Nooh v. Recontrust Company, N.A. Substitute Trustee et al
Filing
19
Order Correcting the Docket, Order Denying the Motions to Dismiss Filed by Various Defendants, Order of Dismissal, Order Certifying Appeal Not Taken in Good Faith, and Order Denying Leave to Proceed In Forma Pauperis on Appeal. Signed by Judge S. Thomas Anderson on 3/29/12. (Anderson, S.)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
ABDUL NOOH,
Plaintiff,
vs.
RECONTRUST CO., N.A., et al.,
Defendant.
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No. 11-2506-STA-dkv
ORDER CORRECTING THE DOCKET
ORDER DENYING THE MOTIONS TO DISMISS FILED BY VARIOUS DEFENDANTS
ORDER OF DISMISSAL
ORDER CERTIFYING APPEAL NOT TAKEN IN GOOD FAITH
AND
ORDER DENYING LEAVE TO PROCEED IN FORMA PAUPERIS ON APPEAL
On June 20, 2011, Plaintiff Abdul Nooh, a resident of
Cordova, Tennessee, filed a pro se Complaint to Restrict and Prohibit
Foreclosure, Motion to Set Aside Foreclosure & For Damages and Demand
for Trial, accompanied by a motion seeking leave to proceed in forma
pauperis. (ECF Nos. 1 & 2.) The Court issued an order on June 21,
2011, granting leave to proceed in forma pauperis. (ECF No. 3.) The
Clerk
shall
record
the
defendants
as
ReconTrust
Company,
N.A.
(“ReconTrust”), which was sued as Recontrust Company, N.A.; Mortgage
Electronic Registrations System, Inc. (“MERS”), which was sued as
Mortgage Electronic Registration System; CIT Group/Consumer Finance,
Inc.; Earnest B. Williams, IV; The Bank of New York Mellon f/k/a Bank
of New York, as trustee for the Certificateholders CWABS, Inc.;
Asset-Backed Securities, Series 2006-BC3; BAC Home Loans Servicing,
L.P.; Discover Bank; the Internal Revenue Service (“IRS”); Arrow
Financial Services; and U.S. Bank National Association (“U.S. Bank”),
which was sued as US Bank Home Mortgage.1
This is an action to set aside a non-judicial foreclosure.
The Complaint asserts claims for fraud and misrepresentation (Compl.
¶¶ 28-36, ECF No. 1), wrongful foreclosure (id. ¶¶ 37-42), slander
of title (id. ¶¶ 43-48), unlawful interference with possessory
interest (id. ¶¶ 49-56), and conflict of interest (id. ¶¶ 57-65). The
Complaint also asserts that “Federal Reserve Notes are not money by
law” (id., pp. 18-19 (emphasis omitted)) and that Defendants lack
standing to foreclose (id. ¶¶ 66-77). The Complaint seeks declaratory
and injunctive relief and money damages. (Id. pp. 22-23.)
On October 25, 2011, Defendant U.S. Bank filed a motion to
dismiss the complaint for want of subject-matter jurisdiction and
failure properly to effect service of process, pursuant to Federal
Rules of Civil Procedure 12(b)(1) & (5). (ECF Nos. 10 & 11.) On
November 1, 2011, Defendants ReconTrust, MERS, and The Bank of New
York Mellon, Bank of America, N.A., successor by merger to BAC Home
Loans Servicing, LP, filed a motion to dismiss pursuant to Federal
1
The Clerk is directed to correct the docket to reflect the legal name
of Defendants ReconTrust, MERS, and U.S. Bank, which was taken from their motions
to dismiss. (ECF No. 10 at 1; ECF No. 13 at 1.)
The Complaint also purports to sue “John and Jane Does 1-20” (ECF No.
1 at 1), but service of process cannot be made on a fictitious party. The filing
of a complaint against “John Doe” defendants does not toll the running of the
statute of limitation against those parties. See Cox v. Treadway, 75 F.3d 230, 240
(6th Cir. 1996); Bufalino v. Mich. Bell Tel. Co., 404 F.2d 1023, 1028 (6th Cir.
1968). Thus, if Plaintiff seeks to sue any other individual or entity, he must
identify the defendant and file a new suit within the applicable statute of
limitations.
2
Rule of Civil Procedure 4(m). (ECF No. 13.) Plaintiff has not
responded to these motions.
The motions to dismiss pursuant to Rules 12(b)(5) and 4(m)
are meritless. Pursuant to Local Rule 4.1(a), service will not issue
on a pro se complaint where a plaintiff has been granted leave to
proceed in forma pauperis until the complaint has been screened under
28 U.S.C. § 1915(e)(2). The Clerk is authorized to issue summonses
to pro se litigants only after that review is complete and an order
of the Court issues. Because the Court had not screened the case,
Plaintiff has good cause for failing to serve Defendants. The motions
to dismiss pursuant to Rules 4(m) and 12(b)(5) are DENIED. This order
will constitute the Court’s screening.2
The
Court
is
required
to
screen
in
forma
pauperis
complaints and to dismiss any complaint, or any portion thereof, if
the action —
(i)
is frivolous or malicious;
(ii)
fails to state a claim on which relief may be
granted; or
(iii)
seeks monetary relief against a defendant who is
immune from such relief.
