Young v. Amerihome Mortgage Company, LLC

• Court: District Court, S.D. California
• Decided: August 16, 2022
• Docket: 3:22-cv-01163
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 KENT YOUNG, Case No.: 22-CV-1163 JLS (AGS)

12 Plaintiff, ORDER (1) REMANDING ACTION 13 v. TO THE SUPERIOR COURT OF THE STATE OF CALIFORNIA, 14 AMERIHOME MORTGAGE COUNTY OF SAN DIEGO, FOR COMPANY, LLC; and 15 LACK OF SUBJECT-MATTER MTC FINANCIAL INC. DBA JURISDICTION, (2) EXTENDING 16 TRUSTEE CORPS., TEMPORARY RESTRAINING 17 Defendants. ORDER, AND (3) DENYING AS MOOT MOTION TO DISMISS AND 18 ACCOMPANYING REQUEST FOR 19 JUDICIAL NOTICE

20 (ECF Nos. 2, 3, 5, 6, & 6-1) 21

22 On August 8, 2022, this Court issued an Order to Show Cause directing Defendant 23 AmeriHome Mortgage Company, LLC (“Defendant”) to inform this Court (1) whether the 24 preliminary injunction (“PI”) hearing in this matter scheduled for 8:30 a.m. on August 8, 25 2022, in the Superior Court of California, County of San Diego, proceeded and, if so, its 26 outcome; and (2) why this Court has subject-matter jurisdiction over this matter. See 27 generally ECF No. 2 (the “OSC”). On August 10, 2022, Defendant filed a Response to the 28 OSC (“Resp.,” ECF No. 3), and on August 11, 2022, Plaintiff filed a Reply (“Reply,” ECF 1 No. 5). For the reasons that follow, the Court REMANDS this action to the Superior 2 Court and EXTENDS the Temporary Restraining Order (“TRO”) previously issued in this 3 action. Accordingly, the Court also DENIES AS MOOT Defendant’s Motion to Dismiss 4 Pursuant to Federal Rule of Civil Procedure 12(b)(6) (“MTD,” ECF No. 6) and 5 accompanying Request for Judicial Notice (ECF No. 6-1). 6 BACKGROUND 7 On July 8, 2022, Plaintiff initiated this action in the Superior Court of California, 8 County of San Diego. See generally Notice Ex. A (ECF No. 1-2) at 132 (“Compl.”). 9 Plaintiff owns the real property located at 801 Ash Street, Unit 402, San Diego, California 10 92101 (the “Property”). Id. ¶ 10. Defendant is the mortgage servicer on the Property. Id. 11 ¶ 11. On September 3, 2021, Defendant approved Plaintiff for a six-month forbearance of 12 his mortgage payments pursuant to the Covid-19 Small Landlord and Homeowner Relief 13 Act of 2020, Cal. Civ. Code §§ 3273.01 et seq. Id. ¶ 14. Plaintiff alleges he “has the 14 unconditional right to extend the forbearance for an additional 180 days,” relying on the 15 Covid-19 Small Landlord and Homeowner Relief Act of 2020’s statement that “[a] 16 mortgage servicer shall comply with applicable federal guidance regarding borrower 17 options following a COVID-19 related forbearance.” Id. at 1 n.1. Plaintiff contends this 18 “incorporates the Federal Coronavirus Aid, Relief, and Economic Security (“CARES” 19 Act.” Id. Thereafter, Plaintiff requested an extension of his forbearance on three separate 20 occasions, but Defendant failed to respond and instead scheduled a foreclosure sale of the 21 Property for July 15, 2022. Id. ¶¶ 13–16. Plaintiff’s Complaint asserts violations of the 22 California Civil Code and seeks a TRO and injunctive relief. See generally id. 23 On July 14, 2022, the Superior Court held a hearing on Plaintiff’s ex parte 24 application for a TRO. See Notice Ex. A at 27. The Superior Court granted the TRO and 25 26 1 Plaintiff seeks leave to file a slightly overlength brief, which request the Court grants. See Reply at 2 n.2. 27

28 2 In citing to page numbers, the Court refers to the blue numbers Bates-stamped in the upper-righthand 1 scheduled a PI hearing for 8:30 a.m. on August 8, 2022. See id. On July 26, 2022, 2 Defendant filed an Opposition to the PI. See id. at 29. Plaintiff filed his reply in support 3 of the PI on August 4, 2022. Id. at 158; see also Resp. at 7. Defendant thereafter removed 4 the action to this District, invoking federal-question jurisdiction pursuant to 28 U.S.C. 5 § 1331. See generally Notice.3 On August 8, 2022, this Court issued the OSC regarding 6 subject-matter jurisdiction now at issue and extended the TRO pending its jurisdictional 7 determination and/or any PI hearing. See generally OSC. 8 LEGAL STANDARD 9 “Federal district courts are courts of limited jurisdiction that ‘may not grant relief 10 absent a constitutional or valid statutory grant of jurisdiction’ and are ‘presumed to lack 11 jurisdiction in a particular case unless the contrary affirmatively appears.’” Cooper v. 12 Tokyo Elec. Power Co., 990 F. Supp. 2d 1035, 1038 (S.D. Cal. 2013) (quoting A-Z Int’l v. 13 Phillips, 323 F.3d 1141, 1145 (9th Cir. 2003)). A defendant may remove an action from 14 state court to a district court if the district court has original jurisdiction over the matter. 15 See 28 U.S.C. § 1441(a). “The removal statute is strictly construed, and any doubt about 16 the right of removal requires resolution in favor of remand.” Moore-Thomas v. Alaska 17 Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009) (citing Gaus v. Miles, Inc., 980 F.2d 18 564, 566 (9th Cir. 1992)). 19

