Brown et al v. Florida Coastal Partners, LLC et al
Filing
65
OPINION AND ORDER granting 54 Motion for Summary Judgment as to the claims brought by Mr. Brown only; denying as moot 60 Motion for Leave to File Amended Complaint, Motion to Stay; denying 61 Amended Motion for Leave to File Amended Complaint, Motion to Stay. Signed by Magistrate Judge Terence P. Kemp on 7/10/2015. (agm)(This document has been sent by regular mail to the party(ies) listed in the NEF that did not receive electronic notification.)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Ronald Brown, et al.,
:
Plaintiffs,
:
v.
:
Florida Coastal Partners, LLC,
Case No. 2:13-cv-1225
:
:
Magistrate Judge Kemp
Defendants.
OPINION AND ORDER
This case (in which the parties have consented to full
disposition by the Magistrate Judge) is before the Court on a
“notice of bankruptcy and suggestion stay [sic]” filed by
defendant attorney Charles R. Griffith on his own behalf and on
behalf of his client Florida Coastal Partners, LLC, relating to a
bankruptcy filing made by plaintiff Tonya Brown.
(Doc. 57).
Also before the Court is a motion for summary judgment filed by
defendant Carlisle, McNellie, Rini, Kramer & Ulrich, Co., LPA
(“Carlisle”) (Doc. 54), the plaintiffs’ motion for leave to file
an amended complaint and injunction or motion to stay (Doc. 60),
and their amended motion for leave to file an amended complaint
and injunction or motion to stay.
(Doc. 61).
For the reasons
set forth below, the Court will find that Ms. Brown is no longer
the real party in interest with respect to her claims in light of
her pending bankruptcy.
Thus, the Court will consider the
pending motions only as they apply to Mr. Brown.
The Court will
grant Carlisle’s summary judgment as to the claims brought by Mr.
Brown only.
Further, the Court will deny the motion for leave to
file an amended complaint and injunction or motion to stay as
moot.
(Doc. 60).
Finally, the Court also will deny Mr. Brown’s
amended motion for leave to file an amended complaint and
injunction or motion to stay.
(Doc. 61).
I. Background
The Browns are property owners who are parties to a
foreclosure action filed in the Delaware County Court of Common
Pleas as Case No. 08-CVE-12-1598.
A discussion of the procedural
history of that foreclosure action is necessary to address the
notice of bankruptcy and suggestion of stay and the pending
motions.
CitiGroup Global Markets Realty Corp. (“CitiGroup”) filed
the foreclosure case against the Browns in December, 2008.
On
September 8, 2010, CitiGroup filed a motion to substitute Kondaur
Capital Corporation (“Kondaur”) as the plaintiff.
CitiGroup
attached an assignment of mortgage to the motion reflecting that
CitiGroup had assigned the mortgage and note to Kondaur.
Before
the Court of Common Pleas ruled on the motion to substitute, it
became aware that Mr. Brown had filed a petition in United States
Bankruptcy Court.
Consequently, pursuant to 11 U.S.C. §362, the
Court of Common Pleas stayed the case on October 11, 2010.
The
Court of Common Pleas lifted the stay and returned the case to
its active docket on July 5, 2011.
Thereafter, on October 24,
2011, the Court of Common Pleas granted the motion to substitute.
In doing so, the Court of Common Pleas noted that, after the
action was filed, “Plaintiff CitiGroup ... assigned the subject
mortgage together with the note to Kondaur ....”
Carlisle acted
as counsel to both CitiGroup and Kondaur.
Kondaur and Florida Coastal Partners, LLC (“Florida
Coastal”) subsequently filed a joint motion to substitute party
plaintiff and counsel.
That motion, filed on August 20, 2013,
reflected that the note and mortgage were transferred by Kondaur
to Florida Coastal by assignment of mortgage dated December 11,
2011.
The motion also sought to replace Carlisle and substitute
Charles R. Griffith as the attorney for Florida Coastal.
2
The
Court of Common Pleas granted the joint motion to substitute
party plaintiff and counsel on September 25, 2013.
