Chase Bank USA, N.A. v. City of Cleveland , 695 F.3d 548 ( 2012 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 12a0348p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
CHASE BANK USA, N.A., JPMORGAN CHASE X
-
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BANK, N.A., JPMORGAN MORTGAGE
ACQUISITION CORP., and J.P. MORGAN -
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Nos. 10-4115/4116
SECURITIES, INC.,
Plaintiffs-Appellants/Cross-Appellees, ,>
-
-
-
v.
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Defendant-Appellee/Cross-Appellant. N
CITY OF CLEVELAND,
Appeal from the United States District Court
for the Northern District of Ohio at Cleveland.
No. 08-00514—Sara E. Lioi, District Judge.
Decided and Filed: September 26, 2012
Before: MOORE and GRIFFIN, Circuit Judges, and QUIST, District Judge.*
_________________
COUNSEL
ON BRIEF: Isaac Schulz, Michael N. Ungar, Richik Sarkar, ULMER & BERNE LLP,
Cleveland, Ohio, for Appellants/Cross-Appellees. Joshua R. Cohen, COHEN
ROSENTHAL & KRAMER LLP, Cleveland, Ohio, for Appellees/Cross-Appellants.
_________________
OPINION
_________________
KAREN NELSON MOORE, Circuit Judge. The foreclosure crisis that swept the
nation in the latter half of the past decade hit Cleveland particularly hard. It also led to
this litigation. Though this case has as its background such weighty factual topics as
subprime-mortgage lending, foreclosures, and the precarious economic state of the post-
*
The Honorable Gordon J. Quist, United States District Judge for the Western District of
Michigan, sitting by designation.
1
Nos. 10-4115/4116 Chase Bank, et al. v. City of Cleveland Page 2
industrial Midwest, the issue at stake in this appeal is solely procedural. Our task is to
determine whether the district court had subject-matter jurisdiction over a suit by several
financial institutions seeking declaratory and injunctive relief from two other lawsuits
filed by the City of Cleveland. We conclude that it did. Because the district court
nonetheless dismissed the suit sua sponte for failure to state a claim without notice to the
parties, we REVERSE the judgment of the district court and REMAND for further
proceedings.
I. BACKGROUND
The City of Cleveland has seen a record number of home foreclosures in the past
decade. Between 2000 and 2008, Cuyahoga County, Ohio, where Cleveland is located,
recorded approximately 80,000 foreclosures. Scott Simon, In Cleveland, Foreclosures
Decimate Neighborhoods, Nat’l Pub. Radio, May 24, 2008. In 2007, County Treasurer
Jim Rokakis described the city as “the epicenter of the mortgage meltdown in America.”
Thomas Ott & Susan Vinella, Home Loan Foreclosures on the Rise in Cuyahoga, The
Plain Dealer, July 4, 2007, at B1. Against this backdrop came the three lawsuits relevant
to this case.
A. City of Cleveland v. Ameriquest Mortgage Securities, Inc. (City of Cleveland I)
In January 2008, Cleveland brought suit against twenty-one financial institutions
in Ohio state court, alleging that the defendants’ actions in the subprime-mortgage
industry constituted a public nuisance under Ohio common law. By securitizing
subprime mortgages and later foreclosing on the houses purchased through such
mortgages, the defendants allegedly contributed to a financial crisis in the city that
included significant declines in property values, a shrinking tax base, and an increase in
criminal activity. Cleveland sought to recover for the costs it incurred in monitoring,
maintaining, or demolishing foreclosed properties and for decreased tax revenues. The
defendants removed the case to federal court on diversity grounds. After denying
Cleveland’s motions to remand and to amend its complaint by adding JPMorgan Chase
Bank, N.A., a non-diverse party, the district court granted the defendants’ motion to
Nos. 10-4115/4116 Chase Bank, et al. v. City of Cleveland Page 3
dismiss on the grounds that the city’s suit was preempted by state law and was barred
by the economic-loss doctrine, and, alternatively, that the complaint failed to
demonstrate that the defendants’ actions unreasonably interfered with a public right or
were the proximate cause of the alleged harm. City of Cleveland v. Ameriquest
Mortgage Sec., Inc., 621 F. Supp. 2d 513, 516–17 (N.D. Ohio 2009). We affirmed on
proximate-cause grounds. 615 F.3d 496, 502–06 (6th Cir. 2010), cert. denied, 131 S. Ct.
