Rothman v. Friedman Vartolo, LLP

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY COURT

DISTRICT OF NEW JERSEY

In Re:

Case No.: 23-15073-ABA

MICHELE D. ROTHMAN,

Chapter: 7

Debtor.

MICHELE D. ROTHMAN,

Plaintiff,

v.

Adv. Proc. No.: 23-01298-ABA

FRIEDMAN VARTOLO, LLP, SN

SERVICING CORPORATION AS SERVICER Judge: Andrew B. Altenburg, Jr.

FOR U.S. BANK TRUST NATIONAL

ASSOCIATION AS TRUSTEE OF THE Hearing Date: February 20, 2024

CABANA SERIES IV TRUST, JASON

SCHWARTZ, ESQ., AND FRIEDMAN

DEFENDANTS,

Defendants.

MEMORANDUM DECISION

The matter before the court is the motion of Jason Schwartz, Esq.; Friedman Vartolo, LLP;

Friedman Defendants; and SN Servicing Corporation as Servicer for U.S. Bank Trust National

Association as Trustee of the Cabana Series IV Trust (collectively, the “Defendants”) to dismiss

the adversary proceeding, due to a lack of standing under Fed. R. Civ. P. 12(b)(1) and under Fed.

R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted or, in the alternative,

that the court permissively abstain from hearing the adversary proceeding pursuant to 28 U.S.C. §

1334(c) (the “Motion”). Michele D. Rothman (the “Plaintiff”) opposes the Motion. For the reasons

that follow, the court will grant the Motion in its entirety.

JURISDICTION AND VENUE

This matter before the court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(G), (K)

and (O), and the court has jurisdiction pursuant to 28 U.S.C. § 1334, 28 U.S.C. § 157(a) and the

Standing Order of Reference issued by the United States District Court for the District of New

Jersey on July 23, 1984, as amended on September 18, 2012, referring all bankruptcy cases to the

bankruptcy court. The following constitutes this court’s findings of fact and conclusions of law as

required by Federal Rule of Bankruptcy Procedure 7052.

RELEVANT FACTS/PROCEDURAL HISTORY

Inasmuch as the Plaintiff has specifically sought relief associated with matters or actions

in her main bankruptcy case, Bankr. Case No. 23-15073-ABA (the “Main Case”), some

background is necessary.

This adversary proceeding is the latest chapter in an ongoing, multi-year litigation by the

Plaintiff and her family against the Defendants and their predecessors in interest. The crux of this

dispute concerns real property located at 2823 Schooner Lane in Hammonton, NJ 08037 (the

“Property”), and an allegedly invalid Notice of Settlement.

The Main Case was initially filed as a chapter 13 case. On her schedules, the Plaintiff

claimed to have a legal or equitable interest in the Property—invoking 11 U.S.C. §§ 541 and 362

and purportedly making it property of the estate protected by the automatic stay. Main Case, Doc.

No. 19 at 2. Shortly after filing, the Plaintiff voluntarily converted her case to a chapter 7 case.

Main Case, Doc. No. 56.

Prior to the initiation of this adversary proceeding, Defendant SN Servicing Corporation

as servicer for U.S. Bank Trust N.A. as Trustee of the Cabana Series IV Trust (hereinafter, “SN

Servicing”) sought stay relief in the Main Case, citing the fact that the Plaintiff did not own the

Property and that neither the Plaintiff, nor anyone else, had made any post-petition payments for

the obligation secured by the Property during the pendency of the case. Main Case, Doc. No. 77.

The Plaintiff responded, not by producing documentation evincing an interest in the Property or

that post-petition payments were made, but by arguing that SN Servicing’s motion was frivolous

and that it lacked legal standing to bring its motion. Main Case, Doc. No. 83. The Plaintiff also

made serious, but entirely unsubstantiated, allegations of ethical violations and wrongdoing. Id.

After a hearing on the matter which both parties attended, the court issued an opinion

granting the motion for stay relief. Main Case, Doc. No. 86 (“Main Case Opinion”). The court

addressed the Plaintiff’s argument that SN Servicing lacked standing, explaining:

In bankruptcy, a party may establish standing to seek relief from stay by

demonstrating that it is a “party in interest” in the case. In re Genrette, 797 F.

App’x 739, 740 n.3 (3d Cir. 2020). Unquestionably, a servicer is a proper party in

interest. In re Lau, 684 F. App’x 235, 238 (3d Cir. 2017) (citing Greer v. O’Dell,

305 F.3d 1297, 1302 (11th Cir. 2002) (“A servicer is a party in interest in

proceedings involving loans which it services”)); Bankers Tr. (Del.) v. 236

Beltway Inv., 865 F. Supp. 1186, 1191 (E.D. Va. 1994) (holding that either the

lender or its servicer had standing to sue on mortgagor’s default even though the

servicer was not the holder of the mortgage); In re Alcide, 450 B.R. 526, 538

(Bankr. E.D. Pa. 2011) (a servicer may establish its authority to initiate legal

proceedings, including motions for relief from the automatic stay in bankruptcy

court); In re Tainan, 48 B.R. 250, 252 (Bankr. E.D. Pa. 1985) (determining that

mortgage servicer was a party in interest for purposes of a relief from stay

proceeding). Under New Jersey law, it is likewise recognized that “loan servicers

also address delinquent payments with a borrower and initiate foreclosure

actions.” Prop. Asset Mgmt., Inc. v. Momanyi, No. A-2713-09T2, 2011 WL

4056076, at *2 (N.J. Super. Ct. App. Div. Sept. 14, 2011).

“In the context of a motion for relief from the automatic stay to enforce a

creditor’s rights under a mortgage, courts have recognized that to have the ‘legally

protected interest’ that makes a party a ‘party in interest,’ the movant must be the

party that has authority to enforce the mortgage under applicable nonbankruptcy

law.” In re Alcide, 450 B.R. at 536. In New Jersey, either possession of the note

or an assignment of the mortgage confers standing. Bank of New York Mellon v.

Johnson, No. A-2915-21, 2023 WL 4614618, at *2 (N.J. Super. Ct. App. Div.

July 19, 2023). Here, the Secured Creditor has both.

As to the note, it is well established in New Jersey that possession of the note

confers standing on a party. Grant-Covert v. Wells Fargo Bank, N.A., No. 15-

6018 (NLH), 2016 WL 901081, at *3 (D.N.J. Mar. 9, 2016), aff’d (3rd Cir. 16-

1880 Oct. 6, 2016); see also Deutsche Bank Tr. Co. Americas v. Angeles, 428 N.J.

Super. 315, 318, 53 A.3d 673, 675 (App. Div. 2012); Deutsche Bank Nat. Tr. Co.

v. Mitchell, 422 N.J. Super. 214, 223, 27 A.3d 1229, 1235 (App. Div. 2011). In

this case, the original note was executed in favor of Superior Mortgage Corp. Doc.

No. 77-3, p.1. The note was then endorsed by Superior Mortgage Corp to Wells

Fargo Bank, N.A. Doc. No. 77-3, p.3. In turn, Wells Fargo endorsed the note in

blank. Id. The Secured Creditor includes the original endorsed note. Therefore, it

has standing to prosecute this Motion.

As to the mortgage, it is likewise well established in New Jersey that an

assignment of a mortgage confers standing on a party. Grant-Covert v. Wells

Fargo Bank, N.A., 2016 WL 901081 at *3; see also Sterling Nat’l Bank v. Ruccio,

No. A-3307-17T4, 2019 WL 149697 (N.J. Super. Ct. App. Div. Jan. 9, 2019). In

this case, Superior Mortgage Corp is also the original mortgagee. Doc. No. 77-4,

p.1. The mortgage was assigned by MERS, as nominee for Superior Mortgage

Corp to Wells Fargo Bank, NA. Doc. No. 77-5, p. 5. In turn, Wells Fargo assigned

the mortgage to US Bank National Association as Trustee of the Igloo Series IV

Trust. Id., p. 9. Then, US Bank Trust National Association as Trustee of the Igloo

Series IV Trust assigned the mortgage to US Bank Trust National Association as

Trustee of the Cabana Series IV Trust. Id., p. 12. Thus, as servicer to US Bank

Trust National Association as Trustee of the Cabana Series IV Trust, the Secured

Creditor has standing to prosecute this Motion.

