Hawaii Central Federal Credit Union v. Kealoha, et al.
Filing
71
ORDER GRANTING IN PART and DENYING IN PART Defendant The United States of America's Motion To Dismiss and GRANTING Plaintiff's Motion For Remand re 55 60 .On the basis of the foregoing, the Government's Motion to Dismiss, filed M ay 9, 2019 is HEREBY GRANTED IN PART AND DENIED IN PART. The Motion to Dismiss is GRANTED insofar as Plaintiff's claims for: 1) repayment of the balance of the Note and Mortgage; and 2) attorneys' fees and costs against the Substitute Res, are DISMISSED WITH PREJUDICE. The Motion to Dismiss is DENIED as to Plaintiff's claim for a deficiency judgment against the Kealohas, jointly and severally.Plaintiff's Motion for Remand, filed May 24, 2019, is HEREBY GRANTED as to P laintiff's remaining claim for a deficiency judgment against the Kealohas, and this case is REMANDED to the State of Hawai`i, First Circuit Court. The Clerk's Office is DIRECTED to effectuate the remand on August 15, 2019, unless any party files a timely motion for reconsideration of this Order. Signed by JUDGE LESLIE E. KOBAYASHI on 7/31/2019. (cib)
FILED IN THE
UNITED STATES DISTRICT COURT
DISTRICT OF HAWAII
Jul 31, 2019
SUE BEITIA, CLERK
UNITED STATES DISTRICT COURT
DISTRICT OF HAWAII
HAWAII CENTRAL FEDERAL CREDIT
UNION,
CIV. NO. 18-00108 LEK-KJM
Plaintiff,
vs.
LOUIS MAHINA KEALOHA, KATHERINE
ELIZABETH KEALOHA, MARINER'S
COVE ASSOCIATION, A HAWAII
NONPROFIT CORPORATION; LUNA-KAI
MARINA PARK ASSOCIATION, A
HAWAII NONPROFIT CORPORATION;
HAWAII KAI MARINA COMMUNITY
ASSOCIATION, A HAWAII NONPROFIT
CORPORATION; SUMIDA AU & WONG
LLC, A HAWAII LIMITED LIABILITY
COMPANY; UNITED STATES OF
AMERICA, JOHN DOES 1-10, JANE
DOES 1-10, DOE PARTNERSHIPS 110, DOE CORPORATIONS 1-10, DOE
ENTITIES 1-10, DOE GOVERNMENTAL
UNITS 1-10,
Defendants.
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANT THE UNITED STATES OF AMERICA’S MOTION
TO DISMISS AND GRANTING PLAINTIFF’S MOTION FOR REMAND
Before the Court is: Defendant the United States of
America’s (“the Government”) Motion to Dismiss, filed on May 9,
2019, and Plaintiff Hawaii Central Federal Credit Union’s
(“Plaintiff”) Motion for Remand, filed on May 24, 2019.
nos. 55, 60.]
[Dkt.
On May 22, 2019, Defendant Mariner’s Cove
Association (“MCA”) filed its statement of no position to the
Motion to Dismiss, and on May 24, 2019, Plaintiff filed its
memorandum in opposition to the Motion to Dismiss (“Plaintiff
Dismiss Opposition”).
[Dkt. nos. 58, 59.]
On June 6, 2019, the
Government filed its reply (“Government Reply”), and also filed
its memorandum in opposition to the Motion for Remand
(“Government Remand Opposition”).
[Dkt. nos. 62, 63.]
On
June 12, 2019, MCA filed a statement of no position to the
Motion for Remand, and Defendant Sumida Au & Wong, LLLC (“SAW”)
filed its memorandum in opposition to the Motion to Remand (“SAW
Remand Opposition”).
[Dkt. nos. 68, 69.]
On June 25, 2019,
Plaintiff filed its reply in support of the Motion for Remand.
[Dkt. no. 70.]
The Court finds the Motion to Dismiss and the Motion
for Remand (“the Motions”) suitable for disposition without a
hearing pursuant to Rule LR7.2(d) of the Local Rules of Practice
for the United States District Court for the District of Hawaii
(“Local Rules”).
