Opinion
C.A. NO. G-12-188
03-22-2013
IN RE: PURPORTED LIEN OR CLAIM AGAINST YOLANDA BOND v. BARRETT DAFFIN FRAPPIER TURNER & ENGEL, LLP, ET AL.
MEMORANDUM AND RECOMMENDATION TO GRANT DEFENDANTS' MOTIONS TO DISMISS
This is a state law action in which Plaintiff, proceeding pro se, seeks to invalidate the assignment of her mortgage loan documents. Although it was originally filed in state court, Defendant EMC Mortgage L.L.C., formerly known as EMC Mortgage Company ("EMC"), has removed this action to federal court pursuant to 28 U.S.C. §§ 1332, 1441(a). Pending are two motions to dismiss, one filed by Defendant Barrett Daffin Frappier Turner & Engel, L.L.P. ("Barrett"), (D.E. 24), and the other filed by Defendants Kristen Bailey and Misty L. Odom. (D.E. 22). Plaintiff has filed a response opposing each motion, (D.E. 26; 27), and Defendants have filed corresponding replies. (D.E. 28; 29). For the reasons stated herein, it is respectfully recommended that Defendants' motions be granted and that Plaintiff's claims be dismissed.
I. JURISDICTION
A party may remove an action from state court to federal court if the action is one over which the federal court possesses subject matter jurisdiction. See 28 U.S.C. § 1441(a). The removing party bears the burden of showing that federal jurisdiction exists and that removal was proper. See Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002) (citations omitted). "Any ambiguities are construed against removal because the removal statute should be strictly construed in favor of remand." Id. (citations omitted); see also Acuna v. Brown & Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000) ("doubts regarding whether removal jurisdiction is proper should be resolved against federal jurisdiction").
When the alleged basis for federal jurisdiction is diversity, a federal district court has subject matter jurisdiction if there is: (1) complete diversity of citizenship; and (2) an amount-in-controversy greater than $75,000. See 28 U.S.C. § 1332(a). It is well-established that the diversity statute requires complete diversity of citizenship. A district court generally "cannot exercise diversity jurisdiction if one of the plaintiffs shares the same state citizenship as any one of the defendants." Corfield v. Dallas Glen Hills LP, 355 F.3d 853, 857 (5th Cir. 2003) (citations omitted).
A. There Is Complete Diversity Among The Parties.
Here, there is complete diversity between the parties because the Plaintiff is not a citizen of the same state as any Defendant. Defendants Odom and Bailey are citizens of Louisiana. (D.E. 1, at 4). Defendant EMC is a limited liability company, and therefore its citizenship for the purposes of diversity is determined by the citizenship of its members. Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1080 (5th Cir. 2008). The sole member of EMC is Bear Stearns Companies, LLC. In turn, the sole member of Bear Stearns Companies, LLC, is JPMorgan Chase & Co., which is a Delaware corporation with its principal place of business in New York. Therefore, JPMorgan Chase & Co.-and by extension, Defendant EMC-is a citizen of Delaware and New York. 28 U.S.C. § 1332. Plaintiff is a citizen and resident of Texas. (D.E. 8, at 1).
Defendant EMC contends that although Defendant Barrett is a citizen of Texas, it does not destroy complete diversity because it was improperly joined. The Fifth Circuit has counseled district courts, in analyzing diversity jurisdiction, to disregard the citizenship of parties that have been improperly joined. See Smallwood v. Ill. Cent. R.R., 385 F.3d 568, 572-73 (5th Cir. 2004) (en banc) ("The doctrine of improper joinder rests on ... statutory underpinnings, which entitle a defendant to remove to a federal forum unless an in-state defendant has been 'properly joined.'"). The rationale of this doctrine of improper joinder (also known as "fraudulent joinder") is that the right of removal should not "be defeated by a fraudulent joinder of a resident defendant having no real connection with the controversy." Chesapeake & Ohio Ry. v. Cockrell, 232 U.S. 146, 152 (1914) (citations omitted). Rather, federal courts should be vigilant not to sanction devices intended to prevent the removal to a federal court where a defendant has that right. Smallwood, 385 F.3d at 573 (quotation omitted).
The term, "improper joinder," was recently adopted by the Fifth Circuit. See Smallwood, 385 F.3d at 571 n.1 ("We adopt the term 'improper joinder' as being more consistent with the statutory language than the term 'fraudulent joinder,' which has been used in the past. Although there is no substantive difference between the two terms, 'improper joinder' is preferred.").
The burden of proving improper joinder, however, is on the defendant, and that burden is a "heavy one." Griggs v. State Farm Lloyds, 181 F.3d 694, 699, 701 (5th Cir. 1999). Indeed, the Supreme Court has noted that the defendant's burden is not insignificant:
Merely to traverse the allegations upon which the liability of the resident defendant is rested, or to apply the epithet 'fraudulent' to the joinder, will not suffice: the showing must be such as compels the conclusion that the joinder is without right and made in bad faith.Chesapeake, 232 U.S. at 152 (citations omitted).
Therefore, the Fifth Circuit has explained that improper joinder may be established in one of two ways. The defendant either must show "(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court." Smallwood, 385 F.3d at 573 (citation omitted). Only the second method is at issue in this case, and the test for improper joinder under this second approach is whether "there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant." Id.
When applying this test, a court must first "resolve all disputed questions of fact and all ambiguities in the controlling state law in favor of the non-removing party. [A court is] then to determine whether that party has any possibility of recovery against the party whose joinder is questioned." Hart v. Bayer Corp., 199 F.3d 239, 246 (5th Cir. 2000) (emphasis in original) (quotation omitted). Generally, in determining the possibility of recovery pursuant to state law, a court conducts "a Rule 12(b)(6)-type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant." Smallwood, 385 F.3d at 573. "[I]f the plaintiff can survive a Rule 12(b)(6) challenge, there [generally] is no improper joinder." Id. However, the Court must carefully distinguish an attack on the overall merits of the case from a showing that defendants were improperly joined in order to defeat diversity. See id.; see also Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 284 (5th Cir. 2007) ("a meritless claim against an in-state defendant is not the equivalent of improper joinder").