Main Case Opinion at 3–4.1 Thus, the court has already clearly found, contrary to the Plaintiff’s

assertion in her opposition to the current Motion, Doc. No. 7, p. 2, that SN Servicing has standing

and is entitled to file pleadings with the court.2

Having found that SN Servicing had standing, the court next addressed whether grounds

existed for stay relief. The court noted that the credible evidence presented indicated that the

Property was owned not by the Plaintiff, but by her brother, Bernard Rothman; that the Plaintiff

was not obligated on the mortgage or note; and that the Plaintiff had not demonstrated either an

interest in the Property or an interest that would allow her to claim an interest in equity in the

Property. Id. at 4. The court also noted that the dispute as to the debt related to the Property was

subject to pending state court litigation, where summary judgment has already been entered. Id.

Notwithstanding the foregoing, before the court issued its opinion granting stay relief, the

Plaintiff filed this adversary complaint. Doc. No. 1 (the “Complaint”). Her Complaint very closely

resembles her opposition to the motion for relief from stay.3 While she directly admits that SN

Servicing has obtained summary judgment in the state court foreclosure action, Complaint, ¶4, she

continues to attack the legal standing of the Defendants, repeating the same arguments which this

court ultimately rejected in its Main Case Opinion. She still raises vague, unsubstantiated

allegations of misconduct against Mr. Schwartz and the Friedman Vartolo firm as drafters of the

motion for stay relief, accuses them of criminal conduct for submitting fraudulent documents

before the court, and demands that the Defendants be removed from this bankruptcy case.

The court scheduled a Pre-Trial conference for January 23, 2024, at 2:00 p.m. Doc. No. 2-

1 at 1. The Defendants filed their Motion to be returnable on the same day as the Pre-Trial

conference. In their Motion, the Defendants sought dismissal of the adversary proceeding under

Federal Rule of Civil Procedure 12(b), or in the alternative, that the court permissively abstain

from hearing the adversary proceeding. Doc. No. 6. The Plaintiff timely filed opposition to the

Motion, Doc. No. 7, and the Defendants responded to the Plaintiff’s opposition. Doc. No. 8.

While the Defendants appeared on January 23rd, the Plaintiff did not—despite being

provided with the Notice of Pre-Trial Conference.4 As to the Motion, the court learned after the

hearing that the Defendants never served the Plaintiff with the actual hearing date and time of the

Motion. Even though the Plaintiff SHOULD have been present, if only for the Pre-Trial

Conference, to ensure due process is served the court immediately rescheduled the hearing on the

1 The court is aware that Plaintiff has filed a Notice of Appeal to United States District Court with regard to the Main

Case Opinion and the order connected therewith. That appeal has no impact on the court’s determination here. If the

District Court reverses this court’s decision in the Main Case Opinion, it would seem that this adversary proceeding

is moot. On the other hand, if the District Court affirms this court’s decision, the Defendants have standing and as set

forth below, the Plaintiff cannot succeed on her other claims.

2 In addition, the Main Case Opinion directly addresses the standing allegations asserted in paragraphs 3–5, 9, and 14–

16 of the Complaint here.

3 Indeed, in the adversary proceeding, the Plaintiff specifically requests that the court deny the motion for stay relief—

but that ship has sailed, as evidenced by the issuance of the court’s Main Case Opinion.

4 See Doc. No. 5, which is the Plaintiff’s Certificate of Service evidencing that she served the Defendants with the

Pre-Trial notice and thus was aware of same.

Motion to February 20, 2024, by way of its own order. Doc. No. 10. That order, which required

the parties to request oral argument if they wanted it, was timely and properly served on the parties.

Doc. No. 12. No party requested oral argument and the court does not need any. The court

considers the matter on the papers pursuant to D.N.J. LBR 9013-3(d).

The record is closed. The court has considered all submissions. The matter is ripe for

disposition.

DISCUSSION

A. Fed. R. Civ. P. 12(b)(1) - Lack of Standing

Rule Federal Rule of Civil Procedure 12(b)(1) provides that a party may move to dismiss

a case for lack of subject-matter jurisdiction. There are two types of Rule 12(b)(1) attacks: facial

and factual. A facial 12(b)(1) challenge “attacks the complaint on its face without contesting its

alleged facts,” and requires the court to “consider the allegations of the complaint as true.” Hartig

Drug Co. Inc. v. Senju Pharm. Co., 836 F.3d 261, 268 (3d Cir. 2016) (citing Constitution Party of

Pa. v. Aichele, 757 F.3d 347, 358 (3d Cir. 2014)). “[A] factual 12(b)(1) challenge attacks

allegations underlying the assertion of jurisdiction in the complaint, and it allows the defendant to

present competing facts.” Id.

The Motion attaches several exhibits, taking its challenge to subject-matter jurisdiction

outside the four corners of the complaint. Therefore, the court will construe the Motion as a factual

12(b)(1) challenge. When considering a factual 12(b)(1) challenge, “no presumptive truthfulness

attaches to [a] plaintiff's allegations, and the existence of disputed material facts will not preclude

the trial court from evaluating for itself the merits of jurisdictional claims. Moreover, the plaintiff

will have the burden of proof that jurisdiction does in fact exist.” Mortensen v. First Fed. Sav. &

Loan Ass’n, 549 F.2d 884, 891 (3d Cir. 1977); TransUnion LLC v. Ramirez, 594 U.S. 413, 430–

31 (2021).

“A motion to dismiss for want of standing is . . . properly brought pursuant to Rule

12(b)(1), because standing is a jurisdictional matter.” Ballentine v. United States, 486 F.3d 806,

810 (3d Cir. 2007); see also Const. Party of Pennsylvania, 757 F.3d at 357. This adversary

proceeding implicates two distinct standing concepts: Article III standing, which is jurisdictional,

and statutory standing, which is not. Article III standing “is a doctrine rooted in the traditional

understanding of a case or controversy.” Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016), as

revised (May 24, 2016). It “is built on separation-of-powers principles, [and] serves to prevent the

judicial process from being used to usurp the powers of the political branches.” Clapper v. Amnesty

Int’l USA, 568 U.S. 398, 408 (2013). Statutory standing, however, only goes to whether a party is

statutorily entitled to bring a claim, not the power of the court to adjudicate the case. See Leyse v.

Bank of Am. Nat. Ass’n, 804 F.3d 316, 320 (3d Cir. 2015) (citing Lexmark Int'l, Inc. v. Static

Control Components, Inc., 572 U.S. 118, 128 n.4 (2014)). Because these are two distinct concepts,

is entirely conceivable that a party might have statutory standing but not Article III standing, or

vice versa.

Here, the Defendants challenge the Plaintiff’s Article III standing to bring the claims in her

complaint, not her statutory standing to initiate this proceeding. Motion at 3–4. So, even assuming

that her mere possessory interest in the property is sufficient such that she is statutorily entitled to

initiate this adversary proceeding,5 the Plaintiff’s claim still fails because her possessory interest

is not sufficient to establish Article III standing. See In re Hart, No. 2:13-BK-17412-BR, 2015

WL 3895476, at *2 (B.A.P. 9th Cir. June 24, 2015) (a possessory interest in the Property is

“insufficient to confer standing in a dispute which challenged the loan, loan documents, and

foreclosure”).

Article III standing requires that “[t]he plaintiff must have (1) suffered an injury in fact, (2)

that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be

redressed by a favorable judicial decision.” Spokeo, 578 U.S. at 338; see also Lujan v. Defs. of

Wildlife, 504 U.S. 555, 560 (1992). The Plaintiff has not shown that she meets these requirements.

For one, it is unclear from her Complaint what the “injury in fact” to her is. She challenges the

Defendants’ standing to file pleadings in this court, but fails to identify an injury fairly traceable

to this fact: this is a no-asset chapter 7 bankruptcy case, so vacating the stay as to Property that she

does not own or is not obligated for has no effect whatsoever on her case. She also fails to show

that her claim is redressable. She challenges the underlying mortgage, but even assuming arguendo

that a mere possessory interest in property gives rise to a cognizable injury—and caselaw suggests

that it does not, see In re Hart, cited supra—the relief she requests would not redress that injury.

