The District Court for the Northern District of New York handed down an unusual decision yesterday. The district court found that it had federal question jurisdiction even though the Plaintiff only asserted one claim in his Complaint: a violation of a state statute. The decision provides a good practice point for defense attorneys.
In Arnold v. Navient Solutions, LLC, the Plaintiff, an attorney, sought to purchase a home in New York but was denied a mortgage due to his credit score. When he reviewed his credit report, he discovered that Navient had reported three private student loans and a federal student loan as delinquent, which resulted in a lower credit score. Although he had settled the private loans, the Plaintiff claimed that Navient wrongfully reported them as delinquent loans to the CRAs. Plaintiff also argued that Navient denied all requests to revise the reports to reflect that the loans were settled and, thus, no longer delinquent. Plaintiff filed suit the New York Supreme Court (the inaptly named trial-level court in New York) and asserted a claim under New York General Business Law §349, which is New York’s unfair trade practices statute. Navient removed the case to district court and filed a motion to dismiss. The Plaintiff moved to remand, arguing that the district court lacked subject matter jurisdiction.
In its decision, the district court noted that it is a well-known rule that plaintiffs are masters of their own pleadings. Plaintiffs may avoid federal jurisdiction by pleading only state claims even where a federal claim is also available. But this rule isn’t absolute. The “artful pleading rule” prevents a plaintiff from avoiding removal by omitting necessary federal questions from his or her pleadings. Similarly, the “complete pre-emption” doctrine provides that, once an area of state law has been completely pre-empted, any claim purportedly based on that pre-empted state law is considered a federal claim, and therefore arises under federal law. The Court found that, although Plaintiff asserted only a state law claim, the state claim was preempted by the Fair Credit Reporting Act, that the claim was thus a FCRA claim and the Court, therefore, had federal question jurisdiction.
Arnold is a good reminder to litigants that removal may be available to non-diverse litigants even when the Complaint doesn’t explicitly raise a federal or constitutional claim. (It’s also a helpful tip that FCRA issues often lurk in the background).
Copyright © 2023 Womble Bond Dickinson (US) LLP All Rights Reserved.