Court Opinion

ID: 3047754
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:22:10.687891+00
Date Added: 2024-06-11T09:49:26.344452
License: Public Domain

United States Court of Appeals
                         FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 09-1096
                                    ___________

Michael Casey; Julie Pennington;         *
Michael Crider; Kathleen Keller;         *
Richard Keller; Richard Piatchek;        *
Heidi Piatchek,                          *
                                         *
             Plaintiffs – Appellants,    *
                                         *
       v.                                *
                                         *
Federal Deposit Insurance Corporation, * Appeal from the United States
as receiver of Washington Mutual         * District Court for the Eastern
Bank,                                    * District of Missouri.
                                         *
             Defendant,                  *
                                         *
North American Savings Bank;             *
Heartland Bank; ABM AMRO                 *
Mortgage Group, Inc.,                    *
                                         *
             Defendants – Appellees.     *
                                    ___________

                            Submitted: September 24, 2009
                               Filed: October 20, 2009
                                ___________

Before MURPHY, BRIGHT, and RILEY, Circuit Judges.
                           ___________

MURPHY, Circuit Judge.
       The plaintiffs in this case were members of a class who brought claims in
Missouri state court against their mortgage lenders, alleging that the lenders had
engaged in the unauthorized practice of law by charging a fee for preparation of loan
documents by nonlawyers. The state court dismissed the claims against four lenders
who were federal savings associations (FSAs). While an appeal of that decision was
pending, the Federal Deposit Insurance Corporation (FDIC) was substituted for one
of the FSA lenders and it removed the claims to federal district court. That court1
adopted the state court's preemption decision and then transferred the appeal to this
court, together with a renewed motion to remand. We affirm.

                                          I.

      Appellants are seven homeowners whose claims against FSA lenders were
dismissed by the state court based on federal preemption: Michael Casey, Julie
Pennington, Michael Crider, Kathleen Keller, Richard Keller, Richard Piatcheck, and
Heidi Piatchek (the homeowners). The original appellees were the FDIC and three
FSA lenders: North American Savings Bank, Heartland Bank, and ABM AMRO
Mortgage Group, Inc. While this appeal was pending, we granted Michael Crider's
motion to dismiss his claims against the FDIC.

       The FSA lenders are mortgage lenders or brokers who extended credit or
refinancing for the homeowners' purchases of residential property. In the course of
these transactions, the FSA lenders allegedly charged fees ranging from $100 to $250
in exchange for the preparation of mortgage documents. The homeowners allege that
charging such fees constitutes the practice of law which Missouri reserves for licensed
attorneys. They seek to enforce Missouri statutory and common law prohibiting the

      1
        The Honorable Jean C. Hamilton, United States District Judge for the Eastern
District of Missouri.

                                         -2-
unauthorized practice of law, as well as the Missouri Merchandising Practices Act
(MMPA).

       The FSA lenders moved in the state court to dismiss the claims against them,
arguing that the Missouri laws in question were preempted by 12 C.F.R. § 560.2, a
federal regulation issued by the Office of Thrift Supervision (OTS) under the Home
Owners’ Loan Act (HOLA), 12 U.S.C. §§ 1461–1468. The state court agreed and
granted the motion, concluding that the Missouri laws were preempted and therefore
the claims failed to state causes of action.

      The homeowners appealed to the Missouri Court of Appeals and while their
appeal was pending, the FDIC was appointed receiver of Washington Mutual Bank,
which was successor in interest to one of the FSA lenders, North American Mortgage
Company (NAMCO). After its motions to be substituted for NAMCO and for a
ninety day stay were granted under 12 U.S.C. § 1821(d), the FDIC removed all these
claims to the United States District Court for the Eastern District of Missouri under
§ 1819(b)(2)(B).

       The homeowners filed two motions in the federal district court. One was filed
by Michael Crider who sought dismissal with prejudice of his claims against the FDIC
pursuant to Rule 41(a)(2) of the Federal Rules of Civil Procedure. The second was
filed by the remaining homeowners who sought remand of their appeals to the
Missouri Court of Appeals. The district court denied the first motion without
prejudice but did not rule on the second. Instead it adopted the state court’s order as
its own, relying upon Metro North State Bank v. Gaskin, 34 F.3d 589 (8th Cir. 1994),
and transferred the case to this court for appeal.

