Opposition Brief — Beneficial Nat. Bank v. Anderson

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Nos. 02-306 & 02-312 ee

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IN THE

Supreme Court of the United States

BENEFICIAL NATIONAL BANK and

BENEFICIAL TAX MASTERS, INC.,

Petitioners,

-and-

H & R BLOCK, INC.,

Petitioner

MARIE ANDERSON, et al.,

Respondents.

On Petitions FoR Writ oF CERTIORARI TO THE

UNitepD States Court OF APPEALS

FOR THE ELEVENTH CirRCUIT

BRIEF IN OPPOSITION

DeNNis G. PANTAZIS

Brian M. CLark*

Of Counsel: Gorbon, SILBERMAN,

Jerr S. DANIEL Wicains & Cuitps, P.C.

Post Office Box 131323 1400 SouthTrust Tower

Birmingham, AL 35213 Birmingham, AL 35203

(205) 531-1287 (205) 328-0640

Counsel for Respondents

* Counsel of Record

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QUESTION PRESENTED FOR REVIEW

Whether the Eleventh Circuit of Appeals was correct in

refusing to expand the extremely limited doctrine of complete

or field preemption to claims where the National Bank Act may

provide a defense to a state law claim, and the law is that a case

in which the plaintiff asserts only state law claims may not be

removed to federal court based on a federal defense — even the

defense of ordinary preemption. Caterpillar, Inc. v. Williams,

482 U.S. 386, 399 (1987) (“Congress has long since decided

that federal defenses do not provide a basis for removal.”).

TABLE OF CONTENTS

Question Presented for Review ................

Bees CC COMNRNED . woe ccccestdesense ee

Table of Cited Authorities .....................

Objection to Jurisdiction .........ccccccccccees

Statement of the Case oo. .cscccscoseuneeeeeee

Statutory Provisions Involved .................

Reasons for Denying the Petition ...............

A. The Burden Is On Defendants To Show That

State Law Causes Of Action Are Removable.

ee see ceoeseeaeeeseeoeseeseeeseee eae eee eee eee ee eee ee

B. The Parameters Of The National Bank Act

Fall Far Short Of What Is Necessary For

“Complete” Or “Field” Preemption. ......

1. Difference Between Ordinary And

Complete Preemption. ..............

2. There Is No Evidence Of Any Intent To

Displace State Causes Of Action By The

National Banking Act. ..............

Cemenmgiems ...ccccccscceceses ee

TABLE OF CITED AUTHORITIES

Page

Cases

Avco Corp. v. Aero Lodge No. 735, International

Assoc. of Machinists & Aerospace Workers, 390

U.S. 557, 88 S. Ct. 1235, 20 L. Ed. 2d 126

eee ee Secacectecccececcceess 6, 12

BLAB TV of Mobile, Inc. v. Comcast Cable Comm.,

Inc., 182 F.3d 851 (11" Cir. 1999) ............ 7,19

Burns v. Windsor Ins. Co., 31 F.2d 1092 (11" Cir.

ee cee caneecbeencecccces 5

Butero v. Royal Maccabees Life Ins. Co., 174 F.3d

Ee ence ckGeecdecccccccees 12

Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987)

PTT TTTTTIETULTLIELE LILLE passim

First National Bank of Aberdeen v. Aberdeen

National Bank, 627 F.2d 843 (8" Cir. 1980)

*“eeeoeeeeeeeeeeeeeeeeeeeee eeeeeeeeeee ee © © @ &

Florence 2. R. & Improvement Co. v. Chase National

Bank, 17 So. 720 (Ala. 1895) ....... 2.2.2.5... 8

Franchise Tax Bd of Cal. v. Construction Laborers

Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 77

ence ics cconcececcecce 9,10

Cited Authorities

Page

Gully v. First National Bank, 627 F.2d 843 (8" Cir.

SEE Ndenkceeceetedsdaecenenesecauennens 3

Hare, et al. v. H & R " ock and Beneficial,

Case No.:CV-02-C-1848-W ............0005. 3,4

Helms v. First Alabama Bank, N.A., 386 So. 2d 450

Ss WUE hosuedeudssuddécduesusncheseuns 8

Jones v. BancBoston, N.A., 115 F. Supp.2d 1350

SRE ccdcouseeddideunaeenaes 12, 13,14

Kemp v. International Bus. Mach. Corp., 109 F.3d

Se Gk SD 06 66400sedsanudesecoenes 19

Krispin v. May Dept. Stores Co., 218 F.3d 919

EP LEE Geacococoncocanauunadeceenss 2,4

Mayor & Alderman of City of Nashville v. Cooper,

ST wedddéadsonnsnctidedeiis 18

M. Nahas & Co., Inc. v. First National Bank,

930 F.2d 608 (8" Cir. 1991) ............0... passim

Mercantile Nat'l Bank at Dallas vy. Longdeau,

See Ce PE Kubdevacesannkedceuneade 9

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58,

107 S. Ct. 1542, 95 L. Ed. 2d 55 (1987) ...... passim

Cited Authorities

Page

Pacheco de Perez v. AT&T Co., 139 F.3d 1373

SEEM GR FERED cccccccccccccescccesccccecs 5

Rivet v. Regions Bank of Louisiana, 522 U.S. 470

CED Se cdidecccccecesscedtonvasedccocedes 6

Smiley v. Citibank, 517 U.S. 735 (1996) ......... 15

Smith v. GTE Corporation, 236 F.3d 1292 (11" Cir.

SED cecdceeundecdséseceeesedeccassieess 8

Spellman v. Meridian Bank (Delaware), 1995 WL

PED kcpecdcousnentecnsessédeseedsenns 15,17

University of South Alabama v. American Tobacco

Co., 168 F.3d 405 (11% Cir. 1999) ............ 5

Video Trax, Inc. v. NationsBank, N.A., 33 F. Supp.

