Opinion ID: 791359
Heading Depth: 1
Heading Rank: 4

Heading: jurisdiction

Text: 80 We must consider at the outset Appellants' argument that the District Court lacked subject matter jurisdiction over the original Kessler action, and that as a result we must vacate the settlement and direct remand to the Pennsylvania state court. 81 As the District Court recognized, there was no diversity in the original Kessler action and no federal question was pled on the face of the complaint. It is well settled that [o]nly state-court actions that originally could have been filed in federal court may be removed to federal court by the defendant. Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). Under the well-pleaded complaint rule, there can be no removal on the basis of a federal question unless the federal law under which the claim arises is a direct and essential element of the plaintiffs case. See Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 10-12, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983); Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908). However, the complete preemption doctrine is an independent corollary to the well-pleaded complaint rule. Caterpillar Inc., 482 U.S. at 393, 107 S.Ct. 2425. In Caterpillar, the Supreme Court stated: 82 On occasion, the Court has concluded that the preemptive force of a statute is so extraordinary that it converts an ordinary state common-law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule. . . . Once an area of state law has been completely pre-empted, any claim purportedly based on that pre-empted state law is considered, from its inception, a federal claim, and therefore arises under federal law. 83 Id. (internal quotations and citations omitted); see also In re U.S. Healthcare, Inc., 193 F.3d 151, 161 (3d Cir. 1999); Schmeling v. NORDAM, 97 F.3d 1336, 1342 (10th Cir. 1996) (stating that complete preemption is not as a crude measure of the breadth of the preemption (in the ordinary sense) of a state law by a federal law, but rather as a description of the specific situation in which a federal law not only preempts a state law to some degree but also substitutes a federal cause of action for the state cause of action, thereby manifesting Congress's intent to permit removal). 84 RFC removed the Kessler action on the ground that plaintiffs' charges of blatantly fraudulent origination and title services fees, 7 are completely preempted by §§ 85 and 86 of the NBA and by § 521 of the DIDA. 85 In Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003), the Supreme Court definitively held that §§ 85 8 and 86 9 of the NBA completely preempt state law usury claims against national banks. The Court stated: 86 Because §§ 85 and 86 provide the exclusive cause of action for [usury] . . . 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 violate usury laws. This cause of action against national banks only arises under federal law and could, therefore, be removed under § 1441. 87 539 U.S. at 11, 123 S.Ct. 2058. In other words, a claim of usury against a national bank such as GNBT purporting to be grounded in state law is in reality a federal claim. 88 Likewise, § 521 of DIDA 10 completely preempts any state law attempting to limit the amount of interest and fees a federally insured-state chartered bank can charge. See Greenwood Trust Co. v. Mass., 971 F.2d 818, 826-28 (1st Cir. 1992). Not only does § 521 contains an express preemption clause, notwithstanding any State constitution or statute which is hereby preempted for the purposes of this section, 12 U.S.C. § 1831d(a), but the statute also incorporates verbatim the language of § 85 of the NBA. When Congress borrows language from one statute and incorporates it into a second statute, the language of the two acts ordinarily should be interpreted the same way. See Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383-84, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992); Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 144-45, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990); Oscar Mayer & Co. v. Evans, 441 U.S. 750, 756, 99 S.Ct. 2066, 60 L.Ed.2d 609 (1979). 89 In light of this precedent, we must examine the Kessler complaint to determine if it alleged state law claims of unlawful interest by a nationally or state chartered bank. We can set aside the issue raised by the District Court during the October 31, 2003 conference call (whether the fraudulent origination and title service fees alleged by plaintiffs constitute interest under the NBA or the DIDA) and focus instead on two more substantial, and ultimately determinative, issues. First, the Kessler complaint asserted no claims against a national or state chartered federally insured bank. Rather, only RFC (and not CBNV or GNBT) was named as a defendant in the original action. See, e.g., Colorado ex rel. Salazar v. ACE Cash Express, Inc., 188 F.Supp.2d 1282, 1285 (D.Colo. 2002) (The Complaint strictly is about a non-bank's violation of state law. It alleges no claims against a national bank under the NBA. ). Second, the complaint asserted no usury claims against any party under Pennsylvania state law. 90 Sections 85 and 86 of the NBA and Section 521 of the DIDA apply only to national and state chartered banks, not to non-bank purchasers of second mortgage loans such as RFC. See, e.g., Weiner v. Bank of King of Prussia, 358 F.Supp. 684, 687 (E.D.Pa. 1973) (stating that NBA regulates national banks and only national banks, which can be identified by the word `national' in their name). Several courts have explored the issue of removal in cases involving complaints very similar to that found in the present case and found removal improper. 