Ashley v. Rushmore Loan Management Services LLC et al

Filing 10

ORDER: The Court DENIES Defendants' Joint Motion to Dismiss [ECF No. 5 ] with prejudice to the extent it seeks dismissal based on the Younger and Colorado River abstention doctrines, and without prejudice to the extent it seeks dismissal of each of Plaintiff's causes of action under Rule 12(b)6) for failure to state a plausible claim. The Court DIRECTS the parties to brief the issue of whether a stay is proper and to submit these briefs within thirty days of the date of this Order. Signed by the Honorable R. Bryan Harwell on 3/27/2017. (hcic, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
FLORENCE DIVISION
Wayne Ashley,

)
)
Plaintiff,
)
)
v.
)
)
Rushmore Loan Management Services, LLC )
and U.S. Bank National Association,
)
)
Defendants.
)
____________________________________)

Civil Action No.: 4:16-cv-01969-RBH

ORDER

This matter is before the Court for resolution of Defendants’ Joint Motion to Dismiss. See ECF
No. 5. The Court denies the motion for the reasons herein.1
Background
On June 16, 2016, Plaintiff Wayne Ashley filed this action in this Court against Rushmore Loan
Management Services, LLC (“Rushmore”) and U.S. Bank National Association (“U.S. Bank”)
(collectively, “Defendants”) asserting various claims related to his efforts at loan modification of his
residential mortgage. See ECF No. 1. The allegations in Plaintiff’s complaint indicate that U.S. Bank
is the mortgage holder and that Rushmore acts as the mortgage servicer as well as debt collector. See
id. at ¶¶ 5-9, 11, 21. He alleges Defendants intentionally delayed his requests for a loan modification,
never actually intended to provide him an affordable loan modification, wrongfully applied funds from
a mortgage assistance program, and never notified him of a pending foreclosure action. Id. at ¶¶ 10-46.
Plaintiff asserts two federal causes of action and seven state causes of action, specifically: (1) violation
of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605 and 12 C.F.R. § 1024.41; (2) violation

1

Pursuant to Local Civil Rule 7.08, the district court may decide motions without a hearing. The Court has
reviewed the parties’ filings and determined a hearing in this matter is unnecessary.

of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692; (3) violation of the South Carolina Unfair
Trade Practices Act, S.C. Code Ann. §§ 39-5-10 et seq.; (4) fraud; (5) negligence; (6) negligent training
and supervision; (7) reckless and wanton training and supervision; (8) breach of contract; and (9)
intentional infliction of emotional distress.2 Id. at ¶¶ 47-104. Significantly, Plaintiff seeks monetary
damages, costs, and attorney’s fees, but does not seek declaratory, equitable, or other discretionary
relief. See id. at pp. 22-23 (prayer for relief).
On July 14, 2016, Defendants filed a joint motion to dismiss arguing the Court should abstain
from exercising jurisdiction over this action pursuant to both Younger v. Harris, 401 U.S. 37 (1971),
and Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976), because there
is an ongoing foreclosure proceeding in state court. See ECF No. 5. Defendants have attached various
exhibits to their motion to dismiss, including copies of court documents from the state foreclosure
proceeding, which was filed prior to the instant federal action. See ECF Nos. 5-2 through 5-17. These
documents indicate the following chronology of events:
!

December 13, 2013: U.S. Bank filed a foreclosure action3 against Plaintiff in the
Court of Common Pleas for Florence County, South Carolina.
See ECF No. 5-4.

!

July 10, 2014:

After Plaintiff failed to respond, the state court held a foreclosure
hearing and entered a judgment of foreclosure and sale. See ECF
No. 5-8.

!

July 25, 2014:

Plaintiff appeared and filed a motion to vacate the judgment of

2

Plaintiff asserts all nine claims against Rushmore, and eight claims (excluding violation of the Fair Debt
Collection Practices Act) against U.S. Bank. Compare ECF No. 1 at ¶¶ 47-104 (claims against Rushmore), with id.
at ¶¶ 47-55, 61-104 (claims against U.S. Bank).

3

Rushmore is not a party to the state foreclosure action.

2

foreclosure and sale.4 See ECF No. 5-10.
!

January 12, 2015:

The state court granted Plaintiff’s motion to vacate. See ECF
No. 5-14.

!

