ATTACHMENT A Amicus Curiae Brief of Professor Adam J. Levitin in Support of Plaintiffs’ Motion for Summary Judgment Motion of Professor Adam J. Levitin for Leave to File Brief as Amicus Curiae Case No. 20-cv-5200-JSW 1 Seth E. Mermin (CA SBN 189194) Eliza J. Duggan (CA SBN 312621) 2 2 UC BERKELEY CENTER FOR 3 CONSUMER LAW & ECONOMIC JUSTICE 3 University of California, Berkeley 4 School of LaW 4 Berkeley, CA 94720-7200 5 Email: [email protected] 5 Telephone: (510) 393-8254 6 Facsimile: (510) 849-1536 6 7 7 Counsel for Amicus Curiae Professor Adam J. Levitin 8 8 9 9 UNITED STATES DISTRICT COURT 10 10 NORTHERN DISTRICT OF CALIFORNIA 11 11 OAKLAND DIVISION 12 12 13 PEOPLE OF THE STATE OF 13 CALIFORNIA ex rel. Xavier Becerra, 14 Attorney General of California, 1514 PEOPLE OF THE STATE OF ILLINOIS ex 1615 rel. KWame Raoul, Attorney General of Illinois, and 1617 Case No. 20-cv-5200-JSW PEOPLE OF THE STATE OF NEW YORK 1718 ex rel. Letitia James, Attorney General of BRIEF OF PROFESSOR ADAM J. NeW York, LEVITIN AS AMICUS CURIAE IN 1819 SUPPORT OF PLAINTIFFS’ Plaintiffs, MOTION FOR SUMMARY 1920 JUDGMENT v. 21 20 Date: March 19, 2021 THE OFFICE OF THE COMPTROLLER Time: 9:00 a.m. 22 21 OF THE CURRENCY, and BRIAN P. Judge: Hon. Jeffrey S. White 23 BROOKS, in his official capacity as Acting Crtrm: Courtroom 5, 2nd Floor 22 Comptroller of the Currency, 1301 Clay Street 24 Oakland, CA 94612 23 Defendants. 25 24 26 25 27 26 28 27 1 Brief of Professor Adam J. Levitin as Amicus Curiae 28 Case No. 20-cv-5200-JSW 1 TABLE OF CONTENTS TABLE OF AUTHORITIES ......................................................................................................... iii 2 INTRODUCTION .......................................................................................................................... 1 3 INTEREST OF AMICUS CURIAE ............................................................................................... 4 4 4 ARGUMENT .................................................................................................................................. 5 5 5 I. The Nonbank Usury Rule Is Inconsistent with the Common Law Incorporated into the National 6 Bank Act ................................................................................................................................... 8 6 7 A. The “valid-when-made” doctrine is a 21st century invention and was not part of the 7 common law background of the National Bank Act of 1864 ............................................. 9 8 8 1. The “valid-when-made” doctrine could not have pre-dated and been incorporated into 9 the National Bank Act, because it addresses a problem created by that statute ........... 9 9 10 2. The 19th century cases relied upon for the “valid-when-made” doctrine have nothing 10 to do with the effect of assignment on usury .............................................................. 10 11 3. The only court ever to consider whether valid-when-made was part of the common law 11 12 background of the National Bank Act rejected the doctrine’s supposed historicity ... 14 1312 B. The common law of assignments is irrelevant because interest rate exportation is a non- assignable personal privilege of a national bank, not a feature of a note ......................... 15 1413 C. The common law incorporated into the National Bank Act includes a strong anti-evasion 1514 doctrine that the OCC failed to address ............................................................................ 17 1615 II. The OCC Failed to Consider Consumer Protection Concerns When Promulgating the Nonbank Usury Rule .............................................................................................................................. 18 1617 A. The Nonbank Usury Rule is inconsistent with section 1 of the National Bank Act ......... 18 1718 B. The OCC failed to consider its statutory charge of consumer protection when promulgating the Nonbank Usury Rule ................................................................................................... 19 1819 III. The OCC Failed to Comply with the Procedural Requirements of the National Bank Act When 20 19 Promulgating the Nonbank Usury Rule .................................................................................. 20 21 20 IV. The OCC’s Claims About the Nonbank Usury Rule’s Impact on Bank Liquidity Are 22 Unsupported. ........................................................................................................................... 22 21 CONCLUSION ............................................................................................................................. 25 23 22 APPENDIX A: Adam J. Levitin, Rent-a-Bank: Bank Partnerships and the Evasion of Usury 24 Laws, working paper, Dec. 22, 2020 ................................................................................ 