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Gibbs v. Bank of America, N.A.

United States District Court, D. Maryland, Southern Division

March 31, 2017

BARBARA A. GIBBS, et al, Plaintiffs,
v.
BANK OF AMERICA, N.A., et al, Defendants.

          MEMORANDUM OPINION

          GEORGE J. HAZEL United States District Judge.

         This removal action stems from pro se Plaintiffs Barbara A. Gibbs and Melvin E. Gibbs' claims against Defendants Bank of America, N.A. ("Bank of America"), Nationstar Mortgage ("Nationstar"); Urban Settlement Services, d/b/a Urban Lending Solutions ("Urban"); Jeffrey Nadel, Esq.; Atlantic Law Group, LLC ("Atlantic Law Group"); Montgomery Village Foundation, Inc. ("Montgomery Village Foundation"); Maryland Attorney General Brian E. Frosh; South Carolina State Judge Cynthia Graham Howe and South Carolina Attorney General Alan McCroy Wilson (hereinafter, the "South Carolina Defendants") and four unnamed defendants ("DOES 6-10"), regarding Plaintiffs' unsuccessful attempts to receive loan modifications on their mortgages. Dispositive motions are pending before the Court on behalf of all of the named defendants in this case: Defendant Frosh's Motion to Dismiss, ECF No. 10; Defendants Bank of America and Nationstar's Motion to Dismiss, ECF No. 13; Defendant Nadel's Motion to Dismiss, ECF No. 17; Montgomery Village Foundation's Motion to Dismiss, ECF No. 25; Defendant Urban's Motion to Dismiss, ECF No. 31; the South Carolina Defendants' Motion to Dismiss, ECF No. 57; and Defendant Atlantic Law Group's Motion to Dismiss, ECF No. 66. Plaintiffs have filed a myriad of motions which the Court will also consider at this time: Plaintiffs' Motion for Summary Judgment, ECF No. 39; Plaintiffs' Motion for Clerk's Entry of Default as to Defendant Atlantic Law Group, ECF No. 48; Plaintiffs' Motion for Sanctions Against All Defendants, ECF Nos. 53, 70 and 74; Plaintiffs' Motion for Leave to File a Second Amended Complaint, ECF No. 60; Plaintiffs' Motion for Clerk's Entry of Default as to unspecified Defendants, ECF No. 65; and Plaintiffs' Motion for Clerk's Entry of Default as to Bank of America, Nationstar, Nadel, Atlantic Law Group, the South Carolina Defendants and the Attorney General of Maryland, ECF No. 71. A hearing is unnecessary. Loc. R. 105.6 (D. Md. 2016). For the reasons stated below, the Court will grant all of Defendants' pending motions to dismiss and deny Plaintiffs' motions.

         I. BACKGROUND[1]

         Between 2005 and 2006, Plaintiffs purchased two homes, one in Florence, South Carolina and one in Gaithersburg, Maryland. ECF No. 2 ¶ 50. Plaintiffs state that they "financed the building of their South Carolina home with a one year construction loan[, ] purchased with a 30-year fixed rate mortgage from [Bank of America.]." Id. Plaintiffs further state that the South Carolina home was their primary residence until 2011, when they moved to Maryland so that Mr. Gibbs could receive cancer treatment at Johns Hopkins Hospital in Baltimore, Maryland. Id. ¶¶ 50, 59. They proffer no additional facts regarding the existence of a mortgage for their Maryland home. However, the judge in a prior, almost identical case that Plaintiffs brought in the District of Colorado stated that "it is clear that both of the Plaintiffs' mortgages were with [Bank of America]." See Gibbs-Squires v. Urban Settlement Servs., No. 14-CV-00488-MSK-CBS, 2015 WL 196217, at *9 n.12 (D. Colo. Jan. 14, 2015), aff'd, 623 F.App'x 917 (10th Cir. 2015) (emphasis in the original) (hereinafter, "the Colorado Action").[2]

