Opinion
No. 01-2714 GB
July 31, 2002
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS
On August 2, 2001 plaintiffs Leroy E. Frazier, Annanoise Frazier, Freeman Phillips, and Bobbie Phillips ("plaintiffs"), on behalf of themselves and all other persons similarly situated, initiated this action in the Circuit Court of Shelby County, Tennessee against defendants Preferred Credit (aka Preferred Credit Corporation; aka Preferred Mortgage Corporation; aka T.A.R. Preferred Mortgage Corporation); IMPAC Funding Corporation ("IMPAC Funding"); IMPAC Mortgage Holdings, Inc. ("IMPAC Mortgage"); IMPAC Secured Assets Corporation ("IMPAC Secured"); US Bank N.A.; US Bank, NA, ND; Imperial Credit Industries, Inc.; ICIFC Secured Assets Corporation, Mortgage Pass-Through Certificates, Series 1997-1; ICTFC Secured Assets Corporation, Mortgage Pass-Through Certificates, Series 1997-2; ICIFC Secured Assets Corporation, Mortgage Pass-Through Certificates, Series 1997-3; IMPAC Secured Assets CMLI Trust Series 98-1 Collateralized Asset-Backed Notes, Series 1998-1 (collectively "ICIFC Trusts"); Empire Funding Home Loan Owner Trust 1998-1 ("Empire Trust"); Credit Suisse First Boston Mortgage Securities Corporation; Credit Suisse First Boston Mortgage Securities Corporation Preferred Mortgage Asset-Backed Certificates, Series 1996-2; Credit Suisse First Boston Mortgage Securities Corporation Preferred Mortgage Asset-Backed Certificates, Series 1997-1 (collectively "First Boston Trusts"); Bankers Trust Company of California, NA; Bankers Trust Company (collectively "Bankers Trust"); GMAC-Residential Funding Corporation ("GMAC-RFC"); Life Bank; and Life Financial Home Loan Owner Trust 1997-3 ("Life Trust") (collectively "defendants"). Plaintiffs allege that defendants are current holders or assignees of certain second mortgage notes between Preferred Credit and plaintiff class members, and the mortgage notes violate the Tennessee statutory limitations on interest, loan origination fees, loan brokerage commissions and/or other loan charges established in Tennessee Code Annotated sections 47-14-102, 47-14-103, 47-14-112, 47-14-113, 47-14-117, 47-15-102, 47-15-103, and 47-15-104, and the Rules of the Tennessee Department of Financial Institutions, chapter 0180-17. Plaintiffs also allege that Preferred Credit violated the Tennessee Consumer Protection Act ("TCPA"), Tenn. Code Ann. §§ 47-18-101 et seq., which prohibits unfair or deceptive acts or practices. Additionally, plaintiffs allege that since Preferred Credit violated the above Tennessee statutory provisions, the loan agreements between plaintiffs and Preferred Credit are void or voidable as an illegal contract against public policy. Plaintiffs assert that defendants, as holders of the notes securing the mortgages, are liable for Preferred Credit's conduct. Plaintiffs seek relief in several forms, including injunctive and declaratory relief, compensatory and punitive damages, attorneys' fees, costs, and pre- and post-judgment interest. (Compl. ¶¶ B-K.)
Class certification has not yet been requested.
Plaintiffs allege that defendants are all current holders or assignees of certain of the second mortgage notes between Preferred Credit and plaintiffs. (Compl. ¶ 28.)
Plaintiffs voluntarily dismissed Imperial Credit Industries, Inc. without prejudice on May 23, 2002.
Plaintiffs voluntarily dismissed Credit Suisse First Boston Mortgage Securities Corporation without prejudice on April 18, 2002.
