State of Hawaii v. Capital One Bank (USA), N.A. et al
Filing
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ORDER DENYING PLAINTIFF'S MOTION TO REMAND AND FOR COSTS AND FEES. Signed by JUDGE LESLIE E. KOBAYASHI on 11/30/2012. re: Motion to Remand to State Court Civil 12-00268 filed as docket entry no. (39) in Civil 12-00263-LEK-KSC. (afc) CERTIFICATE OF SERVICEParticipants 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 were served by first class mail on the date of this docket entry
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 DENYING PLAINTIFF’S MOTION
TO REMAND AND FOR COSTS AND FEES
Plaintiff the State of Hawaii, ex rel. David M. Louie,
Attorney General (“the Attorney General”) seeks to remand his
lawsuits against several financial entities on the basis that, in
each case, there was no federal jurisdiction for the removal of
his litigation from state court.
This Court concludes, as set
forth more fully below, that removal was proper based on the
complete preemption doctrine.
In particular, this Court finds
that the payment protection plans and other ancillary products at
issue in these lawsuits are debt cancellation contracts and/or
debt suspension agreements, and that the fees assessed for these
products are interest for purposes of the National Bank Act.
Thus, the Court concludes that the claims the Attorney General
asserted under state law are preempted, and there is federal
question jurisdiction.
On June 15, 2012, the Attorney General filed a Motion
to Remand and for Costs and Fees in each of the following cases:
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”).
3
On October 29, 2012, CV 12-00263 Defendants JP Morgan
Chase & Co. and Chase Bank USA, N.A. (collectively “Chase
Defendants”) filed a Memorandum in Opposition on their behalf and
on behalf of: the CV 12-00266 Defendants HSBC Bank Nevada, N.A.,
and HSBC Card Services, Inc. (collectively “HSBC Defendants”);
the CV 12-00268 Defendants Capital One Bank (USA) N.A., and
Capital One Services, LLC (collectively “Capital One
Defendants”); Defendants Discover Financial Services, Inc.,
Discover Bank, DFS Services, LLC (collectively “Discover
Defendants”) in CV 12-00269;1 the CV 12-00270 Defendants Bank of
America Corporation and FIA Card Services, N.A. (collectively
“BoA Defendants”); and the CV 12-00271 Defendants CitiGroup Inc.,
Citibank, N.A., and Department Stores National Bank (collectively
“Citi Defendants”).
[Dkt. no. 75.]
The Attorney General filed
his Reply to the Memorandum in Opposition on November 5, 2012.
[Dkt. no. 78.]
On November 15, 2012, Defendants filed their Sur-
reply pursuant to leave of this Court.
[Dkt. no. 85.]
These matters came on for hearing on November 19, 2012.
Appearing on behalf of the Attorney General were L. Richard
1
Assurant, Inc. was also named as a defendant in the
original complaint filed in what became CV 12-00269. Prior to
removal, the parties stipulated to substitute Defendant American
Bankers Management Company, Inc. (“American Bankers”) for
Defendant Assurant, Inc. [CV 12-00269, Notice of Removal, Decl.
of John P. Manaut, Exh. 6.] On October 30, 2012, American
Bankers filed a joinder in the Memorandum in Opposition. [Dkt.
no. 76.]
4
Fried, Jr., Esq., Patrick McTernan, Esq., S. Ann Saucer, Esq.,
Laura Baughman, Esq., and Stephen Levins, Esq.
Appearing on
behalf of the Chase Defendants was Thomas Benedict, Esq.
Appearing on behalf of the HSBC Defendants were Michael Bird,
Esq., and Jason Woo, Esq.
Appearing on behalf of the Capital One
Defendants were Margery Bronster, Esq., Andrew Pepper, Esq.,
Sunny Lee, Esq., and James McCabe, Esq.
Appearing on behalf of
the Discover Defendants were William Harstad, Esq., Jason SungHyuk Yoo, Esq., Michael Bird, Esq., and Kunio Kuwabe, Esq.2
Appearing on behalf of the BoA Defendants were Patricia McHenry,
Esq., and Patrick Thompson, Esq.
Appearing on behalf of the Citi
Defendants were Michael Purpura, Esq., Michael Scanlon, Esq.,
Mitch Weber, Esq., and Robert Trenchard, Esq.
After careful consideration of the Motion, supporting
and opposing memoranda, and the arguments of counsel, the
Attorney General’s motions for remand are HEREBY DENIED for the
reasons set forth below.
BACKGROUND
I.
Initial Filings
On April 12, 2012, the Attorney General filed his
Complaint in each of these actions in the Circuit Court of the
First Circuit, State of Hawai`i (“State Court”).
Complaints are substantively identical.
2
The six
They allege that
Kunio Kuwabe also appeared on behalf of American Bankers.
5
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
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, 2012, the Chase Defendants removed CV 1200263 to this district court.
The Chase Defendants assert
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.
6
They
also assert that there is supplemental jurisdiction pursuant to
28 U.S.C. § 1367 over any claims that are not independently
removable.
[CV 12-00263, Notice of Removal at ¶ 13.]
On May 18, 2012, the HSBC Defendants removed CV 12-
00266, the Capital One Defendants removed CV 12-00268, the
Discover Defendants removed CV 12-00269, and the BoA Defendants
removed CV 12-00270 based on the same grounds that the Chase
Defendants relied upon.
[CV 12-00266, Notice of Removal at ¶ 8;
CV 12-00268, Notice of Removal at ¶ 15; CV 12-00269, Notice of
Removal at ¶ 10; CV 12-0027066, Notice of Removal at ¶ 13.]
Also
on May 18, 2012, the Citi Defendants removed CV 12-00271 based on
the CAFA argument and the complete preemption argument that the
other Defendants relied upon, as well as the additional argument
that there is jurisdiction under 28 U.S.C. § 1331 because the
case raises a “substantial federal question”.
[CV 12-00271,
Notice of Removal at ¶ 15 (quotation marks omitted).]
The Citi
Defendants argue that, even if a federal question does not appear
on the face of the well-pleaded complaint, the Attorney General’s
state law claims necessarily raise a federal issue.
[Id. at ¶ 36
(quoting Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg.,
545 U.S. 308, 314 (2005)).]
II.
The Instant Motions
Insofar as all of the Notices of Removal address the
same two primary bases of removal - the CAFA argument and the
7
complete preemption argument - the Attorney General submitted an
omnibus memorandum in support of all six motions to remand.
The
memorandum in support of the motion for CV 12-00271 also contains
a discussion of the Citi Defendants’ Grable argument.
The Court
will therefore discuss the Attorney General’s Motion to Remand
and for Costs and Fees for CV 12-00263 (“Omnibus Motion”) for the
CAFA argument and the complete preemption argument, and the Court
will discuss the Attorney General’s Motion to Remand and for
Costs and Fees for CV 12-00271 (“Grable Motion”) for the Grable
argument.
The Court refers to all of the defendants in the six
actions collectively as “Defendants”.
A.
Omnibus Motion
At the outset, the Attorney General emphasizes that the
Complaints only assert state law claims and “expressly disclaim[]
both the class action form and federal question jurisdiction.[3]”
3
In CV 12-00263, the Attorney General states that he is
bringing the action under § 480-2(d), Haw. Rev. Stat. § 661-10,
and under his parens patriae authority “on behalf of the State
and its citizens to enforce Hawaii law.” [CV 12-00263, Complaint
at ¶ 8.] The Attorney General also stated:
The State asserts no claims arising out of, under
or in any way preempted by the laws (common,
statutory or administrative) of the United States,
nor does it bring this action on behalf of a class
or any group of persons that can be construed as a
class. The State specifically disclaims any such
claims that would support removal of this action
to a United States District Court on the basis of
diversity, jurisdictional mandates under the Class
Action Fairness Act of 2005 (28 U.S.C. §§ 1332(d),
(continued...)
8
[Mem. in Supp. of Omnibus Motion at 2 (citation omitted).]
The Attorney General argues that the principles behind
the general removal standard, which favors remand, “are
heightened where, as here, the actions are brought by a state.
In such cases, ‘considerations of comity make [courts] reluctant
to snatch cases which a State has brought from the courts of that
State, unless some clear rule demands it.’”
[Id. at 3
(alteration in Mem. in Supp. of Omnibus Motion) (quoting
Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1,
21 n.22 (1983)).]
The Attorney General points out that the Ninth
Circuit has relied on Franchise Tax Board in reversing the denial
of the Nevada attorney general’s motion to remand a case brought
against various banking defendants for violations of state
consumer protection laws because no clear rule demanded removal
and removal did not serve an overriding federal interest.
[Id.
at 3-4 (discussing Nevada v. Bank of Am. Corp., 672 F.3d 661, 676
(9th Cir. 2012)).]
The Attorney General urges this Court to rely
on similar grounds and to grant the Omnibus Motion.
1.
[Id. at 4.]
CAFA
The Attorney General argues that CAFA does not demand
removal.
He emphasizes that the Ninth Circuit has held that:
3
(...continued)
1453, 1711-1715), federal question jurisdiction,
or any other basis.
[Id. at ¶ 9.]
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“‘Under the plain text of 28 U.S.C. § 1332(d), the parens patriae
suits are not class actions within the meaning of CAFA.’”
[Id.
at 5 (quoting Washington v. Chimei Innolux Corp., 659 F.3d 842,
850 (9th Cir. 2011)).]
The Attorney General also emphasizes that
CAFA defines “class action” as a civil action that is filed
pursuant to Fed. R. Civ. P. 23, or a similar state statute or
rule, by one or more representative persons.
In the instant
cases, the Attorney General did not file the actions pursuant to
a class action rule, and he did not bring the actions in a
representative capacity.
§ 1332(d)(1)(B)).]
