Buba et al v. Deutsche Bank National Trust Company Americas
Filing
22
Chief Judge Patti B. Saris: ORDER entered MEMORANDUM AND ORDER: This Court ALLOWS the defendant's Motion to Dismiss the plaintiff's claims Docket No. 5 . (Paine, Matthew) .
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
___________________________________
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RICHARD J. BUBA, et al.,
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Plaintiffs,
)
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v.
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Civil Action
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No. 16-10421-PBS
DEUTSCHE BANK NATIONAL TRUST
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COMPANY AMERICAS, et al.,
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Defendants.
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_____________________________
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MEMORANDUM AND ORDER
May 6, 2016
Saris, C.J.
INTRODUCTION
Plaintiffs Richard and Eugenia Buba (“Bubas”) sued
Defendants Nationstar Mortgage, LLC (“Nationstar”), and Deutsche
Bank National Trust Company Americas, as Trustee for Mortgage
Asset-Backed Pass-Through Certificates, Series 2007-QH4
(“Deutsche Bank”), alleging four counts: (1) wrongful
foreclosure, (2) breach of contract, (3) negligence, and
(4) wrongful foreclosure in violation of M.G.L. ch. 244, §§ 1417 & 35A and M.G.L. ch. 183, § 21. Defendants moved to dismiss
the second amended complaint on the ground that the issues are
precluded by an earlier adverse ruling in state court. After
hearing, the Court ALLOWS the defendants’ Motion to Dismiss
(Docket No. 5).
1
FACTUAL BACKGROUND
Allegations in the second amended complaint, and the
attachments, are taken as true for purposes of this motion to
dismiss. The Court also takes judicial notice of prior court
proceedings, public records, and documents referenced in the
complaint.
The plaintiffs are former owners and residents of the
property at 358 Salem Street, Andover, Massachusetts. The Bubas
purchased the property in December 1986. On February 16, 2007,
the Bubas executed a mortgage on the property in exchange for
$725,000. GN Mortgage, LLC, was the lender and Mortgage
Electronic Registration Systems, Inc. (“MERS”), served as the
lender’s nominee. On February 5, 2011, MERS assigned the
mortgage to Aurora Bank FSB (“Aurora”).
On October 20, 2011, Aurora sent the Bubas a notice via
certified mail that the loan was in default due to an overdue
balance. Docket No. 6, Ex. 1 at 1-3. The letter informed the
plaintiffs of their right to cure the default within 150 days
and the amount required to cure—the overdue balance of
$10,531.68.
On June 28, 2012, Aurora assigned the mortgage to defendant
Nationstar. Nationstar assigned the mortgage to Deutsche Bank.
On September 5, 2013, Nationstar, as servicer on behalf of
Deutsche Bank, sent a second default notice to the Bubas. Docket
2
No. 6, Ex. 2 at 1-3. This letter informed the Bubas that their
overdue balance had ballooned to $99,769.64.
After both Aurora and Nationstar filed complaints to
determine the military status the Bubas, on July 17, 2014, the
Land Court entered judgment permitting Nationstar to commence
with the sale of the property. On December 5, 2014, Nationstar
recorded an affidavit certifying that it had taken reasonable
steps and made a good faith effort to avoid foreclosure—as
required by M.G.L. ch. 244, § 35B—and that it was the authorized
agent of the holder of the promissory note secured by the
mortgage—as required by M.G.L. ch. 244, § 35C. Thereafter,
Nationstar published a notice of sale in the Lawrence EagleTribune. Docket No. 6, Ex. 4 at 5. This notice ran weekly for
three consecutive weeks, beginning with the December 30, 2014
issue. Id. On January 20, 2015, Nationstar held a public auction
and sold the property to itself as the highest bidder for
$791,296.50. Docket No. 6, Ex. 4 at 4. As the servicer for the
note held by Deutsche Bank, Nationstar then assigned its
successful bid to Deutsche Bank. Deutsche Bank then sold the
property on or about May 4, 2015, to Roger Bourk and Anita
Santos (“Bourk and Santos”) for $630,000.
The Bubas did not vacate the property. Subsequently, Bourk
and Santos filed a summary process action against the Bubas in
the Lawrence District Court seeking possession of the property
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and damages for use and occupancy. On June 29, 2015, the Bubas
filed an answer and counterclaimed, alleging that Nationstar was
not the noteholder of record at the time of the foreclosure and
did not have the right to foreclose, and that Nationstar failed
to properly review the Bubas for a loan modification to avoid
foreclosure.
