In the Matter of the Trust established under the Pooling and Servicing Agreement relating to the Wachovia Bank Commercial Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2007-C30
ORDER. IT IS HEREBY ORDERED THAT Case Nos. 19-CV-1387 (PJS/BRT) and 19-CV-2416 (PJS/BRT) are REMANDED to Minnesota District Court, Second Judicial District pursuant to 28 U.S.C. § 1447(c). (Written Opinion) Signed by Judge Patrick J. Schiltz on 10/5/2021.(CLG) Changed to Opinion on 10/5/2021 (KLS).
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
IN THE MATTER OF THE TRUST
ESTABLISHED UNDER THE POOLING
AND SERVICING AGREEMENT
RELATING TO THE WACHOVIA
BANK COMMERCIAL MORTGAGE
TRUST COMMERCIAL MORTGAGE
Case No. 19‐CV‐1387(PJS/BRT)
Case No. 19‐CV‐2416 (PJS/BRT)
This litigation arose out of two trust‐instruction proceedings (“TIPs”) filed in
state court, one by U.S. Bank National Association (“U.S. Bank”) and the other by Wells
Fargo Bank, N.A. (“Wells Fargo”). TIPs are somewhat unusual creations of state law
that are almost always litigated in state court. But interested parties CWCapital Cobalt
Vr Ltd. (“Cobalt”) and Systed, LLC (“Systed”) nevertheless removed these cases to this
Court on the basis of diversity jurisdiction. Case No. 19‐CV‐1387, ECF No. 1 ¶¶ 8–13;
Case No. 19‐CV‐2416, ECF No. 1 ¶¶ 8–13. After this Court discovered that it lacked
sufficient information to determine whether it actually has diversity jurisdiction, the
Court ordered the parties to file affidavits identifying their citizenship for diversity
purposes. Case No. 19‐CV‐1387, ECF No. 388; Case No. 19‐CV‐2416, ECF No. 370.
Upon receiving the parties’ submissions—including an affidavit from one party whose
membership structure is so complicated and includes so many entities that it literally
has been unable to determine its own citizenship—the Court ordered Cobalt1 to show
cause why these cases should not be remanded to state court for lack of jurisdiction.
Case No. 19‐CV‐1387, ECF No. 410; Case No. 19‐CV‐2416, ECF No. 392.
Having considered Cobalt’s submission as well as the unsolicited submission of
parties‐in‐interest Azteca Partners LLC and Palomino Master Ltd., the Court finds that
it does not have jurisdiction over these TIPs and accordingly remands them to state
court under 28 U.S.C. § 1447(c) (“If at any time before final judgment it appears that the
district court lacks subject matter jurisdiction, the case shall be remanded.”).
These related TIPs concern the administration of a securitization trust that holds
loans backed by mortgages on commercial real estate. Non‐party Wachovia
Commercial Mortgage Securities, Inc., conveyed the loans to the trust pursuant to a
Pooling and Servicing Agreement (“PSA”) in exchange for classes of certificates to be
sold to investors. Purchasers of the certificates receive monthly distributions in
accordance with a priority scheme set forth in the PSA. U.S. Bank is the current trustee;
Wells Fargo is the trust’s master servicer and paying agent.
The Court’s order also applied to Systed, as at the time it was unclear whether
Systed remained a party. See Case No. 19‐CV‐1387, ECF No. 410; Case No. 19‐CV‐2416,
ECF No. 392. Systed has now clarified that, having withdrawn its objections to the
petitions, it is no longer a party. Case No. 19‐CV‐1387, ECF Nos. 158, 419; Case No. 19‐
CV‐2416, ECF Nos. 133, 400.
Shortly after the December 2018 distribution, CWCapital Asset Management LLC
(“CWCAM”), which was then acting as the trust’s special servicer, delivered two
“officer’s certificates” to Wells Fargo requesting that Wells Fargo create litigation
reserves totaling $38 million to cover CWCAM’s anticipated legal expenses in two
pending lawsuits.2 To fund those litigation reserves, Wells Fargo clawed back
$38 million that had been distributed to some of the junior certificateholders—
specifically, the Class J and Class K holders. The clawback completely eliminated the
December 2018 distribution to the Class K holders and reduced the distribution to
Class J holders by over $5.5 million.
