Knowles et al v. American Home Mortgage Servicing Inc
Filing
42
MEMORANDUM OPINION AND ORDER: 15 , MOTION to Dismiss and for Rule 54(b) Certification, is DENIED, as further set out in order. Signed by Judge Abdul K Kallon on 06/18/12. (CVA)
FILED
2012 Jun-18 PM 01:19
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
NORTHEASTERN DIVISION
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JAMES E. KNOWLES and
BEVERLY K. KNOWLES,
Plaintiffs,
vs.
AMERICAN HOME
MORTGAGE SERVICING,
INC., JAUREGUI and
LINDSEY, LLC,
Defendants.
Civil Action Number
5:11-cv-01670-AKK
MEMORANDUM OPINION AND ORDER
Defendant Jauregui & Lindsey, LLC (“J&L”) filed a Motion to Dismiss and
for Rule 54(b) Certification. Doc. 15. The motion is fully briefed. Docs. 16, 18,
and 19. For the reasons set forth below, the motion is DENIED.
I. STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain “a
short and plain statement of the claim showing that the pleader is entitled to
relief.” “[T]he pleading standard Rule 8 announces does not require ‘detailed
factual allegations,’ but it demands more than an unadorned, the-defendantunlawfully-harmed-me accusation.” Ashcroft v. Iqbal, ---U.S.---, 129 S. Ct. 1937,
1
1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Mere
“labels and conclusions” or “a formulaic recitation of the elements of a cause of
action” are insufficient. Iqbal, 129 S. Ct. at 1949 (citations and internal quotation
marks omitted). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’
devoid of ‘further factual enhancement.’” Id., at 1949 (citing Bell Atl. Corp., 550
U.S. at 557).
Federal Rule of Civil Procedure 12(b)(6) permits dismissal when a
complaint fails to state a claim upon which relief can be granted. “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.” Iqbal, 129 S. Ct. at
1949 (citations and internal quotation marks omitted). A complaint states a
facially plausible claim for relief “when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for
the misconduct alleged.” Id. (citation omitted). The complaint must establish
“more than a sheer possibility that a defendant has acted unlawfully.” Id.; see also
Bell Atl. Corp., 550 U.S. at 555 (“Factual allegations must be enough to raise a
right to relief above the speculative level.”). Ultimately, this inquiry is a “contextspecific task that requires the reviewing court to draw on its judicial experience
and common sense.” Iqbal, 129 S. Ct. at 1950.
2
II. PROCEDURAL AND FACTUAL BACKGROUND1
On May 4, 2006, Plaintiffs executed a promissory note (the “Note”), secured
by their residence, and obtained a $322,400.00 mortgage loan (the “Loan”) from
Option One Mortgage Corporation (“Option One”). Doc. 3, at 3. Option One
recorded the Note on June 14, 2006. Id. American Home Mortgage Servicing,
Inc. (“AHMSI”) serviced the loan. Id.
On August 19, 2010, Plaintiffs filed for Chapter 13 bankruptcy. Id. at 4.
On August 30, 2010, J&L filed a Motion to Lift the Automatic Stay (the “motion”)
on behalf of AHMSI, servicing agent for HSBC. Id. at 4 & 15. J&L represented
in the motion that HSBC Bank USA (“HSBC”) owned the mortgage due to an
assignment from Option One. Id. at 4. The bankruptcy court granted the motion
with the parties’ consent. Id. at 5. However, Plaintiffs contend they learned
subsequently that no actual assignment occurred from Option One to HSBC and
that J&L knowingly filed a false and fraudulent motion on behalf of AHMSI. Id.
at 4-5. Id.
On May 2, 2011, J&L sent Plaintiffs a “notice of acceleration” letter (the
1
“When considering a motion to dismiss, all facts set forth in the plaintiff’s complaint
‘are to be accepted as true and the court limits its consideration to the pleadings and exhibits
attached thereto.’” Grossman v. Nationsbank, N.A., 225 F.3d 1228, 1231 (11th Cir. 2000)
(quoting GSW, Inc. v. Long County, 999 F.2d 1508, 1510 (11th Cir. 1993)). However, legal
conclusions unsupported by factual allegations are not entitled to that assumption of truth. See
Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1950 (2009).
