The Mississippi Attorney General filed a state court lawsuit against six credit card companies alleging violations of the Mississippi Consumer Protection Act by charging consumers for products they did not need or want and without their consent and without proper disclosure. See Hood v. JP Morgan Chase & Company, ___F.3d ____, (5th Cir. 2013) (Case No. 13-60686 dated December 2, 2013). The service at issue was a Payment Protection Plan which amended a customer’s credit card loan agreement and would suspend or cancel a customer’s obligation to repay credit card debt under certain circumstances such as death, disaster or disability. If the repayment obligation was suspended, the customer did not have to make minimum payments and was relieved of interest charges and late fees during the relevant period.
The credit card companies removed to federal district court, filed a motion to dismiss based on the class action fairness act and preemption under the National Banking Act. The credit card companies alleged that state law claims were preempted by federal usury laws or that the usury claims had to be resolved in accordance with those laws. The district court agreed with the credit card companies and an interlocutory appeal was taken to the United States Court of Appeals for the Fifth Circuit.
In reversing and remanding the case, the Fifth Circuit restated the well pleaded complaint rule and held that the Mississippi AG had the right to allege only state law causes of action, even when federal remedies may be available. A defendant, such as the credit card companies, cannot inject a federal question into a state law claim and transform the action into one arising under federal law. While there is an exception to the well pleaded complaint rule for complete preemption which arises when Congress “so completely preempts a particular area that any complaint raising this select group of claims is federal in character,” the Mississippi AG’s claims are only preempted if federal law provides the “exclusive cause of action” for its claims. See Hood v. JP Morgan Chase & Company, ___F.3d ____, (5th Cir. 2013) (Case No. 13-60686 dated December 2, 2013). In rejecting this argument, the Fifth Circuit pointed out that the Mississippi AG did not allege any usury issues; the removal statute required strict construction and based on comity considerations, preemption was held to be unwarranted because the credit card companies failed to identify a clear rule that demanded removal under the applicable law. Further, neither the National Banking Act or the regulations promulgated by the Office of the Comptroller of the Currency explicitly indicate that Payment Protection Plan fees are “interest.”
The result in this case should encourage more consumer protection lawsuits by State Attorney Generals. The opinions in this blog are solely the author’s and any comments, suggestions or replies can be sent to John@jrjoneslaw.com.