Rose v. Chase Manhattan Bank ( 2008 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DENISE ROSE, SCOTT RAITT, 
SALVADOR ABEYTA, and LEA REIS,
on behalf of themselves and all No. 05-56850
persons similarly situated,
Plaintiffs-Appellants,  D.C. No.
CV-05-0754-JVS
v. OPINION
CHASE BANK USA, N.A.,
Defendant-Appellee.

Appeal from the United States District Court
For the Central District of California
James V. Selna, District Judge, Presiding
Argued and Submitted
August 8, 2007—Pasadena, California
Filed January 23, 2008
Before: Alex Kozinski, Chief Judge, Johnnie B. Rawlinson,
Circuit Judge, and Harold Baer, Jr.,* Senior District Judge.
Opinion by Judge Baer
*The Honorable Harold Baer, Jr., Senior United States District Judge
for the Southern District of New York, sitting by designation.
999
1002 ROSE v. CHASE BANK USA
COUNSEL
Jeffrey Wilens, Lakeshore Law Center, Yorba Linda, Califor-
nia, for the plaintiffs-appellants.
Laurence J. Hutt, Howard N. Cayne, Nancy L. Perkins,
Arnold & Porter, Los Angeles, California, for the defendant-
appellee.
OPINION
BAER, Senior District Judge:
Plaintiffs-Appellants Denise Rose, Scott Raitt, Salvador
Abeyta, and Lea Reis (“Plaintiffs”), ostensibly on behalf of
themselves and all others similarly situated, appeal the district
court’s grant of judgment on the pleadings pursuant to Fed. R.
Civ. P. 12(c) to Defendant Chase Bank USA, N.A. (“Chase”
or “Defendant”) on all claims.1
We affirm the district court’s grant of judgment on the
pleadings on all claims.
I. BACKGROUND
The following facts are taken from Plaintiff’s First
Amended Complaint and are taken as true for the purpose of
reviewing a motion for judgment on the pleadings. See Torbet
1
Defendant Chase Bank USA, N.A. was formerly known as Chase Man-
hattan Bank USA, N.A., under which name Defendant was originally
sued.
ROSE v. CHASE BANK USA 1003
v. United Airlines, Inc., 298 F.3d 1087, 1089 (9th Cir. 2002)
(“Judgment on the pleadings is proper when, taking all the
allegations in the pleadings as true, the moving party is enti-
tled to judgment as a matter of law.”).
Plaintiffs, all California residents, brought this action on
behalf of an ostensible class of California holders of credit
cards issued by Chase. Chase, at various points after June 13,
2001, extended credit to its credit card holders by mailing
them a preprinted check or draft, more commonly known as
a “convenience check.” The “convenience checks” were (and
are) commonly attached to a letter or invitation from the bank,
and perforated so that they can be torn off and used. That con-
venience check, if torn off and cashed, resulted in a charge
against the user’s credit card account, as well as associated
finance charges or transaction fees. Plaintiffs cashed those
convenience checks and incurred those charges or fees.
Cal. Civ. Code § 1748.9, which became operative on July
1, 2000, provides in full:
(a) A credit card issuer that extends credit to a
cardholder through the use of a preprinted
check or draft shall disclose on the front of an
attachment that is affixed by perforation or
other means to the preprinted check or draft, in
clear and conspicuous language, all of the fol-
lowing information:
(1) That “use of the attached check or draft
will constitute a charge against your credit
account.”
(2) The annual percentage rate and the cal-
culation of finance charges, as required by
Section 226.16 of Regulation Z of the Code
of Federal Regulations, associated with the
use of the attached check or draft.
1004 ROSE v. CHASE BANK USA
(3) Whether the finance charges are trig-
gered immediately upon the use of the
check or draft.
According to Plaintiffs, when Chase mailed its credit card
holders a convenience check, Chase did not include or attach
language pursuant to Cal. Civ. Code § 1748.9(a)(1) that “use
of the attached check . . . will constitute a charge against
[Plaintiff’s] credit account.” Chase also did not disclose, pur-
suant to § 1748.9(a)(3), whether the finance charges would be
triggered immediately upon the use of the check. Id.
