Citations
- 241 F. Supp. 3d 905
Full opinion text
MEMORANDUM OPINION AND ORDER
DONOVAN W. FRANK, United States District Judge
INTRODUCTION
Petitioner U.S. Bank National Association (“U.S. Bank” or “Trustee”), acting in its capacity as Trustee, initiated this trust instruction proceeding under the Minnesota Trust Code by filing a Petition in Minnesota state court. Through its Petition, the Trustee seeks judicial instruction concerning the proper interpretation of the trusts’ governing agreements. As explained below, five other entities appeared in state court in various capacities regarding the Petition, including: Appaloosa Investment, L.P., I and Palomino Fund Ltd. (“Appaloosa”), Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”), CWCapital Asset Management LLC (“CWCAM”), and PSW NYC LLC (“PSW’). CWCAM filed a Motion to Dismiss on jurisdictional grounds, and the state court denied the motion. Freddie Mac thereafter removed the proceeding to this Court. The matter is currently before the Court on: (1) CWCAM’s Motion to Rehear CWCAM’s Motion to Dismiss Under Fed. R. Civ. P. 12(b) or Alternatively, to Adopt the State Court Order (Doc. No. 30); (2) Appaloosa’s Motion to Remand (Doc. No. 46); and (3) Freddie Mac’s Motion to Transfer (Doc. No. 53). For the reasons discussed below, the Court reserves determination on the Motion to Rehear, denies the Motion to Remand, and grants the Motion to Transfer.
BACKGROUND
U.S. Bank serves as Trustee for five trusts governed by the pooling and servicing agreements (“PSAs”) for which it seeks judicial instruction in this matter. The relevant trusts (collectively, the “Trusts”) are designated as follows:
(1) Wachovia Bank Commercial Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2007-C30 (the “C30 Trust”);
(2) COBALT CMBS Commercial Mortgage Trust 2007-C2 Commercial Mortgage Pass-Through Certificates, Series 2007-C2;
(3) Wachovia Bank Commercial Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2007-C31;
(4) ML-CFC Commercial Mortgage Trust 2007-5 Commercial Mortgage Pass-Through Certificates, Series 2007-5; and
(5) ML-CFC Commercial Mortgage Trust 2007-6 Commercial Mortgage Pass-Through Certificates, Series 2007-6.
(Doc. No. 1 (“Notice of Removal”) ¶ 19, Ex. A (“Pet.”) at 1-2.) Wells Fargo Bank, N.A. (‘Wells Fargo”) serves as Master Servicer for the Trusts, and CWCAM serves as Special Servicer. (Pet. at 1-2, Ex. A; Doc. No. 56 (“Davis Decl.”) ¶ 4, Ex. B (“Iannarone Aff.”) ¶ 7.) The PSA for the C30 Trust was entered into on March 1, 2007, by and among Wachovia Commercial Mortgage Securities, Inc., as Depositor; Wachovia Bank, National Association, as Master Ser-vicer; CWCAM, as Special Servicer; and Wells Fargo Bank, N.A., as the original Trustee. (Pet. at 1-2.) The PSAs are governed by New York law. (Id. ¶ 24.)
The Trustee seeks judicial instruction regarding a disputed interpretation over the proper allocation of proceeds from the sale of a significant trust asset — a loan secured by a mortgage on the Peter Cooper Village and Stuyvesant Town property in New York, New York (the “Property” or “Stuy Town”). (Id. at 1-2, ¶2.) The Property is New York City’s largest residential development. (Iannarone Aff. ¶ 14.) A $3 billion senior loan (the “Senior Loan”) secured by a mortgage on the Property was divided into six promissory notes sold to the Trusts. (Pet. ¶¶ 20, 22.) On March 12, 2007, a Co-Lender Agreement was entered into by and among Wachovia Bank, National Association and Merrill Lynch Mortgage Lending, Inc. establishing a “Lead Lender” on the Senior Loan with the right to administer the Senior Loan and enforce the loans on behalf of all of the Trusts. (Id. ¶ 26 & n.4; see also Doc. No. 94 (“Davis Decl. Ill”) ¶ 3, Ex. B (“Co-Lender Agreement”).) According to the Petition, the C30 Trust holds the rights of the Lead Lender. (Id. ¶ 26.)
