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The Charles Schwab Corporation v. Banc of America Securities LLC


March 11, 2011


The opinion of the court was delivered by: Lucy H. Koh United States District Judge


Plaintiff in this action has moved to remand the case to state court, where it was initially filed. For the reasons discussed below, the Court GRANTS Plaintiff's motion and remands the 20 case. In light of this, the Case Management Conference set for March 18, 2011 at 11 a.m. is hereby VACATED.

I. Background

On June 29, 2010, Plaintiff Charles Schwab Corporation (Schwab) filed a complaint in the San Francisco County Superior Court, case number GCG-10-501151. See Notice of Removal (UBS Removal), Dkt. No. 1 at Ex. A (Compl.). The Complaint alleged that Schwab invested $130 million in three securitization trusts backed by residential mortgage loans. Compl. ¶ 1.

Schwab claimed that defendants made misleading statements about the mortgages in those trusts, 28 and that defendants omitted necessary material facts relating to the investments. Id. On the basis of these allegations, the Complaint asserted the following causes of action: violations of the California Corporate Securities Act §§ 25401 and 25501; violations of the Securities Act of 1933, §§ 11, 12(a)(2), and 15; violations of the California civil code §§ 1572 and 1710; and a right to 4 contract rescission under California civil code § 1689 et seq. In addition to the defendants named 5 in the caption above, a number of other defendants were named. Bank of America Securities LLC 6 and Bank of America Funding Corporation (together, BofA) were not named as defendants.

Schwab served defendants UBS Securities LLC (UBS) and defendants Wells Fargo Asset Securities Corporation and Wells Fargo Bank, N.A. (together, Wells Fargo) with the Complaint on 9 or near July 9, 2010. UBS Removal at ¶ 3; Wells Fargo Joinder in Notice of Removal (Wells in state court, dropping a number of defendants and adding BofA. In the FAC, Schwab alleges that it purchased two $50 M certificates from two separate securitizations, one issued by Wells Fargo Trust"), the other by BofA (the Banc of America Funding Trust, Mortgage Pass-Through On August 9, 2010, UBS removed the action from state court. In the Notice of Removal, UBS identified two bases for removability. First, UBS claimed that the case was removable 18 because Schwab's claims are "related to" bankruptcy actions involving American Home Mortgage 19 and First Magnus Financial, pursuant to 28 U.S.C. § 1334(b). UBS Removal at 4-5. Second, UBS 20 claimed that the matter was removable based on diversity jurisdiction. UBS Removal at 5. Wells Fargo joined in UBS's Removal, asserting the same bases for removal (except that Wells Fargo did not rely on the First Magnus Financial bankruptcy as a source of "related to" bankruptcy removability). See Wells Fargo Removal. (Dkt. No. 26). In addition to joining in the removal bases cited by UBS, BofA asserted that BofA did not raise a separate legal basis for removal.

Fargo Removal), Dkt. No. 7, at ¶ 3. On July 27, 2010, Schwab filed an amended Complaint (FAC)

(the Wells Fargo Mortgage Backed Securities Trust, Series 2007-10, or "Wells Fargo 2007-10 Certificates, Series 2006-D, or "BofA 2006D Trust").

On August 17, 2010, after removal by UBS and Wells Fargo, Schwab served BofA with the FAC. On September 16, 2010, BofA joined in the original UBS Removal. See BofA Removal "related-to" bankruptcy jurisdiction arises based on the bankruptcy of IndyMac Bancorp, Inc. Id. 28


Before BofA's joinder in the UBS Removal, on September 8, 2010, Schwab filed its Motion to Remand. See Mot. (Dkt. No. 18). Pursuant to party stipulation, the briefing schedule on 3 this motion was extended, such that the Motion was set for hearing on February 3, 2011.

The first-filed of these cases, Schwab v. BNP Paribas et al., 10-cv-04030, was recently remanded 7 to the San Francisco Superior Court on the basis of equitable remand. See Feb. 23, 2011 Order.

Related cases Schwab v. J.P. Morgan Secs. Inc., 10-cv-04522 and Schwab v. J.P. Morgan Secs.

