KEVIN McNULTY, District Judge.
Jose Rodriguez brings this action in connection with a mortgage on his property in Kearny, New Jersey. Now before the court are motions under Federal Rule of Civil Procedure 12(b)(1) to dismiss the complaint for lack of jurisdiction, and under Federal Rule of Civil Procedure 12(b)(6) to dismiss the complaint for failure to state a claim upon which relief may be granted. Those three motions are brought by defendants General Electric Company ("GE") and WMC Mortgage Corp. ("WMC") (ECF no. 5); HSBC Bank USA National Association as Trustee ("HSBC"), U.S. Bank N.A. ("U.S. Bank"), and Wells Fargo Bank, N.A. ("Wells Fargo") (ECF no. 21); and Mortgage Electronic Registration Systems, Inc. ("MERS") (ECF no. 24). For the reasons stated herein, the motions to dismiss will be granted.
On October 22, 2013, Mr. Rodrigues filed a civil complaint, later amended, in Superior Court, Chancery Division, Hudson County. The three named defendants were Wells Fargo Bank, N.A. (Wells Fargo), U.S. Bank National Association as Trustee for WFMBS 2007-007 (U.S. Bank), and HSBC Bank USA, National Association as Trustee for Wells Fargo Asset Securities Corporation, Mortgage Pass-Through Certificates, Series 2007-7 ("HSBC"). Rodrigues v. Wells Fargo Bank, N.A., et al., Docket No. C 000144-13 (the "State Action").
On December 8, 2014, the defendants in the State Action filed a motion for summary judgment. (ECF no. 21-4) On January 9, 2015, Hector R. Velazquez, P.J. Ch., entered an order granting the defendants' motion for summary judgment and dismissing the amended complaint with prejudice. (ECF no. 21-5)
Rodrigues appealed. (ECF no. 21-6) The New Jersey Superior Court, Appellate Division, affirmed. Rodrigues v. Wells Fargo Bank, N.A., No. A-2373-14T4, 2016 WL 2759358 (N.J. Super. Ct. App. Div. May 13, 2016) (copy at ECF no. 21-3). I quote at length the Appellate Division's opinion, which summarizes the facts established on summary judgment, the claims asserted by the plaintiff, and the basis for the judgment it was upholding:
Id. at *1-*2.
The Appellate Division affirmed the judgment of the Chancery Division. The New Jersey Supreme Court denied certification. 2016 WL 6305413 (N.J. Oct. 7, 2016).
The Complaint in the above-captioned action (the "Federal Action") was filed on June 27, 2016. (ECF no. 1) That filing date was approximately two years and five months after the Chancery Division granted summary judgment in the State Action, and approximately two and one half months after the Appellate Division affirmed the Chancery Division's judgment.
The Complaint in this Federal Action is brought against Wells Fargo Bank, N.A. ("Wells Fargo"); U.S. Bank N.A. ("U.S. Bank"); HSBC Bank USA National Association as Trustee ("HSBC"); Mortgage Electronic Registration Systems, Inc. ("MERS"); WMC Mortgage Corp. ("WMC"); and General Electric Company ("GE"). In that federal roster, the first three defendants — Wells Fargo, U.S. Bank, and HSBC — seem to duplicate the three defendants in the State Action.
The Complaint in the Federal Action alleges that the plaintiff "is informed and believes" that the defendants have no legal rights with respect to the mortgage in question. (Cplt. ¶¶ 1-5) Rodrigues alleges that he is the owner of property at 289 Highland Avenue, Kearny, New Jersey. (Cplt. ¶ 6) On October 28, 2005, he obtained a purchase money mortgage in the amount of $332,640 from WMC Mortgage Corp. (Cplt. ¶ 7) He "believed" that on March 28, 2007, he refinanced the loan in the amount of $438, 400. The "alleged" refinance lender was Wells Fargo. (Cplt. ¶ 8) The Complaint alleges thirteen counts, or causes of action.
Counts 1, 2, and 3 arise under the Truth in Lending Act ("TILA"), 15 U.S.C. § 1635. Count 1 alleges that Rodrigues sent a notice of rescission, as authorized by Jesinoski v. Countrywide Home Loans, Inc., ___ U.S. ___, 135 S.Ct. 790, 792 (2015), to which Wells Fargo, U.S. Bank, and HSBC did not respond. The notice, date-stamped May 24, 2016, is attached to the Complaint. (ECF no. 1-3) Count 2 alleges that "pretend lenders" were involved. Count 3 alleges that the "actual funder of the loan" was not disclosed as required. Count 9 cites 12 C.F.R. § 226.23(1) & (3) and invokes the right of rescission, as well as cases finding that no loan transaction was "consummated."
