Walker v. Am. Express Centurion Bank

HON. CLAUDE EARL WALKER,Attorney General of the Virgin Islands of the United States, in his official capacity;and the GOVERNMENT OF THE VIRGIN ISLANDS OF THE UNITED STATES, Petitioners, v. AMERICAN EXPRESS CENTURION BANK and AMERICAN EXPRESS BANK, FSP., Respondents.

Civil Action No. 2018-0001

DISTRICT COURT OF THE VIRGIN ISLANDS DIVISION OF ST. CROIX

September 17, 2020

Attorneys:

Carol Thomas-Jacobs, Esq.,

St. Thomas, U.S.V.I.

David I. Ackerman, Esq.,

Washington, D.C.

For Petitioners

Chad C. Messier, Esq.,

St. Thomas, U.S.V.I.

David S. Lesser, Esq.,

New York, N.Y.

David W. Ogden, Esq.,

Washington, D.C.

For Respondents

MEMORANDUM OPINION

Lewis, Chief Judge

THIS MATTER is before the Court on a Report and Recommendation ("R&R") issued by Magistrate Judge George W. Cannon, Jr. (Dkt. No. 20), pursuant to an Order referring this matter for the same (Dkt. No. 16). In his R&R, the Magistrate Judge recommends that the Court remand to the Superior Court of the Virgin Islands the "Petition to Enforce Administrative Subpoena under 12A V.I.C. §104(b)" ("Petition") filed by the Attorney General of the Virgin Islands and the Government of the Virgin Islands (collectively "Government"). (Dkt. No. 1-1). American Express Centurion Bank and American Express Bank, FSP (collectively "American Express") filed Objections to the R&R (Dkt. No. 22), to which the Government responded (Dkt. No. 34), and American Express then replied (Dkt. No. 35).¹ For the reasons that follow, the Court rejects the Magistrate Judge's R&R, as discussed herein, and will retain jurisdiction over the Petition.

I. BACKGROUND

In this action, the Government issued a "Civil Investigative Demand" ("CID") directing American Express to produce information and documents relating to allegations that American Express engaged in disparate treatment of consumers, including consumers in the Virgin Islands. (Dkt. No. 1-1).² The allegations against American Express were originally asserted in an administrative proceeding before the Consumer Finance Protection Bureau ("CFPB"). (Dkt. No. 4-2). In August 2017, American Express and the CFPB entered into a 46-page Consent Order (the "Consent Order") resolving the CFPB's allegations. As part of the Consent Order, American Express paid more than $90 million in remediation. American Express agreed to the Consent Order"without admitting or denying any of the [CFPB's] findings of fact or conclusions of law." (Dkt. No. 4-2 at 3-4). The Consent Order also specifically states that its provisions "do not bar, estop, or otherwise prevent . . . any other governmental agency from taking any other action against" American Express. (Dkt. Nos. 1-1 at 67; 4-2 at 45).

Although American Express allegedly cooperated with investigating authorities in the continental United States in connection with the conduct described in the Consent Order, the Government has alleged difficulty in the course of its investigation. The Government thus initiated proceedings in the Superior Court of the Virgin Islands to enforce American Express' compliance with the CID so that the Government could gain access to materials necessary to determine whether American Express' conduct violated, among other things, the Unfair Trade Practices Act, 12A V.I.C. § 101 et seq. (Dkt. No. 1-1 at 2-9). On the same day as the Government's filing in the Superior Court, American Express filed a "Petition to Quash Non-Judicial Civil Investigative Demand and for a Protective Order" in the Supreme Court of the State of New York, County of New York.

Thereafter, American Express timely removed the instant enforcement action from the Superior Court to this Court pursuant to the "Edge Act," codified at 12 U.S.C. § 632. The Edge Act grants federal jurisdiction over certain types of civil matters in which a federally chartered bank is a party. In its Notice of Removal, American Express contends that removal is proper because: (1) the Petition is a "suit of a civil nature at common law or in equity;" (2) the Government's action to enforce its CID related to American Express' credit and charge card services "arises out of transactions involving banking in a dependency or insular possession . . . for purposes of Edge Act jurisdiction;" (3) "[t]he Action involves traditional banking activity by requesting materials related to, inter alia, [American Express'] pricing, fee structure, andcondition[s] for credit and charge cards issued in the U.S. Virgin Islands;" and (4) "[t]he Action also involves credit and charge card underwriting account management services" and "implicates 'financial operations'" under the Edge Act. (Dkt. No. 1 at ¶¶ 15-18).

