Oby et al v. Clear Recon Corporation et al

Filing 34

MEMORANDUM and ORDER denying 17 Motion to Remand signed by District Judge Morrison C. England, Jr on 2/22/17. (Kaminski, H)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 ROBERT OBY and SUSAN OBY, 12 13 14 15 16 17 18 No. 2:16-cv-01008-MCE-CKD Plaintiffs, v. MEMORANDUM AND ORDER CLEAR RECON CORPORATION; SELECT PORTFOLIO SERVICING, INC; JP MORGAN CHASE; and DOES 1 through 50, inclusive, Defendants. On April 14, 2016, Plaintiffs Robert Oby and Susan Oby (“Plaintiffs”) filed this 19 action in state court on grounds that Defendant JPMorgan Chase Bank, N.A., sued 20 erroneously as JP Morgan Chase, (“Chase”) and Defendant Select Portfolio Servicing, 21 Inc. (“SPS”) committed various violations of California’s Homeowners’ Bill of Rights by 22 instituting foreclosure proceedings against Plaintiffs’ home before the time for appealing 23 denial of a loan modification request had lapsed. Chase subsequently removed the 24 case to this Court on May 11, 2016 on diversity of citizenship grounds pursuant to 28 25 U.S.C. § 1332. According to Chase, it is a national banking association deemed to be a 26 citizen of Ohio since its main office is located within that state. Moreover, Plaintiffs’ own 27 complaint alleges that Defendant SPS is a Utah corporation with its principal place of 28 business in Salt Lake City. Finally, in its Notice of Removal (ECF No. 1), Chase alleges 1 1 that the California citizenship of the remaining Defendant, Clear Recon Corporation 2 (“Clear Recon”) should be disregarded for diversity purposes since, as a mere 3 foreclosure trustee, Clear Recon should be viewed as a nominal defendant whose 4 presence is irrelevant to a diversity analysis. Plaintiffs disagree with that 5 characterization and now move to remand the case back to state court on grounds that 6 the requisite diversity of citizenship is not present, both because Clear Recon’s 7 citizenship should be considered and because Chase should be deemed to be a citizen 8 of California in any event, thus destroying diversity on that ground as well.1 For the 9 reasons set forth below, Plaintiffs’ Motion to Remand (ECF No. 17) is DENIED.2 10 11 STANDARD 12 13 When a case “of which the district courts of the United States have original 14 jurisdiction” is initially brought in state court, the defendant may remove it to a federal 15 court “embracing the place where such action is pending.” 28 U.S.C. § 1441(a). There 16 are two bases for federal subject matter jurisdiction: (1) federal question jurisdiction 17 under 28 U.S.C. § 1331, and (2) diversity jurisdiction under 28 U.S.C. § 1332. A district 18 court has federal question jurisdiction in “all civil actions arising under the Constitution, 19 laws, or treaties of the United States.” Id. § 1331. A district court has diversity 20 jurisdiction “where the matter in controversy exceeds the sum or value of 21 $75,000, . . . and is between citizens of different states, or citizens of a State and citizens 22 or subjects of a foreign state . . . .” Id. § 1332(a)(1)-(2). 23 24 25 26 27 1 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.”). 2 28 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). 2 1 A defendant may remove any civil action from state court to federal district court if 2 the district court has original jurisdiction over the matter. 28 U.S.C. § 1441(a). “The 3 party invoking the removal statute bears the burden of establishing federal jurisdiction.” 4 Ethridge v. Harbor House Rest., 861 F.2d 1389, 1393 (9th Cir. 1988) (citing Williams v. 5 Caterpillar Tractor Co., 786 F.2d 928, 940 (9th Cir. 1986)). Courts “strictly construe the 6 removal statute against removal jurisdiction.” Gaus v. Miles, Inc., 980 F.2d 564, 566 7 (9th Cir. 1992) (internal citations omitted). “[I]f there is any doubt as to the right of 8 removal in the first instance,” the motion for remand must be granted. Id. Therefore, “[i]f 9 at any time before final judgment it appears that the district court lacks subject matter 10 jurisdiction, the case shall be remanded” to state court. 28 U.S.C. § 1447(c). 11 12 ANALYSIS 13 14 In order to obtain diversity jurisdiction, each plaintiff must be of different 15 citizenship than each defendant. 28 U.S.C. § 1332(a); Athena Automotive, Inc. v. 16 DiGregorio, 166 F.3d 288, 290 (4th Cir. 1999). The requisite citizenship determination 17 must be made at the time the action is filed. Grupo Dataflux v. Atlas Global Group, LP, 18 541 U.S. 567, 570-71 (2004). 