West Virginia ex rel. McGraw v. JPMorgan Chase & Co.
| Decision Date | 10 February 2012 |
| Docket Number | 3:11–0690,3:11–0688,3:11–0691,3:11–0717.,3:11–0693,Civil Action Nos. 3:11–0683,3:11–0689,3:11–0695 |
| Citation | 842 F.Supp.2d 984 |
| Court | U.S. District Court — Southern District of West Virginia |
| Parties | State of WEST VIRGINIA ex rel. Darrell V. McGRAW, Jr., Attorney General, Plaintiff, v. JPMORGAN CHASE & CO. and Chase Bank USA, N.A., Defendants. State of West Virginia ex rel. Darrell V. McGraw, Jr., Attorney General, Plaintiff, v. Discover Financial Services, Inc., Discovery Bank, DFS Services, L.L.C. and Assurant, Inc., Defendants. State of West Virginia ex rel. Darrell V. McGraw, Jr., Attorney General, Plaintiff, v. GE Money Bank, Defendant. State of West Virginia ex rel. Darrell V. McGraw, Jr., Attorney General, Plaintiff, v. World Financial Network National Bank, CSI Processing, LLC and CPP North America, LLC, Defendants. State of West Virginia ex rel. Darrell V. McGraw, Jr., Attorney General, Plaintiff, v. First Premier Bank First Premier Bankcard and United National Corporation, Defendants. State of West Virginia ex rel. Darrell V. McGraw, Jr., Attorney General, Plaintiff, v. Bank of America Corporation and Fia Card Services, N.A., Defendants. State of West Virginia ex rel. Darrell V. McGraw, Jr., Attorney General, Plaintiff, v. Citigroup, Inc and Citibank, N.A., Defendants. State of West Virginia ex rel. Darrell V. McGraw, Jr., Attorney General, Plaintiff, v. HSBC Bank Nevada, N.A. and HSBC Card Services, Inc., Defendants. |
OPINION TEXT STARTS HERE
Frances A. Hughes, Office of the Attorney General, Guy R. Bucci, L. Lee Javins, II, Timothy C. Bailey, Bucci Bailey & Javins, William S. Druckman, Law Offices of William S. Druckman, Charleston, WV, Laura J. Baughman, Sherri Ann Saucer, Baron & Budd, Dallas, TX, for Plaintiff.
Andrew A. Ruffino, Covington & Burling, New York, NY, Andrew James Soukup, Robert D. Wick, Covington & Burling, Washington, DC, Thomas H. Ewing, William W. Booker, Kay Casto & Chaney, Charleston, WV, for Defendants.
Pending is Plaintiff's Motion to Remand and for Costs and Fees (ECF No. 14). For the reasons given below, the motion is GRANTED as to remand and DENIED as to costs and fees.
In August 2011, the State of West Virginia, through its Attorney General, Darrell V. McGraw, Jr., brought suit in the Circuit Court of Mason County, West Virginia, against eight credit card issuers. Complaint, ECF No. 1,1 Ex.1 (Civil Action No. 11–C–94–N, Filed Aug. 16, 2011). The actions challenge Defendants' practices in selling and administering “payment protection plans,” ancillary services attached to consumer credit card accounts. Id. The Defendants are: JP Morgan Chase & Co. and Chase Bank USA, N.A., 3:11–683, a nationally-chartered banking association; Discover Bank, 3:11–688, a state-chartered bank; GE Money Bank, 3:11–689, a federally-chartered savings association; World Financial Network Bank, 3:11–690, previously a nationally-chartered bank, but now a state-chartered bank; First Premier Bank, 3:11–691, a state-chartered bank; Bank of America Corp. and FIA Card Services, N.A., 3:11–693, a nationally-chartered banking association; Citigroup, Inc., and Citibank, N.A., 3:11–695, a nationally-chartered banking association; and HSBC Bank Nev., 3:11–717, a nationally-chartered banking association. The Complaint is largely identical as all Defendants, and, although the cases are not formally consolidated, Defendants agreed to a coordinated briefing process. See ECF No. 13.