The Government’s Motion to Dismiss is granted
in part and denied in part, and Plaintiff’s Motion for Remand is
granted for the reasons set forth below.
BACKGROUND
The factual and procedural background of this matter
is set forth in the Court’s Order Granting Defendant United
States of America’s Motion to Stay Civil Proceeding, filed on
2
October 29, 2018 (“Stay Order”), and only relevant facts will be
repeated here.
[Dkt. no. 41. 1]
On February 28, 2018, Plaintiff filed the instant case
against Defendants Louis Mahina Kealoha and Katherine Elizabeth
Kealoha (“the Kealohas”); the Government; MCA; SAW; Hawaii Kai
Marina Community Association (“HKMCA”); and Luna-Kai Marina Park
Association (“LKMPA,” all collectively “Defendants”). 2
[Notice
of Removal of Civil Action (“Notice of Removal”), filed 3/20/18
(dkt. no. 1), Exh. A at pgs. 4-13 (Complaint) at ¶¶ 2-7. 3]
In
the Complaint, Plaintiff alleges the Kealohas obtained a loan
from Plaintiff to purchase the real property on Niumali Loop,
Honolulu, Hawai`i (“the Property”), as evidenced by the Note
dated September 6, 2016 (“Note”).
[Complaint at ¶¶ 8-9.]
As
security for the Note, the Kealohas executed a Mortgage dated
September 6, 2016, granting Plaintiff a security interest in
their real and personal property, including the subject
1
The Stay Order is also available at 2018 WL 5499530.
2
On May 21, 2018, this Court issued an entry of default
against LKMPA and HKMCA for their failure to answer or otherwise
respond to the Complaint. [Dkt. no. 25.] On July 20, 2018,
Plaintiff filed a stipulation for dismissal without prejudice as
to LKMPA. [Dkt. no. 35.] The Kealohas did not file any
responsive document to the Motions.
3
Exhibit A to the Notice of Removal consists of multiple
documents that are not consecutively paginated. All citations
to Exhibit A refer to the page numbers assigned by the district
court’s electronic case filing system.
3
Property. 4
[Id. at ¶ 9.]
Plaintiff alleges the Kealohas have
defaulted on the Note and Mortgage, therefore Plaintiff is
entitled to foreclose upon the Property, and is entitled to
reimbursement of its costs and reasonable attorneys’ fees
incurred in connection with this matter.
[Id. at ¶¶ 10, 14.]
In the alternative, Plaintiff seeks a deficiency judgment if a
money judgment is not entered in Plaintiff’s favor, or if the
sale proceeds from the Property do not satisfy the outstanding
amounts owed to Plaintiff.
[Id., Prayer for Relief at ¶ A.]
On October 29, 2018, this Court issued the Stay Order
to temporarily stay the case until either the completion of the
interlocutory sale of the Property in the criminal matter known
as United States of America v. Louis M. Kealoha, et al., CR 1800068 JMS-WRP (“CR 18-00068”), or the conclusion of CR 18-00068.
Stay Order, 2018 WL 5499530, at *3.
On September 27, 2018, the magistrate judge issued the
Order Granting the United States’ Motion for Interlocutory Sale
of Real Property Subject to Criminal Proceedings (“Interlocutory
Order”), directing, inter alia, the Government and Plaintiff to
work together to sell the Property and apply the proceeds first
4
The Mortgage was
of the State of Hawai`i
amended in that certain
2015, and recorded with
“Mortgage”). [Complaint
recorded with the Bureau of Conveyances
(“BOC”) as Document No. A-61010206, as
Amendment to Mortgage dated January 16,
the BOC as Document No. A-55110470 (the
at ¶ 9.]
4
to any outstanding taxes, as well as expenses incurred by the
United States Marshals Service (“USMS”) related to the sale of
the Property, then to Plaintiff.
[CR 18-00068, dkt. no. 79.]
The Property was sold pursuant to the Interlocutory Order, and
on March 18, 2019, the district court confirmed the sale of the
Property.
