Kondaur Capital Corp. v. Finley

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TENNESSEE

WESTERN DIVISION

______________________________________________________________________________

KONDAUR CAPITAL CORP., )

)

Plaintiff, )

v. ) No. 2:20-cv-02423-JTF-tmp

)

KEITH T. FINLEY, )

)

Defendant. )

_____________________________________________________________________________

ORDER ADOPTING MAGISTRATE JUDGE’S

REPORT AND RECOMMENDATION AND DISMISSING CASE

_ _____________________________________________________________________________

Before the Court is Defendant Keith T. Finley’s pro se Notice of Removal (“Notice”), filed

on June 12, 2020, pursuant to 28 U.S.C. § 1331. (ECF No. 1.) Defendant also filed a Motion

seeking leave to proceed in forma pauperis (ECF No. 6), which was granted on July 16, 2020.

(ECF No. 7.) On September 10, 2020, the Magistrate Judge, upon screening Defendant’s Notice,

entered a Report and Recommendation suggesting dismissal and remand of the action for lack of

subject matter jurisdiction. (ECF No. 8.) On September 22, 2020, Defendant timely filed

Objections to the Report and Recommendation. (ECF No. 9.) For the reasons below, the Court

ADOPTS the Magistrate Judge’s Report and Recommendation to DISMISS this action and

remand to the Circuit Court of Shelby County for the State of Tennessee.

FACTUAL HISTORY

At the outset, the Court notes that Defendant did not attach Plaintiff Kondaur Capital

Corporation’s initial complaint to his Notice. Accompanying Defendant’s Notice are (1) a

statement setting forth the alleged grounds for removal; (2) a Motion to Void and Dismiss

Judgment Pursuant to Federal Rules of Civil Procedure 60(b)(4), 12(b)(1), and 12(h)(3), filed in

the Circuit Court of Shelby County for the State of Tennessee (“Circuit Court”) proceeding; (3) a

withdrawal of Plaintiff’s objection to Defendant’s statement of evidence filed in the Circuit Court;

(4) a Circuit Court order granting Plaintiff’s motion for summary judgment; and (5) an email

between Defendant and Plaintiff’s counsel regarding the aforementioned statement of evidence.

(ECF Nos. 1 & 1-4.)

The Court also notes that a federal proceeding related to this action occurred previously.

On February 17, 2012, Defendant filed a wrongful foreclosure action against Plaintiff and four

other defendants in the Chancery Court of Shelby County for the State of Tennessee. See Finley

v. Kondaur Capital Corp., 909 F. Supp. 2d 969, 973 (W.D. Tenn. 2012). In Count VII of the

wrongful foreclosure action, Defendant asserted a claim to quiet title under Tennessee state law.

Id. at 982. The wrongful foreclosure action was removed to the Western District of Tennessee on

March 9, 2012. Id. at 974. The federal district court in that case denied Plaintiff’s motion to

dismiss Defendant’s quiet title claim because the Court “possesse[d] insufficient information” to

warrant dismissal. Id. at 982. On January 25, 2013, the Court entered an Order and Judgment

declaring Defendant as the “mortgagor-in-possession” and that “any present mortgage foreclosure

proceeding now pending or initiated by Plaintiff but not yet filed in the courts of Tennessee is null

and void and of no effect upon Finley’s title to the premises.” Order and Judgment, Finley v.

Kondaur Capital Corp., No. 12-cv-02197-WGY-dkv (W.D. Tenn. Jan. 25, 2013), ECF No. 43.

Importantly, however, the Court noted that this Order was “without prejudice to Kondaur—once

its paperwork was in order—initiating a new foreclosure proceeding should Finley remain in

default on the mortgage.” (Id. at 1–2.)

Subsequently, on November 19, 2013, Plaintiff initiated the present foreclosure/eviction

action against Defendant in the Circuit Court.1 (ECF No. 1-3, 2.) On July 17, 2014, the Circuit

Court denied Plaintiff’s first motion for summary judgment without prejudice for the purpose of

permitting Defendant to produce certain evidence. (ECF No. 9-3, 1.) Following the Circuit

Court’s denial of the first summary judgment motion, Plaintiff filed a Motion for Reconsideration

and to Alter or Amend Judgment. On August 29, 2014, the Circuit Court granted Plaintiff’s

Motion for Reconsideration and granted summary judgment in favor of Plaintiff, awarding to

Plaintiff possession of the property and attorneys’ fees in the amount of $14,430.00. (ECF No. 1-

3, 1–2.) In his Notice, Defendant alleges that the Circuit Court’s hearing on the summary judgment

motion took place without notice to him. (ECF No. 1, 2.)

