Cline et al v. Quicken Loans, Inc. et al

Filing 31

MEMORANDUM OPINION AND ORDER Denying without prejudice 7 Motion to Dismiss; Denying without prejudice 8 Motion to Dismiss; Granting in part and Denying as moot in part 9 Motion to Remand to State Court; case is remanded to Circuit Court of Marshall County; and Clerk is directed to enter judgment pursuant to FRCP 58. Signed by Senior Judge Frederick P. Stamp, Jr on 7/5/11. (copy to Clerk of Circuit Court of Marshall Co., WV, by mail)(soa)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
DAVID CLINE and ANNA CLINE,
Plaintiffs,
v.

Civil Action No. 5:11CV63
(STAMP)

QUICKEN LOANS INC.,
TITLE SOURCE INC. d/b/a
TITLE SOURCE INC. OF WEST VIRGINIA,
APPRAISALS UNLIMITED, INCORPORATED,
DEWEY V. GUIDA and JOHN DOE NOTE HOLDER,
Defendants.
MEMORANDUM OPINION AND ORDER
GRANTING IN PART AND DENYING AS MOOT IN PART
THE PLAINTIFFS’ MOTION TO ABSTAIN, TO REMAND,
AND TO STAY BRIEFING OF THE MOTION TO DISMISS;
DENYING WITHOUT PREJUDICE DEFENDANT
QUICKEN LOANS INC.’S MOTION TO DISMISS;
AND DENYING WITHOUT PREJUDICE DEFENDANT
TITLE SOURCE, INC.’S MOTION TO DISMISS
I.

Procedural History

The plaintiffs, David Cline and Anna Cline, filed a complaint
against the defendants in the Circuit Court of Marshall County,
West

Virginia,

alleging

various

state

law

causes

of

action

including unconscionability, breach of fiduciary duty, fraud/
intentional misrepresentation, negligent misrepresentation, illegal
loans in excess of fair market value, breach of professional
standards and professional negligence, damages, joint venture, and
punitive damages.

Defendants Quicken Loans Inc. (“Quicken”) and

Title Source, Inc. (“Title Source”) removed this civil action to
this Court pursuant to 28 U.S.C. §§ 1334, 1441, and 1452.

The

defendants maintain that this Court has subject matter jurisdiction

over this action because the case is related to a case arising
under

Title

11

of

the

United

States

Code

and

involving

the

bankruptcy proceedings pending against defendant Dewey Guida.
The plaintiffs filed a motion to abstain, to remand, and to
stay briefing of the motion to dismiss.

The plaintiffs state that

they have met the five elements under § 1334(c)(2) for mandatory
abstention.

They next argue that even if mandatory abstention is

inapplicable,

the

factors

for

discretionary

abstention

or,

alternatively, for equitable remand weigh heavily in favor of state
court jurisdiction.

Finally, they believe that this Court should

resolve the issue of abstention before requiring briefing of the
motions to dismiss. Quicken filed a response to which Title Source
joined. It argues that mandatory abstention does not apply because
this is a core proceeding as it is liquidating proofs of claim
against Guida and affects the administration of Guida’s estate.
Quicken also argues that the plaintiffs have filed to meet their
burden of demonstrating that the action can be timely adjudicated
in state court.

Quicken next argues that discretionary abstention

is improper as the 28 U.S.C. § 1334(c)(1) and § 1452(b) factors
weigh in favor of this Court retaining jurisdiction.

Finally,

Quicken opposes the plaintiffs’ request for a stay of briefing.
The plaintiffs filed a reply.

In addition, both Quicken and Title

Source filed motions to dismiss.

The plaintiffs filed a notice of

supplemental authority in which they discuss the recent Supreme

2

Court opinion of Stern v. Marshall, --- U.S. ---, 2011 WL 2472792
(2011)
For the reasons stated below, this Court grants in part and
denies as moot in part the plaintiffs’ motion to abstain, to
remand,

and

to

stay

briefing

of

the

motion

to

dismiss.

Specifically, this Court finds that mandatory abstention applies
and that this civil action must be remanded to the Circuit Court of
Marshall County, West Virginia and that the plaintiffs’ motion to
stay briefing is now moot as the motion to dismiss is fully
briefed.
II.

Facts1

The plaintiffs visited lendingtree.com for the purpose of
consolidating multiple credit card obligations.

Quicken then

allegedly repeatedly called the plaintiffs to pursue a refinance of
their

existing

Quicken.

The

mortgage.
plaintiffs

The

plaintiffs

executed

a

refinanced

promissory

note

through
in

the

principal sum of $99,300.00.

