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Nature of Suit Code: 990
Nature of Suit: 
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 07-3129

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Mamot Feed Lot and Trucking, *

A Nebraska Partnership; Eugene *

P. Sonnenfeld, An Individual and *

On Behalf of a Class Similarly *

Situated; John Richter, Husband *

and On Behalf of a Class Similarly *

Situated; Rosemary Richter, Wife *

and on Behalf of a Class Similarly *

Situated; Dennis Land, Husband and *

on Behalf of a Class Similarly *

Situated; Rita Land, Wife and on * Appeal from the United States

Behalf of a Class Similarly * District Court for the

Situated; Dave Vest, Husband * District of Nebraska.

and on Behalf of a Class Similarly *

Situated; Mary Vest, Wife *

and on Behalf of a Class Similarly *

Situated; Robert E. Smith, *

Husband and on Behalf of a Class *

Similarly Situated; Teresa R. *

Smith, Wife and on Behalf of *

a Class Similarly Situated; Ed *

Boltz, An Individual and on Behalf *

of a Class Similarly Situated; *

Ray Doggett, An Individual *

and on Behalf of a Class Similarly *

Situated, doing business as *

Doggett Hay Coach; Eldon Dubas, *

An Individual and on Behalf of *

a Class Similarly Situated; Dale *

Brabander, Husband and on Behalf *

of a Class Similarly Situated; *

Appellate Case: 07-3129 Page: 1 Date Filed: 08/26/2008 Entry ID: 3464452
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Delores Brabander, Wife and on *

Behalf of a Class Similarly *

Situated; Jerry Rowse, An *

Individual and on Behalf of a *

Class Similarly Situated, *

*

Appellants, *

*

v. *

*

Scott Hobson, Individually and in *

His Official Capacity, as Former *

President of Exchange Bank; *

Exchange Bank, A Federally *

Insured State-Charter Bank, *

also known as Exchange Bank *

of Gibbon Collectively; *

Exchange Company, A Nebraska *

Bank Holding Company; Dennis *

Schardt, Individually and in *

His Official Capacity; Susan *

Schardt, Individually and in *

Her Official Capacity; Brian *

Schardt, Individually and in *

His Official Capacity; Tom *

Baxter, Individually and in *

His Official Capacity; Sue *

Bolin, Individually and in *

Her Official Capacity; Allissa *

Kroll Bombeck, Individually and in *

Her Official Capacity; Janet Carr, *

Individually and in Her *

Official Capacity; Linda Clevenger, *

Individually and in Her Official *

Capacity; Craig Dewalt, *

Individually and in His Official *

Capacity; Vaughn Duncan, *

Appellate Case: 07-3129 Page: 2 Date Filed: 08/26/2008 Entry ID: 3464452
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Individually and in His Official *

Capacity; Stephen England, *

Individually and in His Official *

Capacity; Kim Hannon, *

Individually and in Her Official *

Capacity; Roger Heffelfinger, *

Individually and in His Official *

Capacity; Michelle High, *

Individually and in Her Official *

Capacity; Tim Horacek, *

Individually and in His Official *

Capacity; Kevin Hynes, *

Individually and in His Official *

Capacity; Heather Jurgens, *

Individually and in Her Official *

Capacity; Jeff Konen, *

Individually and in His Official *

Capacity; Dee Krolikowski, *

Individually and in Her Official *

Capacity; Sheri Lyons, *

Individually and in Her Official *

Capacity; Pat Manfull, *

Individually and in Her Official *

Capacity; Patrick McGuire, *

Individually and in His Official *

Capacity; Pat Meyer, *

Individually and in Her Official *

Capacity; Rebecca Rathjen, *

Individually and in Her Official *

Capacity; Deb Slack, *

Individually and in Her Official *

Capacity, *

*

Appellees. *

Appellate Case: 07-3129 Page: 3 Date Filed: 08/26/2008 Entry ID: 3464452
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The Honorable Richard G. Kopf, United States District Judge for the District

of Nebraska. 