Counts 5 and 6 arise under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. Count 4 alleges that there were false and misleading representations because the legal status of the debt is in doubt. Count 5 alleges that the nature of the "unauthorized agreement" creating the debt was not disclosed. Count 6 alleges that the name of the creditor to whom the debt is allegedly owed is unknown.
Count 11 cites the legal elements of a claim under the New Jersey Consumer Fraud Act, N.J. Stat. Ann. § 56:8-1 et seq. Count 13 cites 15 U.S.C. § 1640 as the basis for a claim for damages. Neither Count contains additional factual allegations.
Counts 7 and 8 cite definitional sections, 15 U.S.C. §§ 1602(g)(2) ("creditor") and (h) ("credit sale"). Count 8 also recites that TILA applies to consumer credit transactions.
The two remaining claims, Counts 10 and 12, cite criminal statutes that do not provide for a private cause of action. Count 12 cites 15 U.S.C. § 1611, a statute imposing criminal liability for certain knowing and willful violations of Title 15, ch. 41, subch. I. Count 10 cites N.J. Stat. Ann. § 2C:28-7a(2)(1) & (2), a State criminal statute relating to tampering with public records. The facts alleged under Count 10 relate primarily to MERS. MERS is alleged to be the nominee for the beneficial owner of the original 2005 mortgage and is named as the entity that released it in connection with the refinancing in 2007. (Cplt. ¶¶ 27-29) The upshot of the allegations seems to be a claim that MERS, as a nominee, has no legal status with respect to the mortgage. This count also seems to allege that there is no proof that the original 2005 mortgage was ever funded, or alternatively that MERS lacked the capacity to validly release it in connection with the refinancing.
Defendants have moved, in part, to dismiss the Complaint for lack of jurisdiction, citing the Rooker-Feldman doctrine. Rule 12(b)(1) governs jurisdictional challenges to a complaint. These may be either facial or factual attacks. See 2 Moore's Federal Practice § 12.30[4] (3d ed. 2007); Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). A facial challenge asserts that the complaint does not allege sufficient grounds to establish subject matter jurisdiction. Iwanowa v. Ford Motor Co., 67 F.Supp.2d 424, 438 (D.N.J. 1999). A court considering such a facial challenge assumes that the allegations in the complaint are true, and may dismiss the complaint only if it nevertheless appears that the plaintiff will not be able to assert a colorable claim of subject matter jurisdiction. Cardio-Med. Assoc., Ltd. v. Crozer-Chester Med. Ctr., 721 F.2d 68, 75 (3d Cir. 1983); Iwanowa, 67 F. Supp. 2d at 438.
Defendants have also moved to dismiss the Complaint for failure to state a claim, pursuant to Fed. R. Civ. P. 12(b)(6). Rule 12(b)(6) provides for the dismissal of a complaint, in whole or in part, if it fails to state a claim upon which relief can be granted. The defendant, as the moving party, bears the burden of showing that no claim has been stated. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a Rule 12(b)(6) motion, a court must take the allegations of the complaint as true and draw reasonable inferences in the light most favorable to the plaintiff. Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (traditional "reasonable inferences" principle not undermined by Twombly, see infra).
Federal Rule of Civil Procedure 8(a) does not require that a complaint contain detailed factual allegations. Nevertheless, "a plaintiff's obligation to provide the `grounds' of his `entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the complaint's factual allegations must be sufficient to raise a plaintiff's right to relief above a speculative level, so that a claim is "plausible on its face." Id. at 570; see also Umland v. PLANCO Fin. Serv., Inc., 542 F.3d 59, 64 (3d Cir. 2008). That facial-plausibility standard is met "when the plaintiff pleads factual content that allows 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) (citing Twombly, 550 U.S. at 556). While "[t]he plausibility standard is not akin to a `probability requirement' . . . it asks for more than a sheer possibility." Iqbal, 556 U.S. at 678.
