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HUNTER v. GREENWOOD TRUST CO.

November 24, 1992

JAMES H. HUNTER, on behalf of himself and all others similarly situated, Plaintiff,
v.
GREENWOOD TRUST COMPANY, Defendant.



The opinion of the court was delivered by: JEROME B. SIMANDLE

 SIMANDLE, District Judge:

 Presently before the court is the motion by plaintiff, James H. Hunter, to remand the present matter to the Superior Court of New Jersey, Camden County, pursuant to 28 U.S.C. § 1447(c). Plaintiff's motion requires this court to determine whether it has federal question or diversity jurisdiction over plaintiff's action. For the reasons stated herein, plaintiff's motion is granted because this courts lacks subject matter jurisdiction to hear plaintiff's claims.

 I. Background

 Plaintiff, James H. Hunter, commenced this action in the Superior Court of New Jersey, Camden County, with the filing on March 6, 1992, of a Class Action complaint against defendant, Greenwood Trust Company ("Greenwood Trust"), a state chartered bank insured by the Federal Deposit Insurance Corporation ("FDIC") and located in New Castle, Delaware, alleging that Greenwood Trust's practice of charging late fees on credit cards issued to New Jersey residents violates New Jersey consumer protection law as well as New Jersey common law. Specifically, plaintiff's claims are brought on behalf of all New Jersey residents who are or have been holders of a Discover credit card ("Discover Card") issued by Greenwood Trust.

 The Discover Card permits Greenwood Trust to lend money on an open-end credit basis to borrowers throughout the United States, including New Jersey. The terms and conditions governing the use of Greenwood Trust's Discover Card are set forth in the Cardmember Agreement ("Agreement"). The Agreement provides, inter alia, that a cardmember must make a specified minimum monthly payment on account of outstanding balances, and a failure to do so by the due date constitutes a default. The Agreement further provides for the imposition of a $ 10 late charge if the specified minimum payment is not paid within 20 days of the due date.

 According to plaintiff, Greenwood Trust issued a Discover Card to him sometime in or around 1985, and he thereafter used it to purchase goods and services in New Jersey primarily for personal, family, and household purposes. From March, 1990 through December, 1991, plaintiff admittedly did not always pay the minimum monthly installment due on his account as stated on his monthly billing statements from Greenwood Trust. In its subsequent billing statements to plaintiff, Greenwood Trust imposed at least three separate late charges of $ 10 each. These late charges were added to plaintiff's unpaid balance as reflected in his monthly billing statements, and interest was then charged on the resulting balance. Plaintiff has since made payments to Greenwood Trust to reduce his unpaid balance, paying both the late charges and the interest accumulated thereon.

 As a result, the plaintiff filed the instant action alleging that Greenwood Trust willfully failed to comply with the New Jersey Consumer Fraud Act ("Consumers Act"), N.J.S.A. 56:8-1, et seq., as it knowingly contracted for, charged, and collected late fees prohibited by N.J.S.A. 17:9A-59.7. *fn1" Plaintiff seeks reimbursement of all late fees as well as an injunction pursuant to N.J.S.A. 17:9A-59.7, which prohibits credit card issuers such as Greenwood Trust from imposing any charges on New Jersey consumers other than those permitted by the Consumers Act. The injunction would serve to restrain Greenwood Trust from continuing its practice of contracting for, charging, and collecting late fees from Discover Card holders in New Jersey and to prohibit Greenwood Trust from communicating adverse payment information about the nonpayment of late fees by plaintiff to any credit bureaus. Plaintiff alternatively seeks recovery of all credit card late charges under the New Jersey common law theory of unjust enrichment.

 II. Discussion of Law

 A state court action may properly be removed to federal court only if it is an action over which the federal court would have had original jurisdiction. See 28 U.S.C. § 1441 (a); Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 96 L. Ed. 2d 318, 107 S. Ct. 2425 (1987); Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 19 n.18, 77 L. Ed. 2d 420, 103 S. Ct. 2841 (1983); Trent Realty Associates v. First Fed. Sav. & Loan Assoc., 657 F.2d 29, 36 (3d Cir. 1981). The United States Supreme Court long ago recognized that "the first and fundamental question is that of jurisdiction . . . this question the court is bound to ask and answer itself, even when not otherwise suggested, and without respect to the relation of the parties to it." Bender v. Williamsport Area School District, 475 U.S. 534, 547, 89 L. Ed. 2d 501, 106 S. Ct. 1326 (1986) (quoting Mansfield C. & L.M.R. Co. v. Swan, 111 U.S. 379, 382, 28 L. Ed. 462, 4 S. Ct. 510 (1884)).

