McClain v. Wells Fargo Company, & Wells Fargo & Company, NA et al
Filing
83
MEMORANDUM OPINION. Signed by Judge Theodore D. Chuang on 3/8/2018. (c/m 3/9/2018 aos, Deputy Clerk)
UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND
IRIS MCCLAIN,
Plaintiff,
v.
WELLS FARGO BANK, N.A.,
WELLS FARGO HOME MORTGAGE,
"WELLS FARGO,"
TIM SLOAN, President & CEO of Wells
Fargo Bank, NA.,
J.P. MORGAN CHASE & CO.,
J.P. MORGAN CHASE BANK, N.A.,
JAMES DIMON, CEO of JP. Morgan Chase
&
Co.,
THE BANK OF NEW YORK MELLON,
GERALD HASSELL, Chairman & CEO of
The Bank of New York Mellon,
GOLDMAN SACHS MORTGAGE CO.,
GOLDMAN SACHS GROUP, INC.,
LLOYD BLANKFEIN, CEO & Chairman of
Goldman Sachs Mortgage Co.,
KRISTINE D. BROWN, ESQ.,
GREGORY N. BRITTO, ESQ.,
ROBYN A. MCQUILLEN, ESQ.,
WILLIAM M. SAVAGE, ESQ., Managing
Partner of Shapiro & Brown Alt, LLP, and
LILA Z. STITELY, ESQ.,
Civil Action No. TDC-17-1094
Defendants.
MEMORANDUM OPINION
Plaintiff Iris McClain, who is self-represented, has filed suit against 16 Defendants based
on what she asserts is a history of fraudulent dealing related to her mortgage for a property
located on Herrington Drive in Upper Marlboro, Maryland ("the Property"), to foreclosure
actions on the Property, and to several bankruptcy actions.
McClain sues Defendants Wells
Fargo Bank, N.A. and Wells Fargo Home Mortgage; Timothy Sloan, the President and Chief
Executive Officer of Wells Fargo Bank N.A.; J.P. Morgan Chase & Co.; J.P. Morgan Chase
Bank, N.A.; James Dimon, the Chief Executive Officer of J.P. Morgan Chase and Co.; the Bank
of New York Mellon; and Gerald Hassell, the Chairman and Chief Executive Officer of the Bank
of New York Mellon (collectively, "the Wells Fargo Defendants") based on her grievances about
a 2007 modification to her mortgage loan, the subsequent servicing of that loan, as well as
allegations relating to their conduct during the pending foreclosure on the Property and during
two of her bankruptcy
cases.
McClain sues the Goldman Sachs Group, Inc. and Lloyd
Blankfein, Chief Executive Officer and Chairman of Goldman Sachs Mortgage Co. (collectively,
"the Goldman Sachs Defendants"),
and Goldman Sachs Mortgage Company ("GSMC"),
on
substantially the same basis. Lastly, McClain sues Kristine D. Brown, Esq.; Gregory N. Britto,
Esq.; Robyn A. McQuillen,
Esq.; William M. Savage, Esq.; and Lila Z. Stitely, Esq.
(collectively, "the Attorney Defendants") for alleged fraud relating to the foreclosure and her
multiple bankruptcy proceedings.
McClain asserts 11 claims against various combinations of Defendants.
Specifically, she
asserts claims for (1) fraud; (2) conspiracy to commit fraud; (3) a violation of the Truth in
Lending Act ("TILA"), 15 U.S.C.
SS
1601-1667f (2012); (4) unjust enrichment; (5) negligent
infliction of emotional distress; (6) a violation of the Protection of Homeowners in Foreclosure
Act ("PHIFA"),
Md. Code Ann., Real Prop.
SS
7-301-7-325
(West 2012); the Maryland
Mortgage Fraud Protection Act ("MMFPA") Md. Code Ann., Real Prop.
12 C.F.R.
S
SS
7-401-7-409;
and
1015.4(c) ("Regulation 0"); (7) a violation of the Racketeer Influenced and Corrupt
Organizations Act ("RICO"), 18 U.S.C.
