Campidoglio LLC v. Wells Fargo & Company

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CAMPIDOGLIO LLC; CARMEN LLC; Nos. 14-35898
SAN MARCO LLC, 14-36091
Plaintiffs-Appellants/
Cross-Appellees, D.C. No.
2:12-cv-00949-
v. TSZ
WELLS FARGO & COMPANY,
Defendant, OPINION
and
WELLS FARGO BANK, NA,
Defendant-Appellee/
Cross-Appellant.
Appeal from the United States District Court
for the Western District of Washington
Thomas S. Zilly, Senior District Judge, Presiding
Argued and Submitted June 8, 2017
Seattle, Washington
Filed September 12, 2017
Before: M. Margaret McKeown, Consuelo M. Callahan,
and Sandra S. Ikuta, Circuit Judges.
Opinion by Judge Callahan
2 CAMPIDOGLIO V. WELLS FARGO BANK
SUMMARY*
Home Owners’ Loan Act
The panel vacated the district court’s order dismissing, as
preempted by the Home Owners’ Loan Act (“HOLA”), the
plaintiffs/borrowers’ claim that the Lenders (comprised of
Wells Fargo Bank, N.A. and its predecessors) breached their
contracts by using indexes other than those actually approved
by their “primary regulator” to calculate the borrowers’
interest rates; affirmed the district court’s grant of summary
judgment in Wells Fargo Bank’s favor on the borrowers’
claims premised on the Lenders’ alleged failure to obtain
approval from the “primary regulators” to substitute the “cost
of savings index” as the index; affirmed the district court’s
denial of borrowers’ Fed. R. Civ. P. 37 discovery motion;
vacated without prejudice the district court’s denial of Wells
Fargo’s motion for attorneys’ fees; and remanded.
The borrowers filed their putative class action against
Wells Fargo in Washington state court alleging causes of
action based on the Lenders’ alleged miscalculation of
interest on the borrowers’ loans. Wells Fargo removed the
case to federal court under diversity jurisdiction, and moved
to dismiss.
The panel held that the borrowers sufficiently raised their
“Interest Rate Calculation” breach of contract claim before
the district court, and borrowers did not waive their right to
challenge the dismissal of the claim. The panel further held
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
CAMPIDOGLIO V. WELLS FARGO BANK 3
that the federal Home Owners’ Loan Act (“HOLA”) did not
preempt the borrowers’ Washington state law “Interest Rate
Calculation” breach of contract claim. Specifically, the panel
held that a common law breach of contract claim was not the
type of law listed in paragraph (b) of 12 C.F.R. § 560.2, but
it came within paragraph (c) of that regulation, and was a law
that only incidentally affected the lending operations of
federal savings associations; and hence, it was not preempted
by HOLA.
Next, the panel addressed whether the district court erred
in granting summary judgment in Wells Fargo’s favor on the
borrowers’ “Use of Unapproved Indexes” breach of contract
claim, and the other claims related to this alleged conduct by
the Lenders. The panel affirmed the summary judgment
because the Lenders gave notice to their primary regulators
of their intent to substitute the indexes used to calculate
interest on the borrowers’ loans and the regulators did not
object.
The panel affirmed the district court’s denial of the
borrowers’ motion for discovery sanctions pursuant to
Federal Rule of Civil Procedure 37 because the borrowers
failed to show prejudice resulting from this ruling.
Finally, in light of its determination that HOLA did not
preempt the borrowers’ “Interest Rate Calculation” claim, the
panel vacated the district court’s denial of attorneys’ fees
without prejudice. The panel vacated without prejudice to the
district court’s consideration of the prevailing party’s
entitlement to fees after entry of a new judgment.
4 CAMPIDOGLIO V. WELLS FARGO BANK
COUNSEL
Benjamin Gould (argued), Ryan McDevitt, Raymond J.
Farrow, and Mark A. Griffin, Keller Rohrback L.L.P., Seattle,
Washington, for Plaintiffs-Appellants/Cross-Appellees.
Robert Collings Little (argued), Robin C. Campbell, Mark T.
Flewelling, and Leigh O. Curran, Anglin Flewelling
Rasmussen Campbell & Trytten LLP, Pasadena, California,
for Defendant-Appellee/Cross-Appellant.
OPINION
CALLAHAN, Circuit Judge:
Campidoglio LLC, Carmen LLC, and San Marco LLC
(the Borrowers) sued Wells Fargo Bank, N.A. (Wells Fargo)
based on Wells Fargo and its predecessors’ (together, the
Lenders) alleged miscalculation of interest on the Borrowers’
loans. This case presents four issues for our review. First,
we are called upon to determine whether the Home Owners’
Loan Act (“HOLA”) preempts the Borrowers’ “Interest Rate
Calculation” breach of contract claim, which arises under
Washington law. Because we find that a common law breach
of contract claim is not the type of law listed in paragraph (b)
of 12 C.F.R. § 560.2, but comes within paragraph (c) of that
regulation and is a law that only incidentally affects the
lending operations of federal savings associations, we
conclude that this claim is not preempted by HOLA. Second,
we address whether the district court erred in granting
summary judgment in Wells Fargo’s favor on the Borrowers’
“Use of Unapproved Indexes” breach of contract claim, and
the other claims related to this alleged conduct by the
CAMPIDOGLIO V. WELLS FARGO BANK 5
Lenders. We affirm the grant of summary judgment because
the Lenders gave notice to their primary regulators of their
intent to substitute the Indexes used to calculate interest on
the Borrowers’ loans and the regulators did not object. Third,
we affirm the district court’s denial of the Borrowers’ motion
for discovery sanctions pursuant to Federal Rule of Civil
Procedure 37 because the Borrowers fail to show prejudice
resulting from this ruling. Finally, in light of our
determination that HOLA does not preempt the Borrowers’
“Interest Rate Calculation” claim, we vacate the district
court’s denial of attorneys’ fees without prejudice.
