State of Nevada v. Bank of America Corporation, et al
FILED OPINION (STEPHEN R. REINHARDT, KIM MCLANE WARDLAW and CONSUELO M. CALLAHAN) REVERSED. Judge: KMW Authoring, FILED AND ENTERED JUDGMENT. 
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MAR 02 2012
UNITED STATES COURT OF APPEALS
MOLLY C. DWYER, CLERK
U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
STATE OF NEVADA,
Plaintiff - Appellant,
D.C. No. 3:11-cv-00135-RCJWGC
BANK OF AMERICA CORPORATION;
BANK OF AMERICA NATIONAL
ASSOCIATION; BAC HOME LOANS
SERVICING, LP; RECONSTRUCT
COMPANY, N.A.; COUNTRYWIDE
COUNTRYWIDE HOME LOANS, INC.;
FULL SPECTRUM LENDING, INC.,
Defendants - Appellees.
Appeal from the United States District Court
for the District of Nevada
Robert Clive Jones, Chief District Judge, Presiding
Argued and Submitted February 8, 2012
Before: REINHARDT, WARDLAW, and CALLAHAN, Circuit Judges.
Opinion by Judge WARDLAW:
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The State of Nevada, through its Attorney General, Catherine Cortez Masto,
filed this parens patriae lawsuit against Bank of America Corporation and several
related entities (collectively, “Bank of America”) in Clark County District Court.
Nevada alleges that Bank of America misled Nevada consumers about the terms
and operation of its home mortgage modification and foreclosure processes, in
violation of the Nevada Deceptive Trade Practices Act, Nev. Rev. Stat.
§§ 598.0903-.0999. Nevada also alleges that Bank of America violated an existing
consent judgment (“Consent Judgment”) in a prior case between Nevada and
several of Bank of America’s subsidiaries, entered in Clark County District Court.
Bank of America removed this action to federal district court, asserting
federal subject matter jurisdiction as either a “class action” or “mass action” under
the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d), and as arising
under federal law, 28 U.S.C. § 1331. Denying Nevada’s motion to remand, the
federal district court concluded that it has jurisdiction over this action as a CAFA
“class action,” but not as a “mass action,” and that it also has federal question
jurisdiction because resolving the state claims will require an interpretation of
We granted Nevada’s request for leave to appeal the district court’s denial of
its motion to remand pursuant to 28 U.S.C. § 1453(c)(1). We conclude that
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because parens patriae actions are not removable under CAFA, and the action
does not otherwise satisfy CAFA’s “mass action” requirements, the district court
lacks jurisdiction under CAFA. We also exercise our interlocutory appellate
jurisdiction under 28 U.S.C. § 1453(c) to review the district court’s determination
that it has federal question jurisdiction because the complaint references the federal
Home Affordable Mortgage Program and the Fair Debt Collection Practices Act.
We conclude that the district court lacks federal question jurisdiction. Because
there is no basis for federal subject matter jurisdiction, this case must be remanded
to Nevada state court.
The Nevada Deceptive Trade Practices Act (“DTPA”) authorizes the Nevada
Attorney General to “bring an action in the name of the State of Nevada” against
any person whom the Attorney General “has reason to believe . . . has engaged or
is engaging in a deceptive trade practice.” Nev. Rev. Stat. § 598.0963(3). The
State of Nevada filed its amended complaint (“Complaint”) in the Clark County
District Court on January 19, 2011. The Complaint alleges that Bank of America
violated the DTPA by misleading Nevada consumers who sought modifications of
residential mortgages. It also alleges that Bank of America violated the terms of a
February 24, 2009, Consent Judgment between Nevada and several of the bank’s
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subsidiaries. The Clark County District Court entered the Consent Judgment and
retains enforcement jurisdiction.
This action is based on complaints Nevada has reviewed and investigated
from more than 150 consumers, housing counselors and other industry sources.
The Complaint alleges that Bank of America has engaged in a pattern of
misconduct in which it has and continues to:
a. Mislead consumers with false promises that it will act on their
modifications within a set period of time, but keeps them waiting for
months, and sometimes more than a year, beyond the promised term;
b. Mislead consumers with assurances that they will not be foreclosed
upon while the Bank considered their requests for modifications.
However Bank of America has sold the homes of some Nevada
consumers and sent foreclosure notices to many more while their
requests for modifications were still pending;
c. Misrepresent to consumers that they must be delinquent on their
loans in order to qualify for assistance, even though neither Bank of
America’s proprietary programs nor the federal HAMP 1 program
requires that homeowners have missed payments;
The Home Affordable Mortgage Program (“HAMP”), 12 U.S.C. § 5219a, is
a federal program whereby the United States government privately contracts with
banks to provide incentives to enter into residential mortgage modifications. “In
March 2009, the United States Department of Treasury announced the details of
the Home Affordable Modification Program as part of the Making Home
Affordable Program. Under HAMP, individual loan servicers voluntarily enter
into contracts with Fannie Mae, acting as the financial agent of the United States,
to perform loan modification services in exchange for certain financial incentives.”
