United States District Court, D. Minnesota
MEMORANDUM OPINION AND ORDER
RICHARD NELSON, United States District Judge
matter is before the Court on PNC Bank, N.A.'s Motion to
Dismiss [Doc. No. 2344] and Origin Bank's Notice of
Joinder in Motion to Dismiss for Lack of Subject Matter
Jurisdiction [Doc. No. 2350]. For the reasons set forth
below, the Court denies PNC's motion to dismiss, grants
Origin's motion for joinder, and denies Origin's
motion to dismiss.
general facts pertaining to this consolidated action are set
forth in previous rulings by this Court and are incorporated
herein by reference. See, e.g., ResCap
Liquidating Trust v. CMG Mortg., Inc., Case No.
13-cv-3451, 2015 WL 2373401, at *1-2 (D. Minn. May 18, 2015);
Residential Funding Co. v. Acad. Mortg. Corp., 59
F.Supp.3d 935, 938-41 (D. Minn. 2014); Residential
Funding Co. v. Terrace Mortg. Co., 850 F.Supp.2d 961,
962-64 (D. Minn. 2012).
briefly, prior to May 2012, Residential Funding Corporation
(“RFC”) “was in the business of acquiring
and securitizing residential mortgage loans.”
(See Compl. ¶ 5 [Case No. 17-cv-0196, Doc. No.
1] (“PNC Compl.”).) RFC acquired the loans from
“correspondent lenders” and distributed the loans
by either pooling them with other loans to sell into
residential mortgage-backed securitization
(“RMBS”) trusts or selling them to other
purchasers. (Id.) To ensure loan quality, RFC
required the correspondent lenders to abide by certain
representations and warranties regarding the loans.
(Id. ¶ 7.) According to Plaintiff ResCap
Liquidating Trust (“Trust”), the correspondent
lenders were responsible for collecting information from
borrowers, verifying the accuracy of that information, and
underwriting the loans. (Id. ¶ 22.)
14, 2012, RFC filed for Chapter 11 bankruptcy protection in
the United States Bankruptcy Court for the Southern District
of New York. (Id. ¶ 55); In re Residential
Capital, LLC, Case No. 12-12020 (MG) (Bankr. S.D.N.Y.
filed May 14, 2012). By that time, RFC had spent millions of
dollars repurchasing defective loans. (PNC Compl. ¶ 61.)
Hundreds of proofs of claim related to allegedly defective
mortgage loans were filed in connection with the bankruptcy
proceedings. (Id. ¶ 63.) The Bankruptcy Court
eventually approved a global settlement that provided for
resolution of the RMBS-related liabilities for more than $10
billion. (Id. ¶ 68.) The Chapter 11 bankruptcy
plan (“Plan”) became effective on December 17,
2013. (Id.) Under the Plan, the Trust succeeded to
all of RFC's rights and interests. (Id.
¶¶ 15, 69.) The purpose of the Trust is to monetize
RFC's remaining assets, pursue claims in litigation, and
distribute the proceeds to RFC's creditors. (Id.
the correspondent lenders with whom RFC did business were
Community Bank of Northern Virginia (“CBNV”), a
predecessor-in-interest to PNC; and Cimarron Mortgage Company
(“Cimarron”), a predecessor-in-interest to
Origin. (See PNC Compl. ¶¶ 16, 19; Compl.
¶¶ 16, 19 [Case No. 17-cv-0203, Doc. No. 1]
(“Origin Compl.”).) PNC and Origin are sued in
these actions in their capacities as successors to CBNV and
Trust brings two claims against PNC and Origin: (1) a breach
of contract claim founded on alleged breaches of warranties
and representations, and (2) an indemnification claim. (PNC
Compl. ¶¶ 70-83; Origin Compl. ¶¶ 75-88.)
As the basis for federal subject matter jurisdiction, the
Trust invokes bankruptcy jurisdiction under 28 U.S.C. §
1334 and diversity jurisdiction under 28 U.S.C. § 1332.
(PNC Compl. ¶ 17; Origin Compl. ¶ 17.)
PNC's motion to dismiss, PNC moves to dismiss all claims
against it pursuant to Federal Rule of Civil Procedure
12(b)(1), asserting a lack of subject matter jurisdiction
based on either diversity of citizenship or
bankruptcy-related jurisdiction. Alternatively, PNC asks the
Court to abstain from exercising jurisdiction under 28 U.S.C.
§ 1334(c)(1). PNC also contends that the Trust's
claims against it are barred by the prohibition against claim
splitting. Origin seeks leave to join in PNC's arguments
concerning subject matter jurisdiction and asks the Court to
dismiss all claims against it on those grounds.
Bankruptcy “Related To” Subject Matter
argues that this Court lacks bankruptcy jurisdiction in that
the Trust's claims are not “related to” the
underlying bankruptcy proceedings. PNC acknowledges that this
Court has already determined the existence of “related
to” jurisdiction in several earlier cases consolidated
in this action, but asks the Court to give “fresh
consideration” to the issue. (PNC's Mem. Supp. Mot.
Dismiss at 9 n.4 [Doc. No. 2347].)
The May 18, 2015 Order
Order dated May 18, 2015, this Court determined that
bankruptcy jurisdiction existed pursuant to 28 U.S.C. §
1334(b) in several cases transferred to the District of
Minnesota from the United States Bankruptcy Court for the
Southern District of New York. (Order at 8-12, May 18, 2015
[Doc. No. 452] (“Transfer Defs. Order”).) The
supporting legal authority and rationale for that
determination bear repeating.
district courts “have original but not exclusive
jurisdiction of all civil proceedings arising under title 11,
or arising in or related to cases under title 11.” 28
U.S.C. § 1334(b). “Congress did not delineate the
scope of ‘related to' jurisdiction, but its choice
of words suggests a grant of some breadth.” Celotex
Corp. v. Edwards, 514 U.S. 300, 307-08 (1995); see
In re NWFX, Inc., 881 F.2d 530, 533 (8th Cir. 1989)
(construing broadly the concept of “related to”
jurisdiction). Federal subject matter jurisdiction exists in
a “related to” case when there is “some
nexus between the civil proceeding and the Title 11
case.” Integrated Health Servs. of Cliff Manor,
Inc. v. THCI Co., LLC, 417 F.3d 953, 958 (8th Cir. 2005)
(quoting Specialty Mills, Inc. v. Citizens State
Bank, 51 F.3d 770, 774 (8th Cir. 1995)). “A claim
is ‘related to' a bankruptcy proceeding within ...