United States District Court, N.D. Texas, Dallas Division
MEMORANDUM OPINION AND ORDER
A. FITZWATER SENIOR JUDGE
action challenging an attempted foreclosure, defendants Ocwen
Loan Servicing, LLC (“Ocwen”) and Wells Fargo
Bank, National Association, As Trustee For Option One
Mortgage Loan Trust 2007-4, Asset-Backed Certificates, Series
2007-4 (“Wells Fargo”) (collectively, “the
Ocwen Defendants”), removed the case to this court
based on diversity jurisdiction, contending that defendant
R.H. Lending, Inc. d/b/a Residential Home Lending
(“R.H. Lending”), whom they assume is a Texas
citizen, was improperly joined. Plaintiff Anthony Hicks
(“Hicks”) did not move to remand. Several months
after the case was removed, the Ocwen Defendants moved for
summary judgment, but the court ordered the parties to brief
the issue of improper joinder before it would consider the
motion. The parties' jurisdictional briefing is now
complete. For the reasons that follow, the court sua
sponte dismisses defendant R.H. Lending on the ground
that it was improperly joined, and grants in part and denies
in part the Ocwen Defendants' motion for summary
January 2007 plaintiff Hicks took out a mortgage loan from
R.H. Lending in the amount of $143, 920. The loan was
secured by a deed of trust against Hicks's property
located on Rawlins Drive in Lancaster, Texas. According to
the Ocwen Defendants' evidence, R.H. Lending assigned the
note and deed of trust to Option One Mortgage Corporation
(“Option One”) that same month. The Ocwen
Defendants' evidence further shows that in 2011 Sand
Canyon Corporation-formerly known as Option One-conveyed the
same note and deed of trust to Wells Fargo. Both assignments
appear to have been duly recorded in the official Dallas
County land records.
has since defaulted on the loan. Ocwen-Hicks's current
loan servicer-sent a notice of default to Hicks on October 5,
2017, informing him that the debt had been accelerated and
the full amount was due no later than November 11, 2017. The
Ocwen Defendants' foreclosure counsel sent a notice of
acceleration of maturity-which included the scheduled date of
the foreclosure sale, March 6, 2018-to Hicks on January 31,
2018. On February 9, 2018 the Ocwen Defendants'
foreclosure counsel sent a notice of substitute trustee sale
to Hicks, again informing him of the March 6, 2018
March 5, 2018-the day before the scheduled foreclosure
sale-Hicks filed the instant lawsuit in Texas county court.
His original petition and application for temporary
restraining order allege that the Dallas County land records
do not reflect any assignment of his mortgage from Option One
to Wells Fargo, that his mortgage note bears no endorsement
or allonge, that the Ocwen Defendants did not send him the
pre-foreclosure notices required by Texas law, that the Ocwen
Defendants failed to credit him for payments he made through
October 2017, and that the Ocwen Defendants failed to respond
to a request for a loan modification. Hicks asserts that the
Ocwen Defendants violated the Texas Debt Collection Practices
Act (“TDCPA”), Tex. Fin. Code Ann. §§
392.001-.404 (West 2016); that they failed to comply with
Tex. Prop. Code Ann. § 51.002 (West 2014); and that they
breached the contractual terms of the note and deed of trust.
Hicks also alleges that, by assigning his mortgage to Option
One, R.H. Lending breached its fiduciary duty to him because
it knew about Option One's “pattern and practice of
. . . disregard of applicable law in the servicing of
mortgage loans.” Pet. ¶ 8. Hicks seeks injunctive
and declaratory relief, compensatory and exemplary damages,
and attorney's fees and costs.
Ocwen Defendants removed this case to this court based on
diversity of citizenship, asserting that the one apparently
non-diverse defendant-R.H. Lending-was improperly joined. The
Ocwen Defendants now move for summary judgment on all claims.
Hicks opposes the motion. At the court's request, the
parties have also briefed the question whether the court has
subject matter jurisdiction.
Fargo and Ocwen contend that R.H. Lending is improperly
joined, and that the court therefore may exercise diversity
jurisdiction over this case. The court agrees.
case to be removed based on diversity jurisdiction,
“all persons on one side of the controversy [must] be
citizens of different states than all persons on the other
side.” Harvey v. Grey Wolf Drilling Co., 542
F.3d 1077, 1079 (5th Cir. 2008) (quoting McLaughlin v.
Miss. Power Co., 376 F.3d 344, 353 (5th Cir. 2004)).
“The jurisdictional facts that support removal must be
judged at the time of the removal.” Gebbia v.
Wal-Mart Stores, Inc., 233 F.3d 880, 883 (5th Cir. 2000)
(citations omitted). Moreover, under 28 U.S.C. §
1441(b), a case cannot be removed based on diversity
jurisdiction if any properly joined defendant is a citizen of
the state in which the action is brought (here, Texas).
doctrine of improper joinder is a narrow exception to the
rule of complete diversity, and it “entitle[s] a
defendant to remove to a federal forum unless an in-state
defendant has been ‘properly joined.'”
Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573
(5th Cir. 2004) (en banc); see also Meritt Buffalo Events
Ctr. LLC v. Cent. Mut. Ins. Co., 2016 WL 931217, at *2
(N.D. Tex. Mar. 11, 2016) (Fitzwater, J.). The doctrine
allows federal courts to defend against attempts to
manipulate their jurisdiction, such as by joining nondiverse
parties solely to deprive federal courts of diversity
jurisdiction. See Smallwood, 385 F.3d at 576.
Because “the effect of removal is to deprive the state
court of an action properly before it, removal raises
significant federalism concerns.” Gasch v.
Hartford Accident & Indem. Co., 491 F.3d
278, 281 (5th Cir. 2007) (quoting Carpenter v. Wichita
Falls Indep. Sch. Dist., 44 F.3d 362, 365-66 (5th Cir.
1995)). Therefore, the removal statute is strictly construed,
with “any doubt about the propriety of removal [being]
resolved in favor of remand.” Id. at 281-82.
In determining whether a party was improperly joined, the
court “resolve[s] all contested factual issues and
ambiguities of state law in favor of the plaintiff.”
Id. at 281. The party seeking removal bears a heavy
burden to prove improper joinder. Smallwood, 385
F.3d at 574.
joinder is established by showing that there was either
actual fraud in the pleading of jurisdictional facts or that
the plaintiff is unable to establish a cause of action
against the nondiverse defendant in state court. Parsons
v. Baylor Health Care Sys., 2012 WL 5844188, at *2 (N.D.
Tex. Nov. 19, 2012) (Fitzwater, C.J.) (citing
Smallwood, 385 F.3d at 573). Under the second
alternative-the one at issue in this case-the test for
improper joinder 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.”
Smallwood, 385 F.3d at 573; see also Travis v.
Irby, 326 F.3d 644, 648 (5th Cir. 2003) (explaining that
terms “no possibility” of recovery and
“reasonable basis” for recovery have essentially
identical meaning, and holding that pleadings must show more
than “any mere theoretical possibility of
recovery”). To assess “whether a plaintiff has a
reasonable basis of recovery under state law, ”
[t]he court may conduct a [Fed. R. Civ. P.] 12(b)(6)-type
analysis, looking initially at the allegations of the
complaint to determine whether the complaint states a claim
under state law against the in-state defendant. Ordinarily,
if a plaintiff can survive a Rule 12(b)(6) challenge, there
is no improper joinder. That said, there are cases, hopefully
few in number, in which a plaintiff has stated a claim, but
has misstated or omitted discrete facts that would determine
the propriety of joinder. In such cases, the district court
may, in its discretion, pierce the pleadings and conduct a
Smallwood, 385 F.3d at 573 (footnotes omitted).
analysis does not end with the conclusion that there is no
possibility of recovery against the non-diverse defendant.
“When the only proffered justification for improper
joinder is that there is no reasonable basis for predicting
recovery against the in-state defendant, and that showing is
equally dispositive of all defendants rather than to the
in-state defendants alone, ” the removing party has
failed to show improper joinder. Id. at 575. This
principle is sometimes called the “common defense
rule.” See 14C Charles Alan Wright &
Arthur R. Miller, Federal Practice & Procedure
§ 3723.1, at 362-63 (4th ed. 2018). Under the common
defense rule, the court must remand the case “[i]f, but
only if, the showing which forecloses
[plaintiff's] claims against the non-diverse defendants
necessarily and equally compels foreclosure
of all their claims against all the diverse
defendants.” Boone v. Citigroup, Inc., 416
F.3d 382, 391 (5th Cir. 2005).
deciding whether a defendant has been improperly joined, a
federal district court must apply the federal pleading
standard. See Int'l Energy Ventures Mgmt., L.L.C. v.
United Energy Grp. Ltd., 818 F.3d 193, 207-08 (5th Cir.
2016) (on rehearing). This standard requires the plaintiff to
plead enough facts “to state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). “A claim has
facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
“The plausibility standard is not akin to a
‘probability requirement,' but it asks for more
than a sheer possibility that a defendant has acted
unlawfully.” Id.; see also Twombly,
550 U.S. at 555 (“Factual allegations must be enough to
raise a right to relief above the speculative
level[.]”). “[W]here the well-pleaded facts do
not permit the court to infer more than the mere possibility
of misconduct, the complaint has alleged-but it has not
‘shown'-‘that the pleader is entitled to
relief.'” Iqbal, 566 U.S. at 679
(alteration omitted) (quoting Rule 8(a)(2)). Furthermore,
under Rule 8(a)(2), a pleading must contain “a short
and plain statement of the claim showing that the pleader is
entitled to relief.” Although “the pleading
standard Rule 8 announces does not require ‘detailed
factual allegations, '” it demands more than
“labels and conclusions.” Iqbal, 566
U.S. at 678 (quoting Twombly, 550 U.S. at 555). And
“a formulaic recitation of the elements of a cause of
action will not do.” Id. (quoting
Twombly, 550 U.S. at 555).
the controlling standard, the Ocwen Defendants have met their
heavy burden of proving that R.H. Lending has been improperly
joined. The only claim that Hicks brings against R.H. Lending
is for breach of fiduciary duty. Hicks's petition
appears, however, to contradict itself as to the nature of
the relationship between Hicks and R.H.