In addition to this case, Schwab has brought three other cases in San Francisco Superior Court asserting similar claims based on its investments in Mortgage Backed Securities (MBS).

Inc., 10-cv-04523 are pending before Judge White in this District, and motions to remand are 10 pending. outside this limited jurisdiction until the party asserting jurisdiction establishes otherwise.

Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A defendant may remove 15 an action from state court if it could have originally been brought in federal court. 28 U.S.C. 980 F.2d 564, 566 (9th Cir. 1992).

a. Removal based on Diversity Jurisdiction

Defendants argue that the Court should find jurisdiction based on diversity in this matter.

Defendants concede that the parties in this case are not diverse.*fn1 See UBS/Wells Fargo Opp'n at 1.

However, defendants urge the Court to look behind what they call a "collusive assignment" of 23 claims from Charles Schwab Bank, N.A. (Schwab Bank, a Schwab affiliate) to Schwab, and to 24 consider the citizenship of Schwab Bank rather than Schwab to determine whether diversity 25 jurisdiction is proper. Schwab Bank is a citizen of California, while none of the defendants are California citizens. Schwab Bank is the entity that actually invested in the MBS trusts at issue in 27 this case, but it assigned its claims relating to these investments to plaintiff Schwab. Thus, if

II. Legal Standard

Federal courts are courts of limited jurisdiction, and a cause of action is presumed to lie§ 1441. The defendant has the burden of establishing that removal is proper. Gaus v. Miles, Inc.,

III. Analysis

Schwab Bank had not assigned its claims to Schwab, but had itself sued defendants, diversity 2 jurisdiction would exist. While 28 U.S.C. § 1359 prohibits the creation of diversity jurisdiction 3 through collusive assignment, it says nothing about the destruction of diversity jurisdiction by 4 assignment. However, Defendants urge the Court to apply a Section 1359-type analysis to the 5 alleged destruction of diversity by Schwab. hallmarks of a collusive assignment. The assignment was executed on the same day that the 8 original Complaint was filed. See Hartman Decl. ISO Mot. to Remand, Ex. A (Assignment).

Defendants argue that the assignment from Schwab Bank to Schwab bears several

Schwab Bank assigned "all of its right, title, and interest in any and all claims . . . that it has or may 10 have . . ." to Schwab. Id. However, the agreement states that Schwab will pay Schwab Bank "97% of any amounts it recovers in pursuing such Claims, whether by settlement or award." Id.

Defendants argue that under Ninth Circuit authority, the Court should find that this assignment was 13 made in order to destroy diversity, and should therefore disregard it when considering the diversity 14 of the parties. Attorneys Trust v. Videotape Computer Prods., 93 F.3d 593, 598 (9th Cir. 1996). corporation (VCP) to a collection agency (Attorneys Trust), also a California citizen. Attorneys (even though it was not diverse from defendant VCP). Id. VCP counter-claimed against CMC, 19 and the attorney representing Attorneys Trust appeared on behalf of CMC. Id. Attorneys Trust 20 obtained "a result inimical to the interests of CMC" at trial. Id. After this defeat, Attorneys Trust appealed, arguing that the district court never properly had jurisdiction because there was no diversity between the parties (despite the fact that Attorneys Trust itself had asserted diversity jurisdiction as the basis for its federal filing). federal courts to countenance destruction of jurisdiction by the use of straw parties than there is for 26 them to countenance the creation of jurisdiction in that manner," and disregarded the assignment 27 from CMC to Attorneys Trust in finding that the district court properly exercised jurisdiction based 28 on diversity. Attorneys Trust, 93 F.3d at 598-600. Relying on statements like this from Attorneys

In Attorneys Trust, a Chinese corporation (CMC) assigned its claim against a California

Trust, 93 F.3d at 594. Attorneys Trust filed suit in federal court, claiming diversity jurisdiction

