Dixon et al v. USDA Rural Development et al

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IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
HOT SPRINGS DIVISION
BRITTANY DIXON and
KELTON DIXON 	PLAINTIFFS
v. 	Civil No. 6:24-cv-06093
USDA RURAL DEVELOPMENT,
GRAY REI, LLC; AND 117 HOT SPRINGS
DR., ARKADELPHIA CLARK COUNTY,
ARKANSAS, IN REM 	DEFENDANTS
REPORT AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
Before the Court is Defendant, USDA Rural Development Motion to Dismiss and Brief. ECF
No. 8, 9. Britany Dixon and Kelton Dixon (“Plaintiffs”) responded to the Motion. ECF No. 17, 18.
Also before the Court is Defendant Gary REI, LLC. 	Motion to Dismiss and Brief. 	ECF No. 5.
Plaintiffs responded to the Motion. ECF No. 6. This matter has been referred to the undersigned,
and it is now ripe for consideration.
1. 	Background:
Plaintiffs bring this action against Defendants United States Department of Agriculture Rural
Development (“USDA RD”) and Gray REI LLC. This matter was removed to this Court, by USDA
RD, following a Notice of Removal that was filed on July 12, 2024. ECF No. 2.
According to the Complaint, Jo Ella Trejo became indebted to the United States Department
of Agriculture (“USDA”) for a mortgage in the amount of $85,880.00 which was taken out through
the Rural Housing Service on or about April 23, 2007. ECF No. 3, p. 2. Ms. Trejo purchased and
took title to the property via a Corporation Warranty Deed on the same day. Id. On March 20, 2012,
Ms. Trejo died intestate and unmarried. Id. Ms. Trejo’s sole heirs at her time of death were Plaintiff
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Brittany Perez Dixon, along with Lindsey Trejo and Alicia Trejo. Id. It is admitted that no payments
on the original mortgage have been made or accepted on the loan since 2012.0F
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According to the Plaintiffs’ Complaint, on or about May 1, 2016, the Plaintiffs moved into
the property and made it their primary residence. 	ECF No. 3, p. 2. 	On May 2, 2016, Plaintiffs
assumed the loan originally obtained by Ms. Trejo. 	Id at p. 3. 	On October 16, 2016, a Quitclaim
Deed was executed by Lindsey Trejo and Alicia Trejo, which transferred any interest they had in the
property to Plaintiffs. 	Id. 	On January 9, 2017, Plaintiffs were notified by USDA RD, through a
Notice of Acceleration of Mortgage Loan, of an outstanding balance on the loan of $112,132.16. Id
at pp. 3 and 18. USDA RD began the non-judicial foreclosure process on May 23, 2022, filing the
Mortgagee’s Notice of Default and Intention to Sell. Id at p. 3. A sale was held July 22, 2022, and
USDA RD was the high bidder by purchasing the property for $102,000. Id. On or about April 17,
2023, USDA RD sold the property to Gray REI, LLC, through Quitclaim Deed. Id.
On March 28, 2024, Plaintiffs filed a Complaint for Declaratory Judgment, to Quiet Title, and
for Other Relief in the Circuit Court of Clark County, Arkansas. Plaintiffs allege (1) the foreclosure
sale was barred by the Statute of Limitations, (2) they failed to receive proper notice of sale, (3) failure
to follow Arkansas law on foreclosure sales, and (4) seek to Quiet Title in their favor. Id. This state
court complaint was removed to this Court on July 12, 2024. ECF Nos. 1 and 2.
2. 	Applicable Law:
“Federal courts are courts of limited jurisdiction, possessing only that power authorized by
Constitution and statute.” Great Lakes Gas Transmission Ltd. P'ship v. Essar Steel Minn. LLC, 843
F.3d 325, 328 (8th Cir. 2016) (citing Gunn v. Minton, 568 U.S. 251, 256 (2013) ). Federal Rule of
Civil Procedure 12(b)(1) allows a defendant to seek dismissal of an action for lack of subject-matter
1 Two payments were attempted on the loan by Plaintiffs in 2016, but were refunded to Plaintiffs by USDA RD. ECF
No. 3, p. 3.
