[00:00:04] Speaker 02:
May it please the court, Robert Friedman for Appellant Andrew King.

[00:00:07] Speaker 02:
I'm going to try to reserve three minutes for rebuttal.

[00:00:11] Speaker 02:
This case involves claims brought under generally applicable state law that two federal agencies have separately determined, that's the National Credit Union Administration and the Consumer Financial Protection Bureau, have separately determined likely violates federal law.

[00:00:26] Speaker 02:
And on appeal, Navy Federal does not dispute that the fee is in fact illegal.

[00:00:31] Speaker 02:
Nevertheless, Navy federal argues that Mr. King's claims conflict with federal law and are therefore preempted.

[00:00:38] Speaker 02:
To make that argument, Navy Federal advances and the District Court adopted an expansive interpretation of the preemption clause at issue in this case.

[00:00:47] Speaker 02:
Under Navy Federal's reading, any state law that relates to credit union fees or any other matter affecting the opening or maintaining of a credit union account is preempted.

[00:00:58] Speaker 02:
That broad reading, which applies to generally applicable laws and credit union specific laws alike,

[00:01:06] Speaker 02:
would knock out not just the claims in this case, but also any claim brought under the UCL or another state's consumer protection law, any state antitrust claim, or any even state anti-discrimination claim that involves fees.

[00:01:22] Speaker 02:
Nothing in the text or history of 701.35C supports that interpretation.

[00:01:29] Speaker 02:
The preemption clause was promulgated in direct response to state laws specifically aimed at lawful credit union activities.

[00:01:36] Speaker 02:
For example, a Connecticut law that purported to tell credit unions how they must disclose their account terms.

[00:01:42] Speaker 02:
It was not promulgated in response to the application of generally applicable state laws, and it was not promulgated in response to state laws that address conduct illegal under federal law.

[00:01:53] Speaker 02:
In two ways, the text of the preemption clause reflects that history and demonstrates that it displaces the type of law that prompted it in the first place.

[00:02:02] Speaker 02:
And each of those two.

[00:02:03] Speaker 03:
Well, counsel, if I can jump in, sorry, on the screen over here.

[00:02:07] Speaker 03:
So I'm just trying to follow your argument to the end here.

[00:02:12] Speaker 03:
You could have sued for federal law violations, correct?

[00:02:16] Speaker 03:
I'm sorry?

[00:02:17] Speaker 03:
You could have sued for federal law

[00:02:20] Speaker 03:
violations, correct?

[00:02:22] Speaker 02:
Well, our claim is based on a federal law violation, one of our theories, but there is no private cause of action under the Consumer Financial Protection Act.

[00:02:30] Speaker 02:
So that's why it's a state law claim.

[00:02:32] Speaker 03:
So you can't even sue to enjoin it in some way?

[00:02:35] Speaker 02:
Well, we're seeking monetary damages.

[00:02:37] Speaker 02:
I don't think that we'd have standing to seek an injunction here.

[00:02:41] Speaker 03:
So let me ask the follow-up question then.

[00:02:43] Speaker 03:
Let's say some states say you shouldn't charge fees

[00:02:48] Speaker 03:
But other states say you must charge fees in this situation.

[00:02:53] Speaker 03:
What is the credit union supposed to do?

[00:02:55] Speaker 02:
Well, so in that instance, that would be a law that regulates credit union fees.

[00:03:01] Speaker 02:
And so that would be preempted under our interpretation of the preemption clause because it's a law that is specific to credit union activities.

[00:03:09] Speaker 02:
It is not a generally applicable law.

[00:03:11] Speaker 02:
And that's the type of law that the NCUA had in mind when it

[00:03:16] Speaker 02:
promulgated this regulation.

[00:03:19] Speaker 03:
So you think that Congress would have wanted to not preempt the UCL, which is a very broad law, but would want to preempt these specific ones, and why would they make that distinction?

[00:03:33] Speaker 02:
Well, I think it's a common distinction in preemption schemes.

[00:03:36] Speaker 02:
We go through this at pages 21 to 22 of our brief that Congress will frequently preempt laws that regulate a certain activity, but leave in place generally applicable laws.

[00:03:50] Speaker 02:
And if you look at the Whygot case from the Seventh Circuit that we cite, it actually says that when Congress preempts generally applicable laws,

[00:03:56] Speaker 02:
That's the exceptional case, not the ordinary case.

[00:03:59] Speaker 02:
And the reason is that when there's a law that regulates and is aimed specifically at whatever the subject matter is, that implies a substantive standard, a substantive policy judgment that is different from the one that Congress has put in place.

[00:04:11] Speaker 02:
And I just want to be clear that there's two independent bases why the preemption clause doesn't apply here.

