Meade v. Avant of Colorado LLC

Filing 75

Order Adopting Recommendation and Remanding Case by Judge William J. Martinez on 3/1/2018. (wjmlc2, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 17-cv-0620-WJM-STV
JULIE ANN MEADE, Administrator, Uniform Consumer Credit,
Plaintiff,
v.
AVANT OF COLORADO, LLC, d/b/a Avant, and
AVANT, INC.,
Defendants.

ORDER ADOPTING RECOMMENDATION AND REMANDING CASE

Now before the Court in this financial regulation action is the Plaintiff’s Motion to
Remand for Lack of Subject Matter Jurisdiction (ECF No. 28 (the “Motion)), and the
Recommendation entered by U.S. Magistrate Judge Scott T. Varholak that Plaintiff’s
Motion should be granted (ECF No. 62 (the “Recommendation”)). For the reasons
explained below, the Recommendation is adopted, the Motion is granted, and this case
will be remanded to Denver District Court.
I. PROCEDURAL BACKGROUND
This action seeking to enforce Colorado statutes is brought by Plaintiff, Julie Ann
Meade, the Administrator of the Colorado Uniform Consumer Credit Code (the
“Administrator”) against Defendants Avant of Colorado, LLC and Avant, Inc. (together,
“Avant”).
The Administrator filed this action in Denver District Court, alleging Avant had
violated Colorado’s statutory limits on excessive finance and delinquency charges

Colorado Revised Statutes §§ 5-2-201 & -203, as to certain consum er credit loans
further described below, and also that the terms of those loans included an unlawful
choice of law provision, in violation of Colorado Revised Statutes § 5-1-201(8). (See
generally ECF No. 6.)
Avant removed the action on March 9, 2017 under 28 U.S.C. § 1441(a), arg uing
that this Court has federal subject matter jurisdiction under 28 U.S.C. § 1331 “because
Congress has completely preempted the state law claims at issue in this case,”
specifically, that Section 27 of the Federal Deposit Insurance Act (as amended by the
Depository Institutions Deregulation and Monetary Control Act of 1980, Pub. L. No. 96221 (“DIDA” or “DIDMCA”)), codified at 12 U.S.C. § 1831d, 1 “provides the exclusive
cause of action for the harm alleged by the Administrator,” and allows Avant to impose
finance and delinquency charges in excess of what Colorado law would permit,
because Avant’s loans were initiated by WebBank, a federally insured bank chartered
in Utah, where comparatively permissive usury laws would permit the charges and
interest at issue here. (ECF No. 1 ¶¶ 13, 21–22.)
The Administrator filed her Motion to Remand for Lack of Subject Matter
Jurisdiction on March 31, 2017. (ECF No. 28 (the “Motion”).) The Motion has been
fully briefed, including multiple briefs submitted by amici curiae in the banking and

1

Some decisions cited in this Order cite this statute as DIDA, while others refer to it as
the FDIA, or more specifically, Section 27. For consistency with the Recommendation and the
parties’ briefing, the Court uses “Section 27,” interchangeably with citation to 12 U.S.C.
§ 1831d.

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lending industry. (See ECF Nos. 41, 44-1, 49, 51, 58.) 2 The undersigned referred the
Motion to United States Magistrate Judge Scott T. Varholak for a Recommendation.
Judge Varholak held oral argument on the Motion (ECF Nos. 59, 61), and entered his
written Recommendation that the Motion should be granted (ECF No. 62). Avant timely
filed an Objection to the Recommendation pursuant to Federal Rule of Civil Procedure
72(b) (ECF No. 69); an additional amicus brief was filed by WebBank in support of
Avant’s Objection (ECF No. 68-1); and the Administrator has responded (ECF No. 73).
II. FACTUAL BACKGROUND
No party objects to the Recommendation’s summary of the relevant factual
background, which, in the interest of simplicity, the Court adopts in full and
incorporates herein:
The Administrator is authorized to enforce compliance with
the Colorado Uniform Consumer Credit Code (UCCC), see
generally Colo. Rev. Stat. § 5-6-104, including conducting
investigations of violations of the UCCC, id. §§ 5-6-106,
5-2-305, issuing cease and desist orders for violations of the
UCCC, id. § 5-6-109, and initiating civil actions against
creditors “for making or collecting charges in excess of those
permitted by this code,” id. § 5-6-114. In a civil action, the
Administrator may seek injunctive relief “to restrain a person
from violating” the code, id. § 5-6-111, and to prevent a
creditor or person from “[m]aking or enforcing
unconscionable terms or provisions of consumer credit
transactions,” or engaging in fraudulent conduct to induce
consumers to enter credit transactions, id. § 5-6-112. The

2

A closely related Motion to Remand has been fully briefed and is pending in Meade v.
Marlette Funding LLC, Case No. 1:17-cv-0575-PAB-MJW (D. Colo.), while in another action,
Cross River Bank v. Meade, Case No. 1:17-cv-0832-PAB-KMT, the plaintiff filed suit against the
Administrator, affirmatively seeking declaratory and injunctive relief from the Administrator’s
enforcement action, and the Administrator has filed a Motion to Dismiss raising largely the
same jurisdictional issues addressed here. Additional amicus briefs have been filed in both of
those actions, and the Court is advised of the arguments raised.

