Opinion
5:22-CV-00454-M-RN
05-08-2023
Trevor G. Graham & Ann Graham, Plaintiffs, v. Trustee Service of Carolina, PLLC, et al., Defendants.
ORDER & MEMORANDUM & RECOMMENDATION
Robert T. Numbers, II, United States Magistrate Judge
Pro se Plaintiffs Trevor G. Graham and his wife, Ann Graham, have sued Trustee Service of Carolina, PLLC, NewRez, LLC d/b/a Shellpoint Mortgage Servicing, and the Clerk of Superior Court of Wake County, North Carolina. In essence, the Grahams allege that Defendants conspired to deny them their constitutional due process rights by falsifying chain of title documents and manipulating North Carolina state court proceedings to obtain a foreclosure on the Grahams' home in August 2022. Compl. at 7-10. They also contend that Defendants intentionally inflicted emotional distress on them in violation of North Carolina tort law. Id. at 11-12.
The Grahams misnamed this Defendant in their complaint. Trustee Services of Carolina, LLC, made a limited appearance to respond to the Grahams' complaint, but it maintains that it might not be a proper party to the suit. See Mem. Supp. TSC Mot. Dismiss at 1 n.1, D.E. 22. Because the court should dismiss the Grahams' complaint in its entirety despite the mix-up, however, the undersigned proceeds as though TSC was properly named.
Although the Grahams' complaint begins with numbered paragraphs, its numeration sometimes restarts or is altogether absent. Thus, cites to the complaint will point to pages rather than paragraphs.
Before the court are these seven motions:
• The Grahams' motion to reconsider a December 2022 order granting Shellpoint an extension of time to respond to their complaint (Mot. Reconsideration, D.E. 20);
• Two motions filed by the Grahams asking the court to enter default judgment against Defendants (Mots. Default J., D.E. 18 & 44);
• The Grahams' motion to strike an affidavit the Wake County Clerk of Court submitted in response to their second motion for default judgment (D.E. 52);
• TSC's motion to dismiss the Grahams' complaint (TSC Mot. Dismiss, D.E. 21);
• Shellpoint's motion to dismiss the Grahams' complaint (Shellpoint Mot. Dismiss, D.E. 23); and
• A three-in-one motion filed by the Grahams asking the court to provide them relief from the transfer of title that happened after the foreclosure sale, strike Shellpoint's motion to dismiss, and hold Shellpoint in contempt of court (Misc. Mot., D.E. 35).
As discussed more fully below, it is unclear which Defendants the Grahams seek to default. The undersigned will proceed as though the Grahams seek default judgment against all Defendants.
For the reasons below, the court denies the Grahams' motion for reconsideration (D.E. 20), their motion seeking miscellaneous relief (D.E. 35), and their motion to strike (D.E. 52). The undersigned further recommends that the court deny their motions for default judgment (D.E. 18 & 44) and grant Defendants' motions to dismiss (D.E. 21 & 23). Given that the court cannot (in the case of the federal claims) and should not (in the case of the state tort claim) exercise subject-matter jurisdiction over the Grahams' claims, this case should be dismissed in its entirety.
The Grahams' complaint does not provide a clear picture of the facts underlying this lawsuit. Thus, the information in this section was cobbled together from the complaint itself and public records included as attachments to the parties' filings. Cf. Philips v. Pitt Cnty. Mem. Hosp., 572 F.3d 176, 180 (4th Cir. 2009) (“In reviewing a Rule 12(b)(6) dismissal, we may properly take judicial notice of matters of public record.”) (citations omitted).
In March 2007, the Grahams signed a promissory note secured by their Raleigh, North Carolina, home through a deed of trust. See Lending Docs. at 4-8 & 11-23, D.E. 1-5. Roughly four and a half years later, the Bank of New York Mellon became the holder of the note. See Assignment Docs. at 6, D.E. 1-3. In December 2019, Mellon appointed TSC-a North Carolina corporation-as the substitute trustee under the deed of trust. See Appointment, D.E. 22-4. And although it's unclear when Shellpoint entered the equation, it currently services the loan. See State Court Docs. at 21, D.E. 1-1.
See N.C. Secretary of State Docs. at 3, D.E. 22-14 (establishing that TSC is headquartered in North Carolina).
Believing the Grahams defaulted on their loan, TSC commenced foreclosure proceedings in April 2022. See Foreclosure Hr'g Notice, D.E. 22-5. The Wake County Clerk of Superior Court determined that Mellon was the proper holder of the note, the Grahams had defaulted on the note, and the foreclosure sale could proceed. Clerk's Order, D.E. 22-6.
