Lundahl v. Home Depot, Inc.

                                                             FILED
                                                 United States Court of Appeals
                    UNITED STATES COURT OF APPEALS       Tenth Circuit

                           FOR THE TENTH CIRCUIT                      December 3, 2014

                                                                     Elisabeth A. Shumaker
                                                                         Clerk of Court
HOLLI LUNDAHL, a/k/a Holli Telford,

             Plaintiff - Appellant,

v.                                                         No. 14-8001
                                                 (D.C. No. 2:13-CV-00222-SWS)
THE HOME DEPOT, INC.;                                       (D. Wyo.)
CITIBANK, N.A.,

             Defendants - Appellees.


                            ORDER AND JUDGMENT*


Before McHUGH, McKAY, and O’BRIEN, Circuit Judges.


      Plaintiff Holli Lundahl, proceeding pro se,1 appeals from the district court’s

order denying her motion for sanctions under Fed. R. Civ. P. 11 against defendants



*
      After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
1
       Ms. Lundahl is under filing restrictions, as described in Johnson v. Stock,
No. 03-4219, 2005 WL 1349963, at *3-4 (10th Cir. June 8, 2005). This court granted
her permission to proceed pro se in this case by order issued February 5, 2014.
Home Depot, Inc., and Citibank N.A based on her assertion they wrongfully removed

the case from state court. We have jurisdiction under 28 U.S.C. § 1291 and affirm.

                                      I. Background

         Ms. Lundahl filed a pro se lawsuit in Wyoming state court in July 2013,

against Home Depot, Citibank (collectively, the “Defendants”), and three credit

reporting agencies. She alleged she received an incorrect refund on her Home Depot

credit card, which is issued by Citibank. She did not serve, and later voluntarily

dismissed, the credit reporting agencies. The state court entered default judgment

against the Defendants on September 23, 2013, after they failed to file an answer.

On October 1, 2013, the Defendants removed the suit to federal court, asserting the

district court’s original federal question jurisdiction. See 28 U.S.C. §§ 1331,

1441(a). The Defendants also sought to set aside the Wyoming default judgment

under Fed. R. Civ. P. 60(b)(4), claiming they had not been properly served in state

court.

         The Defendants asserted that Ms. Lundahl’s complaint included two federal

claims. First, her complaint alleged she had been assessed interest on her credit card

“in violation of . . . the federal and state usury laws; thus constituting illegal loan

sharking on Home Depot[’s] and Citibank’s behalf.” R. Vol. 1, at 17, Compl. ¶ 13.

The Defendants noted that Citibank is a national bank and cited the Supreme Court’s

“‘longstanding and consistent construction of the National Bank Act as providing an

exclusive federal cause of action for usury against national banks.’” Id. at 7, Notice


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of Removal (quoting Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 10 (2003);

see 12 U.S.C. §§ 85-86 (interest rate and usury provisions relating to national banks).

Second, Ms. Lundahl’s complaint alleged she was entitled to compensatory damages

because she had been subjected to an increased mortgage rate “as a result of

defendants[’] willful violations of the Wyoming Consumer Protection Act and the

[f]ederal [Fair] Credit Reporting Act, [15 U.S.C. §§ 1681-1681x (“FCRA”)].”

R. Vol. 1, at 19, Compl. ¶ 20.

      Ms. Lundahl moved to remand the action to state court, arguing that the sole

claim asserted against the Defendants was a violation of Wyoming law; that the

FCRA claim was asserted only against the three credit reporting agencies, which she

had dismissed; and that her complaint mentioned usury under federal law only in

passing. She also moved to strike the Defendants’ motion to set aside the default

judgment and requested sanctions or contempt damages in the amount of $20,000

under 28 U.S.C. § 1447(c) and Fed. R. Civ. P. 11 based on their wrongful removal of

the case from state court.