[00:04:16] Speaker 02:
One is that the UCL is a generally applicable law.

[00:04:19] Speaker 02:
But the other is also that our claims here are based on conduct that specifically violates federal law.

[00:04:24] Speaker 02:
And those cases, again, at 21 to 22, show that in numerous preemption schemes, when conduct is illegal under federal law, state law can provide a remedy.

[00:04:35] Speaker 02:
And that's true for very sensitive areas like the Atomic Energy Act.

[00:04:39] Speaker 02:
That's the Silkwood case.

[00:04:40] Speaker 02:
It's also true for how federally chartered banks work under National Bank Act preemption.

[00:04:46] Speaker 02:
If something's illegal under federal law, states can supply a remedy.

[00:04:49] Speaker 02:
And I don't think you have to worry about any real damage being done to the way that federally chartered credit unions operate here, because the NCAA's recent guidance shows that this is how it reads the preemption clause, and it didn't see any tremendous red flags that prevented it from reading it.

[00:05:07] Speaker 02:
And if you go back to the original commentary that accompanied the final rule in 1985, what the NCAA said in response to

[00:05:14] Speaker 02:
a state agency that asked whether it could go after fees charged to dormant credit union accounts.

[00:05:21] Speaker 02:
It said if those fees are not prohibited by the Federal Credit Union Act regulations, et cetera, then state laws is preempted.

[00:05:29] Speaker 02:
What that necessarily implies is that if the fees were legal under federal law, then states could supply their own remedy.

[00:05:35] Speaker 02:
And again, that's an incredibly common way of preemption schemes working.

[00:05:40] Speaker 02:
When it comes to the term regulating this has a settled meaning in the preemption context This court in total TV said that regulating has a limited preemptive intent And it does not mean related to

[00:05:55] Speaker 02:
And it does not sweep in generally applicable laws.

[00:05:57] Speaker 02:
And that's what we have at issue here.

[00:05:59] Speaker 02:
That's undisputed on this appeal, that Mr. King's claims proceed under generally applicable law.

[00:06:05] Speaker 02:
So to rule for Navy Federal here, this court has to hold the opposite of what it said in Total TV, which is also what the Supreme Court said in Morales when it contrasted between regulating and relating to.

[00:06:16] Speaker 02:
And it's also what dictionaries and common parlance tell us, that they have two separate meanings.

[00:06:21] Speaker 02:
because Navy Federal's argument here that a generally applicable law is displaced depends solely on equating regulating with relating to.

[00:06:31] Speaker 02:
And this court would be the first to offer that holding if it reaches that conclusion.

[00:06:35] Speaker 02:
Navy Federal offers only one textual basis for equating regulating with relating to.

[00:06:41] Speaker 02:
And that is that the phrase two federal credit unions that appears at the end of 70135C would be superfluous if Mr. King were correct about the meaning of regulating that it means specifically directed towards credit unions.

[00:06:55] Speaker 02:
But that's wrong for two reasons.

[00:06:57] Speaker 02:
The first is the phrase to federal credit unions still tells the reader that the law has forced and is applicable to state credit unions, including federally chartered state credit unions.

[00:07:08] Speaker 02:
And there's a host of federal statutes about federally insured state credit unions.

[00:07:14] Speaker 02:
And the second is that Navy federal tacitly admits that if the phrase to federal carrier unions was not at the end of 35c Then there would be no textual hook for its reading and if you go back to the original preemption clause as it existed in 1985 this is at page 15 of our reply brief that we lay out the full text of that original regulation and

[00:07:36] Speaker 02:
it did not have the phrase two federal credit unions.

[00:07:39] Speaker 02:
It ended at the word applicable.

[00:07:42] Speaker 02:
So at that time, I think Navy Federal has no textual hook for its reading.

[00:07:47] Speaker 02:
And what the NCUA said in 1988 when it added the phrase two federal credit unions is that it was not changing the substantive scope of the regulation.

[00:07:56] Speaker 02:
So it was not tacitly converting

[00:07:59] Speaker 02:
regulating into relating to.

[00:08:02] Speaker 02:
So because regulating had the meaning that we ascribe to it when the regulation was, when the preemption clause was first promulgated,

[00:08:08] Speaker 02:
It also has that meaning now.

[00:08:11] Speaker 02:
And that's the only textual hook for Navy Federal's claim that regulating is equated with relating to under this clause.

[00:08:20] Speaker 02:
I want to shift to the other independent limitation and independent basis for reversal, which is the scope of the phrase such activities.