That August, the Grahams appealed the Clerk's order to Superior Court. See State Court Docs. at 41-53. The presiding judge held a hearing, at which the Grahams alleged that Mellon came to hold the note through fraudulent documents. See id. at 13-16. The Judge disagreed-after the hearing, he issued a de novo order that echoed the Clerk's findings: Mellon properly held the note, and TSC could proceed in its foreclosure action. Superior Court's Order, D.E. 22-7. The Grahams did not appeal that order. And although they tried to stay the foreclosure sale, the Superior Court denied their motion. Order Denying Mot. Stay, D.E. 22-10. At the November 2022 foreclosure sale, Mellon was the highest bidder. The next month, TSC deeded the home to it. See Substitute Trustee's Deed, D.E. 22-12.
Two weeks before the foreclosure sale, the Grahams filed this lawsuit. Their claims are somewhat unclear-in essence, they accuse Defendants (and their counsel) of denying them due process of law and obtaining the foreclosure judgment by filing fraudulent documents. See, e.g., Compl. at 7-10, 12. Construing the Grahams' complaint liberally, the undersigned finds that they bring two causes of action: First, they allege that Defendants conspired to deny them their Fifth and Fourteenth Amendment due process rights through fraudulent, illegal, and time-barred court proceedings. Id. at 10-11, 14. And second, they claim that the conspiracy to deny them due process amounts to an intentional infliction of emotional distress. Id. at 11-12. The Grahams seek more than $250 million in damages alongside a declaratory judgment stating that the state court proceedings and the foreclosure were illegal. Id. at 19.
The Grahams appear to have filed a nearly identical lawsuit in North Carolina court about a week before they filed their federal suit. See Mot. Withdraw Compl., D.E. 22-13. Although the Grahams quickly attempted to withdraw their state-court suit because it was “[f]iled in the wrong court[,]” see id. at 4, TSC alleges that it remains pending, see Mem. Supp. TSC Mot. Dismiss at 5.
On December 20, 2022, the Grahams moved for default judgment against all Defendants. First Mot. Default J. at 3-5. They claim that, although they properly served Defendants, each failed to respond. Id. That same day, Shellpoint asked the court for more time to answer the complaint, alleging that it was not properly served. Shellpoint Mot. Extension, D.E. 15. Finding Shellpoint's argument persuasive, the court granted its motion the next day. Order Granting Shellpoint Mot. Extension, D.E. 17. TSC received a similar extension earlier that month. See Order Granting TSC Mot. Extension, D.E. 10. As a result, both Defendants' responsive pleadings were due on January 9, 2023.
The day their pleadings were due, TSC and Shellpoint moved to dismiss the claims against them. Both Defendants contend that this court lacks subject-matter jurisdiction because the Rooker-Feldman doctrine prevents it from reviewing state court judgments. And even if the court has subject-matter jurisdiction, Defendants allege that the Grahams have failed to state a claim against them. TSC further claims that the Grahams failed to serve it properly and that the process itself was deficient, rendering this court unable to assert personal jurisdiction over it. Finally, TSC maintains that the Grahams' claims are moot and barred by issue and claim preclusion. The Grahams contest each of Defendants' bases for dismissal. They also ask the court to reconsider the extension it gave Shellpoint. Mot. Reconsideration at 1-3.
In March 2023, the Grahams filed a difficult motion to decipher. Construing the motion broadly, the undersigned gathers that the Grahams seek to undo the transfer of title that occurred after the November 2022 foreclosure sale because it violated North Carolina law. See Misc. Mot. at 4-5. They also ask the court to strike Shellpoint's motion to dismiss because it was filed after the allegedly illegal transfer of title took place. Id. at 6. Finally, they request that the court hold Shellpoint in contempt of court because it deeded the property to Mellon during this lawsuit. Id. at 7.
The next month, the Grahams moved for default judgment yet again-this time targeting only the Wake County Clerk of Superior Court, who had not yet responded to the complaint. Second Mot. Default J., D.E. 44. The Clerk makes several arguments in response, including that it was not properly served and that Rooker-Feldman doctrine bars the Grahams' lawsuit. See Resp. Opp'n Second Mot. Default J. at 2-10, D.E. 47.
To recap, the six motions before the court are: the Grahams' motion for reconsideration (D.E. 20); the Grahams' two motions for default judgment (D.E. 18 & 44); TSC's motion to dismiss (D.E. 21); Shellpoint's motion to dismiss (D.E. 23); and the Grahams' motion for miscellaneous relief (D.E. 35). The undersigned will discuss the Grahams' four motions before turning to Defendants' motions to dismiss.
