What is a bank robber?

Christopher L. Peterson
University of Utah, S.J. Quinney College of Law
Associate Dean for Academic Affairs, Professor of Law

In the wake of the financial crisis internet bloggers, newspaper columnists, and many middle and working class Americans have called the financiers responsible for the residential mortgage backed securities are “crooks,” “criminals,” and even “Wall Street gangsters.” While this populist rhetoric is widespread, neither the nation’s academics nor mainstream policy makers have taken this name calling particularly seriously. But perhaps there is more to these claims than initially meets the eye: there are some profound organizational similarities between organized crime and the behavior of many of the most important American bankers in the past ten years.

While there are many different forms organized crime, the prototypical gangsters in the American experience were the so called Italian-American “mafia” families in large north-Eastern U.S. cities. Although sensationalized by Hollywood, these criminal organizations exerted significant influence on the U.S. economy and even, at times, political institutions. Mafia organizational structure relied on insulating leadership positions from government prosecution through the use of expendable soldiers. Soldiers were expected to suffer through periodic arrests, incarceration, and violence associated with the illegal acts upon which these criminal enterprises depended. But because the compensation for soldiers was high relative to their other employment prospects, crime families could maintain adequate staffing in the soldier class.

In residential mortgage backed securitization deals, the management of investment banks, insulated themselves and the bonuses they received through the use less powerful, less capitalized mortgage origination and brokerage companies. Like mafia soldiers, mortgage brokers and originators were expected to commit or abet fraud, violate sound underwriting practices, and ignore or undermine consumer protection statutes. As law enforcement claims and bad debts accumulated, the collective understanding was that mortgage originators and brokers would shed their corporate identity through insolvency—doing their time so to speak—only to reappear in another business form when the opportunity presented itself. Originator and broker insolvency absorbed and deflected government sanctions, preserving the vital link to world capital markets provided by the large investment banks. Both the mafia and structured finance systems featured and relied on high, but manageable, casualty rates and instability in the soldier class.

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Reuters-

We all know that the foreclosure crisis has been a disaster for state and county governments. When homeowners lose their houses, they stop paying property taxes, which is one of the reasons why municipal governments have been driven to consider ideas like seizing underwater mortgages through the use of eminent domain. We’ve also seen state and local officials file lawsuits against the Mortgage Electronic Registration Systems, claiming that MERS and its member banks have cheated governments out of mortgage recording fees in the securitization process. MERS has had mixed results in shutting down those cases but so far hasn’t been found liable.

There’s another tranche of litigation that’s gotten much less attention but could result in billions of dollars for state and county governments, courtesy of Fannie Mae and Freddie Mac, the government-sponsored mortgage guarantors that have taken ownership of thousands and thousands of foreclosed homes. The Judicial Panel on Multidistrict Litigation is weighing a motion to consolidate 23 suits from around the country that claim Fannie and Freddie owe real estate transfer taxes on foreclosed homes they resold. The total exposure for Fannie and Freddie, which are now in federal conservatorship, hasn’t been publicly tabulated, but in the two cases that sparked the MDL motion, the Michigan attorney general and the county government of Oakland, Michigan, claimed that Fannie and Freddie owe millions in transfer taxes just to Oakland County. Class actions already on the dockets have asserted claims on behalf of 13 states, but according to a consolidation motion filed by Genesee County, Michigan, 35 states have real estate transfer tax statutes that could be asserted against Fannie and Freddie. I’d be surprised if most of them (including California and Nevada, which haven’t yet brought cases) don’t end up filing claims.

[REUTERS]

Cindy Lesman, Plaintiff, Pro Se.

Mortgage Electronic Registration Systems, Inc., Defendant, represented by Suzanne R. Haley, McGuireWoods, LLP-NC.

Bank of America, N.A., as Servicer for Citibank, N.A., Defendant, represented by Suzanne R. Haley, McGuireWoods, LLP-NC.

RICHARD W. STORY, District Judge.

This case grows out of proceedings to foreclose on property owned by Plaintiffs Mark and Cindy Lesman (“Plaintiffs” or “the Lesmans”). Now before the Court are the motion to dismiss [Doc. 5] and motion to strike Plaintiffs’ reply [Doc. 21] filed by Defendants Mortgage Electronic Registration Systems, Inc. (“MERS”) and Bank of America, N.A. (“BOA”). For the reasons discussed below, it is ORDERED that Defendants’ motion to strike is DENIED as moot Defendants’ motion to dismiss is DENIED without prejudice.

I. Procedural History

On November 28, 2011, the Lesmans filed a complaint in the Superior Court of Forsyth County, Georgia asserting various claims against MERS and BOA. (See Compl., Doc. 1-1).¹ These include “foreclosure (pleading) fraud, lack of standing and/or lack of capacity to foreclose, breach of contract (deceptive and unfair practices) and [] violations under the Fair Debt Collection Act (15 U.S.C. sec. 1692c(2)(A), (5) & (10).” (Id. at 3).² The Lesmans seek “emergency temporary and permanent injunctive relief,” declaratory relief, “exemplary or punitive damages,” and costs. (Id. at 10, 12, 15). BOA removed the case to this Court on January 25, 2012. [Doc. 1].³ In lieu of answers, MERS and BOA filed the pending motion to dismiss the Lesmans’ complaint. [Doc. 5]. The Lesmans then filed a “Rebuttal/Objections to Defendants’ Mot[i]on to Dismiss” [Doc. 15] and a “Brief in Support of Objection to Defendants[‘] Motion to Dismiss With Memorandum of Law Incorporated” [Doc. 18]. Defendants filed a reply [Doc. 19] and the Lesmans then filed a surreply [Doc. 20], which Defendants have moved to strike [Doc. 21].

