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Hopson v. Chase Home Finance LLC

United States District Court, S.D. Mississippi, Northern Division

April 11, 2014


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Mary Frances Hopson, Plaintiff, Pro se, Florence, Ms.

Bobby Wayne Hopson, Plaintiff, Pro se, Florence, Ms.

For Chase Home Finance, LLC, JPMorgan Chase Bank, N.A., Deutsche Bank National Trust Company, Chase Bank USA, N.A., Chase Manhattan Mortgage Corp-CA, J.P. Morgan Mortgage Acquisition Corporation, J.P. Morgan Securities LLC, F/K/A J.P. Morgan Securities Inc., J.P. Morgan Acceptance Corporation I, Defendants: Mark H. Tyson, LEAD ATTORNEY, MCGLINCHEY STAFFORD, PLLC - Jackson, Jackson, MS.


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Plaintiffs Mary Frances Hopson and Bobby Wayne Hopson filed their original complaint in this cause on July 18, 2012 against JP Morgan Chase Bank, N.A., Chase Bank USA, N.A. and numerous Chase affiliates and employees, and against Deutsche Bank National Trust Company (Deutsche Bank), Prommis Solution, LLC, The Bank of New York and J.M. Adjustments Services, purporting to assert myriad claims under state and federal law based on alleged misrepresentations and nondisclosures in connection with a mortgage loan that plaintiffs obtained from Chase Bank USA, N.A., in March 2007 for the purchase of a home located in Rankin County, Mississippi. By order entered November 7, 2012, the magistrate judge granted plaintiffs leave to proceed in forma pauperis and directed that plaintiffs file an amended complaint clarifying who they intended to sue and for what reasons. On November 20, 2012, plaintiffs

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filed a 122-page amended complaint [1] purporting to more particularly articulate defendants' alleged violations of various federal and state laws relating to plaintiffs' loan transaction.

Upon receipt of service of the amended complaint, defendant JP Morgan Chase Bank promptly moved to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Additional defendants have joined the motion upon being served with process, including Deutsche Bank, JP Morgan Acquisition Corporation, Chase Home Finance, JP Morgan Securities LLC, Chase Bank USA, N.A., Chase Manhattan Mortgage Corp.-CA and JP Morgan Acceptance Corporation I.[2] Plaintiffs have responded to the motion and the court, having considered the memoranda of authorities submitted by the parties, concludes for reasons which follow that the motion to dismiss is well taken and that plaintiffs' complaint should be dismissed in its entirety.

The Complaint

Plaintiff's amended complaint evidently has been cobbled together from several different form complaints that plaintiffs presumably located on the Internet. The " preliminary statement" and " introduction", which purport to recount the history of subprime mortgage lending, appear to have been copied from a form complaint drafted by a California law firm, UFAN Legal Group, and filed in Bhayroo v. Ocwen Loan Servicing, LLC, Case No. RG12616583 (Cal. S.Ct. May 2, 2012); all of the allegations relating to " Residential Mortgage-Backed Securitizations in General" and causes of action for alleged violations of securities laws (which collectively comprise roughly half of plaintiffs' amended complaint) have been copied nearly verbatim from a complaint filed by the Federal Housing Finance Agency (FHFA), as conservator of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), against JP Morgan Chase, Fed. Housing Fin. Agency v. JP Morgan Chase, et al., No. 1:11-cv-6188-PKC (S.D.N.Y.); [3] and the majority of the remaining allegations appear to have been copied directly from the complaint in Mirales v. Wells Fargo Bank, N.A., et al., Case No. BC467652 (Super. Ct. Ca. Aug. 16, 2011).[4] Woven into

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this amalgamation of assorted pleadings are the following factual allegations pertinent to these particular plaintiffs.

