United States District Court, D. Montana, Missoula Division
THE BANK OF NEW YORK MELLON, as Trustee for the Certificate holders of the CWABS, Inc., Asset Backed Certificates, Series 2007-11, Plaintiff and Counterclaim Defendant,
LENNY J. RUSTAD, Defendant and Third Party Plaintiff,
BANK OF AMERICA, N.A., Third Party Defendant.
L. CHRISTENSEN, CHIEF JUDGE.
before the Court is Lenny J. Rustad's
("Rustad") Motion to Remand (Doc. 2). For the
reasons explained, the Court grants the Motion.
and Procedural Background
case involves a real property dispute concerning lots owned
by Rustad, mortgaged with Bank of New York Mellon
("BONY"), and serviced by Bank of America, NA
("BANA"). Currently, there are two related cases
pending before this Court: the first is Rustad v. Bank of
America, CV-16-72-DLC which is currently stayed. The
second is the matter at hand, Bank of New York Mellon v.
Rustad, CV-18-62-DLC. While both suits concern the same
property and related allegations, only the narrow issue of
whether the Court should remand the latter is presently
before it. Nonetheless, because these cases are intertwined,
the Court will discuss the matter in its entirety.
8, 2016, Rustad filed suit against BANA in federal court.
(Rustad, Doc. 1.) Rustad did not name BONY, the
mortgage holder, as a defendant. (See id.)
Subsequently, BONY filed suit against Rustad in state court.
(BONY, Doc. 11.) In order to defend BONY's
claims, Rustad responded by counterclaiming against BONY and
added his third-party claims against BANA. (BONY,
Doc. 12.) These claims substantially mirror his federal court
claims. Therefore, Rustad moved to dismiss his federal claims
without prejudice, so the matter could be litigated
judiciously in state court. (Rustad, Doc. 25.) BANA
objected to dismissal, seeking the benefit of a federal
forum. (Rustad, Doc. 28.)
state court, Rustad argued that BONY's claims against him
were time-barred. (BONY, Doc. 15 at 1.) Judge Dayton
agreed and dismissed those claims, leaving only Rustad's
counter and third-party claims. (BONY, Doc. 15 at
6.) Then, in the federal case, BANA filed a Notice of
Supplemental Authority, informing this Court of Judge
Dayton's decision, and arguing that it rendered
Rustad's motion to dismiss moot. (Rustad, Doc.
30.) This Court subsequently denied the motion as moot and
the parties have stayed the federal case. (Rustad,
Docs. 31, 33.) However, there is still the matter of
Rustad's claims against BONY and BANA. Which brings us to
the present issue.
Judge Dayton ruled against BONY, BANA (the third-party
defendant in the state court action) removed the case to
federal court. (BONY, Doc. 1.) Rustad subsequently
moved this Court to remand the action, arguing that removal
was not appropriate because BANA is not a defendant under 28
U.S.C. § 1441(a). (BONY, Docs. 2, 3.) BANA then
defaulted and Rustad moved for default judgment.
(BONY, Doc. 5.) Default Judgment was entered by the
Clerk of Court on April 4, 2018 (BONY, Doc. 6), and
BANA subsequently moved to set it aside (BONY, Doc.
7). The threshold issue is whether this Court has
jurisdiction over the removed state court action. Because the
Court concludes that it does not, it does not reach the issue
of whether to set aside default judgment.
support of its Motion to Remand, Rustad claims that: (1)
BANA, a third-party defendant, improperly removed this action
under 28 U.S.C. § 1441(a); (2) removal violates the
forum-defendant rule; (3) Rustad did not consent to removal;
and (4) removal was not timely. (Doc. 3.)
response, BANA argues generally that the unique procedural
history in this case makes removal appropriate. Specifically,
BANA argues that: (1) Rustad initially chose a federal forum
to litigate his claims; (2) the Ninth Circuit has not clearly
prohibited third-party defendants from removing a case to
federal court; (3) additionally, or alternatively, the Court
could realign the parties according to their true interests,
in which case Rustad would be the plaintiff, rendering BANA
the defendant, and thus removal would be proper; and (4)
removal was timely. (Doc. 17.)
defendant in state court may remove an action to federal
court when it could have been filed in federal court
originally. 28 U.S.C. § 1441(a); City of Chicago v.
International College of Surgeons, 522 U.S. 156, 163
(1997). Removal may be based on either diversity jurisdiction
or federal question jurisdiction. 28 U.S.C. § 1441(b).
If, at any point prior to a final judgment, a federal
district court lacks subject matter jurisdiction because of
improper removal, it must remand the case to state court. 28
U.S.C. § 1447(c).
removing-party bears the burden to show that removal was
appropriate. Gaus v. Miles, Inc., 980 F.2d 564,
566-67 (9th Cir. 1992). "Federal jurisdiction must be
rejected if there is any doubt as to the right of removal in
the first instance." Id. at 566. If a district
court determines that removal was not appropriate, "it
is divested of jurisdiction and can take no further action on
the case." Wells Fargo Bank, N.A. v. Zimmerman,
2015 WL 9093465, at *3 (CD. Cal. Dec. 16, 2015) (quoting
Seedman v. U.S. Dist. Ct. for Cent. Dist. of Cal,
837 F.2d 413 (9th Cir. 1988)).
plain language of § 1441(a) allows removal by a
"the defendant or the defendants." Though the
question has been raised, the Ninth Circuit has not yet
squarely addressed whether removal is proper when effectuated
by a third-party defendant. Columbia State Bank v.
Daybreak Estates, LLC, 2011 WL 832132, at *2 (D. Or.
Feb. 9, 2011). "[T]he majority view is that the
determination of who is a defendant is determined by the
original complaint, not subsequent third or fourth- party
complaints." Schmidt v. Association of Apartment
Owners of Marco Polo Condominium,780 F.Supp. 699, 702
(D. Haw. 1991) (citing to 1A Moore's Federal Practice
§ 0.157 (1989)); Ciolino v. Ryan, 2003 WL
21556959, at *3 (N.D. Cal. July 9, 2003) (collecting cases).
As one Colorado district court explained, an
"appropriately strict construction of § 1441(a)...
permits removal only 'by the defendant or the
defendants,' [which] places a third-party defendant
outside the ambit of the removal statute." NCO Fin.
Sys., Inc. v. Yari,422 F.Supp.2d 1237, 1239 (D. Col.
2006) (citing Monmouth-Ocean Collection Serv., Inc. v.
Klor,46 F.Supp.2d 385 (D.N.J.1999)). The court observed
that this rule avoids the odd outcome that results if a
plaintiff is forced to litigate in a federal forum that she
did not chose and would not have been available to her
adversary, if not for the third-party defendant. Id.
Allowing third-party defendants to seek a federal forum where
there is no diversity of federal question prior to the
third-parties involvement increases the jurisdiction of
federal courts "in contravention of the statutory limits
on the right of ...