Ford v. Specialized Loan Servicing, LLC, et al

Filing 91

ORDER denying without prejudice 47 Motion to Dismiss for Failure to State a Claim; denying 50 Motion to Dismiss; granting in part and denying in part 72 Motion to Amend/Correct; adopting in part Report and Recommendations re 78 Report and Recommendations.; denying without prejudice 30 Motion to Dismiss for Failure to State a Claim; denying without prejudice 32 Motion to Dismiss for Failure to State a Claim; denying without prejudice 33 Motion to Dismiss for Failure to State a Claim; denying without prejudice 35 Motion to Dismiss for Failure to State a Claim. Signed by Judge Jon Phipps McCalla on 3/31/17. (McCalla, Jon)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
KELVIN FORD and TASHA FORD,
Plaintiffs,
v.
SPECIALIZED LOAN SERVICING, LLC,
CHASE MORTGAGE COMPANY,
SHAPIRO & INGLE, LLP; MARATHON
MANAGEMENT, LLC; MARVIN’S
GARDEN, LLC, and AUCTION.COM,
INC.,
Defendants.

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No. 2:16-cv-02414-JPM-tmp

ORDER ADOPTING IN PART REPORT AND RECOMMENDATION

Before the Court is the Magistrate Judge’s Report and Recommendation on Plaintiffs’
Motion to Amend Amended Complaint (ECF No. 72) and on Defendants’ Motions to Dismiss
(ECF Nos. 30, 32, 33, 35, and 47), filed on January 24, 2017. (ECF No. 78.) In the Report and
Recommendation, the Magistrate Judge recommends that “the motion to amend be granted in
part and denied in part, and that the motions to dismiss be granted in part and denied in part.”
(Id. at PageID 639.) For the reasons stated below, the Court ADOPTS IN PART the Report and
Recommendation.
I.

BACKGROUND
This pro se case arises out of a foreclosure sale of Plaintiffs’ home at 7421 Iris Cove,

Memphis, Tennessee. (ECF No. 18.) Plaintiffs allege that Defendants were involved in a
wrongful foreclosure of Plaintiffs’ home in the following capacities: Defendant Specialized Loan
Servicing, LLC (“SLS”) was the alleged servicer of the wrongfully foreclosed loan and acted as
an agent of the holder/owner of the loan. (Id. at PageID 100.) Defendant JPMorgan Chase

Bank, N.A. (“Chase”) was the alleged holder/owner of the wrongfully foreclosed loan. (Id.)
Defendant Shapiro & Ingle, LLP (“SAI”) was the alleged substitute trustee that conducted
foreclosure proceedings and functioned as a debt collector for Chase and SLS. (Id.) Defendant
Marathon Management, LLC was the alleged agent of Marvin’s Garden, LLC, and allegedly
evicted Plaintiffs through a proceeding in Shelby County Court. Defendant Marvin’s Garden,
LLC was the alleged purchaser at the foreclosure sale of the property. Auction.com, Inc. was
allegedly employed by SAI to conduct foreclosure proceedings as an auctioneer. The foreclosure
sale occurred on June 2, 2016. (ECF No. 18 at PageID 106.)
Plaintiffs requested an injunction from the Shelby County Chancery Court but no relief
was granted. (ECF No. 1-2.) The case was removed to this Court on June 13, 2016. (ECF No.
1.) With leave of the Court, Plaintiffs filed an Amended Complaint on July 13, 2016. (ECF No.
18.) The Amended Complaint asserts the following claims: (1) breach of contract against Chase,
SLS, and SAI; (2) breach of the covenant of good faith and fair dealing against Chase, SLS, SAI,
and Auction.com; (3) fraud and deceit against Chase, SLS, SAI, and Auction.com; (4) violation
of RESPA against Chase and SLS; (5) violation of escrow waving against Chase; (6) quiet title /
set aside sale; (7) declaratory judgment that Plaintiffs are the owners of the property and are
entitled to its possession. (ECF No. 18.) Plaintiffs request compensatory damages, exemplary
and/or punitive damages for fraud and deceit, and are also seeking to quiet title to the property.
(ECF No. 18 at PageIDs 114-15.) Defendants filed motions to dismiss the Amended Complaint
pursuant to Federal Rule of Civil Procedure 12 (b) (6). (ECF Nos. 30, 32, 33, 35, and 47.)
Plaintiffs were granted until September 28, 2016 to respond to the motions to dismiss (ECF No.
49); however, Plaintiffs failed to respond by the deadline and Defendants Chase and SLS filed a
motion to dismiss for failure to comply with the court’s order (ECF No. 78). Plaintiffs filed

