Last month, just a few days before the preliminary injunction hearing, Colorado’s attorney general filed a Motion to Dismiss the Complaint filed in federal district court in Colorado by three financial services industry trade groups challenging Colorado’s statute purporting to opt out (slated to take effect July 1, 2024) of a federal law that permits FDIC-insured state-chartered banks to “export” interest rates on interstate loans.  Pursuant to Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”), an FDIC-insured, state-chartered bank has the power to “export” the interest rates authorized in the state where the bank is located to borrowers in other states.  Section 525 of DIDMCA allows states to enact laws opting out of Section 521’s preemptive effect with respect to loans “made in” the enacting state.  The issue before the court in Colorado is where a loan is “made” in the case of loans to Colorado residents by insured state banks located in other states.

In support of its assertion that the plaintiffs’ complaint must be dismissed, Colorado first argues “Federal law expressly permits states to opt out of [DIDMCA] so their interest rate laws will not be preempted by state-chartered banks. . . Plaintiffs seek to deny Colorado the choice expressly provided by federal law.  Their claims should be dismissed.”

The Motion to Dismiss proceeds with further arguments, including:

• The plaintiffs’ allegation that Colorado’s opt-out violates the Supremacy Clause of the U.S. Constitution fails to state a claim because “there is no conflict” between the Colorado opt-out and federal law “as a matter of law,” since “plaintiffs have failed to allege that Colorado’s Opt-Out exceeded the authority granted in Section 525 or that there is a conflict between state and federal law,” and because in fact Colorado’s opt-out does not exceed that authority or conflict with Section 525; 
• The Supremacy Clause does not create a cause of action permitting the plaintiffs to sue for injunctive relief, and no challenge is available to plaintiffs under the Federal Deposit Insurance Act;
• Plaintiffs’ Dormant Commerce Clause argument fails because Congress authorized Colorado’s opt-out, and because the plaintiffs did not plead facts “identifying a law that discriminates against interstate commerce;” and
• Plaintiffs lack standing because “plaintiffs’ injury is based on a misconstruction of Section 525.”  

The plaintiffs’ Motion for Preliminary Injunction, which was the subject of a court hearing on May 16, remains pending.  It is interesting to note that in its Motion to Dismiss, Colorado also takes the opportunity to counter arguments made in both the amicus brief filed by the ABA and CBA supporting the plaintiffs’ Motion for Preliminary Injunction, and the plaintiffs’ Reply to Colorado’s Response to the Motion for Preliminary Injunction.  For example, in refuting violation of the Supremacy Clause, the Motion to Dismiss asserts that “the plain text and structure” of DIDMCA supports Colorado’s argument that loans are “made” in the state where the borrower is located, a position also adopted by the FDIC in its amicus brief unexpectedly filed in support of Colorado’s opt-out. 

Indeed, it appears that the defendants’ main reason for filing their Motion to Dismiss when they did was to respond to the plaintiffs’ reply brief and the ABA/CBA amicus brief submitted in connection with the plaintiffs’ motion for preliminary injunction.

The parties have stipulated to extend the plaintiffs’ time to respond to Colorado’s Motion to Dismiss until June 24, 2024.    

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