II. Defendants’ Motion to Strike

Defendants move to strike Plaintiffs’ Reply to Defendants’ Reply in Support of Defendants’ Motion to Dismiss (“surreply”) [Doc. 20] on the ground that “it is procedurally improper” under both federal and local rules and “without merit.” (Doc. 21 at 1-2).

This Court has repeatedly held that a motion to strike is not the proper vehicle for challenging matters not contained in pleadings, which Fed. R. Civ. P. 7(a) defines to include complaints, answers and court-ordered replies to answers, but not motions or supporting exhibits. In Luster v. Ledbetter, 647 F.Supp.2d 1303 (M.D. Ala. 2009), the court explained that “[t]he Federal Rules of Civil Procedure delineate the general use of a motion to strike: `Upon motion made by a party . . . the court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.'” Id. at 1305 (quoting Fed. R. Civ. P. 12(f)). “The terms of the rule make clear that `[o]nly material included in a “pleading” may be subject of a motion to strike. … Motions, briefs or memoranda, objections, or affidavits may not be attacked by the motion to strike.'” Id. (quoting 2 James Wm. Moore, et al., Moore’s Federal Practice § 12.37[2] (3d ed. 1999)); see also JP Morgan Chase Bank, N.A. v. Sampson, No. 1:10-cv-1666-JEC, 2012 U.S. Dist. LEXIS 37514, at *6 (N.D. Ga. Mar. 20, 2012) (denying motion to strike late-filed response brief and explaining that “`[t]he terms of Rules 12(f) and 7(a) make clear that only material included in a pleading may be subject of a motion to strike and that motions, briefs or memoranda, objections, or affidavits may not be attacked by the motion to strike'” (quoting Jeter v. Montgomery Cnty., 480 F.Supp.2d 1293, 1296 (M.D. Ala. 2007))). Nevertheless, in deciding Defendants’ motion, the undersigned will not consider the Lesmans’ surreply, which was not authorized by the Federal Rules or this Court’s local rules and was filed without court approval. See, e.g., Byrom v. Delta Family Care-Disability & Survivorship Plan, 343 F.Supp.2d 1163, 1188 (N.D. Ga. 2004) (“Neither the Federal Rules of Civil Procedure nor the local rules for the Northern District of Georgia authorize parties to file surreplies. Indeed, `to allow such surreplies as a regular practice would put the court in the position of refereeing an endless volley of briefs.'” (quoting Garrison v. Northeast Ga. Med. Ctr., Inc., 66 F.Supp.2d 1336, 1340 (N.D. Ga. 1999 ), aff’d, 211 F.3d 130 (11th Cir. 2000))). Accordingly, Defendants’ motion to strike the Lesmans’ surreply is DENIED as moot.

III. Discussion

A. The Complaint

The Lesmans’ complaint contains the following pertinent allegations:

The Lesmans live in the State of Georgia, and reside on the property that is the subject of their complaint, which is located in Cumming, Forsyth County, Georgia and is “know[n] as 2640 Old Atlanta Road, Cumming, GA 30041” (“the Property”). (Doc. 1, Compl. ¶¶ 1, 6). The Lesmans “are challenging the alleged soon-to-occur sale and non-judicial foreclosure of [the Property]” which is described in a “Deed to Secure Debt and Security Agreement allegedly signed between Plaintiff Mark Lesman, only . . . and [D]efendant M.E.R.S. … securing a Note in the original principal amount of $1,065,000.00.” (Id. ¶ 6).

“Plaintiffs assert here that there has been fraud, pleading fraud and breach of contract by all [D]efendants.” (Id. ¶ 8). “Plaintiffs assert herein that [D]efendant M.E.R.S. fraudulently transferred the Deed of Trust to pursue foreclosure proceedings and are presently under investigation for questionable and unlawful transactions in Georgia, deceiving Plaintiffs.” (Id. ¶ 9).

“Defendant BOA, allegedly as servicer for Citibank, N.A.(CB) as trustee for the Certificateholders of SAMI II inc., Bear Sterns ARM Trust, Mortgage Pass-Through asset-backed Certificates, series 2006-4 is and was . . . a foreign corporation whose corporate domicile and alleged authority to do business in the State of Georgia is unknown.” (Id. ¶ 10). Citibank “(by and through Defendant BOA) is a corporate entity functioning as an alleged trustee for another corporation” whose “authority to do business in Georgia is also unknown,” and Citibank “issued securities which may . . . have been [im]properly registered and in the form of . . . investment vehicle[s] which may or may not be collateralized in whole or in part by the mortgage the subject of this action,” and “the Certificateholders of the subject securities may or may not have an interest[] . . . in the mortgage and or the Note the subject of this action.” (Id. ¶ 11). “Defendant BOA is the alleged `servicer’ of the loan and purported agent for the original holder of the original note, Countrywide Bank, N.A. … in connection with a non-judicial foreclosure proceeding as to the Property . . . [and] has no legal interest in either the mortgage or the [subject] Note. …” (Id. ¶ 12).

“[N]o . . . Assignment [of Plaintiffs’ mortgage] has ever been produced to the Plaintiffs; and Defendants M.E.R.S. and BOA have failed to prove . . . that [either] is the holder of all rights under the Note. …” (Id. ¶ 13). “[T]here appears to be no lawful assignment of the mortgage. …” (Id. ¶ 14). “[D]efendants, in seeking foreclosure and, later, a writ of possession against Plaintiffs, cannot prove the chain of ownership.” (Id. ¶ 15). “Plaintiffs are in doubt as to the legality of the assignment(s) and suspect that their mortgage contract is one of the bundled mortgages put together for investors who were offered the opportunity to buy shares (securitization) in each bundle without the proper assignment ever being recorded.” (Id. ¶ 16). The “lawful transfer of [Plaintiffs’] mortgage never occurred and . . . the actual date that the property was acquired has been concealed and has fraudulently been made to facilitate foreclosure against Plaintiffs.” (Id. ¶ 17). Defendants have initiated foreclosure proceedings “under false pretenses and without legal authority to do so, defrauding Plaintiffs.” (Id. ¶ 18).

