## Facts

- The decision arose in the multidistrict litigation captioned *In re Ameriquest Mortgage Co. Mortgage Lending Practices Litigation* (MDL No. 1715) pending in the Northern District of Illinois.
- Barbara Skanes alleged she entered into a mortgage transaction with Ameriquest Mortgage Co. in connection with purchasing a home.
- According to Skanes, Ameriquest obtained an appraisal of the property shortly before closing.
- Skanes alleged Ameriquest and the appraiser inflated the home’s value in the appraisal to increase the loan amount and, in turn, Ameriquest’s profit from the transaction.
- Skanes claimed the allegedly inflated valuation and resulting loan terms caused her to pay more over the life of the loan and impeded her ability to refinance.
- In her complaint, Skanes asserted a federal claim under the Truth in Lending Act (TILA) against Ameriquest and state-law fraud and related claims tied to the appraisal and alleged misrepresentations, including claims against the appraiser.
- The appraiser moved to dismiss the state-law claims, arguing the federal court lacked supplemental jurisdiction over those claims (or should not exercise it) because they did not form part of the same case or controversy as the TILA claim.

## Issues

1. Whether Skanes’s state-law fraud and related claims against the appraiser were sufficiently related to her federal TILA claim such that they formed part of the same case or controversy under 28 U.S.C. § 1367(a).
2. If supplemental jurisdiction existed, whether any basis under 28 U.S.C. § 1367(c) justified declining to exercise that jurisdiction over the state-law claims.

## Decision

- The court held it had supplemental jurisdiction over Skanes’s state-law claims under 28 U.S.C. § 1367(a) because the federal and state claims shared a common nucleus of operative fact arising from the same mortgage transaction.
- The court concluded there was no adequate reason under § 1367(c) to decline jurisdiction where the federal TILA claim remained pending and the state-law claims were closely tied to the same alleged course of conduct and injury.
- The court denied the appraiser’s motion to dismiss the state-law claims on jurisdictional grounds, allowing the TILA and state-law claims to proceed in the same action.

## Legal Principles

- A federal court with original jurisdiction over a federal claim has supplemental jurisdiction over additional claims that are so related to the claims within original jurisdiction that they form part of the same case or controversy. 28 U.S.C. § 1367(a).
- Claims form part of the same case or controversy when they share a common nucleus of operative fact—typically where they arise from the same transaction or occurrence and involve overlapping proof and alleged injury.
- Even when § 1367(a) is satisfied, a court may decline to exercise supplemental jurisdiction only in the circumstances listed in § 1367(c): (1) the state claim raises a novel or complex issue of state law; (2) the state claim substantially predominates over the federal claim(s); (3) the court has dismissed all claims over which it has original jurisdiction; or (4) other exceptional circumstances provide compelling reasons to decline.
- Where a borrower’s federal TILA theory and state-law fraud theory are factually linked to the origination of the same mortgage loan—such as allegations about the appraisal, the loan amount, and resulting payment and refinancing consequences—supplemental jurisdiction is generally appropriate while the federal claim remains pending.

## Conclusion

Because Skanes’s TILA claim and her state-law fraud claims were factually connected to the same mortgage origination and alleged appraisal inflation, the court held the state claims were part of the same case or controversy under § 1367(a) and, finding no § 1367(c) basis to refuse jurisdiction, denied the appraiser’s motion to dismiss the state-law claims.


In re Ameriquest Mortgage Co. Mortgage Lending Practices Litigation, 2007 U.S. Dist. LEXIS 70805 (2007)