Defendant EMC urges that Defendant Barrett is improperly joined. Citing § 51.007 of the Texas Property Code, it argues that Defendant Barrett was named solely in its capacity as substitute trustee, and that Plaintiff has failed to assert any cause of action against it. (D.E. 1, at 4). Section 51.007(f) protects trustees "for any good faith error resulting from reliance on any information in law or fact provided by the mortgagor or mortgagee or their respective attorney, agent, or representative or other third party." Tex. Prop. Code § 51.007(f). Unlike the provisions of § 51.007(a)-(e), which provide a procedural mechanism for dismissing claims against trustees where appropriate, see Beard v. Aurora Loan Servs., LLC, C.A. C-06-1142; 2006 WL 1350286, at *8 (S.D. Tex. May 17, 2006) (unpublished), § 51.007(f) imposes a substantive pleading requirement. Therefore, in order to satisfy § 51.007(f), a plaintiff must allege bad faith on the part of a substitute trustee named in the action. See Cantor v. Wachovia Mortg., FSB, 641 F. Supp. 2d 602, 611 (N.D. Tex. 2009). In cases where the plaintiff did not allege bad faith on the part of the defendant, courts have held that substitute trustees were improperly joined for the purposes of establishing diversity jurisdiction. Id.; see also Mechali v. CTX Mortg. Co., LLC, No. 4:11CV114, 2011 WL 2683190, at *4 (E.D. Tex. June 7, 2011) (unpublished), adopted by No. 4:11CV114, 2011 WL 2685708 (E.D. Tex. July 11, 2011) (unpublished); Eisenberg v. Deutsche Bank Trust Co. Americas, No. SA-11-CV-384-XR, 2011 WL 2636135, at *3-4 (W.D. Tex. July 5, 2011) (unpublished).
Here, it is unclear why or how Plaintiff seeks to hold Defendant Barrett liable. She alleges that the law firm prepared the document assigning her home mortgage documents to Defendant EMC, (D.E. 21, at 2), and that the assignment constituted a "fraudulent conveyance." (D.E. 21, at 16). She elaborates on this claim, explaining that Defendant Barrett's "specific intent is manufacturing fraudulent documents in order [to] create the false impression that various entities obtained valid, recordable interests in real properties, when in fact they actually maintained no lawful interest in said properties." Id. at 17. Moreover, she alleges that Defendant Barrett "intentionally creat[ed] fraudulent documents[] with forged signatures." Id. In sum, her claim is that Defendant Barrett is engaged in a criminal enterprise to convey real property to Defendant EMC. Id. at 18. These allegations, however, are not supported by any specific evidence. Although Plaintiff submits a copy of the document executing the assignment in question, nothing in it establishes fraud or bad faith by Defendant Barrett. (D.E. 21-1, at 2). Lacking other evidence or specific allegations, Plaintiff has failed to show that errors by Defendant Barrett in its preparation of the assignment-assuming there are any-were not made in good faith. Accordingly, it is respectfully recommended that because there is no reasonable basis for Plaintiff to succeed in her claims against Defendant Barrett, it does not destroy complete diversity. B. The Amount In Controversy Exceeds $75,000.
The amount in controversy exceeds $75,000 exclusive of interest and costs. Although Plaintiff has not specified any amount of damages that she seeks to recover, she does seek a declaration that the assignment of her loan documents by Defendant EMC was invalid, presumably so that she can prevent foreclosure of her property. According to the Brazoria County Central Appraisal District, the value of Plaintiff's property subject to the mortgage is appraised at $166,210. Therefore, the amount of damages exceeds the jurisdictional amount.
See Brazoria County Appraisal District - Property Details, https://propaccess.trueautomation.com/ClientDB/Property.aspx?prop_id=525921.
Accordingly, it is respectfully recommended that Defendant EMC has established the requirements of diversity jurisdiction for the purposes of removal.
Although Defendant EMC did not obtain the consent to remove by each Defendant, no non-removing Defendant had been properly served at the time of removal. (D.E. 1, at 2). Therefore, it was not necessary for those Defendants to consent. Getty Oil Corp. v. Insurance Co. of N. Am., 841 F.2d 1254, 1261 n.9 (5th Cir. 1988) ("Defendants (at least those not citizens of the forum state) who are unserved when the removal petition is filed need not join in.") (citing Pullman Co. v. Jenkins, 305 U.S. 534, 540 (1939); Lewis v. Rego Co., 757 F.2d 66, 68-69 (3d Cir. 1985)). Moreover, because Defendant Barrett was improperly joined, its consent was not needed either. See Rico v. Flores, 481 F.3d 234, 239 (5th Cir. 2007) ("a removing party need not obtain the consent of a co-defendant that the removing party contends is improperly joined") (citing Jernigan v. Ashland Oil Inc., 989 F.2d 812, 815 (5th Cir. 1993) (per curiam)).
II. BACKGROUND
On November 15, 2011, Plaintiff filed this action in Texas state court against Defendants Barrett, Bailey and Odom, seeking a judgment invalidating the December 22, 2010 assignment of a Deed of Trust ("Assignment") securing payment of a Note on her property from Defendant EMC to the Bank of New York Mellon, as successor trustee to JP Morgan Chase Bank, N.A. ("JPMorgan"). (D.E. 1-5, at 6). The Assignment was prepared by Defendant Barrett, and executed in Louisiana by Defendant Bailey on behalf of Defendant EMC as its Assistant Secretary. Id. Defendant Bailey is also an employee of JPMorgan. (D.E. 22, at 13). The Assignment was notarized by Defendant Odom, a notary public in Louisiana and an employee of JPMorgan. Id.; (D.E. 22, at 13; D.E. 28, at 4). On January 3, 2011, it was recorded in Brazoria County, Texas. (D.E. 1-5, at 7).
