Amicus Curiae Brief — Beneficial Nat. Bank v. Anderson

\ J ; 1 r, i}

No. 02-306

APR 4 2003

In The :

Supreme Court of the United States...

¢

BENEFICIAL NATIONAL BANK, ET AL.,

Petitioners,

V.

MARIE ANDERSON, ET AL.,

Respondents.

S

On Writ Of Certiorari To The

United States Court Of Appeals

For The Eleventh Circuit

¢

BRIEF OF ARIZONA, ALASKA, CONNECTICUT,

GEORGIA, HAWAII, ILLINOIS, IOWA, MARYLAND,

MINNESOTA, MISSOURI, NEW HAMPSHIRE,

NEW MEXICO, NEW YORK, OHIO, OREGON,

SOUTH CAROLINA, SOUTH DAKOTA, TEXAS,

AND WASHINGTON AS AMICI CURIAE

IN SUPPORT OF RESPONDENTS

¢

TERRY GODDARD

Attorney General of Arizona

Of Counsel: Mary O’GRADY

DAN SCHWEITZER Solicitor General

National Association JOSEPH A. KANEFIELD*

of Attorneys General Assistant Attorney General

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‘ 1

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ........--c.c--seccssecesssvesssvveee iii

INTEREST OF THE AMICT ..0......ccc-ssvcessssvessssveessee 1

SUMMARY OF ARGUMENT. ..........ccscsscsssssseeessssveeee 2

pS te 4

THE DOCTRINE OF COMPLETE PREEMP-

TION DOES NOT APPLY TO A STATE-LAW

| CLAIM WHICH A NATIONAL BANK ASSERTS

| IS PREEMPTED BY THE USURY PROVISIONS

| OF THE NATIONAL BANK ACT...........cccccccceeeeees 4

A. State-Law Claims Are Generally Not Remov-

able to Federal Court Merely Because the

Defense of Preemption Is Asserted ................ 4

B. The Well-Pleaded Complaint Rule Only

| Permits Removal of a State-Law Claim When

Congress Specifically Intended That Type of

Claim to be Transformed, by Operation of

Law, into a Federal Claim..........................+++ 6

1. Congressional intent to create an exclu-

sive federal cause of action does not, by

itself, establish congressional intent to

convert a state-law claim into a federal

claim by operation of law......................... 8

2. This Court’s decisions confirm that the

complete preemption doctrine applies

only when Congress specifically intended

to convert state-law claims into federal

claims by operation of law....................... 11

ii

TABLE OF CONTENTS - Continued

Page

C. There Is No Basis Upon Which to Conclude

That Congress, Through the National Bank

Act, Intended to Convert State-Law Usury

Claims into Federal Causes Of Action ........... 15

TTT LTE TT ONO 20

TABLE OF AUTHORITIES

Page

CASES

Anderson Nat'l Bank v. Luckett, 321 U.S. 233

Sinead ictantnasiaaaali catia iaaachcireaineaecirsinreainnaeil 17

Atherton v. FDIC, 519 U.S. 213 (1997) ...........ccccccccceeeeeeeees 17

Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557

Sa inaceasthaiinidiatieihachiiiahlatthcaci iiaaharesaaiaiiaiaaeiaheanaratidiiiil 3, 13, 14

Bleh TV. of Mobile, Inc. v. Comcast Cable

Communications, Inc., 182 F.3d 851 (11th Cir.

Ee ne 8, 10, 11

Caterpillar Inc. v. Williams, 482 U.S. 386 (1987).......... 5, 10

Davis v. Elmira Sav. Bank, 161 U.S. 275 (1896)............... 17

El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473

eee eee 9,10

First Nat'l Bank v. Commonwealth, 76 U.S. 353

EER cae ee eee eee ee Te 16, 17, 18

First Nat'l Bank in St. Louis v. Missouri, 263 U.S.

A aa ene ee ee ee 17

Franchise Tax Bd. v. Constr. Laborers Vacation

NL ES 5, 14

Franklin Nat'l Bank v. New York, 347 U.S. 373

ane 16

Gore v. Trans World Airlines, Inc., 210 F.3d 944 (8th

ke eee ee 10

Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473

Ia occeneeeesaniietheeialeanterietdectaela ideal amnatataina iain eae 6

Gully v. First Nat'l Bank, 299 U.S. 109 (1936)................... 5

Husmann v. Trans World Airlines, Inc., 169 F.3d

Se GES Cie cceenneenssssensscsnsvessmeereneesennenemmeneman 1l

iv

TABLE OF AUTHORITIES — Continued

- Page

Louisville & Nashville R.R. Co. v. Mottley, 211 U.S.