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Administrator may seek civil penalties and refunds to
consumers against creditors charging fees in excess of
those allowed by the UCCC. Id. § 5-6-114.
Defendant Avant of CO, a limited liability company organized
under the laws of Delaware, and a subsidiary of Defendant
Avant, Inc., applied to the Administrator for a Colorado
supervised lender’s license in March 2013. [#6 at 2, 4]
According to the Administrator, Avant of CO sought the
license for the purpose of “making (i.e., originating) small
installment loans of $1,000 or less” and “making (i.e.,
originating) unsecured loans or loans secured by personal
property and/or autos.” [Id. at 5] Avant of CO became a
Colorado supervised lender. [Id. at 6]
Avant, Inc. entered into a lending program agreement with
WebBank, a Utah-chartered industrial bank in 2014. [ Id. at
25] Pursuant to the agreement, WebBank makes loans to
consumers [id. at 27], who apply for and obtain loans
through Avant, Inc.’s website (“Avant Loans”) [id. at 7-8].
Within two business days of when the Avant Loans are
made, WebBank sells the loans to third-party purchasers,
including Avant, Inc., or an Avant, Inc. non-bank affiliate.
[Id. at 28; #41 at 4]
The Administrator argues that WebBank is “not the true
lender of the Avant Loans” that it sells to Avant, Inc. or its
affiliates because “WebBank does not bear the predominant
economic interest in the loans.” [#6 at 33] For example,
Avant, Inc. paid the implementation fee to initiate the lending
program, paid all of WebBank's legal fees in the program,
bears all of the expenses incurred in marketing the lending
program to consumers, determines which loan applicants
will receive Avant Loans and bears all costs of making these
determinations, ensures the program complies with federal
and state law, assumes responsibility for all servicing and
administration of the Avant Loans “even during the period
before WebBank sells the loans to Avant, Inc. or its
affiliates,” and assumes responsibility for all communications
with loan applicants and consumers who receive Avant
Loans. [Id. at 34(a)-(j)] Additionally, Avant, Inc. bears all
risk of default, and indemnifies WebBank against all claims
arising from WebBank's participation in the lending program.
[Id. at 34(l)] Avant, Inc., along with the other non-bank
entities, collects 99% of the profits on the loans while
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“WebBank's share in the profit is only approximately one
percent.” [Id. at 34(o); see also #28 at 4]
The Administrator alleges that a primary purpose of
WebBank's arrangement with Defendants “is to allow Avant,
Inc. or other non-banks to circumvent state laws, including
Colorado laws, that limit the interest rates and other finance
charges that may be assessed on the Avant Loans.” [#6 at
29] Avant of CO and Avant, Inc. “have undertaken direct
collection of payments from or enforcement of rights against
consumers arising from” these loans [Id. at 19], and collect
delinquency charges on the loans for late payments [Id. at
22-23]. Defendants “have made or collected charges from
consumers” on these loans “which exceed the maximum
finance charges that are permitted for supervised loans
under Colorado Law.” [Id. at 20] The written agreements
evidencing the Avant Loans also purport to apply Utah state
law to the agreements. [Id. at 24]
In January 2016, the Administrator conducted a compliance
examination of Avant of CO, pursuant to Colo. Rev. Stat.
§ 5-2-305. [Id. at 36] In the subsequent report of
examination, the Administrator informed Avant of CO that it
was charging finance and delinquency charges in violation of
Colorado law, and that the loan agreements providing for the
application of Utah law also violated Colorado law. [Id. at
37] The Administrator directed Avant of CO to issue refunds
to consumers for the excess charges and fees, and to apply
Colorado law to any loan agreements. [Id. at 38] Avant of
CO responded that its relationship with WebBank preempted
Colorado finance charge limits and choice of law restrictions.
[Id. at 39] The Administrator rejected this position and
again requested that Avant of CO take corrective action. [Id.
at 40] Avant of CO refused. [Id. at 41]
(ECF No. 62 at 2–4 (citations as in original; footnote omitted).)
III. LEGAL STANDARDS
A.

Review Under Federal Rule of Civil Procedure 72(b)
When a magistrate judge issues a recommendation on a dispositive matter,

Federal Rule of Civil Procedure 72(b)(3) requires that the district judge “determine de
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novo any part of the magistrate judge’s [recommendation] that has been properly
objected to.” An objection to a recommendation is properly made if it is both timely and
specific. United States v. One Parcel of Real Property Known as 2121 East 30th St.,
73 F.3d 1057, 1059 (10th Cir. 1996). An objection is suf ficiently specific if it “enables
the district judge to focus attention on those issues—factual and legal—that are at the
heart of the parties’ dispute.” Id. In conducting its review, “[t]he district court judge may
accept, reject, or modify the recommendation; receive further evidence; or return the
matter to the magistrate judge with instructions.” Id. Here, Avant filed a timely and
sufficiently specific Objection (ECF No. 69), and the Court engages in de novo review.
B.

Federal Question Removal & Complete Preemption
A case that has been removed to federal court pursuant to 28 U.S.C. § 1441

must be remanded back to state court if, at any time prior to final judgment, the federal
court finds that it lacks subject matter jurisdiction. 28 U.S.C. § 1447(c). The party
invoking federal jurisdiction via removal has the burden of showing that removal is
proper. Lindstrom v. United States, 510 F.3d 1191, 1193 (10th Cir. 2007) (citing McNutt
v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936)). Courts must
strictly construe the requirements of removal jurisdiction and “all doubts are to be
resolved against removal.” Fajen v. Found. Reserve Ins. Co., 683 F.2d 331, 333 (10th
Cir. 1982).
In the absence of diversity of citizenship, a case may be tried in federal court
when the civil action arises “under the Constitution, laws, or treaties of the United
States.” 28 U.S.C. § 1331; see also Pan Am. Petroleum Corp. v. Superior Court of Del.

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In and For New Castle Cnty., 366 U.S. 656, 663 (1961) (there is no federal question
jurisdiction “unless it appears from the face of the complaint that determination of the
suit depends upon a question of federal law.”).
“[A] right or immunity created by the Constitution or laws of the United States
must be an element, and an essential one, of the plaintiff's cause of action . . . and the
controversy must be disclosed upon the face of the complaint, unaided by the answer
or by the petition for removal.” Id. at 663 (quoting Gully v. First Nat’l Bank, 299 U.S.
109, 112–13 (1936)). This “well-pleaded complaint rule” provides that “the plaintiff is
the master of the complaint, that a federal question must appear on the face of the
complaint, and that the plaintiff may, by eschewing claims based on federal law, choose
to have the cause heard in state court.” Caterpillar Inc. v. Williams, 482 U.S. 386,
398-99 (1987).
“The fact that a court must apply federal law to a plaintiff's claims or construe
federal law to determine whether the plaintiff is entitled to relief will not confer subject
matter jurisdiction” Dunlap v. G&L Holding Grp. Inc., 381 F.3d 1285, 1291-92 (11th Cir.
2004) (emphasis in original); Felix v. Lucent Techs., Inc., 387 F.3d 1146, 1154 (10th
Cir. 2004). Nor is it be enough that an asserted or anticipated defense “relies on the
preclusive effect of a prior federal judgment, or the pre-emptive effect of a federal
statute.” Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6 (2003) (“Beneficial”) (citing
Rivet v. Regions Bank of La., 522 U.S. 470 (1998)); Franchise Tax Bd. of Cal. v.
Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1 (1983); Devon
Energy Prod. Co., L.P. v. Mosaic Potash Carlsbad, Inc., 693 F.3d 1195, 1204 (10th Cir.

7

2012) (“Ordinarily, neither the plaintiff's anticipation of a federal defense nor the
defendant’s assertion of a federal defense is sufficient to make the case arise under
federal law.” (internal quotation marks omitted; alterations incorporated)); Felix, 387
F.3d at 1154 (“a federal defense, even one relying on the preclusive effect of a federal
statute, is not enough to authorize removal to federal court.”).
However, as a corollary to the well-pleaded complaint role, the complete
preemption doctrine allows, in limited circumstances that “a state law cause of action
may be removed to federal court on the theory that federal preemption makes the state
law claim necessarily federal in character.” Devon, 693 F.3d at 1203 (internal quotation
marks omitted).
The doctrine of complete preemption should not be confused with ordinary
preemption, which occurs when there is the defense of “express preemption,” “conflict
preemption,” or “field preemption” to state law claims. Express preemption is limited to
those situations where a federal statute expressly preempts state law. Arizona v.
United States, 567 U.S. 387 (2012). Conflict preemption contemplates those situations
where it is impossible to comply with both federal and state law, and state law creates
an obstacle to the congressional intention in enacting a federal statute. Id. Field
preemption occurs where a pervasive framework leaves no room for the state to act, or
where the federal interest is so dominant that it precludes enforcement of state law on
the same subject. Id. However, these concepts are distinct from complete preemption,
Felix, 387 F.3d at 1156, providing only a federal “defense to the allegations,”
Caterpillar, 482 U.S. at 392. As a mere defense, however, the “preemptive effect of a

