(PS) Harris v. Shellpoint Debt Collecting Co. ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 ARTHUR HARRIS, No. 2:21-cv-01604-KJM-CKD PS 12 Plaintiff, 13 v. ORDER GRANTING IFP 14 NEW REZ, LLC, et al., AND 15 FINDINGS AND RECOMMENDATIONS TO Defendants. DISMISS WITHOUT LEAVE TO AMEND 16 17 18 This action was referred to the undersigned pursuant to Local Rule 302(c)(21). See 28 19 U.S.C. § 636(b)(1). Plaintiff’s pro se complaint filed on September 7, 2021 is before the court for 20 screening. 21 Plaintiff filed an application in support of his request to proceed in forma pauperis. (ECF 22 No. 2.) Plaintiff’s application makes the showing required by 28 U.S.C. § 1915. The motion to 23 proceed in forma pauperis will be granted. 24 I. SCREENING REQUIREMENT 25 Pursuant to 28 U.S.C. § 1915(e), the court must screen every in forma pauperis 26 proceeding, and must order dismissal of the case if it is “frivolous or malicious,” “fails to state a 27 claim on which relief may be granted,” or “seeks monetary relief against a defendant who is 28 immune from such relief.” 28 U.S.C. § 1915(e)(2)(B); Lopez v. Smith, 203 F.3d 1122, 1126-27 1 (2000). A claim is legally frivolous when it lacks an arguable basis either in law or in fact. 2 Neitzke v. Williams, 490 U.S. 319, 325 (1989). In reviewing a complaint under this standard, the 3 court accepts as true the factual allegations contained in the complaint, unless they are clearly 4 baseless or fanciful, and construes those allegations in the light most favorable to the plaintiff. 5 See Neitzke, 490 U.S. at 327; Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 6 954, 960 (9th Cir. 2010), cert. denied, 564 U.S. 1037 (2011). 7 Pro se pleadings are held to a less stringent standard than those drafted by lawyers. Haines 8 v. Kerner, 404 U.S. 519, 520 (1972). However, the court need not accept as true conclusory 9 allegations, unreasonable inferences, or unwarranted deductions of fact. Western Mining Council 10 v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). A formulaic recitation of the elements of a cause of 11 action does not suffice to state a claim. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-57 12 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 13 To state a claim on which relief may be granted, the plaintiff must allege enough facts “to 14 state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. “A claim has facial 15 plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable 16 inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. A pro se 17 litigant is entitled to notice of the deficiencies in the complaint and an opportunity to amend 18 unless the complaint’s deficiencies could not be cured by amendment. See Noll v. Carlson, 809 19 F.2d 1446, 1448 (9th Cir. 1987), superseded on other grounds by statute as stated in Lopez v. 20 Smith, 203 F.3d 1122 (9th Cir. 2000) (en banc). 21 II. RES JUDICATA BARS THE CLAIMS AGAINST SHELLPOINT/ NEW REZ 22 A. Allegations in the Present Complaint 23 Plaintiff names three defendants whom he identifies in the present complaint as Shellpoint 24 Debt Collecting Co. (“Shellpoint”), New Rez LLC Mortgage Servicing Co. (“New Rez”), and 25 Ditech Financial Mortgage Servicing (“Ditech”). Plaintiff alleges defendants violated his rights 26 when the servicing of his mortgage was transferred from Ditech to New Rez and/or Shellpoint. 27 Plaintiff alleges defendants New Rez and/or Shellpoint sent plaintiff mortgage payment invoices 28 on several occasions between February 5, 2020 and the present, claiming plaintiff owed money 1 against his mortgage which plaintiff alleges he had already paid. Defendants also sent letters 2 threatening to foreclose on plaintiff’s property. Plaintiff seeks damages. 