Federal banking law doesn't pre-empt state usury claims.

• Author: Sanders, Carol McHugh

In an 11th Circuit opinion that provides a brief history lesson on two Congressional acts dating back to 1789 and 1864, the court determined that the National Bank Act (NBA) does not completely pre-empt state law claims challenging usurious interest rates. A dissenting judge in Anderson v. H&R Block Inc., 287 F.3d 1038 (2002), however, said he found language in a law predating the NBA's enactment in 1864 that shows that the usury rate action can be filed only in federal court.

The 11th Circuit's decision also departs from the Eighth Circuit's ruling in M. Nahas & Co. v. First National Bank of Hot Springs, 930 F.2d 608 (1991), which held that the NBA's Section 86 completely pre-empts state law usury claims.

Twenty-six customers of H&R Block who had taken out tax refund anticipation loans from Beneficial National Bank, alleged that Block and the bank violated Alabama's usury rate laws. Asserting that the state law usury claims should be recharacterized as federal claims under the doctrine of complete pre-emption because they were covered by Sections 85 and 86 of the NBA, Beneficial and Block removed the case to federal court.

On the plaintiff's motion to remand back to state court, the district court held that removal was proper because federal question jurisdiction existed based on complete pre-emption. The district court, recognizing that the issue was unsettled in the 11th Circuit, certified an interlocutory appeal to determine whether the NBA provisions pre-empt state law usury claims so as to confer removal jurisdiction.

The majority of the 11th Circuit panel, in an opinion by Judge Wilson, held that complete pre-emption, which means that a federal forum is mandated, was not what Congress intended when it enacted the NBA in 1864. Complete pre-emption, the court pointed out, is a different animal from "ordinary pre-emption," which can be asserted in state court and applied by state judges. The court noted that the U.S. Supreme Court has found complete preemption under only two federal statutes: Section 301 of the Labor Management Relations Act and Section 502(a) of the Employee Retirement...