Ninth Circuit gives Hawaii AG permission to file appeal in suit against credit card issuers

By Jessica M. Karmasek | May 8, 2013

SAN FRANCISCO (Legal Newsline) -- In an order last month, the U.S. Court of Appeals for the Ninth Circuit gave Hawaii Attorney General David Louie the go-ahead to file an interlocutory appeal in a case against a group of credit card issuers.

In a one-paragraph order dated April 1, Circuit Judges Susan Graber and Norman Randy Smith granted Louie's petition for permission to appeal. The attorney general filed the petition Feb. 7.

Louie had 14 days from the date of the order to "perfect" the appeal, the judges wrote.

In January, a federal judge granted a motion by the attorney general, allowing him to file a proposed appeal with the Ninth Circuit.

Louie filed a motion for certification of question for interlocutory appeal and a motion to stay proceedings in the U.S. District Court for the District of Hawaii Dec. 10.

Defendants JP Morgan Chase & Co. and Chase Bank USA N.A. filed a joint memorandum in opposition on their behalf and on behalf of defendants Capital One Bank USA N.A., Capital One Services LLC, Citigroup Inc., Citibank N.A., Department Stores National Bank, Discover Financial Services Inc., Discover Bank, DFS Services LLC, Bank of America Corp., FIA Card Services N.A., HSBC Bank Nevada N.A. and HSBC Card Services Inc. Dec. 27.

Louie filed a reply Jan. 4, and a hearing was held Jan. 18.

U.S. District Judge Leslie E. Kobayashi, in his Jan. 29 order, said he granted the attorney general's motion because the proposed appeal could "materially affect the outcome of the instant litigation."

The credit card issuers, in a Feb. 19 filing with the Ninth Circuit, argued that the court should have denied Louie's petition because neither of the attorney general's two questions satisfies the statutory requirements for immediate review.

"The attorney general first proposes that this court review the question of whether the district court applied the appropriate definition of 'interest' in its complete preemption analysis. That question, however, does not present a 'controlling question of law' on which 'there is a substantial ground for difference of opinion,'" the companies wrote.

They argued that Louie simply disagrees with the way the district court applied the definition to the factual record.

"Specifically, whereas the attorney general believes that payment protection charges fall outside the operative definition of 'interest,' the district court, on the basis of the factual record before it, reached the opposite conclusion," they wrote in their 23-page answer.

"Under settled law, this mere disagreement about the proper application of law to fact is not a disagreement on a 'controlling question of law' that justifies immediate appellate review."

The credit card companies also took issue with Louie's question of whether the attorney general's allegations were correctly "characterized" by the district court.

"The law is clear, however, that the proper 'characterization' of the allegations in a particular complaint is the antithesis of a proper appeal," they wrote. "Furthermore, there is no merit to the attorney general's assertion that the district court mischaracterized the allegations in the complaints; nor is there any substance to his erroneous suggestion that the district court held that ordinary claims of deceptive marketing are subject to complete preemption.

"The district court instead reached the straightforward and correct conclusion that the complaints in these actions go beyond mere allegations of deceptive marketing and also challenge the amount of interest that defendants charge for payment protection plans."

In his January order, which stayed the district court case pending the outcome of the Ninth Circuit's review, Kobayashi said the outcome of the interlocutory appeal will ultimately determine whether federal jurisdiction exists in the case.

Louie originally filed six complaints against the credit card issuers in the state's First Circuit Court last April.

In his suits, the attorney general alleges that the credit card companies have engaged in "deceptive and predatory practices" in marketing and selling ancillary credit card products -- such as payment protection plans, identity theft protection plans and extended warranties -- to Hawaii residents.

In particular, Louie alleges that the defendants have targeted particularly vulnerable consumers, including the elderly and those with credit problems.

The defendants quickly removed each of the six cases to the federal court. They asserted federal jurisdiction based on the Class Action Fairness Act and jurisdiction based on the complete preemption doctrine.

In June, Louie filed a motion to remand and for costs and fees in each of the six cases.

In November, the federal court issued an order denying the attorney general's motion.

In the remand order, the court concluded that removal was proper based on the complete preemption doctrine.

More specifically, it found that the payment protection plans and other ancillary products at issue in the cases were debt cancellation contracts and/or debt suspension agreements, and that the fees assessed for the products were interest for purposes of the National Bank Act.

As such, the court concluded that the claims asserted by Louie under state law are preempted and there is federal question jurisdiction, and thus denied the attorney general's motions to remand.

The attorney general argues that the interlocutory appeal would materially advance the ultimate termination of the litigation -- if the Ninth Circuit holds that there is no removal jurisdiction, the ruling will terminate the case.

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

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