Newell v. Wells Fargo Bank, N.A., 2012 WL 27783, at *1 (N.D. Cal. Jan. 5, 2012).
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d. Mislead consumers with false promises that their initial, trial
modifications would be made permanent if and when they made the
required three payments on those plans, but then failed to convert
e. Tell consumers their modifications were denied for reasons that
were untrue, such as that: (i) the owner of the loan refused to allow the
modification when Bank of America had full authority to modify the
loan without the investor’s approval; (ii) the Bank had tried
unsuccessfully to reach the consumer, even though the consumer
repeatedly called the Bank; (iii) the loan was previously modified
when it was not; (iv) the borrower failed to make trial payments, when
they made all payments; and (v) the borrower was current on his or
her loan, when delinquency is not a condition of a modification;
f. Falsely notify consumers or credit reporting agencies that
consumers are in default when they are not;
g. Mislead consumers with offers of modification on one set of terms,
and then provide agreements with materially different terms, or
inform consumers that their modifications had been approved, but
then tell them that their requests were denied, often months before.
The Complaint also alleges that Bank of America is in contempt of the
Consent Judgment because of its failure to offer loan modifications to eligible
consumers and its practice of conducting foreclosures while consumers are being
considered for modifications. The Complaint seeks declaratory and injunctive
relief, civil penalties, restitution for defrauded Nevada consumers, attorney’s fees
and the costs of investigation.
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Bank of America removed the case to the United States District Court for the
District of Nevada on February 23, 2011, asserting three theories of federal
jurisdiction: (1) jurisdiction under CAFA, as both a “class action,” 28 U.S.C.
§ 1332(d)(2)-(10), and a “mass action,” 28 U.S.C. § 1332(d)(11); (2) federal
question jurisdiction, 28 U.S.C. §§ 1331, 1441(b); and (3) bankruptcy jurisdiction,
28 U.S.C. §§ 1334(b), 1452. On March 22, 2011, Nevada moved to remand the
case to state court.
The district court denied Nevada’s remand motion on July 5, 2011,
concluding that the case was a “class action” under CAFA, 28 U.S.C. § 1332(d).
As an alternative basis for federal jurisdiction, the district court concluded that the
case presented a federal question under 28 U.S.C. § 1331. The district court also
determined that the case did not satisfy CAFA’s “mass action” prong, 28 U.S.C.
§ 1332(d)(11). On July 15, 2011, Nevada timely requested permission to appeal
the denial of the remand motion pursuant to 28 U.S.C. § 1453(c). We held the
petition for permission to appeal in abeyance pending disposition of Washington v.
Chimei Innolux Corp., 659 F.3d 843 (9th Cir. 2011), which presented the question
of whether a state Attorney General parens patriae action is a “class action” as
defined by CAFA, and then accepted the appeal on January 3, 2012.
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“Determinations regarding subject matter jurisdiction are reviewed de
novo.” Chapman v. Deutsche Bank Nat’l Trust Co., 651 F.3d 1039, 1043 (9th Cir.
2011) (citation omitted). “We review the ‘construction, interpretation, or
applicability’ of CAFA de novo.” Chimei, 659 F.3d at 846-47 (quoting Bush v.
Cheaptickets, Inc., 425 F.3d 683, 686 (9th Cir. 2005)). “We review de novo a
district court’s denial of a motion to remand to state court for lack of federal
subject matter jurisdiction.” Chapman, 651 F.3d at 1043 (citation omitted).
Removal statutes are to be “strictly construed” against removal jurisdiction.
Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28, 32 (2002) (citation omitted).
We first consider whether the district court correctly concluded that this case
was removable under CAFA. CAFA provides for the removal of class actions and
mass actions involving parties with minimal diversity. 28 U.S.C. § 1332(d)(2)(A).
Under CAFA, a “class action” is defined as “any civil action filed under Rule 23 of
the Federal Rules of Civil Procedure or similar State statute or rule of judicial
procedure authorizing an action to be brought by 1 or more representative persons
as a class action.” 28 U.S.C. § 1332(d)(1)(B). A “mass action” is defined as “any
civil action . . . in which monetary relief claims of 100 or more persons are
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proposed to be tried jointly on the ground that the plaintiffs’ claims involve
common questions of law or fact.” 28 U.S.C. § 1332(d)(11)(B)(i).
Since the district court issued its order holding that this action is a CAFA
“class action,” we have held to the contrary. In Washington v. Chimei Innolux
Corp., we held that attorney general enforcement actions are not removable as
“class actions” under CAFA. 659 F.3d at 847. In Chimei, the attorneys general of
Washington and California brought parens patriae suits under their states’ antitrust
laws, alleging that a group of manufacturers and distributors engaged in a
conspiracy to fix the prices of certain liquid crystal display panels. Id. at 846. The
defendants removed the cases to federal court, arguing that “consumers were the
real parties in interest for the monetary relief claims, and that therefore the States’
parens patriae claims were disguised class actions removable under CAFA.” Id.