Specifically, the Bubas alleged in their answer that the
foreclosure was void and brought additional counterclaims:
wrongful foreclosure, void foreclosure because of M.G.L. ch. 93A
violations by Nationstar, and intentional infliction of
emotional distress, which the Bubas asserted resulted after
Bourk and Santos purportedly attempted to self-evict the Bubas.
On August 14, 2015, the Bubas filed an amended answer alleging
that Nationstar was neither the holder nor the agent of the
holder at the time of the foreclosure, and that for this reason,
the foreclosure was invalid. On September 18, 2015, for the
first time, the Bubas challenged the adequacy of the default
notice, alleging that it did not strictly comply with paragraph
22 of the mortgage as required by the Massachusetts Supreme
Judicial Court in the recent case of Pinti v. Emigrant Mortg.
Co., Inc., 33 N.E.3d 1213 (Mass. 2015).
Bourk and Santos filed a motion for summary judgment. They
argued, among other things, that Massachusetts bars the Bubas’
counterclaims against third party purchasers for value. See
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M.G.L. ch. 244, § 35B(f). 1 Summary judgment was granted in favor
of Bourk and Santos on December 1, 2015, by the Honorable Mark
A. Sullivan of the Lawrence District Court. With respect to the
default notice, the court found that “Nationstar complied with
the requirements of M.G.L. ch. 244, § 35A.” Docket No. 6, Ex. 9
at 4-5. As to the claim that the defendants had not properly
reviewed the Bubas for a loan modification, the court rejected
the Bubas’ argument, stating that under M.G.L. ch. 244, § 35B(f)
“plaintiffs cannot be liable for any alleged noncompliance by
Nationstar” on this issue. Id. at 5. With regard to the adequacy
of the default notice provisions in paragraph 22, the court
declined to retroactively apply Pinti, which found that failure
1
“Prior to publishing a notice of a foreclosure sale, as
required by section 14, the creditor, or if the creditor is not
a natural person, an officer or duly authorized agent of the
creditor, shall certify compliance with this section in an
affidavit based upon a review of the creditor’s business
records. The creditor, or an officer or duly authorized agent of
the creditor, shall record this affidavit with the registry of
deeds for the county or district where the land lies. The
affidavit certifying compliance with this section shall be
conclusive evidence in favor of an arm’s-length third party
purchaser for value, at or subsequent to the resulting
foreclosure sale, that the creditor has fully complied with this
section and the mortgagee is entitled to proceed with
foreclosure of the subject mortgage under the power of sale
contained in the mortgage and any 1 or more of the foreclosure
procedures authorized in this chapter; provided, that the arm’slength third party purchaser for value relying on such affidavit
shall not be liable for any failure of the foreclosing party to
comply and title to the real property thereby acquired shall not
be set aside on account of such failure.” M.G.L. ch. 244,
§ 35B(f).
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to strictly comply with the terms in paragraph 22 rendered a
foreclosure invalid. Id. at 5-6.
The Bubas moved for reconsideration of this decision on
January 25, 2016. Docket No. 6, Ex. 6 at 5. On February 1, 2016,
Judge Sullivan denied this motion. Id. The Bubas filed an appeal
on February 10, 2016. Id. The appeal was dismissed on March 1,
2016. Id. at 6. On August 10, 2015, the Bubas filed a complaint
in the Massachusetts Superior Court, Essex County. 2 On February
29, 2016, the defendants removed pursuant to diversity
jurisdiction under 28 U.S.C. §§ 1332, 1441 & 1446.
DISCUSSION
I.
Standard of Review
In order to survive a Rule 12(b)(6) motion to dismiss, the
factual allegations in a complaint must “possess enough heft” to
state a claim for relief that is facially plausible. Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 557 (2007). “A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at
556).
2
The initial state court complaint included claims against Bourk
and Santos. On February 11, 2016, before the present defendants
removed the case, the state court dismissed Bourk and Santos
with prejudice. See Docket No. 6, Ex. 10 at 4.
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“An affirmative defense may be adjudicated on a motion to
dismiss for failure to state a claim.” In re Colonial Mortg.
Bankers Corp., 324 F.3d 12, 16 (1st Cir. 2003). “The affirmative
defense of res judicata is no exception.” Id. In considering the
affirmative defense of issue preclusion, “the court must view
the facts contained in the pleadings in the light most favorable
to the nonmovant and draw all reasonable inferences” in favor of
the nonmovant. R.G. Fin. Corp. v. Vergara-Nunez, 446 F.3d 178,
182 (1st Cir. 2006).
Generally, a court reviewing a 12(b)(6) motion must limit
itself to “facts and documents that are part of or incorporated
into the complaint.” Trans-Spec Truck Serv., Inc. v.