The note was secured by a deed of

trust on the plaintiffs’ home.

The plaintiffs allege that Quicken

failed to comply with appropriate and meaningful application,
approval, underwriting and closing processes for the loan and that
in furtherance of a predatory lending scheme, Quicken and Title
Source willfully secured an inflated appraisal from Appraisals
Unlimited and Guida of $112,000.00.

1

The plaintiffs state that

For purposes of deciding these motions, the facts are based
upon the allegations contained in the complaint.
3

through the appraisal, the defendants were able to misrepresent the
market value of the subject property to the plaintiffs.

The

plaintiffs allege that at the time of the appraisal, the property
was worth $80,000.00.

The plaintiffs state that, because of the

alleged predatory loan transaction, the plaintiffs have suffered
emotional distress annoyance and inconvenience.
III.
A.

Applicable Law

Abstention
Title

28,

United

States

Code,

Sections

1334(c)(1)

and

1334(c)(2) provide for both permissive and mandatory abstention to
be exercised by district courts in certain situations.

Section

1334(c)(2) provides:
Upon timely motion of a party in a proceeding based upon
a state law claim or state law cause of action, related
to a case under Title 11 but not arising under Title 11
or arising in a case under Title 11, with respect to
which an action cannot have commenced in a court of the
United States absent jurisdiction under this section, the
district court shall abstain from hearing such proceeding
if an action is commenced, and can be timely adjudicated,
in a state forum of appropriate jurisdiction.
28 U.S.C. § 1334(c)(2)(emphasis added).

“In other words, a

district court must abstain from hearing a non-core, related matter
if the action can be timely adjudicated in state court.” WheelingPittsburgh Corp. v. Am. Ins. Co., 267 B.R. 535, 538 (N.D. W. Va.
2001) (quoting Howe v. Vaughan, 913 F.2d 1138, 1142 (5th Cir.
1990)).

Courts and commentators have derived five basic factors

from the mandatory abstention statute to be employed by district
courts in deciding whether or not to abstain from hearing the

4

claims of a particular case, including whether: (1) a timely motion
to abstain has been made; (2) the proceeding is based upon a state
law cause of action; (3) the proceeding is related to a Title 11
case but is not a core proceeding; (4) the action could not have
been commenced in federal court absent jurisdiction under § 1334;
and (5) an action is commenced, and can be timely adjudicated, in
state court with proper jurisdiction.

Id. (citing In re Midgard

Corp. v. Kennedy, 204 B.R. 764, 776-79 (BAP 10th Cir. 1997) and
Business and Commercial Litigation in Federal Courts, § 45.5
(Robert L. Haig Ed., 1998)).
B.

Equitable Remand
Plaintiffs argue that principles of equitable remand should be

applied.

Title 28, United States Code, Section 1452 provides, in

relevant part:
(a) A party may remove any claim or cause of action in
any civil action . . . to the district court for the
district where such civil action is pending, if such
district court has jurisdiction of such claim or cause of
action under section 1334 of this title.
(b) The court to which such claim or cause of action is
removed may remand such claim or cause of action on any
equitable ground.
28 U.S.C. § 1452.
Several factors to be considered in determining whether a
remand is appropriate under 28 U.S.C. § 1452(b) include:
whether remand would prevent duplication or uneconomical
use of judicial resources; the effect of the remand on
the administration of the bankruptcy estate; whether the
case involves questions of state law better addressed by
a state court; comity; judicial economy; prejudice to
involuntarily removed parties; the effect of bifurcating
5

the action, including whether remand will increase or
decrease the possibility of inconsistent results; the
predominance of state law issues and non-debtor parties;
and the expertise of the court in which the action
originated.
In re Asbestos Litigation, 271 B.R. 118, 125 (S.D. W. Va. 2001).
IV.
A.

Discussion

Jurisdiction
Title 28, United States Code, Section 1452(a) states that “[a]

party may remove any claim or cause of action in a civil action
. . . to the district court for the district where such civil
action is pending, if such district court has jurisdiction of such
claim or cause of action under [28 U.S.C. § 1334].”

Title 28,

United States Code, Section 1334(b) provides that “the district
court shall have original but not exclusive jurisdiction of all
civil proceedings arising under Title 11, or arising in or related
to cases under Title 11.”
“Congress intended to grant comprehensive jurisdiction to the
bankruptcy

courts

so

that

they

might

deal

efficiently

and

expeditiously with all matters connected to the bankruptcy estate.”
Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995) (internal
citations omitted).

“The ‘related to’ language of § 1334(b) must

be read to give district courts . . . jurisdiction over more than
simple proceedings involving the property of the debtor of the
estate.”

