Rouse v. Mortgage
| Decision Date | 13 January 2012 |
| Docket Number | Case No. EDCV 11-00928 DMG (DTBx) |
| Court | U.S. District Court — Central District of California |
| Parties | ROBERT ROUSE, et al., Plaintiffs, v. WACHOVIA MORTGAGE, FSB, et al., Defendants. |
The Court is presented with the issue of whether, for diversity of citizenship purposes, a national banking association is a citizen of the state where its principal place of business is located. For the reasons set forth below, the Court concludes that it is. As complete diversity is therefore lacking and this action no longer raises a federal question, the Court declines to exercise supplemental jurisdiction over Plaintiffs' state law claims. Accordingly, this case is REMANDED to San Bernardino County Superior Court.
On May 16, 2011, Plaintiffs Robert and Victoria Rouse filed this action in San Bernardino County Superior Court against Defendants Wells Fargo Bank, N.A. and its Wachovia Mortgage division (collectively, "Wells Fargo"), Wells Fargo and Company, NDeX West LLC, and Does 1 through 50.1 The original complaint raised 23 causes of action under state and federal law pertaining to Plaintiffs' home loan and deed of trust.
Wells Fargo Bank removed the action to this Court on June 10, 2011 [Doc. # 1], asserting both the existence of a federal question and diversity of citizenship as bases for subject matter jurisdiction. See 28 U.S.C. §§ 1331, 1332(a). On June 17, 2011, Wells Fargo Bank filed a motion to dismiss the complaint [Doc. # 9], in which NDeX West joined [Doc. # 12]. The Court granted the motion to dismiss with leave to amend [Doc. # 16].
On September 20, 2011, Plaintiffs filed the operative first amended complaint, containing solely state law claims [Doc. # 19].2 On October 3, 2011, Wells Fargo moved to dismiss the first amended complaint and strike portions thereof [Doc. ## 20, 22]. NDeX West joined in the motion to dismiss [Doc. # 23].
Because Plaintiffs' operative pleading no longer raises a substantial federal question and it was uncertain whether Wells Fargo is in fact diverse from Plaintiffs, the Court issued an Order to Show Cause ("OSC") why this action should not be remanded to state court [Doc. # 28]. The Court took Defendants' pending motions under submission and set the hearing on the OSC for January 13, 2012 [Doc. ## 36, 38].
It is a "bedrock principle" that federal courts are of limited jurisdiction. Alcala v. Holder, 563 F.3d 1009, 1016 (9th Cir. 2009) (citing Cary v. Curtis, 44 U.S. (3 How.)236, 244, 11 L.Ed. 576 (1845)). Consequently, a district court must remand a case removed from state court "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. § 1447(c). There is a "strong presumption against removal jurisdiction," and courts must reject it "if there is any doubt as to the right of removal in the first instance." Geographic Expeditions, Inc. v. Estate of Lhotka ex rel. Lhotka, 599 F.3d 1102, 1107 (9th Cir. 2010) (quoting Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (per curiam)) (internal quotation marks omitted).
The burden of establishing federal subject matter jurisdiction lies with the party seeking removal. Washington v. Chimei Innolux Corp., 659 F.3d 842, 847 (9th Cir. 2011) (citing Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 686 (9th Cir. 2006)). Nonetheless, district courts have an independent duty to establish subject matter jurisdiction over a removed action regardless of whether a party raises the issue. United Investors Life Ins. Co. v. Waddell & Reed Inc., 360 F.3d 960, 967 (9th Cir. 2004) (citing Feidt v. Owens Corning Fiberglas Corp., 153 F.3d 124, 128 (3d Cir. 1998)); see also Dahl v. Rosenfeld, 316 F.3d 1074, 1076 (9th Cir. 2003) () (citing Lyons v. Alaska Teamsters Employer Serv. Corp., 188 F.3d 1170, 1171 (9th Cir. 1999)).
The Constitution extends the judicial power of federal courts "to Controversies . . . between Citizens of different States." U.S. Const. art. III, § 2. By statute, Congress has bestowed district courts with original and removal jurisdiction over civil actions involving diversity of citizenship. 28 U.S.C. §§ 1332(a)(1), 1441(a). Subject to exceptions not applicable here, "[d]iversity jurisdiction requires complete diversity between the parties—each defendant must be a citizen of a different state from each plaintiff." Diaz v. Davis (In re Digimarc Corp. Derivative Litig.), 549 F.3d 1223, 1234(9th Cir. 2008) (citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 267, 2 L.Ed. 435 (1806)). For natural persons, citizenship is determined by the state of domicile. Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001). When the "citizen" at issue is a business entity, citizenship depends on the nature of the entity. Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006).