CREE Ie 4

McClellan v. Chipman, 164 U.S. 347 (1896) .............c000008 16

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

ee passim

Osborn v. Bank of the United States, 22 U.S. 738

Reenter meres rnc ees He 4

Peters v. Union Pac. R.R. Co., 80 F.3d 257 (8th Cir.

Itachi chen iia laaian dinars 11

Rice v. Santa Fe Elevator Corp., 331 U.S. 218

iach ial lalate tall 18

Rodriguez v. United States, 480 U.S. 522 (1987)............006 9

Rosciszewski v. Arete Assocs., Inc., 1 F.3d 225 (4th

a 11

Stone v. Powell, 428 U.S. 465 (1976) .............cccccccceeeeseeeeees 19

Textile Workers Union of America v. Lincoln Mills,

8 EEC ren ere ene near eIe 13

Wichita Royalty Co. v. City Nat'l Bank of Wichita

Oe 17

FEDERAL STATUTES

ee 15

eee 4,5,7

I atacand netaalaaemceaieaiaietes i)

A 5, 7

I ain errr erins teaser ininaeaeaeianmninS 13

GB WEG. § BORD ccceccecccvccccccccscvscccsevevcccsveccecccnsseecoees 3,9

Vv

TABLE OF AUTHORITIES -— Continued

Page

NN ii italiane 3,9

EEL eae ee ee 11

EE a ee 11

Tet eae a ee ll

| ee ne 11

TT eee a ll

Act of July 27, 1868, 15 Stat. 226-27 .000.....ccccccccccccccccceeeeeee 19

ee 15, 18

Ee 15, 18

Price-Anderson Act, Pub. L. No. 85-256, 71 Stat.

Soper isebnieiehdeririideletetaeiehnetbeiia biennial )

Price-Anderson Amendments Act of 1988, Pub. L.

No. 100-408, 102 Stat. 1066.00.00... ccceeeeeeeeeeeeeeeees i)

OTHER AUTHORITIES

H.R. Conf. Rep. No. 93-1280 (1974)..........cccccccccsseseesseseeeeee 12

Miller, Arthur A., Artful Pleading: A Doctrine in

Search of a Definition, 76 Tex. L. Rev. 1781

a 1, 6, 8, 10

Nelson, Caleb, Preemption, 86 Va. L. Rev. 225

ee 8

Posner, Richard, The Federal Courts: Crisis and

I 5

1

INTEREST OF THE AMICI

The question presented is whether the doctrine of

complete preemption applies to state-law usury claims

filed in state court against a national bank. The amici

States have two discrete interests in the resolution of that

question.

First, the doctrine of complete preemption affects

important federalism interests. Under the well-pleaded

complaint rule, state courts have the initial opportunity to

resolve whether a state-law claim is preempted by federal

law. That rule is a core component of the division of

responsibility between state and federal courts, and

reflects Congress’s recognition of the competence of state

courts. See Arthur A. Miller, Artful Pleading: A Doctrine in

Search of a Definition, 76 Tex. L. Rev. 1781, 1797 (1998)

(noting “the obvious federalism implications of the com-

plete-preemption doctrine and its inconsistency with the

well-pleaded complaint rule”). The amici States have an

abiding interest in ensuring that this division of responsi-

bility is not unjustifiably revised to lessen the role of state

courts.

Second, the amici States have a significant interest in

the extent to which the National Bank Act (NBA) is found

to preempt state law. Although this case involves only a

discrete section of the NBA, it is important to the States

that this Court not waver from its long-standing precedent

that the States retain concurrent jurisdiction over national

banks operating within their borders.

¢

2

SUMMARY OF ARGUMENT

At issue in this case is when complete preemption

occurs, such that a state-law claim is converted into a

federal claim by operation of law and may, therefore, be

removed to federal court. This Court presently has before

it two competing theories. Petitioners and the United

States contend that complete preemption occurs whenever

a plaintiff asserts a state-law claim that falls within the

scope of “an exclusive federal cause of action” created by

Congress. Pet. Br. 21; U.S. Br. 10. The Eleventh Circuit

adopted the position that complete preemption in addition

requires “clear congressional intent to permit removal.”

Pet. App. 4a. Amici submit that neither of these compet-

ing theories adequately explains when the doctrine ap-

plies.

Petitioners and the United States are correct in

recognizing that the ultimate question does not center on

removal per se, but on whether the state-law claim must

be deemed federal in nature by operation of law. Once that

transformation takes place, the federal courts have origi-

nal and removal jurisdiction over the claim. It therefore

does not matter whether Congress expressed any specific

intent regarding removal. But Petitioners and the United

States wrongly conclude that Congress intended certain

types of state-law claims to be converted into federal

claims. Simply put, it is one thing for Congress to enact a

preemptive federal rule and concomitant federal cause of

action; it is a far different thing for Congress to enact a

rule that converts plaintiffs’ state-law claims into federal

claims. Such a rule does not, as a matter of logic, prece-

dent, or policy, ineluctably follow from the former enact-

ments.

