Missouri v. Webb
| Decision Date | 27 March 2012 |
| Docket Number | Case No. 4:11CV1237 AGF |
| Parties | STATE OF MISSOURI, Plaintiff, v. MARTIN A. WEBB, et al. Defendants. |
| Court | U.S. District Court — Eastern District of Missouri |
Plaintiff filed this action in the Circuit Court of St. Louis County, Missouri, alleging claims for piercing of the corporate veil and violation of the Missouri Merchandising Practices Act ("MMPA"), Mo. Rev. Stat. § 407.010 et. seq. against Defendants Martin A. Webb ("Webb"), 24-7 Cash Direct LLC, Financial Solutions LLC, Great Sky Finance LLC, High Country Ventures LLC, Management Systems LLC, Payday Financial LLC, Red River Ventures LLC, Red Stone Financial LLC, Western Capital LLC, Western Sky Financial LLC ("the Lending Companies"), certain limited liability companies organized and registered under the laws of South Dakota, engaged in the business of internet-based lending, and owned, controlled, or managed by Webb.
Defendants timely removed this action pursuant to 28 U.S.C. §§ 1331 and 1441(a), asserting in their notice of removal that Plaintiff's claims give rise to substantial, disputed questions of federal law, and that they are entitled to tribal immunity as Native-American owned businesses operating on tribal lands. Now before the Court are Plaintiff's motionto remand pursuant to 28 U.S.C. § 1447(c), and Defendants' motion to dismiss. For the reasons set forth below, the Court will grant Plaintiff's motion to remand and, therefore, does not address the arguments set forth in Defendants' motion to dismiss.
In its complaint Plaintiff alleges that Webb is an enrolled member of the Cheyenne River Sioux Tribe ("the Tribe"), but that the Lending Companies, which are South Dakota limited liability companies, are not, and have not applied to become, sovereign tribal entities.1 Plaintiff further alleges that Defendants are engaged in the business of soliciting, making, and collecting loans to and from Missouri residents through the use of television advertisements and websites. The loans made by Defendants, in amounts varying between $300 and $3000, are payable in one to several monthly installments at annual percentage rates exceeding 250%. Missouri residents apply for loans directly through Defendants' websites, on which Plaintiff asserts, Defendants falsely represent themselves as licensed Missouri lenders. The loan agreements state that they are governed by the Indian Commerce Clause and the laws of the Tribe. The Lending Companies' websites also state that all loans "will be subject solely to the exclusive laws and jurisdiction of the Tribe, Cheyenne River Sioux Reservation ("the Reservation"), and that borrowers "must consent to be bound to the jurisdiction of the Cheyenne River Sioux Tribal Court, and further agree that no otherstate or federal law or regulation shall apply to this Loan Agreement, its enforcement or interpretation." In addition, Plaintiff alleges that the websites also indicate that each entity is a Native-American owned business operating within the boundaries of the Reservation, a sovereign nation. In the process of collecting on the loans, Defendants contact employers and consumers claiming that as "sovereign tribal entities, and Indian-owned businesses operating within the external boundaries of the Tribe," they have the authority to garnish wages without a court order. On the basis of the above allegations, Plaintiff asserts that Defendants have engaged in numerous violations of the MMPA.
Plaintiff alleges, and Defendants do not dispute, that Defendants operate by way of the Internet. Borrowers do not go to the Reservation to apply for, negotiate, or enter into loans. They apply for loans in Missouri by accessing Defendants' website. They repay the loans and pay the financing charges from Missouri. Plaintiffs further allege that the Lending Companies are authorized to withdraw the funds electronically from borrowers' bank accounts in Missouri or to garnish wages owed the borrowers by Missouri employers, with the result that the impact of the allegedly excessive interest rates and other abusive practices is felt in Missouri. Plaintiff has moved to remand, arguing that the complaint asserts only state, and not federal, claims.
In opposition to the motion to remand, Defendants assert that Webb's status as an enrolled member of the Tribe and owner of the Lending Companies confers tribal immunity upon their activities, that Plaintiff's claims necessarily require consideration of questions of federal law, and that the forum selection clauses in the loan agreementspreclude state-law regulation of the activities of their business activities. Defendants specifically assert that their business activity is beyond the reach of state regulation because it occurs on the Reservation. In support of this contention, they assert that consumers apply for loans online, and that Defendants receive, review, accept, or deny loan applications and fund loans from a bank account on the Reservation.
