MERS et al v Johnston | MERS, MERSCORP'S DIVERSITY ARGUMENTS FAIL IN TRYING TO UPEND ANOTHER CALIFORNIA QUIET TITLE CASE!

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MERS et al v Johnston | MERS, MERSCORP’S DIVERSITY ARGUMENTS FAIL IN TRYING TO UPEND ANOTHER CALIFORNIA QUIET TITLE CASE!

MERS et al v Johnston | MERS, MERSCORP’S DIVERSITY ARGUMENTS FAIL IN TRYING TO UPEND ANOTHER CALIFORNIA QUIET TITLE CASE!

H/T Dave Krieger of Quiet Title Blog

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL

Case No. CV 15-04853-BRO (FFMx)

Date September 11, 2015

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC ET AL

V.

TIMOTHY J. JOHNSTON

ORDER GRANTING DEFENDANT’S MOTION TO
DISMISS [16]

I. INTRODUCTION
Pending before the Court is Defendant Timothy Johnston’s motion to dismiss
Plaintiffs Mortgage Electronic Registration Systems, Inc.’s (“MERS”), MERSCORP
Holdings, Inc.’s, and The Bank of New York Mellon f/k/a The Bank of New York as
Trustee for Structured Asset Mortgage Investments II Trust 2006-AR8, Mortgage Pass-
Through Certificates, Series 2006-AR8’s (“BNYM”) (collectively, “Plaintiffs”)
Complaint. (Dkt. No. 16.) After considering the papers filed in support of and in
opposition to the instant motion, the Court deems this matter appropriate for resolution
without oral argument of counsel. See Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. Because
the Court finds, sua sponte, that it lacks subject matter jurisdiction over this matter, the
Court GRANTS Defendant’s motion to dismiss Plaintiffs’ complaint with leave to
amend.

II. FACTUAL AND PROCEDURAL BACKGROUND
In February 2005, Defendant acquired title to real property (the “Property”) located
in Santa Maria, California, by means of a quitclaim deed. (Compl. ¶¶ 11–12.) The
quitclaim deed was recorded in the Santa Barbara County Recorder’s Office on July 31,
2006. (Compl. ¶ 12.) In July 2006, Defendant obtained a residential mortgage loan on
the Property for $408,700.00, secured by a deed of trust. (Compl. ¶ 30.) Defendant
recorded the deed of trust with the Santa Barbara County Recorder’s Office. (Id.) The
deed of trust identified Southstar Funding, LLC (“Southstar”) as the “Lender” on the
loan, and MERS as “a separate corporation . . . acting solely as a nominee for Lender and
Lender’s successors and assigns.” (Dkt. No. 11, Ex. A at 1; see Compl. ¶ 32.) The deed
of trust named MERS the beneficiary under the “Security Instrument . . . (solely as
nominee for Lender and Lender’s successors and assigns) and the successors and assigns
of MERS.” (Dkt No. 11, Ex. A at 1–2; Compl. ¶¶ 33–34.) Because the deed of trust
“grant[ed] a power of sale over the Property together with all improvements and interests
therein,” (Compl. ¶ 35), the deed of trust further provided:

Borrower [i.e., Defendant] understands and agrees that MERS holds only
legal title to the interests granted by Borrower in this Security Instrument,
but, if necessary to comply with law or custom, MERS (as nominee for
Lender and Lender’s successors and assigns) has the right: to exercise any or
all of those interests, including, but not limited to, the right to foreclose and
sell the Property; and to take any action required of Lender including, but
not limited to, releasing and canceling this Security Instrument.
(Dkt. No. 11, Ex. A at 2; see Compl. ¶ 35.)

In May 2012, Defendant filed an action in Santa Barbara Superior Court to quiet
title to the Property. (Compl. ¶ 40; see Dkt. No. 11, Ex. B.) Defendant named Southstar
as a defendant in the quiet title action, as well as “unknown persons and entities”
claiming any right or interest in the Property adverse to Defendant’s claim. (Compl. ¶¶
40, 46.) Defendant did not name Plaintiffs as defendants. (See Dkt. No. 11, Ex. B;
Compl. ¶ 46.)