91 In Flowers v. EZPawn Oklahoma, Inc., 307 F.Supp.2d 1191 (N.D.Okla. 2004), plaintiffs brought Oklahoma state-law claims of usury and fraud against two defendants, alleging that those defendants had [entered] into a `sham' relationship with County Bank of Rehoboth Beach, Delaware . . . for the purpose of claiming federal preemption and evading state usury, fraud and consumer protection laws. Id. at 1196. County Bank itself was not named as a defendant in the state court action. The district court denied removal, stating that [n]o claims have been brought against County Bank in this lawsuit. The state action claims are asserted against EZPawn and EZCorp, neither of which is a state-chartered, federally insured (or national) bank. Id. at 1204. 92 Likewise, in Colorado v. Ace Cash Express, Inc., 188 F.Supp.2d 1282 (D.Colo. 2002), plaintiffs asserted state law claims against a non-bank check cashing business, which offered ancillary loans made by a national bank. The national bank was not named as a defendant in the complaint. The district court denied defendants' attempt at removal, stating that in this case Defendant and the national bank are separate entities and their relationship does not give rise to complete preemption under the NBA. . . . The Complaint strictly is about a non-bank's violations of state law. It alleges no claims against a national bank under the NBA.  Id. at 1285. 93 The facts in the Kessler action are distinguishable from Krispin v. May Dep't Stores Co., 218 F.3d 919 (8th Cir. 2000), where the holders of a department store's credit cards brought a class action alleging violation of Missouri state usury laws. Although there were no claims against a national or state-chartered bank, the loans were issued by a national bank, which was a wholly owned subsidiary of the department store. Therefore, the Eighth Circuit held that removal was proper, noting that although the credit agreement existed between customers and the department store, it was the national bank that process[ed] and servic[ed] customer accounts, and set[] terms [such] as interest and late fees. Id. at 924. 94 Krispin is inapplicable to Kessler where, despite the provision in the loan agreement that loans were made through a national or state-chartered bank (CBNV or GNBT), the loans were, in fact, made and serviced by Shumway, a non-depository institution. These loans were then bought by RFC (the named defendant), also a non-bank, in the secondary market. Because RFC, CBNV, and GNBT are entirely separate entities, plaintiffs' state law claims against RFC could not be preempted by the NBA or by the DIDA. 95 Moreover, the original Kessler complaint failed to plead any state law usury claims, alleging only a series of other state law claims that are not preempted by the NBA, DIDA, or any other federal law. See Appendix of Exhibits, Ex. 1 at 33 ( Kessler complaint) (The claim that Plaintiff and the Class are asserting in this Count [Count III] is predicated upon state common law and this claim is expressly not seeking to assert a private right of action under the Pennsylvania Secondary Mortgage Loan Act or any other statutory law.). It follows that removal was improper. 96 This does not end our inquiry. The Supreme Court has held that 97 where after removal a case is tried on the merits without objection and the federal court enters judgment, the issue in subsequent proceedings on appeal is not whether the case was properly removed, but whether the federal district court would have had original jurisdiction of the case had it been filed in that court. 98 Grubbs v. Gen. Elec. Credit Corp., 405 U.S. 699, 702, 92 S.Ct. 1344, 31 L.Ed.2d 612 (1972); see also Knop v. McMahan, 872 F.2d 1132, 1138 (3d Cir. 1989). 99 The same result may obtain where a case has been improperly removed but the original complaint is subsequently amended to state a well-pleaded federal question. See Pegram v. Herdrich, 530 U.S. 211, 215 n. 2, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000) (stating that plaintiff's amended complaint alleged ERISA violations, over which the federal courts have jurisdiction, and we therefore have jurisdiction regardless of the correctness of the removal); Cotton v. Mass. Mut. Life Ins. Co., 402 F.3d 1267, 1280 (11th Cir. 2005) (same); Barbara v. N.Y. Stock Exch., Inc., 99 F.3d 49, 56 (2d Cir. 1996) ([I]f a district court erroneously exercises removal jurisdiction . . ., and the plaintiff voluntarily amends the complaint to allege federal claims, we will not remand for want of jurisdiction.); Kidd v. Southwest Airlines, Co., 891 F.2d 540, 547 (5th Cir. 1990) (same); Bernstein v. Lind-Waldock & Co., 738 F.2d 179, 185 (7th Cir. 1984) (holding that although plaintiff's original complaint was not removable, his decision to throw in the towel and amend his complaint to state an unmistakable federal cause of action conferred original jurisdiction on the federal court). 11 100 The amended complaint submitted by the settling parties on November 10, 2004, not only added CBNV and GNBT as defendants, but also explicitly asserted federal claims, specifically, violations of RESPA at Counts I and II, and RICO at Count III. We are persuaded that under the Supreme Court's holdings in Grubbs and Pegram, the District Court properly acquired subject matter jurisdiction by virtue of the amended complaint. 12