WBCMT 2007-C33 NY Living, LLC v. 1145 Clay Avenue Owner, LLC
964 F. Supp. 2d 265
S.D.N.Y.2013Background
- Plaintiff WBCMT 2007-C33 NY Living, LLC (WBCMT) sued in diversity to foreclose a $133 million mortgage on 40 New York multifamily properties against 36 LLC Borrower Defendants, a guarantor, and other creditors.
- WBCMT’s operating agreement names "U.S. Bank National Association, as trustee for the registered holders of Wachovia Bank Commercial Mortgage Trust, series 2007-C33" as the sole member; WBCMT is managed by another LLC, LNR Partners.
- Borrower Defendants moved under Rule 12(b)(1) to dismiss for lack of subject matter jurisdiction, challenging WBCMT’s citizenship and arguing the trustee status requires considering trust beneficiaries’ citizenship.
- Factual contention: Borrowers suspect some certificate-holders (beneficial owners) are New York or Delaware entities; WBCMT did not allege beneficiaries’ identities.
- Court found, based on the operating agreement and amendment, that WBCMT’s sole member is a trustee (U.S. Bank NA) and that U.S. Bank’s citizenship (Ohio) controls the LLC’s citizenship.
- Court also held WBCMT itself holds all rights, title, and interest in the loan documents and therefore is a real and substantial party to the controversy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether diversity jurisdiction exists given LLC membership structure | WBCMT: sole member is U.S. Bank (trustee); citizenship of trustee governs | Borrowers: must consider citizenship of trust beneficiaries; trustee membership means beneficiaries determine LLC citizenship | Held: When sole member is a trustee, the trustee's citizenship controls; diversity satisfied via U.S. Bank (Ohio) |
| Whether the operating agreement properly identifies the sole member | WBCMT: operating agreement & amendment make U.S. Bank sole member | Borrowers: amendment invalid/did not effect change; beneficiaries functionally members | Held: Amendment valid under agreement; U.S. Bank is the sole member per operating agreement |
| Whether courts must "unravel" trust/beneficiary arrangements to determine citizenship | WBCMT: trustee can sue in its own right; no need to look to beneficiaries | Borrowers: citizenship inquiry should include beneficiaries (more layers) | Held: No unraveling here — applicable precedent allows trustee’s citizenship to suffice when trustee is sole member and acts in its own right |
| Whether plaintiff is a "real and substantial party" (not mere agent) | WBCMT: it holds all rights, title and interest in loan documents, so has a stake | Borrowers: U.S. Bank lacks control over trust assets and is a conduit for beneficiaries | Held: WBCMT itself holds the loan rights and is a real and substantial party to the controversy |
Key Cases Cited
- Navarro Savings Ass'n v. Lee, 446 U.S. 458 (real party in interest/when trustees may sue in own right)
- Carden v. Arkoma Associates, 494 U.S. 185 (LLC citizenship follows its members)
- Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186 (party suing in multiple capacities counts as real party)
- Wachovia Bank, N.A. v. Schmidt, 546 U.S. 303 (national bank citizenship rule)
- Makarova v. United States, 201 F.3d 110 (plaintiff bears burden to prove subject-matter jurisdiction)