Plaintiffs obtained a $266,000 mortgage loan in March 2007 from Chase Bank USA for the purchase of a home in Rankin County, Mississippi. During the origination of the loan, plaintiffs dealt with a broker on behalf of Chase Bank who " intentionally failed and/or refused to provide plaintiffs various disclosures that would indicate to plaintiffs that the contract entered into was void and illegal" and " misrepresented the terms of the loan agreement." That is, while Chase had represented to plaintiffs during the origination of the loan that they would have a thirty-year fixed rate mortgage at 6.9% with monthly payments of approximately $1,200, the terms of the loan presented to plaintiffs at closing were much different, namely, a two-year adjustable rate mortgage at 8.75% with monthly payments of $2,116. When plaintiffs questioned this, the broker assured them the loan would be affordable and that they could adjust easily by refinancing in two years to get a lower rate and payment before the rate adjusted upward. Plaintiffs signed the loan documents - including three HUD-1 Settlement Statements, each with different figures - because they were told this was " standard practice" and they " felt pressured" to do so " due to the many closing documents being passed around, the fast talk and the private conference with Chase." However, at the closing, they were not provided copies of the documents they signed; and while they were assured they would receive a signed copy of the completed loan package in the mail, the documents were never provided.

Plaintiffs allege that after the economic crisis severely and unforeseeably altered their financial circumstances and their adjustable rate payments continued to increase, they sought a loan modification from Chase, which continued to service their loan despite the loan having been sold to Deutsche Bank following the closing. After enlisting the assistance of an attorney group and following an extensive battle with Chase and many threatened foreclosures, Chase offered plaintiffs a trial modification and represented to them that they would receive documents for a permanent modification after making their third trial payment. However, despite making six consecutive timely monthly payments, plaintiffs received notice from Chase that their request for modification was denied since their paperwork was not timely received. Their efforts to rectify the problem were rejected, and defendants have continued to demand payment and to threaten to foreclose on plaintiffs. Plaintiffs allege that as a result of these events, they have suffered extreme emotional distress; their credit has been negatively impacted, which has in turn negatively impacted their business and income; and they have lost the equity in their home. They seek as relief, inter alia, damages of not less than $2,168,715.60 per defendant, restitution, rescission and vacatur of the note and deed of trust.

Scattered throughout plaintiffs' amended complaint are references to various federal and state laws which they contend were violated. From what the court can reasonably discern, plaintiffs have attempted to allege claims for violation of the following federal laws: the Securities Act of 1933, 15 U.S.C. § 77a et seq. ; the Truth in Lending Act, 15 U.S.C. § 1601 et seq., and Regulation Z promulgated thereunder, 12 C.F.R. § 226; the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq. ; the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. ; the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. ; the Home Ownership and Equity Protection Act, 15 U.S.C. § 1639;

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the Troubled Asset Relief Program, 12 U.S.C. § 5211 et seq. ; Title III of the USA Patriot Act, 31 U.S.C. § 5318 et seq. ; and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. In addition, they have alleged state common law claims for wrongful foreclosure, fraudulent misrepresentation and/or negligent misrepresentation, aiding and abetting, promissory estoppel and cancellation of instruments. Defendants have moved for dismissal of each of plaintiffs' purported causes of action on one or more bases. Plaintiffs oppose the motion, and insist that they have " sufficiently pled that relief can be granted on each and every one of the complaint's causes of action." [5] The court addresses each of these claims below.

Rule 12(b)(6) Standard of Review

Rule 12(b)(6) allows dismissal if a plaintiff fails " to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). The pleading standards for a Rule 12(b)(6) motion to dismiss are derived from Rule 8 of the Federal Rules of Civil Procedure, which provides, in relevant part, that a pleading stating a claim for relief must contain " a short and plain statement of the claim showing that the pleader is entitled to relief." In re McCoy, 666 F.3d 924, 926 (5th Cir. 2012) (quoting Fed.R.Civ.P. 8(a)(2)). " The ultimate question in a Rule 12(b)(6) motion is whether the complaint states a valid claim when all well-pleaded facts are assumed true and are viewed in the light most favorable to the plaintiff." Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010) (citing In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007)). To withstand dismissal, a pleading " must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face." Id. (quoting Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

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While " 'detailed factual allegations' are not necessary, the pleading must be supported by more than mere 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action." Id. (quoting Twombly, 550 U.S. at 555). " Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted).

