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Eminence Investors, L.L.L.P. v. Bank of New York Mellon

United States District Court, E.D. California

June 6, 2014

EMINENCE INVESTORS, L.L.L.P., Plaintiff,
v.
BANK OF NEW YORK MELLON, Defendant.

FINDINGS AND RECOMMENDATIONS GRANTING PLAINTIFFS' MOTION TO REMAND (ECF No. 25)

MICHAEL J. SENG, Magistrate Judge.

I. INTRODUCTION AND PROCEDURAL HISTORY

In this action Eminence Investors, L.L.L.P. and John Does ("Plaintiffs") seek to recover for Bank of New York Mellon's ("Defendant's") alleged breaches of duties it owed as the Indenture Trustee of bonds issued to fund the development of real property.

Apparently undisputed facts reflect that in 1996, the Jensen Ranch Public Financing Authority ("Financing Authority") issued $16 million in bonds to fund development of property in Madera County, California, owned by River Bend Ranches, L.P. The Financing Authority entered into an Indenture with Defendant's predecessor trustee obligating the trustee to perform specified functions in connection with the bonds. The Financing Authority loaned the property owner the proceeds of the bonds and took as security a deed of trust on the real property. The Financing Authority then assigned the note and deed of trust to the Indenture Trustee as called for in the Indenture. Defendant later succeeded, and assumed the duties of, the original Indenture Trustee.

In 2001, River Bend Ranches, L.P. defaulted on the note and the Financing Authority defaulted under the terms of the Indenture. Plaintiff Eminence Investors, L.L.L.P. ("Plaintiff Eminence") subsequently purchased approximately 9.6% ($1, 539, 000 face value) of the outstanding bonds. On November 23, 2011, Plaintiff Eminence initiated this case against Defendant and two California residents in Madera County California Superior Court, Case No. MCV 058453. The Complaint identified Plaintiff Eminence as the "representative owner" of 25% of the outstanding bonds and sought in excess of $10, 000, 000 in damages for Defendant's alleged breach of fiduciary duties, negligence, unjust enrichment, and violation of California Business and Professions Code section 17200, all arising out of Defendant's role as Indenture Trustee.

On November 13, 2013, the Madera Superior Court entered an Order approving the parties' stipulation to Plaintiff Eminence's filing a First Amended Complaint. The First Amended Complaint added class allegations on behalf of more than 100 individuals each holding bonds having at least $5000 in face value.[1]

On December 10, 2013, within 30 days of the filing of the First Amended Complaint, Defendant removed the case to this Court alleging federal jurisdiction under the Class Action Fairness Act, 28 U.S.C. Section 1446. (ECF No. 1.) On January 9, 2014, Plaintiffs filed this Motion to Remand the action back to the state Superior Court. (ECF No. 25.)

A hearing on the Remand motion was held February 7, 2014. The Court there requested supplemental briefing which Plaintiff filed February 21, 2014, and Defendant filed March 7, 2014. (ECF Nos. 50 & 51, respectively.) The parties then submitted unsolicited letter briefs addressing the Ninth Circuit Court of Appeals February 18, 2014, decision in Rea v. Michaels Stores, Inc. , 742 F.3d 1234 (9th Cir. 2014).

Plaintiffs' Motion for Remand now stands ready for decision.

II. ISSUES PRESENTED

Plaintiffs do not appear to dispute that the diversity, numerosity, and amount in controversy requirements for removal have been met here.

Rather, Plaintiffs claim, first, that Defendant's removal of this case to Federal Court was untimely because it came more than thirty days after August 23, 2013, when for the first time there was complete diversity between the only remaining parties, Plaintiff Eminence, an Arkansas limited partnership, and Defendant, a New York corporation. According to Plaintiffs, Defendant therefor had only until September 22, 2013, to remove the case.

Defendant responds that Plaintiffs' November 13, 2013, First Amended Complaint so fundamentally altered the nature of the case as to provide a new basis for removal, and thereby started the thirty day time limit for removal running again.

Plaintiffs also claim that Defendant's removal under CAFA is misplaced because their claims arise out of Defendant's failure to perform as obligated under the Indenture Agreement and the statute specifically excludes from its coverage actions arising out of rights, duties and obligations related to or created by a security (such as the bonds here). 28 U.S.C. ยง 1332(d)(9)(C).

To this latter claim Defendant responds that Plaintiffs' claims arise solely out of common law and exist independently of, and indeed are wholly inconsistent with, the terms of the Indenture Agreement ...


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