State of Hawaii v. JP Morgan Chase & Co. et al

Filing 107

ORDER GRANTING PLAINTIFF'S MOTION FOR CERTIFICATION OF QUESTION FOR INTERLOCUTORY APPEAL AND MOTION TO STAY PROCEEDINGS 95 . Signed by JUDGE LESLIE E. KOBAYASHI on 1/29/2013. (afc)CERTIFICATE OF SERVICEParticip ants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications will be served by first class mail on January 30, 2013. Modified on 1/29/2013: ORDER FOLLOWS HEARING held on 1/18/2013. Minutes: doc no. 105 (afc).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
STATE OF HAWAII, ex rel.
DAVID M. LOUIE, ATTORNEY
GENERAL,

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Plaintiff,
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vs.
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JP MORGAN CHASE & CO., CHASE )
BANK USA, N.A., and DOE
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DEFENDANTS 1-20,,
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Defendants.
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_____________________________ )
STATE OF HAWAII, ex rel.
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DAVID M. LOUIE, ATTORNEY
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GENERAL,
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Plaintiff,
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vs.
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HSBC BANK NEVADA, N.A., HSBC )
CARD SERVICES, INC., and DOE )
DEFENDANTS 1-20,
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Defendants.
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_____________________________ )
STATE OF HAWAII, ex rel.
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DAVID M. LOUIE, ATTORNEY
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GENERAL,
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Plaintiff,
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vs.
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CAPITAL ONE BANK (USA), N.A. )
CAPITAL ONE SERVICES, LLC,
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and DOE DEFENDANTS 1-20,
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Defendants.
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_____________________________ )
STATE OF HAWAII, ex rel.
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DAVID M. LOUIE, ATTORNEY
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GENERAL,
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CIVIL NO. 12-00263 LEK-KSC

CIVIL NO. 12-00266 LEK-KSC

CIVIL NO. 12-00268 LEK-KSC

CIVIL NO. 12-00269 LEK-KSC

Plaintiff,
vs.
DISCOVERY FINANCIAL SERVICES,
INC., DISCOVER BANK, DFS
SERVICES, L.L.C., ASSURANT,
INC., and DOE DEFENDANTS 120,
Defendants.
_____________________________
STATE OF HAWAII, ex rel.
DAVID M. LOUIE, ATTORNEY
GENERAL,
Plaintiff,
vs.
BANK OF AMERICA CORPORATION,
FIA CARD SERVICES, N.A., and
DOE DEFENDANTS 1-20,
Defendants.
_____________________________
STATE OF HAWAII, ex rel.
DAVID M. LOUIE, ATTORNEY
GENERAL,
Plaintiff,
vs.
CITIGROUP INC., CITIBANK,
N.A., DEPARTMENT STORES
NATIONAL BANK, and DOE
DEFENDANTS 1-20,
Defendants.
_____________________________

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CIVIL NO. 12-00270 LEK-KSC

CIVIL NO. 12-00271 LEK-KSC

ORDER GRANTING PLAINTIFF’S MOTION FOR CERTIFICATION OF QUESTION
FOR INTERLOCUTORY APPEAL AND MOTION TO STAY PROCEEDINGS
Before the Court is Plaintiff the State of Hawaii, ex
rel. David M. Louis, Attorney General’s (the “Attorney General”)

Motion for Certification of Question for Interlocutory Appeal
Under 28 U.S.C. § 1292(b) and Motion to Stay Proceedings
(“Motion”), filed on December 10, 2012.

On December 27, 2012,

Defendants JP Morgan Chase & Co. and Chase Bank USA, N.A. filed a
Joint Memorandum in Opposition on their behalf and on behalf of
Defendants Capital One Bank (USA), N.A., Capital One Services,
LLC, Citigroup Inc., Citibank, N.A., Department Stores National
Bank, Discover Financial Services, Inc., Discover Bank, DFS
Services, LLC, Bank of America Corp., FIA Card Services, N.A.,
HSBC Bank Nevada, N.A., and HSBC Card Services, Inc. (all
collectively “Defendants”).