In these atypical circumstances, the Ninth Circuit noted that "there is no more reason for Trust, defendants urge the Court to extend its holding to the present case. However, the Ninth Circuit characterized Attorneys Trust as a "most unusual situation" and limited the holding to cases 3 where "an action is filed directly in the district court." Id., 93 F.3d at 600. has many characteristics of a collusive assignment as defined in Attorneys Trust. See Attorneys Defendants correctly assert that the assignment between Schwab Bank and plaintiff Schwab Trust, 93 F.3d at 599. The facts that Schwab had no prior interest in the claim, that the assignment 7 was executed on the day the suit was filed, and that no consideration for the assignment was given 8 beyond a contingency interest all suggest collusion. In addition to these factors, defendants argue 9 that the Court should consider the assignment a partial assignment, because Schwab will only 10 retain 3% of any recovery obtained through the assignment. See UBS/Wells Fargo Opp'n at 10. one between Schwab Bank and Schwab to be a complete assignment. See Sprint Commc'ns Co., Bank and Schwab, the Sprint assignment gave "all rights, title and interest" in the assignor's claims to the assignees. However, pursuant to a separate agreement, 100% of the litigation proceeds would be returned to the assignors, and the assignees would be paid a fee for litigating the claims.

"lock, stock, and barrel" to the assignee, and was a complete assignment. Id. at 272, 286. Despite 20 the later transfer of any recovery, for the period of the litigation, the assignees retained all rights to 21 the claims, and standing to enforce them. Id. at 286. Although the Supreme Court was considering 22 standing rather than diversity jurisdiction, the Court finds the holding pertinent to the analysis here. entities bears some hallmarks of collusion to defeat jurisdiction, following Sprint, the Court finds that the assignment is complete. In light of this complete assignment, no other party (including Schwab Bank) has standing to bring the claims that Schwab brings here. Accordingly, the Court 27 declines to ignore Schwab's citizenship and to rely on the citizenship of non-party Schwab Bank to 28 find that diversity jurisdiction exists. As the Ninth Circuit held in Attorneys Trust, in the context of Schwab responds that its assignment should be considered complete.

Schwab relies on a recent Supreme Court decision finding an assignment very similar to the L.P. v. APCC Servs., Inc., 554 U.S. 269, 286 (2008). Just like the assignment between Schwab Sprint, 554 U.S. at 272. The Supreme Court held this assignment transferred the assigned claims Although defendants are correct in arguing that the assignment between the two Schwab diversity-destroying assignments, "courts have remained sensitive to and concerned by manipulations of their jurisdiction with partial assignments which lack reality and amount to no change in the identity of the party with the real interest in the outcome of the case." Attorneys Trust, 93 F.3d at 597 (emphasis added). In contrast, "if an assignment is entire, not partial, there is 5 a very good chance that it will be found to be proper." Attorneys Trust, 93 F.3d at 596.

As the Supreme Court noted in Sprint, assignees like Schwab are considered real parties in interest. Sprint, 554 U.S. at 284, citing 6A C. Wright, A. Miller, & M. Kane, Federal Practice and Circuit authority other than Attorneys Trust in support of their argument that the Court should 10 ignore the citizenship of the actual plaintiff and instead consider that of a non-party to find that diversity jurisdiction exists.*fn2 Schwab notes that another judge in this District has found no diversity jurisdiction in a factual situation very similar to the one presented here. See Go (N.D. Cal. Nov. 21, 2005) (finding assignment complete although consideration was only a 15 variable percentage of the recovery, and declining to find diversity jurisdiction when parties were 16 non-diverse). As noted above, Attorneys Trust was limited to the unusual case where the party 17 attacking diversity jurisdiction initially filed suit in federal court.

However, the authorities defendants cite on this point considered assignments to create federal 21 jurisdiction, not assignments to destroy it. See Yokeno v. Mafnas, 973 F.2d 803, 809-10 (9th Cir. 22 1994), Attorneys Trust, 93 F.3d at 596 (discussing case law in diversity-creation cases). In Yokeno, Opposition, for the proposition that the Court could look to the citizenship of non-parties to find diversity jurisdiction. See Johnson v. Columbia Properties Anchorage, LP, 437 F.3d 894 (9th Cir. 26 2006); Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 463 n.9 (U.S. 1980). However, as the Court noted at the hearing, both of these cases determined the citizenship of business entities (respectively, an LLC and a business trust). In the Ninth Circuit, the citizenship of an LLC is the citizenship of all its individual members. See Johnson, 437 F.3d at 899. Because the business entities were parties 28 to these cases, their members were parties as well. Thus, these authorities are inapposite.