Collection Practices Act ("FDCPA"),
SS
1961-1968 (2012); (8) a violation of the Fair Debt
15 U.S.C.
2
SS
1692-1692p; (9) bankruptcy fraud; (10)
foreclosure fraud; and (II) a violation of "Advocate Rule 3.3(A)(I)." Am. Compi. at 60, ECF
No. 45-1.
The Wells Fargo Defendants, the Goldman Sachs Defendants, GSMC, and the
Attorney Defendants have each filed separate Motions to Dismiss. At the close of the briefing
on the Wells Fargo Defendants' Motion, McClain filed a Motion for Leave to File a Sur-Reply to
the Wells Fargo Defendants' Reply. Having reviewed the Complaint and the briefs, the Court
finds no hearing necessary. See D. Md. Local R. 105.6 (2016). For the reasons set forth below,
the Motions to Dismiss are granted, the Motion for Leave to File a Sur-Reply is denied, and the
case is dismissed.
BACKGROUND
McClain purchased the Property through a mortgage loan in 1997.
The loan was
subsequently securitized into a mortgage-backed security held first by J.P. Morgan Chase Bank
and then by the Bank of New York Mellon ("BNYM").
Wells Fargo Bank, N.A. ("Wells
Fargo") acts as the mortgage servicer on behalf of BNYM. In 2006, McClain fell behind on the
mortgage. In January 2007, she contacted Wells Fargo to discuss options to bring her loan
current, and in July 2007 she signed a loan modification agreement that changed her adjustablerate mortgage to a fixed-rate mortgage. That loan modification, submitted by McClain as part of
later bankruptcy proceedings, provides that McClain's mortgage loan will accrue interest "at a
yearly rate of 7.000%." Am. Objection to Third Am. Proof of Claim, Ex. A, In re McClain, No.
09-22554 (Bankr. Md. 2009) (Dkt. No. 95-1 ).1 According to McClain, what ensued after she
signed the modification were a series of misrepresentations and mishandling of her payments on
the part of Wells Fargo representatives.
The Court takes judicial notice of McClain's bankruptcy proceedings pursuant to Federal Rule
of Evidence 201 (b)(2).
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3
In March 2008, still behind on her mortgage, McClain attended a foreclosure prevention
seminar hosted by Wells Fargo. At that event, she was told by a representative that she did not
qualify for a second loan modification because, based on her 2007 modification, her interest rate
had already been converted from an adjustable rate to a fixed rate. Later that same day, McClain
reviewed her 2007 loan modification and, in her estimation, found no language converting her
mortgage to a fixed rate.
McClain argues that her loan modification agreement was part of a fraudulent scheme
devised by Wells Fargo, on advice from Goldman Sachs, to profit from distressed homeowners.
She asserts that as a result of this loan modification, she has had to pay several thousands of
dollars in fees that she would not otherwise have had to pay, and also has been locked into a
fixed interest rate of 7 percent, which is higher than the rate she had prior to the modification and
higher than what average mortgage rates have been in subsequent years, thus requiring her to pay
more in interest on her mortgage than she would have had she not agreed to the loan
modification.
In 2009, McClain filed a Chapter 7 bankruptcy petition in the United States Bankruptcy
Court for the District of Maryland ("the bankruptcy court").
In re McClain, No. 09-22554
(Bankr. Md. 2009). As part of that proceeding, she contested Wells Fargo's claim against the.
bankruptcy estate for the balance of her mortgage loan, asserting, as she does in this case, that
Wells Fargo misinformed her about the terms of her loan modification and misapplied her
payments.
Am. Objection to Third Am. Proof of Claim, In re McClain, No. 09-22554 (Bankr.
Md. 2009) (Dkt. No. 95).
