Williams v. Quantum Servicing Corporation et al

Filing 65

MEMORANDUM OPINION Signed by the Honorable John F. Grady on January 23, 2013. Mailed notice(cdh, )

11-9106.131-JCD

January 23, 2013

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
KEITH WILLIAMS and
STANDARD BANK AND TRUST COMPANY
AS TRUSTEE u.t.a. dated 10-06-1993
a.k.a. Trust No. 14086,
Plaintiffs,
v.
QUANTUM SERVICING CORPORATION and
MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC.,
Defendants.

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No. 11 C 9106

MEMORANDUM OPINION
Before

the

court

are

the

motions

of

defendants

Quantum

Servicing Corporation and Mortgage Electronic Registration Systems,
Inc. to dismiss the First Amended Complaint or stay the action and
the

plaintiffs’

Complaint.

motion

for

leave

to

file

a

Second

Amended

For the reasons explained below, the defendants’

motions are granted in large part and the plaintiffs’ motion is
denied.
BACKGROUND
Plaintiff Standard Bank and Trust Company (the “Bank as
Trustee”) is the trustee of a land trust formed by plaintiff Keith
Williams to hold title to his house.

On June 11, 2007, the house

was mortgaged with American Home Mortgage Corporation (“American

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Home”).1

As part of this transaction, Williams and the Bank as

Trustee signed a note (the “Note”) in favor of American Home, and
the Bank as Trustee signed a mortgage (the “Mortgage”) conveying a
security interest in the house.

The Mortgage identifies American

Home as Lender and states that defendant Mortgage Electronic
Registration Systems, Inc. (“MERS”) “is a separate corporation that
is acting solely as a nominee for Lender and Lender’s successors
and

MERS

assigns.

Instrument.”

is

the

mortgagee

under

this

Security

(The Note is attached as Exhibit A, and the Mortgage

is attached as Exhibit B, to plaintiffs’ First Amended Complaint.)
Shortly thereafter, American Home sold the Note and the
Mortgage to Société Générale, a French bank.
loan,

however,

which

apparently

was

The servicer of the

American

Servicing, Inc., remained the same at that point.

Home

Mortgage

From September

1, 2007 onward, defendant Quantum Servicing Corporation (“Quantum”)
has represented itself (falsely, it is alleged) to plaintiffs as
the servicer of the Note and Mortgage.

Quantum sent Williams

statements each month, and Williams made mortgage payments to
Quantum.

(First Am. Compl. ¶ 21.)

On January 20, 2010, Quantum recorded what plaintiffs deem a
“purported” “Loan Modification Agreement (the “Agreement”) between
the Bank as Trustee and Quantum; the Agreement identifies Quantum
as Lender. Plaintiffs allege that Quantum “induced Plaintiffs into
1/

American Home was originally named as a defendant in this case, but
plaintiffs have dismissed their claims against it.

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signing” the Agreement by making the false representation to them
that it is the servicer.

(First Am. Compl. ¶ 21.)

It is alleged

that no Assignment or other transfer of the Note or Mortgage to
Quantum had been recorded as of the date when the Agreement was
recorded.

(First Am. Compl. ¶ 17.)

It is plaintiffs’ position

that the Agreement is void and conveyed nothing to Quantum and that
Quantum is neither the owner nor legal holder of the Note or
Mortgage.

(First Am. Compl. ¶ 33.)

Subsequently,
foreclosure

action

on

October

against

8,

2010,

plaintiffs,

in

preparation

Quantum

recorded

for

a

what

plaintiffs deem a “purported” Assignment of Mortgage wherein MERS
assigned the Mortgage to Quantum.

According to plaintiffs, the

Assignment of Mortgage “was signed by two employees of Quantum who
falsely claimed to sign on behalf of MERS when in fact they had no
authority to do so.”

(First Am. Compl. ¶ 34.)

On February 9,

2011, Quantum filed a “Complaint to Foreclose Mortgage” against
plaintiffs in the Circuit Court of Cook County.