When Southstar failed to appear and defend the state court quiet title action,
Defendant secured a default judgment for quiet title on April 17, 2013. (Compl. ¶¶ 47,
49.) Defendant recorded the judgment with the Santa Barbara Recorder’s Office.
(Compl. ¶ 50; see Ex. C.)

MERS assigned its rights and interests under the deed of trust to BNYM, as
trustee, on April 17, 2013. (Compl. ¶ 48.) On June 26, 2015, MERS, MERS’s parent
company MERSCORP Holdings, Inc., and BNYM filed the action now before this Court,
seeking to set aside Defendant’s quiet title judgment. (See Dkt. No. 1.) Plaintiffs allege
that Defendant intentionally violated California’s quiet title statutes which require
plaintiffs in quiet title actions to “name as defendants in the action the persons having
adverse claims to the title of the plaintiff against which a determination is sought.” Cal.
Civ. Proc. Code § 762.020. (See Compl. ¶¶ 26, 53, 60.) Plaintiffs’ Complaint requests:
(1) declaratory judgment for violation of California’s quiet title statutes (Cal. Civ. Proc.
Code §§ 760.010–764.045) and to set aside the void quiet title judgment, (Compl. ¶¶ 59–
67); and (2) declaratory judgment for violation of due process and to set aside the void
quiet title judgment, (Compl. ¶¶68–76).

Defendant filed the instant Motion to Dismiss on July 31, 2015. (Dkt. No. 16.)
Plaintiffs opposed Defendant’s motion on August 24, 2015, (Dkt. No. 21), and Defendant
timely replied on August 31, 2015, (Dkt. No. 23).

 

III. REQUEST FOR JUDICIAL NOTICE

When considering a motion to dismiss, a court typically does not look beyond the
complaint in order to avoid converting a motion to dismiss into a motion for summary
judgment. See Mack v. S. Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986),
overruled on other grounds by Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S. 104
(1991). Notwithstanding this precept, a court may properly take judicial notice of
(1) material which is included as part of the complaint or relied upon by the complaint,
and (2) matters in the public record. See Marder v. Lopez, 450 F.3d 445, 448 (9th Cir.
2006); Lee v. City of L.A., 250 F.3d 668, 688–89 (9th Cir. 2001).
A court may also take judicial notice pursuant to Federal Rule of Evidence 201(b).
Under the rule, a judicially-noticed fact must be one which is “not subject to reasonable
dispute because it: (1) is generally known within the trial court’s territorial jurisdiction;
or (2) can be accurately and readily determined from sources whose accuracy cannot
reasonably be questioned.” Fed. R. Evid. 201(b). A court “must take judicial notice if a
party requests it and the court is supplied with the necessary information.” See Fed. R.
Evid. 201(c)(2); In re Icenhower, 755 F.3d 1130, 1142 (9th Cir. 2014).
Defendant requests that this Court take judicial notice of eleven documents,
including: (1) record searches from Delaware’s, California’s, Georgia’s, and New York’s
Secretary of State websites, (RJN, Exs. 1–3, 9–11); (2) the May 23, 2012 Notice of
Pendency of Action executed on May 15, 2012, and recorded in the official land records
of Santa Barbara as Instrument Number 2012-0033831, (RJN, Ex. 4); (3) copies of two
orders and one judgment from the state court quiet title action, (RJN, Exs. 5–7); and, (4) a
Corporate Assignment of Deed of Trust for the Property, dated April 17, 2013, (RJN, Ex.
8).

