Asheville Downtown Holdings, LTD v. TD Bank, N.A. et al
Filing
32
ORDER granting 29 Motion to Remand to Buncombe County General Court of Justice, Superior Court Division. Signed by District Judge Martin Reidinger on 02/24/2014. (thh)
THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:13-cv-00135-MR-DLH
ASHEVILLE DOWNTOWN
HOLDINGS, LTD.,
)
)
)
Plaintiff,
)
)
vs.
)
)
TD BANK, N.A., successor in
)
interest to Carolina First Bank, and )
J.W. DAVIS, former president of
)
Carolina First Bank,
)
)
Defendants.
)
_______________________________ )
ORDER
THIS MATTER is before the Court on Plaintiff’s Motion to Remand.
[Doc. 29]. The Defendants oppose the Plaintiff’s Motion. [Doc. 30].
I.
FACTUAL AND PROCEDURAL BACKGROUND
On May 1, 2013, the Plaintiff filed this action in the Buncombe County
General Court of Justice, Superior Court Division, against Defendants,
asserting
claims
for
negligence,
breach
of
contract,
negligent
misrepresentation/constructive fraud and fraud by omission, fraud, breach
of fiduciary duty, and unfair and deceptive trade acts and practices, under
North Carolina law, and a claim under the Racketeer Influenced and
Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 (RICO Act). [Doc. 12].
In summary, this case concerns a dispute between the parties
regarding numerous commercial loan accounts between 2005 and 2008.
[Doc. 26]. The Plaintiff asserts that the Defendants “were involved in a
wave of questionable lending transactions that drew the scrutiny of
government banking regulators,” and that the Defendants used “coercive
and improper practices [that] ultimately harmed [the Plaintiff’s] assets and
business.” [Doc. 29].
On May 10, 2013, the Defendant T.D. Bank, N.A. filed a Notice of
Removal of this action to this Court.
[Doc. 1]. On May 31, 2013, the
Defendant J.W. Davis consented to the Notice of Removal.
[Doc. 7].
Thereafter, the Defendants filed Motions to Dismiss the Plaintiff’s
Complaint on June 11, 2013 and June 12, 2013, respectively. [Docs. 9,
11]. On July 12, 2013, the Plaintiff moved to amend its Complaint and
moved to remand this case to state court. [Doc. 17]. On September 20,
2013, an Order was entered allowing the Plaintiff to amend its Complaint
and instructing that this First Amended Complaint would be the operable
Complaint in this case [Doc. 25]. In the First Amended Complaint, the
Plaintiff eliminated the federal RICO Act claim and provided supplementary
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factual allegations in support of its state law claims. [Doc. 26]. On October
15, 2013, the Plaintiff timely moved to remand this case. [Doc. 29].
II.
DISCUSSION
Here, the parties do not dispute that this case was properly removed
to this Court under 28 U.S.C. § 1331, as the Plaintiff asserted a federal
claim against the Defendants for violation of the RICO Act in the original
Complaint.
[Docs. 30, 31, 1-2].
Subsequent to removal, however, the
Plaintiff was allowed to amend its Complaint, eliminating the federal RICO
Act claim and providing supplementary factual allegations in support of the
state law claims. [Doc. 26]. In granting the Plaintiff leave to amend, the
Magistrate Judge specifically found as follows:
The proposed amendments would not prejudice the
Defendants, Plaintiff has not acted in bad faith, and the
amendments are not so futile as to warrant denying Plaintiff
leave to amend at such an early stage in these proceedings.
Moreover, the fact that one of Plaintiff’s motivations in moving
to amend is to eliminate the federal claim and attempt to defeat
federal jurisdiction does not in and of itself constitute bad faith.
See Harless v. CSX Hotels, Inc., 389 F.3d 444, 448 (4th Cir.
2004); Kimsey v. Snap-On Tools Corp., 752 F. Supp. 693, 695
(W.D.N.C. Nov. 28, 1990) (Potter, C.J.); Henry v. UBC Prod.
Support Ctr., Inc., Civil Action No. 1:08cv123, 2008 WL
5378321 *7 (N.D.W. Va. Dec. 24, 2008).
[Doc. 25 at 2-3]. Notably, the Defendants did not seek reconsideration of
the Order granting the Plaintiff’s Motion to Amend.
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The Defendants argue that, despite the dismissal of the sole federal
claim, this Court should retain supplemental jurisdiction to hear this case
because 1) the Defendants objected to the Plaintiff’s motion to amend as
being filed in bad faith, 2) there was no substantive reason for the Plaintiff’s
removal of its RICO Act claim, and 3) threshold issues of federal law are
central to the disposition of this case.
[Doc. 30].
