UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK FEDERAL HOME LOAN MORTGAGE CORPORATION, 20Civ. 8884(PAE) Plaintiff, -v- ORDER FINDLAY ESTATES, LLC, SHEINDY GRUNHUT, COHLER FUEL OIL COMPANY, INC., and JOHN DOES 1-50, the names of the last 50 Defendants, being fictitious and unknown to Plaintiff, such persons or parties being intended to designate parties with liens that are subject and subordinate to the lien of the mortgage being foreclosed herein and tenants, lessees, or occupants of portions of the mortgaged premises described in the Complaint, Defendants. PAUL A. ENGELMAYER, District Judge: Defendants Findlay Estates, LLC(“Findlay”) andSheindy Grunhut (“Grunhut”)move here under Federal Rule of Civil Procedure 12(b)(1) to dismiss the complaint of plaintiff Federal Home Loan Mortgage Corporation (“Freddie Mac”), arguingthat Freddie Mac colluded with loan originator and servicer Greystone Servicing Company LLC (“Greystone”) to manufacture subject matter jurisdiction. For the reasons that follow, the Court denies the motion to dismiss. I. Background1 Onor aboutJanuary 14, 2019, Greystone originated a mortgage loan of $6,335,000 on the property located at 1056, 1060, and 1064 FindlayAvenue, Bronx, New York(the “Property”) 1 This account draws from the complaint, Dkt. 1 (“Compl.”), the parties’ submissions on the motionto dismiss, includingdefendants’ memorandum of law in support, Dkt. 29-6 (“Mem.”), Freddie Mac’s opposition, Dkt. 42 (“Opp’n”), and defendants’ reply, Dkt. 45(“Reply”), and the to borrower Findlay. Compl. ¶¶ 1, 9–10. Grunhunt is purportedly Findlay’s sole member and is the loan’s guarantor. Id.¶¶ 3–4. On January 14, 2019, Greystone assigned all right,title,and interest in the loan to Freddie Mac,id.¶ 12, but continued to service the loan until December 31, 2020,see Pierre Decl. ¶2. Greystone made the assignment to Freddie Mac in the “regular course

of Freddie Mac’s Multifamily Seller/Servicer program,” the objective of which is to provide a “secondary market” to private lenders to “establish and enhance markets for home and multifamily Mortgages.” Walsh Decl. ¶¶ 3, 10. As a part of that assignment, Greystone agreed to repurchase the loan from Freddie Mac in the event of certain defaults on the loan. See Pierre Decl.¶ 5. Those defaults allegedly occurred in 2020. Id. Although Greystone and Freddie Mac agreed to provide Greystone with additional time to work with Findlay, on September 15, 2020, Freddie Mac informed Greystone that because the loan was 60 days delinquent, Greystone would be required to repurchase the loan on November 12, 2020. See id.¶¶ 5–6; Walsh Decl. ¶ 7; id., Ex. 1 (email notice from Freddie Mac to Greystone that it would have to repurchase the loan on November 12, 2020).

On October 23, 2020, Freddie Mac filed the complaint, seeking to foreclose on the mortgage. Compl. At that time, Freddie Mac still held all right,title,and interest in the loan. Id.¶ 2. Thus,at the time the complaint was filed, the parties anticipated that Freddie Mac would assign the rights to the loan back to Greystone onNovember 2020. Id.¶13; Walsh Decl., Ex. 1.

Declarations (some with accompanying exhibits)of Kevin Walsh, Dkt. 43 (“Walsh Decl.”), and Alix Pierre, Dkt. 44 (“Pierre Decl.”). On a motion to dismiss pursuant to Rule 12(b)(1), a court must take as true all material factual allegations in the Complaint, see Shipping Fin. Servs. Corp. v. Drakos,

(2dCir. 1998), but may also examine materials outside the pleadings to determine whether it has jurisdiction, see Morrison v. Nat’l Austl. Bank Ltd.,

(2d Cir. 2008). In the complaint, Freddie Mac represented that this Court has jurisdiction pursuant to

(f). Compl. ¶ 6. On November 12, 2020, Greystone repurchased the loan. See Pierre Decl. ¶¶ 7–9;id., Exs. 2 (repurchase statement), 4 (assignment from Freddie Mac to Greystone). On November

24, 2020, Freddie Mac moved to substitute Greystone as plaintiff. Dkts.22–24. On December 12, 2020, defendants moved to dismiss the complaint for lack of subject matter jurisdiction. Dkt.29.2 II. Legal Standards Governing 12(b)(1) Motion toDismiss “[F]ederal courts are courts of limited jurisdictionand lack the power to disregard such limits as have been imposed by the Constitution or Congress.” Durant, Nichols, Houston, Hodgson & Cortese-Costa P.C. v. Dupont,

