Bank of America, N.A., as successor by merger to BAC Home Loans Servicing, LP v. Fidelity National Title Group, Inc.

• Court: District Court, D. Nevada
• Decided: March 28, 2022
• Docket: 2:21-cv-00353
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 * * *

7 BANK OF AMERICA, N.A., AS SUCCESSOR Case No. 2:21-cv-00353-KJD-NJK BY MERGER TO BAC HOME LOANS 8 SERVICING, LP, ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 9 Plaintiff,

10 v.

11 FIDELITY NATIONAL TITLE GROUP, INC.; CHICAGO TITLE INSURANCE COMPANY; 12 CHICAGO TITLE OF NEVADA, INC.; FIDELITY NATIONAL TITLE AGENCY OF 13 NEVADA, INC.; TICOR TITLE OF NEVADA, INC.; DOE INDIVIDUALS I through X; and 14 ROE CORPORATIONS XI through XX, inclusive, 15 Defendants. 16 Before the Court are Plaintiff’s Motion to Remand (ECF #7) and Motion for Attorney 17 Fees (ECF #8). Defendant responded in opposition (ECF #24) to which Plaintiff replied (ECF 18 #25). 19 I. Background 20 On April 23, 2021, the parties stipulated to stay this action pending the appeal of a similar 21 case. (ECF #12). The Ninth Circuit issued its ruling on the appeal on November 5, 2021. Wells 22 Fargo Bank, N.A. v. Fidelity Nat’l Title Ins. Co., No. 19-17332, 2021 WL 5150044 (9th Cir. 23 Nov. 5, 2021). The parties have not requested that the stay be lifted but have filed their response 24 and reply to the instant motion after the Ninth Circuit’s decision. As such, the Court lifts the stay 25 to rule on the motion. Dependable Highway Exp., Inc. v. Navigators Ins. Co., 498 F.3d 1059, 26 1066 (9th Cir. 2007) (“[A] district court possesses the inherent power to control its docket and 27 promote efficient use of judicial resources.”). 28 1 This is a breach of contract and insurance bad faith claim. (ECF #7, at 2). Plaintiff Bank 2 of America, N.A. as successor by merger to BAC Home Loans Servicing, LP (“BANA”) filed 3 the action in the Eighth Judicial District Court of Nevada on March 1, 2021. (ECF #1-1, at 59). 4 That same day, Defendant Chicago Title Insurance Company (“Chicago Title”) removed the 5 action to federal court. (ECF #1, at 5). Chicago Title removed the action based on diversity 6 jurisdiction. Id. at 2. Chicago Title is a Florida corporation with its principal place of business in 7 Florida; Fidelity National Title Group (“Fidelity”) is alleged to be a Delaware corporation with 8 its principal place of business in Florida; Chicago Title of Nevada (“Chicago Nevada”), Fidelity 9 National Title Agency of Nevada (“Fidelity Nevada”), and Ticor Title of Nevada (“Ticor 10 Nevada”) are all Nevada corporations with their principal place of business in Nevada. Id. 11 BANA is believed to have its principal place of business in North Carolina. Id. at 3. 12 BANA is the beneficiary of several deeds of trust encumbering real property throughout 13 Nevada. (ECF #7, at 3). Each of the properties was foreclosed on by the homeowners’ 14 association (“HOA”) and sold to a third party. Id. BANA alleges that it, or its predecessor, 15 entered into contractual relationships with Chicago Title and either Chicago Nevada, Fidelity 16 Nevada, or Ticor Nevada to insure the Deed of Trust in superior position to competing liens, 17 including the HOA’s liens. Id. BANA then submitted claims to Chicago Title under the 18 insurance policy, but the claims were denied. Id. at 4. This led to a multitude of lawsuits being 19 filed by both banks and buyers of property at the HOA foreclosure sales. Id. Now, BANA seeks 20 to recover its remaining losses and other damages. Id. 21 There are many similar actions currently being litigated in Nevada and this issue of snap 22 removal has become a common question. To date, six judges in the District of Nevada have ruled 23 on the issue.1 Five, including this Court, have found that snap removal is improper and remanded

