Smith v. Manley, Deas, & Kochalski LLC
| Decision Date | 30 September 2022 |
| Docket Number | 2:21-cv-00931 |
| Parties | DEMETRIOUS-YADIRFA SMITH, et al., Plaintiff, v. MANLEY, DEAS, AND KOCHALSKI, LLC, et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
This matter is before the Court on numerous motions from multiple parties, including motions to dismiss from Defendants Judge Ruehlman (ECF No. 23, 25), Manley, Deas, and Kochalski, LLC (ECF No. 34), Hamilton County Land Reutilization Corporation (ECF No. 41), and Volunteer Lawyers for the Poor (ECF No 44). This Court also entertains Plaintiffs' motions for leave to file a second amended complaint (ECF Nos. 19, 45) to intervene (ECF No. 47), and to restrict an exhibit (ECF No. 48). Finally, Defendant Hamilton County Land Reutilization Corporation seeks leave to file supplemental memoranda (ECF No. 45). For the reasons set forth below, Defendants' Motions to Dismiss (ECF Nos. 23, 25, 34, 41, 44) are GRANTED. Defendant Landbank's Motion for Leave to File Supplemental Memoranda (ECF No. 45) and Plaintiffs' Motion to Restrict Exhibit #37 (ECF No. 48) are also GRANTED. Plaintiffs' Motion for Leave to File Second Amended Complaint (ECF No. 19), Motion for Leave to File Second Amended 5.5 Million Dollar Lawsuit (ECF No. 37), and Motion to Intervene (ECF No. 47) are DENIED. Defendant Judge Ruehlman's additional motion to dismiss (ECF No. 26) is DENIED AS MOOT.
At its core, Plaintiffs' First Amended Complaint (ECF No. 18) centers on the world of high-risk mortgage loans and rampant foreclosures that characterized the housing bubble of the mid- to late-2000s. Plaintiffs' alleged claims range across a wide array of federal laws and constitutional provisions; their facts, though sparse, revolve around an alleged conspiracy between banks, courts, legal services, and public agencies to deprive low-income and minority homeowners of their houses and their rights.
In 2002, Plaintiffs Demetrious-Yadrifa Smith and Amy-Kathleen Smith (collectively, “the Smiths”) purchased property at 4703 Winona Terrace, Cincinnati, Ohio, subject to a mortgage from ABN AMRO Mortgage Group. (See ECF No. 34-2 at 7).[1] This mortgage, which allowed the Smiths to borrow $100,000 over 30 years, was assigned to LaSalle Bank Midwest National Association (“LaSalle”) in March 2008. (Id. at 7, 18). LaSalle then merged with Bank of America, N.A. (“Bank of America”); concurrently, the mortgage was re-assigned from Lasalle to Bank of America. (Id. at 19-23). In the meantime, the Smiths filed for Chapter 13 bankruptcy in the Southern District of Ohio. (Id. at 27 ¶ 6). Margaret Burks, who was appointed as the non-party Chapter 13 trustee, was receiving Mr. Smith's mortgage payments intended for ABN AMRO. (ECF No. 18 at 3). In turn, Ms. Burks distributed the mortgage payments to foreclosure and bankruptcy attorney as “corporate fee advances.” (Id. at 4). That case was terminated on October 14, 2011. (ECF No. 34-2 at 27).
After the Smiths fell behind on their mortgage payments, Bank of America initiated a foreclosure action in the Court of Common Pleas for Hamilton County, Ohio. (Id. at 1-6; ECF Nos. 18 at 3; 18-2 at 9). Bank of America is represented by Manley, Deas, and Kochalski, LLC (“MDK”), in that proceeding, which is still ongoing: it has been removed by the Smiths to this Court, remanded by Judge Dlott, appealed to the state appellate court and sent back down, then removed to the Southern District of New York and finally remanded back to the Common Court of Pleas for Hamilton County. See generally Bank of America, N.A. By LaSalle v. Smith, et al., 2017 WL 1426513 (S.D. Ohio Apr. 21, 2017); Bank of America, N.A. v. Smith, 2018 WL 4353598 (Ohio. Ct. App. Sept. 12, 2018). The Court of Common Pleas ruled against the Smiths and entered judgment on their property, and the Smiths' appeal of that decision is now pending before the state appellate court. (ECF Nos. 34 at 6; 34-5).
Defendant Judge Ruehlman of the Court of Common Pleas was assigned to the foreclosure proceeding. The Smiths sought to disqualify Judge Ruehlman based on allegations that he is biased against homeowners. (ECF Nos. 18 at 4; 34 at 5). The disqualification efforts were, however, rejected by the Supreme Court of Ohio in February 2019. (ECF No. 34-4). More generally, the Smiths state that the judges of the Court of Common Pleas for Hamilton County have conflicts of interest because of their investments in mortgage-backed securities (“MBS”) and that they rubberstamp foreclosure actions in favor of lenders. (See ECF No. 18 at 5). The Smith have never actually been in Judge Ruehlman's courtroom. (Id.). They claim that a major impediment has been Local Rule 10, which requires trial counsel to fill out a form with the Clerk of Courts to receive notification of hearings. (Id. at 5-6, 8; ECF No. 23-1). Local Rule 10 does not apply to pro se parties like the Smiths. (ECF No. 23 at 3).
