On October 19, a coalition of 10 states led by Oregon filed an opposition in the U.S. District Court for the District of Oregon to the OCC’s motion to dismiss their challenge to its interest-on-escrow rules or, alternatively, to transfer the case to the District of Columbia. As previously covered by InfoBytes, the OCC argued that the states lacked standing, that venue was improper for all plaintiffs other than Oregon, and that the states failed to state a claim challenging its escrow powers rule.

The states argued that they suffered a ripe sovereign injury because the rules, which took effect June 18, purport to preempt their interest-on-escrow laws, and that whether national banks voluntarily keep paying interest is irrelevant. The states also rejected the OCC’s characterization of the suit as a parens patriae action, arguing that it rests on the states’ own interest in enforcing their laws. With respect to New York, Connecticut and Vermont, the states argued that the court need not reach the standing issue because the other seven states unquestionably have standing, and further contended that: (i) the U.S. Court of Appeals for the 2nd Circuit’s May decision (covered by InfoBytes here) addressed only New York’s law; (ii) Connecticut’s and Vermont’s laws differ materially; and (iii) the rules create a separate ground for preemption of New York’s law, an injury that only vacatur of the rules can redress.

On venue, the states argued that because the OCC concedes venue is proper for Oregon, binding precedent from the U.S. Court of Appeals for the 9th Circuit makes it proper for all plaintiffs, since venue “need be proper for only one plaintiff.” They also argued that no transfer factor favors the District of Columbia, contending that the rules’ effects are felt in the plaintiff states and that the OCC’s reasoning would effectively route virtually all suits over federal regulatory actions to Washington, D.C. The states added that witness and evidence convenience is irrelevant because the OCC itself expects the case to be decided on the administrative record, and that the OCC’s pending request to stay the proceedings, in light of the U.S. Supreme Court’s request for the Solicitor General’s views on three pending certiorari petitions, undercuts its court-congestion argument.

On the merits, the states maintained that the escrow powers rule was issued to “complement” the OCC’s preemption determination and is therefore subject to the Dodd-Frank Act’s limits on preemption, including the case-by-case review and substantial-evidence requirements, and to TILA’s requirement that lenders pay interest on certain mortgage escrow accounts as prescribed by applicable state law. They further argued that the OCC cannot rely on its general rulemaking authority under the National Bank Act to get around those more specific Dodd-Frank limits.