Peter Otoh v. Federal National Mortgage Association, et al.

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 23-12302
Non-Argument Calendar
____________________
PETER OTOH,
Plaintiff-Appellant,
versus
FEDERAL NATIONAL MORTGAGE ASSOCIATION,
VRMTG ASSET TRUST,
NATIONSTAR MORTGAGE, LLC,
d.b.a. Mr. Cooper,
NEWREZ LLC,
d.b.a. Shellpoint Mortgage Servicing,
AUCTION.COM ENTERPRISES, LLC, et al.,
Defendants-Appellees.
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2 Opinion of the Court 23-12302
____________________
Appeal from the United States District Court
for the Northern District of Georgia
D.C. Docket No. 1:23-cv-02444-TCB
____________________
Before J ILL PRYOR , BRANCH, and H ULL , Circuit Judges.
PER CURIAM:
Plaintiff Peter Otoh, pro se, appeals (1) the district court’s
denial of his motion to remand this case back to state court for lack
of diversity of citizenship and (2) the district court’s subsequent
grant of the defendants’ motions to dismiss Otoh’s complaint.
In Georgia state court, Otoh brought this suit alleging state
law claims against seven defendants, including VRMTG Asset
Trust (the “VRMTG Trust”). Subsequently, three defendants
removed the case to the United States District Court for the
Northern District of Georgia. In a single sentence, the district court
denied Otoh’s motion to remand, concluding there was diversity
jurisdiction.
On appeal, Otoh asserts that removal was improper because
the defendants failed to prove that the parties—in particular, Otoh,
a citizen of Georgia, and the VRMTG Trust—were completely
diverse and that removal jurisdiction existed. After review, we
conclude that the defendants’ notice of removal did not properly
allege the citizenship of the VRMTG Trust and therefore did not
establish diversity of citizenship between Otoh and the VRMTG
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23-12302 Opinion of the Court 3
Trust. Accordingly, we vacate the district court’s judgment and its
orders denying Otoh’s motions to remand and granting the
defendants’ motions to dismiss. We remand for further briefing
and for the district court to consider whether complete diversity
between the parties exists in this case.
I. FACTUAL BACKGROUND
A. Otoh’s State Court Complaint
On May 8, 2023, Otoh filed this action in the Superior Court
of Gwinnett County, Georgia, naming as defendants: (1) the
VRMTG Trust; (2) the alleged owner trustee of the VRMTG Trust,
identified as the U.S. Bank Trust National Association (“the U.S.
Bank Trustee”); (3) Federal National Mortgage Association
(“Fannie Mae”); (4) Nationstar Mortgage, LLC, d/b/a Mr. Cooper
(“Nationstar”); (5) Mr. Cooper Group (“Mr. Cooper”); (6) Newrez,
LLC, d/b/a Shellpoint Mortgage Servicing (“Shellpoint”); and (7)
Auction.com Enterprises, LLC (“Auction.com”) (collectively, “the
defendants”).
Otoh’s complaint alleged, inter alia, intentional infliction of
emotional distress by the defendants in their attempt to foreclose
and sell his home. Otoh sought cancelation of a security deed on
his property, hundreds of millions of dollars in monetary relief, and
various forms of equitable relief. Otoh’s complaint alleged that
defendant VRMTG Trust was assigned an invalid security deed
that was being used to foreclose on Otoh’s home, causing him
severe emotional distress.
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4 Opinion of the Court 23-12302
B. Defendants’ Notice of Removal
On May 31, 2023, defendants Shellpoint, the VRMTG Trust,
and the U.S. Bank Trustee (“the removing defendants”) filed a
notice of removal to move Otoh’s action to federal court based on
diversity jurisdiction under 28 U.S.C. § 1332. The removing
defendants’ notice of removal stated that: (1) Otoh was a Georgia
citizen; (2) Shellpoint was a citizen of Delaware and New York; (3)
Fannie Mae was a citizen of the District of Columbia; (4) Nationstar
was a citizen of Delaware and Texas; (5) Mr. Cooper was a citizen
of Delaware and Texas; (6) Auction.com was a citizen of Delaware
and California; and (7) the U.S. Bank Trustee was a citizen of Ohio.