On September 24, 2001, defendant Life Bank filed a motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). On September 26, 2001, defendant Life Financial Home Loan Owner Trust 1997-3 joined Life Bank's motion to dismiss. On April 1, 2002, defendants U.S. Bank, NA; U.S. Bank, NA ND; Empire Trust; and First Boston Trusts collectively filed a motion to dismiss pursuant to Rule 12(b)(2) for lack of personal jurisdiction or, in the alternative, pursuant to Rule 12(b)(6) for failure to state claims upon which relief can be granted. On that same date, defendants IMPAC Funding, IMPAC Mortgage, IMPAC Secured, ICIFC Trusts, and Bankers Trusts similarly filed a collective motion to dismiss pursuant to Rule 12(b)(2) or, in the alternative, Rule 12(b)(6). Also on that same date, defendant GMAC-RFC filed a motion to dismiss pursuant to Rule 12(b)(6) The arguments raised in each of these motions are substantially similar and will be dealt with by the court together; distinctions as to which defendant or defendants an analysis is applicable will be indicated as necessary. The issues raised by defendants are: (1) whether this court has personal jurisdiction over some of the defendants; (2) whether plaintiffs have standing to assert claims against some of the defendants; (3) whether plaintiffs' claims against federal savings banks are preempted by federal law; (4) whether assignees of the loans can be held liable for the actions of the original lenders; and (5) whether certain of plaintiffs' claims are barred by Tennessee statutory provisions including statute of limitations, statute of repose, and exclusivity of remedies. The court now considers these motions.
The following factual allegations are included in plaintiffs' complaint and are taken as true for purposes of this order. The Fraziers obtained a second mortgage home equity loan from Preferred Credit on May 14, 1997, which was secured by their residence in Memphis, Tennessee. (Compl. ¶ 29.) The original principal amount of the loan was $33,000. Id. Their loan included the following costs: a 14.25% interest rate, a $3,300 broker fee, a $395 loan processing fee, a $125 underwriting fee, a $125 document preparation fee, a $190 sub-escrow fee, and a $150 appraisal fee. Id. ¶ 30. The last payment on the loan is scheduled for May 27, 2012. Id. ¶ 31. The Phillips obtained a second mortgage home equity loan from Preferred Credit on May 8, 1997, which was secured by their residence in Memphis, Tennessee. Id. ¶ 34. The original principal amount of the loan was $27,500. Id. Their loan included the following costs: a 14.25% interest rate, a $2,160 broker fee, a $395 loan processing fee, a $125 underwriting fee, a $125 document preparation fee, and a $190 sub-escrow fee. Id. ¶ 35. The last payment on the loan is scheduled for May 27, 2012. Id. ¶ 36. Plaintiffs assert that the interest rate and closing costs charged exceed that which is allowed under Tennessee law and that the fees charged were in excess of the costs incurred and for services not provided. Id. ¶¶ 32-33, 37-38. Plaintiffs allege that defendants are "[u]pon information and belief . . . currently a holder of certain of the second mortgage loan notes made to class members." Id. ¶¶ 4-23.
The following facts are relevant to the jurisdiction analysis and are undisputed. Pamela Wieder, Vice President of U.S. Bank, attests that Empire Home Loan Owner Trust 1998-1 ("Empire Trust") was formed and created under the terms of a owner trust agreement, entered into by Financial Asset Securities Corporation, Empire Funding Corp., Wilmington Trust Company, and U.S. Bank NA. (Wieder Aff. VI ¶¶ 3-5.) The Empire Trust was formed and created under the terms of trust agreements entered into in 1998, pursuant to which Wilmington Trust Company is the owner trustee and U.S. Bank, NA is the paying agent. Id. ¶ 3. The purpose of the Empire Trust is to hold the owner trust estate (which holds second mortgage loans), to receive income from the mortgage loans (which is collected by the loan servicer), and to distribute that income to holders of notes and certificates of beneficial interest in the Trust. Id. ¶ 6. The Empire Trust issues certificates and notes under the terms of the trust agreement and the indenture. Id. ¶ 7, 9.
The Empire Trust is a Delaware Business Trust located and administered in Delaware. Id. ¶ 9. Its only office is that which is maintained as the Corporate Trust Office of Wilmington Trust Company in Delaware. Id. ¶ 10. It has no bank accounts in Tennessee. Id. ¶ 11. It has no employees, pursuant to the terms of the trust agreement. Id. ¶ 12. It has no agent in Tennessee and no representative of the Empire Trust has traveled to Tennessee on its behalf. Id.
The Empire Trust does not own, lease, or use real estate in Tennessee.Id. ¶ 16. It does not engage in any business in Tennessee. Id. ¶ 15. It has not entered into any contracts in Tennessee. Id. ¶ 18. It has not solicited second mortgage loans in Tennessee, nor has it solicited any of the named plaintiffs or putative class members for the purposes of originating second mortgage loans. Id. ¶ 19. It has not entered into second mortgage loans in Tennessee, and it has not loaned money to any of the named plaintiffs or putative class members. Id. ¶ 20. While the Empire Trust holds several thousand second mortgage loans throughout the country, in no case do the loans secured by Tennessee property held by it exceed two percent of all the loans held by the Owner Trusts. Id. ¶ 16.
