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Hymes v. Bank of Am., N.A.

United States District Court for the Eastern District of New York

September 30, 2019, Decided; September 30, 2019, Filed

18-CV-2352 (RRM) (ARL); 18-CV-4157 (RRM) (ARL)

Opinion

 [*174]  MEMORANDUM AND ORDER

ROSLYNN R. MAUSKOPF, United States District Judge.

 [*175]  Plaintiffs Saul Hymes and Illana Harwayne-Gidansky (the "Hymes Plaintiffs"), and plaintiff Alex Cantero (collectively with the Hymes Plaintiffs, "Plaintiffs"), bring this pair of putative class actions against Bank of America, N.A. ("the Bank"), seeking to require the Bank to pay interest, as required by New York General Obligation Law ("GOL") § 5-601, on money Plaintiffs have deposited into mortgage escrow accounts. Before the Court are the Bank's nearly identical motions to dismiss the complaints in each action for failure to state a claim pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). In each motion, the Bank principally argues that the National Bank Act ("NBA") preempts GOL § 5-601 and that Plaintiff's claims for breach of contract, unjust enrichment, and violation of state consumer protection law must therefore be dismissed. [**3]  The motions are consolidated for the purposes of this Memorandum and Order.

For the reasons set forth below, the Court concludes the NBA does not preempt GOL § 5-601. Accordingly, Plaintiffs' complaints state valid claims for breach of contract. Plaintiffs' claims for unjust enrichment and violation of New York General Business Law § 349 are dismissed.

BACKGROUND

I. The NBA and Dodd—Frank

"In 1864, Congress enacted the NBA, establishing the system of national banking still in place today." Watters v. Wachovia Bank, N.A., 550 U.S. 1, 10-11, 127 S. Ct. 1559, 167 L. Ed. 2d 389 (2007) (citations omitted). The NBA created the Office of the Comptroller of the Currency ("OCC") to oversee nationally chartered banks, and it vested those banks with certain enumerated powers. Since the early twentieth century, this has included the power to "make, arrange, purchase or sell loans or extensions of credit secured by liens on interests in real estate." 12 U.S.C. § 371(a); accord 12 C.F.R. § 34.3(a).1 The NBA also vested national banks with "all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; . . . [and] by loaning money on personal security." 12 U.S.C. § 24 (Seventh). Pursuant to these powers, throughout the past century, national banks have engaged [**4]  in the business of making residential real estate loans secured by mortgages.

While Congress delegated regulation of national banks to the OCC, it did not "wholly withdraw" them "from the operation of State legislation." First Nat'l Bank v. Kentucky, 76 U.S. 353, 361, (9 Wall.) 353, 19 L. Ed. 701 (1869). "It is often said that we have a 'dual banking system' of federal and state regulation." Wachovia Bank, N.A. v. Burke, 414 F.3d 305, 314 (2d Cir. 2005) (citations omitted). In this system, and as will be discussed more fully below, national banks are subject to state law, provided the state law does not "prevent or significantly interfere with the national bank[s'] exercise of [their] powers." Barnett Bank of Marion Cty., N.A. v. Nelson, 517 U.S. 25, 33, 116 S. Ct. 1103, 134 L. Ed. 2d 237 (1996). When state law does  [*176]  prevent or significantly interfere with banks' exercise of their powers, it is preempted by the NBA. Id.

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408 F. Supp. 3d 171 *; 2019 U.S. Dist. LEXIS 172107 **; 2019 WL 4888123

SAUL R. HYMES and ILLANA HARWAYNE-GIDANSKY, on behalf of themselves and all others similarly situated, Plaintiffs, - against - BANK OF AMERICA, N.A., and Does 1 through 10, inclusive, Defendants.ALEX CANTERO, individually and on behalf of all others similarly situated, Plaintiff, - against - BANK OF AMERICA, N.A., Defendant.

CORE TERMS

escrow, mortgage, preempted, preemption, lenders, deference, borrowers, lending, consumer, enrichment, unjust, deposits, deceptive, incidental, savings, persuasive, rulemaking, exempt, notice, promulgated, compliance, prescribed, customers, impound, consolidated, interfered