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MORTERA v. NORTH AMERICA MORTGAGE COMPANY

October 9, 2001

ISABEL MORTERA, PLAINTIFF,
v.
NORTH AMERICA MORTGAGE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Orrick, District Judge.

OPINION AND ORDER

In this private attorney general action under § 17200 et seq. of the California Business and Professions Code, brought by plaintiff Isabel Mortera ("Mortera") against defendant North American Mortgage Company ("North American") to join it from charging California veterans who participate in the VA Home Loan Guaranty Program (the "VA Program") certain fees, and was removed by North American to this Court, Mortera now moves to remand the case back to the Superior Court of the County of Alameda. For the reasons set forth hereinafter, the motion is granted.

I.

The following summary of the facts of this case is taken from the allegations in plaintiffs complaint filed in the Superior Court.

The VA Program permits eligible veterans of the United States Armed Forces to purchase homes with mortgages backed by the federal government. (Id. ¶ 2.) State and federal law limit the type and amount of fees and costs that a lender may charge a veteran participating in the VA Program. (Id. ¶ 4.) Mortera alleges that North American violates the law by charging veterans excess fees for loans originated by mortgage brokers. (Id. ¶ 5.)

Mortera, suing on of behalf of the general public as a private attorney general as defined in § 17204 of the California Business and Professions Code (id. ¶ 11), does not herself claim to be a veteran or otherwise eligible for the VA Program, nor does she allege to have been personally injured by North American's allegedly illegal loan practices. Her single cause of action pleads a violation of California's Unfair Competition Act, § 17200 et seq. of the California Business and Professions Code (id. ¶¶ 35-39). She seeks injunctive and declaratory relief to stop North American From engaging in the allegedly unlawful Business practices, restitution of the loan fees, and attorney's fees and costs.

II.

If at any time before final judgment it appears that the district court lacks subject matter jurisdiction over a case that has been removed to federal court, the case shall be remanded. 28 U.S.C. § 1447 (c). "We strictly construe removal statute against removal jurisdiction." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (per curiam). This strong presumption against removal jurisdiction means that the defendant always has the burden of proving that removal is proper. Id.

Here, Mortera makes three independent arguments in support of her motion to remand. First, she argues that remand is required because her lack of Article III standing deprives this Court of original jurisdiction. Second, she argues that this Court lacks diversity jurisdiction because the amount in controversy requirement is not met in this case. Third, she argues that there is no federal question jurisdiction because her claim arises under California law. Because it is clear that Mortera lacks standing to bring this case in federal court, it is unnecessary to reach her remaining arguments.

A.

The jurisdiction of federal courts is defined and limited by Article III of the Constitution. Flast v. Cohen, 392 U.S. 83, 94, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968). Standing "is an essential and unchanging part of the case-or-controversy requirement of Article III." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). The Supreme Court has established that parties seeking to invoke federal jurisdiction must establish (1) personal injury or threat of injury; (2) that the injury can be fairly traced to the action challenged; and (3) that the injury is likely to be addressed by the requested relief. Id. at 561, 112 S.Ct. 2130.

B.

In this case, Mortera does not allege that she suffered any injury as a result of North American's allegedly unfair and illegal loan practices. Rather, she brings her claim on behalf of the public as a private attorney general under California's Unfair Competition Act (the "UCA"), Business & Professions Code § 17200 et seq. The UCA provides that an action challenging wrongful business conduct may be brought "by any person acting for the interests of itself, its members or the general public." Id. § 17204. The California Supreme Court has held that a person suing under the UCA does not have to prove that he or she was directly injured by the defendant's wrongful business practice. Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal.4th 553, 561, 71 Cal.Rptr.2d 731, 736, 950 P.2d 1086 (1998) ("`[A] private plaintiff who has himself suffered no injury at all may sue to obtain relief for others.'") (quoting Cal. Bus. & Prof.Code § 17204). Thus, a plaintiff can sue in California courts under the UCA even though he or she has suffered no injury in fact and would not have standing to sue in federal court.

A number of federal courts have remanded private attorney general actions under the UCA due to lack of standing. In Toxic Injuries Corp. v. Safety-Kleen Corp., 57 F. Supp.2d 947 (C.D.Cal. 1999), the court held that plaintiff did not have standing because it alleged only generalized injuries as a result of exposure to defendant's chemicals, not that plaintiff or any of its directors suffered individual injuries. Similarly, in Levy v. Dial Corp., 1997 WL 588925 (N.D.Cal. 1997), the court remanded a UCA case involving misleading product packaging where the complaint did not allege that the plaintiff ever bought the product or was personally misled. The court in As You Sow v. Sherwin-Williams Co., 1993 WL 560086 (N.D.Cal. 1993), held that "[plaintiffs] state created statutory right to act as a private attorney general does not confer "injury' on [plaintiff] sufficient to satisfy federal standing requirements." Id. at *2. The As You Sow court cited ...


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