Sanders v. Homecomings Financial, LLC

Filing 19

MEMORANDUM OPINION AND ORDER as follows: 1) Granting 9 MOTION to Remand filed by Jimmy Sanders; 2) This case is Remanded to the CC of Lee County, AL; 3)The Clerk is directed to take appropriate steps to effect the remand; 4) Any pending motions are left for resolution by the state court. Signed by Hon. Chief Judge Mark E. Fuller on 4/29/09. (Attachments: # 1 appeals checklist)(mailed CC Lee Co., AL)(vma, )

IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA E A S T E R N DIVISION J IM M Y SANDERS, P L A IN T IF F , v. H O M E C O M IN G S FINANCIAL, LLC, D EFEN D A N T. ) ) ) ) ) ) ) ) )

C A S E NO.: 2:08-CV-369-MEF (WO--Do Not Publish)

M E M O R A N D U M OPINION AND ORDER T h is case is presently before the Court on a Motion to Remand (Doc. # 9), filed by P la in tif f Jimmy Sanders ("Sanders") on June 25, 2008. Defendant Homecomings Financial, L L C ("Homecomings") removed this action from the Circuit Court of Lee County, Alabama p u rs u a n t to 28 U.S.C. §§ 1441, 1446 on May 19, 2008. Homecomings argues in the Notice o f Removal (Doc. # 1-1) that this Court has subject matter jurisdiction over this action p u rs u a n t to 28 U.S.C. §§ 1331, 1332, 1367. After careful consideration of the applicable la w and the arguments of counsel on the many issues raised by the motion to remand, the C o u rt finds that the motion to remand is due to be GRANTED. FACTUAL AND PROCEDURAL BACKGROUND This case arises out of an adjustable rate purchase money mortgage loan H o m e c o m in g s issued to Sanders in March, 2005. The original value of the mortgage was $ 9 7 ,5 0 0 .0 0 . Two years after origination, the interest rate on the loan reset, and Sanders had tro u b le paying the amount due each month. The unpaid balance on the loan after acceleration

was $98,127.38. Homecomings understood Sanders to be in default on the mortgage and in s titu te d a non-judicial foreclosure action under the terms of the mortgage contract. Upon le a rn in g of Homecomings' intention to exercise its right of sale under the contract, Sanders f ile d a complaint in the Circuit Court of Lee County, Alabama. (Doc. # 1-2.) The complaint s e t out the factual predicate for the action and stated claims in eight counts. Counts I through V II, respectively, asserted claims for: negligence, wantonness, unjust enrichment, " c o m m is s io n of certain acts and practices prohibited as unfair and deceptive,"1 suppression, v io la tio n of the Alabama Extended Manufacturer's Liability Doctrine, and wrongful fo re c lo s u re . Sanders seeks unspecified compensatory and punitive damages for these alleged w ro n g s . A final count sought an ex parte temporary restraining order to prevent the im p e n d in g sale of the Sanders home.2 On May 19, 2008, Homecomings removed the action to this Court invoking its s u b je c t matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1332, 1367. (Doc. # 1.)
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This count claims that certain enumerated actions of Homecomings are "instances o f unconscionable conduct previously banned as unfair and deceptive by federal regulatory a u th o ritie s under chapter 5 of the Federal Trade Commission Act and adopted by federal b a n k regulators." (Doc. # 1-2 ¶ 35.) This count also states that "Plaintiff lacked legitimate b a rg a in in g power, was not provided with adequate disclosures, . . . , was completely without m e a n in g f u l choice." (Doc. # 1-2 ¶ 36.) The count further alleges that the terms of the m o rtg a g e contract totally and completely favor Homecomings and that the contract is one of a d h e s io n containing oppressive, one-sided, and patently unfair terms. (Doc. # 1-2 ¶¶ 37-39.) Because of this, Sanders seeks "all damages allowable under law as a result of defendant's u n c o n sc i o n a b le conduct in violation of unfair and deceptive acts and practices by the d e f e n d a n t." (Doc. # 1-2 ¶ 40.) The Circuit Court of Lee County granted the temporary restraining order prior to re m o v a l. 2
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Homecomings argues the Court has jurisdiction over this case for several reasons. First, H o m e c o m in g s points to the section of the complaint labeled "JURISDICTION." The first s e n te n c e in that section states "Jurisdiction is proper in the federal district court based upon d iv e rsity jurisdiction." (Doc. # 1-2 ¶ 3.) That section also states: "this Court is authorized u n d e r its inherent powers to exercise supplementary jurisdiction over the common law claims o f the plaintiff." (Id.) Second, Homecomings argues that this Court has diversity jurisdiction u n d e r 28 U.S.C. § 1332, because there is no dispute as to the diversity of the citizenship of th e parties,3 and because the original value of the mortgage loan in question was $94,500.00, w h ic h is in excess of $75,000.00. Finally, Homecomings argues that this Court has federal q u e s tio n jurisdiction under 28 U.S.C. § 1331 and supplemental jurisdiction under 28 U.S.C. § 1367 because of the federal regulations discussed in Count IV, which is detailed supra at f o o tn o te one. On June 25, 2008, Sanders filed a Motion to Remand (Doc. # 6), which is now u n d e r submission and ripe for disposition. DISCUSSION A . Legal Framework F e d e ra l courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. o f Am., 511 U.S. 375 (1994); Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir. 1994);