The Plaintiff requests that this court:

a. Strike all pleadings of Mr. Jason Schwartz, Esq

b. Order Friedman Vartolo, LLP and Mr. Schwartz, Esq., to be removed

from this bankruptcy case.

c. Deny Motion to vacate the automatic stay.

d. Order all Counsels for Friedman Vartolo, LLP to seek other Counsels

for SN Servicing Corporation and US bank Trust as Trustee of the

Cabana Series IV Trust.

Complaint at 7. But all of these requests for relief are forward looking, and none would redress

any injury she alleges associated with the Property.

Moreover, beyond this bare constitutional minimum, “[i]t is a well-established tenet of

standing that a ‘litigant must assert his or her own legal rights and interests, and cannot rest a claim

to relief on the legal rights or interests of third parties.’” Pennsylvania Psychiatric Soc. v. Green

Spring Health Servs., Inc., 280 F.3d 278, 288 (3d Cir. 2002) (citing Powers v. Ohio, 499 U.S. 400,

5 Interestingly, the Trustee has not abandoned any property in the Main Bankruptcy Case. Therefore, the Plaintiff’s

claim against the Defendants, to the extent she has a legitimate claim, is property of the estate. 11 U.S.C. § 541. As

such, she has no statutory ability to bring her claims. See, e.g., In re Hart, No. 2:13-BK-17412-BR, 2015 WL 3895476,

at *3 (B.A.P. 9th Cir. June 24, 2015); In re Roszkowski, No. 12-06256-8-JRL, 2013 WL 652996, at *1 (Bankr.

E.D.N.C. Feb. 21, 2013) (“A chapter 7 debtor does not have standing to pursue an action which is property of the

estate that the trustee has not abandoned; the trustee alone has standing to sue.”). Instead, the proper party here would

be the chapter 7 trustee, who represents the estate. See 11 U.S.C. § 323; see also In re Hart, 2015 WL 3895476, at *3.

In any case, the court will not dispose of this adversary proceeding on these grounds as this issue has not been briefed

by the Defendants.

410 (1991)); see also Kowalski v. Tesmer, 543 U.S. 125, 129 (2004) (citing Warth v. Seldin, 422

U.S. 490, 499 (1975)). A plaintiff can only assert the legal rights of a third party in specific, limited

circumstances: “1) the plaintiff must suffer injury; 2) the plaintiff and the third party must have a

‘close relationship’; and 3) the third party must face some obstacles that prevent it from pursuing

its own claims.” Pennsylvania Psychiatric Soc., 280 F.3d at 288–89 (citing Campbell v. Louisiana,

523 U.S. 392, 397 (1998)). All three of these criteria must be satisfied. Camacho v. Brandon, 317

F.3d 153, 159 (2d Cir. 2003); see also Miller v. Albright, 523 U.S. 420, 447 (1998) (O’Connor, J.,

concurring); Powers, 499 U.S. at 411.

The Defendants assert that the Plaintiff lacks standing to bring this lawsuit because she

neither owns the Property nor is obligated on the mortgage and note. Plainly, all of the allegations

contained in the Complaint relate either to the mortgage or the Property and conduct related

thereto. The court agrees with the Defendants. The Plaintiff has not suffered an injury because she

does not own the Property and is not obligated to the Defendants. And, because the Plaintiff does

not own the Property and she is not obligated on the mortgage or note, she has no legal standing

to raise these claims on her own. See United States v. Palmer, 578 F.2d 144, 146 (5th Cir. 1978);

Garner v. Wells Fargo Home Mortg., Inc., 505 F. App’x 837 (11th Cir. 2013); Bell v. Clarke, No.

CV TDC-15-1621, 2016 WL 1045959, at *2 (D. Md. Mar. 16, 2016); Karim v. Bank of Am., N.A.,

No. CA 10-519 S, 2011 WL 4457212, at *11 (D.R.I. May 6, 2011), report and recommendation

adopted, No. CA 10-519 S, 2011 WL 4458765 (D.R.I. Sept. 23, 2011); Bank of Maine v. Matthews,

795 F. Supp. 492, 494 n.4 (D. Me. 1992). Even if she were obligated on the mortgage, it is

questionable whether she would have standing to challenge the assignment of the mortgage. See

Rajamin v. Deutsche Bank Nat. Tr. Co., 757 F.3d 79, 87 (2d Cir. 2014); Wolf v. Fed. Nat. Mortg.

Ass’n, 512 F. App’x 336, 342 (4th Cir. 2013) (mortgagor lacks standing to challenge the propriety

of the assignment of the mortgage); Bell, 2016 WL 1045959 at *2 (“mortgagors generally lack

standing to attack transfers of their mortgages through assignments”); see also Rogers v. Bank of

Am., N.A., 787 F.3d 937, 939 (8th Cir. 2015).

Nevertheless, the Plaintiff attempts to rest her claim to relief on the legal rights or interests

of third parties, as confirmed by her own pleadings filed in opposition to the Motion.

Unquestionably, she is asserting not her own legal rights and interests, but either those of Bernard

Rothman, the owner of the Property, or her father. First, she attaches a copy of the state court

foreclosure docket, which from the court’s review, shows that she was not involved in the

foreclosure action in any way until she filed for bankruptcy. Doc. No. 7-1 at 2–11. In fact, it is not

until the docket entries on 6/22/23 and 6/30/23 that for the first time the Plaintiff’s name is even

mentioned—and then, only to reference her bankruptcy filing. But, those entries also note:

“Michele D. Rothman is not a party to the case according to the case management system”. Id. at

10 (emphasis added). Similar notations are placed on the docket on 8/14/23 and 8/16/23. Id. at 11.6

What is more, the Plaintiff attaches several pleadings filed in the state court action, but again, none

of those pleadings contain the Plaintiff’s name, name her as a party, or were signed by the

Plaintiff—in fact, all were prepared by the Plaintiff’s father. Doc. No. 7-2; Doc. No. 7-3. Without

doubt, the Plaintiff, through the Complaint, is resting her claim to relief on the legal rights or

interests of third parties.

6 Plaintiff provided a copy of what appears to be the entire docket for the foreclosure action. Of note—of the 232

docket entries made in that action, the only entries which contain the Plaintiff’s name are those in which the state

court has noted the Plaintiff is not a party to the case.

While it is enough to end the discussion here and dismiss the Complaint due to the

Plaintiff’s direct lack of standing as set forth above, it is also important to note that the Plaintiff

has not established a required element to secure third-party standing: that “the third party must

face some obstacles that prevent it from pursuing its own claims.” Pennsylvania Psychiatric Soc.,

280 F.3d at 289. The Plaintiff has not demonstrated that there are obstacles preventing the owner

of the Property or some other true party in interest from seeking relief on their own behalf. In fact,

through her submissions, the Plaintiff has actually demonstrated the opposite. The state court’s

docket and the other documents prepared in connection with that case, which have been provided

in this matter, show that there has been no obstacle preventing other relevant parties from accessing

the state court and/or the District Court system. Simply put, a party who is not obligated on a

mortgage cannot act on the mortgagor’s behalf in the absence of evidence that some obstacle

prevented that person from protecting their own interests. Garner, 505 F. App’x at 837 (citing

Warth v. Seldin, 422 U.S. 490, 499 (1975)). Because the Plaintiff has not demonstrated any

obstacle to the owner of the Property or some other true party in interest from seeking relief on

their own behalf, and because the pleadings submitted by the Plaintiff obviously demonstrate the

absence of any such obstacle, the Plaintiff fails to meet the third criteria required for third-party

standing, which is fatal to her claim.

Accordingly, since the Plaintiff has not met all the criteria necessary for direct standing

and cannot meet all the criteria for third-party standing, dismissal of the Complaint is appropriate

for lack of subject matter jurisdiction.

B. Fed. R. Civ. P. 12(h)(3) - 28 U.S.C. § 157 Jurisdiction

In addition to the foregoing reasons why this court lacks subject matter jurisdiction, this

court also lacks subject matter jurisdiction because the Plaintiff’s complaint does not raise any

claims over which this court has 28 U.S.C. § 157 jurisdiction. Federal Rule of Civil Procedure 12,

made applicable in bankruptcy by Federal Rule of Bankruptcy Procedure 7012(b), provides that a

court “must” dismiss a complaint if it “determines at any time that it lacks subject-matter

jurisdiction.” Fed. R. Civ. P. 12(h)(3); Fed. R. Bankr. P. 7012(b). And, because subject-matter

jurisdiction “functions as a restriction on federal power,” a court must “raise lack of subject-matter

jurisdiction on its own motion.” Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456

U.S. 694, 702 (1982); see also Bracken v. Matgouranis, 296 F.3d 160, 162 (3d Cir. 2002) (courts

have “a continuing obligation to sua sponte raise the issue of subject matter jurisdiction”).