On December 13, 2013, while the foreclosure action was still
pending in the Court of Common Pleas, the Browns brought this
action pursuant to this Court’s federal question jurisdiction,
alleging that Florida Coastal and John Doe, Individuals 1-50
violated the Fair Debt Collection Practices Act (“FDCPA”), 15
U.S.C. §§1692 et seq.
The Browns also alleged fraud in
connection with the mortgage on their property and sought to
quiet the title to the property.
On January 3, 2014, the Browns
filed an amended complaint adding Mr. Griffith as a defendant and
adding, among other allegations, a claim for slander of title.
Finally, on May 23, 2014, with leave of Court, the Browns filed a
“3rd amended complaint” against Florida Coastal, Mr. Griffith,
Carlisle, and John Doe, Individuals 1-50.
Count one of the 3rd amended complaint alleges that the
defendants violated the FDCPA.
More specifically, the Browns
allege that Carlisle falsely represented in the Common Pleas
Court action that its clients were proper party plaintiffs
(specifically, holders of the loan) when, in fact, they were debt
collectors.
The Browns allege that Carlisle’s false and
misleading representations resulted in judgments and sanctions
against them in the foreclosure action.
Similarly, the Browns
allege that Mr. Griffith falsely represented that Florida Coastal
was a proper party plaintiff in that case when, in fact, it was
also a debt collector.
The Browns further allege that Florida
Coastal and Mr. Griffith misrepresented the character, amount,
and legal status of the mortgage and note in violation of the
FDCPA.
The Browns also set forth state law claims for
foreclosure fraud (count two), slander of title (count three),
slander of credit (count four), emotional distress (count five),
and quiet title (count six).
On October 10, 2014, the Court
3
granted in part a motion to dismiss by Carlisle, dismissing the
Browns’ claims against Carlisle for the intentional infliction of
emotional distress and to quiet title.
(Doc. 46).
One day after they filed the complaint in this case, the
Browns removed the state court foreclosure action from the
Delaware County Court of Common Pleas.
cv-1232.
It became Case No. 2:13-
On September 24, 2014, Judge Economus of this Court
issued an Opinion and Order adopting a Report and Recommendation
which determined that the Court lacked subject matter
jurisdiction over the dispute, and he remanded the case to the
Delaware County Court of Common Pleas.
The Delaware County Court
of Common Pleas entered a judgment of foreclosure on November 12,
2014 and a judgment confirming the sale and distribution of sale
proceeds on February 11, 2015.
In the final entry of
confirmation and order for distribution, the Court of Common
Pleas indicated that property was sold at Sheriff’s sale for
$240,000 to Florida Coastal, which then assigned its bid to
Triton Investments, LLC.
On February 13, 2015, the Browns filed
an appeal and an emergency motion seeking a stay of the
foreclosure and a writ of possession.
On February 20, 2015, Tonya Brown filed a Chapter 11
bankruptcy petition in the United States Bankruptcy Court for the
Southern District of Ohio, Case No. 2:15-bk-50925.
On February
27, 2015, Florida Coastal filed a notice of bankruptcy and
suggestion of stay.
The Ohio Court of Appeals for the Fifth
Appellate District issued a judgment entry on March 13, 2015,
staying the appeal in light of the pending bankruptcy.
The Court
of Appeals closed the action and stated that the parties may take
action to reinstate the appeal after settlement of the bankruptcy
or in the event that the bankruptcy court lifts the automatic
stay.
On May 7, 2015, the bankruptcy court granted relief from
the automatic stay with respect to Triton Investments, LLC, its
4
successors, and assigns – the purchaser of the property –
limiting the relief to the “in rem action against the real
property located at 6374 Hermitage Dr., Westerville, Ohio 43082.”
The Browns appealed the bankruptcy court’s decision lifting
the stay with respect to Triton Investments LLC, and they moved
to stay the appeal of the Court of Common Pleas case pending
decision on the appeal of the bankruptcy court’s order lifting
the stay.
