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Baker v. Tait

United States District Court, D. Alaska

May 17, 2017

Henry E. Baker, Plaintiff,
Robinson Tait, P.S., Defendants.




         Defendant Ocwen Loan Servicing, LLC (“Ocwen”) removed this case from the Alaska Superior Court to this court pursuant to 28 U.S.C. § 1446. At docket 22 plaintif f Henry E. Baker (“Baker”) moves pursuant to 28 U.S.C. § 1447(c) to remand the case based on the lack of subject matter jurisdiction. Baker supports his motion with his own affidavit at docket 23 and a memorandum at docket 24. Ocwen opposes the motion at docket 33, supported by a memorandum at docket 34. Baker replies at docket 40.

         Oral argument was not requested and would not assist the court.


         According to Baker's complaint, defendant Robinson Tait, P.S. (“Robinson Tait”) is attempting to sell his home at foreclosure as the successor trustee of a deed of trust (“DOT”) to which Ocwen is the purported beneficiary. Baker alleges that his home loan is a “VA loan, ”[1] meaning that Ocwen is contractually prohibited from foreclosing on him without first notifying the Secretary of Veteran's Affairs of the possible foreclosure[2] and informing him “of his right to contact the VA for mortgage assistance.”[3] Baker claims that Ocwen breached the parties' contract by not complying with these requirements.[4]

         Baker also asserts a number of claims against Robinson Tait. He claims that Robinson Tait:

(1) is committing wrongful foreclosure by attempting to foreclose on him even though Ocwen has not complied with its contractual obligations;[5]
(2) lacks authority to act as the DOT's successor trustee due to an invalid appointment;[6]
(3) violated Alaska's Unfair Trade Practices and Consumer Protection Act (“UTPCPA”)[7] by sending him a misleading notice, dated April 19, 2016, that violates the Fair Debt Collection Practice Act (“FDCPA”)[8] because it “fails to tell [him] how to contact his original creditor and that, if [he] requested verification of the debt, all collection activity by [Ocwen and Robinson Tait] would cease;”[9]
(4) violated the UTPCPA by falsely claiming that it is the successor trustee under the DOT;[10]
(5) violated the UTPCPA by issuing Baker a misleading and confusing notice of default (“NOD”);[11]
(6) violated the UTPCPA by misstating which entity executed the allegedly invalid appointment;[12] and
(7) violated its fiduciary duty to Baker by acting in the above-described manner.[13]

         Baker's complaint seeks actual and statutory damages and an injunction prohibiting Ocwen and Robinson Tait from foreclosing on him until (1) Ocwen complies with the rules and regulations governing VA loans[14] and (2) they both “comply with the Alaska statute governing non-judicial foreclosures.”[15]

         Ocwen's notice of removal asserts that this court has both federal question and diversity jurisdiction.[16]


         “A motion to remand is the proper procedure for challenging removal.”[17] The removal statute should be strictly construed against removal and any doubts as to the right of removal are to be resolved in favor of remand to the state court.[18] “The presumption against removal means that ‘the defendant always has the burden of establishing removal is proper.'”[19] That is, the defendant has the burden of proving all jurisdictional facts.


         A. Federal Question Jurisdiction

         A defendant may remove to federal court any state court action that the plaintiff could have brought “in federal district court originally, 28 U.S.C. § 1441(a), as a civil action ‘arising under the Constitution, laws, or treaties of the United States, ' § 1331.”[20]The Supreme Court has long held that even state-law claims can satisfy federal “arising under” jurisdiction if they “implicate significant federal issues.”[21] Although this means that state-law claims are not kept out of federal court “simply because they appeared in state raiment, ” “federal issue” is not “a password opening federal courts to any state action embracing a point of federal law.”[22] To determine whether a federal issue suffices to confer “arising under” jurisdiction, the court must determine whether “a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress” (the Grable factors).[23]

         Ocwen argues that Baker's complaint raises two federal issues: (1) whether the rules that govern VA loans “cited in the complaint carry the force of law and whether Defendants violated them; and (2) whether [the FDCPA] is enforceable against Defendants and whether they violated it.”[24] The court will apply the Grable factors to these two arguments in turn.

         1. The VA rules

         Baker alleges that Ocwen has violated two rules governing VA loans: 38 U.S.C. § 3732 and 38 C.F.R. § 36.4350 (the “VA rules”). As Ocwen observes, these alleged VA rules violations relate to three of Baker's causes of actions: Baker's breach-of-contract claim is based on Ocwen's alleged VA rules violations;[25] and Baker's second wrongful foreclosure claim and breach-of-fiduciary-duty claim (at least in part) are based on Robinson Tait's decision to proceed with foreclosure despite Ocwen's alleged VA rules violations.[26] The parties do not dispute that these are all state-law causes of action.