Plaintiffs do not oppose Defendant’s request. (See generally Opp’n.) In fact,
Plaintiffs incorporated the state court’s judgment for quiet title as an exhibit to their own
Complaint. (Compare Compl., Ex. C, with RJN, Ex. 7.) See Marder, 450 F.3d at 448
(explaining that a “court may consider evidence on which the complaint ‘necessarily
relies’” and “may treat such a document as ‘part of the complaint, and thus may assume
that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6)’”
(quoting United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003))).
Because Defendant requests that the Court take judicial notice of documents that
are matters of public record and from sources whose accuracy cannot reasonably be
questioned—and which Plaintiffs do not question—the Court GRANTS Defendant’s
request for judicial notice in its entirety. See Reyn’s Pasta Bella, LLC v. Visa USA, Inc.,
442 F.3d 741, 746 n.6 (9th Cir. 2006) (holding that judicial notice of court filings is
proper); Burbank-Glendale-Pasadena Airport Auth. v. City of Burbank, 136 F.3d 1360,
1364 (9th Cir. 1998) (granting motion for judicial notice of pleadings filed in a related
state court action); Wise v. Wells Fargo Bank, N.A., 850 F. Supp. 2d 1047, 1057 (C.D.
Cal. 2012) (granting request for judicial notice of documents recorded in the Official
Records of the Los Angeles County Recorder’s Office); L’Garde, Inc. v. Raytheon Space
& Airborne Sys., 805 F. Supp. 2d 932, 937–38 (C.D. Cal. 2011) (granting judicial notice
of records searches from the California Secretary of State website because “the accuracy
of the results of records searches from the Secretary of State for the State of California
corporate search website [could] be determined by readily accessible resources whose
accuracy [could not] reasonably be questioned”).

IV. LEGAL STANDARD

A. Motion to Dismiss for Lack of Subject Matter Jurisdiction
A party may contest subject matter jurisdiction pursuant to a motion to dismiss
under Federal Rule of Civil Procedure 12(b)(1). Fed. R. Civ. P. 12(b)(1). Under Rule
12(b)(1), the moving party may either attack the pleadings on their face or present
extrinsic evidence for the district court’s consideration. Kohler v. CJP, Ltd., 818 F. Supp.
2d 1169, 1172 (C.D. Cal. 2011) (citing White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000)
(noting that Rule 12(b)(1) jurisdictional attacks “can be either facial or factual”)). A
district court must determine whether an attack is facial or factual, as this determination
governs the scope of the court’s review. See Kohler, 818 F. Supp. 2d at 1172.
When deciding a Rule 12(b)(1) motion that attacks the complaint on its face, a
court “must accept the allegations of the complaint as true.” Id. (citing Valdez v. United
States, 837 F. Supp. 1065, 1067 (E.D. Cal. 1993), aff’d, 56 F.3d 1177 (9th Cir. 1995)).
But in deciding a Rule 12(b)(1) motion that raises a factual attack, courts “may weigh the
evidence presented, and determine the facts in order to evaluate whether they have power
to hear the case.” Id. (citing Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987));
see also White, 227 F.3d at 1242 (when a motion relies on extrinsic evidence, a court
“need not presume the truthfulness of the plaintiffs’ allegations”).

 

The more expansive standard for factual attacks is inappropriate “where issues of
jurisdiction and substance are intertwined.” Roberts, 812 F.2d at 1177. Thus, “[a] court
may not resolve genuinely disputed facts where ‘the question of jurisdiction is dependent
on the resolution of factual issues going to the merits.’” Id. (quoting Augustine v. United
States, 704 F.2d 1074, 1077 (9th Cir. 1983)); see also Rosales v. United States, 824 F.2d
799, 803 (9th Cir. 1987). In such cases, the court must assume the truth of the
complaint’s allegations unless they are controverted by undisputed facts. Kohler, 818 F.
Supp. 2d at 1173; Roberts, 812 F.2d at 1177. Additionally, where the question of
jurisdiction “is so intertwined with the merits that its resolution depends on the resolution
of the merits, ‘the trial court should employ the standard applicable to a motion for
summary judgment.’” Careau Grp. v. United Farm Workers of Am., AFL-CIO, 940 F.2d
1291, 1293 (9th Cir. 1991) (quoting Augustine, 704 F.2d at 1077). In such cases, the
court must convert the motion into a Rule 12(b)(6) motion to dismiss or a Rule 56
summary judgment motion. Islands, Inc. v. U.S. Bureau of Reclamation, 64 F. Supp. 2d
966, 968 (E.D. Cal. 1999), vacated on other grounds, 10 Fed. App’x 491 (9th Cir. 2001).
The party asserting subject matter jurisdiction bears the burden of establishing it.
If the moving party presents extrinsic evidence to defeat subject matter jurisdiction, the
party asserting jurisdiction must present its own evidence to meet its burden. See Savage
v. Glendale Union High Sch., Dist. No. 205, Maricopa Cty., 343 F.3d 1036, 1039 n.2 (9th
Cir. 2003); St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989).

