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LYNN A. NICHALSON v. FIRST FRANKLIN FINANCIAL CORPORATION

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA


November 30, 2010

LYNN A. NICHALSON,
PLAINTIFF,
v.
FIRST FRANKLIN FINANCIAL CORPORATION, ET AL., DEFENDANTS.

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

MEMORANDUM AND ORDER

Plaintiff Lynn Nichalson ("Plaintiff") seeks redress from Defendants First Franklin Financial Corporation, Home Loan Services, Inc., Mortgage Technology, Inc., Mortgage Electronic Registration Systems, Inc., and U.S. Bank, National Association (collectively, "Defendants") based on various state claims, including Fraud, Conspiracy to Defraud, Negligence, and violations of the Business and Professions Code § 17200.

Previous allegations against Defendants included violations of the Truth in Lending Act ("TILA") and the Real Estate Settlement Procedures Act ("RESPA"), which were dismissed by this Court in previous orders. See Order Def.'s Mot. Dismiss, ECF No. 17; Order Def.'s Mot. Dismiss, ECF No. 28. Presently before the Court is Defendant First Franklin Financial Corporation's ("Defendant") Motion to Dismiss Plaintiff's Complaint for failure to state a claim upon which relief may be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6).*fn1 Defendant asserts that since only state law claims remain, the Court should exercise supplemental jurisdiction and rule on the merits of the motion or, in the alternative, dismiss the entire case.

Defendant has concurrently filed a Motion to Strike pursuant to Rule 12(f). Plaintiff's opposition asks the Court to remand the case back to state court since no federal claims remain. For the reasons set forth below, the case is remanded to state court and the Defendant's Motion to Dismiss and Motion to Strike are both denied as moot.

BACKGROUND*fn2

This action arises out of Plaintiff's 2006 residential mortgage loan transaction, secured by property located at 9527 Clarke Farms Drive, Elk Grove, California ("Property").

Plaintiff alleges that Defendant extended credit to her without regard to her ability to pay. She contends that she accurately reported her income on her loan application, but that Defendant subsequently falsified her income, as well as the property's appraisal information, without Plaintiff's knowledge or consent to get the loan approved. Furthermore, Plaintiff alleges that the loan's interest rates were subject to increase, such that the monthly payments exceeded Plaintiff's ability to pay. Nonetheless, as indicated in the Deed of Trust, Plaintiff was approved for a loan in the amount of $534,800.00.

Plaintiff further alleges that Defendant awarded higher commissions to its loan officers when they sold a large volume of loans or loans with high yield spread premiums. Plaintiff states that these practices encouraged loan officers to steer borrowers, into loans that they were unable to repay. The terms of the loan were memorialized in a Promissory Note, which was secured by a Deed of Trust on the Property.

If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. 28 U.S.C. § 1447(c). Where an amendment eliminates the federal claim upon which federal court jurisdiction is premised, this Court may, in its discretion, decline to exercise supplemental jurisdiction and remand the remaining state law claims. See 28 U.S.C. § 1367(c). See also Harrell v. 20th Century Ins. Co., 934 F.2d 203, 205 (9th Cir. 1991).

Plaintiff initially filed suit in Superior Court alleging claims under both state and federal laws, including a cause of action for violation of both TILA and RESPA. Defendant subsequently removed the suit to this Court on the basis of federal question jurisdiction.

Plaintiff has currently filed a Second Amended Complaint abandoning both federal claims. Only Plaintiff's state law claims remain. With only Plaintiff's state law claims remaining, this Court ceases to have subject matter jurisdiction over the suit. The Court declines to exercise pendent jurisdiction over the remaining state claims. Therefore, the matter is hereby REMANDED to Superior Court, County of Sacramento. Defendant's Motion to Dismiss and Motion to Strike are both DENIED as moot. The Clerk is directed to close the file.*fn3

IT IS SO ORDERED.


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