Howard Bank v. Compu-Link Corp.
| Citation | 472 F.Supp.3d 267 |
| Decision Date | 16 July 2020 |
| Docket Number | Civil Action No. ELH-20-314 |
| Parties | HOWARD BANK, as successor to First Mariner Bank, Plaintiff, v. COMPU-LINK CORPORATION, d/b/a Celink, Defendant. |
| Court | U.S. District Court — District of Maryland |
Michael Evan Blumenfeld, Timothy McDevitt Hurley, Nelson Mullins Riley & Scarborough LLP, Baltimore, MD, for Plaintiff.
Jennifer L. Gray, Pro Hac Vice, Hinshaw Culbertson LLP, Los Angeles, CA, John Alexander Nader, McGlinchey Stafford, PLLC, Washington, DC, for Defendant.
This case concerns the timeliness of removal. But it is not a mundane dispute. Rather, it presents the novel issue of whether a contract's notice provision delineates the exclusive methods for effecting service of process, which in turn determines when the time period for removal begins to run.
Plaintiff Howard Bank, as successor to First Mariner Bank ("First Mariner"),1 filed suit in the Circuit Court for Baltimore City against Compu-Link Corporation d/b/a Celink ("Celink"), alleging that Celink breached its contractual obligations to indemnify First Mariner for losses that First Mariner sustained defending a lawsuit that settled in 2017. ECF 2 (the "Complaint"). The Complaint contains six counts under Maryland law: breach of contract (Count One); contractual indemnity (Count Two); common law indemnity (Count Three); contribution (Count Four); negligence (Count Five); and negligent misrepresentation (Count Six). Defendant removed the action to federal court, asserting diversity of citizenship jurisdiction under 42 U.S.C. § 1332. ECF 1 ("Notice of Removal"), ¶ 1.
Celink has moved to dismiss the Complaint, claiming lack of personal jurisdiction, pursuant to Fed. R. Civ. 12(b)(2), and failure to state a claim, under Fed. R. Civ. P. 12(b)(6). ECF 8. The motion is supported by a memorandum of law (ECF 8-1) (collectively, the "Motion to Dismiss") and five exhibits. ECF 8-2 to ECF 8-6. Howard Bank opposes the Motion to Dismiss (ECF 18) and Celink has replied. ECF 21.
In addition, Howard Bank has moved to remand the suit to State court, pursuant to 28 U.S.C. § 1447(c) and Local Rule 105 (ECF 16), accompanied by a memorandum. ECF 16-1 (collectively, the "Motion to Remand"). Celink opposes the Motion to Remand (ECF 20) and Howard Bank has replied. ECF 22.
The motions are fully briefed and no hearing is necessary to resolve them. See Local Rule 105.6. For the reasons that follow, I will grant Howard Bank's Motion to Remand. Therefore, I shall deny, without prejudice, Celink's Motion to Dismiss.
Before merging with Howard Bank in 2018, First Mariner was a Maryland-chartered trust company based in Baltimore. See ECF 2, ¶¶ 2, 7; First Mariner Bancorp. Annual Report (10-K Form) (Dec. 31, 2008) (hereafter "2008 10-K Form"). Among other business ventures, First Mariner originated reverse and conventional mortgage loans through commission-based loan officers. See 2008 10-K Form; see also ECF 2, ¶ 8. First Mariner sold some of these reverse mortgage loans to the Federal National Mortgage Association ("Fannie Mae"). ECF 2, ¶ 8. Under this arrangement, the U.S. Department of Housing ("HUD") insured the loan, but First Mariner retained the right to service the loan on behalf of Fannie Mae. Id. ¶¶ 8-10.
On May 22, 2006, First Mariner entered into a Reverse Mortgage Subservicing Agreement ("RMSA" or the "Agreement") with Celink, a Michigan corporation headquartered in Lansing, Michigan. See id. ¶¶ 3, 12; ECF 8-2 (RMSA). The Agreement includes a choice-of-law provision, which provides that its terms "shall be construed" in accordance with Michigan law. ECF 8-2 at 22. Further, § 9.04 of the Agreement, titled "Notices ," addresses communications between First Mariner and Celink. Id. at 23. It provides, id. :
All demands, notices, certificates or other communications hereunder shall be in writing (unless otherwise specified) and shall be deemed given when personally delivered or four (4) Business Days after mailing by United States Postal Service Second Day Priority Mail, postage prepaid, return receipt requested, addressed to the appropriate Notice Address.
Section 1.01 of the Agreement specifies that Celink's "Notice Address" is its headquarters in Lansing, Michigan. Id. at 8.