3
“Letter”), stating that J&L “represented Fidelity National Foreclosure and
Bankruptcy Solutions (“Fidelity”) on behalf of AHMSI, servicing agent for
HSBC” and that it intended to collect a debt or to foreclose. Id. Thereafter, J&L
published the foreclosure notice on May 6, 2011, demanding $411,093.38 and
stating that Option One assigned Plaintiffs’ mortgage to HSBC. Id. J&L
republished the notice on May 13 and May 20, 2011. Id. On May 19, 2011, J&L
recorded the assignment of the mortgage, with an effective date of May 2, 2011,
“from Sand Canyon f/k/a Option One to HSBC.” Id. at 6. Plaintiffs contend that
Elizabeth Boulton (“Boulton”) signed the assignment on behalf of Option One,
even though Boulton worked for AHMSI at the time. Id.
III. ANALYSIS
Plaintiffs filed this lawsuit on August 8, 2011, alleging that J&L violated
the Fair Debt Collections Practices Act (“FDCPA”) (Count I) and conveyed
fraudulent information to the bankruptcy court (Count II). Id. at 9-10. Each claim
is analyzed below.
A.
FDCPA Claim – Count I
Among other things, the FDCPA prohibits “debt collectors”2 from using a
2
A “debt collector” is any person who uses any instrumentality of interstate commerce or
the mails in any business the principal purpose of which is the collection of any debts, or who
regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be
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“false, deceptive, or misleading representation or means in connection with the
collection of any debt.” 15 U.S.C. § 1692(e); see also Reese v. Ellis, Painter,
Ratterree & Adams, LLP, No. 10-14366, 2012 WL 1500108, at *3 (11th Cir. May
1, 2012). However, “[a]n enforcer of a security interest, such as a [mortgage
company] foreclosing on mortgages of real property . . . falls outside the ambit of
the FDCPA except for the provisions of section 1692f(6).”3 Warren v.
Countrywide Home Loans, Inc., 342 F. App’x. 458, 460 (11th Cir. 2009).
Moreover, “if a person enforcing a security interest is not a debt collector, it
likewise is reasonable to conclude that enforcement of a security interest through
the foreclosure process is not debt collection for purpose of the Act.” Id. at 461
(quoting Overton v. Foutty & Foutty, LLP, No. 1:07-cv-0274-DFH-TAB, 2007
WL 2413026 (S.D. Ind. Aug. 21, 2007)). “If a person invokes judicial remedies
owed or due another. 15 U.S.C. § 1692a(6).
3
Section 1692f(6) prohibits the “[t]aking or threatening to take any nonjudicial action to
effect dispossession or disablement of property if-(A) there is no present right to possession of the property claimed as collateral through
an enforceable security interest;
(B) there is no present intention to take possession of the property; or
(C) the property is exempt by law from such dispossession or disablement.”
15 U.S.C.A. § 1692f(6)
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only to enforce the security interest in property, then the effort is not subject to the
FDCPA.” Id. at 461. Thus, to state a “plausible FDCPA claim under § 1962e, a
plaintiff must allege, among other things, (1) that the defendant is a ‘debt
collector’ and (2) that the challenged conduct is related to debt collection.” Reese,
2012 WL 1500108, at *3.
Here, Plaintiffs allege that J&L is a “debt collector” and that J&L violated
several provisions of the FDCPA by (1) sending Plaintiffs a Letter stating that it
represented AHMSI in violation of section 1692e; (2) misrepresenting the
character and legal status of the debt and advertising the foreclosure in violation of
sections 1692e(2), 1692e(4) and 1692d(4); (3) participating in a fraudulent
assignment of the mortgage as an illegal means to collect a debt, in violation of
section 1692e(5); and (4) that “the actions of Defendant J&L is [sic] unfair and
unconscionable, thereby violating the [FDCPA] at 15 U.S.C. § 1692f.” Doc. 3, at
7-9. J&L disagrees and asserts that it is not subject to the FDCPA because it is not
a “debt collector.” Doc. 16, at 8. To support its position, J&L maintains that
“[t]he Eleventh Circuit has held that the FDCPA, except for limited circumstances
under § 1692(f)(6), does not apply to mortgage foreclosures as such foreclosures
do not constitute debt collection activities governed by the FDCPA.” Id.