Disputes then arose over whether (1) the PSA even permitted the creation of the
litigation reserves and (2) how funds that were placed in those reserves but never used
should be distributed. Roughly speaking, the junior certificateholders—specifically, the
Class J and Class K holders—contend that Wells Fargo had no authority under the PSA
to create the litigation reserves and that the creation of those reserves constituted an
“Event of Default” within the meaning of the PSA. To remedy this default, they argue,
the remaining reserve funds must be distributed to them and all new distributions must
The parties dispute whether Wells Fargo was required to comply with the
officer’s certificates. In reciting these background facts, the Court does not intend to
take a position on this or any other disputed issue.
be paid exclusively to them until they have recovered the full amount of the clawback
For their part, the senior certificateholders contend that, regardless of whether
the PSA authorized the reserves, the PSA requires the unspent funds in the reserves to
be distributed on the next available distribution date according to the priority
established in the PSA. It appears to be undisputed that, if the reserves are distributed
in this manner, the Class J and Class K holders would not receive anything. In other
words, even though the litigation reserves were created by clawing back funds from the
Class J and Class K holders, those holders would not receive a penny of the unspent
Faced with competing claims to the reserves, U.S. Bank, in its capacity as trustee,
brought a TIP in state court, seeking instructions concerning the proper interpretation of
the PSA. Case No. 19‐CV‐1387, ECF No. 1‐1; Minn. Stat. § 501C.0201(a); id.
§ 501C.0202(4), (24). The parties refer to the case filed by U.S. Bank as the “Trustee
TIP.” In its petition, U.S. Bank asks the Court to find, among other things, that U.S.
Bank did not have any knowledge of an “Event of Default” within the meaning of the
PSA, that U.S. Bank is not obligated to take any particular action with respect to the
reserved amounts, and that U.S. Bank has satisfied its duties under the PSA in
connection with the reserved amounts.
While the Trustee TIP was pending in state court, Cobalt and Systed (who are
Class J and Class K holders) entered appearances and removed the case to this Court.
Horrell Decl. Ex. 1. Following removal, a number of additional parties made
appearances and filed responses to U.S. Bank’s petition, including CWCAM (the former
special servicer), Case No. 19‐CV‐1387, ECF Nos. 55, 75; C‐III Asset Management LLC
(the current special servicer), id. ECF Nos. 42, 78; Wells Fargo (the master servicer and
paying agent), id. ECF Nos. 45, 76; several senior certificateholders (Azteca Partners
LLC, Palomino Master Ltd., and DW Partners, LP), id. ECF Nos. 49, 58, 79, 82; and
additional Class J and Class K holders (Torchlight Value Fund, LLC3 and Torchlight
Debt Opportunity Fund II, LLC4), id. ECF Nos. 50, 77.
Several months after U.S. Bank commenced the Trustee TIP, Wells Fargo, in its
capacity as master servicer, commenced a similar TIP that the parties refer to as the
“Master Servicer TIP.” Case No. 19‐CV‐2416, ECF No. 1‐1. In its petition, Wells Fargo
seeks an order holding, among other things, that Wells Fargo should instruct the Paying
Agent (which is also Wells Fargo) that any unused reserve amounts should be
distributed on the next distribution date according to the terms of the PSA and that, in
Torchlight Value Fund, LLC is now known as Torchlight Credit Fund, LLC.
Case No. 19‐CV‐1387, ECF No. 406 ¶ 5; Case No. 19‐CV‐2416, ECF No. 388 ¶ 5.
Torchlight Debt Opportunity Fund II, LLC, dissolved in December 2020 and its
assets are now held by Torchlight Debt Opportunity Fund II, LLC Liquidation Trust.
Case No. 19‐CV‐1387, ECF No. 406 ¶ 3; Case No. 19‐CV‐2416, ECF No. 388 ¶ 3.
distributing the unused reserve amounts, Wells Fargo and all other parties responsible
for administering the trust will be complying with their duties and the PSA.
