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Klahn v. Clackamas County Bank

United States District Court, Ninth Circuit

December 12, 2013

DANIEL P. KLAHN, SR., Plaintiff,
v.
CLACKAMAS COUNTY BANK, Defendant.

OPINION AND ORDER

JANICE M. STEWART, Magistrate Judge.

Plaintiff, Daniel P. Klahn, Sr. ("Klahn"), appearing pro se, filed this action against defendant Clackamas County Bank ("Bank") and two other defendants, arising out of conduct both leading to and resulting in foreclosure of his floating home. The original Complaint alleged a claim under the Fair Debt Collection Practices Act ("FDCPA") against the other defendants and various state law claims against the Bank. After this court dismissed the original Complaint for failure to state a claim, Klahn filed the First Amended Complaint (docket #63) which alleges a claim under the Due Process Clause of the Fourteenth Amendment and four state law claims against the Bank as the sole defendant.

The Bank has filed a Motion to Dismiss the First Amended Complaint (docket #65) under FRCP 12(b)(1) for lack of subject matter jurisdiction and under FRCP 12(b)(6) for failure to state a claim upon which relief can be granted.[1] For the reasons stated on the record at the hearing and summarized below, the motion for lack of subject matter jurisdiction is denied and all claims except part of Claim 4 are dismissed for failure to state a claim.

I. Motion to Dismiss for Lack of Jurisdiction

When a motion to dismiss for lack of jurisdiction is filed in conjunction with other motions to dismiss under FRCP 12, the court normally considers the issue of jurisdiction first. Doing so prevents a court without subject matter jurisdiction from prematurely dismissing a case with prejudice. Sinochem Int'l Co. Ltc. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 430-31 (2007); Potter v. Hugh, 546 F.3d 1051, 1056 n2 (9th Cir 2008).

A. Which Complaint Governs Jurisdiction

Initially, this court must determine which complaint governs the jurisdictional analysis. The original Complaint alleged a claim for violation of the FDCPA against the other two defendants as the basis for federal question jurisdiction under 28 USC § 1331 and also alleged diversity jurisdiction under 28 USC § 1332. This court dismissed the FDCPA claim with prejudice and the remaining state law claims without prejudice. Klahn then filed the First Amended Complaint which again invokes federal question jurisdiction by alleging a new federal claim against the Bank under the Fourteenth Amendment. For the following reasons, the court looks to the original Complaint for subject matter jurisdiction.

As a general rule, jurisdiction is governed by the original complaint. "Subject matter jurisdiction must exist as of the time the action is commenced." Morongo Band of Mission Indians v. Cal. State Bd. of Equalization, 858 F.2d 1376, 1380 n2 (9th Cir 1988) (citations omitted); see also Grup Data flux v. Atlas Global Grp., LP, 541 U.S. 567, 571 (2004) (diversity jurisdiction). If the allegations of jurisdiction are "defective, " then the court may grant leave to amend under 28 USC § 1953. However, that statute "provides a remedy for defective allegations only; it does not provide a remedy for defective jurisdiction itself.'" Morongo Band of Mission Indians, 858 F.2d at 1380 n2 (citations omitted). As to defects of substance, jurisdiction cannot be acquired by some later amendment. Id ("[A] district court is powerless to grant leave to amend when it lacks jurisdiction over the original complaint.").[2]

B. Supplemental Jurisdiction

With these principles in mind, the court turns to the original Complaint. Federal question jurisdiction existed when the action was commenced, but was lost when the sole federal claim was dismissed, leaving only state law claims.

When a court dismisses on the merits a federal claim that serves as the basis for subject matter jurisdiction, it may retain supplemental jurisdiction under 28 USC § 1367 to adjudicate any state law claims that are related to the federal claim. Consequently, jurisdiction may continue even if the plaintiff abandons the federal claim after it is dismissed with leave to amend. Prince v. Rescorp Realty, 940 F.2d 1104, 1105 n2 (9th Cir 1991). However, if the federal claim is not dismissed on the merits, but is dismissed for lack of subject matter jurisdiction, then the court has "no discretion to retain supplemental jurisdiction over [the] state law claims." Scott v. Pasadena Unified Sch. Dist., 306 F.3d 646, 664 (9th Cir 2002) (citations omitted).

