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Murphy v. Aurora Loan Services, LLC

United States District Court, Eighth Circuit

May 31, 2013

Kevin M. Murphy, Kathleen K. Murphy, Civ. James L. Lang, Charlene Ann Brady, Erika R. Hogenson, Harold J. Thompson, III, Julianne Thompson, Miriam E. Stone, May K. Vang, Jeffrey A. Kirschbaum, and Tou A. Vang, Plaintiffs,
v.
Aurora Loan Services, LLC, Aurora Bank FSB, Mortgage Electronic Registration Systems, Inc., Wilford & Geske, P.A., and MERSCORP, Inc., Defendants.

James L. Gunn, IV, Esq., Jeffrey R. Vesel Law Office, counsel for Murphy Plaintiffs.

William B. Butler, Esq., Butler Liberty Law, LLC, counsel for all other Plaintiffs.

Eric D. Cook, Esq., and Michael R. Sauer, Esq., Wilford, Geske & Cook, P.A.; J. Matthew Goodin, Esq., and Julia C. Webb, Esq., Locke Lord LLP, counsel for Defendants.

ORDER AND MEMORANDUM

JEFFREY J. KEYES, Magistrate Judge.

This matter came before the Court on April 24, 2013, pursuant to Plaintiffs' Joint Motion for Leave to File Second Amended Complaint (Doc. No. 147). Based on the parties' submissions and arguments, together with all pleadings, records, and files herein, the Court denies Plaintiffs' motion. This matter is also before the Court on its April 26, 2013 Order to Show Cause, ordering William B. Butler to address why he should not be sanctioned for signing, filing, submitting, and advocating for claims against Wilford & Geske, P.A., in a Second Amended Complaint, in light of the Eighth Circuit's dismissal of all claims against Wilford & Geske, P.A., with prejudice in Murphy v. Aurora Loan Services, LLC, 699 F.3d 1027 (8th Cir. 2012). Based on the parties' submissions, together with all pleadings, records, and files herein, the Court concludes that Rule 11 sanctions are warranted.

Accordingly, IT IS HEREBY ORDERED that:

1. Plaintiffs' Joint Motion for Leave to File Second Amended Complaint (Doc. No. 147), is DENIED; and

2. Pursuant to Fed.R.Civ.P. 11, attorney William Butler shall pay into Court a sanction in the amount of $25, 000. This amount is due and payable within 10 days of the issuance of this Order; and

3. The following Memorandum is incorporated herein by reference.

MEMORANDUM

I. BACKGROUND

This Court has stated the facts underlying this case in previous orders, and the Eighth Circuit also recently summarized the facts underlying this case. See Murphy v. Aurora Loan Servs., LLC, 699 F.3d 1027, 1030-31 (8th Cir. 2012). Therefore, the Court restates only the facts relevant to the motion to amend and Order to Show Cause here. Plaintiffs are Minnesota homeowners who borrowed money to purchase a home. Each signed a promissory note, promising to repay the loan. As security for the promise, each executed a mortgage on which Mortgage Electronic Registration Systems, Inc. ("MERS"), was the nominal mortgagee. The various lenders holding Plaintiffs' promissory notes then pooled, securitized, and sold the notes in the secondary market. MERS subsequently assigned each mortgage to Aurora Loan Services, LLC, and Aurora Bank FSB (collectively "Aurora"). After Plaintiffs defaulted on their repayment obligations, Aurora retained the legal services of Wilford & Geske, P.A. ("W&G"), to aid them in foreclosing on the properties pursuant to Minnesota's foreclosure-byadvertisement statute. Plaintiffs do not contest the validity of their initial mortgage agreements in this lawsuit, nor do they contest their subsequent defaults. Rather, as originally pleaded, they allege that neither Aurora nor MERS is entitled to foreclose on the properties and that W&G knowingly made false representations regarding Aurora's authority to foreclose.

In their original Complaint filed in state court, Plaintiffs stated several reasons why they believed Aurora and MERS lacked the authority to foreclose and, among other claims, brought suit to quiet title. After Aurora and MERS removed the action to federal court based on the allegedly fraudulent joinder of W&G, the District Court denied Plaintiffs' motion to remand and dismissed all of their claims with prejudice, because it viewed the Complaint as articulating nothing more than repackaged versions of the "show-me-the-note" theory, which the Minnesota Supreme Court in Jackson v. Mortg. Elec. Registration Sys., Inc., 770 N.W.2d 487, 490-91 (Minn. 2009), and this District in many cases has definitively rejected several times. Plaintiffs then appealed the District Court's dismissal of their claims to the Eighth Circuit.

In its amended decision dated November 29, 2012, the Eighth Circuit affirmed the District Court's dismissal of W&G as fraudulently joined, partially reversed as to the dismissal of the quiet-title cause of action, and affirmed the dismissal with prejudice as to all of Plaintiffs' other claims. On remand, this Court held a status conference in the case and determined that discovery would not commence until Defendants presented, and the District Court ruled on, a motion to dismiss that addressed the remanded quiet-title claims. Thereafter, Defendants Aurora Loans Services, LLC, Aurora Bank FSB, Mortgage Electronic Registration Systems, Inc., and MERSCORP, Inc., filed a motion to dismiss the remanded claims. Several weeks later, Plaintiffs filed two "amended complaints, " which were both stricken because Plaintiffs failed to obtain leave of court prior to filing. The Court then allowed Plaintiffs to file a motion seeking leave to amend, and directed Plaintiffs' counsel that they must file their motion jointly and that they must submit one joint proposed Amended Complaint. On March 28, 2013, Plaintiffs filed their motion, and on April 24, 2013, the Court held a hearing on the matter.

Through the allegations proposed by the Plaintiffs that Mr. Butler represents (the Butler Plaintiffs"), it is apparent that they are requesting leave to again assert claims against Wilford & Geske, P.A. Because the Eighth Circuit had already dismissed all claims against W&G with prejudice in this case, and because when asked for his support in asserting such claims now Butler cited the case Ruiz v. 1st Fidelity Loan Servicing, LLC, 829 N.W.2d 53 (Minn. 2013), a case that does not support asserting claims against W&G, the Court issued an Order for Mr. Butler to show cause why he should not be sanctioned for signing, filing, submitting, and advocating for the ...


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