Brinkman v. Bank of Am., N.A.

• Decision Date: 03 July 2012
• Docket Number: Case No. 11-3240 (JRT/TNL)
• Parties: RANDY S. BRINKMAN, CAROL M. BRINKMAN, DEAN J. WELK, JANET N. RICE, JAMES L. RICE, GE VANG, MELINA YANG, SUSAN MARYANN AMADICK, SUSAN L. GRADY, JACOB YANG, KANG T. YANG, MONA R. HOREJSH, STEPHEN HENRY QUENROE, Plaintiffs, v. BANK OF AMERICA, N.A.; BAC HOME LOANS SERVICING, LP; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; MERSCORP, INC.; WELLS FARGO BANK, N.A.; THE BANK OF NEW YORK MELLON, formerly known as The Bank of New York; PETERSON, FRAM AND BERGMAN, P.A., Defendants.
• Court: U.S. District Court — District of Minnesota

RANDY S. BRINKMAN, CAROL M. BRINKMAN, DEAN J. WELK, JANET N. RICE, JAMES L. RICE, GE VANG,MELINA YANG, SUSAN MARYANN AMADICK, SUSAN L. GRADY, JACOB YANG, KANG T. YANG,MONA R. HOREJSH, STEPHEN HENRY QUENROE, Plaintiffs,

v. BANK OF AMERICA, N.A.; BAC HOME LOANS SERVICING, LP; MORTGAGE ELECTRONIC REGISTRATIONSYSTEMS, INC.; MERSCORP, INC.; WELLS FARGO BANK, N.A.; THE BANK OF NEW YORK MELLON,formerly known as The Bank of New York; PETERSON, FRAM AND BERGMAN, P.A., Defendants.

Case No. 11-3240 (JRT/TNL)

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

Dated: July 3, 2012

REPORT

&

RECOMMENDATION

William B. Butler, BUTLER LIBERTY LAW, LLC, 33 South 6th Street, Suite 4100, Minneapolis, MN 55402, for Plaintiffs;

Thomas M. Hefferon (pro hac vice), GOODWIN PROCTER LLP, 901 New York Avenue Northwest, Washington, DC 20001; Alan H. Maclin, Benjamin E. Gurstelle, and Mark G. Schroeder, BRIGGS & MORGAN, PA, 80 South 8th Street, Suite 2200, Minneapolis, MN 55402, for Defendants Bank of America, N.A.; BAC Home Loans Servicing, LP; Mortgage Electronic Registration Systems, Inc.; MERSCORP, Inc.; Wells Fargo Bank, N.A.; The Bank of New York Mellon; andJared M. Goerlitz and Steven H. Bruns, PETERSON, FRAM & BERGMAN, PA, 55 East 5th Street, Suite 800, St Paul, MN 55101, for Peterson, Fram and Bergman, P.A.

I. INTRODUCTION

This matter is before the Court, United States Magistrate Judge Tony N. Leung, on the following motions: (1) Defendant Peterson, Fram & Bergman, P.A.'s Motion to Dismiss (Docket No. 7); (2) Defendants Bank of America, N.A., BAC Home Loans Servicing, LP, Mortgage Electronic Registration Systems, Inc., Merscorp, Inc., Wells Fargo Bank, N.A., and The Bank of New York Mellon's Motion to Dismiss the Complaint (Docket No. 12) (hereinafter "Foreclosing Defendants' Motion to Dismiss"); (3) Plaintiffs' Motion to Remand (Docket No. 23); (4) Plaintiffs' Motion to Amend (Docket No. 31); and (5) Defendant Peterson, Fram & Bergman's Joinder in Supplemental Briefing Regarding Multiple Pending Motions by Bank of America, N.A., BAC Home Loans Servicing, LP, Mortgage Electronic Registration Systems, Inc., Merscorp, Inc., Wells Fargo Bank N.A. and The Bank of New York Mellon F/K/A the Bank of New York (Docket No. 44) (hereinafter "Defendant Law Firm's Briefing Motion").