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federal statute . . . will not provide a basis for removal.” Beneficial, 539 U.S. at 6. “[A]
state cause of action may not be viable because it is preempted by a federal law—but
only if federal law provides its own cause of action does the case raise a federal
question that can be heard in federal court.” Dutcher v. Matheson, 733 F.3d 980, 986
(10th Cir. 2013)
“By contrast, when complete preemption exists, there is ‘no such thing’ as the
state action, since the federal claim is treated as if it appears on the face of the
complaint because it effectively displaces the state cause of action.” Lontz v. Tharp,
413 F.3d 435, 441 (4th Cir. 2005) (quoting Beneficial, 539 U.S. at 11). Because this
doctrine undermines a plaintiff's ability to plead claims under the law of his or her
choosing, the Supreme Court has been “reluctant” to find complete preemption. Id.
(citing Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 65 (1987)). Complete preemption has
been characterized as “quite rare,” Dutcher, 733 F.3d at 985 (internal quotation marks
omitted), representing an “extraordinary pre-emptive power,” that “should not be lightly
implied,” Devon 693 F.3d at 1204.
Indeed, the Supreme Court has recognized complete preemption in only three
areas, specifically, cases involving § 301 of the Labor Management Relations Act of
1947; § 502 of the Employee Retirement Income Security Act of 1974 (“ERISA”);
and—as most relevant here—in actions for usury against national banks under the
National Bank Act. See Beneficial, 539 U.S. at 10–11 (National Bank Act); Metro. Life,
481 U.S. at 66--67 (ERISA § 502(a)); Avco Corp. v. Aero Lodge No. 735, Int’l Ass’n of
Machinists, 390 U.S. 557, 560 (1968) (Labor Management Relations Act § 301).

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For complete preemption to apply, the challenged claims must “fall within the
scope of federal statutes intended by Congress completely to displace all state law on
the given issue and comprehensively to regulate the area.” Hansen v. Harper
Excavating, Inc., 641 F.3d 1216, 1221 (10th Cir. 2011). T he Tenth Circuit has
explained:
We read the term [“complete preemption”] not as a crude
measure of the breadth of the preemption (in the ordinary
sense) of a state law by a federal law, but rather as a
description of the specific situation in which a federal law not
only preempts a state law to some degree but also
substitutes a federal cause of action for the state cause of
action, thereby manifesting Congress’s intent to permit
removal.
Schmeling v. NORDAM, 97 F.3d 1336, 1339 (10th Cir. 1996).
Consequently, the Tenth Circuit has held that a claim of complete preemption
requires a two-part analysis. The court must ask both “whether the federal regulation at
issue preempts the state law relied on by the plaintiff,” and also “whether Congress
intended to allow removal in such a case, as manifested by the provision of a federal
cause of action to enforce the federal regulation.” Devon, 693 F.3d at 1205-06 (citation
and internal punctuation omitted). Courts should usually begin with the second of these
two inquiries. Id.; accord Schmeling, 97 F.3d at 1343 (interests of “comity and
prudence” dictate that courts addressing remand should avoid needlessly addressing
the first question, which will frequently require a discussion of the merits of the
preemption defense).

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IV. ANALYSIS
A.

The Court Adopts the Recommendation
Judge Varholak’s Recommendation began by observing that Section 27 “allows

a state bank to charge interest rates permitted in its home state on loans made in
another state, even if that interest rate would be unlawful in the state where the loan is
made.” (Id. at 8–9.) The Recommendation noted this is similar to Sections 85 & 86 of
the National Bank Act (“NBA”), which “allo[w] national banks to charge interest rates to
the extent allowed by their home states, notwithstanding the laws of the states in which
the loans are made,” and “se[t] forth the elements of a usury claim against a national
bank.”
Judge Varholak also summarized the holding in Beneficial National Bank v.
Anderson, namely, that Sections 85 & 86 of the NBA “‘provide the exclusive cause of
action’ for usury claims against national banks and ‘there is . . . no such thing as a
state-law claim of usury against a national bank’ and thus the NBA com pletely preempts
state law usury claims against national banks.” (Id. at 9 (quoting Beneficial, 539 U.S. at
11).)
Noting that the Supreme Court has not resolved “whether the FDIA completely
preempts usury claims against state-chartered banks,” the Recommendation
acknowledged that “courts have split” on the question of whether Section 27 completely
preempts usury claims against state chartered banks” (id. at 10 (collecting cases),3 but

3

Cases reflecting this divided authority include Thomas v. U.S. Bank Nat. Ass’n ND, 575
F.3d 794, 797 (8th Cir. 2009) (“Complete preemption does not exist here because the language
of [Section 27] unlike the NBA, does not reflect Congress’ intent to provide the exclusive cause
of action for a usury claim against a federally-insured state-chartered bank. To the contrary, a

11

also concluded that this Court “need not venture into this uncertain territory,” because in
this case “the Administrator has not asserted a claim against a state bank” (id. at 11).
The Recommendation reviewed numerous court decisions which “have
repeatedly held that when claims are asserted against a non-bank entity, complete
preemption does not apply . . . even if the non-bank defendant has a close relationship
with a state or national bank.” (Id. at 11–12.)4

close examination of the statutory language indicates Congress very clearly intended the
preemptive scope of [Section 27] to be limited to particular circumstances.”; recognizing
disagreement with Vaden II); Discover Bank v. Vaden, 489 F.3d 594, 606 (4th Cir. 2007)
(“Vaden II”) (“we are hard-pressed to conclude other than that Congress intended complete
preemption of state-court usury claims under the FDIA”); rev’d on other grounds, 556 U.S. 49
(2009) (“Vaden III”) (holding the court lacked federal question jurisdiction to compel arbitration;
“the Court of Appeals misidentified the dimensions of ‘the controversy between the parties * * *
the whole ‘controversy between the parties’ [did] not qualify for federal-court adjudication”); and
In re Cmty. Bank of N. Virginia, 418 F.3d 277, 295 (3d Cir. 2005) (“Community Bank”) (“[Section
27] completely preempts any state law attempting to limit the amount of interest and fees a
federally insured-state chartered bank can charge”).
4

