McKay v. Fay Servicing, LLC

Background

April McKay filed a foreclosure-related suit against Fay Servicing, LLC. She moved for a temporary restraining order, asking the court to stop a foreclosure sale involving certain real property located in Antioch, at least until the court could hold a hearing on a preliminary injunction.

McKay alleged that the court had diversity jurisdiction because all parties were diverse and the amount in controversy exceeded $75,000. Fay Servicing disputed that allegation, arguing that McKay appeared to be a California citizen and that Fay Servicing was also a California citizen.

Jurisdictional Evidence

The court explained that a limited liability company is a citizen of every state of which its owners or members are citizens. If one of the members is another limited liability company, the court must also determine the citizenship of that company’s members.

Fay Servicing submitted a declaration from Michael Paterno, who stated that he was an employee of Fay Servicing and had become familiar with its ownership. He stated that Fay Servicing is a single-member limited liability company wholly owned by Fay Management, LLC; that Fay Management has multiple individual members; and that at least one Fay Management member is a California citizen. The declaration did not identify that member or provide the member’s name.

McKay criticized the declaration because it did not state Paterno’s job title. She also argued that it did not adequately prove that one member was in California and that the court should wait for a more developed factual record before deciding subject-matter jurisdiction.

Ruling

The court rejected McKay’s challenge to the declaration for purposes of deciding the temporary restraining order. It stated that the declaration itself was evidence, was submitted under penalty of perjury, and had not been challenged with opposing evidence. The court also noted that Federal Rule of Civil Procedure 11 held Fay Servicing’s counsel accountable.

The court denied McKay’s motion for a temporary restraining order. It did not dismiss the federal case for lack of subject-matter jurisdiction at that time. The court stated that Fay Servicing could later bring a motion based on jurisdiction if it wished, and that McKay was not precluded from seeking relief in state court while the federal action remained pending. The order disposed of Docket No. 4. A footnote stated that the foreclosure sale, originally set for July 31, 2023, had apparently been postponed to August 15, 2023.