Franklyn v. Federal National Mortgage Association et al
Filing
42
OPINION and ORDER Granting in Part 7 MOTION Dismiss Plaintiff's Complaint re 1 Complaint MOTION to Dismiss , 8 MOTION Dismiss Plaintiff's Complaint re 1 Complaint MOTION to Dismiss , and 27 MOTION for Judgment on the Pleadings and for Summary Judgment: AND Setting ( Amended Complaint Due 1/27/2015 and Status Conference for 2/12/2015 02:00 AM before District Judge Laurie J. Michelson) Signed by District Judge Laurie J. Michelson. (JJoh)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
KEVIN FRANKLYN,
Plaintiff,
v.
Case No. 14-cv-10943
Honorable Laurie J. Michelson
Magistrate Judge David R. Grand
FEDERAL NATIONAL MORTGAGE
ASSOCIATION; NATIONAL ASSET
ADVISORS, LLC; HARBOUR PORTFOLIO
VI, LP; RECA PROPERTIES, LLC;
WELTMAN, WEINBURG, AND REIS, CO.,
LPA; and WILLIAM CLOS,
Defendants.
OPINION AND ORDER GRANTING IN PART
(1) WELTMAN, WEINBURG, AND REIS, CO., LPA’S MOTION TO DISMISS [7],
(2) WILLIAM CLOS’ MOTION TO DISMISS [8], AND
(3) FEDERAL NATIONAL MORTGAGE ASSOCIATION’S MOTION FOR
JUDGMENT ON THE PLEADINGS AND FOR SUMMARY JUDGMENT [27]
Plaintiff Kevin Franklyn has filed a 57-page, pro se complaint against six defendants
alleging eighteen causes of action based on events stemming from his purchase of a house.
Defendants Weltman, Weinburg, and Reis, Co., LPA (“WWR”) and William Clos say that
Franklyn’s claims against them fail to state a claim for relief and thus should be dismissed
pursuant to Federal Rule of Civil Procedure 12(b)(6). (Dkts. 7, 8.) Defendant Federal National
Mortgage Association (“Fannie Mae”) filed an answer but now moves under Rules 12(c) and 56
for judgment on the pleadings and summary judgment. (Dkt. 27.) Having reviewed the motions
and associated briefing, the Court will proceed without oral argument. See E.D. Mich. LR 7.1(f).
For the reasons that follow, WWR’s, Clos’, and Fannie Mae’s motions will be granted in large
part and denied in part.
I.
A.
Because Defendants seek judgment on the pleadings, the following summary presents as
fact the non-conclusory allegations of Franklyn’s Complaint (to the extent they can be
deciphered).
In “early 2011,” Franklyn saw a for-sale sign posted on a house on 14617 Penrod in
Detroit, Michigan (“Property”). (Compl. at 3.) The sign stated that monthly payments would be
under $400 and provided a number to call if interested. (Id.) Franklyn called the number and
someone associated with Defendant RECA Properties answered, checked Franklyn’s
qualifications, and then gave Franklyn a code to the lock on the door. (Compl. at 3–4.) Franklyn
was also informed that if he liked the house, he should call back and would be dealing with
Defendant Harbour Portfolio VI. (Id.)
Franklyn was interested in the property and sent an application packet and a $1,000
deposit to “Defendants[].” (Compl. at 4.) On February 24, 2011, Franklyn entered into a
mortgage with “Defendants[].” (Id.) But Franklyn notes that Harbour Portfolio did not have a
license to do business in Michigan until “mid-2011.” (Compl. at 5.)
Franklyn attempted to record the “Agreement for Deed/mortgage” but the register of
deeds refused because Franklyn did not have the original. (Compl. at 4.) Franklyn then contacted
“Defendants[]”; they told him “it was not their policy to register deeds with the county until the
contract had been paid off.” (Compl. at 4.)
In January 2013, “the Defendants[]” sent Franklyn a tax form (1098 INT), which led
Franklyn to “read the contract more closely and he concluded that the contract contained a loan,
which was secured by a mortgage.” (Compl. at 5.) According to Franklyn, “[t]he contract on its
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face, appeared to be an agreement for deed, then a mortgage with a loan, then it also had a rental
agreement.” (Id.) The mortgage and associated loan documents are not part of the Complaint, nor
has WWR, Clos, or Fannie Mae attached them to their motions.
In February 2013, Franklyn “was given a loan modification agreement.” (Compl. at 5.)
Also “early in 2013” Franklyn was informed that the Property was located in “an
empowerment zone” and thus eligible for a tax break based on certain improvements, including
those Franklyn had made to the Property (e.g., thirty-year roof shingles). (Compl. at 6.) Franklyn
tried to reduce his taxes in 2013, but learned that he could not negotiate his taxes due to the fact
that the taxes on the Property were not “listed in his name.” (Compl. at 7.) “The taxes for real
property payable to the [C]ity of Detroit were and are currently listed as of January 2014 [as]
paid by Fannie Mae.” (Compl. at 7.) Franklyn says that had he been able to negotiate his taxes,
they would be thirty-five to forty-five percent less. (Id.)
