[No. 60075-3-I. Division One. June 2, 2008.]
[1] Courts — Rules of Court — Construction — Rules of Statutory Construction. Court rules are interpreted in the same manner as statutes. [2] Courts — Rules of Court — Construction — By Supreme Court — Effect. Once the state Supreme Court decides an issue concerning a state court rule, that interpretation is binding on all lower courts until it is overruled by the Supreme Court. [3] Dismissal and Nonsuit — Failure To State Claim — Test — Stare Decisis. The Court of Appeals is without authority to adopt a standard for claim dismissal under CR 12(b)(6) different from the one declared by the Supreme Court. [4] Dismissal and Nonsuit — Failure To State Claim — Test — In General. Under CR 12(b)(6), a challenge to the legal sufficiency of a plaintiff's allegations must be denied unless no state of facts which the plaintiff could prove, consistent with the complaint, would entitle the plaintiff to relief on the claim. [5] Statutes — Construction — Federal Statutes — Preemption of State Law — Basis — Supremacy Clause. The Supremacy Clause of the United States Constitution (U.S. Const. art. VI) provides the basis for federal preemption of state laws. [6] Financial Institutions — National Banks — Federally Chartered Savings Banks — Loan-Related Activities — Federal Regulation — Preemption of State Law — Thrift Supervision Rule — Occupation of Entire Field. Under the authority of the Home Owners' Loan Act (12 U.S.C. §§ 1461-1470), the federal Office of Thrift Supervision adopted 12 C.F.R. § 560.2(a) with the specific intention of occupying the entire field of lending regulation for federal savings associations. The rule is explicit that federal law leaves no room for direct state regulation of the loan-related activities of federal savings associations, including regulation effected by judicial decisions concerning state law claims. [7] Administrative Law — Rules — Federal Rules — Preemption of State Law. Federal administrative rules enacted under a congressional grant of authority are entitled to the same preemptive effect as a federal statute. [8] Financial Institutions — National Banks — Federally Chartered Savings Banks — Loan-Related Activities — Federal Regulation — Preemption of State Law — Thrift Supervision Rule — Loan Fees — In General. The Office of Thrift Supervision's preemption rule, 12 C.F.R. § 560.2(a), provides a nonexclusive, illustrative list of the types of state regulatory behaviors, categorized by the object of regulation, that are expressly barred by the application of federal law. In addition to listing nearly every conceivable state licensing or other requirement that might be imposed on federal savings associations themselves, as well as state regulations purporting to mediate the terms of credit as between the lender and borrower, the rule explicitly lists as preempted those state regulatory actions that attempt to define the lawfulness of various fees imposed by federal savings associations on their customers. The rule preempts any state statute or judicial decision purporting to regulate loan-related fees or the processing and servicing of mortgages, or any state statute or judicial decision that has more than an incidental effect on the lending operations of federal savings associations. [9] Financial Institutions — National Banks — Federally Chartered Savings Banks — Loan-Related Activities — Federal Regulation — Preemption of State Law — Thrift Supervision Rule — Exceptions — Determination. The Office of Thrift Supervision's preemption rule, 12 C.F.R. § 560.2(a), provides that generally applicable state laws are not preempted, provided that they do not directly affect the lending operations of federal savings associations. Intrinsic to the preemption framework of 12 C.F.R. § 560.2(a) is that federal savings associations are subject to the majority of generally applicable state laws, except when those laws purport to affect their lending operations, in which case the state laws are superseded. The key determination in any case where state law claims challenge the legality of actions taken by federal savings associations against their customers is which claims fall on the regulatory side of the ledger and which fall on the common law side. [10] Financial Institutions — National Banks — Federally Chartered Savings Banks — Loan-Related Activities — Federal Regulation — Preemption of State Law — Thrift Supervision Rule — Purpose. Under 61 Fed. Reg. 50,951, 50,966 (Sept. 30, 1996), the purpose of the Office of Thrift Supervision's preemption rule, 12 C.F.R. § 560.2(a), is to provide an interpretive standard for identifying state laws that may be designed to look like traditional property, contract, tort, or commercial laws but, in reality, are aimed at other objectives, such as regulating the relationship between lenders and borrowers. The absence of a particular type of state law in the list set forth in 12 C.F.R. § 560.2(b) of the types of state regulation preempted by federal law should not be deemed to constitute evidence of an intent to permit state laws of that type to apply to federal savings