Dutcher v. Matheson

Decision Date13 August 2013
Docket NumberNo. 12–4150.,12–4150.
Citation733 F.3d 980
CourtU.S. Court of Appeals — Tenth Circuit
PartiesRichard DUTCHER; Gwen Dutcher; Richard Ferguson; Michelle Ferguson; Catherine Richards Ahlers, on their own behalf and on behalf of a class of similarly situated persons, Plaintiffs–Appellants, v. Stuart T. MATHESON; Matheson, Mortensen, Olsen & Jeppson, P.C.; ReconTrust Company, N.A.; BAC Home Loans Servicing, LP; Bank of America, N.A., Defendants–Appellees. State of Utah; Office of Comptroller Of The Currency, Amici Curiae.


Marcus R. Mumford of Mumford Rawson LLC, Salt Lake City, UT, for PlaintiffAppellants.

Amy Miller of McGuireWoods, LLP, Washington, D.C., (Brian Emory Pumphrey of McGuireWoods LLP, Richmond, VA, and Craig Robert Mariger of Jones Waldo Holbrook & McDonough, PC, Salt

Lake City, UT, with her on the briefs), for DefendantsAppellees.

Thom D. Roberts, (Mark L. Shurtleff with him on the brief), Salt Lake City, UT, for Amicus Curiae, State of Utah.

Amy S. Friend, Chief Counsel; Daniel P. Stipano, Deputy Chief Counsel; Horace G. Sneed and Douglas B. Jordan, Attorneys, Office of the Comptroller of the Currency, Washington, D.C., filed an Amicus Curiae brief for the Office of the Comptroller of the Currency.

Before BRISCOE, Chief Judge, SEYMOUR and BACHARACH, Circuit Judges.

BRISCOE, Chief Judge.

Although this case presents significant questions regarding the interaction of federal banking and state foreclosure laws, our focus is upon a more fundamental question: whether the district court even had jurisdiction to consider the issues raised. Plaintiffs 1 filed a class-action lawsuit in state court, alleging that the defendants 2—including ReconTrust, a Texas-based national bank—had conducted non-judicial foreclosure sales that did not comply with Utah law. After removal, the district court dismissed the complaint for failure to state a claim, concluding that whether federal law “incorporates Utah or Texas law, Recon[Trust] has not operated beyond the law by acting as a foreclosure trustee in Utah.” Dist. Ct. Op. at 16. Plaintiffs now appeal.

On the limited record presented, we conclude that the district court erred in determining it had jurisdiction to hear this case. Exercising jurisdiction under 28 U.S.C. § 1291, we vacate the district court's order of dismissal and its rulings on plaintiffs' motion for reconsideration and motion to amend. We remand for proceedings consistent with this opinion.


In November 2007, Richard and Gwen Dutcher borrowed money from and executed a securing deed of trust in favor of Countrywide Bank. In February 2011, Countrywide assigned the beneficial interest in the trust deed to BAC Home Loans Servicing, LP, which in turn appointed ReconTrust as the successor trustee. ReconTrust filed a notice of non-judicial foreclosure with the Utah County Recorder. On June 14, 2011, Stuart T. Matheson, a Utah-based attorney, conducted a non-judicial foreclosure sale on behalf of ReconTrust.

Procedural Background

Shortly after that sale, the Dutchers, along with the other named plaintiffs, filed a class-action lawsuit in Utah state court alleging that Matheson and his law firm, ReconTrust, and Bank of America had violated Utah law as it applies to non-judicial foreclosures. Under Utah law, only certain trustees may conduct a non-judicial foreclosure: 1) any active member of the state bar “who maintains a place within the state where the trustor or other interested parties may meet with the trustee,” Utah Code Ann. § 57–1–21(1)(a)(i); and 2) title insurance companies that “actually do[ ] business” and maintain “bona fide office[s] in the state,” Utah Code Ann. § 57–1–21(1)(a)(iv). SeeUtah Code Ann. § 57–1–21(3). Thus, plaintiffs argued, ReconTrust, a Texas-based bank, had no authorityunder Utah law to conduct non-judicial foreclosures. And Matheson and his law firm, the plaintiffs added, enabled this illegal conduct by holding the foreclosure sales on behalf of ReconTrust. The complaint alleged violations of Utah Code Ann. § 57–1–23.5, violations of Utah Code Ann. § 57–1–21, conversion, wrongful lien, wrongful foreclosure, and intentional infliction of emotional distress.

