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Plaintiff’s State Court Claim Not Preempted by the National Bank Act or Related Federal Regulations

Donna Epps, et al. v. JP Morgan Chase Bank, N.A., et al.
Case No.: 10-2444 (U.S. Court of Appeals for the Fourth Circuit)

by Eric M. Leppo, Associate
Semmes, Bowen & Semmes (

In this recently issued Opinion from the United States Court of Appeals for the Fourth Circuit, the Court reversed the U.S. District Court for the District of Maryland, and held that Plaintiff’s claims were improperly dismissed as neither Federal Statute nor associated regulations preempted her Maryland statutory claims.

In 2007, the Plaintiff/Appellant Donna Epps purchased a used vehicle from Thompson Toyota. The purchase was financed through a real estate installment contract (“RIC”). The dealership’s rights under the RIC were then assigned to Defendant/Appellee JP Morgan Chase Bank (“Chase”). The agreement expressly stated that the contract would be subject to Federal law and Maryland’s Credit Grantor Closed End Credit Provisions ("CLEC"), MD. CODE ANN., COM. LAW § 12-1001 et seq.

In 2009, Ms. Epps fell behind on her car payments, and thereafter ceased making payments at all. As a result of her default on the loan, Chase repossessed the vehicle and issued notice to her that the vehicle would be sold at private sale sometime after December 28, 2009. The notice did not include the current location of the vehicle, or the time and place at which it was to be sold as is required by the CLEC. Once the vehicle was sold, Chase informed the Plaintiff that it would seek a deficiency judgment for the unpaid balance of the loan.

Ms. Epps filed suit in a Maryland state court raising claims that Chase violated the CLEC, as well as, breached its contract. The matter was removed to Federal Court by Chase on diversity of citizenship, and Chase filed a Motion to Dismiss pursuant to FED. R. CIV. P. 12(b)(6). Chase argued that Plaintiffs CLEC claims were preempted by Federal Law in the area as a result of the National Bank Act (“NBA”) and related regulations promulgated by the Office of the Comptroller of the Currency. The District Court granted Chase’s Motion to Dismiss, and Ms. Epps appealed.

The Court first noted that there is no question that preemption can result from the NBA, stating that the Supreme Court has “repeatedly made clear that federal control shields national banking from unduly burdensome and duplicative state regulation." Epps at *7 (quoting Watters v. Wachovia Bank, N.A., 550 U.S. 1, 11 (2007)). The Court also noted the over-arching doctrine of preemption, that is state laws which conflict with federal laws, are preempted. Epps at *11 (citing Cox v. Shalala, 112 F.3d 151, 154 (4th Cir. 1997)).

Preemption can occur expressly when Congress clearly exhibits intent to do so, usually by so stating within the applicable Federal statute. Preemption can also occur when Congress “occupies the field” so pervasively that there is no room left for state law to supplement the federal law in terms of regulation. Finally, preemption can occur when the state law actually conflicts with the federal law.

In this case, the NBA does not expressly preempt state law, but the associated regulations do contain preemption language. The Court found, however, that such regulations do not have express preemption language in regard to repossession of tangible personal property, the area in which Plaintiff’s claim under Maryland’s CLEC arose.

The Court found that neither the NBA nor the federal regulations occupied the field or that there was any direct conflict. The relevant portions of the CLEC dealt with debt collection/property repossession, areas in which neither the federal law nor associated regulations were overly pervasive. As such, the Fourth Circuit found that federal preemption did not exist, and reversed the U.S. District Court’s dismissal of Plaintiff’s action.