# Petition for Writ of Certiorari — Chevy Chase Bank, F. S. B. v. Wells > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386001_0861%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 2004 - **Citation:** 541 U.S. 983 ## Text Supreme Ce FILED 03 918 DEC 22209 No. IN THE Pupremne @ Gourt of the Hnited States CHEVY CHASE BANK, F.S.B., ET AL., : Petitioners, = We DALE WELLS, ET AL. { Respondents. On Petition for a Writ of Certiorari to the Maryland Court of Appeals PETITION FOR A WRIT OF CERTIORARI MICHAEL A. CARVIN Counsel of Record JONES DAY 51 Louisiana Avenue, N.W. Washington, D.C. 20001 (202) 879-3939 DAVID J. CYNAMON GERARD M. BABENDREIER ERICA S. SIMPSON SHAW PITTMAN LLP 2300 N Street, N.W. Washington, D.C. 20037 (202) 663-8000 Counsel for Petitioners December 22, 2003 1 QUESTION PRESENTED Where the federal government has occupied the field, can a state court interpret a standard contractual choice-of-law provision to impose otherwise preempted state law on the contracting parties? ee ee ee ee ee ape LRN : F j i & : z f Fr f 4 4 ‘ i F il LIST OF PARTIES 1. Chevy Chase Bank, F.S.B. and Bank One Delaware, N.A. (formerly First USA Bank, N.A.) are the petitioners in this Court, defendants in the Circuit Court for Baltimore City, Maryland and were appellees in the Maryland Court of Appeals. 2. Dale Wells, Sharon Goldenberg and John Dovel are the respondents in this Court, plaintiffs in the Circuit Court for Baltimore City, Maryland and were appellants in the Maryland Court of Appeals. ili CORPORATE DISCLOSURE STATEMENT Petitioners provide the following corporate disclosures pursuant‘to Supreme Court Rule 29.6: _ 1. Chevy Chase Bank, F.S.B. states that 80% of its stock is owned by the B.F. Saul Real Estate Investment Trust. No other publicly-held corporation owns 10% or more of its stock. 2. Bank One Delaware, N.A. states that it is a wholly-owned subsidiary of Bank One Corporation. iV TABLE OF CONTENTS Page RFI eee RINE EOD hrc niscaritssninscevenintcinanirinivssecapnsnebnitens i Ee BI sisacsnsbsssnieeissiessaaloadinsaiciceuavanenlaiaianannneee ii CORPORATE DISCLOSURE STATEMENT...................... ili Fe EE Oe ceriiierrtntsneinemtoescbsnscntinvsinnsinneis vi UE oietashaks derescench leicht mcainiohiiaairimnsendineine l ae is inckinisaruiestuinidneinnisientunehiineieenindansanenaphtcieits 1 CONSTITUTIONAL PROVISION, STATUTES AND REGULATIONS INVOLVED ...........eeseeeseeeseeees l SEAT RE GOR FE A cesrvcnisesnssccennssvcsavesentnniatensssnnes l NI siisuisesceninticeinienassesaninantanonsnconitionsounkmnieiamasioniad l lr II cain tnccansnsiansadchaninsnnsnenincesnsonienmarannibaiinns 2 Fe FE I ee isesisnaissiniineszenscicsicimnneterntennsinncin 4 REASONS FOR GRANTING THE PETITION ................... 6 I. THE DECISION BELOW DIRECTLY CONFLICTS WITH THE UNIFORM DECISIONS OF THIS COURT, OTHER FEDERAL COURTS AND OTS. .........sccsssscssconseseereoes 7 II. THE DECISION BELOW WILL SUBVERT UNIFORM OTS REGULATION OF FEDERAL LENDERS AND WILL UNDERMINE PREEMPTION IN OTHER AREAS IN WHICH THE FEDERAL GOVERNMENT HAS OCCUPIED THE PI 60 aiinsilansseehsinlnowessniinsniiatenciseladecaahitihesbiateiess 19 aaa TT sisson iominsisiecdeisivachnbisdeoniaiceisealenara vipciacnicobuataagabiidita 23 APPENDIX A Opinion of the Maryland Court of Appeals .................... la Vv TABLE OF CONTENTS—continued APPENDIX B Order and Memorandum of the Circuit Court for Baltimore City, Maryland ..0.0......csccecsscscsesessseceseccececee. 44a APPENDIX C Article VI, Clause 2 of the United States ; RN act ssicinisielsictetersiciatese bcc et oe 53a bib ok Oe Ee I er mtcocienniaauetisaiacda eee 54a Maryland Code, Commercial Law, Title 12, Subtitle 9, §§ 12-901 ef Seq. ..cececcccescsessssssssssseseseeees 57a APPENDIX D October 6, 2003 Opinion Letter of the Office of Thrift Supervision, Department of the Treasury ......... 10la APPENDIX E October 6, 2003 Letter from the National Association of Attorneys General to the Office of the Comptroller of the Currency......... seviminnianbenseabinntiines 109a vi TABLE OF AUTHORITIES Cases Page(s) American Airlines, Inc. v. Wolens, 513 U.S. 219 ISD issdrsstsensensiniiersecinnemcinneiitenebinansnamimenaatainttio passim Arana v. Ochsner Health Plan, 338 F.3d 433 CO Set. Be aessanscssiniiiervccencianeniienes Scids Nias becelivdiabet 22 Ass’n of Int’l Auto. Mfrs. v. Comm'r, Mass. Dep't of Envtl. Protection, 208 F.3d 1 (1st Cir. 2000)............. 18 ‘Atkinson v. Gen. Elec. Credit Corp., 866 F.2d 396 (11th Cir.), cert. denied, Pe UE. BAS CIF ciinhsioeintcteermiatiicsmnanes 12, 13 Bank of Am. v. City & County of San Francisco, SEF Be S51 CC, TI Ds cicsenssctnsrtcpcsnanetpnctantassininns 15 Barnett Bank of Marion County, N.A. v. Nelson, SEF UG, To Ca sesvescssricitecmtienieianencinmaas 15 Breitling U.S.A., Inc. v. Fed. Express Corp., 45 F. Supp. 2d 179 (D. Conn. 1999).............sssceeeee 11,17 Brown v. Investors Mortgage Co., 121 F.3d 472 Oe, TIT cecsvernevinavencspsencs ebnettenaemeonninmeietenaes 12 Cal. v. ARC Am. Corp., 490 U.S. 93 (1989)... eesessseeeeeees 16 Cent. States S.E. & S.W. Areas Health & Welfare Fund v. Pathology Labs., 71 F.3d 1251 (7th Cir. 1995), cert. denied, 517 U.S. 1233 (1996)...... 18 Difelice v. Aetna U.S. Healthcare, 346 F.3d 442 CR CUR. FOE Pi osinssisunivnionscessninicbebs ceiabdidiatienciacsnnomean 22 Fantastic Fakes, Inc. v. Pickwick Int'l, Inc., GO1 F 26 S79 (5s Cae. FI vencncccccnrcesvceseess 12, 13, 17, 21 Fid. Fed. Sav. & Loan Ass’n v. De la Cuesta, BSS UD. 161 Cais wkicnicen teen passim Hauenstein v. Lynham, 100 U.S. 483 (1880) ......... cc eeeeeeeeeees 8 Hines v. Davidowitz, 312 U.S. 52 (1941) occ eeeceseeeeeeeee 15 Jones v. United States Fid. & Guar. Co., Civ. A. No. 90-5005, 1992 U.S. Dist. LEXIS 12908 €6.D. 1a. Bee, 5, TI ccenticbeciiontvcs 12, 17 Vii TABLE OF AUTHORITIES—continued Kawamata Farms, Inc. v. United Agric. Prods., 948 P.2d 1055 (Haw. 1997) .........cccccscececcscssssssesesssessesess 18 La. Pub. Serv. Comm’n v. F.C.C., SPW SF Ais. He Oe iiss diterasnisdonicntalisbbcntaitiedaeclinseas 16 Lyng v. Payne, 476 U.S. 926 (1986) ....cccccccsccscsssssssssescesecece. 14 Martin v. Ford Motor Co., 914 F. Supp.-1449 PU WN WOM csiiacdllescdvbescissthiestiinmldchobiossas muskets cccindéiacs 18 N.W. Cent. Pipeline Corp. v. State Corp. Comm'n, 489 U.S. 493 (1989) ....cccccscesecesssccscscssseseseceee. 16 ProCbD, Inc. v. Zeidenberg, 86 F.3d 1447 GPE Ge BU is sevsaspictdBininiecetebninsis seshcabcreinidas cheats 18 Roadway Package Sys., Inc. v. Kayser, 257 F.3d 287 (3d Cir.), cert. denied, ee 13, 17, 19, 21 Singh v. Prudential Health Care Plan, Inc., 335 F.3d 278 (4th Cir.), cert. denied, 03-478, 2003 U.S. LEXIS 9007 (2003) .........ceccesessseseees 22 Smith v. Comair, Inc., 134 F.3d 254 (4th Cir. | 11 Udall v. Tallman, 380 U.S. 1 (1965)......cccccscsessssesessecseeseseeee 14 Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 ne 18 Wallace v. Parks Corp., 629 N.Y.S.2d 570 SP iti te 18 Wells v. Chevy Chase Bank, 377 Md. 197, Oe POE I asics priciest eden es ataettrie ok 1 Constitutional and Statutory Provisions ete Ma: I Oe i 1, 6 Ra Chime © WN ERs ccsdicscascibacdidedibiccsicu cesses 3 BB Oe, © CO Risiecisicsdvenicciccitedisacsilcteciec detent l Be Aen & BR TID CI iciceccccseitecthsilcsikshiscscscesnl once. 1 BP Ween SA CI coiciciiadiiieeih estinccedas Si 7 MD. CODE ANN., Com. Law §§ 12-901 EI Gi iticniithaia sedaataatic atti ee o> passim LS ROL hs BN Ran iF Bice. ai yay pie 5: STS Mey Lee Revo neas eauyrr = ' - * vill TABLE OF AUTHORITIES—continued Federal Regulations Fe ee ih es cicerccicesesnaieisstictineneniniunssisecmnstsiecsosticl 1 Be a ile NE CED ees ansissneessnnniciinisintnnieleinanniines oe ee Ae a i ee Riis tiasentisvinitesnctansnsiensissiedaiboia 2,21 Fa i ae 0 ID sisiisiessicscesnrsiciaievenlessisiioinniais 20, 21 ESE Bes G FOU. Pe) Ds csncrscssersasesignenssntoonnvees pabininati 3 61 Fed. Reg. 50951 (Sept. 30, 1996)............ccsecssscsersees passim 68 Fed. Reg. 46119 (Aug. 5, 2003).....ccccssssssscssssssssssssseceseee 22 A le IA al a Be A tal ek aS Sone PETITION FOR A WRIT OF CERTIORARI Chevy Chase Bank, F.S.B. (“Chevy Chase”) and Bank One Delaware, N.A. hereby petition for a writ of certiorari to review the judgment of the Maryland Court of Appeals in this case. OPINIONS BELOW The opinion of the Maryland Court of Appeals (App. la- 43a) is reported at 377 Md. 197, 832 A.2d 812 (2003). The opinion and order of-the Circuit Court for Baltimore City, Maryland (App. 44a-52a) is unreported. JURISDICTION The judgment of the Maryland Court of Appeals was entered on September 23, 2003. The jurisdiction of this Court is invoked under 28 U.S.C. § 1257(a) (2003). CONSTITUTIONAL PROVISION, STATUTES AND REGULATIONS INVOLVED The constitutional provision, statutes and regulations involved are Art. VI, cl. 2 of the United States Constitution; Section 5(a) of the Home Owners’ Loan Act, 12 U.S.C. § 1464(a) (2003); 12 C.F.R. § 560.2 (2003); and Title 12, Subtitle 9 of the Maryland Commercial Law Article, MD. CODE ANN., Com. LAW §§ 12-901 et seq. (2002) (hereafter “Subtitle 9”). They are reproduced in Appendix C. (App. 53a-100a.) STATEMENT OF THE CASE 1. Introduction. The Office of Thrift Supervision (“OTS”) “occupies the entire field of lending regulation for federal Savings associations.” 12 C.F.R. § 560.2(a). (App. 54a.) See also 12 U.S.C. § 1464(a). (App. 53a-54a.) The express purpose of OTS’s occupation of the field is “[t]o enhance the Safety and soundness and to enable federal savings associations to conduct their operations in accordance with best practices (by efficiently delivering low-cost credit to the Rae ile ie ed oe a — © “ NTE public free from undue regulatory duplication and burden).” 12 C.F.R. § 560.2(a). (App. 54a.) OTS’s field preemption regulations specifically preempt, among other things, state laws, such as Maryland’s Subtitle 9, that require disclosures of certain information in credit-related documents. 12 C.F.R. § 560.2(b). (App. 55a-56a.) - In the case below, the Maryland Court of Appeals held that, notwithstanding OTS’s field preemption of state lending laws governing federal savings associations, Subtitle 9 could be imposed on a federal lender simply because that state law is referred to in the choice-of-law provision in the lender’s contract with its credit cardholders. The court’s decision directly conflicts with the decisions of this Court and every other federal court that has considered the issue, as well as with the position of OTS itself. Moreover, the Court of Appeals’ decision creates a dangerous precedent for other state courts to undermine the federal government’s occupation of the field not only in the regulation of federal ' lenders but in-any area in which ubiquitous contractual choice-of-law provisions could be “interpreted” to override preemptive federal law. 2. Statement of Facts. This case arose from a lawsuit on behalf of former credit cardholders of Chevy Chase, a federal Savings association. The Cardholder Agreement embodying the terms of the credit card contract between Chevy Chase and its customers contained a change-in-terms provision that permitted Chevy Chase to “amend the terms of [the] Agreement in accordance with applicable law at any time.” (App. 46a.) The Cardholder Agreement also contained a choice-of-law provision, entitled “Governing Law,” which defined the “governing law” of the contract as “Subtitle 9 of 3 Title 12 of the Commercial Law Article of the Maryland Annotated Code and applicable federal laws.” (App 47a.)' On January 16, 1996, Chevy Chase, with the approval of OTS, relocated its “home office,” as defined by applicable federal regulations, from Maryland to Virginia. (App. 4a.) In connection with that relocation, Chevy Chase amended the choice-of-law provision to provide that the Cardholder Agreement “is subject to and governed by Virginia law and applicable federal laws and regulations.” Jd Chevy Chase subsequently amended other provisions of the Cardholder Agreement, including finance charges and other fees. (App. 4a-Sa.) Notice of the amendments was provided in ' The choice-of-law provision referred to Subtitle 9, rather than Maryland law generally, because Maryland maintains several different usury laws potentially applicable to lenders. Unlike most states that do so, Maryland specifically requires lenders to designate the “new” and more flexible usury laws (of which Subtitle 9 is a part) in writing in their credit agreements in order to avoid being subjected to the more restrictive provisions of the “old” usury laws set forth in Subtitle 3 of Title 12 of the Maryland Commercial Law Article and elsewhere. See Mp. CODE ANN., CoM. LAW § 12-913.1 (2002). Thus, Chevy Chase needed to designate Subtitle 9 as the governing state law in order to ensure that it would govern any aspect of the Cardholder Agreement that might not be governed by preemptive federal law, and in order to obtain maximum flexibility with respect to interest rates and related charges, as to which federal regulations look to state law. See 12 U.S.C. § 1463(g) (2003); 12 C.F.R. § 560.110(b) (2003) (authorizing federal Savings institutions to “export” the “most favored lender” interest rate and charges of the state in which they are located). 4 accordance with the Truth-in-Lending Act (“TILA”), which is the applicable law pursuant to OTS regulations. See Lending & Investment, 61 Fed. Reg. 50951, 50965-66 (Sept. 30, 1996). 