The Court of Common Pleas granted the motion for a
stay of execution of judgment pending appeal, subject to the
posting of a supersedeas bond.
On June 9, 2015, the Browns filed
a notice urging that they were not required to post bond due to
the pending bankruptcy.
In this case, also on February 27, 2015, Mr. Griffith and
Florida Coastal filed a notice of bankruptcy and suggestion of
stay.
(Doc. 57).
In examining that bankruptcy, the Court notes
that the Office of the United States Trustee (“UST”) moved the
bankruptcy court for an order dismissing the Chapter 11 case.
its motion, the UST stated:
While this case is relatively new, the UST is concerned
that the case was filed solely as a stop-gap maneuver,
relative to a recent confirmed Sheriff’s Sale of the
Debtor’s real property.
Considering the history
reflected in Debtor’s Non-Filing Spouse’s cases, the
allegations in the Motion for Relief from Stay, and the
Debtor’s failure to appear for the Meeting of Creditors,
the UST believes that the Debtor lacks a good faith
intention of fulfilling the obligations commensurate with
bankruptcy protection. The Debtor’s behavior thus far,
though admittedly limited to just over one month,
demonstrates behavior that is prejudicial to her
creditors. The Debtor cannot be permitted to enjoy the
benefits of bankruptcy protection without complying with
the requirements of the Bankruptcy laws or the UST
Guidelines.
(Bankr. Doc. 47 at 5).
Based on the contention that Ms. Brown
refused to “play by the rules,” the UST asked that the case be
dismissed or, alternatively, converted to Chapter 7.
5
Id.
The
In
bankruptcy court found the motion to be well taken and ruled that
conversion to Chapter 7 was appropriate.
Thus, Ms. Brown’s
bankruptcy is now a Chapter 7 bankruptcy.
In this Opinion and Order, the Court will first examine the
impact of Ms. Brown’s bankruptcy on this litigation.
After doing
so, the Court will examine Mr. Brown’s motions, namely the motion
for leave to file an amended complaint and injunction or stay
filed on May 14, 2015 (Doc. 60), and the amended motion for leave
to file an amended complaint and injunction or motion to stay
filed on May 15, 2015 (Doc. 61).
Finally, the Court will
consider the motion for summary judgment filed by Carlisle on
January 1, 2015.
(Doc. 54).
II. Impact of Pending Bankruptcy
Once a debtor files a petition in bankruptcy, only the
bankruptcy trustee has standing to pursue the debtor’s prepetition causes of action.
Tyler v. Capital Mgmt., Inc., 736
F.3d 455, 461 (6th Cir. 2013), citing Stevenson v. J.C. Bradford
& Co. (In re Cannon), 277 F.3d 838, 853 (6th Cir. 2002).
That
is, the trustee, and not the debtor, has standing to pursue
existing claims after the debtor files for bankruptcy protection
because such claims are considered to be “property of the estate”
under 11 U.S.C. §541(a)(1).
See, e.g., In re Bernstein, 525 B.R.
505, 508 (N.D. Ga. 2015)(“a Chapter 7 debtor lacks standing to
litigate pre-petition claims and is not the real party in
interest in whose name such claims may be brought unless and
until such claims are abandoned by the trustee back to the
debtor”).
As the Court of Appeals has observed, “[t]he
Bankruptcy Code itself provides that the bankruptcy estate
comprises ‘all legal or equitable interests of the debtor in
property as of the commencement of the case,’ 11 U.S.C.
§541(a)(1), and it is well established that the ‘interests of the
debtor in property’ include ‘causes of action.’”
6
Bauer v.
Commerce Union Bank, Clarksville, Tenn., 859 F.2d 438, 440-41
(6th Cir. 1988).
Further, this Court may raise the issue of
standing sua sponte.
See Coston v. Petro, 398 F. Supp. 2d 878,
882 (S.D. Ohio 2005).
There is no question that Ms. Brown is a Chapter 7 debtor.
In light of the pending bankruptcy, Ms. Brown lacks standing to
pursue her pre-petition claims in this Court because those claims
are now considered to be “property of the estate.”
