ORDER
Pending before the Court are Defendants Crouch Insurance Consulting, Ltd., LLC and Gregory Crouch’s Rule 12(b)(6) Motion to Dismiss and Brief in Support, Defendant Michele Whiteside’s Motion to Dismiss for Lack of Personal Jurisdiction Pursuant to Fed.R.Civ.P. 12(b)(2), and, Subject Thereto, Defendants Michele Whiteside, Fannie Mae, Fannie Mae Foundation, Bank of America Corporation, Trimont Real Estate Advisors, Inc., and Tritex Real Estate Advisors, Inc.’s Motion to Dismiss Plaintiffs Claims Pursuant to Fed. R.CivP. 9(b) and 12(b)(6), and Plaintiff Rincon Del Sol, LLC’s Motion to Remand. Having considered the motions, submissions, and applicable law, the Court determines the motion to remand should be granted and the motions to dismiss should be denied as moot.
BACKGROUND
This case arises from a dispute over insurance coverage for an apartment complex located in Houston, Texas. Plaintiff Rincon Del Sol, LLC (“Plaintiff’), a California corporation, alleges that an apartment complex (the “Property”) it owns incurred $634,057.87 worth of damage as a result of Hurricane Ike. According to Plaintiff, the insurance carriers fraudulently assessed damage at $48,901.99, an amount below the deductible, and refused to pay Plaintiffs claims. Plaintiff further alleges that some of the defendants breached a forbearance agreement made while awaiting proceeds of its insurance claims, resulting in foreclosure of the Property.
On January 6, 2010, Plaintiff filed its original petition in the 281st Judicial District Court of Harris County, Texas, alleging various causes of actions against multiple defendants. Plaintiff amended its complaint on January 28, 2010, adding the Federal National Mortgage Association (“Fannie Mae”) as a defendant. On February 8, 2010, Defendants Steadfast Insurance Company, Essex Insurance Company, and Axis Surplus Insurance Company (“Removing Defendants” or “Defendants”) filed a notice of removal to federal court asserting diversity jurisdiction. These defendants admit that Defendants Mike Carpenter, Gregory Crouch, and Crouch Insurance Company (“Texas Defendants”) are citizens of Texas for diversity purposes but argue that they were improperly joined. The Removing Defendants contend there is “no reasonable possibility of recovery” against the Texas Defendants, making removal proper. Plaintiff argues that the Texas Defendants were not improperly joined because Plaintiff has asserted legitimate claims against them and, therefore, the case must be remanded to state court.
On February 12, 2010, the Removing Defendants filed a supplemental notice of removal, asserting an additional basis for jurisdiction due to Fannie Mae’s addition as a party. They argue Fannie Mae’s presence as a defendant confers original jurisdiction upon federal courts under provisions 12 U.S.C. § 1723a(a), the Fannie
STANDARD OF REVIEW
The party seeking to remove the case to federal court bears the burden of establishing federal jurisdiction.
Jernigan v. Ashland Oil, Inc.,
LAW & ANALYSIS
The Removing Defendants contend removal is proper for two reasons: (1) diversity jurisdiction exists because the Texas Defendants were improperly joined; and (2) the existence of Fannie Mae as a defendant compels the removal to federal forum under 12 U.S.C. § 1723a(a). The Court addresses each argument in turn.
I. Diversity Jurisdiction
A. Complete Diversity
A defendant may remove a state-court action to federal court based on diversity jurisdiction.
See
28 U.S.C. §§ 1332, 1441. Diversity jurisdiction requires complete diversity of citizenship between all plaintiffs and all defendants.
See Owen Equip. & Erection Co. v. Kroger,
The parties agree that Plaintiff is a citizen of California for diversity purposes. Thus, for diversity jurisdiction to exist, all defendants must be citizens of states other than California. It is apparent that is the case here. Because each defendant is diverse from Plaintiff, the Court determines that complete diversity exists in this ease.
B. Local Defendant
But even when complete diversity exists, 28 U.S.C. § 1441(b) imposes a limitation on removal.
See
28 U.S.C. § 1441(b). An action in which there exists complete diversity of citizenship is not removable if a defendant is a citizen of the state in which the action was brought.
Crockett v. R.J. Reynolds Tobacco Co.,
The Removing Defendants argue that the Texas Defendants were improperly
The Court must evaluate the factual allegations made in the state-court pleadings in the light most favorable to Plaintiff.
