Cleveland Hous. Renewal Project v. Deutsche Bank Trust Co.

• Decision Date: 20 September 2010
• Docket Number: Nos. 09-3571, 09-3648.,s. 09-3571, 09-3648.
• Citation: 621 F.3d 554
• Parties: CLEVELAND HOUSING RENEWAL PROJECT, Plaintiff-Appellee, v. DEUTSCHE BANK TRUST COMPANY; Deutsche Bank National Trust Company; Deutsche Fargo Bank National Trust Company; Deutsche Bank Trust Company Americas, fka Bankers Trust Company, Defendants-Appellants, City of Cleveland, Defendant.
• Court: U.S. Court of Appeals — Sixth Circuit

621 F.3d 554

CLEVELAND HOUSING RENEWAL PROJECT, Plaintiff-Appellee,

v. DEUTSCHE BANK TRUST COMPANY; Deutsche Bank National Trust Company; Deutsche Fargo Bank National Trust Company; Deutsche Bank Trust Company Americas, fka Bankers Trust Company, Defendants-Appellants,City of Cleveland, Defendant.

Nos. 09-3571, 09-3648.

United States Court of Appeals,Sixth Circuit.

Argued: April 30, 2010.

Decided and Filed: Sept. 20, 2010.

ARGUED: Allyson N. Ho, Morgan, Lewis & Bockius LLP, Houston, Texas, for Appellants. Thomas C. Wagner, Van Deusen & Wagner, LLC, Cleveland, Ohio, for Appellee. ON BRIEF: Allyson N. Ho, Morgan, Lewis & Bockius LLP, Houston, Texas, Jami Wintz McKeon, Elizabeth A. Frohlich, Morgan, Lewis & Bockius LLP, San Francisco, California, Hugh E. McKay, Porter, Wright, Morris & Arthur LLP, Cleveland, Ohio, for Appellants. Thomas C. Wagner, Roger W. Van Deusen, Van Deusen & Wagner, LLC, Cleveland, Ohio, for Appellee.

Before: COOK and McKEAGUE, Circuit Judges; HOOD, District Judge. ^*

OPINION

McKEAGUE, Circuit Judge.

This is a public nuisance action brought against Deutsche Bank Trust Company and affiliated companies (“Deutsche Bank”), in relation to twenty-five vacant properties in and around Cleveland owned by Deutsche Bank. Plaintiff Cleveland Housing Renewal Project, Inc. (“CHRP”), filed the action in the Cleveland Municipal Housing Court seeking declaratory and injunctive relief. Deutsche Bank removed the action to federal court based on the parties' diversity of citizenship. However, the district court granted CHRP's motion to remand. The court concluded that subject matter jurisdiction was established by virtue of the parties' diversity of citizenship and that CHRP had standing to proceed in federal court. The court nonetheless remanded the action to state court based on Burford abstention, to avoid federal disruption of a coherent state policy regarding a matter of substantial public concern. Deutsche Bank timely appealed. Finding that abstention is not warranted, we vacate the abstention order and remand the case to the district court for further proceedings on CHRP's complaint.

I. BACKGROUND

Plaintiff CHRP is a private non-profit corporation whose principal goal is the improvement and renewal of housing and economic conditions in the City of Cleveland. We accept that the four affiliated Deutsche Bank entities named as defendants comprise a national banking association incorporated under the laws of the United States and include a New York state chartered trust company.

CHRP filed its complaint on December 15, 2008, in the Cleveland Municipal Housing Court, (1) seeking a declaration that each of twenty-five named residential properties allegedly owned by Deutsche Bank constitutes a “public nuisance” as defined by Ohio law, being a menace to the public health, welfare, or safety; and (2) seeking injunctive relief requiring Deutsche Bank to abate the alleged nuisances. The complaint also alleges that Deutsche Bank's “business practices” relating to the maintenance and sale of properties subject to foreclosure amount to common-law nuisances, in that homes are sold at extremely distressed prices, purchased by speculators, “flipped,” and ultimately abandoned, to the detriment of property values and neighborhood quality. CHRP alleges that Deutsche Bank's practices place homes in a “post foreclosure death spiral: vacancy ? boarded windows and doors ? break-ins and vandalism ? theft of the home's assets (copper, aluminum, iron) ? haven for criminal activity ? decrease in neighboring housing values.” R. 1, Complaint ¶ 5. CHRP also seeks an injunction prohibiting these practices.

In addition to Deutsche Bank, CHRP named the City of Cleveland as a defendant. The complaint does not allege any cause of action against the City, nor does it seek any relief from the City. The complaint identifies the City as an entity that “may have or claim to have some interest in real property that is the subject of this action by virtue of code violations, utility assessments and Nuisance abatement costs.” R. 1, Complaint ¶ 8. In answering the complaint, the City asserted cross-claims against Deutsche Bank. Deutsche Bank removed this action to federal court on the basis of diversity of citizenship.