[Id., Order Granting Interested Party Hawaii Central
Federal Credit Union’s Motion for Confirmation of Interlocutory
Sale of Real Property, ECF No. 139 (“Preliminary Order”) (dkt.
no. 153).]
On March 29, 2019, the district court issued its
Final Order Granting Interested Party Hawaii Central Federal
Credit Union’s Motion for Confirmation of Interlocutory Sale of
Real Property, ECF No. 139 (“Final Order”).
no. 156.]
[Id., dkt.
The Final Order approved the sale of the Property for
$1,305,000.00, and ordered these funds to be disbursed in
accordance with the terms outlined in the Final Order.
Final Order at 4-6, ¶¶ 1-2.]
[Id.,
After calculating the “outstanding
real property taxes and the expenses of custody and sale
incurred by the USMS,” this district court ordered the sum of
$1,099,096.60 to be paid to Plaintiff in satisfaction of the
balance owed under the Note and Mortgage, calculated as of
March 29, 2019.
[Id. at 4, 6, ¶ 2.m. 5]
5
If the sale proceeds
The $1,099,096.60 included interest at 3.75% up to
March 29, 2019, the escrow/impound overdraft, and unpaid late
charges. [CR 18-00068, Final Order at 6, ¶ 2.m.]
5
were “insufficient to pay all amounts due on the Note and
Mortgage including attorneys’ fees and costs,” this district
court permitted Plaintiff to seek a deficiency judgment against
the Kealohas, jointly and severally.
[Id. at 6, ¶ 3.]
The
district court ordered the remaining net proceeds from the sale
of the Property to be substituted for the Property (“Substitute
Res”), and to be paid to the Clerk of Court for the United
States District Court for the District of Hawai`i, to be
deposited in an interest-bearing account pending a final
judgment in CR 18-00068.
[Id. at 6, ¶ 4.]
Finally, the
district court ordered:
All other right, title, claim, liens, and
interest of any and all persons or parties
whatsoever existing or asserted in said Real
Property shall be made upon the substitute res.
The validity and priority of any such right,
title, claims, liens, and interest will be
determined at an ancillary proceeding pursuant to
Title 21, United States Code, Section 853(n),
contingent upon and following a judgment in the
criminal case and the Court’s entry of a final
order of forfeiture to the United States. If
Defendants Katherine P. Kealoha and Louis M.
Kealoha are found not guilty of the charges
contained in Counts 1 through 8 of the Second
Superseding Indictment, the Court will retain
jurisdiction of the substitute res pending
further proceedings.
[Id. at 6-7, ¶ 5.]
On April 18, 2019, this Court issued an entering order
lifting the stay for the limited purpose of permitting the
Government to file its Motion to Dismiss (“4/18/19 EO”).
6
[Dkt.
no. 48.]
The Government’s Motion to Dismiss, and Plaintiff’s
Motion to Remand followed.
The Government argues dismissal is
proper based on Fed. R. Civ. P. 12(b)(1) and (6), and 21 U.S.C.
§ 853(k), which bars any proceeding against the Government for
adjudicating a third-party interest in forfeitable property,
outside of the procedure provided in 21 U.S.C. § 853(n).
Plaintiff seeks an order remanding its foreclosure claim to the
state court because the Substitute Res is in the possession of
the district court pending the conclusion of CR 18-00068,
therefore the Government is no longer a necessary party to this
action and should be dismissed.
Once the Government is
dismissed, Plaintiff argues this Court would lack subject matter
jurisdiction over Plaintiff’s state-law foreclosure claims, and
remand is mandatory under 28 U.S.C. § 1447(c).
DISCUSSION
I.
Preliminary Matters
The Court notes Plaintiff’s Motion for Remand was not
expressly permitted under the 4/18/19 EO, which lifted the stay
“for the limited purposed of: 1) permitting the Government - if
it chooses - to file an optional motion based on the arguments
set forth in the Government’s letter brief; and 2) permitting
the parties to file their respective responses to the
Government’s optional motion.”
