NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

 :

NEWMARK PIONEER, LLC, et al., :

 : CIVIL ACTION NO. 11-376 (MLC)

Plaintiffs, :

 : MEMORANDUM OPINION

v. :

 :

DATA TRACE INFORMATION :

SOLUTIONS, LLC, et al., :

 :

Defendants. :

 :

COOPER, District Judge

Plaintiffs, Newmark Pioneer, LLC (“Newmark Pioneer”) and

Mark Botros (“Botros”) (collectively, “Plaintiffs”), commenced

this action in state court against defendants, Data Trace

Information Services, LLC (incorrectly named as Data Trace

Information Solutions, LLC) (“Data Trace”), Signature Information

Solutions, LLC (“SIS”), and Cortes & Hay, Inc. (“Cortes & Hay”),

alleging various state law claims for, inter alia, negligence,

breach of contract, and breach of warranty. (Dkt. entry no. 1,

Rmv. Not. at 1 & Ex. 1, Compl.) Defendants removed the action,

alleging that removal was proper pursuant to 28 U.S.C. §

(“Section”) 1441 because federal question jurisdiction exists

under Section 1331. (Rmv. Not.) 

Cortes & Hay were voluntarily dismissed from the action

without prejudice. (Dkt. entry no. 7, 3-1-11 Order.) Data Trace

and SIS (“Defendants”) move for summary judgment in their favor. 

(Dkt. entry no. 12, Def. Mot. for Summ. J.) Plaintiffs

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apparently cross-move for summary judgment in their favor, though

the Proposed Order filed with the cross motion makes no reference

to entry of judgment in Plaintiffs’ favor, but rather seeks

denial of Defendants’ motion. (Dkt. entry no. 15, Pl. Cross Mot.

& Proposed Order.) Plaintiffs also separately oppose Defendants’

motion for summary judgment. (Dkt. entry no. 17, Pl. Opp’n.)

The Court has considered the parties’ moving papers, as well

as the Notice of Removal, and finds that the Court lacks subject

matter jurisdiction over this action. Removal based on

jurisdiction under Section 1331 was improper, due to the lack of

a federal question in Plaintiffs’ well-pleaded complaint. 

Accordingly, the Court may not reach the merits of the motion and

cross motion. We will (1) sua sponte consider the issue of

subject matter jurisdiction, pursuant to Federal Rule of Civil

Procedure 12(h)(3), and (2) remand the action to state court. 

See 28 U.S.C. § 1447(c).

BACKGROUND

Botros is the principal owner and member of Newmark Pioneer. 

(Compl. at ¶ 2.) In July 2005, Botros purchased a commercial

property known as 105 Manheim Avenue in Bridgeton, New Jersey

(the “property”). (Id. at ¶ 6.) Botros assigned the contract

for the sale of the property to Newmark Pioneer prior to closing. 

(Id.) In preparation for the closing, Plaintiffs hired Cortes &

Hay “to perform a search of [the] property . . . including a

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flood hazard determination search.” (Id. at ¶ 7.) Cortes & Hay

sub-contracted with Data Trace to perform the flood hazard

determination search. (Id. at ¶ 8.) Data Trace “issued a Flood

Hazard Certificate which stated that the property . . . was not

in a special flood hazard area.” (Id. at ¶ 9.) 

Plaintiffs again hired Cortes & Hay “to perform an updated

search of the subject property, including a flood hazard

determination search,” in August 2009 in association with a

refinancing of the mortgage on the property. (Id. at ¶ 14.) 

This updated flood hazard determination search resulted in the

issuance of a Flood Hazard Certificate indicating that the

property “was partially affected by the special flood hazard and

a survey was needed.” (Id. at ¶ 16.) On August 26, 2009, a

Flood Hazard Certificate was issued, indicating that the property

“was located in an A1 flood zone.” (Id. at ¶ 17.) This

determination was confirmed by an elevation survey conducted in

September 2009. (Id. at ¶ 19.)

Plaintiffs allege that the “flood hazard determination

search” done by Data Trace was “false, misleading and

inaccurate.” (Id. at ¶ 20.) They seek to recover against

Defendants under common law tort and contract theories:

negligence (count 1), material misrepresentation and respondeat

superior (count 2), breach of contract (count 3), breach of

warranty (count 4), detrimental reliance (count 5), and reckless

indifference (count 6). (See generally Compl.)