Bankruptcy courts are courts of limited jurisdiction, which extends to only four types of

matters: “(1) cases under title 11, (2) proceedings arising under title 11, (3) proceedings arising in

a case under title 11, and (4) proceedings related to a case under title 11.” In re Marcus Hook Dev.

Park, Inc., 943 F.2d 261, 264 (3d Cir. 1991); see also 28 U.S.C. § 157(b)(1), (c)(1). “Cases under

title 11, proceedings arising under title 11, and proceedings arising in a case under title 11 are

referred to as ‘core’ proceedings; whereas proceedings ‘related to’ a case under title 11 are referred

to as ‘non-core’ proceedings.” In re Resorts Int’l, Inc., 372 F.3d 154, 162 (3d Cir. 2004). Core

proceedings are those which “invoke[] a substantive right provided by title 11” or those which

“could arise only in the context of a bankruptcy case.” Halper v. Halper, 164 F.3d 830, 836 (3d

Cir. 1999) (citing In re Guild & Gallery Plus, Inc., 72 F.3d 1171, 1178 (3d Cir. 1996)). Non-core,

related to proceedings are those in which “the outcome of that proceeding could conceivably have

any effect on the estate being administered in bankruptcy.” Pacor, Inc. v. Higgins, 743 F.2d 984,

994 (3d Cir. 1984). When a matter is neither a “core” nor “non-core” proceeding, a bankruptcy

court has no subject matter jurisdiction. E.g., In re Csondor, 309 B.R. 124, 129 (Bankr. E.D. Pa.

2004); see also Pacor, 743 F.2d at 996. Such matters must be dismissed sua sponte. E.g. In re

Wisdom, No. 11-01135-JDP, 2016 WL 872102, at *4 (Bankr. D. Idaho Mar. 7, 2016), aff'd sub

nom. Wisdom v. Gugino, 610 B.R. 327 (D. Idaho 2019).

This matter is not a core proceeding. Nowhere in the Complaint does the Plaintiff invoke

any substantive right provided by title 11. Nor does she raise any claims which could arise only in

the context of a bankruptcy case. The only relief she requests which is even remotely related to

her bankruptcy case is her opposition to the Defendants’ motion for stay relief, but even then, her

arguments do not sound under bankruptcy law, and stay relief has been granted. The parties are

free to pursue their rights outside of bankruptcy. More significantly, since the court’s granting of

stay relief has been appealed, the pending appeal divests this court of jurisdiction to consider that

matter further. In re St. Clair & Karen M. St. Clair, 251 B.R. 660, 669 (D.N.J. 2000). Finally, the

Complaint fails the Pacor test for related-to jurisdiction because the outcome of the adversary

proceeding cannot conceivably have any effect on the estate. This is a no-asset chapter 7

bankruptcy, and none of the relief which the Plaintiff requests will affect the estate. Accordingly,

since there is no core or non-core jurisdiction, the Complaint must be dismissed for lack of subject

matter jurisdiction.

C. Fed. R. Civ. P. 12(b)(1) - Failure to State a Claim

Federal Rule of Civil Procedure 12(b), made applicable in adversary proceedings by

Federal Rule of Bankruptcy Procedure 7012, provides that a court may dismiss a complaint for

failure to state a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6); Fed. R. Bankr.

P. 7012(b). A motion to dismiss under Civil Rule 12(b)(6) may be granted if, accepting all well-

pled allegations in the complaint as true and viewing them in the light most favorable to the

plaintiff, a court concludes that a plaintiff has failed to set forth “fair notice of what the claim is

and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007)

(ellipses omitted). A complaint will only survive a motion to dismiss if it “contain[s] 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) (internal quotation marks omitted). “A claim has facial plausibility

when the pleaded factual content allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Id. at 663 (citing Twombly, 550 U.S. at 556).

“Detailed factual allegations” are not required, but “more than an unadorned, the-defendant-

unlawfully-harmed-me accusation” must be pled. Id. at 678. A complaint will not suffice if it

tenders naked assertions devoid of further factual enhancement. Id. And a court is “not bound to

accept as true a legal conclusion couched as a factual allegation.” Papasan v. Allain, 478 U.S. 265,

286 (1986).

At the motion to dismiss stage, “the issue is not whether a plaintiff will ultimately prevail

but whether the claimant is entitled to offer evidence to support the claims.” Jackson v.

Birmingham Bd. of Educ., 544 U.S. 167, 184 (2005) (citing Scheuer v. Rhodes, 416 U.S. 232, 236

(1974)). When considering a Rule 12(b)(6) motion, the court must accept all the factual allegations

contained within the complaint as true. United States v. Gaubert, 499 U.S. 315, 327 (1991); Fowler

v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). All reasonable inferences should be drawn

in favor of the plaintiff. Gary v. Air Group, Inc., 397 F.3d 183, 186 (3d Cir. 2005). Pro se

complaints, however inartfully pleaded, are held to less stringent standards than formal pleadings

drafted by lawyers. Estelle v. Gamble, 429 U.S. 97, 106 (1976); Haines v. Kerner, 404 U.S. 519,

520–21 (1972); Erickson v. Pardus, 551 U.S. 89, 94 (2007). However, “pro se litigants still must

allege sufficient facts in their complaints to support a claim.” Mala v. Crown Bay Marina, Inc.,

704 F.3d 239, 245 (3d Cir. 2013); see also Rivera v. Monko, 37 F.4th 909, 914 (3d Cir. 2022).

When deciding a motion to dismiss, a court “must consider only the complaint, exhibits

attached to the complaint, matters of public record, as well as undisputedly authentic documents

if the complainant’s claims are based upon these documents.” Mayer v. Belichick, 605 F.3d 223,

230 (3d Cir. 2010); see also Alpizar-Fallas v. Favero, 908 F.3d 910, 914 (3d Cir. 2018); Pension

Ben. Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993). A Court may

also refer to “orders and items appearing in the record of the case.” In re RIH Acquisitions NJ,

LLC, 551 B.R. 563, 565 (Bankr. D.N.J. 2016). This doctrine “applies in adversary proceedings in

a bankruptcy case, and even between separate adversary proceedings in the same bankruptcy case.”

In re Pilgrim’s Pride Corp., 442 B.R. 522, 530 (Bankr. N.D. Tex. 2010). Finally, a court may also

consider “indisputably authentic documents that are referenced in or relied upon by the complaint.”

In re Evergreen Solar, Inc., No. 11-12590 (MFW), 2014 WL 300965, at *1 (Bankr. D. Del. Jan.

28, 2014).

i. The Defendants’ Standing as the “Subject of Controversy”

- Complaint, ¶¶1, 3–5, 8, 9, and 14–177

Without further repeating its conclusion in the Main Case Opinion finding that the

Defendants had standing to pursue stay relief specifically on the merits of the evidence presented,

the court incorporates the Main Case Opinion, as set forth above, here. And while the court

believes that is enough, further discussion of standing generally is warranted.

The Plaintiff acknowledges that she resides at the Property.8 Complaint, ¶1. Thus, at

minimum, the Plaintiff has a possessory interest in the Property. Under the bankruptcy code, a

“mere possessory interest in property, whether or not pursuant to a legal right of possession, is

protected by the automatic stay.” In re Escobedo, 513 B.R. 605, 611 (Bankr. D.N.M. 2014) (citing

In re Milaisnovich, No. 11-13-12294 TA, 2014 WL 644455 (Bankr. D.N.M. 2014)). Likewise, the

Third Circuit has directly held that “a possessory interest in real property is within the ambit of the

estate in bankruptcy under Section 541, and thus the protection of the automatic stay of Section

7 To the extent that a specific paragraph of the Complaint is not directly addressed, it is because that paragraph does

not need to be directly addressed, either because it is a legal conclusion, has been addressed by the state court in the

foreclosure action, or is argumentative, repetitive, irrelevant to this matter, already addressed in the Main Case

Opinion, and/or information not requiring a response.