Id.

The Supreme Court did find, however, that “related

to” jurisdiction does have limits.

Id.

“Shared facts between the

third-party action and a debtor-creditor conflict do not in and of

6

themselves suffice to make the third-party action ‘related to’ the
bankruptcy.”

Wise v. Travelers Indem. Co., 192 F. Supp. 2d 506,

516 (N.D. W. Va. 2002).

Similarly, judicial economy by itself

cannot justify “related to” jurisdiction.

Id.

The United States

Court of Appeals for the Fourth Circuit has adopted the following
definition of § 1334 “related to” jurisdiction: “[A]n action is
related to bankruptcy if the outcome could alter the debtor’s
rights,

liabilities,

options

or

freedom

of

action

(either

positively or negatively) and which in any way impacts upon the
handling and administration of the bankrupt estate.”

A.H. Robins

Co., Inc. v. Piccinin, 788 F.2d 994, 1002, n.11 (4th Cir. 1986),
cert. denied, 479 U.S. 876 (1986) (adopting the definition set
forth in Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)).
After considering the applicable law, this Court finds that it
has “related to” jurisdiction over this action because the outcome
of this action may result in an additional liability of defendant
Guida, and therefore impact his bankruptcy case. Frelin v. Oakwood
Homes Corp., 292 B.R. 369, 377 (Bankr. E.D. Ark. 2003).
B.

Abstention
The plaintiffs argue that this Court must abstain pursuant to

28 U.S.C. § 1334(c)(2).

Section 1334(c)(2) states:

Upon timely motion of a party in a proceeding based upon
a State law claim or State law cause of action, related
to a case under title 11 but not arising under title 11
or arising in a case under title 11, with respect to
which an action could not have been commenced in a court
of the United States absent jurisdiction under this
section, the district court shall abstain from hearing
such proceeding if an action is commenced, and can be
7

timely adjudicated, in a State forum of appropriate
jurisdiction.
28 U.S.C. § 1334(c)(2).

The plaintiffs argue that this section is

implicated because: (1) the plaintiffs have timely moved for
abstention; (2) the proceeding is based upon a state law claim; (3)
it is not a core proceeding; (4) the action could not have
commenced in federal court absent jurisdiction under § 1334; and
(5) the action can be timely adjudicated in a state forum.
1.

Timely Motion

The first factor in § 1334(c)(2) requires that the moving
party make a timely motion requesting the court to abstain. See 28
U.S.C. § 1334(c)(2).

As this Court has recognized, “[c]ourts have

generally adopted a flexible case-specific approach in determining
whether a motion for mandatory abstention is ‘timely.’”
Pittsburgh, 267 B.R. 535 at 538.

Wheeling-

Here, the defendants filed a

notice of removal on April 29, 2011 and the plaintiffs promptly
filed their first motion for the court to abstain and to remand on
May 20, 2011.

This Court finds that the plaintiffs have satisfied

the first factor for the mandatory abstention statute.
2.

State Law Cause of Action

The second factor of 28 U.S.C. § 1334(c)(2) is whether the
proceeding is based upon a state law claim or state law cause of
action.

The underlying causes of action in this case are for

unconscionability, breach of fiduciary duty, fraud/intentional
misrepresentation, negligent misrepresentation, illegal loans in
excess of fair market value, breach of professional standards and
8

professional negligence, damages, joint venture, and punitive
damages.

The plaintiffs’ claims do not arise under federal law.

Accordingly, this Court finds that the second factor of the
mandatory abstention statute is met.
3.

Core or Non-core Proceeding

Application of § 1334(c)(2) next requires that the proceeding
be related to a Title 11 case but not arising under Title 11 or
arising

in

a

case

under

Title

11.

In

Northern

Pipeline

Construction Co. v. Marathon Pipeline Co., 458 U.S. 50 (1982), the
United States Supreme Court struck down portions of the Bankruptcy
Act of 1978 as vocative of Article III of the Constitution.
Following Northern Pipeline, Congress amended the Bankruptcy Act of
1978 and made the bankruptcy courts adjuncts of Article III courts
when adjudicating state law matters. See Bankruptcy Amendments and
Federal Judgeship Act of 1984, Pub. L. No. 98-353, 98 Stat. 333, 28
U.S.C. § 152.

The 1984 Act drew a distinction between core and

non-core bankruptcy proceedings.

