Dijkstra v. Carenbauer et al
Filing
69
MEMORANDUM OPINION AND ORDER Denying Plaintiff's 23 Motion to Remand. Signed by District Judge Irene M. Keeley on 5/1/12. (mji)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
LIJKEL DIJKSTRA, individually and on
behalf of other similarly situated
individuals,
Plaintiff,
v.
//
CIVIL ACTION NO. 5:11CV152
(Judge Keeley)
HARRY J. CARENBAUER, HOME LOAN CENTER,
doing business as Lendingtree Loans,
HLC ESCROW, LENDERS FIRST CHOICE, ENCORE
CREDIT CORPORATION, now known as Performance
Credit Company, CHASE HOME FINANCE, LLC,
OPTION ONE MORTGAGE COMPANY, WILSHIRE
CREDIT CORPORATION, EMPIRE FIRE AND MARINE
INSURANCE COMPANY, MERRILL LYNCH MORTGAGE
LENDING, INC., LASALLE BANK, N.A., As Trustee
for MLMI Trust Services 2007 SD1, DANIEL J.
MANCINI, ESQUIRE, JOHN DOE LENDERS, LOAN BROKERS,
ASSIGNEES, LOAN CLOSERS, LOAN SERVICERS, INSPECTORS,
and APPRAISERS and/or AGENTS or EMPLOYEES THEREOF,
Defendants.
MEMORANDUM OPINION AND ORDER DENYING
PLAINTIFF’S MOTION TO REMAND [DKT. NO. 23]
This memorandum opinion memorializes the ruling of the Court
on February 3, 2012, DENYING the plaintiff’s motion to remand.
I.
On
November
7,
2008,
the
plaintiff,
Lijkel
Dijkstra
(“Dijkstra”), filed a putative class action in the Circuit Court of
Ohio County, West Virginia, alleging that the defendants, Harry J.
Carenbauer (“Carenbauer”), Home Loan Center, (“HLC”), HLC Escrow,
Lenders First Choice, Encore Credit Corporation (“Encore”), Chase
DIJKSTRA v. CARENBAUER, ET AL
5:11CV152
MEMORANDUM OPINION AND ORDER
Home Finance, LLC (“Chase”), Option One Mortgage Company (“Option
One”), Wilshire Credit Corporation (“Wilshire”), Empire Fire and
Marine
Insurance
Company
(“Empire”),
Merrill
Lynch
Mortgage
Lending, Inc., Lasalle Bank, N.A., Daniel J. Mancini, Esquire, as
well as other unnamed parties, engaged in fraud, misrepresentation,
and conversion, breached their fiduciary duties, and violated the
West Virginia Consumer Credit Protection Act (“WVCCPA”), W. Va.
Code § 46A-2-127, by engaging in fraudulent lending practices
related to Dijkstra’s home mortgage. He also claimed that the
defendants who closed the loan were not licensed to practice law in
West Virginia, and that those who serviced and managed the mortgage
charged him unnecessary insurance premiums and unconscionable fees.
The defendants first removed the case on January 7, 2009. The
Court remanded it at that time, however, because, pursuant to the
Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d), the
defendants had failed to establish that the putative class met the
requisite numerosity and amount in controversy requirements for the
exercise of federal jurisdiction. (Case No. 5:08CV187, Dkt. No.
72). The defendants again removed the case on October 28, 2011,
following which Dijkstra moved to remand it on the basis that the
removal was untimely (dkt. no. 23).
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5:11CV152
MEMORANDUM OPINION AND ORDER
II.
According to Dijkstra, the defendants could have ascertained
that the case was removable on August 19, 2011. In support of his
argument, he relies on three letters he sent to the defendants,
including 1) a demand that Option One pay $95,000, dated May 25,
2011 (dkt. no. 3-8 at 3-4), 2) a demand that Encore pay $316,000,
dated July 27, 2011 (dkt. no. 3-8 at 5-6), and 3) a demand to
Wilshire, dated August 19, 2011, proposing a settlement for 640
class members.
According to Dijkstra, the total value of his August 19th
demand, which sought $1000 per class member, an additional $3000
for
borrowers
who
had
modified
or
reinstated
loans,
the
cancellation of all deficiencies owed by foreclosed customers, and
additional
payments
to
class
members
who
met
other
specific
criteria (dkt. no. 3-8 at 7-8), exceeded $5 million.1
Dijkstra
also
argues
that,
based
on
written
discovery
responses exchanged on August 23 and 24, 2011, the defendants could
have ascertained that damages for the putative class would exceed
$5
million.
