Kronemeyer v. U.S. Bank National Assoc. ( 2006 )


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  •                   NOTICE                          NO. 5-05-0374
    Decision filed 07/05/06. The text of
    this decision may be changed or                     IN THE
    corrected prior to the filing of a
    Petition   for    Rehearing   or   the   APPELLATE COURT OF ILLINOIS
    disposition of the same.
    FIFTH DISTRICT
    ___________________________________________________________________________
    KENNETH KRONEMEYER and DARRYL L. ) Appeal from the
    JOHNSON, Individually and as the        ) Circuit Court of
    Representatives of a Class of Similarly ) Madison County.
    Situated Persons,                       )
    )
    Plaintiffs-Appellees,                )
    )
    v.                                      ) No. 04-L-229
    )
    U.S. BANK NATIONAL ASSOCIATION,         ) Honorable
    ) Nicholas G. Byron,
    Defendant-Appellant.                 ) Judge, presiding.
    __________________________________________________________________________
    PRESIDING JUSTICE SPOMER delivered the opinion of the court:
    We granted the petition of the defendant for leave to appeal the denial of its motion to
    dismiss count I of the plaintiffs' third amended complaint, based on the following questions
    certified by the circuit court of Madison County pursuant to Illinois Supreme Court Rule 308
    (155 Ill. 2d R. 308): (1) whether the plaintiffs' claims are preempted under the National Bank
    Act (12 U.S.C. '93a (2000)) and the regulations and regulatory interpretations issued
    thereunder by the Office of the Comptroller of the Currency (OCC) and (2) whether the
    circuit court has jurisdiction to review whether the OCC correctly interpreted its own
    regulation or whether that review lies within the exclusive jurisdiction of the federal courts
    pursuant to the Administrative Procedure Act (5 U.S.C. '701 et seq. (2000)).
    For the reasons set forth below, we decline to reach the issue certified on appeal with
    regard to the plaintiffs' claim for wrongful dishonor under section 4-402 of the Uniform
    Commercial Code (810 ILCS 5/4-402 (West 2004)) because the plaintiffs lack standing to
    1
    bring that claim. As to the plaintiffs' remaining claims, we answer the preemption question
    in the affirmative and therefore decline to rule on the jurisdictional question. Accordingly,
    we reverse the order of the circuit court that denied the defendant's motion to dismiss.
    The facts necessary for our disposition of this appeal are as follows. On December 10,
    2004, the plaintiffs, Kenneth Kronemeyer and Darryl Johnson, filed a first amended class
    action complaint in the circuit court of Madison County, alleging that the defendant, U.S.
    Bank National Association (U.S. Bank), regularly charges a fee of $10 to persons who do not
    have accounts at U.S. Bank and who present for payment checks drawn by its depositors.
    The complaint further alleges that on several occasions the plaintiffs presented checks for
    payment at U.S. Bank offices in Madison and St. Clair Counties, that the checks were drawn
    on U.S. Bank checking accounts, and that the plaintiffs were named payees. Upon
    presentment, the plaintiffs were charged the $10 fee. The complaint seeks to establish a
    nationwide class of individuals who paid U.S. Bank a fee when presenting for payment a
    check drawn on a U.S. Bank account. Count I of the plaintiffs' complaint purports to state a
    cause of action for wrongful dishonor pursuant to section 4-402 of the Uniform Commercial
    Code (810 ILCS 5/4-402 (West 2004)). Count II alleges a violation of the Consumer Fraud
    and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2004)). Count III sets
    forth a common law cause of action under a theory of unjust enrichment.
    On January 24, 2005, U.S. Bank filed a motion to dismiss pursuant to section 2-619
    or, in the alternative, pursuant to section 2-615 of the Illinois Code of Civil Procedure (735
    ILCS 5/2-619, 2-615 (West 2004)). In its motion to dismiss, U.S. Bank argued, inter alia,
    that the plaintiffs did not have standing to assert a cause of action for wrongful dishonor
    under section 4-402 of the Uniform Commercial Code (810 ILCS 5/4-402 (West 2004)). In
    addition, U.S. Bank argued that all the plaintiffs' claims are preempted by the National Bank
    Act (12 U.S.C. '93a (2000)) and the regulations and regulatory interpretations issued
    2
    thereunder by the OCC. Finally, U.S. Bank argued that to the extent that the plaintiffs were
    challenging the regulatory interpretation of the OCC, exclusive jurisdiction lies with the
    federal courts pursuant to the Administrative Procedure Act (5 U.S.C. '701 et seq. (2000)).
