Out-of-state bank fees are permitted under federal law, the Eleventh U.S. Circuit Court of Appeals recently concluded.
A pair of Florida customers – Derek Pereira and Camila De Freitas – presented checks at a Florida branch of Regions Bank in July 2012. The checks were drawn on Alabama-based Regions, for which the bank charged each a fee.
Florida Statute Section 655.85 provides that a financial institution “may not settle any check drawn on it otherwise than at par.” Pereira and De Freitas filed a putative class action suit against Regions in Florida federal court, alleging that because of the fee they received less than the full amount of their checks and therefore less than par value.
Regions relied on a preemption defense, arguing that regulations promulgated by the Office of the Comptroller of the Currency pursuant to the National Bank Act trumped this Florida statute with respect to out-of-state state banks.
Regions Bank moved to dismiss, which the district court granted on the grounds that, among other things, federal law preempts Section 655.85. On appeal, the unanimous federal appellate panel noted that an earlier decision – Baptista v. JPMorgan Chase Bank – found such claims pursuant to Section 655.85 to be preempted with regard to national banks. The court also looked to 12 U.S.C. § 1831a(j), which provides that “[t]he laws of a host State . . . shall apply to any branch in the host State of an out-of-State State bank to the same extent as such State laws apply to a branch in the host State of an out-of-State national bank. To the extent host State law is inapplicable to a branch of an out-of-State State bank in such host State pursuant to the preceding sentence, home State law shall apply to such branch.”
Applying the statute and Baptista together, the court “readily conclude[d]” that the plaintiffs’ causes of action were preempted.
“Assuming for the sake of argument that [Florida law] would prohibit Florida branches of an out-of-state state banks from charging a fee to cash a check presented in person, that law would apply ‘to the same extent’ that it applies to out-of-state national banks. And, as explained previously, federal law preempts [Florida law] with respect to national banks,” the panel wrote. “Therefore, even if [Florida law] would otherwise apply to Regions, federal law preempts its application.”
Further support for the court’s conclusion was found in the legislative history of the federal statute, amended in 1997 by Congress “to alter how states regulate out-of state banks; from treating them the same as in-state banks to treating them as out-of-state national banks are treated.”
“The plain language of § 1831a(j)(1), along with its legislative history, combined with binding circuit precedent, convince us that [Florida law] is preempted as to out-of-state state banks,” the panel wrote. Additional claims for unjust enrichment were premised on the same facts as those alleging violations of Florida state law, requiring dismissal of the entire suit on federal preemption grounds.
To read the decision in Pereira v. Regions Bank, click here.
Why it matters: Although the Eleventh Circuit panel based its decision on several grounds – from federal statute to circuit precedent to legislative history – counsel for the plaintiffs told Law360 that his clients intend to appeal the decision, which he contends directly conflicts with rulings from Florida state courts. “We will likely petition the U.S. Supreme Court to resolve [the split],” he said.