(Cite as: 2003 WL 21297300 (S.D.N.Y.)) United States District Court, S.D. New York. Alan D. PINTO, on behalf of himself and all others similarly situated Plaintiff, v. BANK ONE CORPORATION and First USA Bank, N.A. Defendants. No. 02 Civ.8477 NRB. June 4, 2003. Credit cardholder brought putative class action in state court against issuing bank, claiming that bank illegally honored credit card gambling charges. Issuing bank removed and cardholder moved for remand. The District Court, Buchwald, J., held that: (1) there was no diversity jurisdiction, due to failure to satisfy amount in controversy requirement, and (2) there was jurisdiction under Edge Act. Motion denied. Krishnan S. Chittur, Chittur & Associates, P.C., New York, NY, for Plaintiff. Christopher R. Lipsett, Matthew P. Previn, Wilmer, Cutler & Pickering, New York, NY, for Defendant. MEMORANDUM AND ORDER BUCHWALD, J. *1 Alan D. Pinto brought this action in state court on behalf of himself and other New Yorkers whose VISA and/or MasterCard accounts were advanced funds electronically by defendants for purposes of gambling in Internet casinos. Pinto sued against defendants Bank One Corporation ("Bank One Corp.") and First USA Bank, N.A., which is now known as Bank One, Delaware, National Association ("Bank One Delaware").FN1 Bank One Delaware is a large issuer of Visa and MasterCard credit cards, and a subsidiary of Bank One Corp. Pinto alleges that defendants' cash advances enabled him to gamble on Internet gambling sites, that the loans were illegal under the New York State Constitution and New York State statutes which prohibit gambling, that the loans constituted unfair trade practices under the New York General Business Law, and that collecting on the loans violated the New York State common law doctrines of unjust enrichment and money had and received. Based on these allegations of illegality, Pinto seeks to recover the money he paid on these loans, to prevent defendants from continuing to collect on them, and to enjoin defendants from entering adverse credit entries in Pinto's credit history. He also seeks an order rectifying any such entries already made and enjoining defendants from financing Internet gambling. Pinto also seeks costs, punitive damages, and treble damages of not less than $100 million for himself and class members. FN1. For clarity, we will refer to Bank One Delaware as such, even though in some instances relevant to this suit the same entity might have been known as First USA Bank, N.A. When Bank One Corp. and Bank One Delaware are referred to together, they will be described as "the defendants." The defendants removed this case to federal court, asserting both diversity jurisdiction and jurisdiction under the Edge Act, which grants federal jurisdiction to all suits "arising out of transactions involving international or foreign banking."12 U.S.C. s 632. Pinto subsequently filed this motion to remand, on which the court heard oral argument on April 4, 2003. To understand the asserted basis for removal under the Edge Act, it is helpful to appreciate the basic processing of a credit card transaction. When a consumer seeks to place a purchase on a credit card, the merchant selling the item transmits the request for credit to an "acquiring bank" or "merchant bank." The merchant bank, in turn, in the case of an overseas purchase, clears the charge request through international credit card clearing facilities, thereby getting the approval of the card-issuing bank, in this case Bank One Delaware. Based on copies of credit card statements submitted by the defendants, during 1999 and 2000, Mr. Pinto maintained a credit card account with Bank One Delaware and a credit card account with a bank that was acquired by Bank One Delaware, with the highest balance at any time being $26,166.22 on the Bank One Delaware account. Most if not all of the charges on these statements appear to be charges from Internet gambling sites. The credit card statements provided by the defendants also offer information about the location of the entities that processed Pinto's Internet gambling charges. Under "Merchant Name or Transaction Description," some of the charges state the following: "MPACT_ ITOPS_(800)220-0000 HAMILTON BM." Joette Herrera, a Vice President for Bank One Delaware, states in a Declaration included with the defendants' opposition papers that the Bank Identification Number for the MPACT_ITOPS entries indicates that the Bank of Bermuda Ltd., located in Hamilton, Bermuda, was the acquiring bank, also known as the merchant bank, for the MPACT_ITOPS transactions. Several transactions on the statements also list the following in the "Merchant" column: "CRYPTOLOGIC INC. 8888722238 NY," or "CRYPTOLOGIC, INC. (US) 888-872-2238 CA." The Bank Identification Number corresponding to several of the Cryptologic transactions identifies Harris Trust & Savings Bank as the merchant