Caterpillar, Inc., 524 F.3d 315, 321 (1st Cir. 2008). However,
“a district court may also consider ‘documents incorporated by
reference in the complaint, matters of public record, and other
matters susceptible to judicial notice.’” Giragosian v. Ryan,
547 F.3d 59, 65 (1st Cir. 2008) (quoting In re Colonial Mortg.
Bankers Corp., 324 F.3d at 20) (alterations omitted); see also
Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993) (“[C]ourts have
made narrow exceptions for documents the authenticity of which
are not disputed by the parties; for official records; for
documents central to plaintiffs’ claim; or for documents
sufficiently referred to in the complaint.”). “Matters of public
record ordinarily include documents from prior state court
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adjudications.” Giragosian, 547 F.3d at 66 (internal citation
and quotation marks omitted).
II.
Issue Preclusion
Defendants argue that the plaintiffs’ claims are barred by
the doctrine of issue preclusion. Federal courts have a “duty to
give full faith and credit to judgments of the state court.”
Wayside Transp. Co. v. Marcell’s Motor Exp., Inc., 284 F.2d 868,
870-71 (1st Cir. 1960). “The reach of a prior state court
judgment is determined by state law.” N.H. Motor Transp. Ass’n
v. Town of Plaistow, 67 F.3d 326, 328 (1st Cir. 1995). Broadly,
issue preclusion “prevents relitigation of an issue determined
in an earlier action where the same issue arises in a later
action, based on a different claim.” Heacock v. Heacock, 520
N.E.2d 151, 152 n.2 (Mass. 1988).
Under Massachusetts law, issue preclusion only applies if
the Court affirmatively answers four questions:
(1) Was there a final judgment on the merits in the prior
adjudication; (2) was the party against whom estoppel is
asserted a party (or in privity with a party) to the
prior adjudication; (3) was the issue decided in the
prior adjudication identical with the one presented in
the action in question; and (4) was the issue decided in
the prior adjudication essential to the judgment in the
prior adjudication?
Alba v. Raytheon Co., 809 N.E.2d 516, 521 (Mass. 2004). The key
issue behind applying issue preclusion is “whether defendants
‘received a full and fair opportunity to litigate their claims’”
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in an earlier proceeding. Acevedo-Garcia v. Monroig, 351 F.3d
547, 575 (1st Cir. 2003) (quoting Parklane Hosiery Co. v. Shore,
439 U.S. 322, 332 (1979)). An issue is actually litigated if
“logically or practically, a necessary component of the decision
[was] reached in the prior litigation.” Grella v. Salem Five
Cent Sav. Bank, 42 F.3d 26, 31 (1st Cir. 1994). See generally
Restatement (Second) of Judgments § 27 (1982) (“When an issue of
fact or law is actually litigated and determined by a valid and
final judgment, and the determination is essential to the
judgment, the determination is conclusive in a subsequent action
between the parties, whether as the same or a different
claim.”).
With respect to the first prong of the preclusion test, the
Lawrence District Court’s summary judgment ruling in the summary
process action in state court was a final judgment on the
merits. See Jarosz v. Palmer, 766 N.E.2d 482, 489 (Mass. 2002)
(“[T]he term ‘judgment’ refers to a final determination on the
merits of the proceeding.”).
Second, with respect to the identity of the parties, the
Bubas were parties to the summary process action brought by
Bourk and Santos. The defendants were not parties at the earlier
adjudication, but their presence is not required in order for
issue preclusion to apply. Miles v. Aetna Cas. & Sur. Co., 589
N.E. 2d 314, 317 (Mass. 1992) (“[O]ne not a party to the first
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action may use a judgment in that action defensively against a
party who was a plaintiff in the first action on the issues
which the judgment decided.”).
The third prong considers whether “the issue sought to be
precluded is the same as that which was involved in the prior
proceeding.” Faigin v. Kelly, 184 F.3d 67, 78 (1st Cir. 1999).
Issue preclusion “can apply where the subsequent proceeding
involves a cause of action different from the first.” Manganella
v. Evanston Ins. Co., 700 F.3d 585, 591 (1st Cir. 2012) (citing
Comm’r v. Sunnen, 333 U.S. 591, 601 (1948)). “Even if there is a
lack of total identity between the issues involved in two
adjudications, the overlap may be so substantial that preclusion
is plainly appropriate.” Comm’r of Dept. of Emp’t & Training v.
Dugan, 697 N.E. 2d 533, 537 (Mass. 1998).