         Applying the first Grable factor, Ocwen argues that Baker's causes of action necessarily raise a federal issue: whether Ocwen violated the VA rules.[27] Baker disagrees. For example, he states that his breach-of-contract claim merely requires him to show that Ocwen had a contractual duty, Ocwen breached that duty, and Baker suffered damages as a result.[28] On a superficial level, Baker is correct. Yet his argument is unpersuasive. When applying the first Grable factor, the court's job is not to focus on the prima facie elements of the state cause of action, but rather to determine “litigation reality.”[29] In reality, Baker must show that Ocwen violated the VA rules in order to prevail on his breach-of-contract claim because that is the only breach alleged by Baker. The first Grable factor is satisfied.

         Ocwen's argument founders on Grable's next two factors. With regard to these factors, which ask whether the issue raised is “actually disputed and substantial, ” Ocwen merely concludes without explanation that “the interpretation of federal law is it is [sic] determinative to the outcome.”[30] This vague statement is insufficient to meet Ocwen's burden. In order to invoke this court's limited jurisdiction, Ocwen must at least establish the basis of the parties' dispute. For example, in Grable the plaintiff interpreted 26 U.S.C. § 6335 to require personal service of a written seizure notice; the defendant interpreted that same statute as allowing service by certified mail.[31] In Gunn, the plaintiff argued that a particular provision of federal patent law applied to the facts that would have changed the outcome of the plaintiff's patent case if his lawyer had presented such an argument; the defendant argued that the provision did not apply.[32]Here, the court has no idea what Ocwen's interpretation of the VA rules is, or how Baker's interpretation differs from Ocwen's.[33]

         This deficiency relates not only to the question whether the meaning of the VA rules is “actually disputed, ” but also whether the parties' dispute is substantial. “The ‘substantial question' branch of federal question jurisdiction is exceedingly narrow-a ‘special and small category' of cases.”[34] The substantiality factor requires Ocwen to show that the parties' dispute is regarding “an important issue of federal law that sensibly belongs in a federal court.[35] Although Ocwen notes the federal government's undeniable interest in “maintaining its military and looking after veterans, ”[36] it does not explain how this case might substantially affect that interest. The court has no idea whether the outcome of this case “could turn on a new interpretation of a federal statute or regulation which will govern a large number of cases, ” or if the parties' dispute “is the sort of ‘fact-bound and situation-specific' claim whose resolution is unlikely to have any impact on the development of federal law.”[37]

         Because Ocwen has failed to establish the second and third Grable factors, the court need not consider whether the fourth Grable factor is satisfied.

         2. The FDCPA

         Baker's four UTPCPA causes of action against Robinson Tait cross-reference the FDCPA.[38] Each claim alleges that Robinson Tait made a false or misleading statement that violates both the FDCPA and the UTPCPA. Ocwen argues that these state-law causes of action raise federal issues that suffice to confer federal question jurisdiction. The court disagrees.

         Nevada v. Bank of America[39] is on point. There, the State of Nevada brought an action against Bank of America alleging “that Bank of America misled Nevada consumers about the terms and operation of its home mortgage modification and foreclosure processes, in violation of the Nevada Deceptive Trade Practices Act” (“DTPA”).[40] The DTPA gives the Nevada Attorney General authority to bring a civil action against any person who “has engaged or is engaging in a deceptive trade practice.”[41] Similar to Baker's complaint in this case, Nevada's complaint cross-referenced federal law: Nevada alleged that some of Bank of America's actionable misrepresentations related to the federal Home Affordable Mortgage Program (“HAMP”)[42] and constituted violations of the FDCPA.[43]

         In holding that federal question jurisdiction did not exist, the Ninth Circuit found that Nevada's complaint did not satisfy the first or fourth Grable factors. The court held that the first factor (whether a federal issue was “necessarily raised”) was not satisfied because any federal law theories of liability were alternative and independent to state law theories. “‘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.'”[44] Although the Nevada statute contains a “borrowing” provision, making it a violation of the DTPA to violate a “federal statute or regulation relating to the sale or lease of goods or services, ”[45] that does not automatically convert all DTPA claims subject to that provision into federal causes of action.[46] “Nevada's glancing reference to federal law is insufficient to confer federal jurisdiction over Nevada's state law claims.”[47]

         With regard to the fourth Grable factor, the Ninth Circuit observed that “[s]tate courts frequently handle state-law consumer protection suits that refer to or are predicated on standards set forth in federal statutes.”[48] To hold that federal courts have jurisdiction over all of these cases would “‘herald[ ] a potentially enormous shift of traditionally state cases into federal courts.'”[49]

         In order for Baker to prevail on his UTPCPA claims, he must establish that Robinson Tait has committed “unfair or deceptive acts or practices in the conduct of trade or commerce.”[50] As Ocwen points out, the text of the UTPCPA does not contain a borrowing provision that makes it a per se violation of the UTPCPA to violate a federal consumer protection statute. But, the UTPCPA does state that “[i]n interpreting AS 45.50.471 due consideration and great weight should be given the interpretations of . . . § 5(a)(1) of the Federal Trade Commission Act.”[51] Relying on this provision, the Alaska Supreme Court has held that a violation of the FDCPA “is inescapably an ‘unfair or deceptive act [ ] or practice[ ]” under AS 45.50.471(a)” because it falls “within at least the penumbra of some . . . ...

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