1685 (2011).
B. City of Cleveland v. JP Morgan Chase Bank, N.A. (City of Cleveland II)
In August 2008, shortly after the district court denied Cleveland’s motion to
remand in City of Cleveland I, Cleveland filed a second suit in Ohio state court against
twenty-eight financial institutions, including the non-diverse JPMorgan Chase Bank,
N.A. In addition to pleading another public-nuisance claim, Cleveland alleged that the
defendants had violated the Ohio Corrupt Activities Act (“OCAA”), the state RICO
analogue, by inaccurately claiming title to mortgages and promissory notes in
foreclosure proceedings in violation of Ohio Revised Code § 2921.12(A). See Ohio Rev.
Code § 2923.32. Cleveland also sought to recover under Ohio Revised Code § 715.261
for costs incurred maintaining or demolishing foreclosed houses.
C. Chase Bank, USA, N.A. v. City of Cleveland (Chase Bank)
In February 2008, while City of Cleveland I was pending, Plaintiffs-Appellants
Chase Bank, USA, N.A., JPMorgan Chase Bank, N.A., JPMorgan Mortgage Acquisition
Corp., and J.P. Morgan Securities, Inc. (collectively, “Chase Bank”) brought the suit that
is currently before us. Chase Bank sued Cleveland in federal district court, seeking a
declaratory judgment that Cleveland’s public-nuisance claim in City of Cleveland I was
preempted by the National Bank Act and requesting an injunction against that suit. After
Cleveland filed City of Cleveland II, Chase Bank amended its complaint to request
declaratory relief and an injunction against both of Cleveland’s lawsuits.1 Cleveland
1
For the sake of clarity, we pause to review the lineup in these three lawsuits. The plaintiffs in
Chase Bank, which is the suit currently before us, are Chase Bank, USA, N.A., JPMorgan Chase Bank,
N.A., JPMorgan Mortgage Acquisition Corp., and J.P. Morgan Securities, Inc. Of these plaintiffs, Chase
Nos. 10-4115/4116 Chase Bank, et al. v. City of Cleveland Page 4
moved to dismiss Chase Bank’s suit for lack of subject-matter jurisdiction under Federal
Rule of Civil Procedure 12(b)(1), arguing that the suit did not raise a federal question.
The district court ruled in August 2010, suggesting that it lacked subject-matter
jurisdiction to issue declaratory relief, but had jurisdiction to issue an injunction.
Despite the latter ruling, the court dismissed Chase Bank’s suit without prejudice for
failure to show irreparable harm. Because Chase Bank “cannot, at this time, demonstrate
irreparable harm from a failure of this Court to grant injunctive relief,” the district court
held, Chase Bank’s “request to enjoin the pending lawsuits is not yet ripe, and must be
dismissed without prejudice.” R.38 at 17–18 (Dist. Ct. Op.) (Page ID #508–09).
Chase Bank timely appealed, contending that the district court had subject-matter
jurisdiction to issue both declaratory and injunctive relief pursuant to either 28 U.S.C.
§ 1331 or 28 U.S.C. § 1343(a)(3) (the jurisdictional counterpart to 42 U.S.C. § 1983).
Cleveland cross-appealed, arguing that the district court lacked subject-matter
jurisdiction to issue either type of relief. Cleveland alternatively argues that, even if the
district court had subject-matter jurisdiction over both the declaratory and injunctive
claims, the dismissal can be affirmed on three non-jurisdictional grounds: (1) district
courts have discretion whether to hear declaratory-judgment actions, (2) enjoining the
state-court proceedings in City of Cleveland II would violate the Anti-Injunction Act, or
(3) Younger abstention was warranted.
D. Recent Developments
Since this case left the district court, several developments have occurred in both
City of Cleveland I and City of Cleveland II.2 In City of Cleveland II, the Cuyahoga
County Court of Common Pleas dismissed Cleveland’s public-nuisance and OCAA
claims, but denied the defendants’ motion to dismiss as to Cleveland’s claim under Ohio
Bank, USA, N.A., JPMorgan Mortgage Acquisition Corp., and J.P. Morgan Securities, Inc. were
defendants in City of Cleveland I. JPMorgan Chase Bank, N.A. and J.P. Morgan Securities, Inc. are
defendants in City of Cleveland II.