Plaintiffs argue that their claims are not barred because
the Lawrence District Court’s “core consideration in the summary
process proceeding” was M.G.L. ch. 244, § 35B(f), a provision
that the defendants—unlike the third party purchasers—cannot
rely on to avoid liability. Docket No. 11 at 5. Section 35B
requires that a mortgagee not cause publication of notice of a
foreclosure sale “unless it has first taken reasonable steps and
made a good faith effort to avoid foreclosure.” Olabode v.
Caliber Home Loans, Inc., No. 15-CV-10146-ADB, 2015 WL 4111439,
at *2 n.3 (D. Mass. July 8, 2015) (quoting M.G.L. ch. 244,
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§ 35B(b)). Under § 35B(f), third party purchasers are not liable
for the mortgagee’s failure to comply with § 35B so long as the
mortgagee filed an affidavit certifying compliance with that
section and the third party purchasers relied on the affidavit.
Id. at § 35B(f). Nationstar executed the requisite § 35B(f)
affidavit, certifying that it had taken reasonable steps and
made good faith efforts to avoid foreclosure. See Docket No. 6,
Ex. 3. As a result, the Lawrence District Court found that Bourk
and Santos, as the third party purchasers, were not liable for
any failure of Nationstar to comply with the requirements of
§ 35B. See Docket No. 6, Ex. 9 at 5 (citing M.G.L. ch. 244,
§ 35B(f)).
In their opposition to the defendants’ motion to dismiss,
the plaintiffs allege that, because the Lawrence District Court
rested its decision (in part) on the § 35B(f) affidavit, the
claims raised here have not been adjudicated, at least not with
respect to the present defendants. The plaintiffs emphasize that
the § 35B(f) affidavit does not serve to insulate the
defendants, even if it did shield Bourk and Santos from
liability in the state court action.
The plaintiffs reliance on § 35B(f) does not save them from
a finding that the claims it presses here are precluded. First,
§ 35B(f) affidavits only protect a third party purchaser with
respect to noncompliance with the requirements of § 35B. See
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§ 35B(f). Because the Bubas’ counterclaims in the Lawrence
District Court proceeding raised other issues—such as compliance
with § 35A and paragraph 22—the Lawrence District Court’s
decision could not, and did not, rest solely on the existence of
the § 35B(f) affidavit. See Docket No. 6, Ex. 9 at 4-6. It is
those additional issues adjudicated by the Lawrence District
Court that the Bubas seek to relitigate here. Second, the Bubas,
in this suit, do not allege noncompliance with § 35B. See Docket
No. 1, Ex. 3. So while a § 35B(f) affidavit does “not relieve
the affiant, or other person on whose behalf the affidavit is
executed, from liability for failure to comply with [§ 35B],”
that provision does not apply to claims alleging violations of
other sections. M.G.L. ch. 244, § 35B(f).
Of the four counts in the present action, three of them
raise the identical challenge to the adequacy of the notice
under paragraph 22 of the mortgage presented in the state court
action. Count I is a wrongful foreclosure claim alleging that
Nationstar and Deutsche Bank foreclosed on the property “in
violation of Paragraph 22 of the subject mortgage and contrary
to the provisions of M.G.L. c. 183, § 21.” Docket No. 1, Ex. 3
at 5, ¶ 32. Plaintiffs allege that the notices violated
paragraph 22 because they failed to inform the plaintiffs of
their right “to bring a court action to assert the non-existence
of a default or any other defense of borrower to acceleration
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and sale.” Id. at ¶ 34. Count II is a breach of contract claim
that also alleges non-compliance with paragraph 22 of the
mortgage as well as statutory violations of M.G.L. ch. 244, § 14
and ch. 183, § 21. Count III alleges the defendants were
negligent by failing to give proper notice of default as set
forth in the mortgage.
The challenge to the validity of the notices was rejected
in the summary judgment ruling for Bourk and Santos, where the
district court found “that the notice of default, signed for by
Mr. Buba on October 25, 2011, complied with paragraph 22 of the
mortgage.” Docket No. 6, Ex. 9 at 2. While the notice may not
have been compliant post-Pinti, the district court correctly
noted that strict compliance under Pinti was not required. The
notices of default—the first mailed in October 2011 and the
second mailed in September 2013—were sent prior to the Pinti
decision and the Supreme Judicial Court gave the decision
“prospective effect only.” Pinti, 33 N.E.3d at 1227. Nor was the
case on appeal at the time Pinti was decided. Aurora Loan
Servs., LLC v. Murphy, 41 N.E.3d 751, 755 (Mass. App. Ct. 2015).
Count IV raises a wrongful foreclosure claim in violation
of M.G.L. ch. 244, § 14 and M.G.L. ch. 183, § 21, alleging that
a broken chain of title rendered the foreclosure null and void.
