KEVIN McNULTY, District Judge.
This action arises from a state court mortgage foreclosure action which went to final judgment on July 31, 2017. Starr Barrett, as mortgagor/borrower, brings this action against Washington Mutual Bank, FA ("WaMu"), whose successor is JPMorgan Chase Bank, N.A. ("Chase"); Fannie Mae; Fannie Mae as Trustee for Securitized Trust Fannie Mae Guaranteed REMIC Pass-Through Certificates REMIC 2003-128 Trust; and Wells Fargo Home Mortgage. Defendants move under Fed. R. Civ. P. 12(b)(1) to dismiss the complaint on jurisdictional grounds, and under Rule 12(b)(6) to dismiss it for failure to state a claim. (ECF nos. 19, 20) For the reasons stated below, the motion will be granted and the complaint will be dismissed without prejudice.
On November 10, 2003, Washington Mutual Bank, FA ("WaMu") made a residential loan to the plaintiff, Ms. Barrett. The note is secured by a mortgage on the property, 1472A Liberty Avenue, Hillside, New Jersey. On September 25, 2008, JPMorgan Chase Bank, N.A. ("Chase") purchased certain assets of WaMu from the Federal Deposit Insurance Corporation ("FDIC") as receiver. The mortgage was assigned to Chase. (Declaration of Richard P. Haber ("Haber Decl."), ECF no. 20-2, ¶ 3) Barrett entered into a loan modification agreement with Chase on November 5, 2011. (Id. ¶ 4) Although the complaint alleges that the loan was sold to Fannie Mae and securitized, Morgan remains the mortgage of record. (Id. ¶ 3) Barrett defaulted under the note and mortgage by failing to make the payment due on September 1, 2016. (Id. ¶¶ 5, 7)
On February 22, 2017, Chase filed a complaint in foreclosure in the Superior Court of New Jersey, Chancery Division, Union County. (Docket No. F-4449-17) (Haber Decl. ¶ 5 & Ex. D) The Superior Court entered a final judgment of foreclosure on July 31, 2017. (Id. ¶ 6 & Ex. E)
On October 6, 2017, Barrett filed this action in federal court. The Complaint ("Cplt.", ECF no. 1) asserts nine causes of action:
A separate motion to dismiss was filed on behalf of defendant Wells Fargo. (ECF no. 19) A motion to dismiss was also filed on behalf of all remaining defendants (including Chase as successor to WaMu). (ECF no. 20) ("Defendants," as used herein, will refer to those remaining defendants.)
Defendants have moved to dismiss the Complaint for lack of jurisdiction, citing the Rooker-Feldman doctrine (see infra). 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 and Wells Fargo 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, defendants have attached records of the state court foreclosure proceeding. These are cited, not for the facts contained therein, but only in order to establish the nature and scope of prior proceedings between the parties, and the rulings of the state court. 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.
Defendants have also attached the underlying mortgage documents. Such documents, as well as the records of the foreclosure action, may be considered without converting a facial Rule 12(b)(1) challenge into a factual one, or a Rule 12(b)(6) motion into one for summary judgment. See Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014) ("However, an exception to the general rule is that a `document integral to or explicitly relied upon in the complaint' may be considered `without converting the motion to dismiss into one for summary judgment.'") (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)); Pension Ben. Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).
Where a complaint is based on particular documents, a defendant may submit and rely on such documents in its motion to dismiss. The reasons for the rule are (1) that the plaintiff, having relied on the document, cannot claim unfair surprise; and (2) the plaintiff cannot base a claim on a document while shielding the document itself from view:
Burlington, 114 F.3d at 1426 (on 12(b)(6) motion to dismiss securities fraud complaint alleging misstatements in annual report, court may examine the report itself).
The very substance of this complaint is based on the mortgage and note and the alleged illegality of the state foreclosure proceedings. The mortgage and note, and the publicly filed pleadings and rulings of the court in those foreclosure proceedings may therefore be considered.
Where the plaintiff 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).
Wells Fargo Home Mortgage is named in the caption of the Complaint. The body of the complaint contains no factual allegations against Wells Fargo, which is not so much as mentioned. In its brief, Wells Fargo states that it had nothing to do with this loan. That statement is confirmed by a review of the loan documents and the rulings in the state foreclosure proceedings.
