Kelly et al v. JP Morgan Chase Bank, National Association

Filing 25

MEMORANDUM ORDER GRANTING 14 Motion to Remand; DENYING request for attorney's fees; DENYING AS MOOT 15 Motion to Dismiss for Failure to State a Claim; DENYING AS MOOT 19 Motion for Leave to File Surreply and remanding case to the Circuit Court for Montgomery County, Maryland. Signed by Judge Theodore D. Chuang on 12/17/2015. (kns, Deputy Clerk)(c/m 12/17/15)

UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND

BARBARA ANN KELLY and
GREGORY MYERS
Plaintiffs,
v.

Civil Action No. TDC-15-1115

JP MORGAN CHASE BANK, NATIONAL
ASSOCIATION,
Defendant.

MEMORANDUM ORDER
Pending before the Court is the Motion to Remand filed by Barbara Ann Kelly and
Gregory Myers. The Motion is fully briefed and ripe for disposition. No hearing is necessary to
resolve the issues. See D. Md. Local Rule 105.6. For the reasons set forth below, the Motion is
GRANTED.
On or about August 29, 2014, Mark Wittstadt initiated a foreclosure proceeding against
Kelly and Myers in the Circuit Court for Montgomery County, Maryland. On February 13,
2015, Kelly and Myers (collectively, “Kelly”), the defendants in that action, filed a verified
third-party complaint (“the Third-Party Complaint”) against JP Morgan Chase Bank, National
Association (“Chase”), alleging breach of contract based on Chase’s refusal to modify Kelly’s
mortgage loan. On February 18, 2015, pursuant to a standing August 20, 2012 Administrative
Order, the Clerk of the Circuit Court “severed for the purpose of litigation” the Third-Party
Complaint from the foreclosure action, assigned it a separate case number, marked it as related to
the foreclosure action, and “delivered together” the foreclosure case and the Third-Party

Complaint case to the next available judge “for the resolution of any preliminary motions and
determination of the order in which the issues raised shall be heard.” Admin. Order, ECF No. 3.
The foreclosure action retained the original case number of 394829V; the Third-Party Complaint
received the case number 401247V. On April 20, 2015, Chase removed 401247V on the basis of
diversity jurisdiction. On May 18, 2015, Kelly filed the pending Motion to Remand. On June 4,
2015, Chase filed a Response. Kelly did not file a Reply.
A defendant in a state civil action may remove the case to federal district court provided
that the district court would have had original jurisdiction had the action been filed there in the
first instance. 28 U.S.C. § 1441(a) (2012). When the plaintiff challenges the propriety of
removal, the defendant bears the burden to establish that removal was proper. Dixon v. Coburg
Dairy, Inc., 369 F.3d 811, 816 (4th Cir. 2004). “Doubts about the propriety of removal should
be resolved in favor of remanding the case to state court.” Barbour v. Int'l Union, 640 F.3d 599,
605 (4th Cir. 2011) (en banc), abrogated on other grounds by 28 U.S.C. § 1446(b)(2)(B).
Kelly argues that removal was improper because, under 28 U.S.C. § 1441(a), only the
original defendant in the state court action may remove the case, such that Chase, as the thirdparty defendant, may not do so. Generally, a counter-defendant or a third-party defendant may
not remove a case to federal court. Palisades Collections LLC v. Shorts, 553 F.3d 327, 333 (4th
Cir. 2008). In Cohn v. Charles, 857 F. Supp. 2d 544 (D. Md. 2012), the court held that counterdefendants and a third-party defendant in a foreclosure action could not remove the original
defendants’ counterclaim and third-party complaint to federal court. Id. at 548-49. The court
rejected the counter-defendants’ and third-party defendant’s attempt to “unilaterally sever the
Counterclaim and Third Party Complaint from the foreclosure proceeding.” Id. at 548.

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Chase argues that the Administrative Order severing Kelly’s Third Party Complaint from
the foreclosure action distinguishes the present case from Cohn. In a recent case in this district,
the court (Chasanow, J.) addressed the precise question at issue here: whether the actions
directed by the very same Montgomery County Circuit Court Administrative Order upon the
filing of a third-party complaint by a foreclosure defendant rendered the third-party complaint
removable. Wittstadt v. Reyes, No. 15-1263, 2015 WL 4232379, at *3 (D. Md. July 13, 2015).
The court concluded that it did not. Id. Although the Administrative Order severs counterclaims
from the foreclosure proceeding “for the purpose of litigation,” “‘[s]everance for litigation’ is
not the same as severance into independent separate actions sufficient to trigger the right to
remove.” Id. at *1, 3. Noting that administrative orders generally do not alter substantive
aspects of a case, the court read the Administrative Order as merely granting the Circuit Court
more flexibility in addressing the thorny issues that often arise when counterclaims are filed in
foreclosure actions. Id. at *3; see Fairfax Sav., F.S.B. v. Kris Jen Ltd. P’ship, 655 A.2d 1265,
1275 n.9 (Md. 1995) (noting the “practical difficulties” that stem from the docketing of
counterclaims in foreclosure proceedings). For instance, the Administrative Order allows the
Circuit Court to decide “the order in which the issues raised shall be heard” and whether to try
actions separately.

Admin. Order.

The fact that counterclaims and foreclosure cases are

“marked as related and kept together” further indicates that they do not constitute separate
actions subject to removal.

Wittstadt, 2015 WL 4232379, at *3.

To interpret the Order

otherwise “would not promote the efficient adjudication” of such related matters. Id.
The Court finds the analysis of Wittstadt persuasive and reaches the same conclusion, that
the Administrative Order merely bifurcates the foreclosure action and the Third-Party Complaint
to facilitate the Circuit Court’s case management and thus does not alter the general rule that a

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third-party complaint may not be removed under 28 U.S.C. § 1441(a). See Palisades Collections
LLC, 553 F.3d at 333. Chase has thus failed to carry its burden to show that removal was proper.
The Court will not, however, grant Kelly’s request for attorney’s fees. A remand order
“may require payment of just costs and any actual expenses, including attorney fees, incurred as
a result of the removal.” 28 U.S.C. § 1447(c). “Absent unusual circumstances, courts may
award attorney’s fees under § 1447(c) only where the removing party lacked an objectively
reasonable basis for seeking removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141
(2005).

Although the Court finds that removal was improper, the interpretation of the

Administrative Order upon which Chase based its removal argument was not objectively
unreasonable, particularly given that Wittstadt had not been decided as of the date of removal.
See Cohn, 857 F. Supp. 2d at 549-50 (remanding but denying fees given the unsettled state of
remand law in relation to foreclosure proceedings). The Court therefore denies Kelly’s request
for attorney’s fees.
Because the Court is remanding this case, it need not reach Kelly’s abstention argument.
In addition, the Court’s remand order renders as moot Chase’s Motion to Dismiss, ECF No. 15,
and Kelly’s Motion for Leave to File Surreply, ECF No. 19.

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Accordingly, it is hereby ORDERED that:
1. Kelly’s Motion to Remand, ECF No. 14, is GRANTED;
2. Kelly’s request for attorney’s fees is DENIED;
3. Chase’s Motion to Dismiss, ECF No. 15, is DENIED AS MOOT;
4. Kelly’s Motion to File Surreply, ECF No. 19, is DENIED AS MOOT;
5. This case is remanded to the Circuit Court for Montgomery County, Maryland; and
6. The Clerk is directed to close the case.

Date: December 17, 2015

/s/
THEODORE D. CHUANG
United States District Judge

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