Allan et al v. Federal National Mortgage Association et al, No. 3:2016cv00215 - Document 17 (E.D. Va. 2016)
Court Description: MEMORANDUM OPINION. See Opinion for complete details. Signed by District Judge Robert E. Payne on 10/24/2016. (ccol, )
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Allan et al v. Federal National Mortgage Association et al Doc. 17 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division WILLIAM S. ALLAN, et al., Plaintiffs, Civil Action No. V. 3:16CV215 ASSOCIATION, R\ r FEDERAL NATIONAL MORTGAGE -nMl et al.. OCT 25 2016 Defendants. CLERK, U.S. OtSTniCT COURl RICHMOND.VA MEMORANDUM OPINION This REMAND matter is (Docket No. before 7). the Court on Plaintiffs' For the reasons stated below. MOTION TO Plaintiff's MOTION TO REMAND will be granted. BACKGROUND On J. December Allan Mortgage 9, 2004, ("the Allans") Plaintiffs William S. borrowed $168,400.00 Corporation and signed an (Def.'s Notice of Removal, Mortgage associated promissory Docket No. Corporation, on 1, the Removal note to (State 1) . American Home Mortgage Federal Court National Complaint, Mortgage Docket same Inc., day; 1-1, f as American the deed was (Def.'s Notice Corporation Association No. note. 1).The Allans granted a recorded in the Circuit Court of Powhatan County. of Susan from American Home Deed of Trust to Mortgage Electronic Systems, Home Allan and assigned the ("Fannie 12). Mae"). Fannie Mae Dockets.Justia.com retained Green Tree Servicing, LLC, as Green servicer on the Tree Servicing also known as Ditech Financial, loan. (State Court Complaint, appointed 12). Trustees Commonwealth f LLC ("Commonwealth") as the Substitute Trustee on November 13, 2014. (Def.'s Notice of Removal 2). Rosenberg Associates, LLC ("Rosenberg") represents Commonwealth. (Def.'s Notice of Removal 2) . foreclosure sale, In 2014, III, LLC Commonwealth initiated a ("JCM") purchased the property. (Def.'s and JCM Notice of Removal 2). On November Circuit Court Commonwealth, 9, 2015, for JCM, the Allans Powhatan and filed a County Rosenberg Complaint against (collectively, Fannie Mem."). Commonwealth, diversity Removal JCM, 3-4). January are Rosenberg (Pl.'s Fannie Mae's Virginia are Remand counsel residents, Virginia Mem. 1; entered ("Pl.'s and corporations for Def.'s an Notice of appearance on 2015, and service was effective on Fannie Mae as of 6, Commonwealth, Allans and purposes. November 23, Mem. The Mae, "Defendants"). (Pl.'s Mem. in Supp. of Mtn. to Remand, Docket No. 8, 1) Remand in the 2016. JCM, (Pl.'s Remand and Rosenberg Mem. 1). filed demurrers. Fannie Mae, (Pl.'s Remand 1-2). The sought State Court Complaint rescission of the asserted foreclosure ten claims. Count One on the basis of Rosenberg and Commonwealth's requirement that the purchaser pay Rosenberg $445.00 for violation dealing. review of of questionable the Rosenberg (State rescission of Court the settlement and Commonwealth's Complaint foreclosure $445.00 fee documents, SlSl on 13-36) . the dissuaded duty against Count basis buyers allegedly Two that who selfsought the could in legally tell that such legally questionable fee would leave the purchase open to a legal challenge such as this suit. 39) . Count Allans' Three sought deprivation of Complaint SISI 40-43) . that Commonwealth trustee. (State compensatory provisions 66). Count collective Court damages Six compensatory the not of their properly Complaint against deed of sought failure use damages related home. (State to appointed 15 any Court Mae the Count mortgage Seven documents. sought Court based time (State Court compensatory damages the the Allans Fannie Mae to notify the Allans of an opportunity to cure. like Count Six, 73-75) . compensatory Count Court an 67-72). failure sought (State of as required Complaint against 63- Defendants' Count Eight, Seven, foreclosure. sought certain 73-75). 