Specifically, the
Defendants assert that a substantial question of federal law is central to
this case, relating to whether Section 1141(a) of the Bankruptcy Code, and
the doctrines of res judicata and collateral estoppel, bar the Plaintiff’s
claims due to the Plaintiff’s prior Chapter 11 bankruptcy case and
Confirmation Order.1 [Doc. 30]. The Defendants claim that the Plaintiff will
be precluded from bringing its claims “against either Defendant because it
never disclosed or raised the now asserted claims in its bankruptcy and . . .
never scheduled any claims, counterclaims, or rights to setoff against the
Defendants as potential assets of its bankruptcy estate . . .,” noting that
1
In 2010, the Plaintiffs defaulted on two loans with the Defendant TD Bank, at which
time the Defendant TD Bank, N.A. initiated foreclosure proceedings and then held
foreclosure sales in March 2011. [Doc. 30]. On April 1, 2011, the Plaintiff filed a
Chapter 11 Bankruptcy Petition, and on April 7, 2011, the Defendant TD Bank, N.A. filed
a notice of appearance in the bankruptcy and challenged the case. Id. The Plaintiff
filed a Chapter 11 Plan and Disclosure Statement, followed by many amendments, until
an Order confirmed the Plaintiff’s Chapter 11 plan on August 8, 2012, followed by a
Final Decree entered on November 21, 2012. Id. The Confirmation Order directed the
Plaintiff to pay the Defendant TD Bank, N.A. under the Chapter 11 Plan. Id.
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both the Fourth Circuit Court of Appeals and other courts have established
that a confirmed plan “bars re-litigation of any issues raised or that could
have been raised in the bankruptcy.” [Id.] Additionally, the Defendants
suggest that it would be more convenient and economic for this Court to
exert supplemental jurisdiction due to its familiarity with bankruptcy law and
its access to bankruptcy records.
Where federal district courts have proper original jurisdiction over a
claim, they may exert “supplemental jurisdiction over all other claims that
are so related to claims in the action within such original jurisdiction that
they form part of the same case or controversy,” “deriv[ing] from a common
nucleus of operative fact . . .” 28 U.S.C. § 1367; United Mine Workers of
Am. v. Gibbs, 383 U.S. 715, 724 (1966). Further, the Court has discretion
to decide whether to retain supplemental jurisdiction over state law claims
which are part of the same case or controversy “when the federal basis for
an action drops away” even after proper removal of a case. 28 U.S.C. §
1367; see Shanaghan v. Cahill, 58 F.3d 106, 109 (4th Cir. 1995); see also
Reinhart v. City of Brevard, 826 F. Supp. 2d 887, 889-90 (W.D.N.C. 2011).
In deciding whether it can assert supplemental jurisdiction over state law
claims, the Court will “consider and weigh in each case, and at every stage
of litigation, the values of judicial economy, convenience, fairness, and
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comity.” City of Chicago v. Int’l Coll. Of Surgeons, 522 U.S. 156, 173
(1997).
When all federal claims have been extinguished in a removed action,
the Court has “wide latitude” in deciding whether to retain jurisdiction over
state law claims, with “a powerful reason to choose not to continue to
exercise jurisdiction,” Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 344
(1988), Shanaghan, 58 F.3d at 110, due to the responsibility of the Court to
“best serv[e] the principles of judicial economy, procedural convenience,
fairness to litigants, and comity to the States . . .”2 Id. Further, “[n]eedless
decisions of state law [by federal courts] should be avoided both as a
matter of comity and to promote justice between the parties, by procuring
for them a surer-footed reading of applicable law.” Id. (citing Gibbs, 383
U.S. at 726).
Here, the case is still in the early stages of litigation. Further, the
Plaintiff’s remaining claims are purely state law claims which can be as
readily addressed by a state court as a federal court. Accordingly, the
This Court has previously held that “[w]hen a plaintiff eliminates federal claims at an
early stage in the litigation, remand to state court best serves the considerations of
economy, convenience, fairness and comity.” Reinhart, 826 F.Supp. 2d at 890 (citing
Wood v. Durham County Bd. of Educ., 2011 WL 723048 at *3 (M.D.N.C. 2011) and
Dominion Healthcare Servs., Inc. v. Value Options, Inc., 2009 WL 580326, at *5
(M.D.N.C. 2009)).
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2
Court concludes that the principles of comity and judicial economy will be
best served by the remand of this case to state court.
Although the
Defendants argue that the Plaintiff had no “substantive reason” to remove
its RICO Act claim from this case and that the Plaintiff acted in bad faith to
amend the Complaint, such assertions are warrantless based upon the
Magistrate Judge’s finding of an absence of bad faith in granting the
Plaintiff’s Motion for Leave to Amend even if the Plaintiff intended to defeat
federal jurisdiction. [Doc. 25]. Additionally, since all parties to this action
reside in western North Carolina [see Docs. 3 at 2, 13 at 2, 26 at 5],
litigating this case in the Buncombe County General Court of Justice will
not pose any unnecessary inconvenience to them.
Finally, while the
Defendants argue that the state court will have difficulty correctly
determining the bankruptcy-related issues in this case, this Court is
confident that the state court can competently and fairly handle the matters
involved in this case including federal law defenses.
Therefore, in the
interests of judicial economy, convenience, fairness, and comity to all
parties, this Court in the exercise of its discretion declines to exert
supplemental jurisdiction over the state law claims in this action.
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III.
CONCLUSION
Upon careful consideration of the arguments of both parties in this
case, the Court concludes that this case is based on state law claims over
which no supplemental jurisdiction should be exercised. Accordingly, the
Plaintiff’s Motion to Remand is granted.
ORDER
IT IS, THEREFORE ORDERED that the Plaintiff’s Motion to Remand
[Doc. 29] is GRANTED, and this case is hereby REMANDED to the
Buncombe County General Court of Justice, Superior Court Division.
IT IS SO ORDERED.
Signed: February 24, 2014
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