Plaintiffs accordingly brought three causes of action against
Chase. Plaintiffs’ first claim is that Chase violated Califor-
nia’s Unfair Competition Law (“UCL”), see Cal. Bus. & Prof.
Code § 17200 et seq., by committing an “unlawful” business
practice, owing to Chase’s alleged violations of Cal. Civ.
Code § 1748.9(a)(1) and (a)(3) when it failed to make the pur-
suant disclosures. Plaintiffs’ second claim is that Chase vio-
lated California’s UCL by committing a “fraudulent” business
practice, or engaging in “deceptive or misleading advertising”
when it failed to make those disclosures (regardless of
whether Chase’s actions violated Cal. Civ. Code § 1748.9).
Plaintiffs’ third claim is that Chase violated California’s UCL
by committing an “unfair” business practice when it failed to
make those disclosures (again, regardless of whether its
actions violated Cal. Civ. Code § 1748.9).
After removing the case to federal court, Chase moved for
judgment on the pleadings on all three of Plaintiffs’ claims.
Chase argued that the National Bank Act (“NBA”), 12 U.S.C.
§ 21 et seq., as well as regulations promulgated thereunder by
the federal Office of the Comptroller of the Currency
(“OCC”), see 12 CFR § 7.4008, preempt the California laws
upon which Plaintiffs based their three claims.
The National Bank Act provides, in relevant part, that
nationally chartered banks may exercise “all such incidental
ROSE v. CHASE BANK USA 1005
powers as shall be necessary to carry on the business of bank-
ing [such as] . . . by loaning money on personal security.” 12
U.S.C. § 24 (Seventh).
The OCC regulations at issue here, effective February 12,
2004,2 further provide that “[a] national bank may make, sell,
purchase, participate in, or otherwise deal in loans and inter-
ests in loans that are not secured by liens on, or interests in,
real estate, subject to such terms, conditions, and limitations
prescribed by the Comptroller of the Currency and any other
applicable Federal law.” 12 CFR § 7.4008(a).
Further, with regard to the applicability of state law, the
OCC regulations provide in relevant part:
(d) Applicability of state law.
(1) Except where made applicable by Fed-
eral law, state laws that obstruct, impair, or
condition a national bank’s ability to fully
exercise its Federally authorized non-real
estate lending powers are not applicable to
national banks.
(2) A national bank may make non-real
estate loans without regard to state law lim-
itations concerning . . .
(viii) Disclosure and advertising, includ-
ing laws requiring specific statements,
information, or other content to be
included in credit application forms,
credit solicitations, billing statements,
credit contracts, or other credit-related
documents . . .
2
See 69 Fed. Reg. 1904 (2004).
1006 ROSE v. CHASE BANK USA
12 CFR § 7.4008(d).
The district court, finding that the NBA and the OCC regu-
lations preempted Plaintiffs’ claims, granted Chase’s motion
for judgment on the pleadings in its entirety and entered judg-
ment on November 3, 2005. See Rose v. Chase Manhattan
Bank USA, N.A., 396 F. Supp. 2d 1116 (C.D. Cal. Oct. 27,
2005); ER 110-113 (district court’s judgment). Plaintiffs
timely appealed.
II. STANDARD OF REVIEW
This Court reviews de novo an order granting a motion for
judgment on the pleadings. See Milne ex rel. Coyne v. Stephen
Slesinger, Inc., 430 F.3d 1036, 1042 (9th Cir. 2005).
“[J]udgment on the pleadings is properly granted when, tak-
ing all the allegations in the pleadings as true, the moving
party is entitled to judgment as a matter of law.” Id. Concomi-
tantly, this Circuit reviews de novo a district court’s decision
that state claims are preempted by federal law. See Olympic
Pipe Line Co. v. City of Seattle, 437 F.3d 872, 877 n.12 (9th
Cir. 2006).
