Opinion
IP 4:02-CV-244 B/H.
June 26, 2003.
Order Granting Plaintiff's Motion to Remand
Plaintiff Integra Bank, N.A. ("Integra") moves to remand this case to Ripley Circuit Court arguing that Defendant Charles Robert Greer ("Greer") removed the case improperly because: (1) he had waived the right of removal, (2) the state court final judgment cannot be appealed to a federal district court, and (3) this court does not have subject matter jurisdiction over this dispute. For the reasons set forth below, we GRANT Plaintiff's Motion to Remand.
Procedural History
Greer obtained a 15-year, $24,000 loan for the purchase of real estate from Ripley County Bank on or about November 8, 1996, with payments to begin on the same date. To secure the loan, Greer and Ripley County Bank entered into, and recorded, a mortgage agreement on November 14, 1996. Greer stopped making payments on the loan after May 8, 2000. On September 15, 2000, Integra merged with Ripley County Bank, and Integra, as the successor-in-interest, acquired all legal rights and liabilities with regard to Greer's outstanding loan with the former Ripley County Bank.
On November 26, 2001, Integra filed a complaint in Ripley Circuit Court seeking foreclosure of the mortgage based on Greer's non-payment on the outstanding loan. A copy of the summons and complaint was properly delivered to Greer on December 3, 2001. On January 23, 2002, Greer filed his answer, which included a counterclaim. On November 14, 2002, the Ripley Circuit Court entered judgment for Integra, and a copy of the judgment was received by Greer on November 23, 2002.
No appeal was taken from that judgment. Instead, Greer removed the case to this court on December 16, 2002. Integra's Motion to Remand was timely filed on January 13, 2003.
Standard for Remand
A defendant may remove to federal court a civil action brought in state court if the action is within the original jurisdiction of the district court. 28 U.S.C. § 1441 (2003). Once an action is found to be within the original jurisdiction of the district court, § 1446 governs the process of removal to federal court. Removal must be filed within 30 days "after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based," (hereinafter "original 30-day removal period"). 28 U.S.C. § 1446(b) (2003). If the case is not originally removable, then the removal motion may be filed within 30 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," (hereinafter "new 30-day removal period"). Id.
After a case has been removed to federal court, the plaintiff may move for remand based upon any removal defect. 28 U.S.C. § 1447 (2003). A motion by the plaintiff to remand for a removal defect other than lack of subject matter jurisdiction, such as a timeliness defect, must occur within 30 days after the defendant filed for removal under § 1446. Id. A motion to remand for lack of subject matter jurisdiction may be brought at any time before final judgment. Id.
Legal Analysis
The twofold purpose of both 30-day removal periods under § 1446(b) shapes our analysis of this case. Wilson v. Intercollegiate (Big Ten) Conference Athletic Ass'n, 668 F.2d 962, 965 (7th Cir. 1982). One purpose of the 30-day removal periods is to eliminate the tactical advantage that the defendant would obtain if the defendant could wait to see how the case was unfolding in the state court before removing the case to federal court. Id. The second purpose is to prevent the removal of cases after significant time and resources have been expended by the state court in adjudicating the case. Id. Allowing removal after significant proceedings have occurred is inefficient and wasteful of judicial resources.Integra effected service of process by simultaneously serving a summons and complaint on Greer. When the summons and the complaint are served together, the original 30-day removal period begins to run immediately upon the accomplishment of service of process. Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 354 (1999). In the case at bar, the original 30-day removal period expired approximately 11 months prior to Greer's removal of the case to federal court. Clearly, Greer's removal was belated pursuant to § 1446(b).
A. State Court Final Judgment
Greer's way around this problem of untimely removal is to contend that a new 30-day removal period was triggered upon his receipt of the state court's final judgment, an event that he alleges made a formerly nonremovable case removable because the final judgment constituted an "order," as used in § 1446(b). Greer contends that the final judgment provided him, for the first time, with notice that the foreclosed loan was a Federal Real Estate Settlement Procedures Act (RESPA) loan, and that Integra was required to include in the complaint that the foreclosure was covered by RESPA. Greer contends that because the loan was subject to the protections of RESPA, a federal question exists pursuant to 28 U.S.C. § 1331, and on that basis the case is removable. (Greer did file his removal petition within 30 days after receipt of a copy of the final judgment.)
The principle purpose of RESPA is to "protect home buyers from material non-disclosures in settlement statements and abusive practices in the settlement process." MorEquity, Inc. v. Naeem, 118 F. Supp.2d 885, 900 (N.D. Ill. 2000).
Greer also contends that Integra should have included the Rollover Mortgage Loan Note ("Note") in the complaint, apparently contending that the Note also creates a basis for removal to federal court. However, the Note does not give rise to a federal question because it is not based on a federal law (i.e. the Note is not connected to RESPA or any other federal law). Thus, Greer's reference to the Note's absence from the complaint is immaterial.
