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United States Court of Appeals for the Fifth Circuit
February 5, 2003, Decided ; February 5, 2003, Filed
[*489] BENAVIDES, Circuit Judge:
This banking case presents a preemption question. The Texas Legislature enacted a par value statute, Tex. Bus. & Com. Code § 4.112, (hereinafter "Par Value") which prohibits banks in Texas, including national banks, from charging a fee for cashing a check that is presented to be drawn against an account that the bank itself holds. Plaintiff-appellees Wells Fargo Bank of Texas, et al. (the "Banks") are national banks that do business in Texas. 1 The Banks contend that Par Value [*490] is preempted by the National Bank Act, 12 U.S.C. § 21 et seq., and by 12 C.F.R. § 7.4002(a) . On cross motions for summary judgment, the district court found that Par Value is preempted, granted summary judgment in favor of the Banks, permanently enjoined Defendant-appellant James, in his capacity as Texas Banking Commissioner (hereinafter Texas or Appellant), from enforcing Par Value, and decreed Par Value null and void. Appellant appeals from this ruling. [**2]
Texas enacted Par Value which provides that, " a payor bank shall pay a check drawn on it against an account with a sufficient balance at par, without regard to whether the payee holds an account at the bank." Texas BCC § 4.112(a). The legislation prohibits banks from charging a fee to non-account holding payees who present a check to the bank which holds the account that the check is drawn against. Under Par Value banks are still permitted to charge a fee for cashing a check to the account holder who authored the check. Texas offers two policy considerations in support of Par Value. First, Texas identifies Par Value as a consumer protection measure, enacted to ensure that Texas employees, and in particular the working poor, receive payment for the face value of their paycheck. Texas notes that individuals who do not have a checking account and who seek to cash checks [**3] at the institution which issued the negotiable instrument are predominately low-income individuals, and are also disproportionately members of minorities. Texas sought to prohibit banks from exporting the cost of issuing a negotiable instrument to its account holder- a service that is clearly useless unless the instrument is redeemable - to non-account holding payees with whom the bank has no financial relationship. Additionally, Texas sought to protect the integrity of negotiable instruments in Texas, concluding that if a check is subject to a redemption fee, the value of the check itself differs from its face value. Par Value was scheduled to go into effect September 1, 2001.
Appellee Banks are organized under the National Bank Act (NBA), 12 U.S.C. § 21 et seq. and they conduct business in Texas. ] The NBA authorizes federally chartered national banks to, "exercise all such incidental powers to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange and other evidences of debt." 12 U.S.C. § 24 (Seventh).
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321 F.3d 488 *; 2003 U.S. App. LEXIS 1998 **
WELLS FARGO BANK OF TEXAS NA; BANK OF AMERICA NA; BANK ONE NA; THE CHASE MANHATTAN BANK; COMERICA BANK-TEXAS, Plaintiffs - Appellees, v. RANDALL S. JAMES, in his official capacity as Texas Banking Commissioner, Defendant-Appellant.
Subsequent History: [**1] As Revised February 17, 2003.
Prior History: Appeal from the United States District Court for the Western District of Texas. 1:01-CV-538-JN. James R Nowlin, Chief Judge.
par value, national bank, Banks, regulation, preempted, payees, customer, district court, deference, delegate, state law, check-cashing, non-account, authorizes, prohibits, negotiable
Banking Law, National Banks, Bank Powers, Implied & Incidental Powers, Business & Corporate Compliance, Negotiable Instruments, Types of Negotiable Instruments, Bills of Exchange, Banking & Finance, Federal Acts, National Bank Act, Types of Banks & Financial Institutions, General Overview, Contracts Law, Discharge & Payment, Payments, Interest & Usury, Regulators, US Office of the Comptroller of the Currency, Constitutional Law, Supremacy Clause, Governments, Legislation, Interpretation, State & Territorial Governments, Legislatures, Federal Preemption, Insurance Law, Industry Practices, Federal Regulations, Insurance Brokerage, Insurance Company Operations, Conducting Business, Banks, Administrative Law, Agency Rulemaking, Rule Application & Interpretation, Federal Government, Claims By & Against, Examinations, Bank Activities, Securities, Nonbank Banks, Consumer Protection, Civil Procedure, Appeals, Standards of Review, Clearly Erroneous Review, Types of Parties, Payees