3 B. Analysis 4 In this case, plaintiff attempts to brings claims that could have already been litigated in 5 other cases previously litigated in this district: 20-cv-2340 KJM CKD (“Harris I”) and 21-636 6 KJM CKD (“Harris II”). Harris I was dismissed in its entirety with prejudice for failure to state a 7 claim. See Harris I at ECF Nos. 24, 47, 48.1 In Harris II, which was originally filed in the 8 Superior Court of California, County of Solano, and removed to this court by defendants, all 9 federal claims were similarly dismissed with prejudice and the case was remanded to the superior 10 court. See Harris II at ECF Nos. 25, 35.2 Based on these prior actions, the current claims against 11 Shellpoint and New Rez are barred by the doctrine of res judicata and must be dismissed. 12 “The preclusive effect of a judgment is defined by claim preclusion and issue preclusion, 13 which are collectively referred to as ‘res judicata.’” Taylor v. Sturgell, 553 U.S. 880, 892 (2008) 14 (footnote omitted). The legal doctrine of res judicata bars repetitious suits involving the same 15 cause of action once a court of competent jurisdiction has entered a final judgment on the merits. 16 United States v. Tohono of Odham Nation, 563 U.S. 307, 315 (2011). Res judicata prevents the 17 litigation of claims for, or defenses to, recovery that were previously available to the parties, 18 regardless of whether they were asserted or determined in the prior proceeding. Chicot County 19 Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 378 (1940); Stewart v. U.S. Bancorp, 297 20 F.3d 953, 956 (9th Cir. 2002) (internal citations omitted). 21 “Res judicata is applicable whenever there is (1) an identity of claims, (2) a final judgment 22 on the merits, and (3) privity between parties.” Tahoe–Sierra Preservation Council Inc. v. Tahoe 23 Regional Planning Agency, 322 F.3d 1064, 1077 (9th Cir. 2003) (internal quotation marks 24 omitted). Under federal law, a judgment pending on appeal is final for purposes of res judicata 25 effect. See Damascus v. Five Unknown Named Agents for U.S. Att’y Generals Off., 892 F.2d 26 1 Plaintiff filed a notice of appeal, resulting in USCA case number 21-16456 in the Ninth Circuit. 27 2 Plaintiff again filed a notice of appeal, resulting in USCA case number 21-16308 in the Ninth 28 Circuit. 1 1045 (9th Cir. 1990) (“the pendency of an appeal does not alter the preclusive effect of an 2 otherwise final decision of a district court”). 3 The elements of res judicata are met in this instance. First, there is an identity of claims. 4 Identity of claims exists when two suits arise from “the same transactional nucleus of facts.” 5 Tahoe-Sierra Pres. Council, Inc., 322 F.3d at 1078. Newly articulated claims based on the same 6 nucleus of facts are subject to a res judicata finding if the claims could have been brought in the 7 earlier action. Id. 8 In each of the three cases, the complaint seeks damages, alleging the assignment of 9 plaintiff’s mortgage loan was unlawful or invalid. Plaintiff alleges the new mortgage servicer 10 lacks standing to enforce the terms of the loan because plaintiff did not sign a contract with the 11 new mortgage servicer. The complaint in each of the three cases alleges the new mortgage 12 servicer has demanded mortgage payments from plaintiff corresponding to months for which 13 plaintiff alleges he paid his mortgage payment. Compare, ECF No. 1 at 5, 8, 14-16, with Harris I 14 at ECF No. 1 at 2-3; see also Harris II at ECF No. 1 at 11-17. Each case is styled as bringing 15 claims under “federal mortgage fraud laws” as well as the California Penal Code. Compare, ECF 16 No. 1 at 11 with Harris I at ECF No. 1 at 1-3; see also Harris II at ECF No. 1 at 9. Though the 17 complaints are not identical and do not attempt to bring identical claims, they all arise from the 18 same set of facts. Thus, the claims raised now could have been raised in either prior action. 