Cox et al v. Mortgage Electronic Registration Systems, Inc. et al
ORDER granting 4 Motion to Dismiss/General; denying 11 Motion for temporary injunction (Written Opinion). Signed by Senior Judge David S. Doty on 6/30/2011. (PJM)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 10-4626(DSD/SER)
Gary Cox and Jill Cox,
Mortgage Electronic Registration
Systems, Inc., and Aurora Loan
Christopher P. Parrington, Esq., Patrick D. Boyle, Esq.,
Ryan P. Myers, Esq. and Skjold Parrington, PA, 222 South
Ninth Street, Suite 3220, Minneapolis, MN 55402, counsel
Christina M. Weber, Esq., Eric D. Cook, Esq. and Wilford,
Geske & Cook, PA, 8425 Seasons Parkway, Suite 105,
Woodbury, MN 55125, counsel for defendants.
This matter is before the court upon the motion to dismiss1 by
defendants Mortgage Electronic Registration Systems, Inc. (MERS)
and Aurora Loan Services, LLC. (Aurora) and the motion for a
preliminary injunction2 by plaintiffs Gary E. Cox and Jill D. Cox.3
Defendants styled the motion as a motion to dismiss pursuant
to Rule 56 of the Federal Rules of Civil Procedure. See ECF No. 4,
Defendants’ brief recites the standards of review for
motions to dismiss under Rule 12 and motions for summary judgment
under Rule 56. The court construes the present motion as a motion
to dismiss under Rule 12.
Plaintiffs styled the motion as a motion for “temporary
injunction” pursuant to Rule 65 of the Federal Rules of Civil
A temporary injunction is a state-law remedy.
Minn. R. Civ. P. 65.02. Although the Supreme Court has noted that
state law might apply to an injunction in a diversity case, it has
Based on a review of the file, record and proceedings herein, and
for the following reasons, the court grants defendants’ motion.
This foreclosure dispute arises out of a January 16, 2004,
promissory note and mortgage from plaintiffs to nonparty Universal
V. Compl. ¶ 6.
Thereafter, Aurora acquired
the loan and became the servicer of the note.
MERS is the nominal
In February 2009, plaintiffs called Aurora to
request a loan modification due to financial hardship.
Id. ¶ 10.
At that time, plaintiffs were current with their mortgage payments.
Id. ¶ 12.
Aurora informed plaintiffs that they could apply for a
home loan modification.
Id. ¶ 13.
Plaintiffs submitted an
application and provided documentation requested by Aurora over the
Id. ¶¶ 14, 16.
not so held. See Grupo Mexicano de Desarrollo S.A. v. Alliance
Bond Fund, Inc., 527 U.S. 308, 319 n.3 (1999). The court need not
resolve the question, however, because as detailed below, dismissal
Plaintiffs are Minnesota citizens.
Aurora is a limitedliability company whose sole member, Aurora Bank, FSB, is a citizen
of Delaware. See ECF Nos. 32, 34; GMAC Commercial Credit LLC v.
Dillard Dept. Stores, Inc., 357 F.3d 827, 829 (8th Cir. 2004)
(citizenship of LLC is citizenship of its members).
MERS is a
Delaware corporation with its principal place of business in
Virginia. The amount in controversy exceeds $75,000, exclusive of
interests and costs.
“potentially qualified for a modification” and would be placed on
a “Trial Period Plan” during which time they should pay $2,779.38
Id. ¶ 17.
On October 1, 2009, and for the next three
months, plaintiffs made trial payments in the requisite amount.
Id. ¶ 18. On December 28, 2009, plaintiffs contacted Terry Martin,
an Aurora employee, who instructed them to discontinue modified
payments because they had demonstrated their ability to make
payments pursuant to the modification and should wait to receive
notice of their modification approval.
modification had been approved.”
Id. ¶ 19.
Id. ¶ 20.
On February 4, 2010,
Aurora mailed a letter to plaintiffs informing them that it was
unable to offer them a “Home Affordable Modification” because the
net present value (NPV) calculation did not support modification.
Id. ¶ 21; id. Ex. A.
