Chase Manhattan Mortg. Corp. v. Smith

• Decision Date: 14 November 2007
• Docket Number: No. 06-4656.,06-4656.
• Citation: 507 F.3d 910
• Parties: CHASE MANHATTAN MORTGAGE CORPORATION, Plaintiff-Appellee, v. Demetrious Yadirf SMITH; Amy K. Smith, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

507 F.3d 910

CHASE MANHATTAN MORTGAGE CORPORATION, Plaintiff-Appellee, v. Demetrious Yadirf SMITH; Amy K. Smith, Defendants-Appellants.

No. 06-4656.

United States Court of Appeals, Sixth Circuit.

Argued October 25, 2007.

Decided and Filed November 14, 2007.^*

ARGUED:

Rose Ann Fleming, Rose Ann Fleming, Professional Corporation, Cincinnati, Ohio, for Appellants. Vladimir P. Belo, Bricker & Eckler, Columbus, Ohio, for Appellee.

ON BRIEF:

Rose Ann Fleming, Rose Ann Fleming, Professional Corporation, Cincinnati, Ohio, for Appellants. Vladimir P. Belo, Nelson Marlin Reid, Bricker & Eckler, Columbus, Ohio, for Appellee.

Before: MERRITT, ROGERS, and McKEAGUE, Circuit Judges.

ROGERS, Circuit Judge.

After defendants removed a state court foreclosure action to federal district court, plaintiff filed a motion to remand. The district court granted the motion and, pursuant to its discretion under 28 U.S.C. § 1447(c), awarded plaintiff attorney fees and costs incurred as a result of the removal. On appeal, defendants argue that the district court abused its discretion to award fees and costs to plaintiff. Because defendants' removal action lacked an objectively reasonable basis, we affirm.

I.

On January 29, 2003, Defendant Demetrious Smith purchased residential property located at 5555 Ehrling Road in Cincinnati, Ohio. Smith financed the purchase by executing an adjustable rate note in the amount of $85,400 with Aegis Funding Corporation ("Aegis"). Aegis later assigned its rights under the note to Plaintiff Chase Manhattan Mortgage Corporation ("Chase"). To secure repayment of the note, Smith and his wife, Defendant Amy Smith, mortgaged the property to Mortgage Electronic Registration Systems, Inc. ("MERS"). On October 20, 2004, Chase and MERS filed a foreclosure action against the Smiths in the Court of Common Pleas in Hamilton County, Ohio.¹ The state court complaint contained two counts that alleged default on the note and prayed for foreclosure on the Ehrling Road property. Attached to the complaint was a notice that apprised the Smiths of certain rights under federal law.

The Smiths first attempted to remove Chase's and MERS's foreclosure action to federal court on December 5, 2005.² Acting pro se, the Smiths filed in district court a motion to proceed in forma pauperis, along with a notice of removal.³ Because the Smiths were represented by licensed counsel in state court, the district court denied the Smiths' pro se motion and notice without prejudice to reconsideration. After counsel for the Smiths entered a notice of appearance, the Smiths filed a Motion for Reconsideration. The district court granted the motion, entering a notice of removal on January 24, 2006. The district court also granted the Smiths' request to proceed in forma pauperis.

In their pro se notice of removal, the Smiths asserted both diversity of citizenship and federal question jurisdiction as grounds for removal under 28 U.S.C. § 1441. The Smiths claimed that they had been denied due process under the Fifth and Fourteenth Amendments and that Chase and MERS had violated, among other things, the Fair Housing Act, the Equal Credit Opportunity Act, the Truth in Lending Act, and RICO. The Smiths also asked the district court to consider the "exception" to the well-pleaded complaint rule that "a plaintiff cannot thwart the removal of a case by inadvertently, mistakenly or fraudulently concealing the federal question that would have appeared if the complaint had been well pleaded." In their subsequent Motion for Reconsideration, the Smiths did not amend or supplement the grounds for removal stated in their pro se notice.

On February 21, 2006, Chase and MERS filed a Motion for Remand and the Award of Attorneys' Fees and Costs, arguing that the Smiths' removal was improper and frivolous. The district court referred the matter to a magistrate judge, who subsequently issued a report recommending that the case be remanded to state court and that attorney fees and costs be awarded pursuant to 28 U.S.C. § 1447(c). The magistrate determined that the district court had neither diversity nor federal question jurisdiction over the matter and concluded that the Smiths' removal action was "devoid of even fair support." Thereafter, the district court adopted the magistrate's recommendation. The district court remanded the case to state court and ordered Chase and MERS to submit an itemized statement of costs and fees incurred as a result of the removal. Chase and MERS submitted a statement cataloguing attorney fees and costs in the amount of $6,513.16, and the magistrate determined that amount to be reasonable. On November 15, 2006, the district court issued a second order awarding $6,513.16 in fees and costs to Chase and MERS.