The Smiths also took out a mortgage with Chase Bank, the precise date and terms of which are unknown. In 2004, Chase notified the Smiths of issues with the repayment on that mortgage and moved to foreclose on their property. (ECF No. 18-2 at 7, 8). In that proceeding, the Smiths again sought removal to federal court, which was rejected by both the district court and the Sixth Circuit. See Chase Manhattan Mortg. Corp. v. Smith, 507 F.3d 910 (6th Cir. 2017).
The final twist to the Smiths' case involves their friend, Denise Hill, who also suffered through the indignity of foreclosure. In 2000, she reached out to Volunteer Lawyers for the Poor (“Volunteer Lawyers”),[2] a legal aid referral program in Cincinnati, seeking legal assistance. (See ECF No. 18-2 at 1). Volunteer Lawyers referred Ms. Hill to Mr. Rick D. DeBlasis, an attorney at Lerner Sampson & Rothfuss (“LSR”), who agreed to take on Ms. Hill's case pro bono. (Id.). That representation apparently was unsuccessful, as Mr. DeBlasis later resigned and Ms. Hill's property at 18 Mulberry St. in Hamilton County, Ohio, was sold at a sheriff's sale on July 28, 2005. (ECF Nos. 18 at 4; 18-1 at 8). That property has since been acquired by Defendant Hamilton County Land Reutilization Corporation (“HCLRC” or “Landbank”), of which Mr. Robert Goering is now the president. (ECF Nos. 18 at 10-11; 18-6). At some point (the timing is unclear), Mr. Goering had previously served as Ms. Hill's bankruptcy attorney. (ECF No. 18 at 10-11).
In the end, Plaintiffs' animating thesis is that the aftermath of the housing bubble was discriminatory and predatory towards communities of color and low-income communities, and that that discrimination has been carried out, at least in the Cincinnati area, through an intricate network of individuals and organizations, some of whom are named as Defendants here. (See generally id. at 6-8). Millions of aspiring homeowners took out speculative loans and, when they defaulted on those loans, lost their homes. (Id. at 7). The foreclosure crisis has impacted communities of color particularly hard, causing problems that have since been exacerbated in many cities by gentrification and an increasingly unaffordable housing market. (See id.). Plaintiffs pinpoint the Over-the-Rhine neighborhood in Cincinnati as an exemplar of this double-edged trend, as the city's push to revitalize the historic neighborhood after the 2001 riots certainly reduced violence but also pushed out a substantial portion of existing Black residents. See Colin Woodard, How Cincinnati Salvaged the Nation's Most Dangerous Neighborhood, POLITICO (June 16, 2016), https://www.politico.com/magazine/story/2016/06/what-works-cincinnati-ohio-over-the-rhine-crime-neighborhood-turnaround-city-urban-revitalization-213969/. Moreover, as the housing market burst, news stories exposed improprieties within certain segments of the justice system that favored lenders at the expense of the lower- and middle-classes. (See, e.g., ECF Nos. 18-1 at 1; 18-3 at 2). The trials and tribulations suffered by Plaintiffs fit squarely within this intersection of a bursting housing bubble, burgeoning gentrification, and increasing fears that the system is rigged against the lower classes.
On March 5, 2021, Plaintiffs Demetrious-Yadrifa Smith and Amy-Kathleen Smith filed their original complaint in this case. That complaint (ECF No. 1) named the following defendants: Manley, Deas, and Kochalski, LLC; Lerner, Sampson & Rothfuss, LPA; Judge Robert Ruehlman of the Court of Common Pleas for Hamilton County; Judges Michael R. Barrett and Susan Dlott of this Court; and DOES 1-100. (ECF No. 1 at 1). The Smiths were granted leave to file an amended complaint. (See ECF No. 15). The Smiths did so, filing their First Amended Complaint on April 19, 2021, six days after the deadline set by Magistrate Judge Jolson (ECF No. 18). There, the Smiths asserted largely the same claims as they did in the original complaint, but joined Denise Hill as a plaintiff and Volunteer Lawyers and Landbank as defendants. (See ECF No. 18 at 1). The Smiths also dropped Judges Barrett and Dlott from the First Amended Complaint. (See id.).
Judge Ruehlman, MDK, the Landbank, and Volunteer Lawyers have all filed motions to dismiss (ECF Nos. 23, 25, 34, 41, 44). Plaintiffs have also submitted a Motion for Leave to File Second Amended Complaint (ECF No. 19), Motion for Leave to File Second Amended 5.5 Million Dollar Lawsuit (ECF No. 37), Motion to Intervene (ECF No. 47), and Motion to Strike Exhibit #37 (ECF No. 48). Finally, Defendant Landbank has requested leave to file supplemental pleadings (ECF No. 45). All motions are now ripe before this Court.
A motion to dismiss...
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