United States District Court, D. Hawaii
WILLIAM C. SCHNUTE; MAN-NA NANCY KUO; KENNETH SHIM; NANCY LEE O'KEEFE; and JOHN PAUL O'KEEFE, Plaintiffs,
PNC BANK, N.A.; MICHAEL ALAN TORRE; MECHELLE ANTOINETTE TORRE; MOANI AKANA; KEVIN K. MEDEIROS; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC.; HOMESTREET BANK; and DOE DEFENDANTS 1-50, Defendants.
ORDER REJECTING MAGISTRATE JUDGE'S FINDINGS AND
RECOMMENDATION TO DENY PLAINTIFFS' MOTION TO REMAND AND
REMANDING ACTION TO STATE COURT
Oki Mollway United States District Judge.
William C. Schnute, Man-Na Nancy Kuo, Kenneth Shim, Nancy Lee
O'Keefe, and John Paul O'Keefe (collectively,
“Plaintiffs”) owned real property on the Big
Island. They defaulted on their mortgage loans, and their
lender, Defendant PNC Bank, N.A. (“PNC”),
commenced nonjudicial foreclosure proceedings. Following
completion of the foreclosures, Plaintiffs sued PNC in state
court, asserting that PNC wrongfully foreclosed, and that PNC
committed unfair and deceptive trade practices and unfair
methods of competition. ECF No. 1-3, PageID #s 89-105.
also asserted a third claim of quiet title and ejectment
against the subsequent purchasers of the properties and their
lienholders: Defendants Michael Alan Torre, Mechelle
Antoinette Torre, Moani Akana, and Kevin K. Medeiros
(collectively, “Individual Defendants”), as well
as Defendants Mortgage Electronic Registration Systems Inc.
(“MERS”) and Homestreet Bank. See Id. at
105-13. The court refers to the parties sued under the quiet
title and ejectment claim collectively as the “Count
Plaintiffs and the Individual Defendants are citizens of
Hawaii and California, meaning that complete diversity is
lacking, PNC removed the case to this court, arguing that the
Count III Defendants were fraudulently joined because
Plaintiffs may not assert a quiet title and ejectment claim
against bona fide purchasers of the properties. ECF No. 1.
Plaintiffs seek a remand of the case. ECF No. 13. The
Magistrate Judge issued his Findings & Recommendations
(“F&R”), concluding that the Count III
Defendants were fraudulently joined and recommending that,
given the existence of diversity if the Individual Defendants
are disregarded, this court deny Plaintiffs' motion to
remand. ECF No. 28. Plaintiffs now object to the F&R. ECF
reviewed the F&R in light of Plaintiffs' objections,
this court concludes that PNC has not established under
settled Hawaii law that the Count III Defendants were
fraudulently joined. A state court could possibly determine
that Plaintiffs may proceed against the Count III Defendants.
As a result, this court grants Plaintiffs' motion to
remand this case to state court.
purposes of this order, the court adopts the F&R's
background section as setting forth the relevant facts.
Neither party has raised any objection related to that
section. The F&R's background section states:
The Court recites only those background facts necessary for
disposition of the current Motion. Plaintiffs obtained
mortgages from Defendant PNC or its predecessor, which were
secured by three properties located in Hawaii. ECF No. 1-3
¶¶ 27-34. Defendant PNC commenced non-judicial
foreclosure proceedings against the three properties pursuant
to the power of sale provision in the mortgage agreements at
issue. Id. ¶ 35. For purposes of this Motion,
the Court refers to the three properties at issue based on
the Plaintiffs that are associated with each property: the
Schnute/Kuo Property, the Shim Property, and the
O'Keefe Property. 
Following the non-judicial foreclosure, the Schnute/Kuo
Property was transferred from Defendant PNC to itself by
quitclaim deed and then transferred to [the Torres] by
special warranty apartment deed. Id. ¶¶
79- 80. The Shim Property was transferred from Defendant PNC
to itself by quitclaim deed and then transferred to [Akana
and Medeiros] by limited warranty deed. Id.
¶¶ 97-98. [Akana and Medeiros] have a mortgage on
the Shim Property with Defendant MERS as nominee for
Defendant Homestreet Bank. Id. ¶ 107.
Plaintiffs do not assert a quiet title and ejectment claim
regarding the O'Keefe Property. However, it appears that
Plaintiffs may assert such a claim in the future after they
receive “appellate clarification” regarding the
applicable statute of limitations. Id. at 21 n.1.