associations. [11] Financial Institutions — National Banks — Federally Chartered Savings Banks — Loan-Related Activities — Federal Regulation — Preemption of State Law — Thrift Supervision Rule — Presumption of Preemption. Under 12 C.F.R. § 560.2(a), it is presumed that state laws regulating the relationship between federal savings associations and their loan customers are uniformly preempted. [12] Financial Institutions — National Banks — Federally Chartered Savings Banks — Loan-Related Activities — Federal Regulation — Preemption of State Law — Thrift Supervision Rule — Application — Analysis. Under 61 Fed. Reg. 50,966-67 (Sept. 30, 1996), whether a state law is preempted by 12 C.F.R. § 560.2(a) is determined by the following analysis: The first step involves determining whether the type of law in question is listed in § 560.2(b). If so, the analysis ends 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 rebutted only if the law clearly fits within the confines of § 560.2(c). For this purpose, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption. [13] Financial Institutions — National Banks — Federally Chartered Savings Banks — Loan-Related Activities — Federal Regulation — Preemption of State Law — Contractual Choice of Law — Effect. A contractual choice of law provision is ineffective to preserve a state law claim for relief from a lending practice by a federal savings association inasmuch as the Office of Thrift Supervision's preemption rule, 12 C.F.R. § 560.2(a), occupies the entire field of lending regulation for federal savings associations. Under 12 C.F.R. § 560.2(a), there is no applicable state law that a party may elect. [14] Financial Institutions — National Banks — Federally Chartered Savings Banks — Loan-Related Activities — Federal Regulation — Preemption of State Law — Thrift Supervision Rule — Loan Fees — Fax and Notary Fees. Fax and notary fees charged by a federally chartered savings bank in a loan payoff statement are "loan-related fees" within the meaning of 12 C.F.R. § 560.2(b)(5). As such, state law claims for relief from the fees are preempted by 12 C.F.R. § 560.2(a). State law claims for relief from the fees also are preempted under 12 C.F.R. § 560.2(c) on the grounds that a judicial decision imposing restrictions on the fees would more than "incidentally affect" the lending operations of federally chartered savings banks. Nature of Action: Action against a federally chartered savings bank for breach of contract, unjust enrichment, and violation of the Consumer Protection Act. The claims arose out of the bank's practice of requiring real estate loan customers to pay fax and notary fees before a loan payoff will be processed. Superior Court: The Superior Court for King County, No. 06-2-12686-6, Richard D. Eadie, J., dismissed the action on May 11, 2007. Court of Appeals: Holding that the plaintiffs' state law challenges to the validity of the fax and notary fees are preempted by federal law, the court affirms the dismissal order. Roblin J. Williamson- (of Williamson & Williams); and Guy W. Beckett- (of Beckett Law Offices, PLLC), for appellants. Timothy J. Filer-, Jeffrey S. Miller-, and Neil A. Dial- (of Foster Pepper, PLLC), for respondent. ¶1 DWYER, A.C.J. — In this case we are asked to decide whether federal regulations preempt certain state law claims made against a home loan lender. Anne and Chris McCurry appeal the trial court's dismissal of their putative nationwide class action against federally chartered savings bank Chevy Chase Bank, FSB. Chevy Chase charged the McCurrys $20 in "Accumulated Fax Fees" and a $2 "Notary Fee" as a result of the McCurrys' payoff of a home loan made to them by Chevy Chase. In a "Payoff Statement" issued to the McCurrys, Chevy Chase stated that the McCurrys' "[p]ayoffs cannot be processed unless the 'Total Amount Due Chevy Chase' [including the fax and notary fees] is remitted." ¶2 The McCurrys' complaint alleges that these fees breached Chevy Chase's contract with the McCurrys (i.e., the deed of trust securing their loan), unjustly enriched Chevy Chase, and violated Washington's Consumer Protection Act (CPA), chapter 19.86 RCW. The trial court ruled that these allegations fail to state a claim upon which relief could be granted because regulations issued by the federal Office of Thrift Supervision (OTS), pursuant to its authority under the federal Home Owners' Loan Act (HOLA), 12 U.S.C. §§ 1461-70, occupy "the entire field of lending regulation for federal savings associations," and expressly preempt state statutes and judicial decisions that purport to regulate "[l]oan-related fees." 12 C.F.R. § 560.2. Because we agree with the trial court that the fees about which the McCurrys complain are not subject to additional regulation arising out of Washington state court adjudication of state statutory or common law claims, we affirm. CR 12(b)(6) Standard ¶3 A preliminary issue is whether, in reviewing the trial court's dismissal of the McCurrys' complaint, we should adopt the standard for dismissal now utilized by the federal courts in resolving motions brought pursuant to Federal Rule of Civil