Arnold v. Stearns Lending Services, LLC ( 2023 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 KIMBLY ARNOLD and BYRON Case No. 1:22-CV-01534-JLT-SKO ARNOLD, 12 ORDER REMANDING CASE Plaintiffs, 13 v. 14 STEARNS LENDING SERVICES LLC, et 15 al., 16 Defendants. 17 18 19 LoanCare LLC removed this action from Stanislaus County Superior Court to this Court 20 citing federal question jurisdiction as the sole basis for the removal. (Doc. 1 at 2–3.) This Court 21 ordered Defendant to show cause why this case should not be remanded sua sponte to state court. 22 Defendant filed a response, and the Plaintiffs. (Doc. 13; Doc. 15.) Having considered the entire 23 record, the Court concludes that remand is required. 24 For the sake of expedience, the Court repeats here the pertinent parts of its OSC: 25 Federal courts are courts of limited jurisdiction and may adjudicate only those cases authorized by federal law. Kokkonen v. Guardian 26 Life Ins. Co., 511 U.S. 375, 377 (1994); Willy v. Coastal Corp., 503 U.S. 131, 136–37 (1992). “Federal courts are presumed to lack 27 jurisdiction, ‘unless the contrary appears affirmatively from the record.’” Casey v. Lewis, 4 F.3d 1516, 1519 (9th Cir. 1993) 28 (quoting Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 546 1 (1986)). Lack of subject matter jurisdiction may be raised by the court at any time during the proceedings. Attorneys Trust v. 2 Videotape Computer Prods., Inc., 93 F.3d 593, 594–95 (9th Cir. 1996). A federal court “ha[s] an independent obligation to address 3 sua sponte whether [it] has subject-matter jurisdiction.” Dittman v. California, 191 F.3d 1020, 1025 (9th Cir. 1999). The burden of 4 establishing jurisdiction rests upon plaintiff as the party asserting jurisdiction. Kokkonen, 511 U.S. at 377. 5 District courts have “original jurisdiction of all civil actions arising 6 under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. “Most federal-question jurisdiction cases are those 7 in which federal law creates a cause of action. A case may also arise under federal law where ‘it appears that some substantial, 8 disputed question of federal law is a necessary element of one of the well-pleaded state claims.’” Wander v. Kaus, 304 F.3d 856, 858 9 (9th Cir. 2002) (quoting Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 13 (1983)). The 10 “well-pleaded complaint rule” provides that federal jurisdiction exists only when a federal question is presented on the face of the 11 plaintiff’s properly pleaded complaint. California v. United States, 215 F.3d 1005, 1014 (9th Cir. 2000). The mere presence of a 12 federal issue does not automatically confer federal question jurisdiction and passing references to federal statutes do not create a 13 substantial federal question. Lippitt v. Raymond James Fin. Servs., Inc., 340 F.3d 1033, 1040–41 (9th Cir. 2003). “‘Arising under’ 14 federal jurisdiction only arises . . . when the federal law does more than just shape a court’s interpretation of state law; the federal law 15 must be at issue.” Int’l Union of Operating Eng’rs v. County of Plumas, 559 F.3d 1041, 1045 (9th Cir. 2009). More specifically, 16 “federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and 17 (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.” Gunn v. Minton, 568 18 U.S. 251, 258 (2013). 19 According to Defendant[], there is a federal question because “Plaintiffs seek rescission of the claims and liens of the Secretary of 20 the Department of Housing and Urban Development (HUD) pursuant to the Promissory Note and Deed of Trust in FHA Case 21 No. 045-8460051-703, appearing at Attachment ‘B’ to the Complaint.” (Id. at 2.) Though the complaint repeatedly mentions 22 the “FHA”, “FHA-Partial Claims,” the CARES Act, and certain other federal programs, agencies, and rules/regulations, the only 23 cause of action for rescission in the Complaint is facially premised upon California Civil Code § 1689, which permits rescission of a 24 contract under various circumstances. No other claim in the case is facially premised upon federal law. Rather, they are all explicitly 25 grounded in California law. Relatedly, the Court is unaware of any authority that indicates a federal question is present simply because 26 a mortgage in dispute is FHA-insured. The Court directs the parties’ attention to the recent decision in Young v. AmeriHome Mortg. Co., 27 LLC, No. 22-CV-1163 JLS (AGS), 2022 WL 3371341, at *2 (S.D. Cal. Aug. 16, 2022), which found no federal question jurisdiction 28 over state law claims despite the Plaintiff’s repeated reliance in the 1 Complaint on mortgage relief provisions contained within the federal CARES Act. In sum, Court is unable to determine from the 2 face of the Complaint or the Notice of Removal whether federal question exists. 3 4 (Doc. 11 at 1–3.) 5 Defendant’s response contains two paragraphs of argument in which it acknowledges that 6 Plaintiff’s claim for rescission is premised upon California law but insists that the terms of the 7 agreement “expressly implicate federal law in the determination of the enforceability of the 8 agreement, including the security for the debt. As such 12 [C.F.R.] Part 1025 (Regulation Z) is 9 implicated, in particular, section 1026.2, relating to a borrower’s right of rescission.” (Doc. 13 at 10 4.) 11 This entirely conclusory argument, even though it references Regulation Z, fails to meet 12 Defendant’s burden to establish the propriety of removal. See Kokkonen, 511 U.S. at 377. Even in 13 cases where Regulation Z is a necessary element of a state law claim, that fact still may be 14 insufficient to maintain federal question jurisdiction. See Medina v. Performance Auto. Grp., Inc., 15 841 F. Supp. 2d 1121, 1124 (E.D. Cal. 2012) (remanding claim brought under Cal. Civ. Code § 16 1689 even though the claim itself mentioned Regulation Z); Muller v. Auto Mission, Ltd., No. 13- 17 CV-00304-NC, 2013 WL 1996916, at *7 (N.D. Cal. May 13, 2013) (“Even if Regulation Z were 18 shown to be a necessary element, defendants have not met their burden of demonstrating a 19 substantial and disputed question under Regulation Z.”). Defendant has made no effort to explain 20 why the claims in this case raise substantial and disputed questions related to Regulation Z or any 21 other federal law. It is not the Court’s responsibility to identify authority or make arguments for 22 Defendant. 23 The Court acknowledges that the complaint is in many respects “incomprehensible,” but a 24 court cannot presume federal jurisdiction simply because a complaint is confusing. This is 25 particularly so given that courts are directed to construe the removal statute strictly, Provincial 26 Gov’t of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009) (citations 27 omitted), and to resolve all doubts in favor of remand. Matheson v. Progressive Specialty Ins. 28 Co., 319 F.3d 1089, 1090 (9th Cir. 2003). Accordingly, this case is REMANDED to the Superior 1 | Court for the County of Stanislaus. 2 3 IT IS SO ORDERED. Dated: _ April 26, 2023 Charis [Tourn TED STATES DISTRICT JUDGE 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28