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51 » VISIT US ONLINE @ DSNEWS.COM Asset-Backed Certif icates Series 2006-24, 866 F.3d 351, 357 (5th Cir. 2017) ("Where a trustee has been sued or f iles suit in her own name, the only preliminary question a court must answer is whether the party is an active trustee whose control over the assets held in its name is real and substantial "); Raymond Loubier Irrevocable Tr. v. Loubier, 858 F.3d 719, 722 (2d Cir. 2017) (holding where a party trust was created "from trust agreements establishing only traditional f iduciary relationships" and is not a distinct entity under state law, legal proceedings were properly brought against the trustee and the trustee's citizenship controlled). Until Demarest, the Ninth Circuit had not yet weighed in on the issue. Accordingly, Joan Demarest argued that Americold constituted a "sea change" in how courts determine the citizenship of a trust, and required the Ninth Circuit to f ind that an investment trust's citizenship was that of all of its benef iciaries. Had Demarest prevailed in her argument, an investment trust's ability to remove a case on diversity jurisdiction grounds would have been precluded unless the trust could prove that no benef iciaries of the trust resided in the same state as the borrower—a potentially formidable task, as the benef iciaries of these trusts presumably reside in many states across the country. The Ninth Circuit rejected the argument, however, f inding that the citizenship of an investment trust, sued in its own name, and arising out of a trust agreement containing typical f iduciary powers, is the citizenship of its trustee. The Court's decision was premised on two separate grounds. First, the Court distinguished Americold from Demarest on the grounds that the trust in Americold had brought suit in the trust's own name, as it was allowed to under Maryland law. In contrast, Demarest had brought suit against "HSBC Bank, N.A.," itself, naming the Trustee only and not the Trust. The Demarest Court noted that Americold, as well as other prior Supreme Court precedent, supported the ruling that "when a trustee f iles a lawsuit or is sued in her own name, her citizenship is all that matters for diversity purposes." Demarest, 2019 WL 1510430, at *5 (citing Americold, 136 S. Ct. at 1016; Navarro Savings Assn. v. Lee, 446 U.S. 458, 462-466, 100 S. Ct. 1779 (1980)). Second, the Ninth Circuit distinguished the mortgage-backed investment trust in Demarest from the Maryland investment trust in Americold, f inding that the Trust in Demarest was, "under any criteria, properly characterized as a traditional trust." 2019 WL 1510430, at *5. The Court noted that traditionally a trust was not considered a distinct legal entity capable of suing and being sued, and that the Maryland trust in Americold therefore differed from a traditional trust because it was authorized by statute to sue in its own name. Further, the Trust Agreement governing the Trust in Demarest indicated that it was a common law trust governed by New York law and provided that HSBC as Trustee had the power to hold the Trust's assets, sue in its own name, transact the Trust's business, and engage in other necessary activities. HSBC as Trustee was therefore the real party in interest for the Trust, given it possessed "certain customary powers to hold, manage, and dispose of assets for the benef it of others." 2019 WL 1510430, at *5. The Court held that, as the real party in interest, a trustee's citizenship controlled for purposes of diversity jurisdiction analysis. In sum, the Demarest Court concluded that Americold was limited in application, and did not upset Ninth Circuit or prior U.S. Supreme Court precedent holding that where a trustee is sued in its own name, or where it is a traditional trust that is sued, the citizenship of the trust remains that of its trustee. Emilie K. Edling is the Appellate Practice Chair for the national law firm, Houser & Allison, APC. Her practice focuses on mortgage servicing and other business litigation, as well as appellate advocacy before Washington, California, and Oregon Courts, Federal Circuit Courts, and Bankruptcy Appellate Panels. She can be reached at eedling@houser-law.com. "In a good news ruling for Investors in mortgage real estate trusts, the Ninth Circuit Court of Appeals has published a decision which allows securitized trusts to stay in federal court based on diversity jurisdiction." GENERAL CONTRACTORS ASPEN Renovating Chicagoland since 1997 aspen@aspengen.com 708-579-0600

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