Procedure 12(b)(6). See Bell Atl. Corp. v. Twombly, ___ U.S. ___, 127 S. Ct. 1955, 1965, 167 L. Ed. 2d 929 (2007). Chevy Chase urges us to apply the Twombly standard, noting that it requires that allegations be "plausible" in order to survive a motion for dismissal. Twombly, 127 S. Ct. at 1965-66. Preemption ¶6 The central issue before us is whether the express preemption regulations issued by OTS bar the state law claims asserted by the McCurrys. The McCurrys contend that their claims against Chevy Chase are not preempted by 12 C.F.R. § 560.2 because, first, the fax and notary fees charged by Chevy Chase are not "loan-related fees," and, second, their claims pertaining to these fees, if found to be viable under Washington law, would have "only incidentally affect[ed] the lending operations" of federally chartered savings banks such as Chevy Chase. See 12 C.F.R. § 560.2(b)(5) and (c). Chevy Chase responds that the fax fees and notary fees charged in its payoff statement are precisely the type of "loan-related fees" described in 12 C.F.R. § 560.2(b)(5) and are, accordingly, immune from state regulation either directly by statute or indirectly by judicial application of state law. Chevy Chase is correct. ¶8 The OTS regulations are explicit that federal law leaves no room for direct state regulation of the loan-related activities of federally chartered savings associations, including regulation through judicial decisions of state law claims: (a) Occupation of field. . . . OTS hereby occupies the entire field of lending regulation for federal savings associations. OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, federal savings associations may extend credit as authorized under federal law, including this part, without regard to state laws purporting to regulate or otherwise affect their credit activities, except to the extent provided in paragraph (c) of this section or § 560.110 of this part. For purposes of this section, "state law" includes any state statute, regulation, ruling, order or judicial decision. 12 C.F.R. § 560.2. (b) Illustrative examples. . . . [T]he types of state laws preempted by paragraph (a) of this section include, without limitation, state laws purporting to impose requirements regarding: . . . . (5) Loan-related fees, including without limitation, initial charges, late charges, prepayment penalties, servicing fees, and overlimit fees. 12 C.F.R. § 560.2. ¶10 Finally, the OTS regulations provide that generally applicable state laws are not preempted, provided that they do not directly affect the lending operations of federally chartered savings associations: (c) State laws that are not preempted. State laws of the following types 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: (1) Contract and commercial law; (2) Real property law; (3) Homestead laws specified in 12 U.S.C. 1462a(f); (4) Tort law; (5) Criminal law; and (6) Any other law that OTS, upon review, finds: (i) Furthers a vital state interest; and (ii) Either has only an incidental effect on lending operations or is not otherwise contrary to the purposes expressed in paragraph (a) of this section. 12 C.F.R. § 560.2(c). "Thus, § 560.2 would preempt any state statute or judicial decision purporting to regulate loan-related fees or the processing and servicing of mortgages, or any state statute or judicial decision that has more than an incidental effect on the lending operations of federal savings associations." Haehl v. Wash. Mut. Bank, FA, 277 F. Supp. 2d 933, 940 (S.D. Ind. 2003). ¶11 Intrinsic to this preemption framework, then, is that federally chartered savings associations are subject to the majority of generally applicable state laws, except when those laws purport to affect their lending operations, in which case the state laws are superseded. Accordingly, the key determination in any case where state law claims challenge the legality of actions taken by federal savings associations against their customers is "which claims fall on the regulatory side of the ledger and which, for want of a better term, fall on the common law side." Ocwen, 491 F.3d at 644. When analyzing the status of state laws under § 560.2, the 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. 61 Fed. Reg. at 50,966-67 (emphasis added). A working example of the types of laws OTS intended to preempt comes from [the Connecticut consumer protection law's] analog, the Unfair Competition Act ("UCA"), Cal. Bus. & Prof. Code §§ 17200 et seq. In an opinion letter OTS stated that UCA is preempted by HOLA where it attempts to regulate loan-related fees including statement fees and facsimile charges. Boursiquot, 323 F. Supp. 2d at 355 n.3 (citing OTS Opinion Letter P-99-3, Mar. 10, 1999, at 16). ¶14 Similarly, in Lopez v. World Savings & Loan Ass'n, 105 Cal. App. 4th 729, 130 Cal. Rptr. 2d 42 (2003), the California Court of Appeal rejected precisely the same argument that the McCurrys are making in this case—that "a fee for providing a payoff demand statement is not a loan-related fee" and thus is not preempted. Lopez, 105 Cal. App. 4th at 738-39. The court pointed out, reasonably, that "[p]roviding