Beginning in November 2009, CWCAM administered the Senior Loan on the Property as Special Servicer for the C30 Trust from offices in New York and Maryland. (Id. ¶ 28; Iannarone Aff. ¶¶ 9-10.) Following default by the borrowers, CWCAM foreclosed on the Property and eventually obtained title to the Property via a deed in lieu of foreclosure in 2014. (Pet. ¶¶ 4, 29-33.) In October 2015, it was announced that the Property was to be sold for approximately $5.3 billion. (Id. ¶ 36.) CWCAM, as Special Servicer for the C30 Trust, claimed that it was entitled to more than $500 million constituting Penalty Interest from the sale of the Property as compensation pursuant to the PSA. (Id. ¶ 7; see also Doc. No. 33 (“Crosby Aff.”) ¶ 9, Ex. G at 5-6.) Certain investors, namely Appaloosa, have argued that these amounts belong to the Trusts as Gain-on-Sale Proceeds. (Pet. ¶ 8.)
On November 12, 2015, Appaloosa filed a lawsuit concerning the Trusts in New York State Court, seeking a preliminary injunction against CWCAM to enforce its interpretation of the proper distribution of sale proceeds. (Id. ¶¶ 56-58.) Appaloosa’s motion for a preliminary injunction was denied for lack of standing, and Appaloosa voluntarily discontinued its lawsuit. (Id. ¶ 58.) Thereafter, Appaloosa requested that the Trustee take action to enforce the PSA and threatened litigation against the Trustee if it failed to take steps necessary to preserve and protect the Trusts. (Id. ¶ 59.)
On December 18, 2015, the Property was sold; the sale negotiations and closing took place in New York. (Iannarone Aff. ¶ 17.) CWCAM thereafter allocated the proceeds from its offices in New York. (Id. ¶ 18.) CWCAM has retained the portion of the proceeds representing Penalty Interest based on its interpretation' of the PSA. (Id. ¶ 19.)
On December 17, 2015, in light of the competing interpretations regarding the distribution of the sale proceeds, the Trustee filed a Petition for Instructions in state court in Ramsey County, Minnesota (“State Court”) pursuant to the Minnesota Trust Code. (See generally Pet.) Specifically, the Petition posed two discrete issues for judicial resolution;
A. Can any sale proceeds from the Property be properly allocated .to pay any “penalty interest (arising out of a default)” that accrued on the REO Loans relating to the Property?
B. What amount of “penalty interest (arising out of a default)” accrued on the REO Loans relating to the Property?.
(Id. at 10-13.) Accordingly, in its Request for Relief, the Trustee sought an Order from the Court, in relevant part, as follows:
(i) Instructing the Trustee, beneficiaries, and any other interested parties as to the amount of the Disputed Funds, if any, that constitute Penalty Interest that CWCAM is entitled to receive as additional servicing compensation, with respect to each Trust;
(ii) Instructing the Trustee, beneficiaries, and any other interested parties as to the amount of the Disputed Funds, if any, that constitute Gain-on-Sale Proceeds that must be deposited into the Gain-on-Sale Reserve Account, with respect to each Trust ...
(Id. at Request for Relief ¶ C.)
On December 18, 2015, the State Court issued an Order setting a February 8,2016 hearing regarding the Petition. (Doc, No. 84 (“Davis Decl. II”) ¶ 3, Ex. B (“COBALT 2007-C2, WBCMT 2007-C31, MLCFC 2007-5, and MLCFC 2007-6 Trusts Notice”) at Appendix II.) The Order directed the Trustee to send copies of the Order and Petition to all Certificateholders and the parties to the PSAs, including the Special Servicer, and it provided the following regarding the rights of parties in interest:
5, Parties in interest may object to the Petition, or any of the relief being sought therein, by filing a memorandum of law setting forth their respective positions regarding the issues presented by the Petition ... not later than five (5) days before the hearing date set forth above.
6. The parties in interest are hereby referred to the Petition provided to them and on file in the office of the Court Administrator for a specification of the matters to be considered at said hearing.