February 6, 2015:

Plaintiff filed an answer to the foreclosure complaint. See ECF
Nos. 5-15 & 8-1.

Besides reviewing these state court filings attached to Defendants’ motion to dismiss, the Court has also
reviewed the Florence County Public Index and takes judicial notice5 that the foreclosure action is still
pending in state court.6
Alternatively, if the Court declines to abstain from exercising jurisdiction, Defendants seek
dismissal of each of Plaintiff’s causes of action under Federal Rule of Civil Procedure 12(b)(6) for
failure to state a plausible claim. See ECF No. 5. Plaintiff filed a response in opposition on August 1,
2016, and Defendants filed a reply on August 11, 2016. See ECF Nos. 8 & 9.
Discussion
Defendants contend the Court should dismiss this action on abstention grounds under Younger
and Colorado River because there is an ongoing foreclosure proceeding in state court. ECF No. 5-1 at
10-15.
The Court has subject matter jurisdiction over Plaintiffs’ claims for damages pursuant to 28

4

Plaintiff claimed in the motion to vacate (and in his instant federal complaint) that he did not learn of the
foreclosure action until July 22, 2014. See ECF No. 5-8 at ¶ 10; ECF No. 1 at ¶ 18.

5

The Court may take judicial notice of the records from the state foreclosure action. See Colonial Penn Ins.
Co. v. Coil, 887 F.2d 1236, 1239 (4th Cir. 1989) (“[F]ederal courts, in appropriate circumstances, may take notice
of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct
relation to matters at issue.”).

6

The Florence County Public Index indicates a motion for a continuance in the foreclosure action was granted
on October 5, 2016, and a notice of hearing was entered on March 17, 2017. See U.S. Bank Nat’l Ass’n v. Wayne
A. Ashley et al., Civ. Action No. 2013-CP-21-3207, available at http://publicindex.sccourts.org/Florence/PublicIndex
(last visited Mar. 27, 2017).

3

U.S.C. §§ 1331 and 1332. See Compl. at ¶ 2. “District courts ordinarily have a strict duty to exercise
the jurisdiction that is conferred on them by Congress.” Myles Lumber Co. v. CNA Fin. Corp., 233 F.3d
821, 823 (4th Cir. 2000). “[A]bstention from the exercise of federal jurisdiction is the exception, not
the rule. The obligation to hear cases properly before the district court is virtually unflagging.”
Richmond, Fredericksburg & Potomac R. Co. v. Forst, 4 F.3d 244, 251 (4th Cir. 1993) (internal
quotation marks and citation omitted). “Abstention is not in order simply because a pending state-court
proceeding involves the same subject matter.” Sprint Commc’ns, Inc. v. Jacobs, 134 S. Ct. 584, 588
(2013). “Abstention may be justified only in the exceptional circumstances where the order to the
parties to repair to the state court would clearly serve an important countervailing interest.” Forst, 4
F.3d at 251 (internal quotation marks omitted).
“The Supreme Court has identified various circumstances where abstention may be
warranted . . . .” Ackerman v. ExxonMobil Corp., 734 F.3d 237, 248 (4th Cir. 2013); see generally
Skipper v. Hambleton Meadows Architectural Review Comm., 996 F. Supp. 478, 481-81 (D. Md. 1998)
(summarizing the categories of abstention). At issue in this case are the forms of abstention recognized
in Younger v. Harris, 401 U.S. 37 (1971), and Colorado River Water Conservation District v. United
States, 424 U.S. 800 (1976). Younger abstention applies to three “exceptional” categories of cases: (1)
“state criminal prosecutions,” (2) “civil enforcement proceedings,” and (3) “civil proceedings involving
certain orders that are uniquely in furtherance of the state courts’ ability to perform their judicial
functions.” Sprint, 134 S. Ct. at 588.7 Colorado River abstention “permits federal courts, under
exceptional circumstances, to refrain from exercising jurisdiction in deference to pending, parallel state
7

The Supreme Court in Sprint clarified the limited scope of Younger, stating, “W e have not applied Younger
outside these three ‘exceptional’ categories, and today hold . . . that they define Younger’s scope.” 134 S. Ct. at 591;
see id. at 593-94 (“In short, to guide other federal courts, we today clarify and affirm that Younger extends to the
three “exceptional circumstances” . . . , but no further.”).