On February 6, 2015, the Circuit Court held an eviction hearing, which Defendant also

alleges occurred without proper service or notice to him. (Id.) Ultimately, on March 3, 2015,

Defendant was evicted from the property. (Id.)

On February 12, 2019, Defendant filed a Statement of Evidence in the Circuit Court, to

which Plaintiff initially objected. (ECF No. 1-2, 1.) However, on May 7, 2019, Plaintiff withdrew

its objections to Defendant’s Statement. (Id.) Defendant has not provided this Statement of

Evidence to this Court.

On June 12, 2020, Defendant filed his Notice of Removal. (ECF No. 1.) On September

10, 2020, the Magistrate Judge entered the Report and Recommendations. (ECF No. 8.)

Thereafter, on September 22, 2020, Defendant filed his Objections to the Proposed Findings and

1 The Court adopts and incorporates the Magistrate Judge’s use of judicial notice regarding the

filing date of this action. See Chase Bank USA, N.A. v. City of Cleveland, 695 F.3d 548, 553 n.2

(6th Cir. 2012) (noting that judicial notice is proper as to “developments in ‘related proceedings

in other courts of record’”).

Recommendations (“Objections”), attaching a Memorandum/Order and a Judgment entered by the

district court in Defendant’s 2012 wrongful foreclosure action, the Circuit Court’s July 17, 2014

denial of Plaintiff’s motion for summary judgment, and an assignment of a deed of trust filed with

the Register of Shelby County, Tennessee. (ECF No. 9.)

LEGAL STANDARD

Congress passed 28 U.S.C. § 636(b) “to relieve some of the burden on the federal courts

by permitting the assignment of certain district court duties to magistrates.” United States v.

Curtis, 237 F.3d 598, 602 (6th Cir. 2001). Pursuant to the provision, magistrate judges may hear

and determine any pretrial matter pending before the Court, except various dispositive motions.

28 U.S.C. § 636(b)(1)(A). Upon hearing a pending matter, “the magistrate judge must enter a

recommended disposition, including, if appropriate, proposed findings of fact.” Fed. R. Civ. P.

72(b)(1); see also Baker v. Peterson, 67 F. App’x 308, 310 (6th Cir. 2003). Any party who

disagrees with a magistrate’s proposed findings and recommendation may file written objections

to the report and recommendation. Fed. R. Civ. P. 72(b)(2).

The district court reviews a magistrate judge’s proposed findings and recommendation.

The standard of review that is applied depends on the nature of the matter considered by the

magistrate judge. See Baker v. Peterson, 67 F. App’x 308, 310 (6th Cir. 2003) (citations omitted)

(“A district court normally applies a ‘clearly erroneous or contrary to law’ standard of review for

nondispositive preliminary measures. A district court must review dispositive motions under the

de novo standard.”). Upon review of the evidence, the district court may accept, reject, or modify

the proposed findings or recommendations of the magistrate judge. Brown v. Board of Educ., 47

F. Supp. 3d 665, 674 (W.D. Tenn. 2014); see also 28 U.S.C. § 636(b)(1). The court “may also

receive further evidence or recommit the matter to the [m]agistrate [j]udge with instructions.”

Moses v. Gardner, No. 2:14-cv-2706-SHL-dkv, 2015 U.S. Dist. LEXIS 29701, at *3 (W.D. Tenn.

Mar. 11, 2015). A district judge should adopt the findings and rulings of the magistrate judge to

which no specific objection is filed. Brown, 47 F. Supp. 3d at 674.

28 U.S.C. § 1915(e)(2) Screening

Pursuant to Local Rule 4.1, in cases where a pro se plaintiff has been granted leave to

proceed in forma pauperis, the complaint must be screened under 28 U.S.C. § 1915(e)(2)(B). LR

4.1(b). Specifically, courts are required to screen in forma pauperis complaints and dismiss any

complaint, or portion thereof, if the allegation of poverty is untrue or if the action (i) is frivolous

or malicious, (ii) fails to state a claim on which relief may be granted, or (iii) seeks monetary relief

against a defendant who is immune from such relief. 28 U.S.C. § 1915(e)(2).