Williams and the

Bank as Trustee moved to dismiss the action on the ground that
Quantum has no standing to foreclose because it is not the “holder”
of the mortgage. The motion was denied, and a motion to reconsider
that ruling was also denied.
Then, on December 22, 2011, plaintiffs brought the instant
action in this court.
counts.

The First Amended Complaint contains five

Count I alleges that Quantum violated the Fair Debt

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Collection Practices Act by making false representations that the
mortgage payments were owed to Quantum.
claim against Quantum and MERS.

Count II is a quiet-title

Count III alleges that Quantum

violated the Illinois Uniform Deceptive Trade Practices Act by
“falsely holding itself out as the servicer of the Note and the
Mortgage and wrongfully collecting mortgage payments.”
Compl. ¶ 45.)

(First Am.

Counts IV and V are claims against Quantum for,

respectively, slander of title and unjust enrichment.

Plaintiffs

seek actual, statutory, and punitive damages, restitution in the
amount of $100,000.00, reasonable attorney’s fees and costs, and an
order enjoining Quantum from representing itself as the servicer or
as mortgagee and from attempting to collect the subject debt. They
also seek a declaration that Quantum and MERS do not have any
interest in the subject property and that they are entitled to none
of the rights and remedies accorded to mortgagees.
The defendants move to dismiss or stay the action pursuant to
the

Younger

and

Colorado

River

abstention

doctrines

and

alternatively to dismiss pursuant to Federal Rule 12(b)(6) for
failure to state a claim.2

Plaintiffs have responded and have

filed a motion for leave to file a Second Amended Complaint that
would add a Count VI, a federal antitrust claim pursuant to the
Sherman Act against Quantum and MERS.3

2/
Quantum briefed its motion; MERS filed a separate motion that adopts
the arguments in Quantum’s briefs.
3/

We took plaintiffs’ motion under advisement without requiring briefs.

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DISCUSSION
Defendants’ primary argument is that in light of the pending
state-court foreclosure proceeding, we should dismiss or stay this
action pursuant to the abstention doctrines set forth in Younger v.
Harris, 401 U.S. 37 (1971), and Colorado River Water Conservation
District v. United States, 424 U.S. 800 (1976).
Younger does not fit this case. Plaintiffs point out that the
Court of Appeals has stated that Younger abstention “is appropriate
only when there is an action in state court against the federal
plaintiff and the state is seeking to enforce the contested law in
that proceeding.”

Forty One News, Inc. v. County of Lake, 491 F.3d

662, 665 (7th Cir. 2007).

In the state-court proceeding against

plaintiffs, the state is not seeking to enforce any of its laws.
Defendants do not argue otherwise, and they fail to address Forty
One News.

Instead, they ask to us to follow a Kentucky district-

court opinion that applied the Younger doctrine in a similar case.
We decline to do so; we are bound by Seventh Circuit law.
Colorado River, however, does apply.

The Colorado River

abstention doctrine “permits a district court to dismiss or stay an
action when there is an ongoing parallel action in state court.”
LaDuke v. Burlington N. R.R. Co., 879 F.2d 1556, 1558 (7th Cir.
1989).

The

principles

underlying

the

doctrine

“‘rest

on

considerations of wise judicial administration, giving regard to
conservation of judicial resources and comprehensive disposition of

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litigation.’”

Id. (quoting Colorado River, 424 U.S. at 817) (some

internal quotation marks and brackets omitted).

The mere fact of

pending state-court litigation is insufficient; our “virtually
unflagging

obligation”

abstention

must

be

to

exercise

limited

to

jurisdiction

“exceptional”

means

that

circumstances.

Colorado River, 424 U.S. at 817-18; LaDuke, 879 F.2d at 1558.
The first step in the analysis is to determine whether the
concurrent

state

and

federal

LaDuke, 879 F.2d at 1559.

actions

are

actually

parallel.

“Suits are parallel when substantially

the same parties are contemporaneously litigating substantially the
same issues in another forum.”
omitted).

