In Re: RFC and RESCAP Liquidating Trust Litigation

Filing 2706

MEMORANDUM OPINION AND ORDER denying #2344 Motion to Dismiss/General; granting #2350 Motion for Joinder insofar as the motion requests permission to join in PNC's arguments concerning subject matter jurisdiction, but denying as to dismissal. (Written Opinion) Signed by Judge Susan Richard Nelson on 07/21/2017. (SMD)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
________________________________________________________________________
In Re: RFC and ResCap Liquidating
Trust Litigation

Case No. 13-cv-3451(SRN/HB)

MEMORANDUM OPINION
AND ORDER
This document relates to:
ResCap Liquidating Trust v. PNC Bank,
N.A., as successor to Community Bank of
Northern Virginia, Case No. 17-cv-0196
ResCap Liquidating Trust v. Origin Bank, f/k/a
Community Trust Financial Corporation, as
successor to Cimarron Mortgage Company,
Case No. 17-cv-0203
_______________________________________________________________________
SUSAN RICHARD NELSON, United States District Judge
I.

INTRODUCTION
This matter is before the Court on PNC Bank, N.A.’s Motion to Dismiss [Doc. No.

2344] and Origin Bank’s Notice of Joinder in Motion to Dismiss for Lack of Subject
Matter Jurisdiction [Doc. No. 2350]. For the reasons set forth below, the Court denies
PNC’s motion to dismiss, grants Origin’s motion for joinder, and denies Origin’s motion
to dismiss.
II.

BACKGROUND
The general facts pertaining to this consolidated action are set forth in previous

rulings by this Court and are incorporated herein by reference. See, e.g., ResCap
Liquidating Trust v. CMG Mortg., Inc., Case No. 13-cv-3451, 2015 WL 2373401, at *1-2
(D. Minn. May 18, 2015); Residential Funding Co. v. Acad. Mortg. Corp., 59 F. Supp. 3d
935, 938-41 (D. Minn. 2014); Residential Funding Co. v. Terrace Mortg. Co., 850 F.
Supp. 2d 961, 962-64 (D. Minn. 2012).
Stated briefly, prior to May 2012, Residential Funding Corporation (“RFC”) “was
in the business of acquiring and securitizing residential mortgage loans.” (See Compl. ¶ 5
[Case No. 17-cv-0196, Doc. No. 1] (“PNC Compl.”).) RFC acquired the loans from
“correspondent lenders” and distributed the loans by either pooling them with other loans
to sell into residential mortgage-backed securitization (“RMBS”) trusts or selling them to
other purchasers. (Id.) To ensure loan quality, RFC required the correspondent lenders
to abide by certain representations and warranties regarding the loans. (Id. ¶ 7.)
According to Plaintiff ResCap Liquidating Trust (“Trust”), the correspondent lenders
were responsible for collecting information from borrowers, verifying the accuracy of
that information, and underwriting the loans. (Id. ¶ 22.)
On May 14, 2012, RFC filed for Chapter 11 bankruptcy protection in the United
States Bankruptcy Court for the Southern District of New York. (Id. ¶ 55); In re
Residential Capital, LLC, Case No. 12-12020 (MG) (Bankr. S.D.N.Y. filed May 14,
2012). By that time, RFC had spent millions of dollars repurchasing defective loans.
(PNC Compl. ¶ 61.) Hundreds of proofs of claim related to allegedly defective mortgage
loans were filed in connection with the bankruptcy proceedings. (Id. ¶ 63.) The
Bankruptcy Court eventually approved a global settlement that provided for resolution of
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the RMBS-related liabilities for more than $10 billion. (Id. ¶ 68.) The Chapter 11
bankruptcy plan (“Plan”) became effective on December 17, 2013. (Id.) Under the Plan,
the Trust succeeded to all of RFC’s rights and interests. (Id. ¶¶ 15, 69.) The purpose of
the Trust is to monetize RFC’s remaining assets, pursue claims in litigation, and
distribute the proceeds to RFC’s creditors. (Id. ¶ 12.)
Two of the correspondent lenders with whom RFC did business were Community
Bank of Northern Virginia (“CBNV”), a predecessor-in-interest to PNC; and Cimarron
Mortgage Company (“Cimarron”), a predecessor-in-interest to Origin. (See PNC Compl.
¶¶ 16, 19; Compl. ¶¶ 16, 19 [Case No. 17-cv-0203, Doc. No. 1] (“Origin Compl.”).)
PNC and Origin are sued in these actions in their capacities as successors to CBNV and
Cimarron, respectively. 1
The Trust brings two claims against PNC and Origin: (1) a breach of contract
claim founded on alleged breaches of warranties and representations, and (2) an
indemnification claim. (PNC Compl. ¶¶ 70-83; Origin Compl. ¶¶ 75-88.) As the basis
for federal subject matter jurisdiction, the Trust invokes bankruptcy jurisdiction under 28
U.S.C. § 1334 and diversity jurisdiction under 28 U.S.C. § 1332. (PNC Compl. ¶ 17;
Origin Compl. ¶ 17.)
Through PNC’s motion to dismiss, PNC moves to dismiss all claims against it
pursuant to Federal Rule of Civil Procedure 12(b)(1), asserting a lack of subject matter
1

