Neff v. Bank of America, N.A. et al

Filing 19

REPORT AND RECOMMENDATIONS re 6 Motion to Remand to State Court, filed by Jonah Neff, 17 Motion to Dismiss filed by Barrett Daffin Frapier Turner & Engle, LLP. Signed by Judge Mark Lane. (td)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
JONAH NEFF,
Plaintiff,
V.
BANK OF AMERICA, N.A., AS
SUCCESSOR BY MERGER TO BAC
HOME LOANS SERVICING, L.P., and
BARRETT DAFFIN FRAPPIER TURNER
& ENGLE, LLP,
Defendants.

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A-14-CV-00901-LY-ML

REPORT AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
TO:

THE HONORABLE LEE YEAKEL,
UNITED STATES DISTRICT JUDGE

Before the Court are Plaintiff’s Motion to Remand, filed October 29, 2014 (Clerk’s Dkt.
#6), Defendant Barrett Daffin Frappier Turner & Engle, LLP’s Response to Plaintiff’s Motion to
Remand, filed November 17, 2014 (Clerk’s Dkt. #9); Plaintiff’s Supplement to Motion to
Remand, filed January 22, 2015 (Clerk’s Dkt. #14), Defendant’s Response to Plaintiff’s
Supplement to Motion to Remand, filed January 30, 2015 (Clerk’s Dkt. #15), Plaintiff’s Reply to
Defendant’s Response to Plaintiff’s Supplement to Motion to Remand, filed February 6, 2015
(Clerk’s Dkt. #16); Defendant Barrett Daffin Frappier Turner & Engle, LLP’s Motion to
Dismiss, filed May 21, 2015 (Clerk’s Dkt. #17), and Plaintiff’s Response thereto, filed May 28,
2015 (Clerk’s Dkt. #18). All pending nondispositive motions in the above-styled cause have
been referred to the undersigned by United States District Judge, Lee Yeakel, for resolution
pursuant to 28 U.S.C. § 636(b)(1)(A), Federal Rule of Civil Procedure 72, and Rule 1(c) of
Appendix C of the Local Rules of the United States District Court for the Western District of
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Texas. Likewise, all dispositive motions have been referred to the undersigned for a Report and
Recommendation as to the merits pursuant to 28 U.S.C. § 636(b), Rule 72 of the Federal Rules
of Civil Procedure, and Rule 1(d) of Appendix C of the Local Rules of the United States District
Court for the Western District of Texas.
After reviewing the pending motions, the relevant case law, as well as the entire case file,
the undersigned issues the following Report and Recommendation to the District Court.
I.

BACKGROUND
This action arises out of admittedly mistaken foreclosure proceedings. On January 14,

2013, the Plaintiff, Jonah Neff, came to own real property commonly known as 2401 E. 6th
Street, Unit 6103, Austin, Travis County, Texas. Mot. Remand (Clerk’s Dkt. #6) at ¶ 2.1. Neff’s
property, formerly owned by Matt Lindsay, had no liens on it. Id. On July 15, 2013, Neff
received a Notice of Foreclosure from Bank of America, N.A. (“Bank of America”) and law firm
Barrett, Daffin, Frappier, Turner & Engel (“Barrett”) addressed to former owner Lindsay for the
nonpayment of a $23,000 Home Equity Loan dated August 16, 2006. Id. at ¶2.2-2.4. While the
Notice of Foreclosure correctly described Lindsay’s property to be foreclosed, an attached
document incorrectly referenced a legal description of Neff’s property. Id. at ¶2.3-2.4. On July
26, 2013, Neff notified Bank of America and Barrett of the errors contained in the Notice of
Foreclosure. Id. at ¶2.5. Despite repeated attempts by Neff to notify both Bank of America and
Barrett, Barrett erroneously attempted to foreclose on Neff’s property August 6, 2013 and again
on March 4, 2014. Id. at ¶2.6-2.8.
Plaintiff filed this breach of contract and tort action in the 419th Judicial District Court of
Travis County, Texas on August 24, 2014 against Bank of America and Barrett. On September
29, 2014, Bank of America filed a timely Notice of Removal to United States District Court for
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the Western District of Texas, Austin Division asserting federal diversity jurisdiction pursuant to
28 U.S.C. §§ 1332 & 1441. Plaintiff moved to remand on October 29, 2014. See generally Mot.
Remand (Clerk’s Dkt. #6).
Neff and Bank of America filed a Stipulation of Dismissal with Prejudice as to Bank of
America on January 20, 2015. Stip. Dism. (Clerk’s Dkt. #13). In light of Bank of America’s
dismissal, Neff filed a supplement to his Motion to Remand asserting diversity jurisdiction, if it
ever existed in this case, was destroyed. Supp. Mot. Remand (Clerk’s Dkt. #14) at ¶¶ 2.1-2.3.
The remaining Defendant, Barrett, opposes remand and requests that this court exercise its
supplemental jurisdiction to dismiss Plaintiff’s claims against Barrett with prejudice. Mot. Dism.
(Clerk’s Dkt. # 17).
II.

