Aurora Bank, FSB v. Seattle Mortgage Company
Filing
32
ORDER granting in part and denying as moot in part 14 Motion to Dismiss for Lack of Jurisdiction and Venue by Judge Christine M. Arguello on 10/21/13. This case is dismissed without prejudice, and Defendant shall have its costs.(dkals, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 13-cv-00725-CMA-KLM
AURORA BANK, FSB,
Plaintiff,
v.
SEATTLE BANK f/k/a SEATTLE SAVINGS BANK,
Defendant.
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
FOR LACK OF JURISDICTION AND VENUE
This case arises out of claims made by Plaintiff Aurora Bank, FSB against
Defendant Seattle Bank f/k/a Seattle Savings Bank for breach of contract and breach of
express warranty relating to the purchase of residential mortgage loans. (Doc. # 3 at 10–
12.) This matter is before the Court on Defendant Seattle Bank’s Motion to Dismiss
for lack of Jurisdiction and Venue, or, in the alternative, Motion to Transfer Venue to
the Western District of Washington. (Doc. # 14.) For the reasons stated below,
Defendant’s motion is granted in part as to the lack of personal jurisdiction, and denied
as moot as to Defendant’s request to transfer venue.
I. BACKGROUND
Defendant Seattle Bank is incorporated in the state of Washington, with its
principal place of business in Seattle. (Doc. # 14 at 1-2.) It operated as “Seattle
Savings Bank” until about 2009, when it changed its name to “Seattle Bank.” (Doc. # 14
at 2.) Defendant asserts that it is a local community bank that focuses its lending efforts
on loans to customers in the Puget Sound area of Washington. (Id.) Defendant alleges
that it (1) is not registered to do business in Colorado; (2) has never transacted business,
or originated any loans, in Colorado; (3) has no offices in Colorado; (4) has not advertised
in Colorado and would not lend on a transaction in Colorado. (Doc. # 14 at 4.)
However, Defendant’s majority shareholder, Seattle Financial Group, had stake in
another corporation, Seattle Mortgage Company, which conducted business in Colorado
until 2008. (Doc. # 30 at 6.) The parties disagree over whether Seattle Bank and
Seattle Mortgage Company were operating as essentially the same entity, or as distinct
entities, during the relevant timeframe.
Plaintiff Aurora Bank, FSB, was formerly known as Lehman Brothers Bank, FSB.
(Doc. # 22 at n.1.) Lehman Brothers Bank was incorporated and headquartered in
Delaware. (Doc. # 14 at 3.) Plaintiff is now headquartered in Colorado. (Doc. # 30
at 3.) On April 20, 2006, Defendant entered into a Loan Purchase Agreement with
Lehman Brothers Bank, which allowed Defendant to sell certain residential mortgage
loans to Lehman Brothers Bank. (Doc. # 14 at 2.) The Agreement was governed
by New York law. (Id.) In the process of forming the Agreement, Defendant sent a
Correspondent Application to Aurora Loan Services (“ALS”), Plaintiff’s wholly owned
subsidiary in Colorado. (Doc. # 22 at 3.) ALS is a Delaware corporation with its
principal place of business in Colorado. (Doc. # 22 at 3.) Defendant admits that it knew
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that ALS was affiliated with Lehman Brothers Bank, and that ALS would assist Lehman
Brothers Bank in evaluating the Correspondent Application and in later servicing any
loans that Defendant sold to Lehman Brothers Bank. (Doc. # 30 at 4.) Additionally, the
Loan Purchase Agreement later signed by the parties expressly incorporated the terms
and provisions of ALS’s Seller’s Guide. (Doc. # 22 at 5.)
On February 13, 2007, Defendant loaned money to Wendy Mitchell as part of a
mortgage refinance on her home in Washington. (Doc. # 14 at 3.) Shortly thereafter,
Defendant sold that loan to Lehman Brothers Bank pursuant to the Loan Purchase
Agreement. (Id.) On June 25, 2012, claiming a breach of the Loan Purchase
Agreement, Plaintiff sent a demand letter to the Defendant, asking it to either repurchase
the Mitchell loan or indemnify the Plaintiff. (Doc. # 22 at 2.) When Defendant refused
Plaintiff’s demand, Plaintiff brought the current action for breach of contract and breach
of express warranty. (Id.)
