Jackson Cnty. v. Merscorp, Inc.

• Decision Date: 14 January 2013
• Docket Number: Case No. 12–0665–CV–W–ODS.
• Citation: 915 F.Supp.2d 1064
• Parties: JACKSON COUNTY, MISSOURI, by and through W. Stephen NIXON, Jackson County Counselor, Plaintiff, v. MERSCORP, INC., n/k/a MERSCORP Holdings, Inc., et al., Defendants.
• Court: U.S. District Court — Western District of Missouri

915 F.Supp.2d 1064

JACKSON COUNTY, MISSOURI, by and through W. Stephen NIXON, Jackson CountyCounselor, Plaintiff,

v.MERSCORP, INC., n/k/a MERSCORP Holdings, Inc., et al., Defendants.

Case No. 12–0665–CV–W–ODS.

United States District Court,

W.D. Missouri,

Western Division.

Jan. 14, 2013.

Adam J. Levitt, Wolf, Haldenstein, Adler, Freeman & Herz, Chicago, IL, Edward J. Hershewe, The Hershewe Law Firm, PC, Joplin, MO, Louis F. Bonacorsi, Bryan Cave, St. Louis, MO, Matthew Lee Dameron, Norman Eli Siegel, Steven N. Six, Stueve Siegel Hanson, LLP, Thomas Hershewe, Tim Eugene Dollar, Dollar, Burns & Becker, Kansas City, MO, Demet Basar, Lydia A. Keaney, Malcolm T. Brown, Wolf Haldenstein Adler Freeman & Herz LLP, New York, NY, for Plaintiff.

Joann T. Sandifer, Husch Blackwell LLP, Louis F. Bonacorsi, Bryan Cave, St. Louis, MO, Robert M. Brochin, Morgan, Lewis & Bockius LLP, Miami, FL, Romeo S. Quinto, Morgan, Lewis & Brockius, LLP, Chicago, IL, for Defendants.

ORDER AND OPINION GRANTING DEFENDANTS' JOINT MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT

ORTRIE D. SMITH, Senior District Judge.

Pending is Defendants' Joint Motion to Dismiss(Doc. # 68).The Motion is granted.

I.BACKGROUND

Plaintiff, Jackson County, Missouri, filed this putative class action on April 23, 2012, in the Circuit Court of Jackson County, Missouri, which was subsequently removed to federal court on May 31, 2012.The Defendants are MERSCORP, Inc., n/k/a MERSCORP Holdings, Inc.(“MERSCORP”); Mortgage Electronic Registration Systems, Inc.(“MERS”); Bank of America, N.A.; Citimortgage, Inc.; Corinthian Mortgage Corporation; Everhome Mortgage Company; GMAC Residential Funding Corporation; HSBC Bank, U.S.A., N.A.; JPMorgan Chase Bank, N.A.; Suntrust Mortgage, Inc.; BAC Home Loans Servicing L.P.; Wells Fargo Bank, N.A.; WMC Mortgage Corporation; and John DoeDefendants 1–100.Amended Complaint (“AC”), ¶ 13–26.

Plaintiff seeks to pursue claims on its own behalf and on behalf of all other similarly situated counties in the State of Missouri and the City of St. Louis against MERS and its parent company, MERSCORP, the owner and operator of a national registry that tracks ownership interests and servicing rights associated with residential mortgage loans.The other Defendants are various mortgage companies and John Doedefendants, which are alleged to be members of MERS, shareholders of MERSCORP, or both.

The facts of this case are derived from the factual allegations in Plaintiff's AmendedComplaint.In summary, Plaintiff's allegations arise from Defendants' failure to record deeds of trust assignments and failure to pay the applicable recording fees.The class action “seeks to redress the economic and public harm to [Plaintiffs] caused by Defendants' scheme to use MERS and the MERS® System, the private electronic registry created by the biggest players in the mortgage industry to track ownership and servicing rights for residential mortgage loans, for the express purpose of avoiding recording mortgage assignments and instruments that affect real estate in county recoding offices and paying the applicable recording fees.”AC, ¶ 1.As a result, “lenders, servicers, and other players in the mortgage industry have saved upwards of $8 billion, which, but for MERS, they would have paid—and previously did pay—to county recorders to record instruments in the ordinary course of business to perfect their security interests.”Id.