We rejected this argument, noting that “[p]arens patriae suits lack the defining
attributes of true class actions. As such, they only ‘resemble’ class actions in the
sense that they are representative suits.” Id. at 850. See also LG Display Co., Ltd.
v. Madigan, 665 F.3d 768, 772 (7th Cir. 2011) (parens patriae suit not a “class
action” because the “case was brought by the Attorney General, not by a
representative of a class”); West Virginia ex rel. McGraw v. CVS Pharmacy, Inc.,
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646 F.3d 169, 174-76 (4th Cir. 2011) (West Virginia Attorney General’s parens
patriae action to enforce consumer protection statute not removable under CAFA
because state statute lacked the procedural requirements of Rule 23).
Our decision in Chimei, which Bank of America concedes controls our
decision as to whether this action is a CAFA class action, makes clear that it cannot
be so characterized.
Bank of America next argues that Nevada’s action is nevertheless removable
as a “mass action” under 28 U.S.C. § 1332(d)(11). A mass action is defined as
“any civil action . . . in which monetary relief claims of 100 or more persons are
proposed to be tried jointly on the ground that the plaintiffs’ claims involve
common questions of law or fact, except that jurisdiction shall exist only over
those plaintiffs whose claims in a mass action satisfy the [$75,000] jurisdictional
amount requirement” set forth in § 1332(a). 28 U.S.C. § 1332(d)(11)(B)(i).
The district court ruled that this action does not qualify as a “mass action”
under the “event or occurrence” exclusion in CAFA, which expressly provides that
the term “mass action” excludes any civil action in which “all of the claims in the
action arise from an event or occurrence in the State in which the action was filed,
and that allegedly resulted in injuries in that State . . . .” 28 U.S.C.
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§ 1332(d)(11)(B)(ii)(I). The district court reasoned that it lacked mass action
jurisdiction because “the claims all allegedly arise from activity in Nevada and all
injuries allegedly resulted in Nevada.” This was a misapplication of the “event or
The “event or occurrence” exclusion applies only where all claims arise
from a single event or occurrence. “[C]ourts have consistently construed the
‘event or occurrence’ language to apply only in cases involving a single event or
occurrence, such as an environmental accident, that gives rise to the claims of all
plaintiffs.” Lafalier v. Cinnabar Serv. Co., Inc., 2010 WL 1486900, at *4 (N.D.
Okla. Apr. 13, 2010). Moreover, the legislative history of CAFA supports this
interpretation, making clear that the exception was intended to apply “only to a
truly local single event with no substantial interstate effects” in order to “allow
cases involving environmental torts such as a chemical spill to remain in state court
if both the event and the injuries were truly local.” S. Rep. No. 109-14, at 41
(2005), reprinted in 2005 U.S.C.C.A.N. 3, 44. The Complaint in this case alleges
widespread fraud in thousands of borrower interactions, and thus this action does
not come within the “event or occurrence” exclusion.2 Therefore, we hold that the
Nevada did not argue below for application of the “event or occurrence”
exclusion, and does not attempt to justify the district court’s conclusion on appeal.
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“event or occurrence” exclusion, 28 U.S.C. § 1332(d)(11)(B)(ii)(III), does not
apply to this action.
We have not yet had occasion to decide whether a state’s parens patriae
action is removable as a mass action. The two circuits that have addressed this
question, the Seventh and Fifth, have reached conflicting results. See Madigan,
665 F.3d at 772 (parens patriae suit not a mass action because the Attorney
General is the only plaintiff); Louisiana ex rel. Caldwell v. Allstate Ins. Co., 536
F.3d 418, 429 (5th Cir. 2008) (state’s parens patriae antitrust action against
insurance companies qualifies as mass action because insurance policyholders are
the “real parties in interest”).
In Madigan, the Illinois Attorney General filed an action in state court
against manufacturers of liquid crystal display panels for violations of the Illinois
Antitrust Act. 665 F.3d at 769. The complaint sought injunctive relief, civil
penalties, and treble statutory damages for the state as a purchaser and, as parens
patriae, for injured residents. Id. Concluding that the suit was not a mass action,
the Seventh Circuit reasoned that it did not involve “monetary relief claims of 100
or more persons . . . proposed to be tried jointly,” as required by CAFA, because
“only the Illinois Attorney General makes a claim for damages (among other
things), precisely as authorized by the IAA.” Id. at 772. The Seventh Circuit also
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reasoned that a suit is not a “mass action” if “‘all of the claims in the action are
asserted on behalf of the general public (and not on behalf of individual claimants
or members of a purported class) pursuant to a State statute specifically authorizing
such action,’” quoting the statutory language of § 1332(d)(11)(B)(ii)(III). Id.
