Heather Welk v. Ally Financial, Inc. ( 2013 )

United States Court of Appeals
For the Eighth Circuit
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No. 12-3141
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Heather L. Welk; Susie B. Jones; William Bigelow; Christine Heinzman; Mark
Heinzman; Sigmond Singramdoo; Troy Forte; Lynn M. Forte; David J. Roster;
Charity Roster; Patrick Rucci; Gary G. Klingner; Rebecca A. Albers; Ian
Patterson; James Willis Konobeck, Jr.; Alison Konobeck; Amy B. Tibke; Dane A.
Tibke; Tracy J. Miklas; Michelle L. Miklas
lllllllllllllllllllll Plaintiffs - Appellants
v.
GMAC Mortgage, LLC
lllllllllllllllllllll Defendant
Ally Financial, Inc.; Mortgage Electronic Registration Systems, Inc.;
MERSCORP, Inc.; U.S. Bank, N.A.; Deutsche Bank Trust Company Americas;
Shapiro & Zielke, LLP; U.S. Bank National Association ND; Deutsche Bank
National Trust Company; Bank of New York Mellon, f/k/a Bank of New York
lllllllllllllllllllll Defendants - Appellees
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: June 17, 2013
Filed: July 15, 2013
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Before MURPHY, SHEPHERD, and KELLY, Circuit Judges.
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MURPHY, Circuit Judge.
Several Minnesota homeowners represented by attorney William B. Butler
brought a quiet title suit in state court, alleging that their home mortgages were
invalid because the companies that held them did not possess the original promissory
notes. The plaintiffs brought thirteen separate claims, nearly all of which rested on
this "show me the note" theory. The defendants removed the case to federal court and
moved to dismiss. The district court1 granted the defendants' motion and dismissed
nearly all the plaintiffs' claims.2 The court also sua sponte sanctioned Butler and
awarded attorney fees to the defendants, finding that the plaintiffs' "show me the
note" theory had been repeatedly rejected by the courts and that Butler had engaged
in abusive litigation tactics. The plaintiffs appeal.
After careful review, we conclude that there was no error in the district court's
thorough and well reasoned order. The district court correctly concluded that it had
diversity jurisdiction, as the claims against the sole nondiverse defendant lacked a
"reasonable basis in fact and law," Murphy v. Aurora Loan Servs., LLC, 699 F.3d
1027, 1031 (8th Cir. 2012) (quoting Filla v. Norfolk S. Ry. Co., 336 F.3d 806, 810
(8th Cir. 2003)), and the doctrine of prior exclusive jurisdiction was not implicated,
see 13F Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure
§ 3631 (3d ed. 1998). It also correctly concluded that the plaintiffs failed to state a
plausible claim for relief sufficient to survive a motion to dismiss. See Fed. R. Civ.
P. 12(b)(6); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The quiet title claims are
but variations on the "show me the note" theory which has been repeatedly rejected
by the Minnesota Supreme Court and our court applying Minnesota law. See, e.g.,
Jackson v. Mortg. Elec. Regist. Sys., Inc., 770 N.W.2d 487, 490–91 (Minn. 2009)
1
The Honorable Patrick J. Schiltz, United States District Judge for the District
of Minnesota.
2
The claims of one plaintiff were severed and are not part of this appeal.
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Murphy, 699 F.3d at 1030–31. The plaintiffs' slander of title claims are equally
meritless. See Karnatcheva v. JPMorgan Chase Bank, 704 F.3d 545, 546–47 (8th Cir.
2013). The plaintiffs have abandoned the remainder of their claims on appeal.
Nor did the district court abuse its discretion in imposing sanctions under
Federal Rule of Civil Procedure 11(c) and 28 U.S.C. § 1927. See generally Clark v.
UPS, Inc., 460 F.3d 1004 (8th Cir. 2006). It reasonably concluded that the plaintiffs'
claims were not "warranted by existing law or by a nonfrivolous argument for
extending, modifying, or reversing existing law or for establishing new law," and that
they had been brought "for an[] improper purpose, such as to harass, cause
unnecessary delay, or needlessly increase the cost of litigation." Fed. R. Civ. P.
11(b)(1)–(2). It also reasonably concluded that Butler's actions in this case
"multiplie[d] the proceedings . . . unreasonably and vexatiously." 28 U.S.C. § 1927.
The district court aptly summarized Butler's abusive tactics:
Butler takes a group of a dozen or so individuals who are facing
foreclosure but otherwise have no connection to one another; he gins up
a dozen or so claims against a dozen or so defendants grounded mostly
on the show-me-the-note theory; he improperly packages these claims
into a single state-court action; and he fraudulently joins a single
nondiverse defendant (typically a law firm that represented one of the
lenders in foreclosure proceedings) in an attempt to block removal to
federal court. The defendants generally remove the cases to federal
court, and Butler then moves to remand. If the judge denies Butler's
motion, he might "remand" the case himself by voluntarily dismissing
it and refiling it in state court within a day or two, thereby starting the
process all over again. Butler might also "judge shop" in the same
manner; if he does not like his chances before a particular federal judge,
he might voluntarily dismiss his case, promptly refile it in state court,
and start the process all over again. To hide his conduct, Butler will
reorder the names of the plaintiffs or substitute a new plaintiff for one
of the old plaintiffs, so that the refiled case will have a different caption.
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When Butler's claims are finally challenged on the merits, he
makes false representations and spins out contradictory and often absurd
arguments in the apparent hope that their sheer weight and number,
multiplied by the number of parties and claims, will overwhelm his
opponents and the court. Butler makes claims in his briefs that do not
appear in his pleadings; he makes claims during hearings that do not
appear in either his briefs or his pleadings; and, when ordered to show
cause why he should not be sanctioned, he makes claims in his
responses that he did not make during the hearing or in his briefs or
pleadings.
In his briefs to this court Butler similarly omits any discussion of the recent
cases rejecting his "show me the note" theory and jurisdictional arguments, and he
makes no attempt to distinguish or argue against them. He simply represents that
Minnesota law requires a foreclosing mortgagee to possess the note and that the
district court lacked jurisdiction to hear the case. This is troubling. Butler himself
has argued several cases in which we rejected his "show me the note" theory under
Minnesota law. E.g., Murphy, 699 F.3d at 1030; Butler v. Bank of Am., N.A., 690
F.3d 959, 959 (8th Cir. 2012); Stein v. Chase Home Fin., LLC, 662 F.3d 976, 977
(8th Cir. 2011). His deliberate attempt to ignore these cases suggests that he has the
intention of deceiving or misleading the court into ruling in his favor. At the very
least, it suggests that he lacks a nonfrivolous basis for appeal. Such conduct may
provide a basis for this court to impose sanctions of its own in the future. See Fed.
R. App. P. 38.
The judgment of the district court is affirmed.
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