Opinion
5:22-CV-326-FL
02-27-2023
CPI AMHERST SFR and MAIN STREET RENEWAL, Plaintiffs, v. TAMEKA ALEXANDER, Defendant.
ORDER AND MEMORANDUM AND RECOMMENDATION
Brian S. Meyers United States Magistrate Judge
This pro se case is before the court on the application by defendant Tameka Alexander (“defendant” or, in context, “Ms. Alexander”) to proceed in forma pauperis [D.E. 1] pursuant to 28 U.S.C. § 1915(a)(1) (“application”), which defendant filed in conjunction with a notice of removal ([D.E. 1-1] at 4-5) of this state eviction action from Wake County District Court. This case is also before the court for a frivolity review pursuant to 28 U.S.C. § 1915(e)(2)(B). The application and the frivolity review were referred to the undersigned magistrate judge pursuant to 28 U.S.C. § 636(b)(1)(A) and (B), respectively. The court finds that defendant has demonstrated appropriate evidence of inability to pay the required court costs, and the application to proceed in forma pauperis will be allowed. However, for the reasons set forth below, it is recommended that this case be remanded to the state court in Wake County, North Carolina.
ORDER ON IN FORMA PAUPERISMOTION
To qualify for in forma pauperis status, a person must show that she “cannot because of [her] poverty pay or give security for the costs . . . and still be able to provide [herself] and dependents with the necessities of life.” See Adkins v. E.I. DuPont de Nemours & Co., 335 U.S. 331, 339 (1948) (omission in original) (internal quotation marks omitted). The court has reviewed defendant's application and finds that she has adequately demonstrated her inability to prepay the required court costs. Her application to proceed in forma pauperis [D.E. 1] is therefore ALLOWED.
MEMORANDUM AND RECOMMENDATION ON FRIVOLITY REVIEW
I. BACKGROUND
On August 18, 2022, defendant filed in this court a “Proposed Notice of Removal” ([D.E. 1-1] at 4-5), seeking to remove to this court pursuant to 28 U.S.C. § 1452 an eviction action for defendant's “home, possession of the premises and attorney fees.” [D.E. 1-1] at 4. Defendant claims that this court has jurisdiction over this matter as “Section 27 of the Exchange Act grants federal courts exclusive jurisdiction over all ‘equity action' brought to enforce liability created by Exchange Act [sic].” [D.E. 1-1] at 2. She also argues that removal is proper under 28 U.S.C. § 1409 and 28 U.S.C. § 1331. [D.E. 1-1] at 4.
Although defendant's handwritten complaint is difficult to read, defendant appears to allege as follows:
While Ms. Alexander is the defendant seeking removal in this case, it appears that she describes herself as the “Plaintiff” in her handwritten complaint form narrative. See [D.E. 1-1] at 1-3. The court, therefore, construes references to “Defendent” [sic] in the complaint form ([D.E. 1-1] at 1-3) as references to CPI Amherst SFR and/or Mainstreet Renewal.
Unauthorized use of Plaintiff's securities and profitting [sic] off market. Defendant filed 1099C IRS Form with IRS creating certificate of indebtedness but failed to provide to consumer for proper filing. Defendent [sic] has committed fraud as summary ejectment was filed in state court when all payments were made by cancellation of debt on 1099C filed and securities earned off of stock market. Defendant is in violation of the security agreement signed by CPI Amherst and Security Exchange. Defendant transferred Plaintiff [sic] lease on open market for profit.[D.E. 1-1] at 2.
In addition, in her notice of removal, defendant alleges the following additional facts:
1. On 08/11/2022, an action was filed against the DEFENDANT in the WAKE COUNTY DISTRIC [sic] CLERK OFFICE Court of STATE OF NORTH CAROLINA[.] This action, [sic] now pending at docket number 22CVM3094 2. In the above-referenced action the Plaintiff is seeking WRIT OF EVICTION on the Debtor's home, possession of the premises, and attorney fees.
3. The Debto/DEFENDANT [sic] has answered the complaint raising several defenses.
4. On MAY 17, 2022 the Debto/DEFENDANT [sic] filed a petition for relief from
US BANKRUPTCY Court under chapter 7 of the Bankruptcy Code.
5. On August 18, 2022 Tameka Alexander filed Federal motion [sic] under nature of suit code 480, 850.
6. The Debtor/DEFENDANT has a right to remove the above-described state court action because it is a civil action over which this Court has jurisdiction and which is removable under 28 U.S.C. § 1409, 28 USC 1331.