[00:08:28] Speaker 02:
In the second sentence of 35C, Judge Owens, this is where we find a textual hook for the fact that

[00:08:36] Speaker 02:
State laws can supply their own remedies for conduct that is illegal under federal law The context of the 35c shows that such activities captures only activity that is lawful under federal law the first sentence of 35c is Authorizing credit unions to engage in certain activities and those activities must be consistent with other federal law contractual obligations Etc

[00:09:03] Speaker 02:
The second sentence provides protection to such activities.

[00:09:07] Speaker 02:
It makes sense for those two sentences to be harmonized and to have congruence.

[00:09:12] Speaker 02:
So the first sentence provides authorization.

[00:09:15] Speaker 02:
The second sentence provides protection.

[00:09:17] Speaker 02:
It shields them from state law.

[00:09:19] Speaker 02:
That's Mr. King's reading.

[00:09:20] Speaker 02:
Under Navy Federal's reading, although the first sentence provides authorization only to engage in activities that are lawful under federal law and contract obligations, et cetera,

[00:09:31] Speaker 02:
The second sentence goes farther, and it sweeps in and provides protection for other activities as well, including conduct that is illegal under federal law.

[00:09:42] Speaker 02:
There's no indication that that's what the NCUA meant to do.

[00:09:46] Speaker 02:
Again, that would be an abnormal approach to preemption, the kind of exceptional case where federal power might be at its height in immigration, for instance.

[00:09:56] Speaker 02:
The administrative history also supports our reading again that comment in response to the state agency about going after fees.

[00:10:04] Speaker 02:
that are charged dormant credit accounts, the NCUA was clear that that would be impermissible if the fee was not prohibited by federal law.

[00:10:12] Speaker 02:
That aligns with Mr. King's reading, not with Navy Federal's reading.

[00:10:16] Speaker 02:
Navy Federal does point to different statements in the administrative history, and we walk through those in detail in our reply brief at pages 12 to 18.

[00:10:25] Speaker 02:
And I won't repeat that all here, but I do want to emphasize one point, which is that none of those statements address what happens

[00:10:32] Speaker 02:
when conduct is lawful versus unlawful under federal law.

[00:10:35] Speaker 02:
The only statement that does that is the one that I just discussed about fees on dormant accounts.

[00:10:42] Speaker 02:
And the third point I'll make about supplying the scope of the phrase such activities is that it

[00:10:52] Speaker 02:
It brings this preemption clause into the most common method of dealing with state law because supplying a remedy for conduct that's illegal under federal law isn't going to change the way that a credit union can go about conducting its business.

[00:11:09] Speaker 02:
So if this court wants to take the narrower path here, that would be it.

[00:11:12] Speaker 02:
And that's again something that the NCAA said is how it reads the preemption clause

[00:11:17] Speaker 02:
in its recent guidance letter.

[00:11:20] Speaker 02:
Had the NCOA wanted to go even further, there was a clear way for it to and to displace all generally applicable laws and also laws that address conduct that's illegal under federal law.

[00:11:31] Speaker 02:
There was a clear way for it to express that intent.

[00:11:34] Speaker 02:
I'm going to put to the side that we think going even further would be beyond its authority and would make the regulation invalid.

[00:11:41] Speaker 02:
That's another reason not to read the clause that way, that avoidance argument that we make.

[00:11:45] Speaker 02:
But had it wanted to express that intent, it could have used terms like relating to or affecting or concerning credit union fees.

[00:11:54] Speaker 02:
And in fact, just one year earlier, when it passed a preemption clause for credit union loans, it used that exact language in 701.21.

[00:12:04] Speaker 02:
So it knew how to promulgate a broader preemption clause that would reach generally applicable state laws.

[00:12:11] Speaker 02:
And there's in fact a savings clause with that regulation.

[00:12:14] Speaker 02:
And it chose not to use that broader language here, and I'll try to save the rest of my time for a bottle all right.

[00:12:20] Speaker 00:
Thank you counsel

[00:12:47] Speaker 01:
Good morning, Your Honors.

[00:12:48] Speaker 01:
May it please the Court, David Parker of Hunt and Andrews-Kirth.

[00:12:51] Speaker 01:
I'm here representing the appellee, Navy Federal Credit Union.

[00:12:55] Speaker 01:
The text of 701.35C is clear that it broadly preempts all state laws that regulate share account fees.

[00:13:02] Speaker 01:
That includes the law at issue here.

[00:13:04] Speaker 01:
And I'll get to that text in just a moment.

[00:13:06] Speaker 01:
But before I do, I think it's important to step back and discuss some of the broader context that hasn't yet been addressed today.

[00:13:13] Speaker 01:
Navy Federal is a federal credit union.

[00:13:15] Speaker 01:
It's not a state credit union.

[00:13:17] Speaker 01:
It's federally chartered.

[00:13:18] Speaker 01:
It's overseen by federal regulators, primarily the NCUA.

