Roberts v. American Bank & Trust Co., Inc. et al
Filing
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ORDER & REASONS granting 7 Motion to Dismiss; denying 10 Motion for Preliminary Injunction; denying 10 Motion for Permanent Injunction; granting in part and denying in part 17 Motion to Dismiss. Signed by Judge Eldon E. Fallon on 12/20/11. (ala, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
VIVIAN A. ROBERTS
VERSUS
AMERICAN BANK & TRUST CO., INC., ET AL
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CIVIL ACTION
NO. 11-2054
SECTION “L” (5)
ORDER & REASONS
Before the Court are three motions: a Motion to Dismiss Claims against American Bank
& Trust Co. and Marian Kinchen Pursuant to Federal Rule of Civil Procedure 12(b)(6) and
12(b)(1) (Rec. Doc. No. 7) filed by Defendants American Bank & Trust Co. and Marian
Kinchen; a Motion to Dismiss Pursuant to Rules 12(b)(6) and 12(b)(1) (Rec. Doc. No. 17) filed
by Defendants Penny Daigrepont, Claire Mayer, Shapiro & Daigrepont, and Eva Simkovitz; and
a Motion for a Preliminary and Permanent Injunction (Rec. Doc. No. 10) filed by Plaintiff. The
Court, having reviewed the submitted memoranda and the applicable law, now issues this Order
& Reasons.
I. BACKGROUND
This case arises out of an executory process proceeding instituted against Plaintiff by
Defendant American Bank & Trust Co. (“American Bank”). Plaintiff avers that on April 9, 2009,
she executed a note in favor of Defendant American Bank in the amount of $165,750. The note
was secured by a mortgage on the property located at 40065 Emerald Drive, Unit A,
Ponchatoula, Louisiana. Plaintiff became delinquent on that note, and Defendant American Bank
instituted an executory process against her on June 7, 2011, in the Judicial District Court for the
Parish of Tangipahoa, Louisiana. On June 24, 2011, Plaintiff removed the Executory Process
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Petition to this court and filed an answer, asserting counterclaims against Defendant American
Bank. In addition, Plaintiff asserted claims against the law firm of Shapiro & Daigrepont, LLC,
as well as certain individuals with the law firm (collectively, “the Shapiro & Daigrepont
Defendants”), and Ms. Marian Kinchen, an employee of Defendant American Bank (together
with Defendant American Bank, “the American Bank Defendants”). On August 17, 2011, this
Court granted American Bank’s Motion to Remand, citing the lack of federal question
jurisdiction over the removed foreclosure action, and further noting that the state court would
address the need to strike Robert’s Answer and Counterclaim pursuant to Article 2642 of the
Louisiana Code of Civil Procedure.
On August 19, 2011, Plaintiff filed the instant suit in this Court, reiterating the same
claims made in her counterclaims in the remanded action. Namely, Plaintiff seeks (1) to recover
damages under the Truth-in-Lending Act for Defendant American Bank’s alleged failure to
make substantial disclosures to Plaintiff and failing to tender her two copies of a notice of a right
to rescind on April 2, 2009; (2) to recover damages under the Fair Debt Collection Practices Act
from the American Bank Defendants and the Shapiro & Daigrepont Defendants for their alleged
harassing letters and phone calls; (3) to recover damages from the American Bank Defendants
and the Shapiro & Daigrepont Defendants for their alleged violation of the automatic stay
granted to Plaintiff upon her filing of a Chapter XIII bankruptcy petition; (4) to recover damages
under the Louisiana Unfair Trade Practices and Consumer Protection Law from the American
Bank Defendants and the Shapiro & Daigrepont Defendants; and (5) to have the note executed
on April 9, 2009, declared null, void, and unenforceable. Furthermore, Plaintiff seeks various
forms of equitable relief from this Court, specifically: (a) a preliminary and permanent injunction
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against Defendant American Bank, restraining it from taking further action in the executory
proceeding currently pending in state court; (b) a mandatory injunction against Defendant United
States Agriculture, requiring it to provide Plaintiff with special loan servicing under 42 U.S.C. §
1472(h) and 7 C.F.R. §§ 1980.373 and 1980.374; (c) the appointment of a receiver to supervise
and manage the activities and procedures of Defendant Shapiro & Daigrepont its to ensure that it
complies with applicable federal laws; (d) the creation of a constructive trust for all monies
received by Defendant American Bank from Plaintiff in connection with the April 9, 2009, note;
and (e) an accounting by Defendant American Bank for all monies received from Plaintiff in
connection with the April 9, 2009, note. Finally, Plaintiff asserts that the executory process
procedure that was used by Defendant American Bank, codified in Articles 1633 through 1644
of the Louisiana Code of Civil Procedure, violates Plaintiff’s substantive and procedural due
process rights as guaranteed by § 1 of the Fourteenth Amendment and § 1 of the Civil Rights Act
of 1871.
II. PENDING MOTIONS
A. American Bank and Marian Kinchen’s Motion to Dismiss (Rec. Doc. No. 7)
The American Bank Defendants contend that Plaintiff fails to state causes of action
upon which relief can be granted under any of the statutes allegedly violated. Moreover,
Defendants argue that this Court lacks jurisdiction over her Plaintiff’s claims related to the
ongoing state court proceeding and the claims arising under the Bankruptcy Code. The Court
will describe the arguments in turn and then address the applicable law and the Court’s ruling.
1. Truth-in-Lending Act
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The American Bank Defendants argue that Plaintiff’s claim under 15 U.S.C. § 1635
of the Truth-in-Lending Act fails as a matter of law for two reasons. First, they note that any
action for damages under such provision must be brought within one year of the violation,
pursuant to 15 U.S.C. § 1640(e). In addition, Defendants observe that Plaintiff does not allege
fraudulent concealment or other actions by American Bank that would have prevented Plaintiff
from discovering her claim. Defendants argue that because the alleged violation of the statute
occurred on April 9, 2009, and this suit was filed in August 2011, the claim is proscribed.
Second, Defendants contend that the transaction between Plaintiff and Defendant
American Bank is exempt from the right to rescind protected by the Truth-in-Lending Act.
Defendants claim that, under the statute, a mortgagor has no duty to disclose the obligor’s right
to rescind in a purchase-money residential mortgage transaction. Citing Ortiz v. Accredited
Home Lender, Inc., 639 F. Supp. 2d 1159 (S.D. Cal. 2009), Defendants argue that they could not
have violated a duty to disclose Plaintiff’s right to rescind when no such duty existed. As a
result, according to Defendants, Plaintiff’s claim under the Truth-in-Lending Act should be
dismissed.
Plaintiff made two responses to this argument. Plaintiff argues, first, that the date of
Defendants’ violation was July 7, 2011. Plaintiff avers that she mailed her notice of rescission to
Defendant American Bank on June 20, 2011. Therefore, she argues, Defendant American Bank
violated the statute when it failed to take steps to cancel the security interest it held on her
property and return Plaintiff’s money within twenty days, or on July 11, 2011. Because this suit
was filed the following month, Plaintiff concludes that it is within the statute of limitations and
should not be dismissed on those grounds.
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Second, Plaintiff claims that the details of her mortgage transaction render it an
exception to the residential mortgage transaction exception to the right to rescission. Under the
Truth-in-Lending Act, there is a right to rescission in the context of a residential mortgage if the
obligor had “previously purchased and acquired some interest to the dwelling.” 12 C.F.R. §
226.2(a)(24). Plaintiff alleges that on February 21, 2009, she wrote a $1000.00 check as a down
payment to the realty firm with whom she dealt in her purchase of the residence at issue. This
check, she claims, created an enforceable contract between Plaintiff and Defendant American
Bank. Citing Estate of Martinek v. Martinek, 140 Ill.App. 3d 621 (1989), Plaintiff contends that
this down payment made her an equitable owner of the property. Therefore, she argues, when the
loan was closed on April 9, 2009, her purchase was of a home in which she had previously
acquired an interest. As a result, Plaintiff claims, her mortgage transaction would be subject to
the Truth-in-Lending Act’s right to rescission, and this claim should not be dismissed.
2. Fair Debt Collection Practices Act
The American Bank Defendants argue that Plaintiff’s claim under the FDCPA fails as
a matter of law also fails for two reasons. First, Defendants claim that the statute exempts both
banks and their employees. Defendants assert that the FDCPA specifically excludes from its
ambit creditors’ employees collecting in the name of the creditor. See 15 U.S.C. § 1692a(6)(A).
Furthermore, citing Thomasson v. Bank One, Louisiana, N.A., 137 F.Supp. 2d 721 (E.D. La.
2001), American Bank claims that it, too, would be outside the reach of the FDCPA because it
does not fit the definition of “debt collector” as the statute defines the term.
Second, the American Bank Defendants argue that Plaintiff’s claim under the FDCPA
is time-barred. Noting the one-year statute of limitations for violations of the Act, 15 U.S.C. §
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1692k(d), Defendants argue that even if Plaintiff could bring a claim against them under the
FDCPA, the violations are not alleged to have occurred within the past year, and therefore the
suit is proscribed.