Procedure § 1545, at 346-348 (2d ed. 1990)). Defendants have been unable to cite to any Ninth Computer, Inc. v. Microsoft Corp., No. C 05-03356 JSW, 2005 U.S. Dist. LEXIS 31404 at *8 Defendants also argue that because the assignment was made between related entities it is Schwab's burden to prove that the assignment was proper. UBS/Wells Fargo Opp'n at 9-10. 1992); Nike, Inc. v. Comercial Iberica de Exclusivas Deportivas, S.A., 20 F.3d 987, 992 (9th Cir. for example, the plaintiff bore the burden of establishing that the assignment which created 2 diversity was for non-pretextual business reasons. But it is always the burden of the party asserting 3 federal jurisdiction to show that such jurisdiction is appropriate. See Kokkonen, 511 U.S. at 377.

Here, the parties asserting federal jurisdiction are the defendants, not the plaintiff. Thus, the Court 5 declines to extend the Yokeno rule to impose a burden on Schwab in this context of alleged 6 diversity destruction. Accordingly, the Court concludes that there is no diversity jurisdiction in this 7 matter, and removal on that ground was not proper. jurisdiction.*fn3 Under 28 U.S.C. § 1334, federal courts have original jurisdiction over claims that are

b. Removal based on "Related to" Bankruptcy Jurisdiction

This action was removed from state court in part on the basis of "related to" bankruptcy "related to cases under title 11." 28 U.S.C. § 1334. The Ninth Circuit has held that a case is "related to" a bankruptcy case if "'the outcome of the proceeding could conceivably have any effect 13 on the estate being administered in bankruptcy,'" such that "'the outcome could alter the debtor's 14 rights, liabilities, options, or freedom of action (either positively or negatively) and which in any 15 way impacts upon the handling and administration of the bankrupt estate.'" In re Fietz, 852 F.2d 16 455, 457 (9th Cir. 1988) (citing Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984) (emphasis 17 in original).

Once a bankruptcy plan has been confirmed, however, "related to" jurisdiction is limited to cases presenting a "close nexus" to the bankruptcy plan. In these circumstances, matters that affect "'the interpretation, implementation, consummation, execution, or administration of the confirmed 21 plan will typically have the requisite close nexus.'" Montana v. Goldin (In re Pegasus Gold jurisdiction. *fn4 The Court considers these in turn. basis. Wells Fargo states that AHM originated about 15%*fn5 of the loans in the Wells Fargo 2007-10

i. "Related to" Bankruptcy Jurisdiction

Defendants assert two different bankruptcies as the basis for related-to bankruptcy Wells Fargo asserts the bankruptcy of American Home Mortgage (AHM) as a jurisdictional

Trust, and that through contractual indemnity provisions, Wells Fargo is entitled to "all defense 7 costs and attorneys' fees" relating to these AHM-originated mortgages. While Schwab's Motion 8 was pending, the AHM bankruptcy plan was confirmed. See Reply at 10. Therefore, the "close 9 nexus" test applies to determine whether Wells Fargo's indemnity claims bear a "close nexus" to 10 the AHM bankruptcy. At the hearing on this Motion, Wells Fargo stated that it has submitted a proof of claim in the AHM bankruptcy. If no objection to this claim is made, there will be some administrative evaluation of it and, potentially, a pay out to Wells Fargo. If an objection is made, a 13 contested proceeding in bankruptcy court could follow. test rather than the "close nexus" test. In factually-similar cases, several district courts have 16 concluded that the AHM bankruptcy gives rise to "related to" jurisdiction under either the LEXIS 138564 at *15 (applying "conceivable effects" test); Stichting Pensioenfonds ABP v. Cal. Dec. 29, 2010) (applying "close nexus" test); Schwab v. BNP Paribas et al., No. 10-cv-04030, 2011 U.S. Dist. LEXIS 22322 at *10 (Feb. 23, 2011) (assuming, without deciding, that the "close 22 nexus" test had been met). The Court concludes that Wells Fargo has shown that its proof of claim 23 against AHM could "affect" the "interpretation" or "implementation" of the AHM bankruptcy. 24

