U.S. Bank Nat'Lass'N v. Cheryle A. Collins-Fuller T.

• Decision Date: 09 March 2015
• Docket Number: 12 C 5057
• Parties: U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE RELATING TO J.P. MORGAN MORTGAGE ACQUISITION CORP. 2005-FRE1 ASSET BACKED PASS-THROUGH CERTIFICATES, SERIES 2005-FRE1, Plaintiff, v. CHERYLE A. COLLINS-FULLER T., HEYWOOD FULLER T., KEYBANK NATIONAL ASSOCIATION, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. AS NOMINEE FOR FREMONT INVESTMENT AND LOAN, Defendants.
• Court: U.S. District Court — Northern District of Illinois

U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE RELATING TO J.P.MORGAN MORTGAGE ACQUISITION CORP. 2005-FRE1 ASSET BACKEDPASS-THROUGH CERTIFICATES, SERIES 2005-FRE1, Plaintiff, v. CHERYLE A. COLLINS-FULLER T., HEYWOOD FULLER T., KEYBANKNATIONAL ASSOCIATION, MORTGAGE ELECTRONICREGISTRATION SYSTEMS, INC. AS NOMINEE FOR FREMONTINVESTMENT AND LOAN, Defendants.

12 C 5057

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

March 9, 2015

Hon. Marvin E. Aspen

MEMORANDUM OPINION AND ORDER

MARVIN E. ASPEN, District Court Judge:

Presently before us is a motion for voluntary dismissal filed by Plaintiff U.S. Bank National Association pursuant to Federal Rule of Civil Procedure 41(a)(2). (Dkt. No. 149.) As set forth below, we lack subject matter jurisdiction and thus dismiss Plaintiff's complaint. We also order Defendants to submit an additional brief addressing their failure to serve process on non-party Litton Loan Servicing, on or by March 25, 2015.

BACKGROUND

Plaintiff filed this foreclosure action on June 26, 2012, claiming diversity jurisdiction. (Compl. ¶¶ 3-5.) Plaintiff alleged that it is a national association chartered under the laws of Ohio, with its principal place of business located there. (Id. ¶ 3.) Plaintiff stated that thehomeowners/debtors, Cheryle Collins-Fuller T. and Heywood Fuller T. ("Defendants"), are citizens of Illinois. (Id. ¶ 4.) Plaintiff further alleged that defendant KeyBank National Association ("Keybank") is a North Carolina citizen, while defendant Mortgage Electronic Registration Systems, Inc. ("MERS") is a California citizen.¹ (Id. ¶ 5.) Plaintiffs also asserted that the amount in controversy exceeds $75,000, thus fulfilling the requirements for diversity jurisdiction. (Id. ¶¶ 2, 10(j).) See 28 U.S.C. § 1332(a).

Plaintiff has alleged that it "is the legal holder of the indebtedness and the owner of the mortgage given as security" by Defendants and, as such, is entitled to foreclose on the residential property at issue because of their default. (Id. ¶ 10(n), (p), (s).) Plaintiff also alleged that Keybank has been joined as a party because it holds a junior lien on the property pursuant to a separate mortgage entered into between Defendants and Keybank. (Id. ¶ 10(l).)

According to Plaintiff, recent investigation revealed that Keybank is not a citizen of North Carolina as previously pled. Plaintiff contends that Keybank is, in fact, a fellow citizen of Ohio. In the present motion, Plaintiff seeks to voluntarily dismiss this action under Rule 41(a)(2) due to the lack of diversity jurisdiction.

Defendants oppose the motion on several grounds. Defendants decry Plaintiff's lack of due diligence in failing to investigate Keybank's citizenship at the outset. (Resp. at 1-3.) They argue that Keybank is a dispensable party and should be dismissed under Rule 21, thus reviving diversity of the parties and our jurisdiction over the case. (Id. at 1, 6.) Defendants also contend that they have raised federal questions in their counterclaims and other filings, entitling them to stay here in federal court. (Id. at 1-2, 4-6.)

STANDARD OF REVIEW

Rule 41(a)(2) provides that "an action may be dismissed at the plaintiff's request only by court order, on terms that the court considers proper." Fed. R. Civ. P. 41(a)(2). For cases involving counterclaims, the rule further provides that dismissal may occur "over the defendant's objection only if the counterclaim can remain pending for independent adjudication." Id. Permitting a plaintiff to voluntarily dismiss an action without prejudice, under Rule 41(a)(2), is within our sound discretion. Tolle v. Carroll Touch, Inc., 23 F.3d 174, 177 (7th Cir. 1994). In evaluating such a motion, we consider four factors to ensure that the defendant is not prejudiced: "[t]he defendant's effort and expense of preparation for trial, excessive delay and lack of diligence on the part of the plaintiff in prosecuting the action, insufficient explanation for the need to take a dismissal, and the fact that a motion for summary judgment has been filed by the defendant." Kunz v. DeFelice, 538 F.3d 667, 677-78 (7th Cir. 2008) (quoting Pace v. S. Express Co., 409 F.2d 331, 334 (7th Cir. 1969)). Additionally, we are free to impose such terms and conditions as necessary, including dismissal with prejudice. Ratkovich v. Smith Kline, 951 F.2d 155, 157-58 (7th Cir. 1991); McCall-Bey v. Franzen, 777 F.2d 1178, 1184 (7th Cir. 1985) (noting that a district court's terms and conditions of dismissal are the "quid pro quo of allowing the plaintiff to dismiss his suit").