(2d Cir. 2009)(internal citations and quotations omitted). “A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it.” Makarova v. United States,

(2d Cir. 2000). Although the court must “accept as true all material factual allegations in the complaint,” an affirmative showing of jurisdiction is

not made“by drawing from the pleadings inferences favorable to the party asserting it.” Drakos,

. Unlike under Rule 12(b)(6), “[a] plaintiff asserting subject matter jurisdiction has the burden of proving by a preponderance of the evidence that it exists.” Morrison,

(citation omitted). Further, the Court may properly refer to matters outside the pleadings when considering the existence of jurisdiction pursuant to Rule 12(b)(1).

2 Greystone later sold the loan to PFSS 2020 Holding Co., LLC (“PFSS”). Pierre Decl. ¶¶ 14– 20. On January 14, 2020, Freddie Mac moved to substitute PFSS as plaintiff. Dkts. 36–39. The Court will resolve the motions to substitute by separate order. III. Analysis Defendants contend that this Court does not have subject matter jurisdiction over this case and move to dismiss the complaint pursuant to Rule 12(b)(1). They argue that the transfers between Greystone and Freddie Mac were collusive and done with the express purpose of manufacturing jurisdiction, whether that be diversity jurisdiction under

or

original jurisdiction under 12U.S.C. §1452. The Court easily disposes of the argument that Greystone and Freddie Mac colluded to manufacture diversity jurisdiction. Diversity jurisdiction is not at issue in this case. Freddie Mac has not pled anddoes not contend that this Court has subject matter jurisdiction by virtue of diversity of the parties. See generally Opp’n. Rather, it contends that this Court has subject matter jurisdiction because Freddie Mac was an original party to the suit. Under 12U.S.C. §1452(f), federal courts have original jurisdiction over civil actions in which Freddie Mac is a party.3 “Suits involving Freddie Macmay be brought in federal court.” Lightfoot v. Cendant Mortg. Corp.,

(2017). Freddie Mac commenced this action, and thus the Court had jurisdiction over the case.

3 Defendants argue that §1452 is inoperable following Freddie Mac’s 1989 reorganization. Reply at 3–6 (citing U.S. ex rel. Adams v. Aurora Loan Servs., Inc.,

(9th Cir. 2016)). Because defendants made that argument for the first time on reply, the Court has considered Freddie Mac’s letter in response to this argument. See Dkt.46 (Freddie Mac sur- reply). Defendants dispute whether this sur-reply is properly considered, see Dkt. 47, but it clearly is, as defendants—despite the Complaint’s express pleadingthat the Court had jurisdiction based on §1452—did not address § 1452until their reply. On the merits, defendants’ attempt to neutralize § 1452 fails. As Freddie Mac correctly notes, Adams held that, for purposes of a claim under the False Claims Act, “a claim presented to Fannie Mae or Freddie Mac is not presented to an ‘officer, employee or agent’ of the United States” because Fannie Mae and Freddie Mac are “private companies” that are “sponsored or chartered by the federal government.” Adams,813 F.3dat 1260. But Adams did not address the extent to which §1452 gives federal courts withjurisdictionover claims in which Freddie Mac is a party. The ensuingtransfers of the loan did not divest the Court of subject matter jurisdiction. Freddie Mac concedes that it no longer has any interest in the loan and that the sole basis of this Court’s jurisdiction is §1452. See Opp’n at 4–6. And although no court in this Circuit has specifically resolved whether a district court retains jurisdiction over a case originally brought by

Freddie Mac where Freddie Mac has since transferred itsinterest to a private party, the Second Circuit’s resolution of similar issue involvingthe Federal Depository Insurance Corporation (“FDIC”) is instructive. See FDICv. Four Star Holding Co.,

(2d Cir. 1999). The claims in that case arose understate law, and the sole basis for jurisdiction was FDIC’s enabling statute, which grantsfederal courts federal question jurisdiction over civil cases in which the FDIC is a party. Id.at 100(citing

(b)(2)(A)). The Second Circuit upheld the district court’s finding that it retainedsubject matter jurisdiction over the case after the FDIC had transferred its interest in the subject property to a private party. Id.at 100–01. The Circuit explained that jurisdiction “ordinarily depends on the facts as they exist when the complaint is filed,” id.at 100 (quoting Newman–Green, Inc. v. Alfonzo–Larrain,

(1989)), and that as a matter of policy, a contrary rule could “could well have the effect of deterring normal business transactions” during the litigation, includingtransactions in the public interest, id.at 101 (internal citations and quotations omitted). That reasoning equally applies here, where, after bringing suit,Freddie Mac exercised its contractualright to force Greystone to repurchase the loan uponcertain defaults. And there is noevidenceto support defendants’ claim that the transfers were collusive. Defendants rely on

