Unreported / Non-Citable
Background
Homeowners facing foreclosure sued in California state court, pleading only state-law claims under the Homeowner Bill of Rights (HBOR). The defendants, including Rocket Mortgage, LLC, removed the case to the Northern District of California on diversity grounds. Plaintiffs did not move to remand. After a hearing on the defendants' motion to dismiss, however, Judge Edward M. Chen requested supplemental briefing on the amount in controversy, citing the court's independent obligation to confirm jurisdiction. Plaintiffs' supplemental brief also belatedly urged remand.
Defendants conceded that the complaint's caption states an amount in controversy below $75,000, but argued the body was vaguer, because it described the amount as approximately $75,000 "and/or according to proof." They relied on the plaintiffs' request for civil penalties under Civil Code section 2924.12(b), which are the greater of treble damages or $50,000, and on allegations that plaintiffs owe about $730,000 and that the property is worth over $1 million. The complaint alleged a trustee's sale had been noticed for the day after filing, and it sought an injunction before any sale, or penalties only if a sale occurred.
The Court’s Holding
The court held that defendants, as the removing parties, failed to prove by a preponderance of the evidence that more than $75,000 was in controversy, applying the strong presumption against removal jurisdiction. First, damages and penalties under section 2924.12(b) are available only after a trustee's deed upon sale is recorded; before then only injunctive relief is available. No deed had been recorded when the complaint was filed, when the case was removed, or when the court ruled, and nothing in the record showed the sale had occurred. Relying on several district court decisions, the court declined to count those penalties. Defendants also made no argument about attorney's fees, so they did not prove any likely fee amount.
Second, the court refused to count the roughly $730,000 debt or the property's value. Under Corral v. Select Portfolio Servicing, Inc., 878 F.3d 770 (9th Cir. 2017), those figures measure the amount in controversy when plaintiffs seek to quiet title, rescind the loan, or enjoin foreclosure indefinitely or permanently. The complaint did not seek that relief. Read as a whole, it asked for an injunction before the sale so plaintiffs could request an alternative, such as selling the property themselves, if the loan modification was denied. Defendants' emphasis on preserving $1,000,000 in equity misconstrued that relief; the only pecuniary benefit was temporarily keeping possession while the request was reviewed.
The court rejected the argument that Corral does not apply because the loan modification was denied. Corral does not bar the framework where a temporary injunction is sought to request other relief, and in any event plaintiffs alleged they were told of a denial but received no written denial, so the process arguably was not finalized. Defendants did not quantify other measures Corral allows, such as lender delay costs or fair rental value, and conclusory allegations are insufficient. The court remanded to state court and found the motion to dismiss moot, without precluding defendants from raising the same arguments there.
Key Takeaways
- A defendant removing on diversity grounds must prove the amount in controversy by a preponderance of the evidence, and doubts are resolved in favor of remand.
- Civil penalties under Civil Code section 2924.12(b) do not count toward the amount in controversy when no trustee's deed upon sale has been recorded.
- Where homeowners seek only a temporary injunction of the foreclosure process, the loan balance and property value are generally not the measure of the amount in controversy under Corral.
- A removing party that relies on attorney's fees, lender delay costs, or rental value must quantify them with evidence rather than assertion.
- The remand leaves the HBOR claims and the motion to dismiss for the state court; the federal court decided nothing on the merits.
Why It Matters
This is a district court order, not a published appellate opinion, so it carries persuasive weight only. It applies Corral to an HBOR case in which no loan modification application was clearly pending, and treats a request for a temporary injunction to pursue a different workout, such as a borrower-led sale, as within Corral's reasoning.
For lenders and servicers, the order signals that removing foreclosure-prevention suits requires concrete evidence of the value of the relief actually sought, not headline figures for debt and equity. It also shows that the timing of a trustee's sale matters: penalties become relevant to jurisdiction only after a recorded deed. What remains open is whether the plaintiffs can establish their HBOR claims, which the state court will decide; the federal court did not consider the merits.