Greer relies on Bezy v. Floyd County Plan Comm'n, 199 F.R.D. 308, 313 (S.D. Ind. 2001), to argue that the filing of a complaint is not the only action that begins the 30-day removal periods, which contention we accept, at least to that extent. However, Bezy does not hold that a state court final judgment qualifies as an "order" that would trigger a new 30-day removal period, because the final judgment represents the end of a litigation, not the commencement of or a restart of a litigation, such as with an amendment to the original complaint. The final judgment reflects the claims asserted in the original complaint, which frames the lawsuit clear to its end.
Assuming arguendo that the state issued final judgment does comprise an order triggering a new 30-day removal period, Greer's ability to remove this case is nonetheless nullified by the doctrine of res judicata. Baker by Thomas v. Gen. Motors Corp., 522 U.S. 222, 233 (1998); Kremer v. Chem. Constr. Corp., 456 U.S. 461, 467 (1982); Allen v. McCurry, 449 U.S. 90, 96 (1980). A final judgment rendered on the merits of a case precludes the parties from further litigation on the issues that were, or could have been, presented in the action. Baker by Thomas, 522 U.S. at 233; Kremer, 456 U.S. at 467; Allen, 449 U.S. at 94. This doctrine recognizes the comity that exists between the state and federal court systems. Kremer; 456 U.S. at 467; Allen, 449 U.S. at 96. State court proceedings are given the same "full faith and credit" in all federal courts, the same as they would be given in the courts of the forum state. 28 U.S.C. § 1738 (2003).
In the case at bar, the state court rendered a final judgment. Res judicata prevents the relitigation of any of the issues decided by the state court, including the state court's decision to allow foreclosure. Res judicata also precludes a review of issues concerning RESPA's impact on Integra's foreclosure action because Greer could have raised that defense in the state court action. Thus, the state judgment is not an order that triggers a new 30-day removal period, under § 1446(b).
Greer signed the RESPA Servicing Disclosure Statement when the loan was initially granted by the bank; thus we assume he had full knowledge of the RESPA nature of the loan and the possibility that a federal question might exist from the outset of the case. Greer proceeded on the merits rather than seeking removal within the initial 30-day removal period assuming there was in fact a federal question presented.
Greer contends that the state court's final judgment erroneously decided that a RESPA loan could be foreclosed and that we should therefore revisit the decision. Federal district courts do not sit as an appellate court for issues decided in a state court final judgment. Even if the state court erred in allowing foreclosure of the RESPA loan, under the Rooker-Feldman doctrine we lack appellate jurisdiction to redress an injury resulting from a state court's final judgment. Schmitt v. Schmitt, 324 F F.3d 484, 486 (7th Cir. 2003); Garry v. Geils, 82 F.3d 1362, 1365-66 (7th Cir. 1996). A claimed injury or challenged result from a state court is reviewable by the state appellate courts, not the federal trial courts. Schmitt, 324 F.3d at 486; Garry, 82 F.3d at 1366. Greer's alleged injury resulted from the state court judgment and an appeal to this court is foreclosed by these well-established principles of law.
B. Waiver
Even if the state case had not generated a final judgment, the doctrine of waiver bars its removal to federal court. When Greer filed his counterclaim to Plaintiff's complaint and then proceeded to an adjudication on the merits of the case in state court, he waived removal. Waiver occurs when a defendant affirmatively demonstrates his intent to dispose of the case in state court. Fate v. Buckeye State Mut. Ins. Co., 174 F. Supp.2d 876, 881-82 (N.D. Ind. 2001). Once the defendant manifests an intent to litigate in state court, as occurs when there has been significant progress on the merits, he will be deemed to have waived his right to remove the case to federal court. Fate, 174 F. Supp.2d at 881-82 (citing Chavez v. Kincaid, 15 F. Supp.2d 1118, 1125 (N.M. 1998)).
We acknowledge that Rothner v. City of Chicago, 879 F.2d 1402, 1411 (7th Cir. 1989), held that waiver was not grounds for remanding a case. However, Rothner was based on language of § 1447(c) which was amended in 1988. The 1988 amendment established time limits for plaintiffs to file removal objections and eliminated the terms "removed improvidently and without jurisdiction" in regards to remand. Fate, 174 F. Supp.2d at 880. The new language has been construed to permit a broader approach to removal objections. Fate, 174 F. Supp.2d at 881. Thus, Rothner's holding is inapplicable to the current language of § 1447(c). Id.
Greer clearly disclosed his intent to litigate this dispute in state court by filing a counterclaim against Integra and by allowing a final judgment to be entered some 11 months after the case began before seeking removal. Accordingly, he has waived any right to remove it to federal court.
C. Independent Basis for Federal Jurisdiction
Even if the removal petition had been filed within the original 30-day period, we would lack subject matter jurisdiction because there is neither diversity of citizenship nor a federal question involved. Because Greer does not contend that diversity of citizenship exists, we limit our discussion here to federal question jurisdiction.