II. Motion for Reconsideration
The Grahams first ask the court to reconsider the extension of time it gave Shellpoint to move to dismiss. Federal Rule of Civil Procedure 54 allows a court to revise its interlocutory orders any time before final judgment when such relief is warranted. Fed.R.Civ.P. 54(b); see also Am. Canoe Ass'n v. Murphy Farms, Inc., 326 F.3d 505, 514-15 (4th Cir. 2003). Generally, courts grant motions for reconsideration under Rule 54(b) in only three circumstances. Carlson v. Boston Sci. Corp., 856 F.3d 320, 325 (4th Cir. 2017). First, when there has been an intervening change in controlling law. Id. Second, when there is additional evidence that was not previously available. Id. And third, when the prior decision was based on clear error or would work manifest injustice. Id.; see U.S. Tobacco Coop. v. United States, No. 5:18-CV-473-BO, 2019 WL 8323614, at *1 (E.D. N.C. Nov. 8, 2019); Matter of Vulcan Const. Materials, LLC, 433 F.Supp.3d 816, 819-20 (E.D. Va. 2019).
The Grahams point to no change in the law that would govern this dispute, and they do not ask the court to consider evidence unavailable when it issued the December 21, 2022 Order. Thus, to successfully persuade this court to alter or amend its order, the Grahams must prove that a clear error by the court merits such a change.
They have not done so. Their arguments focus on rules and decisions from North Carolina's state courts, which are not binding on procedural questions raised in federal court. See, e.g., Hanna v. Plumer, 380 U.S. 460, 470 (1965) (discussing the primacy of federal procedural rules in federal court). What's more, the Grahams present no evidence contradicting the argument at the core of Shellpoint's motion for extension of time: The Grahams did not properly serve Shellpoint with a copy of the summons and complaint. Thus, their motion for reconsideration (D.E. 20) is denied.
III. Motion for Miscellaneous Relief
The Grahams' next motion seeks a trifecta of relief: First, it asks the court to nullify the transfer of title to Mellon after it bought their former home in the November 2022 foreclosure sale. Misc. Mot. at 4-5, D.E 35. Next, it requests that the court strike Shellpoint's motion to dismiss because Shellpoint filed its motion after the transfer of title took place. Id. at 6. And finally, it implores the court to hold Shellpoint in contempt for transferring the title during this lawsuit. Id. at 7.
But the Grahams can point to no court order forbidding transferring title pending the outcome of their litigation. In fact, the Wake County Superior court specifically ordered that the foreclosure sale could proceed. Superior Court's Order at 2. And although the Grahams tried to stay the sale after the Superior Court entered its judgment, the court denied their motion. Order Denying Mot. Stay at 2. The Grahams sought a similar temporary restraining order in the early stages of their federal lawsuit, but this court denied that motion as well. Order Denying Mot. TRO at 3, D.E. 6. Neither Shellpoint nor any other Defendant defied a court order in proceeding with the foreclosure sale and concomitant transfer of title; the Grahams' motion for miscellaneous relief (D.E. 35) is denied.
IV. Motions for Entry of Default Judgment
The Grahams' final two motions ask that the court enter a default judgment in their favor against Defendants. Their motions, however, are somewhat unclear. Their first motion refers to the Clerk of Superior Court and Trustee Service of Carolina, but their proposed orders seek entry of default against the Clerk and Shellpoint Mortgage Servicing. Compare First Mot. Default J. at 3, with Proposed First Mot. Default J. Summons, D.E. 18-1 & Proposed Default J. Order, D.E. 18-2. And their second motion refers only to the Clerk of Superior Court. See Second Mot. Default J. at 1-2.
In any case, the Grahams are not entitled to the relief they seek. At the most basic level, they are not entitled to a default judgment because the court has not entered a default against any Defendant-a prerequisite to entry of a default judgment. But more importantly, the Grahams are not entitled to entry of default against Defendants because each has properly responded to the complaint. Therefore, the district court should deny the motion for entry of default judgment.
Federal Rule 55 governs the entry of default and default judgment. This two-step process begins when a party “show[s] by affidavit or otherwise” that “a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend” the case. Fed.R.Civ.P. 55(a). In that circumstance, the Clerk of Court “must enter the party's default.” Id.
After an entry of default, depending on the type of relief sought, either the Clerk of Court or the court itself can enter a default judgment. If the amount sought “is for a sum certain or a sum that can be made certain by computation,” the Clerk of Court, upon the appropriate showing, can enter a default judgment for the amount sought. Id. 55(b)(1). But “[i]n all other cases, the party must apply to the court for a default judgment.” Id. 55(b)(2).
