United States Court of Appeals 

For the Seventh Circuit 

Chicago, Illinois 60604 

Submitted February 26, 2019*

Decided February 26, 2019 

Before 

MICHAEL B. BRENNAN, Circuit Judge 

MICHAEL Y. SCUDDER, Circuit Judge 

AMY J. ST. EVE, Circuit Judge

No. 18-3025 

STEVEN R. SCHMIDT, 

Plaintiff-Appellant, 

v. 

WATERSTONE BANK SSB, 

 Defendant-Appellee.

 Appeal from the United States District 

Court for the Eastern District of Wisconsin. 

No. 18-CV-863-JPS 

J.P. Stadtmueller, 

Judge. 

O R D E R 

Steven Schmidt filed this action alleging that WaterStone Bank discriminated 

against him in the terms and conditions of his mortgage because of his disability. The 

Bank moved to dismiss the complaint for lack of subject-matter jurisdiction and for 

failure to state a claim for relief. The district court concluded that it lacked 

subject-matter jurisdiction over Schmidt’s suit because, as it understood his complaint, 

 

*

 We have agreed to decide this case without oral argument because the briefs 

and record adequately present the facts and legal arguments, and oral argument would 

not significantly aid the court. FED. R. APP. P. 34(a)(2)(C). 

NONPRECEDENTIAL DISPOSITION 

To be cited only in accordance with Fed. R. App. P. 32.1 
No. 18-3025 Page 2 

Schmidt and the Bank both are citizens of Wisconsin and because Schmidt had not 

identified a federal law at issue. Schmidt appeals. 

Our account of the facts comes from Schmidt’s complaint. See Baylay v. Etihad 

Airways P.J.S.C., 881 F.3d 1032, 1035 (7th Cir. 2018). Schmidt lives in Wisconsin, and 

WaterStone Bank is a Wisconsin state savings bank, a type of Wisconsin corporation. 

The Bank holds a mortgage on Schmidt’s property. Schmidt made two payments of 

$9,800 in in 2016, but the Bank credited him for just one. In 2018, the Bank refused to 

work with Schmidt to modify his loan, although he had never missed a payment. 

Schmidt added that the Bank misled him about the terms of his mortgage, which he 

recently was told “is not considered an FDIC, FHA, Fanny Mae, Freddie Mac or a 

Conventional mortgage loan,” despite the Bank’s representations to him that it is. 

Schmidt lives with a disabling blood disorder, and the Bank is aware of his disability 

from the income paperwork that Schmidt filed to receive the mortgage. Schmidt asserts 

that the Bank’s actions are part of an “ongoing fraud scheme to foreclose on [his] 

house” and he says he is “being treated differently due to [his] disability.” 

The Bank moved to dismiss the complaint for lack of subject-matter jurisdiction 

and for failure to state a claim. It asserted that Schmidt and the Bank were citizens of 

Wisconsin, so Schmidt could not invoke federal jurisdiction based on diversity of 

citizenship. See 28 U.S.C. § 1332. And the court did not have federal question 

jurisdiction, the Bank insisted, because Schmidt had not identified any federal law or 

constitutional provision that the Bank had violated, and the Bank could hypothesize 

none. See 28 U.S.C. § 1331. Alternatively, the Bank asked that the court order Schmidt to 

provide a more definite statement. FED. R. CIV. P. 12(e). Schmidt responded, asserting 

that the court “has [f]ederal [j]urisdiction by FDIC, FHA, Fanny Mae, Freddie [M]ac ..., 

this case also involves handicapped disabled person discrimination.” But the district 

court agreed with the Bank that it lacked jurisdiction because Schmidt did not “identify 

a federal law which would protect him from [the Bank’s alleged] discrimination in the 

context of a mortgage,” and so it dismissed the complaint without prejudice. 

We review de novo a dismissal for lack of subject-matter jurisdiction. See Baylay, 

881 F.3d at 1040. District courts have jurisdiction over civil actions “arising under” the 

Constitution or the laws of the United States. 28 U.S.C. § 1331. A case “arises under” 

federal law if the plaintiff’s “well-pleaded complaint establishes either that federal law 

creates the cause of action or that the plaintiff’s right to relief necessarily depends on 

resolution of a substantial question of federal law.” Empire Healthchoice Assurance, Inc. 

v. McVeigh, 547 U.S. 677, 689–90 (2006); see also Louisville & Nashville R.R. v. Mottley, 
No. 18-3025 Page 3 

211 U.S. 149, 152 (1908). The party invoking federal jurisdiction has the burden of 

establishing its existence. See Smart v. Local 702 Int’l Bhd. of Elec. Workers, 562 F.3d 798, 

802–03 (7th Cir. 2009). 

Here, we conclude that Schmidt invoked federal-question jurisdiction. Contrary 

to the Bank’s and the district court’s suggestions, Schmidt was not required to plead a 

legal theory in his complaint. See Reeves ex rel. Reeves v. Jewel Food Stores, Inc., 759 F.3d 

698, 701 (7th Cir. 2014). Once the Bank moved to dismiss the complaint, however, 

Schmidt had an obligation to direct the judge to the legal basis for his claims. Accord 

Cmty. Bank of Trenton v. Schnuck Markets, Inc., 887 F.3d 803, 825–26 (7th Cir. 2018). 

Schmidt fulfilled that obligation by pointing to the Fair Housing Act—which he also 

mentioned in his complaint—as the basis for federal jurisdiction. 

Schmidt alleged that the Bank was aware of his disability and that it prevented 

him from altering the terms of his mortgage because of his disability. The Fair Housing 

Act squarely prohibits that alleged conduct, see 42 U.S.C. § 3605, and allows aggrieved 

individuals to sue to enforce their rights, see id. § 3613(a). Because Schmidt “properly 

pleaded a colorable claim arising under a law of the United States, the district court had 

subject matter jurisdiction pursuant to 28 U.S.C. § 1331.” Hallinan v. Fraternal Order of 

Police of Chi. Lodge No. 7, 570 F.3d 811, 820–21 (7th Cir. 2009); see also Grable & Sons Metal 

Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 312 (2005) (§ 1331 invoked “by plaintiffs 

pleading a cause of action created by federal law”); Swanson v. Citibank, N.A., 614 F.3d 

400, 405 (7th Cir. 2010) (holding plaintiff stated a claim under § 3605). 

Accordingly, we VACATE the judgment and REMAND the case to the district 

court for further proceedings.