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California v. Bank of America Corp.

United States District Court, C.D. California

February 2, 2015

California
v.
Bank of America Corporation, et al

Attorneys for Plaintiff: Not Present.

Attorneys for Defendants: Not Present.

Honorable Percy Anderson, UNITED STATES DISTRICT JUDGE.

CIVIL MINUTES - GENERAL

Proceedings: IN CHAMBERS -- COURT ORDER

On December 19, 2014, Los Angeles City Attorney Michael Feuer (" Feuer") commenced an action against defendants Bank of America Corporation, Bank of America, N.A., Countrywide Financial Corporation, Countrywide Home Loans, and Countrywide Bank, FSB (collectively " BofA") alleging a single claim for unfair business practices pursuant to California Business and Professions Code section 17200, in Case No. CV 14-9744 PA (AGRx) (" Case No. CV 14-9477"). Feuer brings the action " in the name of the People of the State of California pursuant to section 17200." (Compl. ¶ 14.) The state law unfair competition in Case No. 1409744 is premised on a violation of the Fair Housing Act (" FHA"), 42 U.S.C. § § 3601, et seq., to support allegations under the " unlawful prong" of section 17200. The Complaint alleges that this Court's jurisdiction is based on " 42 U.S.C. § 3613 and 28 U.S.C. § 1331, [and] 1343, because the claims alleged herein arise under the laws of the United States." (Compl. ¶ 30.) According to the Complaint, " Plaintiff's unlawful prong claim under [section 17200] necessarily required determination whether Defendants violated the FHA." (Id.)

Previously, on December 6, 2013, Feuer, as Los Angeles City Attorney, and on behalf of the City of Los Angeles (the " City"), commenced an action against the identical defendants in Case No. CV 13-9046 PA (AGRx) (" Case No. CV 13-9046"). In both actions, Feuer is represented by the same private counsel. Case No. CV 13-9046 alleges a single claim against BofA for violation of the FHA. The substantive allegations against BofA concerning discriminatory lending practices are nearly identical in Case Nos. CV 13-9046 and CV 14-9744.

On August 14, 2014, this Court issued a Minute Order in Case No. CV 13-9046 establishing pretrial and trial dates. The Minute Order was followed by a Scheduling Order issued on August 15, 2014. Those orders established that the last day for a hearing on a motion to amend the pleadings or add parties was November 10, 2014. The City never sought to add a section 17200 claim to Case No. CV 13-9046.

After reviewing the Complaint in Case No. CV 14-9744, the Court issued two orders to show cause. In the first order to show cause, the Court ordered the parties to show cause why Case No. CV 14-9744 should not be dismissed for impermissible claim-splitting. In the second order to show cause, the Court ordered the parties to show cause why Case No. CV 14-9744 should not be dismissed for lack of subject matter jurisdiction. The parties have submitted their responses to both orders to show cause.

It is well-established that " a district court's duty to establish subject matter jurisdiction is not contingent upon the parties' arguments." See United Investors Life Ins. Co. v. Waddell & Reed Inc., 360 F.3d 960, 966 (9th Cir. 2004). Parties cannot agree to nor can they " waive" a lack of such jurisdiction. Id. at 966-67. Courts may consider the issue sua sponte. Demery v. Kupperman, 735 F.2d 1139, 1149 n.8 (9th Cir. 1984). Indeed, the Supreme Court has repeatedly emphasized that " district courts have an 'independent obligation to address subject-matter jurisdiction sua sponte.'" Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 593, 124 S.Ct. 1920, 1937, 158 L.Ed.2d 866 (2004) (quoting United States v. So. Cal. Edison Co., 300 F.Supp.2d 964, 972 (E.D. Cal. 2004)).