Additionally, J&L relies on Warren in which the Eleventh Circuit noted that while
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the FDCPA does not define debt collection, “the plain language of the FDCPA
supports the . . . conclusion that foreclosing on a security interest is not debt
collection activity . . . . Indeed, the statute specifically says that a person in the
business of enforcing security interests is a ‘debt collector’ for the purposes of §
1692g, which reasonably suggests that such a person is not a debt collector for
purposes of other sections of the Act.” Warren, F. App’x at 460. Thus, J&L
asserts that because it represented a creditor trying to foreclose on a house, rather
than one collecting on a debt, the FDCPA does not apply. Id.
Unfortunately for J&L, the Eleventh Circuit recently rejected J&L’s broad
argument that all attempts to enforce a security interest fall outside the FDCPA:
The rule the Ellis law firm asks us to adopt would exempt from the
provisions of § 1692e any communication that attempts to enforce a
security interest regardless of whether it also attempts to collect the
underlying debt. That rule would create a loophole in the FDCPA. A
big one. In every case involving a secured debt, the proposed rule
would allow the party demanding payment on the underlying debt to
dodge the dictates of § 1693e by giving notice of foreclosure on the
secured interest. The practical result would be that the Act would
apply only to efforts to collect unsecured debts. So long as the debt
was secured, a lender (or its law firm) could harass or mislead a
debtor without violating the FDCPA. That can’t be right. It isn’t. A
communication related to debt collection does not become unrelated
to debt collection simply because it also relates to the enforcement of
a security interest. A ‘debt’ is still a ‘debt’ even if it is secured.
Reese, 2012 WL 1500108, at *5. Stated differently, rather than accepting J&L’s
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broad assertion that it sought simply to enforce a “security interest,” the court must
also ascertain whether J&L, in fact, sought to collect a “debt.”4 See generally id.
In that regard, accepting Plaintiffs’ facts as true, Plaintiffs received a mortgage
loan for $322,400.00 to refinance their property and executed a promissory note
secured by the loan. Doc. 3, at 3. After Plaintiffs defaulted, “Defendant J&L sent
a letter to Plaintiffs . . . . The May 2 Letter was an industry standard ‘notice of
acceleration’ and an ‘attempt to collect a debt’ and foreclosure notice . . . .” Id. at
5. Moreover, the Letter informed Plaintiffs that “[t]his is an attempt to collect a
debt, and any information obtained will be used for that purpose.” Doc. 18-1, at 2
(emphasis added). The Letter added further that “[t]he amount of indebtedness
owed to HSBC Bank as of the date hereof is . . . $411,093.38 plus accrued interest
and this firm’s fees and expenses.” Id. Additionally, the Letter stated that “HSBC
Bank has elected to, and does hereby, declare the entire indebtedness secured by
your mortgage to be due and payable . . . .” Id.
In light of these facts, the FDCPA’s definition of “debt” “clearly
encompasses [Plaintiffs’] payment obligations under the promissory note at issue
in this case,” Reese, 2012 WL 1500108, at *4, because Plaintiffs are consumers
whose obligation to pay money arose from a “transaction in which the . . . property
4
“The term “debt” means any obligation or alleged obligation of a consumer to pay
money arising out of a transaction in which the money, property, insurance, or services which are
the subject of the transaction are primarily for personal, family, or household purposes, whether
or not such obligation has been reduced to judgment.” 15 U.S.C. § 1692a(5).
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. . . [is] primarily for personal, family, or household purposes,” 15 U.S.C. §
1692a(5). Thus, “the promissory note is a ‘debt’ within the plain language of §
1692a(5).” Reese, 2012 WL 1500108, at *4; see also Bourff v. Rubin Lublin,
LLC, 674 F.3d 1238, 1241 (11th Cir. Mar. 15, 2012) (holding that a letter
requesting payment on a promissory note secured by a mortgage is “an attempt at
debt collection” within the meaning of the FDCPA).5 Significantly, J&L’s
contention that it attempted simply to enforce a security interest, “wrongly
assumes that a communication cannot have dual purposes. Even if the [J&L] firm
intended the letter and documents to give notice of the foreclosure to the
[Plaintiffs], they also could have – and did – demand payment on the underlying
debt.” Reese, 2012 WL 1500108, at *4. Therefore, the court finds that Plaintiffs
asserted sufficient allegations to allege that J&L attempted to collect a “debt.”
