Funk v. Bank of Hawaii

Background

Leire Funk sued Bank of Hawai’i (BOH) and MTGLQ Investors, L.P. (MTGLQ) in Santa Clara County Superior Court. She alleged unlawful conduct related to the defendants’ foreclosure of her real property. Her claims included alleged violations of California foreclosure and debt-collection laws, breach of contract, breach of the covenant of good faith and fair dealing, unfair business practices, and negligence.

BOH removed the case to federal court based on diversity jurisdiction, which generally requires the parties to be citizens of different states and more than $75,000 to be in dispute. Funk moved to remand, arguing that BOH’s original removal papers did not establish MTGLQ’s citizenship, MTGLQ’s consent to removal, or the required amount in controversy. After Funk filed the motion, MTGLQ appeared, consented to removal, and stated that it was a citizen of Delaware and New York. BOH then filed an amended notice of removal. Funk no longer disputed that the parties had diverse citizenship.

Amount in Controversy

The court held that the defendants had not shown, by a preponderance of the evidence, that more than $75,000 was in controversy.

The court excluded the value of the property and the amount owed on the loans because Funk sought only a temporary injunction against foreclosure, not relief from the debt itself. It counted approximately $26,000 in alleged unlawful legal fees as compensatory damages. It counted $300 in statutory damages available under California Civil Code section 2943. The court rejected the defendants’ argument that Funk’s California Homeowner Bill of Rights claims added $50,000 per defendant because the complaint did not allege that a foreclosure sale or recording of a trustee’s deed upon sale had occurred, and the defendants supplied no evidence of either event.

The court accepted the defendants’ estimate of $26,000 in punitive damages. It did not add an amount for emotional-distress damages, attorneys’ fees, or the defendants’ claimed transactional costs because the defendants had not provided a sufficient basis for estimating those amounts. The resulting total was $52,300, below the jurisdictional threshold.

Attorneys’ Fees and Costs

The court granted Funk’s request for attorneys’ fees and costs incurred because of the removal. Under 28 U.S.C. § 1447(c), a court may award those expenses when removal lacked an objectively reasonable basis. The court concluded that the law was clear that the value of the property and loan debt could not be counted for Funk’s temporary-injunction request, and that the claimed Homeowner Bill of Rights damages were unavailable based on the allegations and evidence before the court. The court also noted that BOH acknowledged that its original removal notice was faulty.

The court stated that Funk was entitled to recover fees and costs from BOH and retained jurisdiction over the fee award. It ordered Funk to file a declaration and supporting documents within 14 days. BOH could file a response within seven days after receiving the declaration.

Disposition

The court granted Funk’s motion for remand and ordered the Clerk to return the case to the Superior Court of the State of California for Santa Clara County. It granted Funk’s request for attorneys’ fees and costs. It terminated MTGLQ’s motion to dismiss without prejudice. The court also vacated the scheduled hearing because it decided the remand motion without oral argument.