Federal National Mortgage Association v. David Garcia Martinez et al

Filing 9

ORDER TO SHOW CAUSE by Judge Margaret M. Morrow. In order to assure proper jurisdiction, the court orders defendants to show cause on or beforeJanuary 6, 2012, why the court should not remand this action to Los Angeles Superior Court for lack of subject matter jurisdiction. Plaintiffs may file a response by January 17, 2012. (rrey)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL

Case No.

CV 11-07649 MMM (PJWx)

Date

December 12, 2011

Federal National Mortgage Assoc. v. Martinez, et al.

Title

Present: The Honorable

MARGARET M. MORROW

ANEL HUERTA

N/A

Deputy Clerk

Court Reporter

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

None

None

Proceedings:

Order to Show Cause Why Action Should Not Be Remanded For Lack
of Federal Question and Diversity Jurisdiction
I. BACKGROUND

On August 25, 2011, plaintiffs filed this complaint for unlawful detainer following a
foreclosure sale, under California Code of Civil Procedure § 1161a(b)(3).1 The case was designated
as a limited civil case, where the amount demanded did not exceed $10,000. The complaint alleges
that plaintiff, Federal National Mortgage Association, is entitled to possession of a parcel of real
property located at 210 North Spring Avenue, Compton, CA 90221, after purchasing the property
following a foreclosure sale pursuant to a deed of trust executed by defendants.
Defendants David Garcia Martinez and Nora Martinez are currently in possession of the
premises, and are the former trustors or holdover occupants of the former trustors. They allegedly
defaulted under the terms of the deed of trust that secured the property, and a trustee’s sale was
subsequently held. The complaint prays for restitution of the property, as well as damages in an
amount to be determined at trial.
The defendants removed this action, invoking the court’s federal question and diversity
jurisdiction. Defendants contend that complete diversity exists between the parties, and that the total

1

Notice of Removal (“Removal”), Docket No. 1 (Sept. 15, 2011), Exh. A (“Complaint”).

amount in controversy exceeds $75,000. They also allege that this complaint presents a federal
question under the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq, as “[t]he loan was
originated on January 4, 2008,” and the statute of limitations “expires on or about January 4, 2012.”
Defendants contend that plaintiffs’ failure to comply with TILA led to the illegal sale and wrongful
foreclosure of the subject property, which ultimately resulted in the filing of this unlawful detainer
action.
Defendants have also filed a motion to consolidate this action with another action, Martinez
v. HSCB Bank USA N.A., et al., CV No. 11-07649 MMM (PJWx). In that case, the Martinezes are
the plaintiffs and allege various causes of action against HSBC Bank and other defendants regarding
the foreclosure of the subject property.
II. DISCUSSION
A. Federal Question Jurisdiction
Under 28 U.S.C. § 1331, the district courts “have original jurisdiction of all civil actions
arising under the Constitution, laws, or treaties of the United States” (emphasis added). Federal
question jurisdiction is presumed absent unless defendants, as the party seeking to invoke this court’s
jurisdiction, McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189 (1936), show that
plaintiffs have either alleged a federal cause of action, American Well Works Co. v. Layne & Bowler
Co., 241 U.S. 257, 260 (1916) (“a suit arises under the law that creates the action”), a state cause
of action that turns on a substantial dispositive issue of federal law, Franchise Tax Bd. v. Construction
Laborers Vacation Trust, 463 U.S. 1, 9 (1983); Smith v. Kansas City Title & Trust Co., 255 U.S.
180, 199 (1921), or a state cause of action that Congress has transformed into an inherently federal
cause of action by completely preempting the field of its subject matter, Avco Corp. v. Aero Lodge
No. 735, 390 U.S. 557, 560 (1968); Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65 (1987).
The question of whether a claim “arises under” federal law must be determined by reference
to the “well-pleaded complaint.” Franchise Tax Bd., supra, 463 U.S. at 9-10. Since a defendant may
remove a case under 28 U.S.C. § 1441(b) only if the claim could have been brought in federal court,
the question for removal jurisdiction must also be determined by reference to the “well-pleaded
complaint.” Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 808 (1986). The wellpleaded complaint rule makes the plaintiff the “master of the claim” for purposes of removal
jurisdiction. Caterpillar, supra, 482 U.S. at 392. Thus, where the plaintiff could maintain claims
under both federal and state law, plaintiff can prevent removal by ignoring the federal claim and
alleging only state law claims. Rains v. Criterion Systems, Inc., 80 F.3d 339, 344 (9th Cir.1996).
For federal question jurisdiction to attach,“a right or immunity created by the Constitution or
laws of the United States must be an element, and an essential one, of the plaintiff’s cause of action.”