Because the
Chapter 7 trustee is the real party in interest to Ms. Brown’s
claims, the Court will analyze the pending motions only to the
extent that they pertain to Mr. Brown.
III. Mr. Brown’s Motions
On May 14, 2015, Mr. Brown filed a motion for leave to file
an amended complaint and injunction or stay.
(Doc. 60).
The
following day, on May 15, 2015, Mr. Brown filed an amended motion
for leave to file an amended complaint and injunction or motion
to stay.
(Doc. 61).
The latter motion is identical to the one
filed the previous day, except that the attached proposed fourth
amended complaint differs in some respects.
It is apparent that
Mr. Brown intended for the amended motion (Doc. 61) to replace
the original motion (Doc. 60).
the original motion as moot.
Consequently, the Court will deny
(Doc. 60).
The Court now turns to the amended motion for leave to file
an amended complaint and injunction or motion to stay.
61).
(Doc.
In the amended motion, Mr. Brown seeks leave to file a
fourth amended complaint “to add violations of Racketeer
Influenced Corrupt Organizations Act, 18 U.S.C. 1962 et seq.,
1964 (‘RICO’) and new Defendants....”
Id. at 2.
Mr. Brown
claims that he has new evidence that the property which was
subject to foreclosure has been used in a scheme of racketeering.
More specifically, Mr. Brown states that he learned that Alexius
Dorsey is to become recipient of the real property, and that Mr.
7
Dorsey filed a false affidavit in state court concerning his
interaction with and knowledge of the mortgage and note.
In the
proposed fourth amended complaint, Mr. Brown seeks to add the
following defendants:
The Windsor Companies, Triton Investments,
LLC, Alex Dorsey, and Luke Farrell.
In addition, Mr. Brown seeks
to introduce new facts and to assert the following causes of
action:
FDCPA (count one), fraud (count two), a “violation of
federal rule 62" rendering the “state court action void” (count
three), “removal of state court action” rendering the state court
“proceedings void” (count four), RICO violations (count five),
slander of title (count six), and slander of credit (count
seven).
Carlisle filed a response to the motion, arguing that Mr.
Brown’s motion should be denied.
(Doc. 62).
More specifically,
Carlisle argues that it will suffer prejudice if the motion is
granted “as it will unduly delay the already pending Motion for
Summary Judgment....”
Id. at 2.
Carlisle also argues that the
futility of “[the] proposed amendment is apparent on its face and
the proposed amendment fails to cure the deficiencies contained
in Browns’ previous pleadings.”
Id. at 3.
Mr. Griffith and Florida Coastal also filed a memorandum in
opposition to Mr. Brown’s motion, together with The Windsor
Companies, Triton Investments, LLC, Alex Dorsey, and Luke
Farrell.
(Doc. 64).
In a typical case, non-parties such as The
Windsor Companies, Triton Investments, LLC, Alex Dorsey, and Luke
Farrell would not, without leave of Court, be permitted to appear
and oppose a motion for leave to amend.
See, e.g., Custom Pak
Brokerage., LLC v. Dandrea Produce, Inc., 2014 WL 988829, at *2
(D.N.J. Feb. 27, 2014)(“Proposed defendants do not have standing
to oppose a motion to amend because they are not yet named
parties”)(internal quotations and citation omitted).
Thus, this
Court will consider the memorandum in opposition only insofar as
8
it was filed by defendants Mr. Griffith and Florida Coastal.
In their memorandum in opposition, Mr. Griffith and Florida
Coastal argue that Mr. Brown’s motion should be denied because it
is “just another attempt to try and delay the foreclosure process
that has been ongoing.”
Id. at 2.
Mr. Griffith and Florida
Coastal provide this Court with a history of the relevant cases
in an effort to demonstrate that Mr. Brown has repeatedly tried
to get the foreclosure action stayed or removed.
