Sastin 2 LLC v. Hemingway Association Inc
Filing
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ORDER: Plaintiff has not made an adequate showing that the Court has jurisdiction over this matter. Plaintiff's claims are dismissed without prejudice to their refiling. Plaintiff's 16 Second Motion to Compel Discovery is rendered moot by this Order. Signed by Honorable Timothy D. DeGiusti on 11/19/2018. (ml)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
SASTIN 2, LLC,
Plaintiff,
v.
HEMINGWAY ASSOCIATION, INC.,
Defendant.
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Case No. CIV-17-1252-D
ORDER
Concerned that subject matter jurisdiction was lacking under 28 U.S.C. § 1331, the
Court directed the parties to brief the issue. [Doc. No. 26]. As the party seeking to invoke
the jurisdiction of this Court, Plaintiff submitted an opening brief [Doc. No. 27], and
Defendant filed a response [Doc. No. 28]. The matter is fully briefed and at issue.
BACKGROUND
On November 21, 2017, Plaintiff initiated this action seeking declaratory and
injunctive relief regarding two provisions of Defendant’s Rules and Regulations. [Doc.
No. 1]. Plaintiff is an Oklahoma LLC, which owns condominiums at the Hemingway
Condominiums.
Defendant is an Oklahoma not-for-profit, non-stock corporation
(homeowner’s association) tasked with managing the condominiums and their common
elements.
Specifically, Plaintiff asserts that the provision prohibiting the installation of outside
satellite dishes on condominium units violates § 207 of the Telecommunications Act of
1996 and 47 C.F.R. § 1.4000. Plaintiff also asserts that Defendant’s assessment of fines
and penalties amounts to a state action that violates the Fourteenth Amendment of the
United States Constitution. Plaintiff asserts that the Court has jurisdiction pursuant to 28
U.S.C. § 1331 (federal question jurisdiction). In the alternative, Plaintiff suggests that
diversity jurisdiction could be pleaded in an Amended Complaint, if necessary. Defendant
asserts that there is no statutory private right of action under these circumstances, that state
action is lacking under Plaintiff’s constitutional claim, and that Plaintiff’s argument that
diversity jurisdiction now exists is without merit.
In briefing the issue of subject matter jurisdiction, the Court asked the parties to
focus on two questions of law: (1) whether § 207 of the Telecommunications Act of 1996,
or 47 C.F.R. § 1.4000, provide for a private right of action; and (2) whether the requisite
state action has occurred. [Doc. No. 26].
ANALYSIS
Federal courts are courts of limited jurisdiction. United States ex rel. Fine v. MKFerguson Co., 99 F.3d 1538, 1543 (10th Cir. 1996). “A court’s jurisdiction is therefore
presumed not to exist absent a showing by the party invoking federal jurisdiction.” Id.
Moreover, “‘statutes conferring jurisdiction on federal courts are to be strictly construed,
and doubts resolved against federal jurisdiction.’” Id. (quoting F&S Constr. Co. v. Jensen,
337 F.2d 160, 161 (10th Cir. 1964)).
A. Section 207 of the Telecommunications Act of 1996 and 47 C.F.R. § 1.4000
do not provide for a private right of action.
As with any case involving the interpretation of a statute, the Court’s analysis begins
with the language of the statute itself. Touche Ross & Co. v. Redington, 442 U.S. 560, 568
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(1979). Section 207 of the Telecommunications Act of 19961 provides:
Within 180 days after the date of enactment of this Act, the Commission
shall, pursuant to section 303 of the Communications Act of 1934,
promulgate regulations to prohibit restrictions that impair a viewer’s ability
to receive video programming services through devices designed for overthe-air reception of television broadcast signals, multichannel multipoint
distribution service, or direct broadcast satellite services.
By its terms, the statute authorizes the Federal Communications Commission (“FCC”) to
adopt regulations to carry out the statute’s purpose. Absent from § 207 is any language
indicating a congressional intent to provide a private right of action.
In Redington, the Supreme Court cautioned that “implying a private right of action
on the basis of congressional silence is a hazardous enterprise, at best.” Redington, 442
U.S. at 571 (finding that the plain language of the statute weighed against implication of a
private remedy). In reaching its decision, the Supreme Court in Redington relied on the
statutory scheme in which the provision was found. Id. at 571. The relevant provision was
flanked by provisions that explicitly granted private causes of action; thus, the Court
concluded that Congress knew how to provide a private remedy when it wanted to do so.
Id. at 571-572.