II. STANDARD OF REVIEW
Plaintiff bears the burden of establishing the Court's personal jurisdiction over the
Defendant. Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1070 (10th
Cir. 2008). Where, as here, a district court considers a pre-trial motion to dismiss for lack
of personal jurisdiction, the plaintiff need only make a prima facie showing of personal
jurisdiction. AST Sports Sci., Inc. v. CLF Distrib. Ltd., 514 F.3d 1054, 1056–57 (10th Cir.
2008).
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In resolving this motion, the Court accepts as true all well-pled facts—i.e., facts
that are neither conclusory nor speculative—alleged by the Plaintiff. Dudnikov, 514 F.3d
at 1070. Additionally, Plaintiff has “the duty to support jurisdictional allegations in a
complaint by competent proof of the supporting facts if the jurisdictional allegations are
challenged by an appropriate pleading.” Pytlik v. Prof'l Res., Ltd., 887 F.2d 1371, 1376
(10th Cir. 1989). If the parties’ affidavits conflict, the conflicts “must be resolved in the
plaintiff’s favor, and the plaintiff’s prima facie showing is sufficient notwithstanding the
contrary presentation by the moving party.” Wenz, 55 F.3d at 1505 (internal quotation
marks and citation omitted).
III. DISCUSSION
A.
LAW
To obtain personal jurisdiction over a nonresident defendant in a diversity action, a
plaintiff must show (1) that jurisdiction is legitimate under the laws of the forum state, and
(2) that the exercise of jurisdiction does not offend the Due Process Clause. Soma Med.
Int’l v. Standard Chartered Bank, 196 F.3d 1292, 1295 (10th Cir. 1999) (citation omitted).
In Colorado, this two-pronged inquiry collapses into one inquiry, because AColorado’s
long arm statute is coextensive with constitutional limitations imposed by the due process
clause.@ Grynberg v. Ivanhoe Energy, Inc., 666 F. Supp. 2d 1218, 1229 (D. Colo. 2009)
(internal quotation marks and citation omitted). Thus, Aif jurisdiction is consistent with
the due process clause, Colorado’s long arm statute authorizes jurisdiction over a
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nonresident defendant.@ Id. Therefore, the Court asks only whether the exercise
of personal jurisdiction over Defendant comports with due process.
To determine if the exercise of personal jurisdiction over the Defendant offends
due process, courts consider (1) Awhether the non-resident defendant has >minimum
contacts’ with the forum state@ such that he should have reasonably anticipated being
haled into court there, and (2) whether the “exercise of jurisdiction over the Defendant
offends >traditional notions of fair play and substantial justice,= that is, whether the
exercise of jurisdiction is >reasonable= under the circumstances.@ Melea, Ltd. v. Jawer
SA, 511 F.3d 1060, 1065 (10th Cir. 2007).
Plaintiff contends that Defendant is subject to specific personal jurisdiction
in Colorado because it has had sufficient minimum contacts with Colorado. 1 The
determination of “whether a non-resident defendant has the requisite minimum contacts
with the forum state to establish in personam jurisdiction must be decided on the
particular facts of each case.@ Benton v. Cameco Corp., 375 F.3d 1070, 1076 (10th
Cir. 2004). To have sufficient minimum contacts for specific personal jurisdiction, the
out-of-state defendant must have (i) purposefully directed activities at forum residents,
and (ii) the litigation must result from alleged injuries that arise out of those forum-related
activities. Dudnikov, 514 F.3d at 1071 (citing Burger King Corp. v. Rudzewicz, 471 U.S.
462, 472 (1985)). The Supreme Court has said that the aim of the Apurposeful direction”
1
The Court need not discuss whether there was Ageneral@ personal jurisdiction because the Plaintiff has
not alleged that Defendant had Acontinuous and systematic contacts@ with Colorado sufficient to permit
the Court to exercise such jurisdiction. See Beverly Kuenzle, Wayne Kuenzle v. HTM Sport-Und
Freizeitgerate AG, 102 F.3d 453, 455-56 (10th Cir. 1996); see also Dudnikov, 514 F.3d at 1078-79
(discussing the distinction between general and specific personal jurisdiction).
