Case No IN THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT PENI COX, Plaintiff-Appellant. vs.

Transcription

1 Appellate Case: Document: Date Filed: 11/03/2010 Page: 1 Case No IN THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT PENI COX, Plaintiff-Appellant vs. RECONTRUST COMPANY, N.A.; BANK OF AMERICA HOME LOANS SERVICING, LP; BANK OF AMERICA, FSB; NEW LINE MORTGAGE, DIVISION OF REPULIC MORTGAGE HOME LOANS, LLC; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AND DOES 1-5, Defendants-Appellee Interlocutory Appeal from an Order of the United States District Court For The District of Utah, Central Division No. 2:10-CV SA Hon. Clark Waddoups REPLY BRIEF OF APPELLANT JOHN CHRISTIAN BARLOW CAMERON SORAN (Law Student) Attorney for Plaintiff/Appellant 40 North 300 East, Suite 101 St. George, UT Telephone: (435) E.CRAIG SMAY Attorney for Plaintiff/Appellant 174 E. South Temple Salt Lake City, UT Telephone: ORAL ARGUMENT REQUESTED

2 Appellate Case: Document: Date Filed: 11/03/2010 Page: 2 TABLE OF CONTENTS TABLE OF CONTENTS... i TABLE OF AUTHORITIES... iii INTRODUCTION... 1 RESPONSE TO COUNTERSTATEMENT OF THE ISSUES PRESENTED ON APPEAL... 3 RESPONSE TO STANDARD OF REVIEW... 6 SUMMARY OF ARGUMENT... 6 ARGUMENT... 9 I. THE DISTRICT COURT SHOULD ONLY HAVE EXERCISED JURISDICTION IN THIS CASE IF THE NATIONAL BANK ACT COMPLETELY PREEMPTED THE RELEVANT UTAH STATUTES...10 II. THE NATIONAL BANK ACT DOES NOT PREEMPT EITHER UTAH STATUTE...12 A. The Presumption Against Preemption Applies in this Case...12 B. As Stated Previously, the NBA does not Preempt either Utah Statute...14 C. Defendants Analysis of 12 U.S.C. 92a and Associated Regulations is Incorrect...14 D. Defendants Reliance on the OCC Interpretive Letters is Unavailing...17 E. Defendants Other Arguments are Unavailing...19 F. The National Bank Act does not Completely Preempt both Utah Statutes 20 III. THE PREMISE OF RECONTRUST S ARGUMENT IS THAT STATE LAWS DO NOT APPLY TO NATIONAL BANKS...21 A. The Historical Overview of the Subjection of National Banks to State Laws According to the Supreme Court...21 B. The Correct Interpretation of How Utah State Laws Apply to National Banks...23 i

3 Appellate Case: Document: Date Filed: 11/03/2010 Page: 3 CONCLUSION...26 STATEMENT REGARDING ORAL ARGUMENT...26 ATTACHMENTS 1. Defendant s Memorandum in Opposition to Plaintiff Peni Cox s Motion for Partial Summary Judgment 2. Declaration of Richard F. Ensor Requesting Judicial Notice in Connection with Reply Brief in Support of Motion to Dismiss 3. Peni Cox Deed of Trust ii

4 Appellate Case: Document: Date Filed: 11/03/2010 Page: 4 Cases TABLE OF AUTHORITIES 770 PPR, LLC v. TJCV Land Trust, 30 So.3d 613 (Fla. App. 2010)...19 American Bush v. City of South Salt Lake, 42 Fed.Appx. 308 (2002)...11 Anderson Nat. Bank v. Luckett, 321 U.S. 233 (1944)...22 Attorney General of Oklahoma v. Tyson Foods, Inc., 565 F.3d 769 (2009)... 6 Bank of Am. v. City & County of San Francisco, 309 F.3d 551 (9th Cir. 2002)...24 Barnett Bank of Marion County v. Nelson, 517 U.S. 25(1996)... 12, 22 Bauchman ex rel. Bauchman v. West High Sch., 132 F.3d 542 (10th Cir.1997)...10 Beneficial Nat l Bank v. Anderson, 539 U.S. 1 (2003)... 9, 10, 11, 20, 21 Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343 (1988)...7, 10 Caterpillar Inc. v. Williams, 482 U.S. 386, (1999)...21 Christensen v. Harris County, 529 U.S. 576 (2000)...18 City of Burbank v. Lockheed Air Terminal, Inc., 411 U.S. 624 (1973)...13 Cuomo v. Clearing House Ass'n, L.L.C., 129 S. Ct. 2710, (2009)... passim Enterprise Intern., Inc. v. Corporation Estatal Petrolera Ecuatoriana, 762 F.2d 464 (5 th Cir. 1985)... 4 First Nat'l Bank v. Dickinson, 396 U.S. 122 (1969)...23 First National Bank in St. Louis v. Missouri, 263 U.S. 640, (1924)...23 Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132 (1963)...13 iii

5 Appellate Case: Document: Date Filed: 11/03/2010 Page: 5 Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal.,463 U.S. 1 (1983)...21 Indiana National Bank v. Roberts, 326 So.2d 802 (Miss. 1976)...19 Jones v. Rath Packing Co., 430 U.S. 519 (1977)... 12, 13 National Bank v. Commonwealth, 9 Wall. 353 (1870)... 13, 22, 23 Nat'l State Bank v. Long, 630 F.2d 981 (3d Cir.1980)...24 Perdue v. Crocker Nat'l Bank, 38 Cal.3d 913 (1985)...24 Pullman Co. v. Jenkins, 305 U.S. 534 (1939)...10 Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947)... 12, 13 United States v. Bass, 404 U.S. 336 (1971)...12 United States v. Mead Corp., 533 U.S. 218 (2001)...18 Waite v. Dowley, 94 U.S. 527, (1876)...22 Watters v. Wachovia Bank, N.A., 550 U.S. 1 (2007)... 12, 14, 23 Wells Fargo Bank N.A. v. Boutris, 419 F.3d 949 (9th Cir. 2005)...19 Statutes 12 U.S.C U.S.C. 92a... passim 28 U.S.C U.S.C U.S.C , 10, 11 iv