2
We can take judicial notice of developments in related “‘proceedings in other courts of record.’”
Walburn v. Lockheed Martin Corp., 431 F.3d 966, 972 n.5 (6th Cir. 2005) (quoting Rodic v. Thistledown
Racing Club, Inc., 615 F.2d 736, 738 (6th Cir. 1980); Federal Rule of Evidence 201.
Nos. 10-4115/4116 Chase Bank, et al. v. City of Cleveland Page 5
Revised Code § 715.261. City of Cleveland v. JP Morgan Chase Bank, N.A., No. CV-
08-668608 (Cuyahoga Cnty. Ct. Com. Pl. Nov. 23, 2011). Cleveland voluntarily
dismissed its § 715.261 claim and appealed the trial court’s dismissal of the public-
nuisance and OCAA claims. That appeal is currently pending in the Court of Appeals
of Ohio, Eighth Appellate District.
In addition, the United States Supreme Court denied Cleveland’s petition for a
writ of certiorari in City of Cleveland I. City of Cleveland v. Ameriquest Mortgage Sec.,
Inc., 131 S. Ct. 1685 (2011). Accordingly, Chase Bank’s request for injunctive and
declaratory relief regarding City of Cleveland I is now moot. All that remains of the
suits in which Cleveland is the plaintiff is City of Cleveland II. Because Chase Bank,
USA, N.A. and JPMorgan Mortgage Acquisition Corp. are not parties to City of
Cleveland II, we dismiss their claims as moot.
II. ANALYSIS
“It is a principle of first importance that the federal courts are tribunals of limited
subject matter jurisdiction,” and can adjudicate only those claims that “(1) are within the
judicial power of the United States, as defined in the Constitution, and (2) that have been
entrusted to them by a jurisdictional grant by Congress.” 13 Charles Alan Wright,
Arthur Miller, Edward Cooper & Richard Freer, Federal Practice & Procedure § 3522
at 100 (3d ed. 2008) (hereinafter, Wright & Miller, Federal Practice & Procedure).
Accordingly, a federal court must dismiss any claim for which it lacks jurisdiction
without addressing the merits. We review de novo a district court’s grant of a motion
to dismiss for lack of subject-matter jurisdiction based on a facial attack. Carrier Corp.
v. Outokumpu Oyj, 673 F.3d 430, 440 (6th Cir. 2012). We likewise review de novo a
dismissal for failure to state a claim. Id. at 444.
Nos. 10-4115/4116 Chase Bank, et al. v. City of Cleveland Page 6
A. Subject-Matter Jurisdiction3
Federal district courts have subject-matter jurisdiction over “all civil actions
arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331.
In order to trigger federal-question jurisdiction under § 1331, a lawsuit must satisfy the
well-pleaded complaint rule. Under this rule, a federal question must appear on the face
of the complaint rather than as part of a defense, even if a federal-law defense is
anticipated. In the declaratory-judgment context, whether a federal question exists is
determined by reference to a hypothetical non-declaratory suit (i.e., a suit for coercive
relief) between the same parties; if a federal question would appear in the complaint in
this hypothetical suit, federal jurisdiction exists over the declaratory-judgment action.
In cases in which the plaintiff seeks a declaratory judgment that he would have a valid
defense to an anticipated claim, we consider whether a federal question would arise in
a hypothetical non-declaratory suit in which the declaratory-judgment defendant is the
plaintiff and the declaratory-judgment plaintiff is the defendant. See Franchise Tax Bd.
v. Constr. Laborers Vacation Trust, 463 U.S. 1, 19 (1983); AmSouth Bank v. Dale,
386 F.3d 763, 775 (6th Cir. 2004).
Federal courts have jurisdiction under § 1331 “over suits to enjoin state officials
from interfering with federal rights” by enforcing state laws that are preempted by
federal law. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96 n.14 (1983) (citing Ex parte
Young, 209 U.S. 123, 160–62 (1908)); see also Verizon Md., Inc. v. Pub. Serv. Comm’n
3
As an initial matter, the district court’s holding is not entirely clear. Both parties characterize
the opinion as holding that the district court lacked subject-matter jurisdiction over the declaratory-
judgment claim but had jurisdiction to issue an injunction. This characterization is supported by the
opinion’s concluding statement that “the City’s motion to dismiss is granted, in part, and denied, in part.”