I
A
Each Borrower executed an adjustable-rate mortgage
promissory note in favor of World Savings Bank (the Notes).
The interest rate for all three Notes is calculated by adding
the “stated margin,” which is a constant value, and the
“current index” (the Index), which has a fluctuating value.
When the Borrowers executed the Notes, the Notes defined
“Index” to mean the “weighted average of the interest rates in
effect as of the last day of each calendar month on the deposit
accounts of the federally insured depository institution
subsidiaries . . . of Golden West Financial Corporation”
(Golden West). It also provided that “[i]f an index is
substituted as described in this Section . . . the alternative
index will become the Index.” At that time, World Savings
Bank was Golden West’s subsidiary, and the Index was the
Golden West “cost of savings” index, or the “Golden West
COSI.” The Notes also provide:
6 CAMPIDOGLIO V. WELLS FARGO BANK
The Lender may choose an alternative to be
the Index if the Index is no longer
available. . . . The selection of the alternative
index shall be at the Lender’s sole discretion.
The alternative index may be a national or
regional index or another type of index
approved by the Lender’s primary regulator.
The Lender will give notice to the Borrower
of the alternative index.
Wachovia Corporation (Wachovia) later acquired Golden
West and World Savings Bank, and World Savings Bank
changed its name to Wachovia Mortgage, FSB. On
December 15, 2006, Wachovia submitted a letter to its
primary regulator, the Office of Thrift Supervision (OTS),
stating that Wachovia intended to change the Index from the
Golden West COSI to the Wachovia COSI.1 The letter
discusses both new and existing loans. In January 2007, the
OTS responded to Wachovia. The response describes
Wachovia’s December 2006 letter as seeking “to establish an
alternative adjustable-rate loan index for new mortgage
loans,” and states that:
[B]ased upon the regulatory criteria and the
representations made in the Notice, the OTS
takes no objection to World [Savings Bank’s]
1
We note that while the parties’ briefs and portions of the record are
filed under seal, the district court’s decision was not. Moreover, neither
party requested that we file our disposition under seal. See Interim Circuit
Rule 27-13(k). We presumptively file dispositions publicly, id., and we
do so here, as we refer only to those facts contained in the district court’s
publicly filed decision.
CAMPIDOGLIO V. WELLS FARGO BANK 7
use of the proposed alternative adjustable-rate
loan index.
The OTS’s January 2007 letter does not, however,
specifically mention existing loans. The OTS and Wachovia
later communicated about Wachovia’s plan for substituting
the Index for existing loans. In July 2007, the Borrowers
were notified that because the Golden West COSI would no
longer be available, the Wachovia COSI would be used as the
Index going forward.
Then, in 2008, Wells Fargo acquired Wachovia, including
Wachovia Mortgage. Because the Wachovia COSI would no
longer be available for use as the Index, Wells Fargo sent
letters to Wachovia’s primary regulator, the OTS, and its own
primary regulator, the Office of the Comptroller of the
Currency (OCC), seeking approval to use a new Index value:
the Wells Fargo COSI.2 The OCC responded, indicating that,
based on the information provided by Wells Fargo, it had no
objection to Wells Fargo using the Wells Fargo COSI as the
Index. In a footnote, the OCC’s letter recites that the
“Wachovia COSI was approved by the OTS for use by World
Savings [Bank] in May 2007. Wachovia COSI replaced a
similar World Savings [Bank] index the OTS had approved
in 1997.” The OTS similarly informed Wells Fargo that it
had no objection. Wells Fargo then switched to using the
Wells Fargo COSI as the Index for calculating the interest
rate on various adjustable-rate mortgage loans, including the
Borrowers’ loans.
2
Wells Fargo is a national bank, regulated by the OCC. Wachovia
and World Savings Bank are federal savings associations, regulated by the
OTS.
8 CAMPIDOGLIO V. WELLS FARGO BANK
B
The Borrowers filed a putative class action in Washington
state court in May 2012, alleging four separate claims for
breach of contract, a claim for breach of the implied covenant
of good faith and fair dealing, violations of the Washington
Consumer Protection Act (WCPA), and unjust enrichment.
The breach of contract claims are based on the Lenders’
allegedly improper “Interest Rate Calculation,” “Substitution
of Indexes,” “Transparency of Calculation,” and “Use of
Unapproved Indexes.” Wells Fargo removed the case to the
United States District Court for the Western District of
Washington, and moved to dismiss the complaint for failure
to state a claim upon which relief could be granted. Wells
Fargo argued that HOLA preempted the Borrowers’ claims.
The district court granted the motion in part, finding that
HOLA preempted three of the Borrowers’ four claims for
breach of contract, including the “Interest Rate Calculation”
breach of contract claim. The surviving breach of contract
claim, entitled “Use of Unapproved Indexes,” alleged that the
Lenders breached their contractual duty “to substitute only
indexes qualifying as ‘national or regional indexes’ and/or
approved by their primary regulator” by using the Wachovia
COSI and the Wells Fargo COSI. The Borrowers’ claims for
violations of the WCPA, unjust enrichment, and breach of the
covenant of good faith and fair dealing survived to the extent
they were premised on this alleged misconduct.
