Watters v. Wachovia Bank, N.A. et al.,

National banking trade associations

In the recently decided Supreme Court case Watters v. Wachovia Bank, N.A. et al., No. 05-1342, -- S. Ct. --, 2007 WL 1119539 (Apr. 17, 2007), our attorneys filed an amicus brief on behalf of all of the major national banking trade associations, as well as almost 60 state banking trade associations. In an extremely significant decision, the Court held that preemption of state law by the National Bank Act (NBA) extends not only to national banks, but also to "operating subsidiaries" of such banks. In reaching that conclusion, the Court explicitly accepted the key arguments made our firm's amicus brief. First, we argued that preemption under the NBA occurs whenever state law interferes with the exercise of federally authorized national bank powers, irrespective of the corporate structure of the entity exercising those powers. Embracing this argument, the Court found: "We have never held that the preemptive reach of the NBA extends only to a national bank itself. Rather, in analyzing whether state law hampers the federally permitted activities of a national bank, we have focused on the exercise of a national bank's powers, not on its corporate structure."  Second, we argued that the Court need not reach the difficult question of whether judicial deference was due to the preemption regulations of the Office of the Comptroller of the Currency (OCC), because preemption flows from the NBA itself. Accepting this argument, the Court stated that deference to the OCC's preemption regulation "is beside the point . . . [The OCC's regulation] merely clarifies and confirms what the NBA already conveys." The Court's focus on national bank powers and the broad scope of preemption by the NBA itself provides a firm basis for preemption of state law in future cases where, even if the state law at issue does not directly apply to national banks, it nevertheless has an impact on the exercise of their banking powers.

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