20 3 While the issue is ancillary to the question of this Court’s subject-matter jurisdiction, the Court feels 21 compelled to address Defendant’s adamance that this action was removed on August 5, 2022, rather than August 8, 2022. See, e.g., Resp. at 8. The Court declines to quibble about technicalities. Whether this 22 action was technically removed the Monday morning that the TRO was set to expire and the PI hearing was to take place in the Superior Court, or whether this action was removed shortly before close of 23 business on the preceding Friday, see Request for Judicial Notice (ECF No. 3-2) Ex. A (filing fee receipt 24 timestamped 4:42 p.m. PDT), ultimately is irrelevant and, frankly, a distinction without a difference. Either way, this Court was unaware of the removal and existence of this action until it was recorded on 25 the docket midmorning on August 8, 2022; and the Superior Court apparently also was unaware that this action had been removed until the case was called at the 8:30 a.m. August 8, 2022 PI hearing, at which 26 point Defendant’s counsel “informed the court of the removal of this matter to federal court on August 5, 2022,” see Declaration of Alice M. Hosden (ECF No. 3-8) ¶ 2. The fact remains that Defendant waited 27 until the eleventh hour to remove this action. Defendant was entitled to do so. But filing late on the Friday 28 before a Monday morning hearing, rather than on the morning of the hearing itself, hardly positions 1 As noted supra, Defendant has invoked federal subject-matter jurisdiction pursuant 2 to 28 U.S.C. § 1331, see generally Notice, which provides that “[t]he district courts shall 3 have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties 4 of the United States.” 28 U.S.C. § 1331. This is generally known as “federal-question 5 jurisdiction.” “Most federal-question jurisdiction cases are those in which federal law 6 creates a cause of action.” Wander v. Kaus, 304 F.3d 856, 858 (9th Cir. 2002) 7 (citing Merrell Dow Pharms. Inc. v. Thompson, 478 U.S. 804, 808 (1986)). However, “[a] 8 case may also arise under federal law where ‘it appears that some substantial, disputed 9 question of federal law is a necessary element of one of the well-pleaded state claims.’” 10 Id. (quoting Franchise Tax Bd. of State of Cal. v. Constr. Laborers Vacation Trust for S. 11 Cal., 463 U.S. 1, 13 (1983)). 12 Specifically, “federal jurisdiction over a state law claim will lie if a federal issue is: 13 (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution 14 in federal court without disrupting the federal-state balance approved by Congress.” Gunn 15 v. Minton, 568 U.S. 251, 258 (2013). “‘Only a few cases’ have ever fallen into this narrow 16 category.” Cnty. of San Mateo v. Chevron Corp., 32 F.4th 733, 746 (9th Cir. 2022) (citing 17 City of Oakland v. BP PLC, 969 F.3d 895, 904 (9th Cir. 2020)). Often, the focus falls on 18 the third requirement, which “focuses on the importance of a federal issue ‘to the federal 19 system as a whole.’” City of Oakland, 969 F.3d at 905 (quoting Gunn, 568 U.S. at 260). 20 ANALYSIS 21 Defendant contends that this Court has subject-matter jurisdiction over Plaintiff’s 22 state-law claim because the claim “arises under” the laws of the United States. See 23 generally Resp. at 8–14. Plaintiff, on the other hand, argues that Defendant fails to meet 24 its burden of establishing that a substantial federal issue is necessarily raised. See Reply at 25 4–6. 