Noyes v. Federal National Mortgage Association

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

JEFFREY L. NOYES, )

)

Plaintiff, )

)

v. )

Case No. 4:20-CV-1005-SPM

)

FEDERAL NATIONAL MORTGAGE )

ASSOCIATION, )

)

Defendant. )

MEMORANDUM AND ORDER

This matter is before the Court on Defendant Federal National Mortgage Association’s

Motion to Dismiss. (Doc. 16). The motion has been fully briefed, and the parties have consented

to the jurisdiction of the undersigned United States Magistrate Judge pursuant to 28 U.S.C.

§ 636(c). (Doc. 8). For the reasons stated below, the motion will be granted, and the case will be

dismissed.

I. BACKGROUND

A. Allegations in Plaintiff’s Complaint

On July 31, 2020, Plaintiff Jeffrey L. Noyes (“Plaintiff”) filed the instant action against

Federal National Mortgage Association (“Defendant” or “Fannie Mae”).1 Since August 18, 2006,

Plaintiff has been licensed by the State of Missouri’s Department of Professional Registration (the

1 The Court has jurisdiction over this matter under 28 U.S.C. § 1332(a), which grants this Court

original jurisdiction over an action “where the matter in controversy exceeds the sum or value of

$75,000, exclusive of interest and costs,” and the action is between citizens of different states.

§ 1332(a). Plaintiff seeks damages in excess of $75,000. Plaintiff alleges that he is a citizen of

Missouri. “For purposes of determining diversity jurisdiction, Fannie Mae is designated by statute

as a citizen of the District of Columbia.” Albors Gonzalez v. Fed. Nat’l Mortg. Ass’n, 803 F. App’x

226, 228 (11th Cir. 2020) (citing 12 U.S.C. § 1717(a)(2)(B)).

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responsible for determining the competency and eligibility of an individual to perform real estate

appraisals in Missouri. In or around 2006, Plaintiff became eligible to perform real estate

appraisals for lenders seeking sale to or guarantee from Fannie Mae without review, and he

continued in that status until on or about July 31, 2015.

On or about July 31, 2015, Defendant began communicating to mortgage lenders that

Defendant had placed Plaintiff on Defendant’s 100% Review List (the “List”), a list of a small

number of appraisers whom Defendant had deemed had performed deficient appraisals. Defendant

persisted in communicating to mortgage lenders for well over a year that Plaintiff remained on the

List. Plaintiff had not, however, engaged in any conduct that would justify his inclusion on the

List. Plaintiff alleges that Defendant’s decision to place Plaintiff on the List was made by an

employee lacking sufficient knowledge and skill to make an accurate determination as to whether

Plaintiff’s appraisal(s) had been performed deficiently and therefore warranted review 100 percent

of the time.

Plaintiff alleges that his presence on the List caused mortgage lenders to expect that

selecting Plaintiff as their appraiser would create a delay in the mortgage loan being granted.

Shortly after Plaintiff was placed on the List, he became aware that the number of appraisals

mortgage lenders contracted with him to perform greatly diminished, as did his business revenues.

His revenues remained greatly diminished at least throughout the period when he was on the List,

and Plaintiff believes his contracts still remain impaired as a result of Defendant’s conduct.

Plaintiff also alleges that suffered severe, pervasive emotional distress, including chronic anxiety,

as a result of Defendant’s actions.

Plaintiff asserts four counts against Defendant. In Count I (Tortious Interference with

Business Expectancy), Plaintiff alleges that Defendant intentionally interfered with his business

expectancy of continuing to be paid by mortgage lenders to conduct real estate appraisals at or

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that Plaintiff sustained a loss of income and emotional distress as a result of Defendant’s conduct.

In Count II (Negligent Supervision), Plaintiff alleges that Defendant was negligent in failing to

adequately supervise its employees who made the decision to place and keep Plaintiff on the List.

In Count III (Negligent Infliction of Emotional Distress), Plaintiff alleges that Defendant breached

its duty to protect Plaintiff from any injury resulting from its communications to mortgage lenders

that Defendant had placed Plaintiff on the List, and that as a result of Defendant’s conduct, Plaintiff

has suffered significant emotional distress. In Count IV (Defamation), Plaintiff alleges that

Defendant’s publication of Plaintiff’s name on the list damaged Plaintiff’s reputation within the

mortgage lending industry, causing Plaintiff to suffer a deprivation of gain and profits.

