United States District Court, D. Arizona
G. Campbell United States District Judge.
Edward Gallagher moves to remand this case to state court.
Doc. 19. Defendant Wells Fargo Bank opposes remand and moves
to dismiss Plaintiff's second amended complaint pursuant
to Rule 12(b)(6). Doc. 23. The motions are fully briefed and
no party has requested oral argument. For reasons stated
below, the Court will deny the motion to remand and grant the
motion to dismiss in part.
filed suit in Arizona state court against his mortgage
lender, Wells Fargo, alleging that it wrongfully handled two
property insurance claims and instituted foreclosure
proceedings. Doc. 1-1 ¶¶ 15-40. The original
complaint alleges six causes of action: conversion, breach of
contract, breach of fiduciary duty, breach of the implied
covenant of good faith and fair dealing, negligent
misrepresentation, and intentional misrepresentation. Doc.
1-1. The complaint also seeks an injunction preventing Wells
Fargo from holding the scheduled trustee sale. Id.
Since removal, the parties have stipulated to withdrawal of
the injunctive relief claims and Gallagher has filed first
and second amended complaints. See Docs. 11, 13, 18.
Motion to Remand.
civil action over which the federal district courts have
original jurisdiction may be removed from state court to the
federal court for the district where the action is pending.
28 U.S.C. § 1441(a). Courts strictly construe the
statute against removal jurisdiction. Gaus v. Miles,
Inc., 980 F.2d 564, 566 (9th Cir. 1992). Indeed, there
is a “strong presumption” against removal, and
“[f]ederal jurisdiction must be rejected if there is
any doubt as to the right of removal in the first
instance.” Id. This strong presumption
“means that the defendant always has the burden of
establishing that removal is proper.” Id.
“If at any time before final judgment it appears that
the district court lacks subject matter jurisdiction, the
case shall be remanded.” 28 U.S.C. § 1447(c).
Court has jurisdiction over cases in which the parties are
diverse and the amount in controversy exceeds $75, 000. 28
U.S.C. § 1332. Gallagher argues that the amount in
controversy requirement is not satisfied in this case. Doc.
19 at 2.
original complaint does not allege an amount in controversy.
Rather, it requests “compensatory damages in an amount
to be proven at trial, ” punitive damages
“sufficient to deter Wells Fargo from engaging in such
conduct in the future, ” an injunction preventing the
trustee sale, attorney's fees, and “other relief
that the Court deems just and proper.” Doc. 1-1 at
12-13. Gallagher certified in the state court action that he
was seeking more than $50, 000, the compulsory arbitration
threshold. Doc. 1-3 at 2.
Fargo “bears the burden of establishing, by a
preponderance of the evidence, that the amount in controversy
exceeds [$75, 000].” Sanchez v. Monumental Life
Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996). Wells
Fargo's notice of removal asserts that “Plaintiff
seeks an order permanently enjoining the trustee's sale
of real property believed to be valued in excess of $250, 000
and which secures a loan with a remaining unpaid balance in
excess of $132, 000, ” and that “Plaintiff
further seeks unspecified compensatory damages, punitive
damages, and attorney's fees.” Doc. 1 ¶ 8.
Fargo contends that because the original complaint seeks a
permanent injunction preventing sale of the property, the
loan balance or property value - which both exceed $75, 000 -
are appropriate measures of damages. Doc. 24 at 9-11.
Gallagher does not dispute that the property value and loan
amount exceed $75, 000, but argues that these are not
relevant measures of damages because the complaint seeks only
a temporary injunction to allow litigation of his
compensatory claims and does not seek rescission of the loan.
Doc. 19 at 4-7.
actions seeking declaratory or injunctive relief, it is well
established that the amount in controversy is measured by the
value of the object of the litigation.” Cohn v.
Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002)
(citing Hunt v. Wash. State Apple Adver. Comm'n,
432 U.S. 333, 347 (1977)). Gallagher concedes that generally
the object of a lawsuit brought to enjoin a bank from selling
property is that property. Doc. 19 at 3 (citing Lee v.
Wells Fargo Bank, N.A., 2015 WL 5618869, at *5 (C.D.