7. The removed action would be a core proceeding in the FEDERAL CIVIL CLAIM FILED IN U.S. COURTS.
8. A copy of all process and pleadings in the state court action is attached hereto
WHEREFORE, the Debtor prays that the case of SUMMARY EJECTMENT be removed to this Court DUE TO FEDERAL COURTS HAVE [SIC] EXCLUSIVE JURISDICTION OVER CASES OF EQUITY AND CHAPTER 27 EXCHANGE ACTId. at 4.
The undersigned takes judicial notice of the fact that the bankruptcy proceedings referenced in defendant's notice of removal were filed in the United States Bankruptcy Court for the Eastern District of North Carolina on May 17, 2022, in the matter In Re: Tomeka Lashawn Alexander, No. 22-01060-5-DMW (Bankr. E.D. N.C. ). See 22-01060-5-DMW, [DE-1]. Defendant's case was dismissed by the Bankruptcy Court on June 17, 2022, due to a failure to comply with the directives of that court and the requirements of the United States Bankruptcy Code, as well as failure to attend a scheduled hearing. See 22-01060-5-DMW, [DE-40] at 3.
II. APPLICABLE LEGAL STANDARDS FOR FRIVOLITY REVIEW
After allowing a party to proceed in forma pauperis, as here, the court must conduct a frivolity review of the case pursuant to 28 U.S.C. § 1915(e)(2)(B). In such a review, the court must determine whether the action is frivolous or malicious, fails to state a claim upon which relief can be granted, or seeks monetary relief from an immune defendant, and is thereby subject to dismissal. 28 U.S.C. § 1915(e)(2)(B); see Denton v. Hernandez, 504 U.S. 25, 31-33 (1992) (standard for frivolousness). A case is frivolous if “it lacks an arguable basis either in law or fact.” Neitzke v. Williams, 490 U.S. 319, 325 (1989).
In evaluating frivolity specifically, a pro se party's pleadings are held to “less stringent standards” than those drafted by attorneys. White v. White, 886 F.2d 721, 722-23 (4th Cir. 1989). Nonetheless, the court is not required to accept a pro se party's contentions as true. Denton, 504 U.S. at 32. The court is permitted to “pierce the veil of the complaint's factual allegations and dismiss those claims whose factual contentions are clearly baseless.” Neitzke, 490 U.S. at 327. Such baseless claims include those that describe “fantastic or delusional scenarios.” Id. at 328. Provided that a party's claims are not clearly baseless, the court must weigh the factual allegations in the party's favor in its frivolity analysis. Denton, 504 U.S. at 32. The court must read the complaint carefully to determine if a party has alleged specific facts sufficient to support the claims asserted. White, 886 F.2d at 724.
Under Rule 8 of the Federal Rules of Criminal Procedure, a pleading that states a claim for relief must contain “a short and plain statement of the grounds for the court's jurisdiction . . . [and] a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(1), (2). Case law explains that the factual allegations in the complaint must create more than a mere possibility of misconduct. Coleman v. Md. Ct. Appeals, 626 F.3d 187, 190-91 (4th Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Likewise, a complaint is insufficient if it offers merely “labels and conclusions,” “a formulaic recitation of the elements of a cause of action,” or “naked assertion[s] devoid of further factual enhancement.” Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-57 (2007) (alterations in original) (internal quotation marks omitted)).
A court may also consider subject matter jurisdiction as part of the frivolity review. See Lovern v. Edwards, 190 F.3d 648, 654 (4th Cir. 1999) (holding that “[d]etermining the question of subject matter jurisdiction at the outset of the litigation is often the most efficient procedure”); Hill v. Se. Reg'l Med. Ctr., No. 7:19-CV-60-BO, 2019 WL 7041893, at *2 (E.D. N.C. Oct. 21, 2019), report and recommendation adopted, No. 7:19-CV-60-BO, 2019 WL 7163434 (E.D. N.C. Dec. 20, 2019), aff'd, 818 Fed.Appx. 261 (4th Cir. 2020) (discussing the lack of federal question jurisdiction and diversity jurisdiction during frivolity review as a basis for dismissal). “Federal courts are courts of limited jurisdiction and are empowered to act only in those specific instances authorized by Congress.” Bowman v. White, 388 F.2d 756, 760 (4th Cir. 1968). The presumption is that a federal court lacks jurisdiction in a particular case unless it is demonstrated that jurisdiction exists. Lehigh Min. & Mfg. Co. v. Kelly, 160 U.S. 327, 337 (1895). The burden of establishing subject matter jurisdiction rests on the party invoking jurisdiction, here the defendant. Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982) (“The burden of proving subject matter jurisdiction . . . is on . . . the party asserting jurisdiction.”). The complaint must affirmatively allege the grounds for jurisdiction. Bowman, 388 F.2d at 760. If the court determines that it lacks subject matter jurisdiction, it must dismiss the action. Fed.R.Civ.P. 12(h)(3). One basis for subject matter jurisdiction, so-called federal question jurisdiction, is that a claim arises under the Constitution, laws, or treaties of the United States. 28 U.S.C. § 1331.