[00:13:22] Speaker 01:
The NCUA used to regulate the fees at issue here.

[00:13:26] Speaker 01:
But in the early 1980s, they stopped.

[00:13:28] Speaker 01:
And then they drafted this preemption clause to stop states from regulating these fees as well.

[00:13:33] Speaker 01:
Now, why did they do that?

[00:13:34] Speaker 01:
They did that because federal credit unions are unique.

[00:13:37] Speaker 01:
They're not like big banks.

[00:13:39] Speaker 01:
They're owned by their members, and that includes Mr. King.

[00:13:42] Speaker 01:
And that means a few things.

[00:13:44] Speaker 01:
It means they have voting rights and they can vote out the directors if they're not happy.

[00:13:48] Speaker 01:
And the other thing is the federal credit unions have no incentive to rip off their members.

[00:13:53] Speaker 01:
The money from these fees stays inside the credit union.

[00:13:56] Speaker 01:
It does not go to some outside investor as it might in a big bank.

[00:14:00] Speaker 01:
Now that does not mean that federal credit unions are just left to their own devices with these fees.

[00:14:05] Speaker 01:
The fees are still subject to other federal law.

[00:14:07] Speaker 04:
Can I ask a question about the fees?

[00:14:08] Speaker 04:
Do you agree that the fees here are illegal under federal law?

[00:14:12] Speaker 01:
We do not.

[00:14:13] Speaker 01:
We do not.

[00:14:14] Speaker 01:
So my friend on the other side said that in his presentation.

[00:14:18] Speaker 01:
We do not agree that they're illegal.

[00:14:20] Speaker 01:
We're not contesting for purposes of this appeal that he's adequately alleged that they're illegal, but we do not agree that they are illegal.

[00:14:28] Speaker 00:
What about the CFPB's statement that they're unlawful?

[00:14:33] Speaker 01:
The 2024 statement.

[00:14:35] Speaker 00:
Right.

[00:14:36] Speaker 00:
So again, we're not contesting that King has adequately alleged that it's... No, but I mean, we have a federal agency that said these types of fees are unlawful.

[00:14:47] Speaker 00:
You're contesting that?

[00:14:49] Speaker 01:
We would contest that if it goes back down, Your Honor, yes.

[00:14:52] Speaker 01:
But I don't think that it's relevant to this appeal.

[00:14:55] Speaker 00:
Well, in fact, your client has stopped charging those fees since the CFPB made that statement, correct?

[00:15:04] Speaker 01:
correct they have stopped charges yes but again i think that the issue here on appeal is is preemption and uh... even if they were illegal

[00:15:15] Speaker 01:
I mean, first of all, I guess if they're illegal under federal law and CFPB or NCUA wants to come after federal credit unions for charging them, that's still a possibility.

[00:15:29] Speaker 01:
They're still well within their rights to do that.

[00:15:33] Speaker 01:
But the point here is that what this preemption clause does is prevent states from imposing laws that would regulate these fees.

[00:15:42] Speaker 00:
okay well the argument here is that the california unfair competition law doesn't regulate these fees it relates to and therefore it's outside the preemption clause yes your honor that is one of king's two arguments here that's his argument on regulating and on that point we don't actually

[00:16:08] Speaker 01:
have to take the position that it means relating to.

[00:16:11] Speaker 01:
So I think it's important to look at this phrase in context.

[00:16:16] Speaker 01:
We're not just evaluating the phrase or the word regulating in isolation.

[00:16:21] Speaker 01:
We're looking at what it is regulating.

[00:16:23] Speaker 01:
Here, we're regulating such activities.

[00:16:26] Speaker 00:
And so in case- And such activities means what?

[00:16:30] Speaker 01:
Such activities means, according to King, the activities of determining the fees, determining the fees or charges or other matters.

[00:16:40] Speaker 00:
And according to Navy Federal Credit Union?

[00:16:44] Speaker 01:
I'm sorry, that's according to Navy Federal Credit Union.

[00:16:46] Speaker 01:
According to King, it's determining those fees consistent with other federal law, contractual obligations, et cetera.

[00:16:53] Speaker 01:
But we're talking about regulating activities in this preemption clause.

[00:16:57] Speaker 01:
In King's cases, in Morales and Pilot Life, those preemption clauses, which were in different statutes, we're talking about regulating insurance.

[00:17:05] Speaker 01:
So regulating the insurance industry writ large.

[00:17:09] Speaker 01:
And what those cases hold is that generally applicable laws don't regulate the insurance industry unless they're specifically directed towards that industry.

[00:17:19] Speaker 01:
If a generally applicable law just affects an insurance company, it's not regulating it.

[00:17:25] Speaker 01:
That makes sense.