The Madigan defendants argued, like Bank of America here, that the court
should apply a “claim by claim” analysis to conclude that the action was “really” to
recover damages for the hundreds of persons who purchased the unlawfully priced
LCD panels and that those purchasers were the real parties in interest for the nonenforcement-related claims in the suit, thus satisfying the “mass action”
requirements. Id. at 772-73. The Seventh Circuit rejected this approach, instead
looking at the complaint as a whole, and concluding that the State was the real
party in interest. Id. at 774. It reasoned, “Whether a state is the real party in
interest in a suit ‘is a question to be determined from the essential nature and effect
of the proceeding.’” Id. at 773 (quoting Nuclear Eng’g Co. v. Scott, 660 F.2d 241,
250 (7th Cir. 1981)) (internal quotation marks omitted).
In Caldwell, on the other hand, the Fifth Circuit adopted this “claim-byclaim” approach to identify the real party in interest in a parens patriae action
brought by the State of Louisiana. Caldwell, 536 F.3d at 430. Louisiana filed an
antitrust suit in state court against several insurance companies, seeking to enforce
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the Louisiana Monopolies Act and to recover treble damages, among other relief.
Id. at 423. The Fifth Circuit dissected the claims to “conclude that as far as the
State’s request for treble damages is concerned, the policyholders are the real
parties in interest,” because the plain language of the Monopolies Act authorized
only injured individuals to recover for treble damages. Id. at 429. Louisiana’s
argument that it was the real party in interest was belied by the language in the
complaint, which sought recovery of “damages suffered by individual
policyholders.” Id. at 428 (emphasis in original). The Fifth Circuit also relied
upon the essential nature of an antitrust proceeding, reasoning that “given that the
purpose of antitrust treble damages provisions are to encourage private lawsuits by
aggrieved individuals for injuries to their business or property,” it had no reason to
believe that individual policyholders were not the real parties in interest. Id. at 430
(citing Hawaii v. Standard Oil Co., 405 U.S. 251, 262 (1972)).
As both sides agree, the characterization of this case as a “mass action” thus
turns on whether the State of Nevada or the hundred-plus consumers on whose
behalf it seeks restitution are the real party(ies) in interest. This determination
affects both CAFA’s numerosity requirement, 28 U.S.C. § 1332(d)(11)(B)(i), and
its minimal diversity requirement, § 1332(d)(2)(A), because defendants are not
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citizens of Nevada and Nevada is not a citizen for purposes of diversity analysis,
Dyack v. N. Mariana Islands, 317 F.3d 1030, 1037 (9th Cir. 2003).
Relying on our recent decision in Department of Fair Employment and
Housing v. Lucent Technologies, Inc., 642 F.3d 728 (9th Cir. 2011), the district
court, though recognizing that “district courts are mainly in agreement that when a
state attorney general brings such a case, the fact that a discrete class of individuals
will receive restitution does not defeat the fact that the gravamen of the action is
protection of the public welfare,” nevertheless concluded that the individual
consumers are the real parties in interest for the restitution, declarative and
injunctive claims for relief.
In Lucent, we considered whether the district court had diversity jurisdiction
over an action filed by the California Department of Fair Employment and Housing
(“DFEH”) on behalf of a single aggrieved employee. Id. at 735. This question
turned on whether DFEH or the employee was the real party in interest, because if
the State had only the general interest it holds on behalf of all its citizens and their
welfare, it would not satisfy the “real party to the controversy requirement for the
purposes of defeating diversity” jurisdiction. Id. at 737. Though the statute at
issue, the California Fair Employment and Housing Act (“FEHA”), Cal. Gov’t
Code § 12900 et seq., declares the State’s interest in protecting all persons from
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employment discrimination, that governmental interest was too “general” to render
the State a real party in the controversy. Lucent, 642 F.3d at 738. Moreover, the
relief sought included reinstatement and payment of compensatory and punitive
damages to the aggrieved individual, who was also able to secure the equitable
relief sought by the State. Lucent, 642 F.3d at 739. Any relief that was unique to
DFEH was “tangential” to the relief sought for the employee, and thus could not
render DFEH a real party in interest. Id.
Our rationale for finding that the aggrieved individual was the real party in
interest in Lucent compels the conclusion that Nevada is the real party in interest
here. Unlike the California DFEH, which sued on behalf of a single aggrieved
employee, here, the Nevada Attorney General sued to protect the hundreds of
thousands of homeowners in the state allegedly deceived by Bank of America, as
well as those affected by the impact of Bank of America’s alleged frauds on
Nevada’s economy. In Lucent, we addressed whether there was a “substantial state
interest” separate and distinct from the relief sought on behalf of the individual;
there, the interests that were unique to the State were merely “tangential.” Id.
Furthermore, in Lucent we adopted the approach of looking at the case as a whole
to determine the real party in interest, rather than the claim-by-claim approach
adopted in Caldwell and advocated by Bank of America. Id. at 740 (quoting
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Geeslin v. Merriman, 527 F.2d 452, 455 (6th Cir. 1975), for the proposition that
“[t]he question as to whether or not the state is the real party in interest must be
determined by the essential nature and effect of the proceeding as it appears from
the entire record”).
