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Usaa Federal Savings Bank v. Pennsylvania Human

August 23, 2011

USAA FEDERAL SAVINGS BANK
v.
PENNSYLVANIA HUMAN
RELATIONS COMMISSION



The opinion of the court was delivered by: Savage, J.

MEMORANDUM OPINION

In a case of first impression, we are asked to decide whether a state agency, pursuant to a delegation from a federal agency mandated by federal law, can investigate a federally created savings and loan institution under state antidiscrimination laws. The question is whether the state agency is preempted from enforcing state antidiscrimination laws even though it is doing so pursuant to a federal statute. The case presents an apparent conflict between one federal statute and a regulation issued by a federal agency acting with the authority granted by another federal statute.

USAA Federal Savings Bank ("USAA") brought this action seeking a declaration that it is not subject to the Pennsylvania Human Relations Act's antidiscrimination laws and the Pennsylvania Human Relations Commission ("PHRC")*fn1 cannot investigate it for violations of Pennsylvania law. It requests an injunction barring the PHRC from investigating it. It contends that the state antidiscrimination statute is preempted by federal law. According to USAA, as a federal savings and loan institution subject to the exclusive oversight and regulation of the Office of Thrift Supervision ("OTS"), it has no obligation to submit to and cooperate with the PHRC's investigation into an allegation that it discriminated against a loan applicant on the basis of her national origin when it denied her loan application. USAA also contends that the PHRC's investigation is an impermissible exercise of "visitorial powers" in violation of federal law.

The PHRC counters that Pennsylvania's antidiscrimination laws are not preempted because the Fair Housing Act ("FHA"), 42 U.S.C. §§ 3601-3631, specifically authorizes state agencies operating under housing regulations "substantially equivalent" to federal law to investigate and prosecute claims of discrimination. It also contends that the OTS regulations do not preempt state antidiscrimination laws and the PHRC's investigation is not visitorial. Therefore, according to the PHRC, USAA is obligated to comply with its investigation of the complaint which a federal agency referred to it pursuant to federal law.

We conclude that the PHRC's investigation pursuant to the Pennsylvania Human Relations Act ("PHRA") is not preempted by federal law. On the contrary, it was mandated by federal law. Given this conclusion, there is no impermissible exercise of visitorial power. Therefore, USAA's motion for judgment will be denied and the PHRC's motion will be granted.*fn2

Background

In May of 2009, Madeline Jacob applied to USAA for a loan to refinance a residential investment property. USAA denied her application, claiming that her debt-to-income ratio was too high and that she did not possess sufficient cash reserves. Jacob then filed a complaint with the United States Department of Housing and Urban Development ("HUD"), alleging that USAA had discriminated against her on the basis of her national origin. Pursuant to the FHA, HUD referred the complaint to the PHRC.

Upon referral from HUD, the PHRC began an investigation into Jacob's discrimination complaint and requested documents from USAA. After USAA refused to voluntarily produce the documents, the PHRC issued a subpoena.*fn3 In response, USAA filed this action seeking a declaratory judgment that it was not obligated to comply with the PHRC's investigation.

Preemption

Federal preemption of a state law exists in three situations: express preemption, field preemption, and conflict preemption. Holk v. Snapple Beverage Corp., 575 F.3d 329, 334 (3d Cir. 2009) (citing Hillsborough County, Fla. v. Automated Med. Labs., Inc., 471 U.S. 707, 713 (1985)). Express preemption occurs when a Congressional statute or agency regulation*fn4 has expressly stated that state law is preempted. Altria Group Inc. v. Good, 555 U.S. 70, 76 (2008); Farina v. Nokia, Inc., 625 F.3d 97, 115 (3d Cir. 2010). Field preemption applies when a federal statute or regulations promulgated under it are so pervasive that they completely occupy a field, leaving no room for additional state regulation. Hillsborough County, 471 U.S. at 713; Farina, 625 F.3d 115. Conflict preemption arises when either compliance with both state and federal requirements is impossible or the state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Holk, 575 F.3d at 339 (citations omitted).

USAA contends that express preemption applies.*fn5 It argues that exercising its authority under the Home Owners' Loan Act, 12 U.S.C. § 1461 et seq. (2011) ("HOLA"), the OTS has promulgated regulations that expressly preempt state laws related to the lending and operational activities of federal savings banks. It cites OTS regulations that specifically declare that it is occupying the entire field of lending regulations for federal savings associations. See 12 C.F. R. § 560.2(a).

HOLA was enacted by Congress to provide emergency relief for home mortgage debt and as a "radical and comprehensive response to the inadequacies of the existing state systems." Fidelity Fed. S&L Ass'n v. de la Cuesta, 458 U.S. 141, 159-60 (1982) (internal quotations and citations omitted). When it created federal savings and loan associations in HOLA, Congress granted the OTS*fn6 authority to promulgate regulations with respect to the "organization, incorporation, examination, operation, and regulation" of federal savings and loan institutions. 12 U.S.C. § 1464(a)(1). In enacting this legislation, Congress "expressly contemplated, and approved, the [OTS]'s promulgation of regulations superseding state law." de la Cuesta, 458 U.S. at 161-62 (internal citations omitted).

Pursuant to this Congressional authority, the OTS has promulgated regulations that preempt "any state law purporting to address the subject of the operations of a Federal savings association." 12 C.F.R. § 545.2. Through its regulations, the OTS has made clear that it intends its regulations to occupy the entire field of lending for federal savings associations. 12 C.F.R. § 560.2 (1996) ("To enhance safety and soundness and to enable federal savings associations to conduct their operations in accordance with best practices . . . OTS hereby occupies the entire field of lending regulation for federal savings associations.").

USAA contends that the HOLA and the OTS regulations preempt the PHRC's investigation. The PHRC counters that this case does not involve preemption because, pursuant to the FHA, it is required by Congress ...


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