Credit Consulting Services, Inc. v. Scott, No. 3:2019cv00332 - Document 17 (N.D. Cal. 2019)
Court Description: ORDER GRANTING 10 MOTION TO REMAND; DENYING 16 SPECIAL MOTION TO STRIKE AND MOTION FOR JUDGMENT ON THE PLEADINGS AS MOOT by Judge William H. Orrick. (jmdS, COURT STAFF) (Filed on 2/25/2019)
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 CREDIT CONSULTING SERVICES, INC., 7 Plaintiff, 8 ORDER GRANTING MOTION TO REMAND; DENYING SPECIAL MOTION TO STRIKE AND MOTION FOR JUDGMENT ON THE PLEADINGS AS MOOT v. 9 CLIFTON JAMES SCOTT, 10 Defendant. 11 United States District Court Northern District of California Case No. 19-cv-00332-WHO Re: Dkt. Nos. 10, 16 12 Plaintiff and cross-defendant Credit Consulting Services, Inc. (“CCS”) filed a collection 13 14 action against defendant and cross-claimant Clifton James Scott (“Scott”) in state court on October 15 30, 2018. Scott filed a cross-complaint against CCS and two of CCS’ officers, alleging violations 16 of one state cause of action and the federal Fair Debt Collection Practices Act ("FDCPA"). On the 17 basis of Scott’s FDCPA counterclaim, CCS and the officer defendants removed the action to this 18 court. 19 Scott moves to remand, arguing that a counterclaim based on federal law cannot serve as a 20 basis for removal.1 He is correct. I grant Scott’s motion to remand. The Special Motion to Strike 21 Cross-Complainant’s Cross-Complaint and Motion for Judgment on the Pleadings filed by CCS 22 and the officer defendants’ is denied as moot. 23 BACKGROUND 24 CCS filed an action against Scott in the Superior Court of California, County of San Benito 25 on October 30, 2018, for breach of contract regarding collection of Scott’s alleged debt owed to 26 Hazel Hawkins Memorial Hospital. Summons and Complaint, attached as Exhibit A to Cross- 27 28 1 Pursuant to Civil Local Rule 7-1(b), I find this matter suitable for disposition without oral argument and vacate the hearing currently scheduled for February 27, 2019. 1 Defendant Credit Consulting Services’ and Defendants Rodney Meeks and Christine Meeks’ 2 Amended Notice of Removal of Action Under 28 U.S.C. § 1441 (“Amended Notice of Removal”) 3 [Dkt. No. 13]. Prior to service, CCS stapled a yellow note to the summons at a 90-degree angle, 4 stating CCS’s contract information. Class Action Cross-Complaint Statutory Damages (“Cross- 5 Complaint”) at 7, attached as Exhibit B to Amended Notice of Removal [Dkt. No. 13]. The 6 complaint, summons, and affixed yellow note were served to Scott together. Id. United States District Court Northern District of California 7 On December 19, 2018, Scott filed a cross-complaint against CCS and CCS’s officers 8 Rodney Lynn Meeks and Christine Louise Meeks (“Meeks”). Id. at 4-6. The cross-complaint 9 alleges violation of the California Rosenthal Fair Debt Collection Practices Act, California Civil 10 Code §§ 1788-1788.33 and the federal Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. 11 §§ 1692-1692p, and seeks individual and class statutory damages. Id. at 11-15. 12 On January 18, 2019, CCS removed this case to federal court under 28 U.S.C. § 1441(a) 13 based upon the federal question raised by FDCPA. Notice of Removal at ¶ 3. On January 22, 14 2019, Scott filed a motion to remand under 28 U.S.C. § 1447(c) on the ground that a federal 15 question raised in a cross-complaint cannot form the basis for removal and requested award of 16 attorneys’ fees and costs. Memorandum of Points and Authorities in Support of Motion to 17 Remand (“Mot.”) at 3-4 [Dkt. No. 10-1]. On February 5, 2019, CCS and Meeks filed an amended 18 notice of removal claiming that the entire action may be removed under 28 U.S.C. § 1441(c) by 19 Meeks because Scott’s claims against Meeks under the FDCPA arise under federal law and are 20 separate and independent from CCS’s contract claims against Scott. Amended Notice of Removal 21 at ¶¶ 2-3 [Dkt. No. 13]. CCS asserts that the amended notice of removal cures any procedural 22 defects contained in the original notice of removal. Id. at ¶ 6. 23 LEGAL STANDARD 24 A defendant sued in state court may remove the action to federal court if the action could 25 have been brought in federal court in the first instance. 