      The district court held a hearing on the parties’ motions. It stated it had

“carefully reviewed and re-reviewed the complaint” and reviewed the law with

respect to the FCRA. R. Doc. 32, (“Hr’g Tr.”), at 7.2 The court concluded that,




2
       The transcript of the November 22, 2013, hearing was filed in the district court
on April 24, 2014, after the primary volumes of the record on appeal were filed. The
transcript is also part of the record on appeal pursuant to 10th Cir. R. 11.2(A) (“In a
                                                                              (continued)
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“while [it could] certainly see the basis that the defendants in this action sought

removal, upon review and based upon the subsequent dismissal of the consumer

credit reporting agency defendants,” there was not a federal question that was fairly

presented. Id. at 7-8.3 The district court noted that while paragraph 20 of

Ms. Lundahl’s complaint broadly sought damages against “defendants” for violation

of the FCRA, paragraph 5 of the complaint, which discussed her FCRA claim in

detail, was asserted only against the credit reporting agencies. Id. at 8. Thus,

notwithstanding Ms. Lundahl’s broad use of the term “defendants” in paragraph 20,

the district court concluded that, in the context of paragraph 5, Ms. Lundahl’s FCRA

claim was not asserted against Home Depot or Citibank. Id. As to the federal usury

claim, the district court noted that Ms. Lundahl’s prayer for relief on the final page of

her complaint did not actually claim any damages tied to usury interest. Id. at 8-9.

The district court described its decision to remand as a “close call” because

Ms. Lundahl’s complaint was drafted in generalities and failed to separate the claims

for relief. Id. at 9.



pro se appeal . . . the district court clerk must forward the record to the circuit clerk
[which] must include any transcript that has been filed . . . .”).
3
       The transcript of the November 22, 2013 hearing was filed in the district court
April 24, 2014, after the record on appeal was filed, but it is part of the record on
appeal pursuant to 10th Cir. R. 11.2(A) (“[i]n a pro se appeal . . . the district court
clerk must forward the record to the circuit clerk [which] must include any transcript
that has been filed . . . .”).



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      “[B]ased upon the lack of specificity” in Ms. Lundahl’s complaint and the

court’s conclusion that the Defendants had a “good faith basis” to seek removal, the

district court declined to impose any damages or sanctions for filing a notice of

removal, as Ms. Lundahl had requested. Id. The district court remanded the case to

state court and ruled the Defendants’ Rule 60(b)(4) motion seeking to vacate the

state’s default judgment was moot.

                                     II. Discussion

      Ms. Lundahl appeals the district court’s denial of sanctions under Rule 11.4

Under Rule 11, a signer of a pleading “certifies that to the best of the person’s

knowledge, information, and belief, formed after an inquiry reasonable under the

circumstances,” the pleading “is not being presented for any improper purpose, such

as to harass, cause unnecessary delay, or needlessly increase in the cost of litigation”

and that “the claims, defenses, and other legal contentions are warranted by existing

law or by a nonfrivolous argument for extending, modifying, or reversing existing
4
       Ms. Lundahl’s brief does not challenge the district court’s dismissal of her
request for costs and expenses incurred as a result of the removal under
28 U.S.C. § 1447(c), though she makes a few passing references to § 1447(c).
Awards under § 1447(c) are left to the district court’s wide discretion, and there is no
presumption in favor of a § 1447(c) award when a case is remanded to state court.
Martin v. Franklin Capital Corp., 546 U.S. 132, 136-41 (2005) (noting that
“awarding fees simply because the party did not prevail could discourage all but the
most airtight claims, for seldom can a party be sure of ultimate success”) (bracket
and internal quotation marks omitted). “[W]hen an objectively reasonable basis
exists [for seeking removal], fees should be denied.” Id. at 141. As a pro se litigant,
we construe Ms. Lundahl’s brief liberally; thus, to the extent that she preserved her
§ 1447(c) claim for appellate review, we find no abuse of the district court’s
discretion in denying her request.


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law or for establishing new law.” Fed. R. Civ. P. 11(b). This certification standard is

one of “[objective] reasonableness under the circumstances.” Bus. Guides, Inc. v.

Chromatic Commc’ns Enters., Inc., 498 U.S. 533, 551 (1991) (emphasis omitted).