3

Congress has long accepted the well-pleaded com-

plaint rule and its ramifications, the most notable of which

is the maintenance in state court of state-law claims

subject to the defense of preemption. When Congress

desires a different procedure, it can expressly provide for

one, as it did in the Price-Anderson Act. See 42 U.S.C.

§§ 2014(h)(h), 2210(n\(2) (deeming all actions asserting

liability arising from nuclear incidents to be federal

actions). Congress can also implicitly provide for the

conversion of state-law claims into federal claims, as this

Court found it did in Section 301 of the Labor Manage-

ment Relations Act (LMRA), Avco Corp. v. Aero Lodge No.

735, 390 U.S. 557 (1968), and in Section 502(a) of the

Employee Retirement Income Security Act of 1974

(ERISA), Metropolitan Life Insurance Co. v. Taylor, 481

U.S. 58 (1987). But absent congressional intent specific to

the conversion of state-law claims into federal claims — as

distinct from the intent to create an exclusive federal

cause of action — there is no basis upon which to convert a

plaintiff’s claim by operation of law from a state-based

claim into a federal claim. In Taylor, this Court found

complete preemption only after applying precisely this

approach. |

When this standard is applied to the usury provisions

of the National Bank Act, the result is affirmance of the

Eleventh Circuit. Section 30 of the National Bank Act

neither explicitly nor implicitly provides that state-law

claims should be deemed federal by operation of law. It

necessarily follows that the NBA does not convert state-

law usury claims into federal claims. The United States’

contention that the NBA mandates freedom from state

laws is both irrelevant and incorrect: this Court has long

and consistently held that national banks are subject to

4

numerous state laws. The proper outcome of this case,

therefore, is for the Alabama state court to determine

whether the NBA preempts application of the state usury

law against Petitioners.

+

ARGUMENT

THE DOCTRINE OF COMPLETE PREEMPTION

DOES NOT APPLY TO A STATE-LAW CLAIM

WHICH A NATIONAL BANK ASSERTS IS PRE-

EMPTED BY THE USURY PROVISIONS OF THE

NATIONAL BANK ACT.

A. State-Law Claims Are Generally Not Remov-

able to Federal Court Merely Because the De-

fense of Preemption Is Asserted.

Congress has never authorized federal courts to hear

claims under their “arising under” jurisdiction to the full

extent permitted by the Constitution. In Osborn v. Bank of

the United States, 22 U.S. 738, 822-23 (1824), the Court

_ held that “arising under” jurisdiction within the meaning

of Article III, Section 2, exists when the resolution of a

federal question might determine the outcome of the case.

In a series of cases culminating in Louisville & Nashville

R.R. Co. v. Mottley, 211 U.S. 149 (1908), however, the

Court construed 28 U.S.C. § 1331 as giving federal courts

far narrower “arising under” jurisdiction. In Mottlev, the

Court ruled that a federal court lacks subject-matter

jurisdiction under § 1331 if the plaintiff’s complaint

asserts on its face only state-law causes of action, regard-

less of whether the defendant asserts (or can be expected

to assert) federal defenses such as preemption. 211 U.S. at

152.

—s -

-- ——

a ee

5

Concomitantly, this Court has held that an action

“may not be removed to federal court on the basis of a

federal defense, including the defense of pre-emption, even

if the defense is anticipated in the plaintiff’s complaint,

and even if both parties concede that the federal defense is

the only question truly at issue.” Caterpillar Inc. v. Wil-

liams, 482 U.S. 386, 393 (1987). Cases may be removed

under 28 U.S.C. § i1441(a) only if district courts “have

original jurisdiction” over the action; and the well-pleaded

complaint rule governs whether such original jurisdiction

exists. Ever since Congress amended the removal statute

in 1887, original and removal jurisdiction have been

understood as co-extensive. See Franchise Tax Bd. v.

Constr. Laborers Vacation Trust, 463 U.S. 1, 10-11 & n.9

(1983).

Several policies are furthered by Congress’s embrace

of the well-pleaded complaint rule through its enactment

of, and amendments to, §§ 1331 and 1441, and its accep-

tance of the Court’s construction of those provisions.

Writing for the Court in Gully v. First Nat'l Bank, 299 U.S.