Sanders is a resident and citizen of the State of Alabama. Homecomings is a D e la w a re corporation with its principal place of business in Minnesota. 3

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Wymbs v. Republican State Executive Comm., 719 F.2d 1072, 1076 (11th Cir. 1983). As s u c h , federal courts only have the power to hear cases that they have been authorized to hear b y the Constitution and the Congress of the United States. Kokkonen, 511 U.S. at 377. When a case is originally filed in state court, a party may remove it if the case o rig in a lly could have been brought in federal court. See 28 U.S.C. § 1441(a); Lowery v. A la b a m a Power Co., 483 F.3d 1184, 1207 (11th Cir. 2007), cert. denied, 128 S. Ct. 2877 (2 0 0 8 ) (holding that "the party seeking a federal venue must establish the venue's ju ris d ic tio n a l requirements" and that removing defendants bear that burden in the context of a motion to remand). The non-moving party may move for remand, however, which the c o u rt should grant, if "it appears that the district court lacks subject matter jurisdiction." See 2 8 U.S.C. § 1447(c).4 Because removal jurisdiction raises significant federalism concerns, " re m o v a l statutes are construed narrowly; where plaintiff and defendant clash about ju ris d ic tio n , uncertainties are resolved in favor of remand." Burns, 31 F.3d at 1095. Recently the Eleventh Circuit Court of Appeals provided significant clarification of " e x is tin g principles of law governing removal generally--who bears the burden of e s ta b lis h in g that removal is proper, how that party can satisfy its burden, and how a district

U n d e r 28 U.S.C. § 1447, a plaintiff may move to remand the case, though if the m o tio n is based on any ground other than subject matter jurisdiction the plaintiff must make s u c h a motion within thirty days of removal. Here, the motion to remand was filed more than th irty days after removal. Because the motion is based on subject matter jurisdiction, the C o u rt must nevertheless entertain the motion. See 28 U.S.C. § 1447(c) ("[i]f at any time b e f o re final judgment it appears that the district court lacks subject matter jurisdiction, the c a s e shall be remanded.") 4

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court must proceed in evaluating its jurisdiction after removal." Lowery, 483 F.3d at 1187. Although Lowery arose in the context of a removal pursuant to the Class Action Fairness Act o f 2005 ("CAFA"), it is plain from the text of Lowery that the holdings of the case are not lim ite d solely to cases removed under CAFA. In Lowery, the Eleventh Circuit reiterated that in cases such as this one, where the complaint does not specify the amount of damages s o u g h t, "the removing party bears burden of establishing the jurisdictional amount by a p re p o n d e ra n c e of the evidence." 483 F.3d at 1208-09, 1210. The court cautioned, however, th a t "[i]f the jurisdictional amount is either stated clearly on the face of the documents before th e court, or is readily deducible from them, then the court has jurisdiction. If not, the court m u s t remand. Under this approach, jurisdiction is either evident from the removing