A key aspect of this process, however, is ensuring that the party who is to be defaulted was properly served with the summons and complaint. Md. State Firemen's Ass'n v. Chaves, 166 F.R.D. 353, 354 (D. Md. 1996) (“It is axiomatic that service of process must be effective under the Federal Rules of Civil Procedure before a default . . . may be entered against a defendant.”). The plaintiff bears the burden of establishing that service of process was effective. Ayres v. Ocwen Loan Servicing, LLC, 129 F.Supp.3d 249, 261 (D. Md. 2015). Without making such a showing, the plaintiff is not entitled to entry of default or default judgment. See, e.g., Dahl v. Kanawha Inv. Holding Co., 161 F.R.D. 673, 685 (N.D. Iowa 1995).
With these standards in mind, the court will turn to whether it is appropriate to enter default or default judgment against each Defendant.
A. Wake County Clerk of Superior Court, Special Procedure Division
The Grahams seek entry of default judgment against the Wake County Clerk of Superior Court, Special Procedure Division. The record reflects that the Clerk of Court has not responded to the complaint, so entry of default would be appropriate if the Grahams properly served the Clerk of Court.
In North Carolina, the Clerk of Superior Court is a judicial officer in the Superior Court Division of North Carolina's General Court of Justice. N.C. Const. art. IV, §§ 2, 9; N.C. Gen. Stat. §§ 7A-4, 7A-40. Because the Clerk is a state official, Federal Rule 4(j)(2) provides two methods of proper service: First, a party can affect proper service by “delivering a copy of the summons and of the complaint to its chief executive officer[.]” Fed.R.Civ.P. 4(j)(2)(A). In this context, delivery means personal service on the chief executive officer. See Scott v. N.C. Dep't of Revenue, No. 3:13-CV-00294, 2014 WL 1267248, at *3 (W.D. N.C. Mar. 26, 2014); 4B Fed. Prac. & Proc. Civ. § 1109 (4th ed. Apr. 2023) (collecting cases). Second, “serving a copy of each in the manner prescribed by that state's law for serving a summons or like process on such a defendant” constitutes proper service. Id. 4(j)(2)(B). North Carolina law provides for service of state agencies by delivering or mailing the summons and complaint to a process agent appointed by the agency or, if no agent has been appointed, the Attorney General. N.C. Gen. Stat. § 1A-1, Rule 4(j)(4).
The Grahams have failed to show that they properly served the Clerk of Court's Office. The Proof of Service the Grahams filed with the court notes that they mailed the Summons directly to the Clerk of Court's Office at a Post Office Box in Raleigh. Returned Clerk of Court Summons at 4, D.E. 11. They have not shown that they delivered a copy of the relevant documents to the Clerk of Court. Nor have they shown that they served the appropriate process agent or the Attorney General. Thus, the Grahams are not entitled to entry of default or default judgment-they have not established that they properly served the Wake County Clerk of Superior Court, Special Procedure Division.
B. Shellpoint Mortgage Servicing
The Grahams are not entitled to entry of default against Shellpoint Mortgage Servicing because it responded to the complaint in the time allowed by the court. In December 2022, the court allowed Shellpoint until January 9, 2023, to respond to the complaint. Order Granting Shellpoint Mot. Extension at 1. On that date, it moved to dismiss the Grahams' claims against it. Shellpoint Mot. Dismiss at 1. The Grahams have not shown that Shellpoint failed to defend against their claims. Thus, the court should deny the motion for entry of default.
C. Trustee Service of Carolina PLLC
As with Shellpoint Mortgage Servicing, the Grahams cannot show they are entitled to entry of default against Trustee Services of North Carolina. The court allowed Trustee Services until January 9, 2023, to respond to the complaint. Order Granting TSC Mot. Extension at 1. It met this deadline by timely moving to dismiss. TSC Mot. Dismiss at 1. Thus, the court should deny the motion for entry of default.
V. Motion to Strike
In response to the Grahams' second motion for default judgment, the Wake County Clerk of Court submitted an affidavit contending that the Clerk's office had not been properly served. See Affidavit, D.E. 51-1. The next day, the Grahams moved to strike the affidavit because it allegedly contains hearsay. Mot. Strike, D.E. 52. But the court did not consider the Clerk's affidavit in its analysis of the Grahams' motion for default. Thus, the court denies the motion to disregard the affidavit (D.E. 52) as moot. See, e.g., Daniels v. Metro. Life Ins. Co., No. 5:05-CV-773-BR(2), 2007 WL 9718507, at *6 (E.D. N.C. Apr. 26, 2007).
