Phipps v. F.D.I.C.

• Decision Date: 28 July 2005
• Docket Number: No. 03-3423.,03-3423.
• Citation: 417 F.3d 1006
• Parties: Alvin L. PHIPPS; Linda L. Phipps; John A. St. Clair; Elizabeth R. St. Clair; Shawn V. Starkey; Lorene A. Starkey, Appellants, v. FEDERAL DEPOSIT INSURANCE CORPORATION; GMAC-Residential Funding Corporation, a Minnesota Corporation; Residential Funding Mortgage Securities II, Inc., a Minnesota corporation; Chase Manhattan Bank, as Indenture Trustee of the GMAC-RFC and RFMS Securitized Trusts; Wilmington Trust Company, as Owner Trustee of the GMAC-RFC and RFMS Securitized Trusts; Homecomings Financial Network, Inc., a Delaware corporation; Household Finance, Inc., a Delaware corporation; Does, 1 through 25, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

417 F.3d 1006

Alvin L. PHIPPS; Linda L. Phipps; John A. St. Clair; Elizabeth R. St. Clair; Shawn V. Starkey; Lorene A. Starkey, Appellants, v.FEDERAL DEPOSIT INSURANCE CORPORATION; GMAC-Residential Funding Corporation, a Minnesota Corporation; Residential Funding Mortgage Securities II, Inc., a Minnesota corporation; Chase Manhattan Bank, as IndentureTrustee of the GMAC-RFC and RFMS Securitized Trusts; Wilmington Trust Company, as OwnerTrustee of the GMAC-RFC and RFMS Securitized Trusts; Homecomings Financial Network, Inc., a Delaware corporation; Household Finance, Inc., a Delaware corporation; Does, 1 through 25, Appellees.

No. 03-3423.

United States Court of Appeals, Eighth Circuit.

Submitted: March 17, 2005.

Filed: July 28, 2005.

COPYRIGHT MATERIAL OMITTED

Kip D. Richards, argued, Kansas City, MO (J. Michael Vaughan on the brief), for appellant.

Daniel H. Squire, argued, Washington, D.C. (David A. Luigs, Stephen R. Heifetz, and Kelly Cochran and Todd W. Ruskamp of Kansas City, MO., on this brief), for appellee.

Roy W. Arnold, argued, Pittsburgh, PA. (Thomas L. Allen and James C. Martin of Pittsburgh, PA, and Randolph G. Willis and Daniel L. McClain of Kansas City, MO, on the brief), for appellee GMAC.

Lawrence H. Richmond, argued, Washington, D.C., for appellee FDIC.

Before RILEY, BOWMAN, and GRUENDER, Circuit Judges.

RILEY, Circuit Judge.

The plaintiffs, Alvin and Linda Phipps(Phipps), John and Elizabeth St. Clair(St. Clair), and Shawn and Lorene Starkey(Starkey) filed a putative class action lawsuit in Missouri state court, seeking to recover allegedly unlawful fees charged on second mortgage loans by Guaranty National Bank of Tallahassee (GNBT).GNBT and other defendants removed to the federal district court,¹ which denied the plaintiffs' motion to remand and granted the defendants' motions to dismiss.We affirm.

I.BACKGROUND

The plaintiffs purport to represent a class of Missouri borrowers who took out second mortgage loans from GNBT, a federally chartered national bank located in Florida and regulated by the Office of the Comptroller of Currency(OCC).²The plaintiffs filed a putative class action in Missouri state court against GNBT, and also against GMAC-Residential Funding Corporation(RFC), Household Finance Corporation III (Household), and other defendants.The plaintiffs alleged GNBT charged them unlawful fees on their second mortgage loans, in violation of Missouri's Second Mortgage Loan Act (SMLA), Mo.Rev.Stat. §§ 408.231-.241, and later sold the second mortgage loans to the other defendants, including RFC and Household.The plaintiffs claim GNBT unlawfully charged loan origination, loan discount, underwriting, and application fees; settlement fees; abstract fees; title search and examination fees; and document review fees, "together with charging high interest rates all as part of a scheme to make high-cost loans to Missouri borrowers, as well as borrowers across the country."The plaintiffs also claim the loan origination and loan discount fees actually were "finder's fees" paid to a third party, Equity Guaranty LLC(Equity), although the plaintiffs signed Settlement Statements (HUD-1s) with the Department of Housing and Urban Development(HUD) stating these fees were paid to GNBT.The plaintiffs further claim GNBT and Equity conspired "to give the appearance of making these loans through a national bank ... to ... avoid the consumer protection laws of the states."

In their state court petition (complaint), the plaintiffs sought a refund of the allegedly unlawful fees and interest paid and also sought to enjoin the defendants from collecting interest on the loans.Phipps allege they were charged 16.99% interest on a 15-year loan, and St. Clair and Starkey claim they were charged 11.99% interest on 25- and 15-year loans, respectively.The district court noted Missouri's usury law currently caps interest rates at 10%.SeeMo.Rev.Stat. § 408.030.1.However, the plaintiffs strenuously argue their claims are based on unlawful fees charged, not unlawful interest.

