Schultz v. BAC Home Loans Servicing LP et al

Filing 16

ORDER: Plaintiff's 8 Motion for Remand is denied. See order for complete details. Signed by Judge Neil V Wake on 05/10/11. (NKS)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Plaintiff,
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vs.
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BAC Home Loans Servicing, LP; third)
party not at fault Recontrust Company,)
NA; Doe Mortgage Backed Securities 1-)
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10; Does 1-100,
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Defendants.
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Tamara Schultz, an individual,

No. CV-11-00558-PHX-NVW
ORDER

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Before the Court is Plaintiff’s Motion for Remand (Doc. 8), which will be denied for

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the reasons stated below.

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I.

Background

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This action arises from a dispute regarding Plaintiff’s mortgage loan in the amount of

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$304,200, secured by real property located at 1611 West Mulberry Drive, Phoenix, Arizona

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85015. Plaintiff filed her complaint in the Superior Court of Maricopa County, Arizona on

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March 8, 2011, seeking damages, injunctive and declaratory relief for breach of contract,

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quiet title, and bad faith (Doc. 1). Plaintiff applied for and obtained a temporary restraining

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order to prohibit a foreclosure sale of her property from the Superior Court on March 15,

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2011 (Doc. 8). On March 25, 2011, Defendants removed the case to this Court on the basis

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of diversity jurisdiction (Doc. 1). Plaintiff filed the pending motion to remand on April 4,

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2011 (Doc. 8).

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II.

Legal Standard

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Under 28 U.S.C. § 1441(a), “any civil action brought in a State court of which the

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district courts of the United States have original jurisdiction, may be removed by the

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defendant . . . to the district court of the United States for the district and division embracing

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the place where such action is pending.” While there is a “strong presumption” against

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removal, see Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992), diversity jurisdiction is

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not discretionary. See First State Ins. Co. v. Callan Assoc., 113 F.3d 161, 162 (9th Cir. 1997)

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(“[T]he obligation to exercise jurisdiction is ‘virtually unflagging.’ ”). Diversity jurisdiction

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exists for “all civil actions where the matter in controversy exceeds the sum or value of

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$75,000, exclusive of interests and costs, and is between ... citizens of different States[.]” 28

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U.S.C. § 1332(a)(1). Defendants have the burden of establishing that the requirements for

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diversity jurisdiction have been satisfied. See Singer v. State Farm Mut. Auto. Ins. Co., 116

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F.3d 373, 376 (9th Cir. 1997) (“Where the complaint does not demand a dollar amount, the

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removing defendant bears the burden of proving by a preponderance of the evidence that the

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amount in controversy exceeds [$75,000].”). Abstention by a federal court that otherwise

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has jurisdiction over a matter is the “exception rather than the rule.” AmerisourceBergen

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Corp. v. Roden, 495 F.3d 1143, 1148 (9th Cir. 2007) (internal citations omitted).

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III.

Analysis

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Plaintiff requests that this case be remanded because 1) it involves “state substantive

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issues of first impression”; 2) the Court lacks subject matter jurisdiction; and 3) the requisite

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amount in controversy is not met (Doc. 1).

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A.

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Plaintiff argues that this Court lacks subject matter jurisdiction over this matter

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because (1) Plaintiff did not plead any federal causes of action to support original jurisdiction

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pursuant to 28 U.S.C. § 1331; and (2) the amount in controversy is not sufficient to support

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diversity jurisdiction under 28 U.S.C. § 1332(a). Defendants do not claim that Plaintiff has

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raised any federal claims, but instead assert that this action is properly before the Court based

Jurisdiction

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on diversity jurisdiction. See 28 U.S.C. § 1332(a). In their notice of removal, Defendants

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state that there is complete diversity of citizenship between the parties because Plaintiff is

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a citizen of Arizona, Defendant Bank of America, N.A. is a citizen of North Carolina, and

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Defendant ReconTrust Company, N.A. is a citizen of California (Doc. 1).

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Defendants assert (and Plaintiff has not claimed otherwise) that Plaintiff’s property is valued

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at $128,800 and that her mortgage loan has a current outstanding principal balance of

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$299,055.16 (Doc. 12).

