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Lee v. Deutsche Bank National Trust Company

United States District Court, E.D. Louisiana

July 25, 2019


         SECTION: “J” (1)



         Before the Court is a Motion to Dismiss (Rec. Doc. 57) filed by Defendants Stacy C. Wheat; Fred J. Daigle; and Graham, Arceneaux & Allen, LLC (“GAA”) (collectively, the “GAA Defendants”). Plaintiff Jessie Lee filed an opposition to the motion.[1] Considering the motions, the memoranda, the record, and the applicable law, the Court finds that the Motion should be GRANTED.


         Plaintiff, proceeding pro se, claims in his complaint his home was illegally foreclosed upon in a sham foreclosure proceeding in the Civil District Court for the Parish of Orleans.[2] Lee argues the foreclosure was fraudulent because the wrong party foreclosed on him and because Louisiana's executory process is unconstitutional. A brief review of the foreclosure proceeding that took place before the state court is necessary to understand Lee's claims.

         As trustee for Long Beach Mortgage Loan Trust 2005-WL1, Deutsche Bank National Trust Company (“Deutsche Bank”) filed suit against Lee for executory process on December 22, 2014, to foreclose upon a debt Lee incurred on March 24, 2005; the debt was evinced by a promissory note and secured by a mortgage on real property located at 904 N. Rendon Street, New Orleans, Louisiana (the “Property”).[3]Barry Grodsky acted as Deutsche Bank's counsel in the foreclosure proceeding. Deutsche Bank filed the mortgage and promissory note with its petition for executory process. The state court determined these documents were authentic and included a confession of judgment clause; accordingly, the court issued an order authorizing executory process on December 29, 2014.[4] On January 22, 2015, Lee filed an emergency motion to vacate the writ for executory process and cancel the sale.[5] The state court held a hearing on Lee's motion on May 20, 2016, and denied the requested injunction the same day, [6] and then, upon prompting by Lee, supplied reasons for its judgment.[7]

         In his motion to vacate, Lee did not claim he had not defaulted on his debt. He argued instead that the letter giving him notice of an intent to foreclose listed the “client” as JP Morgan Chase Bank, N.A. and not Deutsche Bank.[8] The state court found this difference to be inconsequential. First, the court noted that the requirements for executory process set out by the Louisiana Code of Civil Procedure had been met: “Deutsche Bank's Petition attaches all necessary authentic evidence to invoke executory process, namely, the note and the mortgage containing a confession of judgment clause.”[9] See La. Code Civ. Proc. Ann. art. 2635. Second, the court found the note was endorsed in blank and concluded that the “note could have been enforced by any entity in possession.”[10] See La. Stat. Ann. § 10:3-202(b) (“When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed.”). The state court denied Lee's request for an injunction[11] and allowed the sheriff's sale to go forward on January 25, 2018. BMRC Properties, LLC (“BMRC”) purchased the Property.

         After losing in the foreclosure proceeding, Lee filed suit in this Court. The primary basis for Lee's federal suit is Lee's continuing belief that the foreclosure and sale of his home were contrary to law and are therefore null.[12] In his amended complaint, Lee asserts claims against almost everyone who had a role in the foreclosure: Deutsche Bank; JP Morgan Chase Bank, N.A.; Lakesha Sellers, a vice president at JP Morgan Chase Bank; Todd Sylvester, a notary who Lee alleges fraudulently attested that Sellers is a vice president at JP Morgan Chase Bank; Barry Grodsky and his wife; BMRC and its principal, Brian Mahon; the Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank (“FDIC-Receiver”); GAA and two GAA attorneys, Stacy C. Wheat and Fred J. Daigle; and the Orleans Parish Sheriff's Office. Lee alleges that the documents detailing the assignments of his mortgage from one entity to another are fraudulent, that the fraud was perpetuated by GAA's attorneys, and that the filing of these counterfeit documents “aided and abetted in the foreclosure and illegal eviction of Jessie Lee.”[13] As to the law firm itself, “Defendant [GAA] is believed by this Plaintiff, to be a Foreclosure Mill.”[14] Lee's contention against Sheriff Gusman[15] is that the Sheriff's deputies evicted him “with fake paperwork, pretending to have court authority.”[16] Lee also generally alleges that Louisiana's executory process procedure violates the Due Process Clause and the Takings Clause because it does not require a petitioner to “show proof of Authentication” and because it allows for a confession of judgment.[17]The GAA Defendants then filed the instant motion to dismiss.


         The GAA Defendants first allege that this Court lacks subject matter jurisdiction because although Lee cites to 42 U.S.C. § 1983 and 28 U.S.C. § 1331 as the basis for jurisdiction in his complaint, he does not allege the GAA Defendants have acted under color of state law. Second, they assert that the attempt to have this Court find Louisiana's executory process unconstitutional is frivolous. Third, the GAA Defendants argue that Lee has failed to state a claim which would entitle him to relief. Fourth, they argue that Lee's complaint is an improper collateral attack precluded by the Rooker-Feldman doctrine.

         Lee argues this Court has jurisdiction because he has alleged that he was deprived of his property by use of state foreclosure procedures in violation of the Fourteenth Amendment. Lee contends his claims are not frivolous because he “has provided evidence that proves Deutsche Bank as Trustee did not file a foreclosure on Plaintiff's property” and Louisiana's executory process is unconstitutional because it does not prevent “the illegal creation and filing of fraudulent documents used to foreclose upon citizens of the state of Louisiana.”[18] Lee argues his claims are not precluded by the Rooker-Feldman doctrine because his constitutional claims did not arise until his rights were violated as a part of the allegedly corrupted foreclosure proceeding.


