United States District Court, S.D. Indiana, Indianapolis Division
ORDER GRANTING MOTION TO REMAND
Patrick Hanlon, United States District Judge.
Rehabilitation Initiatives, LLC (“DRI”) sued
Federal Home Loan Bank of Indianapolis (“FHLBI”)
in state court after FHLBI allegedly breached their
agreements and rescinded DRI’s membership in
the Federal Home Loan Bank system. FHLBI removed the case to
federal court, alleging federal-question jurisdiction under
28 U.S.C. § 1331. Dkt. 1 ¶ 19. Before addressing
the merits of DRI’s motion for a temporary restraining
order, dkt. 9, the Court directed the parties to brief the
issue of jurisdiction, dkt. 18. In response, DRI filed a
motion to remand, dkt. , which FHLBI opposed, dkt. 30.
For the reasons stated below, that motion is
GRANTED and the case is
REMANDED to Marion County Superior Court.
federal courts are of limited jurisdiction, “district
courts may not exercise jurisdiction absent a statutory
basis.” Home Depot U.S. A., Inc. v. Jackson,
139 S.Ct. 1743, 1746 (2019). Congress granted federal courts
a statutory basis for jurisdiction over two types of cases:
cases arising under federal law and cases where the amount in
controversy exceeds $75,000 and there is diversity of
citizenship among the parties. 28 U.S.C. §§ 1331,
1332(a). “These jurisdictional grants are known as
‘federal-question jurisdiction’ and
‘diversity jurisdiction,’ respectively.”
Home Depot, 139 S.Ct. at 1746.
evaluating federal-question jurisdiction, courts use the
“well-pleaded complaint rule,” which states that
“federal jurisdiction exists only when a federal
question is presented on the face of the plaintiff’s
properly pleaded complaint.” Citadel Sec., LLC v.
Chi. Bd. Options Exch., Inc., 808 F.3d 694, 701 (7th
Cir. 2015) (quoting Caterpillar Inc. v. Williams,
482 U.S. 386, 392 (1987)). Under this rule, the plaintiff is
“the master of the claim; he or she may avoid federal
jurisdiction by exclusive reliance on state law.”
Caterpillar, 482 U.S. at 392.
case is removed to federal court, jurisdiction is determined
“by looking at the complaint as it existed at the time
the petition for removal was filed.” United Farm
Bureau Mut. Ins. Co. v. Metropolitan Human Relations
Comm’n, 24 F.3d 1008, 1014 (7th Cir. 1994).
Jurisdiction, therefore, is based on whether the court had
jurisdiction “on the day the suit was removed.”
Oshana v. Coca-Cola Co., 472 F.3d 506, 511 (7th Cir.
the operative complaint at the time of removal was the First
Amended Complaint. Dkt. 1-3. Nevertheless, FHLBI contends
that the Court may consider the Second Amended Complaint in
evaluating whether there is federal-question jurisdiction.
Dkt. 30 at 6-7 (citing Bernstein v. Lind-Waldock &
Co., 738 F.2d 179, 181 (7th Cir. 1984)). But having
identified the potential jurisdictional defect, the Court did
not rule on DRI’s motion for leave to file the Second
Amended Complaint. That distinguishes this case from
Bernstein where the Seventh Circuit considered the
amended complaint, which was the operative complaint, when
determining jurisdiction. Indeed, the court in
Bernstein held that if the original complaint had
remained the operative complaint on appeal, the court would
have remanded the case. Id. at 185. The Second
Amended Complaint is not the operative complaint here, so the
Court considers the First Amended Complaint when assessing
whether there is federal jurisdiction.
First Amended Complaint sets forth the basis for jurisdiction
and venue in the Marion County Superior Court under the
Indiana Rules of Trial Procedure and makes no reference to
federal law or federal jurisdiction. Dkt. 1-3 ¶¶
7-8. The sole cause of action alleged is breach of contract,
specifically, that FHLBI breached the Agreements when it
rescinded DRI’s membership and terminated the
Agreements. Id. ¶¶ 27, 31-37.
FHLBI argues that the Court has federal-question jurisdiction
because its membership criteria is based on federal
regulations. Dkt. 1 ¶ 19. FHLBI claims that
this case therefore “presents one of the rare instances
when federal-question jurisdiction exists over a complaint
asserting only state-law causes of action.” Dkt. 1
¶ 17 (quoting Evergreen Square of Cudahy v. Wis.
Hous. & Econ. Dev. Auth., 776 F.3d 463, 464 (7th
court may have federal-question jurisdiction over
“state-law claims that implicate significant federal
issues,” Grable & Sons Metal Prods., Inc. v.
Darue Eng’g & Mfg., 545 U.S. 308, 312 (2005),
that is the exception to the rule and does not apply here.
DRI alleges that FHLBI is liable for breach of contract
because it terminated the Agreements and rescinded
DRI’s membership. Dkt. 1-3 ¶¶ 27, 31-37.
FHLBI claims that it “misinterpreted federal membership
regulations” when it admitted DRI as a member. Dkt. 14
at 1. FHLBI further claims that it rescinded DRI’s
membership and terminated the Agreements because DRI
“failed to meet the . . . regulatory membership
requirements at the time of application.” Id.
at 7. But the federal regulations are raised only by FHLBI in
response to DRI’s allegations, in other words, as a
case may not be removed on the basis of a federal
defense.” Citadel, 808 F.3d at 701;
Jackson Cty. Bank v. DuSablon, 915 F.3d 422, 424
(7th Cir. 2019) (“The complaint is based entirely on
state law and any potential federal defense cannot form the
basis for removal.”). Furthermore, this case does not
fall under the Grable exception because
“Grable does not alter the rule that a
potential federal defense is not enough to create federal
jurisdiction under § 1331.” Chi. Tribune Co.
v. Bd. of Trustees of Univ. of Ill., 680 F.3d 1001, 1003
(7th Cir. 2012).
argues that the federal regulations are not a federal defense
but form “the crux of this case.” Dkt. 30 at 12
(citing dkt. 27 at 2). But regardless of FHLBI’s
characterization of the regulations, it is “settled law
that a case may not be removed to federal court on the basis
of a federal defense . . . even if the defense is anticipated
in the plaintiff’s complaint, and even if both ...