American Bankers Ass'n v. Lockyer

541 F.3d 1214, 2008 D.A.R. 14, 2008 U.S. App. LEXIS 18861
CourtCourt of Appeals for the Ninth Circuit
DecidedSeptember 4, 2008
Docket05-17163, 05-17206
StatusPublished
Cited by1 cases

This text of 541 F.3d 1214 (American Bankers Ass'n v. Lockyer) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
American Bankers Ass'n v. Lockyer, 541 F.3d 1214, 2008 D.A.R. 14, 2008 U.S. App. LEXIS 18861 (9th Cir. 2008).

Opinions

Opinion by Judge GRABER; Dissent by Judge WALLACE.

GRABER, Circuit Judge:

This case comes before us for the second time. See Am. Bankers Ass’n v. Gould, 412 F.3d 1081 (9th Cir.2005). In 2003, the California State Legislature enacted the California Financial Information Privacy Act (“SB1”), Cal. Fin.Code §§ 4050-4060, “for financial institutions to provide their consumers notice and meaningful choice about how consumers’ nonpublic personal information is shared or sold by their financial institutions,” id. § 4051(a). Plaintiffs American Bankers Association, The Financial Services Roundtable, and Consumer Bankers Association filed suit, alleging that the federal Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681-1681x, preempted SBl’s regulation of information sharing between financial institutions and their affiliates.

Previously, we held that the affiliate-sharing preemption clause of the FCRA, 15 U.S.C. § 16811(b)(2),1 preempted the affiliate-sharing provision of SB1, Cal. Fin. Code § 4053(b)(1),2 “insofar as [SB1] at[1216]*1216tempts to regulate the communication between affiliates of ‘information,’ as that term is used in [15 U.S.C.] § 1681a(d)(l),” Am. Bankers Ass’n, 412 F.3d at 1087, which defines “consumer report” information under the FCRA.3 We remanded to “determine whether, applying this restricted meaning of ‘information,’ any portion of the affiliate-sharing provisions of SB1 survives preemption and, if so, whether it is severable from the portion that does not.” Id.

On remand, the district court held that no portion of section 4053(b)(1) survives preemption and that, even if a portion did survive, the court lacked the power to sever the preempted applications. Accordingly, the court enjoined enforcement of section 4053(b)(1) “to the extent [that it is] preempted by 15 U.S.C. [§ ] 1681t(b)(2),” which, the court ruled, meant the statute in its entirety. On de novo review, Silvas v. E*Trade Mortgage Corp., 514 F.3d 1001, 1004 (9th Cir.2008) (preemption); Aria. Libertarian Party, Inc. v. Bayless, 351 F.3d 1277, 1283 (9th Cir.2003) (per curiam) (severability), we reverse and remand. We hold that section 4053(b)(1) has non-preempted applications and that California law requires that we reform section 4053(b)(1) to sever its preempted applications.

As a preliminary matter, Plaintiffs argue that, under our prior mandate, no “portion” of section 4053(b)(1) survives preemption because no physically distinct segment of the statute “applies only to information that falls outside the FCRA preemption clause.” We reject such a hyper-technical reading of our mandate. The previous panel was aware of, and indeed quoted from, the text of SB1 regulating “ ‘nonpublic personal information.’ ” Am. Bankers Ass’n, 412 F.3d at 1085 (quoting Cal. Fin.Code § 4053(b)(1)). If the question were whether a physically distinct segment of the statute could be severed, the previous panel never would have remanded the case, because the answer is obvious. The panel would have held that, striking “nonpublic personal information” from the statute, no part of the statute survives preemption. But the panel did not so hold. Instead, the panel remanded to determine whether the statute survives beyond “the extent that it applies” to consumer report information as defined by the FCRA. Id. at 1087. In other words, we remanded to determine whether SB1 section 4053(b)(1) applies to non-consumer report information and, if so, whether California law allows its application to consumer report information to be severed from the statute.

Plaintiffs concede that SB1 has non-preempted applications.4 Consequently, the only remand question now in dispute is whether California law allows us to sever the preempted applications from the statute by narrowing the statute’s reach.

[1217]*1217Under California law, “[w]hen faced with a question of whether to reform a state statute, the function of a federal court is to divine, to the best of its ability, how the state’s highest court would resolve that state law issue.” Kopp v. Fair Political Practices Comm’n, 11 Cal.4th 607, 47 Cal.Rptr.2d 108, 905 P.2d 1248, 1259 (Cal.1995). We must revise the statute “if we conclude that the Legislature’s intent clearly would be furthered by application of the revised version rather than by-the alternative of invalidation.” People v. Sandoval, 41 Cal.4th 825, 62 Cal.Rptr.3d 588, 161 P.3d 1146, 1158 (Cal.2007); see also Ayotte v. Planned Parenthood of N. New England, 546 U.S. 320, 329, 126 S.Ct. 961, 163 L.Ed.2d 812 (2006) (“[T]he normal rule is that partial, rather than facial, invalidation is the required course, such that a statute may be declared invalid to the extent that it reaches too far, but otherwise left intact.” (internal quotation marks and ellipsis omitted)). Specifically, judicial reformation or rewriting of a statute is appropriate “when (i) doing so closely effectuates policy judgments clearly articulated by the enacting body, and (ii) the enacting body would have preferred such a reformed version of the statute over the invalid and unenforceable statute.” Kopp, 47 Cal.Rptr.2d 108, 905 P.2d at 1259.

Thus, this appeal turns on whether narrowing section 4053(b)(1) to exclude the regulation of consumer report information would effectuate the intent of the California Legislature and whether the Legislature would have preferred the narrowed statute to no statute at all.

As part of SB1, the Legislature included “Legislative intent” and “Legislative findings” provisions. Cal. Fin.Code §§ 4051, 4051.5. The Legislature stated that, in enacting SB1, it “intends for financial institutions to provide their consumers notice and meaningful choice about how consumers’ nonpublic personal information is shared or sold by their financial institutions.” Id. § 4051(a). The Legislature also stated that its intent in passing SB1 was “[t]o further achieve ... control for California consumers by providing consumers with the ability to prevent the sharing of financial information among affiliated companies through a simple opt-out mechanism via a clear and understandable notice provided to the consumer.” Id. § 4051.5(b)(3). A narrowed version of section 4053(b)(1) would effectuate those statements of intent because it still would enable consumers “to prevent the sharing of financial information” — their non-consumer report financial information.

Those statements by the Legislature also demonstrate that it would have preferred a narrowed version of section 4053(b)(1) to no version at all.

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541 F.3d 1214, 2008 D.A.R. 14, 2008 U.S. App. LEXIS 18861, Counsel Stack Legal Research, https://law.counselstack.com/opinion/american-bankers-assn-v-lockyer-ca9-2008.