Ninth Circuit Holds State AG Credit Card Add-On Suits Belong In State Court

Credit Cards State Attorney General Ancillary Products

On August 1, the U.S. Court of Appeals for the Ninth Circuit held that neither the federal question statute nor the Class Action Fairness Act provide a federal district court with subject matter jurisdiction over the Hawaii Attorney General’s (AG) suit against credit card issuers over allegedly deceptive marketing of add-on products. Hawaii v. HSBC Bank Nev., N.A., No. 12-263, 2014 WL 3765697 (9th Cir. Aug. 1, 2014). The Hawaii AG filed suits in state court against several credit card issuers asserting three state law causes of action based on allegations that the issuers deceptively marketed and enrolled Hawaii cardholders in various debt protection products. After the issuers removed the cases to federal court, the district court refused to remand, holding that at least one claim in each case was preempted by the National Bank Act. The court reasoned that the AG implicitly challenged the “rate of interest” on outstanding credit card balances by alleging the issuers charged “significant fees” for “minimal benefits” and had “increased profits by substantial sums,” and explained that the National Bank Act completely preempts state laws regulating the interest rates charged by nationally chartered banks. The appeals court disagreed, concluding—as the Fifth Circuit did last year in a similar case—that regardless of how state law labels the claims, the AG’s complaints did not challenge the “rate of interest” that issuers charged and are not preempted. Further, the court held that CAFA does not provide an alternative basis for federal jurisdiction because the AG’s suits are common law parens patriae suits that specifically disclaimed class status, and, as such, they are not class actions.