Federal Home Loan Mortgage Corporation v. King et al

Filing 5

Findings & Recommendation: This FED action involves a state regulatory statute and important state policy issues. The Court should abstain and remand the case to State Court. Defendants' Motion to Dismiss and IFP application are accordingly mo ot. Objections to the Findings and Recommendation are due by 07/10/2009. If objections are filed, Responses to the Objections are due within 10 days. Please access entire text by document number hyperlink. Ordered by Magistrate Judge Mark D. Clarke. (rsm)

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I N T I I E UNITED STATES DISTRICT C O U R T F O R T H E DISTRICT OF O R E G O N

FEDERAL HOME LOAN MORTGAGE CORPORATION, Case N u m b e r C V 0 9 - 3 0 4 8 - C L Plaintiff,

v.
REPORT & R E C O M M E N D A T I O N
J E A N N E T T E K I N G and J O H N D O E K I N G a n d a l l o c c u p a n t s o f 1215 W e s t M a i n S t r e e t , U n i t F , Medford, O R 97501, Defendants. C l a r k e , M a g i s t r a t e Judge: Intro: D e f e n d a n t s Jeannette King, J o h n D o e King, and all occupants o f 1215 W e s t M a i n Street, U n i t F , M e d f o r d , O R 97501 ( " D e f e n d a n t s " ) , p r o c e e d i n g p r o s e , h a v e f i l e d a N o t i c e o f R e m o v a l ( # 2 ) a l l e g i n g j u r i s d i c t i o n i n t h i s c o u r t o n t h e b a s i s o f 2 8 U . S . C . § 1332, d i v e r s i t y j u r i s d i c t i o n , a n d

§ 1367, supplemental jurisdiction. (Notice o f Removal 1.) P l a i n t i f f F e d e r a l H o m e L o a n
M o r t g a g e C o r p o r a t i o n ( " P l a i n t i f f ' ) o r i g i n a l l y filed a s u m m o n s a n d e v i c t i o n i n J a c k s o n C o u n t y C i r c u i t Court. ( N o t i c e o f R e m o v a l , Ex. A.) D e f e n d a n t s filed a n application to p r o c e e d in forma pauperis ("IFP application") (#1). D e f e n d a n t s h a v e a l s o f i l e d a m o t i o n t o d i s m i s s (#3).

Report & Recommendation 1

For t h e reasons set forth below, t h e Court recommends that abstention is appropriate. T h i s action should b e remanded to state court. Defendants' motion to dismiss a n d IFP a p p l i c a t i o n are t h e r e f o r e m o o t .

I.

Procedural Background
P l a i n t i f f f i l e d a c l a i m i n J a c k s o n C o u n t y C i r c u i t C o u r t o n A p r i l 2 8 , 2 0 0 9 , to e v i c t

D e f e n d a n t s . P l a i n t i f f s state c o u r t c l a i m explains t h a t o n F e b r u a r y 2 0 , 2 0 0 9 , i t o b t a i n e d t h e d e e d o f t r u s t at a t r u s t e e ' s s a l e after D e f e n d a n t s ( t h e n g r a n t o r s o f t h e t r u s t ) d e f a u l t e d o n t h e i r obligations. P l a i n t i f f asserted that i t w a s entitled to possession o f the property because o f a trust d e e d foreclosure, pursuant to Or. Rev. Stat. 86.755(5). Defendants were summoned to Jackson C o u n t y C i r c u i t C o u r t o n M a y 1 3 , 2 0 0 9 . ( N o t i c e o f R e m o v a l , Ex. A , 1 - 2 . ) T h i s w a s a f o r c i b l e entry and detainer (FED) action under Or. Rev. Stat. §§ 105.105 through 105.168. I t is unclear w h a t resulted o n M a y 13, 2009. O n June 3, 2009, Defendants filed this notice o f removal along w i t h a m o t i o n t o d i s m i s s o n s e v e r a l g r o u n d s a n d a n IFP a p p l i c a t i o n . P l a i n t i f f h a s f i l e d n o d o c u m e n t s w i t h t h e f e d e r a l c o u r t a t t h i s time.

II.

