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Hey...procedure exam in a couple hours. I'm hung up on an issue from a practice exam. The professor supposedly reuses hypos and questions a lot, so there's a fair chance it or a similar issue will come up.

The facts briefly are...

Plaintiff gave a loan in Texas for $100,0000 + 20% interest. Defendant hasn't paid, and P sues initially in state court. Defendant wants to remove...there's probably grounds for removal under diversity jurisdiciton, but the hypo all says the claim alleges "that the collection of 20% interest is permissiblein spite of Texas ursury lwas because the FEderal Sall Business Invesment ACt overrides stae law. It allegedly authorizes P to exceed state usury limits that otherwise would make the promissory note and guaranty unlawful.

So under Mottley/well pleaded complaint rule, would this be considered federal issue in the claim or just a federal issue in anticipation of a defense. The way it's worded sets it up like in anticipation of a defense, but assuming state laws bar the action, that federal law applies is essential to a well-pleaded complaint. Am I thinking about this right?

Thanks.

You need to think what the plaintiff brought suit under. I read it as a breach of contract COA. That would mean state law and therefore Mott doesn't apply. The federal law wouldn't come up until the D brought up the Texas law and then the P countered with federal law.

The suit is for breach of contract (a state law claim). Thus, unless somehow the cited statute authorized breach of contract claims arising from loans to be brought in federal court, the suit should be in state court. The issue as to how much interest to award is only relevant ONCE the contract is found to be breached. Then they would need to apply a federal statute.