699 F.3d 1027 (8th Cir. 2012), 12-1398, Murphy v. Aurora Loan Services, LLC

Docket Nº:12-1398.
Citation:699 F.3d 1027
Opinion Judge:GRUENDER, Circuit Judge.
Party Name:Kevin M. MURPHY and Kathleen K. Murphy, James L. Lang, Charlene Ann Brady, Erika R. Hogenson, Harold J. Thompson, III, Julianne Thompson, Miriam E. Stone, Jeffrey A. Kirschbaum, Tou A. Vang and May K. Vang, Plaintiffs-Appellants v. AURORA LOAN SERVICES, LLC, Aurora Bank FSB, Mortgage Electronic Registration Systems, Inc., Merscorp, Inc., and Wilfor
Attorney:James L. Gunn, Woodbury, MN, for appellants Kevin M. Murphy and Kathleen K. Murphy. William Bernard Butler, Minneapolis, MN, for appellants James L. Lang, Charlene Ann Brady, Erika R. Hogenson, Harold J. Thompson, III, Julianne Thompson, Mirriam E. Stone, Jeffrey A. Kirschbaum, Tou A. Tang, and M...
Judge Panel:Before RILEY, Chief Judge, ARNOLD and GRUENDER, Circuit Judges.
Case Date:November 08, 2012
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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699 F.3d 1027 (8th Cir. 2012)

Kevin M. MURPHY and Kathleen K. Murphy, James L. Lang, Charlene Ann Brady, Erika R. Hogenson, Harold J. Thompson, III, Julianne Thompson, Miriam E. Stone, Jeffrey A. Kirschbaum, Tou A. Vang and May K. Vang, Plaintiffs-Appellants

v.

AURORA LOAN SERVICES, LLC, Aurora Bank FSB, Mortgage Electronic Registration Systems, Inc., Merscorp, Inc., and Wilford & Geske, P.A., Defendants-Appellees.

No. 12-1398.

United States Court of Appeals, Eighth Circuit.

November 8, 2012

Submitted: Oct. 15, 2012.

As Corrected Nov. 28, 2012.

Rehearing and Rehearing En Banc Denied Dec. 19, 2012.[*]

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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James L. Gunn, Woodbury, MN, for appellants Kevin M. Murphy and Kathleen K. Murphy.

William Bernard Butler, Minneapolis, MN, for appellants James L. Lang, Charlene Ann Brady, Erika R. Hogenson, Harold J. Thompson, III, Julianne Thompson, Mirriam E. Stone, Jeffrey A. Kirschbaum, Tou A. Tang, and May K. Vang.

J. Matthew Goodin, Hugh S. Balsam, Julie C. Webb, Chicago, IL, for appellees Aurora Loan Services, LLC, Aurora Bank FSB, Mortgage Electronic Registration Systems, Inc., and MERSCORP, Inc.

Eric D. Cook, Michael R. Sauer, Woodbury, MN, for appellees Aurora Loan Services, LLC, Aurora Bank FSB, Mortgage Electronic Registration Systems, Inc., MERSCORP, Inc., and Wilford & Geske, P.A.

Before RILEY, Chief Judge, ARNOLD and GRUENDER, Circuit Judges.

GRUENDER, Circuit Judge.

The plaintiffs are all Minnesota homeowners (" Homeowners" ) who borrowed money for the purpose of purchasing a home. Each signed a promissory note, promising to repay the loan. As security for the promise they executed a mortgage on which Mortgage Electronic Registration Systems, Inc. (" MERS" ) 1 was the nominal mortgagee. The various lenders holding the Homeowners' promissory notes then pooled, securitized, and sold them in the secondary market. MERS subsequently assigned each mortgage to Aurora Loan Services, LLC and Aurora Bank FSB (collectively " Aurora" ). After the Homeowners defaulted on their repayment obligations, Aurora retained the legal services of Wilford & Geske, P.A. (" W & G" ) to aid them in foreclosing on the properties pursuant to Minnesota's foreclosure-by-advertisement statute. The Homeowners do not contest the validity of their initial mortgage agreements, nor do they contest their subsequent defaults. Rather, they allege that neither Aurora nor MERS is entitled to foreclose on the properties and that W & G knowingly made false representations regarding Aurora's authority to foreclose.

In their complaint initially filed in state court, the Homeowners set forth a host of reasons why Aurora and MERS lacked the authority to foreclose and, among other claims, brought suit to quiet title. After Aurora and MERS removed the action to federal court based on the allegedly fraudulent joinder of W & G, the district court denied the Homeowners' motion to remand and dismissed all of their claims with prejudice. The district court viewed the complaint as articulating nothing more than repackaged versions of the " show-me-the-note" theory, which argues the holder of legal title to a mortgage cannot foreclose if he is unable to produce the underlying promissory note. See Stein v. Chase Home Fin., LLC, 662 F.3d 976, 978-79 (8th Cir.2011). The Minnesota Supreme Court definitively rejected the viability of

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this theory in Jackson, as we recognized in Stein. See Stein, 662 F.3d at 979-80; Jackson, 770 N.W.2d at 500-01. On appeal, the Homeowners contest the district court's exercise of subject matter jurisdiction. They also insist their theories of recovery do not run afoul of Jackson because their challenges to the authority of Aurora and MERS to foreclose are not premised on a failure to produce their promissory notes. We affirm the district court's dismissal of W & G as fraudulently joined. We partially reverse as to the dismissal of the quiet-title cause of action, but we affirm the dismissal with prejudice of all of the Homeowners' remaining claims.

I.

Although nominally the Homeowners lack complete diversity with W & G, Aurora and MERS removed this suit to federal court based on the allegedly fraudulent joinder of W & G. A party has been fraudulently joined if there is " no reasonable basis in fact and law" for the claim...

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