The letter stated that “[i]f, within 30 days
of receiving this information you provide us with evidence that any
of these input values are inaccurate ... we will conduct a new NPV
calculation,” but “[a]s of the date of this letter, your request
for a Home Affordable Modification is considered closed.”
The letter further stated:
foreclosure action may be immediately resumed
from the date of this letter .... If you do
not bring your loan current immediately, any
foreclosure action will resume.
If you can
bring your loan current ... please contact
Aurora .... PLEASE ACT NOW TO SAVE YOUR HOME!
The letter also stated: “Depending upon your situation, you
might be eligible for other alternatives to foreclosure.”
On March 8, 2010, Aurora mailed a letter to plaintiffs,
informing them that (1) they “may not be eligible for the Home
Affordable Mortgage Program (HAMP) because of Negative NPV;” (2) at
request had been placed on a “30 day review period” during which
time they should continue to make monthly payments in the amount of
the trial period plan payments; (3) at the end of the 30-day
regarding the status of their modification; and (4) if they were
deemed ineligible at the end of the review period, Aurora would
work with them to explore other available options.
Id. Ex. B.
of March 19, 2010, plaintiffs owed over $30,000 in late payments.
See ECF No. 1-1, at 23.
On March 24, 2010, non-party Wilford &
Geske, P.A., sent plaintiffs a Notice of Mortgage Foreclosure Sale.
See V. Compl. Ex. C.
On October 4, 2010, the property was sold in
a sheriff’s sale.
On November 4, 2010, plaintiffs filed this action in state
court, alleging claims of accounting, breach of mortgage duty,
breach of duty of good faith and fair dealing, fraud and negligent
On November 8, 2010, a state-court judge
granted plaintiffs’ ex parte motion for a temporary injunction.
See Boyle Aff. Ex. A.
Plaintiffs did not file an affidavit of
service and defendants did not appear.
The state court judge
set the matter for hearing on November 23, 2010.
On November 16,
2010, defendants removed this action, and moved to dismiss on
November 23, 2010.
On March 4, 2011, plaintiffs moved for a
The court now considers the motions.
Standard of Review
To survive a motion to dismiss for failure to state a claim,
“‘a complaint must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its face.’”
Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009)
(quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)). “A claim
has facial plausibility when the plaintiff [has pleaded] factual
content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Iqbal, 129 S.
Ct. at 1949 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556
Although a complaint need not contain detailed factual
allegations, it must raise a right to relief above the speculative
level. See Twombly, 550 U.S. at 555.
“[L]abels and conclusions or
a formulaic recitation of the elements of a cause of action are not
sufficient to state a claim.”
Iqbal, 129 S. Ct. at 1949 (citation
and internal quotation marks omitted).
The court does not consider matters outside the pleadings in
deciding a motion to dismiss under Rule 12(b)(6). See Fed. R. Civ.
The court may consider materials “that are part of the
Porous Media Corp. v. Pall Corp., 186 F.3d 1077,
1079 (8th Cir. 1999), and matters “necessarily embraced by the
pleadings and exhibits attached to the complaint.”
Mattes v. ABC
Plastics, Inc., 323 F.3d 695, 698 n.4 (8th Cir. 2003).
The United States Department of the Treasury created the Home
Affordable Mortgage Program (HAMP) in response to a directive in
the Emergency Economic Stabilization Act of 2008 (EESA), 12 U.S.C.
mortgage servicers to modify mortgages. See Williams v. Timothy F.
Geithner, No. 09-1959, 2009 WL 3757380, at *2 (D. Minn. Nov. 9,
2009). HAMP imposes several obligations on servicers who choose to
Id. at *2-3.
Congress vested discretion in the
claiming that he is entitled to a modification or a reply to a
Id. at *6–7.
As an initial matter, all of plaintiffs’ claims implicate HAMP
modification, defendants’ conduct associated with the request and
the ultimate denial of the request.
Despite avoiding direct
references to HAMP in the verified complaint, the facts pleaded in
support of plaintiffs’ claims are entirely based on the loan
modification request under HAMP.
action under HAMP.
There is no private right of
See McInroy v. BAC Home Loan Servicing, LP, No.
2011 WL 1770947, at *3 (D. Minn. May 9, 2011).
Therefore, dismissal is warranted on this basis alone.
