Case 4:16-cv-00389-ALM Document 17 Filed 08/16/16 Page 1 of 10 PageID #: 275
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`United States District Court
`EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
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`JENNIFER SCHMELZER
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`v.
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`§
`§
`§
`NATIONSTAR MORTGAGE, LLC, and
`DEUTSCHE BANK NATIONAL TRUST §
`COMPANY, AS TRUSTEE FOR GSR
`§
`MORTGAGE LOAN TRUST 2007 OA1, §
`MORTGAGE PASS-THROUGH
`§
`CERTIFICATES, SERIES 2007-OA1
`§
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`CASE NO. 4:16-CV-389
`Judge Mazzant
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`§§
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`MEMORANDUM OPINION AND ORDER
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`Pending before the Court is Plaintiff’s Motion to Remand (Dkt. #9). Having considered the
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`relevant pleadings, the Court is of the opinion that this motion should be denied.
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`BACKGROUND
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`Plaintiff Jennifer Schmelzer filed a civil action in the Probate Court of Denton County,
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`Texas, against Defendant Nationstar Mortgage, LLC (“Nationstar”) and Deutsche Bank National
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`Trust Company, as Trustee for GSR Mortgage Loan Trust 2007-OA1, Mortgage Pass-Through
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`Certificates Series 2007-OA1 (“Deutsche Bank”). Plaintiff seeks a declaratory judgment that,
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`because her loan has been accelerated for more than four years, the Deed of Trust lien and power of
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`sale as part of a mortgage loan are void pursuant to Tex. Civ. Prac. & Rem. Code § 16.035(b).
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`Plaintiff asserts if she is granted declaratory relief, any mortgagee or mortgage servicer would be
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`precluded from administering a foreclosure action resulting in judicial or non-judicial foreclosure
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`sale of the property. Plaintiff further asserts, upon information and belief, that Deutsche Bank is the
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`mortgagee, and Nationstar is its loan servicer.
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`On February 21, 2007, Plaintiff executed a Promissory Note in the original amount of
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`Case 4:16-cv-00389-ALM Document 17 Filed 08/16/16 Page 2 of 10 PageID #: 276
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`$488,000 payable to Countrywide Bank, N.A. (“Countrywide”) for real property located at 11763
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`Coronado Trail, Frisco, Texas 75034. Plaintiff also executed a Deed of Trust granting a lien against
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`the property in favor of Countrywide to secure repayment of the Note. The Note and Deed of Trust
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`were assigned to Deutsche Bank, which is the current mortgagee of the Deed of Trust.
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`On December 6, 2011, Plaintiff filed suit against Bank of America, N.A. (“BANA”), the
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`mortgage servicer of the loan at the time, seeking to prevent a foreclosure sale scheduled the same
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`day. Over four years later, Plaintiff filed notice non-suiting her claims against BANA, and the court
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`dismissed the previous lawsuit by order dated January 7, 2016.
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`On October 6, 2014, Plaintiff filed a Chapter 13 bankruptcy petition to prevent a foreclosure
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`sale scheduled the next day. Plaintiff’s bankruptcy case was ultimately dismissed, as a result of her
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`failure to file a Chapter 13 plan, by order dated March 25, 2015. Plaintiff filed the present lawsuit
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`seeking to prevent the foreclosure sale of the property scheduled for June 7, 2016.
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`Deutsche Bank filed its Notice of Removal (Dkt. #1). Deutsche Bank asserts that this Court
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`has diversity jurisdiction because Nationstar is a nominal party, and thus, the joining of Nationstar
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`should not destroy diversity jurisdiction.
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`Plaintiff filed a motion to remand (Dkt. #9). Deutsche Bank filed a response (Dkt. #11) and
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`Plaintiff filed a reply (Dkt. #13).
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`It is undisputed that Plaintiff and Deutsche Bank are diverse, and that the amount in
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`controversy exceeds $75,000. The only question is whether Nationstar is a nominal party, allowing
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`the Court to disregard Nationstar being a citizen of Texas.
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`LEGAL STANDARD
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`A defendant may remove any civil action from state court to a district court of the United
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`Case 4:16-cv-00389-ALM Document 17 Filed 08/16/16 Page 3 of 10 PageID #: 277
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`States which has original jurisdiction. 28 U.S.C. § 1441. District courts have original jurisdiction
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`over all civil actions that are between citizens of different states and involve an amount in
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`controversy in excess of $75,000, exclusive of interest and costs. 28 U.S.C. § 1332. The party
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`seeking removal “bears the burden of establishing that federal jurisdiction exists and that removal
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`was proper.” Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002);
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`Weaver v. Zurich Am. Ins. Co., No. Civ. A. H–10–1813, 2010 WL 3910053, at *1 (S.D. Tex. Oct.1,
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`2010). The removal statute must “be strictly construed, and any doubt about the propriety of removal
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`must be resolved in favor of remand.” Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278,
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`281–82 (5th Cir. 2007). A district court is required to remand the case to state court if, at any time
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`before final judgment, it determines that it lacks subject matter jurisdiction. See 28 U.S.C. §
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`1447(c); Groupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567, 571 (2004).