bank. Harris Trust, a U.S. bank with a branch in the Bahamas, is a subsidiary of the Bank of Montreal, which, according to a web site printout submitted by the defendants, is the bank used by Cryptologic. This web site further indicates that Cryptologic is itself based in Canada. *2 Pinto's complaint effectively acknowledges the international nature of the gambling charges when it alleges that "[o]ff-shore gambling operations used by New Yorkers are ... illegal under federal law, 18 U.S.C. s 1084."Compl. at P 18. We now turn to a discussion of the two grounds for removal asserted by the defendants. Discussion A. Diversity Jurisdiction [1] Relying on the allegation in the complaint that Pinto seeks damages for himself and class members of at least $100 million, the defendants assert that there is diversity jurisdiction. This contention is easily disposed of. The diversity statute only gives federal courts jurisdiction "where the matter in controversy exceeds the sum or value of $ 75,000."28 U.S.C. s 1332(a). The claims of multiple plaintiffs cannot be aggregated to satisfy this requirement. Snyder v. Harris, 394 U.S. 332, 335-36, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969).Seealso Mehlenbacher v. Akzo Nobel Salt, Inc., 216 F.3d 291, 296 (2d Cir.2000) (applying Snyder ). Moreover, the burden of establishing that the requirements of diversity jurisdiction have been met falls on the party seeking removal to federal court. Id. Defendants have presented no colorable basis upon which to conclude that any of the class members have claims in excess of $75,000.FN2Since the aggregate amount stated in the complaint does not satisfy the jurisdictional amount requirement, there is no basis for the assertion of diversity jurisdiction. FN2. The defendants' argument that the jurisdictional amount requirement is satisfied by the allegation in the complaint that "the mean gambling debt of [compulsive gamblers] is up to $92,000," Compl. at P 21, is wholly insufficient. There is no indication that any members of the class who might be compulsive gamblers owe this amount of money to solely one credit card company, nor is there any indication that, if such members do owe this debt to one credit card company, that company is Bank One Delaware. B. Edge Act Jurisdiction [2] Defendants' second ground for removal is that this court has jurisdiction under the Edge Act because the suit arises out of foreign banking transactions. In relevant part, the Edge Act states: 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; and any defendant in any such suit may, at any time before the trial thereof, remove such suits from a State court into the district court of the United States for the proper district by following the procedure for the removal of causes otherwise provided by law. 12 U.S.C. s 632 (italics added). Thus, to establish jurisdiction under the Edge Act: "1) the suit must be civil in nature; 2) one of the parties at interest is a corporation organized under the laws of the United States; and 3) the suit arises out of a transaction involving international or foreign banking." First Nat'l Bank v. Promatek Med. Sys., Inc., 870 F.Supp. 234, 237 (N.D.Ill.1994).See Bank of N.Y. v. Bank of Am., 861 F.Supp. 225, 232 (S.D.N.Y.1994) ("[I]n order for [s 632] to apply (1) one of the parties to a suit must be a federally chartered corporation, and (2) the suit must arise out of a transaction involving international or foreign banking or financial operations."). *3 In this case, the issue in dispute is whether the suit arises out of an international or foreign banking transaction or financial operation. Not all cases involving a federally chartered bank and a foreign party fall within the ambit of the Edge Act: "[A] district court cannot find that it has s 632 jurisdiction merely because there was a federally chartered bank involved, there were banking-related activities, and there were foreign parties."Lazard Freres & Co. v. First Nat'l Bank, 91 Civ. 0628(KMW), 1991 U.S. Dist. LEXIS 14665, at *3 (S.D.N.Y. Oct. 16, 1991)."Rather, a Court should satisfy itself that the suit arises out of an international or foreign transaction which falls within the realm of those 'characterized as traditional banking activities." ' Bank of N.Y., 861 F.Supp. at 232 (quoting Telecredit Serv. Ctr., 679 F.Supp. at 1103).Seeid.