The dispositive motions were referred to the undersigned magistrate judge for report and recommendation to the district court under 28 U.S.C. § 636 and Local Rule 72.2(b). See Order, (D. Minn. Dec. 22, 2011) (Docket No. 19). A hearing was held on the motions on May 31, 2012. William B. Butler appeared on behalf of Plaintiffs. Thomas Heffron appeared on behalf of Foreclosing Defendants. Jared M. Goerlitz appeared on behalf of Peterson, Fram & Bergman, P.A. ("Defendant Law Firm").

Because these motions are interrelated, this Court has addressed them all in this Report and Recommendation. For the reasons set forth herein, IT IS HEREBY RECOMMENDED as follows: (1) Defendant Peterson, Fram & Bergman, P.A.'s Motion to Dismiss (Docket No. 7) be GRANTED; (2) Foreclosing Defendants' Motion to Dismiss (Docket No. 12) be GRANTED; (3) Plaintiffs' Motion to Remand (Docket No. 23) be DENIED; (4) Plaintiffs' Motion to Amend (Docket No. 31) be DENIED; and (5) Defendant Law Firm's Briefing Motion (Docket No. 44) be GRANTED.

II. BACKGROUND

A. Original Complaint

Plaintiffs—who are all Minnesota residents—allege that they executed promissory notes and mortgages in favor of certain Foreclosing Defendants for the purchase of real property located in the State of Minnesota.¹ It is undisputed that the ForeclosingDefendants—i.e., Bank of America, N.A.; BAC Home Loan Servicing LP; Mortgage Electronic Registration Systems, Inc. (MERS); MERSCORP, Inc.; Wells Fargo Bank, N.A.; and The Bank of New York Mellon—are neither incorporated nor headquartered in Minnesota; thus, they are diverse from all Plaintiffs for the purposes of diversity of citizenship jurisdiction. Compl. at ¶¶ 9-14, Oct. 3, 2011 (Docket No. 1). Defendant Law Firm is a Minnesota professional association. Id. at ¶ 16.

The crux of Plaintiffs' Complaint is that Foreclosing Defendants did not have the right to initiate foreclosure proceedings because Foreclosing Defendants do not possess the promissory notes and Foreclosing Defendants are not entitled to enforce the promissory notes. Compl. at ¶¶ 18-41. Plaintiffs allege that the promissory notes "were securitized and sold . . . into a 'pooling and serving agreement'" and the rights under the promissory notes were sold to third-party purchasers of mortgage-back securities. Compl. at ¶ 32. This sort of allegation is

colloquially termed a "show me the note" claim, in which foreclosures are challenged when the original paperwork evidencing a note and mortgage has been lost due to the widespread practice of reselling and bundling mortgages. A "show me the note" plaintiff . . . alleges a foreclosure is invalid unless the foreclosing entity produces the original note.[² ]

Stein v. Chase Home Fin., LLC, 662 F.3d 976, 978 (8th Cir. 2011). Plaintiffs further allege that, because Foreclosing Defendants did not have a right to foreclosure, Defendant Law Firm wrongfully represented the status of the Foreclosing Defendants' rights in foreclosure by advertisement proceedings. Id. at ¶ 16.

Based upon these allegations, Plaintiffs assert 13 separate claims for relief. Plaintiffs assert the following claims against all Defendants: slander of title (IV), conversion (V), civil conspiracy (VII), negligent misrepresentation (X), and equitable estoppel (XII). Plaintiffs assert the following claims against Foreclosing Defendants: quiet title (I), "Defendants are not real parties in interest" (II), "Lack of Legal Standing to Foreclose" (III), unjust enrichment (VI), breach of fiduciary duty (VIII), fraud (IX), and accounting (XIII). Plaintiffs assert a claim of fraud ("XIV [sic]") against Defendant Law Firm.

