United States District Court, D. Colorado
A. BRIMMER United States District Judge.
matter comes before the Court on Defendant's 12(b)(1) and
(6) Motion to Dismiss WebBank's Complaint [Dkt. #1]
[Docket No. 17].
case is related to a separate action captioned Meade v.
Avant of Colorado, LLC, No. 17-cv-0620-WJM-STV
(“Avant” or the “enforcement
action”). In the enforcement action, the defendant
here, Julie Ann Meade (the “Administrator”),
seeks to enforce Colorado's statutory limits on finance
and delinquency charges in her role as the Administrator of
the Colorado Uniform Consumer Credit Code. Avant,
2018 WL 1101672, at *1 (D. Colo. Mar. 1, 2018). The defendant
in the enforcement action, Avant of Colorado, LLC
(“Avant”), is a “servicing partner”
that purchases WebBank-originated loans. Docket No. 1 at 2,
¶¶ 3, 5. W ebBank is not a party to the enforcement
action. Avant, 2018 WL 1101672, at *1; Docket No. 1
at 2, ¶ 5. On March 9, 2017, Avant removed the
enforcement action to federal court in this district.
Avant, 2018 WL 1101672, at *1.
March 28, 2017, WebBank filed its complaint in this lawsuit.
Docket No. 1. WebBank alleges that the enforcement action
“directly interferes with WebBank's core lending
power and is foreclosed by federal law.” Id.
at 1, ¶ 1. WebBank claims that, as a “federally
regulated bank, federally insured by the Federal Deposit
Insurance Corporation (“FDIC”), . . . WebBank
lends to borrowers on a uniform, nationwide basis, using the
authority provided by Section 27 of the Federal Deposit
Insurance Act (“FDIA”), 12 U.S.C. §
1831d.” Docket No. 1 at 1, ¶ 2. WebBank seeks a
declaratory judgment that Colo. Rev. Stat. §§
5-1-201(8), 5-2-201, and 5-2-203 (collectively
“Colorado usury laws”) are “expressly
preempted by Section 27 of the Federal Deposit Insurance Act
as to loans originated by WebBank.” Docket No. 1 at 31,
¶ 93. WebBank further seeks a permanent injunction
against the Administrator to prevent her from enforcing
Colorado usury laws against “WebBank, any loans
originated by WebBank, or any assignee, partner, program,
and/or servicer with respect to their involvement with any
loans originated by WebBank.” Id. at 31-32,
March 31, 2017, the Administrator filed a motion to remand
the enforcement action. Avant, 2018 WL 1101672, at
*1. On April 25, 2017, the Administrator filed the current
motion to dismiss this case. Docket No. 17. The Administrator
argues that WebBank lacks standing because it alleges only
attenuated injury and that WebBank fails to state a claim
because Colorado usury laws are not preempted when applied to
non-bank entities. Id. at 4-11. The Administrator
also argues that, in the event the enforcement action is
remanded to state court, the Court must abstain from hearing
WebBank's claim pursuant to Younger v. Harris,
401 U.S. 37 (1971), or, in the alternative, that the Court
should decline to exercise jurisdiction to issue a
declaratory judgment. Docket No. 17 at 12-15.
March 1, 2018, Judge William J. Martínez granted the
Administrator's motion to remand the enforcement action
to state court. Avant, 2018 WL 1101672, at *15.
Court addresses only the issue of Younger abstention
because it is dispositive.
Younger, the Supreme Court ruled that a district
court's injunction of a pending state court criminal
prosecution violated “the national policy forbidding
federal courts to stay or enjoin pending state court
proceedings except under special circumstances.” 401
U.S. at 41. Younger abstention dictates “that
federal courts not interfere with state court proceedings by
granting equitable relief - such as injunctions of important
state proceedings or declaratory judgments regarding
constitutional issues in those proceedings - when such relief
could adequately be sought before the state court.”
Rienhardt v. Kelly, 164 F.3d 1296, 1302 (10th Cir.
1999). Thus, after Younger, even when a federal
court would otherwise have jurisdiction to grant declaratory
or equitable relief, the court must abstain from exercising
jurisdiction when a judgment on the claim would interfere
with ongoing state criminal or civil proceedings. D.L. v.
Unified Sch. Dist., 392 F.3d 1223, 1227-28 (10th Cir.
2004); see also Samuels v. Mackell, 401 U.S. 66, 73
(1971) (“[W]here an injunction would be impermissible
under these principles, declaratory relief should ordinarily
be denied as well.”). The Supreme Court has established
a threefold analysis for abstention under Younger.
