On November 12, U.S. SDNY granted a motion to remand a consumer lending case brought by New York Attorney General Letitia James to state court. The court’s analysis focused on whether the case presented a federal question sufficient for federal jurisdiction. As previously covered by InfoBytes, the complaint alleged that a financial services company, via its wage advance product, violated New York State usury laws, engaged in deceptive and abusive practices, and misrepresented costs to consumers.

While the complaint included causes of action referencing alleged violations of the federal CFPA, the court found that all claims were brought under New York Executive Law § 63(12) — a state law which authorizes the attorney general to seek relief for repeated or persistent illegal or fraudulent conduct, including conduct that violates state or federal law. The court held that referencing federal law (i.e., the CFPA) as a predicate for liability under state law does not convert a state law claim into a federal one.

The court explained that federal jurisdiction over a state law claim exists only if a federal issue is: (i) necessarily raised; (ii) actually disputed; (iii) substantial; and (iv) capable of resolution in federal court without disrupting the federal-state balance. Applying these factors, known as the Grable-Gunn test, the court found that, although the complaint referenced federal law, any federal issues were not substantial to the federal system as a whole and their resolution would not disrupt the balance of judicial responsibilities between state and federal courts. The court also noted that Congress intended to preserve state enforcement authority under the CFPA. Accordingly, the court determined that state court was the proper forum for the claims to be adjudicated and ordered the case remanded to the New York Supreme Court.