Saturday, August 25, 2007, 6:36 AM

Vaden Lives

Last week, with Republic Bank & Trust Company v. Kucan, the Fourth Circuit underscored what it held in Discover Bank v. Vaden (blogged by Sean earlier this year) -- that where a state-chartered bank is a real party in interest to state law usury claims against the bank's servicing agent, the usury claims are completely preempted by the Federal Deposit Insurance Act.

In Republic Bank, the defendants were borrowers of "pay-day loans" serviced by Advance America. The borrowers brought suit in North Carolina state court under North Carolina's usury laws and Consumer Finance Act. Republic Bank, in turn, moved in federal court to compel arbitration. The E.D.N.C. dismissed for lack of standing.

The Fourth Circuit held that standing existed, finding that Republic Bank had a sufficiently direct and personal stake in the litigation nominally between Advance America and the borrowers because, inter alia, Republic Bank was a party to the arbitration agreements and was at risk of losing assets if the loans were void under the Consumer Finance Act.

The Fourth Circuit could not determine, however, and therefore remanded regarding, whether the other requirements for federal jurisdiction were present, i.e., whether the jurisdictional amount for diversity jurisdiction was met, or whether Republic Bank was the real subject of the borrowers' claims.

(In the interest of full disclosre, WCSR represents Advance America.)


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