    After full briefing by the parties, a hearing was held on May 13, 2005, on U.S. Bank's
    motion to dismiss. At that time, the circuit court entered an order denying U.S. Bank's
    motion to dismiss. On June 8, 2005, U.S. Bank filed an unopposed motion to certify the
    preemption and jurisdiction issues for interlocutory appeal pursuant to Illinois Supreme Court
    Rule 308 (155 Ill. 2d R. 308), and an order was entered granting the motion and certifying
    the issues. Thereafter, we granted the petition of the defendant for leave to appeal.            eW
    begin our analysis of the certified questions at issue with a discussion of the applicable
    standard of review. This court's examination of an interlocutory appeal is usually limited to
    the questions certified by the trial court and, as with all questions of law, is a de novo review.
    Thompson v. Gordon, 
    356 Ill. App. 3d 447
    , 451 (2005), aff'd, No. 100600 (June 2, 2006).
    Thus, in most circumstances, our task is to answer the certified question rather than to rule on
    the propriety of the underlying order. 
    Thompson, 356 Ill. App. 3d at 451
    . In the interests of
    judicial economy and reaching an equitable result, however, we may go beyond the certified
    question and consider the appropriateness of the order giving rise to the appeal. 
    Thompson, 356 Ill. App. 3d at 451
    . We find this to be such a case.
    Count I of the plaintiffs' complaint alleges a cause of action for wrongful dishonor
    under section 4-402 of the Uniform Commercial Code (810 ILCS 5/4-402 (West 2004)).
    Section 4-402(b) of the Uniform Commercial Code provides, "A payor bank is liable to its
    customer for damages proximately caused by the wrongful dishonor of an item." 810 ILCS
    5/4-402(b) (West 2004). The Uniform Commercial Code defines the word "customer" as "a
    person having an account with a bank or for whom a bank has agreed to collect items,
    including a bank that maintains an account at another bank." 810 ILCS 5/4-104(a)(5) (West
    3
    2004). Section 4-402(b) confers no cause of action on the holder of an allegedly dishonored
    item. Accordingly, the plaintiffs have no standing to pursue a cause of action against U.S.
    Bank for a wrongful dishonor. Because the plaintiffs lack standing, there is no reason to
    determine whether the plaintiffs' claim for wrongful dishonor is preempted by federal law.
    We now turn to the issue of whether the plaintiffs' remaining claims against U.S. Bank
    are preempted by the National Bank Act (12 U.S.C. '93a (2000)) and the regulations and
    regulatory interpretations issued thereunder by the OCC. The United States Supreme Court
    has held that where state law interferes with a power which national banks are authorized to
    exercise, the state law irreconcilably conflicts with the federal law and is preempted by
    operation of the supremacy clause (U.S. Const., art. VI, cl. 2). Barnett Bank of Marion
    County, N.A. v. Nelson, 
    517 U.S. 25
    , 31, 
    134 L. Ed. 2d 237
    , 244, 
    116 S. Ct. 1103
    , 1108
    (1996). Therefore, in the case at bar, to determine whether the plaintiffs' claims stand in
    conflict with federal law, we must first determine whether federal law authorizes U.S. Bank
    to charge the fee that is the basis for the plaintiffs' claims.
    The plaintiffs do not contest the fact that U.S. Bank is organized under the National
    Bank Act (12 U.S.C. '21 et seq. (2000)). The National Bank Act authorizes federally
    chartered banks to "exercise *** all such incidental powers *** to carry on the business of
    banking[,] by discounting and negotiating promissory notes, drafts, bills of exchange, and
    other evidences of debt." 12 U.S.C. '24 (2000). The OCC is the agency empowered by the
    National Bank Act to supervise and regulate federally chartered banks in accordance with the
    broad substantive provisions of the National Bank Act. Wells Fargo Bank of Texas NA v.
