Parks v. MBNA Am. Bank, N.A., G040798.

Citation184 Cal.App.4th 652,109 Cal.Rptr.3d 248
Decision Date01 September 2010
Docket NumberNo. G040798.,G040798.
PartiesAllan PARKS, Plaintiff and Appellant, v. MBNA AMERICA BANK, N.A., Defendant and Respondent.
CourtCalifornia Court of Appeals

Rosner & Mansfield, Michael R. Vachon, San Diego; Law Office of Michael R. Vachon and Michael R. Vachon for Plaintiff and Appellant.

Arnold & Porter, Laurence J. Hutt, Los Angeles, Teri R. Richardson, and Christopher S. Tarbell, Los Angeles, for Defendant and Respondent.

Edmund G. Brown Jr., Attorney General, Frances T. Grunder, Assistant Attorney General, Kathrin Sears and Sheldon H. Jaffe, Deputy Attorneys General, for the Attorney General of the State of California as Amicus Curiae upon the request of the Court of Appeal.

Horace G. Sneed, Director of Litigation, and Douglas B. Jordan, Senior Counsel, for the Office of the Comptroller of the Currency Administrator of National Banks as Amicus Curiae upon the request of the Court of Appeal.

OPINION

IKOLA, J.

Civil Code section 1748.9 (section 1748.9) requires credit card issuers engaged in extending credit to cardholders by means of a "preprinted check or draft" (known as "convenience checks" in the industry) to "disclose on the front of an attachment that is affixed by perforation or other means to the preprinted check or draft, in clear and conspicuous language, all of the following information: [¶] (1) That 'use of the attached check or draft will constitute a charge against your credit account.' [¶] (2) The annual percentage rate and the calculation of finance charges, as required by Section 226.16 of Regulation Z of the Code of Federal Regulations, associated with the use of the attached check or draft. [¶] (3) Whether the finance charges are triggered immediately upon the use of the check or draft."

Alleging systematic violations of section 1748.9, plaintiff Allan Parks filed a class action lawsuit against defendant MBNA America Bank, N.A. (MBNA) 1 for its purportedly unlawful business practices under Business and Professions Code section 17200 et seq. MBNA is a national banking association, organized under the laws of the United States and regulated by the Office of the Comptroller of the Currency (OCC). (See 12 U.S.C. § 1 et seq.) The trial court granted judgment on the pleadings to MBNA, following Rose v. Chase Bank USA, N.A. (9th Cir.2008) 513 F.3d 1032 ( Rose ) in finding section 1748.9 preempted by federal law applicable to national banks. We conclude section 1748.9 is not, on its face, preempted and therefore reverse. Section 1748.9 does not preclude national banks from exercising their authority to lend money on personal security under section 24 of title 12 of the United States Code (Seventh). Furthermore, without a factual record, a court cannot conclude that section 1748.9 significantly impairs national banks' authorized activities.2

FACTS

As the court granted judgment on the pleadings to MBNA, we assume the truthof, and liberally construe, all properly pleaded factual allegations in Parks's complaint. ( Stone Street Capital, LLC v. California State Lottery Com. (2008) 165 Cal.App.4th 109, 116, 80 Cal.Rptr.3d 326 ( Stone Street ).)

In February 2003, MBNA issued a credit card to Parks. MBNA sent several preprinted drafts to his residence (and the residences of other similarly situated proposed class members) in late 2003. The drafts sent to Parks and the other proposed class members did not contain any of the three disclosures required by section 1748.9. Parks used two of the preprinted drafts; other proposed class members used drafts sent to them. Parks (and the other class members) incurred finance charges and interest charges for each transaction, as interest accrued as of the date of the transactions (there was no "grace period" as is typical in credit card transactions).

Parks, on behalf of himself and all others similarly situated, sued MBNA in June 2004 for its alleged violations of Business and Professions Code section 17200 et seq. Several years into the litigation, MBNA renewed a previously rejected motion for judgment on the pleadings, basing its renewed motion on subsequent case lawRose, supra, 513 F.3d 1032. The court granted MBNA's motion and entered judgment against Parks.

DISCUSSION

We review the judgment de novo, as it was based on the trial court's grant of MBNA's motion for judgment on the pleadings. ( Stone Street, supra, 165 Cal.App.4th at p. 116, 80 Cal.Rptr.3d 326.)

In all material respects, Rose, supra, 513 F.3d 1032, is factually identical to the case before us. In Rose, class action plaintiffs sued Chase Bank USA, N.A. (Chase) for its alleged violations of section 1748.9. ( Rose, at pp. 1034-1035.) The convenience checks provided by Chase to its cardholders lacked disclosures required under section 1748.9. ( Rose, at p. 1035.) The district court granted Chase's motion for judgment on the pleadings and the Ninth Circuit Court of Appeals affirmed. ( Id. at p. 1036.) Both courts held federal law preempted section 1748.9 as applied to national banks. ( Rose, at pp. 1037-1038; Rose v. Chase Manhattan Bank USA (C.D.Cal.2005) 396 F.Supp.2d 1116, 1122-1123.)