d o c u m e n ts or remand is appropriate." Indeed, "in assessing the propriety of removal, the c o u rt considers the documents received by the defendant from the plaintiff-- be it the initial c o m p la in t or a later received paper--and determines whether that document and the notice o f removal unambiguously establish federal jurisdiction." Id. at 1213. The defendant and th e court may not speculate about the amount in controversy, nor should "the existence of ju ris d ic tio n " be "divined by looking to the stars." Id. at 1215. Importantly, the Lowery court s ta te d that it is highly questionable whether a defendant could ever file a notice of removal on d iv e rs ity grounds in a case such as the one before us--where the defendant, th e party with the burden of proof, has only bare pleadings containing u n s p e c if ie d damages on which to base its notice--without seriously testing the lim its of compliance with Rule 11. Unlike the typical plaintiff who originally b rin g s a diversity action in federal court, the removing defendant generally will 5

have no direct knowledge of the value of plaintiff's claims. Id. at 1215. "When a plaintiff seeks unliquidated damages and does not make a specific d e m a n d , therefore, the factual information establishing the jurisdictional amount must come f ro m the plaintiff." Id. at1215. B. Diversity Jurisdiction A m o n g the cases over which a federal district court may exercise subject matter ju ris d ic tio n are civil actions in which only state law claims are alleged if the civil action a rise s under the federal court's diversity jurisdiction. See 28 U.S.C. § 1332(a). The diversity s ta tu te confers jurisdiction on the federal courts in civil actions "between citizens of different s ta te s " in which the jurisdictional amount, currently in excess of $75,000, is met. Id. The heart of the complaint is the unspecified damages Sanders seeks as a result of the m o rtg a g e contract and as a result of the alleged negligence, fraud, and coercion associated w ith the sale of the mortgage product to him by Homecomings. Homecomings, however, a rg u e s that the $75,000.00 amount-in-controversy requirement is met because the original v a lu e of the mortgage was $94,500.00. The Court disagrees. First, the amount of the mortgage is not an issue with respect to the first seven counts b e c a u s e those counts seek damage for the wrongful conduct of Homecomings in connection w ith the original transaction. See Horace v. LaSalle Bank Nat'l Ass'n, 2009 WL 426467, *2 (M .D . Ala. Feb 17, 2009) (Thompson, J.). The value of the mortgage loan has only the s lig h te s t relationship to the damage Sanders might have suffered due to Homecomings'

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alleged misconduct in the sale of the loan to Sanders. Hence, the value of the mortgage loan g iv e s little information about the amount in controversy under the first seven counts. Additionally, the eighth count regarding the temporary restraining order cannot s u p p o rt jurisdiction even though the original value of the mortgage was in excess of $ 7 5 ,0 0 0 .0 0 . "[T]he value of the object of the litigation" is measured from the perspective of th e plaintiff. Ericsson GE Mobile Commc'ns, Inc. v. Motorola Commc'ns & Elecs., Inc., 120 F .3 d 216, 218 (11th Cir. 1997). "[T]he value of the requested injunctive relief is the m o n e ta ry value of the benefit that would flow to the plaintiff if the injunction were granted." M o r r is o n v. Allstate Indemnity Co., 228 F.3d 1255, 1268 (11th Cir. 2000). Here, Sanders' in te re s t in the property is, as the very most, his equity in the home. Though the Court does n o t have direct evidence of Sanders' equity in the home, the balance due on the loan at the tim e Homecomings instituted foreclosure proceedings ($98,127.38) was greater than the o rig in a l value of the loan ($97,500.00). This--together with the broad national trend of d e c lin in g home values--suggests Sanders' interest in the home is an obligation, rather than a n asset, because he would have to pay the balance due on the loan following foreclosure s a le . In any event, the Court would have to speculate about the amount in controversy given o n ly the facts before it. There is nothing on the face of the complaint unambiguously stating how much S a n d e rs seeks in damages, nor can the Court determine the amount in issue by looking at the

