EATON v. THE BANK OF NEW YORK MELLON

UNITED STATES DISTRICT COURT FOR THE

NORTHERN DISTRICT OF FLORIDA

PENSACOLA DIVISION

MARK EATON, et al.,

Plaintiffs,

vs. Case No.: 3:21cv251/MCR/EMT

THE BANK OF NEW YORK

MELLON,

Defendant.

_____________________________/

REPORT AND RECOMMENDATION

Defendant Bank of New York Mellon (BoNYM) has moved for an order

allowing attorneys’ fees against Plaintiffs Mark and Suzanne Eaton (Eaton) (ECF

No. 46). The matter has been referred to the undersigned for purposes of preparing

a Report and Recommendation. After careful consideration, I recommend that the

motion be granted.

I. SUMMARY OF BACKGROUND

The procedural background of this case is set out in the District Court’s order

granting BoNYM’s motion to set aside default (ECF No. 44). The matters leading

up to the initial default obtained by Eaton, and the setting aside of that default with

a specific directive to Eaton as to how to proceed, are central to disposition of the

present motion. The following procedural background is drawn from the District

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Court’s order and the pleadings docketed in the court’s electronic record (ECF No.

44).

Eaton filed suit in Santa Rosa County Circuit Court alleging an earlier

wrongful foreclosure action by BoNYM (ECF Nos. 1–1 at 6–18, 44 at 2). Eaton

claimed entitlement to damages, inter alia, under Florida’s Civil Remedies for

Criminal Practices Act, Fla. Stat § 772.101, et seq (ECF Nos. 1–1 at 17, 44 at 2),

also referred to as the civil theft statute. Eaton attempted service on CT

Corporations System (CT), alleging that CT is the registered agent for BoNYM

(ECF Nos. 1–1 at 21–25, 44 at 2). Eaton served an amended complaint on CT on

November 2, 2020 (ECF Nos. 1–1 at 47, 44 at 2).

When BoNYM did not appear in state court, Eaton obtained a clerk’s default,

and then moved for summary judgment, based upon the default (ECF No. 44 at 28–

29, 49–51). Subsequently, BoNYM appeared and moved to set aside the default,

quash service, and preclude entry of judgment after default (id. at 59–85). BoNYM

maintained the state court had no personal jurisdiction because CT is not the

registered agent of BoNYM. BoNYM argued it is a New York corporation, and

pointed out that the State of Florida’s Corporations’ directory lists no registered

agent for BoNYM. In addition, BoNYM provided the affidavit of CT’s

Representation Services Advisor, stating that CT is not the registered agent for

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BoNYM (id. at 94–99). CT also provided correspondence to Eaton’s lawyer,

explaining expressly that CT is not the registered agent for BoNYM, and thus was

unable to accept service or to forward the complaint to BoNYM (id.).

Shortly thereafter, BoNYM removed this case to federal court (ECF No. 1).

Eaton moved for remand, claiming untimely removal, and argued that service on CT

was sufficient, because BoNYM and the Bank of New York (an entity for which CT

is listed as registered agent) are one and the same (ECF No. 4). The District Court

determined that it must resolve the sufficiency of service issue in order to decide

whether removal was timely (ECF No. 44 at 6–12). Citing other cases reaching an

identical result as to BoNYM, the District Court ruled that CT is not the registered

agent for BoNYM, and that BoNYM had not been served, thus rendering the

removal timely. For the same reason, the court quashed service and set aside the

default. Central to the present fee motion, the court’s order provided, “Plaintiffs

have thirty (30) days to properly effect service. Absent proof of service filed on or

before May 11, 2021, the case will be dismissed” (ECF No. 44 at 12). On May 26,

BoNYM moved for an order of fee entitlement (ECF No. 46). This motion sets out

matters that occurred before Eaton filed the underlying suit.

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In 2014, BoNYM brought a foreclosure action against Eaton (ECF No. 46–1

at 2–4). Eaton moved to dismiss and for summary judgment, and the state court

denied both motions on January 16, 2016 (ECF No. 46–1 at 87–88). Subsequently,

the parties reached an agreement whereby Eaton agreed to satisfy the loan, and

BoNYM dismissed the foreclosure action (ECF No. 46 at 2). BoNYM recorded a

release of its mortgage lien on October 3, 2019 (ECF No. 46–1 at 93).

