Federal Home Loan Bank of Bost v. Moody's Corporation

821 F.3d 102, 2016 U.S. App. LEXIS 7954, 2016 WL 1732656
CourtCourt of Appeals for the First Circuit
DecidedMay 2, 2016
Docket14-2148P
StatusPublished
Cited by62 cases

This text of 821 F.3d 102 (Federal Home Loan Bank of Bost v. Moody's Corporation) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Federal Home Loan Bank of Bost v. Moody's Corporation, 821 F.3d 102, 2016 U.S. App. LEXIS 7954, 2016 WL 1732656 (1st Cir. 2016).

Opinion

THOMPSON, Circuit Judge.

The allegations in' this case hearken back to the days of the recent financial crisis and the near-cóllapse of the mortgage-bácked securities market. The issues we deal with today, though, are of the technical, legalistic vkriety: we have to figure out' whether the district court erred hi finding that it lacks statutory power to transfer this action to. another federal court in which personal jurisdiction over certain defending parties may be met. Concluding that' the district court does in fact have authority to effectuate such a transfer, we vacate its dismissal order and remand for further proceedings.

WHAT THE CASE IS ABOUT

In April of 2011, appellant Federal Home Loan Bank of Bostón (“Bank”), á federally-chartered entity pursuant to 12 U.S.C. § 1432(a) (more.on this statute later), filed suit against a slew of defendants in Massachusetts state court. These defendants included appellees Moody’s Corporation and Moody’s Investors Service, Inc. (collectively, “Moody’s”). The Bank’s complaint generally alleges that the Bank follows a conservatiye investment philosophy and that it is only able to purchase mortgage-backed securities that have a triple-A rating. So, whenever it bought a mortgage-backed security the Bank made sure that it had received a triple-A rating from a rating agency like Moody’s. Briefly, the Bank alleges .that various rating agencies, including Moody’s, falsely gave out triple-A ratings to mortgage-backed *106 securities they knew were far riskier than indicated by their pristine ratings. Per the Bank, its unwitting purchase of “low-quality, high-risk” securities — all of which have since been downgraded to “junk” status — has caused it to suffer losses on the order of hundreds of millions of dollars.

But none of these allegations matter to us today. The issues we have to contend with, while perhaps not as sexy as fraud claims involving bucketloads of money, are nevertheless of tremendous import to our federal system. What we’re talking about today are both . flavors of jurisdiction— subject-matter and personal. So, on we go.

HOW THE CASE GOT HERE

. Some of- the- defendants (but not Moody’s) removed the .case to the Massachusetts federal district court. In doing so, they relied on the fact that the Bank is federally chartered to invoke the district court’s original jurisdiction. 1 The following day, Moody’s — “appear[ing] specifically for the purpose of removal only and reserving] all defenses as to jurisdiction ... available to it in this action” — filed a Notice of Consent to Removal with the district court.

Moody’s next moved to dismiss on the ground that'the Massachusetts district court lacks personal jurisdiction over it. The details of its legal position are not especially important here. It is enough to note that Moody’s asserted that it is incorporated in Delaware, that its headquarters are located in New York, that it has only limited contacts with Massachusetts, and that the ratings the Bank complatóed about were all prepared by Moody’s analysts in New York and issued from its New York headquarters. Based on all this, Moody’s argued that the Massachusetts district court may not exercise general or specific jurisdiction over it. 2

The district judge disagreed. He concluded that the contacts Moody’s had with Massachusetts were sufficiently extensive to subject it to general jurisdiction in the Commonwealth’s courts^ and that it was reasonable to exercise personal jurisdiction over it in this case. Having made these findings, the district judge denied the mo *107 tion to dismiss. And he denied the motion for reconsideration Moody’s filed, too.

About two months later, the Supreme Court released its opinion in Daimler AG v. Bauman, - U.S. -, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014), a case which addressed the circumstances in which a court may subject a defendant to general personal jurisdiction. Arguing that the‘Supreme Court had just limited the reach of a court’s jurisdiction, Moody’s renewed its motion for reconsideration. The Bank opposed the motion. But as a backup strategy, and relying on 28 U.S.C. § 1631 and 28 U.S.C. § 1406(a), the Bank asked the.district judge — should he conclude that personal jurisdiction is lacking after Daimler AG — to sever its claims against Moody’s from those against the other defendants and transfer them to the Southern District of New York.

For Moody’s, the third,, time around turned out to be the charm: the district judge agreed with its take on Daimler AG and concluded personal jurisdiction was lacking in Massachusetts. Further,' Moody’s won a double victory, with the district judge’ also denying the Bank’s motion to sever and transfer its claims, agáinst Moody’s. In denying this motion, the judge concluded he did not have the power to transfer the claims against Moody’s under either statute the' Bank relied upon. Accordingly, he dismissed the claims against Moody’s for lack of personal jurisdiction, and entered separate and final judgment in favor of Moody’s. 3 The Bank’s timely appeal of the dismissal *108 and of the denial of its motion to sever and transfer followed.

SHOULD WE EVEN BE IN FEDERAL COURT? (SUBJECT MATTER JURISDICTION)

Both the Bank and Moody’s tell us that this action -was properly removed to federal court based on the Bank’s federal corporate charter codified at 12 U.S.C. § 1432(a), The Bank cited Lightfoot v. Cendant Mortgage Corp., 769 F.3d 681, 683-87 (9th Cir.2014), petition for cert. filed, No. 14-1055, -— U.S. -, — S.Ct. -, — L.Ed.2d -, 2015 WL 905913 (U.S. filed Feb. 17, 2015), a case in which the Bank says the Ninth Circuit concluded federal subject matter jurisdiction existed based on Fannie Mae’s “materially identical charter” to the Bank’s own. Mood/s does not challenge' the Bank’s view of Lightfoot. 4

But “[p]arties cannot confer subject matter jurisdiction on either a trial or an appellate court by indolence, oversight, acquiescence, or consent.” United States v. Horn, 29 F.3d 754, 768 (1st Cir.1994). . And we are “powerless to act in the absence of subject matter jurisdiction.” Espinal-Dominguez v. Puerto Rico, 352 F.3d 490, 495 (1st Cir.2003). This court, therefore, has “an unflagging obligation to notice jurisdictional defects and to pursue them on our own initiative.” Harrison v. Granite Bay Care, Inc., 811 F.3d 36, 38 (1st Cir.2016) (quoting Espinal-Dominguez, 352 F.3d at 495).

Related

Cite This Page — Counsel Stack

Bluebook (online)
821 F.3d 102, 2016 U.S. App. LEXIS 7954, 2016 WL 1732656, Counsel Stack Legal Research, https://law.counselstack.com/opinion/federal-home-loan-bank-of-bost-v-moodys-corporation-ca1-2016.