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Priester v. Deutsche Bank National Trust Co.

United States District Court, E.D. Texas, Sherman Division

June 30, 2017




         Came on for consideration the report of the United States Magistrate Judge in this action, this matter having been heretofore referred to the Magistrate Judge pursuant to 28 U.S.C. § 636. On May 19, 2017, the report of the Magistrate Judge (Dkt. #82) was entered containing proposed findings of fact and recommendations that Plaintiffs John Priester and Bettie Priester's Partially Unopposed Motion for Miscellaneous Relief (Dkt. #74) be granted in part and denied in part and that Plaintiffs' first-filed Amended Complaint (Dkt. #66) be stricken. Having received the report and recommendation of the Magistrate Judge (Dkt. #82), having considered Plaintiffs' timely filed objections (Dkt. #87) Defendants' response thereto (Dkt. #95), and Plaintiffs' reply (Dkt. #97), and having conducted a de novo review, the Court is of the opinion that the findings and conclusions of the Magistrate Judge are correct and adopts the Magistrate Judge's report (Dkt. #82) as the findings and conclusions of the Court.


         The Court already has detailed the factual and procedural history of this case in prior memoranda entered in this matter (see Dkt. #62; Dkt. #64), and the Magistrate Judge explains thoroughly the background related to the motion at issue here (see Dkt. #82 at 1-3). Accordingly, the Court outlines only the background necessary to address Plaintiffs' objections and Defendants' response thereto.

         In late 2005, Plaintiffs Bettie and John Priester acquired from Long Beach Mortgage Company (“Long Beach”) a home equity loan secured by a first lien on their home (Dkt. #3 at 5). See also Priester v. JP Morgan Chase Bank, N.A. (Priester I), 708 F.3d 667, 671 (5th Cir. 2013). Contemporaneous with closing the loan, Plaintiffs executed a Texas Home Equity Affidavit and Agreement (the “Home Equity Affidavit”) making various representations, including that they closed the loan in compliance with the Texas Constitution (Dkt. #10, Exhibit A). Nearly five years later, in mid-2010, Plaintiffs sent Long Beach (and subsequently JPMorgan Bank, N.A. (“Chase”), which had acquired the loan) a letter requesting that Long Beach and/or Chase “cure” alleged constitutional deficiencies with the home equity loan. Plaintiffs alleged they had only just discovered such deficiencies. Chase took no action to remedy the alleged deficiencies, and, as a result, Plaintiffs sued Chase (and various others) in state court, seeking declaratory judgment. Specifically, Plaintiffs asserted “that the closing of the loan occurred in their home rather than at the office of an attorney, the lender, or a title company as required by the Texas Constitution[] . . . [and] that they did not receive notice of their rights twelve days before closing as required by the state constitution.” Priester I, 708 F.3d at 671. Chase then removed to federal court and, after the district court granted Chase's motion to dismiss and the Fifth Circuit affirmed, Plaintiffs' case was dismissed. Id. at 672, 679. In October 2013, the U.S. Supreme Court denied Plaintiffs' writ of certiorari (see Dkt. #62 in Case No. 4:10-cv-641).[1]

         Subsequently, on November 26, 2014, Deutsche Bank filed an application for an expedited order of foreclosure under Texas Rule of Civil Procedure 736 (“Rule 736”) seeking an order permitting it to proceed with foreclosure of Plaintiffs' home (hereinafter the “Original State Court Action”) (see Register of Actions in Case No. 429-04751-2014 in the 429th District Court of Collin County, Texas). The parties to the Original State Court Action included Deutsche Bank (as applicant), the current occupant of the home (as defendant), and Plaintiffs (as defendants). After conducting a hearing, the state court ordered expedited foreclosure on March 15, 2016.

         Plaintiffs filed this case in the 380th Judicial District Court of Collin County, Texas, on June 6, 2016, seeking, inter alia, to prevent Defendants from foreclosing Plaintiffs' home (Dkt. #1). Defendants removed the case on June 27, 2016, asserting the Court had diversity jurisdiction over the matter because Plaintiffs had improperly joined a number of non-diverse defendants (Dkt. #1). The Court agreed, finding Plaintiffs had improperly joined the non-diverse defendants, and dismissing the non-diverse defendants from this suit (Dkt. #62). In the meantime, Defendants had filed a motion for judgment on the pleadings arguing, inter alia, the Court should dismiss Plaintiffs' claims as barred by res judicata (Dkt. #10). Plaintiffs alleged, however, that a material change in circumstances had occurred, precluding application of the res judicata defense (Dkt. #23). The Court determined after considering the arguments that “Plaintiffs should be afforded leave to amend their Original Petition so as to more fully set out the details of the alleged material change of circumstances” and provided Plaintiffs leave through March 17, 2017, to file an amended complaint setting forth such details (Dkt. #64).