As they did with respect to the Trustee TIP, Cobalt and Systed entered
appearances and removed the Master Servicer TIP to this Court. Horrell Decl. Ex. 2.
Following removal, the same set of parties that appeared in the Trustee TIP also entered
appearances and filed responses to Wells Fargo’s petition. See Case No. 19‐CV‐2416,
ECF No. 62 (U.S. Bank); id. ECF No. 66 (CWCAM); id. ECF No. 68 (C‐III Asset
Management LLC); id. ECF No. 61 (Azteca Partners LLC and Palomino Master Ltd.); id.
ECF No. 65 (DW Partners, LP); id. ECF No. 63 (Torchlight Value Fund, LLC and
Torchlight Debt Opportunity Fund II, LLC). A number of parties then brought motions
for judgment on the pleadings, which the Court denied. Since then, the parties have
been engaged in discovery.
As noted, Cobalt and Systed removed these cases on the grounds that the Court
has diversity jurisdiction under 28 U.S.C. § 1332(a).5 Case No. 19‐CV‐1387, ECF No. 1
The notice of removal in the Trustee TIP also cites 28 U.S.C. § 1331, which
provides for federal‐question jurisdiction. Case No. 19‐CV‐1387, ECF No. 1 at 1. But
U.S. Bank’s petition seeks relief solely under state law. See id. ECF No. 1‐1. The notice
of removal does not otherwise claim to invoke this Court’s federal‐question jurisdiction,
nor has any party, in response to the Court’s order to show cause, claimed that the
Court has jurisdiction under § 1331. Notably, the notice of removal in the Master
Servicer TIP does not cite § 1331, Case No. 19‐2416, ECF No. 1, which suggests that the
¶¶ 8–13; Case No. 19‐CV‐2416, ECF No. 1 ¶¶ 8–13. Section 1332(a) requires complete
diversity; none of the parties on one side of the “v” may be a citizen of the same state as
any of the parties on the other side of the “v.” See Exxon Mobil Corp. v. Allapattah Servs.,
Inc., 545 U.S. 546, 553 (2005) (“[W]e have consistently interpreted § 1332 as requiring
complete diversity: In a case with multiple plaintiffs and multiple defendants, the
presence in the action of a single plaintiff from the same State as a single defendant
deprives the district court of original diversity jurisdiction over the entire action.”).
In determining who belongs on one side of the “v” and who belongs on the
other, courts are not bound by the parties’ designations. City of Indianapolis v. Chase
Nat’l Bank, 314 U.S. 63, 69 (1941) (“Diversity jurisdiction cannot be conferred upon the
federal courts by the parties’ own determination of who are plaintiffs and who
defendants.”). Instead, courts have a “duty . . . to look beyond the pleadings, and
arrange the parties according to their sides in the dispute.” Id. (citation and quotation
marks omitted). The removing parties bear the burden of establishing jurisdiction, and
“[a]ll doubts about federal jurisdiction should be resolved in favor of remand to state
court.” Knudson v. Sys. Painters, Inc., 634 F.3d 968, 975 (8th Cir. 2011) (citation and
quotation marks omitted).
citation to § 1331 in the Trustee TIP was a mistake.
As noted, these cases are somewhat unusual creations of Minnesota state law
onto which the Federal Rules of Civil Procedure do not readily map, and that makes it
somewhat challenging to figure out how all of the parties should be aligned. What is
beyond dispute, however, is that the interests of the Class J and Class K holders are
directly opposed to the interests of the senior certificateholders (Azteca Partners LLC,
Palomino Master Ltd., and DW Partners, LP). The two groups are making conflicting
claims to the remaining reserve funds; put simply, each group is trying to take money
out of the pockets of the other group.
Regardless of how any other parties are aligned, therefore, it is clear that the
Class J and Class K holders, on the one hand, and the senior certificateholders, on the
other, are not on the same side of the “v.” And because they are not on the same side of
the “v,” complete diversity is lacking: The senior certificateholders participating in this
case include citizens of New York, New Jersey, and Florida, see Case No. 19‐CV‐1387,
ECF Nos. 401–02, 404; Case No. 19‐CV‐2416, ECF Nos. 383–84, 386, while the Class J and
Class K holders participating in this case also include citizens of New York, New Jersey,
and Florida, Case No. 19‐CV‐1387, ECF No. 406; Case No. 19‐CV‐2416, ECF No. 388.