         Beginning in May of 2008, Plaintiffs sought loan modifications from Bank of America.[3] ECF No. 2 ¶ 53. Bank of America initially approved Plaintiffs' request for loan modifications, conditioned upon their payment of $30, 000 in closing costs. Id. Plaintiffs declined the loan modifications because any savings from a reduction in their monthly mortgage payments would be erased by the new requirement to pay closing costs. Id. Plaintiffs continued, unsuccessfully, to request alternative loan modifications from Bank of America until 2012. Id. ¶¶ 55-70. At that point, they were informed by Bank of America that their mortgages had been sold to Nationstar. Id. ¶ 70. Although Plaintiffs state that they "made all of their mortgage payments in full and on time, " id. ¶ 50, this contention is contradicted by their filings in the Colorado Action, where they stated that "[i]n or about November 2009, after being totally frustrated with [Bank of America], Mr. Gibbs returned to South Carolina; we stopped paying the mortgage and have not paid the mortgage in five (5) years." Colorado Action, 2015 WL 196217, at *9.[4]

         Plaintiffs complain about their treatment by Bank of America employees while they sought loan modifications, stating that they were repeatedly misled about their qualifications for a federal program known as the Home Affordable Modification Program ("HAMP"), which aims to provide mortgage modifications to eligible borrowers facing foreclosure, and were often told to resubmit documents that they had already submitted. Id. ¶¶ 5-6, 50-73.[5] These allegations are repeated, almost word for word, from the allegations in Plaintiffs' Colorado Action complaint, which focused on Plaintiffs' request for a loan modification regarding the South Carolina property. Compare ECF No. 1 ¶¶ 50-73, with Colorado Action, 2015 WL 196217, at Dkt. No. 1 ¶¶ 109-131.[6]

         These allegations serve as the basis for what Plaintiffs describe as a violation of the Racketeer Influenced and Corrupt Organizations ("RICO") Act, 18 U.S.C. § 1962(c), in which Bank of America, Nationstar, Urban and other known and unknown defendants, conspired to defeat the purpose of the HAMP program by misleading and deceiving borrowers. ECF No. 2 ¶¶ 2, 5-6, 9-13; see also Id. ¶¶ 77-98. According to Plaintiffs, Bank of America and its coconspirators "serially strung out, delayed and otherwise hindered the modification processes that it agreed to facilitate, " resulting in otherwise qualified homeowners becoming unable to participate in the program. Id. ¶¶ 4-5. Plaintiffs allege that Bank of America directed Nationstar and Urban to acquire mortgages of HAMP applicants and foreclose on their homes. Id. ¶¶ 7, 25-46. They further assert that Bank of America, Nationstar, Urban, and their other co-conspirators, fraudulently claimed that key documents relating to HAMP modifications were never received and lied to homeowners who were in the process of applying for HAMP modifications. Id. ¶ 9.

         Plaintiffs also allege that Bank of America directed Defendants Nadel, Atlantic Law Group and Montgomery Village Foundation, to file frivolous lawsuits against them, with the goal of "stealing" their homes. Id. ¶ 24.[7] They further allege that the Maryland Attorney General entered into a consent agreement with Bank of America, agreeing to turn a "Blind Eye to [Bank of America's] continued conspiracy and racketeering in defrauding HAMP" in return for receiving money from the bank. Id. ¶ 24. Finally, Plaintiffs claim that Defendants have "paid bribes to South Carolina government employees to institute and maintain their illegal foreclosure practices." Id. ¶ 107.

         Together with their RICO claim, Plaintiffs bring seven additional claims against the Defendants, who they often refer to generally as "Defendants" or the "HAMP-less gang." Id. ¶ 23. First, they allege state law claims of breach of contract, unjust enrichment, conspiracy and violations of the Maryland Consumer Protection Act ("MCPA"), Md. Code Ann., Com. Law § 13-101, et seq. Id. ¶¶ 49-73, 99-109.[8] Plaintiffs also allege violations of three federal civil rights statutes, 42 U.S.C. §§ 1983, 1985 and 1986, claiming that Defendants' "illegal actions were instituted against Plaintiffs based on their RACE: BLACK." Id. ¶ 108.