6 Appellate Case: Document: Date Filed: 11/03/2010 Page: 6 Utah Code Utah Code 16-10a , 19, 25 Utah Code 16-10a Utah Code 16-10a , 14 Utah Code , 25 Rules Fed. R. App. P. Rule 28(c)... 1 Regulations 12 C.F.R , 16, 23, C.F.R C.F.R Other Authorities Activities Permissible for a National Bank...16 Comptroller s Licensing Manual, Fiduciary Powers...16 OCC Interp. Letter No v

7 Appellate Case: Document: Date Filed: 11/03/2010 Page: 7 Case No IN THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT PENI COX, Plaintiff-Appellant vs. RECONTRUST COMPANY, N.A.; BANK OF AMERICA HOME LOANS SERVICING, LP; BANK OF AMERICA, FSB; NEW LINE MORTGAGE, DIVISION OF REPULIC MORTGAGE HOME LOANS, LLC; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AND DOES 1-5, Defendants-Appellee Interlocutory Appeal from an Order of the United States District Court for the District of Utah, Central Division Hon. Clark Waddoups REPLY BRIEF OF APPELLANT INTRODUCTION Plaintiff-Appellant Peni Cox ( Cox ) submits this Reply Brief pursuant to Fed. R. App. P. Rule 28(c).Cox clarifies the issue presented by the Defendant- Appellees, ReconTrust, Bank of America, and Mortgage Electronic Registration Systems. For the purpose of this reply brief, Defendant-Appellees shall be known as ReconTrust, although they are separate entities. 1

8 Appellate Case: Document: Date Filed: 11/03/2010 Page: 8 This is an appeal of an Interlocutory Decision by the District Court that lifted an injunction issued by the State Court. This Court has jurisdiction under 28 U.S.C. 1441(b). Except as provided in subsections (c) and (d) of this section, the courts of appeals shall have jurisdiction of appeals from: (1) Interlocutory orders of the district courts of the United States, of the judges thereof, granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions, except where a direct review may be had in the Supreme Court[.] This section, under which Cox appeals, allows this court to review an interlocutory order of a district court that dissolved an injunction. The District Court entered an Interlocutory order in which it ruled it had jurisdiction to lift the State Court injunction based upon the fact the preemption exists which allows ReconTrust to operate in the State of Utah without being subject to state laws because ReconTrust is a National Bank. This court need not review the merits of the injunction itself because that is not the basis of this appeal, but this court must review the District Court s decision upon which the District Court determined the State Court Injunction invalid. this appeal: Cox submits to this Court that there are three possible scenarios presented by (1) The District Court lacks jurisdiction. This being so, the case should be remanded to the State Court, Injunction intact. 2

9 Appellate Case: Document: Date Filed: 11/03/2010 Page: 9 (2) The District Court has jurisdiction but made an error in its interpretation of the National Bank Act and the ability of a National Bank to preempt State statutes. The result would be that the District court retains jurisdiction, but, based on Utah law, the injunction must be reinstated or a new injunction issued. (3) The District Court has jurisdiction and did not error in its interpretation of the National Bank Act. This is the position of ReconTrust which Cox wholly disputes. Cox declines to argue the merits of the injunction because the injunction itself is not the basis of the appeal, but a more substantial issue of preemption 1 that was addressed in the Interlocutory order is what Cox submits to this court as the basis of appeal. RESPONSE TO COUNTERSTATEMENT OF THE ISSUES PRESENTED ON APPEAL The Defendants suggest that Plaintiff Cox filed the appeal to decide whether the district court abused its discretion when it dissolved the state court injunction. See Respondent s Brief p. 3. This is incorrect. The threshold question here is whether the [district] court has subject matter jurisdiction over this action. District Court Memo. Dec. at 2. Plaintiff filed an interlocutory appeal pursuant to 28 1 The question becomes whether the National Banking Act completely preempts these Utah causes of action allowing for removal in this case. Appellant Brief Attachment 1, Memo. Dec. p. 8. 3

10 Appellate Case: Document: Date Filed: 11/03/2010 Page: 10 U.S.C. 1292(a) for this court to review an interlocutory order of a district court that dissolved an injunction. The threshold question for modification of an injunction is whether the district court has jurisdiction, not whether the district court abused its discretion in dissolving the injunction. See Enterprise Intern., Inc. v. Corporation Estatal Petrolera Ecuatoriana, 762 F.2d 464, (5 th Cir. 1985) (a district court must have valid jurisdiction before entering an order respecting interlocutory injunctive relief); Respondent s Brief p. 13 (agreeing with this point). The district court ruled that it held jurisdiction on the sole grounds of complete preemption of both Utah statutes. District Court Memorandum Opinion p. 2 Defendants contend that the injunction as a result of their failure to register as a foreign corporation is procedurally invalid. The State Court correctly issued the injunction. The Defendants reach their conclusion as a result of their flawed reading of the statute. The Utah registration statute is stated thusly: 16-10a Consequences of transacting business without authority. (5) Upon a finding by the court that a foreign corporation or any of its officers or agents have transacted business in this state in violation of this part, the court shall issue, in addition to or instead of a civil penalty, an injunction restraining the further transaction of the business of the foreign corporation and the further exercise of any corporate rights and privileges in this state. Upon issuance of the injunction, the foreign corporation shall be enjoined from transacting business in this state until all civil penalties have been paid, plus any 4