(presenting similar summary of Edge Act jurisprudence). Thus, defendants must show that the events out of which the suit arises are (a) foreign; and (b) are either banking transactions or financial operations. We deal with each of these requirements in turn. i. Foreign Status Under Edge Act We first address whether the transactions at issue are properly described as "foreign." Pinto does not seriously dispute that at least some of his Internet gambling transactions-those for which "MPACT_ITOPS" is listed on his credit card statements-involved foreign banks. The statements say "Hamilton BM" next to those entries, and the Declaration of Joette Herrera is uncontroverted evidence that the merchant bank for those transactions is located in Hamilton, Bermuda.FN3Though the five transactions marked "MPACT_ITOPS" represent a small portion of the total listed on all Pinto's statements, "[a] suit satisfies the jurisdictional requisites of Section 632 if any part of it arises out of transactions involving international or foreign banking."FN4 In re Lloyd's Am. Trust Fund Litig., 928 F.Supp. 333, 338 (S.D.N.Y.1996). Thus, we find that the transactions are sufficiently foreign to meet the requirements of the Edge Act. FN3. Pinto argues that we must ignore this affidavit, because, he apparently contends, only papers filed with defendants' Notice of Removal may be considered on a motion to remand. For this proposition, he cites Mehlenbacher v. Akzo Nobel Salt, 216 F.3d 291 (2d Cir.2000), which states in a parenthetical: "[The defendant seeking removal] must allege in his pleading the facts necessary to show jurisdiction." Id. at 298 (alteration in original) (quoting McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936)). Defendants have alleged the necessary facts, however. The Notice of Removal clearly states that "[a]t least some of the transactions that are the subject of the complaint have been processed by foreign banking or financial entities operating, on behalf of internet casinos, through international credit card banking systems."Notice of Removal, P 5. Having adequately alleged the basis for removal in their Notice of Removal, the defendants' additional evidentiary submission in opposition to the plaintiff's removal motion is proper. See, e.g.,Maddaloni Jewelers, Inc. v. Rolex Watch U.S.A., Inc., 02 Civ. 6438(SAS), 2002 U.S. Dist. LEXIS 21730, at *3 n. 1 (S.D.N.Y. Nov. 8, 2002) (considering declaration submitted in opposition to motion to remand). FN4. We note here the high probability that Pinto's Internet gambling transactions were channeled through other foreign entities as well. The bulk of the entries on Pinto's credit card statement are for an entity called Cryptologic. As noted earlier, though the entries list various U.S. states next to the name Cryptologic, it is a Canadian company, according to a web site printout submitted by the defendants. Herrera Aff. Ex. 5. The merchant bank for the Cryptologic transactions is Harris Trust & Savings Bank, which, though a U.S. bank, is a subsidiary of the Bank of Montreal, which is Cryptologic's bank, according to its website. Herrera Aff. at P 12, Herrera Aff. Ex. 5, Def. Brief at 9. Moreover, the Complaint acknowledges that at least some of the gambling sites used by Pinto and other class members were foreign when it refers to "[o]ff-shore gambling operations used by New Yorkers."Compl. at P 18. ii. Banking Status Under Edge Act We agree with the District Court for the Northern District of Illinois that "[t]he issuance of a credit card involves a traditional banking function" under the Edge Act.FN5Clarken v. Citicorp Diners Club, Inc., 01 C 5123, 2001 U.S. Dist. LEXIS 17607, at *3 (N.D.Ill. Oct. 24, 2001). Though this case lacks an additional banking element that was also present in Clarken, currency conversion, id., it is clear that the basic components of administering credit cards, all of which are present here-advancing loans to customers to finance purchases, charging interest on those loans, and collecting loan payments from customers-represent what banks do, and have been doing for centuries. See United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 327 n. 5, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963) (discussing banking industry and noting "the principal banking 'products' are of course various types of credit, for example: unsecured personal and business loans, mortgage loans, loans secured by securities or accounts receivable, automobile installment and consumer goods installment loans, tuition financing, bank credit cards, revolving credit funds"); Ltd. v. Comm'r, 286 F.3d 324, 332 (6th Cir.2002) (holding that the phrase "persons carrying on the banking business" in 26 U.S.C. s 956(c)(2)(A)"has an ordinary and natural meaning wherein credit card companies ... constitute 'persons carrying on the banking business" '). FN5. We are aware of no cases within the Second Circuit that have analyzed the applicability of the Edge Act to credit card transactions. The only other federal case we have found dealing with the issue supports our conclusion that credit card transactions constitute banking activity under the Edge Act. In Telecredit Serv. Ctr., 679 F.Supp. at 1101, the Southern District of Florida dealt with a dispute between First National Bank, a bank that accepted deposits from merchants, and Telecredit, a firm that had contracted with First National to provide technical assistance and to act as a go-between for