      The homeowners renewed both motions before this court. On February 3,
2009, we granted Michael Crider’s motion to dismiss pursuant to Rule 42(b) of the

                                         -3-
Federal Rules of Appellate Procedure. We ordered that the remaining homeowners’
renewed motion for remand be considered with the substantive appeal.

                                          II.

       The homeowners argue that remand to the Missouri Court of Appeals is
required by 28 U.S.C. §§ 1446(a), 1447(c) and that it is appropriate as a matter of
judicial discretion under 28 U.S.C. § 1441(c) and Burford v. Sun Oil Co., 319 U.S.
315 (1943). They also contend that the state court erred when it found their state law
claims preempted by 12 C.F.R. § 560.2. We consider the renewed motion to remand
before turning to the state court preemption decision which was adopted by the district
court.

                                          A.

       The homeowners first argue that remand is required because the February 3,
2009 dismissal of the claims against the FDIC deprived this court of subject matter
jurisdiction over their state law claims against the remaining FSA lenders. Section
1447(c) requires that a case removed to federal court be remanded if at any time it is
determined that subject matter jurisdiction is lacking. Filla v. Norfolk Southern Ry.
Co., 336 F.3d 806, 809 (8th Cir. 2003). Because we retain subject matter jurisdiction
under 12 U.S.C. § 1819(b)(2)(A), however, remand is not required by § 1447(c).

      We have not previously addressed the issue whether dismissal of the FDIC from
a case predicated upon § 1819(b)(2) jurisdiction deprives a federal court of subject
matter jurisdiction over remaining state law claims. We have however answered an
analogous question in the negative: in Kansas Pub. Emples. Retirement Sys. v. Reimer
& Koger Assocs., 77 F.3d 1063, 1067 (8th Cir. 1996) (KPERS), we decided that
dismissal of the Resolution Trust Corporation (RTC) from a case predicated upon 12

                                         -4-
U.S.C. § 1441a(a)(11) jurisdiction did not divest federal subject matter jurisdiction
over remaining state law claims for which no other basis of jurisdiction existed.

       In KPERS, the plaintiff sued a bank and various individuals in state court,
alleging violations of state law. Id. at 1065. After the RTC was substituted for the
bank, it removed the entire case to federal court under § 1441a(a)(11), which provided
the sole basis for federal subject matter jurisdiction. Id. at 1066. Subsequently the
RTC was dismissed from the case, and the plaintiff moved to remand the state law
claims brought against the individual defendants. Id. We affirmed the district court's
refusal to remand, holding that "under [§ 1441a(a)(11)], once the RTC becomes a
party to the case, the entire action is 'deemed to arise under the laws of the United
States' and is within the original jurisdiction of the district court." Id. at 1067 (quoting
§ 1441a(a)(11)).

        The language in § 1441a(a)(11), upon which that holding turned, tracks the
wording found in § 1819(b)(2)(A), the statute which serves as the sole basis for
federal subject matter jurisdiction in this case. Compare § 1441a(a)(11) ("[A]ny civil
action, suit, or proceeding to which the Thrift Depositor Protection Oversight Board
is a party shall be deemed to arise under the laws of the United States . . . .), with §
1819(b)(2)(A) ("[A]ll suits of a civil nature . . . to which the [FDIC], in any capacity,
is a party shall be deemed to arise under the laws of the United States."). Employment
of such similar language in these two closely related statutes implies an intent by
Congress that the two be interpreted in the same way. See Atlantic Clearners & Dyers
v. U.S., 286 U.S. 427, 433 (1932). The fact that the current versions of the two
sections were enacted by the same act of Congress only buttresses that inference. See
Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No.
101-73, 103 Stat. 183, 216, 367. Moreover, the law concerning the RTC often
informs its analogue in the FDIC context, and vice versa. See, e.g., In re Collins Sec.
Corp., 998 F.2d 551 (8th Cir. 1993).