11 Appellate Case: Document: Date Filed: 11/03/2010 Page: 11 interest and court costs assessed by the court, and until the foreign corporation has otherwise complied with the provisions of this part. The State Court received evidence that ReconTrust, Bank of America, and MERS are not registered to do business in the State of Utah. The State Court then issued an injunction as it is directed to do so under the statute. ReconTrust reads the statute thusly: If a foreign corporation is found to be in violation of these provisions, section 1502(5) permits a court issue an injunction restraining the further transaction of the business of the foreign corporation and the further transaction of the business of the foreign corporation and the further exercise of any corporate rights and privileges in this state. Respondents Brief Foot note 6 page 32. ReconTrust believes that the injunction was permissive, and ReconTrust wants this court to think that the State Court was outside its boundaries when it issued the injunction. According to the plain language of the statute, an injunction was mandatory. If ReconTrust has issue with the fact that the statute requires an injunction they need to challenge the statute in court, not simply try to convince this Court that the statute says something other than what it actually does. Thus, the question of whether the District Court properly exercised jurisdiction is the only question on appeal which this Court must answer. This Court need not determine the validity of the injunction issued by the State Court. 5

12 Appellate Case: Document: Date Filed: 11/03/2010 Page: 12 RESPONSE TO STANDARD OF REVIEW Defendants argue that the standard of review in this case is abuse of discretion. See Respondent s Brief p. 13. Defendants are incorrect. The standard of review for this case is de novo. See Appellants Brief p. 2. Even assuming Defendants view of the issues on appeal is correct, the standard of review is still de novo. Attorney General of Oklahoma v. Tyson Foods, Inc., 565 F.3d 769, 776 (10 Cir. 2009). SUMMARY OF ARGUMENT The District Court did not have the power to dissolve the Injunction issued by the State Court. The District Court claimed that complete preemption existed making Plaintiff s claims federal, and that it had jurisdiction over the issues enabling it to enter a ruling dissolving the injunction. District Court Memo. Dec. at 17. The District Court held that there are only two possible grounds for concluding that the court could retain jurisdiction and dissolve the injunction. District Court Memo. Dec. at 3. First, if supplemental jurisdiction existed, then the District Court could have exercised jurisdiction. Id. Second, if the National Bank Act (NBA) completely preempted both Utah statutes, then the District Court could have exercised jurisdiction. Id. Neither supplemental jurisdiction nor complete preemption however, is present in this case. 6

13 Appellate Case: Document: Date Filed: 11/03/2010 Page: 13 First, there was no supplemental jurisdiction at the time of removal, since Plaintiff s state law claims were not so related to her RESPA claim that they formed part of the same case or controversy. District Court Memo. Dec. at 3. Even if they did, a District Court should not exercise supplemental jurisdiction when the federal law claims are no longer present. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988). Second, the NBA does not completely preempt both Utah statutes. Plaintiff has already thoroughly demonstrated this point in the original brief, and all of Defendants arguments in their response are unavailing. (1) Despite the Defendant s assertions to the contrary, the presumption against preemption does apply here. Cuomo v. Clearing House Ass n, L.L.C., 129 S. Ct. 2710, (2009). (2) Moreover, 12 U.S.C. 92a and associated regulations do not preempt both Utah statutes, since neither statue is an exercise of visitorial powers nor specifically preempted by 12 U.S.C. 92a and associated regulations. Indeed, the only interpretation that would allow for 12 U.S.C. 92a and associated regulations to preempt both Utah statutes would make national banks completely immune to all State laws, a clearly absurd result. 7

14 Appellate Case: Document: Date Filed: 11/03/2010 Page: 14 (3) Nor is the Defendants reliance on the OCC interpretation letters particularly persuasive, since they are neither binding, nor do they specifically address the question at issue. (4) Defendants other arguments are neither persuasive nor on point. (5) Defendant now serially shifts positions to disguise the fact that no similar institution, state or federally chartered, is given power of sale as trustee of a trust deed by Utah law. First defendant claimed to be a depository institution 2 in obtaining reversal of the state court injunction. Next, Defendants claimed to be a Trust (Non-Deposit) and a non-depository institution. 3 It appearing that trust companies also lack power of sale under Utah law, defendant now claims that federally chartered trust companies have power of sale by implication from their trust powers, though state trust companies do not. (6) Lastly Defendants position is undermined by the very instrument they wish to enforce, the Deed of Trust. Under paragraph 16 of the Deed of 2 Utah Code provides a list of persons eligible to act as trustees in Utah. These include members of the Utah state bar, depository institutions, and title insurance companies. Utah Code ReconTrust is not permitted to serve as a trustee under this Utah regulation. This restriction on ReconTrust s ability to act as a trustee clearly conflicts with 12 U.S.C. 92a(b) because Utah Code allows a depository institution, which is unquestionably a competitor of a national bank, to act as a trustee. (Memo. Dec. [Doc. # 45] at 14.) Preemption principles thus bar the application of to ReconTrust, and Plaintiff s request for summary judgment on her claim based on that statute must be denied. Defendants Memo. in Opp., [Doc. #58] at 6, Attach The Court can take judicial notice of the fact that ReconTrust Company, N.A. is a nondepository institution as that fact is set forth in the public records. Dec. Richard Ensor [Doc. # 66] at 2, par. 2, Attach. 2. 8

