United States District Court, D. Colorado
JULIE ANN MEADE, Administrator, Uniform Consumer Credit Code, Plaintiff,
MARLETTE FUNDING LLC d/b/a BEST EGG, Defendant.
A. BRIMMER UNITED STATES DISTRICT JUDGE
matter is before the Court on Plaintiff's Motion to
Remand for Lack of Subject Matter Jurisdiction [Docket No.
25] filed by Julie Ann Meade, Colorado's Administrator of
its Uniform Consumer Credit Code. Defendant Marlette Funding
LLC states that the Court has subject matter jurisdiction
over this lawsuit pursuant to 28 U.S.C. § 1331 based on
complete federal preemption. Docket No. 1 at 2, ¶ 2.
Plaintiff filed a motion to remand on the ground that she
alleges only state law causes of action and complete
preemption does not apply to her claims against defendant.
Docket No. 25 at 2-3.
is the Colorado state official charged by law with enforcing
Colorado's Uniform Consumer Credit Code
(“UCCC”). Colo. Rev. Stat. § 5-6-104(1)(g).
In her official capacity, plaintiff can bring civil actions
against creditors to enforce the UCCC's provisions. Colo.
Rev. Stat. § 5-6-114.
which does business under the name “Best Egg, ”
is a Delaware limited liability company that is licensed by
plaintiff as a Colorado supervised lender. Docket No. 5 at 2,
¶¶ 2-3. Defendant markets loans to Colorado
consumers through a website and by mailings. Id. at
2-3, ¶¶ 7, 14. The loans are made in partnership
with Cross River Bank, a New Jersey state-chartered bank.
Id. at 4, ¶ 24. The loan agreements identify
Cross River Bank as the entity making the loans, but
approximately 90% of the loans are sold to defendant and
defendant's designees within two days of when the loans
are made. Id., ¶¶ 25-26. Plaintiff further
alleges that “Cross River Bank does not bear the
predominant economic interest in such loans” because
defendant pays the costs associated with the lending
partnership and “Cross River Bank bears no risk that it
will lose its principal in the event that consumers
default.” Id. at 5, ¶ 32. Therefore,
plaintiff argues, defendant and the other loan purchasers are
the “true lender[s].” Id. at 6, ¶
33. Plaintiff alleges that a “primary purpose of Cross
River Bank's involvement is to allow Marlette and other
non-banks to circumvent state laws, including Colorado laws,
that limit the interest rates and other finance charges that
may be assessed.” Id. at 4, ¶ 27.
January 27, 2017, plaintiff filed a complaint against
defendant in the District Court for the City and County of
Denver, Colorado. Docket No. 3. On February 15, 2017,
plaintiff filed an amended complaint. Docket No. 5. Plaintiff
asserts three claims: (1) making excessive finance charges
and delinquency charges in violation of Colo. Rev. Stat.
§§ 201 and 203, respectively, (2) using choice of
law provisions that identify the law of a state other than
Colorado in violation of Colo. Rev. Stat. § 5-1-201(8),
and (3) charging a fee to process a request for an extension
of a loan agreement in violation of Colo. Rev. Stat.
§§ 5-2-201, 5-2-204. Docket No. 5 at 7-8. On March
3, 2017, defendant removed the lawsuit to this Court,
claiming that “Section 27 of the Federal Deposit
Insurance Act (“FDIA”), 12 U.S.C. § 1831d,
completely pre-empts” plaintiff's claims and,
therefore, the Court has jurisdiction pursuant to 28 U.S.C.
§ 1331. Docket No. 1 at 2, ¶ 3 (internal quotation
marks omitted). On March 27, 2017, plaintiff filed the
current motion to remand, arguing that complete preemption
does not apply to her claims against defendant because it is
not a bank. Docket No. 25 at 2-3.
about the same time that this lawsuit was initiated,
plaintiff filed another action against a different non-bank
entity, which was removed to federal court on March 9, 2017.