Regarding property taxes, Franklyn states that during the “entire life of the mortgage
between [himself] and Harbour Portfolio VI, LP,” Harbour Portfolio did not pay any property
taxes. (Compl. at 7.) Instead, Franklyn paid taxes, and submitted them to Defendants
“RECA/National Asset Advisors.” (Compl. at 7–8.) Franklyn says that “[t]his deception” made it
clear to Franklyn that either Harbour Portfolio diverted the funds he submitted to pay property
taxes “or the [P]roperty may not be owned by [Fannie Mae].” (Compl. at 8.)
Franklyn also makes much of how the Property came to be Harbour Portfolio’s. In
October 2009, the Property was purchased at a sheriff’s sale by non-party BAC Home Loans
Servicing, L.P., for about $92,000. (FNMA’s Mot. at PID 213, Sheriff’s Deed.) BAC then
deeded the home—Franklyn stresses that BAC did so for only $1.00 (Compl. at 8, 21)—to
Fannie Mae on November 4, 2009. (FNMA’s Mot. at PID 220, Quit Claim Deed.) Then on
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January 27, 2011, Fannie Mae deeded the Property to Harbour Portfolio for $4,958. (FNMA’s
Mot. at PID 223, Covenant Deed.) Franklyn says that the deed identified Fannie Mae as Grantor
but did not identify the Grantee, which is “the first known document fraud between Defendants.”
(Compl. at 14.) Although the deed does not identify the Grantee, it does say that Fannie Mae
“conveys and warrants” the Property to “Harbour Portfolio VI, LP.” (FNMA’s Mot. at PID 223,
Covenant Deed (capitalization altered).)
Franklyn maintains that BAC and Fannie Mae transferred the Property and associated
loan as part of a scheme to eliminate poor-performing loans from their books and therefore
appear financially fit. (Compl. ¶¶ 16–17.) It appears that Franklyn maintains that, under this
scheme, unwitting investors, like him, maintain the home and provide for its upkeep while BAC
and Fannie Mae somehow profit. (Compl. ¶¶ 23, 29.) Franklyn points to a statement on National
Asset Advisors’ website: “Strategy is to keep holding costs, such as real estate taxes, yard care
and home maintenance, to a minimum, while generating revenue as quickly as possible.”
(Compl. at 14.) He also says that Fannie Mae and BAC “intend to use” Harbour Portfolio “to
manage low end, non-performing loans while technically removing them from their respective
balance sheets,” (Compl. ¶ 15), and Harbour Portfolio “and its partners dupe the customers into a
mortgage where the customers assume[] the responsibility and upkeep of the property” (Compl.
¶ 27). He says that “[t]he fraud is misleading of the customer into caring for the asset secures it
for the A/B entity, . . . knowing [full] well that the holding entity never means to complete the
selling transaction.” (Compl. ¶ 29.)
Franklyn says that “Defendants’” “ill will” was evident when on August 13, 2013,
Defendant Clos, an attorney employed with Defendant WWR, filed a suit in Michigan’s 36th
District Court “for possession after land contract forfeiture.” (Compl. at 8.) Franklyn says, “This
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complaint contained a principal balance due of $4,711,094.00.” (Id.) The state-court complaint
sought to recover possession of the Property and “listed a material breach of contract violation
for nonpayment of taxes and insurance.” (Compl. at 9.) The complaint also listed Franklyn’s
address as 15871 Kentucky in Detroit, Michigan, rather than the address of the Property. (Compl.
at 9–10.) “The complaint for possession after land contract forfeiture never lists . . . Penrod
Detroit, MI . . . as the address of the home in question.” (Compl. at 10.) None of Franklyn,
WWR, Clos, or Fannie Mae has provided the Court with a copy of the state-court complaint.
Apparently as a result of Clos’ use of the 15871 Kentucky address, Franklyn was not
served with the complaint, and the state court entered a default judgment against him for his nonappearance. (See Compl. at 11.) “[O]n or about August 30, 2013,” Franklyn checked the mail at
15871 Kentucky and found a copy of the judgment. (Id.)
Franklyn then sought to set the default judgment aside. (Id.) At the hearing on Franklyn’s
motion, Franklyn asserted that the $4.7 million figure was error and that the 36th District Court
lacked jurisdiction given that amount-in-controversy. (Compl. at 11–12.) The state court denied
Franklyn’s motion. (Compl. at 12.) Franklyn appealed. (Compl. at 12.) The appeal was dismissed
on Harbour Portfolio’s motion. (Compl. at 12–13.)
B.
In March 2014, Franklyn filed this suit naming six defendants: Federal National
Mortgage Association; Harbour Portfolio VI, LP; National Asset Advisors, LLC; RECA
Properties, LLC; Weltman Weinburg, and Reis, Co., LPA; and William Clos. (See generally
Compl.)
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In April 2014, WWR and Clos each filed a motion to dismiss pursuant to Federal Rule of
Civil Procedure 12(b)(6). Following its May 2014 answer, Fannie Mae filed a motion for
judgment on the pleadings pursuant to Rule 12(c) and for summary judgment under Rule 56.
II.
