Fed. Home Loan Bank of Bos. v. Moody's Corp.

821 F.3d 102

FEDERAL HOME LOAN BANK OF BOSTON, Plaintiff, Appellant

v.MOODY'S CORPORATION; Moody's Investors Service, Inc., Defendants, Appellees

Ally Financial Inc., f/k/a GMAC, Inc.; BCAP LLC; Barclays Capital, Inc.; Bear Stearns Asset Backed Securities I LLC, f/k/a The Bear Stearns Companies, Inc.; Chevy Chase Funding, LLC ; Citimortgage, Inc.; Citicorp Mortgage Securities, Inc. ; Citigroup Financial Products, Inc. ; Citigroup Global Markets Realty Corp.; Citigroup Global Markets, Inc.; Citigroup Mortgage Loan Trust, Inc. ; Citigroup, Inc.; Credit Suisse (USA), Inc.; Credit Suisse First Boston Mortgage Securities Corp.; Credit Suisse Holdings (USA), Inc.; Credit Suisse Securities (USA) LLC; db Structured Products, Inc. ; db U.S. Financial Market Holding Corporation; DLJ Mortgage Capital, Inc. ; Deutsche Alt–A Securities, Inc.; Deutsche Bank Securities, Inc.; EMC Mortgage Corporation; Lana Franks; Richard S. Fuld, Jr.; GMAC Mortgage Group, LLC; Edward Grieb; IMH Assets Corp. ; Impac Funding Corporation; Impac Mortgage Holdings, Inc.; Impac Secured Assets Corp.; J.P. Morgan Acceptance Corporation I; J.P. Morgan Chase & Co.; JP Morgan Securities Holdings, LLC; JPMorgan Acquisition Corp.; JPMorgan Chase Bank, N.A.; MIT Holdings, Inc.; Richard McKinney ; Morgan Stanley; Morgan Stanley & Co., Inc.; Morgan Stanley Capital I Inc.; Morgan Stanley Mortgage Capital Holdings, LLC ; Mortgage Asset Securitization Transactions, Inc. ; MortgageIT Securities Corp. ; MortgageIT, Inc.; MortgageIT Holdings, Inc.; Nomura Asset Acceptance Corporation ; Nomura Credit & Capital, Inc. ; Nomura Holding America, Inc. ; Nomura Securities International, Inc.; Barry J. O'Brien; Christopher M. O'Meara; RBS Acceptance Inc., f/k/a Greenwich Capital Acceptance, Inc. ; RBS Financial Products, Inc., f/k/a Greenwich Capital Financial Products, Inc.; RBS Holdings USA Inc.; RBS Securities Inc., f/k/a Greenwich Capital Markets, Inc.; Residential Accredit Loans, Inc. ; Residential Funding Company, LLC, f/k/a Residential Funding Corporation; Kristine Smith ; Structured Asset Mortgage Investments II Inc.; James J. Sullivan ; Samir Tabet; The Bear Stearns Companies LLC; UBS Americas, Inc.; UBS Real Estate Securities, Inc.; UBS Securities, LLC; Wamu Capital Corp.; Wells Fargo & Company; Wells Fargo Asset Securities Corporation ; Wells Fargo Bank, N.A.; Mark Zusy; Banc of America Funding Corporation; Bank of America Corporation; Bank of America, National Association; Capital One Financial Corporation; Capital One, National Association; Countrywide Financial Corporation; Countrywide Home Loans, Inc.; Countrywide Securities Corporation; CWALT, Inc. ; CWMBS, Inc. ; Fitch, Inc.; Goldman, Sachs & Co.; Merrill Lynch Mortgage Investors, Inc. ; Merrill Lynch & Co., Inc.; Merrill Lynch Mortgage Lending, Inc. ; Merrill Lynch, Pierce, Fenner & Smith, Inc.; Sandler, O'Neill & Partners, L.P.; John Does 1–50; Standard & Poor's Financial Services, LLC; The McGraw Hill Companies, Inc., Defendants.

No. 14–2148.

United States Court of Appeals, First Circuit.

May 2, 2016.

Benjamin Gould, with whom Derek W. Loeser ; Amy Williams–Derry ; Gary A. Gotto ; Lynn L. Sarko ; Keller Rohrback L.L.P.; Thomas G. Shapiro ; Adam M. Stewart ; and Shapiro Haber & Urmy LLP were on brief, for appellant.

Joshua M. Rubins, with whom Ralph T. Lepore, III ; Michael T. Maroney ; Nathaniel F. Hulme ; Holland & Knight LLP; Glenn C. Edwards ; James J. Coster ; and Satterlee Stephens Burke & Burke LLP were on brief, for appellees.

Before THOMPSON and KAYATTA, Circuit Judges, and MASTROIANNI,^* District Judge.

THOMPSON, Circuit Judge.

The allegations in this case hearken back to the days of the recent financial crisis and the near-collapse of the mortgage-backed securities market. The issues we deal with today, though, are of the technical, legalistic variety: we have to figure out whether the district court erred in 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 Boston (“Bank”), a 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 conservative 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 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 reserv[ing] 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 complained 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 motion 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 against 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 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. Moody'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 ).⁵

Our starting point is the...