“Plaintiffs have questions as to whom they should be negotiating or corresponding with regarding [their] mortgage, or if the foreclosure is even lawful.” (Id. ¶ 19). “Plaintiffs . . . are victims of predatory lending by [Countrywide],” and “[D]efendant M.E.R.S. is . . . attempting to conceal that fact from the courts.” (Id. ¶ 20). “Defendant M.E.R.S.’ legal standing has been successfully challenged in several . . . courts across the country. …” (Id. ¶ 21). “[D]efendant M.E.R.S. is engaged in . . . unfair and deceptive business practices against the real property of Plaintiffs.” (Id. ¶ 22).

“Defendant BOA, as alleged `Trustee’ for unnamed `Certificateholders[,]’ . . . has failed to demonstrate that it, and not the Certificateholders, is the party with the true ownership interest in the Mortgage. . ., or that the Certificateholders have acceded or legally assigned their rights to and under the subject Mortgage to Defendant BOA, specifically the right to seek a foreclosure.” (Id. ¶ 23). “Defendant BOA has not demonstrated that it has suffered an actual or threatened injury as a consequence of any default,” and thus has not demonstrated that it has “legal standing to institute [a] foreclosure.” (Id. ¶ 24). Defendant BOA has created a “cloud” on the subject property’s title by filing “an action styled `Notice of Sale Under Power’ against both Plaintiffs, in it erroneously claiming to be `. . . attorney-in-fact for Mark and Cindy Lesman’ without legal authority to do so.” (Id. ¶ 25).

“Defendant BOA, through its counsel, has notified Plaintiffs that the foreclosure sale on the Property has been scheduled to take place on the first Tuesday in December, 2011.” (Id. ¶ 26). “On or about September 10th, after Plaintiffs[ made] repeated requests to restructure/refinance the Note, were refused by BOA [;] Plaintiffs[] . . . request[ed] the payment reduction to $2,700.00/month and also informed BOA that they were willing to pay a specified lump sum payment in addition to the reduction in monthly payments[; h]owever, Defendant BOA [] refused to negotiate . . . and . . . began foreclosure against Plaintiff Mark Lesman, erroneously including Plaintiff Cindy Lesman to the foreclosure action when Plaintiff Cindy Lesman never signed the Note.” (Id. ¶ 27). Plaintiffs seek “to challenge the foreclosure prior to the issuance of any Certificate of Title following as a severance of the ownership and possession of the original Note and Mortgage has occurred and as the true owner and holder of both the original Note and Mortgage are unknown as a result of one or more alleged assignments and the parsed sale of certain rights under the Note in part to at least one third party (Countrywide Bank), Defendants M.E.R.S. and BOA are both legally precluded from foreclosing on the Property unless and until they can both demonstrate full legal standing to do so.” (Id. ¶ 28). “[T]he foreclosure sale [on the Property is] set for eight (8) calendar days . . . from the date of the filing of this Complaint.” (Id. ¶ 34). “Plaintiffs respectfully request that this Court . . . enter an Order . . . precluding and cancelling the foreclosure sale presently scheduled for the first Tuesday in December, 2011.” (Id. ¶ 37).

“Defendants M.E.R.S. and BOA . . . were not a party to the original mortgage contract documents[ and were] not named as a payee in the Note; and both have failed to demonstrate any valid assignment of either the Mortgage or the Note. …” (Id. ¶ 44). Defendant BOA as “servicer of the Note” and Defendant M.E.R.S. as “`nominee’ of the Note, . . . cannot institute or maintain a foreclosure proceeding either directly or indirectly as agent of Countrywide Bank, N.A.” (Id. ¶¶ 45-46). “Defendants M.E.R.S. and BOA have filed, or caused to be filed[,] false and fabricated assignment of mortgage in order to foreclose upon Plaintiffs’ property.” (Id. ¶ 47). “Defendant BOA . .. has assisted Defendant M.E.R.S. in proceeding to a foreclosure/writ of possession action against the Plaintiffs under false pretenses and without legal authority, breaching the contract and breaching their fiduciary duty to Plaintiffs.” (Id. ¶ 48).

Plaintiffs also assert that, in violation of the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692, et seq.,

In attempting to foreclose on plaintiffs’ property, all defendants:

a. made false, deceptive and misleading representations concerning their standing to sue and their interest in the debt;

b. falsely represented the status of the debt, in particular, that i[t] was due and owing to them at the time the foreclosure was initiated;

c. falsely represented or implied that the debt was owing to them as an innocent purchaser for value, when in fact, such assignment had not been accomplished;

d. threatened to take action, namely engaging in collection activities and collection and foreclosure that cannot legally be taken by them; and,

e. obtained access to state recorder’s offices in order to collect notes and foreclose on mortgages under false pretenses, namely, that they were duly authorized to engage in such activities when in fact they were not[.]

(Id. ¶ 50; see also id. ¶¶ 49, 52).

B. Defendants’ Motion to Dismiss

1. Failure to Effect Service of Process

Defendants move to dismiss the complaint on the ground that the Lesmans failed to effect service of process on both MERS and BOA and the Court therefore lacks personal jurisdiction over them. (Doc. 5, Def. Br. at 23-25). The Lesmans subsequently sent both Defendants a request to waive service, and Defendants “have agreed to waive service by signing and returning the waiver[s] to Plaintiffs” and have withdrawn their failure to effect service argument. (Doc. 19, Def. Resp. at 2 n.1). Accordingly, Defendants’ motion to dismiss based on the Lesmans’ failure to effect service of process is DENIED as moot.

