Utah Federal Court Extends "Complete Preemption" Doctrine to National Banking Act

On June 18, the U.S. District Court for the District of Utah issued a memorandum opinion explaining its June 11 order to vacate a preliminary injunction entered by a Utah state court, which had enjoined a defendant national bank and its trustee services company from conducting foreclosure sales in Utah (the order to vacate was reported in InfoBytes, June 18, 2010). Cox v. ReconTrust Co., N.A., No. 2:10-CV-492, 2010 WL 2519716 (D. Utah June 18, 2010). In Cox, the plaintiff, a borrower who was facing foreclosure, originally filed suit in state court claiming that the defendants, both national banks licensed under the National Banking Act (NBA), (i) were foreign companies not registered to transact business in Utah, (ii) were not qualified to act as trustees under Utah code, and (iii) violated the Real Estate Settlement Procedures Act (RESPA). Citing the federal claim under RESPA, the defendants removed the case to federal court. Thereafter, the borrower voluntarily dismissed her RESPA claim and moved for remand. Rejecting the motion for remand, the district court found that it retained original jurisdiction because the state law claims were subject to complete preemption under the NBA. The district court concluded that Congress intended for the NBA to exclusively control how national banks transact business nationwide and act as trustees and, thus, provided removal jurisdiction. This interpretation of the NBA also defeated the preliminary injunction because the NBA preempted the borrower’s state law claims that a national bank must be registered with Utah as a foreign corporation to foreclose on a property and must comply with Utah’s statutory requirements for trustees.