                                            -5-
        We find our holding in KPERS persuasive here and conclude that all claims
in a case to which the FDIC is a party have "arising under" federal subject matter
jurisdiction. The subsequent dismissal of the claim against the FDIC did not defeat
that jurisdiction or withdraw the court's jurisdiction over the state law claims filed
against the other FSA lenders. Because we retain jurisdiction over the latter claims,
section 1447(c) does not require that they be remanded to the Missouri Court of
Appeals.

       The homeowners next argue that because the FSA lenders did not join in the
FDIC’s motion to remove, the rule of unanimity requires remand. The rule of
unanimity ordinarily requires that a case be remanded to the state court from which
it was removed unless all defendants join in the motion for removal. 28 U.S.C. §
1446(a); Horton v. Conklin, 431 F.3d 602, 604 (8th Cir. 2005). This case was
removed under § 1819(b)(2)(B), however, and that statute allows the FDIC to remove
any case to which it is a party from state to federal court within ninety days of its
becoming a party. The FDIC’s authority to remove under the statute is unilateral: it
does not depend upon the consent of other defendants. To read onto § 1819(b)(2)(B)
a requirement that all defendants join in the FDIC’s motion for removal would
undermine the broad removal power that the statute grants the FDIC. We conclude
that the rule of unanimity does not limit the FDIC’s unilateral power of removal under
§ 1819(b)(2)(B). Accord Franklin Nat’l Bank Sec. Litig. v. Andersen, 532 F.2d 842,
846 (2d Cir. 1976).

       The homeowners argue in the alternative that remand is appropriate as a matter
of judicial discretion under 28 U.S.C. § 1441(c). We question the applicability of §
1441(c) in this context since § 1819(b)(2)(B) provides jurisdiction over the state law
claims. Even assuming that § 1441(c) were properly invoked here, the threshold for
triggering our discretion to remand would not be met. When a case arising under
federal law is removed from state court, § 1441(c) affords the federal court discretion
to “remand all [otherwise nonremovable] matters in which State law predominates.”

                                         -6-
 The question of predominance is informed by the precept that “[p]re-emption, the
practical manifestation of the Supremacy Clause, is always a federal question.” Int’l
Longshoreman’s Ass’n v. Davis, 476 U.S. 380, 388 (1986).

       The homeowners urge us to exercise our statutory discretion to remand because
Missouri law governing the practice of law allegedly predominates over the question
of the preemptive effect of 12 C.F.R. § 560.2. With the exception of their renewed
motion to remand, however, the sole issue on appeal is whether § 560.2 preempts the
Missouri laws upon which the homeowners base their claims. And since “[p]re-
emption . . . is always a federal question,” Missouri law is not even at issue, let alone
predominant. Davis, 476 U.S. at 388. Remand under § 1441(c) would be
inappropriate because the requirement that state law predominate is unmet.

       Finally the homeowners invoke Burford v. Sun Oil Co., 319 U.S. 315 (1943),
and ask us to abstain from reaching the preemption question in order to avoid
impairing Missouri's ability to regulate the legal profession within its borders.
“Burford abstention applies when a state has established a complex regulatory scheme
supervised by state courts and serving important state interests, and when resolution
of the case demands specialized knowledge and the application of complicated state
laws.” Melahn v. Pennock Ins., Inc., 965 F.2d 1497, 1506 (8th Cir. 1992). That is not
the situation here. Moreover, Burford abstention is appropriate only with respect to
equitable claims. Barzilay v. Barzilay, 536 F.3d 844, 850–51 (8th Cir. 2008). Not
only is there no indication that Missouri’s prohibition on the unauthorized practice of
law constitutes “a complex regulatory scheme,” Melahn, 965 F.2d at 1506, it appears
from their first amended petition that plaintiffs have prayed for monetary relief alone.
See Barzilay, 536 F.3d at 850–51.

     For the foregoing reasons, we deny the homeowners' renewed motion to
remand.

                                          -7-
                                          B.

       The Missouri Circuit Court dismissed the homeowners’ claims against the FSA
lenders because it found the predicate state laws preempted by 12 C.F.R. § 560.2, a
federal regulation issued by the Office of Thrift Supervision (OTS) under the authority
of the Home Owners’ Loan Act (HOLA) of 1933, 12 U.S.C. §§ 1461–1468. We
review de novo the circuit court’s dismissal on grounds of preemption. Phipps v.
FDIC, 417 F.3d 1006, 1010 (8th Cir. 2005).

