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Haddad v. M&T Bank

United States District Court, D. Maryland

May 6, 2014

MICHAEL HADDAD, et. al., pro se Plaintiffs
v.
M&T BANK, Defendant.

MEMORANDUM OPINION

PETER J. MESSITTE, District Judge.

Michael and Theresa Haddad are citizens of Maryland who own a small business ("Astornet") that provides technology services to state and federal agencies. M&T Bank ("M&T") is a New York corporation that maintains its principal place of business in New York. The Haddads filed suit against M&T in the Circuit Court for Montgomery County, Maryland based on a dispute arising out of a line of credit M&T extended to Astornet. M&T subsequently removed the case to this Court. The Haddads have filed a Motion to Remand the case to Circuit Court [Paper No. 12]. Shortly after removal, M&T filed a Motion to Dismiss Plaintiffs' Complaint [Paper No.9]. For the reasons that follow, the Haddads' Motion for Remand is DENIED and M&T's Motion to Dismiss is GRANTED.

I.

On April 28, 2005, the Haddads executed a promissory note in favor of Provident Bank of Maryland ("Provident") to secure a $150, 000 line of credit extended to Astornet, the Haddads' business. The loan was partially guaranteed by the Small Business Administration ("SBA"). While executing the note on behalf of Astornet, the Haddads both signed an agreement personally guaranteeing the loan. The Loan and Guarantee Agreements stated that Provident could collect the amount borrowed from any guarantors even if Astomet did not default.[1] In 2009, Provident was acquired by M&T Bank, which is incorporated and headquartered in New Yark. M&T became Provident's successor in interest with respect to loans such as the one made to Astomet.

Astomet eventually exhausted the line of credit and ran into financial trouble, leaving it unable to make its loan payments. In 2012, M&T informed the Haddads that, pursuant to the guarantee agreements, they were individually required to repay the entire amount borrowed by Astomet. In response, the Haddads asserted that they were only responsible for 15% of the amount borrowed and refused to pay. After M&T indicated that it would exercise its contractual right of foreclosure on the Haddads' home if the Haddads remained in default, the Haddads borrowed money from family to repay M&T. They ultimately repaid the entire amount of the loan which, with accumulated interest, totaled approximately $171, 000.

In their Complaint, the Haddads assert that before executing the note, M&T told them that they were only personally responsible for 15% ofthe amount borrowed in the event of a default and that the SBA was responsible for the remaining 85%. They argue that M&T had an obligation to collect the other 85% of the amount borrowed from the SBA. Their Complaint, inter alia, asserts that M&T's actions violated the federal False Claims Act, 31 U.S.C. § 3729, and that liability was also created by virtue of Maryland contract law. The Haddads seek reimbursement for 85% of the amount repaid to M&T and to have their damages trebled pursuant to the False Claims Act.

Now, however, the Haddads ask to have the case remanded to state court based on lack of diversity of citizenship of the parties. M&T submits that diversity in fact exists, and federal question jurisdiction as well such that jurisdiction lies in this Court.

M&T, for its part, asks the Court to dismiss the False Claim Act claim, then judge the state causes of action insufficient as a matter of law and dismiss them as well.

II.

A.

Federal district courts have jurisdiction over "all civil actions where the matter in controversy exceeds the sum or value of $75, 000... and is between citizens of different states." 28 U.S.C. § 1332. A defendant may remove to federal court "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." 28 U.S.C. § 1441(a).

The Haddads contend that the Court does not have jurisdiction under § 1332 because the parties are not citizens of different states. While they do not dispute that M&T is headquartered and incorporated in New York, they submit that because they entered into the loan agreement with Provident, which was a Maryland corporation before it was acquired by M&T, there is no diversity of citizenship. They also argue that, since M&T has shareholders who are Maryland residents, there is no diversity. Both arguments are without merit.

For diversity purposes, a party's citizenship is established as ofthe time the suit is filed. See Grupo Dataflux v. Atlas Global Group, 541 U.S. 567, 570 (2004). When two corporations merge, the citizenship of the surviving corporation is the only relevant factor for diversity purposes and the citizenship of the predecessor corporation becomes irrelevant. See 13F C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3623 (3d ed. 2013); see also Hoefferle Truck Sales, Inc. v. DivcoWayne, 523 F.2d 548-49 (7th Cir. 1975). Corporate citizenship is determined only by the corporation's place of incorporation and principal place of business; it is not based on the citizenship of its shareholders. See 28 U.S.C. § 1332(c)(1); Belle View Apartments v. Realty ReFund Trust, 602 F.2d 668, 669 (4th Cir. 1979). The Court therefore concludes ...


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