[Id. at 5-6 (quoting 28 U.S.C.
The Attorney General notes that the Ninth
Circuit’s CAFA holding in Chimei, which it re-affirmed in Bank of
America, is consistent with the majority of federal decisions on
the issue.
[Id. at 6-7 (citing cases).]
The Attorney General argues that the instant case is
indistinguishable from Chimei.
As in the instant case, the
Washington attorney general sought restitution on behalf of
Washington consumers, and the California attorney general sought
restitution for California residents, who purchased the
defendants’ products.
The Attorney General asserts that he has
brought the same type of parens patriae action that the
California and Washington attorneys general brought in Chimei and
which the Ninth Circuit held was distinguishable from a true
class action.
[Id. at 7-8 (discussing Chimei, 659 F.3d at 846,
10
848).]
Further, Bank of America reinforced Chimei and also
approved of the analysis in a Seventh Circuit case holding that a
parens patriae suit is not a class action because it is not
brought by a representative of a class.
Both Bank of America and
LG Display Co. v. Madigan, 665 F.3d 768 (7th Cir. 2011), held
that determining whether a parens patriae suit is a class action
requires looking at the Complaint as a whole to determine whether
the states or the individual consumers are the real parties in
interest.
Both the Ninth Circuit and the Seventh Circuit
rejected a claim-by-claim analysis.
[Id. at 8 (citing Bank of
Am., 672 F.3d at 667, 669; Madigan, 665 F.3d 772, 774).]
Thus,
the Attorney General argues that, in the instant cases,
Defendants cannot focus solely on the restitution claims as the
basis for federal CAFA jurisdiction.
[Id. at 8-9.]
Defendants have also argued that the Attorney General’s
choice of counsel supports Defendants’ position that the instant
cases are class actions.
[CV 12-00263, Complaint at ¶ 20.]
The
Attorney General asserts that there is no legal authority
supporting the position that the identity of a plaintiff’s
counsel can make a particular case a class action.
[Mem. in
Supp. of Omnibus Motion at 9-10.]
The Attorney General emphasizes that he has not brought
these actions pursuant to Haw. Rev. Stat. § 480-14(b) or Haw. R.
Civ. P. 23, and he denies Defendants’ position that he brought
11
the actions pursuant to Haw. Rev. Stat. §§ 480-3.1, 480-13.5, and
480-15.
He emphasizes that, although § 480-14(b) allows the
attorney general to bring a class-action-type case alleging UDAP
claims, the statute does not require a UDAP case to brought in
that form.4
The Attorney General also argues that parens patriae
claims for disgorgement and restitution are distinguishable from
private parties’ claims for damages.
He contends that the
Complaints in the instant case are indistinguishable from the
complaints in Chimei and Bank of America.
[Id. at 11-14.]
The Attorney General also argues that Haw. Rev. Stat.
§ 480-22(c) indicates that the legislature clearly contemplated
that the attorney general could bring a UDAP action without
4
Section 480-14(b) states:
The attorney general of the State shall be
authorized to bring a class action for indirect
purchasers asserting claims under this chapter.
The attorney general or the director of the office
of consumer protection may bring a class action on
behalf of consumers based on unfair or deceptive
acts or practices declared unlawful by section
480-2. Actions brought under this subsection
shall be brought as parens patriae on behalf of
natural persons residing in the State to secure
threefold damages for injuries sustained by the
natural persons to their property by reason of any
violation of this chapter.
(Emphases added.) The Attorney General argues that the Hawai`i
Legislature intentionally used the word “may” to allow the option
to bring class-action-type cases, but a class-action-type case is
not the only way to litigate UDAPs. [Mem. in Supp. of Omnibus
Motion at 15-17.]
12
invoking § 480-14(b).
[Id. at 17-18 & n.16.]
Further, even
assuming, arguendo, that the Attorney General brought the instant
Complaints as a “class action” pursuant to § 480-14(b), he would
not be advancing the case as a representative class member, as
required by CAFA, and the action would not meet all of the
requirements of a CAFA class action.
As the Ninth Circuit noted
in Chimei, where a state procedural device has some elements of a
class action (notice to affected persons, opt-out provision,
court approval of settlements), but not the adequacy or
typicality elements, there is no CAFA jurisdiction.
[Id. at 18-
20 (discussing Chimei, 659 F.3d at 850).]
The Attorney General also argues that Defendants’
argument that the instant action constitutes a “mass action”
pursuant to CAFA is contrary to the plain language of CAFA and
controlling Ninth Circuit case law.
The Attorney General argues
that the Ninth Circuit held in Bank of America that a state
attorney general’s parens patriae action pursuant to state
consumer protection laws is not a “mass action”.
2.
[Id. at 20.]
Complete Preemption
The Attorney General emphasizes that, pursuant to the
well-pleaded complaint rule, he is the master of his claim and he
may avoid federal jurisdiction by relying exclusively on state
law.
He also emphasizes that complete preemption is the
exception rather than the rule, and the doctrine is reserved only
13
for rare and extraordinary departures from the well-pleaded
complaint rule.
The Attorney General argues that the Court
should not apply the complete preemption doctrine to Defendants’
argument that the Complaints assert claims for usury, which are
preempted pursuant to Beneficial National Bank v. Anderson, 539
U.S. 1 (2003), because Defendants rely on an overly expansive
interpretation of Beneficial National.
The Attorney General
argues that the recognition in Beneficial National that 12 U.S.C.
§§ 85, 86 completely preempts usury cases against national banks
is inapplicable in the instant cases, which do not allege usury
claims.
[Id. at 23-25.]
The Attorney General argues that charges for
Defendants’ ancillary products, such as payment protection plans,
are not interest as defined in § 85 because the charges do not
compensate the banks for making loans.
Further, even if the
charges constitute interest, the Complaints do not challenge the
rate of interest.
[Id. at 25-26.]
The Attorney General notes that this Court need not
decide whether the charges for payment protection plans
constitute interest because, even if they are interest, complete
preemption does not apply because the Attorney General is not
challenging the rate of interest, and § 86 does not provide a
remedy for the violations alleged in these cases.
The Attorney
General notes that the district court in West Virginia ex rel.
14
McGraw v. JPMorgan Chase & Co., 842 F. Supp. 2d 984 (S.D.W. Va.
2012), rejected arguments identical to the ones Defendants raise
here.
The Attorney General emphasizes that none of the
Complaints in the instant cases contains an allegation that an
interest rate is excessive.
[Id. at 30-32.]
The Attorney
General asserts that a long line of cases has held that non-usury
consumer protection cases are not subject to preemption under the
National Bank Act.
[Id. at 33-35 (citing cases).]
In addition, the Attorney General notes that Discover
Bank, one of the defendants in CV 12-00269, is a state-chartered
bank.
Discover Bank asserts federal jurisdiction pursuant to 12
U.S.C. § 1831d(a), but the Discover Defendants have not
identified a state-law maximum interest rate which the Attorney
General alleges Discover Bank has exceeded.
[Id. at 35-36.]
Thus, the Attorney General urges this Court to remand
these cases to the State Court, and the Attorney General seeks
removal related expenses, including attorneys’ fees, because the
Attorney General contends that Defendants lacked an objectively
reasonable basis for removal.
B.
[Id. at 37.]
Grable Motion
According to the Attorney General, the Citi Defendants
argue that Grable overruled the well-pleaded complaint rule as
set forth in Louisville & Nashville Railroad Co. v. Mottley, 211
U.S. 149 (1908), and its progeny.
15
[Mem. in Supp. of Grable
Motion at 38 (citing CV 12-00271 Notice of Removal at ¶ 36).]
The Attorney General argues that Grable does not mention such a
drastic shift in federal question jurisprudence, and the United
States Supreme Court has expressly narrowed the scope of Grable
to “a ‘special and small category[.]’”
[Id. at 39 (alteration in
Mem. in Supp. of Grable Motion) (quoting Empire HealthChoice
Assur., Inc. v. McVeigh, 547 U.S. 677, 699 (2006)).]
Further,
the Ninth Circuit has expressly rejected this interpretation of
Grable.
[Id. at 39-40 (quoting Cal. Shock Trauma Air Rescue v.
State Comp. Ins. Fund, 636 F.3d 538, 542 (9th Cir. 2011)).]
The Attorney General emphasizes that the CV 12-00271
Complaint does not assert any federal claims and specifically
disclaims any cause of action that would support federal
jurisdiction.
¶ 9).]
[Id. at 40 (citing CV 12-00271, Complaint at
The Citi Defendants’ Notice of Removal argues that the CV
12-00271 Complaint suggests that the Citi Defendants violated a
federal regulation, which the Attorney General argues the Citi
Defendants will rely upon to assert a non-complete preemption
defense.
[Id. at 40-41 (citing CV 12-00271, Notice of Removal at
¶¶ 39-40).]
The Attorney General, however, argues that, even if
the Citi Defendants violated federal regulations, that does not
mean that federal law creates the cause of action the Attorney
General asserts.
Further, the mere fact that the Citi Defendants
intend to raise a non-complete preemption defense based on
16
federal regulations does not create removal jurisdiction.
The
Citi Defendants’ Notice of Removal relies upon Sparta Surgical
Corp. v. NASD, 159 F.3d 1209 (9th Cir. 1998), but the Attorney
General argues that Sparta is inapplicable because, in that case,
there was exclusive federal jurisdiction pursuant to 15 U.S.C.
§ 78aa, not 28 U.S.C. § 1331.
[Id. at 41-44.]
The Attorney General emphasizes that the Citi
Defendants are the only ones to make the Grable argument, which
contradicts well-established Supreme Court precedent.
Thus, the
Attorney General asserts that an award of removal related
expenses is particularly appropriate against the Citi Defendants.
[Id. at 44-45.]
