Cantero v. Bank of Am., N.A.

21-400-cv, 21-403-cv Cantero v. Bank of Am., N.A. United States Court of Appeals for the Second Circuit August Term 2021 Argued: March 31, 2022 Decided: September 15, 2022 Nos. 21-400, 21-403 ALEX CANTERO, individually and on behalf of all others similarly situated, Plaintiff-Appellee, v. BANK OF AMERICA, N.A., Defendant-Appellant. SAUL R. HYMES, ILANA HARWAYNE-GIDANSKY, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, v. BANK OF AMERICA, N.A., Defendant-Appellant. On Appeal from the United States District Court for the Eastern District of New York Before: LIVINGSTON, Chief Judge, and PARK and PÉREZ, Circuit Judges. Plaintiffs in these two putative class actions took out home mortgage loans from Bank of America, N.A. (“BOA”), one before and the other after the effective date of certain provisions of the Dodd- Frank Wall Street Reform and Consumer Protection Act (“Dodd- Frank”). The loan agreements, which were governed by the laws of New York, required Plaintiffs to deposit money in escrow accounts for property taxes and insurance payments for each mortgaged property. When BOA paid no interest on the escrowed amounts, Plaintiffs sued for breach of contract, claiming that they were entitled to interest under New York General Obligations Law § 5-601, which sets a minimum 2% interest rate on mortgage escrow accounts. BOA moved to dismiss on the ground that GOL § 5-601 does not apply to mortgage loans made by federally chartered banks because, as applied to such banks, it is preempted by the National Bank Act of 1864 (“NBA”). The district court (Mauskopf, J.) disagreed and denied the motion, but this was error. We hold that (1) New York’s interest-on-escrow law is preempted by the NBA under the “ordinary legal principles of pre-emption,” Barnett Bank of Marion Cnty., N.A. v. Nelson, 517 U.S. 25, 37 (1996), and (2) the Dodd-Frank Act does not change this analysis. GOL § 5-601 thus did not require BOA to pay a minimum rate of interest, and Plaintiffs have alleged no facts supporting a claim that interest is due. The district court’s order is REVERSED and the cases are REMANDED for further proceedings consistent with this opinion. Judge Pérez concurs in a separate opinion. MARK W. MOSIER, Covington & Burling LLP, Washington, DC (Andrew Soukup, Laura Dolbow, Covington & Burling LLP, Washington, DC; Thomas M. Hefferon, Goodwin Procter LLP, Washington, DC, on the brief), for Defendant-Appellant. 2 JONATHAN E. TAYLOR, Gupta Wessler PLLC, Washington, DC (Matthew W.H. Wessler, Gupta Wessler PLLC, Washington, DC; Jonathan M. Streisfeld, Kopelowitz Ostrow Ferguson Weiselberg Gilbert, Ft. Lauderdale, FL; Hassan Zavareei, Anna C. Haac, Tycko & Zavareei LLP, Washington, DC; Todd S. Garber, Finkelstein, Bankinship, Frei-Pearson & Garber, LLP, White Plains, NY, on the brief), for Plaintiff-Appellee Alex Cantero. Mark C. Rifkin, Daniel W. Krasner, Wolf Haldenstein Adler Freeman & Herz LLP, New York, NY, for Plaintiffs- Appellees Saul R. Hymes and Ilana Harwayne-Gidansky. Benjamin W. McDonough, Bao Nguyen, Gregory F. Taylor, Peter C. Koch, Gabriel A. Hindin, Michael K. Morelli, Office of the Comptroller of the Currency, Washington, DC, for …

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