ANALYSIS
Neff asserts there was never any diversity jurisdiction to support removal, because he has

viable state-law claims against Barrett, a non-diverse, Texas-based Defendant. See generally
Mot. Remand (Clerk’s Dkt. #6). In the alternative, he asserts the dismissal with prejudice of his
claims against Bank of America destroys diversity jurisdiction, and the exercise of supplemental
jurisdiction would be inappropriate in the absence of any diverse parties or federal claims. See
generally Supp. Mot. Remand (Clerk’s Dkt. #14). Barrett asserts Plaintiff’s state law claims
against them are not viable, that diversity jurisdiction was therefore appropriate at the time of
removal, and supplemental jurisdiction is appropriate to dismiss Plaintiff’s claims now. See
generally Mot. Dism. (Clerk’s Dkt. #17).

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A. Standard of Review
The subject matter jurisdiction of the Federal District Court after removal is predicated
upon 28 U.S.C. §§ 1332 & 1441(b). Cases removed from state to federal court based on diversity
jurisdiction require an amount in controversy in excess of $75,000, exclusive of interests and
costs, and complete diversity among the parties both at the time of filing and at the time of
removal. 28 U.S.C. § 1332(a); Strawbridge v. Curtiss, 7 U.S. 267, 267, 2 L.Ed. 435, 435 (1806);
Coury v. Prot, 85 F.3d 244, 249 (5th Cir. 1996). The burden of showing the propriety of removal
falls on the removing party. Callivani v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 263 (5th
Cir. 1995). If removal is found to be improper, the District Court may remand a case for lack of
subject matter jurisdiction and award attorney fees and costs associated with efforts by
defendants to effect a bad faith removal. Martin v. Franklin Capital Corp., 546 U.S. 132, 14041, 126 S.Ct. 704, 710 (2005); Valdes v. Wal-Mart Stores, Inc., 199 F.3d 290, 294 (5th Cir.
2000); Griffin v. Georgia Gulf Lake Charles, LLC, 562 F. Supp.2d 775, 778 (W.D. La 2008).
B.

