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Coleman v. Chase Home Finance

May 11, 2009


The opinion of the court was delivered by: Hillman, District Judge


This putative class action case concerns plaintiff's claims that defendant charged excessive attorney's fees and costs in plaintiff's state court foreclosure action. Presently before the Court is defendant's motion to dismiss all of plaintiff's claims pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons expressed below, defendant's motion will be denied without prejudice to defendant's right to refile its motion if it is determined, following jurisdictional discovery, that this Court may exercise its subject matter jurisdiction over plaintiff's case.


On October 25, 2001, Chase Manhattan Mortgage Corporation*fn1 instituted a foreclosure action against plaintiff Stacey Coleman in New Jersey Superior Court, Chancery Division. On August 1, 2002, the Chancery Court entered a final judgment in favor of Chase in the amount of $90401.53, plus interest and counsel fees, and ordered the sale of Coleman's home to satisfy the monies due. On November 4, 2005, Chase provided Coleman with reinstatement figures. On January 17, 2006, Coleman reinstated her mortgage by paying $18,658.24, which included $6691.73 for fees and costs. On January 20, 2006, the foreclosure action was dismissed without prejudice, with the Chancery Court noting that the action was amicably settled between the parties.

Coleman brings this case against Chase asserting numerous causes of action based on her claim that Chase demanded, and was paid, fees in excess of $5,000 of what is permitted by New Jersey statute and court rules. She purports to bring these claims on her behalf and on behalf of similarly situated individuals who have also paid these allegedly excessive fees.

Through its motion to dismiss, Chase argues that Coleman's claims are barred by the entire controversy doctrine and otherwise fail to state a claim. Coleman has opposed Chase's motion.

The Court's independent review of Coleman's complaint, however, reveals that subject matter jurisdiction may be lacking. Because a district court has an obligation to determine subject matter jurisdiction prior to considering the merits of a case, Trent Realty Assocs. v. First Fed. Sav. & Loan Ass'n of Philadelphia, 657 F.2d 29, 36 (3d Cir. 1981), that issue must be addressed first prior to analyzing the entire controversy doctrine and defendant's other bases for dismissal.


Coleman asserts that this Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332(d)(2), the Class Action Fairness Act (CAFA), which provides, in relevant part, that "district courts shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which . . . (A) any member of a class of plaintiffs is a citizen of a State different from any defendant."*fn2

On its face, Coleman's complaint satisfies § 1332(d)(2). Coleman claims that she is a citizen of New Jersey and Chase is a citizen of Delaware, and therefore, she is a member of the class who is a citizen of a different state from the defendant. A problem with this statement is that Coleman has not fully alleged Chase's citizenship. Coleman claims that Chase is a Delaware limited liability company ("LLC"), and generally, an LLC is viewed as a partnership rather than a corporation for diversity purposes. Kimberly-Clark PA, LLC v. Delaware County, 527 F. Supp. 2d 430, 432-33 (E.D. Pa. 2007)(stating that although neither the Supreme Court nor the Third Circuit have specifically ruled on this issue, all Circuit Courts that have addressed the issue have concluded that an LLC is a partnership for diversity purposes)(citations omitted). As a partnership, the citizenship of an LLC is determined from the citizenship of all of its members. Id. (stating that the rationale for treating an LLC as a partnership is based on the Supreme Court's decision in Carden v. Arkoma Assoc., 494 U.S. 185, 195-96 (1990), which held that the citizenship of a limited partnership for diversity jurisdiction purposes is determined by the citizenship of all its members). Therefore, applying the rationale that non-personal entities, other than corporations, are not "citizens" for jurisdictional purposes, the citizenship of an artificial entity such as an LLC for purposes of diversity jurisdiction is determined by the citizenship of all its members. Id.

CAFA, however, contains a specific provision regarding the citizenship of unincorporated associations. Section 1332(d)(10) provides that "an unincorporated association shall be deemed to be a citizen of the State where it has its principal place of business and the State under whose laws it is organized." Several courts have determined that this provision applies to LLCs. See Bond v. Veolia Water Indianapolis, LLC, 571 F. Supp. 2d 905, 910 (S.D. Ind. 2008) (explaining that the rule in Carden stands for the proposition that artificial business entities other than corporations are all treated as unincorporated associations, and, therefore, § 1332(d)(10) applies to LLCs); Lewis v. Seneff, 2008 WL 3200273, *5 (M.D. Fla. Aug. 5, 2008) (ordering plaintiffs to properly allege the citizenship of two defendant LLCs pursuant to § 1332(d)(10)); Geismann v. Aestheticare, LLC, 2008 WL 961272, *5 (D. Kan. 2008) (explaining that the citizenship of an LLC is different for diversity jurisdiction, where the LLC was required to allege the citizenship of each of its members, than from CAFA jurisdiction, where the LLC must allege its principal place of business and state of organization, and stating that these "two definitions of citizenship necessitate distinct factual support and reveal another material difference between Sections 1332(a) and 1332(d)"); Dunham v. Coffeyville Resources, LLC, 2007 WL 3283774, *4 (D. Kan. Nov. 6, 2007) (finding that for the purposes of § 1332(d)(10), the defendant LLC was a citizen of Delaware, where it was organized, and Kansas, where it has its principal place of business); see also Davis v. HSBC Bank Nevada, N.A., 557 F.3d 1026, 1032 (9th Cir. 2009) (noting that CAFA abrogates the traditional rule that an unincorporated association shares the citizenship of each of its members for diversity purposes).

The Senate committee report on CAFA also supports this view:

New subsection 1332(d)(10) provides that for purposes of this new section and section 1453 of title 28, an unincorporated association shall be deemed to be a citizen of a state where it has its principal place of business and the state under whose laws it is organized. This provision is added to ensure that unincorporated associations receive the same treatment as corporations for purposes of diversity jurisdiction. The U.S. Supreme Court has held that "[f]or purposes of diversity jurisdiction, the citizenship of an unincorporated association is the citizenship of the individual members of the association." This rule "has been frequently criticized because often * * * an unincorporated association is, as a practical matter, indistinguishable from a corporation in the same business." Some insurance companies, for example, are "inter-insurance exchanges" or "reciprocal insurance associations." For that reason, federal courts have treated them as unincorporated associations for diversity jurisdiction purposes. Since such companies are nationwide companies, they are deemed to be citizens of any state in which they have insured customers. ...

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