In response to the first argument, Plaintiff disputes the exemptions and contends that
Defendants did not cite sufficient authority in support of their argument. In response to
Defendant’s argument that the claim was time-barred, Plaintiff asserts that the violation of the
FDCPA occurred when Defendants made harassing phone calls, beginning February 3, 2011.
Therefore, Plaintiff avers that the suit was filed within a year of the violations and is not timebarred.
3. Violation of the Automatic Stay
The American Bank Defendants argue that Plaintiff’s claim that Defendants violated
the automatic stay fails as a matter of law for two reasons. First, Defendants contend that this
Court lacks subject matter jurisdiction over the issue. Citing Eastern Equipment and Services
Corporation v. Factory Point National Bank, 236 F.2d 1098 (2d Cir. 2001), Defendants assert
that claims under 11 U.S.C. § 362 must brought in bankruptcy court. Therefore, they argue, this
claim must be dismissed for lack of subject matter jurisdiction.
Second, the American Bank Defendants contend that Plaintiff fails to state a claim for
relief under § 362. Defendants assert that § 342(g)(2) provides that a “monetary penalty” may
not be imposed on a creditor under § 362(k) for violation of an automatic stay unless the conduct
that is the basis for the violation occurs after the creditor has received effective notice as
provided under § 342 of the order of relief. Defendants argue that because Plaintiff’s claim is for
damages in the amount of $250,000, and because Plaintiff did not claim that the alleged conduct
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of the American Bank Defendants occurred after such effective notice, Plaintiff has failed to
state a claim under § 362.
Plaintiff has not responded to these arguments.
4. Louisiana Unfair and Deceptive Trade Practices Act
Defendant American Bank makes two arguments with respect to Plaintiff’s claim
under the Louisiana Unfair and Deceptive Trade Practices Act. First, American Bank asserts that
under La. Rev. Stat. 51:1406, federally insured financial institutions and their subsidiaries are
exempt from LUDTPA. Therefore, American Bank argues, Plaintiff has no claim against it,
because it is an FDIC-insured bank. Second, American Bank asserts that the one-year statute of
limitation on any claim under LUDTPA had already run by the time Plaintiff filed her claim in
August 2011.
Plaintiff responded to Defendant’s first argument by contending that, although the
exemption under La. Rev. Stat. 51:1406 is broad, it does not encompass American Bank’s
alleged actions that are the subject of her claim. Citing Bank of New Orleans and Trust Co. v.
Phillips, 415 So. 2d 973 (La. 1982), Plaintiff argues that because American Bank decided to
foreclose using the executory process procedure, it should not be exempted from LUDTPA.
Plaintiff did not respond to American Bank’s second argument.
5. Louisiana Civil Code
The American Bank Defendants argue that Plaintiff has failed to state a claim under
Article 1918 of the Louisiana Civil Code. Article 1918 allows for rescission of a conventional
obligation due to incapacity or “undue or unw[anted] pressure.” Defendants contend that
Plaintiff has failed to state a claim for two reasons. First, Defendants argue that Plaintiff has
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failed to allege that she was “deprived of reasoning” at the time of the transaction. Defendants
argue that Plaintiff’s alleged deprivation of “an understanding explication” of the documents
provided to her by American Bank did not render her legally incapable of consenting to a
contract, and that her claim lacks any basis for legal incapacity that would reach the level of
“deprived of reason.”
Second, Defendants contend that there is no valid claim for rescission based on
“undue or unw[anted] pressure.” Citing Louisiana Civil Code Article 1959, Defendants assert
that consent is only negated “when it has been obtained by duress of such nature as to cause a
reasonable fear of unjust and considerable injury to a party’s person, property, or reputation.”
Defendants argue that because Plaintiff’s complaint fails to allege any such reasonable fear of
injury, Plaintiff’s claim for rescission under the Louisiana Civil Code must be dismissed.
Plaintiff responds to the first argument by relying primarily on Succession of
Molaison, 34 So. 2d 897 (1947). Plaintiff claims that Molaison stands as the leading Louisiana
case on contractual incapacity and represents the proposition that a person of limited education
and a lack of experience in business and finance, who does not understand the nature of a
transaction into which she is entering, lacks the capacity to agree to a binding legal obligation.
Plaintiff did not respond to Defendants’ second argument.
Defendants filed a reply to Plaintiff’s response to their first argument. In it,
Defendants assert that the holding in Molaison is distinguishable, as the plaintiff in that case was
suffering from an untreated case of diabetes, which resulted in an “obtuse” mental capacity.
Molaison, 34 So.2d, at 902. Furthermore, Defendants point to a later Louisiana Court of Appeal
case in which the court stated that the holding in Molaison “should be...restricted to its facts.”
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Banks v. Johns, 289 So. 2d 194, 198 (La. App. 1 Cir. 1973). In addition, Defendants note that the
Louisiana Civil Code allows rescission in the case of incapacity “only upon [a] showing that the
other party knew of should have known of that person’s incapacity.” La. Civ. Code Art. 1925.
Defendants argue that because Plaintiff has not shown that Defendants knew of any incapacity at
the time of contracting, Plaintiff fails to state a claim based on the Civil Code. Finally,
Defendants argue that if the courts allowed rescission of every transaction entered into by a
person of limited education and a lack of business experience, they would open themselves to
thousands of claims and would undermine the “sanctity” of contractual obligations in Louisiana.
6. Injunctive relief, receivership, and accounting
Finally, Defendants American Bank and Ms. Kinchen argue that Plaintiff’s requests
for equitable relief, including a preliminary and permanent injunction, a receivership, and an
accounting, are barred by the Anti-Injunction Act. Defendants assert that 28 U.S.C. § 2283
prohibits granting injunctions to stay state court proceedings, including mortgage transactions.
Furthermore, Defendants contend, this Court must abstain from hearing the remaining equitable
claims related to the state court proceeding because the foreclosure action has not yet come to
final judgment and any ruling would interfere with state court rulings and effectively constitute
injunctions in violation of the Anti-Injunction Act. Defendants cite St. Clair v. Wertzberger, 637
F. Supp. 2d 251 (D.C.N.J. 2009), in which a court held that it must abstain from hearing the
debtor’s FDCPA claims and dismiss the federal court action without prejudice because doing
otherwise would violate the Anti-Injunction Act. Therefore, Defendants argue, all three claims
for equitable relief should be dismissed for lack of subject matter jurisdiction pursuant to Federal
Rule of Civil Procedure 12(b)(1).
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Plaintiff responds that this case is brought under the first section of the Civil Rights
Act of 1871, codified as 42 U.S.C. § 1983, under which, Plaintiff argues, a federal court may
grant an injunction of a state court proceeding. In support of this assertion, Plaintiff cites
Mitchum v. Foster, in which the Supreme Court stated that in passing the Civil Rights Act of
1871, “Congress plainly authorized the federal courts to issue injunctions in § 1983 actions, by
expressly authorizing a ‘suit in equity’ as one of the means of redress.” Mitchum v. Foster, 407
U.S. 225, 242 (1972). Plaintiff cites Duncan v. Perez, F.Supp. 181 (E.D. La. 1970), as an
example of this court issuing an injunction against a state criminal action in a proceeding under §
1983.
Defendants filed a reply to Plaintiff’s response, arguing that the precedent set by
Mitchum is inapplicable to the case at bar. Defendants assert that the Mitchum holding only
permitted injunctions as to state court actions “where the state law is flagrantly or patently
violative of express constitutional prohibitions” or where there is a showing of bad faith,
harassment, or other unusual circumstances. Id. at 230-31. Defendants further argue that the
Court in Mitchum created a test for determining whether an exception to the Anti-Injunction Act
applies, namely, “whether an Act of Congress, clearly creating a federal right or remedy
enforceable in a federal court of equity, could be given its intended scope only by the stay of a
state court proceeding.” Id. at 238. Finally, Defendants argue that the Duncan case is
distinguishable as an exception that was rendered as to a state court suit initiated by the
government, not a foreclosure initiated by a private bank. In addition, Defendants note that in
Duncan, the government was prosecuting the Duncan in an attempt to harass him, and no such
allegation of bad faith or harassment was made in the instant suit. Therefore, Defendants argue
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that Plaintiff’s claims for equitable relief do not fall into an exception created by § 1983 and are
barred by the Anti-Injunction Act.
B. The Shapiro & Daigrepont Defendants’ Motion to Dismiss (Rec. Doc. No. 17)
Defendants Shapiro & Daigrepont, Penny Daigrepont, Claire Mayer, and Eva
Simkovitz also contend that Plaintiff fails to state causes of action upon which relief can be
granted under any of the statutes she alleges that they violated. In addition, the Shapiro &
Daigrepont Defendants argue that this Court lacks jurisdiction to adjudicate Plaintiff’s claims
related to the ongoing state court proceeding and the claims arising under the Bankruptcy Code.
The Court will describe the arguments in turn.
