Salomon v. Federal National Mortgage Association
2:15-cv-00332
D. Nev.Mar 31, 2017Background
- Plaintiff Richard Salomon filed a state-court quiet-title action (Nevada property at 1150 N. Buffalo Dr., Unit 1055) on January 5, 2015.
- Defendant Federal National Mortgage Association (Fannie Mae) removed the case to federal court relying on Lightfoot v. Cendant Mortgage Corp. to assert federal jurisdiction.
- After the U.S. Supreme Court’s decision in Lightfoot, which limited the reach of Fannie Mae’s "sue and be sued" clause, the district court issued an order to show cause why the case should not be remanded.
- Fannie Mae argued (1) federal-question jurisdiction via the coercive-action (declaratory/coercive) doctrine tied to the Federal Foreclosure Bar and (2) diversity jurisdiction by asserting fraudulent joinder of non-diverse defendants (the Garcias and Bank of Nevada).
- The court found Fannie Mae’s federal-question argument insufficient because the plaintiff’s complaint pleaded only state-law claims and the Federal Foreclosure Bar does not create an independent federal cause of action.
- The court rejected Fannie Mae’s fraudulent-joinder argument (and its attempt to assert a new basis for removal) and remanded the case to Clark County District Court for lack of subject-matter jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal-question jurisdiction exists | Salomon’s complaint alleges only state-law quiet-title claims (no federal question) | Fannie Mae: coercive-action doctrine and 12 U.S.C. § 4617(j)(3) would give rise to a federal question related to the Federal Foreclosure Bar | Court: No federal-question jurisdiction; declaratory/quiet-title claims do not invoke coercive-action exception and the Foreclosure Bar is not an independent cause of action |
| Whether diversity jurisdiction exists | Salomon: non-diverse defendants (Garcias, Bank of Nevada) destroy diversity | Fannie Mae: those defendants were fraudulently joined and should be disregarded for diversity | Court: Fraudulent-joinder showing fails; diversity jurisdiction not established |
| Whether Lightfoot forecloses removal based solely on Fannie Mae’s charter clause | Salomon: Lightfoot bars removal based only on "sue or be sued" clause | Fannie Mae: asserts independent bases for jurisdiction despite Lightfoot | Court: Lightfoot controls; Fannie Mae did not show a valid independent basis for federal jurisdiction |
| Whether Fannie Mae may amend removal grounds after removal to add new jurisdictional bases | Salomon: removing party cannot add a new basis for removal post hoc | Fannie Mae: attempted to rely on arguments not previously asserted at removal | Court: Amendments to add new removal bases are impermissible; cannot cure defective jurisdiction by adding new grounds post-removal |
Key Cases Cited
- Lightfoot v. Cendant Mortgage Corp., 137 S. Ct. 554 (2017) (Fannie Mae’s charter does not confer federal jurisdiction absent an independent jurisdictional basis)
- Medtronic, Inc. v. Mirowski Family Ventures, LLC, 134 S. Ct. 843 (2014) (coercive-action/declaratory-judgment framework for federal-question jurisdiction)
- Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1 (1983) (well-pleaded complaint rule governs federal-question jurisdiction)
- Caterpillar Inc. v. Williams, 482 U.S. 386 (1987) (federal jurisdiction exists only from plaintiff’s well-pleaded complaint; federal defenses insufficient)
- Gaus v. Miles, Inc., 980 F.2d 564 (9th Cir. 1992) (removal statutes strictly construed; doubt requires remand)
- Morris v. Princess Cruises, Inc., 236 F.3d 1061 (9th Cir. 2001) (complete diversity requirement)
- Weeping Hollow Avenue Trust v. Spencer, 831 F.3d 1110 (9th Cir. 2016) (prior owner’s joinder in foreclosure/quiet-title context is not necessarily fraudulent)
- Hamilton Materials, Inc. v. Dow Chemical Corp., 494 F.3d 1203 (9th Cir. 2007) (standard for fraudulent joinder)
- Hunter v. Philip Morris USA, 582 F.3d 1039 (9th Cir. 2009) (court may ignore fraudulently joined defendants when establishing diversity)
- Arco Envtl. Remediation, LLC v. Dep’t of Health & Envtl. Quality of Mont., 213 F.3d 1108 (9th Cir. 2000) (removing party may not add a new basis for removal after the fact)