Decisions cited by the Recommendation include: Cmty. State Bank v. Knox, 523 F.
App’x 925, 930 (4th Cir. 2013) (“Knox II”) (no federal subject-matter jurisdiction where plaintiff
did not bring claims against bank); Community Bank, 418 F.3d at 296–97; Commonwealth of
Pennsylvania v. Think Fin., Inc., 2016 WL 183289, at *13 (E.D. Pa. Jan. 14, 2016) (“Think
Finance”) (“The Third Circuit . . . distinguishes between claims against banks and claims
against non-banks for purposes of preemption” (citing Community Bank, 418 F.3d at 296); “that
there are no claims made against a bank is sufficient to avoid preemption”); Cmty. State Bank
v. Knox, 850 F. Supp. 2d 586, 601 (M.D.N.C. 2012) (“Knox I ” ) (“[The] Plaintiffs chose to bring
claims against only the non-bank entities and have asserted potential claims regardless of
whether those entities are the true lenders or only the servicers of the loans at issue. As a
result, the state-law claims . . . are simply state law claims against non-bank entities, and are
not completely preempted by federal law.”), aff'd, Knox II, 523 F. App’x 925; Dandy v.
Wilmington Fin., Inc., 2010 WL 11493721, at *6 (D.N.M. May 3, 2010) (“Plaintiff is not suing . . .
any . . . . federal financial institution. The sole Defendant is [a non-bank]. * * * Because the
alleged federal nature of Plaintiff's claim is not clear on the face of the Complaint, Defendant is
using preemption only as a defense, which is generally not grounds for removal.”); W. Virginia
v. CashCall, Inc., 605 F. Supp. 2d 781, 788 (S.D.W.Va. 2009) (“CashCall”) (“[T]he State's usury
law claim is directed against CashCall, which is not a bank, and therefore, the claim does not
invoke and cannot be completely preempted by the FDIA.”); Flowers v. EZPawn Okla., Inc., 307
F. Supp. 2d 1191, 1196, 1204 (N.D. Okla. 2004) (no complete preemption where plaintiff’s
claims were only brought against non-bank defendants); and Colorado ex rel. Salazar v. Ace
Cash Exp., Inc., 188 F. Supp. 2d 1282, 1285 (D. Colo. 2002) (“Ace Cash”) (“Defendant and the
national bank are separate entities and their relationship does not give rise to complete

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Consistent with these several decisions, and particularly noting the 2002
decision by Senior U.S. District Judge Wiley Y. Daniel of this Court in Ace Cash, supra
note 3, the Recommendation resolved the present issue in the same way. Emphasizing
that “the Administrator only asserts . . . . claims against [Avant],” “does not assert any
claims against WebBank,” and that “the relief sought is related to the charges that
[Avant has] imposed on the loans [it] purchased from WebBank” (id. at 15), and after
distinguishing cases and arguments advanced by Avant which are further addressed
below, the Recommendation concluded that the “Administrator’s state law claims are
directed against [Avant],” which is not a state-chartered bank, and “[t]he claim s thus are
not completely preempted by the FDIA, even if the Court were to find that complete
preemption applies to usury claims against state-chartered banks” (id. at 22).
The Court is broadly persuaded by the analysis set out in the Recommendation,
and, applying de novo review under rule 72(b), agrees with Judge Varholak’s view of
the applicable law, and adopts and affirms the Recommendation in its entirety.
B.

Avant’s Objections are Unavailing
In its Objection, Avant argues that Judge Varholak erred in four ways. Having

reviewed the Motion, the Recommendation, Avant’s Objection, and all of the related
briefs, the Court organizes its further discussion by addressing each of Avant’s four
arguments in turn.
1.

Complete Preemption Under Section 27
a.

“Any loan . . . made” by a Federally-Insured Bank

preemption under the NBA. * * * Defendant's relationship with [a bank] does not elevate
Defendant's status to that of a national bank.”).

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Avant argues that the recommendation mis-applied the complete preemption
doctrine inasmuch as Avant argues that Section 27 applies to “‘any loan . . . made’ by a
state-chartered bank” and “makes no distinction between a cause of action against
banks versus one against ‘non-bank defendants.’” (ECF No. 69 at 4 (quoting 12 U.S.C.
§ 1831d); emphasis in original.) Relatedly, Avant argues that under common law
principles the assignee of a loan “steps into the shoes of the assignor” (id. at 5 (internal
quotation marks omitted)), and thus “the complete preemption of state usury law [by
Section 27] survives the assignment of the loans . . . to Avant,” meaning that complete
preemption should apply regardless of whether the loan “is held by WebBank or
assigned to Avant . . . or its affiliates or any other third party” (id. at 6). Thus, in Avant’s
view, it is immaterial whether a loan is presently “held” by a State-chartered bank, so
long as it was originally “made” by such a bank.
In support, Avant argues that the text of Section 27 “makes no distinction
between a cause of action against banks versus one against ‘non-bank defendants,’”
and that an “exclusive federal cause of action for bringing a usury claim” is set out by
Section 27 which “is tied to the scope of preemption,” and applicable to “‘any loan . . .
made’ by a state-chartered bank,” regardless of whether another entity later acquires
rights in the debt or loan. (ECF No. 69 at 5.)
However, while Avant’s “any loan . . . made” argument relies on isolating three
words from the statute, the language of § 1831d as a whole defeats Avant’s argument.
Initially, the statute states its purpose is to prevent discrimination “against Statechartered insured depository institutions,” and does not, on its face, state any purpose
with regard to institutions other than federally-insured banks, much less a
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Congressional intent to broadly foreclose state law actions or to permit removal to
federal court.
Further, and significantly, the relevant text of § 1831d(a) states that “[a] State
bank . . . . may, notwithstanding any State constitution or statute which is hereby
preempted for the purposes of this section, . . . charge on any loan . . . or . . . note . . .
or other evidence of debt, interest at a rate of not more than . . . the rate allowed by the
laws of the State . . . where the bank is located.” 12 U.S.C. § 1831d(a). 5 This language

5

The statute in its entirety reads as follows:
(a) Interest rates
In order to prevent discrimination against State-chartered insured
depository institutions, including insured savings banks, or insured
branches of foreign banks with respect to interest rates, if the
applicable rate prescribed in this subsection exceeds the rate
such State bank or insured branch of a foreign bank would be
permitted to charge in the absence of this subsection, such State
bank or such insured branch of a foreign bank may,
notwithstanding any State constitution or statute which is hereby
preempted for the purposes of this section, take, receive, reserve,
and charge on any loan or discount made, or upon any note, bill
of exchange, or other evidence of debt, interest at a rate of not
more than 1 per centum in excess of the discount rate on
ninety-day commercial paper in effect at the Federal Reserve
bank in the Federal Reserve district where such State bank or
such insured branch of a foreign bank is located or at the rate
allowed by the laws of the State, territory, or district where the
bank is located, whichever may be greater.