         “Federal courts are courts of limited jurisdiction” and “possess only that power authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). “Where a federal court rules in a matter over which it does not have jurisdiction, its decisions, opinions and orders are without effect.” In re Majestic Energy Corp., 835 F.2d 87, 89 (5th Cir. 1988). Accordingly, the Court must first consider whether it is endowed with subject matter jurisdiction before considering other bases for dismissal.

         In deciding a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), “the district court is ‘free to weigh the evidence and resolve factual disputes in order to satisfy itself that it has the power to hear the case.'” Krim v., Inc., 402 F.3d 489, 494 (5th Cir. 2005) (citation omitted). The party asserting jurisdiction must carry the burden of proof for a Rule 12(b)(1) motion to dismiss. Randall D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 762 (5th Cir. 2011). The standard of review for a motion to dismiss under Rule 12(b)(1) is the same as that for a motion to dismiss pursuant to Rule 12(b)(6). Benton v. United States, 960 F.2d 19, 21 (5th Cir. 1992); see also 13 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3522 (3d ed. 2008). If the Court determines it has jurisdiction to hear the plaintiff's claims, it may consider other grounds for dismissal urged by a defendant.

         Pursuant to the Federal Rules of Civil Procedure, a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). “Under Rule 12(b)(6), a claim may be dismissed when a plaintiff fails to allege any set of facts in support of his claim which would entitle him to relief.” Taylor v. Books A Million, Inc., 296 F.3d 376, 378 (5th Cir. 2002). The complaint “must provide the defendant with ‘fair notice of what the claim is and the grounds upon which it rests.'” Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 346 (2005) (citation omitted). The allegations “must be simple, concise, and direct.” Fed.R.Civ.P. 8(d)(1).

         To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead sufficient facts to “‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when the plaintiff pleads facts that allow the court to “draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. A court must accept all well-pleaded facts as true and must draw all reasonable inferences in favor of the plaintiff. Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009). The court is not, however, bound to accept as true legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678. “‘[C]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss.'” Taylor, 296 F.3d at 378 (citation omitted).



         In his amended complaint, Lee suggests this Court has federal question jurisdiction under 28 U.S.C. § 1331 over his § 1983 claim and supplemental jurisdiction over a host of state law claims under 28 U.S.C. § 1337. There is no diversity jurisdiction in this case. The basis for Lee's § 1983 claim is an allegation that the defendants violated his due process rights under the Fourteenth Amendment.[19] However, “[s]ection 1983 does not reach all constitutional injuries, but only those caused by persons acting ‘under color of state law.'” Earnest v. Lowentritt, 690 F.2d 1198, 1200 (5th Cir. 1982) (citations omitted).[20] As they point out in opposition, the GAA Defendants are private actors. A private actor may be liable under § 1983 “if the individual is a ‘willful participant in joint action with the State or its agents.'” Id. (quoting Adickes v. S. H. Kress & Co., 398 U.S. 144, 152 (1970)). There is “joint participation” with the state if the private actor “obtained significant aid from state officials, or because his conduct is otherwise chargeable to the State.” Lugar v. Edmondson Oil Co., Inc., 457 U.S. 922, 931, 937 (1982). The Supreme Court has recognized that an individual had received significant aid from the state in depriving an individual of property where the state had “created a system whereby state officials will attach property on the ex parte application of one party to a private dispute.” Id. at 942.

         Lee's home was foreclosed upon pursuant to Louisiana's statutory system of executory process, a type of non-judicial foreclosure, specifically, “an action [i]n rem by the holder of a mortgage or privilege evidenced by an authentic act importing a confession of judgment to effect the seizure and sale of the encumbered property.” Buckner v. Carmack, 272 So.2d 326, 329 (La. 1973).[21] Unlike some other systems of seizure, courts do not consider the state to be a “willful” or “joint” participant with the private actor merely because the private actor resorts to non-judicial foreclosure. See Barrera v. Sec. Bldg. & Inv. Corp., 519 F.2d 1166, 1169-70 (5th Cir. 1975) (collecting cases). Consistent with this judicial trend, in Earnest, the Fifth Circuit recognized that Louisiana's system for executory process is not “pre-adjudicative seizure” if “the execution order permitting the sheriff to sell the [debtor's] property was obtained only after notice to the debtor and the opportunity to be heard concerning the merits of the seizure” was given. 690 F.2d at 1201.

         This case is indistinguishable from Earnest. Just as the plaintiffs did in that case, Lee filed suit in federal court claiming the foreclosure on his property by executory process was defective because the party that foreclosed did not provide sufficient proof of ownership of the notes evidencing his debt.[22]See Id. at 1200. And as in Earnest, Lee's complaint fails to allege “that he was denied the opportunity to contest the seizure and sale of his property.” Id. at 1202. To the contrary, Lee acknowledges that he appeared at the foreclosure proceeding[23] and that “[n]o less than three different state court Judges” found the note and mortgage presented at the foreclosure proceeding to be authentic and sufficient for executory process.[24]Accordingly, for the reasons stated in Earnest, the foreclosure proceeding described by Lee is not the type of pre-adjudicative seizure that should be considered to involve “joint participation” from the state.[25] Thus, the “foreclosure on the mortgage given . . . by [Lee] was a purely private ...

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