Mr. Griffith
and Florida Coastal further argue that Mr. Brown’s motion should
be denied because it seeks to re-litigate matters resolved
against Mr. Brown in other courts and to add “new parties that
have no relation to the original action.”
Id. at 4.
To add the
new defendants at this stage, Mr. Griffith and Florida Coastal
argue, “would unduly prejudice and delay this proceeding.”
at 5.
Id.
Mr. Griffith and Florida Coastal further assert that there
is no basis for the requested injunctive relief.
As set forth previously by this Court, generally, motions to
amend pleadings are governed by Rule 15(a) of the Federal Rules
of Civil Procedure, which provides that after the time for
amending as a matter of course has passed, “a party may amend its
pleading only with the opposing party’s written consent or the
court’s leave. The court should freely give leave when justice so
requires.”
Fed. R. Civ. P. 15(a).
The higher standard set forth
in Rule 16(b) for modifying a scheduling order only applies when
a court has issued a scheduling order setting a deadline for
motions to amend the pleadings.
Fed. R. Civ. P. 16(b).
The
Court has not entered a scheduling order in this case.
Accordingly, the liberal standard set forth in Rule 15(a) applies
here.
Under this standard, motions for leave to amend may be
denied “where the court finds ‘undue delay, bad faith or dilatory
motive on the part of the movant, repeated failure to cure
9
deficiencies by amendments previously allowed, undue prejudice to
the opposing party by virtue of allowance of the amendment,
futility of the amendment, etc.’”
Marquette Gen. Hosp. v.
Excalibur Med. Imaging, LLC, 528 F. App’x 446, 448 (6th Cir.
2013), quoting Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227,
9 L. Ed.2d 222 (1962).
In considering what constitutes “undue
delay” and “undue prejudice,” the Court of Appeals has considered
factors including the length of the delay, whether dispositive
motions have been granted, whether the new allegations would
require the opponent to expend significant additional resources
to conduct discovery and prepare for trial, and whether the new
allegations would significantly delay resolution of the dispute.
See, e.g., Phelps v. McClellan, 30 F.3d 658, 662-63 (6th Cir.
1994) (“In determining what constitutes prejudice, the court
considers whether the assertion of the new claim or defense
would: require the opponent to expend significant additional
resources to conduct discovery and prepare for trial;
significantly delay the resolution of the dispute; or prevent the
plaintiff from bringing a timely action in another
jurisdiction”).
“The longer the delay, the less prejudice the
opposing party will be required to show.”
Dubuc v. Green Oak
Tp., 312 F.3d 736, 752 (6th Cir. 2002) (citation omitted).
On
the other hand, “[i]n the absence of reasons such as those listed
above, leave should generally be granted.”
Johnson v. Metro.
Gov’t of Nashville & Davidson Cnty., Tenn., 502 F. App'x 523, 541
(6th Cir. 2012), citing Foman, 371 U.S. 178.
In this case, the Court finds that granting Mr. Brown’s
motion for leave to file a fourth amended complaint would cause
undue delay and prejudice.
Mr. Brown is attempting to add new
parties and bring entirely new claims in a case which has been
pending since December 10, 2013.
To allow Mr. Brown to begin
this case once again at this stage of the proceedings would cause
10
undue delay and unfair prejudice to the existing defendants in
that the addition of the new claims and defendants would require
the existing defendants to expend additional resources to conduct
additional discovery and would significantly delay the resolution
of this dispute.
See, e.g., Cross v. MHM Corr. Servs., Inc.,
2014 WL 346038, at *3 (E.D. Mo. Jan. 30, 2014) (denying motion
for leave to file fourth amended complaint because, inter alia,
“[t]o essentially start the case over, which has been pending for
over two years and already has been amended several times would
cause further delay and burden Defendants with additional
responsive pleading and discovery requirements”).
Conversely,
denying Mr. Brown’s motion would not be unduly prejudicial to
him, given that he is free to pursue any valid claims in a
separate action.
See id.
Consequently, the Court, in its
discretion, will deny the amended motion for leave to file an
amended complaint.
Further, Mr. Brown does not provide this
Court with any basis upon which to grant an injunction or a stay.
