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October 4, 2005.

CULLEN, Plaintiff,
BANK ONE, Defendants.

The opinion of the court was delivered by: RUDI BREWSTER, Senior District Judge

I. Introduction
The case is before the Court on remand from the Ninth Circuit for the Court to determine whether Plaintiff and Bankruptcy Debtor Michael Cullen lacked prudential standing to continue as the sole Plaintiff (1) at the time the Court issued a prior order dismissing the case with prejudice on January 21, 2003, and (2) at the time Plaintiff filed a Notice of Appeal to the Ninth Circuit. See Turner v. Cook, 362 F.3d 1219, 1225-26 (9th Cir. 2004). In particular, the Court must determine whether Bankruptcy Debtor Cullen's failure to include the bankruptcy estate in the lawsuit was an "understandable mistake" that cured his standing problem specifically in view of the bankruptcy trustee's later ratification of the lawsuit in favor of debtor Cullen. See Dunmore v. United States, 358 F.3d 1107, 1112-13 (9th Cir. 2004). As discussed below, the Court finds that Plaintiff Cullen lacked prudential standing at the two time periods in question because his decision to continue in his own name was not an understandable mistake. Accordingly, the Court vacates its prior order (Doc. No. 24) dated January 21, 2003, and the clerk's judgment (Doc. No. 25) dated January 24, 2003, dismissing the case with prejudice. Instead, the Court dismisses the case without prejudice nunc pro tunc to January 21, 2003.

II. Factual Background and Procedural History

  Plaintiff Cullen filed suit against Defendant Bank One Corporation for violations of the Truth in Lending Act ("TILA") stemming from the refinancing of his residence. On November 15, 2002, Plaintiff filed a first amended complaint ("FAC"). On November 25, 2002, Defendant Bank One filed a motion to dismiss the FAC under Rule 12(b)(6) of the Federal Rules of Procedure. On January 16, 2003, Plaintiff Cullen filed for bankruptcy under Title 11 of the Bankruptcy Code and listed the Bank One lawsuit as an asset, thereby making the lawsuit the property of the bankruptcy estate. See Turner, 362 F.3d at 1225-26 (citing 11 U.S.C. § 541(a)(1)). Plaintiff Cullen also listed his residence as a bankruptcy asset and took a homestead exemption in his residence. On January 17, 2003, Plaintiff Cullen filed a Notice of Bankruptcy Stay in this Court, informing the Court about the bankruptcy filing and about an automatic stay that applies to all actions against the debtor or property of the bankruptcy estate. On January 21, 2003, i.e. after the bankruptcy petition was filed, the Court granted Defendant's Motion to Dismiss the FAC with prejudice. See Doc. No. 24. A Clerk's judgment was entered on January 24, 2003. See Doc. No. 25.

  On February 18, 2003, Plaintiff's counsel contacted Bankruptcy Trustee Harold Taxel to inform him that Cullen intended to file a Notice of Appeal on February 20, 2003. Plaintiff's counsel asked Trustee Taxel to join in the appeal or abandon the claim to Cullen to pursue on his own. Trustee Taxel requested a written assessment of Cullen's claim before he would agree to abandon the claim. On February 19, 2003, Trustee Taxel, after receiving an assessment of the case, gave Plaintiff's counsel written notice that he did not wish to join the appeal and he intended to abandon the claim against Bank One. On February 20, 2003, Plaintiff Cullen filed a timely notice of appeal to the Ninth Circuit.

  On February 21, 2003, Trustee Taxel filed in the Bankruptcy Court a Trustee Request for Notice of Proposed Abandonment of Cullen's Claim against Bank One. On The Clerk of the Bankruptcy Court notice the proposed abandonment of property and set March 26, 2003, as a deadline for objections to the proposed abandonment. This procedure is necessary since creditors of the debtor have standing to object to potential elimination of bankruptcy estate's assets. There were no objections to the proposed abandonment, and on April 1, 2003, the Bankruptcy Trustee filed a Report of Abandonment of Real Property for Cullen's claims against Bank One, thereby relinquishing the claim to debtor Cullen.