109 (1936), Justice Cardozo emphasized the practical

advantages of the rule. “If we follow the ascent far

enough,” he wrote, “countless claims of right can be

discovered to have their source or their operative limits in

the provisions of a federal statute or in the Constitution

itself.” Id. at 118. The well-pleaded complaint rule is

necessary, therefore, “[t]o set bounds to the pursuit... . We

shall be lost in a maze if we put that compass by.” Jd. More

concretely, plaintiffs may incorrectly anticipate defen-

dants’ defenses, the federal issue in a case may not become

apparent until well after the litigation has proceeded in

state court, and federal defenses may be “concocted purely

to confer jurisdiction.” Richard Posner, The Federal

Courts: Crisis and Reform 190 (1985).

6

The well-pleaded complaint rule also serves the

interests of federalism. The rule apportions cases between

the state courts and federal courts in a manner that leaves

state courts with considerable responsibility for construing

federal law. That delegation of power to state courts

reflects Congress’s recognition that state courts are fully

capable of discharging their constitutional mandate to

construe federal law. See Miller, supra, at 1782 (the well-

pleaded complaint rule “reflects ... the constitutional

compulsion to properly distribute judicial jurisdiction

between the state and federal courts”). It is also consistent

with the state courts’ historical role as arbiters of federal

law. See Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473,

477-78 & n.4 (1981).

B. The Well-Pleaded Complaint Rule Only Per-

mits Removal of a State-Law Claim When

Congress Specifically Intended That Type of

Claim to be Transformed, by Operation of

Law, into a Federal Claim.

In the ordinary case, when a plaintiff asserts a claim

in state court that is preempted by federal law two things

will transpire: the plaintiff will lose the case; and a state

court, not a federal court, will issue that ruling. On rare

occasion — when the doctrine of “complete preemption”

applies — the case plays out very differently: the otherwise

preempted state-law claim is converted by rule of law into

a federal claim that is litigated in federal court. The issue

before the Court is when this transformation of a state-law

claim into a federal claim by operation of law should occur.

The answer, we submit, is a simple one: when Congress

specifically intends that outcome.

7

This congressional-intent rule differs in important

ways from the positions advanced by Petitioners and the

United States, on ‘he one hand, and the Eleventh Circuit,

on the other. Petitioners and the United States would

make dispositive Congress’s creation of an exclusive

federal cause of action. Pet. Br. 21; U.S. Br. 10. Once

Congress creates an exclusive federal cause of action, they

argue, it follows that Congress also mandates the conver-

sion of a state-law claim falling within the scope of that

cause of action into a federal claim. But neither Petition-

ers nor the United States persuasively explains why that

is so. As explained below, Congress is perfectly capable of

expressing its specific intent to convert state-law claims

into federal claims governed by an exclusive federal cause

of action. When Congress elects not to express that intent,

a strong presumption must exist that Congress did not

intend to carve out an exception to the ordinary procedure

applicable to preemption cases.

This congressional-intent rule differs in one funda-

mental respect from the rule adopted by the Eleventh

Circuit. According to the court of appeals, the complete

preemption doctrine applies only where there is “clear

congressional intent to permit removal.” Pet. App. 4a. The

touchstone of the complete preemption doctrine, however,

is not removal per se, but the conversion of a state-law

claim into a federal claim. Once that conversion occurs,

the claim could be brought in federal court either origi-

nally or through removal, just like any other federal claim.

See 28 U.S.C. §§ 1331, 1441. The pivotal congressional

8

intent, therefore, is not an “intent to permit removal,” but

an intent to convert state-law claims into federal claims.

1. Congressional intent to create an exclu-

sive federal cause of action does not, by

itself, establish congressional intent to

convert a state-law claim into a federal

claim by operation of law.

As a matter of pure logic, there is no necessary con-

nection between creating an exclusive federal cause of

action and converting otherwise preempted state claims

into federal claims asserting that federal cause of action.

Congress preempts state laws for a variety of reasons and

through a variety of means. See generally Caleb Nelson,

Preemption, 86 Va. L. Rev. 225, 226-29 (2000) (discussing

and contrasting “express preemption,” “conflict preemp-

tion,” and “field preemption”). As is obvious from the

continued acceptance of the well-pleaded complaint

doctrine, Congress’s intent to preempt state law does not

imply any intent to convert a preempted state-law claim

into a federal claim.

