Summary
finding that because Chase Bank's main office is in Ohio, it is an Ohio citizen
Summary of this case from Bendeck v. U.S. Bank Nat'l Ass'nOpinion
No. 2:16-cv-01008-MCE-CKD
02-22-2017
ROBERT OBY and SUSAN OBY, Plaintiffs, v. CLEAR RECON CORPORATION; SELECT PORTFOLIO SERVICING, INC; JP MORGAN CHASE; and DOES 1 through 50, inclusive, Defendants.
MEMORANDUM AND ORDER
On April 14, 2016, Plaintiffs Robert Oby and Susan Oby ("Plaintiffs") filed this action in state court on grounds that Defendant JPMorgan Chase Bank, N.A., sued erroneously as JP Morgan Chase, ("Chase") and Defendant Select Portfolio Servicing, Inc. ("SPS") committed various violations of California's Homeowners' Bill of Rights by instituting foreclosure proceedings against Plaintiffs' home before the time for appealing denial of a loan modification request had lapsed. Chase subsequently removed the case to this Court on May 11, 2016 on diversity of citizenship grounds pursuant to 28 U.S.C. § 1332. According to Chase, it is a national banking association deemed to be a citizen of Ohio since its main office is located within that state. Moreover, Plaintiffs' own complaint alleges that Defendant SPS is a Utah corporation with its principal place of business in Salt Lake City. Finally, in its Notice of Removal (ECF No. 1), Chase alleges that the California citizenship of the remaining Defendant, Clear Recon Corporation ("Clear Recon") should be disregarded for diversity purposes since, as a mere foreclosure trustee, Clear Recon should be viewed as a nominal defendant whose presence is irrelevant to a diversity analysis. Plaintiffs disagree with that characterization and now move to remand the case back to state court on grounds that the requisite diversity of citizenship is not present, both because Clear Recon's citizenship should be considered and because Chase should be deemed to be a citizen of California in any event, thus destroying diversity on that ground as well. For the reasons set forth below, Plaintiffs' Motion to Remand (ECF No. 17) is DENIED.
Plaintiffs also urge the Court to remand on ground that Chase failed to obtain the consent of Clear Recon prior to removal, citing case law requiring unanimity of consent in removal cases involving multiple defendants. See, e.g., Russell Corp. v. American Home Assur. Co., 264 F.3d 1040 1050 (11th Cir. 2001). As set forth below, however, because the Court concludes that Clear Recon was a nominal defendant, its consent to removal was not required. See Emrich v. Touche Ross & Co., 846 F.2d 1190, 1193 n.1 (9th Cir. 1988) ("Ordinarily, under 28 U.S.C. § 1146(a), all defendants in a state action must join in the petition for removal, except for nominal, unknown, or fraudulently joined parties.").
Having concluded that oral argument was not of material assistance, the Court submitted this matter on the briefs in accordance with Local Rule 230(g).
STANDARD
When a case "of which the district courts of the United States have original jurisdiction" is initially brought in state court, the defendant may remove it to a federal court "embracing the place where such action is pending." 28 U.S.C. § 1441(a). There are two bases for federal subject matter jurisdiction: (1) federal question jurisdiction under 28 U.S.C. § 1331, and (2) diversity jurisdiction under 28 U.S.C. § 1332. A district court has federal question jurisdiction in "all civil actions arising under the Constitution, laws, or treaties of the United States." Id. § 1331. A district court has diversity jurisdiction "where the matter in controversy exceeds the sum or value of $75,000, . . . and is between citizens of different states, or citizens of a State and citizens or subjects of a foreign state . . . ." Id. § 1332(a)(1)-(2).
A defendant may remove any civil action from state court to federal district court if the district court has original jurisdiction over the matter. 28 U.S.C. § 1441(a). "The party invoking the removal statute bears the burden of establishing federal jurisdiction." Ethridge v. Harbor House Rest., 861 F.2d 1389, 1393 (9th Cir. 1988) (citing Williams v. Caterpillar Tractor Co., 786 F.2d 928, 940 (9th Cir. 1986)). Courts "strictly construe the removal statute against removal jurisdiction." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (internal citations omitted). "[I]f there is any doubt as to the right of removal in the first instance," the motion for remand must be granted. Id. Therefore, "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded" to state court. 28 U.S.C. § 1447(c).
ANALYSIS
In order to obtain diversity jurisdiction, each plaintiff must be of different citizenship than each defendant. 28 U.S.C. § 1332(a); Athena Automotive, Inc. v. DiGregorio, 166 F.3d 288, 290 (4th Cir. 1999). The requisite citizenship determination must be made at the time the action is filed. Grupo Dataflux v. Atlas Global Group, LP, 541 U.S. 567, 570-71 (2004). Even if the controversy is primarily between citizens of different states, if a properly joined defendant is a citizen of the same state as one of the plaintiffs, complete diversity is not present and no federal jurisdiction accrues. See Exxon Mobil Corp. v. Allapattah Servs, Inc., 545 U.S. 546, 562 (2005) (inclusion of non-diverse party "contaminates" complaint).