At that time, Defendant EMC was EMC Mortgage Corporation. (D.E. 1, at 1; D.E. 1-5, at 6).
The full name of the assignee is The Bank of New York Mellon Formerly Known as the Bank of New York as Successor Trustee to JP Morgan Chase Bank, N.A., As Trustee for Certificate holders of Bear Stearns Asset Backed Securities Trust 2006-SD3, Asset Backed Certificates, Series 2006-SD3. (D.E. 1-5, at 6).
On December 1, 2011, Plaintiff filed a separate action in state court seeking to enjoin foreclosure on her property by JPMorgan as well as Defendant Barrett, challenging JPMorgan's authority to foreclose pursuant to the Deed of Trust. Bond, et al. v. JPMorgan Chase Bank, N.A., f/k/a EMC Mortgage Corp., et al., No. 65933 (Tex. Dist. Dec. 1, 2011) (unpublished). The action was removed to this Court, and on February 14, 2012, it was dismissed with prejudice for failure to state a claim. Bond v. JPMorgan Chase Bank, N.A., No. G-11-538, 2012 WL 502705 (S.D. Tex. Feb. 14, 2012) (unpublished).
Plaintiff alleges four causes of action. First, she accuses Defendant Odom of notary fraud on the basis that her Louisiana notary commission had been suspended on the date she notarized the Assignment. (D.E. 21, at 3). Second, Plaintiff alleges "tortuous violations" of §§ 32.46, 32.48, 32.49, and 37.13 of the Texas Penal Code by Defendant Bailey, claiming that she executed the Assignment outside the presence of a notary and "without direct personal knowledge of the information and authority in the Assignment." Id. at 8. Third, she asserts that the Assignment is fraudulent pursuant to § 51.901(c)(2) of the Texas Government Code, and that it violated a pooling and servicing agreement ("Pooling Agreement") as well as New York law. Id. at 10-15. Finally, she appears to contend that all Defendants participated in a conspiracy to commit fraud through execution of the Assignment. Id. at 15-23. In her prayer for relief, Plaintiff requests that the Court determine whether the assignment "should be accorded lien status," and, if not, presumably invalidate it. Id. at 23.
Defendant EMC, believing it had been named in this action, removed to this Court on June 25, 2012. (D.E. 1). On July 13, 2012, Plaintiff filed a notice of dismissal as to Defendant EMC pursuant to Rule 41(a) of the Federal Rules of Civil Procedure. (D.E. 5). On November 19, 2012, Defendants Bailey and Odom filed a motion to dismiss Plaintiff's complaint. (D.E. 22). Plaintiff filed a response in opposition on January 4, 2013, (D.E. 26), to which Defendants filed their reply on January 24, 2013. (D.E. 28). On December 17, 2012, Defendant Barrett also filed a motion to dismiss. (D.E. 24). Plaintiff filed a response on January 14, 2013, (D.E. 27), and Defendant Barrett filed its reply on February 6, 2013. (D.E. 29).
III. DISCUSSION
Defendants Bailey and Odom seek dismissal on seven grounds: (1) the Court lacks personal jurisdiction over them; (2) Plaintiff lacks standing to contest the Assignment; (3) she lacks standing to contest the Pooling Agreement; (4) she lacks standing to bring criminal charges against them; (5) the action is barred by res judicata; (6) Defendants are not proper parties to a suit seeking to invalidate a lien; and (7) Plaintiff cannot state a claim pursuant to the Declaratory Judgment Act. (D.E. 22).
Defendant Barrett seeks dismissal on four grounds: (1) Plaintiff has failed to effect service of process on Defendant pursuant to Rule 4 of the Federal Rules of Civil Procedure; (2) she lacks standing to contest the Assignment; (3) she lacks standing to contest the Pooling Agreement; and (4) her allegation that the Assignment constitutes a fraudulent lien fails to state a claim. (D.E. 24). Because of the overlapping claims, Defendants' arguments shall be addressed together for the purposes of this discussion.
A. Plaintiff's Claims Against Defendant Barrett Should Be Dismissed For Failure To Effect Service of Process Pursuant To Rule 4 Of The Federal Rules Of Civil Procedure.
When an action is removed to federal court before the plaintiff has effected service of process on a defendant, the Federal Rules of Civil Procedure governs defects of service. 28 U.S.C. § 1448. Rule 4(m) of the Federal Rules of Civil Procedure requires a plaintiff to serve the defendant with a copy of the summons and complaint within 120 days after the complaint is filed, or, if the case has been removed, 120 days from the date of removal. Fed. R. Civ. Proc. 4(m); Cardenas v. City of Chicago, 646 F.3d 1001, 1004 (7th Cir. 2011) (citations omitted). This action was removed to federal court on June 25, 2012. (D.E. 1). At that time, Plaintiff had not yet served Defendant Barrett. (D.E. 1). Therefore, she had until October 24, 2012 to effect service. To date she has still not done so. Although she contends that she served Defendant Barrett through certified mail on May 25, 2012, (D.E. 27, at 3), there is no proof that Defendant was actually served. In particular, there is no evidence of a return of service of process or return of summons, or even evidence showing she requested that a summons be issued. (D.E. 29, at 2); see also Al-Harbi v. Coronado Country Club, No. EP-04-CA-0285-DB, 2005 WL 1020893, at *1-2 (W.D. Tex. Apr. 29, 2005) (unpublished) (proper service pursuant to Rule 4(c)(1) of the Federal Rules of Civil Procedure requires service of a complaint and summons). Plaintiff has not explained this discrepancy. See Systems Signs Supplies v. U.S. Dep't of Justice, 903 F.2d 1011, 1013 (5th Cir. 1990) (per curiam) (burden on plaintiff to prove that she has served defendant or to show good cause as to why she has not) (citations omitted). Accordingly, it is respectfully recommended that Plaintiff's claims against Defendant Barrett be dismissed for failure to timely effect service of process pursuant to Rule 4(m).
