McKenna v. Wells Fargo Bank, N.A.

• Decision Date: 16 August 2012
• Docket Number: No. 11–1650.,11–1650.
• Citation: 693 F.3d 207
• Parties: Suzette McKENNA, Plaintiff, Appellant, v. WELLS FARGO BANK, N.A., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

693 F.3d 207

Suzette McKENNA, Plaintiff, Appellant,

v.WELLS FARGO BANK, N.A., Defendant, Appellee.

No. 11–1650.

United States Court of Appeals, First Circuit.

Heard Jan. 11, 2012.

Decided Aug. 16, 2012.

Glenn F. Russell, Jr. with whom Law Office of Glenn F. Russell, Jr. was on brief for appellant.

Jeffrey S. Patterson with whom Morgan T. Nickerson and Nelson Mullins Riley & Scarborough LLP were on brief for appellee.

Before TORRUELLA, Circuit Judge, SOUTER,^* Associate Justice, and BOUDIN, Circuit Judge.

BOUDIN, Circuit Judge.

On November 9, 2006, Charles McKenna entered into a loan refinancing agreement with Wells Fargo Bank, N.A., evidently to help pay for his children's college education. As part of the transaction, Charles McKenna and his wife, Suzette McKenna, granted Wells Fargo a mortgage on their residence in South Orleans, Massachusetts. On the same day, Wells Fargo provided the McKennas with a disclosure form stating the loan amount and terms. On November 15, 2006, the mortgage was recorded at the Barnstable County Registry of Deeds.

Charles McKenna died of a heart attack on May 24, 2009, at age 54, leaving his wife as administratrix of his estate. Some time thereafter, Suzette McKenna fell behind on her monthly mortgage payments. Under Massachusetts law, if a mortgage gives the mortgage holder the “power of sale” (as the McKennas' mortgage did), the mortgagee may foreclose—without a court judgment ordering the sale—after a “limited judicial procedure” to establish that the mortgagor is not a present or recent member of the armed forces, which Suzette McKenna was not.¹

Wells Fargo successfully brought such a proceeding in Massachusetts Land Court in October 2009. Then, on January 14, 2010, Wells Fargo sent Suzette McKenna a statutory notice of foreclosure sale informing her that the bank intended to auction her home on or after February 16 of that year. Suzette McKenna countered by writing to assert a right to rescind the mortgage and then filing suit to preclude the foreclosure sale—her lawsuit being the origin of the appeal now before us.

In a letter that she sent to Wells Fargo on February 6, 2010, Suzette McKenna claimed a right to rescind on the grounds that (1) Wells Fargo had provided her and Charles McKenna with only one Truth in Lending disclosure statement at the time of the loan rather than two copies, and (2) Wells Fargo had understated the finance charge in its Truth in Lending statement by “more than $35.00.” On February 11, 2010, Suzette McKenna filed a complaint in Barnstable County Superior Court seeking an injunction to prevent Wells Fargo from proceeding with the foreclosure sale. Five days later, the Superior Court issued a preliminary injunction restraining Wells Fargo from taking further action to sell Suzette McKenna's home.²

On March 10, 2010, Wells Fargo removed the case to the federal district court in Massachusetts. The bank asserted that federal question jurisdiction existed over what it deemed (incorrectly) to be Suzette McKenna's federal claims, supplemental jurisdiction over her related state law claims, and diversity jurisdiction over the entire action due to the amount in controversy and diversity of citizenship. No one thereafter appears to have contested subject matter jurisdiction, although Wells Fargo has raised challenges to our appellate jurisdiction, which we address below.

Following a seven-count amended complaint filed on September 3, 2010, Wells Fargo moved to dismiss for failure to state a claim, Fed.R.Civ.P. 12(b)(6), and the district court granted the motion. McKenna v. Wells Fargo Bank, N.A., No. 10–10417–JLT, 2011 U.S. Dist. LEXIS 28719, 2011 WL 1100160 (D.Mass. Mar. 21, 2011) (the “12(b)(6) order”). Suzette McKenna's timely motion to alter, amend, or vacate the judgment, Fed.R.Civ.P. 59(e), 60(b)(2) (the “motion for reconsideration”), was denied on May 11, 2011. Suzette McKenna filed a notice of appeal on June 6, 2011.

At the outset we face questions relating to the district court's subject matter jurisdiction which we are required to consider sua sponte where jurisdiction is in doubt. McCulloch v. Velez, 364 F.3d 1, 5 (1st Cir.2004). Here, Wells Fargo's primary assertion in its removal papers—that there is federal question jurisdiction present in this case—turns out to be mistaken because no federal claim is presented. In the end, however, diversity jurisdiction does appear sufficient to support the state statutory claims that are asserted in the complaint.

The federal Truth in Lending Act (“TILA”) gives homeowners a right to rescind certain credit transactions, 15 U.S.C. § 1635(a) (2006), and creates a private right of action for damages, 15 U.S.C. § 1640, which would ordinarily satisfy federal question jurisdiction. 28 U.S.C. § 1331. But although Suzette McKenna's amended complaint makes passing reference to the federal TILA, she styles all of her claims as arising under state law, including the Massachusetts Consumer Credit Cost Disclosure Act (“MCCCDA”), Mass. Gen. Laws ch. 140D.