McClain, who was represented by counsel in those bankruptcy
proceedings, later withdrew her objection with prejudice. Consent Order Resolving Objection to
Proof of Claim, In re McClain, No. 09-22554 (Bankr. Md. 2009) (Dkt. No. 117). McClain also
4
alleges that as part of that 2009 bankruptcy process, attorneys working on behalf of Wells Fargo
promised her a new loan modification, but that the offered modification never materialized and
was then denied. That bankruptcy case was closed in 2012.
According to McClain, "(p]erhaps late 2012," the law firm employing the Attorney
Defendants, at the behest of Wells Fargo, engaged in improper debt collection practices relating
to her past due mortgage loan. Am Compi. ~ 210. In November 2013, foreclosure proceedings
were initiated against the Property in the Circuit Court for Prince George's County, Maryland.
BSBSC v. McClain, No. CAEF13-337l4
(Cir. Ct. Prince George's Co. 2013). That proceeding is
ongoing but is presently stayed based on a later bankruptcy petition filed by McClain.
According to McClain, on February 18,2014, she received correspondence from a Wells
Fargo representative in response to a complaint from McClain.
The letter assured her that her
mortgage loan was being accurately billed according to the terms of the adjustable rate note,
which McClain took as confirmation that her loan modification was not supposed to have
changed the interest rate from an adjustable rate to a fixed rate. McClain also asserts that in May
2015, as part of bankruptcy proceedings, she received a marked-up copy of her 2007 loan
modification agreement with various margin notes revealing that Wells Fargo and Goldman
Sachs "keep 2 sets of books." Am. Compi. ~ 30.
In March 2015, McClain, proceeding pro se, filed a Chapter 13 bankruptcy petition ("the
2015 bankruptcy case"). In re McClain II, No. 15-13657 (Bankr. Md. 2015). In June 2016, the
bankruptcy court denied confirmation of McClain's Chapter 13 plan without leave to amend, and
in September 2016, her petition was dismissed and the case closed.
Days later, McClain,
initially represented by counsel and then later proceeding pro se, filed another Chapter 13
bankruptcy petition ("the 2016 bankruptcy case"). In re McClain III, No. 16-22179 (Bankr. Md.
5
2016). On October 31, 2017, BNYM filed an Objection to Confirmation of Plan in that case in
which it asserted that McClain owed over $170,000 on her mortgage loan, although she had
scheduled the debt for only $80,000. That Objection was signed by attorney Robyn McQuillen
of Shapiro & Brown, LLP, on behalf of herself and co-counsel Kristine Brown, William Savage,
Lila Stitely, and James R. Meizanis.
On May 11, 2017, as part of the 2016 bankruptcy case, McClain filed a motion requesting
that the bankruptcy court disallow that Objection as to her mortgage loan.
In that Motion to
Disallow, she alleged that BNYM's statements about the terms of her modified loan and the
amounts due were incorrect?
The following day, she filed a Motion for Sanctions, asking the
bankruptcy court to prosecute Defendants McQuillen and Brown, as well as her own attorney,
for misconduct in both the 2015 and 2016 bankruptcy cases, which she asserted had prevented
her from receiving bankruptcy protection.
The bankruptcy court denied both motions. The 2016
bankruptcy case was dismissed on October 30, 2017.
McClain has appealed that dismissal,
focusing on her contention that BNYM's Objection should have been dismissed. See McClain v.
The Bank o/New York Mellon et aI., TDC-17-3397 (D. Md. 2017).
In February 2017, McClain filed the present suit in the Circuit Court for Prince George's
County.
After Defendants removed the case to this Court, McClain amended her Complaint.
Among other relief, she seeks money damages; asks the Court to enjoin the pending foreclosure
proceedings and any debt collection actions, declare the 2007 loan modification void, and cancel
the debt on that loan other than the principal balance; and requests that the Court award her the
In her Amended Complaint, McClain seems to suggest that this Objection was filed by Wells
Fargo. However, it was filed by BNYM, which was the holder of McClain's mortgage, while
Wells Fargo was her loan servicer. See Objection to Plan, In re McClain III, No. 16-22179
(Bankr. Md. 2016) (Dkt. No. 22).