28 U.S.C. § 1915(e)(2).
In assessing whether the complaint in this case states a
claim on which relief may be granted, the standards under Rule
12(b)(6) of the Federal Rules of Civil Procedure, as stated in
2
Before addressing a dispositive motion, the Court ordinarily issues an
order directing a non-moving party who has failed to respond to show cause why the
motion should not be granted. It is unnecessary to do so in this case because the
action is appropriately dismissed sua sponte as to all parties for the reasons
stated infra. The remaining ground for U.S. Bank’s motion to dismiss is DENIED as
moot.
3
Ashcroft v. Iqbal, 556 U.S. 662, ___, 129 S. Ct. 1937, 1949-50
(2009), and in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-57
(2007), are applied. Hill v. Lappin, 630 F.3d 468, 470-71 (6th Cir.
2010). “Accepting all well-pleaded allegations in the complaint as
true,
the
Court
‘consider[s]
the
factual
allegations
in
[the]
complaint to determine if they plausibly suggest an entitlement to
relief.’” Williams v. Curtin, 631 F.3d 380, 383 (6th Cir. 2011)
(quoting Iqbal, 556 U.S. at ___, 129 S. Ct. at 1951) (alteration in
original). “[P]leadings that . . . are no more than conclusions[] are
not entitled to the assumption of truth. While legal conclusions can
provide the framework of a complaint, they must be supported by
factual allegations.” Iqbal, 556 U.S. at ___, 129 S. Ct. at 1950; see
also Twombly, 550 U.S. at 555 n.3 (“Rule 8(a)(2) still requires a
‘showing,’ rather than a blanket assertion, of entitlement to relief.
Without some factual allegation in the complaint, it is hard to see
how a claimant could satisfy the requirement of providing not only
‘fair notice’ of the nature of the claim, but also ‘grounds’ on which
the claim rests.”).
“A complaint can be frivolous either factually or legally.
Any complaint that is legally frivolous would ipso facto fail to
state a claim upon which relief can be granted.” Hill, 630 F.3d at
470 (internal citation omitted).
Whether a complaint is factually frivolous under §§
1915A(b)(1) and 1915(e)(2)(B)(i) is a separate issue from
whether it fails to state a claim for relief. Statutes
allowing a complaint to be dismissed as frivolous give
judges not only the authority to dismiss a claim based on
an indisputably meritless legal theory, but also the
unusual power to pierce the veil of the complaint’s factual
allegations and dismiss those claims whose factual
contentions are clearly baseless. Unlike a dismissal for
4
failure to state a claim, where a judge must accept all
factual allegations as true, a judge does not have to
accept “fantastic or delusional” factual allegations as
true in prisoner complaints that are reviewed for
frivolousness.
Id. at 471 (internal citations & quotation marks omitted).
“Pro se complaints are to be held to less stringent
standards than formal pleadings drafted by lawyers, and should
therefore
be
liberally
construed.”
Williams,
631
F.3d
at
383
(internal quotation marks omitted). Pro se litigants, however, are
not exempt from the requirements of the Federal Rules of Civil
Procedure. Wells v. Brown, 891 F.2d 591, 594 (6th Cir. 1989), reh’g
denied (Jan. 19, 1990); see also Brown v. Matauszak, 415 F. App’x
608, 613 (6th Cir. 2011) (“[A] court cannot create a claim which [a
plaintiff] has not spelled out in his pleading”) (internal quotation
marks omitted); Payne v. Secretary of Treas., 73 F. App’x 836, 837
(6th Cir. 2003) (affirming sua sponte dismissal of complaint pursuant
to Fed. R. Civ. P. 8(a)(2) and stating, “[n]either this court nor the
district court is required to create Payne’s claim for her”); cf.
Pliler v. Ford, 542 U.S. 225, 231, 124 S. Ct. 2441, 2446, 159 L. Ed.
2d 338 (2004) (“District judges have no obligation to act as counsel
or paralegal to pro se litigants.”); Young Bok Song v. Gipson, 423
F. App’x 506, 510 (6th Cir. 2011) (“[W]e decline to affirmatively
require courts to ferret out the strongest cause of action on behalf
of pro se litigants. Not only would that duty be overly burdensome,
it would transform the courts from neutral arbiters of disputes into
advocates for a particular party. While courts are properly charged
with
protecting
the
rights
of
all
who
come
before
it,
that
responsibility does not encompass advising litigants as to what legal
5
theories they should pursue.”), cert. denied, ___ U.S. ___, 132 S.
Ct. 461 (2011).
The first issue to be considered is whether the Court has
subject-matter jurisdiction over this action. “Federal courts are
courts
of
limited
jurisdiction.
