206 F.Supp.3d 131
D.D.C.2016Background
- Esther and Karim Steward own 715 S Street NW, D.C.; they refinanced in March 2006 with Fremont Investment & Loan and executed two deeds of trust (Deed I and Deed II).
- Fremont made loans of $624,000 and $156,000; MERS assigned Deed I to U.S. Bank in 2008; MERS assigned Deed II to Goldman Sachs in 2011, which appointed Litton as servicer.
- The Stewards sued Goldman Sachs and Litton in D.C. Superior Court (Civil Action No. 14-1868) alleging violations of the D.C. Mortgage Lender and Broker Act and the D.C. Loan Shark Act; defendants removed and moved to dismiss.
- U.S. Bank filed a separate foreclosure action against the Stewards in Superior Court (Civil Action No. 15-2041); the Stewards removed that action to federal court and sought consolidation; U.S. Bank moved to remand.
- The district court held Fremont qualified as a "bank" under D.C. Code § 26-1102(1) at the time of the loans (so the Mortgage Lender and Broker Act did not apply) and the Loan Shark Act exemption for loans over $25,000 applied to the $156,000 loan; thus the Stewards’ federal suit against Goldman Sachs and Litton was dismissed.
- The court also remanded U.S. Bank’s foreclosure action because removal was improper under 28 U.S.C. § 1441(b)(2) since defendant Karim Steward is a D.C. resident and the case was originally filed in the forum state; the consolidation motion was rendered moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether D.C. Mortgage Lender and Broker Act applies to Fremont’s loan | Stewards: Fremont was an unlicensed lender, so purchasers of its loans (Goldman/Litton) violated § 26-1114(a)(10) and Deed II is void | Goldman/Litton: Fremont was a "bank" exempt under § 26-1102(1), so the Act does not apply | Court: Fremont was a bank in Mar 2006; Act does not apply; claim dismissed |
| Whether D.C. Loan Shark Act applies | Stewards: Loan shark statute was violated by lending practices | Defs: Loan Shark Act exempts loans > $25,000; loan here was $156,000 | Court: Loan exceeds $25,000; Act does not apply; claim dismissed |
| Whether the Superior Court foreclosure action was properly removed to federal court | Stewards (as removers): removal based on diversity under § 1332(a) | U.S. Bank: removal barred because a defendant (Karim Steward) is a citizen of the forum state where action was filed, under § 1441(b)(2) | Court: Removal improper; remand to D.C. Superior Court granted |
| Whether consolidation of the two cases should proceed | Stewards: cases should be consolidated in federal court | Defs: consolidation moot if federal case dismissed or remand granted | Court: Dismissal and remand render consolidation moot |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (facial plausibility standard and pleading requirements)
- Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (strict construction of removal statute)
- Caterpillar, Inc. v. Lewis, 519 U.S. 61 (removal limits when defendant is citizen of forum state)
- Blue v. Fremont Inv. & Loan, 562 F. Supp. 2d 33 (D.D.C. 2008) (Fremont qualifies as a bank exempt from D.C. Mortgage Lender and Broker Act)
- Poblete v. Indymac Bank, 657 F. Supp. 2d 86 (D.D.C. 2009) (Loan Shark Act does not apply to loans over $25,000)
- Brooks v. District of Columbia, 819 F. Supp. 67 (D.D.C. 1993) (remand where defendants are residents of forum state)
- Strategic Lien Acquisitions LLC v. Republic of Zaire, 344 F. Supp. 2d 145 (D.D.C. 2004) (removal improper when defendant is citizen of the forum state)
- Boykin v. Gray, 895 F. Supp. 2d 199 (D.D.C. 2012) (complaint must be construed liberally for Rule 12(b)(6) analysis)