The Empire Trust does not hold title to any mortgage loans. Id. ¶ 21. Rather, it holds the owner trust estate, which includes the income, payments, and rights to payment from second mortgage loans, title to which remains with U.S. Bank as grantor trustee. Id. Physical custody of the mortgage notes is with U.S. Bank in Minnesota. Id. ¶ 26. The mortgage notes are serviced by OCWEN Federal Bank, which is located in Florida.Id. ¶ 27. OCWEN has full authority and power, acting alone, to perform all actions that are necessary or desirable in connection with administering the loans, including collecting all payments. Id. OCWEN remits all payments of principal and interest collected on the notes to U.S. Bank at U.S. Bank's offices in Minnesota. Id. ¶¶ 27-28. The Empire Trust has not directly collected payments from any loan obligors in Tennessee or from plaintiffs, as it does not collect payments on or enforce second mortgage loans. Id. ¶¶ 24, 29.
Richard Johnson, treasurer and vice president of IMPAC Mortgage attests that IMPAC Secured is an affiliate of IMPAC Mortgage. (Johnson Aff. ¶¶ 1-2.) IMPAC Mortgage is a Maryland corporation with its principal place of business in California. IMPAC Secured is a California corporation with its principal place of business in California. Id. ¶ 2. Neither IMPAC Mortgage nor IMPAC Secured has employees, offices, agents, or operations in Tennessee. Id. ¶ 3. Neither IMPAC Mortgage nor IMPAC Secured owns or leases property in Tennessee, and neither maintains bank accounts in Tennessee. Id. Neither has solicited or negotiated with Tennessee borrowers whose loans were originated by Preferred Credit. Id. ¶ 4. Neither has ever originated loans in Tennessee. Id.
Part of the business of IMPAC Mortgage and its affiliates involves the creation of securitization trusts. Id. ¶ 5. The purpose of such trusts is to hold mortgage loans, including second mortgage loans, and distribute payments to persons holding beneficial interests in the trusts. Id. IMPAC Mortgage and its affiliates played a role in creating the following trusts: ICIFC Secured Assets Corporation Mortgage Pass-Through Certificates, Series 1997-1; ICIFC Secured Assets Corporation Mortgage Pass-Through Certificates, Series 1997-2; ICIFC Secured Assets Corporation Mortgage Pass-Through Certificates, Series 1997-3; and IMPAC Secured Assets CMN Trust Series 1998-1 Collateralized Asset-Backed Notes (collectively "Trusts"). Id. ¶ 6. The Trusts engage in no business in Tennessee. Id. ¶ 7. The Trusts have no employees, agents, or operations in Tennessee. Id. Other than the loans contributed to the trusts, the Trusts neither own nor lease property in Tennessee, and they maintain no bank accounts in Tennessee. Id. The Trusts have never originated loans in Tennessee or elsewhere. Id. ¶ 8. The Trusts never solicited or negotiated with Tennessee borrowers whose loans were originated by Preferred Credit. Id.
Defendants Empire Trust, IMPAC Mortgage, IMPAC Securities, ICIFC Trusts, and First Boston Trusts contend that plaintiffs' action against them should be dismissed since this court lacks personal jurisdiction over them. To defeat a motion to dismiss for lack of personal jurisdiction, a plaintiff has the burden of making a prima facie showing of facts sufficient to justify personal jurisdiction. Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1272 (6th Cir. 1998). The plaintiff may not rely on his pleadings; he must, by affidavit or otherwise, set forth specific facts establishing that the court has jurisdiction. Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991) (citing Weller v. Cromwell Oil Co., 504 F.2d 927, 930 (6th Cir. 1974)). Presented with a properly supported motion to dismiss, the court has three procedural alternatives: "It may decide the motion upon the affidavits alone; it may permit discovery in aid of deciding the motion; or it may conduct an evidentiary hearing to resolve any apparent factual questions." Weller, 504 F.2d at 1458 (citing Serras v. First Tenn. Bank Nat'l Ass'n., 875 F.2d 1212, 1214 (6th Cir. 1989). In all cases, the plaintiff bears the burden of establishing that jurisdiction exists. Theunissen, 935 F.2d at 1458. Here, since the court did not hold an evidentiary hearing, it must consider the pleadings, depositions, and affidavits in the light most favorable to the plaintiff. Dean, 134 F.3d at 1272. However, this requirement does not compel the court "to ignore undisputed factual representations of the defendant which are consistent with the representations of the plaintiffs." Kerry Steel v. Paragon Indus., Inc., 106 F.3d 147, 153 (6th Cir. 1997).
