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Conrad v. Ocwen Loan Servicing, LLC

United States District Court, N.D. West Virginia

July 26, 2017

ROBERT G. CONRAD, Plaintiff,

          Keeley, Judge


         On February 27, 2017, the plaintiff, Robert G. Conrad (“Conrad”), [1] filed a complaint in the Circuit Court of Doddridge County, West Virginia (“Circuit Court”), against the defendants, Ocwen Loan Servicing, LLC (“Ocwen”); U.S. Bank National Association, as Trustee for C-BASS Mortgage Loan Asset-Backed Certificates, Series 2007-SP2 (“U.S. Bank”); and Dakota Hinterer (“Hinterer”) (Dkt. No. 1-1 at 5). On April 7, 2017, Ocwen and U.S. Bank removed the case to this Court, arguing that Hinterer, the only non-diverse defendant, was fraudulently joined to defeat diversity (Dkt. No. 1).After considering Conrad's motion to remand (Dkt. No. 6), the Court concludes that it lacks subject matter jurisdiction. Therefore, it GRANTS Conrad's motion and REMANDS this case to the Circuit Court.

         I. BACKGROUND

         In 1996, Conrad purchased his home for $73, 000 with a loan held by U.S. Bank. After Conrad refinanced the home in 2000, Litton Loan Servicing, LP (“Litton”), began servicing the loan. Thereafter, Conrad applied for a loan modification, which Litton approved. By this, Conrad lowered his interest rate from 8.5% to 3.5% (Dkt. No. 1 at 6-7).

         Before the agreement was memorialized, Ocwen purchased Litton. After it began servicing Conrad's loan, it “refused to honor the agreement that Litton provided.”[2] Instead, on several occasions, Ocwen instructed Conrad to reapply for loss mitigation assistance and to stop making payments until it finalized his loan modification. Most recently, in August 2016, Conrad again applied for loss mitigation assistance because Ocwen had not responded to his previous communications. Id. at 7-8.

         On January 18, 2017, Conrad received a letter dated January 11, 2017, in which Ocwen denied his request for loss mitigation assistance. It based its denial in part on the falsehood that Conrad had failed to provide an application before 2017. An individual also stopped at Conrad's house to notify him that his property would be sold at foreclosure later that day. Hinterer, whose family is involved in the oil and gas business, purchased the home at the foreclosure sale. Id. at 9. The contract of sale establishes that Hinterer purchased the property for $171, 063.11, and paid $17, 000.00 as a deposit (Dkt. No. 18-1).[3]

         In his complaint, Conrad alleges that Ocwen failed to comply with industry standards and commercially reasonable business practices regarding loss mitigation applications, and that it never actually evaluated his application or provided him a right to appeal its denial (Dkt. No. 1-1 at 9). He further claims that, based on Ocwen's representations, he did not pursue other options, such as selling the property, refinancing, or obtaining assistance.

         Therefore, Conrad allegedly could not avoid foreclosure and suffered “economic loss, annoyance and inconvenience, stress and worry, and fear of loss of his home.” Id. at 10. Conrad seeks relief based on various violations of the West Virginia Consumer Credit and Protection Act, as well as common law claims for tortious interference, fraud, “equity abhors a forfeiture, ” and estoppel. Id. at 10-15. Only the latter two causes of action are asserted against “all defendants.” Id. at 14-15.

         On April 7, 2017, Ocwen and U.S. Bank (“the removing defendants”), both diverse from Conrad, removed the case to this Court (Dkt. No. 1). They aver that Hinterer, a West Virginia resident, was fraudulently joined to defeat diversity because Conrad “failed to allege any wrongdoing or state a valid claim against him.” Id. at 4. On April 14, 2017, the removing defendants filed their answer to the complaint (Dkt. No. 5). Thereafter, on May 8, 2017, Conrad moved to remand the case to state court, contending that the removing defendants “have failed to satisfy their burden in the notice of removal that Defendant Hinterer has been fraudulently joined or that he [is] only a nominal party” (Dkt. No. 6-1 at 1). At a scheduling conference on June 20, 2017, the Court heard argument on the motion to remand (Dkt. No. 12), and directed the parties to file supplemental briefs by June 30, 2017 (Dkt. No. 13).


         Title 28 U.S.C. § 1441(a) provides that “any civil action brought in a state court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants.” See also King v. Marriott Int'l, Inc., 337 F.3d 421, 424 (4th Cir. 2003). Nonetheless, “federal courts, unlike state courts, are courts of limited jurisdiction, created by Congress with specified jurisdictional requirements and limitations, ” Strawn v. AT&T Mobility LLC, 530 F.3d 293, 296 (4th Cir. 2008), and federalism counsels that removal jurisdiction should be strictly construed. Palisades Collections LLC v. Shorts, 552 F.3d 327, 334 (4th Cir. 2008) (citing Md. Stadium Auth. v. Ellerbe Becket Inc., 407 F.3d 255, 260 (4th Cir. 2005)).

         “The burden of establishing federal jurisdiction is placed upon the party seeking the removal.” Mulcahey v. Columbia Organic Chems., Inc., 29 F.3d 148, 151 (4th Cir. 1994). “All doubts about the propriety of removal should be resolved in favor of retaining state court jurisdiction, ” and thus remanding a case to state court. Vitatoe v. Mylan Pharm., Inc., No. 1:08cv85, 2008 WL 3540462, at *2 (N.D. W.Va. Aug. 13, 2008) (citing Hartley v. CSX Transp., Inc., 187 F.3d 422, 425 (4th Cir. 1999)). The Court is limited in its consideration to the facts on the record at the time of removal. See Lowrey v. Al. Power Co., 483 F.3d 1184, 1213-15 (11th Cir. 2007).


         “The district courts have 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). This provision has been consistently interpreted “to require complete diversity of citizenship of each plaintiff from each defendant.” Rosmer v. Pfizer Inc., 263 F.3d 110, 123 (4th Cir. 2001) (Motz, J., dissenting) (citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806)).

         Nonetheless, naming a non-diverse defendant does not necessarily defeat diversity jurisdiction. There are “three exceptions to the strict requirement of diversity: (1) a court may ignore the citizenship of nominal parties; (2) a court may dismiss parties fraudulently joined; and (3) a court may realign the parties based on their true interests.” Chamberlain v. 37th Parallel Properties Inv. Grp., LLC, No. 3:15-cv-00080, 2015 WL 1954674, at *2 (E.D. Va. Apr. 29, 2015). Although Hinterer is non-diverse, the ...

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