2
6
attorney's fees and expenses she paid in the 2015 and 2016 bankruptcy cases. All Defendants
seek dismissal of McClain's Amended Complaint.
DISCUSSION
I.
Legal Standard
To defeat a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), the
complaint must allege enough facts to state a plausible claim for relief. Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). A claim is plausible when the facts pleaded allow "the Court to draw the
reasonable inference that the defendant is liable for the misconduct alleged."
Id. Although
courts should construe pleadings of self-represented litigants liberally, Erickson v. Pardus, 551
U.S. 89, 94 (2007), legal conclusions or conclusory statements do not suffice, Iqbal, 556 U.S. at
678. The Court must examine the complaint as a whole, consider the factual allegations in the
complaint as true, and construe the factual allegations in the light most favorable to the plaintiff.
Albright v. Oliver, 510 U.S. 266, 268 (1994); Lambeth v. Bd. ofComm'rs
of Davidson Cly., 407
F.3d 266, 268 (4th Cir. 2005).
In addition, because McClain's
allegations
sound in fraud, she is subject to the
heightened pleading standards of Rule 9(b). See Fed. R. Civ. P. 9(b) ("In alleging fraud or
mistake, a party must state with particularity the circumstances constituting fraud or mistake.").
Under this heightened pleading standard, McClain must allege "the time, place, and contents" of
the fraudulent representation, the identity of the person who made the misrepresentation,
"what he obtained thereby."
and
See Harrison v. Westinghouse Savannah River Co., 176 F.3d 776,
784 (4th Cir. 1999).
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II.
Defendants without Allegations
McClain alleges no particular wrongdoing on the part of Defendants Sloan, Dimon,
Hassell, or Blankfein other than that they were the leaders of financial institutions that she
contends have engaged in unethical and illegal practices.
McClain's
Amended Complaint
therefore fails to contain "a short and plain statement of the claim showing that the pleader is
entitled to relief' against any of these Defendants. Fed. R. Civ. P. 8(a)(2). Even if McClain had
included specific allegations against these Defendants, her claims would still fail, for the reasons
discussed below. McClain's claims against these Defendants will therefore be dismissed.
III.
Mortgage Claims
The first seven causes of action asserted by McClain relate to her mortgage loan
modification and the servicing of her mortgage loan. McClain asserts Counts One, Two, and
Seven-fraud,
conspiracy to commit fraud, and a RICO claim, respectively-against
Wells
Fargo Bank, N.A. and Wells Fargo Home Mortgage (collectively, "the Wells Fargo Entities");
and GSMC and the Goldman Sachs Group, Inc., (collectively, "the Goldman Sachs Entities"). In
Counts Three, Four, Five, and Six-unjust
enrichment, negligent infliction of emotional distress,
a claim under TILA, and a claim under the PHIF A, MMFP A, and Regulation 0, respectivelyshe adds J.P. Morgan Chase & Co. and J.P. Morgan Chase Bank, N.A. (collectively, "the J.P.
Morgan Entities") and BNYM as Defendants.
The Wells Fargo Entities, the Goldman Sachs
Entities, the J.P. Morgan Entities, and BNYM each assert that these claims should be dismissed
because they are outside the applicable statutes of limitations. They are substantially correct.
A statute of limitations argument is an affirmative defense that may be raised through a
Rule 12(b)(6) motion if "the time bar is apparent on the face of the complaint." Dean v.
Pilgrim's Pride Corp., 395 F.3d 471,474 (4th Cir. 2005). Such a motion should not be granted
8
"unless it is clear from the facts and allegations on the face of the complaint that the statute of
limitations has run." Litz v. Md. Dep't of Env't, 76 A.3d 1076, 1086 (Md. 2013).
Accord
Pilgrim's Pride, 395 F.3d at 474.
Under Maryland law, "[a] civil action at law shall be filed within three years from the
date it accrues unless another provision of the Code provides a different period of time within
which an action shall be commenced."