B. Plaintiff's Claim Should Be Dismissed Pursuant To Rule 12(b)(2).
Defendants Bailey and Odom contend that Plaintiff's claims against them must be dismissed pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure because this Court lacks personal jurisdiction over them.
1. Standard of review for a Rule 12(b)(2) motion.
Rule 12(b)(2) of the Federal Rules of Civil Procedure addresses motions to dismiss for "lack of personal jurisdiction." Fed. R. Civ. P. 12(b)(2). "The plaintiff bears the burden of establishing the court's personal jurisdiction over [a] nonresident defendant." See Kevlin Serv., Inc. v. Lexington State Bank, 46 F.3d 13, 14 (5th Cir. 1995) (per curiam) (citation omitted); Luv N' Care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 469 (5th Cir. 2006) ("Where a defendant challenges personal jurisdiction, the party seeking to invoke the power of the court bears the burden of proving that jurisdiction exists.") (citing Wyatt v. Kaplan, 686 F.2d 276, 280 (5th Cir. 1982)).
In order to survive a Rule 12(b)(2) motion to dismiss, "[a] [p]laintiff[] need only plead a prima facie case for personal jurisdiction." Fielding v. Hubert Burda Media, Inc., 415 F.3d 419, 424 (5th Cir. 2005) (citing Felch v. Transportes Lar-Mex S.A. De CV, 92 F.3d 320, 326 (5th Cir. 1996)); Brown v. Slenker, 220 F.3d 411, 417 (5th Cir. 2000) ("To defeat dismissal, the [plaintiff] was required only to present facts sufficient to constitute a prima facie case of personal jurisdiction.") (citing Bullion v. Gillespie, 895 F.2d 213, 217 (5th Cir. 1990)); Luv N' Care, 438 F.3d at 469 ("The plaintiff need not ... establish jurisdiction by a preponderance of the evidence; a prima facie showing suffices.") (citing Wyatt, 686 F.2d at 280).
2. Defendants do not have minimum contacts with the forum.
Defendants Bailey and Odom argue that Plaintiff has not shown the court has personal jurisdiction over either of them because they are citizens of Louisiana and they do not have minimum contacts with the forum. Plaintiff argues in response that Defendants do, in fact, have minimum contacts with Texas because they worked with Defendant Barrett by notarizing documents for it; they are employees of Defendant EMC, which is located in Lewisville, Texas; and they signed numerous documents that they knew would be filed in Texas county records.
The Fifth Circuit has explained that "[a] federal court can exercise personal jurisdiction over a nonresident defendant if: (1) the long-arm statute of the forum state confers personal jurisdiction over that defendant; and (2) the exercise of such jurisdiction by the forum state is consistent with due process under the United States Constitution." Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 418 (5th Cir. 1993) (citations omitted); see also Wilson v. Belin, 20 F.3d 644, 646-47 (5th Cir. 1994) (citing Bullion, 895 F.2d at 215). Only the latter inquiry need be addressed, however, because the Texas long-arm statute extends to the limits of federal due process. See Moncrief Oil Int'l Inc. v. OAO Gazprom, 481 F.3d 309, 311 n.1 (5th Cir. 2007) ("The Texas long-arm statute extends personal jurisdiction to the permissible limits of the Due Process Clause, and so we only need to determine whether the exercise of personal jurisdiction in this case would comport with those federal guarantees.") (citations omitted); see also Tex. Civ. Prac. & Rem. Code § 17.041, et seq. (Texas Long Arm Statute).
The Fifth Circuit has determined that "[t]he Due Process Clause permits the exercise of personal jurisdiction over a non-resident defendant if: 1) that defendant has 'minimum contacts' with the forum state; and 2) the exercise of jurisdiction does not offend 'traditional notions of fair play and substantial justice.'" Brown, 220 F.3d at 417 (citing Ruston Gas Turbines, 9 F.3d at 418). For a federal court to exercise personal jurisdiction, "[b]oth prongs of the due process test must be met." Ruston Gas Turbines, 9 F.3d at 418. Once a plaintiff makes a prima facie showing of minimum contacts pursuant to the first prong, the burden then shifts to the defendant to show that "the exercise of jurisdiction would not comply with 'fair play' and 'substantial justice.'" Freudensprung v. Offshore Technical Servs., Inc., 379 F.3d 327, 343 (5th Cir. 2004) (citing Nuovo Pignone, SpA v. STORMAN ASIA M/V, 310 F.3d 374, 378 (5th Cir. 2002)).
To satisfy the "minimum contacts" prong of the test set forth above, the Supreme Court has established standards for "specific" and "general" jurisdiction. Wilson, 20 F.3d at 647; Ruston Gas Turbines, 9 F.3d at 418-19. A court may exercise "specific jurisdiction" over a non-resident defendant when the suit arises from or relates to the defendant's contacts within the forum state. See Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984); Freudensprung, 379 F.3d at 343 ("A court may exercise specific jurisdiction when (1) the defendant purposely directed its activities toward the forum state or purposely availed itself of the privileges of conducting activities there; and (2) the controversy arises out of or is related to the defendants['] contacts with the forum state.") (citations omitted).