III. LACK OF SUBJECT MATTER JURISDICTION
Having found that defendant is financially eligible to proceed in forma pauperis, the court must now undertake a frivolity review of this case, pursuant to 28 U.S.C. § 1915(e)(2)(B). A court may consider subject matter jurisdiction as part of the frivolity review. See Lovern 190 F.3d at 654. Defendant claims federal question jurisdiction under 28 U.S.C. § 1331 and Securities Exchange Act of 1934, as amended, (the “Exchange Act”) § 27, which is codified as 15 U.S.C. § 78aa. [D.E. 1-1] at 2, 4. In her civil cover sheet, she additionally cites to 18 U.S.C. § 1348 as the basis for her federal question jurisdiction. See [DE-1-2] (Civ. Cover Sheet § VI Cause of Action - listing “18 U.S.C. § 1348,” “28 U.S.C. § 1331” and “Section 27 Exchange Act” as causes of action).
28 U.S.C. § 1331 is the statute codifying federal question jurisdiction and is not a source of substantive rights itself. The other statues cited to support federal question jurisdiction are also without merit, as discussed below.
“The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331.
A. Lack of subject matter jurisdiction under the Exchange Act and 18 U.S.C. § 1348
Defendant has not alleged facts that raise a federal question claim under the Exchange Act § 27. The Exchange Act § 27, in relevant part, provides:
The district courts of the United States and the United States courts of any Territory or other place subject to the jurisdiction of the United States shall have exclusive jurisdiction of violations of this chapter or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by this chapter or the rules and regulations thereunder.15 U.S.C. § 78aa(a).
The Supreme Court has held that “§ 27's language is best read to capture both suits brought under the Exchange Act and the rare suit in which a state-law claim rises and falls on the plaintiff's ability to prove the violation of a federal duty.” Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, 578 U.S. 374, 136 S.Ct. 1562, 1564, 194 L.Ed.2d 671 (2016). Defendant's complaint neither alleges any violations of the Exchange Act, nor identifies a federal duty that has been violated. See generally [D.E. 1-1].
Similarly, defendant has not plausibly alleged a violation of 18 U.S.C. § 1348. 18 U.S.C. § 1348 provides:
Whoever knowingly executes, or attempts to execute, a scheme or artifice
(1) to defraud any person in connection with any security of an issuer with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l) or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)); or
(2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property in connection with the purchase or sale of any security of an issuer with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l) or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d));
shall be fined under this title, or imprisoned not more than 25 years, or both.18 U.S.C. § 1348.
18 U.S.C. § 1348 is a criminal securities and commodities fraud statute and does not create a private right of action. See Donaldson v. Severn Sav. Bank, F.S.B., No. CV JKB-15-901, 2015 WL 7294362, at *2 (D. Md. Nov. 18, 2015) (noting that 18 U.S.C. § 1348 and other similar statutes are federal criminal statutes and do not prescribe a civil penalty). Even if defendant had built her claim around the Exchange Act fraud provision that does allow a private right of action, Rule10(b), codified as 15 U.S.C. § 78j(b), the fraud provision of the Exchange Act is limited to buyers and sellers of the relevant security. See Marsh v. Armada Corp., 533 F.2d 978, 981-82 (6th Cir. 1976) (“Standing is established by allegations that plaintiffs bought or sold shares of the stock in question within a reasonable period of time after the allegedly fraudulent conduct occurred to support an inference of reliance.”); Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 730, 95 S.Ct. 1917, 1923, 44 L.Ed.2d 539 (1975) (“[T]he plaintiff class for purposes of a private damage action under s 10(b) and Rule 10b-5 was limited to actual purchasers and sellers of securities.”)
