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Newcomer v. Wells Fargo Bank, National Association

United States District Court, E.D. Virginia, Richmond Division

January 18, 2019

JUSTIN NEWCOMER, et al., Plaintiffs,
v.
WELLS FARGO BANK, NATIONAL ASSOCIATION, et al., Defendants.

          MEMORANDUM OPINION

          Robert E. Payne Senior United States District Judge.

         This matter is before the Court on the Newcomers' MOTION TO REMAND (ECF No. 10) . For the following reasons, the motion is GRANTED.

         BACKGROUND

         Plaintiffs Justin and Monica Newcomer filed this action in state court in relation to a loan they secured from Wells Fargo for a house. ECF No. 1, Exhibit No. 3 at 2. In their complaint, the Newcomers specify a certain federal regulation-38 C.F.R. 36.4346-that they allege Wells Fargo violated. Id. at 3. They claim that Wells Fargo committed: (1) actual fraud, arguing that a Wells Fargo representative intentionally lied to them by telling them to fall behind on their loans to lower their loan payments, which resulted in negative credit reports; (2) constructive fraud, because of the facts stated in Count One; (3) breach of Virginia regulations, because of the violation of 38 C.F.R. 36.4346; (4) foreclosure in breach of Virginia regulations, because of other Virginia regulations that resulted in negative reports to credit reporting agencies and other damages; (5) foreclosure in breach of the Virginia regulatory requirement of compliance with accepted lending practices, because Wells Fargo would not consider any alternatives to foreclosure; and (6) breach of fiduciary duty by PFC by being a fiduciary to both Wells Fargo and the Newcomers. See generally id. None of these claims say that Wells Fargo or any other defendant violated the Fair Credit Reporting Act ("FCRA"). Fair Credit Reporting Act, § 602 et seq., 15 U.S.C.A. § 1681 et seq. Instead, all are state claims.

         Wells Fargo filed a notice of removal on March 26. ECF No. 1.

         STANDARD GOVERNING REMOVAL

         The Court strictly construes removal jurisdiction. Mulcahey v. Columbia Organic Chemicals Co., 29 F.3d 148, 151 (4th Cir. 1994). If federal jurisdiction is doubtful, remand is required. Id. "The burden of establishing federal jurisdiction is placed upon the party seeking removal." Id.

         DISCUSSION

         In its notice of removal, Wells Fargo says that the FCRA "preempts state law claims relating to credit reporting." ECF No. 1 at 3, ¶14. Thus, in its view, the Court has subject matter jurisdiction, because "[t]he Newcomers' claims for damages based on credit reporting by Wells Fargo in Counts One, Two and Three are claims for alleged violations of the FCRA . . . and consequently 'arises [sic] under' the laws of the United States." Id. at 3, ¶¶15-16.

         To the contrary, the Court does not have subject matter jurisdiction to hear this case because the Newcomers' well-pleaded complaint does not plead a federal action here, and because Wells Fargo's basis for removal-claiming that the Newcomers' claims are preempted under federal law-does not establish subject matter jurisdiction in federal court. Consequently, this case will be remanded.

         I. A Federal Preemption Defense Under the FCRA Does Not Establish Federal Subject Matter Jurisdiction

         If a federal law preempts a state law, preemption is a federal defense to a suit. Metropolitan Life Ins. Co. v. Taylor, 481 U.S.58, 63 (1987) . Whether that is so is measured by looking at the face of the complaint. If the preemption defense does not appear on the face of the complaint, removal is not permitted even if the defendant offers a federal defense. Id. An exception to this general rule is the doctrine of complete preemption, meaning that "Congress [] so completely pre-empt[s] a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Id. at 63-64. This class of cases has been described as "extraordinary," and the Fourth Circuit has said that "the application of complete preemption 'converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.'" Owen v. Carpenters' Dist. Council, 161 F.3d 767, 772 (4th Cir. 1998) (quoting Taylor, 481 U.S. at 65).

         Otherwise, "a defendant may not remove a civil action on the basis of a defense of federal preemption, even if the defense is anticipated in the complaint, and even if pre-emption is the only issue in the case." Id. Whether the complete preemption exception is applicable focuses on congressional intent. Rosciszewski v. Arete Assocs., Inc., 1 F.3d 225, 231 (4th Cir. 1993).

         Several district courts in this circuit have examined whether the FCRA completely preempts all claims related to credit reporting. They have unanimously held that it does not. See Rule v. Ford Receivables, Inc., 36 F.Supp.2d 335 (S.D. W.V. 1999); Swecker v. Trans Union Corp., 31 F.Supp.2d 536 (E.D. Va. 1998); Sloan v. Green Tree Servicing LLC, No. 2:05-CV-00558, 2005 WL 2428161 (S.D. W.V. 2005). The Court finds that these opinions are well-reasoned. Basically, their reasoning is that: (1) the Supreme Court has said that complete preemption is an exception to the well-pleaded complaint rule, not the rule; and (2) complete preemption applies only when Congress clearly manifests an intent to replace all state causes of action and provide exclusive jurisdiction to the federal courts; and (3) the FCRA "explicitly declines to replace all state causes of action or to provide exclusive jurisdiction in the federal courts"; thus, (4) the FCRA does not completely preempt all state claims, even if the specific claims brought by ...


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