3. The Proceedings Below. The three named plaintiffs in the case below continued to use their credit cards subject to the amended terms and conditions without protest or objection for three years. On January 15, 1999, one day short of the applicable statute of limitations, they commenced this action in the Circuit Court for Baltimore City, Maryland, against Chevy Chase and Bank One Delaware, N.A., which had purchased Chevy Chase’s credit card business in 1998. (App. 5a.) The complaint alleges that Chevy Chase breached the Cardholder Agreement and committed unfair and deceptive trade practices when it amended the Cardholder Agreement in 1996, because Chevy Chase allegedly failed to give notice of the amendments in accordance with the provisions of Subtitle 9, which impose disclosure requirements beyond those required by TILA. (App. 5a-6a.) Chevy Chase moved to dismiss the complaint on the ground that Subtitle 9 was preempted by federal law. Plaintiffs acknowledged that fact but contended that Chevy Chase had obligated itself to follow the notice provisions of Subtitle 9-by referring to that statute in the choice-of-law provision of the Cardholder Agreement. (App. 45a-46a.) The circuit court granted Chevy Chase’s motion, characterizing plaintiffs’ argument as “both ingenious, and a trifle disingenuous.” (App. 51a.) The court noted, “It seems both implausible and inconsistent with federal preemption to claim that a state regulatory scheme was agreed to between the parties by a mere reference to Subtitle 9 [in the choice-of- law clause].” Jd. The court explained that “[the parties] could not waive federal preemption and could only have intended that state law apply as ‘governing law’ should ‘federal law’ not apply.” (App. 52a.) 5 Plaintiffs sought review of this decision in the Maryland Court of Appeals. Initially, the Court of Appeals denied plaintiffs’ petition for a writ of certiorari. Subsequently, however, the court granted certiorari on its own initiative, and reversed the circuit court in a 6-1 decision. (App. 1a-43a.) The Court of Appeals necessarily acknowledged that OTS has occupied the field and that Subtitle 9 is therefore preempted. (App. 19a-21a.) The court nonetheless held that, because the choice-of-law provision in the Cardholder Agreement refers to state law, that provision could be interpreted to mean that Chevy Chase had contractually obligated itself to comply with the notice provisions of the otherwise preempted state law. (App. 22a-42a.) In reaching that conclusion, the court relied heavily on this Court*s decision in American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995), which held that express contractual obligations are not preempted by federal law. (App. 24a-29a.) The Court of Appeals concluded, therefore, that the mere reference to Subtitle 9 in the choice-of-law provision could be interpreted as an incorporation by reference of all of the terms of Subtitle 9 as express-contractual obligations. (App. 38a-42a.) While Wolens did not involve the question presented in this case — whether a contractual choice-of-law provision can ever be read as an election by the contracting parties to override preemptive federal law - the court below distinguished another decision of this Court that addressed this precise issue and definitively answered it in the negative. Fid. Fed. Sav. & Loan Ass'n v. De la Cuesta, 458 U.S. 141 (1982) (“Fidelity”). The Court of Appeals erroneously read Fidelity as applying only to cases where the chosen state law is in direct conflict with federal law. (App. 35a-36a.) The court similarly purported to distinguish the subsequent decisions of lower federal courts that uniformly hold that a choice-of-law provision cannot be interpreted to allow the application of preempted state law instead of preemptive federal law. (App. 36a-38a.) 6 In view of its holding that plaintiffs’ breach of contract claims based on Subtitle 9 were not preempted, the court remanded the case to the circuit court to determine, pursuant to state law canons of contract construction, whether the Cardholder Agreement obligated Chevy Chase to follow the notice requirements of Subtitle 9. (App. 42a.) REASONS FOR GRANTING THE PETITION The decision below flatly contradicts this Court’s decision in Fidelity, 458 U.S. 141, and the uniform decisions of the lower federal courts that a contractual choice-of-law provision cannot be read to “choose” a designated state’s laws over preemptive federal law. Those decisions are based on the fundamental principle, enunciated by this Court in Fidelity, that pursuant to the Supremacy Clause, Art. VI, cl. 2, “the Constitution, laws and treaties of the United States are as much a part of the law of every State as its-own local laws and Constitution.” 458 U.S. at 157. Thus, while a contractual choice-of-law provision can designate which state law will govern the parties’ agreement (since none is superior to the other), the parties cannot elect to impose a subordinate state law in favor of superior federal law. Since the Maryland Court of Appeals’ decision, if left in place, will create both confusion and a sweeping exception to this heretofore well- established principle of federal preemption, this Court should grant review. It takes little imagination to recognize the destructive effect the decision below will have on OTS’s effort to establish consistent regulation of the lending operations of federal Savings associations. Under the decision below, all it takes for a concededly preempted “consumer protection” state law to be applied to a federal lending institution is a choice-of-law provision that refers to state law. Because choice-of-law provisions are virtually universal in credit and loan agreements, all of these state laws will be revived, even though they were preempted precisely because OTS believed 7 federal savings institutions should not be “subject to a hodge- podge of conflicting and overlapping _ state lending requirements.” 61 Fed. Reg. 50951, 50965. Although the federal courts have consistently rejected this result, this is the first decision of a state’s highest court on the subject. As such, it provides a roadmap for all other state courts to subject federal savings institutions to inconsistent and onerous state law regulation through the back door of “contract interpretation.” Needless to say, states have a vested and well-documented interest in bringing federal savings institutions within their regulatory ambit, thereby significantly undermining the uniform, national regulatory scheme that OTS has established to promote the safety and soundness of those institutions. Nor will this abrogation of well-settled preemption principles be limited to federal savings or other financial institutions. Because choice-of-law provisions are common in all types of commercial contracts, the decision below will be used to reassert state law through the back door in other areas of regulation, such as the Employment Retirement Income Security Act, 29 U.S.C. § 1144(a) (2003) (“ERISA”), in which the federal government has occupied the field. This Court should not condone the lower court’s transparent effort to undermine the careful balance struck by federal regulators through its impermissible manipulation of “contract interpretation” principles. I. THE DECISION BELOW DIRECTLY CONFLICTS WITH THE UNIFORM DECISIONS OF THIS COURT, OTHER FEDERAL COURTS AND OTS Until the court below issued its decision, every court that has considered this issue, including this Court, held that a contractual choice-of-law provision cannot be read to override preemptive federal law. In Fidelity, this Court struck down a California state law prohibiting due-on-sale clauses in mortgage agreements on the ground that it was preempted by 8 federal regulations that permitted such clauses. (A due-on- sale clause allows the lender to declare the entire balance of a loan immediately payable when the property securing the loan is sold, and OTS’s predecessor had authorized federal savings associations to include such clauses in their loan contracts.) 458 U.S. at 145-46. The plaintiffs in that case argued that, notwithstanding preemptive federal law, the more restrictive state law should apply because the governing law provisions of the loan documents in question provided that they would be “governed by the law of the jurisdiction in which the Property is located.” Jd. at 148. Unlike Chevy Chase’s Cardholder Agreement, which explicitly referred to federal law as well as Maryland’s Subtitle 9, the governing law provisions in Fidelity did not even mention federal law. Nonetheless, this Court held that “the incorporation of state law does not signify the inapplicability of federal law, for a ‘fundamental principle in our system of complex national polity’ mandates that ‘the Constitution, laws and treaties of the United States are as much a part of the law of every State as its own local laws and Constitution.’” Jd. at 157 (quoting Hauenstein v. Lynham, 100 U.S. 483, 490 (1880)). The Court therefore rejected the plaintiffs’ argument that the choice-of- law provision meant that the parties to the contract agreed to be bound by the restrictive state law. The Court noted in this regard that “the ‘law of the jurisdiction’ includes federal as well as state law.” Jd. at 157 n.12. The Court also pointed out that the purpose of the contractual reference to locai law was “not to elevate state law over federal law, but to provide a uniform choice-of-law provision to be used when interstate disputes arose regarding the interpretation of a mortgage.” Jd. In short, both because private parties are obviously powerless to elevate state law over federal law and because state law necessarily incorporates federal law, reference to state law in a choice-of-law provision cannot be interpreted as a promise to be bound by otherwise preempted state law. This prudent rule, of course, also avoids presenting lending We PEN wt Declan tna eR TI a eal ras Retain Rs Al a Cin Ne 9 institutions with the Hobson’s Choice of either foregoing choice-of-law provisions or having a state court subsequently “interpret” these provisions to expose them to the host of consumer protection laws that federal regulators have deemed unduly burdensome or otherwise inconsistent with the national regulatory scheme. Perhaps most important, the Fidelity rule avoids the undermining of the distinct regulatory balance struck by federal regulators that would result from indirectly exposing federally regulated institutions to a patchwork of non-uniform and conflicting state laws. To be sure, federal lending institutions, like all contracting parties, can directly promise to provide consumers with benefits in addition to those required by federal law and of the sort mandated by preempted state law. Thus, the savings association m Fidelity could have promised that the balance of the loan would not be due when the securing property was sold, or Chevy Chase could have promised to provide cardholders with notice in addition to that required by TILA. This simply reflects the fact that contracting parties may proraise anything not prohibited by law and that a court can enforce such voluntarily undertaken contractual obligations without disrupting the federal regulatory scheme. This Court’s decision in American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995) makes this obvious point. In Wolens, this Court held that the Airline Deregulation Act (“ADA”), which preempts state laws purporting to regulate airlines’ rates, routes or services, precluded private claims against the airline based on state consumer protection laws. Id. at 226-28. The Court nevertheless allowed claims seeking to enforce “self imposed undertakings” expressly promised in the “contract terms” by the airline, because the “terms and conditions airlines offer and passengers accept are privately- ordered obligations,” which can be enforced like other voluntarily offered consideration for a contract. Jd. at 228. The Court thus distinguished between claims seeking to enforce express promises contained within the four corners of 10 the contract, which are not preempted, and claims that involve “enlargement or enhancement based on state laws or policies external to the agreement,” which are preempted. Jd. at 233. Thus, Wolens and Fidelity set forth a quite straightforward preemption principle. While companies subject to extensive federal regulation may voluntarily undertake to commit themselves to actions not required by federal law (or putatively required by preempted state law), a contractual choice-of-law provision stating that a particular state’s law governs cannot be interpreted as a commitment by the promisor to abide by such preempted state law. This “distinction between what the State dictates and what the [promisor] itself undertakes confines courts, in breach-of- contracts actions, to the parties’ bargain, with no enlargement or enhancement based on state laws or policies external to the agreement.” Wolens, 513 U.S. at 233. The Maryland Court of Appeals — alone among lower courts — flipped this straightforward rule on its head by concluding that a choice-of-law provision referencing state law is equivalent to an express agreement to voluntarily undertake to do all that is required by the preempted state law. In this regard, the court below contemptuously stated that the distinction set forth in Wolens — between contractual obligations contained directly in the agreement and state laws external to the agreement — “make[s] absolutely no sense” 11 because it “fails to distinguish between the preemption issue and the contract interpretation issue.” (App. 39a.)? But, of course, it is the Maryland Court of Appeals that mangles both contract interpretation and preemption doctrine by invoking the plainly inapposite Wolens rule that applies to specific promises in the document, rather than the obviously controlling Fidelity rule that applies to choice-of-law provisions that reference state law external to the agreement. The Court of Appeals’ fundamental error is in stark conflict with the uniform view of the lower federal courts and OTS’s Own interpretation of the preemptive force of its field preemption regulation. ? In this regard, the court reasoned that the issue of whether a choice-of-law provision may incorporate external State policies is “a question of state law” and thus, apparently, immune from this Court’s rulings specifying which contractual language can form the basis for a contractual challenge to enforce preempted state law. (App. 39a.) Incredibly, to support this facially erroneous result, the court relied on a series of cases that in no way suggest that the requirements of a preempted state law can become private contractual rights merely because the state law is mentioned in a choice-of-law provision. Indeed, the cases relied on expressly hold that, under Wolens, the contractual provisions were “preempted by the ADA” because they sought to “impose common law principles and policies on the agreement between the two parties... .” Breitling USA, Inc. v. Fed. Express Corp., 45 F. Supp. 2d 179, 183-84 (D. Conn. 1999) (quoted at App. 40a). See also Smith v. Comair, Inc., 134 F.3d 254, 258 (4th Cir. 1998) (holding contract claim was “preempted under the ADA” because plaintiff's “contract claim can only be adjudicated by reference to law and policies external to the parties’ bargain”) (also quoted at App. 40a). 12 For example, in Atkinson v. General Electric Credit Corp., 866 F.2d 396 (11th Cir.), cert. denied, 493 U.S. 815 (1989), the Eleventh Circuit found that the plaintiff's usury claim under Georgia law was preempted because the loan contract at issue complied with the requirements of governing federal regulations. 