The indebtedness in defendant's complaint appears to relate to her rent obligation, which is not a “liability or duty created by [the Exchange Act].” 15 U.S.C. § 78aa(a). IRS Form 1099-C is a federal tax form used to report cancellation of indebtedness to the Internal Revenue Service (“IRS”) and does not create “a liability or duty” under the Exchange Act. See 26 CFR § 1.6050P-1(a) (requiring relevant entities to report cancellation of indebtedness of an individual on a Form 1099-C). While the Internal Revenue Code does create certain private causes of action, see, e.g., 26 U.S.C. §§ 7431-37, the failure to issue or file a 1099-C does not create any such private cause of action. See 26 CFR § 1.6050P-1(a), (f)-(g); 26 U.S.C. § 6721-24 (showing only penalties, but no private cause of action with respect to failures to report or furnish a 1099-C.).
Defendant's allegation of “unauthorized use of [her] securities” is a conclusory statement as she nowhere indicates what the securities are, or the nature of the unauthorized use. Iqbal, 556 U.S. at 678 (holding that a complaint is insufficient if it offers merely “labels and conclusions,” “a formulaic recitation of the elements of a cause of action,” or “naked assertion[s]” devoid of “further factual enhancement.” (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks omitted))). Similarly, while defendant claims that “[CPI Amherst] is in violation of the securities agreement signed by CPI Amherst and Security Exchange” ([D.E. 1-1] at 2), nowhere does she allege (i) how CPI Amherst has violated this agreement; (ii) how she, as a third party, would have standing to sue if such a violation had occurred; or (iii) what the basis for federal jurisdiction would be for what appears to be a breach of contract claim.
To the extent that defendant's allegation that her “lease [was transferred] on the open market for profit” ([D.E. 1-1] at 2) could be construed as a claim that her rent obligations provided collateral security for a syndicated instrument that was sold to third party investors on the open market, defendant would still have failed to allege any facts creating a cause of action under the Exchange Act. See Beaudett v. City of Hampton, 775 F.2d 1274, 1278 (4th Cir. 1985) (showing that the principles requiring generous construction of pro se complaints are not without limits and the district courts are not required “to conjure up questions never squarely presented to them.”)
The only fraud that defendant expressly alleges is that “summary ejectment was filed in state court when all payments were made by cancellation of debt on 1099-C and securities earned on stock market.” [D.E. 1-1] at 2. Even if defendant is alleging that she was improperly evicted because of the underlying debt obligations were settled, this does not involve a liability or duty created by Exchange Act, or otherwise represent a federal question. An eviction proceeding absent a federal question or diversity jurisdiction, does not have federal jurisdiction. See Lhnh Northwoods Townhomes NC, LLC v. Ajifowobaje, No. 5:17-CV-265-FL, 2017 WL 5180973, at *2 (E.D. N.C. Oct. 11, 2017), report and recommendation adopted, No. 5:17-CV-265-FL, 2017 WL 5178037 (E.D. N.C. Nov. 8, 2017) (denying removal of an eviction proceeding where there was no federal question or diversity jurisdiction); see also Cranberry Fin., LLC v. Ctr. of Love Mission Church, No. 5:10-CV-524-FL, 2010 WL 5353361, at *2 (E.D. N.C. Dec. 15, 2010) (concluding that “[p]laintiff's foreclosure action and the later eviction proceedings could not have been brought in [federal] court.”)
Even if defendant had valid counterclaims based on federal civil rights law, “actions in which defendants merely claim a substantive federal defense to a state-law claim do not raise a federal question.” Id. (quoting In re Blackwater Sec. Consulting, LLC, 460 F.3d 576, 584 (4th Cir. 2006)); see also KBS Legacy Partners Grand, LLC v. Williams, No. 1:16CV1302, 2017 WL 829785, at *2 (M.D. N.C. Jan. 11, 2017) (rejecting argument that federal-question jurisdiction existed because defendant intended to offer plaintiff's noncompliance with the Civil Rights Act of 1968 as a defense), adopted by 2017 WL 822104 (M.D. N.C. Mar. 2, 2017); Eure v. NVF Co., 481 F.Supp. 639, 642 (E.D. N.C. 1979) (“The basis of federal question jurisdiction [ ] must appear upon the face of the state court complaint, and it cannot be supplied by reference to the answer or petition.” (citing Gully v. First Nat'l Bank, 299 U.S. 109 (1936))).
B. No jurisdiction under § 1334
28 U.S.C. § 1334 provides federal district courts “original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.” 28 U.S.C. § 1334(b) (emphasis added).
