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Baker v. Ocean 18 LLC

United States District Court, W.D. Missouri, Western Division

October 10, 2019

YVETTE BAKER, Plaintiff,
OCEAN 18 LLC, et al., Defendants.



         Before the Court are 1) Defendant Martin Leigh PC's Motion to Dismiss (Doc. #5) and 2) Plaintiff's Motion for Remand (Doc. #12). Defendants Ocean 18, LLC and Nationwide Servicing Center, Inc. filed a notice joining, in part, Defendant Martin Leigh's motion to dismiss. (Doc. #9). Plaintiff's Motion for Remand (Doc. #12) is GRANTED. This case is remanded to the Circuit Court of Jackson County, Missouri. Defendant Martin Leigh PC's Motion to Dismiss (Doc. #5) will remain pending for the state court's consideration.

         I. Background

         Plaintiff Yvette Baker filed this action in the Circuit Court of Jackson County, Missouri on December 11, 2018. Plaintiff's claims arise from the purported, attempted, wrongful non-judicial foreclosure of her property. Plaintiff's original verified petition included claims against Ocean 18, Nationwide, and Martin Leigh (collectively “Defendants”) for violations of the Missouri Merchandising Practices Act (“MMPA”) and a request for injunctive relief to prevent the foreclosure of Plaintiff's property. A preliminary injunction was issued on December 21, 2018. Defendants filed a motion to dismiss on December 17, 2018, and Plaintiff filed a motion for leave to file an amended petition on January 11, 2019. On February 5, 2019, and before the state court ruled on the pending motion for leave to file an amended petition, Defendants removed the case to this Court on the basis of diversity jurisdiction. Given that the operative, original petition did not satisfy the amount-in-controversy requirement, this Court remanded the case to state court on April 23, 2019.

         On remand, the state court granted Plaintiff leave to file an amended petition, which was filed on July 2, 2019. On August 1, 2019, Defendants again removed the case to this Court. The now operative, first-amended petition includes three counts against the same Defendants. Counts I and II are MMPA claims against all Defendants, and Count III is a state-wide, class-action claim against only Defendant Martin Leigh for violation of the MMPA. The first-amended petition defines the class:

All Missouri citizens who received a debt collection letter from Martin Leigh between 2007 and the present where Martin Leigh was acting on behalf of a debt purchaser.

(Doc. #1-1, ¶ 73).

         Defendant Martin Leigh's Notice of Removal states this Court has subject-matter jurisdiction under the Class Action Fairness Act, 28 U.S.C. §§ 1332(d)(2) and 1453. Alternatively, Defendant Martin Leigh states traditional diversity jurisdiction exists because Defendant Martin Leigh has been fraudulently joined in this case in that a successor trustee under a deed of trust cannot be found liable for MMPA violations as a matter of law. The parties' citizenship is undisputed. Plaintiff is a Missouri citizen, and Defendant Martin Leigh is also a Missouri citizen. For purposes of CAFA, Ocean 18 is a citizen of California and Delaware, and Nationwide is a California citizen.

         The original petition identified Defendant Martin Leigh as a successor trustee under a deed of trust. The first-amended petition does not use the term “successor trustee” but characterizes Defendant Martin Leigh as a debt collector. More important for this Court's analysis, however, are the allegations of actual misconduct by Defendant Martin Leigh, some of which fall inside the successor-trustee role and some of which fall outside the successor-trustee role.

         The Court will summarize Plaintiff's allegations in the first-amended petition. On September 30, 2005, Plaintiff signed two Promissory Notes and two Deeds of Trust granting a first and second mortgage to EquiFirst Corporation. The second mortgage was in the amount of $26, 600.00. The mortgages and/or servicing of the mortgages were thereafter transferred to other entities. On or around July 1, 2009, Plaintiff began making all mortgage payments to the then loan servicer, GMAC Mortgage, LLC. On August 8, 2012, GMAC sent Plaintiff a letter approving a modification of Plaintiff's mortgages. Plaintiff thereafter paid the modified payments. Plaintiff did not receive any notice that her second mortgage or the servicing of her second mortgage was transferred to Ocean 18 or Nationwide. Plaintiff did not receive any notice of default until August 3, 2018, when Plaintiff received a 45-day Notice of Demand - Intent to Foreclose and Right to Cure from Mortgage Default Services, LLC for the amount of $29, 123.90. Plaintiff alleges she was not in default on the second mortgage.

         On October 15, 2018, Defendant Martin Leigh recorded a Request for Notice of Sale dated October 12, 2018. Defendant Martin Leigh published notice in a newspaper of the foreclosure sale scheduled for December 13, 2018. On or about November 14, 2018, Plaintiff received fifteen certified-mail letters from Defendant Martin Leigh notifying Plaintiff of the trustee's sale scheduled for December 6, 2018, at 12:30 p.m. On December 4, 2018, Plaintiff sent Defendant Martin Leigh a letter requesting validation of the debt. On December 7, 2018, Plaintiff received from Defendant Martin Leigh a packet of documents that included a copy of the second note. The second note indicated there were three allonges containing alleged endorsements of the second note. The third allonge was not affixed to the second note. The packet included a letter from Defendant Martin Leigh on the bottom of which was a statement in all capital letters, “MARTIN LEIGH PC IS ATTEMPTING TO COLLECT A DEBT AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE.” (Doc. #1-1, p. 23).