The defendants removed the case to federal court based on federal question jurisdiction.The plaintiffs sought remand, claiming they had not stated a claim for excessive interest against the defendants so federal jurisdiction did not exist.In response, the defendants argued the plaintiffs' claims are usury claims against a national bank.The defendants contended federal law preempts the claims, because the fees charged were actually "interest" under the broad definition afforded that term under federal law.Thus, the defendants argued the federal court had jurisdiction.Further, the defendants moved to dismiss the plaintiffs' claims, because the complaint did not state a claim for which relief could be granted.Household also moved to dismiss, claiming the plaintiffs lacked standing to sue Household, as it did not hold any of the plaintiffs' mortgages.

The district court denied the plaintiffs' motion to remand, concluding the loan origination and discount fees fit within the OCC's definition of interest, so under federal law, the plaintiffs' claims were for interest, not fees.The court ruled federal statutes governing national banks create an exclusive cause of action against national banks for usury; thus, no state law cause of action exists.Next, because the plaintiffs attempted to assert a usury claim against a national bank based upon the SMLA, a Missouri statute, the district court dismissed the complaint for failure to state a claim for which relief could be granted.Finally, the court concluded Household's motion to dismiss was moot, but granted the motion, because the claims against Household derived from those against GNBT.

II.DISCUSSION

"We review the district court's denial of a motion to remand and its dismissal of the complaint on grounds of preemption under a de novo standard."Gore v. TWA,210 F.3d 944, 948(8th Cir.2000).As to the motion to dismiss, under Federal Rule of Civil Procedure 12(b)(6), we must accept the plaintiffs' factual allegations as true and grant all reasonable inferences in the plaintiffs' favor.MM&S Fin., Inc. v. Nat'l Ass'n of Sec. Dealers, Inc.,364 F.3d 908, 909(8th Cir.2004).We may affirm the district court's dismissal on any basis supported by the record.In re K-tel Int'l, Inc. Sec. Litig.,300 F.3d 881, 889(8th Cir.2001)(citation omitted).

A.Preemption

A defendant may remove a state law claim to federal court when the federal court would have had original jurisdiction if the suit originally had been filed there.See28 U.S.C. § 1441(b).Removal based on federal question jurisdiction is usually governed by the "well-pleaded complaint" rule.Krispin v. May Dep't Stores Co.,218 F.3d 919, 922(8th Cir.2000).This rule provides that federal jurisdiction may be invoked "only where a federal question is presented on the face of the plaintiff's properly pleaded complaint."Id.The rule also "makes the plaintiff the master of the claim," allowing the plaintiff to "avoid federal jurisdiction by exclusive reliance on state law."Caterpillar Inc. v. Williams,482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318(1987).An independent corollary to this general rule is the "complete preemption" doctrine, "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."Krispin,218 F.3d at 922(citingCaterpillar Inc.,482 U.S. at 393, 107 S.Ct. 2425).Only claims falling within the preemptive scope of a federal statute are considered to invoke federal question jurisdiction, and the presence of even a single federal claim gives the defendant the right to remove an entire case to federal court.Gaming Corp. of Am. v. Dorsey & Whitney,88 F.3d 536, 543(8th Cir.1996).

The National Bank Act (NBA), 12 U.S.C. §§ 21-216d, authorizes a national bank "to charge interest at the rate allowed by the laws of the state in which the bank is located."Krispin,218 F.3d at 922(citing 12, U.S.C. § 85).³The NBA preempts actions challenging the lawfulness of the interest charged by a national bank.In Beneficial National Bank v. Anderson,539 U.S. 1, 11, 123 S.Ct. 2058, 156 L.Ed.2d 1(2003), the Supreme Court held sections 85and86 of the NBA"supersede both the substantive and the remedial provisions of state usury laws and create a federal remedy for overcharges that is exclusive, even when a state complainant... relies entirely on state law."The Court reasoned "[u]niform rules limiting the liability of national banks and prescribing exclusive remedies for their overcharges are an integral part of a banking system that needed protection from `possible unfriendly State legislation.'"Id. at 10, 123 S.Ct. 2058(citation omitted)."Because §§ 85and86 provide the exclusive cause of action for such claims, there is, in short, no such thing as a state-law claim of usury against a national bank.Even though the complaint makes no mention of federal law, it unquestionably and unambiguously claims that petitioners violated usury laws."Id. at 11, 123 S.Ct. 2058;see alsoKrispin,218 F.3d at 922("We have held that sections 85and86 . . . completely preempt state law claims of usury brought against a national bank.").

As the district court observed, the remand issue here boils down to whether the plaintiffs brought a claim of unlawful interest charged by the defendants, notwithstanding the plaintiffs' protestations their claims focused on unlawful fees.The plaintiffs argue the loan origination and discount fees were merely "finder's fees" paid to Equity, which they contend are excluded from the OCC's definition of interest.However, we are required to look beyond the plaintiffs' artful attempts to characterize their claims to avoid federal jurisdiction, M. Nahas & Co., Inc. v. First Nat'l Bank of Hot Springs,930 F.2d 608, 611-12...