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proceedings . . . in cases where ‘considerations of wise judicial administration, giving regard to
conservation of judicial resources and comprehensive disposition of litigation’ clearly favor abstention.”
Ackerman, 734 F.3d at 247-48 (quoting Colorado River, 424 U.S. at 817).
In Quackenbush v. Allstate Insurance Co., the Supreme Court clarified that a federal court can
stay an action for damages based on abstention principles but cannot dismiss (or remand) an action for
damages:
We have thus held that in cases where the relief being sought is
equitable in nature or otherwise discretionary, federal courts not only
have the power to stay the action based on abstention principles, but
can also, in otherwise appropriate circumstances, decline to exercise
jurisdiction altogether by either dismissing the suit or remanding it to
state court. By contrast, while we have held that federal courts may
stay actions for damages based on abstention principles, we have
not held that those principles support the outright dismissal or
remand of damages actions.
....
In those cases in which we have applied traditional abstention
principles to damages actions, we have only permitted a federal
court to withhold action until the state proceedings have concluded;
that is, we have permitted federal courts applying abstention
principles in damages actions to enter a stay, but we have not
permitted them to dismiss the action altogether[.]
517 U.S. 706, 721, 730 (1996) (internal quotation marks and citation omitted) (emphases added). The
Fourth Circuit has strictly adhered to Quackenbush, consistently ruled that a district court applying
abstention principles can only stay—not dismiss or remand—an action for monetary damages, and
found reversible error where a district court dismissed or remanded actions or claims for damages. See,
e.g., Nivens v. Gilchrist, 444 F.3d 237, 247-48 (4th Cir. 2006); Myles Lumber Co. v. CNA Fin. Corp.,
233 F.3d 821, 823-25 (4th Cir. 2000); Johnson v. Collins Entm’t Co., 199 F.3d 710, 727-29 (4th Cir.
1999); Clowdis v. Silverman, 666 F. App’x 267, 270 (4th Cir. Nov. 22, 2016) (unpublished); Beam v.
5

Tatum, 299 F. App’x 243, 244-48 (4th Cir. 2008) (unpublished); I-77 Props., LLC v. Fairfield Cty., 288
F. App’x 108, 110-11 (4th Cir. 2008) (unpublished); Fourth Quarter Props. IV, Inc. v. City of Concord,
127 F. App’x 648, 654-57 (4th Cir. 2005) (unpublished); Johnson v. City of Chesapeake, 205 F.3d
1333, 2000 WL 219756, at *1-2 (4th Cir. 2000) (unpublished).8 Significantly, another court within this
circuit has recently applied Quackenbush where there were pending foreclosure actions in state court
and ruled it could not dismiss the federal actions seeking damages. See Lindsay v. Rushmore Loan
Mgmt., Servs., LLC, No. PWG-15-1031, 2017 WL 167832, at *1, 4 (D. Md. Jan. 17, 2017); Tucker v.
Specialized Loan Servicing, LLC, 83 F. Supp. 3d 635, 647 (D. Md. 2015).
In his federal complaint, Plaintiff seeks only monetary damages, does not seek to enjoin the
foreclosure process, and does not ask for equitable, declaratory, or discretionary relief. See ECF No.
1 at pp. 22-23 (prayer for relief). Plaintiff himself acknowledges this fact in his response in opposition
to Defendants’ motion. See ECF No. 8 at 5 (“Plaintiff is not seeking an injunction in the underlying
foreclosure action . . . . [T]his action does not even seek equitable relief relating to the pending
foreclosure.”). Although Defendants address the substantive law pertaining to the Younger and
Colorado River abstention doctrines, they fail to recognize the Court does not have the discretion to
dismiss this damages-only action. Given the unequivocal language of Quackenbush,9 the Court must
deny Defendants’ motion to the extent it seeks dismissal based on the Younger and Colorado River

8

Likewise, courts in this district strictly follow Quackenbush. See, e.g., Gracious Living Corp. v. Colucci
& Gallaher, PC, __ F. Supp. 3d __, __, 2016 W L 6102248, at *6 (D.S.C. Oct. 19, 2016); Cramer v. Walley, No.
5:14-cv-03857-JMC, 2015 W L 3968155, at *7 (D.S.C. June 30, 2015); Valencia v. Doe Officers, No.
6:13-cv-00634-MGL-JDA, 2014 W L 3687422, at *4 (D.S.C. July 23, 2014); Wirtz v. Oconee Cty. Sheriff’s Dep’t,
No. 8:13-cv-01041-RMG, 2013 W L 5372795, at *5 (D.S.C. Sept. 24, 2013); Stewart v. Beaufort Cty., 481 F. Supp.
2d 483, 494-96 (D.S.C. 2007).