Standard of Review for Lack of Subject-Matter Jurisdiction

While Kondaur has not challenged the removal of this case, “federal courts have a duty to

consider their subject matter jurisdiction in regard to every case and may raise the issue sua

sponte.” Answers in Genesis of Ky., Inc. v. Creation Ministries Int’l, Ltd., 556 F.3d 459, 465 (6th

Cir. 2009). When a court determines that it lacks subject matter jurisdiction, the court has an

obligation to dismiss the case. Fed. R. Civ. P. 12(h)(3). The Sixth Circuit employs a presumption

against federal subject matter jurisdiction, which must be overcome by the removing party.

Farmer v. Fisher, 386 F. App’x 554, 557 (6th Cir. 2010); Egan v. Premier Scales & Sys., 237 F.

Supp. 2d 774, 777 (W.D. Ky. 2002) (citing Her Majesty the Queen v. City of Detroit, 874 F.2d

332, 339 (6th Cir. 1989)).

ANALYSIS

Because Defendant has filed Objections to the Magistrate Judge’s recommendation that

this action be dismissed for lack of subject matter jurisdiction and remanded, the Court reviews

the Magistrate Judge’s Report and Recommendation de novo. See 28 U.S.C. § 636(b)(1). The

Magistrate Judge concluded that because Defendant did not plead facts establishing the existence

of subject matter jurisdiction, the Court lacks subject matter jurisdiction over this case.

Accordingly, the Magistrate Judge recommended that this case be dismissed and remanded to the

Circuit Court. (ECF No. 8, 4.)

Defendant’s Notice set forth 28 U.S.C. § 1331—i.e., federal question jurisdiction—as the

basis for federal subject matter jurisdiction. Defendant also alleges in his Objections that diversity

jurisdiction is proper. (ECF No. 9, 1.)

For the reasons set forth below, the Court ADOPTS the Magistrate Judge’s

recommendation to dismiss and remand this action to the Shelby County Circuit Court. Neither

Defendant’s Notice nor his Objections adequately set forth any basis for federal subject matter

jurisdiction, because diversity jurisdiction is unavailable in this case, and further, there is no federal

question presented.

Diversity Jurisdiction

In his Notice, Defendant did not plead diversity jurisdiction. (ECF No. 1.) The Magistrate

Judge concluded that removal based on diversity jurisdiction was therefore unavailable. (ECF No.

8, 5.) In his Objections, Defendant now asserts that diversity jurisdiction is proper. (ECF No. 9,

1.)

Federal district courts have original jurisdiction over civil actions between citizens of

different states in which the amount-in-controversy exceeds $75,000. See 28 U.S.C. §§ 1332,

1441. The removing defendant bears the burden of sufficiently alleging diversity jurisdiction. See

28 U.S.C. § 1446(a). Specifically, the removing defendant must provide “a short and plain

statement of the grounds for removal, together with a copy of all process, pleadings, and orders

served upon such defendant . . . in such action.” Id. Defendant’s status as a pro se litigant does

not completely excuse the pleading requirements. See Wells v. Brown, 891 F.2d 591, 594 (6th Cir.

1989) (“Neither this Court nor other courts, however, have been willing to abrogate basic pleading

essentials in pro se suits.”); see also Brown v. Matauszak, 415 F. App’x 608, 613 (6th Cir. 2011).

Despite not providing the Complaint in this action, in his Objections, Defendant argues

that diversity jurisdiction is proper. As to diversity of citizenship, Defendant states that he is a

citizen of Tennessee and that Plaintiff is a citizen of California. (ECF No. 9, 1.) Regarding the

amount-in-controversy, Defendant alleges that it necessarily exceeds $75,000 since the value of

the property from which he was evicted is greater than $100,000. (Id.)

However, even assuming Defendant’s Objections are a proper means of pleading diversity

jurisdiction, removal based on diversity would nonetheless remain unavailable because Defendant

is a citizen of Tennessee. Diversity jurisdiction cannot serve as the basis for removal “if any of

the parties in interest properly joined and served as defendants is a citizen of the State in which

such action is brought.” 28 U.S.C. § 1441(b)(2). Further, removal based on diversity generally

must occur within one year of the commencement of the action. See 28 U.S.C. § 1446(c)(1). Thus,

in addition to Defendant’s status as a Tennessee citizen precluding diversity jurisdiction,

Defendant’s Notice was untimely.