       The parties do not contest that § 560.2 preempts conflicting state law, for state
law that conflicts with federal law or that frustrates its effect is preempted. U.S.
Const. art. VI, cl. 2. And “federal regulations have no less pre-emptive effect than
federal statutes.” Fidelity Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 153
(1982). The only question then is whether the state laws upon which the homeowners
base their claims fall within the intended preemptive scope of § 560.2.

       We begin with the regulation itself, which declares unequivocally the OTS’
intent “[to] occupy the entire field of lending regulation for [FSAs].” § 560.2(a).
Paragraph (a) of § 560.2 defines the extent to which state law is preempted: “[FSAs]
may extend credit . . . without regard to state laws purporting to regulate or otherwise
affect their credit activities.” Id. Paragraph (b) provides a nonexhaustive list of the
types of state laws that are preempted by paragraph (a). § 560.2(b). Paragraph (c)
provides the exception, sheltering from the regulation’s preemptive scope state
contract, commercial, real property, homestead, tort, and criminal law “to the extent
that they only incidentally affect the lending operations of [FSAs] or are otherwise
consistent with the purposes of paragraph (a).” § 560.2(c).

      OTS interpretative guidelines specify the type of analysis courts should
undertake in determining whether § 560.2 preempts a particular state law:

                                          -8-
      [T]he first step will be to determine whether the type of law in question
      is listed in paragraph (b). If so, the analysis will end there; the law is
      preempted. If the law is not covered by paragraph (b), the next question
      is whether the law affects lending. If it does, then, in accordance with
      paragraph (a), the presumption arises that the law is preempted. This
      presumption can be reversed only if the law can clearly be shown to fit
      within the confines of paragraph (c). For these purposes, paragraph (c)
      is intended to be interpreted narrowly. Any doubt should be resolved in
      favor of preemption.

61 Fed. Reg. 50951-01, 50965–67 (Sept. 30, 1996). “[A]n agency’s interpretation of
its own regulation is entitled to deference unless plainly erroneous or inconsistent with
the regulation.” United States v. Bailey, 571 F.3d 791, 803 n.7 (8th Cir. 2009)
(internal quotation marks omitted). Since OTS’ interpretation is neither, it is due our
deference.

       Our analysis thus begins by determining whether the state laws in question fall
within the scope of § 560.2(b). “If so, . . . the law[s] [are] preempted.” 61 Fed. Reg.
at 50966. Paragraph (b) clarifies that the regulation preempts “state laws purporting
to impose requirements regarding . . . (5) [l]oan-related fees, including without
limitation, initial charges.” The parties contest the precise meaning of this language.
The homeowners read the words “state laws purporting to impose requirements” to
mean state laws that on their face impose requirements expressly upon lenders. Thus
the argument goes, a law which makes no mention of lending necessarily falls outside
the scope of the § 560.2(b) examples and is preempted only if § 560.2(a) requires that
result, without regard to § 560.2(b). The FSA lenders read the regulation more
broadly: a state law that does not expressly mention lending is nevertheless
preempted if, as applied, the law is one described in § 560.2(b).

       Although construction of the regulation is an issue of first impression in this
circuit, other courts have confronted the issue. The Ninth Circuit, for example, has
considered the preemptive effect of § 560.2 upon two California statutes prohibiting

                                          -9-
unfair advertising and unfair competition. Silvas v. E*Trade Mortgage Corp., 514
F.3d 1001 (9th Cir. 2008). Neither statute purported on its face to impose
requirements on lending. Because the statutes as applied were ones described in §
560.2(b), however, the court held them preempted. Id. at 1006. The Ninth Circuit
framed the inquiry under § 560.2(b) similarly to the FSA lenders: that is, whether the
state law, “as applied, is a type of state law listed under [§ 560.2(b)].” 514 F.3d at
1006 (emphasis added).2 Holding that the generally applicable state laws met this test,
the court expressly rejected any need to analyze the laws under § 560.2(c). Id.
Although it failed to explain the reason for its conclusion that an “as applied” analysis
was required, the court cited two OTS legal opinions which support its approach.

