The Bank of New York Mellon v. Reaves et al

Filing 22

MEMORANDUM OPINION AND ORDER re 10 Motion to Remand. The motion includes a request for attorney's fees and costs incurred as a result of Bank of America, N. A.'s allegedly improvident removal. It is ORDERED that the Reaveses' 10 Mo tion to Remand is GRANTED and that this action is REMANDED to the Circuit Court of Chambers County, Alabama. It is further ORDERED that the Reaveses' request for costs and fees is DENIED. The Clerk of the Court is DIRECTED to take steps necessary to effectuate the remand. Signed by Chief Judge William Keith Watkins on 9/30/2015. (Attachments: # 1 Civil Appeals Checklist) Copy mailed to Clerk, Circuit Court of Chambers County, Alabama.(dmn, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
EASTERN DIVISION
THE BANK OF NEW YORK
MELLON, as Trustee for the
Certificateholders of the CWABS,
Asset-Backed Certificates, Series
2007-9, formerly known as THE
BANK OF NEW YORK,
Plaintiff,
v.
RANDY T. REAVES and TAMMY
S. REAVES,
Defendants.
RANDY T. REAVES and TAMMY
S. REAVES,
Counterclaimants and
Third Party Plaintiffs,
v.
THE BANK OF NEW YORK
MELLON,
Counterdefendant,
and
BANK OF AMERICA, N.A. and
SPECIALIZED LOAN
SERVICING, LLC,
Third Party Defendants.

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CASE NO. 3:15-CV-311-WKW
[WO]

MEMORANDUM OPINION AND ORDER
Before the court is Randy Reaves and Tammy Reaves’s motion to remand
(Doc. # 10), which has been fully briefed (Docs. # 13, 14, 16, 19). The motion
includes a request for attorney’s fees and costs incurred as a result of Bank of
America, N.A.’s allegedly improvident removal.

Upon consideration of the

parties’ arguments and relevant law, particularly 28 U.S.C. § 1441(c), the
Reaveses’ motion to remand is due to be granted, but their request for costs and
fees is due to be denied.
I. INTRODUCTION
This case began as a state court action for ejectment against the Reaveses by
The Bank of New York Mellon (“BONY”)1 in the Circuit Court of Chambers
County, Alabama. (See Doc. # 1-5.) The Reaveses filed counterclaims and thirdparty claims against BONY, Bank of America, and Specialized Loan Servicing,
LLC (“SLS”).

(Doc. # 1-7.)

The Reaveses allege that Bank of America

wrongfully instituted foreclosure against them after they continued making
adjusted payments on what they believed was a proper modification of their loan.
Although BONY is named as a counter-defendant, the Reaveses lodge most of
their factual allegations against Bank of America as a “third-party defendant,” as
stated in the style of the case, and simply as a defendant in the Counterclaim. It is
1

BONY is involved as a trustee for certificate-holders of asset-based certificates. Most
of the dealings at issue here occurred between the Reaveses and Bank of America.

not alleged by the Reaveses that Bank of America or SLS are true third-party
defendants. (See Doc. # 1-7, at ¶¶ 18–40, 46–48.) There are also a few factspecific allegations involving SLS. (See Doc. # 1-7, at ¶¶ 41–44.)
Counts I–XIII of the Reaveses’ Countercomplaint/Third Party Complaint set
out state-law claims against Bank of America, SLS, and BONY.2 Count X is a
cause of action against Bank of America only, arising under a federal statute, the
Real Estate Settlement Procedures Act (“RESPA”), for Bank of America’s failure
to make appropriate corrections to the Reaveses’ account upon the Reaveses’
submission of a qualified written request, and for Bank of America’s wrongful
report of derogatory information to credit bureaus while the Reaveses were
disputing their loan obligation. (See Doc. # 1-7, at ¶¶ 85–86.)
Bank of America, with the consent of SLS and BONY (see Doc. # 1-3),
removed the entire case to this court on May 8, 2015, invoking this court’s federalquestion jurisdiction over the Reaveses’ RESPA claim. (Doc. # 1.) The Reaveses
filed their motion to remand on May 27, 2015. (Doc. # 10.)
II. STANDARD OF REVIEW
The party removing a case from state court to federal court bears the burden
of proving that federal jurisdiction exists. Williams v. Best Buy Co., 269 F.3d
1316, 1319 (11th Cir. 2001). Federal courts have limited jurisdiction and are

2

Count IX is a request for declaratory and injunctive relief.
3

“empowered to hear only those cases within the judicial power of the United States
as defined by Article III of the Constitution, and which have been entrusted to
them by a jurisdictional grant authorized by Congress.” Univ. of S. Ala. v. Am.
Tobacco Co., 168 F.3d 405, 409 (11th Cir. 1999) (internal quotation marks
omitted). “A necessary corollary to the concept that a federal court is powerless to
act without jurisdiction is the equally unremarkable principle that a court should
inquire,” even on its own initiative, “into whether it has subject matter jurisdiction
at the earliest possible stage in the proceedings.” Id. at 410; see also 28 U.S.C.
§ 1447(c) (“If at any time before final judgment it appears that the district court
lacks subject matter jurisdiction, the case shall be remanded.”).
III. DISCUSSION
A.