The defendants took two approaches in response. First, they sought to remove the case to federal court. They argued that the district court had jurisdiction under either the Class Action Fairness Act, or diversity jurisdiction. Second, the defendants filed a motion to dismiss. They argued that federal banking laws permitted ReconTrust to exercise the non-judicial power of sale thereby preempting application of the cited provision of Utah state law to the foreclosures at issue.3

The district court held that it had jurisdiction under both 28 U.S.C. § 1331 and § 1332. It then dismissed the complaint for failure to state a claim. But shortly thereafter, another district court in Utah concluded in a similar case that federal law did not preempt Utah state law. See Bell v. Countrywide Bank, N.A., 860 F.Supp.2d 1290, 1297–1309 (D.Utah 2012). This led the plaintiffs in this case to file a motion for reconsideration. They also asked for leave to amend their complaint. The proposed amended complaint no longer named Matheson and his law firm as defendants. It also dropped a number of the causes of action, including conversion, wrongful lien, and intentional infliction of emotional distress.

In July 2012, the district court issued an order denying all pending motions. Regarding the motion for reconsideration, the district court said: 1) that plaintiffs had waived the arguments they now wanted the court to consider because they failed to raise them in their initial brief; and 2) that “clear error” does not result simply because another district court reached a different outcome. As the district court continued to believe that the plaintiffs had presented no viable causes of action, it also denied the motion to amend. Finally, the district court denied the State of Utah's motion to intervene as untimely.

The plaintiffs now appeal both the district court's initial decision dismissing their complaint and the subsequent decisions denying their motions. The State of Utah has filed an amicus curiae brief on behalf of the plaintiffs-appellants. We have also asked for and received an amicus brief from the Office of Comptroller of Currency (OCC), which administers the federal statute at issue in this case, 12 U.S.C. § 92a.


“Federal courts are courts of limited jurisdiction; they must have a statutory basis for their jurisdiction.” Rural Water Dist. No. 2 v. City of Glenpool, 698 F.3d 1270, 1274 (10th Cir.2012) (quotation omitted). The federal removal statute, 28 U.S.C. § 1441, permits a defendant to remove to federal court “any civil action brought in a State court of which the district courts of the United States have original jurisdiction.” The defendants removed the case from state court, and the district court concluded that federal jurisdiction could be established under both: 1) 28 U.S.C. § 1331, which gives district courts “original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States”; and 2) 28 U.S.C. § 1332, the diversity jurisdiction statute. Although the plaintiffs did not challenge the district court's jurisdictional rulings on appeal, we asked the parties to submit supplemental briefing because [t]his court has an independent obligation to ensure it has subject matter jurisdiction at every stage of the litigation.” Fancher v. Barrientos, 723 F.3d 1191, 1198–1200, No. 12–2114, 2013 WL 3481983 at *6 n. 2 (10th Cir. July 12, 2013).

We review de novo whether the district court had jurisdiction to act. United States ex rel. Hafter v. Spectrum Emergency Care, Inc., 190 F.3d 1156, 1160 (10th Cir.1999). “Since federal courts are courts of limited jurisdiction, we presume no jurisdiction exists absent an adequate showing by the party invoking federal jurisdiction.” Id. As the parties removing this case to federal court, the defendants bear the burden of establishing jurisdiction by a preponderance of the evidence. Id.

a. Complete Preemption

A claim may be brought in federal court if the claim is one “arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. When determining whether a claim arises under federal law, we examine the ‘well pleaded’ allegations of the complaint and ignore potential defenses.” Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003). “A suit arises under the Constitution and laws of the United States only when the plaintiff's statement of his own cause of action shows that it is based upon those laws or that Constitution.” Id. (quotation and alteration omitted). The plaintiffs' complaint did not assert any cause of action premised upon a violation of a federal statute or the Constitution.4 Typically, then, we would not have jurisdiction under § 1331.

But the doctrine of complete preemption provides an exception to the well-pleaded complaint rule. “When the federal statute completely pre-empts the state-law cause of action, a claim which comes within the scope of that cause of action, even if pleaded in terms of state law, is in reality based on federal law.” Id. That said, [c]omplete preemption is ... quite rare.” Johnson v. MFA Petroleum Co., 701 F.3d 243, 248 (8th Cir.2012).

In our circuit, “a claim of complete preemption demands a two-part analysis: first, we ask whether the federal question at issue preempts the state law relied on by the plaintiff; and second, whether Congress intended to allow removal in such a case, as manifested by the provision of a federal cause of action....” Devon Energy Prod. Co. v. Mosaic Potash Carlsbad, Inc., 693 F.3d 1195, 1205 (10th Cir.2012) (quotations and alterations omitted). But we usually address the second prong of this analysis first. Id. at 1206. The existence of a potential federal cause of action is critical; complete preemption is not...

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