26 23 25 APPENDIX B: Order on the Bankruptcy Court's Determination, In re: Rent-Rite Superkegs 24 West, Ltd., No. 19-cv-01522 (D. Colo. Aug. 12, 2019) .................................................. 110 26 25 APPENDIX C: Comment of the Structured Finance Association and Bank Policy Institute .... 124 27 APPENDIX D: Comment of Professor Adam J. Levitin ............................................................ 136 26 28 27 i Brief of Professor Adam J. Levitin as Amicus Curiae 28 Case No. 20-cv-5200-JSW APPENDIX E: Comment of the Center for Responsible Lending et al. .................................... 218 1 APPENDIX F: Comment of Sen. Sherrod Brown et al. ............................................................ 318 2 APPENDIX G: Comment of AARP ........................................................................................... 324 3 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 1312 1413 1514 1615 1617 1718 1819 1920 21 20 22 21 23 22 24 23 25 24 26 25 27 26 28 27 ii Brief of Professor Adam J. Levitin as Amicus Curiae 28 Case No. 20-cv-5200-JSW TABLE OF AUTHORITIES 1 2 Reported Cases 3 4 Andrews v. Pond, 4 38 U.S. 65 (1839) ...................................................................................................17 5 5 Astoria Fed. Sav. & Loan Ass’n v. Solimino, 6 6 501 U.S. 104 (1991) .................................................................................................5 7 7 Coral Gables First Nat’l Bank v. Constructors of Fla., Inc., 8 119 So. 2d 741(Fla. Dist. Ct. App. 1960) ..............................................................13 8 9 Cram v. Hendricks, 9 10 7 Wend. 569 (N.Y. Ct. for the Correction of Errors 1831) ....................................13 10 11 De Wolf v. Johnson, 11 23 U.S. 367 (1825) .................................................................................................17 12 1312 Evans v. Nat’l Bank of Savannah, 251 U.S. 108 (1919) ...............................................................................................11 13 14 1514 FDIC v. Tito Castro Constr., 548 F. Supp. 1224 (D.P.R. 1982) ...........................................................................13 1615 Gaither v. Farmers’ & Mechanics’ Bank of Georgetown, 1617 26 U.S. (1 Pet.) 37 (1828) ..................................................................................6, 11 1718 Gavey Props./762 v. First Fin. Sav. & Loan Ass’n, 1819 845 F.2d 519 (5th Cir. 1988) ....................................................................................1 20 19 Highway Equip. & Supply Co. v. Jones, 21 153 N.W.2d 859 (Neb. 1967) .................................................................................13 20 22 21 Hoffman v. Key Federal Sav. and Loan Ass’n, 23 416 A.2d 1265 (Md. 1979) ....................................................................................13 22 24 Knights v. Putnam, 23 20 Mass. 184, 185 (Mass. 1825) ............................................................................13 25 24 26 Madden v. Midland Funding LLC, 25 786 F.3d 246 (2d Cir. 2015).............................................................................23, 24 27 26 28 27 iii Brief of Professor Adam J. Levitin as Amicus Curiae 28 Case No. 20-cv-5200-JSW Marquette Nat’l Bank of Minnea. v. First of Omaha Serv. Corp., 1 1 439 U.S. 299 (1978) .................................................................................................1 2 Miller v. Tiffany, 3 68 U.S. 298 (1864) .................................................................................................18 4 4 Motor Vehicle Mfrs. Ass’n v. State Farm Ins., 5 463 U.S. 29 (1983) .......................................................................................7, 18, 20 5 6 6 Munn v. Comm’n Co., 7 15 Johns. 44 (N.Y. Sup. Ct. 1818) ........................................................................12 7 8 Nat’l Bank of Gloversville v. Johnson, 8 104 U.S. 271 (1881) ...............................................................................................11 9 9 10 Nichols v. Fearson, 10 32 U.S. (7 Pet.) 103 (1833) ..........................................................................6, 11, 12 11 11 Olvera v. Blitt & Gaines, P.C., 12 431 F.3d 285 (7th Cir. 2005) ................................................................................167 1312 Rangen, Inc. v. Valley Trout Farms, Inc., 13 14 658 P.2d 955, 959 (Id. 1983) .................................................................................13 1514 Rent-Rite SuperKegs W., Ltd. v. World Bus. Lenders, LLC 1615 (In re Rent-Rite SuperKegs W., Ltd.), 603 B.R. 41 (Bankr. D. Colo. 2019) .......................................................... 10, 14-15 1617 1718