Capital One Bank (Usa), N.A. v. McGraw

563 F.Supp.2d 613

CAPITAL ONE BANK (USA), N.A., et al., Plaintiffs, v. Darrell V. McGRAW, Jr., Defendant.

Civil Action No. 2:08-cv-00165.

United States District Court, S.D. West Virginia, Charleston Division.

June 26, 2008.

Bruce M. Jacobs, Niall A. Paul, Spilman Thomas & Battle, Charleston, WV, James R. McGuire, Rita Lin, Morrison & Foerster, San Francisco, CA, for Plaintiffs.

Charli Fulton, Office of the Attorney General, Troy N. Giatras, The Giatras Law Firm, Charleston, WV, for Defendant.

MEMORANDUM OPINION AND ORDER

JOSEPH R. GOODWIN, Chief Judge.

Pending before the court is the defendant's Motion to Dismiss. For reasons set forth below, the defendant's motion is DENIED in part and GRANTED in part. Because I find as a matter of law that the defendant's subpoena cannot lawfully be enforced against Capital One Bank (USA), N.A., the defendant and his agents are (1) permanently ENJOINED from issuing subpoenas or demanding the inspection of the books and records of Capital One Bank (USA), N.A., in connection with the defendant's investigation into credit card lending, and (2) permanently ENJOINED from seeking to enforce the subpoena referenced in State of West Virginia ex rel. Darrell V. McGraw, Jr., Attorney General v. Capital One Bank, Misc. Action No. 05-C-71 (Circuit Court of Lincoln County). Because I find that Capital One Services, Inc., is not protected by the National Bank Act, the plaintiffs' claims regarding the defendant's subpoena of Capital One Services, Inc., are DISMISSED with prejudice. Likewise, the plaintiffs' § 1983 claims are DISMISSED with prejudice.

Also pending before the court is the defendant's Motion to Unseal File for the Limited Purpose of Appointing Amicus Curiae. This motion is DENIED as moot.

I. Background

A Factual Background

This case arises from the West Virginia Attorney General's attempt to investigate consumer complaints regarding the activities of plaintiff Capital One Bank (USA), N.A., ("Capital One") and Capital One Services, Inc. ("COSI"). After receiving approximately 150 consumer complaints against Capital One and approximately 114 complaints against COSI, the defendant launched an investigation of these entities. (Procedural Order 9, 18, Circuit Court of Lincoln County, Def.'s Brief Ex. 1.) The complaints included claims that (1) consumers were promised high amounts of credit that they did not receive, (2) consumers were faced with high interest rates, high late fees, and over-limit fees, (3) consumers had problems trying to settle and close their accounts, and (4) consumers who purchased a product called "The Payment Protection Plan" were not receiving the benefits for which they paid. (Procedural Order 18-19.)

As a result of these consumer complaints, the defendant served subpoenas on Capital One and COSI on April 4, 2005. At the time the defendant served the subpoenas, Capital One was a Virginia-chartered bank and COSI was a Delaware corporation. (Compl. ¶¶ 12-3.) The subpoenas, which are virtually identical, were issued to assist the defendant "in the investigation of possible unfair or deceptive acts or practices relating to marketing, advertising, servicing, including debt collection, and issuing of credit cards and related services, in violation of the West Virginia Consumer Credit and Protection Act, W. Va.Code § 46A-1-101, et seq." (Capital One Subpoena, Pis.' Brief Ex. A; COSI Subpoena, Pis.' Brief Ex. B.) The subpoena's, as originally issued, request information for the time period beginning on January 1, 2001, and continuing until the plaintiffs respond. (Capital One subpoena 2.)

In the subpoenas, the defendant requests information regarding, among other things: (1) the Payment Protection Plan, (2) offers of credit made to consumers, (3) secured credit cards, (4) consumers who attempted to close a credit card but where unable to do so because of an outstanding balance, (5) fees charged in connection with credit card products, and (6) procedures for investigating consumer complaints. (Capital One Subpoena; COSI Subpoena.) The subpoenas also request the identity and account information of consumers who purchased certain products from the plaintiffs. (Capital One Subpoena; COSI Subpoena.) Finally, the subpoenas seek documents relating to the ownership and corporate structure of Capital One and COSI. (Capital One Subpoena; COSI Subpoena.)