By contrast, when the act or transaction that forms the basis of the plaintiff's action is unrelated to the defendant's contacts with the forum, personal jurisdiction does not exist unless the defendant has sufficient "continuous and systematic" contacts with the forum state to support an exercise of "general jurisdiction." Freudensprung, 379 F.3d at 345 (citing Helicopteros Nacionales de Columbia, 466 U.S. at 414, 417). More specifically, a defendant's contacts with the forum state must be so continuous and systematic that the defendant should reasonably expect to be sued there. See Felch, 92 F.3d at 327; Marathon Oil Co. v. A.G. Ruhrgas, 182 F.3d 291, 295 (5th Cir. 1999) (en banc) (per curiam) ("General personal jurisdiction is found when the nonresident defendant's contacts with the forum state, even if unrelated to the cause of action, are continuous, systematic, and substantial.") (citations omitted).
Here, Plaintiff has failed to meet her burden of establishing personal jurisdiction over Defendants Odom and Bailey because she has not shown that Defendants have minimum contacts with the forum. Her attempt to establish specific jurisdiction is unfounded. In particular, the fact that Defendant Barrett prepared the Assignment and Defendants Bailey and Odom signed it does not suffice to establish some link to Texas amounting to minimum contacts. Defendants are Louisiana citizens and the Assignment was executed and notarized in Louisiana. Moreover, merely knowing that a document may be filed as a public record in Texas does not constitute purposeful availment. See McFadin v. Gerber, 587 F.3d 753, 762 (5th Cir. 2009) ("[f]oreseeable injury alone is not sufficient to confer specific jurisdiction, absent the direction of specific acts toward the forum") (quoting Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 212 (5th Cir. 1999)).
In addition, Plaintiff cannot establish general jurisdiction for the purpose of minimum contacts. Her argument that Defendants Odom and Bailey worked for Defendant Barrett is unfounded. Defendants are undisputed employees of Defendant JPMorgan. (D.E. 22, at 6). Although JPMorgan might be subject to jurisdiction in Texas, this alone does not establish that Defendants Odom and Bailey have continuous or systematic contacts with Texas sufficient to subject them to suit. Accordingly, it is respectfully recommended that Plaintiff's claims against Defendants Odom and Bailey be dismissed for lack of personal jurisdiction.
C. Plaintiff's Claims Should Be Dismissed Pursuant To Rule 12(b)(6).
1. Standard of review for a motion to dismiss.
Rule 12(b)(6) of the Federal Rules of Civil Procedure authorizes courts to dismiss claims for failure to state a legally cognizable claim that is plausible. Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). When ruling on a Rule 12(b)(6) motion, a court must accept the plaintiff's factual allegations as true and view them in the light most favorable to the plaintiff. Capital Parks, Inc. v. Se. Adver. & Sales Sys., Inc., 30 F.3d 627, 629 (5th Cir. 1994) (citation omitted); see also Neitzke v. Williams, 490 U.S. 319, 327 (1989) ("Rule 12(b)(6) does not countenance ... dismissals based on a judge's disbelief of a complaint's factual allegations."). A court may not look beyond the face of the pleadings to determine whether relief can be granted based on the alleged facts. Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999) (citation omitted); see also Fed. R. Civ. P. 12(d) ("If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.").
The Supreme Court recently reiterated the stringent standards that plaintiffs must overcome to survive such a dismissal:
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, ... a plaintiff's obligation to provide the "grounds" of his "entitle[ment] to relief" requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.... Factual allegations must be enough to raise a right to relief above the speculative level, ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)....Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). In other words, the claim for relief must be plausible, rather than just conceivable. Id. at 570. The allegation of "facts that are 'merely consistent with' a defendant's liability" will not suffice. Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 557). According to the Supreme Court, "[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556); see also Twombly, 550 U.S. at 561 (rejecting the "no set of facts" standard enunciated in Conley v. Gibson, 355 U.S. 41, 45-46 (1957) because it permitted the survival of "a wholly conclusory statement of claim ... whenever the pleadings left open the possibility that a plaintiff might later establish some 'set of [undisclosed] facts' to support recovery"); see also Campbell v. City of San Antonio, 43 F.3d 973, 975 (5th Cir. 1995) ("conclusory allegations ... masquerading as factual conclusions will not suffice to prevent a motion to dismiss") (citation omitted).
By authorizing dismissal on the basis of some dispositive issue of law, the Rule 12(b)(6) pleading test dispenses with "needless discovery and factfinding" for the ultimate purpose of streamlining litigation. Neitzke, 490 U.S. at 326-27. The Fifth Circuit has specified that "'[d]ismissal is proper if the complaint lacks an allegation regarding a required element necessary to obtain relief.'" Torch Liquidating Trust ex rel. Bridge Associates L.L.C. v. Stockstill, 561 F.3d 377, 384 (5th Cir. 2009) (quoting Campbell, 43 F.3d at 975). Moreover, a "court is not required to 'conjure up unpled allegations or construe elaborately arcane scripts to' save a complaint." Campbell, 43 F.3d at 975 (quoting Gooley v. Mobil Oil Corp., 851 F.2d 513, 514 (1st Cir. 1988)).
Finally, the Fifth Circuit has explained that "[i]n deciding a motion to dismiss the court may consider documents attached to or incorporated in the complaint and matters of which judicial notice may be taken." United States ex rel. Willard v. Humana Health Plan of Tex. Inc., 336 F.3d 375, 379 (5th Cir. 2003) (citation omitted); see also Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007) ( "matters of which a court may take judicial notice" are permissible to consider in ruling on a Rule 12(b)(6) motion). "Documents that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to her claim." Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004) (citation omitted); accord In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (citations omitted). Moreover, pursuant to the Federal Rules of Evidence, courts "may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b).