24 1 See Deutsche Bank Nat’l Tr. Co. as Tr. for Am. Home Mortg. Inv. Tr. 2007-1 v. Old Republic Title Ins. 25 Grp., Inc., 532 F.Supp.3d 1004, 1010–11 n.3 (D. Nev. 2021); U.S. Bank Tr. Nat’l Ass’n v. Fidelity Nat’l Title Grp., Inc., No 2:20-cv-02068-JCM-VCF, 2021 WL 223384 (D. Nev. Jan. 22, 2021); HSBC Bank USA, Nat’l Ass’n as Tr. 26 for Certificateholders of ACE Secs. Corp. Home Equity Loan Tr., Series 2007-MW1, Asset-Backed Pass-through Certificates v. Fidelity Nat’l Title Grp., Inc., 508 F.Supp.3d 781 (D. Nev. 2020); Wells Fargo Bank, N.A. as Tr. of 27 Holders of Harborview Mortg. Loan Tr. Mort. Loan Pass-through Certificates, Series 2006-12 v. Fidelity Nat’l Title Grp., Inc., No. 2:20-cv-01849-APG-NJK, 2020 WL 7388621 (D. Nev. Dec. 15, 2020); Deutsche Bank Nat’l Tr. Co. 28 v. Fidelity Nat’l Title Grp., Inc., No. 2:20-cv-01606-APG-BNW, 2020 WL 7360680 (D. Nev. Dec. 15, 2020); Sparks v. Mamer, No. 2:20-cv-0661-KJD-VCF, 2020 WL 6820796 (D. Nev. Nov. 20, 2020). 1 the cases to state court, while one judge has denied remand, ruling that the snap removal is an 2 acceptable practice according to the plain language of the statute.2 The Court joins the majority 3 of the judges in the District and finds that Defendant’s snap removal prior to service was 4 improper and the forum defendant rule requires a remand to state court. 5 II. Legal Standard 6 Federal courts are courts of limited jurisdiction. See U.S. CONST. art. III, § 2, cl. 1; Owen 7 Equip. & Erection Co. v. Kroger, 437 U.S. 365, 374 (1978). Accordingly, there is a strong 8 presumption against removal. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). A 9 defendant may remove any civil action from state court when the federal district court has 10 original jurisdiction. 28 U.S.C. § 1441(a). A diversity case cannot be removed if “any of the 11 parties in interest properly joined and served as defendants is a citizen of the State in which such 12 action is brought.” Id. at § 1441(b)(2). Courts strictly construe the removal statute against 13 removal, and “[f]ederal jurisdiction must be rejected if there is any doubt as to right of removal 14 in the first instance.” Gaus, 980 F.2d at 566. The removing party bears the burden of establishing 15 federal jurisdiction. California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 838 (9th Cir. 16 2007). 17 Removal based on diversity jurisdiction requires complete diversity, meaning “the 18 citizenship of each plaintiff is diverse from the citizenship of each defendant.” Caterpillar, Inc. v. 19 Lewis, 519 U.S. 61, 68 (1996). However, when “determining whether there is complete 20 diversity, district courts may disregard the citizenship of a non-diverse defendant who has been 21 fraudulently joined.” Grancare, LLC v. Thrower by & through Mills, 889 F.3d 543, 548 (9th Cir. 22 2018) (citing Chesapeake & Ohio Ry. Co. v. Cockrell, 232 U.S. 146, 152 (1914)). 23 III. Analysis 24 Chicago Title argues that the plain language of the removal statute permits removal of 25 this action. Chicago Title focuses on the language of the statute, which states that diversity 26 actions may not be removed “if any of the parties in interest properly joined and served as 27 28 2 See U.S. Bank, N.A. as Tr. to Wachovia Bank Nat’l Assoc. v. Fidelity Nat’l Title Grp., Inc., No. 2:21-cv- 00339-GMN-VCF (D. Nev. Nov. 29, 2021). 1 defendants is a citizen of the State in which such action is brought.” 28 U.S.C. § 1441(b)(2) 2 (emphasis added). This is known as the forum defendant rule. Chicago Title argues that because 3 it removed the action prior to any defendant being served, the forum defendant rule does not 4 apply. Additionally, Chicago Title argues that BANA fraudulently joined twenty-two claim 5 denials to defeat diversity. According to Chicago Title, BANA should have filed separate 6 lawsuits for each of the denied claims. If it had, then eight of the claims would not have a local 7 defendant and would defeat removal. Chicago Title also argues that federal question jurisdiction 8 exists because BANA is not the true party in interest. It argues that BANA does not have 9 standing to sue because BANA is merely the servicer of the loans and Freddie Mac is the 10 insured. With Freddie Mac as the actual party in interest, federal question jurisdiction exists, and 11 