Legal Standards
T h e r e m o v a l statute i s strictly c o n s t r u e d against r e m o v a l j u r i s d i c t i o n . I f t h e r e i s a n y

doubt as to t h e right o f removal, federal jurisdiction must b e rejected. Gaus v. Miles. Inc., 9 8 0 F. 2 d 564, 566 ( 9 t h Cir. 1992) ( p e r curiam); D u n c a n v. Stuetzle, 76 F . 3 d 1480, 1485 ( 9 t h Cir. 1996). Because o f this strong presumption against removal jurisdiction, the defendant has t h e burden o f establishing that removal was proper. Gaus, 980 F . 2 d at 566; Duncan, 76 F . 3 d a t

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1485. L a c k o f s u b j e c t m a t t e r j u r i s d i c t i o n m a y b e raised b y t h e c o u r t o n its o w n motion.! R o c k w e l l Int'l C r e d i t C o m . v. U n i t e d States Aircraft Ins. Group, 823 F . 2 d 302, 303 ( 9 t h Cir. 1987), o v e r r u l e d o n a n o t h e r ground b y P a d d i n g t o n v. Gedan, 923 F . 2 d 6 8 6 ( 9 t h Cir. 1991); T a n z y m o r e v. B e t h l e h e m Steel C o m . , 457 F . 2 d 1320, 1323 ( 3 d Cir. 1972). Generally a d e f e n d a n t m a y r e m o v e a n a c t i o n t o f e d e r a l c o u r t o n t h e b a s i s o f f e d e r a l q u e s t i o n j u r i s d i c t i o n , 28 U . S . C . § 1 3 3 1 , o r d i v e r s i t y j u r i s d i c t i o n , 2 8 U . S . C . § 1332. 2 8 U . S . C . § 1 4 4 6 .

Ill.

T h e C o u r t Should Abstain from E x e r d s i n g J u r i s d i c t i o n a n d R e m a n d t h e C a s e to State Court
D e f e n d a n t s filed this N o t i c e o f R e m o v a l , asserting that the c a s e h a d "original

j u r i s d i c t i o n " b e c a u s e o f d i v e r s i t y b e t w e e n p a r t i e s , as D e f e n d a n t s a r e r e s i d e n t s o f O r e g o n a n d P l a i n t i f f i s r e s i d e n t o f W a s h i n g t o n , a n d t h e a m o u n t i n c o n t r o v e r s y e x c e e d s $ 7 5 , 0 0 0 , as r e q u i r e d u n 2 8 U . S . C . § 1332. ( N o t i c e o f R e m o v a l 1 3 . ) D e f e n d a n t s f u r t h e r a r g u e t h a t t h e r e i s s u p p l e m e n t a l j u r i s d i c t i o n u n d e r 2 8 U . S . C . § 1 3 6 7 .2 ( N o t i c e o f R e m o v a l , . 7 . )

1 T h e C o u r t n o t e s t h a t t h e r e m o v a l statute p r o v i d e s t h a t a n a c t i o n o t h e r t h a n o n e f o u n d e d o n f e d e r a l q u e s t i o n j u r i s d i c t i o n "shall b e removable only i f none o f the . . . defendants is a citizen o f the State i n w h i c h s u c h a c t i o n i s p e n d i n g . " 2 8 U . S . C . § 1 4 4 1 ( b ) . H o w e v e r , this f o r u m d e f e n d a n t r u l e i s p r o c e d u r a l a n d n o t j u r i s d i c t i o n a l , a n d the c o u r t m a y n o t raise the issue s u a sponte as a g r o u n d for remand. Lively v. W i l d Oats Markets. Inc .. 4 5 6 F . 3 d 9 3 3 , 9 3 6 , 9 3 9 , 9 4 2 ( 9 t h Cir. 2 0 0 6 ) , c e r t . d e n i e d , 5 4 9 U . S . 1 2 0 7 ( 2 0 0 7 ) . Claims violating the forum defendant rule should n o t b e dismissed u n d e r 2 8 U.S. C. § 1915, Proceedings in f o r m a p a u p e r i s either. Section 1 9 l 5 (e)(2) authorizes t h e court to dismiss a claim. f r o m a p a r t y seeking I F P status a t any t i m e i f "the c o u r t determines that - (A) the allegation o f p o v e r t y is untrue; o r (B) t h e action o r a p p e a l - (i) is frivolous o r malicious; (ii) fails t o state a c l a i m o n which r e l i e f m a y b e granted; o r (iii) seeks monetary r e l i e f against a d e f e n d a n t w h o is i m n n m e f r o m s u c h relief." A d e f e c t i n a p r o c e d u r a l r u l e does n o t m a k e t h e c l a i m f r i v o l o u s o r malicious, i t d o e s n o t m e a n t h a t the c l a i m cannot b e g r a n t e d relief, and it does n o t implicate a p a r t y who has immunity. O n t h e i s s u e o f t h e f o r u m d e f e n d a n t r u l e alone, t h e c l a i m s h o u l d n e i t h e r b e d i s m i s s e d s u a s p o n t e n o r remanded. 2 D e f e n d a n t s also a r g u e i n t h e i r M o t i o n t o D i s m i s s t h a t there a r e c o n s t i t u t i o n a l i s s u e s i n v o l v e d . D e f e n d a n t s c l a i m t h a t O r e g o n ' s F E D l a w s d e p r i v e t h e m o f s e v e r a l o f t h e i r c o n s t i t u t i o n a l rights. ( D e f . ' s M e m . i n Supp. o f Mot. t o Dismiss 11~) However, i n determining whether removal i s appropriate, the C o u rt only considers the arguments f o u n d i n the N o t i c e o f Removal.