15

governs what charges a “State bank” may impose, but again, does not on its face
regulate interest or charges that may be imposed by a non-bank, including one which
later acquires or is assigned a loan made or originated by a state bank.
Moreover, the cause of action provided by § 1831d(b), does not on its face apply
to actions against non-banks, instead providing a cause of action to “the person who
paid” an excess rate of interest, who then “may recover in a civil action . . . from such
State bank . . . .” 12 U.S.C. § 1831d(b). Contrary to Avant’s argument that the statute
“makes no distinction” between banks and non-banks, and that its cause o f action does
not distinguish between bank and non-bank defendants, the statutory text in fact
provides for recovery “from [a] State bank,” but is silent as to any remedy or recovery
against a non-bank such as Avant.
Under the first, and here dispositive, inquiry of the two-part complete preemption
analysis, the cause of action provided by § 1831d(b) does not manifest a Congressional
(b) Interest overcharge; forfeiture; interest payment recovery
If the rate prescribed in subsection (a) of this section exceeds the
rate such State bank or such insured branch of a foreign bank
would be permitted to charge in the absence of this section, and
such State fixed rate is thereby preempted by the rate described
in subsection (a) of this section, the taking, receiving, reserving,
or charging a greater rate of interest than is allowed by subsection
(a) of this section, when knowingly done, shall be deemed a
forfeiture of the entire interest which the note, bill, or other
evidence of debt carries with it, or which has been agreed to be
paid thereon. If such greater rate of interest has been paid, the
person who paid it may recover in a civil action commenced in a
court of appropriate jurisdiction not later than two years after the
date of such payment, an amount equal to twice the amount of
the interest paid from such State bank or such insured branch of a
foreign bank taking, receiving, reserving, or charging such
interest.
12 U.S.C. § 1831d

16

intent to allow removal of actions such as this one, which pleads only state law claims,
brought against a non-bank entity. See Devon, 693 F.3d 1195. In sum, the Court is
unpersuaded by Avant’s “any loan . . . made” argument, as lacking a sound basis in the
statutory text. The Court cannot agree that the language of § 1831d manifests a
Congressional intent to allow removal, which should “not be lightly implied.” See id. at
1204, 1205-06. Nor is the Court persuaded that § 1831d ref lects Congressional intent
to “completely to displace all state law,” Hansen, 641 F.3d at 1221, including as to state
regulation of lenders who are neither banks chartered in other states nor f ederally
insured, or to displace state regulation of other, similarly situated non-bank defendants
who violate state-law lending protections. Accordingly, this is not an instance that gives
rise to the “rare” and “extraordinary” doctrine of complete preemption, and so removal
was improper. Cf. Dutcher, 733 F.3d at 987 (“the absence of a federal cause of action
precludes us from relying on complete preemption as a jurisdictional basis for the
district court to act”); accord CashCall, 605 F. Supp. 2d at 786, 788 (“The totality of the
Complaint shows that the State’s suit is directed against a single, specific entity
violating . . . state laws including the usury law—that entity is . . . not the Bank.”; “as . . .
in [Ace Cash] . . . [t]he Complaint strictly is about a non-bank’s violation of state law. It
alleges no claims against a . . . bank” (emphasis in original)). Whether or not Section
27 gives rise to a defense of preemption on the merits of Plaintiff’s claims, it does not
establish complete preemption or permit removal of the Administrator’s exclusively
state-law claims to federal court.

6

6

Even as to the question of whether § 1831d gives rise to complete preemption of
claims against banks, courts which have held there is not such complete preemption have

17

b.

Beneficial and Sawyer

The Administrator correctly—and tellingly—points out that “Avant does not cite a
single case that has relied upon its ‘any loan . . . made’ argument to conclude that usury
claims against non-banks are completely prempted,” and that “Avant’s argument is
contrary to the . . . decisions . . . [that] uniformly hold that Section 27 of the FDIA, and [§§
85 & 86] of the National Bank Act do not apply to non-bank entities, and that state usury
claims against such non-banks . . . are not completely preempted.” (ECF No. 73 at 3.)
In this respect, the Court agrees with the Administrator’s argument against
removal, with the Recommendation’s conclusion that “[o]ther courts have consistently
come to the same conclusion, especially when the plaintiff has pled facts suggesting
that the non-bank is the true lender” (ECF No. 62 at 14), and w ith the conclusion of U.S.
District Judge James A Beaty, Jr. in Knox I that “the weight of authority” supports “the
conclusion that state law claims brought only against non-bank are not subject to
complete preemption, even if the state law claims would have been subject to complete
preemption if they had been brought against a national or state-chartered bank.” 850 F.
Supp. 2d at 598–99 (emphasis added; gathering additional authorities).
Avant’s argument to the contrary relies principally on Beneficial and on Sawyer v.

distinguished the text of § 1831d from the provisions of the NBA addressed in Beneficial,
finding the preemption language in Section 27 too equivocal to give rise to complete
preemption, in contrast to the relevant language in the NBA. See, e.g., Thomas, 575 F.3d at
797; Robinson v. First Hawaiian Bank, 2017 WL 3641564, at *6 (D. Haw. Aug. 24, 2017)
(finding the language of § 1831d “evinces a contingency—i.e., state law is preempted only if
and when a specific interest rate comparison test is met. Since the language is unmistakably
conditional . . . Congressional intent could not have been to completely preempt the field”
(emphasis in original)); Robinson v. Bank of Hawaii, 2017 WL 2901333, at *5, 6 (D. Haw. July
7, 2017) (“The limiting language contained in [Section 27] does not reflect an intent by
Congress to convert all state law usury claims into federal question causes of action.”).

18

Bill Me Later, Inc., 23 F. Supp. 3d 1359 (D. Utah 2014). The Recommendation
considered both at length, and neither supports Avant’s complete preemption
argument.
In Beneficial, borrowers sued the bank from which they obtained certain shortterm loans, alleging common law usury and violation of a state statute limiting
excessive interest. 539 U.S. at 4, 9. The Supreme Court recognized complete
preemption, holding the “the National Bank Act [NBA] provide[s] the exclusive cause of
action for usury claims against national banks.” See Id. at 9 (emphasis added). No
less than eight times, the Supreme Court’s discussion framed the issue as whether
complete preemption applied to claims and remedies sought “against a national bank.”
See id. at 5–11; see, e.g. id. at 9 (“Only if Congress intended § 86 to provide the
exclusive cause of action for usury claims against national banks would the statute”
[give rise to complete preemption]” (emphasis added)); id. at 11 (“In actions against
national banks [the NBA] supersede[s] . . . . state usury laws and create[s] a federal
remedy . . . . that is exclusive” (emphasis added)). Thus, neither the holding nor the
reasoning of Beneficial provides any support to Avant’s argument that complete
preemption “travels with the loan,” and should apply equally to claims brought against
either banks or their assignees. (See ECF No. 69 at 5.)
In Sawyer, the plaintiff used eBay/PayPal’s “Bill Me Later” program to finance an
online purchase. 23 F. Supp. 3d at 1360. T he Bill Me Later entity facilitated such loans
and acted as a “service provider,” performing credit checks and other services, id. at
1361, while the originating lender was a Utah-chartered, federally insured bank (first
CIT Bank, later WebBank, the same bank involved in the lending program here), id. at
19

