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Scarlott v. Ocwen Loan Servicing, LLC

United States District Court, Fifth Circuit

January 10, 2014

APRIL SCARLOTT, Plaintiff,
v.
OCWEN LOAN SERVICING, LLC, et al., Defendants.

MEMORANDUM AND ORDER

NANCY F. ATLAS, Judge.

This foreclosure case is before the Court on Plaintiff April Scarlott's ("Scarlott" or "Plaintiff") Motion for Remand to State Court [Doc. # 8]. Also before the Court is the Motion to Dismiss [Doc. # 14] of Defendant AVT Title Services, LLC ("AVT"). These motions are ripe for consideration.[1] Having considered the parties' briefing and the applicable legal authorities, the Court denies Scarlott's Motion to Remand and grants AVT's Motion to Dismiss.

I. BACKGROUND

In 1999, Scarlott purchased a home located at 4738 Cavern Dr., Friendswood, Texas, 77546 (the "Property"). Plaintiff's Original Petition and Application for Temporary Restraining Order and Temporary Injunction [Doc. # 1-2] ("Complaint"), ¶¶ 9-10. Defendant AVT was Plaintiff's title insurer on the Property. Motion to Remand [Doc. # 8], ¶ 8.[2] Fourteen years later, on June 1, 2013, Scarlott received a notice of acceleration and notice of sale regarding the Property. Id. , ¶ 14.

Scarlott filed this lawsuit in the 11th Judicial District Court of Harris County, Texas, on August 30, 2013, alleging that Defendants Ocwen Loan Servicing, LLC ("Ocwen"), Deutsche Bank National Trust Company, as Trustee, in trust for registered holders of ABFC 2005-AQ1 Trust, Asset-Backed Certificates, Series 2005-AQ1 ("Deutsche Bank"), and AVT improperly initiated the 2013 foreclosure proceedings on the Property. Among other things, Scarlott asserts claims of defective notice regarding the foreclosure, trespass to try title, suit to quiet title, fraud, and breach of fiduciary duty, all apparently arising from assignments of Scarlott's mortgage on the Property and the attempted foreclosure in 2013. See id. , ¶¶ 34-76.

On September 18, 2013, Defendants Ocwen and Deutsche Bank[3] timely removed this case to federal court, alleging federal subject matter jurisdiction on the basis of federal question jurisdiction, pursuant to 28 U.S.C. § 1331, and diversity of citizenship, pursuant to 28 U.S.C. § 1332. Defendant AVT filed a notice of consent to removal on November 7, 2013. See Doc. # 10. Ocwen and Deutsche Bank argue that non-diverse Defendant AVT has been improperly joined as a party and, as a result, should not be considered for diversity of citizenship purposes. Scarlott timely filed her Motion to Remand on October 18, 2013.

II. LEGAL STANDARD

A. Motion to Remand

"Federal courts are courts of limited jurisdiction.'" Rasul v. Bush , 542 U.S. 466, 489 (2004) (quoting Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377 (1994)); McKee v. Kansas City S. Ry. Co. , 358 F.3d 329, 337 (5th Cir. 2004); Howery v. Allstate Ins. Co. , 243 F.3d 912, 916 (5th Cir. 2001). "They possess only that power authorized by Constitution and statute, which is not to be expanded by judicial decree.'" Rasul , 542 U.S. at 489 (quoting Kokkonen , 511 U.S. at 377 (citations omitted)). The court "must presume that a suit lies outside this limited jurisdiction, and the burden of establishing federal jurisdiction rests on the party seeking the federal forum." Howery , 243 F.3d at 916 (citing Kokkonen , 511 U.S. at 377); see also Boone v. Citigroup, Inc. , 416 F.3d 382, 388 (5th Cir. 2005).

A non-diverse defendant may be found to be improperly joined if either there is "actual fraud in the plaintiff's pleading of jurisdictional facts" or if the removing defendant demonstrates that the plaintiff cannot establish a cause of action against the non-diverse defendant. See Kling Realty Co., Inc. v. Chevron USA, Inc. , 575 F.3d 510, 513 (5th Cir. 2009) (citing Campbell v. Stone Ins., Inc. , 509 F.3d 665, 669 (5th Cir. 2007)). There is no allegation of actual fraud in Scarlott's pleading of the jurisdictional facts in this case.

The test under the second prong "is whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant, which stated differently means that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant." Id. (quoting Smallwood v. Ill. Cent. R.R. Co. , 385 F.3d 568, 573 (5th Cir. 2004) ( en banc )). The party asserting improper joinder bears a heavy burden of persuasion. Id. at 514. "[A]ny doubt about the propriety of removal must be resolved in favor of remand." Gasch v. Hartford Acc. & Indem. Co. , 491 F.3d 278, 281-82 (5th Cir. 2007).

The district court may resolve the improper joinder issue by conducting "a Rule 12(b)(6)-type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law" by the non-diverse plaintiff against the defendant. Smallwood , 385 F.3d at 573. "Ordinarily, if a plaintiff can survive a Rule 12(b)(6) challenge, there is no improper joinder." Id.

Where the showing that there is no reasonable basis to predict that state law would allow recovery against the non-diverse defendant is on a basis that would necessarily demonstrate the same result for the diverse defendant, "there is no improper joinder; there is only a lawsuit lacking in merit." Id. , 385 F.3d at 574 (citing Chesapeake & Ohio Ry. v. Cockrell , 232 U.S. 146, 153 (1914)). Therefore, if the basis for finding that there is no reasonable basis for Plaintiff to recover against the non-diverse defendant is equally dispositive of the claim against all defendants, ...


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