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West v. Wells Fargo Bank, N.A.

United States District Court, N.D. Georgia, Atlanta Division

February 13, 2017

HERETTA L. WEST, Plaintiff,
v.
WELLS FARGO BANK, N.A., Defendant.

          UNITED STATES MAGISTRATE JUDGE'S FINAL REPORT AND RECOMMENDATION

          ALAN J. BAVERMA UNITED STATES MAGISTRATE JUDGE

         This matter is before the Court on Defendant Wells Fargo Bank, N.A.'s (“Defendant”) motion to dismiss Plaintiff's complaint. [Doc. 3]. For the reasons set forth below, the undersigned RECOMMENDS that the motion be GRANTED and that the action be DISMISSED WITH PREJUDICE.

         I. BACKGROUND

         On April 20, 2007, Plaintiff Heretta West (“Plaintiff”) obtained a loan from MortgageIT, Inc. (“MortgageIT”) in the amount of $743, 200.00. [Doc. 3-2].[1]

         To secure repayment of the promissory note, Plaintiff executed a security deed which conveyed legal title and power of sale of the real property located at 2398 Monte Villa Court, Marietta, Georgia 30062 (the “Property”) to Mortgage Electronic Registration Systems, Inc. (“MERS”) as nominee for MortgageIT. [Id.].[2]On January 20, 2012, MERS transferred and assigned its rights, title, and interest in the security deed to HSBC Bank USA, National Association as Trustee For MortgageIT Securities Corp. Mortgage Loan Trust Series 2007-1, Mortgage Pass-Through Certificates (“HSBC”).[3] Wells Fargo is the servicer of the loan on behalf of HSBC. [Doc. 1 at 9, ¶ 31 & Doc. 3-1 at 2].

         On November 27, 2013, Plaintiff, proceeding pro se, filed a complaint in the Superior Court of Cobb County. See West v. Wells Fargo Bank, N.A., Case No. 13-1-10266-34.3 (hereinafter “West I”). [Doc. 3-4]. On April 9, 2014, Plaintiff voluntarily dismissed that complaint. [Doc. 3-5]. On October 1, 2014, again proceeding pro se, Plaintiff filed a another complaint in the Superior Court of Cobb County that was nearly identical to the complaint filed in West I. See West v. Wells Fargo Bank, N.A., Case No. 14-1-7667-53 (hereinafter (“West II”). [Doc 3-6]. Plaintiff voluntarily dismissed West II on December 2, 2014. [Doc. 3-7].

         On January 9, 2015, Plaintiff, proceeding pro se, filed a third complaint in the Superior Court of Cobb County. See West v. Wells Fargo Bank, N.A., Case No. 15-1-175-52 (“West III”). [Doc. 3-8]. In West III, Plaintiff asserted claims against Defendant for conversion, attempted wrongful foreclosure, breach of good faith and fair dealing, unfair and deceptive business practices, fraud, violations under the Real Estate Settlement Procedures Act (“RESPA”), unjust enrichment, “adequate assurances of performance, ” unconscionability, and sought a declaratory judgment and reasonable attorney's fees. [Doc. 3-8]. On December 21, 2015, the Cobb County Superior Court dismissed Plaintiff's claims with prejudice. [Doc. 3-9].

         Plaintiff, proceeding pro se, filed a complaint in this Court on February 9, 2016. [Doc. 1]. Plaintiff's complaint asserts claims against Defendant for violation of the Fair Debt Collections Practices Act (“FDCPA”) (Count I), violation of the Fair Credit Reporting Act (“FCRA”) (Count II), negligence (Count III), intentional infliction of emotion distress (“IIED”) (Count IV), declaratory judgment/quiet title (Count V), injunctive relief, (Count VI), wrongful foreclosure (Count VII), and violation of the Georgia Fair Business Practices Act (“GFBPA”) (Count VIII). [Doc. 1]. She seeks equitable and injunctive relief, compensatory and punitive damages, and attorney's fees. [Doc. 1 at 36-37].

         Defendant moved to dismiss Plaintiff's complaint on two primary grounds: (1) Plaintiff's claims are barred by the doctrines of res judicata, collateral estoppel, and the “two dismissal” rule; and (2) Plaintiff's complaint fails to state a claim upon which relief can be granted. [Doc. 3-1]. Plaintiff responded. [Doc. 4]. Defendant did not file a reply. (See Dkt.). With briefing concluded, the motion to dismiss is ripe for recommended resolution.

