Mustafa v. Market Street Mortgage Corporation et al

Filing 16

MEMORANDUM OPINION AND ORDER: The case is hereby REMANDED to the Circuit Court of Montgomery County, Alabama, and the Clerk is DIRECTED to take appropriate steps to effect the remand. The pending 5 Motion to Dismiss filed by Dovenmuehle Mortgage is left for resolution by the state court. Signed by Honorable Judge Mark E. Fuller on 1/12/2012. Certified copy of order mailed to Clerk, Circuit Court of Montgomery County, AL. (dmn, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
YUSUF MUSTAFA,
Plaintiff,
v.
MARKET STREET MORTGAGE
CORPORATION, et al.,
Defendants.

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Case No. 2:11-cv-862-MEF
(WO—Publish)

MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
Defendants Market Street Mortgage Corporation (Market Street), MGC Mortgage,
Inc. (MGC), Dovenmuehle Mortgage, Inc. (Dovenmuehle), and LNV Corporation (LNV)
removed this case to federal court from the Circuit Court of Montgomery County,
Alabama.1 (Doc. # 1.) In response, Plaintiff Yusuf Mustafa filed the Motion to Remand
(Doc. #6) now before the Court. For the reasons discussed below, Mustafa’s motion is
due to be GRANTED.

II. BACKGROUND2
Yusuf Mustafa and his late wife bought a home like most people do: by executing

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Although Market Street has yet to appear in the case, it did join in and consent to the removal.
(See Doc. # 1-5.)
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The Court has taken the facts from the complaint and accepts them as true for present purposes.

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a promissory note and granting a mortgage on the home to secure their repayment
obligation. Market Street, the initial mortgagee, transferred its rights to repayment on the
note to MGC shortly after informing Mustafa about its intent to do so. MGC then took
over for Market Street, telling Mustafa that the conditions on the mortgage would stay
the same except for the terms related to the loan’s servicing. Mustafa then began making
mortgage payments to MGC.
The mortgagor-mortgagee relationship between Mustafa and MGC fell apart at
this point. Mustafa claims that MGC, acting at the direction of LNV, the mortgage note
holder, failed to give him credit for payments made to Market Street; improperly held
payments and miscalculated the amount owed to MGC; misapplied payments when it
forced-placed insurance on the home, despite Mustafa having adequate insurance;
charged Mustafa late fees for payments timely received; declared Mustafa in default;
improperly initiated foreclosure proceedings; and misrepresented how the company
would service Mustafa’s loan. MGC then told Mustafa that Dovenmuehle would share in
the right to repayment of the note with MGC, and that this new arrangement would not
affect the terms of the mortgage except for those directly related to the loan’s servicing.
Things did not improve at this point. According to Mustafa’s complaint, all of the
disputed practices continued, only now with Dovenmuehle taking part. Worse yet,
Dovenmuehle and MGC told Mustafa to cure his delinquency by applying for assistance,
but then turned around and refused Mustafa’s request for help, stating that he had

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submitted an incomplete application. The two mortgage companies still charged Mustafa
application fees, however, and refused to consider participating in Hardest Hit Alabama,
a state-sponsored foreclosure assistance program that would have allowed Mustafa to
continue making payments.
As a result of these actions, Mustafa filed a complaint in the Circuit Court of
Montgomery County, Alabama, asserting various state law claims related to the servicing
of his mortgage loan. He joined the four mortgage companies discussed above—Market
Street, MGC, Dovenmuehle, and LNV Corporation—as defendants. In his complaint,
Mustafa alleged a smattering of state law claims, asserting liability theories based on
misrepresentation, suppression, breach of contract, negligence, wantonness, negligent
and wanton hiring and supervision, intentional infliction of emotional distress, trespass,
defamation, conspiracy, and breach of a third-party contract. The defendants then
removed the action, filing their removal papers on October 11, 2011.3 Mustafa filed his
remand motion about a month later on November 10, 2011.
III. SHOULD THE ACTION BE REMANDED?
A. The remand standard
Federal courts are courts of limited jurisdiction. See, e.g., Kokkonen v. Guardian
Life Ins. Co. Of Am., 511 U.S. 375, 377 (1994); Burns v. Windsor Ins. Co., 31 F.3d 1092,
1095 (11th Cir. 1994); Wymbs v. Republican State Executive Comm., 719 F.2d 1072,

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The parties do not dispute the procedural propriety of removal.

