Sexton v. NDEX West, LLC

After a matter has been removed to federal court, the doctrine of prior exclusive jurisdiction in inapplicable when a state court does not retain jurisdiction over the appellants’ property and the Colorado River abstention doctrine is inapplicable when appellants do not have concurrently proceeding actions relating to their property in both state and federal court.

In August of 2010, after falling behind on their loan payments, foreclosure proceedings commenced against Scott and Sonia Sexton (“the Sextons”). The Sextons brought an action in state court against the original lender IndyMac, One West the agent of the new beneficiary, the original trustee Stewart Title, and NDEX West the new trustee. In their complaint the Sextons alleged wrongful foreclosure among other claims. They sought quiet title and to stop the foreclosure proceedings on their house. The defendants removed the suit to federal court under diversity jurisdiction. The Sextons appealed from a motion to dismiss and argued that the district court should have remanded the case sua sponte to state court. The Sextons claimed that that the federal court did not have jurisdiction based on both the doctrine of prior exclusive jurisdiction and the Colorado River abstention doctrine. The doctrine of prior exclusive jurisdiction prohibits a federal court from exercising jurisdiction over a matter that is simultaneously involved in a state court proceeding. The Sextons argued that because the state had in rem jurisdiction over their home when the complaint challenging the eviction was filed, the doctrine of prior exclusive jurisdiction had been violated. The Ninth Circuit rejected this argument because when the case was removed to federal court the state court’s jurisdiction ended. The Sextons also sought relief under the Colorado River abstention doctrine, which outlines the factors that federal courts should consider in exercising jurisdiction over subject that is also involved in a concurrent state court proceeding. However, the panel found that the Sextons did not show that their house was involved in a concurrent state court proceeding when the matter was removed. For this reason the panel also rejected the argument that the Colorado River abstention doctrine prevented the removal. AFFIRMED.