RFC filed suit against PNC in 2013 over loans sold to RFC by National City Mortgage
Co. (“National City”), another predecessor-in-interest to PNC. See Residential Funding
Co. v. PNC Bank, N.A., Case No. 13-cv-3498 (D. Minn. filed Dec. 13, 2013). Both
RFC’s 2013 case against PNC and the Trust’s 2017 case against PNC are consolidated
into this matter.
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jurisdiction based on either diversity of citizenship or bankruptcy-related jurisdiction.
Alternatively, PNC asks the Court to abstain from exercising jurisdiction under 28 U.S.C.
§ 1334(c)(1). PNC also contends that the Trust’s claims against it are barred by the
prohibition against claim splitting. Origin seeks leave to join in PNC’s arguments
concerning subject matter jurisdiction and asks the Court to dismiss all claims against it
on those grounds.
III.

DISCUSSION
A.

Bankruptcy “Related To” Subject Matter Jurisdiction

PNC argues that this Court lacks bankruptcy jurisdiction in that the Trust’s claims
are not “related to” the underlying bankruptcy proceedings. PNC acknowledges that this
Court has already determined the existence of “related to” jurisdiction in several earlier
cases consolidated in this action, but asks the Court to give “fresh consideration” to the
issue. (PNC’s Mem. Supp. Mot. Dismiss at 9 n.4 [Doc. No. 2347].)
1.

The May 18, 2015 Order

In an Order dated May 18, 2015, this Court determined that bankruptcy
jurisdiction existed pursuant to 28 U.S.C. § 1334(b) in several cases transferred to the
District of Minnesota from the United States Bankruptcy Court for the Southern District
of New York. (Order at 8-12, May 18, 2015 [Doc. No. 452] (“Transfer Defs. Order”).)
The supporting legal authority and rationale for that determination bear repeating.
Federal district courts “have original but not exclusive jurisdiction of all civil
proceedings arising under title 11, or arising in or related to cases under title 11.” 28
U.S.C. § 1334(b). “Congress did not delineate the scope of ‘related to’ jurisdiction, but
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its choice of words suggests a grant of some breadth.” Celotex Corp. v. Edwards, 514
U.S. 300, 307-08 (1995); see In re NWFX, Inc., 881 F.2d 530, 533 (8th Cir. 1989)
(construing broadly the concept of “related to” jurisdiction). Federal subject matter
jurisdiction exists in a “related to” case when there is “some nexus between the civil
proceeding and the Title 11 case.” Integrated Health Servs. of Cliff Manor, Inc. v. THCI
Co., LLC, 417 F.3d 953, 958 (8th Cir. 2005) (quoting Specialty Mills, Inc. v. Citizens
State Bank, 51 F.3d 770, 774 (8th Cir. 1995)). “A claim is ‘related to’ a bankruptcy
proceeding within the meaning of § 1334(b) if it ‘could conceivably have any effect’ on
the bankruptcy estate.” Kocher v. Dow Chem. Co., 132 F.3d 1225, 1230-31 (8th Cir.
1997) (quoting Abramowitz v. Palmer, 999 F.2d 1274, 1277 (8th Cir. 1993)).
The test in the Eighth Circuit to determine “related to” jurisdiction is whether the
outcome of the civil case “could conceivably have any effect on the estate being
administered in bankruptcy.” Specialty Mills, 51 F.3d at 774 (quoting Dogpatch Props.,
Inc. v. Dogpatch U.S.A., Inc. (In re: Dogpatch U.S.A., Inc.), 810 F.2d 782, 786 (8th Cir.
1987)); see Greenpond S., LLC v. Gen. Elec. Capital Corp., Case No. 14-cv-1214
(SRN/TNL), 2015 WL 225227, at *4 (D. Minn. Jan. 16, 2015) (citing Buffets, Inc. v.
Leischow, 732 F.3d 889, 894 (8th Cir. 2013)). “These possible effects include any matter
that could alter the debtor’s rights, liabilities, options, or freedom of action . . . and which
in any way impacts upon the handling and administration of the bankrupt estate.”
Integrated Health Servs., 417 F.3d 953, 958 (8th Cir. 2005) (quoting Dogpatch Props.,
810 F.2d at 786) (internal quotation marks omitted). Even a case that “portends a mere