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1076 (11th Cir. 1983). As a result, they only have the power to hear cases over which the
Constitution or Congress has given them authority. See Kokkonen, 511 U.S. at 377.
Congress has empowered the federal courts to hear a case removed by a defendant from
state to federal court if the plaintiff could have brought the claims in federal court
originally. See 28 U.S.C. § 1441(a); Caterpillar, Inc. v. Williams, 482 U.S. 386, 392
(1987). To accomplish a successful removal, the removing defendant bears the burden of
showing that a district court has subject matter jurisdiction over an action. See Diaz v.
Sheppard, 85 F.3d 1502, 1505 (11th Cir. 1996) (putting the burden of establishing federal
jurisdiction on the defendant seeking removal to federal court). And although the
Eleventh Circuit favors remand where federal jurisdiction is not absolutely clear, see
Burns, 31 F.3d at 1095, “federal courts have a strict duty to exercise the jurisdiction that
is conferred upon them by Congress.” Quackenbush v. Allstate Ins. Co., 517 U.S. 706,
716 (1996).

B. The removal statutes
The removal statute, 28 U.S.C. § 1441(a), allows a defendant to remove an action
from state to federal court if the plaintiff could have originally brought his claim in
federal court. For this Court to exercise removal jurisdiction based on diversity, there
must exist “complete diversity” between adverse parties—no plaintiff may share state
citizenship with any of the defendants.4 See Riley v. Merrill Lynch, Pierce, Fenner &
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The parties do not dispute the complete diversity requirement and instead focus solely on the
amount in controversy. Even so, the Court notes the plaintiff resides in Alabama whereas MGC and LNV

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Smith, Inc., 292 F.3d 1334, 1337 (11th Cir. 2002). In addition, the amount in controversy

must exceed $75,000, exclusive of interests and costs. 28 U.S.C. § 1332(a); Triggs v.
John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998). Where the plaintiff has
not specified his claimed damages, the removing defendant has to show, by a
preponderance of the evidence, that the action exceeds the $75,000 requirement. See,
e.g., Leonard v. Enterprise Rent a Car, 279 F.3d 967, 972 (11th Cir. 2002). To make this
determination, district courts can make “reasonable deductions, reasonable inferences, or
other reasonable extrapolations from the pleadings.” Roe v. Michelin N. Am., Inc., 613
F.3d 1058, 1066 (11th Cir. 2010).
C. Analysis
The defendants believe that the value of Mustafa’s home, $233,600, serves as the
basis for determining the amount in controversy. And to establish convincingly that they
have met the requirement, they note that Mustafa’s mental anguish and punitive damages
claims would surely push the amount in controversy past $75,000. Mustafa disputes this
of course, contending instead that his lawsuit only revolves around the improper fees
allegedly charged by the defendants. To this end, he points out that he does not dispute
the mortgage’s validity, nor does he seek an injunction to stop foreclosure. And he notes
the speculative nature of any mental anguish or punitive damages that might attend an

are citizens of Texas (both were incorporated and have their principal place of business there),
Dovenmuehle is a citizen of Delaware (state of incorporation) and Illinois (principal place of business),
and Market Street Mortgage is a citizen of Florida (state of incorporation and principal place of
business). The parties therefore satisfy the complete diversity requirement.

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award based on the allegedly improper fees.
Mustafa has the better of this argument considering how judges in this district
have addressed the amount-in-controversy requirement in mortgage foreclosure cases.
For example, in White v. Wells Fargo Home Mortgage, Judge Thompson reasoned that,
because the plaintiff based his state law claims on allegedly improper fees, declined to
seek injunctive relief, and never questioned the mortgage’s validity, he did not put the
value of the home in controversy. No. 1:11-cv-408, 2011 WL 3666613, at *3 (M.D. Ala.
Aug. 22, 2011). Judge Albritton recently adopted this line of reasoning, holding that
plaintiffs who neither sought injunctive relief nor questioned the validity of their
mortgage had not put the total value of their home at issue. Parks v. Countrywide Home
Loans, No. 2:11-cv-852, 2011 WL 6223049 (M.D. Ala. Dec. 15, 2011).
Like the plaintiffs in White and Parks, Mustafa has refrained from putting the total
value of his home in controversy: he neither seeks injunctive relief nor does he question
the validity of his mortgage. Accordingly, the defendants’ attempt to use $233,600 as the
amount in controversy fails as a matter of law. Indeed, the principal case they cite used
the plaintiff’s home’s value to determine the amount in controversy on a request for
injunctive relief. See Mapp v. Deutsche Bank Nat’l Trust Co., No. 3:08-cv-695, 2009
WL 3664118 (M.D. Ala. Oct. 28, 2009) (Watkins, J.) (“As the parties are aware, when
declaratory or injunctive relief is sought, “it is well established that the amount in
controversy is measured by the value of the object of the litigation.” (citing Ericsson GE

