CARLTON W. REEVES, District Judge.
Before the Court are a Motion to Dismiss by Defendant JPMorgan Chase Bank, Inc. ("Chase"), Docket No. 6; Plaintiff's Motion to Remand, Docket No. 8; a Motion to Dismiss by Tammy Michelle Dorman, Terry Monroe Dorman, and Frances M. Gray ("Individual Defendants"), Docket No. 10; Plaintiff's Motion to Stay Proceedings, Docket No. 13; Plaintiff's Motion to Strike Chase's memorandum in opposition to the motion to remand, Docket No. 18; and Chase's Motion to Strike Plaintiff's response in reply to the motion to remand, Docket No. 23. After careful consideration of the submissions of the parties and the applicable law, the Court finds that Motion to Remand will be granted and the Motions to Dismiss
This action arises out of Chase's foreclosure on the plaintiff's property and the subsequent conveyance of the property to the Individual Defendants.
Plaintiff Tina L. Housdan claims that she acquired a certain tract of real property in Brandon, Mississippi, on or about April 25, 2008. Complaint, Docket No.1, Ex. 1, at ¶ 13. She executed a deed of trust in connection with the purchase and secured an indebtedness of $207,313.00. This deed of trust and indebtedness were then assigned to Chase Home Finance LLC. According to the Complaint, Housdan was employed as mortgage broker when she acquired the property in early 2008. Housdan alleges that she had difficulty submitting her mortgage payments starting in early 2009 because her income was significantly reduced due to the economic downturn. After falling behind on her payments, Housdan received notice that her property was scheduled to be sold at foreclosure.
Housdan states that she contacted Chase to begin the loan modification application process, and Chase advised her that the foreclosure had been stopped while the modification application was pending. Housdan alleges that she sent Chase all of the information that it requested for the loan modification process multiple times, and that a Chase representative told her that she was approved for a loan modification, the foreclosure sale had been cancelled, and that she would soon receive the necessary paperwork to complete and sign. According to Housdan, she never received the paperwork after waiting nearly two months. She frequently called about the status of the modification process and the paperwork, but she "received conflicting information from Chase" and "never spoke with the same person twice." Id. ¶ 24. During one such attempt, a Chase representative informed her that she did not qualify for the modification. When Housdan explained that another representative had told her that she had previously been approved and that she was waiting on the paperwork, the representative insisted that she did not qualify. Shortly thereafter, Housdan received a letter notifying her that her property would be sold at foreclosure and that she was required to leave the premises. She left before the stated date in her "eviction notice." Id. ¶ 26.
In August 2010, the property was sold at foreclosure at the Rankin County Courthouse to Chase Home Finance LLC for the amount of $226,285.58. Chase sold the property to the Secretary of the U.S. Department of Housing and Urban Development ("HUD") by special warranty deed. HUD then sold the property by assignment of lease to the current owners, Tammy Michelle Dorman, Terry Monroe Dorman, and Frances M. Gray. On November 18, 2011, Housdan filed a Chapter 7 petition for bankruptcy in the U.S. District Court for the Southern District of Mississippi. The bankruptcy court granted Plaintiff a standard, no-asset discharge on March 28, 2012.
On August 2, 2013, Housdan filed this action in the Circuit Court of Rankin County, Mississippi, asserting state law causes of action in tort, fraud, breach of contract, breach of implied covenant of good faith and fair dealing, negligent infliction of emotional distress, negligence/gross negligence, wrongful foreclosure, and unjust enrichment. She also raised claims of trespass, fraudulent conveyance and ejectment against the Individual Defendants. The Individual Defendants are all Mississippi citizens and Chase is a non-Mississippi national association.
Chase removed the case to this Court, alleging that the Individual Defendants were improperly joined for the purpose of defeating diversity jurisdiction. It has also argued that this Court has subject matter jurisdiction based on federal question because Plaintiff's complaint raises Consent Orders between Chase and the U.S. Office of the Comptroller of the Currency ("OCC") and HUD regulations.