Pursuant to the RMSA, Celink agreed to service certain reverse mortgages for which First Mariner was the owner or servicer, including loans that First Mariner had sold to Fannie Mae and thus were insured by HUD. ECF 2, ¶ 12. Specifically, § 5.02 of the RMSA provides that, as to each loan, "until the earlier of the payment in full of such loan, the termination of this Agreement, or the sale and assignment, or other disposition of ownership," Celink would "subservice the Loan ... as Subservicer on behalf of 1st Mariner and shall do all things necessary to perform such services pursuant to this Agreement ...." ECF 8-2 at 14. Among other subservicing obligations, Celink agreed to comply with all Fannie Mae and HUD requirements. ECF 2, ¶ 15. In exchange, First Mariner paid Celink a monthly fee for each loan that it serviced. See ECF 8-2 at 16-17.
The Agreement contains an indemnification provision obligating Celink to reimburse First Mariner for certain losses. Specifically, § 9.12(a) of the RMSA states, id. at 24:
Celink agrees to, and does hereby indemnify and hold harmless 1st Mariner and its directors, officers, employees and agents, and their successors and assigns against, and shall reimburse 1st Mariner for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses, and disbursements of any kind or nature whatsoever including reasonable fees and expenses of counsel of litigation which may be imposed on, incurred by or asserted against 1st Mariner, in any way related to, or arising out of, this Agreement or any of the transactions contemplated herein, to the extent that any of the same results from or arises out of (i) any material breach of any representation or warranty made by Celink in this Agreement, [or] (ii) any material breach by Celink of any covenant or obligation of Celink under this Agreement or any schedule, written statement, document, or certificate furnished by Celink pursuant to this Agreement.
On March 31, 2011, First Mariner and Sun West Mortgage Company, Inc. ("Sun West"), executed two agreements, by which First Mariner assigned to Sun West its rights, title, and interest in approximately 2,200 reverse mortgage loans owned by Fannie Mae and serviced by First Mariner (the "Loans"). ECF 2, ¶ 18. First, in a contract titled "Assignment of Servicing Rights Agreement," First Mariner assigned the mortgage servicing rights associated with the Loans to Sun West, and Sun West agreed to accept the assignment. ECF 8-3 (Servicing Agreement). Second, in a contract titled "Services and Indemnification Agreement," First Mariner and Sun West agreed to certain servicing standards. ECF 8-4 (Services Agreement). According to First Mariner, prior to the assignment, Celink serviced the Loans on behalf of First Mariner. ECF 2, ¶ 18.
On or about August 5, 2015, Sun West filed breach of contract claims against First Mariner and several other defendants in the United States District Court for the Central District of California, alleging that the Loans had been improperly or inadequately serviced before the assignment, including by failing to meet various HUD requirements. Id. ¶¶ 19-20; see Sun West v. First Mariner , No. 2:14-cv-04903-PSG-AS, ECF 1 (C.D. Cal.). In total, Sun West allegedly sought to recover more than $7 million in damages from First Mariner. ECF 2, ¶ 21.
According to Howard Bank, because Celink serviced the Loans that First Mariner assigned to Sun West, any damages that Sun West sought against First Mariner "were the direct result of Celink's failure to fulfill its contract obligations" under the RMSA. Id. ¶ 22. Howard Bank claims that First Mariner "did not discover, and could not have discovered," Celink's alleged breach of the RMSA until the Sun West litigation. Id. ¶ 23.
Invoking the indemnification clause in the RMSA, First Mariner allegedly invited Celink to participate in the settlement negotiations between First Mariner and Sun West on April 30, 2017. Id. ¶ 25. However, Celink declined First Mariner's invitation. Id. Ultimately, in May 2017, First Mariner and Sun West settled the lawsuit for an undisclosed amount. Id. ¶ 26; see Sun West v. First Mariner , No. 2:14-cv-04903-PSG-AS, ECF 203 (C.D. Cal.).
First Mariner allegedly "incurred substantial legal fees" in connection with defending the Sun West litigation. ECF 2, ¶ 27. Following the settlement of the Sun West litigation, First Mariner made "multiple requests" to Celink to cover these losses, pursuant to § 9.12 of the RMSA, but Celink allegedly refused to compensate First Mariner. Id. ¶ 28.
Howard Bank acquired First Mariner on March 1, 2018. Id. at ¶ 2. On September 25, 2019, Howard Bank, as successor in interest to First Mariner, filed this suit in the Circuit Court for Baltimore City. ECF 2. Howard Bank alleges that Celink breached the RMSA, inter alia , by failing to properly and adequately service the Loans on behalf of First Mariner between May 22, 2006 and March 31, 2011, and by refusing to indemnify First Mariner in connection with the Sun West litigation. See id. at ¶¶ 32-25. As noted, the Complaint contains six counts, all arising under State law. Id. ¶¶ 29-70. Howard Bank seeks "compensatory damages in an amount in excess of $75,000 to be proved at trial." Id. at 12.
On October 14, 2019, Howard Bank served a copy of the summons and Complaint by certified mail on Celink's registered agent in Maryland, "CSC-Lawyers Incorporating Service Company" ("CSC"). ECF 5-1 (11/15/2019 Affidavit of Service); see also ECF 1, ¶ 2. Celink's registered agent in Maryland subsequently forwarded the summons and Complaint by email to Celink's headquarters in Michigan. ECF 13-1 ...
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