Peterson et al v. Hamilton Mortgage Company et al

Filing 22

MEMORANDUM AND ORDER adopting the 21 Findings and Recommendation recommending withdrawal of the reference. This case is stayed as to GMAC Mortgage and Homecomings Financial, LLC., the parties in bankruptcy, until the stay is no longer in effe ct pursuant to 11 U.S.C. § 362, or relief from the automatic stay is requested and obtained from the appropriate bankruptcy court. The debtors are directed to inform the Court every 60 days of the status of the bankruptcy proceedings. Initia l Status Report deadline set for September 6, 2013. The plaintiffs shall file an amended complaint with the Court establishing an adequate basis for the Court's jurisdiction on or before July 29, 2013. Amended Complaint deadline set for July 29, 2013. Ordered by Judge John M. Gerrard. (MKR)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
JAY S. PETERSON and DEBORAH
K. PETERSON,
8:13-CV-115
Plaintiffs,
vs.

MEMORANDUM AND ORDER

HAMILTON MORTGAGE
COMPANY, et al.,
Defendants.
This matter is before the Court on the Report and Recommendation of
the United States Bankruptcy Judge (filing 21). In addition, the Court will,
on its own motion, require the plaintiffs to file an amended complaint
remedying defects in their allegations of subject matter jurisdiction.
WITHDRAWAL OF BANKRUPTCY COURT REFERENCE
The United States Bankruptcy Judge has recommended that reference
of this case to the Bankruptcy Court be withdrawn. Filing 21. No objections
to that report and recommendation have been filed. The failure to file an
objection eliminates not only the need for de novo review, but any review by
the Court. See Leonard v. Dorsey & Whitney LLP, 553 F.3d 609 (8th Cir.
2009). Accordingly, the Court will adopt the report and recommendation of
the United States Bankruptcy Judge that the referral of this matter to the
Bankruptcy Court be withdrawn as to the claims that are within the scope of
the limited relief granted by the New York bankruptcy court as to lien
priority and validity disputes. See filing 21.
In particular, the plaintiffs may proceed with their claim for
declaratory relief, and their claims for compensatory damages from the
defendants other than the debtors, GMAC Mortgage and Homecomings
Financial, LLC. But the plaintiffs' compensatory damage claims shall be
stayed as to the debtors until the automatic stay is no longer in effect or relief
from the automatic stay is requested and obtained from the appropriate
bankruptcy court.

SUBJECT MATTER JURISDICTION
That is, the plaintiffs may proceed if this Court has jurisdiction over
their claims. But the Court, on its own motion, notes defects in the plaintiffs'
complaint (filing 1) that calls into question whether federal jurisdiction based
on diversity of citizenship exists in this case. And the Court has an obligation
to consider its subject matter jurisdiction where there is a reason to suspect
that such jurisdiction is lacking. See Hart v. United States, 630 F.3d 1085,
1089 (8th Cir. 2011).
Specifically, the plaintiffs' complaint must set forth a short and plain
statement of the grounds for the Court's jurisdiction. Fed. R. Civ. P. 8(a)(1).
The plaintiffs assert diversity jurisdiction pursuant to 28 U.S.C. § 1332. It is,
therefore, their burden to plead, and if necessary, prove diversity. Walker v.
Norwest Corp., 108 F.3d 158, 162 (8th Cir. 1997). But their allegations are
deficient in three respects.
First, they allege that they "are U.S. Citizens whose state of residence
is Nebraska." Filing 1 at 2. But an allegation of "residency" is not the same as
an allegation of "citizenship." See, Walker, 108 F.3d at 161-162; Dale v.
Weller, 956 F.2d 813, 814-15 (8th Cir. 1992); Sanders v. Clemco Indus., 823
F.2d 214, 216 (8th Cir. 1987). In order to establish diversity jurisdiction, the
plaintiffs must allege not just that they are "residents", but that they are
citizens of or domiciled in Nebraska—or, at least, some State other than any
of the defendants.
Second, the plaintiffs allege that defendant Edward Brink "is a
Trustee, that works for South and Associates, PC in Nebraska." Filing 1 at 3.
This obviously does not allege that Brink is not a citizen of Nebraska.1 And
the Supreme Court has 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 Court of original diversity jurisdiction over the entire
action. Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553 (2005);
see also Walker, 108 F.3d at 161. In other words, if Brink is a citizen of
Nebraska, and the plaintiffs are citizens of Nebraska, then diversity
jurisdiction is lacking. So, in order to establish diversity jurisdiction, the
plaintiffs must allege that each defendant is a citizen of a different State
than each of the plaintiffs.