The Attorney General filed his reply

on January 4, 2013.
The Motion came on for hearing on January 18, 2013.
Appearing on behalf of the Attorney General were L. Richard
Fried, Jr., Esq., Patrick F. McTernan, Esq., S. Ann Saucer, Esq.,
and Stephen H. Levins, Esq., and appearing on behalf of
Defendants were Thomas Benedict, Esq., Sunny Lee, Esq., J.
Mitchell Webber, Esq., Jason Sung-Hyuk Yoo, Esq., William
Matsujiro Harstad, Esq., Kunio Kuwabe, Esq., William K. Shultz,
Esq., Michael Purpura, Esq., and Michael J. Scanlon, Esq.

After

careful consideration of the Motion, supporting and opposing
memoranda, and the relevant legal authority, the Attorney
General’s Motion is HEREBY GRANTED because the proposed appeal
could materially affect the outcome of the instant litigation,
and for the reasons set forth below.

BACKGROUND
On April 12, 2012, the Attorney General filed the six
Complaints in this action1 in the Circuit Court of the First
Circuit, State of Hawai`i (“State Court”).
are substantively identical.

The six Complaints

They allege that Defendants have

engaged in deceptive and predatory practices in marketing and
selling ancillary credit card products to Hawai`i residents.
Examples of such products include: payment protection plans,
identity theft protection plans, and extended warranties.

In

particular, the Attorney General contends that Defendants have
targeted particularly vulnerable consumers, including the elderly
and persons with credit problems.
The Complaints allege the following claims: unfair or
deceptive acts or practices (“UDAPs”), in violation of Haw. Rev.
Stat. §§ 480-1 et seq. (“Count I”); violation of the UDAP laws,
Haw. Rev. Stat. § 480-13.5, specifically addressing consumer
fraud against elders (“Count II”); and unjust enrichment (“Count
III”).

The Complaints seek the following relief: an order

enjoining Defendants from engaging in UDAPs; a judgment for
1

The six cases are as follows: State of Hawaii, ex rel.
Louie v. JP Morgan Chase & Co., et al., CV 12-00263 LEK-KSC (“CV
12-00263”); State of Hawaii, ex rel. Louie v. HSBC Bank Nevada,
N.A., et al., CV 12-00266 LEK-KSC (“CV 12-00266”); State of
Hawaii, ex rel. Louie v. Capital One Bank (USA) N.A., et al., CV
12-00268 LEK-KSC (“CV 12-00268”); State of Hawaii, ex rel. Louie
v. Discover Financial Services, Inc., et al., CV 12-00269 LEK-KSC
(“CV 12-00269”); State of Hawaii, ex rel. Louie v. Bank of
America Corp., et al., CV 12-00270 LEK-KSC (“CV 12-00270”); State
of Hawaii, ex rel. Louie v. CitiGroup Inc., et al., CV 12-00271
LEK-KSC (“CV 12-00271”).

restitution and disgorgement of monies for all Hawai`i consumers
injured by Defendants’ acts as alleged in the Complaints; a
declaratory judgment that Defendants violated Hawai`i law; civil
penalties; attorneys’ fees and costs; pre-judgment and postjudgment interest; and any other appropriate relief.
On May 17 and 18, 2012, the Defendants filed Notices of
Removal and removed each of the six cases to this district court.
The Defendants asserted federal jurisdiction based on the Class
Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d), and
jurisdiction pursuant to 28 U.S.C. § 1331 based on the complete
preemption doctrine.
On June 15, 2012, the Attorney General filed a Motion
to Remand and for Costs and Fees in each of the six cases.

The

Removing Defendants opposed the Motion to Remand.
I.

Remand Order
On November 30, 2012, this Court issued its Order

Denying Plaintiff’s Motion to Remand and For Costs and Fees
(“Remand Order”).

2012 WL 6019709.

In the Remand Order, this

Court concluded, inter alia, that removal was proper based on the
complete preemption doctrine.

The Court found that the payment

protection plans and other ancillary products at issue in the
lawsuits were debt cancellation contracts and/or debt suspension
agreements, and that the fees assessed for the products were
interest for purposes of the National Bank Act.

Id. at *19-21.