Md. Code Ann., Cts. & Jud. Proc.
McClain pleads five state law causes of action:
S
5-101 (2011).
fraud, conspiracy to commit fraud, unjust
enrichment, negligent infliction of emotional distress, and a statutory violation of the PHIF A and
the MMFPA.
As part of her PHIFA/MMFPA
claim, McClain also references Regulation O.
That regulation does not contain its own statute of limitations, so the Court must import one from
the most analogous state law cause of action, which here is the PHIF A. See, e.g., Owens v.
Baltimore City State's Atty's Off, 767 F.3d 379, 388 (4th Cir. 2014). Maryland's general threeyear statute of limitations for civil actions applies to each of the common law claims.
Code Ann., Cts. & Jud. Proc.
S
Md.
5-101; see Jason v. Nat 'I Loan Recoveries, LLC, 134 A.3d 421,
427-28 (Md. Ct. Spec. App. 2016) (unjust enrichment); Hall v. St. Mary's Seminary and Univ.,
608 F. Supp. 2d 679, 688 n.9 (D. Md. 2009) (noting that claims for intentional infliction of
emotional distress and negligence are governed by Maryland's
general three-year statute of
limitations); Fairfax Sav., FS.E. v. Weinberg & Green, 685 A.2d 1189, 1204-06 (Md. Ct. Spec.
App. 1996) (fraud). Because the PHIF A and the MMPF A do not contain their own statutes of
limitations, the general three-year statute of limitations applies to them and, by extension, to
5-101; Md. Code Ann., Real Prop.
S 7-
320 (providing a cause of action under the PHIF A but containing no statute of limitations);
S 7-
Regulation O. See Md. Code Ann., Cts. & Jud. Proc.
9
S
406 (providing a cause of action under the MMPF A but containing no statute of limitations);
Owens, 767 F.3d at 388.
McClain also pleads two federal causes of action, a TILA claim and a RICO claim.
TILA has either a one- or three-year statute of limitations, depending on the provision of TILA
allegedly violated. See 15 U.S.C.
9
1640(e).
RICO's statute of limitations for civil actions is
four years. Rotella v. Wood, 528 U.S. 549, 553 (2000).
Under Maryland law, the statute of limitations period begins to run when the "plaintiff
discovers, or through the exercise of due diligence, should have discovered, the injury."
Ver
Brycke v. Ver Brycke, 843 A.2d 758, 775 (Md. 2004) (quoting Frederick Rd. Ltd. P'ship v.
Brown & Sturm, 756 A.2d 963, 973 (2000ยป. For federal claims, "a cause of action accrues when
the plaintiff possesses sufficient facts about the harm done . . . that a reasonable inquiry will
reveal [the] cause of action"). Nasim v. Warden, Md. House o/Corr., 64 F.3d 951,955 (4th Cir.
1995).
Here, McClain's mortgage Claims largely stem from her loan modification, which she
asserts was fraudulent in that it converted her adjustable-rate mortgage to a fixed-rate mortgage
without her knowledge, and resulted in the improper misapplication
of the funds she paid
pursuant to the loan modification and the imposition of various fees not properly disclosed.
For
example, her TILA claim asserts that Wells Fargo failed to disclose in a Truth-in-Lending
Statement the true costs of the 2007 loan modification arising from the change to a fixed-rate
mortgage. As she admits, the loan modification took place in 2007, and the instances of
misapplication of funds and imposition of improper fees occurred at various points in 2007 and
2008. Based on the face of the Amended Complaint, McClain's mortgage claims, filed in 2017,
therefore appear to be untimely.
10
McClain asserts, however, that the statute of limitations did not begin to run until 2014,
because she was "kept in the dark" about Defendants' wrongdoing.
Resp. Opp'n Wells Fargo
Defs.' Mot. Dismiss at 11, ECF No. 77. To support this contention, McClain references a 2014
communication from Wells Fargo describing her mortgage as an adjustable-rate mortgage and
her discovery, in 2015, of a marked-up copy of her 2007 loan modification that, she asserts,
reveals that Wells Fargo was keeping two sets of books.