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contingent or tangential effect on a debtor’s estate meets the broad jurisdictional test.” In
re Titan Energy, Inc., 837 F.2d 325, 330 (8th Cir. 1988).
This Court determined in its Order of May 18, 2015, that RFC’s claims could
conceivably have an effect on the implementation, interpretation, or administration of the
Plan for the following reasons. First, the Plan expressly preserved RFC’s claims and
transferred them to the Trust to pursue. (Transfer Defs. Order at 10 (citing ResCap
Liquidating Trust v. Primary Capital Advisors, LLC (In re Residential Capital, LLC), 527
B.R. 865, 871 (S.D.N.Y. 2014); Residential Funding Co. LLC v. Greenpoint Mortg.
Funding, Inc. (In re Residential Capital, LLC), 519 B.R. 593, 600 (S.D.N.Y. 2014)).)
The very purpose of those actions was to prosecute those claims. (Id.) Second, the Plan
provided for RFC’s creditors to share in any recovery obtained by the Trust. (Id. (citing
Primary Capital, 527 B.R. at 871; Greenpoint, 519 B.R. at 600).) “An action is related to
the bankruptcy case if ‘it affects the amount of property available for distribution or the
allocation of property among creditors.’” Luker v. Reeves (In re Reeves), 65 F.3d 670,
675 (8th Cir. 1995) (quotation omitted). Finally, the Plan expressly provided for the
retention of jurisdiction over the claims, and the claims fell within the scope of the Plan.
(Transfer Defs. Order at 11 (citing Primary Capital, 527 B.R. at 871; Greenpoint, 519
B.R. at 600).)
2.

PNC-Specific Arguments

PNC first contends that the Trust’s claims cannot conceivably have any effect on
the bankruptcy estate, because the estate ceased to exist when the Plan was confirmed.
See Binder v. Price Waterhouse & Co. (In re Resorts Int’l, Inc.), 372 F.3d 154, 165 (3d
6

Cir. 2004) (“At the most literal level, it is impossible for the bankrupt debtor’s estate to
be affected by a post-confirmation dispute because the debtor’s estate ceases to exist once
confirmation has occurred.”).
The Court disagrees that “related to” bankruptcy jurisdiction automatically and
invariably dissipates when a bankruptcy plan is confirmed. Courts should not apply the
“related to” jurisdiction test “so literally as to entirely bar post-confirmation bankruptcy
jurisdiction.” In re Resorts, 372 F.3d at 165. Although “the scope of bankruptcy court
jurisdiction diminishes with plan confirmation, bankruptcy court jurisdiction does not
disappear entirely.” Id. Bankruptcy jurisdiction still exists, even after a plan has been
confirmed, “if there is sufficient connection to the bankruptcy.” Id. at 164. That
connection is present in these consolidated matters.
Unlike the Plan in these actions, the bankruptcy plan in In re Resorts did not
preserve the claims sought to be litigated, nor would the resolution of the claims brought
there have affected the estate. Id. at 169-70. These distinctions are present in several
other cases on which PNC relies. See Faricy Law Firm, P.A. v. A.P.I. Asbestos
Settlement Trust (In re A.P.I., Inc.), 537 B.R. 902, 904, 911-13 (Bankr. D. Minn. 2015)
(finding no jurisdiction where claim was not preserved in the plan and did not belong to
the estate); Shandler v. DLJ Merch. Banking, Inc. (In re Insilco Techs., Inc.), 330 B.R.
512, 524-25 (Bankr. D. Del. 2005) (same); Falise v. Am. Tobacco Co., 241 B.R. 48, 60
(E.D.N.Y. 1999) (“The language of the Plan does not come close to contemplating a suit

