PROCEDURAL AND FACTUAL BACKGROUND

The plaintiffs began this litigation on or about May 21, 1993 by filing their complaint in the Suffolk County, Massachusetts Superior Court. The complaint was amended as of right in that court on July 14, 1993. In their complaint, they allege a complex home mortgage loan scheme in which the defendants conspired to defraud them. The complaint asserts that defendant Fast Talking Mortgage Corporation (hereinafter "Fast Talking Mortgage") misrepresented itself as a home mortgage lender when it in fact was acting as a mortgage broker on behalf of

Aggressive and defendant XYZ Financial Trust. In the case of plaintiff Mary Glass, the actual mortgage lender was defendant XYZ Financial Trust (hereinafter "XYZ"). In the case of plaintiffs Brenda Old and Donna Smith, the actual mortgage lender was Aggressive.

Each plaintiff complains that Fast Talking Mortgage arranged loans with Aggressive and XYZ on terms that were unconscionable, terms that included exorbitant interest rates, negative amortization, and so-called "balloon payments" requiring immediate refinancing. In each case, the plaintiffs assert that Fast Talking Mortgage negligently and fraudulently misrepresented the amounts financed in the loans, to the benefit of Aggressive and XYZ. In each case, the plaintiffs were charged excessive fees for the closing of the loans, including "brokers fees" paid to Fast Talking Mortgage and excessive attorneys fees. In each case, Fast Talking Mortgage arranged for immediate refinancing of the loans with third party lenders, causing the plaintiffs to incur prepayment penalties and substantial, duplicate and excessive costs associated with prepayment of the Aggressive and XYZ loans. By obtaining financing from third parties (in each case within four months of their original loans) the defendants obtained profits ranging from 150% to

1,300% annualized return on the amount they invested. In each case, the plaintiffs now face imminent sale of their homes by foreclosure of the third party loans arranged by the defendants.

One example of the defendants' modus operandi from a myriad alleged in the complaint is as follows: at the closing of the loan in favor of plaintiff Donna Smith, the defendant Aggressive Mortgage Co. gave Ms. Smith loan disclosures indicating that a $3,00.001 [sic] broker fee would be paid from the proceeds of the loan to the defendant Fast Talking Mortgage Co. At that

closing, the defendant Fast Talking Mortgage Co. was purportedly acting as Ms. Smith's agent in its capacity as "loan broker." The defendant David Stevens was purportedly acting as

Aggressive's agent as "closing attorney."

A subsequent list of disbursements provided by Mr. Stevens to Fast Talking indicated that a $5,000 broker fee was actually paid by Aggressive to Fast Talking from the proceeds of the loan. Perhaps this is less surprising in view of the fact that Mr. Stevens, Aggressive's attorney, was then also a principal of Fast Talking. Ms. Smith was not only responsible to repay the $5,000 she supposedly borrowed to pay Fast Talking as her loan broker, but also she was on the hook to repay it with over 20% interest to Aggressive.

The plaintiffs' amended complaint states seven causes of action, six of which are entirely state law claims. The state law claims are based on Defendants' violations of the Massachusetts consumer protection statute, M.G.L. ch. 93A; state common law claims of breach of fiduciary obligation, misrepresentation, fraud and negligence; state law claims of breach of warranty and contract; and Defendants' violations of the Massachusetts Consumer Credit Cost Disclosure Act, M.G.L. ch. 140D. [See Am. Complaint, Counts I through V, and Count VI.] Plaintiffs' one federal claim derives from the civil remedies provisions of the Racketeering Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §1964. [See Am. Complaint at Count VI.] The plaintiffs allege inter alia that the defendants, including Aggressive, have participated in the affairs of an enterprise (Fast Talking Mortgage Co. or Fast Talking Funding) through a pattern of racketeering activity or collection of unlawful debt in violation of 18 U.S.C. §1962(c). Plaintiffs further allege that Defendants have conspired in violation of 18 U.S.C. §1962(d) and have

invested income from their activities in violation of 18 U.S.C. §1962(a). The pattern of racketeering activities and the collection of unlawful debt which form the basis of the RICO count of the complaint are based on the same conduct which is alleged in the other counts of the complaint as the basis for the state law causes of action. Thus, the plaintiffs' state law and RICO claims are intimately related and inseparably linked.