866 F.2d at 397, 399. The loan agreement specified that the governing law was the law of Georgia, with no reference to federal law. Applying the principle set forth in Fidelity, however, the court held that the governing law provision could mean only that Georgia state law would govern matters not controlled by preemptive federal law. Atkinson, 866 F.2d. at 398. See also Brown v. Investors Mortgage Co., 121 F.3d 472, 476 (9th Cir. 1997) (holding that provision stating that loan “shall be governed by the laws of the State of Washington” did not waive lender’s federal preemption defense); Fantastic Fakes, Inc. v. Pickwick Int’l, Inc., 661 F.2d 479, 483 (Sth Cir. 1981) (holding that contractual choice-of-law provision “merely designates the state whose law is to be applied to the extent its use is not preempted by nor contrary to the policies of’ federal copyright law). As the court explained in Jones v. United States Fidelity & Guaranty Co., Civ. A. No. 90-5005, 1992 U.S. Dist. LEXIS 12303, at *10 (E.D. La. Aug. 5, 1992), “the purpose of a choice-of-law provision in a contract is to ensure that the law of State A, as opposed to State B, will govern the contract. The parties may not use a choice-of-law provision to provide that state law, instead of federal law, will apply to a federal question.” All of these cases recognize that where the federal government has chosen to regulate a particular activity or field, as it has done with respect to the lending activities of federal savings banks like Chevy Chase, neither states nor private parties can elect to ignore such federal law in favor of preempted state law, because state law _ necessarily incorporates the preemptive federal scheme. 13 Thus, in analyzing the effect of a choice-of-law provision in an arbitration agreement, the Third Circuit differentiated between what it called “horizontal” choice-of-law — “whether the laws of State X or State Y supply the relevant rule of decision” — and “vertical” choice-of-law: “whether the rule of decision is supplied by the laws of State X or by federal law.” Roadway Package Sys., Inc. v. Kayser, 257 F.3d 287, 293-94 (3d Cir.), cert. denied, 534 U.S. 1020 (2001). On the latter choice, the court explained: Judge-made _choice-of-law. doctrines (and, accordingly, attempts by contracting parties to influence their application with choice-of-law clauses) have no applicability to answering this question because the relevant rule is supplied by the Constitution itself: a valid federal law preempts any state law purporting to regulate the same issue. See U.S. Const. Art. VI. Id. at 293-94. In other words, the Supremacy Clause precludes courts from ruling that parties have elected state law over preemptive federal law by means of a contractual choice-of-law provision. Similarly, in Fantastic Fakes, Inc., 661 F.2d 479, the Fifth Circuit specifically considered whether a choice-of-law provision in a copyright license that designated Georgia law meant that such state law would supersede rights and obligations created by federal copyright law. See id. at 482- 83. The court held that the choice-of-law provision could not be read in that fashion because preemptive federal law cannot be nullified by state law. Jd. at 483. Accordingly, the court held that the choice-of-law provision could be read only to mean that Georgia law applied to the extent not otherwise preempted by federal law. Id. See also Atkinson, 866 F.2d at 398. OTS itself has reached the same conclusion. In an opinion letter issued just two weeks after the decision below, OTS 14 stated that “reference to federal law and state law in a choice- of-law provision includes the preemptive effect of federal law” and does not obligate the lender to follow the preempted New York state law. OTS Opinion Letter P-2003-7 (Oct. 6, 2003). (App. 101la-108a.) Citing Fidelity, OTS explained that the reference to state law in the choice-of-law provision “does not nullify or negate the preemptive effect of federal law.” (App. 106a.) Accordingly, OTS opined that the lender was not obligated to pay interest on escrow accounts, which is required by New York law but not by federal law.’ The court below attempted to evade the clear conflict with Fidelity and the lower federal courts’ interpretation of it by “distinguishing” these cases on facially erroneous grounds that merely confirm the court’s fundamental misunderstanding of the controlling law. The court below claimed that Fidelity was different than the instant case because Fidelity involved a “direct conflict between federal regulations permitting due-on-sale clauses in mortgage agreements and restrictions placed by the California Supreme Court on the exercise of the clauses.” (App. 36a.)* But this > OTS’s interpretation and application of its own field preemption regulations is, of course, entitled to substantial deference. See Lyng v. Payne, 476 U.S. 926, 939 (1986); Udall v. Tallman, 380 U.S. 1, 16 (1965). * In a similar“vein, the Court of Appeals mistakenly concluded that there is no conflict between the notice requirements of TILA and the notice requirements of Subtitle 9 because TILA does not preempt state disclosure laws. (App. 35a-36a.) The court failed to take into account that because OTS has occupied the field of lending regulation, including regulation of disclosures, TILA effectively becomes the applicable disclosure standard for federal savings associations and, insofar as they are concerned, preempts state Footnote continued on next page b Adee =. 15 purported distinction is both factually inaccurate and legally erroneous. First, the conflict here is precisely the same as the Fidelity conflict. In neither Fidelity nor the instant case did state law prohibit what federal law required. As this Court noted, federal law permitted, but did not require, the due-on- sale clauses allegedly proscribed by state law. Fidelity, 458 U.S. at 155. Here, federal regulations permitted, but did' not require, Chevy Chase to give notice of amendments to its cardholders that are prohibited as insufficient under Maryland’s Subtitle9. In both cases, then, state law is preempted because it prohibits what federal law allows and therefore creates an “obstacle to the accomplishment and execution of the full purposes and objectives” of the federal government. Fidelity, 458 U.S. at 156 (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)). See also, Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25, 31 (1996). Indeed, this is undisputed, since, as respondents conceded and the Court of Appeals held, Maryland’s “Subtitle 9 is preempted” because it imposes “additional requirements [on] a credit agreement with a federal savings association” and thus is “inconsistent with OTS’s expressed intention to ‘occupy the entire field of lending regulation for federal Footnote continued from previous page disclosure laws. See Bank of Am. v. City & County of San Francisco, 309 F.3d 551, 565-66 (9th Cir. 2002) (anti- preemption provision of Electronic Fund Transfer Act does not preserve state or local laws preempted by the Home Owners’ Loan Act). OTS made this point explicitly in promulgating its field preemption regulations. See 61 Fed. Reg. 50951, 50965-66. Yet the Court of Appeals either ignored or did not understand this basic fact. (App. 35a-36a.) ye eee 16 savings associations.” (App. 21a.)° Thus, as in Fidelity, the restrictions placed by the Maryland Court of Appeals on the notice provided by Chevy Chase — through interpretation of a choice-of-law provision — is in direct conflict with federally authorized activity. (App. 36a.) In any event, it is legally irrelevant whether state law is preempted because it directly conflicts with federal law or because the federal government has occupied the field. In either case, the preemptive federal law is incorporated into state law and thus, under Fidelity, a choice of Maryland law necessarily incorporates the preemptive federal law. Thus, the kind or source of federal preemption is utterly immaterial to the question of whether a choice-of-law provision may incorporate federal law. Consequently, the lower court’s interpretation of Fidelity as disapproving only those choice- of-law provisions where the promisor binds itself to a state law that affirmatively violates a “conflicting federal law” is clearly without merit. (App. 35a.) Indeed, so interpreting Fidelity would nonsensically reduce it to reflect nothing more than the basic contract law principle that a promise to perform an illegal act is unenforceable. ° This conclusion simply recognizes the obvious point that Subtitle 9 is preempted because OTS occupies the entire field of regulation of the lending operations of federal lenders, “leaving no room for the States to supplement federal law.” N.W. Cent. Pipeline Corp. v. State Corp. Comm’n, 489 U.S. 493, 509 (1989). See also Cal. v. ARC Am. Corp., 490 U.S. 93, 100 (1989) (state laws are preempted either when they conflict with federal law or when the federal government has occupied the field); La. Pub. Serv. Comm’n v. F.C.C., 476 U.S. 355, 368-69 (1986) (states may not regulate where Congress or a federal agency acting within the scope of its delegated authority has occupied the field). 17 For the same reason, the Court of Appeals’ attempt to distinguish Jones is unavailing. The decision below stated that Jones was “inapposite” because it involved ERISA, “a ‘deliberately expansive’ statute designed to make regulation of employee benefit plans an exclusively federal concern.” (App. 38a (quoting Jones, 1992 U.S. Dist. LEXIS 12303, at *7).) Again, this does not factually distinguish the instant case because OTS, pursuant to broad statutory authorization, has likewise promulgated “deliberately expansive” regulations designed to make lending regulation of federal savings institutions “an exclusively federal concern.” And, again, there is no legal significance to this “distinction” because it is conceded that Subtitle 9 is preempted by the OTS regulation, and Fidelity applies to all preempted laws, without regard to how they are preempted. The lower court’s efforts to distinguish other squarely conflicting cases were similarly meritless. Fantastic Fakes and Roadway Package System were “distinguished” on the ground that they did not involve “preemption,” but rather “contract interpretation.” (App. 37a.) As established above, however, both cases squarely held that a choice-of-law provision could not be “interpreted” to mean that a subordinate state law was elected over a superior federal law — reasoning that is irreconcilable with the result reached by the Maryland Court of Appeals. Moreover, for the reasons already indicated, Wolens provides no support for the decision below.® Neither Wolens nor any of the other cases cited by the court below even suggests that the requirements of a preempted state law can become private contractual undertakings merely because the. ° The cases applying Wolens have recognized that its exception to the preemptive effect of federal law “is a narrow one.” Breitling, 45 F. Supp. 2d at 184. 18 state law is mentioned in a choice-of-law provision. (App. 29a.)’ Wolens teaches only that, if Chevy Chase had voluntarily included specific provisions in the Cardholder Agreement promising to give notice of amendments to the Agreement in a manner not required by federal law, such express contractual obligations could be enforced without regard to preemption. But Chevy Chase did not do so. The supposed contractual notice requirements that the plaintiffs seek to impose on Chevy Chase can be found only by looking outside of the contract to Subtitle 9 and importing that preempted law’s requirements into the Cardholder Agreement ’ See Volt Info. Scis. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 (1989) (Federal Arbitration Act does not preempt state procedures governing the conduct of arbitration proceedings, and therefore parties may contract to apply state rules and procedures to such proceedings); Ass’n of Int’l Auto. Mfrs. v. Comm’r, Mass. Dep’t of Envtl. Prot., 208 F.3d 1 (1st Cir. 2000) (Massachusetts emission standards are preempted by federal Clean Air Act and were not embodied in any independent contractual obligations); ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996) (express terms and conditions of contract are not preempted by the federal Copyright Act); Cent. States S.E. & S.W. Areas Health & Welfare Fund v. Pathology Labs., 71 F.3d 1251 (7th Cir. 1995), cert. denied, 517 U.S. 1233 (1996) (ERISA did not preempt bills for medical services that were not covered by welfare benefit plan). The remaining cases cited by the lower court hold simply that express contractual warranty claims are uc! preempted by federal law. See Martin v. Ford Motor Co., 914 F. Supp. 1449 (S.D. Tex. 1996); Kawamata Farms, Inc. v. United Agric. Prods., 948 P.2d 1055 (Haw. 1997); Wallace v. Parks Corp., 629 N.Y.S.2d 570 (App. Div. 1995). 19 by means of the choice-of-law provision. Such an endeavor is exactly what Wolens (and Fidelity) prohibits. 513 U.S. at 233. In short, Wolens in no way suggests that the mention of Subtitle 9 in the “Governing Law” provision of the Cardholder Agreement could represent an incorporation by reference of that law’s requirements as private contractual undertakings. (App. 38a-40a.) In fact, Fidelity and the uniform line of lower federal authorities subsequent to Fidelity emphatically state that the Supremacy Clause prohibits such an interpretation. In sum, the Maryland Court of Appeals’ decision not only conflicts directly with Fidelity and the decisions of other federal courts; it misapplies Wolens in a way that is likely to create mischief and confusion, particularly among the state courts, about the proper application of the Supremacy Clause in contract cases. This Court should grant certiorari in order to eliminate the conflict and to restore order in a previously settled area. Il. THE DECISION BELOW WILL SUBVERT UNIFORM OTS REGULATION OF FEDERAL LENDERS AND WILL UNDERMINE PREEMPTION IN OTHER AREAS IN WHICH THE FEDERAL GOVERNMENT HAS OCCUPIED THE FIELD The decision below, although manifestly erroneous, cannot — be disregarded as the isolated product of a lower federal or state court. Rather, it is a detailed pronouncement by the highest court of the State of Maryland, and the first decision on this issue by the highest court of any state. Choice-of-law provisions exist in virtually every consumer and commercial contract. See Roadway Package Sys., 257 F.3d at 292. Pursuant to the opinion below, any such contract between a federal lender and its customers could be interpreted pursuant to state law contract principles to mean that the lender has obligated itself to comply with otherwise preempted state law. 20 Thus, unless it is promptly reversed, the decision will serve as precedent for other states to impose their regulatory and consumer protection laws on federal lenders, regardless of OTS’s uniform national regulatory scheme. OTS’s regulatory scheme would have little vitality in such circumstances.* The Maryland court’s decision is particularly damaging because it turns the OTS regulations on their head. Those regulations contain a “savings clause,” which preserves basic state “contract and commercial laws” to the extent such laws “only incidentally affect the lending operations of federal savings institutions.” 