Unanimous US Supreme Court Revives Goldenberg Schneider’s Mortgage Escrow Interest Class Action Against Bank of America

On May 30, 2024, the Supreme Court of the United States unanimously agreed with plaintiffs represented by Goldenberg Schneider, LPA and its co-counsel that the Court of Appeals for the Second Circuit had erred by dismissing the plaintiffs’ putative class action against Bank of America, N.A. on federal preemption grounds. The plaintiffs in the case obtained home mortgage loans from Bank of America, a national bank chartered under the National Bank Act. The contracts required plaintiffs to make monthly deposits into escrow accounts. Escrow accounts ensure the availability of funds to pay the insurance premium and property taxes on the borrower’s behalf. New York state law provides that a bank “shall” pay borrowers “interest” on the balance held in an escrow account maintained in connection with a mortgage on certain real estate. N. Y. Gen. Oblig. Law Ann. §5–601. However, Bank of America did not pay interest on the balances held in plaintiffs’ escrow accounts, taking the position New York’s interest-on-escrow law was preempted by the National Bank Act, which has no escrow interest requirements. The plaintiffs, represented by Goldenberg Schneider and co-counsel, brought putative class-action suits in federal district court, claiming that they were entitled to interest on their mortgage escrows. The district court concluded that nothing in the National Bank Act or other federal law preempted the New York law. The Second Circuit reversed, holding that because the New York law “would exert control over” national banks’ power “to create and fund escrow accounts,” the law was preempted. The Supreme Court reversed, finding that the Second Circuit has erred by applying the wrong standard for preemption, and remanded the case back to the Second Circuit to conduct a proper preemption analysis consistent with existing Supreme Court precedent. See Cantero v. Bank of America, N.A., 602 U.S. _____ (2024).