Credit card companies say Miss. AG's lawsuit against them belongs in federal court

JACKSON, Miss. (Legal Newsline) -- A group of credit card issuers being sued by Mississippi Attorney General Jim Hood say the lawsuits against them should not be heard in state court, according to a filing in federal court earlier this month.

Defendants Capital One Bank USA N.A. and Capital One Services LLC; Citigroup Inc., Citibank N.A. and Department Stores National Bank; JPMorgan Chase & Co. and Chase Bank USA N.A.; Discover Financial Services Inc., Discover Bank and DFS Services LLC; Bank of America Corp. and FIA Card Services N.A.; and HSBC Bank Nevada N.A., HSBC Card Services Inc. and HSBC Bank USA N.A. submitted a joint sur-reply memorandum in opposition to Hood's motions to remand the cases Feb. 5.

According to their seven-page opposition filed in the U.S. District Court for the Southern District of Mississippi Jackson Division, the credit card companies argue that declarations -- explaining how payment protection fees extend credit to consumers -- further support the conclusion that the fees charged for such plans are "interest" under the National Bank Act, a "necessary premise" of their complete preemption argument.

Hood is one of three attorneys general -- including Hawaii's David Louie and West Virginia's Darrell McGraw -- to have filed suit over the companies' payment-protection products that carry monthly fees.

Hood, in his suits, alleges the companies' "abusive acts and practices" are causing state credit card holders to be charged "spurious" service plan fees.

In particular, he alleges that the defendants misrepresent the nature and benefits of their services, place unauthorized and undisclosed charges on customers' accounts, and target the state's most vulnerable consumers in a deceptive scheme to "gouge" the elderly and others.

A month after the defendants had the cases removed to the federal court, Hood's office filed a motion to remand the suits on Sept. 7.

The attorney general, who hired two out-of-state firms to represent the state in the cases, argues that his case is neither a mass action nor a class action and must be heard in state court.

Class action lawsuits are removable to federal court under the Class Action Fairness Act. Hood says every federal circuit court of appeal has resolved the question of whether parens patriae actions filed by attorneys general constitute class actions.

"The procedural differences between an attorney general's action and a class action prevent the removal of an attorney general's suit on class action grounds," according to his September motion.

"Unlike private litigants, the attorneys general have statutory authority to sue in parens patriae and need not demonstrate standing through a representative injury nor obtain certification of a class in order to recover on behalf of individuals.

"Additionally, the attorney general is not required to provide notice, and recovery is paid into state funds rather than to the individual victims of fraud. Thus, no amount of linguistic gymnastics can change the state's (Consumer Protection Act) case into a class action."

In December, Hood filed a supplemental memorandum of law in support of his motions to remand, pursuant to a November order by the federal court.

The credit card companies, in their opposition, contend the attorney general's argument -- that the federal court may not consider the declarations in determining whether it has jurisdiction over the cases -- is "fundamentally mistaken."

Courts, the companies argue, "routinely consider declarations and other evidence in determining whether they have original jurisdiction or removal jurisdiction over a challenge."

U.S. District Judge William Barbour said back in September he would wait on a ruling from the U.S. Court of Appeals for the Fifth Circuit to decide if Hood's case belongs in federal or state court. The Fifth Circuit is hearing the appeal of companies involved in liquid crystal display panels sued by Hood.

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