Epps v. J.P. Morgan Chase Bank, N.A., No. 10-2444

Decided April 5, 2012

On appeal, the Fourth Circuit vacated the district court’s decision and held that a Maryland law, requiring creditors to fulfill certain notice requirements before repossessing a debtor’s tangible personal property upon the debtor’s default of a loan, was not preempted by the National Bank Act (“NBA”) or related regulations issued by the Office of the Comptroller of the Currency (“OCC”).

In 2007, Donna Epps purchased a used vehicle from Thompson Toyota Scion (“Thompson”), an automobile dealer in Maryland.  Epps financed her purchase through a retail sales installment contract (“RIC”) with Thompson, and Thompson later assigned the RIC to JP Morgan Chase Bank, N.A. (“Chase”).  By the end of 2009, Epps had fallen behind and ceased all payments to Chase pursuant to the RIC.  Upon Epps’s default, Chase repossessed her vehicle financed through the RIC but failed to comply with notice requirements set forth in the Maryland Credit Grantor Closed End Credit Provisions (“CLEC”) or the RIC, which expressly provided that the contract would be subject to the CLEC.  Epps subsequently filed this action in Maryland state court, claiming that Chase violated the CLEC and breached the RIC.  Chase removed the action to the U.S. District Court of Maryland which ruled in favor of Chase and dismissed Epps’ complaint in its entirety after finding that the CLEC post-repossession notice requirements were preempted by federal OCC regulations and dismissing Epps’s breach of contract claim, despite the fact that the RIC specified that the CLEC applied.

On appeal, the Fourth Circuit considered Epps’ two main arguments: (1) that the district court erred in finding that the NBA and OCC regulations preempt the CLEC and (2) that the district court erred in rejecting her breach of contract claim.  On the first issue, the court dismissed Epps’s request that it apply a presumption against preemption, finding that “the CLEC regulates an area with authorized federal presence,” and affirming its decision in Nat’l City Bank of Ind. v. Turnbaugh, 463 F.3d 325, 330 (4th Cir. 2006), that “an assumption against preemption ‘is not triggered when a State regulates an area where there has been a history of significant federal presence.’”  Next, the court looked at Congress’s intent and found that while the NBA does not expressly preempt state law, the OCC regulations do contain express preemption provisions.  However, the court found that the repossession provisions at issue were not expressly preempted by these regulations.  The court further concluded that “field preemption” did not apply because “the NBA and OCC regulations do not ‘occupy the field.’”  Finally, the court dismissed several of Chase’s claims after distinguishing debt collection from the extension of credit, finding that the OCC regulations do not preempt state law on debt collection, and concluding that “[t]he Supreme Court has long recognized that national banks are subject to state law regarding collection of debts.”  The court also affirmed the Ninth Circuit’s conclusion that “debt collection, and specifically the right to repossess property that is the subject of a secured transaction, has deep roots in common law and remains a fixture of state, not federal law,” Aguayo v. U.S. Bank, 653 F.3d 912, 923 (9th Cir. 2011), and found that because the CLEC “does not discriminate against national banks,” it is “preserve[d] from any preemptive effect of the NBA or OCC regulations.”

Addressing Epps’s second claim that the district court erred in dismissing her breach of contract claim, the court rejected Chase’s argument that because it did not negotiate the terms of the RIC, it could not be bound by the contract’s election of the CLEC.  The court concluded that Chase, as Thompson’s successor-in-interest, is bound by Thompson’s voluntary decision to have the RIC governed by the CLEC and held that the district court erred in dismissing Epps’s breach of contract claim.

Full Opinion

-Allison Hite

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