International Municipal Lawyers Association - Local Government Blog

Court issues decision in Cuomo v. Clearing House Association

June 30, 2009
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In 2005, the Attorney General for New York began an investigation into lending practices by national banks in the State of New York and whether these practices violated New York’s fair-lending laws. As part of the investigation, the Attorney General (Eliot Spitzer) sent a letter to a number of national banks asking that they provide specific non-public information about their lending practices. These letters were sent “in lieu of subpoena.”

The Office of the Comptroller of the Currency (“OCC”) and a banking trade group, the Clearing House Association, brought suit to prevent the information request, on the basis that OCC’s regulations under the federal National Bank Act prohibited state law enforcement against national banks. Section 484(a) of the National Bank Act reads:

“No national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice or such as shall be, or have been exercised or directed by Congress or by either House thereof or by any committee of Congress or of either House duly authorized.”

The OCC, charged with administering the National Bank Act adopted regulations further defining the term “visitorial powers.” The regulations stated in part that “(o)nly the OCC. . .may exercise visitorial powers with respect to national banks. . . . State officials may not exercise visitorial powers. . .such as conducting examinations, inspecting or requiring the production of books or records of national banks, or prosecuting enforcement actions.” (emphasis added).   

The district court entered an injunction in favor of OCC and the Clearing House Association which prohibited an attorney general from enforcing state fair-lending laws through demands for records or judicial proceedings. The Second Circuit Court of Appeals affirmed. The Supreme Court affirmed in part and reversed in part.

The Court, in its opinion written by Justice Scalia, started its analysis by looking at prior decisions to help determine the “outer limits” of the term “visitorial powers,” noting that the Supreme Court has “always understood ‘visitation’ as [the] right to oversee corporate affairs, quite separate from the power to enforce the law.” For example, in First Nat. Bank in St. Louis v. Missouri, 263 U.S. 640 (1924), the Court upheld the right of the Attorney General of Missouri to bring a suit to enforce a state anti-bank-branching law against a national bank. In that case, the Court stated the federal government may perform visitorial administrative oversight, such as “inquir[ing] by quo warranto whether a national bank is acting in excess of its charter powers.” However, if it is a state statute of general applicability which is not substantively pre-empted, then the Court stated that “the power of enforcement must rest with the [State] and not with” the federal government. The Court went further to state that “reading ‘visitorial powers’ as limiting only sovereign oversight and supervision would produce an entirely commonplace result – the precise result contemplated by our opinion in St. Louis, which said that if a state statute is valid as to national banks, ‘the corollary that it obligatory and enforceable necessarily results.”

The Court noted that the OCC had tried to limit its regulation by noting in its argument that existing case law did recognize that states retained some power to regulate national banks, in areas such as contract, debt collection, taxation, zoning, criminal, and more. However, the Court noted that the language of OCC’s regulation was much more since it categorically prohibited “prosecuting enforcement actions” and defined visitorial powers to include “[e]nforcing compliance with any applicable. . .state laws concerning” “activities authorized or permitted pursuant to federal banking law.”

The Court concluded by applying the above-mentioned principles to the case. “Visitorial powers” in the National Bank Act:

“refers to a sovereign’s supervisory powers over corporations. They include any form of administrative oversight that allows a sovereign to inspect books and records on demand, even if the process is mediated by a court through prerogative writs or similar means.”

However, in this case the state attorney general was not acting in the “sovereign-as-supervisor” role, but instead was in the role “sovereign-as-law-enforcer.” This role is not a “visitorial power” and this, the OCC erred by extending the definition to include “prosecuting enforcement actions” in state courts.

The judgment of the Second Circuit was affirmed in part and reversed in part. The particular action by the Attorney General, the threatening letter “in lieu of subpoena,” is not an exercise of power of law enforcement “vested in the courts of justice” which the National Bank Act exempts from the ban on the exercise of supervisory power. The Court affirmed the injunction below as applied to the letter. More importantly, the Court vacated the injunction and reversed the lower courts decision that had prohibited the Attorney General from bringing a judicial enforcement action.

The decision can be found here.

Gold in the Trailings

May 14, 2009
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Posted By: Nick Miller, Partner, Miller & Van Eaton

The economic news for local governments and their attorneys has not been good.  Big time cutbacks in local budgets have forced major changes in the law offices advising local governments.  In the midst of this economic detritus, some good news is emerging.

