Cox v. United States Department of Agriculture

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 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. *1032 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 U^DA 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). 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.