The parties opposing remand argue that, in a TIP, the petitioner should be
aligned on one side and everyone else—including those who are fighting each other
over the same funds—on the other. Even if this argument were correct, complete
diversity would still be lacking in the Trustee TIP, as both U.S. Bank and CWCAM are
citizens of Ohio.6 Case No. 19‐CV‐1387, ECF Nos. 396, 408. And if the Trustee TIP were
to be remanded, then it is possible that the Master Servicer TIP would also have to be
remanded, even if there is complete diversity in the Master Servicer TIP.7 See Marshall v.
Marshall, 547 U.S. 293, 311 (2006) (noting “the general principle that, when one court is
exercising in rem jurisdiction over a res, a second court will not assume in rem
jurisdiction over the same res”).
In any event, the Court does not agree that the petitioner should be aligned on
one side of the “v” and everyone else should be aligned on the other side. In arguing
that there is a TIP exception to the general obligation to align parties according to their
interests, the parties opposing remand rely on In re Trusteeship Created by LNR IV, Ltd.,
No. 12‐CV‐2789 (MJD/JSM), 2013 WL 1364255 (D. Minn. Apr. 4, 2013). To the extent
In its order to show cause, the Court noted that it was unclear whether U.S.
Bank asserts that it is a citizen of Ohio, Minnesota, or both. Case No. 19‐CV‐1387, ECF
No. 410 at 3; Case No. 19‐CV‐2416, ECF No. 392 at 3. Either way, complete diversity is
still lacking, as CWCAM is also a citizen of Minnesota. Case No. 19‐CV‐1387, ECF
The Court doubts that the parties could establish that there is complete diversity
in the Master Servicer TIP—even if the petitioner were placed on one side of the “v”
and all of the other parties were placed on the other side—given that CWCAM’s
membership structure is so complicated and includes so many entities that even
CWCAM has not been able to determine all of the states in which it is a citizen. See
Case No. 19‐CV‐1387, ECF No. 396 ¶ 51 n.2; Case No. 19‐CV‐2416, ECF No. 378 ¶ 51 n.2.
that LNR IV purports to recognize such an exception for TIPs, the Court does not find
LNR IV persuasive on that issue, as LNR IV provided no analysis of the issue and
simply cited a single case that does not even mention the topic of alignment. Id. at *3
(citing In re Trusteeship Created by Alaska Indus. Dev. & Exp. Auth., No. 10‐2996 (DSD/JJG),
2010 WL 4811899, at *1 (D. Minn. Nov. 19, 2010)). Notably, courts in other TIPs have
followed the usual practice of aligning parties according to their interests when
determining whether diversity jurisdiction exists. See In re Trusteeship Created by Am.
Home Mortg. Inv. Tr. 2005‐2, No. 14 Civ. 2494 (AKH), 2014 WL 3858506, at *10 (S.D.N.Y.
July 24, 2014) (“Since Sceptre and Wells Fargo had different legal interests, they were
considered opposing parties for diversity purposes.”). Finally, while “later events do
not deprive a court of jurisdiction over parties who were properly aligned in the first
instance,” Ryan ex rel. Ryan v. Schneider National Carriers, Inc., 263 F.3d 816, 819 (8th Cir.
2001) (per curiam), the interests of the Class J and Class K holders have been adverse to
those of the senior certificateholders from the outset; the two groups did not become
adverse after removal on account of “later events.” The Court therefore rejects the
argument that it cannot realign the parties for the purpose of determining whether there
is complete diversity.
B. Post‐Removal Joinder
Relying once again on LNR IV, the parties opposing remand argue that the only
parties whose citizenship matters for purposes of determining diversity jurisdiction are
those parties who appeared in the lawsuits before they were removed to federal court.
