Summary
holding that debtors' purported state law claim that defendants arbitrarily assessed excessive fees and charges was preempted by the National Bank Act
Summary of this case from Garcia v. Greenpoint Mortgage Funding Inc.Opinion
CIVIL ACTION No. 04-0841 SECTION: E/2
April 19, 2004
ORDER AND REASONS
This matter is before the court on plaintiffs' ("the Taylors") motion to remand. Defendant Wells Fargo opposes the motion, which was submitted on the briefs. For the reasons that follow, the motion is denied.
BACKGROUND
The Taylors secured an adjustable rate mortgage loan from Wells Fargo in July of 2001, to purchase a home located at 19491 Taylor Lane, Covington, Louisiana. The loan was secured by a mortgage on the property. By March 2003, the Taylors had fallen behind on their loan payments to Wells Fargo. Defendant Dean Morris, L.L.P., ("Morris"), counsel for Wells Fargo, filed suit to foreclose on the mortgage in state court in St. Tammany Parish. The Taylors contacted Morris to determine the cost to reinstate the mortgage and redeem the property. Ultimately, in June, 2003, Morris gave the Taylors a redemption quote. On June 27, 2003, the Taylors paid a total redemption fee of $13,713.88 to reinstate the mortgage. That amount included $9,471.92 for "payment due", late charges of $287.81, escrow deficit payment of $151.87, property preservation, inspection and appraisal/BPO fees of $331.00, and finally, $3,471.28 in attorney's fees and costs, which in turn included an estimated amount of $1,424.94 for Clerk's fees and Sheriff's costs and commission. The Taylors discovered that the actual amount paid by Morris for the Clerk's fees and Sheriff's costs and commission was $781.77. They made written demand on Morris for the refund of $643.17, the excess amount collected by Morris. Morris did not refund the excess costs collected from the Taylors.
The Taylors filed a class action suit in state court alleging only state contract and tort claims against defendants. The complaint alleges, at ¶ XVII, that "Defendants" arbitrarily assessed "excessive fees and charges" to the Taylors when they redeemed their loan. It further alleges, at ¶ XVIII, that the fees and costs defendants charged the Taylors (and putative class members) to redeem and reinstate their loan included amounts that the mortgage contract prohibited defendants from collecting, and that defendants "knowingly and deliberately" failed to return the excess amounts charged to them once the actual amounts were known and paid. At ¶ XXVII, the complaint prays for "reasonable damages, including compensatory and punitive damages. . . ."
Wells Fargo removed the lawsuit to federal district court based on federal question jurisdiction, 28 U.S.C. § 1331. The Taylors filed this motion to remand.
ANALYSIS
Removal jurisdiction must be strictly construed because federal courts are courts of limited jurisdiction, and because removal of a case implicates significant federalism concerns. Carpenter v. Wichita Falls Independent School District, 44 F.3d 362, 365 (5th Cir. 1995) (citations omitted). The party invoking federal subject matter jurisdiction bears the burden of establishing that jurisdiction. Id.;St. Paul Reinsurance Company, Ltd, v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998), citing Gaitor v. Penninsular Occidental Steamship Co., 287 F.2d 252, 253-54 (5th Cir. 1961). Absent diversity jurisdiction, a complaint that alleges only state law claims "may be removed to federal court only under two circumstances — when Congress expressly so provides, . . ., or when a federal statute wholly displaces the state-law claim through complete pre-emption." Beneficial National Bank v. Anderson, 539 U.S. 1, 123 S.Ct. 2058, 2063, 156 L.Ed.2d 1 (2003).
Wells Fargo asserts that the Taylors' cause of action is preempted by the National Bank Act, 12 U.S.C. § 85 and 86 and is removable. In addition, Wells Fargo argues that the lawsuit is removable because the facts alleged and actions complained of involve and include alleged violations of the federal Fair Debt Collection Practices Act (FDCPA) 15 U.S.C. § 1692 et seq., Fair Credit Reporting Act (FCRA) 15 U.S.C. § 1681 et seq., and Real Estate Settlement Procedures Act of 1974 (RESPA) 12 U.S.C. § 2605 and 2614, and that although the complaint does not mention those statutes, neither does it "expressly waive or disavow" the federal causes of action.
On January 30, 2004, the Taylors had filed an essentially identical lawsuit in state court, which, however, seated causes of action pursuant to each of these federal statutes. Wells Fargo removed the complaint to federal court. See EDLA C.A. 04-725. The Taylors voluntarily dismissed the complaint without prejudice.
