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Kronemeyer v. U.S. Bank: Class Action Alleging Bank Wrongfully Charged Fee To Negotiate Checks Preempted By Federal National Bank Act Illinois Court Holds

Illinois Appellate Court Holds Defense Motion to Dismiss Class Action Should Have Been Granted Because Plaintiffs Lack Standing To Allege Wrongful Dishonor Of Check and Because Federal National Bank Act Preempts Illinois State Law Regarding Fees Charged to Negotiate Checks for Non-Customers

On July 5, 2006, an Illinois appellate court issued a surprising opinion in favor of the defense in a class action case. Illinois follows the rule that courts with interlocutory appeal/certified question procedures usually follow: “Th[e] court’s examination of an interlocutory appeal is usually limited to the questions certified by the trial court and, as with all questions of law, is a de novo review.” Kronemeyer v. U.S. Bank Nat’l Ass’n, ___ Ill.App.3d __ (Ill.App. 2006) (citation omitted) [Slip Opn., at 2]. Rarely do courts deviate from this general rule but the Kronemeyer appellate court did just that, sidestepping one of the questions certified for appeal, addressing a question that had not been certified for appeal, and reversing the trial court’s order denying the defense motion to dismiss the class action.

Plaintiffs filed a putative nationwide class action alleging that U.S. Bank “regularly charges a fee of $10 to persons who do not have accounts at U.S. Bank and who present for payment checks drawn by its depositors,” and pleading state law causes of action. The defense filed a motion to dismiss the class action on the grounds, inter alia, that plaintiffs lacked standing to prosecute the “wrongful dishonor” claim, and that the claims were preempted by federal National Bank Act, 12 U.S.C. § 93a (2000), and the regulations and regulation interpretations issued by the Office of the Comptroller of the Currency (OCC). Slip Opn., at 2. The trial court denied the motion to dismiss, id., but certified for interlocutory appeal two questions: “(1) whether the plaintiffs’ claims are preempted under the National Bank Act . . . and the regulations and regulatory interpretations issued thereunder by the [OCC] and (2) whether the circuit court has jurisdiction to review whether the OCC correctly interpreted its own regulation or whether that review lies within the exclusive jurisdiction of the federal courts pursuant to the Administrative Procedures Act,” id., at 1 (citations omitted).

The appellate court, however, first held that, as the defense had argued below, plaintiffs lacked standing on the wrongful dishonor claim because the statutory language imposes liability upon a bank “to its customer for damages proximately caused by the wrongful dishonor of an item,” Slip Opn., at 2 (italics added) (citation omitted), and plaintiffs were not bank customers, id., at 2-3. The Court concluded that the statute “confers no cause of action on the holder of an allegedly dishonored item,” id.

Kronemeyer next addressed whether federal law authorizes a bank to charge the type of fee at issue and concluded that, under OCC regulations and its interpretation of its regulations, “national banks [may] charge a check-cashing fee to non-account-holding payees.” Slip Opn., at 4. Federal law thus preempted plaintiffs claims “because the plaintiffs’ state law claims seek damages from U.S. Bank based on the exercise of a power that federal law expressly grants the national banks,” id. Accordingly, the appellate court reversed the trial court order denying the defense motion to dismiss the class action complaint.

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