Dismissals of Lawsuits by Consumers, Employees and for Civil Rights Violations Disparately Impacted by Twombly Iqbal

By Beth:

Those attorneys who represent consumers or individuals against corporations will be in the “tell me something I don’t know” category regarding the way the district courts treat the 12(b)(6) motion as the new summary judgment motion.  In other words, post-Iqbal and Twombly, the pleading standards are being used to dismiss the cases of those with the least access to pre-suit discovery from high-powered Goliaths, with sole custody and control of discovery.  Those of us who litigated for years prior to Iqbal and Twombly have lamented the sea change in long-established fundamental pleading standards.

The district courts have gone beyond what was envisioned by Twombly (a complex anti-trust case) (read Justice Souter’s important caveats) and Iqbal (a case against the US Attorney General, with important immunity issues not at issue in your typical consumer litigation).  Many questioned whether the concerns of discovery costs for a defendant were sufficient reasons to change the established pleading tradition of the Federal Rules “notice pleading” and Conley v. Gibson in the first place.  The perversion of these standards to allow judges to decide what is “plausible” by the facts which are supposed to be “taken as true” unless they are of the “little green man on the moon” variety (again, see Souter) has been one of the most radical, creeping changes in modern civil jurisprudence.  We have been referring to it as “12(b)(6) abuse for awhile now.

As reported this week in the Consumer Law and Policy Blog, full article at the link:

A study to be published in a forthcoming edition of the Virginia Law Review examines the effect of the Court’s Iqbal and Twombly decisions and concludes that its effect has been significant. The article’s abstract summarizes its findings:

First, this Article provides data showing that dismissals of employment discrimination and civil rights cases have risen significantly in the wake of Iqbal. These results remained significant even after controlling for potential confounding factors. Second, the data also suggest that certain factors interact with the plausibility standard to influence the resolution of a motion to dismiss, including perhaps most importantly the institutional status of the plaintiff and defendant. Individuals have fared poorly under the plausibility regime, at least when compared to corporate and governmental agents and entities. These effects remained significant even after controlling for several potentially confounding variables. Finally, by analyzing data on the progress of cases after a motion to dismiss has been adjudicated, this Article shows that the advent of heightened pleading has not resulted in higher quality claims.

The study found that cases brought by individuals represented by lawyers were dismissed 42 percent of the time before Iqbal and 59 percent after. For corporate plaintiffs, the dismissal rate was almost unchanged, moving from 37 up to 38 percent.

Further, the data show that dismissals of employment discrimination and civil rights cases have risen significantly in the wake of Iqbal.

See Reinert, Alex, Measuring the Impact of Plausibility Pleading (May 6, 2015). __ Virginia Law Review __ (2015 Forthcoming); Cardozo Legal Studies Research Paper No. 455. Available at SSRN:http://ssrn.com/abstract=2603273


In the United States, modern civil procedure began in 1938 with the promulgation of the Federal Rules of Civil Procedure. From then, until very recently, the notice pleading standard – emphasizing simplicity and brevity in pleadings over technicality – was held up as an example of the Rule’s commitment to adjudicating the merits of every claim and avoiding premature and wasteful disputes that often had little to do with merits. In Bell Atlantic v. Twombly and Ashcroft v. Iqbal, announced in 2007 and 2009, the United States Supreme Court revisited the notice pleading standard, announcing that “plausibility pleading” must now be the standard for assessing whether a complaint’s allegations are sufficient to justify moving to discovery and merits adjudication. This Article offers a comprehensive analysis of the impact of the plausibility pleading standard on resolutions of motions to dismiss in almost 4200 cases from 15 different judicial districts, representing all 12 general jurisdiction circuit courts of appeal. Relying on data obtained from all published and unpublished opinions in these districts for the years 2006 and 2010, this study provides the most detailed analysis to date of the impact that plausibility pleading and other variables have had on the resolutions of motions to dismiss in civil cases.The data reported here suggest that many prior studies have failed adequately to capture the full impact of Iqbal and Twombly on the resolution of motions to dismiss in federal court. First, this Article provides data showing that dismissals of employment discrimination and civil rights cases have risen significantly in the wake of Iqbal. These results remained significant even after controlling for potential confounding factors. Second, the data also suggest that certain factors interact with the plausibility standard to influence the resolution of a motion to dismiss, including perhaps most importantly the institutional status of the plaintiff and defendant. Individuals have fared poorly under the plausibility regime, at least when compared to corporate and governmental agents and entities. These effects remained significant even after controlling for several potentially confounding variables. Finally, by analyzing data on the progress of cases after a motion to dismiss has been adjudicated, this Article shows that the advent of heightened pleading has not resulted in higher quality claims.