         On March 26, 2015, Nadel, on behalf of Nationstar, instituted foreclosure proceedings against Plaintiffs regarding the Maryland property. See Nadel Action, Case No. 402900V, at Dkt. No. 1. On June 2, 2015, Plaintiffs filed a counter-claim in that case, id., at Dkt. No.12, which was separated from the foreclosure case and became the initial complaint in a new case. See Gibbs v. Bank of America, N.A., Case No. 405624V (Mont. Co. Cir. Ct. 2015), Dkt. No 1 (hereinafter, the "Gibbs Action").[9] On August 12, 2016, Defendants Bank of America and Nationstar removed the Gibbs Action to this Court. ECF No. 1.

         After removal, each of the named Defendants filed a motion to dismiss, arguing that Plaintiffs' claims were barred on multiple grounds including res judicata, lack of subject matter jurisdiction, improper venue, lack of personal jurisdiction, and failure to state a claim upon which relief may be granted. See ECF Nos. 10, 13, 17, 25, 31, 57, and 66. Plaintiffs responded to Defendants' motions via two omnibus Responses in Opposition, along with separate Responses to the South Carolina Defendants and Defendant Atlantic Law Group's motions, purporting to address the arguments of the Defendants, but instead mainly reiterating the conclusory allegations from their Amended Complaint. See ECF Nos. 20, 38, 62 and 69. Plaintiffs have also filed their own motions, including a Motion for Summary Judgment on all claims, ECF No. 39; Motion for Clerk's Entry of Default as to Defendant Atlantic Law Group, ECF No. 48; Motion for Sanctions Against All Defendants, ECF Nos. 53, 70 and 74; Motion for Leave to File a Second Amended Complaint, ECF No. 60; Motion for Clerk's Entry of Default as to unspecified Defendants, ECF No. 65; and Motion for Clerk's Entry of Default as to All Defendants, ECF No. 71.

         II. STANDARD OF REVIEW

         To survive a motion to dismiss invoking Fed.R.Civ.P. 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555) ("a Plaintiffs' obligation to provide the 'grounds' of his 'entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do.").

         Fed. R. Civ. P. 12(b)(6)'s purpose "is to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006) (citation and internal quotation marks omitted). When deciding a motion to dismiss under Rule 12(b)(6), a court "must accept as true all of the factual allegations contained in the complaint, " and must "draw all reasonable inferences [from those facts] in favor of the plaintiff." E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011) (citations and internal quotation marks omitted). The Court need not, however, accept unsupported legal allegations, see Revene v. Charles County Comm 'rs, 882 F.2d 870, 873 (4th Cir. 1989), legal conclusions couched as factual allegations, Papasan v. Allain, 478 U.S. 265, 286 (1986), or conclusory factual allegations devoid of any reference to actual events. United Black Firefighters of Norfolk v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979). Amended Complaints filed by pro se plaintiffs, as here, are "to be liberally construed" and "must be held to less stringent standards than formal pleadings drafted by lawyers." Erickson v. Pardus, 551 U.S. 89, 94 (2007).[10] However, the Amended Complaint must contain more than "legal conclusions, elements of a cause of action, and bare assertions devoid of further factual enhancement." Nemet Chevrolet, Ltd v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009).