11 the of related Complaint Court Complaint on notify Five damages Court to the substitute breach for (State rescission at a 44-62). Fannie trust. as opportunity to cure by paying the principal in full, by to 37- Count Four sought rescission on the grounds was of the {State Court Complaint M Complaint for 11 sought rescission based on Nine, damages like against Counts Fannie (State Six Mae and for damages related to the foreclosure. (State Court Complaint 81-83). Count Ten sought compensatory damages against Fannie Mae for implied covenant Court Complaint SlSl of good 84-89) . faith The and fair Defendants dealing. (State filed demurrers as to a l l causes of action. On March 13, 2016, the Opinion, Circuit Opinion" (Letter Docket Opinion") sustaining the demurrers the counts. (Pl.'s Remand Mem. particular, the Count One, Letter Count Two, No. as issued 3, Ex. to some, a C) "Letter ("Letter all, of Def.'s Notice of Remand 3). 2; Opinion Court In sustained Count Three, but not the Count Four, demurrers Count Five, as to Count Six, Count Eight, and Count Ten. (Letter Opinion 1-3). The Court did the as not sustain demurrers to Count Seven (noting factual dispute about whether a cure notice was sent) Nine 2-3). (same). sustaining leaving (Letter the Opinion demurrers only claims against against the This all diverse had the a and Count effect of non-diverse defendants, defendant, Fannie Mae. (Pl.'s Remand Mem. 2; Def.'s Notice of Removal 2-3).^ On April 13, When Fannie Mae 2016, Fannie Mae filed this notice of removal. removed the case, the Circuit ^ The Letter Opinion dismissed Counts One, Court had Two, Three, not Four, Five, Six, Eight, and Ten, and did not dismiss Counts Seven and Nine. (Pl.'s Remand Mem. 2). Counts Seven and Nine seek compensatory damages from Fannie Mae for an alleged failure to send a Notice of Acceleration to the Allans. (Def.'s Notice of Removal 2). entered an 2) . the same it filed At Removal, order, order formally (Def.'s effectuating time a that motion adopting the Docket No. May (Docket No. 6, 2016, 7) . the Mae this Mtn. 4) (Pl.'s filed Court Circuit Consented Demurrers in Part, opinion. Fannie in Partially On its Enter ("Def.'s Mtn. Allans filed The Allans assert their Mem. Notice of to enter an Letter Opinion. Order Sustaining to Enter") Motion four theories the so-called involuntary-dismissal rule; its seeking Court's to Remand for to Remand. remand: (1) (2) diversity does not yet exist because the Circuit Court has not formally dismissed Commonwealth or JCM; fraudulently joined; (3) and JCM (4) if and Commonwealth JCM and were Commonwealth not were fraudulently joined, then the thirty-day clock for Fannie Mae to file for removal ran from the date of service, not from the date of the Letter Opinion. LEGAL STANDARD An action is properly removed to this Court for diversity of citizenship if the amount in controversy exceeds $75,000 and the parties 1332(a)(1). are citizens "Removal of of different civil cases to States. 28 federal court infringement on state sovereignty." Adams v. Inc., 657 F. Supp. 519, ^ "Partially consented," 521 (E.D. in this Defendants consented to the motion, (Def.'s Mtn. to Enter 1 n.l). 5 Va. is § an Aero Servs. Int'l, Therefore, "[t]he 1987). case, U.S.C. means that the other but that the Allans did not. burden of seeking demonstrating removal.'" (4th Cir.2010) 29 F.3d Barbour v. 148, 151 (4th Cir. that a challenged must matter in Union, with 594 'the F.3d party 315, 326 Columbia Organic Chems. Co., 1994)). federal federal demonstrate, over the matter." Strawn v. (4th Cir. allege 2008) . As a courts, federal result of unlike most than is alleged in complaint." federal Mulcahey, a F.3d required 192, jurisdiction court's defendant in his allege, the state is notice required removal, to However, establish Ellenburg (4th v. Cir. the burden of a 530 "this burden is no federal jurisdiction Spartan Motors 2008). doubtful, to "when jurisdiction is proper." Strawn, 200 is when 530 F.3d 293, only of and jurisdiction LLC, the removing party bear[s] greater 519 federal (emphasis in original). a must AT & T Mobility, jurisdiction demonstrating that removal F.3d at 297 court the Although removal is challenged, Inc., resides are courts of limited jurisdiction," "a party seeking to adjudicate 296 Int'l (quoting Mulcahey v. "undergirding principle courts, jurisdiction Chassis, Nevertheless, remand is as "if necessary." 