In its Opposition to Schwab's Motion, Wells Fargo focused on the "any conceivable effect" "conceivable effects" test or the "close nexus" test. See Deutsche Bank Secs., 2010 U.S. Dist. Accordingly, the Court finds that Wells Fargo has satisfied the "close nexus" test regarding the AHM bankruptcy, and this Court has jurisdiction on this basis. for "related to" jurisdiction. However, BofA has no indemnity agreement with IndyMac Parent.

Instead, BofA claims indemnity against IndyMac Bank. IndyMac Parent is the parent holding 6 company of IndyMac Bank; IndyMac Bank is the sole asset in the bankruptcy estate of its parent.

IndyMac Bank was a federally-insured bank, it could not declare bankruptcy itself. Instead, in BofA has asserted the bankruptcy of IndyMac Bancorp, Inc. (IndyMac Parent) as the basis BofA alleges that IndyMac Bank originated 25% of the loans in the BofA 2006D Trust. Because July, 2008, it was taken into receivership by the FDIC. FDIC Notice, 74 F.R. 59540-01. BofA 10 urges that it "makes no difference" that IndyMac itself has not declared bankruptcy. BofA Opp'n 11 at 14. Schwab responds that in light of a March 19, 2009 FDIC determination that IndyMac

IndyMac Parent because there will never be any funds in the estate to claim. See Reply at 9-10;

In a recent decision, Judge Conti of this District considered the IndyMac Bancorp, Inc. bankruptcy and its relationship to indemnity claims from an MBS case similar to the one Schwab 17 brings here. See Deutsche Bank, 2010 U.S. Dist. LEXIS 138564 at *12. Judge Conti found that 18 although it was "conceivable" that the Deutsche Bank action could have an effect on the IndyMac

Parent bankruptcy, such an outcome was "unlikely" in light of the FDIC's Notice. Id. Likewise, 20 the Court concludes that, under the "any conceivable effects" test, there is at least a possibility that

In its Motion, Schwab argued that the indemnity provisions at issue could not be enforced by the defendants without a separate action to enforce them, and that on this basis the Court should 24 find no "related to" bankruptcy jurisdiction. See Mot. at 14-15. In Opposition, defendants argued 25 that the provisions at issue provided "automatic and contractual indemnity rights," and no separate 26 filing was required to enforce them. UBS/Wells Fargo Opp'n at 13. Defendants distinguished the 27 authority cited by Schwab, all from the Third Circuit, arguing that the cited cases addressed 28 equitable rather than contractual indemnity agreements. See Pacor, 743 F.2d 984, 995 (3rd Cir.

Bank's debts exceed its assets there is no likelihood that BofA will ever impact the bankruptcy of FDIC Notice, 74 F.R. 59540-01.

BofA's claims will impact the IndyMac Parent bankruptcy. However, this possibility is remote.

1984), overruled on other grounds by Things Remembered, Inc. v. Petrarca, 516 U.S. 124 (1995); Circuit found that equitable indemnity rights did not give rise to "related to" jurisdiction, but in so 4 holding noted that contractual indemnity claims did provide a basis for the exercise of "related to" 5 jurisdiction. Pacor, 743 F.2d at 995. Schwab did not address this argument in its Reply. At the 6 hearing on its Motion, Schwab would not concede that it had withdrawn this argument, but 7 recognized that several courts had rejected it In light of the holding in Pacor, this Court rejects it 8 as well. basis of the AHM and IndyMac parent bankruptcies. This does not end the inquiry, however.

In re Federal-Mogul Global, Inc., 300 F.3d 368, 380-82 (3d Cir. 2002). In Pacor, the Third Accordingly, the Court concludes that it does have related-to bankruptcy jurisdiction on the Under 28 U.S.C. § 1452(b), the Court may remand a claim removed pursuant to 28 U.S.C.

