Beck et al v. Wells Fargo Bank, National Association et al

Filing 48

ORDER TO SHOW CAUSE RE SUBJECT MATTER JURISDICTION AND DISMISSAL. Signed by Judge Edward J. Davila on 6/6/12. Show Cause Response due by 6/27/2012. No hearing is set at this time; if after receiving Plaintiffs' response the court determines that a hearing would be helpful, it will set one by further order. (ejdlc3, COURT STAFF) (Filed on 6/6/2012) (Additional attachment(s) added on 6/6/2012: # 1 Certificate of Service) (ecg, COURT STAFF).

1
2
3
4
5
6
7

IN THE UNITED STATES DISTRICT COURT

8

FOR THE NORTHERN DISTRICT OF CALIFORNIA

9

SAN JOSE DIVISION
CASE NO. 5:11-CV-00663-EJD

SALLY ANN BECK and LINDA L.
TUCKER,

11
For the Northern District of California

United States District Court

10

12

ORDER TO SHOW CAUSE RE SUBJECT
MATTER JURISDICTION AND
DISMISSAL

Plaintiffs,
v.

13
14

WELLS FARGO BANK N.A. and
FEDERAL HOME MORTGAGE
CORPORATION,

15
16

Defendants.
/

17
18

In November 2002, Plaintiffs refinanced their home in Watsonville, California by obtaining a

19

new $320,000 mortgage through Wells Fargo. Original Compl. 3:1–2 & Ex. D. Plaintiffs eventually

20

defaulted, and Wells Fargo initiated a nonjudicial foreclosure in 2010. RJN Exs. 9, 10; Opp. Mot.

21

Dismiss 3–4, Sept. 2, 2011, ECF No. 35.

22

Plaintiffs filed this action on February 14, 2011, alleging a variety of violations that they

23

claim should bar any foreclosure from going forward. The initial complaint named two causes of

24

action: one for “Declaratory Relief Based on TILA [Truth in Lending Act] Violations/Rescission”

25

and one to “Quiet Title”. The declaratory relief cause of action also attempted to establish violations

26

of the Real Estate Settlement Procedures Act (RESPA) and the Fair Debt Collection Practices Act

27

(FDCPA). On March 9, 2011, Wells Fargo moved to dismiss the complaint for failure to state a

28

claim. On December 14, 2011, the court granted Wells Fargo’s motion in part, dismissing the TILA
1
CASE NO. 5:11-CV-00663-EJD
ORDER TO SHOW CAUSE RE SUBJECT MATTER JURISDICTION AND DISMISSAL

1

claims with prejudice and the RESPA claims with leave to amend. The court expressly declined to

2

exercise supplemental jurisdiction over any claim arising out of California law at that time.

3

On January 3, 2012, Plaintiffs filed an amended complaint which abandoned all the original

4

claims and raising six new causes of action under state law instead. Defendants, presumably wishing

5

to have the case resolved as soon as possible, have filed a motion to dismiss the amended complaint

6

on Rule 12(b)(6) grounds without raising the question of jurisdiction. Parties cannot waive defects in

7

subject matter jurisdiction, however, so the court visits the issue on its own.

8
9

Generally speaking, federal district courts have jurisdiction over two categories of cases:
those presenting a question of federal law and those between parties of diverse citizenship. 28
U.S.C. §§ 1331, 1332. The first category encompasses all civil actions “arising under the

11
For the Northern District of California

United States District Court

10

Constitution, laws, or treaties of the Untied States.” § 1331. The second category includes those

12

actions in which the amount in controversy exceeds $75,000 and in which all plaintiffs are citizens

13

of different states than all defendants. § 1332(a)(1). The burden of establishing subject matter

14

jurisdiction lies with the party asserting it. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S.

15

375, 377 (1994).

16

A district court has supplemental jurisdiction over all claims which form part of the same

17

case or controversy as any claim over which it has original jurisdiction. 28 U.S.C. § 1367(a). Most

18

frequently, supplemental jurisdiction is exercised over state law claims that arise out of a transaction

19

which also gives rise to a federal claim. The court is not necessarily divested of its supplemental

20

jurisdiction over the state law claims even once all of the related federal claims have been dismissed;

21

rather, retention of the state claims is left to the court’s discretion. 28 U.S.C. § 1367(c); see Acri v.

22

Varian Assocs., Inc., 114 F.3d 999 (9th Cir. 1997). But when a plaintiff on her own initiative

23

amends the complaint to abandon the federal claims which formed the basis of the court’s

24

jurisdiction, supplemental jurisdiction is extinguished. See Rockwell Int’l Corp. v. U.S., 549 U.S.