' This characterization of the Eleventh Circuit’s opinion is

consistent with how Petitioners and the United States have character-

ized it. See Pet. Br. 29-32; U.S. Br. 26-27. We recognize, however, that

this reading of the opinion may be a strawman. The court of appeals

relied extensively (Pet. App. 5a-6a, 8a-9a, 15a) on its prior opinion in

Blab TV. of Mobile, Inc. v. Comcast Cable Communications, Inc., which

focused not merely on congressional intent to permit removal, but on

congressional intent to “‘transform[ ] the state cause of action into a

federal [one].’” 182 F.3d 851, 857 (11th Cir. 1999) (quoting Miller, supra

at 1797-98). As argued in the above text, that latter focus is the correct

9

Congress also has a variety of reasons for creating

federal causes of action that can be asserted in the place of

preempted state-law claims. Most obviously, Congress

often wishes to provide a private right of action for a

particular injury, but wants the substantive law governing

that action to be uniform across the country. In other

instances, state law is “borrowed” and incorporated to

furnish the governing federal rule, subject to specific

federal remedies desired by Congress. See, e.g., the Fed-

eral Tort Claims Act, 28 U.S.C. § 1346(b) (“law of the place

where the act or omission occurred” is controlling). Neither

objective, however, can be achieved only if Congress

additionally mandates that courts rewrite complaints filed

in state court that assert state-law claims of the type

covered by an exclusive federal cause of action. Cf. Rodri-

guez v. United States, 480 U.S. 522, 526 (1987) (“no legisla-

tion pursues its purposes at all costs.... [I)t frustrates

rather than effectuates legislative intent simplistically to

assume that whatever furthers the statute’s primary

objective must be the law.”). A run-of-the-mill dismissal of

a preempted state-law claim does not in any way under-

mine the governing federal rules adopted by Congress.

To be sure, Congress might conclude that public policy

would be served by declaring that state-law claims be

converted into claims arising under exclusive federal

causes of action. Congress did just that when it amended

the Price-Anderson Act, Pub. L. No. 85-256, 71 Stat. 576,

through the Price-Anderson Amendments Act of 1988,

Pub. L. No. 100-408, 102 Stat. 1066. Through “its unusual

preemption provision, see 42 U.S.C. § 2014(h)h), the Price-

Anderson Act transforms into a federal action ‘any public

liability action arising out of or resulting from a nuclear

incident.’ § 2210(n\2).” El Paso Natural Gas Co. v.

10

Neztsosie, 526 U.S. 473, 484 (1999). The statute thereby

establishes original and removal jurisdiction over such

causes of action in federal court — regardless of how those

actions are initially pled by the plaintiff. Cf id. at 484 n.6

(observing that the structure of the Price-Anderson Act

“resembles” the complete preemption doctrine).

Express “conversion” provisions of this sort are “rare,”

id. at 485-86 n.7 — far rarer than the creation of exclusive

federal causes of action. The obvious inference to be drawn

is that Congress is aware of the option of transforming

preempted state-law claims into federal claims, but

chooses to exercise that option sparingly. It is common

ground that the intent of Congress is the touchstone for

determining whether the complete preemption doctrine

applies. Under the Petitioners’ and United States’ position,

however, that intent is “sometimes divined and sometimes

fabricated.” Miller, supra, at 1821. Far better, we submit,

to rely on Congress specifically to instruct when it wants

state-law claims converted into federal causes of action.

Moreover, this Court has described statutes that

completely preempt state laws as “extraordinary.” Taylor,

481 U.S. at 65, quoted in Caterpiller, 482 U.S. at 393. Yet,

as the Eleventh Circuit observed in a prior decision, “[i}f

the creation of a federal cause of action served as the sole

litmus test for congressional intent, ... complete preemp-

tion would be common rather than extraordinary.” Blab

T.V. of Mobile, Inc. v. Comcast Cable Communications,

Inc., 182 F.3d 851, 859 n.3 (11th Cir. 1999).

The Eighth Circuit, which applies the liberal standard

suggested by Petitioners, has ruled that three federal

statutes, in addition to the NBA, completely preempt

state-law claims. See Gore v. Trans World Airlines, Inc.,

11

210 F.3d 944 (8th Cir. 2000) (the Railway Labor Act, 45

U.S.C. §§ 151-63; 181-88); Husmann v. Trans World

Airlines, Inc., 169 F.3d 1151 (8th Cir. 1999) (the Warsaw

Convention); Peters v. Union Pac. R.R. Co., 80 F.3d 257

(8th Cir. 1996) (the Federal Railroad Safety Act, 49 U.S.C.

§ 20106 (previously 45 U.S.C. § 434)). The Fourth Circuit

has held that Section 301(a) of the Copyright Act com-

pletely preempts state-law claims. See Rosciszewski v.

Arete Assocs., Inc., 1 F.3d 225, 232-33 (4th Cir. 1993). And

the Eleventh Circuit suggested that, were it bound by

Petitioners’ standard, Section 612 of the Cable Communi-

cations Policy Act of 1984, 47 U.S.C. §532, would be

completely preemptive. Blab T:V., 182 F.3d at 858-59 &

n.3. The list of exclusive federal causes of action presuma-

bly is longer still. If the well-pleaded complaint rule is to

be side-stepped so frequently, it should be based on a

specific congressional! directive.