For these reasons, the Court will deny Mr. Brown’s amended motion
in its entirety.
(Doc. 61).
IV. Carlisle’s Motion for Summary Judgment
The Court now turns to Carlisle’s motion for summary
judgment.
Summary judgment is not a substitute for a trial when
facts material to the Court’s ultimate resolution of the case are
in dispute.
It may be rendered only when appropriate evidentiary
materials, as described in Fed. R. Civ. P. 56(c), demonstrate the
absence of a material factual dispute and the moving party is
entitled to judgment as a matter of law.
Broad. Sys., Inc., 368 U.S. 464 (1962).
Poller v. Columbia
The moving party bears
the burden of demonstrating that no material facts are in
dispute, and the evidence submitted must be viewed in the light
most favorable to the nonmoving party.
Co., 398 U.S. 144 (1970).
Adickes v. S.H. Kress &
“[I]f the evidence is insufficient to
11
reasonably support a jury verdict in favor of the nonmoving
party, the motion for summary judgment will be granted.”
Cox v.
Kentucky Dep’t of Transp., 53 F.3d 146, 150 (6th Cir.
1995)(citation omitted).
Additionally, the Court must draw all
reasonable inferences from that evidence in favor of the
nonmoving party.
(1962).
United States v. Diebold, Inc., 369 U.S. 654
The nonmoving party does have the burden, however, after
completion of sufficient discovery, to submit evidence in support
of any material element of a claim or defense on which that party
would bear the burden of proof at trial, even if the moving party
has not submitted evidence to negate the existence of that
material fact.
See Celotex Corp. v. Catrett, 477 U.S. 317
(1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986).
Of
course, since “a party seeking summary judgment ... bears the
initial responsibility of informing the district court of the
basis for its motion, and identifying those portions of [the
record] which it believes demonstrate the absence of a genuine
issue of material fact,” Celotex, 477 U.S. at 323, the responding
party is only required to respond to those issues clearly
identified by the moving party as being subject to the motion.
It is with these standards in mind that the instant motion for
summary judgment must be decided.
On January 8, 2015, Carlisle filed a motion for summary
judgment, arguing that this action is merely an improper attempt
by the Browns to re-litigate the foreclosure action filed and
decided against them in state court.
More specifically, Carlisle
argues, inter alia, that the claims against it are barred by the
doctrine of res judicata because “many of the issues crucial to
Plaintiff’s [sic] claims against Carlisle are res judicata as
determined by the November 12, 2014 final judgment rendered in
case number 08-CVE-12-1598 (The State Foreclosure Action).”
(Doc. 54 at 4).
12
There is both a federal law standard and a state law
standard for issue preclusion, also known as collateral estoppel,
and these standards share several common elements.
Under the
federal standard, the party claiming preclusion must demonstrate:
(1) the precise issue raised in the present case must
have been raised and actually litigated in the prior
proceeding; (2) determination of the issue must have been
necessary to the outcome of the prior proceeding; (3) the
prior proceeding must have resulted in a final judgment
on the merits; and (4) the party against whom estoppel is
sought must have had a full and fair opportunity to
litigate the issue in the prior proceeding.
Kosinski v. Commissioner of Internal Revenue, 541 F.3d 671, 675
(6th Cir. 2008), quoting United States v. Cinemark USA, Inc., 348
F.3d 569, 583 (6th Cir. 2003).
Similarly, issue preclusion under
the Ohio standard applies if:
1) the fact or issue was actually litigated in the prior
action; 2) the court actually determined the fact or
issue in question; 3) the party against whom issue
preclusion is asserted was a party, or in privity with a
party, to the prior action.
Osborn v. Knights of Columbus, 401 F. Supp.2d 830, 832-33 (N.D.
Ohio 2005).
The third element of issue preclusion under Ohio law
is required only if “a party seeks to use issue preclusion
offensively” in the litigation.
Id., citing Chambers v. Ohio
Dep’t of Human Services, 145 F.3d 793, 801 n.14 (6th Cir. 1998).
