Castillo v. J.P. Morgan Chase Bank, N.A.

Background

Gilbert Castillo brought a claim under the Telephone Consumer Protection Act, a federal law regulating certain telephone calls, alleging that J.P. Morgan Chase Bank, N.A. repeatedly called his cellular telephone beginning in March 2017 using an automatic telephone dialing system to collect a credit-card debt. Castillo alleged that the calls continued after he repeatedly asked the bank to stop.

The bank filed counterclaims for breach of contract, account stated, and quantum meruit. It alleged that Castillo opened a credit-card account in 2014, agreed to a written cardmember agreement, failed to make timely payments, and owed a current balance of $5,006.36. The bank sought the balance, interest, attorneys’ fees, and costs.

Jurisdiction and the parties’ arguments

Castillo moved under Federal Rule of Civil Procedure 12(b)(1), which permits dismissal for lack of subject-matter jurisdiction. The court had federal-question jurisdiction over Castillo’s federal telephone claim. It found no original jurisdiction over the bank’s state-law counterclaims because the parties had not alleged complete diversity of citizenship and the counterclaims did not arise under federal law.

The issue was whether the court could exercise supplemental jurisdiction under 28 U.S.C. § 1367. Supplemental jurisdiction can allow a federal court to hear related state-law claims that form part of the same constitutional case or controversy as a federal claim. Castillo argued that the bank’s counterclaims were permissive, not compulsory, under Federal Rule of Civil Procedure 13 and were not sufficiently related to his claim. The bank conceded that the counterclaims were not compulsory.

Court’s reasoning

The court assumed, for purposes of the order, that at least some permissive counterclaims could fall within supplemental jurisdiction. It nevertheless concluded that these counterclaims did not share a common nucleus of operative fact with Castillo’s federal claim.

The court explained that the telephone claim required proof that the bank called a cellular telephone number, used an automatic telephone dialing system, and lacked Castillo’s prior express consent. The reason for the calls and the parties’ prior credit relationship were not necessary facts for that claim. The court also rejected the bank’s argument that its affirmative defenses—consent to the calls and a possible setoff based on the alleged debt—could establish supplemental jurisdiction over the counterclaims.

By contrast, the counterclaims would require proof about the credit agreement, the alleged debt, Castillo’s failure to pay, and the bank’s resulting damages. The court said the counterclaims would involve different facts, witnesses, and law, and therefore did not form part of the same case or controversy.

The court also held that, even if the counterclaims were sufficiently related, exceptional circumstances justified declining supplemental jurisdiction. It reasoned that allowing the bank to pursue its collection claims in the same case could discourage future telephone-privacy plaintiffs from bringing claims. The court compared Castillo’s potential statutory damages for 34 calls—$17,000 if he succeeded on all calls—with the bank’s request for the $5,006.36 debt, interest, attorneys’ fees, and costs.

Disposition

The court GRANTED Castillo’s motion to dismiss the bank’s counterclaims. The order did not state that the dismissal was with or without prejudice. It also stated that the dates in the existing scheduling order remained in effect. The opinion did not decide the merits of Castillo’s Telephone Consumer Protection Act claim.

Terminology note

The background identifies the third counterclaim as quantum meruit, while the later analysis refers to it as an unjust-enrichment or quasi-contract claim. The opinion does not explain the difference between those descriptions.