III. Joint Memorandum in Opposition
In Defendants’ joint Memorandum in Opposition,
Defendants state that the payment protection plans at issue in
these cases “are actually contractual modifications of credit
card loan agreements.”
[Mem. in Opp. at 4-5 & n.2 (citing Fink
Decl. ¶ 4; Jantzi Decl. ¶ 4; Choltus Decl. ¶ 7)5.]
5
Defendants
The “Fink Declaration” is the Declaration of Marc Fink,
attached to the Memorandum in Opposition, Declaration of Counsel,
as Exhibit 1. [Dkt. no. 75-2.] Mr. Fink is a Marketing Director
for Chase Bank USA, N.A. [Id. at ¶ 1.] The Fink Declaration was
originally filed as an exhibit to the Notice of Removal in CV 1200263.
The “Jantzi Declaration” is the Declaration of Mona Jantzi,
attached to the Memorandum in Opposition, Declaration of Counsel,
as Exhibit 2. [Dkt. no. 75-3.] Ms. Fink is a Vice President,
Card Customer Management for Capital One Bank (USA) N.A. [Id. at
(continued...)
17
assert that the payment protection plans are “loan modification
agreements” considered “debt cancellation contracts” or “debt
suspension agreements.”
[Id. at 5 (citing 12 C.F.R. § 37.1(a)).]
According to Defendants:
Payment protection plans extend additional
credit to credit card holders by relieving or
suspending their obligation to repay their credit
card debt under certain circumstances. For
example, if a cardholder is hospitalized, loses a
job, or becomes disabled, a payment protection
plan typically will cancel or suspend the
cardholder’s payment obligations on an interestfree basis. In exchange for these favorable
credit terms, cardholders pay a monthly fee
calculated as a percentage of their credit card
loan balance, e.g., 0.89 percent of their monthly
balance.
[Id. (footnotes omitted) (citing Fink Decl. ¶¶ 5-6; Jantzi Decl.
¶¶ 4-5; Choltus Decl. ¶¶ 7-8).]
Defendants emphasize that the
Office of the Comptroller of the Currency’s (“OCC”) regulations,
12 C.F.R. Part 37, authorize national banks to offer payment
protection plans, and such plans are governed by federal law and
regulations, not by state law.
§ 37.1(c)).]
[Id. at 5-6 (citing 12 C.F.R.
Discover Bank is chartered in Delaware, and Del.
5
(...continued)
¶ 1.] The Jantzi Declaration was originally filed as an exhibit
to the Notice of Removal in CV 12-00268.
The “Choltus Declaration” is the Declaration of Eric
Choltus, attached to the Memorandum in Opposition, Declaration of
Counsel, as Exhibit 3. [Dkt. no. 75-4.] Mr. Choltus is a Senior
Vice President, Business Production Management Executive at Bank
of America Corporation. [Id. at ¶ 1.] The Choltus Declaration
was originally filed as an exhibit to the Notice of Removal in CV
12-00270.
18
Admin. Code § 713-3.1.1 authorizes it to offer payment protection
plans under Delaware law.
[Id. at 5-6 n.5.]
Defendants urge this Court to carefully scrutinize the
Complaints to determine whether it should re-characterize the
Complaints to reflect the fact that they actually assert
removable claims.
A.
[Id. at 7.]
CAFA
Defendants argue that these cases were properly removed
pursuant to CAFA because the Attorney General filed them under a
state statute that is similar to Fed. R. Civ. P. 23 and
authorizes the suit as a class action.
[Id. at 8 (citing 28
U.S.C. § 1332(d)(1)(B); Washington v. Chimei Innolux Corp., 659
F.3d 842, 848 (9th Cir. 2011)).]
Defendants argue that § 480-
14(b) is the only provision which authorizes the Attorney General
to recover monetary relief on behalf of consumers for UDAPs, and
it requires the Attorney General to do so through a parens
patriae class action pursuant to Haw. R. Civ. P. 23.
Defendants
assert that this precludes the Attorney General from obtaining
such monetary relief through any other means.
[Id. at 8-11.]
Defendants also argue that legislative history
indicates that the Hawai`i Legislature intended § 480-14(b) to be
the sole method for the Attorney General to obtain monetary
relief on behalf of consumers for UDAPs.
[Id. at 11-12 (citing
1987 Haw. Sess. Laws Act 274, §§ 1, 5.]
According to Defendants,
19
the use of the word “may” in § 480-14(b) merely gives the
Attorney General the discretion to determine whether or not to
bring a class action on behalf of consumers.
so, he must follow § 480-14(b).
If he decides to do
Defendants contend that courts
interpret numerous statutes as creating exclusive remedies, even
though the statute states that a plaintiff “may” bring that type
of claim.
[Id. at 13-14.]
Defendants argue that the other statutes cited by the
Attorney General do no authorize him to seek monetary relief on
behalf of consumers.
Section 480-2(d) does not create a cause of
action; § 480-3.1 and § 480-13.5 only authorize the Attorney
General to bring an action to recover penalties payable to the
State of Hawai`i; § 480-15 only authorizes the Attorney General
to bring actions for injunctive relief for violations of Chapter
480; and § 661-10 only authorizes actions for monetary damages or
penalties for the State.
Even if § 661-10 does allow actions to
recover monetary damages for consumers, the more specific statute
- § 480-14(b) - controls.
[Id. at 15-16.]
Defendants argue that the Attorney General’s denial in
each case that he is asserting a class action and his denial that
he brought each action on behalf of a class are belied by the
allegations in each of the Complaints.
According to Defendants,
the Attorney General’s denials are legal conclusions that this
Court must disregard.
The Attorney General clearly seeks Chapter
20
480 relief on behalf of Hawai`i consumers pursuant to the parens
patriae doctrine and any other applicable authority.
Defendants
assert that the applicable authority is § 480-14(b), which
provides that such actions are class actions, and Defendants
point out that the Complaints specifically cite § 480-14 as the
source of the Attorney General’s authority to bring these cases.
[Id. at 17-18.]
Further, Defendants argue that these actions constitute
“class actions” as defined in CAFA.
Defendants note that Haw.
Rev. Stat. § 480-1 specifies that a class action under Chapter
480 is a class action as provided for in Haw. R. Civ. P. 23, and
Haw. R. Civ. P. 23 is essentially identical to Fed. R. Civ. P.
23.
Defendants argue that it is irrelevant that the Attorney
General is not a member of the class because CAFA does not
require that the plaintiff be a member of the proposed class.
Pursuant to 28 U.S.C. § 1332(d)(1)(B), all that is required is
that the representative person be authorized to bring suit on
behalf of that class, and the Attorney General has that authority
pursuant to § 480-14(b).
CAFA does not require that the
representative be an adequate representative under federal class
action case law; it only requires that the representative have
authority under state law.
[Id. at 19-21.]
Defendants argue
that the legislative history of CAFA and other authority indicate
that CAFA’s removal provisions are to be interpreted liberally.
21
According to Defendants, the Ninth Circuit has recognized that
CAFA provides a right of removal for state class actions, even if
the action could not have been brought as a class action in
federal court.
[Id. at 21-22.]
Defendants argue that Chimei and Bank of America are
distinguishable and actually support removal in these cases.
The
Washington and California statutes at issue in Chimei did not
provide that the type of actions at issue should be brought as
class actions, and the Nevada statute at issue in Bank of America
did not authorize the Nevada attorney general to bring class
actions.
In contrast, Chapter 480 requires the Attorney General
to bring his parens patriae action under § 480-14(b) as a Haw. R.
Civ. P. 23 class action.
As to the Attorney General’s argument
that Bank of America rejected a claim-by-claim analysis,
Defendants point out that the Ninth Circuit rejected a claim-byclaim analysis in the determination of whether an action was a
parens patriae action or not.
They assert that this Court must
apply the general rule that, in determining whether removal is
proper, a district court looks at each claim individually because
even one claim in a complaint can make removal of the action
proper.
[Id. at 22-24.]
To the extent that other claims are not
independently removable, Defendants urge this Court to exercise
supplemental jurisdiction pursuant to 28 U.S.C. § 1367(a).
at 40.]
22
[Id.
Defendants state that they raised the “mass action”
argument to preserve it for appeal, but they acknowledge that
Bank of America rejects this argument.
B.
[Id. at 25.]
Complete Preemption
Defendants reiterate that these cases are removable
under the complete preemption doctrine applied in Beneficial
National.
First, the fees for payment protection plans are
interest under the National Bank Act and pursuant to the 12
C.F.R. § 7.4001(a) definition of interest.
Defendants argue that
the fact that payment protection plans are optional does not mean
that the fees for such plans are not interest.
Other optional
fees, such as late fees, over-limit fees, insufficient funds
fees, and prepayment penalties, are considered interest.
[Id. at
26-30.]
Further, Defendants argue that the fees for payment
protection plans are not compensation for a separate service
because what the cardholders pay for is an extension of
additional credit and the payment protection plans amend the
underlying loan agreements.
considered insurance.
Nor are the payment protection plans
Defendants assert that, even if the plans
are like insurance, only the fee that the lender pays to a third
party to insure against the risk of the borrower’s default is
excluded from the definition of interest.
to participate in the plan are interest.
23
The cardholder’s fees
[Id. at 31-32.]
Defendants argue that JPMorgan does not support the
Attorney General’s position.
In that case, the district court
accepted the complaint’s assertion that the plan fees were not
interest, and the defendants did not offer contrary evidence.
In
the instant case, however, Defendants have submitted undisputed
declarations supporting their characterization of the plan fees
as interest.
[Id. at 32-33 & n.25 (citing Fink Decl. ¶¶ 5-6;
Jantzi Decl. ¶¶ 4-5; Choltus Decl. ¶¶ 7-8).]
