On Appeal from the United States District Court for the Western District of Pennsylvania
(D.C. Civil Action Nos. 93-cv-868, 93-cv-878, 92-cv-244, 92-cv-302, 92-cv-330, 92-cv-346, 92-cv-375, 92-cv-1025, 92-cv-398, 92-cv-1427 & 92-cv-714)
Before: SCIRICA, ROTH and SAROKIN, Circuit Judges
Argued on February 2, 1995
These eleven consolidated *fn1 actions were brought by concerned Pennsylvanians who believed that they were being charged excessive fees and interest on their credit cards and that these charges violated Pennsylvania consumer protection laws. None of the defendants are Pennsylvania lending institutions. The cases were all brought in Pennsylvania state courts and then removed by the defendants to the federal system. *fn2
These cases require that we resolve the conflict between state consumer-protection law and federal banking law. We will first consider the district courts' holdings that removal jurisdiction was proper, based on the doctrine of complete preemption. We will reverse the district courts on this issue. The Supreme Court's conservative extension of the complete preemption doctrine and the application of the Third Circuit's two-pronged test establish that federal jurisdiction is lacking in those cases in which the plaintiffs did not amend their complaints to allege federal claims.
Certain plaintiffs also alleged federal causes of action against California lending institutions. *fn3 Consequently, we will next consider claims particular to these actions, which the district court dismissed. We conclude that the district court properly determined that the plaintiffs in two of the California-lender actions lacked standing. In the remaining action, however, we must consider whether the term "interest" in Section(s) 30 of the National Bank Act, 12 U.S.C. Section(s) 85 (1988), encompasses late charges and over-limit fees assessed to credit card holders. We will affirm the district court to the extent that the court held that plaintiffs' state law claims regarding late charges and over-limit fees were substantively preempted. See Ament v. PNC Nat'l Bank, 849 F. Supp. 1015, 1018-21 (W.D. Pa. 1994). We will reverse and remand, however, for further proceedings regarding the legality of these fees under California law.
Plaintiff cardholders allege that the defendant banks violated Pennsylvania law by charging certain fees in connection with their credit card programs. Plaintiffs' accounts are governed by agreements that provide for one or more of the following charges: percentage-based finance charges on outstanding balances, annual fees, over-credit limit charges, late charges, returned check charges, and cash advance fees. Plaintiffs contend all of the charges, except for the finance charges, violate Pennsylvania statutory *fn4 and common law.
Plaintiffs filed eleven separate actions in the Courts of Common Pleas for Allegheny and Philadelphia counties. The banks filed notices of removal based on federal question and diversity jurisdiction. The nine cases filed in Allegheny County were removed to the United States District Court for the Western District of Pennsylvania, where they were consolidated. The two Philadelphia County cases were removed to the United States District Court for the Eastern District of Pennsylvania.
Plaintiffs moved to remand. The district courts denied the motions, holding federal question jurisdiction existed based on the "complete preemption" doctrine. Goehl v. Mellon Bank (DE), 825 F. Supp. 1239, 1243 (E.D. Pa. 1993); Ament, 825 F. Supp. at 1251. The district court then transferred the Eastern District cases to the Western District.
The banks filed motions to dismiss, for judgment on the pleadings and for summary judgment. The district court granted the motions and dismissed all of the actions, holding that Section(s) 30 of the National Bank Act, 12 U.S.C. Section(s) 85, *fn5 and Section(s) 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 ("DIDA"), 12 U.S.C. Section(s) 1831d (1988 & Supp. III 1991), preempted Pennsylvania's prohibition of the challenged fees. Ament, 849 F. Supp. at 1018-19. The district court held that the banks' charges constituted "interest" under federal law and that plaintiffs' state law claims were preempted. Id. at 1019-21. These consolidated appeals followed. Assuming the district court properly had jurisdiction, we have appellate jurisdiction under 28 U.S.C. Section(s) 1291 (1988).
Plaintiffs challenge the propriety of federal court removal jurisdiction in all but three of these cases. *fn6 Defendant's removal petitions were premised on both federal question jurisdiction, via the complete preemption doctrine, and on diversity of citizenship. The district court asserted subject matter jurisdiction based on complete preemption and therefore failed to reach diversity. We disagree. We find no jurisdiction under either the complete preemption doctrine or the diversity statute.
