Lightfoot v. Cendant Mortg. Corp.
| Decision Date | 02 October 2014 |
| Docket Number | No. 10–56068.,10–56068. |
| Citation | 769 F.3d 681 |
| Parties | Crystal Monique LIGHTFOOT; Beverly Ann Hollis–Arrington, Plaintiffs–Appellants, v. CENDANT MORTGAGE CORPORATION, doing business as PHH Mortgage; Fannie Mae; Robert O. Matthews; Attorneys Equity National Corporation, Defendants–Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
OPINION TEXT STARTS HERE
Thomas Ogden (argued), Law Offices of Thomas Ogden, Alhambra, California; Crystal Monique Lightfoot, West Hills, CA, for Plaintiffs–Appellants.
Jonathan Hacker (argued), O'Melveny & Myers LLP, Washington, D.C.; Jan T. Chilton, Severson & Werson, San Francisco, CA, for Defendants–Appellees.
Appeal from the United States District Court for the Central District of California, Consuelo B. Marshall, Senior District Judge, Presiding. D.C. No. 2:02–cv–06568–CBM–AJW.
Before: STEPHEN S. TROTT and WILLIAM A. FLETCHER, Circuit Judges, and SIDNEY H. STEIN, District Judge.*
Opinion by Judge W. FLETCHER; Dissent by Judge STEIN.
Plaintiffs Beverly Ann Hollis–Arrington and Crystal Monique Lightfoot appeal the district court's judgment dismissing their claims against the Federal National Mortgage Association (“Fannie Mae”). They argue that the district court lacked subject matter jurisdiction over their claims. We disagree. Under the rule announced in American National Red Cross v. S.G., 505 U.S. 247, 112 S.Ct. 2465, 120 L.Ed.2d 201 (1992), Fannie Mae's federal charter confers federal question jurisdiction over claims brought by or against Fannie Mae. We affirm the district court.
This case is one of several brought by the plaintiffs following foreclosure proceedings initiated by Fannie Mae against Hollis–Arrington's home in West Hills, California. Hollis–Arrington first filed two suits in the United States District Court for the Central District of California, alleging numerous state-and federal-law claims against Fannie Mae and other defendants. The district court dismissed both suits, and we affirmed on appeal. Hollis–Arrington v. Cendant Mortg. Corp., 61 Fed.Appx. 462 (9th Cir.2003); Hollis–Arrington v. Cendant Mortg. Corp., 61 Fed.Appx. 463 (9th Cir.2003).
Plaintiffs then filed the present suit in California state court, alleging state-law claims similar or identical to those in the two earlier federal suits. Fannie Mae removed to federal court, arguing that the sue-and-be-sued clause in its federal corporate charter conferred federal question subject matter jurisdiction. Plaintiffs filed a motion to remand, which the district court denied. The district court dismissed all of plaintiffs' claims as barred by res judicata and collateral estoppel. We initially affirmed in an unpublished disposition. Lightfoot v. Cendant Mortg. Corp., 465 Fed.Appx. 668 (9th Cir.2012). We laterwithdrew that disposition, appointed pro bono counsel, and ordered the parties to brief whether Fannie Mae's federal charter granted the district court subject matter jurisdiction. Lightfoot v. Cendant Mortg. Corp., No. 10–56068 (Apr. 13, 2012) (order withdrawing disposition).
The sue-and-be-sued clause in Fannie Mae's charter authorizes Fannie Mae “to sue and be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal.” 12 U.S.C. § 1723a(a). We hold that this language confers federal question jurisdiction over claims brought by or against Fannie Mae. In so holding, we do not write on a clean slate. In Red Cross, the Supreme Court gave us a clear rule for construing sue-and-be-sued clauses for federally chartered corporations. The Court held that “a congressional charter's ‘sue and be sued’ provision may be read to confer federal court jurisdiction if, but only if, it specifically mentions the federal courts.” 505 U.S. at 255, 112 S.Ct. 2465.
The question in Red Cross was whether the American National Red Cross's federal charter conferred federal question jurisdiction over suits brought by or against the Red Cross. The sue-and-be-sued clause in the Red Cross's charter authorized the Red Cross “to sue and be sued in courts of law and equity, State or Federal, within the jurisdiction of the United States.” Id. at 248, 112 S.Ct. 2465. The Court held that the clause conferred federal question jurisdiction. Id. at 257, 112 S.Ct. 2465. Justice Scalia dissented for himself and three others. He and his fellow dissenters would have held that the clause conferred only corporate capacity to sue and be sued, and that subject matter jurisdiction had to be conferred by some other provision of federal law. Id. at 265, 112 S.Ct. 2465 (Scalia, J., dissenting).