No party suggests that the court should hold an evidentiary hearing to resolve this motion.
To determine whether the court may exercise personal jurisdiction over a nonresident defendant, the court must first determine whether it has jurisdiction under the long-arm statute of the state in which the court sits. Dean, 134 F.3d at 1273; Serras, 875 F.2d at 1216. The Tennessee long-arm statute, Tenn. Code Ann. § 20-2-214(a)(6), extends the personal jurisdiction of Tennessee courts to the limits of the Due Process Clause. Payne v. Motorists' Mut. Ins. Co., 4 F.3d 452, 455 (6th Cir. 1993). Therefore, courts in Tennessee only need to determine whether the assertion of personal jurisdiction over a defendant violates federal constitutional due process. Id.
Consistent with the Due Process Clause, courts can exercise personal jurisdiction over a defendant so long as that defendant has "certain minimum contacts" with the forum state such that the exercise of personal jurisdiction "does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Within the minimum contacts doctrine, there is a distinction between general and specific personal jurisdiction. Aristech Chem. Int'l v. Acrylic Fabricators Ltd., 138 F.3d 624, 627-28 (6th Cir. 1998). General jurisdiction exists when a defendant's forum activities are "substantial" or "continuous or systematic," even though they are unrelated to the cause of action. Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 446-47 (1952); Helicopteros Nacionales de Colombia S.A. v. Hall, 466 U.S. 408, 414 n. 9 (1984). In general, proving general jurisdiction over a nonresident defendant is difficult, as evidenced by the greater number of cases rejecting such jurisdiction rather than finding it. See Chase Cavett Servs., Inc. v. Brandon Apparel Group, Inc., No. 02A01-9803-CH-00055, 1998 WL 846708, at *7 n. 4 (Tenn.Ct.App. 1998) (observing that "[t]he Supreme Court cases followingInternational Shoe have applied the minimum contacts test in a more conservative manner when the issue was one of general jurisdiction").
By contrast, specific jurisdiction exists when a defendant has sufficient minimum contacts that arise from or are related to the cause of action. Helicopteros, 466 U.S. at 414 n. 8. Specific personal jurisdiction is appropriate when three criteria are satisfied: (1) the defendant purposely avails himself of the privilege of acting in the forum state or intentionally causes a consequence there; (2) the plaintiff's cause of action arises from the defendant's actions in the forum state; and (3) the exercise of personal jurisdiction is reasonable in light of the defendant's acts or the consequences of his acts in the forum state. Aristech, 138 F.3d at 628; Payne, 4 F.3d at 455; S. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968). The Court of Appeals for the Sixth Circuit has made clear that purposeful availment is "the sine qua non for in personam jurisdiction." Kerry Steel, 106 F.3d at 150 (1997) (quoting Mohasco, 401 F.2d at 381-82). The significance of purposeful availment is that it "allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit," World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980), and "ensures that a defendant will not be haled into a jurisdiction solely as a result of `random,' `fortuitous' or `attenuated' contacts." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1986); Kerry Steel, 106 F.3d at 150.
In applying these elements, the contacts of each defendant must be assessed individually. Rush v. Savchuk, 444 U.S. 320, 332 (1980) Additionally, it is the named class representatives whose claims must satisfy these elements in order for the Court to have personal jurisdiction over defendants in the action. Barry v. Mortgage Servicing Acguisition Corp., 999 F. Supp. 65, 73 (1995).
In this case, plaintiffs argue that the following contacts justify the exercise of general personal jurisdiction over defendants: defendants' purchase of at least seventy-four second mortgage loans secured by property held by Tennessee residents (Wieder Aff. VI ¶ 16); defendants' receipt of income from these mortgages, id. ¶ 6; and defendants' holding of notes secured by mortgages from Tennessee residents secured by real property located within the state, id. ¶ 21.