Along with providing an important descriptive account of the impact that plausibility pleading has had on the course of federal litigation, this Article suggests two heretofore unexplored bases for questioning the wisdom of the transition initiated by Twombly and solidified by Iqbal. First, while one should not be shocked by the observation that civil rights and employment discrimination claims suffer under the plausibility pleading regime, one should still be troubled by it given the historical role that federal courts have played in such cases. Second, to the extent that the plausibility regime has exacerbated inequality in the courts between individual litigants on one hand and corporate and governmental entities on the other, without increasing overall case quality, there should be wider agreement that such a change is to be lamented.

The New York Times reported yesterday, link here, excerpt below:

Six years ago this week, the Supreme Court transformed civil litigation in the federal courts, making it much easier for judges to dismiss cases soon after they are filed.

The decision, Ashcroft v. Iqbal, may be the most consequential ruling in Chief Justice John G. Roberts Jr.’s 10-year tenure.

It has been cited in more than 85,000 lower-court decisions. But lawyers and law professors continue to differ about its practical effects, which are harder to measure than one may think. The latest and probably most thorough in a long series of studies, to be published in the Virginia Law Review, concluded that the decision had hit the powerless the hardest.

Before Iqbal, cases brought by individuals represented by lawyers were dismissed 42 percent of the time. After Iqbal, the rate was 59 percent. For corporate plaintiffs, the rates of dismissal stayed basically flat, edging up to 38 percent from 37 percent.

. . .

The new standard is sometimes called “plausibility pleading.” Soon after it was announced, Justice Ruth Bader Ginsburg, who had dissented, told a group of judges that it had “messed up the federal rules” governing civil litigation.

A couple of years later, a federal appeals court judge said the new standard might have required dismissal of the terse complaint in Brown v. Board of Education, the one that led to the Supreme Court’s landmark 1954 school desegregation decision.