III. ARGUMENT

Aggressive's petition for removal, with its citation to 28 U.S.C. §1441, makes only the most general reference to the statutory basis for removing this case to federal court. The petition does cite the Court's federal question jurisdiction over the RICO claim as grounds for the

removal. [See Petition for Removal at page 1.] See also 28 U.S.C. §1331. The petition does not, however, recite any basis for this Court's jurisdiction over the plaintiff's state law claims, and the plaintiffs can only assume that Aggressive views the state law issues as nonremovable.

Aggressive's removal petition can therefore fairly be characterized as predicated on §1441(c), which states:

Whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of [Title 28] is joined with one or more otherwise nonremovable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates.

The plaintiffs readily admit that the Court's federal question jurisdiction extends to the RICO claim. They do not concede the jurisdiction that Aggressive's petition fails to assert, that is, jurisdiction over the state law issues as supplemental or "pendant" claims under 28 U.S.C.

§1367(a). For purposes of argument, however, the plaintiffs ask the Court to exercise its discretion to remand this case on alternative theories. On the one hand, they contend that a remand is appropriate and necessary under the provisions of §1441(c) which grants the Court discretionary authority to "remand all matters in which state law predominates." Alternatively, assuming, arguendo, the supplemental jurisdiction of the Court over the state law claims,

Plaintiffs ask the Court to "decline to exercise supplemental jurisdiction" pursuant to §1367(c) because their case "raises... complex issue[s] of state law" and because the state law claims

"substantially predominate over" the federal claims.

The "separate and independent" causes of action referenced in §1441(c) are distinguished from §1367(a) pendant claims in that the latter "derive from a common nucleus of operative fact," see Carnegie-Mellon University v. Cohill, 484 U.S. 348, 349; 108 S.Ct. 614, 618 (1988) (citations omitted), while the former are characterized by the "singularity of harm suffered by an injured plaintiff." New England Concrete Pipe v. D/C Systems of New England, Inc., 658 F.2d 867, 872 (1st Cir. 1981). The distinction is, of course, crucial for determining the statutory basis for the Court's exercise of remand authority. Nevertheless, the striking similarity in the language of each statute, and the near-identical jurisprudential policies that they are intended to support require a remand of this case under either statute.

Section 1441(c) "confers considerable discretion" on the district courts to remand entire cases involving federal questions "where state law claims are found to predominate." See

Moralez v. Meat Cutters Local 539, 778 F. Supp. 368, 370 (E.D. Mich. 1991) and the authorities collected therein. The exercise of that discretion is informed by the complexity of the state law claims, the extent to which they "would require more judicial resources to adjudicate than their federal counterparts" and whether "the majority of the claims... are based on state law." Id at 370.

See also Moore v. DeBiase, 766 F. Supp. 1311, 1319 (E.D.N.J. 1991). Moreover, "[r]emoval statutes... are to be strictly construed in order to further principles of judicial economy and comity." Santiago v. Barre Nat., Inc., 795 F. Supp. 508, 511 (D. Mass. 1992). Those principles apply whether a remand is mandated by law, Santiago v. Barre Nat., Inc., supra, or permitted as discretionary under §1441(c). Moralez v. Meat Cutters Local 539, supra at 778 F. Supp. 371, n.

4.

Similar policies ground the exercise of District Court discretion under §1367(c). The language of the section itself identifies the complexity and predominancy of state law issues as two reasons warranting remand. See 28 U.S.C. §1367(c)(1) and (2). In addition, "a court has

²A copy of the Tracking Order is attached to this memorandum [not reprinted infra]. Such orders are required in Massachusetts by Second Amended Standing Order 1-88.

discretion to remand [under §1367(c)] in cases where it best serves the `principles of economy, convenience, fairness, and comity which underlie the pendant jurisdiction doctrine.'"

Administaff, Inc. v. Kaiser, 799 F. Supp. 685, 689 (W.D. Tex. 1992), quoting Carnegie-Mellon University v. Cohill, supra at 108 S.Ct. 619. See also Masdea v. Scholz, 742 F. Supp. 713, 716-717 (D. Mass. 1990).