Plaintiffs repeatedly argue in their consolidated response that they have not had an opportunity to develop evidence beyond the documents presented by the assignee defendants with respect to defendants' motion to dismiss for lack of personal jurisdiction. Specifically, plaintiffs contend that they have attempted to conduct discovery regarding factual information which would address this issue, but that defendants have not been responsive to their requests. Plaintiffs also claim that they will file a motion to compel this discovery. In the Rule 16(b) Scheduling Order of March 20, 2002, the court ordered that discovery would be limited to issues raised by or related to motions to remand and motions to dismiss. The deadline for responding to such motions was originally set for May 1, 2002 and was later extended to June 11, 2002 to provide plaintiffs the opportunity to receive responsive information to their discovery requests from defendants. However, as of the date of this order, plaintiffs have not filed a motion to compel; additionally, they did not seek to extend the deadline for responding to the motion to dismiss. Due to these failures, the court finds plaintiffs' assertion that they have not had an opportunity to develop evidence beyond the documents presented by defendants unconvincing. Thus, the court will proceed with its analysis based upon the evidence that is presently before it.
Defendants argue that they have insufficient contacts with the state of Tennessee to justify this court exercising general personal jurisdiction over them. To support this contention, defendants point the court toBarry v. Mortgage Servicing Acguisition Corp., 909 F. Supp. 65 (D.R.I. 1995). In Barry, plaintiff asserted that an assignee defendant with no banking operations, offices, or real property in Rhode Island, no personnel that travel regularly to Rhode Island, and no solicitation of business or formation of contracts within Rhode Island, still was subject to the personal jurisdiction of Rhode Island since the defendant was the assignee of 138 mortgages secured by real property in Rhode Island. Without deciding whether an assignment of a mortgage constitutes an ownership interest in the property, the court rejected plaintiff's contention that standing alone, the fact that defendant held 138 mortgages secured by Rhode Island property, is sufficient to confer general personal jurisdiction. Id. at 74-75. This court finds the reasoning in Barry compelling. When a defendant's forum activities consist solely of holding mortgages secured by property in the forum state, the contacts cannot be characterized as continuous or systematic such that an exercise of general personal jurisdiction would be permissible. With this principle in mind, the court examines the contacts of each defendant with the state of Tennessee.
Plaintiffs try to convince the court that the reasoning in Barry is inapposite. Their logic is that in Barry, the issue was whether Rhode Island courts could assert jurisdiction over a dispute between a Massachusetts borrower and a national bank headquartered in Texas, involving a loan secured by Massachusetts property. In contrast, they argue, this is a case dealing with Tennessee courts exercising jurisdiction over disputes between Tennessee borrowers and holders of their notes secured by Tennessee property. However, plaintiffs miss the point. Nowhere in their complaint do plaintiffs allege that their loans, which are secured by Tennessee property, are held by defendants. Instead, plaintiffs argue that an exercise of personal jurisdiction is appropriate only based upon the holding of mortgages secured by Tennessee property unrelated to their own claims.
The court first addresses whether it has general jurisdiction over defendant Empire Trust. Plaintiffs argue that the following contacts justify the exercise of general personal jurisdiction over these defendants: defendant's purchase of at least seventy-four second mortgage loans secured by property held by Tennessee residents (Wieder Aff. VI ¶ 16); defendant's receipt of income from these mortgages, id. ¶ 6; and defendant's holding of notes secured by mortgages from Tennessee residents secured by real property located within the state, id. ¶ 21. As discussed above, the holding of mortgages secured by property in Tennessee, without more, is insufficient to confer personal jurisdiction over defendants. However, plaintiffs have not alleged that Empire Trust has any other contacts with Tennessee. In addition, plaintiffs do not contest that the Trust has no employees or agents in Tennessee, nor that it has no representatives that have traveled to Tennessee. Id. ¶ 12. Plaintiffs also do not contest that Empire Trust has not entered into any contracts, including second mortgage loans, in Tennessee. Id. ¶¶ 18, 20. While the Trust holds several thousand second mortgage loans throughout the country, the loans it holds secured by Tennessee property do not exceed two percent of all the loans it holds. Id. ¶ 16. Furthermore, an independent servicer has exclusive power to perform all acts in connection with administering the loans, including collecting payments and enforcing performance of or seeking remedies with respect to the loans. Id. ¶¶ 27-29. Since plaintiffs can point to no contacts with Tennessee other than the Trust's holding of mortgages secured by property in Tennessee, the court finds that it cannot exercise general personal jurisdiction over Empire Trust.
