Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-2_09-cv-00729/USCOURTS-almd-2_09-cv-00729-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:2201 Declaratory Judgement

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IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF ALABAMA

NORTHERN DIVISION

THE STATE OF ALABAMA and )

THE ALABAMA SECURITIES )

COMMISSION )

)

Plaintiff, )

v. ) CASE NO. 2:09-cv-729-MEF

)

ALLEGRO LAW, LLC, et al., ) (WO ̄Do Not Publish)

)

Defendants. )

MEMORANDUM OPINION AND ORDER

I. INTRODUCTION

This cause is before the Court on a Motion to Remand, filed by the plaintiffs, the State

of Alabama and the Alabama Securities Commission (collectively “Alabama”), on August

10, 2009. (Doc. # 2.) The defendants, Allegro Law, LLC, Allegro Financial Services, LLC,

and Keith Anderson Nelms (collectively “Allegro”), removed this action from the Circuit

Court in Autauga County, Alabama, pursuant to 28 U.S.C. §§ 1441 and 1446 on July 31,

2009. In its Notice of Removal, Allegro argued that this Court has subject-matter jurisdiction over this case under 28 U.S.C. § 1331 because Alabama’s Complaint raises “issues

that substantially [a]ffect the Commerce Clause, and the Due Process Clause of the Fourteenth Amendment of the United States Constitution.” (Doc. # 1 at 5.) Alabama disagrees

and moves to remand the action back to state court. For the following reasons, this Court

will grant the motion.

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II. BACKGROUND

Alabama brings this enforcement action against Allegro for the unlawful and

fraudulent provision of “debt payment services” without a license. According to Alabama’s

Complaint, Allegro advertised itself to the public as a debt-payment business and attempted

to convince potential clients that, because it was managed by and employed licensed

attorneys, it operated under higher standards, possessed greater knowledge, capability, and

skill, and achieved greater success at handling debt settlement than nonattorney service

providers. Allegro promoted a particularly risky form of debt-settlement service in which

consumers are counseled to stop paying monthly minimum amounts to their creditors in

the hope that those creditors would either write off the debt in full or at least agree to a

substantial reduction in the amount of the monthly minimum payment on the debt. The

consequence of this scheme is more fees for the debt-payment service provider, less money

to the creditor for the satisfaction of the debt, and a lower credit rating for the consumer.

Neither Allegro nor any of Allegro’s employees were properly licensed by the Alabama

Securities Commission to provide debt-payment services in Alabama.

Alabama filed this suit for violations of two state statutes. The Alabama Securities

Commission, which is a state agency with jurisdiction over all debt-payment businesses that

accept money for the purpose of paying another person’s debts, brings an action for Allegro’s

breach of its statutory duty under the Alabama Sale of Checks Act to obtain a license before

engaging in debt-payment services. In addition, the State of Alabama, through its Attorney

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General, brings an action under the Alabama Deceptive Trade Practices Act for the false,

misleading, and deceptive nature of Allegro’s business plan, collection operations, and advertisements. Alabama seeks a declaratory judgment, injunctive relief, civil penalties, and

disgorgement for unjust enrichment.

Allegro removed this case on the ground that this Court has original federal-question

jurisdiction over it because, according to Allegro in its Notice of Removal, “Plaintiffs allege

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that they have the absolute right to interfere with contracts held between the Defendant

Allegro Law, LLC and some 15,000 citizens residing outside the state of Alabama.” (Doc.

# 1 at 5.) In other words, Allegro argues that Alabama’s enforcement of the Alabama Sale

of Checks Act in this case will substantially burden Allegro’s interstate debt-settlement

contracts with its out-of-state clients, in violation of the constitutional doctrine known as the

“Dormant” Commerce Clause. Therefore, because a federal constitutional issue is present

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in this case, Allegro argues that this Court has subject-matter jurisdiction.

Alabama disagrees and moves to remand this case back to state court. It argues that

The Court notes that Allegro’s argument comes solely fromthe Notice of Removal because Allegro

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has failed to respond to this Court’s Order of August 11, 2009, requiring Allegro to show cause why

Alabama’s Motion to Remand should not be granted. (Doc. # 7.) Nonetheless, because the question before

the Court is one of jurisdiction, the Court will decide whether it has the authority to hear the case without

regard to Allegro’s failure to respond.