In general, the citizenship of an artificial entity depends on the citizenship of all of the entity's owners or members. Carden v. Arkoma Assocs., 494 U.S. 185, 195-96, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990); Johnson, 437 F.3d at 899. The most common exception to the general rule, a state-chartered corporation, derives its citizenship from its state of incorporation and, if different, "the State where it has its principal place of business." 28 U.S.C. § 1332(c)(1).
For national banks, the relevant statute provides as follows: "All national banking associations shall, for the purposes of . . . actions by or against them, be deemed citizens of the States in which they are respectively located." 28 U.S.C. § 1348. Where a national bank is "located" is an issue that has long bedeviled the courts.
The jurisdictional facts here are not in dispute. Plaintiffs are California citizens because they reside at real property located in this State (1st Am. Compl. ¶ 9) and through this very lawsuit intend to continue residing at that property. See Kanter, 265 F.3d at 857 (). NDeX West, a limited liability company with no owners or members who are California citizens (Notice of Removal, Ex. D ¶ 4), is diverse from Plaintiffs. See Johnson, 437 F.3d at 899 (). According to Wells Fargo, Wells Fargo and Company was fraudulently joined and should be disregarded in the diversity analysis (Notice of Removal at 4-6), which the Court assumes without deciding to be true.
That leaves only Wells Fargo as a potentially non-diverse party. Wells Fargo is a national banking association chartered pursuant to the National Bank Act, 12 U.S.C. § 21 et seq. (Notice of Removal at 3.) Because its articles of association designate Sioux Falls, South Dakota as the location of its main office (id., Ex. C at 177),3 Wells Fargo is a citizen at least of South Dakota. See Wachovia Bank v. Schmidt, 546 U.S. 303, 318, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006).
The question raised by the Court in the OSC is whether Wells Fargo is also a citizen of the state in which it maintains its principal place of business. Wells Fargo's principal place of business is in San Francisco, California.4 See, e.g., Wells Fargo Bank, N.A. v. WMR e-PIN, LLC, 653 F.3d 702, 705 (8th Cir. 2011); DeLeon v. Wells Fargo Bank, N.A., 729 F. Supp. 2d 1119, 1121 (N.D. Cal. 2010) (citations omitted). Thus, if a national bank is a citizen of both the place designated in its articles of association and its principal place of business, then Wells Fargo is not diverse.
In the nineteenth century, the phrase "principal place of business" was frequently used to describe a business entity's main office—either nationally or within a state—as designated in its articles of incorporation or association, see, e.g., Wash. & Idaho R.R. v. Coeur D'Alene Ry. & Navigation Co., 160 U.S. 77, 81, 16 S.Ct. 231, 40 L.Ed. 355 (1895) (); St. Louis, Iron Mountain & S. Ry. v. Commercial Union Ins. Co., 139 U.S. 223, 234, 11 S.Ct. 554, 35 L.Ed. 154 (1891)(discussing Arkansas statute "contemplating that a foreign insurance company would have no principal place of business within the state, but would transact its business in the usual manner through agents at different places"—in contrast to state law "concerning foreign corporations generally, which required a certificate to be filed with the secretary of state, designating an agent upon whom service might be made, and stating the principal place of business of the corporation within the state"), though use of the phrase in its more familiar sense was not unknown, see, e.g., Proprietors of Charles River Bridge v. Proprietors of Warren Bridge, 24 Mass. (7 Pick.) 344, 392 (1829) ().
The phrase gained jurisdictional cachet as a test for corporate citizenship in the Bankruptcy Act of 1898. Act of July 1, 1898, ch. 541, 30 Stat. 544, repealed by Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549. The Bankruptcy Act provided district courts with jurisdiction to "adjudge persons bankrupt who have had their principal place of business, resided, or had their domicile within [the court's] territorial jurisdiction[] for the preceding six months, or the greater portion thereof." Id. § 2. The statute used the phrase "principal place of business" in its "common acceptation," i.e., ...
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