The court next addresses whether it has general jurisdiction over defendants First Boston Trusts. Plaintiffs point to no affidavit, deposition, or other testimony to support their contention that these defendants have continuous and systematic contacts with Tennessee; plaintiffs point only to the affidavit of Pamela Wieder, Vice President of U.S. Bank, NA. Plaintiffs do not explain how Wieder's affidavit relates to these defendants. Thus, the court finds that plaintiffs have not met their burden to support their contention that First Boston Trusts have the continuous and systematic contacts required to subject them to liability for acts unrelated to their contacts with Tennessee.
Similarly, plaintiffs point to no evidence to show general personal jurisdiction over IMPAC Mortgage, IMPAC Secured, or ICTFC Trusts. Relying upon the uncontested affidavits provided by defendants, the court finds the facts regarding these defendants' contacts with Tennessee substantially similar to that of Empire Funding such that an exercise of general personal jurisdiction over these defendants would be inappropriate. IMPAC Mortgage, IMPAC Secured, and ICIFC Trusts have no employees, offices, or bank accounts in Tennessee. (Johnson Aff. ¶¶ 3, 7.) They have not solicited or entered into any second mortgage loans in Tennessee. Id. ¶¶ 4, 8. Since plaintiffs can point to no contacts with Tennessee other than defendants' holding of unrelated mortgages secured by property in Tennessee, the court finds that it cannot exercise general personal jurisdiction over these defendants.
The court now addresses whether plaintiffs have shown that this court has specific jurisdiction over defendants. As discussed above, to establish specific jurisdiction, plaintiffs must demonstrate that their suit arises out of or is related to defendants' contacts with Tennessee. Plaintiffs do not allege which, if any, defendants actually hold their second mortgage loans. They merely assert "[u]pon information and belief, [defendants are] currently a holder of certain of the second mortgage loan notes made to class members." (Compl. ¶¶ 4-23.) Since named plaintiffs' claims must satisfy the requirements for personal jurisdiction, a general allegation that defendants hold the mortgages made to putative class members is insufficient. This court does not have specific personal jurisdiction over any defendant that does not allegedly hold named plaintiffs' loans. Since plaintiffs fail to meet their burden in showing which defendants hold their loans, this court cannot find personal jurisdiction over any defendant. Thus, the court grants Empire Trust's, First Boston Trusts', IMPAC Mortgage, IMPAC Secured, and ICIFC Trusts' motions to dismiss for lack of personal jurisdiction.
The parties discuss at length the relevance of a case recently decided by the United States District Court for the District of Kansas,Piloher v. Direct Equity Lending, 189 F. Supp.2d 1198 (D. Kan. 2002) In Plicher, plaintiffs actually alleged which assignee defendants held their loans. In contrast, named plaintiffs in the instant action have specifically avoided informing the court which defendants hold their loans. Thus, it need not be decided at this time whether the actual holding of named plaintiffs' loans would subject an assignee defendant to the specific personal jurisdiction of this court.
Next, the court addresses the contention of defendants Life Bank; Life Trust; GMAC-RFC; U.S. Bank, NA; U.S. Bank, NA, ND; Bankers Trust Company of California, NA; Bankers Trust Company; and IMPAC Funding that plaintiffs' action against them should be dismissed pursuant to Rule 12(b)(6) due to lack of standing, since no allegation is made that any of defendants hold the loans made to named plaintiffs. Article 1111 of the United States Constitution provides that federal courts may hear only justiciable cases or controversies. U.S. Const. Art. III, § 2; see also Nat'l Rifle Ass'n of Am. v. Magaw, 132 F.3d 272, 279 (6th Cir. 1997) (noting that Article III "confines the federal courts to adjudicating actual `cases' and `controversies' and that "[t]he threshold question in every federal case is whether the court has the judicial power to entertain the suit" (internal citations omitted)) In evaluating whether a case is justiciable, a court must determine whether the plaintiff has standing to bring the lawsuit. Id. at 279-80. The Supreme Court has "established that the irreducible constitutional minimum of standing contains three elements." Lulan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992) First, the plaintiff must have suffered an injury in fact. This injury must be "an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical." Id. (internal quotations and citations omitted) Second, standing requires a causal connection between the plaintiff's injury and the defendant's action: the injury must be "fairly traceable to the challenged action of the defendant." let. (internal quotations and citations omitted) Third, it must be likely that the requested relief will redress the plaintiff's injury. Id. at 561. (internal quotations and citations omitted)
In a class action (or potential class action), the individual standing of each named plaintiff vis-a-vis each defendant is a threshold issue.Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410, 423 (6th Cir. 1998) (internal citations omitted) Named plaintiffs do not acquire standing by virtue of bringing a class action. Id. Rather,
