Obduskey v. Wells Fargo et al
Filing
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Memorandum Opinion and Order. Upon completion of an independent and comprehensive review of the orders and rulings in this case, I find that the undisclosed ownership of Wells Fargo stock by Judge Jackson or his wife could not have had any influence on the outcome of this case. As such, Mr. Obduskey was not prejudiced by Judge Jacksons untimely recusal. The matter is deemed terminated. ORDERED by Judge John L. Kane on 4/15/2022.(angar, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 15-cv-01734-JLK
DENNIS OBDUSKEY,
Plaintiff,
v.
WELLS FARGO,
WELLS FARGO BANK,
WELLS FARGO & CO.,
WELLS FARGO BANK, N.A.,
WELLS FARGO HOME MORTGAGE, and
MCCARTHY AND HOLTHUS LLP,
Defendants.
MEMORANDUM OPINION AND ORDER
Kane, J.
This case was reassigned to me because Judge R. Brooke Jackson disclosed that either he
or his wife owned stock in Defendant Wells Fargo Bank, N.A. (“Wells Fargo”)1 during the time
he presided over the case. Although Judge Jackson has recused, he did so after ruling on the
merits and entering final judgment in favor of Defendants Wells Fargo and McCarthy and
Holthus, LLP (“McCarthy”), and against Plaintiff Dennis Obduskey. In response to Judge
Jackson’s disclosure of the grounds for his disqualification, Mr. Obduskey requested “at least
three weeks to locate counsel and . . . potentially request a review.” Pl.’s Resp. to Letter from
Clerk at 1, ECF No. 51. Wells Fargo requested a similar extension of time to respond. Wells
Fargo Resp. to Letter from Clerk at 2, ECF No. 55.
1
Wells Fargo Bank, N.A. asserted Mr. Obduskey improperly filed suit against Wells Fargo,
Wells Fargo Bank, Wells Fargo & Co., and Wells Fargo Home Mortgage. See Wells Fargo Mot.
to Dismiss at 1, ECF No. 14.
1
I have conducted a sua sponte review of the case. For the reasons stated in this Order, I
find the circumstances here do not warrant vacatur—the only relief available to Mr. Obduskey—
as there was no prejudicial error in the judgment or rulings against him.
Background
In 2007, Mr. Obduskey obtained a loan from Magnus Financial Corporation to purchase a
home in Bailey, Colorado. The loan was secured by Mr. Obduskey’s property and was serviced
by Wells Fargo. Mr. Obduskey defaulted on the loan in June 2009. Wells Fargo initiated
nonjudicial foreclosure proceedings the next month by filing a Notice of Election and Demand
for Sale by Public Trustee (“NED”), pursuant to Colorado law. See 7/10/2009 NED, ECF No. 129. That nonjudicial foreclosure proceeding, as well as two others on the property, was not
completed.
Between 2008 and 2012, Wells Fargo accepted 12 trial payments from Mr. Obduskey in
accordance with three loan modification offers. Nevertheless, his loan was not modified. Over
the course of that four-year span, Wells Fargo sent documents to Mr. Obduskey with “opposing
messages within days of each other” and it “claimed numerous different owners of the note.”
Compl. at 3 ¶ 5; 5 ¶ 14. In January 2013, Mr. Obduskey became aware that Wells Fargo had
reported “dispute resolved; customer disagrees” to the credit bureaus—information he describes
as “derogatory.” Id. at 15 ¶ 25. That same year, despite being notified that Mr. Obduskey was
represented by counsel, either Wells Fargo or an authorized representative began posting
monthly notices at Mr. Obduskey’s home, urging him to contact his mortgage servicer. Id. at 8 ¶
26. When he called the phone number listed on the notices, he was directed to Wells Fargo. Id.
2
In 2014, Wells Fargo retained a new law firm, McCarthy and Holthus, LLP, to initiate a
fourth nonjudicial foreclosure of Mr. Obduskey’s property. McCarthy sent Mr. Obduskey
undated letters in August 2014 advising him that the firm was serving as Wells Fargo’s debt
collector, and that Wells Fargo intended to re-initiate foreclosure proceedings. The notices
informed Mr. Obduskey that McCarthy would assume, for purposes of the Fair Debt Collection
Practices Act (the “FDCPA” or “Act”), that the debt was valid unless Mr. Obduskey responded
within 30 days. The FDCPA states:
If the consumer notifies the debt collector in writing within [30 days] . . ., the debt
collector shall cease collection of the debt, or any disputed portion thereof, until the
debt collector obtains verification of the debt or a copy of a judgment, or the name
and address of the original creditor, and a copy of such verification or judgment, or
name and address of the original creditor, is mailed to the consumer by the debt
collector.