See Meade v. Avant of Colorado, LLC, No.
17-cv-0620-WJM-STV, 2018 WL 1101672, at *1 (D. Colo. Mar. 1,
2018) (“Avant”). On March 1, 2018, Judge
William J. Martínez accepted the recommendation of
Magistrate Judge Scott T. Varholak that plaintiff's
motion to remand in that action be granted and remanded the
case to state court. Id. at *15; see also
Docket No. 55-1 (Judge Varholak's recommendation filed as
supplemental authority in this action).
may remove “any civil action brought in a State court
of which the district courts of the United States have
original jurisdiction.” 28 U.S.C. § 1441(a). If a
civil action includes any claim “arising under”
federal law, the “entire action may be removed.”
28 U.S.C. § 1441(c). Defendant invokes the terminology
and the case law surrounding the doctrine of “complete
preemption” to claim this Court has federal question
jurisdiction pursuant to 28 U.S.C. § 1331 over
plaintiff's state law claims.
general rule, the “plaintiff is the ‘master of
the claim' and may prevent removal by choosing not to
plead a federal claim even if one is available.”
Schmeling v. NORDAM, 97 F.3d 1336, 1339 (10th Cir.
1996) (quoting Caterpillar Inc. v. Williams, 482
U.S. 386, 392 (1987)). However, there are limits to this
proposition. For example, “[u]nder the ‘artful
pleading' doctrine, . . . a plaintiff may not defeat
removal by failing to plead federal questions that are
essential elements of the plaintiff's claim.”
Schmeling, 97 F.3d at 1339 (citing Franchise Tax
Bd. of the State of Cal. v. Constr. Laborers Vacation Trust
for S. Cal., 463 U.S. 1, 22 (1983)). Outside of a few
narrow exceptions, a claim that is stated in terms of state
law “may be removed to federal court in only two
circumstances - when Congress expressly so provides . . . or
when a federal statute wholly displaces the state-law cause
of action through complete pre-emption.”Beneficial
Nat'l Bank v. Anderson, 539 U.S. 1, 8 (2003)
(internal citation omitted). “Complete
preemption” differs from the type of preemption often
asserted as a defense. Metro. Life Ins. Co. v.
Taylor, 481 U.S. 58, 63-64 (1987). “Complete
preemption” exists where Congress chooses to “so
completely pre-empt a particular area that any civil
complaint raising this select group of claims is necessarily
federal in character.” Metro. Life Ins., 481
U.S. at 63-64. When a claim falls into one of these
particular areas, “a plaintiff's state cause of
action may be recast as a federal claim for relief, making
its removal by the defendant proper on the basis of federal
question jurisdiction.” Vaden v. Discover
Bank, 556 U.S. 49, 61 (2009) (internal quotation marks
and alteration marks omitted).
Beneficial Nat'l Bank, the Supreme Court found
that the National Bank Act, 12 U.S.C. § 85, completely
preempts state causes of action governing the rates national
banks may charge and, therefore, that such claims could be
removed pursuant to 28 U.S.C. § 1441. 539 U.S. at 11.
Neither the Supreme Court nor the Tenth Circuit Court of
Appeals has ruled on whether the complete preemption doctrine
applies to the FDIA, the statute relied upon by defendant.
Courts are split on this issue in cases involving bank
defendants. See Docket No. 55-1 at 10-11 (collecting
cases). However, defendant is not a bank. “Courts in
this Circuit and others have repeatedly held that when claims
are asserted against a non-bank entity, complete preemption
does not apply and remand to state court is warranted, even
if the non-bank defendant has a close relationship with a
state or national bank.” Id. at 11 (citing
Dandy v. Wilmington Fin., Inc., 2010 WL 11493721, at
*6 (D.N.M. May 3, 2010); Flowers v. EZPawn Okla.,
Inc., 307 F.Supp.2d 1191, 1195-96 (N.D. Okla. 2004);
Colorado ex rel. Salazar v. Ace Cash Exp., Inc., 188
F.Supp.2d 1282, 1284-85 (D. Colo. 2002); Cmty. State Bank
v. Knox, 850 F.Supp.2d 586, 600-02 (M.D. N.C. 2012),
aff'd, 523 F. App'x 925, 929-30 (4th Cir.
