JPMorgan Chase Bank, Nat'l Ass'n v. Nell
| Decision Date | 27 March 2012 |
| Docket Number | 10-CV-1656(RRM) |
| Parties | JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, Plaintiff, v. JAMES D. NELL a/k/a JAMES NELL; WASHINGTON MUTUAL BANK, A FEDERAL ASSOCIATION; NYC PARKING VIOLATIONS BUREAU; "JOHN DOES #1 - 5" and "JANE DOES #1 - 5" said names being fictitious, it being the intention of the Plaintiff to designate any and all occupants, tenants or corporations, if any, having or claiming an interest in or lien upon the premises being foreclosed herein, Defendants. JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, Third-Party Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER OF WASHINGTON MUTUAL BANK, Third-Party Defendant. |
| Court | U.S. District Court — Eastern District of New York |
The Federal Deposit Insurance Corporation ("FDIC"), in its capacity as receiver for Washington Mutual Bank, F.A. ("WaMu"), moves to intervene in this foreclosure action as a counterclaim defendant pursuant to Federal Rules of Civil Procedure 24(a)(2) and 24(b). The FDIC seeks to defend certain counterclaims by defendant mortgagor James Nell ("Nell")asserted against WaMu's successor-in-interest JPMorgan Chase Bank, N.A. ("Chase"): counterclaims two (violation of the Truth in Lending Act), four (recoupment), five (unjust enrichment), six (conspiracy to commit fraud), and seven (deceptive trade practices) (together, the "Borrower Claims"). If intervention is granted, the FDIC also asks the Court to dismiss Chase's third-party complaint against it as moot, since Chase only seeks indemnification from the FDIC for the Borrower Claims.
The FDIC also moves under Rule 12(b)(1) to dismiss the Borrower Claims without prejudice pursuant to the Financial Institutions Reform, Recovery and Enforcement Act of 1989, codified as amended in the Federal Deposit Insurance Act, 12 U.S.C. § 1821(d) (2011) ("FIRREA"). The FDIC alleges that Nell failed to exhaust his Borrower Claims through the FDIC's administrative review process, barring him from raising those claims in this Court.
For the reasons that follow, the Court grants the FDIC's motion to intervene (Doc. No. 19), dismisses Chase's third-party complaint against the FDIC, and dismisses the Borrower Claims for lack of jurisdiction. Further, since the FDIC's party status was the only basis for federal jurisdiction here. The Court remands the remaining claims to New York Supreme Court, Richmond County.
On or about July 30, 2004, Nell acquired residential property at 16 Turf Road, Staten Island, New York by virtue of a $386,250 mortgage (the "Mortgage") issued by WaMu.
On September 25, 2008, the Office of Thrift Supervision declared WaMu insolvent and appointed the FDIC to act as receiver pursuant to 12 U.S.C. §§ 1464(d)(2)(A) and 1821(c)(5). The FDIC became successor-in-interest to WaMu, assuming all of its rights, titles, powers, privileges and operations. On that same date, the FDIC sold WaMu's assets to Chase, pursuant to a Purchase and Assumption Agreement ("P & A Agreement").2 Notably, P & A Agreement Section 2.5 excluded the transfer of any liability for claims seeking monetary relief arising out of WaMu's pre-failure lending activities; the FDIC retained exclusive liability for these claims.
On July 20, 2009, Chase, as successor-in-interest to WaMu's mortgage assets, commenced a foreclosure action against Nell in New York Supreme Court, Richmond County. In opposition, Nell brought foreclosure misconduct counterclaims directly against Chase, but also alleged WaMu's misconduct in the underlying mortgage-lending process. Despite relying in part on WaMu's conduct in asserting his Borrower Claims, Nell directed those claims solely against Chase on a successor-in-interest theory.
Chase notified the FDIC of Nell's Borrower Claims on or about October 26, 2009. On December 2, 2009, the FDIC moved to intervene in the state court foreclosure action by Order to Show Cause. In an opinion dated February 18, 2010, the state court denied the FDIC's motion to intervene.
Chase then sued the FDIC in a third-party state court action filed on March 30, 2010, seeking indemnification for any pre-acquisition lender liability attributable to WaMu's conduct in issuing the Mortgage. On April 14, 2010, third-party defendant FDIC removed both the third-party and foreclosure actions to this Court pursuant to 28 U.S.C. § 1331, 28 U.S.C. § 1441, 12 U.S.C. § 1819(b)(2)(B), and 12 U.S.C. § 1821(d)(6)(A). On June 14, 2010, Nell moved under 28 U.S.C. § 1447(c) to remand the actions to state court, arguing that the FDIC's removal was untimely. In an order dated November 9, 2010 (Doc. No. 16), this Court denied Nell's motion
On February 28, 2011, the FDIC moved under Rule 24(a)(2), or alternatively Rule 24(b), to intervene as a counterclaim defendant as to the Borrower Claims. (Mot. to Dismiss and Intervene (Doc. No. 19).) The FDIC also moved under FIRREA and Rule 12(b)(1) to dismiss Nell's counterclaims and Chase's third-party complaint without prejudice, arguing that 12 U.S.C. §§ 1821(d)(3)-(13) denies this Court jurisdiction over creditor claims against the FDIC as receiver until they have been exhausted in the FDIC's administrative claims review process. (Id.)
