Bank of Am., N.A. v. Fid. Nat'l Title Grp., Inc.

594 F.Supp.3d 1234

BANK OF AMERICA, N.A., as Successor by Merger to BAC Home Loans Servicing, LP, Plaintiff,

v.FIDELITY NATIONAL TITLE GROUP, INC. ; Chicago Title Insurance Company ; Chicago Title of Nevada, Inc. ; Fidelity National Title Agency of Nevada, Inc. ; Ticor Title of Nevada, Inc.; Doe Individuals I through X; and Roe Corporations XI through XX, inclusive, Defendants.

Case No. 2:21-cv-00353-KJD-NJK

United States District Court, D. Nevada.

Signed March 28, 2022

Christina Miller, Darren T. Brenner, Lindsay Dragon, Wright, Finlay & Zak, LLP, Las Vegas, NV, for Plaintiff.

Gary L. Compton, Las Vegas, NV, Michael R. Merritt, McCormick Barstow, Las Vegas, NV, Scott E. Gizer, Sophia Shunwan Lau, Early Sullivan Wright Gizer & McRae LLP, Las Vegas, NV, Kevin Samuel Sinclair, Sinclair Braun LLP, Encino, CA, for Defendants Fidelity National Title Group, Inc., Chicago Title of Nevada, Inc., Fidelity National Title Agency of Nevada, Inc., Ticor Title of Nevada, Inc.

Gary L. Compton, Las Vegas, NV, Michael R. Merritt, McCormick Barstow, Las Vegas, NV, Scott E. Gizer, Sophia Shunwan Lau, Early Sullivan Wright Gizer & McRae LLP, Las Vegas, NV, Michael A. Pintar, McCormick Barstow Sheppard Wayte & Carruth, LLP, Reno, NV, Kevin Samuel Sinclair, Sinclair Braun LLP, Encino, CA, for Defendant Chicago Title Insurance Company.

ORDER GRANTING PLAINTIFF'S MOTION TO REMAND

Kent J. Dawson, United States District Judge

Before the Court are Plaintiff's Motion to Remand (ECF #7) and Motion for Attorney Fees (ECF #8). Defendant responded in opposition (ECF #24) to which Plaintiff replied (ECF #25).

I. Background

On April 23, 2021, the parties stipulated to stay this action pending the appeal of a similar case. (ECF #12). The Ninth Circuit issued its ruling on the appeal on November 5, 2021. Wells Fargo Bank, N.A. v. Fidelity Nat'l Title Ins. Co., No. 19-17332, 2021 WL 5150044 (9th Cir. Nov. 5, 2021). The parties have not requested that the stay be lifted but have filed their response and reply to the instant motion after the Ninth Circuit's decision. As such, the Court lifts the stay to rule on the motion. Dependable Highway Exp., Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 2007) ("[A] district court possesses the inherent power to control its docket and promote efficient use of judicial resources.").

This is a breach of contract and insurance bad faith claim. (ECF #7, at 2). Plaintiff Bank of America, N.A. as successor by merger to BAC Home Loans Servicing, LP ("BANA") filed the action in the Eighth Judicial District Court of Nevada on March 1, 2021. (ECF #1-1, at 59). That same day, Defendant Chicago Title Insurance Company ("Chicago Title") removed the action to federal court. (ECF #1, at 5). Chicago Title removed the action based on diversity jurisdiction. Id. at 2. Chicago Title is a Florida corporation with its principal place of business in Florida; Fidelity National Title Group ("Fidelity") is alleged to be a Delaware corporation with its principal place of business in Florida; Chicago Title of Nevada ("Chicago Nevada"), Fidelity National Title Agency of Nevada ("Fidelity Nevada"), and Ticor Title of Nevada ("Ticor Nevada") are all Nevada corporations with their principal place of business in Nevada. Id. BANA is believed to have its principal place of business in North Carolina. Id. at 3.

BANA is the beneficiary of several deeds of trust encumbering real property throughout Nevada. (ECF #7, at 3). Each of the properties was foreclosed on by the homeowners’ association ("HOA") and sold to a third party. Id. BANA alleges that it, or its predecessor, entered into contractual relationships with Chicago Title and either Chicago Nevada, Fidelity Nevada, or Ticor Nevada to insure the Deed of Trust in superior position to competing liens, including the HOA's liens. Id. BANA then submitted claims to Chicago Title under the insurance policy, but the claims were denied. Id. at 4. This led to a multitude of lawsuits being filed by both banks and buyers of property at the HOA foreclosure sales. Id. Now, BANA seeks to recover its remaining losses and other damages. Id.