12 C.F.R. § 560.2(c) (emphasis added). (App. 56a.) The “savings clause” merely reflects that federal savings institutions are not immune from the basic infrastructure of generally applicable laws, such as state uniform commercial codes and tort laws, that underlie commercial transactions. See 61 Fed. Reg. 50951, 50966. It obviously does not provide a basis for interpreting a choice- of-law provision to incorporate concededly preempted state laws that directly and substantially affect lending operations. See id. Not only does Fidelity preclude such “contract interpretation” as a general matter, but OTS, as noted, has * Nor can the effect of the decision be minimized simply because the Court of Appeals did not finally decide the contract interpretation question but rather remanded the case to the trial court to determine whether the Cardholder Agreement obligated Chevy Chase to follow the notice provisions of Subtitle 9. (App. 42a.) The mischief results from the Court of Appeals’ holding that a choice-of-law provision can be interpreted to nullify preemptive federal law. Once that proposition is accepted, state courts can ignore the Supremacy Clause and apply state law contract principles to convert preempted state ‘aw into private contractual obligations. : 21 expressly confirmed that its regulations do preempt any such application of choice-of-law provisions to revive preempted “consumer protection” statutes. Any potential ambiguity in this regard was eliminated by what OTS stated in promulgating this provision: OTS wishes to make clear that the purpose of paragraph (c) is to preserve the basic infrastructure of basic state laws that undergird commercial transactions, not to open the door to state regulation of lending by federal savings associations. ... For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption. 61 Fed. Reg. 50951, 50966-67 (emphases added). Contrary to that admonition, the court below held that, under 12 C.F.R. 560.2(c), a state regulation that directly affects lending operations can be imposed on a federal Savings association through a contractual choice-of-law provision. Because the court determined that a reference to a state’s laws in a choice-of-law provision should be analyzed under state contract law, pursuant to the exception in 12 C.F.R. § 560.2(c), rather than analyzing whether the particular state law allegedly being “chosen” is preempted by OTS under 12 C.F.R § 560.2(a) and (b), the court widened the exception to swallow the rule. The whole purpose of contractual choice-of-law provisions is to designate which state law to apply to a given contract (to the extent not preempted by federal law). See Roadway Package Sys., 257 F.3d at 293-94; Fantastic Fakes, 661 F.2d at 483. Therefore, the lower court’s misreading of the OTS regulations serves as precedent for other state courts hostile to preemptive federal regulation to eviscerate the OTS’s uniform national regulatory regime. Federal savings institutions would once again be subject to “undue regulatory duplication and burden.” 12 C.F.R. § 560.2(a). 22 This is not merely a hypothetical concern. The federal Office of the Comptroller of the Currency (“OCC”) has recently proposed regulations for national banks that would preempt state law in a manner similar to the OTS regulations for federal savings institutions. See Bank Activities & Operations, Real Estate Lending & Appraisals, 68 Fed. Reg. 46119 (Aug. 5, 2003). In response, the Attorneys General for all fifty states, as well as the Virgin Islands and the District of | Columbia, have submitted comments strenuously opposing the adoption of such regulations and insisting that national banks should be subject to the states’ consumer protection laws. (App. 109a-141a.) The decision below provides a powerful weapon to the states’ Attorneys General and courts to overcome any attempt by OCC, as well as OTS, to implement and maintain a uniform national set of regulations that free federal lenders from duplicative and conflicting state law requirements. The potential ramifications of the Maryland decision go well beyond the field of lending regulation. The extent to which ERISA preempts state regulation of HMO’s and medical insurance decisions is a subject of continuing controversy. See, e.g., Difelice v. Aetna U.S. Healthcare, 346 F.3d 442 (3d Cir. 2003); Arana v. Ochsner Health Plan, 338 F.3d 433 (Sth Cir. 2003); Singh v. Prudential Health Care Plan, Inc., 335 F.3d 278 (4th Cir.), cert. denied, 03-478, 2003 U.S. LEXIS 9007 (2003). Because contracts in this area also contain choice-of-law provisions, the decision below will be used to circumvent ERISA, even on matters in which it is intended to compietely preempt state laws. More generally, since states understandably seek the broadest scope for their regulatory requirements, the decision provides a clear roadmap for evading the federal government’s occupation of any field to maintain state regulatory control of any parties that have contracts with choice-of-law provisions. To ensure that this does not occur and to maintain the integrity of OTS’s uniform national regulatory regime, this | a — eo ee ee a _ — eee ee hep ee eg ee eee eo er SY BR oR er 2 ge i 23 Court should grant review of the Maryland Court of Appeals’ decision. CONCLUSION The petition for a writ of certiorari should be granted. ~ Respectfully submitted, MICHAEL A. CARVIN Counsel of Record JONES DAY 51 Louisiana Avenue, N.W. Washington, D.C. 20001 (202) 879-3939 DAVID J. CYNAMON GERARD M. BABENDREIER ERICA S. SIMPSON SHAW PITTMAN LLP 2300 N Street, N.W. Washington, D.C. 20037 - (202) 663-8000 Counsel for Petitioners December 22, 2003 SATE paencans ore a SELL OW OE PON IS Ther Ie : wera. ‘ ‘ % aE RL DW PT MS The Ie Pe PR a ag ae ee IPT TERE EES SLE Te eens Gee aoe, See Eee ee ene a NT a ic aL SMP AT d ME ONAN ADSI WD APPENDICES la APPENDIX A 832 A.2d 812 Court of Appeals of Maryland. Dale WELLS, et al. v. CHEVY CHASE BANK, FS.B., et al. No. 41 Sept. Term 2002. Sept. 23, 2003. F. Paul Bland, Jr. (Leslie Bruekner of Trial Lawyers for Public Justice of Washington, DC,; John T. Ward, Robert B. Kershaw of Ward Kershaw, P.A. of Baltimore; Michael P. Malakoff of Malakoff, Doyle & Finberg, PC. of Pittsburgh, PA), on brief, for appellants. David J. Cynamon (Erica S. Simpson of Shaw Pittman LLP, on brief), Washington, DC, for appellees. Argued before BELL, C.J., ELDRIDGE, RAKER, WILNER, CATHELL, HARRELL and BATTAGLIA, JJ. BELL, Chief Judge. In this case, we are asked to resolve whether a credit- card agreement (the “Cardholder Agreement”), between Dale Wells, Sharon Goldenberg and John Dovel, the appellants, and Chevy Chase Bank, FS.B. and U.S.A. Bank, N.A., the appellees, contractually bound the appel- lees to comply with provisions of Subtitle 9, which address the form of the notice required when a Cardholder Agree- ment is amended, where the Cardholder Agreement in the section captioned “Governing Law,” references Subtitle 9 of the Commercial Law Article, Md.Code (1975, 2000 Repl.Vol.), §§ 12-901 -— 12-924 of the Commercial Law oacabeesaeaiel 2a Article (“Subtitle 9”) and “applicable federal law.” Al- though the parties agree that State laws purporting to regulate the appellees’ lending activities have been pre- empted by § 5(a) of the Homeowners Loan Act (“HOLA”) 12 U.S.C. 1464(a) and its implementing regulations, see 12 C.F.R. pt. 560, the appellants characterize the reference to Subtitle 9 in the Cardholder Agreement as a provision in a contract, which, notwithstanding federal preemption, defines a particular aspect of the relationship between the parties, the manner in which notice is to be given when the Cardholder Agreement is amended. Consequently, rather than because it was a failure to comply with state law, the appellants seek to recover damages from the appellees for breach of their contract with the appellants to comply with Subtitle 9 when amending the Cardholder Agreement. The Circuit Court for Baltimore City observed that it “seems both implausible and inconsistent with federal preemption to claim that a state regulatory scheme was agreed to between [the] parties by a mere reference to Subtitle 9” and, thus, rejected the appellants’ argument. We do not agree. Accordingly, we shall reverse and remand the case to the Circuit Court for further proceedings. 8 SDS UNRRT ET OREN I. This is not the first occasion on which this case, the parties to it and the issues presented by it, have been before this Court. Wells v. Chevy Chase Bank, F:S.B., et al., 363 Md. 232, 768 A.2d 620 (2001) (“Wells I”) was an appeal taken from an order compelling arbitration. Preparatory to addressing the substantive issue that case presented, whether the appellants agreed to arbitrate, we summa- rized the factual and procedural history of the case: —— eee 3a “Plaintiffs’ first amended complaint alleges that the Defendants, in a number of aspects, breached the open end credit agreement (the Cardholder Agreement) in effect between Plaintiffs, as card- holders of credit cards issued by Chevy Chase, and Chevy Chase, as card-issuing credit grantor. “Prior to January 16, 1996, Chevy Chase had maintained its home office in Maryland.’ The Cardholder Agreement provided for an annual fee, a minimum late charge fee of fifteen dollars, described the method of computing the finance charge, and stated that the ‘ANNUAL PER- CENTAGE RATE will never exceed 24%’ With respect to amendments the Cardholder Agree- ment read: ‘We may amend the terms of this Agreement in accordance with applicable law at any time. Also we may at any time add new credit services, dis- continue any credit services, or replace your card with another card.’ “The Cardholder Agreement also contained a ‘Governing Law’ provision reading: ‘This Agreement is made in Maryland. It is gov- erned by Subtitle 9 [‘Credit Grantor Revolving Credit Provisions’] of Title 12 [‘Credit Regula- tions’] of the Commercial Law Article of the Maryland Annotated Code and applicable federal laws.’ ' Regulations of the Office of Thrift Supervision, United States Department of the Treasury, state that “{a]ll operations of a Federal Savings association shall be subject to direction from the home office.” 12 C.F.R. § 545.91. Paper ame eae eee Here ese see ees Caper ee ea 4a “There was no mediation or arbitration provision in the Cardholder Agreement. “On or about January 16, 1996, Chevy Chase moved its home office to Virginia. With the peri- odic statements mailed in January and February of 1996 to its cardholders, Chevy Chase included a notice of change of terms of the Cardholder Agreement. The notice of change took the form of a restatement and revision of the Cardholder Agreement, with the new or revised terms itali- cized and, with respect to a waiver of jury trial provision, both italics and all uppercase print was used. Solely for purposes of this appeal, and without indicating any opinion on whether the Cardholder Agreement was effectively amended or whether the amendments are substantively valid, we shall call the product of the January and February mailings the ‘Amended Agree- ment.’ The Amended Agreement provided that it was made in Virginia and was ‘subject to and governed by Virginia law and applicable federal law and regulations.’ The Amended Agreement further recited that t]he parties agree that by engaging in activities with or involving each other, they are participating in transactions in- volving interstate commerce.’ “Also contained in the Amended Agreement was an alternative dispute resolution section which in relevant part reads: ‘Mediation and Arbitration — Any controversy or claim (“Claim”) between or among you and us or our agents, employees and affiliates, including but not limited to those arising out of or relating to this Agreement or any related agreements, in- cluding without limitation any Claim based on or arising from an alleged tort, shall, at the request 5a and expense of the claiming party, be submitted to mediation, using the rules of the American Ar- bitration Association (“AAA”).’ ‘If mediation fails to resolve the Claim within 30 days from the date of engagement, then the Claim shall be determined by binding arbitra- tion. (Mediation or Arbitration, as appropriate, are sometimes referred to below as the ‘Proceed- ing’.) Arbitration shall be conducted in accor- dance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Agreement, and under the rules of the AAA. Either you or we may, by summary proceedings (e.g., a plea in abatement or motion to stay further proceedings), bring an action in any court having jurisdiction for the sole purpose of compelling compliance with these mediation and arbitration provisions.’ “On or about September 30, 1998, First U.S.A.” purchased the credit card portfolio of Chevy Chase. “Plaintiffs instituted the ... action [in Wells I] in January 1999. They allege that the defendants breached the Cardholder Agreement by charging interest in excess of twenty-four percent, by in- creasing the interest on past balances, by failing to provide legally required notice of the amend- ments, by changing the method of calculating the finance charge without proper notice, and by in- creasing the late fees and over-limit fees without proper notice. Plaintiffs also allege violation of the Maryland Consumer Protection Act, Maryland * One of the appellee’s in the case sub judice 5 aici carr e 6a Code (2000 Repl.Vol.), §§ 13-101(d) and 13-303(3) of the Commercial Law Article (CL).” Wells I, 363 Md. at 235-37, 768 A.2d at 621-22 (foot- note omitted). This history applies as well to the case sub Judice. _ The Court identified the principal theory of the appellants’ case as being that the Cardholder Agreement had not been effectively amended and elucidated the supporting rationale underlying it: “Plaintiffs principally rely on CL § 12-912 that addresses amendment of the agreement govern- ing a revolving credit plan. In broad strokes, that section requires, ‘at least 25 days before the ef- | fective date of the amendment,’ a clear and con- spicuous written notice, ‘if the amendment has the effect of increasing the interest, finance charges, or other fees and charges to be paid by the borrower ... or altering the manner of their computation.’ § 12-912(b)(1). The notice must in- clude ‘[a] clear statement comparing the original terms and the terms under the amended agree- ment.’ § 12-912(b)(1)(i). The initial notice is also to include ‘a statement that a second notice will be sent in the borrower’s next periodic state- ment.’ § 12-912(c)(7). Both notices are to be in ten point type. Id. The notice is to advise of the card- holder’s optional right to refuse the amendment - and to describe the manner of refusing. § 12- 912(c)(7)(ii). Where, as here, the plan charges an annual fee, rejection of the amendment entitles the cardholder to ‘use the account pursuant to its original, unamended terms, for ... the duration of the time for which a fee was paid for use of the plan.’ § 12-912(c)(5)(i)1. 7a “In addition, § 12-912(e) provides: ‘If the terms of the agreement governing the plan, as originally drawn or amended[,] provide, any amendment may, on or after the date on which it becomes effective as to a particular bor- rower, apply to all then outstanding unpaid in- debtedness in the borrower’s account under the plan, including any indebtedness which shall have arisen out of purchases made or loans ob- tained prior to the effective date of the amend- ment.’” Wells I, 363 Md. at 237-38, 768 A.2d at 622-23. We noted, that in addition to moving to compel arbi- tration, the appellees also argued in the trial court that § 12-912, on which the appellants principally relied, was preempted by 12 C.F.R. § 560.2(a), a regulation of the Office of Thrift Supervision (OTS) that undertakes to “occupyl ] the entire field of lending regulation for federal savings associations.” Jd. As indicated, the motion to compel arbitration prevailed in the trial court, prompting the appellants’ appeal. In response, the appellees moved to dismiss the appeal, arguing that the Maryland law permitting an appeal from an order compelling arbitration was, itself, preempted by 9 U.S.C. § 16(b)(2) of the Federal Arbitration Act. This preliminary procedural issue, see Wells I, 363 Md. at 235, 768 A.2d at 621, was premised on the fact that the arbitration order “‘was entered in the context of a larger breach of contract dispute, the arbitration issue was ‘embedded’ in appellants’ contract and state statutory claims, and therefore the Arbitration Order is not an appealable ‘final decision’ for purposes of FAA § 16.’” Wells I, 363 Md. at 242, 768 A.2d at 625, quoting the appellees’ 8a brief, which cited In re Pisgah Contractors, 117 F.3d 133, 136 (4th Cir.1997).° The Court resolved both the preliminary procedural issue and the substantive issue in favor of the appellants and, thus, reversed the judgment of the Circuit Court. As to whether the parties agreed to arbitrate, it reasoned: “The arbitration clause in the Amended Agree- ment in this case is susceptible of but one rea- sonable interpretation. The promise is to mediate and, if necessary, arbitrate ‘at the request and expense of the claiming party.’ The Plaintiffs are the claiming parties, not the Defendants. This conclusion is neither altered, nor the language made ambiguous, by the provision in the next fol- lowing paragraph reading: ‘Either you or we may, by summary proceedings (e.g., a plea in abate- ment or motion to stay further proceedings), bring an action in any court having jurisdiction * Pursuant to 9 U.S.C. 16(a)(3), “an appeal may be taken from... a final decision with respect to an arbitration that is subject to this title.” Despite this apparently clear direction, the appellees relied on a definition of “final decision” drawn by some federal cases, “one that resolves an ‘independent’ action, in which the ‘sole issue before the district court is the arbitrability of the [underlying] dispute.’” Wells v. Chevy Chase Bank, F:S.B., et al., 363 Md. 232, 241-42, 768 A.2d 620, 625 (2001), quoting the appellees’s brief, which, in turn, quoted In re Pisgah Contractors, 117 F.3d 133, 136 (4th Cir.1997) (quoting Hum- phrey v. Prudential Sec., Inc., 4 F.3d 313, 317 (4th Cir.1993)). Thus, the appellees argue, citing Pisgah and American Cas. Co. v. L-d, Inc., 35 F.3d 133, 136 (4th Cir.1994), “Where arbitration is only ‘one issue among others for the district court to resolve,’ the arbitration issue is considered to be ‘embedded,’ and an order compelling arbitration in such a case is an unappealable interlocutory order within the meaning of FAA § 16(b), even if the order compels arbitration of all substantive claims involved in the dispute.” 9a for the sole purpose of compelling compliance with these mediation and arbitration provisions.’ Ordering the claiming party to mediate and, ‘if mediation fails’ to arbitrate, when the claiming party has not requested mediation does not com- pel compliance with the mediation and arbitra- . tion clause provisions; rather, an order so compelling exceeds those provisions.” Wells I, 363 Md. at 251-52, 768 A.2d at 630.‘ Therefore, the issue we resolved in Wells I, related solely to whether “the appellants ... agreed to arbitrate,” id. at 235, 768 A.2d at 621. This was an issue related to, but different from the issue the parties principally argued which was whether the appellees’ attempt to amend the Cardholder Agreement was effective. Although, the gravamen of the complaint in Wells I, as it is in the case * Neither party argued the plain meaning of the contract. We noted, however, our discretion to consider the argument, even if a new issue, especially when to do so avoids the need to decide a constitutional issue, in this case, the preemption of § 12-912. Wells I, 363 Md. at 252, 768 A.2d at 631, citing Baltimore Sun Co. v. Mayor & City Council of Baltimore, 359 Md. 653, 659, 755 A.2d 1130, 1133-34 (2000); Profes- sional Staff Nurses Ass’n v. Dimensions Health Corp., 346 Md. 132, 138- 40, 695 A.2d 158, 160-61 (1997). * As we explained, the appellees defended against the complaint in Wells I “by moving, pursuant to the [Federal Arbitration Act], to compel mediation/arbitration in accordance with the Amended Agreement.” Id. at 238, 768 A.2d at 623. The trial court granted the appellees’ Motion to Compel Arbitration, whereupon, the appellants noted an appeal from the trial court’s order compelling arbitration. Responding to the appeal, the appellees filed a Motion to Dismiss the Appeal arguing “[bJecause the Arbitration Order here was entered in the context of a larger breach of contract dispute, the arbitration issue was ‘embedded’ in appellants’ contract and state statutory claim, and therefore the Arbitration Order is not an appealable ‘final order’ for purposes of the FAA § 16.” 10a \ sub judice, centered on that latter question, this Court did not address it. Indeed, we expressly did not venture an opinion as to “whether the Cardholder Agreement was effectively amended or whether the amendments are substantively valid.” Jd. at 236, 768 A.2d at 622. On remand, the question of whether arbitration was a requirement having already been decided was squarely before the court for resolution. As they had done in the earlier action, the appellants argued that the Cardholder Agreement had not been amended effectively and that the appellees, therefore were in breach of the contractual terms of the unamended Cardholder Agreement. Once again, the appellants relied on the Governing Law provi- sion of the Agreement, emphasizing that provision’s reference to “Subtitle 9 of Title 12 of the Commercial Law Article of the Maryland Annotated Code.” The Circuit Court for Baltimore City, agreeing that appellants’ claims are preempted by federal law, granted the appellees’ motion to dismiss. It opined: “(I]t is both ingenuous, and a trifle disingenuous to, to admit that the specific state imposed notice re- strictions are preempted by federal law, while at the same time contend that the general reference to Maryland law, as the governing law, specifically reincorporates into the Cardholder Agreement these provisions as private agreements. It seems both implausible and inconsistent with federal pre- emption to claim that a state regulatory scheme was agreed to between the parties by the mere ref- erence to Subtitle 9. This is a great deal beyond the scope of preserving the traditional infrastructure of state laws that undergird commercial transactions. * * * lla “This court is convinced that to permit [appel- lants] to thwart the admitted preemption of the relevant law solely because of a general reference to Maryland law, flies in the face of common sense and contract interpretation. When the par- ties mentioned Subtitle 9 [of Title 12] of the Maryland Code and “applicable federal law” as governing law, they did not incorporate the pro- tections of a Maryland regulatory scheme into the agreement. Had they meant to do that, they could have done so in clear-cut terms. As the Chaires [v. Chevy Chase Bank, 131 Md.App. 64, 748 A.2d 34 (2000), cert. denied, 359 Md. 334, 753 A.2d 1031 (2000),] case makes clear, they could not waive federal preemption and could only have intended that state law apply as ‘governing law’ should ‘federal law’ not apply. There is no basis for claiming that they entered into a pri- vate agreement incorporating a complex and de- tailed state regulatory scheme.” The appellants noted an appeal to the Court of Special Appeals and this Court issued, on its own initiative, a Writ of Certiorari, Wells v. Chevy Chase, 369 Md. 570, 801 A.2d 1031 (2002), prior to any proceedings in the intermediate appellate court. Although, the appellants agree that Subtitle 9 is preempted by HOLA and its implementing regulations, they nevertheless insist that the appellees’ agreement to comply with that subtitle’s relevant notice provisions and protections may still be enforced. The appellants argue, in other words, that while Subtitle 9 may not be invoked to evaluate the adequacy of a credit agreement where there is no agreement by the parties as to its applicability, when there is such an agreement, federal preemption cannot negate the appellees’ promise. They rely on American | | J yl a ii 12a Airlines v. Wolens, 513 U.S. 219, 228-29, 115 S.Ct. 817, 823-824, 130 L.Ed.2d 715, 725-726 (1995), which they submit stands for the proposition that parties to a com- mercial transaction may elect, as a self-imposed, voluntary undertaking, to follow otherwise preempted state law and thus preserve state law claims for breach of contract. The appellants also find support for their position in 12 C.F.R. § 560.2. Section (c) of that regulation exempts, inter alia, contract and commercial laws “to the extent that they only incidentally affect the lending operations of Federal savings associations or are otherwise consistent with the purposes of paragraph (a) of this section.” Consequently, they argue that the claims they advance have been ex- pressly excluded from the preemptive scope of HOLA and the OTS regulations. The appellees rejoin that the appellants have misin- terpreted the governing law provision of the Cardholder Agreement. Specifically, they characterize the appellants’ argument that the parties agreed to a notice regime prescribed by an otherwise preempted statute as an “attempt to impose Subtitle 9’s preempted regulatory requirements on Chevy Chase through the back door of the choice-of-law provision in the Cardholder Agreement.” The appellants’ contract claim would not exist, they argue, if the requirements of Subtitle 9 are not imposed on Chevy Chase. Furthermore, they submit that a mere reference in the ‘governing law” provision of the Cardholder Agreement is insufficient to transform a preempted state law into a private contract. With respect to the exception to preemp- tion recognized in 12 C.F.R. § 560.2(c), they point out that, in 61 Fed.Reg. 50951, 50966 (1966), the OTS noted the narrowness of the exception: 13a “OTS wishes to make clear that the purpose of paragraph (c) is to preserve the traditional infra- structure of basic state laws that undergird commercial transactions, not to open the door to state regulation of lending by federal savings as- sociations. ... For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption.” The appellees rely on Chaires v. Chevy Chase Bank, 131 Md.App. 64, 748 A.2d 34, cert. denied, 359 Md. 334, 753 A.2d 1031 (2000), which they contend rejected the precise argument, on virtually identical facts, being made by the appellants. It also was correctly decided, they maintain. The appellants’ reliance on the Supreme Court’s holding in Wolens is rejected by the appellees as being “unsupported by an analysis of the holding in that case.” Contending that, if relevant, it supports their position, the appellees argue (citing Wolens, 513 U.S. at 233, 115 S.Ct. at 826-827, 130 L.Ed.2d at 728-729) “[t]he Supreme Court held in Wolens that claims based on state laws or policies external to a contract, as opposed to the express terms of the contract, are preempted by governing federal law. ... [The appellants’] claims in this case are premised entirely on the terms of Subtitle 9, all of which are external to the Cardholder Agreement itself. Thus, those claims are preempted.” IT. The federal preemption doctrine has its origin in the Supremacy Clause of the United States Constitution. See, U.S. Const., Art. VI, cl. 2. That Clause provides: l4a “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding.” The constitutional mandate imposed on this Court by the Supremacy Clause requires this Court to declare state law unenforceable to the extent that federal law expressly so provides or the circumstances indicate that federal law supercedes state law. The rules governing preemption are well settled.’ Preemption may occur in one of three ways. Where Con- gress has expressly stated its intent to preempt state law, federal law prevails. Law v. Int'l Union of Operating Engineers Local No. 37, AFL-CIO, 373 Md. 459, 467, 818 A.2d 1136, 1141 (2003) (citing Harrison v. Schwartz, 319 Md. 360, 364, 572 A.2d 528, 530, cert. denied, 498 U.S. 851, 111 S.Ct. 1438, 112 L.Ed.2d 110 (1990)); see also, Becker v. Litty, 318 Md. 76, 86, 566 A.2d 1101, 1106 (1989). Preemption of state laws also may still occur, even where Congress has not expressly stated its intention in that regard, if there is evidence of Congress’ intent to “occupy a * While the law may be settled, the Supreme Court recently remarked: “This relatively clear and simple mandate has generated considerable discussion in cases where we have had to dis- cern whether Congress has preempted state action in a par- ticular area.” Lorillard Tobacco Co., v. Reilly, 533 U.S. 525, 540, 121 S.Ct. 2404, 2414, 150 L.Ed.2d 532, 550 (2001). de ented tt dewllten bee wi 4 oe i 15a given field,” and the state law falls within that field. Harrison, 319 Md. at 364, 572 A.2d at 530. Finally, state law is preempted when “compliance with both federal and state law is a physical impossibility.” Law, 373 Md. at 466- 67, 818 A.2d at 1141 (2003) (citing Sanders v. State, 57 Md.App. 156, 167, 469 A.2d 476, 482, cert. denied, 299 Md. 656, 474 A.2d 1345 (1984). Determining whether a state law has been preempted by federal law is ordinarily a question of “congressional intent.” Fidelity Federal Savings and Loan Assoc., et. al., v. de la Cuesta, et al., 458 U.S. 141, 152, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664, 674 (1982); see also, Barnett Bank N.A., v. Nelson, 517 U.S. 25, 30, 116 S.Ct. 1103, 1107, 134 L.Ed.2d 237, 243 (1996) (“[The preemption] question is basically one of congressional intent”); FMC Corp., v. Holliday, 498 U.S. 52, 56, 111 S.Ct. 403, 407, 112 L.Ed.2d 356, 363 (1990) (“in determining whether federal law preempts a state statute, we look to congressional in- tent.”); Malone v. White Motor Corp., 435 U.S. 497, 504, 98 S.Ct. 1185, 1190, 55 L.Ed.2d 443, 450 (1978) (“The purpose of Congress is the ultimate touchstone” of preemption analysis.) (quoting Retail Clerks Int'l Assoc. v. Schermer- horn, 375 U.S. 96, 103, 84 S.Ct. 219, 223, 11 L.Ed.2d 179, 184 (1963)). Moreover, “[flederal regulations have no less pre-emptive effect than federal statutes. Where Congress has directed an administrator to exercise his discre- tion, his judgments are subject to judicial review only to determine whether he has exceeded his statutory authority or acted arbitrarily. United States v. Shimer, 367 U.S. 374, 381-382, 81 S.Ct. 16a 1554, 6 L.Ed.2d 908 (1962). When the adminis- trator promulgates regulations intended to pre- empt state law, the court’s inquiry is similarly limited: ‘If [his] choice represents a reasonable accommo- dation of conflicting policies that were committed to the agency’s care by the statute, we should not disturb it unless it appears from the statute or its legislative history that the accommodation is not one that Congress would have sanctioned. Id. at 383, 81 S.Ct. 1554.’” de la Cuesta, supra, 458 U.S. at 153-154, 102 S.Ct. at 3022-3023, 73 L.Ed.2d at 675. When reviewing the pre- emptive effect of federal reguiations on state laws, a court must not confine its inquiry to whether Congress intended to preempt state law. Rather, the appropriate inquiry, the Court instructs, considers whether the administrative agency intended to preempt state law and whether the action taken was within the delegation of authority by Congress. Id., at 154, 102 S.Ct. at 3023, 73 L.Ed.2d at 676. In this case, we are concerned with Congressional intent in enacting the HOLA and the intent of the OTS, the federal agency charged with administering the HOLA, when it promulgated the regulations to implement that act. The HOLA was enacted by Congress largely in re- sponse to the effect the Great Depression had on the national housing market. See generally, Glendale Federal Savings & Loan Assoc. v. Fox, 459 F.Supp. 903, 908 (C.D.Cal.1978). Its purposes were: ““To provide emergency relief with respect to home mortgage indebtedness, to refinance home mortgages, to extend relief to the owners of homes occupied by them and who are unable to Ny Sle dee ale «Cah piace indele 17a amortize their debt elsewhere, to amend the Federal Home Loan bank Act, to increase the market for obligations of the United States and for other purposes.’ Preamble, 48 Stat. 128 (1933).” A significant component of HOLA was the creation of a “system of federal savings and loans associations.” Id. at 909. Rather than subject the operation of federal savings and loans associations to state regulation, much of which was “ill-advised” and the object of the remedial legislation, Congress created the Home Owners’ Loan Corporation, the predecessor of the Office of Thrift Supervision, id. at 908, and “gave the Bank Board plenary authority over the creation and operation of federal associations.” Id. at 909. See § 5(a), which provides: “In order to provide local mutual thrift institu- tions in which people may invest their funds and in order to provide for the financing of homes, the Board is authorized, under such rules and regula- tions as it may prescribe, to provide for the organi- zation, incorporation, examination, operation, and regulation of associations to be known ‘Federal Savings and Loan Associations”, and to issue charters therefor, giving primary consideration to the best practices of local mutual thrifts and home-financing institutions in the United States. 12 U.S.C. § 1464(a).” Thus, “Federal savings and loan associations were not to be operated and regulated by what a particu- lar state conceived to be the ‘best practices.’ Rather, the Bank Board was delegated by Con- gress the authority to select from the prevailing practices in all states what it deemed the best j 18a practices and to prescribe a nationwide system of operation, supervision, and regulation which would apply to all federal associations.” Glendale Federal, 459 F.Supp. at 909. Comprehensive rules and regulations have been adopted by OTS and its predecessor agency concerning the “powers and operations of every Federal savings and loan association from its cradle to its corporate grave.” de la Cuesta, supra, 458 U.S. at 145, 102 S.Ct. at 3018, 73 L.Ed.2d at 669, citing California v. Coast Fed. Sav. & Loan Ass’n, 98 F.Supp. 311, 316 (S.D.Cal.1951). Critically important to the analysis that governs the dispute sub judice is, as we have seen, 12 C.F.R. § 560.2 (2002),’ promulgated by the OTS. " As relevant, 12 C.F.R. § 560.2 (2002) provides: “(a) Occupation of field. Pursuant to section 4(a) and 5(a) of the HOLA, 12 U.S.C. 1463(a), 1464(a), OTS is authorized to promulgate regulations that preempt state laws affecting the operations of federal savings associations when deemed appropriate to facilitate the safe and sound operation of fed- eral savings associations to conduct their operations in ac- cordance with the best practices of thrift institutions in the United States, or to further other purposes of the HOLA. To enhance safety and soundness and to enable federal savings associations to conduct their operations in accordance best practices (by efficiently delivering low-cost credit to the pub- lic free from undue regulatory duplication and burden), OTS hereby occupies the entire field of lending regulations for federal savings associations. OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, a federal savings association may extend credit as authorized under federal law, including this part, without regard to state laws purporting to regulate or (Continued on following page) 19a Section (a) of the regulation makes clear that OTS intended to occupy the “entire field of lending regulations for federal savings associations” and that the regulations it promulgated would preempt state laws, defined as “any state statute, regulation, ruling, order or judicial decision,” affecting operation of federal savings associations “when deemed appropriate to facilitate the safe and sound operation of federal savings associations to conduct their operations in accordance with the best practices of thrift institutions in the United States, or to further other otherwise affect their credit activities, except to the extent provided in paragraph (c) of this section or § 560.110 of this part. For purposes of this section, ‘state law includes any state statute, regulation, ruling, order or judicial decision. “(b) Illustrative examples. Except as provided in § 560.110 of this part, the types of state laws preempted by paragraph (a) of this section include, without limitation, state laws purporting to impose requirements regarding: “(4) The terms of credit, including amortization of loans and the deferral and capitalization of interest and adjust- ments to the interest rate, balance, payments due, or terms of maturity of the loan, including the circumstances under which a loan may be called due and payable upon the pas- sage of time or a specified event external to the loan; “9) Disclosure and advertising, including laws requiring specific statements, information, or other content to be in- cluded in credit applications forms, credit solicitations, bill- ing statements, credit contracts, or other credit-related documents and laws requiring creditors to supply copies of credit reports to borrowers or applicants; “(c) State laws that are not preempted. State laws of the following types are not preempted to the extent that they only incidentally affect the lending operations of Federal savings associations or are otherwise consistent with the purposes of paragraph (a) of this section: “(1) Contract and commercial law.” 20a purposes of the HOLA.” The kinds of laws preempted are illustrated in section (b), including those purporting to impose requirements regarding the terms of credit and disclosure and advertising. See 12 C.F.R § 560.2(b)(4) and 12 C.F.R. § 560.2(b)(9). Section (c) exempts from preemp- tion those state laws that only incidentally affect lending operations or that are consistent with section (a)’s purpose of “giv[ing] federal savings associations maximum flexibil- ity to exercise their lending powers in accordance with a uniform federal scheme of regulation.” Subtitle 9, the Maryland statute at issue in the case, contains the “Credit Grantor Revolving Credit Provisions.” The term “Revolving credit plan” is defined to “mean a plan that contemplates the extension of credit under an account governed by an agree- ment between the credit grantor and a borrower under which: “(1) the credit grantor permits the borrower and, if the agreement governing the plan per- mits, persons acting on behalf of or with the au- thorization from the borrower to make purchases or obtain loans from time to time; “(2) The amounts of purchases and loans are charged to the borrower’s account; “(3) The borrower is required to pay the credit grantor the amounts of all purchases and loans charged to the borrower’s account under [the] plan but has the privilege of paying amounts due from time to time as agreed; and “(4) Interest or finance charges may be charged and collected by the credit grantor from time to time on the amounts due under the plan.” 2la Md.Code (1975, 2000 Repl.Vol.), § 12-901(e) of the Commercial Law Article. Additional statutory provisions in Subtitle 9 provide explicit directives for the regulation of revolving credit plans in the State of Maryland, includ- ing, without limitation, variation in interest rates, the amount of fees and charges that may be imposed, and procedures for amending revolving credit plans. Because they impact how credit grantors may operate and conduct their lending activities, which is inconsistent with OTS’s expressed intention to “occupy the entire field of lending regulation for federal savings-associations,” any attempt to enforce these provisions as a matter of State law and as additional requirements of a credit agreement with a federal savings association must fail. The appellees appro- priately conceded that Subtitle 9 qua Subtitle 9 is pre- empted.° Notwithstanding the concession, the appellants pursue the appellees on a breach of contract theory. The * Under the guidelines for preemption analysis set forth by the OTS in 1998, a court’s “first step will be to determine whether the type of law in question is listed in paragraph (b) [of 12 C.F.R. 560.2).” If so, the analysis will end there; the law is preempted.” (61 Fed.Reg. 50951, 50966 (Sept. 30, 1996)). On the other hand: “If the law is not covered by paragraph (b), the next ques- tion is whether the law affects lending: If it does, then, in accordance with paragraph (a), the presumption arises that the law is preempted. This presumption can be reversed only if the law can clearly be shown to fit within the con- fines of paragraph (c). For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption.” Id. at 50996-50997. Looking to 12 C.F.R. 560.2(b)(4) and (b\(9), it is manifestly obvious, as the trial court concluded, and all the parties agree, that Subtitle 9 has been preempted. ae ER, 22a issue that must be resolved, therefore, is whether the cause of action, or at least, the basis for the claimed breach, is preempted. The cause of action is not preempted. The OTS regula- tions expressly exempt from preemption “contract and commercial law ... that... only incidentally affect[s] the lending operations of Federal savings associations or [is] otherwise consistent with” the purpose of the regulations. 12 C.F.R. § 560.2(c). That intention was confirmed in 61 Fed.Reg. at 50966: “OTS wants to make clear that it does not intend to preempt basic state laws such as state uniform commercial codes and state laws governing real property, contracts [or] torts... .” See also Derenco, Inc. v. Benjamin Franklin Federal Savings & Loan Ass’n, 281 Or. 533, 577 P.2d 477, 481-88, cert. denied, 439 U.S. 1051, 99 S.Ct. 733, 58 L.Ed.2d 712 (1978) (applying state common- law restitutionary principles to loan-related activities of federal lenders); Fenning v. Glenfed, Inc., 40 Cal.App.4th 1285, 1295-99 (1995), review denied, 1996 Cal. LEXIS 1870 (1996) (suit against a federai thrift for fraud and unfair business practices not preempted by HOLA nor its implementing regulations); People ex rel Sepulveda uv. Highland Federal Savings & Loan, 14 Cal.App.4th 1692, 1708, 19 Cal.Rptr.2d 555, cert. denied, sub nom. Highland Fed. Sav. & Loan Ass’n v. California, 510 U.S. 928, 114 S.Ct. 338, 126 L.Ed.2d 282 510 U.S. 928, (1993) (“we have found no provision of HOLA nor any particular regulation, and none have been cited to us, which expressly preempt the statutory action by the People for unfair business practices and the causes of action by the tenant plaintiffs for fraud, RICO violations, etc.”); Siegel v. American Savings & Loan Ass’n, 210 Cal.App.3d 953, 258 Cal.Rptr. 746, 748-53 (1989) (suit 23a based on a variety of state-law claims, including unfair competition, breach of contract, and breach of agency duty, permitted against federal lender); Konynenbelt v. Flagstar Bank, 242 Mich.App. 21, 617 N.W.2d 706, 712-14 (2000) (HOLA does not preempt common-law tort and contract claims); Flanagan v. Germania, F-A., 872 F.2d 231, 234 (8th Cir.1989) (claim for tortious interference with con- tract not preempted by HOLA); Tuxedo Beach Club Corp. v. City Federal Savings Bank, 749 F.Supp. 635, 648 (D.N.J.1990) (private right of action under state consumer protection law not preempted by HOLA);. Morse v. Mutual Federal Savings & Loan of Whitman, 536 F.Supp. 1271, 1280-81 (D.Mass.1982) (“[tJhe fact that federal statutes or regulations covering some aspects of a regulated area are, by necessity, complex and detailed, does not imply that Congress intended to occupy the entire field to the exclu- sion of state law”). Nor is a federal lenders’ contractual undertakings preempted. The OTS regulations indicate that OTS “occu- pies the entire field of lending regulations for federal savings associations.” In that regard, they provide that, consistent with OTS’s intent “to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation,” a federal savings association may extend credit as authorizea «sr federal law ... without regard to state laws purporting to regulate or otherwise affect their credit activities.” Thus, the regulations apply only to State law, which they define as including “any state statutory regulation, ruling order or judicial decision.” § 560.2(a). See 61 Fed.Reg. 50591 at 10 (“the terms of the... loan should be a matter of contract between the savings 24a association and the purchaser”). Wolens, 513 U.S. 219, 115 S.Ct. 817, 130 L.Ed.2d 715, is instructive on this point. In Wolens, the United States Supreme Court ad- dressed the preemptive effect of the Airline Deregulation Act of 1978(ADA), 49 U.S.C.App. § 1305,’ on state-imposed regulation of the airline industry. There, the plaintiffs, participants in American Airlines’ frequent flyer program, AAdvantage, sued the Airline, challenging the retroactive application to them of modifications the Airline made to the program in 1988. 