On March 11, 2011, Nell opposed the FDIC's motion to intervene. (Opp. Mem. (Doc. No. 20).) Nell contends that the motion is untimely, and that the FDIC and Chase have not established that his Mortgage was among those assets transferred from WaMu under the P & A Agreement. (Id. at 6.) In response, on April 4, 2011, the FDIC provided executed copies of the P & A Agreement and Mortgage, along with a declaration by a Chase Mortgage Officerconfirming Chase's purchase of the Mortgage. (See Attachments to Reply Mem. (Doc. No. 21).) Chase submitted no opposition to the FDIC's motion.
A party may intervene as of right pursuant to Rule 24(a)(2) if: "(1) the motion is timely; (2) the applicant asserts an interest relating to the property or transaction that is the subject of the action; (3) the applicant is so situated that without intervention, disposition of the action may, as a practical matter, impair or impede the applicant's ability to protect its interest; and (4) the applicant's interest is not adequately represented by the other parties." MasterCard Int'l, Inc. v. Visa Int'l Serv. Ass'n, Inc., 471 F.3d 377, 389 (2d Cir. 2006). The test is flexible and courts generally look at all of the factors rather than focusing narrowly on any one of the criteria. Long Island Trucking, Inc. v. Brooks Pharmacy, 219 F.R.D. 53, 55 (E.D.N.Y. 2003) (citing Tachiona v. Mugabe, 186 F. Supp. 2d 383, 394 (S.D.N.Y. 2002)).
Nell challenges the FDIC's motion only under the first two Rule 24(a)(2) factors, timeliness and interest.
In this Circuit, "[t]he determination of timeliness [under Rule 24] is within the discretion of the district court," and its discretion should be exercised based on the "totality of circumstances." D'Amato v. Deutsche Bank, 236 F.3d 78, 84 (2d Cir. 2001) (internal quotation marks and citation omitted). "It is firmly established that the most significant criterion in determining timeliness is whether the delay in moving for intervention has prejudiced any of theexisting parties." Hartford Fire Ins. Co. v. Mitlof, 193 F.R.D. 154, 160 (S.D.N.Y. 2000) (citation omitted).
The FDIC first moved to intervene in state court in December of 2009, only four months after Nell filed his Borrower Claims. Although the FDIC was denied intervention in state court, it advised Nell that it would seek to intervene in this Court only two months after Nell's motion to remand was denied. (See Joint Proposed Briefing Schedule of Jan. 12, 2011 (Doc. No. 17).) The FDIC surely did not prejudice Nell, already on notice of its intent, by allowing this Court to resolve his remand motion before presenting its motion. Courts in this Circuit have found delays greater than two months to be reasonable in the absence of intervening substantive action. See, e.g., Hartford Fire Ins., 193 F.R.D. at 160 (three months); New England Petroleum Corp. v. Fed. Energy Admin., 71 F.R.D. 454, 460 (S.D.N.Y. 1976) (four months). Nell argues that Chase should have named the FDIC when it filed its foreclosure action in July of 2009, but Chase was not obligated to anticipate Nell's counterclaims, particularly where, as discussed infra, Nell had not yet raised those claims in the FDIC's prerequisite review process. See Halpern v. Rosenbloom, 459 F. Supp. 1346, 1354 (S.D.N.Y. 1978) () In any event, as discussed infra, the FDIC, not Chase, is the holder of WaMu's pre-failure liabilities and the only party who can grant Nell the relief he seeks in the Borrower Claims. Therefore even if the FDIC were arguendo slow to intervene, its appearance to defend those claims in the absence of intervening action would not prejudice Nell.
For an interest to be cognizable by Rule 24(a)(2), "it must be direct, substantial, and legally protectable." Bridgeport Guardians v. Delmonte, 602 F.3d 469, 473 (2d Cir. 2010) (citation omitted). An owner of property underlying an action has a direct interest in the actionfor Rule 24(a) purposes. See Long Island Trucking, 219 F.R.D. at 56 (citing Brennan v. N.Y.C. Bd. of Educ., 260 F.3d 123, 130 (2d Cir. 2001)).
The FDIC asserts that it holds all borrower liabilities for the Mortgage. Nell counters that the FDIC and Chase have not proven the purchase of his specific Mortgage. (See Opp. Mem. at 2.) But on its face, the P & A Agreement establishes the interests of Chase and the FDIC in all assets of WaMu, including Nell's Mortgage. (See Landis Decl. Ex. A (Doc. No. 21-4) at 13.) Moreover, the FDIC has provided a record copy of Nell's Mortgage, and a declaration by a Chase Mortgage Officer under penalty of perjury...
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