2B BOGE GRD. Fie. BGUED oc cccccccccccsccess 18

Cited Authorities

Page

Statutes

EE GEE Kevevecccdcaeneeccesex 1,2

PED Condccckeceseccccucesenceceses: 9

Pe IEE wecevéiccdcnccconnescdéesséuves passim

SPEED Cédeneesodeceseconseceesences passim

PE OEE Kecnccevecccvesennseccscessns 1,10

Pe OED kb edecdccededensceceneus l

Employer Retirement Income Security Act of 1974 =

Labor Management Relations Act of 1947 ....... 5

Rule

ee es SED Gocceccdceséedcascnduces 2,3

Other Authority

Michael T. Collins, the Unhappy History of Federal

Question and Removal, 71 lowa Law Review 717

DE sacdscbkoteccoatesusuaneseueesunees 18

vil

TABLE OF APPENDICES

Page

Appendix A— Complaint .................45. la

Appendix B — In The United States District Court

For The Northern District Of Alabama, Western

Division Dated And Filed September 6, 2002 ..... 12a

OBJECTION TO JURISDICTION

Neither this Court, nor any other Federal court, has

jurisdiction over this case because the diversity statute does not

apply, and there is no claim, “arising under the Constitution,

laws, or treaties of the United States,” 28 U.S.C. § 1331, allowing

for removal jurisdiction under 28 U.S.C. § 1441(b).

STATEMENT OF THE CASE

On or September 19, 2000, Plaintiff Marie Anderson,

and twenty-five (25) other persons, filed a Complaint in the

Circuit Court of Barbour County, Alabama, Clayton Division,

against defendants H & R Block, Inc. (“H & R Block”),

Beneficial National Bank, and Beneficial Tax Masters, Inc.

(collectively referred to herein as “Beneficial”). The factual

allegations of the Complaint are that Plaintiffs went to

H & R Block, and were participants in the H & R Block tax

refund anticipation loan program. A tax refund anticipation

loan is where a taxpayer is given a short term loan from

Beneficial in exchange for a pledge of an anticipated tax

refund. The allegations of the Complaint are that the interest

rate paid by Plaintiffs for the tax refund anticipation loans

was higher than the rate disclosed to the plaintiffs, that

Defendants utilized unreasonable repayment periods to

calculate the interest rate, and that the amount charged for

interest was in excess of that allowed by the State of Alabama.

The causes of action in the Complaint are for fraud (Count

I); suppression (Count II); breach of fiduciary duty (Count

Ill); for the charging of an excessive interest rate under

Ala. Code § 8-8-1 (1975) (Count IV); and for violation of

the Alabama Mini-Code (Count V).

Defendants removed the case to the District Court for

the Middle District of Alabama, asserting complete

preemption of Plaintiffs’ usury claims under the National

Bank Act. On November 22, 2000, Plaintiffs timely filed a

Motion to Remand. On December 14, 2000, the District Court

entered an Order denying Plaintiffs’ Motion to Remand the

case to state court. However, the District Court certified its

Order denying Plaintiff’s remand motion for interlocutory

appeal to the Eleventh Circuit Court of Appeals. On April 3,

2002, the Eleventh Circuit reversed the District Court’s Order

denying Plaintiff’s Motion to Remand, and remanded the case

for further proceedings consistent with its opinion. Both

Beneficial and H & R Block have filed Petitions for a Writ

of Certiorari with this Court.

STATUTORY PROVISIONS INVOLVED

In addition to the provisions set forth in the petitions,

Ala. Code § 8-8-1 (1975) is also involved.

REASONS FOR DENYING THE PETITION

Petitioners point to the case of M. Nahas & Co., Inc. v.

First National Bank, 930 F.2d 608 (8 Cir. 1991), as an

example of a split in the circuits such that certiorari ought to

be granted in this case. However, neither this opinion, nor

its progeny, Krispin v. May Dept. Stores Co., 218 F.3d 919

(8" Cir. 2000), compel this Court to exercise its limited

jurisdiction.

Supreme Court Rule of Procedure 10 sets forth factors

to be considered in granting a Petition for Writ of Certiorari.

One of those is when a Circuit Court has entered a decision

in conflict with the decision of another Circuit “on the same

important matter.” Sup. Ct. R. 10(a). While the Eighth

Circuit’s opinion does completely preempt a state law usury

claim, even the decisions relied upon by Defendant do not

stand for the proposition than any claim that may be

defensively preempted by the National Banking Act is

necessarily completely preempted by the Act such that a

federal court has jurisdiction.

In M. Nahas, the Court held that, “in areas other than

usury, national banks have been denied removal even though

the National Bank Act would ultimately control all or part of

plaintiffs’ state law action.” M. Nahas, 930 F.2d at 611, citing

Gully v. First National Bank, 627 F.2d 843 (8" Cir. 1980).

In M. Nahas, the Court not only affirmed the denial of the

plaintiffs’ motion to remand, but also dismissed the case

based on the statute of limitations, thereby ending the case.

However, that would not be the situation here. First, if

Defendants’ arguments are carried to their logical end, the

claims would first be completely preempted, and then the

claim for usury would be defensively preempted. This would

leave Plaintiffs’ fraud, suppression, breach of fiduciary duty,

and Alabama mini-code claims in federal court with no

jurisdictional basis. Apparently, however, that is what

Defendants seek in this case, complete field preemption of

any claim that in any way touches or concerns the National

Bank Act.' That is not what the M. Nahas decision stands

1. Any question that what Defendants seek to accomplish here

is much broader than simply having usury claims completely

preempted is answered by the activities of these same two defendants

in the case of Hare, et al. v. H & R Block and Beneficial, Case No.

CV-02-C-C-1848-W, pending in the United States District Court for

the Northern District of Alabama (copies of the Complaint and Order

denying Motion to Lift Stay and Remand to State Court attached

(Cont'd)

for, and its not even the basis upon which Defendants seek

to graft federal jurisdiction on in this action. In both M. Nahas

and Krispin, the Court was dealing with a claim of usury,

without regard or consideration as to the implications

of complete or field preemption on other claims even the

Eighth Circuit has not found to provide basis for removal.

The alleged “split” occurred in cases with a key factual

distinction. In M. Nahas, the case was due to be dismissed

(Cont'd)

hereto as Appendices AI and All). Hare is a tax refund anticipation

loan case, with a factual scenario very similar to the case sub judice.