Much like the middle income families that can now afford to buy houses that are in foreclosure, City Attorney offices may now have the chance to attract and hold some of the very best new lawyers graduating this June.  We all know the big law firms have driven associate salaries far beyond government salare levels and the big firms have thereby discouraged many young attorneys from pursuing public service careers.  Now the economy is forcing the large firms to change their hiring patterns.  And the door may be opening for government law offices to compete on equal footing for this young talent.

Recent news headlines on law firms have focused on the tragedy of job losses and personal tragedies among recently fired attorneys.  This is grim, heart-rending news.  But underneath these headlines is a less reported trend.  The biggest firms are changing their offers to third year law students and first year attorneys.  They are deferring start dates for new attorneys, in many cases until January 2010 or even June 2010.  And they are rolling back associate starting salaries to levels comparable to the late 1990’s.

This change offers City Attorneys the chance to compete more equally for this talent pool.  Local government law has always had the attractive qualities of public service, challenging and wide ranging legal issues, and family-friendly working hours.  To this list can now be added competitive compensation, and a chance to try public service before stepping into 2400 hours/year work environs.

The salary picture is better for three reasons.  Associate salaries are being rolled back o levels comparable to the late 1990’s.  Also most of the large firms are offering to pay the deferred attorneys some portion (often 50%) of the normal first year salary in return for accepting the delayed start date.  And the over-enrollment of attorneys in the big firms means many firms will not object if a first year attorney decides to not pursue the big firm job, even after accepting the deferred compensation for several months.

So now is the time to reach out to your local law school placement offices.  And reach out to your colleagues in larger firms.  Tell them you are looking to help June graduates or 2008 deferred graduates find useful legal work.


February 6, 2009
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Posted By: Joesph Van Eaton, Partner, Miller & Van Eaton, PLLC

AT&T’s entry into the video market has not been smooth. Unlike Verizon, which is building fiber to the home, AT&T is by and large upgrading its old copper wire system so that it can be used to provide video. Its design required it to place refrigerator-sized cabinets throughout communities – a move that forced many communities to develop new siting standards (it didn’t help that some of the cabinets exploded).

Now two challenges have been filed at the Federal Communications Commission, claiming that manner in which AT&T provides public, educational and government access violates the law. One challenge was filed by the City of Lansing, Michigan. A more detailed challenge was filed by a consortium of organizations that promote access, community colleges, local governments, and local government organizations. The lead petitioner is the Alliance for Community Media (“ACM”). The petition was filed by the law firm of Spiegel & McDiarmid.

As the ACM petition points out, AT&T does not really provide PEG channels. It provides what it calls a PEG “application” or “platform.” The PEG application does not function like a normal, commercial channel on the AT&T system: AT&T cannot pass through closed captioning for example. One of the reasons some community colleges joined in the FCC petition was because they are required to deliver programming with closed captioning. AT&T won’t deliver secondary audio signals (used to deliver programming in a second language) on PEG channels. A viewer cannot surf between commercial and PEG channels; PEG channels can’t be recorded while viewing another channel. There are significant quality issues as well. The FCC will now decide whether these deficiencies violate federal law.

The ACM petition raises only federal claims. More challenges may be on the way: the Illinois Attorney General has announced that AT&T provision of PEG access is under investigation by the state. Many communities could raise (and are considering raising) independent claims under state laws. Lansing filed a state court claim at the same time it filed its FCC claim.

These cases are serious, and at the very least should raise a red flag for attorneys in communities that plan to provide access programming to AT&T systems. It will be important to review any programming arrangements carefully to be sure that rights are not lost.

The Curious Case of California Same-Sex Marriage

January 29, 2009

Posted By: Larry Hoyt, County Attorney, Boulder, Colorado

Curious – Part One:

Background: A funny thing happened on the way to the wedding chapel!

First, way back in 2004, the Honorable Gavin Newsom, Mayor of San Francisco, ordered the County Clerk to begin issuing marriage licenses to same-sex couples; numerous licenses were issued and ceremonies held within the space of about a week to great notoriety and in the face of multiple camera crews, in the San Francisco City Hall, and the San Francisco Superior Court refused to stop the weddings that were taking place.