In connection with the motions, the defendants proffer materials extrinsic to the complaint. These consist of papers filed in the State Action and decisions of the State courts. These are cited to establish the nature and scope of prior proceedings between the parties, and the rulings of the state courts. Such records are subject to judicial notice. S. Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Grp. Ltd., 181 F.3d 410, 426-27 (3d Cir. 1999). See generally Fed. R. Evid. 201.
Where the plaintiff, like Mr. Rodrigues here, is proceeding pro se, the complaint is "to be liberally construed," and, "however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers." Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). Nevertheless, "pro se litigants still must allege sufficient facts in their complaints to support a claim." Mala v. Crown Bay Marina, Inc., 704 F.3d 239, 245 (3d Cir. 2013). "While a litigant's pro se status requires a court to construe the allegations in the complaint liberally, a litigant is not absolved from complying with Twombly and the federal pleading requirements merely because s/he proceeds pro se." Thakar v. Tan, 372 F. App'x 325, 328 (3d Cir. 2010) (citation omitted).
The defendants move to dismiss the complaint under the Rooker-Feldman doctrine. Because that doctrine imposes a limitation on the subject matter jurisdiction of the Court, I consider this portion of the motion under Rule 12(b)(1). Defendants assert that the Chancery Division's award of summary judgment to defendants in the State Action deprives this Court of jurisdiction.
A federal district court does not sit to hear appeals from state court judgments. Rooker-Feldman thus operates to prevent a disgruntled party in state court litigation from collaterally attacking the results of that litigation in federal court, claiming constitutional or other error. See also B.S. v. Somerset County, 704 F.3d 250 (3d Cir. 2013). To put it another way, Rooker-Feldman bars "cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments." Exxon Mobil Corp. v. Saudi Basic Indus., Inc., 544 U.S. 280, 284 (2005).
Rooker-Feldman has four essential prerequisites:
Great Western Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 166 (3d Cir. 2010).
As to elements 1 and 3, there can be no doubt. Summary judgment was awarded on the merits to three of the defendants here by the New Jersey Superior Court. (ECF no. 21-5) That judgment was final as to liability, and it was adverse to Mr. Rodrigues, plaintiff here as he was there. His complaint was dismissed with prejudice. And that final State court judgment, rendered on January 9, 2015, well preceded the filing of this Federal Action on June 27, 2016 (ECF no.1).
That leaves interrelated elements 2 and 4: that the federal plaintiff complains of injuries caused by the state court judgment, and invites the federal court to reject it. As to the applicability of those elements, the case law provides some guidance. Under Rooker-Feldman, lower federal courts cannot entertain federal claims that (1) were previously adjudicated in state court or (2) are inextricably intertwined with a prior state court decision. See District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 416 (1923); Guarino v. Larsen, 11 F.3d 1151, 1156-57 (3d Cir. 1993); Port Auth. Police Benev. Ass'n v. Port Auth., 973 F.2d 169, 178 (3d Cir. 1992). The first alternative, actual adjudication, requires little explication. As for the second, a federal claim is "inextricably intertwined" with a prior state court decision if "granting the relief requested in the federal action requires determining that the state court's decision is wrong or would void the state court's ruling." FOCUS v. Allegheny County Court of Common Pleas., 75 F.3d 834, 839-40 (3d Cir. 1996). "If the relief requested in the federal action requires determining that the state court's decision is wrong or would void the state court's ruling, then the issues are inextricably intertwined and the district court has no subject matter jurisdiction to hear the suit." FOCUS, 75 F.3d at 840. Especially in the context of "inextricably intertwined" claims, the court must apply Rooker-Feldman with caution. The doctrine does not operate to preclude all claims that are related to the state court judgment; it applies only to claims that were the basis of, or injuries allegedly caused by, the state court judgment. See Cuevas v. Wells Fargo Bank, N.A., 643 F. App'x 124, 126 (3d Cir. 2016) (citing Great W. Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 166 (3d Cir. 2010)). To the extent that the federal action presents "some independent claim," i.e., one that does not implicate the validity of the state court judgment, the doctrine does not apply. Exxon Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280, 292, 125 S.Ct. 1517 (2005), quoted in Turner v. Crawford Square Apartments III, L.P., 449 F.3d 542, 547-48 (3d Cir. 2006)).
Here, the State Action challenged the validity and assignment of the mortgage, claimed that it violated federal HUD regulations and RESPA, and sought rescission. To some degree, then, it appears that Mr. Rodrigues may be asserting some of the same matters in this Federal Action. To the extent he is, this Court would lack jurisdiction.