Under the plausibility standard articulated in Bell Atl. Corp. v. Twombly, 550 U.S. 544,
(2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), when a defendant moves to dismiss pursuant
to Federal Rule of Civil Procedure 12(b)(6), a court can first cull legal conclusions from the
complaint, leaving only factual allegations to be accepted as true. Iqbal, 556 U.S. at 679. The
inquiry then becomes whether the remaining assertions of fact “allow[] the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged,” Iqbal, 556 U.S. at
678. Although the plausibility threshold is more than “sheer possibility that a defendant . . . acted
unlawfully,” it is not a “‘probability requirement.’” Id. at 678 (quoting Twombly, 550 U.S. at
556). Whether a plaintiff has presented enough factual matter to “‘nudg[e]’” his claim “‘across
the line from conceivable to plausible’” is “a context-specific task” requiring this Court to “draw
on its judicial experience and common sense.” Iqbal, 556 U.S. at 679, 683 (quoting Twombly,
550 U.S. at 570).
Fannie Mae’s Rule 12(c) motion is also governed by this standard. See Daily Servs., LLC
v. Valentino, 756 F.3d 893, 898 (6th Cir. 2014).1
1
Because Franklyn’s Complaint does not state a claim against Fannie Mae, the Court
does not look beyond the Complaint (and materials referred to in the Complaint and central to its
claims) to address Fannie Mae’s alternate motion for summary judgment. See FNMA’s Mot. at
1, 4. In any event, the sole evidence Franklyn has submitted is an “affidavit,” but it is not signed
or notarized and, therefore, is not summary-judgment evidence. See Sfakianos v. Shelby Cnty.
Gov’t, 481 F. App’x 244, 245 (6th Cir. 2012); Pollock v. Pollock, 154 F.3d 601, 612 n.20 (6th
Cir. 1998).
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III.
After Franklyn filed his pro se Complaint, and after WWR, Clos, and Fannie Mae filed
their dispositive motions, Franklyn obtained counsel. (Dkt. 30.) Through counsel, Franklyn
informs that he only asserts two counts against WWR and Clos: Count I, a Fair Debt Collection
Practices Act (“FDCPA”) claim, and Count VI, a Racketeer Influenced and Corrupt
Organizations Act (“RICO”) claim. (Dkt. 36, Pl.’s Resp. to WWR’s Mot. at 3; Dkt. 37, Pl.’s
Resp. to Clos’ Mot. at 3.) Similarly, he “requests this Honorable Court grant [Fannie Mae’s]
Motion as it relates to Counts II – V, VII, VIII, X – XII, and XIV – XVIII,” (Pl.’s Resp. to
FNMA’s Mot. at 10), with the caveat that the allegations in these counts “are applicable to other
[c]ounts,” (id. at 5–9). The Court will grant Franklyn’s request. Accordingly, the Court will only
consider Count I (FDCPA), Count VI (RICO), Count IX (breach of contract), and Count XIII
(quiet title) as alleged against Fannie Mae, and only Counts I and VI against WWR and Clos.
The Court turns first to WWR and Clos’ claim that this Court lacks subject-matter
jurisdiction over the claims against them. It then examines Franklyn’s FDCPA, RICO, breach-ofcontract, and quiet-title claims.
A.
Although Franklyn’s Complaint includes counts based on federal law, WWR and Clos
contend that this Court lacks subject-matter jurisdiction over Franklyn’s claims against them
because those claims ask a federal district court to review a state-court judgment. (WWR’s Mot.
at PID 119-20; Clos’ Mot. at PID 144–45); see also Rooker v. Fid. Trust Co., 263 U.S. 413
(1923); D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983). The Court disagrees.
“Rooker and Feldman exhibit the limited circumstances in which [the Supreme] Court’s
appellate jurisdiction over state-court judgments, 28 U.S.C. § 1257, precludes a United States
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district court from exercising subject-matter jurisdiction in an action it would otherwise be
empowered to adjudicate under a congressional grant of authority.” Exxon Mobil Corp. v. Saudi
Basic Indus. Corp., 544 U.S. 280, 291 (2005). Thus, the scope of the Rooker–Feldman doctrine
is not the same as claim or issue preclusion—it does not apply simply because a state-court has
already adjudicated a claim later asserted in federal court. Exxon Mobil, 544 U.S. at 293. Nor
does it apply whenever a federal court’s resolution of a claim would deny a prior state-court legal
conclusion. Id.
District courts in this Circuit have been instructed to focus on the source of the injury as
alleged:
If the source of the injury is the state court decision, then the Rooker-Feldman
doctrine would prevent the district court from asserting jurisdiction. If there is
some other source of injury, such as a third party’s actions, then the plaintiff
asserts an independent claim. . . . The key point is that the source of the injury
must be from the state court judgment itself; a claim alleging another source of
injury is an independent claim.
451 F.3d 382, 393–94 (6th Cir. 2006); see also Hoblock v. Albany County Bd. of Elections, 422
F.3d 77, 87–88 (2d Cir. 2005) (“[F]ederal plaintiffs are not subject to the Rooker–Feldman bar
unless they complain of an injury caused by a state judgment.”).
Here, the injuries alleged in Franklyn’s FDCPA count, at least those attributable to WWR
and Clos, do not stem from the state-court judgment. It appears that Franklyn’s FDCPA claims
against these two Defendants are based on two acts: (1) Clos falsely stated in the state-court
complaint that the principal and interest due was over $4.7 million, and (2) Clos incorrectly filed
for “forfeiture rather than a foreclosure.” (Compl. ¶¶ 9, 14.) It is true that if this Court (or a jury)
were to find Franklyn correct on these points, the validity of the state-court judgment would be
in question. But that does not mean Franklyn’s FDCPA claim based on these assertions stems
from that judgment. To the contrary, Franklyn could presumably have filed his FDCPA claim for
8
these allegedly wrongful acts if the state court action had been dismissed or was still pending.