1. Violation of the Automatic Stay
The Shapiro & Daigrepont Defendants have moved to dismiss Plaintiff’s claim
against them for their alleged violation of the automatic stay. First, Defendants assert that
Plaintiff’s allegations that they violated the automatic stay are conclusory within the meaning of
Supreme Court cases Bell Atlantic Corp v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal,
556 U.S. 662 (2009). As a result, Defendants argue, Plaintiff’s pleading is insufficient to support
a claim against the Shapiro & Daigrepont Defendants and must be dismissed. Furthermore,
Defendants point to Docket Sheet Entry No. 49 of the Roberts Bankruptcy, in which Ms. Roberts
sought imposition of actual and punitive damages upon American Bank and opposed American
Bank’s Motion for Relief from Automatic Stay. Defendants note that Ms. Roberts made no claim
against the Shapiro & Daigrepont Defendants, a fact which they argue renders the allegation that
they violated the automatic stay implausible.
Second, the Shapiro & Daigrepont Defendants echo the contention of the American
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Bank Defendants that this Court lacks subject matter jurisdiction with respect to the alleged
violation of the automatic stay. The Defendants argue that such a claim may only be brought in a
bankruptcy court, and therefore the instant claim must be dismissed.
Plaintiff responded to the Defendants’ first argument, stating that the Defendants
have failed to explain how the claim for violation of the automatic stay is “conclusory.” Plaintiff
points to several paragraphs of her complaint that, she contends, create a sufficient basis for
relief. Furthermore, Plaintiff asserts that a recent Fifth Circuit holding, Turner v. Pleasant, 2011
WL 5865604 (5th Cir. 2011), supports her argument regarding the adequacy of the complaint.
Regarding Defendants’ argument that the claim should be dismissed for lack of
subject matter jurisdiction, Plaintiff responds that “[t]he bankruptcy law violations are but a
component of the violation of the [FDCPA].” Therefore, she argues, it is proper for this Court to
retain jurisdiction of the claim of violation of the automatic stay, as it is merely a segment of a
larger claim over which this Court has jurisdiction.
Defendants have filed a reply to Plaintiff’s response. In it, Defendants elucidate the
meaning of the term “conclusory,” explaining that merely alleging harm or a violation of an
agreement is a conclusory allegation, impermissible under the precedent set by Twombly and
Iqbal. Furthermore, Defendants argue that this Court can make a “common sense” determination
that, had the Shapiro & Daigrepont Defendants actually violated the automatic stay, Plaintiff
would have named them in the action she undertook in the bankruptcy court.
2. Fair Debt Collection Practices Act
The Shapiro & Daigrepont Defendants have moved to dismiss Plaintiff’s claim
against them for their alleged violation of the FDCPA. Defendants argue that simple allegations
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that they have “violated” and “committed multiple violations” of the FDCPA are conclusory and
should therefore be dismissed.
Plaintiff provides the same response to this argument as to Defendants’ assertion
regarding her claim for violation of the automatic stay, detailed above: Plaintiff denies that her
complaint is conclusory and points to specific paragraphs in it, which she contends provide
sufficient basis for relief.
3. Louisiana Unfair and Deceptive Trade Practices Act
The Shapiro & Daigrepont Defendants have moved to dismiss Plaintiff’s claim
against them for their alleged violation of LUDTPA. Defendants provide five arguments in
support of their motion: (1) the allegations contained in the complaint are conclusory; (2) there is
no contractual privity between the Plaintiff and the Shapiro & Daigrepont Defendants ; (3) the
“unfair trade practices” prohibited by the statute do not include the Defendants’ conduct, which
included, as they describe it, “resorting appropriately to judicial process,” seeking to enforce a
contractual right, and “attempting to collect a debt which is admittedly due and owing”; (4) the
Shapiro & Daigrepont Defendants are in an attorney-client relationship with American Bank,
and because they did not act outside the scope of their authority, they cannot be held liable to a
third party; and (5) Plaintiffs do not allege that the Defendants’ purported unfair trade practices
caused them a loss, as required in order to recover under LUDTPA.
Plaintiff’s Opposition to the Motion did not contain a response to this argument.
4. Appointment of a Receiver
The Shapiro & Daigrepont Defendants have moved to dismiss Plaintiff’s request for a
receivership to supervise the Defendants’ activities in order to ensure compliance with TILA, the
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FDCPA, and the Bankruptcy Code. First, Defendants argue that the allegations of violations of
the FDCPA are conclusory. Second, Defendants argue that Plaintiffs provide no legal support for
their statement that a receiver is required to ensure compliance with TILA and the FDCPA.
Third, Defendants assert that this Court lacks jurisdiction over a request for receivership, and
that the Louisiana Supreme Court is the proper authority. Finally, Defendants note that Plaintiff
does not allege TILA violations against the Shapiro & Daigrepont Defendants in the complaint.
Furthermore, Defendants argue, their committing such a violation would be impossible, as TILA
violations may only be asserted as to the origination of the loan, an event which predates their
involvement in this affair.
Plaintiff opposes dismissal of her request. First, Plaintiff states that this Court has
broad discretion to appoint a receiver upon a showing of necessity. Plaintiff argues that she has
shown the necessity in providing and preserving the property of debtors. Second, Plaintiff
contends that the motion for dismissal regarding the request for receivership is premature, as the
appointment of a receiver is done later in a case, in aid of a particular remedial outcome.
5. Constitutionality of Executory Process
The Shapiro & Daigrepont Defendants have moved to dismiss Plaintiff’s claim that
the executory process procedure used by the Defendants is unconstitutional. First, citing several
Supreme Court and Louisiana state cases, Defendants argue that the constitutionality of the
procedure is well-settled. Second, Defendants argue that, although the complaint states that the
Defendants acted “under color of the laws of the State of Louisiana,” Plaintiff does not assert
that Defendants failed to comply with the executory process procedures as set forth in the
Louisiana Civil Code. Therefore, Defendants contend that the § 1983 claim that relies on this
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“under color of law” allegation should be dismissed.
Plaintiff opposes dismissal of her claim. In response to Defendants’ first argument,
Plaintiff relies on Jones v. Flowers, 547 U.S. 220 (2006), a Supreme Court opinion that held that
prior to a taking, due process requires that the government “provide notice, reasonably
calculated, under all the circumstances, to apprise interested parties of pendency of action and
afford them an opportunity to present their objections.” Id. at 226. Plaintiff argues that in this
context, the notice requirement set by Jones exceeds that provided under the executory process
procedure, and therefore the procedure must be deemed unconstitutional. Plaintiff also contends
that Jones v. First Bank and Trust Co., a recent case decided in this Court that was cited by
Defendants, is questionable authority because the opinion did not grapple with the holding of
Jones v. Flowers.
In response to Defendants’ second argument, Plaintiff argues that although the
Defendants may have complied with the procedure set by the Louisiana Civil Code, executory
process is in itself an unconstitutional remedy. According to Plaintiff, § 1983 gives her the right
to redress her constitutional rights when a violation has been effected under state law. Relying on
Jones v. Flowers and Zinermon v. Burch, 494 U.S. 113 (1990), Plaintiff argues that she has
standing to file a due process claim in response to Defendants’ actions and use of executory
process procedure.
Defendants have filed a reply to Plaintiff’s response. First, Defendants argue that the
Jones v. Flowers decision did not involve executory process, but rather a tax sale, and is
therefore inapplicable. Relying on Guillie v. Marine Towing, Inc., 670 So. 2d 1298 (La. App. 5
Cir. 1996), Defendants also assert that in order for Plaintiff to have Louisiana’s executory
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process procedure declared unconstitutional, she must join the Louisiana Attorney General.
Finally, Defendants note that they are not state actors and may not be held liable under § 1983 as
if they are.
C. Plaintiff’s Motion for Preliminary and Permanent Injunction and
Declaratory Relief (Rec. Doc. No. 10)
Plaintiff has filed a motion for a preliminary and permanent injunction against
Defendant American Bank, prohibiting and restraining American Bank from proceeding further
in its foreclosure action against Plaintiff, now pending in state court. Plaintiff also requests that
the injunction require American Bank to cancel, annul, and erase all security interests it purports
to hold against Plaintiff arising out of the April 9, 2009, transaction. Finally, Plaintiff requests
that the Court issue a declaratory judgment that the obligation between the Bank and Plaintiff,
dated April 9, 2009, is null, void, and unenforceable.
As the basis for this request, Plaintiff makes two arguments. First, Plaintiff asserts
that the executory process procedure under Articles 1633 through 1644 of the Louisiana Code of
Civil Procedure, used by American Bank to foreclose against Plaintiff, violates the Due Process
Clause of the Fourteenth Amendment on its face and as applied.
Second, Plaintiff contends that the loan and mortgage created by the April 9, 2009,
transaction are null, void, and unenforceable because Plaintiff invoked her right of rescission
under § 125 of the Truth-in-Lending Act and cancelled the obligation. Furthermore, Plaintiff
argues that she lacked capacity to enter into the transaction in the first place, under Article 1918
of the Louisiana Civil Code.
Defendant American Bank opposes this motion. First, American Bank argues that
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Plaintiff’s request for a declaratory judgment must be denied because one may not request such
relief in a motion. Alternatively, American Bank argues that even if this Court were to construe
the motion as a Motion for Summary Judgment, it must be denied because Plaintiff has not
shown that there is no genuine issue of material fact.