Barrett's Response (ECF no. 25) offers nothing but a statement that Wells Fargo "is included in the suit because they may be a qualified securitized trust and must be searched for discovery of actual loan level detail." Even assuming that I may consider these statements in a brief,
Where there are no factual allegations against a defendant, it is possible to quibble over whether dismissal would be more appropriate for lack of jurisdiction or for failure to state a claim. Either way, the complaint is dismissed as against Wells Fargo.
Defendant move, pursuant to Fed. R. Civ. P. 12(b)(1), to dismiss the complaint for lack of jurisdiction under the Rooker-Feldman doctrine.
A federal district court does not sit to hear appeals from state court judgments. Thus Rooker-Feldman holds that lower federal courts cannot entertain federal claims that (1) where 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).
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).
A final judgment of foreclosure was entered in New Jersey Superior Court on July 31, 2017. That state court judgment preceded the filing of this action on October 6, 2017.
The question now is whether the claims in this federal court action are "inextricably intertwined" with that state foreclosure proceeding. The state foreclosure action and judgment necessarily involved the following essential elements: the validity of the note and mortgage; the alleged default; and the plaintiff's right to foreclose (which would include plaintiff's standing by assignment or otherwise). See Great Falls Bank v. Pardo, 263 N.J.Super. 388, 394, 622 A.2d 1353, 1356 (Ch. Div. 1993). "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. As to federal actions following mortgage foreclosures, the case law gives some guidance.
In re Madera, 586 F.3d 228, 232 (3d Cir. 2009), for example, considered a post-foreclosure federal claim for rescission of the mortgage. A finding that no valid mortgage existed, the Court held, would eliminate the basis for the prior foreclosure judgment. Such a claim is an easy case for application of Rooker-Feldman. A federal claim that the state foreclosure court entered its judgment in the absence of personal jurisdiction is likewise barred by Rooker-Feldman. Because such a plaintiff "can only prevail if a federal court concludes that the state courts' default judgments were improperly obtained," his claim is inextricably intertwined with the state proceedings. In re Knapper, 407 F.3d 573, 581 (3d Cir. 2005). See also Ayres-Fountain v. E. Sav. Bank, 153 F. App'x 91, 92 (3d Cir. 2005) (barring post-foreclosure federal claim for rescission of mortgage and damages); Moncrief v. Chase Manhattan Mortgage Corp., 275 F. App'x 149, 153 (3d Cir. 2008) (barring a claim for "redress" of state court judgment in a foreclosure action).
Under these precedents, Barrett's causes of action are barred. (See list of counts, p. 2, supra.) They share a central feature: all seek a declaration, or rely on the premise, that the mortgage and foreclosure judgment were invalid. They implicate the validity of the mortgage, the procedures leading to the foreclosure, and the foreclosure proceeding itself. They require a finding that Chase was not the true holder of the secured interest in question, and was not entitled to pursue the foreclosure. In short, this complaint is fatally intertwined with the forfeiture judgment. It is dismissed for lack of jurisdiction.
On the chance that some claims may pass the jurisdictional bar, I briefly consider res judicata as alternative grounds for dismissal.
Claims that survive scrutiny under Rooker-Feldman may nevertheless be barred by doctrines of res judicata.
Whether a state court judgment should have a preclusive effect 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) ("Congress has specifically required all federal courts to give preclusive effect to state-court judgments whenever the courts of the State from which the judgments emerged would do so."). Here, that State is New Jersey.
New Jersey claim preclusion law, like federal law, has three essential elements: (1) a final judgment on the merits; (2) the prior suit involved the same parties or their privies; and (3) the subsequent suit is based on the same transaction or occurrence. Watkins v. Resorts Int'l Hotel and Casino, Inc., 124 N.J. 398, 412, 591 A.2d 592, 599 (1991) (state law); United States v. Athlone Indus., Inc., 746 F.2d 977, 983 (3d Cir. 1984) (federal law). If those three requirements are met, then the doctrine bars "the parties or their privies from relitigating issues that were or could have been raised in that action." Allen, 449 U.S. at 94, 101 S. Ct. at 414; Watkins, 124 N.J. at 412, 591 A.2d at 599 ("Claim preclusion applies not only to matters actually determined in an earlier action, but to all relevant matters that could have been so determined.")