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untimely responses to the motions to dismiss on October 12, 2016 and October 13, 2016 (ECF
Nos. 52, 53, 54, 56, and 57), and explained that the responses were untimely due to personal
circumstances of “extreme hardship,” including “death in the family, illness, and an accident
resulting in the totaling of a car” (ECF No. 55).
On November 30, 2017, Plaintiffs filed a motion to amend the Amended Complaint.
(ECF No. 72-1.) Defendants Chase, SLS, Marathon, Marvin’s, and Auction.com have filed
responses in opposition to the motion to amend. (ECF Nos. 73, 74, and 75.)
On January 24, 2017, the Magistrate Judge issued a Report and Recommendation on
Defendants’ motions to dismiss the Amended Complaint (ECF Nos. 30, 32, 33, 35, 47),
Defendants Chase and SLS’s Motion to Dismiss for Failure to Comply with Court Order (ECF
No. 50), and Plaintiffs’ Motion to Amend the Amended Complaint. (ECF No. 78.) Defendant
SAI timely filed objections to the Report and Recommendation on February 6, 2017, asserting
the following three objections: (1) the Magistrate erred in disregarding the affidavit of Nicholas
Raab (ECF No. 36-1); (2) the Magistrate erred in not analyzing whether SAI’s allegedly conduct
prejudiced Plaintiff’s in some manner; and (3) the Magistrate erred in not analyzing whether SAI
was privileged to conduct a foreclosure sale. (ECF No. 79.) No other parties have filed
objections to the Report and Recommendation to date.
II.

LEGAL STANDARD
Federal Rule of Civil Procedure 72(b)(2) provides that “[w]ithin 14 days after being

served with a copy of the recommended disposition, a party may serve and file specific written
objections to the proposed findings and recommendations.” Fed R. Civ. P. 72(b)(2). “The
district judge must determine de novo any part of the magistrate judge’s disposition that has been
properly objected to.” Fed. R. Civ. P. 72(b)(3).

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The portions of the Report and Recommendation as to which no specific objections were
timely filed are reviewed for clear error. See Fed. R. Civ. P. 72(b) advisory committee notes;
Howard v. Sec’y of Health and Human Servs., 932 F.2d 505, 509 (6th Cir. 1991) (noting that
when a party makes a general objection, “[t]he district court’s attention is not focused on any
specific issues for review, thereby making the initial reference to the magistrate useless.”). “A
general objection to the entirety of the magistrate’s report has the same effects as would a failure
to object.” Howard, 932 F.2d at 509. Moreover, the “failure to properly file objections
constitutes a waiver of appeal.” See Howard, 932 F.2d at 508 (citing United States v. Walters,
638 F.2d 947, 950 (6th Cir. 1981)).
III.

ANALYSIS
A. Plaintiffs’ Motion to Amend the Amended Complaint
1. Count 1 – Breach of Contract
As to Count 1 – Breach of Contract, the Magistrate Judge finds that “the Fords have

adequately alleged a violation of the notice requirements contained in the DOT, as well as the
statutory requirements.” (ECF No. 78 at PageID 650.) The Magistrate Judge also finds that “the
Proposed Complaint plausibly alleges a claim for breach of the DOT against Chase, Shapiro, and
Specialized on the grounds that the Fords were not in default.” (Id. at PageID 652.) Lastly, the
Magistrate Judge finds that the Proposed Complaint fails to state any claim for a breach of the
DOT resulting from either of the following: the initiation of foreclosure proceedings on the DOT
around the middle of May 2015, a breach of section 20 of the DOT, or a violation of Tennessee
Code Annotated § 35-5-114. (Id. at PageIDs 652-53.)
Plaintiffs propose the following material amendments to Count 1 – Breach of Contract:
(1) that SLS breached section 20 of the DOT by failing to provide a reasonable period of time for