B. 2018 State Court Proceedings

On September 9, 2018, nearly two years before the instant action was filed, Plaintiff filed

an Amended Petition against Fannie Mae in the Circuit Court of St. Louis County, State of

Missouri. Def.’s Ex. 1, Doc. 17-1. In that Amended Petition, Plaintiff alleged that he had been a

residential real estate appraiser since August 18, 2006; that on July 31, 2015, Defendant placed

him on the “100% Review List” and communicated that to mortgage lenders; that this was a

communication that Plaintiff was deficient as a real estate appraiser; that the decision to place

Plaintiff on the list was without merit; and that Defendants’ communication to mortgage lenders

that Plaintiff was deficient as a mortgage appraiser was false. Plaintiff alleged that these

communications damaged Plaintiff’s reputation and that as a result of the communications,

mortgage lenders refrained on many occasions from using Plaintiff’s services. Plaintiff alleged

that he was greatly injured in his reputation and his business suffered. He asserted a single count

of libel. On November 19, 2019, the state court entered an Order and Judgment granting Fannie

Mae’s motion to dismiss Plaintiff’s petition and dismissing Plaintiff’s case with prejudice. Def.’s

Ex. 2, Doc. 17-2. The Order does not state the reasons for the dismissal.

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To survive a motion to dismiss, “a complaint must contain sufficient factual matter,

accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S.

662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When ruling on

a Rule 12(b)(6) motion to dismiss, the Court must accept as true all of the factual allegations in

the complaint, though it need not accept the legal conclusions. Iqbal, 556 U.S. at 678.

III. DISCUSSION

Defendant makes two arguments in favor of dismissal: (1) that Plaintiff’s claims are barred

by the doctrine of res judicata and/or the doctrine of claim splitting, because Plaintiff’s claims in

this action are based on the same alleged facts as the St. Louis County action, which was dismissed

with prejudice; and (2) that Plaintiff has failed to state a claim upon which relief may be granted.

In his opposition, Plaintiff states that he no longer intends to pursue the defamation claim in Count

IV and states that he plans to promptly file either a motion to voluntarily dismiss that count or an

amended complaint that omits the defamation count.2 He argues that he has alleged sufficient facts

to state a claim on the other three counts. Plaintiff does not address Defendant’s arguments

regarding res judicata or claim splitting.

The Court first addresses Defendant’s res judicata argument. The Eighth Circuit has found

that although res judicata is an affirmative defense, it can be the basis for a motion to dismiss under

Rule 12(b)(6) if the defense “is apparent on the face of the complaint.” C.H. Robinson Worldwide,

Inc. v. Lobrano, 695 F.3d 758, 764 (8th Cir. 2012) (quoting Noble Sys. Corp. v. Alorica Cent.,

LLC 543 F.3d 978. 983 (8th Cir. 2008)). In this context, “the phrase face of the

complaint . . . include[s] public records and materials embraced by the complaint, and material[s]

attached to the complaint ” Id. (alterations in original) (citations and quotation marks omitted). Cf.

2 To date, Plaintiff has not filed either a motion to dismiss or an amended complaint.

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on a state court dismissal in reviewing a motion to dismiss; noting that “[s]ome materials that are

part of the public record or do not contradict the complaint may be considered by a court in

deciding a Rule 12(b)(6) motion” and that “[i]n Missouri, as in other states, court records are public

records.”) (internal citations and quotation marks omitted). Applying this rule, district courts

within the Eighth Circuit have routinely considered prior state court judgments in evaluating

motions to dismiss based on res judicata, without converting those motions to summary judgment

motions. See, e.g., MacCormack v. Adel Wiggins Grp., No. 4:16-CV-414-CEJ, 2017 WL 914262,

at *2-*3 (E.D. Mo. Mar. 8, 2017) (rejecting the plaintiffs’ argument that a summary judgment

motion was required to assert a res judicata argument, and considering state court records in

evaluating the defendant’s motion to dismiss based on res judicata); Carter v. Clark, No. CIV. 14-