Defendants
acknowledge that not all of the allegations in the Complaints
challenge the amount of the banks’ interest charges.
Defendants,
however, argue that other allegations do challenge the amount the
plan charges and therefore the Complaints were properly removed.
[Id. at 34.]
At a minimum, the unjust enrichment claim challenges
the amount of the payment protection plan fees because there
would be no unjust enrichment unless the banks’ charges were
excessive in comparison to the value the consumers obtain from
the plans.
[Id.]
Defendants argue that the allegations of the
Complaints support this characterization of the unjust enrichment
claim.
[Id. at 35-36 & nn.26-27 (citing CV 12-00268, Complaint
at ¶¶ 7, 61, 69; CV 12-00271, Complaint at ¶¶ 7, 61, 69; CV 1200263, Complaint at ¶¶ 7, 61, 69; CV 12-00269, Complaint at ¶¶ 7,
66, 74; CV 12-00270, Complaint at ¶¶ 7, 61, 69; CV 12-00266,
Complaint at ¶¶ 7, 63, 70).]
Defendants argue that other federal
24
courts have ruled that similar unjust enrichment claims challenge
the amount of interest and trigger preemption, and those courts
have ruled that the complete preemption holding of Beneficial
National is not limited to usury claims.
(citing cases).]
[Id. at 36-37 & n.28
Defendants note that the Attorney General
relies upon JPMorgan Chase, but that case involved claims similar
to the Attorney General’s UDAP claims; it did not involve an
unjust enrichment claim.
[Id. at 37.]
Defendants also contend that the same analysis applies
to Discover Bank because “[s]ection 521 of the Depository
Institutions Deregulation and Monetary Control Act of 1980
(“DIDA”), 12 U.S.C. § 1831d, incorporates the operative language
of 12 U.S.C. §§ 85 and 86 and provides the same protection to
state-chartered banks.”
[Id. at 38 (footnote omitted).]
Section
1831d(a) allows state-chartered banks to assess interest at the
rate allowed by the law of the state where the bank is located,
and Delaware allows a bank to charge any agreed upon rate.
The
Attorney General’s position is that the rate Discover Bank
charges exceeds the rate allowed under Hawai`i law.
complete preemption doctrine applies.
C.
Thus, the
[Id. at 39-40.]
Grable Argument
Defendants acknowledge that Bank of America rejected
the Grable argument the Citi Defendants raised in their Notice of
Removal.
The Citi Defendants raised the argument to preserve it
25
for appeal, and they rely on the other grounds asserted in the
Memorandum in Opposition.
D.
[Id. at 41.]
Removal Expenses
Defendants argue that, if this Court grants remand, the
Attorney General is not entitled to removal related expenses
because there is no clearly established law which forecloses
Defendants’ bases for removal.
The Notices of Removal present
issues of first impression, and therefore awards of expenses are
not warranted.
IV.
[Id. at 41-42.]
The Attorney General’s Reply
In the Reply, the Attorney General largely reiterates
the arguments he raised in the Omnibus Motion.
A.
CAFA
The Attorney General emphasizes that he did not plead a
class action and that no authority requires him to bring these
parens patriae consumer protection actions as class actions.
Thus, whether Haw. R. Civ. P. 23 is a similar statute for CAFA
purposes is irrelevant because the Attorney General did not file
these actions pursuant to Haw. R. Civ. P. 23.
The Attorney
General notes that the Complaints do not plead the elements of a
Haw. R. Civ. P. 23 action.
[Reply at 3-4.]
The Attorney General
argues that the Complaints’ assertions that they are not brought
on behalf of a class are not legal conclusions which this Court
can ignore; they are assertions of fact.
26
The Attorney General
also reiterates that the Complaints do not establish that these
cases meet the requirements of CAFA.
[Id. at 5-6.]
The Attorney General asserts that he is bringing this
action on behalf of the State, in its own right, not on behalf of
Defendants’ victimized customers.
The Attorney General points
out that the Middle District of Florida has recently adopted a
similar interpretation and ruled that the card holders’ rights
were separate and distinct from the state’s.
[Id. at 6-7 (citing
Spinelli v. Capital One Bank, USA, et al., No. 8:08-cv-00132,
Dkt. 253 (M.D. Fla. Aug. 22, 2012)).]
The Attorney General also reiterates that Defendants’
interpretation of § 480-14(b) ignores the broad authority granted
in § 661-10.
The Attorney General points out that the Memorandum
in Opposition did not respond to the Attorney General’s argument
regarding the interpretation of the term “may” in § 480-14(b), in
light of the fact that “may” is used in close proximity to the
term “shall”.
The Attorney General argues that this is further
evidence that Defendants’ interpretation of § 480-14(b) is
erroneous.
[Id. at 7-8.]
The Attorney General contends that the
case law Defendants cite in support of their interpretation of
§ 480-14(b) is inapplicable because those cases do not address
Chapter 480 and the statutes those case do address are
incomparable to § 480-14(b).
[Id. at 9.]
The cases Defendants
cited which do discuss Chapter 480 do not support their position.
27
[Id. at 13-14.]
The Attorney General also argues that the Chapter 480
legislative history which Defendants cited does not support
either Defendants’ interpretation of “may” or their position that
Chapter 480 limits the Attorney General’s authority.
11.]
[Id. at
Further, Defendants ignore the portions of the legislative
history which clearly state that the Hawai`i Legislature intended
to allow antitrust suits by indirect purchasers, which the
Attorney General argues shows that the legislature was “trying to
help, not hinder the Attorney General.”
[Id. at 11-12 (citing
Conf. Com. Rep. 104 on H.B. No. 1525 at ¶¶ 3, 5).]
The Attorney
General, however, states that § 480-14(b) and its meaning are not
actually at issue in this case because he did not file these
actions under § 480-14(b).
B.
[Id. at 11.]
Complete Preemption
The Attorney General argues that the Memorandum in
Opposition did not raise any authority to refute the Omnibus
Motion’s argument that consumer protection cases do not lie in
usury.
[Id. at 14.]
As to the issue of whether fees for payment protection
plans are interest, the Attorney General argues that late fees,
loan origination fees, and loan discount fees are distinguishable
and therefore cases holding those fees to be interest do not
support Defendants’ position.
The Attorney General urges this
28
Court to follow JPMorgan because it addressed and distinguished
the authority that Defendants rely upon here.
The Attorney
General urges the Court to disregard the declarations submitted
with the Memorandum in Opposition because the Court should look
to the four-corners of the pleadings and should not rely on the
self-serving characterization by Defendants’ representatives
about the payment protection plans.
The Attorney General also
argues that, even if this Court considered the declarations, they
would not change the JPMorgan analysis.
[Id. at 15-18.]
Even assuming, arguendo, that the fees for the payment
protection plans are interest, the Attorney General reiterates
that § 86 was not intended to provide a remedy, let alone an
exclusive remedy, for the unfair charging of plan fees to
customers who did not knowingly agree to the charge or for the
fraudulent administration of those plans.
The Attorney General
argues that Congress has not manifested a clear intent to allow
removal of this type of cases.
Thus, the Attorney General
reiterates that complete preemption does not apply because the
instant cases do not lie in usury.
[Id. at 18-20.]
The Attorney General urges the Court to grant his
motions to remand and to order Defendants to pay his removal
related expenses.
V.
Defendants’ Sur-reply
29
In Defendants’ Sur-reply, they argue that a district
court may resolve factual disputes relevant to the jurisdictional
issues raised in a motion to remand by considering evidence,
including affidavits and testimony.
[Sur-reply at 5 (quoting
McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988)).]
Defendants contend that district courts do so routinely, and the
cases the Attorney General cited do not contradict this
principle.
Thus, Defendants urge the Court to consider the
declarations which Defendants submitted with the Memorandum in
Opposition.
[Id. at 6-7.]
STANDARD
A plaintiff may file a motion for remand to challenge
the removal of an action from state court to federal court.
The
removal is proper under 28 U.S.C. § 1441(a) as long as the
plaintiff could have brought the action in federal court.
Section 1441, however, is strictly construed against removal, and
courts resolve any doubts about the propriety of removal in favor
of remanding the case to state court.
See Durham v. Lockheed
Martin Corp., 445 F.3d 1247, 1252 (9th Cir. 2006).
The party
seeking to remove the case bears the burden of establishing the
existence of federal jurisdiction.
See Cal. ex rel. Lockyer v.
Dynegy, Inc., 375 F.3d 831, 838 (9th Cir. 2004).
30
DISCUSSION
I.
CAFA
In Washington v. Chimei Innolux Corp., the Ninth
Circuit stated:
Congress enacted CAFA to “‘curb perceived
abuses of the class action device which, in the
view of CAFA’s proponents, had often been used to
litigate multi-state or even national class
actions in state courts.’” United Steel v. Shell
Oil Co., 602 F.3d 1087, 1090 (9th Cir. 2010)
(quoting Tanoh v. Dow Chem. Co., 561 F.3d 945, 952
(9th Cir. 2009)). CAFA vests a district court
with original jurisdiction over “a class action”
where: (1) there are one-hundred or more putative
class members; (2) at least one class member is a
citizen of a state different from the state of any
defendant; and (3) the aggregated amount in
controversy exceeds $5 million, exclusive of costs
and interest. 28 U.S.C. § 1332(d)(2), (5)(B),
(6).
CAFA authorizes the removal of class action
lawsuits from state to federal court when the
jurisdictional requirements are satisfied. 28
U.S.C. § 1332(d)(2). However, the general
principles of removal jurisdiction apply in CAFA
cases. . . .