a plaintiff "cannot represent those having causes of action against other defendants against whom the plaintiff has no cause of action and from whose hands he suffered no injury." This is true even though the plaintiff may have suffered an injury identical to that of the other parties he is representing.Thompson v. Bd. of Educ. of the Romeo Cmty. Schs., 709 F.2d 1200, 1204 (6th Cir. 1983) (quoting LaMar v. HB Novelty Loan Co., 489 F.2d 461, 462 (9th Cir. 1973). However, there are two exceptions to the general rule that each member of a plaintiff class must have a cause of action against each defendant:
(1) Situations in which all injuries are the result of a conspiracy or concerted schemes between the defendants at whose hands the class suffered injury; and (2) Instances in which all defendants are juridically related in a manner that suggests a single resolution of the dispute would be expeditious.Id. at 1204-05 (emphasis in original) (citing LaMar, 489 F.2d at 462). A juridical relationship among defendants is most often found "[w]here all members of the defendant class are officials of a single state and are charged with enforcing or uniformly acting in accordance with a state statute, or common rule or practice of state-wide application, which is alleged to be unconstitutional." Id. at 1205 (quoting Mudd v. Busse, 68 F.R.D. 522, 527-28 (N.D. Ind. 1975) It is also used in cases in which there is a contractual obligation among all defendants. See, e.g., United States v. Trucking Employers, Inc., 75 F.R.D. 682 (D.D.C. 1977).
In LaMar, the court discussed the two exceptions within the context of whether plaintiff met Rule 23's requirement that "the representative party will fairly and adequately protect the interests of the class":
[W]e assert that a plaintiff who has no cause of action against the defendant can not "fairly and adequately protect the interests" of those who do have such causes of action. This is true even though the plaintiff may have suffered an identical injury at the hands of a party other than the defendant and even though his attorney is excellent in every material respect. Obviously this position does no embrace situations in which all injuries are the result of a conspiracy or concerted schemes between the defendants at show hands the class suffered injury. Nor is it intended to apply in instances in which all defendants are juridically related in a manner that suggests a single resolution of the dispute would be expeditious.LaMar, 489 F.2d at 466 (internal citations omitted) The court did not first address the issue of standing since it ultimately held that plaintiffs were not entitled to bring a class action against defendants with whom they had no dealing. Id. at 464.
The only claims that are before this court are those of named plaintiffs. Thus, each named plaintiff must demonstrate that he satisfies the requirements of standing vis-a-vis each defendant. Since named plaintiffs fail to state which defendant actually holds their loans, they fail to meet this test with respect to any of the defendants. Instead, plaintiffs state that they will lack standing as to those defendants that do not hold the named plaintiffs' loans only if they do not succeed on the issue of class certification. However, even assuming that this court were to certify plaintiffs as a class, this would not cure the fact that named plaintiffs do not have standing against any defendant who does not actually hold their loans.
Furthermore, plaintiffs' contention that class certification issues are "logically antecedent" to standing issues is contrary to law. Although the Supreme Court states in Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999), rthat the "class certification issues are, as they were in [Amchem Prod., Inc. v. Windsor, 521 U.S. 591 (1997)], `logically antecedent' to Article III concerns, and themselves pertain to statutory standing, which may properly be treated before Article III standing," it prefaced this statement by saying, "[o]rdinarily, of course, this or any other Article III court must be sure of its own jurisdiction before getting to the merits." Ortiz, 527 U.S. at 831. Moreover, the Court determined that class certification was improper and never specifically addressed whether standing existed. Therefore, this court sees no reason why it should address class certification issues, which are not even presently before it, before addressing whether plaintiffs have standing against defendants.
Furthermore, plaintiffs do not fall within the "juridical link" exception. The types of cases that fall within this exception are those that have either a contractual obligation among all defendants or a state or local statute which requires common action by defendants. Neither of these situations exists in the present action. Despite this failing, plaintiffs rely on Moore v. Comfed Savings Bank, 908 F.2d 834, 838-39 (11th Cir. 1990), to support their position that defendants are juridically linked. In Moore, however, although the Eleventh Circuit discussed the juridical link exception, it did not expressly resolve the standing question, but rather found that defendants were properly joined pursuant to Federal Rule of Civil Procedure 20. Thus,Moore does not support plaintiffs' position that defendants are juridically linked when plaintiffs' loans are originated by a common lender and subsequently assigned to unrelated defendants.