That
discovery included
1
a
table
produced
by
HLC
Dijkstra provides the following estimates: (1) $1000 per loan
($640,000); (2) $3000 for an estimated 125 borrowers who had modified or
reinstated loans ($375,000); (3) cancellation of deficiencies, estimated
$20,000 for 200 borrowers ($4 million); and (4) additional payments,
estimated at $330,000.
3
DIJKSTRA v. CARENBAUER, ET AL
5:11CV152
MEMORANDUM OPINION AND ORDER
documenting
851
instances
in
which
non-lawyers
originated
or
brokered loans in West Virginia (dkt. no. 23-4 at 3).2 Dijkstra
asserts this information established a class size of 851 people,
and that his response to HLC’s interrogatories made it clear each
of the 851 class members intended to pursue maximum statutory
damages:
Plaintiff seeks a maximum statutory penalty for each
violation of the West Virginia Credit and Consumer
Protection Act. He will ask that the Court to [sic] find
[HLC] in contempt for authorizing the unauthorized
practice of law by its loan closer. He also seeks to have
his loan voided and all payments his [sic] and fees he
paid returned. He also seeks compensatory damages for
annoyance and inconvenience, emotional distress and
punitive damages, and also attorneys’ fees and costs. The
statutory, contempt, and compensatory damages are not
readily ascertainable, but will be determined by a judge
and/or jury. . . .
(Dkt. No. 23-1 at 2).
The defendants contend that neither Dijkstra’s August 19th
settlement demand nor his interrogatory responses established an
amount in controversy exceeding $5 million. In their view, the case
was not removable until September 29, 2011, which is when Dijkstra
sent HLC a letter demanding $4,255,000 (dkt. no. 3-8 at 1-2). They
argue that, when combined with his earlier demands, this letter put
2
Dijkstra provides the following estimates: (1) a maximum statutory
penalty of $4500 per violation under the § 46A-5-101(1) of the WVCCPA (as
adjusted for inflation) for 841 class members ($3,829,500); (2) $250,000
total compensatory damages; and (3) $250,000 total punitive damages.
4
DIJKSTRA v. CARENBAUER, ET AL
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MEMORANDUM OPINION AND ORDER
them on notice for the first time that Dijkstra’s case exceeded
CAFA’s jurisdictional threshold.
Regarding the August 19th demand letter, which on its face
sought only $640,000, the defendants insist they were under no duty
to inquire further about the amount of any other demands. With
respect to the exchange of interrogatory responses, they argue
these did not include a quantitative assessment of damages, and
Dijkstra’s
response
itself
conceded
that
“[t]he
statutory,
contempt, and compensatory damages are not readily ascertainable.”
(Dkt. No. 23-1 at 2). Thus, they contend the information in these
documents was insufficient to establish federal jurisdiction under
CAFA by a preponderance of the evidence, and that any attempt to
remove the case before September 29, 2011, would have been based
upon “mere speculation.” See Bartnikowski v. NVR, Inc., 307 F.
App'x 730, 734 (4th Cir. 2009).
III.
A.
A defendant may remove a case from state to federal court in
instances where the federal court is able to exercise original
jurisdiction over the matter. 28 U.S.C. § 1441. CAFA confers
original jurisdiction on district courts over class actions in
which any member of a class comprised of at least one hundred
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DIJKSTRA v. CARENBAUER, ET AL
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MEMORANDUM OPINION AND ORDER
plaintiffs is of diverse citizenship from any defendant, and in
which the amount in controversy exceeds $5 million, exclusive of
interests and costs. 28 U.S.C. § 1332(d). The claims of individual
class members may be aggregated to meet the $5 million amount in
controversy. 28 U.S.C. § 1332(d)(6).
It is well settled that the party seeking removal bears the
burden
of
establishing
federal
jurisdiction.
See
Mulcahey
v.
Columbia Organic Chems. Co., Inc., 29 F.3d 148, 151 (4th Cir.
1994). The Fourth Circuit has held that “while CAFA was intended to
open the doors of the federal courts to class action litigants, its
statutory
language
did
nothing
to
reverse
the
long-settled
principle that a defendant seeking to invoke a federal court's
removal
jurisdiction
bears
the
burden
of
demonstrating
that
jurisdiction would be proper.” Bartnikowski, 307 F. App'x at 734
(citing Strawn v. AT & T Mobility LLC, 530 F.3d 293, 297 (4th Cir.