This may have been done because a federal TILA claim for rescission must be brought within three years of the transaction, 15 U.S.C. § 1635(f), while the MCCCDA allows four years, Mass. Gen. Laws ch. 140D, § 10(f), and McKenna's suit appears to satisfy the latter time requirement but not the former. There are also unsettled questions as to what federal rights are displaced and what others remain where, as is the case with Massachusetts, the Federal Reserve has exempted a state from various TILA's provisions on the grounds that state law establishes “substantially similar” requirements. See Palmer v. Champion Mortg., 465 F.3d 24, 27 n. 4 (1st Cir.2006) (discussing one such “unsettled” question); cf.15 U.S.C. § 1633; 12 C.F.R. § 226.29 (2011); 47 Fed.Reg. 42,171 (Sept. 24, 1982).

While “the MCCCDA was ‘closely modeled’ after the TILA and, in most respects, ‘mirrors its federal counterpart,’ ” DiVittorio v. HSBC Bank USA, NA (In re DiVittorio), 670 F.3d 273, 282–83 (1st Cir.2012) (quoting McKenna v. First Horizon Home Loan Corp., 475 F.3d 418, 422 (1st Cir.2007)), an MCCCDA claim on its own almost surely does not satisfy federal question jurisdiction, cf. Belini, 412 F.3d at 28 (relying on supplemental jurisdiction statute, 28 U.S.C. § 1367, for federal jurisdiction over MCCCDA claim).

One out-of-circuit precedent suggests that “federal courts continue to have [federal question] jurisdiction over any civil suit claiming violation of [an exempt state]'s disclosure requirements,” Ives v. W.T. Grant Co., 522 F.2d 749, 753–54 (2d Cir.1975). But we are not persuaded; our circuit has only found such federal question jurisdiction to exist where, unlike this case, the plaintiff explicitly pleads a federal section 1640 claim under TILA. See Belini, 412 F.3d at 28;Bizier v. Globe Fin. Servs., Inc., 654 F.2d 1, 4 (1st Cir.1981).

However, the removal can be supported by diversity jurisdiction, which requires that the parties be citizens of different states and that the amount in controversy exceed $75,000. See28 U.S.C. §§ 1332(a), 1441. Suzette McKenna is a citizen of Massachusetts. Well Fargo, a national bank, is a citizen of the state where it is “located,” 28 U.S.C. § 1348; this is “the State designated in its articles of association as its main office,” Wachovia Bank, N.A. v. Schmidt, 546 U.S. 303, 318, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006); and “Wells Fargo is a citizen of South Dakota for diversity purposes.” Hargrow v. Wells Fargo Bank N.A., No. 11–1806, 2012 U.S.App. LEXIS 13638, at *4, 2012 WL 2552805, at *2 (6th Cir. July 3, 2012).

As for the $75,000 amount-in-controversy requirement, “[n]umerous [district] courts have held that, where a complaint seeks to invalidate a loan secured by a deed of trust, the amount in controversy is the loan amount,” Ngoc Nguyen v. Wells Fargo Bank, N.A., 749 F.Supp.2d 1022, 1028 (N.D.Cal.2010),³ although other courts have calculated the amount in controversy by reference to alternative criteria, including, inter alia, “the unpaid principal balance on the note as of the date of removal,” see RC Lodge, LLC v. SE Prop. Holdings, LLC, No. 12–0112, 2012 U.S. Dist. LEXIS 98199, at *4, 2012 WL 2898815, at *1 (S.D.Ala. July 16, 2012).⁴

The face-value-of-the-loan rule, of course, has the advantage of perfect simplicity, cf. Hertz Corp. v. Friend, ––– U.S. ––––, 130 S.Ct. 1181, 1185–86, 175 L.Ed.2d 1029 (2010) (“we place primary weight upon the need for judicial administration of a jurisdictional statute to remain as simple as possible”); and unlike a rule based on the amount already paid or the balance still due, the face-value-of-the-loan approach cannot be manipulated through strategic timing of a filing. Cf. ConnectU LLC v. Zuckerberg, 522 F.3d 82, 93 (1st Cir.2008) (“concerns about forum-shopping and strategic behavior” may “offer special justifications” for jurisdictional rules). So there is much to be said for such an approach.

However, the subject has not been briefed (or indeed even raised), so it is wiser to reserve the question of which test this circuit would approve; it is enough here that by any of the suggested tests the matter in controversy exceeds $75,000. This is readily demonstrated, particularly because for dismissal on amount-in-controversy grounds, “[i]t must appear to a legal certainty that the claim is really for less than the jurisdictional amount,” Stewart v. Tupperware Corp., 356 F.3d 335, 338 (1st Cir.2004) (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288–89, 58 S.Ct. 586, 82 L.Ed. 845 (1938)).

Wells Fargo's disclosure statement listed the loan amount as $430,000 and the annual percentage rate as 8.269 percent, with monthly payments over a 30–year period, ending with a balloon payment of $251,430.05 due in December 2036. Thus, both the face value and the amount still due exceed the $75,000 threshold, as does the sum of the monthly payments already made ($3,030.25 a month over about a...