15 U.S.C. § 1692g(b). Although Mr. Obduskey requested verification of the debt, McCarthy did
not provide the requested information before initiating a foreclosure action by filing an NED in
May 2015. As with the earlier foreclosure attempts, the proceedings “became a matter of public
record” and notice of the proceeding appeared in local publications. Compl. at 15 ¶¶ 23, 24.
Mr. Obduskey filed the Complaint in this case in August 2015. In it, he alleged (1)
violations of the FDCPA, 15 U.S.C. §§ 1692, et seq.; (2) unfair and deceptive trade practices in
violation of the Colorado Consumer Protection Act (the “CCPA”), Colo. Rev. Stat. §§ 6-1-101 et
seq.; (3) defamation; (4) extreme and outrageous conduct; and (5) “commencement of an
unlawful collections action.” Compl. at 12-18, ECF No. 1. Defendants filed motions to dismiss
pursuant to Federal Rule of Civil Procedure 12(b)(6), and Judge Jackson granted the motions on
3
July 19, 2016, dismissing each of Mr. Obduskey’s claims with prejudice. 2 See 7/19/2016 Order,
ECF No. 41. In his ruling, Judge Jackson determined neither Wells Fargo nor McCarthy
qualified as a debt collector under the FDCPA and, consequently, its provisions did not apply. Id.
at 5-7. He dismissed the remaining four claims for failure to allege a necessary element or failure
to plead a recognized cause of action. Id. at 8-16. Mr. Obduskey appealed.
On appeal, the Tenth Circuit Court of Appeals conducted a de novo review. 3 See
Obduskey v. Wells Fargo, 879 F.3d 1216 (10th Cir. 2018), aff’d sub nom. Obduskey v. McCarthy
& Holthus LLP, 139 S. Ct. 1029 (2019). After noting a division among the Circuit Courts, the
Tenth Circuit held for the first time that “[e]ntities engaged in non-judicial foreclosure actions in
Colorado are not debt collectors under the FDCPA.” Id. at 1221. The Court affirmed Judge
Jackson’s dismissal of Mr. Obduskey’s FDCPA claim on that basis. It also affirmed the dismissal
of Mr. Obduskey’s remaining claims, noting they only “warrant[ed] summary treatment.” Id. at
1223. Again, Mr. Obduskey appealed.
The United States Supreme Court granted Mr. Obduskey’s petition for certiorari as to his
FDCPA claim against McCarthy 4 “in light of [the] different views among the Circuits about
application of the FDCPA to nonjudicial foreclosure proceedings.” Obduskey, 139 S. Ct. at 1035.
2
Judge Jackson also denied Mr. Obduskey’s request for a temporary restraining order and
preliminary injunction based on his conclusion that dismissal was appropriate. See 7/19/2016
Order at 17.
3
A de novo review means the reviewing court “uses the trial court’s record but reviews the
evidence and law without deference to the trial court’s rulings.” Appeal De Novo, Black’s Law
Dictionary (11th ed. 2019).
4
The Tenth Circuit agreed with the district court that Wells Fargo is not a “debt collector” under
the FDCPA because it began servicing Mr. Obduskey’s loan before he went into default.
Obduskey v. Wells Fargo, 879 F.3d at 1219 (citing 15 U.S.C. § 1692a(6)(F) (excluding “any
person collecting or attempting to collect any debt . . . which was not in default at the time it was
obtained by such person”)); see also 7/19/2016 Order at 6. McCarthy, on the other hand, began
its collection efforts after Mr. Obduskey’s default.
4
The Court considered the extent to which the FDCPA applies to nonjudicial foreclosure
proceedings by focusing on the Act’s “limited-purpose definition” as it applied to McCarthy. Id.
at 1036 (“For the purpose of section 1692f(6) [the] term [debt collector] also includes any person
. . . in any business the principal purpose of which is the enforcement of security interests.”
(quoting 15 U.S.C. § 1692a(6))). While the parties did not dispute McCarthy was subject to
section 1692f(6)’s prohibitions, they disagreed about whether it was subject to the main coverage
of the Act. Id. The Supreme Court held that McCarthy was not subject to the Act’s main
provisions. Id. at 1038 (“[B]ut for § 1692f(6), those who engage in only nonjudicial foreclosure
proceedings are not debt collectors within the meaning of the Act.”). Consequently, on March
20, 2019, the Tenth Circuit’s judgment was affirmed.
Judge Jackson’s Recusal
On November 8, 2021, the Clerk of the Court notified Mr. Obduskey of Judge Jackson’s
recusal and the reason therefor, explaining that the “stock ownership would have required recusal
under the Code of Conduct for United States Judges . . . .” Letter from Clerk at 1, ECF No. 50.