Mere reference to a federal law to support a state unfair competition claim does not convert such a claim into a federal cause of action. See Nevada v. Bank of America Corp., 672 F.3d 661, 675 (9th Cir. 2012). " Even where a state law claim does necessarily turn on a substantial and disputed question of federal law, removal is subject to a 'possible veto' where exercising federal jurisdiction is not 'consistent with congressional judgment about the sound division of labor between state and federal courts governing the application of § 1331.'" Id. at 675 (quoting Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 313-14, 125 S.Ct. 2363, 2367, 162 L.Ed.2d 257 (2005)); see also id. at 676 (" State courts frequently handle state-law consumer protection suits that refer to or are predicated on standards set forth in federal statutes. Exercising federal question jurisdiction over any state law claim that references a federal consumer protection statute would 'herald[] a potentially enormous shift of traditionally state cases into federal courts.'") (quoting Grable & Sons, 545 U.S. at 319, 125 S.Ct. at 2370-71, 162 L.Ed.2d 257).

Although the Complaint in Case No. 14-9744 alleges violations of the FHA to support the unlawful prong of the 17200 claim, that claim could easily be supported by the analogous provisions of the California Fair Employment and Housing Act (" FEHA"), Cal. Gov't Code § 12955. For instance, both the FHA and FEHA make it unlawful for a business that engages in residential real estate-related transactions to discriminate against any person on the basis of race and other characteristics in making available a transaction or the terms of such a transaction. Compare 42 U.S.C. § 3605(a) (" It shall be unlawful for any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin."); with Cal. Gov't Code § 12955(i) (" [It shall be unlawful] for any person or other organization or entity whose business involves real estate-related transactions to discriminate against any person in making available a transaction, or in the terms and conditions of a transaction, because of race, color, religion, sex, gener, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, source of income, familial status, disability, or genetic information.").

Analogous provisions of the FHA and FEHA are interpreted similarly by California's courts. See Walker v. City of Lakewood, 272 F.3d 1114, 1131 n.8 (9th Cir. 2001) (" [W]e apply the same standards to FHA and FEHA claims."); Sada v. Robert F. Kennedy Med. Ctr., 56 Cal.App.4th 138, 150 n.6, 65 Cal.Rptr.2d 112, 119 (1997) (" In applying the provisions of FEHA, California courts often follow decisions construing federal antidiscrimination statutes, as long as those decisions provide appropriate guidance."). The mere fact that the Complaint in Case No. CV 14-9744 references the FHA, and ignores the nearly identical language in FEHA does not transform the state law 17200 claim into a federal claim even if, for strategic reasons, neither party wishes to recognize that fact. To hold otherwise would allow parties to transform state law claims into " substantial" federal claims simply by neglecting to cite an alternative state law basis of the claim. See Nevada, 672 F.3d at 675-76. The parties cannot stipulate to create federal question jurisdiction where there is none. See United Investors Life Ins. Co., 360 F.3d at 966-67. The Court therefore concludes that the Complaint in Case No. CV 14-9744 does not raise a substantial federal question, but is instead a state law unlawful business practices claim over which it lacks subject matter jurisdiction.

Even if the Court did possess subject matter jurisdiction in Case No. 14-9744, dismissal would nevertheless be appropriate because the City has engaged in impermissible claim-splitting. Plaintiffs generally have 'no right to maintain two separate actions involving the same subject matter at the same time in the same court and against the same defendant.'" Adams v. Cal. Dep't of Health Servs., 487 F.3d 684, 688 (9th Cir. 2007) (quoting Walton v. Eaton Corp., 563 F.2d 66, 70 (3d Cir. 1977)). Here, by filing Case No. CV 14-9744 after the expiration of the deadline for amending its Complaint in Case No. CV 13-9046, the City has engaged in impermissible claim-splitting in an effort to avoid the deadlines established in this Court's Scheduling Order issued in Case No. CV 13-9046.