This court dismissed the sole federal claim based on a violation of the FDCPA for failure to state a claim, not for lack of subject matter jurisdiction. As a result, this court, in its discretion, could exercise supplemental jurisdiction under 28 USC § 1367 over the remaining state law claims in the Complaint. When dismissing the original Complaint, this court did not make any determination regarding the exercise of supplemental jurisdiction.

This court is not required to retain supplemental jurisdiction over any related state law claims alleged by Klahn. To the contrary, "in the usual case in which federal-law claims are eliminated before trial, the balance of factors... will point toward declining to exercise jurisdiction over the remaining state law claims." Gini v. Las Vegas Metro. Police Dept., 40 F.3d 1041, 1046 (9th Cir 1994) (citation omitted). However, if a case has been pending in federal court for an extended time, the court is familiar with the issues, and a good deal of time has been invested in the matter, then considerations of judicial economy favor retaining jurisdiction. Munger v. City of Glasgow Police Dept., 227 F.3d 1082, 1088 n4 (9th Cir 2000).

Judicial economy is not an issue here because it is still early in the litigation; a dismissal will not require duplicative proceedings in state court or cause great delay. Other factors favoring retention of supplemental jurisdiction include the running of the statute of limitations on the state law claims or a clear resolution of the state law claims. RWJ Mgmt. Co. Inc. v. BP Products N. Am., Inc., 672 F.3d 476, 480 (7th Cir 2012). The record is silent as to those considerations. Therefore, this court has no reason to retain supplemental jurisdiction over the state law claims after dismissing the FDCPA claim in the original Complaint.[3]

Dismissal of state law claims for lack of supplemental jurisdiction is improper, however, where an independent basis for jurisdiction exists. The original Complaint did invoke another independent basis for jurisdiction, namely diversity jurisdiction under 28 USC § 1332. Because the federal claim provided a basis for federal question jurisdiction, this court did not previously address this alternative basis for subject matter jurisdiction.

C. Diversity Jurisdiction

The original Complaint alleged that complete diversity existed between the parties because Klahn is a citizen of California and the Bank and other defendants are citizens of Oregon. However, diversity jurisdiction also requires that the amount in controversy exceed $75, 000.00, exclusive of interest and costs. 28 USC § 1332(a)(1). In ruling on the prior motions to dismiss, this court noted that the original Complaint failed to allege that the amount in controversy exceeded $75, 000.00, but did no further analysis because Klahn also alleged a federal claim sufficient for federal question jurisdiction. Now it must decide whether Klahn alleged the necessary amount in controversy in the original Complaint.

The amount in controversy is determined when the action is commenced "from the face of the pleadings.'" Crum v. Circus Circus Enters., 231 F.3d 1129, 1131 (9th Cir 2000). "To justify dismissal, it must appear to a legal certainty that the claim is really for less than the jurisdictional amount." Id. Under the "legal certainty standard, " it must be obvious upon the face of the complaint that the suit cannot involve the necessary amount. Geographic Expeditions, Inc. v. Estate of Lhotka ex rel. Lhotka, 599 F.3d 1102, 1106 (9th Cir 2010). The Ninth Circuit permits a dismissal under this standard "when a rule of law or limitation of damages would make it virtually impossible for a plaintiff to meet the amount-in-controversy requirement." Pachinger v. MGM Grand Hotel-Las Vegas, Inc., 802 F.2d 362, 364 (9th Cir 1986). Dismissal also is permitted when the amount alleged is made in "bad faith, " i.e. solely to invoke diversity jurisdiction. Diefenthal v. C.A.B., 681 F.2d 1039, 1052 (5th Cir 1982); see Crum, 231 F.3d at 1131 ("The sum claimed by the plaintiff controls so long as the claim is made in good faith."). To defeat a ...


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