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Defendants contend that the “Flood Hazard Certificate”

alleged in the Complaint to have been prepared by Data Trace

refers to a “Special Flood Hazard Determination” form (“SFHD”)

designated as “FEMA Form 81-93.” (Dkt. entry no. 12, Def. Br. at

3.) Defendants state that “[a]ll six counts of the plaintiffs’

complaint plead reliance upon a particular SFHD prepared and

issued by Data Trace.” (Id.) Defendants’ arguments in favor of

summary judgment are as follows: (1) Plaintiffs lack standing to

sue; (2) Plaintiffs’ claims are preempted by the National Flood

Insurance Act (“NFIA”), 42 U.S.C. § 4001 et seq.; (3) Plaintiffs

have no private right of action based on the SFHD prepared by

Data Trace; (4) principles of federalism dictate that Plaintiffs

have no common law rights of action; and (5) Plaintiffs’ alleged

reliance on the SFHD “is illusory because the purchase contract’s

due diligence time already expired before Cortes & Hay requested

the Data Trace SFHD.” (Def. Br. at 8-9.)

ANALYSIS

Federal courts have limited jurisdiction, possessing “only

that power authorized by Constitution and statute.” Exxon Mobil

Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552 (2005). 

Where, as here, a defendant removes an action to federal court

pursuant to Section 1441, the removing party bears the burden of

demonstrating the existence of federal subject matter over the

action. Samuel-Bassett v. KIA Motors Am., Inc., 357 F.3d 392,

396 (3d Cir. 2004); see 28 U.S.C. § 1441(a) (permitting removal

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of “any action brought in a State court of which the district

courts of the United States have original jurisdiction”). “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).

Defendants contend that federal question jurisdiction exists

pursuant to Section 1331 “because Plaintiffs’ claims are governed

entirely by the [NFIA]. Plaintiffs’ assertion of implied rights

of action that do not exist under the NFIA and [sic] may present

issues of first impression for this federal district.” (Rmv.

Not. at ¶ 8.) Defendants thus contend that the Court “has

original jurisdiction over this action . . . because this suit

arises under the laws of the United States (42 U.S.C. § 4001-4129

[sic]).” (Id. at ¶ 13.) Plaintiffs respond that the Complaint

“does not seek redress under the [NFIA], but rather bases the

claims on state common-law contract and tort theories.” (Pl.

Opp’n at 9.) Although Plaintiffs do not expressly seek remand

for lack of subject matter jurisdiction, they do observe that

Defendants’ removal “was predicated on an attempt to frame the

issue as a federal question when in fact, the plaintiffs [sic]

causes of action are based on state common-law contract and tort

theories.” (Id. at 10.)

Defendants’ asserted basis for removal would contravene the

familiar and well-settled “well-pleaded complaint” rule. Federal

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question jurisdiction will lie only if the complaint pleads a

federal cause of action. Merrell Dow Pharm. Inc. v. Thompson,

478 U.S. 804, 808 (1986); see also Beneficial Nat’l Bank v.

Anderson, 539 U.S. 1, 6 (2003) (“As a general rule, absent

diversity jurisdiction, a case will not be removable if the

complaint does not affirmatively allege a federal claim.”). “The

presence or absence of a federal question is governed by the

well-pleaded complaint rule, which provides that federal question

jurisdiction exists only when a federal question is presented on

the face of the plaintiff’s properly pleaded Complaint.” 

Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987).

The well-pleaded complaint rule limits the jurisdictional

inquiry to the claims and theories asserted in the complaint, and

absent a federal question on the face of the complaint,

jurisdiction will not lie even if a defense to state law claims

relies on federal law. Franchise Tax Bd. of Cal. v. Constr.

Laborers Trust, 463 U.S. 1, 12 (1983) (providing that a case may

not be removed to federal court on the basis of a federal

preemption defense, even if the defense is anticipated in the

complaint and both parties concede that the federal defense is

the only question truly at issue); Louisville & Nashville R.R.

Co. v. Mottley, 211 U.S. 149, 152-53 (1908) (“[A] suit arises

under [federal law] only when the plaintiff’s statement of his

own cause of action shows that it is based upon those laws or

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[the] Constitution. It is not enough that the plaintiff alleges

some anticipated defense to his cause of action, and asserts that

the defense is invalidated by [federal law].”). An exception to

this rule exists for “complete preemption,” where a “federal

statute completely pre-empts the state-law cause of action,” so

that “a claim which comes within the scope of that cause of

action, even if pleaded in terms of state law, is in reality

based on federal law.” Beneficial Nat’l Bank, 539 U.S. at 8.

The Complaint does not allege any cause of action arising

under federal law. It does not appear that resolution of

Plaintiffs’ claims necessarily would involve a finding that

Defendants “violated” the NFIA, per se, such that Plaintiffs’

claims could be said to “necessarily raise a stated federal

issue, actually disputed and substantial.” See Probola v. Long &

Foster Real Estate, Inc., No. 11-6334, 2012 WL 194955, at *4

(D.N.J. Jan. 23, 2012) (rejecting defendants’ assertion that

plaintiffs’ claim was necessarily dependent upon a determination

of a federal law, even where “Plaintiffs cite federal statutes,

federal district court opinions, federal regulations, and federal

interpretations of federal regulations in support of their

purported state-law claims,” and remanding action for lack of 

federal question jurisdiction under Section 1331). 

