Court Opinion

ID: 2667518
Source: CourtListenerOpinion
Date Created: 2014-04-04 13:57:34.256111+00
Date Added: 2024-06-11T13:24:47.432149
License: Public Domain

UNITED STATES DISTRICT COURT
                       FOR THE DISTRICT OF COLUMBIA

                                    )
DISTRICT OF COLUMBIA,               )
                                    )
                  Plaintiff,        )
                                    ) Civil Action No. 09-879 (EGS)
                  v.                )
                                    )
UNITED LEASING ASSOCIATES           )
OF AMERICA, LTD., et al.,           )
                                    )
                  Defendants.       )
                                    )

                            MEMORANDUM OPINION

     Pending before the Court is plaintiff’s motion to remand the

case to the Superior Court for the District of Columbia (“D.C.

Superior Court”) and defendant Balboa Capital Corporation’s

motion for jurisdictional discovery.      Upon consideration of the

motions, the responses and replies thereto, the applicable law,

the entire record herein, and for the reasons stated below, this

Court GRANTS plaintiff’s motion to remand, DENIES plaintiff’s

request for attorneys fees and costs incurred in bringing this

motion, and DENIES AS MOOT defendant’s motion for jurisdictional

discovery.

I.   BACKGROUND

     On April 9, 2009, the District of Columbia (the “District”)

filed this action in D.C. Superior Court against defendants

United Leasing Associates of America (“United Leasing”), Balboa

Capital Corporation (“Balboa”), Chesapeake Industrial Leasing
Company (“Chesapeake”), Television Broadcasting Online, Inc.

(“TVBO”), Urban Interfaith Network, Inc. (“Urban Interfaith”),

Willie Perkins (“Perkins”), and Michael J. Morris (“Morris”).

Am. Compl. ¶¶ 3-9.   The District alleges that from 2004 to the

present, defendants conspired to “illegally obtain hundreds of

thousands of dollars” from “African-American religious

congregations in the District of Columbia and in other regions of

the country” through a computer-leasing scheme developed by

Morris and Perkins, both individually and through their companies

TVBO and Urban Interfaith (collectively, the “TVBO Defenants”).

Am. Compl. at 2, ¶¶ 11-18.1   The TVBO Defendants allegedly

induced congregations to accept computer equipment on the

representation that it was “free of charge,” when in fact, the

congregations were contractually obligated to make “tens of

thousands of dollars” in leasing payments to United Leasing,

Balboa and Chesapeake (collectively, the “Leasing Defendants”)

for equipment “that did not work.”   Am. Compl. at 2, ¶¶ 11-29.

As a result of the alleged scheme, some churches in the District

were “forced to remove money from their community funds to keep

paying the leases,” while other churches were subject to

aggressive collection efforts and threatened with litigation.

1
     A detailed description of the alleged scheme is contained in
the District’s First Amended Complaint. See Docket No. 1, Ex. 1.
Because the details of the alleged scheme are not relevant to the
pending motion, it is discussed only in general terms.

                                 2
Am. Compl. ¶¶ 27-29.   The District further alleges that the

defendants’ actions resulted in many of the churches having to

reduce their religious services and other community activities.

Am. Compl. ¶ 64.

      Pursuant to its authority under the D.C. Consumer Protection

Procedures Act (“DCCPPA”), and as parens patriae for the

residents of the District, the District brought this action

asserting claims of fraud, negligence, civil conspiracy, and

public nuisance, as well as violations of the D.C. Human Rights

Act (“DCHRA”) and the DCCPPA.   The District is requesting: (i) an

injunction to prevent further collection on the leases; (ii)

rescission of the transactions; (iii) restitution and

disgorgement; (iv) a permanent injunction prohibiting defendants

from engaging in the behavior alleged in the complaint; (v) civil

penalties; and (vi) attorneys fees and costs.   Am. Compl. at 16-

17.

      On May 8, 2009, defendants filed a Notice of Removal with

this Court, asserting “complete diversity of citizenship between

all of the Defendants and all of the Plaintiffs.”   Notice of

Removal ¶ 4.   On June 8, 2009, the District filed the pending

motion to remand, which defendants oppose.