the diversity question is irrelevant. BANA disagrees with each argument, arguing that it is an 12 insured, that the joinder rules encourage judicial economy rather than splitting up the twenty-two 13 denied claims into separate lawsuits, and that snap removal promotes gamesmanship by 14 defendants and undermines the purpose of the forum defendant rule. 15 A. The Forum Defendants are Properly Joined 16 Chicago Title argues that BANA fraudulently joined twenty-two separate claims to defeat 17 diversity. It asks the Court to retain jurisdiction of eight of the claims and remand the other 14 18 back to state court. In general, a “party asserting a claim, counterclaim, crossclaim, or third-party 19 claim may join, as independent or alternative claims, as many claims as it has against an 20 opposing party.” FED. R. CIV. P. 18(a). Parties may be permissively joined as defendants if “any 21 right to relief is asserted against them jointly, severally, or in the alternative with respect to or 22 arising out of the same transaction, occurrence, or series of transactions or occurrences; and any 23 question of law or fact common to all defendants will arise in the action.” Id. at 20(a)(2). If the 24 alleged fraudulent claims do not arise out of the same transaction or occurrence and do not 25 contain a common question of law or fact, then they cannot be permissively joined. 26 This action focuses on denied claims that involve multiple properties and multiple 27 defendants. The Ninth Circuit has indicated that such claims can arise out of the same transaction 28 or occurrence and contain a common question of law or fact. In a case involving the purchase of 1 properties in HOA foreclosure sales, it stated that “the purchase of nine Nevada properties in 2 homeowners’ association foreclosure sales by three interconnected real estate development 3 corporations constituted a ‘series of transactions or occurrences.’” Fed. Housing Fin. Agency v. 4 Las Vegas Dev. Grp., LLC, No. 20-15658, 2021 WL 5359593, at *1 (9th Cir. Nov. 17, 2021). 5 The real estate development companies were interconnected, which likely weighed in favor of 6 the court’s finding that they constituted a series of transactions or occurrences. Here, there are 7 multiple claims for multiple properties that were denied. There is only one plaintiff, and all the 8 defendants are interconnected, as each claim was printed on the same form and the defendants 9 are alleged to be controlled by Fidelity. The consistent denial of the claims that were executed on 10 the same forms is sufficient to constitute a series of transactions or occurrences. 11 Fed. Housing also contained a common question of law and fact, including whether a 12 statute preserved the plaintiff’s property interests after the foreclosure sales. Id. Litigating the 13 claims together would answer that question for all the defendants. BANA argues that there are 14 questions of law or fact common to all defendants that would be answered in litigating these 15 claims together. Those questions include whether the forms used by each defendant provided 16 coverage, whether Fidelity instructed the other defendants to represent to potential clients that 17 the forms provided coverage, and whether Fidelity adopted a coverage position that was at odds 18 with its manuals to wrongfully deny all the claims. (ECF #25, at 12). Because the defendants are 19 interconnected, controlled by Fidelity, and used the same forms, the Court agrees that there exist 20 questions common to all defendants. 21 Because the claims satisfy Rule 20(a), they were permissively joined and BANA may 22 litigate the actions collectively. Additionally, the Court sees no reason to retain jurisdiction of 23 eight of the claims. Such a ruling would discourage judicial economy and require multiple 24 lawsuits. Cuprite Mine Partners, LLC v. Anderson, 809 F.3d 548, 552 (9th Cir. 2015) 25 (“Permissive joinder is to be liberally construed to promote the expeditious determination of 26 disputes, and to prevent multiple lawsuits.”). 