8 The Plaintiff has never demonstrated that she is a lawful owner of the Property.

362.” In re Atl. Bus. & Cmty. Corp., 901 F.2d 325, 328 (3d Cir. 1990). Accordingly, because the

Plaintiff’s property—i.e., her possessory interest in the Property—is property of the estate, a

creditor would be required to obtain relief from the automatic stay to enforce its claim against the

Property.

Along with that, on her bankruptcy schedules, the Plaintiff asserted an actual interest in the

Property thereby bringing the protections of the automatic stay into play. The Plaintiff also actually

listed SN Servicing as a creditor with a disputed secured claim against the Property on her

Bankruptcy Petition. Main Case, Doc. 1.9 Consequently, the Plaintiff, though her own admission

in her petition, has acknowledged that SN Servicing has a claim.10

What is more, the disputed nature of the claim does not invalidate or extinguish the claim

under the bankruptcy code. 11 U.S.C.A. § 101(5)(A) provides:

The term “claim” means--

right to payment, whether or not such right is reduced to judgment,

liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,

undisputed, legal, equitable, secured, or unsecured;

Id. (emphasis added). Thus, the Plaintiff’s disputing the claim does not make SN Servicing any

less of a “creditor” in bankruptcy. In re Holstein, 299 B.R. 211, 224 (Bankr. N.D. Ill. 2003), aff’d

sub nom. Jeffrey M. Goldberg & Assocs., Ltd. v. Holstein, No. 03 C 8023, 2004 WL 2075442

(N.D. Ill. Aug. 31, 2004). If that were the rule, then debtors could foreclose the ability of creditors

to file pleadings simply by scheduling their debts as disputed. Obviously, this would be untenable;

the bankruptcy code’s broad definition of a “claim” remedies this effect. See 11 U.S.C. §

101(5)(A); see also In re Knight, 55 F.3d 231, 234 (7th Cir. 1995) (“a disputed claim is

nevertheless a claim”). Most importantly, a creditor with a disputed claim still has standing to seek

stay relief. See In re Scott, 607 B.R. 211, 216 (Bankr. W.D. Pa. 2019). This is true even when the

dispute arises from an underlying mortgage, as a disputed claim is still a claim “[r]egardless of

whether the underlying mortgage is valid.” In re Powers, 860 F. App’x 159, 162 (11th Cir. 2021).

Even if it could be suggested that listing SN Servicing as a creditor in her Main Case was

incorrect, the bankruptcy code tells us that it still has a claim in the Main Case. The bankruptcy

code provides that a “‘claim against the debtor’ includes [a] claim against property of the debtor.”

11 U.S.C.A. § 102(2). Thus, a direct individual claim against a debtor is not required. See Johnson

v. Home State Bank, 501 U.S. 78, 86 (1991) (“Congress fully expected that an obligation

9 When deciding a motion to dismiss in an adversary proceeding, “a bankruptcy court may take judicial notice of the

docket entries in a case and the contents of the bankruptcy schedules to determine the timing and status of case events

and other facts which are not reasonably in dispute.” In re Brown, 591 B.R. 587, 591 (Bankr. M.D. Pa. 2018). This

includes schedules. Id.; see also In re Trichilo, 540 B.R. 547, 549 (Bankr. M.D. Pa. 2015); In re Baker, No. 19-12015,

2020 WL 3815280, at *2 (Bankr. D. Kan. June 1, 2020); In re Wright, No. 7-09-10892 JR, 2009 WL 3633811, at *3

(Bankr. D.N.M. Oct. 30, 2009).

10 Indeed, in the Complaint, the Plaintiff does not dispute that a mortgage loan was entered into. Rather, the Plaintiff

disputes the validity of the mortgage loan note due to the late filing of a Notice of Settlement. Complaint, ¶10.

enforceable only against a debtor's property would be a ‘claim’ under § 101(5) of the Code.”); see

also In re Sandrin, 536 B.R. 309, 314 (Bankr. D. Colo. 2015) (a party has standing to enforce note

by virtue of his claim against the debtor's property); In re Davis, 447 B.R. 738, 742 (Bankr. D.

Md. 2011), aff'd (Jan. 12, 2012), aff'd sub nom. TD Bank, N.A. v. Davis, No. CIV. PJM 11-1270,

2012 WL 439701 (D. Md. Jan. 12, 2012), aff'd sub nom. In re Davis, 716 F.3d 331 (4th Cir. 2013)

(bank had standing to challenge confirmation because it has a claim against property of the estate).

In addition, the bankruptcy code defines a creditor as an “entity that has a claim against the

debtor. . .” 11 U.S.C. § 101(10)(A). Certainly, a creditor has standing to seek stay relief. See In re

Garcia, 584 B.R. 483, 487 (Bankr. S.D.N.Y. 2018) (“in order to invoke the court's jurisdiction to

obtain relief from the automatic stay, the moving party must be either a creditor or a debtor”); see

also In re Junk, 512 B.R. 584, 605 (Bankr. S.D. Ohio 2014), aff'd sub nom. Junk v. CitiMortgage,

Inc., No. 2:14-CV-1428, 2015 WL 14025962 (S.D. Ohio Aug. 28, 2015), aff'd, No. 15-3986, 2016

WL 11900483 (6th Cir. May 19, 2016) (“Section 362(d)(1) permits relief from stay to be requested

by a ‘party in interest.’ 11 U.S.C. § 362(d)(1). . . . The term creditor includes an entity holding a

prepetition ‘claim against the debtor[,]’ 11 U.S.C. § 101(10)(A), and a ‘“claim against the debtor”

includes claim against property of the debtor[.]”’ 11 U.S.C. § 102(2).”); In re Castro, No. BAP

CO-11-040, 2012 WL 611437, at *3 (10th Cir. BAP (Colo.) Feb. 27, 2012), aff’d, 503 F. App’x

612 (10th Cir. 2012) (“in order to be a party in interest with standing to seek relief under § 362(d),

one must be either a debtor or a creditor of the bankruptcy estate”).

The bottom line here is that SN Servicing has a claim against the property of the bankruptcy

estate, either directly based upon the Plaintiff’s schedules, or indirectly because of the Plaintiff’s

possessory interest in the Property. And because SN Servicing has a claim and/or is a creditor, it

is a proper party-in-interest that has standing to file pleadings seeking relief from the automatic

stay. The court confirmed SN Servicing’s standing through the Main Case Opinion. Its pleadings

were not frivolous as suggested by the Plaintiff. Complaint, ¶9. Thus, accepting all the factual

allegations contained within the Complaint as true and drawing all reasonable inferences in favor

of the Plaintiff, she cannot offer any evidence which would contradict that SN Servicing has a

claim against the property of the bankruptcy estate giving it standing to seek stay relief. As such,

the Complaint fails to state a claim and cannot state a claim upon which the court can grant relief.

Dismissal is appropriate.

ii. Failure to File a Proof of Claim

- Complaint, ¶7

The Plaintiff notes that SN Servicing never filed a proof of claim. Complaint, ¶7. The court

can only assume that the Plaintiff is suggesting that SN Servicing’s failure to do so somehow

deprives it of standing. This is a red herring. “A person need not have filed a proof of claim in

order to be a ‘party in interest’” with standing. In re Armstrong, 303 B.R. 213, 219 (B.A.P. 10th

Cir. 2004). Additionally, the Plaintiff’s Main Case is a no-asset chapter 7 case. As such, there is

no requirement that creditors file claims. See Fed. R. Bankr. P. 2002(e); In re Toms, 229 B.R. 646,

650 n.3 (Bankr. E.D. Pa. 1999); see also In re Geisler, No. ADV 14-2098-CMB, 2014 WL

6608765, at *2 (Bankr. W.D. Pa. Nov. 19, 2014), aff’d, 539 B.R. 253 (W.D. Pa. 2015), aff’d sub

nom. In Re Geisler, 667 F. App’x 781 (3d Cir. 2016) (no purpose of filing proofs of claims in no-

asset chapter 7 cases because there are no assets to administer); Judd v. Wolfe, 78 F.3d 110, 115

(3d Cir. 1996) (“In a case where there are no assets to distribute, however, the right to file a proof

of claim is a hollow one”). The Plaintiff’s argument is misguided and has no bearing on the

standing of the Defendants. Thus, accepting all the factual allegations contained within the

Complaint as true and drawing all reasonable inferences in favor of the Plaintiff, she cannot offer

any evidence which would establish that SN Servicing was required to file a proof of claim in

order to assert standing or for any other purpose. As such, the Complaint fails to state a claim and

cannot state a claim upon which the court can grant relief. Dismissal is appropriate.

iii. Alleged Criminal Acts11

- Complaint ¶¶13 and 18

In declining to impose criminal punishment, the court in In re Wallace, 311 B.R. 601

(Bankr. N.D. Okla. 2004) explained:

Bankruptcy court jurisdiction is a creature of statute. Under 28 U.S.C.A. § 1334,

Congress vested federal district courts with “original and exclusive jurisdiction of

all cases under title 11” and “original but not exclusive jurisdiction of all civil

proceedings arising under title 11, or arising in or related to cases under title 11.”16

Bankruptcy courts must operate within this framework. . . . Section 1334 vests

bankruptcy courts with jurisdiction over certain “civil proceedings.” . . . this Court

lacks jurisdiction . . .

