Alphonse v. Arch Bay Holdings, LLC et al
Filing
168
ORDER and REASONS that the remaining claims are DISMISSED without prejudice under 28:1367(c). The Court declines to exercise supplemental jurisdiction over those claims. Signed by Judge Helen G. Berrigan on 11/24/14.(plh) Modified doc type on 11/24/2014 (plh).
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
GLENN E. ALPHONSE, JR.
CIVIL ACTION
VERSUS
NO. 12‐330
ARCH BAY HOLDINGS, LLC, ET AL
SECTION ʺCʺ (4)
ORDER AND REASONS
This matter comes before the Court on the issue of subject matter jurisdiction and
whether the remaining state law claims should be dismissed under 28 U.S.C. § 1367(c).
Having considered the record, the memoranda of counsel and the law, the Court
dismisses the remaining claims against Arch Bay Holdings, L.L.C. (ʺArch Bayʺ) and
Specialized Loans Servicing, L.L.C. (ʺSLSʺ) for lack of subject matter jurisdiction under
Section 1367(c).
The salient facts are set forth in the Fifth Circuit opinion in this matter, 548 Fed.
Appx. 979 (5th Cir. 2013). On the defendantsʹ second motion to dismiss, this Court
dismissed all claims under the Federal Debt Collection Practices Act (ʺFDCPAʺ) and
Louisiana Unfair Trade Practices Act (ʺLUTPAʺ) and the plaintiff appealed in February
2013. 2013 WL 55911 (E.D.La). Among the holdings appealed was that the plaintiff
sued the wrong party because Arch Bay‐Series 2010B (ʺSeries 2010Bʺ), Arch Bayʹs
subsidiary, initiated the foreclosure proceedings and held the note. 2013 WL 55911 at
**4–5. This Court also dismissed all FDCPA claims against both defendants Arch Bay
and SLS, leaving no federal claims pending. Id. at *6. On appeal, the Fifth Circuit
acknowledged that the plaintiff did not ʺpressʺ the dismissal of his FDCPA claims on
appeal and considered only the dismissal of LUTPA claims against Arch Bay and SLS.1
548 Fed. Appx. at 981.
The Fifth Circuit reversed and remanded for further factual development distinct
issues relating to res judicata, specifically, whether there exists sufficient ʹidentity of the
partiesʹ between Arch Bay (the parent company) and Series 2010 B (the judgment
creditor) as well as between SLS (the mortgage servicer) and Series 2010B,ʺ2 and
whether ʺSeries 2010B is in fact a distinct juridical entity.ʺ 548 Fed. Appx. at 982–84. The
Fifth Circuit also held ʺdismissal under Federal Rule of Civil Procedure 12 without leave
to amend was errorʺ because the Court failed to consider ʺwhether liability as between a
third‐party plaintiff with respect to a holding company LLC or its Series LLC constitutes
internal or external affairs.ʺ 548 Fed. Appx. at 986. The remand order included the
specific instruction for this Court to ʺconsider the external–internal affairs conflict‐of‐
law question under Louisiana law.ʺ 548 Fed. Appx. at 986.
1
Under the waiver doctrine, an issue that could have been raised on appeal but was not raised are
barred from consideration on remand. Medical Center Pharmacy v. Holder, 634 F.3d 830, 834 (5th Cir. 2011).
Therefore, the any challenge to the dismissal of the FDCPA claims has been forfeited by the plaintiff and
those claims remain dismissed. Rec. Doc. 133.
2
The parties agreed on appeal that this Courtʹs dismissal based on the Rooker‐Feldman doctrine
was erroneous in light of the interim ruling in Truong v. Bank of America, N.A., 717 F.3d 377 (5th Cir. 2013).
2
In conjunction with a pre‐appeal motion to dismiss in July 2012, this Court
advised that it ʺwill need to revisit the issue of subject matter jurisdiction in the event
that plaintiffʹs claims under the FDCPA are dismissed,ʺ and that ʺ[i]f that need arises,
this Court will need the citizenship of the defendants specified in accordance with the
rule set forth in Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1080 (5th Cir. 2008).ʺ 2012
WL 3096033 (E.D.La). It ordered that ʺ[f]acts relevant to citizenship should be
specifically pled in any amendment.ʺ
The plaintiffʹs amended and supplemental complaint did not provide what
Harvey requires. Rec. Doc. 33. The Court again ordered compliance in order to
determine whether diversity of citizenship exists and SLS was determined to be diverse.
Rec. Docs. 104, 111. In his first response, the plaintiff complained that the defendants
objected to his 2014 discovery requests regarding their citizenship and offered that ʺit is
unlikelyʺ that any defendant is a Louisiana citizen.3 Rec. Doc. 119 at 5. The defendants
offered to stipulate to diversity rather than divulge the citizenship of Arch Bay. Rec.