         Pursuant to Federal Rule of Evidence 201, a court at any stage of the proceedings may "judicially notice a fact that is not subject to reasonable dispute, " provided that the fact "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b)(2). These facts may be properly considered by the court without converting a motion to dismiss into a motion for summary judgment, as long as the facts are construed in the light most favorable to the plaintiff. Zak v. Chelsea Therapeutics Int'l Ltd., 780 F.3d 597, 607 (4th Cir. 2015). Specifically, when as here, Defendants have raised the defense of res judicata, "a court may judicially notice facts from a prior judicial proceeding." Ashe v. PNC Fin. Servs. Grp., Inc., 165 F.Supp.3d 357, 360 (D. Md. 2015) (quoting Brooks v. Arthur, 626 F.3d 194, 199 n.6 (4th Cir. 2010)). The consideration of the affirmative defense of res judicata is appropriate at the motion to dismiss stage where "it clearly appears on the face of the complaint... and the res judicata defense raises no disputed issue of fact" Andrews v. Daw, 201 F.3d 521, 524 n.1 (4th Cir. 2000).

         III. DISCUSSION[11]

         A. Res Judicata

         Defendants Bank of America, Urban and Nationstar argue that all of Plaintiffs' claims against them should be barred by the doctrine of res judicata because the District Court of Colorado rejected the same allegations two years ago in the Colorado Action. See Colorado Action, 2015 WL 196217. While taking the time to file eight motions in this case, including motions for sanctions, default and summary judgment, Plaintiffs never mention the existence of the prior litigation and do not address Defendants' arguments regarding res judicata.

         "Res judicata, also known as claim preclusion, bars a party from relitigating a claim that was decided or could have been decided in an original suit." Mbongo v. JP Morgan Chase Bank, N.A., No. CIV. PWG-14-1620, 2014 WL 3845443, at *3 (D. Md. Aug. 4, 2014), affd, 589 F.App'x 188 (4th Cir. 2015) (quoting Laurel Sand & Gravel Co. v. Wilson, 519 F.3d 156, 161 (4th Cir. 2008)). "For res judicata to prevent a party from raising a claim, three elements must be present: '(1)a judgment on the merits in a prior suit resolving (2) claims by the same parties or their privies, and (3) a subsequent suit based on the same cause of action."' Ohio Valley Envtl Coal v. Aracoma Coal Co., 556 F.3d 177, 210 (4th Cir. 2009) (quoting Miff v. Joy Mfg. Co., 914 F.2d 39, 42 (4th Cir. 1990)). "Even claims that were not raised in the original suit may be precluded if they arose from the same transaction or occurrence as those raised in the first suit and were available to the plaintiff at the time of the first suit." Id. at 210-11.

         In this instance, the relevant prior proceedings occurred in federal court. Thus, Fourth Circuit precedent regarding res judicata applies, as "[i]t has been held in non-diversity cases since Erie v. Tompkins, that the federal courts will apply their own rule of res judicata." Heiser v. Woodruff, 327 U.S. 726, 733 (1946); see also Andrews, 201 F.3d at 524 ("Because [plaintiff] brought his first suit against [defendant] in federal court, federal rules of res judicata apply."). This is true even when, as is the case here, the prior litigation included both state and federal claims. See Mbongo, 2014 WL 3845443, at *3 (D. Md. Aug. 4, 2014) (quoting Shoup v. Bell & Howell Co., 872 F.2d 1178, 1179 (4th Cir. 1989) (internal citations omitted) ("[F]ederal, not state, law determines the preclusive effect of a prior federal judgment, " including actions where "a federal court sits in diversity or has some other basis of jurisdiction.").

         Having deciding the appropriate law to apply, the Court finds it useful to first address the second element ofres judicata, by identifying the claims and parties involved in the prior litigation, before determining what issues were decided on the merits. In the Colorado Action, the same plaintiffs, Mr. and Mrs. Gibbs, brought claims against three of the same defendants that appear in this litigation, Bank of America, Urban and Nationstar. There, as here, plaintiffs alleged that the defendants conspired to defeat the purpose of the HAMP program by misleading and deceiving borrowers in violation of RICO. As is relevant to these proceedings, plaintiffs also alleged state law claims of breach of contract and unjust enrichment regarding their South Carolina property, and violations of several federal civil rights statutes including 42 USC §§ 1983, 1985 and 1986. As the same parties present in the instant suit brought claims against the same defendants in the prior suit, the second element ofres judicata, requiring "claims by the same parties or their privies, " Ohio Valley Envtl. Coal, 556 F.3d at 210, is satisfied.