Under both standards, Carlisle is able to establish that
issue preclusion bars Mr. Brown’s claims against it in this case.
Mr. Brown’s FDCPA claim (count one) raises issues as to whether
Carlisle’s clients were proper party plaintiffs, as opposed to
debt collectors, and whether Carlisle made misleading
representations with respect to the mortgage and note.
In his
fraud claim (count two), Mr. Brown alleges that Carlisle
fraudulently back-dated an assignment of the mortgage and note,
and that it fraudulently brought the foreclosure action on behalf
13
of debt collectors.
Mr. Brown’s slander of title claim (count
three) challenges the validity of the mortgage assignments.
Finally, in his slander of credit claim (count four), Mr. Brown
raises an issue concerning allegedly misleading and deceptive
debt collection practices.
As set forth by Carlisle, all of
these issues were raised and resolved in the judgment decree and
order of foreclosure issued by the Delaware County Court of
Common Pleas on November 12, 2014.
In the judgment decree and order of foreclosure, the
findings of the Court of Common Pleas included the following with
respect to CitiGroup and Kondaur (collectively, “Carlisle’s
clients”):
•
that Carlisle’s clients provided clear and accurate
disclosures and performed all of the conditions
precedent required to be performed prior to the
acceleration of the mortgage and initiation of
foreclosure proceedings;
•
that the accounting of the amount owed was accurate
and the interest rate was proper;
•
that the mortgage was assigned to CitiGroup on
December 1, 2008 and officially recorded;
•
that the mortgage was further assigned to Kondaur
on November 9, 2009 and officially recorded;
•
that a judgment of foreclosure against the Browns
was warranted;
•
that Carlisle’s clients did not: breach the
mortgage contract or any contract, commit fraud,
violate federal laws or regulations with regard to
the mortgage, engage in willful or wanton
misconduct in their handling of the loan,
misrepresent any material facts regarding the loan
relationship, violate the Ohio Consumer Sales
Practices Act, use inaccurate or misleading terms
with regard to the loan, violate a fiduciary duty
owed to the Browns, breach any contractual
obligations of good faith, charge excessive
forfeiture/penalty payments above market rates with
14
respect to the loan, engage in unfair methods of
commerce, or make any false representation orally
or in writing to the Browns.
See Joint Decree and Order of Foreclosure, Case No. 08 CV E 12
1598 (Nov. 12, 2014).
The determination of those issues was
necessary to resolve the judgment decree and order of
foreclosure.
If, for example, there been improper debt
collection practices, fraud, or improper assignments, those
issues necessarily would have impacted the state court’s
decision.
Further, under Ohio law, the decree of foreclosure is
a final judgment for res judicata purposes.
B.R. 190, 194 (S.D. Ohio 1995).
See In re Hoff, 187
Finally, Mr. Brown had a full
and fair opportunity to litigate these issues in the Court of
Common Pleas.
Here, Carlisle does not need to demonstrate
mutuality of parties in the prior litigation because it seeks to
use issue preclusion defensively, rather than offensively.
Based
on the foregoing, the Court agrees that Mr. Brown’s claims
against Carlisle in the instant case are barred by res judicata.
In his memorandum in opposition to Carlisle’s motion for
summary judgment, Mr. Brown argues against this conclusion.
(Doc. 58).
First, Mr. Brown appears to argue that res judicata
does not bar his claims because he filed a timely appeal of the
Court of Common Pleas decision.
See 15 CAE 02 0014.
Mr. Brown
attaches a February 17, 2015 notice of appeal as an exhibit to
his memorandum in opposition, which reflects that the Browns are
appealing the judgment confirming the sale and distribution of
sale proceeds issued on February 11, 2015.
Id., Ex. A.
Mr.
Brown also states that “Res Judicata and Claim preclusion are not
applicable to the FDCPA complaint because the Plaintiffs Brown
have not previously litigated any federal law claims” against
Carlisle.
Id. at 4.