The bankruptcy proceedings referenced in defendant's notice of removal, In Re: Tomeka Lashawn Alexander, No. 22-01060-5-DMW (Bankr. E.D. N.C. ), were filed on May 17, 2022 (see 22-01060-5-DMW, [DE-4] at 1) in the United States Bankruptcy Court for the Eastern District of North Carolina, and were dismissed by that court on June 17, 2022, due to a failure to comply with the directives of that court and the requirements of the United States Bankruptcy Code, as well as failure to attend a scheduled hearing. See 22-01060-5-DMW, [DE-4] at 1; [DE-40] at 3. As the title 11 proceedings were dismissed on June 17, 2022, there were no pending title 11 proceedings when the in forma pauperis application was filed on August 18, 2022. Accordingly, there can be no federal question jurisdiction under § 1334.
Similarly, defendant's claim that her action would represent a “core proceeding” in federal court, is also misplaced as there is no underlying title 11 bankruptcy proceeding to which this matter could be considered “core”. 28 U.S.C. § 157(b)(1) (“Bankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11.”) (emphasis added).
C. Improper removal under § 1452 improper venue under § 1409
Given the lack of subject matter jurisdiction, as discussed above, defendant's references to removal and venue provisions are also misplaced. 28 U.S.C. § 1452 provides in relevant part:
(a) A party may remove any claim or cause of action in a civil action [with limited exceptions] . . . 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.28 U.S.C. § 1452(a) (emphasis added).
As there is no jurisdiction under §1334, as discussed above, there is no basis for removal. Similarly, transfer of venue under 28 U.S.C. § 1409 is misplaced. § 1409 is a statute governing venue for title 11 bankruptcy proceedings. 28 U.S.C. § 1409(a) (“Except as otherwise provided . . . a proceeding arising under title 11 or arising in or related to a case under title 11 may be commenced in the district court in which such case is pending.”) (emphasis added). As there is no pending title 11 bankruptcy proceeding, 28 U.S.C. § 1409 is inapplicable.
D. No diversity jurisdiction
Finally, there is no basis for the court to exercise its diversity jurisdiction. While the parties appear to be domiciled in different states, the complaint does not state any amount in controversy. See [D.E. 1-1] at 3. Defendant simply requests a return of “all currency going to defendant [sic] over the entire course of the lease.” Id.; see also 28 U.S.C. § 1332 (requiring amount in controversy of $75,000 or more to qualify for diversity jurisdiction).
Even if the amount in controversy were over $75,000, “[a] civil action otherwise removable solely on the basis of the jurisdiction under section 1332(a) of this title may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.” 28 U.S.C. § 1441(b)(2). As defendant is a resident of the Eastern District of North Carolina, this action cannot be removed on the basis of diversity jurisdiction alone. See [D.E. 1-1] at 1 (showing that defendant resides in Raleigh, North Carolina).
Accordingly, because the court lacks subject matter jurisdiction over defendant's claims, it is recommended that the case be remanded to state court.
IV. CONCLUSION
For the foregoing reasons, it is RECOMMENDED that the court enter an order providing that this action is REMANDED to Wake County District Court, pursuant to the court's frivolity review under 28 U.S.C. § 1915(e)(2)(B).
IT IS DIRECTED that a copy of this Order and Memorandum and Recommendation be served on defendant or, if represented, his counsel. Defendant shall have until March 14, 2023 to file written objections to this Memorandum and Recommendation. The presiding district judge must conduct her own review (that is, make a de novo determination) of those portions of the Memorandum and Recommendation to which objection is properly made and may accept, reject, or modify the determinations in the Memorandum and Recommendation; receive further evidence; or return the matter to the magistrate judge with instructions. See, e.g., 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b)(3); Local Civ. R. 1.1 (permitting modification of deadlines specified in local rules), 72.4(b), E.D. N.C.
If a party does not file written objections to the Memorandum and Recommendation by the foregoing deadline, the party will be giving up the right to review of the Memorandum and Recommendation by the presiding district judge as described above, and the presiding district judge may enter an order or judgment based on the Memorandum and Recommendation without such review. In addition, the party's failure to file written objections by the foregoing deadline will bar defendant from appealing to the Court of Appeals from an order or judgment of the presiding district judge based on the Memorandum and Recommendation. See Wright v. Collins, 766 F.2d 841, 846-47 (4th Cir. 1985).