Salei v. Boardwalk Regency Corp.

Decision Date23 January 1996
Docket NumberNo. 94-72239-DT.,94-72239-DT.
Citation913 F. Supp. 993
PartiesIsrael SALEI, Plaintiff, v. BOARDWALK REGENCY CORPORATION, a foreign corporation, d/b/a Caesars Atlantic City, Defendant.
CourtU.S. District Court — Eastern District of Michigan


Robert V. Seymour, Southfield, Michigan, for plaintiff.

Jonathan T. Walton, Jr., Detroit, Michigan, for defendant.


ROSEN, District Judge.


On May 6, 1994, Plaintiff Israel Salei ("Plaintiff") filed a three-count complaint against Defendant Boardwalk Regency Corporation ("Defendant") in Oakland County Circuit Court. Counts one and two are based on Michigan law. Count three alleges that Defendant violated the federal Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq., by obtaining a credit report for an impermissible purpose.

On June 8, 1994, Defendant removed this case from state to federal court based on the federal question raised by Plaintiff's third count. Defendant followed with a Motion to Dismiss filed on June 15, 1994. Plaintiff filed a Motion to Remand on June 22, 1994. Responses to both motions were filed on July 11, 1994. These two motions were referred to Magistrate Judge Thomas A. Carlson for resolution.

Magistrate Judge Carlson heard oral arguments on August 19, 1994, and considered supplemental briefs filed on August 29 and September 22. On November 10, 1994, he issued a Report and Recommendation advising the Court to grant Plaintiff's Motion to Remand, or, in the alternative, to deny Defendant's Motion to Dismiss. Defendant filed objections to the Report and Recommendation on December 1, 1994.

After reviewing the papers filed by the parties and the Magistrate Judge's Report and Recommendation, and for the reasons stated herein, the Court remands Plaintiff's state law claims to the Oakland County Circuit Court, retains jurisdiction over Plaintiff's federal claim, and denies Defendant's Motion to Dismiss with respect to the federal claim. In addition, because the Court finds that Plaintiff's state law claims are separate and independent from his federal claim, the Court must interpret 28 U.S.C. § 1441(c) in order to determine which of Plaintiff's claims to retain and which to remand. As discussed in detail below, the Court's attempt to apply 28 U.S.C. § 1441(c) leads to the conclusion that the provision is unconstitutional.


The Magistrate Judge's Report and Recommendation ably summarizes the series of events leading up to this action:

Defendant Boardwalk is a New Jersey corporation, with its principal place of business in New Jersey, and operates a gambling casino in Atlantic City under the name of "Caesars Atlantic City." In 1990 and 1991 Plaintiff visited Caesars on numerous occasions, gambled, and wrote a series of personal checks in exchange for gambling chips. When some of the checks were returned unpaid, Defendant filed suit in New Jersey state court to recover its losses; on February 6, 1992 it obtained a default judgment against Plaintiff.
In June 1992 Boardwalk filed suit in Oakland County Circuit Court against Plaintiff to enforce its New Jersey judgment. In July 1993, when the case was ready for trial, the parties entered into a settlement agreement, which, inter alia, directed Boardwalk to "discharge, set aside and vacate with prejudice the New Jersey judgment ... within 10 days."
In February 1994, Salei filed a Motion for Contempt In Violating Court Order And To Impose Fine and Sanctions, in the Oakland County Circuit Court, alleging that Boardwalk had failed to discharge, set aside and vacate the New Jersey judgment, as agreed upon and ordered, and seeking for relief a finding of contempt, "an appropriate fine of not less that $10,000 and, in addition, a continuing fine of not less than $200 per day until Caesars' contempt is cured, and to impose such additional sanctions as may be lawful and appropriate."
A hearing was held on the Motion for Contempt, on March 16, 1994, at which the Court held that "I won't hold them in contempt because I can understand the misunderstandings here between the two, but based upon counsel for Salei's representation as an officer of the Court, you will prepare the document that comports with this wording that you agreed to...." (TR p. 7, filed by Defendant on 7/6/94). Boardwalk obtained the required discharge/set aside order in New Jersey on April 12, 1994.
Plaintiff then filed the instant Complaint in Oakland County Circuit Court, on May 6, 1994, against Defendant, alleging breach of the settlement agreement (Count I), violation of the Circuit Court's Order of July 21, 1993 ordering Defendant to discharge and set aside the New Jersey judgment (Count II), and violation of the federal Fair Credit Reporting Act (Count III). The Complaint was based upon Defendant's failure to set aside the New Jersey judgment for eight months (July 1993-April 1994), and upon alleged improperly motivated investigative consumer reports, and sought damages for Plaintiff's alleged injuries to his credit standing and reputation and for related financial losses.

