United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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 No. 99-2930

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Paul T. Krispin, Jr., *

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Appellant, *

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v. *

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The May Department Stores Company, *

*

Appellee. *

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Appeals from the United States

 No. 99-3002 District Court for the

 ___________ Eastern District of Missouri.

Scott Matheis, individually and on *

behalf of all others similarly situated, *

*

Appellee, *

*

v. *

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The May Department Stores Company, *

doing business as Famous-Barr Co., *

*

Appellant. *

______________________ *

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Paul T. Krispin, Jr., *

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Appellee, *

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1The Honorable Richard W. Goldberg, Judge, United States Court of

International Trade, sitting by designation.

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v. *

*

The May Department Stores Company, *

*

Appellant. *

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Submitted: April 10, 2000

Filed: July 28, 2000 

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Before WOLLMAN, Chief Judge, MURPHY, Circuit Judge, and GOLDBERG,1

Judge.

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WOLLMAN, Chief Judge.

Paul T. Krispin, Jr., who, along with Scott Matheis, brought claims against The

May Department Stores Company (the store) under Missouri state law, appeals from

the district court’s determination that the National Bank Act (NBA), 12 U.S.C. §§ 85

& 86, completely preempts his claims, from its adverse entry of summary judgment,

and from its denial of leave to amend Krispin’s complaint to state a claim under the

NBA. The store cross-appeals, arguing that the court should not have remanded

several of Matheis’s claims to state court. We reverse and remand.

I.

Krispin and Matheis (appellants) had Famous-Barr credit cards issued by the

store prior to 1996. Their accounts were governed by agreements that stated that they
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were governed by Missouri law and that provided for finance charges “which will not

be in excess of that permitted by law.” Missouri law prohibits delinquency fees of

more than $10, or $5 if the total monthly installment is less than $25. See Mo. Rev.

Stat. § 408.330 (1994). The credit agreements allowed for unilateral modification by

the store on at least fifteen days’ notice to cardholders.

In 1996, the store sent letters styled “IMPORTANT NOTICE” to its credit card

customers announcing that, “[e]ffective immediately, credit is being extended by the

May National Bank of Arizona” (the bank), and stating that late payment fees would

now be “up to $12.00, or as allowed by law.” Subsequently, similar notices indicated

that late fees would be “$15, or as allowed by law. This varies from state to state.”

These notices contained little additional information and did not purport to change any

other terms of the agreements, including the choice of law provision. The bank was not

a party to the original credit agreements.

At the time of the 1996 notices, the store had assigned all its credit accounts, and

transferred all authority over the terms and operation of those accounts, to the bank, an

Arizona corporation recently created by the store. Not long after this transfer the bank

began charging delinquent cardholders, including those who had entered into

agreements with the store before 1996, late fees of $15. 

Appellants filed separate state class action lawsuits against the store, raising

various claims related to their allegation that the late fees exceeded the amount

permitted by Missouri law. The store removed the actions to federal court on the

grounds that the claims amounted to allegations of usury against the bank and that, as

such, they were completely preempted by the NBA. The cases were consolidated.

The federal district court assumed jurisdiction and entered summary judgment

for the store on all of Krispin’s claims and two of Matheis’s claims, remanding the

remainder of Matheis’s claims to state court. The district court did not permit either
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plaintiff to amend his complaint to state a claim under the NBA. Krispin appeals from

the complete preemption determination and from the denial of leave to amend. He also

seeks leave to file a motion under Federal Rule of Civil Procedure 60(a) requesting the

district court to reconsider its decision not to remand his breach of contract claim to

state court. Matheis has not filed a brief in this appeal, but requests permission to join

in Krispin’s brief, which we grant. The store cross-appeals the decision to remand four

of Matheis’s claims to state court.

II.

A. Federal Jurisdiction

Appellants first argue that the district court erred in exercising removal

jurisdiction based on the doctrine of complete preemption. We review this question of

law de novo. See Husmann v. TWA, Inc., 169 F.3d 1151, 1152 (8th Cir. 1999).

