Plaintiff alleged that she signed a mortgage with Defendant Ameriquest. Defendant Ameriquest ordered an appraisal of the home Plaintiff was going to purchase. Plaintiff alleged that Defendants Ameriquest and the appraiser inflated the value of the home to increase the loan amount, which increased Defendant Ameriquest’s profit. In her complaint, Plaintiff asserted a federal claim under the Truth-in-Lending Act (TILA) and state-law claims for fraud. Defendants moved to dismiss Plaintiff‘s state-law claims.
In any action in which a district court already has jurisdiction over some federal claim, federal courts also have supplemental jurisdiction over state claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy.
Plaintiff consummated a mortgage transaction with Defendants. Shortly before the close of the transaction, an appraisal was made for her home amounting to $163,000. Plaintiff, however, alleged that the value at the time of the appraisal was actually $ 130,000-135,000, and that Plaintiff‘s value was “substantially and artificially inflated” to increase the loan amount for which Plaintiff could qualify and thereby increase Defendants‘ potential profit. Plaintiff was unable to have her mortgage refinanced. A case was filed for violation of the Truth In Lending Act (TILA), Michigan Mortgage Brokers, Lenders and Services Lending Act and a civil conspiracy claim with the District Court for the Northern District of Illinois. Defendants claim lack of jurisdiction between the violations for the TILA and Michigan Mortgage Brokers, Lenders and Services Lending Act claims.
Is there a sufficient nexus between the mortgagee’s state law claims and her TILA claim to support supplemental jurisdiction?
The court has jurisdiction over the federal TILA claim, and it can exercise supplemental jurisdiction over the state-law fraud claims if they are so related to the federal claims that they form part of the same case or controversy. A court may also choose not to exercise supplemental jurisdiction in four instances: (1) if the claim raises a novel or complex issue of state law; (2) if the state law claim substantially predominates over the federal law claim; (3) if it has dismissed all claims over which it has original jurisdiction; or (4) where there are other compelling circumstances to justify declining jurisdiction. Here, Plaintiff factually connected her federal and state-law claims. The facts underlying both state and federal claims combine to tell one story: Plaintiff did not fully know of her right to cancel her mortgage at the beginning; because that mortgage was overstated, she paid too much during the life of her loan; and — also because of the overstatement — she could not refinance the mortgage. Therefore, the court cannot rule out the possibility that Plaintiff might not be able to recover the amount of her allegedly overpaid mortgage under TILA if her state-law claims were dismissed. Moreover, none of the 4 situations under which a court may choose not to exercise supplemental jurisdiction) are present in the instant case. Therefore, the choice to exercise supplemental jurisdiction over the state law fraud claim is appropriate and the court denied the motion to dismiss.