Cherry v. One Stop Auto Parts, Inc.

LATARSHA CHERRY, et al., Plaintiffs, v. ONE STOP AUTO PARTS, INC., et al., Defendants.

Civil No. RDB-18-3054

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

May 17, 2019

MEMORANDUM OPINION

Latarsha Cherry and Albert Brown ("Plaintiffs"), filed this purported class action lawsuit in the Circuit Court for Baltimore City, Maryland, against One Stop Auto Parts, Inc. ("One Stop"), Ferdinand F. Greeff ("Greeff"), and Schrier, Tolin & Wagman, LLC ("STW") (collectively, "Defendants"), for damages and injunctive relief related to unlicensed lending and other actions in violation of consumer protection laws. (Compl. ¶ 1, ECF No. 1-1.) Defendants timely removed the case to this Court on October 4, 2018, asserting that Plaintiffs' legal theory related to excessive "interest" is premised on a federal statute, the Truth in Lending Act, 15 U.S.C. § 1601 et. seq. (Removal ¶¶ 5-6, 14-15, ECF No. 1.)

Pending before this Court is Plaintiff's [sic] Motion to Remand the Case to the Circuit Court for Baltimore City. (ECF No. 3.) The parties' submissions have been reviewed, and no hearing is necessary. See Local Rule 105.6 (D. Md. 2016). Plaintiffs also seek sanctions for improper removal, including costs and attorneys' fees under 28 U.S.C. § 1447(c). (Id.) For the reasons that follow, this Court shall GRANT Plaintiffs' request to remand this case to the Circuit Court for Baltimore City, Maryland, but shall DENY Plaintiffs' request for sanctions, costs, and attorneys' fees.

BACKGROUND

The facts contained herein are taken largely from Plaintiffs' Complaint and are viewed in the Plaintiffs' favor in light of the Defendants' removal of this action from state court. One Stop is an automobile repair shop located in Baltimore, Maryland that primarily served economically-depressed customers in east and west Baltimore. (Compl. ¶ 3, ECF No. 1-1.) Defendant Ferdinand Greeff is the owner, and Defendant Schrier, Tolin & Wagman, LLC ("STW") is One Stop's legal counsel. (Id. at ¶¶ 2, 9-10.)

One Stop extended loans to its customers to facilitate financing the repairs it performed. (Id. at ¶ 4.) Plaintiffs allege that the loans had hidden and onerous financing terms with usurious interest rates. (Id.) Plaintiffs also allege that One Stop never held the required licensing for acting as a lender. (Id. at ¶¶ 4, 15-17.) One Stop, through its counsel STW, takes aggressive collection efforts to collect on the loans that One Stop issued and has filed hundreds of collection lawsuits against its former customers. (Id. at ¶¶ 5, 8, 10, 23.)

Plaintiffs purport to represent a class of "[a]ll Maryland consumers who, since August 3, 2012, entered into a Retail Installment Contract with One Stop." (Id. at ¶ 38.) They also purport to represent a subclass of class members "who had judgments entered against them and in favor of One Stop based on the Retail Installment Contract with One Stop that was entered into since August 3, 2012." (Id.) Plaintiffs filed their Complaint in the Circuit Court for Baltimore City, Maryland on July 17, 2018, alleging six causes of action:

• Count One: Declaratory Judgment to Subclass, under the Maryland Declaratory Judgment Act, Md. Code Ann., Cts. & Jud. Pro. § 3-406.

• Count Two: Usury - Defendants One Stop and Greeff. Md. Code Ann., Com. Law § 12-103, 12-105(c)(3).

• Count Three: CLEC¹ (as to Defendants One Stop and Greeff only). In the alternative. (Compl. ¶ 64, ECF No. 1-1.) Md. Code Ann., Com. Law § 12-1008(b),(d). CLEC requires applicable disclosures under the federal Truth in Lending Act and its regulations. Md. Code Ann., Com. Law § 12-1014(b). (Compl. ¶ 68, ECF No. 1-1.)

• Count Four: Maryland Consumer Debt Collection Act. Md. Code Ann., Com. Law § 14-201(b),(c); 14-202(8).

• Count Five: Maryland Consumer Protection Act (as to Defendants One Stop and Greeff only). Md. Code Ann., Com. Law § 13-101 et seq.

• Count Six: Unjust Enrichment.

Defendants removed the case to this Court on October 4, 2018, asserting that the case arises under federal law, and Plaintiffs promptly responded on October 8, 2018 with the instant motion to remand. (Removal ¶¶ 5-6, 14-15, ECF No. 1; Mot., ECF No. 3.) Defendant STW then filed a Motion to Dismiss to Compel Arbitration on October 9, 2018 based on the arbitration clause in the loan documents. (Mot. Dismiss, ECF No. 5.) On October 10, 2018, Defendants, One Stop and Greeff, filed a Motion to Dismiss or Stay Pending Arbitration. (ECF No. 7.) On October 18, 2018, this Court granted the Consent Motion Regarding Plaintiffs' Opposition to Defendants' Motion to Dismiss and to Compel Arbitration (ECF No. 10) (filed on October 17, 2018), deferring Plaintiffs' opposition until 14 days after a decision by this Court denying Plaintiffs' Motion to Remand.