Because removal based on diversity jurisdiction is unavailable where a defendant is a

resident of the state in which the suit is brought—like Defendant here—the Court ADOPTS the

Magistrate Judge’s recommendation that this Court lacks diversity jurisdiction over this action.

Federal Question Jurisdiction

The Magistrate Judge concluded that federal question jurisdiction is unavailable in this

case for multiple reasons. First, the Magistrate Judge concluded that because Defendant did not

include a copy of the complaint with his Notice, federal question jurisdiction could not be apparent

from the face of the complaint. (ECF No. 8, 6.) Second, the Magistrate Judge concluded that

notwithstanding the absence of the complaint, it was apparent that Plaintiff’s eviction action is not

one arising under federal law. (Id.) Finally, the Magistrate Judge concluded that Defendant’s

Notice attempts to invoke federal question jurisdiction through the assertion of a counterclaim,

which is impermissible. (Id.)

As set forth by statute, federal district courts “shall have original jurisdiction of all civil

actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331.

The well-pleaded complaint rule guides the determination of whether federal question jurisdiction

exists, requiring that “a federal question is presented on the face of the plaintiff’s complaint.”

Kitzmann v. Local 619-M Graphic Comms. Conference of Int’l Bhd. of Teamsters, 415 F. App’x

714, 716 (6th Cir. 2011). The obvious issue that Defendant faces here is that the complaint was

not attached to the Notice, and Defendant did not include the complaint with his Objections. (ECF

Nos. 1 & 9.) Accordingly, the Magistrate Judge correctly concluded that no federal question is

presented on the face of the complaint in this case. (ECF No. 8, 6.) Further, the Magistrate Judge

also found it “clear” that Plaintiff lacked the ability to bring its eviction action against Defendant

in federal court originally. (ECF No. 8, 6.)

Defendant’s Notice focuses on the allegation that the Circuit Court proceeding violated his

Due Process rights under the federal Constitution. (ECF No. 1, 2.) Essentially, Defendant asserts

in his Notice and Objections that because the Circuit Court allegedly violated his Due Process

rights in granting Plaintiff’s motion for summary judgment, this case “arises under” federal law.

(ECF Nos. 1, 2 & 9, 3.) The Court adopts the Magistrate Judge’s finding (ECF No. 8, 6), that

Defendant appears to be asserting a counterclaim with this allegation, which cannot serve as the

basis for federal question jurisdiction. See Chase Manhattan Mortg. Corp. v. Smith, 507 F.3d 910,

914–15 (6th Cir. 2007) (“[I]t is well settled that federal counterclaims and defenses are ‘inadequate

to confer federal jurisdiction’ . . . .” (quoting Merrell Dow Pharm., Inc. v. Thompson, 478 U.S.

804, 808 (1986))). Additionally, based on the nature of the state court proceeding, the Magistrate

Judge correctly concluded that Plaintiff’s eviction action is not one that was initially within the

Court’s original jurisdiction, because such an action would not arise under federal law. See 28

U.S.C. § 1331, 1441.

In his Objections, Defendant makes two arguments in support of federal question

jurisdiction as a basis for removal. First, Defendant argues that it was improper for Plaintiff to

initiate an eviction proceeding in Shelby County General Sessions Court on September 5, 2013

while Finley’s 2012 wrongful foreclosure action was “pending” in federal court. (ECF No. 9, 2.)

However, as set forth in the facts above, the Court entered judgment in that proceeding on January

25, 2013 and barred only then-pending foreclosure actions by Plaintiff. Plaintiff was not barred

from subsequently commencing a new action against Defendant in Tennessee state court.

Accordingly, the Court rejects Defendant’s argument that his 2012 wrongful foreclosure case

confers federal question jurisdiction on this action. Second, Defendant argues that because his

2012 wrongful foreclosure action is “still pending” in federal court, this Court necessarily has

federal question jurisdiction. (ECF No. 9, 3.) As explained above, that case is no longer pending

and the Court’s January 25, 2013 Order is inapplicable to the present case.