[00:17:26] Speaker 01:
But here we're talking about regulating such activities, not an industry.

[00:17:30] Speaker 01:
So if we look at the California unfair competition law, which King says was violated here, what is that regulating?

[00:17:37] Speaker 01:
It's regulating activities.

[00:17:39] Speaker 01:
It's regulating all activities that are unfair business practices.

[00:17:43] Speaker 01:
And that includes, according to King, the specific activities here.

[00:17:47] Speaker 01:
So if he were right, if the UCL does prohibit this activity, then yes, it is specifically directed towards this activity and all other activities that are unfair business practices.

[00:17:57] Speaker 01:
Now the UCL is not targeting or specifically directed towards federal credit unions.

[00:18:02] Speaker 01:
That's a different question.

[00:18:03] Speaker 01:
And that is why King pivots in his reply in the introduction to say this is not a law that's specifically directed towards federal credit unions.

[00:18:12] Speaker 01:
We agree with that.

[00:18:13] Speaker 01:
But that's not what the preemption clause says.

[00:18:17] Speaker 01:
laws that are regulating these activities.

[00:18:19] Speaker 01:
And this law, this UCL, if it does prohibit these activities, then it is regulating those activities.

[00:18:26] Speaker 01:
And the policy here, I think, is pretty simple.

[00:18:30] Speaker 01:
NCUA was trying to take states out of the picture when it comes to interfering with federal credit unions' ability to charge these fees.

[00:18:40] Speaker 01:
Now, under King's reading, and Judge Hinderacher, I believe you were getting at this with your questions, would allow states to regulate these fees, or to interfere with these fees, I should say, if they do so with a generally applicable law.

[00:18:55] Speaker 01:
And I don't know why they would want to leave that loophole open.

[00:19:03] Speaker 01:
Let's take a hypothetical.

[00:19:04] Speaker 01:
There could be a state that really wants to get rid of certain fees, and it

[00:19:11] Speaker 01:
It knows that it can't do that under King's reading with this specifically targeted law that expressly refers to the fee, but it can do it with a generally applicable law.

[00:19:20] Speaker 01:
So it just sets up an enforcement policy with the state agency to say, go after these fees under these generally applicable laws.

[00:19:29] Speaker 01:
And they could do that under King's reading.

[00:19:31] Speaker 01:
And there's no reason why NCUA would want that.

[00:19:35] Speaker 01:
So I'd like to move, if I could, to the other dispute that we have about the text, which is the such activities phrase.

[00:19:41] Speaker 01:
So if you look at the preemption clause at issue here, there are two sentences.

[00:19:46] Speaker 01:
The last sentence is the one that provides the preemption.

[00:19:49] Speaker 01:
And what it says is state laws regulating such activities are not applicable to federal credit unions.

[00:19:54] Speaker 01:
And before we start picking apart those words, let's just pause for a second, because on the face of it, that language is very broad.

[00:20:01] Speaker 01:
This is not the type of language, Your Honors.

[00:20:04] Speaker 01:
that you use if all you want is basically just conflict preemption.

[00:20:08] Speaker 01:
If that's all you want, there are lots of other statutes and regulations that you could model off of.

[00:20:13] Speaker 01:
So there are the TISA preemption clauses under both the statute and the regulation there.

[00:20:18] Speaker 01:
Those are at 16 to 18 of King's reply.

[00:20:21] Speaker 01:
And those preempt state laws that are, quote, inconsistent with TISA but only to the extent of the inconsistency, that's very clear that Congress and the agency only wanted conflict preemption.

[00:20:33] Speaker 01:
That is not how 701.35c is written.

[00:20:38] Speaker 01:
And King also says, you know, okay, preemption is a little bit broader than conflict preemption here.

[00:20:44] Speaker 01:
There are other ways to get at that type of preemption too.

[00:20:49] Speaker 01:
For example, you could preempt state law that is, quote, different from or in addition to federal law.

[00:20:55] Speaker 01:
And there are lots of examples of that kind of language, 21 USC 360K, 7 USC 136VB, 21 USC 678.

[00:21:06] Speaker 01:
Those are just a few examples of the type of language that you would use.

[00:21:09] Speaker 01:
You would not have a sentence that says state laws regulating such activities are not applicable.

[00:21:15] Speaker 01:
So let's look more specifically at the text, and the important phrase here is such activities.

[00:21:20] Speaker 01:
So if you look at the first sentence in the preemption clause,

[00:21:25] Speaker 01:
It describes those activities.

[00:21:27] Speaker 01:
It says the activities are determining the types of fees or charges or other matters associated with these share accounts.

[00:21:35] Speaker 01:
That's what I'll call the activities clause.

