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Smith v. U.S. Bank National Association

United States District Court, N.D. Ohio, Eastern Division

March 27, 2018

RONALD J. SMITH, et al., Plaintiffs,
v.
U.S. BANK NATIONAL A SSOCIATION, et al., Defendants.

          MEMORANDUM OF OPINION AND ORDER [RESOLVING ECF NOS. 17, 24, AND 32]

          Benita Y. Pearson United States District Judge.

         Pending are Defendants' Motion to Dismiss (ECF No. 17) pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6); Plaintiffs' Request for Leave to Amend their Complaint (ECF No. 24); and Plaintiffs' Request for Judicial Notice (ECF No. 32). For the reasons set forth below, the Court grants Defendants' Motion to Dismiss (ECF No. 17) and Plaintiffs' Request for Judicial Notice (ECF No. 32) of certain documents. Plaintiffs' Request for Leave to Amend (ECF No. 24) is granted in part.

         I. Background

         Plaintiffs Ronald J. Smith and Nancy L. Smith filed suit against Defendant U.S. Bank National Association (“U.S. Bank”), as Trustee for Certificate Holders of Bear Stearns Asset-Backed Securities I LLC Asset-Backed Certificate Series 2004-HE5, and Defendant Select Portfolio Servicing, Inc. (“SPS”), as Loan Servicer, (collectively “Defendants”), seeking civil penalties, a permanent injunction, restitution, disgorgement, and other equitable relief. ECF No. 1. Plaintiffs contend that Defendants failed to provide financial services and debt collection practices in a manner consistent with their legal obligations under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C §§ 16811681x; the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1692 1692p; and the Federal Trade Commission Act (“FTC”), 15 U.S.C. § 44. Id. at PageID#: 1. A brief history of the on-going mortgage dispute is provided below.

         A. The Mortgage

         In January 2004, Plaintiffs had several discussions with a representative from Plaintiffs' original mortgagee, Motion Financial, concerning a possible refinancing of the mortgage on their home. ECF No. 1 at PageID#: 3, ¶ 11. Plaintiffs sought to “either refinance the balance of the loan, or, in the alternative, to extract equity from their [home], for the purpose of paying credit cards and other personal loans due to a deteriorating income stream as compared to their income stream for the prior year, and additionally to be able to fund the March 1, 2004 mortgage payment.” Id. at ¶ 12. On March 5, 2004, Plaintiffs entered into a mortgage loan agreement with Motion Financial and Encore Credit Corp (“Encore”), who was a subsequent Loan Servicer. Id. at PageID#: 4, ¶ 20. Plaintiffs executed a Note in the amount of $528, 500.00 in favor of Encore for their home, and the Note was secured by a Mortgage encumbering their home. Id. at PageID#: 3, ¶¶ 9 10.

         Plaintiffs allege that after the loan refinance was executed, the loan “was sold to a securities firm” immediately after the closing and, “ended up as collateral for Bear Stearns Asset-Backed Securities LLC Asset-Backed Certificates Series 2004-HE5, a securitized Trust.” Id. at PageID#: 4, ¶ 21. On May 10, 2005, the Mortgage was assigned to LaSalle Bank National Association (“LaSalle”), as Trustee for certificateholders of Bear Stearns Asset Backed Securities I LLC Asset-Backed Certificates Series 2004-HE5. ECF Nos. 1 at PageID#: 4, ¶ 22; 17 1 at PageID#: 96.

         B. The State-Court Foreclosure Action

         Plaintiffs defaulted on the loan, and on October 18, 2005, LaSalle filed a foreclosure action against Plaintiffs and others in the Court of Common Pleas for Mahoning County, Ohio, identified as Case No. 2005-CV-3869. ECF No. 1 at PageID#: 5, ¶ 28. After an evidentiary hearing, the state court granted LaSalle's motion for summary and default judgment, and entered judgment against Plaintiffs on January 12, 2007. Id. at ¶ 32. The state court noted in its Order that “Plaintiffs' property ‘shall be foreclosed and . . . an order of sale may be issued to the Mahoning County Sheriff, directing him to appraise, advertise in a paper of general circulation within the County and sell said premises as upon execution and according to law free and clear of the interest of all parties to this action.'” Id. A series of foreclosure sales were scheduled, but were withdrawn for various reasons, including a bankruptcy filing. Id. at PageID#: 6, ¶¶ 33 42.