311 B.R. at 605–06 (footnote omitted). Indeed, the bankruptcy court is a court of limited

jurisdiction and has no jurisdiction to hear criminal matters. In re Lindsey, 178 B.R. 895, 903

(Bankr. N.D. Ga. 1995). “By precedent and by statute the adjudication of criminal matters is not

the provenance of a bankruptcy court. Indeed, the Code explicitly provides that ‘[t]he filing of a

petition under section 301, 302 or 303 of this title ... does not operate as a stay ... of the

commencement or continuation of a criminal action or proceeding against the debtor[.]’ 11 U.S.C.

§ 362(b).” In re Fidler, 442 B.R. 763, 767 (Bankr. D. Nev. 2010); see also In re Vaso Active

Pharms., Inc., 514 B.R. 416, 421–22 (Bankr. D. Del. 2014) (“bankruptcy courts possess no

criminal jurisdiction.”); In re Wilcox, 529 B.R. 231, 233 n.3 (Bankr. W.D. Mich. 2015)

(“Bankruptcy courts have no criminal jurisdiction”). Likewise, “a bankruptcy court does not have

jurisdiction to compel an investigation of alleged crimes.” In re Inglewood Woman's Club, Inc.,

No. 4:15-BK-15376-SHG, 2017 WL 2492530, at *1 (B.A.P. 9th Cir. June 7, 2017), aff’d, 708 F.

App’x 392 (9th Cir. 2017). Consequently, the court has no jurisdiction over the Plaintiff’s demand

to impose punishment for the Defendants’ alleged criminal conduct. Thus, accepting all the factual

allegations contained within the Complaint as true and drawing all reasonable inferences in favor

of the Plaintiff, she cannot offer any evidence which would contradict the fact that the court has

no jurisdiction over criminal matters.

Finally, the Plaintiff would not have standing to pursue such criminal actions. “A ‘bare

criminal statute’ does not create a private right of action. And individuals may not sue to compel

11 To the extent that the Plaintiff is merely using the term “criminal” to sensationalize her allegations, or simply as a

term of art, rather than actually seeking criminal prosecution, the court’s reasoning throughout the entirety of this

opinion still applies. Accordingly, the Plaintiff has failed to state a claim upon which relief can be granted.

the enforcement of criminal laws.” Rothman v. Cabana Series IV Tr., No. 1:23-CV-03183, 2023

WL 4866359, at *2 (D.N.J. July 31, 2023) (internal citations omitted) (citing Cent. Bank of Denver

v. First Interstate Bank of Denver, 511 U.S. 164, 190 (1994) and Leeke v. Timmerman, 454 U.S.

83, 85–86 (1981)). As such, the Complaint fails to state a claim and cannot state a claim upon

which the court can grant relief. Dismissal is appropriate.

iv. The Defendants’ Alleged Conflict of Interest

- Complaint, ¶21

Finally, the Plaintiff demands that Mr. Schwartz and Friedman Vartolo be removed from

this case and that SN Servicing be required to obtain substitute counsel. She states that Friedman

Vartolo and its attorneys are named as defendants in a separate action which is being appealed to

the Third Circuit. Doc. No. 1, ¶21.Therefore, she summarily concludes, they cannot represent SN

Servicing in this action and SN Servicing “must be represented by another counsel.” Id. She does

not provide any further explanation, legal basis, or evidence for this drastic request beyond mere

conclusory allegations of “conflict of interest.”

However, even if it is true that Friedman Vartolo is a defendant in another case, that fact

bears no relevance whatsoever on whether Friedman Vartolo may represent SN Servicing in this

case. If it were the rule that a party named as a defendant in a separate proceeding could not appear

in any other case involving the same plaintiff, then litigious plaintiffs could simply file frivolous

lawsuits to disqualify the chosen counsel of their adversaries. Obviously, this cannot be the case.

The Plaintiff’s request for disqualification is especially troubling in light of the fact that it is her

father, not her, who is the plaintiff-appellant in the other case she references.12 The Plaintiff and

her family cannot drag the Defendants into litigation through multiple proceedings in different

courts and then turn around and argue that those same Defendants are not allowed to appear and

defend themselves. That is simply not how it works. Disqualification is a drastic remedy, and is

disfavored. E.g., Essex Chem. Corp. v. Hartford Acc. & Indem. Co., 993 F. Supp. 241, 246 (D.N.J.

1998); see also Carlyle Towers Condominium Ass’n v. Crossland Sav., 944 F. Supp. 341, 345

(D.N.J. 1996); Alexander v. Primerica Holdings, Inc., 822 F. Supp. 1099, 1114 (D.N.J. 1993).

Courts have cautioned that disqualification should only be imposed when absolutely necessary,

see, e.g., Alexander, 822 F. Supp. at 1114 (citing Schiessle v. Stephens, 717 F.2d 417, 420 (7th

Cir. 1983)), and have recognized that disqualifying an attorney because of who the plaintiff

chooses to sue “would encourage pleading gamesmanship,” see Tapia v. City of Albuquerque, 10

F. Supp. 3d 1171, 1206 (D.N.M. 2014). The Plaintiff has not shown nor even remotely alleged any

set of facts to support of her drastic claim. Thus, accepting all the factual allegations contained

within the Complaint as true and drawing all reasonable inferences in favor of the Plaintiff, she

cannot offer any evidence which warrants a finding by the court to disqualify the Defendants. This

distasteful litigation tactic will not prevail. As such, the Complaint fails to state a claim and cannot

state a claim upon which the court can grant relief. Dismissal is appropriate.

12 The court may properly reference the docket in that case, 23-2455 Ronald Rothman v. Cabana Series IV Trust,

because it is a judicial proceeding not subject to reasonable dispute over its authenticity. See S. Cross Overseas

Agencies, Inc. v. Wah Kwong Shipping Grp. Ltd., 181 F.3d 410, 426 (3d Cir. 1999).

v. Leave to Amend in Lieu of Dismissal

The court is aware that generally, leave to amend in lieu of dismissal of a complaint is a

preferred remedy, and that leave to amend should be freely given when justice so requires. Fed. R.

Civ. P. 15(a); Fed. R. Bankr. P. 7015. However, leave to amend need not be given when

amendment would be futile, and in such cases, it is firmly within the court’s discretion to dismiss

a case without leave to amend. See Foman v. Davis, 371 U.S. 178, 182 (1962); see also Shane v.

Fauver, 213 F.3d 113, 117 (3d Cir. 2000) (court may dismiss without leave to amend “on the

grounds of bad faith, undue delay, prejudice, or futility”). “‘Futility’ means that the complaint, as

amended, would fail to state a claim upon which relief could be granted.” In re Burlington Coat

Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997). This is the case where an amendment

would be “frivolous or advance[] a claim or defense that is legally insufficient on its face.”