2. Plaintiff does not have standing to contest either the Assignment or the Pooling Agreement.
Defendants Barrett, Odom and Bailey urge that Plaintiff does not have standing to contest either the Assignment or the Pooling Agreement because she was not a party to either contract. In response, Plaintiff argues that Texas law permits a debtor to assert any claim against an assignee that renders an assignment void or invalid. (D.E. 27, at 10).
Pursuant to Texas law, a plaintiff does not have standing to challenge a contract unless it is a party, agent or assignee of a party, or a third-party beneficiary of the agreement. Morlock, L.L.C. v. JP Morgan Chase Bank, N.A., No. H-12-1448, 2012 WL 3187918, at *5 (S.D. Tex. Aug. 2, 2012) (unpublished) (citing Bittinger v. Wells Fargo Bank NA, 744 F. Supp. 2d 619, 625-26 (S.D. Tex. 2010); James v. Wells Fargo Bank, N.A., No. 3:11-CV-2228-B, 2012 WL 778510, at *2 (N.D. Tex. Mar. 12, 2012) (unpublished)); see also Eskridge v. Fed. Home Loan Mortgage Corp., No. W-10-CA-285, 2011 WL 2163989, at *5 (W.D. Tex. Feb. 24, 2011) (unpublished) ("Plaintiff has no standing to contest the various assignments as she was not a party to the assignments."); Edwards v. Ocwen Loan Servicing, LLC, No. 9:10-CV-089, 2012 WL 844396, at *5 (E.D. Tex. Mar. 12, 2012) (unpublished) ("a mortgagor does not have standing to challenge various assignments of the note or pooling and servicing agreements because the mortgagor is not a party to the assignments or the agreements.") (citations omitted). Accordingly, to the extent Plaintiff seeks to challenge either the Assignment or the Pooling Agreement, she lacks standing because she is not a party to either contract.
Plaintiff's argument to the contrary relies on an exception to this rule that applies in limited circumstances not present here. Specifically, that exception allows an obligor who has been sued by an assignee to assert any defense that would render the assignment void, although not one that would render it only voidable. See Kramer v. Federal Nat'l Mortg. Ass'n, No. A-12-CA-276-SS, 2012 WL 3027990, at *4-5 (W.D. Tex. May 15, 2012) (unpublished) (citing Tri-Cities Constr., Inc. v. Am. Nat'l Ins. Co., 523 S.W.2d 426, 430 (Tex. App. 1975); Tex. Bus. & Com. Code § 3.305(c)). The purpose of this exception is to ensure that an obligor will not be held liable for the same claim twice by different parties asserting an interest and seeking to collect. Id. Here, Defendants have not sued Plaintiff, and there is no indication that she might be required to pay the same claim twice. See id. at *5 (rejecting plaintiff's challenge to assignment of a deed of trust, explaining that "there is no suggestion [the plaintiff] is being put in a position where he will have to pay the same claim twice," and concluding that "if an error [in the assignment] was indeed committed, and the wrong entity received the foreclosure sale proceeds, that is a matter properly resolved between the various parties who have a legitimate claim to the property"). Therefore, it is respectfully recommended that Plaintiff lacks standing to contest the Assignment or the Pooling Agreement.
3. Plaintiff cannot assert criminal charges against Defendants Odom and Bailey.
Defendants Odom and Bailey argue that Plaintiff does not have standing to assert criminal charges against them, including her allegations of notary fraud, violations of various sections of an unspecified penal code, misprision of felony, and robo-signing. (D.E. 21, at 3, 8, 10, 21). Pursuant to Texas law, "[t]he state, through its prosecuting attorney, has the right to enforce the rights of crime victims." Tex. Const. art. I, § 30(d). However, a victim "does not have standing to participate as a party in a criminal proceeding." Tex. Const. art. I, § 30(e). Thus, Plaintiff does not have standing to assert criminal charges against Defendants.
Moreover, regardless of the issue of standing, it is not the role of federal courts to interfere with state criminal proceedings. Additionally, this Court lacks jurisdiction in a civil action to address these allegations of state criminal violation. See Younger v. Harris, 91 U.S. 746, 750-51 (1971) (federalism and comity concerns require federal courts to avoid interfering with state criminal matters); 28 U.S.C. § 1332 ("The district courts shall have original jurisdiction of all civil actions" where diversity requirements are met) (emphasis added). Accordingly, it is respectfully recommended that Plaintiff's claims asserting criminal charges against Defendants be dismissed.
4. Plaintiff has failed to show that the Assignment constitutes a fraudulent lien.
Defendant Barrett seeks dismissal of Plaintiff's "fraudulent lien" claims, arguing that an Assignment does not constitute a lien pursuant to Texas law.
First, Plaintiff appears to assert a cause of action pursuant to § 51.903 of the Texas Government Code, alleging that the Assignment is fraudulent within the meaning of § 51.901(c)(2). (D.E. 21, at 11). Section 51.901(c)(2) provides that a document "purport[ing] to create a lien or assert a claim against real [property] ... or an interest in real [property]" is presumed to be "fraudulent" if it "is not created by implied or express consent or agreement of the obligor, debtor, or the owner" of the property. Tex. Gov't Code § 51.901(c)(2). Additionally, section 51.903 creates a cause of action for "[a] person who is the purported debtor or obligor or who owns real [property] ... or an interest in real [property] ... and who has reason to believe that the document purporting to create a lien or claim against [the property] ... previously filed or submitted for filing and recording is fraudulent." Tex. Gov't Code § 51.903(a).