2008)). Therefore, in this case the burden of establishing the $5
million jurisdictional threshold amount in controversy rests with
the defendants.3 See Mulcahey, 29 F.3d at 151.
3
Here, the defendants argue that Dijkstra bears the burden of
establishing that federal jurisdiction could have existed as of August
19, 2011 or August 24, 2011 because, by challenging the timeliness of
removal, the plaintiff is actually the proponent of federal jurisdiction
as of the earlier date. The case law, however, does not support this
proposition.
Indeed,
courts
have
consistently
6
emphasized
that
the
burden
of
DIJKSTRA v. CARENBAUER, ET AL
5:11CV152
MEMORANDUM OPINION AND ORDER
Courts have consistently applied the “preponderance of the
evidence” standard when determining whether a removing defendant
has met its burden of establishing the amount in controversy. The
well-settled test in the Fourth Circuit for calculating this amount
is “‘the pecuniary result to either party which [a] judgment would
produce.’” Dixon v. Edwards, 290 F.3d 699, 710 (4th Cir. 2002)
(quoting Gov't Emps. Ins. Co. v. Lally, F.2d 568, 569 (4th Cir.
1964)). Removal jurisdiction is strictly construed; if federal
jurisdiction is doubtful, the Court must remand. Mulcahey, 29 F.3d
at 151.
B.
Untimely removal constitutes a procedural defect that renders
the case improperly removed. Cades v. H&R Block, Inc., 43 F. 3d
869, 873 (4th Cir. 1994). Generally, a defendant must file a notice
of removal within thirty days following receipt of the complaint.
28 U.S.C. § 1446(b)(1). However,
establishing federal jurisdiction is upon the party seeking removal. This
is true even where a plaintiff challenges removal as untimely because the
case could have been removed earlier. See, e.g. Stenger v. Carelink
Health Plans, Inc., No. 5:10CV109, 2011 WL 2550850 (N.D.W. Va. June 27,
2011); Link Telecomms. v. Sapperstein, 119 F. Supp. 2d 536, 542 (D. Md.
2000); see also Kaneshiro v. N. Am. Co. Life and Health Ins., 496 F.
Supp. 452, 462 (D. Hawaii 1980) (abrogated on other grounds) (explaining
that the burden must remain on the defendant because he is the only party
with an interest in seeking access to a federal court of limited
jurisdiction).
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DIJKSTRA v. CARENBAUER, ET AL
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MEMORANDUM OPINION AND ORDER
[i]f the case stated by the initial pleading is not
removable, a notice of removal may be filed within thirty
days after receipt by the defendant, through service or
otherwise, of a copy of an amended pleading, motion,
order or other paper from which it may first be
ascertained that the case is one which is or has become
removable.
28 U.S.C. § 1446(b)(1), (3) (emphasis added).
The term “other paper” is broad enough to include most written
information received by the defendant, “whether communicated in a
formal or informal manner.” Yarnevic v. Brink’s, Inc., 102 F.3d
753, 755 (4th Cir. 1996). This includes settlement demands and
answers to interrogatories. See Lovern v. Gen. Motors, Corp., 121
F. 3d. 160, 163 (4th Cir. 1997); Link Telecomms. v. Sapperstein,
119 F. Supp. 2d 536, 542 (D. Md. 2000).4
IV.
Here, the question is whether the defendants timely removed
this case on October 28, 2011, or, as Dijkstra contends, could have
ascertained from pleadings and “other paper” sometime prior to
September 29, 2011, that the amount in controversy exceeded $5
million.
4
Of note, although 28 U.S.C. § 1446(c) generally prohibits removal
based on diversity more than one year after commencement of the action,
CAFA has eliminated this one-year limitation. 28 U.S.C. § 1453.
Additionally, even if CAFA's threshold jurisdictional requirements are
met, remand is required where the case meets certain exceptions, which
are not applicable here. 28 U.S.C. § 1332(d)(4).
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DIJKSTRA v. CARENBAUER, ET AL
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MEMORANDUM OPINION AND ORDER
The Fourth Circuit has adopted an objective test to determine
the meaning of the phrase “from which it may first be ascertained”
in § 1446(b)(3):
[W]e will not require courts to inquire into the
subjective knowledge of the defendant, an inquiry that
could degenerate into a mini-trial regarding who knew
what and when. Rather, we will allow the court to rely on
the face of the initial pleading and on the documents
exchanged in the case by the parties to determine when
the defendant had notice of the grounds for removal,
requiring that those grounds be apparent within the four
corners of the initial pleading or subsequent paper.