Plaintiffs' First Amended Complaint asserts two claims
against Defendant PNC: violations of state law governing
non-judicial residential foreclosures (Count I); and
violations of Hawaii Revised Statutes Chapter 480 for unfair
and deceptive trade practices related to the non-judicial
foreclosures (Count II). ECF No. 1-3. Plaintiffs also assert
a claim for quiet title and ejectment against the Individual
Defendants and Defendants Homestreet Bank and MERS (Count
Defendant PNC removed this action on January 16, 2019. ECF
No. 1. In the present Motion, Plaintiffs argue that remand is
appropriate because the Court lacks subject matter
jurisdiction. Specifically, Plaintiffs contend that complete
diversity is lacking because Plaintiffs and the Individual
Defendants are citizens of the same states. Defendant PNC
argues that the Individual Defendants, Defendant Homestreet
Bank, and Defendant MERS were fraudulently joined as sham
defendants to defeat jurisdiction and, therefore,
jurisdiction is proper in federal court.
ECF No. 28, PageID #s 568-70.
APPLICABLE LEGAL STANDARDS.
Review of Magistrate Judge's Findings and
has empowered magistrate judges, upon referral of dispositive
pretrial motions by district judges, to conduct hearings and
issue findings and recommendations regarding dispositive
pretrial motions. See 28 U.S.C. § 636(b)(1)(B);
see also Fed. R. Civ. P. 72(b) (promulgating rule).
district judge reviews a magistrate judge's findings and
recommendations prior to ruling on the motion, and may
accept, reject, or modify, in whole or in part, the findings
and recommendations made by the magistrate judge.
Fed.R.Civ.P. 72(b). If a party timely objects to portions of
the findings and recommendations, the district judge reviews
those portions of the findings and recommendations de novo.
Fed.R.Civ.P. 72(b)(3); Local Rule 74.2. The district judge
may consider the record developed before the magistrate
judge. Local Rule 74.2. The district judge also has
discretion to receive further evidence. 28 U.S.C. §
636(b)(1); Fed.R.Civ.P. 72(b)(3); Local Rule 74.2; see
also United States v. Raddatz, 447 U.S. 667, 676 (1980)
(explaining that a district judge has wide discretion in
deciding whether to allow new evidence). The de novo standard
requires the district court to consider a matter anew and
arrive at its own independent conclusions, but a de novo
hearing is not ordinarily required. See United States v.
Remsing, 874 F.2d 614, 617 (9th Cir. 1989); United
States v. Boulware, 350 F.Supp.2d 837, 841 (D. Haw.
2004); Local Rule 74.2.
district judge may accept the portions of the findings and
recommendations to which the parties have not objected as
long as it is satisfied that there is no clear error on the
face of the record. See United States v. Bright,
Civ. No. 07-00311 ACK/KSC, 2009 WL 5064355, at *3 (D. Haw.
Dec. 23, 2009); Stow v. Murashige, 288 F.Supp.2d
1122, 1127 (D. Haw. 2003); Fed.R.Civ.P. 72(b) advisory
filed this case in state court, and PNC removed to this court
shortly thereafter. 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. Hunter v. Philip Morris USA, 582 F.3d
1039, 1042 (9th Cir. 2009). This means that a defendant may
remove an action based on federal question jurisdiction or
diversity jurisdiction. Id. The removal statute is
strictly construed against removal. Provincial Gov't
of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087
(9th Cir. 2009). “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.” Hunter, 582
F.3d at 1042 (quoting Gaus v. Miles, Inc., 980 F.2d
564, 566 (9th Cir. 1992) (per curiam)).
asserts diversity jurisdiction as the basis for removal.
Diversity jurisdiction exists when the amount in controversy
exceeds $75, 000, exclusive of interest and costs, and the
matter in controversy is between citizens of different
states. 28 U.S.C. § 1332(a)(1). Complete diversity of
citizenship requires that “each defendant must be a
citizen of a different state from each plaintiff.”
In re Digimarc Corp. Derivative Litig., 549 F.3d
1223, 1234 (9th Cir. 2008). Removal based on diversity
jurisdiction is not allowed “if any of the parties in
interest properly joined and served as defendants is a
citizen of the State in which such action is brought.”
28 U.S.C. § 1441(b)(2). In other words,
“[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).
parties acknowledge that complete diversity exists between
Plaintiffs and PNC. The First Amended Complaint
(“Complaint”) alleges that some Plaintiffs
(Schnute and Kuo) and Individual Defendants (the Torres) are
residents of California and that the remaining Plaintiffs
(Shim and the O'Keefes) and Individual Defendants (Akana
and Medeiros) are residents of Hawaii. ECF No. 1-3, PageID #