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Patterson v. Regions Bank

November 27, 2006


The opinion of the court was delivered by: Herndon, District Judge



In this case, plaintiff Galen Patterson brings this suit as the sole beneficiary of plaintiff Red Leaf Land Trust ("Trust") against defendant Regions Bank ("Defendant" or the "Bank"), successor in interest to Union Planters Bank (Doc. 3 -Complaint), alleging claims for a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act ("Consumer Fraud Act"), 815 ILL.COMP.STAT. 505/1 - 505/12. Plaintiffs' suit was originally filed in the Circuit Court of St. Clair County, Illinois. Defendant removed the case to this Court (Doc. 2), asserting that two grounds existed to establish jurisdiction: (1) diversity and (2) federal question. Disagreeing with the existence of federal subject matter jurisdiction in this case, Plaintiffs filed a Motion to Remand (Doc. 13), to which Defendant timely opposed (Doc. 19). After reviewing the issues presented and fully briefed by the parties, the Court finds that it presently lacks jurisdiction over this matter and must therefore remand Plaintiffs' case.


Plaintiffs' claims arise from a loan agreement ("Loan") negotiated with Defendant, which provides for a repayment of the principal plus interest at a rate of 6.5% per annum. The Promissory Note*fn1 ("Note") states that the annual interest on the Loan was actually "computed on a 365/360 basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding" (Doc. 19, p. 2, Ex. 1, p. 1). Plaintiffs' Complaint pleads two Counts, both of which allege violations of the Consumer Fraud Act. Plaintiffs seek a finding by the Court that Defendant violated the Consumer Fraud Act and a subsequent injunction requiring Defendant to cease using a time period of less than 12 calendar months to compute annual interest on Plaintiffs' loan, plus attorneys' fees (Doc. 3, p. 6).

Count I alleges that Defendant violated the Consumer Fraud Act by engaging in the deceptive and unfair business practice of fraudulent misrepresentation. Essentially, Plaintiffs believe Defendant "conceal[ed] and obfuscat[ed] the true interest rate and cost of [the] Loan by deceptive half-truth representations of the interest rate and adding a vague, confusing, and contradictory boilerplate sentence in [the] Note misrepresenting how the annual interest rate on the Note is computed" (Doc. 3, ¶ 9(d)). Further, Plaintiffs allege Defendant failed to clearly inform regarding its particular method of annual interest computation, instead representing to Plaintiffs a rate of annual interest based upon a 12-month calendar year, knowing its method of computing interest would be a material fact relied upon by Plaintiffs in deciding whether to obtain the Loan (Id. at ¶¶ 9(f), (g) & 12). Plaintiffs state that subsections (a) and (c) of Section 10a of the Consumer Fraud Act (815ILL.COMP.STAT. 505/10a(a) & (c)) warrant their request for injunctive relief.

In Count II, Plaintiffs allege that Defendant violated the Consumer Fraud Act by engaging in unfair and deceptive business practices -- namely, for Defendant's use of a computation of per annum interest in violation of the Illinois Interest Act, 815 ILL.COMP.STAT. 205/1 - 205/11. In other words, Plaintiffs allege that this violation stems from Defendant's act of charging an interest rate which actually exceeds the rate allegedly agreed upon by the parties of 6.5% per annum. Therefore, this "willful and material violation of Section 5 of the Illinois Interest Act*fn2 that prohibits a creditor from 'directly or indirectly accepting or receiving in money . . . any sum . . . greater than' the rate of interest of 6.500% per annum agreed upon by the Bank and the Plaintiff" (Doc. 3, ¶ 11). As such, Plaintiffs claim Defendant's alleged violation of the Interest Act also constitutes a violation of Section 2F of the Consumer Fraud Act (815 ILL.COMP.STAT. 505/2F).

As previously stated, Defendant removed this case based upon two jurisdictional grounds: diversity and federal question jurisdiction (Doc. 2). Plaintiffs' Motion to Remand challenges the existence of either of these jurisdictional bases in this matter. The Court's analysis will address both.


A. Removal

The removal statute, 28 U.S.C. § 1441, is construed narrowly, and doubts concerning removal are resolved in favor of remand. Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993).A defendant bears the burden to present evidence of federal jurisdiction once the existence of that jurisdiction is fairly cast into doubt. See In re Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599, 607 (7th Cir. 1997). "A defendant meets this burden by supporting [its] allegations of jurisdiction with 'competent proof,' which in [the Seventh Circuit] requires the defendant to offer evidence which proves 'to a reasonable probability that jurisdiction exists.'" Chase v. Shop 'N Save Warehouse Foods, Inc., 110 F.3d 424, 427 (7th Cir. 1997)(citations omitted). However, if the district court lacks subject matter jurisdiction, the action must be remanded to state court pursuant to 28 U.S.C. § 1447(c).

B. Subject Matter Jurisdiction

1. Diversity Jurisdiction

The statute regarding diversity jurisdiction, 28 U.S.C. § 1332,requires complete diversity between the parties plus an amount in controversy which exceeds $75,000.00, exclusive of interest and costs. In this case, the parties do not contest the fact that diversity of citizenship exists. Instead, they differ on the issue of whether the amount in controversy is met. First, Defendant argues Plaintiffs are really seeking a declaration from the Court that Defendant's method of computing interest, as stated in the Note, is unlawful. Coupled with this declaration would be an injunction to prohibit Defendant from engaging in this practice. Therefore, Defendant proffers that such a declaration/injunction would be valued at not only Plaintiffs' own damages (plus attorneys fees), but also the pecuniary loss to Defendant if it was unable to compute its loans based on a 360-day year (Doc. 2, ¶ 11), as opposed to the 365-day year calculation that Plaintiffs favor. Defendant asserts that considering it has ...

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