Docs. 118, 124 at 2. The Court issued additional orders for compliance, continued the
pre‐trial conference and the trial, and issued a stay until the issue of diversity was
resolved. Rec. Docs. 129, 133, 138. Shortly thereafter, information was discovered that
3
The plaintiff did not file a motion to compel in response to the defendantsʹ objection to the
discovery of this information until the Court issued additional orders for compliance. Rec. Doc. 142.
3
Arch Bay is not diverse. Rec. Docs. 135–37, 159, 164. It took the parties over two years
and several orders to provide this basic information.
The issue now presented is whether this Court should maintain supplemental
jurisdiction under 28 U.S.C. § 1367( c), which provides as follows:
The district courts may decline to exercise supplemental jurisdiction over a [state
law] claim if –
(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or claims over
which the district court has original jurisdiction;
(3) the district court has dismissed all claims over which it has original
jurisdiction, or
(4) in exceptional circumstances, there are other compelling reasons for
declining jurisdiction.
In addition to these statutory provisions, the balance of the relevant factors of judicial
economy, convenience, fairness and comity identified by the Supreme Court in Carnegie‐
Mellon University v. Cohill, 484 U.S. 343, 350–53 (1988) and United Mine Workers v. Gibbs,
383 U.S. 715 (1966), should be considered when determining the propriety of dismissal.
Batiste v Island Records, Inc., 179 F.3d 217, 227 (5th Cir. 1999). No single factor is
determinative but, generally, district courts decline jurisdiction over pendent state law
claims if all federal claims are eliminated prior to trial. Id.
Here, all the statutory factors weigh in favor of the dismissal of the remaining
state law claims. The plaintiff repeatedly states that the viability of the claims he is
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attempting to make is a ʺmatter of first impressionʺ under Louisiana law. Rec. Doc. 125
at 4, 6. Moreover, he is essentially challenging the effect of a completed foreclosure
proceeding in state court, while maintaining that the foreclosure was based on an
incomplete instrument and faulty corporate entities according to Louisiana law. Rec.
Doc. 122 at 15. ʺThe significant inquiry this Court must answer therefore, is whether
and to what degree Alphonseʹs claims herein could have been settled, litigated or
adjudicated in the underlying foreclosure procedure.ʺ Rec. Doc. 122 at 13‐14. The
plaintiffʹs claims present extremely novel, complex and fluid issues of Louisiana law.
As previously stated, the Courtʹs concern in July 2012 and now is the same: these alleged
state law claims ask for pronouncements of Louisiana law that are more appropriately
addressed to a Louisiana state court. Rec. Doc. 133 at 4.
The Court finds that the balance of the factors of judicial economy, convenience,
fairness and comity also weigh in favor of declining to exercise jurisdiction. Although it
is argued that this case was filed in 2012 and has been appealed, the necessity of
diversity jurisdiction over the state claims was announced within months of the
commencement of suit. Although some discovery has been undertaken since remand,
the record reflects that the plaintiff recently moved for a continuance of trial in order to
undertake more discovery to identify the alleged ʺman behind the curtain.ʺ Rec. Doc.
5
114‐1 at 11. The viability of the claims and the res judicata effect of the state law
judgment has not been determined. The Court finds that judicial economy,
convenience, fairness and comity are not served by maintaining federal jurisdiction or a
jury trial on the remaining state law claims, the viability of which will inevitably need to
be recognized by the state courts.
More significant, however, is the fact that the Court first advised the parties in
2012 of its concern over the viability of the federal claims and the need for an
independent basis of jurisdiction over the state claims. The Courtʹs concern about the
viability of the federal claims was actualized in February 2013 when the plaintiff
decided not to appeal the Courtʹs dismissal of those claims. Whether or not the federal
claims were formed to fit a federal mold because of the plaintiffʹs possible preference for
a federal forum for his state law monetary attack on state court foreclosures, those
federal claims were short‐lived. All partiesʹ subsequent conduct and delay in providing
information about citizenship appears to be a deliberate refusal to follow the Courtʹs
orders in order to protect supplemental jurisdiction, as further evidenced by the partiesʹ
ill‐fated willingness to consent to diversity subject matter jurisdiction where none exists.
Rec. Docs. 118– 119, 124, 135. In this regard, the Supreme Court specifically advised that
the Court can consider whether the parties have engaged in any ʺmanipulative tacticsʺ
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when it decides whether to exercise supplemental jurisdiction. Carnegie‐Mellon, 484 U.S.
at 622–23. At a minimum, the manipulative tactics presented here weigh heavily in
favor of dismissal under Section 1367( c). Supplemental jurisdiction ʺis a doctrine of
discretion, not of plaintiffʹs right.ʺ Gibbs, 383 U.S. at 726.
Accordingly,
IT IS ORDERED that the remaining claims are DISMISSED without prejudice
under 28 U.S.C. § 1367( c). The Court declines to exercise supplemental jurisdiction over
those claims.
New Orleans, Louisiana, this 24th day of November, 2014.
_________________________________________
HELEN G. BERRIGAN
UNITED STATES DISTRICT JUDGE
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