Courts have consistently struck down challenges to the assignment of mortgage documents brought pursuant to § 51.903, on the basis that an assignment or transfer does not create a lien. See In re Campbell, No. 03-11-00524-CV, 2012 WL 1811616, at *2 (Tex. App. 2012) (unpublished); Marsh v. JPMorgan Chase Bank, N.A., 888 F. Supp. 2d 805, 811 (W.D. Tex. 2012). As one Texas court explained in rejecting a plaintiff's § 51.903 claim seeking to challenge the assignment of a note and deed of trust:
[Plaintiff's] reliance on government code section 51.903 to challenge the assignment's validity is misplaced. Section 51.903 does not apply to assignments; rather, it applies only to documents or instruments "purporting to create a lien or claim" against property. The assignment at issue in the present case does not purport to create a lien or claim, it merely purports to transfer an existing deed of trust from one entity to another. We conclude that the [plaintiff] cannot rely on government code section 51.903 to challenge the validity of an assignment of a deed of trust based on an alleged lack of authority to make the assignment.In re Campbell, 2012 WL 1811616, at *2 (citations omitted); accord Marsh, 888 F. Supp. 2d at 811. Here, the Assignment does not create a lien. Rather, it merely transfers interest in the Deed of Trust. (D.E. 1-5, at 6). Accordingly, it is respectfully recommended that Plaintiff's fraudulent lien claim pursuant to § 51.903 be dismissed.
Second, Plaintiff appears to allege that Defendants filed a false lien in violation of § 12.002 of the Texas Civil Practice and Remedies Code. (D.E. 21, at 5). However, this claim is similarly unfounded. Section 12.002 prohibits a person from filing fraudulent documents under certain circumstances, providing that:
[a] person may not make, present, or use a document or other record with: (1) knowledge that the document or other record is ... a fraudulent lien or claim against real [property]; (2) intent that the document ... be given the same legal effect as a court record ... ; and (3) intent to cause another person to suffer: (A) physical injury; (B) financial injury; or (C) mental anguish or emotional distress.Tex. Civ. Prac. & Rem. Code § 12.002(a). Pursuant to § 12.001, a "lien" is defined as "a claim in property for the payment of a debt and includes a security interest." Tex. Civ. Prac. & Rem. Code § 12.001(3). This definition does not encompass the assignment or transfer of an interest in property. See Marsh, 888 F. Supp. 2d at 812 (discussing § 12.002 and concluding that based on the plain meaning of the statute as well as the legislative history, an assignment does not "create a lien or claim" against property for the purposes of establishing a fraudulent lien claim); accord Garcia v. Bank of New York Mellon, No. 3:12-CV-0062-D, 2012 WL 692099, at *3 (N.D. Tex. Mar. 5, 2012) (unpublished) (dismissing plaintiffs' fraudulent lien claim pursuant to § 12.002 because they failed to plead facts showing that the assignment of the deed of trust constitutes a "lien" within the meaning of § 12.001). Accordingly, to the extent Plaintiff asserts a fraudulent lien claim pursuant to § 12.002, it is respectfully recommended that her claim be dismissed.
Section 12.003 creates a cause of action for an obligor or debtor, or a person who owns an interest in real property subject to an alleged fraudulent lien, to enjoin violation of § 12.002 and recover damages. Tex. Civ. Prac. & Rem. Code § 12.003(a)(8).
5. Plaintiff's claims are barred by res judicata.
Defendants Odom and Bailey contend that Plaintiff's claims are barred by res judicata because she raised related issues against identical parties in a previous federal action, which was dismissed with prejudice. (D.E. 22, at 12). In response, Plaintiff argues that res judicata does not apply because fraud was involved. (D.E. 26, at 4).
Res judicata bars a plaintiff from litigating a claim if four requirements are met: (1) the parties in both actions are identical or in privity; (2) the judgment in the prior action was rendered by a court of competent jurisdiction; (3) the prior action concluded with a final judgment on the merits; and (4) the same claim or cause of action was asserted in both actions. United States v. Davenport, 484 F.3d 321, 326 (5th Cir. 2007) (citation omitted). In regards to the fourth element, the Fifth Circuit has explained that courts should apply the transactional test to determine whether both actions assert the same claim or cause of action. See Davis v. Dallas Area Rapid Transit, 383 F.3d 309, 313 (5th Cir. 2004) (citation omitted). "Under the transactional test, a prior judgment's preclusive effect extends to all rights of the plaintiff 'with respect to all or any part of the transaction, or series of connected transactions, out of which the [original] action arose.'" Id. (quoting Petro-Hunt, L.L.C. v. United States, 365 F.3d 385, 395-96 (5th Cir. 2004)). Thus, a second claim is barred if it arises from "'the same nucleus of operative facts'" as the previous claim, regardless of the "type of relief requested, substantive theories advanced, or types of rights asserted" in either claim. Id. (citing Petro-Hunt); accord In re Southmark Corp., 163 F.3d 925, 934 (5th Cir. 1999); Agrilectric Power Partners, Ltd. v. Gen. Elec. Co., 20 F.3d 663, 665 (5th Cir. 1994).
Applying these four elements here, it appears that Plaintiff's claims are barred by res judicata. First, in the prior action, Plaintiff named as Defendants JPMorgan, as the successor of Defendant EMC, as well as Defendant Barrett. Bond v. JPMorgan Chase Bank, N.A., No. 3:11CV00538 (S.D. Tex. Dec. 12, 2011) (notice of removal and original complaint). These parties are identical or in privity with the Defendants named in this action. Defendant Barrett was named in both actions. Defendants Odom and Bailey are employees of JPMorgan, and to the extent Plaintiff sues them in their capacities as agents, this relationship establishes privity for the purposes of res judicata. See Russell v. SunAmerica Sec., Inc., 962 F.2d 1169, 1173-76 (5th Cir. 1992) (collecting cases). To the extent Plaintiff sues them in their capacities as agents of Defendant EMC, privity is established because JPMorgan is a "'mere continuation'" of Defendant EMC as its successor. Id. at 1176 (citing Mozingo v. Correct Mfg. Corp., 752 F.2d 168, 175 (5th Cir. 1985)). Regardless of the capacity Plaintiff seeks to hold Defendants liable, however, there is no doubt that JPMorgan adequately represented Defendants' interest in the prior litigation, given its interest in pursuing foreclosure. See Southwest Airlines Co. v. Texas Int'l Airlines, Inc., 546 F.2d 84, 95 (5th Cir. 1977) (explaining that privity exists for the purposes of res judicata where non-party's interests were adequately represented by a party to the original suit).
