Welk v. GMAC Mortgage, LLC, 850 F. Supp. 2d 976

Federal courts are treating numerous Minnesota show-me-the-note foreclosure suits; many lack merit and some are abusive.
Plaintiffs allege that mortgagees must hold the note to foreclose, a theory rejected by Minnesota law and multiple courts.
Butler, a Minnesota attorney, has filed ~30 show-me-the-note cases, bundling many plaintiffs and defendants to defeat removal and delay foreclosures.
This case includes motions to dismiss, remand, and sanctions under Fed.R.Civ.P. 11; Butler’s conduct is central to the dispute.
Court analyzes the merits, confirms the show-me-the-note claims are frivolous, and identifies independent viable claims (conversion/unjust enrichment, slander/misrepresentation, accounting) that are limited.
Court ultimately sanctions Butler, awards fees under 28 U.S.C. § 1927, and orders various case-management steps including severance for Singramdoo and a remand decision based on jurisdiction.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether show-me-the-note claims are meritorious under Minnesota law	Welk et al. rely on Jackson/Stein to void foreclosures	Jackson/Stein hold mortgagees may foreclose without the note	Frivolous; claims dismissed with prejudice
Whether Shapiro was fraudulently joined to defeat diversity jurisdiction	Shapiro’s alleged agency connects plaintiffs to defendants	No viable basis; no damages connection shown	Shapiro fraudulently joined; remand denied; diversity lacking but upheld removal
Whether the case is in rem and whether prior exclusive jurisdiction applies to remand	State court had in rem jurisdiction before removal	Removal divests state court; doctrine in rem applies only in limited scenarios	Court retains jurisdiction; Welk issues stayed pending briefing; other remand denied
Whether conversion/unjust enrichment and misrepresentation claims survive	Claims independent of show-me-the-note theory	Most claims rely on show-me-the-note theory; and many are duplicative or frivolous	Conversion/unjust enrichment against GMAC preserved for Jones; other claims dismissed with prejudice
Whether sanctions under Rule 11 and § 1927 are warranted for Butler’s conduct	Butler’s filings were warranted or at least nonfrivolous	Butler engaged in frivolous, vexatious litigation and delay tactics	Rule 11 sanctions imposed; $50,000; § 1927 fees awarded; conduct monitored and ordered for attorney Newman/fees

Jackson v. Mortgage Electronic Registration Systems, Inc., 770 N.W.2d 487 (Minn. 2009) (mortgagee may foreclose without holding the note; disputes between note holder and mortgagee do not affect mortgagor"s foreclosure rights")
Stein v. Chase Home Finance, LLC, 662 F.3d 976 (8th Cir. 2011) (rejected show-me-the-note arguments; held Chase had right to foreclose even without note)
In re Banks, 457 B.R. 9 (8th Cir. BAP 2011) (bankruptcy context; note possession issues; discussed chain of title to mortgage)
Bottineau v. Aetna Life Ins. Co., 16 N.W. 849 (Minn. 1883) (disputes between note holder and mortgagee do not void foreclosure rights)
Kebasso v. BAC Home Loans Servicing, LB, 813 F.Supp.2d 1104 (D. Minn. 2011) (disputes between note holder and mortgagee do not give mortgagor standing to challenge foreclose)
City of St. Paul v. St. Anthony Flats Ltd. P’ship, 517 N.W.2d 58 (Minn. Ct. App. 1994) (double recovery considerations in mortgage debt vs. mortgage foreclosure)
Chapman v. Deutsche Bank Nat’l Trust Co., 651 F.3d 1039 (9th Cir. 2011) (discussed concurrent in rem proceedings (cite for doctrine context))
State Eng’r v. S. Fork Band of the Te-Moak Tribe, 339 F.3d 804 (9th Cir. 2003) (continuing state jurisdiction can preclude federal jurisdiction in rem)