Wells Fargo later moved for summary judgment on the
Borrowers’ remaining claims. Due to ongoing discovery
disputes, the district court continued the hearing on this
motion several times. The parties’ discovery skirmishes
culminated in the Borrowers filing a motion for sanctions
pursuant to Federal Rule of Civil Procedure 37. The
CAMPIDOGLIO V. WELLS FARGO BANK 9
Borrowers asserted that although Wells Fargo had identified
approximately 6,000 documents responsive to the Borrowers’
requests for production, Wells Fargo withheld production of,
or redacted, 4,636 documents based on overly broad
assertions of attorney-client privilege. The Borrowers argued
that Wells Fargo’s failure to produce these documents
violated a prior court order, and sought to compel their
production.
The court for the most part deferred ruling on the motion,
indicating that it lacked sufficient information to determine
whether Wells Fargo had properly invoked the attorney-client
privilege.3 The court ordered the Borrowers to designate up
to twenty of Wells Fargo’s privilege log entries that, in the
Borrowers’ view, identified communications not actually
protected by the attorney-client privilege. Wells Fargo would
then submit these communications, and the corresponding
privilege log entries, to the court for in camera review. The
court indicated that if Wells Fargo had properly invoked the
attorney-client privilege for the designated communications,
then the court would deny this portion of the Borrowers’ Rule
37 motion. But, if “Wells Fargo ha[d] improperly asserted
the attorney-client privilege as to a significant portion of the
communications,” then the court would “grant appropriate
relief to [the Borrowers], potentially including in camera
review of additional materials and/or directing Wells Fargo
to produce all documents identified in the privilege log.”
3
The Borrowers’ Rule 37 motion also requested that the district court
find that Wells Fargo waived its assertions of the attorney-client privilege
and the bank examination privilege, and deem Wells Fargo’s privilege log
deficient for failing to provide certain information. The court denied the
request regarding the privilege assertions, and struck as moot the request
regarding the privilege log.
10 CAMPIDOGLIO V. WELLS FARGO BANK
Wells Fargo subsequently withdrew its assertion of the
attorney-client privilege for some documents, but maintained
that those documents were nonetheless protected by the “bank
examination privilege.” See infra note 5. Wells Fargo
asserted that although it had correctly withheld documents
based on privilege, on some privilege log entries it might
have misstated the applicable privilege.
The district court issued two orders on the Rule 37
motion. It first found that Wells Fargo had appropriately
invoked the bank examination privilege as to some
documents, and that Wells Fargo was not required to produce
other documents because, although not privileged, those
documents were not “reasonably calculated to lead to the
discovery of admissible evidence.” But the court found it still
lacked adequate information to determine whether the
privilege was properly invoked for another group of
documents. Following further supplemental briefing, the
court denied the remainder of the Borrowers’ Rule 37 motion
because it ultimately was “satisfied that Wells Fargo ha[d]
complied with its discovery obligations.”
Having decided the parties’ discovery dispute, the district
court addressed Wells Fargo’s motion for summary judgment.
The court granted summary judgment in favor of Wells
Fargo. It found that, as a matter of law, both Wachovia and
Wells Fargo had complied with the applicable regulations,
had given notice to their primary regulators of their intent to
substitute the Index, and had received approval to do so.
Wells Fargo then moved for attorneys’ fees based on
language in the Notes which provided that “[t]he Borrower
will pay back the Lender for all of the Lender’s costs and
expenses in the enforcement or collection of this Note or the
CAMPIDOGLIO V. WELLS FARGO BANK 11
Security Agreement, subject to the limits imposed by
applicable law.” The court denied the motion, holding that
the incurred attorneys’ fees did not fall within this term.
Wells Fargo requested reconsideration, which the court
denied.
Both the Borrowers and Wells Fargo timely appealed.
The Borrowers seek review of three decisions: the dismissal
of their “Interest Rate Calculation” breach of contract claim
on the basis of HOLA preemption, the grant of summary
judgment in Wells Fargo’s favor on their “Use of
Unapproved Indexes” breach of contract claim and their other
claims arising from this alleged conduct, and the denial of
relief under Rule 37. Wells Fargo appeals the district court’s
decision denying its motion for attorneys’ fees.
We have jurisdiction over the Borrowers’ and Wells
Fargo’s appeals pursuant to 28 U.S.C. § 1291. We affirm in
part, vacate in part, and remand.
II
The district court found that HOLA preempted a number
of the Borrowers’ breach of contract claims and dismissed
them pursuant to Federal Rule of Civil Procedure 12(b)(6).
On appeal, the Borrowers contend that the district court erred
in dismissing one claim: their “Interest Rate Calculation”
claim, which alleged that the Lenders breached their
contractual obligation to apply the Index the Notes said they
would apply. In other words, the Borrowers assert that even
if the Lenders received approval to use the Wachovia and
Wells Fargo COSIs as the Index, the Lenders failed to
actually use either of these COSIs as the Index and instead
applied some other, unknown value as the Index. “We review
12 CAMPIDOGLIO V. WELLS FARGO BANK
de novo the district court’s grant of a motion to dismiss under
Rule 12(b)(6), accepting all factual allegations in the
complaint as true and construing them in the light most
favorable to the nonmoving party.” Skilstaf, Inc. v. CVS
Caremark Corp., 669 F.3d 1005, 1014 (9th Cir. 2012).
