United States District Court, D. Alaska
Henry E. Baker, Plaintiff,
v.
Robinson Tait, P.S., Defendants.
ORDER AND OPINION [RE: MOTION AT DOCKET 22]
JOHN
W. SEDWICK SENIOR JUDGE
I.
MOTION PRESENTED
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.
II.
BACKGROUND
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]
III.
STANDARD OF REVIEW
“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.
IV.
DISCUSSION
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 . . .
...