VI. Motions to Dismiss
The Grahams-who received an unfavorable judgment in North Carolina court-seek an order declaring that judgment invalid. But this court lacks subject-matter jurisdiction to review state court decisions under the Rooker-Feldman doctrine. Thus, the court should dismiss the Grahams' claims alleging that the North Carolina Superior Court's order should be overturned for alleged due process violations. And even if their intentional infliction of emotional distress claim survives Rooker-Feldman analysis, the court should dismiss it as well-the court should decline to exercise supplemental jurisdiction over the Grahams' tort claim, and they do not allege sufficient facts to state a claim for relief.
Unlike their state counterparts, federal courts have jurisdiction over only a limited set of cases and controversies. They are “constrained to exercise only the authority conferred by Article III of the Constitution and affirmatively granted by federal statute.” In re Bulldog Trucking, Inc., 147 F.3d 347, 352 (4th Cir. 1998). Because of the limited nature of federal court jurisdiction, there is a presumption that a federal court lacks jurisdiction unless the party invoking the court's jurisdiction shows that it exists. Lehigh MM. & Mfg. Co. v. Kelly, 160 U.S. 327, 336 (1895); Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982) (“The burden of proving subject matter jurisdiction . . . is on the plaintiff, the party asserting jurisdiction.”). If the court determines that it lacks subjectmatter jurisdiction, it must dismiss the action. Fed.R.Civ.P. 12(h)(3).
In most civil cases, a court obtains subject-matter jurisdiction in one of two ways. First, under federal question jurisdiction, a federal court will have jurisdiction to resolve a claim if it arises “under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. Second, a federal court may have authority to hear a case through diversity jurisdiction if the amount at issue exceeds $ 75,000 and the parties to the case are citizens of different states. 28 U.S.C. § 1332. There must be complete diversity between the parties-each plaintiff must be a citizen of a different state than each defendant. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806).
In this case, the court would, generally, have subject-matter jurisdiction over the Grahams' constitutional claims under the federal question doctrine. And, as a result, it may also exercise supplemental jurisdiction over their state-law tort claim. But given the facts here, the Rooker-Feldman doctrine deprives the court of subject-matter jurisdiction over the federal claims and the relevant considerations counsel against exercising supplemental jurisdiction. Thus the district court should dismiss the Grahams' claims-including the claims against the Wake County Clerk of Court- because of lack of subject matter jurisdiction.
A. Due Process Claim and Rooker-Feldman Doctrine
Aside from complying with statutory subject-matter jurisdiction requirements, federal courts must ensure that they do not hear cases that would interfere with state judicial proceedings. To this end, the Rooker-Feldman doctrine often prevents federal courts from exercising subjectmatter jurisdiction when doing so would require the court to review a state court judgment. The doctrine is jurisdictional-courts may examine whether it bars their adjudication over a claim sua sponte. See, e.g., Am. Reliable Ins. Co. v. Stillwell, 336 F.3d 311, 316 (4th Cir. 2003) (collecting cases).
The Rooker-Feldman doctrine gets its name from the two cases that created it: Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983). Both cases involved the jurisdiction of lower federal courts to adjudicate disputes involving state court decision. Before addressing the doctrine's applicability here, it is worthwhile to review what the doctrine does and does not apply to.
Rooker involved an attempt to have “a judgment . . . which was affirmed by the [Indiana] Supreme Court . . . declared null and void, and to obtain other relief dependent on that outcome.” 263 U.S. at 414. Rooker claimed that the judgment violated the United States Constitution's contracts clause and the Fourteenth Amendment. Id. at 415. The district court held that it did not have jurisdiction to address the case, and an appeal followed. Id.
The Supreme Court determined that the district court was right. Id. According to the Court, Congress established it as the sole venue for appeals of state court decisions. Id. at 416. As the “jurisdiction possessed by the District Courts is strictly original” it cannot “entertain a proceeding to reverse or modify the judgment” of a state court. Id. So the Supreme Court affirmed the trial court's determination that it lacked jurisdiction over Rooker's claim. Id. at 417.
Several decades later, the Supreme Court returned to this issue in Feldman. Under review in Feldman was a decision from the District of Columbia Court of Appeals denying two petitions seeking waivers of a District of Columbia bar admission rule. 460 U.S. at 463.
After unsuccessfully pursuing the matter in the local court system, the petitioners resorted to the federal courts. Id. at 468. One petitioner, Feldman, sought a declaration that the denial of his waiver request violated the Fifth Amendment and an injunction either admitting him to practice in the District of Columbia or allowing him to sit for its bar exam. Id. at 468-69. And the other petitioner, Hickey, claimed that the denial “violated the Fifth Amendment and the federal antitrust laws.” Id. at 472. Hickey sought an order that would allow him to sit for the District of Columbia bar exam. Id.
