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Glenn J. Schneider and v. Regions Bank

August 23, 2012


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


A. Introduction

In February 2012, Glenn and Carrie Schneider sued Regions Bank in the Circuit Court of St. Clair County, Illinois, alleging that Regions failed to timely close a credit account after the Schneiders fully paid off their debt, costing the Schneiders improperly charged late fees and resulting in derogatory credit reporting, a lower credit score, and the inability to refinance loans. Served with the complaint on March 29, 2012, Regions removed the action to this district court on April 30, 2012,*fn1 asserting subject matter jurisdiction under "11 U.S.C. § 1331" (Doc. 2, ¶ 4), which appears to be a typographical error meant to cite 28 U.S.C. 1331, the federal question statute.

Regions asserts that Plaintiffs' claims arise under a federal law (the Fair Credit Reporting Act) and that any state law causes of action are preempted by the Fair Credit Reporting Act. Regions also moves to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) with prejudice (Docs. 5-6).

Plaintiffs responded on June 7, 2012 with a motion to remand this case to state court for lack of subject matter jurisdiction (Doc. 12). Regions filed a memorandum opposing remand on July 12, 2012 (Doc. 15). The remand motion ripened when the July 30, 2012 reply brief deadline elapsed (no reply brief was filed). For the reasons set forth below, the Court denies Plaintiffs' remand motion and grants Regions' dismissal motion.

B. Analysis

The question of jurisdiction must be resolved first. "Federal district courts are courts of limited jurisdiction" which 'possess only that power authorized by Constitution and statute.'" Smart v. Local 702 Inter. Broth. Of Electrical Workers, 562 F.3d 798, 802 (7th Cir. 2009), quoting Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552 (2005). In 28 U.S.C. 1441, Congress authorized the removal of civil actions filed in state court over which federal courts enjoy original jurisdiction. See Hukic v. Aurora Loan Serv., 588 F.3d 420, 427 (7th Cir. 2009).

Here, Regions contends that original jurisdiction lies over Plaintiffs' claims under the federal question statute, 28 U.S.C. 1331. Section 1331 confers jurisdiction over cases that arise "under the Constitution, laws, or treaties of the United States." Id. at 429, citing 28 U.S.C. 1331.

Regions maintains that Plaintiffs' complaint presents a question of federal law: "it appears that Plaintiffs are seeking damages from Regions Bank based upon a theory of inaccurate reporting of information to reporting agencies, which is not a common law cause of action, but arises under the Fair Credit Reporting Act, 15 U.S.C. 1681, et seq." (Doc. 15, p. 2). Additionally, Regions suggests that even if the complaint could be construed to an Illinois-law-based cause of action, the specific conduct at issue here, as alleged by Plaintiffs, would violate the provisions of (and therefore be preempted by) the Fair Credit Reporting Act.

It is well-established that to support the exercise of subject matter jurisdiction under § 1331, the "federal question must be part of the plaintiff's well-pleaded complaint; jurisdiction may not be 'predicated on an actual or anticipated defense.'" Wisconsin Interscholastic Athletic Ass'n v. Gannett Co., Inc., 658 F.3d 614, 619 (7th Cir. 2011), citing Vaden v. Discover Bank, 556 U.S. 49 (2009), and Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149 (1908).

Stated another way,

A case arises under federal law if "'a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law.'" Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 689--90 . (2006) (quoting Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 27--28 (1983)); see also Mims v. Arrow Fin. Servs., LLC, ---- U.S. ----, 132 S.Ct. 740, 744 . (2012) (long recognized that a "suit arises under the law that creates the cause of action" (quoting Am. Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260 . (1916))); Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 312 . (2005) (§ 1331 satisfied by pleading "a cause of action created by federal law").

Trustees of Carpenters' Health and Welfare Trust Fund of St. Louis v. Darr, -- F.3d --, 2012 WL 3573360, *2 (7th Cir. Aug. 21, 2012)(emphasis added). See alsoSmart, 562 F.3d at 802 (the court determines the presence or absence of a federal question by examining the plaintiff's well-pleaded complaint, ).

In the case at bar, the complaint alleges the following. Plaintiffs established an open-end credit account with Regions Bank on October 12, 2007. Plaintiffs gave Regions a mortgage on their Breese, Illinois home as security for the account. Plaintiffs paid the credit account in full on May 16, 2008, at which time Regions should have closed the account. Regions did not close the account. Regions improperly continued to allow the account to exist. Because the account was not closed in a timely manner, Plaintiffs were charged late fees. The late fees resulted in derogatory credit reporting to Plaintiffs' credit bureau. Regions knew the mortgage loan had been paid in full. In fact, Regions admitted its error in a letter dated August 23, 2010 and promised to update Plaintiffs' credit report to delete any negative information. But as of April 30, 2012, despite this assurance by Regions and numerous requests by Plaintiffs, Regions still had not corrected or deleted the negative credit report ...

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