Allegro also asserts that this enforcement action violates the Due Process Clause of the Fourteenth

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Amendment to the U.S. Constitution. Allegro does not explain the basis for this contention. The Court can

only assume that Allegro included the Fourteenth Amendment contention because it is arguing that a state

allegedly infringed Allegro’s interstate debt-settlement contracts, even though the Dormant Commerce

Clause itself targets unconstitutionally burdensome state action and does not require the assistance of the

Fourteenth Amendment to do so. 

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remand is appropriate because the only federal issue alive in this action is Allegro’s alleged

federal constitutional defense under the Dormant Commerce Clause, which, standing alone,

is insufficient to support removal under § 1441.

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III. DISCUSSION

Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co.

of Am., 511 U.S. 375, 377 (1994); see also Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095

(11th Cir. 1994). As such, federal courts have the power to hear only those cases that they

have been authorized to hear by the Constitution or federal statute. Kokkonen, 311 U.S. at

377. When a case is filed in state court, a party may remove it if the case originally could

have been brought in federal court. See 28 U.S.C. § 1441(a). The nonmoving party may

move for remand, which must be granted if “it appears that the district court lacks subject

matter jurisdiction . . . .” See id. § 1447(c). Because removal raises significant federalism

concerns, “removal statutes are construed narrowly; where plaintiff and defendant clash

about jurisdiction, uncertainties are resolved in favor of remand.” Burns, 31 F.3d at 1095.

When a case is removed from state court, the burden is on the party who removed the action

to establish subject-matter jurisdiction. Id.

A civil action filed in state court may be removed to federal court under § 1441(b) if

Alabama also argues that remand is appropriate because (1) Allegro filed its Notice of Removal 3

too late, and (2) removal is barred by Alabama’s immunity under the Eleventh Amendment. The Court need

not address these other arguments because the Court’s holding in this Order ̄that it does not have subjectmatter jurisdiction over the substance of the claims and defenses as set out in the pleadings ̄is sufficient

to support remand.

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the claim is one “arising under” federal law. Beneficial Nat’l Bank v. Anderson, 539 U.S.

1, 6 (2003). To determine whether a claim arises under federal law, a court must examine

the “well pleaded” allegations of the complaint. Id. In this case, Alabama has not made any

allegations under federal law in its complaint, nor has Allegro asserted that Alabama has

made any such allegations.

Rather, Allegro has asserted a defense that arises under federal constitutional law.

But this assertion is not sufficient for subject-matter jurisdiction. It is well settled that a case

initiated in state court is not removable if subject-matter jurisdiction is based solely on a

federal issue raised by way of defense, even if the defense that is raised is that the plaintiff’s

state-law claim is preempted by federal law. Ark. v. Kan. & Tex. Coal Co., 183 U.S. 185,

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188 (1901) (“[J]urisdiction is not conferred by allegations that defendant intends to assert

a defense based on the Constitution or a law or treaty of the United States . . . .”). The

Supreme Court has held:

[I]t has been settled law that a case may not be removed to federal court on the

basis of a federal defense, including the defense of preemption, even if the

defense is anticipated in the plaintiff’s complaint, and even if both parties

admit that the defense is the only question truly at issue in the case.

Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 14 (1983); see also

Geddes v. Am. Airlines, Inc., 321 F.3d 1349, 1352S53 (11th Cir. 2003) (same). Because

The only exception to this rule is where the plaintiff’s claim falls within the limited category of

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claims that have been judicially declared to be “completely” preempted by federal law. See BLAB T.V. of

Mobile, Inc. v. Comcast Cable Commc’ns, Inc., 182 F.3d 851, 854 (11th Cir. 1999). Allegro does not make

a complete-preemption argument, and even if it did, a federal defense founded on the Dormant Commerce

Clause does not trigger complete preemption.

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Allegro’s defense under the Dormant Commerce Clause is the only federal question upon

which Allegro bases subject-matter jurisdiction over this action, removal is not appropriate

under § 1441.

IV. CONCLUSION

Accordingly, it is hereby ORDERED as follows:

1. Plaintiffs The State of Alabama and The Alabama Securities Commission’s

Motion to Remand, filed on August 10, 2009 (Doc. # 2), is GRANTED, and this case is

REMANDED to the Circuit Court of Autauga County, Alabama.

2. The Clerk of the Court is DIRECTED to take the appropriate steps to affect

the remand.

DONE this the 24th day of November, 2009.

/s/ Mark E. Fuller

CHIEF UNITED STATES DISTRICT JUDGE

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