Eaton filed the present action in state court on October 1, 2020 (ECF No. 1–

1). Eaton claimed the underlying, and now resolved, foreclosure had been

“fraudulent, illegal, [and] perjurious” (ECF No. 1–1). Based upon these

allegations, Eaton sought damages under the Florida Civil Remedies for Criminal

Practices Act. Eaton also made a claim for slander of title (ECF No. 1–1 at 41–

42). The matters set out above concerning attempted service, removal, and setting

aside of clerk’s default ensued. When, after the District Court’s order, Eaton failed

to serve BoNYM or to file a return of service within the time established by the order

setting aside default, the court dismissed the action on May 14, 2021:

“Accordingly, the case is DISMISSED without prejudice for the failure to effect

service and failure to comply with the Court’s Order. The Clerk is directed to close

the file” (ECF No. 45).

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Under Florida’s Civil Remedies for Criminal Practices Act, upon which

Eaton based its claims, a fee award is mandated where the plaintiff “raised a claim

which was without substantial fact or legal support.” Fla. Stat. § 772.104(3).

BoNYM advances several reasons to support its position that the case is over, and it

is the winner. Eaton responds, saying the court’s dismissal was without prejudice,

and thus not an adjudication on the merits (ECF No. 49). In simple terms, Eaton

says the case is not over, so BoNYM is not eligible for fees. The parties declined

the court’s offer of an evidentiary hearing, and the matter was deemed submitted for

decision as of August 26, 2021 (ECF No. 53).

II. ANALYSIS

A. Fee Entitlement under § 772.104(3), Florida Statutes.1

As noted above, Florida’s Civil Remedies for Criminal Practices Act

mandates fees to a prevailing defendant where a plaintiff raises a claim without

substantial fact or legal support. In its successful motion to set aside the clerk’s

1 “The analysis to impose fees under section 772.104 is a difficult task. There is very little case

law guiding the Court on the meaning of ‘without substantial factual or legal support.’ Marcus v.

Miller, 663 So. 2d 1340, 1342 (Fla. 4th DCA 1995).” Colite Int'l, Inc. v. Robert L. Lipton, Inc.,

No. 05-60046-CIV, 2007 WL 9698300, at *5 (S.D. Fla. Mar. 13, 2007). In preparing this Report

and Recommendation, the undersigned acknowledges the risk that the Southern District=s

statement of “very little case law” may survive.

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default, BoNYM set out the arguments upon which it now relies on the claim for fee

entitlement (ECF No. 17). BoNYM prevailed on its motion to set aside, largely

because, as the district court found, Eaton had never served BoNYM (ECF No. 44

at 9). In support of the motion, BoNYM advanced several arguments which closely

track the arguments in favor of fee entitlement in this matter. These arguments set

forth BoNYM’s defenses to Eaton’s complaint.

The predicate for statutory fees is the lack of substantial fact or legal support

for a claim made under the statute. The test has been distinguished from Fla. Stat.

§ 57.105, the so-called frivolous suit standard. “Clearly, the standard is less

stringent under the civil theft statute.” Bronson v. Bronson, 685 So. 2d 994, 995

(Fla. 4th DCA 1997). “The obvious intent of the [Florida] legislature in adopting

this broader standard was to ‘discourage civil theft claims lacking in legal or factual

substance.’” Id.

Recognizing that no finding has yet been made concerning lack of substantial

fact or legal support, BoNYM bases its claim for fees on a contention that, despite

the dismissal without prejudice, no successful claim under the Florida statute could

possibly be raised (ECF No. 46). Under the applicable standard, the undersigned

must decide whether a suit filed to “test the water,” perhaps in hopes of a default

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judgment, and then allowed by Plaintiff to die on the vine, qualifies under Florida

law for an award of fees. Did the dismissal without prejudice, and allowing time

for service of Defendant, ripen functionally into a dismissal with prejudice when

Plaintiff declined to attempt service on Defendant? Plaintiffs appear to claim that

their case lingers in purgatory (apparently forever) (ECF No. 49 at 2, 4), while

Defendant maintains that the failure to make an effort at service within the allotted

time pushes the matter into that well-known (and from which no hope of escape

exists) realm beyond purgatory, because any further claim would be barred (ECF

No. 46).

