“Mind the gap” is a memorable warning to London underground travelers. It is also an appropriate warning to civil litigators regarding federal jurisdiction. And U.S. District Court Judge Richard H. Kyle issued the warning this week in a class action removed from state court involving “gap insurance,” as it happens.
“Gap insurance” is a financial product offered with the purchase of automobiles to address the risk that buyers have of being “underwater” with their car loan payments, in a sense — that is, gap insurance provides coverage when a car buyer loses her car through theft, vandalism, or accident and the debt owed on the car exceeds the fair market value reimbursed under the auto insurance. (Gap insurance is more fully explained here, in Constance Lewis’ class action complaint against Phoenix American Administrators, Wynn’s Extended Care, Inc., and others. )
If you look at the complaint, you’ll note that it bears a Minnesota state court caption but defendants removed the case to U.S. federal court, based on so-called “federal question” jurisdiction and allegations in the complaint that defendants’ practices violated federal regulations as to “debt cancellation contracts” (which is one way of analyzing “gap insurance”). Judge Kyle, however, points out that the federal law does not create a cause of action — a “federal case” — it just is a rule. This, by itself, may be insufficient to fill bridge the gap and defendants may find themselves remanded to defend against this consumer class action in Minnesota state court (Hennepin County).