19 In addition, both Harris I and the federal claims in Harris II were dismissed for failure to 20 state a claim upon which relief can be granted. Harris I at ECF Nos. 24, 47, 48; Harris II at ECF 21 Nos. 25, 35. These dismissals constitute dismissals on the merits for res judicata purposes. See 22 Stewart, 297 F.3d at 956 (holding that, unless an order states otherwise, a dismissal on any 23 ground other than lack of jurisdiction, improper venue, or failure to join a party under Fed. R. 24 Civ. P. 19 operates a dismissal on the merits for res judicata purposes) (citing Fed. R. Civ. P. 25 41(b)). 26 Finally, there is full privity between the parties as to plaintiff and defendants New Rez and 27 Shellpoint because these parties in each suit are the same. Where the parties in both actions are 28 identical, they are “quite obviously in privity.” Tahoe-Sierra Pres. Council, Inc., 322 F.3d at 1 1081. Accordingly, all of the elements for res judicata are met, and plaintiff’s claims against 2 defendants New Rez and Shellpoint be dismissed with prejudice. 3 III. THE CLAIMS AGAINST DITECH ALSO FAIL 4 A. Allegations against Ditech 5 On or about February 1, 2020, Ditech, who was plaintiff’s mortgage company at the time, 6 informed plaintiff his mortgage contract was being re-assigned to New Rez. (ECF No. 1 at 14.) In 7 the same letter, Ditech told plaintiff to start sending all mortgage payments to New Rez. (Id.) 8 Plaintiff states he brings claims under the following authorities: (1) the Federal Fraud 9 Enforcement and Recovery Act of 2009 (“FERA”); (2) 18 U.S.C. § 1349 (attempt and 10 conspiracy); (3) California Civil Code § 3294 (exemplary damages); and (4) California Penal 11 Code §§ 532f and 664 (mortgage fraud and attempt). (ECF No. 1 at 18-19.) 12 B. FERA 13 By referencing the FERA, it appears plaintiff is claiming the defendants committed 14 mortgage fraud in violation of 31 U.S.C. § 3729, et seq, also known as the False Claims Act 15 (“FCA”). The FERA of 2009 amended and strengthened the FCA. See 31 U.S.C. § 3729, et seq; 16 see also United States ex rel. Garbe v. Kmart Corp., 824 F.3d 632, 639 (7th Cir. 2016) (“FERA 17 had the effect of bringing within the FCA’s ambit false claims to intermediaries or other private 18 entities that either implement government programs or use government funds.”). 19 The purpose of the FCA is “to discourage fraud against the government.” [...] The FCA imposes civil liability on any person who 20 knowingly uses a “false record or statement to get a false or 21 fraudulent claim paid or approved by the Government,” [...] and any person who “conspires to defraud the Government by getting a false 22 or fraudulent claim allowed or paid.” [...] To encourage the disclosure of potential fraud, under the qui tam provisions of the 23 FCA, relators may “bring a civil action for a violation of [§] 3729 for the person and for the United States Government. 24 25 Cell Therapeutics, Inc. v. Lash Grp., Inc., 586 F.3d 1204, 1205-06 (9th Cir. 2009), as amended on 26 denial of reh’g and reh’g en banc (Jan. 6, 2010) (citations omitted). Under the FCA, a private 27 citizen may bring an action on behalf of the government and in the name of the government as a 28 relator. 31 U.S.C. § 3730(b). 1 Although FERA permits civil actions by private persons for violations of 31 U.S.C. § 2 3729, such actions are subject to strict procedural requirements including a heightened pleading 3 standard which plaintiff has not met. See Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 998 (9th 4 Cir. 2010) (holding that Federal Rule of Civil Procedure 9(b) provides the pleading standard 5 under the FCA). In addition, plaintiff does not bring this action on behalf of the government. 