LNR IV (and cases citing it), in turn, rely on the general principle that jurisdiction is
determined at the time of filing (and removal, if the case is removed). LNR IV, 2013 WL
1364255 at *2–4. Under this principle, a federal court is not divested of diversity
jurisdiction if an existing party’s citizenship later changes or if the amount in
controversy later falls below the jurisdictional minimum. See Saadeh v. Farouki, 107 F.3d
52, 57 (D.C. Cir. 1997) (“if parties are diverse at the time of filing, a subsequent change
in citizenship or domicile will not divest the court of jurisdiction”); Schubert v. Auto
Owners Ins. Co., 649 F.3d 817, 822–23 (8th Cir. 2011) (“Neither the existence of a valid
defense nor subsequent events reducing the amount in controversy divest the court of
This general principle does not apply to the addition of new parties, however;
the addition of parties after filing (or removal, if the case is removed) can indeed divest
a federal court of diversity jurisdiction. In fact, 28 U.S.C. § 1447(e) makes this clear: “If
after removal the plaintiff seeks to join additional defendants whose joinder would
destroy subject matter jurisdiction, the court may  deny joinder, or  permit joinder
and remand the action to the State court.”8 (Emphasis added.) See Powerex Corp. v.
Reliant Energy Servs., Inc., 551 U.S. 224, 232 (2007) (Section 1447(e) “unambiguously
demonstrates that a case can be properly removed and yet suffer from a failing in
subject‐matter jurisdiction that requires remand.”); see also Bailey v. Bayer CropScience
L.P., 563 F.3d 302, 308 (8th Cir. 2009) (“Only when the potential defendant is deemed
dispensable may the district court deny joinder and retain jurisdiction over the
action.”); Dominium Austin Partners, L.L.C. v. Emerson, 248 F.3d 720, 725 (8th Cir. 2001)
(“If subject matter jurisdiction exists at the time the action is commenced, it will
generally not be divested by subsequent events. The exception is where a nondiverse
party must be joined because the party was indispensable at the time the complaint was
filed.” (citation omitted)); ARE Sikeston Ltd. P’ship v. Weslock Nat’l, Inc., 120 F.3d 820, 833
(8th Cir. 1997) (“the district court could, in its discretion, choose either to deny ARE
Sikeston’s motion for leave to amend or to grant the motion and remand the case to
Cobalt contends that, because the parties in this case were not added by
“joinder” under either Rules 19 or 20 of the Federal Rules of Civil Procedure, § 1447(e)
is irrelevant. But Cobalt cites no authority supporting its contention that the manner of
joinder is determinative. The precise manner in which parties joined this case may not
be covered by the express terms of § 1447(e) (because a TIP is such an odd proceeding),
but that does not mean that those parties’ citizenship is irrelevant. The purpose of
§ 1447(e) is to give courts discretion to deny joinder in order to preserve jurisdiction; the
statute’s purpose is not to define all possible circumstances in which joinder destroys
jurisdiction. Cf. Mayes v. Rapoport, 198 F.3d 457, 462 n.11 (4th Cir. 1999) (explaining that
§ 1447(e) permits a court to deny joinder even where a plaintiff otherwise has a right to
amend her complaint without leave of court).
state court”); Hensgens v. Deere & Co., 833 F.2d 1179, 1181 (5th Cir. 1987) (“most post‐
removal developments—amendment of pleadings to below jurisdictional amount or
change in citizenship of a party—will not divest the court of jurisdiction but an addition
of a nondiverse defendant will do so”).9
The Court therefore rejects the argument that it should ignore the citizenship of
the parties who joined these cases after they were removed to federal court.
