13
National Bank Citizenship
National banks – banks organized pursuant to the laws of the United States rather than
the laws of any particular state – are citizens of the state of their “main office” as specified in
their articles of association. There are some wrongly decided district court opinions that hold
that a national bank is a citizen of both the state specified as the location of its main office in its
articles of association and the state of its principal place of business. The majority of decisions,
however, hold that a national bank is a citizen of only one state – the state specified in its articles
of association as the location of its main office.
LLC/Partnership Citizenship
Limited liability companies and partnerships are problematic because they are considered
citizens of the states in which their members or partners are citizens. In larger LLCs or
partnerships, this can be a large number of states, which often precludes removal on the basis of
diversity jurisdiction. Fortunately, few mortgage servicers are organized as LLCs or
partnerships.
Trust/Trustee Citizenship
Unfortunately, trusts and trustees are frequently defendants in mortgage servicing
litigation, and the analysis of the citizenship of a trust is problematic. If a trustee is a “real party
in interest,” then only the trustee’s citizenship is considered for purposes of diversity jurisdiction.
However, it would be a rare case in which the servicer would want to take the position that the
trustee of the typical RMBS trust is the “real party in interest.” In most cases, the plaintiff is
seeking relief against the trust, not the trustee individually. The trustee will want to avoid
individual liability and limit liability to the trust for which the trustee serves as trustee. For
example, if the plaintiff is suing for consumer fraud and includes “XYZ Mortgage Servicing,
Inc., a Delaware corporation and ABC Bank, N.A., as Trustee for the 2006-1 Series 6
Certificates” as defendants, ABC Bank, N.A. will want to avoid individual liability – in other
words, if plaintiff successfully obtains a $1,000,000 judgment, the ABC Bank will want
satisfaction of that judgment to come exclusively from the Trust, not from the Bank’s assets.
Note that state law can vary on the ability of a trustee to avoid individual liability in this way – a
topic beyond the scope of this pamphlet. For purposes of citizenship, the salient point is that if
the servicer plans to take the position that the trustee is not the “real party in interest” and that
the trust itself is the “real party in interest,” then the citizenship of the beneficiaries of the trust
must be considered. That is, the servicer will need to know who all the investors in the trust are
(as well as their citizenship) in order to use diversity as a basis for removal.
Beware of cutting corners here. If the servicer takes the position that only the citizenship
of the trustee matters, the trustee could be estopped from later contending that it is not the real
party in interest. Since it is very unlikely that a servicer would ever take the position that the
trustee is the real party in interest, if you are removing a case in which a trust or trustee is a
defendant, you will need to determine who the beneficiaries are and their citizenship, and lay
those facts out in the notice of removal.