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Mobile Commc’ns, Inc. v. Motorola Commc’ns & Elecs., Inc., 120 F.3d 216, 218 (11th
Cir. 1997) (emphasis added) (internal citations omitted))).
The defendants alternatively argue that the disputed mortgage arrearage,
combined with Mustafa’s claimed mental anguish and punitive damages, satifies the
$75,000 amount-in-controversy requirement. But even if the Court takes the amount
needed to pay off the loan ($246,361.35), and subtracts it from the unpaid principal
($226,917.02), the defendants can only establish $19,444.33 in liquidated damages. And
although Mustafa’s mental anguish and punitive damages claims count towards the
amount-in-controversy calculation, see, e.g., Bell v. Preferred Life Assurance Soc’y, 320
U.S. 238, 240 (1943), the Court has no way to make a non-speculative estimate as to
their value.
Yet the defendants ask the Court to apply a multiplier to the $19,444.33 worth of
compensatory damages so as to capture the value of Mustafa’s mental anguish and
punitive damages claims. For support they cite Blackwell v. Great American Financial
Resources, Inc., a case finding the $75,000 requirement satisfied even though the
plaintiff only sought $23,172.28 in compensatory damages. 620 F. Supp. 2d 1289 (N.D.
Ala. 2009). In finding it had subject matter jurisdiction, the Blackwell court reasoned that
a single digit multiple of the punitive damages claim would satisfy the amount-incontroversy requirement while still comporting with the Due Process Clause. Id. at 1291
(citing State Farm Mut. Auto. Ins. v. Campbell, 538 U.S. 408 (2003) (suggesting punitive

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damages award that exceeds a single digit multiple of compensatory damages violates
due process)).
This Court finds Blackwell unpersuasive, however, for it fails to put the burden of
proof on the removing party, ignores established precedent, and undermines the
foundational principal that a federal court should construe its removal jurisdictional
narrowly. First, applying a single digit multiplier sufficiently high to satisfy the amountin-controversy requirement, without more, assumes away the removing party’s burden to
prove the propriety of removal by a preponderance of the evidence. Second, it also
ignores the Eleventh Circuit’s command in Lowery v. Alabama Power Company to look
at the facts supporting a damages assertion, because “the existence of jurisdiction should
not be divined by looking to the stars.” 483 F.3d 1184 (11th Cir. 2007). Woodenly
applying a single digit multiple of the compensatory damages claimed, without a nonspeculative reason to believe the jury would come back with such an award, violates
Lowery’s explicit commands and is not a reasonable extrapolation from the pleadings
under Roe. Third, assuming a punitive damages award of up to nine times compensatory
damages (likely the highest multiplier that comports with due process) ignores the
principal that courts should construe the remand statutes narrowly so as to resolve
jurisdictional uncertainties in favor of remand. Burns v. Windsor Ins. Co., 31 F.3d 1092,
1095 (11th Cir. 1994). Furthermore, using a multiplier, without more, would trigger
grave federalism concerns: cases with compensatory damages of just $8,333.33 could

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begin finding their way into federal court, thus usurping the States’ jurisdiction over all
but the smallest claims.
Still, the defendants attempt to overcome the speculative nature of the value of
Mustafa’s mental anguish and punitive damages claims by citing to damages awards
exceeding $75,000 in somewhat similar cases. But doing so does not suffice: the “mere
citation of what has happened in the past does nothing to overcome the indeterminate and
speculative nature of” the defendants’ assertions. See Federated Mut. Ins. Co. v.
McKinnon Motors, LLC, 329 F.3d 805, 809 (11th Cir. 2003). The defendants have
presented no evidence other than these cases to prove the monetary value of the mental
anguish and punitive damages claimed. Therefore, the Court concludes that the
defendants have failed to meet their burden to establish that the amount in controversy
exceeds $75,000. Accordingly, the case is due to be remanded back to state court.
IV. CONCLUSION
The case is hereby REMANDED to the Circuit Court of Montgomery County,
Alabama, and the Clerk is DIRECTED to take appropriate steps to effect the remand.
The pending motion to dismiss filed by Dovenmuehle Mortgage (Doc. # 5) is left for
resolution by the state court.
DONE this the 12 th day of January, 2012.
/s/ Mark E. Fuller
UNITED STATES DISTRICT JUDGE

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