A
As a preliminary matter, Wells Fargo contends that the
Borrowers did not advance the theory supporting their
“Interest Rate Calculation” breach of contract claim before
the district court, and have waived their right to challenge the
dismissal of this claim. We disagree. The thrust of the
Borrowers’ complaint was that the Lenders did not receive
approval to use the Wells Fargo and Wachovia COSIs, that
those COSIs could not properly be applied to the Borrowers’
loans, and that the COSIs were calculated based only on the
weighted average of interest rates paid on CD accounts, rather
than the weighted average of interest rates paid on all deposit
accounts. Their complaint, however, also included
allegations adequately setting forth the alternative theory of
liability: Wells Fargo failed to apply the Indexes that the
Notes said it would. Indeed, the Borrowers’ first claim for
breach of contract, entitled “Interest Rate Calculation,” states
that the Lenders breached their contractual obligations by
“charging interest rates not based on any discernible index
since the fourth quarter of 2007, using indexes—the
Wachovia COSI and purported Wells Fargo COSI—that did
and do not reflect the weighted average of the interest rates
payable on all deposit accounts, and by adjusting interest
rates in a manner that does not accurately reflect the correct
average rates.” In opposing Wells Fargo’s motion to dismiss,
the Borrowers argued that Wells Fargo breached its
contractual obligations by “calculating their interest rates on
CAMPIDOGLIO V. WELLS FARGO BANK 13
the basis of indices based on CDs only rather than all deposit
accounts, and/or charging interest rates inconsistent even
with the CD rates.” They also argued that “Wells Fargo
ultimately used indices calculated on the basis only of certain
deposit accounts, and/or indices not ascertainably based on
any set of deposit accounts.” The district court characterized
the first claim for breach of contract as a claim that the
Lenders “incorrectly calculated, and inflated, the interest rates
starting in the fourth quarter of 2007.” We find that these
allegations and arguments support the conclusion that the
Borrowers sufficiently “presented [and] developed” the
“Interest Rate Calculation” breach of contract claim “for the
trial court to rule on it.” In re Mercury Interactive Corp. Sec.
Litig., 618 F.3d 988, 992 (9th Cir. 2010) (quoting Whittaker
Corp. v. Execuair Corp., 953 F.2d 510, 515 (9th Cir. 1992)).
B
Turning to whether the district court erred in dismissing
the Borrowers “Interest Rate Calculation” breach of contract
claim as preempted by HOLA, we focus on the scope of
HOLA’s preemption. The Borrowers argue that HOLA does
not apply to its claims against Wells Fargo at all because
HOLA applies only to federal savings associations, whereas
Wells Fargo is a national bank regulated by the OCC under
the National Banking Act. See Bank of Am. v. City of San
Francisco, 309 F.3d 551, 561–62 (9th Cir. 2002). Whether,
and to what extent, HOLA applies to claims against a national
bank when that bank has acquired a loan executed by a
federal savings association is an open question in our court.
But we need not resolve this question because we find that,
even assuming that HOLA applies to the Borrowers’ claims
against Wells Fargo, it would not preempt the Borrowers’
breach of contract claim.
14 CAMPIDOGLIO V. WELLS FARGO BANK
HOLA is undoubtedly expansive. Enacted in 1933, it is
“a product of the Great Depression of the 1930’s, [and] was
intended ‘to provide emergency relief with respect to home
mortgage indebtedness’ at a time when as many as half of all
home loans in the country were in default.” Fidelity Fed.
Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 159 (1982)
(citation omitted). HOLA empowered the regulatory body,
which became the OTS, to authorize the creation of federal
savings and loan associations, to regulate them, and, by its
regulations, to preempt conflicting state law. Id. at 161–62.
The OTS regulations have been described as “a ‘radical and
comprehensive response to the inadequacies of the existing
state system,’ and ‘so pervasive as to leave no room for state
regulatory control.’” Silvas v. E*Trade Mortg. Corp.,
514 F.3d 1001, 1004–05 (9th Cir. 2008) (quoting Conference
of Fed. Sav. & Loan Ass’ns v. Stein, 604 F.2d 1256, 1257,
1260 (9th Cir. 1979)). In Silvas, we held that the OTS
regulation for federal savings associations occupies the field.
Id. at 1005. Moreover, although it is generally presumed that
Congress does not intend to preempt state law absent a clear
manifestation of intent to the contrary, that presumption does
not apply to regulations in the field of national banking. Id.at 1004–05.
Nonetheless, HOLA does not preempt all state laws. The
relevant OTS regulations, set forth at 12 C.F.R. § 560.2,
provide the framework for determining whether a state law is,
in fact, preempted by HOLA. Paragraph (a) sets up a
presumption that laws affecting lending are preempted.
Paragraph (b) of § 560.2 provides the “types of state laws
preempted by paragraph (a)” of the regulation “include,
without limitation, state laws purporting to impose
requirements regarding” thirteen different categories of
lending operations. These categories include “[t]he terms of
CAMPIDOGLIO V. WELLS FARGO BANK 15
credit,” “[l]oan-related fees,” “[e]scrow accounts,” and
“[d]isclosure and advertising.” Id. § 560.2(b)(4), (5), (6), (9).
Paragraph (c) of § 560.2 provides a list of state laws that “are
not preempted to the extent that they only incidentally affect
the lending operations of Federal savings associations or are
otherwise consistent with the purposes of paragraph (a) of
this section.” That list includes “[c]ontract and commercial
law.” Id. § 560.2(c)(1).
We follow a three-step process prescribed by the OTS for
analyzing whether a state law is preempted under this
regulation.