1360. Similar to the facts here, WebBank generally sold the loans two days after they
were originated, including to the Bill Me Later entity. Id. Plaintiff sued Bill Me Later,
alleging violation of California statutes and usury law. See Id. at 1360, 1361–62. In
granting Bill Me Later’s motion to dismiss the claims under Rule 12(b)(6), U.S. District
Judge Clark Waddoups held that “in light of the express preemption of Section 27 of the
FDIA of Plaintiff’s usury and late fee claims * * * Plaintiff cannot allege that Utah does
not allow the interest rates and late fees disclosed and then charged” on the loans
initiated by Utah banks. Id. at 1370 (emphasis added).
Sawyer thus dealt with the defense of express preemption. It did not address
complete preemption, nor the relevant concerns of federal question jurisdiction and
removal. To the contrary, Judge Waddoups expressly described as “inapposite” and
“inapplicable,” cases cited which were “dealing . . . with the issue of complete
preemption for removal jurisdiction.” Id. at 1369 (citing Vaden II, 489 F.3d at 602, and
Flowers, 307 F. Supp. 2d at 1205). 7
Thus neither Beneficial nor Sawyer dealt with the issue raised here, whether
Section 27 gives rise to complete preemption permitting removal of state law claims
asserted against a non-bank entity. To the extent Avant argues that Section 27 should
be read to incorporate the common law principle “that the assignee steps into the shoes
of the assignor,” the Court finds this reiteration of the “any loan . . . made” argument is
insufficient to overcome the lack of either a textual basis or any prior case law

7

To the extent Sawyer relied on Beneficial as “holding [an] action [was] expressly
preempted” under the NBA, it mischaracterized the holding of Beneficial as addressing express
preemption, rather than complete preemption. See Sawyer, 23 F. Supp. 3d at 1363.

20

supporting Avant’s argument that “complete preemption travels with the loan.”
c.

“Suing the Wrong Party”

Avant’s reliance on Hogan v. Jacobson, 823 F.3d 872, 880 (6th Cir. 2016) for the
proposition that the administrator “may not evade complete preemption merely by suing
the wrong party” is also unavailing. (See ECF No. 69 at 5.) Even assuming the
analysis of Hogan (an ERISA case) applies here, the relevant inquiry under its analysis
would be “whether the facts alleged in the complaint actually implicate a federal cause
of action.” 823 F.3d at 880. As analyzed above, the Court is unpersuaded that the
Administrator’s state law claims, brought only against non-bank entities, implicate any
federal cause of action.8
Moreover, the Court finds that this is not a case where the Administrator is “suing
the wrong party” or manipulating her pleadings to avoid preemption. As pled in the
Complaint and summarized in the Recommendation, Avant provides the website
through which customers apply for the Avant Loans, Avant develops the criteria for
making loans, Avant decides which applicants will receive the loans, and Avant (or its
affiliates) purchases the loans within two days after they are made by WebBank. (See
ECF No. 62 at 16; see generally ECF No. 6 ¶¶ 7–32.) Avant also ensures the

8

WebBank has not sought to intervene (perhaps lending support to both the
Administrator’s position that Avant is the “true lender,” and an argument that Avant, not
WebBank, is the real party in interest), but WebBank did file an amicus brief in support of
Avant’s Objection to the Recommendation. (ECF No. 68-1.) WebBank makes the same
“wrong party” and “any loan . . . made” arguments which the Court has addressed above. (ECF
No. 68-1 at 1–2 (citing Hogan, 823 F.3d at 880).) WebBank’s passing citation to David P.
Coldesina, D.D.S., P.C. v. Estates of Simper, 407 F.3d 1126, 1139 (10th Cir. 2005) is
inapposite and equally unavailing. (ECF No. 68-1 at 2.) Coldesina did not address remand, but
held that because a direct claim against an ERISA fiduciary was pre-empted, a derivative claim
for vicarious liability based on the fiduciary’s actions was also preempted. 407 F. 3d at 1139.
That conclusion has no bearing here.

21

program’s compliance with state and federal law, services and administers the loans,
bears all the risk on the loans in the event of default, pays all the legal fees and
expenses related to the lending program, retains 99% of the profits on the loans, and
indemnifies WebBank against all claims arising from WebBanks’s involvement in the
loan program. (ECF No. 62 at 16.) These circumstances are far closer to CashCall
than to Hogan, or any other case cited by Avant, and the Court sees no impropriety in
the Administrator having pled state law claims solely against Avant. See CashCall, 605
F. Supp. 2d at 786–87 (concluding “[t]he Complaint as a whole . . . . is directed against
CashCall, rather than the Bank,” and finding an “absence of any indication that the
State artfully pled its claims . . . to thwart federal question jurisdiction”).
2.

Prior Cases Remanding Claims Brought Against Non-Banks Are Not
Meaningfully Distinguishable

Avant argues the Recommendation erred by relying on Ace Cash and other
cases that found no complete preemption as to claims brought exclusively against nonbank defendants. See supra, note 3. Avant argues that whereas in Ace Cash the
defendant was “an ‘agent for loans made by [the bank],’” here Avant is the assignee of
the loans originated by WebBank. (ECF No. 69 at 7.) According to Avant, the
Recommendation “misses the legal significance of the assignment of loans,” and Avant
argues that it is this assignment which is the critical fact permitting removal of claims
brought against Avant, as the assignee or purchaser of loans originated by WebBank,
rather than merely a service provider or agent. (Id. at 7.) As analyzed above, however,
the Court rejects Avant’s argument that Section 27 completely preempts claims brought
against non-bank assignees, or evinces an intent to have complete preemption “trave[l]

22

with loan.”
Moreover, while Avant argues that the assignment of WebBank’s loans makes
this case most analogous to Krispin v. May Dep’t Stores Co., 218 F.3d 919, 924 (8th
Cir. 2000), Krispin does not support a finding of complete preemption here. In Krispin,
the plaintiffs were holders of credit cards issued by a department store, which were later
assigned to a bank that was “a wholly-owned subsidiary of the store . . . established
specifically for the purpose of taking over the store’s credit card operations,” under
terms which permitted the store to unilaterally modify the credit terms. Id. at 923.
The Eighth Circuit found complete preemption of claims brought against the
store under state law, agreeing that the store’s assignment of the accounts was “fully
effective to cause the bank, and not the store, to be the orig inator of appellants’
accounts,” given that “appellants’ accounts are now controlled by the bank.” 218 F.3d
at 924. Noting that “the bank, and not the store . . . issues credit, processes and
services customer accounts, and sets . . . interest and late f ees,” the court held that “in
these circumstances . . . it makes sense to look to the originating entity (the bank) and
not the ongoing assignee (the store), in determining whether the NBA applies.” Id.
Finding that “the real party in interest [was] the bank, not the store,” the court held the
“state law usury claims against the store therefore implicate the NBA” and were subject
to complete preemption. Id. at 924 (emphasis added).
Thus, both the analysis and the result in Krispin rested on facts not present here.
In Krispin, the bank was the assignee of the credit accounts and broadly in control of
those accounts, leading the court to find that the bank was the real party in interest.
Something close to the opposite holds true here, where the non-bank, Avant, is the
23

