865 F.3d 880
7th Cir.2017Background
- Berry obtained a 30-year mortgage in 2006 and the property was foreclosed; he contested the foreclosure and related proceedings extensively in Illinois state court through 2015.
- HSBC (as trustee/mortgagee) prosecuted the foreclosure; Wells Fargo was Berry’s mortgage servicer and later named in federal suit.
- Berry filed federal claims alleging improper fees, misstated payoff amounts, denial of loan modification, and racial discrimination under the Fair Housing Act; earlier federal claims under ECOA and TILA were dismissed as time-barred.
- The state court confirmed the final judicial sale in 2015; defendants moved to dismiss Berry’s amended federal complaint on claim-preclusion grounds and other bases.
- The district court found the federal suit rehashed the same operative facts and claims resolved (or litigable) in state court, held there was privity between HSBC and Wells Fargo, and dismissed the suit with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether claim preclusion bars Berry’s federal suit | Berry: federal claims raise matters not decided in state court and some claims couldn’t be litigated there | Defendants: state foreclosure judgment was final; federal claims arise from same operative facts; Wells Fargo in privity with HSBC | Court: preclusion applies — same causes of action and privity; dismissal affirmed |
| Whether Wells Fargo is in privity with HSBC for preclusion | Berry: Wells Fargo was not a party to the foreclosure and thus not bound | Defendants: servicer’s interests align with mortgagee; typical agency/privity for mortgage matters | Court: privity found; servicer effectively aligned with mortgagee in this context |
| Whether Berry could raise claims that "could not have been litigated" in state court | Berry: some federal claims were distinct or unavailable in state forum | Defendants: claims arise from same single group of operative facts and therefore were or could have been litigated | Court: claims are precluded if they arise from same operative facts, including those that could have been litigated |
| Whether a new allegation (apartment search) avoids preclusion | Berry: alleged unlawful search of public-housing unit after foreclosure | Defendants: search involved third parties unconnected to them; no allegation linking them to search | Court: search allegations do not state a claim against HSBC or Wells Fargo and do not evade preclusion |
Key Cases Cited
- Walczak v. Chicago Bd. of Educ., 739 F.3d 1013 (7th Cir. 2014) (preclusion analysis and effect of prior state filings on federal proceedings)
- Dookeran v. County of Cook, Ill., 719 F.3d 570 (7th Cir. 2013) (claims that could have been litigated are precluded if arising from same operative facts)
- R.G. Financial Corp. v. Vergara-Nuñez, 446 F.3d 178 (1st Cir. 2006) (mortgage servicer typically in privity with mortgagee for successive suits arising from same mortgage transaction)
- EMC Mortgage Corp. v. Kemp, 982 N.E.2d 152 (Ill. 2012) (judicial approval of foreclosure sale constitutes a final judgment)
- Cooney v. Rossiter, 986 N.E.2d 618 (Ill. 2013) (discussion of privity and preclusion in Illinois litigation)