(See id.) On or about December 29, 2015, the Trustee notified the Certificateholders of the State Court proceeding, enclosing a copy of the Petition and the December 18, 2015 State Court Order. (Doc. No. 50 (“Bolin Decl”) ¶ 6, Ex. A (“C30 Trust Notice”); COBALT 2007-C2, WBCMT 2007-C31, MLCFC 2007-5, and MLCFC 2007-6 Trusts Notice.) Appaloosa, Fannie Mae, and Freddie Mac are all Certificateholders in one or more of the Trusts. (Bolin Decl. ¶ 2; Doc. No. 49 (“Abramson Decl.”) ¶ 12, Ex. J at 3; Doc. No. 85 (“Walker Decl.”) ¶¶ 3 — 4.)
On February 3, 2016, Appaloosa filed an Objection and Answer to the Petition, asserting its position regarding the proper characterization of the disputed funds. (Doc. No. 76 (“Biron Decl.”) ¶ 2, Ex. 1.) On April 28, 2016, Fannie Mae filed an Objection to the Petition, challenging Appaloosa’s interpretation of “Gain-on-Sale” Proceeds because it would divert tens of millions of dollars in sales proceeds from senior Certificateholders to junior Certifi-cateholders. (Abramson Decl. ¶ 12, Ex. J.) On May 6, 2016, Freddie Mac filed an objection on the same basis. (Abramson Decl. ¶ 13, Ex. K.)
On February 24, 2016, CWCAM filed a Motion to Dismiss the Petition, arguing that (1) the State Court lacked in rem jurisdiction over the Trusts, (2) the Trustee had no standing, (3) the State Court lacked personal jurisdiction over CWCAM, (4) the Court should dismiss based on forum non conveniens because New York would be a proper alternative forum, and (5) the action should be dismissed as moot due to the completed sale of the Property. (See generally Crosby Aff. ¶¶ 4-5, Exs. B, C.) The Trustee and Appaloosa opposed the Motion. (See Crosby Aff. ¶¶ 9, 14, Exs. G, L.) On July 19, 2016, the State Court denied CWCAM’s Motion to Dismiss, finding that it could properly exercise in rem jurisdiction over the Trusts pursuant to the Minnesota Trust Code, that it was not necessary for the State Court to exercise personal jurisdiction over CWCAM in order to resolve the Petition, and that Minnesota was a proper forum. (Crosby Aff. ¶ 19, Ex. Q.)
Freddie Mac removed the action to this Court on July 22, 2016, invoking 12 U.S.C. § 1452(f)(2) and 28 U.S.C. § 1331 on the basis of federal question jurisdiction. (Doc. No. 1.) According to Freddie Mac, at the time of removal, no discovery had taken place in State Court, and the State Court had not yet addressed the merits of the Petition or any Objections. (Id. ¶ 11.) The following motions were subsequently filed in this matter: (1) Motion to Rehear CWCAM’s Motion to Dismiss Under Fed. R. Civ. P. 12(b) or, Alternatively, to Adopt the State Court Order by CWCAM (Doc. No. 80); (2) Motion to Remand by Appaloosa (Doc. No. 46); and (3) Motion to Transfer by Freddie Mac (Doc. No. 53). The matter is currently before the Court on these three motions.
DISCUSSION
Appaloosa argues that Freddie Mac had no basis to properly remove this proceeding to federal court and that this Court consequently lacks jurisdiction over the matter. (Doc. No. 46.) Freddie Mac and CWCAM have opposed Appaloosa’s Motion to Remand. According to these parties, Congress plainly authorized Freddie Mac to remove any case in which it is “a party,” including this trust instruction proceeding initiated in state court. U.S. Bank, PSW, and Fannie Mae take no position on Appaloosa’s Motion.
Freddie Mac asks the Court to transfer this matter to the United States District Court for the Southern District of New York, given the lack of any meaningful connection between this forum and the facts underlying this matter. (Doc. No. 53.) Appaloosa opposes the Motion to Transfer. No other parties take a position on Freddie Mac’s motion.
CWCAM requests a rehearing on its Motion to Dismiss the Trustee’s Petition under Federal Rule of Civil Procedure 12(b). (See Doc. No. 30.) Should the Court decline CWCAM’s request, CWCAM asks the Court to incorporate the State Court Motion to Dismiss and associated briefing into the record in this case and to adopt the July 19, 2016 State Court Order. (See id.) PSW, U.S. Bank, and Appaloosa oppose CWCAM’s Motion. Freddie Mac and Fannie Mae take no position on CWCAM’s motion.