[4/18/19 EO at 2.]
Plaintiff
filed both a response to the Motion to Dismiss, and a separate
7
Motion for Remand.
Nevertheless, because this Court has an
independent duty to address jurisdictional issues at any time
before final judgment, and the Motion for Remand addresses this
Court’s subject matter jurisdiction, it will consider the
motion.
See Williams v. United Airlines, Inc., 500 F.3d 1019,
1021 (9th Cir. 2007) (“[W]e are ‘obliged to raise questions of
the district court’s subject-matter jurisdiction sua sponte.’”
(some citations omitted) (quoting Hart v. United States, 817
F.2d 78, 80 (9th Cir. 1987))); United Inv’rs Life Ins. v.
Waddell & Reed Inc., 360 F.3d 960, 967 (9th Cir. 2004) (“the
district court had a duty to establish subject matter
jurisdiction over the removed action sua sponte, whether the
parties raised the issue or not” (citation omitted)).
The Court
cautions the parties that any future failure to comply with an
express order from this Court may result in sanctions, under the
right conditions.
See, e.g., Reno Air Racing Ass’n v. McCord,
452 F.3d 1126, 1130 (9th Cir. 2006) (discussing conditions for
applying civil contempt sanctions when a party disobeys a
“specific and definite court order”); B.K.B. v. Maui Police
Dep’t, 276 F.3d 1091, 1107-09 (9th Cir. 2002) (discussing the
court’s inherent power to impose sanctions for conduct that is
tantamount to bad faith).
8
II.
Motion to Dismiss
At this point, the Property has been sold via
interlocutory sale, and Plaintiff has been paid $1,099,096.60
for the “balance owed under the Note and Mortgage, calculated to
March 29, 2019.”
[CR 18-00068, Final Order at 4, 6.]
Plaintiff
does not dispute that this portion of its claim has been
resolved.
See Pltf. Dismiss Opp. at 4-5 (“Outstanding principal
and interest were paid, along with late charges and most of the
costs Plaintiff incurred in maintaining, marketing and selling
the Property pursuant to the Interlocutory Sale Order.”).
Because there is no longer a live controversy as to the balance
of the Note and Mortgage, this portion of Plaintiff’s claim is
now moot.
See Negrete v. Allianz Life Ins. Co. of N. Am., 523
F.3d 1091, 1097 & n.8 (9th Cir. 2008) (“We recognize that an
issue becomes moot when no controversy remains.” (citing
Arizonans for Official English v. Arizona, 520 U.S. 43, 67, 117
S. Ct. 1055, 1068, 137 L. Ed. 2d 170 (1997))).
Because this
portion of Plaintiff’s claim is moot, it must be dismissed with
prejudice.
See Foster v. Carson, 347 F.3d 742, 745 (9th Cir.
2003) (“If there is no longer a possibility that an appellant
can obtain relief for his claim, that claim is moot and must be
dismissed for lack of jurisdiction.” (citation and quotation
marks omitted)).
9
However, Plaintiff claims its attorneys’ fees and
costs are still outstanding, and, until it recovers those fees
and costs, it will not be made whole.
5.]
[Pltf. Dismiss Opp. at
To the extent Plaintiff seeks to recover its attorneys’
fees and costs from the Substitute Res, this is a claim against
the Property which was subject to the criminal forfeiture
statutes, and which the Government has an interest in.
The
Ninth Circuit has held that a third-party asserting an interest
in property subject to criminal forfeiture must pursue their
claim through § 853(n).
See United States v. Lazarenko, 476
F.3d 642, 648 (9th Cir. 2007) (“The law appears settled that an
ancillary proceeding constitutes the only avenue for a third
party claiming an interest in seized property.” (citations
omitted)); see also United States v. MacInnes, 223 F. App’x 549,
553 (9th Cir. 2007) (stating that “the only right a party with
an interest in the Property prior to forfeiture retains
‘subsequent to the filing of an indictment or information
alleging that the property is subject to forfeiture,’ 21 U.S.C.