It does not appear to me, however, that this Court lacks all jurisdiction. This Court could find in Mr. Rodrigues's favor on at least some of his federal court claims without disturbing the basis of the State Action. Satisfied that I possess subject matter jurisdiction, then, I proceed to consider the defendants' non-jurisdictional challenges to the complaint, such as res judicata or the statute of limitations.
Claims that survive scrutiny under Rooker-Feldman may nevertheless be barred by parallel doctrines of res judicata.
Res judicata, an affirmative defense, may raise issues of fact, but in a proper case may be cognizable on a motion to dismiss:
Rycoline Products, Inc. v. C & W Unlimited, 109 F.3d 883, 886 (3d Cir. 1997). Thus res judicata may be considered on a Rule 12(b)(6) motion, where, as here, the necessary facts are "apparent on the face of the face of the complaint" and other documents properly considered on a motion to dismiss.
The preclusive effect of a state court judgment in a subsequent federal action depends on the law of the state that adjudicated the original action. See Greenleaf v. Garlock, Inc., 174 F.3d 352, 357 (3d Cir. 1999) ("To determine the preclusive effect of [the plaintiff's] prior state action we must look to the law of the adjudicating state."). See also Allen v. McCurry, 449 U.S. 90, 96, 101 S.Ct. 411, 415 (1980). Under New Jersey law, claim preclusion in the traditional sense tends to be subsumed by the broader "entire controversy" rule. The entire controversy rule precludes, not just claims actually decided by a prior judgment, but all claims and parties that a party could and should have joined in a prior case based on the same transaction or occurrence.
As to claims, the entire controversy doctrine "requires a party to bring in one action `all affirmative claims that [it] might have against another party, including counterclaims and cross-claims,' . . . or be forever barred from bringing a subsequent action involving the same underlying facts." Rycoline Prods., Inc. v. C & W Unlimited, 109 F.3d 883, 885 (3d Cir. 1997) (quoting Circle Chevrolet Co. v. Giordano, Halleran & Ciesla, 142 N.J. 280, 289, 662 A.2d 509, 513 (1995)).
Ricketti v. Barry, 775 F.3d 611, 613 (3d Cir. 2014).
There is no requirement that the claim as to which preclusion is sought have been actually asserted in the prior action. Rather, the necessary relation between the prior action and the present one is a transactional one:
Wadeer v. New Jersey Mfrs. Ins. Co., 220 N.J. 591, 605, 110 A.3d 19, 27 (2015). So the entire controversy doctrine applies in federal court "when there was a previous state-court action involving the same transaction." Bennun v. Rutgers State Univ., 941 F.2d 154, 163 (3d Cir. 1991). It extinguishes any subsequent federal-court claim that could and should have been joined in the prior state action.
The entire controversy doctrine encompasses not just claims but parties. Although the party-joinder component of the doctrine evolved more slowly, it has long been clear that the rule encompasses mandatory joinder of parties. See Olds v. Donnelly, 150 N.J. 424, 433-34, 696 A.2d 633, 638 (1997) (citing joinder of all parties with a material interest in a litigation thus guarantees a complete determination of liability, avoids prejudice to absent parties, and prevents a duplication of lawsuits." Olds, 150 N.J. at 434, 696 A.2d at 638. Thus the party-joinder component of the entire controversy doctrine requires a plaintiff to join in the prior action "`all parties with a material interest in the controversy,' or be forever barred from bringing a subsequent action involving the same underlying facts." Rycoline Prods, 109 F.3d at 885 (quoting Circle Chevrolet, 142 N.J. at 289, 662 A.2d at 513 (1995)).
Since the adoption of Rule 4:30A in 1990, the preclusive effect of the entire controversy rule as to both claims and parties has been explicit: "Non-joinder of claims or parties required to be joined by the entire controversy doctrine shall result in the preclusion of the omitted claims to the extent required by the entire controversy doctrine. . . ." N.J. Ct. R. 4:30A (current ver.).
The entire controversy rule surely applies here. The State Action brought by Mr. Rodrigues was "a previous state-court action involving the same transaction," i.e., the mortgages, their validity, and the defendants' entitlement to enforce them. See Bennun, 941 F.2d at 163 (3d Cir. 1991).
The claims in this Federal Action, for the most part, were not explicitly pled in the State Action. They appear to arise under different statutes. I therefore consider whether these are claims that are nevertheless precluded because they are part of the same transaction sued upon in in the State Action. Clearly they are.