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value of the underlying mortgage.5 A conclusion that more than $75,000.00 in controversy c o u ld only be supported by the kind of unguided speculation explicitly prohibited by Lowrey. Therefore, this Court cannot exercise jurisdiction pursuant to 28 U.S.C. § 1332. C. Federal Question Jurisdiction H o m e c o m in g s also argues that this Court has federal question jurisdiction under 28 U .S .C . § 1331. This argument is based on citations in Count IV of the complaint to "chapter 5 of the Federal Trade Commission Act [as] adopted by federal bank regulators." (Doc. # 1-2 ¶ 35.) This passing reference to a federal statute cannot support jurisdiction. The complaint raises the specter of federal law in the context of a muddied count that a p p e a rs to both assert state law defenses to the mortgage contract in issue and affirmatively s e e k a remedy for conduct it casts as negligence or wantonness per se. The Supreme Court h a s long recognized that "in certain cases federal-question jurisdiction will lie over state-law c la im s that implicate significant federal issues." Grable & Sons Metal Prods., Inc., v. Draue E n g 'g & Mfg., 545 U.S. 308, 312 (2005) (citing Hopkins v. Walker, 244 U.S. 486, 490-91 (1 9 1 7 )). This aspect of federal question jurisdiction ensures that the federal courts have the

A s stated above, the jurisdiction section of the state court complaint does contain la n g u a g e that seems to indicate Sanders was asserting this Court's jurisdiction. Because it a p p e a re d to the Court that Sanders included this statement in the complaint inadvertently, the C o u rt directed him to brief the issue of whether the inclusion of the statement was intended to invoke this Court's jurisdiction or whether it was an error. (Doc. # 17.) After careful c o n s i d e r a ti o n of Sanders' response to the Court's Order (Doc. # 18), the Court is satisfied b o th that this statement was included inadvertently and that it cannot alone support ju r is d ic tio n . 8

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last say on all substantial questions of federal law. Id. Not all state law claims that involve f e d e ra l law qualify, though. The only state law claims that satisfy the "arising under" re q u ire m e n t are those that "really and substantially involve a dispute or controversy respecting th e validity, construction, or effect of federal law." Id. (quoting Shulthis v. McDougal, 225 U .S . 561 (1912)). Deciding whether a state law claim meets this standard "calls for a `c o m m o n -s e n s e accommodation of judgment to [the] kaleidoscopic situations' that present a federal issue, in `a selective process which picks the substantial causes out of the web and la ys the other ones aside.'" Id. (quoting Gully v. First Nat'l Bank in Meridian, 299 U.S. 109, 1 1 7 -1 1 8 (1936)). Hence, federal question jurisdiction requires not only a contested federal iss u e , but "a substantial one, indicating a serious federal interest in claiming the advantages th o u g h t to be inherent in a federal forum." Id. Ultimately, "the question is, does a state-law c la im necessarily raise a stated federal issue, actually disputed and substantial, which a federal f o ru m may entertain without disturbing any congressionally approved balance of federal and s ta te judicial responsibilities?" Id. at 314. A look at the whole of Count IV reveals its nature: it alleges that the mortgage contract in this case is unconscionable and is a contract of adhesion, and that Homecomings breached c e rta in standards of care set by federal law. The count begins by asserting that certain e n u m e ra t e d actions of Homecomings are "instances of unconscionable conduct previously b a n n e d as unfair and deceptive by federal regulatory authorities under chapter 5 of the Federal T ra d e Commission Act and adopted by federal bank regulators." (Doc. # 1-2 ¶ 35.) This is the