The Court notes that in a Fed. R. Civ. P. 12(b)(1) motion, defendants Brink and South and
Associates asserted that Brink is a citizen of and domiciled in Nebraska. Filing 15 at 1. But
they presented no evidence to support that assertion, which they were permitted to do. See
Jessie v. Potter, 516 F.3d 709, 712 (8th Cir. 2008).
1

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And third, complete diversity is also defeated by the 20 John Doe
defendants that the plaintiffs have attempted to sue, because the plaintiffs
have not alleged that they are citizens of some State other than the plaintiffs.
Filing 1 at 3. And this Court has held that the presence of John Doe
defendants destroys original diversity jurisdiction, because the Court cannot
simply presume diversity is present and the proponent of jurisdiction cannot
prove diversity without some indication of the Does' citizenship. Payich v.
GGNSC Omaha Oak Grove, LLC, 2012 WL 1416693, at *3 (D. Neb. 2012),
(citing Howell by Goerdt v. Tribune Entertainment Co., 106 F.3d 215, 218 (7th
Cir. 1997); Meng v. Schwartz, 305 F. Supp. 2d 49, 55–56 (D.D.C.2004)). So, in
order to establish diversity jurisdiction, the plaintiffs must allege that any
John Doe defendants are citizens of different States than the plaintiffs.
As a result of these three defects, the Court has cause to question its
jurisdiction. This "is not merely technical." Dale, 956 F.2d at 815. From the
complaint, the Court cannot determine whether diversity jurisdiction exists,
raising "serious concerns" that the Court is required to address. See id. But
the plaintiffs are entitled to an opportunity to address those concerns. See,
id.; Sanders, 823 F.2d at 216-17. So, the Court will afford the plaintiffs leave
to amend their complaint. The plaintiffs shall file their amended complaint
on or before July 29, 2013; otherwise, their complaint will be dismissed
without prejudice.
IT IS ORDERED:
1.

The report and recommendation of the United States
Bankruptcy Judge (filing 21) recommending withdrawal of
the reference is adopted.

2.

This case is stayed as to GMAC Mortgage and
Homecomings Financial, LLC., the parties in bankruptcy,
until the stay is no longer in effect pursuant to 11 U.S.C. §
362, or relief from the automatic stay is requested and
obtained from the appropriate bankruptcy court.

3.

The debtors are directed to inform the Court every 60 days
of the status of the bankruptcy proceedings.

4.

The Clerk of the Court is directed to enter an initial status
report deadline of September 6, 2013.

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5.

The plaintiffs shall file an amended complaint with the
Court establishing an adequate basis for the Court's
jurisdiction on or before July 29, 2013.

6.

The Clerk of the Court is directed to enter an amended
complaint deadline of July 29, 2013.

7.

Should the plaintiffs fail to file a timely amended
complaint, this case will be dismissed.

8.

The defendants shall, pursuant to Fed. R. Civ. P. 15(a)(3),
respond to the plaintiffs' amended complaint within 14
days of its service. Any defendant that previously filed a
Fed. R. Civ. P. 12 motion may, by notice to the Court, stand
on that motion as it relates to the amended complaint.

Dated this 8th day of July, 2013.
BY THE COURT:

John M. Gerrard
United States District Judge

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