Court Opinion

ID: 4302591
Source: CourtListenerOpinion
Date Created: 2018-08-10 00:00:30.813066+00
Date Added: 2024-06-11T12:49:43.835294
License: Public Domain

Case: 17-50732      Document: 00514593621         Page: 1    Date Filed: 08/09/2018

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT

                                      No. 17-50732                  United States Court of Appeals
                                                                             Fifth Circuit

                                                                           FILED
                                                                      August 9, 2018
ALLAN R. WOLF,
                                                                      Lyle W. Cayce
              Plaintiff–Appellant,                                         Clerk

v.

DEUTSCHE BANK NATIONAL TRUST COMPANY, as Indenture Trustee
for American Home Mortgage Investment Trust 2007-1; HOMEWARD
RESIDENTIAL, INCORPORATED, formerly known as American Home
Mortgage Servicing, Incorporated; LINDA GREEN; DANIELLE STERLING;
AIMEE V. LERMAN, formerly known as Aimee L. Wolf,

              Defendants–Appellees.

                   Appeal from the United States District Court
                        for the Western District of Texas
                              USDC No. 1:17-cv-79

Before JOLLY, ELROD, and WILLETT, Circuit Judges.
PER CURIAM:*
       Allan Wolf appeals the denial of his motion to remand. We find that any
defendants whose presence destroys complete diversity were improperly
joined. Thus, a federal court may exercise diversity jurisdiction over the suit.
We AFFIRM.

       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
    Case: 17-50732      Document: 00514593621      Page: 2    Date Filed: 08/09/2018

                                   No. 17-50732
                                 I. BACKGROUND
      In 2007, Allan Wolf and his then-wife Aimee Lerman refinanced their
property in Austin, Texas. The next year, they declared Chapter 7 bankruptcy
and divorced. Soon after, Lerman conveyed her interest in the property to Wolf
through a deed without warranty, and Wolf granted Lerman a “deed of trust
to secure assumption.”
      Several years later, Deutsche Bank foreclosed on the property. In
response, Wolf sued to quiet title and void the foreclosure. He sought a
declaratory judgment that the interests of the Defendants—including
Deutsche Bank, Homeward Residential, and Lerman—were void. 1
      Deutsche Bank removed the suit to federal court based on diversity
jurisdiction and filed a motion to dismiss for failure to state a claim. Deutsche
Bank claims that diversity jurisdiction exists because even though two
Defendants—Lerman and Homeward Residential—are Texas citizens, they
were improperly joined. 2
      Wolf moved to remand. 3 He claimed that the district court lacked subject
matter jurisdiction over the suit because Lerman and Homeward Residential
were properly joined. Wolf also argued that remand was proper because the
state court had “prior exclusive jurisdiction” over the property.
      A magistrate judge recommended denying Wolf’s motion because he
failed to allege a valid claim for quiet title against either Lerman or Homeward
Residential. The magistrate judge concluded that these two Defendants were
improperly joined, so the district court could exercise diversity jurisdiction over
the suit. The magistrate judge also found the prior exclusive jurisdiction

      1 This is Wolf’s fourth suit against Deutsche Bank alleging that the Bank lacked
authority to foreclose.
      2 Deutsche Bank is a citizen of California.
      3 Wolf did not respond to the motion to dismiss.

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doctrine inapplicable because removing the case to federal court divested the
state court of jurisdiction. Finally, the magistrate judge recommended
dismissing Wolf’s complaint without prejudice.
      The district court—after “having reviewed the entire record and finding
no plain error”—adopted the magistrate judge’s report and recommendations
“for substantially the reasons stated” in the report. Accordingly, the court
denied Wolf’s motion to remand and granted Deutsche Bank’s motion to
dismiss. Wolf timely appealed.
                                   II. DISCUSSION
      “We review a denial of a motion to remand de novo.” Brittania-U Nigeria,
Ltd. v. Chevron USA, Inc., 866 F.3d 709, 712 (5th Cir. 2017) (citing Int’l Energy
Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 199 (5th Cir.
2016)).
      We face two issues on appeal: (1) whether Wolf improperly joined
Lerman and Homeward Residential; and (2) whether the prior exclusive
jurisdiction doctrine prevents removal. We address each issue in turn.
A.    Improper Joinder
      “[F]ederal courts may exercise diversity jurisdiction over a civil action
between citizens of different States if the amount in controversy exceeds
$75,000.” 4 Flagg v. Stryker Corp., 819 F.3d 132, 135 (5th Cir. 2016). Diversity
jurisdiction typically requires “complete diversity” of parties. Id. at 136. That
is, no plaintiff may be a “citizen of the same State as any defendant.” Id.
      By statute, a defendant may remove a case from state court to federal
court on the basis of diversity jurisdiction so long as none “of the parties in
interest properly joined and served as defendants is a citizen of the State in