R.38 at 19 (Page ID #510). However, the opinion elsewhere seems to suggest that the district court would
lack jurisdiction over the request for a declaratory judgment by itself, but had jurisdiction over the entire
suit because Chase Bank also sought an injunction.
To the extent that the district court indeed analyzed the declaratory-judgment and injunction
requests separately for jurisdictional purposes, this distinction is not supported by the caselaw in which
plaintiffs sought both forms of relief, see infra note 5, and is not particularly practical. A federal court that
enjoins a state suit on preemption grounds for all intents and purposes declares that the state suit is
preempted. Even if the two forms of relief are conceptually distinct for jurisdictional purposes, a federal
district court with jurisdiction to issue an injunction could exercise supplemental jurisdiction over the claim
for declaratory relief. To the extent that the district court suggests that it would lack subject-matter
jurisdiction over a suit seeking only declaratory relief, that question is not before us and we need not
answer it. For the reasons described herein, we hold simply that the district court had subject-matter
jurisdiction over Chase Bank’s suit in its entirety.
Nos. 10-4115/4116 Chase Bank, et al. v. City of Cleveland Page 7
of Md., 535 U.S. 635, 642 (2002); Ammex, Inc. v. Cox, 351 F.3d 697, 702–03 (6th Cir.
2003). The federal law with purported preemptive effect need not expressly provide a
cause of action against preempted state law; the cause of action is implied under the
Supremacy Clause, U.S. Const. art. VI, cl. 2. See 13D Wright & Miller, Federal Practice
& Procedure § 3566 at 292 (“The best explanation of Ex parte Young and its progeny is
that the Supremacy Clause creates an implied right of action for injunctive relief against
state officers who are threatening to violate the federal Constitution and laws.”).4
The plaintiffs in Shaw sought to enjoin enforcement of a requirement under the
New York Human Rights Law and Disability Benefits Law that employers include
pregnancy benefits in their employee benefit plans on the grounds that the state laws
were preempted by ERISA. 463 U.S. at 92. At least one of the plaintiffs had previously
been a party to state Division of Human Rights proceedings for not paying such benefits
and sought to enjoin the prosecution of pending complaints. See id. at 93 n.9; Burroughs
Corp. v. Kramarsky, No. 79-778, 1980 WL 18671, at *1–2 (W.D.N.Y. Jan. 14, 1980).
Verizon involved a ruling by the Maryland Public Service Commission that state contract
law required that the plaintiff pay compensation to a competitor for certain telephone
calls, a ruling that the plaintiff contended violated the federal Telecommunications Act
and Federal Communications Commission regulations. 535 U.S. at 640.
The plaintiff in Ammex, a duty-free store on the U.S.-Canadian border, argued
that federal law preempted the Michigan Consumer Protection Act with respect to
foreign-trade zones and duty-free stores and sought to enjoin the Michigan Attorney
General from enforcing the Act. 351 F.3d at 700, 703. The Attorney General had issued
a notice of intended action warning the plaintiff that, unless it halted its alleged
4
The scope of this cause of action is a matter of debate. The Supreme Court recently granted
certiorari on the issue in Douglas v. Independent Living Center of Southern California, Inc., but ultimately
disposed of the case on narrower grounds. 132 S. Ct. 1204, 1207–08 (2012). Even the critics of an
implied cause of action under the Supremacy Clause seem to recognize the viability of claims in the
circumstances presented here—a plaintiff seeking declaratory or injunctive relief against a state or local
government that is presently taking or threatening action against the plaintiff pursuant an allegedly
preempted state law. See Stephen I. Vladeck, Douglas and the Fate of Ex Parte Young, 122 Yale L.J.