As such, the Court concluded that the claims asserted by the

Attorney General under state law are preempted and there is
federal question jurisdiction, and thus denied the Attorney
General’s motions to remand.
II.

Id. at *22.

The Attorney General’s Motion
In the instant Motion, the Attorney General argues that

an interlocutory appeal is appropriate in this case because the
existence of federal jurisdiction is a threshold issue.

The

Attorney General further argues that there are unsettled
questions of law in the case, including ( 1) whether the Court,
in the Remand Order, applied the appropriate definition of
“interest” for purposes of the National Bank Act, and (2) whether
the Attorney General’s allegations may be characterized as a
usury claim even though the Attorney General did not expressly
raise a state anti-usury claim in the Complaints.
of Motion at 5.]

[Mem. in Supp.

Finally, the Attorney General argues that an

interlocutory appeal would materially advance the ultimate
termination of the litigation.

If the Ninth Circuit holds that

there is no removal jurisdiction, the ruling will terminate the
case.

[Id. at 16.]

III. Defendants’ Joint Memorandum in Opposition
In their Joint Memorandum in Opposition, Defendants
argue that the Attorney General fails to meet the criteria for
certification under 28 U.S.C. § 1292(b).

Defendants contend that

the issue of whether the payment protection fees are a form of
“interest” under the National Bank Act is not a pure question of

law, but is rather a mixed question of law and fact that turns on
the application of settled law to a factual record.

Defendants

argue that the definition of “interest” in 12 C.F.R. § 7.4001 was
upheld by the Supreme Court in Smiley v. Citibank (S.D.), N.D.,
517 U.S. 735 (1996), and is thus not subject to dispute.

While

the Attorney General may disagree with the Court’s application of
this standard, he does not disagree with the Court’s articulation
of the standard itself.

[Mem. In Opp. at 8-11.]

Similarly,

Defendants argue that the Court’s interpretation of the
Complaints as making anti-usury claims is not a question of law.
[Id. at 16-17.]
Finally, Defendants argue that an interlocutory appeal
will not materially advance the termination of this case because
“certification of an immediate appeal is likely to freeze the
progress of this litigation for a period of 15 to 32 months.”
[Id. at 21.]

Defendants further state that they are “on the

cusp” of filing a preemption motion and that, should the Court
grant the motion, the case would be dismissed in its entirety and
the Attorney General would then be free to pursue his appeal to
the Ninth Circuit.

[Id. at 22-23.]

Defendants therefore urge the Court to deny the Motion.
IV.

The Attorney General’s Reply
In his reply, the Attorney General argues that he has

satisfied the requirements for an interlocutory appeal.

The

Attorney General contends that the controlling questions of law

at issue, including the definition of “interest” for purposes of
the National Bank Act, are not settled.

The Attorney General

emphasizes that the fact that the Remand Order contained an
examination of the pleadings does not, in and of itself,
disqualify it from certification.

[Reply at 8 (citing Thompson

v. Crane Company, et al., No. 11-00638 LEK, 2012 WL 2359950 (D.
Haw., June 19, 2012)).]

The Attorney General reiterates that the

interlocutory appeal would materially advance the ultimate
termination of this case.

He therefore urges the Court to grant

the Motion and stay the instant proceedings pending the outcome
of the Ninth Circuit’s review.
STANDARD
The Attorney General seeks leave to file an
interlocutory appeal from the Remand Order pursuant to 28 U.S.C.
§ 1292(b), which states:
When a district judge, in making in a civil action
an order not otherwise appealable under this
section, shall be of the opinion that such order
involves a controlling question of law as to which
there is substantial ground for difference of
opinion and that an immediate appeal from the
order may materially advance the ultimate
termination of the litigation, he shall so state
in writing in such order. The Court of Appeals
which would have jurisdiction of an appeal of such
action may thereupon, in its discretion, permit an
appeal to be taken from such order, if application
is made to it within ten days after the entry of
the order: Provided, however, That application for
an appeal hereunder shall not stay proceedings in
the district court unless the district judge or
the Court of Appeals or a judge thereof shall so
order.
(Emphasis in original.)

