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Johnson v. Morrison Homes

July 23, 2010


The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge


In June 2005, Traci Johnson ("Plaintiff"), with the assistance of a federally related mortgage loan, entered into a contract with Morrison Homes, Inc. and Taylor Morrison, Inc. ("Defendants") for the purchase of a home in Elk Grove, California.*fn1 On March 12, 2008, Plaintiff commenced this class action suit in the Superior Court of Sacramento County alleging that Defendants violated, inter alia, California Financial Code § 50505.

In July 2008, Defendants removed this action from Sacramento County Superior Court to this Court under 28 U.S.C. § 1441(a) on grounds that the state law claims are based entirely upon two federal authorities: (1) the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2607, 2608 ("RESPA"); and (2) Regulation X, 24 C.F.R. § 3500. (Def.'s Opp., 2) Plaintiff has now filed a Motion to Remand this case to the Superior Court of Sacramento County. For the reasons stated below, Plaintiff's Motion to Remand is denied.


In June 2005, Plaintiff purchased a home from Defendants in Elk Grove in Sacramento County, California with the assistance of a federally related mortgage loan. She asserts that the sales contract required her to purchase title insurance from First American Title Insurance Company ("First American"). (Pl.'s Mot. Remand, 2) Plaintiff alleges that this provision was included in the sales contract due to a "business relationship" between First American and Defendants which involved a "kickback" scheme, in direct contradiction with RESPA and California Financial Code § 50505. (Pl.'s Compl. ¶¶ 15, 16, 17) This illicit conduct, Plaintiff contends, is manifested by her paying $514 for her title insurance policy---well in excess of the $125 that First American charges per policy as is filed with the California Department of Insurance. (Pl.'s Mot. Remand, 3)

Plaintiff's Complaint alleges that the Defendants' conduct violated numerous state laws that entitle her to relief:

(1) Unfair Competition Law, Business and Prof. Code §§ 17200 and 1750; (2) Consumers Legal Remedy Act, Civil Code § 1750, et seq.; (3) California Financial Code § 50505; (4) Breach of Contract; (5) Negligence; (6) Unjust Enrichment; and (7) Declaratory Relief. (Pl.'s Comp., 1)

On July 10, 2008, Defendants removed this action from the Sacramento Superior Court pursuant to federal question jurisdiction. 28. U.S.C. § 1441(a). Defendants contend that the Plaintiff's claims are based solely on alleged violations of RESPA and Regulation X, and that the validity of those claims "turn[] solely on the interpretation and application of RESPA and Regulation X." (Def. Opp., 2) Plaintiff now moves to remand alleging that this Court does not have jurisdiction to hear Plaintiff's claims.


A defendant may remove any civil action from state court to federal district court if the district court has original jurisdiction over the matter. 28 U.S.C. § 1441(a). Generally, district courts have original jurisdiction over civil actions in two instances: (1) where there is complete diversity between the parties, or (2) where a federal question is presented in an action arising under the Constitution, federal law, or treaty.

28 U.S.C. §§ 1331 and 1332.

The removing party bears the burden of establishing federal jurisdiction. Ethridge v. Harbor House Rest., 861 F.2d 1389, 1393 (9th Cir. 1988). Furthermore, courts construe the removal statute strictly against removal. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citations omitted). If there is any doubt as to the right of removal in the first instance, remand must be granted. See Gaus, 980 F.2d at 566. If the court at any time determines that it lacks jurisdiction over the removed action, it must remedy the improper grant of removal by remanding to the state court. 28 U.S.C. § 1447(c); see ARCO Envtl. Remediation L.L.C. v. Dep't of Health & Envtl. Quality of Mont., 213 F.3d 1108, 1114 (9th Cir. 2000) (internal citations omitted).

The district court determines whether removal is proper by first determining whether a federal question exists on the face of the plaintiff's well-pleaded complaint. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). If a complaint alleges only state law claims and lacks a federal question on its face, then the federal court must grant the motion to remand. See 28 U.S.C. ยง 1447(c); Caterpillar, 482 U.S. at 392. Nonetheless, there are rare exceptions when a well--pleaded state law cause of action will be deemed to arise under federal law and support removal. They are "...(1) where federal law completely preempts state law, (2) where the ...

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