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Submitted: May 16, 2008

 Filed: August 26, 2008

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Before RILEY, HANSEN, and ARNOLD, Circuit Judges. 

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HANSEN, Circuit Judge.

Appellants were each either customers of the Exchange Bank of Gibbon (Bank)

or have been sued by the Bank. The appellants brought this action as a class action

against the Bank, its holding company, and various shareholders, officers, and

employees of the Bank, following the criminal indictment of Scott Hobson, the Bank's

president, for defrauding the bank of nearly one million dollars. The appellants

brought federal usury and antitying claims against the Bank based on Hobson's

actions, relying on 12 U.S.C. §§ 85, 86 (the National Bank Act); 12 U.S.C. §§ 1972,

1975; and 12 U.S.C. § 1831d (the Depository Institutions Deregulation and Monetary

Control Act of 1980 (DIDA)). All of the appellees except Hobson (collectively the

"Bank Defendants") filed a joint motion to dismiss for want of jurisdiction as to the

National Bank Act claim and for failure to state a claim on the remaining claims,

which the district court1

 granted. The Appellants appeal, and we affirm.

I. 

Exchange Bank is a federally-insured, state-chartered bank located in Nebraska.

Although it is less than clear from the parties' district court filings or the briefs on

appeal, apparently (and allegedly) Scott Hobson, as the President of the Bank,

Appellate Case: 07-3129 Page: 4 Date Filed: 08/26/2008 Entry ID: 3464452
2

Although there is a factual discrepancy in the record about whether Eldon

Dubas, Jerry Rowse, Ray Doggett, and Dale and Delores Brabander were customers

of the Bank (see Appellants' App. at 213; Appellants' Br. at 7), the factual dispute does

not change the outcome of this appeal, and we recite the facts as stated in the

complaint. 

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misappropriated assets of the Bank, misstated the value of collateral on loans,

misstated the Bank's assets on its balance sheet, and diverted loan payments made by

customers to other accounts. Appellants Dennis and Rita Land, Eugene Sonnenfeld,

Dave and Mary Vest, Robert and Teresa Smith, Eldon Dubas, Jerry Rowse, Dale and

Delores Brabander, Ed Boltz, and Ray Doggett were all customers of the Bank.2

Appellant Mamot Feed Lot and Trucking is not a customer of the Bank but purchased

hay from Appellant Sonnenfeld. Apparently, the hay served as collateral for

Sonnenfeld's loan with the Bank, and the Bank has brought an action in state court

against Mamot Feed Lot and Trucking based on its security interest in Sonnenfeld's

crop.

Following Hobson's indictment on fraud charges, the Appellants filed this

action in federal court claiming that the Bank Defendants had charged them usurious

interest. The basis for the usurious interest claim was that "Hobson, without

permission, contrary to the documents, but with the full approval of Defendant

Exchange Bank of Gibbon, et. al. deliberately and intentionally misstated or took

collateral of Plaintiffs, for his or others [sic] benefits, misstated the value of the

collateral on the books and records of Defendant Exchange Bank, and that all amounts

misappropriated, stolen, misstated, diverted, by Defendant Scott Hobson shall be

deemed excessive interest paid by plaintiff/borrower . . . ." (Appellants' App. at 210.)

The complaint also alleged that Hobson "routinely, systematically and deliberately

overstated the statements of financial condition of said borrower so that the loan could

be 'booked' as a legitimate asset on the books and records of defendant Exchange

Bank," and that Hobson "deliberately converted collateral of said Plaintiffs and

deliberately diverted payments on loans to his own account thereby again misstating

Appellate Case: 07-3129 Page: 5 Date Filed: 08/26/2008 Entry ID: 3464452
3

The Appellants' reliance on Discover Bank v. Vaden, 489 F.3d 594 (4th Cir.

2007), cert. granted, 128 S. Ct. 1651 (2008), is misplaced as to the National Bank Act

claims. Discover Bank held that 28 U.S.C. § 1831d completely preempted state law

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the books and records of the bank, thereby triggering a default and thereby triggering

phoney acceleration clauses and attorney's fees clauses, all of which constitute interest

which is excessive." (Appellants' App. at 211.)