15 Appellate Case: Document: Date Filed: 11/03/2010 Page: 15 Trust states This Security Instrument shall be governed by federal law and the law of the jurisdiction in which the property is located. Attach.3. Even if the NBA did preempt either Utah statute, the NBA does not completely preempt them. Federal preemption requires that the State statute conflicts with the federal statute, but complete preemption requires that the NBA provide the exclusive cause of action for the claim asserted and also set forth procedures and remedies governing that cause of action. Beneficial Nat l Bank v. Anderson, 539 U.S. 1, 8 (2003) (emphasis added). This standard, as articulated by the Supreme Court, is simply not present in this case. Thus, the District Court incorrectly exercised jurisdiction in this case, and this Court should remand this case to the State trial court, or in the alternative issue an order to the District Court to correct its ruling. ARGUMENT Plaintiff will not restate all of the same arguments already presented within Plaintiff s opening brief. Rather, Plaintiff will only focus on responding to arguments that Respondent raises that the Plaintiff has not already covered in the opening brief. 9

16 Appellate Case: Document: Date Filed: 11/03/2010 Page: 16 I. THE DISTRICT COURT SHOULD ONLY HAVE EXERCISED JURISDICTION IN THIS CASE IF THE NATIONAL BANK ACT COMPLETELY PREEMPTED THE RELEVANT UTAH STATUTES A defendant may remove a civil action filed in state court to federal court if a claim arises under federal law. 28 U.S.C. 1441(b) (2010). In determining if a claim arises under federal law, courts examine the well pleaded allegations of the complaint and ignore potential defenses. Beneficial Nat l Bank v. Anderson, 539 U.S. 1, 6 (2003) and 28 U.S.C (2010). The action here was removed solely on the basis of an original claim under RESPA. Since Cox amended her complaint to voluntarily dismiss the RESPA claim and include only state claims, there are only two possible grounds for the District Court to retain jurisdiction. Removal is not available to re-institute the RESPA claim for decision. (1)The court may exercise supplemental jurisdiction if it concludes that the state law claims are so related to her RESPA claim that they form part of the same case or controversy. 28 U.S.C. 1367(a) (2010). It is not necessary that the plaintiff alleges no federal claim now, since the court must determine the right to remove at the time of the petition for removal. Pullman Co. v. Jenkins, 305 U.S. 534, 537 (1939). However, the District Court should refuse supplemental jurisdiction if the federal claims are no longer present. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988); Bauchman ex rel. Bauchman v. West High Sch., 132 F.3d 542, 549 (10th Cir.1997); American Bush v. City of South Salt Lake, 10

17 Appellate Case: Document: Date Filed: 11/03/2010 Page: Fed.Appx. 308, 310 (2002). The cases cited by defendant (e.g. Boelens, 759 F.2d 504 (5 Cir. 1985); Westmoreland, 605 F.2d 119 (3 Cir. 1979)) nowhere suggest that voluntary dismissal of a federal claim after removal leaves the federal court with jurisdiction to review and reverse prior state law decisions of the state court. Such decisions would be protected by at least comity and the law of the case. Bank of America s alleged RESPA and TILA violations, that were dropped from Cox s amended complaint, are not related to ReconTrust s power to sell Ms. Cox s home, let alone so related that they form part of the same case or controversy. 28 U.S.C. 1367(a) (2010). Indeed, the District Court concluded that it would be incorrect to exercise supplemental jurisdiction in this case. District Court Memorandum opinion at 3. (2) The defendant may remove to federal court when a federal statute wholly displaces a State law cause of action through complete preemption. 4 Beneficial Nat l Bankv. Anderson, 539 U.S. 1, 8 (2003) and 28 U.S.C (2010). Complete preemption only occurs when the federal statutes at issue provide the exclusive cause of action for the claim asserted and also set forth procedures and remedies governing that cause of action. Beneficial Nat l Bank v. Anderson, Diversity of citizenship was not asserted as a ground for removal. Further, diversity may not be resorted to for removal of a matter in which the state court has ruled on a state law issue, to obtain review of that decision by the federal court. 11

18 Appellate Case: Document: Date Filed: 11/03/2010 Page: 18 U.S. 1, 8 (2003) (emphasis added). In other words, the cause of action, even if pleaded in terms of state law, is in reality based on federal law. Id. Thus, in order for complete preemption to occur here, the NBA must not simply interfere with the state law claims, but the NBA must completely control this specific cause of action by the Plaintiff. In this case it does not. See for example Cuomo at , States have always enforced their general laws against national banks--and have enforced their banking-related laws against national banks ; Watters, at 12; and Barnett Bank of Marion County v. Nelson, 517 U.S. 25, 31 stating the NBA preempts state law whenever a state law directly conflicts with a specific federal statute, or the state law would significantly impair a specific federal statute. II. THE NATIONAL BANK ACT DOES NOT PREEMPT EITHER UTAH STATUTE A. The Presumption Against Preemption Applies in this Case The presumption against preemption applies when the area of law is historically under the States police powers. Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947). This assumption provides assurance that "the federal-state balance," United States v. Bass, 404 U.S. 336, 349 (1971), will not be disturbed unintentionally by Congress or unnecessarily by the courts. Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977). 12

19 Appellate Case: Document: Date Filed: 11/03/2010 Page: 19 This presumption against preemption however, does not apply when Congress has unmistakably ordained, Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142 (1963), that its enactments alone are to regulate a part of commerce, state laws regulating that aspect of commerce must fall. This result is compelled whether Congress' command is explicitly stated in the statute's language or implicitly contained in its structure and purpose. City of Burbank v. Lockheed Air Terminal, Inc., 411 U.S. 624, 633 (1973); Rice at 230; Jones at 525. However, States, on the other hand, have always enforced their general laws against national banks--and have enforced their banking-related laws against national banks. Cuomo at As both Utah statutes are general laws, applying to national banks and non-national banks alike, they merit presumption against preemption under the Court s analysis. Furthermore, [N]ational Banks acquisition and transfer of property [are] based on state law. Watters at 6, quoting National Bank v. Commonwealth, 9 Wall. 353, 362 (1870). Therefore, since both Utah statutes concern the acquisition and transfer of property within their borders, they fall within the traditional police powers of the States. Thus, these statutes merit presumption against preemption under the Court s analysis. 13