This district court has recently described the standard
applicable to § 1292(b) as follows:
A movant seeking an interlocutory appeal has
a heavy burden to show that “exceptional
circumstances justify a departure from the basic
policy of postponing appellate review until after
the entry of a final judgment.” Coopers & Lybrand
v. Livesay, 437 U.S. 463, 475 (1978); see also
James v. Price Stern Sloan, Inc., 283 F.3d 1064,
1067 n.6 (9th Cir. 2002) (“Section 1292(b) is a
departure from the normal rule that only final
judgments are appealable, and therefore must be
construed narrowly.”); Pac. Union Conference of
Seventh–Day Adventists v. Marshall, 434 U.S. 1305,
1309 (1977) (“The policy against piecemeal
interlocutory review other than as provided for by
statutorily authorized appeals is a strong one.”
(citations omitted)). Indeed, § 1292(b) is used
“only in exceptional situations in which allowing
an interlocutory appeal would avoid protracted and
expensive litigation.” In re Cement Antitrust
Litig., 673 F.2d 1020, 1026 (9th Cir. 1982)
(citing U.S. Rubber Co. v. Wright, 359 F.2d 784,
785 (9th Cir. 1966) (per curiam)).
Leite v. Crane Co., Civil No. 11–00636 JMS/RLP, 2012 WL 1982535,
at *2 (D. Hawai`i May 31, 2012).
DISCUSSION
I.

Controlling Question of Law
To meet the requirement that the proposed interlocutory

appeal raises a controlling question of law, the moving party
must show “that resolution of the issue on appeal could
materially affect the outcome of litigation in the district
court.”

In re Cement, 673 F.2d at 1026 (citing U.S. Rubber Co.,

359 F.2d at 785).

Controlling questions of law include

“determination[s] of who are necessary and proper parties,
whether a court to which a cause has been transferred has

jurisdiction, or whether state or federal law should be applied.”
Id.
The Ninth Circuit has not expressly defined the term
“question of law”; however, a number of other courts have stated
that the term means a “pure question of law” rather than a mixed
question of law and fact or the application of law to a
particular set of facts.

Chehalem Physical Therapy, Inc. v.

Coventry Health Care, Inc., 2010 WL 952273, at *3 (D. Or. Mar.
10, 2010) (collecting cases); see also McFarlin v. Conseco
Servs., LLC, 381 F.3d 1251, 1259 (11th Cir. 2004) (stating that
Ҥ 1292(b) appeals were intended, and should be reserved, for
situations in which the court of appeals can rule on a pure,
controlling question of law without having to delve beyond the
surface of the record in order to determine the facts”);
Ahrenholz v. Bd. of Trs. of Univ. of Ill., 219 F.3d 674, 677 (7th
Cir. 2000) (“The idea [behind § 1292] was that if a case turned
on a pure question of law, something the court of appeals could
decide quickly and cleanly without having to study the record,
the court should be enabled to do so without having to wait till
the end of the case.”); Keystone Tobacco Co. v. U.S. Tobacco Co.,
217 F.R.D. 235, 239 (D.D.C. 2003) (When “the crux of an issue
decided by the court is fact-dependent, the court has not decided
a ‘controlling question of law’ justifying immediate appeal.”).
The Attorney General’s proposed interlocutory appeal
will challenge this Court’s ruling that the complete preemption

doctrine preempts the Attorney General’s claims asserted under
state law because the fees assessed for the payment protection
plans constitute interest for purposes of the National Bank Act,
and the claims in the Complaint challenge the rate of interest
charged by Defendants.

As this Court has previously stated, it

is clear that the existence of federal jurisdiction is a
threshold determination.

Thompson, 2012 WL 2359950 at *6.

See

also, e.g., Doe v. Mann, 415 F.3d 1038, 1040 (9th Cir. 2005) (“As
a threshold matter, we conclude that the federal court has
jurisdiction under 28 U.S.C. § 1331[.]”).

Here, as in Thompson,

if the Ninth Circuit reverses this Court’s ruling that federal
jurisdiction exists, the Ninth Circuit will likely order the case
remanded to the state court, terminating the action in this
district court.

Thus, the outcome of the proposed interlocutory

appeal “could materially affect the outcome of litigation in the
district court.”