However, a week later, upon petition of the state Attorney General and others, the state Supreme Court enjoined further issuance of same-sex marriage licenses, then decided on the merits that San Francisco did not have the authority to permit marriages that were contrary to state law; it ruled that the marriages that had been performed for same-sex couples to that date were invalid (see Lockyer v. City and County of San Francisco (2004) 33 Cal.4th 1055.)

All of this was happening while a coalition of individuals and groups were pursuing lawsuits in the California state courts seeking to overturn the state law (mini-DOMA: state “Defense of Marriage Act”, styled after the federal DOMA signed by Clinton in 2000, that states that no agency of the federal government shall recognize a same-sex marriage, and seeks to limit any use of the Full Faith and Credit Clause to extend recognition of a same-sex marriage in one state to other states) that limited state recognition of marriages to those comprised of two opposite-gender individuals.

Finally, in May 2008, the California Supreme Court took this issue head-on, and ruled that the California state constitution’s equal protection clause required marriage equality, that sexual orientation is a suspect classification, and that marriage is a fundamental right.   Same-sex marriage certificates began to be issued on July 17, 2008.

*But wait!  Even as the Court was issuing its ruling, same-sex marriage opponents had obtained sufficient signatures on petitions to place an initiated measure on the statewide ballot in November to amend the California state constitution to include a provision stating that marriage in California is solely between one man and one woman.  On November 4, 2008, statewide voters approved the ballot measure, known as Proposition 8, by a margin of 52% to 48%, and county clerks throughout the state were ordered to stop issuing same-sex marriage licenses once again.

Immediately following the announcement by the California secretary of state’s office that Prop. 8 appeared to have passed, lawsuits were once again filed, this time directly in the California Supreme Court, asking that Prop. 8 be declared void.

So, Curiosity No. 1 is the California Supreme Court’s ruling from May 15, 2008, that limiting marriage to only opposite-gender couples is unconstitutional as a violation of equal protection under the state constitution.  The Court stated the issue thusly:

Accordingly, the legal issue we must resolve is not whether it would be constitutionally permissible under the California Constitution for the state to limit marriage only to opposite-sex couples while denying same-sex couples any opportunity to enter into an official relationship with all or virtually all of the same substantive attributes, but rather whether our state Constitution prohibits the state from establishing a statutory scheme in which both opposite-sex and same-sex couples are granted the right to enter into an officially recognized family relationship that affords all of the significant legal rights and obligations traditionally associated under state law with the institution of marriage, but under which the union of an opposite-sex couple is officially designated a “marriage” whereas the union of a same-sex couple is officially designated a “domestic partnership.” The question we must address is whether, under these circumstances, the failure to designate the official relationship of same-sex couples as marriage violates the California Constitution.
In re Marriage Cases  43 Cal.4th 757, 779-780, 183 P.3d 384, 39, 76 Cal.Rptr.3d 683, 699 (Cal.,2008)

It turns out that, but for the approval by the state legislature of a same-sex domestic partnership law, effective January 1, 2005, that provided for domestic partnerships with virtually all the state-law derived rights and responsibilities of marriage in California, the Court would have been presented with essentially the identical question that many other courts have addressed, i.e. is a state’s constitutional guarantee of equal protection violated by restricting state recognition of marriage to opposite-gender couples?  Instead, the Court was presented with a “separate-but-equal” challenge, given the marriage v. domestic partnership scheme of California law.

Why is this curious?  It evokes a great deal of irony that, essentially, the more rights and responsibilities a state recognizes for same-sex couples, the less likely it is to be able to maintain a distinction between those relationships and state-sanctioned marriage.  Put another way, the states that treat same-sex couples the worst (i.e. no recognition, no rights or responsibilities that accompany the relationship, as opposed to the rights of individuals who have many characteristics, including a sexual orientation) have the best chance to discriminate against same-sex couples in excluding them from marriage.  Perhaps it was good for California, but query where it leaves GLBT persons in the middle of the country who are seeking protections for even more basic rights, like employment, enjoyment of public accommodations, and housing?

NEXT TIME: Curiosity Part 2: Is a state constitution’s equal protection guarantee worth anything?

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This blog is made possible by the International Municipal Lawyers Association (IMLA), but may include guest bloggers (who are attorneys with experience in local government matters) who might or might not work for IMLA. Their views (and those expressed on this site) do not necessarily express the views of IMLA.