Saunders v. Select Portfolio Servicing, Inc.

          OPINION AND ORDER

          Robert L. Miller, Jr. Judge

         Kira Saunders filed a pro se complaint alleging various federal and state law causes of action against Select Portfolio Servicing, Inc. and U.S. Bank National Association stemming from what she describes as a wrongful foreclosure. The defendants moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(1), arguing that the Rooker-Feldman doctrine deprives the court of subject matter jurisdiction over Ms. Saunders's claims and under Rule 12(b)(6), contending that the court should give preclusive effect to the state court's foreclosure proceedings. [Doc. No. 10]. For the following reasons, the court grants in part and denies in part the motion to dismiss.

         I. Background

         In 2017, Ms. Saunders acquired sole possession and ownership of property following her grandmother's death, but had difficulty establishing successorship with the mortgage servicer, Select Portfolio Servicing. Before she could establish successorship, she received a notice of default and acceleration and U.S. Bank National Association, acting as trustee for the mortgage holder, filed a foreclosure action in Cass County court. On July 27, 2018, while the foreclosure action was still pending, Ms. Saunders filed this action in federal court alleging state law claims based on a wrongful foreclosure action and that Select Portfolio Servicing violated federal regulations. On August 3, the state court held a hearing on U.S. Bank's motion for summary judgment, at which Ms. Saunders argued against the foreclosure. The court granted the motion the same day, and entered a foreclosure decree.

         Before proceedings to the merits of the motion to dismiss, the court must resolve two motions related to Ms. Saunders's sur-reply. After the defendants filed a reply brief in support of their motion that included a new exhibit-a transcript of the Cass County court's hearing on the summary judgment motion-and addressed the hearing for the first time, Ms. Saunders filed a sur-reply. [Doc. No. 16]. The defendants moved to strike the sur-reply, arguing Ms. Saunders hadn't sought or been granted leave to file it. [Doc. No. 17]. Ms. Saunders responded by filing a motion for leave to file a sur-reply and attached her proposed sur-reply. [Doc. No. 18]. The defendants didn't respond to Ms. Saunders's motion.

         Courts generally disfavor sur-replies but have discretion to allow them “to address new arguments or evidence raised in the reply brief.” Thompson v. City of Indianapolis, No. 115CV01712TWPDML, 2017 WL 1546316, at *2 (S.D. Ind. Apr. 28, 2017). Because the defendants included a new exhibit with their reply brief, the court will consider Ms. Saunders's sur-reply and, accordingly, denies the motion to strike and denies Ms. Saunders's motion for leave to file a sur-reply as unnecessary.

         II. Discussion

         A. Rooker-Feldman Doctrine

         In their motion to dismiss, the defendants first argue that the court should dismiss this case pursuant to Rule 12(b)(1), asserting that Ms. Saunders's complaint seeks to set aside a state court judgment and decree of foreclosure entered against her by the Cass County Circuit Court. The defendants contend that the Rooker-Feldman doctrine deprives the court of subject matter jurisdiction over all of her claims because she seeks review of a state court decision.

         A federal court must assure itself that it has jurisdiction over the subject matter of a case - the power to hear and decide it -- before it can proceed to take any action on the merits. See Warth v. Seldin, 422 U.S. 490, 498 (1975); Craig v. Ontario Corp., 543 F.3d 872, 875 (7th Cir. 2008). Rule 12(b)(1) authorizes dismissal of complaints that bring no actionable claim within the subject matter jurisdiction of the federal courts. In reviewing a motion under Rule 12(b)(1), the court must “accept as true all well-pleaded factual allegations and draw all reasonable inferences in favor of the plaintiff, ” yet, if necessary, may “look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists.” St. John's United Church of Christ v. City of Chicago, 502 F.3d 616, 625 (7th Cir. 2007) (internal quotations and citation omitted). The party asserting jurisdiction bears the burden of demonstrating subject matter jurisdiction by competent proof. Thomas v. Gaskill, 315 U.S. 442, 446 (1942); Sprint Spectrum L.P. v. City of Carmel, Ind., 361 F.3d 998, 1001 (7th Cir. 2004). A court must dismiss an action without reaching the merits if there is no jurisdiction. Sinochem Int'l Co. Ltd. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 430-431 (2007).

         “Lower federal courts are not vested with appellate authority over state courts.” Sykes v. Cook Cty. Circuit Court Prob. Div., 837 F.3d 736, 741 (7th Cir. 2016) (citations omitted). The Rooker-Feldman doctrine “is a rule of federal jurisdiction, ” Frederiksen v. City of Lockport, 384 F.3d 437, 438 (7th Cir. 2004), that “deprives federal courts of subject matter jurisdiction where a party . . . sues in federal court seeking to set aside the state court judgment and requesting a remedy for an injury caused by that judgment.” Johnson v. Orr, 551 F.3d 564, 568 (7th Cir. 2008).

         Ms. Saunders argues that the Rooker-Feldman doctrine doesn't apply because she filed her complaint on July 27, 2018, a week before the Cass County court entered the foreclosure decree. The court agrees. According to the Supreme Court, the Rooker-Feldman doctrine “is confined 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.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005) (emphasis added). See also TruServ Corp. v. Flegles, Inc., 419 F.3d 584, 591 (7th Cir. 2005) (quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. at 291) (the Rooker-Feldman “only applies to cases like Rooker and Feldman where ‘the losing party in state court filed suit in federal court after the state proceedings ended' ”) (emphasis supplied). In their reply brief, the defendants recognize that Ms. Saunders filed this case before the state court judgment and decree was entered, but don't address Exxon Mobil Corp. v. Saudi Basic Indus. Corp. and its progeny.

         Because Ms. Saunders filed this case before the Cass County court entered its judgment and decree of foreclosure, the Rooker-Feldman doctrine doesn't apply and the court can't dismiss the case for want of jurisdiction. See Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. at 284.

         B. ...