assignee of the loans, Avant has only a contractual relationship with WebBank, which
plays only an ephemeral role in making the loans, then immediately sells them, and it is
Avant which generally directs the fees and activities that allegedly violate state law.
(See ECF No. 62 at 16.) To the extent a “real party in interest” analysis akin to the
analysis conducted in Krispin is appropriate in this case, the facts here would lead to
the opposite conclusion.
The Court is also unpersuaded by Avant’s argument that the Supreme Court’s
2003 decision in Beneficial undermines the application of Ace Cash or other cases that
preceded Beneficial and are unhelpful to Avant’s arguments—a contention Avant
advances even though it seems happy to rely on pre-Beneficial cases where they
support its positions. As detailed above, Beneficial did not address claims brought
against a non-bank, and the Court sees no way in which Beneficial alters the conclusion
in Ace Cash, or in the numerous cited cases to have reached similar conclusions where
exclusively state law claims are properly pled only against non-bank defendants. See
supra, note 3.
Avant also cites Vaden II, 489 F.3d 594, and Community Bank, 418 F.3d 277, as
ostensibly standing for the proposition that “usury claims as to loans originated by a
state-chartered federally insured banks are completely preempted under Section 27.”
(ECF No. 69 at 9.) As noted above, other courts have disagreed as to this conclusion,
even as to claims plainly brought against state-chartered banks. Supra, note 2.
Moreover, the cases cited by Avant do not support its argument here. Vaden
originated as a “garden-variety, state-law-based contract action” in which the “servicing
affiliate” of a state-chartered bank sued to collect an unpaid credit card balance. Vaden
24

III, 556 U.S. at 54; see also Vaden II, 489 F.3d at 597. The customer filed usuryrelated counterclaims, and the bank then sought to compel arbitration under the
Federal Arbitration Act (“FAA”), claiming the counterclaims were completely preempted
under Section 27, giving rise to federal jurisdiction. Vaden II, 489 F.3d at 597. The
Fourth Circuit concluded it must first determine whether the bank was “the real party in
interest with respect to . . . [the] counterclaims,” reasoning that if the bank “is not the
real party in interest . . . the FDIA does not apply because [the servicing affiliate] is not
a bank, and therefore the counter-claims implicate no federal law.” Id. at 601.
Engaging in a fact-specific analysis, the Fourth Circuit found the bank was the
real party in interest, and went on to hold that Section 27 completely preempted the
plaintiff’s state law usury counterclaims, at least to the extent asserted “against a statechartered, federally insured bank that is the real party in interest of a state court
dispute.” See id. at 603–04. The Supreme Court reversed, applying the rule that
“[f]ederal jurisdiction cannot be predicated on an actual or anticipated def ense . . . .
Nor can federal jurisdiction rest upon an actual or anticipated counterclaim ,” 556 U.S. at
60, and holding that even “a completely preempted counterclaim remains a
counterclaim and thus does not provide a key capable of opening a federal court’s
door,” id. at 66.
Thus, even assuming that the Fourth Circuit’s Vaden II opinion continues to have
any persuasive force following its reversal, to have application here, Avant would need
to show WebBank is the real party in interest to the Administrator’s enforcement action,
given that even the Fourth Circuit’s analysis concluded that if the bank “is not the real
party in interest . . . the FDIA does not apply.” Id. at 601. Avant, however, has not
25

made a showing that WebBank (or any other federally-insured bank) is the real party in
interest, instead relying on the far broader argument that complete preemption applies
in perpetuity to any assignee of loans originated by WebBank. (See ECF No. 69 at
4–7.) Vaden II never stood for such a sweeping proposition, and the Court has already
rejected Avant’s argument that Section 27 creates complete preemption as to any nonbank assignee.
Thus, both Avant’s emphasis on the “contractual shifting of rights through an
assignment” and its reliance on Vaden are unavailing. (See ECF No. 69 at 9–10.) As
with Krispin, to the extent complete preemption might depend on a real party in interest
analysis, as conducted in Vaden II, the facts here must lead to the opposite result.
Here, Avant is for all practical purposes in control of the Avant loans, and it has
indemnified WebBank, whose role was short-lived and is now entirely in the past. In
Vaden II, by contrast, the bank remained “the party in charge of setting the terms and
conditions,” and the set the guidelines implemented by the affiliate servicing provider,
which the bank also indemnified. (Compare ECF No. 62 at 15 and ECF No. 6 with
Vaden II, 489 F.3d at 602–03.)
Moreover, as the Recommendation observed, since the Supreme Court’s
reversal in Vaden III, the Fourth Circuit has held, on facts more applicable here, that
“claims against . . . non-bank loan servicers fall squarely outside the scope of the
FDIA.” Knox II, 523 F. App’x at 929. Thus, the Fourth Circuit itself does not apply
Vaden II as standing for the broad proposition advanced by Avant, namely, that Section
27 completely preempts all usury claims “as to loans originated by a state-chartered

26

federally insured ban[k].” (ECF No. 69 at 9.)9
3.

True Lender

Avant next objects that the Recommendation “wrongly conclude[d] that
allegations that a bank was not the ‘true lender’ are sufficient to defeat federal
jurisdiction.” (ECF No. 69 at 12.) Avant claims that the issue of whether it is the “true
lender” “is a purely legal question whether . . . factual allegations in the complaint . . . .
are legally sufficient to treat Avant as the ‘true lender’ notwithstanding that it did not
make the loans,” and argues that this question “must be decided under federal law.”
(ECF No. 69 at 11–12.)
The Court finds no error in the Recommendation’s treatment of the Complaint’s
“true lender” allegations (ECF No. 6 ¶¶ 32–34), and finds, moreover, that this issue is
not controlling of the Court’s removal jurisdiction. The Court disagrees with Avant’s
characterization that the Recommendation treated the “true lender” issue as controlling
or sufficient by itself to warrant remand. (See generally ECF No. 62 at 11–14.)
Moreover, even if resolution of the Administrator’s “true lender” allegations might
support a defense of federal preemption (i.e., if Avant can disprove the allegations and
prove that WebBank is in fact the true lender), and even if Avant is correct that this
issue may ultimately be undisputed or could be determined a matter of law, the Court

9

Similarly, contrary to Avant’s reliance on Community Bank, 418 F.3d at 295–96, at
least one decision in the Third Circuit has since applied the lengthy analysis in Community Bank
as “distinguish[ing] between claims against banks and claims against non-banks for purposes
of preemption.” Think Finance, 2016 WL 183289, at *13; Community Bank, 418 F.3d at 296
(“Sections 85 and 86 of the NBA and Section 521 of the DIDA apply only to national and state
chartered banks, not to non-bank purchasers of . . . loans * * * Several courts have explored the
issue of removal in cases involving complaints very similar . . . and found removal improper.”
(citing with approval to Flowers and Ace Cash, while distinguishing Krispin)).

27

finds this at most gives rise to a preemption defense, but does not reflect complete
preemption, nor create a federal question permitting removal under the well-pleaded
complaint rule. See Caterpillar, 482 U.S. at 398–99; Vaden III, 129 S.Ct. at 1272
(“Federal jurisdiction cannot be predicated on an actual or anticipated def ense.”). To
the extent that Avant is simply arguing that the Administrator’s allegations should not by
themselves control federal jurisdiction, that argument is contrary to the well-pleaded
complaint rule.
4.