The State Action arose from the original mortgage loan in 2005, the refinancing in 2007, and the chain of assignments. See Section I.A, supra. There, Mr. Rodrigues alleged various forms of chicanery with regard to the chain of title, alleged that the mortgage was invalid under, inter alia, HUD regulations and the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617, and sought rescission of the mortgage. The claims in this Federal Action are closely related and parallel to those claims in the State Action. They seek the same relief, and cite many of the same considerations, although the statutory bases are distinct.
For the reasons stated in Section III.B. 1, immediately preceding, the entire controversy doctrine contains no requirement that the causes of action be legally identical. Indeed, quite the opposite. Because the factual circumstances and transactions giving rise to both actions are the same, the necessary connection is present. The current claims are precluded under the claims component of the entire controversy doctrine.
Three of the defendants in this Federal Action seem to be identical to the defendants in the State Action. Also named in this Federal Action are three additional defendants: MERS, WMC, and GE. Their alleged involvement, however, is tightly bound to the parties and transactions that are at issue in both the State and Federal actions. WMC was the original mortgagee on the 2005 mortgage. The Complaint alleges that WMC is now defunct, and that its parent corporation is GE. (Cplt. ¶ 5) MERS is alleged to be the nominee for the beneficial owner of the original 2005 mortgage and is named as the entity that released that mortgage in connection with the refinancing in 2007. (Cplt. ¶¶ 27-29) These parties are part and parcel of the mortgages and the mortgage transactions that Mr. Rodrigues challenged and attempted to invalidate in the State Action.
For all these reasons, then, the claims in this Federal Action, as against all six defendants, are barred by the entire controversy doctrine. The motion to dismiss on Rule 12(b)(6) grounds is therefore granted
The grounds discussed above are sufficient to dispose of the case. I nevertheless comment briefly on one other threshold bar to relief: the statute of limitations.
The TILA claims here are essentially claims for rescission. A request for rescission under TILA must be brought within three years.
The statute of limitations under the FDCPA is one year. 15 U.S.C. § 1692k(d) (claim may be brought "A claim under the FDCPA "may be brought . . . within one year from the date on which the violation occurs.""). The claim in the Complaint under 15 U.S.C. § 1640 is ill-defined, but the statute of limitations for such a claim would be 3 years at most. See 15 U.S.C. § 1640(e) (defining different limitations period depending on the nature of the claim). The Complaint asserts a claim under the New Jersey Consumer Fraud Act, and also contains scattered allegations of fraud. The statute of limitations for a fraud claim is six years. N.J. Stat. Ann. § 2A:14-1. That limitations period runs from when the fraudulent act or omission occurred, or could have been discovered through the exercise of reasonable diligence. See Southern Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Grp. Ltd., 181 F.3d 410, 425 (3d Cir. 1999) (New Jersey law).
Any cause of action under the FDCPA or for fraud in connection with the original mortgage or financing accrued at or about the time of closing in 2005 or 2007. This action was not filed until some nine years later, in 2016. Nor does the plaintiff articulate any basis for delayed accrual, or for tolling the statute of limitations (to the extent any of them are subject to tolling). The claims express doubt as to whether the loans were funded; if they had not been, that surely would have become immediately apparent. They also object to the identity of the parties involved; again, the holder of the mortgage and the party to whom the plaintiff was directed to send payments would have been apparent at the time. Vague and conclusory allegations of concealment of the "true" mortgagee, or that the funding of the loan has not been "proven," do not pass the plausibility standard of Twombly.
The remaining counts, which cite definitional sections or criminal statutes that do not contain a private cause of action, do not even meet the threshold of requiring a statute of limitations analysis.
If the Court were to reach the statute of limitations issue, then, dismissal on those grounds would be appropriate.
The defendants have asserted a number of alternative grounds for granting a Rule 12(b)(6) dismissal. I do not reach them.
Defendants' motions (ECF nos. 5, 21, 24) under Federal Rule of Civil Procedure 12(b)(1) to dismiss the complaint for lack of jurisdiction, and under Federal Rule of Civil Procedure 12(b)(6) to dismiss the complaint for failure to state a claim upon which relief may be granted, are granted. A separate Order accompanies this Opinion.
Paramount Aviation Corp. v. Agusta, 178 F.3d 132, 137 (3d Cir. 1999).