There are many similar actions currently being litigated in Nevada and this issue of snap removal has become a common question. To date, six judges in the District of Nevada have ruled on the issue.¹ Five, including this Court, have found that snap removal is improper and remanded the cases to state court, while one judge has denied remand, ruling that the snap removal is an acceptable practice according to the plain language of the statute.² The Court joins the majority of the judges in the District and finds that Defendant's snap removal prior to service was improper and the forum defendant rule requires a remand to state court.

II. Legal Standard

Federal courts are courts of limited jurisdiction. See U.S. CONST . art. III, § 2, cl. 1 ; Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 374, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978). Accordingly, there is a strong presumption against removal. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). A defendant may remove any civil action from state court when the federal district court has original jurisdiction. 28 U.S.C. § 1441(a). A diversity case cannot be removed if "any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." Id. at § 1441(b)(2). Courts strictly construe the removal statute against removal, and "[f]ederal jurisdiction must be rejected if there is any doubt as to right of removal in the first instance." Gaus, 980 F.2d at 566. The removing party bears the burden of establishing federal jurisdiction. California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 838 (9th Cir. 2004).

Removal based on diversity jurisdiction requires complete diversity, meaning "the citizenship of each plaintiff is diverse from the citizenship of each defendant." Caterpillar, Inc. v. Lewis, 519 U.S. 61, 68, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996). However, when "determining whether there is complete diversity, district courts may disregard the citizenship of a non-diverse defendant who has been fraudulently joined." Grancare, LLC v. Thrower by & through Mills, 889 F.3d 543, 548 (9th Cir. 2018) (citing Chesapeake & Ohio Ry. Co. v. Cockrell, 232 U.S. 146, 152, 34 S.Ct. 278, 58 L.Ed. 544 (1914) ).

III. Analysis

Chicago Title argues that the plain language of the removal statute permits removal of this action. Chicago Title focuses on the language of the statute, which states that diversity actions may not be removed "if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." 28 U.S.C. § 1441(b)(2) (emphasis added). This is known as the forum defendant rule. Chicago Title argues that because it removed the action prior to any defendant being served, the forum defendant rule does not apply. Additionally, Chicago Title argues that BANA fraudulently joined twenty-two claim denials to defeat diversity. According to Chicago Title, BANA should have filed separate lawsuits for each of the denied claims. If it had, then eight of the claims would not have a local defendant and would defeat removal. Chicago Title also argues that federal question jurisdiction exists because BANA is not the true party in interest. It argues that BANA does not have standing to sue because BANA is merely the servicer of the loans and Freddie Mac is the insured. With Freddie Mac as the actual party in interest, federal question jurisdiction exists, and the diversity question is irrelevant. BANA disagrees with each argument, arguing that it is an insured, that the joinder rules encourage judicial economy rather than splitting up the twenty-two denied claims into separate lawsuits, and that snap removal promotes gamesmanship by defendants and undermines the purpose of the forum defendant rule.

A. The Forum Defendants are Properly Joined

Chicago Title argues that BANA fraudulently joined twenty-two separate claims to defeat diversity. It asks the Court to retain jurisdiction of eight of the claims and remand the other 14 back to state court. In general, a "party asserting a claim, counterclaim, crossclaim, or third-party claim may join, as independent or alternative claims, as many claims as it has against an opposing party." FED. R. CIV. P. 18(a). Parties may be permissively joined as defendants if "any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and any question of law or fact common to all defendants will arise in the action." Id. at 20(a)(2). If the alleged fraudulent claims do not arise out of the same transaction or occurrence and do not contain a common question of law or fact, then they cannot be permissively joined.

This action focuses on denied claims that involve multiple properties and multiple defendants. The Ninth Circuit has indicated that such claims can arise out of the same transaction or occurrence and contain a common question of law or fact. In a case involving the purchase of properties in HOA foreclosure sales, it stated that "the purchase of nine Nevada properties in homeowners’ association foreclosure sales by three interconnected real estate development corporations constituted a ‘series of transactions or occurrences.’ " Fed. Housing Fin. Agency v. Las Vegas Dev. Grp., LLC, No. 20-15658, 2021 WL 5359593, at *1 (9th Cir. Nov. 17, 2021). The real estate development companies were interconnected, which likely weighed in favor of the court's finding that they constituted a series of transactions or occurrences. Here, there are multiple claims for multiple properties that were denied. There is only one plaintiff, and all the defendants are interconnected, as each claim was printed on the same form and the defendants are alleged to be controlled by...