However, the Complaint does not contain a cause of action for the

charging of a usurious interest rate. Despite the absence of a claim

that even has the National Bank Act as a defense, Defendants have

successfully managed to remove the case, and keep it in Federal Court,

on preemption grounds. This was done despite the Eighth Circuit

opinion in First National Bank of Aberdeen v. Aberdeen National

Bank, 627 F.2d 843 (8 Cir. 1980). In First National Bank of

Aberdeen, the same Eighth Circuit that decided the M. Nahas case

held, in a case wherein the defendants sought preemption based on

the National Bank Act, as follows:

These quoted passages clearly suggest that the Gully

Court believed a defensive assertion of preemption did

not give rise to federal question jurisdiction.

* * .

But however Avco may be interpreted in special

circumstances, we are not persuaded that the Supreme

Court in Avco intended to invalidate the generally

accepted principle that defensive assertion of federal

preemption in response to a state law claim may not

constitute ground for removal.

First National Bank of Aberdeen, 627 F.2d at 852.

once the doctrine of complete preemption was applied. In

this case, this Court would have to go even a step further

and confer federal jurisdiction over state law claims that do

not even suggest a defense of ordinary preemption. Even the

Eighth Circuit has decided this cannot stand. See, M. Nahas,

supra. As such there is no true split here, and certainly not a

split on “the same important matter.”

A. The Burden Is On Defendants To Show That State Law

Causes Of Action Are Removable.

It is well-established that the burden is on the shoulders

of the removing party to prove that removal is proper, and to

prove that the district court has jurisdiction over the removed

case. University of South Alabama v. American Tobacco Co.,

168 F.3d 405, 411-12 (11" Cir. 1999); see also Pacheco de

Perez v. AT&T Co., 139 F.3d 1373 (11 Cir. 1998). Federal

courts are of limited jurisdiction, and removal is not favored.

A case will be remanded whenever jurisdiction is in doubt.

Burns v. Windsor Ins. Co., 31 F.2d 1092, 1095 (11" Cir. 1994).

Moreover, a case cannot be removed on the basis of a federal

defense, including the defense of preemption. Caterpillar,

Inc. v. Williams, 482 U.S. 386, 393 (1987).

The United States Supreme Court has recognized

complete preemption of state law claims only in the rarest of

circumstances. Those circumstances only exist where the

preemptive force of the federal statute is so “extraordinary”

that it “converts an ordinary common law complaint into

one stating a federal claim for purposes of the well pled

complaint rule.” Caterpillar, Inc., 482 U.S. at 393. These

“extraordinary” circumstances have been recognized by the

Supreme Court in only two areas: the Labor Management

Relations Act of 1947 (“LMRA”); and the Employer

Retirement Income Security Act of 1974 (“ERISA”). See Avco

Corp. v. Aero Lodge No. 735, 390 U.S. 557 (1968). (Section

301 of the LMRA “completely preempted” any state law

cause of action for violation of mandatory arbitration clauses

between an employer and a labor organization); Metropolitan

Life Ins. Co. v. Taylor, 481 U.S. 58 (1987) (Sections

502(a)(1)(B) and Section 502(f) of ERISA “completely

preempt” employees common law contract and tort claims

arising from the employer’s insurer’s termination of disability

benefits under an ERISA Plan). See also Rivet v. Regions

Bank of Louisiana, 522 U.S. 470 (1998) (Knowing that

Supreme Court precedent allows only two instances of

complete preemption). What Defendants wish to do now is

to add a third category of complete preemption in the National

Bank Act. However, even the Eighth Circuit does not go so

far. See, id.

B. The Parameters Of The National Bank Act Fall Far

Short Of What Is Necessar¥y"Por “Complete” Or

“Field” Preemption.

Any discussion of complete preemption must begin

with the recognition that complete preemption is an

“extraordinary” remedy that the Court has been “reluctant”

to expand. It must be recognized that, even where it does

apply, complete preemption operates as an extraordinary

departure from the well-pleaded complaint rule, which states

that a case in which the plaintiff asserts only state law claims

may not be removed to Federal court based on the existence

of a federal defense — even the defense of ordinary

preemption. Caterpillar, Inc., 482 U.S. at 393. (“Congress

has long since decided that federal defenses do not provide a

basis for removal.”’)

1. Difference Between Ordinary And Complete

Preemption.

Ordinary preemption is a defense that may be raised in a

state court, as well as in federal court. As a defense, ordinary

preemption does not appear in the plaintiff’s well-pleaded

complaint, and thus does not give the defendant the ability

to remove a case to federal court. Caterpillar, Inc., 482

U.S. at 393. Unlike the defense of ordinary preemption, the

doctrine of complete preemption gives a defendant the ability

to remove the case to federal court. BLAB TV of Mobile, Inc.

v. Comcast Cable Comm., Inc., 182 F.3d 851, 854 (11" Cir.

1999).

The Supreme Court has found complete preemption

under only the two federal statutes related above.

In Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987),

the Supreme Court cautiously extended the doctrine of

complete preemption to ERISA § 502(a) claims. However,

the doctrine of complete preemption applies only where

Congress has “clearly manifested an intent” to make a

particular cause of action removable to a federal court.

Metropolitan Life Ins. Co., 481 U.S. at 66. The Metropolitan

Life Court explained the difference between ordinary and

complete preemption as such:

Federal preemption is ordinarily a federal defense

to the plaintiff’s suit. As a defense, it does not

appear on the face of a well-pleaded complaint,

and, therefore, does not authorize removal to

federal court. Gulley v. First National Bank, 1099

U.S. 109 (1936). One corollary of the well-pleaded

complaint rule developed in the case law, however,

is that Congress may so completely preempt a

particular area that any civil complaint raising the

select group of claims is necessarily federal in

character. For twenty years, this Court has singled

out claims preempted by § 301 of the LMRA for

such special treatment.’

