Scott v. Northwest Trustee Services, Inc.
3:16-cv-05810
| W.D. Wash. | Dec 22, 2016Background
- Plaintiffs Floyd and Margaret Scott borrowed to buy a home in 2010 and secured the loan with a deed of trust; they defaulted in 2015 and sued in Washington state court in 2016.
- Scotts challenge the lender's standing to enforce the note and contend the trustee (Northwest Trustee Services, NWTS) was not properly appointed, rendering its foreclosure-related acts ineffective and wrongful.
- Defendants (Wells Fargo and NWTS) removed the case to federal court, asserting NWTS was a nominal defendant and its Washington citizenship should be disregarded for diversity jurisdiction.
- Scotts moved to remand, arguing they made specific allegations against NWTS and seek damages and fees from it, so NWTS is not nominal or fraudulently joined.
- Defendants argued the Scotts’ claims against both NWTS and Wells Fargo lack legal basis; defendants also filed motions to dismiss asserting Washington law defeats the claims.
- The district court addressed the burden on removers to prove a party is nominal and whether the trustee’s alleged conduct made it a real party for jurisdictional purposes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NWTS is a nominal defendant for diversity removal purposes | Scotts: complaint asserts specific conduct by NWTS and seeks money damages/fees, so NWTS is a real party | Defs: NWTS is only a trustee with no interest in the controversy and thus nominal; its citizenship should be disregarded | NWTS is not nominal; removal improper; remand granted |
| Burden of proof for removal where nominal-defendant claim asserted | Scotts: removal should fail because they pleaded substantive claims against NWTS | Defs: removing party must show by preponderance that NWTS is nominal | Court: removing party bears burden; any doubt favors remand |
| Whether the merits of claims determine nominal-party status | Scotts: merits irrelevant to whether allegations make NWTS non-nominal | Defs: because claims lack legal basis, NWTS remains nominal | Court: meritlessness does not make asserted claims nonexistent for nominal-party analysis |
| Whether fraudulent joinder was established | Scotts: no fraudulent joinder; claims against NWTS are genuine | Defs: argue no viable claims so joinder was fraudulent | Court: no suggestion of fraudulent joinder; remand required |
Key Cases Cited
- Conrad Associates v. Hartford Accident & Indemnity Co., 994 F. Supp. 1196 (N.D. Cal. 1998) (removal statute strictly construed and defendant bears burden to establish removal)
- Gaus v. Miles, 980 F.2d 564 (9th Cir. 1992) (plaintiff’s right to remand resolved against removal if any doubt exists; burden on removing party)
- S.E.C. v. Colello, 139 F.3d 674 (9th Cir. 1998) (definition and treatment of nominal defendants)
- S.E.C. v. Cherif, 933 F.2d 403 (7th Cir. 1991) (paradigmatic nominal defendant described as trustee/agent joined only to facilitate collection)
- Bacon v. Rives, 106 U.S. 99 (1882) (nominal party’s interest is incidental; outcome of controversy is immaterial to the nominal party)