2. This Court’s decisions confirm that the

complete preemption doctrine applies

only when Congress specifically intended

to convert state-law claims into federal

claims by operation of law.

The two instances in which this Court has found

complete preemption confirm that a state-law claim is

removable under the complete preemption doctrine only

when Congress has specifically expressed its intent to

convert that type of claim into a federal claim. Particularly

instructive is Metropolitan Life Ins. Co. v. Taylor, 481 U.S.

58 (1987), in which the Court held that Section 502(a) of

ERISA completely preempted an employee’s common law

contract and tort claims asserting improper processing of a

claim for benefits under an ERISA plan. The Court took

12

note of the federal cause of action created by § 502(a),

which “lies at the heart of a statute with ... unique pre-

emptive force,” but stated that without additional indicia

of congressional intent it “would be reluctant to find that

extraordinary pre-emptive power ... that converts an

ordinary state common law complaint into one stating a

federal claim for purpose of the well-pleaded complaint

rule.” 481 U.S. at 65.

The Court found the necessary evidence that Congress

specifically intended state-law claims falling within the

scope of § 502(a) to be converted into federal claims. The

Court first observed that “the language of the jurisdic-

tional subsection of ERISA’s civil enforcement provisions

close., parallels that of § 301 of the LMRA” (id.) — which

the Court in Avco found mandates the conversion of state-

law claims. The Court next pointed to explicit statements

in the legislative history of ERISA speaking to this precise

issue, quoting from the portion of the Conference Report

describing ERISA’s civil enforcement provisions: “All such

actions in Federal or State courts are to be regarded as

arising under the laws of the United States in similar

fashion to those brought under section 301 of the Labor-

Management Relations Act of 1947.” Taylor, 481 U.S. at

65-66 (quoting H.R. Conf. Rep. No. 93-1280, p. 327 (1974))

(internal quotation marks and emphasis omitted).

The Court continued:

No more specific reference to the Avco rule can be

expected and the rest of the legislative history

consistently sets out this clear intention to make

§ 502(a)(1B) suits ... federal questions for the

purposes of federal court jurisdiction in like

manner as § 301 of the LMRA.

13

Id. at 66. The Court then summarized its understanding of

the complete preemption doctrine, stating that “the

touchstone of the federal district court’s removal jurisdic-

tion is not the ‘obviousness’ of the pre-emption defense but

the intent of Congress.” Jd. at 66. The only fair reading o°

the Court’s opinion is that the intent to which the Court

referred was the intent to convert state-law claims into

federal claims, not the mere intent to create an exclusive

federal cause of action.’

The other statute the Court has found to completely

preempt state-law claims is, as noted, Section 301 of the

LMRA, 29 U.S.C. § 185. In Avco, the Court (without using

the term “complete preemption”) held that a state-law

breach of contract claim alleging that a union breached a

“no strike” clause in a collective bargaining agreement

may be removed because it is “[aJn action arising under

§ 301” and “is controlled by federal substantive law even

though it is brought in state court.” 390 U.S. at 560. The

Avco opinion did not explain the reasoning behind its

conclusion, apparently because it believed the issue was

largely resolved in Textile Workers Union of America v.

Lincoln Mills, 353 U.S. 448 (1957).

Immediately prior to announcing its holding, Avco

quoted the portion of Lincoln Mills which held that “the

substantive law to apply in suits under § 301(a) is federal

law” and that

* Justice Brennan, in a concurring opinion to Taylor, wrote

separately “only to note that today’s holding is a narrow one,” reaffirm-

ing that removal jurisdiction exists only when “Congress has clearly

manifested an intent to make causes of action .. . removable to federal

court.” Jd. at 67-68 (Brennan, J., concurring) (alteration i in original).

14

state law, if compatible with the purpose of § 301,

may be resorted to in order to find the rule that

will best effectuate the federal policy. * * * Any

state law applied, however, will be absorbed as

federal law and will not be an independent source

of private rights.

Avco, 390 U.S. at 559-60 (quoting Lincoln Mills, 353 U.S.

at 456-57) (emphasis added). Avco construed that final

sentence as meaning “{a]ny state law applied” — even if

asserted in the form of a state-law claim — “will be ab-

sorbed as federal law.” This explains why the Court,

directly after the above-quoted language, stated that Avco

Corporation’s state-law claim was federal in nature and,

therefore, “arfose] under the ‘laws of the United States’

within the meaning of the removal statute.” Avco, 390 U.S.

at 560. No further explanation was needed.