See Exxon Mobil, 544 U.S. at 293 (“If a federal plaintiff presents some independent claim, albeit
one that denies a legal conclusion that a state court has reached in a case to which he was a party,
then there is jurisdiction and state law determines whether the defendant prevails under
principles of preclusion.” (internal quotation marks, alterations, and citation omitted)).
As for Franklyn’s RICO claim, that cause of action is difficult to decipher (a point
discussed more below). But whatever its precise basis, the claim appears to rest primarily on
WWR and Clos’ pre-state-court-judgment conduct:
Borrowers of FANNIE MAE underwritten and HARBOUR VI, LP instituted
mortgages[,] and/or whose mortgages are serviced by any of HARBOUR VI, LP
entities or those debts collected by RECA, NATIONAL ASSET ADVISORS,
WELTMAN, WEINBERG, and REIS, LLC against people such as Plaintiff[,]
ha[ve] suffered a loss as a result of the Defendant[s] and their actions, in that they
paid money for mortgages or mortgage servicing that they would not otherwise
have, absent RECA/HARBOUR VI, LP’s deceptive marketing practices through
especially, RECA and the threats of HARBOUR PORTF[OLIO] VI, LP
WELTMAN, WEINBERG, and REIS, LLC.
(Compl. at 35.)
As such, the Rooker-Feldman doctrine does not apply to Franklyn’s two claims against
WWR and Clos.
B.
WWR, Clos, and Fannie Mae each assert that Franklyn has not sufficiently pled a
violation of the Fair Debt Collection Practices Act as against them.
1.
WWR and Clos argue that Franklyn’s FDCPA claim fails because he has not pled that
they were attempting to collect a “debt.” (WWR’s Mot. at 122; Clos’ Mot. at PID 147.) The
FDCPA defines a “debt” as “arising out of a transaction in which the money, property, insurance,
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or services which are the subject of the transaction are primarily for personal, family, or
household purposes.” 15 U.S.C. § 1692a(5). WWR and Clos say that “the [C]omplaint contains
allegations that would suggest the possibility that Plaintiff’s obligation associated with
acquisition of the [Property] was not a consumer debt but was commercial in nature.” (WWR’s
Mot. at PID 122; Clos’ Mot. at PID 147.) They point out that Franklyn’s address listed in both
the state-court complaint and the one filed here is not the address of the Property. (WWR’s Mot.
at PID 122; Clos’ Mot. at PID 147.) WWR and Clos further note that Franklyn pleads that a
“Lisa Micou” was an “occupant” of the Property, suggesting that it was not his home. (WWR’s
Mot. at PID 122; Clos’ Mot. at PID 147.)
WWR and Clos misstate the relevant standard. On a Rule 12(b)(6) motion, this Court
does not concern itself with whether it is “possible” that the debt was commercial in nature. The
question is whether the Complaint permits the reasonable inference, see Iqbal, 556 U.S. at 678,
that the debt arose from a transaction primarily for personal purposes, see 15 U.S.C. § 1692a(5).
It does. The very first sentence of the first substantive section of the Complaint says, “This . . .
action brought by the Plaintiff, Kevin Franklyn arises from the Defendants’ scheme to defraud
the Plaintiff detailed within this claim, to his right to liberty, life and his home.” (Compl. at 3
(emphasis added).) Franklyn also pleads that “he was meant solely to [be a] place hold[er] [for]
the house, maintain the property as a home, and pay the taxes until the market rebounds.”
(Compl. at 14.) Discovery might reveal that the Property was an investment for Franklyn and not
his residence. But on the facts alleged, the reverse is plausible. Franklyn thus adequately alleges
a “debt” under the FDCPA.
WWR and Clos next say that Franklyn’s FDCPA claim does not allege that they were
engaged in “debt collection” under the Act. Relying on Bobo v. Trott & Trott, P.C., No. 13-
10
14696, 2014 WL 555201 (E.D. Mich. Feb. 12, 2014), WWR and Clos imply that the state-court
proceedings were not debt collection because they sought possession. See Bobo, 2014 WL
555201, at *2 (finding that the defendant “was not attempting to collect a debt when it sent
Plaintiff the notice to vacate and initiated eviction proceedings”). WWR and Clos are correct that
Franklyn asserts that the state-court action was “a complaint for possession after land contract
forfeiture.” (Compl. at 8.) And he pleads that the “complaint intended to recover possession of
the [P]roperty.” (Comp. at 9.) But Franklyn also alleges that “[t]he complaint . . . listed a
material breach of contract violation for nonpayment of taxes and insurances.” (Compl. at 9.) It
is thus plausible that the state-court action was more than a proceeding for possession following
a sheriff’s sale. See Glazer v. Chase Home Fin. LLC, 704 F.3d 453, 464 (6th Cir. 2013) (holding
that “mortgage foreclosure is debt collection under the Act”). As such, the Court will not dismiss
Franklyn’s FDCPA on this basis.