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doctrine is to “ensure that an out-of-state defendant is not bound to appear to account for
merely >random, fortuitous, or attenuated contacts’ with the forum state.@ Dudnikov, 514
F.3d at 1071.
A defendant is not necessarily subject to personal jurisdiction in a forum state
simply because he enters into a contract with a party that resides in that forum. Burger
King, 471 U.S. at 478 (an individual's contract with an out-of-state party cannot
automatically establish sufficient minimum contacts in that party’s home forum); SGI Air
Holdings II LLC. v. Novartis Int'l, AG, 192 F. Supp. 2d 1195, 1202 (D. Colo. 2002) (same).
However, a contract may establish sufficient minimum contacts with the forum state
where it has a “substantial connection” with that forum state. TH Agriculture & Nutrition,
LLC v. Ace European Grp. Ltd., 488 F.3d 1282, 1288 (10th Cir. 2007). Without
substantial connection, there may be no personal jurisdiction even in cases where the
defendant enters that forum state to discuss some of the details of the contract. See SGI
Air Holdings II, 192 F. Supp. 2d at 1202.
Similarly, entering into a contract with a resident of the forum state and exchanging
communication in furtherance of that contract does not necessarily create sufficient
contacts to justify the exercise of specific personal jurisdiction. SGI Air Holdings II, 192
F. Supp. 2d at 1203 (“Negotiations conducted over various electronic devices, in the
absence of further contact, do not rise to the level of purposeful availment contemplated
by the courts.”); G & G Int'l, LLC v. Camsing Co., No. 09-CV-00366-MSK-MEH, 2010 WL
466812, at *2 (D. Colo. Feb. 9, 2010) (“[E]ntering into a contract with a resident of the
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forum state and exchanging interstate telephone calls and messages in furtherance of
that contract does not, of itself, necessarily create sufficient contacts with the forum state
to support the exercise of personal jurisdiction.”). “[T]he mere quantum of contacts
between the forum and defendant is not determinative; [r]ather, the quantity of the
contacts, their significance to the venture, and the overall purpose of the parties’ efforts
all factor into an assessment of the sufficiency of the contacts.” G & G Int'l, 2010 WL
466812, at *2.
B.
ANALYSIS
In the instant case, Defendant, a Washington entity, entered into the contract at
issue with Plaintiff, then a Delaware company, outside of Colorado. (Doc. # 14 at 1-3.)
The parties agreed that the contract would be governed by New York law. (Id. at 2.)
The Mitchell loan, the transaction underlying the claims in this case, was made in
Washington to a Washington resident. (Id. at 3.)
Plaintiff asserts that the following contacts with Colorado subject Defendant to
specific personal jurisdiction: (1) submitting the Correspondent Application to Plaintiff’s
wholly-owned subsidiary in Colorado; (2) entering into the Loan Purchase Agreement
knowing that a Colorado entity would be servicing the loans; (3) entering into the Loan
Purchase Agreement knowing that a Colorado entity’s Seller’s Guide was incorporated
into the contract; (4) communicating with Plaintiff, a Colorado entity, regarding Plaintiff’s
demand for indemnification; and (5) operating in Colorado as “Seattle Mortgage
Company” for a number of years, until 2008. (Doc. # 22 at 4-5.)
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In the process of forming an agreement with the Delaware-based Plaintiff,
Defendant sent a separate Correspondent Application for approval to Plaintiff’s
wholly-owned subsidiary in Colorado. (Doc. # 22 at 2-3.) Plaintiff alleges this as an
important fact in the jurisdiction analysis, but fails to explain this Application’s significance
to the venture and, without further explanation, merely states that “following approval of
Defendant’s Correspondent Application, Plaintiff and Defendant entered the written Loan
Purchase Agreement.” (Id. at 3.) Because the Plaintiff retains the burden to establish
jurisdiction over Defendant and has the duty to support its allegations by facts, Dudnikov,
514 F.3d at 1070, the Court cannot presume the importance of Defendant’s submission
of the Correspondent Application to ALS in Colorado. 2 Even if this one contact was
somehow significant to the later Loan Purchase Agreement at issue in this case, sending
one application to a subsidiary in Colorado that allowed for the formation of a later
contract with a parent outside of Colorado is not sufficient to support jurisdiction.
