MSR Trust v. Nationstar Mortgage LLC

Background

MSR Trust sued Nationstar Mortgage LLC, doing business as Mr. Cooper, in New York state court for breach of contract based on two agreements executed in 2014. Nationstar removed the case to the U.S. District Court for the Southern District of New York under diversity jurisdiction, a form of federal jurisdiction generally available when opposing parties are citizens of different states and the amount in controversy exceeds $75,000.

MSR Trust moved to remand, meaning to send the case back to state court. It argued that complete diversity was lacking because its trustee, U.S. Bank Trust National Association, was a citizen of Delaware, while Nationstar was also a citizen of Delaware and Texas. MSR Trust is an unincorporated statutory trust. Its ultimate sole beneficial owner was Natixis S.A., a French company. The trust agreement stated that the trustee had no ownership interest in the trust and that the trust’s assets were held in the trust’s name.

Report and Recommendation

Magistrate Judge Robert W. Lehrburger recommended denying the motion to remand. Neither party objected to the recommendation. Judge Daniels therefore reviewed it for clear error, meaning an obvious mistake after reviewing the record.

Court’s Analysis

The court held that the trustee was not a “member” of the unincorporated trust for purposes of determining citizenship. Relying on the Supreme Court’s decisions concerning the citizenship of unincorporated entities, including Americold Realty Trust v. ConAgra Foods, the court explained that membership is tied to ownership. Natixis was the only entity with an ownership interest in MSR Trust’s property, while the trustee had none.

The court also relied on the fact that MSR Trust sued in its own name, which indicated that the beneficial owner, rather than the trustee, was the real party in interest. The trustee’s work and responsibilities did not affect whether it was a member. The court found no clear error in the magistrate judge’s conclusion that Natixis’s French citizenship and Nationstar’s Delaware and Texas citizenships established complete diversity.

Disposition

The court adopted Magistrate Judge Lehrburger’s report in full and denied Plaintiff’s motion to remand. The clerk was directed to close the motion. The opinion addressed the federal court’s authority to hear the case and did not decide the underlying breach-of-contract claims.