Landmark Equity Fund II, LLC v. Residential Fund 76, LLC
631 F. App'x 882
11th Cir.2015Background
- RF76 contracted with Citigroup to purchase a pool of real estate loans; LFS (Landmark’s predecessor) contracted separately with RF76 to buy some of those loans. RF76 failed to assign certain loans to LFS, claiming it lacked assignments from Citigroup. LFS assigned its claims to Landmark.
- Landmark sued RF76, REMIC, and Citigroup in federal court asserting contractual, third-party beneficiary, implied/quasi-contract, and unjust enrichment claims.
- RF76 and REMIC moved to dismiss for lack of subject-matter jurisdiction, arguing LFS manufactured diversity by assigning claims to Landmark; Citigroup moved to dismiss under Rule 12(b)(6).
- The district court dismissed RF76 and REMIC without prejudice for lack of jurisdiction (finding collusive assignment under 28 U.S.C. § 1359) but concluded they were dispensable parties and retained jurisdiction over Landmark’s claims against Citigroup.
- The court then dismissed Landmark’s claims against Citigroup with prejudice under Rule 12(b)(6) for failure to state a claim (holding Landmark was not an intended third-party beneficiary and equitable/quasi-contract claims were precluded by existing written contracts).
- Landmark appealed the Rule 12(b)(6) dismissal and the district court’s retention of jurisdiction over Citigroup.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether district court should have dismissed the entire case for lack of subject-matter jurisdiction after finding collusive assignment under § 1359 | LFS’s retained interest made LFS indispensable; entire case must be dismissed | Court can cure diversity defect by dropping nondiverse dispensable parties and retain claims against diverse defendants | Affirmed: court properly dismissed RF76/REMIC and retained claims against Citigroup because RF76/REMIC were dispensable and the cure was permitted |
| Whether RF76 and REMIC were required parties under Rule 19(a) (i.e., indispensability) | RF76/REMIC necessary because Citigroup must first deliver assignments to RF76 for Landmarks’ requested relief | RF76/REMIC have not asserted an interest; complete relief against Citigroup could be granted without them | Affirmed: district court did not abuse discretion in finding RF76/REMIC dispensable under Rule 19(a) and (b) |
| Whether the court erred by proceeding without LFS after finding collusive assignment | LFS retained an interest and thus is indispensable; absence of LFS prevents final adjudication | Relevant test asks whether LFS would be indispensable absent the assignment; LFS assigned its rights so it is not presently indispensable | Affirmed: finding of collusion pertained to what would have been indispensable absent assignment; that does not prevent proceeding against Citigroup |
| Whether Landmark stated claims against Citigroup (third-party beneficiary; implied/quasi-contract; unjust enrichment) | Landmark claims third-party beneficiary status and equitable relief against Citigroup | Contract names only Citigroup and RF76; choice-of-law (New York) bars third-party beneficiary and precludes quasi-contract/unjust enrichment where express written contract governs | Affirmed: Landmark failed to plausibly allege intended third-party beneficiary status; implied/quasi-contract and unjust enrichment precluded by the existing written contracts; dismissal with prejudice appropriate |
Key Cases Cited
- Grupo Dataflux v. Atlas Global Group, LP, 541 U.S. 567 (2004) (a jurisdictional defect can be cured by dismissal of the nondiverse party; courts must address dispensability)
- Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826 (1989) (Rule 21 permits dropping dispensable nondiverse parties to cure diversity defects)
- Horn v. Lockhart, 84 U.S. 570 (1873) (historical authorization for dismissing dispensable parties to cure jurisdiction)
- City of Marietta v. CSX Transp., Inc., 196 F.3d 1300 (11th Cir. 1999) (Rule 19 two-step test for required/indispensable parties)
- Cal. Pub. Emps. Ret. Sys. v. Shearman & Sterling, 741 N.E.2d 101 (N.Y. 2000) (third-party beneficiary claim requires clear contractual intent to benefit the third party)
- Miller v. Schloss, 113 N.E. 337 (N.Y. 1916) (no contract implied in fact where an express contract governs the subject matter)
- IDT Corp. v. Morgan Stanley Dean Witter & Co., 907 N.E.2d 268 (N.Y. 2009) (unjust enrichment recovery ordinarily precluded where a valid written contract governs the subject matter)
- Ironworkers Local Union 68 v. AstraZeneca Pharm., LP, 634 F.3d 1352 (11th Cir. 2011) (standard of review on Rule 12(b)(6): accept complaint allegations as true and construe favorably to plaintiff)