[T]he first step will be to determine whether
the type of law in question is listed in
paragraph (b). If so, the analysis will end
there; the law is preempted. If the law is not
covered by paragraph (b), the next question is
whether the law affects lending. If it does,
then, in accordance with paragraph (a), the
presumption arises that the law is preempted.
This presumption can be reversed only if the
law can clearly be shown to fit within the
confines of paragraph (c). For these purposes,
paragraph (c) is intended to be interpreted
narrowly. Any doubt should be resolved in
favor of preemption.
Silvas, 514 F.3d at 1005 (quoting OTS, Final Rule, 61 Fed.
Reg. 50,951, 50,966–67 (Sept. 30, 1996)). In conducting this
analysis, we are not limited to assessing whether the state law
on its face comes within paragraph (b) of the regulation.
Instead, we ask whether the state law, “as applied, is a type of
16 CAMPIDOGLIO V. WELLS FARGO BANK
state law contemplated in the list under paragraph (b) . . . . If
it is, the preemption analysis ends.” Id. at 1006.
We find that Washington’s common law of contracts,
under which the Borrowers assert their breach of contract
claim, is not the type of law listed in paragraph (b) of the
regulation. To the contrary, Washington contract law, as
alleged in the Borrowers’ complaint, imposes no
requirements on Wells Fargo regarding banking regulations.
While the Borrowers’ breach of contract claim undoubtedly
relates to “terms of credit,” 12 C.F.R. § 560.2(b)(4), it is the
parties’ own agreement, rather than Washington state law,
that imposes any requirements on Wells Fargo regarding
these terms. See Cipollone v. Ligegett Grp., Inc., 505 U.S.
504, 525 (1992) (holding that an express warranty was not a
“requirement . . . imposed under State law” because the
obligation was imposed by the warrantor). Wells Fargo
cannot be excused from an alleged failure to comply with its
contractual obligations simply because those obligations
relate to the subject matter contained in paragraph (b) of the
regulation.
Our conclusion is consistent with Silvas. There, we
assessed whether HOLA preempted claims brought under
California’s Unfair Competition Law, Cal. Bus. & Prof. Code
§ 17200, and California’s Unfair Advertising Law, Cal. Bus.
& Prof. Code § 17500. Silvas, 514 F.3d at 1006. The Silvas
plaintiffs’ section 17500 claim alleged that the defendant, a
federal savings association, violated state law “by
representing to its customers that its lock-in fee [was] non-
refundable when, under law, it is refundable if the consumer
decides to exercise his or her rescission rights under [the
Truth in Lending Act, 15 U.S.C. § 1601].” Id. at 1003. The
plaintiffs further alleged “that the false statement was made
CAMPIDOGLIO V. WELLS FARGO BANK 17
in [the defendant’s] website and its customer disclosures and
thus constituted false advertising.” Id. The plaintiffs’ unfair
competition claim was based on allegations that “the lock-in
policy itself violated UCL § 17200 as an unlawful business
act,” and that the defendant’s “practice of misrepresenting
consumers’ legal rights in advertisements and other
documents [was] unfair, deceptive, and contrary to the policy
of California.” Id. We found that sections 17200 and 17500,
as applied to the plaintiffs’ claims, imposed requirements
regarding “disclosure and advertising” as well as “loan-
related fees” on a federal savings association. Because these
matters came clearly within paragraph (b) of 12 C.F.R.
§ 560.2, we concluded that HOLA preempted the plaintiffs’
claims. Id. at 1006.
By contrast, the Borrowers’ claim against Wells Fargo
seeks to impose only the state law requirement that Wells
Fargo honor a contractual promise made by its predecessor-
in-interest. Contract law is silent regarding terms of credit.
Furthermore, it is the contract, not the law, that regulates
Wells Fargo’s conduct. That the promise at issue relates to
the terms of credit does not bring Washington’s common law
of contracts within the meaning of paragraph (b).
Next, we ask “whether the law affects lending.” Silvas,
514 F.3d at 1005. We assume, without deciding, that
Washington’s common law of contracts does affect lending,
thus giving rise to a “presumption . . . that the law is
preempted.” Id. Applying Silvas, however, we find that
“[t]his presumption [is] reversed” because the law at issue
here—Washington’s common law of contracts—fits into
paragraph (c)(1), “Contract and commercial law,” and is a
law that “only incidentally affect[s] the lending operations of
Federal savings associations . . . .” 12 C.F.R. § 560(c); see
18 CAMPIDOGLIO V. WELLS FARGO BANK
also Silvas, 514 F.3d at 1006. Because the law “can clearly
be shown to fit within the confines of paragraph (c),” HOLA
does not preempt it. Silvas, 514 F.3d at 1005.
We therefore vacate the district court’s order dismissing
the “Interest Rate Calculation” breach of contract claim and
remand for further proceedings consistent with this opinion.
III
We next turn to the Borrowers’ breach of contract claim
premised on the Lenders’ alleged “Use of Unapproved
Indexes.” This claim alleged that the Lenders breached their
contractual obligations to obtain approval from their primary
regulators—the OTS or the OCC—before substituting an
Index that is not a national or regional index. Lenders obtain
approval from their “primary regulators” through the
procedures set forth in 12 C.F.R. § 560.35(d)(3), which
applies to the OTS, and 12 C.F.R. § 34.22, which applies to
the OCC. Under § 560.35, the lender must file a notice with
the OTS of its intent to use an index other than a national or
regional index. If, after 30 days, the OTS has not informed
the lender that “the notice presents supervisory concerns or
raises significant issues of law or policy,” the index may be
used. 12 C.F.R. § 560.35(d)(3). A similar procedure applies
to the OCC. 12 C.F.R. § 34.22. The lender must give notice
to the OCC, and unless the OCC notifies the lender of
“supervisory concerns” or “significant issues of law or
policy” within 30 days, the lender “may use” the new index.
