United States District Court, E.D. Michigan, Southern Division
OPINION AND ORDER ADOPTING IN PART REPORT AND RECOMMENDATIONS, OVERRULING PLAINTIFFS' OBJECTIONS, GRANTING MOTION TO DISMISS, AND DISMISSING AMENDED COMPLAINT WITH PREJUDICE
DAVID M. LAWSON, District Judge.
Plaintiffs Antonio Bey and Renee Smith-Bey filed a seven-count complaint alleging claims under federal and state law against defendants LVN Corporation and MGC Mortgage, Inc. based on the defendants' actions in foreclosing the mortgage on the plaintiffs' home. The complaint, which was followed by an amended complaint, both filed pro se, contains claims based on 42 U.S.C. § 1983, 42 U.S.C. § 1985, malicious abuse of process, intentional infliction of emotional distress, fraud and misrepresentation, trespass, and mail fraud. The Court referred this case to Magistrate Judge Anthony P. Patti for pretrial management. Thereafter, the defendants filed a motion to dismiss the complaint, and then a motion to dismiss the amended complaint. Judge Patti filed a report on May 22, 2015 recommending that the first motion be denied as moot and the second motion be granted. The plaintiffs filed timely objections, and the matter is before the Court for de novo review. After considering the motions, the pleadings, and the magistrate judge's report in light of the objections filed, the Court finds that the magistrate correctly determined the issues. Therefore, the Court will adopt the report and recommendation in part and dismiss the case.
Both the complaint and the amended complaint are sparse on actual facts, but they are rich in legal theories, conclusions, and hyperbole. However, the complaint is accompanied by an exhibit entitled "Affidavit of Facts, " which fills in much of the factual detail customarily included in a complaint under Federal Rule of Civil Procedure 8. The amended complaint contains no such attachment, but because pleadings from pro se filers generally are accorded considerable latitude, Haynes v. Kerner, 404 U.S. 519, 520 (1972), the Court will presume that the plaintiffs intended to include the "Affidavit of Facts" with the amended complaint as well.
The complaints and motion papers tell a story of a family that, when refinancing their home loan, felt the full impact of the financial crisis of 2008, which adversely affected property values and consumer loans across the country. The Beys purchased their home in Brownstown Township, Michigan in 2005, financing it with a promissory note secured by an adjustable rate mortgage. When their payment tripled withing two years, the Beys refinanced their home in the summer of 2006 with another adjustable rate note to Decision One Mortgage Company and a mortgage in favor of Mortgage Electronic Registration Systems, Inc. (MERS). On March 10, 2006, MERS assigned the mortgage to defendant LVN Corporation and received by defendant MGC Mortgage, which shares an address with LVN.
Bey, who was employed as a firefighter, saw his interest rate - and his house payment - rising again, along with fuel prices and other household expenses. But with decreasing property values, Bey's options were limited and he was unable to refinance again. He explored the prospect of a loan modification; during that process, his loan was sold again and acquired by GMAC. He says he submitted documents to GMAC seeking a loan modification, but during that process his loan was transferred again, this time to defendant MGC.
Bey says he was concerned about his home being foreclosed, and he was able to bring his loan current, apparently by signing a repayment agreement with GMAC, after GMAC had commenced foreclosure proceedings. But he received a pay cut, presumably because he was not able to work the overtime he was accustomed to in the past. He again requested a loan modification. He also consulted with an attorney, Steven Ruza, who was supposed to have been negotiating for the loan modification. Although the plaintiffs do not say as much, their loan must have become delinquent again, as they acknowledge that the defendants commenced non-judicial foreclosure proceedings while the loan modification request was pending. Attorney Ruza turned out to be no help at all, as he was charged by the Michigan Attorney General with fraud based on the work he supposedly was doing for the plaintiffs and others.
The Beys tell an unfortunately familiar story of their ill-fated loan modification attempt. They say that they furnished requested documentation, only to be contacted by MGC stating that the documents were missing or incomplete, and with demands for the same documents. They say that the foreclosure proceedings were occurring at the same time that their modification request was pending. A foreclosure sale took place on March 27, 2014, with a redemption period expiring on September 27, 2014. The defendants were the purchasers and received a sheriff's deed.
