United States District Court, W.D. Washington, Seattle
ORDER TO SHOW CAUSE REGARDING SUBJECT MATTER
L. ROBART United States District Judge
the court is Defendant U.S. Bank NA, as successor trustee to
Bank of America NA, as successor in interest to LaSalle Bank
NA, as trustee for Washington Mutual Mortgage Pass-Through
Certificate WMALT Series 2006-AR4's (“the
Trust”) notice of removal. (Not. of Rem. (Dkt. # 1).)
The court has reviewed the Trust's notice // and
supporting documentation and concludes that the Trust has
failed to establish that the court has subject matter
jurisdiction over this action.
Trust invokes the court's diversity jurisdiction.
(Id. at 2.) A federal court's diversity
jurisdiction extends to “all civil actions where the
matter in controversy exceeds . . . $75, 000 . . . and is
between . . . citizens of different States.” 28 U.S.C.
§ 1332(a)(1). For the court to exercise diversity
jurisdiction, each defendant must be citizen of a different
state from each plaintiff. In re Digimarc Corp.
Derivative Litig., 549 F.3d 1223, 1234 (9th Cir. 2008).
notice of removal, the Trust fails to demonstrate complete
diversity of jurisdiction between the parties. Plaintiffs
allege that they are residents of Washington. (Compl. (Dkt. #
1-1) ¶ 1.1.) On this basis, the Trust asserts that
Plaintiffs are citizens of Washington. (Not. of Rem. at 4);
Adams v. Matrixx Initiatives, Inc., No.
CV-09-1529-PHX-FJM, 2009 WL 3131459, at *2 (D. Ariz. Sept.
25, 2009) (citing State Farm Mut. Auto. Ins. Co. v.
Dyer, 19 F.3d 514, 519 (10th Cir. 1994) and Lew v.
Moss, 797 F.2d 747, 751 (9th Cir. 1986))
(“Allegations of residency in a state court complaint
can create a rebuttable presumption of domicile supporting
diversity of citizenship.”). The Trust also asserts
that it, U.S. Bank NA, LaSalle Bank NA, and Bank of America
NA are all citizens of Ohio. (See id.) These alleged
fact are good as far as they go, but they do not go far
enough to establish complete diversity of citizenship between
all Plaintiffs and Defendants in this action.
the Trust does account for the citizenship of Defendant
Residential Funding, LLC (“Residential Funding”).
Plaintiffs do not allege Residential Funding's
citizenship but simply state that it is “foreign
limited liability company, [which] is currently listed as
‘inactive' on the Secretary of State's
website.” (Compl. ¶ 1.5.) In its notice of
removal, the Trust states that its counsel spoke to a former
attorney for Residential Funding, who stated that
“Residential Funding is no longer in business, ”
that it had “filed for Chapter 11 bankruptcy in New
York, ” and that it “chose to liquidate rather
than restructure.” (McEllrath Decl. ¶ 3.) The Trust
implies that it can discount the citizenship of Residential
Funding for purposes of determining diversity jurisdiction
because Residential Funding is allegedly inactive and has
apparently declared bankruptcy. (See Id. Not. of
Rem. at 5 (concluding that “[c]omplete diversity is
present, as none of the defendants are citizens of the same
state as the Plaintiffs”).) The Trust cites no legal
authority supporting this assumption.
contrary, in Stewart v. A.G. Edwards & Sons,
Inc., the court found that complete diversity of
citizenship did not exist because the bankruptcy petition at
issue did not operate as a dismissal of the non-diverse
defendant but merely suspended the proceedings against that
defendant. 74 B.R. 26, 27 (D.S.C. 1987). Thus, the court
concluded that the diverse defendant's removal to federal
court was improper. Id.; see also Sutton
Woodworking Mach. Co. v. Mereen-Johnson Mach. Co., 328
F.Supp.2d 601, 605 (M.D. N.C. 2004) (“[Defendant's]
Chapter 7 petition for bankruptcy, without more, does not
create diversity of citizenship or otherwise permit removal
on the basis of diversity of citizenship. The automatic stay
triggered by [the defendant's] petition for bankruptcy is
not tantamount to dismissal of [the defendant] from the case,
and merely suspends the proceedings pending against [the
defendant].”); David v. Hooker, Ltd., 560 F.2d
412, 418 (9th Cir. 1977) (“[A] stay of a suit pending
in another court against the bankrupt is not a dismissal of
the suit nor does it deprive the court of jurisdiction over
the matter; it merely suspends the proceedings.”);
Paws Up Ranch, LLC v. Green, No.
2:12-cv-01547-GMN-NJK, 2015 WL 4113113, at *3 (D. Nev. July
8, 2015) (considering the citizenship of an inactive limited
liability company in determining that the citizenship of the
parties was completely diverse).
court is not assured that it has diversity jurisdiction over
this action because the court cannot determine the
citizenship of Residential Funding from the Trust's
notice of removal. The right to remove a case to federal
court is entirely a creature of statute. See Libhart v.
Santa Monica Diary Co., 592 F.2d 1062, 1062 (9th Cir.
1979). The Ninth Circuit “strictly constue[s] the
removal statue against removal jurisdiction, ” and
“[f]ederal jurisdiction must be rejected if there is
any doubt as to the right of removal in the first
instance.” Gaus v. Miles, Inc., 980 F.2d 564,
566 (9th Cir. 1992). “The ‘strong
presumption' against removal jurisdiction means that the
defendant always has the burden of establishing that removal
is proper.” Id. If a federal court determines
that it lacks subject matter jurisdiction at any time during
a dispute, the court must dismiss the action. See
Fed. R. Civ. P. 12(h)(3); Hertz Corp. v. Friend, 559
U.S. 77, 94 (2010) (“Courts have an independent
obligation to determine whether subject-matter jurisdiction
exists, even when no party challenges it.”);
Rosales v. United States, 824 F.2d 799, 803 n.4 (9th
it appears to the court that subject matter jurisdiction may
be lacking because the Trust has failed to demonstrate that
complete diversity of citizenship exists between all
Plaintiffs and Defendants in this action. Specifically, the
Trust has failed to demonstrate the citizenship of
Residential Funding or provided the court with any authority
for discounting Residential Funding's citizenship.
Accordingly, the court ORDERS the Trust to SHOW CAUSE why
this matter should not be dismissed pursuant to Federal Rule
of Civil Procedure 12(h)(3) for lack of subject matter
jurisdiction. The Trust must file a response within seven (7)
days of the date of this order. If the Trust fails to file a
timely response that satisfies the court that it has subject
matter jurisdiction, the court will dismiss this action
without prejudice and without further notice to the Trust.
 The Trust asserts that Plaintiffs
erroneously named as defendants all previous successors or
trustees that are listed in the Trust's full name. (Not.
of Rem. at 1 n.1.) The Trust asserts that-as the holder of
the note-it is the proper defendant. (Id.) The court
need not rule on this issue for purposes of the present order
to show cause.
 For purposes of diversity
jurisdiction, a trust has the citizenship of its trustee or
trustees. Johnson v. Columbia Props. Anchorage, LP,
437 F.3d 894, 899 (9th Cir. 2006).
 A court assessing diversity
jurisdiction in a proceeding involving a limited liability
company must consider the citizenship of all members of the
limited liability company. Johnson v. Columbia Props.
Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006)
(“[A]n LLC is a citizen of every state of which its
owners/members are citizens.”).
 The Trust's counsel also attempted
to contact Residential Funding's counsel in a bankruptcy
case in the Southern District of New York, but has not
received a response. ...