Opinion
3:23-cv-00274-YY
03-01-2023
CAPITAL CREDIT AND COLLECTION SERVICE, INC., Plaintiff, v. JEFFREY M. DIVERS, Defendant.
FINDINGS AND RECOMMENDATIONS
YOULEE YIM YOU, MAGISTRATE JUDGE
FINDINGS
Defendant Jeffrey M. Divers has filed a Notice of Removal, seeking to remove a collections/breach of contract action that was originally filed in Clackamas County Circuit Court for damages in the amount of $835 plus interest. ECF 1. The Notice of Removal fails to establish this court's jurisdiction; therefore, no response from plaintiff is necessary. This matter should be remanded to Clackamas County.
I. Lack of Timeliness
A notice of removal must be filed within 30 days after the defendant is served with a copy of the complaint. 28 U.S.C. § 1446(b)(1). In his notice of removal, defendant indicates he was served with a copy of the complaint on January 7, 2023; however, he did not file his notice of removal until February 27, 2023. Notice Removal ¶ 2, ECF 1. Because more than 30 days have elapsed since defendant was served with the complaint, his notice of removal is untimely.
II. Lack of Jurisdiction
Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). “It is to be presumed that a cause lies outside this limited jurisdiction, . . . and the burden of establishing the contrary rests upon the party asserting jurisdiction.” Id. “If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.” FED. R. CIV. P. 12(h)(3); see also Fiedler v. Clark, 714 F.2d 77, 78-79 (9th Cir. 1983) (recognizing that the court may sua sponte dismiss an action if it finds that subject matter jurisdiction is lacking).
“The defendant bears the burden of establishing that removal is proper.” Provincial Gov't of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009). The court strictly construes the removal statute against removal jurisdiction. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). “Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.” Id. “If a district court lacks subject matter jurisdiction over a removed action, it has the duty to remand it ....” Sparta Surgical Corp. v. Nat'l Ass'n of Sec. Dealers, Inc., 159 F.3d 1209, 1211 (9th Cir. 1998), abrogated by Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, 578 U.S. 374 (2016)
Defendant claims this court has original jurisdiction over this case pursuant to 28 U.S.C. § 1331 “because it arises under a federal question.” Notice Removal ¶ 4, ECF 1. The Supreme Court “has long held that a district court, when determining whether it has original jurisdiction over a civil action, should evaluate whether that action could have been brought originally in federal court.” Home Depot U.S. A., Inc. v. Jackson, 139 S.Ct. 1743, 1748 (2019). “This requires a district court to evaluate whether the plaintiff could have filed its operative complaint in federal court, either because it raises claims arising under federal law or because it falls within the court's diversity jurisdiction.” Id.
Here, the complaint alleges a claim for breach of contract, which is a question of state law, not federal law. It appears that defendant believes removal is allowed because he intends to assert a counterclaim under the Fair Debt Collection Practices Act (“FDCPA”). See Civil Cover Sheet, ECF 1-1 (referring to the cause of action as a “Violation of FDCPA”). But defendant has not yet alleged any counterclaim under the FDCPA or other federal law. See Franklin v. CarFin. Servs., Inc., No. 09CV1361LABAJB, 2009 WL 3762687, at *3 (S.D. Cal. Nov. 9, 2009) (“It is also significant that Car Financial did not file its counterclaims until after it removed this case to federal court.”) (citing Warren Loveland, LLC v. Keycorp Investment L.P. IV, No. 05-C-162, 2005 WL 1427707, at *3 (W.D. Wis. 2005) (declining to reach question whether compulsory counterclaim could satisfy amount in controversy requirement because counterclaim was filed after removal). Moreover, as noted, this court looks to the complaint in determining whether it has jurisdiction. Home Depot U.S.A., 139 S.Ct. at 1748. “Removability cannot be created by defendant pleading a counter-claim presenting a federal question ....” Rath Packing Co. v. Becker, 530 F.2d 1295, 1303 (9th Cir. 1975). Therefore, this court does not have federal question jurisdiction over this case.
Defendant also asserts this court has diversity jurisdiction pursuant to “28 U.S.C. § 1441(b).” Notice Removal ¶ 4, ECF 1. Under 28 U.S.C. § 1332(a)(1), district courts 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 . . . citizens of different states.” Based on defendant's address, which he provided in his notice of removal, it appears defendant is a citizen of Oregon. However, defendant has provided no information regarding the citizenship of plaintiff Capital Credit and Collection Service, Inc., to show that the parties are citizens of different states.
Even if defendant could meet the citizenship requirement, he has failed to meet the amount in controversy requirement. Defendant contends that his yet-to-be-pleaded counterclaim will exceed $75,000. But “[t]he general federal rule has long been to decide what the amount in controversy is from the complaint itself.” Horton v. Liberty Mut. Ins. Co., 367 U.S. 348, 353 (1961). “[C]ourts have generally refused to consider the damages pled in permissive counterclaims as supplying the amount in controversy necessary for removal of a diversity action.” Quality Mgmt., LLC v. Time & Place World, LLC, 521 F.Supp.2d 83, 85 (D.D.C. 2007) (internal quotations omitted); see also HSBC Bank USA etc. v. Jose Coria, et al., No. 222CV01003DMGAFMX, 2022 WL 504563, at *2 (C.D. Cal. Feb. 18, 2022) (“Diversity jurisdiction cannot be justified based on the alleged value of a yet-to-be asserted counterclaim.”); Ford Motor Credit Co. v. Gefroh, No. CV-04-1173-ST, 2004 WL 1969411, at *2 (D. Or. Sept. 2, 2004) (holding that, even if damages for counterclaim exceeded $75,000, “it is doubtful that removal can be based on a counterclaim, cross-claim or third party claim”).
And while there is a split of authority, “the near unanimous rule” is that even the amount alleged in a compulsory counterclaim cannot be used to meet the amount in controversy requirement. Thrash v. New England Mut. Life Ins. Co., 534 F.Supp.2d 691, 696-97 (S.D.Miss. 2008); see also Franklin., 2009 WL 3762687, at *2-3 (collecting cases). Therefore, this court lacks diversity jurisdiction over this case. Where the court lacks jurisdiction, this case must be remanded back to state court.
RECOMMENDATIONS
Because defendant's Notice of Removal (ECF 1) is untimely and this court lacks jurisdiction, the case should be remanded to Clackamas County Circuit Court.
SCHEDULING ORDER
These Findings and Recommendations will be referred to a district judge. Objections, if any, are due Monday, March 20, 2023. If no objections are filed, then the Findings and Recommendations will go under advisement on that date.
If objections are filed, then a response is due within 14 days after being served with a copy of the objections. When the response is due or filed, whichever date is earlier, the Findings and Recommendations will go under advisement.
NOTICE
These Findings and Recommendations are not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any Notice of Appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of a judgment.