Finally, WWR and Clos argue that “[w]ithin Count I, Plaintiff has offered only
conclusory allegations of violations.” (WWR’s Mot. at PID 123; Clos’ Mot. at PID 148.) The
Court agrees with WWR and Clos that the Complaint is difficult to follow and it would be
helpful if Franklyn had provided additional explanation as to the factual basis of some of his
FDCPA claims. Nonetheless, because Franklyn was pro se when the Complaint was filed, the
Court declines at this time to dismiss Franklyn’s claims that WWR and Clos violated 15 U.S.C.
§§ 1692e and 1692f. See Erickson v. Pardus, 551 U.S. 89, 94 (2007) (noting pro se complaints
should be “liberally construed” and held to “less stringent standards” (quoting Estelle v. Gamble,
429 U.S. 97, 106 (1976))).
Franklyn has alleged at least two false statements by WWR and Clos. The first relates to
the amount of the debt. According to Franklyn, the Truth in Lending statement associated with
11
the Note provided that his mortgage was for $44,925.00. (Compl. at 5.) In contrast, Franklyn
alleges that the state-court complaint alleged that he owed $4,711,094 in principal and interest.
(Compl. at 12 & ¶ 13.) Second, Franklyn alleges that “Defendants[] did willfully conceal from
the Plaintiff, what amounted to excessive, fees, principal, and/or interests totaling
$4,711,094.00” and cites § 1692e. (Compl. ¶¶ 8–9.) He also says, “Defendants imposed and/or
collected service charges in the . . . course of collection debts from Plaintiff, even though such
amounts were not expressly authorized by HARBOUR VI LP’s mortgage contracts with
Plaintiff, or permitted by law, in violation of 15 U.S.C. 1692f(1).” (Compl. ¶ 11.) Reading all of
this together in the light most favorable to Franklyn, Franklyn alleges that the state-court
complaint falsely stated that the amount he owed Harbour Portfolio was over $4.7 million, and
that the attorney fees, principal, interest, and costs that purportedly totaled that amount were kept
from him during loan servicing or other proceedings leading to the state-court complaint. Thus,
WWR and Clos have not shown that Franklyn’s §§ 1692e and 1692f claims are implausible. See
15 U.S.C. § 1692e(2) (“[T]he following conduct is a violation of this section . . . [t]he false
representation of . . . (A) the character, amount, or legal status of any debt; or (B) any services
rendered or compensation which may be lawfully received by any debt collector for the
collection of a debt.”); 15 U.S.C. § 1692f(1) (“[T]he following conduct is a violation of this
section: (1) The collection of any amount (including any interest, fee, charge, or expense
incidental to the principal obligation) unless such amount is expressly authorized by the
agreement creating the debt or permitted by law.”); see also Crugher v. Prelesnik, 761 F.3d 610,
614 (6th Cir. 2014) (“The defendant has the burden of showing that the plaintiff has failed to
state a claim for relief.”). Indeed, WWR and Clos do not even address the requirements of
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§§ 1692e or 1692f in their motions. (See WWR’s Mot. at PID 121–23; Clos’ Mot. at PID 146–
48.)
The same holds for Franklyn’s reliance on 15 U.S.C. § 1692g (Compl. ¶ 13)—WWR and
Clos also fail to discuss that section or its requirements in their motions. But the allegations in
the Complaint show that Franklyn has not pled a plausible claim under § 1692g. The Complaint
avers, “KEVIN FRANKLYN did inform, at the hearing dated, October 3, 2013 the Defendants’
counsel and the Hon. Demetria Brue of the excessive nature of the principal and interest due
calling it, ‘judgment.’ Then, further informed the Court, ‘ . . . he believed the amount $4,711,094
to be an error . . .’ thereby giving notice to plaintiff’s counsel (15USC1692g).” (Compl. ¶ 13.)
Apparently Franklyn relies on subsection (b) of § 1692g, which essentially provides that if a
consumer disputes a debt within thirty days of receiving notice contemplated by subsection (a),
debt collection must cease until the collector verifies the debt. It is implausible that WWR or
Clos violated 1692g(b) at least because Franklyn first learned of the $4.7 million figure when he
received the default judgment in the mail on August 30, 2013, and the state-court hearing was
not until October 3, 2013—more than thirty days later. Moreover, § 1692g does not contemplate
oral notice, and Franklyn has not pled written notice. His allegation is merely that he informed
Clos at the hearing that the figure was incorrect. (Compl. ¶ 13.) Franklyn’s claim that WWR or
Clos violated § 1692g is thus implausible.
WWR and Clos do specifically address 15 U.S.C. § 1692i, and the Court agrees with
them that Franklyn has not pled a claim under that section of the FDCPA. That section pertains
to the venue in which a debt collector may sue a debtor: “Any debt collector who brings any
legal action on a debt against any consumer shall—(1) in the case of an action to enforce an
interest in real property securing the consumer’s obligation, bring such action only in a judicial
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district or similar legal entity in which such real property is located.” 15 U.S.C. § 1692i. The
Complaint alleges that the Property is located in Detroit and that WWR and Clos (on behalf of
Harbour Portfolio) sued in Michigan’s 36th District Court. That state district court serves the
City of Detroit. See Michigan’s 36th District Court Website, http://www.36thdistrictcourt.org/
education.html (last visited Dec. 15, 2014). It is thus implausible that WWR and Clos violated 15
U.S.C. § 1692i by filing the state-court action in 36th District Court.