We exercise plenary review in jurisdictional matters. Packard v. Provident Nat'l Bank, 994 F.2d 1039, 1044 (3d Cir. 1993), cert denied sub nom. Upp v. Mellon Bank, N.A., ___ U.S. ___, 114 S.Ct. 440 (1993). Removal of civil actions from state to federal court is governed by 28 U.S.C. Section(s) 1441 (1988), which provides in pertinent part:
Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the . . . defendants to the district court of the United States for the district and division embracing the place where such action is pending.
Removal is therefore premised on original jurisdiction, which in turn must rest on either federal question jurisdiction under 28 U.S.C. Section(s) 1331 or on diversity jurisdiction under 28 U.S.C. Section(s) 1332.
We first consider federal question jurisdiction under 28 U.S.C. Section(s) 1331, the basis upon which the district court found jurisdiction. In determining whether a federal question is raised, the "well-pleaded complaint" rule applies. Railway Labor Executives Ass'n v. Pittsburgh & Lake Erie R.R. Co., 858 F.2d 936, 939 (3d Cir. 1988). This rule requires the federal question be presented on the face of the plaintiff's properly pleaded complaint in order for the case to be removable under Section(s) 1441. See Gully v. First Nat'l Bank, 299 U.S. 109, 112-13 (1936). The presence of a federal defense does not make a case removable even if the defense is preemption and even if the federal defense is the only issue in the case. Caterpillar Inc. v. Williams, 482 U.S. 386, 393 (1987). The well-pleaded complaint rule "makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law." Id. at 392.
The doctrine of complete preemption is a narrow corollary to the well-pleaded complaint rule. The Supreme Court explained the doctrine in Caterpillar Inc., 482 U.S. at 393 (citation omitted):
On occasion, the Court has concluded that the pre-emptive 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.
The complete preemption doctrine is of recent vintage. Since 1968, the Supreme Court has found complete preemption expressly in only two settings: (1) for claims alleging a breach of a collective bargaining agreement that fall under Section(s) 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. Section(s) 185 (1988), see Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557 (1968); and (2) for claims for benefits or enforcement of rights under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. Section(s) 1132(a)(1)(B) (1988), see Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-67 (1987). *fn7 The Court has applied the doctrine "primarily in cases raising claims pre-empted by Section(s) 301 of the LMRA." Caterpillar Inc., 482 U.S. at 393. Other courts of appeals have cautiously extended the boundaries of the complete preemption doctrine in some instances *fn8 but refused to expand the doctrine in others. *fn9
This court has adopted a two-pronged test by which a federal court may determine whether it is authorized to assert complete preemption jurisdiction. Pursuant to the test, a court determines the "very limited area in which a federal court in a case removed from a state court is authorized to recharacterize what purports to be a state law claim as a claim arising under a federal statute." Railway Labor, 858 F.2d at 942. First, the court must determine that "the statute relied upon by the defendant as preemptive contains civil enforcement provisions within the scope of which the plaintiff's state claim falls." Id. at 942 (citing Franchise Tax Board, 463 U.S. at 24, 26). Second, the court must find "a clear indication of a Congressional intention to permit removal despite the plaintiff's exclusive reliance on state law." Id.; see also Goepel v. National Postal Mail Handlers Union, 36 F.3d 306, 311 (3d Cir. 1994), cert. denied, __ U.S. __, 115 S. Ct. 1691 (1995); Krashna v. Oliver Realty, Inc., 895 F.2d 111, 114 (3d Cir. 1990).
The first prong of the test requires a comparison between the federal statute's enforcement provisions and the nature of the plaintiffs' claims. We must ask if the National Bank Act's and DIDA's civil enforcement provisions, 12 U.S.C. Section(s) 86 and 1831d, govern the same interests plaintiffs seek to vindicate in their suits. See Allstate Ins. Co. v. 65 Security Plan, 879 F.2d 90, 93-94 (3d Cir. 1989).
Section 86 of the National Bank Act sets forth the civil enforcement provision for individuals charged excessive interest by national banks: The taking, receiving, reserving, or charging a rate of interest greater than is allowed by section 85 of this title, when knowingly done, shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it, or which has been agreed to be paid thereon. In case the greater rate of interest has been paid, the person by whom it has been paid, or his legal representatives, may recover back, in an action in the nature of an action of debt, twice the amount of the interest thus paid from the association taking or receiving the same: Provided, That such action is commenced within two years from the time the usurious transaction occurred.