They
possess
only
that
power
authorized by Constitution and statute, which is not to be expanded
by judicial decree. It is to be presumed that a cause lies outside
this
limited
jurisdiction,
and
the
burden
of
establishing
the
contrary rests upon the party asserting jurisdiction.”3 Federal
courts are obliged to act sua sponte whenever a question about
jurisdiction arises.4 Under Rule 12(h)(3) of the Federal Rules of
Civil Procedure, “[i]f the court determines at any time that it lacks
subject-matter jurisdiction, the court must dismiss the action.”
The Complaint’s jurisdictional allegations are as follows:
The United States District Court for the WESTERN DISTRICT
OF TENNESSEE has jurisdiction based on “diversity” pursuant
to The United States Constitution, Article III, § 2 and 28
U.S.C. § 1331. This Court has jurisdiction over this action
3
Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 114 S. Ct. 1673, 128
L. Ed 2d 391 (1994) (citations omitted); see also Bender v. Williamsport Area Sch.
Dist., 475 U.S. 534, 541, 106 S. Ct. 1326, 1331, 89 L. Ed. 2d 501 (1986) (“Federal
courts are not courts of general jurisdiction; they have only the power that is
authorized by Article III of the Constitution and the statutes enacted by Congress
pursuant thereto.”); Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxite de
Guinee, 456 U.S. 694, 701, 102 S. Ct. 2099, 2104, 72 L. Ed. 2d 492 (1982) (“Federal
courts are courts of limited jurisdiction. The character of the controversies over
which federal judicial authority may extend are delineated in Art. III, § 2, cl.
1. Jurisdiction of the lower federal courts is further limited to those subjects
encompassed within a statutory grant of jurisdiction.”); Owen Equip. & Erection Co.
v. Kroger, 437 U.S. 365, 374, 98 S. Ct. 2396, 2403, 57 L. Ed. 2d 274 (1978) (“It
is a fundamental precept that federal courts are courts of limited jurisdiction.”).
4
See, e.g., Ins. Corp. of Ireland, Ltd., 456 U.S. at 702, 102 S. Ct. at
2104 (“a court, including an appellate court, will raise lack of subject-matter
jurisdiction on its own motion”); St. Paul Mercury Indem. Co. v. Red Cab Co., 303
U.S. 283, 287 n.10, 58 S. Ct. 586, 589 n.10, 82 L. Ed. 845 (1938); Answers in
Genesis, Inc. v. Creation Ministries Int’l, Ltd., 556 F.3d 459, 465 (6th Cir. 2009)
(“federal courts have a duty to consider their subject matter jurisdiction in
regard to every case and may raise the issue sua sponte”).
6
pursuant to 28 U.S.C. § 2241 because Pending foreclosure
sales on Plaintiff’s real property is in violation of the
Constitution and laws of the United States. The Court has
jurisdiction under 28 U.S.C. § 1332, in that the amount in
controversy is in excess of $75,000.00. The Plaintiff also
invokes the jurisdiction of this Court pursuant to 28
U.S.C. § 1343(4) in that the Plaintiff seeks to redress
deprivation of rights guaranteed by both the Constitution
and federal statutes. Venue is appropriate in this District
under 28 U.S.C. § 1391(b)(1), (b)(2), and (c).
(Compl. ¶ 10.)
The Complaint does not adequately allege that there is
diversity jurisdiction. Diversity of citizenship means that the
action is between “citizens of different States.” 28 U.S.C. §
1332(a).5 A federal court has jurisdiction under § 1332 only if there
is “complete diversity between all plaintiffs and all defendants.”
Lincoln Prop. Co. v. Roche, 546 U.S. 81, 89, 126 S. Ct. 606, 613, 163
L. Ed. 2d 415 (2005) (citations omitted). “To establish diversity
jurisdiction, one must plead the citizenship of the corporate and
individual
parties.”6
Pursuant
to
28
U.S.C.
§
1332(c)(1),
“a
corporation shall be deemed to be a citizen of any State by which it
has been incorporated and of the State where it has its principal
place of business.”
5
The Complaint mis-cites 28 U.S.C. § 1331 as governing diversity
jurisdiction. That provision addresses federal-question jurisdiction.
6
Naartex Consulting Corp. v. Watt, 722 F.2d 779, 792 n.20 (D.C. Cir.
1983); see also Johnson v. New York, 315 F. App’x 394, 395 (3d Cir. 2009) (per
curiam); Sanders v. Clemco Indus., 823 F.2d 214, 216 (8th Cir. 1987) (complaint did
not properly allege diversity jurisdiction); Leys v. Lowe’s Home Ctrs., Inc., 601
F. Supp. 2d 908, 912-13 (W.D. Mich. 2009) (complaint and notice of removal did not
adequately establish diversity jurisdiction); Ellis v. Kaye-Kibbey, No. 1:07-cv910, 2008 WL 2696891, at *2-3 (W.D. Mich. July 1, 2008) (dismissing complaint for
failure adequately to allege facts establishing diversity of citizenship despite
conclusory allegation that diversity exists); 5 Charles Alan Wright & Arthur R.
