United States District Court, District of Columbia
OPINION AND ORDER
PAUL L. FRIEDMAN, District Judge.
Currently pending before the Court in these two matters are a number of motions filed by the pro se plaintiff, Dr. Henok Araya, as well as motions for summary judgment filed by defendant JPMorgan Chase Bank, N.A. ("Chase"), successor by merger to Chase Home Finance, LLC. The Court does not address these motions in this Opinion and Order. Instead, the Court considers whether it continues to hold subject matter jurisdiction over the two cases, an issue that has been drawn into question by the D.C. Circuit's recent decision in a third, closely related case brought by the plaintiff against Chase and others. In that case, the Circuit held that the district court abused its discretion by exercising supplemental jurisdiction over the plaintiff's state law claims and ordered that those claims be remanded to the Superior Court of the District of Columbia. See Araya v. JPMorgan Chase Bank, N.A., 775 F.3d 409, 417-19 (D.C. Cir. 2014). For the reasons explained below, the Court concludes that it now lacks subject matter jurisdiction over these remaining two cases, and it therefore will remand them to the Superior Court of the District of Columbia.
The issue of this Court's continuing jurisdiction over these cases has been called into question by the court of appeals' recent decision in Dr. Araya's third case against Chase. In that third case - Civil Action No. 12-0335 - Dr. Araya sued Chase in the Superior Court of the District of Columbia, alleging wrongdoing in connection with Chase's foreclosure on real property located at 2630 Myrtle Avenue, Northeast in Washington, D.C. See Araya v. JPMorgan Chase Bank, N.A., 775 F.3d at 411-12. Also named as defendants were the law firm of Shapiro & Burson, LLP; Dorothy Ihuoma; and Fannie Mae. Id. at 412. Chase and Fannie Mae removed the case to this Court on the basis of federal question jurisdiction. Id. After removal, the district court dismissed Ms. Ihuoma - who had purchased the property after foreclosure - from the case, concluding that she was a bona fide purchaser. Id. The Court then issued a Memorandum Opinion and accompanying Order in which it dismissed Fannie Mae; denied Araya's motion for leave to file a second amended complaint; granted partial summary judgment to Chase; and granted judgment on the pleadings to Chase and Shapiro & Burson with respect to Araya's remaining state law claims against those defendants. Henok v. Chase Home Finance, LLC, 922 F.Supp.2d 110 (D.D.C. 2013); Order (Feb. 13, 2013) [Dkt. No. 48 in Civil Action No. 12-0335].
On Dr. Araya's appeal, the D.C. Circuit held that once Fannie Mae had been dismissed from the case, "the basis of federal question jurisdiction had vanished." Araya v. JPMorgan Chase Bank, N.A., 775 F.3d at 416. The court of appeals further held that it became incumbent upon the district court at that point to consider the propriety of exercising supplemental jurisdiction over the remaining state law claims. See id. at 417-18. And the Circuit concluded that the district court had abused its discretion by retaining jurisdiction over those claims, which could be characterized as implicating "novel issues of state law." Id. at 417. Accordingly, it vacated the district court's orders relating to the state law claims against Chase and Shapiro & Burson, and it returned the case to this Court with directions to remand those remaining claims to the Superior Court of the District of Columbia. Id. at 419.
Given the close similarity between Araya's three home foreclosure cases - the action already considered by the court of appeals, as well as the two presently before this Court - Chase submitted an unsolicited "Notice Regarding Jurisdiction" urging this Court to retain jurisdiction over Civil Action Nos. 12-0292 and 12-0336 on either of two bases: diversity of citizenship, or supplemental jurisdiction. The Court then invited any other interested parties to offer their views regarding jurisdiction, and Shapiro & Burson answered that call with a short memorandum adopting Chase's arguments, and also maintaining that the Court's prior dismissal of it as a party to these two cases should not be "clouded" by subsequent events. See S&B and Britto's Response Regarding Jurisdiction [Dkt. No. 134 in Civil Action No. 12-0292; Dkt. No. 123 in Civil Action No. 12-0336] at 1, 4. In the meantime, a variety of motions in the two cases were filed, including motions for default and to amend the complaint filed by Dr. Araya; a motion for summary judgment filed by Araya in Civil Action No. 12-0292; as well as motions for summary judgment filed by Chase in each case. Before it can address any of these motions, however, the Court must determine whether it has jurisdiction to do so.