The Propriety of Removal: Interpreting 28 U.S.C. § 1441(a) and (c)
Section 1441(a) confers upon “the defendant or the defendants” a statutory

right to remove “any civil action brought in a State court of which the district
courts of the United States have original jurisdiction.” Although a majority of
federal courts restrict the right of removal to original defendants, district courts of
the Eleventh Circuit, following binding precedent of the former Fifth Circuit, have
permitted third-party indemnity defendants to remove cases on the bases of thirdparty federal question claims. See Carl Heck Eng’rs, Inc. v. Lafourche Parish

4

Police Jury, 622 F.2d 133, 135–36 (5th Cir. 1980).3 For decades, courts have
disputed whether removal is proper when it is “sought solely on the basis of a third
party claim.” Id. at 135 (discussing a former version of 28 U.S.C. § 1441(c)).4
Today, § 1441(c) provides as follows:
(1) If a civil action includes –
(A) a claim arising under the Constitution, laws, or treaties of the
United States (within the meaning of section 1331 of this title), and
(B) a claim not within the original or supplemental jurisdiction of
the district court or a claim that has been made nonremovable by
statute, the entire action may be removed if the action would be
removable without the inclusion of the claim described in
subparagraph (B).
(2) Upon removal of an action described in paragraph (1), the district
court shall sever from the action all claims described in paragraph
(1)(B) and shall remand the severed claims to the State court from
which the action was removed. Only defendants against whom a
claim described in paragraph (1)(A) has been asserted are required to
join in or consent to the removal under paragraph (1).

3

In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the
Eleventh Circuit adopted as binding precedent all decisions of the former Fifth Circuit handed
down prior to October 1, 1981.
4

At the time the Fifth Circuit decided Carl Heck, § 1441(c) provided:

Whenever a separate and independent claim or cause of action, which would be
removable if sued upon alone, is joined with one or more otherwise nonremovable 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 not otherwise within its original jurisdiction.
Carl Heck, 622 F.2d at 135. Section 1441 has been revised several times since 1980, but most
recently, in 2011, Congress amended § 1441(c) to remove the requirement that the removable
claim or cause of action be “separate and independent.”
5

A recent opinion from the Northern District of Alabama thoroughly discusses this
most recent iteration of § 1441(c), explains why Carl Heck is still good law in this
Circuit when removal is based on federal question jurisdiction, and advises
counter-claim defendants may remove a case on the basis of a federal question
presented in a counterclaim against a non-original defendant. See WGB, LLC v.
Bowling, 18 F. Supp. 3d 1288 (N.D. Ala. 2014).5 Consequently, Bank of America,
SLS, and BONY all rely on WGB in their opposition to the motion to remand.
Further, following WGB’s lead, they suggest that the court should sever and
remand the original ejectment suit but retain jurisdiction over all other claims.
To support removal of the counterclaims against BONY along with the
“third-party claims” against SLS and Bank of America, BONY argues that this
court has original federal-question jurisdiction over the RESPA claim against Bank
of America and supplemental jurisdiction under 28 U.S.C. § 1367 over the statelaw claims against BONY, Bank of America, and SLS. (See Doc. # 16, at 7–8
(quoting Chicago v. Int’l Coll. of Surgeons, 522 U.S. 156, 165 (1997)).) As
explained by the Court in College of Surgeons, § 1367 “applies with equal force to
cases removed to federal court as to cases initially filed there.” “Section 1367(a)
authorizes a court to hear supplemental claims to the full extent allowed by the
‘case or controversy’ standard of Article III of the Constitution.” Parker v. Scrap
5

The WGB court certified its order for interlocutory appellate review, but no party
accepted the court’s invitation to seek review of the Eleventh Circuit.
6