Title 28, Section 1332 of the United States Code confers federal diversity jurisdiction over civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and the civil action is between citizens of different states. It is undisputed that the amount in controversy is satisfied in this lawsuit, and that Chase, with its principal place of business in Ohio, and Plaintiff Housdan domiciled in Mississippi, are diverse from one another. The issue before the Court is whether the Individual Defendants, who are Mississippi residents, were improperly joined. If the Individual Defendants are proper parties to this action, diversity is defeated and the case should be remanded. If they were improperly joined, complete diversity exists and the case must remain in federal court.
Federal courts are courts of limited jurisdiction, and therefore, removal statutes are subject to strict construction. Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1988). The party seeking removal bears the burden of establishing that federal jurisdiction exists and showing that removal is procedurally proper. Boone v. Citigroup, Inc., 416 F.3d 382, 388 (5th Cir. 2005); Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). Any doubt regarding whether federal jurisdiction exists following removal must be resolved against a finding of federal jurisdiction. Gash v. Hartford Acc. & Indem. Co., 491 F.3d 278, 281-82 (5th Cir. 2007); Acuna v. Brown & Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000). Lack of diversity is a jurisdictional defect that cannot be waived. Freeman v. Northwest Acceptance Corp., 754 F.2d 553, 560 (5th Cir. 1985).
To establish improper or fraudulent joinder, the moving party must demonstrate either "(1) actual fraud in the pleading of jurisdiction facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court." Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004). Under the second inquiry, this Court must determine "whether that party has any possibility of recovery against the party whose joinder is questioned. If there is arguably a reasonable basis for predicting that the state law might impose liability on the facts involved, then there is no [improper] joinder. This possibility, however, must be reasonable, not merely theoretical." Travis v. Irby, 326 F.3d 644, 648 (5th Cir. 2003). Defendants must demonstrate that there is "`no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant.'" Kling Realty Co. v. Chevron USA, Inc., 575 F.3d 510, 513 (5th Cir. 2009) (quoting Smallwood, 385 F.3d at 573). "When conducting a fraudulent joinder analysis, a court must resolve all disputed questions of fact and ambiguities of law in favor of the non-removing party." Barahona Rodriguez v. Kivett's Inc., No. 3:05-CV-738-WHB-JCS, 3:06 CV 13, 2006 WL 2645190, at *3 (S.D. Miss. Sept. 12, 2006) (citing Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42 (5th Cir. 1992)).
To determine whether a plaintiff has a reasonable basis of recovery under state law, courts generally conduct a Rule 12(b)(6)-type analysis, "looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant." Smallwood, 385 F.3d at 573. "Ordinarily, if a plaintiff can survive a Rule 12(b)(6) challenge, there is no improper joinder." Id. Chase, as the removing party, bears the heavy burden of demonstrating that there is no possibility of recovery against the Individual Defendants. See Travis 326 F.3d at 648-49 (citing B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. 1981)). Chase has failed to meet its burden.
Plaintiff has argued that Chase has failed to prove that there is "absolutely no possibility" that the plaintiff will be able to establish a claim against the Individual Defendants for ejectment, trespass and fraudulent conveyance,
Plaintiff has asserted causes of action for trespass and ejectment against the Individual Defendants. With respect to her trespass claim, Plaintiff alleges that (1) the Individual Defendants are "improperly and illegally possessing the subject property" and "committed trespass . . . when they intentionally invaded the property without consent or right to enter the land," Compl., Docket No. 1, Ex. A, ¶ 104; and (2) that she suffered nominal damages and actual damages for which she is entitled to recover. With these pleadings, Plaintiff has at least stated a "possibility of success" on her trespass allegations. Brasel, 2014 WL 2879698, at *4.
In her claim for ejectment, Plaintiff alleges that (1) the Individual Defendants "illegally possess the subject property," Compl., Docket No. 1, Ex. A, ¶ 112; (2) Plaintiff has "superior/equitable/actual title" against any conveyance or claim of title held by the Individual Defendants, id. ¶ 113; and (3) Plaintiff seeks an order of ejectment judgment finding that the Plaintiff is the legal owner to the subject property. Id. ¶ 114. In this case, Housdan argues that the foreclosure sale is void and thus no title passed to Individual Defendants.