[00:21:37] Speaker 01:
The sentence also has what I'll call the consistent with clause.

[00:21:41] Speaker 01:
That is, in the middle of the sentence, it says consistent with other federal law, contractual obligations, etc.

[00:21:47] Speaker 01:
This clause is not describing activities, it is describing limits on those activities under other sources of law.

[00:21:54] Speaker 01:
What NCUA is doing with this consistent with clause is it's making clear, we are preempting state law, we are not displacing other federal law, we are not displacing contracts.

[00:22:05] Speaker 01:
So why did they have to say that?

[00:22:07] Speaker 01:
Is that superfluous?

[00:22:08] Speaker 01:
No, it's not superfluous because otherwise there could be a question here.

[00:22:12] Speaker 01:
There could be an ambiguity as to how far NCUA wants to go.

[00:22:16] Speaker 01:
So that's all that they're doing with this consistent with clause.

[00:22:20] Speaker 01:
And the only reason that we're here, your honors, standing here today is because NCUA put that consistent with clause in the middle of the first sentence.

[00:22:28] Speaker 01:
And King's argument relies specifically on the order of those terms.

[00:22:33] Speaker 01:
He says that the term such in the second sentence refers back to the first sentence, be consistent with clauses in the first sentence, therefore it must limit the scope of preemption.

[00:22:42] Speaker 01:
Well, if you look at the way that the original version of this preemption clause was phrased, it had the reference to contractual obligations after the phrase such activities.

[00:22:56] Speaker 01:
This is on page 22 of our brief.

[00:22:59] Speaker 01:
This is the original version from 1985.

[00:23:02] Speaker 01:
And what it says after such activity is, nothing herein is intended, however, to allow a federal credit union to amend or modify its contract.

[00:23:11] Speaker 01:
So this is happening after the phrase such activity.

[00:23:14] Speaker 01:
So it is not modifying the scope of the activities here.

[00:23:18] Speaker 01:
And that's the whole ball game here, Your Honors, because King admits, and he's admitted here today again at argument, that the meaning of this provision did not change when NCUA rephrased it and amended it into its current form.

[00:23:31] Speaker 01:
The other thing I'll note is that in this original version, it says nothing at all about other federal law.

[00:23:36] Speaker 01:
So there's no argument, I think, that the scope of activities in this original version was limited by other federal law.

[00:23:44] Speaker 01:
And again, King admits that this original version is substantively identical to the current version.

[00:23:51] Speaker 01:
So that is fatal to his claim.

[00:23:54] Speaker 01:
Now, it's not just King admitting this, by the way.

[00:23:56] Speaker 01:
It's NCUA itself that said this.

[00:23:58] Speaker 01:
If you look at what NCUA said when it amended this,

[00:24:01] Speaker 01:
regulation into its current form and King cites this and quotes from this language at pages 11 and 12 in his reply brief.

[00:24:09] Speaker 01:
It said when it moved the reference to contractual obligations from the last sentence up into the first sentence

[00:24:15] Speaker 01:
It was simply clarifying the wording, simplifying the wording.

[00:24:19] Speaker 01:
It was not changing the scope of preemption at all.

[00:24:22] Speaker 01:
And the same thing about other federal law.

[00:24:24] Speaker 01:
When it added that phrase, it was not changing the scope of preemption.

[00:24:28] Speaker 01:
It was merely, quote, alerting credit unions to the fact that they need to look to these other sources of law to make sure what they're doing is legal.

[00:24:35] Speaker 01:
That's exactly what the current clause is doing too.

[00:24:40] Speaker 01:
It's not changing the scope of preemption.

[00:24:42] Speaker 01:
It's just alerting credit unions that while you don't have to look to state law when you're determining these fees, you do have to look to other federal law.

[00:24:51] Speaker 01:
You do have to look to your contractual obligations.

[00:24:54] Speaker 01:
We're not displacing those sources of law.

[00:24:57] Speaker 01:
So that should be the end of the analysis.

[00:24:59] Speaker 01:
You have a prior version that is incompatible with King's argument about such activities.

[00:25:05] Speaker 01:
And he admits that this prior version is substantively identical to the current version.

[00:25:11] Speaker 01:
Now, this is evident from the plain text.

[00:25:14] Speaker 00:
Yes, Your Honor.

[00:25:15] Speaker 00:
So what do we make of the 2024 opinion letter from the, I think it's from the NCUA that says the Federal Credit Union Act does not preempt state laws that apply to practices of federal credit unions that violate other federal laws, such as the FTC Act or the CFPA?