         Plaintiffs thereafter filed an Amended Complaint on March 17, 2017 (Dkt. #66) (hereinafter the “First-Filed Amended Complaint”), purporting therein to assert claims against the previously dismissed non-diverse defendants as well as new claims against Defendants Deutsche Bank and Select Portfolio Services, Inc. (“SPS”), and attempting to join an additional non-diverse defendant, Hughes, Watters & Askanse LLP (“HWA”).[2] Specifically, through the First-Filed Amended Complaint, Plaintiffs claim HWA is a “Texas Limited Liability Company” based in Houston, Texas, which makes it a “Texas resident[, ] destroying diversity” (Dkt. #66 at 2, 4). Plaintiffs allege, as well, that SPS retained HWA in or around November 2014 “to collect the alleged debt surrounding [Plaintiffs' home]” and that “HWA threatened foreclosure on the void lien” at the center of this lawsuit; Plaintiffs claim these actions constitute violations of the Fair Debt Collection Practices Act (“FDCPA”) (on the part of HWA and SPS) and the Texas Debt Collection Act (“TDCA”) (on the part of HWA, SPS, and Deutsche Bank) (Dkt. #66 at 10, 29-30). Defendants (including the previously dismissed non-diverse defendants) responded by filing multiple motions to dismiss, raising myriad objections to the First-Filed Amended Complaint (Dkt. #69; Dkts. #71-73). Plaintiffs then filed the instant motion (Dkt. #74) and a further Amended Complaint (Dkt. #75) (hereinafter the “Amended Complaint”), which largely duplicates the First-Filed Amended Complaint but removes the previously dismissed defendants from its roster of “Parties.” In sum, the Amended Complaint names a new party (HWA) and includes new claims under the FDCPA against SPS and HWA and under the TDCA against SPS, HWA, and Deutsche Bank.

         The Magistrate Judge entered a report and recommendation on May 19, 2017, recommending that Plaintiffs' Partially Unopposed Motion for Miscellaneous Relief (Dkt. #74) be granted in part and denied in part, and that the First-Filed Amended Complaint (Dkt. #66) be stricken (Dkt. #82). Plaintiffs timely filed objections to the Magistrate Judge's report and recommendation on June 2, 2017 (Dkt. #87), and Defendants responded in turn on June 13, 2017 (Dkt. #95). Plaintiffs filed a reply to Defendants' response on June 16, 2017 (Dkt. #97).[3]


         A party who files timely written objections to a magistrate judge's report and recommendation is entitled to a de novo review of those findings or recommendations to which the party specifically objects. 28 U.S.C. § 636(b)(1)(C); Fed.R.Civ.P. 72(b)(2)-(3). At the outset, the Court notes the Magistrate Judge finds in the report and recommendation that (1) the First-Filed Amended Complaint should be stricken, (2) “leave to add the non-diverse Defendant HWA should be denied, ” (3) “Plaintiffs' new claim against SPS for violation of the FDCPA has no merit” and accordingly is futile; (4) “leave to add the TDCA claims pleaded in the Amended Complaint [against Deutsche Bank and SPS] should be granted[, ]” and (5) “[a]ny other requests to amend made by Plaintiffs through [the instant motion] should be denied” (Dkt. #82 at 3 n.1, 16). Neither Party objects to the Magistrate Judge's first, fourth, or fifth findings. As such, the Court adopts these findings and proceeds to evaluate Plaintiffs' objections regarding the FDCPA claims against HWA and SPS (the second and third findings), and the denial of leave to join HWA (the second finding).

         Plaintiffs object that the Magistrate Judge erred in finding Plaintiffs' amendment to add claims against (and to join) HWA in this lawsuit improper (Dkt. #87). Specifically, Plaintiffs assert the Magistrate Judge erroneously applied the stricter standard for post-removal joinder of a non-diverse defendant (supplied by Hensgens v. Deere & Co., 833 F.2d 1179 (5th Cir. 1987)) because Plaintiffs allege a claim under the FDCPA (and thus a federal question) against HWA. Further, Plaintiffs assert that, even if Hensgens does apply, the Magistrate Judge improperly applied the Hensgens factors and, thus, found Plaintiffs should not be permitted leave to join (or assert claims against) HWA. Finally, Plaintiffs claim that, under the lighter standard governing amendment of pleadings after a scheduling order deadline has expired (via Federal Rule of Civil Procedure 16(b) and S&W Enters. v. SouthTrust Bank, 315 F.3d 533, 536 (5th Cir. 2003)), which the Magistrate Judge should have applied, Plaintiffs' request for leave to amend must be granted (Dkt. #87). Defendants argue in response that (1) the Magistrate Judge properly applied the Hensgens factors (and reached the appropriate conclusion in so doing) because Plaintiffs clearly intended to destroy the Court's subject matter jurisdiction through joinder of HWA and (2) an amendment to add an FDCPA claim against HWA would be futile (because the claim is barred by the statute of limitations or because HWA has immunity against Plaintiffs' claims) (Dkt. #95). Plaintiffs contend in their reply in support of their objections that Defendants misinterpret the relation back doctrine and assert Rule 15(c)(1)(B) should apply such that Plaintiffs need only show the amendment relates to a core set of facts set out in the original pleading (Dkt. #97). Plaintiffs assert, as well, that their amendment should relate back to Defendant's initiation of the Rule 736 proceeding in November 2014. Plaintiffs also argue for the first time that the Magistrate Judge erred in finding their claim in the Amended Complaint against SPS futile (Dkt. #97).

         Futility of FDCPA Claims

         The Court first addresses the Parties' arguments concerning Plaintiffs' new FDCPA claims against SPS and HWA and finds that (1) these claims are barred by the applicable statute of limitations and (2) any amendment to add such claim would be futile. See, e.g., Crostley v. Lamar Cty., 717 F.3d 410, 422 (5th Cir. 2013) (finding “the bar created by the statute of limitation for a claim against [defendant] means that an amendment adding him as a defendant would indeed be futile” and affirming the district court's denial of motion for leave); August v. Woods, No. 1:12- CV-15, 2015 WL 1119736, at *2 (E.D. Tex. Feb. 13, 2015), report and recommendation adopted, 2015 WL ...

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