Regarding the Plaintiff’s request for a permanent injunction, American Bank argues
that it must be denied because one cannot obtain permanent injunctive relief without actual
success on the merits. Second, American Bank argues that all of Plaintiff’s claims for injunctive
relief are barred by the Anti-Injunction Act. Finally, American Bank argues that Plaintiff does
not establish the four requirements necessary to prevail on a preliminary injunction request.
III. LAW AND ANALYSIS
A. Standard of Review for Motions to Dismiss Pursuant to Rule 12(b)(1) and 12(b)(6)
In considering a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(1), the party asserting subject matter jurisdiction bears the burden of proof. Ramming v.
United States, 281 F.3d 158, 161 (5th Cir. 2001). “A Rule 12(b)(1) motion should be granted
only if it appears certain that the plaintiff cannot prove a plausible set of facts that establish
subject-matter jurisdiction.” Davis v. United States, 597 F.3d 646, 649 (5th Cir. 2009) (quotation
omitted). The Court may decide the jurisdictional question based on “(1) the complaint alone; (2)
the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint
supplemented by undisputed facts plus the court's resolution of disputed facts.”
Barrera-Montenegro v. United States, 74 F.3d 657, 659 (5th Cir. 1996) (citations omitted). If the
Court resolves disputed facts to decide if it has jurisdiction, “no presumptive truthfulness
attaches to the plaintiff's allegations.” Montez v. Dep't of Navy, 392 F.3d 147, 149 (5th Cir.
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2004).
In considering a motion to dismiss under Rule 12(b)(6), the Court accepts all
well-pleaded facts as true, viewing them in the light most favorable to the plaintiff. In re Katrina
Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007). However, a pleading that offers
“labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not
do.” Ashcroft v. Iqbal, 556 U.S. 662 (2009). Therefore, to survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that
is plausible on its face. Id. “The plausibility standard is not akin to a ‘probability requirement,’
but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. “This
requirement holds true even for pro se litigants.” Roque v. Jazz Casino Co. LLC, 2010 WL
2930876, at *3 (5th Cir. July 22, 2010).
B. Analysis
1. Truth-in-Lending Act claim
Plaintiff alleges that American Bank failed to properly disclose Plaintiff’s right to
rescind the mortgage transaction into which she entered on April 9, 2009. The mortgage at issue
was transacted in order to finance Plaintiff’s home in Ponchatoula, Louisiana. As Plaintiff
concedes, “residential mortgage transactions” are excluded from the right of rescission that
TILA created. 15 U.S.C. § 1635(e). Nevertheless, Plaintiff attempts to circumvent this exclusion
with complicated reasoning and tenuous analogies, and it is this argument to which the Court
will now turn.
The exception for “residential mortgage transactions” is subject to an exception itself,
created by the Federal Reserve Board’s Staff Commentary on the regulations implementing
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TILA. As Plaintiff states, the regulations state that a residential mortgage transaction “does not
include a transaction involving a consumer’s principal dwelling if the consumer had previously
purchased or acquired some interest to the dwelling.” 12 C.F.R. pt. 226, Supp. I. Plaintiff claims
that this provision applies to the instant case, arguing that the $1000 down payment to the realty
firm made Plaintiff an equitable owner of the property, and therefore when the loan was closed,
she was purchasing a dwelling of which she had previously acquired some interest.
Despite its fancy footwork, this argument cannot withstand scrutiny. First of all, the
down payment paid by Plaintiff just weeks before the loan closed was not a separate transaction
that one could consider a “previous” acquisition of partial ownership. In truth, the down payment
and the finalization of financing were all components of single transaction: the purchase of
Plaintiff’s home. Although Plaintiff attempts to obfuscate this truth by deeming the $1000 check
an “escrow payment,” functionally it is not distinct from the loan closing that took place less
than seven weeks later.
As Defendant American Bank notes, to conclude otherwise would be to warp
Congress’s intent to exempt residential mortgages from the right to rescission. Considering the
frequency of down payments as part of mortgage transactions, if this Court held that such a
payment created a previous interest in the dwellings they finance, the exception would swallow
the rule, and nearly every mortgage transaction would be subject to a right to rescission. Clearly
this result was not the intended purpose of the provisions of TILA.
Further support for this conclusion can be found in the same document cited by
Plaintiff: the official staff commentary on the implementing regulations. Directly following the
passage creating the “exception to the exception” that Plaintiff claims is supportive of her
19
argument are two examples of such a transaction. They are a “financing of a balloon payment
due under a land sale contract” and an “extension of credit made to a joint owner of property to
buy out the other joint owner’s interest.” 12 C.F.R. pt. 226, Supp. I. Taking these examples as
illustrative of the intended meaning of a dwelling in which one has “previously purchased or
acquired some interest,” it is clear that the Federal Reserve Board did not contemplate a nominal
down payment made on a house just weeks before loan closing. On the contrary, the Federal
Reserve Board intended to capture those transactions in which the buyer had previously acquired
some significant interest in a transaction formally and functionally distinct from the purchase. As
a result, Plaintiff’s purchase of her home cannot fall into the exception to the “residential
mortgage transaction” definition. Thus, Plaintiff’s transaction was not subject to the right to
rescission created by TILA. Because Plaintiff did not have a right to rescind the mortgage under
TILA, American Bank did not violate Plaintiff’s right by not canceling her mortgage or returning
any monies paid. In sum, Plaintiff has failed to state a claim under the statute, and American
Bank’s motion to dismiss Plaintiff’s claims under the Truth-in-Lending Act must be granted.1
2. Fair Debt Collection Practices Act claim
Both the American Bank Defendants and the Shapiro & Daigrepont Defendants have
filed motions to dismiss Plaintiff’s claims under the FDCPA. The Court will address the
Defendants’ motions in turn.
a. American Bank Defendants
The American Bank Defendants have moved to dismiss Plaintiff’s claim under the
1
Because the Motion to Dismiss Plaintiff’s claim under the TILA may be granted based
on the lack of a right to rescind, this Court need not reach Defendant’s argument that the claim
should be dismissed because the claim is prescribed and time barred.
20
FDCPA, arguing that the statute exempts both banks and their employees and that the one-year
statute of limitations renders Plaintiff’s claim time-barred.
The FDCPA prohibits debt collectors’ use of unfair practices, including threats and
harassment. “Debt collectors” is a term of art that is defined within the statute as “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 another.” 15 U.S.C. § 1692a(6). This court, as well as
others, have held that the term “debt collector” does not refer to banks . See Thomasson v. Bank
One, Louisiana, N.A., 137 F.Supp. 2d 721, 723 (E.D. La. 2001) (holding that bank was a “debt
collector” under the FDCPA because bank was collecting debt owned directly to it and bank’s
primary purpose was to loan money to consumers, not collection of outstanding debts); see also
Montgomery v. Huntington Bank, 346 F.3d 693 (6th Cir. 2003); Robertson v. GE Consumer
Finance, Inc., 2008 WL 4868289 *3 (S.D. Miss. 2008). Accordingly, American Bank cannot be
held liable under the FDCPA, and Plaintiff’s claim against it under this statute must be
dismissed.
Plaintiff’s claim against Ms. Kinchen may also be easily disposed of. Plaintiff alleges
that Ms. Kinchen is liable under the FDCPA for her participation in the foreclosure process as an
employee of American Bank. Section 1692a(6)(A) of the statute exempts “any officer or
employee of a creditor while, in the name of the creditor, collecting debts for such creditor.” 15
U.S.C. § 1692a(6)(A). Clearly, this provision includes Ms. Kinchen acting in her role as a bank
employee. Therefore, Ms. Kinchen cannot be held liable under the FDCPA, and Plaintiff’s claim
21
against her under the statute must be dismissed.2
b. Shapiro & Daigrepont Defendants
The Shapiro & Daigrepont Defendants have also moved to dismiss Plaintiff’s claim
under the FDCPA, arguing that Plaintiff’s allegations that provide the basis of the claim are
conclusory.
In reviewing the complaint, this Court takes the factual allegations of the complaint
as true, and draws all reasonable inferences, and resolves ambiguities, in the plaintiff's favor. See
Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009). However, conclusory
allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a
motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937 (2009); see also
Fernandez–Montes v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir.1993). Bare recitals of the
elements of a cause of action, supported by mere conclusory statements, will not suffice to either
obtain, or prevent, dismissal for failure to state a claim. Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555 (2007).
Under Iqbal-Twombly’s two-pronged approach, the Court must determine whether
the complaint contains “sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face.” Iqbal, 129 S. Ct. at 1948-49; Twombly, 550 U.S. at 555. The first step for
the Court is to determine those pleadings that are more than just “mere conclusions” and thus are
entitled to the presumption of truth. Iqbal, 129 S. Ct. at 1949–50. Then, assuming the veracity of
these facts, the Court must determine whether the factual content “allows the court to draw the
2
Because the Motion to Dismiss Plaintiff’s claim under the FDCPA may be granted based
on the exemption provided for banks and their employees, this Court need not reach Defendant’s
argument that the claim should be dismissed because the claim is prescribed and time barred.
22
reasonable inference that the defendant is liable for the misconduct alleged” and “plausibly
give[s] rise to an entitlement to relief.” Id.; see also Rhodes v. Prince, 360 F. App'x 555, 557 (5th
Cir. 2010). If the pleadings fail to meet the requirements of Iqbal and Twombly, no viable claim
is stated, and the pleading is subject to dismissal.