A federal court must determine its own jurisdiction even when there is no objection
to it. Rains v. Criterion Sys., Inc., 80 F.3d 339, 342 (9th Cir. 1996). Jurisdiction must be
determined from the face of the complaint. Caterpillar, Inc. v. Williams, 482 U.S. 386,
392 (1987). Under 28 U.S.C. § 1331, federal courts possess jurisdiction over “all civil
actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. §
1331. A case “arises under” federal law if a plaintiff’s “well-pleaded complaint
establishes either that federal law creates the cause of action” or that the plaintiff’s “right
to relief under state law requires resolution of a substantial question of federal law in
dispute between the parties.” Franchise Tax Bd. v. Constr. Laborers Vacation Trust for
S. Cal., 463 U.S. 1, 13 (1983).

B. Motion to Dismiss for Failure to State a Claim Under Rule 12(b)(6)
Under Rule 8(a), a complaint must contain a “short and plain statement of the
claim showing that the [plaintiff] is entitled to relief.” Fed. R. Civ. P. 8(a). If a
complaint fails to do this, the defendant may move to dismiss it under Rule 12(b)(6).
Fed. R. Civ. P. 12(b)(6). Courts generally “consider only allegations contained in the
pleadings, exhibits attached to the complaint, and matters properly subject to judicial
notice.” Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). “To survive a motion
to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a
claim that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim
is plausible on its face “when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.
“Factual allegations must be enough to raise a right to relief above the speculative level.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, there must be “more than a
sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678. “Where
a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops
short of the line between possibility and plausibility’” that the plaintiff is entitled to
relief. Id.

C. Whether to Provide Plaintiffs Leave to Amend Complaint
A district court should provide leave to amend when it grants a motion to dismiss
under Rule 12(b)(1) or Rule 12(b)(6) unless it is clear that the complaint could not be
saved by any amendment. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025,
1031 (9th Cir. 2008) (“Dismissal without leave to amend is improper unless it is clear,
upon de novo review, that the complaint could not be saved by any amendment.”); Snell
v. Cleveland, Inc., 316 F.3d 822, 828, 828 n.6 (9th Cir. 2002) (explaining that courts have
“the authority to grant leave to amend a complaint in order to cure defective allegations
of jurisdiction” and “[d]ismissal without leave to amend is improper unless it is clear,
upon de novo review, that the complaint could not be saved by amendment”) (citing Lee
v. City of L.A., 250 F.3d 668, 692 (9th Cir. 2001)). Leave to amend, however, “is
properly denied . . . if amendment would be futile.” Carrico v. City & Cty. of S.F., 656
F.3d 1002, 1008 (9th Cir. 2011).

V. DISCUSSION
Defendant moves to dismiss Plaintiffs’ complaint on the grounds that: the Court
lacks subject matter jurisdiction over the case under Federal Rule of Civil Procedure
12(b)(1) because the Rooker-Feldman doctrine applies, (Mot. at 4–6); Plaintiffs lack
capacity to sue, (Mot. at 6–12); res judicata bars Plaintiffs’ claims, (Mot. at 12–13);
Plaintiffs fail to join an indispensable party under Federal Rule of Civil Procedure
12(b)(7), (Mot. at 13–14); and Plaintiffs fail to state sufficient facts to make a plausible
claim for relief under Federal Rule of Civil Procedure 12(b)(6), (Mot. at 14–19).
Despite the fact that the Rooker-Feldman doctrine does not apply for the reasons
discussed below, the Court finds, sua sponte, that it lacks subject matter jurisdiction over
this action. The Court accordingly GRANTS Defendant’s motion to dismiss with leave
to amend.

