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Zander v. Saxon Mortgage Service, Inc.

United States District Court, M.D. North Carolina

June 18, 2015

KARIN KIRKSEY ZANDER, Plaintiff,
v.
SAXON MORTGAGE SERVICE, INC., MORGAN STANLEY & COMPANY, INC., and OCWEN FINANCIAL CORPORATION, Defendants.

MEMORANDUM OPINION AND ORDER

WILLIAM L. OSTEEN, Jr., District Judge.

Plaintiff Karin Kirksey Zander ("Plaintiff"), proceeding pro se, has asserted various claims under North Carolina state law regarding the reporting of a foreclosure proceeding. This matter comes before this court on three motions: (1) Plaintiff's Motion to Remand (Doc. 20); (2) a Motion to Dismiss filed by Defendant Ocwen Financial Corporation ("Ocwen") (Doc. 10); and (3) a Motion to Dismiss filed by Defendants Morgan Stanley & Company, LLC[1] ("Morgan Stanley") and Saxon Mortgage Service, Inc. ("Saxon") (Doc. 29).

This court has carefully considered Plaintiff's Motion to Remand ("Plaintiff's Motion"), Defendants' responses in opposition (Docs. 28, 32, 33), and Plaintiff's reply (Doc. 35). For the reasons stated fully below, this court will deny Plaintiff's Motion. In addition, this court has carefully considered both Motions to Dismiss filed by Defendants (Docs. 10, 29), their supporting documents (Docs. 11, 30, 31, 40, 43), and Plaintiff's responses (Docs. 22, 27, 36, 37, 42). For the reasons stated fully below, this court will grant Defendants' motions and dismiss the present action for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6).

I. BACKGROUND

Plaintiff commenced the present action[2] in Durham County Superior Court on September 17, 2014, against Defendants Saxon, Morgan Stanley, and Ocwen (collectively "Defendants"). Morgan Stanley removed the action to this court on October 9, 2014, pursuant to both diversity and federal question jurisdiction. (Morgan Stanley's Removal Notice (Doc. 1) at 1.) On October 17, 2014, Ocwen filed a Motion to Dismiss for Failure to State a Claim and a corresponding Memorandum. (Docs. 10, 11.) On October 20, 2014, Plaintiff filed a Motion for Entry of Default against Ocwen, claiming Ocwen's motion was not timely. (Doc. 15.) On October 21, 2014, Ocwen filed a Response in Opposition to the Entry of Default and a Motion for Extension of Time and to Deem Motion to Dismiss and Supporting Memorandum Timely Filed. (Docs. 16, 17.) Per this court's November 6, 2014 Text Order, the court requested that any response by Plaintiff to Ocwen's Motion to Deem Motion to Dismiss Timely Filed be filed by November 21, 2014. Plaintiff timely filed her response in opposition. (See Doc. 25.) In addition, Plaintiff filed a Motion to Remand to State Court. (Doc. 20.)

On November 25, 2014, this court held a status conference. At that status conference, this court denied Plaintiff's Motion for Entry of Default and granted Ocwen's Motion for Extension of Time and to Deem Motion to Dismiss and Supporting Memorandum Timely Filed (Doc. 17). In addition, this court set a filing schedule allowing Plaintiff twenty days to file supplemental briefing stating "specific facts upon which [Plaintiff] relies to allege that any reporting of the institution of foreclosure proceedings was false, fraudulent, misleading, or not legitimate." (Minute Entry 11/25/2014.) Due dates for any supplemental responsive pleadings were also set at the status conference, and this court extended the response deadline as to Plaintiff's Motion to be due on the same date as any supplemental pleadings were filed. (Id.) Plaintiff filed her Supplemental Brief on December 15, 2014. (Doc. 27.) On December 30, 2014, all Defendants filed briefs in opposition to Plaintiff's Motion to Remand. (Docs. 28, 32, 33.)

On January 15, 2015, Plaintiff filed a Reply in Response to Motion to Remand to State Court. (Doc. 35.) Also on January 15, 2015, Plaintiff filed a Motion for Entry of Default against Morgan Stanley and Saxon for not complying with the scheduling order. (Doc. 38.) For the reasons fully stated in this court's January 22, 2015 Order, this court denied Plaintiff's Default Motion against Morgan Stanley and Saxon and amended the pleading schedule. (Doc. 39.) In accordance with the January 22, 2015 Order, all parties subsequently submitted Replies and Reponses (Docs. 40, 42, 43), and the present motions are ripe for review. This court will first address Plaintiff's Motion to Remand and then turn to Defendants' Motions to Dismiss.

II. MOTION TO REMAND

A. Standard of Review

"Federal courts are courts of limited jurisdiction, and [must] presume that a cause lies outside this limited jurisdiction." Wheeling Hosp., Inc. v. Health Plan of the Upper Ohio Valley, Inc., 683 F.3d 577, 583-84 (4th Cir. 2012). "The burden of establishing federal jurisdiction is placed upon the party seeking removal. Because removal jurisdiction raises significant federalism concerns, [courts] must strictly construe removal jurisdiction. If federal jurisdiction is doubtful, a remand is necessary." Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994) (citations omitted).

