On November 2, the OCC filed a reply in the U.S. District Court for the District of Oregon in support of its motion to dismiss a challenge brought by 10 states to its interest-on-escrow rules, or in the alternative to transfer the case to the U.S. District Court for the District of Columbia (previously covered by InfoBytes here). The states challenge a rule on real estate lending escrow accounts (the “Powers Rule”) and a determination that state interest-on-escrow laws are preempted. Responding to the states’ opposition, the OCC argued that the states had not shown a ripe injury to their sovereign interests, because neither action bars national banks from complying with state law and, according to the OCC, the states conceded they had no allegation that any national bank fails to pay interest-on-escrow. The OCC contended that the cases the states cited involved situations where compliance with both federal and state law was impossible. Citing Trump v. California, the OCC argued that standing and ripeness are distinct and that “standing is not dispensed in gross,” so the states had to plead a separate injury from the Powers Rule.

The OCC further argued that New York, Connecticut, and Vermont cannot establish traceability or redressability, because, in the OCC’s view, a decision by the U.S. Court of Appeals for the 2nd Circuit holding state interest-on-escrow laws preempted by the National Bank Act (covered here) binds those states regardless of the OCC’s actions. The OCC asserted that the states did not explain why differences in the Connecticut and Vermont laws matter, and that the states relied inconsistently on 1st and 9th Circuit decisions upholding other states’ laws. The OCC characterized the multistate suit as forum-shopping by those states to avoid that “binding precedent.” The OCC also said venue is “highly questionable” for the nine states other than Oregon under 28 U.S.C. § 1391(e)(1). In the OCC’s view, transfer is warranted because the decision-making and the administrative record are in Washington, D.C., and civil cases move faster there. On the merits, the OCC asserted that the Powers Rule codifies longstanding national bank powers under 12 U.S.C. § 371. It also asserted that the Dodd-Frank Act’s procedural requirements apply only to preemption determinations, and that neither the Dodd-Frank Act nor TILA limits the OCC’s authority to issue the Powers Rule. The OCC noted that it has separately moved to partially stay the case until three related Supreme Court proceedings are resolved.