See Burger King, 471 U.S. at 478 (forming a contract with an out-of-state party cannot,
by itself, establish sufficient minimum contacts in that party’s home forum).
Moreover, when Defendant sent the Correspondent Application to ALS, Defendant
was not forming a contract with a Colorado entity. (See Doc. # 22 at 3.) The contract
that was allegedly breached is the Loan Purchase Agreement formed outside of Colorado
between two non-Colorado entities and which is governed by New York law. (See Doc.
# 14 at 1-2.) In entering into that contract, Defendant was seeking to do business with
2
Additionally, because Plaintiff does not establish the role the Correspondent Application plays in the
alleged breach of the Loan Purchase Agreement, the Court cannot assume that Plaintiff’s claim arises
out of the Correspondent Application.
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a Delaware corporation, which directed Defendant to send an application (of unknown
importance) to its loan servicer, a subsidiary located in Colorado. See G & G Int'l, 2010
WL 466812, at *2 (no specific jurisdiction where defendant sought out Maryland parent,
which directed defendant to a Colorado subsidiary, because no activities were
undertaken in Colorado except those associated with ordinary contract administration,
and contacts with the Colorado subsidiary were less significant than the primary
communications with the Maryland parent company upon which the business venture
was based). This scenario does not support Plaintiff’s contention that Defendant
purposefully directed its activities at Colorado. See Dudnikov, 514 F.3d at 1071;
cf. Quarles v. Fuqua Indus., Inc., 504 F.2d 1358, 1364 (10th Cir. 1974) (“[A] wholly owned
subsidiary may be an agent and when its activities as an agent are of such a character as
to amount to doing business of the parent, the parent is subjected to the in personam
jurisdiction of the state.”) (quoting Curtis Publ'g Co. v. Cassel, 302 F.2d 132, 137 (10th
Cir. 1962)).
Similarly, the Court is not convinced that Defendant subjected itself to jurisdiction
in Colorado because it signed the Loan Purchase Agreement knowing that ALS, a
Colorado entity, would be servicing its loans. (See Doc. # 22 at 4.) Even though
the Loan Purchase Agreement established that ALS would service any future loans,
foreseeability that a Colorado entity may be involved in the future to service loans for
the Plaintiff after Defendant sold them to Plaintiff is not enough to subject Defendant to
personal jurisdiction in Colorado. See World-Wide Volkswagen Corp. v. Woodson, 444
9
U.S. 286, 295-97 (1980) (“[F]oreseeability alone has never been a sufficient benchmark
for personal jurisdiction”; foreseeability is only relevant to the degree that “defendant’s
conduct and connection with the forum State are such that he should reasonably
anticipate being haled into court there”). Moreover, although the Loan Purchase
Agreement “contemplated business activities involving a Colorado based corporation,
there is no showing [Defendant] transacted business in Colorado.” Encore Productions,
Inc. v. Promise Keepers, 53 F. Supp. 2d 1101, 1117 (D. Colo. 1999) (subcontract that
contemplates business in Colorado not a sufficient basis for specific jurisdiction).
Indeed, despite the foreseeability of ALS’s involvement at the time the parties entered
into the Loan Purchase Agreement, ALS’s involvement with the Mitchell loan that
underlies this suit was a result of Plaintiff’s acts, not Defendant’s. See Hanson v.
Denckla, 357 U.S. 235, 253 (1958) (“The unilateral activity of those who claim some
relationship with a nonresident defendant cannot satisfy the requirement of contact
with the forum State.”) Once the Mitchell loan was sold by Defendant to then
Delaware-based Plaintiff, its involvement with the loan ceased. Even though ALS
later became involved in servicing the Mitchell loan, Defendant’s business activities
were aimed at Lehman Brothers Bank, a Delaware corporation, and not at ALS.
Thus, Plaintiff’s use of its Colorado-based subsidiary to service loans is irrelevant to
the jurisdictional analysis.
