U.S. Bank National Association v. Keybank, National Assication

Background U.S. Bank National Association, as trustee and successor in interest to Bank of America, N.A., sued Keybank, National Association, and Berkadia Commercial Mortgage, LLC. U.S. Bank acted through its special servicer, Torchlight Loan Services, LLC. The second amended complaint asserted various state-law breach-of-contract claims based on diversity jurisdiction, which allows a federal court to hear certain disputes between citizens of different states.

The defendants moved to dismiss the second amended complaint. The court explained that the pleading identified defendants as citizens of Ohio, New York, Delaware, and Nebraska, but did not adequately establish the plaintiff’s citizenship.

Jurisdictional Deficiencies Because U.S. Bank sued as trustee on behalf of a securitized trust, the court considered whether U.S. Bank was the “real party in interest”—the party with sufficient authority over the trust’s assets to be treated as the party bringing the case for diversity purposes. The complaint did not show that U.S. Bank possessed the customary powers to hold, manage, and dispose of trust assets. In particular, it did not refer to the relevant Pooling and Service Agreement between U.S. Bank and the trust.

The complaint also did not allege Torchlight’s citizenship. The court noted that an LLC is considered a citizen of each state of which its members are citizens, so an amended complaint must identify the citizenship of Torchlight’s constituent members. The court further rejected U.S. Bank’s assertion that Torchlight’s citizenship automatically did not matter. U.S. Bank had not shown, with specific reference to the relevant agreement, that Torchlight’s stake in the litigation was sufficiently minimal to exclude its citizenship from the diversity analysis.

Ruling The court held that it could not determine from the pleadings whether it had diversity jurisdiction. Judge Analisa Torres denied the defendants’ motions to dismiss without prejudice to renewal after U.S. Bank files a third amended complaint addressing the jurisdictional deficiencies. She ordered U.S. Bank to file the amended complaint and a supplemental letter, if necessary, by April 4, 2022. U.S. Bank must seek the court’s permission to make any other changes to its pleading. The Clerk of Court was directed to terminate the pending motions.