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Gibbs v. Federal National Mortgage Association

United States District Court, E.D. Virginia, Richmond Division

April 4, 2018

NORMA J. GIBBS, Plaintiff,



         THIS MATTER is before the Court on Plaintiff Norma J. Gibbs's ("Plaintiff) Motion to Remand to State Court (ECF No. 8), filed on March 7, 2018. Defendants Federal National Mortgage Association ("FNMA") and PHH Mortgage Association ("PHH") removed this action to this Court on February 5, 2018, alleging that the relevant parties in this action are diverse and that the amount in controversy exceeds $ 75, 000. (Notice of Removal ¶ 9, ECF No. 1.) Defendants PHH and FNMA are citizens of New Jersey and the District of Columbia, respectively (Id. ¶ 11-12), and Plaintiff is a citizen of Virginia. (Compl.¶ 1, ECF No. 1-1.) Defendant Professional Foreclosure Corporation of Virginia ("PFC") is also a citizen of Virginia (Id. ¶ 1), but Defendants FNMA and PHH claim that PFC's citizenship can be disregarded because it was fraudulently joined. (Notice of Removal ¶ 13.)

         Each side has filed memoranda supporting their respective positions. The Court will dispense with oral argument because the facts and legal contentions are adequately presented in the materials before the Court, and oral argument would not aid in the decisional process.

         For the reasons that follow, the Court will grant Plaintiffs Motion (ECF No. 8), and the action will be remanded to the Circuit Court of Spotsylvania County.

         I. BACKGROUND

         Plaintiff initially filed this action in the Circuit Court of Spotsylvania County on December 18, 2017 against Defendant FNMA, PHH and PFC. (Compl. 1.) Plaintiffs claims stem from the foreclosure sale of a home, located at 11802 Berwick Court, Fredericksburg, Virginia 22408 ("Property"). (Id. ¶ 1.)

         Wallace E. Gibbs purchased the Property in 2005 and financed the transaction through a loan and deed of trust ("DOT') with Defendant PHH. (Id. ¶ 6-7.) Plaintiff married Wallace Gibbs in 2013, and he executed a quitclaim deed conveying his ownership interest in the Property to Plaintiff in 2015. (Id. ¶ 8-9.) Wallace Gibbs died intestate on July 18, 2015, and Plaintiff qualified as the administrator of his estate. (Id. ¶ 11-12.) At some point in early 2016, Plaintiff defaulted on the loan with Defendant PHH. (Id. at Ex. E.)

         The DOT contains a provision that allows PHH to accelerate the full balance of the loan in the event of default. (Id. at Ex. B.) However, prior to accelerating the balance due, PHH was required to provide notice that states "(a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date of notice is given to the Borrower, by which the default must be cured." (Id.) Additionally, the notice must inform Plaintiff that failure to cure may result in acceleration. (Id.) Plaintiff claims that PHH provided a notice to cure "not sooner than February 24, 2016" and the notice provided a deadline of March 24, 2016. (Compl. ¶ 15-17.) PFC conducted a foreclosure sale of the Property on July 12, 2016. (Id. ¶ 23.)

         Plaintiff alleges that PHH breached the deed of trust by providing a notice that "gave a deadline, at the most, of 29 days rather than 30 days" and further alleges that PFC breached a fiduciary duty owed to her by failing to use due diligence to ensure that it was not wrongfully foreclosing on the Property. (Id. ¶¶ 17, 41.)


         As the removing parties, Defendants bear the burden of demonstrating that this Court has subject-matter jurisdiction. Press! v. Appalachian Power Co., 842 F.3d 299, 302 (4th Cir. 2016). Additionally, Defendants must satisfy the requirements of 28 U.S.C. § 1446, which outlines the procedures for removal. See Marler v. Amoco Oil Co., 793 F.Supp. 656, 658-59 (E.D. N.C. 1992) ("Defendant bears the burden of establishing the right to removal, including compliance with the requirements of [28 U.S.C] § 1446(b)."). Removing proceedings from state court raises significant federalism concerns; accordingly, "[i]f federal jurisdiction is doubtful, a remand is necessary." Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994).

         This Court has "original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between ... Citizens of different States" 28 U.S.C. § 1332(a)(1). Diversity must be complete "such that the state of citizenship of each plaintiff must be different from that of each defendant" at the time an action commences. Athena Auto., Inc. v. DiGregorio, 166 F.3d 288, 290 (4th Cir. 1999).

         However, "[t]he fraudulent joinder doctrine provides an exception to the complete diversity requirement." E.D. ex rel. Darcy v. Pfizer, Inc., 722 F.3d 574, 578 (4th Cir. 2013). The doctrine "permits a federal court to disregard, for jurisdictional purposes, the citizenship of non-diverse defendants." McFadden v. Fannie Mae, 525 Fed.App'x 223, 227 (4th Cir. 2013) (citations and quotation marks omitted).

         The term "fraudulent joinder" is, in many ways, a misnomer. See Id. More accurately characterized, it is "a term of art, [which] does not reflect on the integrity of plaintiff or counsel, but is merely the rubric applied when a court finds either that no cause of action is stated against the non diverse defendant, or in fact no cause of action exists." AIDS Counseling & Testing Ctrs. v. Group WTelevision, Inc.,903 F.2d 1000, 1003 (4th Cir. 1990) (citations and quotation marks omitted). "The removing party must establish that there is no possibility the plaintiff could establish a cause of action against the in-state defendant in state court, or that there has been outright fraud in the plaintiffs pleading of jurisdictional facts. A claim need not succeed to ...

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