Absence of Complete Diversity at Removal

It is undisputed that both Neff and Barrett are citizens of Texas. Notice of Removal
(Clerk’s Dkt. #1) at ¶ 6. Barrett’s contention that complete diversity exists in this state law claim
rests on its assertion of nominal defendant status. Resp. Mot. Remand (Clerk’s Dkt. #15) at ¶ 6.
A nominal defendant is a nonessential party who could leave the suit without affecting the equity
and fairness of a final judgment, and is disregarded for purposes of determining diversity of the
parties. Acosta v. Maint. & Constr. Inc., 452 F.3d 373, 379 (5th Cir. 2006).
Neff alleges that Barrett, unlike a true nominal defendant, substantially and
independently contributed to Neff’s injuries that form the basis of his claims for relief. See
generally Mot. Remand (Clerk’s Dkt. # 6). Among other allegations, Neff asserts tort claims
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against Barrett specifically for abuse of process and intentional infliction of emotional distress.
Original Pet. (Ex. A) at ¶¶ 8.2-10.4.
Additionally and in the alternative, Barrett argues against the viability of Neff’s state law
claims on the basis of attorney immunity. Resp. Mot. Remand (Clerk’s Dkt. #9) at 4. Barrett
asserts that Texas’s attorney immunity doctrine protects it from any suit brought by a non-client
for actions taken on behalf of a mortgagee. Id. at 5. Barrett cites several recent cases where
attorney immunity is applied to it specifically in previous foreclosure proceedings. Id. at 6. Texas
does have a strong interest in ensuring zealous representation by protecting attorneys
representing clients within the confines of the law. Brandt v. West, 892 S.W.2d 56, 76 (Tex.
App.—Houston [1st Dist.] 1994, writ denied). However, attorneys in Texas enjoy only
“‘qualified immunity’ from civil liability with respect to non-clients for actions taken in
connection with representing a client” therefore, “the applicability of qualified immunity
depends on the nature of the attorney conduct at issue.” Alpert v. Crain, Caton & James, P.C.,
178 S.W.3d 398, 405-06 (Tex. App.—Houston [14th Dist.] 2005, pet. denied). Qualified
immunity does not apply to fraudulent or malicious attorney conduct. Likover v. Sunflower
Terrace II, Ltd., 696 S.W.2d 468, 472 (Tex. App.—Houston [1st Dist.] 1985, no writ).
Texas courts have consistently held that intentional torts, like Neff’s claims of intentional
infliction of emotional distress and tortious interference, fall under the malicious conduct
exception to attorney immunity set out in Likover. See, e.g., Miller v. Stonehenge/Fasa-Texas,
JDC, L.P., 993 F.Supp. 461, 464-65 (N.D. Tex. 1998) (including intentional infliction of
emotional distress in the category of malicious conduct excluded from attorney immunity and
stating “the law does not provide absolute immunity for every tort committed by a lawyer that
may be tangentially related to his professional role.”); Sacks v. Zimmerman, 401 S.W.3d 336,
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340 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) (holding that certain intentional torts
that fall into a class recognized by Texas law as malicious preclude immunity).
Crucially, Barrett’s supporting authorities can be distinguished from the present action
due to Neff’s status as the rightful owner of a property free of liens. Each of Barrett’s past
invocations of attorney immunity came against adversary-mortgagor’s, not non-mortgagors like
Neff. Rojas v. Wells Fargo Bank, N.A., 571 Fed. Appx. 274, 277 (5th Cir. 2014); L’Amoreax v.
Wells Fargo Bank, N.A., 755 F.3d 748, 749 (5th Cir. 2014); Iqbal v. Bank of America, N.A., 559
Fed. Appx. 363, 364 (5th Cir. 2014). Neff alleges not only that his property was free of liens, but
that Barrett had both actual and constructive notice of that fact when it twice attempted
foreclosure. In light of the malicious conduct alleged by Neff against Barrett, attorney immunity
cannot apply. Likover, 969 S.W.2d at 472. Therefore, Barrett’s claims of improper joinder fail as
a matter law. See FED. R. CIV. P 20 (a)(2) (parties may be joined as defendants when “any right
to relief is asserted against them…with respect to or arising out of the same transactions or
occurrences and any question of law or fact common to all defendants” exists.)
In removal, ambiguity is construed against the side seeking removal and the removing
side bears the burden of clarifying any ambiguity. Cavallini, 44 F.3d at 263; Marshall v. Skydive
America South, 903 F. Supp. 1067, 1069 (E.D. Tex. 1995). The circumstances of this case create
ambiguity about the existence of diversity, and Barrett failed to meet their burden of establishing
attorney immunity or nominal defendant status. This preliminary examination of the case alone
calls into question the propriety of the removal.
C.

Diversity Jurisdiction and the Time-of-Filing Rule

On January 20, 2015, all claims against North Carolina-based Defendant, Bank of
America, were dismissed with prejudice. Stip. Dism. (Clerk’s Dkt. #13). Barrett contends this
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dismissal does not affect the court’s diversity jurisdiction because diversity jurisdiction is
determined at the time of filing. Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 575,
124 S.Ct. 1920,1926 (2004). Courts generally do not consider subsequent changes within the
parties, like a diversity-destroying change in the citizenship of one formerly diverse party, after
removal. Id. This time-of-filing rule promotes deferential treatment of the plaintiff’s forum
choice, conserves judicial resources by preventing constant reassessment of jurisdiction, and
discourages manipulative behavior. Id.
Exceptions to the time-of-filing rule operate in situations where policy considerations
such as plaintiff’s forum choice, propriety of removal, and judicial economy cannot be advanced
by strict adherence to the rule. Marshall, 903 F.Supp. at 1070, n.5. Barrett contends that none of
these exceptions apply to the present case. Defendant’s Resp. to Mot. Remand (Clerk’s Dkt. #9)
at ¶ 6. Nevertheless, since the propriety of removal is in question and removal went against
Neff’s forum choice, remand does not go against policy considerations and the undersigned finds
time-of-filing exceptions may properly be considered on these facts. Marshall, 903 F.Supp. at
1070 n.5.
D.