B. Procedural Posture

1. Motion Practice before this Court

Plaintiffs commenced this action in Ramsey County District Court in October 2011. On November 2, 2011, this matter was removed to the United State District Court for the District of Minnesota. Thereafter, Defendant Law Firm filed its Motion to Dismiss, arguing that it was fraudulently joined as a party. Foreclosing Defendants filed their Motion to Dismiss, arguing Plaintiffs' lack standing to bring their claims; the Complaint does not satisfy the requirements of Fed. R. Civ. P. 8; and the Complaint fails to state claims upon which relief can be granted.

Plaintiffs oppose Defendants' motions. See generally, Pl.'s Mem. Dec. 19, 2011 (Docket No. 17); Pl.'s Mem. Dec. 22, 2011 (Docket No. 20). Plaintiffs also filed a Motion to Remand, arguing "the Court does not have subject matter jurisdiction because this is a quasi in rem action over which the Ramsey County District Court first acquired jurisdiction." Pl.'s Mem. at 3, Feb. 27, 2012 (Docket No. 25). After Defendants' motions to dismiss were fully briefed, Plaintiffs filed a Motion to Amend. The contents of the proposed amended complaint will be discussed later.

Defendants oppose Plaintiffs' motions. Foreclosing Defendants also moved for Sanctions (Docket No. 54) under Federal Rule of Civil Procedure 11 and 28 U.S.C. § 1927, arguing that the filing and continuing prosecution of a meritless complaint warrants sanctions. Foreclosing Def.'s Mem. at 2, May 17, 2012 (Docket No. 56). Defendant Law Firm filed Defendant Peterson, Fram & Bergman's Joinder in Motion for Sanctions by Bank Defendants (Docket No. 59). Plaintiffs oppose the Motion for Sanctions. These motions will be address in a separate order.

In addition to the motions before this Court, Plaintiffs filed a Motion to Certify Question (Docket No. 50), seeking direction from the Minnesota Supreme Court as to whether an eviction proceeding is in rem. Plaintiffs contend that if the Minnesota Supreme Court holds that a Minnesota eviction proceeding is in rem, then this Court lacks jurisdiction to consider the present action under the prior-exclusive-jurisdiction doctrine. The Motion to Certify Question will be considered by the Honorable John R. Tunheim, United States District Court Judge for the District of Minnesota. See Docket No. 64. The certification motion pertains to Plaintiffs' Motion for Remand because, as will be discussed, Plaintiffscontend that Minnesota state courts have prior exclusive jurisdiction over at least one property at issue because both the present action and the eviction proceedings are in rem (or quasi in rem) proceedings.

2. Supplemental Briefing

This is not the only case of this kind brought by Plaintiffs' counsel, William B. Butler, and adjudicated in the United States District Court for the District of Minnesota.³ Typically, the fact that an attorney has brought multiple actions of a similar nature is neither surprising nor noteworthy. Butler's cases, however, are exceptional because they have all followed the same unavailing course: Butler brings a complaint on behalf of multiple Minnesota plaintiff mortgagors against jurisdictionally diverse foreclosing defendants and a Minnesota law firm. The complaint asserts numerous show-me-the-note claims. The complaint is removed to federal court based upon the fact that the Minnesota law firm defendant was fraudulently joined. The motion to remand is denied. The foreclosing defendants' motions to dismiss are granted.

Days before the hearing date in this matter, another court in this district ruled against Butler in Welk v. GMAC Mortgage, LLC, Civil Case No. 0:11-cv-02676-PJS-JJK, 2012 WL 1035433 (Docket No. 121) (D. Minn. Mar. 29, 2012). After thoroughly vetting the claims brought by Butler, the Welk court denied the motion to remand, granted the foreclosing defendants' motion to dismiss, and levied a significant sanction against Butler.⁴

Plaintiffs concede that the original Complaint before this Court is almost identical to the one at issue in Welk. See Pl.'s Supp. Mem. at 3, May...