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portion that appears to assert an affirmative claim for negligence or wantonness per se. The c o u n t continues, however, with averments that "Plaintiff lacked legitimate bargaining power, w a s not provided with adequate disclosures, . . . , [and] was completely without meaningful c h o ic e ." (Doc. # 1-2 ¶ 36.) The count further alleges that the terms of the mortgage contract to ta lly and completely favor the defendant and that the contract is one of adhesion containing o p p re s s iv e , one-sided, and patently unfair terms; in short, that the contract is unconscionable. (Doc. # 1-2 ¶¶ 37-39.) Because of this, Sanders seeks "all damages allowable under law as a result of defendant's unconscionable conduct in violation of unfair and deceptive acts and p ra c tic e s by the defendant." (Doc. # 1-2 ¶ 40.) S a n d e rs claims Count IV is one for negligence per se or wantonness per se. The Court v i e w s the allegations as equally supportive of a defense to the enforceability of the c o n t r a c t -- t h a t the contract is unconscionable and was a contract of adhesion. Because re m o v a l jurisdiction--and removal jurisdiction based on "substantial" federal questions e m b e d d e d in state law claims--raises significant federalism concerns, "removal statutes are c o n s tru e d narrowly; where plaintiff and defendant clash about jurisdiction, uncertainties are re s o lv e d in favor of remand." Burns, 31 F.3d at 1095; see Grable, 545 U.S. at 312-14 (requ irin g an assessment of any disruption to established boundaries between federal and state ju d ic ia l responsibilities when exercising federal question jurisdiction in cases based upon f e d e ra l questions embedded in state law claims). Sanders' passing reference to federal law,

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as adopted by unnamed federal regulators,6 is not sufficient to make jurisdiction clear on the f a c e of the complaint. Lowery, 483 F.3d at 1213. In fact, as the preceding discussion illu s tra te s , all these references do is raise uncertainty about the nature of the claim asserted in Count IV. It is hardly clear that this case is one that raises substantial federal questions and should b e "picked from the web" and resolved with the advantages of a federal forum. See Grable, 5 4 5 U.S. at 312. In fact, it is not clear to the Court that it could entertain the claim set out in C o u n t IV without "disturbing any congressionally approved balance of federal and state ju d ic ia l responsibilities" because the Federal Trade Commission Act does not provide a p riv a te right of action. Allowing plaintiffs to bootstrap a claim for a violation of that act into a state law claim that can always be heard in federal court could upset the traditional balance o f power between state and federal courts and belie Congress' intent. See, e.g., Naylor v. C a s e & McGrath, Inc., 585 F.2d 557, 561 (2d Cir. 1978); American Airlines v. Christensen, 9 6 7 F.2d 410, 414 (10th Cir. 1992); Helms v. Consumerinfo.com, Inc., 436 F. Supp. 2d 1220, 1 2 3 5 (N.D. Ala. 2005). While it is not obvious that this case should be "la[id] . . . aside,"

In one portion of the complaint, Sanders does note that the group of federal financial re g u la to rs has adopted chapter 5 of the Federal Trade Commission Act. Paragraph sixteen o f the complaint trots out the acronyms for the Federal Deposit Insurance Corporation, the O f f ic e of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal R e se rv e Board of governors, and other Federal Regulatory Authorities. How these various f in a n c ia l sector regulators bear on the present action is not explained. This scattershot list a d d s to, rather than detracts from, the uncertainty surrounding the nature of the federal q u e s tio n raised by Count IV. 11

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Grable, 545 U.S. at 312, uncertainties are resolved in favor of remand. Burns, 31 F.3d at 1 0 9 5 . Consequently, because there is no certain basis to support federal jurisdiction in this c a s e , it is due to be remanded.7 C O N C L U S IO N F o r the foregoing reasons, it is hereby ORDERED as follows: 1. 2. 3. 4. S a n d e rs ' Motion to Remand (Doc. # 6) is GRANTED. T h is case is REMANDED to the Circuit Court of Lee County, Alabama. T h e Clerk is DIRECTED to take appropriate steps to effect the remand. Any pending motions are left for resolution by the state court.

D O N E this the 29th day of April, 2009. /s/ Mark E. Fuller CHIEF UNITED STATES DISTRICT JUDGE

H o m e c o m in g s also claims that this Court can exercise supplemental jurisdiction over th e state law claims pursuant to 28 U.S.C. § 1367. Supplemental jurisdiction is, of course, d e p e n d a n t on the existence of federal question jurisdiction. Therefore, in cases like this one w h e re federal question jurisdiction is lacking, the court cannot exercise supplemental ju ris d ic tio n over related state law claims. See 28 U.S.C. § 1367. 12

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