Scott et al v. US Bank, NA et al

Filing 22

ORDER signed by Judge Benjamin H. Settle granting 19 Motion to Remand; finding as moot 11 Motion to Dismiss for Failure to State a Claim; finding as moot 15 Motion for Joinder. Per LCR 3(h), case will be remanded 14 days from date of this Order, on 8/23/2017. (TG)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA

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FLOYD SCOTT, et al.,

CASE NO. C17-5405 BHS
Plaintiffs,

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v.
U.S. BANK, NA, et al.,

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ORDER GRANTING PLAINTIFFS’
MOTION TO REMAND AND
DENYING DEFENDANTS’
MOTIONS TO DISMISS AS MOOT

Defendants.

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This matter comes before the Court on Defendants’ motions to dismiss (Dkts. 11,

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15) and Plaintiffs’ motion to remand (Dkt. 19). The Court has considered the pleadings

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filed in support of and in opposition to the motions and the remainder of the file and, for

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the reasons stated below, hereby (1) grants the motion to remand and (2) denies the

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motions to dismiss as moot.

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I.

BACKGROUND

On April 20, 2017, Plaintiffs filed a complaint against Defendants in Clark County

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Superior Court. Dkt. 1 at 2. On May 26, 2017, Defendants removed the action based on

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diversity jurisdiction under 28 U.S.C. § 1332. Dkt. 1.

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ORDER - 1

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On June 2, 2017, Defendants Federal Home Loan Mortgage Corporation,

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Mortgage Electronic Registration Systems Inc., and U.S. Bank, N.A. moved to dismiss.

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Dkt. 11. On June 8, 2017, Defendant North Cascade Trustee Services Inc. (“NTCS”) filed

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a motion joining in its codefendants’ motion to dismiss. Dkt. 15.

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On June 6, 2017, Plaintiffs moved to remand the case to Clark County Superior

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Court. Dkt. 19. On July 10, 2017, Defendants responded in opposition to Plaintiffs’

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motion for remand. Dkt. 20.

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II.

DISCUSSION

Plaintiffs move to remand the proceedings to state court on the basis that the

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presence of MTC Financial Inc. (“MTC”) and NTCS in this case destroys the diversity

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necessary for federal jurisdiction under 28 U.S.C. § 1332. The Court agrees. Plaintiffs

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have shown that MTC and NTCS are non-diverse parties and Defendants do not contend

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otherwise. Instead, Defendants argue that diversity jurisdiction exists because either: (1)

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MTC and NTCS are nominal defendants, or (2) MTC and NTCS were fraudulently

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joined. The Court rejects both of these arguments.

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“[A] federal court must disregard nominal or formal parties and rest jurisdiction

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only upon the citizenship of real parties to the controversy.” Petheram v. Wells Fargo

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Bank, C13-1016JLR, 2013 WL 4761049, at *2 (W.D. Wash. Sept. 3, 2013) (quoting

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Navarro Sav. Ass’ n v. Lee, 446 U.S. 458, 461 (1980)). While trustees are often treated as

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nominal parties, “[a] trustee has been found to be a real party when a plaintiff’s complaint

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asserts claims against a trustee, including . . . allegations that the trustee . . . was not the

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trustee authorized to initiate non judicial foreclosure proceedings.” Beiermann v. JP

ORDER - 2

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Morgan Chase Bank Nat. Ass’n, 3:11-CV-05952 RBL, 2012 WL 1377094, at *2 (W.D.

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Wash. Apr. 19, 2012). Such is the case here, where Plaintiffs assert Washington

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Consumer Protection Act claims against MTC and NTCS on the bases that they accepted

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appointments as successor trustees that they knew were unlawful and subsequently

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initiated non-judicial foreclosure proceedings despite knowing that they were not

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properly authorized trustees. See Dkt. 1-2 at 9, 14–15.

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Further, Plaintiff fraudulently joined MTC or NTCS. Joinder of a resident

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defendant is fraudulent for the purpose of defeating diversity jurisdiction only when: (1)

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the plaintiff fails to state a cause of action against a resident defendant and (2) the failure

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is obvious according to the settled rules of the state. Ritchey v. Upjohn Drug Co., 139

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F.3d 1313, 1318 (9th Cir. 1998). In this case, it very well may be that Plaintiffs have

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failed to state a claim against MTC and NTCS. Indeed, as argued in Defendants’ motion

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to dismiss and accompanying request for judicial notice, it appears likely that U.S. Bank

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appointed successor trustees under its lawful authority as the holder of the subject note.

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See Dkts. 11, 11-1. However, the second prong of the fraudulent joinder test states that

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“the non-diverse claim must not only be unsuccessful, it must be untenable ab initio.”

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Davis v. Prentiss Properties Ltd., Inc., 66 F. Supp. 2d 1112, 1115 (C.D. Cal. 1999). This

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reflects the fact that the Court’s jurisdiction is a threshold issue: the Court cannot decide

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the type of arguments advanced in Defendants’ motions to dismiss, which require

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examining the merits of the claims in detail by taking judicial notice of applicable loan

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documents, without jurisdictional authority.

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ORDER - 3

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Reviewing nothing but the allegations in the complaint that MTC and NTCS

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accepted unlawful appointments as successor trustees and subsequently proceeded to act

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on claims of default, Plaintiffs have alleged a tenable claim against non-diverse

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defendants under the CPA. See Knecht v. Fid. Nat. Title Ins. Co., C12-1575RAJ, 2014

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WL 4057148, at *8 (W.D. Wash. Aug. 14, 2014). Whether Plaintiffs’ allegations are

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contradicted or unsupported by the very loan documents that they necessarily incorporate,

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and therefore fail to state a claim, is a question to be resolved by a court with jurisdiction

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to hear the parties’ dispute. That is not this Court.

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III.

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ORDER

Therefore, it is hereby ORDERED that Plaintiffs’ motion to remand (Dkt. 19) is

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GRANTED. Plaintiffs’ motions to dismiss (Dkts. 11, 15) are DENIED without

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prejudice as moot. The Clerk shall REMAND this matter to Clark County Superior

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Court.

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Dated this 9th day of August, 2017.

A

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BENJAMIN H. SETTLE
United States District Judge

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ORDER - 4