         II. LEGAL STANDARDS

         “At the motion to dismiss stage, all well-pleaded facts are accepted as true, and the reasonable inferences therefrom are construed in the light most favorable to the plaintiff.” Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1273 n.1 (11th Cir. 1999); see also Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (noting that all allegations in the complaint are to be taken to be true even if doubtful in fact). However, “courts may infer from the factual allegations in the complaint ‘obvious alternative explanation[s], ' which suggest lawful conduct rather than the unlawful conduct the plaintiff would ask the court to infer.” Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir. 2010) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 682 (2009)). Additionally, the Court is not required to accept Plaintiff's legal conclusions. See Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th Cir. 2009), abrogated on other grounds by Mohamad v. Palestinian Auth., 132 S.Ct. 1702 (2012) (citing Iqbal, 556 U.S. at 678). Nor will the Court “accept as true a legal conclusion couched as a factual allegation.” See Twombly, 550 U.S. at 555.

         To avoid dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.' ” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). Under Rule 8 of the Federal Rules of Civil Procedure, a pleading states a claim when it contains, inter alia, “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed R. Civ. P. 8(a)(2). Although the factual allegations of a complaint must generally be taken as true when ruling on a motion to dismiss, a court should not accept “conclusory allegations, unwarranted deductions of facts or legal conclusions masquerading as facts.” Oxford Asset Mgmt., Ltd. v. Jaharis, 297 F.3d 1182, 1188 (11th Cir. 2002). While a complaint need not contain detailed factual allegations, mere “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555; accord Iqbal, 556 U.S. at 678-79 (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice” and are “not entitled to the assumption of truth.”). Rather, plaintiffs are required to make factual allegations that are “enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Complaints must “contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory.” Fin. Sec. Assurance, Inc. v. Stephens, Inc., 500 F.3d 1276, 1282-83 (11th Cir. 2007) (per curiam) (internal quotation marks omitted). The Court also may dismiss a claim pursuant to Rule 12(b)(6) when, on the basis of a dispositive issue of law, no construction of the factual allegations will support the cause of action. Marshall Cnty. Bd. of Educ. v. Marshall Cnty. Gas Dist., 992 F.2d 1171, 1174 (11th Cir. 1993).

         A “document filed pro se is ‘to be liberally construed, ' . . ., and ‘a pro se complaint, however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers.' ” Erikson v. Pardus, 551 U.S. 89, 94 (2007) (quoting Estelle v. Gamble, 429 U.S. 97, 106 (1976)); see also Mederos v. United States, 218 F.3d 1252, 1254 (11th Cir. 2000) (discussing that pro se filings are entitled to liberal construction). “Courts do and should show a leniency to pro se litigants not enjoyed by those with the benefit of a legal education. . . . Yet even in the case of pro se litigants this leniency does not give a court license to serve as de facto counsel for a party, . . . or to rewrite an otherwise deficient pleading in order to sustain an action.” GJR Invs., Inc. v. Cnty. of Escambia, Fla., 132 F.3d 1359, 1369 (11th Cir. 1998) (citations omitted), overruled on other grounds as recognized in Randall v. Scott, 610 F.3d 701, 709 (11th Cir. 2010).

         III. DISCUSSION

         A. Res Judicata and Collateral Estoppel[4]

         1. Res Judicata

         To the extent that Plaintiff's claims are predicated upon her contention that Defendant has no right to initiate foreclosure proceedings or foreclose on the Property, or can be construed to be part of the same foreclosure proceeding that was scheduled for February 2015 (even though a new foreclosure date has subsequently been scheduled for March 1, 2016, [Doc. 1 at 2]), Plaintiff's claims are barred by res judicata .