MERS Lacks Legal Authority and Public Accountability

Harvard Amicus Brief on MERS

Some of the best quotes,

  • Mortgage servicing companies, banks, courts and government agencies have all expressed astonishment at the extent to which MERS database is inaccurate. (p. 24)
  • “Simply put, ‘MERS is the Wikipedia of land registration systems.’ Culhane v. Aurora Loan Services, 826 F. Supp. 2d 352 (D. Mass. 2011) aff’d, 708 F.3d 282 (1st Cir. 2013).” (p. 12)
  • Janis Smith, a spokeswoman for Fannie Mae, admitted Fannie Mae kept its own records and that “We would never rely on it [MERS] to find ownership.” Powell and Morgenson,
    supra p. 32. (p. 25)
  • Judge Jennifer Bailey, a circuit court judge in Miami stated of 60,000 foreclosures filed in 2009 in her court, “[A]lmost every single one of them… represents a situation where the bank’s position is constantly shifting and changing because they don’t know what the Sam Hill is going on in their files.” Transcript of Hearing on Order to Show Cause at 5, HSBC Bank USA v. Eslava, No. 1-2008-CA-055313 (Fla. Cir. Ct. May 6, 2010).
  • “…MERS never requests or possesses proof that one of its members in fact holds the mortgage note or is the agent of the note holder when that member seeks to foreclose.”
  • Because MERS records are shrouded in secrecy, it is also impossible to know just how incomplete or inaccurate MERS records are. However, surveys and
    reporting by public media have suggested that the MERS database is alarmingly inaccurate. (p. 23)
  • When one compares these costs to the costs of record-keeping that the industry targeted for elimination, $10 per recordation, amounting to around $30 per loan, seems a small amount to pay to protect a family’s interest in the ability to discover who owns their loan, who would execute a foreclosure proceeding against them, and to challenge a party attempting to do so on the basis of mistake or fraud
  •  “The creators of MERS did not lobby Congress for a uniform, electronic mortgage system that could have retained the public recording system’s transparency and reduced costs. Rather, without judicially or statutorily recognized legal authority, they independently launched MERS as a private system, and created legal theories to legitimate the system post facto.” (p. 13)
  • In Professor Joseph Singer’s words, MERS allowed banks “to be prolific about securitizing those mortgages but complacent about formalizing mortgage assignments. The resultwas that the banks made many, many mistakes in keeping track of these transactions. Formal records of mortgage transfers are often incomplete or incorrect; the chain of title for many properties appears to be irretrievably broken.” Joseph Singer, Foreclosure and the Failures of Formality, 46 Conn. L. Rev. 497, 503-04 (2013).” (pp. 13-14)
  • While MERS’ creators knew that differences in state real property law would pose problems but chose not to investigate the possible impact, Nevertheless, MERS conducted no fifty-state analysis of the potential impact of its operations. Memorandum from Covington & Burling to R.K. Arnold, President and CEO, MERSCORP, Inc. (Sept. 1, 1997) (on file with the Duke LawJournal). (p. 22)
  • MERS’s attempt to establish “facts on the ground supporting its existence therefore does not deserve deference, and in practice has not worked. State laws have unsurprisingly taken disparate positions with respect to numerous aspects of MERS, and borrowers are now impacted in vastly different ways based on their jurisdiction. Laura A. Steven, MERS and the Mortgage Crisis: Obfuscating Loan Ownership and the Need for Clarity,” 7 Brook. J. Corp. Fin. & Com. L. 251, 256-57 (2012). (p. 23)
  • MERS inserts a placeholder in the public record. It thereby grafts itself onto systems for recording interests in land, while rendering that recording meaningless.
  • MERS has therefore privatized the majority of mortgage records in the country while undermining the value of county public records. Peterson, Two Faces, supra p. 9, at 132 (2011).
  • MERS, in effect, creates a lacuna in the record, and makes meaningless the record onto which it is grafted. As Professor Christopher Peterson writes, “Recording mortgages in MERS’s name and subsequent refusal to record assignments is not a technological innovation. On the contrary, it is an example of atrophy of the mortgage market’s information infrastructure and the rule of law.” Peterson, Foreclosure, supra p. 4, at 1404. (p. 26)
  • Additionally, the Interagency Report found that servicers had failed in conducting appropriate due diligence assessments of and quality control processes pertaining to MERS, by failing to monitor, evaluate, and appropriately manage the MERS contractual relationship, assess internal control processes at MERS, ensure the accuracy of servicing transfers, and ensure that servicers’ records matched MERS records. Id.Federal Reserve, Office of the Comptroller of the Currency, and Office of Thrift Supervision, Interagency Review of Foreclosure Policies and Practices 10-11 (2011).

The brief also recognizes MERS shape-shifting tendency to take contradictory positions given the jurisdiction:

  • For example, when MERS has brought foreclosure actions, it has argued that it was an actual mortgagee or assignee. See, e.g., Landmark National Bank v. Kesler, 40 Kan. App. 2d 325, 327(2008) (“MERS claims that it holds the title to the second mortgage… MERS objects to its characterization as an agent.”).

  • However, when faced with suits alleging fraud, deceptive practices, or when it wished to avoid license and registration requirements, it argued that it was merely an agent without exposure toliability, and did not have the same power as a mortgage owner. See, e.g., Escher v. Decision One Mortgage Co., 369 B.R. 862 n.8 (Bankr. E.D. Pa. 2007) (“MERS’s role as nominee leads the Court to conclude that it cannot be liable on any of the Plaintiff’s [Truth in Lending or Pennsylvania consumer protection] claims. A nominee is understood to be an agent for another.”).