§ 853(k)(2), is the right to petition the district court
pursuant to section 853(n)” (emphasis in MacInnes)). 6
6
For this
In MacInnes, Frazer Charles and Maureen MacInnes were
indicted for and eventually pleaded guilty to marijuana-related
charges, and a final order of civil forfeiture was entered on
February 26, 2003. 223 F. App’x at 550. The Government
initiated a criminal forfeiture proceeding pursuant to § 853 on
(. . . continued)
10
reason, the Court dismisses the portion of Plaintiff’s claim for
attorneys’ fees and costs seeking recovery against the
Substitute Res because it is an action against the Government.
Plaintiff must pursue this portion of its claim in the ancillary
proceeding to be held in the CR 18-00068, following and
contingent upon the outcome of the criminal case and the entry
of a final order of forfeiture to the United States.
00068, Final Order at 6-7, ¶ 5.
See CR 18-
Further, the dismissal is with
prejudice, because § 853(k)(2) precludes any action against the
Government “concerning the validity of [Plaintiff’s] alleged
interest in the property [made] subsequent to the filing of an
indictment or information alleging that the property is subject
to forfeiture.”
The Motion to Dismiss is therefore granted in
part as to this portion of Plaintiff’s claim against the
Government.
February 24, 2003, and an Amended Order of Criminal Forfeiture
was issued on May 16, 2003, recognizing Washington Mutual Bank
(“Bank”) as having an interest in the real property to be
forfeited, because the Bank had submitted a claim on the real
property to the “U.S. Attorney’s Office . . . based on a
promissory note secured by a trust deed, to the [Property].”
Id. at 550-51 (brackets in MacInnes). The Bank initiated
foreclosure proceedings against the real property, but failed to
provide notice of the sale to the Government; U.S. Financial
purchased the real property at a public auction foreclosure
sale. Id. at 551. The district court granted the Government’s
motion to set aside the forfeiture sale, which the Ninth Circuit
affirmed on appeal. Id. at 551-54.
11
The only remaining issue is the portion of Plaintiff’s
claim seeking a deficiency judgment if the proceeds of the sale
of the Property, i.e., the Substitute Res, do not make Plaintiff
whole.
Plaintiff argues remand, not dismissal, is the
appropriate way to adjudicate this part of its claim because, if
a deficiency judgment is appropriate, it would be an in personam
claim against the Kealohas – not the Government.
The claim,
Plaintiff argues, would only arise if Plaintiff cannot be made
whole from the Substitute Res and must look to the Kealohas for
recovery.
Because it would no longer involve the Substitute
Res, it would not constitute an action against the Government,
and would fall beyond the purview of § 853.
The Government
argues Plaintiff cannot maintain this claim because any right
Plaintiff may have to a deficiency judgment arises from the
foreclosure pursuant to the Note and Mortgage, which is subject
to criminal forfeiture.
The issue therefore is whether the
right to seek a deficiency judgment is a part of the foreclosure
action that is barred by § 853(k), or a separate claim.
The United States Bankruptcy Court for the District of
Hawai`i (“bankruptcy court”) addressed a similar question
regarding whether an award of a deficiency judgment should be
considered a part of the foreclosure of the real property, or if
it was a separate issue relating to monetary damages that was
subject to arbitration under the terms of a purchase agreement.
12
See In re 1250 Oceanside Partners, Bankruptcy No. 13–00353, 2013
WL 6243889, at *6-7 (D. Hawai`i Dec. 2, 2013). 7
The plaintiff
argued the language of the purchase agreement permitting it to
“foreclose on the property covered by the mortgage” included the
award of a deficiency judgment, while the defendants argued an
award of a deficiency judgment was a separate matter, and
subject to the arbitration clause that covered “monetary damages
or costs of any type.”
Id. (quotation marks omitted).