[00:25:39] Speaker 01:
Yes your honor well I think King has told us what we should make of that when he was opposing our motion to file the cert reply and our cert reply addresses this at length but what he said in opposing that is I'm not arguing for any kind of deference to that statement not under our

[00:25:56] Speaker 01:
and not even any persuasive force under skidmore so he's saying that this statement doesn't actually change anything and the other thing and and he's right by the way because this was a statement that was made thirty years after the original uh... preemption clause was promulgated and then amended it was in a footnote of uh... guidance that was on a different issue uh... so it should be given no weight and if NCUA really feels

[00:26:26] Speaker 01:
This is how the preemption clause should be construed.

[00:26:28] Speaker 01:
It cannot amend the preemption clause in a footnote in this guidance.

[00:26:32] Speaker 01:
It needs to actually amend the preemption clause through notice and comment.

[00:26:36] Speaker 01:
So that's what I would say about the 2024 statement.

[00:26:41] Speaker 01:
Now the last point that I'd like to get to today in my remaining minute is the point that this regulation somehow exceeds the scope of NCUA's authority.

[00:26:51] Speaker 01:
Now King's argument here is both waived and it fails on the merits.

[00:26:55] Speaker 01:
So the argument is waived because King said nothing at all about NCUA's authority to promulgate this regulation below.

[00:27:02] Speaker 01:
So the way he tries to package this on appeal is that it's an avoidance argument.

[00:27:07] Speaker 01:
So it's just an avoidance argument.

[00:27:08] Speaker 01:
I didn't have to make it below.

[00:27:10] Speaker 01:
It's not just an avoidance argument, Your Honors.

[00:27:12] Speaker 01:
This is a direct challenge to NCUA's authority.

[00:27:15] Speaker 01:
And that's because King's reading does not avoid the problem that he identifies as being there.

[00:27:21] Speaker 01:
So he is saying NCUA can only impose limitations.

[00:27:25] Speaker 01:
It can't lift any limitations, including lifting state law.

[00:27:29] Speaker 01:
But his reading allows NCUA to do that.

[00:27:31] Speaker 01:
His reading does allow NCUA to lift certain state laws, to preempt certain state laws.

[00:27:37] Speaker 01:
So his reading doesn't avoid the problem.

[00:27:39] Speaker 01:
And the last thing I'll say, Your Honors, is that if you look at the statutory provision that he cites, it actually supports Navy Federal.

[00:27:46] Speaker 01:
Because what it says is, federal credit unions have the power to set their own terms and conditions for these share accounts unless NCUA says otherwise, within limitations prescribed by the board.

[00:27:57] Speaker 01:
Well, that is exactly what NCUA is doing with this preemption clause.

[00:28:00] Speaker 01:
It's giving federal credit unions the power to set their own terms and conditions free from any state regulation.

[00:28:07] Speaker 01:
And so this provision actually supports Navy Federal and not King.

[00:28:11] Speaker 01:
And unless there are further questions, I'd like to rest on our brief.

[00:28:16] Speaker 00:
Thank you, counsel.

[00:28:17] Speaker 01:
Thank you.

[00:28:28] Speaker 04:
Mr. Freeman, just before you get started, two questions.

[00:28:31] Speaker 04:
One, do you agree that the current version and the 1985 version mean the same thing?

[00:28:36] Speaker 04:
In other words, the current version was just meant to clarify what the 1985 version meant.

[00:28:41] Speaker 04:
We can look to that because that's what Mr. Parker said.

[00:28:45] Speaker 02:
That was one of the things I was going to bring up anyway.

[00:28:47] Speaker 02:
So ultimately, this court has to interpret the text as it is, but we think that they have the same meaning, and I'll explain how.

[00:28:54] Speaker 02:
The original version didn't include the phrase other federal law, but it did include the term empowered.

[00:29:02] Speaker 02:
And the NCUA said that it empowered credit unions to take certain actions.

[00:29:06] Speaker 02:
And the NCUA only ever had the authority to empower credit unions to take actions lawful under federal law.

[00:29:12] Speaker 02:
And so what the 1988 clarification does is it gets rid of the word empowered and it adds the phrase other federal law.

[00:29:19] Speaker 02:
And you can see that the NCOA always believed that the credit union had to act consistent with federal law, again, in that response.

[00:29:27] Speaker 02:
to the state agency about dormant fees charged to dormant accounts.

[00:29:32] Speaker 02:
So yes, we think it has the same meaning, but to the extent you think other federal law work to substantive change, that's what states are going to look to now, what credit unions are going to look to now, what you have to interpret.

[00:29:44] Speaker 02:
I do have other points, but you said you had a second question.

[00:29:46] Speaker 04:
Second question is the December 2024, we've called it a statement, came in a footnote from CFPB.

[00:29:53] Speaker 04:
Do you agree that that should be given little weight?

[00:29:57] Speaker 02:
I think you're referring to the NCUA letter.

