569 F. App'x 421
6th Cir.2014Background
- Tom and Pamela Farnsworth defaulted on a 2006 mortgage serviced by Nationstar; they claim repeated loan-modification negotiations (“paperwork hell”) and alleged qualifying payments for modifications that were never finalized.
- Nationstar sent a § 600.3205a notice and began foreclosure by advertisement in June–August 2012; it purchased the property at a sheriff’s sale on August 30, 2012, starting a six-month statutory redemption period.
- The Farnsworths filed suit in Michigan circuit court on February 20, 2013 (ten days before the redemption period originally expired) alleging breach of contract, statutory violations of Michigan’s foreclosure/modification statutes, fraud, negligence, tortious interference, and civil conspiracy; they sought injunctive relief to halt redemption expiry.
- Wayne County court extended the redemption period to April 5, 2013; Nationstar removed the case to federal court on diversity grounds; the district court denied injunctive relief and later dismissed the remaining claims under Rule 12(b)(6).
- On appeal the Sixth Circuit affirmed: it found federal diversity jurisdiction proper, held the Farnsworths failed to show a likelihood of success for preliminary injunctive relief, and concluded their post-redemption claims were insufficiently pleaded to set aside the sheriff’s sale or to overcome statute-of-frauds and Rule 9(b) hurdles.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject-matter jurisdiction / removal | Removal improper because Nationstar didn’t file summonses for the unknown defendants; unanimity rule violated | Unknown defendants were not properly served; Nationstar was the only served defendant so removal was proper | District court had diversity jurisdiction; denial of remand affirmed |
| Preliminary injunction / TRO to stop redemption | Farnsworths argued imminent irreparable harm and likelihood of success on claims (contract, statutory violations, fraud) | Nationstar argued plaintiffs failed to show likelihood of success or entitlement to extraordinary relief | Denial affirmed: plaintiffs failed to show strong likelihood of success; equitable relief was not warranted |
| Setting aside sheriff’s sale after redemption period expired | Sale should be set aside due to irregularities in modification/foreclosure process (statutory violations under § 600.3205c) | Redemption period ran and extinguished plaintiffs’ rights; alleged defects were conclusory and not tied to foreclosure procedure or prejudicial | Dismissal affirmed: plaintiffs lost rights when redemption expired and failed to show fraud/irregularity tied to the foreclosure or resulting prejudice |
| Sufficiency of pleaded claims (breach, fraud, statute of frauds, Rule 9(b)) | Plaintiffs alleged they signed/returned modification agreements and made payments; asserted fraud and statutory violations | Nationstar argued lack of signed written agreements (statute of frauds) and that fraud allegations lacked the particularity required by Rule 9(b) | Dismissal affirmed: breach claims barred/unsupported by signed writing; fraud claims fail Rule 9(b) particularity; § 600.3205c allegations were conclusory and plaintiff didn’t pursue the statute’s exclusive remedy |
Key Cases Cited
- Brierly v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527 (6th Cir.) (unanimity rule for removal requires served defendants to join or consent)
- Mitan v. Federal Home Loan Mortg. Corp., 703 F.3d 949 (6th Cir.) (lender may foreclose by advertisement if borrower fails to return offered loan-modification agreement within 14 days)
- Conlin v. Mortgage Elec. Registration Sys., 714 F.3d 355 (6th Cir.) (statutory scheme governing foreclosure by advertisement and effect of redemption period)
- Rishoi v. Deutsche Bank Nat’l Trust Co., [citation="552 F. App'x 417"] (6th Cir.) (filing suit does not toll the six-month redemption period; limited ability to set aside sale post-redemption)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must raise claim above speculative level)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (conclusory legal statements insufficient to survive Rule 12(b)(6))