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Gardner v. Specialized Loan Servicing LLC

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

October 7, 2019




         This case has been referred to the undersigned United States magistrate judge for pretrial management under 28 U.S.C. § 636(b) and a standing order of reference from United States District Judge Karen Gren Scholer.

         Defendants Specialized Loan Servicing, LLC and Deutsche Bank National Trust Company removed this action from the 193rd Judicial District Court of Dallas County, Texas, to the United States District Court for the Northern District of Texas, Dallas Division, under 28 U.S.C. §§ 1332(a), 1441, and 1446 and assert that co-defendant Shapiro Schwartz, LLP's citizenship should be disregarded for the purposes of diversity because it is merely a nominal party that has been improperly joined.

         Plaintiffs Patricia Renee Gardner and Reginald Elam were ordered to file a brief explaining whether, as Defendants argue in their Notice of Removal [Dkt. No. 1], Shapiro Schwartz, LLP was improperly joined and, if so, should be dismissed from this lawsuit and whether subject matter jurisdiction otherwise exists based on the complete diversity between any remaining, properly joined parties. Dkt. No. 6. Plaintiffs have not complied with that order.

         The undersigned concludes that, disregarding the citizenship of the improperly joined Defendant, complete diversity of citizenship exists between all properly-joined parties and the amount in controversy in this action exceeds $75, 000 exclusive of costs and interest. Therefore, under 28 U.S.C. § 1332, the Court has subject matter jurisdiction over this action.


         On or about June 10, 2005, Plaintiffs executed a promissory note and deed of trust to secure a lien on their home located at 222 River Birch Trail, Garland, Texas 75040. Dkt. No. 1.1 at 2. New Century Mortgage Corporation of Irvine, California was Plaintiffs' original lender. Id. At some point between 2005 and 2019, Plaintiffs' mortgage was assigned to Deutsche Bank, a national banking association with its principal place of business in the State of California. Dkt. No. 1 at 4. Specialized Loan Servicing, LLC, a loan servicing limited liability company with Australian citizenship, became Plaintiffs' mortgage servicer. Id. at 3. At some point after the assignment of the mortgage, Plaintiffs defaulted on their loan.

         Plaintiffs allege that they never received a written notice of default from their mortgage servicer. Dkt. No. 1.1. at 3. Plaintiffs further allege that, during a phone call in March 2019, a representative for Specialized Loan Servicing, LLC gave them assurances that their loan would be modified and Plaintiffs would be able to avoid a foreclosure sale until “all available options [were] exhausted.” Id. Plaintiffs also allege that the same representative advised them that an assumption of the loan would be possible if a loan modification was not successful. See id. Despite these alleged assurances, on or about April 25, 2019, Plaintiffs received a “Notice of Substitute Trustee's Sale” providing notice that their home would be publicly sold in foreclosure proceedings. Id. Shapiro Schwartz, LLP, a law firm based out of Houston, Texas, is the substitute trustee appointed to carry out the foreclosure and related proceedings. The foreclosure sale was scheduled for June 4, 2019. See id.

         On May 10, 2019, Plaintiffs filed their original petition in the 193rd Judicial District Court of Dallas County, Texas, styled Patricia Renee Gardner and Reginald Elam v. Specialized Loan Servicing LLC and Deutsche Bank National Trust Company as Trustee for HIS Asset Corporation Trust 2006-HE1, Mortgage Pass-Through Certificates, Series 2006-HE1, and Shapiro Schwartz, LLP, Substitute Trustee(s), Cause No. DC-19-06695. Plaintiffs' petition asserts state law causes of action for breach of contract, promissory estoppel, and breach of fiduciary duty based on the alleged wrongful foreclosure and sale of their home. See Dkt. No. 1.1 at 3-5. Plaintiffs also claim that Defendants did not comply with Texas State Property Code § 51.002(d), which requires a mortgage servicer to provide a written notice of default and at least 20 days to cure the default before moving forward with foreclosure proceedings. See Id. at 3.