The complaint relied solely on federal question jurisdiction under 28 U.S.C.

§ 1331, citing 12 U.S.C. §§ 85, 86; 12 U.S.C. §§ 1972, 1975; and 12 U.S.C. § 1831d.

The plaintiffs sought a declaratory judgment that the Bank Defendants charged and

received usurious interest, entitling the plaintiffs to damages in the amount of $50

million, allegedly representing twice the amount of usurious interest paid by the

plaintiffs. The Bank Defendants filed a Motion to Dismiss on March 19, 2007. The

district court subsequently granted the motion to dismiss as to all plaintiffs except

defendant Scott Hobson, who did not join in the motion, and the court certified the

order as immediately appealable under Rule 54(b) of the Federal Rules of Civil

Procedure.

II. 

We review the district court's dismissal of the National Bank Act claim for want

of federal jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure de

novo, accepting all factual allegations in the complaint as true and viewing them in the

light most favorable to the nonmoving party. See Hastings v. Wilson, 516 F.3d 1055,

1058 (8th Cir. 2008). Federal courts are courts of limited jurisdiction, and a district

court's federal question jurisdiction extends only to "civil actions arising under the

Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. 

Appellants claim that the Bank Defendants' actions amounted to the illegal

charging of usurious interest in violation of §§ 85 and 86 of the National Bank Act.3

Appellate Case: 07-3129 Page: 6 Date Filed: 08/26/2008 Entry ID: 3464452
usury claims against federally insured, state-chartered banks. Id. at 606. Section

1831d is not part of the National Bank Act, however, see 12 U.S.C. § 38, and

Discover Bank does not address the separate issue of whether §§ 85 and 86 (as

opposed to § 1831d) apply to state-chartered banks.

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Section 85 "sets forth the substantive limits on the rates of interest that national banks

may charge," Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 9 (2003), while section

86 "sets forth the elements of a usury claim against a national bank . . . and prescribes

the remedies available to borrowers who are charged higher rates," id. Exchange

Bank is a state-chartered bank, not a national bank. Sections 85 and 86 of the

National Bank Act apply only to "associations," see § 85 ("Any association may take

. . ."); § 86 (allowing recovery "from the association"), referring to national banking

associations, see 12 U.S.C. § 37 (defining "associations" as used in the National

Banking Act as "all associations organized to carry on the business of banking under

any Act of Congress"). Thus, the National Bank Act does not apply to state-chartered

banks. See First and Beck, a Nevada LLC v. Bank of Southwest, 267 Fed. Appx. 499,

501 (9th Cir. 2007) (unpublished) (dismissing National Bank Act claim against statechartered bank for lack of jurisdiction because "12 U.S.C. § 85 provides for a cause

of action only against nationally-chartered banks"); Krispin v. May Dep't Stores Co.,

218 F.3d 919, 923 (8th Cir. 2000) (noting that the National Bank Act applies to

national banking associations as defined by 12 U.S.C. §§ 21, 37); Greenwood Trust

Co. v. Massachusetts, 971 F.2d 818, 826 (1st Cir. 1992) (explaining the history behind

the DIDA and noting Congress's intent to level the playing field between national

banks, whose interest rates were tied to federal discount rates under § 85, and state

banks, whose interest rates prior to enactment of § 1831d were limited by state usury

laws), cert. denied, 506 U.S. 1052 (1993). Because §§ 85 and 86 do not apply to statechartered banks, the district court properly dismissed those claims brought under the

National Bank Act for want of jurisdiction.

The appellants also claimed that the Bank Defendants' actions violated 12

U.S.C. § 1831d, which, by its explicit terms, does apply to federally-insured stateAppellate Case: 07-3129 Page: 7 Date Filed: 08/26/2008 Entry ID: 3464452
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Courts construe the parallel provisions of § 85 and § 1831d similarly, as

§ 1831d was modeled after § 85. See Discover Bank, 489 F.3d at 606.