a payoff demand statement is a service provided by the association as lender in connection with its outstanding loan, and is a necessary step in paying off the loan." Lopez, 105 Cal. App. 4th at 739. Accordingly, the court concluded that fees associated with the plaintiffs' payoff statement were "loan-related fees," and that the plaintiffs' claims were barred by federal law. Lopez, 105 Cal. App. 4th at 737-38. The contrary contention, advanced by both the McCurrys and the plaintiffs in Lopez—that fees associated with something fundamentally necessary to the discharge of the loan (the payoff statement) are somehow not "loan-related"—fairly strains the English language. ¶15 Most other cases directly on point are in accord. See, e.g., Haehl, 277 F. Supp. 2d at 941 (reconveyance fee "falls within the broad category of 'loan-related fees' ") (citing Chaires v. Chevy Chase Bank, FSB, 131 Md. App. 64, 748 A.2d 34 (2000)); Moskowitz v. Wash. Mut. Bank, FA, 329 Ill. App. 3d 144, 148, 768 N.E.2d 262, 263 Ill. Dec. 502 (2002) (fax and other fees in payoff statement are "loan-related fees" within the meaning of 12 C.F.R. § 560.2(b)(5)). ¶16 The Chaires opinion additionally, and correctly, rejects one of the McCurrys' subsidiary arguments—that a choice of law provision in a deed of trust can, by selecting state law, displace a superseding federal regulation. Chaires, 131 Md. App. at 85 ("appellees did not, as they could not, elect state law over federal law"). This result is hardly surprising; insofar as "OTS . . . occupies the entire field of lending regulation for federal savings associations," 12 C.F.R. § 560.2(a), there is no applicable state law that the McCurrys may elect. ¶17 The decisions that the McCurrys rely upon, in contrast, either address different types of fees, and so are irrelevant, are unpersuasive, or have been overturned. First, the vast majority of the McCurrys' authority must be distinguished as dealing with different types of fees or claims. See McKell v. Wash. Mut., Inc., 142 Cal. App. 4th 1457, 1465, 49 Cal. Rptr. 3d 227 (2006) (pass-through fees, which dissent nonetheless convincingly argues are "loan-related"); Gibson v. World Sav. & Loan Ass'n, 103 Cal. App. 4th 1291, 1294, 128 Cal. Rptr. 2d 19 (2002) (unlawful insurance charges); Fenning v. Glenfed, Inc., 40 Cal. App. 4th 1285, 1289-90, 47 Cal. Rptr. 2d 715 (1995) (fraudulent inducement to purchase risky investments; no lending at issue); Pinchot v. Charter One Bank, FSB, 99 Ohio St. 3d 390, 398, 2003-Ohio-4122, 792 N.E.2d 1105 (mortgage satisfaction statute not preempted because not regulating lending activity). ¶18 Others of the McCurrys' cited cases are simply unpersuasive. ¶19 Similarly, Leto v. World Savings & Loan Ass'n, No. CIV.A.SA-98-CA0261OG, 1998 WL 1784221 (W.D. Tex. 1998), another opinion cited by the McCurrys, is lacking in persuasive power. Leto is simply an unpublished report and recommendation by a federal magistrate judge, in which the court finds no basis for federal removal jurisdiction because some state law claims might preclude total preemption. Leto, 1998 WL 1784221, at *4. ¶20 In sum, every currently valid published judicial opinion—with the exception of Konynenbelt—and OTS itself conclude that fees of the type at issue in this case are "loan-related fees" within the plain meaning of 12 C.F.R. § 560.2(b)(5). As such, "the analysis [ends] there," and any claim alleging the illegality of such fees "is preempted." 61 Fed. Reg. at 50,966. Put more bluntly, our conclusion that the fax fees and notary fees challenged by the McCurrys are "loan-related fees" means "that is the end of the case." Ocwen, 491 F.3d at 643. ¶21 Moreover, even were we to conclude that 12 C.F.R. § 560.2(b)(5) did not conclusively resolve the preemption issue, we would nonetheless conclude, consistent with the rationale stated in Haehl, that a judicial decision imposing restrictions on the type of fees at issue in this case would more than "incidentally affect" the lending operations of federally chartered savings banks and thus nonetheless be preempted pursuant to 12 C.F.R. § 560.2(c): A decision in plaintiffs' favor would have the same effect as a direct regulation of the fees: to determine the circumstances under which [the defendant] may charge its customers a reconveyance fee . . . . Thus, applying [state] tort law in this case would more than "incidentally affect" lending operations by imposing substantive requirements on lending operations. Haehl, 277 F. Supp. 2d at 942. This rationale applies with equal force to the McCurrys' state contract and CPA claims. ¶22 Contrary to the McCurrys' contention, there is no basis for distinguishing between the fax fees and notary fees that the McCurrys claim to be unlawful. Both are "loan-related fees" required for the reconveyance and recordation of the deed of trust that was held by Chevy Chase as security for the McCurrys' home loan. This being so, the fees at issue here are directly regulated by OTS, and state law may not directly or indirectly impose additional requirements on Chevy Chase with respect to them. ¶23 Affirmed. AGID and LEACH, JJ., concur.