Cline v. Quicken Loans, Inc.
5:11-cv-00063
N.D.W. Va.Jul 5, 2011Background
- Plaintiffs Cline sued in Marshall County Circuit Court asserting state-law claims including unconscionability, fiduciary duty breach, fraud, negligent misrepresentation, illegal overvalued loans, professional negligence, damages, joint venture, and punitive damages against Quicken Loans, Title Source, Appraisals Unlimited, Guida, and a note holder.
- Defendants removed the action to this Court citing related bankruptcy proceedings involving Guida and asking for abstention/remand and dismissal briefing.
- Plaintiffs moved for mandatory abstention/remand and to stay briefing of the motions to dismiss.
- The Court held mandatory abstention applies and remands the case to state court, denying the stay briefing as moot.
- Factual basis: plaintiffs refinanced a mortgage with a $99,300 note; allegedly inflated appraisal of $112,000 empowered misrepresentation of market value; the property was worth about $80,000.
- The action is non-core and related to Guida’s bankruptcy; jurisdiction under 28 U.S.C. §1334 and §1452; equitable remand and comity considerations weigh toward remand to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether mandatory abstention applies under §1334(c)(2). | Cline argues five-factor mandatory abstention applies. | Quicken/Title Source argue abstention not required and federal jurisdiction should remain. | Yes; mandatory abstention applies and case must be remanded. |
| Whether the action is core or non-core under §157. | State-law claims are non-core | Defendants contend the action relates to the bankruptcy and may affect the estate. | Non-core; related to bankruptcy, not core. |
| Whether discretionary abstention or equitable remand is appropriate. | State court preferred for state-law issues and comity. | Perhaps retain in federal court if efficient; otherwise remand. | Discretionary abstention and equitable remand also support remand. |
| Whether the case could have been commenced in federal court absent §1334. | No federal-question claims; diversity lacking; 1334 jurisdiction required. | If related, federal jurisdiction could apply. | Could not have been commenced in federal court absent §1334. |
| Impact on bankruptcy estate administration. | Remand would not unduly impact the estate. | Retention could aid estate administration. | Remand appropriate; limited impact on estate administration. |
Key Cases Cited
- Wheeling- Pittsburgh Corp. v. American Insurance Co., 267 B.R. 535 (N.D. W. Va. 2001) (five-factor approach for mandatory abstention)
- Howe v. Vaughan, 913 F.2d 1138 (5th Cir. 1990) (context for abstention and relatedness)
- In re Midgard Corp. v. Kennedy, 204 B.R. 764 (BAP 10th Cir. 1997) (five-factor test for mandatory abstention)
- Frelin v. Oakwood Homes Corp., 292 B.R. 369 (Bankr. E.D. Ark. 2003) (related-to jurisdiction under 1334)
- Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984) (definition of 'related to' bankruptcy jurisdiction)
- Robbins Co. v. Piccinin, 788 F.2d 994 (4th Cir. 1986) (related proceedings can be non-core; impact on estate)
- Celotex Corp. v. Edwards, 514 U.S. 300 (1995) (Supreme Court on bankruptcy jurisdiction; scope of 1334)
- Northern Pipeline Construction Co. v. Marathon Pipeline Co., 458 U.S. 50 (1982) (core vs non-core framework post-1984 Act)