In response, Plaintiff asserts that the Court lacks removal jurisdiction because the claims alleged arise exclusively under state law; Defendants are not tribal entities engaged in tribal business exclusively on tribal lands; that the doctrine of "complete preemption" is not applicable here; and that Defendants' reliance on the doctrine of "tribal immunity," and the allegedly preemptive force of the "Indian Commerce Clause," are federal defenses and do not provide a basis for federal jurisdiction. Plaintiff further alleges that the forum selection clauses have no effect on the ability of the Plaintiff to bring an action against the Lending Companies under the MMPA, and cannot serve to confer federal jurisdiction.
Removal statutes are strictly construed and any doubts about the propriety of removal are to be resolved in favor of remand. Cent. Iowa Power Co-op. v. Midwest Indep. Transmission Sys. Operator, Inc., 561 F.3d 904, 912 (8th Cir. 2009) (citation omitted). The removing party, as the party invoking jurisdiction, bears the burden of proving that all prerequisites to jurisdiction are satisfied. Id. (citation omitted). Further,the United States Supreme Court has noted that "considerations of comity make us reluctant to snatch cases which a State has brought from the courts of that State, unless some clear rule demands it." Franchise Tax Bd. of California v. Constr. Laborers Vacation Trust for S. California, 463 U.S. 1, 21 n. 22 (1983).
It is settled law that under the 'well-pleaded complaint' rule, federal jurisdiction exists "only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) (citation omitted). A plaintiff, as the "master of the claim," may avoid federal jurisdiction by choosing to plead claims based exclusively upon state law, even if federal claims are available. Id. at 392, 398-99. Under the "artful pleading" doctrine, however, a plaintiff may not defeat removal by failing to plead federal questions that are essential elements of the plaintiff's claim. See Franchise Tax Bd., 463 U.S. at 22.
Although a plaintiff is required to plead federal questions essential to the elements of its claim, a federal defense, without more, does not form a basis for the exercise of federal jurisdiction. Id. at 393. "[T]he existence of a federal immunity . . . does not convert a suit otherwise arising under state law into one which, in a statutory sense, arises under federal law." Oklahoma Tax Comm'n v. Graham, 489 U.S. 838, 841 (1989) (). Generally, when a claim filed in state court alleges only state law claims, the existence of a federal defense, even a defense of preemption, will not support the removal of the case to federal court. Rivet v. RegionsBank of La., 522 U.S. 470, 475 (1998) (citing Caterpillar, 482 U.S. at 392); see also State ex rel. Nixon v. Coeur D'Alene Tribe, 164 F.3d 1102, 1109 (8th Cir. 1999) (citing Franchise Tax Bd., 463 U.S. at 10-12). This is true even if the defense is anticipated in the plaintiff's complaint, and even if both parties admit that the defense is the only question truly at issue in the case." Caterpillar, 482 U.S. at 393; see also Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6 (2003).
The "independent corollary" to the well-pleaded complaint rule, is the "complete preemption" doctrine. Franchise Tax Bd., 463 U.S. at 22. "Complete preemption" is found when the pre-emptive force of a statute is deemed so "extraordinary" that it "converts an ordinary state common-law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule." Metropolitan Life Ins. v. Taylor, 481 U.S. 58, 65-67 (1987). Once an area of state law has been completely pre-empted by the operation of a federal statute, any claim purportedly based on that pre-empted state law is considered, from its inception, a federal claim, and therefore arises under federal law. Franchise Tax Board, 463 U.S. at 24 ().
Complete preemption, as opposed to ordinary or conflict preemption, is rare, however, and only applies if the "federal statutes at issue provide[ ] the exclusive cause of action for the claim asserted and also set forth procedures and remedies governing thatcause of action." Beneficial Nat'l Bank, 539 U.S. at 8. In the area of Native-American affairs, complete preemption has been found only where a federal statute or grant creates a grant of preemptive authority. See, e.g., Oneida Indian Nation v. Cnty. of Oneida, 414 U.S. 661, 677 (1...
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