Because Appaloosa’s Motion to Remand presents a threshold question regarding the Court’s jurisdiction, the Court will address this motion first. See Greenpond S., LLC v. Gen. Elec. Capital Corp., Civ. No. 14-1214, 2015 WL 225227, at *1 (D. Minn. Jan. 16, 2015). Next, the Court will evaluate Freddie Mac’s Motion to Transfer. Finally, the Court will address CWCAM’s request for rehearing or adoption of the State Court Order.
I. Appaloosa’s Motion to Remand
A. Legal Standard
A party opposing removal may bring a motion requesting that the federal court remand the case back to state court. 28 U.S.C. § 1447(c). The district court shall remand the case back to state court if it determines that the court lacks subject matter jurisdiction. Id.; Martin v. Franklin Capital Corp., 546 U.S. 132, 134, 126 S.Ct. 704, 163 L.Ed.2d 547 (2005). On a motion to remand, the party seeking removal and opposing remand bears the burden of demonstrating federal jurisdiction by a preponderance of the evidence. In re Prempro Prods. Liab. Litig., 591 F.3d 613, 620 (8th Cir. 2010); In re Bus. Men’s Assur. Co. of Am., 992 F.2d 181, 183 (8th Cir. 1993). The federal court should resolve any doubt as to the propriety of removal in favor of remand. Prempro, 591 F.3d at 620; Bus. Men’s Assur., 992 F.2d at 183. “In addition to the notice of removal and its exhibits, to determine whether there is jurisdiction, the court may consider documents submitted after the notice of removal as well as those attached to subsequent motions.” Guggenberger v. Starkey Labs., Inc., Civ. No. 16-2021, 2016 WL 7479542, at *5 (D. Minn. Dec. 29, 2016).
B. Removal by Freddie Mac
Freddie Mac is a federally chartered corporation established under the Federal Home Loan Mortgage Corporation Act, 12 U.S.C. §§ 1451-59. Pursuant to its statutory charter, Freddie Mac is “authorized to purchase, and make commitments to purchase, residential mortgages.” 12 U.S.C. § 1454(a)(1). It may also “hold and deal with, and sell or otherwise dispose of ... any such mortgage or interest therein.” Id, Its involvement in this litigation arises out of such congressionally authorized investment activity. (See Walker Decl. ¶¶ 3-4.)
Freddie Mac filed a Notice of Removal as a “Party in Interest” in this matter, citing 12 U.S.C. § 1452(f)(3), 28 U.S.C. § 1442, and 28 U.S.C. § 1446. Freddie Mac asserted that “[r]emoval is made pursuant to 12 U.S.C. § 1452(f)(2) and 28 U.S.C. § 1331 on the basis of federal question jurisdiction.” (Notice of Removal at 1.) According to Freddie Mac, it has a “significant financial stake” in the State Court proceeding because it could lose “tens of millions of dollars” if the Petition is resolved consistent with Appaloosa’s interpretation of the PSAs. (Id. at 4.) This financial stake, Freddie Mac suggests, gives it standing to participate in the State Court trust instruction proceeding as an “interested person” or “party in interest” under Minn. Stat. § 501C.0201. Thus, Freddie Mac contends it is a “party” for purposes of interpreting 12 U.S.C. § 1452. In Freddie Mac’s Anew, this status grants the Court federal-question jurisdiction under 28 U.S.C. § 1331 pursuant to 12 U.S.C. § 1452(f)(2) which provides that “all civil actions to which the Corporation is a party shall be deemed to arise under the laws of the United States, and the district courts of the United States shall have original jurisdiction of all such actions.” Similarly, Freddie asserts that its status as a party gives it the power to remove the action pursuant to 12 U.S.C. § 1452(f)(3) which provides that “any civil ... action ... to which the Corporation is a party may at any time before the trial thereof be removed by the Corporation.” Freddie Mac also asserts its right to remove as a deemed agency under 28 U.S.C. § 1442(a) pursuant to 12 U.S.C. § 1452(f)(1) and contends that it may remove the matter on this basis without the consent of any other parties.