This

suit

and

the

Id. (internal quotation marks
state-court suit

are parallel.

Although MERS is not a party to the state-court suit, the parties
are substantially identical.

MERS’s interests are aligned with

Quantum’s,4 and “formal symmetry” is not required for suits to be
sufficiently parallel.
Cir.

2004).

The

See Clark v. Lacy, 376 F.3d 682, 686 (7th

salient

question

is

whether

“there

is

a

substantial likelihood that the state court litigation will dispose
of all claims presented in the federal case.”
Flegles,
omitted).

Inc.,

419

F.3d

584,

592

(7th

Cir.

TruServ Corp. v.
2005)

(brackets

The central issue in both cases, and the issue on which

plaintiffs’ state and federal claims are premised, is whether
Quantum has the right to foreclose on the subject property based on
4/

The only claim in this suit to which MERS is named as a defendant is
the quiet-title claim.

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the mortgage securing the debt owed by Williams.

It is very likely

that the state-court proceeding will dispose of all the claims
presented in the instant case.
Where,

as

here,

there

are

parallel

federal

and

state

proceedings, we consider the following non-exclusive factors to
determine whether we should abstain:
1) whether the state has assumed jurisdiction over
property; 2) the inconvenience of the federal forum; 3)
the desirability of avoiding piecemeal litigation; 4) the
order in which jurisdiction was obtained by the
concurrent forums; 5) the source of governing law, state
or federal; 6) the adequacy of state-court action to
protect the federal plaintiff’s rights; 7) the relative
progress of state and federal proceedings; 8) the
presence or absence of concurrent jurisdiction; 9) the
availability of removal; and 10) the vexatious or
contrived nature of the federal claim.
LaDuke, 879 F.2d at 1559.

These factors are “‘to be applied in a

pragmatic, flexible manner with a view to the realities of the case
at hand.’”

Id. (quoting Moses H. Cone Mem’l Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 21 (1983)).

“[T]he weight given to any

particular factor will vary greatly from case to case, depending on
the particular factual setting of the case at hand,” and we should
also consider any “special factors counselling for or against the
exercise of jurisdiction” in the case before us.

LaDuke, 879 F.2d

at 1559 (internal quotation marks omitted).
The majority of the factors enumerated by the Seventh Circuit,

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taken together, weigh strongly in favor of abstention.5

Factors

one and four weigh in favor of abstention: the state court assumed
jurisdiction over the property at issue in both cases, and it did
so several months before plaintiffs filed the instant case. Factor
seven

slightly

favors

abstention:

the

state-court

case

has

progressed a bit further than the instant case, beyond a motion to
dismiss and a motion to reconsider the denial of that motion, but
nothing significant has happened since then.

Factor 5, which

favors abstention when state law governs the outcome of a suit,
Caminiti & Iatarola, Ltd. v. Behnke Warehousing, Inc., 962 F.2d
698, 702 (7th Cir. 1992), favors abstention here because the issue
of Quantum’s interest in the subject property is one of Illinois
mortgage-foreclosure

law,

see

735

ILCS

5/15-1501

et

seq.

Plaintiffs’ FDCPA claim is a question of federal law, but that
claim ultimately hinges on the same state-law issue, whether
Quantum has the right to foreclose.

The FDCPA grants state and

federal courts concurrent jurisdiction to enforce its provisions,
15 U.S.C. § 1692k(d), so factor eight favors abstention.

Factor

six also favors abstention because we have no reason to question
the adequacy of the state-court action to protect plaintiffs’
rights.

Plaintiffs present a single-sentence argument that the

Cook County foreclosure courts are “burdened with a staggering

5/
Factor two is neutral; the state and federal courts are both in the
Chicago metropolitan area, and the parties would not have to commute a long
distance to either court.

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volume of cases” and “lack both the time and resources to address”
their FDCPA claim, Pls.’ Resp. at 14, but the Seventh Circuit has
rejected such conclusory contentions.