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II. STANDARD OF REVIEW

     “[A]ny civil action brought in a State court of which the

district courts of the United States have original jurisdiction,

may be removed by the defendant or the defendants, to the

district court of the United States for the district and division

embracing the place where such action is pending.”   28 U.S.C. §

1441(a).   A district court has original jurisdiction of all civil

actions “where the matter in controversy exceeds the sum or value

of $75,000, exclusive of interest and costs” and “is between

Citizens of different States.”    Id. § 1332(a).   “When a

plaintiff seeks to remand to state court a case that was removed

to federal court, ‘the party opposing a motion to remand bears

the burden of establishing that subject matter jurisdiction

exists in federal court.’”    RWN Dev. Group, LLC v. Travelers

Indem. Co. of Conn., 540 F. Supp. 2d 83, 86 (D.D.C. 2008)

(quoting Int’l Union of Bricklayers & Allied Craftworkers v. Ins.

Co. of the West, 366 F. Supp. 2d 33, 36 (D.D.C. 2005)).

     “Because of the significant federalism concerns involved,

this Court strictly construes the scope of its removal

jurisdiction.”   Breakman v. AOL, LLC, 545 F. Supp. 2d 96, 100

(D.D.C. 2008) (citing Shamrock Oil & Gas Corp. v. Sheets, 313

U.S. 100, 107-09 (1941)).    Therefore, “[a]ny doubts as to whether

federal jurisdiction exist must be resolved in favor of remand.”

RWN Dev. Group, 540 F. Supp. 2d at 87 (citing cases); see also,

                                  4
e.g., Breakman, 545 F. Supp. at 101 (“‘[I]f federal jurisdiction

is doubtful, a remand to state court is necessary.’” (quoting

Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 815-16 (4th Cir. 2003)

(en banc)); Johnson-Brown v. 2200 M St. LLC, 257 F. Supp. 2d 175,

177 (D.D.C. 2003) (“Where the need to remand is not self-evident,

the court must resolve any ambiguities concerning the propriety

of removal in favor of remand.”).    If the removing party cannot

meet its burden, the court must remand the case.    See, e.g., Reed

v. Alliedbarton Sec. Servs., LLC, 583 F. Supp. 2d 92, 93 (D.D.C.

2008); Johnson-Brown, 257 F. Supp. 2d at 177.

III. DISCUSSION

     A.   Plaintiff’s Motion to Remand to D.C. Superior Court

     Defendants allege that this Court has original jurisdiction

pursuant to 28 U.S.C. § 1332.   Notice of Removal ¶ 8.     As noted

above, diversity jurisdiction requires both (i) complete

diversity and (ii) an amount in controversy exceeding $75,000.

See 28 U.S.C. § 1332.   The parties dispute whether the former

requirement has been met in this case.

     As relevant here, complete diversity exists where parties

are “Citizens of different States.”    Id. § 1332(a)(1).    States,

however, are not subject to diversity jurisdiction under § 1332.

See Long v. District of Columbia, 820 F.2d 409, 412-13 (D.C. Cir.

1987) (explaining that because “‘a suit between a State and a

citizen or corporation of another State is not between citizens

                                 5
of different States,’” a federal court will only have

jurisdiction if the action “‘arises under the Constitution, laws

or treaties of the United States’” (quoting Postal Telegraph

Cable Co. v. Alabama, 155 U.S. 482 (1894))).      The D.C. Circuit

has concluded that the District must be treated like a state for

purposes of diversity jurisdiction, and consequently is not

subject to removal under § 1332.       See id. at 414 (“[T]he

District, like the fifty states, is not subject to diversity

jurisdiction.”).

     The District therefore argues that defendants’ removal on

the basis diversity jurisdiction was improper.      Pl.’s Mot. to

Remand at 10-15.2   Defendants counter, however, that removal was

proper because “[t]he real plaintiffs in interest are various

church congregations located in and constituting citizens of the

District of Columbia.”   Notice of Removal ¶ 6.     Accordingly,

defendants argue that the District is a nominal party whose

presence should be disregarded for purposes of determining

2
     In its motion to remand, the District raised additional
arguments regarding why removal was improper. Specifically, the
District argues that: (i) defendants Perkins and TVBO are
citizens of the District, and therefore complete diversity does
not exist; and (ii) certain defendants failed to provide timely
notice of or consent to removal. In response to the District’s
first argument, Balboa filed a motion seeking leave to conduct
limited depositions of Perkins and TVBO. See generally Docket
No. 26. Because the Court finds that the District is not subject
to removal on the basis of diversity jurisdiction, the Court need
not reach these additional issues. Accordingly, Balboa’s motion
for leave to conduct jurisdictional discovery is DENIED AS MOOT.

