Opinion
Case No. 02-CV-70832-DT
April 12, 2002
OPINION AND ORDER REMANDING CASE TO OAKLAND COUNTY CIRCUIT COURT
At a session of said Court, held in the U.S. District Courthouse, City of Detroit, Courthouse Wayne, State of Michigan, on April 12, 2002.
Plaintiff, City of Pontiac (Pontiac), originally filed this action in Oakland County Circuit Court. Defendant, Pontiac Neighborhood Housing Services, Inc. (PNHS), removed the case to this Court on March 6, 2002. PNHS's basis for removal is this Court's federal question jurisdiction. On March 13, 2002, this Court ordered PNHS to show cause why this action should not be remanded for lack of subject matter jurisdiction. PNHS responded to the Order on March 27, 2002.
For the reasons set forth below, this case shall be remanded to Oakland County Circuit Court based on this Court's lack of subject matter jurisdiction.
DISCUSSION
A case may be removed from state court to federal district court pursuant to 28 U.S.C. § 1441 and 1446. Section 1441 provides:
any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.
(b) Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. . . .28 U.S.C. § 1441 (a) and (b) (emphasis added). Section 1446 controls the procedure for removal, and provides that "defendants desiring to remove any civil action . . . shall file . . . a notice of removal . . . containing a short and plain statement of the grounds for removal. . . ." 28 U.S.C. § 1446 (a). PNHS has filed a Notice of Removal, stating the basis for removal as Pontiac's claims "revolving around the interpretation of contracts based on Federal Law." (Notice of Removal).
This Court's federal question jurisdiction is controlled by 28 U.S.C. § 1331. Section 1331 grants district courts jurisdiction over "civil actions arising under the Constitution laws, or treaties of the United States." 28 U.S.C. § 1331 (emphasis added). The Supreme Court interpreted "arising under" in Louisville Nashville Railroad v. Motley, 211 U.S. 149 (1908), stating " [i]t is the settled interpretation of these words, as used in this statute, conferring jurisdiction, that a suit arises under the Constitution and laws of the United States only when the plaintiff's statement of his own cause of action shows that it is based upon those laws or that Constitution." Id. at 152. In removing a case, defendant has the burden of establishing that the court has subject matter jurisdiction. Ahearn v. Charter Twp. of Bloomfield, 100 F.3d 451, 454 (6th Cir. 1996).
Pontiac's claims are: 1) Breach of Contract, 2) Negligence, 3) Breach of Fiduciary Duty, 4) Conversion, and 5) Fraud/Misrepresentation. None of these claims are federal law claims. The bases for these claims are the parties' conduct pursuant to contracts between Pontiac and PNHS, entered into for the purpose of promoting "development of habitable low income housing within the City of Pontiac through the use of funds made available by" the United States Department of Housing and Urban Development (HUD). (Compl. at ¶ 5).
Pontiac has multiple claims under some of these theories based on the two separate contracts.
Pontiac describes the contracts and basis for its Complaint as:
7. The contract attached as Exhibit A authorized PNHS to retain the proceeds from an earlier project to the tune of $85,283.28 to develop subsequent housing projects.
8. The contract attached as Exhibit B contemplated PNHS serving as the developer and/or general contractor for the construction, marketing and sale of 14 units of housing.
9. Both contracts are exacting in detail regarding the requirements imposed upon PNHS so as to insure that HUD funds are properly utilized for the purposes contemplated.
10. For example, only qualified low income purchasers as defined by exacting regulation may purchase the housing units and stay within plan.
11. PNHS has failed to move on the project laid out in the contract attached as Exhibit A, and at this point in time, given the specific performance period set forth in Exhibit A, there is now impossibility of performance.
12. PNHS has failed to complete the project set forth in Exhibit B within the parameters required and has engaged in various breaches of conduct, negligent oversight combined with willful [sic] failure to turn over proceeds from the sale of the units as required by the contract.
(Compl. at ¶¶ 7-12).
PNHS contends in its Notice of Removal that these contracts are "based on Federal Law." (Notice of Removal). In its Response to the Court's Order to Show Cause, PNHS states:
1. The contracts at issue, which have not been fully identified . . . allege m, terial [sic] breaches of contract relating to HUD's CHDO's program and the funding of municipalities for the development of low income housing which is all based on federal law, and not state law.
2. To determine if there were breaches committed by PNHS, which cannot be done, requires this court's interpretation of Federal Statutes and Part 92 of HUD's Internal Regulations, which can be disclosed as part of this Court's required Rule 26 disclosures.
3. Plaintiff, by its' [sic] own admissions cedes that federal questions are involved as each count of the Complaint requires a detailed analysis of the questioned contracts together with federal case law precedent and HUD's future granting of grant monies to municipal CHDO's, such as the City of Pontiac.
(Def.'s Resp. at 2). PNHS is not claiming that federal law provides for Pontiac's claims, but that Pontiac's claims involve federal questions. Such a basis for removal is proper only when "plaintiffs right to relief necessarily depends on resolution of a substantial question of federal law." Thompson v. Merreil Dow Pharmaceuticals, 766 F.2d 1005, 1006 (6th Cir. 1985) (emphasis added). PNHS, having the burden to establish this Court's subject matter jurisdiction, has failed to show this Court any part of the Complaint where Pontiac's claim "necessarily depends" on this Court's "resolution" of a federal question.
PNHS also states in its Response that there are complex legal issues involved, that the Oakland County Circuit Court is located in Pontiac, and that "issues relating to the interpretation of HUD's own internal procedure . . . requires the expertise of this Honorable Court . . . [therefore] it just appears that the case, based on the foregoing, should remain in the federal system, [sic] so as to at least avoid the appearance of any impropriety." (Def.'s Resp. at 2). PNHS fails to show how these assertions can serve as the basis for subject matter jurisdiction in this Court.
Pontiac, in its Complaint, states "[b]oth contracts are exacting in detail regarding the requirements imposed upon PNHS so as to insure that HUD funds are properly utilized for the purposes contemplated." (Compl. at ¶ 9). Thus, PNHS's "duties" under the contract, whether based on HUD requirements or not, were included in the contracts. In this Court's opinion, Pontiac's right to relief can be determined by the terms of the contracts alone, without necessarily resolving any "substantial" federal questions. Therefore, this Court lacks subject matter jurisdiction, and this case shall be remanded to Oakland County Circuit Court, pursuant to 28 U.S.C. § 1447 (c).
The pertinent part of § 1447(c) states that "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447 (c).
Accordingly,
IT IS ORDERED that this case be hereby REMANDED to Oakland County Circuit Court.