Report & Recommendation 3

A.

T h e A b s t e n t i o n P r i n c i p l e I s A p p r o p r i a t e W h e n t h e C l a i m Involves Basic I s s u e s o f S t a t e Policy

T h e Supreme Court explained i n Burford v. Sun Oil, 3 1 9 U.S. 315 (1933) that the federal c o u r t m a y e x e r c i s e i t s discretion, w h e t h e r the Court h a s j u r i s d i c t i o n u n d e r d i v e r s i t y o r o t h e r w i s e , a n d " ' r e f u s e t o e n f o r c e o r p r o t e c t l e g a l rights, t h e e x e r c i s e o f w h i c h m a y b e p r e j u d i c i a l t o t h e public interest . . . '" 319 U.S. 315, 317-18 (1933), Quoting U.S. v. D e m , 289 U.S. 352, 3 6 0 (1933). Abstention evolves from "scrupulous regard for the rightful independence o f t h e state g o v e r n m e n t s a n d f o r t h e s m o o t h w o r k i n g o f t h e federal j u d i c i a r y . " I d . , 3 1 9 U . S . a t 3 3 2 ( c i t a t i o n s o m i t t e d ) . " [ W ] h e n a n i s s u e ' c l e a r l y i n v o l v e s b a s i c p r o b l e m s o f [state] p o l i c y [ , ] . . . e q u i t a b l e discretion should b e exercised to give the [state] courts the ftrst opportunity to consider them.'" Fireman's F u n d Ins. Co. v. Quackenbush, 87 F.3d 2 9 0 , 2 9 6 (9th Cir. 1996) Quoting Burford, 319 U . S . at 3 3 2 . " [ A ] b s t e n t i o n i s p a r t i c u l a r l y a p p r o p r i a t e w h e n d e a l i n g w i t h a c o m p l i c a t e d c o m p r e h e n s i v e r e g u l a t o r y s t a t u t e i n t e n d e d t o strike a b a l a n c e b e t w e e n d i f f e r i n g l o c a l interests." Moos v. Wells, 585 F.Supp. 1348, 1350 (S.D. N e w York 1984) (citations omitted). T h e N i n t h C i r c u i t r e q u i r e s s p e c i f i c factors t o b e p r e s e n t b e f o r e a p p l y i n g t h e B u r f o r d a b s t e n t i o n p r i n c i p l e : "(1) t h a t t h e s t a t e h a s c o n c e n t r a t e d s u i t s i n v o l v i n g t h e l o c a l i s s u e i n a particular court; (2) t h e federal issues are not easily separable from complicated state l a w issues with w h i c h the state courts m a y h a v e special competence; and (3) t h a t federal review m i g h t disrupt state efforts to establish a coherent policy." Tucker. v. First Maryland Savings & Loan. Inc., 942 F . 2 d 1401, 1405 (9th Cir. 1991) citing Knudsen Com. v. N e v a d a State D a i r y Comm'n, 6 7 6 F . 2 d 3 7 4 , 3 7 7 ( 9 t h Cir. 1 9 8 2 ) . B u r f o r d o n l y a p p l i e s to e q u i t a b l e a c t i o n s . S p a c e A g e F u e l s . Inc. v. Standard Oil Co.
ofCaliforni~

1996 W L 160741 (D.Or.).

Report & Recommendation 4

B.