7

such as the instant one.”). Consequently, PNC’s reliance on those cases is unavailing. 2
PNC also relies on this Court’s decision in Greenpond for the proposition that the
bankruptcy estate—and bankruptcy jurisdiction with it—cease to exist when a plan is
confirmed. But Greenpond spoke in more general terms than PNC allows. In
Greenpond, this Court said: “Generally, once a bankruptcy debtor’s reorganization plan
has been confirmed, ‘the estate of the debtor, and thus the bankruptcy court’s jurisdiction,
ceases to exist.’” 2015 WL 225227, at *5 n.1 (quoting In re D & P P’ship, 91 F.3d 1072,
1074 (8th Cir. 1996)). PNC omitted the qualifying language preceding the Court’s
pronouncement in its memorandum. (PNC’s Mem. Supp. Mot. Dismiss at 9.) Moreover,
the Court acknowledged in Greenpond the possibility of post-confirmation “related to”
jurisdiction, either through the retention of jurisdiction in a confirmation order or when a
claim relates to the administration and interpretation of a plan. Id. at *5 n.1, *9 n.3. PNC
disregards this language as well.
In ruling on an earlier motion to dismiss filed by consolidated Defendant Decision
One Mortgage Company, LLC, the Court remarked that although the estate of a debtor
typically ceases to exist once a Chapter 11 plan is confirmed, “this is not always the
case.” (Order at 18, June 16, 2015 [Doc. No. 537] (“Decision One Order”) (quoting
United States v. Unger, 949 F.2d 231, 233 (8th Cir. 1991)).) The termination of a
bankruptcy estate “is expressly subject to the terms and provisions of the confirmed

2

PNC contends in its letter of June 8, 2017, that “jurisdiction does not exist merely
because a claim is preserved for litigation by a liquidating trust.” (Golin Letter at 2 [Doc.
No. 2638]) (emphasis omitted). This may be so, but whether a plan explicitly preserves a
claim is a factor in determining whether a case is related to a bankruptcy proceeding.
8

plan,” and “the confirmed plan need not state in explicit terms that the bankruptcy estate
is to continue in existence.” Id. (quoting In re Canton Jubilee, Inc., 253 B.R. 770, 776
(Bankr. E.D. Tex. 2000) (internal citations omitted)). Thus, whether a bankruptcy estate
has been “terminated” for the purpose of determining “related to” jurisdiction depends on
the language of the bankruptcy plan, but the plan need not specifically provide that the
bankruptcy estate continues to exist.
The Court further observed in the Decision One Order that “the plain language of
the Bankruptcy Court’s Confirmation Order and the Chapter 11 Plan demonstrates that
the claims at issue were not extinguished upon confirmation of the Plan,” and that “the
Order and Plan authorized the creation of a ‘Liquidating Trust,’ into which RFC was to
transfer and assign its assets.” (Decision One Order at 18-19.) Moreover, the Plan and
Confirmation Order preserved the Trust’s (and the RFC bankruptcy estate’s) causes of
action, and the liabilities underlying RFC’s indemnity claims were preserved through the
exchange of “units” for allowed claims and through the obligation on the Trust to
maximize the unitholders’ recovery. 3 (Decision One Order at 20.)
PNC provides no convincing reason to depart from the Decision One Order. It is
beyond dispute that the Trust was established for the purpose of administering, winding
down, and distributing the assets of RFC’s bankruptcy estate, and that the Plan expressly
preserved the claims now asserted against PNC and Origin. (See Scheck Decl. Ex. A