In the instant case, Plaintiff alleges that Defendants violated 15 U.S.C. §§ 1692b(3),
(6); 1692c(a)(2), (c); 1692e(5), (10); 1692f; and 1692g of the FDCPA. In support of this
assertion, Plaintiff alleges that the Shapiro & Daigrepont Defendants “[sent] [Plaintiff] harassing
letters threatening foreclosure,” and “relentlessly call[ed] . . . [Plaintiff] with threats of
foreclosure and a deficiency judgment.” Pl’s. Compl. 8-9. Furthermore, Plaintiff asserts that the
Shapiro & Daigrepont Defendants specialize in collection law. Pl’s. Compl. 10-11.
Section 1692b(3) and (6) prohibits a “debt collector communicating with any person
other than the consumer for the purpose of acquiring location information about the consumer”
from communicating with such person more than once unless except in certain circumstances,
and from communicating with anyone other than the consumer’s attorney once the debt collector
is aware that the consumer has representation. See id. § 1692b(3), (6).
Section 1692c(a)(2) prohibits communication with the consumer when the debt
collector knows the consumer is represented by an attorney with the respect to such debt, without
prior consent of the consumer. Section 1692c(c) prohibits communication with a consumer if the
consumer has notified the debt collector in writing that the consumer refuses to pay a debt or that
consumer wishes to cease communication.
Section 1692e(5) prohibits debt collectors from threatening that “any action that
cannot be taken or that is not intended to be taken.” Section 1692e(10) prohibits the use of any
23
false representation or deceptive means to collect or attempt to collect any debt or to obtain
information concerning a consumer.
Section 1692f prohibits debt collectors from using unfair or unconscionable means to
collect or attempt to collect any debt. The section lists examples of such conduct, including
collecting any amount unless such amount is expressly authorized by the agreement, and
depositing any postdated check prior to the date on such check.
Section 1692g sets out requirements of debt collectors regarding notice of debt and
communication with a consumer who disputes the validity of said debt.
In the instant case, drawing all reasonable inferences in favor of Plaintiff, several of
the provisions that Plaintiff alleges have been violated do find sufficient support in Plaintiff’s
Complaint. Sections 1692c(c), 1692e(5), 1692f, and 1692g all create prohibitions and standards
that could plausibly give rise to an entitlement to relief based on Plaintiff’s Complaint.
Therefore, this Court finds that further discovery is warranted with respect to these allegations,
and the Shapiro & Daigrepont Defendants’ Motion to Dismiss these claims must be denied.
Sections 1692b(3) and (6), 1692c(a)(2), and 1963e(10) however, present a different
story. These provisions prohibit the debt collector from speaking with a person other than the
consumer in certain circumstances, from communication with the consumer when it knows that
he or she is represented by an attorney, and from using false representation or deceptive means
to collect a debt. Nowhere in Plaintiff’s Complaint does she assert that the Shapiro & Daigrepont
Defendants communicated with anyone other than her, or that the Shapiro & Daigrepont
Defendants continued communication with her despite notification that she had acquired
representation for the matter. Finally, Plaintiff does not allege that the Shapiro & Daigrepont
24
Defendants were deceptive in their attempts to collect the debt; to the contrary, Plaintiff alleges
that the Defendants were too forward and forthcoming with their communications regarding the
debt. As central aspects of a claim under these sections, these factual allegations must be present
for this Court to allow these claims to proceed. As such, this Court must grant the Shapiro &
Daigrepont Defendants’ Motion to Dismiss Plaintiff’s claims under 15 U.S.C. §§ 1692b(3), (6),
1692c(a)(2), and 1692e(10). If Plaintiff is able to plead sufficient facts to sustain these claims,
she may do so by filing an amended complaint.
3. Lack of capacity under the Louisiana Civil Code
Plaintiff alleges that she had a right to rescind the mortgage contract under Article
1918 of the Louisiana Civil Code. Article 1918 states, “All persons have capacity to contract,
except unemancipated minors, interdicts, and persons deprived of reason at the time of
contracting.” This general rule that all persons have capacity is subject to some exceptions, and
the meaning of “persons deprived of reason” has been clarified by cases such as those cited in
Official Comment (b) to the article. Examples of what constitutes a deprivation of reason include
insanity, Succession of Schmidt, 53 So. 2d 834 (1951), habitual drunkenness, Interdiction of
Gasquet, 68 So. 89 (1915), and senility, Smith v. Blum, 143 So. 2d 419 (La. App. 4 Cir. 1962).
Plaintiff asserts that she was deprived of reasoning due to her limited education and
lack of experience in business and finance, in addition to American Bank’s lack of sufficient
explication of the provisions of the mortgage. In support of her assertion, Plaintiff relies on
another case, one not noted in the Official Comment: Succession of Molaison, 34 So. 2d 897
(1947). In Molaison, the plaintiff had been induced by the residuary legatee-executrix of an
estate to renounce her claim to one-third of a $225,000 estate in exchange for a $5,000 legacy.
25
The plaintiff was suffering from an advance stage of diabetes and, although educated, was
described as not very bright. In annulling the renunciation, the court stated that “it is the duty of
the courts to carefully and painstakingly investigate the circumstances surrounding transactions
between a person of limited mental capacity and one experienced in business affairs, in order
that substantial justice might be meted out.” Id. at 903. According to Plaintiff, this holding
supports her argument that, due to her lack of experience in financial affairs, she lacked capacity
to enter into the mortgage, and therefore the transaction is null, void, and unenforceable.
The holding in Molaison seems anomalous and appears to find no support in other
cases. For example, in the case cited by Defendants in their briefs, Banks v. Johns, the Louisiana
Court of Appeal stated that the holding of Molaison “should be . . . restricted to its facts.” 289
So. 2d 194, 198 (La. App. 1 Cir. 1973). The court explained that Molaison “stands alone in our
jurisprudence” and “cited no authority for the principle of law on which it relied in setting aside
the act.” Id. Indeed, since Molaison, the holding has only been cited by one other case, Higgins
v. Spencer, 531 So. 2d 768 (La. App. 1 Cir. 1988).
Aside from the dubious precedential value, the facts of the case are inapposite here.
The Plaintiff in Molaison was not simply unfamiliar with business and financial affairs, but
described as “undoubtedly a woman of limited mental capacity” and “obtuse.” Molaison, 34 So.
2d at 902. Furthermore, she was suffering from an untreated case of diabetes, which the court
notes may have contributed to her mental capacity. See id. Similarly, the plaintiff in the only
case to follow this holding of Molaison was “mentally retarded,” “unable to read or write,” and
“had the mentality of a 5 or 6 year old child.” Higgins, 531 So. 2d at 771. Plaintiff argues that
Molaison and Higgins stand for the proposition that a person of limited education and lack of
26
business experience who claims to not understand the nature of a contract lacks legal capacity to
enter into it. Clearly, this far-fetched argument is incorrect. Plaintiff does not allege that she has
severe mental disabilities and that these prohibited her from comprehending the nature of the
transaction. The Molaison reasoning, whatever value it retains, does not apply here.
And nor should it. To hold that any person who lacks “experience in business and
finance” may have a transaction declared null and void would undermine the integrity of
contracts within the State of Louisiana. Nearly every person who enters into a mortgage is less
experienced in financial affairs than the bank with which they are contracting, and to use the
holding of Molaison to determine that this inequality allows courts to disturb every mortgage and
investigate the circumstances surrounding it would create chaos.
In sum, the authorities cited by Plaintiff are of dubious precedential value, inapposite,
and would have an absurd effect on the right to contract. Therefore this Court must grant
Defendants’ Motion to Dismiss Plaintiff’s claim under the Louisiana Civil Code.
4. Louisiana Unfair and Deceptive Trade Practices Act claim
Both the American Bank Defendants and the Shapiro & Daigrepont Defendants have
filed motions to dismiss Plaintiff’s claims of violations of the automatic stay. Because the
LUDTPA claims against both groups of defendants may be dismissed on the same grounds, the
Court will address the Defendants’ motions as one.
LUDTPA makes unlawful any “unfair methods of competition and unfair or
deceptive acts or practices in the conduct of any trade or commerce.” La. Rev. Stat. Ann. 51:
1405(A). Private actions under the statute are prescribed by one year, beginning from the time of
the transaction or act that gives rise to the claim. Id. at 1409(E).
27
In the instant case, Plaintiff filed her claim on August 19, 2011. Plaintiff alleges in
the complaint that the acts that give rise to the LUDTPA claims took place from April 9, 2009,
when the loan and mortgage were executed, through June 20, 2011, encompassing the period of
time during which the Defendants allegedly violated the Fair Debt Collection Practices and the
automatic stay imposed by the bankruptcy filing. Pl’s. Compl. 18. If the Court finds that the only
conduct that can support the violation occurred at the time of the transaction, on April 9, 2009,
then the LUDTPA claim is time-barred. In effect, Plaintiff is attempting to obfuscate the
possibility that the claim is time-barred by asserting that Defendants’ alleged violations of the
FDCPA and the automatic stay, which allegedly occurred during 2010 and 2011, constitute
violations of the LUDTPA. This argument cannot stand. The Fifth Circuit has explained that the
purpose of LUDTPA is to prohibit unfair commercial acts that undermine competition. See
Omnitch Intern., Inc. v. Clorox Co., 11 F.3d 1316, 1331 (5th Cir. 1004) (“The real thrust of the
LUTPA . . . is to deter injury to competition.”). “To recover under LUDTPA, a plaintiff must
prove fraud, misrepresentation, or other unethical conduct.” Computer Mgmt. Assistant Co. v.
