Rizwan v. FCI Lender Services Inc.

Citations: 176 F. Supp. 3d 513; 2016 U.S. Dist. LEXIS 46963; 2016 WL 1377404Docket: Civil Action No. DKC 16-0478

Court: District Court, D. Maryland; April 7, 2016; Federal District Court

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A motion to remand and for attorney’s fees, submitted by Mohammad Rizwan and Robina Shaheen, is partially granted by the court, while the motion to dismiss by FCI Lender Services, Inc., LongVue Mortgage Capital, Inc., and WestVue NPL Trust II is not addressed. The case originated from a foreclosure action initiated by Substitute Trustees against Rizwan and Shaheen in Montgomery County Circuit Court. In response, the defendants filed a counter-complaint alleging violations of the Fair Debt Collection Practices Act and the Maryland Consumer Debt Collection Act. Following an administrative order, the counterclaim was severed and assigned a separate case number, which the Counterclaim Defendants subsequently attempted to remove to federal court. The court emphasized that under 28 U.S.C. 1441(a), removal is limited to cases with original jurisdiction, and the burden of proof lies with the removing party. It ruled that recent legal precedents establish that counterclaims within foreclosure actions are not removable, reaffirming that third-party defendants lack removal rights under this statute.

Counterclaim and Third Party Complaint filings within an existing state proceeding do not constitute a removable ‘civil action brought in state court,’ as established in Wittstadt, 113 F. Supp. 3d at 807. Despite the Counterclaim Defendants' argument that the counter-complaint should be viewed as a separate complaint due to the absence of claims against the Substitute Trustee, who initiated the foreclosure, the court maintains that the claims remain part of the original foreclosure action. The Administrative Order’s severance does not create a new action that would permit removal. Counterclaim Defendants' efforts to differentiate their case from Wittstadt and Palisades Collections are deemed unpersuasive. The court emphasizes that the interpretation of "defendant" under 28 U.S.C. § 1441(a) is narrow, referring specifically to parties against whom the original plaintiff asserts claims. Since the Counterclaim Defendants do not fall into this category, the court concludes they lack the authority to remove the case. Supporting this decision, Judge Chuang in Kelly v. JP Morgan Chase Bank similarly ruled that a third-party complaint in a bifurcated foreclosure case could not be removed, reinforcing the court's stance that the current action does not qualify for removal under federal law.

Mr. Rizwan and Ms. Shaheen's complaint is deemed part of the foreclosure action, despite being separated for litigation ease by an Administrative Order. The Administrative Order allows for the bifurcation of the case, permitting separate trials for the foreclosure and counterclaims. The discretion to sever federal claims from the foreclosure lies with the Maryland Circuit Court. Consequently, the case will be remanded to the circuit court, but attorney's fees and costs will not be awarded to Mr. Rizwan and Ms. Shaheen. Under 28 U.S.C. 1447(c), attorney’s fees are typically awarded only when the removing party lacked an objectively reasonable basis for removal. Although the court found the removal improper, the Counterclaim Defendants' arguments were not deemed objectively unreasonable. Recent case law, including Kelly, indicates that removal in such procedural contexts is improper, but the overall legal landscape remains unclear regarding the interaction of state law foreclosure and federal counterclaims. Therefore, the request for attorney’s fees and costs is denied. The motion to remand is granted in part, while the motions to dismiss and for an extension of time to respond will be addressed upon remand. A separate order will follow.