25

457, 473–474 (2007) (“[W]hen a plaintiff files a complaint in federal court and then voluntarily

26

amends the complaint, courts look to the amended complaint to determine jurisdiction.”); 13D

27

Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3567.3 & nn.91–92 (3d

28

ed. 2008).
2
CASE NO. 5:11-CV-00663-EJD
ORDER TO SHOW CAUSE RE SUBJECT MATTER JURISDICTION AND DISMISSAL

1

Plaintiffs brought this case in federal court, so it is their responsibility to establish that

2

subject matter jurisdiction exists. This court had federal question jurisdiction over the original

3

complaint pursuant to 28 U.S.C. § 1331 because it raised causes of action under TILA and RESPA.

4

The court dismissed all of the federal claims from the original complaint—the RESPA claims with

5

leave to amend and the TILA claims without leave to amend. The amended complaint abandons the

6

federal claims and relies entirely on new theories of recovery.

7

The new claims are outside the scope of the amendments permitted by the court’s order. The

Federal Home Mortgage Corporation. That the scope of permitted amendments to the complaint was

10

restricted was made clear in the order’s title: “Order Granting Wells Fargo’s Motion to Dismiss with

11
For the Northern District of California

order allowed only for amendments to Plaintiffs’ RESPA claim and to any FDCPA claim against

9

United States District Court

8

Limited Leave to Amend.” The First Amended Complaint drops the federal claims altogether and

12

adds six state law claims without leave of court. The court is inclined to dismiss the state law claims

13

with prejudice as to their refiling in this case but without prejudice as to their refiling in state court

14

or in another case.

15

Even if the new claims were permitted to go forward, the posture of this case makes it

16

difficult to say whether the amended complaint ousts any basis for jurisdiction, as suggested by

17

Rockwell Int’l Corp. and as explicitly held in Wellness Community–National v. Wellness House, 70

18

F.3d 46 (7th Cir. 1995).1 But resolving this jurisdictional issue is unnecessary: even assuming the

19

court has the authority to retain jurisdiction over the state law claims, this would not be an

20

appropriate case for it to exercise its discretion to do so. First, as a procedural matter, the court has

21

already decided the issue: the order granting Wells Fargo’s first motion to dismiss stated, “The court

22

declines to exercise its supplemental jurisdiction over the state law claims at this time.” Order at 8,

23

ECF No. 39. Second, even if the court had initially exercised jurisdiction over the state law claims, it

24

would still relinquish jurisdiction at this stage. The federal claims were dismissed early enough in

25

the case that the few resources expended in federal court do not outweigh the comity concerns of

26
27
28

1

Wellness Community–Nat’l might be distinguished on the grounds that in that case the
Plaintiff affirmatively and voluntarily made a Rule 15 motion for leave to amend, whereas the
amendment in this case was in response to an order dismissing claims with leave to amend.
3
CASE NO. 5:11-CV-00663-EJD
ORDER TO SHOW CAUSE RE SUBJECT MATTER JURISDICTION AND DISMISSAL

1

having purely state law issues decided in state court. See Carnegie-Mellon University v. Cohill, 484

2

U.S. 343, 350 n.7 (1988); Reynolds v. County of San Diego, 84 F.3d 1162, 1171 (9th Cir. 1996).

3

Even so, “an action should not be dismissed for lack of jurisdiction without giving the

4

plaintiff an opportunity to be heard unless it is clear the deficiency cannot be overcome by

5

amendment.” May Dept. Store v. Graphic Process Co., 637 F.2d 1211, 1216 (9th Cir. 1980). This

6

principle is especially motivating when the plaintiff is proceeding pro se. Here, it is possible that a

7

separate basis for jurisdiction might exist—for example, under 28 U.S.C. § 1332.

8

It must be made clear that if this case is dismissed for lack of jurisdiction, the dismissal will

9

necessarily be without prejudice: Plaintiffs would be free to refile the same complaint in state court,

11
For the Northern District of California

United States District Court

10

and that court will adjudicate the merits of the case.
Plaintiffs are hereby ORDERED TO SHOW CAUSE within 21 days why this action should

12

not be dismissed for lack of subject matter jurisdiction. Plaintiffs may respond to this Order in one

13

of several ways:

14

(1) By filing a response to this Order to Show Cause explaining why the above

15

doubts about the propriety of Plaintiffs’ amendment and the court’s jurisdiction over this

16

case are unfounded.

17

(2) By filing a motion for leave to file a Second Amended Complaint. Any such

18

motion must be accompanied by the proposed Second Amended Complaint, in which a basis

19

for this court’s jurisdiction must be clearly alleged.

20

(3) By doing nothing. If no response is filed, the court will dismiss the action for lack

21

of subject matter jurisdiction. The dismissal will be without prejudice to refiling the case in

22

state court.

23

Defendants’ Motion to Dismiss the First Amended Complaint remains under submission

24

pending resolution of this Order to Show Cause.

25

IT IS SO ORDERED.

26
27

Dated: June 6, 2012
EDWARD J. DAVILA
United States District Judge

28
4

CASE NO. 5:11-CV-00663-EJD
ORDER TO SHOW CAUSE RE SUBJECT MATTER JURISDICTION AND DISMISSAL