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jurisdiction. Fed. R. Civ. P. 12(b)(1). 	Dismissal of a case pursuant to Rule 12(b)(1) may occur
through a challenge to the complaint “on its face or on the factual truthfulness of its averments.” Titus
v. Sullivan, 4 F.3d 590, 593 (8th Cir.1993).
When ruling on a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a federal
district court should accept the allegations contained in the complaint as true. See Young v. City of St.
Charles, 244 F.3d 623, 627 (8th Cir.2001). Further, any reasonable inferences from the complaint
are drawn in favor of the nonmoving party. See id.
A motion to dismiss is properly granted when, based on the plaintiff's own allegations, it is
clear that the defendant is entitled to judgment as a matter of law. 	See Young, 244 F.3d at 627.
“Though pro se complaints are to be construed liberally, see Estelle v. Gamble, 429 U.S. 97, 106, 97
S.Ct. 285 (1976), they still must allege sufficient facts to support the claims advanced.” Stone v.
Harry, 364 F.3d 912, 914 (8th Cir.2004). To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to “state a claim for relief that is plausible on its face.” Id.
(citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
3. 	Discussion:
A. USDA RD Motion to Dismiss
Defendant, USDA RD, argues this case should be dismissed for lack of subject matter
jurisdiction because they are entitled to sovereign immunity. ECF No. 8. Plaintiffs argue the Court
has jurisdiction over this matter under 28 U.S.C. § 1346(f). ECF No. 18.
The doctrine of sovereign immunity bars private civil actions against the United States and its
agencies and officers, unless the party bringing the action can show that sovereign immunity was
expressly waived for the type of claim being raised. United States v. Mitchell, 463 U.S. 206, 212
(1983); Mader v. United States, 654 F.3d 794, 797 (8th Cir. 2011).1F
2 If the Court lacks subject matter
2 There is no dispute among the parties that Defendant USDA RD is an agency of the United States.
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jurisdiction over a case, that case must be dismissed. See Williams v. Cnty. of Dakota, Neb., 687 F.3d
1064, 1067 (8th Cir. 2012).
However, 	there 	are 	certain 	well-established 	exceptions 	to 	the 	reach 	of
the Eleventh Amendment. 	Burk v. Beene, 948 F.2d 489, 493 (8th Cir. 1991). 	“A waiver of the
Federal Government’s sovereign immunity must be unequivocally expressed in statutory text and will
not be implied.” Lane v. Pena, 518 U.S 187, 192 (1996). “Moreover, a waiver of the Government’s
sovereign immunity will be strictly construed, in terms of its scope, in favor of the sovereign.” Id.
The Court must “construe ambiguities in favor of immunity.” Id
28 U.S.C. §1346(f) confers exclusive subject matter jurisdiction for civil actions under 28
U.S.C. § 2409a to quiet title to an interest in real property in which the United States claims an interest
other than a security interest or water rights. For the Court to have jurisdiction over Plaintiffs action,
they must establish both that: (1) the United States claims an interest in the property at issue; and (2)
title to the property is disputed. See Leisnoi, Inc. v. United States, 267 F.3d 1019, 1023 (9th Cir.
2001).
Plaintiffs have failed to show that the requirements for a waiver of sovereign immunity in this
case are satisfied with regard to their section 2409a claim. Where the property at issue has been sold,
the government no longer “claims an interest” and section 2409a is not applicable. 	See Seed-Faith
Church of God v. Preliminary Hove Federal Sav. & Loan Ass'n of San Diego, 935 F.2d 275, 1991
WL 99604 (9th Cir. 1991) (unpublished opinion), Bay Savings Bank, F.S.B. v. I.R.S., 837 F.Supp.