The district court dismissed the petitioners' claims for lack of jurisdiction. Id. at 470. That court determined that the denials constituted a “judicial act.” Id. at 470, 473. So reviewing the orders would constitute reviewing the final decision of the highest court of a state. But Congress had reserved this task for the Supreme Court alone. Id.
After a stop at the D.C. Circuit, the case made its way to the Supreme Court. The Court determined that the district court “is without authority to review final determinations of the District of Columbia Court of Appeals in judicial proceedings.” Id. at 476.
But that was not the end of the matter. The court distinguished the judicial act of assessing whether a person was entitled to a waiver of a rule from the legislative act of drafting the rule itself. Id. at 482-84. Reviewing the constitutionality of the latter activity would not put the court in the position of reviewing a state-court judgment. So the district court would have jurisdiction to consider “a general challenge to the constitutionality” of the bar rule. Id. at 483.
The next major development in the Rooker-Feldman doctrine occurred in Exxon Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280 (2005). The question in Exxon was whether, under Rooker-Feldman, a state-court judgment issued in a parallel proceeding divests a federal court of jurisdiction over its dispute. Id. at 292-93. For reasons not relevant here, it does not. Id.
More relevant here is the Supreme Court's discussion of the doctrine's scope. The Court noted that, over the years, “the doctrine has sometimes been construed to extend far beyond the contours of” its namesake cases. Id. at 283. Its expansion led to “overriding Congress' conferral of federal-court jurisdiction concurrent with jurisdiction exercised by state courts, and superseding the ordinary application of preclusion law pursuant to 28 U.S.C. § 1738.” Id. See VanderKodde v. Mary Jane M. Elliott, P.C., 951 F.3d 397, 405-09 (6th Cir. 2020) (Sutton, J., concurring) (describing the Rooker-Feldman doctrine's development into an “inscrutable abstention doctrine” that “wreak[s] havoc” by “misleading federal courts into thinking they have no jurisdiction over cases Congress empowered them to decide”).
To remedy these problems, the court “confined” the doctrine “to cases of the kind from which the doctrine acquired its name[.]” Exxon, 544 U.S. at 284. Thus, the Rooker-Feldman doctrine applies only to “cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.” Id.
For the doctrine to apply, it is not enough to simply note that a party is attempting “to litigate in federal court a matter previously litigated in state court.” Id. If a federal case involves “some independent claim, albeit one that denies a legal conclusion that a state court has reached in a case to which he was a party . . . then there is jurisdiction and state law determines whether the defendant prevails under principles of preclusion.” Id. (quoting GASH Assocs. v. Rosemont, 995 F.2d 726, 728 (7th Cir. 1993)).
Shortly after Exxon, the Fourth Circuit addressed the revised scope of Rooker-Feldman in Davani v. Virginia Department of Transportation, 434 F.3d 712 (4th Cir. 2006). There, the Court of Appeals recognized that it had employed a “broad interpretation of the Rooker-Feldman doctrine” that was not viable after Exxon. Id. at 718. No longer did it matter whether a state-court loser is “attempting to litigate claims he either litigated or could have litigated before the state court.” Id. Post-Exxon, a complaint only triggers Rooker-Feldman scrutiny if “the state-court loser . . . seeks redress for an injury caused by the state-court decision itself.” Id. The doctrine applies even if the challenge to the state-court judgment depends on a ground that could have been, but was not, raised below. Id. at 719.
The Court of Appeals also noted that Exxon changed how courts applied Feldman's “inextricably intertwined” language. Id. No longer does this language create “an additional legal test” for applying the doctrine; instead it “merely states a conclusion[.]” Id. And that conclusion is that “if the state-court loser seeks redress in the federal district court for the injury caused by the state-court decision, his federal claim is, by definition, ‘inextricably intertwined' with the statecourt decision, and is therefore outside of the jurisdiction of the federal district court.” Id.
The Rooker-Feldman doctrine prevents this court from exercising subject-matter jurisdiction over the Grahams' claims. They allege that Defendants denied them due process by lying in court and falsifying documents appointing Mellon as the holder of their promissory note to obtain a foreclosure order. See, e.g., Compl. at 7-11, 14. And the court's foreclosure order is the source of the Grahams' harm-without it, the foreclosure could not have happened.
