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IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
FEDERAL HOUSING FINANCE AGENCY, AS
CONSERVATOR FOR THE FEDERAL HOME
LOAN MORTGAGE CORPORATION, on behalf
of the Trustee of the Securitized Asset Backed
Receivables LLC Trust 2006-WM4 (SABR 2006WM4),
Case No. 1:13-cv-0584
Plaintiff,
v.
WMC MORTGAGE, LLC f/k/a WMC
MORTGAGE CORP.
Defendant.
STATEMENT REGARDING JURISDICTION
On June 11, 2013, this Court heard oral argument on the Motion to Intervene (the
“Motion”) filed by Deutsche Bank National Trust Company, solely in its capacity as Trustee of
the SABR 2006-WM4 trust (“DBNTC” or the “Trustee”). This is in response to the Court’s
request for a statement from the Trustee concerning jurisdiction over this matter.
This Court has proper jurisdiction over this action. The Court has jurisdiction over the
subject matter of this action pursuant to 28 U.S.C. § 1332(a)(2) because there is complete
diversity of citizenship between the parties and the amount in controversy exceeds $75,000
(exclusive of interest and costs). The Court also has personal jurisdiction over defendant WMC
Mortgage LLC, f/k/a WMC Mortgage Corporation (“WMC”) because WMC is registered to do
business in New York and has substantial contacts with New York. Accordingly, the Trustee
respectfully submits that this Court may properly exercise jurisdiction over this matter.
Case 1:13-cv-00584-AKH Document 30
I.
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Subject Matter Jurisdiction
This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §
1332(a)(2) because there is complete diversity of citizenship between the parties and the amount
in controversy, exclusive of interest and costs, exceeds $75,000. See 28 U.S.C. § 1332(a).
A.
The Parties Are Citizens Of Different States.
For diversity jurisdiction to exist, the action must be between “citizens of different
States.” 28 U.S.C. § 1332(a)(1); E.R. Squibb & Sons, Inc. v. Accident & Cas. Ins. Co., 160 F.3d
925, 930 (2d Cir. 1998) (“It is axiomatic that, for diversity jurisdiction to be available, all of the
adverse parties in a suit must be completely diverse with regard to citizenship”).
1.
Citizenship of the Plaintiff
Upon the filing of the Trustee’s complaint (the “Complaint”), the plaintiff in this action
will be the Trustee. DBNTC is a national banking association organized under the laws of the
United States to carry on the business of a limited purpose trust company. Compl. ¶ 12.1 For
diversity purposes, “the citizenship of a national banking association is determined solely by the
location of its main office.” Manufacturers and Traders Trust Co. v. HSBC Bank USA, N.A.,
564 F. Supp. 2d 261, 265 (S.D.N.Y. 2008); see also Excelsior Funds, Inc. v. JP Morgan Chase
Bank, N.A., 470 F. Supp. 2d 312, 313 (S.D.N.Y. 2006). DBNTC’s “main office” is located at
2000 Avenue of the Stars, 9th Floor, North Tower, Los Angeles, California, 90067. Its trust
administration offices are located at 1761 East St. Andrew Place, Santa Ana, California 97025.
Id. Therefore, as a national banking association, the Trustee is a citizen of California for
purposes of evaluating diversity jurisdiction. See Manufacturers and Traders Trust, 564 F.
Supp. at 265.
1
All references to the Complaint are to the Proposed Complaint filed in the above captioned matter on
April 26, 2012 as Exhibit C to the Declaration of Daniel Ward (the “Ward Declaration”) in Support of the
Trustee’s Motion to Intervene.
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In assessing whether the citizenship of the trustee or the beneficiaries controls, the
relevant question is “whether [the] trustees are real parties to [the] controversy.” Navarro Sav.
Ass'n v. Lee, 446 U.S. 458, 462 (1980). If the trustee is a “real part[y] to the controversy,” the
trustee’s citizenship, rather than the citizenship of the trust beneficiaries, controls the diversity
determination.2
Id. at 465-66. A trustee is a “real party to the controversy for purposes of
diversity jurisdiction when he possesses … customary powers to hold, manage, and dispose of
assets for the benefit of others.” Mills 2011 LLC v. Synovus Bank, No. 12 Civ. 6158(AJN), 2013
WL 443541, at *5 (S.D.N.Y. Feb. 5, 2013) (quoting Navarro, 446 U.S. at 465-66). “Customary
powers” include the authority to: (1) “take legal title to trust assets;” (2) “invest those assets for
the benefit of the shareholders;” and (3) “sue and be sued in their capacity as trustees.” Id. at
464-65.
