Lightfoot v. Cendant Mortg. Corp.
137 S. Ct. 553, 85 U.S.L.W. 4031, 196 L. Ed. 2d 493 (2017)
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Rule of Law:
A "sue-and-be-sued" clause in a federal charter that authorizes suit in "any court of competent jurisdiction, State or Federal," does not, by itself, grant subject-matter jurisdiction to federal courts. Instead, the clause confers only the capacity to sue or be sued in a court that already has an independent basis for jurisdiction.
Facts:
- In 1999, Beverly Ann Hollis-Arrington refinanced her home mortgage with Cendant Mortgage Corporation.
- The Federal National Mortgage Association (Fannie Mae) subsequently purchased the mortgage from Cendant, while Cendant continued to service it.
- Hollis-Arrington became unable to make her payments and attempted to negotiate a forbearance agreement with Cendant, but no agreement was reached.
- The home entered foreclosure, and Cendant repurchased the mortgage from Fannie Mae because it did not meet Fannie Mae's credit standards.
- Hollis-Arrington and her daughter, Crystal Lightfoot, transferred the property between themselves in an unsuccessful attempt to avoid foreclosure.
- The home was ultimately sold at a trustee's sale in 2001.
Procedural Posture:
- Beverly Ann Hollis-Arrington and Crystal Lightfoot filed suit in California state court against Fannie Mae.
- Fannie Mae removed the case to the U.S. District Court for the Central District of California, claiming federal jurisdiction based on its charter's 'sue-and-be-sued' clause.
- The District Court denied the plaintiffs' motion to remand the case to state court.
- The District Court dismissed the claims against Fannie Mae, and the plaintiffs appealed to the U.S. Court of Appeals for the Ninth Circuit.
- A divided panel of the Ninth Circuit affirmed the District Court's jurisdictional ruling, holding that Fannie Mae's sue-and-be-sued clause did confer federal jurisdiction.
- The U.S. Supreme Court granted certiorari to resolve a split among the circuit courts on this issue.
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Issue:
Does the 'sue-and-be-sued' clause in the Federal National Mortgage Association's (Fannie Mae) charter, which authorizes it to sue and be sued 'in any court of competent jurisdiction, State or Federal,' independently grant federal district courts subject-matter jurisdiction over cases involving Fannie Mae?
Opinions:
Majority - Justice Sotomayor
No. The 'sue-and-be-sued' clause in Fannie Mae's charter does not independently grant federal district courts subject-matter jurisdiction. The clause's crucial qualifying phrase, 'court of competent jurisdiction,' requires a court to have a pre-existing, independent basis for subject-matter jurisdiction, such as diversity of citizenship or a federal question. This language acts as a limitation, distinguishing it from other sue-and-be-sued clauses that the Court has interpreted as jurisdiction-conferring. The Court reasoned that a 'court of competent jurisdiction' is, by definition, a court already possessing the power to adjudicate the case. Therefore, the clause merely confers the capacity to be a party in a court that already has jurisdiction; it does not create jurisdiction where none existed. The decision distinguished this case from American Nat. Red Cross v. S. G., where the Red Cross charter lacked the limiting phrase 'of competent jurisdiction,' clarifying that the mere mention of 'Federal' courts is not sufficient to grant jurisdiction when such qualifying language is also present.
Analysis:
This decision clarifies the rule from American Nat. Red Cross, establishing that the mere mention of 'Federal' courts in a 'sue-and-be-sued' clause is not a talisman for automatic federal jurisdiction. By focusing on the plain meaning of 'court of competent jurisdiction,' the Court narrowed the path for federally chartered corporations to remove cases from state to federal court. This ruling will likely keep more state-law disputes involving such entities in state courts, reinforcing the principle that congressional grants of federal jurisdiction must be explicit and are not to be lightly inferred from ambiguous statutory language. It underscores a stricter textualist approach to interpreting jurisdictional statutes.