      If a court determines that a party has violated Rule 11(b), it may, in its

discretion, impose sanctions. Fed. R. Civ. P. 11(c) (“[T]he court may impose an

appropriate sanction. . . .”) (emphasis added)). “This court reviews the district

court’s refusal to impose Rule 11 sanctions for abuse of discretion.” Brown v.

Eppler, 725 F.3d 1221, 1228 n.3 (10th Cir. 2013). Under this standard, reversal

would be appropriate only if the district court “based its ruling on an erroneous view

of the law or on a clearly erroneous assessment of the evidence.” Cooter & Gell v.

Hartmarx Corp., 496 U.S. 384, 405 (1990).

      Ms. Lundahl argues that: (1) Rule 11 sanctions were mandatory because the

Defendants’ basis for removal was a sham; (2) Rule 11 sanctions were proper

because the Defendants’ action amounted to economic extortion; and (3) Rule 11

sanctions were mandatory because removal of the state suit was barred by the

Rooker-Feldman doctrine.5 Contrary to the premise of her arguments, sanctions


5
       Ms. Lundahl failed to raise this issue—that removal was improper because
federal review of the state court’s default judgment was barred by the
Rooker-Feldman doctrine—in the district court. Her argument is without merit in
any event. “The Rooker –Feldman doctrine arose out of [28 U.S.C. § 1257(a)], and
provides that only the Supreme Court has jurisdiction to hear appeals from final state
court judgments.” Bear v. Patton, 451 F.3d 639, 641 (10th Cir. 2006). But removal
does not constitute an appeal, de facto or otherwise, of the state court proceedings;
rather it is a continuation of the proceedings and “[t]he jurisdiction exercised on
                                                                              (continued)
                                           -6-
under Rule 11 are discretionary; not mandatory. See 5A C. Wright & A. Miller,

Federal Practice and Procedure (3d ed.), § 1331 at 476 (explaining that under the

1993 amendments to Rule 11, “[t]he district court now has discretion in determining

whether or not to apply sanctions for a Rule 11 violation and no longer is mandated

to do so as was true under the 1983 amendment”); Brown, 725 F.3d at 1228 & nn.2 &

3 (rejecting as meritless the argument that “[a] trial court abuses its discretion when it

refuses to impose sanctions . . . for a clear violation of Rule 11”).

       Ms. Lundahl claims it was “undisputed” that she asserted only state law claims

against the Defendants. Aplt. Opening Br. at 6. But this is factually incorrect: her

complaint facially alleged federal claims against Home Depot and Citibank; the

Defendants disputed her claim that she asserted only state law claims against them;

and the district court characterized that dispute as a “close call,” Hr’g Tr. at 9.

Ms. Lundahl argues removal was frivolous because only credit reporting agencies can

be liable under the FCRA. But she did not raise this argument below, arguing only

that her complaint did not allege a federal claim against the Defendants. She

supported this argument by misquoting her complaint, omitting the FCRA allegations

against “defendants” in paragraph 20. Compare R. Vol. 1, at 19, Compl. ¶ 20, with

id. at 256. Moreover, Ms. Lundahl’s discussion of her complaint on appeal is

selective; she makes no mention of the allegation in her complaint that Home Depot


removal is original not appellate.” Freeman v. Bee Mach. Co., 319 U.S. 448, 452
(1943).


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and Citibank, specifically, engaged in illegal loan sharking in violation of federal

usury laws. Id. at 17, Compl. ¶ 13.

      The Supreme Court has ruled that circuit courts are to apply an abuse of

discretion standard when reviewing all aspects of a district court’s Rule 11 decision,

including its determination “that a litigant’s position is factually well grounded and

legally tenable for Rule 11 purposes.” Cooter & Gell, 496 U.S. at 403-05. Here, the

district court determined that its decision to remand was a “close call,” and that it

could “certainly see the basis” for Defendants’ removal, particularly given the

deficiencies and generalities in Ms. Lundahl’s complaint. Hr’g Tr. at 7-9. Based

upon our review of the record, we see no abuse of the district court’s discretion to

deny Ms. Lundahl’s request for sanctions.

      Affirmed.


                                                Entered for the Court


                                                Carolyn B. McHugh
                                                Circuit Judge




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