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`“[A] federal court must disregard nominal or formal parties and rest jurisdiction only upon
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`the citizenship of real parties to the controversy.” Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 461
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`(1980). “Whether a party is [formal or] ‘nominal’ for removal purposes depends on ‘whether, in the
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`absence of the [party], the Court can enter a final judgment consistent with equity and good
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`conscience, which would not be in any way unfair or inequitable....’” Acosta v. Master Maint. &
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`Constr. Inc., 452 F.3d 373, 379 (5th Cir. 2006) (quoting Tri–Cities Newspapers, Inc. v. Tri–Cities
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`Printing Pressmen & Assistants Local 349, 427 F.2d 325, 327 (5th Cir. 1970)). Nominal parties are
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`not required to join in the removal petition, and joinder is also not required when defendants have
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`not been served at the time of removal. Farias v. Bexar County Bd. of Trs. for Mental Health
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`Retardation Servs., 925 F.2d 866, 871 (5th Cir. 1991).
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`“To establish that non-removing parties are nominal parties, ‘the removing party must show
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`Case 4:16-cv-00389-ALM Document 17 Filed 08/16/16 Page 4 of 10 PageID #: 278
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`... that there is no possibility that the plaintiff would be able to establish a cause of action against the
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`non-removing defendants in state court.’” Farias, 925 F.2d at 871 (quoting B., Inc. v. Miller Brewing
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`Co., 663 F.2d 545, 549 (5th Cir. Unit A Dec. 1981)).
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`“An alternate articulation of the test is whether or not a named party's ‘role in the law suit
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`is that of a depositary or stakeholder.’ “ La. v. Union Oil Co. of Cal., 458 F.3d 364, 367 (5th Cir.
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`2006) (citing Tri–Cities Newspapers, Inc., 427 F.2d at 327). The Court takes “practical
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`considerations into account in making this determination .” Id. at 367. The Court’s analysis is not
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`“dependant on how the plaintiff labels its complaint, but rather on the practical effect of a judgment
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`on a given defendant.” In re Beazley Ins. Co., No. 09–20005, 2009 WL 7361370, at *4 (5th Cir. May
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`4, 2009) (citing Union Oil Co., 458 F.3d at 367). The result of the analysis will depend “on the facts
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`in each case.” Tri–Cities Newspapers, Inc., 427 F.2d at 327 (citing Boeing Airplane Co. v.
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`Aeronautical Indus., 91 F. Supp. 596 (W.D.Wash.1950)). “The bottom line concern in determining
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`a nominal party is whether the plaintiff can establish a cause of action against the non-removing [or
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`non-diverse] defendant in state court.” Farias, 925 F.2d at 872. “The question of whether a named
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`defendant is a nominal party depends on the facts in each case,” and the Court must “look to whether
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`a party was nominal at the time of removal rather than considering any subsequent events.” In re
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`Beazley Ins. Co., 2009 WL 7361370, at *4 (5th Cir. May 4, 2009).
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`Some courts have noted that the inquiry is the same as the improper joinder analysis. See,
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`e.g., S. Lavon Evans, Jr. Drilling Venture, LLC v. Laredo Energy Holdings, LLC, Civ. A. No.
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`2:11–CV– 12, 2011 WL 1104150 at *4 n. 2 (S.D. Miss. March 23, 2011) (“The two analyses appear
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`to be substantially identical.”). “When assessing whether diversity jurisdiction exists, a court must
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`disregard non-diverse citizenship of an improperly joined defendant.” Doucet v. State Farm Fire
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`Case 4:16-cv-00389-ALM Document 17 Filed 08/16/16 Page 5 of 10 PageID #: 279
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`and Cas. Co., No. 1:09–CV–142, 2009 WL 3157478, at *4 (E.D. Tex. Sept. 25, 2009) (citing
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`Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 572–73 (5th Cir. 2004)). A defendant who contends
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`that a non-diverse party is improperly joined has a “heavy” burden of proof. Green v. Amerada Hess
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`Corp., 707 F.2d 201, 205 (5th Cir. 1983); Great Plains Trust Co. v. Morgan Stanley Dean Witter
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`& Co., 313 F.3d 305, 312 (5th Cir. 2002) (citation omitted). “In making its determination, the court
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`must ordinarily evaluate all of the factual allegations in the plaintiff’s state court pleadings in the
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`light most favorable to the plaintiff, resolving all contested issues of substantive fact in favor of the
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`plaintiff.” Green, 707 F.2d at 205.