20 Appellate Case: Document: Date Filed: 11/03/2010 Page: 20 B. As Stated Previously, the NBA does not Preempt either Utah Statute As originally stated in the Appellant s Brief, the NBA only preempts a State statute in two instances. First, when the state exercises visitorial powers. Cuomo at 2721, and Watters at 6. The Supreme Court has defined visitorial powers as a sovereign s supervisory powers over corporations, including any form of administrative oversight that allows a sovereign to inspect books and records on demand. Cuomo, at But since neither Utah Code 16-10a nor (3) are an exercise of visitorial powers, the NBA cannot preempt them. Second, the NBA preempts state law whenever a state law directly conflicts with a specific federal statute, or the state law would significantly impair a specific federal statute. Watters, at 12 and Barnett at 31. However, there is no specific federal statute that would preempt either State statute. Consequently, the NBA does not preempt either Utah statute. powers: C. Defendants Analysis of 12 U.S.C. 92a and Associated Regulations is Incorrect Section 92a addresses the applicability of state laws to a national bank's trust (a) Authority of Comptroller of the Currency. The Comptroller of the Currency shall be authorized and empowered to grant by special permit to national banks applying therefor, when not in contravention a-1505(3) This chapter does not authorize this state to regulate the organization or internal affairs of a foreign corporation authorized to transact business in this state. 14

21 Appellate Case: Document: Date Filed: 11/03/2010 Page: 21 of State or local law, the right to act as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies, or other corporations which come into competition with national banks are permitted to act under the laws of the State in which the national bank is located. (emphasis added). 12 U.S.C. 92a(a). Therefore, a national bank may receive the legal status as a trustee from the Comptroller when not in contravention of State or local law within the State in which it is located. The Definition of Located. Looking at the plain language of the statute we can determine the definition of the word located. (a) Authority of Comptroller of the Currency. The Comptroller of the Currency shall be authorized and empowered to grant by special permit to national banks applying therefor, when not in contravention of State or local law, the right to act as trustee, or in any other fiduciary capacity in which State banks, trust companies, or other corporations which come into competition with national banks are permitted to act under the laws of the State in which the national bank is located. (emphasis added). 12 U.S.C. 92a(a). Located refers to any State where the national bank is in competition with State banks. The OCC interprets locate not as defining situs in one state, but in any State in which the national bank is in competition with State banks. To clarify locate the Comptroller promulgated 12 C.F.R The state laws that apply to a national bank's fiduciary activities by virtue of 12 U.S.C. 92a are the laws of 15

22 Appellate Case: Document: Date Filed: 11/03/2010 Page: 22 the State in which the bank acts in a fiduciary capacity. 12 C.F.R. 9.7 (e). A national bank acts in fiduciary capacity in the State in which it accepts the fiduciary appointment, executes the documents that create the fiduciary relationship, and makes discretionary decisions regarding the investment or distribution of fiduciary assets. 12 C.F.R. 9.7 (d). Under the title Fiduciary Activities in Activities Permissible for a National Bank, published in April of 2010, the OCC says: Fiduciary Activities, In Gerneral. National banks with fiduciary powers (which may be granted at the time of the chartering or subsequently on application to the OCC) are subject to federal rules that define fiduciary standards and authorize national banks to operate in the same capacities as fiduciaries are permitted to operate 6 in the States 7 where the bank conducts its trust activities(emphasis added). 12 USC 92a and 12 CFR 9. (P.42) In the Comptroller s Licensing Manual, Fiduciary Powers, published in June 2002, the OCC says: Fiduciary powers mean the authority the OCC permits a bank to exercise pursuant to 12 USC 92a. The extent of fiduciary powers is the same for out-of-state national banks as for instate national banks and that extent depends upon what powers the state grants to the fiduciaries in the state with which the national banks compete. (p.2). A bank with existing fiduciary powers may offer services in multiple states through branches, trust offices, or trust representative offices in such states. Such a bank may exercise any of the fiduciary powers granted in 12 USC 92a(a) in any state, unless that state 6 In Watters the Supreme Court used the word operate interchangeably with locate when discussing an analogous situation involving the location of a subsidiary bank. 7 Note that States is plural, meaning that the bank can operate and conduct its activities in more than one State. 16

23 Appellate Case: Document: Date Filed: 11/03/2010 Page: 23 prohibits both national banks and competing institutions in its own state from exercising that fiduciary power. (p.3). Where is ReconTrust Located? ReconTrust, as a national bank comes into competition with which State banks? Utah State banks. ReconTrust is not competing with California State banks in Utah. ReconTrust is not competing with Texas State banks in Utah. ReconTrust is not competing with Utah State banks in Texas or California. ReconTrust is competing with Utah State banks and/or trust companies. ReconTrust is located in Utah. ReconTrust is Located in Utah, California, Texas, Arizona, Alaska, Arkansas, Idaho, Mississippi, Montana, Nebraska, Nevada, Oregon, Tennessee, Virginia, and Washington. According to the ReconTrust website, ReconTrust is located in 15 States. ReconTrust claims it is headquartered in California and its trust operations for Utah foreclosures take place in Texas. Appellee Brief pg. 41. ReconTrust at least admits to being located in at least two places, California and Texas. D. Defendants Reliance on the OCC Interpretive Letters is Unavailing Defendants incorrectly rely on the OCC interpretive letters. See Respondent s Brief at p First, the OCC Interpretive Letters are not binding. The 1994 amendments on the NBA recognized that the OCC had been issuing interpretive letters on 17