Finding that J&L may have attempted to collect a debt is only one factor in
the analysis. The court must still address whether Plaintiffs alleged sufficient facts
that J&L is a “debt collector” as defined by 15 U.S.C. § 1692a(6). In that respect,
J&L can qualify as a “debt collector” by either using “‘an instrumentality of
5
In Bourff, a law firm sent notice to a plaintiff stating that BAC, the creditor of the
plaintiff’s loan, had retained the law firm to help collect a debt on the loan and that the law firm’s
letter to the plaintiff constituted a “NOTICE PURSUANT TO FAIR DEBT COLLECTION
PRACTICES ACT 15 U.S.C § 1962” and that it was “AN ATTEMPT TO COLLECT A DEBT.”
674 F.3d at 1240. The plaintiff’s complaint alleged that BAC “received an assignment of the
security deed and debt . . . for the purpose of facilitating collection of such debt for another . . . .”
Id. at * 2. The court held that the law firm was a “debt collector” under the FDCPA and violated
its provisions because it misrepresented BAC as a creditor instead of a debt collector. Id.
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interstate commerce or the mails’ in operating a business that has the principle
purpose of collecting debts or by ‘regularly’ attempting to collect debts.” Reese,
2012 WL 1500108, at *5. While it is clear from the complaint that J&L used “an
instrumentality of interstate commerce or the mails,” it is not clear whether
Plaintiffs are maintaining that J&L’s “principle purpose” is collecting debts or that
J&L regularly attempts to collect debts. Nonetheless, because the Reese court
allowed a claim against a law firm to proceed where the plaintiff alleged that the
law firm is “engaged in the business of collecting debts owed to others incurred
for personal, family[,] or household purposes . . . that in the year before the
complaint was filed the firm had sent more than 500 people ‘dunning notice[s]’
containing the ‘same or substantially similar language’ to that found in the letter
and documents attached to the complaint in this case,” Reese, 2012 WL 1500108,
at *6, the court believes it is premature to conclude at this juncture that J&L is not
“operating a business that has the principle purpose of collecting debts or by
‘regularly’ attempting to collect debts.” Instead, the court will give Plaintiffs an
opportunity to conduct some discovery on this issue to see if they can establish
that J&L meets the Reese criteria. Accordingly, the motion to dismiss the FDCPA
claim is DENIED without prejudice.
B.
Fraud Claim – Count II
In Count II, Plaintiffs allege that J&L filed a fraudulent motion with the
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bankruptcy court by representing that HSBC properly secured an interest in
Plaintiffs’ property, which Plaintiffs relied on, and, as a result, suffered harm, i.e.,
a foreclosure action. Doc. 3, at 10. J&L contends that dismissal is warranted
because (1) the fraud claim is preempted by bankruptcy law, (2) J&L’s actions and
statements related to the motion to lift the stay are protected under Alabama’s
litigation privilege, and (3) Plaintiffs are collaterally estopped from bringing
claims against J&L. Doc. 16, at 12-20. The court addresses each contention
below.
1.
Plaintiffs’ Fraud Claim is Not Preempted by Bankruptcy Law.
First, relying on In re Sims, 278 B.R. 457 (E.D. Tenn., Bankr. 2002), J&L
contends that “[a]ny state-law claims against J&L based upon representations
made to or filings made with the Bankruptcy Court are preempted and precluded
under federal bankruptcy law . . . .” Doc. 16, at 12. In In re Sims, the court held
that chapter 13 debtors could not bring a state law claim against a creditor for
abuse of process or material misrepresentation on allegations that the creditor
knowingly and willingly made false material misrepresentations in the bankruptcy
court because “[p]ermitting assertion of a host of state law causes of action to
redress wrongs under the Bankruptcy Code would undermine the uniformity the
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Code endeavors to preserve and would ‘stand as an obstacles to the
accomplishment and execution of the full purposes and objectives of Congress.’”
Id. at 480. Therefore, the court dismissed the state claim on preemption grounds.
Id. at 479.