Federal district courts may exercise removal jurisdiction only where they would

have had original jurisdiction had the suit initially been filed in federal court. See 28

U.S.C. § 1441(b). Removal based on federal question jurisdiction, as in this case, is

generally governed by the “well-pleaded complaint” rule, which provides that federal

jurisdiction exists only where a federal question is presented on the face of the

plaintiff’s properly pleaded complaint. See Magee v. Exxon Corp., 135 F.3d 599, 601

(8th Cir. 1998). A narrow exception to this general rule, however, is the doctrine of

“complete preemption,” under which the preemptive force of certain federal statutes

is deemed so “extraordinary” as to convert complaints purportedly based on the

preempted state law into complaints stating federal claims from their inception. See

Caterpillar Inc. v. Williams, 482 U.S. 386, 393 (1987); Magee, 135 F.3d at 601. We

have held that sections 85 and 86 of the National Bank Act completely preempt state

law claims of usury brought against a national bank. See M. Nahas & Co., Inc. v. First

Nat. Bank of Hot Springs, 930 F.2d 608, 611 (8th Cir. 1991).
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The NBA permits any national banking association to charge interest at the rate

allowed by the laws of the state in which the bank is located. See 12 U.S.C. § 85.

Thus, national banks may charge out-of-state credit cardholders the interest rate

allowed by the bank’s home state even if that rate would otherwise be illegal in the

state where the cardholders reside. See Marquette Nat’l Bank v. First of Omaha Svc.

Corp., 439 U.S. 299, 313-19 (1978). For purposes of this rule, “interest” includes late

payment fees. See Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 744-47

(1996). Section 86 of the NBA provides the exclusive remedy for violations of section

85. Because appellants do not dispute that the bank is a national banking association

as defined by the NBA, see 12 U.S.C. §§ 21, 37, the question of complete preemption

in this case turns on whether appellants’ suit against the store actually amounted, at

least in part, to a state law usury claim against the bank. 

Appellants stress that their complaints focused exclusively on the store, the only

entity with which they had ever entered into credit agreements. They also emphasize

that, even after their credit accounts were transferred to the bank in 1996, the store

remained substantially involved in the collection process because it purchased the

bank’s receivables on a daily basis. The store in turn asserts, and the district court

agreed, that the 1996 assignment was fully effective to cause the bank, and not the

store, to be the originator of appellants’ accounts subsequent to that time. The store

characterizes its continuing role in account collection as that of an assignee, and argues

that its purchase of the bank’s receivables does not alter the fact that appellants’

accounts are now controlled by the bank. We agree with the store. 

The bank, a wholly-owned subsidiary of the store, with which it is required to

maintain arms’-length transactions, was established specifically for the purpose of

taking over the store’s credit card operations. To this end, shortly after the bank’s

creation, the store and the bank entered into an agreement completely transferring

authority over all customer credit accounts. This agreement required the bank to

continue to extend credit to the store’s pre-existing cardholders “[s]ubject to . . . the
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terms and conditions in the Credit Card Agreement” that such cardholders had

previously signed. Although appellants acknowledge that their original credit card

agreement permitted unilateral modification, they argue, citing a case from the Tenth

Circuit, that “a third party may not be added to a contract without consent of both

original parties.” Denver Metropolitan Ass’n v. Journeyman Plumbers & Gas Fitters

Local No. 3, 586 F.2d 1367, 1370 (10th Cir. 1978). Appellants note that they never

saw the agreement between the store and the bank, but instead simply received the

aforementioned notice informing them that “[e]ffective immediately, credit is being

extended by the May National Bank of Arizona.”

We find this argument unavailing to defeat federal jurisdiction. The 1996

account transfer was not, in our view, an “addition” of a party to the contract, as

discussed in Denver Metropolitan Association – a case presenting the question whether

a collective bargaining agreement prohibited employers who were not members of a

signatory trade association from contributing to certain employee trust funds. See id.

at 1369-71. Rather, the transfer in the instant case was an assignment – a shifting of

contractual rights and duties to another. See In re Food Barn Stores, Inc., 107 F.3d

558, 561 n.5 (8th Cir. 1997) (citing Metropolitan Airports Comm’n v. Northwest

Airlines, Inc., 6 F.3d 492, 495 n.4 (7th Cir. 1993)).