26 The Court assumes for purposes of its analysis that a federal issue is “necessarily 27 raised” and “actually disputed,” given that Plaintiff’s claim to mortgage forbearance relies 28 on California’s Covid-19 Small Landlord and Homeowner Relief Act’s reference to 1 “applicable federal guidance.” See, e.g., Compl. at 1 n.1; id. ¶¶ 5, 17. Nonetheless, the 2 Court finds that subject-matter jurisdiction is lacking because the federal issue is not 3 substantial and resolution in the federal courts would disrupt the federal-state balance 4 approved by Congress. 5 Defendant contends that the federal issue here is substantial because “the Complaint 6 requires the interpretation of the legality of Defendant’s denial of an extension pursuant to 7 applicable federal law.” Resp. at 11 (emphasis omitted). Defendant claims this issue “is 8 of significant importance to the federal system as a whole to ensure uniform adjudication 9 on issues such as extensions for federal-backed loans under Covid-19 related federal 10 regulations.” Id. In so arguing, Defendant invokes Evergreen Square of Cudahy v. 11 Wisconsin Housing & Economic Development Authority, 776 F.3d 463 (7th Cir. 2015). 12 This out-of-circuit authority is not controlling on this Court. Even if it were, however, it 13 is distinguishable. First, in Evergreen Square, the plaintiff affirmatively elected to bring 14 its action in federal court. See id. at 464–65. Thus, the presumption against removal 15 jurisdiction was not at issue. Second, Evergreen Square involved contracts “to which 16 HUD, a federal agency, prescribes both the form and content”; in other words, contracts 17 that “must be approved by HUD and [whose] terms are administered pursuant to federal 18 laws and regulations.” Id. at 468. The Seventh Circuit noted that “[s]imilar lawsuits have 19 been brought nationwide by Section 8 property owners,” and, “[i]n the aggregate, these 20 cases have the potential to substantially influence the scope and success of the Section 8 21 program.” Id. (citations omitted). Here, on the other hand, the mortgage forbearance 22 provision in the CARES Act is but one small part of an expansive legislative scheme 23 enacted to afford a broad array of relief during and in the wake of the Covid-19 pandemic. 24 The success of Covid-19 relief efforts will not rise or fall based on the interpretation of this 25 one statutory section. And, as Defendant concedes, “it is the rare foreclosure injunction 26 action that involves contested issues of federal law related to Covid-19 legislation.” Resp. 27 at 12 (emphasis and citation omitted). 28 / / / 1 This concession also undercuts Defendant’s argument that this issue “is of 2 significant importance to the federal system as a whole to ensure uniform adjudication on 3 issues such as extensions for federal-backed loans under Covid-19 related federal 4 regulations.” Id. at 11. First, “[t]o the extent that [Defendant] is arguing that state use and 5 interpretation of the [CARES Act] pose a threat to the order and stability of the [CARES 6 Act] regime, [Defendant] should be arguing, not that federal courts should be able to review 7 and enforce state [CARES Act]-based causes of action as an aspect of federal-question 8 jurisdiction, but that the [CARES Act] pre-empts state-court jurisdiction over the issue in 9 dispute.” Merrell Dow, 478 U.S. at 816 (footnote omitted). Second, “[Defendant]’s 10 concern about the uniformity of interpretation, moreover, is considerably mitigated by the 11 fact that, even if there is no original district court jurisdiction for these kinds of action, th[e 12 U.S. Supreme] Court retains power to review the decision of a federal issue in a state cause 13 of action.” Id. (footnote omitted). In short, the Court finds the federal issue raised in this 14 matter is not substantial. 15 However, “[e]ven where a state law claim does necessarily turn on a substantial and 16 disputed question of federal law, removal is subject to a ‘possible veto’ where exercising 17 federal jurisdiction is not ‘consistent with congressional judgment about the sound division 18 of labor between state and federal courts governing the application of § 1331.’” Nevada v. 19 Bank of Am. Corp., 672 F.3d 661, 675 (9th Cir. 2012) (quoting Grable, 545 U.S. at 313). 20 Defendant argues that exercising jurisdiction over this case will not disrupt the federal- 21 state balance. Resp. at 8–10. However, as Defendant notes, “the CARES Act provides no 22 private right of action.” Id. at 8; see also Scott v. Gate Gourmet, Inc., No. 23 220CV11033CASJPRX, 2021 WL 677897, at *6 (C.D. Cal. Feb. 22, 2021) (“Here, as the 24 parties agree, the CARES Act provides no private right of action.”) (citations omitted). 