Antitrust Law Daily Wrap Up, RICO—WDLa: Failure to Record Mortgage Assignment Does Not Support RICO Liability, (Feb 21, 2013)

By Tobias J. Gillett, J.D., LLM.

A mortgagee could not state Racketeer Influenced and Corrupt Organizations (RICO) Act claims against mortgage loan providers and servicers over the companies’ alleged failure to record an assignment of her mortgage because her claims did not satisfy Federal Rule of Civil Procedure 9(b)’s heightened pleading requirements for fraud claims and because no law obligated mortgage companies to record such assignments, the federal district court in Monroe, Louisiana has ruled (Debois v. Bank of America, February 19, 2013, Trimble, J.).

On August 24, 2009, Saminthia Debois obtained a mortgage on her property through Bank of America, N.A., with Mortgage Electronic Registration Systems, Inc. (MERS) named as a nominee, and on May 12, 2012 the mortgage was assigned to EverBank. The mortgage later went into foreclosure, and on July 31, 2012 a writ of seizure and sale was issued by Louisiana state court. On October 10, 2012 the property was adjudicated to EverBank at Sheriff’s Sale, and subsequently deeded to it. On October 30, 2012, Debois filed suit against Bank of America, MERS, and EverBank, seeking to enjoin the seizure and sale of her property, and alleging violations of the RICO Act, among other claims.

Rooker-Feldman Doctrine. Bank of America initially argued that Debois’s lawsuit was barred by the Rooker-Feldman doctrine, under which the “federal courts lack subject matter jurisdiction to review a final state court decision arising out of a judicial proceeding unless a federal statute specifically authorizes such a review,” and the court agreed. Debois sought an injunction to prevent EverBank from seizing and selling her property pursuant to the Louisiana state court’s judgment. The court did not have jurisdiction to review the state court judgment or Debois’s challenges to it based on the Fair Debt Collection Procedures Act (FDCPA), in the court’s view.

RICO Claims. Debois had alleged that the defendants violated the RICO Act by failing to record the assignment of her mortgage from Bank of America to EverBank. The defendants responded by arguing that Debois had not alleged (1) any RICO predicate acts; (2) specific evidence to support her claims of mail or wire fraud; (3) how the MERS system was fraudulent; (4) RICO damages or proximate cause; (5) standing; (6) the existence of a RICO “enterprise,” as distinguished from Bank of America and MERS as RICO “persons”; and (7) how Bank of America and MERS operated their “enterprise.”

The court concluded that Debois had not satisfied Federal Rule of Civil Procedure 9(b)’s requirement that allegations of fraud be pled with particularity. Moreover, no legal requirement mandated that mortgage assignments must be recorded. The court noted that case precedent had consistently rejected the argument that MERS represented “a fraudulent scheme designed to avoid the payment of assignment recording fees.” Furthermore, Debois did not plead any facts that would suggest that the defendant’s failure to record the transfer caused her any injury, since her failure to pay timely installments on her loan led to the foreclosure.

Therefore, the court dismissed with prejudice Debois’s wire and mail fraud claims, and thus her RICO claims, “[f]or the reasons set forth above and because MERS is legally valid and neither its existence nor the defendants’ participation in MERS is a basis for an ‘intent to defraud.’” The court also dismissed her claims based on the National Bank Act, the FDCPA, and other laws, as well as her motion for reconsideration of a stay of the writ of execution pending the outcome of the case.

The case is No. 12-2789.

Attorneys: Saminthia L. Debois, pro se. Stephen Winthrop Rider (McGlinchey Stafford) for Bank of America, N.A. Lindsay Marie Graham (Shapiro & Daigrepont) for EverBank.

Companies: EverBank; Bank of America, N.A.; Mortgage Electronic Registration Systems, Inc.

Cases: RICO LouisianaNews