19 different states, if a properly joined defendant is a citizen of the same state as one of the 20 plaintiffs, complete diversity is not present and no federal jurisdiction accrues. See 21 Exxon Mobil Corp. v. Allapattah Servs, Inc., 545 U.S. 546, 562 (2005) (inclusion of non- 22 diverse party “contaminates” complaint). Even if the controversy is primarily between citizens of 23 According to the Complaint, Plaintiffs are California residents. Compl, ECF 24 No. 1-1, ¶ 1. Under the above-stated analysis, then, diversity is present only if all of the 25 Defendants are not deemed citizens of the State of California. While Plaintiffs’ 26 Complaint states that Clear Recon is a Washington corporation with its principal place of 27 business in Washington, Plaintiffs now allege that Clear Recon is registered with the 28 State of California and consequently must be deemed a California resident. In removing 3 1 the action, Chase simply states that because Clear Recon’s only role in this matter is as 2 trustee of the Deed of Trust encumbering Plaintiffs’ property, it must be deemed a 3 nominal defendant whose location is irrelevant to the diversity analysis. Defs.’ Notice of 4 Removal, ECF No. 1, ¶ 13. Chase argues that Plaintiffs make no specific allegations of 5 wrongdoing against Clear Recon, instead alleging only that Clear Recon recorded a 6 Notice of Trustee’s Sale and subsequently issued a letter postponing that sale. Pls.’ 7 Comp., ¶¶ 16-17.3 Where the allegations against the trustee turn on the loan servicer’s 8 conduct as opposed to the trustee’s, the trustee should be considered a “sham 9 defendant whose naming does not defeat diversity jurisdiction.” Rieger v. Wells Fargo 10 11 Nat’l Ass’n, No. 3:13:0749-JSC, 2013 WL 1748045 at *6 (N.D. Cal. Apr. 23, 2013). In the present matter, there are no allegations that Clear Recon did anything other 12 than conduct the ministerial duties of a trustee under the operable Deed of Trust. 13 Moreover, in serving as a foreclosure Trustee, Clear Recon was immune from liability 14 under state law because it was not a creditor and lacked any beneficial interest in the 15 deed of trust. See Cal. Civ Code § 2924(b),(d).4 Clear Recon’s inclusion in Plaintiffs’ 16 Complaint must therefore be considered nominal. A nominal party with no real interest 17 in the controversy is disregarded and cannot constitute the basis for removal. Roth v. 18 Davis, 231 F.3d 681, 683 (9th Cir. 1956) (“Jurisdiction is not ousted by the joinder or 19 non-joinder of mere formal parties); see also Strotek Corp v. Air Transp. Ass’n of Am., 20 300 F.3d 1129 (9th Cir. 2000) (ignoring nominal trustee’s citizenship). A foreclosure 21 22 23 24 25 26 27 28 3 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. 4 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. 4 1 trustee with “no interest in the outcome of the litigation” has nominal status and “its 2 citizenship is not considered for the purpose of establishing diversity jurisdiction.” 3 Prasad v. Wells Fargo Bank, N.A., No. C11-894-RSM, 2011 WL 4074300 at *3 (W.D. 4 Wash. Sept. 13, 2011). 5 Plaintiffs’ remaining argument, that Chase should be considered a citizen of 6 California for diversity purposes, is no more persuasive. Chase is a federally chartered 7 “national banking association” organized and existing under the National Bank Act, 8 12 U.S.C. § 21, et seq. For purposes of diversity jurisdiction under 28 U.S.C. §§ 1332 9 and 1348, a national banking association is a citizen of the state in which its main office 10 is located, as identified in its articles of association. Wachovia Bank N.A. v. Schmidt, 11 546 U.S. 303, 318 (2006) (rejecting argument that national banking association is citizen 12 of every state in which it operates); Rouse v. Wachovia Mortg. FSB, 747 F.3d 707, 709 13 (9th Cir. 2014) (reversing remand, finding complete diversity between homeowners and 14 national bank because bank is citizen only of state in which its main office is located). 15 Chase’s Articles of Association designate its main office as being located in 16 Columbus, Ohio. See Notice of Removal, ECF No. 1, ¶ 11, EX. D; see also Decl. of 17 Mary McNeill, ECF No. 26, Ex. A at 1 (“The main office of [Chase] shall be in the city of 18 Columbus, County of Delaware, State of Ohio.”). As the Central District has recognized, 19 “[b]ecause [Chase’s] main office is located in Columbus, Ohio, it is a citizen only of 20 Ohio.” Matute v. JPMorgan Chase & Co., 2016 WL 3092124 at *4 (C.D. Cal. May 31, 21 2016). Chase therefore is an Ohio citizen for diversity purposes. 22 In urging the Court to reach a different conclusion, Plaintiffs largely rely on an 23 unsupported allegation that based on the “muscle test,” Chase’s “principal place of 24 business” should be deemed to be in San Francisco, California. Plaintiffs do not even 25 define what their purported “muscle test” is, let alone distinguish the clear authority 26 described above which stands for the proposition that as a national banking association 27 with its main office in Ohio, Chase is deemed an Ohio citizen in determining diversity. 28 /// 5 1 Because the Court concludes that complete diversity is indeed present under the 2 circumstances of this matter, and because the parties do not dispute that the $75,000 3 amount in controversy requirement is satisfied, this Court has diversity jurisdiction, 4 removal was proper, and the instant motion to remand fails. 5 6 CONCLUSION 7 8 9 10 11 12 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 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6

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