24 Appellate Case: Document: Date Filed: 11/03/2010 Page: 24 federal preemption. See 12 U.S.C. 43. However, by its own language, 43 does not confer any authority on the OCC to make binding determinations concerning statutory preemption. Id. Rather, 43(a) requires the OCC to follow notice-andcomment procedures before issuing any opinion letter or interpretive rule that concludes that Federal law preempts the application to a national bank of any State law regarding community reinvestment, consumer protection, fair lending, or the establishment of intrastate branches. The crucial phrase here, opinion letter or interpretive rule, makes it clear that these types of administrative actions do not have any force of law and generally are not eligible for Chevron deference. See United States v. Mead Corp., 533 U.S. 218 (2001); Christensen v. Harris County, 529 U.S. 576 (2000). Second, Defendants appear to over-read these OCC interpretive letters. In each instance, the OCC appears to adhere to the analysis that the Plaintiff set out in the original brief. See Petitioner s Brief at p The NBA preempts State law when it attempts to exercise visitorial powers, or when there is a specific federal law on point. See OCC Interp. Letter No (North Carolina law specifically conflicting with 12 U.S.C. 92a). As stated previously, neither situation is present here. See Petitioner s Brief. 18

25 Appellate Case: Document: Date Filed: 11/03/2010 Page: 25 E. Defendants Other Arguments are Unavailing First, Defendants argue that Utah Code 16-10a-1501 is an exercise of visitorial powers. However, for the reasons stated in the Petitioner s original brief, this argument is unpersuasive. Second, Defendants urge reliance on three more non-binding cases that they believe to be persuasive in this case: Wells Fargo Bank N.A. v. Boutris, 419 F.3d 949 (9 th Cir. 2005); 770 PPR, LLC v. TJCV Land Trust, 30 So.3d 613 (Fla. App. 2010); Indiana National Bank v. Roberts, 326 So.2d 802 (Miss. 1976). Not only are these cases non-binding, they are not particularly persuasive. Boutris held that the OCC s extensive regulation concerning operating subsidiaries of a national bank (12 C.F.R. 5.34) preempted a blatant exercise of visitorial powers over a subsidiary of a national bank. Boutris, 419 F.3d at Both TJCV and Roberts held that a State cannot prohibit a national bank from filing suit or being sued due to a specific federal law stating to the contrary. It is not clear how these cases are particularly analogous, let alone persuasive, to the current dispute. 19

26 Appellate Case: Document: Date Filed: 11/03/2010 Page: 26 Third, Defendant argues that Plaintiff Cox uses this appeal as a challenge to remand ruling. This is incorrect. Plaintiff filed this appeal to challenge the district court s ruling that the NBA completely preempted both Utah statutes. Such a decision implies that State regulations concerning commercial and real property law cannot apply to national banks, a completely absurd result and one that conflicts with the long history of federal law concerning State regulation of national banks. F. The National Bank Act does not Completely Preempt both Utah Statutes As stated above, the NBA does not preempt either Utah statute. However, the standard here is not that the National Bank Act must preempt these statutes, but that they must completely preempt them. Complete preemption only occurs when the federal statutes at issue provide the exclusive cause of action for the claim asserted and also set forth procedures and remedies governing that cause of action. Beneficial Nat l Bank v. Anderson, 539 U.S. 1, 8 (2003) (emphasis added). In other words, the cause of action, even if pleaded in terms of State law, is in reality based on federal law. Id. Under the well-pleaded-complaint rule, a federal court does not have original jurisdiction over a case in which the complaint presents a State-law cause of action, but also asserts that federal law deprives the defendant of a defense he 20

27 Appellate Case: Document: Date Filed: 11/03/2010 Page: 27 may raise,... or that a federal defense the defendant may raise is not sufficient to defeat the claim. Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 10 (1983). [A] case may not be removed to federal court on the basis of... the defense of pre-emption... Caterpillar Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct (1999). To be sure, preemption requires a State court to dismiss a particular claim filed under State law, but it does not, as a general matter, provide grounds for removal. Even assuming arguendo that Defendant ReconTrust is correct in asserting that the National Bank Act preempts both Utah statutes, the National Bank Act does not provide for the exclusive cause of action for the claim asserted and also set forth procedures and remedies governing that cause of action in all State agency registration and trustee power of sale cases based on State law. (Emphasis added). Beneficial at 8. Therefore, the District Court incorrectly ruled that the National Bank Act completely preempts both Utah statutes. III. THE PREMISE OF RECONTRUST S ARGUMENT IS THAT STATE LAWS DO NOT APPLY TO NATIONAL BANKS A. The Historical Overview of the Subjection of National Banks to State Laws According to the Supreme Court So of the banks. They are subject to the laws of the State, and are governed in their daily course of business far more by the laws of the State than of the Nation. *** It is only when the State law 21

28 Appellate Case: Document: Date Filed: 11/03/2010 Page: 28 incapacitates the banks from discharging their duties to the government that it becomes unconstitutional. National Bank v. Commonwealth, 76 U.S. 353, 362 (1869). We have more than once held in this court that the national banks organized under the acts of Congress are subject to State Legislation, except were such legislation is in conflict with some act of Congress, or where it tends to impair or destroy the utility of such banks, as agents or instrumentalities of the United States, or interferes with the purposes of their creation. Waite v. Dowley, 94 U.S. 527, 533 (1876). National banks are brought into existence under the federal legislation, are instrumentalities of the federal government and are necessarily subject to the paramount authority of the United States. Nevertheless, national banks are subject to the laws of a state in respect of their affairs, unless such laws interfere with the purposes of their creation, tend to impair or destroy their efficiency as federal agencies, or conflict with the paramount law of the United States. First National Bank in St. Louis v. Missouri, 263 U.S. 640, 656 (1924). This Court has often pointed out that national banks are subject to state laws, unless those laws infringe the national banking laws or impose an undue burden on the performance of the banks' functions. Anderson Nat. Bank v. Luckett, 321 U.S. 233, 248 (1944). In defining the pre-emptive scope of statutes and regulations granting a power to national banks, these cases take the view that normally Congress would not want States to forbid, or to impair significantly, the exercise of a power that Congress explicitly granted. To say this is not to deprive States of the power to regulate national banks, where (unlike here) doing so does not prevent or significantly interfere with the national bank's exercise of its powers. Barnett Bank of Marion County v. Nelson, 517 U.S. 25, 33 (1996). Federally chartered banks are subject to state laws of general application in their daily business to the extent such laws do not conflict with the letter or the general purposes of the NBA. States are permitted to regulate the activities of national banks where doing so 22

