federal Reserve 15 years ago. OCC Mem. at 7. The OCC argues that the Federal Reserve defined a "bank" to include, inter alia, "operating subsidiaries that are functionally equivalent to a department or division of the bank itself." Id.7 FMC agrees, stating that, as the primary supervisor for all national banks, the OCC treats operating subsidiaries the same as banks, subjecting them to all the banking law restrictions applicable to the parent banks.8 Def. Mem. in Supp. at 4. FMC also argues that deference should be accorded to the definition of the OCC regarding whether an operating subsidiary should be considered a part of the bank, and thus "itself a bank" by extension, because the OCC determines what activities are "banking activities" in order to regulate permissible acts of operating subsidiaries. Id. at 14. Under this scheme, FMC argues that the TSR does not apply to banks under the banking exclusion from FTC jurisdiction, and thus, since operating subsidiaries are "effectively" defined as banks, and therefore indistinguishable, the TSR does not apply to them either. Def. Resp. to FTC Mem. at 5.
These arguments are unavailing, however, because § 133 specifically identifies Congress' intended source for determining the proper definition of a "bank" for purposes of applying the section. The language of § 133 clearly and unambiguously applies to any bank or savings association "as such terms are defined in section 3 of the Federal Deposit Insurance Act." GLBA, § 133(a). Thus, the only relevant definition of "bank" is the one specified in § 133. The Federal Deposit Insurance Act defines a "bank" as "any national bank, State bank, District Bank, and any Federal branch and insured branch." 12 U.S.C. § 1813(a)(1)(A). There is no ambiguity present in this definition. The definition of "bank" identified by Congress simply does not include subsidiaries of banks. Therefore, FMC fits precisely into the category of entities described by the language of § 133 as an entity controlled by a bank that is not itself a bank according to the prescribed definition. This ordinary meaning of the words is presumed to express congressional purpose. United States v. Vig, 167 F.3d 443, 447 (8th Cir. 1999), cert. denied, 528 U.S. 859 (1999).
Because the plain language of § 133 has an unambiguous meaning on its face, only a "clearly expressed legislative intention to the contrary" can override that meaning. Id. The arguments of FMC do not rise to the level of identifying a clearly expressed ...
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