Here, DBNTC is a “real party to the controversy” because under the Pooling and
Servicing Agreement (“PSA”), DBNTC possesses powers to hold assets for the benefit of others,
and the power to sue and be sued in its capacity as Trustee. First, DBNTC has legal title to the
Trust’s assets. See Article I, § 2.01(a) (conveying to Trustee “all the right, title and interest of
the Depositor in and to the Trust Fund,” which is defined as the “corpus of the trust created
[under the PSA] consisting of . . . the Mortgage Loans and all interest and principal with respect
thereto . . . .”); see also id. §2.01(d) (giving Trustee the power “to accept the sale, transfer,
assignment, set over and conveyance by the Depositor to the Trust of all the right, title and
2
Compare Bank of Am., N.A. v. 3301 Atl., No. 10–CV–5204 (FB), 2012 WL 2529196, at *1, *3–4
(E.D.N.Y. June 29, 2012) (because suit was brought in trustee’s name, Navarro controls), with Pavlov v.
Bank of N.Y. Co., 135 F. Supp. 2d 426, 432 (S.D.N.Y. 2001) (noting that “the trustee has not sued in his
own name” and thus that allegations not addressing the trust’s “members or beneficiaries” failed to
adequately plead jurisdiction).
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interest of the Depositor in and to the Trust Fund (including… the Mortgage Loans . . . )
pursuant to Section 2.01(a) [of the PSA].”).3
Second, DBNTC holds Trust assets for the benefit of the Certificateholders. See Id. §
2.02 (Trustee agreed to “hold[ ]…such other assets as are included in the Trust Fund, in trust for
the exclusive use and benefit of all present and future Certificateholders.”); see also id. § 10.07
(“No Certificateholder shall have any right to…in any manner otherwise control the operation
and management of the Trust Fund”).
Third, the PSA expressly provides that the Trustee is vested with the authority to bring
suit on behalf of the Trust, and the Certificateholders are prohibited from doing so except where
certain criteria are met. See Exhibit 1, § 2.03(c) (“[t]he Trustee shall enforce the rights of the
Trust under the Sponsor Representation Letter.”); id. § 10.07 (“No Certificateholder shall have
any right…to institute any suit, action or proceeding …with respect to this Agreement, unless
such Holder previously shall have given to the Trustee a written notice of an Event of
Default…and unless the Holders…not less than 25%…shall also have made written request to
the Trustee to institute such action…in its own name as Trustee”).
Therefore, because the Trustee is the holder and owner of the Mortgage Loans, as well as
of all of the rights relating to the Mortgage Loans on behalf and for the benefit of the
Certificateholders, the Trustee is a “real party in interest.”
Consequently, the Trustee’s
citizenship is determinative for diversity purposes. See Navarro, 446 U.S. at 465-66.
2. Citizenship of the Defendant
WMC, a limited liability corporation, is the defendant in this action. For purposes of
diversity
jurisdiction,
a
limited
liability
company
has
the
citizenship
of
its
membership. Handelsman v. Bedford Village Associates L.P., 213 F.3d 48, 51–52 (2d Cir.
3
The PSA was attached as Exhibit A to the Ward Declaration.
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2000); Strother v. Harte, 171 F. Supp. 2d 203, 205 (S.D.N.Y. 2001); see also New Millennium
Capital Partners, III, LLC v. Juniper Group Inc., No. 10 Civ. 46(PKC), 2010 WL 1257325, at
*1 (S.D.N.Y. Mar. 26, 2010) (“A complaint premised upon diversity of citizenship must allege
the citizenship of… the place of incorporation and principal place of business of any corporate
entities who are members of the limited liability company.”); Castillo Grand LLC v. Sheraton
Operating Corp., No. 09 Civ. 7197(RPP), 2009 WL 4667104, at *1 (S.D.N.Y. Dec. 9, 2009)
(“For purposes of assessing diversity jurisdiction, an unincorporated entity such as a…limited
liability company is deemed to be a citizen of all states of which its partners or members are
citizens.”) (citation omitted).
WMC has only one member, General Electric Capital Corporation (“GE Capital”). A
corporation is deemed to be a citizen of both the state of its incorporation and the state where it
has its principal place of business for purposes of diversity jurisdiction. Durant, Nichols,
Houston, Hodgson & Cortese-Costa P.C. v. Dupont, 565 F.3d 56, 59 (2d Cir. 2009).
GE
Capital is a Delaware corporation with a principal place of business in Connecticut. Compl. ¶
14. Thus, WMC is a citizen of Delaware and Connecticut for diversity purposes. See Castillo
Grand, 2009 WL 4667104, at *1.
Because the Trustee is a citizen of California and WMC is a citizen of Delaware and
Connecticut, complete diversity of citizenship exists between the parties.
B. The Amount In Controversy Exceeds $75,000.
Diversity jurisdiction also requires that “the matter in controversy exceeds the sum or
value of $75,000, exclusive of interest and costs.” 28 U.S.C. § 1332(a) (2006); Correspondent
Servs. Corp. v. First Equities Corp. of Fla., 442 F.3d 767, 769 (2d Cir. 2006). Because this
action concerns WMC’s liability to repurchase or pay damages with respect to over 4,000
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mortgage loans with an average principal balance of $183,689.00, the amount in controversy
exceeds $75,000, many times over. See Compl. ¶ 15. Therefore, because there is complete
diversity of citizenship between the parties and the amount in controversy, exclusive of interest
and costs, exceeds $75,000, the Court has subject matter jurisdiction over this action.
