Deutsche Bank Nat'l Trust Co. v. Old Republic Title Ins. Grp., Inc.

• Citation: 532 F.Supp.3d 1004
• Decision Date: 02 April 2021
• Docket Number: Case No. 3:20-cv-00535-MMD-CLB
• Parties: DEUTSCHE BANK NATIONAL TRUST COMPANY, AS Indenture TRUSTEE FOR AMERICAN HOME MORTGAGE INVESTMENT TRUST 2007-1, Plaintiff, v. OLD REPUBLIC TITLE INSURANCE GROUP, INC., et al., Defendants.
• Court: U.S. District Court — District of Nevada

532 F.Supp.3d 1004

DEUTSCHE BANK NATIONAL TRUST COMPANY, AS Indenture TRUSTEE FOR AMERICAN HOME MORTGAGE INVESTMENT TRUST 2007-1, Plaintiff,

v.OLD REPUBLIC TITLE INSURANCE GROUP, INC., et al., Defendants.

Case No. 3:20-cv-00535-MMD-CLB

United States District Court, D. Nevada.

Signed April 2, 2021

Robin P. Wright, Darren T. Brenner, Lindsay Robbins, Christina Miller, Wright, Finlay & Zak, LLP, Las Vegas, NV, for Plaintiff.

Scott E. Gizer, Sophia Shunwan Lau, Early Sullivan Wright Gizer & McRae LLP, Las Vegas, NV, for Defendants Old Republic Title Insurance Group, Inc., Old Republic National Title Insurance Company.

ORDER

MIRANDA M. DU, CHIEF UNITED STATES DISTRICT JUDGE

I. SUMMARY

In this removed action, Plaintiff Deutsche Bank National Trust Company seeks remand, contending that the "snap removal" was improper under 28 U.S.C. § 1441(b)(2) because Defendants may not remove in the presence of a forum defendant and Defendant Founders Title Company of Nevada ("Founders") is a citizen of Nevada ("Motion").¹ (ECF No. 9.) Defendant Old Republic Title Insurance Group ("Old Republic") counters that removal was proper because they removed before Founders was "properly joined and served" and, alternatively, that Founders was fraudulently joined. (ECF No. 14.) Because the Court finds Defendants failed to demonstrate Founders was fraudulently joined and, further, that § 1441(b)(2) does not permit snap removal, the Court will grant Plaintiff's Motion.

II. BACKGROUND

On September 10, 2020, Plaintiff filed its complaint in Nevada state court. (ECF No. 1-2.) Plaintiff brought several claims under Nevada state law against three defendants—Old Republic, Old Republic National, and Founders—for allegedly breaching their obligation to defend and indemnify Plaintiff under a title insurance policy issued to insure a mortgage on a home in Nevada. (Id. ) Plaintiff is a citizen of New York, Old Republic is a citizen of Delaware, Old Republic National is a citizen of Florida and Illinois, and Founders is a citizen of Nevada. (Id. at 3-4.)

Twelve days later,² on September 22, 2020, Defendants removed to this Court. (ECF No. 1.) Defendants allege that Founders was "fraudulently joined as an in-state defendant in an effort to defeat diversity of citizenship." (Id. at 2.) Plaintiff moved to remand, denying that Founders was a sham defendant and arguing that removal before any defendant was served is improper "snap removal." (ECF No. 9.) Defendants opposed the Motion (ECF No. 14) and Plaintiff replied (ECF No. 18).

III. LEGAL STANDARD

Federal courts are courts of limited jurisdiction, having subject-matter jurisdiction only over matters authorized by the Constitution and Congress. See U.S. Const. art. III, § 2, cl. 1 ; Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). Accordingly, a defendant may remove a suit filed in state court to federal court only if the federal court would have had original jurisdiction over the suit at commencement of the action. See 28 U.S.C. § 1441(a). A civil action otherwise removable solely on the basis of diversity jurisdiction may not be removed "if any of the parties in interests properly joined and served as defendants is a citizen of the State in which such action is brought. Id. at § 1441(b)(2). Courts strictly construe the removal statute against removal jurisdiction, and "[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, Inc. , 980 F.2d 564, 566 (9th Cir. 1992). The party seeking removal bears the burden of establishing federal jurisdiction. California ex rel. Lockyer v. Dynegy, Inc. , 375 F.3d 831, 838 (9th Cir. 2007).

"Diversity removal requires complete diversity, meaning that each plaintiff must be of a different citizenship from each defendant." Grancare, LLC v. Thrower by and through Mills , 889 F.3d 543, 548 (9th Cir. 2018) (citing Caterpillar Inc. v. Lewis , 519 U.S. 61, 68, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996) ). But "[i]n determining whether there is complete diversity, district courts may disregard the citizenship of a non-diverse defendant who has been fraudulently joined." Id. (citing Chesapeake & Ohio Ry. Co. v. Cockrell , 232 U.S. 146, 152, 34 S.Ct. 278, 58 L.Ed. 544 (1914) ). "There are two ways to establish fraudulent joinder: ‘(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.’ " Id. (quoting Hunter v. Philip Morris USA , 582 F.3d 1039, 1044 (9th Cir. 2009) (internal quotations omitted)). "Fraudulent joinder must be proven by clear and convincing evidence." Hamilton Materials, Inc. v. Dow Chem. Corp. , 494 F.3d 1203, 1206 (9th Cir. 2007).