Claim preclusion in the traditional sense tends to be subsumed by New Jersey's "entire controversy" rule. The entire controversy rule emphasizes, not just claims within the scope of the prior judgment, but all claims and parties that a party could have joined in a prior case based on the same transaction or occurrence. The entire controversy doctrine thus "requires a party to bring in one action `all affirmative claims that [it] might have against another party, including counterclaim and cross-claims,' and to join in that action `all parties with a material interest in the controversy,' or be foreover 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, 662 A.2d 509, 513 (1995)).
Ricketti v. Barry, 775 F.3d 611, 613 (3d Cir. 2014).
Like traditional res judicata, the state 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 have been joined, but was not raised in the prior state action:
Paramount Aviation Corp. v. Agusta, 178 F.3d 132, 137 (3d Cir. 1999).
The preclusive effect of the rule is 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. But the rule applies only to claims that could have been permissible joined in the prior proceeding. And the entire controversy rule itself notes the limitations on claims in a foreclosure proceeding: ". . . except as otherwise provided by R. 4:64-5 (foreclosure actions). . . ." Id.
The upshot is that only claims germane to the prior mortgage foreclosure will be precluded in a later action. The cited rule, N.J. Ct. R. 4:64-5, limits permissible claims in mortgage foreclosure actions to those which are "germane" to the foreclosure.
As to what claims are "germane," the seminal case is Leisure Technology-Northeast v. Klingbeil Holding Co., 137 N.J.Super. 353, 349 A.2d 96 (App. Div. 1975). "The use of the word `germane' in the language of the rule," said the Appellate Division, "undoubtedly was intended to limit counterclaim in foreclosure actions to claim arising out of the mortgage transaction which is the subject matter of the foreclosure action." 349 A.2d at 98-99 (emphasis added). There, the foreclosure defendant/borrower had pled an affirmative defense and counterclaim. The Appellate Division held that "the thrust of the counterclaim is the assertion that plaintiff had breached the underlying agreement in relation to which the mortgage was executed and interfered with defendants' rights under that agreement. In the usually understood sense of the word, these claims were germane to the foreclosure action." 349 A.2d at 99.
Post-Leisure Technology, the germaneness rule has solidified thus:
Zebrowski v. Wells Fargo Bank, N.A., No. CIV. 1:07CV05236JHR, 2010 WL 2595237, at *6 (D.N.J. June 21, 2010) (Rodriguez, J.); see also Joan Ryno, Inc. v. First Nat. Bank of S. Jersey, 208 N.J.Super. 562, 570, 506 A.2d 762, 766 (App. Div. 1986).
A Third Circuit case persuasively penned by Judge Fuentes (himself a product of the New Jersey bench and bar) illustrates the "germaneness" issue as it bears on the entire controversy doctrine. In Coleman v. Chase Home Fin., LLC ex rel. Chase Manhattan Mortgage Corp., 446 F. App'x 469 (3d Cir. 2011), a foreclosure action went to final judgment. After bankruptcy-related delays that staved off a sheriff's sale, the borrower/owner paid a reinstatement fee and obtained a dismissal of the foreclosure. The borrower then brought a putative class action in federal court, claiming that the lender had charged excessive fees in connection with reinstatement.
Judge Fuentes found that the borrower's claims could have been brought in the foreclosure under New Jersey practice:
446 F. App'x at 472. Because the claims would have been "germane" in the sense that they arose from the relevant mortgage transaction, they were now barred by the entire controversy doctrine. See also Dennis v. MERS/Merscorp Mortgage Elec. Registration Sys., Inc., No. CIV.A. 11-4821 JLL, 2011 WL 4905711, at *1 (D.N.J. Oct. 13, 2011) (barring claims by plaintiff who had defaulted in state foreclosure action that "as a result of defective assignments of her mortgage, all claims to the property are void").