Any suggestion by Defendants that the complete preemption

exception to the well-pleaded complaint rule applies here would

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be futile in light of their assertion that “Plaintiffs have no

private right of action upon the defendants’ SFHDs.” (Def. Br.

at 8.) See Thorp v. Centura Bank, 200 F.Supp.2d 559, 560

(E.D.N.C. 2001) (remanding action where parties agreed that

plaintiffs would not have a private cause of action under the

NFIA “to redress the wrongs that Plaintiffs allege in their

Complaint” and claims all arose under state law). 

Defendants argue that “Plaintiffs’ lawsuit is not about the

necessity (or not) of [statutory] ‘forced placed’ flood

insurance. Plaintiffs’ lawsuit is not about flood damage to

plaintiffs’ property. Plaintiffs’ lawsuit concerns plaintiffs’

claim of having negotiated too high a purchase price when buying

the property in 2005–allegedly in reliance upon the Data Trace

SFHD.” (Def. Br. at 7.) The Court agrees that on its face, the

Complaint alleges only state law claims sounding in tort and

contract based on Plaintiffs’ alleged reliance on the form at

issue. This distinguishes Plaintiffs’ case from a situation

where the complete preemption doctrine might provide a basis for

federal jurisdiction. That exception applies only when a

plaintiff pleads state law claims that should have been brought

as federal claims under a federal statute that completely

preempts the state law claims. See, e.g., Silverman v. Verrelli,

No. 11-6576, 2012 WL 395665, at *5 (D.N.J. Feb. 7, 2012) (denying

motion to remand where plaintiff’s claims for defamation, false

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light, and invasion of privacy were completely preempted by the

federal Labor Management Relations Act (“LMRA”), because under

the facts alleged, those state law claims “must be deemed to

arise under” the LMRA’s private cause of action). 

The Silverman court noted that the “extraordinary complete

preemption doctrine” has been recognized “in only a few areas of

the law,” including the LMRA, certain claims for benefits under

Section 502(a) of the Employee Retirement Income Security Act of

1974, and tort actions arising out of nuclear accidents expressly

subject to removal under the Price-Anderson Act. Id. at *5

(citing Beneficial Nat’l Bank, 539 U.S. at 6-7, and Avco Corp. v.

Aero Lodge No. 735, Int’l Assoc. of Machinists & Aerospace

Workers, 390 U.S. 557, 560-61 (1968)). Defendants’ contention

that no federal private cause of action exists for Plaintiffs to

pursue their claims thus precludes any viability of the complete

preemption exception to the well-pleaded complaint rule in this

instance. Cf. Tenet Health Sys. Phila., Inc. v. Diversified

Admin. Corp., No. 07-4948, 2012 WL 1548931, at *4 (E.D. Pa. May 2,

2012) (“Plaintiff’s claims are not completely preempted because

it does not have standing to bring a claim under section 502(a)”

of ERISA, such that removal to federal court was improper).

Defendants’ preemption and standing arguments are mere

defenses to Plaintiffs’ state law claims, and do not create

federal subject matter jurisdiction in the face of Plaintiffs’

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well-pleaded complaint. See Caterpillar Inc., 482 U.S. at 399

(“[A] defendant cannot, merely by injecting a federal question

into an action that asserts what is plainly a state-law claim,

transform the action into one arising under federal law.”). 

Questions such as whether Plaintiffs have standing, whether

Plaintiffs were “the intended beneficiary of the SFHD” and

whether “Plaintiffs’ alleged reliance on the SFHD is illusory

because the purchase contract’s due diligence time already

expired before Cortes & Hay requested the SFHD” may be resolved

by the state court. (Pl. Opp’n at 12; Def. Br. at 9.) 

It appears that the parties are nondiverse, precluding 

jurisdiction under Section 1332. (Dkt. entry no. 16, Br. Supp.

Pl. Mot. for Summ. J. at 4 (stating that Newmark Pioneer, Data

Trace, and SIS are all New Jersey citizens).) Because the Court

lacks subject matter jurisdiction, the action must be remanded. 

28 U.S.C. § 1447; In re Orthopedic Bone Screw Prods. Liability

Litig., 132 F.3d 152, 155 (3d Cir. 1997) (“If a case, over which

the court lacks subject matter jurisdiction, was originally filed

in federal court, it must be dismissed. If it was removed from

state court, it must be remanded.”).

CONCLUSION

For the reasons discussed supra, the Court will sua sponte

remand the action to New Jersey Superior Court, Somerset County. 

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The Court will deny without prejudice the pending motion and

cross motion. The Court will issue an appropriate Order and

Judgment.

 s/ Mary L. Cooper 

MARY L. COOPER

United States District Judge

Dated: May 21, 2012

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