Federal District Court Judge J. Frederick Motz has channeled the spirit of Officer Alex James Murphy, from the 1987 film Robocop, to blast the Plaintiff's "robo-signing" lawsuit against the foreclosure law firm of Shapiro & Burson, in his 4 page dismissal of Smalley v. Shapiro & Burson.
former employee's public disclosure that he was asked to sign various affidavits without knowing whether the content was accurate.
In federal court, the plaintiffs asserted, among other things, that the "robo-signing" caused them to incur needless liability for attorney's fees charged to the foreclosure sale in the auditor's report. The plaintiffs also alleged that the foreclosing entities did not actually own the loans being foreclosed, and that affidavits declaring ownership and standing were false. Take a peek at the full Amended Complaint for all the gory details. But in summary, the plaintiffs alleged that non-lawyer employees executed affidavits swearing to the existence of lost notes, and ownership of loans by various lenders, without personal knowledge or due diligence knowledge of the actual facts.
Shapiro & Burson filed a Motion to Dismiss, arguing "much ado about nothing." As a predicate, they pointed out that each plaintiff admitted to being delinquent in their mortgage loans, and then argued that each plaintiff had enjoyed full opportunity to litigate the alleged frauds in the state courts. The foreclosure firm relied primarily on the legal concept of res judicata, which means that the issue has already been decided. The concept includes both matters actually decided by the lower or state court, and matters that could have been raised in the prior action. And for the plaintiffs in this case, there's the rub. (in fairness, the defendants declared "much ado about nothing" in their brief, so I get to make the Hamlet reference).
The plaintiffs' Opposition memorandum retorted that their alleged damages arose from the fees asserted by the foreclosing lenders during the audit process, after ratification of the sale by the court. They cast the fight as one over the manner in which the mortgage debts were being collected, and not over whether the plaintiffs were in default, and deserving of a good foreclosing.
The motion process extended for nine months, but when Judge Motz ruled on January 26, 2012, he fired a short burst from both barrels that stops the plaintiffs' case, dead, on the basis of claim preclusion. In short, the issues complained of could have been brought up in the state court cases, and so the law bars the plaintiffs' federal court claim for the same monetary damages. And when I say Judge Motz loosed a "short burst," I mean that the memorandum opinion is a mere 4 pages long! The picture of brevity, after considering well over one hundred pages of briefing, and even more comprising the exhibits. Officer Murphy would be envious!
So, if you're not a party to the case, what's it all mean for you? I see a very simple lesson: raise all your issues in the state court foreclosure proceeding. But we're back at "the rub," again-- the very folks who are expected to investigate and litigate their claims fully are the very folks who have no money! The foreclosure defendant can't pay the mortgage, and definitely has other financial pressures, and is not likely to have the financial resources needed to put a legal bloodhound on the procedural or paper trail of the lender and its counsel or trustees.
And so it goes.