        In a 1999 advisory opinion, the OTS had examined the same California statutes
at issue in Silvas. See OTS Op. Chief Counsel (March 10, 1999). Acknowledging
that the statutes did not on their face come within§ 560.2(b), the agency proceeded to
determine whether the § 560.2(c) exception to preemption applied. Id. at 12. The
OTS did not analyze the statutes under the express terms of § 560.2(c), however,
because they had been applied to impose requirements within the scope of § 560.2(b).
Id. at 14–16. OTS thus adopted the approach later employed in Silvas and advocated
by the FSA lenders here: a state law that on its face is not one described in § 560.2(b)
may nevertheless be preempted if, as applied, it fits within § 560.2(b).

      2
        The Ninth Circuit is not the only court to have found the “as applied” approach
to be correct. See, e.g., Boursiquot v. Citibank F.S.B., 323 F. Supp. 2d 350 (D. Conn.
2004) (§ 560.2 preempted claims under the Connecticut Unfair Trade Practices Act
because, when applied to the generally applicable statute, the claims came within the
scope of § 560.2(b)); Moskowitz v. Wash. Mut. Bank, 768 N.E.2d 262 (Ill. App.
2002) (claims under the Illinois Consumer Fraud and Deceptive Business Practices
Act preempted for the same reason); McCurry v. Chevy Chase Bank, F.S.B., 193 P.3d
155 (Wash. Ct. App. 2008) (claims under the Washington Consumer Protection Act
preempted for the same reason).

                                          -10-
       A 1996 OTS opinion supports this interpretation. Acknowledging that an
Indiana deceptive practices statute was on its face not one described in § 560.2(b), the
agency nevertheless examined whether it could escape preemption under § 560.2(c).
OTS Op. Chief Counsel (December 24, 1996), at 9. The agency concluded in this
case that the Indiana statute was not preempted because it fit within the § 560.2(c)
preemption exception. Id. at 10. Unlike its later opinion, in 1996 the OTS did not
analyze whether the statute as applied came within § 560.2(b). With no applications
of the Indiana statute to inform its inquiry, the OTS could not analyze whether the
statute as applied was one described in § 560.2(b), but had to rely on an abstract
analysis.

       The conclusion that § 560.2(b) contemplates an “as applied” analysis finds
further support in an amicus curiae brief filed by the OTS in Jenkins v. Concorde
Acceptance Corp., 802 N.E.2d 1270 (Ill. App. 2003)—a case factually similar to the
case before the court. As here, the Jenkins plaintiffs sought to enforce against FSA
lenders a state statute prohibiting the imposition of fees for the preparation of legal
documents by nonlawyers. Id. at 1270. And as here, the statute was facially neutral.
It did not mention lending and thus was not a type of law listed in § 560.2(b). The
OTS maintained that the statute was nevertheless preempted because, as applied, it
imposed requirements regarding loan related fees—making it one of the types of laws
enumerated in § 560.2(b). Brief of the Office of Thrift Supervision as Amicus Curiae
Supporting Defendant Cititbank, F.S.B. and Similarly Situated Defendants at 10,
Jenkins, 802 N.E.2d 1270 (No. 02-2738).

       In sum, the OTS adheres to the analytic approach advocated by the FSA
lenders. That approach is not only sensible, it is owed deference. See Auer v.
Robbins, 519 U.S. 452, 461 (1997). We conclude that a state law that either on its
face or as applied3 imposes requirements regarding the examples listed in § 560.2(b)

      3
        The homeowners contend that a decision of the Seventh Circuit is at odds with
this interpretation. It is not. In In re Ocwen Loan Servicing, LLC Mortgage Servicing

                                         -11-
is preempted. A generally applicable state law that imposes no such requirements will
not be preempted if, as applied, it “only incidentally affect[s] the lending operations
of [FSAs] or [is] otherwise consistent with the purposes of [§ 560.2(a)].” § 560.2(c).