659 F.3d 842, 847 (9th Cir. 2011).
In Chimei, the Ninth Circuit considered whether parens
patriae actions brought by the Washington attorney general and
the California attorney general “alleging that Defendants engaged
in a conspiracy to fix the prices of thin-film transistor liquid
crystal display (‘TFT–LCD’) panels, and that state agencies and
consumers were injured by paying inflated prices for products
containing TFT–LCD panels.”
Id. at 846.
31
The Ninth Circuit set
forth the applicable analysis as follows:
The question of whether these parens patriae
lawsuits are class actions within the meaning of
CAFA is one of statutory construction. As always,
our starting point is the plain language of the
statute. Children’s Hosp. & Health Ctr. v.
Belshe, 188 F.3d 1090, 1096 (9th Cir. 1999).
“[W]e examine not only the specific provision at
issue, but also the structure of the statute as a
whole, including its object and policy.” Id. If
the plain meaning of the statute is unambiguous,
that meaning is controlling and we need not
examine legislative history as an aid to
interpretation unless “the legislative history
clearly indicates that Congress meant something
other than what it said.” Carson Harbor Village,
Ltd. v. Unocal Corp., 270 F.3d 863, 877 (9th Cir.
2001) (en banc). If the statutory language is
ambiguous, then we consult legislative history.
United States v. Daas, 198 F.3d 1167, 1174 (9th
Cir. 1999).
Id. at 847-48 (alteration in Chimei).
The Ninth Circuit ultimately held that the district
court properly remanded the actions and that the parens patriae
actions at issue were not class actions within the meaning of
CAFA.
Id. at 847.
The Ninth Circuit noted that neither action
was filed pursuant to Fed. R. Civ. P. 23 or a similar state
statute.6
Further, “[n]one of the state statutes contain the
6
The relevant statutes in Chimei were Wash. Rev. Code §
19.86.080(1) and Cal. Bus. & Prof. Code § 16760(a)(1). 659 F.3d
at 847.
Wash. Rev. Code. § 19.86.080(1) authorizes the Washington
attorney general to file a suit “in the name of the state, or as
parens patriae on behalf of persons residing in the state” to
“prevent the doing of any act herein prohibited or declared to be
unlawful[.]”
Cal. Bus. & Prof. Code § 16760(a)(1) authorizes the
(continued...)
32
typical class action requirements of showing numerosity,
commonality, typicality, or adequacy of representation.”
Id. at
848 (citing Marlo v. United Parcel Serv., Inc., 639 F.3d 942, 946
(9th Cir. 2011) (“To maintain a class action, a plaintiff must
demonstrate numerosity, commonality, typicality, and adequate
representation of the class interest.”)).
The Ninth Circuit
noted that not all representative actions are class actions and,
unlike a traditional class action, a statutory parens patriae
action could result in a settlement requiring only penalties paid
to the public treasury, with no restitution to the victims of the
alleged fraud.
Id.
The Ninth Circuit also noted that, although
a parens patriae action’s similarities to a Fed. R. Civ. P. 23
action are useful in determining whether the action is a class
action for purposes of CAFA, they are not determinative because
CAFA also requires that the allegedly similar statute authorize
the action as a class action and that the action actually be
brought as a class action.
Id. at 849-50.
The Complaints allege that the Attorney General “is
authorized under . . . Haw. Rev. Stat. § 480-2(d), and under
parens patriae authority, on behalf of the State and its citizens
to enforce Hawaii law.
The Attorney General has the power to
6
(...continued)
California attorney general to file a suit as parens patriae to
“secure monetary relief . . . for injury sustained by those
natural persons to their property by reason of any violation of
this chapter.”
33
bring these claims on behalf of the State under the provisions of
Haw. Rev. Stat. § 661-10.”
¶ 8.
See, e.g., CV 12-00263, Complaint at
The Complaints also allege that the Attorney General
“may bring an action based upon unfair or
deceptive acts or practices declared unlawful by
this section.” Id. at § 480-2(d). The Attorney
General is specifically charged with the
administration of the UDAP, and may act sua sponte
as the agent and legal representative of the State
in civil proceedings to enforce the statute.
See, e.g., id. at ¶ 74 (emphasis added).
Defendants are correct that § 480-2(d) does not create
a cause of action; it merely states, “[n]o person other than a
consumer, the attorney general or the director of the office of
consumer protection may bring an action based upon unfair or
deceptive acts or practices declared unlawful by this section.”
The Attorney General, however, specifically seeks, in conjunction
with Count I, “penalties of up to $10,000 for each violation of
the UDAP ([Haw. Rev. Stat. § 480-3.1]) and injunctive relief (id.
at 480-15)[,]” see, e.g., id. at ¶ 79,7 and, in conjunction with
7
Haw. Rev. Stat. § 480-3.1 states:
Any person, firm, company, association, or
corporation violating any of the provisions of
section 480-2 shall be fined a sum of not less
than $500 nor more than $10,000 for each
violation, which sum shall be collected in a civil
action brought by the attorney general or the
director of the office of consumer protection on
behalf of the State. The penalties provided in
this section are cumulative to the remedies or
penalties available under all other laws of this
(continued...)
34
Count II, “additional penalties of up to $10,000 for each
violation of the UDAP committed against elders.”
(citing Haw. Rev. Stat. § 480-13.5(a)).8
See, e.g., id.
The Attorney General
has therefore clearly invoked his civil enforcement authority
under Chapter 480, and proceedings brought in that capacity are
not class actions for purposes of CAFA.
The Attorney General has also invoked his “parens
patriae authority, on behalf of the State and its citizens to
enforce Hawaii law.”
See, e.g., id. at ¶ 8.
Section 480-14(b)
expressly refers to the Attorney General’s authority to bring a
parens patriae action to recover damages on behalf of Hawai`i
consumers.
It states:
The attorney general of the State shall be
authorized to bring a class action for indirect
purchasers asserting claims under this chapter.
The attorney general or the director of the office
of consumer protection may bring a class action on
behalf of consumers based on unfair or deceptive
acts or practices declared unlawful by section
7
(...continued)
State. Each day that a violation of section 480-2
occurs shall be a separate violation.
Haw. Rev. Stat. § 480-15 states: “The attorney general may
bring proceedings to enjoin any violation of this chapter;
provided that the director of the office of consumer protection
may also bring proceedings to enjoin any violation of section
480-2.”
8
Haw. Rev. Stat. § 480-13.5 states: “If a person commits a
violation under section 480-2 which is directed toward, targets,
or injures an elder, a court, in addition to any other civil
penalty, may impose a civil penalty not to exceed $10,000 for
each violation.”
35
480-2. Actions brought under this subsection
shall be brought as parens patriae on behalf of
natural persons residing in the State to secure
threefold damages for injuries sustained by the
natural persons to their property by reason of any
violation of this chapter.
Haw. Rev. Stat. § 480-14(b).
This provision gives the Attorney
General the authority to bring parens patriae class actions to
recover damages on behalf of Hawai`i consumers who were indirect
purchasers.
Although the Attorney General makes much of the use
of the word “may” as opposed to the word “shall”, the statement
that the Attorney General “may bring a class action” is merely a
recognition that the Attorney General has the discretion, as
opposed to a statutory obligation, to bring such actions in
response to violations of § 480-2.
Reading subsection (b) in the
context of section 480-14 as a whole, as a well as in the context
of Chapter 480 in general, this Court rejects the Attorney
General’s interpretation of § 480-14(b) as authorizing the
Attorney General to bring parens patriae suits regarding
violations of § 480-2 as either a class action or a non-class
action.
Based upon the plain language of the provision, read in
context, the only reasonable interpretation of § 480-14(b) is: if
the Attorney General elects in his discretion to bring an action
to recover damages on behalf of Hawai`i consumers pursuant to
§ 480-14(b), he can only do so in a parens patriae class action.
A class action for purposes of CAFA “means any civil
action filed under rule 23 of the Federal Rules of Civil
36
Procedure or similar State statute or rule of judicial procedure
authorizing an action to be brought by 1 or more representative
persons as a class action[.]”
28 U.S.C. § 1332(d)(1)(B).
The
term class “class action” is defined, for purposes of Haw. Rev.
Stat. Chapter 480, as “includ[ing] the definition as provided in
rule 23 of the Hawaii rules of civil procedure.”
§ 480-1.
Haw. Rev. Stat.
The key terms of Haw. R. Civ. P. 23 are substantively
identical to Fed. R. Civ. P. 23, but this does not end the
inquiry into whether § 480-14(b) authorizes parens patriae class
actions pursuant to a rule that is “similar” to Fed. R. Civ. P.
23 for purposes of CAFA.
The Ninth Circuit has recognized that,
although CAFA does not require that the state class action scheme
contain all of the requirements and procedures associated with
Fed. R. Civ. P. 23, “it must, at a minimum, provide a procedure
by which a member of a class whose claim is typical of all
members of the class can bring an action not only on his own
behalf but also on behalf of all others in the class . . . .”
Chimei, 659 F.3d at 849 (alteration in Chimei) (emphases added)
(quoting W. Vir. ex rel. McGraw v. CVS Pharm., Inc., 646 F.3d
169, 175 (4th Cir. 2011)).
In the instant case, the Attorney General argues that
he is not asserting a class action because he does not have a
claim that is typical of the members of the purported class.
While the State and the Attorney General certainly have an
37
interest in protecting the State’s consumers from predatory
banking practices, the State and its agencies do not have
consumer credit cards, and thus they have not been harmed in the
same manner as the purported class members have been harmed by
the allegedly predatory practices Defendants employ in connection
with the credit card ancillary plans.
This Court, however, notes
that, if that is what is required for the Attorney General to
bring a § 480-14(b) class action claim, there would be many
instances, such as in the instant case, in which the Attorney
General would lack the typicality necessary to pursue a class
action.