Id. The Borrowers alleged that the Lenders did not comply
with these procedures, and thus did not obtain valid approval
to substitute the Wachovia and Wells Fargo COSIs as the
Index.
CAMPIDOGLIO V. WELLS FARGO BANK 19
The district court granted summary judgment in Wells
Fargo’s favor. We review de novo a district court’s grant of
summary judgment. Albino v. Baca, 747 F.3d 1162, 1168
(9th Cir. 2014) (en banc). “[S]ummary judgment is
appropriate when ‘there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.’” Id. (quoting Fed. R. Civ. P. 56(a)). In
conducting this review, “we view the evidence in the light
most favorable to the non-moving party,” id., and “[w]e may
affirm summary judgment on any ground supported by the
record,” Video Software Dealers Ass’n v. Schwarzenegger,
556 F.3d 950, 956 (9th Cir. 2009). Because we find that the
undisputed facts establish, as a matter of law, that the Lenders
obtained the OTS and the OCC’s approval to use the Wells
Fargo and Wachovia COSIs as the Index on the Borrowers’
loans, we affirm.
The Borrowers’ argument that, at the very least, a jury
should decide whether Wachovia obtained the OTS’s
approval before applying the Wachovia COSI to their loans,
assumes that interpreting Wachovia’s December 2006 letter
to the OTS, and the OTS’s January 2007 response, raises
questions of fact to be decided by a jury. This assumption
misapprehends what constitutes a question of fact. Whether
a breach occurred is, of course, a question of fact. Frank
Coluccio Constr. Co. v. King Cty., 136 Wash. App. 751, 762
(2007). But whether the Lenders gave notice and received
approval from their primary regulators under the relevant
regulations are questions of law. See Johnson v. Allstate Ins.
Co., 126 Wash. App. 510, 515 (2005) (questions of law
include the interpretation of contracts, statutes, “and other
writings”); Wash. Rev. Code § 4.44.080 (questions of law
include “the construction of . . . writings”). Moreover, the
material facts—that is, what the communications between the
20 CAMPIDOGLIO V. WELLS FARGO BANK
Lenders and the primary regulators actually say—are
undisputed. The dispute focuses instead on the interpretation
of the words contained in those communications, and whether
those words establish the requisite notice and approval under
the regulations. The issue before us is thus a mixed question
of law and fact; it is “[a] question[] in which the historical
facts are admitted or established, the rule of law is
undisputed, and the issue is whether the facts satisfy the
[legal] standard . . . .” Pullman-Standard v. Swint, 456 U.S.
273, 289 n.19 (1982). “Where a case turns on a mixed
question of law and fact and . . . the only disputes relate to the
legal significance of undisputed facts, ‘the controversy
collapses into a question of law suitable to disposition on
summary judgment.’” Blue Lake Rancheria v. United States,
653 F.3d 1112, 1115 (9th Cir. 2011) (quoting Thrifty Oil Co.
v. Bank of Am. Nat’l Trust & Sav. Ass’n, 322 F.3d 1039, 1046
(9th Cir. 2003)). Accord Batdorf v. Transam. Title Ins. Co.,
41 Wash. App. 254, 257 (1985).
Thus, we turn to resolving the legal significance of the
Lenders’ missives to the OCC and the OTS, and their
responses. Wachovia’s December 2006 letter to the OTS
clearly informs the OTS that Wachovia will first introduce
the Wachovia COSI for new loans, and will subsequently
substitute the Wachovia COSI as the index for existing
loans.4 The letter’s statement that the “specific plans for
4
Wachovia’s use of the words“plans to” and “will undertake” both
signal Wachovia’s intent to apply the Wachovia COSI as the Index for
new and existing loans. Merriam-Webster defines “plan” as “to devise or
project the realization of,” “to have in mind,” or “to have a specified
intention.” Merriam-Webster Online Dictionary, https://www.merriam-
webster.com/dictionary/plan. It defines “undertake” as “to take upon
oneself : set about,” “to put oneself under obligation to perform, also : to
accept as a charge or responsibility,” and “guarantee, promise.”
CAMPIDOGLIO V. WELLS FARGO BANK 21
substitution have not been finalized” does not obfuscate
Wachovia’s statement of intent to use the Wachovia COSI as
the Index for existing loans. Instead, this language merely
indicates that Wachovia’s procedures for substituting the
Index, including the materials it would provide to borrowers,
were not yet finalized.