C. In Rem Jurisdiction
Cobalt next argues that, because these cases are in rem proceedings, the parties‐
in‐interest that appeared after removal are not essential and their citizenship may
therefore be disregarded. Cobalt does not suggest that these parties should be
Freeport‐McMoRan, Inc. v. K N Energy, Inc., 498 U.S. 426 (1991) (per curiam), is
not to the contrary. Freeport did say that “[d]iversity jurisdiction, once established, is
not defeated by the addition of a nondiverse party to the action,” id. at 428, but later
cases have made clear that Freeport’s holding is much more limited than this broad
language might suggest. See Dominium Austin Partners, 248 F.3d at 725 (citing Freeport
but noting that the additional of a nondiverse party does destroy jurisdiction); Am. Fiber
& Finishing, Inc. v. Tyco Healthcare Grp., LP, 362 F.3d 136, 140 (1st Cir. 2004) (“[W]hen the
Court declared that ‘subsequent events’ do not divest the district court of diversity
jurisdiction, it was referring mainly to post‐filing transfers of interest—not to all post‐
filing additions of non‐diverse parties. Accordingly, we join several other courts of
appeals that have read Freeport narrowly and restricted its precedential force to the
precincts patrolled by Rule 25.”).
dismissed, however, and while they remain in this action, complete diversity is
Even if Cobalt had suggested dismissing the nondiverse parties‐in‐interest that
appeared after removal, the Court would reject the suggestion. The parties‐in‐interest
who claim an entitlement to the remaining reserve funds easily qualify as necessary
parties. See Fed. R. Civ. P. 19(a) (a “[r]equired party” includes a person who “claims an
interest relating to the subject of the action and is so situated that disposing of the action
in the person’s absence may . . . as a practical matter impair or impede the person’s
ability to protect the interest”). And the Court—after considering all of the facts and
circumstances of this case—also finds that those parties‐in‐interest are indispensable.
In CRI, Inc. v. Watson, 608 F.2d 1137 (8th Cir. 1979), the Eighth Circuit indicated
that because a party was not indispensable to the action, “its presence by intervention
. . . did not divest the court of jurisdiction.” Id. at 1140. As the Supreme Court has
subsequently made clear, however, the presence of a nondiverse, dispensable party is
indeed a jurisdictional defect that must be cured through dismissal. See Grupo Dataflux
v. Atlas Glob. Grp., L.P., 541 U.S. 567, 572 (2004) (if a party is dispensable, “the
jurisdiction of the court should be retained and the suit dismissed as to them” (citation
and quotation marks omitted)); Newman‐Green, Inc. v. Alfonzo‐Larrain, 490 U.S. 826, 827
(1989) (“We decide today that a court of appeals may grant a motion to dismiss a
dispensable party whose presence spoils statutory diversity jurisdiction.”); see also 28
U.S.C. § 1447(e) (requiring remand where a court permits joinder of a defendant whose
presence destroys subject‐matter jurisdiction). Likewise, the later‐enacted
supplemental‐jurisdiction statute makes clear that federal courts do not have
supplemental jurisdiction over the type of claim that CRI permitted. See 28 U.S.C.
§ 1367(b) (no supplemental jurisdiction over claims by or against parties who intervene
under Fed. R. Civ. P. 24); Exxon Mobil Corp., 545 U.S. at 554 (“Incomplete diversity
destroys original jurisdiction with respect to all claims, so there is nothing to which
supplemental jurisdiction can adhere.”).
See Bailey, 563 F.3d at 308 (articulating factors to consider and noting that “[t]he
determination of whether or not a person is an indispensable party is one which must
be made on a case‐by‐case basis and is dependent upon the facts and circumstances of
each case” (citation and quotation marks omitted)). It would be prejudicial to dismiss
other parties from this case and allow Cobalt—alone among all of the parties who claim
an interest in the reserve funds—to appear in this action. Conversely, permitting all of
the parties who claim an interest in the reserve funds to remain in this action will not
prejudice Cobalt or any other party, as these cases may be fully litigated in state court.
