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In re Mortgage Electronic Registration Systems (MERS) Litigation

United States District Court, D. Arizona

July 21, 2016

IN RE MORTGAGE ELECTRONIC REGISTRATION SYSTEMS (MERS) LITIGATION THIS DOCUMENT RELATES TO: Nicholas DeBaggis

          ORDER

          JAMES A. TEILBORG SENIOR UNITED STATES DISTRICT JUDGE

         Pending before the Court is Defendant MERSCORP Inc. n/k/a MERSCORP Holdings, Inc.’s and Defendant Mortgage Electronic Registration Systems, Inc.’s (collectively, “Defendants”) Motion to Dismiss Plaintiff Nicholas DeBaggis’s (“DeBaggis”) claims for lack of jurisdiction. (Doc. 1985 at 2, n.1). The Court rules as follows.

         I. BACKGROUND

         For purposes of the resolution of the pending Motion, the Court considers the relevant facts and background to be as follows.

         As stated in this Court’s December 21, 2015 Order, “[t]his case originally began as a multi-district litigation (“MDL”) centralizing civil actions related to the formation and operation of Mortgage Electronic Registration Systems, Inc. and MERSCORP, Inc., [] [the Defendants]. (Doc. 1). After claims in twenty of the associated cases were dismissed (Doc. 1170; Doc. 1247), the remaining Plaintiffs filed a Consolidated Amended Complaint (“CAC”) on June 4, 2011. (Doc. 1424).” (Doc. 2005 at 1-2).

         On October 3, 2011, this Court dismissed the CAC with prejudice (Doc. 1602) under Federal Rule of Civil Procedure 12(b)(6) for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). This Order explicitly mentioned DeBaggis in its discussion of Count I of the CAC, stating “alleged Plaintiff DeBaggis is not a named Plaintiff in any member case of this MDL. Accordingly, Plaintiffs’ claim cannot rest on allegations relating to Plaintiff DeBaggis.” (Doc. 1602 at 8). Plaintiffs then appealed the dismissal of Counts I-VI of the CAC to the Ninth Circuit Court of Appeals. (Doc. 2005 at 2). The Court of Appeals affirmed the dismissal of Counts II-VI, but reversed and remanded as to Count I.[1] In re Mortgage Elec. Registration Sys., Inc., 754 F.3d 772, 786 (9th Cir. 2014).

         On September 3, 2015, Defendant U.S. Bank National Association (“U.S. Bank”) also pointed out that DeBaggis “never filed a lawsuit that the Judicial Panel on Multi-district Litigation transferred to this Court.”[2] (Doc. 1926 at 2). Shortly thereafter, on November 6, 2015, the Court noted, “in amending the complaint in this MDL, at some point, Plaintiffs’ counsel added Mr. DeBaggis as a Plaintiff. Further, the Ninth Circuit Court of Appeals expressly referenced Mr. DeBaggis as having stated a claim in its opinion on appeal.” (Doc. 1978 at 1). Accordingly, the Court ordered DeBaggis to “show cause why his ‘case’ should not be dismissed (unrelated to any claim he might have as a potential class member in the motions for class certification), because he is not properly before this Court as a named Plaintiff.” (Id. at 2).

         On November 10, 2015, Defendants moved for summary judgment on Count I in Plaintiffs’ CAC as to Plaintiff DeBaggis. (Doc. 1985). In this Motion for Summary Judgment, Defendants’ alternately moved to dismiss DeBaggis’s claims:

DeBaggis never filed a lawsuit that the Judicial Panel on Multi-District Litigation transferred to this Court. Rather, DeBaggis was joined when Plaintiffs filed their Consolidated Master Complaint-which is impermissible-and thus, this Court’s jurisdiction has not been invoked. See, e.g., In re Farmers Ins. Exch. Claims Representatives’ Overtime Pay Litig., 2008 WL 4763029, at *5 (D. Or. Oct. 28, 2008) (dismissing four claims because there is “no authority for this court, as an MDL transferee court, to exercise subject matter jurisdiction over state law claims not transferred by the MDL Panel”); In re Packaged Ice Antitrust Litig., 2011 WL 6178891, at *9 (E.D. Mich. Dec. 12, 2011) (attempt to add new named plaintiffs to consolidated amended complaint “ignored basic Article III principles and . . . bypassed the appropriate MDL process for consolidation of these plaintiffs’ claims”). The MERS Defendants alternatively request that DeBaggis’s claims be dismissed for lack of jurisdiction.

(Id. at 2, n.1).

         On November 12, 2015, Plaintiffs filed a Notice of Compliance with Order to Show Cause Regarding Nicholas DeBaggis. (Doc. 1992). Although Plaintiff’s Notice of Compliance “explained the reasons that Mr. DeBaggis stated a claim, ” “[t]he Court had no doubt . . . that Mr. DeBaggis stated a claim” pursuant to Rule 12(b)(6) following the Ninth Circuit’s mandate in the matter of In re Mortgage Elec. Registration Sys., Inc.. (Doc. 1996 at 1). “However, Plaintiff’s argument that the Court of Appeals could confer jurisdiction on this Court by negative implication is not well taken.” (Id.). Accordingly, finding that Plaintiffs’ Notice of Compliance failed to answer the Court’s question posed in its prior Order (Doc. 1978), the Court then ordered Plaintiffs on November 17, 2015 to file a supplemental brief answering two questions:

1. Does a transferee MDL court have the authority to join ‘new’ plaintiffs in an MDL when such Plaintiffs never filed their own case (nor paid the filing fee) and never had their cases transferred to this Court by the panel on multidistrict litigation.
2. Who are the defendants to Mr. DeBaggis’s case and what is the Court’s basis for federal subject matter jurisdiction over Mr. DeBaggis’s case.

(Doc. 1996 at 1-2) (footnote omitted).

         On December 4, 2015, Plaintiffs filed the requested Supplemental Brief Regarding Jurisdictional Issues. (Doc. 2001). In their brief, Plaintiffs assert that the Court has subject-matter jurisdiction over DeBaggis’s claims even though DeBaggis “was added [as a Plaintiff] by amendment and not as a result of his filing a separate member case.” (Id. at 3-4). Plaintiffs allege that “[t]he basis for this Court’s federal subject matter jurisdiction over Mr. DeBaggis’ case is diversity of citizenship.” (Id. at 6-7). Plaintiffs further contend in its brief that DeBaggis has a claim against Defendant Mortgage Electronic Registration Systems, Inc. “based on its involvement in the recording of the false documents related to Mr. DeBaggis’ property.” (Id. at 6).

         On December 18, 2015, Defendants filed their Reply to Plaintiffs’ Supplemental Brief. (Doc. 2004). This Reply states:

The jurisdictional issue relating to DeBaggis does not involve whether there was diversity jurisdiction or federal question jurisdiction relating to DeBaggis’s claims. Rather, the issue is whether the Court’s jurisdiction was sufficiently invoked because DeBaggis never filed a lawsuit in this federal court or in any other federal court that was then transferred to the MDL Court by the Judicial Panel on Multi-District Litigation.

(Id. at 16, n.8).

         On February 1, 2016, Plaintiffs responded to Defendants’ Motion to Dismiss, incorporating by reference their Supplemental Brief Regarding Jurisdictional Issues. (Doc. 2013 at 2). Defendants’ replied to Plaintiffs’ response on February 29, 2016, again stating that “DeBaggis’s claims alternatively should be dismissed for lack of jurisdiction.” (Doc. 2044 at 1, n.1).

         II. LEGAL STANDARD

         Dismissal for Lack of ...


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