[1] Parks asserts Rose was wrongly decided. We are not bound to follow federal court precedent; however, " 'numerous and consistent' " federal decisions may be particularly persuasive when they interpret federal law. ( Etcheverry v. Tri-Ag Service, Inc. (2000) 22 Cal.4th 316, 320-321, 93 Cal.Rptr.2d 36, 993 P.2d 366, overruled on another ground in Bates v. Dow Agrosciences LLC (2005) 544 U.S. 431, 437, 452, 125 S.Ct. 1788, 161 L.Ed.2d 687.) If we are persuaded federal law preempts section 1748.9 as applied to national banks, the supremacy clause (U.S. Const., art. VI, cl. 2) obligates this court to honor federal law by holding section 1748.9 inapplicable to MBNA.

Uncontroverted Legal Framework

[2] We begin our analysis by setting forth several uncontroversial propositions. First, "federal law can preempt state law in one of three ways: (1) expressly; (2) by actually conflicting with state law; or (3) by exclusively occupying a legislative field." ( Miller v. Bank of America, N.A. (2009) 170 Cal.App.4th 980, 984, 88 Cal.Rptr.3d 723 ( Miller ).)

[3][4][5] Second, federal banking law sometimes, but not always, preempts state regulation as applied to national banks. "Business activities of national banks arecontrolled by the National Bank Act (NBA or Act), 12 U.S.C. § 1 et seq., and regulations promulgated thereunder by the [OCC]. [Citations.] As the agency charged by Congress with supervision of the NBA, OCC oversees the operations of national banks and their interactions with customers." ( Watters v. Wachovia Bank, N.A. (2007) 550 U.S. 1, 6, 127 S.Ct. 1559, 167 L.Ed.2d 389 ( Watters ).) "[F]ederal control shields national banking from unduly burdensome and duplicative state regulation. [Citations.] Federally chartered banks are subject to state laws of general application in their daily business to the extent such laws do not conflict with the letter or the general purposes of the NBA." ( Id. at p. 11, 127 S.Ct. 1559.)

Third, national banks are authorized by the NBA "to carry on the business of banking ... by loaning money on personal security...." (12 U.S.C. § 24 (Seventh).) It is uncontested that federal law authorizes MBNA to extend credit by way of convenience checks to Parks and other credit card customers. (Cf. Smiley v. Citibank (1995) 11 Cal.4th 138, 146-147, 44 Cal.Rptr.2d 441, 900 P.2d 690 ["It is clear that national banks are authorized to conduct credit card programs, to issue credit cards to holders, and to provide money thereunder to such persons and to others on their behalf in exchange for goods or services"].) But there is no reference to state law in the text of the NBA with regard to the business of loaning money on personal security. The NBA does not explicitly answer whether state law requiring particular disclosures in connection with convenience checks is preempted.

Fourth, OCC issued regulations in 2004 that purport to explain which state laws pertaining to non-real estate lending powers of national banks are preempted. In relevant part, these regulations provide: "(1) Except where made applicable by Federal law, state laws that obstruct, impair, or condition a national bank's ability to fully exercise its Federally authorized non-real estate lending powers are not applicable to national banks. [¶] (2) A national bank may make non-real estate loans without regard to state law limitations concerning: [¶] ... [¶] (viii) Disclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents." (12 C.F.R. § 7.4008(d) (2010).) "State laws on the following subjects are not inconsistent with the non-real estate lending powers of national banks and apply to national banks to the extent that they only incidentally affect the exercise of national banks' non-real estate lending powers: [¶] (1) Contracts; [¶] (2) Torts; [¶] (3) Criminal law; [¶] (4) Rights to collect debts; [¶] (5) Acquisition and transfer of property; [¶] (6) Taxation; [¶] (7) Zoning; and [¶] (8) Any other law the effect of which the OCC determines to be incidental to the non-real estate lending operations of national banks or otherwise consistent with the powers set out in paragraph (a) of this section." (12 C.F.R. § 7.4008(e) (2010) fn. omitted.) 3

Fifth, the federal Truth in Lending Act (TILA), title 15 of the United States Code section 1601 et seq., and its accompanying regulations (Regulation Z), 12 Code of Federal Regulations part 226.1 (2009) et seq., require specific disclosures by businesses offering consumer credit (includingnational banks issuing credit cards). TILA grants the Board of Governors of the Federal Reserve System (and not OCC) power to prescribe regulations and...

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