       Two Missouri statutes are at issue here: § 484.020 of the Missouri Revised
Statutes, which prohibits the unlicensed practice of the “law business”; and the
MMPA, Mo. Rev. Stat. §§ 407.010 et seq., which prohibits fraudulent conduct in
commerce. Neither statute purports on its face to impose requirements on lending.
The pertinent inquiry is thus whether either statute, as applied, imposes requirements
on lending such that it is a type of law enumerated in § 560.2(b).

       The first amended petition alleges that the FSA lenders violated both Missouri
statutes by charging the homeowners fees for legal document preparation by
nonlawyers. Assuming the allegations are true, the charging of those fees would
violate both statutes. See Eisel v. Midwest BankCentre, 230 S.W.3d 335, 338 (Mo.
2007) (holding that such fees violate § 484.020); Zmuda v. Chesterfield Valley Power
Sports, Inc., 267 S.W.3d 712, 716 (Mo. Ct. App. 2008) (holding that such fees violate
the MMPA). Thus, as applied, the statutes would impose requirements relating to
document preparation fees in mortgage transactions. The question, then, is whether
such fees fall within the scope of the examples listed in § 560.2(b).

Litigation, 491 F.3d 638 (7th Cir. 2007), the court held that several generally
applicable state statutes were preempted by § 560.2(a) because, as applied, they fell
within the § 560.2(b) illustrative examples. See id. at 645–48. It refused, however,
to hold preempted traditional common law actions such as fraud, breach of contract,
defamation, and slander of title. Id. Here, the homeowners have alleged a right to
recover under the common law theory of money had and received, but unless the
Missouri statutes survive the preemptive effect of § 560.2, they have no claim
cognizable under that theory. See Carpenter v. Countrywide Home Loans, Inc., 250
S.W.3d 697, 703 (Mo. 2008) (“Any person engaged in the unauthorized practice of
law has no right to collect fees, and those who have been improperly charged these
fees have the right to their return at common law under the theory of money had and
received.” (emphasis added)).

                                         -12-
      According to the FSA lenders, the document preparation fees at issue constitute
“[l]oan-related fees, including without limitation, initial charges,” as enumerated in
§ 560.2(b)(5). We agree. We find highly informative the amicus curiae brief filed by
the OTS in Jenkins—a case that, for purposes of the preemption analysis, was nearly
factually identical to the case here. There, document preparation fees charged by
FSAs were alleged to violate a generally applicable state statute prohibiting the
imposition of fees for legal document preparation by nonlawyers. See Jenkins, 802
N.E.2d 1270. The OTS stated its conclusion unequivocally: “The document
preparation charges at issue fall squarely within the[] illustrations [enumerated in §
560.2(b)]: they are initial charges and the task of preparing the documents is part of
the process of originating the loan.” Brief of the Office of Thrift Supervision as
Amicus Curiae at 10, Jenkins, 802 N.E.2d 1270 (No. 02-2738). The homeowners do
not contest the OTS conclusion. Nor given the deference due it, do we. See Auer,
519 U.S. at 461.

       Accordingly, we conclude that the Missouri statutes upon which the
homeowners base their claims would impose requirements regarding “loan-related
fees,” as listed in § 560.2(b)(5). “[Because] the type of law[s] in question [are] listed
in paragraph (b)[,] . . . the analysis . . . end[s] there; the law[s] [are] preempted.” 61
Fed. Reg. at 50966. Since the preemption question is thus resolved, further analysis
under the § 560.2(c) exception is unnecessary. Id.

                                           III.

      We deny the homeowners' renewed motion to remand to the Missouri Court of
Appeals because we retain arising under jurisdiction over the remaining state law
claims lodged against the FSA lenders, the FDIC's removal power under 12 U.S.C. §
1891(b)(2)(B) is undiminished by the rule of unanimity, the requirement under 28
U.S.C. § 1441(c) that state law predominate is not met, and Burford abstention would
be inappropriate. Furthermore, we conclude that the Missouri laws upon which the

                                          -13-
homeowners base their claims are, as applied, types of laws identified in 12 C.F.R. §
560.2(b). As a result federal law preempts their enforcement here, and the
homeowners' claims fail to state causes of action. We therefore affirm the dismissal
of the homeowner claims on grounds of preemption.

                       ______________________________

                                        -14-