• October 20, 2009

In late September, the Eighth Circuit U.S. Court of Appeals heard oral argument in Casey v. North American Savings, 8th Cir. File No. 09-1096, on an issue of federal preemption in the context of the regulation of federal lending institutions and today the court issued its ruling. It is a case of first impression with potential ramifications for borrowers and lenders in Missouri, and perhaps more broadly in the Eighth Circuit.

Today the Court held that the Missouri laws on which plaintiffs built their case were preempted by federal law.

At issue are Missouri laws that restrict certain activities to Missouri lawyers, Mo. Stat. 484.020.2. Plaintiffs brought suit against federal lenders, arguing that lenders charged “document preparation fees” when that work was not performed by Missouri lawyers. (“Doc prep fees” are one of those line items in many loan transactions, relatively small amounts of money the value of which many borrowers question (and perhaps Judge Bright at oral argument?)).

Lenders want to get these cases kicked out of court based on federal preemption and relying on a federal regulation: 12 C.F.R. 560.2(a). Borrowers point to the preemption carve-out at in that very same regulation: 12 C.F.R. 560.2(c).

As if preemption, by itself, did not have enough complexity, the case reached the Eighth Circuit in a complicated and convoluted fashion due to the FDIC’s insertion into the case as Receiver for regulated banking entities, which resulted in the substitution of some lender defendants with the FDIC and resulting removal from state court. Also pending before the U.S. Court of Appeals was plaintiffs’ motion to remand to state court (needless to say, denied)…

Leave a Reply

Your email address will not be published. Required fields are marked *