II.
Personal Jurisdiction
“A federal court sitting in diversity cases may exercise personal jurisdiction to the same
extent as courts of general jurisdiction in the state in which it sits.” Indelible Media Corp. v.
Meat and Potatoes, Inc., No. 12–CV–0978 (GBD), 2012 WL 3893523, at *3 (S.D.N.Y. Sept. 07,
2012) (citing Fed. R. Civ. P. 4(k)(1)(A)). To exercise jurisdiction in New York, there must be
(1) a statutory basis for the exercise of jurisdiction under New York law and (2) it must comport
with the Due Process Clause of the Fourteenth Amendment. See Bank Brussels Lambert v.
Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 124 (2d Cir. 2002).
Under § 301 of the New York Civil Practice Law and Rules, a court “may exercise
personal jurisdiction over a non-domiciliary corporation if the corporation is found to have been
‘doing business’ in the State of New York at the time that the complaint was filed.” Speed v.
Pelican Resort N.V., No. 91 Civ. 7686 (SWK), No. 1992 WL 147646, at *1 (S.D.N.Y. June 16,
1992) (applying New York law); see also Sino Clean Energy Inc. v. Little, No. 651248/2011,
2012 WL 1849658, at *4 (N.Y. Sup. Ct. May 21, 2012). “[I]f a foreign corporation is authorized
to do business in [New York], a court is justified in inferring that it is doing business so that it is
subject to jurisdiction of the courts.” Speed, 1992 WL 147646, at *1 (internal citation and
quotations omitted).
“[I]t is well settled that a foreign corporation that registers under the New York Business
Corporation Law…has consented to personal jurisdiction in the State of New York.” People ex
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rel. Spitzer v. H & R Block, Inc., No. 401110/2006, 2007 WL 2330924, at *4 (N.Y. Sup. Ct. July
9, 2007); see also Speed, 1992 WL 147646, at *2 (“[defendant]…has registered to do business in
New York, thereby consenting to this Court's jurisdiction”) (applying New York law); Advance
Realty Assoc. v. Krupp, 636 F. Supp. 316, 317 (S.D.N.Y 1986) (Under New York law, “[a]
foreign corporation is deemed to have consented to general jurisdiction over it when it registers
to do business in New York….”). Additionally, due process is satisfied so long as a defendant’s
conduct with the forum state resulted from purposeful conduct such that he or she could
“reasonably anticipate being haled into court there.” LaMarca v. Pak-Mor Mfg. Co., 95 N.Y.2d
210, 216 (2000) (quoting World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297
(1980)).
Here, WMC is a foreign corporation that registered to do business in New York. See
WMC Registration Document; Compl. ¶ 14. Consequently, it is deemed to be “doing business”
in New York pursuant to N.Y.C.P.L.R. § 301, and to have consented to personal jurisdiction in
New York. See Speed v. Pelican Resort, 1992 WL 147646, at *1. Furthermore, WMC’s
purposeful conduct, in signing the PSA that created a New York trust, governed under New York
laws, with a New York Depositor, establishes a sufficient basis for the exercise of personal
jurisdiction over WMC, consistent with due process.
See LaMarca, 95 N.Y.2d at 216.
Accordingly, this Court properly exercises personal jurisdiction over WMC. Finally, WMC
availed itself of the jurisdiction of this Court by removing the action.
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VENUE
Venue is proper in this district pursuant to 28 U.S.C. § 1391(b)(2) because a substantial
part of the events or omissions giving rise to the claim occurred, and a substantial part of
property that is subject to the action is situated, in this judicial district. 28 U.S.C. § 1391(b)(2).
The Trust at issue is an express New York trust. See Exhibit 1, § 2.01(c) (“The Depositor does
hereby establish, pursuant to the further provisions of this Agreement and the laws of the State of
New York, an express trust…). Additionally, the PSA’s Depositor is located this judicial
district. See PSA, § 10.05(c). Finally, numerous of the mortgage loans owned by the Trust are
secured by real property located in New York, including in this judicial district. Accordingly,
venue is proper in the Southern District of New York.
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CONCLUSION
For the foregoing reasons, the Trustee respectfully submits that this Court may properly
take jurisdiction over this action upon the filing of the Trustee’s intervening Complaint.
Dated: June 18, 2013
ROPES & GRAY LLP
/s/ Harvey J. Wolkoff_________
Harvey J. Wolkoff
Daniel V. Ward
Prudential Tower
800 Boylston Street
Boston, MA 02199-3600
Tel: (617) 951-7703
Fax: (617) 951-7050
harvey.wolkoff@ropesgray.com
daniel.ward@ropesgray.com
Carly B. Baratt
1211 Avenue of the Americas
New York, NY 10036-8704
Tel: (212) 596-9000
Fax: (212) 596-9090
carly.baratt@ropesgray.com
Attorneys for Deutsche Bank National Trust
Company in its capacity as Trustee for the
SABR 2006-WM4 Trust
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