In 2018, the Ninth Circuit held in Lusnak v. Bank of America, N.A. that California’s interest-on-escrow law was not preempted by the National Bank Act because the California law did not prevent or significantly interfere with the bank’s exercise of its powers.  883 F.3d 1185 (9th Cir. 2018).  Six years after Lusnak, the Supreme Court held in Cantero v. Bank of America that test for preemption under the National Bank Act requires courts to “make a practical assessment of the nature and degree of the interference caused by a state law,” and courts should do so by engaging in a “nuanced comparative analysis” that compares the interference caused by previous state laws that were challenged as preempted before the Supreme Court to the law at issue.  602 U.S. 205, 219–21 (2024). 

Post-Cantero, another bank argued that Lusnak was no longer tenable because it did not engage in the “nuanced comparative analysis” set forth in Cantero.  In Kivett v. Flagstar, 2025 WL 2800150 (9th Cir. Oct. 2, 2025), the Ninth Circuit addressed whether the decision in Lusnak was “clearly irreconcilable” with the “theory or reasoning in Cantero.”[1]  Id. at *3.  A 2-1 majority determined that the answer was “no.” Although the majority admitted that Lusnak did not “cite or discuss the six [other] preemption cases” identified in Cantero, the panel majority did not find irreconcilability for two reasons: first, the prior National Bank Act cases would not have compelled a different result, and second, “nothing in Cantero suggest[ed] that the ‘nuanced comparative analysis’” is “the sole method for determining preemption.”  Id. at *6 (quoting Cantero, 602 U.S. at 220)).

Judge Nelson dissented.  In his view, because Lusnak did not “apply the comparative analysis required by Cantero,” its theory or reasoning was irreconcilable with Cantero and should be seen as effectively overruled.  Id. at *7 (Nelson, J., dissenting).  Judge Nelson also went further, writing that Lusnak was “wrongly decided,” and explaining why, in his view, California’s interest-on-escrow law significantly interferes with national bank powers and is preempted.  Id. at *15­–18.[2] 

As noted above, there seems to be no dispute that Lusnak did not follow “nuanced comparative analysis” Cantero directs courts to employ.  And despite the Kivett majority’s suggestion to the contrary, Cantero should be read to require that comparative analysis.  See 602 U.S. at 215­–16 (“[C]ourts addressing preemption questions in this context must do as Barnett Bank did and likewise take account of those prior decisions of this Court and similar precedents.” (emphasis added)). Given that potential conflict, it would not be surprising to see a petition for rehearing en banc.  But Lusnak remains good law and creates challenges to establishing National Bank Act preemption in the Ninth Circuit.

[1] Under Ninth Circuit precedent, a three-judge panel is bound by and cannot overrule prior precedent unless, amongst other things, the prior precedent is “clearly irreconcilable” with the “theory or reasoning” of a subsequent Supreme Court decision.  See Miller v. Gammie, 335 F.3d 889, 900 (9th Cir. 2003) (en banc).

[2] A recent panel of the First Circuit reached the opposite conclusion, finding that Cantero’s comparative test reveals that Rhode Island’s similar interest-on-escrow law is not preempted by the National Bank Act.  See Conti v. Citizens Bank, N.A., 2025 WL 2693215 (1st Cir. Sept. 22, 2025), which was addressed by this blog here.