Further,

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Plaintiff has not challenged the diversity of the parties. Instead, she claims that the

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the amount in controversy has not been met because Plaintiff is “seeking an establishment

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of rights and not necessarily damages[,]” and that she is simply challenging “the validity of

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the Defendants [sic] standing to collect on the debt, if one exists, and/or right to exercise the

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power of sale of her primary residence because of bifurcation of the note and deed of trust.”

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(Doc. 13.) Plaintiff’s contentions here are disingenuous. Her complaint clearly challenges

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the validity of her loan and in fact explicitly seeks “Rescission of the Contract(s)” as well as

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compensatory, general and punitive damages (Doc. 1-1 at 72-73). Further, Plaintiff seeks

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quiet title to the property, which would also require rescission of the promissory note. The

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Court is thus persuaded that the value of this lawsuit is at least the value of the subject

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property and, more likely, the value of the loan. Defendants have accordingly met their

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burden of establishing that the amount in controversy more likely than not exceeds $75,000.

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See Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996) (noting

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defendant’s burden is to establish it is “more likely than not” that amount in controversy

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exceeds $75,000). Therefore, the Court has subject matter jurisdiction over this matter based

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on diversity. 28 U.S.C. § 1332(a).

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Plaintiff’s additional arguments against this Court’s jurisdiction also lack merit.

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Plaintiff argues that Defendants have failed to establish federal jurisdiction because she has

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pled only state law, not federal, claims. In so arguing, Plaintiff appears to conflate original

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jurisdiction with federal question jurisdiction. However, the Court has original jurisdiction

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over an action where there is either federal question jurisdiction, 28 U.S.C. § 1331, or
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diversity jurisdiction, 28 U.S.C. § 1332(a). As discussed above, the Court has original

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jurisdiction over this action based on diversity jurisdiction.

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Further, Plaintiff argues that she has the right to choose the forum for this action and

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can “avoid federal jurisdiction by relying exclusively on state law.” (Doc. 8). However, the

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case she cites for this proposition concerns a situation where there was neither federal

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question jurisdiction nor diversity jurisdiction. See Caterpillar, Inc. v. Williams, 482 U.S.

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386, 398-99 (1987). There is no authority to support Plaintiff's argument that remand is

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warranted because Plaintiff's decision to select a state forum “should be given due respect

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and consideration.” (Doc. 8). The Court has original jurisdiction over a properly removed

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action pursuant to diversity jurisdiction.

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Finally, Plaintiff argues that the Court should decline to exercise supplemental

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jurisdiction over her state law claims (Doc. 8). However, as established above, Defendants

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properly removed this action pursuant to the Court’s diversity jurisdiction. Therefore, the

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Court has original jurisdiction based on diversity and is not exercising supplemental

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jurisdiction over Plaintiff’s state law claims.

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B.

Abstention

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Plaintiff also argues that the Court should remand this action because Arizona state

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courts need to rule on issues of first impression concerning foreclosures, which are a state

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policy problem and of substantial public importance. Plaintiff cites the Burford abstention

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doctrine, Burford v. Sun Oil Co., 319 U.S. 315 (1943), the Younger abstention doctrine,

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Younger v. Harris, 401 U.S. 37 (1971) , and the Rooker-Feldman doctrine, Rooker v. Fidelity

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Trust Co., 263 U.S. 413, (1923), District of Columbia Court of Appeals v. Feldman, 460 U.S.

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462 (1983), to support her argument. Plaintiff has asserted claims for breach of contract,

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quiet title, and bad faith. Defendants argue, and the Court agrees, that none of Plaintiff's

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claims are novel issues that require abstention.

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1.

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Under Burford, abstention may be appropriate in order to avoid federal intrusion into

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issues that are of largely local concern and that are within the special competence of state

Burford Abstention Doctrine

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courts. See New Orleans Pub. Serv., Inc. v. Council of the City of New Orleans, 491 U.S.

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350, 361 (1989). “While Burford is concerned with protecting complex state administrative

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processes from undue federal interference, it does not require abstention whenever there

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exists such a process, or even in all cases where there is a ‘potential for conflict’ with state

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regulatory law or policy.” See Tucker v. First Md. Sav. & Loan, Inc., 942 F.2d 1401, 1404-

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05 (9th Cir. 1991) (quoting New Orleans Pub. Serv., 491 U.S. at 362). In order to limit

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Burford’s application, the following factors are generally required for abstention to apply:

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“(1) that the state has concentrated suits involving the local issue in a particular court; (2) the

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federal issues are not easily separable from complicated state law issues with which the state

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courts may have special competence; and (3) that federal review might disrupt state court

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efforts to establish a coherent policy.” Id. at 1405 (citing Knudsen Corp. v. Nevada State

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Dairy Comm’n, 676 F.2d 374, 377 (9th Cir. 1982)).