         On December 11, 2018, Plaintiff's counsel inspected the second note at Defendant Martin Leigh's office, and Plaintiff's counsel requested a scanned copy of the second note. The December 11 scanned copy “was substantially different” than the December 7 copy in that the December 11 copy had a third allonge affixed to the second note. (Doc. #1-1, p. 7). Plaintiff alleges, “Upon information and belief, the second note was altered in order to argue that it was in compliance with the applicable laws of Missouri requiring all allonges to be firmly fixed to the note to be enforceable, and Ocean 18, Nationwide, and Martin Leigh were the only parties who had access to the second note to make alterations.” (Doc. #1-1, p. 14).

         On December 14, 2018, Defendant Martin Leigh proposed a “workout arrangement” that would allow Plaintiff to make payments over time. On February 28, 2019, Defendant Martin Leigh proposed Plaintiff make a $38, 000 payment to Ocean 18 to satisfy the debt. In connection with the state-wide class-action claim, Plaintiff alleges, “Martin Leigh's business involves the collection of debts and its collection activities were carried out to attempt to complete the sale transactions on behalf of the servicer's collection process.” (Doc. #1-1, p. 11).

         Defendant Martin Leigh filed its motion to dismiss on August 7, 2019. In the motion to dismiss, Defendant Martin Leigh argues Plaintiff failed to state a claim against Defendant Martin Leigh because the MMPA does not apply to successor trustees under a deed of trust. Defendant Martin Leigh also argues, and Defendants Ocean 18 and Nationwide join in this portion of the motion, that Plaintiff's MMPA claims fail because Plaintiff does not allege an ascertainable loss. On August 16, 2019, Plaintiff filed her motion for remand. Though the motion to dismiss was filed first, the Court must find it has subject-matter jurisdiction over this matter before it can consider any merits arguments under Federal Rule of Civil Procedure 12(b)(6). See 28 U.S.C. § 1447(c) (“If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.).

         II. Legal Standard

         Defendants may remove to federal court “any civil action brought in a State court of which the district courts of the United States have original jurisdiction[.]” 28 U.S.C. § 1441(a). The party seeking removal bears the burden of establishing subject-matter jurisdiction. In re Bus. Men's Assurance Co. of Am., 992 F.2d 181, 183 (8th Cir. 1993). “[A] district court is required to resolve all doubts about federal jurisdiction in favor of remand.” Transit Cas. Co. v. Certain Underwriters at Lloyd's of London, 119 F.3d 619, 625 (8th Cir. 1997) (citation omitted).

         Pursuant to 28 U.S.C. § 1332(a)(1), “The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between-(1) citizens of different states[.]” Section 1332(a)(1) requires complete diversity, which means “each defendant is a citizen of a different State from each plaintiff.” Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978) (emphasis in original). Removal based on CAFA, however, requires only minimal diversity. Pursuant to § 1332(d)(2)(A), “The district courts shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5, 000, 000, exclusive of interest and costs, and is a class action in which-(A) any member of a class of plaintiffs is a citizen of a State different from any defendant[.]” Two mandatory exceptions to CAFA jurisdiction are codified at § 1332(d)(4)(A) and (B), the local-controversy exception and the home-state exception, respectively.

         “The doctrine of fraudulent joinder allows a district court to assume jurisdiction over a facially nondiverse case temporarily and, if there is no reasonable basis for the imposition of liability under state law, dismiss the nondiverse party from the case and retain subject matter jurisdiction over the remaining claims.” Murphy v. Aurora Loan Svcs., LLC, 699 F.3d 1027, 1031 (8th Cir. 2012). The Eighth Circuit has articulated the fraudulent joinder standard:

Where applicable state precedent precludes the existence of a cause of action against a defendant, joinder is fraudulent. “[I]t is well established that if it is clear under governing state law that the complaint does not state a cause of action against the non-diverse defendant, the joinder is fraudulent and federal jurisdiction of the case should be retained.” Iowa Pub. Serv. Co. v. Med. Bow Coal Co., 556 F.2d 400, 406 (8th Cir. 1977). However, if there is a “colorable” cause of action-that is, if the state law might impose liability on the resident defendant under the facts alleged-then there is no fraudulent joinder. See Foslip Pharm., Inc. v. Metabolife Int'l, Inc., 92 F.Supp.2d 891, 903 (N.D. Iowa 2000). As we recently stated in [Wiles v. Capitol Indem. Corp., 280 F.3d 868, 871 (8th Cir. 2002)], “. . . joinder is fraudulent when ...

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