Citibank (South Dakota), N.A. v. Duncan

Filing 31

MEMORANDUM OPINION AND ORDER directing that: 1) Dft/Counter-Plf Angela L. Duncan's 15 MOTION to Remand is GRANTED; 2) To the extent they have not already been resolved, the remaining motions (Docs. # 8 , 11 ) are DENIED as MOOT; 3) This case is REMANDED to the Circuit Court of Montgomery County, Alabama; and 4) The Clerk is DIRECTED to take all steps necessary to effect the remand. Signed by Honorable William Keith Watkins on 1/25/2010. (wcl, )

IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA N O R T H E R N DIVISION C IT IB A N K (SOUTH DAKOTA), N.A., P lain tiff /C o u n ter -D e f e n d a n t, v. A N G E L A L. DUNCAN, D e f e n d a n t/C o u n te r- P la in tif f v. Z A R Z A U R & SCHWARTZ, P.C., et al., C o u n t e r- D e f e n d a n ts . ) ) ) ) ) CASE NO. 2:09-CV-868-WKW[WO] ) ) ) ) ) ) ) ) ) )

M E M O R A N D U M OPINION AND ORDER T h is case is before the court on Defendant/Counter-Plaintiff Angela L. Duncan's (" D u n c a n " ) Motion to Remand (Doc. # 15). For the reasons to follow, the motion is due to b e granted and this action remanded for lack of jurisdiction. I . FACTS AND PROCEDURAL HISTORY On July 15, 2009, Plaintiff/Counter-Defendant Citibank (South Dakota), N.A. (" C itib a n k " ), filed an action in the Circuit Court of Montgomery, Alabama, against Duncan to collect an overdue balance on a credit card account. (Doc. # 1, pt. 3.) On August 31, 2 0 0 9 , Duncan filed an answer including various counterclaims and adding new counterclaim d e f e n d a n ts. (Doc. # 1, pt. 4.) Although they were not parties to the original complaint,

Z a rz a u r & Schwartz, P.C. ("Zarzaur") and Hope Financial USA, Inc. ("Hope") were added a s "Counterclaim Defendants." (Docs. # 1, 2.) T h e counterclaim asserts a number of federal claims against Zarzaur and Citibank in c lu d in g , inter alia, claims under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 16921 6 9 2 p . (Doc. # 1, pt. 3 ¶¶ 111-22.) Duncan asserts a number of federal claims against Hope in c lu d in g , inter alia, claims under the U.S. Credit Repair Organization Act, 15 U.S.C. §§ 1 6 7 9 -1 6 7 9 j, (Doc. # 1, pt. 3 ¶¶ 70-74), and the Debt Relief Agency portions of the U.S. B a n k r u p tc y Code, 11 U.S.C. §§ 526-28, (Doc. # 1, pt. 3 ¶¶ 75-110). Duncan brings these c la im s on her own behalf and on behalf of a putative class of persons who have been sued b y Citibank and Zarzaur in collection cases in which they sought to collect charged off debt o r contracted with Hope for provision of services under the Credit Repair Act or Debt Relief A g e n c y Act. (Doc. # 1, pt. 3 ¶¶ 44-56.) Duncan seeks for her and the putative class actual a n d statutory damages, punitive damages, declaratory and injunctive relief, and reasonable a tto rn e y's fees; however, a specific dollar amount is not alleged. Additionally, Duncan se rv e d notice that she will seek sanctions against any party who attempts to remove this a c tio n . (Doc. # 1, pt. 3 ¶ 22.) O n September 11, 2009, Zarzaur removed this action, and Citibank and Hope later c o n se n te d to the removal. (Docs. # 1, 2, 17.) Zarzaur alleges that because it is "not an o rig in a l plaintiff in this action, but rather is an `additional' or `new' defendant against whom a separate and independent federal claim is brought, it may remove this case." (Doc. # 1

2

¶ ¶ 3-4.) Moreover, Zarzaur alleges that, pursuant to 28 U.S.C. §§ 1332(d)(2) and § 1453, the c o u rt has jurisdiction over this proposed class action because it meets minimal diversity and th e amount in controversy requirements and because all other jurisdictional requirements h a v e been met. (Docs. # 1, 6, 8-13.) O n October 1, 2009, Duncan filed the instant motion to remand. (Doc. # 15.) The p a rties have fully briefed the motion. Additionally, Duncan requests that, if the motion to re m a n d is not granted and such decision is based upon the authority of Carl Heck Engineers, I n c . v. Lafourche Parish Police Jury, 622 F.2d 133 (5th Cir. 1980), the court certify an order f o r interlocutory appeal. (Doc. # 28, at 5.) I I . STANDARD OF REVIEW F e d e ra l courts have a strict duty to exercise the jurisdiction conferred on them by C o n g re s s . Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996). However, "[f]ederal c o u rts are courts of limited jurisdiction." Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 ( 1 1 th Cir. 1994). Thus, with respect to cases removed to this court pursuant to 28 U.S.C. § 1441, the law of the Eleventh Circuit favors remand where federal jurisdiction is not a b so lu te ly clear. "[R]emoval statutes are construed narrowly; where plaintiff and defendant c la sh about jurisdiction, uncertainties are resolved in favor of remand." Id. The removing d e f e n d a n t bears the burden of establishing the propriety of removal. See Lowery v. Ala. P o w e r Co., 483 F.3d 1184, 1208 (11th Cir. 2007); Leonard v. Enter. Rent a Car, 279 F.3d 9 6 7 , 972 (11th Cir. 2002).

