Debbie Thompson v. U.S. Bank, N.A.

• Court: Court of Appeals for the Ninth Circuit
• Decided: November 8, 2021
• Docket: 20-16376
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS NOV 8 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

DEBBIE ALICE THOMPSON, No. 20-16376

Plaintiff-Appellant, D.C. No. 5:20-cv-02107-EJD

v.

U.S. BANK, N.A., as Trustee, successor in MEMORANDUM* interest to Bank of America, National Association, as Trustee as successor by merger to Lasalle Bank, National Association as Trustee for WaMu; et al.,

Defendants-Appellees.

Appeal from the United States District Court for the Northern District of California Edward J. Davila, District Judge, Presiding

Argued and Submitted July 30, 2021 San Francisco, California

Before: McKEOWN and NGUYEN, Circuit Judges, and LAMBERTH,** District Judge.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Royce C. Lamberth, United States District Judge for the District of Columbia, sitting by designation. 1 Debbie Thompson appeals from the district court’s denial of her motion to

remand to state court and dismissal of her claims on the ground of res judicata. We

have jurisdiction under 28 U.S.C. § 1291, and we affirm.

As to diversity jurisdiction, “[t]he district court’s factual findings are

reviewed under the clearly erroneous standard.” Co-Efficient Energy Sys. v. CSL

Indus., Inc., 812 F.2d 556, 557 (9th Cir. 1987) (citing Bruce v. United States, 759

F.2d 755, 758 (9th Cir. 1985)). By contrast, “[t]he ultimate legal conclusion that

the underlying facts are insufficient to establish diversity jurisdiction is subject to

de novo review.” Id. As to preclusion issues, “[w]e review de novo a district

court’s dismissal based on res judicata.” Stewart v. U.S. Bancorp, 297 F.3d 953,

956 (9th Cir. 2002) (citing Cabrera v. City of Huntington Park, 159 F.3d 374, 381

(9th Cir. 1998) (per curiam)).

The district court properly held that it had diversity jurisdiction. As to the

non-diverse defendants, the district court correctly determined that Collen Irby,

California Reconveyance Company, Quality Loan Service Corporation, and

McCarthy & Holthus, LLP have no interest in Thompson’s property and thus are

merely “nominal.” See SEC v. Colello, 139 F.3d 674, 676 (9th Cir. 1998). Because

they are nominal, the district court properly disregarded their citizenship in the

jurisdictional analysis. See Prudential Real Estate Affiliates, Inc. v. PPR Realty,

Inc., 204 F.3d 867, 873 (9th Cir. 2000). Further, the relevant defendant— U.S.

2 Bank, N.A. (“U.S. Bank”)—is diverse. Though the district court failed to grapple

with this point, U.S. Bank is the real party in interest to this litigation, rather than

the WaMu Mortgage Pass-Through Certificates Series 2006-AR9 Trust. See

Demarest v. HSBC Bank USA, N.A., 920 F.3d 1223, 1226–31 (9th Cir. 2019)

(holding that the trustee of a real estate investment trust was the real party in

interest for diversity purposes); see also In re Leavitt, 171 F.3d 1219, 1223 (9th

Cir. 1999) (“The appellate court may affirm the lower court on any ground fairly

supported by the record.”). And U.S. Bank is a citizen of Ohio. See Wachovia Bank

v. Schmidt, 546 U.S. 303, 307 (2006). So as between the relevant parties, there was

complete diversity, since Thompson is a citizen of California.

The district court also properly determined that the amount-in-controversy

requirement was satisfied. In an action in equity, the “amount in controversy” may

be established by examining “the value of the object of the litigation.” Hunt v.

Wash. State Apple Advert. Comm’n, 432 U.S. 333, 347 (1977); accord Chapman v.

Deutsche Bank Nat’l Tr. Co., 651 F.3d 1039, 1045 n.2 (9th Cir. 2011) (per

curiam). Here, the object of the litigation is Thompson’s home. Because

Thompson’s home has been valued at well over $2 million, the district court

correctly concluded that the amount-in-controversy requirement was satisfied. The

district court thus properly determined, after removal, that it had jurisdiction on the

basis of diversity.

3 Thompson’s argument that the district court should have somehow abstained

from exercising removal jurisdiction on “public policy” grounds is unpersuasive.