150, 153 (E.D.Va.1993). In this case, the parties agree that on or about April 17, 2023, USDA RD
sold the property to Gray REI, LLC, through Quitclaim Deed. 	As a result, USDA RD no longer
claims an interest in the property in question. 	Accordingly, Defendant USDA RD’s sovereign
immunity remains, and the Court lacks subject matter jurisdiction over the claims against USDA.
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B. Gary REI, LLC. Motion to Dismiss
Also, before the Court is Defendant Gary REI, LLC. Motion to Dismiss. ECF No. 5. 	Gary
REI, LLC seeks dismissal based on collateral estoppel, res judicata, and improper appeal of state
court proceeding. Id.2F
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However, before reaching the merits of this Motion, as discussed above, the Court lacks
subject matter jurisdiction over all claims asserted against Defendant USDA RD. 	This case was
removed under 28 U.S.C. § 1442, which provides for the removal of a civil action commenced in
state court against an agency of the United States or its officers. If the Court dismisses the claims
against Defendant USDA RD, there will be no other federal-government party or claim in this case
that fits the basis for removal under 18 U.S.C. § 1442(a)(1). 	The case will only involve Arkansas
state-law claims between non-diverse parties. As such, there would be no original jurisdiction over
the remaining claims, which are only before the Court under its exercise of supplemental jurisdiction.
See Russell v. Harris, No. 4:08-cv-0145- SWW, 2009 WL 10677138, at *2 (E.D. Ark. Jan. 14, 2009)
(finding the same after dismissing all claims removed under 18 U.S.C. § 1442(a)(1)).
The Court may decline to exercise supplemental jurisdiction over state claims if it “has
dismissed all claims over which it has original jurisdiction.” 28 U.S.C. § 1367(c)(3). When
determining whether to exercise supplemental jurisdiction, the Court must consider factors such as
judicial economy, convenience, fairness, and comity. See Carnegie-Mellon Univ. v. Cohill, 484 U.S.
343, 357 (1988).
However, “in the usual case in which all federal-law claims are eliminated before trial, the
balance of factors to be considered under the pendent jurisdiction doctrine—judicial economy,
3 This Motion to Dismiss was filed in the Circuit Court of Clark County, Arkansas prior to removal brought by USDA
RD.
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convenience, fairness, and comity—will point toward declining to exercise jurisdiction over the
remaining state-law claims.” Carnegie–Mellon, 484 U.S. 343, 350 n. 7.
This is the case here, having dismissed all claims over which the Court has original jurisdiction
under 28 U.S.C. § 1442(a)(1), the remaining state-law claims against Defendant Gary REI, LLC
should be remanded to the Circuit Court of Clark County, Arkansas, because Plaintiffs claims arise
under state law and will best be tried in state court.
4. 	Conclusion:
Based upon the foregoing, the Court recommends USDA Rural Development Motion to
Dismiss (ECF No. 8) be GRANTED and that the claims of Plaintiff against USDA Rural
Development be DISMISSED with prejudice. Additionally, the Court recommends the Motion to
Dismiss of Defendant Gary REI, LLC (ECF No. 5) be DENIED without prejudice, but that the
remaining claims against Defendant Gary REI, LLC be remanded back to the Circuit Court of Clark
County, Arkansas.
The Parties have fourteen (14) days from receipt of this Report and Recommendation in
which to file written objections pursuant to 28 U.S.C. § 636(b)(1). 	The failure to file timely
objections may result in waiver of the right to appeal questions of fact. 	The Parties are
reminded that objections must be both timely and specific to trigger de novo review by the
district court. See Thompson v. Nix, 897 F.2d 356, 357 (8th Cir. 1990).
DATED this 7th day of January 2025.
/s/ 	Barry A. Bryant
HON. BARRY A. BRYANT
U.S. MAGISTRATE JUDGE
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