In Moore, the plaintiffs' loans were originated by a common lender who subsequently sold them to savings and loans companies throughout the country. Moore, 908 F.2d at 836.
Plaintiffs' reliance upon the joinder rules similarly does not cure named plaintiffs' lack of standing. Plaintiffs argue that joinder of the assignee defendants that do not hold named plaintiffs' loans is required since these defendants are necessary parties under Federal Rule of Civil Procedure 19(a). They assert that without the presence of the assignee defendants in this action, complete relief cannot be accorded to the class members. However, this assumes that class members are parties to this action. Since class certification has not yet been ordered, or even requested, joinder of additional parties related to unnamed class members would be inappropriate at this time. Moreover, procedural rules, such as the joinder rules, cannot expand the jurisdiction of the federal courts, and thus, cannot confer standing where a case or controversy otherwise would not exist. See, e.g., Christiansen v. Beneficial Nat'1 Bank, 972 F. Supp. 681, 683 (S.D. Ga. 1997); United States ex rel. Tenn. Valley Authority v. Easement and Right of Way, 204 F. Supp. 837, 840 (E.D. Tenn. 1962).
Rule 19(a) states, in pertinent part:
A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in the person's absence complete relief cannot be accorded among those already parties . . .
Fed.R.Civ.Pro. 19(a).
Finally, plaintiffs attempt to convince the court that they have standing pursuant to the Home Ownership and Equity Protection Act of 1994 ("HOEPA"), Pub.L. No. 103-325, 108 Stat. 2190 (codified as amended at 15 U.S.C. § 1602(aa), 1639, and 1641(d)), which amended the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq. The crux of their argument is based on the following logic: Plaintiffs first assert that the injuries of which they complain are based upon the second mortgage loans entered into by themselves and the originating lender such that plaintiffs have standing to sue the original lender. Second, they point to HOEPA which states that "any person who purchases or is otherwise assigned a mortgage referred to in section 1602(aa) of this title shall be subject to all claims and defenses with respect to that mortgage that the consumer could assert against the creditor of the mortgage . . ." 15 U.S.C. § 1641(d)(1). Finally, plaintiffs reason that under HOEPA' s assignee liability provisions, the assignee defendants do not possess any defense, including standing, distinct from the defenses that would be available to the lender. However, plaintiffs logic is flawed as they mistakenly focus on the language regarding "all claims and defenses." Since standing is a threshold jurisdictional question, the proper focus of the standing inquiry deals with the following clauses: "any person who purchases or is otherwise assigned a mortgage" and "with respect to that mortgage that the consumer could assert against the creditor of the mortgage." As stated above, named plaintiffs do not have standing to sue someone who does not actually hold their loans. HOEPA does nothing to alter the requirements of Article III standing; rather, it merely eliminates holder in due course defenses for assignees of certain high cost mortgages when the assignee holds the plaintiffs' loans. See. e.g., In re Rodrigues, 278 B.R. 683, 688 (Bankr. D.R.I. 2002); Vandenbroeck v. Contimortgage Corp. and Greentree Fin. Servicing Corp., 53 F. Supp.2d 965, 968 (W.D. Mich. 1999); In re Murray, 239 B.R. 728, 733 (Bankr. E.D. Penn. 1999)).
Pursuant to the above analysis, plaintiffs do not have standing against any defendant that does not hold plaintiffs' loans. However, plaintiffs fail to specify which defendants, if any, actually hold their loans. Thus, the court grants Life Bank's, Life Trust's, GMAC-RFC's, U.S. Bank, NA's, U.S. Bank, NA, ND's, Bankers Trust Company of California, NA's, Bankers Trust Company's, and IMPAC Funding's motions to dismiss.
In accordance with the above discussion, the court concludes that it does not have personal jurisdiction over IMPAC Mortgage, IMPAC Secured, ICIFC Trusts, Empire Funding, and First Boston Trusts. Thus, these defendants' motions to dismiss are granted. Additionally, the court finds that, based on the facts presently before the court, plaintiffs do not have standing to assert claims against U.S. Bank, NA; U.S. Bank, NA, ND; Bankers Trust Company of California, NA; Bankers Trust Company; GMAC-FRC; Life Bank; Life Trust; or IMPAC Funding. Thus, their motions to dismiss are granted. The dismissal is without prejudice as to any defendant that may actually hold plaintiffs' loans.
IT IS SO ORDERED.