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Alphonse v. Arch Bay Holdings, LLC

United States District Court, E.D. Louisiana

November 24, 2014

GLENN E. ALPHONSE, JR
v.
ARCH BAY HOLDINGS, LLC, ET AL., Section

ORDER AND REASONS

HELEN G. BERRIGAN, District Judge.

This matter comes before the Court on the issue of subject matter jurisdiction and whether the remaining state law claims should be dismissed under 28 U.S.C. § 1367(c). Having considered the record, the memoranda of counsel and the law, the Court dismisses the remaining claims against Arch Bay Holdings, L.L.C. ("Arch Bay") and Specialized Loans Servicing, L.L.C. ("SLS") for lack of subject matter jurisdiction under Section 1367(c).

The salient facts are set forth in the Fifth Circuit opinion in this matter, 548 Fed.Appx. 979 (5th Cir. 2013). On the defendants' second motion to dismiss, this Court dismissed all claims under the Federal Debt Collection Practices Act ("FDCPA") and Louisiana Unfair Trade Practices Act ("LUTPA") and the plaintiff appealed in February 2013. 2013 WL 55911 (E.D.La). Among the holdings appealed was that the plaintiff sued the wrong party because Arch Bay-Series 2010B ("Series 2010B"), Arch Bay's subsidiary, initiated the foreclosure proceedings and held the note. 2013 WL 55911 at **4-5. This Court also dismissed all FDCPA claims against both defendants Arch Bay and SLS, leaving no federal claims pending. Id. at *6. On appeal, the Fifth Circuit acknowledged that the plaintiff did not "press" the dismissal of his FDCPA claims on appeal and considered only the dismissal of LUTPA claims against Arch Bay and SLS.[1] 548 Fed.Appx. at 981.

The Fifth Circuit reversed and remanded for further factual development distinct issues relating to res judicata, specifically, whether there exists sufficient identity of the parties' between Arch Bay (the parent company) and Series 2010 B (the judgment creditor) as well as between SLS (the mortgage servicer) and Series 2010B, "[2] and whether "Series 2010B is in fact a distinct juridical entity." 548 Fed.Appx. at 982-84. The Fifth Circuit also held "dismissal under Federal Rule of Civil Procedure 12 without leave to amend was error" because the Court failed to consider "whether liability as between a third-party plaintiff with respect to a holding company LLC or its Series LLC constitutes internal or external affairs." 548 Fed.Appx. at 986. The remand order included the specific instruction for this Court to "consider the external-internal affairs conflict-oflaw question under Louisiana law." 548 Fed.Appx. at 986.

In conjunction with a pre-appeal motion to dismiss in July 2012, this Court advised that it "will need to revisit the issue of subject matter jurisdiction in the event that plaintiff's claims under the FDCPA are dismissed, " and that "[i]f that need arises, this Court will need the citizenship of the defendants specified in accordance with the rule set forth in Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1080 (5th Cir. 2008)." 2012 WL 3096033 (E.D.La). It ordered that "[f]acts relevant to citizenship should be specifically pled in any amendment."

The plaintiff's amended and supplemental complaint did not provide what Harvey requires. Rec. Doc. 33. The Court again ordered compliance in order to determine whether diversity of citizenship exists and SLS was determined to be diverse. Rec. Docs. 104, 111. In his first response, the plaintiff complained that the defendants objected to his 2014 discovery requests regarding their citizenship and offered that "it is unlikely" that any defendant is a Louisiana citizen.[3] Rec. Doc. 119 at 5. The defendants offered to stipulate to diversity rather than divulge the citizenship of Arch Bay. Rec. Docs. 118, 124 at 2. The Court issued additional orders for compliance, continued the pre-trial conference and the trial, and issued a stay until the issue of diversity was resolved. Rec. Docs. 129, 133, 138. Shortly thereafter, information was discovered that Arch Bay is not diverse. Rec. Docs. 135-37, 159, 164. It took the parties over two years and several orders to provide this basic information.

The issue now presented is whether this Court should maintain supplemental jurisdiction under 28 U.S.C. § 1367(c), which provides as follows:

The district courts may decline to exercise supplemental jurisdiction over a [state law] claim if -
(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction;
(3) the district court has dismissed all claims over which it has original jurisdiction, or
(4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.

In addition to these statutory provisions, the balance of the relevant factors of judicial economy, convenience, fairness and comity identified by the Supreme Court in Carnegie-Mellon University v. Cohill, 484 U.S. 343, 350-53 (1988) and United Mine Workers v. Gibbs, 383 U.S. 715 (1966), should be considered when determining the propriety of dismissal. Batiste v Island Records, Inc., 179 F.3d 217, 227 (5th Cir. 1999). No single factor is determinative but, generally, district courts decline jurisdiction over pendent state law claims if all federal claims are eliminated prior to trial. Id.

Here, all the statutory factors weigh in favor of the dismissal of the remaining state law claims. The plaintiff repeatedly states that the viability of the claims he is attempting to make is a "matter of first impression" under Louisiana law. Rec. Doc. 125 at 4, 6. Moreover, he is essentially challenging the effect of a completed foreclosure proceeding in state court, while maintaining that the foreclosure was based on an incomplete instrument and faulty corporate entities according to Louisiana law. Rec. Doc. 122 at 15. "The significant inquiry this Court must answer therefore, is whether and to what degree Alphonse's claims herein could have been settled, litigated or adjudicated in the underlying foreclosure procedure." Rec. Doc. 122 at 13-14. The plaintiff's claims present extremely novel, complex and fluid issues of Louisiana law. As previously ...


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