Cunningham v. Matrix Fin. Servs., LLC

• Decision Date: 31 March 2021
• Docket Number: Civil Action No. 4:19-cv-896
• Parties: Craig CUNNINGHAM, Plaintiff, v. MATRIX FINANCIAL SERVICES, LLC, et al., Defendants.
• Court: U.S. District Court — Eastern District of Texas

531 F.Supp.3d 1164

Craig CUNNINGHAM, Plaintiff,

v.MATRIX FINANCIAL SERVICES, LLC, et al., Defendants.

Civil Action No. 4:19-cv-896

United States District Court, E.D. Texas, Sherman Division.

Signed March 31, 2021

Craig Cunningham, Plano, TX, Pro Se.

Jason Stuart Weiss, Weiss Law Group, P.A., Coral Springs, FL, Robert Douglas Scott, The Law Offices of Craig Zimmerman, Arlington, TX, for Defendants National Car Cure, LLC, Zander Collins & Smith.

Robert Douglas Scott, The Law Offices of Craig Zimmerman, Arlington, TX, for Defendant David Glenwinkel.

William Edward Reid, Reid & Dennis, Dallas, TX, Brion B. Doyle, Varnum LLP, Grand Rapids, MI, for Defendant Sing for Service, LLC.

Jason Stuart Weiss, Weiss Law Group, P.A., Coral Springs, FL, Andrew Ross Kasner, McDowell Hetherington LLP, Houston, TX, Biniam T. Tesfamariam, Joseph P. Bowser, Roth Jackson Gibbons Condlin, PLC, Richmond, VA, for Defendant Matrix Financial Services, LLC.

MEMORANDUM REJECTING REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE

Came on for consideration the report of United States Magistrate Judge Christine Nowak in this action, this matter having been heretofore referred to the Magistrate Judge pursuant to 28 U.S.C. § 636. On February 12, 2021, the report of the Magistrate Judge (Dkt. #142) was entered containing proposed findings of fact and recommendations that the Court has subject matter jurisdiction over the action; that Plaintiff Craig Cunningham's claims against Defendants Matrix Financial Services, LLC, David Glenwinkel, and Sing for Service, LLC d/b/a Mepco (Dkt. #50) be dismissed in their entirety pursuant to Rule 12(b)(6) ; and that Plaintiff's claims against Defendants National Car Cure, LLC and Zander, Collins & Smith, LLC (Dkt. #50) be dismissed in part pursuant to Rule 12(b)(6). Having received the report of the Magistrate Judge and having conducted a de novo review, the Court is of the opinion that the Magistrate Judge's report should be rejected as to the issue of subject matter jurisdiction.

BACKGROUND

Plaintiff Craig Cunningham ("Cunningham") is a citizen who allegedly received calls to his cell phone in violation of the Telephone Consumer Protection Act of 1991 ("TCPA"). On May 4, 2020, Cunningham filed an amended complaint asserting, among others, TCPA claims against Defendants Matrix Financial Services, LLC, David Glenwinkel, Sing for Service, LLC d/b/a Mepco, National Car Cure, LLC, and Zander, Collins & Smith, LLC. After Cunningham filed his amended complaint, Defendants moved for dismissal for failure to state a claim. In addition, several Defendants later filed motions to dismiss for lack of subject matter jurisdiction.

In the report, the Magistrate Judge recommended the Court deny the motions to dismiss for lack of subject matter jurisdiction (Dkt. #142 at pp. 9–18). After framing the issue and presenting the parties’ contentions (Dkt. #142 at pp. 9–14), the Magistrate Judge analyzed the arguments and their applicability to existing law (Dkt. #142 at pp. 15–18). In the report, the Magistrate Judge found three points sufficiently compelling to recommend denial of the motions to dismiss for lack of subject matter jurisdiction. First, while acknowledging its non-binding status, the Magistrate Judge found footnote twelve of Justice Kavanaugh's plurality opinion persuasive (Dkt. #142 at p. 15, 17). Second, the Magistrate Judge found persuasive that the majority of district courts that already decided this issue had held that federal courts retained subject matter jurisdiction over the sort of claims in question (Dkt. #142 at pp. 15–16). Third, the rationales of the district courts finding subject matter jurisdiction lacking in similar situations were unconvincing to the Magistrate Judge (Dkt. #142 at p. 16).

After concluding that Defendants’ motions to dismiss for lack of subject matter jurisdiction should be denied, the Magistrate Judge turned to Defendants’ motions to dismiss for failure to state a claim (see Dkt. #142 at pp. 18–34). The Magistrate Judge ultimately recommended that the claims against Defendants Matrix Financial Services, LLC, David Glenwinkel, and Sing for Service, LLC d/b/a Mepco be dismissed in their entirety and the claims against Defendants National Car Cure, LLC and Zander, Collins & Smith, LLC be dismissed in part (Dkt. #142 at p. 2).

LEGAL STANDARD

" ‘Federal courts are courts of limited jurisdiction,’ possessing ‘only that power authorized by Constitution and statute.’ " Xitronix Corp. v. KLA-Tencor Corp. , 916 F.3d 429, 435 (5th Cir. 2019) (quoting Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) ); see 13 CHARLES ALAN WRIGHT ET AL. , FEDERAL PRACTICE AND PROCEDURE § 3522 (3d ed.) ("A federal court's entertaining a case that is not within its subject matter jurisdiction is no mere technical violation; it is nothing less than an unconstitutional usurpation of state judicial power."). Absent subject matter jurisdiction, federal courts are without authority to act.