See In re Cement, 673 F.2d at 1026 (citation

omitted).
As to whether the Attorney General’s proposed
interlocutory appeal presents questions of law, the Court
acknowledges that the Remand Order addressed some factual issues,
including the portions of the pleadings addressing the nature of
the payment protection plans.

2012 WL 6019709, at *20-21.

Nevertheless, legal issues are at the heart of Plaintiff’s
proposed interlocutory appeal.

The Attorney General argues that

the Court, in the Remand Order, misapplied the governing laws and

regulations when determining whether the payment protection plans
constituted interest under the National Bank Act.

Specifically,

the Attorney General argues that this Court used a broader
definition of “interest” than was articulated by the Supreme
Court when interpreting the provisions of 12 C.F.R. 7.4001(a) in
Smiley v. Citibank (S.D.), N.A., 517 U.S. 735 741-42 (1996).
Further, the Attorney General challenges this Court’s reading of
the standard articulated in Beneficial National Bank v. Anderson,
539 U.S. 1 (2003), arguing that it is an open legal question
whether a complaint that does not expressly raise a state usury
claim must nevertheless be preempted under 12 U.S.C. §§ 85 and 86
of the National Bank Act as if it had raised such a claim.

Both

the issue of the appropriate definition of “interest” and the
applicability of preemption to complaints not specifically
alleging state usury claims are questions of law.
As such, this Court therefore finds that the Attorney
General’s proposed interlocutory appeal presents controlling
questions of law.
II.

Substantial Ground for a Difference of Opinion
The second requirement the Attorney General must meet

in order for this Court to grant leave to file an interlocutory
appeal is that there must be substantial ground for a difference
of opinion regarding the controlling question of law.

As to this

requirement, the Ninth Circuit has stated:
To determine if a “substantial ground for
difference of opinion” exists under § 1292(b),

courts must examine to what extent the controlling
law is unclear. Courts traditionally will find
that a substantial ground for difference of
opinion exists where “the circuits are in dispute
on the question and the court of appeals of the
circuit has not spoken on the point, if
complicated questions arise under foreign law, or
if novel and difficult questions of first
impression are presented.” 3 Federal Procedure,
Lawyers Edition § 3:212 (2010) (footnotes
omitted). However, “just because a court is the
first to rule on a particular question or just
because counsel contends that one precedent rather
than another is controlling does not mean there is
such a substantial difference of opinion as will
support an interlocutory appeal.” Id. (footnotes
omitted).
Couch v. Telescope Inc., 611 F.3d 629, 633 (9th Cir. 2010).
Defendants argue that there is no substantial ground
for a difference of opinion regarding the issues that the
Attorney General would raise in the interlocutory appeal because
the Attorney General merely disagrees with this Court’s
application of the undisputed controlling law to the particular
facts of this case, and does not challenge what the controlling
legal standard is.

Quite to the contrary, however, as discussed

above, the Attorney General’s proposed interlocutory appeal would
raise a number of legal issues, including the proper
interpretation of the definition of “interest” for purpose of the
National Bank Act, as well as the applicability of 12 U.S.C. §§
85 and 86 of the National Bank Act to a complaint that does not
expressly allege a state usury claim.
Further, as the Attorney General has demonstrated,
other courts have reached conclusions different from this Court’s

on the issue of the proper definition of “interest” under the
National Bank Act.

See West Virginia ex rel. McGraw v. JPMorgan

Chase & Co., 842 F. Supp. 2d 984, 990-991 (S.D. W. Va. Feb. 10,
2012) (analyzing the applicable regulations regarding the
definition of “interest” under the National Bank Act and finding
that payment protection plans are not “interest”, as they are a
charge “specifically assigned” for a service separate from the
provision or extension of credit).

Other courts have also

declined to find complete preemption where a plaintiff’s
complaint fails to expressly allege a state law usury claim.

