Krispin v. May Department Stores Co.

• Decision Date: 10 April 2000
• Docket Number: No. 99-2930,99-3002,FAMOUS-BARR,99-2930
• Citation: 218 F.3d 919
• Parties: (8th Cir. 2000) PAUL T. KRISPIN, JR., APPELLANT, v. THE MAY DEPARTMENT STORES COMPANY, APPELLEE. SCOTT MATHEIS, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, APPELLEE, v. THE MAY DEPARTMENT STORES COMPANY, DOING BUSINESS ASCO., APPELLANT. PAUL T. KRISPIN, JR., APPELLEE, v. THE MAY DEPARTMENT STORES COMPANY, APPELLANT. Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 919

218 F.3d 919 (8th Cir. 2000)

PAUL T. KRISPIN, JR., APPELLANT, v. THE MAY DEPARTMENT STORES COMPANY, APPELLEE.

SCOTT MATHEIS, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, APPELLEE, v. THE MAY DEPARTMENT STORES COMPANY, DOING BUSINESS AS FAMOUS-BARR CO., APPELLANT.

PAUL T. KRISPIN, JR., APPELLEE, v. THE MAY DEPARTMENT STORES COMPANY, APPELLANT.

No. 99-2930, 99-3002

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Submitted: April 10, 2000

Filed: July 28, 2000

Appeals from the United States District Court for the Eastern District of Missouri. [Copyrighted Material Omitted] Before Wollman, Chief Judge, Murphy, Circuit Judge, and Goldberg, ¹ Judge.

Wollman, Chief Judge.

Paul T. Krispin, Jr., who, along with Scott Matheis, brought claims against The May Department Stores Company (the store) under Missouri state law, appeals from the district court's determination that the National Bank Act (NBA), 12 U.S.C. 85 & 86, completely preempts his claims, from its adverse entry of summary judgment, and from its denial of leave to amend Krispin's complaint to state a claim under the NBA. The store cross-appeals, arguing that the court should not have remanded several of Matheis's claims to state court. We reverse and remand.

I.

Krispin and Matheis (appellants) had Famous-Barr credit cards issued by the store prior to 1996. Their accounts were governed by agreements that stated that they were governed by Missouri law and that provided for finance charges "which will not be in excess of that permitted by law." Missouri law prohibits delinquency fees of more than $10, or $5 if the total monthly installment is less than $25. See Mo. Rev. Stat. 408.330 (1994). The credit agreements allowed for unilateral modification by the store on at least fifteen days' notice to cardholders.

In 1996, the store sent letters styled "IMPORTANT NOTICE" to its credit card customers announcing that, "[e]ffective immediately, credit is being extended by the May National Bank of Arizona" (the bank), and stating that late payment fees would now be "up to $12.00, or as allowed by law." Subsequently, similar notices indicated that late fees would be "$15, or as allowed by law. This varies from state to state." These notices contained little additional information and did not purport to change any other terms of the agreements, including the choice of law provision. The bank was not a party to the original credit agreements.

At the time of the 1996 notices, the store had assigned all its credit accounts, and transferred all authority over the terms and operation of those accounts, to the bank, an Arizona corporation recently created by the store. Not long after this transfer the bank began charging delinquent cardholders, including those who had entered into agreements with the store before 1996, late fees of $15.

Appellants filed separate state class action lawsuits against the store, raising various claims related to their allegation that the late fees exceeded the amount permitted by Missouri law. The store removed the actions to federal court on the grounds that the claims amounted to allegations of usury against the bank and that, as such, they were completely preempted by the NBA. The cases were consolidated.

The federal district court assumed jurisdiction and entered summary judgment for the store on all of Krispin's claims and two of Matheis's claims, remanding the remainder of Matheis's claims to state court. The district court did not permit either plaintiff to amend his complaint to state a claim under the NBA. Krispin appeals from the complete preemption determination and from the denial of leave to amend. He also seeks leave to file a motion under Federal Rule of Civil Procedure 60(a) requesting the district court to reconsider its decision not to remand his breach of contract claim to state court. Matheis has not filed a brief in this appeal, but requests permission to join in Krispin's brief, which we grant. The store cross-appeals the decision to remand four of Matheis's claims to state court.

II.

A. Federal Jurisdiction

Appellants first argue that the district court erred in exercising removal jurisdiction based on the doctrine of complete preemption. We review this question of law de novo. See Husmann v. TWA, Inc., 169 F.3d 1151, 1152 (8th Cir. 1999).