         Specialized Loan Servicing, LLC's registered agent was served with a citation and a copy of the original petition on May 17, 2019. See Dkt. No. 1.3 at 2. Service was perfected on Defendant Deutsche Bank by delivering a copy of the petition and the citation to the office of the Secretary of State on May 23, 2019. See Dkt. 1.4 at 2. Defendant Shapiro Schwartz, LLP alleges that it was not properly served. See Dkt. No. 1. Neither the citation nor the return receipt for Shapiro Schwartz, LLP is addressed to either an authorized agent for Shapiro Schwartz, LLP or the Secretary of State. See Dkt. No. 1.5. at 2. The Officer's Return for the citation shows that the document was delivered to Shapiro Schwartz, LLP, on May 19, 2019, but the signature on the return receipt is illegible. See id.

         On June 11, 2019 Defendants removed this case to federal court based solely on diversity of citizenship under 28 U.S.C. § 1332(a). See Dkt. No. 1. They contend that complete diversity exists because Plaintiffs are citizens of Texas, Specialized Loan Servicing, LLC is a citizen of Australia, Deutsche Bank is a citizen of California, and Shapiro Schwartz, LLP “is a citizen of the State of Texas whose citizenship should be disregarded for purposes of determining diversity jurisdiction” because it is improperly joined in this action. Id. at 4. Defendants also claim that the amount in controversy requirement for diversity jurisdiction is satisfied because the value of the property that is the object of litigation exceeds $75, 000. See Dkt. No. 1 at 6-7.

         Defendants argue that Shapiro Schwartz, LLP is improperly joined because Plaintiffs have no possibility of recovery against it, since it is merely the substitute trustee assigned to carry out the foreclosure proceedings. More specifically, Defendants contend that Plaintiffs named “Shapiro Schwartz, LLP [in this action] for the sole purpose of avoiding the jurisdiction of the federal district court” and that Plaintiffs have failed to plead any cause of action or wrongdoing by the firm as substitute trustee. Id. at 4-5. Defendants also argue that Plaintiffs have failed to properly effectuate service of process on Shapiro Schwartz, LLP. See Id. at 5.

         Legal Standards

         I. Subject Matter Jurisdiction Over Actions Removed from State Court

         Federal courts have an independent duty to examine their own subject matter jurisdiction. See Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583-84 (1999); McDonal v. Abbott Labs., 408 F.3d 177, 182 n.5 (5th Cir. 2005) (“[A]ny federal court may raise subject matter jurisdiction sua sponte.”). Where subject matter jurisdiction is based on diversity, the “presence in the action of a single plaintiff from the same State as a single defendant deprives the district court of original diversity jurisdiction over the entire action.” Intl. Energy Ventures Mgmt. v. United Energy Grp. Ltd., 818 F.3d 193, 209 (5th Cir. 2016).

         A defendant may remove an action filed in state court to federal court if the action is one that could have originally been filed in federal court. See 28 U.S.C. § 1441(a). Statutes that authorize removal are meant to be strictly construed, and any doubt as to the propriety of removal should be resolved in favor of remand. See Hood ex rel. Mississippi v. JP Morgan Chase & Co., 737 F.3d 78, 89 (5th Cir. 2013).

         The removing party bears the burden of establishing jurisdiction. See Miller v. Diamond Shamrock Co., 275 F.3d 414, 417 (5th Cir. 2001). A federal court's jurisdiction is limited, and federal courts generally may hear a case of this nature only if it involves a question of federal law or where diversity of citizenship exists between the parties. See 28 U.S.C. §§ 1331, 1332. “As a general rule, absent diversity jurisdiction, a case will not be removable if the complaint does not affirmatively allege a federal claim.” Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6 (2003). “[T]he basis upon which jurisdiction depends must be alleged affirmatively and distinctly and cannot be established argumentatively or by mere inference.” Ill. Cent. Gulf R. Co. v. Pargas, Inc., 706 F.2d 633, 636 (5th Cir. 1983) ...

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