Boyd County et al v. MERSCORP, Inc. et al

Filing 128

ORDER: IT IS HEREBY ORDERED that Plaintiff's Motion for Reconsideration and to Certify Question of Law to the Kentucky Supreme Court DE# 123 be OVERRULED. Signed by Judge Henry R. Wilhoit, Jr on 4/30/2014. (KSS)cc: COR

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF KENTUCKY

NORTHERN DIVISION

ASHLAND

CIVIL ACTION NO. 12-33-HRW

BOYD COUNTY, ex rei. Phillip Hedrick,

County Attorney of Boyd County, Kentucky, et al.,

v.

MEMORANDUM OPINION AND ORDER

MERSCORP, INC., et al.,
I.

PLAINTIFFS,

DEFENDANTS.

INTRODUCTION
This matter is before the Court upon Plaintiff s Motion for Reconsideration and to Certify

Question of Law to the Kentucky Supreme Court [Docket No. 123]. The motion has been fully
briefed by the parties [Docket Nos. 124 and 125] and, for the reason set forth herein, the Court
finds no basis upon which to reconsider its previous ruling and that certification is not warranted.

II.

BACKGROUND
This civil action was filed by forty-one County Attorneys on behalf of forty-one Kentucky

counties: Boyd County, Breathitt County, Carter County, Christian County, Clark County, Floyd
County, Franklin County, Greenup County, Johnson County, Letcher County, Magoffin County,
Mason County, Pike County, Warren County, Ballard County, Barren County, Boone County,
Carlisle County, Estill County, Garrard County, Hancock County, Harlan County, Hart County,
Henry County, Hickman County, LaRue County, Laurel County, Lewis County, Logan County,
Menifee County, Monroe County, Montgomery County, Nelson County, Nicholas County, Ohio
County, Oldham County, Perry County, Rockcastle County, Spencer County, Trimble County

and Wolfe County. Plaintiffs allege that the financial institutions and mortgage / title companies
Defendants devised and executed a scheme to avoid paying recording fees for mortgage
assignments.
Specifically, Plaintiffs allege that the Defendants, shareholders of Defendant Mortgage
Electronic Registration Systems, Inc. ("MERS") established the MERS system in the mid-1990s
to act as an electronic clearinghouse for the transfer of mortgage interests among its members
expressly to avoid recording mortgage assignments with local recording systems and to avoid
paying requisite recording fees [Docket No. 88 at ~ 82]. Plaintiffs maintain that the MERS
system circumvents the mortgage assignment recordation system of Kentucky's counties by
facilitating the selling and buying of notes secured by real property without complying with
Kentucky's requirements for the recordation of mortgage assignments. Id Plaintiffs claim that
the Defendants deliberately failed to record required mortgage assignments in the proper
Kentucky county recording offices, and, as a result, deprived each county and the
Commonwealth of Kentucky of recording fees required by Kentucky law. They further allege
that the Defendants filed false mortgage documents, and, therefore deprived mortgagees of their
statutorily required notice of mortgage assignments [Docket No. 88 at ~ 75].
In their First Amended Complaint [Docket No. 88], Plaintiffs alleged the following
causes of action: (1) negligent and/or will violation of KRS 382.360 [Docket No. 88 at ~~ 107­
109], (2) negligent and/or will violation of KRS 434.155 [Docket No. 88 at ~~ 110-112], (3)
fraud [Docket No. 88 at ~~ 113-117], (4) unjust enrichment [Docket No. 88 at ~~ 118-121] and
(5) civil conspiracy to violate KRS 382.360 and 434.155 [Docket No. 88 at ~~ 122-125].

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Subsequently, Defendants sought entry of an order staying all proceedings in this matter
pending final resolution of Christian County Clerk v. Mortgage Electronic Registration Systems,

Inc. (6th Cir. No. 12-5237), a case involving the same legal issues presented in this case as well
as several of the same Defendants. This Court sustained Defendants' motion and this matter was
stayed.
The plaintiffs in Christian County were clerks of two Kentucky counties who, as in this
case, alleged that the defendants did not create and record assignments of mortgages when
interests in MERS-registered notes were transferred. 2013 WL 565198, at * 1. As in this case, the
plaintiffs in Christian County alleged a violation ofKRS 382.360, and common law claims for
conspiracy and unjust enrichment. Id. The plaintiffs also alleged the same harm as is alleged
here: lost recording fees. Id. Chief Judge McKinley of the Western District dismissed the