Plaintiff's Complaint alleges several violations of the West Virginia Consumer Credit and Protection Act (“WVCCPA”), specifically: 1) unfair or deceptive acts or practices; 2) unconscionable conduct; and 3) collection of excess charges. Complaint, ECF No. 1, Ex. 1. All eight Defendants removed the actions to this Court (Defs.' Notice of Removal (“NOR”), ECF No. 1), and Plaintiff moved to remand (Pl.'s Mot. to Remand, ECF No. 14). Defendants oppose remand, arguing that removal to this court is justified for three reasons. First, the Complaint challenges the “rate of interest” charged to credit card accounts, and is therefore completely preempted by the National Bank Act under Beneficial National Bank v. Anderson, 539 U.S. 1, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003). Second, the Complaint is actually a disguised class or mass action under the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), and may be removed on that basis. Third, some of the Defendants argue that the Complaint presents a substantial federal question, and is therefore removable under the rule of Grable & Sons Metal Prods., Inc. v. Darue Eng. & Mfg., 545 U.S. 308, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005). In evaluating these arguments, the Court is mindful “that federal courts are courts of limited jurisdiction, that [we] should construe removal statutes narrowly, and that any doubts should be resolved in favor of state court jurisdiction.” Barbour v. Int'l Union, 640 F.3d 599, 617 (4th Cir.2011) (en banc).
The Complaint focuses on “payment protection plans” and related products, sometimes called “Debt Cancellation Contracts” (DCC) or “Debt Suspension Agreements” (DSA).2 These products allow credit card holders to suspend due minimum payments,or cancel debt entirely, when a “qualifying” event occurs, usually a life event interrupting employment, such as job loss, illness, deployment, or marriage. Cardholders pay a monthly fee for this service, which is charged directly to the enrolled credit card account. The fee is generally a percentage of the enrolled account's monthly balance. Cardholders sign up for these products in a process separate from initially opening the credit card account. The Comptroller of Currency (OCC) regulates these plans when offered by national banks. See12 C.F.R. § 37.1 et seq.
The Complaint attacks Defendants' sale and administration of DCC and DSA on several grounds. First, Plaintiff alleges that the plans have little-to-no value to many of the consumers who pay for them. Complaint, ECF No. 1, Ex. 1, at ¶¶ 43–45. Further, when a consumer does experience a qualifying event, it is prohibitively difficult to claim any benefit from the plans. Id. at ¶ 61. Next, Plaintiff challenges Defendants' methods of enrolling and retaining cardholders as plan customers. Defendants allegedly enroll consumers without informed consent—for example, asking a consumer if he or she would like to see a packet of paperwork on the plan, then taking acceptance of the packet as an acceptance of the plan. Id. at ¶¶ 24–25. Plaintiff also alleges that Defendants knowingly enroll consumers who could never receive benefits under the plan, such as disabled or retired persons, whose fixed income is not subject to the qualifying events that trigger coverage under the plan. Id. at ¶¶ 46–55. Plaintiff last alleges that it is prohibitively difficult to cancel a subscription to the plan. Id. at ¶ 62.
Defendants first ground their removal argument in the doctrine of complete preemption, arguing that the Complaint's attacks on DCC/DSA challenge the “rate of interest” charged to the enrolled credit card account. Under the National Bank Act (NBA), any challenge to the “rate of interest” is completely preempted by federal law. 12 U.S.C. § 85. Resolution of this issue requires a detailed examination of the specifics of the Complaint, of the doctrine of complete preemption, and of the definition of the “rate of interest” under the NBA.
Plaintiff's Complaint asserts misconduct in the sale and administration of various financial service products, but focuses, as do Defendants' arguments for removal, on payment protection plans (DCC/DSA). The Complaint defines the plans as “ancillary services,” which protect consumers from fraud and unauthorized charges and increase financial security. Complaint, ECF No. 1, Ex. 1, at ¶¶ 19–20. The plans allow a cardholder to cancel monthly minimum payments, or defer them for a limited period, thus preventing delinquencies. Id. at ¶¶ 42–43. When the payment deferment or cancellation benefit is invoked, both monthly interest and the DCC/DSA fee continue to accrue. Id. at ¶ 47. Defendants offer no evidence to support a contrary characterization of the DCC/DSA at issue, nor do they offer any affirmative evidence that they treat the plans as “interest” in their own business practices. In the absence of such evidence the Court relies on Plaintiff's undisputed characterization of the substance and function of the plans at issue.
This Court's removal jurisdiction is limited. A civil action is removable if the plaintiff's claim is one “arising under” federal law. 28 U.S.C. § 1441(b). Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 53 L.Ed. 126 (1908). In this case, Plaintiff's Complaint states only claims under the WVCCPA, a state law, and mentions no federal cause of action. “As a general rule, absent diversity jurisdiction, a case will not be removable if the complaint does not affirmatively allege a federal claim.” Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003).
However, certain exceptions to this “well pleaded complaint” rule do exist. For instance, “[w]hen [a] federal statute completely pre-empts [a] state-law cause of action, a claim which comes within the scope of that cause of action, even if pleaded in terms of state law, is in reality based on federal law.” Id. at 8, 123 S.Ct. 2058. Under the “complete preemption” doctrine, such a case is removable pursuant to 28 U.S.C. § 1441(b). Complete preemption removal is subject to the “general principle that defendants seeking removal under the doctrine...
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