The Court based its holding on a line of cases, stretching back to Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 6 L.Ed. 204 (1824), that made clear that a sue-and-be-sued clause for a federally chartered corporation confers federal question jurisdiction if it specifically mentions federal courts. Red Cross, 505 U.S. at 252–56, 112 S.Ct. 2465. The Court in Osborn held, in an opinion by Chief Justice Marshall, that a clause authorizing the second Bank of the United States “to sue and be sued ... in all state courts having competent jurisdiction and in any circuit court of the United States” conferred federal question jurisdiction. 22 U.S. (9 Wheat.) at 817–18. Chief Justice Marshall distinguished Osborn from Bank of the United States v. Deveaux, 9 U.S. (5 Cranch) 61, 3 L.Ed. 38 (1809), in which the Court had held that the charter of the first Bank of the United States did not confer federal subject matter jurisdiction because that bank's charter authorized the bank to “sue and be sued ... in Courts of record,” without specifying the federal courts. Osborn, 22 U.S. (9 Wheat.) at 817–18; Deveaux, 9 U.S. (5 Cranch) at 85. Chief Justice Marshall wrote that, in contrast to the first bank's charter, the second bank's charter could not have been “more direct and appropriate” in conferring federal question jurisdiction. Osborn, 22 U.S. (9 Wheat.) at 817.
Almost a century later, the Court held in Bankers' Trust Co. v. Texas & Pacific Railway, 241 U.S. 295, 36 S.Ct. 569, 60 L.Ed. 1010 (1916), that a federal corporate charter did not confer federal question jurisdiction when it authorized a railroad “to sue and be sued ... in all courts of law and equity within the United States.” Id. at 304–05, 36 S.Ct. 569. That language had “the same generality and natural import”as the language in Deveaux because it did not specifically mention the federal courts. Id. at 304, 36 S.Ct. 569; see Red Cross, 505 U.S. at 254, 112 S.Ct. 2465. Then, in D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), the Court upheld federal question jurisdiction based on a federal charter authorizing the Federal Deposit Insurance Corporation to sue or be sued “in any court of law or equity, State or Federal.” Id. at 455, 62 S.Ct. 676.
The Court wrote in Red Cross that these cases established a “rule” that would have been known to Congress at least as far back as 1942, when D'Oench was decided. Red Cross, 505 U.S. at 255–57, 259–60, 112 S.Ct. 2465. When federal charters, like those of the Red Cross and of Fannie Mae, “expressly authoriz[e] the organization to sue and be sued in federal courts ... the provision extends beyond a mere grant of general corporate capacity to sue, and suffices to confer federal jurisdiction.” Id. at 257, 112 S.Ct. 2465. As the Court of Appeals for the D.C. Circuit has already held, that rule resolves this case. See Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust ex rel. Fed. Nat'l Mortg. Ass'n v. Raines, 534 F.3d 779, 784 (D.C.Cir.2008) ().
Despite the specific reference to federal courts in Fannie Mae's sue-and-be-sued clause, our dissenting colleague contends that the clause does not confer federal question jurisdiction. Like Justice Scalia and his fellow dissenters in Red Cross, the dissent argues that the clause confers only corporate capacity to sue and be sued, and that subject matter jurisdiction must come from some other provision of federal law. Dissent at 692. The dissent relies on the phrase “court of competent jurisdiction” in the clause. Before 1954, Fannie Mae, like the Red Cross, had the statutory authority to “sue and be sued; complain and defend, in any court of law or equity, State or Federal.” H.R.Rep. No. 83–1429, at 82 (1954) (emphasis added). In 1954, as one of many changes to Fannie Mae's charter, Congress amended Fannie Mae's sue-and-be-sued clause to authorize it “to sue and to be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal.” Housing Act of 1954, Pub.L. No. 83–560, § 201, 68 Stat. 590, 620 () (emphasis added).
The dissent acknowledges that Fannie Mae's pre–1954 charter conferred federal question jurisdiction, but argues that Congress eliminated that jurisdiction by replacing the phrase “court of law or equity” with “court of competent jurisdiction.” Dissent at 692–93. We disagree. Eliminating the charter's grant of federal question jurisdiction would have imposed a severe new restraint on Fannie Mae's ability to litigate in federal court. Under the general federal question jurisdiction statute, 28 U.S.C. § 1331, Fannie Mae would have been restricted by the well-pleaded complaint rule. See, e.g., Franchise Tax Bd. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 9–10, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983); Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 53 L.Ed. 126 (1908). Given that Fannie Mae is often sued under state-law causes of action, § 1331 would have conferred jurisdiction in a relatively small number of cases. Diversity jurisdiction under 28 U.S.C. § 1332, if it existed at all, would have been...
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