Welk v. GMAC Mortg., LLC

• Decision Date: 15 July 2013
• Docket Number: No. 12–3141.,12–3141.
• Citation: 720 F.3d 736
• Parties: Heather L. WELK; Susie B. Jones; William Bigelow; Christine Heinzman; Mark Heinzman; Sigmond Singramdoo; Troy Forte; Lynn M. Forte; David J. Roster; Charity Roster; Patrick Rucci; Gary G. Klingner; Rebecca A. Albers; Ian Patterson; James Willis Konobeck, Jr.; Alison Konobeck; Amy B. Tibke; Dane A. Tibke; Tracy J. Miklas; Michelle L. Miklas, Plaintiffs–Appellants v. GMAC MORTGAGE, LLC, Defendant Ally Financial, Inc.; Mortgage Electronic Registration Systems, Inc.; MERSCORP, Inc.; U.S. Bank, N.A.; Deutsche Bank Trust Company Americas; Shapiro & Zielke, LLP; U.S. Bank National Association ND; Deutsche Bank National Trust Company; Bank of New York Mellon, f/k/a Bank of New York, Defendants–Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

720 F.3d 736

Heather L. WELK; Susie B. Jones; William Bigelow; Christine Heinzman; Mark Heinzman; Sigmond Singramdoo; Troy Forte; Lynn M. Forte; David J. Roster; Charity Roster; Patrick Rucci; Gary G. Klingner; Rebecca A. Albers; Ian Patterson; James Willis Konobeck, Jr.; Alison Konobeck; Amy B. Tibke; Dane A. Tibke; Tracy J. Miklas; Michelle L. Miklas, Plaintiffs–Appellants

v. GMAC MORTGAGE, LLC, DefendantAlly Financial, Inc.; Mortgage Electronic Registration Systems, Inc.; MERSCORP, Inc.; U.S. Bank, N.A.; Deutsche Bank Trust Company Americas; Shapiro & Zielke, LLP; U.S. Bank National Association ND; Deutsche Bank National Trust Company; Bank of New York Mellon, f/k/a Bank of New York, Defendants–Appellees.

No. 12–3141.

United States Court of Appeals, Eighth Circuit.

Submitted: June 17, 2013.

Filed: July 15, 2013.

William Bernard Butler on the brief, Minneapolis, MN, for appellant.

Fredrick S. Levin, of Detroit, MI, Charles F. Webber, of Minneapolis, MN, William P. Wassweiler, of Minneapolis, MN, Brian L. Vander Pol, of Minneapolis, MN, Kalli Lynn Ostlie, of Burnsville, MN, Kirstin Dawn Kanski, of Minneapolis, MN, Dawn Williams of Chicago, IL, on the brief, for appellee.

Before MURPHY, SHEPHERD, and KELLY, Circuit Judges.

MURPHY, Circuit Judge.

Several Minnesota homeowners represented by attorney William B. Butler brought a quiet title suit in state court, alleging that their home mortgages were invalid because the companies that held them did not possess the original promissory notes. The plaintiffs brought thirteen separate claims, nearly all of which rested on this “show me the note” theory. The defendants removed the case to federal court and moved to dismiss. The district court ¹ granted the defendants' motion and dismissed nearly all the plaintiffs' claims. ² The court also sua sponte sanctioned Butler and awarded attorney fees to the defendants, finding that the plaintiffs' “show me the note” theory had been repeatedly rejected by the courts and that Butler had engaged in abusive litigation tactics. The plaintiffs appeal.

After careful review, we conclude that there was no error in the district court's thorough and well reasoned order. The district court correctly concluded that it had diversity jurisdiction, as the claims against the sole nondiverse defendant lacked a “reasonable basis in fact and law,” Murphy v. Aurora Loan Servs., LLC, 699 F.3d 1027, 1031 (8th Cir.2012) (quoting Filla v. Norfolk S. Ry. Co., 336 F.3d 806, 810 (8th Cir.2003)), and the doctrine of prior exclusive jurisdiction was not implicated,see13F Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 3631 (3d ed. 1998). It also correctly concluded that the plaintiffs failed to state a plausible claim for relief sufficient to survive a motion to dismiss. SeeFed.R.Civ.P. 12(b)(6); Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The quiet title claims are but variations on the “show me the note” theory which has been repeatedly rejected by the Minnesota Supreme Court and our court applying Minnesota law. See, e.g., Jackson v. Mortg. Elec. Regist. Sys., Inc., 770 N.W.2d 487, 490–91 (Minn.2009)Murphy, 699 F.3d at 1030–31. The plaintiffs' slander of title claims are equally meritless. See Karnatcheva v. JPMorgan Chase Bank, 704 F.3d 545, 546–47 (8th Cir.2013). The plaintiffs have abandoned the remainder of their claims on appeal.

Nor did the district court abuse its discretion in imposing sanctions under Federal Rule of Civil Procedure 11(c) and 28 U.S.C. § 1927. See generally Clark v. UPS, Inc., 460 F.3d 1004 (8th Cir.2006). It reasonably concluded that the plaintiffs' claims were not “warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law,” and that they had been brought “for an[ ] improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation.” Fed.R.Civ.P. 11(b)(1)-(2). It also reasonably concluded that Butler's actions in this case “multiplie[d] the proceedings ... unreasonably and vexatiously.” 28 U.S.C. § 1927.

The district court aptly summarized Butler's abusive tactics:

Butler takes a group of a dozen or so individuals who are facing foreclosure but otherwise have no connection to one another; he gins up a dozen or so claims against a dozen or so defendants grounded mostly on the show-me-the-note theory; he improperly packages these claims into a single state-court action; and he fraudulently joins a single nondiverse defendant (typically a law firm that represented one of the lenders in foreclosure proceedings) in an attempt to block removal to federal court. The defendants generally remove the cases to federal court, and Butler then moves to remand. If the judge denies Butler's motion, he might “remand” the case himself by voluntarily dismissing it and refiling it in state court within a day or two, thereby starting the process all over again. Butler might also “judge shop” in the same manner; if he does not like his chances before a particular federal...