“Core matters are those that

would fit within the Bankruptcy Court’s summary jurisdiction prior
to 1978; that is, core matters are those involving the bankrupt’s
property or assets within the jurisdiction of the Bankruptcy Court.
Bankruptcy Courts may ‘hear and decide’ these core proceedings.”
Erwin Chemerinsky Federal Jurisdiction § 4.5.3 (5th ed. 2007).
Title 28, United States Code, Section 157(b)(2) provides that
core proceedings include, but are not limited to:
(A)

matters concerning the administration of the estate;

9

(B) allowance or disallowance of claims against the
estate or exemptions from property of the estate, and
estimation of claims or interests for the purposes of
confirming a plan under chapter 11, 12, or 13 of title 11
but not the liquidation or estimation of contingent or
unliquidated personal injury tort or wrongful death
claims against the estate for purposes of distribution in
a case under title 11;
(C) counterclaims by the estate against persons filing
claims against the estate;
(D)

orders in respect to obtaining credit;

(E)

orders to turn over property of the estate;

(F) proceedings
preferences;

to

determine,

avoid,

or recover

(G) motions to terminate, annul, or modify the automatic
stay;
(H) proceedings to determine,
fraudulent conveyances;

avoid,

(I) determinations
particular debts;

dischargeability

(J)

as

to

the

or

recover
of

objections to discharges;

(K) determinations of the validity, extent, or priority
of liens;
(L)

confirmations of plans;

(M) orders approving the use or lease of property,
including the use of cash collateral;
(N) orders approving the sale of property other than
property resulting from claims brought by the estate
against persons who have not filed claims against the
estate;
(O) other proceedings affecting the liquidation of the
assets of the estate or the adjustment of the debtorcreditor or the equity security holder relationship,
except personal injury tort or wrongful death claims; and
(P) recognition of foreign proceedings and other matters
under chapter 15 of title 11.
10

28 U.S.C. § 157(b)(2).
Non-core proceedings are those “related” to a Title 11 case.
See In re Johnson, 960 F.2d 398, 402 (4th Cir. 1992) (noting
“related proceedings cannot be treated as core proceedings pursuant
to . . . 28 U.S.C. § 157(b)(1), (c)(1) and (c)(2)”).

The Fourth

Circuit Court of Appeals has adopted the definition of “related”
found in Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984),
stating “an action is related to bankruptcy if the outcome could
alter the debtor’s rights, liabilities, options, or freedom of
action (either positively or negatively) and which in any way
impacts upon the handling and administration of the bankrupt
estate.” See Robbins Co. v. Piccinin, 788 F.2d 994, 1002 n.11 (4th
Cir. 1986)(citing Pacor, Inc.).
The defendants contend that this is a core proceeding because
Quicken filed a proof of claim in Guida’s bankruptcy case and
because this proceeding will affect the administration of Guida’s
estate.

Additionally,

contemplating

filling

the

cross

defendants
claims

state

against

that

Guida

they

are

seeking

to

liquidate the indemnity or contribution rights that the defendants
hold against him for any liability that may be imposed upon them as
a result of this civil action.
This

Court

proceeding.

finds

that

this

civil

action

is

a

non-core

As stated above, this case is “related to” Guida’s

bankruptcy proceeding.

Civil actions, such as this case, “do not

automatically become core proceedings in bankruptcy simply because

11

a related proof of claim is filed in the bankruptcy case.” Frelin,
292 B.R. at 378.

In this case, no party alleges that the

plaintiffs have filed a proof of claim against Guida.

This Court

“has no evidence that the exact issues raised in Plaintiffs’ State
Court complaint . . . are before the [bankruptcy court] for
adjudication.”

Id.

Where

only

one

defendant’s

potential

indemnification liability to another defendant is directly before
the

bankruptcy

court

rather

than

the

defendants’

potential

liability to the plaintiffs, “the proof of claim . . . does not
transform the State Court Action filed by Plaintiffs into a core
proceeding.”

Id.

Furthermore, the defendants have not shown that any potential
cross claims against Guida seeking to liquidate the indemnity or
contribution rights cannot be brought in state court. Accordingly,
this Court finds the third requirement of § 1334(c)(2) is met.
4.

No Federal Jurisdiction Absent § 1334

The next factor under § 1334(c)(2) is that the action could
not have been commenced in federal court absent jurisdiction under
§ 1334. As discussed above, the plaintiffs have asserted no claims
arising under federal law.

The only other avenue for jurisdiction

is found in diversity of citizenship pursuant to § 1332.

The

plaintiffs and defendant Guida are West Virginia residents and
defendant Appraisals Unlimited is a West Virginia corporation.
Therefore, this Court finds that this action could not have been

12

commenced in federal court absent jurisdiction under § 1334, and
thus the fourth factor under § 1334(c)(2) has been met.
5.