29 Appellate Case: Document: Date Filed: 11/03/2010 Page: 29 does not prevent or significantly interfere with the national bank's or the national bank regulator's exercise of its powers. Watters v. Wachovia Bank, 550 U.S. 1, 11, 12 (2007). No one denies that the National Bank Act leaves in place some state substantive laws affecting banks. This [national banking] system echoes many other mixed state/federal regimes in which the Federal Government exercises general oversight while leaving state substantive law in place. Cuomo v. The Clearing House Association, L.L. C. and Office of the Comptroller of the Currency, 129 S. Ct. 2710, (2009). B. The Correct Interpretation of How Utah State Laws Apply to National Banks Trustee Status in Utah Defendants suggest that State laws concerning the acquisition and transfer of property do not apply to national banks. That would mean that Utah could regulate how individuals and State banks acquire and transfer property, but that these laws could not apply to national banks. Not only does this run afoul of Supreme Court case law ( [N]ational Banks acquisition and transfer of property [are] based on State law. Watters at 6, quoting National Bank v. Commonwealth, 9 Wall. 353, 362 (1870)), but it also violates States police powers 8 and allows national banks to completely ignore State law. See 12 C.F.R. 9.7 (d). 8 See, e.g., 12 C.F.R (a) & 560.2(c) (state laws pertaining to contract and commercial law, tort law, criminal law, real property law, and homestead law are not preempted by OTS regulations); de la Cuesta, 458 U.S. at 172, 102 S.Ct ( Nothing in the language of... HOLA... suggests that Congress intended to permit the [OTS] to displace local laws, such as tax statutes and zoning ordinances, not directly related to savings and loan practices. ) (O'Connor, J., concurring); First Nat'l Bank v. Dickinson, 396 U.S. 122, 90 S.Ct. 337, 24 L.Ed.2d 312 (1969) (allowing application of a Florida branch bank statute to national banks in the state); Franklin Nat. Bank v. New York, 347 U.S. 373, 378 n. 7, 74 S.Ct. 550, 98 L.Ed. 767 (1954) ( [N]ational banks may be subject to some state laws in the normal course of business if there is no conflict 23

30 Appellate Case: Document: Date Filed: 11/03/2010 Page: 30 The Defendants also contend that 12 CFR 9.7(e) grants them the power of sale. Both the plain and correct reading of this statute is that federal law limits the assignment to national banks of authority to act only when not in contravention of State or local law. A federally chartered trust company can have no power conferred upon it by the comptroller which is not conferred by State law, such as , UCA (1953), upon similar State chartered institutions. But the Defendants then take this regulation to justify that they may ignore any State law that they believe limits or establishes preconditions on their ability to act as a trustee. The Defendants completely misunderstand 9.7(e). This regulation was meant to ensure that national banks may have the legal authority to act as a trustee (among the other fiduciary capacities) - not to ignore the laws of the States in which they do business. If ReconTrust s reading was correct, then a national bank could ignore all State laws since they would potentially limit or establish preconditions on their ability to act in fiduciary capacity. Indeed, it is difficult to imagine a single economic or property regulation that a State could promulgate that would not in some way limit a national bank s ability to act in one of its eight fiduciary capacities. with federal law. ); see also Nat'l State Bank v. Long, 630 F.2d 981, 985 (3d Cir.1980) ( [R]egulation of banking has been one of dual [federal-state] control since the passage of the first National Bank Act in ); Perdue v. Crocker Nat'l Bank, 38 Cal.3d 913, 937, 216 Cal.Rptr. 345, 702 P.2d 503 (1985) ( Congress has declined to provide an entire system of federal law to govern every aspect of national bank operations. ), appeal dismissed, 475 U.S. 1001, 106 S.Ct. 1170, 89 L.Ed.2d 290 (1986) (noting lack of jurisdiction). Bank of Am. v. City & County of San Francisco, 309 F.3d 551, 566 (9th Cir. 2002) 24

31 Appellate Case: Document: Date Filed: 11/03/2010 Page: 31 The correct reading is that a national bank may receive the legal status as a trustee from the Comptroller when not in contravention of State or local law of the State in which it acts with fiduciary capacity. However, a national bank must still respect the method in which a State regulates the acquisition and transfer of property. Registration of Foreign Corporations in Utah ReconTrust claims that the Utah registration statute inhibits the OCC s ability to authorize a national bank to conduct the business of banking. Appellee s Brief p Once again, this is an overgeneralization. Utah Code Section 16-10a-1501(1) requires foreign corporations to register with the division [of corporations]. Utah Code Section requires financial institutions to register with the State Department of Financial Institutions. The irony here is that Countrywide Home Loans, of which ReconTrust is a subsidiary, or which is also a subsidiary of BAC, and doing business in the State of Utah, is registered with both State agencies. Registration with the State is not a licensing activity. No requirements are made. Everyone can register any business entity they want. The cost is $ Articles of Incorporation must be filed and the Registered Agent must be identified. 25