28 U.S.C. § 1441(a). The Ninth Circuit 26 “strictly construe[s] the removal statute against removal jurisdiction;” accordingly, “[f]ederal 27 jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.” 28 Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (internal quotation marks and citations 2 1 omitted). When a plaintiff challenges the removal of a case to federal court, it is the defendant 2 who bears the burden of establishing the propriety of that removal. Id. at 566–67. A district 3 court's order remanding an action to state court for lack of subject matter jurisdiction or a defect in 4 the removal procedure is not reviewable on appeal. 28 U.S.C. § 1447(d); Things Remembered, 5 Inc. v. Petrarca, 516 U.S. 124, 127–128 (1995). DISCUSSION 6 I. MOTION TO REMAND 7 Scott moves to remand, arguing that a counterclaim based on federal law cannot serve as a 8 United States District Court Northern District of California 9 basis for removal.2 Mot. at 3. CCS and Meeks counter that removal is proper under § 1441(c) 10 because the Meeks are third-party defendants and Scott’s federal counterclaims under the FDCPA 11 are “separate and independent” from CCS’s underlying contract claim. Opposition at 4-7 [Dkt. 12 No. 14]. Under 28 U.S.C. § 1331, federal courts have original jurisdiction over civil actions “arising 13 14 under” federal law. Removal based on § 1331 is governed by the “well-pleaded complaint” rule. 15 Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). Under this rule, “federal jurisdiction 16 exists only when a federal question is presented on the face of plaintiff’s properly pleaded 17 complaint.” Id. “Removal, therefore cannot be based on a counterclaim or cross-claim raising a 18 federal question.” Redevelopment Agency of City of San Bernardino v. Alvarez, 288 F. Supp. 2d 19 1112, 1115 (C.D. Cal. 2003). Accordingly, the FDCPA claim raised in Scott’s cross-complaint 20 cannot form a basis for federal question jurisdiction here. Bank of New York Mellon v. Hong Xuan 21 Vo, No.: 14–cv–05110–LHK, 2015 WL 662221, at *2 (N.D. Cal. Feb.12, 2015) (FDCPA 22 counterclaims cannot form a basis for federal question jurisdiction); NCCS Inc. v. Frank Hegardt 23 24 25 26 27 28 2 Scott also argues in his late filed reply that removal is untimely because CCS asserted a completely different basis for removal in its amended notice of removal and that amended notice of removal was filed past the thirty-day removal period codified in 28 U.S.C. § 1446(b). Reply at 6-7 [Dkt. No. 15]. Although a notice of removal “cannot be amended to add a separate basis for removal jurisdiction after the thirty day period,” “a defendant may amend the notice of removal after the thirty day window has closed to correct a defective allegation of jurisdiction.” ARCO Environmental Remediation, L.L.C. v. Dept. of Health and Environmental Qualify of Montana, 213 F.3d 1108, 1117 (9th Cir. 2000). CCS’s amended removal notice did not add a separate basis for removal jurisdiction and remained based on the FDCPA cross-claim. Therefore, the amendment is permissible. 3 1 2 In addition, only a defendant may remove an action. 28 U.S.C. § 1441(a). The Ninth 3 Circuit has ruled that a counterclaim defendant who is not a plaintiff to the original state action, 4 and third-party defendants, may not remove the case to federal court. Westwood Apex v. 5 Contreras, 644 F.3d 799, 805 (9th Cir. 2011). Because CCS and Meeks are not considered 6 “defendants” for purpose of the removal statute, this action must be remanded. Midland Funding 7 LLC v. Korte, No. 2:13-cv-0103, 2013 WL 1165031, at *2 (E.D. Cal. Mar. 20, 2013) (FDCPA 8 cross-complaint cannot form basis for removal jurisdiction under § 1441(a); Pub. Storage v. 9 Sobayo, No. 12-cv-05263 SBA, 2013 WL 163777, at *2 (N.D. Cal. Jan. 15, 2013) (same). 10 CCS asserts nonetheless that the Meeks are entitled to remove this action under 28 U.S.C. 14 § 1441(c), which states: Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters not otherwise within its original jurisdiction. 