Defendants and others allegedly “conspired to develop a confidential, electronic registry that would track ownership and servicing rights for residential mortgage loans ‘in-house.’ ”AC, ¶ 4.MERSCORP, MERS, and the MERS® System were created as a result.Id.MERS was created “to save the mortgage industry money—recording fees—that lenders and other paid to county recorders to secure or maintain the first lien status of mortgages as mortgages were assigned multiple times during the securitization process.AC, ¶ 73.Before MERS, assignees of mortgages would record the assignments.AC, ¶ 73

MERS works as follows: when a lender issues a mortgage, the lender names MERS as “nominee” for the lender and the lender's successors and assigns and the “beneficiary” of the security instrument.AC, ¶ 5.MERS is the mortgagee of record on the mortgage, and listed as “Grantee” when the mortgage is recorded with the appropriate county recorder.Id.MERS has a valid first lien security interest in the mortgage by virtue of the initial recordation.Id.Once MERS is listed as the mortgagee in the county records, the lender (a “member” of MERS) registers the mortgage on the MERS® System.Id.When the lender assigns the mortgage, “instead of recording the assignment with the county [recorder] of deeds in order to ensure priority against subsequent purchasers, it ‘transfers' the note to another MERS member and MERS remains the beneficiary of record for both the lender and the transfers, and the holder of the security interest.”Id.Subsequent transfers are tracked by the MERS® System and not recorded because “the MERS® System allows MERS Members to claim that the transfers are not assignments and, therefore, need not be recorded.”Id.

But for MERS, Defendants“would have paid to record assignments in order to inoculate the security interest against subsequent good faith purchasers, mortgagees, or creditors without notice.”AC, ¶ 6.Defendant's conduct “has broken once transparent chains of title in Missouri counties' public land records by creating gaps when Defendants transfer mortgages on the MERS® System instead of recording mortgage assignments in county land records.”AC, ¶ 8.

Although Plaintiff alleges that Missouri has a statutory framework “that encourages the recording of land instruments, and specifies the consequences of failing to record land instruments,”AC, ¶ 30, it does not maintain that there is a legal duty to record assignments under Missouri law.To the contrary, and as shall be discussed later, Plaintiff concedes no such duty exists.

Plaintiff asserts five causes of action: (1) Unjust Enrichment; (2) Civil Conspiracy; (3) Prima Facie Tort; (4) Declaratory Judgment; and (5) Injunctive Relief.Plaintiff also seeks to pierce the corporate veil of MERS and MERSCORP.

Defendants have moved to dismiss this class action on various grounds, many of which are related.Defendants contend that the Missouri recording statutes create no private cause of action in favor of Jackson County, that Jackson County lacks standing because it cannot recover recording fees for assignments it never recorded, that there is no duty under Missouri law to record deed of trust assignments, and that Jackson County's allegations fail to state claims upon which relief can be granted.

II.DISCUSSION

A.Standing

Defendants seek dismissal because they argue Plaintiff lacks standing.Essentially, Defendants argument is that because Plaintiff has no valid cause of action, Plaintiff lacks standing.However, the absence of a valid cause of action does not implicate subject-matter jurisdiction.Steel Co. v. Citizens for a Better Environment,523 U.S. 83, 89, 118 S.Ct. 1003, 140 L.Ed.2d 210(1998);see alsoBell v. Hood,327 U.S. 678, 682, 66 S.Ct. 773, 90 L.Ed. 939(1946)(“Jurisdiction ... is not defeated ... by the possibility that the averments might fail to state a cause of action on which petitioners could actually recover.”).

Further, the Court disagrees with Defendants' argument that Plaintiff lacks standing because it has not alleged an injury in fact.

To have standing, a party must show:

(1)‘an injury in fact,’ meaning ‘the actual or imminent invasion of a concrete and particularized legal interest’; (2) a causal connection between the alleged injury and the challenged action of the defendants' and (3) a likelihood that the injury will be redressed by a favorable decision of the court.

Strutton v. Meade,668 F.3d 549, 555(8th Cir.2012)(quotingSierra Club v. U.S. Army Corps of Eng'rs,645 F.3d 978, 985–86(8th Cir.2011)).

Here, Plaintiff has alleged an injury to its financial interest in the form of lost recording fees caused by the actions of Defendants and seeks redress in this Court.Further, Plaintiff alleges it has suffered an injury in the form of inaccurate county land records.These allegations are sufficient to establish Article III standing.

B.Motion to Dismiss

The liberal pleading standard created by the Federal Rules of Civil Procedure requires “a short and plain statement of the claim showing that the pleader is entitled to relief.”Erickson v. Pardus,551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081(2007)(per curiam)(quotingFed.R.Civ.P. 8(a)(2)).“Specific facts are not necessary; the statement need only ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ ”Id.(citingBell Atlantic Corp. v. Twombly,550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929(2007)).In ruling on a motion to dismiss, the Court“must accept as true all of the complaint's factual allegations and view them in the light most favorable to the Plaintiff[ ].”Stodghill v. Wellston School Dist.,512 F.3d 472, 476(8th Cir.2008).

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.

Ashcroft v. Iqbal,556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868(2009).

In keeping with these principles a court considering...