III. DISCUSSION
Plaintiffs primarily advance three contentions on appeal.
First, Plaintiffs contend that the NBA does not preempt Cal.
Civ. Code § 1748.9, and accordingly, because Defendants
have violated Cal. Civ. Code § 1748.9 and thus committed an
“unlawful” business practice within the meaning of Califor-
nia’s UCL, Plaintiffs’ first claim survives. Secondly, Plaintiffs
contend that the OCC regulations do not alternatively and
concurrently preempt Cal. Civ. Code § 1748.9, and thus
Plaintiffs’ first claim still survives. Third, Plaintiffs contend
that even if Plaintiffs’ first claim that alleges “unlawful” busi-
ness practices is preempted, Plaintiffs’ second and third
claims that allege “fraudulent” and “unfair” business prac-
ROSE v. CHASE BANK USA 1007
tices, respectively (without explicit reliance on Cal. Civ. Code
§ 1748.9) are not preempted.
Plaintiffs’ contentions, addressed below seriatim, are
rejected.
A. NBA Preemption of Cal. Civ. Code § 1748.9[1] “Nearly two hundred years ago . . . [the Supreme] Court
held federal law supreme over state law with respect to
national banking.” Watters v. Wachovia Bank, N.A., 127
S. Ct. 1559, 1566 (2007) (citing McCulloch v. Maryland, 17
U.S. 316 (1819)). “In 1864, Congress enacted the NBA,
establishing the system of national banking still in place
today.” Id. (citations omitted). The Act vested in nationally
chartered banks enumerated powers and “all such incidental
powers as shall be necessary to carry on the business of bank-
ing.” Id. (citing 12 U.S.C. § 24 (Seventh)). Those incidental
powers include the power to “loan money on personal securi-
ty,” which is at issue in the instant case. See 12 U.S.C. § 24(Seventh); see also Wells Fargo Bank N.A. v. Boutris, 419
F.3d 949, 959 n.13 (9th Cir. 2005).
[2] The Supreme Court has interpreted grants of “powers”
to national banks as “grants of authority not normally limited
by, but rather ordinarily pre-empting, contrary state law.”3
Watters, 127 S. Ct. at 1567 (citing Barnett Bank of Marion
County, N.A. v. Nelson, 517 U.S. 25, 32 (1996)); accord
Boutris, 419 F.3d at 956 (citing Bank of Am. v. City of San
Francisco, 309 F.3d 551, 558 (9th Cir. 2002)). Accordingly,
“the usual presumption against federal preemption of state
law is inapplicable to federal banking regulation.” Boutris,
419 F.3d at 956 (citing Bank of Am., 309 F.3d at 558-59); see
also Barnett Bank, 517 U.S. at 32.
3
If Congress enacts a federal statute with the intent to exercise its con-
stitutionally delegated authority to set aside the laws of a state, the
Supremacy Clause requires courts to follow federal, not state, law. See
Barnett Bank, 517 U.S. at 30 (citing U.S. Const. art. VI, cl.2).
1008 ROSE v. CHASE BANK USA
[3] “Federally chartered banks are subject to state laws of
general application in their daily business to the extent such
laws do not conflict with the letter or the general purposes of
the NBA.” Watters, 127 S. Ct. at 1567 (citing Atherton v.
FDIC, 519 U.S. 222, 223 (1997); Davis v. Elmira Sav. Bank,
161 U.S. 275, 290 (1896)); see also Bank of Am., 309 F.3d at
558-59. “However, ‘the States can exercise no control over
[national banks], nor in any wise affect their operation, except
in so far as Congress may see proper to permit. Any thing
beyond this is an abuse, because it is the usurpation of power
which a single State cannot give.’ ” Watters, 127 S. Ct. at
1567 (quoting Farmers’ and Mechanics’ Nat’l Bank v. Dear-
ing, 91 U.S. 29, 34 (1875)). “States are permitted to regulate
the activities of national banks where doing so does not pre-
vent or significantly interfere with the national bank’s or the
national bank regulator’s exercise of its powers. But when
state prescriptions significantly impair the exercise of author-
ity, enumerated or incidental under the NBA, the State’s regu-
lations must give way.” Id. (citing Franklin Nat’l Bank of
Franklin Square v. New York, 347 U.S. 373, 377-79 (1954);
Barnett Bank, 517 U.S. at 32-34); see also Boutris, 419 F.3d
at 963 (citing Bank of Am., 309 F.3d at 559).