A state court action may be removed by a defendant to federal district court only if the state court action could have been originally filed in federal district court. 28 U.S.C. § 1441. Generally, a case may be filed in a federal district court if there is "federal question" jurisdiction under 28 U.S.C. § 1331 or diversity of citizenship under 28 U.S.C. § 1332. Accordingly, "a defendant may remove a case to federal court if: 1) the parties are diverse and the statutory requirements for diversity jurisdiction are met; 2) the face of the complaint raises a federal question; or 3) on the basis of a narrow exception to the well-pleaded complaint rule known as the complete preemption doctrine.'" Chappell v. Int'l Bhd. Elec. Workers Local Union 772, Civil Action No. 3:14-cv-02153, 2014 WL 4748607, at *1 (D.S.C. Sept. 23, 2014).

B. Analysis

Morgan Stanley removed the present action to this court on October 9, 2014, alleging both federal question and diversity jurisdiction. (Removal Notice (Doc. 1) at 1.) The first iteration of this action was originally commenced in state court, removed based on federal question jurisdiction, and eventually remanded back to state court. See supra note 2. Morgan Stanley was not a defendant in the original complaint but was added as a defendant when Plaintiff filed an amended complaint in Durham County Superior Court on September 17, 2014. (See Removal Notice, Ex. 1, State Court Record as to Morgan Stanley (Doc. 1-1).) Plaintiff filed her Motion to Remand on October 23, 2014. (Pl.'s Mot. to Remand ("Pl.'s Mot.") (Doc. 20).)

Plaintiff asserts four arguments in support of her motion to remand: (1) Morgan Stanley is bound by this court's August 26, 2014 Memorandum Opinion and Order and Judgment in the initial action in this court (1:13CV1141); (2) removal is barred pursuant to this court's prior 28 U.S.C. § 1367(c) ruling, which is the "law of the case"; (3) removal is improper pursuant to 28 U.S.C. § 1441; and (4) removal is sought for an improper purpose and in bad faith. (Id.) This court will address Plaintiff's arguments in that order.

1. Morgan Stanley is not bound by this court's August 26, 2014 Memorandum Opinion and Order and Judgment in the initial action (1:13CV1141)

Plaintiff asserts that removal is improper in the current action because, "defendant Morgan Stanley [] is clearly in privity with defendant Saxon [] and a real party-in-interest in this action." (Pl.'s Mot. (Doc. 20) at 1.) Plaintiff argues that this privity causes Morgan Stanley to be bound by this court's August 26, 2014 Memorandum Opinion and Order and Judgment in the initial action that granted then Defendants Ocwen and Saxon's Motions to Dismiss for Failure to State a Claim, dismissed Plaintiff's FCRA claims, and remanded the other claims back to state court. Plaintiff "submits that the identities of the parties in the first and still pending removal action, case number 1:13-cv-01141, are unquestionably the same as the parties here in the second removal case number 1:14-cv-00857." (Id. at 3.) Plaintiff goes on to argue that because Saxon and Morgan Stanley are the same party, Morgan Stanley has been on notice of this action since it originally commenced with the filing of the initial action between Plaintiff and Saxon. (Id. at 4.) Plaintiff's argument does not have a sound basis in law. Morgan Stanley was not a party to the initial action and did not become a party until Plaintiff filed an Amended Verified Complaint on September 17, 2014, after this court remanded the initial action. Morgan Stanley filed its Notice of Removal pursuant to 28 U.S.C. § 1446(b) on October 9, 2014 (see Removal Notice (Doc. 1)), and Plaintiff concedes this removal was timely. (See Pl.'s Mot. (Doc. 20) at 5.) Morgan Stanley responded to Plaintiff's Motion (Doc. 28), citing United States v. Martinez, in which the Supreme Court held, "For obvious reasons, a party brought into court by an amendment, and who has, for the first time, an opportunity to make defense to the action, has a right to treat the proceeding, as to him, as commenced by the process which brings him into court." United States v. Martinez, 195 U.S. 469, 473 (1904). Until Morgan Stanley was made a party to the lawsuit, Morgan Stanley could not assert its removal rights. Thus, Morgan Stanley is not bound by any action they were not a party to, as is the case here.

2. Removal is not barred pursuant to this court's prior 28 U.S.C. § 1367(c) ruling which is the "law of the case"

Plaintiff next argues that this court's remanding of the initial action between the parties bars Morgan Stanley from removing the present action. Plaintiff references the doctrine of "law of the case." (Pl.'s Mot. (Doc. 20) at 5.) "[T]he doctrine of law of the case restricts a court to legal decisions it has made on the same issues in the same case." MacDonald v. Moose, 710 F.3d 154, 161 n.10 (4th Cir.), cert. denied, ____ U.S. ____, 134 S.Ct. 200 (2013). Jurisdiction in the initial action was based on federal question. Currently, Morgan Stanley seeks removal based on diversity. Morgan Stanley notes in its response:

This Court's previous order dismissed Plaintiff's Fair Credit Reporting Act claims and "decline[d]" to exercise supplemental jurisdiction of Plaintiff's state law claims under 28 U.S.C. § 1367. The issue of this Court's diversity jurisdiction under 28 U.S.C. § 1332(a) was not ...

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