Federal district courts may exercise removal jurisdiction only where they would have had original jurisdiction had the suit initially been filed in federal court. See 28 U.S.C. 1441(b). Removal based on federal question jurisdiction, as in this case, is generally governed by the "well-pleaded complaint" rule, which provides that federal jurisdiction exists only where a federal question is presented on the face of the plaintiff's properly pleaded complaint. See Magee v. Exxon Corp., 135 F.3d 599, 601 (8th Cir. 1998). A narrow exception to this general rule, however, is the doctrine of "complete preemption," under which the preemptive force of certain federal statutes is deemed so "extraordinary" as to convert complaints purportedly based on the preempted state law into complaints stating federal claims from their inception. See Caterpillar Inc. v. Williams, 482 U.S. 386, 393 (1987); Magee, 135 F.3d at 601. We have held that sections 85 and 86 of the National Bank Act completely preempt state law claims of usury brought against a national bank. See M. Nahas & Co., Inc. v. First Nat. Bank of Hot Springs, 930 F.2d 608, 611 (8th Cir. 1991).

The NBA permits any national banking association to charge interest at the rate allowed by the laws of the state in which the bank is located. See 12 U.S.C. 85. Thus, national banks may charge out-of-state credit cardholders the interest rate allowed by the bank's home state even if that rate would otherwise be illegal in the state where the cardholders reside. See Marquette Nat'l Bank v. First of Omaha Svc. Corp., 439 U.S. 299, 313-19 (1978). For purposes of this rule, "interest" includes late payment fees. See Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 744-47 (1996). Section 86 of the NBA provides the exclusive remedy for violations of section 85. Because appellants do not dispute that the bank is a national banking association as defined by the NBA, see 12 U.S.C. 21, 37, the question of complete preemption in this case turns on whether appellants' suit against the store actually amounted, at least in part, to a state law usury claim against the bank.

Appellants stress that their complaints focused exclusively on the store, the only entity with which they had ever entered into credit agreements. They also emphasize that, even after their credit accounts were transferred to the bank in 1996, the store remained substantially involved in the collection process because it purchased the bank's receivables on a daily basis. The store in turn asserts, and the district court agreed, that the 1996 assignment was fully effective to cause the bank, and not the store, to be the originator of appellants' accounts subsequent to that time. The store characterizes its continuing role in account collection as that of an assignee, and argues that its purchase of the bank's receivables does not alter the fact that appellants' accounts are now controlled by the bank. We agree with the store.

The bank, a wholly-owned subsidiary of the store, with which it is required to maintain arms'-length transactions, was established specifically for the purpose of taking over the store's credit card operations. To this end, shortly after the bank's creation, the store and the bank entered into an agreement completely transferring authority over all customer credit accounts. This agreement required the bank to continue to extend credit to the store's pre-existing cardholders "[s]ubject to . . . the terms and conditions in the Credit Card Agreement" that such cardholders had previously signed. Although appellants acknowledge that their original credit card agreement permitted unilateral modification, they argue, citing a case from the Tenth Circuit, that "a third party may not be added to a contract without consent of both original parties." Denver Metropolitan Ass'n v. Journeyman Plumbers & Gas Fitters Local No. 3, 586 F.2d 1367, 1370 (10th Cir. 1978). Appellants note that they never saw the agreement between the store and the bank, but instead simply received the aforementioned notice informing them that "[e]ffective immediately, credit is being extended by the May National Bank of Arizona."

We find this argument unavailing to defeat federal jurisdiction. The 1996 account transfer was not, in our view, an "addition" of a party to the contract, as discussed in Denver Metropolitan Association - a case presenting the question whether a collective bargaining agreement prohibited employers who were not members of a signatory trade association from contributing to certain employee trust funds. See id. at 1369-71. Rather, the transfer in the instant case was an assignment - a shifting of contractual rights and duties to another. See In re Food Barn Stores, Inc., 107 F.3d 558, 561 n.5 (8th Cir. 1997) (citing Metropolitan Airports Comm'n v. Northwest Airlines, Inc., 6 F.3d 492, 495 n.4 (7th Cir. 1993)).

In general, unless the original contract or a relevant statute specifies otherwise, a party may assign contractual rights without notice. See United States v. Doe, 940 F.2d 199, 204-05 (7th Cir. 1991); Restatement (2d) Contracts 317 (1979); 4 Corbin, Contracts 870 (1951). We have so stated in a previous case arising out of Missouri, see Imperial Assur. Co. v. Livingston, 49 F.2d 745, 751 (8th Cir. 1931), and Missouri courts appear to have similarly held, see Milliken-Helm Comm'n Co. v. C.H. Albers Comm'n Co., 147 S.W. 1065, 1066-67 (Mo. 1912); cf. Kenneth D. Corwin, Ltd. v. Mo. Med. Serv., 684 S.W.2d 598, 600 (Mo. App. 1985). The pre-1996 credit agreement between the store and its customers did not explicitly prohibit assignment,...