 It is axiomatic that federal courts are courts of limited jurisdiction, empowered to hear cases only as provided for under Article III of the Constitution and congressional enactments pursuant thereto. U.S. Const. art. III, § 2, cl. 1; Bender, 475 U.S. at 547; Employers Ins. of Wausau v. Crown Cork & Seal Co., 905 F.2d 42, 45 (3d Cir. 1990). Congress has specifically provided two independent bases for subject matter jurisdiction in the federal courts - federal question jurisdiction and diversity jurisdiction - under 28 U.S.C. §§ 1331 & 1332. Without the existence of at least one of these bases, a controversy is not properly removable from state to federal court. Caterpillar, 482 U.S. at 392; Krashna v. Oliver Realty, Inc., 895 F.2d 111, 113 (3d Cir. 1990); United Jersey Banks v. Parell, 783 F.2d 360, 365 (3d Cir. 1986), cert. denied, First Fidelity Bancorporation v. Parell, 476 U.S. 1170, 90 L. Ed. 2d 979, 106 S. Ct. 2892 (1986).

 When removal is sought, the removing party bears the burden of proving that federal subject matter jurisdiction exists, that removal was timely, and that removal was proper. Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990), cert. denied, 498 U.S. 1085, 112 L. Ed. 2d 1046, 111 S. Ct. 959 (1991); Steel Valley Auth. v. Union Switch and Signal Division, 809 F.2d 1006, 1011 (3d Cir. 1987), cert. dismissed, 484 U.S. 1021 (1988); Moore v. DeBiase, 766 F. Supp. 1311, 1315 n.5 (D.N.J. 1991). Significantly, the removal statutes are to be strictly construed against removal and all doubts are to be resolved in favor of remand. Boyer, 913 F.2d at 111; Steel Valley Auth., 809 F.2d at 1010. Nevertheless, a "federal court should be cautious about remand, lest it erroneously deprive a defendant of the right to a federal forum." 14A Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction and Related Matters 2d § 3721 at 218-19 (2d ed. 1985); see also Crier v. Zimmer, 565 F. Supp. 1000, 1001 (E.D. La. 1983) (recognizing that a federal district court should not erroneously deprive a defendant of the right to a federal forum). In light of these pronouncements, Greenwood Trust must establish that plaintiff could have originally filed this matter in federal court based on either federal question or diversity jurisdiction.

 A. Federal question Jurisdiction

 Removal of a state court action based on federal question jurisdiction is proper only if the action asserts a claim "arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. §§ 1331, 1441(b); see United Jersey Banks, 783 F.2d at 365. Ordinarily, a case "arises under" federal law only when a federal question appears on the face of the plaintiff's "well-pleaded complaint." Caterpillar, 482 U.S. at 392 (citing Gully v. First National Bank, 299 U.S. 109, 112-13, 81 L. Ed. 70, 57 S. Ct. 96 (1936)); Franchise Tax Board, 463 U.S. at 10; United Jersey Banks, 783 F.2d at 365. Under the well-pleaded complaint rule, a case cannot be removed based upon a federal defense to a state law claim, including the defense of preemption, even if the defense is anticipated in the complaint and both parties concede that it is the only question at issue. Caterpillar, 482 U.S. at 393; Franchise Tax Board, 463 U.S. at 12; Railway Labor Exec. v. Pittsburgh & Lake Erie R.R., 858 F.2d 936, 939 (3d Cir. 1988). Rather, "[A] right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action." Franchise Tax Board, 463 U.S. at 10-11 (quoting Gully, 299 U.S. at 112); see also United Jersey Banks, 783 F.2d at 366 (recognizing that a substantial, disputed question of federal law must be a necessary element of one of the well-pleaded state claims for federal jurisdiction to exist).

 An independent corollary to the well-pleaded complaint rule which similarly confers federal question jurisdiction for removal purposes is the "complete preemption doctrine." Krashna, 895 F.2d at 113; Railway Labor, 858 F.2d at 939. Under complete preemption, the preemptive force of a statute can be "so extraordinary that it converts an ordinary state common-law complaint into one stating a federal claim for the purposes of the well-pleaded complaint rule." Krashna, 895 F.2d at 113 (quoting Caterpillar, 482 U.S. at 393). The complete preemption doctrine holds that Congress may so completely preempt a particular area that any civil complaint raising this select group of claims is necessarily federal in character. Krashna, 895 F.2d at 113-14; Railway Labor, 858 F.2d at 939. For the purposes of removal, "once an area of state law has been completely preempted, any claim purportedly based on that preempted state law is considered, from its inception, a federal claim, and therefore arises under federal law." Krashna, 895 F.2d at 114 (quoting Caterpillar, 482 U.S. at 393). *fn2" Defendant does not invoke the complete preemption doctrine as a basis for federal question jurisdiction, so this court will not consider ...


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