Harrison Beverage Co. v. Dribeck Importers, Inc., 133 F.R.D. 463, 468 (D.N.J. 1990) (citing 6

Wright, Miller & Kane, Federal Practice & Procedure § 1487 at 637–642 (2d ed. 1990)). Although

pro se plaintiffs are ordinarily granted leave to amend inadequate complaints before a court rules

on a motion to dismiss, courts routinely dismiss complaints without leave to amend when a claim

is frivolous. See White v. Hinds, No. CIV.A. 13-7441 MAS, 2015 WL 3745216, at *4 (D.N.J. June

15, 2015), aff’d, 675 F. App’x 186 (3d Cir. 2017).

Undoubtedly, this rule applies here. The Plaintiff’s Complaint is utterly without merit and

devoid of credible factual assertions. The claims alleged are legally insufficient on their face. The

documents submitted in connection with the Motion have no bearing here and do not even involve

the Plaintiff. The whole matter reeks of bad faith, abuse, and as it did in the Main Case Opinion,

the court questions who is really running the show here. There is absolutely NO basis for the relief

sought by the Plaintiff and any amendment would be futile. Dismissal of the Complaint, rather

than leave to amend, is warranted.

D. Defendants’ Motion for the Court to Permissively Abstain

Separate from the Defendants’ request for the court to dismiss the case is its request for the

court to permissively abstain. Even assuming, arguendo, that the court is incorrect in its decision

to dismiss the Plaintiff’s Complaint without leave to amend, this court would abstain anyway.

The Defendants request that this court permissively abstain from deciding this adversary

proceeding. Permissive abstention is governed by 28 U.S.C. § 1334(c), which provides that a

bankruptcy court may abstain from hearing an adversary proceeding “in the interest of justice, or

in the interest of comity with State courts or respect for State law.” 28 U.S.C. § 1334(c)(1). There

is no bright-line test to apply when determining whether permissive abstention is appropriate;

rather, courts in the Third Circuit consider a variety of factors. Most courts apply a twelve-factor

test, considering:

(1) the presence in the proceeding of non debtor parties; (2) the extent to which

state law issues predominate; (3) the unsettled nature of the applicable state law;

(4) the presence of a related proceeding commenced in state court; (5) the

jurisdictional basis, if any, other [than] 28 U.S.C. § 1334; (6) the degree of

relatedness or remoteness of the proceeding to the main bankruptcy case; (7) the

substance rather than the form of an asserted “core” proceeding; (8) the feasibility

of severing state law claims from core bankruptcy matters to allow judgments to be

entered in state court without enforcement left to the bankruptcy court; (9) the effect

or lack thereof on the efficient administration of the estate if a court recommends

abstention; (10) the existence of a right to a jury trial; (11) the burden on the

bankruptcy court's docket; and (12) the likelihood that the commencement of the

proceeding in bankruptcy court involves forum shopping by one of the parties.

In re Simpson, No. 14-16173 (JNP), 2015 WL 6124004, at *5 (Bankr. D.N.J. Oct. 16, 2015) (citing

In re Cent. Jersey Airport Servs., LLC, 282 B.R. 176, 185 (Bankr. D.N.J. 2002)); see also In re

Windhaven Top Ins. Holdings, LLC, 636 B.R. 596 (Bankr. D. Del. 2021); In re DHP Holdings II

Corp., 435 B.R. 220 (Bankr. D. Del. 2010); In re Topfer, 587 B.R. 622 (Bankr. M.D. Pa. 2018).

“Out of these twelve, ‘three factors are given more weight than the others: (1) the effect on the

administration of the estate; (2) whether the claim involves only state law issues; and (3) whether

the proceeding is core or non-core.’” In re Windhaven Top Ins. Holdings, LLC, 636 B.R. at 607 (citing

In re Patriot Nat’l, Inc., 623 B.R. 696, 712 (D. Del. 2020)).

Other courts apply a sixteen-factor test. E.g., In re MicroBilt Corp., 484 B.R. 56, 66 (Bankr.

D.N.J. 2012); In re Strano, 248 B.R. 493, 504 (Bankr. D.N.J. 2000). And some other courts use a

seven-factor test. E.g., Jazz Photo Corp. v. Dreier LLP, No. 05–5198, 2005 WL 3542468, at *7

(D.N.J. Dec. 23, 2005); In re Donington, Karcher, Salmond, Ronan & Rainone, 194 B.R. 750,

756–59 (Bankr. D.N.J.1996). However, the difference between these tests is not substantial, and

in any case, courts do not need to consider every factor in every case. Monmouth Inv., LLC v.

Saker, No. CIV.09-3063 (FLW), 2010 WL 143687, at *4 (D.N.J. Jan. 12, 2010). Rather, “[c]ourts

should apply these factors flexibly, for their relevance and importance will vary with the particular

circumstances of each case, and no one factor is necessarily determinative.” Shalom Torah Centers

v. Philadelphia Indem. Ins. Companies, No. CIV.A. 10-6766 FLW, 2011 WL 1322295, at *4

(D.N.J. Mar. 31, 2011) (citing In re Earned Capital Corp., 331 B.R. 208, 220 (Bankr. W.D. Pa.

2005), aff'd sub nom. Geruschat v. Ernst & Young LLP, 346 B.R. 123 (W.D. Pa. 2006), aff’d sub

nom. In re Seven Fields Dev. Corp., 505 F.3d 237 (3d Cir. 2007)).

For the purposes of a motion to dismiss based on abstention, not only are courts not limited

to the four corners of the complaint, but courts can also properly consider matters outside the

pleadings. See Hazbun Escaf v. Rodriquez, 191 F. Supp. 2d 685, 687 n.7 (E.D. Va.), aff’d sub nom.

Escaf v. Rodriguez, 52 F. App’x 207 (4th Cir. 2002); see also Virginia ex rel. Integra REC LLC v.

Countrywide Sec. Corp., 92 F. Supp. 3d 469, 476 (E.D. Va. 2015). Reviewing the record, and

applying these twelve factors here, presents a clear case for abstention.

The first factor favors abstention. It is abundantly clear that there is attempt to do in this

court what other non-debtor parties could not achieve in the foreclosure matter currently pending

in the state court. In Part A, above, the court has demonstrated how the Plaintiff has no direct or

third-party standing as it relates to the Property which is the subject matter of the state court

proceeding. In her opposition to the Motion, the Plaintiff’s argument focuses solely on matters

arising out of the state court foreclosure action—an action she is NOT a party to, as confirmed by

the state court docket the Plaintiff attached as Exhibit A in support of her opposition. Doc. 7-1.

What is more, the remaining exhibits attached in support of her opposition to the Motion are ALL

prepared by non-debtor parties. See Doc. Nos. 7-2, 7-3, & 7-4. The Plaintiff is not even named or

listed on those non-debtor party documents! This proceeding ONLY involves the presence of non-

debtor parties who are attempting to utilize the court here because they are not getting the results

they want in the pending state court foreclosure action. The first abstention factor is satisfied.

The second factor, the extent to which state law issues predominate, strongly favors

abstention. Nearly every claim which the Plaintiff raises sounds under state foreclosure law. First,

she attacks the validity of the note, which arose under and is governed by New Jersey law. Doc.

No. 1, ¶10. Essentially, her argument is that the note is invalid because the original lender failed

to properly file a notice of settlement. Id., ¶11. But this is a state law claim. The fact that the

Plaintiff cites exclusively to New Jersey statutes, and not to any provision of the bankruptcy code,

proves as much. Id. Next, she accuses Friedman Vartolo of professional misconduct. Again, New

Jersey law, not federal law, governs here. See, e.g., Maldonado v. New Jersey ex rel. Admin. Off.

of Cts.-Prob. Div., 225 F.R.D. 120, 137 (D.N.J. 2004). Then, she raises vague allegations of

criminal conduct. Because her pleadings are so vague, the court is unable to discern if the Plaintiff

is attempting to allege a federal or state criminal matter. In either case, as noted in Part C. iii.,

above, it is outside of this court’s jurisdiction, and certainly not a matter of bankruptcy law. In fact,

the only bankruptcy issue which the Plaintiff raises in her adversary complaint is her request that

the motion for relief from stay be denied. This claim, however, is moot because this court already

granted stay relief, and in any case the pending appeal divests this court of jurisdiction over the

matter. Thus, not only do state law issues predominate, but state law issues are the only issues.

Most compellingly, the Plaintiff even admits that there is no issue of bankruptcy law, claiming,

incredibly, that “[t]he Complaint filed does not warrant a Bankruptcy Statute.” Doc. No. 7 at 2.