The
bankruptcy court stated the plaintiff’s interpretation that a
deficiency judgment is a part of a foreclosure ran contrary to
the plain meaning of the word:
According to Black’s Law Dictionary, a
“foreclosure” is “a legal proceeding to terminate
a mortgagor’s interest in property, instituted by
the lender (the mortgagee) either to gain title
or to force a sale in order to satisfy the unpaid
debt secured by the property.” Black’s Law
Dictionary 674 (8th ed.). The right to a
deficiency judgment is not included in that
definition. “Foreclosure on the property”
includes only the sale of the property and either
the transfer of title to the lender or the
application of the sales proceeds to the secured
debt.
Id. (emphasis added).
7
1250 Oceanside Partners, 2013 WL 6243889, is the
bankruptcy court’s Proposed Findings of Fact and Conclusions of
Law on Motions to Dismiss and for Summary Judgment (“Proposed
FOF/COL”), which was transmitted to the district court in CV 1400016 JMS-KSC. The Proposed FOF/COL was never acted upon
because a stipulation of dismissal was filed on August 23, 2016.
[CV 14-00016 JMS-KSC, dkt. no. 18.]
13
The bankruptcy court’s reasoning is supported by this
district court’s prior discussion of foreclosure procedure under
Hawai`i law.
See United States v. Staton, Civ. No. 12-00319
ACK-KSC, 2018 WL 2144148, at *2 n.1 (D. Hawai`i May 9, 2018)
(explaining that foreclosure cases are “bifurcated into two
separately appealable parts” (quoting Am. Gen. Fin. of Hawaii,
Inc. v. Domen, No. 25774, 2003 WL 22053702, at *1 (Haw. Aug. 29,
2003) (unpublished decision))).
This Court finds the bankruptcy
court’s reasoning persuasive, and concludes that Plaintiff’s
right to seek an award of a deficiency judgment in this case is
not a right included in the right to foreclosure.
Instead, it
is a separate contractual right Plaintiff may have against the
Kealohas, only.
See 1250 Oceanside Partners, 2013 WL 6243889,
at *8 (“In Hawaii, notes and mortgages are contracts.
Beneficial Hawaii, Inc. v. Kida, 96 Haw. 289, 312 (Haw. 2001).
Any deficiency or award of attorneys’ fees and costs in this
case would relate to a breach of the note and mortgage.”).
Further, the cases cited by the Government for the proposition
that the foreclosure action is an action against the Government,
do not specifically discuss whether a deficiency judgment is
also an action against the Government in the context of § 853(k)
or (n).
Cf. MacInnes, 223 F. App’x at 554 (“Therefore, we join
the Fourth Circuit and conclude that a foreclosure sale of
forfeited property is ‘an action . . . against the United
14
States. . . .’” (alterations in MacInnes) (emphasis added)
(quoting United States v Phillips, 185 F.3d 183, 188 (4th
Cir. 1999))).
The Ninth Circuit’s reasoning also supports this
proposition.
In MacInnes, U.S. Financial purchased the real
property at a foreclosure sale, which was later set aside
because the foreclosing bank that sold the real property had no
interest in it at the time of sale, since its right had been
terminated by earlier civil and criminal forfeiture proceedings.
Id. at 550.
On appeal, U.S. Financial argued that § 853(k) did
not invalid the foreclosure sale, because the Government
“stepped into the place of the previous owners” and “[a]s the
new owner, . . . was required to make payments on the loan
secured by the deed of trust.”
Id. at 553.
The Ninth Circuit
disagreed, stating:
While in many ways, the Government steps into the
shoes of the previous owner when it takes title
to real property by forfeiture under § 853, it
does not do so entirely. Rather, § 853(k)
extinguishes the right of lien holders and other
interested parties to enforce their rights
against the Government through separate civil
litigation. In its place it establishes an
alternative remedy, § 853(n), the administrative
remedies in 28 C.F.R. § 9.1 et seq., and the
benefit of having the most desirable of
creditors, the federal government of the United
States.
Id. (emphases added).
Following the Ninth Circuit’s reasoning,
it cannot be said the Government steps into the shoes of the
15
Kealohas for all of their obligations.
Therefore this Court
concludes Plaintiff’s potential right to seek a deficiency
judgment if it is not made whole when it attempts to recover its
attorneys’ fees and costs from the Substitute Res in the
ancillary proceeding, is not an action against the Government,
but an action against the Kealohas.