3

To effectuate the purpose of the Trust under the Plan, RFC’s creditors were issued
“units” of the Trust proportionate to their share of allowed claims. (Griffin Decl. Ex. 1
(Plan art. III.D.3(d) at 50) [Doc. No. 2348-1].) Unitholders receive distributions of cash
as the Trust liquidates assets. (See Plan art. VII.C at 85.)
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(Disclosure Statement for the Joint Chapter 11 Plan art. II.N at 44-45, In re Residential
Capital, LLC, Case No. 12-12020 (MG) (Bankr. S.D.N.Y. Aug. 23, 2013) (“Disclosure
Statement”) [Doc. No. 2506-1]; Griffin Decl. Ex. 1 (Plan arts. I.A.27 at 4, I.A.173 at 20,
VI.B at 79) [Doc. No. 2348-1].) Both the Disclosure Statement and the Liquidating Trust
Agreement envisioned that the winding down would commence after the Plan was
confirmed. (See Disclosure Statement art. II.N at 44-45; Griffin Decl. Ex. 3 (Liquidating
Trust Agreement § 2.2(c) at 12) [Doc. No. 2348-3].) Given the Trust’s appointment as
representative and task of winding down the bankruptcy estate after confirmation of the
Plan, “the estate must also still exist post-confirmation. Otherwise, the [representative]
would represent nothing.” Sergent v. McKinstry, 472 B.R. 387, 399 (E.D. Ky. 2012).
This is consistent with authority from the same bankruptcy court that approved the
RFC global settlement and confirmed the Plan. In Residential Funding Co., LLC v. UBS
Real Estate Securities, Inc. (In re Residential Capital, LLC), the Honorable Martin
Glenn, United States Bankruptcy Judge, rejected the argument that a post-confirmation
action would have no effect on the RFC bankruptcy proceedings, because “any recovery
in this action will go to RFC’s creditors under the terms of the confirmed Plan.” 515
B.R. 52, 67 (Bankr. S.D.N.Y. 2014) (discussing effect on the bankruptcy proceedings in
the context of abstention). Judge Glenn further remarked that “any judgment in favor of
RFC in this action will result in an affirmative recovery for the RFC bankruptcy estate,
which is being administered by the Trust. The potential benefit to RFC’s creditors alone
is sufficient to find an effect on the efficient administration of the estate.” Id. at 68. The
same is true here. The Trust is participating in the administration of RFC’s bankruptcy
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estate by pursuing claims and distributing funds, and the claims have not just a
conceivable—but an actual—effect on the estate.
The specific provisions of the Plan and the purpose and obligations of the Trust
distinguish this case from Fairfield Communities, Inc. v. Daleske (In re Fairfield
Communities, Inc.), 142 F.3d 1093 (8th Cir. 1998), on which PNC relies. First, there was
no indication in Fairfield that the bankruptcy estate continued to exist after the plan was
confirmed. See id. at 1095. Second, the issue in Fairfield was whether a plan’s retention
of jurisdiction “over cases involving the enforcement of the plan” covered claims that had
arisen after the plan was confirmed. Id. Because the claims had arisen after
confirmation, there was no basis for jurisdiction. Id. at 1096. That is not the situation
here, where the alleged breaches arose before the Plan was confirmed. Third, PNC
mischaracterizes Fairfield’s statement that a bankruptcy court “may explicitly retain
jurisdiction” in a confirmation order, id. at 1095 (emphasis added), by changing “may” to
“must” in its memorandum. (PNC’s Mem. Supp. Mot. Summ. J. at 16.) Fairfield does
not stand for the proposition that bankruptcy jurisdiction exists only if explicitly retained
in a confirmation order. 4
The Eighth Circuit’s more recent decision in GAF Holdings, LLC v. Rinaldi (In re
Farmland Industries, Inc.), 567 F.3d 1010 (8th Cir. 2009), demonstrates that “related to”

