Lightfoot v. Cendant Mortgage Corp.

12 U. S. C. §1723a(a)’s sued-and-be-sued clause does not establish federal subject matter jurisdiction over all cases involving Fannie Mae.

Petitioners failed to make payments on their mortgages, owned by Respondent Fannie Mae, and it entered into foreclosure. The mortgage was sold to the private mortgage company and, after efforts to prevent the foreclosure failed, the home was sold at a trustee’s sale. After two failed federal lawsuits attempting to reverse the foreclosure, Petitioners filed the present action in state court. Respondent removed the case to federal court and the District Court found for Respondent, a decision that was affirmed by the Ninth Circuit. Upon request for rehearing, the Ninth Circuit ordered additional briefing on the question of subject matter jurisdiction. Respondent furthered the argument that subject matter jurisdiction was created by 12 U. S. C. §1723a(a)'s sue-and-be-sued clause that states that Fannie Mae can sue and be sued “in any court of competent jurisdiction, State or Federal.” On appeal, the Supreme Court held that “competent jurisdiction” relates historically to courts with valid subject matter jurisdiction over the claim and valid personal jurisdiction over the parties. Thus, it held that the language of the clause does not express legislative intent to confer subject matter jurisdiction. Because the language is restating “the basic rule” set forth in Deveaux and Osborne, the Supreme Court further held that the clause provided a general right to sue, and did not confer original jurisdiction, thereby allowing a state court with personal jurisdiction over Respondent and subject matter jurisdiction over the case to be competent to hear it. REVERSED.