Timely Adjudication

Finally, § 1334(c)(2) directs a court to determine whether the
proceedings can be resolved in a timely fashion before the state
court.

No evidence has been presented showing the state court’s

docket is unmanageable or that the state court will not determine
matters in a timely fashion.

Therefore, the fifth and final

condition for mandatory remand under § 1334(c)(2) has been met and
this Court finds it must abstain from exercising its jurisdiction
under § 1334.
B.

Discretionary Abstention and Equitable Remand
Alternatively,

this

Court

finds

that

even

if

mandatory

abstention was not proper, it must exercise its discretionary
abstention pursuant to 28 U.S.C. § 1334(c)(1) or exercise equitable
remand under 28 U.S.C. § 1452(b).

A.H. Robins, 788 F.2d at 1010

n.14. Section 1334(c)(1) states: “Nothing in this section prevents
a district court in the interest of justice, or in the interest of
comity with State courts or respect for State law, from abstaining
from hearing a particular proceeding arising under title 11 or
arising in or related to a case under title 11.”
§ 1334(c)(1).

28 U.S.C.

In analyzing whether permissive abstention is

appropriate, a court should consider the following factors:
(1) the court’s duty to resolve matters properly before
it; (2) the predominance of state law issues and nondebtor parties; (3) the economical use of judicial
resources; (4) the effect of remand on the administration
13

of the bankruptcy estate; (5) the relatedness or
remoteness of the action to the bankruptcy case; (6)
whether the case involves questions of state law better
addressed by the state court; (7) comity considerations;
(8) any prejudice to the involuntarily removed parties;
(9) forum non conveniens; (10) the possibility of
inconsistent results; (11) any expertise of the court
where the action originated; and (12) the existence of a
right to a jury trial.
Blanton v. IMN Fin. Corp., 260 B.R. 257, 265 (M.D.N.C. 2001)
(citations omitted).

Courts have noted that the factors for

judging the propriety of permissive abstention are essentially
identical to the factors articulated for determining the propriety
of remand under 28 U.S.C. § 1452(b).

Blanton, 260 B.R. at 265 n.5.

This Court finds that the state law proceeding is based solely
on issues of state law that would be better addressed by a state
court.

As addressed above, Quicken’s proof of claim does not

transform this state law action into a core proceeding. This Court
does not believe that remanding this civil action will have a
significant impact on the administration of the bankruptcy estate
of Guida.

The plaintiffs attach a May 20, 2011 order of the

bankruptcy court, which lifted the bankruptcy stay so that the
plaintiffs could proceed with their claims solely with respect to
obtaining liability policy information from Guida’s insurance
carrier and to pursue their right to file a claim against the
liability policy and to pursue an action to collect under that
policy and for no other purpose.

The order states that the

plaintiffs will not be entitled to collect anything from Guida
personally.

The

plaintiffs

are

14

correct

that

the

Quicken’s

indemnification

claim

may

be

litigated

in

state

court.

If

successful, Quicken can then file a proof of claim for the judgment
amount in Guida’s bankruptcy case.
In addition, as discussed above, this civil action is noncore.

Because it is a non-core action, the claims cannot be tried

in the bankruptcy court.

Judicial economy, therefore, does not

weigh in favor of this Court retaining jurisdiction because this
Court has been presented with no evidence to show that proceeding
in state court will be less efficient than proceeding in federal
court.

This Court also finds that it is in the interest of comity

to permit the case to proceed in state court.
This
abstention

Court
and

has

considered

equitable

remand

abstention is appropriate.
mandatory

abstention

discretionary

factors

for

discretionary

finds

that

discretionary

and

Because this Court has concluded that

applies

abstention

the

and

applies,

that,
this

in
civil

the

alternative,

action

must

be

remanded.
V.

Conclusion

For the reasons stated above, the plaintiffs’ motion to
abstain, to remand, and to stay briefing of the motion to dismiss
(Document No. 9) is GRANTED IN PART and DENIED AS MOOT IN PART.
Accordingly, this Court ABSTAINS from any further proceedings in
this civil action and REMANDS this case to the Circuit Court of
Marshall County, West Virginia.

Defendant Quicken Loans, Inc.’s

motion to dismiss (Document No. 7) and defendant Title Source

15

Inc.’s motion to dismiss are DENIED WITHOUT PREJUDICE to the
parties raising the same issues before the Circuit Court of
Marshall County, West Virginia.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein and to the Clerk of
the Circuit Court of Marshall County, West Virginia.

Pursuant to

Federal Rule of Civil Procedure 58, the Clerk is DIRECTED to enter
judgment on this matter.
DATED:

July 5, 2011

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

16