See B., Inc. v. Miller Brewing Co.,
There are two proper methods for predicting whether a plaintiff has a reasonable basis of recovery under state law: (1) “[t]he court may conduct a Rule 12(b)(6)-type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant”; or (2) “pierce the pleadings and conduct a summary inquiry” in cases in which the plaintiff has “misstated or omitted discrete facts that would determine the propriety of joinder.”
Smalhvood,
Carpenter, Crouch, and Crouch Insurance Consulting are local defendants. The Removing Defendants do not contend there is “actual fraud in the pleading of jurisdictional facts.” Indeed, they agree that the Texas Defendants are Texas citizens. Rather, they argue that Plaintiff cannot show a legitimate cause of action against the Texas Defendants. Plaintiff’s complaint asserts that Plaintiff contracted with Carpenter to manage the Property. Plaintiff alleges the contract obligated Carpenter to procure the proper insurance coverage for the Property and Carpenter breached his obligation. Further, Plaintiff alleges Carpenter entered into a side agreement with Crouch to purchase insufficient insurance coverage from Crouch Insurance. Assuming Plaintiffs factual allegations are true — as the Court must at this stage — the Court finds that Plaintiff asserts a claim against Carpenter upon which Plaintiff has a reasonable basis to seek recovery.
1
See Smallwood,
II. Original Jurisdiction
Next, the Removing Defendants argue subject matter jurisdiction nevertheless exists because Defendant Fannie Mae’s charter grants it the protection of a federal forum. Fannie Mae’s charter authorizes the organization “to sue and be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal.” 12 U.S.C. § 1723a(a). Defendants contend this provision, standing alone, confers upon the Court original subject matter jurisdiction in this case. Thus, Defendants argue, removal is proper merely because Fannie Mae is a named defendant.
To support their argument that original jurisdiction exists, Defendants rely upon
American National Red Cross v. S.G.,
As an initial matter, the Court finds no opinion of the United States Court of Appeals for the Fifth Circuit applying
Red Cross
in interpreting the Fannie Mae “sue- and-be-sued” charter language. Moreover, it appears that the United States Court of Appeals for the District of Columbia and a few district courts across the country have addressed it and its effect on federal jurisdiction, with those courts taking divergent opinions.
Compare Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Raines,
Defendants point the Court to the D.C. Circuit’s opinion in
Pirelli
as authority for its preferred construction of the Fannie Mae charter’s “sue-and-be-sued” provision. In
Pirelli,
the D.C. Circuit relied upon
Red Cross
and concluded the Fannie Mae “sue- and-be-sued” language “provides federal subject matter jurisdiction to Fannie Mae cases.”
Pirelli,
The Removing Defendants argue that “in light of this clear precedent contrary to [Plaintiffs] position” the Court should deny remand. The Court is unconvinced. First, Pirelli is not binding on this Court, and, given other courts’ more persuasive analyses, the Court is finds that Red Cross does not compel a decision in this case that original jurisdiction exists. Rather, the Court finds the “sue-and-be-sued” provision in the Fannie Mae charter requires an independent source of subject matter jurisdiction. This is so because the Fannie Mae “sue-and-be-sued” provision differs distinctly from the language with which the Supreme Court was confronted in Red Cross. Indeed, as the Pirelli court admitted, “the Fannie Mae sue-and-be-sued clause differs from the Red Cross statute” in that the Fannie Mae clause contains the words “of competent jurisdiction,” whereas the Red Cross charter does not. Id. at 784-85. And, the Pirelli court acknowledges that other courts have read this language to simply waive immunity and require an independent basis of jurisdiction in federal court. Id. Nonetheless the Pirelli court took the opposite view. The Court disagrees with Pirelli.
First, the district courts that have most thoroughly analyzed this issue have found that the Fannie Mae charter’s “sue-and-be-sued” clause merely allows that plaintiffs may sue Fannie Mae in federal court but that Fannie Mae’s existence as a defendant does not compel removal to federal court.
See Knuckles,
To conclude, as Fannie Mae suggests, that its charter could be read to confer original federal jurisdiction in all suits in which it is a party, notwithstanding the absence of an independent basis for federal jurisdiction, would effectively eliminate the phrase ‘of competent jurisdiction’ from the charter. Stated differently, were the court to adopt Fannie Mae’s reading of its charter, all federal courts would possess jurisdiction, regardless of competency.
Id.
