Case No. 17-cv-0030-BTM-JLB.

JOHN G. PETROU, an individual, Plaintiff, v. NAVIENT CORPORATION, a Delaware corporation; SALLIE MAE CORPORATION, a Delaware corporation; SELAINA A. PETROU, an individual, Defendants.

United States District Court, S.D. California.

Editors Note
Applicable Law: 20 U.S.C. § 1070
Cause: 20 U.S.C. § 1070 Student Assistance
Nature of Suit: 480 Consumer Credit
Source: PACER

Attorney(s) appearing for the Case

John G. Petrou, Plaintiff, represented by Ben-Thomas Hamilton , Hamilton & McInnis, L.L.P..

Navient Corporation, Defendant, represented by Robert R. Yap , Akerman LLP.

Selaina A. Petrou, Defendant, represented by William F. Small, III , Small & Schena LLP.


BARRY TED MOSKOWITZ, Chief District Judge.

On January 6, 2017, Navient Solutions ("Defendant"), a defendant in a state court action originally filed in the Superior Court of California, County of San Diego, filed a Notice of Removal removing the action to this Court. (Notice of Removal, ECF No. 1.) The Court finds that Defendant's Notice of Removal fails to establish that this Court has subject matter jurisdiction over the removed action, and accordingly REMANDS the action to state court.

Defendant asserts that removal is proper on the basis of federal question jurisdiction. (Notice of Removal at 2.) It argues that Plaintiff's complaint rests on federal law, namely the Higher Education Act ("HEA"), 20 U.S.C. §§ 1070. (Id. at 3.)

Subject to exceptions not applicable here, "[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). The removal statute is strictly construed against removal jurisdiction, and the removing defendant bears the burden of establishing federal jurisdiction. California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 838 (9th Cir. 2004).

"Congress has given the lower federal courts jurisdiction to hear, originally or by removal from a state court, only those cases in which a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law." Franchise Tax Bd. Of State of Calif. V. Constr. Laborers Vacation Tr. for S. Calif., 463 U.S. 1, 27-28 (1983). Whether a case "arises under" federal law thus turns on the nature of the claims asserted in plaintiff's complaint. See id. at 10 ("For better or worse . . . a defendant may not remove a case to federal court unless the plaintiff's complaint establishes that the case `arises under' federal law"). "A federal defense, however, is `inadequate to confer federal jurisdiction.'" Dennis v. Hart, 724 F.3d 1249, 1253 (9th Cir. 2013) (quoting Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808 (1986)).

Here, Defendant argues that federally owned and guaranteed student loans are exclusively governed by the HEA and because "Plaintiff's claims relate to his Federal Direct PLUS loan, they necessarily arise under federal law and are subject to this Court's original jurisdiction." (Notice of Removal at 3.) However, Plaintiff filed a complaint asserting only state law causes of action: (1) fraud; (2) cancellation/rescission of the parent plus loan; (3) violation of the California Identity Theft Act; (4) violation of the California Consumer Credit Reporting Agencies Act; and (5) declaratory relief. (Notice of Removal, Ex. A.) The complaint therefore does not state a federal claim, nor do the asserted causes of action rest on federal law. While Plaintiff's state law claims may relate to federal law, Plaintiff's right to relief does not necessarily depend on a substantial question of federal law. See Merrell Dow Pharmaceuticals, 478 U.S. at 807-808. Moreover, the Ninth Circuit has held that the HEA affords no private right of action. Parks Sch. of Business v. Symington, 51 F.3d 1480, 1485 (9th Cir. 1995).

Defendant further argues that the HEA and regulations issued by the Department of Education completely preempt conflicting state law theories of liability. (Notice of Removal at 3.) To the extent that Defendant is arguing that the doctrine of complete preemption applies to the HEA, the Court is not persuaded. To support a finding of complete preemption, the preemptive force of federal law must be so "`extraordinary' that it converts state common law claims into claims arising under federal law for purposes of jurisdiction." Holman v. Laulo-Rowe Agency, 994 F.2d 666, 668 (9th Cir. 1993) (citing Caterpillar, Inc. v. Williams, 482 U.S. 386, 393 (1987)). The doctrine of complete preemption, however, is extremely limited. Id. The United States Supreme Court has only recognized three areas of complete preemption: (1) claims under the Labor Management Relations Act ("LMRA"); (2) claims under the Employment Retirement and Insurance Security Act ("ERISA"); and (3) certain Indian Land grant rights. See Ben. Nat'l Bank v. Anderson, 539 U.S. 1, 8 (2003). The Ninth Circuit, along with its sister circuits, have rejected the proposition that the HEA completely preempts state law claims. Keams v. Tempe Technical Inst., Inc., 39 F.3d 222 (9th Cir. 1994) ("The Higher Education Act has not be read . . . as occupying the field and leaving no room for state law to operate."); see also Armstrong v. Accrediting Council for Educ., 168 F.3d 1362, 1639 (D.C. Cir. 1999); see also Ammedie v. Sallie Mae, Inc., No. 12-10012, 2012 WL 3100771, at *3 (11th Cir. July 31, 2012).

In the absence of complete preemption, Defendant's allegations are, at most, a defense to Plaintiff's state law action. However, the law is clear that a federal defense, including the defense of preemption, does not confer federal question jurisdiction. Dennis, 724 F.3d at 1253; see also Franchise Tax Bd. V. Constr. Laborers Vacation Trust, 463 U.S. 1, 13 (1983). Thus, Defendant has failed to establish this Court's subject matter jurisdiction over this action. Therefore, the Court REMANDS this action to the Superior Court of San Diego, County of San Diego.

The parties' joint motions for extensions of time to file answers to Plaintiff's Complaint are DENIED as moot.



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