29 F.3d at 151. To establish that a defendant has been fraudulently joined, the removing possibility party that cause of action or that "there the must plaintiff against has prove the been either would in-state outright be that "there able to defendant in fraud in the is establish no a state court" plaintiff's pleading of jurisdictional Corp., 6 F.3d Sites, 886 F. 229, 232 Supp. facts." (4th 1300, Cir. 1302 Marshall 1993); (E.D. v. see Va. Manville also 1995). Sales Beaudoin Where, v. as here, the removing party argues that there is no possibility that the plaintiff will be able to state a claim against the non-diverse defendant, [t]he burden on the defendant claiming fraudulent joinder is heavy: the defendant must show that the plaintiff cannot establish a claim against the nondiverse defendant even after resolving all issues of fact and law in the plaintiff's favor. Marshall, 6 When bound by F.3d at 232-33. fraudulent the joinder allegations of 'consider the entire record, by any means Group available."' W Television, (citation omitted). deposition affidavits allegations Inc., deposition contained Miller Brewing Co., at the issue, "the pleadings, court but may is not instead and determine the basis of joinder AIDS 903 Counseling F.2d 1000, & Testing Centers 1004 (4th Cir. v. 1990) "[T]he defendants may submit affidavits and transcripts; and is in and . . . the transcripts the verified 663 F.2d 545, 549 plaintiff along with complaint." (5th Cir. 1981) may the B. , submit factual Inc. v. ANALYSIS A. The Letter Opinion Is Sufficient to Formally Dismiss Non-Diverse Defendants for the Purposes of Removal The Allans remained argue before the that ^'[b]ecause Circuit Court the JCM ... and Commonwealth ... at the time of removal," because the Letter Opinion had not been the subject of a formal order, "the parties before this Court lack complete diversity." (Pl.'s Remand Mem. 7). The Letter Opinion is unquestionably not an order, given that consistent order. it requests (Letter Opinion that 4) . the parties However, prepare a the lack of an order formally implementing the Letter Opinion an independent bar to removal. The removal statute states that if the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant ... of a copy of an amended pleading, which it case is motion, may order or other paper from first one be which ascertained is or that has the become removable. 28 U.S.C. § 1446(b)(3) (emphasis added). Opinions, even when no order is entered effectuating the opinion, can start the thirtyday clock because such opinions are "other papers" from which a defendant removable. 119 F. may first E.g., Supp. ascertain that the case Link Telecommunications, 2d 536, 543 (D. Md. 2000) is Inc. or v. has become Sapperstein, (state court judge's opinion was "other paper" for purposes of 30-day deadline), 8 If opinions could start the clock on a thirty-day deadline, but not effectively defendants remove could non-diverse barred be defendants, exercising from then diverse their statutory removal rights. The fact that no order was entered effectuating the Letter Opinion filed within its thirty-days, Notice of and Removal that without Fannie the Mae benefit accordingly of an order effectuating the Letter Opinion, is not a bar to removal. B. The So-Called Voluntary-Involuntary Rule Bars Removal Notwithstanding the general rule that diversity cases may be removed to federal court, [w]hen the dismissal of all non-diverse defendants results from something other than the voluntary action of the plaintiff, a federal court cannot exercise jurisdiction under the so-called "voluntary-involuntary" rule, and removal is not proper. Riverdale Baptist Church v. 943, 945 Co., 935 (D.Md. 2004} F.2d 57, Nemours & Co., against thwarting a is the a on Grubb 1991); 1166 non-diverse removal, 2d at 946 (4th Cir. joinder, voluntary/involuntary Supp. (relying 863 F.3d 1162, Fraudulent