Lovern, 121 F.3d at 162 (emphasis added) (citing Foster v. Mut.
Fire, Marine & Inland Ins. Co., 986 F.2d 48, 53-54 (3d Cir. 1993)
(“[T]he relevant test is not what the defendants purportedly knew,
but what these documents said.)); see also Chapman v. Powermatic,
Inc., 969 F.2d 160, 163 (5th Cir. 1992) (adopting same test) (“[I]t
promotes certainty and judicial efficiency by not requiring courts
to
inquire
into
what
a
particular
defendant
may
or
may
not
subjectively know.”).
Some courts applying Lovern’s objective test have concluded
that pleadings or other paper that merely provide “a clue” removal
is available trigger the thirty-day clock for timely removal. See
Stenger v. Carelink Healthplans, Inc., No. 5:10CV109, 2011 WL
2550850, at *2 (N.D.W. Va. June 27, 2011) (Stamp, J); King v.
Homeside Lending, Inc., No. 2:03-2134, 2007 WL 1009383, at *3
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DIJKSTRA v. CARENBAUER, ET AL
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MEMORANDUM OPINION AND ORDER
(S.D.W.
Va.
Mar.
30,
2007)
(Copenhaver,
J.);
and
Link
Telecommunications, 119 F. Supp. 2d at 544 (Harvey, J.). Other
courts have adopted a bright-line test and rejected the notion that
a
defendant
should
have
to
scrutinize
a
case
to
determine
removability where the initial pleading is indeterminate. See
Dugdale v. Nationwide Mutual Fire Insurance Co., No. 4:05CV138,
2006 WL 335628, at *6 (E.D. Va. Feb. 14, 2006).
Courts adopting the “clue” test have relied heavily on the
analysis in Kaneshiro v. North American Company for Life and Health
Insurance, 496 F. Supp. 452, 460 (D. Hawaii 1980), where the
district court looked “beyond the pleadings” to determine when the
thirty-day clock for timely removal begins:
[T]here appears to be a line of support for placing on
the defendant desiring removal the burden of scrutinizing
the plaintiff’s initial pleading, even if it is
indeterminate on its face, and of removing within 30
days, at least unless the initial pleading provides ‘no
clue’ that the case is actually removable.
Id. (emphasis added). From this perspective, “even if the other
paper is ‘vague,’ as long as it provides at least some ‘clue’ that
federal claims are asserted, the thirty day time period for removal
begins to run.” Stenger, 2011 WL 2550850, at *2.
In Dugdale, on the other hand, the court required that the
grounds for removal be apparent within the four corners of the
initial pleading or subsequent paper. However, a defendant could
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DIJKSTRA v. CARENBAUER, ET AL
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MEMORANDUM OPINION AND ORDER
not ignore other objective information establishing a federal claim
that it had received in conjunction with the lawsuit. Dugdale, 2006
WL 335628 at *5.
The Fourth Circuit has never adopted Kaneshiro’s “clue” test.
Moreover, the Court of Appeals for the Ninth Circuit expressly
rejected it in Harris v. Bankers Life and Casualty Co., 425 F.3d
689, 698 (9th Cir. 2005), observing that “in the twenty-five years
since Kaneshiro was decided, no federal circuit court of appeals
has embraced its rationale.” Id. Furthermore, since “notice of
removability under § 1446(b) is determined through examination of
the
four
corners
of
the
applicable
pleadings,
not
through
subjective knowledge or a duty to make further inquiry,” Harris
concluded that its interpretation was consistent with the test
articulated by the Fourth Circuit in Lovern. Harris, 425 F.3d at
694. Thus, at least in the view of the Ninth Circuit, the “clue”
test and its subjective inquiry regarding “who knew what when,” is
incompatible with Lovern’s objective standard. Id.; Lovern, 121
F.3d at 162.
V.
A bright-line test is consistent with the canon of case law
that instructs courts to construe removal statutes narrowly in
favor of remand, see Mulcahey, 29 F.3d at 151 (citing Shamrock Oil
11
DIJKSTRA v. CARENBAUER, ET AL
5:11CV152
MEMORANDUM OPINION AND ORDER
& Gas Corp. v. Sheets, 313 U.S. 100, 109 (1941)), and also guards
against premature and protective removals. Furthermore, it ensures
that removal only occurs once the facts supporting removal are
evident, thereby minimizing the potential for a “cottage industry
of removal litigation.” Harris, 425 F.3d at 698.