  • See also Peterson, Foreclosure, supra p. 4, at 1376. MERS’s adoption of inconsistent positions across jurisdictions to obtain favorable outcomes in litigation underscores its fundamentallack of legal authority. See also Landmark Nat’l Bank v. Kesler, 289 Kan. 528, 216 P.3d 158, 165–66 (2009) (stating that MERS defines its role “in much the same way that the blind men of Indian legend described an elephant—their description depended on which part they were touching at any given time”).



Lots of Homeowner “Friends of Court” Swinging Into Yvanova Case in California Supreme Court

There have been several amicus curiae briefs filed in the last few days in the Yvanova case, currently pending before the California Supreme Court on Glaski-type issues of a borrower’s ability to challenge the foreclosing party’s authority, whether it came from a bad assignment, or from a hallucination from the Dalai Lama.

California Attorney General FINAL-Amicus Brief-Yvanova pdf pdf (Attachment) Copy

National Consumer Law Center (NCLC) and National Association of Consumer Advocates (NACA)NCLC amicus brief Yvanova

Consumer Attorneys of California (CAOC)CAOC brief Consumer Attorneys Amicus Yvanova


And let’s not forget this doozie filed by the Banker’s Association.  2015-04-20_Yvanova_v _New_Century_Amicus_Cal_Bankers_Assoc (2)

Maybe I’m not being entirely fair but it seems to consist mainly of a major distraction tactic of showing false concern for homeowners.  You see, guys, these are just homeowner “delay” tactics (these pesky laws as set forth in the statutes and the contracts governing the loan transaction), and “studies” (no doubt commissioned by the Banker’s Aid Relief Charitable Society) show that giving distressed homeowners more time in their homes does not improve their chance of successful reinstatement.”  Huh?  What does that have to do with the issue of whether a foreclosing party is civilly liable for exercising authority he does not have to take real property that does not belong to him?

Two Million Dollar Jury Award in Federal Court in Illinois for Modification Misconduct

OAK BROOK, Ill., April 22, 2015 /SATPR.COM/ — Alena Hammer secured a jury verdict against Residential Credit Solutions, Inc. (RCS), a national mortgage loan servicer headquartered in Fort Worth, Texas, for its breach of contract, violations of the Real Estate Settlement Procedures Act (RESPA), and violations of the unfairness and deception provisions of the Illinois Consumer Fraud and Deceptive Business Practices Act. All of Hammer’s claims dealt with RCS’s misconduct in handling and servicing the mortgage loan on Hammer’s home in DuPage County, Illinois, where Hammer has resided for the last 27 years.

Hammer’s mortgage loan was serviced by AmTrust Bank (AmTrust) until AmTrust failed and was taken over by the FDIC in December 2009. In June 2010, Hammer entered into a loan modification agreement with the FDIC as receiver for AmTrust. Hammer’s home mortgage loan was then transferred to RCS in August 2010. In September 2010, RCS began rejecting Hammer’s monthly payments and refused to acknowledge the existence of the loan modification. RCS then proceeded to prosecute two separate foreclosure actions against Hammer, despite the fact that Hammer, still to this day, has tendered all of her monthly payments as required under the loan modification agreement. The first foreclosure case was dismissed in favor of Hammer and against RCS in March 2011. However, RCScontinued to reject Hammer’s payments and continued to deny the existence of the loan modification agreement; RCS filed a second foreclosure action against Hammer in September 2011 and prosecuted that case through December 2013. Hammer had complained of improper fees and costs assessed to her loan account, the attorney’s fees and costs she incurred to defend two improper foreclosure proceedings, damages for mental anguish and emotional distress, and other damages that were incurred during the nearly three and a half year ordeal.

The six (6) day federal trial concluded on April 20, 2015 in Chicago, Illinois at the Everett McKinley Dirksen United States Court House. The jury, after deliberating for approximately two hours, determined that RCS breached the loan modification agreement, violated RESPA for failing to adequately respond to Hammer’s Qualified Written Request, and committed both unfair and deceptive acts in violation of the Illinois Consumer Fraud Act. Alena Hammer was awarded $500,000 in compensatory damages and $1,500,000 in punitive damages. Nicholas Heath Wooten, Esq., Ross Michael Zambon, Esq., and Mara Ann Baltabols, Esq. led the litigation team on behalf of Hammer. Each attorney is a student of the nationally renowned and esteemed North Carolina attorney, O. Max Gardner III, and each is a graduate of his highly acclaimed Consumer Bankruptcy and Litigation Boot Camps.