2. Failure to State a Claim Upon Which Relief Can be Granted

a. The Parties’ Contentions

Defendants contend that the Lesmans’ complaint should be dismissed pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted. (Doc. 5, Def. Br. at 1-2). Defendants argue:

This lawsuit arises out of Plaintiffs’ efforts to thwart the lawful foreclosure of their home following their failure to make their required mortgage payments. The Complaint simply lacks the factual and legal support necessary to permit this suit to proceed. Simply put, Plaintiffs are in default on their loan obligations and have brought this action as a last ditch attempt to frustrate further foreclosure efforts. The case has no merit and is predicated on fundamentally incorrect legal theories that have been routinely rejected by Georgia courts. Plaintiffs’ entire Complaint fails as a matter of law, and thus, should be dismissed.

(Id. at 2). Defendants recite the pleading standards of Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), discussed infra, and they argue that “Plaintiffs fail to allege any facts sufficient to show that they are parties to the Assignment of the Security Deed” or “stating that they are third-party beneficiaries to the Assignment.” (Id. at 7). They fault the Lesmans’ allegations that MERS and BOA have no legal standing or right to pursue foreclosure as “conclusory” (id. at 11-12) and they argue that the Lesmans have not pled the elements of a claim under the FDCPA or facts sufficient to support such a claim (id. at 15-16). In addition, they argue that the Lesmans have made only “generalized allegations” alluding to fraud and have “fail[ed] to allege fraud with the necessary particularity” required by Georgia law and Fed. R. Civ. P. 9(b). (Id. at 18-19). Defendants also contend that “[t]he Complaint fails to offer anything more than conclusory allegations masquerading as facts, which is not sufficient to support Plaintiffs’ demand for injunctive relief” (id. at 20) and that the Lesmans “have failed to plead facts sufficient to demonstrate an actual controversy and are not entitled to declaratory relief” (id. at 23). Defendants also argue that the Lesmans’ putative claims fail on the merits. (Id. at 6-23).

In their “Rebuttal/Objections to Defendants’ Mot[i]on to Dismiss” [Doc. 15], the Lesmans assert in conclusory fashion “that they originally filed a well plead complaint . . . and deserve the right to move forward with this matter” and to engage in discovery (id. at 2-3). In their “Brief in Support of Objection to Defendants[‘] Motion to Dismiss With Memorandum of Law Incorporated” [Doc. 18], the Lesmans argue, first, that this Court lacks jurisdiction over this action and that it should be remanded to the state court (id. at 2-4). They acknowledge that their complaint “mentioned possible violations under the federal Fair Debt Collection Practices Act” (“FDCPA”) but maintain that it “in no way emphasized that that is an important part of their claims.” (Id. at 3). They also argue, “Plaintiffs do not lack standing to challenge fraudulent assignments and Plaintiffs assert that MERS assignment(s) are not valid” (id. at 4-14), and “Plaintiffs have not failed to state a claim and Plaintiffs are certainly entitled to injunctive relief as well as declaratory relief” (id. at 14-20). (Formatting altered).

In their reply brief [Doc. 19], Defendants argue first that removal of this action was proper because the Court has federal-question jurisdiction based on the Lesmans’ FDCPA claims and diversity jurisdiction based on the diverse citizenship of the parties and an amount in controversy greater that $75,000. (Doc. 19, Def. Reply at 2 n.1). Defendants argue further that the Lesmans “still fail to allege any facts to show that the attempted foreclosure was unlawful,” and they “still fail to state a claim under the FDCPA,” “still fail to state a claim for fraud,” and “still fail to state a claim for declaratory or injunctive relief.” (Id. at 3-15 (formatting altered)).

b. This Court’s Jurisdiction

Whether this Court has subject matter jurisdiction following its removal from the state court is a threshold question. Thus, the Court addresses the Lesmans’ argument that this Court lacks subject matter jurisdiction first.

Pursuant to 28 U.S.C. § 1441(a), “any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant . . . to the district court of the United States for the district and division embracing the place where such action is pending.” 28 U.S.C. § 1331 provides that “[t]he district courts shall have original jurisdiction of all civil actions arising under the . . . laws . . . of the United States.” “Whether a claim `arises under’ federal law is determined by the well-pleaded complaint rule, which provides for federal-question jurisdiction when a federal question is presented on the face of the plaintiffs’ properly pleaded complaint.” Liebman v. Deutsche Bank Nat’l Trust Co., 462 F. App’x 876, 878 (11th Cir. 2012) (unpublished decision) (citing Hill v. BellSouth Telecomms., Inc., 364 F.3d 1308, 1314 (11th Cir. 2004) (“Any claim that was originally filed in state court may be removed by a defendant to federal court if the case could have been file in federal court originally.”)). It is not in dispute that “federal question jurisdiction exists over claims arising under the FDCPA pursuant to 28 U.S.C. § 1331 and 15 U.S.C. § 1692k.” Ortega v. Collectors Training Inst. of Ill., Inc., No. 09-21 744-CIV-GOLD/McALILEY, 2011 U.S. Dist. LEXIS 6282, at *8 (S.D. Fla. Jan. 24, 2011). The question is whether the Lesmans’ complaint presents a federal question on its face.