Miller, Federal Practice and Procedure § 1208 (3d ed. 2004).
7
The Complaint does not allege the citizenship of the
parties. Plaintiff is a resident of Tennessee, and the Complaint does
not allege his citizenship. (See Compl. ¶ 1.) Although the Complaint
alleges the states in which certain defendants are incorporated,
there are no allegations about any Defendant’s principal place of
business. Moreover, the Complaint provides a Tennessee address for
the only individual defendant, Defendant Williams. (Id. ¶ 3.)
The presence of the IRS as a party also destroys diversity.
“[T]he law is clear that federal agencies, such as the IRS, are not
citizens of any state and cannot be sued in diversity.” Bingham v.
Crosby, No. 04-1246-T/AN, 2005 WL 1155731 (W.D. Tenn. Jan. 26, 2005);
see also Texas v. Interstate Commerce Comm’n, 258 U.S. 158, 160, 42
S. Ct. 261, 262, 66 L. Ed. 531 (1922); General Ry. Signal Co. v.
Corcoran, 921 F.2d 700, 703 (7th Cir. 1991); Weeks Constr., Inc. v.
Oglala Sioux Housing Auth., 797 F.2d 668, 676 n.10 (8th Cir. 1986).
The presence of a federal agency as a party destroys diversity. Frey
v. Envtl. Prot. Agency, 270 F.3d 1129, 1136-37 (7th Cir. 2001).
The other provisions cited by Plaintiff are insufficient
to confer federal jurisdiction. Twenty-eight U.S.C. § 2241, which
governs writs of habeas corpus, requires that the movant be “in
custody.” See 28 U.S.C. § 2241(c). Plaintiff is not a prisoner.
Plaintiff also cites 28 U.S.C. § 1343(4), which confers
federal jurisdiction over suits “[t]o recover damages or to secure
equitable or other relief under any Act of Congress providing for the
protection of civil rights, including the right to vote.” The Supreme
Court has rejected the position that § 1343(4) “encompass[es] all
federal statutory suits,” Chapman v. Houston Welfare Rights Org., 441
8
U.S. 618, 99 S. Ct. 1905, 1916, 60 L. Ed. 2d 508 (1979), or “allow[s]
jurisdiction without respect to the amount in controversy for claims
which in fact have nothing to do with ‘civil rights,’” id. at 620,
99 S. Ct. at 1917.
[T]he Congress that enacted § 1343(4) was primarily
concerned with providing jurisdiction for actions dealing
with the civil rights enumerated in 42 U.S.C. § 1985, and
most notably the right to vote. While the words of [that]
statute[] are not limited to the precise claims which
motivated their passage, it is inappropriate to read the
jurisdictional provisions to encompass new claims which
falls well outside the common understand of their terms.
Id. at 621, 99 S. Ct. at 1918. Thus, in Chapman the Supreme Court
held that the Social Security Act is not a statute providing for
“civil rights” within the meaning of § 1343(4). Id. at 623, 99 S. Ct.
at 1919.
Plaintiff’s Complaint does not allege a violation of any
federal
statute
providing
for
the
protection
of
civil
rights.
Although the Complaint contains scattered references to federal
statutes,
see,
e.g.,
Compl.
¶¶
16(a)
(promissory
note
“is
specifically governed by federal law,” without specifying the law),
18
(referring
to
“FDCA,”
without
citation
or
elaboration),
22
(“FDCA”), 53 (National Currency Act of 1863, 12 Stat. 665), 54-55
(“Public Law Volume 13 of the 39th Congress Stat 119-118”), 65
(“Section 23 page 106 of the 38th Congress”), 72 (“15 U S C sec.
1635(a)
and
“conducted
(b)
an
and
illegal
12
CFR
sec.
enterprise
226.23(b)”),7
within
the
74
(Defendants
meaning
of
RICO
statute”), and 75 (“civil RICO”), each of the claims asserted arises
7
The statutory provision is part of the Truth in Lending Act, 15 U.S.C.
§§ 1601 et seq.
9
under state law. See supra p. 2. Moreover, just as the Social
Security Act is not an “Act of Congress providing for the protection
of civil rights,” none of the federal statues cited in the Complaint
provides for the protection of civil rights. Therefore, there is no
jurisdiction under 28 U.S.C. § 1343(4).
It is also necessary to consider whether there might be
subject-matter jurisdiction under 28 U.S.C. § 1331, which provides
for federal jurisdiction over “all civil actions arising under the
Constitution, laws, or treaties of the United States.” Despite
scattered references to the United States Constitution, the Complaint
does
not
allege
a
constitutional
violation.
There
also
is
no
allegation that Defendants have violated any treaty.
The Complaint does not assert a claim arising under any
federal
statute.