98 MJD/LIB, 2015 WL 505743, at *4-*9 (D. Minn. Feb. 6, 2015) (considering records from prior

state court case in evaluating a motion to dismiss based on res judicata), aff’d, 622 F. App’x 607

(8th Cir. 2015); Vargo v. City of St. Louis, No. 4:15-CV-00520-AGF, 2015 WL 4207112, at *2

(E.D. Mo. July 10, 2015) (same). Thus, the Court will consider Defendant’s res judicata argument,

and in doing so will consider the two public records attached to Defendant’s motion: the Amended

Petition filed in state court and the Order and Judgment entered by the state court.

“Res judicata operates so that ‘a final judgment on the merits of an action precludes the

parties or their privies from relitigating issues that were or could have been raised in that action.’”

Brown v. Kansas City Live, LLC, 931 F.3d 712 (8th Cir. 2019) (quoting Federated Dep’t Stores,

Inc. v. Moitie, 452 U.S. 394, 398 (1981)). “Federal courts are required ‘to give preclusive effect to

state-court judgments whenever the courts of the State from which the judgments emerged would

do so.’” Id. (quoting Allen v. McCurry, 449 U.S. 90, 96 (1980)).

Under Missouri law, “Res judicata, or claim preclusion, prohibits a party from bringing

any previously-litigated claim and any claim that, with the exercise of reasonable diligence, should

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(Mo. App. W.D. 2017) (citing Kesterson v. State Farm Fire & Cas. Co., 242 S.W.3d 712, 715

(Mo. 2008)). “[T]he doctrine applies to ‘every point properly belonging to the subject matter of

litigation and which the parties, exercising reasonable diligence, might have brought forward at

the time.’” Kesterson, 242 S.W.3d at 716 (quoting King Gen. Contractors, Inc. v. Reorganized

Church of Jesus Christ of Latter Day Saints, 821 S.W.2d 495, 501 (Mo. 1991)). If a claim in the

second action arises out of the same “act, contract or transaction” as the previously litigated claim,

then the claim in the second action is barred by the earlier judgment. Kesterson, 242 S.W.2d at

716. In determining whether two claims arise out of the same transaction, “a court must look to

the factual bases for the claims, not the legal theories . . .” Id. at 716 (citing Chesterfield Village,

Inc. v. City of Chesterfield, 64 S.W.3d 315, 319 (Mo. 2002)). “In order for a subsequent claim on

the same transaction to be considered separate . . . there must be new ultimate facts, as opposed to

evidentiary details, that form a new claim for relief.” Id. This rule “serves to ‘prevent a multiplicity

of suits and appeals with respect to a single cause of action, and is designed to protect defendants

against fragmented litigation, which is vexatious and costly.’” Kesterson, 242 S.W.3d at 716

(quoting Bagsby v. Gehres, 139 S.W.3d 611, 615 (Mo. Ct. App. 2004)).

The Eighth Circuit recently addressed circumstances similar to those in the instant case and

found that the second case was barred by res judicata under Missouri law. In Brown v. Kansas City

Live, LLC, an individual who was accused of trespassing in a restaurant was cursed at, pushed out

of the restaurant, and detained. 931 F.3d at 713. He filed suit in state court against the restaurant

and several involved individuals, asserting state-law claims of assault, battery, false imprisonment,

negligence, and malicious prosecution. Id. The state court dismissed the case with prejudice after

the plaintiff’s attorney failed to respond to discovery requests and comply with court orders. Id. at

714. The plaintiff then hired a new attorney and filed suit in federal court. Id. The factual

allegations and defendants were the same, but the plaintiff sought relief under 42 U.S.C. § 1981.

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prior dismissal with prejudice, and it granted the defendants’ motion to dismiss. Id.