Christian County complaint, holding that the plaintiff clerks lacked a private right of action
under the statutes on which they relied. 2012 WL 566807, at *5 (W.D. Ky. Feb. 21, 2012). The
Court reviewed the Kentucky recording statutes at length, holding that they "reserve[] the cause
of action for failure of an assignee to [record] to a real property owner or a party acquiring an
interest in the real property." Id. at 3. As the plaintiffs did not sue based on any property interest,
the Court held they had no right to sue. Id.
On appeal, the Sixth Circuit affirmed this dismissal. It, too, reviewed the recording
statutes at issue and concluded that "the recording statutes do not provide a civil remedy for the
Clerks to pursue alleged violations." 2013 WL 565198, at *5. The Sixth Circuit declined to
recognize an implied right of action under KRS 446.070, ruling that Kentucky's recording
statutes protect three distinct groups of persons: (1) existing lienholders and lenders ... (2)
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prospective lienholders and purchasers, and (3) property owners and borrowers whose loans have
been satisfied. Id. The Christian County plaintiffs did not fit any of these categories, and, as such,
they lacked a private right to sue. Nor did the fact that clerks were responsible for recording
documents related to real property create a cause of action: "[u]nder [that] rationale, every public
officer would have a private right of action under the law he or she administers," which is not the
law. 2013 WL 565198, at *5.
The Sixth Circuit further ruled that the clerks' conspiracy and unjust enrichment claims
failed, finding that each "rest[ed] on the theory that Defendants failed to record assignments as
required by Kentucky's recording statutes and thus avoided paying statutorily mandated
recording fees." Id. at *7 n.7. In addition, the Court held that no unjust enrichment claim could
lie because the purportedly conferred benefits were "derived from Kentucky law, not from the
Clerks themselves." Id. at *8.
Following the Sixth Circuit Court of Appeals's decision in Christian County, the stay was
lifted and Defendants sought dismissal of this action.
In sustaining the Defendants' Motion to Dismiss, the undersigned issued a detailed
opinion finding that Christian County was on-point and controlling. This Court held that
Plaintiffs lack a private right of action to enforce KRS 382.360 because they are not among the
three categories of persons that the Kentucky General Assembly protected when it passed the
statute: (1) existing lienholders and lenders; (2) prospective lienholders and purchasers; and (3)
property owners whose loans have been satisfied. [Docket no. l2l}. This Court considered and
rejected Plaintiffs' various assertions in support of their argument they had a private right of
action under Kentucky law.
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Now Plaintiffs request that the Court reconsider its earlier opinion, vacate the order of
dismissal and certify the following question to the Kentucky Supreme Court: Are Kentucky
counties, through their respective county attorneys, authorized under Kentucky law to enforce the
requirement ofKRS 382.360 that mortgage assignments be recorded?

III.

MOTION TO RECONSIDER
Although the Federal Rules of Civil Procedure do not contemplate a motion to reconsider,

courts evaluate motions to reconsider under the same standard as a motion to alter or amend
judgment under Rule 59(e). Keith v. Bobby, 618 F.3d 594,597-98 (6th Cir.201O). The standards
for reconsideration are necessarily high. There are only three grounds for a district court to
amend its judgment: (I) to accommodate an intervening change in controlling laws; (2) to
account for new evidence not available previously; and (3) to correct a clear error of law or to
prevent manifest injustice. Intera Corp. v. Henderson, 428 F.3d 605, 620 (6 th Cir. 2005). See

also, Berridge v. Heiser, 993 F. Supp. 1136, 1146-47 (S.D. Ohio 1997).
Plaintiffs' motion It does not cite any intervening change in the law that applies to this
case. It does not offer newly-discovered evidence. And it does not contend that the Court
overlooked or ignored any arguments that Plaintiffs made. Rather, Plaintiffs reassert the same
arguments that they made to the Court in opposing dismissal of the lawsuit, and which the Court
considered and rejected. The Sixth Circuit has held time and time again that a motion for
reconsideration is not an opportunity to re-argue a case and "should not be used to raise
arguments which could, and should, have been made before judgment issued." Sault Ste. Marie

Tribe o/Chippewa Indians v. Engler, 146 F.3d 367,364 (6 th Cir. 1998)(citation omitted).
Although Plaintiffs maintain they should be allowed to file suit to enforce KRS 382.260.
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The Court considered Plaintiffs' arguments, and held that the Sixth Circuit's decision in
Christian County applies with equal force to their claims. The channel for Plaintiffs to express
disagreement is an appeal, not a motion for reconsideration.

IV.

MOTION TO CERTIFY QUESTION OF LAW TO KENTUCKY SUPREME
COURT
In addition to reconsideration, Plaintiffs ask this Court to certify the question of whether

