Veronica Gutierrez v. Wells Fargo Bank, N.A.

Majority - McKeown, Circuit Judge

Yes, the National Bank Act preempts the application of California's Unfair Competition Law to dictate a national bank's order of posting and to impose affirmative disclosure requirements. However, it does not preempt claims for affirmative misrepresentations under the fraudulent prong of the Unfair Competition Law. First, the court denied Wells Fargo's post-judgment request to compel arbitration based on AT&T Mobility LLC v. Concepcion, finding that Wells Fargo had waived its right to arbitrate. The arbitration clause was permissive, Wells Fargo never demanded arbitration throughout extensive litigation, and ordering arbitration five years into the case would severely prejudice the plaintiffs and undermine the Federal Arbitration Act's purpose of streamlined proceedings. The court rejected the argument that an earlier demand would have been futile, noting that other litigants had successfully compelled arbitration under California's Discover Bank rule. Regarding preemption, the National Bank Act (12 U.S.C. § 24 (Seventh)) grants national banks the power to receive deposits and exercise incidental powers, which includes choosing a method of posting transactions. Federal banking regulations by the Office of the Comptroller of the Currency (OCC) (12 C.F.R. § 7.4002(b)) specifically delegate to banks the method of calculating fees and interpret high-to-low posting as a "pricing decision authorized by Federal law." Therefore, any state law, such as California’s Unfair Competition Law, that dictates a national bank's posting order "prevents or significantly interferes" with this federally authorized power and is preempted. The district court's inquiry into Wells Fargo's compliance with OCC's "safe and sound banking principles" was deemed an exclusive supervisory power of the OCC, not subject to state court determination. Consequently, the permanent injunction and $203 million restitution order, premised solely on the "unfair" business practice prong dictating the posting order, are vacated. Furthermore, state law limitations concerning "disclosure requirements" are expressly preempted by federal regulation (12 C.F.R. § 7.4007(b)(3)). Thus, the Unfair Competition Law cannot impose liability merely based on the bank's failure to disclose its chosen posting method. However, the Unfair Competition Law's prohibition on misleading statements (the "fraudulent" prong) is a non-discriminating state law of general applicability. This general prohibition on fraud does not conflict with federal law, frustrate the purposes of the National Bank Act, or significantly interfere with a national bank's ability to offer services, choose a posting method, or calculate fees. The OCC itself has issued advisory letters cautioning banks about state laws prohibiting unfair or deceptive acts. Wells Fargo's ability to clearly explain its posting process to tellers and phone-bank employees demonstrated it could communicate accurately when it chose to. Accordingly, the claim for affirmative misrepresentations under the fraudulent prong is not preempted. The court affirmed the district court's findings on standing (plaintiffs showed actual reliance on misleading statements), class certification (pervasive misleading marketing materials led to common questions), and that Wells Fargo made misleading statements (e.g., "immediately" deducted language, chronological online display). The case is remanded for the district court to determine appropriate injunctive relief and restitution, if any, for the non-preempted fraudulent misrepresentation claim, consistent with the limitations outlined in this opinion. Each party is to pay its own fees on appeal.