Appaloosa seeks remand to State Court, arguing that Freddie Mac has no right to remove this in rem trust instruction proceeding as a party in interest. Pointing to four recent federal district court cases addressing Freddie Mac’s removal rights under 12 U.S.C. § 1452, Appaloosa asks this Court to hold that Freddie Mac may only remove cases in which it is a defendant. Alternatively, Appaloosa argues that even if Freddie Mac’s removal right is not limited to when Freddie Mac is a defendant, then it should not apply in this case because the State Court proceeding is not “against” Freddie Mac. Finally, Appaloosa contends that the general policies underlying removal are inapplicable in this ease, making it improper for the Court to exercise its limited jurisdiction over the matter.
Freddie Mac and CWCAM oppose Appaloosa’s Motion to Remand and assert that the Court may properly exercise its jurisdiction over the Trustee’s Petition. Primarily, they urge the Court to adopt the statute’s unambiguous plain language and hold that 12 U.S.C. § 1452’s reference to “a party” means any party, including the parties in interest in this in rem trust instruction proceeding. Freddie Mac and CWCAM also direct the Court to caselaw interpreting parallel language in removal statutes applicable to the Federal Deposit Insurance Corporation (“FDIC”), Federal Savings and Loan Insurance Corporation (“FSLIC”), and Resolution Trust Corporation (“RTC”) to permit removal regardless of party alignment. Beyond the statute’s plain text, Freddie Mac and CWCAM also argue that the legislative history supports removal of any case in which Freddie Mac “is involved.” Finally, they assert that 28 U.S.C. § 1441’s general removal provision and 28 U.S.C. § 1442’s agency removal provision further support removal here.
1. Plain Language
“The jurisdiction of the lower federal courts is entirely a creature of statute. So is the privilege of removal from a state court to a federal court.” Cont’l Cablevision of St. Paul, Inc. v. U.S. Postal Serv., 945 F.2d 1434, 1435 (8th Cir. 1991). Thus, Appaloosa’s motion presents two straightforward questions of statutory interpretation: (1) whether there is a basis for the Court to exercise jurisdiction over this matter; and (2) whether Freddie Mac had the privilege to remove. See id. In this case, the relevant provisions of Freddie Mac’s charter contained in 12 U.S.C. § 1452(f) plainly answer both questions in the affirmative.
Numerous courts, including the Eighth Circuit and this District, have read 12 U.S.C. § 1452(f) to unambiguously confer federal quéstion jurisdiction and broad removal power to Freddie Mac in any case in which it is a party. See, e.g,, Lackey v. Wells Fargo Bank, N.A., 747 F.3d 1033, 1035 n.2 (8th Cir. 2014) (“Because Freddie Mac is a party to this case, the district court had original jurisdiction pursuant to 12 U.S.C. § 1452(f).”); Anderson v. Citi-Mortgage, Inc., 519 Fed.Appx. 415, 416 (8th Cir. 2013) (“Section 1452(f) provides that the Federal Home Loan Mortgage Corporation ... may remove any civil action in which it is a party”). In specific reference to Freddie Mac’s removal right, another judge in this District has stated:
Freddie Mac has the unfettered right to remove to federal court any lawsuit in which it is involved. 12 U.S.C. § 1452(f). The statute is unqualified. It provides that, “[notwithstanding .;. any other provision of law, .., any civil or other action ... in a court of a State ... to which [Freddie Mac] is a party may at any time before the trial thereof be removed by [Freddie Mac] ... to the district court of the United States.... ” 12 U-S.C. § 1452(f)(3) (emphases added).
Pope v. Fed. Home Loan Mortg. Corp., Civ. No. 12-3094, 2013 WL 2251001, at *2 (D. Minn. May 22, 2013), aff'd, 561 Fed.Appx. 569 (8th Cir. 2014). Although none of these cases involved the specific question presented here — whether Freddie Mac can properly remove as a party in interest in an. in rem trust instruction proceeding — these courts’ clear and consistent application of 12 U.S.C. § 1452’s plain meaning persuade the Court that it is proper to similarly apply the unambiguous statutory language in this case.