25 California’s Covid-19 Small Landlord and Homeowner Relief Act, on the other hand, 26 provides such a private right of action, which Plaintiff invoked in bringing his suit. See 27 Compl. ¶ 6 (citing Cal. Civ. Code § 3273.15). “[T]he congressional determination that 28 there should be no federal remedy for the violation of this federal statute is tantamount to 1 a congressional conclusion that the presence of a claimed violation of the statute as an 2 element of a state cause of action is insufficiently ‘substantial’ to confer federal-question 3 jurisdiction.” Merrell Dow, 478 U.S. at 814. Permitting plaintiffs to bring claims under 4 the CARES Act in district court by backdooring federal subject-matter jurisdiction utilizing 5 an “arising under” theory would subvert the congressional determination that there should 6 be no federal remedy for such violations and could “‘herald[] a potentially enormous shift 7 of traditionally state cases into federal courts.’” Nevada, 672 F.3d at 676 (citing Grable, 8 545 U.S. at 319). Thus, for this additional reason the Court finds federal subject-matter 9 jurisdiction lacking. 10 The Court finds its reasoning vindicated in the disposition of Cantu v. Savings, Civil 11 Action No. 7:21-CV-00224, 2021 WL 8944405 (S.D. Tex. Oct. 6, 2021), in which the 12 plaintiff, asserting state-law claims seeking to prevent a foreclosure sale, obtained a TRO 13 in the state court, after which the defendant removed on the basis of federal-question 14 jurisdiction, arguing that the federal foreclosure moratorium of the CARES Act supplied 15 the relevant federal question. Id. at * 1. Ultimately, “[t]he [c]ourt decline[d] to place 16 Plaintiff’s passing reference to the federal foreclosure moratorium into the ‘special and 17 small category of cases’ that meet th[e “arising under”] test.’” Id. at *2 (citing Bd. of 18 Comm’rs of Se. La. Flood Prot. Auth.-E. v. Tenn. Gas Pipeline Co., L.L.C., 850 F.3d 714, 19 721 (5th Cir. 2017)). On the similar facts before it, this Court, too, finds federal subject- 20 matter jurisdiction lacking. 21 Ultimately, the jurisdictional question here is a close one. However, resolving any 22 doubts in favor of remand, the Court finds that the instant action does not “arise under” 23 federal law such that this Court can exercise federal subject-matter jurisdiction over it. See 24 Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009) (“The ‘strong 25 presumption against removal jurisdiction means that the defendant always has the burden 26 of establishing that removal is proper,’ and that the court resolves all ambiguity in favor of 27 remand to state court.”) (quoting Gaus, 980 F.2d at 566). Ultimately, the federal issue is 28 / / / 1 || not sufficiently substantial, and resolving it in a federal forum could upset the state-federal 2 || balance. 3 CONCLUSION 4 In light of the foregoing, the Court REMANDS this action to the Superior Court for 5 State of California, County of San Diego, for lack of subject-matter jurisdiction and 6 || DENIES AS MOOT Defendant’s Motion to Dismiss and supporting Request for Judicial 7 || Notice (ECF Nos. 6 & 6-1). Additionally, the Court EXTENDS the TRO issued by the 8 || Superior Court and previously extended by this Court in order to maintain the status quo 9 allow Plaintiff adequate time to reinstate PI proceedings in state court. See, e.g., 10 || Genius Fund I ABC, LLC v. Shinder, No. 221CV03765VAPMAAX, 2021 WL 2136414, 11 |} at *7-8 (C.D. Cal. May 26, 2021) (remanding case due to lack of subject-matter jurisdiction 12 || but extending TRO originally issued by state court to maintain status quo); Lopez v. Wells 13 || Fargo Bank, NA, No. 3:11-CV-740-RCJ-WGC, 2011 WL 6936345, at *3 (D. Nev. Dec. 14 |/30, 2011) (remanding due to lack of subject-matter jurisdiction but issuing request for TRO 15 || to prevent foreclosure sale). The TRO, under the terms originally ordered by the Superior 16 || Court, shall remain in full force and effect through August 23, 2022. As this concludes the 17 || litigation in this matter, the Clerk of the Court SHALL CLOSE the file. 18 IT IS SO ORDERED. 19 Dated: August 16, 2022 je te JL, nermeaitecete- 20 on. Janis L. Sammartino 5 United States District Judge 22 23 24 25 26 27 28