Opinion
No. 01 C 9392
January 29, 2002
MEMORANDUM
Harry and Louise Carmichael (collectively "Carmichaels") have served a notice of their counsel's proposed February 12, 2002 presentment of a motion to dismiss the mortgage foreclosure counterclaim brought against them in this Truth in Lending Act action against Payment Center, Inc. ("Payment Center"). Because it appears that Carmichaels' counsel has misapprehended the current posture of Seventh Circuit law in that respect, this memorandum is issued sua sponte to alert both sides' counsel as to the issue to be addressed at the scheduled date of presentment.
In part Carmichaels' Brief in support of their motion points toValencia v. Anderson Bros. Ford, 617 F.2d 1278, 1290-92 (7th Cir. 1980) and to some district court decisions as barring the exercise of federal jurisdiction over the counterclaim (which is a state law claim between nondiverse parties). But that contention ignores the impact of Channell v. Citicorp Nat'l Servs., Inc., 89 F.2d 379, 384-87 (7th Cir. 1996), which teaches that the supplemental jurisdiction provisions of 28 U.S.C. § 1367 ("Section 1367") have changed the legal landscape announced in Valencia by supplanting the former compulsory counterclaim test under Fed.R.Civ. p. 13(a) with a less demanding requirement that the counterclaim be "so related to claims in the action within original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution" — as to which requirement Channell, 89 F.3d at 385 has reconfirmed:
It is not as though Carmichaels' counsel were unaware of Channell, which is actually cited in the supporting Brief.
In Baer v. First Options of Chicago Inc., 72 F.3d 1294, 1298-1301 (7th Cir. 1995), we concluded that § 1367 has extended the scope of supplemental jurisdiction, as the statute's language says, to the limits of Article III — which means that "[a] loose factual connection between the claims" can be enough, quoting from Ammerman v. Sween, 54 F.3d 423, 424 (7th Cir. 1995).
Accordingly the relevant inquiry would appear to be not whether supplemental jurisdiction exists over Payment Center's counterclaim under Section 1367(a), but rather whether this is an appropriate case for the declination of such jurisdiction under either Section 1367(c)(2) or (4). Carmichaels' counsel are oversimplistic in urging that just because Carmichaels claim to have rescinded the credit agreement at issue, Payment Center's foreclosure effort via its counterclaim "refus[es] to honor plaintiffs' statutorily-prescribed rights, an act which sounds in bad faith in disrespect to this court and the tenants [sic] of the TILA." After all, Payment Center disputes the validity of Carmichaels' attempted rescission — and if no valid rescission took place, Payment Center is entitled to pursue its own rights and remedies (including foreclosure). As stated earlier, both sides' lawyers should come to the motion presentment date prepared to dismiss the matter in those terms.