The Court finds that federal-question jurisdiction exists based on the Lesmans’ FDCPA claim. While simply “listing” federal statutes in a complaint may not be enough to confer federal-question jurisdiction upon a district court, see Riley v. Fairbanks Capital Corp., 222 F. App’x 897, 897-99 (11th Cir. 2007) (unpublished decision) (finding that district court did not have federal-question jurisdiction over action where complaint “listed some federal statutes,” including the FDCPA, “in the complaint’s preamble” but did “not contain such [a] claim[] or other claims `arising under the Constitution, laws, or treatises of the United States'”), the Lesmans’ complaint goes beyond simply “listing” a federal claim. The complaint sets out Defendants’ alleged violation of the FDCPA “[i]n attempting to foreclose on [P]laintiffs’ property”; it both cites to and quotes language from the FDCPA; and it expressly seeks “statutory damages” under the FDCPA “up to $1,000.00 per Plaintiff.” (Compl. Doc. 1-1 at 1 & ¶¶ 49, 50, 52); see also 15 U.S.C. § 1692k(a)(2)(A) (allowing damages “not exceeding $1,000” for violations of FDCPA). Putting aside at this point the sufficiency of the Lesmans’ pleading, the undersigned finds that their complaint, on its face, alleges claims under the FDCPA and thus presents a federal question supplying the basis for this Court’s subject matter jurisdiction.

c. Standards Applicable to Motion to Dismiss

Federal Rule of Civil Procedure 8(a)(2) requires that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” In order to state a claim that can survive a motion to dismiss, “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). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice,” and “only a complaint that states a plausible claim for relief survives a motion to dismiss.” Iqbal, 556 U.S. at 678-79. To be plausible, the complaint must contain “well-pleaded facts” that “permit the court to infer more than the mere possibility of misconduct.” Id. at 679.

To survive a motion to dismiss, a complaint “does not need detailed factual allegations,” but it must provide “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. “Nor does a complaint suffice if it tenders `naked assertion[s]’ devoid of `further factual enhancement.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). Furthermore, “[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555 (internal citations omitted); see also Redland Co. v. Bank of Am. Corp., 568 F.3d 1232, 1234 (11th Cir. 2009) (explaining that “`[t]o survive dismissal, the complaint’s allegations must plausibly suggest that the plaintiff has a right to relief, raising that possibility above a speculative level; if they do not, the plaintiff’s complaint should be dismissed'” (internal quotation omitted)). “Furthermore, although pro se pleadings are governed by less stringent standards than pleadings prepared by attorneys, pro se parties are still required to comply with minimum pleading standards set forth in the Federal Rules of Civil Procedure and this district’s Local Rules.” Habib v. Bank of Am. Corp., No. 1:10-cv-04079-SCJ-RGV, 2011 U.S. Dist. LEXIS 69858, at *6 (N.D. Ga. Mar. 15, 2011) (internal citations omitted) (citing Haines v. Kerner, 404 U.S. 519, 520 (1972); Tannenbaum v. United States, 148 F.3d 1262, 1263 (11th Cir. 1998) (per curiam)), adopted by 2011 U.S. Dist. LEXIS 69805 (N.D. Ga. June 29, 2011).

d. Analysis

The undersigned finds that the instant complaint is deficient under the standards of Rule 8, Twombly and Iqbal. As noted, the Lesmans’ complaint includes a list of “claims” on the first page: “foreclosure (pleading) fraud, lack of standing and/or lack of capacity to foreclose, breach of contract (deceptive and unfair practices) and [] violations under the Fair Debt Collection [Practices] Act.” (Doc. 1-1, Compl. at 1). It does not, however, set out these “claims” in separate counts, each of which states the nature of the claim—for example, by setting out the elements of the claim—and alleges “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). Rather, the nature and/or elements of each of the Lesmans’ putative claims (or causes of action) are not clearly set out and, as Defendants point out, many of the allegations in the complaint are generalizations or conclusions, not specific facts that describe or assert, with respect to each Defendant, the acts of that Defendant allegedly supporting each claim or cause of action. In fact, the complaint consists largely of conclusory assertions about mortgages, assignments, foreclosures and the involvement of MERS and BOA in those activities generally. Moreover, because the complaint sets out 24 paragraphs of “facts” without connecting those “facts” with the putative claims, it is not clear which “facts” are material to which claim or claims. Nor is it clear whether the Lesmans allege all claims against both Defendants. Furthermore, as Defendants also point out, the complaint fails to plead fraud with the specificity required by Fed. R. Civ. P. 9(b) and it does not set out facts that would show the Defendants violated the FDCPA. In short, the complaint generally contains no more than “labels and conclusions,” Twombly, 550 U.S. at 555, and “naked assertion[s] devoid of further factual enhancement,” Iqbal, 556 U.S. at 678 (internal quotation omitted), and the undersigned finds that it fails to state a claim upon which relief can be granted.

Nevertheless, “where a more carefully drafted complaint might state a claim upon which relief could be granted, a court should not dismiss with prejudice a pro se complaint even if the plaintiff has not requested leave to amend without giving the plaintiff at least one chance to amend the complaint.” Habib, 2011 U.S. Dist. LEXIS 69858, at *14 n.3. Accordingly, Defendants’ motion to dismiss the Lesmans’ complaint is DENIED without prejudice to their right to refile after the Lesmans have been given an opportunity to amend their complaint. Within fourteen (14) days from the date of entry of this Order, the Lesmans shall file an amended complaint that complies with Rule 8, Twombly and Iqbal. The Lesmans are advised that any amended complaint should clearly set out each claim alleged; that each claim should be set out in a separate count identifying the defendant(s) against whom the claim is alleged and stating the facts supporting the claim; and that the documents they deem material to their claims, including deeds, assignments, transfers, notices of foreclosure, etc. should be attached to any amended complaint.

IV. Conclusion

For the reasons discussed above, it is ORDERED that Defendants’ motion to strike [Doc. 21] is DENIED as moot, and Defendants’ motion to dismiss [Doc. 5] is DENIED without prejudice.

SO ORDERED.

Footnotes

1. The complaint does not set out these “claims” as separate counts. Instead, it simply lists these claims on the first page and then refers to them throughout the complaint. (See Compl., Doc. 1-1). The complaint does set out two “counts”: Count I is titled “EMERGENCY TEMPORARY AND PERMANENT INJUNCTIVE RELIEF” and Count II is titled “DECLARATORY RELIEF.” Neither “count” sets out a “plausible claim for relief” containing “well-pleaded facts.” Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). Iqbal‘s requirements are discussed in more detail infra.