Indeed, the Code of Conduct provides: “A judge . . . should act at all times in a manner that
promotes public confidence in the integrity and impartiality of the judiciary.” Code of Conduct
for United States Judges, Canon 2(A). This provision is advisory and admonitory as reflected in
the word “should.” More to the point, and binding as a matter of law, is the statutory provision,
28 U.S.C. § 455(a), which states “[a]ny justice, judge, or magistrate judge of the United States
shall disqualify himself in any proceeding in which his impartiality might reasonably be
questioned.” The word “shall” makes this statute mandatory rather than advisory. Section 455(a)
can be violated without knowledge of a disqualifying circumstance, though a “judge’s lack of
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knowledge . . . may bear on the question of remedy.” Liljeberg v. Health Services Acquisition
Corp., 486 U.S. 847, 859 (1988).
Section 455(b) specifically compels a judge to disqualify himself if either he or his
spouse “has a financial interest . . . in a party to the proceeding.” It matters not how small the
ownership interest is, or how trivial it might be in the context of the judge’s financial affairs, as
section 455(b) applies to any financial interest, “however small.” Id. § 455(d)(4). Additionally,
section 455(c) states: “A judge should inform himself about his personal and fiduciary financial
interests, and make a reasonable effort to inform himself about the personal financial interests of
his spouse . . . .”
Pursuant to these provisions, Judge Jackson should have recused from this case upon its
assignment to him without taking any other action beforehand. Nevertheless, he recused in
accordance with Canon 3(C)(1) of the aforementioned Code once the Wells Fargo stock
ownership was brought to his attention. See Order of Recusal, ECF No. 59.
The Clerk’s letter regarding the grounds for recusal invited Mr. Obduskey to submit a
response and advised that any such response would be considered by another judge of this court
without the participation of Judge Jackson. On November 30, 2021, Mr. Obduskey filed a timely
response in which he stated he was not represented by counsel, and he had only received a copy
of the Clerk’s letter a week earlier. Pl.’s Resp. to Letter from Clerk at 1. Mr. Obduskey requested
at least three weeks to find new counsel and to “determine [his] ability to pursue the matter in the
courts and potentially request a review.” Id. Aware of Mr. Obduskey’s intentions to retain new
counsel, his prior counsel filed a Motion to Withdraw as Counsel of Record (ECF No. 53) two
days later. That motion is hereby GRANTED. More than four months have passed since Mr.
Obduskey submitted his letter and no new attorney has entered an appearance.
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Independent Review
Following the submission of Mr. Obduskey’s letter and reassignment of this case to me, it
is incumbent upon me to review the case de novo to confirm that no error affected Mr.
Obduskey’s substantial rights. To be sure, an error under § 455(b) occurred when Judge Jackson
failed to disclose the stock ownership and recuse from the case immediately upon its having been
drawn to him by the Clerk’s Office. The purpose of my review is to determine whether that error
was prejudicial to Mr. Obduskey.5
In Liljeberg, the Supreme Court explained that “[s]ection 455 does not, on its own,
authorize the reopening of closed litigation. However, . . . Federal Rule[] of Civil Procedure
60(b) provides a procedure whereby, in appropriate cases, a party may be relieved of a final
judgment.” 486 U.S. at 863. “Rule 60(b) . . . grants federal courts broad authority to relieve a
party from a final judgment” by vacating the judgment. Id. Rather than encourage Mr. Obduskey
to pursue a fruitless motion, I have preemptively conducted a comprehensive review of the case
and, in doing so, determined that no prejudicial error would support vacatur here.
5
In considering violations of 28 U.S.C. § 455(a), the Supreme Court has directed courts to
consider “the risk of injustice to the parties in the particular case, the risk that the denial of relief
will produce injustice in other cases, and the risk of undermining the public’s confidence in the
judicial process.” Liljeberg, 486 U.S. at 864; see also Harris v. Champion, 15 F.3d 1538, 1571
(10th Cir. 1994) (extending the Liljeberg analysis to violations of § 455(b)). In conducting my
review, I draw a careful distinction between the usual standard of “harmless error,” i.e., an error
or defect that does not affect a party’s substantial interest, and the factors articulated by the
Supreme Court. I do so because any violation of § 455 causes harm to the integrity of the judicial
process and can impair public confidence in the judicial system even when it is promptly
corrected. After all, “[t]here are few characteristics of a judiciary more cherished and
indispensable to justice than the characteristic of impartiality.” United States v. Greenspan, 26
F.3d 1001, 1007 (10th Cir. 1994). However, under the circumstances here—in particular, Judge
Jackson’s lack of awareness of the grounds for disqualification during the time he presided over
the case—my review is focused on whether the belatedly disclosed stock ownership was
prejudicial to Mr. Obduskey.