To rule in the Grahams' favor would give them relief from the North Carolina Superior Court's holding that the foreclosure sale could proceed. See Superior Court's Order at 2 (finding that Mellon “is the holder of the note sought to be foreclosed” and that the note “evidences a valid debt owed by” the Grahams). In other words, by “seek[ing] a declaratory judgment stating the foreclosure [was] illegal,” Compl. at 14, the Grahams ask this court to directly overturn a state court decision. Rooker-Feldman precludes the court from doing so.
The Grahams counter that Rooker-Feldman does not bar their claims because “a state court loser may challenge a state court judgment in federal court if she argues that the judgment is void on fraud grounds.” Resp. Opp'n Shellpoint Mot. Dismiss at 2, D.E. 30. They base this argument on Resolute Insurance Co. v. North Carolina, 397 F.2d 586, 589 (4th Cir. 1968).
But Resolute does not support their position. In that case, the Fourth Circuit affirmed the dismissal of a federal court action under Rooker precisely because federal courts lack jurisdiction to review state court decisions. Id. (citations omitted). Later in the opinion, the court discussed an alternative theory for dismissal: claim preclusion. The court concluded that the complaint was also barred by claim preclusion, but noted that “a federal court may entertain a collateral attack on a state court judgment which is alleged to have been procured through fraud, deception, accident, or mistake[.]” Id. This remark-discussing a different doctrine-does not establish a fraud exception to Rooker-Feldman. See Jordahl v. Democratic Party of Va., 122 F.3d 192, 203 n.11 (4th Cir. 1997) (noting that Resolute's fraud exception applies to claim preclusion, not the Rooker-Feldman doctrine); see also Nelson v. U.S. Bank N.A., No. 2:14-CV-1349-PMD, 2015 WL 685271, at *3 (D.S.C. Feb. 18, 2015) (same).
While some courts of appeal have established a fraud exception to Rooker-Feldman doctrine, the Fourth Circuit has not. See Smalley v. Shapiro & Burson, LLP, 526 Fed.Appx. 231, 236-37 (4th Cir. 2013) (citing with approval several cases determining that there is no fraud exception to Rooker-Feldman doctrine); see also Sluder v. Nationstar Mortg., LLC, No. 4:16-CV-3199-BHH-TER, 2017 WL 3530521, at *3 (D.S.C. July 25, 2017) (“Numerous federal courts have relied on Rooker-Feldman to bar claims raised by individuals seeking in some fashion to avoid a judgment of foreclosure issued by a state court.”), adopted by 2017 WL 3500349 (D.S.C. Aug. 15, 2017).
In sum, the complaint shows that the Grahams lost their case in state court and came to this court “complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.” Exxon, 544 U.S. at 284. Thus, Rooker-Feldman doctrine bars their constitutional request for relief that casts doubt on the North Carolina Superior Court's judgment. The district court should dismiss these claims against all Defendants.
Defendants also contend that the Grahams fail to state a claim for constitutional relief, the Grahams failed to serve TSC properly, and the Grahams' lawsuit is barred by issue and claim preclusion. But because Rooker-Feldman doctrine precludes this court from entertaining the Grahams' constitutional claim, the undersigned will not address these alternative arguments.
Although the Wake County Clerk of Court has not moved to dismiss the claims on this basis, the court may raise the issue sua sponte. See, e.g., Am. Reliable Ins. Co. v. Stillwell, 336 F.3d 311, 316 (4th Cir. 2003) (collecting cases). The Rooker-Feldman doctrine applies with equal strength to the claims against the Clerk as it does to the claims against the other defendants.
B. Intentional Infliction of Emotional Distress Claim
Although they spend little time fleshing out their argument, the Grahams also claim that Defendants intentionally inflicted emotional distress on them in violation of North Carolina tort law. Compl. at 11-12. Even if this claim survives Rooker-Feldman analysis, the court should decline to exercise supplemental jurisdiction over it, and the Grahams have failed to state a claim for relief. But if the court does exercise supplemental jurisdiction over this claim, it should be dismissed because of failure to state a claim.
Some courts have held that tort claims much like the Grahams' are barred by Rooker-Feldman doctrine. See, e.g., Naylor v. Wells Fargo Home Mortg., Inc., No. 3:15-CV-116-RJC, 2016 WL 55292, at *12 (W.D. N.C. Jan. 5, 2016) (dismissing plaintiff's intentional infliction of emotional distress claim under Rooker-Feldman alongside her fraud claims in a federal lawsuit challenging state foreclosure proceedings). But because the Grahams have failed to establish subject-matter jurisdiction or state a claim for intentional infliction of emotional distress regardless, it will discuss the claim separately.