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corrective action (¶ 41), (2) that SLS breached section 22 of the DOT by failing to send a notice
(¶ 42), and (3) that Plaintiffs were not in default and therefore Auction.com as SAI’s agent
breached the DOT by proceeding to foreclosure (¶¶ 38, 39, 43). (ECF No. 72-1 at PageID 585.)
As to the proposed amendments to paragraph 41 1 of Count 1, the Magistrate Judge first
found that the Proposed Complaint failed to state a claim for a breach of the Deed of Trust
(DOT) based on SLS’s alleged violation of section 20 of the DOT, as “§ 20 does not require a
reasonable period of time for corrective action before a change in the loan servicer.” (ECF No.
78 at PageID 652.) Upon clear error review, the Court finds that section 20 does not require a
reasonable time for corrective action and adopts the Magistrate Judge’s finding regarding
paragraph 41 of the proposed Second Amended Complaint. Plaintiffs are denied leave to amend
the Amended Complaint with regards to paragraph 41.
With regards to the proposed amendment contained in paragraph 42, the Magistrate
Judge found that “the Fords have adequately alleged a violation of the notice requirements
contained in the DOT.” (ECF No. 78 at PageID 650.) In doing so, however, the Magistrate
Judge did not consider Defendants’ exhibits relating to the adequacy of the notice provided to the
Fords, which included the affidavit of Nicholas Raab contained in ECF No. 36-1. (Id. at PageID
651.) SAI filed an objection to the Magistrate Judge’s decision to decline to consider the Raab
affidavit and accompanying exhibits, asserting that the documents “established the nature of the
dispute that arose in September 2015” and are “integral to the Complaint.” (ECF No. 79 at
PageIDs 670, 673.) Case law states that a court may consider documents outside of the
pleadings in ruling on a 12(b)(6) motion to dismiss “when a document is referred to in the
pleadings and is integral to the claims.” See, e.g., In re Fair Finance Company v. Textron

The Court refers to the paragraph numbers in the proposed Second Amended
Complaint (ECF No. 72-1).
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Financial Corp., 834 F. 3d 651 (6th Cir. 2016). Because, as discussed below, the Court declines
to adopt the Magistrate Judge’s recommendations as to the motions to dismiss filed as to the
Amended Complaint, the Court may not consider Defendant’s exhibits in its assessment of the
Motion to Amend the Amended Complaint. As such, the Court reviews the Magistrate Judge’s
recommendation regarding the proposed amendment to paragraph 42 for clear error and
ADOPTS the recommendation. Plaintiffs are granted leave to amend the Amended Complaint to
add the proposed amendment to paragraph 42.
Thirdly, with regards to the proposed amendments to paragraphs 38, 39, 43, and 44 of
Count 1 – Breach of Contract, the Magistrate Judge did not specifically recommend that the
Court grant this proposed amendment. Regarding the proposed amendments to paragraph 38, the
Magistrate Judge stated that “the Proposed Complaint neither sufficiently alleges a violation of §
35-5-114 [which regulates the appointment of substitute trustees relating to foreclosure sales] nor
identifies how such a violation would breach the DOT.” (ECF No. 78 at PageIDs 652-53.)
Regarding the proposed amendments to paragraph 39, the Magistrate Judge found that “the
Proposed Complaint plausibly alleges a claim for breach of the DOT against Chase, Shapiro, and
Specialized on the grounds that the Fords were not in default.” (ECF No. 78 at PageID 652.)
SAI did not file specific objections to the proposed amendments to either paragraph 38 or 39 of
the proposed Second Amended Complaint. Therefore, the Court reviews the Magistrate Judge’s
findings for clear error. Upon clear error review, the Court adopts this portion of the Report and
Recommendation. Plaintiffs are granted leave to amend Count 1 – Breach of Contract to include
the proposed amendments to only paragraphs 39, 43, and 44 of the proposed Second Amended
Complaint.