, under which district courts lack jurisdiction over cases in which a party was collusively joinedby assignment or otherwise. See Mem. at 4–6. Defendants argue that because Greystone is a frequent financer and servicer of loans for Freddie Mac, it is “intertwined” with Freddie Mac. Id.at 5. Defendants also note Greystone’s dutyto repurchase the loan in the event of certain defaults as evidence that Greystone is“affiliated” with Freddie Mac. Id.at 4. And, they argue, there is a presumption of collusion when entities executing the assignment are “affiliated,” a presumption they argue Freddie Mac has not rebutted. Id.(citing

Prudential Oil Corp. v. Phillips Petroleum Co.,

(2d Cir. 1976)). Section 1359 is typicallyinvoked where one or more parties have allegedly colluded to manufacture diversityjurisdiction. See, e.g.,Airlines Reporting Corp. v. S & N Travel, Inc.,

(2d Cir. 1995) (“[W]e construe section 1359 broadly to bar any agreement whose ‘primary aim’ is to concoct federal diversity jurisdiction.”); Prudential Oil Corp.,

(“Section 1359 should therefore be construed broadly to bar any improper attempt to create federal diversity jurisdiction.”). Assuming arguendothat § 1359 applies tocases involving subject matter jurisdiction, Freddie Mac has demonstrated that the transfers were not collusive. First, no presumption that the transfers were collusive is warranted. In Prudential Oil Corp., on which defendants rely, the court held that collusion is presumed “where it is shown

that a non-diverse parent corporation has assigned a claim to its wholly owned diverse subsidiary engaged in no business other than the prosecution of that claim.” Prudential Oil Corp.,

. Other courts have extended the presumption where there is a “sufficient identity of corporate interests.” Airlines Reporting Corp.,

. That is far from the case here. Freddie and Mac and Greystone do not have a corporate relationship. Instead, like other entities at arms-length from Freddie Mac, Greystone participatedin a multifamily mortgage program offered by Freddie Mac. Second, none of the factors courts in this Circuitexamine when determining whether an assignment was collusive for purposes of §1359 indicates that the transfers here were collusive. These are“the assignee’s lack of a previous connection with the claim assigned;the remittance by the assignee to the assignor of any recovery; whether the assignor actually controls the conduct of the litigation; the timing of the assignment; the lack of any meaningful consideration for the assignment; and the underlying purpose of the assignment.” Airlines Reporting Corp.,

58F.3d at 863(citations omitted). Here, the purpose of Freddie Mac’s multifamily programs is to provide a “secondary market” to private lenders to “establish and enhance markets for home and multifamily Mortgages.” Walsh Decl. ¶¶ 3, 10. This is accomplished whenloan originators immediately sell a newloan to Freddie Mac but remainonto service the loan. See Opp’n at 7–8. Consistent with this business model,Greystone originated the loan and then promptly sold it to Freddie Mac. Andthe initial transfer from Greystone to Freddie Mac on January 14, 2019came approximately 21 months before Freddie Mac filedthe complaint to foreclose on the mortgage. As for the second assignment, back to Greystoneafter the initiation of this lawsuit, itwas demonstrablydictated not by litigation strategy, but by Greystone’s contractual dutyto

repurchase the loan. As a part of the multifamily program, loan originators must agree to repurchase the loan in the event of certain defaults. See WalshDecl.¶ 6. And there is no evidence to suggest that Freddie Mac imposes this obligation on private loan originators to manufacturefederal jurisdiction. It instead serves toobligate loan originators to repurchase bad loans from Freddie Mac. Finally, there is no indication that, post-assignment,Freddie Mac will continue to control the litigation. On the contrary, Freddie Mac has filed successivemotions to substitute, for itself as plaintiff, its successor stakeholders, beginning with Greystone. Freddie Mac has therefore demonstrated that the assignments to and from Greystone were done in the normal course of business of the multifamily mortgage program. Accordingly, Freddie Mac has demonstrated, by a preponderance of the evidence, that the Court had subject matter jurisdiction at the time of the Complaint, and that such jurisdiction is undisturbed by Freddie Mac’s transfer of its interest to Greystone or Greystone’s subsequent transfer of that interest to PFSS. CONCLUSION For the foregoing reasons, the Court denies defendants’ motion to dismiss. The Clerk of Court is respectfully directed to terminate the motion pending at docket 29. SO ORDERED. p A Paul A. Engelmayer United States District Judge

Dated: February 1, 2021 New York, New York