12 U.S.C. Section(s) 86. This section contains the exclusive remedy for borrowers to enforce the terms of Section(s) 85 of the National Bank Act *fn10 and to recover impermissible loan fees collected by national banks. M. Nahas, 930 F.2d at 610; see also McCollum v. Hamilton Nat'l Bank, 303 U.S. 245, 248 (1938); Evans v. National Bank of Savannah, 251 U.S. 108, 109, 114 (1919); Farmers' & Mechanics' Nat'l Bank v. Dearing, 91 U.S. 29, 34-35 (1875).
Section 521 of DIDA sets forth the civil enforcement provision for individuals charged excessive interest by federally insured state banks:
[T]he taking, receiving, reserving, or charging a rate of interest greater than is allowed by subsection (a) of this section, *fn11 when knowingly done, shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it, or which has been agreed to be paid thereon. If such greater rate of interest has been paid, the person who paid it may recover in a civil action commenced in a court of appropriate jurisdiction not later than two years after the date of such payment, an amount equal to twice the amount of the interest paid from such State bank or such insured branch of a foreign bank taking, receiving, reserving, or charging such interest. 12 U.S.C. Section(s) 1831d(b) (footnote supplied).
This section is identical to Section(s) 86 in all material respects, and Congress wrote it to duplicate the scope of Section(s) 86. Cf. Greenwood Trust Co. v. Massachusetts, 971 F.2d 818, 826 & n.7 (1st Cir. 1992) (noting the identity of language between the first part of Section(s) 521 of DIDA and Section(s) 85 of the National Bank Act), cert. denied, __ U.S. __, 113 S. Ct. 974 (1993). The scope of the two sections is identical, and the interests covered by Section(s) 86 are the same as those covered by Section(s) 521.
The banks correctly assert that the interests the cardholders seek to vindicate are the same as those protected by both federal statutes. Plaintiffs' causes of action under state law rest on complaints that national banks and federally insured state-chartered banks charged impermissible fees in connection with credit card loans. Recovery of impermissible loan fees is precisely the interest that Section(s) 86 of the National Bank Act and Section(s) 521 of DIDA govern. *fn12 This satisfies the first prong of the test for complete preemption.
The second prong of the complete preemption analysis, in which we examine congressional intent, presents a closer question. Congress has broad authority to control the jurisdiction of the lower federal courts. See Kline v. Burke Constr. Co., 260 U.S. 226, 233-34 (1922) (observing that, aside from the Supreme Court, "[e]very other court created by the general government derives its jurisdiction wholly from the authority of Congress"). Accordingly, the existence of removal jurisdiction in a particular case turns on whether Congress has granted it.
In concluding that Congress intended to permit removal in cases implicating Section(s) 85 and 86 of the National Bank Act, the district courts held that Congress manifested its intent to completely preempt the area by creating an exclusive federal remedy for usury claims against national banks. Goehl, 825 F. Supp. at 1243; Ament, 825 F. Supp. at 1251. By so holding, the trial courts misapplied the second prong of the test laid out in Railway Labor as a matter of law.
The district courts relied on the reasoning of M. Nahas & Co. v. First Nat'l Bank, 930 F.2d 608, 612 (8th Cir. 1991), a case in which the Court of Appeals for the Eighth Circuit found Section(s) 86 of the National Bank Act to be "an exclusive federal remedy, created by Congress over 100 years ago to prevent the application of overly-punitive state law usury penalties against national banks." The plaintiff in M. Nahas brought suit in state court against a national bank, alleging that the bank charged an interest rate that was usurious under state law. The bank removed the action to federal district court, and the court refused to remand, holding that the claim was properly characterized as federal. The circuit court affirmed.
The M. Nahas holding applied on its face to an instance in which a bank charged a percentage interest rate higher than that allowed by state law. Following M. Nahas, however, numerous district courts have held that the National Bank Act completely preempts state laws that limit or prohibit late fees and other such fees charged by national banks. *fn13 Moreover, a district court in the Eighth Circuit extended the M. Nahas holding to Section(s) 521 of DIDA, where the plaintiffs challenged late fees and over-limit charges pursuant to state law. See Hill v. Chemical Bank, 799 F. Supp. 948 (D. Minn. 1992). The court held that "like Section(s) 86 [of the National Bank Act], Section(s) 521(b) creates an exclusive federal remedy" and therefore "completely preempts the field of usury claims against federally-insured state banks." Id. at 952.