In count I, plaintiffs allege a claim of “Accounting” and seek
an order “requiring a detailed accounting of Defendant’s activities
V. Compl. ¶ 34.
Plaintiffs claim that defendants
failed to comply with “certain responsibilities with respect to
processing Plaintiff’s repeated requests for loan modification.”
Id. ¶ 30.
Glickman, Isenberg, Lurie & Co., 273 N.W.2d 647 (Minn. 1978) in
support of this claim.
That case involves accountant malpractice,
not the equitable remedy of accounting.
An accounting is an
AgCountry Farm Credit Servs., 535 F.3d 779, 784 (8th Cir. 2008).
In the present case, plaintiffs seek “the entire contents of
Plaintiff’s loan file from Defendant’s custody,” including:
attempts to contact Defendants to discuss
Any and all records of payment on the
Mortgage received by Defendant;
Any and all correspondence remitted by
Defendant to Plaintiff; and
Any and all correspondence remitted by
Plaintiff to Defendant.
V. Compl. ¶¶ 32, 34.
Plaintiffs’ claim for accounting amounts to
standard discovery requests, governed by the Federal Rules of Civil
In short, an adequate remedy at law is available, and
dismissal is warranted.
Moreover, this request for equitable
relief is premised on defendants liability in counts II-V. Because
those claims warrant dismissal, the claim for accounting also
Breach of Mortgagee Duty
In count II, plaintiffs allege a breach of mortgagee duty
pursuant to Minnesota Statutes § 580.11.
This statute, which
mortgagee, the mortgagee’s assignee, or the legal representative of
either or both, may fairly and in good faith purchase the premises
so advertised, or any part thereof, at such sale.”
Plaintiffs cite Sprague Nat’l Bank v. Dotty, 415 N.W.2d
725 (Minn. Ct. App. 1987) to support their argument that the
statute imposes a general duty of good faith on the mortgagee.
Sprague, however, involved the bad faith acts of a lender in
purchasing property at a foreclosure sale. Id. The statute itself
imposes no fiduciary duty on the mortgagee nor does it concern a
mortgagee’s actions prior to foreclosure. See Scott v. Wells Fargo
Bank, N.A., Civ. No. 10-3368, 2011 WL 381766, at *4 (D. Minn. Feb.
Plaintiffs do not allege that defendants acted unfairly
in purchasing the property at the advertised foreclosure sale, only
that defendants failed to communicate effectively and to release
their loan file.4
Therefore, this claim fails and dismissal is
Good Faith and Fair Dealing
Under Minnesota law, “every contract includes an implied
covenant of good faith and fair dealing requiring that one party
not unjustifiably hinder the other party’s performance of the
In re Hennepin Cnty. 1986 Recycling Bond Litig., 540
In their memorandum, plaintiffs cite at length Minnesota
Statutes § 58.13. Plaintiffs’ complaint does not allege violations
of this statute, and the court does not consider arguments related
to statutory violations not pleaded in the complaint.
N.W.2d 494, 502 (Minn. 1995) (internal quotation marks omitted).
Plaintiffs claim that defendants breached this duty by informing
plaintiffs that Aurora might work with them on a loan modification
and by failing to release their loan file. See V. Compl. ¶¶ 43-44.
Under Minnesota law, “a cause of action for good faith and fair
dealing cannot exist independent of the underlying breach of
Orthomet, Inc. v. A.B. Med., Inc., 990 F.2d 387,
392 (8th Cir. 1993); accord Medtronic, Inc. v. ConvaCare, Inc., 17
F.3d 252, 256 (8th Cir. 1994).
Plaintiffs do not assert a breach
“establish bad faith by demonstrating that the adverse party has an
ulterior motive for its refusal to perform a contractual duty.”
Minnwest Bank Cent. v. Flagship Props. LLC, 689 N.W.2d 295, 303
(Minn. Ct. App. 2004).
Plaintiffs cite no contractual duty from
the mortgage that defendants failed to perform with bad faith or
with an ulterior motive. Therefore, this claim fails and dismissal
Fraud must be pleaded with particularity. See Fed. R. Civ. P.
To satisfy the heightened pleading requirement, a plaintiff
must set forth the “who, what, when, where, and how” of an alleged
United States ex rel. Joshi v. St. Luke’s Hosp., Inc., 441
F.3d 552, 556 (8th Cir. 2006).
