The U.S. Court of Appeals for the Sixth Circuit recently vacated an abstention order entered by a federal court in a public nuisance action brought against a bank in relation to twenty-five vacant properties owned by the bank.
A copy of the opinion is available at: http://www.ca6.uscourts.gov/opinions.pdf/10a0306p-06.pdf
The Cleveland Housing Renewal Project, Inc. ("CHRP") filed this public nuisance action in state court against a bank and its affiliated companies. CHRP sought: (1) a declaration that the 25 named properties constituted a "public nuisance;" (2) injunctive relief requiring the bank to abate the alleged nuisances and (3) an injunction prohibiting the bank from selling foreclosed properties at "extremely distressed prices." The bank removed the action to federal court and CHRP moved to remand. The district court concluded that subject matter jurisdiction was established through diversity and that CHRP had Article III prudential standing, but nonetheless remanded the action to state court pursuant to Burford abstention, to avoid federal disruption of a coherent state policy regarding a substantial public concern. This appeal followed.
In vacating the abstention order and remanding the case to the federal district court, the Court addressed: (1) the federal court's subject matter jurisdiction; (2) CHRP's Article III Standing; and (3) the district court's remand of the case to state court.
As to the federal court's subject matter jurisdiction, the Court agreed that district court had subject matter jurisdiction over the matter, holding that, although the City of Cleveland was named as a defendant, "the district court properly realigned the City as a plaintiff and properly held there is complete diversity between the parties. The Court also agreed that the amount-in-controversy requirement for diversity jurisdiction was met, holding that "[w]hile the value of the requested injunctive relief to CHRP may be difficult to quantify, the notion that abatement of nuisances on twenty-five parcels of abandoned property would amount to improvement valued at less than $75,000 is patently suspect."
As to CHRP's Article III standing, the Court stated: "we find not error in the district court's holding that CHRP has standing to prosecute this action in federal court."
Finally, the Court disagreed with the district court's remand of the case to state court under Burford abstention, which derives from the Supreme Court's ruling in Burford v. Sun Oil Co. that federal courts "should exercise their discretionary power with proper regard for the rightful independence of state governments in carrying out their domestic policy." The Court first examined federal interests in this matter, noting that this particular case "falls within one of those 'classes of cases' to which a 'strong federal interest' attaches," in particular the "strong federal interest in adjudicating cases brought under the congressional grant of diversity jurisdiction." Specifically, the Court noted that "we believe the district court improperly undervalued the strength of the federal interest in affording a neutral forum for the adjudication of disputes between parties of diverse citizenship." The Court next examined the state interests that "may be deemed to outweigh the federal interests," noting first that it is "not immediately apparent what makes CHRP's business practices claim 'difficult,' as opposed to merely 'novel.'"
The Court also ruled that, because Ohio common law of public nuisance is settled, "there is no reason to believe that the federal court's application of settled law to the facts alleged in support of CHRP's common law public nuisance claim would be disruptive of any coherent state policy" and "there is precious little showing" of how adjudication in a federal court "would disrupt or impair state efforts to implement a statewide policy."
Ultimately, the Court held that the district court "undervalued the importance of the federal interest at stake and overvalued the strength of the state interests"
Ralph T. Wutscher
Kahrl Wutscher LLP
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