As to defendant VRMTG Trust itself, the notice of removal
stated it was a Delaware statutory trust, the U.S. Bank Trustee was
an active trustee, and thus only the U.S. Bank Trustee’s citizenship
was examined for purposes of diversity jurisdiction, as follows:
Defendant VRMTG Asset Trust (the “Trust”) is a
Delaware statutory trust registered with the
Delaware Department of State, Division of
Corporations, as File Number 6757776, and
Defendant U.S. Bank the trustee for the Trust. The
Trust is a securitized trust that holds mortgage-
backed securities for the benefit of its
certificateholders. U.S. Bank is the registered agent of
the Trust, and, pursuant to the pooling and servicing
agreement and all other governing documents,
manages the Trust in an active capacity, including the
holding, managing, and disposing of assets, as well as
having the power to control all litigation involving
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23-12302 Opinion of the Court 5
the Trust. As an active trustee, U.S. Bank is the real
party in interest and therefore the party whose
citizenship is to be examined for citizenship purposes.
. . . U.S. Bank, the Trustee of the Trust, is a citizen of
Ohio for the purposes of diversity jurisdiction.
(Footnote omitted.) Claiming only the U.S. Bank Trustee’s
citizenship was relevant, the notice of removal did not allege the
citizenship of the VRMTG Trust or of the beneficiaries of the
VRMTG Trust.
C. Denial of Motion to Remand and Dismissal of Complaint
Otoh moved to remand the case back to state court, arguing
in relevant part, that diversity jurisdiction was lacking. Otoh
argued that, as an unincorporated entity, the VRMTG Trust has
the citizenship of all its members. He also argued that the
defendants had not established the VRMTG Trust’s citizenship
because they did not allege, or present evidence of, the citizenship
of the Trust’s certificateholders.
On June 5, 2023, without waiting for the removing
defendants’ response or holding a hearing, the district court denied
Otoh’s motion to remand, stating “[i]t appear[ed] that Defendants
properly removed th[e] case and that diversity jurisdiction
exist[ed].”
In a separate order on June 21, 2023, the district court
granted the defendants’ motions to dismiss, finding that Otoh’s
action was “duplicative and vexatious.”
Otoh timely appealed.
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6 Opinion of the Court 23-12302
II. STANDARD OF REVIEW
“We review de novo whether a district court properly
exercised removal jurisdiction.” McGee v. Sentinel Offender Servs.,
LLC, 719 F.3d 1236, 1241 (11th Cir. 2013). We likewise review de
novo a district court’s denial of a motion to remand a case back to
state court. Blevins v. Aksut, 849 F.3d 1016, 1018 (11th Cir. 2017).
III. DISCUSSION
A. Removal Based on Diversity Jurisdiction
A state-court defendant may remove a case to federal court
“if the case could have been filed in federal court originally.” Hill
v. BellSouth Telecomms., Inc., 364 F.3d 1308, 1314 (11th Cir. 2004); 28
U.S.C. § 1441(a). The federal district courts have original
jurisdiction over all civil actions where the amount in controversy
exceeds $75,000 and all plaintiffs have diverse citizenship from all
defendants. 28 U.S.C. § 1332(a); Univ. of S. Ala. v. Am. Tobacco Co.,
168 F.3d 405, 412 (11th Cir. 1999).
When a defendant removes a case to federal court on
diversity grounds, the district court must remand the case back to
the state court if the parties are not completely diverse. See
Henderson v. Wash. Nat’l Ins. Co., 454 F.3d 1278, 1281 (11th Cir.
2006). “A party seeking to remove a case to federal court bears the
burden of establishing federal jurisdiction.” McGee, 719 F.3d at
1241.
