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Azad v. PNC Bank, N.A.

United States District Court, D. Hawaii

July 8, 2019

FARZAD AZAD, et al., Plaintiffs,



         Before the Court is Defendant PNC Bank N.A.'s (“PNC”) Objections to Magistrate Judge Mansfield's Findings and Recommendations to Deny Remand [Dkt. 38].[1] ECF No. 40. After careful consideration of the Magistrate Judge's Findings and Recommendation to Grant Motion for Order of Remand (“F&R”), ECF No. 38, the parties' submissions, and the applicable law, the Court ADOPTS the F&R for the reasons set forth below.


         The instant action arises out of the allegedly wrongful foreclosures of Plaintiffs Farzad and Kathryn Azad's (collectively “the Azads”), Patricia Helen Leilani Franco's (“Franco”), Robert Kovach's (“Kovach”), and Nina Tanner-Smith (“Tanner-Smith”), individually and as Trustee of the Nina Tanner-Smith Revocable Trust dated May 18, 2001's (“the Trust”) (collectively “Plaintiffs”) properties. Plaintiffs commenced this action on December 12, 2018 in the Circuit Court of the Second Circuit, State of Hawai'i. The Complaint asserts the following causes of action: (1) wrongful deprivation of real property (Count I); (2) unfair and deceptive trade practices and unfair methods of competition under Hawai'i Revised Statutes (“HRS”) Chapter 480 (Count II); and (3) quiet title and ejectment (Count III).[2]

         On January 22, 2019, PNC removed this action on the basis of diversity jurisdiction. Notice of Removal (“Notice”), ECF No. 1 at ¶ 14. PNC argues that the citizenships of Defendants Charles and Meri Lynn Fedak (collectively “the Fedaks”); Jesseca Kaufman (“Kaufman”); Cari Todd Keenan (“Keenan”); Bank of Hawaii (“BOH”); Mortgage Electronic Registration Systems, Inc. (“MERS”); Benjamin Kane (“Kane”); First Hawaiian Bank (“FHB”); and John and Laurie Trobough[3] (collectively “the Troboughs”) may be disregarded because they were fraudulently joined. Id. at ¶¶ 16-17. Following removal, Plaintiffs filed a Motion for Order of Remand (“Remand Motion”). ECF No. 11.

         The Magistrate Judge recommended that the Remand Motion be granted. He determined that Plaintiffs did not fraudulently join the non-diverse Defendants because (1) “it is possible that a Hawaii state court would find that Plaintiffs state a case of action against the Non-Diverse Citizens for quiet title and ejectment, ” F&R, ECF No. 38 at 20; (2) “[w]ithout any discrete and indisputable facts sufficient enough for this Court to conclude that Plaintiffs cannot possibly sustain a theory that innocent purchasers may be ejected from property because a wrongful foreclosure renders any subsequent transfers void, not voidable, . . . remand is proper, ” id. at 23-24; (3) “[w]ithout making any conclusions about whether, under Hunter [v. Phillip Morris USA, 582 F.3d 1039 (9th Cir. 2009)], PNC's arguments definitively require the district court to remand, this Court finds that Hunter nonetheless provides persuasive guidance that remand is proper in this case, ” id. at 26; and (4) a state court could possibly conclude that a twenty-year statute of limitations period, rather than the shorter six-year limitations period, applies. Id. at 30. The Magistrate Judge declined to recommend an award of attorneys' fees and costs because PNC had an objectively reasonable basis for removing the action based on its fraudulent joinder theory. Id. at 31.

         On June 20, 2019, PNC filed its Objections to the F&R. ECF No. 40. Plaintiffs filed a Response on July 2, 2019. ECF No. 42.


         The Court treats a motion to remand as a dispositive motion. Keown v. Tudor Ins. Co., 621 F.Supp.2d 1025, 1029 (D. Haw. 2008); Bralich v. Sullivan, No. CV 17-00203 ACK-RLP, 2017 WL 4883221, at *4 (D. Haw. Oct. 30, 2017). Magistrate judges may prepare findings and recommendations of pretrial matters dispositive of a claim or defense. Fed.R.Civ.P. 72(b)(1). Parties may object to a magistrate judge's findings and recommendation. Id.; Local Rule 74.2. “The district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to. The district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions.” Fed.R.Civ.P. 72(b)(3); Local Rule 74.2; 28 U.S.C. § 636(b)(1). Under a de novo standard, there is no deference to the lower court's ruling; rather, the Court “freely consider[s] the matter anew, as if no decision had been rendered below.” Dawson v. Marshall, 561 F.3d 930, 933 (9th Cir. 2009) (alteration in original); Freeman v. DirecTV, Inc., 457 F.3d 1001, 1004 (9th Cir. 2006).