2. The page references in this Report and Recommendation correspond to the pagination in the Court’s electronic filing system (CM/ECF).

3. According to BOA, though Defendant MERS had not been served properly and thus was not required to consent to removal, “Defendant MERS consents to removal if and when [it is] properly served.” (Doc. 1 at 1-2).

via: Treasury.gov

Today, Secretary Geithner sent the following letter to Acting Federal Housing Finance Agency Director Ed DeMarco on the Principal Reduction Alternative (PRA) program. Read the full letter here: letter.to.demarco.pdf?

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July 31, 2012

Federal Housing Finance Agency

Office of the Director

400 7th Street S.W.

Washington, D.C. 20024

Dear Acting Director DeMarco,

I am writing in response to the decisions announced in your letter to Congress today.  While I was encouraged that the Federal Housing Finance Agency (FHFA) is making progress on some initiatives we have discussed that will help the housing market recover, I am concerned by your continued opposition to allowing Fannie Mae and Freddie Mac (GSEs) to use targeted principal reduction in their loan modification programs.  

FHFA is an independent federal agency, and I recognize that, as its Acting Director, you have the sole legal authority to make this decision.  However, I do not believe it is the best decision for the country, because, as we have discussed many times, the use of targeted principal reduction by the GSEs would provide much needed help to a significant number of troubled homeowners, help repair the nation’s housing market, and result in a net benefit to taxpayers. 

Indeed, notwithstanding the selective numbers cited in your letter, FHFA’s own analysis, which you have shared with us previously, has shown that permitting the GSEs to participate in the Principal Reduction Alternative program (HAMP-PRA) could help up to half a million homeowners and result in savings to the GSEs of $3.6 billion compared to standard GSE loan modifications. Furthermore, if the GSEs were to participate in HAMP-PRA, taxpayers would save as much as $1 billion on a net basis.  In view of the clear benefits that the use of principal reduction by the GSEs would have for homeowners, the housing market, and taxpayers, I urge you to reconsider this decision. 

I have asked Michael Stegman of my staff to restate in writing for you the case for principal reduction, consistent with FHFA’s mandates as conservator and regulator of the GSEs, that the Treasury has made to you and your staff over the last several months.  His memorandum is enclosed.  Treasury stands ready to provide any additional analytical support to make a targeted principal reduction program at the GSEs successful.

We welcome the positive steps you announced today regarding further refinancing opportunities, providing clarity to lenders on legal exposures, aligning short sale practices, and putting foreclosed properties back on the market.  All of these have the potential to help advance recovery of the housing market.  As we have previously discussed, the impact of these steps will depend on the speed with which you act and the extent of the changes you make.   

Five years into the housing crisis, millions of homeowners are still struggling to stay in their homes, and the legacy of the crisis continues to weigh on the market.  You have the power to help more struggling homeowners and heal the remaining damage from the housing crisis.  I hope you will move to address these problems with a sense of urgency and force commensurate with the scale of the remaining challenges.  

Sincerely,

Timothy F. Geithner?

UPDATE: Case is showing up as Settled: Loan Modified on 3/15/2012 – Thanks J for this info!

Wonder how this panned out? This after he dismissed the case with Prejudice!

What does Dismissed with Prejudice mean? Unfortunately not much. You see after New York Supreme Court Judge Schack dismissed Deutsche Bank’s case against Walter Francis with Prejudice for the inability to demonstrate it owns the mortgage or the note and for an unrecorded mortgage assignment back on March 25, 2011, on December 30, 2011 Deutsche Bank filed the unrecorded assignment of mortgage on what appears to be 9 months later. The assignment is EXECUTED by Denise Bailey who I’m almost certain Judge Schack knows quite well.

Does anyone have the latest info on this case? H/T to Dan H for this info below.

[ipaper docId=101664896 access_key=key-1iahzvhzmdpusqgaxx21 height=600 width=600 /]

Wait…BUT Internal Documents Show Fannie Mae Believed Principal Reduction Would Save Taxpayers Money

Bloomberg-

Fannie Mae (FNMA) and Freddie Mac won’t forgive principal on delinquent mortgages they guarantee even as the U.S. Treasury Department is offering incentive payments for writedowns, the companies’ regulator said today.

Months of analysis showed there would be no clear benefit to taxpayers if the Federal Housing Finance Agency were to change its longstanding policy barring the government-owned mortgage-finance companies from loan modifications that include debt writedowns, Edward J. DeMarco, the agency’s acting director, said today said at a briefing with reporters.

“We concluded the potential benefit was too small and uncertain relative to unknown costs and risks,” DeMarco said.

[BLOOMBERG]

Inlander-

On the 38th floor of a Minneapolis skyscraper, Spokane attorney Kirk Miller begins to interview a so-called “robo-signer.”

Miller, a young, tireless consumer law attorney, is after information about the robo-signer’s work at Midland Credit Management, an arm of Encore Capital. Every year, Encore buys billions of dollars in credit-card debts and then sets out to collect — filing hundreds of thousands of lawsuits against the debtors.

That’s where robo-signers, like the one Miller is deposing, come in.

The woman tells Miller she was paid $12.50 an hour to sign affidavits for those lawsuits. Those documents testify to the veracity of the debts owed and are used to garnish wages, empty bank accounts and repossess property — so their accuracy is essential.

But on busy days, the woman says, she would sign 300 such affidavits in an assembly-line-like process. In batches, she’d sign the documents, the person next to her would notarize them, and another would stuff them in envelopes to be mailed to out-of-state law firms. There, someone would print out a legal package, attach documentation, have a lawyer sign it and finally mail it to local courts like Spokane County Superior Court.