Valid When Made Rule

Lastly, Avant argues that the administrator’s claims “go to the core of WebBank’s
powers to originate and sell loans that include rates and f ees” as permitted under Utah
law, and “is an attack on the bank in the guise of an attack on an assignee,” i.e., Avant.
(ECF No. 69 at 13–14.) Therefore, Avant argues, the Recommendation conflicts with
the long-established “valid-when-made” rule by allowing “that a contract free from usury
in its origins can be made usurious by subsequent transactions.” (Id. at 15 (citing
Gaither v. Farmers & Mechanics Bank of Georgetown, 26 U.S. 37 (1828) and Nichols v.
Fearson, 32 U.S. 103 (1833)).)
Amici likewise emphasize the importance of the valid-when-made rule,
describing this as a “cardinal rule” of banking law. (See, e.g., ECF No. 49 at 5 (quoting
Nichols v. Fearson, 32 U.S. 103 (1833)).)
Amici, generally-speaking, are organizations that represent the interests of
banks, lenders, and the purchasers or assignees of loans initiated by banks. They
argue, generally speaking, that lending programs similar to the Avant loans allow the
financial industry to extend credit, including for lower costs, and to consumers who
28

might otherwise lack access to credit; they argue the importance of allowing “rate
exportation” across state borders; they emphasize the importance of a stable secondary
market and settled legal expectations for selling and assigning loans; and, they
advance arguments as to why the enforcement of state usury laws against loans
originated by out-of-state banks but later sold or assigned would be contrary to
Congressional intent and harmful in view of various policy arguments.10
Avant and its amici argue that the valid-when-made rule “was firmly entrenched”
when Congress enacted the NBA and Section 27 and that the Court should “take it as a
given that Congress . . . legislated with an expectation that the principle will apply.”
(See ECF No. 49 at 5; ECF No. 69 at 6 (both quoting Astoria Fed. Sav. & Loan Ass’n v.
Solimino, 501 U.S. 104, 108 (1991)).)
However, the Court agrees with the Recommendation that these arguments
have little, if any, bearing on the issue of complete preemption. (See ECF No. 62 at
20.) Even assuming the valid-when-made rule does provide Avant with a complete
defense against the Administrator’s claims, and even if amici are correct that Congress
meant to allow practices such as Avant’s, and also that such arrangements provide
public benefits which should be preserved, absolutely nothing prevents Avant (or any
other similarly-situated assignee of bank-originated debt) from asserting those
arguments and maintaining that preemption defense in the state courts. None of these
10

See generally, e.g., Br. of Amici Curiae The Clearing House Association L.L.C., Am.
Bankers Assoc. and Loan Syndic. and Trading Assoc. (ECF No. 49), Br. of Amicus Curiae The
Marketplace Lending Assoc. (ECF No. 44-1); Br. of Amicus Curiae The Marketplace Lending
Association, ECF No. 575, Meade v. Marlette Funding LLC, Case No. 1:17-cv-0575-PAB (D.
Colo. May 3, 2017), Br. of Amici Curiae the Independent Cmty. Bankers of Am. and the NJ
Bankers Assoc., ECF No. 36, Cross River Bank v. Meade, Case No. 1:17-cv-0832-PAB-KMT
(D. Colo. June 7, 2017).

29

arguments provide grounds for removal, in derogation of the well pleaded complaint
rule. Recognition of the valid-when-made rule thus offers no reason to infer that
Congress impliedly provided for an exclusive federal forum, which no express statutory
language provides.
Lastly, the arguments raised by amici in very large part urge the Court not to
follow the Second Circuit’s decision in Madden v. Midland Funding, LLC, 786 F.3d 246
(2d Cir. 2015), cert. denied, 136 S.Ct. 2505 (2016). But Madden, which arose on
dissimilar facts, did not raise complete preemption. In Madden, a national bank sold
written-off credit card debt to a third party, which then sought to collect, claiming a 27%
interest rate. Id. at 248. The plaintiff sued the collector under the Fair Debt Collection
Practices Act and state usury law. Id. Addressing express preemption—not complete
preemption—the Second Circuit reasoned that def endants had not “acted on behalf of
a national bank,” but “solely on their own behalves,” id. at 251, distinguished Krispin, id.
at 252–53, and held that “extension of NBA preemption to third-party debt collectors
* * * would create an end-run around usury laws for non-national bank entities that are
not acting on behalf of a national bank,” id. at 251–52, therefore rejecting the
defendants’ argument that the plaintiff’s claims were preempted. Neither the facts nor
the holding of Madden are implicated here.
Amici clearly wish to avoid having Madden extended to other circuits (and likely
seek a vehicle by which to have it overturned in the Supreme Court).11 But Madden did

11

The Protecting Consumers’ Access to Credit Act of 2017, H.R. 3299, 115th Cong., (2d
Sess.) expressly seeks to nullify Madden by amending various statutory provisions, including
Section 27, to codify the valid-when-made rule by making explicit in the statute that a “loan that
is valid when made . . . shall remain valid . . . regardless of whether the loan is subsequently

30

not raise complete preemption, and the Administrator cites it only in passing, to reflect
the isolated nature of the facts and analysis in Krispin. (See ECF No. 28 at 10 n.4.)
Thus, there is no need here to either follow or reject Madden, nor to take up the views
of the Office of the Comptroller of the Currency and the Federal Deposit Insurance
Corporation, cited by Avant and amici, as to the alleged errors and consequences of
Madden. Having concluded that Section 27 does not com pletely preempt claims
brought against a non-bank defendant in Avant’s position, the Court declines the
invitation of amici to address any broader preemption issues raised by Madden and the
other authorities cited. See Schmeling, 97 F.3d at 1343 (in analyzing complete
preemption, the court should avoid analysis unnecessarily bearing on the merits of the
case).
V. CONCLUSION
For the reasons set forth above, the Court ORDERS as follows:
1.

The Recommendation of U.S. Magistrate Judge Scott T. Varholak (ECF No. 62)
is ADOPTED IN ITS ENTIRETY;

2.

Defendants’ Objection to the Recommendation (ECF No. 69) is OVERRULED;

3.

Plaintiff’s Motion to Remand for Lack of Subject Matter Jurisdiction (ECF No. 28)
is GRANTED;

4.

Defendants’ request for Oral Argument (ECF No. 66) and request for the Court to
request briefing from the Office of the Comptroller of the Currency and/or the

sold, assigned, or otherwise transferred to a third party, and may be enforced by such third
party notwithstanding any State law to the contrary.” This bill was passed by the House of
Representatives on February 14, 2018, but has not been acted upon by the Senate as of the
date of this Order.

31

Federal Deposit Insurance Corporation (ECF No. 69 at 10) are both DENIED.
Given the extensive briefing and argument already submitted and available to
the Court, and given the nearly uniform authority supporting the
Recommendation’s conclusions regarding complete preemption, the Court
agrees with the Administrator that further argument or briefing would lead only to
additional delay in resolving the Administrator’s already long-pending Motion
(see ECF No. 74); and,
5.

The Clerk shall REMAND this case to the District Court for the City and County
of Denver, and shall terminate this action. The parties shall bear their own fees
and costs.
Dated this 1st day of March, 2018.
BY THE COURT:

William J. Martínez
United States District Judge

32