First, BoNYM urges that the Eaton’s statutory action is barred by the ex post

facto clause (ECF No. 1–1 at 77–78). Eaton explained that § 817.535, the specific

statutory prohibition underlying Eaton’s § 772.102 claim, was not enacted until

October 2013 (ECF No. 1–1 at 77–78). See Ch. 2013-228, §§ 1,5, Laws of Fla.

The date of enactment fell after the assignment of mortgage, claimed by Eaton to be

violative of § 817.535, and forming the basis of Eaton’s statutory claim.2 Both the

2 According to the amended complaint, “[Agents of BoNYM] caused to be recorded in the Official

Records of (sic) Pinellas County, Florida at Book 6718, Page 1390, an Assignment of Mortgage,

which purported to assign (the note and mortgage) to Defendant” (ECF No. 1–1 at 37). The

complaint goes on, “recording of the Assignment violated Fla. Stat. §§ 817.535(2)(a) and 817.54

and constituted a. . .felony. . .” Id.

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United States and Florida Constitutions bar the enactment of ex post facto laws.

See U.S. Const. Art I, § 10; Fla. Const. Article I, § 10. Here, the purportedly

fraudulent assignment of mortgage was recorded on May 10, 2011 (ECF No. 1–1 at

77). Thus, violation of a yet to be enacted law cannot support a claim under §

772.102. Eaton has not directly responded to this argument. I find the argument

well-taken. Accordingly, despite the dismissal without prejudice, Eaton cannot

state a cause of action for violation of Florida’s Civil Remedies for Criminal

Practices Act.

BoNYM next argues that the statutory action is barred by the five-year statute

of limitations under § 772.17, Fla. Stat. Assuming, then, that recording the

assignment violated § 817.535, the statute of limitations expired five years after the

recording, which would have been May of 2016. Eaton was certainly aware of the

assignment and its ramifications, as the foreclosure was brought in 2014, over five

years before Eaton filed this suit. Again, Eaton does not provide a direct response

to BoNYM’s point. The expiration of the statute, whether it ran from the recording

of the assignment, or from the date of the foreclosure action, would bar an attempt

to refile under the Civil Remedies for Criminal Practices Act.

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BoNYM also avers that Eaton’s action is barred by the litigation privilege and

by the rule regarding compulsory counterclaims. The litigation privilege is but

sparsely fleshed out (ECF No. 46 at 8), and I am not able to say this point has merit.

In any event, the basis of Eaton’s statutory claim appears to be the mortgage

assignment rather than the foreclosure suit. For purposes of entitlement to fees, the

litigation privilege argument, assuming it is a separate point from the compulsory

counterclaim contention, is not supported.

All of Eaton’s claims, and certainly the claim for violation of Florida’s Civil

Remedies for Criminal Practices Act, relate directly to BoNYM’s foreclosure action.

Eaton could not have suffered the damage they claim but for the foreclosure.

Accordingly, BoNYM says the present action is barred by the rules of compulsory

counterclaims (ECF 46 at 8). Federal Rule of Civil Procedure 13(a)(1) provides:

“A pleading must state as a counterclaim any claim that––at the time of its service–

–the pleader has against an opposing party if the claim (A) arises out of the

transaction or occurrence that is the subject matter of the opposing party’s claim;

[and] (B) does not require adding another party over whom the court cannot acquire

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jurisdiction.”3 “A claim arises out of the same transaction or occurrence if there is

a logical connection between the claims.” Constr. Aggregates, Ltd. v. Forest

Commodities Corp., 147 F. 3d 1334, 1337, n. 6 (11th Cir. 1998). Where “[t]he same

loan transaction, mortgage, and residential property that are at issue here were the

subject matter of the State Foreclosure Action...” a subsequent statutory claim by the

borrower will be barred. Beepot v. J.P. Morgan Chase National Corporate

Services, Inc., 57 F.Supp.3d 1358, 1371 (M.D. Fla. 2014). Importantly, Eaton

makes no direct argument in response to the compulsory counterclaim argument.