The requirements for diversity jurisdiction being satisfied, the district court was

bound to exercise it. Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 404 (1821) (“We

have no more right to decline the exercise of jurisdiction which is given, than to

usurp that which is not given.”); accord Colo. River Water Conservation Dist. v.

United States, 424 U.S. 800, 817 (1976). Thompson’s more law-centric arguments

for remand (such as Burford abstention) fail as well. See Burford v. Sun Oil Co.,

319 U.S. 315, 316–18 (1943). Thompson has not shown that any of the

preconditions for such abstention are present in this case.

Turning to the merits, the district court erred in applying federal-common-

law principles of res judicata. As the Supreme Court explained in Semtek, when a

federal court assesses the preclusive effect of an earlier judgment rendered by

another federal court sitting in diversity, the second court must apply “the law that

would be applied by state courts in the State in which the federal diversity court

s[at].” Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508 (2001); see

also Daewoo Elecs. Am. Inc. v. Opta Corp., 875 F.3d 1241, 1244 (9th Cir. 2017)

(“When it is necessary for a federal district court with diversity jurisdiction to

determine the preclusive effect of a prior decision by a different federal district

court sitting in diversity, the second court must apply preclusion principles

4 according to the law of the initial court’s state.”). Thus, the district court was

bound to apply California preclusion doctrine, rather than general preclusion

principles drawn from federal common law.

That error was harmless, however, because California employs a similar

preclusion regime under its “primary right” doctrine. See Boeken v. Philip Morris

USA, Inc., 230 P.3d 342, 344 (Cal. 2010). Under California law, for each “primary

right” that is violated by “a breach of the corresponding duty,” there is only one

corresponding “cause of action”—one “right to obtain redress for a harm suffered,

regardless of the specific remedy sought or the legal theory (common law or

statutory) advanced.” Id. at 344, 348, 353. So in practical terms, California courts

apply res judicata when a subsequent suit involves “(1) the same cause of action

(2) between the same parties (3) after a final judgment on the merits in the first

suit.” DKN Holdings LLC v. Faerber, 352 P.3d 378, 386 (Cal. 2015) (emphasis

added).

Here, all of those conditions are met. First, Thompson’s 2016 and 2020

lawsuits assert exactly the same cause of action—the right to obtain redress on the

theory that her home is being wrongfully foreclosed on by U.S. Bank, given its

allegedly invalid interest in her property. Second, the suits involve the same

parties, since the parties to the 2016 and 2020 actions are in privity. See id. at 387–

88. U.S. Bank is the real party in interest and was actually involved in both actions;

5 thus, it is obviously “the same party” for preclusion purposes. As to the parties

newly joined in the 2020 action, Thompson has articulated no theory of their

individual wrongdoing other than that they are somehow involved in U.S. Bank’s

allegedly wrongful foreclosure. But U.S. Bank’s allegedly wrongful foreclosure

was precisely the substance of her 2016 action, so U.S. Bank had precisely the

same interest in contesting Thompson’s theory in the earlier suit. In that earlier

suit, then, U.S. Bank served as the new defendants’ “‘virtual representative’ in the

first action.” Id. at 388 (cleaned up). And last, the district court in the 2016 action

issued a “final judgment on the merits,” as California law defines it, when it

dismissed Thompson’s 2016 complaint. In the 2016 action, the district court

specified that its dismissal was “with prejudice and without leave to amend.”

California law is clear that “a dismissal with prejudice is the equivalent of a final

judgment on the merits.” Boeken, 230 P.3d at 345; see Wouldridge v. Burns, 71

Cal. Rptr. 394, 396 (Ct. App. 1968) (“A dismissal with prejudice of an action is a

bar to the bringing of the same cause of action thereafter, and precludes the

plaintiff from litigating that issue again.” (quoting Palmquist v. Palmquist, 27 Cal.

Rptr. 756, 757 (Ct. App. 1963)). Because all the elements of California’s

preclusion test are satisfied, Thompson’s 2020 action is indeed precluded.

Thompson’s other arguments are without merit. And because the court

below both properly assumed jurisdiction and reached the correct holding that

6 Thompson’s suit was precluded, we do not consider appellees’ alternative grounds

for affirmance.

AFFIRMED.