In other words, a plaintiff must
plead “the time, place and contents” of the false representations,
the identity of the individual who made the representations and
what was obtained thereby.
BJC Health Sys. v. Columbia Cas. Co.,
478 F.3d 908, 917 (8th Cir. 2007).
Under Minnesota law, a plaintiff establishes a claim for
fraudulent misrepresentation by establishing that: (1) there was a
false representation by a party of a past or existing material fact
susceptible of knowledge; (2) made with knowledge of the falsity of
the representation or made as of the party’s own knowledge without
knowing whether it was true or false; (3) with the intention to
representation caused the other party to act in reliance thereon;
and (5) that the party suffered pecuniary damage as a result of the
See Best Buy Stores, L.P. v. Developers Diversified
Realty Corp., 636 F. Supp. 2d 869, 887 (D. Minn. 2009).
Plaintiffs’ fraud claims are based on the December 28, 2009,
telephone conversation during which an Aurora employee informed
plaintiffs that they qualified for a loan modification and the
March 8, 2010, letter that informed plaintiffs that their loan had
been placed on a 30-day review period under HAMP.
In support of
this claim, plaintiffs allege that “the representations were false
and were intended to defraud Plaintiff” and that “Plaintiff was
V. Compl. ¶¶ 47-48.
These bare assertions do
not satisfy the Rule 8 pleading standard, much less the heightened
pleading standard imposed under Rule 9.
In particular, plaintiffs
fail to demonstrate that the statements were made with knowledge of
the falsity of the representation, how plaintiffs relied on the
Therefore, this claim fails and dismissal is warranted.
A person makes a negligent misrepresentation when “(1) in the
course of ... a transaction in which he or she has a pecuniary
guidance of others in their business transactions, (3) another
justifiably relies on the information, and (4) the person making
the representation has failed to exercise reasonable care in
obtaining or communicating the information.”
Inc. v. Gaylord’s, Inc., 764 N.W.2d 359, 369 (Minn. 2009) (citation
information during the December 28, 2009, telephone conversation.
Taking as true plaintiffs’ account of this conversation, the
February 4, 2010 letter states that Aurora was unable to offer
plaintiffs a Home Affordable Modification and, as of the date of
the letter, their request was considered closed.
The letter also
informed plaintiffs that they needed to bring their loan current to
Plaintiffs plead no facts indicating that they
resumed mortgage payments after receiving the February 4 letter.
information, no reasonable jury could find that plaintiffs were
justified in relying upon that information once they received the
February 4 letter.
information to plaintiffs on March 8, 2010, when they were informed
Plaintiffs fail to plead any facts demonstrating that they relied
on this information.
Instead, plaintiffs state that they believed
their application was again under review, and “were shocked” when
defendants initiated foreclosure proceedings before the end of the
V. Compl. ¶¶ 24, 26.
The bare assertion that
plaintiffs reasonably relied on the information is not sufficient
to survive a motion to dismiss.
Therefore, this claim also fails
and dismissal is warranted.
A preliminary injunction is an extraordinary remedy, and the
movant bears the burden of establishing its propriety.
Inc. v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003).
injunction should issue: (1) the threat of irreparable harm to the
movant in the absence of relief, (2) the balance between that harm
and the harm that the relief may cause the non-moving party,
(3) the likelihood of the movant’s ultimate success on the merits
and (4) the public interest.
Dataphase Sys., Inc. v. C.L. Sys.,
Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en banc).
success on the merits is the “most significant” Dataphase factor.
S & M Constructors, Inc. v. Foley Co., 959 F.2d 97, 98 (8th Cir.
Here, the court has determined that plaintiffs fail to
state a claim upon which relief can be granted.
preliminary injunction is not warranted.
Accordingly, based on the above, IT IS HEREBY ORDERED that:
Defendants’ motion to dismiss [ECF No. 4] is granted; and
Plaintiffs’ motion for a temporary injunction [ECF No.
11] is denied.
LET JUDGMENT BE ENTERED ACCORDINGLY
June 30, 2011
s/David S. Doty
David S. Doty, Judge
United States District Court
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