         Under the principle of res judicata, or claim preclusion, a final judgment on the merits in a civil action operates to preclude a party, or those in privity with that party, from re-litigating in a subsequent proceeding issues that were or could have been raised in the original action. Federated Dep't Stores, Inc., v. Moitie, 452 U.S. 394, 398 (1981); Ragsdale v. Rubbermaid, Inc., 193 F.3d 1235, 1238 (11th Cir. 1999) (holding that res judicata “bars the filing of claims which were raised or could have been raised in an earlier proceeding”) (citation omitted). The doctrine is “a rule of fundamental and substantial justice, of public policy and of private peace, ” operating to protect defendants against duplicative litigation over the same claims, and accordingly, may not be overridden based on equitable considerations. Federated Dep't Stores, Inc., 452 U.S. at 401 (quotation omitted). “The doctrine of res judicata is one of finality, providing that a final judgment rendered by a court of competent jurisdiction on the merits is conclusive as to the rights and responsibilities of the parties and their privies. As to the parties in the prior proceeding and their privies, res judicata constitutes an absolute bar to a subsequent judicial proceeding involving the same cause of action.” Baptiste v. IRS, 29 F.3d 1533, 1539 (11th Cir. 1994).

         In considering whether to give preclusive effect to state-court judgments under res judicata or collateral estoppel, the federal court must apply the rendering state's law of preclusion. Cmty. State Bank v. Strong, 651 F.3d 1241, 1263 (11th Cir. 2011) (citing Kizzire v. Baptist Health Sys., Inc., 441 F.3d 1306, 1308 (11th Cir. 2006) (res judicata); Agripost, Inc. v. Miami-Dade Cnty., ex rel. Manager, 195 F.3d 1225, 1229 n.7 (11th Cir. 1999) (collateral estoppel); and 28 U.S.C. § 1738); see also N.A.A.C.P. v. Hunt, 891 F.2d 1555, 1560 (11th Cir. 1990). “Under Georgia law, the fundamental elements of res judicata, codified at O.C.G.A. § 9-12-40, are: (1) the parties are identical; (2) the causes of action are identical; and (3) the prior adjudication was made on the merits by a court of competent jurisdiction. QOS Networks Ltd. v. Warburg, Pincus & Co., 294 Ga.App. 528, 531, 669 S.E.2d 536, 540 (2008) (citing O.C.G.A. § 9-12-40); Starship Ent. of Atlanta, Inc. v. Coweta Cnty, Ga., 708 F.3d 1243, 1253 (11th Cir. 2013) (applying § 9-12-40). The party asserting res judicata bears the burden of showing that the later-filed suit is barred. Batchelor-Robjohns v. United States, 788 F.3d 1280, 1285 (11th Cir. 2015) (citing In re Piper Aircraft, 244 F.3d 1289, 1296 (11th Cir. 2001)).

         Applying these factors, first, West III resulted in the entry of a final judgment on the merits by a court of competent jurisdiction. After Defendant filed a motion to dismiss based on Plaintiff's failure to state a claim, in December 2015 the Cobb County Superior Court dismissed Plaintiff's claim with prejudice. [Doc. 3-9]. A dismissal for failure to state a claim is a judgment on the merits. SFM Holdings, Ltd. v. Banc of America Securities, LLC, 764 F.3d 1327, 1344 (11th Cir. 2014) (citations omitted); Lobo v. Celebrity Cruises, Inc., 704 F.3d 882, 893 (11th Cir. 2013) (holding that a Rule 12(b)(6) dismissal with prejudice is an adjudication on the merits); Hunt, 891 F.2d at 1560 (same); see also Harris v. Deutsche Bank Nat'l Trust Co., 338 Ga.App. 838, 840 n.6, 792 S.E.2d 111, 114 n.6 (2016) (A “dismissal for failure to state a claim is a dismissal on the merits and is with prejudice.”) (punctuation and footnote omitted in original; citations omitted).

         Second, the parties are identical in both cases. E.E.O.C. v. Pemco Aeroplex, Inc., 383 F.3d 1280, 1285 (11th Cir. 2008) (“[B]efore the doctrines of either res judicata or collateral estoppel may be asserted against a party, it must be established that the party in the second action was either a party in the previous action or a privy of the party in that action.”). Plaintiff filed both her present complaint and West III against Defendant. [Docs. 1, 3-8].