27 B. Federal Question Jurisdiction Does Not Exist 28 Chicago Title argues that federal question jurisdiction exists because Freddie Mac is the 1 real party in interest and district courts have original jurisdiction over “all civil actions to which 2 [Freddie Mac] is a party.” 12 U.S.C. § 1452(f). According to Chicago Title, BANA is only the 3 servicer of at least four of the loans mentioned in the suit. The owner of the loans is Freddie 4 Mac. As such, Freddie Mac, not BANA, is the real party in interest as to the claims on the four 5 loans that Freddie Mac owns, which gives the court federal question jurisdiction and makes the 6 diversity issue irrelevant. Chicago Title recognizes that the Supreme Court has demonstrated that 7 district courts need not look beyond the four corners of the complaint to assess whether it has 8 jurisdiction. See Lincoln Property Co. v. Roach, 546 U.S. 81, 93 (2005). Instead, Chicago Title 9 argues that BANA does not have standing to bring the claims for the loans owned by Freddie 10 Mac. Chicago Title adds that “BANA’s lack of standing is readily discernible from the facts in 11 the Complaint.” (ECF #24, at 18). The Court disagrees. 12 BANA alleges in its complaint that it is the beneficiary of each Deed of Trust and thus 13 the insured under those policies. Federal question jurisdiction “exists only when a federal 14 question is presented on the face of the plaintiff’s properly pleaded complaint.” Caterpillar, Inc. 15 v. Williams, 482 U.S. 386, 392 (1987). The complaint does not clearly establish federal question 16 jurisdiction. The Court will adhere to the Supreme Court’s guidance and not look beyond the 17 four corners of the complaint to determine whether federal question jurisdiction exists. If 18 Chicago Title wishes to challenge BANA’s standing to bring a cause of action on the loans it 19 alleges BANA merely services, it may do so in a motion to dismiss. 20 C. Chicago Title’s Snap Removal was Improper 21 Chicago Title argues that its snap removal is a valid means of avoiding the forum 22 defendant rule. It urges the Court to follow the appellate courts that have reviewed § 1441(b)(2) 23 and found the statute allows the tactic. BANA argues that allowing snap removal would 24 contravene the statute’s purpose. Both sides acknowledge that the Ninth Circuit has yet to review 25 the specific question. The Courts in this District that have reached the question have almost 26 uniformly held that ‘snap removal’ is improper under 28 U.S.C. § 1441(b)(2). Deutsche Bank 27 Nat’l Tr. Co. as Tr. for Am. Home Mortg. Inv. Tr. 2007-1 v. Old Republic Title Ins. Grp., Inc., 28 1 532 F.Supp.3d 1004, 1010–11 n.3 (D. Nev. 2021) (collecting cases).3 2 When interpreting a statute, the Court looks first to the plain language of the statute to 3 discern congressional intent. See, e.g., Zuress v. Donley, 606 F.3d 1249, 1252–53 (9th Cir. 4 2010). “It is well established that when the statute's language is plain, the sole function of the 5 courts—at least where the disposition required by the text is not absurd—is to enforce it 6 according to its terms.” Lamie v. U.S. Trustee, 540 U.S. 526, 534 (2004) (quoting Hartford 7 Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6, (2000)) (internal quotation 8 marks omitted). The court “may not adopt a plain language interpretation of a statutory provision 9 that directly undercuts the clear purpose of the statute.” Albertson’s, Inc. v. C.I.R, 42 F.3d 537, 10 545 (9th Cir. 1994). 11 Some appellate courts have determined that the “properly joined and served” language in 12 § 1441(b)(2) renders the statue clear and unambiguous, allowing snap removal before any 13 defendant is served. However, not all courts agree. Many judges in the District reason that the 14 word “any” in “any of the parties in interest properly joined and served” necessarily means that 15 the statute assumes one party has been served. 