Online 13, 14–16 (2012). We also note that this case in its present posture does not directly implicate this
debate, because the availability of a cause of action does not affect the court’s jurisdiction. See Verizon,
535 U.S. at 642–43.
Nos. 10-4115/4116 Chase Bank, et al. v. City of Cleveland Page 8
misrepresentations, the state would file a lawsuit which could result in an injunction and
a fine. Id. at 701.5
Federal jurisdiction exists over such preemption-based suits even though “if one
were to examine closely the nature of the complaint in such a case, the asserted
preemption claim would often be remarkably similar to an anticipation of a federal
defense through a declaratory action,” which would typically fail to satisfy the well-
pleaded complaint rule. Id. at 704; cf. Playboy Enters., Inc. v. Pub. Serv. Comm’n of
Puerto Rico, 906 F.2d 25, 30 (1st Cir. 1990) (describing the Shaw line of cases as a
“limitation” on the well-pleaded complaint rule). Despite the arguable disharmony
between the well-pleaded complaint rule and Shaw, the latter is clearly good law that
lower courts must apply.6
Cleveland contends that Shaw and its progeny do not apply because they
involved challenges to state regulations rather than, as here, state litigation. Cleveland
characterizes Chase Bank’s preemption claim (in both its declaratory and injunctive
manifestations) as simply a defense to Cleveland’s lawsuit brought in a different forum.
By contrast, Shaw and Ammex involved attempts to halt a state-law enforcement action
and Verizon involved an attack on a state agency’s ruling.
As a general matter, this distinction is inconsequential. Like litigation, regulatory
enforcement actions often involve proceedings brought by state officials in which the
regulated entity could raise preemption as a defense. Without the injunction, the
5
The plaintiffs in Shaw, 463 U.S. at 92, Verizon, 535 U.S. at 642, and Ammex, 351 F.3d at 701,
sought both injunctive and declaratory relief against the enforcement of preempted state law. The district
court’s conclusion in this case that an injunction and a declaratory judgment should be treated differently
for jurisdictional purposes when the plaintiff seeks both forms of relief thus is not supported by the
caselaw.
6
Cleveland’s argument that the district court lacked subject-matter jurisdiction largely ignores
the fact that Chase Bank’s challenge is preemption-based and that Chase Bank also seeks an injunction,
perhaps owing to the district court’s seeming distinction for jurisdictional purposes between Chase Bank’s
request for a declaratory judgment and an injunction. Many of the cases that Cleveland cites are thus
inapposite, because they do not involve preemption. The cases that do involve preemption are
distinguishable because they involve lawsuits between private parties, see 13D Wright & Miller, Federal
Practice and Procedure § 3566 at 291–92 (“On principle the rule of [Shaw] should be confined to actions
in which state officials are parties.”), or, in the case of Michigan Savings & Loan League v. Francis,
683 F.2d 957 (6th Cir. 1982), pre-date Shaw.
Nos. 10-4115/4116 Chase Bank, et al. v. City of Cleveland Page 9
plaintiffs in Shaw would have been subject to state Division of Human Rights
proceedings, for example. See 463 U.S. at 92 n.9; Burroughs Corp., 1980 WL 18671,
at *1–2, 5. Sometimes the enforcement action is a lawsuit; the plaintiff in Ammex sought
to enjoin a threatened suit in state court by the state Attorney General for violations of
the Michigan Consumer Protection Act. 351 F.3d at 701.
More specifically, Cleveland contends that the litigation at issue in this case is
qualitatively distinct from the actions taken or threatened by the state officials in Shaw,
Verizon, and Ammex. First, Cleveland describes its lawsuit as an application of “general
common-law and statutory principles,” Appellee Reply Br. at 5, because neither the
common-law doctrine of public nuisance nor the Ohio statutes that Cleveland alleges
were violated apply exclusively to the federally regulated activity of banking. The same
can be said of the New York Human Rights Law in Shaw and the Michigan Consumer
Protection Act in Ammex, however. The New York law barred discrimination based on
pregnancy in all aspects of the employment relationship, not just in benefit plans
regulated by ERISA, and the Michigan law applied to all businesses, not just duty-free
stores subject to federal regulation.
Cleveland also emphasizes that it seeks only money damages and that a private
party could have brought essentially the same claims against Chase Bank. For these
reasons, Cleveland contends that its lawsuits are proprietary rather than regulatory in
nature and that it is acting more like a private litigant than a governmental entity.
