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Pennsylvania Federal Court Finds Reg J’s Defenses Do Not By themselves Create Federal Question Jurisdiction | Ballard Spahr srl

A Pennsylvania Federal District Court recently ruled that Regulation J did not fully preempt state law claims related to a wire transfer and therefore did not fall under the “full preemption” exception to the “well-argued complaint rule”. Reg J handles the collection of checks and other items by Federal Reserve Banks and the transfer of funds through Fedwire.

In this case, the applicant was the victim of a fraudulent scheme. Over the course of several months, a fraudster convinced the complainant to transfer $ 4,300,000 from her Dollar Bank account to an account controlled by the fraudster. The plaintiff filed a lawsuit against Dollar Bank in Pennsylvania State Court, alleging a lawsuit for negligence in failing to protect her from the fraudulent scheme and in violation of the Unfair Trade Practices and Consumer Protection Act of Pennsylvania by announcing that it protects customer information from scams.

Dollar Bank returned the lawsuit to federal court, alleging that because the case involved a wire transfer, Reg J had anticipated the plaintiff’s state law claims. Specifically, Dollar Bank argued that the case fell under the full pre-emption exception to the well-argued complaints rule, so the federal court had substantive jurisdiction over the case.

The federal court rejected Dollar Bank’s argument. In so ruling, the Federal Court reiterated the well-known rule: although federal jurisdiction over the matter is usually decided on the basis of a complaint, a narrow exception exists when a federal cause of action entirely supersedes the claims. of state law. The Pennsylvania federal court ruled that Reg J cannot fully pre-empt state law because complete preemption requires an act of Congress, and the Federal Reserve Act – the enabling statute for Reg J – does not reflect the Congressional intention for Reg J to completely pre-empt state law claims. On the contrary, Reg J offers an “ordinary preemption”, namely a defense of preemption against the legal claims of the conflicting states.

The Pennsylvania federal court decision is consistent with decisions of the United States Court of Appeals for the Sixth Circuit and a Mississippi federal district court, finding that Reg J does not fully prejudge claims in law of the ‘State.