According to the Complaint, Plaintiffs are California residents. Compl, ECF No. 1-1, ¶ 1. Under the above-stated analysis, then, diversity is present only if all of the Defendants are not deemed citizens of the State of California. While Plaintiffs' Complaint states that Clear Recon is a Washington corporation with its principal place of business in Washington, Plaintiffs now allege that Clear Recon is registered with the State of California and consequently must be deemed a California resident. In removing the action, Chase simply states that because Clear Recon's only role in this matter is as trustee of the Deed of Trust encumbering Plaintiffs' property, it must be deemed a nominal defendant whose location is irrelevant to the diversity analysis. Defs.' Notice of Removal, ECF No. 1, ¶ 13. Chase argues that Plaintiffs make no specific allegations of wrongdoing against Clear Recon, instead alleging only that Clear Recon recorded a Notice of Trustee's Sale and subsequently issued a letter postponing that sale. Pls.' Comp., ¶¶ 16-17. Where the allegations against the trustee turn on the loan servicer's conduct as opposed to the trustee's, the trustee should be considered a "sham defendant whose naming does not defeat diversity jurisdiction." Rieger v. Wells Fargo Nat'l Ass'n, No. 3:13:0749-JSC, 2013 WL 1748045 at *6 (N.D. Cal. Apr. 23, 2013).
While Plaintiffs claim that Clear Recon is liable for violating a restraining order issued by the state court prior to removal, there are numerous problems with that argument. First, Plaintiffs' Complaint contains no such allegations. In addition, Plaintiffs have cited no authority to the effect that the state court's order remained in effect once this Court assumed jurisdiction. Finally, to the extent that Clear Recon postponed the Trustee's Sale on the property in response to the state court's temporary restraining order, there is no indication that such conduct was a violation of the order in any event. The state court's order prohibited actual sale or foreclosure and did not state that a sale could not be postponed or continued.
In the present matter, there are no allegations that Clear Recon did anything other than conduct the ministerial duties of a trustee under the operable Deed of Trust. Moreover, in serving as a foreclosure Trustee, Clear Recon was immune from liability under state law because it was not a creditor and lacked any beneficial interest in the deed of trust. See Cal. Civ Code § 2924(b),(d). Clear Recon's inclusion in Plaintiffs' Complaint must therefore be considered nominal. A nominal party with no real interest in the controversy is disregarded and cannot constitute the basis for removal. Roth v. Davis, 231 F.3d 681, 683 (9th Cir. 1956) ("Jurisdiction is not ousted by the joinder or non-joinder of mere formal parties); see also Strotek Corp v. Air Transp. Ass'n of Am., 300 F.3d 1129 (9th Cir. 2000) (ignoring nominal trustee's citizenship). A foreclosure trustee with "no interest in the outcome of the litigation" has nominal status and "its citizenship is not considered for the purpose of establishing diversity jurisdiction." Prasad v. Wells Fargo Bank, N.A., No. C11-894-RSM, 2011 WL 4074300 at *3 (W.D. Wash. Sept. 13, 2011).
The Court recognizes Plaintiffs' argument that Clear Recon could have filed a Declaration of Non-Monetary Status under California Code of Civil Procedure 2924l in the event it believed its inclusion in the lawsuit was solely because of its status as trustee. Since the statute by its terms is permissive ("the trustee may file a declaration of non-monetary status"), and because there are no allegations in the Complaint of any independent liability on Clear Recon's part in any event, Clear Recon's failure to file such a Declaration is not dispositive. --------
Plaintiffs' remaining argument, that Chase should be considered a citizen of California for diversity purposes, is no more persuasive. Chase is a federally chartered "national banking association" organized and existing under the National Bank Act, 12 U.S.C. § 21, et seq. For purposes of diversity jurisdiction under 28 U.S.C. §§ 1332 and 1348, a national banking association is a citizen of the state in which its main office is located, as identified in its articles of association. Wachovia Bank N.A. v. Schmidt, 546 U.S. 303, 318 (2006) (rejecting argument that national banking association is citizen of every state in which it operates); Rouse v. Wachovia Mortg. FSB, 747 F.3d 707, 709 (9th Cir. 2014) (reversing remand, finding complete diversity between homeowners and national bank because bank is citizen only of state in which its main office is located).
Chase's Articles of Association designate its main office as being located in Columbus, Ohio. See Notice of Removal, ECF No. 1, ¶ 11, EX. D; see also Decl. of Mary McNeill, ECF No. 26, Ex. A at 1 ("The main office of [Chase] shall be in the city of Columbus, County of Delaware, State of Ohio."). As the Central District has recognized, "[b]ecause [Chase's] main office is located in Columbus, Ohio, it is a citizen only of Ohio." Matute v. JPMorgan Chase & Co., 2016 WL 3092124 at *4 (C.D. Cal. May 31, 2016). Chase therefore is an Ohio citizen for diversity purposes.
In urging the Court to reach a different conclusion, Plaintiffs largely rely on an unsupported allegation that based on the "muscle test," Chase's "principal place of business" should be deemed to be in San Francisco, California. Plaintiffs do not even define what their purported "muscle test" is, let alone distinguish the clear authority described above which stands for the proposition that as a national banking association with its main office in Ohio, Chase is deemed an Ohio citizen in determining diversity. ///
Because the Court concludes that complete diversity is indeed present under the circumstances of this matter, and because the parties do not dispute that the $75,000 amount in controversy requirement is satisfied, this Court has diversity jurisdiction, removal was proper, and the instant motion to remand fails.
CONCLUSION
Based on all the foregoing, Plaintiffs' Motion to Remand (ECF No. 17) is DENIED. Having determined that removal was proper, the Court declines to award any attorneys' fees and costs occasioned by the removal as sought by Plaintiffs.
IT IS SO ORDERED. Dated: February 22, 2017
/s/_________
MORRISON C. ENGLAND, JR.
UNITED STATES DISTRICT JUDGE