In sum, WWR and Clos have not carried their burden in demonstrating that it is
implausible on the facts alleged that they violated 15 U.S.C. §§ 1692e and 1692f. And although
they have also failed to discuss § 1692g, the Complaint itself makes apparent that Franklyn has
not pled a claim under that section of the FDCPA. The Court will, however, dismiss this claim
without prejudice. WWR and Clos have carried their burden with respect to Franklyn’s claim
under § 1692i. This claim will thus be dismissed with prejudice.
2.
The plausibility of Franklyn’s Fair Debt Collection Practice Act claim against Fannie
Mae would appear to present a straightforward analysis: he never names Fannie Mae in that
count. (See Compl. ¶¶ 1–14.) Indeed, Franklyn specifically pleads that Harbour Portfolio and
WWR are “debt collectors” within the meaning of the Act, (Compl. ¶¶ 2–3), while conspicuously
omitting a comparable allegation about Fannie Mae. He does allege conduct by “Defendants” as
violating the FDCPA (e.g., Compl. ¶¶ 6, 8, 10), but the use of that generic term does not give
Fannie Mae fair notice of its allegedly wrongful conduct in a case involving six defendants with
different roles. See Coleman v. Gullet, No. 12-10099, 2013 WL 4026839, at *8 (E.D. Mich. Aug.
6, 2013) (citing cases), report and recommendation adopted, 2013 WL 5172306 (E.D. Mich.
Sept. 13, 2013). Fannie Mae reasonably asserts, “There are no allegations pertaining to Fannie
14
Mae and the [FDCPA] Count should be dismissed for failure to state a claim.” (FNMA’s Mot. at
5.)
Franklyn responds by arguing that he pled that Fannie Mae is the “underlying lender.”
(Pl.’s Resp. to FNMA’s Mot. at 4–5.) But even if the Court were to find that Fannie Mae held the
debt at the time of the alleged FDCPA violations, creditors are generally not “debt collectors”
under the Act because a creditor suffers business consequences if it duns those who borrow from
it. See 15 U.S.C. § 1692a(4), (6)(F); S. Rep. No. 95–382, at 2 (1977). Recognizing this, Franklyn
points to 15 U.S.C. § 1692a(6). (Pl.’s Resp. to FNMA’s Mot. at 4–5.) That paragraph provides:
“the term [debt collector] includes any creditor who, in the process of collecting his own debts,
uses any name other than his own which would indicate that a third person is collecting or
attempting to collect such debts.” 15 U.S.C. § 1692a(6). This paragraph of the Act does not help
Franklyn because he did not plead that Fannie Mae used Harbour Portfolio or WWR as a mere
conduit to collect debts, when Fannie Mae was in fact the entity driving the collection. See
Vincent v. The Money Store, 736 F.3d 88, 103 (2d Cir. 2013) (“[W]hen determining whether a
representation to a debtor indicates that a third party is collecting or attempting to collect a
creditor’s debts, the appropriate inquiry is whether the third party is making bona fide attempts to
collect the debts of the creditor or whether it is merely operating as a ‘conduit’ for a collection
process that the creditor controls.”); cf. Bridge v. Ocwen Fed. Bank, FSB, 681 F.3d 355, 360 (6th
Cir. 2012) (noting—where neither defendant was a creditor—that “the [Plaintiffs] have alleged
that they received collection letters regarding [Plaintiff] Lisa Bridge’s mortgage from an agent or
arm of Defendants, the law firm of Moss, Collis, Stawiarski, Morris, Schneider and Prior, LLC.
For the purposes of a 12(b)(6) motion, this allegation may also bring Defendants within the
statutory definition of a debt collector under the second sentence of § 1692a(6).”).
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In short, Franklyn has not pled a FDCPA claim against Fannie Mae because he has not
adequately pled that Fannie Mae is a debt collector within the meaning of the Act. Under his
theory, Franklyn needed to set forth factual matter permitting the reasonable inference that
Fannie Mae both held the debt at the time of the alleged FDCPA violations and was attempting
to collect on that debt through the conduit of Harbour Portfolio or WWR. The Complaint does
neither.
C.
Count VI of the Complaint asserts a Racketeer Influenced Corrupt Organizations Act
violation against Defendants Harbour Portfolio, RECA Properties, National Asset Advisors, and
two Defendants presently moving for dismissal: WWR and Fannie Mae. (Compl. ¶ 63.)
The Racketeer Influenced Corrupt Organizations Act states in part,
It shall be unlawful for any person employed by or associated with any enterprise
engaged in, or the activities of which affect, interstate or foreign commerce, to
conduct or participate, directly or indirectly, in the conduct of such enterprise's
affairs through a pattern of racketeering activity or collection of unlawful debt.
18 U.S.C. § 1962(c). To state a RICO claim, Franklyn must allege facts making each of the
following plausible: “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering
activity,” Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985).
A RICO “enterprise includes any union or group of individuals associated in fact . . . for a
common purpose of engaging in a course of conduct.” Boyle v. United States, 556 U.S. 938, 944
(2009). The association must have structure, meaning “a purpose, relationships among those
associated with the enterprise, and longevity sufficient to permit these associates to pursue the
enterprise’s purpose.” Id. at 946. An “association in fact” enterprise requires “an ongoing
organization, formal or informal,” with the various associates functioning as a “continuing unit.”
