Crooks v. Household Finance Corporation III et al

Filing 42

OPINION AND ORDER granting 36 MOTION to Dismiss Second Amended Complaint and for Entry of Final Judgment and an Award of Sanctions filed by Lucy R Dollens, Melanie D Margolin, Michele Lorbieski Anderson, Julia Blackwell Gelinas, HSBC Mortgage Service, Household Finance Corporation III.Mr Crooks is afforded to/including 3/22/2012 within which to show cause why sanctions shouldn't be entered against him. Signed by Judge Robert L Miller, Jr on 3/1/2012. (kds)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
DAVID CROOKS,
Plaintiff
vs.
HOUSEHOLD FINANCE CORP. III;
HSBC MORTGAGE SERVICES;
JULIA BLACKWELL GELINAS;
MICHELE LORBIESKI ANDERSON;
MELANIE D. MARGOLIN;
LUCY R. DOLLENS; and
DOES 1 through 10,
Defendants

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CAUSE NO. 3:11-CV-221 RM

OPINION and ORDER
David Crooks, proceeding pro se, has filed a second amended complaint
following the November 7, 2011 dismissal of his first amended complaint pursuant
to Federal Rule of Civil Procedure 12(b)(1), and the dismissal, on August 30, 2011,
of his initial complaint pursuant to Federal Rules of Civil Procedure 8, 9, 10,
12(b)(1), and 12(b)(6). Mr. Crooks alleges in his most recent complaint that the
defendants violated various provisions of the Fair Debt Collection Practices Act,
15 U.S.C. § 1692 et seq. Mr. Crooks is seeking actual or statutory damages,
punitive damages, and attorney’s fees and costs.
Mr. Crooks alleges that in August 2006, August 2010, and August 2011 he
wrote to the defendants seeking validation or verification of his mortgage loan
debt. He says he never received a response, yet the defendants continued

collection activities after receiving his correspondence. Mr. Crooks maintains the
defendants violated the Fair Debt Collection Practices Act by failing to provide
written validation or the legal status of the debt; failing to demonstrate that they
were not making false and misleading representations in communications or in
the nature of the debt; misrepresenting the legal status and amount of the alleged
debt and the character of the debt as an obligation to HSBC Finance Corporation
III; continuing collection activities after receiving notice of dispute; failing to
demonstrate that the interest charged was a term in the alleged agreement or was
permitted by law; using false representations and deceptive means to collect a
debt; attempting to collect a debt when the defendants “knew that the debt was
not legitimate by obfuscating the parties to create confusion and avoid culpability
for the collection of an illegitimate debt;” “engaging in conduct the natural
consequence of which is to harass, oppress, or abuse any person;” and
communicating credit information “which is known or which should be known to
be false, including the failure to communicate that a disputed debt is disputed.”
Mr. Crooks alleges that he is a consumer under the FDCPA and each defendant
is a debt collector within in the meaning of the Act.
The defendants have moved to dismiss the second amended complaint
under Federal Rule of Civil Procedure 12(b)(1), arguing that the Rooker-Feldman
doctrine1 deprives the court of subject matter jurisdiction over Mr. Crooks’s

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See generally Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia
Court of Appeals v. Feldman, 460 U.S. 462 (1983).