Metal Processors, Inc., 468 F.3d 733, 742 (11th Cir. 2006). “The constitutional
‘case or controversy’ standard confers supplemental jurisdiction over all state
claims which arise out of a common nucleus of operative fact with a substantial
federal claim.” Id. at 743. BONY asserts that “the counterclaims against [it] are
almost wholly dependent upon and derivative of the alleged acts and omissions of
[Bank of America and SLS], and [the Reaveses] attempt to impute potential
liability for servicer misconduct to [BONY] through an agency argument.” (Doc.
# 16, at 6.) Without appealing to the language of § 1367, BONY is asserting that
the claims against it and against Bank of America and SLS are “so related” as to
“form part of the same case or controversy under Article III.” § 1367(a). Bank of
America agrees with BONY that the court has supplemental jurisdiction over the
state-law claims against “the New Defendants.” (Doc. # 14, at 4.)
The Reaveses attempt to factually distinguish their case from WGB, (see
Doc. # 19, at 2–4), but the distinctions are immaterial. The Reaveses argue that
WGB is “wrong,” but they offer no specific criticism of that court’s analysis. 6 As
discussed infra, the court declines to follow the path trodden in WGB, but for a
reason not argued by the Reaveses. The Reaveses contend that, even if a third6

The Reaveses instead rely on a case from the Southern District of Alabama that resulted
in remand. (Doc. # 10, at 4–6 (citing The Mobile Wash. (MOWA) Band of The Choctaw Indian
Tribe v. Sunbelt Res., Inc., 649 F. Supp. 2d 1325 (S.D. Ala. 2009)).) However, the MOWA case
is inapposite and readily distinguishable from WGB. In MOWA, the court rejected the arguments
of the removing third-party defendant because “the entire basis of [its] removal request [was]
diversity jurisdiction” rather than federal-question jurisdiction. Id. at 1330.
7

party defendant such as Bank of America may remove an action to federal court,
the original plaintiff and true counter-defendant, BONY, decidedly cannot. The
Reaveses say that, because Bank of America “is merely an agent” of BONY,7 Bank
of America should not be entitled to remove the action to federal court because it
“effectively allow[s] state court plaintiffs to remove their own lawsuits if they
don’t like the way their state court cases are proceeding.” (Doc. # 10, at 7.) On
this point, the Reaveses ignore that they joined Bank of America as a third-party
defendant and asserted a federal claim against it. They also offer no authority in
support of their argument that the court should associate Bank of America and
BONY and deny Bank of America a statutory right of removal.
The Reaveses also request that the court remand the case to state court
because permitting removal would inconvenience them. (Doc. # 10, at 8 (citing
§ 1441(e)(5)).)8 The Reaveses refer to the Middle District of Alabama, Eastern
Division, as “a distant forum.” If the Reaveses’ removable claims are tried in this
district, trial would be held in Opelika, Alabama, which is in Lee County, roughly
twenty-five miles from the Circuit Court of Chambers County in LaFayette,

7

The Reaveses say that Bank of America “is the current or former servicer of the
mortgage held by BONY,” but they also state that they are unsure what Bank of America’s role
was. (Doc. # 10, at 7–8.) They request limited discovery on that issue should the court find their
argument persuasive.
8

It appears that the Reaveses mean to cite subsection (e)(6): “Nothing in this subsection
shall restrict the authority of the district court to transfer or dismiss an action on the ground of
inconvenient forum.”
8

Alabama. This forum is therefore not “distant” or unduly inconvenient, and the
Reaveses’ request under § 1441(e)(6) is due to be denied.
Even though the Reaveses’ arguments in favor of remand are ineffective,
there is another issue that undermines the positions of Bank of America, SLS, and
BONY.

Bank of America is actually a counter-defendant, not a third-party

defendant. The Reaveses describe Bank of America (and SLS) as third-party
defendants in their pleading (see Doc. # 1-7), and the briefing indicates apparent
agreement among the parties that Bank of America is a third-party defendant. But
if Bank of America is not a third-party defendant, then Carl Heck’s interpretation
of § 1441(c) should not apply.
According to Rule 14, a true third-party defendant is one “who is or may be
liable to” the original defendant-turned-third-party-plaintiff “for all or part of the
claim against it.” Fed. R. Civ. P. 14(a)(1); see also Charles Alan Wright, et al., 6
Fed. Prac. & Proc. § 1446 (3d ed.) (“[S]econdary or derivative liability notion is
central and thus impleader has been successfully utilized when the basis of the
third-party claim is indemnity, subrogation, contribution, express or implied
warranty, or some other theory.”); United States v. Olavarrieta, 812 F.2d 640, 643
(11th Cir. 1987) (“Rule 14(a) allows a defendant to assert a claim against any
person not a party to the main action only if that third person’s liability on that