[INLANDER]

Reuters-

* Homeowners claim bank misled them about modifications

* Excess fees, unnecessary foreclosures alleged

* Judge dubs some fee justifications “gibberish”

By Jonathan Stempel

NEW YORK, July 30 (Reuters) – A federal judge rejected JPMorgan Chase & Co’s bid to dismiss a lawsuit accusing it of misleading thousands of cash-strapped homeowners nationwide about modifying their mortgages.

U.S. District Judge Richard Stearns in Boston on Friday let homeowners pursue claims that the largest U.S. bank systematically failed to keep its end of the bargain after signing up borrowers hoping to modify their mortgages under the federal Home Affordable Modification Program, or HAMP.

[REUTERS]

Reuters-

On Friday, plaintiffs’ lawyers at Pomerantz Haudek Grossman & Gross filed the latest class action related to banks’ alleged manipulation of the London interbank offered rate, or Libor, an interest-rate benchmark that affects trillions of dollars of securities. The new complaint, filed in federal court in Manhattan on behalf of Berkshire Bank, asserts claims for all New York financial institutions that “originated, purchased outright or purchased a participation in” loans paying interest rates pegged to Libor.

Is that class different from all investors who purchased securities with Libor-pegged interest rates? Not according to Michael Hausfeld, whose eponymous firm is interim co-lead counsel in a Libor class action already under way before U.S. District Judge Naomi Reice Buchwald in Manhattan. Back in November, after a hard-fought lead counsel contest, Buchwald appointed Hausfeld and Susman Godfrey to head the Libor multidistrict litigation for over-the-counter investors. Kirby McInerney and Lovell Stewart Halebian Jacobson were appointed lead counsel in a separate class action for derivatives investors who traded on exchanges regulated by the Commodity Futures Trading Commission.

[REUTERS ON THE CASE]

Guardian-

Separate inquiry by the Financial Services Authority into Libor fixing scandal covers eight financial institutions, not just banks.

The Serious Fraud Office has moved a step closer to bringing criminal charges against individuals involved in rigging the key Libor interest rate after concluding that the law does cover the offences that led to Barclays being hit by a £290m fine.

The SFO, which had announced a formal investigation into attempts to manipulate the rate on 6 July, said its investigation covered a number of financial institutions.

“The Director of the Serious Fraud Office, David Green QC, is satisfied that existing criminal offences are capable of covering conduct in relation to the alleged manipulation of Libor and related interest rates. The investigation, announced on 6 July, involves a number of financial institutions,” the SFO said.

[GUARDIAN]

Business week-

Bank of America Corp., (BAC) Barclays Plc (BARC) and Credit Suisse Group AG (CSGN) were among the banks sued by an investor over alleged manipulation of the Libor benchmark interest rate.

The investor, 33-35 Green Pond Road Associates LLC, bought an interest rate swap with a floating rate tied to the U.S.- dollar Libor, it said in a complaint filed today in federal court in Manhattan. Green Pond Road seeks to represent a class of investors that bought U.S. dollar Libor-based derivatives beginning on Aug. 1, 2007.

Green Pond Road claims the banks illegally colluded to fix Libor, injuring investors in securities based on the rate. The suit seeks unspecified damages, which could be tripled under U.S. antitrust law.

[BUSINESS WEEK]

CBS-

Seven of the top 10 worst cities hit by foreclosure in the U.S. are in California. But struggling homeowners there have a powerful advocate in their corner: the state’s attorney general, Kamala Harris.

Calif. lawmakers pass Homeowner Bill of Rights

Harris knows what it’s like to be the underdog. She beat the odds to become the first woman and the first African American to be elected attorney general of California.

What it’s like to be the first? Harris said, “When I first was elected as (District Attorney) of San Francisco as the first woman I would get that question, and I’d say, ‘I don’t know how to answer that question because I’ve always been a woman,’ but I’m sure a man could do the job just as well.”

Ending the foreclosure crisis has become Harris’ signature issue. She often visits hard-hit neighborhoods. “You have to see and smell and feel the circumstances of people to really understand them,” Harris said.

[CBS]

H/T Rolling Stone

.

NYT-

In the first sentences to be handed down in a $2.6 billion embezzlement case, an Iranian court ordered the death penalty for four people in the fraud that was uncovered in a network of Iranian banks last year, Iranian state media reported on Monday.

The four, who were not named in the report by the Fars news agency, were among 39 suspects who were convicted in what the Iranian authorities have described as the biggest financial swindle in the country’s history. The top prosecutor, Gholam Hossein Mohseni-Ejei, told reporters that two of the defendants had been given life sentences, while the others were given sentences of up to 25 years.

[NEW YORK TIMES]

IMPORTANT UPDATE & DISCLOSURE:

It appears the attorney Peter Nisson named handling this lawsuit is Current Status:  Not Eligible To Practice Law (Not Entitled).

Way too many to list and name but see the entire Complaint below. Courtesy of Court House News

[ipaper docId=101489791 access_key=key-136zlhrxrx357w7btfmv height=600 width=600 /]

WE NEED TO LOOK AT THOSE OVER AT THE JUSTICE DEPARTMENT AND WHERE THEY WORKED BEFORE THEY GOT THERE BECAUSE I THINK ONE OF THE REASONS PROSECUTION ISN’T THE LEVEL THAT IT SHOULD THERE IS SOME PARALYSIS IN SOME PLACES BECAUSE OF THOSE WHO ARE ABLE TO BLOCK A PLAY.

-Congresswoman Marcy Kaptur

Now for the story below and make sure you click to read of ALL the companies Covington & Burling represent!