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chartered banks. See Discover Bank, 489 F.3d at 604 (noting that § 1831d "is to statechartered banks" as the National Bank Act "is to national banks"). Section 1831d

allows state-chartered banks to charge up to a specified interest rate and explicitly

preempts state laws that set lower ceilings. See § 1831d(a). It also provides a civil

cause of action for a person who is charged a rate higher than that allowed in

subsection (a), specifying the remedy of forfeiture of the entire interest charged as

well as damages in the amount of twice the interest unlawfully paid. § 1831d(b). 

The forfeiture and damages remedies of § 1831d(b) apply to "the taking,

receiving, reserving, or charging [of] a greater rate of interest than is allowed by

subsection (a)." A rather obvious prerequisite to a claim of usurious interest under

§ 1831d is that the overcharge relate to a charge of interest. Regulations interpreting

§ 85 of the National Bank Act define "interest" to "include[] 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." 12 C.F.R. § 7.4001(a).4

 

Appellants pick out the term "compensating" from the definition of "interest"

and assert that they state a claim for usurious interest because "the bank was

compensated by Defendant Hobson's . . . misallocation and theft." (Appellants' Br.

at 19.) We sincerely doubt that benefitting (assuming that the Bank would in some

way benefit from Hobson's alleged action of misallocating nearly $1 million from the

Bank) from another's fraudulent activity amounts to compensation. In any event, it

is not just any "compensation," however broadly construed, that meets the definition

of interest. The compensation must relate to the extension of credit. The regulation

lists examples, including late fees, insufficient funds fees, overlimit fees, annual fees,

cash advance fees, and membership fees as included within the definition of "interest."

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§ 7.4001(a). Although read broadly, the term "interest" is not without limitation. The

regulation explicitly excludes from the definition of "interest" such fees as appraisal

fees, credit insurance premiums, finders fees, document or notary fees, or fees charged

for obtaining a credit report. Id. These fees are surely compensation to the bank,

certainly more closely tied to the extension of credit than the Appellants' claim that

benefitting from fraudulent activity is compensation related to the extension of credit.

Yet, such fees, not directly tied to the extension of credit, are excluded from the

definition of interest to which the federal usury laws apply. See Smiley v. Citibank

(S.D.), N.A., 517 U.S. 735, 745 (1996) (concluding that the regulation's distinction

between charges assigned to specific expenses and charges "assessed for simply

making the loan" was a rational distinction entitled to deference even though "in the

broadest sense all payments connected in any way with the loan . . . can be regarded

as compensating the creditor for the extension of credit" (internal marks omitted)).

It goes without saying that if appraisal fees and credit reporting fees are excluded from

the term interest, so too is a claimed benefit from the misallocation and theft of

collateral and loan payments. See Doe v. Norwest Bank Minn., N.A., 107 F.3d 1297,

1302 (8th Cir. 1997) ("We have little difficulty concluding that the Comptroller's

interpretation of 'interest' as excluding insurance premiums is reasonable."). The first

amended complaint, alleging broadly that the Bank Defendants received compensation

from Hobson's fraudulent acts, simply fails to state a claim under § 1831d. The

district court properly dismissed this claim under Rule 12(b)(6).

The district court also dismissed the tying claims based on §§ 1972 and 1975.

Although the first amended complaint cited to those Code provisions in the

jurisdictional section of the complaint, it provided absolutely no facts to support an

illegal tying claim. To state an antitying claim, "[t]he plaintiff . . . must show that the

bank imposed a tie, that the practice was unusual in the banking industry, that it

resulted in an anticompetitive arrangement, and that it benefitted the bank." Doe, 107

F.3d at 1304 (affirming Rule 12(b)(6) dismissal). Nowhere does the complaint allege

that the Bank illegally tied any of the plaintiffs' loans to other products or services,

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that any of its practices were unusual in the banking business, or that any tying

activity benefitted the Bank. The district court properly dismissed the antitying claim

for failure to state a claim. See Fed. R. Civ. P. 8(a)(2) (requiring "a short and plain

statement of the claim showing that the pleader is entitled to relief"). 

III. 

 

The district court's judgment is affirmed.

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