American Express filed an Opposition to the Government's Petition to Enforce the Administrative Subpoena (Dkt. No. 3), repeating the same arguments it asserted in the New York court. The Government filed a Reply Brief (Dkt. No. 11), and the Court referred the matter to Magistrate Judge George W. Cannon, Jr. for consideration of both the jurisdictional issue and the enforcement action "as appropriate." (Dkt. No. 16). Shortly thereafter, Magistrate Judge Cannon issued his R&R, finding that the Court lacked jurisdiction over this dispute and recommending that the matter be remanded to the Superior Court. (Dkt. No. 19). American Express filed Objections to the Magistrate Judge's ruling. (Dkt. No. 22).

In the interim, the New York litigation proceeded. The Government responded to American Express' Petition and filed its own Motion to Dismiss in the New York state action. The New York state trial court denied American Express' petition and granted the Government's Motion to Dismiss, finding, inter alia, that the matter "should be litigated in the U.S. Virgin Islands, the jurisdiction with the greater interest in the matter." (Dkt. 23-1 at 3). The trial court's decision was subsequently reversed by the Appellate Division of the Supreme Court of the State of New York, First Judicial Department, which found that the petition to quash should have been granted. See Matter of American Express Co. v United States Virgin Is. Dept. of Justice, 178 A.D. 3d 426, 115 N.Y.S.3d 236, 237 (N.Y.A.D. 2019). Thereafter, the Appellate Division rejected a motion by the Government to reargue the case. See In re Am. Express Co. v. United States Virgin Islands Dep't of Justice, et al., 2020 WL 1057944 (N.Y. App. Div. Mar. 5, 2020).

In recommending remand of the Petition to the Superior Court, Magistrate Judge Cannon concluded that the Petition and related CID did not arise out of a banking activity. (Dkt. No. 20). Specifically, the R&R states:

Here, the action removed is enforcement of an administrative subpoena. Even though the subpoena itself requests information that appears to be related to banking activity, the instant Petition is not an action arising from a transaction involving banking. The documents provided to the Court show only that a suit may arise at a future date. A complaint that alleges a violation of law and that contains sufficient facts to show that a transaction involving traditional banking activities is connected to that violation has not been filed.

Id. at 5 (some citations omitted). American Express' Objections—discussed more fully below—challenge Magistrate Judge Cannon's conclusion that the Petition does not arise "from a transaction involving banking" and argue that each requirement for the application of the Edge Act has been satisfied. (Dkt. No. 22).

II. DISCUSSION

A. Applicable Legal Principles

Parties may make "specific written objections" to a magistrate judge's report and recommendation "[w]ithin 14 days after being served with a copy of the recommended disposition." See Fed. R. Civ. P. 72(b)(2); see also 28 U.S.C. § 636(b)(1) ("Within fourteen days after being served with a copy, any party may serve and file written objections to such proposed findings and recommendations as provided by rules of court."). Where—as here—a party makes a timely objection, the district court "make[s] a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1)(C). Accordingly, the Court will review the matter de novo.

Federal courts are courts of limited jurisdiction and thus, are permitted to adjudicate cases and controversies only as allowed under Article III of the United States Constitution. Art. III, § 2. American Express argues that the Petition is properly before this Court because it falls within the purview of the Edge Act, 12 U.S.C. § 632. (Dkt. No. 1 at 1-2). In pertinent part, the Edge Act provides:

Notwithstanding any other provision of law, all suits of a civil nature at common law or in equity to which any corporation organized under the laws of the United States shall be a party, arising out of transactions involving international or foreign banking, or banking in a dependency or insular possession of the United States, or out of other international or foreign financial operations, either directly or through the agency, ownership, or control of branches or local institutions in dependencies or insular possessions of the United States or in foreign countries, shall be deemed to arise under the laws of the United States, and the district courts of the United States shall have original jurisdiction of all such suits.

12 U.S.C. § 632.

In removal cases, the party seeking to remove an action from state court to federal court bears the burden of establishing federal jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994) (burden of establishing federal jurisdiction on the party asserting jurisdiction); Vodenichar v. Halcón Energy Properties, Inc., 733 F.3d 497, 503 (3d Cir. 2013) (party seeking removal under Class Action Fairness Act bears the burden of proving action is properly removed under that statute). Removal statutes should "be strictly construed and all doubts resolved in favor of remand." Brown v. Francis, 75 F.3d 860, 865 (3d Cir. 1996) (...