U.S. Bank National Ass'n v. Nesbitt Bellevue Property LLC
859 F. Supp. 2d 602
S.D.N.Y.2012Background
- U.S. Bank seeks a receiver for the defendants’ Embassy Suites properties due to loan defaults; plaintiff sues as Trustee under a 2006 PSA, with Torchlight as Special Servicer under the PSA.
- Defendants are LLCs operating Embassy Suites hotels collateral for the loans; Torchlight is incorporated in Delaware and acts as Special Servicer under the PSA.
- Plaintiff asserts diversity jurisdiction under 28 U.S.C. § 1332; amount in controversy exceeds $75,000 but complete diversity is contested due to Torchlight’s citizenship.
- The key issue is whether Torchlight’s citizenship must be considered for diversity; U.S. Bank is the real party in interest under Rule 17(a) and the trustee possesses customary powers.
- Court may appoint a receiver; arguments about imminent danger to the properties are contested and an evidentiary hearing is scheduled for May 9, 2012.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Torchlight’s citizenship relevant to diversity? | Torchlight’s citizenship may affect diversity if considered a party. | Torchlight’s citizenship should influence the diversity calculation. | Torchlight’s citizenship not controlling; diversity rests with U.S. Bank as real party in interest. |
| Is U.S. Bank the real party in interest for Rule 17(a)? | U.S. Bank, as Trustee, has customary powers to sue on behalf of the trust. | Torchlight may prosecute the action under the PSA. | U.S. Bank is the real party in interest; Torchlight’s role does not negate that. |
| Do Torchlight’s attributes defeat complete diversity or require its joinder as a party? | Torchlight could affect diversity as a participant with interests. | Torchlight is a representative, not a separately interested party. | Torchlight is not a separate real party for the diversity analysis; diversity remains intact with U.S. Bank. |
| Should the court appoint a receiver in this diversity action? | Receivership is warranted to protect the collateral due to potential franchise risk. | Facts show disputed imminent danger and need for evidence. | Factual dispute exists; an evidentiary hearing is scheduled to resolve the need for a receiver. |
| What is the outcome on the motion to dismiss based on jurisdiction? | Diversity exists; dismissal is improper. | Lack of complete diversity could defeat jurisdiction. | Rule 12(b)(1) dismissal denied; jurisdiction established. |
Key Cases Cited
- Navarro Sav. Ass’n v. Lee, 446 U.S. 458 (1980) (trustee has customary powers; real party in interest when suing)
- Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186 (2d Cir. 2003) (Teal party in interest vs. real party to determine diversity)
- Lehman Bros. Holdings, Inc. v. Lehman, 237 F.Supp.2d 618 (D. Md. 2002) (trustee powers under PSA analysis)
- Nomura Asset Capital Corp. v. LaSalle Bank Nat’l Ass’n, 180 F.Supp.2d 465 (S.D.N.Y. 2001) (trustee’s real party in interest despite special servicer delegation)
- Airlines Reporting Corp. v. S & N Travel, Inc., 58 F.3d 857 (2d Cir. 1995) (agents acting on behalf of principals; citizenship controls for diversity)
- CWCapital Asset Mgmt., LLC v. Chicago Properties, LLC, 610 F.3d 497 (7th Cir. 2010) (trustee/diversity where servicer role involved; distinctions from other circuits)