Lower Colo. River Auth. v. Papalote Creek II, L.L.C. , 858 F.3d 916, 927 (5th Cir. 2017). And while "[c]ourts have an independent obligation to determine whether subject-matter jurisdiction exists," Hertz Corp. v. Friend , 559 U.S. 77, 94, 130 S.Ct. 1181, 175 L.Ed.2d 1029 (2010) (citing Arbaugh v. Y&H Corp. , 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) ), parties may challenge the constitutional or statutory subject-matter jurisdiction of a federal court under Federal Rule of Civil Procedure 12(b)(1), Kumar v. Frisco Indep. Sch. Dist. , 443 F. Supp. 3d 771, 777 (E.D. Tex. 2020). See FED. R. CIV. P. 12(b)(1), (h)(3). If a 12(b)(1) analysis indicates that a court lacks subject-matter jurisdiction, then the case must be dismissed without prejudice. Mitchell v. Bailey , 982 F.3d 937, 944 (5th Cir. 2020).

In considering a 12(b)(1) motion, courts may examine "any of the following: ‘(1) the complaint alone; (2) the complaint supplemented by the undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts.’ " Lane v. Halliburton , 529 F.3d 548, 557 (5th Cir. 2008) (quoting Barrera-Montenegro v. United States , 74 F.3d 657, 659 (5th Cir. 1996) ). Courts "accept as true all well-pleaded allegations set forth in the complaint and construe those allegations in the light most favorable to the plaintiff." Earl v. Boeing Co. , No. 4:19-CV-00507, ––– F.Supp.3d ––––, ––––, 2020 WL 759385, at *2 (E.D. Tex. Feb. 14, 2020) (citing Truman v. United States , 26 F.3d 592, 594 (5th Cir. 1994) ). Once a defendant moves for dismissal under 12(b)(1), "the party asserting jurisdiction" bears "[t]he burden of proving subject matter jurisdiction" "by a preponderance of the evidence." In re S. Recycling, L.L.C. , 982 F.3d 374, 379 (5th Cir. 2020) ; Morris v. Thompson , 852 F.3d 416, 419 (5th Cir. 2017) ("The party asserting jurisdiction ‘constantly bears the burden of proof that jurisdiction does in fact exist.’ " (quoting Ramming v. United States , 281 F.3d 158, 161 (5th Cir. 2001) )). "Yet that is no high bar: ‘It is extremely difficult to dismiss a claim for lack of subject matter jurisdiction.’ " Outlaw Lab., LP v. Shenoor Enter., Inc. , 371 F. Supp. 3d 355, 360 (N.D. Tex. 2019) (cleaned up) (quoting Santerre v. Agip Petrol. Co. , 45 F. Supp. 2d 558, 566 (S.D. Tex. 1999) ).

ANALYSIS

The immediate dispute concerns the Court's authority to adjudicate this case. Cunningham presses three causes of action against Defendants and proffers that the Court has subject matter jurisdiction over the case on account of the federal question involved (Dkt. #50 at pp. 2, 16–18). For each and every case or controversy, it is incumbent upon the Court to police its subject matter jurisdiction vigilantly because "district courts may not exercise jurisdiction absent a statutory basis."¹ Exxon Mobil Corp. v. Allapattah Servs., Inc. , 545 U.S. 546, 552, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005) ; see Home Depot U.S.A., Inc. v. Jackson , ––– U.S. ––––, 139 S. Ct. 1743, 1746, 204 L.Ed.2d 34 (2019).

The crux of the matter involves a recent Supreme Court case, Barr v. American Association of Political Consultants, Inc. (AAPC ), ––– U.S. ––––, 140 S. Ct. 2335, 207 L.Ed.2d 784 (2020). In their motions, Defendants argue that, in finding the government-debt exception of 47 U.S.C. § 227(b)(1)(A)(iii) unconstitutional, AAPC invalidated the statutory provision during the exception's operative time period, thereby stripping federal courts of subject matter jurisdiction over alleged violations of § 227(b)(1)(A)(iii) that occurred from the moment Congress enacted the government-debt exception to the Supreme Court's invalidation of the exception in AAPC (Dkt. #131 at pp. 2–3; Dkt. #133 at p. 2–3). Cunningham wholeheartedly disagrees (Dkt. #137 at p. 2). While these motions present the atypical situation of reevaluating subject matter jurisdiction following a Supreme Court decision, it is certainly not a first. See, e.g. , Rodriguez Delgado v. Shell Oil Co. , 322 F. Supp. 2d 798, 816–17 (S.D. Tex. 2004). Moreover, because complete diversity is not present in this suit (Dkt. #50 at p. 1), the stakes are high—if Defendants are correct, the Court must dismiss this case. See id. at 816.

I. AAPC

In AAPC , the two-part question before the Supreme Court was:

Whether the government-debt exception to the TCPA's automated-call restriction violates the First Amendment, and whether the proper remedy for any constitutional violation is to sever the exception from the remainder of the statute.

Petition for Writ of Certiorari at I, AAPC , 140 S. Ct. 2335 (2020) (No. 19-631), 2019 WL 6115075, at *I.² As summarized in the plurality opinion, six Justices found the government-debt exception of 47 U.S.C. § 227(b)(1)(A)(iii) violative of the First Amendment as a content-based speech restriction, and seven Justices concluded that...