Metropolitan Life, 481 U.S. at 60. In Taylor, the Court noted

that, “Congress has clearly manifested an intent to make

causes of action within the scope of the civil enforcement

provisions of § 502(a) [of ERISA] removable to federal

court.” /d. at 66. However, there is no similar “clear manifest

of intent” to make causes of action within the scope of the

National Bank Act removable to federal court. In fact, the

M. Nahas Court specifically recognized that national banks

have been denied removal of claims even though the National

Bank Act would ultimately control all or part of a plaintiff’s

state law action. M. Nahas, 930 F.2d at 608.

2. There Is No Evidence Of Any Intent To Displace State

Causes Of Action By The National Banking Act.

In order for there to be complete preemption, the

preemptive force of a federal statute must be “so powerful”

as to “displace entirely any state cause of action.” In the

LMRA context, the Courts have held that the congressional

2. Defendant’s concerns that somehow they are without the

ability to use their ordinary preemption defense in the Alabama state

courts is unfounded. Alabama courts have a long history of applying

the doctrine of ordinary preemption to §§ 85 and 86 of the National

Bank Act. Helms v. First Alabama Bank, N.A., 386 So. 2d 450 (Ala.

1980); Florence R. R. & Improvement Co. v. Chase National Bank,

17 So. 720 (Ala. 1895). The denial of federal jurisdiction does not

preclude the defense of preemption. Smith v. GTE Corporation, 236

F.3d 1292 (11" Cir. 2001).

intent is present to preempt any cause arising out of an

employer/employee relationship covered by a collective

bargaining agreement. This complete preemption power in

the LMRA context has been stated in the following terms.

“The necessary ground of decision [in Avco] was that the

preemptive force of § 301 is so powerful as to displace

entirely any state cause of action ‘for violation of contracts

between an employer and a labor organization.’” Franchise

Tax Bd. of Cal. v. Construction Laborers Vacation Trust,

463 U.S. 1, 23 (1983), quoted in Metropolitan Life, supra. It

is clear, even under Eighth Circuit precedent, that the

National Bank Act does not displace entirely any cause of

action between a person and a national bank, or where the

National Bank Act that is implicated. See M. Nahas, First

National Bank of Aberdeen, supra. As such, the doctrine of

complete preemption simply does not apply.

In fact, the text of the National Bank Act shows just the

opposite. The text of the NBA shows that it was intended

that National Banking Associations could be sued in the state

courts. When Congress replaced the 1963 Act in 1964, the

Statutory language provided for “Suits, actions and

proceedings, against any association under this act, may be

had in any circuit, district, or territorial court .. . or in any

state county, or municipal court in the county or city in which

said association is located ...” Mercantile Nat'l Bank at

Dallas v. Longdeau, 371 U.S. 555 (1963), citing 13 Stat. 116-

17. Even today the Act at 12 U.S.C. § 24 states that a National

Association shall have the power, “To sue and be sued,

complain and defend, in any court of law and equity, as fully

as natural persons.” 12 U.S.C. § 24. Clearly, it was not the

intent of Congress when the National Bank Act was granted,

nor is it the intent today, that National Banking Associations

only be subject to suit in the federal courts.

The subsections of the National Bank Act that are at

issue in the present case were initially enacted as § 30 of

the National Bank Act of 1864, which is now codified at

12 U.S.C. §§ 85-86’ and state as follows:

Any association may take, receive, reserve, and

charge on any loan or discount made, or upon any

notes, bills of exchange, or other evidence of debt,

interest at the rate allowed by the laws of the

State, Territory or District where the bank is

located, or at a rate of one per centum in excess

of the discount rate on 90-day commercial paper

in effect at the Federal reserve bank in the Federal

reserve district where the bank is located,

whichever may be the greater, and no more, except

that where the laws of any State a different rate is

limited for banks organized under state laws, if

the rate so limited shall be allowed for associations

organized or existing in any such state under this

chapter. When no rate is fixed by the laws of the

State, or Territory, or District, the bank may take,

receive, reserve or charge a rate not exceeding 7

per centum, or one per centum in excess of the

discount rate on 90-day commercial paper in effect

at the Federal reserve bank in the Federal reserve

district where the bank is located, whichever may

be the greater, and such interest may be taken in

3. Sections 85 and 86 were enacted into law by Congress before

the existence of federal jurisdiction as enacted under 28 U.S.C.

§ 1331. The first version of § 1331 was enacted on March 3, 1875,

ch. 137, § 1, 18 Stat. 470. See Franchise Tax Board of State of

California v. Construction Laborers Vacation Trust for Southern

California, 463 U.S. 1, 8, 103 S. Ct. 2841, 2845, 77 L. Ed. 2d 420

(1983).

advance, reckoning the days for which the

note, bill, or other evidence of debt has to run.

The maximum amount of interest or discount to

be charged at a branch of an association located

outside of the States of the United States or a

District of Columbia shall be at the rate allowed

by the country, territory, dependency, province,

dominion, insular possession, or other political

subdivision where the branch is located. At the

purchase, discount, or sale of a bonafide bill of

exchange, payable to another place than the place

of such purchase, discount, or sale, at not more

than the current rate of exchange per site drafts in

addition to the interest, shall not be considered as

taking or receiving a greater rate of interest.

12 U.S.C. § 85 (emphasis added).

The taking, receiving, reserving, or charging a rate

of interest greater than is allowed by § 85 of this

title, when knowingly done, shall be deemed a

forfeiture of the entire interest which the note, bill,

or other evidence of debt carries with it, or which

has been agreed to be paid thereon. In case

the greater rate of interest has been paid, the

person by whom it has been paid, or his legal

representatives, may recover back, in the nature

of an action of debt, twice the amount of the

interest thus paid from the acsociation taking or

receiving the same: provided, that such action is

commence within two years from the time the

usurus transaction occurred.

12 U.S.C. § 86.

The National Bank Act, 12 U.S.C. § 85, vests the states

with the authority to legislate and establish interest rate

limitations. As such, it is highly unlikely that Congress

intended to confer complete federal preemption through

the adoption of the laws of the several states. Cf. Butero

v. Royal Maccabees Life Ins. Co., 174 F.3d 1207 (11th

Cir. 1999) (super preemption applies when Congress

comprehensively occupies a field of law and is necessarily

federal in character). In this case, Appellees argue that the

laws of Delaware contro! the loan interest rate, rather than

the laws of Alabama, where the loans were issued. Yet, on

the other hand, it is clear that the National Bank Act would

not preempt or otherwise apply to an interest rate claim by

an Alabama consumer against an Alabama bank. The same

is true with any Delaware consumer against a Delaware bank.

