Larry L. Cox; Renee M. Cox v. United States Department of Agriculture

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
LARRY L. COX; RENEE M. COX,
Plaintiffs-Appellees,
v.
UNITED STATES DEPARTMENT OF
AGRICULTURE,
Defendant-Appellant.
No. 13-15225
D.C. No.
3:11-cv-00454-
RCJ-WGC
ORDER AND
OPINION
Appeal from the United States District Court
for the District of Nevada
Robert Clive Jones, District Judge, Presiding
Submitted July 6, 2015*
San Francisco, California
Filed September 2, 2015
Before: Richard C. Tallman Milan D. Smith, Jr.,
and Mary H. Murguia, Circuit Judges.
Per Curiam Opinion
* The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).

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COX V. USDA 2
SUMMARY**
Foreclosure / Jurisdiction
The panel redesignated the memorandum disposition,
filed July 20, 2015, as a per curiam opinion in which the
panel reversed the district court’s order remanding back to
state court plaintiffs’ petition for an order modifying their
rural housing loan, and remanded with instructions that the
district court dismiss the petition for lack of jurisdiction.
The plaintiffs defaulted on a rural housing loan granted by
the U.S. Department of Agriculture. The USDA initiated
foreclosure proceedings, and the plaintiffs elected to
participate in Nevada’s Foreclosure Mediation Program. The
mediator found that USDA did not participate in mediation in
good faith, chiefly because USDA regulations prevented the
agency from entertaining the loan modifications that the
plaintiffs requested. Plaintiffs filed a petition in Nevada state
court seeking a favorable loan modification and sanctions
against the USDA, and USDA removed the plaintiffs’
petition to federal court.
The panel held that the Nevada state court lacked
jurisdiction over the action because the record contained no
evidence that USDA waived its sovereign immunity to the
plaintiffs’ petition. The panel further held that under the
derivative jurisdiction doctrine, the district court, accordingly,
also lacked jurisdiction over the petition on removal. The
** This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.

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COX V. USDA 3
panel concluded that the district court was bound to dismiss
the petition rather than remand to state court.
COUNSEL
Stuart F. Delery, Acting Assistant Attorney General, Karen L.
Loeffler, United States Attorney, Mark B. Stern and John S.
Koppel, Attorneys, Appellate Staff Civil Division, United
States Department of Justice, Washington, D.C., for
Defendant-Appellant.
No appearance for Plaintiffs-Appellees.
ORDER
Defendant-Appellant U.S. Department of Agriculture’s
request for publication, filed July 20, 2015, is GRANTED.
The memorandum disposition filed July 13, 2015, is revised
and redesignated a per curiam opinion.
OPINION
PER CURIAM:
Plaintiffs-Appellees Larry and Renee Cox defaulted on a
rural housing loan granted by Defendant-Appellee U.S.
Department of Agriculture (“USDA”). When USDA initiated
foreclosure proceedings, the Coxes elected to participate in
Nevada’s Foreclosure Mediation Program. The mediator
found that USDA did not participate in mediation in good

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COX V. USDA 4
faith, chiefly because USDA regulations prevented the
agency from entertaining the loan modifications that the
Coxes requested. The Coxes petitioned in state court for an
order modifying their loan.
USDA then removed the Coxes’ petition to federal court,
but the district court remanded the petition back to state court.
Because the district court should have instead dismissed the
petition for lack of jurisdiction, we now reverse the district
court’s order remanding the petition to state court.
This dispute arose when the Coxes defaulted on an almost
$45,000 home loan from the USDA. After default, USDA
accelerated the loan and instituted foreclosure proceedings.
But, pursuant to a Nevada statute, USDA was required to
engage in a good-faith loan modification mediation with the
Coxes prior to foreclosure. Nev. Rev. Stat. § 107.086(3), (6).
USDA attended the required mediation. The Coxes were
hoping to negotiate a lower interest rate on the home loan and
a longer payment term at the mediation. Federal regulations,
however, prevented USDA from meaningfully altering the
terms of the home loan. See 7 C.F.R. §§ 3550.201,
3550.211(h) (preventing USDA from reamortizing loans that
have been accelerated); 7 C.F.R. § 3550.208 (preventing
USDA from reamortizing loans at a lower interest rate).
Because of these regulations, USDA’s hands were tied.
The state mediator found that USDA did not negotiate in
good faith. The Coxes filed a petition in Nevada state court
seeking a favorable loan modification and sanctions against
USDA for negotiating in bad faith.
In response, USDA properly removed the Coxes’ petition
to the District of Nevada under 28 U.S.C. § 1442(a)(1).

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COX V. USDA 5
USDA also moved to dismiss pursuant to sovereign immunity
and other doctrines. The district court held that it lacked
subject matter jurisdiction and remanded the Coxes’ petition
back to state court. USDA now appeals, arguing that remand
was improper because USDA enjoys sovereign immunity
from suit in Nevada state courts.
Because the record contains no evidence that USDA
waived its sovereign immunity to the Coxes’ petition, the
Nevada state court lacked jurisdiction over the action. See
Neb. ex rel. Dep’t of Soc. Servs. v. Bentson, 146 F.3d 676,
679–80 (9th Cir. 1998). Accordingly, under the derivative
jurisdiction doctrine, the district court also lacks jurisdiction
over the petition on removal. See In re Elko Cnty. Grand
Jury, 109 F.3d 554, 555 (9th Cir. 1997). The district court
therefore was bound to dismiss the petition rather than
remand to state court. See id.
Because we conclude that the district court erred in failing
to dismiss the petition for lack of jurisdiction, we do not
reach the other issues raised on appeal.
The district court’s remand order is REVERSED and the
action REMANDED with instructions that the district court
dismiss the Coxes’ petition for lack of jurisdiction.

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