 

A. The Rooker-Feldman Doctrine Does Not Apply Where Plaintiffs Were
Not Parties in the State Court Action
Defendant argues that the Rooker-Feldman doctrine bars Plaintiffs’ claims. (Mot.
at 5–6.) Because Defendant does not raise factual questions, this is a facial attack on
Plaintiffs’ pleadings. The Court therefore “accept[s] the allegations of the complaint as
true.” Kohler, 818 F. Supp. 2d at 1172 (citing Valdez, 837 F. Supp. at 1067).
Under the Rooker-Feldman doctrine, a district court does not have subject matter
jurisdiction to hear a direct appeal from a final judgment of a state court. Noel v. Hall,
341 F.3d 1148, 1155 (9th Cir. 2003). The doctrine also forbids “de facto” appeals of
state court decisions. Id. at 1158. But Rooker-Feldman does not apply when “the party
against whom the doctrine is invoked was not a party to the underlying state-court
proceeding.” Lance v. Dennis, 546 U.S. 459, 464 (2006) (internal quotations omitted).
Rooker-Feldman is thus inapplicable here where Defendant did not include Plaintiffs as
parties to the quiet title action. (Compl. ¶¶ 40, 46; see Dkt. No. 11, Ex. B.)
Defendant’s argument that “MERS was in privity with Southstar as the purported
nominee of Southstar” is inapposite. (Mot. at 5.) The Supreme Court has explicitly held
that the Rooker-Feldman doctrine does not bar plaintiffs from proceeding with an action
filed in district court on the ground that those plaintiffs were in privity with a party which
did not prevail in state court. Lance, 546 U.S. at 460. Defendant’s argument that
Rooker-Feldman applies to this case fails.

B. The Court Lacks Subject Matter Jurisdiction Over This Case Because
Plaintiffs Fail to Allege State Action Sufficient to Assert a Colorable
Constitutional Claim
Although Defendant’s Rooker-Feldman argument fails, the Court is obligated to
consider sua sponte whether it possesses subject matter jurisdiction and to dismiss the
action if it lacks jurisdiction. See Fed. R. Civ. P. 12(h)(3). Plaintiffs rely on their federal
constitutional claims to allege that the Court has subject matter jurisdiction over this
action. (Compl. ¶ 1 (“This Court has jurisdiction over this action under 28 U.S.C. §
1331, which confers original jurisdiction on federal district courts to hear suits alleging
the violation of rights and privileges under the United States Constitution.”).) Plaintiffs
assert that the quiet title judgment in the state court action violated Plaintiffs’ rights under
the Fifth and Fourteenth Amendments to the United States Constitution. (Compl. ¶¶ 68–
76.)

A constitutional claim is not “colorable” if it “clearly appears to be immaterial and
made solely for the purpose of obtaining jurisdiction or . . . is wholly insubstantial or
frivolous.” Boettcher v. Sec’y of HHS, 759 F.2d 719, 722 (9th Cir. 1985) (quoting Bell v.
Hood, 327 U.S. 678, 682–83 (1946)). “Dismissal for lack of subject-matter jurisdiction
because of the inadequacy of the federal claim is proper only when the claim is ‘so
insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise
completely devoid of merit as not to involve a federal controversy.’” Steel Co. v. Citizens
for a Better Env’t, 523 U.S. 83, 89 (1998) (quoting Oneida India Nation of N.Y. v. Cty. of
Oneida, 414 U.S. 661, 666 (1974)).

Plaintiffs have not alleged a cause of action under the Fifth Amendment. Bingue v.
Prunchak, 512 F.3d 1169, 1174 (9th Cir. 2008) (“[T]he Fifth Amendment’s due process
clause only applies to the federal government.”); see also Betts v. Brady, 316 U.S. 455,
462 (1942) (“Due process of law is secured against invasion by the federal Government
by the Fifth Amendment and is safe-guarded against state action in identical words by the
Fourteenth.”), overruled on other grounds by Gideon v. Wainwright, 372 U.S. 335
(1963). The state court judgment cannot violate Plaintiffs’ Fifth Amendment rights
where it is not federal government action.

