Court Opinion

ID: 9931107
Source: CourtListenerOpinion
Date Created: 2024-02-08 16:02:17.542437+00
Date Added: 2024-06-11T12:16:19.168915
License: Public Domain

USCA11 Case: 23-12302   Document: 30-1    Date Filed: 02/08/2024   Page: 1 of 11

                                                 [DO NOT PUBLISH]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 JILL PRYOR, BRANCH, and HULL, 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. CODE 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. CODE 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.