507 B.R. 477
Bankr. S.D.N.Y.2014Background
- Caren Wilson obtained a mortgage in 2006; the loan was later foreclosed and the property sold in 2012. Wilson repeatedly sued defendants (loan servicers, trustees, MERS, securitization parties) in Virginia state court and in federal court asserting fraud, wrongful foreclosure, securitization defects, TILA/FDCPA and related theories; she relied on a forensic securitization report.
- The federal suit (removed from state court) was dismissed by the Western District of Virginia under Fed. R. Civ. P. 41(b) for failure to prosecute; Wilson did not appeal and the dismissal became final.
- Wilson filed two proofs of claim in the ResCap bankruptcy: Claim No. 4754 (filed pro se) and Claim No. 7181 (filed later by counsel as an "amendment"). Claims asserted multi‑million dollar secured and unsecured sums and alleged RICO/fraud/disgorgement theories but included little factual support.
- The ResCap Borrower Claims Trust objected to both claims, arguing Claim 4754 is barred by res judicata (the federal dismissal), Claim 7181 is either barred by res judicata or is a late post‑bar‑date amendment, and that the claims fail to plead RICO or fraud with required particularity.
- The bankruptcy court held a hearing, denied procedural motions by Wilson’s counsel, took the objection under submission, and sustained the Trust’s objection: both claims were expunged. The court permitted Wilson to seek relief in the Virginia district court to attempt to vacate the dismissal; if successful she may seek reconsideration under 11 U.S.C. § 502(j).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Claim No. 4754 is barred by res judicata | Wilson contended her claims derive from misconduct not finally adjudicated and that she lacked notice of dismissal | Trust argued the federal action was dismissed under Rule 41(b) as an adjudication on the merits; the bankruptcy court should apply federal preclusion to bar claims based on same nucleus of facts | Held: 4754 barred by res judicata because federal dismissal was a final judgment on the merits and claims arise from same operative facts |
| Whether Claim No. 7181 is an allowable post‑bar‑date amendment to 4754 | Wilson asserted 7181 amended and superseded 4754 | Trust argued 7181 either relates to same facts (thus barred by res judicata) or, if asserting different claims, is a late amendment that does not relate back and is untimely | Held: 7181 expunged — if it relates back it is barred by res judicata; if it does not, it is late and disallowed |
| Whether RICO and fraud allegations meet pleading standards | Wilson alleged RICO, fraud, and related theories in conclusory terms and referenced prior filings/reports | Trust argued 7181 contains no factual allegations required for civil RICO and fraud; Rule 8, Rule 9(b) and RICO pleading doctrines require particularized allegations and a RICO case statement | Held: RICO and fraud claims inadequately pleaded; no factual particularity or pattern/enterprise shown — claims deficient on their merits |
| Whether lack of notice of federal proceedings undermines preclusion or service was defective | Wilson claimed she did not receive Roseboro notice or the dismissal and challenged sufficiency of service | Trust produced docket entries and notice evidencing mailing; court declined to revisit the Virginia court’s procedural determinations and noted Wilson did not appeal the dismissal | Held: Lack of notice argument did not alter res judicata result; the bankruptcy court will not set aside the federal dismissal; Wilson may seek relief in district court and then move for reconsideration in bankruptcy if successful |
Key Cases Cited
- Taylor v. Sturgell, 553 U.S. 880 (federal‑court judgments governed by federal res judicata rules for federal‑question cases)
- Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497 (res judicata preclusion principles and differences in diversity context)
- Moss v. Morgan Stanley Inc., 719 F.2d 5 (2d Cir. 1983) (RICO pleading elements and twofold pleading burden)
- In re Teltronics Servs., Inc., 762 F.2d 185 (2d Cir. 1985) (res judicata elements applied in bankruptcy context)
- In re Enron Corp., 419 F.3d 115 (2d Cir. 2005) (standards for permitting post‑bar‑date amendments to proofs of claim)