Bloomberg-

There’s an old saying in journalism that there are no new stories, only new reporters. The revelation that U.S. Attorney General Eric Holder’s old law firm used to represent the bankrupt brokerage firm MF Global Holdings is a great example.

Here’s the lead paragraph from an article yesterday on the right-leaning news website Breitbart.com, which was following up on an op-ed in the Washington Times:

“Those wondering why the Department of Justice has refused to go after Jon Corzine for the vaporization of $1.6 billion in MF Global client funds need look no further than the documents uncovered by the Government Accountability Institute that reveal that the now-defunct MF Global was a client of Attorney General Eric Holder and Assistant Attorney General Lanny Breuer’s former law firm, Covington & Burling.”

[BLOOMBERG]

WSJ-

In the latest sign of the potential legal vulnerability facing banks ensnared in the world-wide probe of interest-rate manipulation, a New York lender alleges in a lawsuit that it was cheated out of interest income because rates on loans tied to Libor were “artificially” depressed.

The lawsuit effectively argues that the alleged manipulation short-changed lenders by helping borrowers pay less for mortgages and other loans.

Berkshire Bank, with 11 branches in New York and New Jersey and about $881 million in assets, claims in a proposed class-action lawsuit in U.S. District Court in New York that “tens, if not hundreds, …

[WALL STREET JOURNAL] subscription required

Bloomberg-

Never underestimate the government’s capacity for incompetence when it comes to overseeing large financial institutions. The latest example: an ill-advised consulting contract between Freddie Mac’s outside auditor and the federal agency in charge of running the company.

Freddie Mac, the housing financier with a $2.1 trillion balance sheet that was seized by regulators in 2008, remains under the control of its conservator, the Federal Housing Finance Agency. Yet its shares and bonds are still publicly traded. And it continues to file reports with the Securities and Exchange Commission, which means it must follow the SEC’s rules.

Some of those regulations seem to have been ignored when the FHFA hired Freddie Mac’s auditor, PricewaterhouseCoopers LLP, in May to provide advice on managing the company. The firm’s work includes consulting services that are barred under the SEC’s auditor-independence rules, as far as I can tell. The agency and the accounting firm say they are following the rules. Their explanations aren’t convincing.

[BLOOMBERG]

Many reasons why she should not be picked:

She has failed Florida Foreclosure Victims.

Other States have sued Lender Processing Services for Foreclosure Fraud.

She has never said one thing against Foreclosure Fraud. Never.

LPS headquarters is in Pam Bondi’s very own Florida. Why no lawsuit?

She fired two of her Asst. AG’s who were investigating the robo signing and foreclosure in Florida.

[…]

NO Actions speak louder than words.

TBO-

Florida Attorney General Pam Bondi is the latest name to emerge from the pool of rumored contenders for the Republican vice presidential slot, but experts consider her a long shot.

Bondi was in New England today campaigning for presumed Republican presidential candidate Mitt Romney, who is in the midst of an international tour.

[TBO.COM]

The Big Picture-

Wall Street fraud caused the Great Depression and the current financial crisis. Top economists and financial experts agree that our economy will never recover unless Wall Street fraud is prosecuted.

Yet the government has more or less made it official policy not to prosecute fraud, and instead to do everything necessary to cover up for Wall Street.  For example, the Obama administration is prosecuting fewer financial crimes  than under Reagan or either Bush.

For example, we pointed out in 2010:

The government’s entire strategy now – as during the S&L crisis – is to cover up how bad things are.

But it is not only a matter of covering up fraud that has already happened. The government also created an environment which greatly encouraged fraud.

Here are just a few of many potential examples:…

[THE BIG PICTURE]

I’ll tell you my opinion.

Maybe because the regulators in DC today and tomorrow were/are the counsel of the Banks. So how can you prosecute the CEO’s? I’m sure the former CEO’s asked for direction or advice from these lawyers. So how can you prosecute? Prosecute whom? Make any sense? Conflict!

Reuters-

Karen Seymour had high hopes for Sarbanes-Oxley. Ten years ago, when the law was passed, Seymour was chief of the criminal division of the U.S. Attorney’s Office in Manhattan, which is regarded as the country’s most prolific prosecutor of financial crimes. When she read Sarbanes-Oxley’s certification provisions, which specify that CEOs and CFOs can be sent to prison for falsely certifying corporate financial reports and reports on internal controls, she thought she finally had a way of getting at wrongdoing by top officials. “I thought it was going to be a really good tool,” she said in an interview this week. “But it never really developed.”

As Sarbanes-Oxley marks its 10th anniversary on Monday, its promise of holding CEOs and CFOs criminally responsible remains unfulfilled. The law states that if top corporate executives knowingly sign off on a false financial report, they’re subject to a prison term of up to 10 years and a fine of up to $1 million, with penalties escalating to 20 years and $5 million if their misconduct is willful. After accounting scandals at Enron, WorldCom and a host of other public companies, SOX’s certification provisions, according to Seymour and other former prosecutors, seemed like a clean, simple way to tie CEOs and CFOs to corporate crimes.

[REUTERS LEGAL]

(Reuters) –

Ben Bernanke heads the most powerful central bank in the world. Yet the Federal Reserve chairman says he was largely powerless to stop what some are calling the biggest financial fraud in history: the systematic manipulation of a key global interest rate.

It’s a line of argument that has fallen flat with some lawmakers and investors, who want to know why Bernanke and other key U.S. regulators did not do more to end a potentially criminal rigging of interest rates affecting trillions of dollars in financial contracts.

Bernanke said last week he had been largely unable to directly address problems with Libor, or the London interbank offered rate, which he said he learned of in 2008.

“We are and need to continue advocating for reforms to the Libor process. It is constructed by a private organization in the UK, and so our direct ability to influence that is limited,” Bernanke said in congressional testimony.

[REUTERS]

image: Reuters/ Gary Cameron