Brown v. Mortgage Electronic Registration Systems, Inc.
2013 U.S. App. LEXIS 25849
| 8th Cir. | 2013Background
- Mayme Brown, Hot Spring County Circuit Clerk, sued mortgage lenders in Arkansas state court claiming they used MERS to avoid recording mortgage-assignment fees, injuring counties and taxpayers under: an Arkansas illegal-exaction constitutional claim, the Arkansas Deceptive Trade Practices Act (ADTPA), and unjust enrichment.
- Lenders removed under the Class Action Fairness Act (CAFA); district court denied Brown’s remand motions and retained jurisdiction, concluding CAFA’s class-size, diversity, and amount-in-controversy requirements were met.
- The district court dismissed the Complaint with prejudice under Fed. R. Civ. P. 12(b)(6), holding: Brown’s illegal-exaction pleading was improper as a tax-receiver action against private parties; Arkansas law imposes no duty to record mortgage assignments, so ADTPA and unjust-enrichment claims fail.
- Brown moved to alter the judgment arguing novel/state-law issues warranted remand; the court denied the motion, finding supplemental jurisdiction appropriate and the state-law claims not novel or complex.
- On appeal the Eighth Circuit affirmed, holding (1) Brown’s illegal-exaction claim qualified as a CAFA "class action" (class = all Arkansas taxpayers) and met CAFA thresholds, (2) supplemental jurisdiction over state claims was properly exercised, (3) Burford abstention was inapplicable, and (4) the state-law claims failed on the merits because Arkansas imposes no duty to record assignments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| CAFA jurisdiction — whether illegal-exaction claim is a "class action" and meets CAFA thresholds | Brown: class limited to county circuit clerks (<=75), so CAFA thresholds not met | Lenders: illegal-exaction claim is a class action on behalf of all Arkansas taxpayers; numerosity and amount-in-controversy satisfied | Affirmed: claim is a CAFA class action for all taxpayers; numerosity and $5M+ met |
| Supplemental jurisdiction over ADTPA and unjust-enrichment claims after federal claim dismissal | Brown: district court should have declined or remanded state claims | Lenders: claims arise from same controversy; district court may retain jurisdiction for economy and comity | Affirmed: district court properly exercised supplemental jurisdiction |
| Abstention (Burford/Levin comity) | Brown: federal court should abstain or defer to state forum/interpretation | Lenders: no complex regulatory scheme; not appropriate to abstain or apply Levin | Affirmed: Burford/Levin inapplicable; abstention not warranted |
| Merits — whether Arkansas law imposes duty to record assignments (affecting ADTPA/unjust-enrichment) | Brown: failure to record deprived counties of fees and is unjust/unconscionable | Lenders: Arkansas statutes/cases do not require recording of assignments; failure to record confers no unjust enrichment or deceptive practice | Affirmed: no duty to record; unjust-enrichment and ADTPA claims fail; dismissal proper |
Key Cases Cited
- Westerfeld v. Indep. Processing, LLC, 621 F.3d 819 (8th Cir. 2010) (de novo review of CAFA interpretation)
- Plubell v. Merck & Co., 434 F.3d 1070 (8th Cir. 2006) (CAFA removal standards)
- Schubert v. Auto Owners Ins. Co., 649 F.3d 817 (8th Cir. 2011) (jurisdictional measurement at time of removal)
- Hargis v. Access Capital Funding, LLC, 674 F.3d 783 (8th Cir. 2012) (CAFA removal where plaintiff later narrows class)
- Parker v. Perry, 131 S.W.3d 338 (Ark. 2003) (illegal-exaction suits are collective actions for all affected taxpayers)
- Worth v. City of Rogers, 89 S.W.3d 875 (Ark. 2002) (procedural guidance for Arkansas illegal-exaction actions)
- Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343 (1988) (factors for retaining or declining supplemental jurisdiction)
- Bryan v. Easton Tire Co., 561 S.W.2d 79 (Ark. 1978) (Arkansas statutes do not require assignments to be recorded)