At some points, the petition seems to allege that R.H.
Lending was itself a mortgagee. See, e.g., Pet.
¶ 4 (“Plaintiff executed a Note . . . and a Deed
of Trust . . . for the benefit of RH [Lending] covering the
Property.”). At others, the petition suggests that R.H.
Lending was a mortgage broker, whose task was to secure
financing on Hicks's behalf. See, e.g., Id.
¶ 8 (“As an entity steering the financing of its
newly constructed homes to a mortgage banker, [R.H. Lending]
had a fiduciary duty to bring a mortgage banker in to finance
the transaction . . . on the best possible price and
terms[.]”). Hicks cites authority suggesting that a
mortgage broker owes a fiduciary duty to its client. See
Kelly v. Gaines, 181 S.W.3d 394, 413-15 (Tex. App.
2005), rev'd on other grounds, 235 S.W.3d 179
(Tex. 2007). But this authority is inapposite.
limited, summary assessment of the evidence submitted by the
parties in relation to the Ocwen Defendants' motion for
summary judgment reveals that R.H. Lending was a mortgage
lender, not a mortgage broker. See
Smallwood, 385 F.3d at 573-74 (recognizing district
court's discretion to pierce the pleadings where
plaintiff has omitted or misstated discrete facts that would
determine propriety of joinder). The Ocwen Defendants have
submitted a note and deed of trust executed by Hicks in favor
of R.H. Lending, as lender and mortgagee. The note
and deed of trust are admissible evidence that the court may
consider. See infra § IV. This evidence makes
it clear that R.H. Lending was not Hicks's mortgage
broker, but rather his lender.
R.H. Lending was Hicks's mortgage lender, Hicks's
breach of fiduciary duty claim fails as a matter of law. In
Texas, there generally is no fiduciary relationship between a
mortgagor and mortgagee. See Wakefield v. Bank of Am.,
N.A., 2018 WL 456721, at *5 (Tex. App. 2018, no pet.)
(citing Lovell v. W. Nat'l Life Ins. Co., 754
S.W.2d 298, 303 (Tex. App. 1988, writ denied)). Nor is there
such a relationship between a loan servicer and its client.
Williams v. Fed. Nat'l Mortg. Ass'n, 2012 WL
443986, at *3 (N.D. Tex. Feb. 13, 2012) (Robinson, J.). Texas
courts have found fiduciary relationships between borrowers
and lenders before, but only based on “extraneous facts
and conduct, such as excessive lender control or influence in
the borrower's business activities.”
Wakefield, 2018 WL 456721, at *5 (quoting Bank
One, Tex., N.A. v. Stewart, 967 S.W.2d 419, 442 (Tex.
App. 1998, pet. denied)). Hicks's petition contains
nothing that plausibly alleges that there are special
circumstances that gave rise to such a relationship. The
Ocwen Defendants have therefore met their heavy burden of
proving that Hicks cannot recover from R.H. Lending for
breach of fiduciary duty.
showing is dispositive of Hicks's claim against R.H.
Lending, but not of his claims against the Ocwen Defendants.
R.H. Lending is the only party named in the breach of
fiduciary duty portion of the petition. And R.H. Lending is
not subject to any other claims: all of Hicks's other
claims either explicitly name Wells Fargo and Ocwen as
defendants, or arise from events that took place long after
R.H. Lending assigned the loan. The common defense rule
therefore does not apply. See Smallwood, 385 F.3d at
575. The court concludes that R.H. Lending is improperly
R.H. Lending is improperly joined, it is within the
court's power to dismiss it from the case. See Flagg
v. Stryker Corp., 819 F.3d 132, 136 (5th Cir. 2016) (en
the plaintiff improperly joins a non-diverse defendant, then
the court may disregard the citizenship of that defendant,
dismiss the non-diverse defendant from the case, and exercise
subject matter jurisdiction over the remaining diverse
defendant.”); see also, e.g., Allen v. Lowe's
Home Ctrs., Inc., 2012 WL 1190255, at *1 (W.D. La. Mar.
1, 2012) (recommending, after sua sponte ordering
jurisdictional briefing, that non-diverse defendant be
dismissed as improperly joined), rec. adopted, 2012