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Gully v. First Nat’l Bank in Meridian, 299 U.S. 109, 112 (1936). Only where the “right to relief
under state law requires resolution of a substantial question of federal law in dispute between the
parties” does a state law cause of action “arise under” the laws of the United States. Franchise Tax
Bd., supra, 463 U.S. at 13 (1983). A claim does not present a “substantial question” of federal law
merely because a federal question is an “ingredient” of the cause of action. Indeed, “the mere
presence of a federal issue in a state cause of action does not automatically confer federal question
jurisdiction.” Merrell Dow, supra, 478 U.S. at 813.
Likewise, it is not enough for removal purposes that a federal question may arise during the
litigation in connection with a defense or counterclaim. “[F]ederal jurisdiction exists only when a
federal question is presented on the face of the plaintiff’s properly pleaded complaint.” Caterpillar,
supra, 482 U.S. at 392. See also Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 152
(1908). “A defense is not part of a plaintiff’s properly pleaded statement of his or her claim.” Rivet
v. Regions Bank of La., 522 U.S. 470, 475 (1998). See also Taylor, supra, 481 U.S. at 63; Gully,
supra, 299 U.S. at 112 (“To bring a case within the [federal-question removal] statute, a right or
immunity created by the Constitution or laws of the United States must be an element, and an essential
one, of the plaintiff's cause of action.”). Thus, “a case may not be removed to federal court on the
basis of a federal defense, . . . even if the defense is anticipated in the plaintiff’s complaint, and even
if both parties admit that the defense is the only question truly at issue in the case.” Franchise Tax
Bd., supra, 463 U.S. at 14.
Here, the complaint pleads only one cause of action under the California Code of Civil
Procedure, which is a claim arising under state law. The complaint pleads no federal question on its
face. While defendants contend that TILA applies to this case, it is not clear from the complaint or
the notice of removal how the plaintiffs’ alleged violation of TILA constitutes an essential element of
plaintiffs’ claim. Insofar as defendants assert TILA violations as an affirmative defense, as noted
above, a federal defense to a state law cause of action does not provide basis for federal question
jurisdiction. Consequently, defendants have failed to meet their burden of demonstrating that federal
question jurisdiction exists in this case.
B.

Diversity Jurisdiction
1.

Legal Standard Governing Diversity Jurisdiction

District courts have original jurisdiction of civil actions between citizens of different states
where the matter in controversy exceeds $75,000. See 28 U.S.C. § 1332(a). First, in any case where
subject matter jurisdiction is premised on diversity, there must be complete diversity, i.e., all
plaintiffs must have citizenship different than all defendants. See Strawbridge v. Curtis, 7 U.S. 267
(1806), overruled in part on other grounds by Louisville, C. & C.R. Co. v. Letson, 43 U.S. 497
(1844); see also Caterpillar Inc., 519 U.S. at 68 n. 3 (1996). For diversity purposes, a corporation