                                   6
whether complete diversity exists.    See District of Columbia, ex

rel. American Combustion, Inc. v. Transamerica Ins. Co., 797 F.2d

1041, 1047-48 (D.C. Cir. 1986) (explaining that when the District

is a nominal party, its presence in the lawsuit does not defeat

diversity jurisdiction); see also Navarro Sav. Ass’n v. Lee, 446

U.S. 458, 461 (1980) (“[A] federal court must disregard nominal

or formal parties and rest jurisdiction only upon the citizenship

of real parties to the controversy.”).

     The issue before the Court, then, is whether the District is

the “real party in interest” in this litigation.   See Fed. R.

Civ. P. 17(a).   If it is, then subject-matter jurisdiction is

lacking and the case must be remanded.

     “The focus of the ‘real party in interest’ inquiry is on

‘the essential nature and effect of the proceedings.’” Wisconsin

v. Abbott Labs., 341 F. Supp. 2d 1057, 1061 (W.D. Wis. 2004)

(quoting Adden v. Middlebrooks, 688 F.2d 1147, 1150 (7th Cir.

1982)).   In conducting this inquiry, courts typically look to the

relief requested.   See Missouri, Kansas, & Texas Ry. Co. v.

Hickman, 183 U.S. 53, 59-61 (1901).   The real party in interest

is generally a direct beneficiary of the requested relief, while

a nominal party is not. See id. (concluding that the government

lacked “a real pecuniary interest in the subject-matter of the

controversy” and therefore was not the real party in interest).

Consequently, nominal parties may be disregarded from the

                                 7
diversity analysis as they lack a “substantial stake in the

outcome of the case.”   Hood ex rel. Mississippi v. Microsoft

Corp., 428 F. Supp. 2d 537, 546 (S.D. Miss. 2006) (“viewing the

complaint as a whole” and then concluding that the state was

sufficiently interested in the outcome of the case such that it

was the real party in interest); see also American Combustion,

797 F.2d at 1047 (concluding that the District was a nominal

party who could be disregarded for diversity purposes because it

had no pecuniary interest in the lawsuit, was not involved in the

prosecution of the lawsuit, and was protected from any liability

for its costs or results).

     Defendants argue that the District is a nominal party

because it seeks to protect “only a specific subgroup of its

population,” and therefore lacks a quasi-sovereign interest in

the case.   Chesapeake Opp’n Br. at 5; see also Balboa Opp’n Br.

at 11.   A quasi-sovereign interest is “an interest apart from the

interests of particular private parties.”    Alfred L. Snapp & Son,

Inc. v. Puerto Rico ex rel. Barez, 458 U.S. 592, 607 (1992).

Without a quasi-sovereign interest, a state is a nominal party

that can be disregarded for diversity purposes.    Id. at 600, 607.

For instance, if a state is merely “stepping in to represent the

interests of particular citizens who, for whatever reason, cannot

represent themselves,” then the state is “a nominal party without

a real interest of its own.”   Id.   However, “[a] state is not a

                                 8
nominal party if it has quasi-sovereign interests beyond the

interests of a few particular private parties.”    Maine v. Data

Gen. Corp., 697 F. Supp. 23, 25 (D. Me. 1988).    Accordingly, in

order to be the real party in interest in this litigation, the

District must have a quasi-sovereign interest that extends beyond

the interests of the African-American churches.   The Court

concludes that such an interest exists.

     Through this action, the District is exercising its

authority to prevent the individuals and corporations engaged in

allegedly predatory and fraudulent activities from targeting and

soliciting further business within its domain.3   Am. Compl. ¶ 2.

