| U.S. Court of Appeals for the Ninth Circuit Opinions |
| KIVETT V. FLAGSTAR BANK, FSB Docket: 21-15667 Opinion Date: October 2, 2025 Judge: Jay Bybee Areas of Law: Banking, Civil Procedure, Class Action, Consumer Law A group of borrowers in California brought a class action against Flagstar Bank, alleging that the bank failed to pay interest on their mortgage escrow accounts as required by California Civil Code § 2954.8(a). Flagstar did not pay interest on these accounts, arguing that the National Bank Act (NBA) preempted the California law, and therefore, it was not obligated to comply. The plaintiffs sought restitution for the unpaid interest. The United States District Court for the Northern District of California, relying on the Ninth Circuit’s prior decision in Lusnak v. Bank of America, N.A., granted summary judgment for the plaintiffs. The court ordered Flagstar to pay restitution and prejudgment interest to the class. Flagstar appealed to the United States Court of Appeals for the Ninth Circuit, which affirmed the district court’s decision, holding that Lusnak foreclosed Flagstar’s preemption argument. However, the Ninth Circuit remanded the case to the district court to correct the class definition date and the judgment amount due to errors in the statute of limitations tolling and calculation of damages. On remand from the United States Supreme Court, following its decision in Cantero v. Bank of America, N.A., the Ninth Circuit reviewed whether it could overrule Lusnak in light of Cantero. The court held that Cantero did not render Lusnak “clearly irreconcilable” with Supreme Court precedent, and therefore, the panel lacked authority to overrule Lusnak. The Ninth Circuit affirmed the district court’s holding that the NBA does not preempt California’s interest-on-escrow law, but vacated and remanded the judgment and class certification order for modification of the class definition date and judgment amount. National Bank Act does not preempt California’s escrow-interest law (Cal. Civ. Code § 2954.8(a)), requiring banks to pay at least 2% interest on mortgage escrow accounts. • Kivett v. Flagstar Bank, FSB (9th Cir. Oct. 2, 2025): Reaffirmed Lusnak even after Cantero v. BofA (2024, SCOTUS). The Ninth Circuit said banks must pay escrow interest under state law; they can’t hide behind NBA preemption. |
Read more at: Americans Against Foreclosures!