“For Younger abstention to apply, there must
be an ongoing state judicial . . . proceeding, the presence
of an important state interest, and an adequate opportunity
to raise federal claims in the state proceedings.”
Planned Parenthood of Kansas v. Andersen, 882 F.3d
1205, 1221 (10th Cir. 2018) (alteration marks and internal
quotation marks omitted); see also Middlesex Cty. Ethics
Comm. v. Garden State Bar Ass'n, 457 U.S. 423,
431-32 (1982); Amanatullah v. Colo. Bd. of Med.
Exam'rs, 187 F.3d 1160, 1163 (10th Cir. 1999);
Crown Point I, LLC v. Intermountain Rural Elec.
Ass'n, 319 F.3d 1211, 1215 (10th Cir. 2003).
Younger abstention is mandatory, and a district
court does not have discretion whether to abstain unless
extraordinary circumstances are present. Weitzel v. Div.
of Occupational and Prof'l Licensing of Dep't of
Commerce, 240 F.3d 871, 875 (10th Cir. 2001) (citing
Amanatullah, 187 F.3d at 1163).
the first prong of the Younger analysis, the
enforcement action is pending in state court. See
Avant, 2018 WL 1101672, at *15. As to the second prong,
enforcing laws regulating lending practices implicates an
important state interest. See Epes v. Green Tree
Servicing, LLC, 2004 WL 5571941, at *10 (E.D. Va. Dec.
14, 2004) (“[T]he state has an important interest in
protecting citizens from predatory lending practices and
usury.” (citations omitted)). The relief WebBank seeks
- an order enjoining the Administrator from enforcing
Colorado usury laws against anyone involved with its loans -
would have a significant effect on the State's ability to
regulate lending. See Docket No. 17 at 13-14; Colo.
Rev. Stat. §§ 5-6-114 (empowering the Administrator
to enforce Colorado's usury laws by civil action). As to
the third prong, WebBank does not argue or allege any facts
showing that Avant would be unable to raise preemption
challenges in relation to the WebBank-initiated loans that it
owns, and the Court finds no basis for so concluding. Cf.
Stoorman v. Greenwood Trust Co., 908 P.2d 133 (Colo.
1995) (finding that federal law preempts Colorado's
limitations on loan fees and interest charges by a
federally-insured, state-chartered bank).
presents three arguments that abstention is nevertheless
inappropriate here: (1) WebBank is not a party to the
enforcement action and is not an alter ego of Avant, (2) the
Younger abstention doctrine was narrowed by
Sprint Commc'ns, Inc. v. Jacobs, 134 S.Ct. 584
(2013), such that it does not apply to the enforcement
action, and (3) preemption under Section 27 of the FDIA is
“facially conclusive” such that no state interest
would be served by allowing the state court to act. Docket
No. 23 at 14. The Court addresses these arguments in
WebBank is Not a Stranger to the Enforcement
argues that abstention is inappropriate because
“WebBank is not a party to the Enforcement Action, and
WebBank cannot be characterized as ‘merely an alter ego
of a party in state court, ' i.e., Avant.” Docket
No. 23 at 14 (quoting D.L., 392 F.3d at 1230). This
argument is not persuasive. In D.L., a school
district brought a state court action for special education
expenses against the mother and cohabiting boyfriend of two
disabled students. D.L., 392 F.3d at 1227. The
mother, boyfriend, and the students filed a complaint in
federal court against the district and its special education
administrator. Id. Even though the two lawsuits had
different parties, the court found that Younger
barred the federal court from hearing claims related to the
special education expenses because, if any federal claim
succeeded, there would be no merit to the district's
state court suit. Id. at 1229. Because a
“resolution favorable to Plaintiffs in [the federal]
case would foreclose [the state] suit (and might even be
enforced by a federal injunction against the suit), ”
the federal case presented an “interference with
state-court litigation that [was] impermissible under
Younger.” Id. (citing
Samuels, 401 U.S. at 72-73). Discussing the Supreme
Court's decision in Doran v. Salem Inn, Inc.,
422 U.S. 922, 928 (1975), the Tenth Circuit explained that it
is “proper for a federal court to exercise jurisdiction
over the claim of a genuine stranger to an ongoing state
proceeding even though a federal decision clearly could
influence the state proceeding by resolving legal issues
identical to those raised in state court-for example, both
proceedings may involve challenges to the same ordinance as
an unconstitutional restraint on expressive activity.”
D.L., 392 F.3d at 1230. The court, however, found
that Younger applied where there ...