J&L’s reliance on In re Sims is misplaced for two reasons. First, the
plaintiffs in In re Sims attacked the actual creditor, rather than its lawyers, for
“knowingly and willingly ma[king] false material misrepresentations to the
[Bankruptcy] Court . . . .” 278 B.R. at 479. Here, J&L was not an actual party in
the bankruptcy proceedings. Consequently, the policy reasons for the decision in
In re Sims do not apply. Second, the In re Sims plaintiffs’ state law claim of
material misrepresentation “presuppose[d] a violation of the Bankruptcy Code”
and the plaintiffs filed their state claims during the course of the bankruptcy
proceedings. Id. In contrast, here, Plaintiffs’ fraud claim does not presuppose a
violation of the bankruptcy code. Rather, Plaintiffs allege only that J&L made a
fraudulent representation to the bankruptcy court about the owner of Plaintiffs’
mortgage. In other words, Plaintiffs are not seeking to litigate a bankruptcy code
matter in this court. Moreover, unlike the debtors in In re Sims, Plaintiffs filed
their fraud claim after the confirmation of their plan, doc. 46, and after the
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bankruptcy judge granted the Trustee and Plaintiffs’ application to employ special
counsel to bring this state law civil action against J&L. Therefore, applying In re
Sims here would be improper and would actually undermine the bankruptcy
judge’s decision to authorize the pursuit of this matter by the Trustee.
Accordingly, as it relates to the bankruptcy preemption argument, the motion to
dismiss the fraud claim is DENIED.
2.
J&L’s Actions and Statements Related to the Motion to Lift the
Bankruptcy Stay Are Not Protected under Alabama’s Litigation
Privilege.
Alternatively, J&L contends that the court should dismiss the fraud claim
because the motion it filed in the bankruptcy proceeding is protected by the
Alabama litigation privilege. Under Alabama law, “[p]ertinent statements made in
the course of judicial proceedings are absolutely privileged.” Drees v. Turner, 45
So. 3d 350, 358 (Ala. Civ. App. 2010) (citing O’Barr v. Feist, 292 Ala. 440, 44546 (1974)). Moreover, “[a]bsolutely privileged statements, no matter how false or
malicious, cannot be made the basis of civil liability.” Drees, 45 So. 3d at 358
(citing O’Barr, 292 Ala. at 445). Significantly, the privilege extends also to
lawyers: “Absolute privilege exists in favor of those involved in judicial
proceedings, including judges, lawyers, jurors, and witnesses, shielding them from
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an action for defamation.” Cutts v. American United Life Ins. Co., 505 So. 2d
1211 (Ala. 1987). Indeed,
[t]he privilege is a matter of public policy, and is not intended so
much for the protection of those engaged in the public service and in
the enactment and administration of law, as for the promotion of the
public welfare, the purpose being that members of the legislature,
judges of courts, jurors, lawyers, and witnesses may speak their minds
freely and exercise their respective functions without incurring the
risk of a criminal prosecution or an action for the recovery of
damages.
Dress, 45 So. 2d at 358-59. Finally, as it relates to the dispute before this court,
Alabama courts have extended the privilege beyond defamation claims. Id. at 358.
Based on the case law, J&L contends that it has absolute protection from
any statements it made in the course of the bankruptcy proceedings. Doc. 16, at
15. However, J&L overlooks that the absolute privilege in Drees and Cutts
applied to misrepresentations made about other litigants in the course of a judicial
proceeding. Drees, 45 So. 3d at 358. Here, J&L’s motion allegedly contained
fraudulent information about the identity of a non-party that purportedly held a
security interest in Plaintiffs’ property. Moreover, allegedly, J&L knew about the
fraudulent nature of the information and filed it nonetheless to obtain relief for its
non-party client. If these allegations are true, allowing lawyers to claim immunity
from filing fraudulent motions would significantly undermine Alabama Rule of
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Professional Conduct (“ARPC”) Rule 3.3’s requirement that lawyers maintain
candor with the court. See ARPC Rule 3.3 (“(a) A lawyer shall not knowingly: (1)
make a false statement of material fact or law to a tribunal; (2) fail to disclose a
material fact to a tribunal when disclosure is necessary to avoid assisting a
criminal or fraudulent act by the client; or (3) offer evidence that the lawyer knows
to be false. If a lawyer has offered material evidence and comes to know of its
falsity, the lawyer shall take reasonable remedial measures.”). While, as a matter
of public policy, courts want litigants to freely prosecute their cases without
worrying about their opponents filing defamation or similar lawsuits against them,
the justifications for such a policy are less applicable in situations where, as here,
lawyers allegedly knowingly filed fraudulent information to obtain otherwise
unavailable relief. To allow blanket immunity under these alleged facts is akin to
condoning the filing of allegedly fraudulent motions. This court is not prepared to
do so at this juncture especially since the relevant cases on the privilege involve
litigants and parties to a lawsuit and, as such, are distinguishable from the alleged
facts before the court. Accordingly, as it relates to the Alabama litigation
privilege argument, J&L’s motion on the fraud claim is also DENIED.6
6
In light of the court’s holding, the court need not reach Plaintiffs contention that their
claims relating to the Letter are not protected by Alabama Litigation Privilege and that J&L
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3.