In general, unless the original contract or a relevant statute specifies otherwise,

a party may assign contractual rights without notice. See United States v. Doe, 940

F.2d 199, 204-05 (7th Cir. 1991); Restatement (2d) Contracts § 317 (1979); 4 Corbin,

Contracts § 870 (1951). We have so stated in a previous case arising out of Missouri,

see Imperial Assur. Co. v. Livingston, 49 F.2d 745, 751 (8th Cir. 1931), and Missouri

courts appear to have similarly held, see Milliken-Helm Comm’n Co. v. C.H. Albers

Comm’n Co., 147 S.W. 1065, 1066-67 (Mo. 1912); cf. Kenneth D. Corwin, Ltd. v.

Mo. Med. Serv., 684 S.W.2d 598, 600 (Mo. App. 1985). The pre-1996 credit

agreement between the store and its customers did not explicitly prohibit assignment,

and we are unaware of any Missouri statute restricting the assignability of contracts.
2Appellants’ arguments that they generally received inadequate notice of the

1996 transfer of their accounts from the store to the bank, and that incidental changes

in the terms of the pre-1996 agreement attendant to this otherwise valid assignment

violated the agreement’s modification clause or other clauses, raise separate issues

properly addressed in the context of appellants’ breach of contract claims against the

store. We express no view on the merits of these arguments.

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Cf. Mo. Rev. Stat. §§ 431.160, 431.170 (1992) (establishing rights and duties of

assignors and assignees). Thus, the agreement between the store and the bank effected

a valid assignment to the bank of whatever contractual rights and duties the store bore

toward its pre-existing credit card customers.

Moreover, the store’s purchase of the bank’s receivables does not diminish the

fact that it is now the bank, and not the store, that issues credit, processes and services

customer accounts, and sets such terms as interest and late fees. Thus, although we

recognize that the NBA governs only national banks, cf., e.g., Green v. H&R Block,

Inc., 981 F.Supp. 951, 955 (D. Md. 1997), in these circumstances we agree with the

district court that it makes sense to look to the originating entity (the bank), and not the

ongoing assignee (the store), in determining whether the NBA applies. Cf. FDIC v.

Lattimore Land Corp., 656 F.2d 139, 147-49 (5th Cir. Unit B Sept. 1981) (stating, in

context of determining whether NBA governs loan assigned by originating entity to

entity in another state, that “[t]he non-usurious character of a note should not change

when the note changes hands”). Accordingly, for purposes of deciding the legality of

the late fees charged to appellants’ credit accounts, we find that the real party in

interest is the bank, not the store.2 Appellants’ state law usury claims against the store

therefore implicate the NBA, and the district court’s decision to exercise removal

jurisdiction based on the complete preemption doctrine was not error. 
3The district court also asserted that the NBA had not been violated. This

assertion, although it appears to be a judgment on the merits of appellants’ NBA

argument, was not supported by any analysis, and we agree with appellants that it was

more in the nature of a dismissal for failure to state a claim. We believe that such a

disposition was unwarranted, as appellants have presented a non-frivolous NBA claim

based on Arizona’s usury statute, which limits late fees to “the maximum rate set by

contract.” Az. St. § 44-1205(C)(4).

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B. Denial of Leave to Amend

The federal rules state that permission to file a first amended complaint “shall

be freely given when justice so requires.” Fed. R. Civ. P. 15(a). Denial of leave to

amend is justified only in the limited circumstances of “undue delay, bad faith on the

part of the moving party, futility of the amendment or unfair prejudice to the opposing

party.” Sanders v. Clemco Indus., 823 F.2d 214, 216 (8th Cir. 1987). We review a

denial of leave to amend for abuse of discretion. See Dennis v. Dillard Dep’t Stores,

Inc., 207 F.3d 523, 525 (8th Cir. 2000). 

