Thomas v. Countrywide Home Loans
| Decision Date | 17 February 2012 |
| Docket Number | CASE NO. 3:11-CV-399-WKW |
| Parties | CELESTINE THOMAS, on behalf of herself and all other similarly Alabama residents, Plaintiff, v. COUNTRYWIDE HOME LOANS, Defendant. |
| Court | U.S. District Court — Middle District of Alabama |
[WO]
Plaintiff Celestine Thomas originally filed this lawsuit in the Circuit Court of Macon County, Alabama, on behalf of an Alabama class of similarly situated individuals. Defendant Countrywide Home Loans removed it to this court under the jurisdictional provisions of the Class Action Fairness Act of 2005 ("CAFA"), 28 U.S.C. § 1711 et seq., and 28 U.S.C. § 1332(d)(2). Before the court is Ms. Thomas's motion to remand for lack of subject matter jurisdiction, filed pursuant to 28 U.S.C. §§ 1332(a) and 1447(c). (Doc. # 7.) Ms. Thomas contends that this action is due to be remanded because the amount in controversy is insufficient to confer federal jurisdiction. Countrywide opposes the motion. After careful consideration of the fully briefed motion to remand, the court finds that it is due to be conditionally granted, as explained in this opinion.
Federal courts have a strict duty to exercise the jurisdiction conferred on them by Congress. Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996). At the same time, "[f]ederal courts are courts of limited jurisdiction." Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir. 1994). Against that legal backdrop, in actions removed from state court to federal court, federal courts strictly construe removal statutes, resolve all doubts in favor of remand, and place the burden of proving jurisdiction on the removing defendant. Miedema v. Maytag Corp., 450 F.3d 1322, 1328-30 (11th Cir. 2006). These principles were well established long before the enactment of CAFA, and the Eleventh Circuit has made clear that, notwithstanding CAFA's expansion of diversity jurisdiction over class actions, these principles remain undisturbed. Id.; see also Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 752 (11th Cir. 2010) ("'CAFA does not change the traditional rule that the party seeking to remove the case to federal court bears the burden of establishing federal jurisdiction.'" (quoting Evans v. Walter Indus., Inc., 449 F.3d 1159, 1164 (11th Cir. 2006)).
Additionally, because this action was removed within thirty days of Countrywide being served with a summons and copy of the complaint, see 28 U.S.C. § 1446(b), the standards enunciated in Pretka govern.1 In Pretka, the Eleventh Circuitheld that, as to removals based on the first paragraph of § 1446(b), no limitations exist as to the evidence a federal court may consider when the removal is timely. See 608 F.3d at 768 (). Hence, under paragraph one of § 1446(b), "the evidence the defendant may use to establish the jurisdictional facts is not limited to that which it received from the plaintiff or the court." Id.
In her class action complaint, Ms. Thomas challenges Countrywide's alleged unlawful business practices of "closing residential mortgage transactions" in Alabama and "target[ing] Alabama residents for predatory, 'subprime' equity loans." (Compl. ¶ 3.) She alleges that Countrywide unlawfully induced Alabama borrowers to enter into residential loans with high and adjustable interest rates, three-year prepayment penalty provisions, and discount fees that yield no corresponding interest rate reduction. Other predatory lending practices challenged by Ms. Thomas include "bait and switch" tactics, "flipping" loans (i.e., persuading borrowers to refinance existing loans on disadvantageous terms), oppressive "marketing techniques to prey upon low income Alabama homeowners," and false representations that Countrywide'smortgage loans are "sound financial transactions that will save borrowers money." (Compl. ¶¶ 37, 39, 43, 44.)
Ms. Thomas alleges that in October 2005, she became a victim of Countrywide's deceptive practices when she refinanced her residential property mortgage loan through Countrywide. (Compl. ¶ 20.) She contends that, as part of the refinancing, Countrywide encouraged her to consolidate her unsecured debt into debt secured by the residential property without disclosing the risks of debt consolidation. (Compl. ¶ 26.) Countrywide allegedly charged her "junk fees" to "bloat the loan," including "false points, closing costs, origination fees, appraisal fees, credit report fees, flood check fees, tax service fees, service charges and other fees," did not properly disclose certain fees, and misrepresented the amount of the fees. (Compl. ¶ 27.) As further alleged, Countrywide provided financial advice to earn Ms. Thomas's trust only in order to "induce [her] [to] take out the loan at a higher cost," all the while knowing that she "ran a risk of having insufficient cash flow to cover all the dedicated expenses." (Compl. ¶¶ 30-31.)