§ 1334(b) "on any equitable ground." As described below, the Court finds that the equities favor 13 remand in this case. whether remand is equitable. In re Roman Catholic Bishop of San Diego, 374 B.R. 756, 761 (Bankr. S.D. Cal. 2007). In the Ninth Circuit, courts consider the following factors when deciding 18 if remand is in the interests of equity: state law; (4) comity; (5) the relatedness of the action to the bankruptcy case; (6) any jury trial right; and (7) prejudice to plaintiffs from removal.

ii. Equitable Remand

Section 1452(b) gives courts "an unusually broad grant of authority" in determining

(1) the effect of the action on the administration of the bankruptcy estate; (2) the extent to which issues of state law predominate; (3) the difficulty of applicable

Hopkins v. Plant Insulation Co., 349 B.R. 805, 813 (N.D. Cal. 2006) (citing Williams v. Shell Oil Co., 169 B.R. 684, 692-93 (S.D. Cal. 1994).

Regarding the first and fifth factors, the fact that the AHM bankruptcy plan is already finalized, and the remote chance that BofA will ever obtain any payout from the IndyMac Parent bankruptcy suggest that the likely overall effect of this litigation on either bankruptcy is minimal or non-existent. Judges Conti and Illston of this District concluded likewise regarding the very bankruptcies at issue here in their recent opinions in factually similar cases. See BNP Paribas et al., 2011 U.S. Dist. LEXIS 22322 at *13; Deutsche Bank, 2010 U.S. Dist. LEXIS 138564 at *34-2 *36. Judge Conti found a "remote connection" between the Deutsche Bank case and the related 3 bankruptcies even though the loans in 16 of the 39 trusts at issue had been originated entirely by 4 bankrupt entities (AHM and IndyMac Parent). See Deutsche Bank, 2010 U.S. Dist. LEXIS 138564 5 at *36 n.11, *37 n.13-15.

Only 15% of the loans in the Wells Fargo 2007-10 Trust were originated by AHM. While 25% of the loans in the BofA 2006D Trust were originated by IndyMac Bank, the FDIC's 8 statements about the IndyMac Parent bankruptcy suggest that it is highly unlikely that BofA will 9 ever have any impact on that estate based on this case. Accordingly, the Court finds that this case 10 will have only a minimal, if any, effect on the AHM and IndyMac Parent bankruptcies. At the hearing on this Motion, the Court asked counsel for defendants to explain if their indemnity claims would proceed any differently if this case were remanded, or not. The only practical effect that 13 defendants cited was the possibility that it would be easier to coordinate any overlapping discovery 14 with the federal bankruptcy proceeding (assuming such discovery is required) if this Court retains 15 the case. But there is no reason that discovery cannot be coordinated between a state court 16 proceeding and a federal bankruptcy proceeding, just as it can be coordinated between a federal 17 district court matter and a federal bankruptcy matter. The Court does not find this to be a 18 compelling reason to retain jurisdiction over the case. Therefore, the Court concludes that these 19 two factors weigh in favor of remand. 20 and state causes of action, neither law can be said to predominate. However, as noted above, the U.S.C. § 77v(a). This Court follows Judges Illston and Conti in finding that, in light of this, comity 24 concerns weigh in favor of remand. See BNP Paribas et al., 2011 U.S. Dist. LEXIS 22322 at *13-25 *14; Deutsche Bank, 2010 U.S. Dist. LEXIS 138564 at *39. Thus, these factors weigh in favor of 26 remand.

Regarding the second, third and fourth factors, because the Complaint alleges both federal 1933 Securities Act claims were not removable when initially asserted in state court. See Regarding the seventh factor, the Court finds that it is neutral regarding remand. While Judge Illston has remanded the BNP Paribas case, Judge White has yet to rule on Schwab's motion to remand its two MBS cases pending before him. Thus, it is not clear that Schwab will be able to 2 move all of these matters back to state court. In these circumstances, the Court does not find that 3

Schwab faces particular prejudice whether or not this matter remains in federal court or returns to 4 state court. Because Schwab is entitled to a jury trial in either court, the sixth factor is irrelevant to the analysis here.