The Change of Parties Exception Requires Remand

The Supreme Court in Grupo Dataflux reiterated the time-of-filing rule when denying a
Motion to Remand but also alluded to an exception to the rule: “the purported cure [to the
diversity defect] arose not from a change in the parties to the action, but from a change in the
citizenship of a continuing party.” Id. The Third Circuit further articulated the change-of-party
exception: “[T]he time-of-filing rule admits exceptions in cases where the parties change in
contrast to cases in which the circumstances attendant to those parties change.” Kaufman v.
Allstate New Jersey Ins. Co., 561 F.3d 144, 152-53 (3rd Cir. 2009). Similarly, in Hensgens, the
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Fifth Circuit held that remand to state court is mandatory upon the addition of a non-diverse
defendant. Hensgens v. Deere & Co., 833 F.2d 1179, 1182 (5th Cir. 1987). Read together, these
cases teach that the post-removal addition or omission of a party, as opposed to a post-removal
change in an existing party’s circumstances, may indeed destroy diversity jurisdiction and
require remand. Kaufman, 561 F.3d at 152-53; Hensgens, 833 F.2d at 1182. In this case, the
dismissal of Bank of America, the only diverse defendant, requires this court to remand. See
Kaufman, 561 F.3d at 152-53.
As in Kaufman, Bank of America’s dismissal from this case amounts to a change in
parties that destroys diversity. 561 F.3d at 153. The federal statute on post-removal procedure
advises “if at any time before final judgment it appears that the district court lacks subject matter
jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). Complete diversity no longer
exists in this case, if it ever existed at all. Kaufman, 561 F.3d at 153. Even allowing Barrett’s
claims that complete diversity existed at the time of filing and removal, the change of party
exception to the time-of-filing rule requires this court to remand this case for want of subject
matter jurisdiction. Id.Therefore, the undersigned RECOMMENDS that Plaintiff’s Motion to
Remand (Clerk’s Dkt. #6) be GRANTED. Because the now-dismissed Bank of America
removed this case, rather than Barrett, the undersigned RECOMMENDS the request for an
award of attorney fees and costs to Neff at Barrett’s expense be DENIED. Valdes, 199 F.3d at
294.
E.

The Court Lacks Jurisdiction To Determine the Motion to Dismiss

Barrett asserts this Court should exercise supplemental jurisdiction to rule on its Motion
to Dismiss Plaintiff’s state-law claims. Mot. Dism. (Clerk’s Dkt. #17). This would be an
improper extension of supplemental jurisdiction. Enochs v. Lampasas Cnty., 641 F.3d 155, 161
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(5th Cir. 2011). The “‘general rule is to dismiss state claims when the federal claims to which
they are pendent are dismissed.’” Id. (quoting Parker & Parsley Petroleum Co. v. Dresser
Indus., 972 F.2d. 580, 585 (5th Cir. 1992)). Defendant’s Motion to Dismiss seeks to address the
merits of Plaintiff’s state law claims, which this Court lacks jurisdiction to do in the absence of
any diverse parties or federal question that would support supplemental jurisdiction. Enochs,
641 at 161. Therefore, the undersigned RECOMMENDS that Defendant’s Motion to Dismiss
(Clerk’s Dkt. #17) be DISMISSED for lack of subject matter jurisdiction.
III.

RECOMMENDATION
For the reasons outlined above, the undersigned RECOMMENDS that the District Court

GRANT Plaintiff’s Motion to Remand (Clerk’s Dkt. #6), DISMISS Defendants’ Motion to
Dismiss (Clerk’s Dkt. #17) for lack of subject matter jurisdiction, and DENY Plaintiff’s request
for attorney’s fees. Reply to Defendant’s Resp. to Mot. Remand (Clerk’s Dkt. #11).
IV.

OBJECTIONS
The parties may file objections to this Report and Recommendation. A party filing

objections must specifically identify those findings or recommendations to which objections are
being made. The District Court need not consider frivolous, conclusive, or general objections.
See Battle v. United States Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party’s failure to file written objections to the proposed findings and recommendations
contained in this Report within fourteen (14) days after the party is served with a copy of the
Report shall bar that party from de novo review by the District Court of the proposed findings
and recommendations in the Report and, except upon grounds of plain error, shall bar the party
from appellate review of unobjected-to proposed factual findings and legal conclusions accepted

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by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53, 106
S. Ct. 466, 472-74 (1985); Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th
Cir. 1996) (en banc).
To the extent that a party has not been served by the Clerk with this Report &
Recommendation electronically, pursuant to the CM/ECF procedures of this District, the Clerk is
ORDERED to mail such party a copy of this Report and Recommendation by certified mail,
return receipt requested.
SIGNED June 11, 2015
_______________________________
MARK LANE
UNITED STATES MAGISTRATE
JUDGE

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