The Defendants argue that the Individual Defendants were bona fide purchasers for value without notice. They claim that Plaintiff cannot successfully state claims against the Individual Defendants because they purchased the property for value without notice of Plaintiff's claim and bona fide purchasers take "title to the property free and clear of any non-perfected claims," and Plaintiff had no legal title to the property to support claims for trespass or ejectment. Ind. Def's MTD, Docket No. 11, at 4. On this issue, this Court concurs with the decision of previous Mississippi courts which have evaluated the same subject. The Individual Defendants' alleged status as bona fide purchasers for value without notice is "an affirmative defense and must be sustained by competent proof." Brasel, 2014 WL 2879698, at *4 (citing Memphis Hardwood Flooring Co. v. Daniel, 771 So.2d 924, 933 (Miss. 2000)). "This Court cannot properly make a ruling in this regard at the motion for remand stage, because such a determination would require this Court to engage in an Erie guess and rule on the merits of the controversy." Id.; see also Sturgis, No. 3:13-cv-544-LG-JMR, Docket No. 36, at 10 (holding that determining whether plaintiff's claim could override the bona fide purchaser affirmative defense "is the type of analysis that is precluded in determining an improper joinder issue, and makes remand all the more appropriate.").
For the reasons above, Chase has failed to meet its heavy burden to justify removal based on improper joinder. Therefore, the joining of the Individual Defendants creates a lack of complete diversity and remand is proper on this ground.
In its Notice of Removal, Chase argues that this Court has subject matter jurisdiction over this action based on federal question jurisdiction. Chase contends that Plaintiff's claims are based on certain consent orders entered into between the OCC and Chase. See Compl. ¶¶ 31-32. Chase also states that Plaintiff has alleged that Chase violated HUD regulations, which require that certain procedures be followed in notifying a mortgagor before instituting a foreclosure sale process. See Compl. ¶¶ 39-50. It appears that Chase has misconstrued Plaintiff's claims, and neither of these allegations grant this Court subject matter jurisdiction over this case.
Under 28 U.S.C. § 1331, "[t]he district courts have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." "A federal question exists only in those cases in which a well-plead complaint establishing either that federal law creates the cause of action or that plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law." Singh v. Duane Morris LLP, 538 F.3d 334, 337-38 (5th Cir. 2008) (quotation marks, citation, and brackets omitted). Although the Court has already discussed removal for purposes of diversity jurisdiction, see supra at 4-5, the same general rules apply when a case is removed for purposes of alleged federal question jurisdiction. A few points bear repeating, however. The party seeking removal bears the burden of establishing that federal jurisdiction exists. Boone., 416 F.3d at 388. "Because the effect of removal is to deprive the state of an action properly before it, removal raises significant federalism concerns . . . and any doubt as to the propriety of removal should be resolved in favor of remand." Rayburn v. Miss. Dev. Authority, 877 F.Supp.2d 494, 496 (S.D. Miss. 2012) (citations omitted). As this Court explained in Hearn v. Reynolds:
876 F.Supp.2d 798, 799 (S.D. Miss. 2012) (citations omitted).
In the Complaint, Plaintiff alleged that Chase and its subsidiaries "have a pattern of wrongful disclosure." Compl. ¶ 31. Plaintiff then referenced a Consent Order that Chase entered into with the OCC as part of a review of Chase's residential mortgage services in which the OCC identified "deficiencies and unsafe or unsound practices in residential mortgage servicing and the Bank's initiation and handling of foreclosure proceedings," and included a summary of this list. Id. ¶ 32. The OCC consent orders do not provide the Plaintiff with a private cause of action. See Green v. Bank of America Corp., 530 F. App'x 426, 430 (6th Cir. 2013) ("Plaintiff has no right to enforce the terms and conditions of the OCC Consent Orders" because "a consent order is a contract that non-parties are not entitled to enforce."). It is well settled that "a consent decree is not enforceable directly or in collateral proceedings by those who are not parties to it even though they were intended to be benefited by it." Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 750 (1975). See also Shatteen v. JP Morgan Chase Bank, N.A., 519 F. App'x 320, 321 (5th Cir. 2013) (unpublished) (holding homeowner "has no standing to enforce consent decrees to which she is not a party"). Plaintiff apparently recognized this point in the Complaint, given that she specifically stated that she was "not making any claim for violation of the OCC Consent decree. [sic]" Id. ¶ 33.