In addition, the time that the parties have spent in this Court will not have been wasted,
as the parties will be able to use whatever they learned in discovery in the state court on
remand, and this Court has not issued any decisions that will somehow be nullified by a
The Court acknowledges that there is non‐binding authority indicating that no
party is indispensable in an in rem action. See United States v. 499.472 Acres of Land More
or Less in Brazoria Cty., Tex., 701 F.2d 545, 550 n.6 (5th Cir. 1983) (“since the proceeding is
in rem, there are no indispensable parties; the failure to join a party does not defeat the
condemnator’s title to the land, though the party will retain his right to compensation”
(citations and quotation marks omitted)).11 The Court does not regard this authority as
Cobalt also cites a state‐court decision in a separate TIP in which the court
germane to this case, however. First, this principle appears to have been applied
primarily in condemnation cases, for which there is a separate statutory grant of federal
jurisdiction. See 28 U.S.C. § 1358; 499.472 Acres of Land, 701 F.2d at 546 (case involving
valuation of condemned property). Here, however, jurisdiction is premised on
complete diversity. If it were true that there is never an indispensable party in an in rem
action regardless of the basis of federal jurisdiction, then there would always be
diversity jurisdiction in such cases—or at least it would be remarkably easy for the
parties to collude to create diversity jurisdiction. Cf. 13F Charles Alan Wright et al.,
Federal Practice and Procedure § 3631 (3d ed. 2009) (“Actions in rem or quasi‐in‐rem, like
actions in personam, must meet subject matter jurisdiction requirements. Thus, either
diversity of citizenship and the requisite amount in controversy or some other basis of
federal jurisdiction must exist.”); Knudson, 634 F.3d at 975 (noting that, in removal cases,
courts require diversity both at time of filing and at time of removal to prevent
defendants from being able to manufacture diversity jurisdiction). Notably, in other
contexts, courts have found that parties can indeed be indispensable in in rem cases. See
denied CWCAM’s motion to dismiss; CWCAM had apparently argued that it was not
subject to personal jurisdiction in Minnesota. See Horrell Decl. Ex. 4. The one‐page
decision did not identify any reason other than that the case was in rem. But under Fed.
R. Civ. P. 19(b), whether a party is indispensable depends on the particular facts and
circumstances of each case. Bailey, 563 F.3d at 308. Moreover, as explained below, there
is more at stake in this case than the disposition of the res.
Franz v. Buder, 11 F.2d 854, 857–59 (8th Cir. 1926) (affirming dismissal of in rem case for
failure to join indispensable parties).
Setting that aside, this case is distinguishable because it is not solely an in rem
action, as there is more at stake than disposition of a res. The Class J and Class K
holders contend that, in addition to directing the distribution of the leftover funds in the
reserves (the res) to them, the Court should also ensure that all future distributions—
including those to which the senior certificateholders would otherwise be entitled
under the PSA—are paid to them until they are made whole for the December 2018
clawback. Case No. 19‐CV‐1387, ECF No. 109 at 28; Case No. 19‐CV‐2416, ECF No. 85
at 28. In other words, the Class J and Class K holders, on the one hand, and the senior
certificateholders, on the other, sharply dispute who is entitled to future distributions
under the terms of the PSA. For these reasons, even if Cobalt had asked the Court to
dismiss the nondiverse parties, the Court would decline to do so.
Finally, Cobalt asks that it be permitted to conduct jurisdictional discovery in the
event that the Court determines that diversity jurisdiction is lacking. So far as the Court
can tell, this request relates mainly to CWCAM’s citizenship, which CWCAM has not
been able to determine. Because complete diversity is lacking regardless of CWCAM’s
citizenship, however, no discovery on that issue is warranted.
To the extent that Cobalt may be requesting discovery as to other parties’
citizenship, Cobalt’s request is denied. The current record establishes that complete
diversity is lacking, and Cobalt has not offered anything but speculation that discovery
might change the result. See FDIC v. Dosland, 50 F. Supp. 3d 1070, 1077 (N.D. Iowa 2014)
(“a bare assertion that jurisdictional discovery would likely reveal facts necessary to
support jurisdiction” is insufficient (citation and quotation marks omitted)).
Based on the foregoing, and on all of the files, records, and proceedings herein,
IT IS HEREBY ORDERED THAT Case Nos. 19‐CV‐1387 (PJS/BRT) and 19‐CV‐2416
(PJS/BRT) are REMANDED to Minnesota District Court, Second Judicial District
pursuant to 28 U.S.C. § 1447(c).
Dated: October 5, 2021
s/Patrick J. Schiltz
Patrick J. Schiltz
United States District Judge
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