First Nat. Bank of Aberdeen v. Aberdeen Nat. Bank

• Decision Date: 06 August 1980
• Docket Number: Nos. 79-1612,79-1644,s. 79-1612
• Parties: FIRST NATIONAL BANK OF ABERDEEN and First National Bank of Aberdeen, Redfield Branch, a national banking corporation, Appellants, v. ABERDEEN NATIONAL BANK, also using name First Bank (N.A.) Aberdeen and the Spink County Branch of the Aberdeen National Bank, also using name First Bank (N.A.) Redfield, Appellees. FIRST NATIONAL BANK OF DULUTH, Appellant, v. NORTHERN CITY NATIONAL BANK and Duluth National Bank, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 843

627 F.2d 843

FIRST NATIONAL BANK OF ABERDEEN and First National Bank of

Aberdeen, Redfield Branch, a national banking

corporation, Appellants, v. ABERDEEN NATIONAL BANK, also using name First Bank (N.A.)

Aberdeen and the Spink County Branch of the

Aberdeen National Bank, also using name

First Bank (N.A.) Redfield, Appellees.

FIRST NATIONAL BANK OF DULUTH, Appellant, v. NORTHERN CITY NATIONAL BANK and Duluth National Bank, Appellees.

Nos. 79-1612, 79-1644.

United States Court of Appeals Eighth Circuit.

Submitted Jan. 16, 1980.

Decided Aug. 6, 1980.

Lloyd C. Richardson, Jr., Aberdeen, S. D., for appellant in case no. 79- 1612.

Thomas R. Thibodeau and James A. Wade, Duluth, Minn., for appellant in case no. 79-1644.

R. D. Miller, Aberdeen, S. D., for appellee in case no. 79-1612.

David A. Ranheim and Darron C. Knutson, Minneapolis, Minn. for appellee in nos. 79-1612, 79-1644.

Before LAY, Chief Judge, and HEANEY, BRIGHT, ROSS, STEPHENSON, HENLEY and McMILLIAN, Circuit Judges, En Banc.

HENLEY, Circuit Judge.

These two consolidated appeals raise the same substantive issue decided by us today in State of North Dakota v. Merchants National Bank & Trust Co., No. 79-1342 (8th Cir. 1980): whether section 30 of the National Bank Act (NBA) preempts the common law of unfair competition insofar as applied to Comptroller-approved name changes by national banks. But unlike the plaintiff in North Dakota, plaintiffs in the present cases commenced their actions in state court and did not join claims as to which federal jurisdiction indisputably existed. The defendant national banks removed the suits to federal court and subsequently secured judgments on the merits. For reasons to be stated, we conclude that in each case the district court lacked removal jurisdiction and should have remanded the case to the state court.

FACTS AND PROCEDURAL BACKGROUND

No. 79-1612

In January, 1978, the Aberdeen National Bank (defendant herein) applied to the Comptroller of the Currency under section 30 of the NBA ¹ to change its name to Four days later, on April 10, 1979, plaintiff brought this action for unfair competition in South Dakota state court, seeking to enjoin defendant ² from using the terms "First" or "1st" or any variation thereof in its new name or "in any other way whatsoever in connection with advertising or labeling in its business or affairs." The complaint alleged that plaintiff, through long use of its name and extensive advertising, had come to be recognized by the public as the "First National Bank," "1st National Bank," "First Bank," or "any derivative thereof which employs the term 'First' or '1st' in conjunction with a national bank." It was further alleged that defendant and its branch had begun using and advertising under the names "First Bank Aberdeen," "First Bank Redfield," "First Bank (N.A.) Aberdeen," and "First Bank (N.A.) Redfield," and that defendant's adoption of these names would mislead the public and would unfairly appropriate plaintiff's reputation and goodwill, in violation of the South Dakota law of unfair competition. The complaint contained no reference to the National Bank Act or to the Comptroller's approval of defendant's name change.

"FIRST BANK (N.A.)." Pursuant to procedural rules issued by the Comptroller, notice of the proposed change was published in local newspapers and in the Comptroller's regional bulletin, which was mailed to plaintiff First National Bank of Aberdeen and to other competing banks in the Aberdeen, South Dakota, area. The banks were thereby notified of their right to object to the proposed name change and to obtain upon request a hearing before the Comptroller. No objection to the change was filed, and in December, 1978 the Comptroller approved the application. On April 6, 1979 defendant began using its new name.