Appellants’ primary argument before the district court was that the case should

be remanded to state court for lack of subject matter jurisdiction. However, in response

to the store’s motion for summary judgment they also argued, in the alternative, that if

the court found the NBA to completely preempt their state law usury claims then it

should permit them to amend their complaint to state a claim against the bank under the

NBA. The district court rejected this request, concluding that appellants did “not allege

that the Bank’s late fees exceed the rate allowed under Arizona law.”3

Appellants did not set forth an NBA claim in their pleadings, and generally in

such circumstances “[t]he plaintiff must bear the consequences of waiting to address

the court’s ruling post-judgment.” Briehl v. General Motors Corp., 172 F.3d 623, 629

(8th Cir. 1999). In this case, however, appellants faced a Hobson’s choice: risk

dismissal for failure to invoke the NBA, or plead an NBA claim, perforce defeating
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their own main argument that the case should remain in state court based on a lack of

federal question jurisdiction. 

The district court could have alleviated this problem by recognizing appellants’

attempt to present their NBA argument in the alternative in their memorandum in

opposition to summary judgment. Cf. Humphrey v. Sequentia, Inc., 58 F.3d 1238,

1240-41 (8th Cir. 1995) (where party opposing removal had been ordered to amend

its complaint to assert a federal claim, in order to avoid creating a Hobson’s choice the

court did not deem the question of removal jurisdiction to have been rendered moot).

Because of the harsh consequences to appellants, we conclude that the court’s failure

to do so constituted an abuse of discretion. In the interest of justice, and to facilitate

the hearing of claims on their merits, appellants should have been permitted to amend

their complaint. See Fed. R. Civ. P. 15(a).

C. Remand of Matheis’s State Law Claims

In light of its disposition of appellants’ state law usury claims, the district court

declined to exercise supplemental jurisdiction over Matheis’s related claims for breach

of contract, breach of duty of good faith and fair dealing, misrepresentation, unjust

enrichment, and civil conspiracy. It thus remanded these claims for consideration by

the state court. The store characterizes these claims as nothing more than further

variations on the state law usury theme, and it contends that the district court should

have retained jurisdiction over them. The store therefore urges us to reverse the

decision to remand Matheis’s claims to state court and to instruct the district court to

enter summary judgment on them.

If the grant of summary judgment on the Missouri usury claims had been proper,

remand of Matheis’s additional claims would likely have been justified as well, since

a district court has discretion to reject supplemental jurisdiction over state claims where

the court has already “dismissed all claims over which it has original jurisdiction.” 28
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U.S.C. § 1367(c)(3). Because we now remand the case for consideration of the NBA

claim, however, and because the district court’s remand order was not based on any of

the grounds set forth in 28 U.S.C. § 1447(c), we conclude that the court should reassert

supplemental jurisdiction over the claims it remanded to state court. See St. John v.

Intern. Ass’n of Machinists and Aerospace Workers, 139 F.3d 1214, 1216-19 (8th Cir.

1998); In re Otter Tail Power Co., 116 F.3d 1207, 1212-14 (8th Cir. 1997). We reject

the store’s argument that these claims, in their entirety, amount to nothing more than

restatements of appellants’ usury arguments. Consequently, we leave it to the district

court, in the exercise of its supplemental jurisdiction, to determine the merits of these

claims.

Finally, we conclude that Krispin’s request for leave to file a Rule 60(a) motion

with the district court during the pendency of this appeal is rendered moot by our

issuance of this decision. Krispin is now free to file such a motion with the district

court without our permission, as Rule 60(a) permits any party to request correction of

clerical mistakes or errors arising from oversight or omission “at any time.” Fed. R.

Civ. P. 60(a); see United States v. Mansion House Center, 855 F.2d 524, 527 (8th Cir.

1988).

For the foregoing reasons, we reverse the order of summary judgment and

remand the case to the district court for further proceedings consistent with this

opinion.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.