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2. Count 2 – Breach of the Covenant of Good Faith and Fair Dealing
In the motion to amend, the Plaintiffs propose the following amendments to Count 2: (1)
the addition of Chase and SLS to paragraph 52 and (2) the addition of Chase and SLS to
paragraph 55. (ECF No. 72-1 at PageID 587.) In the Report and Recommendation, the
Magistrate Judge found “no basis for the proposed claim of breach of the covenant of good faith
and fair dealing” as to all Defendants. (ECF No. 78 at PageIDs 653-54.) None of the parties
have filed objections to this finding. Upon clear error review, the Court adopts the Magistrate
Judge’s finding and DENIES Plaintiffs’ motion to amend regarding the proposed amendments to
Count 2.
3. Count 3 – Fraud and Deceit
Plaintiffs propose the following amendments to Count 3, which involve allegedly false
representations made by SAI: (1) the addition of paragraph 60, (2) the addition of paragraph 61,
and (3) the addition of paragraph 62. (ECF No. 72-1 at PageID 589.) In the Report and
Recommendation, the Magistrate Judge found that “the Proposed Complaint fails to state a claim
for fraud against any defendant” and recommended that “the motion to amend be denied as to the
fraud claims.” (ECF No. 78 at PageID 658.) SAI has not specifically objected to the Magistrate
Judge’s findings as to Count 3. Upon clear error review, the Court adopts the Magistrate Judge’s
findings and DENIES Plaintiffs’ motion to amend regarding the proposed amendments to Count
3.
4. Count 4 – Violation of RESPA
Plaintiffs propose the following amendments to Count 4: (1) additional detail as to the
alleged violation of RESPA in paragraphs 67 and 68 by Chase and SLS, (2) the addition of
paragraphs 69, 70, and 73 as to Chase and SLS, (3) additional specificity as to the allegedly

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violated statutes in paragraphs 72, 74, and 75. (ECF No. 72-1 at PageIDs 590-91.) In the Report
and Recommendation, the Magistrate Judge recommended that “the motion to amend be granted
as to the RESPA claim against Chase and Specialized, and denied as to all other defendants.”
(ECF No. 78 at PageID 664.) Specifically, the Magistrate Judge found that “the Proposed
Complaint states a claim under § 2605 of RESPA against Chase and Specialized that meets the
Rule 12(b)(6) standard.” (Id. at PageID 663.) The Magistrate Judge also found that “the
Proposed Complaint sufficiently alleges actual damages pursuant to § 2605(f)(1),” but that “the
Fords have not stated a claim for statutory damages” or punitive damages under § 2605(f)(1)(B).
(Id. at PageID 664.) SAI has not file specific objections to the Magistrate Judge’s findings
regarding the proposed amendments to Count 4. Upon clear error review, the Court adopts the
Magistrate Judge’s findings. Plaintiffs are granted leave to amend Count 4 to add the proposed
amendments to paragraphs 67, 68, 69, 70, 72, 73, 74, and 75. Plaintiffs are denied leave to
amend Count 4 with regards to the proposed addition of paragraph 76.
5. Count 5 – Violation of Tennessee Code Annotated § 35-5-112
Plaintiffs propose the addition of Count 5 – Violation of Tennessee Code Annotated § 355-112 to the Amended Complaint. (ECF No. 72-1 at PageID 592.) The Report and
Recommendation finds that “the Fords have failed to state a claim under § 35-5-112 (b), and the
court recommends the motion to amend be denied as to this claim.” No party has filed an
objection to this recommendation; the Court hereby adopts the Report and Recommendation with
regards to Count 5 of the proposed Second Amended Complaint and DENIES Plaintiff’s motion
to amend to add Count 5 – Violation of Tennessee Code Annotated § 35-5-112.
6. Count 6 – Violation of Escrow Waving

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Plaintiffs have not proposed any amendments to this count of the proposed Second
Amended Complaint.
7. Count 7 – Quiet Title/Set Aside Sale
Plaintiffs propose the addition of paragraph 92 to Count 7 – Quiet Title/Set Aside Sale.
(ECF No. 72-1 at PageIDs 593-94.) Specifically, Plaintiffs assert that the foreclosure sale that
occurred on June 2, 2016 should be set aside due to the violation of Tennessee Code Annotated §
35-5-112 (b). As previously stated, however, the Court finds that Plaintiff have failed to state a
claim under § 35-5-112(b). As a result, the Court DENIES Plaintiff’s motion to amend to add
paragraph 92 Count 7.
8. Count 8 – Declaratory Judgment
Plaintiffs have not proposed any amendments to this count of the proposed Second
Amended Complaint.
9. Prayer for Relief
Plaintiff propose the following amendments to the prayer for relief; (1) the addition of
Auction.com to paragraph two, and (2) the addition of paragraph six regarding liability under
Tennessee code Annotated § 35-5-112 (b). (ECF No. 72-1 at PageIDs 595-96.) No party has
filed any objections to the proposed amendments to the prayer for relief. As previously
discussed, the Court finds that Plaintiffs have sufficiently stated a claim for breach of contract,
but finds that Plaintiffs have failed to state a claim under § 35-5-112 (b). As a result, the Court
GRANTS Plaintiff’s motion to amend with regards to the proposed amendments to paragraph
two, but DENIES Plaintiff’s motion to amend to add paragraph six to the prayer for relief
section.
B. Defendants’ Motions to Dismiss for Failure to State a Claim