See

Cross-County Bank v. Klussman, CV No. 01-4190-SC, 2004 WL 966289
at *5-6 (N.D. Cal. 2004) (finding no complete preemption where
plaintiff’s complaint contained no usury claim, but rather
challenged defendants’ assessment of interest on charges
allegedly assigned in bad faith); Hunter v. Beneficial Nat’l Bank
USA, 947 F. Supp. 446, 452 (M.D. Ala. 1996) (finding no complete
preemption where the plaintiff’s state law claims were based on
allegations that the way interest was assessed was fraudulent).
In sum, there are legal issues that are neither easy to
decide nor well-settled, and this Court therefore finds that
there is substantial ground for a difference of opinion regarding
the questions of law that the Attorney General will raise in the
interlocutory appeal.

III. Materially Advance the Termination of the Litigation
As to the third requirement that a proposed
interlocutory appeal materially advance the ultimate termination
of the litigation, the district court in Leite stated:
The requirement that an interlocutory appeal
materially advance the ultimate termination of the
litigation is directed to the very purpose of
§ 1292(b)—to “facilitate disposition of the action
by getting a final decision on a controlling legal
issue sooner, rather than later [in order to] save
the courts and the litigants unnecessary trouble
and expense.” United States v. Adam Bros.
Farming, Inc., 369 F. Supp. 2d 1180, 1182 (C.D.
Cal. 2004); see also In re Cement Antitrust
Litig., 673 F.2d at 1026 (stating that § 1292(b)
is used “only in exceptional situations in which
allowing an interlocutory appeal would avoid
protracted and expensive litigation”).
And most critical here, an interlocutory
appeal is appropriate where resolution of the
issue would materially advance the termination of
not only the present case, but also other cases
pending before the court. See Klinghoffer v.
S.N.C. Achille Lauro, 921 F.2d 21, 24 (2d Cir.
1990) (“[T]he impact that an appeal will have on
other cases is a factor that we may take into
account in deciding whether to accept an appeal
that has been properly certified by the district
court.”); Triax Co. v. United States, 20 Cl. Ct.
507, 514 (1990) (determining that an interlocutory
appeal would materially advance the litigation
because reversal of the trial court would resolve
the case and a large number of other cases); see,
e.g., Al Maqaleh v. Gates, 620 F. Supp. 2d 51, 55
(D.D.C. 2009) (“[I]nterlocutory appeal is
warranted where the jurisdictional determination
will impact numerous cases.”); In re Methyl
Tertiary Butyl Ether (“MTBE”) Prods. Liability
Litig., 399 F. Supp. 2d 320, 324 (S.D.N.Y. 2005)
(stating that courts consider, in part, whether
the certified issue has precedential value for a
large number of cases); Krangel v. Crown, 791 F.
Supp. 1436, 1449 (S.D. Cal. 1992) (“Certification
for appeal may also materially advance the
conclusion of other cases involving this same

legal issue.”).
2012 WL 1982535, at *6-7 (alterations in Leite).
As stated previously, it is clear that the Attorney
General’s proposed interlocutory appeal may facilitate the
disposition of this action.

Were this Court to deny the Motion,

and the case proceed to summary judgment or trial, the district
court and the parties will have unnecessarily wasted significant
time and resources if the Ninth Circuit ultimately determined on
appeal that federal jurisdiction did not exist.

This Court

therefore finds that the Attorney General’s proposed
interlocutory appeal may materially advance the termination of
the litigation.
Having found that the Attorney General has established
all of the requirements necessary for an interlocutory appeal,
this Court FINDS that the Attorney General should be allowed to
file the proposed interlocutory appeal.
Because the outcome of the interlocutory appeal will
ultimately determine whether federal jurisdiction exists in this
case, the Court further GRANTS the Attorney General’s Motion for
a stay of the instant proceedings pending the outcome of the
Ninth Circuit’s review.
CONCLUSION
On the basis of the foregoing, the Attorney General’s
Motion for Certification of Question for Interlocutory Appeal
under 28 U.S.C. December 10, 2012, is HEREBY GRANTED.

IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, January 29, 2013.

/S/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge

STATE OF HAWAII, ET AL. V. JP MORGAN CHASE & CO., ET AL; ORDER
GRANTING PLAINTIFF’S MOTION FOR CERTIFICATION OF QUESTION FOR
INTERLOCUTORY APPEAL AND MOTION TO STAY PROCEEDINGS