The plaintiffs filed their lawsuit two days beforehand. After the redemption period expired, the defendants commenced eviction proceedings in the state district court. The plaintiffs attempted to remove that case to this Court, but I remanded the case for want of subject matter jurisdiction. It appears that the eviction case is still pending, with the plaintiffs making escrow payments and remaining in their home for the time being.
The complaint contains seven counts: violation of 42 U.S.C. § 1983 (count 1); conspiracy to violate 42 U.S.C. §§ 1983 and 1985 (count 2); malicious abuse of process (count 3); intentional infliction of emotional distress (count 4); fraud and misrepresentation (count 5); trespass (count 6); and mail fraud (count 7). The complaint is signed only by Antonio Bey. The defendants responded with a motion to dismiss. The Beys filed an amended complaint, which corrected the names of the defendants and was signed also by Renee Smith-Bey, but is otherwise identical to the original complaint. The defendants responded to that pleading with another motion to dismiss.
The magistrate judge filed a report recommending that the section 1983 claims be dismissed because the plaintiffs did not allege that the defendants were state actors; the plaintiffs did not plead facts establishing a conspiracy in count 2; the federal mail fraud statute does not create a private right of action, so count 7 should be dismissed; and the Court should decline to exercise supplemental jurisdiction over the state law claims. He also reasoned that the amended complaint superseded the original complaint, so the first motion to dismiss should be denied as moot, but the second motion should be granted. As noted above, the plaintiffs filed timely objections to the report and recommendation. The defendants filed a response to those objections, and the plaintiffs filed a lengthy reply.
The filing of timely objections to a report and recommendation requires the court to "make a de novo determination of those portions of the report or specified findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1); see also United States v. Raddatz, 447 U.S. 667 (1980); United States v. Walters, 638 F.2d 947 (6th Cir. 1981). This de novo review requires the court to re-examine all of the relevant evidence previously reviewed by the magistrate judge in order to determine whether the recommendation should be accepted, rejected, or modified in whole or in part. 28 U.S.C. § 636(b)(1).
"The filing of objections provides the district court with the opportunity to consider the specific contentions of the parties and to correct any errors immediately, " Walters, 638 F.2d at 950, enabling the court "to focus attention on those issues - factual and legal - that are at the heart of the parties' dispute, " Thomas v. Arn, 474 U.S. 140, 147 (1985). As a result, "[o]nly those specific objections to the magistrate's report made to the district court will be preserved for appellate review; making some objections but failing to raise others will not preserve all the objections a party may have.'" McClanahan v. Comm'r of Soc. Sec., 474 F.3d 830, 837 (6th Cir. 2006) (quoting Smith v. Detroit Fed'n of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987)).
The Court has reviewed the pleadings, the report and recommendation, and the plaintiffs' and defendants' submissions and has made a de novo review of the record in light of the parties' submissions.
A. Section 1983 Claims
The plaintiffs object to the magistrate judge's determination that the defendants were not acting under color of state law as required by 42 U.S.C. § 1983, quoting language from Brentwood Acad. v. Tennessee Secondary Sch. Athletic Ass'n, 531 U.S. 288 (2001), which held that a private actor can be considered a person acting under color of state law when his conduct is "fairly attributable" to the state. The plaintiffs identify the three primary tests to determine whether such conduct exists. They also state that the Privileges and Immunities Clause of Article IV of the Constitution gives them the right to acquire and possess all kinds of property.
It is well recognized that the Constitution protects citizens from infringement of their rights by the government, not by private parties. Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 156 (1978) (recognizing that "most rights secured by the Constitution are protected only against infringement by governments") (citing Jackson v. Metro. Edison Co., 419 U.S. 345, 349 (1974); Civil Rights Cases, 109 U.S. 3, 17-18 (1883)). Therefore, in order for liability to attach under section 1983, "the party charged with the deprivation must be a person who may fairly be said to be a state actor. This may be because he is a state official, because he has acted together with ...