Avco is therefore consistent with the proposition that

the key intent in the complete preemption analysis is the

intent to convert (or “absorb”) state claims into federal

claims. At the very least, it is a decision that did not seek

to — and therefore does not — provide guidance regarding

the contours of the doctrine that 15 years later, in Fran-

chise Tax Board, supra, was given the name “complete

preemption.” 463 U.S. at 24.

In Franchise Tax Board, the Court stated that “[tJhe

necessary ground of [the Avco] decision 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. Any such

suit is purely a creature of federal law....” Id. at 23

(footnote and internal quotation marks omitted). That

explanation, however, begs the question: what made “the

preemptive force of § 301 ... so powerful”? Id. The Court

15

provided an answer four years later in Taylor, when it

searched for congressional intent specific to the conversion

of state-law claims into federal claims.

C. There Is No Basis Upon Which to Conclude

That Congress, Through the National Bank

Act, Intended to Convert State-Law Usury

Claims into Federal Causes of Action.

Neither the text nor the legislative history of §§ 85

and 86 of the National Bank Act shows any specific intent

to convert state-law usury claims into federal claims. In

contrast to § 502(a) of ERISA, the language of the NBA’s

jurisdictional provision, 12 U.S.C. § 94, does not closely

parallel the language of the LMRA’s jurisdictional provi-

sion. And whereas the legislative history of ERISA demon-

strates that Congress intended federal jurisdiction under

ERISA to be co-extensive with that under the LMRA, the

legislative history of the NBA is barren of any evidence

suggesting an intent to convert state-law usury claims into

federal claims.

At bottom, § 85 of the NBA borrows the laws of the

home states of national banks as federal limits, and § 86

creates a federal cause of action that plaintiffs are free to

invoke if they choose. For the reasons set forth in Section

B, supra, that is insufficient to effectuate complete pre-

emption. State-law usury claims are not converted by

operation of law into federal claims arising under NBA,

§ 86. Respondents’ case was properly remanded to state

court, which is well able to determine whether state-law

usury claims are preempted. Petitioners’ and the United

States’ arguments to the contrary have no merit.

16

First, the United States emphasizes the important

purposes behind the NBA, and in particular the intent “to

create a... sound and stable system of banking institu-

tions to support national economic development” (U.S. Br.

23), and one “that could not be disrupted by state legisla-

tion.” U.S. Br. 24; see also Pet. Br. 12-13. In the first place,

that history cannot take the place of the required congres-

sional intent specific to the transformation of state-law

claims into federal claims.

Furthermore, the United States and Petitioners elide

this Court’s long-standing recognition that national banks

are subject to state laws and a dual system of enforcement.

In 1870, this Court rejected a preemption challenge to a

State’s collection of a bank shares tax, declaring that

national banks “are subject to the laws of the State, and

are governed in their daily course of business far more by

the laws of the State than of the nation . . . It is only when

the state law incapacitates the banks from discharging

their duties to the government that it becomes unconstitu-

tional.” First Nat’l Bank v. Commonwealth, 76 U.S. (9

Wall.) 353, 361-62 (1869).

In McClellan v. Chipman, 164 U.S. 347, 359 (1896),

this Court rejected a bank’s “assertion that national banks

in virtue of the [NBA] are entirely removed, as to all their

contracts, from any and every control by the state law,”

- holding that state laws govern the business transactions of

national banks except in areas where Congress expressly

preempts state law or state law would impair the effi-

ciency of the banks in carrying out their duties imposed by

federal law. Numerous other decisions by this Court

affirmed the rule that national banks remain subject to

many state laws. See, e.g., Franklin Nat'l Bank v. New

York, 347 U.S. 373, 378 n.7 (1954) (“national banks may be

a eee a te ee

-— ee ee ee + its

17

subject to some state laws in the normal course of business

if there is no conflict with federal law”); First Nat’l Bank

in St. Louis v. Missouri, 263 U.S. 640, 656 (1924) (“na-

tional banks are subject to the laws of a State in respect to

their affairs unless such laws interfere with the purposes

of their creation, tend to impair or destroy their efficiency

as federal agencies or conflict with the paramount law of

the United States”); Davis v. Elmira Sav. Bank, 161 U.S.

275, 290 (1896) (“Nothing, of course, in this opinion is

intended to deny the operation of general and undiscrimi-

nating state laws on the contracts of national banks, so

long as such laws do not conflict with the letter or the

general objects and purposes of congressional legislation”).

