Redmond v. Polunsky

HOWARD JAMES REDMOND and SHASHONAH DENEEN REDMOND Plaintiffs, v. ALLAN B. POLUNSKY, trustee, et al. Defendants.

Civil Action No. 4:20-mc-00204-ALM

United States District Court, E.D. Texas, Sherman Division

February 21, 2023

MEMORANDUM OPINION AND ORDER

AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE

Pending before the Court is Plaintiffs' complaint which seeks confirmation of an alleged arbitration award pursuant to 9 U.S.C. § 9 and registration of a judgment in this court pursuant to 28 U.S.C. § 1963 (Dkt. #1). Having reviewed the complaint, the Court finds that it lacks subject matter jurisdiction over this matter and dismisses this case sua sponte.

BACKGROUND

Plaintiffs Howard James Redmond and Shashonah Deneen Redmond (“Plaintiffs”), proceeding pro se, filed this lawsuit against Allan B. Polunsky, Trustee, BBMC Mortgage, Fannie Mae, Freddie Mac, MERS Holding Corp., and Flagstar Bank (collectively “Defendants”) seeking to confirm a purported arbitration award (Dkt. #1). Along with their complaint, Plaintiffs attached a copy of the alleged arbitration award (Dkt. #1, Exhibit 1), the alleged underlying contract between the parties (Dkt. #1, Exhibit 2) a Memorandum in Support of Demand to Confirm the Arbitration Award (Dkt. #1, Exhibit 3), an Affidavit of Demand for Registration of Foreign Judgment, (Dkt. #1, Exhibit 4), and other documents relating to legal principles (Dkt. #1 Enclosure 1; Dkt #1, Enclosure 2, Dkt. #1, Enclosure 3). Though the voluminous submissions by Plaintiffs are not a model of clarity, the Court attempts to summarize the gravamen of Plaintiffs' complaint.

According to Plaintiffs, on or about September 6, 2019, the parties entered into an “agreement” which provided that the parties would settle any dispute arising out of the agreement by arbitration (Dkt. #1, Exhibit 3 at p. 1). The “agreement” (Dkt. #1, Exhibit 2) is a document entitled “That Conditional Acceptance for the Value/Agreement/Counter Offer to Acceptance Offer” and subtitled “Show of Cause Proof of Claim Demand” (Dkt. #1, Exhibit 2 at p. 1). It is addressed to the Defendants from Plaintiffs, and states in part as follows:

To the Holder in Due Course and/or agent and/or representative,

I, howard james redmond jr., living man, and shashonah deneen redmond, living woman, have received your offer and accept your offer of your alleged “mortgage” under the following terms and conditions-That you provide the following proof of claim. Your failure to provide proof of claim and to accept payment for credit on account shall constitute a breach of this binding self-executing irrevocable contractual agreement coupled with interest and subject the breaching party to fines, penalties, fees, taxes and other assessments.

(Dkt. #1, Exhibit 2 at p. 2) (emphasis added). Strikingly absent from this “binding self-executing irrevocable contractual agreement” is any signature from any of the Defendants (See Dkt. #1, Exhibit 2 at p. 29) (showing only a signature line for Plaintiffs). Rather, it appears that Plaintiffs' theory is that this “agreement” arose based on Defendants' failure to respond to it.

Indeed, Plaintiffs explain in the attached memorandum the steps that they unilaterally took, and to which Defendants did not respond, that resulted in the formation of the agreement and subsequent purported arbitration award (See Dkt. #1, Exhibit 3). First, on or about September 6, 2019, Plaintiffs mailed to the Defendants the “self-executing irrevocable contractual agreement” and “received no response” (Dkt. #1, Exhibit 3 at p. 2). Then, on December 4, 2019, Plaintiffs sent a “Notice of Default” to the Defendants, which also went unresponded to (Dkt. #1, Exhibit 3 at p. 2). Accordingly, on or about January 5, 2020, pursuant to the alleged agreement, Plaintiffs filed an arbitration claim with Arbitrator Thomas Bradford Schaults, “claiming $167,000 x 6 = $1,002,000.00 total damages” (Dkt. #1, Exhibit 3 at p. 3).

The arbitration award (Dkt. #1, Exhibit 1) purports to have been issued by a company called Private International Arbitration Association,^[1]and is signed by an arbitrator named Thomas Bradford Schaults^[2](Dkt. #1, Exhibit 1 at p. 1, 17). The document states that an arbitration hearing was conducted electronically on January 21, 2019, which the Defendants did not attend (Dkt. #1, Exhibit 1). According to the findings of Schaults, “the parties had a pre-established relationship which placed an obligation on each to communicate with the other” and the Defendants “failure to respond [] constituted an act of ‘tacit acquiescence'” (Dkt. #1, Exhibit 1 at pp. 11-12). Therefore, since there was a “binding irrevocable contractual agreement” between the parties, the Defendants were ordered to pay Plaintiffs $167,000 each (Dkt. #1, Exhibit 1 at pp. 6-7).