Nor was Wachovia required to obtain OTS’s approval of
its specific plans for substituting the Index. In 1996, when
the OTS adopted 12 C.F.R. § 560.35, the notice published in
the Federal Register stated that the regulation was adopted “to
give an association the flexibility to use alternative indices
after notifying OTS.” OTS, Final Rule, 61 Fed. Reg. at
50,954 (Sept. 30, 1996). It indicated that “[t]he notice should
address how indices will be derived, how the association will
ensure the indices’ availability and verifiability, and how the
indices will be disclosed to borrowers.” Id. The Federal
Register further provides, however, that “[o]nce OTS has
reviewed and not objected to an institution’s internal
procedures for the use of alternative indices, subsequent
notices need only address how new indices are derived. If
OTS does not object within 30 days, the association may
proceed with using alternative indices.” Id. at 50,955
(emphasis added). The parties do not dispute that World
Savings Bank had previously received approval from the OTS
to use the Golden West COSI. Wachovia’s subsequent notice
to the OTS therefore needed to address only how the new
Index, the Wachovia COSI, was derived. Wachovia’s offer
Merriam-Webster Online Dictionary, https://www.merriam-
webster.com/dictionary/undertake. Similarly, Black’s Law Dictionary
defines “undertake” as “to take on an obligation or task.” Black’s Law
Dictionary (9th ed. 2009). These terms make clear that Wachovia
expressed an intent to act on both proposed substitutions.
22 CAMPIDOGLIO V. WELLS FARGO BANK
to provide the OTS with information about its plans for
substitution does not signify that further approval was
required before the substitution was implemented. Nor does
Wachovia’s indication that it would provide these plans to the
OTS render its notice of intent to use the Wachovia COSI as
the Index on existing loans incomplete.
We conclude that, as a matter of law, Wachovia’s
December 2006 letter constitutes “notice” to the OTS, under
12 C.F.R. § 560.35, that Wachovia intended to substitute the
Wachovia COSI for the Golden West COSI as the Index for
existing loans.
The remaining inquiry is whether the OTS approved this
proposed Index substitution. The undisputed facts establish
that OTS did not object to Wachovia’s use of the Wachovia
COSI as the Index on existing loans. Accordingly, we find
that, as a matter of law, Wachovia received approval from its
primary regulator. The regulations provide that OTS is
deemed to have approved the proposed substitution thirty
days after the savings association gives notice “unless, within
that 30-day period, OTS has notified the association that the
notice presents supervisory concerns or raises significant
issues of law or policy.” 12 C.F.R. § 560.35(d)(3). The
parties argue at length about the import of conversations
between Wachovia’s representatives and OTS officials and
the meaning of the OTS’s January 2007 response to
Wachovia. But nothing in the record indicates, and no party
contends, that the OTS raised any “supervisory concerns” or
“significant issues of law or policy” to Wachovia’s December
2006 notice. We therefore need not resolve whether the OTS
affirmatively approved the proposed substitution; the
undisputed facts show that the OTS did not object to it.
CAMPIDOGLIO V. WELLS FARGO BANK 23
Accordingly, Wachovia could “use” the Wachovia COSI as
the Index. See 12 C.F.R. § 560.35(d)(3).
Finally, the Borrowers challenge the validity of Wells
Fargo applying the Wells Fargo COSI as the Index on their
loans. They assert that Wells Fargo obtained the OCC’s
approval to use this COSI as the Index by falsely representing
to the OCC that Wachovia had received the OTS’s approval
to use the Wachovia COSI. Our determination that Wachovia
validly obtained the OTS’s approval to use the Wachovia
COSI forecloses this argument.
We therefore affirm the district court’s grant of summary
judgment in Wells Fargo’s favor on the Borrowers’ “Use of
Unapproved Indexes” claim.
IV
Rule 37 provides parties with a mechanism for seeking
sanctions against another party for “failure to comply with a
court order.” Fed. R. Civ. P. 37(b). Subsection (2)(A)
addresses sanctions “for not obeying a discovery order.” We
have recognized that this rule “provides a wide range of
sanctions for a party’s failure to comply with court discovery
orders.” United States v. Sumitomo Marine & Fire Ins. Co.,
617 F.2d 1365, 1369 (9th Cir. 1980). We review orders on
discovery sanctions under Rule 37(b) for an abuse of
discretion, Conn. Gen. Life Ins. Co. v. New Images of Beverly
Hills, 482 F.3d 1091, 1096 (9th Cir. 2007), and we “will not
reverse absent a definite and firm conviction that the district
court made a clear error of judgment,” Allen v. Exxon Corp.
(In re The Exxon Valdez), 102 F.3d 429, 432 (9th Cir. 1996)
(citation omitted). Indeed, whether to issue sanctions, or to
deny the discovery sought pursuant to such a motion, is
24 CAMPIDOGLIO V. WELLS FARGO BANK
within the district court’s “wide discretion in controlling
discovery.” Jeff D. v. Otter, 643 F.3d 278, 289 (9th Cir.
2011) (citation omitted). We will not overturn its decision
absent a showing of prejudice. Bollow v. Fed. Reserve Bank
of S.F., 650 F.2d 1093, 1102 (9th Cir. 1981) (affirming denial
of Rule 37 motion where moving party made no showing of
prejudice resulting from the denial); see also Hallett v.
Morgan, 296 F.3d 732, 751 (9th Cir. 2002) (district court’s
“decision to deny discovery will not be disturbed except upon
the clearest showing that denial of discovery results in actual
and substantial prejudice to the complaining litigant” (citation
omitted)).
Here, the Borrowers filed their Rule 37 motion because
Wells Fargo, asserting the attorney-client privilege, refused
to produce documents in response to a court order. The
Borrowers argued that Wells Fargo’s attorney-client privilege
designations were overbroad, and thus the documents were
improperly withheld from production. As “sanctions,” the
Borrowers’ motion requested that the court (1) order Wells
Fargo to comply with the court’s prior discovery order and
produce all withheld documents; (2) stay supplemental
briefing on Wells Fargo’s pending motion for summary
judgment; and (3) order Wells Fargo to pay the Borrowers’
attorneys’ fees incurred in bringing the Rule 37 motion.