[4] Accordingly, following Supreme Court precedent, we
have held that “normally Congress would not want States to
forbid, or to impair significantly, the exercise of a power that
Congress explicitly granted.” Bank of Am., 309 F.3d at 561
(citing Barnett Bank, 517 U.S. at 33). Congress, when it
enacted the NBA, explicitly granted such a power here. The
NBA specifically enumerates, without limitation, as one “in-
cidental power” of a national bank the power to “loan money
on personal security.” See 12 U.S.C. § 24 (Seventh); see also
Boutris, 419 F.3d at 959 n.13. That power to “loan money on
personal security” is the power pursuant to which Chase here
extends credit to its cardholders via convenience checks.
Where, as here, Congress has explicitly granted a power to a
national bank without any indication that Congress intended
for that power to be subject to local restriction, Congress is
ROSE v. CHASE BANK USA 1009
presumed to have intended to preempt state laws such as Cal
Civ. Code § 1748.9. See Barnett Bank, 517 U.S. at 33-35; see
also Franklin, 347 U.S. at 378; cf. Watters, 127 S. Ct. at 1570(“[I]n analyzing whether state law hampers the federally per-
mitted activities of a national bank, we have focused on the
exercise of a national bank’s powers.”) (emphasis in original).
[5] We are thus constrained by the holdings of Barnett
Bank and Franklin to find that the NBA preempts the disclo-
sure requirements of Cal. Civ. Code 1748.9, insofar as those
requirements apply to national banks.4 Accordingly, the dis-
trict court correctly found that Plaintiffs’ first claim under
California’s UCL must be dismissed, as Plaintiffs’ first claim
rests on the predicate that Chase’s actions are “unlawful”
under Cal. Civ. Code 1748.9.
B. Plaintiffs’ Second and Third UCL Claims
[6] Plaintiffs alternatively contend that even if their first
claim—that Chase committed “unlawful” business practices
—fails because Cal. Civ. Code § 1748.9 is preempted, their
second and third claims—that Chase committed “deceptive”
or “unfair” business practices—survive because those claims
are not predicated on a violation of § 1748.9. Regardless of
the nature of the state law claim alleged, however, the proper
inquiry is whether the “legal duty that is the predicate of”
Plaintiffs’ state law claim falls within the preemptive power
of the NBA or regulations promulgated thereunder. See Cipol-
lone v. Liggett Group, Inc., 505 U.S. 504, 524 (1992). Here,
from the face of Plaintiffs’ complaint, the district court cor-
4
Plaintiffs alternatively contended on appeal that we should remand to
the district court for further discovery regarding the issue of whether the
state law constitutes a “significant” impairment or interference with the
purposes of the National Bank Act. Given the prior holdings of Barnett
Bank and Franklin, however, it appears that no amount of discovery
would change the central holding that Congress intended for the NBA to
preempt state restrictions on national banks such as Cal. Civ. Code
§ 1748.9 here.
1010 ROSE v. CHASE BANK USA
rectly found that Defendants’ alleged legal duties that underlie
Plaintiffs’ UCL claims for “deceptive” or “unfair” business
practices are the same purported duties to disclose imposed by
Cal. Civ. Code § 1748.9, and that are preempted by the NBA
and OCC regulations. See Rose v. Chase Manhattan Bank
USA, N.A., 396 F. Supp. 2d at 1123. Accordingly, the district
court correctly dismissed Plaintiffs’ second and third claims.
IV. CONCLUSION
The district court’s grant of judgment on the pleadings to
Defendant on all claims is AFFIRMED.