4

In PNC’s letter of June 8, 2017, PNC pointed out that “the instant lawsuits were not
filed in the bankruptcy court that is charged with administering and interpreting the
bankruptcy plan and that explicitly retained jurisdiction.” (Letter at 1-2 [Doc. No. 2638])
(quotation marks and alteration omitted). But neither the “any conceivable effect” test
nor PNC’s self-styled “administration and interpretation” test require an action to be filed
in the bankruptcy court that retained jurisdiction for “related to” jurisdiction to exist.
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jurisdiction may exist under the “any conceivable effect” test in post-confirmation
litigation. Id. at 1019. There, the court determined that “related to” jurisdiction existed
because the liquidating trustee was paying money out of the bankruptcy estate for the
legal fees of two former corporate officers. Id. at 1020. The court held that the actual
effect on the estate was sufficient to invoke jurisdiction, and indicated that even the
possibility of indemnification would have sufficed. Id. Though not on point factually,
Farmland is significant for its application of the “any conceivable effect” test after a
plan’s confirmation.
PNC argues, nonetheless, that the Trust must meet a higher standard than the “any
conceivable effect” test and show that its claims “involve the administration and
interpretation” of the Plan. (PNC’s Mem. Supp. Mot. Dismiss at 12.) There is no
question that the Trust’s claims meet this standard. Multiple courts, including this one,
have determined that the Trust’s claims against correspondent lenders such as PNC and
Origin relate to the administration and interpretation of the Plan. (Transfer Defs. Order at
10-11; Decision One Order at 18-20); ResCap Liquidating Trust v. U.S. Bank, N.A., Case
No. 16-cv-4067, 2017 WL 2437242, at *3 (D. Minn. June 5, 2017); Primary Capital, 527
B.R. at 871. To summarize, the Plan expressly preserved the claims and transferred them
to the Trust to pursue on behalf of the estate’s creditors, and the purpose of these actions
is to pursue those claims. The Plan provides for RFC’s creditors to share in any
recoveries obtained by the Trust and for the Trust to distribute such funds. In addition,
this Court has already been called upon to interpret the Plan in a related case to determine
whether the Trust’s claims were extinguished when the Plan was confirmed. (Decision
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One Order at 18-19.) And, several consolidated Defendants, including PNC, have
subpoenaed and deposed numerous witnesses regarding the bankruptcy proceedings and
settlement, including questions about the provisions of the Plan and the Confirmation
Order. (Scheck Decl. ¶ 5.)
Other courts have found that claims similar to those brought here involve the
implementation and administration of a bankruptcy plan. See McKinstry v. Sergent, 442
B.R. 567, 576 (E.D. Ky. 2011) (because a liquidating trust’s sole purpose is to wind
down the bankrupt debtor’s affairs, liquidate its assets, and distribute recovered funds,
concluding that the claims necessarily related to the implementation and execution of the
plan); Kirschner v. Grant Thornton LLP (In re Refco, Inc. Sec. Litig.), 628 F. Supp. 2d
432, 443 (S.D.N.Y. 2008) (finding the administration and implementation of a confirmed
plan directly at issue because the claims brought by the liquidating trust arose under the
plan, and thus, concluding that “related to” jurisdiction existed).
In sum, the Trust’s claims directly affect the implementation, interpretation, and
administration of the Plan, and “related to” jurisdiction is present.
3.

Abstention

PNC asks the Court to abstain from exercising jurisdiction “in the interest of
justice, or in the interest of comity with State courts or respect for State law.” See 28
U.S.C. § 1334(c)(1). PNC argues that the federal interest in adjudicating the Trust’s
claims is too attenuated from RFC’s estate, and that the Trust’s claims sound in state law
and should be adjudicated in state court.
Federal courts have a “virtually unflagging obligation . . . to exercise the
13

jurisdiction given them.” Col. River Water Conserv’n Dist. v. United States, 424 U.S.
800, 817-18 (1976). A court should remain mindful of this principle when deciding
whether to exercise its discretionary authority to abstain under § 1334(c)(1). See UBS
Real Estate, 515 B.R. at 67.
There are several reasons why the Court will not abstain from exercising
jurisdiction. First, these actions could have a direct effect on the bankruptcy estate,
which will benefit from any recovery. See id. at 67-68. Second, though the claims are
grounded in state law, the cases are “fundamentally tied to RFC’s bankruptcy.” See U.S.
Bank, 2017 WL 2437242, at *4. Third, the state law claims are not so complex that
comity favors abstention. See UBS Real Estate, 515 B.R. at 68. Fourth, this Court has
already expended substantial time and resources in managing the cases consolidated into
this action, and to abstain now from jurisdiction in these newly-filed matters would be a
tremendous and needless waste of judicial resources. See U.S. Bank, 2017 WL 2437242,
at *4.
B.

Subject Matter Jurisdiction Based on Diversity of Citizenship

Because the Court finds that “related to” jurisdiction clearly exists, the Court does
not reach the question of whether subject matter jurisdiction could also be founded on
diversity of citizenship.
C.