Similarly, § 207 is flanked by sections in the Act that explicitly provide for a private
cause of action, and sections that explicitly exclude a private cause of action. The statutory
scheme at 47 U.S.C. § 274(e) explicitly provides for a private right of action, while 47
U.S.C. §§ 255(f) and 613(j) specifically prohibit one.
“[W]here Congress includes
1
The Telecommunications Act of 1996 was codified at 47 U.S.C. §§ 201-276. As is often
the case, § 207 of the Act does not correspond with 47 U.S.C. § 207.
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particular language in one section of a statute but omits it in another section of the same
Act, it is generally presumed that Congress acts intentionally and purposely in the disparate
inclusion or exclusion.” United States v. Sturm, 673 F.3d 1274, 1279 (10th Cir. 2012).
Courts should “‘ordinarily resist reading words or elements into a statute that do not appear
on its face.’” Id. (quoting Bates v. United States, 522 U.S. 23, 29 (1997)).
Lending further support to Defendant’s argument is 47 U.S.C. § 303(v), which
provides that the FCC has “exclusive jurisdiction to regulate the provision of direct-tohome satellite services.”
Thus, whether the provision in Defendant’s Rules and
Regulations prohibiting the installation of outside satellite dishes violates § 207 appears to
be an issue reserved exclusively for the FCC to decide.
In determining whether a private remedy is implicit in a statute that does not
expressly provide for one, application of the four Cort factors is relevant: (1) does Plaintiff
belong to a class for whose special benefit the statute was enacted; (2) is there any
indication of legislative intent to create or deny a remedy; (3) is it consistent with the
underlying legislative scheme to imply such a remedy; and (4) is the cause of action one
that is traditionally delegated to state law. Cort v. Ash, 422 U.S. 66, 78 (1975).
In Boughton v. Kristek, the District of New Mexico relied on the Ninth Circuit’s
opinion in Opera Plaza and application of the four Cort factors in concluding that § 207
and 47 C.F.R. § 1.4000 do not give rise to a private right of action. Boughton v. Kristek,
Case No. CIV-16-202, 2016 WL 10538355, at *5 (D.N.M. April 12, 2016). The court
noted that while two of the Cort factors weighed in favor of a private right of action and
two against, the most important factor, congressional intent, weighed against a private right
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of action. Id.; see also Conboy v. AT&T Corp., 241 F.3d 242, 252 (2d Cir. 2001) (noting
that the Supreme Court instructed that the second factor – congressional intent – is the
critical inquiry, and that the other factors are treated as proxies for congressional intent).
Applying the first two Cort factors, the Ninth Circuit in Opera Plaza held that § 207
did not confer jurisdiction on federal courts to hear a routine suit by a condominium
homeowner’s association to enforce its rules prohibiting satellite dishes in common areas.
Opera Plaza Residential Parcel Homeowners Ass’n v. Hoang, 376 F.3d 831, 832 (9th Cir.
2004). In applying the second and most important Cort factor, the Ninth Circuit examined
the language of § 207, the context in which it was passed, and its legislative history. Id. at
836. Section 207 empowers the FCC to promulgate regulations, but there is nothing in the
language that contemplates parties will sue under the statute. Id.
Further, the House
Committee Report gives no indication that § 207 created a federal cause of action. Id. at
837. Section 207 is contained in Title II of the Telecommunications Act, which is entitled
“Broadcast Services.” Title II contains nine sections which basically instruct the FCC how
to regulate broadcast services. Of significance, no portion of Title II “contemplates or in
any way addresses litigation, and this suggests that no private cause of action exists under
… § 207.” Id.
Curiously, Plaintiff relies on Opera Plaza for its position that subject matter
jurisdiction exists. Plaintiff argues the court in Opera Plaza suggested that if the defendant
had been the plaintiff in that case a federal question would have been raised and the court
would have had jurisdiction. However, the Ninth Circuit in Opera Plaza clearly found
“that no private right of action exist[ed] under any of the statutes cited.” Id. at 838.
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Although 47 C.F.R. § 1.4000 provides that “[p]arties may petition … a court of
competent jurisdiction, to determine whether a particular restriction is permissible or
prohibited,” this section does not purport to create jurisdiction in a federal court. Id. at
836. In Lightfoot, the Supreme Court examined Fannie Mae’s charter, which provided it
with the power “to sue and to be sued, and to complain and to defend, in any court of
competent jurisdiction, State or Federal.” Lightfoot v. Cendant Mortgage Corp., 137 S.Ct.
