Henok Araya v. JPMorgan Chase Bank, N.A.
413 U.S. App. D.C. 368
| D.C. Cir. | 2014Background
- Henok Araya bought a rental property in D.C. financed by Chase; loan secured by deed of trust. Foreclosure sale occurred March 24, 2010; Freddie Mac ultimately purchased and sold the property to a third party.
- Araya sued in D.C. Superior Court (2012) against Chase and foreclosure counsel Shapiro & Burson alleging numerous state-law claims (illegal/ wrongful foreclosure, fraud, negligence, etc.) and a Fifth Amendment takings claim; he also (mistakenly) named Fannie Mae and later sought to add Freddie Mac.
- Defendants removed to federal court, asserting federal-question jurisdiction based on Araya’s constitutional claim and based on 12 U.S.C. § 1723a(a) because Fannie Mae was named. The District Court denied remand and later dismissed Fannie Mae as not actually involved.
- The District Court dismissed federal claims and then proceeded to resolve Araya’s multiple state-law claims on the merits and denied leave to amend to add Freddie Mac/RESPA claims.
- On appeal, the D.C. Circuit held the Fifth Amendment claim against private parties was insufficient for federal-question jurisdiction and found Fannie Mae’s naming was mistaken; after Fannie Mae’s dismissal, supplemental jurisdiction over the unsettled D.C. law claims should have been declined.
- The court affirmed denial to add federal claims, vacated the District Court’s rulings on the state-law claims against Chase and Shapiro & Burson, and remanded with instructions to remand those claims to D.C. Superior Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fifth Amendment takings claim against private defendants supplies federal-question jurisdiction | Araya asserted a Fifth Amendment takings claim against Chase and counsel | Defendants argued the Fifth Amendment applies only to government actors and thus cannot create federal jurisdiction | Held: Fifth Amendment claim against private parties is insubstantial for jurisdictional purposes and cannot support federal-question jurisdiction (claim foreclosed by precedent) |
| Whether naming Fannie Mae invoked federal jurisdiction via its "sue-and-be-sued" clause (12 U.S.C. §1723a(a)) | Araya named Fannie Mae as an interested party in the complaint | Defendants relied on Pirelli and argued a named federally chartered entity confers federal jurisdiction | Held: Initially justified denial of remand, but Fannie Mae was mistakenly named and had no connection to the dispute; its dismissal eliminated the federal-hook for jurisdiction |
| Whether district court should exercise supplemental jurisdiction over related state-law claims after dismissal of all federal claims | Araya implicitly preferred federal forum and later sought relief there | Defendants (implicitly) urged continuation in federal court after removal | Held: District Court abused discretion by deciding unsettled D.C. law claims after federal claims were gone; court should have declined supplemental jurisdiction and remanded to D.C. Superior Court |
| Whether to permit leave to amend to add Freddie Mac / RESPA claims | Araya sought leave to add Freddie Mac and a RESPA claim | Defendants opposed amendment as futile | Held: Denial of leave to add additional federal claims was affirmed by the appellate court |
Key Cases Cited
- Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Raines, 534 F.3d 779 (D.C. Cir.) ("sue-and-be-sued" provision can confer federal jurisdiction in Fannie Mae cases)
- Steel Co. v. Citizens for a Better Env't, 523 U.S. 83 (1998) (distinguishes jurisdictional defects from merits; insubstantial federal claims do not create jurisdiction)
- Bell v. Hood, 327 U.S. 678 (1946) (federal jurisdiction exists unless federal claim is wholly insubstantial or frivolous)
- American Nat’l Red Cross v. S.G., 505 U.S. 247 (1992) (treatment of "sue-and-be-sued" provisions and their jurisdictional consequences)
- Edmondson & Gallagher v. Alban Towers Tenants Ass'n, 48 F.3d 1260 (D.C. Cir.) (abuse of discretion to retain and decide local-law claims after dismissal of federal claims)
- Shekoyan v. Sibley Int'l, 409 F.3d 414 (D.C. Cir.) (presumption to remand state-law claims after federal claims dismissed)
- Dimond v. District of Columbia, 792 F.2d 179 (D.C. Cir.) (two-step inquiry: power to adjudicate pendent claims and then exercise discretion to do so)
- City of Chicago v. Int'l Coll. of Surgeons, 522 U.S. 156 (1997) (district court discretion to exercise supplemental jurisdiction; consider character of state claims)