State of Minnesota v. GoodLeap LLC

Background

Minnesota sued Dividend Solar Finance LLC, GoodLeap LLC, Sunlight Financial LLC, and Solar Mosaic LLC in Hennepin County District Court. The State alleged that the defendants marketed residential solar-panel loans using deceptive statements and practices and charged interest rates that violated Minnesota usury laws.

The complaint asserted five counts under Minnesota law: consumer fraud, deceptive trade practices, false advertising, violations of the Minnesota Regulated Loan Act, and a usury claim under that Act and the Minnesota Consumer Credit Code. Some of the consumer-protection allegations also asserted that the defendants failed to disclose financing fees as required by the federal Truth in Lending Act.

Before Minnesota filed and served its complaint, Dividend Solar had merged into Fifth Third Bank, a national bank. The opinion states that the merger occurred in August 2023 and that Dividend Solar therefore ceased to exist as a separate legal entity. Fifth Third became the surviving entity. The loans at issue were made while Dividend Solar was a Fifth Third subsidiary, and the opinion states that the loans were immediately sold to Fifth Third and that Minnesota customers’ payments went directly to Fifth Third.

Fifth Third and Sunlight Financial removed the case to federal court. Fifth Third argued that the usury claim against Dividend Solar was actually a claim against Fifth Third and was completely preempted by the National Bank Act. Complete preemption is a narrow jurisdictional doctrine that can convert a state-law claim into a federal claim for purposes of removal. The defendants also argued that the other claims raised substantial federal questions because they involved the Truth in Lending Act.

Motion to Remand

Minnesota moved to remand the case to state court under 28 U.S.C. § 1447. The State did not dispute the evidence that Dividend Solar had merged into Fifth Third and no longer existed. It argued, however, that Fifth Third could not remove the case because it was not named as a defendant in the complaint.

The court explained that federal courts generally rely on the claims stated on the face of a complaint to determine whether federal-question jurisdiction exists. A narrow exception applies when federal law completely preempts a state-law claim. The court stated that state-law usury claims against national banks are completely preempted by the National Bank Act when the challenged fee or charge qualifies as interest under that Act and the interest rate is disputed.

The court found that this case involved a misnomer rather than a misidentification. A misnomer occurs when the correct party is named incorrectly, while misidentification involves two separate existing legal entities and a plaintiff sues the wrong one. Because Dividend Solar did not exist when Minnesota filed the complaint, the court concluded that Fifth Third was the real party defendant in interest—the entity with the actual legal interest in the claims against Dividend Solar.

The court relied on decisions allowing a real party defendant in interest to remove a case in a misnomer situation without first intervening in the state proceeding. It distinguished decisions refusing removal by a nonparty where the plaintiff had sued a separate, existing legal entity. The court also rejected Minnesota’s argument that service problems prevented removal, noting that Fifth Third had notice of the suit and that Sunlight Financial had jointly filed the notice of removal.

Ruling

Judge Katherine Menendez concluded that Fifth Third was entitled to remove the case because the claims against Dividend Solar were effectively claims against Fifth Third, and the usury claim in Count V was completely preempted by the National Bank Act. The court denied Minnesota’s motion to remand.

The court expressly declined to decide the remaining arguments concerning removal, including whether other claims were completely preempted or necessarily raised a substantial federal question under the Truth in Lending Act. The court also declined to issue an advisory opinion about issues that might arise if Minnesota later amended its complaint or dismissed the usury claim.