Capital One and COSI failed to respond to the defendant's subpoenas. On May 9, 2005, the defendant filed petitions to enforce the subpoenas in the Circuit Court for Lincoln County, West Virginia. (Compl. ¶ 11.) On September 10, 2007, over two years after the defendant filed the petitions, Judge Hoke denied Capital One and COSI's motions to dismiss and granted the defendant's petitions to enforce the subpoenas. (Procedural Order 42.) Judge Hoke ordered Capital One and COSI to respond to the defendant's subpoenas within 90 days of the issuance of the order. (Id. at 43.) Capital One and COSI appealed Judge Hoke's order to the West Virginia Supreme Court of Appeals, and the Supreme Court of Appeals stayed the order pending its consideration of the appeal. (Compl. ¶ 4.)

On March 1, 2008, Capital One converted from a Virginia-chartered bank to "a national banking association organized under the National Bank Act." (Id. ¶ 12.) On March 7, 2008, Capital One and COSI, which remained a Delaware corporation, notified the defendant of Capital One's conversion to a national bank. (Id. ¶ 13.) The plaintiffs requested that in light of this conversion, the defendant withdraw its subpoenas. (Id; Conversion Letter, Compl. Ex. A.) The defendant refused. (Compl. ¶ 14.)

B. Procedural Background

On March 13, 2008, the plaintiffs filed the present suit. The plaintiffs seek a declaration that the defendant and his agents may not enforce the subpoenas against the plaintiffs, pursue the state-court action for enforcement of the subpoenas, or otherwise investigate or sue Capital One or COSI regarding banking activities. (Id. ¶¶ 29-31.) The plaintiffs also seek an injunction requiring the defendant to dismiss the state-court action for enforcement of the subpoenas and preventing them from attempting to investigate or sue Capital One and COSI regarding banking activities. (Id. ¶¶ 15-28.) Finally, the plaintiffs seek injunctive and declaratory relief under 42 U.S.C. § 1983. The court has subject-matter jurisdiction under 28 U.S.C. § 1331.

On March 18, 2008, I ordered the parties to brief (1) whether, by seeking to enforce its subpoenas, the defendant is exercising "visitorial powers" as that term is defined in 12 U.S.C. § 484(a); and (2) whether subpoening COSI in this case hampers the federally authorized activities of a national bank. The parties briefed those issues as ordered. On April 8, 2008, the defendant filed a motion to dismiss based on Rule 12(b)(6) of the Federal Rules of Civil Procedure. On May 6, 2008, the defendant advised that it amended the subpoena issued against Capital One cover only the time period before Capital One became a national bank. (Def.'s Reply 1.)

II. Discussion

In support of its motion to dismiss, the defendant makes four arguments. First, the defendant argues that by subpoening Capital One and COSI, it is not exercising any "visitorial power," and thus 12 U.S.C. § 484(a) does not bar its investigation. Second, the defendant argues that because the subpoena against Capital One is now limited to the time period before Capital One became a national bank, the defendant's enforcement of the subpoena does not implicate any visitorial powers. The defendant also asserts that because COSI is neither a national bank nor an operating subsidiary of a national bank, the National Bank Act ("NBA"), 12 U.S.C. § 1 et seq., does not shield COSI from the defendant's investigation. Finally, the defendant contends that the NBA does not provide national banks with rights enforceable under 42 U.S.C. § 1983.

A. Standard of Review

Federal Rule of Civil Procedure 12(b)(6) allows a defendant to move for dismissal based on the plaintiff having "fail[ed] to state a claim upon which relief can be granted." "The purpose of a Rule 12(b)(6) motion is to test the sufficiency of a complaint," not "resolve contests surrounding the facts or merits of a claim." Smith v. Frye, 488 F.3d 263, 274 (4th Cir.2007) (citing Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir.1999)). In addressing a 12(b)(6) motion, a court will construe the factual allegations in the light most favorable to the nonmoving party and accept them as true, but it is not so bound with respect to the complaint's legal conclusions. Schatz v. Rosenberg, 943 F.2d 485, 489 (4th Cir.1991). "Once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Bell Atl. Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1969, 167 L.Ed.2d 929 (2007). A complaint will survive a 12(b)(6) motion if it contains "enough facts to state a claim to relief that is plausible on its face," but the complaint must consist of "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 1974, 1964-65.

B. Visitorial Powers

The NBA was designed to create a banking system "extending throughout the country, and independent, so far as powers conferred are concerned, of state legislation which, if permitted to be applicable, might impose limitations and restrictions as various and numerous as the states." Easton v. Iowa, 188 U.S. 220, 229, 23 S.Ct. 288, 47 L.Ed. 452 (1903). To protect this independence, the NBA provides that "[n]o national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice or such as shall be, or have been exercised or directed by Congress or by either House thereof or by any committee of Congress or of either House duly authorized." 12 U.S.C. § 484(a). In 12 C.F.R. § 7.4000(a)(...