Most recently, in Atherton v. FDIC, 519 U.S. 213, 222-

23 (1997), this Court reaffirmed the principle that “feder-

ally chartered banks are subject to state law” and, point-

ing to its earlier decisions, stated that it has “found

numerous state laws applicable to federally chartered

banks.” The Court has upheld application to national

banks of a state statute prohibiting branch banks, First

Natl Bank in St. Louis, 263 U.S. at 656, state tort law,

Wichita Royalty Co. v. City Natl Bank of Wichita Falls,

306 U.S. 103 (1939), and a state statute administering

abandoned deposit accounts, Anderson Nat'l Bank v.

Luckett, 321 U.S. 233, 247-52 (1944). Moreover, in Ather-

ton the Court approvingly quoted the passage from First

National Bank v. Commonwealth that national banks’

“acquisition and transfer of property, their right to collect

their debts, and their liability to be sued for debts, are all

based on state law.” Atherton, 519 U.S. at 223 (quoting

18

First National Bank, 76 U.S. at 362). Any suggestion by

Petitioners or the United States that national banks are

uniquely immune from state law is simply incorrect.

Second, Petitioners argue that applying a strict

complete preemption standard is unfair to national banks

because Congress enacted the National Bank Act prior to

its enactment of the removal statute. Pet. Br. 30. But that

merely reinforces our point. When Congress enacted the

NBA in 1864, it gave both state and federal courts jurisdic-

tion over suits against national banks. Yet suits filed

against national banks in state court had to remain there

because Congress had not yet authorized removal of such

actions to federal court — and did not until it enacted the

general removal statute in 1875. Congress therefore had

no reason to mandate that state-law usury claims are

transformed by operation of law into federal claims. Any

suggestion that Congress in 1864 intended the transfor-

mation of state-law claims is utterly implausible.

Nor has Congress taken any action since that time to

suggest an intent to transform state-law usury claims into

* The United States also invokes the doctrine of field eee oe

rt its position. U.S. Br. 19 & n.3. This fails for two interrela

aaa ype sot above, the NBA has not been understood to

occupy the field of regulation of national banks. Second, even if pure

state-law usury claims against national banks are preempted by §§ 85

and 86 of the NBA, this would not mean that the NBA therefore

preempts the “field” of state-law usury claims. Such a leap would make

the concept of field preemption meaningless. When a federal law

preempts a state law, one can always label the preempted subject

matter a “field.” But field preemption means something more, and does

not fit here. See Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 280

(1947) (field preemption may be inferred when the federal regulatory

scheme is “pervasive”).

—

—— i -

19

federal claims arising under NBA, § 86. In 1868, Congress

authorized the removal to federal court of actions filed

against corporations organized under federal law — but

expressly excluded national banks. Act of July 27, 1868, 15

Stat. 226-27, quoted in Pet. App. 12a. And Congress’s

enactment of the general removal statute in 1875 obvi-

ously evinced no particular intent regarding the transfor-

mation of state-law usury claims under the NBA. It is not

the responsibility of this Court to rewrite the legislation in

light of changed circumstances. Congress is fully capable

of amending the NBA if it concludes that public policy

would best be served by the transformation and removal of

state-law usury claims filed in state court.

Finally, Petitioners and amici American Bankers

Association, et al. argue that Petitioners’ approach to

complete preemption is justified by the need for federal

court resolution of preemption issues involving national

banks. Pet. Br. 32-33 n.22; ABA Br. 23-29. This lack of

confidence in the ability of state court judges to decide

federal preemption issues is inconsistent with bedrock

principles of American jurisprudence and repeated state-

ments by this Court. As Justice Powell wrote for the Court

in Stone v. Powell, 428 U.S. 465, 494 n.35 (1976), “we are

unwilling to assume that there now exists a general lack of

appropriate sensitivity to [federal] rights in the trial and

appellate courts of the several States.” Continuing, he

added, “there is no intrinsic reason why the fact that a

man is a federal judge should make him more competent,

or conscientious, or learned ... than his neighbor in the

state courthouse.” Jd. (citation and internal quotation

marks omitted).

In the 139 years since Congress enacted the NBA,

there has been no tradition of complete preemption of

20

state-law usury claims against national banks and no

evidence of congressional intent to establish complete

preemption. This Court should not accept the invitation of

Petitioners and the United States to fabricate such an

intent into the NBA.

¢

CONCLUSION

For the foregoing reasons, the judgment of the court of

appeals should be affirmed.

Respectfully submitted,

TERRY GODDARD

Attorney General of Arizona

Of Counsel: Mary O’GRADY

DAN SCHWEITZER Solicitor General

National Association JOSEPH A. KANEFIELD*

of Attorneys General Assistant Attorney General

750 First Street, N.E. 1275 West Washington Street

Washington, DC 20002 Phoenix, Arizona 85007

(202) 326-6010 (602) 542-3333

[Additional Counsel Listed On Inside Cover]

*Counsel of Record