9

Interestingly, in their motion to dismiss, Defendants cite Quackenbush (in passing reference) but do not
account for the clear language regarding a federal court’s inability to dismiss an action for damages based on
abstention. See ECF No. 5-1 at 10.

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abstention doctrines.
The remaining question is whether the Court should stay this action, which is permissible under
Quackenbush.10 However, Defendants have not moved for a stay, and the Court will not decide whether
a stay is appropriate without first affording the parties an opportunity to brief this issue. The Court
directs the parties to brief the issue of whether a stay is proper and to submit these briefs within
thirty days of the date of this Order.11 Briefly, the Court notes the state foreclosure action concerns
the ownership of the property at issue. Plaintiff does not seek in this federal action ownership of the
property; he seeks only damages. But it is unclear whether the findings in this federal case may have
some effect on the state foreclosure proceedings or vice versa because, in his answer to the state
foreclosure action, Plaintiff alleges as affirmative defenses unclean hands, laches, and waiver regarding
the “loan modification” process by the loan servicer Rushmore. See ECF No. 8-1 at ¶¶ 18-20. This may
implicate Plaintiff’s claim under the Real Estate Settlement Procedures Act in federal court.
Furthermore, the Court at this time will deny Defendants’ motion to dismiss Plaintiff’s claims
under Rule 12(b)(6) without prejudice to refiling such a motion at a later date. The Court does note,
however, that it has reviewed Plaintiff’s claims and believes many may survive a 12(b)(6) motion to

10

Although the parties have not addressed the propriety of a stay, the Court may raise this issue sua sponte.
See generally Maryland v. Universal Elections, Inc., 729 F.3d 370, 379 (4th Cir. 2013) (“[T]he power to stay
proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket
with economy of time and effort for itself, for counsel, and for litigants.” (alteration in original) (quoting Landis v.
N. Am. Co., 299 U.S. 248, 254 (1936))).

11

As mentioned above, another court within this circuit has discussed stays in the same context— where a
foreclosure action was pending in state court— and analyzed the propriety of a stay. See Lindsay v. Rushmore Loan
Mgmt., Servs., LLC, No. PW G-15-1031, 2017 W L 167832 (D. Md. Jan. 17, 2017); Tucker v. Specialized Loan
Servicing, LLC, 83 F. Supp. 3d 635 (D. Md. 2015) (citing Brumfiel v. U.S. Bank, N.A., No. 14-CV-2453-W JM, 2014
W L 7005253 (D. Colo. Dec. 11, 2014); Carrier v. Bank of Am., N.A., No. CIV. 12-104 RMB/JS, 2014 W L 356219
(D.N.J. Jan. 31, 2014), aff’d, 592 F. App’x 135 (3d Cir. 2015); Lech v. Third Fed. Sav. & Loan Ass’n of Cleveland,
No. 2:13-CV-518, 2013 W L 6843062 (S.D. Ohio Dec. 27, 2013), adopted by, 2014 W L 184402 (S.D. Ohio Jan. 14,
2014)).

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dismiss.12
Conclusion
For the foregoing reasons, the Court DENIES Defendants’ Joint Motion to Dismiss [ECF No.
5] with prejudice to the extent it seeks dismissal based on the Younger and Colorado River abstention
doctrines, and without prejudice to the extent it seeks dismissal of each of Plaintiff’s causes of action
under Rule 12(b)6) for failure to state a plausible claim. The Court DIRECTS the parties to brief the
issue of whether a stay is proper and to submit these briefs within thirty days of the date of this Order.
IT IS SO ORDERED.

Florence, South Carolina
March 27, 2017

s/ R. Bryan Harwell
R. Bryan Harwell
United States District Judge

12

Additionally, the Court notes it is unclear whether U.S. Bank would allow Plaintiff to assert these claims
in the state foreclosure action as counterclaims. Plaintiff has submitted a copy of his answer in the foreclosure action,
and it does not indicate he has raised any counterclaims. See ECF No. 8-1.

8