    James, 
    321 F.3d 488
    , 490 (5th Cir. 2003). In the exercise of its authority, the OCC
    promulgated 12 C.F.R. '7.4002(a) (2000), which provides that a national bank may "charge
    its customers non-interest charges and fees." The OCC interprets the word "customer" in the
    regulation to include any person who presents a check for payment. OCC, Interpretive Letter
    4
    No. 932 (August 17, 2001); OCC, Interpretive Letter No. 933 (August 17, 2001); OCC,
    Interpretive Letter No. 934 (August 20, 2001). In August 2001, the OCC issued three nearly
    identical interpretive letters opining that national banks are authorized under 12 C.F.R.
    '7.4002(a) (2000) to charge a check-cashing fee to non-account holders. OCC, Interpretive
    Letter No. 932 (August 17, 2001); OCC, Interpretive Letter No. 933 (August 17, 2001);
    OCC, Interpretive Letter No. 934 (August 20, 2001). Furthermore, the OCC made clear that
    because the power to set fees is an inherent element of national banks' authority to conduct
    the business of banking, no prior approval from the OCC is required for a national bank to set
    or change a fee or service charge. OCC, Interpretive Letter No. 934 (August 20, 2001). U.S.
    Bank argues that given the OCC's construction of the word "customer," 12 C.F.R. '7.4002(a)
    (2000) authorizes U.S. Bank to charge the fee on which the plaintiffs' claims are based.
    The plaintiffs challenge the preemptive effect of 12 C.F.R. '7.4002(a) (2000) on their
    state law claims. The plaintiffs assert that there is a presumption against the preemption of
    state laws in traditionally state-controlled areas such as the tort and consumer fraud claims
    asserted in their complaint. While it is true that there is typically a presumption against
    federal preemption in areas of regulation that are traditionally allocated to states and are of
    particularly local concern, the presumption against preemption disappears in fields of
    regulation that have been substantially occupied by federal authority for an extended period
    of time. Wachovia Bank, N.A. v. Burke, 
    414 F.3d 305
    , 314 (2d Cir. 2005). The regulation of
    federally chartered banks is one such area. Wachovia Bank, 
    N.A., 414 F.3d at 314
    .
    Accordingly, our preemption analysis must focus on the reasonableness of the OCC's
    exercise of regulatory authority, applying the framework of Chevron U.S.A., Inc. v. Natural
    Resources Defense Council, Inc., 
    467 U.S. 837
    , 
    81 L. Ed. 2d 694
    , 
    104 S. Ct. 2778
    (1984).
    It is important to note that the fact that the OCC interpretation of the word "customer"
    appears in an interpretive letter, rather than in a formal rule or adjudication, does not bar the
    5
    application of Chevron U.S.A., Inc. See United States v. Mead Corp., 
    533 U.S. 218
    , 230-31,
    
    150 L. Ed. 292
    , 305-06, 
    121 S. Ct. 2164
    , 2172-73 (2001). As the United States Supreme
    Court reiterated in NationsBank of North Carolina, N.A. v. Variable Annuity Life Insurance
    Co., 
    513 U.S. 251
    , 256-57, 
    130 L. Ed. 2d 740
    , 747, 
    115 S. Ct. 810
    , 813 (1995) (quoting
    Clarke v. Securities Industry Ass'n, 
    479 U.S. 388
    , 403-04, 
    93 L. Ed. 2d 757
    , 771-72, 107 S.
    Ct. 750, 759 (1987)):
    " 'It is settled that courts should give great weight to any reasonable
    construction of a regulatory statute adopted by the agency charged with the
    enforcement of that statute. The Comptroller of the Currency is charged with the
    enforcement of banking laws to an extent that warrants the invocation of this principle
    with respect to his deliberative conclusions as to the meaning of these laws.' "
    This principle of deference to agency interpretation is even stronger when the agency
    is interpreting its own regulation. When an agency interprets its own regulation, the agency's
    interpretation is controlling unless " 'plainly erroneous or inconsistent with the regulation.' "
    Auer v. Robbins, 
    519 U.S. 452
    , 461, 
    137 L. Ed. 2d 79
    , 90, 
    117 S. Ct. 905
    , 911 (1997)
    (quoting Robertson v. Methow Valley Citizens Council, 
    490 U.S. 332
    , 359, 
    104 L. Ed. 2d 351
    , 376, 
    109 S. Ct. 1835
    , 1850 (1989)). Here, the OCC has adopted the position that 12
    C.F.R. '7.4002(a) (2000) authorizes national banks to charge a check-cashing fee to non-
    account-holding payees. The regulation itself provides that national banks "may charge its
    customers non-interest charges and fees" for authorized services. There is no dispute that
    check-cashing is a service which national banks are authorized to provide. The ambiguity
    lies in whether non-account-holding payees are "customers" for the purpose of the regulation.