6 Instead, he alleges only that defendants defrauded him individually. Moreover, courts in the Ninth 7 Circuit do not permit FCA relators to proceed pro se. Stoner v. Santa Clara Cty. Off. of Educ., 8 502 F.3d 1116, 1127 (9th Cir. 2007) (“we cannot interpret [28 U.S.C.] § 1654 as authorizing qui 9 tam relators to proceed pro se in FCA actions”). Here, plaintiff proceeds without counsel and the 10 allegations in the complaint do not meet the requirements for the qui tam provisions of the FCA. 11 Accordingly, plaintiff does not have a viable claim under the FERA. 12 C. 18 U.S.C. § 1349 13 This criminal statute prohibits and sets the punishment for attempt and conspiracy. See 18 14 U.S.C. § 1349 (“Any person who attempts or conspires to commit any offense under this chapter 15 shall be subject to the same penalties as those prescribed for the offense, the commission of which 16 was the object of the attempt or conspiracy.”). Plaintiff provides no authority for the proposition 17 that he has a private right of action to assert a violation of this criminal statute, and no such right 18 exists. See Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980) (criminal statutes generally 19 “provide no basis for civil liability”). Unless there is a clear congressional intent to provide a civil 20 remedy, a plaintiff cannot recover civil damages for an alleged violation of a criminal statute. 21 Federal Sav. & Loan Ins. Corp. v. Reeves, 816 F.2d 130, 138 (4th Cir. 1987) (holding that where 22 there is no affirmative indication that Congress intended to furnish a civil remedy, no civil cause 23 of action exists). 24 D. State-law Claims 25 Plaintiff’s attempted claims under the California Penal Code and the California Civil Code 26 also fail because he has no private right of action. California Civil Code § 3294 sets forth the 27 circumstances in which exemplary, or punitive, damages are allowable under California law. See 28 Cal. Civ. Code § 3294. It does not provide an independent cause of action. See Id. Similarly, there 1 is no basis for civil liability under California Penal Code §§ 532f and 664, which prohibit 2 mortgage fraud and attempt, respectively. See Ellis v. City of San Diego, 176 F.3d 1183, 1189 3 (9th Cir. 1999) (“sections of the California Penal Code… do not create enforceable individual 4 rights”). In any event, because it is being recommended that all federal claims be dismissed, the 5 undersigned will recommend the court decline to exercise supplemental jurisdiction over the 6 state-law claims. 7 IV. CONCLUSION 8 While leave to amend should be “freely given when justice so requires,” Fed. R. Civ. P. 9 15(a), the deficiencies in this complaint could not be cured by the allegation of additional facts. 10 Under these circumstances, leave to amend would be futile and should be denied. See Lucas v. 11 Dep’t of Corrs., 66 F.3d 245, 248 (9th Cir. 1995). 12 In accordance with the above, IT IS ORDERED that plaintiff’s request to proceed in 13 forma pauperis (ECF No. 2) is granted. 14 In addition, IT IS RECOMMENDED: 15 1. Plaintiff’s complaint (ECF No. 1) be DISMISSED without leave to amend because it 16 fails to state a cognizable claim against defendant Ditech and the claims against defendants 17 Shellpoint and New Rez are barred by res judicata. 18 2. The Clerk of Court be directed to close this case. 19 These findings and recommendations are submitted to the United States District Judge 20 assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen days 21 after being served with these findings and recommendations, any party may file written 22 objections with the court and serve a copy on all parties. Such a document should be captioned 23 ///// 24 ///// 25 ///// 26 ///// 27 28 1 | “Objections to Magistrate Judge’s Findings and Recommendations.” Failure to file objections 2 || within the specified time may waive the right to appeal the District Court’s order. Martinez v. 3 || Ylst, 951 F.2d 1153 (9th Cir. 1991). 4 | Dated: January 20, 2022 Card Kt | ba L, / pm 5 CAROLYNK. DELANEY 6 UNITED STATES MAGISTRATE JUDGE 7 | 9 Harris.210v1604.screen 8 9 10 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28