In construing complaints by plaintiffs proceeding pro se, the court applies a " less stringent standard" than used when examining complaints filed by counsel. Frazier v. Wells Fargo Bank, N.A., 541 F.App'x 419, 421 (5th Cir. 2013) (citing Taylor v. Books A Million, Inc., 296 F.3d 376, 378 (5th Cir. 2002)). " Nonetheless, pro se litigants, like all other parties, 'must abide by' the rules that govern the federal courts, id. (citing United States v. Wilkes, 20 F.3d 651, 653 (5th Cir. 1994)), and " 'conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss,'" Taylor, 296 F.3d at 378 (Christian Leadership Conference v. Supreme Court of the State of La., 252 F.3d 781, 786 (5th Cir. 2001)).

Securities Violations

More than half of the purported " factual allegations" in plaintiffs' amended complaint are taken directly from the complaint in Federal Home Finance Agency v. JP Morgan Chase, et al., No. 1:11-cv-6188-PKC, and relate to Chase's securitization practices that allegedly contributed to the 2008 financial crisis. More particularly, the allegations undertake to chronicle Chase's alleged negligent and fraudulent conduct in the sale of residential mortgage-backed securities.[6] Plaintiffs allege

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that defendants [7] are liable " for making false and materially misleading misstatements in [each] of [their] Registration Statements, and for omitting facts necessary to make the facts stated therein not misleading[,]" all in violation of § 11 of the Securities Act of 1933, 15 U.S.C. § 77k. Plaintiffs similarly undertake to state a claim for violation of § 12(a)(2) of the Securities Act of 1933, 15 U.S.C. § 77l(a)(2), based on allegations that defendants " made materially false and misleading statements in the Prospectuses for the Securitizations carried out under the Registration Statements they filed...." Plaintiffs further allege that certain defendants have controlling-person liability under § 15 of the Securities Act of 1933 for the violations of § 11 and § 12(a)(2), and for the violation of 18 U.S.C. § 1962. Plaintiffs lack standing to assert any of these claims.

The Securities Act of 1933 " was designed to provide investors with full disclosure of material information concerning public offerings of securities in commerce, to protect investors against fraud and, through the imposition of specified civil liabilities, to promote ethical standards of honesty and fair dealing." Ernst & Ernst v. Hochfelder, 425 U.S. 185, 194-195, 96 S.Ct. 1375, 1381-1382, 47 L.Ed.2d 668 (1976). Section 11 of the Act states:

In case any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring such security (unless it is proved that at the time of such acquisition he knew of such untruth or omission) may, either at law or in equity, in any court of competent jurisdiction, sue ....

15 U.S.C. § 77k (emphasis added). By its clear terms, " an action under § 11 may be maintained only by one who comes within a narrow class of persons, i.e. those who purchase securities that are the direct subject of the prospectus and registration statement." Barnes v. Osofsky, 373 F.2d 269, 273 (2d Cir. 1967); see also Krim v., 402 F.3d 489, 491-92 (5th Cir. 2005) (explaining that " Section 11 provides a right of action to 'any person acquiring' shares issued pursuant to an untrue registration statement." ); In re Wachovia Equity Sec. Litig., 753 F.Supp.2d 326, 369 (S.D.N.Y. 2011) (stating that " Section 11 expressly limits recovery to 'any person acquiring such security'" ); New Jersey Carpenters Health Fund v. DLJ Mortg. Capital, Inc., No. 08 Civ 5653(PAC), 2010 WL 1473288, 3 (S.D.N.Y. Mar. 29, 2010) (holding that plaintiff asserting § 11 claims concerning mortgage-backed securities from issuing trust lacked standing to sue on claims arising from trust offerings which he did

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not purchase). Plaintiffs do not allege that they are investors or that they purchased securities, directly or indirectly. This ...

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