Such policies, applied to the circumstances of this case, compel a remand. The plaintiffs' state law claims are complex, involving the interplay of the Massachusetts Consumer Credit Cost Disclosure Act ("CCCDA"), M.G.L. ch. 140D, the Commonwealth's consumer protection laws, M.G.L.ch. 93A, and state common law questions of breach of contract and warranty, fraud, misrepresentation, and negligence. The CCCDA, for example, has almost never been interpreted on an issue of substance by the Massachusetts courts.

Six of the seven causes of action recited in the complaint are founded on state law. The plaintiffs' RICO claim derives in part from the allegation that the defendants' violation of

Massachusetts law makes the underlying loans that are subject of the case "unlawful debt" within the meaning of 18 U.S.C. §1962. Prior to removal, the Superior Court issued a Tracking Order fixing a comprehensive and complete schedule aimed at moving the case to a resolution by July 15, 1994.² The case remains at its formative stages, mitigating any possibility of prejudice to any party. Thus, every principle embodied in the provisions of §1441(c) and §1367(c) weighs in favor of remand.

The plaintiffs make two final observations in support of their motion. First, nearly every court construing §1367(c) and §1441(c) understands that these statutes permit a district court grant the relief sought here, that is, to remand the entire case to the state court from which it was removed, including the related federal claims. Indeed, the procedural posture of Holland v.

World Omni Leasing, Inc., 764 F. Supp. 1442 (N.D. Ala. 1991) is virtually identical to this case.

There, as here, the plaintiff's action was based on state claims of fraud, and included only one

³ The Supreme Court has held that a state court has inherent jurisdiction to resolve a federal RICO claim. Tafflin v. Levitt, 493 U.S. 455 (1990).

⁴Alternatively, the Motion for a Remand asks this Court to remand the state law questions in the event that the entire case is not remanded.

federal claim, under RICO.³ There, as here, the "plaintiffs' RICO claim [was] so intertwined with and indistinguishable from, their state law claims as to be very difficult, if not impossible to treat separately." Id at 1444. In deciding to remand the entire case to the state court, RICO claim included, the district court observed, "If this court should retain only the RICO claim, there would invariably be a race-to-judgment between the federal court and the state court, and the first court to decide its case might create a serious res judicata problem for the other court." Id.

Similar concerns motivated district courts in other venues to remand entire cases involving both federal and state law claims. See, e.g., Alexander by Alexander v. Goldome Credit Corp., 772 F.

Supp. 1217, 1225 (M.D. Ala. 1991) ("Allowing for remand of the entire case [under §1441(c)]

allows a court to avoid piecemeal litigation and to properly limit those cases removed to federal court to those that truly present federal issues."), Moralez v. Meat Cutters Local 539, supra and Moore v. Debiase, supra (to same effect), and Administaff, Inc. v. Kaiser, supra (same result under §1367).⁴

Last, the plaintiffs anticipate that Aggressive will claim that their motion is barred by the thirty day time limit on requests for remand in 28 U.S.C. §1447(c). By its terms, that time limit applies only to motions for remand "on the basis of any defect in removal procedure." The plaintiffs assert no such defect here. In fact, district courts confronting this issue view §1367(c) and §1441(c) remands as separate and distinct from the kinds of remands authorized by §1447(c).

Accordingly, they decline to impose the thirty day bar. See, e.g., Moore v. DeBiase, supra at 766 F. Supp. 1315 (§1441) and Administaff, Inc. v. Kaiser, supra at 799 S. Supp. 690 (§1367). There is no time bar to the plaintiffs' motion for a remand in this case.

CONCLUSION

Based on the foregoing facts, law and argument, the plaintiffs ask this Court to exercise its discretion and remand the entire case to the Massachusetts courts. In the alternative, they request a remand of their state law claims.

Respectfully submitted,

Dated:

Counsel for the Plaintiffs

7.5 Memorandum in Opposition to Defendant's Motion to Dismiss

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS Mary Glass, Brenda Old, and Donna Smith