2013); In re Cmty. Bank of N. Va., 418 F.3d 277,
296-97 (3d Cir. 2005); Pennsylvania v. Think
Finance, Inc., 2016 WL 183289, at *13 (E.D. Pa. Jan. 14,
2016); West Virginia v. CashCall, Inc., 605
F.Supp.2d 781, 783-88 (S.D. W.Va. 2009)). The Court agrees
that remand is appropriate for essentially the same reasons
stated by Magistrate Judge Varholak and Judge Martínez
in their recommendation and order in Avant.
who bears the burden of showing that the Court has
jurisdiction, raises three arguments: (1) federal law
completely preempts state law actions on loans issued by
state-chartered banks, Docket No. 37 at 3, (2) plaintiff
cannot avoid complete preemption by bringing suit against a
non-bank entity, id. at 8, and (3) plaintiff's
allegations that Cross River Bank is not the “true
lender” of the loans does not affect the complete
preemption analysis. Id. at 18.
the first argument, defendant claims that “Section 27
completely preempts the application of state interest-rate
laws to limit rates charged on loans issued by a
state-chartered bank.” Docket No. 37 at 5. Defendant
contends that this conclusion is compelled by the text of 12
U.S.C. § 1831d stating that the statute applies to
“any loan or discount made” by banks covered
under the statute. Docket No. 37 at 6. The Court rejects this
argument and agrees instead with the courts holding that,
even if complete preemption applies to claims brought against
state-chartered banks, it does not apply to claims against
non-bank entities. The statute at issue refers only to the
lending powers of a “State bank or such insured branch
of a foreign bank” and does not make any reference to
non-bank entities. See Avant, 2018 WL 1101672, at *7
(rejecting a similar argument because the statutory
“language governs what charges a ‘State bank'
may impose, but again, does not on its face regulate interest
or charges that may be imposed by a non-bank, including one
which later acquires or is assigned a loan made or originated
by a state bank.”). Even where courts have held, based
on the text of the statute, that “§ 27 of the FDIA
completely preempts state usury law claims against
state-chartered banks, ” those same courts have
nevertheless concluded that the “FDIA does not apply to
non-bank entities.” See CashCall, Inc., 605
F.Supp.2d at 785 (citing Discover Bank et al. v.
Vaden, 489 F.3d 594, 601 n.6 and at 606-07 (4th Cir.
2007), rev'd on other grounds, 556 U.S. 49
(2009)); see also Knox, 850 F.Supp.2d at 598-99;
Ace Cash Express, Inc., 188 F.Supp.2d at 1285;
Docket No. 55-1 at 15.
defendant argues that plaintiff “cannot avoid complete
preemption under Section 27 by bringing an action solely
against Marlette because, at bottom, the action seeks to
recover alleged overcharges of interest and fees on loans
made by a federally insured, state-chartered bank on terms
protected by Section 27.” Docket No. 37 at 8. This
argument is unpersuasive. As in Avant, plaintiff
sufficiently alleges that defendant is the “true
lender” because defendant “provides the website
through which customers apply for the [Cross River Bank]
Loans, [defendant] develops the criteria for making loans,
[defendant] decides which applicants will receive the loans,
and [defendant] (or its affiliates) purchases the loans
within two days after they are made.” Avant,
2018 WL 1101672, at *10; see also Docket No. 5 at 2,
¶ 7 (“Consumers can apply for and obtain Best Egg
Loans via a website that is owned and operated by
Marlette.”) and at 5-6, ¶¶ 32-33. In
circumstances where a plaintiff has sufficiently alleged that
the non-bank entity is the true lender, courts have
consistently come to the conclusion that complete preemption
does not apply, “even if the ...