BoNYM’s point is well-taken and demonstrates that no independent action based

upon the mortgage or mortgage assignment could be maintained. Eaton’s action is

thus without substantial support in fact or law. See Orix Capital Mkts., LLC v. Park

Ave. Assocs., 881 So. 2d 646, 650 (Fla. 1st DCA 2004) (“The primary consequence

of a party’s failure to assert a compulsory counterclaim is that such failure constitutes

3 “Rule 1.170 of the Florida Rules of Civil Procedure (Florida Rule(s)) governs the determination

of whether a particular counterclaim constitutes a compulsory counterclaim under Florida law.

See id. That Florida Rule, which incorporates Rule 13(a) of the Federal Rules of Civil Procedure

into Florida law, provides: ‘[a] pleading shall state as a counterclaim any claim which at the time

of serving the pleading the pleader has against any opposing party, if it arises out of the transaction

or occurrence that is the subject matter of the opposing party’s claim and does not require for its

adjudication the presence of third parties of whom the court cannot acquire jurisdiction.’ (Citations

omitted)”. Beepot v. J.P. Morgan Chase National Corporate Services, Inc., 57 F.Supp.3d 1358,

1370 (M.D. Fla. 2014).

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a waiver of the [party’s] right to recover on it.”). Entitlement to fees has been

demonstrated.

BoNYM is also entitled to fees under Fla. Stat. § 817.535(8)(c). Eaton has

alleged as the basis for a violation of the Civil Remedies for Criminal Practices Act

Fla. Stat. § 817.535(8), allowing a cause of action for persons impacted by a

materially false, fictitious, or fraudulent statement or representation in an instrument

recorded in the public records. Section 817.535(8)(c) provides “the prevailing

party in such a suit is entitled to recover costs and reasonable attorney fees.” As

discussed above, and despite the dismissal without prejudice, I have found that

BoNYM is the prevailing party because Eaton could not refile successfully.

Accordingly, BoNYM is entitled to statutory fees.

Lastly, BoNYM seeks fees under portions of the mortgage. I am not

persuaded by this argument, because Eaton does not bring the action under the

mortgage, but as a result of the mortgage foreclosure. BoNYM’s entitlement to

contractual fees would only have been properly plead in the foreclosure action.

For the reasons stated in this Report, I have concluded that Eaton’s claim has

no substantial basis in fact or law.

Accordingly, it is respectfully RECOMMENDED:

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1. That the court GRANT Defendant “BoNYM’s Motion for Entitlement

to Attorneys’ Fees” (ECF No. 46), for the reasons set out herein.

2. That the court allow the parties a reasonable time to reach an agreement

regarding the fee before requiring further proceedings as to amount. Specifically,

that within fourteen days of an order adopting this Report and Recommendation,

lead counsel for the parties must confer in good faith in an effort to agree upon the

amount of the fees to be awarded to Defendant.

3. That the court require the conference must be in person, by phone, or

via video-teleconferencing.

a. That if an agreement is reached, the parties must file a joint

statement so indicating and providing the amount agreed upon within twenty-one

days of the date of an order adopting this Report and Recommendation (the parties

are strongly encouraged to reach an agreement as to the amount of fees, so as not to

consume any additional judicial resources on this case).

b. That if no agreement is reached, Defendant must file declarations

in the manner set forth in N.D. Fla. Loc. R. 54.1(E) within thirty days of the date of

an order adopting this Report and Recommendation and thereafter the parties must

comply with the additional directives set forth in Local Rule 54.1(F) & (G).

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At Pensacola, Florida this 28th day of September 2021.

/s/ Charles J. Kahn, Jr.

CHARLES J. KAHN, JR.

UNITED STATES MAGISTRATE JUDGE

NOTICE TO THE PARTIES

Objections to these proposed findings and recommendations must be

filed within fourteen days of the date of the Report and Recommendation. Any

different deadline that may appear on the electronic docket is for the court’s

internal use only and does not control. An objecting party must serve a copy

of the objections on all other parties. A party who fails to object to the

magistrate judge’s findings or recommendations contained in a report and

recommendation waives the right to challenge on appeal the district court’s

order based on unobjected-to factual and legal conclusions. See 11th Cir. Rule

3-1; 28 U.S.C. § 636.

Case No.: 3:21cv251/MCR/EMT