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Leonard v. CitiBank NA

United States District Court, N.D. Texas, Dallas Division

July 22, 2019

Leslie L. Leonard, Plaintiff,
v.
CitiBank NA, as trustee, in trust for Registered Holders of WaMu Asset-Backed Certificates WaMu Series 2007-HE3 Trust, Defendant.

          FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

          RENEE HARRIS TOLIVER UNITED STATES DISTRICT JUDGE.

         Pursuant to 28 U.S.C. § 636(b) and Special Order 3, this case has been referred to the undersigned United States magistrate judge for pretrial management. Pending before the Court is Plaintiff's First Motion to Remand to State Court, Doc. 8. For the reasons that follow, the motion should be GRANTED.

         I. Background

         This case originated in 193rd Judicial District Court of Dallas County. Doc. 1-4 at 2. In his Original Petition, filed in January 2019, Plaintiff asserts a variety of claims against “Citibank, NA., as Trustee, in Trust for Registered Holders of Wamu Asset-Backed Certificates Wamu Series 2007-He3 Trust” (“Defendant” or “Citibank”). Doc. 1-4 at 2, 4. In February 2019, on the basis of diversity jurisdiction, Defendant removed the case to this Court. Doc. 1 at 1, 3.[1] Plaintiff now moves for remand, arguing that (1) the Court lacks diversity jurisdiction, (2) alternatively, the Court should permit discovery on jurisdictional facts, (3) Defendant waived federal jurisdiction, and (4) the Court should abstain from hearing this case. Doc. 8 at 7-11. Third-Party Defendant Jane F. Leonard has adopted Plaintiff's instant motion. Doc. 13. Because the Court finds Plaintiff's first argument dispositive, it need not address Plaintiff's remaining arguments.

         II. Applicable Law and Analysis

         Plaintiff moves for remand because Defendant asserts the citizenship of CitiBank, the Trustee of the He3 Trust (the “Trust”) without demonstrating that CitiBank is a “real party in interest” in this case. Doc. 8 at 9. Since CitiBank is not a real party in interest, Plaintiff continues, its citizenship cannot support diversity jurisdiction. Doc. 8 at 8-10. Defendant responds that the Pooling and Servicing Agreement (“PSA”) for the Trust “makes clear that CitiBank is the real party to the controversy” and that, thus, CitiBank's citizenship properly supports the Court's diversity jurisdiction over this case. Doc. 17 at 11.

         A party may remove an action from state to federal court if the federal court possesses subject matter jurisdiction over the action. 28 U.S.C. § 1441(a). Federal courts have subject matter jurisdiction over all civil actions where the matter in controversy exceeds $75, 000 and the parties are completely diverse. 28 U.S.C. § 1332. Diversity of citizenship exists between the parties if each plaintiff has a different citizenship from each defendant. Getty Oil Corp. v. Ins. Co. of North America, 841 F.2d 1254, 1258 (5th Cir. 1988).

         In deciding whether it has federal jurisdiction, the Court focuses on the plaintiff's pleadings “as they existed at the time of removal.” See Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). But the Court “may be required to survey the entire record . . . and base its ruling on the complaint, on undisputed facts, and on its resolution of disputed facts.” Aquafaith Shipping, Ltd. v. Jarrillas, 963 F.2d 806, 808 (5th Cir. 1992). Any “ambiguities are construed against removal, ” and the removing party “bears the burden of showing that federal jurisdiction exists.” Manguno, 276 F.3d at 723.

         “[W]hen a trustee files a lawsuit or is sued in [its] own name, [its] citizenship is all that matters for diversity purposes, ” Americold, 136 S.Ct. at 1016, so long as the trustee wields “real and substantial” control over the assets held in its name. Justice v. Wells Fargo Bank Nat'l Ass'n, 674 Fed.Appx. 330, 332 (5th Cir. 2017) (per curium) (citation omitted). Since Plaintiff does not dispute the amount in controversy requirement, Doc. 8 at 8, and CitiBank was sued in its name, Doc. 1-4 at 2, the only question is whether Defendant has shown or can show that it wields real and substantial control over the Trust's assets. That question is answered in the negative.

         Defendant relies on the Justice holding, wherein the United States Court of Appeals for the Fifth Circuit found that the parties' PSA established that Wells Fargo, as trustee, enjoyed sufficient control to render it a real party in the case. Justice, 674 Fed.Appx. at 332. Defendant reasons that the PSA provision in Justice is analogous to section 2.01 of the PSA here. Doc. 17 at 12. However, this case is anopposite. As already stated, the PSA in Justice conveyed control rights to Wells Fargo as trustee. Id. at 332 (citing to the parties' PSA and noting that “Wells Fargo as the trustee holds ‘all the right, title and interest of the Depositor in and to the Trust Fund.'”). Conversely, the PSA here conveys control rights to the Trust. SeeDoc. 18 at 152 (“The Depositor . . . does hereby transfer, assign, set over and otherwise convey to the Trust, without recourse, all the right, title, and interest of the Depositor.”).[2] Moreover, section 11.10 of the PSA in this case-which is not cited by either party-confirms that the parties “intend the conveyance pursuant to Section 2.01 to be a true, absolute and unconditional sale of the Mortgage Loans and assets constituting the Trust Fund by the Depositor to the Trust.” Doc. 18 at 278.

         Defendant also relies on section 11.03 of the PSA, Doc. 17 at 13, but while it addresses the rights of certificate holders, it says nothing about CitiBank's control of the Trust's assets. Doc. 18 at 275. And Defendant's assertion that “[n]umerous courts have found” provisions like section 11.03 “dispositive” is incorrect, because in each of the cases Defendant relies on for that proposition, the court considered provisions similar to 11.03 in addition to some other provision of the PSA that demonstrated the trustee had real and substantial control of a trust's assets.[3]Doc. 17 at 13 n. 2. Defendant, however, has not identified any such provision here.

         Accordingly, the Court concludes that Defendant has not satisfied its burden to show that CitiBank wields “real and substantial” control over the Trust's assets. Justice, 674 Fed.Appx. at 332; Manguno, 276 F.3d at 723 (noting that “ambiguities are construed against removal” and that the removing party “bears the burden of showing that federal jurisdiction exists”). As such, remand is warranted.

         III. Conclusion

         For the foregoing reasons, Plaintiff s First Motion to Remand to State Court, Doc. 8, should be GRANTED, and this case should be remanded to the 193rd Judicial District ...


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