Robert F. DeCastro, Inc., 220 F.3d 396, 414 (5th Cir. 2000); see also Jefferson v. Chevron
U.S.A., Inc., 713 So.2d 785, 792 (La. Ct. App. 1998) (explaining that a trade practice is
deceptive when it amounts to “fraud, deceit, or misrepresentation”).
In this case, the conduct that Plaintiff alleges constitutes violations of FDCPA and the
automatic stay are not fraudulent or deceitful. Plaintiff’s allegations regarding the specific
violations of the FDCPA are unclear, but one can infer that Plaintiff intends to allege that the
Defendants violated the FDCPA by engaging in prohibited communication with them and by
breaching notice requirements. Similarly, Plaintiff alleges that Defendants violated the automatic
28
stay by continuing to contact her regarding the foreclosure after she filed for bankruptcy.
Clearly, there is nothing fraudulent or anticompetitive about this allegation. Accordingly,
because Plaintiff’s claims under the automatic stay and the FDCPA do not constitute violations
of LUDTPA, this Court must find that they do not constitute “acts” that would bring Plaintiff’s
LUDTPA claim within the statute of limitations.
The Court will now sift through the remaining allegations under LUDTPA in order to
determine if any aspects of this claim fall within the one-year statute of limitations. First,
Plaintiff alleges that Defendants violated LUDTPA by seeking foreclosure where there was no
right to do so. Pl’s. Compl. 11. Whether or not wrongfully seeking a foreclosure may have been
mentioned, in dicta, as in violation of another state’s deceptive trade practices statute, see, e.g.,
Flenniken v. Longview Bank and Trust Co., 661 S.W. 2d 705 (Tex. 1983), and whether or not
that state’s interpretation of its own law is persuasive to this Court, such conduct did not occur in
this case. As detailed above, Plaintiff had no right to rescind the mortgage under either the Truthin-Lending Act or the Louisiana Civil Code, and therefore the foreclosure was not wrongful.
In her complaint, Plaintiff also alleges that when American Bank, through the Shapiro
& Daigrepont Defendants, filed the action for foreclosure, she was never served with process. A
defective foreclosure notice has previously provided the basis for a violation of a state’s
deceptive trade practices statute. See In re Smith, 866 F.2d 576 (3d Cir. 1989). Again putting
aside the question of the applicability of another state’s interpretation of its own law, this case is
distinguishable. In Smith, the circuit court reversed a district court’s ruling that improper service
of process was not “deceptive, misleading, or fraudulent.” The court explained, however, that it
was not simply the improper service that formed the basis of its opinion, but also the fact that
29
after the mortgagor informed the bank of her indefinite stay overseas, and less than thirty days
prior to the commencement of the foreclosure action, the bank had corresponded with the
mortgagor at her new address abroad. This, the court stated, “misled or lulled Smith into a false
sense of reliance, ultimately permitting [the bank] to obtain a default judgment and to foreclose
on the property.” Id. at 584. In fact, it was the correspondence to her new address, followed by
the service of process on her old address, that constituted the “misleading” act that violated the
statute.
In the instant case, Plaintiff alleges no such misleading act in conjunction with the
allegedly improper service of process. Instead, the complaint simply alleges that she had never
been served with process and received only a “Notice of Seizure.” While this deficiency may
create other procedural issues in the foreclosure suit itself, it does not give rise to a cause of
action under LUDTPA.
In sum, the Court finds all of Plaintiff’s allegations under LUDTPA either are timebarred or relate to conduct that does not constitute a violation of the statute. Therefore, Plaintiff’s
claim under LUDTPA against both the American Bank Defendants and the Shapiro &
Daigrepont Defendants must be dismissed.3
5. Injunctive relief
Both the American Bank Defendants and the Shapiro & Daigrepont Defendants have
filed motions to dismiss Plaintiff’s requests for injunctive relief.
The American Bank Defendants have moved to dismiss Plaintiff’s requests for (1) a
3
Because the Motion to Dismiss Plaintiff’s claim under LUDTPA may be granted based
on the statute of limitations argument, this Court need not reach Defendants’ various other
arguments, described above.
30
preliminary and permanent injunction against the state court foreclosure proceedings, (2) a
receivership for all monies given to Defendants by Plaintiff in connection with the April 9, 2009,
transaction, and (3) an order that American Bank render an accounting for all monies received
from Plaintiff in connection with the April 9, 2009, transaction. The American Bank Defendants
contend that such injunctive actions are barred by the Anti-Injunction Act and the Colorado
River abstention doctrine. The Shapiro & Daigrepont Defendants have moved to dismiss
Plaintiff’s request for a receivership, the only form of injunctive relief asserted against them in
Plaintiff’s Complaint. See Pl’s. Compl. 17-18. Because both groups of Defendants have moved
to dismiss the request for a receivership on the same grounds, the Court will address their
Motions as one.
a. Preliminary and permanent injunction
The Anti-Injunction Act, 28 U.S.C. § 2283, prohibits the granting of injunctions to
stay state court proceedings, except where expressly authorized by federal statute, or where
necessary in aid of the federal court’s jurisdiction or to protect or effectuate its judgment. None
of these exceptions is applicable here. When applicable, the section “is absolute, that is, it leaves
no discretion in the court.” First Nat. Bank & Trust Co. of Racine v. Village of Skokie, 173 F.2d
1, 4 (7th Cir. 1949). In Nixon v. Individual Head of St. Joseph Mortg. Co., Inc., the district court
held that it did not have the power to enjoin state court mortgage foreclosure proceedings, and
therefore dismissed the case for lack of jurisdiction. 612 F.Supp. 253, 255 (D.C. Ind. 1985); see
also Ungar v. Mandell, 471 F.2d 1163, 1165 (2d Cir. 1972).
In sum, it is clear that, if applicable, Anti-Injunction Act prohibits this Court from
granting an injunction of the ongoing foreclosure proceeding in state court. Plaintiff argues,
31
however, that § 2283 is not appropriate for this case, as she has filed for injunctive relief under
42 U.S.C. § 1983, and that actions for injunctive relief against state courts are not barred under
that statute. Plaintiff relies on the Supreme Court opinion in Mitchum v. Foster to support her
assertion that this Court may intervene in the state court action because it allegedly violates
substantive and procedural due process.
In this instance, Plaintiff is correct. Section 1983 expressly authorizes a “suit in
equity” to redress “the deprivation” under color of state law, “of any rights, privileges, or
immunities secured by the Constitution.” 42 U.S.C. § 1983. The Court in Mitchum was faced
with the question of whether § 1983 came within the “expressly authorized” exception to the
Anti-Injunction Act, in which case a court would be permitted to grant an injunction to stay a
state court proceeding. Mitchum v. Foster, 407 U.S. 225, 226 (1972). The Court held that suits
under § 1983 were intended to come within the exception to the bar against injunctions of state
court proceedings, and therefore a plaintiff who files suit in federal court under that section may
not have his or her suit dismissed due under the Anti-Injunction Act. See, e.g., Bank of New York
Mellon v. Smith, 71 So. 3d 1034 (La. App. 3 Cir. 2011).
In the instant suit, Plaintiff claims in her response to the Motion to Dismiss that she
has filed for the preliminary and permanent injunctions under § 1983. As a basis for this claim,
she argues that the executory process procedure used by the Defendants, as well as the
“confession of judgment,” violate her right to due process. As a result, although Plaintiff’s
claims under § 1983 are questionable, such a claim is not barred by the Anti-Injunction Act. As a
result, Defendants’ Motion to Dismiss Plaintiff’s request for injunctions is denied, and the Court
will assess the merits of Plaintiff’s Motion for a Preliminary and Permanent Injunction below.
32
b. Receivership and accounting
Defendants argue that the remaining requests for injunctive relief, namely the
requests for receivership and accounting, must be dismissed because they are related to the state
court foreclosure proceeding, which has not yet come to final judgment, pursuant to Colorado
River Water Conservation Dist. v. United States, 424 U.S. 800 (1976). Under Colorado River,
federal district courts have a “virtually unflagging obligation . . . to exercise the jurisdiction
given them.” Id. at 817. However, Colorado River also created an abstention doctrine by which
they may abstain from hearing cases under “exceptional circumstances where the order to the
parties to repair to state court would clearly serve an important countervailing interest.” Id. at
813 (internal quotations omitted). The opinion created general categories when abstention would
be appropriate, including one concerned with “contemporaneous exercise of concurrent
jurisdictions, either by federal courts or by federal and state courts.” Id. at 817. Specifically, the
Supreme Court held that abstention might be proper out of respect for “considerations of [w]ise
judicial administration, giving regard to conservation of judicial resources and comprehensive
disposition of litigation.” Id. (citing Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342 U.S.