Thus, the Attorney General would not be able to utilize
this process that the Hawai`i Legislature created as one of the
tools for the Attorney General to protect the interests of
Hawai`i consumers.
The Hawai`i Legislature could not have
intended to create such an illusive process.
Ultimately, however, this Court need not decide upon
the typicality question in the instant cases.
Even assuming,
arguendo, that Attorney General satisfies the statutory
requirement of typicality, this Court must also consider whether
the Attorney General has brought the instant cases as class
actions.
In holding that the parens patriae suits at issue in
Chimei were not class actions, the Ninth Circuit noted that “it
is not only that parens patriae suits are not ‘labeled “class
actions,”’ it is that they also lack statutory requirements for
38
numerosity, commonality, typicality, or adequacy of
representation that would make them sufficiently ‘similar’ to
actions brought under Rule 23, and that they do not contain
certification procedures.”
659 F.3d at 850.
Conversely, if even
there is a similar state statute with the requisite class action
components, the plaintiff must actually invoke that statute or
otherwise label the case a “class action.”
In the instant cases, however, the Complaints expressly
state that the Attorney General is not bringing these actions “on
behalf of a class or any group of persons that can be construed
as a class.”
See, e.g., CV 12-00263, Complaint at ¶ 8.
the Complaints do not invoke § 480-14(b).
Further,
The Court therefore
interprets the Complaints as bringing the Attorney General’s
parens patriae claims pursuant to either Hawai`i state common law
regarding parens patriae actions or the Attorney General’s
general powers under § 661-10.
This Court recognizes that it is not clear whether the
Attorney General can state plausible parens patriae claims based
upon either Hawai`i common law or § 661-10.
There is a dearth of
Hawai`i case law addressing common law parens patriae actions
asserting consumer protection claims.
Most cases addressing the
state’s parens patriae authority relate to charitable trusts,
termination of parental rights, or civil commitment.
See, e.g.,
Takabuki v. Ching, 67 Haw. 515, 521 n.3, 695 P.2d 319, 323 n.3
39
(1985) (discussing “[t]he function of the attorney general, as
parens patriae of charitable trusts” (citations omitted));
Woodruff v. Keale, 64 Haw. 85, 99, 637 P.2d 760, 769 (1981) (“In
the case of involuntary termination, it is only after the parents
have demonstrated some form of ‘unfitness’ as defined by the
legislature in [Haw. Rev. Stat.] § 571-61(b) that the state
intervenes as parens patriae and considers the best interests of
the child.”); In re Doe, 102 Hawai`i 528, 543, 78 P.3d 341, 356
(Ct. App. 2003) (“The state has a legitimate interest under its
parens patriae powers in providing care to its citizens who are
unable because of emotional disorders to care for themselves[.]”
(quoting Addington v. Texas, 441 U.S. 418, 426 (1979))).
Further, even assuming, arguendo, that Hawai`i
recognizes a common law parens patriae consumer protection claim,
it is unclear what remedies would be available for such a claim.
Cf. In re Dynamic Random Access Memory (Dram) Antitrust Litig.,
No. M 02-1486 PJH, 2007 WL 2517851, at *8 (N.D. Cal. Aug. 31,
2007) (“there is no broadly recognized common law parens patriae
right to pursue monetary damages claims, and cases discussing the
common law parens patriae right have generally been limited to
cases seeking injunctive or other equitable relief” (citing
Hawaii v. Standard Oil Co., 405 U.S. 251 (1972); In re
Multidistrict Vehicle Air Pollution, 481 F.2d 122, 131 (9th Cir.
1973) (distinguishing availability of parens patriae authority
40
for suits seeking injunctive relief, from suits seeking
damages))).
There is also a dearth of Hawai`i case law interpreting
or applying § 661-10.
Specifically, there is no case law stating
that § 661-10 gives the Attorney General the authority to bring a
non-class action parens patriae suit seeking the type of relief
requested in the Complaints.
In particular, the issue of the Attorney General’s
capacity to bring the unjust enrichment claim is troubling.
Count III of the Complaints alleges that Defendants were unjustly
enriched when they accepted the benefits of improper charges for
ancillary credit card products to Hawai`i consumers.
CV 12-00263, Complaint at ¶¶ 85-88.
See, e.g.,
The Attorney General seeks
to make the affected consumers whole, and the Attorney General
prays for “restitution and disgorgement of monies[.]”
id. at ¶¶ 88, Relief ¶ 3.
See, e.g.,
Although the Attorney General pled
this request in terms of equitable relief, it appears that the
Attorney General is essentially seeking damages incurred by
Hawai`i consumers who were allegedly injured by Defendants’
predatory practices.
If that is the true nature of the Attorney
General’s claim, the Attorney General must assert the claim
through a § 480-14(b) parens patriae class action.
As previously
stated, § 480-14(b) does not authorize the Attorney General to
recover damages incurred by Hawai`i consumers through a non-class
41
action parens patriae suit.
To the extent that § 661-10 would,
in general, authorize non-class action parens patriae suits for
damages, § 480-14(b) is the more specific statute and is
therefore controlling.
See Spirent Holding Corp. v. State of
Hawai`i, Dep’t of Taxation, 121 Hawai`i 220, 228, 216 P.3d 1243,
1251 (Ct. App. 2009).9
Thus, Defendants may be right that the Attorney
General’s unjust enrichment claims are wolves in sheep’s
clothing, that is § 480-14(b) claims which the Attorney General
has attempted to dress up as common law and § 661-10 claims.
This issue, however, is for the parties to litigate at a later
stage in the litigation.
This Court cannot, at this stage of the
proceedings, conclude that it must: 1) disregard the Attorney
General’s express disclaimer that he is pursuing a class action;
and 2) interpret the Attorney General’s Complaints as asserting
class actions eligible for removal pursuant to CAFA.
Cf. Tanoh
9
The Intermediate Court of Appeals recognized in Spirent
Holding that:
It is a well-established tenet of statutory
construction that “where there is a plainly
irreconcilable conflict between a general and a
specific statute concerning the same subject
matter, the specific will be favored. However,
where the statutes simply overlap in their
application, effect will be given to both if
possible, as repeal by implication is disfavored.”
121 Hawai`i at 228, 216 P.3d at 1251 (quoting Richardson v. City
& County of Honolulu, 76 Hawai`i 46, 55, 868 P.2d 1193, 1202
(1994)).
42
v. Dow Chem. Co., 561 F.3d 945, (9th Cir. 2009) (“In this case,
concluding that plaintiffs’ claims fall outside CAFA’s removal
provisions is not absurd, but rather is consistent with both the
well-established rule that plaintiffs, as masters of their
complaint, may choose their forum by selecting state over federal
court and with the equally well-established presumption against
federal removal jurisdiction.” (citation omitted)).
This Court
therefore CONCLUDES, for purposes of the instant motions to
remand, that it does not have removal jurisdiction pursuant to
CAFA over the instant cases.10
II.
Complete Preemption
Defendants have also removed the instant cases based on
the complete preemption doctrine.
They assert that federal law
preempts the Attorney General’s claims in the instant cases, in
spite of the fact that each Complaint “specifically disclaims any
such claims that would support removal of this action to a United
States District Court on the basis of diversity, jurisdictional
mandates under [CAFA], federal question jurisdiction, or any
other basis.”
See, e.g., CV 12-00263, Complaint at ¶ 9
(citations omitted).
To the extent that there are any other
10
Defendants have acknowledged that, pursuant to Nevada v.
Bank of America Corp., 672 F.3d 661 (9th Cir. 2012), the instant
actions are not “mass actions” under CAFA. [Mem. in Opp. at 25.]
Insofar as Bank of America is controlling precedent, this Court
CONCLUDES that it does not have removal jurisdiction over the
instant cases under CAFA’s provisions regarding mass actions.
43
claims that are not completely preempted, Defendants argue that
this Court may exercise supplemental jurisdiction over those
claims pursuant to 28 U.S.C. § 1367.
The Ninth Circuit has stated that, generally:
Federal courts have original jurisdiction over
“all civil actions arising under the Constitution,
laws, or treaties of the United States.” 28 U.S.C.
§ 1331. “For a case to ‘arise under’ federal law,
a plaintiff’s well-pleaded complaint must
establish either (1) that federal law creates the
cause of action or (2) that the plaintiff’s
asserted right to relief depends on the resolution
of a substantial question of federal law.”
Peabody Coal, 373 F.3d at 949 (citing Franchise
Tax Bd. v. Constr. Laborers Vacation Trust, 463
U.S. 1, 27–28, 103 S. Ct. 2841, 77 L. Ed. 2d 420
(1983)). Federal jurisdiction cannot hinge upon
defenses or counterclaims, whether actual or
anticipated. Vaden v. Discover Bank, 556 U.S. 49,
129 S. Ct. 1262, 1272, 173 L. Ed. 2d 206 (2009).
K2 Am. Corp. v. Roland Oil & Gas, LLC, 653 F.3d 1024, 1029 (9th
Cir. 2011).
“One exception to the statutory ‘well-pleaded
complaint’ rule is when Congress ‘so completely pre-empt[s] a
particular area that any civil complaint raising this select
group of claims is necessarily federal in character.’”
Proctor
v. Vishay Intertechnology Inc., 584 F.3d 1208, 1219 (9th Cir.
2009) (alteration in Proctor) (some citations omitted) (quoting
Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63–64, 107 S. Ct.
1542 (1987)).
A.