After reviewing a sample of twenty documents selected by
the Borrowers as demonstrative of Wells Fargo’s
impermissible privilege designations, the district court denied
the motion, finding that Wells Fargo had complied with its
discovery obligations.
The Borrowers contend that the district court abused its
discretion by denying their Rule 37 motion and finding that
Wells Fargo’s attorney-client privilege designations were not
CAMPIDOGLIO V. WELLS FARGO BANK 25
overbroad when, of the twenty documents the Borrowers
designated for the district court’s review, only five were
subject to the attorney-client privilege. The Borrowers
further contend that the district court erred in finding that
Wells Fargo was not required to produce documents subject
to the bank examiner’s privilege. Finally, the Borrowers
argue that Wells Fargo’s incorrect privilege designations for
fifteen out of twenty documents indicates that Wells Fargo
also incorrectly designated as privileged a large number of
documents within the 4,636 documents ultimately at issue.
The Borrowers assert that they were prejudiced because some
of the documents designated as privileged were internal
Wachovia documents, which, if produced, might “shed light
on Wachovia’s behavior in 2006 and 2007, and strengthen the
inference that [the Lenders] deliberately circumvented
regulatory scrutiny.”
Perhaps the district court erred in finding that the OCC
waived the bank examination privilege for only thirteen
documents, and thus erroneously concluded that seven of the
twenty designated documents remained subject to the bank
examination privilege.5 Moreover, if Wells Fargo incorrectly
designated documents within the twenty-document sample as
privileged, it is not irrational to infer that Wells Fargo also
incorrectly designated as privileged other documents within
the larger group of 4,636 documents withheld from
production. But because the language of Wachovia’s
5
While we have not addressed the bank examiner’s privilege, also
called the bank examination privilege, several of our sister circuits have.
See, e.g., In re Bankers Trust Co., 61 F.3d 465, 471 (6th Cir. 1995). We
need not resolve the contours of this privilege in our own circuit because
assuming, without deciding, that the district court erroneously determined
that the documents at issue were subject to this privilege, the Borrowers
are not entitled to any relief.
26 CAMPIDOGLIO V. WELLS FARGO BANK
December 2006 letter establishes, as a matter of law, that
Wachovia notified the OTS that it would substitute the
Wachovia COSI as the Index for existing loans, the suggested
“inference” does nothing to aid the Borrowers. Whatever
Wachovia’s internal communications might show, they would
not, and could not, change the December 2006 letter’s
language. Thus, even assuming the district court erred in
defining the scope of the bank examination privilege, and
assuming that the seven documents at issue were not actually
subject to the bank examination privilege as asserted by the
OCC in this case, the Borrowers have failed to demonstrate
that the district court’s refusal to compel production of the
additional documents prejudiced them. We thus affirm the
district court’s denial of the Borrowers’ Rule 37 motion.6
V
Finally, we consider Wells Fargo’s cross-appeal
challenging the district court’s decision denying its motion
for attorneys’ fees. “We review an award of attorneys’ fees
for abuse of discretion.” Stanger v. China Elec. Motor, Inc.,
812 F.3d 734, 738 (9th Cir. 2016). “The district court’s
underlying factual determinations are reviewed for clear error
and its legal analysis relevant to the fee determination is
reviewed de novo.” Shapiro ex rel. Shapiro v. Paradise
Valley Unified Sch. Dist. No. 69, 374 F.3d 857, 861 (9th Cir.
2004).
6
We decide this issue on the ground that there was no prejudice to the
Borrowers’ “Use of Unapproved Indexes” claim. We do not decide
whether the Borrowers are entitled to these documents in connection with
their now-revived “Interest Rate Calculation” breach of contract claim.
CAMPIDOGLIO V. WELLS FARGO BANK 27
Wells Fargo moved for attorneys’ fees under a provision
of the Notes that states, “[t]he Borrower will pay back the
Lender for all of the Lender’s costs and expenses in the
enforcement or collection of this Note,” including attorneys’
fees. Applying Washington law, the district court determined
that Wells Fargo’s defense of this action did not constitute
“the enforcement or collection” of the Notes. Although we
question this interpretation, we need not reach the merits of
Wells Fargo’s appeal. Rather, because we determine that the
district court erred in dismissing the Borrowers’ breach of
contract claim as preempted by HOLA, and thus vacate the
district court’s entry of final judgment in Wells Fargo’s favor,
we likewise vacate its order on attorneys’ fees. This order is
vacated without prejudice to the district court’s consideration
of the prevailing party’s entitlement to fees after entry of a
new judgment.
VI
We vacate the district court’s order dismissing, as
preempted by HOLA, the Borrowers’ claim that the Lenders
breached their contracts by using Indexes other than those
actually approved by their “primary regulator ” to calculate
the Borrowers’ interest rates (the “Interest Rate Calculation”
breach of contract claim). We affirm the district court’s grant
of summary judgment in Wells Fargo’s favor on the
Borrowers’ claims premised on the Lenders’ alleged failure
to obtain approval from their “primary regulators” to
substitute the COSIs as the Index (the “Use of Unapproved
Indexes” breach of contract claim). We further affirm the
district court’s denial of the Borrowers’ Rule 37 discovery
motion. Finally, we vacate without prejudice the district
court’s order denying Wells Fargo’s motion for attorneys’
fees.
28 CAMPIDOGLIO V. WELLS FARGO BANK
Each side shall bear its own costs on appeal.
AFFIRMED IN PART, VACATED IN PART, AND
REMANDED.