Even if the Court accepts McClain's assertion that she did not learn all facts relevant to
her claims at the time of the loan modification, McClain's argument is undone by her 2009
bankruptcy proceedings,
in which she raised substantially
the same complaints
about the
handling of her loan modification and the servicing of her mortgage that she alleges here.
Specifically, in her Amended Objection to the Third Amended Proof of Claim, filed on June 2,
2011, she asserted that she had been led to believe that her interest rate would remain adjustable,
but that Wells Fargo was now treating her loan as having a fixed interest rate. She also asserted
that Wells Fargo had misapplied funds she had paid, leading to improper late fees.
Thus,
McClain's own filings in that proceeding establish that by 2011, she had already uncovered the
alleged fraud arising from the fixing of her interest rate and the misapplication of funds that are
the basis of her claims here.
That McClain may have sustained monetary damages for several years after that original
modification resulting from the application of the fixed interest rate and other terms of the loan
modification does not change this analysis. "Accrual occurs when some evidence of legal harm
has been shown, even if the precise amount of damages is not known, and even if plaintiff has
suffered only trivial injuries." Fairfax Sav., 685 A.2d at 1201-02 (internal citations omitted);
accord Nasim, 64 F.3d at 955-56. "The dispositive issue in determining when limitations begin
11
to run is when the plaintiff was put on notice that he may have been injured." Fairfax Sav., 685
A.2d at 1202. Thus, by 2011, McClain had actually uncovered facts underlying her fraud claims,
and she had more than sufficient information to conduct a reasonable inquiry, exercising due
diligence, that would have uncovered her conspiracy, unjust enrichment, TILA, and RICO
claims, as well as the bulk of her negligent infliction of emotional distress claim. Thus, at the
latest, McClain's mortgage claims based on her loan modification needed to be filed by 2014 or,
for the RICO claim, 2015.
The only exception to this statute of limitations bar is McClain's claim for negligent
infliction of emotional distress, which McClain bases in part on the BNYM proof of claim filed
in her 2016 bankruptcy
case.
Even though this event is within the three-year
statute of
limitations, this claim cannot proceed because Maryland does not recognize a cause of action for
negligent infliction of emotional distress. Hamilton v. Ford Motor Credit Co., 502 A.2d 1057,
1066 (Md. Ct. Spec. App. 1986) ("[W]hile other jurisdictions may allow recovery under the
concept of negligent infliction of emotional distress, Maryland does not. ").
McClain's
remaining
mortgage
claim is her claim under PHIFA,
MMFPA,
and
Regulation O. McClain cites as the factual predicate for that claim the allegedly illusory offer of
a loan modification
made by Wells Fargo as part of her 2009 bankruptcy
proceedings.
According to McClain, the bankruptcy judge asked the parties to negotiate an agreement, and in
2009, attorneys for Wells Fargo falsely promised another loan modification and led her to
believe over a lengthy period of time that it would occur, but ultimately revealed that the loan
modification had been denied during a communication with McClain's counsel on "the evening
before a 'drop-dead' date" set by the bankruptcy judge. Am. Compi. ~ 172. At that point, any
claim arising from an alleged promise to grant a new loan modification had accrued.
12
Because
the 2009 bankruptcy proceedings closed on September 25, 2012, accrual necessarily occurred
before that date.
Accordingly, any fraud claim under the PHIFA, MMFPA, and 12 C.F.R.
1015.4 had to be filed no later than September 25, 2015, so this claim is time-barred.
S
All of
McClain's mortgage claims are therefore dismissed.
IV.
Foreclosure and Bankruptcy Claims
A.
FDCPA
McClain pleads a claim under the FDCPA against the Wells Fargo Entities, the Goldman
Sachs Entities, the J.P. Morgan Entities, BNYM, and the Attorney Defendants.