513 U.S. at 224-25, 115 S.Ct. at 822, 130 L.Ed.2d at 723 (describing American Airline’s AAdvan- tage modifications which included the imposition of capacity controls and blackout dates). Acknowledging and conceding the right of the Airline to change the terms and conditions of the program, the plaintiffs there complained that the application of the program modifications retroac- tively devalued the credits they had already earned and, thus, violated the Illinois Consumer Fraud and Deceptive Business Practices Act and was a breach of the Airline’s * At issue in that case was the scope of § 1305(a)(1) of the Airline Deregulation Act, “specifically, its application to a state-court suit, brought by participants in an airline’s frequent flyer program, challeng- ing the airline’s retroactive changes in terms and conditions of the program.” American Airlines v. Wolens, 513 U.S. 219, 221-22, 115 S.Ct. 817, 820, 130 L.Ed.2d 715, 721 (1995). That section, a preemption provision, provides: “No State ... shall enact or enforce a law, rule, regulation, standard or other provision having the force and effect of law relating to rates, routes, or service of any carrier.” Jd. at 222, 115 S.Ct. at 821, 130 L.Ed.2d at 722. Similar to the intent of the HOLA and 12 C.F.R. § 560.2(a) (2002), to avoid “undue regulatory duplication and [state imposed regulatory] burden,” a key component of Congress’ mission in deregulating domestic air transport was “[t]o ensure that the States would not undo federal deregulation with regulation of their own.” Id. 25a contract with them. Jd. at 225, 115 S.Ct. at 822, 130 L.Ed.2d at 723. The Supreme Court of Illinois denied the plaintiffs the injunction they sought, holding that to issue one would be a regulation of the Airline’s current render- ing of service, but, opining that “only those State laws and regulatioiis that specifically relate to and have more than a tangen*ial connection with an airline’s rates, routes or services” are preempted, allowed their breach of contract and consumer actions to proceed. Jd at 225, 115 S.Ct. at 822, 1380 L.Ed.2d at 724. Having reconsidered that deci- sion in light of the intervening decision in Morales v. Trans World Airlines, Inc., 504 U.S. 374, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992), as instructed by the United States Supreme Court, the Illinois court reconfirmed its earlier decision validating the consumer and contract actions. The Supreme Court addressed the actions separately. It held that the consumer action was preempted. Wolens, 513 U.S. at 228, 115 S.Ct. at 824, 1380 L.Ed.2d at 725. Using the National Association of Attorneys General’s guidelines, invalidated in Morales, as a standard, the Court observed: ° Section 1305(a)(1) of the ADA was also at issue in Morales v. Trans World Airlines, Inc., 504 U.S. 374, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992). The Court, in that case, construed the phrase, “related to [airline] rates, routes, or services,” to mean “having a connection with, or reference to, airline ‘rates, routes, or services [.]’” id. at 384, 112 S.Ct. at 2037, 119 L.Ed.2d at 167. Consequently, the Court held that Travel Industry Enforcement Guidelines, composed by the National Association of Attorneys General (NAAG), purporting to govern, inter alia, the content and format of airline fare advertising was preempted by the ADA. Id. at 379, 112 S.Ct. at 2034-2035, 119 L.Ed.2d at 164-165. 26a “the Illinois Consumer Fraud Act serves as a means to guide and police the marketing prac- tices of the airlines; the Act does not simply give effect to bargains offered by the airlines and ac- cepted by airline customers. In light of the full text of the preemption clause, and of the ADA’s purpose to leave largely to the airlines them- selves, and not at all to States, the selection and design of marketing mechanisms appropriate to the furnishing of air transportation services, n4 we conclude that -§ 1305(a)(1) preempts plaintiffs’ claims under the Illinois Consumer Fraud Act.” Wolens, 513 at 228, 115 S.Ct. at 823-824, 130 L.Ed.2d at 725. It agreed with the Airline, “Congress could hardly have intended to allow the States to hobble [competition for airline passengers] through the application of restric- tive state laws.” Id. at 228, 115 S.Ct. at 824, 130 L.Ed.2d at 735-726. The Court reached the opposite result with respect to the contract action. It reasoned: “We do not read the ADA’s preemption clause, however, to shelter airlines from suits alleging no violation of state-imposed obligations, but seek- ing recovery solely for the airline’s alleged breach of its own, self-imposed undertakings. As persua- sively argued by the United States, terms and conditions airlines offer and passengers accept are privately ordered obligations “and thus do not amount to a State’s ‘enactment or enforce- ment [of] any law, rule, regulation, standard, or other provision having the force and effect of law’ within the meaning of [§] 1305(a)(1).” ... Cf. Cipollone v. Liggett Group, Inc., 505 U.S. 504, 526, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992) (plu- rality opinion) (“[A] common-law remedy for a 27a contractual commitment voluntarily undertaken should not be regarded as a ‘requirement .. . im- posed under State law’ within the meaning of [Federal Cigarette Labeling and Advertising Act] § 5(b).”). A remedy confined to a contract’s terms simply holds parties to their agreements — in this instance, to business judgments an airline made public about its rates and services.” Id. at 228-29, 115 S.Ct. at 824, 130 L.Ed.2d at 725-726. (Footnotes omitted). The Court rejected any suggestion that the preemption provision applied to private contracts. Noting the use of the word, “enforce,” and suggesting that preemption might be extended to “even state-court en- forcement of private contracts,” it concluded that “the word series ‘law, rule, regulation, standard, or other provision ... connotes official government-imposed poli- cies, not the terms of a private contract,” and that “ the ban on enacting or enforcing any law ‘relating to rates, routes, or services’ is most sensibly read, in light of the ADA’ overarching deregulatory purpose, to mean ‘states may not seek to impose their own public policies or theo- ries of competition or regulation on the operations of an air carrier.” Jd. at 229 n. 5, 115 S.Ct. at 824 n. 5, 180 L.Ed.2d at 726. The Court was not persuaded by the Airline’s argument that the word, “law” should be read as including “laws that govern the obligations imposed by contract.” Id. n. 6. Rejecting the Airline’s argument that the Department of Transportation is the only competent monitor of its undertakings, the Court reiterated the point that preemp- tion applied to official government-imposed policies, pointing out that 28a “The ADA’s preemption clause, § 1305(a)(1), read together with the FAA’s saving clause, stops States from imposing their own substantive standards with respect to rates, routes, or ser- vices, but not from affording relief to a party who claims and proves that an airline dishonored a term the airline itself stipulated. This distinction between what the State dictates and what the airline itself undertakes confines courts, in breach-of-contract actions, to the parties’ bar- gain, with no enlargement or enhancement based on state laws or policies external to the agree- ment.” | Id. at 232-33, 115 S.Ct. at 826, 130 L.Ed.2d at 728 (foot- note omitted). Finally, the Court considered the argument that the Court’s preemption position did not save the plaintiffs’ claims because those claims “inescapably depend on state policies that are independent of the parties’ intent,” Id. at 233-34, 115 S.Ct. at 826, 130 L.Ed.2d at 728- 729, and that to reach the merits of the claims, the state court must first invalidate or limit the airline’s express reservation to change the program rules contained in the program contracts. Significantly, it responded: “American’s argument is unpersuasive, for it as- sumes the answer to the very contract construc- tion issue on which plaintiffs’ claims turn: Did American, by contract, reserve the right to change the value of already accumulated mileage credits, or only to change the rules governing credits earned from and after the date of the change? See Brief for Respondents 5 (plaintiffs recognize that American ‘reserved the right to re- strict, suspend, or otherwise alter aspects of the Program prospectively,’ but maintain that Ameri- can ‘never reserved the right to retroactively diminish the value of the credits previously 29a minish the value of the credits previously earned by members’). That question of contract interpre- tation has not yet had a full airing, and we inti- mate no view on its resolution.” Id. at 234, 115 S.Ct. at 826, 130 L.Ed.2d at 729. For cases holding that undertakings voluntarily assumed and reflected in private contracts and agree- ments, see Volt Info. Scis. v. Bd. of Trs., 489 U.S. 468, 479, 109 S.Ct. 1248, 1255-56, 103 L.Ed.2d 488, 500 (1989); Ass’n of Int'l Auto Mfrs. v. Comm’r, Mass. Dep’t of Envtl. Prot., 208 F.3d 1, 7-8 (1st Cir.2000); ProCd, Inc. v. Zeiden- berg, 86 F.3d 1447, 1454-1455 (7th Cir.1996); Cent. States Health & Welfare Fund v. Pathology Labs., 71 F.3d 1251, 1254-1255 (7th Cir.1995); Martin v. Ford Motor Co., 914 F.Supp. 1449, 1454 (S.D.Tex.1996); Kawamata Farms, Inc. v. United Agric. Prods., 86 Hawai'i 214, 948 P.2d 1055, 1080 (Haw.1997); Wallace v. Parks Corp., 212 A.D.2d 132, 629 N.Y.S.2d 570, 574 (1995). Noting that the court stated that “the parties could not elect to have state law govern over federal law,” Chaires, 131 Md.App. at 79, 748 A.2d 34 (Footnote Omit- ted), which they interpret as a resolution of the question whether a contractual choice-of-law provision is preempted by federal regulations intended to occupy the field at issue, the appellees maintain, as we have seen, that Chaires is dispositive of the issue presented in this case. They assert further that it is consistent with all of the federal authori- ties on that point, citing Fidelity Federal Savings and Loan Assoc., et. al. v. de la Cuesta, et al., 458 U.S. 141, 152-153, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664, 674-675; Brown v. Investors Mortgage Co., 121 F.3d 472, 476 (9th Cir.1997); Atkinson v. Gen. Elec. Credit Corp., 866 F.2d 396, 398 (11th Cir.), cert. denied, 493 U.S. 815, 110 S.Ct. 30a 64, 107 L.Ed.2d 31 (1989); Fantastic Fakes, Inc. v. Pick- wick Int'l, Inc., 661 F.2d 479, 483 (5th Cir.1981); Roadway Package Sys., Inc. v. Kayser, 257 F.3d 287, 293-94 (8rd Cir.), cert. denied, 534 U.S. 1020, 122 S.Ct. 545, 151 L.Ed.2d 423 (2001); Jones v. U.S. Fid. & Guar. Co., No. 90- 5005, 1992 WL 202327, at 4, 1992 U.S. Dist. Lexis 12303, at *10 (E.D.La.1992). . The appellees argue that Wolens does not mandate the result that the appellants urge and, in fact, is really inapposite. Characterizing the Wolens holding, consistent with Smith v. Comair, Inc., 1384 F.3d 254, 258 (4th Cir.1998) (“Wolens recognized that state contract claims escape preemption only when courts would be confined to the terms of the parties’ agreement.”); Breitling U.S.A., Inc. v. Fed. Express Corp., 45 F.Supp.2d 179, 184 (D.Conn.1999) (“In considering whether a breach of contract action survives [] preemption, a reviewing court is restricted to the actual terms of a party's bargain.”),” " See also Stone v. Continental Airlines, Inc., 905 F.Supp. 823, 826 (D.Haw.1995); Lyn-Lea Travel Corp. v. American Airlines, 283 F.3d 282, 286-90 (5th Cir.2002) (holding plaintiff’s affirmative state law claims, tortious interference with business relationships, breach of contract, fraud, and violations of the Texas Deceptive Trade Practices Act, preempted by the ADA, but holding its affirmative defense of fraudu- lent inducement not preempted). Explaining the preemption decision, the court said: “Lyn-Lea’s claims for affirmative relief have a significant re- lationship to the economic aspects of the airline industry. Lyn-Lea asserts that (1) American intentionally interfered with its business relationships with four customers and an employee, luring the customers away with discounted fares; and (2) American acted fraudulently and deceptively while negotiating the Sabre CRS agreement with Lyn-Lea. The first claim involves American’s dealings with customers, (Continued on following page) 3la cases applying it, as being “that claims based on state law or policies external to a contract, as opposed to the express terms of the contract, are preempted by governing federal law,” they emphasize that the appellants’ claims are premised wholly on the terms of Subtitle 9, “all of which are external to the Cardholder Agreement itself.” The appellees conclude, therefore, that the claims are pre- empted, even under Wolens. Chaires is not dispositive of the case sub judice. To be sure, the choice of law provision at the center of the Court of Special Appeals’s analysis, although conceded by the parties to be ambiguous, is quite similar to the provision under review in this case: “This loan transaction is governed by Title 12, Subtitle 10 of the Commercial Law Article of the Annotated Code of Maryland.” In addition, the FNMA/FHLMC uniform instruments (deeds of trust) in that case indicated that “[l]oans are originated under Title 12, subtitle 10 of the Commercial Law Article of the Maryland Code.” Relying on this lan- guage from the loan documents and certain letters written to the Maryland Commission by Chevy Chase, Chaires, 131 Md.App. at 79, 748 A.2d at 42, the appellants in that case argued that the appellees in that case “‘elected’ Maryland law and waived federal protection.” Id. Also, they challenged the trial court’s construction of the choice while the second relates to enforceability of the Lyn-Lea contract. In other words, by its first claim, Lyn-Lea is seek- ing the application of Texas common law in a way that would regulate American’s pricing policies, commission structure and reservation practices.” Id. at 287. 