1. The court should decline to exercise supplemental jurisdiction over the IIED claim
The Grahams also brought a state-law claim of intentional infliction of emotional distress. Federal courts have limited jurisdiction to hear state-law claims. But so long as a district court has original jurisdiction over a dispute, it may exercise supplemental jurisdiction over any state law tort claims that are “part of the same case or controversy under Article III of the United States Constitution.” 28 U.S.C. § 1367(a). A district court, however, may decline to exercise supplemental jurisdiction over a case once it has dispensed with all the claims over which it had original jurisdiction. Id. § 1367(c)(3); Shanaghan v. Cahill, 58 F.3d 106, 110 (4th Cir. 1995).
The undersigned has recommended that the district court dismiss all the claims that created this court's original jurisdiction. After considering the interests of judicial economy, fairness, federalism, and comity, the undersigned recommends that the district court should decline to exercise supplemental jurisdiction over Grahams' tort claim. Thus, this claim should be dismissed.
2. The Grahams failed to state an IIED claim
But even if the district court retains supplemental jurisdiction over this claim, it should still grant Defendants' motions to dismiss it. The Supreme Court has explained that, to withstand a motion to dismiss for failure to state a claim, “a complaint must contain sufficient factual matter, accepted as true, 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)). The Court explained that “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. Thus, while a court must accept all the factual allegations in a complaint as true, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id.
After Iqbal, a court considering a motion under Rule 12(b)(6) must subject a complaint to a two-part test. First, the court must identify the allegations in the complaint that are not entitled to the assumption of truth because they are conclusory or mere formulaic recitations of the elements of a claim. Id. at 679. Then, taking the remaining factual allegations as true, the court must determine whether the complaint “plausibly give[s] rise to an entitlement to relief.” Id. If, after conducting this two-part analysis, “the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not show[n]- that the pleader is entitled to relief.” Id. (internal citation and quotations omitted). If a party fails to show that they are entitled to relief, the court must dismiss the deficient claims.
To state a claim for intentional infliction of emotional distress in North Carolina, a plaintiff must allege (1) extreme and outrageous conduct (2) intended to cause emotional distress that (3) does, in fact, cause severe emotional distress. Holloway v. Wachovia Bank & Tr. Co., N.A., 452 S.E.2d 233, 240, 339 N.C. 338, 351 (1994) (citation omitted). The North Carolina Court of Appeals has explained that “[c]onduct is extreme and outrageous when it is so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.” Smith-Price v. Charter Behav. Health Sys., 595 S.E.2d 778, 782, 164 N.C.App. 349, 354 (2004) (internal quotation marks and citations omitted). And “severe emotional distress means any emotional or mental disorder, such as, for example, neurosis, psychosis, chronic depression, phobia, or any other type of severe and disabling emotional or mental condition which may be generally recognized and diagnosed by professionals trained to do so.” Waddle v. Sparks, 414 S.E.2d 22, 27, 331 N.C. 73, 83 (1992) (internal quotation marks and citation omitted).
But the Grahams devote only two paragraphs in their complaint to their intentional infliction of emotional distress claim. They do not explain how Defendants' conduct in the state court proceedings transcends the bounds of decency, and they do not list any mental health ailments that they developed because of Defendants' actions. Instead, they merely state that Defendants' “illegal, arbitrary claims” caused them “financial burdens and intentional and emotional distress[.]” Compl. at 12. The Grahams' lack of specificity renders their state tort claim toothless. Thus, even if this claim survives Rooker-Feldman analysis, the district court should dismiss it as to TSC and Shellpoint.
The text of the Grahams' complaint appears to allege that Defendants-not the Grahams- have suffered emotional distress. But the undersigned views this as a scrivener's error.
The Wake County Clerk of Court has not yet moved to dismiss this claim.
VII. Conclusion
For the reasons explained above, the court denies the Grahams' motion for reconsideration (D.E. 20), their motion seeking miscellaneous relief (D.E. 35), and their motion to strike (D.E. 52). The undersigned further recommends that the court deny their motions for default judgment (D.E. 18 & 44) and grant TSC's and Shellpoint's motions to dismiss (D.E. 21 & 23). Because it lacks subject-matter jurisdiction over any claim, the court should dismiss this case in its entirety.
The Clerk of Court must serve a copy of this Memorandum and Recommendation (“M&R”) on each party who has appeared. Any party may file a written objection to the M&R within 14 days from the date the Clerk serves it on them. The objection must specifically note the portion of the M&R that the party objects to and the reasons for their objection. Any other party may respond to the objection within 14 days from the date the objecting party serves it on them. The district judge will review the objection and make their own determination about the matter that is the subject of the objection. If a party does not file a timely written objection, the party will have forfeited their ability to have the M&R (or a later decision based on the M&R) reviewed by the Court of Appeals.