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United States v. Turkette, 452 U.S. 576, 583, 101 S. Ct. 2524, 69 L. Ed. 2d 246 (1981). A
“properly pled RICO claim must cogently allege activity that would show ongoing, coordinated
behavior among the defendants that would constitute an association-in-fact.” Frank v.
D’Ambrosi, 4 F.3d 1378, 1386 (6th Cir. 1993).
A “pattern of racketeering activity” requires “at least two predicate acts of racketeering
activity occurring within a ten-year period.” Moon v. Harrison Piping Supply, 465 F.3d 719, 723
(6th Cir. 2006). The predicate acts of racketeering activity are identified in 18 U.S.C. §
1961(1)(B). See Otworth v. Budnik, No. 14-1139, 2014 WL 6610446, at *2 (6th Cir. Nov. 21,
2014); Slorp v. Lerner, Sampson & Rothfuss, No. 13-3402, 2014 WL 4800100, at *14 (6th Cir.
Sept. 29, 2014). Moreover, “the term pattern itself requires the showing of a relationship between
the predicates and of the threat of continuing activity. It is this factor of continuity plus
relationship which combines to produce a pattern.” H.J., Inc. v. Northwestern Bell Tele. Co., 492
U.S. 229, 238 (1989) (emphasis in original).
Franklyn has not adequately pled a RICO claim. As an initial matter, it is doubtful that he
has adequately pled the “enterprise” element. Plaintiff simply alleges that “Defendants’ actions
and use of multiple corporate entities, multiple parties, and concerted and predetermined acts and
conduct specifically designed to defraud Plaintiff constitutes an ‘enterprise,’ with the aim and
objective of the enterprise being to perpetrate a fraud upon the Plaintiff using intentional
nondisclosure, material misrepresentation, and creation of fraudulent loan documents.” (Compl.,
¶ 66.) In other words, as in Begala v. PNC Bank, Ohio, 214 F.3d 776, 781 (6th Cir. 2000), “the
complaint essentially lists a string of entities allegedly comprising the enterprise, and then lists a
string of supposed racketeering activities in which the enterprise purportedly engages.” The
Complaint is devoid of facts suggesting that the behavior of the listed entities is “coordinated in
17
such a way that they function as a continuing unit.” Id. While the Court thus has serious doubts
about the adequacy of this pleading, the definition of enterprise is broad and thus, the Court will
analyze the other elements.
Franklyn states that WWR received revenue from collecting debts or foreclosing
mortgages on behalf of Harbour Portfolio. (Compl. ¶ 67.) Franklyn also says that Harbour
Portfolio (1) generated revenue “from trades resulting from underwritten losses of certain assets,
especially [the Property]”; (2) received profits from loan servicing; and (3) received a
“percentage share of gross proceeds” from RECA, National Asset Advisors, and WWR’s debt
collection. (Compl. at 68.) It is not clear which, if any, of the “dozens of crimes that constitute
racketeering activity,” Slorp, 2014 WL 4800100, at *14, this conduct implicates. Further
confusion arises because Franklyn pleads, “Each of the RICO Defendants has received income
derived, directly or indirectly, from the pattern of racketeering activity described in and
throughout each count,” (Compl. ¶ 64), thereby apparently referencing the allegations in all 165
paragraphs of the Complaint. Moreover, in his response to Fannie Mae’s motion, Franklyn states,
“Fannie Mae is the central actor in the allegations made under RICO,” (Pl.’s Resp. to FNMA’s
Mot. at 6); but this is confusing because, as discussed, it appears that Fannie Mae had no interest
in the Property following January 2011.
It is not the responsibility of the Court or Defendants to sift through Franklyn’s
Complaint to uncover which alleged conduct Franklyn intended to be the predicate acts
amounting to a pattern of racketeering activity. See Fed. R. Civ. P. 8 (“A pleading that states a
claim for relief must contain[] . . . a short and plain statement of the claim showing that the
pleader is entitled to relief.”). This is especially so where Franklyn himself requests “that he be
18
permitted to submit an Amended Complaint that will more clearly outline the organization of and
the actions taken by the enterprise.” (Pl.’s Resp. to FNMA’s Mot. at 6.)
As such, Franklyn’s RICO claim will be dismissed without prejudice as to WWR and
Fannie Mae, and Franklyn will be given leave to file an amended complaint to clarify his RICO
claim if he believes, pursuant to Federal Rule of Civil Procedure 11, that the facts of this case
warrant allegations of racketeering activity. Additionally, Franklyn’s right to amend is without
prejudice to WWR’s, Clos’, or FNMA’s right to move to dismiss the amended RICO claim.
D.
In support of his breach-of-contract claim, Franklyn states, “Fannie Mae is a party to the
mortgage loan contract. The other Defendant, Harbour Portfolio, according to Kevin Franklyn, is
Fannie Mae’s agent. (Affidavit of Kevin Franklyn).” (Pl.’s Resp. to FNMA’s Mot. at 7.)