32a of law provision, asserting that, being ambiguous, it “should be interpreted by the intent of the parties.” Jd. The intermediate appellate court rejected these arguments. Relying on the provisions of 12 C.F.R. § 560.2 providing that the regulations occupied the entire field of lending and “are to be the governing law for certain activities, including the charging of fees, by federal institutions,” Chaires, 131 Md.App. at 79, 748 A.2d 34, that court held: “[cjontrary to appellants’ argument that appellees elected Maryland law over federal law, the parties could not elect to have state law govern over federal law.” Jd. It then concluded, “upon careful examination,” id. at 83, 748 A.2d at 44-45, of the documents on which the appellants relied to support their argument that the appellees “elected Maryland law over federal law,” id., “The cited deed language, as well as the Septem- ber 6, 1990 letter, simply indicate that appellees were electing to have the Maryland law govern the non-regulated portions of the contract. Al- though appellees could have utilized a more gen- eral choice of law language in the documents and letters, appellees did not, as they could not, elect state law over federal law for all aspects of the loan contract.” Id. at 85, 748 A.2d. at 45-46. Whether the appellants’ claims are preempted and whether the appellees contracted to comply with Subtitle 9 are separate and different questions, requiring different analyses. The former is a defense requiring an analysis of federal law and the determination of the impact the relationship of the parties has on the ability of that law to fulfill its intended goal. The latter involves contract interpretation, discerning the parties’ intent, either actual 33a or presumed. Contract interpretation, unlike the question of federal preemption, is a matter of state law. Volt Info. Scis. v. Bd. of Trs., 489 U.S. 468, 474, 109 S.Ct. 1248, 1253, 103 L.Ed.2d 488, 497 (1989) (“the interpretation of private contracts is ordinarily a question of state law, which this Court does not sit to review”).” The appellants point out, accurately: * Maryland has long adhered to the objective law of contract interpretation and construction. Taylor v. NationsBank, 365 Md. 166, 178, 776 A.2d 645, 653 (2001); Wells v. Chevy Chase Bank, F'S.B., 363 Md. 232, 250-51, 768 A.2d 620, 629-31 (2001); Adloo v. H.T. Brown Real Estate, Inc., 344 Md. 254, 266, 686 A.2d 298, 304 (1996). We explained this principle in Taylor, supra, as follows: “A court construing an agreement under this test must first determine from the language of the agreement itself what a reasonable person in the position of the parties would have meant at the time it was effectuated. In addition, when the language of the contract is plain and unambiguous there is no room for construction, and a court must presume that the parties meant what they expressed. In these circumstances, the true test of what is meant is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant. Consequently, the clear and unambiguous language of an agreement will not give away [sic] to what the parties thought that the agreement meant or intended it to mean.” 365 Md. at 178-179, 776 A.2d at 653 (citing General Motors Acceptance Corp. v. Daniels, 303 Md. 254, 261, 492 A.2d 1306, 1310 (1985). Moreover, “whether a contract is ambiguous is ordinarily determined by the court as a question of law.” Calomiris v. Woods, 353 Md. 425, 434, 727 A.2d 358, 362, citing State Highway Admin. v. Bramble, 351 Md. 226, 239, 717 A.2d 943, 949 (1998). See also JBG/Twinbrook Metro Ltd. v. Wheeler, 346 Md. 601, 625, 697 A.2d 898, 911 (1997) (“The interpreta- tion of a written contract is ordinarily a question of law for the court.”); Suburban Hospital v. Dwiggins, 324 Md. 294, 306, 596 A.2d 1069, 1075 (1991), quoting Gordy v. Ocean Park, Inc., 218 Md. 52, 60, 145 A.2d 273, 277 (1958) (“‘As a general rule, the construction or inierpretation of all (Continued on following page) 34a “Federal preemption is a defense that argues that even if plaintiffs’ state law contract claims are correct — i.e. even if Chevy Chase had prom- ised to follow “subtitle 9 of the Maryland Com- mercial Code” with respect to the notice it would give cardholders of amendments, and even if it broke that promise — federal law bars those claims. The contract interpretation issue, by con- trast, raises the question of whether or not the language of the contract specifying Subtitle 9 re- quires Chevy Chase to comply with the credit card amendment provisions of Subtitle 9.” Although purporting to decide the issue on preemp- tion grounds, at bottom, Chaires was decided on contract interpretation principles. To be sure, the Court of Special Appeals is correct, where there is a conflict between federal and state law or where federal regulations preempt a field, state law may not be elected over federal law in that field. Here, however, the court acknowledged that 12 C.F.R. § 560.2(c) excludes some state laws from preemp- tion and that it was reasonable for the parties in that case to include a choice of law provision. Chaires, 131 Md.App. at 83, 748 A.2d at 44-45. But rather than addressing the preemption issue directly, the court analyzed the parties’ agreement, including extraneous documents, and decided written instruments is [initially] a question of law for the court... .’”); Rothman v. Silver, 245 Md. 292, 296, 226 A.2d 308, 310 (1967) (“If a written contract is susceptible of a clear, unambiguous and definite understanding, ... its construction is for the court to determine.”). Because the determination of ambiguity is a question of law, not fact, the determination is subject to a de novo review by appellate courts. Calomiris, supra, 353 Md. at 434, 727 A.2d at 362. 35a what the appellees in that case intended:” “it appears that the appellees were not attempting to opt for Maryland law over federal law, but were attempting to include a choice of law provision to govern the areas not preempted by the federal regulations.” Moreover, by emphasizing that the parties could not “elect to have state law govern over federal law,” the court suggests that there was a conflict between federal and state law. Where that occurs, preemption in favor of the federal law necessarily follows. See de la Cuesta, 458 U.S. at 152, 102 S.Ct. at 3022, 73 L.Ed.2d at 675. In this case, as the appellants point out, “[t]here is no conflicting federal law for Chevy Chase to have selected Subtitle 9 ‘over.’” See Williams v. First Gov’t Mort. and Investors Corp., 176 F.3d 497, 500 (1999), in which the D.C. Circuit held that the federal Truth in Lending Act did not preempt the District of Columbia Consumer Protection Procedures Act, noting that “Nothing in TILA or its legislative history sug- gests that Congress intended the Act’s disclosure regime to provide the maximum protection to which borrowers are entitled nationwide; states remain free to impose greater protections for bor- rowers. First Government has identified no way in which the CPPA would defeat TILA’s purposes, nor has it suggested how joint applicability of the two statutes would subject it to conflicting obli- gations.” Id. at 500. The appellees’ response, that * We do not address whether the Court of Specials Appeals applied the law appropriately. 36a “TILA and its implementing regulations estab- lish a uniform federal scheme for disclosure of - credit terms, applicable to all creditors including federal savings associations, and OTS has ex- pressly precluded any state regulation of such disclosures insofar as federal savings associa- tions like Chevy Chase are concerned,” is not persuasive. It relies only on 12 C.F.R. § 560.2(a) and fails to take account of the exemption in § (c). The other cases the appellees cite are no more persua- sive. In de la Cuesta, unlike in this case, there was direct conflict between federal regulations permitting due-on- sale clauses in mortgage agreements and restrictions placed by the California Supreme Court on the exercise of the clauses, which was resolved in favor of preemption. 458 U.S. at 154-56, 102 S.Ct. at 3023-3024, 73 L.Ed.2d at 675-677. In Brown v. Investors Mortgage Co., supra, 121 F.3d 472, and Atkinson v. Gen. Elec. Credit Corp., supra, 866 F.2d 396, the court rejected the argument that a general choice of laws provision was effective to avoid the preemptive effect of Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) when the agreement otherwise indicated the contrary intent. In Brown, the court commented: “This language does not address federal law or the relation between state and federal law. The fact that the parties chose to apply the laws of Washington, rather than the laws of another state, does not mean the parties decided that federal law should not apply.” 121 F.3d at 476. In Atkinson, to the court, it was “readily apparent that the parties intended that DIDMCA apply.” 866 F.2d at 398. ———————— 37a Fantastic Fakes, Inc. v. Pickwick Int'l, Inc., supra, 661 F.2d 479, 483 does not directly involve the question of preemption. Thus, the statement to which the appellees refer, that “[a] choice of law provision, therefore, merely designates the state whose law is to be applied to the extent its use is not preempted by nor contrary to the policies of the,” 661 F.2d at 483, applicable federal law, has little relevance to this discussion. It is significant that, in that case, the court engaged in extensive contract inter- pretation. Jd. at 483-84. Neither is Roadway Package Sys., Inc. v. Kayser, supra, 257 F.3d 287, 293-94 apposite. There, the court held that contracting parties may opt out of the FAA’s default vacatur standards and fashion their own. 257 F.3d at 288. It was in this context that the court stated that the generic choice-of-law clause, indicating that the agreement in that case “shall be governed by and con- strued in accordance with the laws of the Commonwealth of Pennsylvania,” “sheds little, if any, light on the parties’ intent,” and thus rejected Kayser’s argument that it should be “read as expressing a desire to opt out of the FAA’s default regime and to incorporate arbitration rules borrowed from Pennsylvania law.” Jd. It is significant that the court characterized the issue as simply a matter of contract construction, id., “not one of choice-of-law or preemption.” Jd. at 294. It is also significant that the court - acknowledged that a different result would have been appropriate had the parties agreed that “any controversy shall be settled by arbitration in accordance with the terms of the Pennsylvania Uniform Arbitration Act.” Jd. at 297. Finally Jones v. U.S. Fid. & Guar. Co., supra, No. 90- 5005, 1992 WL 202327, 1992 U.S. Dist. Lexis 12303 is inapposite. It involved the Employment Retirement 7 - | ‘| 4 eesti 38a Income Security Act, 29 U.S.C. §1144(a) (ERISA), a “deliberately expansive” statute designed to make regula- tion of employee benefit plans an exclusively federal concern. Hansen v. Continental Ins. Co., 940 F.2d 971, 979 (5th Cir.1991), citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). Thus, the statute expressly preempts state law where it relates to any ERISA Plan.“ See Degan v. Ford Motor Co., 869 F.2d 889, 893 (5th Cir.1989) (all “common law contract and tort claims based upon laws of generai application, that is, not specifically related to insurance or employee severance or discrimination are preempted by ERISA.”). Despite its protestations to the contrary,” implicit in the appellees’ Wolens argument is the notion that, in contracts where preemption is an issue, even though federal law may exempt contracts from preemption, all of the terms of the parties’ contract must be set forth in the contract, none of the principal provisions may be supplied by reference. They read the passage from Wolens, prohibit- ing “enlargement or enhancement [of the parties’ bargain] * 29 U.S.C. § 1144(a) provides: “Except as provided in subsection (b) of this section, the provisions of this title and title IV shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan[.]” '* The appellees state that they “never contended that the narrow exception in 12 C.F.R. § 560.2(c) is limited to contractual provisions that mimic[ ] state law, rather than incorporating state law by reference. On the other hand, the appellees characterize the Wolens Court as “distinguish[ing] ... between claims that are based on the express terms of the contract, which are not preempted and claims that involve “enlargement or enhancement based on state laws or policies external to the agreement,” which are preempted. —————Sk eee 39a based on state laws or policies external to the agreement” to mean that, as the appellants put it, “federal law does not preempt a private party from undertaking obligations spelled out in a contract, but does preempt a party from undertaking contractual obligations by reference in a contract to some body of rules ‘external’ to the contract.” Not only does such a distinction make absolutely no sense, it fails to distinguish between the preemption issue and the contract interpretation issue. The latter is, as we have seen, a question of state law. Maryland law recognizes that parties may agree to define their rights and obligations by reference to documents or rules external to the contract. Kirby & McGuire, Inc. v. Board of Education, 210 Md. 383, 385, 123 A.2d 606, 608 (1956) (“It is clear, too, that by virtue of the incorporation by reference of the contract into the bond and of the other documents into the contract, the bond and all of the documents are t= be read and con- strued together, as if set forth in the »vud.”); Ray v. Wil- liam G. Eurice & Bros., Inc., 201 Md. 115, 128, 93 A.2d 272, 279 (1952) (“The lower court seemingly attached significance to the fact that the plans and specifications were not physically fastened to the contract document which was executed, although it specifically and explicitly referred to both. In this situation physical attachment has not the significance so attributed to it. It is settled that where a writing refers to another document that other document, or so much of it as is referred to, is to be inter- preted as part of the writing.”). See Hartford Accident & Indem. Co. v. Scarlett Harbor Assocs. Ltd. P’ship, 346 Md. 122, 128, 695 A.2d 153 (1997). The Wolens Court drew no such distinction. And the courts applying Wolens do not draw such a distinction either. The distinction that the Court drew was between 40a what is required, as a matter of law, without any necessity for a specific agreement to that effect, and what a party voluntarily agrees to do, without regard to what the law might require in the absence of that agreement. It is the l [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386001_0861%3A1. Public record. Not legal advice.