The outcome of this trial should come as good news to all consumers who have struggled with aggressive mortgage servicing tactics throughout the ongoing financial crisis.  The litigation team was meticulous and methodical in its litigation approach, and was able to obtain a punitive damages award for Hammer and against RCS – an award that is meant to punish and deter future misconduct – under the Illinois Consumer Fraud Act.

Leading Attorneys in Consumer Law:

Ahmad Sulaiman, Esq. is the managing partner of Sulaiman Law Group, Ltd. and is also a highly regarded graduate of Gardner’s Consumer Litigation and Bankruptcy Boot Camps. Ahmad is recognized as a thought leader in foreclosure defense, consumer and commercial bankruptcy, and consumer law by his peers. He was designated as a Super Lawyer Rising Star from 2010 through 2015.

Nicholas Heath Wooten, Esq. is the managing partner of Nick Wooten, LLC and is nationally known for his work in mortgage servicing and foreclosure defense litigation. Nick’s courtroom work and writings led to his recognition as a national thought leader on issues of securitization with respect to foreclosure and bankruptcy.

Ross Michael Zambon is the managing partner of Zambon Law, Ltd. and is highly regarded by his peers and adversaries for his litigation work on behalf of consumers. He has been designated as a Super Lawyer Rising Star from 2010 through 2015.

Mara Ann Baltabols, Esq. of Sulaiman Law Group, Ltd. is well known for her work in foreclosure defenseand consumer law.  She has been designated as a Super Lawyer Rising Star by her peers.

About Sulaiman Law Group, Ltd.

Founded in 2005, Sulaiman Law Group Ltd. is a consumer litigation firm in Oak Brook, Illinois that focuses on foreclosure defense, bankruptcy, FDCPA, TCPA, FCRA, and other consumer fraud cases. (http://www.sulaimanlaw.com)

Foreclosure and Suicide

Suicides Doubled During Housing Crisis says article in the Atlantic:

In 2010, just as the U.S. was beginning to climb out of the global financial crisis, suicide was the second-leading cause of death for adults aged 25 to 34 in the U.S., and the fourth-leading cause of death for adults aged 35 to 54. With the Great Recession behind us, public health officials are now trying to measure the toll of the housing crisis in terms of lost life and psychological distress.

A new study released this month in the American Journal of Public Health offers one answer to this complex question. The report finds that suicides spurred by severe housing stress—evictions and foreclosures—doubled between 2005 and 2010.

The study is the work of researchers from the Division of Violence Prevention at the U.S. Centers for Disease Control and Prevention. Led by Katherine A. Fowler, five researchers analyzed suicide findings from 16 states that participate in the National Violent Death Reporting System. The NVDRS is an epidemiological surveillance system that abstracts data from a variety of sources, including death certificates, law-enforcement agencies, coroners, medical examiners, forensic laboratories, and other vital-statistics providers.

“This study was the first to our knowledge to systematically examine suicides linked with eviction and foreclosure,” the report reads.

. . .

The increase in suicides for homeowners (foreclosure-related) was much larger than the increase in suicides for renters (eviction-related). Foreclosure-related suicides more than tripled between 2005 and 2010. “This further suggests a relationship between these suicides and the housing crisis, which resulted in a national 389 percent increase in foreclosures between 2005 and 2010,” the report reads.

Disturbingly, the study suggests that the mechanism of foreclosure proceedings might actually lead to increased risk for suicide:

Foreclosure may be exceptionally stressful because of its protracted nature and multiple negative events that constitute the process, particularly given the evidence that situational depression may respond in a dose-response fashion to negative life events. In addition, depression is more strongly related to stressful life events for which individuals perceive personal responsibility and lack of control over outcomes. All of these factors are mechanisms that make the foreclosure process a potent psychological stressor.