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claims. The defendants also ask that Mr. Crooks be required to pay the attorney
fees they have incurred in defending this action as a sanction for his recycling of
the same claims the court rejected in his first two complaints.
A federal court must assure itself that it has jurisdiction over the subject
matter of a case before it can proceed to take any action on the merits. See Warth
v. Seldin, 422 U.S. 490, 498 (1975); Craig v. Ontario Corp., 543 F.3d 872, 875
(7th Cir. 2008). Federal Rule of Civil Procedure 12(b)(1) authorizes dismissal of
complaints that bring no actionable claim within the subject matter jurisdiction
of the federal courts. In reviewing a motion under Rule 12(b)(1), the court must
“accept as true all well-pleaded factual allegations and draw all reasonable
inferences in favor of the plaintiff,” yet, if necessary, may “look beyond the
jurisdictional allegations of the complaint and view whatever evidence has been
submitted on the issue to determine whether in fact subject matter jurisdiction
exists.” St. John’s United Church of Christ v. City of Chicago, 502 F.3d 616, 625
(7th Cir. 2007) (internal quotations and citation omitted). The party asserting
jurisdiction bears the burden of demonstrating subject matter jurisdiction by
competent proof. Thomas v. Gaskill, 315 U.S. 442, 446 (1942); Sprint Spectrum
L.P. v. City of Carmel, Ind., 361 F.3d 998, 1001 (7th Cir. 2004). A court must
dismiss an action without reaching the merits if there is no jurisdiction. Sinochem
Int’l Co. Ltd. v. Malaysia Int’l Shipping Corp., 549 U.S. 422, 430-431 (2007).
As the court previously explained, “[t]he Rooker-Feldman doctrine ‘is a rule
of federal jurisdiction,’ Frederiksen v. City of Lockport, 384 F.3d 437, 438 (7th Cir.
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2004), which ‘deprives federal courts of subject matter jurisdiction where a party
. . . sues in federal court seeking to set aside the state court judgment and
requesting a remedy for an injury caused by that judgment.’ Johnson v. Orr, 551
F.3d 564, 568 (7th Cir. 2008).” Op. and Ord. (Nov. 7, 2011), at 2-3. RookerFeldman is applicable “not only to claims that were actually raised before the state
court, but also to claims that are inextricably intertwined with state court
determinations,” Kelley v. Med-1 Solutions, LLC, 548 F.3d 600, 603 (7th Cir.
2008), “except where the plaintiff lacked a reasonable opportunity to present those
claims in state court.” Beth-El All Nations Church v. City of Chicago, 486 F.3d
286, 292 (7th Cir. 2007).
The defendants argue that the Rooker-Feldman doctrine bars Mr. Crooks’s
claims because his claims “necessarily flow directly from the foreclosure on his
home.” Defts. Br., at 3. According to the defendants, “[a]s was the case in [Mr.
Crooks’s] first amended complaint, the sole factual allegations of impropriety in
this action relate to an alleged failure to provide ‘competent evidence of a
contractual obligation to pay a creditor or third party debt collector’s alleged
client.’ ([Second] Amended Complaint, Doc. 35, p. 5, compare First Amended
Complaint, pp. 6-9 (seeking ‘verified proof’ of the underlying debt and defendants’
agency to collect)).
Mr. Crooks responds that his current suit “is not remotely connected to his
foreclosure, which is a separate state matter.” Resp., ¶ 3. He complains that the
defendants’ motion is “unresponsive to [his] current complaint” and claims the
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defendants are using Rule 12(b)(1) “as an escape hatch to extricate themselves
without addressing the FDCPA or their violations.” Resp., ¶¶ 4, 5. The court sees
things differently: the defendants’ motion properly challenges this court’s
jurisdiction to hear his claims and, so, is responsive to his second amended
complaint. See Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 577 (1999) (“The
requirement that jurisdiction be established as a threshold matter . . . is inflexible
and without exception, . . . and [w]ithout jurisdiction the court cannot proceed at
all in any cause.”).
Mr. Crooks alleges in his second amended complaint that the defendants
had an obligation to provide him with “validation” or “verification” of his
foreclosure debt. Contrary to Mr. Crooks’s statement that his second amended
complaint isn’t connected to his foreclosure, that complaint’s claims directly relate
to the mortgage loan documents he signed in November 2004 and reaffirmed in
October 2005 and that formed the basis for the Elkhart Superior Court’s January
2011 foreclosure order. Even though Mr. Crooks’s FDCPA claims don’t directly
seek to set aside the state court foreclosure judgment, those claims are
“inextricably intertwined” with that state court judgment. Brown v. Bowman, No.
11-2164, 2012 WL 310832, at *4 (7th Cir. Feb. 2, 2012). As this court previously
concluded in ruling on the motions to dismiss the initial and amended complaints,
Mr. Crooks had ample opportunity to challenge the mortgage loan documents in
his bankruptcy proceedings, filed in 2005 and reopened in 2008, see Op. and Ord.
(Aug. 30, 2011), at 2-5, and to advance numerous objections to the loan
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documents and present defenses to the foreclosure action in the Elkhart Superior
Court and his appeal of that judgment. See Op. and Ord. (Aug. 30, 2011), at 5-8
& n.2.
Mr. Crooks affirms in his response brief that his current claims against
these defendants relate to the mortgage loan documents and the foreclosure
judgment – claims that Mr. Crooks could have and did, in fact, raise in the
bankruptcy and state court actions and on appeal. In his response, Mr. Crooks
explains that “[a]ll FDCPA suits have an alleged or actual underlying debt. Such
debt might be related to a credit card, medical billing, telecom services, or some
permutation of a foreclosure on a note related to vehicle, home or other contract.
This suit had an underlying mortgage.” Resp., at 5. Mr. Crooks’s statement
confirms that he’s contesting the mortgage loan documents that were the subject
of the state court action and judgment. He can’t now re-label those same claims
as ones under the Federal Debt Collection Practices Act.
Even recognizing that the court must construe the amended complaint
liberally, see Erickson v. Pardus, 551 U.S. 89, 94 (2007) (a pro se complaint “must
be held to less stringent standards than formal pleadings drafted by lawyers”), a
review of Mr. Crooks’s claims for violations of the FDCPA shows that, as before,
he hasn’t alleged or set forth facts outside the scope of the foreclosure action that
might bring the defendants’ actions within the purview of the FDCPA or that
would suggest that his claims arose under circumstances separate and apart from
the foreclosure judgment. While the Rooker-Feldman doctrine doesn’t “prevent
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state-court losers from presenting independent claims to a federal district court,”
Crawford v. Countrywide Home Loans, Inc., 647 F.3d 642, 645 (7th Cir. 2011), the
claims Mr. Crooks advances in his second amended complaint aren’t independent
of the state court judgment, and so must be dismissed under Federal Rule of Civil
Procedure 12(b)(1). See Bullock v. Credit Bureau of Greater Indianapolis, Inc., 272
F. Supp. 2d 780, 783 (S.D. Ind. 2003) (“In seeking to avoid Rooker-Feldman,
plaintiffs argue in their brief that their claims were independent of the state court
judgment. They state: ‘Gonon violated numerous provisions of the FDCPA by
attempting to collect amounts from plaintiffs not legally due.’ The problem is that
plaintiffs’ theory is that Gonon violated the federal law by seeking exactly what the
state court awarded. In other words, the state court determined that the amounts
sought were in fact legally due. The state court might have been right and it might
have been wrong under Indiana law. But this court could not rule in plaintiffs’
favor without holding that the state court erred. Again, that is what the RookerFeldman doctrine forbids.”); Derksen v. Rausch Strum Israel & Hornik SC, No. 09CV-588, 2010 WL 3835097, at *2 (E.D. Wis. Sept. 29, 2010) (“The first two areas
isolated by the plaintiffs in their complaint – that the defendants violated federal
and state debt collection laws by (1) attempting to enforce an illegal contract, and
(2) attempting to enforce a debt without sufficient evidence – run smack into the
Rooker-Feldman doctrine, and, as a consequence, the court lacks subject-matter
jurisdiction over those claims.”).