Defendant’s Objections cite Jordan v. Gilligan, 500 F.2d 701 (6th Cir. 1974) for the

proposition that a void judgment is inoperable. (ECF No. 9, 3.) But Gilligan involved a federal

district court’s refusal to vacate a prior federal district court order rather than a state court

judgment. See Gilligan, 500 F.2d at 703. Defendant also cites Kalb v. Feuerstein, 308 U.S. 433

(1940), apparently for the proposition that a federal court—pursuant to its federal question

jurisdiction—may hold a state court judgment to be void. (ECF No. 9, 3.) However, Kalb reversed

a state court judgment rendered after the appellants had commenced a bankruptcy proceeding,

thereby automatically staying all pending state proceedings. Kalb, 308 U.S. at 440. Therefore,

Kalb is clearly inapplicable in this situation. Ultimately, neither of these cases support the

argument that this Court has federal question jurisdiction over this action.

Because Defendant has failed to plead the existence of federal question jurisdiction, the

Court ADOPTS the Magistrate Judge’s recommendation that this Court lacks federal question

jurisdiction over this action.

Supplemental Jurisdiction

In a civil action in which a federal court has original jurisdiction over a claim, additional

claims may fall within the court’s subject matter jurisdiction—even though they do not

independently satisfy subject matter jurisdiction requirements—if they are sufficiently related to

the original claim. See 28 U.S.C. § 1367(a). The Magistrate Judge concluded, and the Court

agrees for the reasons set forth above, that no original jurisdiction exists in this case. (ECF No. 8,

7.) Accordingly, the Court ADOPTS the Magistrate Judge’s recommendation that there is no

supplemental jurisdiction over this action.

Rooker-Feldman Doctrine

The Magistrate Judge noted that aside from the above issues of subject matter jurisdiction,

the Rooker-Feldman doctrine may also bar the exercise of jurisdiction. (ECF No. 8, 7.) The

Rooker-Feldman doctrine bars federal jurisdiction over “cases brought by state-court losers

complaining of injuries caused by state-court judgments rendered before the district court

proceedings commenced and inviting district court review and rejection of those judgments.”

Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005); see also D.C. Ct. App.

v. Feldman, 460 U.S. 462 (1983); Rooker v. Fid. Tr. Co., 263 U.S. 413 (1923). Under the Rooker-

Feldman doctrine, “if the source of the injury is the state court decision,” the federal court lacks

jurisdiction. McCormick v. Braverman, 451 F.3d 382, 393 (6th Cir. 2006); see also VanderKodde

v. Mary Jane M. Elliott, P.C., 951 F.3d 397, 402 (6th Cir. 2020).

There is an exception to the Rooker-Feldman doctrine where a litigant asserts a claim that

is independent from the state court judgment, such as an allegation that the judgment is a product

of fraud. See Brown v. First Nationwide Mortg. Corp., 206 F. App’x 436, 439 (6th Cir. 2006).

Where a party asserts “some independent claim, albeit one that denies a legal conclusion that a

state court has reached in a case to which he was a party,” the doctrine will not preclude

jurisdiction. McCormick, 451 F.3d at 392 (quoting Exxon Mobil, 544 U.S. at 293).

The Magistrate Judge concluded, however, that because Defendant did not plead federal

subject matter jurisdiction, it was not necessary to determine whether the Rooker-Feldman doctrine

applied. The Court ADOPTS the Magistrate Judge’s recommendation that Defendant has failed

to plead subject matter jurisdiction, and consequently, that there is no need to determine the

applicability of the Rooker-Feldman doctrine.

CONCLUSION

The Court hereby ADOPTS the Magistrate Judge’s Report and Recommendation to

DISMISS this action for lack of subject-matter jurisdiction and remand to the Shelby County

Circuit Court.2

2 Due to Defendant’s pro se status, the Court notifies Defendant of his right to appeal pursuant to

Rule 4 of the Federal Rules of Appellate Procedure, which provides: “In a civil case, except as

provided in Rules 4(a)(1)(B), 4(a)(4), and 4(c), the notice of appeal required by Rule 3 must be

filed with the district clerk within 30 days after entry of the judgment or order appealed from.”

Fed. R. App. P. 4(a)(1)(A).

IT IS SO ORDERED this 22nd day of October, 2020.

s/ John T. Fowlkes, Jr.

JOHN T. FOWLKES, JR.

UNITED STATES DISTRICT JUDGE