The FDCPA
claim against the Wells Fargo Entities, the Goldman Sachs Entities, the J.P. Morgan Entities, and
BNYM is fatally defective because, as her mortgage holders and mortgage loan servicer, these
Defendants are outside the ambit of the statute.
See 15 U.S.C. s1692a(6) (defining a "debt
collector" as a person collecting a debt "owed or due another"); Allen v. Bank of America, 933 F.
Supp. 2d 716, 729 (D. Md. 2013) (stating that, with exceptions not relevant here, "mortgage
servicers are not' debt collectors' under the [FDCP A]").
Moreover, all of the Defendants named in the FDCP A claim correctly argue that it is
barred by the statute of limitations.
one year of the alleged violation.
A claim for a violation of the FDCP A must be filed within
15 U.S.C.
S
1692k. McClain references 2012 as the date of the
allegedly improper debt collection practices and does not identify any incident of debt collection
within one year of the date of the Complaint.
Notably, McClain was under bankruptcy
protection for nearly the entire period from 2015 to the time she filed this suit and thereby
benefited from an automatic stay of all debt collection efforts against her.
See 11 U.S.C.
S
362(a) (2012). Where McClain has not alleged any specific debt collection practices during the
relevant time period, and where debt collection efforts were expressly barred because of her
13
bankruptcy petitions, there is no basis upon which this Court may infer that McClain has asserted
a plausible FDCPA violation stemming from conduct within the limitations period.
McClain's
FDCP A claim is therefore dismissed.
B.
Bankruptcy Fraud
McClain sues all Defendants for what she terms "bankruptcy
fraud," consisting of
allegations that proofs of claim filed in her 2015 and 2016 bankruptcy were fraudulent, and that
other documents were not properly served on her.
A central part of this claim is her
disagreement with the amount BNYM asserted she owed on her mortgage loan, a disagreement
based on her underlying contentions as to the defect in the loan modification and loan servicing.
McClain made substantially similar allegations in the 2016 bankruptcy case in her Motion to
Disallow BNYM's claim and the Motion for Sanctions against the attorneys involved in the case.
The bankruptcy court denied both motions.
"The judicial system's need for order and finality requires that orders of courts having
jurisdiction to enter them be obeyed until reversed, even if proper grounds exist to challenge
them." Spartan Mills v. Bank of Am. Ill., 112 F.3d 1251, 1255 (4th Cir. 1997). This "firm and
long standing" principle requires that a "challenge for error must be directed to the ordering
court or a higher court, as the rules provide, but it may not be made collaterally unless it is based
on the original court's lack of jurisdiction."
Id. In Spartan Mills, the Fourth Circuit barred a
collateral attack on orders issued by the bankruptcy court, noting that the plaintiff should have
appealed those orders. See id. at 1255, 1258.
McClain's claim for bankruptcy fraud relies on arguments she previously raised that were
rejected by the bankruptcy court, such that she may not obtain relief for those claims in this case.
Bankruptcy judges are empowered to hear "core proceedings" in bankruptcy cases. 28 U.S.C.
14
S
157(b)(1). Core proceedings include, but are not limited to, the "allowance or disallowance of
claims against the estate," as well as any "other proceedings affecting the liquidation of the
assets of the' estate or the adjustment of the debtor-creditor
... relationship."
S
28 U.S.C.
157(b)(2)(B), (0). McClain's Motion to Disallow BNYM's claim falls squarely within the first
category of core proceedings.
Her Motion for Sanctions, filed because McClain believed
attorneys involved in the bankruptcy proceedings were impeding her from securing bankruptcy
protection, constitutes a matter affecting the estate assets or the debtor-creditor relationship.
Because the bankruptcy court was acting within its jurisdiction
motions as part of the 2016 bankruptcy
case, McClain's
when it denied McClain's
recourse is to challenge those
determinations, as she has, through her pending appeal, not to collaterally attack them through a
claim of bankruptcy fraud in this lawsuit. See Spartan Mills, 112 F.3d at 1255. This claim will
be dismissed.