II. THE COURT MAY NOT EXERCISE DIVERSITY JURISDICTION
"The objection that a federal court lacks subject-matter jurisdiction may be raised by a party, or by a court on its own initiative, at any stage in the litigation, even after trial and the entry of judgment." Arbaugh v. Y & H Corp., 546 U.S. 500, 506 (2006) (citation omitted). "Moreover, [federal courts] have an independent obligation to determine whether subject-matter jurisdiction exists...." Id. at 514. Chase maintains that notwithstanding the Circuit's decision in Civil Action No. 12-0335, this Court may properly exercise jurisdiction over these two actions because there now exists complete diversity between the parties and the amount in controversy exceeds $75, 000. See Chase Jxn. Notice at 1, 6-9.
To begin with, the predicate for federal jurisdiction in these two cases always has been the same as that which grounded the Court's jurisdiction in Civil Action No. 12-0335 - namely, the presence of Fannie Mae as a defendant. The notices of removal in each of the three cases cited Fannie Mae's presence as a jurisdictional basis by invoking 12 U.S.C. § 1723a(a), which, under controlling precedent, "provides federal subject-matter jurisdiction in Fannie Mae cases." Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Raines, 534 F.3d 779, 785 (D.C. Cir. 2008). Thus, it was Fannie Mae's dismissal from the case in Civil Action No. 12-0335 that, in the court of appeals' view, caused the basis for federal jurisdiction to "vanish." See Araya v. JPMorgan Chase Bank, N.A., 775 F.3d at 416. Likewise in the two actions now before this Court, Fannie Mae has been dismissed and federal jurisdiction therefore can no longer rest on its presence as a party. See Henok v. Chase Home Finance, LLC, Civil Action Nos. 12-0292 and 12-0336, 2014 WL 3843222 (D.D.C. Aug. 5, 2014) (dismissing Fannie Mae from both cases). Nor are there any federal claims left in the cases. Although the Court in January 2013 granted Araya leave to add a claim under the Real Estate Settlement Procedures Act to each of his complaints, the Court subsequently granted judgment to Chase on those claims. Henok v. Chase Home Finance, LLC, 950 F.Supp.2d 96 (D.D.C. 2013) (Civil Action No. 12-0292); Henok v. Chase Home Finance, LLC, 947 F.Supp.2d 6 (D.D.C. 2013) (Civil Action No. 12-0336).
Chase argues that despite the dismissal of Fannie Mae from the cases, the Court's continuing jurisdiction may rest on the existence of complete diversity between the parties. But Chase did not invoke diversity as a jurisdictional ground in either of its notices of removal. It is not clear whether Chase failed to do so because it did not believe that complete diversity existed at that time, or instead because it overlooked the possibility that diversity arguably might be present. In either event, however, the Court's diversity jurisdiction was not invoked then, and, for the reasons explained below, the Court concludes that it cannot be invoked now.
"The usual rule is that removability is determined from the record before the court at the time the notice of removal... is filed in federal court." 14B CHARLES ALAN WRIGHT ET AL., FED. PRAC. & PROC. JURIS. § 3723, at 690 (4th ed. 2009). In addition, "[a] large minority of courts require complete diversity not only when removal is sought, but also when the original action is filed in the state court." 13E CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER, FED. PRAC. & PROC. JURIS. § 3608, at 357-58 (3d ed. 2009). At the time of removal in these two cases, Chase did not assert that complete diversity existed between the parties. Nor does it do so now. Rather, Chase contends only that "here, where diversity currently exists, the cases should not be remanded simply because they were removed on other grounds." Chase Jxn. Notice at 6 (emphasis added). To support this argument, Chase cites the Supreme Court's decision in Caterpillar Inc. v. Lewis, 519 U.S. 61 (1996), where the Court stated that "an erroneous removal need not cause the destruction of a final judgment, if the requirements of federal subject-matter jurisdiction are met at the time the judgment is entered." Id. at 73.
