State Farm Bank v. Reardon
| Decision Date | 22 August 2008 |
| Docket Number | No. 07-4260.,07-4260. |
| Citation | 539 F.3d 336 |
| Parties | STATE FARM BANK, FSB and George Meinberg, Plaintifs-Appellants, v. John B. REARDON, Superintendent of the Ohio Division of Financial Institutions, in his official capacity, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
the Ohio Attorney General, Columbus, Ohio, for Appellee. Daniel Mosteller, Center for Responsible Lending, Washington, D.C., Stefan L. Jouret, Donovan Hatem, Boston, Massachusetts, Dirk S. Roberts, Office of Chief Counsel, Office of Thrift Supervision, Washington, D.C., for Amici Curiae.
Before: ROGERS and McKEAGUE, Circuit Judges; ADAMS, District Judge.*
State Farm Bank, a federal savings association and a wholly owned subsidiary of State Farm Mutual Automobile Insurance Co., offers mortgage products and banking services to individuals throughout the United States. State Farm Bank does not maintain any "brick and mortar" branch offices that are open to the public; rather, it solicits and markets its mortgage products and banking services through its existing network of independent and exclusive insurance agents who have been specially trained to serve as mortgage lending and banking agents. The State of Ohio believes that State Farm Bank's exclusive agents must comply with the licensing and registration requirements set forth in the Ohio Mortgage Broker Act ("the Ohio Act"), Ohio Revised Code § 1322.01 et seq.
State Farm Bank argues that federal law governing the operations of federal savings associations preempts the application of the Ohio Act to its exclusive agents. The Office of Thrift Supervision ("the OTS"), the federal agency charged with regulating federal savings associations, issued an opinion letter ("the OTS Opinion") agreeing with State Farm Bank. Notwithstanding the OTS Opinion, the defendant-appellee, John B. Reardon, Superintendent of the Ohio Division of Financial Institutions ("the Superintendent"), declined to exempt State Farm Bank's exclusive agents from compliance with the Ohio Act. State Farm Bank and one of its Ohio-based agents filed this action in the United States District Court for the Southern District of Ohio, seeking declaratory and injunctive relief. The district court held that federal law does not preempt the application of the Ohio Act to State Farm Bank's exclusive agents. We disagree and REVERSE.1
During the district court proceedings, the parties stipulated to the following facts:
1. Plaintiff State Farm Bank, F.S.B. is a federal savings association chartered by the OTS under the Home Owners' Loan Act, 12 U.S.C. § 1461 et seq.
2. Under the Home Owners' Loan Act, the OTS, an office within the United States Department of Treasury, regulates, supervises and examines State Farm Bank 3. State Farm Bank is a wholly owned subsidiary of State Farm Mutual Automobile Insurance Company ("State Farm Mutual") and is headquartered in Bloomington, Illinois.
4. State Farm Bank offers financial products and services, including first and second mortgages and home equity lines of credit, to customers and potential customers nationwide. However, State Farm Bank does not maintain any branches, nor does it maintain any Bank offices that are open to the public.
5. State Farm Bank markets its financial products and services to the public primarily through independent contractors, who are also licensed insurance agents of State Farm Mutual and who market insurance exclusively for or as otherwise authorized by State Farm Mutual. The majority of State Farm Bank's independent contractor agents are individuals who maintain sole proprietorships, but some of the independent contractor agents are incorporated businesses.
6. State Farm Bank requires each independent contractor agent who acts on behalf of State Farm Bank to enter into an exclusive agency agreement with State Farm Bank under which the contractor is permitted to market bank products and services only for State Farm Bank and not for any other banking or lending institution.
7. The State Farm Bank independent contractor agents provide information to customers regarding the financial products and services offered by State Farm Bank and assist customers in completing and submitting applications for loans to State Farm Bank. The independent contractor agents do not, however, evaluate loan applications, apply underwriting criteria, make lending decisions, or receive loan payments; those activities are performed by employees of State Farm Bank's loan operations office (in St. Louis, Missouri).