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`“The removing party must prove that there is absolutely no possibility that the plaintiff will
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`be able to establish a cause of action against the in-state defendant in state court, or that there has
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`been outright fraud in the plaintiff’s pleading of jurisdictional facts.” Great Plains Trust, 313 F.3d
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`at 312 (quoting Green, 707 F.2d at 205). After the Court resolves all disputed questions of fact and
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`all ambiguities in controlling state law in favor of the plaintiff, the Court determines whether the
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`plaintiff has any possibility of recovery against the party whose joinder is questioned. Id. (citation
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`omitted). If there is a reasonable basis for predicting that the state law might impose liability on the
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`facts of the case, then there is no fraudulent joinder. Id. (citation omitted). This possibility must be
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`reasonable and not just theoretical. Id.
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`“A district court should ordinarily resolve [claims of] improper joinder by conducting a Rule
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`12(b)(6)-type analysis.” McDonal v. Abbott Labs., 408 F.3d 177, 183 n.6 (5th Cir. 2005); see also
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`Boone v. Citigroup, Inc., 416 F.3d 382, 388 (5th Cir. 2005). “[I]f a plaintiff can survive a Rule
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`12(b)(6)-type challenge, there is generally no improper joinder.” Guillory v. PPG Indus., Inc., 434
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`F.3d 303, 309 (5th Cir. 2005) (citation omitted); Smallwood, 385 F.3d at 573. The Court, however,
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`must carefully distinguish an attack on the overall merits of the case from a showing that defendants
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`were improperly joined in order to defeat diversity. See Smallwood, 385 F.3d at 573; see also Gasch
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`491 F.3d at 284. However, plaintiff must plead “enough facts to state a claim to relief that is
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`plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). There are cases in
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`which a further summary inquiry is appropriate to “identify the presence of discrete and undisputed
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`facts that would preclude plaintiff's recovery against the in-state defendant.” Smallwood, 385 F.3d
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`at 573-74; Guillory, 434 F.3d at 311.
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`“In evaluating a claim of fraudulent joinder, we do not determine whether the plaintiff will
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`actually or even probably prevail on the merits of the claim, but look only for a possibility that the
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`plaintiff may do so.” Rodriguez v. Sabatino, 120 F.3d 589, 591 (5th Cir. 1997); see Guillory, 434
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`F.3d at 308-09. “If that possibility exists, a good faith assertion of such an expectancy in a state
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`court is not a sham…and is not fraudulent in fact or in law.” B., Inc, 663 F.2d at 550 (citation
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`omitted). “If there is ‘arguably a reasonable basis for predicting that the state law might impose
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`liability on the facts involved,’ then there is no fraudulent joinder,” and the case must be remanded
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`for lack of diversity. Great Plains Tr., 313 F.3d at 312 (citation omitted); Sid Richardson Carbon
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`& Gasoline Co. v. Interenergy Res. Inc., 99 F.3d 746, 751 (5th Cir. 1996).
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`ANALYSIS
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`The question for the Court is whether Deutsche Bank has shown that Plaintiff has no
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`possibility of establishing a valid cause of action against the non-diverse defendant, Nationstar. The
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`Court decides this question looking at the Original Petition on file at the time of removal.
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`First, the Court must decide which standard to apply in the examination of Plaintiff’s state
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`court petition. The Fifth Circuit recently clarified that the federal pleading sufficiency standard
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`Case 4:16-cv-00389-ALM Document 17 Filed 08/16/16 Page 7 of 10 PageID #: 281
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`applies to analyzing improper joinder. See Int'l Energy Ventures Mgmt., L.L.C. v. United Energy
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`Grp., Ltd., 818 F.3d 193, 208 (5th Cir. 2016).
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`Deutsche Bank asserts that Nationstar is a nominal party because its presence in this lawsuit
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`has no practical effect on a potential judgment granting the relief sought by Plaintiff. Deutsche Bank
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`argues that Plaintiff only seeks declaratory relief to preclude foreclosure, and that it is the mortgagee
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`of the Deed of Trust and is the only party whose ownership interest in the loan is implicated by
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`Plaintiff’s request for relief. Deutsche Bank’s Notice of Removal asserts that Nationstar is the
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`mortgage servicing agent for Deutsche Bank, against whom no wrongdoing is attributed or claimed.