Caterpillar involved an application of a long-recognized "exception to the time-of-filing rule" that applies in diversity cases; that exception allows a "jurisdictional defect [to be] cured by the dismissal of the party that had destroyed diversity." See Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 572 (2004); see also 13E WRIGHT, MILLER & COOPER § 3608, at 353, 357 (noting that the Supreme Court in Grupo Dataflux "dramatically reiterated its commitment to the time-of-filing rule, " and explaining that the Court there "declined to extend Caterpillar" to different circumstances). This Court is aware of no authority in which the exception applied in Caterpillar has been understood to allow a case initiated or removed on federal question grounds to remain in federal court on diversity grounds after the basis for federal question jurisdiction disappears but diversity emerges. Indeed, to so hold would be inconsistent with the D.C. Circuit's decision in Araya's third case, where diversity plainly existed after Dorothy Ihuoma and Fannie Mae had been dismissed, yet where, as Chase acknowledges, the court of appeals declined even to address whether diversity could support the Court's continued exercise of jurisdiction over the case. See Chase Jxn. Notice at 5 (the court of appeals "did not analyze whether diversity jurisdiction existed" in Civil Action No. 12-0335).
The Ninth Circuit has allowed removed cases to switch jurisdictional bases from federal question to diversity after all federal claims have been eliminated, even where diversity was not invoked in the defendant's notice of removal, so long as diversity of citizenship could be discerned from the face of the complaint. See Williams v. Costco Wholesale Corp., 471 F.3d 975, 976-77 (9th Cir. 2006) (per curiam); see also Gavin v. AT&T Corp., 464 F.3d 634, 640-41 (7th Cir. 2006) (suggesting that diversity jurisdiction, though not invoked in notice of removal, might later be invoked on appeal, at least where complaint alleged essential facts demonstrating diversity). "The Ninth Circuit's approach, " however, "has been criticized as contrary to well-settled practice, " Wood v. Crane Co., 764 F.3d 316, 326 (4th Cir. 2014) (citing Jeannette Cox, Removed Cases and Uninvoked Jurisdictional Grounds, 86 N.C. L. REV. 937, 953-57 (2008)), including the practice of the D.C. Circuit, where "[d]iversity jurisdiction must be pleaded by the party claiming it." Loughlin v. United States, 393 F.3d 155, 172 (D.C. Cir. 2004).
Under this "traditional approach to uninvoked jurisdictional grounds... the mere fact that a case falls within a congressional grant of federal subject matter jurisdiction does not give a federal court authority to hear a case; a party must also affirmatively invoke the applicable ground or grounds of congressionally authorized jurisdiction." Cox, 86 N.C. L. REV. at 941-42. And in the removal context specifically, "[d]efendants clearly may not remove on grounds not even obliquely referred to in the Notice of Removal." Id. at 945 (quoting Hinojosa v. Perez, 214 F.Supp.2d 703, 707 (S.D. Tex. 2002)). Likewise, "[i]n most circumstances... defendants may not [through amendment of the notice of removal] add completely new grounds for removal... and the court will not, on its own motion, retain jurisdiction on the basis of a ground that is present but that defendants have not relied upon." 14C CHARLES ALAN WRIGHT ET AL., FED. PRAC. & PROC. JURIS. § 3733, at 651-59 (4th ed. 2009); see, e.g., Ervast v. Flexible Products Co., 346 F.3d 1007, 1012 n.4 (11th Cir. 2003) (declining to exercise diversity jurisdiction because removing party "had the burden to plead this basis in its notice of removal, and it did not"); J.S.R. ex ...