    The OCC interprets the word "customer" to include any person who presents a check for
    payment. The plaintiffs argue that the word "customer" should be defined as it is in the
    Uniform Commercial Code, that is, "a person having an account with a bank or for whom a
    6
    bank has agreed to collect items, including a bank that maintains an account at another bank."
    810 ILCS 5/4-104(a)(5) (West 2004). These are both reasonable interpretations of the word
    "customer." Since the OCC interpretation is not a clearly erroneous interpretation, we must
    give it deference.
    The OCC's interpretation that the word "customer" includes payees who present a
    check to a drawee bank for payment is controlling. Consequently, the national banks are
    authorized by federal regulation 12 C.F.R. '7.4002(a) (2000) to charge non-account-holding
    payees a check-cashing fee. Thus, because the plaintiffs' state law claims seek damages from
    U.S. Bank based on the exercise of a power that federal law expressly grants the national
    banks, the plaintiffs' claims are in irreconcilable conflict with the federal regulatory scheme,
    and they are preempted by operation of the supremacy clause (U.S. Const., art. VI, cl. 2).
    See Barnett Bank of Marion County, N.A. v. Nelson, 
    517 U.S. 25
    , 
    134 L. Ed. 2d 237
    , 116 S.
    Ct. 1103 (1996).
    For the foregoing reasons, we hold that the plaintiffs do not have standing to bring a
    claim for wrongful dishonor under section 4-402 of the Uniform Commercial Code (810
    ILCS 5/4-402 (West 2004)). We answer the first certified question in the affirmative
    regarding the plaintiffs' remaining claims, holding that the claims are preempted under the
    National Bank Act (12 U.S.C. '93a (2000)) and the regulations and regulatory interpretations
    of the OCC. We therefore decline to answer the second certified question on appeal. The
    order of the circuit court that denied U.S. Bank's motion to dismiss is reversed.
    Certified questions answered in part; order reversed.
    HOPKINS and DONOVAN, JJ., concur.
    7
    NO. 5-05-0374
    IN THE
    APPELLATE COURT OF ILLINOIS
    FIFTH DISTRICT
    ___________________________________________________________________________________
    KENNETH KRONEMEYER and DARRYL L. ) Appeal from the
    JOHNSON, Individually and as the        ) Circuit Court of
    Representatives of a Class of Similarly ) Madison County.
    Situated Persons,                       )
    )
    Plaintiffs-Appellees,                )
    )
    v.                                      ) No. 04-L-229
    )
    U.S. BANK NATIONAL ASSOCIATION,         ) Honorable
    ) Nicholas G. Byron,
    Defendant-Appellant.                 ) Judge, presiding.
    ___________________________________________________________________________________
    Opinion Filed:   July 5, 2006
    ___________________________________________________________________________________
    Justices:          Honorable Stephen L. Spomer, P.J.
    Honorable Terrence J. Hopkins, J., and
    Honorable James K. Donovan, J.,
    Concur
    ___________________________________________________________________________________
    Attorneys        Alphonse J. Pranaitis, Hoagland, Fitzgerald, Smith & Pranaitis, 401 Market
    for              Street, P.O. Box 130, Alton, IL 62002; Mark S. Mester, Kenneth G. Schuler, B. John
    Appellant        Casey, Latham & Watkins, LLP, Sears Tower, Suite 5800, Chicago, IL 60606
    ___________________________________________________________________________________
    Attorneys        Paul M. Weiss, Tod A. Lewis, Freed & Weiss, LLC, 111 W. Washington Street, Suite
    for              1331, Chicago, IL 60602; Bradley M. Lakin, Gail G. Renshaw, Gary E. Peel, Paul
    Appellees        A. Marks, The Lakin Law Firm, P.C., 300 Evans Avenue, P.O. Box 229, Wood River,
    IL 62095
    ___________________________________________________________________________________
    Attorney           J. Eric Rich, Office of the Comptroller of the Currency, 250 E Street, S.W.,
    for                Washington, DC 20219 (no brief filed)
    Amicus                                                                          Curiae
    _____________________________________________________________________
    ______________