they authorized to enforce KRS 382.360 to the Supreme Court .. Resort to this procedure is
within the discretion of the district court. Transam. Ins. Co. v. Duro Bag MIg. Co., 50 F.3d 370,
372 (6th Cir.1995). Federal courts generally "will not trouble our sister state courts every time
an arguably unsettled question of state law comes across our desks." Pennington v. State Farm
Mutual Insurance Company, 553 F.3d 447,450 (6 th Cir. 2009). This Court is mindful that in the
context of a request for certification, the state court need not have addressed the exact question at
issue, so long as well-established principles exist to govern a decision. Id. citing Pino v. United
States, 507 F.3d 1233, 1236 (10th Cir.2007).
In this case, the Court is not inclined to "trouble" the Kentucky Supreme Court. Plaintiffs
have not shown that the requirements for certification under Kentucky law are satisfied.
According to Kentucky Rules of Civil Procedure 76.37, which provides for certification oflaw,
specifically states that certification is appropriate only when there is "no controlling precedent"
for a federal court to apply. CR 76.37. Here, in Christian County, the Sixth Circuit provided
guidance regarding the availability of a private right of action, relying on controlling
Kentucky appellate precedent. In its opinion, the Sixth Circuit relied on numerous Kentucky
decisions, including Lewis v. B & R Corp., 56 S.W.3d 432 (Ky. App. 2001); Young v. Carran,
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289 S.W.3d 586 (Ky. App. 2008); Hargis v. Baize, 168 S.W.3d 36 (Ky. 2005); Econ. Optical Co.
v. Ky. Bd. ojOptometric Exam'rs, 310 S.W.2d 783 (Ky.1958); Wells Fargo Fin. Ky., Inc. v.

Thomer, 315 S.W.3d 335 (Ky. App. 2010); Trio Realty Co. v. Queenan, 360 S.W.2d 747, 748-49
(Ky. 1962); Creech v. Wis. Steel, Coal & Coke Co., 291 S.W. 385 (Ky. 1927); Union Planters

Bank, NA. v. Hutson, 210 S.W.3d 163 (Ky. App.2006); State Farm Mut. Auto. Ins. Co. v.
Reeder, 763 S.W.2d 116 (Ky. 1988); MPM Fin. Grp., Inc. v. Morton, 289 S.W.3d 193 (Ky.
2009). Therefore, it cannot be said that there was no controlling precedent for the Court to
apply.
Nor would Plaintiffs' proposed question be "determinative" of the case as contemplated
in Ky. CR 76.37. Even if the proposed question were resolved in Plaintiffs' favor, numerous
other issues would remain unaffected and would remain. As Defendants point out, in seeking
dismissal, they argued that the First Claim failed to state a cognizable claim because (1) under
Kentucky law, the transfer of an interest in a promissory note does not require Defendants to
record a mortgage assignment; and (2) Kentucky's recording statutes apply only to
existing documents, and impose no duty to create documents. If this claim survived
dismissal, Defendants would be entitled to assert defenses such as laches and waiver. In these
circumstances, courts regularly deny requests for certification. See e.g. Kiesler v. SCM Corp. ,
1989 WL 125591, at *1 (W.D. Ky. Apr. 7,1989) ("Although the resolution ofthis question
might be helpful, it would not dispose of the entire case and, thus, is not a proper question to
certify to the state court."). See also, Carey v. Wolnitzek, 2007 WL 2726121, at *11 (E.D. Ky.
Sept. 17,2007) (rejecting certification of question that was "not 'determinative' of' plaintiffs
lawsuit).

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Further, post-judgment requests for certification after a litigant has lost are strongly
disfavored in this circuit.

Town o/Smyrna, Tennessee v. Municipal Gas Authority, 723 F.3d

640. See also, Geronimo v. Caterpillar, Inc., 440 F. App'x 442,449 (6th Cir. 2011)
("[C]ertification is disfavored where a plaintiff files in federal court but then, 'in light of an
unfavorable judgment, seek[s] refuge' in a state forum").

"The appropriate time to seek

certification of a state-law issue is before a District Court resolves the issue, not after receiving
an unfavorable ruling" Local 219 Plumbing & Pipefitting Indus. Pension Fund v.

Buck Consultants, LLC, 311 F. App'x 827, 832 (6th Cir. 2009)(emphasis added). In this case,
Plaintiffs failed to raise the issue of certification in the two years this case was pending before
this Court. To the contrary, they staunchly maintained the law was clear and in their favor.
Finally, it was Plaintiffs who selected to proceed in federal court, which renders their plea
to be sent to state court somewhat disingenuous. In Shaheen v. Yonts, the undersigned, sitting by
designation, observed, "at least one circuit court has recognized that certification is not favored
when the moving party chose the federal forum." Shaheen v. Yonts, 394 Fed.Appx, 224, 233 (6 th
Cir. 2010) citing Cantwell v. University o/Mass., 551 F.2d 879,880 (lst Cir.1977)("We do not
look favorably, either on trying to take two bites at the cherry by applying to the state court after
failing to persuade the federal court, or on duplicating judicial effort."). See also [her] state
action in the federal forum ... must ordinarily accept the federal court's reasonable interpretation
of extant state law rather than seeking extensions via the certification process"').

Having

availed itself of this Court's jurisdiction, Plaintiffs are in a "peculiarly poor position to seek
certification." Shaheen, 394 Fed ..Appx. at 244 (citation omitted).
Plaintiffs bear the burden of showing certification is warranted and they have failed to
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demonstrate that this is one of the rare cases requiring certification.

V.

CONCLUSION
Accordingly, IT IS HEREBY ORDERED that Plaintiffs Motion for Reconsideration

and to Certify Question of Law to the Kentucky Supreme Court [Docket No. 123] be

OVERRULED.
This 30th day of April, 2014.

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