Opinion
03-CV-5059(JMR/FLN)
May 12, 2004
ORDER
Plaintiffs, Richard and Beth Howell, move to remand this case for lack of subject matter jurisdiction, and request costs, expenses, and attorneys' fees incurred in bringing this motion. Defendants oppose the motion, claiming this action is correctly venued because plaintiffs' complaint states a cause of action "arising under" federal law, namely, the Truth-in-Lending Act ("TILA") and the Home Owner's Equity Protection Act ("HOEPA"). The Court finds plaintiffs' complaint does not allege a federal cause of action; accordingly, the case is hereby remanded to state court.
I. Background
In 1997, plaintiffs purchased a home for $48,900 at 831 Agate Street, St. Paul, Minnesota. In 2001, Washington Mutual, the mortgagor, commenced foreclosure. A sheriff's sale was conducted on November 21, 2002, and the redemption period expired May 21, 2003.
Plaintiffs allege that "in early 2003," defendants Grant Holding, LLC, its owner Hendrie C. Grant, and Cutler Mortgage Company, acting at the behest of Hendrie Grant, induced them to sign "several sham mortgages in favor of Cutler Mortgage Company." Plaintiffs further claim that by misrepresenting its status as a creditor, Cutler Mortgage was able to claim a right of redemption, and redeemed the mortgage being foreclosed on June 9, 2003.
Plaintiffs also claim they were induced into signing a "Transaction Agreement" and quit claim deed purporting to convey their home to Grant Holding. In late June or early July of 2003, Grant Holding is said to have served a notice demanding that plaintiffs vacate their home no later than July 31, 2003. Grant Holding commenced eviction proceedings in Ramsey County District Court when plaintiffs failed to vacate the home. A hearing was conducted on August 20, 2003, at which plaintiffs informed the court of their intention to commence a separate civil action seeking an injunction of the eviction.
On August 22, 2003, plaintiffs brought a civil action in the Ramsey County District Court alleging six causes of action, namely, unfair and deceptive trade practices; promissory estoppel; breach of fiduciary duty; violations of standards of conduct; unjust enrichment; and fraudulent misrepresentation. All claims are based on Minnesota statutes and common law. Plaintiffs also filed a motion for a temporary restraining order enjoining the eviction action in connection with their complaint. The injunction hearing was scheduled for August 25, 2003, in Ramsey County District Court, but was removed to this Court on August 22, 2003, pursuant to 28 U.S.C. § 1441. Defendants, in their notice of removal, allege that federal question jurisdiction under 28 U.S.C. § 1331 is proper, because in their view, plaintiffs brought claims under the TILA and the HOEPA. Defendants further allege plaintiffs' remaining claims have the same factual basis as the TILA claim, and therefore, supplemental jurisdiction over the remaining claims would be proper under 28 U.S.C. § 1367. The eviction action has been postponed pending resolution of the motion to remand.
II. Analysis
An action filed in state court is removable if the court has original jurisdiction "founded on a claim or right arising under the Constitution, laws, or treaties of the United States. . . ." 28 U.S.C. § 1441(b). "Determining when a suit arises under federal law is customarily determined by applying the well-pleaded complaint rule `which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint.'"Moriconi v. ATT Wireless PCS, LLC, 280 F. Supp.2d 867, 871 (E.D. Ark. 2003) (quoting Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987)). This determination is made without reference to any anticipated defenses or responsive pleadings. Gaming Corp. of Am. v. Dorsey Whitney, 88 F.3d 536, 542-43 (8th Cir. 1996). Therefore, a plaintiff, as master of the complaint, is free to avoid removal by pleading only state law claims. Id. at 542 (citing Caterpillar, Inc., 482 U.S. at 392). This rule, however, is not without limits, because it is equally true that "a plaintiff may not defeat removal by omitting to plead necessary federal questions in a complaint." Franchise Tax Board of California v. Construction Laborers Vacation Trust, 463 U.S. 1, 22 (1983) (citations omitted).
The U.S. Supreme Court recently defined the proper bases for removal, noting that "a state claim may be removed to federal court in only two circumstances — when Congress expressly so provides . . ., or when a federal statute wholly displaces the state-law cause of action through complete preemption." Beneficial National Bank et al., v. Anderson, 539 U.S. 1 (2003). Here, defendants do not allege that either one of these circumstances warrant removal, and the Eighth Circuit Court of Appeals decision in Magee v. Exxon Corp. forecloses any argument that complete preemption applies in the context of the TILA. 135 F.3d 599, 602 (8th Cir. 1998). Defendants also make no claim that the HOEPA, an amendment to the TILA, completely preempts state law.