D e f e n d a n t s R e m o v e d a F E D Action t h a t C o n c e r n s S t a t e P u b l i c P o l i c y

U n d e r a F E D action, " t h e p e r s o n e n t i t l e d t o t h e p r e m i s e s m a y m a i n t a i n i n t h e c o u n t y w h e r e t h e p r o p e r t y i s s i t u a t e d a n a c t i o n to r e c o v e r t h e p o s s e s s i o n o f t h e p r e m i s e s i n t h e c i r c u i t court o r before a n y j u s t o f the peace o f the county." Or. Rev. Stat. § 105.110. Foreclosure o r trustee's sales invoke F E D actions u n d e r Oregon Law: T h e purchaser at the trustee's sale shall b e entitled to possession o f the property . . . a n d a n y p e r s o n s r e m a i n i n g i n p o s s e s s i o n a f t e r that d a y u n d e r a n y interest, e x c e p t o n e p r i o r t o t h e t r u s t d e e d o r created voluntarily b y t h e grantor o r successor o f t h e g r a n t o r , s h a l l b e d e e m e d to b e t e n a n t s a t s u f f e r a n c e . A l l p e r s o n s n o t h o l d i n g u n d e r a n i n t e r e s t p r i o r to t h e t r u s t d e e d m a y b e r e m o v e d f r o m p o s s e s s i o n b y f o l l o w i n g t h e p r o c e d u r e s s e t o u t i n [ O r e g o n F E D statute] . . . " Or. Rev, Stat. § 86.755(5). "[A]n action o f forcible entry and detainer i s a special statutory proceeding, i n derogation o f the common law." Purcell v. Edmunds, 175 Or. 68, 7 0 (1944). D e f e n d a n t s r e m o v e d t h i s F E D a c t i o n , b r o u g h t p u r s u a n t to a t r u s t d e e d f o r e c l o s u r e . P l a i n t i f f filed its "Summons Residential Eviction" Case No. 092877 o n April 28, 2009, i t s J a c k s o n C o u n t y C i r c u i t C o u r t : " T e n a n t s are i n p o s s e s s i o n o f t h e d w e l l i n g u n i t , p r e m i s e s , o r rental p r o p e r t y . . . . Landlord is entitled to possession o f the property because o f . . . Trust D e e d Foreclosure pursuant to ORS 86.755(5)." This F E D action is regulated b y state law, specifically Or. Rev. Stat. §§ 105.105 through 105 .168, which provides such actions to b e brought i n Oregon circuit court. Or. Rev. Stat. § 105.110; see Tucker, 942 F . 2 d at 1405. The Burford abstention principles apply, a n d the state court should b e given the opportunity to resolves this issue. See Fireman's F u n d Ins. Co., 8 7 F . 3 d a t 296.

Report & Recommendation 5

v.

Conclusion
T h i s F E D a c t i o n i n v o l v e s a s t a t e regulatory statue a n d i m p o r t a n t state p o l i c y issues. T h e

C o u r t s h o u l d a b s t a i n a n d r e m a n d t h e c a s e t o s t a t e court. D e f e n d a n t s ' m o t i o n t o d i s m i s s a n d I F P a p p l i c a t i o n are a c c o r d i n g l y m o o t .

VI.

Recommendation
T h e C o u r t r e c o m m e n d s r e m a n d i n g t h e case t o S t a t e Court.

This recommendation is n o t an order that is immediately appealable to the Ninth Circuit Court o fAppeals. A n y notice o f appeal pursuant to Rule 4(a)(1), Federal Rules o f Appellate
P r o c e d u r e , s h o u l d n o t b e filed u n t i l e n t r y o f t h e d i s t r i c t c o u r t ' s j u d g m e n t o r a p p e a l a b l e o r d e r .

Objections to this Report a n d Recommendation. i f a n y . are due b y J u l y 10. 2 0 0 9 f f o b j e c t i o n s are filed. a n y responses to the objections are due within 1 0 days. s e e Federal Rules o f Civil Procedure 72 a n d 6. Failure to timely file objections to any factual detenninations o f t h e
M a g i s t r a t e J u d g e w i l l b e c o n s i d e r e d a w a i v e r o f a p a r t y ' s r i g h t to d e n o v o c o n s i d e r a t i o n o f t h e f a c t u a l i s s u e s a n d w i l l c o n s t i t u t e a w a i v e r o f a party's r i g h t t o a p p e l l a t e r e v i e w o f t h e f m d i n g s o f fact i n an order o r j u d g m e n t entered pursuant to t h e Magistrate Judge's recomment!Sb@S~ D A T E D this

J- h

y of J

M A R K O . CLARKE U n i t e d States M a g i s t r a t e J u d g e

Report & Recommendation 6