Such an action implicates two well-established quasi-sovereign

interests: (i) securing an honest marketplace, see, e.g., Snapp,

458 U.S. at 607 (“[A] State has a quasi-sovereign interest in the

health and well-being - both physical and economic - of its

residents in general.”); Hood, 428 F. Supp. 2d at 545 (“[T]he

State has a quasi-sovereign interest in the economic well-being

of its citizens, which includes securing the integrity of the

marketplace.”); New York v. Gen. Motors Corp., 547 F. Supp. 703,

3
     The DCCPPA authorizes the Attorney General for the District
to bring an action in the name of the District in order to obtain
an injunction, restitution, civil penalties, costs, and fees.
D.C. Code § 28-3909. Moreover, as the officer charged with “the
conduct of all law business” of the District, D.C. Code § 1-
301.111, the Attorney General is authorized to bring common law
actions to protect its quasi-sovereign interests. See generally
Pl.’s Mot. to Remand at 14-15.

                                9
705 (S.D.N.Y. 1982) (“The State’s goal of securing an honest

marketplace in which to transact business is a quasi-sovereign

interest.”); and (ii) securing residents from the harmful effects

of racial discrimination, see, e.g., Snapp, 458 U.S. at 609

(“This court has had too much experience with the political,

social, and moral damage of discrimination not to recognize that

a State has a substantial interest in assuring its residents that

it will act to protect them from these evils.”); New York v.

Peter & John’s Pump House, Inc., 914 F. Supp. 809, 812 (N.D.N.Y.

1996) (“[T]he State has a quasi-sovereign interest in preventing

racial discrimination of its citizens.”).   The District therefore

has significant quasi-sovereign interests that it seeks to

protect through this litigation.

     Moreover, despite defendants’ assertions to the contrary,

this action does not accrue solely to the benefit of the African-

American churches allegedly injured by defendants.   The

District’s request for injunctive relief, civil penalties, and

costs is “designed to vindicate the State’s interest in

preserving fundamental honesty, fair play and right dealings in

public transactions.”   Missouri ex rel. Webster v. Best Buy Co.,

Inc., 715 F. Supp. 1455, 1457 (E.D. Mo. 1989).   The widespread

relief “goes well beyond addressing the claims of previously

injured organizations or individuals.”   See Abbott Labs., 341 F.

Supp. 2d at 1063 (concluding that the Attorney General’s request

                                10
for injunctive relief was aimed at “securing an honest

marketplace, promoting proper business practices, protecting

[state] consumers, and advancing plaintiff’s interest in the

economic well-being of its residents”).   Indeed, “the indirect

benefits of barring unscrupulous companies from soliciting

further business accrues to the population at large.”    Illinois

v. SDS West Corp., No. 09-3128, 2009 U.S. Dist. LEXIS 65736, at

*9 (C.D. Ill. July 29, 2009); see also Pl.’s Mot. to Remand at 15

(“[R]equiring parties who engage in unfair trade practices to

disgorge their ill-gotten gains and pay penalties serves not only

to make private victims whole, but to deter future violation.”)4

     Therefore, having considered the “essential nature and the

effect” of the complaint as a whole, Abbott Labs., 341 F. Supp.

2d at 1061, this Court concludes that the District has a

“substantial stake” in the outcome of this litigation and is the

real party in interest.   See Hood, 428 F. Supp. 2d at 546

(concluding that the State of Mississippi was the real party in

interest due to the State’s “substantial stake” in the case).

The fact that the District is seeking compensatory damages for

4
     Moreover, absent litigation by the District, it is unlikely
that the requested injunctive relief would be obtained because
“the interests of the State and individual victims are not
coextensive.” Peter & John’s Pump House, Inc., 914 F. Supp. at
812. For instance, “[p]rivate litigants might not achieve the
complete relief requested that the State seeks because they have
a greater incentive to compromise requests for injunctive relief
in exchange for increased money damages.” Id.

                                11
the injured African-American churches does not diminish the

District’s substantial stake in this action. See Abbott Labs.,

341 F. Supp. 2d at 1063 (“The fact that private parties may

benefit monetarily from a favorable resolution of this case does

not minimize or negate plaintiff’s substantial interest.”); see

also, e.g., SDS West Corp., 2009 U.S. Dist. LEXIS 65736, at *12

(concluding that the state was the real party in interest even

though it was seeking rescission and restitution on behalf of

injured individuals); Illinois v. LiveDeal, Inc., 2009 U.S. Dist.