Even
if
the
scattered
references
to
various
statutory provisions in the Complaint were construed as asserting
claims under those provisions, the Complaint does not assert a valid
federal claim. The only reference to the Truth in Lending Act
(“TILA”) occurs in a section that argues that Defendants lacked
standing to foreclose on Plaintiff’s real property. Paragraphs 71 and
72 of the Complaint provide as follows:
71. Defendant’s [sic] cause of action is barred in
whole or in part due to Defendant’s [sic] violation of
state and federal Truth in Lending Acts.
72. Said violation, in addition to the fact that
Plaintiff did not properly receive Notices Right to cancel,
constitute violation of 15 U S C sec. 1635(a) and (b) and
12 CFR sec. 226.23(b) and are thus a legal basis for and
legally extend Plaintiff right to exercise the remedy of
rescission.
10
(Compl. ¶¶ 71-72.)8 Plaintiff presumably means that Defendants did
not provide the notice required by § 1635(a).
Under
15
U.S.C.
§
1635(f),
“[a]n
obligor’s
right
of
rescission shall expire three years after the date of consummation
8
The statute provides as follows:
(a) Disclosure of obligor’s right to rescind
Except as otherwise provided in this section, in the case of any
consumer credit transaction (including opening or increasing the
credit limit for an open end credit plan) in which a security
interest, including any such interest arising by operation of law, is
or will be retained or acquired in any property which is used as the
principal dwelling of the person to whom credit is extended, the
obligor shall have the right to rescind the transaction until midnight
of the third business day following the consummation of the
transaction or the delivery of the information and rescission forms
required under this section together with a statement containing the
material disclosures required under this subchapter, whichever is
later, by notifying the creditor, in accordance with regulations of
the Board, of his intention to do so. The creditor shall clearly and
conspicuously disclose, in accordance with regulations of the Board,
to any obligor in a transaction subject to this section the rights of
the obligor under this section. The creditor shall also provide, in
accordance with regulations of the Board, appropriate forms for the
obligor to exercise his right to rescind any transaction subject to
this section.
(b) Return of money or property following rescission
When an obligor exercises his right to rescind under subsection
(a) of this section, he is not liable for any finance or other charge,
and any security interest given by the obligor, including any such
interest arising by operation of law, becomes void upon such a
rescission. Within 20 days after receipt of a notice of rescission,
the creditor shall return to the obligor any money or property given
as earnest money, downpayment, or otherwise, and shall take any action
necessary or appropriate to reflect the termination of any security
interest created under the transaction. If the creditor has delivered
any property to the obligor, the obligor may retain possession of it.
Upon the performance of the creditor’s obligations under this section,
the obligor shall tender the property to the creditor, except that if
return of the property in kind would be impracticable or inequitable,
the obligor shall tender its reasonable value. Tender shall be made at
the location of the property or at the residence of the obligor, at
the option of the obligor. If the creditor does not take possession of
the property within 20 days after tender by the obligor, ownership of
the property vests in the obligor without obligation on his part to
pay for it. The procedures prescribed by this subsection shall apply
except when otherwise ordered by a court.
15 U.S.C. §§ 1635(a)-(b).
11
of the transaction or upon the sale of the property, whichever occurs
first, notwithstanding the fact that the information and forms
required under this section or any other disclosures required under
this
part
have
not
been
delivered
to
the
obligor....”
This
limitations period is not subject to equitable tolling.9 A timebarred TILA violation is not a defense to a subsequent foreclosure.10
Therefore,
the
TILA
does
not
provide
a
basis
for
federal
jurisdiction.
The Complaint also refers, in passing, to the Racketeer
Influenced and Corrupt Organizations Act (“RICO”), 18 U.S. C. §§ 1961
et seq. These references come in the section of the Complaint
addressing Defendants’ standing to foreclose. Paragraphs 74 and 75
provide as follows:
74. On information and belief and given that the
consumer
credit
transaction
was
an
inter-temporal
transaction with multiple assignments as part of an
aggregation and the creation of a REMIC tranche itself a
part of a predetermined and identifiable CMO, all
defendants share in the illegal proceeds of the
transaction; conspired with each other to defraud the
Plaintiff out of the proceeds of the loan; acted in concert
to wrongfully deprive the Plaintiff of his residence; acted
in concert and conspiracy to essentially steal the
Plaintiffs [sic] home and/or convert the Plaintiff’s home
without providing Plaintiff reasonable equivalent value in
exchange; and conducted an illegal enterprise within the
meaning of RICO statute.
