Reported / Citable
Background
Deutsche Bank National Trust Company, acting as trustee for holders of mortgage pass-through certificates, filed an action seeking to foreclose on real property at 3101 Hickory Avenue in Groves, Texas. The bank named several individual and corporate defendants as well as the United States, through the administrator of the U.S. Small Business Administration, because the property was encumbered by a federal lien.
The SBA answered, and the court entered an agreed consent order between Deutsche Bank and the agency. The remaining defendants did not appear, the clerk entered default against them, and Deutsche Bank moved for default judgment. The court later ordered supplemental briefing on whether it had subject-matter jurisdiction and whether the consent order should be vacated.
Deutsche Bank argued that 28 U.S.C. § 2410 supplied federal-question jurisdiction because it permits the United States to be named in certain foreclosure actions. Its complaint also asserted that diversity jurisdiction would exist without the SBA, although the bank did not renew that argument in its supplemental brief.
The Court’s Holding
The court dismissed the action without prejudice for lack of subject-matter jurisdiction. Relying on binding Fifth Circuit precedent, it held that § 2410 waives the United States’ sovereign immunity but does not independently confer federal jurisdiction. The underlying mortgage-enforcement claim did not otherwise arise under federal law merely because the United States held a lien.
The court explained that, under the governing Fifth Circuit decision, federal jurisdiction over a § 2410 proceeding is available when the government removes a state-court action under 28 U.S.C. § 1444. Because Deutsche Bank filed this case initially in federal court, rather than the government removing it from state court, that route to jurisdiction was unavailable. The court declined to follow contrary district-court decisions that relied on nonbinding appellate dicta.
Diversity jurisdiction also was unavailable because the SBA remained a party, Deutsche Bank offered no basis for disregarding it, and the United States and its agencies are not state citizens for diversity purposes. Considerations of fairness and judicial economy could not permit the court to adjudicate a case outside its jurisdiction. The court vacated the consent order, denied all pending motions as moot, and directed the clerk to close the case.
Key Takeaways
- Section 2410 waives federal sovereign immunity in specified lien and foreclosure actions but does not independently create subject-matter jurisdiction.
- Under controlling Fifth Circuit precedent, the federal forum was unavailable because the action was filed there originally rather than removed by the United States under § 1444.
- The SBA’s presence defeated the asserted diversity theory because federal agencies are not citizens of any state for diversity purposes.
Why It Matters
Mortgage holders cannot assume that naming the United States as a lienholder under § 2410 automatically permits them to file a foreclosure action in federal court. Within the Fifth Circuit, plaintiffs must identify an independent jurisdictional basis or proceed in state court, where the government may remove the case under § 1444.
The decision also underscores that neither party consent nor litigation progress can cure absent subject-matter jurisdiction. Even after entering a consent order and receiving a default request, a federal court must dismiss once it determines that jurisdiction is lacking.