Like the court in Knuckles, this Court finds that Red Cross does not compel the conclusion that the “sue-and-be-sued” language in Fannie Mae’s charter necessarily mandates a federal forum. Rather, the Court reads the phrase “of competent jurisdiction” to require an independent basis for jurisdiction to be proper in federal court. See id. This conclusion is supported by the fact that the charter language itself explicitly states that Fannie Mae may “be sued in any court of competent jurisdiction, State or Federal.” (emphasis added). To find, as the Removing Defendants urge, that this language grants Fannie Mae an automatic right to remove to federal court regardless of the lack of an independent basis for federal jurisdiction would belie the plain language of the charter and effectively eliminate a Plaintiffs statutory right to bring suit against Fannie Mae in state court.
Moreover, the D.C. Circuit’s contention that Congress would have omitted the word “Federal” from the statute, instead of adding the words “of competent jurisdiction,” if it desired to eliminate federal jurisdiction in Fannie Mae cases is unpersuasive. As the
Knuckles
court clearly explained, elimination of federal jurisdiction could not reasonably be Congress’s intent and cannot be fairly read into the construction of the Fannie Mae charter’s “sue-and-be-sued” language.
See id.
at 564 & n. 4. Rather, the predication of federal jurisdiction upon some additional basis must have been the legislative concern when Congress included the “of competent jurisdiction, State or Federal” language into the Fannie Mae charter. This must be so because Congress included this additional language — “of competent jurisdiction” — to the Fannie Mae charter seven years after the Supreme Court put Congress on notice of the precise language in federal charters that would be sufficient to confer federal jurisdiction.
Id.; see also Red Cross,
In
Red Cross
the Supreme Court explained that it placed Congress on notice of the language sufficient to confer original jurisdiction with its opinion in
D’Oench, Duhme. Red Cross,
Other district courts have reached the same conclusion.
See, e.g., Poindexter,
Finally, a substantial number of circuit courts, including the Fifth Circuit, have found that the identical “sue-and-be-sued” language found in 12 U.S.C. § 1702 does not automatically confer federal jurisdiction. Indeed, the “majority of federal circuit courts have interpreted the phrase ‘in any court of competent jurisdiction, State or Federal’ found in 12 U.S.C. § 1702 respecting the Secretary of Housing and Urban Development, have rejected the proposition that this language serves as a grant of federal jurisdiction.”
Knuckles,
Accordingly, the Court finds that Fannie Mae’s charter does not work to confer original subject matter jurisdiction upon the Court to hear this case. Because, as the Court has explained, diversity jurisdiction is not proper here, and no other basis for federal jurisdiction exists, the Court lacks subject matter jurisdiction and this case should be remanded to state court.
III. Attorneys’ Fees
Finally, Plaintiff urges the Court to award it attorneys’ fees pursuant to 28 U.S.C. § 1447(c). Under § 1447(c), “[a]n order remanding the case may require payment of costs and any actual expenses, including attorney fees, incurred as a result of the removal.” A court may award attorneys’ fees at its discretion, and
CONCLUSION
The Court must remand this case to state court. The case does not present a federal question nor is diversity jurisdiction proper due to the presence of local defendants. Furthermore, Defendants have not met their burden of proving the local defendants were improperly joined. Accordingly, the Court hereby
ORDERS that Plaintiff Rincon Del Sol, LLC’s Motion to Remand is GRANTED. The Court farther
ORDERS that Defendants Crouch Insurance Consulting, Ltd., LLC and Gregory Crouch’s Rule 12(b)(6) Motion to Dismiss is DENIED as moot. The Court further
ORDERS that Defendant Michele Whiteside’s Motion to Dismiss for Lack of Personal Jurisdiction Pursuant to Fed. R.CivP. 12(b)(2), and, Subject Thereto, Defendants Michele Whiteside, Fannie Mae, Fannie Mae Foundation, Bank of America Corporation, Trimont Real Estate Advisors, Inc., and Tritex Real Estate Ad-visors, Inc.’s Motion to Dismiss Plaintiffs Claims Pursuant to Fed.R.Civ.P. 9(b) and 12(b)(6) is DENIED as moot. The Court further
ORDERS that this case is hereby REMANDED to the 281st Judicial district Court of Harris County, Texas.
Notes
. The Court makes no finding as to the weight of Plaintiff's claim or the probability of Plaintiff prevailing on the claim. The court simply finds that Plaintiff's claim survives the Rule 12(b)(6)-type analysis for purposes of determining whether joinder of the Texas Defendants is proper.
See Smallwood,
. It is not apparent from the record that all of the defendants consented to removal, including the Texas Defendants. It is axiomatic that all defendants in a case must consent to removal.
See, e.g., Tri-Cities Newspapers, Inc. v. Tri-Cities Printing Pressmen & Assistants Local 349,
. Although the D.C. Circuit overruled
Sealed
with its opinion in
Pirelli,