Preemption by the National Bank Act
In Beneficial National Bank v. Anderson, 539 U.S. 1
(2003), the United States Supreme Court stated:
44
In addition to this Court’s longstanding and
consistent construction of the National Bank Act
as providing an exclusive federal cause of action
for usury against national banks, this Court has
also recognized the special nature of federally
chartered banks. Uniform rules limiting the
liability of national banks and prescribing
exclusive remedies for their overcharges are an
integral part of a banking system that needed
protection from “possible unfriendly State
legislation.” Tiffany v. National Bank of Mo., 18
Wall. 409, 412, 21 L. Ed. 862 (1874). The same
federal interest that protected national banks
from the state taxation that Chief Justice
Marshall characterized as the “power to destroy,”
McCulloch v. Maryland, 4 Wheat. 316, 431, 4 L. Ed.
579 (1819), supports the established
interpretation of §§ 85 and 86 that gives those
provisions the requisite pre-emptive force to
provide removal jurisdiction. In actions against
national banks for usury, these provisions
supersede both the substantive and the remedial
provisions of state usury laws and create a
federal remedy for overcharges that is exclusive,
even when a state complainant, as here, relies
entirely on state law. Because §§ 85 and 86
provide the exclusive cause of action for such
claims, there is, in short, no such thing as a
state-law claim of usury against a national bank.
Even though the complaint makes no mention of
federal law, it unquestionably and unambiguously
claims that petitioners violated usury laws. This
cause of action against national banks only arises
under federal law and could, therefore, be removed
under § 1441.
539 U.S. at 10-11.
The National Bank Act provides:
Any association may take, receive, reserve, and
charge on any loan or discount made, or upon any
notes, bills of exchange, or other evidences of
debt, interest at the rate allowed by the laws of
the State, Territory, or District where the bank
is located, or at a rate of 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 the bank is
located, whichever may be the greater, and no
45
more, except that where by the laws of any State a
different rate is limited for banks organized
under State laws, the rate so limited shall be
allowed for associations organized or existing in
any such State under title 62 of the Revised
Statutes. When no rate is fixed by the laws of
the State, or Territory, or District, the bank may
take, receive, reserve, or charge a rate not
exceeding 7 per centum, or 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 the bank is
located, whichever may be the greater, and such
interest may be taken in advance, reckoning the
days for which the note, bill, or other evidence
of debt has to run. The maximum amount of
interest or discount to be charged at a branch of
an association located outside of the States of
the United States and the District of Columbia
shall be at the rate allowed by the laws of the
country, territory, dependency, province,
dominion, insular possession, or other political
subdivision where the branch is located. And the
purchase, discount, or sale of a bona fide bill of
exchange, payable at another place than the place
of such purchase, discount, or sale, at not more
than the current rate of exchange for sight drafts
in addition to the interest, shall not be
considered as taking or receiving a greater rate
of interest.
12 U.S.C. § 85.
Section 86 provides the remedy for violations of
§ 85.
The taking, receiving, reserving, or charging a
rate of interest greater than is allowed by
section 85 of this title, 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. In case the greater rate of
interest has been paid, the person by whom it has
been paid, or his legal representatives, may
recover back, in an action in the nature of an
action of debt, twice the amount of the interest
thus paid from the association taking or receiving
the same: Provided, That such action is commenced
46
within two years from the time the usurious
transaction occurred.
12 U.S.C. § 86.
The Attorney General argues that the complete
preemption doctrine does not apply because: 1) the charges for
Defendants’ ancillary products do not constitute interest under
the National Bank Act; and 2) even assuming, arguendo, that the
charges are interest, the claims in these cases do not challenge
the rate of interest charged.
1.
Whether the Charges Are Interest
The National Bank Act does not define the term
“interest”, as the term is used in § 85 and § 86.
The
regulations promulgated pursuant to the National Bank Act,
however, contain the following definition:
The term “interest” as used in 12 U.S.C. 85
includes any payment compensating a creditor or
prospective creditor for an extension of credit,
making available of a line of credit, or any
default or breach by a borrower of a condition
upon which credit was extended. It includes,
among other things, the following fees connected
with credit extension or availability: numerical
periodic rates, late fees, creditor-imposed not
sufficient funds (NSF) fees charged when a
borrower tenders payment on a debt with a check
drawn on insufficient funds, overlimit fees,
annual fees, cash advance fees, and membership
fees. It does not ordinarily include appraisal
fees, premiums and commissions attributable to
insurance guaranteeing repayment of any extension
of credit, finders’ fees, fees for document
preparation or notarization, or fees incurred to
obtain credit reports.
12 C.F.R. § 7.4001(a); see also Smiley v. Citibank (S.D.), N.A.,
47
517 U.S. 735, 744-45 (1996) (holding that § 7.4001(a) is entitled
to deference and that it is a reasonable interpretation of the
statute).
Defendants argue that the payment protection plans and
other products at issue in these cases are debt cancellation
contracts and/or debt suspension agreements,11 which are governed
by federal law.
12 C.F.R. § 37.1 states:
(a) Authority. A national bank is authorized to
enter into debt cancellation contracts and debt
suspension agreements and charge a fee therefor,
in connection with extensions of credit that it
makes, pursuant to 12 U.S.C. 24(Seventh).
11
A debt cancellation contract is defined as:
a loan term or contractual arrangement modifying
loan terms under which a bank agrees to cancel all
or part of a customer’s obligation to repay an
extension of credit from that bank upon the
occurrence of a specified event. The agreement
may be separate from or a part of other loan
documents.
12 C.F.R. § 37.2(f).
A debt suspension agreement is defined as:
a loan term or contractual arrangement modifying
loan terms under which a bank agrees to suspend
all or part of a customer’s obligation to repay an
extension of credit from that bank upon the
occurrence of a specified event. The agreement
may be separate from or a part of other loan
documents. The term debt suspension agreement
does not include loan payment deferral
arrangements in which the triggering event is the
borrower’s unilateral election to defer repayment,
or the bank’s unilateral decision to allow a
deferral of repayment.
§ 37.2(g).
48
(b) Purpose. This part sets forth the standards
that apply to debt cancellation contracts and debt
suspension agreements entered into by national
banks. The purpose of these standards is to
ensure that national banks offer and implement
such contracts and agreements consistent with safe
and sound banking practices, and subject to
appropriate consumer protections.
(c) Scope. This part applies to debt cancellation
contracts and debt suspension agreements entered
into by national banks in connection with
extensions of credit they make. National banks’
debt cancellation contracts and debt suspension
agreements are governed by this part and
applicable Federal law and regulations, and not by
part 14 of this chapter or by State law.
(Emphasis added.)
Some district courts have recognized that the National
Bank Act preempts claims related to debt cancellation contracts
and debt suspension agreements.
See, e.g., Denton v. Dep’t
Stores Nat’l Bank, No. 10–CV–5830 RBL, 2012 WL 1204940, at *4
(W.D. Wash. Apr. 11, 2012) (ruling that the National Bank Act
preempted the plaintiff’s claim for breach of the covenant of
good faith and fair dealing where the plaintiff alleged that she
applied for and was denied benefits under the defendant’s payment
protection service).
This Court concludes that, based upon the
definitions in the applicable regulations, the ancillary products
at issue in the instant cases constitute debt cancellation
contracts or debt suspension agreements.
The Court acknowledges
that the mere fact that federal regulations govern debt
cancellation contracts and debt suspension agreements and the
49
fact that Defendants may raise these regulations as part of their
defenses to the Attorney General’s claims do not alone create
federal question jurisdiction.
The fact that the ancillary products at issue in these
cases are debt cancellation contracts or debt suspension
agreements, however, supports Defendants’ position that the fees
assessed for these products are interest for purposes of the
National Bank Act.
When a bank enters into a debt cancellation
contract, the bank agrees that, if certain specified events
occur, the bank will “cancel all or part of a customer’s
obligation to repay an extension of credit from that
bank . . . .”
§ 37.2(f).
Similarly, when a bank enters into a
debt suspension agreement, the bank agrees that, if certain
specified events occur, the bank will “suspend all or part of a
customer’s obligation to repay an extension of credit from that
bank . . . .”
§ 37.2(g).
The Fink Declaration explains the nature of the payment
protection plans that Chase Bank USA, N.A. (“Chase”) has sold to
Hawai`i residents:
4.
Chase’s payment protection plans are
optional amendments of Chase cardholder agreements
that modify the contractual terms for repayment of
a customer’s credit card loan. . . .
5.
minimum
balance
plan, a
minimum
Chase cardholders ordinarily must make
payments on their credit card account
each month. Under a payment protection
cardholder’s obligation to make these
payments is suspended or cancelled in
50
whole or in part under the circumstances covered
by the plan. . . .
6.
Chase’s payment protection plans extend
additional credit to cardholders in some or all of
the following ways: (i) they relieve customers of
minimum payment obligations, thus extending the
term of the loan and allowing customers to retain
loaned funds for a longer period of time before
repaying them, (ii) they allow customers to retain
loaned funds on more favorable terms (i.e.,
without paying interest charges that would accrue
in the absence of the plan, and without paying
late fees that otherwise would accrue if the
customer were to fail to make a minimum payment),
(iii) they relieve customers from the prospect of
breaching or defaulting on their credit card loan
terms, (iv) they allow customers to continue
drawing on the credit extended by their credit
card account under circumstances in which it
otherwise might be reduced or withdrawn . . . ,
and (v) the plans may permanently relieve
customers of some or all of their loan balance.
Chase charges a fee for the plans as compensation
for these extensions of credit. These fees
ordinarily are calculated as a percentage of the
customer’s outstanding credit card loan balance.
[Fink Decl. at ¶¶ 4-6.]
The Jantzi Declaration includes similar
testimony regarding the payment protection plans sold by Capital
One Bank (USA) N.A, [Jantzi Decl. at ¶¶ 4-5,] and the Choltus
Declaration includes similar testimony regarding the payment
protection plans sold by FIA Card Services, N.A. [Choltus Decl.
at ¶¶ 6-8].
In considering the instant motions for remand, this
Court has the discretion to consider declarations beyond the
pleadings.