9
Famatiga v. Mortg. Elec. Registration Sys., Inc., No. 10-10937, 2011
WL 3320480, at *4 (E.D. Mich. Aug. 2, 2011) (“Courts in this district have
interpreted § 1635(f) to completely preclude equitable tolling to the statute of
limitations for a plaintiff’s right to rescind.”); Reed v. Duetsche Bank Nat’l
Trust Co., No. 1:09-cv-692, 2009 WL 3270481, at *4 (W.D. Mich. Oct. 5, 2009)
(collecting cases); Bolden v. Aames Funding Corp., No. 03-2827, 2005 WL 928592, at
*3 (W.D. Tenn. Feb. 25, 2002); see also Beach v. Ocwen Fed. Bank, 523 U.S. 410,
419, 118 S. Ct. 1408, 1413, 140 L. Ed. 2d 566 (1998) (TILA “permits no federal
right to rescind, defensively or otherwise, after the 3-year period of § 1635(f)
has run”).
10
Beach, 523 U.S. at 411-12, 118 S. Ct. at 1408.
12
75. The Supreme Court found that the Plaintiff in a
civil RICO action need establish only a criminal
“violation” and not a criminal conviction. Further, the
Court held that the Defendant need only have caused harm
to the Plaintiff by the commission of a predicate offense
in such a way as to constitute a “pattern of racketeering
activity.” That is, the Plaintiff need not demonstrate that
the Defendant is an organized crime figure, a mobster in
the popular sense, or that the Plaintiff has suffered some
type of special Racketeering injury; all that the Plaintiff
must show is what the Statute specifically requires. The
RICO Statute and the civil remedies for its violation are
to be liberally construed to effect the congressional
purpose as broadly formulated in the Statute. Sedima, SPRL
v. Imrex Co., 473 US 479 (1985).
(Compl. ¶¶ 74-75.)
Federal Rule of Civil Procedure 9(b), which requires that,
“[i]n
alleging
fraud
or
mistake,
a
party
must
state
with
particularity the circumstances constituting fraud or mistake,”
applies to RICO claims.11 To comply with Rule 9(b), a complaint
alleging
a
fraudulent
representation
“must
‘(1)
specify
the
statements that the plaintiff contends were fraudulent, (2) identify
the speaker, (3) state where and when the statements were made, and
(4) explain why the statements were fraudulent.’”12 A plaintiff must,
“[a]t a minimum,” “allege the time, place and contents of the
misrepresentations
upon
which
[he]
relied.”13
“Generalized
and
conclusory allegations that the Defendants’ conduct was fraudulent
11
Brown v. Cassens Transp. Co., 546 F.3d 347, 356 n.4 (6th Cir. 2008);
Blount Fin. Servs., Inc. v. Walter E. Heller & Co., 819 F.2d 151, 152-53 (6th Cir.
1987). “The Plaintiff[] must plead more than a generalized grievance against a
collective group of Defendants in order to meet the requirements of FRCP 9(b).”
Masterson v. Meade Cnty. Fiscal Court, 489 F. Supp. 2d 740, 749 (W.D. Ky. 2007)
(citing United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634, 643
(6th Cir. 2003)).
12
Frank v. Dana Corp., 547 F.3d 564, 570 (6th Cir. 2008) (quoting Gupta
v. Terra Nitrogen Corp., 10 F. Supp. 2d 879, 883 (N.D. Ohio 1998)).
13
Id. (citing Bender v. Southland Corp., 749 F.2d 1205, 1216 (6th Cir.
1984)).
13
do not satisfy Rule 9(b).”14 A plaintiff who asserts a claim based on
a
failure
to
disclose
must
plead
all
the
elements
with
particularity.15
The Complaint does not even identify the provision of 18
U.S.C. § 1962 that Defendants allegedly violated, and the various
references to RICO are not entitled to the assumption of truth under
Iqbal, 556 U.S. at ___, 129 S. Ct. at 1950.
Finally, the various references to the National Currency
Act and the assertion that “Federal Reserve notes are not money by
law” are insufficient to invoke federal jurisdiction. The theory that
Federal Reserve notes are not legal tender is meritless as a matter
of law, as another district court in this circuit has explained:
In arguing that the system of lending money in the
United States is unconstitutional, Plaintiff cites Sections
8 and 10 of Article I in the United States Constitution.
. . . Nonetheless, ever since the Supreme Court ruled in
“The Legal-Tender Cases,” in 1884, Courts have consistently
held that neither of these provisions of the Constitution
renders the country’s current money-lending system
unconstitutional. See Julliard v. Greenman (“The LegalTender Cases”), 110 U.S. 421, 447-48, 4 S. Ct. 122, 28 L.
Ed. 204 (1884) (holding that Congress has the power of
making the notes of the United States a legal tender in
payment of private debts, and that such power is not
restricted by the fact that its exercise may affect the
value of private contracts); United States v. Rigen, 577
F.2d 1111, 1113 (8th Cir. 1978) (art. I, § 10 of the
Constitution does not “limit Congress’ power to declare
what shall be legal tender for all debts,” and the fact
that the type of money in use is neither gold nor silver
does not render a loan unconstitutional); Foret v. Wilson,
725 F.2d 254 (5th Cir. 1984) (dismissing plaintiff’s
argument that only gold and silver coin may be constituted
legal tender by the United States); Edgar v. Inland Steel
Co., 744 F.2d 1276, 1277 (7th Cir. 1984) (finding untenable
14
Bovee v. Coopers & Lybrand C.P.A., 272 F.3d 356, 361 (6th Cir. 2001).