CHRP filed a motion to remand, contending primarily that the district court lacked jurisdiction because (i) CHRP lacked Article III and prudential standing; (ii) the City was a non-diverse defendant; and (iii) the jurisdictional amount-in-controversy requirement had not been satisfied. Alternatively, CHRP argued that the district court should abstain from exercising jurisdiction under Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943). Deutsche Bank opposed remand and moved the district court to realign the City as a plaintiff. The district court granted Deutsche Bank's motion for realignment and ruled that it had jurisdiction over CHRP's claims, but declined to exercise jurisdiction under Burford. See Cleveland Housing Renewal Project v. Deutsche Bank Trust Co., 606 F.Supp.2d 698 (N.D.Ohio 2009).

Deutsche Bank filed a motion to reconsider and presented the district court with “newly discovered evidence” concerning the Cleveland Housing Court Judge's alleged bias in this case. The court dismissed the notion of any bias in the housing court, noting that Ohio law provides for disqualification of judges and appellate review of housing court decisions and denied the motion to reconsider. Cleveland Housing Renewal Project v. Deutsche Bank Trust Co., 2009 WL 1034236 (N.D.Ohio, April 16, 2009). Deutsche Bank timely filed notice of appeal.

II. ANALYSIS

A. Appellate Jurisdiction

We have jurisdiction to decide this appeal. In Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 711-12, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996), the Supreme Court held that 28 U.S.C. § 1447(d), which bars appellate review of remand orders in some instances, must be read in pari materia with 28 U.S.C. § 1447(c), “so that only remands based on grounds specified in § 1447(c) are immune from review under § 1447(d).” Id. (quoting Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127, 116 S.Ct. 494, 133 L.Ed.2d 461 (1995)). In Quackenbush, the Court held that an abstention-based remand order does not come within a category of remand orders that are immune from review. Id. at 712, 116 S.Ct. 1712. In other words, per Quackenbush, an abstention-based remand order is subject to appellate review.

CHRP argues that Congress's 1996 amendment of § 1447(c) to include reference to “[a] motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction” changes the meaning of § 1447(c) and renders abstention-based remands also immune from appellate review. Yet, in an opinion issued last year, the Supreme Court declined to read the amendment as working a material change. Carlsbad Technology, Inc. v. HIF Bio, Inc., --- U.S. ----, 129 S.Ct. 1862, 173 L.Ed.2d 843 (2009). Specifically, the Court recognized that remand orders based on a lack of subject matter jurisdiction are not reviewable, but held that a discretionary decision not to exercise jurisdiction is not a remand for lack of subject matter jurisdiction. Id. at 1866-67. In so ruling, the Court cited with approval Quackenbush's holding that an abstention-based remand is not for lack of subject matter jurisdiction. Id. at 1866. The Court refrained from revisiting the premises of the Quackenbush ruling, id. at 1866 n. *, despite expressed unease over the extent to which the Court's applications of § 1447(d) appear to be at odds with the provision's plain language, see id. at 1868-69 (Scalia, J., concurring, and Souter, J., concurring).

We follow the Supreme Court's lead. Accordingly, CHRP's objection to appellate jurisdiction is overruled.

B. Subject Matter Jurisdiction

As a second threshold matter, CHRP argues that irrespective of the merits of Burford abstention, the district court's order of remand should be affirmed because the district court lacked subject matter jurisdiction in the first place. CHRP contends the parties are not completely diverse and the amount-in-controversy is less than $75,000. See 28 U.S.C. § 1332. This Court reviews a district court's decision regarding subject matter jurisdiction de novo. Loren v. Blue Cross & Blue Shield of Mich., 505 F.3d 598, 604 (6th Cir.2007). The party invoking federal court jurisdiction-in this case, Deutsche Bank, as removing party-has the burden of demonstrating by competent proof that the complete-diversity and amount-in-controversy requirements are met. Hertz Corp. v. Friend, --- U.S. ----, 130 S.Ct. 1181, 1194-95, --- L.Ed.2d ---- (2010).

1. Diversity of Citizenship

CHRP named the City of Cleveland (“the City”) as a defendant. Because both CHRP and the City are citizens of Ohio, CHRP argued below that complete diversity of citizenship was lacking and that the district court did not have subject matter jurisdiction. CHRP insisted that the City was a properly joined party, who was not a nominal or formal party, and whose presence was required to avoid the problem of a potential buyer taking the property subject to the City's super-priority lien for unrecorded assessments. The district court, however, granted Deutsche Bank's motion to realign the City as a plaintiff, which created complete diversity between all plaintiffs and all defendants. Cleveland Housing, 606 F.Supp.2d at 709-10. The district court found that CHRP's concerns regarding liens the City might hold on the properties to be ancillary or secondary to the ultimate purpose of the lawsuit, i.e., to abate the conditions creating the nuisance. Id. In relation to the primary dispute in controversy, the district court concluded that the City's interests are aligned with those of CHRP.

The district court properly recognized that it is the court's responsibility to ensure that the parties are properly aligned according to their interests in the...