Graybow v. U.S. Bank

• Decision Date: 18 July 2022
• Docket Number: 22-cv-00055 (SRN/DTS)
• Parties: Caree Graybow, Plaintiff, v. U.S. Bank, Defendant.
• Court: U.S. District Court — District of Minnesota

Caree Graybow, Plaintiff,
v.
U.S. Bank, Defendant.

No. 22-cv-00055 (SRN/DTS)

United States District Court, D. Minnesota

July 18, 2022

David C. Keegan, Keegan Law Firm and Robert E. Mathias, Mathias Law Firm, for Plaintiff.

Erin L. McCann, Faegre Drinker Biddle & Reath LLP, and Ryan A. Sawyer, Locke Lord LLP, for Defendant.

ORDER

SUSAN RICHARD NELSON, United States District Judge

This matter is before the Court on Defendant U.S. Bank's Motion to Dismiss [Doc. No. 23]. Based on a review of the files, submissions, and proceedings herein, and for the reasons below, the Court GRANTS Defendant's motion.

I. BACKGROUND

A. Factual Background

Plaintiff, Caree Graybow (“Ms. Graybow”) alleges that prior to their divorce, her then husband Bruce Graybow (“Mr. Graybow”), obtained a HELOC home equity loan (“the HELOC loan”) from Defendant, U.S. Bank National Association (“U.S. Bank”), using the Graybows' Minnetonka, Minnesota homestead as collateral. (Am. Compl. at ¶ 5.)

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Ms. Graybow alleges that she was not present when the HELOC loan was executed, and that the manager of the Ridgedale Branch of U.S. Bank “negligently and illegally notarized Plaintiff's signature which had been forged by Mr. Graybow.” (Id. at ¶ 6.)

The Graybows began divorce proceedings in September of 2016 (Dissolution J. [Doc. No. 1-3] at 2). Ms. Graybow was represented by counsel for a majority of the proceedings, but was self-represented at trial. (Id. at 2.) She alleges that she first discovered the alleged forgery during this time. (Am. Compl. at ¶ 7.) When she attempted to raise the issue during the trial, she alleges that the judge failed to consider her evidence and U.S. Bank refused to provide her with documents that would prove it. (Id. at ¶¶ 7-8.)

As part of the dissolution judgment entered on March 14, 2018, the state court judge found that Mr. and Ms. Graybow both used the HELOC loan to fund personal and business expenses. (Dissolution J. at 9-10.) Accordingly, he found that it was fair that they continue to be jointly liable on the debt, and that the debt be fully satisfied out of the proceeds from the sale of the homestead. (Id. at 20-21.)

B. Procedural Background

On November 24, 2021, Ms. Graybow filed suit in Minnesota state court against U.S. Bank. (State Ct. Compl. [Doc. No. 1-1].) On January 10, 2022, U.S. Bank removed the case to federal court, and on January 18, 2022, it filed its first Motion to Dismiss [Doc. No. 8]. On February 2, 2022, Ms. Graybow filed an Amended Complaint, alleging that “[a]s a direct result of U.S. Bank's negligent and illegal acts” she lost much of the equity in her home, she was forced to pay money to U.S. Bank that she did not owe, and her credit worthiness was, and will be, adversely affected. (Am. Compl. at ¶¶ 9-11.)

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In response, U.S. Bank filed a second Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) [Doc. No. 23], arguing that Ms. Graybow's Amended Complaint fails to state a claim because it is barred by collateral estoppel or the voluntary payment doctrine. (Def.'s Supp. Mem. [Doc. No. 25] at 4-5.) U.S. Bank also argues that her negligence claim fails because she cannot prove that she suffered any damages. In particular, U.S. Bank alleges that Ms. Graybow cannot cite to her allegedly damaged credit to show injury resulting from U.S. Bank's purported negligence. (Id. at 10-11.) Such a claim, U.S. Bank alleges, can only be asserted under the Fair Credit Reporting Act (“FCRA”). (Id. (citing 15 U.S.C. § 1681h(e)).)