The Fourteenth Amendment, on the other hand, prohibits state action that deprives
a person of life, liberty, or property without due process of law. Ingraham v. Wright, 430
U.S. 651, 672 (1977). As discussed below, Plaintiffs allege a “wholly insubstantial”
constitutional claim under the Fourteenth Amendment. See Boettcher, 759 F.2d at 722.
First, Plaintiffs’ constitutional claim under the Fourteenth Amendment fails to
allege state action. The Due Process Clause of the Fourteenth Amendment only applies
to the conduct of state actors. Jackson v. Brown, 513 F.3d 1057, 1079 (9th Cir. 2008);
see Shelly v. Kraemer, 334 U.S. 1, 13 (1948) (“Th[e Fourteenth] Amendment erects no
shield against merely private conduct, however discriminatory or wrongful.”). Plaintiffs’
sole reference to state action appears when Plaintiffs allege that “Johnston acted in
concert with the state court to obtain clear title to the Property in violation of MERS’
rights, and thus the Prior Action and Judgment entered therein constitute state acts.”
(Compl. ¶ 74.)

“[S]tate action may be found if, though only if, there is such a ‘close nexus
between the State and the challenged action’ that seemingly private behavior ‘may be
fairly treated as that of the State itself.’” Brentwood Acad. v. Tenn. Secondary Sch.
Athletic Ass’n, 531 U.S. 288, 295 (2001) (quoting Jackson v. Metro. Edison Co., 419 U.S.
345, 351 (1974)); see also Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 50 (1999)
(discussing the “state-action requirement of the Fourteenth Amendment” and that it
“requires both an alleged constitutional deprivation ‘caused by the exercise of some right
or privilege created by the State or by a rule of conduct imposed by the State or by a
person for whom the State is responsible,’ and that ‘the party charged with the
deprivation must be a person who may fairly be said to be a state actor’” (quoting Lugar
v. Edmondson Oil Co., 457 U.S. 922, 937 (1982))); Sutton v. Providence St. Joseph Med.
Ctr., 192 F.3d 826, 843 (9th Cir. 1999) (“[T]he plaintiff must establish some other nexus
sufficient to make it fair to attribute liability to the private entity as a governmental actor.
Typically, the nexus consists of some willful participation in a joint activity by the
private entity and the government.”); Fonda v. Gray, 707 F.2d 435, 437 (9th Cir. 1983)
(“A private party may be considered to have acted under color of state law when it
engages in a conspiracy or acts in concert with state agents to deprive one’s constitutional
rights.”). Plaintiffs do not provide the Court with a single factual allegation to suggest
that Defendant “acted in concert with the state court.” (See Compl. ¶ 74.) Plaintiffs’
assertion is merely conclusory and the Court need not accept it. See Twombly, 550 U.S.
at 555 (“[A] formulaic recitation of the elements of a cause of action will not do. Factual
allegations must be enough to raise a right to relief above the speculative level.”)
(internal citations omitted).

In this case, it will be difficult, if not impossible, for Plaintiffs to allege state action
here when “[California] courts have clearly indicated that a judgment obtained under [a
suit to quiet title] is not binding as to a person ‘known’ to plaintiff to have an adverse
claim, if that person is not named and served.” Gerhard v. Stephens, 68 Cal.2d 864, 908
(Cal. 1968). If, as Plaintiffs claim, Defendant knew “that MERS claimed a record
interest in the property adverse to [Defendant’s] claim of title” and “did not name MERS
as a defendant [in the state court action] despite [Defendant’s] actual knowledge,”
(Compl. ¶ 46), then California state courts would presumably not find Defendant’s state
court judgment binding on Plaintiffs. (See also Opp’n at 19–20 (stating that the
constitutionality issue “need never be reached” and “will not likely be reached in this
case”).)