         The final issue is whether such an identity of subject matter exists between the two cases so that the dismissal with prejudice in West III constituted an adjudication on the merits of Plaintiff's present claims against Defendant. A cause of action in Geogia is defined as “being the entire set of facts which give rise to an enforceable claim.” Haley v. Regions Bank, 277 Ga. 85, 91, 586 S.E.2d 633, 638 (2003)(emphasis, citation, and internal marks omitted). As a consequence, “when a subsequent action arises from the same wrong as a prior action and is based on essentially the same facts, the subsequent actions should be barred by res judicata.” Franklin v. Gwinnett Cnty. Pub. Sch., 200 Ga.App. 20, 24, 407 S.E.2d 78, 83 (1991) (citing Spence v. Erwin, 200 Ga. 672, 673, 38 S.E.2d 394, 396-97 (1946)).

The doctrine of res judicata . . . prevents re-litigation of matters that were or could have been litigated in a previously-adjudicated action. The doctrine applies even if some new factual allegations have been made[ or] some new relief has been requested. . . . It is only where the merits were not and could not have been determined under a proper presentation and management of the case that res judicata is not a viable defense. If, [however], the merits were or could or have been determined, then the defense is valid.

Neely v. City of Riverdale, 298 Ga.App. 884, 887, 681 S.E.2d 677, 679 (2009) (first alteration in original) (citations and internal marks omitted).

         After careful comparison between the complaint in West III and the complaint in this case, it is clear that Plaintiff could have raised most of the claims in the instant case in the prior action. Both lawsuits are premised on Plaintiff's allegations that Defendant does not have the authority to foreclose on the Property because Defendant was not the secured creditor, and that Defendant acted improperly as the loan servicer on behalf of HSBC by, for example, charging “false servicer fees” and misrepresenting the balance on the loan and the identify of the secured creditor. [Docs. 1, 3-8].

         In the present action, in Count I, Plaintiff alleges that Defendant violated the FDCPA “starting on or about February 2013, ” which was twenty three months before Plaintiff filed West III on January 9, 2015. [Doc. 1 at 18, ¶ 65]. Defendant's conduct/status as a loan servicer is at issue in both complaints and by Plaintiff's own admission, the conduct of which Plaintiff complains occurred as early as February 2013. Although a plaintiff can have “different theories of recovery arising from the same wrong, [she] should properly [have] assert[ed] those different theories of recovery in separate counts in one suit.” Franklin, 200 Ga.App. at 25, 407 S.E.2d at 83. Accordingly, because Plaintiff should have raised her FDCPA claim in West III, [5] the FDCPA claim now before this Court is barred by res judicata.

         In Counts IV - VIII of the federal complaint, Plaintiff asserts state law claims for negligence, IIED, quiet title and declaratory judgment, injunctive relief, wrongful foreclosure, and violations of the GFBPA. While many of these claims do not set forth a factual basis to support themselves, they do appear to refer to allegations in the complaint which are substantially similar to the allegations Plaintiff made in West III, that is, that Defendant does not have authority to foreclose on the Property and that Defendant acted improperly as the loan servicer acting on behalf of HSBC. Accordingly, because Plaintiff's claims in the instant action arise out of the same set of operative facts that were brought against Defendant in West III, Plaintiff's claims in this case for negligence, IIED, quiet title and declaratory judgment, injunctive relief, wrongful foreclosure and violation of the GFBPA are barred by res judicata.

         The analysis for Counts II and III warrants a different result because it is unclear when the conduct Plaintiff complains about occurred. In Count III, Plaintiff asserts a FCRA claim based on allegations that Defendant improperly obtained Plaintiff's credit report and misreported Plaintiff's credit information. [Doc. 1 at 26-27, ¶¶ 95-98]. However, Plaintiff does not allege when the disputed conduct occurred. If the conduct alleged in the complaint occurred before January 9, 2015, the date Plaintiff filed West III, the res judicata bar applies as Plaintiff initially raised Defendant's loan servicing activities in that complaint. However, to the extent that Plaintiff is asserting an FCRA claim for conduct that occurred after West III was filed, the res judicata doctrine would not apply since the conduct Plaintiff complains about would not yet have occurred so as to be ripe at that time. Similarly, Count III of Plaintiff's complaint alleges negligence based wholly on the same conduct alleged in Plaintiff's FCRA claim. [Doc. 1 at 29, ¶ 106]. Therefore, the same analysis applies to Count III. Because it is not clear from Plaintiff's complaint when the alleged conduct occurred in relation to the filing of West III, Defendant has not met its burden ...


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