Cal. Sep. 24, 2015); Garfinkle v. Wells Fargo Bank,
483 F.2d 1074, 1076 (9th Cir. 1973)). But he argues that this
case is an exception because it was not brought for the
primary purpose of enjoining foreclosure. Doc. 19 at 4-7.
Rather, Gallagher claims, the focus of the case is monetary
damages for wrongful conduct. Id. The Court
brought this case just four days before the scheduled trustee
sale of his property. The complaint asserts within the first
two pages that Gallagher's “property is the subject
matter of this claim.” Doc. 1-1 ¶ 8. It alleges
that as “a direct and proximate result of Wells
Fargo's” conduct, Gallagher “has suffered or
will suffer from the loss of [$20, 842] and his home.”
Id. ¶ 57. It alleges that Wells Fargo
intentionally withheld insurance proceeds so that Gallagher
would be unable to repay the loan and Wells Fargo could sell
the property. Id. ¶ 64. And it requests
“temporary, preliminary and permanent injunctive
relief.” Id. ¶¶ 47, 50. Gallagher
brought suit primarily to prevent foreclosure, which fairly
puts at least the remaining loan balance, if not the value of
the property, in issue. Wells Fargo has met its burden of
showing that the amount in controversy exceeds $75, 000.
Motion to Dismiss.
moves to dismiss the second amended complaint
(“SAC”) pursuant to Rule 12(b)(6). Doc. 23. For
purposes of ruling on the motion, the SAC's factual
allegations must be accepted as true. See Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009).
real property is located in Glendale, Arizona, and is subject
to a deed of trust securing repayment of a loan from Wells
Fargo. Doc. 18 ¶ 5. Gallagher and his wife originally
purchased the property in 1978, but Gallagher refinanced the
property in 2008. Id. ¶¶ 9-11. Gallagher
has AAA hazard insurance coverage on the property.
Id. ¶ 12. With respect to this coverage, the
deed of trust between Gallagher and Wells Fargo states:
All or part of the Insurance proceeds may be applied by
Lender, at its option, either, (a) to the reduction of the
indebtedness under the Note and this Security Instrument,
first to any delinquent amounts applied in the order in
paragraph 3, and then to prepayment of principal, or (b) to
the restoration or repair of the damaged Property.
Id. ¶ 45. The SAC alleges that Gallagher was
harmed by Wells Fargo's conduct regarding three separate
transactions: a 2010 property insurance claim, a 2015
property insurance claim, and a failed loan modification. The
Court will summarize the relevant facts of each transaction.
2010, Gallagher's property was damaged by a hail storm
and AAA approved a claim for $69, 229.54. Id.
¶¶ 14-15. Gallagher hired a contractor to perform
the repairs. Id. ¶ 16. The contractor moved out
of state, leaving $16, 000 to $19, 000 of work unfinished.
Id. ¶¶ 19-20. Gallagher requested that
Wells Fargo disburse $51, 127.22 for the work that was
completed. Id. ¶ 18. Wells Fargo paid this
amount to the contractor, and then paid the contractor an
additional $16, 288.97 in June 2013 without completing an
inspection of the property or obtaining Gallagher's
approval. Id. ¶¶ 21-28. Gallagher was out
of town and ill for “many months” during this
time and therefore was not available to verify the repairs.
Id. ¶ 23. Months after the checks were sent to
the contractor, Gallagher contacted Wells Fargo to inquire
about the claim. Id. ¶ 26. Wells Fargo
indicated that the “final check” was applied to
Gallagher's account, referring to the remaining $1, 950.
Id. ¶¶ 27-28. Wells Fargo did not mention
the $16, 288.97 check sent to the contractor - of which
Gallagher was unaware. Id. ¶ 29.
February 2016, Gallagher was conditionally approved for a
loan modification that would have reduced his monthly
payments by $291.11. Id. ¶¶ 30-31.
Believing, however, that Wells Fargo owed him thousands of
dollars from the 2010 claim, Gallagher refused to sign the
modification agreement unless Wells Fargo turned over certain
documents relating to the 2010 claim. Id.
¶¶ 32, 35. Wells Fargo turned over ...