United States District Court, D. Massachusetts
MEMORANDUM AND ORDER
ALLISON D. BURROUGHS U.S. DISTRICT JUDGE.
the Court is the Commonwealth's motion to remand and
request for costs and expenses. [ECF No. 18]. For the reasons
explained below, the motion to remand is GRANTED and
the request for costs and expenses is DENIED.
Commonwealth filed this action in the Superior Court of
Suffolk County, Massachusetts on May 14, 2018. [ECF No. 5 at
2]. The Complaint asserts claims under the Massachusetts
Consumer Protection Act, Mass. Gen. Laws ch. 93A
(“Chapter 93A”), against Defendants DMB
Financial, LLC (“DMB”) and Global Client
Solutions, LLC (“Global”), and a claim for the
unauthorized practice of law against DMB. DMB is in the
business of charging consumers fees for negotiating down
their debts. [ECF No. 1-2 ¶ 1]. Global is a
“dedicated account provider” that maintains and
provides services in connection with bank accounts into which
financially distressed consumers deposit money pursuant to
debt relief plans, including those offered by DMB. [ECF No.
1-2 ¶¶ 15, 58-60]. The accounts serve as a source
of funds that DMB can rely on as it negotiates down
consumers' debts and for the settlement fees it earns.
The Commonwealth claims that DMB made unfair and deceptive
representations to financially distressed consumers
concerning its debt restructuring program, gave its customers
legal advice that it was not licensed to provide, and then
enriched itself by pilfering the accounts that Global
established and maintained for consumers participating in
DMB's debt restructuring program. [ECF No. 1-2
¶¶ 119-26]. The Commonwealth further alleges that
Global violated Chapter 93A by distributing settlement fees
to DMB from the consumer accounts that it maintained, without
proper authorization and before a consumer had made a payment
pursuant to a negotiated settlement that would have entitled
DMB to the fees, and also by distributing a fee that was
calculated based on an inflated amount of debt. [ECF No. 1-2
Commonwealth moved for a preliminary injunction on May 16,
2018, see [ECF No. 5 at 2], and on May 29, 2018,
Global removed the action to this Court, claiming that this
case arises “under the Constitution, laws, or treaties
of the United States.” [ECF No. 1 ¶ 14 (quoting 28
U.S.C. § 1331)]. The Commonwealth filed a motion to
remand on June 20, 2018. [ECF No. 18]. Global filed its
opposition on July 23, 2018. [ECF No. 30]. The Commonwealth
filed a reply on August 1, 2018, [ECF No. 33], and Global
filed a notice of supplementary authority on October 2, 2018.
[ECF No. 40].
ARISING UNDER JURISDICTION
defendant may remove a civil action from state court to
federal court, if the plaintiff “could have brought it
in federal district court originally.” Grable &
Sons Metal Prods., Inc. v. Darue Eng'g & Mfg.,
545 U.S. 308, 312 (2005) (citing 28 U.S.C. § 1441(a)).
To remove an action to federal court, a defendant must file a
notice of removal within thirty days of receipt of the
complaint and service of summons. 28 U.S.C. § 1446(b);
Murphy Bros. v. Michetti Pipe Stringing, Inc., 526
U.S. 344, 354 (1999). Defendants bear the burden of showing
the federal court's jurisdiction, Danca v. Private
Health Care Sys., Inc., 185 F.3d 1, 4 (1st Cir. 1999)
(citing BIW Deceived v. Local S6, Indus. Union of Marine
& Shipbuilding Workers of Am., IAMAW Dist. Lodge 4,
132 F.3d 824, 831 (1st Cir.1997)), and that showing
“may not be sustained on a theory that the plaintiff
has not advanced.” Merrell Dow Pharm., Inc. v.
Thompson, 478 U.S. 804, 810 n.6 (1986) (citing Healy
v. Sea Gull Specialty Co., 237 U.S. 479, 480 (1915)
(“[T]he plaintiff is absolute master of what
jurisdiction he will appeal to.”); The Fair v.
Kohler Die & Specialty Co., 228 U.S. 22, 25 (1913)
(“[T]he party who brings a suit is master to decide
what law he will rely upon.”); United States v.
Mottaz, 476 U.S. 834, 850 (1986)).
has granted the district courts federal question jurisdiction
over “all civil actions arising under the Constitution,
laws, or treaties of the United States.” 28 U.S.C.
§ 1331. “[T]he vast majority of cases brought
under the general federal-question jurisdiction of the
federal courts are those in which federal law creates the
cause of action.'” Merrell Dow, 478 U.S.
at 808. Global claims that two circumstances in which federal
district courts have “arising under” jurisdiction
even though no federal cause of action has been used by the
plaintiff apply here: (1) federal preemption, see
[ECF No. 1 ¶¶ 28-33], and (2) the “state-law
claims . . . implicate significant federal issues”
under the analysis set forth in Grable, 545 U.S. at
312 (citing Hopkins v. Walker, 244 U.S. 486, 490-491
(1917)); see [ECF No. 1 ¶¶ 14-27]; see
also Narragansett Indian Tribe v. R.I. Dep't of
Transp., 903 F.3d 26, 31 (1st Cir. 2018).
Court will briefly review the Telemarketing Sales Rule
(“TSR”) and the provisions of the 2010 Debt
Relief Amendments that Global claims form the basis of the
Commonwealth's complaint. The Court will then consider
Global's arguments that the Court has jurisdiction.
The TSR and Global
2010, the Federal Trade Commission amended the TSR to curb
deceptive practices associated with debt relief. The
amendments prohibit debt relief providers from collecting
fees until services have been provided, require specific
disclosures, prohibit material misrepresentations, and extend
the TSR's coverage to companies that solicit customers
through general media advertisements as opposed to just
cold-calling. See Telemarketing Sales Rule, 75 Fed.
Reg. 48458 (August 10, 2010) (codified at 16 C.F.R. pt. 310).
The TSR “permits debt relief providers, ” such as
DMB, “to require consumers to place funds designated
for the company's fees and for payment to the
consumer's creditors or debt collectors in a dedicated
bank account.” Id. at 48490. Under a typical
arrangement, a financially distressed consumer makes payments
into an account at an insured financial institution that can
later be drawn upon to cover debts that the relief provider
successfully renegotiates, plus fees earned for the
negotiating. See 16 C.F.R. § 310.4(a)(5). The
funds in such an account belong to the consumer, and the
consumer “may withdraw from the relief service at any
time without penalty and must receive all of the funds in
the account” within seven business days of withdrawing
from the debt service, less amounts earned by the relief
service provider in compliance with the regulations. 16
C.F.R. § 310.4(a)(5)(ii)(E). The TSR restricts when
settlement fees may be assessed and how they are calculated,
including by prohibiting request or receipt of payment from a
consumer's account until the debt service provider has
altered the terms of at least one of the consumer's debts
and the consumer has made a payment pursuant to the altered
agreement. 16 C.F.R. § 310.4(a)(5)(i)(B). Additionally,
the fee must be either proportional to the total fee or a
percentage of the amount saved, and in either case, it must
be calculated based on the amount owed at the time the debt
was enrolled in the service. 16 C.F.R. §
claims to operate in a “specific niche” for
dedicated account providers that was created by the 2010
amendments to the TSR. [ECF No. 1 ¶ 5]. This niche
allows entities that are neither insured depositories nor
debt relief providers to provide services in connection with
a consumer's account, although insured depositories, debt
relief providers, and dedicated account providers are all
subject to the same regulatory requirements described above.
Telemarketing Sales Rule, 75 Fed. Reg. 48490 n.445.