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Kennedy v. Federal National Mortgage Association

United States District Court, E.D. North Carolina, Eastern Division

August 11, 2014



JAMES C. FOX, Sr., District Judge.

This matter is before the court on Defendants Federal National Mortgage Association and Brock & Scott Law Firm's motions to dismiss [DE-9, -13]. For the reasons that follow, this case is DISMISSED for lack of jurisdiction, and the pending motions to dismiss are denied as moot.


In December, 2011, Kathryn Kennedy entered into a residential lease for a home located in Greenville, N.C. The lease was renewed in November, 2012 for an additional year. The owner of the property stopped paying the mortgage payments on the home in the fall of 2012 and the lender placed the home in foreclosure. Kennedy contacted an attorney regarding her tenancy rights in light of the foreclosure. Her attorney surmised that she qualified as a bona fide tenant under the Protecting Tenants in Foreclosure Act of 2009 ("PTFA") and informed her that her tenancy rights would survive the foreclosure sale. Kennedy's counsel also attended the foreclosure sale and notified the representative of the highest bidder, Defendant Brock & Scott law firm, that Kennedy intended to enforce her rights under the PTFA and remain a tenant at the property. Although CitiMortgage was apparently the highest bidder at the foreclosure sale, it assigned all rights to the mortgage to Defendant Federal National Mortgage Association (commonly know as Fannie Mae), who is the current record owner of the home. CitiMortgage is not a party to this action.

Despite counsel's notice to Brock & Scott that the tenancy allegedly remained valid under the PTFA, Brock & Scott, acting as counsel to Fannie Mae, sent Kennedy a "notice to vacate" approximately two months after the foreclosure sale, in April, 2013. The notice provided that Kennedy must vacate the home within ten days. Kennedy, through counsel, sent a certified letter to Brock & Scott again informing it that Kennedy was asserting her rights under the PTFA and that the notice to vacate was therefore invalid. Although Brock & Scott failed to respond to this letter, it eventually responded to an email from counsel, requesting information about Kennedy's lease. Kennedy responded by providing a sworn affidavit that she entered into an oral lease prior to the foreclosure and providing an electric bill for the property in her name. Kennedy followed up multiple times over the course of several months, inquiring as to whether Fannie Mae and Brock & Scott intended to recognized her lease. Brock & Scott failed to respond to any of these inquiries. Instead, in August 2013, Brock & Scott obtained an ex parte writ of possession[1] from the sheriff and informed Kennedy (again) that she must vacate the premises.

In response to the writ of possession, Kennedy filed suit in Pitt County Superior Court, a North Carolina state court. Kennedy's complaint alleges claims for breach of lease, wrongful interference with contract, intentional infliction of emotional distress, and unfair and deceptive trade practices. The complaint also requests a temporary restraining order and a preliminary injunction prohibiting Fannie Mae from pursuing further ejectment procedures. The superior court granted Kennedy's motions for temporary restraining order and preliminary injunction and Kennedy remains in possession of the home awaiting the ultimate outcome of this litigation. After the superior court imposed the preliminary injunction, Fannie Mae[2] removed this action to this court and filed a motion to dismiss for failure to state a claim.


Section 1447(c) of Title 28, United States Code, provides that "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction [over a removed case], the case shall be remanded [to state court]." 28 U.S.C. § 1447(c). Subject matter jurisdiction may not be waived by the parties and the court has an independent obligation to dismiss the case if it determines subject matter jurisdiction is lacking. Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982); Constantine v. Rectors & Visitors of George Mason Univ., 411 F.3d 474, 480 (4th Cir. 2005).

Fannie Mae removed this action from state court under 28 U.S.C. § 1441, which allows for removal if the case originally could have been in federal court. § 1441(a). In light of federalism concerns, removal jurisdiction is not favored and the court therefore must "construe it strictly." In re Blackwater Sec. Consulting, LLC, 460 F.3d 576, 583 (4th Cir. 2006). Because Brock & Scott and Kennedy are both residents of the same state, removal in this case is predicated on federal question jurisdiction under 28 U.S.C. § 1331.

A. Federal Question Jurisdiction

Section 1331 provides that "[t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." Id. The statute is commonly referred to as "federal question jurisdiction." Typically, a case arises under federal law when federal law provides the cause of action, as in a Title VII or § 1983 case. Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 312 (2005). However, in a "slim category" of cases, state law causes of action may arise under federal law where the state law claims raise a substantial issue of federal law. Gunn v. Minton, 133 S.Ct. 1059, 1065 (2013); Grable, 545 U.S. at 312. The Supreme Court recently attempted to bring some clarity to this nebulous doctrine, holding that federal question jurisdiction over a state law claim is proper only if the state claim "necessarily raise[s] a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Grable, 545 U.S. at 314. The Supreme Court recently summarized the test as follows: the federal issue must be "(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress." Gunn, 133 S.Ct. at 1065.

B. Well-Pleaded Complaint Rule

The well-pleaded complaint rule also governs whether a case presents an issue that "aris[es] under the Constitution, laws, or treaties of the United States" for purposes of § 1331. Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). The rule states that "only when a federal question is presented on the face of the plaintiff's properly pleaded complaint" does a case "arise under" the Constitution and laws of the United States. Id .; Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 830-32 (2002); King v. Marriott Int'l Inc., 337 F.3d 421, 424 (4th Cir. 2003). Importantly-and contrary to Fannie Mae's arguments-under the well-pleaded complaint rule, the court may not consider matters outside the plaintiff's complaint for purposes of determining whether federal question jurisdiction exists. Holmes Grp., 535 U.S. at 831 (court may not consider anticipated federal defenses or counterclaims for purposes of deciding whether federal question jurisdiction is present because those ...

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