Aguayo v. U.S. Bank

Summarized by Anthony Bisconti , Bienert Katzman Littrell Williams LLP
14 years 7 months ago

Citation:

Case No. 09-56679 (9th Cir. August 1, 2011)

Tag(s):

9th Circuit

Ruling:

The Court reversed the district court’s order granting Defendant U.S. Bank, N.A.'s ("U.S. Bank") motion to dismiss Plaintiff Jose Aguayo's ("Aguayo") complaint under California's Rees-Levering Act and remanded for further proceedings, holding that the federal National Bank Act (“NBA”) and regulations issued by the Office of the Comptroller of Currency (“OCC”) did not preempt the Rees-Levering Act's provisions governing certain post-repossession notices required under the Act prior to selling repossessed property.

Procedural context:

Appeal of district court’s grant of U.S. Bank's motion to dismiss Aguayo’s complaint that U.S. Bank violated California's Rees-Levering Act by failing to provide Aguayo with required post-repossession notices prior to selling the repossessed vehicle.

Facts:

In 2003, Aguayo purchased and financed a Ford Expedition. Aguayo fell behind on payments. In August 2007, after U.S. Bank repossessed the vehicle, U.S. Bank sent Aguayo several documents. The first document was titled “Notice of Our Plan to Sell Property," which stated that the vehicle would be sold after a date certain. The second document was titled a “Request for Extension,” by which Aguayo could request a ten-day extension of the deadline to redeem the vehicle. The final document was titled “California Redemption Letter with an Extension Agreement Accompanied,” which provided Aguayo with an accounting necessary to either redeem or reinstate the contract. The Letter contained a conspicuous notice in bold, all capital letters, advising that Aguayo may be subject to suit and liability if U.S. Bank’s sale of the vehicle was insufficient to satisfy the balance of the contract. The language in the Letter tracked the language required under the Rees-Levering Act, but did not contain all the required information. U.S. Bank sold the vehicle after Aguayo did not redeem, and sought to recover the deficiency from Aguayo. In response, Aguayo filed suit against U.S. Bank in California state court. U.S. Bank timely removed the action to the district court and moved for dismissal, arguing that the NBA and OCC regulations preempt the Rees-Levering Act, a state law. The district court dismissed the case, holding that the Rees-Levering Act repossession notice requirements were expressly preempted by the federally-enacted NBA and OCC regulations. In so holding, the district court examined the NBA, which exempts national banks from state laws concerning “[d]isclosures and advertising, including 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.” The district court held that the Rees-Levering notice requirements are “disclosures” under the NBA, and found that the post-repossession notice qualified as an “other credit-related document” because it was issued during a continuing credit relationship with Aguayo. The Court found that the district court erred in not analyzing the savings clause of the OCC, which explicitly saves state laws regarding “rights to collect debts” from preemption. Noting that debt collection, and the right to repossess property that is the subject of a secured transaction, traditionally has deep roots in state law, the Court found that the OCC’s use of a vague “credit-related document” term was not sufficient for express preemption. Reviewing the legislative history, the Court determined that the OCC was intended to preserve “undiscriminating” state laws “that form the legal infrastructure for conducting banking or other business.” Finding that the Rees-Levering Act does not discriminate because it applies to any defaulted car loan repossession irrespective of the original lender, the Court held that the challenged sections of the Rees-Levering Act fell under U.S. Bank’s “right to collect debts.” In light of this, the Court held that the district court erred by holding that the Rees-Levering Act post-repossession notices were expressly preempted. The Court examined whether the documents sent to Aguayo constituted “disclosures” under the NBA, and determined that they were nothing more than notices or demand letters. The Court then looked to whether the documents sent to Aguayo constituted “credit related documents” under the NBA. In examining the language in the OCC, the Court noted that the Rees-Levering notification was sent after the lending relationship ended, and if the OCC intended to expand the term “other credit-related document” to debt collection notices, it could have done so expressly.

Judge(s):

Hon. Harry Pregerson, Hon. Kim McLane Wardlaw, Hon. Jack Zouhary

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