As described below, this case does not present a set of circumstances so substantial as to create federal question jurisdiction and choosing to exercise jurisdiction in this case would disrupt Congress's intended balance between the federal and state courts. Therefore, this Court shall GRANT Plaintiffs' request to remand this case to the Circuit Court for Baltimore City, Maryland. However, because Defendants provided an objectively reasonable basis for seeking removal, this Court shall DENY Plaintiffs' request for sanctions, costs, and attorneys' fees. This Court does not reach the motions to dismiss because it lacks jurisdiction to do so.

STANDARD OF REVIEW

A defendant in a state civil action may remove the case to federal court only if the federal court can exercise original jurisdiction over at least one of the asserted claims. 28 U.S.C. § 1441(a)-(c). Once an action is removed to federal court, the plaintiff may file a motion to remand the case to state court if there is a contention that jurisdiction is defective. 28 U.S.C. § 1447(c). The party seeking removal, and not the party seeking remand, bears the burden of establishing jurisdiction in the federal court. Johnson v. Advance America, 549 F.3d 932, 935 (4th Cir. 2008). On a motion to remand, this Court must "strictly construe the removal statute and resolve all doubts in favor of remanding the case to state court." Verbal v. Giant of Maryland, LLC, 204 F. Supp. 3d 837, 841 (D. Md. 2016) (quoting Richardson v. Phillip Morris, Inc., 950 F. Supp. 700, 701-02 (D. Md. 1997)); see also Pressl v. Appalachian Power Co., 842 F.3d 299, 302 (4th Cir. 2016) ("If federal jurisdiction is doubtful, a remand is necessary.").

ANALYSIS

I. Motion to Remand

Plaintiffs contend that this case was improperly removed and must be remanded because all parties are Maryland citizens, so there is no diversity jurisdiction, and all causes of action are based on State law, so there is no federal question jurisdiction. (Mot. 1, ECF No. 3.) Defendants argue that Plaintiffs' allegations of excessive interest are premised on the federal Truth in Lending Act ("TILA"), under which a "pre-penalty" is treated as "interest," and thus the resolution of most of the Plaintiffs' claims involve a substantial question of federal law. (Defs.' Resp. 1-2, ECF No. 12.)

The "well-pleaded complaint rule" governs the presence or absence of federal question jurisdiction. Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). Under this rule, courts "'ordinarily . . . look no further than the plaintiff's [properly pleaded] complaint in determining whether a lawsuit raises issues of federal law capable of creating federal-question jurisdiction under 28 U.S.C. § 1331.'" Pinney v. Nokia, Inc., 402 F.3d 430, 442 (4th Cir. 2005) (quoting Custer v. Sweeney, 89 F.3d 1156, 1165 (4th Cir. 1996)). A case can "arise under" federal law in one of two ways. Virginia ex rel. Hunter Labs., L.L.C. v. Virginia, 828 F.3d 281, 286 (4th Cir. 2016) (citing Gunn v. Minton, 568 U.S. 251, 257 (2013)). The more common is when a plaintiff's cause of action is itself created by federal law. Id. at 287. The second, narrower way of establishing federal jurisdiction is when it is conferred over a "special and small category of claims that originate in state rather than federal law." Id. (citations omitted). In such situations, "jurisdiction will only exist over a state-law claim if a federal issue is (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court withoutdisrupting the federal-state balance approved by Congress." Id. (referring to the Grable test provided by the United States Supreme Court in Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 314 (2005)).

In this case, Plaintiffs bring claims for declaratory judgment, usury, and unjust enrichment, under State law, as well as claims under the Maryland Credit Grantor Closed End Credit provisions ("CLEC"), the Maryland Consumer Debt Collection Act, and the Maryland Consumer Protection Act. The gravamen of their Complaint is that One Stop was an unlicensed lender whose Retail Installment Contract charged usurious interest charges—not quite usurious on its face, but usurious when computed with a complicated pre-penalty charge and excessive monthly late fees that were in violation of Maryland credit law.

Defendants' argument is focused on Count Three, under which Plaintiffs allege, in the alternative,² that One Stop and Greeff violated CLEC in several ways. Plaintiffs state that CLEC prohibits a creditor from imposing more than one late or delinquency charge for any single payment or portion of payment. (Compl. ¶ 66, ECF No. 1-1 (citing Md. Code Ann., Com. Law § 12-1008(b)).) If a creditor assesses charges not permitted by CLEC, those additional charges are considered interest. (Id. (citing Md. Code Ann., Com. Law § 12-1008(d)).) Plaintiffs add that CLEC also requires applicable disclosures under the federal Truth in Lending Act and its regulations. (Id. at ¶ 68 (citing Md. Code Ann., Com. Law § 12-1014(b)).) Plaintiffs allege that under the Truth in Lending Act, One Stop's pre-penalty chargeis considered a "hidden financing charge," which must be...