LBCMT 2007-C3 EAST 8 MILE ROAD, LLC v. GUTTMAN
OPINION and ORDER denying 7 Motion to Dismiss. Signed by District Judge John Corbett O'Meara. (WBar)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
LBCMT 2007-C3 EAST 8 MILE ROAD,
Case No. 16-13436
Honorable John Corbett O’Meara
OPINION AND ORDER DENYING
DEFENDANT’S OCTOBER 18, 2016 MOTION TO DISMISS
This matter came before the court on defendant Jeno Guttman’s October 18,
2016 motion to dismiss. Plaintiff LBCMT filed a response November 14, 2016; and
Defendant filed a reply brief November 28, 2016. Pursuant to Local Rule 7.1(f)(2),
no oral argument was heard.
Plaintiff is a limited liability company; and its sole member is U.S. Bank
National Association (“Trustee”), as trustee for the Registered Holders of LB-UBS
Commercial Mortgage Trust 2007-C3, Commercial Mortgage Pass-Through
Certificates, Series 2007-C3 (“Trust”). Trustee is a national banking association, and
its article of association designate its main office in Cincinnati, Ohio.
The Trust was created pursuant to a Pooling and Service Agreement dated July
11, 2007 (“PSA”). The PSA defines the Trust as a “common law” trust and vests the
Trustee with full title to, and control over, the Trust’s assets. The “beneficiaries” of
the Trust do not “have any right to vote or in any manner otherwise control the
operation and management of the Trust Fund, or the obligations of the parties hereto
. . . .” Plaintiff’s Ex. A. § 11.03(b). The PSA further provides, “No Certificate holder
shall have any right by virtue of any provision of the [PSA] to institute any suit, action
or proceeding in equity or at law upon or under or with respect to this Agreement of
any Mortgage Loan . . . .” Id. § 11.03(c). Thus, under the PSA, the Trustee has
complete control over the Trust’s assets; and the certificate holders have none.
Plaintiff filed this suit and asserted subject matter jurisdiction based on
diversity of citizenship. Defendant Guttman filed this motion to dismiss, alleging that
the court lacks jurisdiction because Plaintiff, a Delaware limited liability corporation,
has failed to state the citizenship of each of the trust beneficiaries.
LAW AND ANALYSIS
For purposes of diversity of citizenship, “a limited liability company . . . has the
citizenship of its members.” Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826,
828 (1989). In this case plaintiff LBCMT’s sole member is Trustee, and Trustee is
a national banking association. A national banking association, for purposes of
diversity, is deemed a citizen of “the State in which its main office, as set forth in its
articles of association, is located.” Wachovia Bank v. Schmidt, 546 U.S. 303, 307
(2006); 28 U.S.C. § 1348.
In Navarro Savings Ass’n v. Lee, 446 U.S. 458 (1980), the United States
Supreme Court held that a trustee is the real party to a case if he “possesses certain
customary powers to hold, manage, and dispose of assets for the benefit of others.”
Id. at 464. The Court differentiated between a trustee and a beneficiary because the
beneficiary, unlike the trustee, could “neither control the disposition of this action nor
intervene in the affairs of the trust . . . .” Id. at 464-65. The trustees in Navarro, like
the Trustee in this case, were authorized under the document creating the trust “to take
legal title to trust assets, to invest those assets for the benefit of the shareholders, and
to sue and be sued in their capacity as trustees.” Id. at 464.
The Court concluded,
We conclude that these respondents are active trustees whose control
over the assets held in their names is real and substantial.
They have legal title; they manage the assets; they control the litigation.
In short, they are real parties to the controversy. For more than 150
years, the law has permitted trustees who meet this standard to sue in
their own right, without regard to the citizenship of the trust
beneficiaries. We find no reason to forsake that principle today.
Id. at 456-66.
The PSA in this case is very similar to the trust document at issue in Navarro.
It expressly authorizes the Trustee to exhibit complete control over the Trust’s assets
and precludes the certificate holders from managing the Trust’s assets in any way or
initiating legal action on behalf of the Trust. Therefore, under the citizenship test set
forth in Navarro, Plaintiff, through the citizenship of its sole member, the Trustee, is
a citizen of Ohio; and guarantor Jeno Guttman is a citizen of New York. Thus,
Plaintiff properly alleged diversity of citizenship as a basis of subject matter
jurisdiction; and the court must deny defendant Guttman’s motion to dismiss.
It is hereby ORDERED that defendant Guttman’s October 18, 2016 motion to
dismiss is DENIED.
s/John Corbett O'Meara
United States District Judge
Date: July 20, 2017
I hereby certify that a copy of the foregoing document was served upon counsel
of record on this date, July 20, 2017, using the ECF system.
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