May 22, 2012
Although the economy is hopefully on the rebound, the deluge of foreclosures continues. And as the foreclosures continue, so too do the various legal battles associated with them. A recent case in the U.S. District Court for the District of Maryland addresses an interesting and somewhat "murky" area of civil procedure in the context of a foreclosure action. Cohn v. Charles, Civ. No. PJM 11-2013, 2012 WL 273751, at *4 (D. Md. Jan. 30, 2012).
I. Section 1441 Removal
"Removal" is defined as "the transfer of an action from state to federal court." Black's Law Dictionary "removal" (9th ed. 2009).
Except as otherwise expressly provided by Act of Congress, 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.
28 U.S.C. § 1441(a). Furthermore, "a claim arising under" federal law may be removed even if coupled with a related state law claim, provided that both the federal and state claims are asserted against the same defendant or defendants. See id. § 1441(c)(1).
Based on the above-stated portions of the removal statute, it has long been well established that "[o]nly a defendant to an action—neither a counter‑defendant nor a third‑party defendant—may remove a case under § 1441(a)." Cohn, 2012 WL 273751, at *1 (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 107-09 (1941); Palisades Collections LLC v. Shorts, 552 F.3d 327, 332 (4th Cir. 2008)).
In determining whether an action "arises under federal law" within the meaning of § 1441(c)(1), courts employ the so-called "well-pleaded complaint rule," whereby the court looks to "'the face of the plaintiff's properly pleaded complaint.'" Id. at *2 (quoting Verizon Md., Inc. v. Global NAPS, Inc., 377 F.3d 355, 363 (4th Cir. 2004) (citing Caterpillar v. Williams, 482 U.S. 386, 392 (1987))).
Accordingly, "[t]o determine whether [a particular] action was properly removed, the Court must first identify which party 'brought' the case in state court," which in turn "will determine which party was the 'defendant' in that court, hence able to initiate removal, and what constituted the 'complaint' for the purposes of the well‑pleaded complaint rule." Id.
II. The Cohn Case
In Cohn, the trustees for a deed of trust (the "Trustees") initiated a foreclosure action in the Circuit Court for Prince George's County, Maryland, regarding a certain parcel of Maryland real estate owned by Yanel Charles ("Charles"). See 2012 WL 273751, at *1. Thereafter, Charles timely filed a counterclaim against the Trustees as well as a third-party complaint against the successor mortgagee, Nationstar Mortgage, LLC ("Nationstar"), alleging violations of the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601 et seq., and the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601 et seq. In response, the Trustees and Nationstar timely removed the counterclaim and third-party complaint to federal district court pursuant to 28 U.S.C. § 1441(a). Charles then moved to remand the matter back to state court.
A. Removal Not Authorized
Initially, the federal district court held that the counterclaim and third-party complaint had been filed within an already existing state court proceeding and, thus, neither Nationstar nor the Trustees were "defendants" who could remove the action to federal court. See Cohn, 2012 WL 273751, at *2. Alternatively, even if Nationstar and the Trustees were "defendants" within the meaning of § 1441, given that the federal question (TILA and RESPA) arose solely from the counterclaim and third-party complaint rather than the initiation of foreclosure proceedings, the federal district court lacked jurisdiction under the well‑pleaded-complaint rule. See id. at *3. Accordingly, regardless of whether the initiation of foreclosure proceedings under Maryland law was a "complaint," Nationstar and the Trustees lacked the "authority to unilaterally sever the Counterclaim and Third Party Complaint from the foreclosure proceeding and remove just that portion of the case to federal court." Id.
B. Attorney's Fees Not Warranted
Lastly, the Cohn court considered Charles's request for attorney's fees and costs pursuant to 28 U.S.C. § 1447(c). "Absent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal. Conversely, when an objectively reasonable basis exists, fees should be denied." Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). Denying Charles's request, the court reasoned:
Although the Court has found that removal was improper, it does not find that the removal was objectively unreasonable. The . . . problematic nature of adjudicating a foreclosure governed by state law together with a mortgagor's federally‑based counterclaims against a mortgagee . . . at a minimum makes the state of remand law murky.Cohn, 2012 WL 273751, at *4.