transactions involving the merchants, First National, and Visa and MasterCard. Id. at 1102.The dispute centered on whether First National or Telecredit bore responsibility for fraudulent "chargebacks," or charges that the cardholder's bank refuses to pay because the cardholder insists they were assessed in error. Id. at 1102, 1104.In analyzing whether the Edge Act provided for federal jurisdiction, the court did not rule on whether credit card transactions generally constituted banking transactions for purposes of the Edge Act. Rather, the court viewed "the nature of the transaction at issue, i.e., the allocation of risk with respect to fraudulent chargebacks, as a contractual dispute between the parties," and not banking, and focused on the tenuous connection to any type of "foreign" activity, i.e., the mere fact that the product that was alleged to be the subject of the fraudulent sales was a foreign travel club membership. Id. at 1103-04.Had the Telecredit Serv. Ctr. court viewed credit card activities not to be banking transactions, it could have easily declined Edge Act jurisdiction on this ground alone, instead of reaching the other two issues noted supra.Its silence on the issue indicates to us that, had it dealt with the issue explicitly, the court would have found that credit card transactions constitute banking activity. *4 Contrary to Pinto's contention, the presence of state law issues does not divest federal courts of Edge Act jurisdiction so long as the foreign banking transactions are involved. As Judge Sweet has stated, "other federal court decisions ... have routinely applied Section 632, even in cases based on state law causes of action and containing only an incidental connection to banking law." In re Lloyd's, 928 F.Supp. at 340 (citing Conjugal Soc'y Composed of Juvenal Rosa v. Chicago Title Insurance Co., 690 F.2d 1, 3-5 (1st Cir.1982) (holding that, where defendants were alleged to have guaranteed fraudulently the completion of construction and the payment of mortgage credits as an inducement to plaintiffs to subordinate their mortgage to that of defendants, "[w]hether defendants' acts are viewed as ones in tort or contract," Edge Act applied); Puerto Rico v. Eastern Sugar Assocs., 156 F.2d 316, 318-20 (1st Cir.1946), cert. denied, 329 U.S. 772, 67 S.Ct. 190, 91 L.Ed. 664 (1946) (finding federal jurisdiction under Edge Act to be "clear" where suit arose out of petition to condemn land and distribute it to squatters and farmers and where one defendant was bank holding mortgage on land); Rose Hall, Ltd. v. Chase Manhattan Overseas Banking Corp., 494 F.Supp. 1139, 1142-44 (D.Del.1980) (finding federal question jurisdiction, diversity jurisdiction, and Edge Act jurisdiction where defendant bank owned mortgage on land adjacent to hotel that plaintiff was trying to sell and defendant bank was alleged to have attempted to frustrate the sale of the hotel); Cutler v. Bank of Am. Nat'l Trust & Sav. Assoc., 441 F.Supp. 863, 864-65 (N.D.Cal.1977) (finding Edge Act jurisdiction where plaintiff alleged "negligence, fraud, conversion, breach of warranty and of contract, and intentional infliction of emotional distress" out of bank robbery in London)). In arguing that the suit does not fall within the scope of the Edge Act, Pinto relies heavily on Bank of New York, 861 F.Supp. at 225, a case in which Judge Preska dealt with two foreign banks whose exclusive negotiations over the sale of certain loans had broken down. Id. at 227.The parties sued each other, with the bank that had been negotiating to buy arguing that an enforceable contract had been created, and the prospective seller arguing that no such contract had been created. Id. While granting that the action "appear[ed] initially" to qualify as one arising out of banking activity, the court concluded that the Bank of New York case was "essentially contractual," and, based on the absence of "banking law issues" in the case, declined to find Edge Act jurisdiction. Id. at 233.The court conceded that requiring only a banking transaction "somewhere in the chain of causation" was "a plausible reading of s 632," but found the better interpretation to be that "the banking aspect of the jurisdictional transaction must be legally significant in the case."Id. Pinto argues that the case before us is analogous, since it deals with "whether defendants' collection of loans knowingly advanced for gambling is proscribed under New York law," which is not, he maintains, a banking law issue. Pl. Brief at 5. *5 Judge Sweet in In re Lloyd's questioned whether Bank of New York is truly consistent with the text of the Edge Act or with the case law interpreting it.FN6As Judge Sweet concluded in In re Lloyd's, it is not necessary to resolve this issue: whether we look simply for the presence of banking activities, or we require that "the banking aspect of the jurisdictional transaction must be legally