Monroe Retail, Inc. v. Rbs Citizens, N.A.

589 F.3d 274

MONROE RETAIL, INC., et al., Plaintiffs-Appellants, v. RBS CITIZENS, N.A., f/k/a Charter One Bank, N.A., et al., Defendants-Appellees.

No. 074263.

United States Court of Appeals, Sixth Circuit.

Argued: September 19, 2008.

Decided and Filed: December 14, 2009.

ARGUED:

William H. Bode, Bode & Grenier, LLP, Washington, DC, for Appellants. Kerin Lyn Kaminski, Giffen & Kaminski, Cleveland, OH, Keith Alexander Noreika, Covington & Burling LLP, Washington, DC, for Appellees.

ON BRIEF:

William H. Bode, Bode & Grenier, LLP, Washington, DC, for Appellants. Karen Louise Giffen, Giffen & Kaminski, Cleveland, OH, Keith Alexander Noreika, Covington & Burling LLP, Washington, DC, Frances F. Goins, Michael Nathan Ungar, Jason S. Hollander, Ulmer & Berne, Cleveland, Ohio, Brett K. Bacon, Gregory R. Farkas, Frantz Ward LLP, Cleveland, OH, for Appellees.

Before: COLE and GIBBONS, Circuit Judges; FORESTER, District Judge.^*

GIBBONS, J., delivered the opinion of the court, in which FORESTER, D.J., joined. COLE, J. (pp. 285-89), delivered a separate dissenting opinion.

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

Plaintiffs-appellants Monroe Retail, Inc.; Jerome Phillips, Esq.; and Leo Marks, Inc. ("the Garnishors") appeal the district court's dismissal of their claim against defendants-appellees RBS Citizens, N.A. (formerly known as Charter One Bank, N.A.); The Huntington National Bank; Huntington Bancshares, Inc.; JPMorgan Chase Bank, N.A.; JPMorgan Chase & Co.; Keybank, N.A.; Keycorp, National City Bank; National City Corporation; Sky Bank; U.S. Bank, N.A.; and U.S. Bancorp ("the Banks"). The Garnishors brought suit against the Banks for conversion, alleging that the Banks unlawfully used garnished funds to satisfy service fees to the Banks. For the reasons below, we affirm the dismissal of the Garnishors' claim.

I.

The relevant facts are not in dispute. The Garnishors are garnishor-creditors in Ohio who obtain judgments against debtors when debts are not repaid. The Garnishors often collect these judgments by garnishing the debtors' bank accounts. Ohio Revised Code ("ORC") § 2716.12 provides that a garnishment action must be accompanied by a one dollar fee to the garnishee, in this case, the Banks who hold the debtors' funds in customer accounts. The Banks charge an additional $25 to $80 service fee to the debtors for the garnishment process. When debtors have insufficient funds to satisfy both the service fee and the garnishment order, the Banks extract the service fees from the garnished funds before releasing the remainder of the funds to the Garnishors.

The Garnishors filed a class action suit against the Banks¹ in the Court of Common Pleas of Lucas County, Ohio, on August 31, 2006, alleging three causes of action against the Banks. First, the Garnishors claimed that the service fees charged by the Banks amount to additional garnishment fees beyond the one dollar fee authorized by ORC § 2716.12 and therefore violate that section, causing the Garnishors to have lost at least $5,000,000. Second, the Garnishors claimed that by deducting these service fees, the Banks were illegally converting funds belonging to the Garnishors for their own use in violation of the garnishment process prescribed by ORC § 2716.13(B) and § 2716.21(D). Third, the Garnishors sought injunctive relief to prevent the Banks from continuing to deduct service fees from funds in the debtors' accounts. The Banks all responded by filing dispositive motions.

Defendants The Huntington National Bank; Huntington Bancshares Inc.; JPMorgan Chase Bank, N.A.; JPMorgan Chase & Co.; National City Bank; National City Corporation; U.S. Bank N.A.; and U.S. Bancorp ("Removing Defendants") timely filed a notice of removal on October 3, 2006. The case was removed to the United States District Court for the Northern District of Ohio. The Removing Defendants filed a motion for judgment on the pleadings on January 19, 2007. Defendants Charter One Bank and Sky Bank also filed motions for judgment on the pleadings. Defendants KeyBank and KeyCorp filed a motion to dismiss. In their various motions, the Banks claimed, inter alia, that 1) the Garnishors lacked standing; 2) the Banks were not proper defendants; 3) ORC § 2716.12 unambiguously permits additional fees beyond one dollar; and 4) the Garnishors' claims are preempted by federal banking law. KeyBank, KeyCorp, and Sky Bank, the sole state bank defendant, additionally claimed that 5) the Banks have a right to "set off" an account-holder's debt to the Banks, including service fees, against the account-holder's debt to the Garnishor.