II. STANDARD OF REVIEW

When considering a motion to dismiss under Rule 12(b)(6), the Court accepts the facts alleged in the complaint as true and views those allegations in the light most favorable to the plaintiff. Hager v. Arkansas Dep't of Health, 735 F.3d 1009, 1013 (8th Cir. 2013). However, the Court need not accept as true wholly conclusory allegations or legal conclusions couched as factual allegations. Id. In addition, the Court ordinarily does not consider matters outside the pleadings on a motion to dismiss. See Fed.R.Civ.P. 12(d). The Court may, however, “consider the pleadings themselves, materials embraced by the pleadings, exhibits attached to the pleadings, and matters of public record.”^[1]

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Illig v. Union Elec. Co., 652 F.3d 971, 976 (8th Cir. 2011) (internal quotation marks and citation omitted).

To survive a motion to dismiss, a complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Although a complaint need not contain “detailed factual allegations,” it must allege facts with enough specificity “to raise a right to relief above the speculative level.” Id. at 555. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements,” are insufficient. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555).

III. ANALYSIS

A. Plaintiff Is Collaterally Estopped From Relitigating Her Liability Under the HELOC Loan

1. The Law

Federal courts must accord the same preclusive effect to a state court judgment that it would receive in the courts of the state from which the judgment emerged. 28 U.S.C. § 1738; Knutson v. City of Fargo, 600 F.3d 992, 996 (8th Cir. 2010). Thus, “Minnesota rules of collateral estoppel apply in federal court cases involving a prior Minnesota state

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court judgment.” Final Exit Network, Inc. v. Ellison, 370 F.Supp.3d 995, 1016 (D. Minn. 2019) (citation omitted).

Under Minnesota law, collateral estoppel “precludes the relitigation of issues that are identical to issues previously litigated and that were necessary and essential to the prior judgment.” Wong v. Minnesota Dep't of Hum. Servs., 820 F.3d 922, 933 (8th Cir. 2016) (citing Minneapolis Cmty. Dev. Agency v. Buchanan, 268 F.3d 562, 566 (8th Cir. 2001)). It applies “where: (1) the issues are identical to those in a prior adjudication; (2) there was a final judgment on the merits; (3) the estopped party was a party or in privity with a party in the previous action; and (4) the estopped party was given a full and fair opportunity to be heard on the adjudicated issues.” Id. at 933-34.

2. Analysis

U.S. Bank argues that collateral estoppel bars Ms. Graybow from relitigating her liability under the HELOC loan. (Def.'s Supp. Mem. at 5-8.) Ms. Graybow concedes that the dissolution judgment is a final judgment on the merits, but argues that collateral estoppel does not preclude her claims in this lawsuit because U.S. Bank was not a party to her divorce proceedings. (Pl.'s Opp'n Resp. at 3.) She also argues that the issues in the instant case are not identical to those in the dissolution proceeding, as that proceeding involved the division of marital assets and debts, not U.S. Bank's conduct. (Id. at 3.) Further, she contends that she was not given a full and fair opportunity to be heard in the previous trial because she was self-represented, and U.S. Bank refused to produce evidence of the alleged forgery during the proceedings. (Id. at 3-4.)

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a. The Estopped Party was a Party in the Previous Action

Collateral estoppel is available if “the estopped party was a party or in privity with a party in the previous action.” Wong, 820 F.3d at 934. Because Ms. Graybow was a party to her divorce proceedings, and is the party against whom estoppel is sought, this element of collateral estoppel has been met. (See Dissolution J. at 1.) U.S. Bank, as the party seeking estoppel, is not required to have been a party to the prior proceedings. Minneapolis Cmty. Dev. Agency v. Buchanan, 268 F.3d 562, 568 (8th Cir. 2001) (finding that “Minnesota law does not require mutuality of parties” to apply collateral estoppel).

b. The Issue in the Divorce Judgment is Identical to the Issue in...