Cf. Saulic v. Symantec Corp., No. SA CV 07-610 AHS
(PLAx), 2007 WL 5074883, at *9, (C.D. Cal. Dec. 26, 2007) (“A
51
court may ‘require parties to submit summary-judgment-type
evidence relevant to the amount in controversy at the time of
removal.’
Singer [v. State Farm Mut. Auto. Ins. Co.,] 116 F.3d
[373,] 377 [(9th Cir. 1997) (quoting Allen v. R & H Oil & Gas
Co., 63 F.3d 1326,] 1335 [(5th Cir. 1995))].
It may also
exercise its discretion to accept ‘formal judicial admissions.’
Id. at 376.
In contrast, where defendants fail to offer ‘any
pleading, evidence, or admission that establishes that it is more
likely than not that jurisdiction lies,’ the Ninth Circuit has
found it ‘well within the court’s discretion to remand to state
court . . . .”
Abrego Abrego [v. Dow Chem. Co.], 443 F.3d [686,]
691 [(9th Cir. 2006)].”).
This Court recognizes that Defendants
did not submit declarations regarding the ancillary products that
the other three banks sold to Hawai`i consumers.
The Court,
however, notes that Defendants have presented joint arguments
regarding the nature of the plans offered by all of the banks.
Further, the Attorney General did not respond with any evidence,
nor did the Attorney General request leave to submit any
evidence, contesting Defendants’ evidence and representations
about the nature of the plans offered by Defendants.
This Court
therefore, in the exercise of its discretion, has considered the
declarations that Defendants submitted, and finds that the
declarations are sufficient evidence, for purposes of the instant
motions only, of the nature of the payment protection plans at
52
issue in these cases.
Based on the definitions in the applicable regulations
and based upon the declarations submitted by Defendants, this
Court FINDS, for purposes of the instant motions only, that the
charges Defendants impose for participation in the payment
protection plans at issue in these cases constitute “interest”
under the National Bank Act.
2.
Whether the Attorney General
Challenges the Rate of Interest
The Attorney General also argues that the complete
preemption doctrine discussed in Beneficial National does not
apply because the instant cases do not challenge the rate of
interest that Defendants impose.
The Attorney General’s
position, however, is belied by the allegations in the
Complaints.
One of the Attorney General’s central challenges to
Defendants’ practices regarding their ancillary products is that
Defendants allegedly charge Hawai`i consumers significant fees to
participate in the various types of payment protection plans even
though the consumers may only receive minimal benefits, or may be
ineligible to receive any benefits from the plans.
This is
particularly so in the case of elderly consumers who are on a
fixed income.
For example, the Complaints allege that “Defendants
bill ineligible Hawaii citizens for this coverage, even though
their status at the time of enrollment prevents them from
53
receiving benefits under the terms of these Payment Protection
Plans.”
See, e.g., CV 12-00263, Complaint at ¶ 5.
The Attorney
General also alleges that “[a]s a result of their unfair and
deceptive marketing practices in connection with sales of Payment
Protection [Plans], Defendants have increased profits by
substantial sums, all thanks to products which provide virtually
no benefit to the Hawaii residents who are nevertheless charged
for these products month in and month out.”
¶ 69.
See, e.g. id. at
Particularly with regard to elderly consumers on fixed
incomes, the Attorney General contends that the protection
provided “may be illusory because the ‘qualifying events’[, such
as unemployment, disability, or natural disaster,] will not
disrupt the income stream coming from a fixed income.”
id. at ¶ 44.
See, e.g.
Count III, the unjust enrichment claim, alleges
that the charges Defendants have imposed are improper and, by
collecting these charges, Defendants have knowingly accepted
benefits which they know they are not entitled to receive.
The
Attorney General argues that Hawai`i consumers who have paid
these charges should be made whole.
See, e.g. id. at ¶ 88.
The
Attorney General therefore prays for “restitution and
disgorgement of monies . . . for all Hawaii consumers injured by
Defendants’ acts described in this Complaint.”
Relief, ¶ 3.
See, e.g. id. at
By these allegations and prayers for relief, the
Attorney General contends that: 1) the costs Defendants assessed
54
for their products exceeded the value conferred upon Hawaii
consumers through the product; and 2) Hawai`i consumers have been
injured as a result.
Insofar as this Court has already concluded
that the charges for participation in these plans constitute
interest, such allegations about the charges necessarily
constitute challenges to the rate of interest.
This Court therefore CONCLUDES, based upon the existing
record, that at least some of the Attorney General’s claims
challenge the rate of interest charged by Defendants in
connection with their ancillary products and these claims
constitute usury claims against national banks.12
This Court
therefore CONCLUDES that the National Bank Act completely
preempts such claims and that there is federal jurisdiction,
based upon Beneficial National, over the Attorney General’s usury
claims against the national banks and their related defendants.
Further, the Court CONCLUDES that it is appropriate to exercise
supplemental jurisdiction, pursuant to 28 U.S.C. § 1367, over the
other claims in the cases involving national banks.
The Court
therefore CONCLUDES that the defendants in CV 12-00263, CV 1200266, CV 12-00268, CV 12-00270, and CV 12-00271 properly removed
12
For example, the portions of the Attorney General’s
claims that are premised upon “slamming” allegations, i.e. that
Defendants enrolled Hawai`i consumers in payment protection plans
without the consumers’ assent, do not challenge the rate of the
interest charged for the consumers’ participation in those plans.
See, e.g., CV 12-00263, Complaint at ¶¶ 20-38 (setting forth
factual allegations regarding “slamming”).
55
those cases, and the Court DENIES the Attorney General’s motions
to remand in those cases.13
B.
Preemption by DIDA
Discover Bank is not a national bank; it is “a Delaware
state-chartered bank[.]”
[CV 12-00269, Notice of Removal at ¶ 5
(citing Complaint at ¶ 11; Exh. 9 to Notice of Removal (Decl. of
Ryan C. Garton) at ¶ 3).]
The Discover Defendants argue that the
Attorney General’s claims against them are completely preempted
pursuant to DIDA, 12 U.S.C. § 1831d, and 28 U.S.C. § 1331.
To
the extent that there are any claims that are not completely
preempted, the Discover Defendants argue that this Court may
exercise supplemental jurisdiction over those claims.
[Id. at
¶ 10.]
Section 1831d states:
(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
13
Insofar as this Court has concluded that it has
jurisdiction over the Attorney General’s Complaint in CV 1200271, this Court need not address the Citi Defendants’ Grable
argument. Further, Defendants have acknowledged that Nevada v.
Bank of America Corp., 672 F.3d 661 (9th Cir. 2012), rejected the
Grable argument that the Citi Defendants raised in their Notice
of Removal. [Mem. in Opp. at 41.] Bank of America is binding
precedent upon this Court. Thus, even if this Court were to
consider the Citi Defendants’ Grable argument, this Court would
conclude, pursuant to Bank of America, that the Citi Defendants
have not established the existence of removal jurisdiction based
upon the existence of a substantial federal question.
56
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.
(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.
For the same reasons discussed, supra section II.A., this Court
CONCLUDES that the charges the Discover Defendants imposed for
57
their ancillary products constitute “interest” for purposes of
DIDA and that at least some of the Attorney General’s claims
against the Discover Defendants allege that the rate of the
interest charged by the Discover Defendants exceeds the allowable
rate.
This Court therefore CONCLUDES that such claims against
the Discover Defendants are complete preempted pursuant to DIDA.
Further, the Court CONCLUDES that it is appropriate to exercise
supplemental jurisdiction over the other claims against the
Discover Defendants pursuant to 28 U.S.C. § 1367.
The Court
therefore CONCLUDES that the Discover Defendants properly removed
CV 12-00269, and the Court DENIES the Attorney General’s motion
to remand in CV 12-00269.
III. Request for Removal-Related Expenses
Insofar as this Court has concluded that Defendants
properly removed the instant cases, the Attorney General’s
request for removal related expenses is DENIED.
CONCLUSION
On the basis of the foregoing, the Attorney General’s
Motions to Remand and for Costs and Fees, filed on June 15, 2012
in CV 12-00263, CV 12-00266, CV 12-00268, CV 12-00269, CV 1200270, CV 12-00271, are HEREBY DENIED.
IT IS SO ORDERED.
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DATED AT HONOLULU, HAWAII, November 30, 2012.
/S/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
STATE OF HAWAII, ex rel. DAVID M. LOUIE, ATTORNEY GENERAL V.
JPMORGAN CHASE & CO., ET AL.; CIVIL NO. 12-00263 LEK-KSC; STATE
OF HAWAII, ex rel. DAVID M. LOUIE, ATTORNEY GENERAL V. HSBC BANK
NEVADA, N.A., ET AL; CIVIL NO. 12-00266 LEK-KSC; STATE OF HAWAII,
ex rel. DAVID M. LOUIE, ATTORNEY GENERAL V. CAPITAL ONE BANK
(USA) N.A., ET AL; CIVIL NO. 12-00268 LEK-KSC; STATE OF HAWAII,
ex rel. DAVID M. LOUIE, ATTORNEY GENERAL V. DISCOVER FINANCIAL
SERVICES, INC., ET AL; CIVIL NO. 12-00269 LEK-KSC; STATE OF
HAWAII, ex rel. DAVID M. LOUIE, ATTORNEY GENERAL V. BANK OF
AMERICA CORP., ET AL; CIVIL NO. 12-00270 LEK-KSC; STATE OF
HAWAII, ex rel. DAVID M. LOUIE, ATTORNEY GENERAL V. CITIGROUP
INC., ET AL; CIVIL NO. 12-00271 LEK-KSC; ORDER DENYING
PLAINTIFF’S MOTION TO REMAND AND FOR COSTS AND FEES
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