This in itself illustrates that the National Bank Act does not

displace the field of state interest rate regulation.

In a thorough analysis of precedent on the issue, the

United States District Court for the Southern District of

Alabama ruled that the National Bank Act does not confer

complete preemption over state law claims for excessive

interest. In Jones v. BankBoston, N.A., 115 F. Supp. 2d 1350

(S.D. Ala. Oct. 2, 2000), the Court engaged in a significant

analysis of the Congressional intent and history of the

National Bank Act.

[T]he significance to complete preemption

analysis of jurisdictional language paralleling that

of the LMRA is dependent on whether the

jurisdictional language was enacted after the 1968

Avco* decision; only then may it be inferred that

4. Avco Corp. v. Aero Lodge No. 735, International Assoc. of

Machinists & Aerospace Workers, 390 U.S. 557, 88 S. Ct. 1235, 20

L. Ed. 2d 126 (1968).

Congress, by its use of such language, desired to

mimic the complete preemption embedded in

the LMRA. Because the National Bank Act’s

jurisdictional provision was enacted a century

before Avco, it cannot be construed as an effort to

invoke complete preemption by parallelism .. .

Even if closely parallel jurisdictional language

carried any significance with respect to statutes

enacted before 1968, the National Bank Act’s

jurisdictional provision does not closely parallel

that of the LMRA.

The most striking difference between the National

Bank Act and the LMRA, however, lies in their

treatment of state court jurisdiction; while the

LMRA is silent, the National Bank Act expressly

contemplates state court jurisdiction. Thus the

National Bank Act’s jurisdictional provision

varies materially in every respect from the

jurisdictional language common to the LMRA and

ERISA. Such a jurisdictional provision cannot be

said to “closely parallel” the LMRA for purposes

of complete preemption analysis.

Jones, 115 F. Supp. 2d at 1358. The Jones Court went on to

analyze the faulty reasoning of the M. Nahas decision.

The Eighth Circuit’s reliance on the existence

of an “exclusive federal remedy” without any

further showing of congressional intent is not

only inconsistent with BLAB TV, by which this

Court is bound, but also appears to contradict

Metropolitan Life v. Taylor itself ... were the

existence of an “exclusive federal remedy” the

only requirement for complete preemption, the

Metropolitan Life Court would have concluded

its analysis at this point and declared the Plaintiffs’

claims completely preempted. Rather than doing

so, the Court noted it would be “reluctant” to grant

complete preemption on so slender a basis and

instead launched into its explication of the statute

and its legislative history. . . . This Court is aware

of no other appellate court utilizing the Eighth

Circuit’s lenient test for complete preemption and

is neither empowered nor inclined to adopt it.

Jones, 115 F. Supp. 2d at 1356 (citations omitted in original).

In Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107

S. Ct. 1542, 95 L. Ed. 2d 55 (1987), the Supreme Court held

that express statutory language and Congressional intent to

displace entirely any state cause of action was required

for the application of the doctrine of complete preemption.

The Court examined language of the jurisdictional subsection

of ERISA’s civil enforcement provisions and determined that

Congress had clearly manifested an intent to make state

causes of action removable to federal court. Jaylor, 481

U.S. at 65, 107 S. Ct. at 1547. The Supreme Court clarified

its holding on complete preemption by stating that:

[E]ven with a provision such as [ERISA]

§ 502(a)(1)(B) that lies at the heart of a statute

with the unique pre-emptive force of ERISA,

however, we would be reluctant to find that

extraordinary preemptive power, such as has been

found with respect to § 301 of the L.M.R.A., that

converts an ordinary state common law complaint

into one stating a federal claim for purposes of

the well-pleaded Complaint rule.

Taylor, 481 U.S. at 65, 107 S. Ct. at 1547 (internal citations

omitted).

The Third Circuit, in the case of Spellman v. Meridian

Bank (Delaware), 1995 WL 764548,° explained the Supreme

Court precedent as to complete preemption in words far more

elegant than this writer could summon.

The Supreme Court has held affirmative evidence

of Congressional intent could be the touchstone

of the federal district court’s removal jurisdiction

and, as discussed above, the court has found such

intent only rarely. The complete preemption

doctrine was originally rooted in a cause of action

arising under § 301 of the L.M.R.A. The court

extended the doctrine reluctantly, in Metropolitan

Life, to an action arising under ERISA. The court

wrote that it did so only because “ERISA’s civil

enforcement provisions closely parallels [sic] that

of § 301 of the L.M.R.A.,” and because explicit

language in the ERISA Conference Report

analogized the ERISA provision to the L.M.R.A.

5. The Spellman opinion is available as a 1995 West law cite,

and was not published in the Federal Reporter. Following the panel

opinion, the Third Circuit voted to grant rehearing en banc and

vacated the panel opinion. The appeal was dismissed before any en

banc opinion was issued. The appeal was dismissed in July of 1996

pursuant to the Supreme Court's ruling in Smiley v. CitiBank, 517

U.S. 735 (1996) which involved a technical definition of “interest”

and did not involve the issue of complete preemption.

language. In the absence of explicit direction from

Congress, the court wrote:

[e]ven with a provision such as 502(a)(1)(B)

{the jurisdictional provision] that lies at the

heart of a statute with the unique pre-

emptive force of ERISA ... we would be

reluctant to find that extraordinary pre-

emptive power, such as that has been found

with respect to 301 of the L.M.R.A., that

converts an ordinary state common law

complaint into one stating a federal claim

for purposes of the well-pleaded complaint

rule.

Neither the National Bank Act nor DIDA

contains a jurisdictional provision evidencing

Congressional intent to permit removal of the sort

relied upon in Avco and Metropolitan Life.

Nor have the banks pointed to Congressional

language suggesting that parties may bring suit

against banks in federal court without regard to

the citizenship of the parties or the amount in

controversy.

