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Dreher Tomkies LLP
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Columbus, Ohio 43215
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DISTRICT COURT HOLDS THAT NATIONAL BANK MAY BE SUED IN STATE COURT FOR ALLEGED VIOLATIONS OF CALIFORNIA LAW OVER FEES

The United States District Court for the Central District of California has held that removal of an action against a national bank to federal court was not proper because the court lacked diversity and federal question jurisdiction. Karis House, Inc. v. Bank of America, No. CV 04-2898 (C.D. Cal. July 19, 2004). Karis House, Inc. maintained a deposit account with Bank of America to cover employee payroll checks. According to Karis House, Bank of America (i) committed an unfair business practice under Section 17200 of California's Business and Professions Code and (ii) caused Karis to violate Section 212 of the California Labor Code by instituting a policy of charging a $5 check cashing fee to non-account holders without informing Karis of this policy. (Section 212 requires employers to issue paychecks that are negotiable and payable in cash, on demand, without discount at some established place of business in California.) Karis filed suit against Bank of America in California state court and Bank of America removed the case to federal court on the basis of federal jurisdiction. The district court remanded.

Bank of America argued that diversity jurisdiction existed because Karis is incorporated in California and Bank of America is incorporated in Delaware and has a principal place of business in North Carolina. The court disagreed. According to the court, diversity jurisdiction only exists if no defendant has the same citizenship as any plaintiff. Furthermore, corporations are citizens of their state of incorporation and the state in which they have their principal place of business. The court indicated that Bank of America should be deemed to have a California principal place of business under prevailing analyses because a predominate amount of its activities occur in California, notwithstanding the fact that its corporate headquarters is in North Carolina. Consequently, the court found that Karis and Bank of America shared California citizenship and the court lacked diversity jurisdiction.

Bank of America also argued that federal question jurisdiction existed because Karis's Section 17200 claim was preempted by Section 484 of the National Bank Act ("NBA"), which prohibits states (and their private attorney generals) from exercising visitorial powers over national banks. Again, the court disagreed. According to the court, federal question jurisdiction exists only when a federal claim is raised on the face of the plaintiff's properly pleaded complaint. A preemption defense to a state law claim is insufficient unless the area of state law is completely preempted. If completely preempted, however, the state law claim should treated as a federal claim for purposes of federal question jurisdiction. The court indicated that Karis's complaint did not raise a federal claim. Moreover, the court indicated that the claims were not completely preempted by federal law because (i) the plain language of Section 484 of the NBA did not provide for such preemption and (ii) federal law clearly permits states to regulated national banks in certain areas as long as they do not prevent or significantly interfere with the bank's exercise of its powers, citing Barnett Bank of Marion County, 527 U.S. 25(1996). With respect to actions for unfair business practices and violations of labor law, the court stated, such actions do not "arise under" federal law, and thus are not preempted, citing First Nat. Bank of Aberdeen v. Aberdeen Nat. Bank, 627 F.2d 843, 849 (8th Cir. 1980), and California Fed. Sav. & Loan Assn. v. Guerra, 479 U.S. 272(1987).
Mike Tomkies and Chuck Gall

FTC RAISES NATIONAL DO NOT CALL REGISTRY FEES

The FTC amended Section 310.8 of its Telemarketing Sales Rule to raise the fees charged for access to the National Do Not Call Registry in order to offset costs incurred for implementing and enforcing the registry. 69 Fed. Reg. 45580. Section 310.8 now provides that the fee charged for each area code of data will be $40 per year, with the first five area codes provided to each entity at no charge. Exempt organizations (e.g., organizations seeking charitable contributions or conducting surveys) that access the registry voluntarily in order to avoid calling individuals who do not wish to receive telemarketing calls may do so at no charge. The maximum amount that may be charged any single entity will be $11,000, which will be charged to any entity accessing to additional area codes of data or more. Entities requesting access to additional area codes of data during the first six months of their annual period will be charged $40 per area code. Entities requesting additional area codes during the second six months of their annual period will be charged $20 per area code. The amendments to Section 310.8 become effective September 1, 2004.
Mike Tomkies and Chuck Gall