         Next, the Court must determine whether the first element of res judicata, "a judgment on the merits in a prior suit, " has been met. Id. While ultimately dismissing all claims against all defendants, the court in the Colorado Action did not reach the merits on every claim, instead dismissing some on jurisdictional grounds. With respect to the RICO claim, it held that plaintiffs failed to establish the alleged predicate acts of mail or wire fraud, and also failed to allege a RICO injury. Colorado Action, 2015 WL 196217, at *6. Specifically, the court opined that as plaintiffs had no right to a HAMP modification, they did not show that "[Bank of America's] actions deprived someone of money or property" and thus, "failed to assert colorable contentions of mail or wire fraud, " as required to support their RICO claim. Id. (emphasis in the original). Additionally, the court held that plaintiffs did not demonstrate that they had suffered a RICO injury, because "they do not allege facts that show that they meet the [HAMP] program's eligibility criteria (much less demonstrate what, if any, modification they would have been entitled to had their application been processed promptly and correctly.)" Id. Because the court ruled that plaintiffs had failed to state a RICO claim, that decision operates as a judgment on the merits in a prior litigation. Id. (dismissing RICO claim "against all parties").

         Because Plaintiffs used RICO as a jurisdictional hook to bring non-Colorado defendants, such as Nationstar and Bank of America, within the jurisdiction of the District Court of Colorado, [12] the court found it lacked personal jurisdiction over Nationstar once the RICO claim had been dismissed. Id. at *6-7. However, "dismissal for jurisdictional defects has no res judicata effect." Hosteller v. United States, 97 F.Supp.2d 691, 695 (E.D. Va. 2000) (citing Williams v. United States, 50 F.3d 299, 304 (4th Cir.1995)). Thus, while additional claims were leveled against Nationstar in the Colorado Action, the Court can only give res judicata effect in this litigation to the RICO claims against Nationstar because that was the sole claim adjudicated on the merits.

         However, the court, finding that it did have personal jurisdiction over Bank of America, and Urban, a Colorado resident, reached the merits as to the remainder of the claims against those two defendants. See Colorado Action, 2015 WL 196217, at *8-l 1. Thus, the first element of res judicata, "a judgment on the merits in a prior suit, " Ohio Valley Envtl. Coal, 556 F.3d at 210, is satisfied for all the prior claims brought against Bank of America and Urban, but only for the RICO claim brought against Nationstar.

         To establish the third and final element of res judicata, the Court must determine whether the present litigation constitutes "a subsequent suit based on the same cause of action." Id. The Fourth Circuit employs a "transactional approach" in determining whether or not there is "an identity of claims between the first and second suit" meaning that "res judicata will bar a newly articulated claim if it is based on the same underlying transaction involved in the first suit and could have been brought in the earlier action." Providence Hall Assocs. Ltd. P'ship v. Wells Fargo Bank, N.A., 816 F.3d 273, 282 (4th Cir. 2016) (internal citations and quotations omitted).

         The RICO claim that Plaintiffs bring in this case is virtually identical to the RICO claim they asserted in the prior litigation, even inserting almost the exact same language from their Colorado Action complaint into their Amended Complaint in this litigation. Compare ECF No. 1 ¶¶ 50-73, with Colorado Action, 2015 WL 196217, at Dkt. No. 1 ΒΆΒΆ 109-131. However, it is unclear to the Court, and the parties have not addressed, whether Plaintiffs' attempts to modify their South Carolina loan are part of same transaction as any attempts to modify their Maryland loan. Thus, the Court finds that Plaintiffs' RICO claims against Bank of America, Nationstar and Urban regarding the South ...


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