553, 558-559 (2017). Writing for a unanimous court, Justice Sotomayor stated that “this
Court has understood the phrase ‘court of competent jurisdiction’ as a reference to a court
with an existing source of subject-matter jurisdiction.” Id. at 561. The Court reasoned that
Fannie Mae’s “sue and to be sued” clause does not grant federal courts subject matter
jurisdiction over all cases involving Fannie Mae. Id. Rather, “it permits suit in any state
or federal court already endowed with subject-matter jurisdiction over the suit.” Id.
Moreover, 47 C.F.R. § 1.4000 is a regulation passed by the FCC; it is not a statute
adopted by Congress. And, the laws passed by Congress, not rules or regulations passed
by an administrative agency, determine whether an implied cause of action exists. Opera
Plaza, 376 F.3d at 836; see, e.g., Redington, 442 U.S. at 577, n. 18 (“the language of the
statute and not the rules must control.”); Adams Fruit Co. v. Barrett, 494 U.S. 638, 650
(1990) (“an agency may not bootstrap itself into an area in which it has no jurisdiction.”);
Sheldon v. Sill, 49 U.S. 441, 449 (1850) (“Courts created by statute can have no jurisdiction
but such as the statute confers.”). Neither § 207 nor 47 C.F.R. § 1.4000 create a private
cause of action.
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B. The requisite state action is lacking.
It is well settled that the Fourteenth Amendment limits only state action. Ross v.
Hatfield, 640 F. Supp. 708, 709 (D. Kan. 1986); Brentwood Acad. v. Tennessee Secondary
Sch. Athletic Ass’n, 531 U.S. 288, 295 (2001); Nat’l Collegiate Athletic Ass’n v. Tarkanian,
488 U.S. 179, 191 (1988). Thus, for this Court to exercise jurisdiction over Plaintiff’s
constitutional claim, the Court must find the required state action. Defendant argues that
state action is lacking. Without citing to any authority, Plaintiff asserts that Defendant has
converted itself into a quasi-governmental agency by issuing fines and penalties when a
property owner violates Defendant’s Rules and Regulations.
“As a general matter the protections under the Fourteenth Amendment do not extend
to ‘private conduct abridging individual rights.’” Tarkanian, 488 U.S. at 191 (quoting
Burton v. Wilmington Parking Auth., 365 U.S. 715, 722 (1961)). Thus, courts must “plot
a line between state action subject to Fourteenth Amendment scrutiny and private conduct
… that is not.” Brentwood Acad., 531 U.S. at 295. State action may be found if, and only
if, there is a “close nexus between the State and the challenged action” so that “seemingly
private behavior may be fairly treated as that of the State itself.” Id. (internal quotation
marks omitted).
In Shelley v. Kraemer, a landmark case involving state action, the Supreme Court
held that racially restrictive covenants “standing alone” did not amount to state action.
Shelley, 334 U.S. 1, 13 (1948). However, state court enforcement of the racially restrictive
covenants did amount to state action and a violation of the Fourteenth Amendment. Id. at
19-20. Shelley involved companion cases. In the first case, a husband and wife sued in
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state court to enforce restrictive covenants against the occupancy or ownership of property
by African Americans. In the second case, landowners sued to enforce a covenant that
property should only be used or occupied by Caucasians.
The Court’s reasoning in Shelley was straightforward: there was no state action
involved in private parties voluntarily adhering to the terms of their agreement. Id. at 13.
However, where the purposes of the private agreements were secured only by judicial
enforcement, state action existed. Id. at 13-14. In other words, “but for the active
intervention of the state courts, supported by the full panoply of state power, petitioners
would have been free to occupy the properties in question without restraint.” Id. at 19.
In 2001, the Supreme Court granted certiorari to decide whether a statewide
association incorporated to regulate interscholastic athletic competition among public and
private secondary schools engaged in state action when it enforced a rule against a member
school. Brentwood Acad. v. Tennessee Secondary Sch. Athletic Ass’n, 531 U.S. 288, 290
(2001). The Court found that the association’s nominally private character was “overborne
by the pervasive entwinement of public institutions and public officials in its composition
and workings.” Id. at 298. Public schools constituted 84 percent of the association’s
membership. Id. “Entwinement will support a conclusion that an ostensibly private
organization ought to be charged with a public character and judged by constitutional
standards.” Id. at 302.
Defendant here is an Oklahoma not-for-profit, non-stock corporation (homeowner’s
association) formed under Oklahoma’s Unit Ownership Estate Act, OKLA. STAT. tit. 60, §§
501-530. Defendant is tasked with managing the Hemingway Condominiums and their
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common elements. [Doc. No. 1-9 at 2]. The owners of the condominium units make up
the homeowner’s association, and the association is governed by a board of directors who
are private individuals. Id. at 3-4. Simply put, under these circumstances there is no
entwinement with the state. Although Defendant imposes fines or penalties when a
property owner violates a rule or regulation, this is not accomplished through the power of
the state.