Common-law actions seeking money damages can serve a regulatory function, even
when brought by a private party, and can thus be preempted. See Riegel v. Medtronic,
Inc., 552 U.S. 312, 324 (2008) (noting that a common-law liability award “‘can be,
indeed is designed to be, a potent method of governing conduct and controlling policy.’”
(quoting Cipollone v. Liggett Group, Inc., 505 U.S. 504, 521 (1992))); Int’l Paper Co.
v. Ouellette, 479 U.S. 481, 494–97 (1987) (holding plaintiff’s common-law nuisance
claim preempted by federal law as inconsistent with Congress’s chosen regulatory
scheme). If such actions are regulatory in nature when undertaken by a private
Nos. 10-4115/4116 Chase Bank, et al. v. City of Cleveland Page 10
individual, the same conclusion applies a fortiori when common-law claims are brought
by a government actor like Cleveland.
Moreover, the fact that a private individual could have brought the same claims against
Chase Bank does not distinguish this case from Ammex. The Michigan Consumer Protection
Act at issue in Ammex provides a private cause of action, Mich. Comp. Laws § 445.911, as well
as enforcement by the state Attorney General, id. § 445.905. Both individuals and the Attorney
General can sue for an injunction; an individual can recover actual damages and the Attorney
General can seek a civil penalty. Id. §§ 445.911(1)–(2), 445.905(1).
The Second Circuit faced a similar scenario in Philip Morris, Inc. v. Blumenthal,
123 F.3d 103 (2d Cir. 1997). Tobacco companies asked the federal district court to enjoin and
declare unconstitutional (under, inter alia, the Supremacy Clause) a state-court lawsuit brought
by the Connecticut Attorney General under state antitrust, consumer protection, and common
law. Id. at 104 & n.1. Even though the state characterized its suit as an enforcement action,
the Second Circuit determined that it was “essentially a suit for money damages” because “the
primary aim of the state is to obtain reimbursement from the tobacco industry for expenditures
caused by its allegedly tortious conduct.” Id. at 106. The Second Circuit did not address the
issue of subject-matter jurisdiction, but because a court must dismiss a case for lack of subject-
matter jurisdiction even if the parties do not raise the issue and cannot assume that jurisdiction
exists in order to reach a different issue, this lack of discussion suggests that the court did not
doubt that jurisdiction existed. Indeed, the district court had held that “Ex Parte Young held
that there is the requisite subject matter jurisdiction for such suits.” Philip Morris, Inc. v.
Blumenthal, 949 F. Supp. 93, 97 (D. Conn. 1996), rev’d on other grounds, 123 F.3d 103(2d Cir. 1997).
Finally, Cleveland’s decision to address the issue of subprime-mortgage securitization
through litigation arguably reflects an otherwise frustrated regulatory intent, as the city likely
could not regulate such activity directly. Ohio law appears to prevent Cleveland from
regulating subprime mortgages in the traditional manner (i.e. by municipal ordinance), as it
vests the state with sole authority to “regulate the business of originating, granting, servicing,
and collecting loans and other forms of credit in the state and the manner in which any such
Nos. 10-4115/4116 Chase Bank, et al. v. City of Cleveland Page 11
business is conducted.” Ohio Rev. Code § 1.63(A). In addition, Ohio law expressly preempts
“[a]ny ordinance, resolution, regulation, or other action by a municipal corporation” to regulate
such matters. Id. § 1.63(B).7 Indeed, the Ohio Supreme Court struck down Cleveland’s
previous attempt to regulate predatory mortgage lending by ordinance as preempted by state
law, including § 1.63. Am. Fin. Servs. Ass’n v. City of Cleveland, 858 N.E.2d 776, 785–86
(Ohio 2006).