Second, the “mere allegation” of a due process violation “is not sufficient to raise a
‘colorable’ constitutional claim to provide subject matter jurisdiction.” Hoye v. Sullivan,
985 F.2d 990, 992 (9th Cir. 1993) (“Every disappointed claimant could raise such a due
process claim, thereby undermining a statutory scheme designed to limit judicial review.”
(quoting Holloway v. Schweiker, 724 F.2d 1102, 1105 (4th Cir. 1984), cert. denied, 467
U.S. 1217 (1984))). Plaintiffs allege the following facts1: MERS held and claimed
various property rights and interests, (Compl. ¶ 70); the state court quiet title action
divested MERS of these rights and interests without due process of law, (Compl. ¶ 72);
the quiet title process established by the State of California requires “substantial
involvement from the state, in particular the state court,” and, as discussed above,
Defendant allegedly “acted in concert with the state court,” (Compl. ¶ 74).
Importantly, “[f]ederal courts are courts of limited jurisdiction.” Kokkonen v.
Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Plaintiffs’ own Opposition
suggests that their constitutional claims are “wholly insubstantial.” Plaintiffs admit that
the “Complaint only requests that the Court invalidate the California statute as alternative
relief in the event the statute does not require notice to MERS. Since that notice is
required on the face of the statute, this issue need never be reached.” (Opp’n at 19; see
also Opp’n at 20 n.5 (repeating that “the issue [challenging the constitutionality of a state
statute] will not likely be reached in this case”).)

Although Plaintiffs argue throughout their opposition that Mortgage Electronic
Registration Systems v. Robinson, 45 F. Supp. 3d 1207, 1213 (C.D. Cal. 2014)
(hereinafter, “Robinson”) is squarely on point, the Court finds that Robinson does not
save Plaintiffs’ Complaint in this case. In Robinson, the plaintiffs “asserted both
diversity and federal question jurisdiction.” Id. at 1213. The defendants in that case
failed to “explain how the availability of [] state-court remedies preclude[d] [the district
court] from exercising diversity jurisdiction, the existence of which Defendants [did] not
question.” Id.

Unlike Robinson, Plaintiffs do not allege that the Court has diversity jurisdiction
here. Plaintiffs’ opposition to Defendant’s motion to dismiss states in a conclusory
fashion that “Plaintiffs properly invoked this Court’s diversity and federal question
jurisdiction.” (Opp’n at 13.) The Court disagrees. Plaintiffs do not—at any point in
their complaint—allege diversity jurisdiction. (Compl. ¶ 1.) In fact, Plaintiffs do not
allege Plaintiff BNYM’s citizenship for purposes of diversity. (See Compl. ¶ 9.)
Plaintiffs only indicate that, as “reflected in Exhibit 9 of [Defendant’s] Request for
Judicial Notice—The Bank of New York Mellon (a plaintiff in this case) is registered
with the Secretary of State of California.” (Opp’n at 17.) And Plaintiffs aver that
Defendant resides at the Property in California. (Compl. ¶ 10.) As currently alleged, the
Court does not have enough information to determine whether the parties are completely
diverse. See Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). (See also RJN, Ex. 9
(indicating that BNYM is registered with the Secretary of State of California).)
Plaintiffs fail to properly allege diversity or federal question jurisdiction. The
Court therefore lacks subject matter jurisdiction over this matter.

VI. CONCLUSION
Because the Court lacks subject matter jurisdiction over this case, the Court
GRANTS Defendant’s motion to dismiss, with leave to amend.2 If Plaintiffs intend to
file an amended complaint, they must do so by September 25, 2015 at 4 p.m.
The Court VACATES the hearing set for Monday, September 14, 2015.
IT IS SO ORDERED. :

Initials of
Preparer rf

footnote:
1 The Court omits Plaintiffs’ legal conclusions, couched as factual allegations in their Complaint. (See
Compl. ¶¶ 69, 71, 73.)

2 Although it may be “difficult, if not impossible, for Plaintiffs to allege state action here,” the Court
grants leave to amend because amendment may not be futile with respect to diversity jurisdiction.

 

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