We therefore examine “the essential nature and effect of the proceeding as it
appears from the entire record,” Lucent, 642 F.3d at 740, and conclude that
Nevada—not the individual consumers—is the real party in interest in this
controversy. Nevada brought this suit pursuant to its statutory authority under the
DTPA because of its interest in protecting the integrity of mortgage loan servicing.
Unlike in Caldwell, there is no doubt that the Attorney General has statutory
authority to pursue such claims. Foreclosures work a widespread and devastating
injury not only to those borrowers who are defrauded, but also on other Nevada
residents and the Nevada economy as a whole. Nevada has been particularly hardhit by the current mortgage crisis, and has a specific, concrete interest in
eliminating any deceptive practices that may have contributed to its cause. Cf.
Lucent, 642 F.3d at 738 (state’s interest too “general” to render it a party in
interest). The Center for Responsible Lending estimates that from 2009 to 2012,
foreclosures on neighboring homes will result in lost home equity in nearly one
million homes across Nevada, amounting to total lost home equity of $54.5
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billion.3 The city of Las Vegas has the second highest foreclosure rate in the
nation.4 Considering the devastating effect of the foreclosure crisis on Nevada, it is
unsurprising that the Attorney General would exercise her statutory right to “bring
an action in the name of the State of Nevada” against any person whom she “has
reason to believe . . . has engaged or is engaging in a deceptive trade practice”
related to mortgage-financing. Nev. Rev. Stat. § 598.0963(3).
Nevada’s sovereign interest in protecting its citizens and economy from
deceptive mortgage practices is not diminished merely because it has tacked on a
claim for restitution. See, e.g., Madigan, 665 F.3d at 773-74 (parens patriae suit
not removable under CAFA despite claim for treble damages on behalf of harmed
residents). In Chimei, although we did not reach the issue of whether a claim for
restitution in a consumer protection action rendered the consumers the real parties
in interest, the district court had concluded that “the States of California and
Washington are the real parties in interest because both States have a sovereign
Ctr. for Responsible Lending, The Cost of Bad Lending in Nevada (Aug.
2011), available at www.responsiblelending.org/mortgage-lending/toolsresources/factsheets/nevada.html.
Debbie Bocian, et al., Lost Ground 2011: Disparities in Mortgage Lending
and Foreclosures at Appendix 2 (Nov. 2011), available at
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interest in the enforcement of their consumer protection and antitrust laws . . .
[and] in securing an honest marketplace and the economic well-being of their
citizens.” In re TFT-LCD (Flat Panel) Antitrust Litig., 2011 WL 560593, at *5
(N.D. Cal. Feb. 15, 2011). Here, as in Chimei, the restitution that Nevada seeks,
“while on behalf of its consumers, would first be paid to the State and distributed
on an equitable basis.” Id. That individual consumers may also benefit from this
lawsuit does not “negate [Nevada’s] substantial interest in [this] case.” Id. See
also City & Cnty. of San Francisco v. PG & E Corp., 433 F.3d 1115, 1126 (9th
Cir. 2006) (“In this case, as in every case involving restitution, a successful result
for the governmental entities may well result in money being paid to private parties
. . . . However, the . . . restitution claims filed by the governmental entities in this
case are fundamentally law enforcement actions designed to protect the public.”)
Similarly, any award of restitution damages here would be paid directly to Nevada
and then distributed to individual consumers. See Nev. Rev. Stat.
In a virtually identical action brought by the Arizona Attorney General
against Bank of America, the District Court of Arizona also reasoned that the fact
“[t]hat some private parties may receive restitution does not negate the State’s
substantial interest or render the entire action removable.” Arizona ex rel. Horne v.
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Countrywide Fin. Corp., No. CV-11-00131-FJM, 2011 WL 995963, at *3 (D. Ariz.
Mar. 21, 2011). As in the Arizona case, the State of Nevada is the real party in
interest because of its “interest in ‘protecting the integrity of the residential
mortgage loan business’ and preventing consumer fraud in loan modifications and
foreclosures.” Id. Moreover, “the State has an interest in the enforcement of its
own state court judgment and its consumer fraud laws.” Id.
The state’s strong and distinct interest in this litigation is further
strengthened by the other forms of relief it seeks. Unlike in Lucent, where the
interests that were unique to DFEH’s lawsuit were “tangential,” here Nevada seeks
substantial relief that is available to it alone. First, it seeks enforcement of the
Consent Judgment, which explicitly disclaims a private right of action. Second, it
seeks civil penalties under the DTPA, which are not available to individual
consumers. See Nev. Rev. Stat. § 598.0999(2). Third, it seeks injunctive relief,
with respect to which the State faces a much lower standard of proof than would be
required for a lawsuit brought by individual consumers. Under Nevada law, “[t]o
obtain injunctive relief in a statutory enforcement action [alleging a deceptive trade
practice], a state or government agency need only show . . . a reasonable likelihood
that the statute was violated.” Nevada ex rel. Office of the Att’y Gen. v. NOS
Commc’ns, Inc., 84 P.3d 1052, 1055 (Nev. 2004). A private party, on the other
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hand, would be required to satisfy the higher burden of demonstrating irreparable
harm and an inadequate legal remedy. Id. at 1054. Fourth, Nevada seeks to recoup
the costs of its substantial investigation into Bank of America’s practices.