Defendant removed the suit to federal district court, primarily on the ground that the action arose under federal law, and plaintiff sought remand. Plaintiff argued, first, that removability of an action must be determined from the complaint, and the complaint in this case was based solely on South Dakota law. Secondly, plaintiff relied on Marquette National Bank v. First National Bank of Omaha, 422 F.Supp. 1346 (D.Minn.1976), for the proposition that the assertion of federal preemption in defense of a state law claim does not provide grounds for federal jurisdiction. Next, plaintiff acknowledged that the Comptroller had approved a change of defendant's name, but disavowed any intent to challenge that decision and stated that its claim of unfair competition was restricted to defendant's use of new names that had not been approved by the Comptroller. ³ Finally Defendant replied that removal was proper on two alternative grounds. First, defendant contended that section 30 of the NBA preempted the state law of unfair competition insofar as the state law "might otherwise seek to regulate the names under which national banks may conduct their business." Thus, plaintiff's complaint, though phrased solely in terms of state law, actually stated a claim in an area governed exclusively by federal law (section 30), the claim arose under that law, and removal was proper because the district court would have had original jurisdiction. Secondly, defendant maintained the case was properly removed pursuant to 28 U.S.C. § 1442(a)(1).

plaintiff rejected the idea that defendant was a "person acting under" the Comptroller or that defendant's adoption of a new name was an "act under color of (the Comptroller's) office," for purposes of removal under 28 U.S.C. § 1442(a)(1). ⁴

In addition to arguing the removability of the case, defendant moved to dismiss the complaint for failure to state a claim on which relief could be granted. For the purposes of this opinion, it is unnecessary to discuss the parties' arguments on this motion.

In June, 1979, the district court denied plaintiff's motion to remand and granted defendant's motion to dismiss. ⁵ Accepting in major part the arguments of defendant, the court held that, because of the preemptive effect of section 30, plaintiff's claims arose solely under federal law. Removal was therefore proper, since the court would have had original jurisdiction of the action. ⁶ The court based its dismissal of the complaint on the finding that plaintiff's state rights were preempted and, apparently, on the unstated conclusion that plaintiff had no right of action under the federal statutory scheme. ⁷

Plaintiff has appealed, arguing that the finding of preemption upon which the district court's rulings were based was incorrect.

Appellant seeks remand of the case to the South Dakota state court for decision on the merits.

No. 79-1644

In December, 1977, Northern City National Bank and Duluth National Bank (defendants herein) applied to the Comptroller to change their names to "FIRST BANK (N.A.) Duluth" and "FIRST BANK (N.A.) Duluth West," respectively. The plaintiff, First National Bank of Duluth, objected to the proposed changes and requested a hearing before the Comptroller. At the hearing, plaintiff was allowed to present its evidence, consisting mostly of testimony by its officers, that the new names would be confusingly similar to plaintiff's name and would permit defendants to usurp plaintiff's goodwill in the Duluth, Minnesota, market. Subsequently, in December, 1978, the Comptroller issued his approval of the name changes.

Plaintiff did not seek judicial review of this decision. Instead, it immediately brought this suit for unfair competition and deceptive trade practices in Minnesota state court, seeking to enjoin defendants from using the terms "First" or "1st" or any variation thereof in their new names. Plaintiff alleged in its complaint that, through long use of its name and extensive advertising, it had come to be known by the public as the "First National Bank," "1st National Bank," or "any derivative thereof which employs the terms 'First' or '1st' in conjunction with a national bank." It was then alleged that defendants had obtained the Comptroller's approval of the new names stated above, and that implementation of these name changes would confuse and mislead the public and would cause "irreparable injury and damage . . . to the plaintiff's good name, reputation, and business." The complaint made no mention of the National Bank Act and referred to the Comptroller's approval of defendants' new names only in pleading the imminence of the threatened name changes. ⁸

Defendants removed the action to federal court, and plaintiff sought remand. Like the plaintiff in Aberdeen, it argued that its complaint stated a claim based exclusively on state law and the action therefore could not be removed as arising under federal law. Secondly, plaintiff maintained that the case was not removable under 28 U.S.C. § 1442(a)(1), for the same reasons given by the plaintiff in Aberdeen. ⁹

In response, defendants contended that section 30 of the NBA

wholly supplants state law on the subject of the name under which a national bank may do business. Thus, any action complaining of a national bank's use of a particular name necessarily arises under federal law and is subject to removal under 28 U.S.C. § 1441.

Defendants also argued that removal was proper under 28 U.S.C. § 1442(a)(1).

In April, 1979, in an unpublished memorandum, Magistrate Patrick J. McNulty recommended that plaintiff's motion to remand be denied. After discussing relevant cases, the magistrate stated a general "guide" to determine whether an action "arises under" federal law for purposes of original or removal jurisdiction: If the complaint discloses, "as innate to the action," the existence of a "basic dispute . . . as to the effect of a federal law" and the "resolution of (this dispute) is necessary to the determination of the rights of the parties," then the action arises under federal law. Applying this principle to the instant case, Magistrate McNulty found...