C.
Foreclosure Fraud
McClain sues all Defendants for what she terms "foreclosure
fraud," asserting that
vanous documents were doctored or records fabricated in order to enable Defendants
to
foreclose on the Property. As a result of this alleged fraud, she asks that this Court declare the
foreclosure proceedings, instituted in 2013 and still pending in the Circuit Court for Prince
George's County, "null and void." Am. Compi. ~ 251.
Generally, "the pendency of an action in the state court is no bar to proceedings
concerning the same matter in the Federal court having jurisdiction."
McClellan v. Carland, 217
U.S. 268, 282 (1910). However, when an action is in rem, "where the jurisdiction of the state
court has first attached, the federal court is precluded from exercising its jurisdiction over the
same res to defeat or impair the state court's jurisdiction."
15
Kline v. Burke Constr. Co., 260 U.S.
226,229 (1922); accord Marshall v. Marshall, 547 U.S. 293, 311 (2006) (reiterating "the general
principle that, when' one court is exercising in rem jurisdiction over a res, a second court will not
assume in rem jurisdiction over the same res"); City a/Orangeburg
v. S. Ry. Co., 134 F.2d 890,
892 (4th Cir. 1943) ("[T]he court, state or federal, which first acquires jurisdiction
over the
subject matter of a suit in rem holds it to the exclusion of any other court until its duty is fully
performed[.]") (citing Kline). Because a foreclosure proceeding was instituted in Maryland state
court in 2013 and remains pending, Maryland first had jurisdiction over the Property. This Court
is therefore precluded from exercising jurisdiction
to resolve McClain's
complaints
about
perceived irregularities in the pending foreclosure proceedings. This claim will be dismissed.
D.
Advocate Rule 3.3(A)(1)
In her last cause of action, McClain asserts that the Attorney Defendants violated what
she calls Advocate Rule 3.3(A). In asserting that this claim should be dismissed, the Attorney
Defendants interpret the claim as one under Rule 3.3 of the Maryland Attorneys'
Professional Conduct ("MRPC"), codified at Md. Rules Attorneys, Rule 19-303.3.
Rules of
That Rule
provides that "[a]n attorney shall not knowingly make a false statement of fact or law to a
tribunal or fail to correct a false statement of material fact or law previously made to the tribunal
by the attorney." Md. Rules Attorneys 19-303.3.
As the Attorney Defendants point out, the
Preamble to the MRPC expressly provides that "[v ]iolation of a Rule does not itself give rise to a
cause of action against an attorney."
Md. Rules Attorneys 19-300.1 (Preamble),-r 20. Rule 3.3
therefore does not create a private right of action. See Bochenski v. M&T Bank, No. ELH-141031,2015 WL 1040281 at *26 (D. Md. Mar. 10,2015) (determining that there was no private
right of action for an alleged violation of MRPC Rule 8A( c)). This claim is therefore dismissed.
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V.
Motion for Leave to File a Sur-Reply
In setting the briefing schedule for the Wells Fargo Defendants' Motion to Dismiss, the
Court expressly instructed the parties that sur-reply briefs would not be permitted absent
exceptional circumstances.
See D. Md. Local R. 105.2(a). In her Motion, McClain seeks leave
to make such a filing because she disagrees with various arguments and terminology used in the
reply brief. Having reviewed McClain's arguments for a sur-reply, the Court concludes that no
exceptional circumstances exist necessitating the filing of a sur-reply. The Motion is denied.
CONCLUSION
For the foregoing reasons, the Motions to Dismiss filed by the Wells Fargo Defendants,
GSMC, the Goldman Sachs Defendants, and the Attorney Defendants are GRANTED.
Motion for Leave to File a Sur-Reply is DENIED. The Amended Complaint is DISMISSED.
separate Order shall issue.
Date: March 8, 2018
THEODORE D. CHUA
United States District Jud
17
The
A
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