180, 183 (1952)). In order to determine whether circumstances permit dismissal of a federal
claim due to the presence of a concurrent state proceeding for reasons of wise judicial
administration, the “threshold issue” is whether the two actions are “parallel.” St. Clair v.
Wertzberger, 637 F.Supp. 2d 251, 255 (D.N.J. 2009). “[P]arallel cases involve the same parties
and ‘substantially identical’ claims, raising ‘nearly identical allegations and issues.’” Id. (citing
IFC Interconsult, AG v. Safeguard Intern. Partners, LLC., 438 F.3d 298, 306 (3d Cir. 2006).
Furthermore, the Court created a set of six factors, most concisely stated in St. Clair: “(1) which
33
court first assumed jurisdiction over a relevant res, if any; (2) whether the federal court is
inconvenient; (3) whether abstention would aid in avoiding piecemeal litigation; (4) which court
first obtained jurisdiction; (5) whether federal or state law applies; and (6) whether the state
action is sufficient to protect the federal plaintiff’s rights.” Id.; see also Colorado River, 424
U.S. at 818-19.
Although this Court recognizes the validity of the Colorado River doctrine, the Fifth
Circuit has demonstrated the high bar it has set for abstention by a district court. See Kelly Inv.,
Inc. v. Continental Common Corp., 315 F.3d 494 (5th Cir. 2002). In Kelly, the Fifth Circuit
reviewed a district court’s decision to abstain from exercising its jurisdiction in a controversy
regarding promissory notes while another, similar suit was pending in Texas state court. In
abstaining from the case, the district court had found several of the Colorado River factors,
including that the federal court in Louisiana was an inconvenient forum, that piecemeal litigation
would result if concurrent proceedings were permitted, and that the Texas proceeding had
progressed further. Id. at 498. Still, the Fifth Circuit reversed the decision, reiterating that
abstention is only proper under “exceptional circumstances.” Id. at 497. The court went on to
explain that the decision to abstain must not be the result of a simple checklist of factors, but
requires fastidious balancing of them, “with the balance heavily weighted in favor of the exercise
of jurisdiction.” Id. at 498 (citing Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 16 (1983)). In the end, the Court concluded that the litigation was “merely duplicative,”
and that res judicata would ensure proper order of any irreconcilable rulings. Id. at 499.
In light of the high standard for abstention in the Fifth Circuit, and the lack of
“exceptional circumstances” in this case, the Court will not use the Colorado River doctrine to
34
decline to stay these proceedings for equitable relief in favor of those pending in state court. This
conclusion does not mean, however, that Plaintiff’s requests for a receivership and an accounting
have been, or will be, granted. A receivership is a remedy that the Court has the power to order
when such relief is warranted. See, e.g., Santibanez v. Weir McMahon & Co., 105 F.3d 234, 241
(5th Cir. 1997) (“[T]he District Court had the power to appoint a receiver to take possession of
the judgment debtor’s property for preservation under Federal Rule of Civil Procedure 66.”).
Appointment of a receiver is a “drastic remedy” and is in the “sound discretion of the court.” Id.
Factors that courts have considered as indicating the need for a receivership include “a valid
claim by the party seeking the appointment.” Id. In this case, Plaintiff has requested the equitable
relief “in view of [Shapiro & Daigrepont Defendants’] repeated violations of the
Truth-in-Lending Act, the Bankruptcy Code and the Fair Debt Collection Practices Act,” Pl.'s
Compl. 18. As discussed above, it has not yet been determined that any such violations occurred,
and in fact, the Court has dismissed all but a few of the FDCPA claims against the Shapiro &
Daigrepont Defendants. As such, although the Court will not dismiss the requests for
receivership entirely based on the Colorado River abstention doctrine, no such relief will be
granted until Plaintiff establishes that she has a valid claim under the FDCPA, and that the
“drastic remedy” of a receivership is warranted.
Similarly, an accounting is a form of equitable relief that a court may grant in aid of
judgment. See Vogt v. Bd. of Levee Com’rs of Orleans Levee Dist., 680 So. 2d 149, 157 (La.
App. 4 Cir. 1996) (“‘Accounting’ has been defined as an act or system of making up or settling
accounts or a rendition of an account. If by order of a court, it imports a rendition of a judgment
for the balance due.”). In the instant case, no such judgment has been rendered, and Plaintiff has
35
not yet established the basis for her request. As such, the Court will not dismiss the request for
an accounting but will reserve ruling on it until a later date.
6. Violation of the Automatic Stay
Both the American Bank Defendants and the Shapiro & Daigrepont Defendants have
filed motions to dismiss Plaintiff’s claims of violations of the automatic stay. The Court will
address the Defendants’ motions in turn.
a. American Bank Defendants
The American Bank Defendants have moved to dismiss Plaintiff’s claims of violation
of the automatic stay, arguing that this Court lacks jurisdiction to hear the claim and that Plaintiff
fails to state a claim upon which relief can be granted.
The United States Bankruptcy Code provides a comprehensive federal system for the
management of debtor’s affairs and creditors’ rights. See 11 U.S.C. § 101, et seq. Within the
arrangement, the code provides for an automatic stay for state proceedings against the debtor.
See 11 U.S.C. § 362. In the instant case, Plaintiff seeks damages under state law in a district
court for alleged violations of the automatic stay provision of the Bankruptcy Code.
Several courts have already examined this question, and currently there is a circuit
split on the issue. The Second Circuit has affirmed dismissal of such cases brought in district
courts, determining that the “[F]ederal Bankruptcy Code preempts any state law claims for a
violation of the automatic stay, and precludes jurisdiction in the district courts. Any relief for a
violation of [an automatic] stay must be sought in the Bankruptcy Court.” Eastern Equipment
and Services Corp. v. Factory Point Nat’l Bank, Bennington, 236 F.3d 117, 121 (2d Cir. 2010).
Meanwhile, however, the Eleventh Circuit has held that district courts do have jurisdiction over
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such claims by virtue of the grant of original jurisdiction over Title 11 cases found in 28 U.S.C.
§ 1331 and 1334. See Justice Cometh, Ltd. v. Lambert, 426 F.3d 1342, 1343 (11th Cir. 2005).
Section 1334(b) of Title 28 explicitly states that district courts have “original but not
exclusive” jurisdiction of all civil proceedings arising under the Bankruptcy Code,
notwithstanding any Act of Congress. 28 U.S.C. § 1334(b). The Eleventh Circuit interpreted this
grant of jurisdiction in conjunction with the Bankruptcy Code to mean that the district courts
may refer cases arising under title 11 to bankruptcy courts for their districts, but that they do not
lack subject matter jurisdiction to adjudicate those claims themselves. See Justice Cometh, 426
F.3d at 1343. Tellingly, this grant of jurisdiction was not discussed in the Second Circuit
decision that district courts may not adjudicate claims of violations of an automatic stay.
Accordingly, this Court finds the Justice Cometh decision more persuasive and holds that it does
not lack subject matter jurisdiction over the claim of violation of the automatic stay.
Defendants also move to dismiss the claim for violation of the automatic stay on the
basis that Plaintiff fails to state a claim upon which relief can be granted. Title 11 U.S.C. § 362.
Defendants argue that Plaintiff has asked for damages as a remedy for the automatic stay
violation, and that a “monetary penalty” may not be imposed on a creditor under § 362(k) unless
the conduct that is the basis for the violation occurs after the creditor has received effective
notice of the stay. See 11 U.S.C. § 342(g)(2). Defendants argue that because no such allegation
has been made by Plaintiff, she has failed to state a claim.
Although Defendants correctly state the requirement set by § 342(g)(2), they
overstate the pleading requirements under it. In order for the Court to grant Defendants’ motion
to dismiss, it must find Plaintiff’s claim that the automatic stay was violated “implausible.”
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Although Plaintiff has not specifically stated that such violative conduct occurred after the notice
was served upon the Defendants, the Court finds that there is more than a “sheer possibility” that
the conduct may have violated the stay, and that discovery is warranted in order to determine if
this is the case. As a result, the Court must deny the motion to dismiss the claim for violation of
the automatic stay. If, after sufficient discovery is conducted, the Defendants can establish that
there is no issue of material fact regarding the notice requirement, they may file a motion for
summary judgment on the issue.
b. Shapiro & Daigrepont Defendants
The Shapiro & Daigrepont Defendants have also moved to dismiss Plaintiff’s claim
for violation of the automatic stay, arguing that the allegations are “conclusory” and that because
Plaintiff did not file such a claim against them in the bankruptcy court, it is implausible that the
Shapiro & Daigrepont Defendants actually violated the stay.
Regarding the Defendants’ first argument, it would be a stretch to deem the Plaintiff’s
allegations “conclusory.” Plaintiff alleges that an automatic stay was imposed when she filed for
bankruptcy and, despite this fact, the Shapiro & Daigrepont Defendants continued to threaten
foreclosure. These allegations are sufficient to constitute a pleading under Federal Rule of
Procedure 8, and the Court declines to dismiss the claim on these grounds.