See, e.g., Tyrer v. City of

S. Beloit, 456 F.3d 744, 757 (7th Cir. 2006) (“The insinuation that
Illinois courts will not live up to the standard of full and fair
adjudication of the issues is pure speculation that we expressly
disavow.”

(internal

quotation

marks

omitted)).

And,

as

we

discussed above, the crux of the FDCPA claim is really a question
of Illinois law.
Factor

three,

the

desirability

of

avoiding

litigation, weighs strongly in favor of abstention.

piecemeal
“Piecemeal

litigation occurs when different tribunals consider the same issue,
thereby

duplicating

efforts

and

possibly

reaching

different

results.”

LaDuke, 879 F.2d at 1560 (internal quotation marks

omitted).

As discussed above, this court and the state court are

considering the same issue--Quantum’s right to foreclose on the
subject property--which results in a duplication of time and effort
and

the

potential

for

gamesmanship

and

conflicting

rulings.

Plaintiffs point to Count VI, the federal antitrust claim they seek
leave to add to the complaint, and argue that it is a “question of
exclusive federal jurisdiction” and that “[t]o move the other
counts . . . to State court” would result in piecemeal litigation.
(Pls.’ Resp. at 14.)

This argument misses the mark because

abstention would not mean that we would “move” anything to state

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court; we

would

simply

stay

proceeding has been resolved.6

this case

until

the

state-court

Furthermore, Count VI does not yet

exist, and for reasons that dovetail with factor 10, which also
favors abstention, we will deny plaintiffs’ motion for leave to
amend the complaint to add that claim.

Under Factor 10, we look at

whether the federal claim is vexatious or contrived.

The timeline

of these cases leads us to believe that this suit is a contrived
reaction to the state-court foreclosure proceeding as well as to
plaintiffs’ setbacks therein.

The FDCPA claim is premised on the

same basic allegation as plaintiffs’ state-law claims. The instant
motion for leave to file a second amended complaint to add an
antitrust claim seems to be another layer of contrivance--an
attempt to prevent the application of an abstention doctrine
instead of a serious assertion of a violation of the Sherman Act.7
Moreover, factor nine, the availability of removal, weighs in favor
of abstention because plaintiffs assert diversity jurisdiction and
therefore could have removed the state-court case to federal court
instead of creating this second action.
6/

Plaintiffs’ assertion that it would be error to dismiss the complaint
because they seek leave to add this Sherman Act claim also misses the mark. We
will not dismiss the complaint pursuant to Colorado River. See, e.g., CIGNA
Healthcare of St. Louis, Inc. v. Kaiser, 294 F.3d 849, 851 (7th Cir. 2002)
(district courts should stay, not dismiss, a case when abstaining under Colorado
River). We will merely stay this action pending the outcome of the state-court
foreclosure proceeding, and in the unlikely event that plaintiffs still wish to
seek leave to assert an antitrust claim after that proceeding is concluded, they
may do so at that point.
7/

It does not appear that the proposed Second Amended Complaint
successfully states an antitrust claim, but because we have decided to stay this
proceeding, we need not discuss the deficiencies of the proposed claim at this
juncture.

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Because nine of the ten enumerated factors favor abstention,
there are exceptional circumstances warranting a stay of this case
pursuant to the Colorado River doctrine.

We need not address

defendants’ Rule 12(b)(6) arguments because dismissal on that basis
is sought only in the alternative to abstention.
CONCLUSION
The defendants’ motions to dismiss or stay the action [36, 39]
are granted to the extent that this action is stayed pursuant to
the Colorado River abstention doctrine pending the outcome of the
state-court foreclosure proceeding.

The plaintiffs’ motion for

leave to file a Second Amended Complaint [48] is denied without
prejudice.
The

parties

are

directed

to

notify

the

court

when

the

foreclosure proceeding in Cook County has been resolved.

DATE:

January 23, 2013

ENTER:

_________________________________________________
John F. Grady, United States District Judge