The Government’s argument
as to Plaintiff’s request for a deficiency judgment is rejected.
The Motion to Dismiss is therefore denied in part as to this
portion of Plaintiff’s Complaint.
III. Dismissal of Defendants
In light of the circumstances, Plaintiff requests that
this Court dismiss its claims against all Defendants except for
the Kealohas.
[Pltf. Dismiss Opp. at 6-7.]
Having concluded
that Plaintiff’s remaining claim is not an action against the
Government but only against the Kealohas, and there being no
counterclaims or cross-claims plead, this Court dismisses all
defendants except the Kealohas from this action.
See Fed. R.
Civ. P. 41(a)(2).
IV.
Remand to State Court
Finally, because Plaintiff’s claim for a deficiency
judgment is not against the Government, the Court must consider
whether remand is appropriate.
The Government initially removed
this action pursuant to 28 U.S.C. §§ 1441(a), 1442(a)(1), and
16
1444. 8
Notice of Removal at ¶¶ 3-5.
The Government alleged:
§ 1441(a) applied because “[f]ederal courts have original and
exclusive jurisdiction of federal forfeiture proceedings
pursuant to 28 U.S.C. § 1355(a)”; [id. at ¶ 3;] § 1442(a)(1)
applied because “[t]his action constitutes an action commenced
in a state court against the United States on account of the
rights, title, and authority of the United States under federal
criminal forfeiture statutes, 18 U.S.C. § 982(a)(2)(A)”; [id. at
¶ 3;] and § 1444 applied because this action “affects property
in which the United States claims an interest,” [id.].
Once the
Government is dismissed from this action, Plaintiff argues
§ 1447(c) requires this Court to remand the case to state court.
This district court has previously stated:
“If at any time before final judgment it
appears that the district court lacks subject
matter jurisdiction, the case shall be remanded.”
28 U.S.C. § 1447(c). “The removal statute is
strictly construed, and any doubt about the right
of removal requires resolution in favor of
remand.” Moore–Thomas v. Alaska Airlines, Inc.,
553 F.3d 1241, 1244 (9th Cir. 2009) (citing Gaus
v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.
1992)). “The presumption against removal means
that ‘the defendant always has the burden of
establishing that removal is proper.’” Id.
(quoting Gaus, 980 F.2d at 566). “[T]he court
resolves all ambiguity in favor of remand to
state court.” Hunter v. Philip Morris USA, 582
8
The Government also cited to 28 U.S.C. § 1446(a), which
provides the general procedure for removal of actions. See
§ 1446(a).
17
F.3d 1039, 1042 (9th Cir. 2009) (citing Gaus, 980
F.2d at 566).
Ross v. Hawaii Nurses’ Ass’n Office & Prof’l Emps. Int’l Union
Local 50, 290 F. Supp. 3d 1136, 1141 (D. Hawai`i 2018)
(alteration in Ross).
“A plaintiff who contests the existence
of removal jurisdiction may file a motion to remand, see 28
U.S.C. § 1447(c), the functional equivalent of a defendant’s
motion to dismiss for lack of subject-matter jurisdiction under
Rule 12(b)(1).”
Leite v. Crane Co., 749 F.3d 1117, 1122 (9th
Cir. 2014). 9
Because removal jurisdiction is determined at the time
of removal regardless of subsequent events, 10 this Court rejects
Plaintiff’s argument that this Court lacks subject matter
jurisdiction and remand is required pursuant to § 1447(c).
At
9
In Leite, the Ninth Circuit addressed whether removal was
appropriate based on the defendant’s assertion that 28 U.S.C.
§ 1442(a)(1), pertaining to suits against federal officers,
presented federal question jurisdiction. 749 F.3d at 1120-21.