The Complaint, read as a whole, demonstrates that Nevada is the real party
in interest in this action. Therefore, neither CAFA’s minimal diversity
requirement, 28 U.S.C. § 1332(d)(2)(A), nor its numerosity requirement, 28 U.S.C.
§ 1332(d)(11)(B)(i), is satisfied. The State of Nevada is the real party in interest,
so the action falls 99 persons short of a “mass action.”5
As an alternative basis for its exercise of jurisdiction over this action, the
district court held that it had federal question jurisdiction because resolution of the
State’s claims “necessarily requires the construction of federal law.” Although the
Complaint alleges purely state law claims, the district court concluded that it would
be required to construe HAMP to determine whether Bank of America
misrepresented what the HAMP program permits or requires. Bank of America
Because we conclude that this case is not a mass action, we need not decide
whether it falls under the “general public” exception to mass action jurisdiction.
See 28 U.S.C. § 1332(d)(11)(B)(ii)(III) (providing that the term “mass action” does
not include any action in which “all of the claims in the action are asserted on
behalf of the general public (and not on behalf of individual claimants or members
of a purported class) pursuant to a State statute specifically authorizing such
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contends that our interlocutory appellate jurisdiction does not extend to review of
this jurisdictional basis. We disagree, and conclude that the district court lacks
federal question jurisdiction over this action.
Under CAFA, “a court of appeals may accept an appeal from an order of a
district court granting or denying a motion to remand a class action to the State
court from which it was removed if application is made to the court of appeals not
more than 10 days after entry of the order.” 28 U.S.C. § 1453(c)(1). Section
1453(c) modifies 28 U.S.C. § 1447(d), which sets forth the general rule that “[a]n
order remanding a case to the State court from which it was removed is not
reviewable on appeal or otherwise.” Bank of America contends that § 1453(c)(1)
confers appellate jurisdiction limited to the CAFA issues in the district court’s
order, and that Nevada’s failure to also seek certification under 28 U.S.C.
§ 1292(b) of the district court’s decision that it has federal question jurisdiction
precludes appellate review.
We have not previously addressed whether we possess appellate jurisdiction
over a non-CAFA issue decided in an order appealable under § 1453(c)(1),
although the question seems straightforward. The plain language of § 1453(c)(1)
confers jurisdiction over “an order of a district court granting or denying a motion
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to remand a class action.” 28 U.S.C. § 1453(c)(1). The Tenth Circuit recently
“concluded that it was ‘free to consider any potential error in the district court’s
decision, not just a mistake in application of the Class Action Fairness Act.’”
Coffey v. Freeport McMoran Copper & Gold, 581 F.3d 1240, 1247 (10th Cir.
2009) (quoting Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 451-52 (7th
Cir. 2005)). We are also guided by the Supreme Court’s conclusion that an
appellate court’s interlocutory jurisdiction under 28 U.S.C. § 1292(b) permits it to
“address any issue fairly included within the certified order because it is the order
that is appealable, and not the controlling question identified by the district court.”
Yamaha Motor Corp. v. Calhoun, 516 U.S. 199, 205 (1996). Moreover, it is well
established that “a court may raise the question of subject matter jurisdiction, sua
sponte, at any time during the pendency of the action, even on appeal.” Snell v.
Cleveland, Inc., 316 F.3d 822, 826 (9th Cir. 2002).
Bank of America’s reliance on Anderson v. Bayer Corp., 610 F.3d 390 (7th
Cir. 2010), and Patterson v. Dean Morris, L.L.P., 448 F.3d 736 (5th Cir. 2006), is
misplaced. In each of those appeals, the circuit courts reviewed orders by the
district courts that had remanded to state court cases removed under CAFA for
failure to satisfy CAFA’s removal requirements. On appeal, the Fifth and Seventh
Circuits affirmed the district courts’ remand orders, and determined that they
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lacked jurisdiction to consider other jurisdictional bases for removal to federal
court because orders granting remand are generally non-reviewable under 28
U.S.C. § 1447(d). See Anderson, 610 F.3d at 394; Patterson, 448 F.3d at 742.
Each circuit decision reasoned that it would be statutorily prohibited from
reviewing the non-CAFA issue if that had been the district court’s sole basis for
remand. See Anderson, 610 F.3d at 394 (“Typically, federal courts of appeal are
barred from reviewing district court orders remanding removed cases to state
court.”); Patterson, 448 F.3d at 742 (after concluding that CAFA is inapplicable,
“[a]ll that remains is an order equitably remanding these actions under § 1452(b),
which we cannot reach without contravening a plain statutory command”).
Conversely, here, we review an order denying remand on both CAFA and federal
question grounds. There is no equivalent statutory constraint on our power to
exercise appellate jurisdiction over an order denying remand. See, e.g., Sheeran v.