3

may have dual citizenship. “[A] corporation shall be deemed a citizen of any State by which it has
been incorporated and of the State where it has its principal place of business . . . .” 28 U.S.C. §
1332(c)(1).
Second, diversity jurisdiction exists only “where the amount in controversy exceeds the sum
or value of $75,000 exclusive of interests and costs . . . .” 28 U.S.C. § 1332(a); see also Matheson
v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003) (“[J]urisdiction founded on
[diversity grounds] requires that the parties be in complete diversity and the amount in controversy
exceed $75,000”). The “amount in controversy is determined from the face of the pleadings.” Crum
v. Circus Circus Enterprises, 231 F.3d 1129, 1131 (9th Cir. 2000).
Where a plaintiff has not specified the amount of damages sought in his or her complaint, the
removing defendant bears the burden of showing that the amount in controversy requirement is
satisfied by a preponderance of the evidence. See Singer v. State Farm Mutual Automobile Insurance
Co., 116 F.3d 373, 376 (9th Cir. 1997); Gaus, 980 F.2d at 567 (9th Cir. 1992). To meet this
burden, defendant must submit “summary-judgment-type evidence” showing that the actual amount
in controversy exceeds $75,000. Singer, 116 F.3d at 377 (citing Allen v. R & H Oil & Gas Co., 63
F.3d 1326, 1335-36 (5th Cir. 1995)). The defendant must demonstrate that the amount in controversy
“more likely than not” exceeds the jurisdictional amount. Sanchez v. Monumental Life Ins. Co., 102
F.3d 398, 404 (9th Cir. 1996). If defendant presents such proof, it becomes plaintiff’s burden to
show, as a matter of law, that it is certain he or she will not recover the jurisdictional amount. See
De Aguilar v. Boeing Co., 47 F.3d 1404, 1411 (5th Cir. 1995).
Jurisdiction, and thus the amount in controversy, is determined at the instant of removal. See
In the Matter of Shell Oil Company, 970 F.2d 355, 356 (7th Cir. 1992). In measuring the amount
in controversy, a court must “assum[e] that the allegations of the complaint are true and assum[e that]
a jury [will] return[ ] a verdict for the plaintiff on all claims made in the complaint.” Jackson v.
American Bankers Ins. Co. of Florida, 976 F.Supp. 1450, 1454 (S.D. Ala. 1997). See also Burns
v. Windsor Ins. Co., 31 F.3d 1092, 1096 (11th Cir. 1994) (the amount in controversy analysis
presumes that “plaintiff prevails on liability”). Cf. Angus v. Shiley Inc., 989 F.2d 142, 146 (3d Cir.
1993) (“the amount in controversy is not measured by the low end of an open-ended claim, but rather
by reasonable reading of the value of the rights being litigated”).
2.

Whether Defendant Has Demonstrated That the Court Has Diversity
Jurisdiction

The notice of removal states that “Plaintiff is domiciled in California with an address of 210

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Initials of Deputy Clerk AH

North Spring Avenue, Compton CA 90221.”2 The notice also states that “Defendant is a Delaware
corporation with its principal place of business in the District of Columbia.”3 The Martinezes have
presumably switched the party designations, and intend to refer to themselves as the removing
defendants, and Federal National Mortgage Association as plaintiff. Assuming that this is the case,
the Martinezes have shown that there is complete diversity between the parties.
The complaint, however, only alleges in conclusory fashion that the “amount in controversy
exceeds $75,000.”4 The Martinezes adduce no proof that plaintiff seeks to place an amount in
controversy above that amount. See Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1117 (9th Cir. 2004)
(“Allstate did not [meet its burden of proof]. Its only effort was the statement in its ‘Petition for
Removal’ that ‘upon information and belief,[it] submit[s] that the amount in controversy ... exceeds
$75,000.00.’ ‘[I]nformation and belief’ hardly constitutes proof ‘by a preponderance of the
evidence.’”); Matheson, 319 F.3d at 1090-1 (“Conclusory allegations as to the amount in controversy
are insufficient.”).
Consequently, defendants have failed to prove by preponderance of evidence that the amount
in controversy meets the jurisdictional minimum.
III. CONCLUSION
In order to assure proper jurisdiction, the court orders defendants to show cause on or before
January 6, 2012, why the court should not remand this action to Los Angeles Superior Court for lack
of subject matter jurisdiction. Plaintiffs may file a response by January 17, 2012.

2

Removal, ¶ 8.

3

Id.

4

Id.

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Initials of Deputy Clerk AH