Congressional intent to permit removal based on

complete preemption would be difficult to divine

from the legislative history of the National

Bank Act, because the act was passed in 1864,

pre-dating federal question jurisdiction, the

well pleaded complaint rule, and the doctrine

of complete preemption. The banks argue,

nonetheless, that Congress evidenced an intent to

provide an exclusive source of relief for claims

of overcharge that, coupled with the general

federal provision allowing for removal of federal

question cases, demonstrates Congressional intent

to allow removal. However, the defendants point

to nothing in the legislative history of §§ 85 and

86 that present the sort of clear indication of

Congressional intent we have looked for in the

past.

There appears to be no indication that Congress

intended to completely preempt the regulation of

national banks or federally-insured state lending

institutions. Therefore we will reverse the

judgments of the district court that found complete

preemption.

Spellman, 1995 WL 764548, *6-7 (internal quotations

omitted).

The requirements specifically articulated by the Supreme

Court are not met in this case — there is neither statutory

language nor Congressional intent that the National Bank

Act displaces entirely the Plaintiffs’ state law causes of

action.® Further examination of the absence of complete

6. Defendants’ assertion that congressional intent cannot

possibly be gleaned as to removal under the National Bank Act

because it was enacted before general federal question jurisdiction,

and before removal was allowed, is not true. First, when Congress

enacted the National Bank Act in 1864, it provided that suit could be

brought in federal or state court. See, supra. Moreover, had the

Congress wished to provide for removal of suits under the National

Bank Act, it could have done so. At the time, Congress had provided

in a handful of civil acts that federal law would both provide a

defense, and while for removal of a cause of action from state to

(Cont'd)

preemption in the National Bank Act by the District Court

for the Southern District of Florida has held that banking is

not an area in which Congress has evidenced an intent to

occupy the entire field to the exclusion of the states, and

thus state legislatures may legislate in all areas not expressly

or impliedly preempted by federal legislation. Video Trax,

Inc. v. NationsBank, N.A., 33 F. Supp. 2d 1041 (S.D. Fla.

1998).

The determination of the maximum amount of

interest which may be charged for the use of

money loaned has always been within the police

power of the state, and the details of the exceptions

to the legislation have rested within the discretion

of the state legislature. In § 85 of the Bank Act,

Congress expressly and unambiguously stated that

a national bank was subject to the interest

provision of the laws of the state in which the bank

was located.

Video Trax., 33 F. Supp. 2d at 1050(S.D. Fla. 1998) (interna!

citations omitted).

(Cont'd)

federal court. See, e.g., Act of March 3, 1863, 12 Stat. 755 (amended

by the Act of May 11, 1866, 14 Stat. 46), Congress provided for a

federal defense and provided the mght of removal of civil or criminal

actions arising out of acts committed under federal authority dung

the Civil War. See Mayor & Alderman of City of Nashville v. Cooper,

73 U.S. 247 (1867); Michael T. Collins, the Unhappy History of

Federal Question and Removal, 7\ lowa Law Review 717, 720-21

(1986). Simply put, had Congress, at the time, it intended that suits

arising out of the National Bank Act be litigated only in the state

courts, Congress had the ability to provide for such extraordinary

juisdiction. It chose not to do so with regard to the National Bank

Act

There is no question that interest rates are determined

by state law. There is no legislative language evidencing

Congressional intent that state-law actions relating to interest

rate claims against national banks are to be considered as

arising under federal law for purposes of removal jurisdiction.

There is no indication that the National Bank Act’s

jurisdictional language is intended to function in the same

manner of Section 301 of the LMRA, or § 502(a) of ERISA,

pursuant to the guidance of the Supreme Court in

Metropolitan Life v. Taylor. See BLAB TV, 132 F.3d at 857.

Defendants cannot extrapolate the doctrine of complete

preemption and claim that the laws of the State of Delaware,

through the application of 12 U.S.C. § 85 and “super

preemption”, create federal subject matter jurisdiction.

At best, the provisions of the National Bank Act only

create a defense based upon the factual application of interest

regulations between the several States and relies on

interpretation of the /aws of a particular state. Therefore,

removal of the Plaintiffs’ case was improper since a case

cannot be “removed on the basis of a federal defense,

including the defense of preemption.” Caterpillar, 482 U.S.

at 393; Kemp v. International Bus. Mach. Corp., 109 F.3d

708, 714 (11" Cir. 1997).

CONCLUSION

For all of the foregoing reasons, Respondents respectfully

request that this Honorable Court deny the Petition.

Respectfully submitted,

Dennis G. PANTAZIS

Brian M. CLarkK*

Of Counsel: :

GorDON, SILBERMAN,

Jerr S. DANIEL Wicains & Cuivps, P.C.

Post Office Box 131323 1400 SouthTrust Tower

Birmingham, AL 35213 Birmingham, AL 35203

(205) 531-1287 (205) 328-0640

Counsel for Respondents

* Counsel of Record

APPENDIX

APPENDIX A— COMPLAINT

IN THE CIRCUIT COURT OF

SUMTER COUNTY, ALABAMA

Civil Action No.:

MARTHA SUE HARE; OTIS JENNINGS;

MILDRED P. SMITH; and WILLIE E. SMITH;

Plaintiffs,

vs.

H & R BLOCK EASTERN TAX SERVICES, INC.;

H & R BLOCK, INC.; BENEFICIAL NATIONAL

BANK; and BENEFICIAL TAX MASTERS, INC.,

Defendants.

There may be other entities whose true names and identities

are unknown to the Plaintiffs at this time who may be legally

responsible for the claim(s) set forth herein who may be added

by amendment by the Plaintiffs when their true names and

identities are accurately ascertained by further discovery.

Until that time, the Plaintiffs will designate these parties in

accordance with Rule 9(h), Alabama Rules of Civil

Procedure. The word “entity” as used herein is intended to

refer to and include any and all legal entities including

individual persons, any and all forms of partnerships, any

and all types of corporations and unincorporated associations.