Reports of suicides related to evictions or foreclosures began to surface in national media early into the housing crisis, of course; but details explaining the frequency or circumstances of housing-related suicides remain elusive, even today. No research explains directly the link between home eviction and foreclosure proceedings and suicide.

Recently, however, researchers have begun to describe this relationship. According to the CDC analysis, mortgage delinquency has been shown to be linked to serious psychological adversity, including major depression (two times greater odds) and “elevated depressive symptoms related to acute stress” (eight times greater odds).

Department of Justice Investigates Deutsche Bank for False Documents Presented to Court in Bankruptcy Foreclosure Case

This was reported by Reuters, in an article entitled US investigates Deutsche Bank in foreclosure case.  Excerpt below but read the whole case at the link (prior):

NEW YORK, Jan 28 (Reuters) – A branch of the U.S. Department of Justice is investigating whether Deutsche Bank (DBKGn.DE) filed false documents and attempted to mislead a bankruptcyjudge in a foreclosure action.

Although the investigation involves the case of only one homeowner in Connecticut, a court document filed on Jan. 26 by the United States Trustee’s Office said it wants to elicit information about Deutsche Bank’s practices in general in foreclosure cases.

The inquiry involves Deutsche Bank National Trust Co, the Deutsche Bank unit that acts as trustee for thousands of trusts that invested in mortgage-backed securities. The U.S. Trustees’ Office is a division of the Department of Justice responsible for overseeing administration of bankruptcy cases.

In recent months, the office has stepped up efforts around the United States to block banks and law firms from using false or fabricated documents in home foreclosure actions. The effort follows disclosures in October 2010 of large-scale “robo-signing”, the mass signing of foreclosure affidavits containing “facts” that had never been checked, and wide production of false mortgage assignments.

The Jan. 26 court motion stated that “The United States Trustee has reviewed the documents filed by Deutsche in this case and has concerns about the integrity of those documents and the process utilized by Deutsche in” filing to foreclose.”

(emphasis added).  Join the club U.S. Trustee.  “Concerns about the integrity of those documents” understates the problem but we’ll take it.

Wells Fargo Takes a Hit for Forged Foreclosure Documents

Federal Judge Slams Wells Fargo for Forged Mortgage Docs


Two Judges Who Get It About the Banks NY Times


(1) “Defendant Wells Fargo’s deceptive and intentional conduct displayed a complete and total disregard for the rights of David and Crystal Holm,” wrote R. Brent Elliott, a circuit judge in Missouri’s 43rd Judicial District, in a Jan. 26 opinion. “Wells Fargo took its money and moved on, with complete disregard to the human damage left in its wake.”

In addition to $2.9 million in punitive damages awarded to the Holms, Judge Elliot gave them clear title to their home and almost $96,000 to be paid by Freddie Mac, representing the difference between the amount it paid for the property in 2008 and its current value.

(2)  The Holms were also awarded $200,000 for emotional distress. Mr. Holm, who is 40, had heart problems that were worsened by anxiety over the case, the judge concluded. Finally, $33,000 of the couple’s legal fees must be paid by Freddie Mac and Wells.

The judge ordered these sanctions because lawyers for Wells and Freddie Mac “have demonstrated a pattern of contempt for the Missouri Supreme Court rules as well as this court’s rules and orders.”

In the other case, presided over by Judge Robert D. Drain at a Bankruptcy Court in White Plains, Wells lost a five-year-old foreclosure dispute involving a $170,000 property owned by Cynthia Carrsow-Franklin.

Her lawyers contended that the bank, after initiating foreclosure proceedings, had simply created a missing document that it needed in order to foreclose. That document, known as an indorsement, transferred the underlying note to Wells Fargo.

On Thursday, Judge Drain sided with the borrower. He wrote that testimony from a Wells Fargo manager in charge of the bank’s default documents and part of its assignment team “constitutes substantial evidence that Wells Fargo’s administrative group responsible for the documentary aspects of enforcing defaulted loan documents created new mortgage assignments and forged indorsements when it was determined by outside counsel that they were required to enforce loans.”