Secondly, this Court will not dismiss an action against a defendant simply because
the plaintiff did not file against them in a different court. The Court recognizes that a multitude
of factors may go into the decision to initiate a legal proceeding, and therefore it will not end an
action in this forum based on decisions made in another. As a result, the Court declines to
dismiss the automatic stay claim against the Shapiro & Daigrepont Defendants on these grounds.
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In sum, the Court denies the Shapiro & Daigrepont Defendants’ motion to dismiss the claim for
violation of the automatic stay.
C. Standard of Review for Motions for Preliminary and Permanent Injunctions
In the Fifth Circuit, a party must establish the following to be entitled to a preliminary
injunction:
(1) a substantial likelihood that plaintiff will prevail on the merits,
(2) a substantial threat that plaintiff will suffer irreparable injury if
the injunction is not granted, (3) that the threatened injury to
plaintiff outweighs the threatened harm the injunction may do to
the defendant, and (4) that granting the preliminary injunction will
not disserve the public interest.
Kennedy v. Potter, 344 Fed. App'x 987 (5th Cir. 2009) (quoting Canal Auth. of Fla. v. Callaway,
489 F.2d 567, 572 (5th Cir. 1974)); accord Bluefield Water Ass'n, Inc. v. City of Starkville, 577
F.3d 250, 252–53 (5th Cir. 2009). “A preliminary injunction is an extraordinary and drastic
remedy.” Id. “The party with the burden must clearly carry the burden of persuasion.” Id.
D. Analysis
1. Preliminary and permanent injunction
Plaintiff has moved for a preliminary and permanent injunction against Defendant
American Bank, prohibiting and restraining American Bank from proceeding further in its
foreclosure action against Plaintiff, now pending in state court. Plaintiff also requests that the
injunction require American Bank to cancel, annul, and erase all security interests it purports to
hold against Plaintiff arising out of the April 9, 2009, transaction.
The Supreme Court has described the preliminary injunction as “an extraordinary
remedy never awarded as of right.” Winter v. Natural Resources Defense Council, Inc., 555 U.S.
7, 24 (2008). “A plaintiff seeking a preliminary injunction must establish that he is likely to
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succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary
relief, that the balance of equities tips in his favor, and that an injunction is in the public
interest.” Id. at 20.
Although the Supreme Court has created a four-part test for plaintiffs requesting a
preliminary injunction, in the instant case, the Court need only review the first part in order to
dispose of the motion: the requirement that Plaintiff establish that she is likely to succeed on the
merits. This element would require that Plaintiff establish one of her two arguments in support of
her motion for a permanent injunction — either that the April 9, 2009, transaction is null, void,
and unenforceable or that the executory process procedure used by American Bank to foreclose
on the property is unconstitutional.
With regard to Plaintiff’s first argument, as the Court concluded in deciding the
American Bank Defendants’ Motion to Dismiss, above, Plaintiff had no right to rescission under
the Truth-in-Lending Act. Therefore, Plaintiff could not have canceled the April 9, 2009,
contract by invoking such a right. Furthermore, Plaintiff did not lack capacity under Article 1918
of the Louisiana Civil Code, as the Court also determined in the above discussion of the
American Bank Defendants’ Motion to Dismiss. In sum, neither the loan nor the mortgage are
null, void, and unenforceable, as argued by Plaintiff. As a result, Plaintiff is quite unlikely to
succeed on the merits with this argument.
Plaintiff’s second argument in support of the injunction is that the executory process
procedure used by American Bank to foreclose on the mortgaged property violated her right to
Due Process under the Fourteenth Amendment. In support of this assertion, Plaintiff cites the
Supreme Court decision in Jones v. Flowers, 547 U.S. 200 (2006). Plaintiff argues that Jones
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and its progeny establish that the notice of seizure and sale provided to a defendant in a
foreclosure proceeding are not sufficient to meet the bar set by the Due Process Clause of the
Fourteenth Amendment.
Despite Plaintiff’s attempts to persuade otherwise, it is well-settled that executory
process, as well as the confession of judgment it is based upon, is constitutional. See, e.g.,
Mitchell v. W.T. Grant Co., 416 U.S. 600 (1974) (upholding the constitutionality of Louisiana’s
executory process statutes); Buckner v. Carmack, 272 So.2d 326 (La. 1973) (holding that
executory process is constitutional, despite defendant’s attacks on the notice provided and the
confession of judgment); see also Fuentes v. Shevin, 407 U.S. 67 (1972) (upholding the
analogous Florida and Pennsylvania “replevin” statutes).
In spite of this clear precedent, Plaintiff continues to argue that executory process
procedure is unconstitutional, contending that these long-settled decisions did not grapple with
the 2006 holding of Jones v. Flowers. But Jones does not upset the precedent as Plaintiff would
like to believe. In Jones, the Supreme Court was faced with a tax sale proceeding in which the
certified letters mailed as notice to the homeowner were returned “unclaimed.” Jones, 547 U.S.
at 223-24. The home was sold, and Jones filed suit, alleging that the proceeding violated his due
process rights by failing to provide him with adequate notice of the sale. Id. at 224-25. In its
decision holding the procedure unconstitutional, the Supreme Court found “that when mailed
notice of a tax sale is returned unclaimed, the State must take additional reasonable steps to
attempt to provide notice to the property owner before selling his property, if it is practicable to
do so.” Id.
Although Plaintiff argues that the Jones decision indicates that Louisiana’s executory
41
process procedure provides inadequate notice of foreclosure, this is simply not the case. Plaintiff
ignores the Supreme Court’s focus on the returned certified letters as the basis for their finding
notice inadequate in Jones. See id. The opinion’s requirement of “additional reasonable steps”
applies to those cases in which the government is made aware that service of notice failed, see
id. at 234, not to cases in which a property owner would simply prefer that additional
information be delivered to his or her door. Plaintiff continues to ignore the “returned mail”
element present in Jones’s progeny. See, e.g., Acevedo v. First Union Nat’l Bank, 476 F.3d 861
(11th Cir. 2007) (undelivered certified letters); Chaidez v. Gonzales, 476 F.3d 1079 (9th Cir.
2007) (certified letter not received); Luessenhop v. Clinton Cty., 466 F.3d 259 (2d Cir. 2006)
(mailed notice not received by taxpayers); Tu v. Nat’l Transp. Safety Bd., 470 F.3d 941 (9th Cir.
2006) (certified letters returned “refused” and “unclaimed”). Despite Plaintiff’s complaint that
the notice of sale and seizure was “terse, uninformative, and incomplete,” Pl’s. Mem. 16, this
does not compare to the complete lack of notice provided to property owners in the Jones line of
cases.
In sum, it is clear that the Jones holding does not taint the long-held constitutionality
of Louisiana’s executory process. The Court must conclude that Plaintiff will not succeed on the
merits of her permanent injunction request with the argument that the procedure violated her due
process rights. As a result, the Court must deny Plaintiff’s requests for a preliminary and
permanent injunction against Defendant American Bank.
2. Declaratory judgment
As noted above, Plaintiff has also used her Motion for Preliminary and Permanent
Injunction request that this Court issue a declaratory judgment that the obligation between
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Plaintiff and American Bank dated April 9, 2009, is null, void, and unenforceable. As has been
made clear above, Plaintiff has asserted no valid basis for such a judgment. Even if this Court
ignores the procedural defects of this request and construes it as a motion for summary
judgment,4 it cannot be granted because Plaintiff has not shown that there is no genuine issue of
material fact regarding the April 9, 2009, transaction. In fact, at this time, Plaintiff has presented
no legitimate arguments that the transaction should be declared unenforceable, as she had no
right to rescind the transaction under either the Louisiana Civil Code or the Truth-in-Lending
Act, and the foreclosure procedure did not violate Plaintiff’s due process rights. Therefore,
Plaintiff’s motion for a declaratory judgment is denied.
IV. CONCLUSION
For the foregoing reasons, IT IS ORDERED that the Motion to Dismiss filed by
American Bank and Marian Kinchen (Rec. Doc. No. 7) is GRANTED as set forth above.
IT IS FURTHER ORDERED that the Motion to Dismiss filed by Penny
Daigrepont, Claire Mayer, Shapiro & Daigrepont, and Eva Simkovitz (Rec. Doc. No. 17) is
GRANTED IN PART AND DENIED IN PART as set forth above.
IT IS FURTHER ORDERED that the Motion for Preliminary and Permanent
Injunction filed by Plaintiff (Rec. Doc. No. 10) is DENIED as set forth above.
New Orleans, Louisiana, this 20th day of December, 2011.
4
As American Bank duly points out, a declaratory judgment is acquired by an action for
declaratory judgment, not by a motion. See Thomas v. Blue Cross & Blue Shield Ass’n, 594 F.3d
823, 830 (11th Cir. 2010) (“[A] party may not make a motion for declaratory relief, but rather,
the party must bring an action for declaratory judgment.”); Kam-Ko Bio-Pharm Trading Co.
Ltd.-Australasia v. Mayne Pharma (USA), Inc., 560 F.3d 935, 943 (9th Cir. 2009) (explaining
that a “motion for declaratory judgment must be construed as a motion for summary judgment on
an action for a declaratory judgment”).
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UNITED STATES DISTRICT JUDGE
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