1. Well-Pleaded Complaint Rule
Whether a federal question exists is an issue tied to the well-pleaded complaint rule under 28 U.S.C. § 1331. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987); Fournier v. Lufthansa German Airlines, 191 F. Supp.2d 996, 1000 (N.D. 11. 2002). A federal question occurs where a "civil action arises under the Constitution, laws, or treaties of the United States." § 1331. Integra, as Plaintiff, was the master of its complaint and had the choice of bringing claims based solely on state law, even when a federal law claim might have existed and could have been made part of the case. Caterpillar, 482 U.S. at 392; Fournier, 191 F. Supp.2d at 1000. For there to be a federal question either the plaintiff must explicitly plead the federal question or the federal question must be a necessary and substantial basis for deciding upon the relief that is sought by the plaintiff. Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 830 (2002) (quoting Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 809 (1988)). A defense to the complaint does not give rise to federal question jurisdiction. Caterpillar, 482 U.S. at 393. Likewise, a counterclaim cannot establish federal question jurisdiction. Holmes Group, Inc., 535 U.S. at 830.
Integra did not explicitly include a federal question in its well-pleaded complaint, as the foreclosure claim was based entirely upon issues of state law. In addition, despite the assertion by Greer that the RESPA Servicing Disclosure Statement ("SDS") negates Integra's ability to foreclose on the mortgage, that interpretation is not apparent from the RESPA-SDS itself. The RESPA-SDS addresses the process of servicing the loan throughout the loan's existence; it does not bar mortgage foreclosure. Therefore, we question whether RESPA presents a necessary and substantial federal question upon which relief would depend for Plaintiff's foreclosure action. Clearly, even if Greer had asserted a defense or counterclaim based on RESPA, it would not create a federal question under § 1331 permitting removal under § 1441.
2. Artful Pleading
We have now held that Integra's foreclosure claim was based entirely upon state law and did not implicate any federal law. Greer's contention that Integra's foreclosure action raises a federal question based on RESPA implies that Integra's failure to frame the foreclosure claim under RESPA was an exercise of "artful pleading" nonetheless warranting relief. The artful pleading doctrine allows the district court to look beyond the explicit wording of a complaint to determine if a federal question is implicit in the pleading. Int'l Armor Limousine Co. v. Moloney Coachbuilders, Inc., 272 F.3d 912, 915 (7th Cir. 2001); In re County Collector, 96 F.3d 890, 896 (7th Cir. 1996). Our examination of the complaint causes us to conclude that Integra did not engage in artful pleading because, as discussed above, RESPA does not address, never mind mandate jurisdiction over foreclosure actions in federal court.
Assuming Integra had been required to include RESPA as grounds for its complaint, the RESPA-SDS claim would not be the main basis of the suit. The main basis for the action was the mortgage foreclosure. As previously noted, the federal question must be the basis or main cause of the action in order for removal to occur. Gully v. First National Bank, 299 U.S. 109, 115 (1936); Bezy, 199 F.R.D. at 312.
3. Complete Federal Pre-Emption
Finally, Greer's arguments imply that RESPA pre-empts state law foreclosure actions, an implication with which we cannot agree. State law claims may implicate a federal question, if the state law claims are completely pre-empted by federal law and Congress has expressed unequivocally its intent for complete pre-emption to exist. Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 66 (1987); Caterpillar, Inc., 482 U.S. at 393; Fournier, 191 F. Supp.2d at 1001-02. Complete pre-emption has been found to pertain only to § 301 of the Labor Management Relations Act, § 514(a) of the Employee Retirement Income Security Act ("ERISA"), and suits challenging ownership of Native American tribal lands. Caterpillar, Inc., 482 U.S. at 393; Fournier, 191 F. Supp.2d at 1002. RESPA clearly is not within any of the three complete pre-emption categories. We are confident therefore that Congress did not intend for RESPA to pre-empt the entire field of mortgage foreclosure litigation.Conclusion
Following removal by Defendant Greer, Plaintiff Integra Bank, N.A. filed a Motion to Remand this action to state court. For the reasons detailed above, we find that remand is proper because (1) Defendant did not seek removal within the original 30-day removal period, (2) the state court's final judgment did not trigger a new 30-day removal period, (3) res judicata and the Rooker-Feldman doctrine prevent relitigation in federal court of the issues that were adjudicated, or could have been presented, in state court, (4) Defendant waived removal by manifesting an intent to litigate and by proceeding to develop the merits of the case, (5) this court lacks original subject matter jurisdiction over this action because diversity of citizenship jurisdiction does not exist and a federal question has not been pleaded or implied in the complaint, and (6) federal law does not preempt state court jurisdiction over mortgage foreclosures based on RESPA. Accordingly, we GRANT Plaintiffs Motion to Remand to Ripley Circuit Court and impose costs and fees based on this erroneous removal against the Defendant pursuant to 28 U.S.C. § 1447(c).
It is so ORDERED.