Franklyn cannot rely on an affidavit to oppose a motion for judgment on the pleadings. See King
v. Henderson, 230 F.3d 1358 (table), 2000 WL 1478360, at *4 (6th Cir. 2000) (“King has
asserted that the trial judge legally erred by dismissing her complaint under Rule 12(b)(6)
because he had resorted to affidavits and documentary proof beyond the pleadings as support for
his conclusion that King had not alleged a sustainable cause of action, whereas Rule 12(b)(6)
contemplates assessment only of the sufficiency of the allegations contained within the
complaint. King’s protest is well taken.”); Ypsilanti Cmty. Utilities Auth. v. MeadWestvaco Air
Sys., LLC, No. 07-CV-15280, 2008 WL 2610273, at *2 (E.D. Mich. June 30, 2008) (“[T]he
Court declines to consider Plaintiffs’ supplemental affidavit, attached to its response to the
motion to dismiss, for the reason that the submitted affidavit is a ‘matter outside the pleadings’
for the purposes [of] the Defendant MWC’s Rule 12(b)(6) motion.”). And to the extent that
Franklyn relies on paragraph 111 of his Complaint—that “each of the Defendants[] sued herein
19
was the agent and employee of each of the remaining Defendants[] sued herein”—that allegation
is conclusory and the Court does not accept it as true. See Iqbal, 556 U.S. at 679. Moreover, as
noted, Franklyn’s “affidavit” is unsigned and not notarized and thus is not competent summaryjudgment evidence.
Turning to the Complaint, although Franklyn pleads that he and “the Defendants[]”
entered into a mortgage, he specifically alleges a “PURCHASE MONEY NOTE between . . .
HARBOUR VI, LP and . . . KEVIN FRANKLYN” and references “HARBOUR VI LP’s
mortgage contracts with Plaintiff.” (Compl. at 4 & ¶¶ 9, 19.) Indeed, his breach-of-contract count
specifically states, “Plaintiff entered into a binding contract with HARBOUR VI, LP regarding
the origination and/or servicing of their loans.” (Compl. ¶ 101.)
Because the factual allegations in the Complaint do not permit the reasonable inference
that Franklyn had a contract with Fannie Mae, his claim that Fannie Mae breached is
implausible. See Kogelshatz v. Gendernalik Funeral Home, Inc., No. 293977, 2010 WL
4628678, at *7 (Mich. Ct. App. Nov. 16, 2010) (“Because no contract existed, there can be no
breach . . . .”).
The Court will, however, dismiss this claim without prejudice. Franklyn’s “affidavit”
provides that Harbour Portfolio held itself out to be Fannie Mae’s agent and that at all times he
understood that Fannie Mae owned the Property and that Fannie Mae was his lender. (Pl.’s Resp.
Ex. A., Franklyn Aff. ¶¶ 3, 11, 12.) Again, the Court will give Franklyn the opportunity, within
the confines of Federal Rule 11, to plead facts showing a plausible contractual relationship
between himself and Fannie Mae.
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E.
In his response to Fannie Mae’s motion, Franklyn states, “[t]o the extent that Fannie Mae
does have an interest in the property by and through its agents, Plaintiff seeks to Quiet Title as to
Fannie Mae.” (Pl.’s Resp. to FNMA’s Mot. at 8.) But Fannie Mae does not claim any interest in
the Property. (FNMA’s Mot. at 15 (“Fannie Mae does not claim an interest in the Subject
Property, thus, it is impossible for Plaintiff to attempt and quiet title against Fannie Mae.”);
FNMA’s Reply at 3 (“Plaintiff utterly ignores the documented fact that Fannie Mae conveyed its
interest in the Subject Property well prior to Plaintiff ever having any interest at all in the Subject
Property.”).) Accordingly, Franklyn’s quiet-title claim against Fannie Mae will be dismissed.
IV.
For the foregoing reasons, the Court orders as follows.
To the extent that any count other than Counts I and VI was pled against WWR and Clos,
Franklyn has abandoned those counts and they are DISMISSED WITH PREJUDICE. To the
extent that Count I alleges that WWR or Clos violated § 1692i of the FDCPA, that claim is
DISMISSED WITH PREJUDICE. To the extent that Count I alleges that WWR or Clos violated
15 U.S.C. § 1692g of the FDCPA, that claim is DISMISSED WITHOUT PREJUDICE. To the
extent that Count I alleges that WWR or Clos violated 15 U.S.C. §§ 1692e or 1692f, WWR’s and
Clos’ motions to dismiss Count I are DENIED WITHOUT PREJUDICE. Count VI (RICO) as
against WWR and Clos is DISMISSED WITHOUT PREJUDICE to Franklyn’s right to file an
amended complaint.
To the extent that any count other than Counts VI and IX was pled against Fannie Mae,
those counts as against Fannie Mae are DISMISSED WITH PREJUDICE. Count VI (RICO) and
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Count IX (breach of contract) as against Fannie Mae are DISMISSED WITHOUT PREJUDICE
to Franklyn’s right to file an amended complaint.
Franklyn has twenty-one days from the entry of this order (January 27, 2015) to file an
amended complaint. Franklyn is advised to clarify all claims not dismissed. All claims must be
pled in good faith. The Court does not grant Franklyn leave to add new causes of action.
The Court hereby orders all parties to appear for a status conference to discuss mediation
procedures on February 12, 2015 at 2:00 p.m.
SO ORDERED.
s/Laurie J. Michelson
LAURIE J. MICHELSON
UNITED STATES DISTRICT JUDGE
Dated: January 6, 2015
CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing document was served on the
attorneys and/or parties of record by electronic means or U.S. Mail on January 6, 2015.
s/Jane Johnson
Case Manager to
Honorable Laurie J. Michelson
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