Longenecker v. Wells Fargo Bank, N.A.

Background

Julie Longenecker filed the case in Dakota County, Minnesota state court. She sought more than $75,000 for alleged problems involving Wells Fargo’s management of her mortgage escrow account. Her claims were negligence, breach of contract, fraud, violation of the Minnesota Consumer Fraud Act, and unjust enrichment. She sued Wells Fargo Bank, N.A., and Deangelo Ellis.

Longenecker alleged that her mortgage agreement required insurance payments to be taken from her monthly mortgage payment and held in escrow until Wells Fargo paid the insurer. She claimed Wells Fargo withheld the payments but did not make the insurance payment, which led to problems with her homeowners insurance. She also alleged that she contacted Ellis, who was listed on Wells Fargo’s website as her Mortgage Consultant, but that he refused to help her.

Wells Fargo removed the case to federal court based on diversity jurisdiction. The opinion states that Longenecker and Ellis are citizens of Minnesota, while Wells Fargo is a national bank headquartered in Sioux Falls, South Dakota. Wells Fargo argued that Ellis had been fraudulently joined to prevent removal and that there was complete diversity between Longenecker and Wells Fargo.

Motion to Remand

Longenecker asked the court to remand, or return, the case to state court. She argued that there was no complete diversity because she and Ellis were both citizens of Minnesota. She also argued that she had stated colorable, meaning legally supportable, claims against Ellis. In addition, she argued that removal was defective because Ellis had not joined the notice of removal.

The court explained that fraudulent joinder is an exception to the complete-diversity requirement. A defendant is fraudulently joined when there is no reasonable basis in fact or law for a claim against that nondiverse defendant. The court considers the state-court complaint when making that determination.

Court’s Analysis

The court found that the complaint did not provide a reasonable basis for any claim against Ellis. The only allegation specifically involving Ellis was that he refused to help Longenecker when she contacted him about the insurance payments. The court determined that this conduct occurred within the scope of Ellis’s employment as a Wells Fargo representative.

The court rejected the negligence claim against Ellis because Longenecker did not allege facts showing that Ellis owed her a duty or acted negligently. It rejected the breach-of-contract claim because Ellis was not a party to the mortgage contract. It found no factual basis for fraud because Longenecker did not allege that Ellis collected or handled her escrow funds, made a false representation, or caused her to rely on such a representation.

The court also found no basis for the Minnesota Consumer Fraud Act claim because Longenecker did not allege that Ellis was involved in selling anything to her, processing or administering her escrow account, or making false or material statements. Finally, the court found no basis for unjust enrichment because there were no allegations that Ellis possessed or controlled Longenecker’s money or personally received a benefit.

The court also considered additional allegations in an affidavit Longenecker submitted with her motion. It stated that fraudulent joinder is determined from the complaint, not the affidavit, and added that the affidavit did not establish a reasonable basis for liability against Ellis.

Ruling

Judge Michael J. Davis found that Ellis was fraudulently joined. Because of that finding, Ellis’s consent was not needed for removal. The court therefore ordered that Longenecker’s motion to remand to state court was DENIED.

The order addressed whether the case should remain in federal court. It did not rule on whether Longenecker’s underlying claims against Wells Fargo would succeed.