15
5A Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 1297, at 72-73, 101 (3d ed. 2004).
14
plaintiff’s argument that federal reserve notes are not
“money” because they are not backed by gold and silver
specie); L.R. Nixon v. Phillipoff, 615 F. Supp. 890 (N.D.
Ind. 1985) (finding that plaintiff’s [sic] misinterpreted
art. I, §§ 8 and 10 of the Constitution, and holding that
Section 10 acts only to “remove from the states the
inherent sovereign power to declare currency, thus leaving
Congress the sole declarant of what constitutes legal
tender”); Kolb v. Naylor, 658 F. Supp. 520 (N.D. Iowa 1987)
(finding that the loans to plaintiffs constituted the
lending of money and the creation of a debt, rather than
the creation of money); United States v. Schiefen, 926 F.
Supp. 877 ([]D.S.D. 1995) (noting that Schiefen’s argument
that United States currency is unconstitutional “unbacked
paper” has been rejected by numerous courts); State ex rel.
White v. Mack, 93 Ohio St. 3d 572, 757 N.E.2d 353, 355
(Ohio 2001) (citing Baird v. Cty. Assessors of Salt Lake
& Utah Ctys., 779 P.2[2d] 676, 680 (Utah 1989)) (finding
that the provision in art. I, § 10 of the United States
Constitution is not a directive to states to use only gold
or silver coins, but is “merely a restriction preventing
states from establishing their own legal tender other than
gold or silver coins”).
Nixon v. Phillipoff provides a thorough analysis of
why courts consider federal reserve notes to be a
constitutional form of legal tender. See 615 F. Supp. 893.
In Nixon, plaintiff, a pro se litigant, sued the individual
who had filed a mortgage foreclosure action against him,
the clerk of court who had accepted the filing fee for that
foreclosure, and the judge who had accepted jurisdiction
over the foreclosure. See id. at 890. Plaintiff’s argument
rested, in part, on his assertion that art. I, § 10, clause
1 of the United States Constitution requires a state to
accept and recognize only gold and silver coin as legal
tender. See id. at 893. The court, however, rejected
Nixon’s argument, concluding:
Nixon’s interpretation of article 1, § 10
creates a rather curious inconsistency with article
1, § 8, clause 5. If states can only recognize gold
and silver coin as legal tender, then Congress does
not have complete power to declare what shall
constitute legal tender for payment of all debts, for
a declaration that a treasury note or federal reserve
note was legal tender would fly in the face of the
restriction of § 10. While this is the conclusoin
[sic] which Nixon wants this court to reach (in
effect declaring federal reserve notes illegal), it
flies in the face of the clear import of § 8, clause
5’s unrestricted language. The power to coin money
necessarily carries with it the power to declare what
is money, and the constitution does not limit
15
Congress to gold and silver coin ... It strains logic
and constitutional interpretation to claim that the
framers of the constitution sought to limit Congress’
power to coin money via an implication derived from
a restriction directed not at Congress but at the
states.
Id. at 893. Moreover, the court explained that,
Nixon has misinterpreted the import of § 10’s
prohibition. Courts have uniformly interpreted § 10
as prohibiting states from declaring anything other
than gold or silver coin as legal tender ... yet
[“The Legal-Tender Cases”] do not interpret § 10 as
requiring states to accept only gold and silver coin
as tender, nor could they, as they both recognize the
unrestricted power of Congress to declare what shall
constitute legal tender, including bills of credit,
treasury notes, and federal reserve notes. In short,
§ 10 acts only to remove from the states the inherent
sovereign power to declare currency, thus leaving
Congress the sole declarant of what constitutes legal
tender. Thus ... the states are constitutionally
compelled to accept [federal reserve notes] as legal
tender.
Id.
In this case, where Plaintiff’s arguments all rest on
his assertion that, according to art. I, §§ 8, and 10 of
the constitution, Defendants unconstitutionally created
money, his argument fails as a matter of law. Private
parties may enter into transactions to trade whatever they
agree upon as having equal value, and they are not limited
to gold and silver coins. . . . Though Plaintiff asserts
that Defendants’ loans were unlawful because they did not
provide him with any “real, gold or silver backed money”
as constitutionally mandated, as evidenced above, Courts
have long held that such transactions are both legal and
constitutional. Hence, Plaintiff’s claims are entirely
without merit.16
Finally, Plaintiff’s contention that mortgages having a
term longer than five years are illegal (Compl. ¶ 56) is meritless.
16
Rudd v. KeyBank, N.A., No. C2-05-CV-0523, 2006 WL 212096, at *4-6 (S.D.