Ms. Thomas seeks relief for herself and "all other similarly situated Alabama residents" for Countrywide's "pattern and practice of wrongful and illegal conduct." (Compl. ¶ 33.) The proposed class is defined as including all individuals "(i) who presently own, or during the Class Period owned property (including mobile homes)in Alabama, and (ii) entered into a mortgage loan transaction relating to such Alabama property with [Countrywide] . . . at any time between January 1, 2005, and the present." (Compl. ¶ 48.)
Ms. Thomas brings state law claims for fraudulent misrepresentation, fraudulent suppression, breach of contract, negligence, wantonness, and conspiracy. She requests restitution, disgorgement, declaratory relief, injunctive relief, compensatory damages, punitive damages, prejudgment interest, costs, and attorney's fees. The Complaint also includes a stipulation that "the amount in controversy is less than $5,000,000.00 (five million dollars)." (Compl. ¶ 12.)
Although this action began in the Circuit Court of Macon County, Countrywide removed it to the United States District Court for the Middle District of Alabama within thirty days of being served with a summons and copy of the complaint. See § 1332(d)(2) (); § 1446(b) (governing removal procedures). In its Notice of Removal, Countrywide sets forth two grounds for federal subject matter jurisdiction. First, it contends that jurisdiction over this CAFA action is proper because the minimal diversity requirements are satisfied, there are more than 100 plaintiffs, and the monetary claims exceed $5 million in the aggregate. (Not. of Removal ¶ 8); see § 1332(d)(2), (5). Countrywide argues that it is clear from the allegations in the Complaint, as well as from the evidence attached to the Notice ofRemoval, that the amount in controversy exceeds $5 million as required by § 1332(d)(2).
Second, assuming the putative class action does not meet CAFA's jurisdictional requirements, Countrywide asserts that Ms. Thomas's individual action independently satisfies § 1332(a)'s requirements for diversity jurisdiction. That being the case, Countrywide contends that § 1367 permits this court to exercise supplemental jurisdiction over the prospective members of Ms. Thomas's class, even if their individual claims fail to meet the amount in controversy threshold. As to the $75,000 amount in controversy, Countrywide relies on the declaration of John Truong.2 He says that Ms. Thomas was charged $4,951.75 as "total settlement charges" for her loan. (Truong Decl.) This total includes numerous fees, including charges for discount points, processing, credit report, appraisal, tax service, and flood check. Because Ms. Thomas calls each of these points and fees into question, and requests restitution and disgorgement, Countrywide contends that $4,951.75 is the starting point for the amount in controversy. Add to that Ms. Thomas's request for punitive damages, calculated based upon a single digit ratio between punitive and compensatory damages ($4,951.75 multiplied by 9), and Countrywide contends that the amount in controversy threshold easily reaches $49,517.50. It then asserts that theamount in controversy exceeds $75,000, when damages for mental anguish and emotional distress and the value of declaratory and injunctive relief are considered. "As a result, the minimum amount in controversy is well above the $75,000 requirement for diversity jurisdiction and 1332 is satisfied." (Not. of Removal ¶ 22.)
Ms. Thomas responded by filing a motion to remand to state court. She challenges Countrywide's ability to prove the amount in controversy under CAFA since her Complaint contains a stipulation to an amount in controversy less than $5 million. She further contends that, although the Complaint leaves the amount of damages unspecified as to her individual claims, she "stipulates that her damages are no more than $74,999.99, and [that] she will file a supplement to this brief in support of remand with an affidavit to that effect."3 (Resp. to Mot. to Remand 6 n.1.) In addition to the latter stipulation, Ms. Thomas contends that Countrywide's calculations are too speculative to satisfy its removal burden. She concedes that the diversity requirements under CAFA and § 1332(a) are satisfied.
The jurisdictional dispute concerns only whether the amount in controversy meets CAFA's requirement of more than $5 million or, alternatively, satisfies § 1332(a)'s requirement of more than $75,000 as to Ms. Thomas's individual claims. These issues bring front and center the sufficiency of Ms. Thomas's stipulations limiting recovery to amounts less than CAFA's and § 1332(a)'s jurisdictional minimums to defeat removal jurisdiction. Two stipulations are at issue: (1) the Complaint's stipulation that the "amount in controversy" is less than $5...
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