Further, signing the Loan Purchase Agreement knowing that ALS’s Seller’s Guide
was incorporated into the Agreement also does not subject Defendant to jurisdiction in
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Colorado. See Burger King, 471 U.S. at 478. It is established that a defendant cannot
be subject to jurisdiction for merely entering into a contract with an entity in the forum
state. Id. Therefore, entering into a contract with a non-forum state entity that
incorporates some terms from a document created by a subsidiary that happens to be
located in the forum state is likewise not sufficient. See id. It is also important that the
entire Agreement, including the incorporated Seller’s Guide, is governed by New York
law. (Doc # 14 at 2.) This signals that, despite entering into an agreement that
incorporated a Colorado entity’s terms, the Defendant did not purposefully invoke the
benefits and protections of Colorado’s laws. See Hanson, 357 U.S. at 253 (specific
jurisdiction exists where defendant “purposely avails itself of the privilege of conducting
activities within the forum State, thus invoking the benefits and protections of its laws”).
Therefore, the Loan Purchase Agreement does not have a “substantial connection” to
Colorado and cannot support the Court’s jurisdiction over the Defendant.
Plaintiff also alleges that Defendant is subject to specific personal jurisdiction
in Colorado because it communicated with Plaintiff concerning its alleged breach of
contract. (Doc # 22 at 5.) However, simply communicating about the matters that gave
rise to this suit is insufficient to justify exercising jurisdiction over Defendant. Associated
Inns & Rest. Co. of Am. v. Dev. Associates, 516 F. Supp. 1023, 1026-27 (D. Colo. 1981)
(plaintiff’s unilateral act of sending demand letter to defendant and resulting interstate
correspondence was an insufficient basis for exercise of jurisdiction).
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Last, Plaintiff alleges that Defendant is subject to jurisdiction in Colorado because
it did business in Colorado under the trade name “Seattle Mortgage Company” until 2008.
(Doc # 22 at 3.) Defendant alleges that Seattle Mortgage Company, though a sister
subsidiary, is a distinct entity. (Doc # 30 at 6.) Resolving whether Defendant and
Seattle Mortgage Company operated as distinct subsidiaries of their parent company, or
whether they operated as essentially the same entity, is unnecessary to this analysis. 3
For this contact to become the basis of specific personal jurisdiction, the claims in this
case must arise out of Seattle Mortgage Company’s transactions in Colorado.
Dudnikov, 514 F.3d at 1071. However, Plaintiff has not established that Seattle
Mortgage Company’s activities gave rise to any of the claims in this suit or that its
activities in Colorado until 2008 are at all associated with the Loan Purchase Agreement
and the Mitchell loan at issue in this case.
In sum, viewing the record as a whole, Defendant did not purposefully direct its
activities at Colorado such that it should have reasonably anticipated being haled into
court here. Rather, Defendant’s contacts with Colorado, even when taken together,
were fortuitous and attenuated. Therefore, exercising personal jurisdiction over the
Defendant would be inappropriate in this case. 4
3
Again, the Plaintiff does not argue that Defendant is subject to general jurisdiction in Colorado. Seattle
Mortgage Company’s status as the same or a distinct entity and its contacts in Colorado could have been
relevant if Plaintiff had alleged general jurisdiction over the Defendant. See Beverly Kuenzle, 102 F.3d at
455-56.
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Because the Court determines that Plaintiff has not made its prima facie showing under step one (i.e.,
it cannot demonstrate that Defendant had sufficient minimum contacts with the forum state), the Court need
not analyze the Afair play and substantial justice@ factors involved in the second step.
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IV. CONCLUSION
For the foregoing reasons, it is ORDERED that Defendant’s Motion to Dismiss
for Lack of Jurisdiction and Venue (Doc. # 14) is GRANTED IN PART as to the lack
of personal jurisdiction and DENIED AS MOOT IN PART as to Defendant’s request
to transfer venue. It is
FURTHER ORDERED that, although each party shall bear its own attorneys’ fees,
Defendant shall have its costs by filing a Bill of Costs with the Clerk of the Court within
fourteen days of the entry of judgment. It is
FURTHER ORDERED that this case be DISMISSED WITHOUT PREJUDICE.
DATED: October
21
, 2013
BY THE COURT:
________________________________
CHRISTINE M. ARGUELLO
United States District Judge
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