A.
Applying a bright-line approach to the facts here leads to the
conclusion that the defendants could not have ascertained that the
amount in controversy exceeded $5 million based upon either the
August 19th demand letter or the parties’ August 23rd and 24th
interrogatory
responses.
Dijkstra’s August 19th
demand letter
notified the defendants that the class with potential claims
against Wilshire
consisted
of
640
members,
each
of
whom was
demanding $1000, and that some members were seeking additional
relief,
including
attorneys’
fees
and
the
cancellation
of
foreclosure debts. The letter did not identify specific class
members, the value of their debts, or how many would be seeking
this additional relief. Therefore, within its four corners, the
letter demanded only $640,000, plus an indeterminate amount of
additional damages.
Nor is there evidence that the defendants ignored other
objective information when evaluating whether this demand letter
12
DIJKSTRA v. CARENBAUER, ET AL
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MEMORANDUM OPINION AND ORDER
provided a proper basis for removal. Unlike the facts in Dugdale,
where the defendant possessed objective knowledge of a specific
insurance policy from which it could have ascertained that the
plaintiff’s case involved a federal claim, the defendants here had
no such information to illuminate the contents of Dijkstra’s August
19th demand letter, which did not reference specific mortgages or
loan accounts, and from which the defendants could not readily have
known the circumstances of 640 unnamed class members, or the value
of their potential damages. See 2006 WL 335628 at *1. Accordingly,
in this Court’s view, as of August 19, 2011, the defendants could
have ascertained an amount in controversy equal only to the sum of
Dijkstra’s demands from May 25th, July 27th, and August 19th, which
totaled $1,051,000, far short of CAFA’s $5 million threshold.
B.
While
parties’
less
explicit
interrogatory
than
Dijkstra’s
responses
on
demand
August
letters,
23rd
and
the
24th
nonetheless did communicate important information relevant to the
amount in controversy. From the table of 851 loans closed by nonlawyers, the defendants could have ascertained that HLC faced 851
potential claims.5 They also could have ascertained that each
5
The defendants argue that, because Dijkstra’s discovery response
answered in the first person rather than expressly on behalf of the
class, they could not have known that all class members would be seeking
13
DIJKSTRA v. CARENBAUER, ET AL
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MEMORANDUM OPINION AND ORDER
claimant intended to seek maximum statutory damages under the
WVCCPA,
as
well
as
compensatory
damages
for
annoyance,
inconvenience, and emotional distress, punitive damages, attorneys’
fees, and loan forgiveness.
Nothing within the four corners of these discovery responses,
however, expressly stated an amount in controversy. Thus, it was
necessary for the defendants to determine whether these documents
illuminated other objective information from which they could then
have ascertained that the case was removable. See Dugdale, 2006 WL
335628 at *6.
The defendants were responsible for knowing the applicable
law, and that the WVCCPA authorizes up to $4500 for each statutory
violation. As of August 24, they could have ascertained that the
851 class members would seek as much as $3,829,500 in statutory
violations. See Caufield v. EMC Mortgage Corp., No. 2:11CV244, 2011
WL 2947039, at *1 n.1 (S.D.W. Va. Jul. 19, 2011) (finding that
maximum inflation-adjusted penalty under § 46A-5-101 is $4500 per
violation). As Dijkstra has conceded, however, the value of the
remaining damages was not “readily ascertainable.” (Dkt. No. 23-1
at 2). Thus, even viewing the plaintiff’s argument most generously,
similar damages. Given that all parties understand this case to be a
putative class action, that argument is unconvincing.
14
DIJKSTRA v. CARENBAUER, ET AL
5:11CV152
MEMORANDUM OPINION AND ORDER
as of August 29, 2011,the defendants could have ascertained at most
an amount in controversy equal only to $4,880,500.
Accordingly, from the facts before it, the Court concludes
that this case became removable only after the defendants received
Dijkstra’s
September
29th
letter
demanding
$4,255,000.
When
considered with all the other relevant information known to the
defendants, it was this demand letter that, for the first time, put
them on notice that the amount in controversy exceeded $5 million.
The defendants’ notice of removal therefore was timely and the
plaintiff’s motion to remand is DENIED.
It is so ORDERED.
The Court directs the Clerk to transmit copies of this Order
to counsel of record.
DATED: May 1, 2012
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE
15
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