However, a failure to establish complete diversity in a notice
of removal is a procedural defect that the defendant must be given
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23-12302 Opinion of the Court 7
an opportunity to cure. Corp. Mgmt. Advisors, Inc. v. Artjen
Complexus, Inc., 561 F.3d 1294, 1296-97 (11th Cir. 2009) (reversing
district court’s sua sponte order remanding case because notice of
removal failed to allege complete diversity). A district court should
determine whether removal jurisdiction exists before addressing
the merits of any other issue. Univ. of S. Ala., 168 F.3d at 411.
B. Type of Trust for Purposes of Citizenship
To properly assess whether the removing defendants
sufficiently alleged complete diversity in this case, we must first
determine the nature of the VRMTG Trust.
An artificial entity other than a corporation generally has the
citizenship of all its members. Americold Realty Tr. v. Conagra Foods,
Inc., 577 U.S. 378, 381 (2016). In Americold, the Supreme Court
addressed the citizenship of a real estate investment trust organized
under Maryland law. Id. at 382. Because Maryland law treated real
estate investment trusts as separate legal entities that could sue and
be sued, the Supreme Court determined that the trust was an
unincorporated entity which possessed the citizenship of all of its
members, rather than a “traditional trust.” Id. at 383.
A “traditional trust,” in contrast, is generally a fiduciary
relationship regarding property where the trust cannot sue and be
sued as an entity under state law. Alliant Tax Credit 31, Inc. v.
Murphy, 924 F.3d 1134, 1143 (11th Cir. 2019). Whether a trust is
traditional depends on the law of the state where the trust is
formed. Id. If state law confers “juridical person status” on a trust
itself, it is not a “traditional trust.” Id. (quotation marks omitted).
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8 Opinion of the Court 23-12302
Applying Americold, this Court has stated that “[a] ‘traditional trust’
holds the citizenship of its trustee, not of its beneficiaries.” Id. That
the entity is named a “trust” does not affect the analysis. Americold,
577 U.S. at 383.
Here, the VRMTG Trust was formed in Delaware.
Therefore, we must turn to Delaware law to determine whether
the VRMTG Trust is a “traditional trust” or an artificial entity other
than a corporation. See id. at 382-83.
The parties agree that the VRMTG Trust is a Delaware
statutory trust. See Delaware Department of State, Division of
Corporations, File Number 6757776 (listing the VRMTG Trust as
a statutory trust). Under Delaware law, a statutory trust is a
separate legal entity. See 12 DEL . C ODE ANN. §§ 3801(i), 3805. “A
statutory trust may sue and be sued,” and “may be sued for debts
and other obligations or liabilities contracted or incurred by the
trustees or other authorized persons.” Id. § 3804(a). An owner of
a beneficial interest in a statutory trust is “entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit.” Id. §§ 3801(a), 3803(a).
Given the foregoing, the VRMTG Trust is not a “traditional
trust” because Delaware confers juridical person status on the trust
itself. See Americold, 577 U.S. at 383; 12 DEL . C ODE ANN. §§ 3801(i),
3804(a), 3805; Delaware Department of State, Division of
Corporations, File Number 6757776. While the notice of removal
states that the U.S. Bank Trustee controls all litigation for the
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23-12302 Opinion of the Court 9
VRMTG Trust, Delaware law provides that the VRMTG Trust
may itself be haled into court. See 12 DEL . CODE ANN. § 3804(a).
The defendants point out that this Court recently affirmed
the denial of a motion to remand in another removed state court
action Otoh filed against some of the same defendants. In that
appeal, this Court concluded, inter alia, that the notice of removal
filed in that action “adequately stated that there was total diversity
of the parties.” See Otoh v. Fed. Nat’l Mortg. Ass’n, 2023 WL 4623614,
at *2 (11th Cir. July 19, 2023). In that case, however, Otoh sued the
U.S. Bank Trustee, but not the VRMTG Trust itself. See id. at *1.
Therefore, neither the VRMTG Trust’s citizenship, nor the type of
trust it is, was at issue in that appeal.