The symbol by which these party Defendants are designated

is intended to include more than one entity in the event that

discovery reveals that the descriptive characterization of the

Appendix A

symbol applies to more than one “entity.” In the present

action, the party Defendants which the Plaintiffs must include

by descriptive characterization are as follows: “A”, “B” &

“C”, whether singular or plural, being the entity that was the

finance company described below that committed the

wrongful acts alleged in Plaintiffs’ Complaint, and/or the

entity on whose behalf the agent in question was acting; “D”,

“E” & “F”, whether singular or plural, being that entity or

persons, other than those entities and persons described

above, which is the successor in interest, or the assignee, or

which undertook the duties, or assumed the liabilities of any

of the entities described herein. Plaintiff alleges that the

identities of the fictitious party-Defendants are otherwise

unknown at this time, or, if known, their identities as proper

party-Defendants are not known, but their true names will

be substituted by amendment when ascertained.

COMPLAINT

1. Plaintiff, Martha Sue Hare, is a resident citizen of Sumter

County, Alabama and is over the age of nineteen years.

2. Plaintiff, Otis Jennings, is a resident citizen of Sumter

County, Alabama and is over the age of nineteen years.

3. Plaintiff, Mildred P. Smith, is a resident citizen of

Sumter County, Alabama and is over the age of nineteen

years.

4. Plaintiff, Willie E. Smith, is a resident citizen of Sumter

County, Alabama and is over 5. The Defendant H & R Block

Eastern Tax Services, Inc. (hereinafter “Eastern Tax Services’’)

Appendix A

is a foreign corporation doing business in Sumter County,

Alabama at all times relevant to the facts herein.

6. The Defendant H & R Block, Inc. (hereinafter “HRB)

is a foreign corporation doing business in Sumter County,

Alabama at all times relevant to the facts herein.

7. The Defendant Beneficial National Bank (hereinafter

Beneficial) is a foreign corporation doing business in Sumter

County, Alabama at all times relevant to the facts herein.

Upon information and belief, Beneficial was acquired and/

or merged with Household International, Inc. on or about

June 1998.

8. The Defendant Beneficial Tax Masters (hereinafter

“Tax Masters”) is a foreign corporation doing business in

Sumter County, Alabama. Upon information and belief,

Tax Masters was acquired and/or merged with Household

International, Inc. on or about June 1998.

9. There may be other entities whose true names and

identities are unknown to the Plaintiffs at this time who may

be legally responsible for the claim(s) set forth herein who

may be added by amendment by the Plaintiffs when their

true names and identities are accurately ascertained by further

discovery. Until that time, the Plaintiffs will designate these

parties in accordance with Rule 9(h), Alabama Rules of Civil

Procedure. The word “entity” as used herein is intended to

refer to and include any and all legal entities including

individual persons, any and all forms of partnerships, any

and all types of corporations and unincorporated associations.

The symbol by which these party Defendants are designated

Appendix A

is intended to include more than one entity in the event that

discovery reveals that the descriptive characterization of the

symbol applies to more than one “entity.” In the present

action, the party Defendants which the Plaintiffs must include

by descriptive characterization are as follows: “A”, “B” &

“C”, whether singular or plural, being the entity that was the

finance company described below that collected fees or

interest and/or committed the wrongful acts alleged in

Plaintiffs’ Complaint, and/or the entity on whose behalf the

agent in question was acting; “D”, “E” & “F” whether

singular or plural, being that entity or persons, other than

those entities and persons described above, which is the

successor in interest, or the assignee, or which undertook

the duties, or assumed the liabilities of any of the entities

described herein. Plaintiff alleges that the identities of the

fictitious party-Defendants are otherwise unknown at this

time, or, if known, their identities as proper party-Defendants

are not known, but their true names will be substituted by

amendment when ascertained.

JURISDICTION AND VENUE

10. The events giving rise to the claims in this Complaint

originated in Sumter County, Alabama. Upon information

and belief, Defendants and Fictitious Party Defendants

presently conduct business by agent in Sumter County,

Alabama, and have done so at all times relevant to this

Complaint. Venue is proper in the Circuit Court of Sumter

County, Alabama as to Defendants and Fictitious Defendants

pursuant to Ala. Code § 6-3-7 (1975) and Alabama Rule of

Civil Procedure.

Appendix A

11. Plaintiffs do not plead any cause of action under any

federal law. Each Plaintiff individually seeks judgment

against Defendants joint and severally for compensatory

damages and punitive damages not to exceed $74,900 per

named Plaintiff.

FACTUAL ALLEGATIONS

12. Each named Plaintiff retained the services of the

Defendants as tax professionals.

13. The Defendants undertook a confidential relationship

with each Plaintiff and established the trust and confidence

for professional advice for taxation matters.

14. Defendants held themselves out to be financial

advisors functioning on behalf of the interest of the Plaintiffs.

15. Defendants made refund anticipation loans to each

of the named Plaintiffs and charged the Plaintiffs for tax

refund anticipation loans.

26. Upon information and belief, Defendants maintained

a fee sharing agreement under which the Defendants profited

by making the refund anticipation loans. The assessment of

costs and fees has damaged the Plaintiffs.

17. Defendants have wrongtully charged Plaintiffs for

excessive fees relating to refund anticipation loans.

Appendix A

COUNTI

INTENTIONAL MISREPRESENTATIONS

18. Plaintiffs reallege and incorporate by reference the

foregoing paragraphs | through 17 and further aver as

follows:

19. Defendants misrepresented material facts to the

Plaintiffs which facts include, but are not limited to, the

following:

(a) the costs paid by the Plaintiffs.

(b) the Plaintiffs fees and costs would be substan-

tially higher than those disclosed due to the Defendants’

receipt of loan repayments.

periods to calculate the costs of the loan.

20. Defendants actions constituted conduct involving

actual malice, or, in the alternative, were a part of a pattern

or practice of intentional wrongful conduct.

21. Defendants intended for Plaintiffs to rely upon the

misrepresentations described hereinabove, and Plaintiffs

reasonably and justifiably relied on those representations to

their detriment by:

(a) paying excessive interest and fees to the Defendants;

(b) foregoing the use of their money; and

Appendix A

22. As a direct and proximate consequence of

Defendants actions, Plaintiffs have been injured and damaged

as identified herinabove.