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`Plaintiff asserts that Nationstar, the current loan servicer, is granted broad discretion by
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`agreement with the mortgagee, as well as under Texas law. Plaintiff asserts that this discretion is
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`especially broad in a loan servicer’s actions in acceleratiing of a loan and administering a
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`foreclosure. Plaintiff further asserts that numerous courts have held that a mortgagee’s loan servicer
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`is a real party in interest, with standing to conduct the legal affairs of the investor of the debt it
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`services. Plaintiff points the Court to Texas statutes that permit mortgage servicers to undertake a
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`host of actions related to a loan. Specifically, Plaintiff cites that a loan servicer handles all of the
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`day-to-day activities of a mortgage loan, including collecting and applying payments, answering
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`mortgagor questions, responding to Qualified Written Requests under RESPA, sending notices and
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`monthly statements, and administering foreclosure proceedings. Plaintiff argues that Nationstar, as
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`the current loan servicer who is attempting to foreclose, is not a nominal party, but a necessary party,
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`and because Nationstar is a citizen of Texas, the parties are not completely diverse, and the Court
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`lacks subject-matter jurisdiction over this lawsuit.
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`Case 4:16-cv-00389-ALM Document 17 Filed 08/16/16 Page 8 of 10 PageID #: 282
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`The Court agrees with Plaintiff’s general citations of the various duties that a loan servicer
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`may undertake in carrying out its duties to the parties. It is uncontested that Nationstar, as the current
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`mortgage servicer, has statutory authority to act on behalf of Deutsche Bank, the mortgagee.
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`However, the statute does not grant Nationstar the power to conduct a non-judicial foreclosure sale,
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`because that authority comes from the agreement between the mortgagee and the property owner,
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`which allows the servicer to act on behalf of the mortgagee.
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`The Court must focus its analysis on what relief Plaintiff is seeking in this case. Plaintiff has
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`one claim. Plaintiff seeks a declaratory judgment that the Defendants are barred by the applicable
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`statute of limitations from foreclosing on the property. Plaintiff also seeks injunctive relief. Based
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`upon the relief Plaintiff is seeking, the Court finds that Nationstar is a nominal party. Nationstar is
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`not a necessary party for the relief sought in this case. If Nationstar were not a party, the Court could
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`enter a final judgment, assuming Plaintiff prevails, against Deutsche Bank, giving Plaintiff the full
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`relief she has requested.
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`Although Plaintiff’s motion to remand fails to cite any authority that addresses the legal
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`standard for determining whether a defendant is a nominal party, Plaintiff does cite several cases for
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`the prospect that a servicer is a real party in interest. See BAC Home Loans Servicing, LP v. Tex.
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`Realty Holdings, LLC, 901 F. Supp. 2d 884, 909 (S.D. Tex. 2012); Greer v. O'Dell, 305 F.3d 1297,
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`1302 (11th Cir. 2002); CWCapital Asset Mgmt., LLC v.Chicago Prop., LLC, 610 F.3d 497, 501 (7th
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`Cir. 2010); ECF N. Ridge Assocs., L.P. v. ORIX Capital Mkts, L.L.C., 336 S.W.3d 400, 407 (Tex.
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`App.—Dallas 2011, pet. denied). None of these cited cases address the question of whether a
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`servicer is a nominal party in a removal situation. Instead, the cases address whether a servicer can
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`qualify as a real party in interest with standing to file suit in its own name.1
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`In her reply, Plaintiff does state part of the legal standard applicable to the Court’s analysis:
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`whether the plaintiff can establish a cause of action against the non-removing defendant in state
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`court. See Farias, 925 F.2d at 872. Additionally, Plaintiff asserts that she could establish a cause
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`of action against Nationstar, and Nationstar is not a nominal party. Plaintiff argues that she can
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`maintain an action against Nationstar for any improper acts and omissions associated with the Deed
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`of Trust lien and power of sale such as what is alleged in this case, being the acts and omissions
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`associated with the foreclosure of a void Deed of Trust lien. The problem with Plaintiff’s argument
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`is that the petition on file at the time of removal does not support this argument. Plaintiff has no
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`affirmative causes of actions, and only seeks declaratory and injunctive relief. Plaintiff only seeks
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`a declaration that foreclosure is barred by the applicable statute of limitations. Based upon this
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`request, the only required party is Deutsche Bank, the mortgagee. Based upon the relief being sought
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`by Plaintiff, Nationstar, the servicer, is not a required party. There are also no allegations that the
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`servicer did anything wrong other than allegedly improperly seeking foreclosure as the agent for
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`Deutsche Bank. Based upon the facts alleged, there are no independent causes of action that would
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`be plausible.2
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`1 In CWCapital, the court acknowledged that the issue of whether diversity jurisdiction
`exists is a separate inquiry than whether the servicer is a real party in interest. See CWCapital
`Asset Mgmt, LLC, 610 F.3d at 500.
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`2 Although there could be situations where a servicer could do something that would
`allow for an independent cause of action against a servicer, Plaintiff asserts no such claims in this
`case.
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`CONCLUSION
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`It is therefore ORDERED that Plaintiff’s Motion to Remand (Dkt. #9) is hereby DENIED,
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`and Nationstar Mortgage, LLC is hereby DISMISSED.
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`10