claim 60 Certainteed Corp., v. (4th Cir. statement Riverdale (relying on Mayes v. Supp. Mut. E.I. 2d Ins. DuPont d 1988)). of defendant F. Donegal Higgins v. a non-meritorious with "well-established rule." 339 the exception Baptist Rapoport, effect Church, to 339 198 F.3d 457, of the F. 461 n.9) (4th 1999)). party removing Cir. "must possibility that the of establish establish plaintiff cause of action against or (2) To fraudulent either be there able to in-state defendant the would (1) joinder, in the is no establish a state court; there has been outright fraud in the plaintiff's pleading jurisdictional Supp.2d at 947 facts." Riverdale (relying on Mayes, does not allege fraud; form of fraudulent Baptist Church, 198 F.3d at 464). 349 F. Fannie Mae the Court therefore focuses on the first joinder: would be able to establish a "no possibility that the plaintiff cause of action." The district court in Riverdale Baptist Church performed a detailed and compelling possibility" approach. at 947-52. analysis of the "lineage" Riverdale Baptist Church, In the original context, of 947 F. the Supp. "no 2d "no possibility" required a defendant to show that "no factual basis existed for any honest belief on the liability." Id. Company, 308 U.S. part at (1964)) 949 F.2d of the 948 plaintiff (relying 474, 478 (5th ground" or a liability suffices to defeat Morris v. E.I. 1934); Phillips v. (E.D. Va. Cir. Parks there was joint New York Times v. 1962), cert, denied, 376 (emphasis added). Other courts have said that a "colorable 822 on that Du Font BJ's "glimmer De a Nemours of hope" fraudulent & Co., Wholesale Club, 2008). There is, 68 for pursuing joinder assertion. F.2d 788 Inc., 591 joint F. (8th Cir. Supp. 2d in other words, an extremely high 10 burden on a defendant to show not dismissed a non-diverse defendant, just that a state court but that plaintiff could not have had an honest belief that it could bring suit against the non-diverse defendant. The Riverdale Baptist Church court noted that its extremely- high bar is appropriate voluntary-involuntary given rule: the animating preserving a principle plaintiff's state appellate procedure. [0]ne of the reasons underlying voluntary/involuntary distinction is the the practical one of allowing the state court to resolve the defendant: status 'In of most of the the non-diverse instances in which the Supreme Court has employed the voluntary-involuntary rule [to compel remand], it appears that the elimination of the resident defendants was not final at the time the issue of the propriety of removal was considered because the state appellate process as to those defendants was complete .... As another court explained: The expedient of removal to a federal court cut such off cannot a be allowed fundamental right to of judicial review. It goes without saying that if the Supreme Court of Alabama should ultimately enter an order setting aside [the lower court ruling] ... there would be no complete diversity in this case. The compelling concepts ... are (1) that the diversity must exist when the suit is filed or thereafter be created by the voluntary act of the plaintiff and not by the plaintiff's involuntary act or by the act of the state court; and (2) that federal courts cannot trespass upon the 11 not of access the to orderly state appellate processes of the court, Harrell v. Reynolds Metals Co., 599 F. Supp. 966, 969-70 (N.D. Ala. 1985) [T]he fact that the appellate process has not been exhausted ... precludes removal. Riverdale Baptist Church, 349 F. Supp. 2d at 950-51.