Newman v. JP Morgan Chase Bank, N.A., 81 F. Supp. 3d 735

Background

Plaintiff obtained a mortgage from Washington Mutual (WaMu) in 2006 and defaulted; WaMu failed in 2008 and the FDIC became receiver.
On September 25, 2008 the FDIC and JP Morgan Chase entered a Purchase and Assumption Agreement (PAA); the FDIC transferred WaMu’s loan assets to Chase and recorded an affidavit reflecting that transfers may occur “without assignment” under 12 U.S.C. § 1821(d)(2)(G)(i)(II).
Chase foreclosed by advertisement, purchased the property at sheriff’s sale in April 2014, and later conveyed title to Fannie Mae by warranty deed.
Plaintiff sued in state court claiming Chase lacked a recorded assignment required by Minn. Stat. § 580.02 and sought declaratory and injunctive relief; defendants removed to federal court and moved to dismiss.
Plaintiff argued the PAA was an assignment that had to be recorded (relying on Ruiz), and alternatively pointed to recorded FDIC assignments in other cases; defendants argued FIRREA permits transfers “without assignment,” preempting any state recording requirement.
The magistrate judge recommended, and the district court adopted, dismissal with prejudice: the PAA was not a recordable assignment and federal law (FIRREA) precludes imposing Minnesota’s recording requirement in this context.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the PAA was a mortgage assignment that had to be recorded under Minn. Stat. § 580.02	The PAA’s language (it “assigns” assets) shows it is an assignment that must be recorded before foreclosure	The PAA effectuated transfers under FIRREA by operation of law; the word “assigns” is descriptive and not a state-recordable assignment	The PAA was not a recordable assignment; FDIC transferred assets by operation of federal law, so no recording was required
Whether FIRREA preempts Minnesota’s recording requirement so that a transfer by the FDIC need not be recorded	Ruiz requires assignments to be recorded before foreclosure, so state law controls	FIRREA authorizes FDIC transfers “without assignment”; imposing recording would conflict with FIRREA’s purpose and is preempted	Even if the PAA were treated as an assignment, conflict preemption prevents imposing Minn. Stat. § 580.02 recording requirements on FIRREA transfers
Whether plaintiff may obtain an injunction to stop state-court eviction proceedings	Injunction necessary to prevent eviction and preserve title	Anti-Injunction Act bars federal injunctions against ongoing state proceedings; underlying claim fails on the merits	Injunctive relief unavailable: injunction is a remedy dependent on a viable underlying claim and is barred by the Anti-Injunction Act
Whether dismissal should be with or without leave to amend	Plaintiff sought to proceed; argued factual bases for assignment claim	Defendants argued claim is legally deficient and foreclosed by precedent and FIRREA	Complaint dismissed with prejudice because defects cannot be cured by amendment

Key Cases Cited

Demelo v. U.S. Bank Nat’l Ass’n, 727 F.3d 117 (1st Cir. 2013) (federal-law transfer can obviate state assignment/recording requirement)
Drobny v. JP Morgan Chase Bank, N.A., 929 F. Supp. 2d 839 (N.D. Ill. 2013) (FDIC may transfer loans without individual assignments under FIRREA)
Sahni v. American Diversified Partners, Inc., 83 F.3d 1054 (9th Cir. 1996) (state restrictions on transfers preempted by FIRREA provision authorizing transfers without consent or assignment)
Federal Deposit Ins. Corp. v. Bank of Boulder, 911 F.2d 1466 (10th Cir. 1990) (state law restrictions on transfers preempted by federal banking statutes governing FDIC authority)
Kim v. JPMorgan Chase Bank, N.A., 825 N.W.2d 329 (Mich. 2012) (Michigan Supreme Court holding PAA did not transfer by operation of law; discussed but not followed)
Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standards for plausible claims)
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (Twombly pleading standard)