Claim Splitting

PNC argues that the Trust’s claims are barred by the rule against claim splitting
and that the Trust should have combined its National City-based claims with its CBNVbased claims in the action filed against PNC in 2013. PNC contends that the Trust’s
14

purported claim splitting will prevent it from mounting an efficient defense and waste
judicial resources.
The prohibition on claim-splitting requires a plaintiff to “bring all claims arising
out of a common set of facts in a single lawsuit.” Elgin v. Dep’t of Treasury, 567 U.S. 1,
34 (2012). A court has the “discretion to enforce that requirement as necessary ‘to avoid
duplicative litigation.’” Id. (quoting Col. River Water Conserv’n Dist., 424 U.S. at 817).
Principles of res judicata apply, except the requirement of a final judgment. MacIntyre v.
Lender Processing Servs., Inc., Case No. 12-1514 (PAM/SER), 2012 WL 4872678, at *2
(D. Minn. Oct. 15, 2012).
A court evaluating whether res judicata applies must consider whether: (1) there
has been a final judgment on the merits of a cause of action; (2) the court that issued the
judgment was of competent jurisdiction; (3) the person seeking to preclude the claim was
a party or a privy to a party in the first litigation; and (4) the claim sought to be precluded
either was actually litigated or is a claim that might have been offered in the first
litigation. See Lundquist v. Rice Mem’l Hosp., 238 F.3d 975, 977 (8th Cir. 2001). In
order to be barred by res judicata, a claim must “arise[] out of the same nucleus of
operative fact[s]” as the prior claim or be “based upon the same factual predicate.”
Hufsmith v. Weaver, 817 F.2d 455, 461 (8th Cir. 1987) (citation and internal quotation
marks omitted). To determine whether the claims are the same, the Court examines “the
factual bases for the claims, not the legal theories.” Citimortgage, Inc. v. Chicago
Bancorp, Inc., Case No. 4:14-CV-01278-AGF, 2015 WL 631365, at *5 (E.D. Mo. Feb.
12, 2015) (quotation omitted).
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The Court finds that principles of res judicata do not apply because the Trust’s
claims against PNC as successor to CBNV do not arise out of the same nucleus of
operative facts as the Trust’s claims against PNC as successor to National City. RFC
purchased more than 21,300 mortgage loans from CBNV pursuant to a client contract
dated May 15, 1998. (PNC Compl. ¶¶ 16, 19; Ex. B.) RFC also purchased more than
74,500 mortgage loans originated by National City and its affiliates from PNC pursuant
to contracts in February 1986, April 2002, and December 2004. (Second Am. Compl.
¶ 17; Ex. A [Case No. 13-cv-3451, Doc. No. 1150].) There is no dispute that the claims
in the second PNC action relate to different loans, different contracts, and different
originators than the claims in the first PNC action. Therefore, the claims did not need to
be brought in the same suit. See CitiMortgage, 2015 WL 631365, at *4 (determining that
each loan sold and each repurchase demand “present[ed] a unique set of operative facts
giving rise to potential relief,” and though the plaintiff could have grouped claims
involving different loans together in one lawsuit, it was not required to do so); Lehman
Bros. Holdings Inc. v. Gateway Funding Diversified Mortg. Servs., L.P., 942 F. Supp. 2d
516, 532 (E.D. Pa. 2013) (finding second lawsuit not barred by res judicata because the
two cases involved different loans); Nordhorn v. Ladish Co., 9 F.3d 1402, 1404 (9th Cir.
1993) (where second lawsuit alleged a breach of a different contract by a different
company, holding the cases did not involve the same claim for purposes of res judicata).
With respect to PNC’s argument that it will be prejudiced by having to litigate two
separate actions, the Court is not unsympathetic to PNC’s situation. But any burden
caused by the Trust’s decision to litigate its claims against PNC in two separate actions
16

filed almost four years apart can be alleviated through efficient case management.

Therefore, IT IS HEREBY ORDERED that:
1. PNC Bank, N.A.’s Motion to Dismiss [Doc. No. 2344] is DENIED; and
2. Origin Bank’s Notice of Joinder in Motion to Dismiss for Lack of Subject Matter
Jurisdiction [Doc. No. 2350] is GRANTED insofar as the motion requests
permission to join in PNC’s arguments concerning subject matter jurisdiction, but
DENIED as to dismissal.

Dated: July 21, 2017

s/Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge

17