C. Citizenship of the VRMTG Trust
Because the VRMTG Trust has juridical person status and is
not a traditional trust, it does not hold the citizenship of its trustee.
Instead, we must look to the citizenship of the VRMTG Trust’s
beneficiaries to determine its citizenship. See Americold, 577 U.S. at
382-83; Alliant, 924 F.3d at 1143. Here, however, the removing
defendants failed to allege in their notice of removal the citizenship
of VRMTG Trust’s beneficiaries. Nor are the beneficiaries’
citizenships evident from the record.
Where, as here, the notice of removal and other pleadings
are inadequate for us to determine that diversity jurisdiction exists,
the proper course is to vacate and remand to the district court to
determine the citizenship of the parties. See Rolling Greens MHP,
L.P. v. Comcast SCH Holdings L.L.C., 374 F.3d 1020, 1022-23 (11th Cir.
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10 Opinion of the Court 23-12302
2004); Williams v. Best Buy Co., 269 F.3d 1316, 1320-21 (11th Cir.
2001).
On appeal, the defendants defend the district court’s denial
of Otoh’s motion to remand by arguing (incorrectly) that only the
citizenship of the U.S. Bank Trustee as an active trustee “matters
for purposes of diversity jurisdiction.”1 However, the defendants
alternatively ask this Court to remand for the district court to
determine any necessary jurisdictional facts, which would include
the VRMTG Trust’s citizenship. We note also that the defendants
were not given an opportunity to respond to Otoh’s motion to
remand in the district court. Accordingly, on remand, the district
court shall afford the defendants the opportunity to respond to
Otoh’s motion to remand and raise any arguments in opposition,
1 The defendants argue that Navarro Savings Ass’n v. Lee, 446 U.S. 458 (1980) is
determinative here and mandates that the citizenship of the VRMTG Trust be
that of its trustee—the U.S. Bank Trustee. But that argument is foreclosed by
Americold. In Americold, the Supreme Court reiterated that:
Navarro had nothing to do with the citizenship of a trust.
Rather, Navarro reaffirmed a separate rule that when a trustee
files a lawsuit in her name, her jurisdictional citizenship is the
State to which she belongs—as is true of any natural person.
This rule coexists with our discussion above that when an
artificial entity is sued in its name, it takes the citizenship of
each of its members.
Americold, 577 U.S. at 382-83 (alterations adopted) (quotation marks and
citations omitted). In other words, whether the U.S. Bank Trustee is the real
party in interest is a separate question from what the citizenship of the
VRMTG Trust is, and Americold makes clear that Navarro has no bearing on
the latter question, which is the one raised is this appeal.
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23-12302 Opinion of the Court 11
and, if necessary, to amend their notice of removal to establish
complete diversity of citizenship. See Artjen Complexus, 561 F.3d at
1297.2
IV. CONCLUSION
Accordingly, we vacate the judgment of the district court,
the district court’s June 5, 2023 order denying plaintiff Otoh’s
motions for remand, and the district court’s June 21, 2023 order
granting the defendants’ motions to dismiss. We remand for the
district court to determine whether complete diversity of
citizenship exists between the parties consistent with this opinion.3
VACATED AND REMANDED.
2 Plaintiffs are “the master of the complaint” and are free to avoid federal
jurisdiction if the method of avoidance is not fraudulent. Scimone v. Carnival
Corp., 720 F.3d 876, 882 (11th Cir. 2013). The defendants state in passing that
Otoh named the VRMTG Trust as a defendant to defeat diversity jurisdiction,
but do not argue in this appeal that the VRMTG Trust was fraudulently joined.
Therefore, we do not address fraudulent joinder. However, on remand, given
our ruling above and the fact that in the district court the defendants did not
have an opportunity to respond to Otoh’s motion to remand, nothing herein
precludes the defendants from raising that issue.
3 Because we vacate and remand for a determination as to whether there is
diversity jurisdiction, we express no opinion as to the merits of Otoh’s
complaint or the defendants’ motions to dismiss.
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