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Plaintiff has not persuaded the Court that Burford abstention is appropriate here. The

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Court, sitting in diversity, will “apply the substantive law of Arizona . . . [and thus sits] in

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the same posture as the Arizona state court.” Id. at 1406. There should accordingly “be no

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different result in the federal proceedings than would have been achieved in the state court

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proceeding.” Id. Further, Arizona does not require that suits brought under Arizona’s deed

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of trust statutes must be filed in any specific court. There is no concern that federal issues

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are not easily separable from complicated state law issues because there are no federal claims

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raised in or implicated by Plaintiff’s suit, nor do Plaintiff’s claims arise out of a complicated

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state regulatory scheme or challenge any state administrative order or regulation. While

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Arizona state courts may not have had the opportunity to resolve some of the complicated

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questions that have arisen in recent years with respect to home mortgage loans transactions,

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the claims Plaintiff has pled here implicate only the Arizona deed of trust statutes, not

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complicated state administrative policies or regulatory schemes.1 For these reasons, this

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Contrary to Plaintiff’s assertions, decisions by other state court evaluating the validity of
MERS operations in accordance with their respective state statutes (Doc. 13) do not provide
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action does not warrant abstention under Burford.

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2.

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In Younger v. Harris, 401 U.S. 37 (1971), the Supreme Court established that a federal

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court generally must abstain from hearing a case that would enjoin or otherwise interfere

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with ongoing state criminal proceedings. Younger can also apply “not only when the pending

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state proceedings are criminal, but also when certain civil proceedings are pending, if the

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State’s interests in the proceeding are so important that exercise of the federal judicial power

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would disregard the comity between the States and the National Government.” Pennzoil Co.

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v. Texaco, Inc., 481 U.S. 1, 11 (1987). Younger abstention is required if four elements are

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met: (1) state proceedings are ongoing; (2) the state proceedings implicate important state

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interests; (3) the state proceedings provide the federal litigant an adequate opportunity to

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raise the federal claims; and (4) the federal proceedings would interfere with the state

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proceedings in a way that Younger disapproves. See San Jose Silicon Valley Chamber of

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Commerce Political Action Comm. v. City of San Jose, 546 F.3d 1087, 1092 (9th Cir. 2008);

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AmerisourceBergen Corp. v. Roden, 495 F.3d 1143, 1148-49 (9th Cir. 2007).

Younger Abstention Doctrine

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Younger abstention is neither required nor appropriate here. Defendants are pursuing

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a non-judicial foreclosure of Plaintiff’s property; there are no ongoing state proceedings in

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this matter with which this Court’s exercise of jurisdiction would interfere. “Contrary to

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Plaintiff’s assertions, non-judicial foreclosure proceedings, such as the trustee’s sale in this

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action, are not ongoing state court proceedings, and do not fall within the purview of the

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Younger abstention doctrine.” Frame v. Cal-Western Reconveyance Corp., No. CV11-0201-

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PHX-JAT, 2011 WL 1576712, at *4 (D. Ariz Apr. 27, 2011).

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3.

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The Rooker-Feldman doctrine similarly fails to support remand of this action. The

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Rooker-Feldman doctrine prohibits a federal district court from hearing a direct appeal from

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the final judgment of a state court. See Noel v. Hall, 341 F.3d 1148, 1154 (9th Cir. 2003).

Rooker-Feldman Doctrine

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support for this Court to abstain from hearing this action.
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However, Plaintiff has not alleged that there is any final state court order or judgment that

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this suit challenges. Without an earlier state court judgment being challenged, the Rooker-

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Feldman doctrine is inapplicable and does not remove this Court’s subject matter jurisdiction

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over this action.

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IT IS THEREFORE ORDERED that Plaintiff’s Motion for Remand (Doc. 8) is
denied.
DATED this 10th day of May, 2011.

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