9

claim is in some way dependent upon the outcome of the main claim.”).9 But in
this case, Bank of America’s liability to the Reaveses is not “in some way
dependent upon the outcome” of BONY’s suit to eject the Reaveses. 812 F.2d
at 643. Rather, the Reaveses’ claims against Bank of America are “separate and
independent” claims that simply happen to “arise[ ] out of the same general set of
facts” surrounding the Reaveses’ loss of their home in foreclosure. Id. Hence,
Bank of America (and SLS) are more properly classified as counter-defendants.
Rule 13(h) contemplates the joinder of nonparties as counter-defendants and crossdefendants where the nonparties are not candidates for joinder via Rule 14
impleader. See Charles Alan Wright, et al., 6 Fed. Prac. & Proc. § 1446 (3d ed.)
(A “combination of a counterclaim and a Rule 13(h) motion is appropriate when
defendant’s claim is against the original plaintiff and a nonparty.”).
BONY foresaw this hurdle and explained in its brief that the Fifth Circuit
has extended Carl Heck to permit removal by counterclaim defendants in addition
to third-party defendants. See Texas v. Walker, 142 F.3d 813, 816 (5th Cir. 1998).
Some district courts in the Eleventh Circuit, including WGB, have followed Walker
as persuasive authority, and each court has been careful to qualify that a counterdefendant may not remove an action to federal court if it was an original plaintiff.
See WGB, 18 F. Supp. 3d at 1294; Mace Sec. Int’l, Inc. v. Odierna, No. 08-607789

Carl Heck provides a classic example of this situation. The original defendant filed a
third-party complaint against an insurer, seeking indemnification. 622 F.2d at 135.
10

CIV, 2008 WL 3851839, at *3 (S.D. Fla. Aug. 14, 2008); N. Star Capital
Acquisitions, LLC v. Krig, No. 3:07-CV-264-J-32MCR, 2007 WL 3522425, at *3
(M.D. Fla. Nov. 15, 2007). But because Walker is not binding, some courts have
declined to follow it and to expand the rule in Carl Heck to encompass removal by
counter-defendants. See Deutsche Bank Nat’l Trust Co. v. Baxter, 969 F. Supp. 2d
1337, 1344 (N.D. Ala. 2013); Karp v. Am. Law Enforcement Network, LLC, No.
CA 11-0449-CG-C, 2011 WL 6963254, at *6 (S.D. Ala. Nov. 18, 2011), report and
recommendation adopted, No. CIV.A. 11-449-CG-C, 2012 WL 38161 (S.D. Ala.
Jan. 6, 2012); Citibank (S. Dakota), N.A. v. Duncan, No. 2:09-CV-868-WKW,
2010 WL 379869, at *2 (M.D. Ala. Jan. 25, 2010).
As this court explained in Citibank,
The Eleventh Circuit has yet to decide whether § 1441(c)
encompasses removals by counter-defendants, and given the
divisiveness among other courts as to the underlying conclusion
reached in Carl Heck, the court is persuaded that the better course is
to remand, rather than to guess what this circuit might hold if
presented with the unsettled issue of whether Carl Heck should be
extended to removals by counter-defendant[s].
2010 WL 379869, at *2. Furthermore, “federal courts are directed to construe
removal statutes strictly” and to resolve “all doubts about jurisdiction . . . in favor
of remand to state court.” Univ. of S. Ala., 168 F.3d at 411 (citations omitted). For
these reasons, the court must conclude that Bank of America has not met its burden
of proving this court’s removal jurisdiction over the RESPA claim against it and
11

the related state-law counterclaims against it, SLS, and BONY. This case is due to
be remanded in its entirety to state court.
B.

Propriety of Costs and Fees
The Reaveses request that Bank of America pay their fees and costs for

improvidently removing this case to federal court. The removal statute provides
that a court “may require payment of just costs and any actual expenses, including
attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c). Hence, an
award of costs and fees to the Reaveses is within the court’s discretion, but the
court must still follow a standard.

Whether an award of costs and fees is

appropriate “turn[s] on the reasonableness of the removal.

Absent unusual

circumstances, courts may award attorney’s fees under § 1447(c) only where the
removing party lacked an objectively reasonable basis for seeking removal.
Conversely, when an objectively reasonable basis exists, fees should be denied.”
Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005).
In this instance, Bank of America relied on persuasive authority from the
Northern District of Alabama in the absence of an opinion from the Eleventh
Circuit since 1980; therefore, an objectively reasonable interpretation of § 1441(c)
supported Bank of America’s removal, and an award of costs and fees would be
inappropriate.

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IV. CONCLUSION
In accordance with the foregoing analysis, it is ORDERED that the
Reaveses’ motion to remand (Doc. # 10) is GRANTED and that this action is
REMANDED to the Circuit Court of Chambers County, Alabama. It is further
ORDERED that the Reaveses’ request for costs and fees is DENIED.
The Clerk of the Court is DIRECTED to take steps necessary to effectuate
the remand.
DONE this 30th day of September, 2015.
/s/ W. Keith Watkins
CHIEF UNITED STATES DISTRICT JUDGE

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