28 U.S.C. § 1441(b)(2) See Wells Fargo Bank, 16 N.A. v. Old Republic Title Ins. Grp., Inc., No. 2:20-cv-00461-JCM-NJK, 2020 WL 5898779, at 17 *2 (D. Nev. Oct. 5, 2020). The fact that reasonable jurists differ on the statute’s language 18 evidences its ambiguity. Whether the language is ambiguous or not, Chicago Title’s 19 interpretation would render the forum defendant rule impotent. 20 The purpose of the removal power is to “protect non-forum litigants from possible state 21 court bias in favor of forum-state litigants.” Gentile v. Biogen Idec, Inc., 934 F.Supp.2d 313, 319 22 (D. Mass. Feb. 21, 2013). Forum defendants are not at such a risk and their presence 23 “presumably mitigates concerns of state-court bias toward the plaintiff.” HSBC Bank, 508 24 F.Supp.3d at 789. The language regarding a defendant who is “properly joined and served” was 25 added to the removal statute in 1948. Gentile, 934 F.Supp.2d at 319. The Gentile court’s review 26 of Supreme Court precedent at that time “suggests the purpose of the ‘properly joined and

27 3 One case disagrees with the other courts in the District and ruled that remand was improper. U.S. Bank, 28 N.A. as Tr. to Wachovia Bank Nat’l Assoc. v. Fidelity Nat’l Title Grp., Inc., No. 2:21-cv-00339-GMN-VCF (D. Nev. Nov. 29, 2021). 1 served’ language was to prevent plaintiffs from defeating removal through improper joinder of a 2 forum defendant,” not to give defendants a loophole to avoid the forum defendant rule. Id. at 3 319–20. Snap removal prior to service does not aid in preventing the defeat of removal through 4 improper joinder. 5 The Court finds that adopting Chicago Title’s interpretation of the statute would 6 “undercut the clear purpose” of the forum defendant rule and encourage defendants to hijack a 7 plaintiff’s choice of forum by racing to remove prior to service. Albertson’s, Inc., 42 F.3d at 545. 8 The Court will not apply the statute in a way that would “eviscerate the purpose of the forum 9 defendant rule.” Mass. Mut. Life Ins. Co. v. Mozilo, 2012 WL 11047336, *2 (C.D. Cal. June 28, 10 2012) (citation omitted). By remanding to state court, the Court “provides some measure of 11 protection for a plaintiff’s choice of forum” while interpreting the statute in favor of remand, as 12 required. HSBC Bank, 508 F.Supp.3d at 789 (quoting Gentile, 934 F.Supp.2d at 319); Gaus, 980 13 F.2d at 566. 14 D. BANA is not Entitled to Attorney’s Fees 15 28 U.S.C. § 1447(c) provides that “[a]n order remanding the case may require payment of 16 just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” 17 The decision to award attorney fees is left to the discretion of the court. Martin v. Franklin 18 Capital Corp., 546 U.S. 132, 139 (2005). “[A]bsent unusual circumstances, courts may award 19 attorney's fees under § 1447(c) only [when] the removing party lacked an objectively reasonable 20 basis for seeking removal.” Martin, 546 U.S. at 136. Therefore, courts in the Ninth Circuit assess 21 the clarity of the relevant law to determine whether there was an objectively reasonable basis for 22 removal. See Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1066 (9th Cir. 2008) (“[T]he test 23 is whether the relevant law clearly foreclosed the defendant's basis of removal.”). 24 BANA argues that Chicago Title has engaged in jurisdictional gamesmanship removing 25 every title insurance case immediately after it is filed. BANA highlights the consensus among 26 the District’s judges that the tactic contorts the meaning and purpose of the removal statue. 27 However, the propriety of snap removal is a contested issue with supporting caselaw that the 28 Ninth Circuit has not ruled on. Because Chicago Title had an objectively reasonable basis for removal, the Court declines to award BANA the fees and costs it incurred because of the 2} removal. 3 ITV. Conclusion 4 Accordingly, IT IS HEREBY ORDERED that Plaintiff's Motion for Remand (ECF #7) is 5 | GRANTED. 6 IT IS FURTHER ORDERED that Plaintiff's Motion for Attorney Fees (ECF #8) 1s 7| DENIED. 8 | Dated this 28th day of March, 2022. 9 el Kent J. Dawson 11 United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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