National banks should be unhappy with the Supreme Court’s new removal decision

By Stephen A. Fogdall

At one time, regulations issued by the Office of the Comptroller of the Currency prohibited state officials from bringing enforcement actions against national banks under state law. The OCC perceived such actions as an exercise of “visitorial powers,” which state officials might assert over their own state-charted banks, but which they could not assert over national banks. Then, in 2009, the U.S. Supreme Court decided Cuomo v. Clearing House Association, L.L.C. That decision rejected the OCC’s position and held that a national bank can be sued by a state attorney general acting to enforce a state law against the bank (at least if the state law is not itself substantively preempted by federal law).

While Clearing House left national banks exposed to state enforcement actions, it said nothing about where these actions could be litigated. Some federal courts interpreted a provision of the Class Action Fairness Act in a way that would permit a national bank to remove such actions from state court to federal court. This provision states that a so-called “mass action” — meaning an action “in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact” — is removable to federal court so long as it meets the removal requirements otherwise applicable to class actions. Some courts, including the U.S. Court of Appeals for the Fifth Circuit, interpreted the language “100 or more persons” to include not only cases involving 100 or more named plaintiffs, but also cases seeking monetary relief on behalf of 100 or more real parties in interest. On this interpretation, an enforcement action filed by a state attorney general seeking monetary relief on behalf of residents of a state would be removable under CAFA, provided at least 100 residents were putatively entitled to relief.

Last week, the U.S. Supreme Court unanimously rejected this interpretation in Mississippi ex rel. Hood v. AU Optronics Corp. The Court held that “100 or more persons” in CAFA means 100 or more named plaintiffs. In a typical enforcement action brought by a state attorney general, there is only one named plaintiff (the attorney general). Thus, the Court concluded, such an action is not removable as a “mass action” under CAFA.

The combined effect of Clearing House and AU Optronics is that national banks now not only are subject to enforcement actions brought by state attorneys general under state law, but they will generally be stuck litigating such actions in state court.

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