Supreme Court Decides Cuomo v. The Clearing House Ass'n

On June 29, the Supreme Court decided Cuomo v. The Clearing House Ass'n, No. 08-453.

Eliot Spitzer, then attorney general for the State of New York, sent letters in 2005 to several national banks requesting production of information about their lending practices in order to evaluate whether the banks had violated the state's fair-lending laws. The banks, together with the Office of the Comptroller of the Currency (OCC) and the Clearing House Association, a banking trade group, sued to enjoin the request, arguing that it was preempted by an OCC regulation implementing the National Bank Act, 12 U.S.C. § 484(a).

Section 484(a) states that "[n]o national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice," or as directed by Congress or its committees. The OCC, implementing § 484(a), issued a regulation stating, in pertinent part, that "State officials may not exercise visitorial powers with respect to national banks, such as conducting examinations, inspecting or requiring the production of books or records of national banks, or prosecuting enforcement actions, except in limited circumstances authorized by federal law." 12 C.F.R. § 7.4000(a)(1) (emphasis added).

The Supreme Court held, with an unusual 5-4 alignment, that the OCC's regulation extending National Bank Act preemption to state enforcement actions is an unreasonable interpretation of the statutory ban on state exercise of "visitorial powers" and is therefore invalid under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Our cases, said the Court, have always understood "visitation" as the right to oversee corporate affairs, quite separate from the power to enforce the law. States, moreover, have always enforced their general laws against national banks. "On a pragmatic level, the difference between visitation and law enforcement is clear. If a State chooses to pursue enforcement of its laws in court, then it is not exercising its power of visitation and will be treated like a litigant." The "critical question" is not what the bank is being compelled to do, but "what sovereign power has been invoked to compel it."

In the case before the Court, the New York attorney general had invoked his own authority to subpoena documents, independent of litigation. "That is not the exercise of the power of law enforcement . . . which 12 U.S.C. § 484(a) exempts from the bank on exercise of supervisory power." The Court therefore affirmed the lower courts' injunction against the information requests. The Court vacated the injunction, however, "insofar as it prohibits the Attorney General from bringing judicial enforcement actions."

Justice Scalia delivered the opinion of the Court, in which Justices Stevens, Souter, Ginsburg, and Breyer joined. Justice Thomas filed an opinion concurring in part and dissenting in part, in which the Chief Justice and Justices Kennedy and Alito joined.