         C. The District-Court Action and Subsequent State-Court Actions

         On June 17, 2008, Plaintiffs filed a complaint in the Northern District of Ohio against Encore, Bear Stearns Residential Mortgage Corporation, Option One Mortgage, Motion Financial, and Ellyn Klein Grober, alleging several claims, including violations of the FCRA. ECF Nos. 1 at PageID#: 7, ¶ 44; 17 3. On December 9, 2008, the district court dismissed the federal claims, none of which alleged a FDCPA violation, with prejudice for failure to state a claim. ECF No. 17 4. On May 1, 2009, Plaintiffs filed a state court action against LaSalle, Encore, Bear Stearns Residential Mortgage Corporation, Option One Mortgage, Motion Financial, Ellyn Klein Grober, Bank of America, and JPMorgan Chase. ECF No. 17 at PageID#: 84. On May 31, 2011, the 2009 state court action was dismissed for failure to state a claim. Id. From 2011 to present, Plaintiffs have filed several motions in state court to vacate the foreclosure judgment but, to no avail. Id. at PageID#: 84 85.

         D. Present District-Court Action

         On June 2, 2017, Plaintiffs filed this action asserting several federal claims against Defendant U.S. Bank (who alleges to be the successor-in-interest to LaSalle) and Defendant SPS, as loan servicer, for failure to provide financial services and debt collection services in a manner consistent with their legal obligations under: (1) the FCRA, 15 U.S.C. §§ 16811681x; (2) the FDCPA, 15 U.S.C. §§ 1692 1692p; and (3) the FTC Act, 15 U.S.C. § 44. ECF No. 1. Plaintiffs' claims are premised upon several alleged actions by Defendants to collect Plaintiffs' debt, that is, when: (1) Defendant SPS included three new charges in their validation of debt letter: (a) interest of $73, 955.17; (b) escrow advance of $93, 938.24; and (c) corporate advances of $5, 083.15, thereby, increasing the amount of debt owed, without any explanation; and, (2) Defendant U.S. Bank falsely misrepresented that it is the real party in interest of Plaintiffs' mortgage upon initiating state foreclosure filings against Plaintiffs. Id. Defendants move to dismiss Plaintiffs' entire complaint. ECF No. 17. In response, Plaintiffs have agreed to the dismissal of Count I, which alleges Defendants' violation of the Fair Credit Reporting Act (“FCRA”); Count III, which alleges Defendants' violation of the FTC; and their allegation in paragraph 95, under Count II of the Complaint, relating to an alleged violation of § 1692e(8) of the FDCPA.[1] ECF No. 24. Defendants replied. ECF No. 25.

         II. Standards of Review

         A. Motion to Dismiss

         Federal Rule of Civil Procedure 12(b)(1) allows dismissal for “lack of jurisdiction over the subject matter” of claims asserted in the complaint. Fed.R.Civ.P. 12(b)(1). A motion to dismiss for lack of subject-matter jurisdiction may involve either facial attacks or factual attacks upon a court's jurisdiction. United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). “A facial attack on the subject-matter jurisdiction alleged in the complaint questions merely the sufficiency of the pleading.” Gentek Bldg. Prods., Inc. v. Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007). When resolving a facial attack, the reviewing court assumes the allegations within the complaint are true. Id.“Where, on the other hand, there is a factual attack on the subject-matter jurisdiction alleged in the complaint, no presumptive truthfulness applies to the allegations.” Id. When reviewing a factual attack, the court must weigh the conflicting evidence to determine whether subject-matter jurisdiction exists. Howard v. Whitbeck, 382 F.3d 633, 636 (6th Cir. 2004). Plaintiffs bear the burden of establishing that jurisdiction exists. Madison Hughes v. Shalala, 80 F.3d 1121, 1130 (6th Cir. 1996). Lack of subject-matter jurisdiction is a non-waivable, fatal defect. Von Dunser v. Aronoff, 915 F.2d 1071, 1074 (6th Cir. 1990).

         To survive a Fed. R. Civ. P.12(b)(6) motion to dismiss, a plaintiff's complaint must allege enough facts to “raise a right to relief above the speculative level.” Ass'n of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 548 (6th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Fed.R.Civ.P. 8(a)(2) requires only that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” However, “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.” Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). A complaint requires “further factual enhancement, ” which “state[s] a claim to relief that is plausible on its face.” Id. at 557, 570. A claim has facial plausibility when there is enough factual content present to allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). When a claim lacks “plausibility in th[e] complaint, ” that cause of action fails to state a claim upon which relief can be granted. Twombly, U.S. 550 at 564.

         B. Consideration of Matters Outside of the Pleadings

         Fed. R. Civ. P. 12(d) provides that if, on a motion pursuant to Rule 12(b)(6), matters outside the pleadings are considered, the motion must be treated as one for summary judgment under Rule 56. In ruling on a motion to dismiss, the Court may only consider documents attached to, incorporated by, or referred to in the pleadings. Whittiker v. Deutsche Bank Nat. Trust Co., 605 F.Supp.2d 914, 924 (N.D. Ohio 2009). Documents attached to a motion to dismiss are considered part of the pleadings if they are referred to in the complaint and are central to the claims, and therefore may be considered without converting a Rule 12(b)(6) motion to dismiss to a Rule 56 motion. Id ...


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