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In the Report and Recommendation, the Magistrate Judge recommends that the motions
to dismiss be “granted in part and denied in part.” (ECF No. 78 at PageID 639.) SAI filed three
general objections regarding the Magistrate Judge’s recommendation on its motion to dismiss –
(1) that the Magistrate erred in disregarding the Affidavit of Nicholas Raab (ECF No. 36-1); (2)
the Magistrate erred in not analyzing whether SAI’s alleged conduct prejudiced Plaintiff’s in
some manner; (3) the Magistrate erred in not analyzing whether SAI was privileged to conduct a
foreclosure sale. (ECF No. 79.) As a preliminary matter, the Court considers the Magistrate
Judge’s decision to rule on the motions to dismiss in conjunction with the motion to amend the
Amended Complaint. As no party has filed specific objections to this decision, the Court
reviews this proposed recommendation for clear error. See Howard, 932 F.2d at 509. On clear
error review, the Court declines to adopt this proposed recommendation. As discussed
previously, the Court grants in part and denies in part Plaintiffs’ Motion to Amend the Amended
Complaint (ECF No. 72) and will allow Plaintiffs to file a Second Amended Complaint in
accordance with the Court’s Order. The Court therefore DENIES WITHOUT PREJUDICE the
Motions to Dismiss filed as to the claims in the current Amended Complaint (ECF No. 18).
Once Plaintiffs file their Second Amended Complaint, Defendants may refile their motions to
dismiss as to the Second Amended Complaint. If Plaintiffs fail to file a Second Amended
Complaint, Defendants may refile the Motions to Dismiss filed to date (ECF Nos. 30, 32, 33, 35,
and 47) and file a motion for reconsideration of the instant Report and Recommendation as to the
proposed recommendation regarding Defendants’ motions to dismiss. Accordingly, the Court
DECLINES to adopt the proposed recommendation regarding Defendants’ Motions to Dismiss
for Failure to State a Claim (ECF Nos. 30, 32, 33, 35, and 47).

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C. Defendants Chase and SLS’s Motion to Dismiss for Failure to Comply with
Court Order
In the Report and Recommendation, the Magistrate Judge recommends that “Chase and
Specialized’s motion to dismiss pursuant to Rule 41(b) be denied.” (ECF No. 78 at PageID 641.)
Because no party has made an objection to this proposed recommendation in the Magistrate
Judge’s report, the Court reviews this proposed recommendation for clear error. See Howard,
932 F.2d at 509. On clear-error review, the Court hereby ADOPTS this recommendation.
Accordingly, Chase and SLS’s Motion to Dismiss for Failure to Comply with Court Order (ECF
No. 50) is DENIED.
IV.

CONCLUSION
For the reasons stated above, the Court hereby ADOPTS IN PART the Report and

Recommendation. Accordingly, the Court DENIES Chase and SLS’s Motion to Dismiss for
Failure to Comply with Court Order (ECF No. 50). The Court DENIES WITHOUT
PREJUDICE the motions to dismiss filed to date (ECF No. 30, 32, 33, 35, and 47). The Court
GRANTS IN PART and DENIES IN PART Plaintiffs’ Motion to Amend the Amended
Complaint (ECF No. 72). Plaintiffs shall have 14 days from the entry of this Order to file their
Second Amended Complaint. 2
IT IS SO ORDERED, this 31st day of March, 2017.

/s/ Jon P. McCalla
JON P. McCALLA
U.S. DISTRICT COURT JUDGE

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Once Plaintiffs file a Second Amended Complaint, Defendants may refile motions to
dismiss as to the Second Amended Complaint, if desired.
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