As for the allegation that this Court has subject matter jurisdiction based on Plaintiff's complaint that Chase breached the deed of trust by not notifying her of default in the manner prescribed by HUD regulations, that claim also fails to provide this Court with subject matter jurisdiction. These regulations derive from the National Housing Act. 12 U.S.C. § 1709. "[T]he National Housing Act and the regulations promulgated thereunder deal only with the regulations between the mortgagee and the government, and give the mortgagor no claim to duty owed nor remedy for failure to follow." Roberts v. Cameron-Brown Co., 556 F.2d 356, 360 (5th Cir. 1977). Chase has not provided any authority to support its assertion that the plaintiff would have a private cause of action under the National Housing Act for the violation of these regulations. Plaintiff has pled her claim as a breach of contract action under the deed of trust. "Jurisdiction may not be sustained on a theory that the plaintiff has not advanced." Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 810 n.6 (1986) (citation omitted). Accordingly, Chase has not met its burden of establishing that federal question jurisdiction based on these OCC consent orders and HUD regulations.
Defendant Chase also alleges that this Court has jurisdiction pursuant to 28 U.S.C. § 157, 1334, & 1452, on the basis that the Plaintiff failed to disclose this suit in her 2011 bankruptcy filing. Chase contends that Plaintiff's standard, no-asset discharge was "[b]ased on her concealment of" this claim to the subject property as an asset of the bankruptcy estate, and that these "new-found and previously undisclosed" claims fall within the bankruptcy court's jurisdiction. Notice of Removal, Docket No. 1, at 5; Docket No. 17, at 16. Plaintiff argues that she did not allege these claims at the time she filed for bankruptcy in 2011 because she was not aware that she had "viable causes of action" against Chase for the foreclosure sale of the subject property.
Thus, Section 1334(b) contains three subcategories of federal subject-matter jurisdiction which are referred to as "arising under," "arising in," and "related to" jurisdiction. Soriano v. Trustmark Nat'l Bank, 3:11CV332-DPJ-FKB, 2012 WL 28596, at *1 (S.D. Miss. Jan. 5, 2012) aff'd, 487 F. App'x 144 (5th Cir. 2012) (citing Dubose v. Merchants and Farmers Bank, 318 F.Supp.2d 419, 425 (S.D. Miss. 2003)).
The Fifth Circuit has explained that proceedings "arise under" Title 11 "insofar as they involve a cause of action created by a statutory provision therein. . . ." In re Wilborn, 609 F.3d 748, 752 (5th Cir. 2010). Proceedings that "arise in" cases under Title 11 by their nature can only arise in bankruptcy cases. Id. The present dispute derives from the foreclosure and subsequent sale of Plaintiff's property, and does not involve a cause of action created by Title 11. See id. Nor is Plaintiff's case of the type that can only arise in bankruptcy cases. See id. The Court is not persuaded that Plaintiff's state law claims against Defendants "arise under" or "arise in" any case under Title 11.
To determine whether a matter is "related to" a bankruptcy case, the Fifth Circuit has adopted the definition that a proceeding is "related to" the bankruptcy case if the outcome of that proceeding could have "any conceivable effect on the estate being administered in bankruptcy." Morrison v. W. Builders of Amarillo, Inc. (In re Morrison), 555 F.3d 473, 479 (5th Cir. 2009) (citing Matter of Wood, 825 F.2d 90, 97 (5th Cir. 1987)). Plaintiff filed for bankruptcy fifteen months after the foreclosure sale of the subject property. The bankruptcy court granted Plaintiff a discharge in March 2011. Plaintiff did not file this action in Rankin County Circuit Court until August 2, 2013, more than two years after the bankruptcy court issued a discharge and her claim was no longer pending. Even if this claim arose after the bankruptcy discharge, Plaintiff also had no reason to list the subject property as an asset of her estate because she no longer had title to it.