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A plaintiff “faced with a properly supported [Rule] 12(b)(1) motion to dismiss
bears the burden of proving that the jurisdictional requirements have been met.”
National Rifle Ass’n of America, Inc. v. City of Evanston, No. 08 C 3693, 2009 WL
1139130, at *2 (N.D. Ill. Apr. 27, 2009). Mr. Crooks hasn’t carried his burden in
this regard. The court reaffirms its previous conclusions that Mr. Crooks’s
complaints about the actions of these defendants are, in reality, defenses to the
foreclosure action and challenges to the state court judgment. See Op. and Ord.
(Aug. 30, 2011), pp. 6-8; Op. and Ord. (Nov. 7, 2011), pp. 3-7. The collection
activities of which Mr. Crooks complains were effectuated by the state court
judgment, and because the relief he seeks can’t be granted “without necessarily
impugning the state court’s judgment,” Crawford v. Countrywide Home Loans,
Inc., 647 F.3d 642, 647 (7th Cir. 2011), the Rooker-Feldman doctrine bars his
claims. See Crawford v. Countrywide Home Loans, 647 F.3d at 646 (“To determine
whether Rooker-Feldman bars a claim, we look beyond the four corners of the
complaint to discern the actual injury claimed by the plaintiff.”). Mr. Crooks’s
challenges to the mortgage loan documents and the resulting state court judgment
must again be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(1).
In dismissing Mr. Crooks’s first amended complaint, the court gave Mr.
Crooks an opportunity to amend his complaint once again with the added warning
that “[s]anctions may be imposed if he again attempts to pursue claims that have
already been decided, by this or any other court, on issues relating to the validity
of his mortgage loan transaction or the related loan documents, the foreclosing
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attorneys’ representation of their client in the foreclosure action, the foreclosure
proceedings, or the state court judgment.” Op. and Ord. (Nov. 7, 2011), at 8. The
defendants contend that because Mr. Crooks’s second amended complaint is
“more of the same,” sanctions are justified. They have asked that Mr. Crooks be
required to reimburse them for the attorneys’ fees they incurred in defending this
action.
While the defendants haven’t offered any legal support for their sanction
request, Federal Rule of Civil Procedure 11 provides that sanctions can be
imposed if an unrepresented party’s pleading is “presented for any improper
purposes, such as to harass, cause unnecessary delay, or needlessly increase the
cost of litigation;” the claims aren’t warranted “by existing law;” or the factual
contentions of the pleading have no evidentiary support or are not likely to have
evidentiary support after a reasonable opportunity for further investigation or
discovery. FED. R. CIV. P. 11(b)(1)-(3). Mr. Crooks will be given a chance to address
the issue of sanctions under Rule 11 and the defendants’ request for an award of
fees. FED. R. CIV. P. 11(c)(3).
Based on the foregoing, the court GRANTS the motion of defendants
Household Finance Corporation, HSBC Mortgage Services, Julia Blackwell
Gelinas, Michele Lorbieski Anderson, Melanie D. Margolin, and Lucy R. Dollens
to dismiss the second amended complaint [docket # 36] pursuant to Federal Rule
of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. Mr. Crooks is

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AFFORDED to and including March 22, 2012 within which to show cause why
sanctions shouldn’t be entered against him.
SO ORDERED.
ENTERED:

March 1, 2012
/s/ Robert L. Miller, Jr.
Judge, United States District Court

cc:

D. Crooks
D. Kasper

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