         PNC objects to the F&R on the following grounds: (1) the Magistrate Judge erroneously concluded that the non-diverse Defendants might not be bona fide purchasers even though Plaintiffs never asserted their title claims prior to this lawsuit; (2) recent Hawai'i Supreme Court cases establish that if Plaintiffs establish wrongful foreclosure, their remedies are limited to money damages against PNC once a bona fide purchaser obtains the property; (3) the Magistrate Judge incorrectly suggested that Hunter persuasively supports remand; and (4) the Magistrate Judge erroneously concluded that Plaintiffs' quiet title/ejectment claims might be subject to a twenty-year statute of limitations. Objections, ECF No. 40 at 3-4.[4]

         A. Removal Jurisdiction

         Under 28 U.S.C. § 1441, a defendant may remove a civil action brought in a state court to federal district court if the district court has original jurisdiction. Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 679-80 (9th Cir. 2006). “Removal . . . statutes are ‘strictly construed,' and a ‘defendant seeking removal has the burden to establish that removal is proper and any doubt is resolved against removability.'” Hawaii ex rel. Louie v. HSBC Bank Nevada, N.A., 761 F.3d 1027, 1034 (9th Cir. 2014) (quoting Luther v. Countrywide Home Loans Serv. LP, 533 F.3d 1031, 1034 (9th Cir. 2008)); Hunter, 582 F.3d at 1042 (quoting Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (per curiam)) (“The ‘strong presumption against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper,' and that the court resolves all ambiguity in favor of remand to state court.”); Durham v. Lockheed Martin Corp., 445 F.3d 1247, 1252 (9th Cir. 2006). Courts should presume that a case lies outside the limited jurisdiction of the federal courts. Hunter, 582 F.3d at 1042.

         B. Diversity of Citizenship

         PNC asserted diversity jurisdiction as the basis for removal. Federal district courts have original jurisdiction over cases where the amount in controversy exceeds $75, 000, exclusive of interest and costs, and where the matter in controversy is between citizens of different states. 28 U.S.C. § 1332(a)(1). Complete diversity of citizenship requires that each of the plaintiffs be a citizen of a different state than each of the defendants. Williams v. United Airlines, Inc., 500 F.3d 1019, 1025 (9th Cir. 2007) (citing Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553 (2005)); Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001). Moreover, actions based on diversity jurisdiction may only be removed if none of the properly joined and served defendants is a citizen of the state in which the action is brought. 28 U.S.C. § 1441(b). Thus, “[d]efendants may remove an action on the basis of diversity of citizenship if there is complete diversity between all named plaintiffs and all named defendants, and no defendant is a citizen of the forum State.” Lincoln Prop. Co. v. Roche, 546 U.S. 81, 84 (2005).

         Here, complete diversity is lacking because Plaintiffs and certain Defendants share Hawai'i or California citizenship. With respect to Plaintiffs, the Azads and Franco are citizens of Hawai'i, Kovach is a citizen of Texas, and Tanner-Smith, individually and as Trustee of the Trust, is a citizen of California. Notice, ECF No. 1-2 at ¶¶ 3-7; see Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006) (“A trust has the citizenship of its trustee or trustees.”). PNC is a citizen of Delaware, where it maintains it principal office. Notice, ECF No. 1 at ¶ 14; Wachovia Bank v. Schmidt, 546 U.S. 303, 303 (2006) (“A national bank, for § 1348 purposes, is a citizen of the State in which its main office, as set forth in its articles of association, is located.”); Rouse v. Wachovia Mortg., FSB, 747 F.3d 707, 708 (9th Cir. 2014). Kaufman, Keenan, BOH, FHB, and the Troboughs are citizens of Hawai'i. Notice, ECF No. 1-2 at ¶¶ 11-13, 17-19. Kane and the Fedaks are citizens of California. Id. at ¶¶ 9-10, 16. PNC identified MERS as a Delaware corporation but did not provide its complete citizenship. 28 U.S.C. § 1332(c)(1) (Corporations are deemed to be citizens of “every State . . . by which it has been incorporated and of the State . . . where it has its principal place of business.”).

         C. Fraud ...

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