On September 18, 2007, the district court held that 1) the Garnishors had standing because they suffered actual injuries; and 2) the Garnishors met their pleading burden to show that the Banks should be defendants. The district court dismissed the Garnishors' complaint on the remaining grounds, concluding that 3) ORC § 2716.12's plain meaning "contains no clear limitation on additional garnishment charges"; 4) the National Banking Act preempts the Garnishors' claims as to national banks but not as to state banks; and 5) the Banks have a right to set off service fees against bank accounts before remitting the remaining funds to the Garnishors. Monroe Retail, Inc. v. Charter One Bank, N.A., 624 F.Supp.2d 677 (N.D.Ohio 2007). The district court noted that its finding that the National Banking Act preempted state regulation of bank fees was consistent with the Officer of the Comptroller of the Currency's interpretation of its own regulations.

The Garnishors timely appealed. In their final reply brief, the Garnishors withdrew their claim that the Banks had violated ORC § 2716.12. Thus the only substantive issue on appeal before us is the Garnishors' conversion claim.

II.

We review a district court's determination of standing de novo. See Wuliger v. Mfrs. Life Ins. Co., 567 F.3d 787, 793 (6th Cir.2009). "Every federal appellate court has a special obligation to `satisfy itself not only of its own jurisdiction, but also that of the lower courts in a cause under review,' even though the parties are prepared to concede it." Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (quoting Mitchell v. Maurer, 293 U.S. 237, 244, 55 S.Ct. 162, 79 L.Ed. 338 (1934)). The issue of standing was thoroughly discussed by the district court, and neither party raised the issue on appeal. Nevertheless, "a merits question cannot be given priority over an Article III question," id. at 97 n. 2, 118 S.Ct. 1003, and we must begin by addressing standing. In order to bring suit, the Garnishors must have standing as required both by Article III of the United States Constitution and by the doctrine of prudential standing. See Warth v. Seldin, 422 U.S. 490, 498-99, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975).

In order to establish Article III standing, the Garnishors "must have suffered some actual or threatened injury due to the alleged illegal conduct of the defendant; the injury must be `fairly traceable' to the challenged action; and there must be a substantial likelihood that the relief requested will redress or prevent the plaintiff's injury." Coyne ex rel. Ohio v. Am. Tobacco Co., 183 F.3d 488, 494 (6th Cir.1999). Phrased succinctly, the "`irreducible minimum' ... requirements for standing are proof of injury in fact, causation, and redressability." Id. The Garnishors claim that by receiving garnishment funds that have been reduced by the Banks' service fees, the Garnishors have suffered actual injuries. This loss is an injury in fact that could be redressed by compensating the Garnishors for their economic losses. See id. We thus affirm the district court's finding that the Garnishors have established standing under Article III.

"Once [the Garnishors] allege[] an injury-in-fact that is fairly traceable to the actions of [the Banks, the Garnishors] must show that [they] ha[ve] met the prudential standing requirements." Club Italia Soccer & Sports Org., Inc. v. Charter Twp. of Shelby, 470 F.3d 286, 295 (6th Cir.2006). In order to satisfy prudential standing, the Garnishors' claims must 1) "assert [their] own legal rights and interests," 2) be more than a "generalized grievance," and, 3) in statutory cases, "fall within the zone of interests regulated by the statute in question." Wuliger, 567 F.3d at 793 (internal citation and quotation marks omitted). The Garnishors have asserted their own legal rights and interests in receiving the full amount of the garnished funds pursuant to lawfully obtained judgments. The fact that the service fees are initially charged to debtors does not negate the fact that their collection by the Banks affects the rights and interests of the Garnishors. Furthermore, the Garnishors pled a particular grievance involving the specific garnishment process undertaken by the Banks with regards to debtors' insufficient garnishment funds. Lastly, the Garnishors have withdrawn their statutory claim, so this requirement is no longer applicable. The Garnishors have demonstrated that they are "proper proponent[s], and the action a proper vehicle, to vindicate the rights asserted." Id. (internal citation and quotation marks omitted). We thus find that the Garnishors have established prudential standing, and we proceed to merits of their claims.

III.

We review de novo a district court's grant of judgment on the pleadings. See Hughlett v. RomerSensky, 497 F.3d 557, 561 (6th Cir.2006). We grant a party's motion for judgment on the pleadings when "all well-pleaded material allegations of the pleadings of the opposing party [are] taken as true, and ... the moving party is nevertheless clearly entitled to judgment." JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 581 (6th Cir.2007) (internal citation and quotation marks omitted). There must be no material issue of fact that could prevent judgment for the moving party. Id. at 582. "The standard of...