^ The Court finds the analysis in Riverdale Baptist Church - the limited origins need to system provide - of effective persuasive joinder, Fannie the and Mae must "no possibility" judicial compelling. establish have held any "honest belief" claim against Fannie Mae review and To approach through the establish that the and the state fraudulent Allans could that they could pursue a Commonwealth. The fact not joint that the state court sustained the demurrers against Commonwealth is not dispositive in establishing fraudulent joinder. In its Notice of Removal, defendants that because there is no possibility that recover from these (Notice of Removal, misunderstands now stated and may are Mae Commonwealth, ... Rosenberg Fannie defendants" Docket No. fraudulent 1, joinder. fraudulently after f It the 28). is "JCM, joined Plaintiffs Letter Opinion. Fannie Mae's argument insufficient that the Allans cannot recover after the state court issued an opinion; for fraudulent ^ The Allans joinder, note that a voluntary action of the Allans they retain the right to move (such for reconsideration and the right ot prosecute an appeal to the Virginia Supreme Court. (Pl.'s Remand Reply, Docket No. 14, 7). 12 as the Allans' Commonwealth recover state without against court an complaint "honest Commonwealth} alleging belief" must that have claims the created against Allans the could fraudulent joinder. Although opinion and Fannie Mae presumably has the briefly opinion explained of the why, its court,'' state in the Allans could not state a claim under Virginia law {Def.'s 0pp. to Pl.'s Mtn. to Remand, presented any argument, the Allans could not Docket No. 13, 5-8), much a have less Fannie Mae has not compelling any honest argument, belief that that they had a claim against the non-diverse Defendants. In so failing, Fannie Mae has not met its burden of showing that removal jurisdiction is proper. Mulcahey, If Strawn, 530 F.3d at 297; Ellenburq, 519 F.3d at 200; 29 F.3d at 151. the claims against the non-diverse defendants were so obviously deficient that the Allans could not have enjoyed any honest belief that they could prosecute a claim against the nondiverse defendants, removed the then case within Defendants pled contemplates exactly such a 4 court's The state Defendants thirty fraudulent could days of joinder. procedure. 42 E.g., Letter Opinion does explanations for that court's decision, not and should service U.S.C. Ross v. in have which 1446(b) Lee, No. present detailed and this Court does not have access to the arguments the parties presented in the state court. 13 3:15CV566, 2016 WL 521529 (E.D. Va. Feb. 5, 2016) (removing within thirty days of service and stating fraudulent joinder of non-diverse action, defendant). and the Court If Fannie Mae had taken such had sustained the non-diverse form of the federal prompt Defendants' demurrers (in the equivalent, a motion to dismiss), then the Allans would have a path for appeal to the Fourth Circuit and the Supreme Court. By not demurrers, removing however, the case before resolution of the Fannie Mae has created exactly the type of situation that the voluntary-involuntary rule intends to protect against. Opinion, court also lower If the Court opinion by a foreclosed federal Cir. federal state from court 1997) courts state-court decisions removal and adopts the Letter then the Allans are foreclosed from review of the state appeals review of E.g., ("Under generally decisions; lies court because state court decisions. (4th permits lower federal not courts Moore, with have The Allans court opinion cannot doctrine, jurisdiction jurisdiction superior to are by a review 129 F.3d 728, Rooker-Feldman rather, exclusively state Plyler v. the do the court. 731 lower review to review such state courts and, ultimately, the United States Supreme Court"). In conclusion, if the Allans' claims were so deficient that they could have no honest belief that they might recover against the non-diverse Defendants, then the 14 Defendants ought to have removed under Defendants' 42 U.S.C. demurrers, bar of the and the state service. sustaining of some though not all of the Defendants' the so, of subsequent raised to do within thirty days court's has failure 1446(b) voluntary-involuntary rule and accordingly prohibits removal. CONCLUSION For the reasons stated above. Plaintiff's MOTION TO REMAND will be granted. I t is so ORDERED. /s/ Robert E. Payne Senior United States District Judge Richmond, Virginia Date: October , 2016 15
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