Ultimately, the fact that the official action that Chase Bank seeks to enjoin and declare
preempted is a lawsuit might raise Anti-Injunction Act or abstention issues, but does not affect
the subject-matter jurisdiction analysis. Because Chase Bank’s suit raised a federal question
under the Supremacy Clause, the district court had subject-matter jurisdiction.8
B. Irreparable Harm
In its ruling on Cleveland’s motion to dismiss under Federal Rule of Civil Procedure
12(b)(1), the district court held that Chase Bank had failed to show irreparable harm and thus
was not entitled to injunctive relief. Because Chase Bank would have an opportunity to raise
the federal-preemption issue as a defense in Cleveland’s federal or state lawsuit, the court
reasoned, it would not suffer irreparable harm if the court did not grant an injunction on
preemption grounds. Chase Bank had not moved for a preliminary injunction, however, and
Cleveland had not moved to dismiss under Rule 12(b)(6) for failure to state a claim. Neither
party had briefed the issue of whether Chase Bank had satisfied the requirements for an
injunction, because neither party was on notice that the court would address that issue. Before
dismissing a complaint sua sponte, even if the dismissal is without prejudice, the court must
give notice to the plaintiff. Morrison v. Tomano, 755 F.2d 515, 516–17 (6th Cir. 1985). The
irreparable-harm ruling was premature, and the district court thus erred in dismissing Chase
7
In City of Cleveland I, the district court held that this provision preempted Cleveland’s public-nuisance
claim. Ameriquest Mortgage Sec., 621 F. Supp. 2d at 517–20. We affirmed on other grounds, and so we did not
address this issue. In City of Cleveland II, the state trial court likewise held that Cleveland’s public-nuisance claim
was preempted by state law. City of Cleveland v. JP Morgan Chase Bank, N.A., No. CV-08-668608 (Cuyahoga
Cnty. Ct. Com. Pl. Nov. 23, 2011).
8
Chase Bank also argues that the district court had federal-question jurisdiction pursuant to 28 U.S.C.
§ 1343(a)(3) because the National Bank Act imbues Chase Bank with rights that are cognizable under § 1983.
Because we conclude that the district court had subject-matter jurisdiction pursuant to § 1331 under the Supremacy
Clause, we do not address this alternative argument.
Nos. 10-4115/4116 Chase Bank, et al. v. City of Cleveland Page 12
Bank’s suit on these grounds. Indeed, Cleveland does not defend this aspect of the district
court’s ruling on appeal.
To the extent that the district court dismissed Chase Bank’s claim seeking an injunction
of pending litigation as unripe, this conclusion was incorrect. A claim is unripe if plaintiffs
“seek to enjoin the enforcement of statutes, regulations, or policies that have not yet been
enforced against them.” Ammex, 351 F.3d at 706. Here, by contrast, Chase Bank faced
ongoing litigation under the law that it alleged was preempted at the time that the district court
dismissed the claim.9
C. Non-Jurisdictional Grounds for Affirmance
Cleveland contends that, even if the district court had subject-matter jurisdiction, we
should nonetheless affirm the dismissal of Chase Bank’s suit as an appropriate exercise of the
district court’s discretion or pursuant to the Anti-Injunction Act or the doctrine of Younger
abstention. Cleveland did not raise any of these non-jurisdictional grounds for dismissal before
the district court, however, and we typically do not address issues not raised below. See
Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 552 (6th Cir. 2008). None of the “exceptional
cases or particular circumstances” warranting deviation from this rule are present here. Id.(internal quotation marks omitted). Because we are remanding, Cleveland will have an
opportunity to present these arguments to the district court.
III. CONCLUSION
Chase Bank’s suit for declaratory and injunctive relief falls within the line of cases
recognizing federal subject-matter jurisdiction over preemption-based challenges to state laws
brought against state officials. The fact that the official action that Chase Bank challenges as
preempted in this case is a lawsuit rather than direct regulation does not affect the jurisdictional
issue; the question of whether it implicates Anti-Injunction Act or abstention concerns is not
properly before us. Because the district court erred in dismissing the complaint for failure to
9
We note, of course, that we express no opinion on whether Chase Bank would face irreparable harm or
is otherwise entitled to an injunction, including whether Chase Bank’s preemption argument is likely to succeed
on the merits.
Nos. 10-4115/4116 Chase Bank, et al. v. City of Cleveland Page 13
state a claim without notice to the parties, it will have an opportunity to address this issue on
remand. We REVERSE the district court’s dismissal of Chase Bank’s suit for declaratory and
injunctive relief and REMAND for further proceedings consistent with this opinion.