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Schales v. Nationstar Mortgage LLC

United States District Court, W.D. Louisiana, Lafayette Division

June 7, 2019





         Before the Court is a Motion to Stay filed by Plaintiff Richard Schales ("Schales").[1] Pursuant to his motion, Schales moves the Court to stay this action pending the outcome of two lawsuits pending in state court, invoking the Colorado River abstention doctrine, [2] Defendants, Nationstar Mortgage LLC ("Nationstar") and Bank of America, N.A. ("BANA"), oppose the motion.[3] For the reasons that follow, the motion is DENIED.



         This suit arises out of an alleged wrongful foreclosure suit filed in state court. Schales executed a $70, 000.00 promissory note in favor of New South Federal Savings Bank on March 20, 2003. Nationstar Mortgage, LLC v. Shales, 261 So.3d 912, 914-15 (La.App. 3 Cir. 2018). The note is secured by a mortgage encumbering property at 2112 Kramer Drive, New Iberia, Louisiana. Id. at 915. New South subsequently indorsed the note to Countrywide Home Loans; Countrywide in turn indorsed the note in blank and delivered the original note to Nationstar. Id. On August 13, 2014, Nationstar filed a verified petition for executory process in state court alleging Schales had defaulted on his obligations under the note and mortgage.[4] Id. On August 19, 2014, the state trial court found Nationstar was entitled to issuance of a writ of seizure and sale, and thereafter the Iberia Parish Clerk of Court issued the writ and the sheriff recorded a notice of seizure. Id.

         On December 18, 2014, Schales filed a petition for preliminary injunction, temporary restraining order, and a reconventional demand for damages against Nationstar in the state court executory proceeding.[5] Id. Schales sought injunctive relief prohibiting the seizure and sale of the property. By his reconventional demand, he sought damages for wrongful foreclosure, negligence, violations of his "Constitutional Due Process Rights," conversion, breach of fiduciary duty, violations of the Louisiana Unfair Trade Practices Act, and violations of the federal Fair Debt Collections Act.[6] Nationstar responded by filing a motion to strike Schales' reconventional demand, dilatory exceptions asserting unauthorized use of summary procedure, improper cumulation of actions, and improper use of executory process, as well as peremptory exceptions of no cause of action and prescription. Id. The trial court granted all of Nationstar's exceptions and dismissed Schales' claims with prejudice. Id. On December 12, 2018, the Third Circuit reversed in part, finding "the trial court erred in dismissing Schales' claims rather than ordering that the improperly cumulated claims be severed and assigned a new docket number or ordering that Schales amend his pleadings to conform to proper procedure." Id. at 921. On December 19, 2018, the trial court issued an order severing Schales' reconventional demand from the suit for executory process.[7]

         Meanwhile, on October 13, 2017 (after the state trial issued its ruling dismissing Schales' claims but before the Third Circuit issued its decision on appeal), Schales filed a new suit in state court, largely mirroring his prior reconventional demand.[8] In this suit, he named not only Nationstar as a defendant, but also BANA.[9] Schales states he filed this suit "to stop prescription in the event the appellate court denied the appeal."[10] BANA removed the suit to this Court on November 17, 2017. Thereafter, Schales filed an Amended Complaint asserting the following claims: breach of contract, contractual fraud, conversion, negligent misrepresentation/delictual fraud, breach of fiduciary duty, violations of the Truth in Lending Act, 15 U.S.C. § 1601, et seq., and violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq.[11] On September 26, 2018, the matter was reassigned to the undersigned. Schales then filed the pending motion to stay, arguing a stay will allow the parties "to avoid piecemeal litigation and inconsistent rulings over the property at issue . .., "[12]


         Applicable Law

         "Colorado River abstention is a narrow exception to a federal court's 'virtually unflagging' duty to adjudicate a controversy that is properly before it." African Methodist Episcopal Church v. Lucien, 756 F.3d 788, 797 (5th Cir. 2014) (discussing Colorado River Water Dist. v. United States, 424 U.S. 800, 817 (1976) and Moses H. Cone Mem. Hosp. v. Mercury Const. Corp., 460 U.S. 1, 16 (1983)). The doctrine applies when a state proceeding is ongoing and is parallel to a federal proceeding. Air Evac EMS, Inc. v. Texas, Dept. of Ins., 851 F.3d 507, 520 (5th Cir. 2017). Under Colorado River, "a federal court may abstain only under exceptional circumstances."[13]Lucien at 797. Before determining whether exceptional circumstances warrant abstention, courts must first find that the state and federal proceedings "are sufficiently parallel to make consideration of abstention proper." Lucien at 191. Parallel actions typically involve the same parties, but the identity of the parties is not determinative. Id. Rather, courts should "look both to the named parties and to the substance of the claims asserted in each proceeding" to determine whether the matters are sufficiently parallel.[14] Id. Only if the matters are deemed parallel must the court then engage in the six-factor Colorado River balancing test, but "with the balance heavily weighted in favor of the exercise of [federal] jurisdiction." Air Evac EMS, 851 F.3d at 520 (alteration in original) (quoting Moses H. Cone Mem. Hosp., 460 U.S. at 16).



         Schales argues the suits pending in state court and this Court are parallel, as "[t]he issues all arise from the wrongful foreclosure of Schales' home and lawsuits against ...

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