Whitt v. Seterus Inc
3:17-cv-01753
D.S.C.Feb 28, 2018Background
- Whitt sued Seterus (loan servicer) and Fannie Mae in South Carolina state court alleging breach of contract, dual‑tracking, violation of S.C. Code § 29‑3‑630, civil conspiracy, and asserting class claims after a state foreclosure action was underway.
- Defendants removed the 2017 action to federal court based on diversity jurisdiction; Whitt moved to remand arguing res judicata barred removal.
- Defendants moved to dismiss for failure to state a claim and to strike class allegations, and argued Younger abstention because a state foreclosure proceeding remained pending.
- The court found subject‑matter jurisdiction under 28 U.S.C. § 1332 and rejected dismissal on Younger abstention grounds for a money‑damages action (citing Quackenbush).
- The court exercised its discretion to stay (not dismiss) the federal damages action pending resolution of the state foreclosure, denied Whitt’s remand motion, denied Defendants’ motion to dismiss without prejudice (leave to refile), and rendered the motion to strike moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction / Remand | Whitt: removal is barred by res judicata and prior federal rulings; case should be remanded | Defendants: removal proper under diversity; federal court has jurisdiction | Court: diversity jurisdiction exists; remand denied |
| Abstention (Younger) / dismissal | Whitt: prior dismissal and state proceedings argued to bar federal action | Defendants: Younger abstention requires dismissal because state foreclosure pending | Court: Abstention cannot be used to dismiss a damages action; dismissal denied but stay appropriate |
| Stay of federal proceedings | Whitt: (implicit) wants federal adjudication | Defendants: state foreclosure should proceed; federal action would interfere | Court: sua sponte stay entered to avoid duplicative litigation and preclusion issues |
| Motion to dismiss for failure to state a claim | Whitt: complaint states claims (including class and statutory claim) | Defendants: claims fail as matter of law; class allegations uncertifiable | Court: denied motion to dismiss without prejudice; leave to refile after state action; motion to strike class allegations moot |
Key Cases Cited
- Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (federal courts are courts of limited jurisdiction)
- Younger v. Harris, 401 U.S. 37 (abstention from state criminal proceedings)
- Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (district courts may stay, not dismiss, damages actions under abstention)
- Middlesex Cty. Ethics Comm. v. Garden State Bar Ass’n, 457 U.S. 423 (abstention applies to important state interests in noncriminal proceedings)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must be plausible)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard and plausibility test)
- Mulcahey v. Columbia Organic Chem. Co., 29 F.3d 148 (burden on removing party to establish federal jurisdiction)
- Strawn v. AT&T Mobility LLC, 530 F.3d 293 (removing party must allege and prove jurisdiction)
- Rooker v. Fidelity Trust Co., 263 U.S. 413 (federal court lacks authority to review state court judgments)
- District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (limits on federal review of state court adjudications)
- Shaffer v. Heitner, 433 U.S. 186 (state interest in adjudicating real property matters)
- Myles Lumber Co. v. CAN Fin. Corp., 233 F.3d 821 (federal courts’ duty to exercise jurisdiction)
- Richmond, Fredericksburg & Potomac R. Co. v. Forst, 4 F.3d 244 (abstention is the exception, not the rule)