Plaintiffs Are Not Collaterally Estopped from Bringing Claims
Against J&L.
Finally, J&L asserts that dismissal of the fraud claim is warranted on
collateral estoppel grounds. “Collateral estoppel . . . has the dual purpose of
protecting litigants from the burden of relitigating an identical issue with the same
party or his privy and of promoting judicial economy by preventing needless
litigation.” CSX Transp., Inc. v. Bhd. of Maint. of Way Emp., 327 F.3d 1309, 1317
(11th Cir. 2003) (emphasis added). Under Alabama law, collateral estoppel will
apply to an issue raised in an administrative proceeding when the following
elements are met: “1) there is identity of the parties or their privies; (2) there is
identity of issues; (3) the parties had an adequate opportunity to litigate the issues
in the administrative proceeding; (4) the issues to be estopped were actually
litigated and determined in the administrative proceeding; and (5) the findings on
the issues to be estopped were necessary to the administrative decision.” Hale v.
Hyundai Motor Mfg. Alabama, LLC, No. 2100991 2012 WL 29168, *7 (Ala. Civ.
failed to identify what “litigation was pending on May 2, 2011, when the collection letter was
mailed to the Plaintiffs.” Doc. 18, at 14. Plaintiffs overlook, however, that in Count II, they
plead a claim based on a court filing rather than the Letter. Specifically, Plaintiffs state that
“Defendant J&L filed false pleading in their MFRS . . . . Plaintiffs consented to J&L MFRS due
to false claims filed in the bankruptcy case, based on their reliance on the documents filed by
Defendant J&L.” Doc. 3, at 10. In other words, Count II is based on the pleading J&L filed in
the bankruptcy case.
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App. Jan. 6, 2012).
J&L contends that Plaintiffs are collaterally estopped from pursuing their
fraud claim because (1) Plaintiffs allege “the issue at stake in the Motion to Lift
the Automatic Stay was whether the stay should be lifted and foreclosure
proceedings commenced by HSBC . . . .[,]” (2) Plaintiffs raised and litigated the
issue in the bankruptcy proceeding, (3) the determination of the issues were
critical and necessary in lifting the stay because the motion clearly set forth that
HSBC was a secured note holder and entitled to foreclose on the issue, and (4)
Plaintiffs had a full and fair opportunity to litigate the issues in the bankruptcy
proceeding. Doc. 16, at 19. As it relates to the bankruptcy proceedings, the court
notes that J&L’s motion, on behalf of AHMSI, cited Plaintiffs “default in the
payment of the post-petition installments due HSBC Bank” as grounds for relief.
Doc. 19 10-83378-JAC13. The Trustee disagreed and alleged that the $20,500.00
equity in Plaintiffs’ property adequately protected AHMSI. Doc. 26. On
September 27, 2010, the bankruptcy court held a hearing and then granted J&L’s
motion with the consent of the parties. See 10-83378-JAC13; Doc. 30.
J&L’s reliance on these proceedings for its collateral estoppel argument
ignores that Plaintiffs are not trying to relitigate the motion to lift the stay. Rather,
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Plaintiffs are alleging that J&L submitted fraudulent filings to the bankruptcy
court and that Plaintiffs, in turn, relied on these filings to consent to the motion to
lift the stay. Moreover, it is clear that the bankruptcy court proceedings only
addressed whether the equity in Plaintiffs’ property adequately protected AHMSI
or whether the court should lift the stay to allow foreclosure proceedings to
commence. In short, Plaintiffs’ fraud claim is not identical to the issues previously
addressed by the bankruptcy court; nor are the parties identical. Accordingly,
Plaintiffs are not collaterally estopped from bringing their fraud claim.
IV. CONCLUSION
For the reasons set forth above, the motion to dismiss and for Rule 54(b)
certification is DENIED.
DONE this 18th day of June, 2012.
________________________________
ABDUL K. KALLON
UNITED STATES DISTRICT JUDGE
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