LEXIS 10560, at *5 (C.D. Ill. Feb. 12, 2009) (same); Webster, 715

F. Supp. at 1457 (same); Gen. Motors Corp., 547 F. Supp. at 706-

07 (same).

     In sum, because the District is the real party in interest,

this is not a dispute between “Citizens of different States” and

diversity jurisdiction is lacking.   28 U.S.C. § 1332(a)(1); see

Long, 820 F.2d at 412-13.5   Accordingly, this Court finds that

5
     Defendants alternatively argue that “[t]o the extent that
the District of Columbia may be the real party in interest with
respect to any Count in the Complaint, there is no possibility
that the District can establish a cause of action, and its
presence should be disregarded under the doctrine of fraudulent
joinder.” Notice of Removal ¶ 7; see Balboa Opp’n Br. at 11-16.
This Court, however, finds the doctrine of fraudulent joinder
inapplicable “where, as here, the party alleged to be
fraudulently joined is the only named plaintiff and that
plaintiff sues on its own behalf.” WMW Mach. Co., Inc. v.
Koerber A.G., 879 F. Supp. 16, 17 (S.D.N.Y. 1995). Indeed,
“[b]ecause here there exists only one named (non-diverse)
plaintiff seeking a remedy for itself, the proper course of
action is for the defendants to pursue dismissal of plaintiff’s
claims in the state court.” Id. But even assuming that

                                12
defendants’ removal was improper and GRANTS plaintiff’s motion to

remand this action to D.C. Superior Court.

     B.   Plaintiff’s Request for Attorneys Fees and Costs

     Under 28 U.S.C. § 1447(c), a court “may require payment of

just costs and any actual expenses, including attorney fees,”

when an action is remanded.   Plaintiff argues that such costs

should be awarded because, among other reasons, “Defendants

sought removal despite the settled case law that the District is

not a diverse party.”   Mot. to Remand at 17; see Johnson-Brown,

257 F. Supp. 2d at 181 (explaining that costs and expenses may be

awarded if “the removing party contradicts well-settled law in

attempting to remove the case to federal court”). In view of the

fact that the specific issue presented in this case - whether the

District is the real party in interest in its public advocacy

litigation - is an issue of first impression for this Court, the

Court concludes that defendants’ removal was not “contrary to

defendants’ fraudulent-joinder argument is cognizable, defendants
have failed to establish that “there is no possibility that
plaintiff would be able to establish a cause of action” against
defendants in D.C. Superior Court, Brown v. Brown & Williamson
Tobacco Corp., 26 F. Supp. 2d 74, 77 (D.D.C. 1998), for the
reasons stated in plaintiff’s reply brief. Pl.’s Reply Br. at
13-16; see also Brown, 26 F. Supp. 2d at 77 (“[G]iven that the
jurisdiction of this court is uncertain and that a determination
[of fraudulent joinder] should be made cautiously by a court
uncertain of its jurisdiction, it is more appropriate to remand
this case and allow the courts of the District of Columbia to
decide whether or not the plaintiffs can state a valid cause of
action. . . .” (internal quotation and citation omitted)).
Remand to D.C. Superior Court, therefore, is the proper course of
action.

                                13
well-settled law.”   Id.   Accordingly, the Court declines to award

attorneys fees and costs given the circumstances of this case.

See LiveDeal, Inc., 2009 U.S. Dist. LEXIS 10560, at *10

(declining to award fees and costs on similar facts when there

was a “lack of controlling authority on point”).   Plaintiff’s

request for attorneys fees and costs is DENIED.

IV.   CONCLUSION

      For the reasons set forth above, the Court GRANTS

plaintiff’s motion to remand this action to D.C. Superior Court,

where the case commenced, DENIES plaintiff’s request for

attorneys fees and costs, and DENIES AS MOOT defendant Balboa’s

motion for jurisdictional discovery.   An appropriate Order

accompanies this Memorandum Opinion.

SIGNED:    Emmet G. Sullivan
           United States District Court Judge
           August 11, 2009

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