Supreme Court Update for Banking and Financial Services Professionals:

by Charles W. Prueter

The Supreme Court soon may take up an important case focusing on the balance of power in the NBA. No, it is not a challenge to the monopoly that the Golden State Warriors currently have on talent and championships in the National Basketball Association. Instead, as you might have guessed, the NBA at the center of this case — Bank of America, N.A. v. Lusnak, No. 18-212 — is the National Bank Act, the federal law at the foundation of the national banking system.

For those who might be unfamiliar, I say “soon may take up” because the Court has not yet decided whether to hear the case. That is, in Supreme Court parlance, the Court has not yet granted a “writ of certiorari.” There is no right in this country to have a case decided by the Supreme Court; the Supreme Court itself gets to decide which cases to hear and resolve. The process by which the Supreme Court makes such a decision starts with a “petition for a writ of certiorari” from the party that loses at the intermediate court of appeals. The justices then collectively decide, in essence, whether the case is of exceptional national importance such that a ruling from the Supreme Court is warranted. This is where Bank of America now finds itself.

In its petition, Bank of America challenges the lawfulness of a California law that requires banks to pay two percent interest on customers’ mortgage loan escrow funds. At the core of its argument, Bank of America contends that the National Bank Act, which created a system of federally chartered national banks that derive their banking powers from federal law and are extensively regulated by the federal government, preempts all state laws regulating national bank loan terms, including California’s law requiring payment of interest on mortgage loan escrow accounts. Bank of America argues that, under federal law, national banks may exercise mortgage-lending authority without regard to state law limitations concerning escrow accounts and that, therefore, national banks need not comply with California’s burdensome regulatory scheme.

Bank of America therefore asks the Court to take up this case in order to reaffirm the centrality and authoritativeness of the National Bank Act on the national banking scene. More broadly, as we often see in cases decided by the Supreme Court, the issue here involves a power struggle between the federal government and a state government. In Bank of America’s view, this is an issue of exceptional importance to the national banking system and therefore warrants Supreme Court review. Almost certainly, those in the banking and financial services industries who work within the national banking system would prefer the uniformity that comes with the National Bank Act over the variety of regulatory schemes that might be imposed by various states if California’s escrow-interest law were to survive in this case. Thus, readers will want to follow Bank of America v. Lusnak, and the Update certainly will return to the issue if the Court decides to hear and decide the case this Spring.

Charles W. Prueter is a trial and appellate lawyer at Waller Lansden Dortch & Davis, LLP, in Birmingham. He can be reached by email at