Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—S.D. Miss.: Claims filed by the Mississippi Attorney General against financial institutions properly removed to federal court, (Aug 2, 2013)

By Jody Coultas, J.D.

The federal district court in Jackson, Mississippi, had subject matter jurisdiction over Mississippi Consumer Protection Act (CPA) claims filed by the Mississippi Attorney General against a number of financial institutions for offering allegedly deceptive products and services (Hood v. JP Morgan Chase & Co., July 31, 2013, Barbour, W.).

The Mississippi Attorney General’s Office filed CPA claims against a number of financial institutions for allegedly charging consumers for ancillary products, including Payment Protection Plans, who either did not want them or were not entitled to benefit from them, and deceptive offered and administered claims for benefits by consumers. The financial instructions allegedly profited from the practices, while Mississippi citizens who were charged for the products did not. After the State filed CPA claims, the defendants removed the claims to federal court.

At the outset, the court found that the lawsuits could not qualify as class actions under the Class Action Fairness Act (CAFA) because the lawsuits were not brought under Federal Rule of Civil Procedure 23, Mississippi law explicitly prohibits class actions, and the CPA explicitly forbids class actions.

The court denied the State’s motion to remand the CPA claims based on federal subject matter jurisdiction. District courts may exercise federal subject matter jurisdiction over mass actions. Mass actions are civil actions that contain a claim for monetary relief, involve claims of 100 or more persons, and that the claims of its members are proposed to be tried jointly and involve common questions of law or fact. Although CPA claims can only be brought by the State through its attorney general, the real parties in interest for purposes of considering whether the claims were a mass action were the Mississippi consumers injured by the financial institutions.

The State’s argument that the general public exception to a mass action under the CAFA was applicable was denied. Because the individual Mississippi credit card holders were the real parties in interest, the State could not show that the claims were asserted on behalf of the general public. The court also found the restitution claims involved common questions of law because each claim was predicated on allegations that the financial institutions violated the CPA.

Because the real parties in interest were the card holders in Mississippi and none of the financial institutions were citizens of Mississippi, the court denied the motions to remand based on an alleged lack of minimum diversity.

Under the CAFA, a mass action may be considered a class action for the purposes of removal if the amount in controversy exceeded $5,000.000. The State argued that the lawsuits should be remanded because the financial institutions failed to show that the claim of any putative mass action member exceeds that $75,000. Nothing in the mass action statutes required that at least one claimant in a class action have a claim in excess of $75,000 before the case can be removed to federal court. The $75,000 individual amount in controversy is an exception to CAFA jurisdiction, rather than a threshold requirement. The State was unable to show that the exception applied in this case.

The court could properly exercise federal question jurisdiction on the basis of complete preemption under the National Bank Act (NBA) because the State had challenged the rate of the fees being charged for Payment Protection Plans, and impliedly alleged that those fees were excessive. A cause of action may be recast as a federal claim, making its removal proper on the basis of federal question jurisdiction, where Congress intended a federal act to provide the exclusive cause of action for the claims at issue. The provision of the NBA concerning interest has been held to completely preempt state law claims based on usury. Because the fees paid for the Payment Protection Plans underlying the CPA claims constituted interest, the claims were completely preempted.

The claims were also preempted under the Depository Institutions Deregulation and Monetary Control Act of 1980 for the same reasons they were preempted under the NBA, according to the court.

The cases are Nos. 3:12-cv-565-WHB-LRA; 3:12-cv-571; 3:12-cv-572; 3:12-cv-573; 3:12-cv-574; and 3:12-cv-575.

Attorneys: Geoffrey C. Morgan (Office of the Attorney General) for the Attorney General of the State of Mississippi. Mark H. Tyson (McGlinchey Stafford, PLLC) for Discover Financial Services

Cases: StateUnfairTradePractices Advertising MississippiNews