  After the submission of appellate briefs and three days prior to oral arguments, the Court of Appeals sua sponte asked the parties to address the issue of standing. On December 11, 2004, the Court of Appeals heard oral arguments. On December 27, 2004, the Court of Appeals entered judgment dismissing Cullen's appeal for lack of standing to sue as plaintiff, citing to Turner, 362 F.3d at 1225-26. On January 7, 2005, Appellant Cullen filed a Petition for Rehearing For Panel With Suggestion For Rehearing En Banc. On June 17, 2005, the Court of Appeals remanded the case to the district court for "appropriate factual findings on the standing issue" in view of Dunmore and Turner. See Dunmore, 358 F.3d at 1112-13; Turner, 362 F.3d at 1225-26.

  On September 1, 2005, both parties filed briefs on the standing issue. Oppositions were filed on September 19, 2005. On September 26, 2005, the Court heard oral arguments on the issue of standing. III. Standing

  A. In District Court

  Pursuant to Federal Rule of Civil Procedure 12(h), "[w]henever it appears . . . that the court lacks jurisdiction of the subject matter, the court shall dismiss the action." Fed.R.Civ.P. 12(h)(3). The Ninth Circuit has interpreted this rule to permit district courts to raise the issue of subject matter jurisdiction sua sponte at any point in the litigation, even on appeal. See Snell v. Cleveland, Inc., 316 F.3d 822, 826 (9th Cir. 2002). The Court does not have subject matter jurisdiction to hear a case if a plaintiff lacks constitutional or prudential standing.

  In order for a plaintiff to have constitutional standing, plaintiff must suffer an injury in fact that is redressable by a decision in plaintiff's favor. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 119 L. Ed. 2d 351, 112 S. Ct. 2130 (1992). In addition to constitutional standing, a plaintiff must have prudential standing whereby plaintiff asserts "his own legal interests as the real party in interest." Dunmore, 358 F.3d at 1112 (citing Warth v. Seldin, 422 U.S. 490, 499 (1975)).

  Here, the issue is whether Plaintiff Cullen lacked prudential standing when this Court dismissed the case with prejudice on January 21, 2003. During the pendency of Plaintiff Cullen's case in district court, Cullen filed for bankruptcy protection, listing the Bank One lawsuit as property. As such, "all the legal or equitable interests" in the Bank One lawsuit became the property of the bankruptcy estate, not Cullen, and was "represented by the bankruptcy trustee." Turner, 362 F.3d at 1225-26 (citing 11 U.S.C. § 541(a)(1)). Because the lawsuit was part of the bankruptcy estate, only the estate, as the real party in interest, had standing to continue the suit. Cullen, however, lacked standing to continue as plaintiff because he was no longer the real party in interest.

  Under Rule 17(a) of the Federal Rules of Civil Procedure, a plaintiff may cure defects in standing by obtaining the real party in interest's ratification to proceed with the cause of action. See Fed.R.Civ.P. 17(a) (2005). The ratification procedure requires notice to all creditors and an opportunity to object because of the potential diminution of the debtor's estate. Plaintiff did not follow this ratification procedure for the district court action.

  In Dunmore, the Ninth Circuit suggested that a trustee's ratification of a lawsuit in favor of a debtor may "cure the standing problem so long as the debtor made an `understandable mistake' by proceeding in his own name, as opposed to some sort of strategic manipulation." 358 F.3d at 1112-13. Therefore, provided that Plaintiff Cullen's decision to sue in his own name was an "understandable mistake" and not a "strategic decision," Trustee Taxel's ratification of the Bank One lawsuit in favor of Plaintiff Cullen on April 1, 2003, relates back to the date the Court issued its ruling granting dismissal of the FAC (i.e. to January 21, 2003). Id. at 1112. However, the Court finds that there was no understandable mistake at the district court level.

  Plaintiff's counsel is an experienced bankruptcy attorney who handled both the bankruptcy filing and Cullen's suit against Bank One in this Court. An experienced bankruptcy attorney would presumably know that once the lawsuit in district court was listed as an asset in bankruptcy, it became property of the bankruptcy estate. Because the lawsuit belonged to the bankruptcy estate, it was not difficult for Plaintiff's counsel to identify the bankruptcy ...

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