While it is not clear exactly what link in the chain is broken,
the Bubas raised the issue of title in the state court
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proceedings. Under Massachusetts law, the time to bring any
claim challenging the validity of title is at the summary
process action:
“[A] mortgagor owner, faced with eviction in a summary
process action commenced following mortgage foreclosure,
has the full opportunity needed to raise, as a defense
in the summary process case, challenges to the mortgage
foreclosure, and to the validity of the title which the
foreclosure sale and deed yielded. Deferral of these
questions, holding them in reserve for another day in
another court, is not an acceptable tactic for the
mortgagor to employ, at least without some clear
understanding on the part of all the summary process
parties that reserves until later the question of the
title
following
the
foreclosure.
[After
bank
foreclosure], the mortgagor who has knowledge of legal
grounds why that foreclosure did not establish title in
the grantee under the foreclosure deed, is bound to raise
and pursue these legal grounds then, in the summary
process forum. The failure to do so will preclude later
litigation on these questions, which are fundamental
elements of the case for possession.”
Solomont v. Howe Real Estate Advisors, LLC, No. 11 MISC. 448092
(GHP), 2011 WL 4483960, at *11 (Mass. Land Ct. Sept. 28, 2011)
(emphasis added). “The purpose of summary process is to enable
the holder of legal title to gain possession of premises
wrongfully withheld.” Bank of N.Y. v. Bailey, 951 N.E.2d 331,
335 (Mass. 2011) (quoting Wayne Inv. Corp. v. Abbott, 215 N.E.2d
795, 795 (Mass. 1966)). “Right to possession must be shown and
legal title may be put in issue . . . . Legal title is
established in summary process by proof that the title was
acquired strictly according to the power of sale provided in the
mortgage.” Id. “By entering a judgment for [plaintiff] in the
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summary process action, the Housing Court necessarily
determine[s] that the [bank] had properly foreclosed and was
entitled to possession of the Property.” Wenzel v. Sand Canyon
Corp., 841 F. Supp. 2d 463, 481 (D. Mass. 2012) (emphasis
added), abrogated on other grounds by Culhane v. Aurora Loan
Servs. of Neb., 708 F.3d 282 (1st Cir. 2013). “Having had the
opportunity to dispute the validity of [the bank’s] authority to
foreclose in the summary process action, the [parties] are now
barred from relitigating those claims.” Id.
During the summary process action, the Bubas’ counterclaim
alleged, “Nationstar foreclosed the subject mortgage without
right to do so since it only held the mortgage but not the note
at the time it conducted the subject foreclosure.” Docket No. 6,
Ex. 8 at 6. However, the district court did not find any defect
in the title. The court stated that Nationstar recorded an
“Eaton” affidavit certifying that it was “the authorized agent
of the holder of the promissory note secured by the subject
mortgage.” Docket No. 6, Ex. 9 at 3. The court also found that
“[a]ttached to the foreclosure deed was an affidavit in which
Nationstar certified that it complied with all foreclosure
notices required by law . . . including the chain of assignments
of the subject mortgage from MERS to Nationstar.” Id. Finally,
the district court found that, on April 16, 2015, after the
foreclosure, Nationstar recorded an additional “Eaton” affidavit
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in compliance with M.G.L. ch. 244, §§ 35B & 35C, which attested
that Nationstar was the “authorized agent of the mortgage note
holder throughout the foreclosure process.” Id. at 4. These
findings dispose of the broken chain of title issue. “The
determination of title in a prior proceeding will, in
appropriate cases, bar a new litigation attempt to adjudicate
title again in a fresh action.” Solomont, 2011 WL 4483960, at
*8.
Finally, the fourth prong of the issue preclusion test is
met. “For a ruling to have preclusive effect, it must have a
bearing on the outcome of the case.” Jarosz, 766 N.E.2d at 489
(quoting Restatement (Second) of Judgments § 27 cmt. h (1982))
(internal quotation marks omitted). Judge Sullivan’s finding
that the sale was valid was a prerequisite to ordering the Bubas
to vacate. See U.S. Bank Nat’l Ass’n v. Schumacher, 5 N.E.3d
882, 888 (Mass. 2014) (finding that the issue before a court in
a summary process action where the defense is a claim of
wrongful foreclosure challenging the plaintiff’s entitlement to
the property, “is whether the mortgagee obtained title in strict
accordance with the power of sale”).
As all four counts are precluded under the doctrine of
issue preclusion, the plaintiff’s claims are dismissed.
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ORDER
The Court ALLOWS the defendant’s Motion to Dismiss the
plaintiff’s claims (Docket No. 5).
/s/ PATTI B. SARIS
Patti B. Saris
Chief United States District Judge
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