Neither Plaintiff nor the Defendants have moved to reopen the bankruptcy proceeding or reverse Plaintiff's discharge, which indicates that this proceeding could not, at least at this stage, have any effect on an estate being administered in bankruptcy. See Nguyen v. Regions Bank, 1:10CV253-HSO-JMR, 2010 WL 5071173, at *6 (S.D. Miss. Dec. 7, 2010); Kane v. National Union Fire Ins. Co., 535 F.3d 380, 383 (5th Cir.2008) (noting that, after defendants moved for summary judgment in state court arguing judicial estoppel, plaintiffs filed motion in bankruptcy court to reopen their bankruptcy proceedings, and after the bankruptcy court granted the motion to reopen, defendant removed the case to federal court invoking the federal district court's "related to" bankruptcy jurisdiction). As a result, the Court is not persuaded that this action is "related to" the Plaintiff's earlier bankruptcy case or any other. Nguyen, 2010 WL 5071173, at *6 (citing In re Morrison, 555 F.3d at 479).
Even if this matter were "related to" Plaintiff's former bankruptcy case, remand would nevertheless be appropriate. Section 1334(c)(2) provides that:
(Emphasis added).
The Fifth Circuit has
In re TXNB Internal Case, 483 F.3d 292, 300 (5th Cir. 2007) (quoting Schuster v. Mims (In re Rupp & Bowman), 109 F.3d 237, 239 (5th Cir. 1997)). As the court decided in Nguyen when faced with a similar question, "Even if this case were `related to' the previous bankruptcy case, Section 1334(c)(2) dictates that, upon Plaintiff's Motion to Remand, the Court must abstain from hearing it. In such a scenario, this case would have no independent basis for federal jurisdiction other than Section 1334(b), it was commenced in state court, and it can be timely adjudicated in that forum." See Nguyen, 2010 WL 5071173, at *6-7 (citing 28 U.S.C. § 1334(c)(2)).
Plaintiff filed a reply brief to Chase's opposition to Plaintiff's motion to remand. Docket No. 20. Chase has filed a motion to strike this reply brief, arguing that (1) Plaintiff raised new arguments on rebuttal that were "not even remotely foreshadowed" by Plaintiff's original motion; (2) Plaintiff failed to waive any arguments about defects in removal by failing to raise them timely, and that the defects Plaintiff raised are inaccurate; and (3) Plaintiff's arguments that the Individual Defendants are necessary and proper parties under Rule 19 are irrelevant to jurisdictional issues in the case; and (4) Plaintiff's affidavit attached to her reply brief is untimely, irrelevant, and does not refute anything raised by Chase in response to its opposition to remand.
In her reply brief, Plaintiff raised multiple arguments that were never raised in the original motion. These arguments include: (1) that Chase's Notice of Removal was procedurally defective because Chase did not obtain "timely consent" from the Individual Defendants nor did it file a notice of removal; (2) that the Defendant Tammy Dorman's Declaration, at Docket No. 16, Ex. N, that Paula M. Joyner, administrative assistant for Plaintiff's counsel, told her that the Individual Defendants were only being sued "to keep the case in state court" was hearsay;
In her Motion to Strike, Docket No.18, Plaintiff seeks to remove alleged statements contained in Defendant Dorman's Declaration. Docket No. 16-14, at ¶ 10. In its response opposing remand, Defendant Chase offers declaration testimony from Defendant Tammy Michele Dorman wherein she claims that, as she was being served with process, Plaintiff's paralegal and process server, Paula M. Joyner, advised her "not to worry" because the Dormans and Frances Gray were only being named as defendants "to keep the case in state court." Id. Chase contends this is additional proof that in-state defendants were improperly joined in this action for the sole purpose of preventing it from being held in a federal forum. In response, Housdan argues that the alleged statements are inadmissible hearsay that cannot be properly considered in this summary judgment proceeding. Because the ruling on the issue of remand did not necessitate reference to the declaration in question, the Court finds that the Motion to Strike is denied as moot.
This matter shall be remanded to the Circuit Court of Rankin County, Mississippi. Because the Court lacks jurisdiction over the case, it does not reach the merits of the Motions to Dismiss [Docket Nos. 6 and 10]. The Motion to Stay Proceedings [Docket No. 13] is now moot. Plaintiff's Motion to Strike [Docket No. 18] is moot. Defendant's Motion to Strike [Docket No. 23] is granted and Plaintiff's Motion to Strike [Docket No. 32] is denied.
