Crystal Lightfoot v. Cendant Mortgage Corporation
769 F.3d 681
9th Cir.2014Background
- Plaintiffs Hollis-Arrington and Lightfoot sued Fannie Mae in state court after prior federal suits and foreclosures; Fannie Mae removed to federal court invoking its federal charter’s sue‑and‑be‑sued clause.
- District court denied remand and dismissed plaintiffs’ claims on res judicata/collateral estoppel; Ninth Circuit initially affirmed, then withdrew disposition to address jurisdictional question.
- Central legal question: whether Fannie Mae’s charter provision authorizing it “to sue and be sued ... in any court of competent jurisdiction, State or Federal” confers federal-question subject‑matter jurisdiction.
- Majority holds that under American National Red Cross v. S.G. and related precedent, a sue‑and‑be‑sued clause that specifically references federal courts confers federal‑question jurisdiction; applies that rule to Fannie Mae’s charter.
- Dissent contends the proviso “of competent jurisdiction” requires an independent basis of jurisdiction (i.e., the clause does not, by itself, confer federal jurisdiction), and relies on statutory history and post‑1954 practice to support that reading.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fannie Mae’s sue‑and‑be‑sued clause confers federal‑question jurisdiction | Clause’s reference to "State or Federal" courts creates federal jurisdiction so removal was proper | Clause is qualified by "of competent jurisdiction," so federal jurisdiction must come from another source | Held: clause confers federal‑question jurisdiction because it expressly references federal courts and Red Cross controls |
| Effect of the 1954 substitution of "court of competent jurisdiction" for "court of law or equity" | (Dissent) change shows Congress removed automatic federal‑jurisdiction grant | (Majority) change was modernization, not intent to eliminate federal jurisdiction; Congress retained explicit reference to federal courts | Held: 1954 change did not eliminate jurisdictional effect; context supports modernization/non‑jurisdictional purpose |
| Relevance of later amendments (1974) and legislative history | (Dissent) 1974 deeming Fannie Mae a D.C. corporation shows Congress intended diversity hook because federal question was removed in 1954 | (Majority) 1974 provision addresses personal‑jurisdiction/venue if Fannie Mae moved offices and does not show Congress intended to eliminate federal‑question jurisdiction in 1954 | Held: 1974 amendment does not undermine conclusion that the sue‑and‑be‑sued clause confers federal‑question jurisdiction |
| Whether post‑1954 circuit and district decisions interpreting similar language control | (Dissent) several circuits/district courts interpret "competent jurisdiction" as requiring independent jurisdictional basis | (Majority) many of those cases predate Red Cross; D.C. Circuit decision supports federal‑jurisdiction reading | Held: Red Cross rule and later D.C. Circuit precedent (Pirelli) govern; clause supplies federal‑question jurisdiction |
Key Cases Cited
- American Nat’l Red Cross v. S.G., 505 U.S. 247 (1992) (sue‑and‑be‑sued clause that specifically mentions federal courts may confer federal‑question jurisdiction)
- Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738 (1824) (charter explicitly naming federal courts confers federal jurisdiction)
- Bank of the United States v. Deveaux, 9 U.S. (5 Cranch) 61 (1809) (general authorization to "sue and be sued" does not by itself confer federal jurisdiction)
- Bankers’ Trust Co. v. Texas & Pac. Ry. Co., 241 U.S. 295 (1916) (charter language lacking specific reference to federal courts does not confer federal jurisdiction)
- D’Oench, Duhme & Co. v. FDIC, 315 U.S. 447 (1942) (sue‑and‑be‑sued clause expressly referencing State or Federal courts supports federal jurisdiction)
- Testa v. Katt, 330 U.S. 386 (1947) (state courts of competent jurisdiction must hear certain federal causes of action)
- Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust ex rel. Fed. Nat’l Mortg. Ass’n v. Raines, 534 F.3d 779 (D.C. Cir. 2008) (applies Red Cross rule to Fannie Mae’s charter and finds federal‑question jurisdiction)