Grable — Federal Jurisdiction Through Conflict with Pending Federal Agency Order — Incomplete Preemption Not Enough - Joseph Hage Aaronson

Commercial Litigation and Arbitration

Commercial Litigation and Arbitration

Grable — Federal Jurisdiction Through Conflict with Pending Federal Agency Order — Incomplete Preemption Not Enough

Massachusetts brought an action in state court against a lender charging that its sub-prime mortgage practices violated state consumer protection statutes, in Com’w of Massachusetts v. Fremont Inv. & Loan, 2007 U.S. Dist. LEXIS 95617 (D. Mass. Dec. 26, 2007). The lender removed to federal court alleging that some of the relief sought in the complaint “may or does conflict with an FDIC Order to Cease and Desist ... [which] was entered pursuant to 12 U.S.C. § 1818, which includes the restriction that ‘no court shall have jurisdiction to affect by injunction or otherwise the ... enforcement of any ... order ... or set aside any such notice or order.’" The plaintiff asserted that the federal question was “whether and to what extent the FDIC Order and § 1818(i)(1) limit the relief that may ultimately be granted should the Commonwealth prevail on its complaint.”

Held, no federal jurisdiction because Grable does not encompass incomplete preemption (at least not in this setting): “[I]f there is any conflict between the FDIC Order and any relief ultimately awarded in state court, there is a problem only to the extent that the state-awarded relief were to be preempted by the federal statute,” and “Grable does not invade the area of less-than-complete preemption already pronounced an insufficient basis for federal-question jurisdiction” in Caterpillar v. Williams, 482 U.S. 386, 392-93 (1987) and Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987).

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