Lightfoot v. Cendant Mortgage Corp,
580 U.S. ___ (2017)

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Justia Opinion Summary

The Federal National Mortgage Association (Fannie Mae) is a federally-chartered corporation that participates in the secondary mortgage market, with authority “to sue and to be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal,” 12 U.S.C. 1723a(a). Plaintiffs filed suit in state court alleging deficiencies in the refinancing, foreclosure, and sale of their home. Fannie Mae removed the case to federal court, relying on its sue-and-be-sued clause as the basis for federal jurisdiction. The district court denied a motion to remand the case to state court and later entered judgment against plaintiffs. The Ninth Circuit affirmed. A unanimous Supreme Court reversed. The clause does not grant federal courts jurisdiction over all cases involving Fannie Mae. Distinguishing cases in which a sue-and-be-sued clause was held to confer jurisdiction, the Court noted that Fannie Mae’s clause adds the qualification “any court of competent jurisdiction.” A court of competent jurisdiction is a court with an existing source of subject-matter jurisdiction; the clause does not grant federal court subject-matter jurisdiction, but confers only a general right to sue.

  • Syllabus  | 
  • Opinion (Sonia Sotomayor)

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued.The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader.See United States v. Detroit Timber & Lumber Co., 200 U. S. 321 .

SUPREME COURT OF THE UNITED STATES

Syllabus

LIGHTFOOT et al. v. CENDANT MORTGAGE CORP., dba PHH MORTGAGE, et al.

certiorari to the united states court of appeals for the ninth circuit

No. 14–1055. Argued November 8, 2016—Decided January 18, 2017

The Federal National Mortgage Association (Fannie Mae) is a federally chartered corporation that participates in the secondary mortgage market. By statute, Fannie Mae has the power “to sue and to be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal.” 12 U. S. C. §1723a(a). When petitioners Beverly Ann Hollis-Arrington and her daughter Crystal Lightfoot filed suit in state court alleging deficiencies in the refinancing, foreclosure, and sale of their home, Fannie Mae removed the case to federal court, relying on its sue-and-be-sued clause as the basis for jurisdiction. The District Court denied a motion to remand the case to state court and later entered judgment against petitioners. The Ninth Circuit affirmed. In concluding that the District Court had jurisdiction under Fannie Mae’s sue-and-be-sued clause, the court relied on American Nat. Red Cross v. S. G., 505 U. S. 247 , which it read as establishing a rule that when a sue-and-be-sued clause in a federal charter expressly authorizes suit in federal court, it confers jurisdiction on the federal courts.

Held: Fannie Mae’s sue-and-be-sued clause does not grant federal courts jurisdiction over all cases involving Fannie Mae. Pp. 6–16.

(a) This Court has addressed the jurisdictional reach of sue-and-be-sued clauses in five federal charters. Three clauses were held to grant jurisdiction—Osborn v. Bank of United States, 9 Wheat. 738; D’Oench, Duhme & Co. v. FDIC, 315 U. S. 447 ; American Nat. Red Cross v. S. G., 505 U. S. 247 —while two were found wanting—Bank of United States v. Deveaux, 5 Cranch 61; Bankers Trust Co. v. Texas & Pacific R. Co., 241 U. S. 295 . Describing the earlier decisions as this Court’s “best efforts at divining congressional intent retrospectively,” 505 U. S., at 252, the Court in Red Cross concluded that those decisions “support the rule that a congressional charter’s ‘sue and be sued’ provision may be read to confer federal court jurisdiction if, but only if, it specifically mentions the federal courts,” id., at 255.

In specifically mentioning the federal courts, Fannie Mae’s sue-and-be-sued clause resembles the three clauses this Court has held confer jurisdiction. But unlike those clauses, Fannie Mae’s clause adds the qualification “any court of competent jurisdiction,” 12 U. S. C. §1723a(a). Thus, the outcome here turns on the meaning of “court of competent jurisdiction.”

A court of competent jurisdiction is a court with the power to adjudicate the case before it, Black’s Law Dictionary 431, and a court’s subject-matter jurisdiction defines its power to hear cases, see Steel Co. v. Citizens for Better Environment, 523 U. S. 83 . It follows that a court of competent jurisdiction is a court with a grant of subject-matter jurisdiction covering the case before it. This Court has understood that phrase as a reference to a court with an existing source of subject-matter jurisdiction. See, e.g., Ex parte Phenix Ins. Co., 118 U. S. 610 . On this understanding, Fannie Mae’s sue-and-be-sued clause is most naturally read not to grant federal courts subject-matter jurisdiction over all cases involving Fannie Mae but to permit suit in any state or federal court already endowed with subject-matter jurisdiction.

Red Cross does not require a different result. It did not set out a rule that an express reference to the federal courts suffices to make a sue-and-be-sued clause a grant of federal jurisdiction. Rather, it restated “the basic rule” of Deveaux and Osborn that a sue-and-be-sued clause conferring only a general right to sue does not grant jurisdiction to the federal courts. 505 U. S., at 253. Pp. 6–11.

(b) Fannie Mae’s arguments against reading its sue-and-be-sued clause as merely capacity conferring are unpersuasive. Its alternative readings of “court of competent jurisdiction” are premised on the already rejected reading of Red Cross. The prior construction canon of statutory interpretation does not apply because none of the cases on which Fannie Mae relies suggest that Congress in 1954 would have surveyed the jurisprudential landscape and necessarily concluded that the courts had already settled the question whether a sue-and-be-sued clause containing the phrase “court of competent jurisdiction” confers jurisdiction on the federal courts. Finally, Fannie Mae’s appeals to congressional purpose do not call into question the plain text reading of its sue-and-be-sued clause. Pp. 11–16.

769 F. 3d 681, reversed.

Sotomayor, J., delivered the opinion for a unanimous Court.

Primary Holding

Any court that has subject-matter jurisdiction may be considered a court of competent jurisdiction, whether it is state or federal, and subject-matter jurisdiction in federal court may not be found solely through the existence of a general right-to-sue clause in a contract.

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