Second, the final judgment in Plaintiff's previous action was rendered by this Court, which is a court of competent jurisdiction. Third, that judgment was on the merits. Specifically, Plaintiff's claims challenging JPMorgan's authority to foreclose pursuant to the Deed of Trust were dismissed with prejudice. Bond, 2012 WL 502705, at *2.
Finally, Plaintiff's action arises from the same nucleus of operative facts as her previous claim. Specifically, in Bond, she challenged the defendants' authority to foreclose based on JPMorgan's failure to produce a copy of the Note and Deed of Trust, allegedly in violation of the Texas Property Code, Commerce Code, and Finance Code. Id. Here, Plaintiff challenges JPMorgan's authority to foreclose from a different angle-by attacking the validity of the Assignment. There is no reason why she could not have raised this claim in her previous action.
Plaintiff argues that res judicata does not bar her claims here because the judgment in Bond was obtained through fraud. She has provided no explanation or factual support for this allegation. To the extent her argument is based on her claim that the Assignment was somehow fraudulent, this type of fraud-even if proven-does not suffice to escape the preclusive effect of res judicata. See In re Agard, 444 B.R. 231, 244 (Bankr. E.D.N.Y. 2011) (res judicata only avoided if judgment was obtained by extrinsic fraud, which "involves the parties' 'opportunity to have a full and fair hearing'") (citation omitted), abrogated in part on other grounds by Agard v. Select Portfolio Servicing, Inc., No. 8-10-77338(REG), 2012 WL 1043690 (E.D.N.Y. Mar. 28, 2012) (unpublished); see also Miller v. Meinhard-Commercial Corp., 462 F.2d 358, 361 (5th Cir. 1972) (citing United States v. Throckmorton, 98 U.S. 61, 68 (1878); Midessa Television Co. v. Motion Pictures for Television, Inc., 290 F.2d 203, 204 (5th Cir. 1961); Restatement (First) of Judgments §§ 62(b), 121(a), 121(b) (1942)).
Accordingly, because each of the four requirements of res judicata are met in this action, it is respectfully recommended that Plaintiff's claims are barred.
6. Plaintiff cannot assert a claim for injunctive relief against Defendants.
Finally, Defendants Odom and Bailey argue that Plaintiff has failed to state a claim for declaratory relief pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202. (D.E. 22, at 16).
The Declaratory Judgment Act provides federal courts broad discretion to grant or deny a declaratory judgment. See Torch, Inc. v. LeBlanc, 947 F.2d 193, 194 (5th Cir. 1991). However, as a matter of constitutional standing, a party asserting a claim for declaratory relief must establish the existence of an actual controversy. Bauer v. Texas, 341 F.3d 352, 357-58 (5th Cir. 2003) (citation omitted); Lawson v. Callahan, 111 F.3d 403, 405 (5th Cir. 1997). As part of the actual controversy requirement, a plaintiff must establish "'actual present harm or a significant possibility of future harm'" that was caused by the challenged action, and which is likely to be redressed if relief is granted. Bauer, 341 F.3d at 357-58 (quoting Peoples Rights Org. v. City of Columbus, 152 F.3d 522, 527 (6th Cir. 1998)); Lawson, 111 F.3d at 405 (quoting Valley Forge Christian College v. Americans United for Separation of Church & State, 454 U.S. 472 (1982)). In addition, parties must have adverse legal interests. Bauer, 341 F.3d at 358.
Here, Plaintiff has failed to show that there is any present harm or the possibility of future harm that was caused by the Assignment or that could be resolved by invalidating it. Granting her the relief she seeks would not allow her to avoid foreclosure, because the validity of the Assignment has no bearing on the validity of the Deed of Trust or the holder's authority to foreclose pursuant to it. Moreover, Plaintiff has failed to show that Defendants have any legal interest in Plaintiff's claim whatsoever. They do not seek to enforce the Assignment nor do they claim ownership of the Note or the Deed of Trust. To the extent Plaintiff attempts to impute JPMorgan's interest as a mortgagee to Defendants, these claims are barred by res judicata. Accordingly, it is respectfully recommended that Plaintiff is not entitled to declaratory relief.
IV. RECOMMENDATION
For the foregoing reasons, it is respectfully recommended that Defendants' motions to dismiss, (D.E. 22; D.E. 24), be granted, and that Plaintiff's claims be dismissed with prejudice.
ORDERED this 22nd day of March 2013.
/s/_________
BRIAN L. OWSLEY
UNITED STATES MAGISTRATE JUDGE
NOTICE TO PARTIES
The Clerk will file this Memorandum and Recommendation and transmit a copy to each party or counsel. Within FOURTEEN (14) DAYS after being served with a copy of the Memorandum and Recommendation, a party may file with the Clerk and serve on the United States Magistrate Judge and all parties, written objections, pursuant to 28 U.S.C. § 636(b)(1); Rule 72(b) of the Federal Rules of Civil Procedure; and Article IV, General Order No. 2002-13, United States District Court for the Southern District of Texas.
A party's failure to file written objections to the proposed findings, conclusions, and recommendation in a magistrate judge's report and recommendation within FOURTEEN (14) DAYS after being served with a copy shall bar that party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the district court. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415 (5th Cir. 1996) (en banc).