The plaintiffs-appellants raised the question of whether a
defendant is only required to allege the necessary facts in
support of federal question jurisdiction, or if he is required
to prove those facts before proceeding in federal court; and, if
so, was the district court required to “resolve evidentiary
challenges to the defendant’s evidence before deciding whether
removal jurisdiction exists?” Id. at 1121. In reaching its
conclusion, the Ninth Circuit applied the same analysis used in
a motion to dismiss for lack of subject matter jurisdiction
because of the “parallel nature of the inquiry.” Id. at 1122.
10
See Allen v. F.D.I.C., 710 F.3d 978, 984 (9th Cir. 2013)
(“federal jurisdiction is determined at the time of removal, not
after a case has been removed” (citations omitted)).
18
the very least, when the Notice of Removal was filed, the
Government was named as a defendant in this case, therefore
removal was appropriate.
See § 1442(a)(1).
Still, since the
Government has been dismissed and the only remaining issue is
Plaintiff’s state law claim seeking a deficiency judgment
against the Kealohas, there are no other claims over which this
Court would otherwise have original jurisdiction.
This district
court has stated:
“[W]hen the single federal law claim in the
action [is] eliminated at an early stage of the
litigation, the district court ha[s] a powerful
reason to choose not to continue to exercise
jurisdiction,” and, thus, “when a district court
may relinquish jurisdiction over a removed case
involving pendent claims, the court has
discretion to remand the case to state court.”
Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343,
351 (1988); Harrell v. 20th Century Ins. Co., 934
F.2d 203, 205 (9th Cir. 1991) (“It is generally
within a district court’s discretion either to
retain jurisdiction to adjudicate the pendent
state claims or to remand them to state court.”).
“The district court’s decision to remand remains
discretionary and is dependent upon what ‘will
best accommodate the values of economy,
convenience, fairness, and comity.’” Harrell,
934 F.2d at 205 (quoting Carnegie–Mellon, 484
U.S. at 351). A district court may remand sua
sponte. Maniar v. FDIC, 979 F.2d 782, 785 (9th
Cir. 1992).
Gebelien v. Lay Out Etc., Inc., CV. NO. 11–00596 DAE, 2012 WL
12516602, at *3 (D. Hawai`i Jan. 20, 2012) (some alterations in
Gebelien).
19
This case was removed on March 20, 2018 pursuant to
the Notice of Removal.
With the exception of the entry of
default against LKMPA and HKMCA filed on May 21, 2018, the Stay
Order, and the instant Motions, no other action has been taken
in this case.
This Court has not ruled on any other motions,
nor has trial been set, nor any deadlines issued regarding
amending pleadings, discovery, or filing dispositive motions.
Because the case has only proceeded on the barest of matters,
and “[n]eedless decisions of state law should be avoided both as
a matter of comity and to promote justice between the parties,”
see United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726
(1966), the Court concludes that remand is appropriate.
CONCLUSION
On the basis of the foregoing, the Government’s Motion
to Dismiss, filed May 9, 2019 is HEREBY GRANTED IN PART AND
DENIED IN PART.
The Motion to Dismiss is GRANTED insofar as
Plaintiff’s claims for: 1) repayment of the balance of the Note
and Mortgage; and 2) attorneys’ fees and costs against the
Substitute Res, are DISMISSED WITH PREJUDICE.
The Motion to
Dismiss is DENIED as to Plaintiff’s claim for a deficiency
judgment against the Kealohas, jointly and severally.
Plaintiff’s Motion for Remand, filed May 24, 2019, is
HEREBY GRANTED as to Plaintiff’s remaining claim for a
deficiency judgment against the Kealohas, and this case is
20
REMANDED to the State of Hawai`i, First Circuit Court.
The
Clerk’s Office is DIRECTED to effectuate the remand on
August 15, 2019, unless any party files a timely motion for
reconsideration of this Order.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAI`I, July 31, 2019.
HAWAII CENTRAL FEDERAL CREDIT UNION v. LOUIS MAHINA KEALOHA, ET
AL.; CIV. NO. 18-00108 LEK-KJM; ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT THE UNITED STATES OF AMERICA’S MOTION
TO DISMISS AND GRANTING PLAINTIFF’S MOTION FOR REMAND
21
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