8. State Farm Bank requires its independent contractor agents to complete prescribed in-house education and training programs, including training directed to compliance with applicable federal statutes, federal regulations, and OTS requirements related to the financial services and products offered by State Farm Bank. Such training programs have been reviewed by the OTS during the course of its examination of State Farm Bank and its independent contractor agents.
9. 12 U.S.C. § 1463(a)(1) requires the Director of the OTS to provide for the examination, safe and sound operation, and regulation of savings associations.
10. Pursuant to 12 U.S.C. § 1464(d)(7)(D), if a savings association causes any authorized service to be performed for the savings association by a person who is not a service company or subsidiary owned at least in part by the savings association (e.g., an independent contractor of the savings association such an as independent contractor agent of State Farm Bank), the performance of the service is subject to examination by the Director of OTS to the same extent as if the services were being performed by the savings association on its own premises.
11. Plaintiff George Meinberg is an independent contractor agent of State Farm Bank and is engaged in the marketing of State Farm Bank's deposit products and services, but currently not mortgage loan products and services, in the State of Ohio.
12. State Farm Bank intends to offer, through its independent contractor agents, first and second mortgages and home equity loans in the State of Ohio.
13. Ohio Revised Code § 1322.01 et seq. requires persons who are not employees of depository institutions or subsidiaries or certain affiliates of depository institutions and who assist others in getting loans secured by mortgages on the borrowers' residences to obtain and maintain state mortgage broker licenses.
14. On October 25, 2004, the OTS issued a formal opinion to State Farm Bank stating that: (1) State Farm Bank's exclusive independent contractor agents are subject to regulation, examination, and oversight by the OTS, and (2) federal law preempts state-level laws (including the laws and regulations of the State of Ohio) that might otherwise apply to the banking-related activities of State Farm Bank's exclusive independent contractor agents ("the OTS Opinion").
15. State Farm Bank notified the Superintendent of the OTS Opinion that state mortgage broker licensing and related requirements are preempted with respect to the independent contractor agents of State Farm Bank. In the notice, State Farm Bank provided the Superintendent with a copy of the OTS Opinion.
16. The Superintendent does not propose to examine or otherwise regulate State Farm Bank.
17. On its face, Ohio Revised Code § 1322.01 et seq. is applicable to and enforceable by the Superintendent against the independent contractor agents of State Farm Bank.
State Farm Bank filed this action after the Superintendent refused to exempt State Farm Bank's exclusive agents from compliance with the Ohio Act, despite the OTS Opinion that federal law preempts application of the Ohio Act to the agents. After stipulating to the facts set forth above, the parties submitted the case to the district court on cross motions for summary judgment. The district court issued an opinion on October 10, 2007, rejecting State Farm Bank's arguments and holding that its exclusive agents were required to comply with the Ohio Act. The district court declined to follow the analysis set forth by the United States District Court for the District of Connecticut in State Farm Bank, FSB v. Burke, 445 F.Supp.2d 207, 219-20 (D.Conn.2006). The Burke court held—in a virtually identical case—that federal law preempted the application of Connecticut's mortgage broker law to State Farm Bank's exclusive agents. Unlike the Burke court, which deferred to an opinion by OTS that Connecticut's law was preempted, the district court here refused to defer to the OTS's conclusion that federal law preempts the application of the Ohio Act to State Farm Bank's exclusive agents. The district court largely declined to defer because it viewed the OTS Opinion as a legislative rule subject to notice and comment under the Administrative Procedures Act, 5 U.S.C. § 553(d)(2). The district court also independently reviewed applicable federal law and held that preemption was not warranted. State Farm Bank timely appealed.
A district court's decision granting summary judgment on the issue of preemption is reviewed de novo. Millsaps v. Thompson, 259 F.3d 535, 537 (6th Cir. 2001).
Although the parties and the amici curiae have submitted voluminous briefs addressing a number of topics, the ultimate question in this case is relatively straightforward:...
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