      4 Wolf seeks monetary relief in excess of $200,000, which satisfies the amount-in-
controversy requirement.
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which such action is brought.” 28 U.S.C. § 1441(b)(2); Alviar v. Lillard, 854
F.3d 286, 289 (5th Cir. 2017). Generally, “[t]he removing party bears the
burden of showing that federal jurisdiction exists and that removal was
proper.” Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th
Cir. 2002).
      If a party has been improperly joined, however, the lack of complete
diversity will not prevent a defendant from removing a case to federal court.
When a “plaintiff improperly joins a non-diverse defendant, . . . the court may
disregard the citizenship of that defendant, dismiss the non-diverse defendant
from the case, and exercise subject matter jurisdiction over the remaining
diverse defendant.” Flagg, 819 F.3d at 136.
      The defendant bears the burden of proving improper joinder. Smallwood
v. Ill. Cent. R.R. Co., 385 F.3d 568, 575 (5th Cir. 2004) (en banc). The defendant
can prove improper joinder in two ways: (1) by showing “actual fraud in the
pleading of jurisdictional facts,” (i.e., the plaintiff pleaded something he knew
was false); or (2) by showing the plaintiff’s inability “to establish a cause of
action against the non-diverse party in state court.” Mumfrey v. CVS
Pharmacy, Inc., 719 F.3d 392, 401 (5th Cir. 2013) (quoting McKee v. Kansas
City S. Ry. Co., 358 F.3d 329, 333 (5th Cir. 2004)).
      “To establish improper joinder under the second prong, the defendant
must demonstrate that there is no possibility of recovery against the in-state
or non-diverse defendant.” Alviar, 854 F.3d at 289 (cleaned up). To predict
whether a plaintiff may recover, “[t]he court may conduct a Rule 12(b)(6)-type
analysis, looking initially at the allegations of the complaint to determine
whether the complaint states a claim under state law against the in-state
defendant. Ordinarily, if a plaintiff can survive a Rule 12(b)(6) challenge, there
is no improper joinder.” Smallwood, 385 F.3d at 573 (footnote omitted). And,
to survive a Rule 12(b)(6) challenge, “a complaint must contain sufficient
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factual matter, accepted as true, to ‘state a claim to relief that is plausible on
its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice” to
state a plausible claim for relief. Id. (citing Bell Atl. Corp., 550 U.S. at 555).
      Here, Deutsche Bank asserts that Wolf improperly joined Lerman and
Homeward Residential. So we must evaluate whether Wolf’s claims against
those parties could survive a Rule 12(b)(6) challenge.
      1. Lerman
      Wolf raises a claim to quiet title against Lerman. Thus, under Texas law,
Wolf must plausibly allege:
      (1) his right, title, or ownership in real property;
      (2) that the defendant has asserted a “cloud” on his property,
          meaning an outstanding claim or encumbrance valid on its face
          that, if it were valid, would affect or impair the property
          owner’s title; and
      (3) that the defendant’s claim or encumbrance is invalid.
Warren v. Bank of Am., N.A., 566 F. App’x 379, 382 (5th Cir. 2014) (per curiam)
(citing Gordon v. W. Hous. Trees, Ltd., 352 S.W.3d 32, 42 (Tex. App.—Houston
[1st Dist.] 2011, no pet.)).
      Wolf failed to plausibly allege his claim. Wolf asserted in his original
petition that his property was “affected by a claim from” Lerman, who has no
“rights to claim any interest in” the property. These conclusory statements do
not suffice. As Deutsche Bank notes, Wolf failed to explain how any claim
Lerman holds would impair his title to the property. Wolf also did not plausibly
allege that Lerman’s claim is invalid. This means his claim against Lerman
could not survive a Rule 12(b)(6) challenge. See Iqbal, 556 U.S. at 678.

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                                   No. 17-50732
      Deutsche Bank carried its burden of proving that Wolf failed to plausibly
allege a viable cause of action against Lerman. As the district court concluded,
Wolf improperly joined Lerman to this suit.
      2. Homeward Residential
      Relatedly, Wolf raised a quiet title claim against Homeward Residential.
As Deutsche Bank notes, however, Wolf failed to plead any facts sufficient to
satisfy the second and third elements of a quiet title claim against Homeward
Residential. Thus, Homeward Residential was also improperly joined.
B.    Prior Exclusive Jurisdiction
      Wolf also argues that the suit must be remanded because the state court
has prior exclusive jurisdiction over the property. Like the district court, we
find this doctrine inapplicable.
      The prior exclusive jurisdiction doctrine states that “when one court is
exercising in rem jurisdiction over a res, a second court will not assume in rem
jurisdiction over the same res.” Marshall v. Marshall, 547 U.S. 293, 311 (2006).
      As this court has noted, however, “the effect of removal is to deprive the
state court of an action properly before it.” Gasch v. Hartford Accident &
Indem. Co., 491 F.3d 278, 281 (5th Cir. 2007) (quoting Carpenter v. Wichita
Falls Indep. Sch. Dist., 44 F.3d 362, 365–66 (5th Cir. 1995); see 28 U.S.C.
§ 1446(d) (establishing that once a party files notice of removal with the state
court, “the State court shall proceed no further unless and until the case is
remanded”). In other words, removal “divests the state court of jurisdiction and
precludes any state-court/federal-court conflict.” Pittman v. Seterus, Inc.,
No. 3:14-CV-3852-M BF, 2015 WL 898990, at *2 (N.D. Tex. Mar. 2, 2015); see
also Iqbal v. Bank of Am., N.A., No. A-12-CA-938-SS, 2012 WL 11955635, at
*5 (W.D. Tex. Dec. 18, 2012), aff’d, 559 F. App’x 363 (5th Cir. 2014) (explaining

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that the doctrine “is not relevant to a lone state court action removed to federal
court”). This is because:
      When a case begins in state court and is later removed to federal
      court, there are not concurrent proceedings. The removal action
      takes the case from the state court and places it in federal court.
      Because the state court no longer has jurisdiction over the case,
      there is no jurisdictional conflict for the law to avoid or resolve.
Bank of Am., 2012 WL 11955635, at *4.
      Here, once Deutsche Bank removed the case to federal court, no state
court retained jurisdiction over the property; there were no concurrent
proceedings. Thus, the prior exclusive jurisdiction doctrine is inapposite.
                                                                    AFFIRMED.

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