Gen. Elec. Co., 593 F.2d 93, 97 (9th Cir. 1979).
We therefore conclude that because § 1453(c)(1) permits appellate review of
remand orders “notwithstanding section 1447(d),” we have the discretion to
entertain the issue of whether another basis for federal jurisdiction exists that
would justify the district court’s denial of Nevada’s motion. Given the wellestablished principle that we may affirm the district court’s order on any ground
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fairly presented in the record, Van Asdale v. Int’l Game Tech., 577 F.3d 989, 994
(9th Cir. 2009), we exercise our discretion to consider whether the district court
correctly concluded that it had federal question jurisdiction. See Coffey, 581 F.3d
at 1247 (“There is no language [in § 1453(c)(1)] limiting the court’s consideration
solely to the CAFA issues in the remand order.”).
We reject Bank of America’s suggestion that, in these circumstances,
Nevada could only obtain interlocutory review of the issue of federal question
jurisdiction through the certification process as both impractical and contrary to the
purposes of CAFA. As the legislative history of CAFA demonstrates, the purpose
of § 1453(c) “‘is to develop a body of appellate law interpreting [CAFA] without
unduly delaying the litigation of class actions.’” Coffey, 581 F.3d at 1247 (quoting
S. Rep. No. 109-14, at 49, reprinted in 2005 U.S.C.C.A.N. at 46) (alterations in
original). To secure expedited review, § 1453(c)(2) requires that once the appellate
court accepts the appeal of the order, it “shall complete all action on such appeal,
including rendering judgment, not later than 60 days after the date on which such
appeal was filed . . . .” Section 1292(b) does not contain a similar time constraint
for review. Requiring compliance with the certification process for review of an
independent basis for the district court’s exercise of jurisdiction could delay the
litigation indefinitely, thus undermining the very purpose of CAFA. While the
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CAFA issues would be resolved within 60 days, the district court and the parties
would remain in the dark as to whether they should proceed in state or federal
court. In enacting CAFA, Congress could not have intended such an absurd result.
Declining to exercise our discretion to determine whether the district court
has federal question jurisdiction under 28 U.S.C. § 1331 over this case would
result in wasted judicial resources where, as here, we conclude that there is no
federal question jurisdiction.
The Supreme Court has never stated a “single, precise, all-embracing test for
jurisdiction over federal issues embedded in state-law claims between nondiverse
parties.” Grable & Sons Metal Prods. v. Darue Eng’g & Mfg., 545 U.S. 308, 314
(2005) (internal quotation marks and citation omitted). A state cause of action
invokes federal question jurisdiction only if it “necessarily raise[s] a stated federal
issue, actually disputed and substantial, which a federal forum may entertain
without disturbing any congressionally approved balance of federal and state
judicial responsibilities.” Id. This type of federal question jurisdiction applies to a
“special and small category” of cases, into which this case does not fall. Empire
Healthchoice Assurance v. McVeigh, 547 U.S. 677, 699 (2006).
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Here, the Complaint raises exclusively state law claims. Nevada alleges that
Bank of America violated the DTPA and the Consent Judgment. The Complaint
does allege misrepresentations about the federal HAMP program and violations of
the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq.
Specifically, the Complaint alleges that Bank of America “[m]isrepresent[ed] to
consumers that they must be delinquent on their loans in order to qualify for
assistance, even though neither Bank of America’s proprietary programs nor the
federal HAMP program requires that homeowners have missed payments.” The
Complaint also alleges that Bank of America’s misrepresentations to credit
agencies concerning consumers’ credit history “violate the Fair Debt Collection
Practices Act, 15 U.S.C. §§ 1692e(2)(A) & (8), and, as a result, the Nevada
Deceptive Trade Practices Act.”
By so alleging, Nevada does not “necessarily raise a . . . substantial” issue of
federal law. Grable, 545 U.S. at 314. The “mere presence of a federal issue in a
state cause of action does not automatically confer federal-question jurisdiction.”
Merrell Dow Pharms. Inc. v. Thompson, 478 U.S. 804, 813 (1986). The federal
issues here are not “pivotal” to Nevada’s case. Lippitt v. Raymond James Fin.
Servs. Inc., 340 F.3d 1033, 1046 (9th Cir. 2003). The gravamen of the Complaint
is that Bank of America violated Nevada’s DTPA through numerous
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misrepresentations, some about the HAMP program, and some which also violate
the FDCPA. For example, Nevada alleges that Bank of America violated the
DTPA by: “promising to act upon requests for mortgage modifications within a
specific period of time” and then failing to do so; giving consumers “false
assurances that their homes would not be foreclosed while their requests for
modifications were pending”; providing “inaccurate and deceptive reasons for
denying . . . requests for modifications”; and “misrepresenting that consumers
[had] been approved for modifications.” “When a claim can be supported by
alternative and independent theories—one of which is a state law theory and one of
which is a federal law theory—federal question jurisdiction does not attach
because federal law is not a necessary element of the claim.” Rains v. Criterion
Sys., Inc., 80 F.3d 339, 346 (9th Cir. 1996).