As an alternative, defendants propose that plaintiffs' claim is not a state claim, but rather arises under the laws of the United States because it mentions the TILA, the HOEPA, and "federal laws." This, according to defendants, justifies removal. The Court disagrees. In order to find that plaintiffs' claim arises under the laws of the United States, defendants must establish that "some substantial, disputed question of federal law is a necessary element of one of the well-pleaded state claims, or that one of the other claims is `really' one of federal law." Franchise Tax Board of California, 463 U.S. at 13. This rule however does nothing to "disturb the long-settled understanding that the mere presence of a federal issue in a state cause of action does not automatically confer federal-question jurisdiction." Merrel Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 813 (1986).
Here, the Court finds plaintiffs' state law claims are not federal questions artfully pleaded, nor do the references to the TILA, the HOEPA, and "federal laws" form "necessary elements" of plaintiffs' claims. It is undisputed that plaintiffs' complaint alleges six different causes of action all seeking redress under Minnesota common law and various state statutes. "Count V" of the complaint is the only count that even references any federal law and appears to be the claim defendant believes justifies removal. Accordingly, this dispute turns on one basic question: Does the TILA, the HOEPA, or any other federal law form a necessary element of Count V of plaintiffs' complaint? The answer to this question is a resounding no.
Count V alleges violations of various "prohibited practices" for mortgage originators and brokers. Plaintiff seeks redress for these violations under Minn. Stat. § 58.13 alleging defendants violated the standards of conduct "by failing to comply with the requirements of . . . state and federal laws relating to mortgage lenders, including . . . federal laws such as the [TILA], the [HOEPA], and state laws such as Minn. Stat. §§ 47.20 to 47.208." Pl's. Compl. at Count V. The Complaint goes on to allege defendants also violated the statute's established standards of conduct by making misrepresentations and omissions, and by publishing, disseminating, circulating, or causing to be made false, deceptive, or misleading statements or representations relating to the business of residential mortgages. See, Pl's. Compl. at Count V.
It is abundantly clear that the claim alleged in Count V is supported by numerous alternative theories of state law. These theories include misrepresentations, fraud, misleading statements, and violation of other state laws. In other words, plaintiffs' success on the merits as to Count V of the complaint does not turn on the construction of the TILA, the HOEPA, or any other federal law. See Gully v. First Nat. Bank In Meridian, 299 U.S. 109, 112 (1936) (a claim arising under the laws of the United States "must be such that it will be supported if the Constitution or the laws of the United States is given one construction or effect, and defeated if they receive another). It is axiomatic, as here, that "when a claim can be supported by alternative and independent theories — one of which is a state law theory and one of which is a federal law theory — federal question jurisdiction does not attach because federal law is not a necessary element of the claim. Rains v. Criterion, 80 F.3d 339, 346 (9th Cir. 1996) (citing Christianson v. Colt Industries Operating Corp., 486 U.S. 800 (1988)) (so holding in the context of § 1338 jurisdiction, but explicitly extending this approach for determining federal question jurisdiction in other contexts). As a result, defendants' contention that federal question jurisdiction exists because Count V of plaintiffs' complaint is necessarily federal in nature fails.
Defendants also contend that removal is proper because Minnesota law precludes private causes of action under the auspices of Minn. Stat. § 58.13, and because plaintiffs are seeking damages not authorized by state law. Defendants argue that this evinces plaintiffs' intent to mask what in reality are federal claims through artful pleading. This argument is unavailing. The availability of a remedy, or the right to bring suit under Minnesota law, is not for this Court to decide, and if plaintiffs' claims have no prospect of success, then the Minnesota state court may dismiss the claims upon remand. See Terrebone Homecare, Inc. v. SMA Health Plan, Inc., 271 F.3d 186, 189 (5th Cir. 2001) (per curiam); Blair v. Source One Mortgage Services Corp., 925 F. Supp. 617, 622 (D. Minn. 1996). This Court, however, cannot say that failure to sufficiently allege a state law action transforms the same action into a federal question case.
III. Conclusion
In sum, plaintiffs, as masters of their complaint, chose to seek relief under applicable Minnesota statutes and common law. Defendants' attempts to characterize plaintiffs' state law claims as necessitating a resolution of substantial questions of federal law are unsupported by the facts underlying this dispute, and are contrary to plaintiffs' proffered intentions.
Accordingly IT IS ORDERED that:
1. Plaintiffs' motion to remand this action to the Ramsey County District Court, Second Judicial District Court, [Docket No. 5] is granted.
2. Plaintiff request for costs, expenses, and attorney's fees is denied.