Federal judge sends W.Va. AG's case against credit card issuers back to state court

HUNTINGTON, W.Va. (Legal Newsline) -- A federal judge has agreed to remand a lawsuit filed by former Attorney General Darrell McGraw against a group of credit card issuers to a state court.

Judge Robert Chambers, in his memorandum opinion and order filed in the U.S. District Court for the Southern District of West Virginia Huntington Division Feb. 10, granted the attorney general's motion to remand but denied his request for costs and fees.

In August 2011, McGraw sued eight credit card issuers in Mason County Circuit Court over their practices in selling and administering payment protection plans and other ancillary services attached to state consumers' credit card accounts.

The named defendants include: JP Morgan Chase & Co. and Chase Bank USA N.A., a nationally-chartered banking association; Discover Bank, a state-chartered bank; GE Money Bank, a federally-chartered savings association; World Financial Network Bank, previously a nationally-chartered bank but now a state-chartered bank; First Premier Bank, a state-chartered bank; Bank of America Corp. and FIA Card Services N.A., a nationally-chartered banking association; Citigroup Inc. and Citibank N.A., a nationally-chartered banking association; and HSBC Bank Nev., a nationally-chartered banking association.

All eight defendants removed the actions to the federal court. McGraw moved to remand.

The defendants argued that removal to the federal court is justified for three reasons.

First, they argued that the attorney general's complaint challenges the "rate of interest" charged to credit card accounts, and is therefore completely preempted by the National Bank Act. Second, the complaint is actually a disguised class or mass action under the Class Action Fairness Act, and may be removed on that basis. Third, some of the defendants argued that the complaint presents a substantial federal question, and is therefore removable under the rule of Grable & Sons Metal Prods. Inc. v. Darue Eng. & Mfg.

Chambers, in his 32-page opinion, explained that the attorney general's complaint -- "viewed as a whole" -- does not state the kind of "substantial" federal question that makes removal under Grable "appropriate."

"(Debt Cancellation Contracts) and (Debt Suspension Agreements) are federally-regulated products, and preemption may require the application of federal law in this action. However, state consumer protection actions are not 'creatures of federal law,' and the state has a significant interest, recognized in (West Virginia ex rel. McGraw v.) CVS Pharmacy Inc., in retaining jurisdiction over this type of action," the judge wrote.

"Therefore, the complaint does not fit into the 'special and small' category of cases exemplified by Grable, and there is no federal jurisdiction."

All eight cases will be remanded to Mason Circuit Court.

As to the attorney general's request for cost and fees, Chambers wrote that although the defendants' arguments for removal jurisdiction "ultimately fail," they are "not objectively unreasonable." Therefore, the judge said he would not award fees and costs.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.