The particular Rule 41(a)(2) motion before us raises a jurisdictional question. "Jurisdiction is the 'power to declare law,' and without it the federal courts cannot proceed." Hay v. Ind. State Bd. of Tax Comm'rs, 312 F.3d 876, 879 (7th Cir. 2002) (quoting Ruhrgas v. Marathon Oil Co., 526 U.S. 574, 577, 583, 119 S. Ct. 1563, 1567 (1999)); see also Wernsing v. Thompson, 423 F.3d 732, 743 (7th Cir. 2005) (further explaining that we have an independent and unwavering duty to confirm the existence of subject matter jurisdiction). Thus, while wekeep in mind the guiding principles about voluntary dismissals, resolution of the motion ultimately turns on whether or not we have jurisdiction.

ANALYSIS

We begin with the diversity jurisdiction question posed by Plaintiff, which is quite straightforward. Defendants raise additional arguments as to why we might continue to have jurisdiction over this case, however, and we shall address each issue briefly.

A. Diversity Jurisdiction

Federal courts have original jurisdiction over a case if: (1) the amount in controversy exceeds $75,000; and (2) all parties are of completely diverse citizenship. See 28 U.S.C. § 1332(a). Complete diversity of citizenship exists when "no plaintiff is a citizen of the same state as any defendant." LM Ins. Corp. v. Spaulding Enters. Inc., 533 F.3d 542, 547 (7th Cir. 2008); see also Krueger v. Cartwright, 996 F.2d 928, 931 (7th Cir. 1993). According to the complaint, both Plaintiff and Keybank are national banking associations. (Compl. ¶¶ 3, 5.)

For jurisdictional purposes, the citizenship of a national banking association is the state in which the bank has its main office, as indicated by its articles of association. Wachovia Bank, N.A. v. Schmidt, 645 U.S. 303, 318, 126 S. Ct. 941, 952 (2006); Hicklin Eng'g v. Bartell, 439 F.3d 346, 348 (7th Cir. 2006); Hill v. Wells Fargo Bank, N.A., 946 F. Supp. 2d 817, 821 (N.D. Ill. 2013); see, e.g., Hertz Corp. v. Friend, 559 U.S. 77, 93-95, 130 S. Ct. 1181, 1192-94 (2010) (holding, with respect to corporations generally, that the principal place of business of a corporation for diversity purposes, or its "nerve center," is "usually its main headquarters, a single place"). In its motion, Plaintiff acknowledges that the prior allegation of diversity of citizenship between the parties was erroneous. (Mot. ¶ 4; Reply at 1-2.) Plaintiff clarifies that Keybank is not a citizen of North Carolina but rather maintains its headquarters in Ohio.(Mot. ¶ 4 & Ex. 2 (FDIC printout showing the address of Keybank's headquarters in Cleveland, Ohio); Reply at 1-2.) Defendants do not dispute the fact that Keybank is headquartered in and a citizen of Ohio. Nor do Defendants dispute the fact that Plaintiff is a citizen of Ohio. Accordingly, we find that diversity jurisdiction is lacking because both Plaintiff and defendant Keybank are citizens of Ohio.

Defendants are understandably frustrated by Plaintiff's mistake and this unwelcome development. They argue that Plaintiff should not be rewarded for its lack of due diligence prior to filing suit in 2012.² (Resp. at 1-4.) Our jurisdiction, however, does not depend on the extent of a party's pre-filing diligence or other such circumstances. See, e.g., U.S. v. Tittjung, 235 F.3d 330, 335 (7th Cir. 2000) ("No court may decide a case without subject matter jurisdiction, and neither the parties nor their lawyers may stipulate to jurisdiction or waive arguments that the court lacks jurisdiction."). That is, either we have subject matter jurisdiction under § 1332 or we do not. On the record before us, it is clear that we do not.

B. Propriety of Severance of Keybank as a Dispensable Party

In their opposition, Defendants contend that we should dismiss the non-diverse party, Keybank, as dispensable under Rule 21. Under Rule 21, we "may at any time, on just terms, add or drop a party" or "sever any claim against a party." Fed. R. Civ. P. 21 (further providing that we should not dismiss an action due to misjoinder). Defendants correctly state that we can "use Rule 21 to dismiss a dispensable, non-diverse party in order to save diversity jurisdiction." Dexia Credit Local v. Rogan, 60 F. Supp. 2d 1180, 1184 (N.D. Ill. 2009); see Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 832-33, 109 S. Ct. 2218, 2223 (1989); Scottsdale Ins. Co. v. Subscriptions Plus, Inc., 195 F.R.D. 640, 643-46 (W.D. Wis. 2000). We may do so only if aparty is unnecessary and/or dispensable as contemplated by Rule 19.³ Dexia Credit Local, 60 F. Supp. 2d at 1184-85; see Ratajczak v. Beazley Solutions Ltd., 13 C 45, 2014 WL 3057158, at *1-2 (E.D. Wis. July 7, 2014); Scottsdale Ins. Co., 195 F.R.D. at 643-44; see also 7 Wright & Miller, Fed. Prac. & Proc. § 1685 (3d ed. 2013) ("Courts frequently employ Rule 21 to preserve diversity jurisdiction over a case by dropping a nondiverse party if the party's presence in the action is not required under Rule 19.").

Our analysis under Rule 19, which governs required joinder, involves two steps. See, e.g., Davis Cos. v. Emerald Casino, Inc., 268 F.3d 477, 481 (7th Cir. 2001); Thomas v. United States, 189 F.3d 662, 666 (7th Cir. 1999). First, Rule 19(a) asks whether the party joined—here, Keybank—is necessary to the action. Dexia Credit Local, 60 F. Supp. 2d at 1184-85; see Ratajczak, 2014 WL 3057158, at *1-2. Keybank must be retained if "in [Keybank's] absence, the court cannot...