Accordingly, the Court finds it appropriate to remand this case to the Superior Court for San Francisco County, where it was originally filed. filed its Joinder in Removal, this Court is without power to equitably remand this case. BofA's 11 argument is as follows. After removal by UBS and Wells Fargo, based on related-to bankruptcy

c. Waiver

BofA urges that because Schwab did not separately move to remand this case after BofA jurisdiction and diversity jurisdiction, Schwab moved to remand the entire case, asserting that 13 neither basis of jurisdiction was appropriate. After Schwab's Motion, BofA filed a Joinder in the 14

UBS Removal, asserting the IndyMac Parent bankruptcy as an additional factual basis supporting 15 the related-to bankruptcy jurisdiction already asserted by UBS and Wells Fargo. Schwab did not 16 file an additional Motion to Remand the case responding to BofA's Joinder; instead, it addressed 17 the IndyMac Parent bankruptcy in its Reply brief. However, Schwab's Motion did assert broad 18 arguments against related-to bankruptcy jurisdiction that applied equally to all asserted 19 bankruptcies, including that of IndyMac Parent. For example, Schwab argued that indemnity 20 claims (like those of BofA and Wells Fargo) must be asserted in a separate action, and that this 21 defeated "related to" jurisdiction. See Mot. at 14-16. BofA argues that Schwab's failure to assert 22 an argument specifically addressing the IndyMac Parent bankruptcy until its Reply waived any 23 objection to this Court exercising original jurisdiction over the 1933 Securities Act claims asserted 24 in the Complaint, and therefore that the Court has no discretion to remand this case. BofA's 25 argument is not persuasive. has found that related-to bankruptcy jurisdiction exists. Thus, even if Schwab "waived" the only 28 basis for removal asserted in BofA's Joinder, this would appear to be moot because the Court has

The Court has rejected Schwab's argument regarding related-to bankruptcy jurisdiction and concluded that jurisdiction based on the IndyMac Parent bankruptcy is proper. However, the Court 2 cannot agree with BofA that Schwab's failure to explicitly address the IndyMac Parent bankruptcy 3 in its Motion somehow waived the Court's discretion to remand this case pursuant to 28 U.S.C.

Securities Act, the Court cannot remand the case because it has original federal jurisdiction over 6 these claims. But BofA's Joinder in Removal said nothing about the 1933 Securities Act claims, presumably because those claims were not removable. The Court is not persuaded that Schwab somehow "waived" by failing to object to a jurisdictional basis not raised by, and not available to, any removing defendant. § 1452(b). BofA argues that because Schwab's complaint alleges federal claims under the 1933

The cases BofA cites in support of this argument are distinguishable. See Northern Cal. Dist. Council of Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1037 (9th Cir. 1995);

Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1070 (9th Cir. Cal. 2001). In Pittsburg-Des Moines, one of the defendants removed the case without obtaining the concurrence of another 14 defendant. Pittsburg-Des Moines at 1037. The plaintiff failed to raise this procedural defect in its 15 motion to remand, but raised it in its reply briefing. Id. The Ninth Circuit held that because this 16 procedural defect was not raised within 30 days of the removal, the argument had been waived. Id.

Putting aside the fact that Schwab did make arguments applicable to the IndyMac Parent 18 bankruptcy in its Motion, in any event, the Court has rejected these arguments, so any waiver on 19 this point is moot. In Morris, the defendants removed on the basis of diversity jurisdiction.

Morris, 236 F.3d at 1069-70. The plaintiff later destroyed diversity by joining a non-diverse 21 defendant, but did not move to remand the case (on this or any ground). Id. The Ninth Circuit held 22 that failure to move for remand waived the argument that federal jurisdiction was improper. Id.

Unlike Schwab, the plaintiff in Morris made no motion to remand at all, and waiver was found on that basis.

In sum, the Court is not persuaded that it was somehow divested of its broad authority to equitably remand a "related to" bankruptcy case because of Schwab's failure to separately address the IndyMac Parent bankruptcy until its Reply brief.

IV. Conclusion

For the foregoing reasons, Schwab's Motion to Remand is GRANTED. The Case Management Conference set for March 18, 2011 at 11 a.m. is hereby VACATED.


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