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This case was decided entirely on issues of law taking all of Mr. Obduskey’s allegations
as true for purposes of the motions to dismiss. Judge Jackson made no findings of fact on
contested matters of evidence. He did not, nor was he required to, make any determinations of
credibility that might have created a possibility of bias. Hence, Judge Jackson made no
discretionary rulings or subjective determinations that favored Defendants.
Judgment entered against Mr. Obduskey because the allegations of his Complaint failed
to put forth any claim upon which relief could be granted as a matter of law. Specifically, Mr.
Obduskey did not satisfy the CCPA’s public impact requirement;6 he failed to allege special
damages, as required for his defamation claim; and he failed to identify conduct that meets the
“high bar” necessary to establish a claim for extreme and outrageous conduct. See 7/19/2016
Order at 8-13. He failed to state his fifth claim because there is no “unlawful collections” claim
or wrongful foreclosure tort under Colorado law. Id. at 14. While Mr. Obduskey’s FDCPA cause
of action showed the most promise, it was also dismissed as a matter of law by all three courts to
consider his arguments.
Judge Jackson’s decision on appeal to the Tenth Circuit was given de novo review. The
Tenth Circuit affirmed the dismissal for failure to state a claim. The Court of Appeal’s decision
affirming Judge Jackson’s Order granting the motions to dismiss is determinative of the present
issue because none of Judge Jackson’s conclusions played a role in the Tenth Circuit’s decision.
6
To prevail on a claim for relief under the CCPA, a plaintiff must prove five elements, the third
of which is the requirement that the defendant’s conduct impact the public:
(1) that the defendant engaged in an unfair or deceptive trade practice; (2) that the
challenged practice occurred in the course of defendant's business, vocation, or
occupation; (3) that it significantly impacts the public as actual or potential
consumers of the defendant’s goods, services, or property; (4) that the plaintiff
suffered injury in fact to a legally protected interest; and (5) that the challenged
practice caused the plaintiff’s injury.
Crowe v. Tull, 126 P.3d 196, 201 (Colo. 2006).
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Moreover, the review of the Order was made by an independent panel of appellate judges, none
of whom had any disqualifying interest concerning the parties or the judgment entered by the
trial court.
The basis for Mr. Obduskey’s FDCPA claim—his strongest claim—was that Defendants
were debt collectors as defined by the Act. As to Wells Fargo, both the Tenth Circuit and the
Supreme Court disagreed with Mr. Obduskey. In regard to McCarthy, the Tenth Circuit held it
was not a debt collector because the FDCPA does not apply to Colorado’s nonjudicial
foreclosure proceedings. The Supreme Court largely concurred with that analysis, however it
identified an exception for entities such as McCarthy. The Court held that McCarthy is only a
debt collector within the meaning of the Act for the limited purpose of enforcing security
interests under section 1692f(6) of the FDCPA. Obduskey, 139 S. Ct. at 1038.
According to section 1692f(6), “[a] debt collector may not use unfair or unconscionable
means to collect or attempt to collect any debt.” 15 U.S.C. § 1692f(6). In addition, “the following
conduct is [also] a violation of this section”:
Taking or threatening to take any nonjudicial action to effect dispossession or
disablement of property if—
•
there is no present right to possession of the property claimed as collateral
through an enforceable security interest;
•
there is no present intention to take possession of the property; or
•
the property is exempt by law from such dispossession or disablement.
Id. (numbering omitted). After applying this sole exception to Mr. Obduskey’s FDCPA claim,
the Court determined McCarthy did not violate § 1692f(6) because “the notices sent by
McCarthy were antecedent steps required under state law to enforce a security interest,” and “the
Act’s (partial) exclusion of ‘the enforcement of security interests’ must also exclude the legal
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means required to do so.” Obduskey, 139 S. Ct. at 1039. In sum, the Court dismissed Mr.
Obduskey’s strongest claim on the basis of statutory interpretation.
To put this matter in a stark comment: Twelve other judges, three on the Court of
Appeals and nine on the Supreme Court, gave this case a fresh look unhindered by an appearance
of impropriety at all. While Judge Jackson’s failure to recuse is sufficient to warrant this
examination by another judge, I find his undisclosed stock interest in Wells Fargo could not have
had any influence or caused any prejudice to Mr. Obduskey. Consequently, there is no useful
purpose in reopening this case.
Conclusion
Upon completion of an independent and comprehensive review of the orders and rulings
in this case, I find that the undisclosed ownership of Wells Fargo stock by Judge Jackson or his
wife could not have had any influence on the outcome of this case. As such, Mr. Obduskey was
not prejudiced by Judge Jackson’s untimely recusal. The matter is deemed terminated.
DATED this 15th day of April, 2022.
______________________________
JOHN L. KANE
SENIOR U.S. DISTRICT JUDGE
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