Ohio Jan. 25, 2006); see also Rahman El v. First Franklin Fin. Corp., No. 09-cv10622, 2009 WL 3876506, at *7 (E.D. Mich. Nov. 17, 2009) (same, collecting cases)
(report and recommendation adopted by district court).
16
12 U.S.C. § 371 expressly authorizes national banks to
engage in real estate lending, and provides, in relevant
part: “Any national banking association may make, arrange,
purchase or sell loans or extensions of credit secured by
liens on interests in real estate, subject to section 1828o
of the title and such restrictions and requirements as the
Comptroller of the Currency may prescribe by regulation or
order.” 12 U.S.C. § 371(a). Section 1828o does not contain
a time limitation. While 12 U.S.C. § 29 does prohibit a
national banking association from holding “the possession
of any real estate under mortgage, or the title and
possession of any real estate purchased to secure any debts
due to it, for a period longer than five years,” this
provision is inapplicable to plaintiff’s Complaint because
plaintiff does not allege, nor does it appear from the
record, that any defendant ever possessed the property that
is referenced in the note and in plaintiff’s complaint.17
For all the foregoing reasons, the Court DISMISSES the
Complaint for want of subject-matter jurisdiction, pursuant to Rules
12(b)(1) and (h)(3) of the Federal Rules of Civil Procedure. Judgment
shall be entered for Defendants.
The Court must also consider whether Plaintiff should be
allowed to appeal this decision in forma pauperis, should he seek to
do so. The United States Court of Appeals for the Sixth Circuit
requires that all district courts in the circuit determine, in all
cases where the appellant seeks to proceed in forma pauperis, whether
the appeal would be frivolous. Twenty-eight U.S.C. § 1915(a)(3)
provides that “[a]n appeal may not be taken in forma pauperis if the
trial court certifies in writing that it is not taken in good faith.”
17
Barnes v. Wells Fargo & Co., No. 4:10CV619 FRB, 2010 WL 3911405, at *4
(E.D. Mo. Sept. 30, 2008); see also Barnes v. Citigroup, Inc., No. 4:10CV620 JCH,
2010 WL 2557508, at *3 (E.D. Mo. June 15, 2010) (12 U.S.C. § 29 “inapplicable, as
Defendants do not possess Plaintiff’s home”). “[T]hirty-year mortgages are common
in the lending industry.” Wilson v. Bank of Am. Corp., No. 4:10-CV-512 CAS, 2010
WL 3843781, at *4 (E.D. Mo. Sept. 27, 2010); see also Barnes, 2010 WL 2557508, at
*3 (“[N]ational banks are permitted to ‘make, arrange, purchase or sell loans or
extensions of credit secured by liens on interests in real estate,’ and thirty-year
mortgages are common in the lending industry.”).
17
Pursuant to the Federal Rules of Appellate Procedure, a
non-prisoner desiring to proceed on appeal in forma pauperis must
obtain pauper status under Federal Rule of Appellate Procedure 24(a).
See Callihan v. Schneider, 178 F.3d 800, 803-04 (6th Cir. 1999). Rule
24(a)(3)(A) provides that if a party was permitted to proceed in
forma pauperis in the district court, he may also proceed on appeal
in forma pauperis without further authorization unless the district
court “certifies that the appeal is not taken in good faith or finds
that
the
party
is
not
otherwise
entitled
to
proceed
in
forma
pauperis.” If the district court denies pauper status, the party may
file a motion to proceed in forma pauperis in the Court of Appeals.
Fed. R. App. P. 24(a)(4)-(5).
The good faith standard is an objective one. Coppedge v.
United States, 369 U.S. 438, 445, 82 S. Ct. 917, 921, 8 L. Ed. 2d 21
(1962). The test under 28 U.S.C. § 1915(a) for whether an appeal is
taken in good faith is whether the litigant seeks appellate review
of any issue that is not frivolous. Id. at 445, 82 S. Ct. at 921. It
would be inconsistent for a district court to determine that a
complaint should be dismissed prior to service on the defendants, but
has sufficient merit to support an appeal in forma pauperis. See
Williams v. Kullman, 722 F.2d 1048, 1050 n.1 (2d Cir. 1983). The same
considerations that lead the Court to dismiss this case for want of
subject-matter jurisdiction also compel the conclusion that an appeal
would not be taken in good faith. It is therefore CERTIFIED, pursuant
to 28 U.S.C. § 1915(a)(3), that any appeal in this matter by
Plaintiff would not be taken in good faith and Plaintiff may not
18
proceed on appeal in forma pauperis. Leave to proceed on appeal in
forma pauperis is, therefore, DENIED.18
IT IS SO ORDERED this 29th day of March, 2012.
s/ S. Thomas Anderson
S. THOMAS ANDERSON
UNITED STATES DISTRICT JUDGE
18
If Plaintiff files a notice of appeal, he must also pay the full $455
appellate filing fee or file a motion to proceed in forma pauperis and supporting
affidavit in the United States Court of Appeals for the Sixth Circuit within thirty
(30) days.
19
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