The second abstention factor is satisfied.

The third factor, the unsettled nature of the applicable state law, favors abstention. Simply

put, the state law is not unsettled on the issues presented, as clearly demonstrated by the thorough

analysis provided by the state court in its Memorandum Of Decision On Motion Pursuant To Rule

1:6-2(F) dated October 21, 2023, in the state court foreclosure action. See Doc. 8-2. The third

abstention factor is satisfied.

The fourth factor, the presence of a related proceeding commenced in state court, favors

abstention. There is an ongoing foreclosure action pending in state court. The Plaintiff’s entire

opposition to the Motion speaks to and incorporates the pending state court foreclosure action.

Doc. No. 7. The Plaintiff even admits that SN Servicing obtained an order for summary judgment

in that action. Complaint, ¶4. Indeed, the Plaintiffs pleadings are replete with references to the

state court action. Doc. No. 1 at ¶¶4, 14, & 16; Doc. No. 7 at ¶¶2, 3, 5, & 6; see also Bankr. Case

No. 23-15073-ABA, Doc. No. 83 at ¶¶8–12. That pending proceeding as it relates to ALL the

claims made by the Plaintiff in this matter establishes that the fourth abstention factor is satisfied.

The fifth factor, the jurisdictional basis, if any, other than 28 U.S.C. § 1334, favors

abstention. This court would not have jurisdiction over any of the Plaintiff’s claims absent the

bankruptcy filing, and even then, as set forth in Part B above, the court doesn’t have jurisdiction

over the non-core issues raised. The fifth abstention factor is satisfied.

The sixth factor, the degree of relatedness or remoteness of the proceeding to the main

bankruptcy case, favors abstention. The Plaintiff’s bankruptcy case is a no-asset chapter 7, and the

outcome of this adversary proceeding bears no relevance whatsoever on the outcome of the main

case. Besides, the court has already granted SN Servicing relief from the automatic stay and

consequently, the estate no longer has any interest, if any, in the Property. The sixth abstention

factor is satisfied.

The seventh factor, the substance rather than the form of an asserted “core” proceeding,

favors abstention. The Third Circuit has held:

To determine whether a proceeding is a “core” proceeding, courts of this Circuit

must consult two sources. First, a court must consult § 157(b). Although § 157(b)

does not precisely define “core” proceedings, it nonetheless provides an illustrative

list of proceedings that may be considered “core.” See id. § 157(b)(2)(A)-(O).

Second, the court must apply this court's test for a “core” proceeding. Under that

test, “‘a proceeding is core [1] if it invokes a substantive right provided by title 11

or [2] if it is a proceeding, that by its nature, could arise only in the context of a

bankruptcy case.’” In re Guild & Gallery Plus, Inc., 72 F.3d 1171, 1178 (3d

Cir.1996) (quoting Marcus Hook, 943 F.2d at 267); see In re Continental Airlines,

125 F.3d 120, 131 (3d Cir.1997); cf. Beard v. Braunstein, 914 F.2d 434, 444 (3d

Cir.1990). This Court and other courts of appeals have relied on this test to ensure

that § 157(b) “core” proceeding jurisdiction is exercised in a manner consistent with

Marathon.

Halper v. Halper, 164 F.3d 830, 836 (3d Cir. 1999). Under that test, this adversary proceeding is

not a core proceeding in substance as much as it is the state court action dressed up as an adversary

complaint. The Plaintiff does not invoke any substantive rights provided by title 11 besides her

opposition to the motion for stay relief, which is moot. Nor could this proceedings arise only in

the context of the bankruptcy case. On the contrary, the issues in this proceeding have been

repeatedly litigated and continue to be litigated in state and federal court outside of bankruptcy.

The seventh abstention factor is satisfied.

The eighth factor, the feasibility of severing state law claims from core bankruptcy matters

to allow judgments to be entered in state court without enforcement left to the bankruptcy court,

favors abstention. Allowing judgments to be entered in state court would not affect the

administration of this bankruptcy case. And, where all claims are essentially non-core matters as

is the case here, abstention is appropriate. See In re DHP Holdings II Corp., 435 B.R. 220, 232

(Bankr. D. Del. 2010). To be sure, as the court has repeatedly noted, the claims raised are ALL

state court or district court claims—not bankruptcy claims. The eighth abstention factor is satisfied.

The ninth factor, the effect or lack thereof on the efficient administration of the estate if a

court recommends abstention, favors abstention. As set forth repeatedly throughout this opinion,

there is absolutely no effect on the administration of the estate. This is a no-asset chapter 7

bankruptcy case. Stay relief has been granted. The Plaintiff’s mere possessory interest has

absolutely NO impact on the estate even if she were successful here, because she does not own the

Property and she is not obligated to SN Servicing under the note and mortgage. There would be

no effect on either of the debtor/creditor relationship, or more importantly, on the estate. The ninth

abstention factor is satisfied.

The tenth factor, the existence of a right to a jury trial, favors abstention. Assuming the

Plaintiff was able to seek a jury trial in state court, that is where it would have to take place as the

bankruptcy court does not conduct jury trials. The tenth abstention factor is satisfied.

The eleventh factor, the burden on the bankruptcy court’s docket, favors abstention. In

effect, the Plaintiff is trying to relitigate matters which have been presented to and decided by other

courts. The Plaintiff is essentially asking this court to sit as an appellate court. The court declines

to do so. Its own docket is full and it need not take up its time with matters that involve non-

debtors, rely solely on state law claims which have already been determined, and have no relation

to or impact on the bankruptcy estate and at best, have no merit. The court instead needs to focus

on matters properly brought before it. The eleventh abstention factor is satisfied.

The twelfth factor, the likelihood that the commencement of the proceeding in bankruptcy

court involves forum shopping by one of the parties, favors abstention. The history of the litigation

surrounding the Property demonstrates a significant degree of forum shopping. First, on February

23, 2022, U.S. Bank Trust, National Association—a Defendant in this case—initiated a foreclosure

action in state court. U.S. Bank Trust Nat’l v. Rothman, No. F-1484-22 (N.J. Super. Ct. Ch. Div.

Feb. 23, 2022); Main Case, Doc. No. 17 at 5. The state court entered summary judgment in favor

of U.S. Bank, and denied reconsideration. Doc. No. 6-1; Doc. No. 6-2. In the state court foreclosure

action, the Plaintiff’s father claimed that U.S. Bank violated the New Jersey Settlement Act by

failing to properly file and record the Notice of Settlement. The court directly rejected this

argument, finding it “meritless”. Doc. No. 6-2 at 15 (emphasis added). After losing in state court,

the Plaintiff’s father attempted to remove the action to federal court. Main Case, Doc. No. 17 at

50. Then, the Plaintiff’s father filed a lawsuit in the district court, challenging the legal standing

of U.S. Bank, challenging the validity of the note, and accusing Friedman Vartolo of misconduct.

Rothman v. Cabana Series IV Tr., No. 1:23-CV-03183, 2023 WL 4866359, at *2 (D.N.J. July 31,

2023); see also Main case, Doc. No. 17 at 5. The district court dismissed the complaint with

prejudice. Now, after losing in state court and before the district court, the Plaintiff files this

Adversary Proceeding and repeats the same arguments that have been unsuccessful elsewhere.

Notably, she raises the exact same argument regarding the Notice of Settlement which the state

court already found to be meritless. Given the history of litigation surrounding this Property, the

similarities between the arguments which were raised in different courts, and the lack of any

legitimate question of bankruptcy law presented by the Plaintiff’s adversary complaint, it is clear

that the Plaintiff, and her family, have engaged in forum shopping. The twelfth abstention factor

is satisfied and that, together with ALL of the foregoing, shows without question that abstention

is warranted.

CONCLUSION

Based upon the foregoing, the Motion is granted in its entirety. The adversary proceeding

is dismissed without leave to amend, and in the unlikelihood that the court is incorrect in this

regard, the court permissively abstains from hearing the matter. The Plaintiff and the Defendants

can continue to pursue their rights and remedies in the pending state court and/or district court

matters.

An appropriate judgment has been entered consistent with this decision.

The court reserves the right to revise its findings of fact and conclusions of law.

/s/ Andrew B. Altenburg, Jr.

United States Bankruptcy Judge

Dated: February 20, 2024