3

I I I. ANALYSIS T h e parties dispute whether Zarzaur properly removed this case to federal court. Z a rz a u r and Hope propose two bases for doing so: (1) under 28 U.S.C. §§ 1331 (federal q u e stio n jurisdiction) and 1441(c) as a counter-defendant who was not a party to the original c la im , pursuant to Carl Heck, and (2) under § 1332 (diversity jurisdiction), § 1441, and § 1453 as a class action counter-defendant who was not a party to the original claim, pursuant t o the Class Action Fairness Act ("CAFA"), Pub. L. No. 109-2, 119 Stat. 4 (codified in p e rtin e n t part at § 1332(d) and § 1453(b)). The court addresses these arguments in turn. T h e re is a dispute among the federal courts about whether a third-party defendant has th e right to remove a case that contains a "separate and independent claim or cause of action" p u rs u a n t to § 1441(c).1 Unlike the majority of courts that have decided the issue, the former F if th Circuit in Carl Heck held that removal of such cases by a third-party indemnity

28 U.S.C. § 1441(c), which governs the removal of § 1331 (federal question) actions from state to federal court, provides: Whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of this title is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates.

1

4

d ef en d an t is proper.2 See 622 F.2d at 135-36. The new Fifth Circuit extended the Carl Heck ru le , allowing counter-defendants who were not parties to the original action to remove a c a se that contained a claim that was separate and independent from the original action. See B d . of Regents of Univ. of Tex. Sys. v. Walker, 142 F.3d 813, 816-17 (5th Cir. 1998). A lth o u g h Carl Heck is binding authority as to removals by third-party defendants,3 Walker is not. Nor is North Star Capital Acquisitions v. Krig, No. 07-264, 2007 WL 3522425 (M.D. F la. Nov. 15, 2007), the unreported district court opinion cited by the counter-defendants in s u p p o rt of removal. Zarzaur and Hope are not third-party defendants, and they have not p e rs u a d e d the court that it should follow the expansion suggested in Walker. The Eleventh C ir c u it has yet to decide whether § 1441(c) encompasses removals by counter-defendants, a n d given the divisiveness among other courts as to the underlying conclusion reached in C a r l Heck, the court is persuaded that the better course is to remand, rather than to guess w h at this circuit might hold if presented with the unsettled issue of whether Carl Heck should b e extended to removals by counter-defendant. See Jones v. LMR Int'l, Inc., 457 F.3d 1174,

See Jefferson Parish Hosp. Dist. No. 2 v. Harvey, 788 F. Supp. 282, 284 (E.D. La. 1992) ("[T]he Fifth Circuit has spearheaded the emergence of the minority rule that a third-party defendant can remove under 28 U.S.C. § 1441(c) `if the third-party complaint states a separate and independent claim which if sued upon alone could have been brought properly in federal court.'" (quoting Carl Heck, 622 F.2d at 136). Carl Heck was superseded in part by § 1441(c) as stated in The Mobile Washington (MOWA) Band of the Choctaw Indian Tribe v. Sunbelt Resources, Inc., 649 F. Supp. 2d 1325, 1330 (S.D. Ala. 2009). Section 1441(c) forecloses removal of claims based upon diversity, but "remains good law with regard to third party removals of actions based upon federal question jurisdiction." BJB Co. v. Comp Air Leroi, 148 F. Supp. 2d 751, 754 (N.D. Tex. 2001). The Eleventh Circuit has adopted all prior decisions of the former Fifth Circuit handed down prior to the close of business on September 30, 1981, as binding precedent. Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
3

2

5

1 1 7 7 (11th Cir. 2006) ("In reviewing matters concerning removal and remand, `it is ax iom atic that ambiguities are generally construed against removal.'" (quoting Butler v. Polk, 5 9 2 F.2d 1293, 1296 (5th Cir. 1979)); cf. Sterling Homes, Inc. v. Swope, 816 F. Supp. 319, 3 2 0 -2 7 (M.D. Pa. 1993) (Based upon the absence of Third Circuit precedent and "the p re su m p tio n against removal in ambiguous cases," the district court "follow[ed] the majority ru le among courts . . . that only first party defendants may remove an action to federal court" an d remanded the action to state court). Z a rz a u r further argues that, as a counter-defendant who was not a party to the original c la im , it can remove this class action pursuant to CAFA. In contrast to the courts that have d e c id e d this issue, see, e.g., Palisades Collections LLC v. Shorts, 552 F.3d 327, 334 (4th Cir. 2 0 0 8 ), cert. denied, AT&T Mobility LLC v. Shorts, 129 S. Ct. 2826 (2009), Zarzaur and Hope a rg u e that CAFA was intended to broaden federal jurisdiction and that the language of § 1453 does not limit a counter-defendant's right to remove a class action. However, no la n g u a g e in § 1453 provides for newly added counter-defendants to remove class actions. M o re o v e r, despite Zarzaur's allegations to the contrary, the removal documents do not e sta b lis h the amount in controversy; therefore, this court does not have diversity jurisdiction u n d e r CAFA or otherwise. See Lowery, 483 F.3d at 1211 ("If the jurisdictional amount is e ith e r stated clearly on the face of the documents before the court, or readily deducible from them , then the court has jurisdiction. If not, the court must remand.").

6

T h e removing defendant has not carried its burden of showing that removal was p ro p e r, and this case is due to be remanded. I V . CONCLUSION F o r the reasons stated above, it is ORDERED that: 1. D e f en d a n t/C o u n te r-P la in tif f Angela L. Duncan's Motion to Remand (Doc.

# 15) is GRANTED; 2. T o the extent they have not already been resolved, the remaining motions

(D o c s . # 8, 11) are DENIED as MOOT; 3. A la b a m a ; and 4. T h e Clerk is DIRECTED to take all steps necessary to effect the remand. T h is case is REMANDED to the Circuit Court of Montgomery County,

DONE this 25th day of January, 2010. /s/ W. Keith Watkins UNITED STATES DISTRICT JUDGE

7