Applying the reasoning from Shelley and Brentwood, most courts agree that actions
by homeowner’s associations fall short of state action because a threat of judicial
enforcement is not enough. In Loren v. Sasser, the Eleventh Circuit held that a property
owners’ association’s denial of the homeowners’ request to post “For Sale” signs in their
front yard to expedite the sale of their homes did not constitute state action. Loren v.
Sasser, 309 F.3d 1296, 1303 (11th Cir. 2002). Citing to the nexus requirement identified
in Brentwood, the court found unavailing the homeowners’ argument that a threat of
judicial enforcement of the covenant constituted state action. Id.
Similarly, in Ross v. Hatfield, the District of Kansas found that state action was
lacking where a homeowner’s association had a restrictive covenant that barred the
plaintiffs from installing satellite television antennas. Ross, 640 F. Supp. at 710-712. The
homeowners in Ross pointed to Shelley, 334 U.S. 1, for their assertion that state action was
present. The court reasoned, however, that Shelley required “actual judicial enforcement
of the covenant before state action may be found,” and a threat to sue in state court was not
sufficient to invoke state action. Ross, 640 F. Supp. at 710.
Here, the covenant has not been judicially enforced, nor has a suit been brought to
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enforce it. Thus, there is no state action.
C. Diversity jurisdiction does not exist.
In the alternative, Plaintiff suggests that diversity jurisdiction could be pleaded in
an Amended Complaint. Plaintiff asserts that since the initial filing of the Complaint some
of its properties were transferred to John Hamlin, and Mr. Hamlin “has relocated to Nevada
for work and tax purposes and hence is no longer a resident of the state of Oklahoma.”
[Doc. No. 27 at 6]. Plaintiff’s argument fails for two reasons.
First, “[f]ederal jurisdiction is determined based on the facts as they existed at the
time the complaint was filed.” Ravenswood Inv. Co., L.P. v. Avalon Corr. Services, 651
F.3d 1219, 1223 (10th Cir. 2011); Siloam Springs Hotel, L.L.C. v. Century Sur. Co., 781
F.3d 1233, 1239 (10th Cir. 2015). For diversity purposes a limited liability company is
treated like a partnership or unincorporated association, and Supreme Court precedent is
clear that in determining the citizenship of an unincorporated association, a federal court
must examine the citizenship of each member of the entity. Siloam Springs Hotel, L.L.C.,
781 F.3d at 1238-1239 (citing Carden v. Arkoma Associates, 494 U.S. 185, 195-196
(1990)).
There is no dispute that at the time the Complaint was filed there was no diversity
jurisdiction. Mr. Hamlin, the only member of Sastin 2, LLC, was domiciled in Oklahoma
when the Complaint was filed. [Doc. No. 1 at 1-2, 7]; [Doc. Nos. 3, 4]. The fact that he
may have moved to Nevada post-filing does not cure the jurisdictional defect. See Grupo
Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 575 (2004) (“allowing a citizenship
change to cure the jurisdictional defect that existed at the time of filing would contravene
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the principle articulated by Chief Justice Marshall in Conolly2. We decline to do today
what the Court has refused to do for the past 175 years.”).
Second, subject matter jurisdiction under 28 U.S.C. § 1332(a) requires, in addition
to diversity of citizenship, an amount in controversy which exceeds $75,000.00. McPhail
v. Deere & Co., 529 F.3d 947, 952 (10th Cir. 2008). Plaintiff has not pled facts necessary
to establish that the amount in controversy exceeds $75,000.00.
CONCLUSION
Plaintiff has not made an adequate showing that the Court has jurisdiction over this
matter. Pursuant to FED. R. CIV. P. 12(h), Plaintiff’s claims are dismissed without prejudice
to their refiling.3 Plaintiff’s Second Motion to Compel Discovery [Doc. No. 16] is rendered
moot by this Order.
IT IS SO ORDERED this 19th day of November 2018.
2
Conolly v. Taylor, 27 U.S. 556, 565 (1829) (“Where there is no change of party, a
jurisdiction depending on the condition of the party is governed by that condition, as it was
at the commencement of the suit.”).
3
See Brereton v. Bountiful City Corp., 434 F.3d 1213, 1218 (10th Cir. 2006) (dismissals
for lack of jurisdiction should be without prejudice because the court, having determined
that it lacks jurisdiction over the action, is incapable of reaching a disposition on the merits
of the underlying claims).
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