The United States District Court for the Northern District of New York recently denied plaintiff bank’s motion for default judgment in a foreclosure action and dismissed the complaint for lack of subject matter jurisdiction, finding that plaintiff failed to sufficiently allege the existence of diversity of citizenship to establish subject matter jurisdiction. See U.S. Bank Trust, N.A. v. Monroe, 2017 WL 923326 (N.D.N.Y. March 8, 2017). In the case, plaintiff filed its complaint in federal court, alleging nonpayment of a mortgage by defendant and asserting subject matter jurisdiction based on diversity of citizenship. Plaintiff, a national bank, alleged that it is a citizen of Delaware based on having a principal place of business in Delaware and that defendant is a citizen of New York. Plaintiff brought the action on behalf of a Master Participation Trust, for which plaintiff bank serves as trustee. Defendant failed to appear in the action and the Clerk of the Court noted his default. Plaintiff subsequently moved for default judgment. The Court denied the motion on multiple grounds.
First, it found that plaintiff’s allegation about its principal place of business was insufficient to establish diversity, and noted that the Second Circuit has expressly held that the principal place of business is not to be considered when determining the citizenship of a national banking association. See OneWest Bank, N.A. v. Melina, 827 F.3d 214, 218–21 (2d Cir. 2016) (holding that a national bank is only a citizen of the state designated by its articles of association as the location of its main office). Plaintiff’s failure to provide the location of its main office meant that it had failed to properly allege its own citizenship. Second, the Court held that plaintiff was only the nominal plaintiff in the action because it brought the complaint on behalf of a trust, and that the trust’s citizenship controls for diversity purposes. Plaintiff failed to include any allegations concerning the type of trust at issue, plaintiff’s degree of control over the trust assets, or, alternatively, the citizenships of the trust’s beneficiaries, all of which would be necessary to determine the trust’s citizenship. While the Court allowed plaintiff leave to file a motion to amend its complaint to address these deficiencies, it was harshly critical of plaintiff’s counsel for not clearly setting forth plaintiff’s basis for diversity jurisdiction.
For an analysis on the Melina decision, please click here.