1. Arises under federal law
"It is well settled that a cause of action arises under federal law only when the plaintiff's well-pleaded complaint raises a question of federal law." Arana v. Ochsner Health Plan, Inc., 302 F.3d 462, 468 (5th Cir. Aug. 15, 2002) (citations omitted). In In re: Industrial Life Insurance Litigation, Judge Feldman stated the law as follows:
To "arise under" federal law for jurisdictional purposes, federal law must create the cause of action stated in the complaint or the state law action must require a construction of federal law. Smith v. Kansas City Tile Trust. Co., 255 U.S. 180, 199 (1921). A federal court has jurisdiction to hear "only those cases in which a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law. Franchise Tax Bd. V. Constr. Laborers Vacation Trust, 463 U.S. 1, 27-28, 103 S.Ct. 2841, 2855, 77 L.Ed.2d 420 (1983).In re: Industrial Life Insurance Litigation. 2002 WL 1359748 *1 (E.D. La., June 4, 2002).
Wells Fargo argues that the Taylors' complaint arises under federal law because, while alleging only state law causes of action, it nevertheless prays for punitive damages which, in this instance, are only available pursuant to federal law — the Fair Credit Reporting Act, 15 U.S.C. § 1681(n)(a)(2) (allowing punitive damages in cases of willful non-compliance with the FCRA). In Medina v. Ramsey Steel Co., Inc., 238 F.3d 674 (5th Cir. 2001), the Fifth Circuit held that where a plaintiff pleads only state law causes of action in the complaint, but seeks a remedy exclusively available under federal law, the federal question jurisdiction exists and removal is proper.Id. at 680. Accordingly, because the Taylors demand for punitive damages is available only pursuant to the FCRA, federal jurisdiction exists and removal is proper.
"Medina's complaint alleged only a state law cause of action for age discrimination, but made a demand for unlimited back pay and liquidated damages which were available only pursuant to federal law. Without any analysis, the Fifth Circuit applied its holding inCarpenter v. Wichita Falls Independent School District. 44 F.3d 362 (5th Cir. 1995) to Medina's demand for damages and concluded that his claim necessarily arose under federal law. In Carpenter, the Court addressed the preemptive effect of plaintiff's claim in a federal lawsuit that the defendant violated her free speech rights under the First Amendment to the United States Constitution, on her parallel state court lawsuit alleging that defendant violated her free speech rights under the Texas State Constitution. The Court held that her state cause of action was not necessarily federal in character so as to arise under federal law, and was not preempted by her federal First Amendment cause of action. In footnote 2, the Court noted as follows:
The Supreme Court has required that the preemption be complete. Franchise Tax Board, 463 U.S. at 23, 103 S.Ct. At 2854. Moreover, it is the cause of action, and not a remedy, that must be preempted. See Merrell Dow, 478 U.S. 804, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986).
2. Preemption by federal law
In limited circumstances, "Congress may so completely preempt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Arana, 302 F.3d at 468, quoting Metro Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). "When the federal statute completely pre-empts the state-law cause of action, a claim which comes within the scope of that cause of action, even if pleaded in terms of state law, is in reality based on federal law." Beneficial National Bank, 123 S.Ct. at 2063. In Beneficial National Bank, the Court observed that where a federal statute provides (1) the exclusive cause of action for the claim asserted, and (2) the procedures and remedies for that cause of action, complete federal pre-emption exists.Id.
Wells Fargo argues that in Beneficial National Bank the United States Supreme Court held than the National Bank Act provides the exclusive cause of action and remedy against national banks and their operating subsidiaries (like Wells Fargo) in litigation asserting improper overcharges, including the improper assessment of interest and interest-related fees and charges. Section 85 of the National Bank Act. "sets forth the substantive limits on the rates of interest that national banks may charge." Beneficial National Bank. 123 S.Ct. at 2063. Section 86 sets forth the elements of a usury claim against a national bank, the remedies available to a claimant, and the procedures governing such a claim. Id.
In Smiley v. Citibank (South Dakota) N.A., 517 U.S. 735, 116 S.Ct. 1730, 1735, 135 L.Ed.2d 25 (1996), the United States Supreme Court deferred to the following definition of "interest" promulgated by Comptroller of the Currency:
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 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, not sufficient funds (NSF) fees, 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. 61 Fed. Reg. 4869 (to be codified in 12 C.F.R. § 7.4001 (a)).
Smiley, 116 S.Ct. At 1733.
The Taylors' purported state law claim that the "Defendants" arbitrarily assessed "excessive fees and charges", including late charges, to the Taylors when they redeemed their loan is preempted by federal law.
Accordingly,
IT IS ORDERED that plaintiffs' motion to remand be and is hereby DENIED.