A defendant can show fraudulent joinder by demonstrating that a party joined in the action "cannot be liable on any theory." Ritchey v. Upjohn Drug Co. , 139 F.3d 1313, 1318 (9th Cir. 1998). But "if there is a possibility that a state court would find that the complaint states a cause of action against any of the resident defendants, the federal court must find that the joinder was proper and remand the case to the state court." Hunter , 582 F.3d at 1046 (internal citations omitted). Moreover, "[a] defendant invoking federal court diversity jurisdiction on the basis of fraudulent joinder bears a heavy burden since there is a ‘general presumption against finding fraudulent joinder." Grancare , 889 F.3d at 548 (internal quotations and citations omitted). The Ninth Circuit has "declined to uphold fraudulent joinder rulings where a defendant raises a defense that requires a searching inquiry into the merits of the plaintiff's case, even if that defense, if successful, would prove fatal." Id.

IV. DISCUSSION

Plaintiff contends that snap removal is improper. (ECF No. 9.) Defendants counter not only that the removal was procedurally proper, but also that the lone forum-defendant, Founders, was fraudulently joined and therefore should not prevent the Court from exercising diversity jurisdiction. (ECF No. 14.) As explained below, the Court agrees with the prior decisions of this District that snap removal is improper under 28 U.S.C. § 1441(b)(2). Moreover, the Court finds that Defendants have not met their burden of showing Founders was fraudulently joined. According, the Court will grant Plaintiff's Motion.

A. Fraudulent Joinder

Defendants argue that removal is proper because the only forum-defendant, Founders Nevada, was fraudulently joined. (ECF No. 14 at 15-21.) Plaintiff asserts six claims against Founders: (1) declaratory judgment that the Policy provides coverage for all losses and damages (ECF No. 1-2 at 24); (2) breach of contract against all defendants including Founders (id. at 26); (3) breach of contract against Founders specifically (id. at 27); (4) bad faith and the breach of the covenant of good faith and fair dealing (id. at 28); (5) deceptive trade practices under NRS § 41.600 and NRS § 598.0915 (id. at 29-30); and (6) unfair claims practices act violations under NRS § 686A.310 (id. at 31).

Defendants argue that Founders is a ‘sham defendant’ because it cannot be held liable for any of the claims asserted against it. First, Defendants argue that because Founders is a "title agent," see NRS § 686A.060, not a "title insurer," see NRS § 686A.070, it cannot be liable for any of Plaintiff's claims. The Nevada Supreme Court has not interpreted NRS §§ 686A.060 or 686A.070, nor can the Court find any authority indicating title agent categorically cannot be liable under Nevada's Unfair Claims Practices Act. Moreover, judges in this District who have considered these statutes in similar circumstances have declined to find that Nevada state courts would find Defendants’ argument undoubtedly successful. See U.S. Bank Tr. Nat'l Ass'n v. Fidelity Nat'l Title Group, Inc. , Case No. 2:20-cv-02068-JCM-VCF, 2021 WL 223384, at *2 (D. Nev. Jan. 22, 2021) ; HSBC Bank USA, Nat'l Ass'n v. Fid. Nat'l Title Grp., Inc. , Case No. 2:20-cv-01515-JAD-BNW, 508 F.Supp.3d 781 (D. Nev. Dec. 22, 2020) ; Wells Fargo Bank, N.A. v. Old Republic Title Ins. Group, Inc. , 2020 WL 5898779, at *3 (D. Nev. Oct. 5, 2020) ; Carrington Mortg. Servs., LLC v. Ticor Title of Nev., Inc. , at *5, 2020 WL 3892786 (D. Nev. Jul. 10, 2020). Determining that no possible claim against Founders could exist because title agents cannot be liable for the claims Plaintiff alleges is premature at this stage of the litigation, particularly when the extent of Founders’ involvement in the execution of the Policy remains uncertain.

Next, Defendants argue that any claims against Founders would be time-barred. (ECF No. 14 at 22.) Defendants contend that because Nevada's statute of limitations for an action of deceptive trade practices is four years, see NRS § 11.190(2)(d), and for an action for misrepresentation is three years, see NRS § 11.190(3)(d), these claims would have expired years before the complaint was filed. (ECF No. 14 at 21.) Indeed, the Ninth Circuit has upheld district courts’ findings that defendants were fraudulently joined when it was clear the only claims alleged against a defendant were barred by the statute of limitations. See Ritchey , 139 F.3d at 1320 (finding non-diverse defendants were fraudulently joined in an asbestos suit because any claims against non-diverse parties were brought decades after the statute of limitations had run). But while Defendants’ arguments may apply to Plaintiff's claims against Old Republic, Defendants make no arguments about whether the same date began running the statute of limitations for Plaintiff's claims against Founders. And even accepting Defendants’ calculations, the pertinent statute of limitations for an action upon a contract is six years, see NRS § 11.190, which could allow certain claims against Founders to survive. Whether there is some potential for a successful claim against Founders therefore remains in...