15 28 U.S.C. § 1441(c). According to CCS, the FDCPA claim is a “separate and independent claim” 16 which allows removal of the entire case, even if raised in a cross-complaint. Oppo. at 4-7. 11 United States District Court Northern District of California Ind., No. 98-cv-2637-VRW, 1998 WL 574379, at *1 (N.D. Cal. Aug.28, 1998) (same). 12 13 17 Federal circuit courts that have squarely decided the issue are split on whether third-party 18 defendants may remove an action under § 1441(c). Compare Thomas v. Shelton, 740 F.2d 478, 19 486–87 (7th Cir.1984) (holding that third-party defendants may not remove under § 1441(c) in the 20 “broad run of third-party cases”) and Lewis v. Windsor Door Co., 926 F.2d 729, 733 (8th 21 Cir.1991) (following the Seventh Circuit's analysis in Thomas v. Shelton) with Carl Heck 22 Engineers, Inc. v. Lafourche Parish Policy Jury, 622 F.2d 133, 135–36 (5th Cir.1980). Although 23 the Ninth Circuit has not squarely ruled on this question, several district courts within the Ninth 24 Circuit, including in this District, have followed the majority view of the Seventh and Eighth 25 Circuits. See Ciolino v. Ryan, No. 03-cv-1396-TEH, 2003 WL 21556959, at *5 (N.D. Cal. July 9, 26 2003) (“[T]he court is persuaded that the prevailing view is the correct one: removal by a third- 27 party defendant is not permitted under 28 U.S.C. § 1441(c)); Cross v. Kaiser Found. Hosps., No. 28 98-cv-03141 MMC, 1998 WL 737998, at *4 (N.D. Cal. Oct. 15, 1998) (finding third-party 4 1 defendants have no right to remove); Aramid Entm't B.V. v. Bontempo Holdings, LLC, No. 10-cv- 2 9078, 2011 WL 71441, at *3 (C.D. Cal. Jan. 7, 2011) (adopting the majority view that a third- 3 party defendant is not entitled to remove an action). I find no reason to depart from the majority 4 view that a third-party defendant is not entitled to remove an action.3 II. ATTORNEY FEES 5 Scott requests an award of attorneys’ fees and costs in relation to his motion to remand United States District Court Northern District of California 6 7 pursuant to 28 U.S.C. § 1447(c).4 Mot. at 3-4. The standard for awarding fees turns on the 8 reasonableness of the removal. Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). As 9 the Supreme Court recognized, “[a]bsent unusual circumstances, courts may award attorney’s fees 10 under 28 U.S.C. § 1447(c) only where the removing party lacked an objectively reasonable basis 11 for seeking removal. Conversely, when an objectively reasonable basis exists, fees should be 12 denied.” Id. Here, since the Ninth Circuit has never squarely ruled on a third party’s ability to remove 13 14 under 28 U.S.C. § 1441(c) and CCS and Meeks have cited some authority supporting their 15 position, I cannot say that their removal petition lacked an objectively reasonable basis. The 16 request for attorneys’ fees is denied. 17 CONCLUSION 18 For the foregoing reasons, CCS and Meeks have failed to establish a basis for subject 19 matter jurisdiction or their right to remove this action. Accordingly, I remand this action to 20 Superior Court of California, County of San Benito. See 28 U.S.C. § 1447(c). Attorney’s fees are 21 22 23 24 25 26 27 28 3 CCS and Meeks cite to a district court decision in the 11th Circuit to support their position. Oppo. 4; see North Star Capital Acquisitions, LLC v. Krig, 2007 WL 3522425, at *2-4 (M.D. Fla. 2007) (removal of FDCPA counterclaims by third-party proper because “the FDCPA counterclaim and the plaintiffs’ original claims involve two distinct wrongs”). However, North Star relies on former Fifth Circuit case law, which is at odds with the majority view, and the view of other courts in this Circuit. Id. North Star is of little persuasive value in this case. 4 Under § 1447(c), “[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” 5 1 not awarded to Scott. CCS and Meeks’s special motion to strike and motion for judgment on the 2 pleadings [Dkt. No. 16] is denied as moot. 3 4 IT IS SO ORDERED. Dated: February 25, 2019 5 6 William H. Orrick United States District Judge 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6
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