Although the banks rely on M. Nahas and its progeny to support their argument in favor of federal jurisdiction, none of the cases are binding on this court. Moreover, they are inconsistent with this court's previous opinions regarding complete preemption, because they do not convincingly establish congressional intent to make causes of action within the scope of Section(s) 85 and 86 of the National Bank Act, or Section(s) 521 of DIDA, removable to federal court. *fn14
Indeed, the Eighth Circuit has rejected expressly the two-pronged complete preemption analysis that this court set forth in Railway Labor. See Deford v. Soo Line R.R. Co., 867 F.2d 1080, 1086 (8th Cir.) (rejecting this court's reasoning in Railway Labor and holding that the Railway Labor Act completely preempts state law claims), cert. denied, 492 U.S. 927 (1989); see also, Goepel, 36 F.3d at 315 n.12 (acknowledging the split between the two courts of appeals). The Eighth Circuit called the Third Circuit's approach "unnecessarily narrow," stating: Not only must we look to affirmative congressional intent and civil enforcement provisions, but we must also look to such factors as the history and purpose of the statute. Recent case law illustrating the federal nature of the statute and analogous statutes with complete preemptive powers are also informative. Id.
Although an examination of Congress's basic goals in enacting Section(s) 85 and 86 and the history behind them would be consistent with the Eighth Circuit's approach, such an approach would diverge from that which this court has prescribed. *fn15 Moreover, it is at odds with the Supreme Court's narrow application of the complete preemption doctrine.
The Supreme Court has held affirmative evidence of congressional intent to be "the touchstone of the federal district court's removal jurisdiction." Metropolitan Life, 481 U.S. at 66. And, as discussed above, the Court has found such intent only rarely. The complete preemption doctrine was originally rooted in a cause of action arising under Section(s) 301 of the LMRA. See Avco Corp., 390 U.S. at 557. The Court extended the doctrine reluctantly, in Metropolitan Life, to an action arising under ERISA. The Court wrote that it did so only because "ERISA's civil enforcement provisions closely parallels [sic] that of Section(s) 301 of the LMRA," and because explicit language in the ERISA Conference Report analogized the ERISA provision to the LMRA language. Metropolitan Life, 481 U.S. at 65; Railway Labor, 858 F.2d at 940. "In the absence of explicit direction from Congress," the Court wrote, [e]ven with a provision such as Section(s) 502(a)(1)(B) [the jurisdictional provision] that lies at the heart of a statute with the unique pre-emptive force of ERISA . . . we would be reluctant to find that extraordinary pre-emptive power, such as has been found with respect to 301 of the LMRA, that converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule. Metropolitan Life, 481 U.S. at 64-65. *fn16
Neither the National Bank Act nor DIDA contains a jurisdictional provision evidencing congressional intent to permit removal of the sort relied upon in Avco and Metropolitan Life. Nor have the banks pointed to congressional language suggesting that parties may bring suit against banks in federal court without regard to the citizenship of the parties or the amount in controversy.
Congressional intent to permit removal based on complete preemption would be difficult to divine from the legislative history of the National Bank Act, because the Act was passed in 1864, pre-dating federal question jurisdiction, the well-pleaded complaint rule, and the doctrine of complete preemption. *fn17 The banks argue, nonetheless, that Congress evidenced an intent to provide an exclusive source of relief for claims of overcharge that, coupled with the general federal provision allowing for removal of federal-question cases, demonstrates congressional intent to allow removal. However, the defendants point to nothing in the legislative history of Section(s) 85 and 86 that presents the sort of clear indication of congressional intent we have looked for in the past. *fn18
Similarly, when Congress enacted Section(s) 521 of DIDA in 1980, it did not adopt language or indicate in the legislative history that the provision would support complete preemption. Cf. Donald v. Golden 1 Credit Union, 839 F. Supp. 1394, 1402 (E.D. Cal. 1993) (refusing to find complete preemption pursuant to Section(s) 523(b) of DIDA -- which contains parallel language to Section(s) 521 but governs insured credit unions -- because nothing in the provision's legislative history "mentions 'arising under' jurisdiction or compares the effect of Section(s) 523(b) to Section(s) 301 of the LMRA or Section(s) 502(f) of ERISA").
There appears to be no indication that Congress intended to completely preempt the regulation of national banks or federally-insured state lending institutions. *fn19 Therefore, we will reverse the judgments of the district courts that found complete ...