Nor does the Complaint’s reference to the FDCPA necessarily raise a
substantial issue of federal law. The Nevada DTPA includes a “borrowing”
provision, making it a violation of the DTPA to “[v]iolate a state or federal
statute or regulation relating to the sale or lease of goods or services.” Nev. Rev.
Stat. § 598.0923(3). California’s Unfair Competition Law (“UCL”), Cal. Bus. &
Prof. Code § 17200, contains a similar “borrowing” provision, and “California
district courts have held that mere references to federal law in UCL claims do not
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convert the claim into a federal cause of action.” Guerra v. Carrington Mortg.
Servs. LLC, 2010 WL 2630278, at *2 (C.D. Cal. June 29, 2010) (citations omitted);
see also Garduno v. Nat’l Bank of Ariz., 738 F. Supp. 2d 1004, 1009 (D. Ariz.
2010). Bank of America concedes that the mere use of a federal statute as a
predicate for a state law cause of action does not necessarily transform that cause
of action into a federal claim, but asserts that this case is an exception to the
general rule because it poses substantial questions about the scope and applicability
of the FDCPA—specifically, whether the FDCPA applies at all to mortgage loan
servicers. However, the Supreme Court has cautioned against finding federal
question jurisdiction on the ground that a case presents a novel issue of federal
law: “We do not believe the question whether a particular claim arises under
federal law depends on the novelty of the federal issue.” Merrell Dow, 478 U.S. at
817. Therefore, Nevada’s glancing reference to federal law is insufficient to confer
federal jurisdiction over Nevada’s state law claims.
Even where a state law claim does necessarily turn on a substantial and
disputed question of federal law, removal is subject to a “possible veto” where
exercising federal jurisdiction is not “consistent with congressional judgment about
the sound division of labor between state and federal courts governing the
application of § 1331.” Grable, 545 U.S. at 313. The exercise of federal
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jurisdiction must not “disturb any congressionally approved balance of federal
and state judicial responsibilities.” Id. at 314. The Supreme Court has instructed
federal courts to approach 28 U.S.C. § 1331 “‘with an eye to practicality and
necessity.’” Merrell Dow, 478 U.S. at 810 (quoting Franchise Tax Bd. v. Constr.
Laborers Vacation Trust, 463 U.S. 1, 20 (1983)). The Court has “consistently
emphasized that, in exploring the outer reaches of § 1331, determinations about
federal jurisdiction require sensitive judgments about congressional intent, judicial
power, and the federal system.” Id.
Here, unlike in Grable, exercising federal question jurisdiction would have
more than a “microscopic effect on the federal-state division of labor.” Grable,
545 U.S. at 315. State courts frequently handle state-law consumer protection suits
that refer to or are predicated on standards set forth in federal statutes. Exercising
federal question jurisdiction over any state law claim that references a federal
consumer protection statute would “herald a potentially enormous shift of
traditionally state cases into federal courts.” Id. at 319.
The Nevada Attorney General brought this parens patriae action in state
court to enforce its own state consumer protection laws. Nevada alleges only state
law causes of action, brought to protect Nevada residents. Under these
circumstances, the “claim of sovereign protection from removal arises in its most
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powerful form.” McGraw, 646 F.3d at 178 (internal quotation marks omitted).
“[C]onsiderations of comity make [federal courts] reluctant to snatch cases which a
State has brought from the courts of that State, unless some clear rule demands it.”
Franchise Tax Bd., 463 U.S. at 21 n.22. Removing a state’s action from its own
courts must “serve an overriding federal interest.” McGraw, 646 F.3d at 178.
Bank of America has not demonstrated that any “clear rule demands” removal, nor
that removal “serves an overriding federal interest.” Therefore, Nevada’s strong
sovereign interest in enforcing its state laws—and its state-law-created Consent
Judgment—in the courts of its own state weighs in favor of remand to its state
For the foregoing reasons, we reverse the district court’s order denying
Nevada’s motion to remand. The district court is instructed to remand this case to
the Eighth Judicial District Court in Clark County, Nevada.
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Catherine Cortez Masto, Binu Palal, Jeffrey Segal, Office of the Nevada Attorney
General, Las Vegas, NV, Linda Singer, Cohen Milstein Sellers & Toll PLLC,
Washington, DC, for Plaintiff-Appellant State of Nevada.
Matthew W. Close, O’Melveny & Myers LLP, Los Angeles, CA, Leslie Bryan
Hart, John D. Tennert, Lionel Sawyer & Collins, Reno, NV, for DefendantsAppellees Bank of America Corporation et al.
Bernard A. Eskandari, Office of the California Attorney General, Los Angeles, for
Amici Curiae State of California, State of Oregon, and State of Arizona.
Nina F. Simon, Center for Responsible Lending, Washington, DC, for Amici
Curiae Center for Responsible Lending, AARP, and Consumer Law Center.
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