On or about February 7, 2020, Plaintiffs allege they attempted to collect on the judgment “by billing/invoicing the [Defendants],” but the Defendants failed to comply (Dkt. #1, Exhibit 3 at p. 3). Accordingly, on December 21, 2020, Plaintiffs filed suit in this Court, seeking “to confirm [the] arbitration award” pursuant to 9 U.S.C. § 9 and “demand[ing] that the Judgment be registered in this Court and that such Judgment be made a Foreign Judgment of this court ....” (Dkt. #1, Exhibit 3 at p. 1; Dkt. #1, Exhibit 4 at p. 2). The Defendants have not appeared in this action.

LEGAL STANDARD

“Subject-matter jurisdiction, because it involves the court's power to hear a case, can never be forfeited or waived.” United States v. Cotton, 535 U.S. 625, 630 (2002). Federal jurisdiction exists only when a “federal question” is presented, 28 USC § 1331, or when there is “diversity of citizenship” and the amount in controversy exceeds $75,000.00, 28 U.S.C. § 1332. At any stage in the litigation, “the objection that a federal court lacks subject-matter jurisdiction . . . may be raised.” Arbaugh v. Y & H Corp., 546 U.S. 500, 506 (2006). Federal courts “have an independent obligation to determine whether subject-matter jurisdiction exists, even in the absence of a challenge from any party.” Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006) (citing Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999)). When a federal court concludes that it lacks subject-matter jurisdiction, the court must dismiss the complaint in its entirety. Id.; see also FED. R. CIV. P. 12(h)(3).

ANALYSIS

Plaintiffs ask the Court to confirm their alleged arbitration award pursuant to 9 U.S.C. § 9 and register their judgment in this Court pursuant to 28 U.S.C. § 1963 (Dkt. #1 Exhibit 3 at p. 6; Dkt. #1 at p. 5).

I. Subject Matter Jurisdiction

This Court must consider the issue of subject matter jurisdiction sua sponte. Howery v. Allstate Ins. Co., 243 F.3d 912, 919 (5th Cir. 2001); see also Arbaugh v. Y & H Corp., 546 U.S. at 514 (“[Federal] courts have an independent obligation to determine whether subject-matter jurisdiction exists, even in the absence of a challenge from any party”). Federal jurisdiction exists only when a “federal question” is presented, 28 USC § 1331, or when there is “diversity of citizenship” and the amount in controversy exceeds $75,000.00. 28 U.S.C. § 1332. The court “must presume that a suit lies outside of this limited jurisdiction, and the burden of establishing federal jurisdiction rests on the party seeking the federal forum.” Howery, 243 F.3d at 916 (5th Cir. 2001).

A party filing a motion under the FAA to confirm an arbitration award must allege facts showing an independent jurisdictional basis for the Court to consider that motion because the FAA, by itself, bestows no federal jurisdiction. See Hall St. Associates, L.L.C. v. Mattel, Inc. 552 U.S. 576, 581-82 (2008); see also Andrew v. Talbot, 833 Fed. App'x. 473, 474 (10th Cir. 2021) (“The Federal Arbitration Act does not confer subject matter jurisdiction on federal courts absent an independent jurisdictional basis.”). Stated differently, “[a] district court has no authority to resolve a motion to confirm an arbitration award under § 9 of the FAA if the arbitration claims would not otherwise be subject to federal jurisdiction absent the arbitration agreement.” Brett-Andrew: House of Nelson v. Jackson, 2020 WL 8458834, at *2 (N.D. Tex. Dec. 4, 2020), rec. accepted, 2021 WL 409999, (N.D. Tex. Feb. 5, 2021) (dismissing similar complaint by another Plaintiff seeking to confirm arbitration award for lack of subject matter jurisdiction). “Such independent bases include diversity of citizenship under 28 U.S.C. § 1332 or federal question jurisdiction under 28 U.S.C. § 1331.” Quezada v. Bechtel OG & C Constr. Servs., Inc., 946 F.3d 837, 841 (5th Cir. 2020) (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 26 n.32 (1983)).

Recently, the Supreme Court of the United States confirmed the aforementioned test to determine when a federal district court may assert jurisdiction over a request to confirm or vacate an arbitral award under Sections 9 and 10 of the FAA, 9 U.S.C. § 1 et seq. Badgerow v. Walters, 142 S.Ct. 1310, 1314, 212 L.Ed.2d 355 (2022). The Supreme Court ultimately concluded that “Section 9 and 10 applications conform to the normal and sensible judicial division of labor: The applications go to state, rather than federal, courts when they raise claims between non-diverse parties involving state law.” Badgerow, 142 S.Ct. at 1321. Although the underlying dispute “may have originated in the arbitration of a federal-law dispute[,]” “the underlying dispute is not now at issue.” Id. “Rather, the application concerns the contractual rights provided in the arbitration agreement, generally governed by state law.” Id. “And adjudication of such state-law contractual rights [ ] typically belongs in state courts.” Id. at 1321-1322.

Here Plaintiffs...