Jepson v. Bank of New York Mellon F/K/A Bank of New York

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 14-2459
IN RE: PATRICIA JEPSON,
Debtor-Appellant,
v.
BANK OF NEW YORK MELLON F/K/A THE BANK OF NEW YORK,
AS TRUSTEE FOR CWABS, INC., ASSET-BACKED CERTIFICATES,
SERIES 2006-1,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:14‐cv‐00423 — James F. Holderman, Judge.
____________________
ON MOTION FOR STAY OF MANDATE
APRIL 15, 2016
____________________
RIPPLE, Circuit Judge (in chambers). Patricia Jepson has filed
a motion requesting that I stay this court’s mandate pending
final disposition of this litigation in the Supreme Court of the
United States. She represents that she plans to file a petition for
a writ of certiorari within the next ninety days. Because I do
2 No. 14-2459
not believe that she has presented any issue upon which the
Court will grant certiorari and because I believe that, even if
certiorari were granted, a majority of the Court would not re-
verse our judgment, I deny the motion.
The underlying facts of this litigation are set forth in plena-
ry fashion in our opinion. I will simply summarize them here.
Patricia Jepson took out a mortgage that was transferred by the
lender and ultimately assigned to CWABS Trust, a residential
mortgage-backed securities (“RMBS”) trust that was formed
and governed by a Pooling and Service Agreement (“PSA”).
Bank of New York Mellon (“BNYM”) is the trustee for the
CWABS Trust and possesses the mortgage note. When
Ms. Jepson defaulted on her monthly payment obligations, the
bank filed a complaint in the Circuit Court of Cook County to
foreclose on the mortgage.
Ms. Jepson then filed for bankruptcy under Chapter 7. That
filing automatically stayed the bank’s foreclosure action, and
the bank moved to modify the automatic stay in the bankrupt-
cy court. Ms. Jepson opposed the motion and initiated an ad-
versary proceeding against the bank, claiming (1) that the bank
had no interest in the mortgage because the note could not be
assigned to the bank under the terms of the PSA, (2) that the
note was void and not a negotiable instrument because the
original lender is a fictitious entity, and (3) that the bank did
not have the authority to foreclose on the property because the
bank is not a collection agency under Illinois law.
The bankruptcy court concluded that Ms. Jepson lacked
standing to challenge violations of the PSA. Accordingly, the
court dismissed the adversary complaint and lifted the auto-
matic stay to allow the bank to proceed with the foreclosure
action in Illinois state court. The bankruptcy court did not,
No. 14-2459 3
however, address Ms. Jepson’s other claims. The district court
affirmed the bankruptcy court’s judgment but likewise did not
consider the claims that were not related to alleged violations
of the PSA.
Ms. Jepson appealed from the district court’s judgment,
and, after full consideration of the briefs and oral argument by
the parties, we concluded that “[t]he bankruptcy court and the
district court correctly held that Ms. Jepson lacks standing to
raise a challenge based on violations of the PSA because she is
not a third-party beneficiary under the agreement.” In re Jepson,
No. 14-2459, slip op. at 6 (7th Cir. Mar. 22, 2016). We also con-
cluded, however, that remand was necessary because neither
the bankruptcy court nor the district court had addressed the
claims that were not based on alleged violations of the PSA. Id.
at 11–12. Accordingly, we affirmed in part the judgment of the
district court and remanded the case for further proceedings
with respect to the claims that had not been considered by the
bankruptcy court or the district court. Id. at 12.
After the rendition of our decision, Ms. Jepson filed this
motion for a stay of our mandate pending the disposition of a
petition for a writ of certiorari by the Supreme Court. The
standards that must govern my consideration of this motion
are well established. A party asking this court to stay its man-
date pending the filing of a petition for a writ of certiorari
“must show that the petition will present a substantial ques-
tion and that there is good cause for a stay.” Books v. City of
Elkhart, 239 F.3d 826, 827 (7th Cir. 2001) (Ripple, J., in cham-
bers). To show a reasonable probability of success, the party
must demonstrate a reasonable probability that four Justices
will vote to grant certiorari as well as a reasonable possibility
that five Justices would vote to reverse our judgment.
4 No. 14-2459
Bricklayers Local 21 of Illinois Apprenticeship & Training Program
v. Banner Restoration, Inc., 384 F.3d 911, 912 (7th Cir. 2004)
(Ripple, J., in chambers).
In an attempt to meet this demanding standard, Ms. Jepson
states that she intends to raise in her petition for a writ of
certiorari whether “a mortgage borrower [has] standing to con-
test an assignment of its note and mortgage to a Real Estate
Investment Conduit (REMIC) trust based on the assignment
being void.” In her view, “there is a split between the Circuits
on this issue”—with the Seventh and Second Circuits on one
side of the divide and the First Circuit on the other.
I cannot accept Ms. Jepson’s submission. She has demon-
strated, at best, that the First and Second Circuits may well
disagree on whether a mortgagor like Ms. Jepson has constitu-
tional standing under Article III to raise a challenge based on
violations of an agreement like the PSA. See Rajamin v. Deutsche
Bank Nat’l Trust Co., 757 F.3d 79, 85–86 (2d Cir. 2014); Culhane v.
Aurora Loan Servs. of Nebraska, 708 F.3d 282, 289–90 (1st Cir.
2013). But this disagreement is not operative in the present liti-
gation. We simply did not base our decision on whether
Ms. Jepson had constitutional standing to challenge a violation
of the PSA. Our focus was on whether Ms. Jepson lacked pru-
dential standing. On that issue, there is no conflict among the
circuits. The circuits identified by Ms. Jepson have reached dif-
ferent conclusions on prudential standing only because their
decisions rested on the laws of different states. For instance, in
this case, we held that Ms. Jepson lacked prudential standing
on the basis of New York law, which governs Ms. Jepson’s
claims that the PSA had been violated. (The PSA states that,
“[t]his agreement shall be construed in accordance with and
governed by the substantive laws of the State of New York.”
No. 14-2459 5
In re Jepson, No. 14-2459, slip op. at 7 (internal quotation marks
omitted).) We noted that, on this point, our reading of New
York law was in accord with that of the Second Circuit.
Rajamin, 757 F.3d at 86–87. The First Circuit, on the other hand,
applied Massachusetts law when it concluded in Culhane that
the mortgagor in that case had prudential standing. Indeed,
that court made clear that it was “hold[ing] only that
Massachusetts mortgagors, under circumstances comparable to
those in this case, have standing to challenge a mortgage as-
signment.” Culhane, 708 F.3d at 290.
Ms. Jepson identifies no other issue that she plans to raise
in her petition for a writ of certiorari. Instead, the remainder of
her motion merely repeats arguments that we rejected in our
opinion without explaining why she believes that those argu-
ments create a reasonable probability that four Justices will
vote to grant the writ of certiorari and that five Justices will
vote to reverse this court’s judgment.
Finally, Ms. Jepson also contends that, absent a stay, she
will suffer irreparable injury because she “will be forced to in-
cur legal fees in both the Bankruptcy Court and the Supreme
Court while both courts determine if the assignments were
void.” This is all that Ms. Jepson says about the matter, howev-
er, and given her lack of specificity or elaboration, this state-
ment is not sufficient to establish the likelihood of irreparable
injury.
Accordingly, Ms. Jepson’s motion for a stay of the mandate
is denied.
Motion for Stay of Mandate Denied