The entire controversy rule applies here. The state court mortgage foreclosure was "a previous state-court action involving the same transaction," i.e., the mortgage, the default, and the foreclosure itself. Bennun, 941 F.2d at 163 (3d Cir. 1991). The subject matter of that prior action necessarily embraced the claims and parties in this federal action. The parties were the same or in privity. Thus, Count 1 claims that the mortgagee did not properly possess standing to foreclose. Count 2 claims that the mortgage was not valid because WaMu concealed the fact that it was not a federal reserve depository bank. Count 3 alleges fraud, again with the object of demonstrating that WaMu did not possess the kind of secured interest that would permit it to foreclose. Count 4 alleges unconscionable conduct in connection with the origination of the mortgage. Counts 5 and 6 allege breach of contract and breach of fiduciary duty, again with the object of demonstrating that WaMu did not have the kind of secured interest that would permit it to foreclose. Count 7 seeks to "quiet title," and Counts 8 and 9 seek injunctive and declaratory relief, based on the same allegations. Barrett points to no reason why she could not have joined all of her federal-court claims and parties in the state action.
In the alternative, the three prerequisites to claim preclusion apply here.
(1) There was a final judgment on the merits. A final judgment of foreclosure was entered in New Jersey Superior Court on July 31, 2017, in the amount of $102,526.48, and a sheriff's sale was ordered.
(2) The prior suit involved the same parties or their privies.
(3) The subsequent suit (i.e., this one) is based on the same transaction or occurrence. It grows out, and is based on, the mortgage and the mortgage foreclosure. Watkins, 124 N.J. at 412, 591 A.2d at 599.
It follows, then, that claim preclusion and the entire controversy doctrine extinguish any subsequent federal-court claim that either was decided, or else could have been joined but was not raised in the prior foreclosure action. As to any claims that survive Rooker-Feldman, 12(b)(6) motion to dismiss on grounds of res judicata and the entire controversy rule is granted.
Defendant Wells Fargo's motion to dismiss the complaint (ECF no. 19) is GRANTED. The remaining defendants' motion to dismiss the complaint (ECF no. 20) pursuant to Fed. R. Civ. P. 12(b)(1), for lack of jurisdiction under the Rocker-Feldman doctrine is GRANTED. To the extent that this court might have jurisdiction of any claims or parts of claims, they are nevertheless dismissed pursuant to Fed. R. Civ. P. 12(b)(6) on grounds of res judicata and the entire controversy rule.
Patetta v. Wells Fargo Bank, NA, Civ. No. 09-2848, 2010 WL 1931256, at *7 (D.N.J. May 13, 2010) (Wolfson, J.).
This Circuit has adopted that stepwise approach. Madera, for example, after applying Rooker-Feldman to bar a claim for rescission, then considered a cause of action for damages based on the title insurer's alleged failure to disclose the correct title insurance charge, in violation of the Truth in Lending Act ("TILA"). As to that claim, Madera did not apply Rooker-Feldman, but proceeded to the merits of the bankruptcy court's grant of summary judgment. 586 F.3d at 232. In Easley v. New Century Mortgage Corp., 394 F. App'x 946 (3d Cir. 2010), the Court upheld the application of Rooker-Feldman to claims that, if granted, would imply that the foreclosure judgment was invalid. Other claims, however, were not decided by the state court and were based on "allegations of fraud, deception and other wrongs which pre-dated the foreclosure action," as to which plaintiff sought consequential damages. Id. at 948. These were not so clearly intertwined with the foreclosure judgment as to be barred by Rooker-Feldman. (Easley held, however, that the claims not barred by Rooker-Feldman were barred by res judicata.)
Claims that could not have been brought in the first proceeding also include those that were "unknown, unarisen, or unaccurred" at the time. Mystic Isle Dev. Corp. v. Perskie & Nehmad, 142 N.J. 310, 662 A.2d 523, 530 (1995) (citations omitted). Those exceptions are not implicated here.
The entire controversy rule applies to parties, as well as claims, that were not joined in the prior action. That aspect of the rule, too, is not relevant here. See Ricketti, supra (requiring particular safeguards as to absent parties).