To determine 12 U.S.C. § 1452’s proper application in this proceeding, the Court begins with the statute’s plain language. See United States v. Behrens, 644 F.3d 754, 755 (8th Cir. 2011). Where the relevant statutory provision is not ambiguous — that is, “not reasonably susceptible to more than one interpretation” — the court should apply the plain language unless it would “produce a result demonstrably at odds with the intentions of its drafters.” United States v. Jungers, 702 F.3d 1066, 1069 (8th Cir. 2013) (quoting Contemp. Indus. Corp. v. Frost, 564 F.3d 981, 985 (8th Cir. 2009)). The court should not simply consider “the bare meaning of the critical word or phrase” but must “look to the provisions of the whole law, and to its object and policy.” Id. at 1069-70 (internal quotation marks and citations omitted). “[I]f the intent of Congress can be clearly discerned from the statute’s language, the judicial inquiry must end.” Behrens, 644 F.3d at 755 (quoting United States v. McAllister, 225 F.3d 982, 986 (8th Cir. 2000)).
Consideration of Freddie Mac’s right to remove this matter requires the Court to construe, the following provisions in Freddie Mac’s governing charter:
Notwithstanding section 1349 of Title 28 or any other provision of law,
(1) the Corporation shall be deemed to be an agency included in sections 1345 and 1442 of such Title 28;
(2) all civil actions to which the Corporation is a party shall be deemed to arise under the laws of the United States, and the district courts of the United States shall have original jurisdiction of all such actions,, without regard to amount or value; and
(3) any civil or other action, case or controversy in a court of a State, or in any court other than a district court of the United States, to which the Corporation is a party may at any time before the trial thereof be removed by the Corporation, without the giving of any bond or security, to the district court of the United States for the district and division embracing the place where the same is pending, or, if there is no such district court, to the district court of the United States for the district in which the principal office of the Corporation is located, by following any procedure for removal of causes in effect at the time of such removal.
To understand the plain meaning of this statute, the Court considers the statute as a whole and imports the relevant provisions of the other statutes cross-referenced therein. The first subsection, 28 U.S.C. § 1452(f)(1), grants Freddie Mac the deemed status of an agency for purposes of 28 U.S.C. §§ 1345 and 1442. 28 U.S.C. § 1345 gives federal district courts “original jurisdiction of all civil actions, suits, or proceedings commenced by the United States, or by any agency or officer thereof expressly authorized to sue by Act of Congress.” 28 U.S.C,, § 1442 provides for removal of “[a] civil action .,. commenced in a State court and that is against or directed to .,. [tjhe United States or any agency thereof or any officer (or any person acting under that officer) of the United States or of any agency thereof, in an official or individual capacity, for or relating to any act under, color of such office....” Finally, the statute contains an implicit cross-reference to 28 U.S.C. § 1446 based on subsection (f)(3)’s reference to “any procedure for removal of causes in effect at the time of such removal.” 28 U.S.C. § 1446 provides the general procedures for removal by “[a] defendant or defendants desiring to remove any civil action from a State court,” including that such removal shall be made.within thirty days of service.
Taken together, subsection (f)(1) gives federal district courts jurisdiction over civil actions commenced by Freddie Mac and permits it to remove actions “against or directed to” Freddie Mac. Subsection (f)(2) establishes federal question jurisdiction in “all civil actions to which the Corporation is a party.” Finally, subsection (f)(3) provides special removal authority, including that Freddie Mac can remove “any civil or other action, case or controversy ... to which the Corporation is a party” and that removal may be accomplished “at any time before ... trial.” 12 U.S.C. § 1452(f)(3).
Subsections (f)(2) and (f)(3) use the identical phrase “to which the Corporation is a party.” The meaning of this language is central to the Court’s inquiry, particularly the reference to “a party.” A term that is not otherwise defined within a statute should be given its “ordinary or natural meaning,” and dictionaries provide a useful reference to ascertain the ordinary meaning of the words used. Jungers, 702 F.3d at 1071 (quoting Smith v. United States, 508 U.S. 223, 228, 113 S.Ct. 2050, 124 L.Ed.2d 138 (1993)). Black’s Law Dictionary defines “party,” in relevant part, as: “One by or against whom a lawsuit is brought; anyone who both is directly interested in a lawsuit and has a right to control the proceedings, make a defense, or appeal from an adverse judgment; litigant .” Party, Black’s Law Dictionary (10th ed. 2014). Merriam-Webster defines “party,” in relevant part, as “a person or group taking one side of a question, dispute, or contest