Finally, Mr. Brown argues that “succeeding
in or a final judgment of a foreclosure does not preclude
15
Plaintiffs from pursuing FDCPA complaints against a law firm.”
Id.
In reply, Carlisle argues that “the Browns have waived the
right (by failure to timely appeal) the validity and findings of
the Judgment Entry of Foreclosure and are instead appealing the
Confirmation of Sale order and questioning whether the execution
of that Judgment Entry of Foreclosure....”
(Doc. 59 at 4).
Carlisle argues that the judgment entry of foreclosure and
confirmation of sale order “are separate and distinct actions,
both of which constitute final appealable orders once entered.”
Id.
Finally, Carlisle argues that no evidence has been offered
in opposition to its motion for summary judgment.
Thus, Carlisle
urges this Court to grant judgment in its favor.
Irrespective of whether Mr. Brown waived his appeal of the
judgment entry of foreclosure, “the fact of a pending appeal does
not impact the res judicata effect of the judgment.”
Chandler v.
Carroll, 2012 WL 252014, at *3 (D. Vt. Jan. 26, 2012), citing
Chariot Plastics, Inc. v. United States, 28 F. Supp.2d 874, 881
(S.D.N.Y. 1998)(noting that “res judicata and collateral estoppel
apply once final judgment is entered in a case, even while an
appeal from that judgment is pending”) (citation omitted).
As to
Mr. Brown’s claim that res judicata should not apply because
Carlisle was counsel in the state court litigation, as opposed to
a party, the Court finds that, as set forth above, mutuality of
parties is required only if issue preclusion is being used
offensively.
Moreover, even if mutuality of parties were
required, that element would be satisfied in this case.
As the
Court of Appeals has noted, “it is well settled that a principalagent relationship satisfies the privity requirement of res
judicata where the claims alleged are within the scope of the
agency relationship.”
ABS Indus., Inc. v. Fifth Third Bank, 2009
WL 1811915, at *5 (6th Cir. June 25, 2009); but see Charvat v.
16
GVN Michigan, Inc., 2010 WL 2706163, at *5 (Ohio Ct. App. 10th
Dist. July 8, 2010)(stating that the cases cited in ABS
Industries “suggest the rule that a principal-agent relationship
satisfies privity for purposes of res judicata is fact-based and
case-specific”).
Because “the relationship between client and
attorney . . . is a quintessential principal-agent relationship,”
CIR v. Banks, 543 U.S. 426, 436 (2005) (citations omitted),
privity in the context of res judicata is satisfied in these
circumstances.
Further, although Carlisle was not a party to the
state court litigation, the Court of Common Pleas made various
rulings which determined that the actions taken by Carlisle on
behalf of its clients were proper.
In addition to the rulings
set forth above, the Delaware Court of Common Pleas also found
that Carlisle did not violate Rule 11 in that action.
Ex. B).
(Doc. 54,
Because issue preclusion bars Mr. Brown’s claims in this
case, Carlisle is entitled to summary judgment.
See, e.g., Byrd
v. Homecomings Finan. Network, 407 F. Supp.2d 937, 944-45 (N.D.
Ill. 2005)(finding FDCPA claim barred by res judicata where the
allegations stem from the same group of facts determined by the
state court foreclosure).
In light of this Court’s determination
that Mr. Brown’s claims against Carlisle in the instant case are
barred by res judicata, the Court need not consider the
additional arguments raised in Carlisle’s motion for summary
judgment.
Carlisle’s motion for summary judgment will be granted
as to Mr. Brown’s claims.
(Doc. 54).
V. Conclusion
For the reasons set forth above, Carlisle’s summary judgment
is granted as to the claims brought by Mr. Brown only.
54).
(Doc.
Further, the motion for leave to file an amended complaint
and injunction or motion to stay is denied as moot.
(Doc. 60).
Finally, to the extent that it is brought by Mr. Brown only, the
amended motion for leave to file an amended complaint and
17
injunction or motion to stay is denied.
(Doc. 61).
/s/ Terence P. Kemp
United States Magistrate Judge
18
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