(Magistrate Judge's Report and Recommendation at 1-3).

Neither Plaintiff's complaint nor any of his subsequent filings sets forth the factual predicate for his FCRA claim. According to Defendant, however, the claim is based on a credit report it obtained after Plaintiff filed his contempt motion in state court. Defendant alleges that it obtained the report to determine whether its action—or, in Plaintiff's view, failure to act—concerning the New Jersey judgment had any adverse impact on Plaintiff's credit rating.


The Magistrate Judge's Report and Recommendation addresses two motions, Defendant's Motion to Dismiss and Plaintiff's Motion to Remand. Defendant's motion argues that, under principles of res judicata, Counts I and II of Plaintiff's complaint are barred by the rulings of the Michigan court in the prior state court action brought by Defendant. Defendant also contends that Count III of Plaintiff's complaint, the federal FCRA claim, must be dismissed because Defendant's minimal contacts with Michigan are insufficient to give this Court personal jurisdiction over Defendant. In turn, Plaintiff's Motion to Remand is based on the contention that removal of the instant action to this Court was both improper and unjustified.

The Magistrate Judge's Report and Recommendation advises this Court to remand the entire matter to state court. The Magistrate Judge reasoned that this Court has subject matter jurisdiction over all of Plaintiffs claims, both state and federal, under either 28 U.S.C. § 1367(a), which defines the scope of a federal court's supplemental jurisdiction, or 28 U.S.C. § 1441(c), which purports to confer subject matter jurisdiction over state law claims that are joined with a "separate and independent" federal claim. The Magistrate Judge next found that, regardless of the method of removal, this Court has the power to remand the entire matter, including the federal claim, to the Michigan court. Because the Magistrate Judge believed that Plaintiff's state law claims predominate over his federal FCRA claim, and because the FCRA claim can be heard by the state court, the Magistrate Judge recommended that the entire matter be remanded.

In the event that this Court decided to retain jurisdiction over some or all of Plaintiff's claims, the Magistrate Judge also addressed the merits of Defendant's Motion to Dismiss. The Magistrate Judge first found that Plaintiff's state law claims are not barred by the doctrine of res judicata, because the Michigan court had not resolved the issues that form the basis of Plaintiff's state law claims in the instant matter. Next, in light of Defendant's initiation of the prior state court action that, in the Magistrate Judge's view, ultimately gave rise to Plaintiff's FCRA claim, the Magistrate Judge found that this Court may exercise limited personal jurisdiction over Defendant for the purpose of addressing that federal claim. Accordingly, should this Court retain subject matter jurisdiction over this matter, the Magistrate Judge recommended that Defendant's Motion to Dismiss be denied in its entirety.

A. This Court Cannot Exercise Supplemental Jurisdiction over Plaintiff's State Law Claims.

In its Notice of Removal, Defendant quite properly states that this Court has subject matter jurisdiction over Plaintiff's FCRA claim pursuant to 28 U.S.C. § 1331, which confers federal question jurisdiction upon this Court. Defendant further cites 28 U.S.C. § 1367(a) as giving this Court subject matter jurisdiction over Plaintiff's two state law claims. Finally, although Defendant's Notice of Removal does not explicitly mention it, 28 U.S.C. § 1441(a) grants this Court the authority to remove "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." Accordingly, because this Court has original jurisdiction over Plaintiff's federal claim and also, according to Defendant, has jurisdiction over the state claims, § 1441(a) would authorize removal of the entire state court action.

The success of Defendant's attempt to keep this entire matter in federal court depends on this Court's authority to hear Plaintiff's state law claims. 28 U.S.C. § 1367(a) codifies the extent of this Court's supplemental jurisdiction1 over such claims, and states in pertinent part:

Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.


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