II.

Because nothing in the record indicates that the Smiths had an objectively reasonable basis to believe that Chase's and MERS's state court action could properly be removed to federal court, we affirm. The Smiths asserted both diversity of citizenship and federal question jurisdiction as bases for removal under 28 U.S.C. § 1441. There was no objectively reasonable basis to conclude that diversity jurisdiction was appropriate because the Smiths were citizens of the state where the state court action was filed. Similarly, Chase's and MERS's foreclosure action relied exclusively upon state law and could not reasonably be construed as supporting federal question jurisdiction.

Under 28 U.S.C. § 1447(c), a district court must remand a removed case if it appears that the district court lacks subject matter jurisdiction. And, as part of the remand order, the district court "may require payment of just costs and any actual expenses, including attorney fees." 28 U.S.C. § 1447(c) (2000). This court has held that "an award of costs [under § 1447(c)], including attorney fees, is inappropriate where the defendant's attempt to remove the action was `fairly supportable,' or where there has not been at least some finding of fault with the defendant's decision to remove." Bartholomew v. Town of Collierville, 409 F.3d 684, 687 (6th Cir. 2005) (quoting Ahearn v. Charter Twp. of Bloomfield, No. 97-1187, 1998 WL 384558, at *2 (6th Cir. June 18, 1998)). More recently, in Martin v. Franklin Capital Corp., 546 U.S. 132, 126 S.Ct. 704, 163 L.Ed.2d 547 (2005), the Supreme Court settled a circuit split and clarified the standard for a fee award under § 1447(c). The Martin Court held that "[a]bsent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal." Id. at 141, 126 S.Ct. 704.

Applying the standard set forth in Martin, we hold that the district court did not abuse its discretion to award fees under § 1447(c). It is well established that removal of a state court action under § 1441 is proper only if the action "originally could have been filed in federal court." Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). Neither diversity nor federal question jurisdiction served as a proper basis for removal of Chase's and MERS's state foreclosure action and the Smiths had no objectively reasonable basis from which to conclude otherwise.

As a preliminary matter, the Smiths were citizens of Ohio and thus barred from invoking removal jurisdiction on the basis of diversity. See 28 U.S.C. § 1441(b) (2000) ("Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought."). The Smiths do not argue on appeal that removal on the basis of diversity was objectively reasonable and, in light of § 1441(b)'s explicit bar, there was no objectively reasonable basis from which the Smiths could have concluded that diversity jurisdiction was proper.

Moreover, nothing in the record indicates that the Smiths had an objectively reasonable basis from which to conclude that federal question jurisdiction supported removal. Federal question jurisdiction under 28 U.S.C. § 1331 is proper "only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Caterpillar, 482 U.S. at 392, 107 S.Ct. 2425. It is undisputed here that the foreclosure action relied exclusively upon state law. Federal law did not create the cause of action, see Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986), nor did Chase's and MERS's state law claims require the resolution of an "actually disputed and substantial" federal issue. See Grable & Sons Metal Products, Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 314, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005). Accordingly, there was no objectively reasonable basis from which the Smiths could have concluded that federal question jurisdiction was proper.

The Smiths provide three principal arguments in support of their contention that removal on the basis of federal question jurisdiction was objectively reasonable. First, in their notice of removal, the Smiths suggested that Chase and MERS artfully pled the state complaint to avoid federal jurisdiction. See, e.g., Rivet v. Regions Bank of La., 522 U.S. 470, 475, 118 S.Ct. 921, 139 L.Ed.2d 912 (1998). The Smiths do not adequately develop this argument on appeal and, in any event, we find no support in the record for the contention that Chase and MERS artfully pled the foreclosure action. Second, the Smiths contend that removal was objectively reasonable based on their belief that Chase and MERS had violated federal law. This argument is without merit. At most, the Smiths may have been aware that certain federal counterclaims or defenses were available to them. Because it is well settled that federal counterclaims and defenses are "inadequate to confer federal jurisdiction," this fails to establish an objectively reasonable basis for removal. See Merrell Dow, 478 U.S. at 808, 106 S.Ct....