Clarifying Federal Removal Jurisdiction: Limits on Federal‐Question and Diversity Removal in Foreclosure Actions

Introduction

In M&T Bank v. Chryssoula Arsenis, the United States Court of Appeals for the Third Circuit considered whether a homeowner’s third attempt to remove a state‐court foreclosure action to federal district court had any statutory basis. Appellant Chryssoula Arsenis invoked three removal statutes—28 U.S.C. §§ 1442 (federal officers or agents), 1443 (civil rights removals), and 1332 (diversity)—arguing that (1) her federal‐law defenses conferred federal‐question jurisdiction, (2) she was acting under federal banking regulation for § 1442 purposes, and (3) complete diversity existed. The District Court remanded for lack of subject‐matter jurisdiction. On appeal, the Third Circuit summarily affirmed, holding that none of the invoked statutes applied.

Summary of the Judgment

The Third Circuit, exercising plenary review, concluded:

No federal‐question removal under § 1443(1). Appellant did not assert a right guaranteed by a civil‐rights statute or show that state law barred her from vindicating such a right.
No officer/agent removal under § 1442. A private homeowner cannot claim the privilege of removal reserved for federal officers or their authorized agents.
No diversity jurisdiction under § 1332. Real parties of interest—the United States and the State of New Jersey—destroyed complete diversity because neither is a “citizen” of a state for diversity purposes.
Because the foreclosure complaint was purely state‐law based, and the removal statutes did not apply, the District Court properly remanded the case to New Jersey Superior Court.

Analysis

Precedents Cited

Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987): Emphasizes the “well‐pleaded complaint” rule—federal question must appear on the face of the plaintiff’s complaint to support removal.
BP P.L.C. v. Mayor & City Council of Baltimore, 141 S. Ct. 1532 (2021): Holds that merely citing § 1442 in a notice of removal suffices to invoke that statute.
Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1 (1983): Confirms that federal defenses to state‐law claims do not create federal‐question jurisdiction.
City of Greenwood v. Peacock, 384 U.S. 808 (1966): Defines the limited class of persons entitled to remove under § 1442—federal officers or those acting under them.
Ramada Inns, Inc. v. Rosemount Memorial Park Ass’n, 598 F.2d 1303 (3d Cir. 1979): Explains that states and the United States, as non‐citizens, destroy diversity jurisdiction when they are real parties in interest.

Legal Reasoning

The court’s reasoning follows three core lines:

Federal‐Question Removal (§ 1443): Section 1443 permits removal when defendants assert “rights under any law providing for equal civil rights” and show that state law precludes their vindication. Arsenis neither identified a specific civil‐rights statute nor demonstrated that New Jersey law barred her federal remedies. The Third Circuit invoked Davis v. Glanton (107 F.3d 1044) and Georgia v. Rachel (384 U.S. 780) to reinforce the narrow scope of § 1443 removals.
Officer/Agent Removal (§ 1442): Section 1442 grants a removal privilege only to federal officers or agents executing federal duties. Citing Peacock, the court held that a private homeowner cannot transform a routine foreclosure defense into a § 1442 removal claim by alleging compliance with federal banking regulations.
Diversity Jurisdiction (§ 1332): To establish diversity, all plaintiffs must be citizens of different states from all defendants. The complaint named the United States and New Jersey as potential lienholders—real parties of interest whose presence “destroys” diversity under Ramada Inns and Bautista Cayman Asset Co. v. Asociacion de Miembros (17 F.4th 167).

Impact

This decision, though non‐precedential, reinforces important removal jurisdiction limits:

It reiterates that federal‐question jurisdiction cannot rest solely on federal defenses to state‐law claims.
It clarifies that § 1442 removal is not available to private parties who merely invoke compliance with federal regulation.
It reminds practitioners to check for non‐citizen real parties (including sovereign entities) that can defeat diversity.

Future litigants will find this case instructive when evaluating removal strategies in foreclosure and other purely state‐law actions.

Complex Concepts Simplified

Well-pleaded complaint rule: Federal courts look only to the plaintiff’s original complaint to determine if a federal question exists—defenses do not count.
Removal under § 1442: Only actual federal officers (or those acting under them) can invoke a privileged removal if they are sued in state court while performing federal duties.
Diversity destruction by sovereigns: States and the United States are not “citizens” of any state for diversity jurisdiction. If named as parties, they eliminate diversity.

Conclusion

M&T Bank v. Arsenis underscores the strict statutory boundaries on removal jurisdiction. The Third Circuit reconfirmed that:

Federal defenses cannot manufacture federal‐question jurisdiction;
Only true federal officers may remove under § 1442;
Presence of sovereign lienholders destroys diversity.

By summarily affirming the remand, the court preserved the principle that federal courts are courts of limited jurisdiction, and removal statutes must be strictly construed. This decision will guide practitioners and district courts in weeding out improper removal attempts in state‐law disputes.