significant in the case," In re Lloyd's, 928 F.Supp. at 341 (quoting Bank of N.Y., 861 F.Supp. at 233), the result is the same. The suit arises out of banking activities, namely, the extension of loans through credit cards and the collection of those loans. Moreover, the existence of those banking activities is legally significant here, as the complaint requires the court to resolve under what conditions, if any, banks in New York can 1) make credit card loans to customers who are gambling over the Internet and 2) expect to have those loans paid back. Banking activities are indispensable to this legal analysis. FN6. In In re Lloyd's, 928 F.Supp. at 333, the defendant was a trustee of trust funds maintained on behalf of the plaintiffs. Id. at 334-35.Plaintiffs alleged that the defendant made improper loans and transfers of money, made improper investments, committed breaches of fiduciary duty, and violated Comptroller of the Currency regulations. Id. at 335.In finding Edge Act jurisdiction and distinguishing Bank of New York, the court stated that "[t]he decision in Bank of New York is, in any event, inconsistent with the text of Section 632 and with other federal court decisions that have routinely applied Section 632, even in cases based on state law causes of action and containing only an incidental connection to banking law."Id. at 340.The court went on to cite the cases identified supra. The other cases cited by Pinto are unavailing. Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786 (2d Cir.1980), the Second Circuit's only significant pronouncement on the Edge Act, does not support Pinto. In that case, the court found Edge Act jurisdiction based on allegations that the provider of a letter of credit had wrongfully allowed drawdowns against the letter of credit, a transaction that the court found "was one involving 'international or foreign banking." ' Id. at 792.Pinto attempts to distinguish that case by quoting the statement that "the central provision of the jurisdictional grant ... is the necessity that the transaction in question be one 'arising out of ... international or foreign banking." ' Pl. Brief at 5-6 (quoting Corporacion Venezolana, 629 F.2d at 791-92). However, Pinto's suit arises out of just such activity, and thus finding Edge Act jurisdiction here is entirely consistent with Corporacion Venezolana. Pinto also attempts to draw an analogy to Telecredit Serv. Ctr., 679 F.Supp. at 1102. That case is inapposite, because, as noted earlier, the only foreign aspect of the dispute in Telecredit Serv. Ctr. was that the particular chargebacks involved foreign travel club memberships, which was irrelevant to the underlying dispute.FN7Id. at 1402.Lazard Freres & Co. v. First Nat'l Bank, 91 Civ. 0628(KMW), 1991 U.S. Dist. LEXIS 14665 (S.D.N.Y. Oct. 16, 1991), may also be distinguished on a similar ground. As in Telecredit Serv. Ctr., the suit in Lazard was for breach of contract over "an agreement between solely American entities."Id. at *4. The only international aspect of the case was that that "agreement was made in connection with another transaction that was international in character."However, "such an indirect connection between the claim giving rise to the suit and international banking does not suffice for jurisdiction under s 632."Id. In contrast, Pinto's claims stem directly from transactions that are themselves international. FN7.Seesupra note 5. iii. Financial Operations Under Edge Act *6 [3] Finally, while we have found that the transactions in question clearly involve foreign banking under the Edge Act, we note that in the alternative, they also involve "foreign financial operations." 12 U.S.C. s 632. The actions of the merchant bank, Bank of Bermuda Ltd., and any other foreign merchant banks that acted to clear Pinto's charges through international credit card clearing facilities constitute financial operations under the Act. "[U]nless otherwise defined, words [in a statute] will be interpreted as taking their ordinary, contemporary, common meaning." Perrin v. United States, 444 U.S. 37, 42, 100 S.Ct. 311, 62 L.Ed.2d 199 (1979), cited in In re Lloyd's, 928 F.Supp. at 341 (holding that suit arising out of alleged mismanagement of trust funds is one arising "out of other international or foreign financial operations" under Edge Act). For these reasons, we find jurisdiction under the Edge Act. CONCLUSION Plaintiff's motion to remand is denied. By letter dated November 21, 2002, the defendants had requested permission to file a motion to stay this case in favor of arbitration. Defendants are hereby granted permission to make that motion, and should contact the court with a briefing schedule after consulting with plaintiff. IT IS SO ORDERED. S.D.N.Y.,2003. Pinto v. Bank One Corp. Not Reported in F.Supp.2d, 2003 WL 21297300 (S.D.N.Y.) END OF DOCUMENT © 2009 Thomson Reuters/West. No Claim to Orig. US Gov. Works.