WHEREFORE, PREMISES CONSIDERED,

Plaintiffs demand judgment against Defendants jointly and

severally for compensatory damages and punitive damages

not to exceed $74,900 per named Plaintiff, in an amount to

be determined by a jury.

COUNT II

SUPPRESSION OF MATERIAL FACTS

23. Plaintiffs reallege and incorporate by reference the

foregoing paragraphs | through 22 and further aver as

follows:

24. Defendants, withheld, concealed, and suppressed

from Plaintiffs certain material facts which the Defendants

were under a duty to communicate to them, based upon a

confidential relationship of the parties or the facts of this

particular case.

25. The material facts which the Defendants withheld,

concealed, and suppressed from Plaintiffs include, but are

not limited to, the following:

(a) the loan cost paid by the Plaintiffs exceeded the

costs to the plaintiffs.

Appendix A

(b) the Plaintiffs’ costs would be substantially higher

than the costs disclosed due to the Defendants’ receipt of

loan repayments.

periods to calculate the loan costs.

26. Defendants intended for Plaintiffs to rely upon the

suppressions described hereinabove, and Plaintiffs reasonably

and justifiably relied on those suppressions to Plaintiffs’

detriment by:

(a) paying excessive costs and fees to the Defendants;

(b) foregoing the use of their money; and

27. Defendants’ actions were fraudulent, malicious,

wanton, gross and/or oppressive, and were intended to injure

or defraud Plaintiffs.

28. Defendants’ actions constituted conduct involving

actual malice, or, in the alternative, were a part of a pattern

or practice of intentional wrongful conduct.

29. Asadirect and proximate consequence of Defendants’

conduct, Plaintiffs have been injured and damaged as

described hereinabove.

Appendix A

WHEREFORE, PREMISES CONSIDERED,

Plaintiffs demand judgment against Defendants jointly and

severally for compensatory damages and punitive damages

not to exceed $74,900 per named Plaintiff, in an amount to

be determined by a jury.

COUNT Ill

BREACH OF FIDUCIARY DUTY

30. Plaintiffs reallege and incorporate by reference each

fact contained in paragraphs | through 29 above, and in the

counts below, as if pleaded separately herein.

31. By virtue of the relationship of the Plaintiffs and

Defendants, the facts suppressed by the Defendants, and the

superior knowledge and bargaining position of the

Defendants, a confidential and fiduciary relationship arose

between the Plaintiffs and the Defendants. Plaintiffs reposed

confidence and trust in Defendants, and relied on Defendants’

duties to act in the best interest of the Plaintiffs.

32. Defendants breached their duty to the Plaintiffs and

failed to disclose the Defendants’ licencing agreement.

Defendants’ breach their duty and failed to notify the

Plaintiffs of a conflict of interest in profiting from the

licensing arrangement.

33. Plaintiffs further relied on Defendants’ actions and

representations and were induced by Defendants to pay

excessive costs and fees, when Plaintiffs otherwise would

not have paid excessive costs and fees.

10a

Appendix A

34. Defendants had a duty to make financial decisions

in the interest of the Plaintiffs.

35. Defendants and their agents recklessly breached

their fiduciary duty to Plaintiffs by suppressing the following

material facts:

(a) the costs paid by the Plaintiffs exceeded the costs

disclosed to the plaintiffs.

(b) the Plaintiffs costs would be substantially higher

than that disclosed due to the Defendants’ receipt of loan

repayments.

periods to calculate the loan costs.

36. Defendants breached their fiduciary duties descnbed

hereinabove, and Plaintiffs suffered damages as follows:

(a) paying excessive costs and fees to the Defendants;

(b) foregoing the use of their money; and

37. Asa direct and proximate consequence of Defendants

actions, Plaintiffs have been injured and damaged as

identified herinabove.

lla

Appendix A

WHEREFORE, PREMISES CONSIDERED,

Plaintiffs demand judgment against Defendants jointly and

severally for compensatory damages and punitive damages

not to exceed $74,900 per named Plaintiff, in an amount to

be determined by a jury.

PLAINTIFFS DEMAND TRIAL BY STRUCK JURY

l2a

APPENDIX B — IN THE UNITED STATES

DISTRICT COURT FOR THE NORTHERN

DISTRICT OF ALABAMA, WESTERN DIVISION

DATED AND FILED SEPTEMBER 6, 2002

IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

WESTERN DIVISION

Civil Action No.: CV-02-C-1848-W

MARTHA SUE HARE; OTIS JENNINGS;

MILDRED P. SMITH; and WILLIE E. SMITH;

Plaintiffs,

vs.

H & R BLOCK EASTERN TAX SERVICES, INC.;

H & R BLOCK, INC.; BENEFICIAL NATIONAL

BANK; and BENEFICIAL TAX MASTERS, INC.,

Defendants.

Filed September 6, 2002

PLAINTIFFS’ MOTION TO LIFT STAY AND

REMAND TO STATE COURT

COME NOW the Plaintiffs, Martha Sue Hare, Otis

Jennings, Mildred P. Smith, and Willie E. Smith, by and

through their attorney of record, and respectfully request that

this Honorable Court lift the stay in this case and order

remand to state court. In support of this motion, Plaintiffs

state as follows:

l3a

Appendix B

A nearly identical case filed against Beneficial! National

Bank an H&R Block on behalf of several residents of Piekens

County, Alabama was recently remanded to state court for

lack of subject matter jurisdiction. See Tracy Brewer, et al.

v. H&R Block Eastern Tax Services, Inc., et al., CV-02-N-

1772-W (N.D. Ala. Sept. 3, 2002) (J. Nelson) (See attached

Exhibit “A’’). In the Brewer case, the plaintiffs allege identical

causes of action against the same defendants in the instant

case. In that case, District Judge Edwin Nelson denied

defendants’ Motion to Stay and Ordered remand to state court.

The court stated as follows:

OVERRULED WITHOUT PREJUDICE

s/ U.W. Clemon 10/9/02

JUDGE DATE

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.