32 Appellate Case: Document: Date Filed: 11/03/2010 Page: 32 The public policy under this statute is that registration makes it easier for citizens to obtain service of process on out-of-state corporations doing business in the State. The OCC may give ReconTrust the necessary authority to carry on business as a National Bank. However, the status of national bank is not license for ReconTrust to operate in any fashion it wants. Necessary does not equate to sufficient. As Plaintiff stated previously in Cox s opening brief, the Utah statute requiring registration of a Foreign Corporation does not require any visitation, and the policy behind the statute is that it makes it easier for citizens to obtain service of process on out-of-state corporations doing business in Utah. CONCLUSION For the foregoing reasons, this Court must reverse the order of the District Court in which it retains jurisdiction, and remand to the State trial Court. Or, alternatively issue an order to the District Court to correct its ruling. STATEMENT REGARDING ORAL ARGUMENT Since this case presents certain key issues concerning the National Bank Act and its relationship to State law within the Tenth Circuit, we believe that Oral Argument is necessary. DATED this _3 day of November, /s/ John Christian Barlow John Christian Barlow Attorney for Plaintiff/Appellant 26

33 Appellate Case: Document: Date Filed: 11/03/2010 Page: 33 CERTIFICATE OF COMPLIANCE WITH RULE 32(a) 1. This brief complies with the type-volume limitations of Fed. R. App. P. 32(a)(7)(B) because it contains 6312 words, excluding the parts of the brief exempted by Fed R. App. P. 32(a)(7)(B)(iii), as counted by Microsoft Word 2007 the word processing software used to prepare this brief. 2. This brief complies with the typeface requirements of the Fed. R. App. P. 32(a)(5) & (6) because it has been prepared in 14 point Times New Roman a plain, Roman, proportionally spaced typeface using Microsoft Word 2007, the word processing software used to create prepare this brief. DATED this 3 day of November, /s/ John Christian Barlow John Christian Barlow Attorney for Plaintiff/Appellant 27

34 Appellate Case: Document: Date Filed: 11/03/2010 Page: 34 CERTIFICATE OF COMPLIANCE WITH THE GENERAL ORDER ON ELECTRONIC FILING This brief complies with this Court s March 18, 2009 general order regarding electronic filing because: (1) all required privacy redactions have been made; (2) the ECF submission is an exact copy of the 7 hard copies of this brief and documents, which will be submitted within 2 business days of the ECF filing; (3) the ECF submission was scanned for viruses with the most recent version of AVG, and according to the program is free of viruses. DATED this 3 day of November, /s/ John Christian Barlow John Christian Barlow Attorney for Plaintiff/Appellant 28

35 Appellate Case: Document: Date Filed: 11/03/2010 Page: 35 CERTIFICATE OF SERVICE I do hereby certify that on this _3 day of November, 2010, I caused to be electronically served a true and correct copy of the foregoing REPLY BRIEF OF APPELLANT to the following: E. Craig Smay 174 E. South Temple Salt Lake City, UT (801) Fax: (801) Cameron Soran (Law Student) 40 N. 300 E. # 101 Saint George, Utah Telephone: (253) Michael Huber 8170 S. Highland Drive, Suite E5 Sandy, Utah Richard F. Ensor (10877) VANTUS LAW GROUP, P.C East Millrock Drive, Suite 160 Salt Lake City, Utah Telephone: (801) Facsimile: (801) Roy W. Arnold (Admitted pro hac vice) REED SMITH LLP Reed Smith Centre 225 Fifth Avenue Pittsburgh, PA Telephone: (412) Facsimile: (412) Amir Shlesinger (Admitted pro hac vice) REED SMITH LLP 355 South Grand Avenue, Suite 2900 Los Angeles, CA Telephone: (213) Facsimile: (213) James Martin Reed Smith LLP 225 Fifth Avenue Pittsburgh, Pennsylvania JMartin@ReedSmith.com Phone: (412) David Bird Reed Smith LLP 225 Fifth Avenue Pittsburgh, Pennsylvania DBird@ReedSmith.com Phone: (412) /s/ John Christian Barlow 29

36 Appellate Case: Document: Date Filed: 11/03/2010 Page: 36 ATTACHMENT 1

37 Case 2:10-cv CW-SA Document 58 Filed 07/08/10 Page 1 of 7 Appellate Case: Document: Date Filed: 11/03/2010 Page: 37 Richard F. Ensor (10877) VANTUS LAW GROUP, P.C East Millrock Drive, Suite 160 Salt Lake City, Utah Telephone: (801) Facsimile: (801) Roy W. Arnold (Admitted pro hac vice) REED SMITH LLP Reed Smith Centre 225 Fifth Avenue Pittsburgh, PA Telephone: (412) Facsimile: (412) Amir Shlesinger (Admitted pro hac vice) REED SMITH LLP 355 South Grand Avenue, Suite 2900 Los Angeles, CA Telephone: (213) Facsimile: (213) Attorneys for Defendants ReconTrust Company, N.A., BAC Home Loans Servicing, LP (erroneously sued as Bank of America Home Loans Servicing, LP ), Bank of America, N.A. (erroneously sued as Bank of America, FSB ), and Mortgage Electronic Registration Systems, Inc. IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH - CENTRAL DIVISION PENI COX, an individual, v. Plaintiff, RECONTRUST COMPANY, N.A., BANK OF AMERICA HOME LOANS SERVICING, LP; BANK OF AMERICA, FSB, NEW LINE MORTGAGE, DIVISION OF REPUBLIC, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; AND DOES 1-5, DEFENDANTS MEMORANDUM IN OPPOSITION TO PLAINTIFF PENI COX S MOTION FOR PARTIAL SUMMARY JUDGMENT Case No. 10-cv Honorable Clark Waddoups Magistrate Judge Alba Defendants.