In its Response, the City contends that it is not a party to Case No. CV 14-9744, and that the doctrine against claim-splitting is therefore inapplicable. Specifically, the City relies on California Business and Professions Code section 17206(a), which requires an unlawful business practices claim to be " brought in the name of the people of the State of California" by " any city attorney of a city having a population in excess of 750, 000." But the fact that Business and Professions Code section 17206(a) requires that the City's 17200 claim be " brought in the name of the people of the State of California" does not mean that the Court can ignore the fact that both Case Nos. CV 13-9046 and CV 14-9744 are being pursued by the City's attorney, allege nearly identical facts, and could (and should) have been brought in a single action.

" [I]n assessing whether the second action is duplicative of the first, we examine whether the causes of action and relief sought, as well as the parties or privies to the action, are the same." Adams, 487 F.3d at 689. Even if the Court were to recognize the legal fiction that Case No. CV 14-9744 is brought by the People of the State of California rather than by the City, the causes of action in the two suits are identical. " To ascertain whether successive causes of action are the same, we use the transaction test, developed in the context of claim preclusion." Id. In applying the transaction test, courts examine four criteria: " '(1) whether rights or interest established in the prior judgment would be destroyed or impaired by prosecution in the second action; (2) whether substantially the same evidence is presented in the two actions; (3) whether the two suits involve infringement of the same right; and (4) whether the two suits arise out of the same transactional nucleus of facts.'" Id. (quoting Costantini v. Trans World Airlines, 681 F.2d 1199, 1201-02 (9th Cir. 1982)).

Here, all for factors are easily satisfied. An examination of the allegations contained in the operative Complaints filed in the two actions discloses that the facts alleged are nearly identical, both allege discrimination arising out of the provision of home loans and related services within the identical area, and are being prosecuted by the same city official. Case Nos. CV 13-9046 and CV 14-9744 therefore allege identical causes of action. Moreover, at least in this factual circumstance, the People, as the putative named plaintiff in Case No. CV 14-9744, are in privity with the City. Id. at 691 (" [T]he concept of privity traditionally applied to a narrow class of relationships in which 'a person is so identified in interest with a party to former litigation that he represents precisely the same right in respect to the subject matter involved.") (quoting Kourtis v. Cameron, 419 F.3d 989, 996 (9th Cir. 2005)). Finally, the City has offered no explanation for why it could not have brought the 17200 claim in Case No. CV 13-9046. The Court has no doubt that a ruling on the merits in Case No. CV 13-9046 would have a preclusive effect in Case No. CV 14-9744. The Court therefore concludes that Case No. CV 14-9744 is duplicative of Case No. CV 13-9046 and that the City has engaged in impermissible claim-splitting.

When a party has impermissibly split its claims, the Court has discretion to dismiss the second action with or without prejudice. Id. at 692 (" Although the district court alternatively could have opted to dismiss [the] later-filed complaint without prejudice, to consolidate the two actions, or to stay or enjoin proceedings, under the circumstances of this case, the district court did not abuse its discretion in electing to dismiss the second action with prejudice."). In this instance, as the Court's conclusion that the City has not alleged a substantial federal claim over which this Court possesses subject matter jurisdiction indicates, the 17200 claim is a state law claim that should be prosecuted, if at all, in state court. The Court will therefore exercise its discretion to dismiss this action without prejudice.

For all of the foregoing reasons, the Court dismisses Case No. CV 14-9744 without prejudice because it both lacks subject matter jurisdiction and the City has impermissibly split its claims between this action and Case No. CV 13-9046.

IT IS SO ORDERED.

JUDGMENT

Pursuant to the Court's February 2, 2015 Minute Order dismissing this action without prejudice for lack of subject matter jurisdiction and because plaintiff had impermissibly split its claim making this a second duplicative action,

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that this action is dismissed without prejudice for lack of subject matter jurisdiction.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that in the alternative, and to the extent plaintiff could be considered to have asserted a federal claim, this action is nevertheless dismissed without prejudice because plaintiff engaged in impermissible claim-splitting.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that plaintiff take nothing and that defendants shall have their costs of suit.

IT IS SO ORDERED.


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