[00:29:59] Speaker 02:
Yes, excuse me.

[00:30:00] Speaker 02:
The NCUA letter should not be deferred to, but it is still a useful indicator here for two reasons.

[00:30:06] Speaker 02:
One, it shows that our interpretation aligns with the regulations text because if you take maybe federal's argument that it was just an offhand comment, well then we were just looking at the plain text.

[00:30:18] Speaker 02:
That's the conclusion they reached.

[00:30:20] Speaker 02:
Two, this is coming from the chairman of the NCUA.

[00:30:22] Speaker 02:
He'd been the chairman for five years at the NCUA for even longer.

[00:30:25] Speaker 02:
If this was going to raise some sort of red flag that would destroy how credit unions operate, he wouldn't have put it out.

[00:30:32] Speaker 02:
I think brush aside any concern that you're going to do real damage here by accepting Mr. King's interpretation.

[00:30:40] Speaker 02:
I'll try and be quick.

[00:30:44] Speaker 02:
Navy Federal argues that it's entitled to special deference because it is not a bank.

[00:30:49] Speaker 02:
Our reading gives it more protection than banks.

[00:30:51] Speaker 02:
If you look at the Cantero case from our opening brief, under the National Bank Act to prove preemption, a bank must make an affirmative showing that it involves a practical assessment of real-world effects.

[00:31:02] Speaker 02:
to displace state law.

[00:31:05] Speaker 02:
A credit union only has to show that a law is specifically aimed at it.

[00:31:10] Speaker 02:
That's an added layer of protection under Mr. King's reading that banks do not enjoy.

[00:31:15] Speaker 02:
And, well, I see that I'm out of time.

[00:31:18] Speaker 00:
You may finish.

[00:31:19] Speaker 02:
Oh, okay, thank you.

[00:31:20] Speaker 02:
The last point that I wanted to make is that Navy Federal now appears to be walking away from the idea that regulating means relating to

[00:31:30] Speaker 02:
and says instead that the UCL regulates fees.

[00:31:35] Speaker 02:
The UCL does not regulate fees.

[00:31:37] Speaker 02:
It's not specifically directed towards credit union fees, and Navy Federal in fact argues that that's all that it's doing in its superfluousness argument.

[00:31:46] Speaker 02:
The UCL is a generally applicable statute about unfair, unlawful, and deceptive business practices.

[00:31:52] Speaker 02:
So, if Navy Federal is now accepting our- It's incredibly broad.

[00:31:56] Speaker 04:
The way I- when I read it, I was like, that's a very broad law.

[00:31:58] Speaker 04:
That could mean a lot of different things.

[00:32:00] Speaker 04:
So, couldn't it- I mean, it seems like it could start to regulate Federal credit unions in a lot of different ways.

[00:32:07] Speaker 04:
that maybe they weren't intended to be regulated because they're federal credit unions and they have boards that oversee them and so forth.

[00:32:16] Speaker 04:
It just seems like it could work into federal credit unions in a lot of ways.

[00:32:20] Speaker 02:
So I'd make three points in response.

[00:32:22] Speaker 02:
First, I just want to reiterate that because we're dealing with conduct that's illegal under federal law, you don't even need to reach this argument.

[00:32:28] Speaker 02:
But second,

[00:32:30] Speaker 02:
If a UCL decisional rule were to be specific to credit unions and regulate in that way, then under our reading, that rule would be displaced.

[00:32:39] Speaker 02:
It would be preempted.

[00:32:40] Speaker 02:
That's what the UNUM decision that we cite in our reply brief teaches.

[00:32:44] Speaker 02:
It doesn't matter just that the law is generally applicable.

[00:32:48] Speaker 02:
Also, the rule of decision has to be generally applicable.

[00:32:51] Speaker 02:
So that would address Your Honor's concern.

[00:32:53] Speaker 02:
And then the third point I'll make is that if there were some generally applicable rule that did extreme damage to credit unions, let's say that the UCL came with a statutory penalty of $10 million for every violation, no matter how generally applicable, it would not be preempted under the

[00:33:12] Speaker 02:
preemption clause.

[00:33:13] Speaker 02:
But Navy Federal can always appeal to the statute itself, an implied conflict preemption, and argue that there's an actual interference with Congress's objectives.

[00:33:24] Speaker 02:
That's what banks have to do, and that is still an option available to banks, excuse me, to credit unions.

[00:33:29] Speaker 02:
But we're talking about what's displaced under the preemption clause here, and the preemption clause does not displace generally applicable laws.

[00:33:37] Speaker 00:
All right.

[00:33:37] Speaker 00:
Thank you, Council.

[00:33:38] Speaker 00:
King versus Navy Federal Credit Union is submitted.