The Eighth Circuit affirmed the dismissal. It stated that “[u]nder Missouri law, ‘res judicata

applies where (1) the prior judgment was rendered by a court of competent jurisdiction, (2) the

decision was a final judgment on the merits, and (3) the same cause of action and the same parties

or their privies were involved in both cases.’” Id. (quoting Bannum, Inc. v. City of St. Louis, 195

S.W.3d 541, 544 (Mo. Ct. App. 2006)). Addressing the first two elements, the Eighth Circuit found

that the state court had jurisdiction and that the dismissal with prejudice was a final judgment on

the merits under Missouri law. Id. As to the third element, the court noted that the parties were the

same in both cases. Id. The court acknowledged that the legal theories presented in the two cases

were different, but it noted that “‘[s]eparate legal theories are not to be considered as separate

claims, even if the several legal theories depend on different shadings of the facts, or would

emphasize different elements of the facts, or would call for different measures of liability or

different kinds of relief.” Id. at 715 (quoting King Gen. Contractors, Inc., 821 S.W.2d at 501

(internal quotation marks omitted). The Eighth Circuit also rejected the plaintiff’s argument that

the federal case involved a different cause of action because the § 1981 claim had different

elements than did the state court claims, stating:

While [the plaintiff] is correct that the two claims have different elements, for the

purposes of res judicata “a court looks to the factual bases for the claims, not the

legal theories.” Chesterfield Village, Inc., 64 S.W.3d at 319. No new facts were

added to the federal claim and the allegations in both lawsuits arise from the same

incident. “In order for a subsequent claim on the same transaction to be considered

[a] separate [cause of action] . . . there must be new ultimate facts, as opposed to

evidentiary details, that form a new claim for relief.” Kesterson v. State Farm Fire

& Cas. Co., 242 S.W.3d 712, 716 (Mo. 2008) (en banc).

Id. The Eighth Circuit concluded that the federal lawsuit was barred by res judicata. Id. at

715.

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in this action. There is no real question that the first two elements are satisfied. Plaintiff does not

argue that the Missouri state court lacked jurisdiction over his case when it entered the dismissal

with prejudice, and there is no basis for the Court to believe that court lacked jurisdiction. The

Missouri state court dismissed Plaintiff’s state court case with prejudice, which constitutes a

judgment on the merits under Missouri law. See Brown, 931 F.3d at 714 (stating, “In Missouri, a

dismissal with prejudice is considered a judgment ‘on the merits’”; finding the plaintiff’s federal

court action barred by res judicata based on a Missouri court’s dismissal with prejudice) (quoting

Greasel Conversions, Inc. v. Massa, 399 S.W.3d 456, 461 (Mo. Ct. App. 2013)). See also Mo.

Sup. Ct. Rule 67.01 (“A dismissal with prejudice bars the assertion of the same cause of action or

claim against the same party.”).

The third element—that “the same cause of action and the same parties or their privies

were involved in both cases”—is also satisfied. It is undisputed that the plaintiff and defendant are

the same in this case and in the state court action. In addition, although, as in Brown, the legal

theories asserted in the cases are different, the claims in both cases arose out of exactly the same

“act, contract or transaction”: Fannie Mae’s allegedly improper placement of Plaintiff on the 100%

Review List on or about July 30, 2015, and the resulting alleged harm to Plaintiff’s reputation and

business. As Defendant argues, a person acting with reasonable diligence could have, and should

have, asserted in the state court action not just a libel claim, but also the claims for tortious

interference with business expectancy, negligent supervision, and negligent infliction of emotional

distress asserted here. Notably, Plaintiff does not offer any argument as to why the claims he now

asserts could not or should not have been asserted in the prior action. Indeed, Plaintiff makes no

attempt to argue any reason why res judicata does not bar the instant lawsuit.

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For all of the above reasons, the Court concludes that the instant action is barred under

principles of res judicata and must be dismissed. The Court need not rule on Defendant’s

alternative argument that Plaintiff has failed to state a claim.

IV. CONCLUSION

For the reasons stated above,

IT IS HEREBY ORDERED that Defendant Federal National Mortgage

Association’s Motion to Dismiss (Doc. 16) is GRANTED.

IT IS FURTHER ORDERED that this action is DISMISSED, with prejudice.

— Mio O02

SHIRLEY PADMORE MENSAH

UNITED STATES MAGISTRATE JUDGE

Dated this 18th day of March, 2021.

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