Ditech Holding Corporation

UNITED STATES BANKRUPTCY COURT NOT FOR PUBLICATION

SOUTHERN DISTRICT OF NEW YORK

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In re: :

Case No. 19-10412 (JLG)

:

Chapter 11

Ditech Holding Corporation, et al., :

:

(Jointly Administered)

Debtors.1 :

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MEMORANDUM DECISION AND ORDER SUSTAINING THE FORTY-THIRD

OMNIBUS OBJECTION (NO BASIS CONSUMER CREDITOR CLAIMS) WITH

RESPECT TO CLAIMS OF SONYA DAVIS

A P P E A R A N C E S :

JENNER & BLOCK LLP

Attorneys for the Consumer Claims Representative

919 Third Avenue

New York, NY 10022

By: Richard Levin, Esq.

Ms. Sonya Davis

Appearing Pro Se

926 W. 174th Street

Hazel Crest, IL 60429

1 The confirmation of the Debtors’ Third Amended Plan (as defined below) created the Wind Down Estates. The

Wind Down Estates, along with the last four digits of their federal tax identification number, as applicable, are

Ditech Holding Corporation (0486); DF Insurance Agency LLC (6918); Ditech Financial LLC (5868); Green Tree

Credit LLC (5864); Green Tree Credit Solutions LLC (1565); Green Tree Insurance Agency of Nevada, Inc. (7331);

Green Tree Investment Holdings III LLC (1008); Green Tree Servicing Corp. (3552); Marix Servicing LLC (6101);

Walter Management Holding Company LLC (9818); and Walter Reverse Acquisition LLC (8837). The Wind Down

Estates’ principal offices are located at 1100 Virginia Drive, Suite 100, Fort Washington, Pennsylvania 19034.

HON. JAMES L. GARRITY, JR.

U.S. BANKRUPTCY JUDGE

Introduction2

Sonya Davis (the “Claimant”) filed five Proofs of Claim (Claim Nos. 155, 874, 1028,

1207 and 2526) in these Chapter 11 Cases against Green Tree Financial Corporation a/k/a Ditech

Financial LLC (“Ditech”), and on behalf of a purported class of plaintiffs (the “Davis Claims”).

Four of the Claims (Claim Nos. 155, 874, 1028 and 1207) (the “Davis Unsecured Claims”) are

unsecured claims seeking damages in either “undetermined” amounts or in the sum of $700,000.

The fifth claim (Claim No. 2526) (the “Davis Administrative Expense Claim”) is styled as “First

Interim Application for Allowance of Compensation and Reimbursement of Expenses by Class

Members Representative,” in which the Claimant seeks payment of $3,550 for research and

travel expenses that she has incurred in preparing various filings in these Chapter 11 Cases.

In their Forty-Third Omnibus Claims Objection (the “Objection”),3 the Plan

Administrator and the Consumer Claims Representative (collectively, the “Estate

Representatives”) seek to disallow and expunge the Davis Claims. The Claimant is acting pro se

in this matter. She responded to the Objection (the “Response”)4 and the Estate Representatives

2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Third

Amended Plan.

3 See Forty-Third Omnibus Objection to Proofs of Claim (No Basis Consumer Creditor Claims) [ECF No. 1976].

References to “ECF No. __” are to documents filed in the electronic docket in these jointly administered cases under

Case No. 19-10412 (the “Chapter 11 Cases”).

4 See Creditor Davis, et. al,, v. Bank of America N.A., et al. c/o Sonya Davis Response to Forty-Third Omnibus

Claims Objection to Proof of Claim (No Basis Consumer Creditor Claims) and Demand Merits Hearing [ECF No.

2408].

submitted a joint reply to the Response (the “Reply”),5 together with a Request for Judicial

Notice (the “Request”) in support of the Reply.6

The Estate Representatives contend that the Court should disallow and expunge the Davis

Claims because they fail to state claims for relief against Ditech. In accordance with the Court’s

Claims Procedures Order,7 the Court conducted a Sufficiency Hearing on the Davis Claims. The

legal standard of review at a Sufficiency Hearing is equivalent to the standard applied to a

motion to dismiss for failure to state a claim upon which relief may be granted under Rule

12(b)(6) of the Federal Rules of Civil Procedure (“Rule 12(b)(6)”).8 See Claims Procedures

Order ¶ 3(iv)(a).

As explained below, the Davis Administrative Expense Claim fails to state a claim for

relief against Ditech because, as a matter of law, it does not qualify as an administrative expense

under section 503 of the Bankruptcy Code. As to the Davis Unsecured Claims, it is settled that

under Rule 12(b)(6), dismissal of a claim on res judicata grounds is appropriate when the

elements of res judicata are apparent on the face of the claim. It is also settled that pro se

claimants are subject to application of the principles of res judicata and claim preclusion. In the

Davis Unsecured Claims, the Claimant seeks relief from Ditech that is identical to the relief that

the Claimant and her co-plaintiffs (collectively, the “Illinois Plaintiffs”) unsuccessfully sought

5 See Joint Reply of Consumer Representative and Plan Administrator in Support of the Forty-Third Omnibus

Objection to Proof of Claim (No Basis Consumer Creditor Claims) with Respect to Claims of Sonya Davis (Claim

Nos. 155, 874, 1028, 1207, 2526) [ECF No. 3318].

6 See Request for Judicial Notice in Support of the Joint Reply of the Consumer Representative and Plan

Administrator in Support of the Forty-Third Omnibus Objection to Proofs of Claim (No Basis Consumer Creditor

Claims) with Respect to Claims of Sonya Davis (155, 874, 1028, 1207, 2526) [ECF No. 3320].

7 See Order Approving (I) Claim Objection Procedures and (II) Claim Hearing Procedures. [ECF No. 1632].

8 Rule 12(b)(6) is incorporated herein by Rule 7012 of the Federal Rules of Bankruptcy Procedure (the

“Bankruptcy Rules”).

against Ditech, and others, (the “Illinois Defendants”) in two pre-petition lawsuits brought

against the defendants in the United States District Court for the Northern District of Illinois. The

Illinois District Court dismissed both lawsuits, the second with prejudice. The Illinois Plaintiffs

did not appeal dismissal of the first action. However, they appealed the dismissal of the second

action, and the Seventh Circuit Court of Appeals affirmed the Illinois District Court’s judgment.

The Illinois Plaintiffs filed a petition for a writ of certiorari to the United States Supreme Court,

which was denied. The order dismissing the second action is final. As explained below, the

Davis Unsecured Claims essentially restate the claims/matters at issue in the Illinois District

Court litigation. Accordingly, construing the Davis Unsecured Claims in the light most favorable

to the pro se Claimant, and drawing all inferences in her favor, it is plain from the face of the

Davis Unsecured Claims that application of the doctrine of res judicata bars the Claimant from

recovery on those claims.

Accordingly, for those reasons, and as discussed below, the Court sustains the Objection

and disallows and expunges the Davis Claims.

Jurisdiction

The Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157 and 1334

and the Amended Standing Order of Referral of Cases to Bankruptcy Judges of the United States

District Court for the Southern District of New York, dated January 31, 2012 (Preska, C.J.). This

is a core proceeding pursuant to 28 U.S.C. § 157(b).

Background9

On June 8, 2016, the Illinois Plaintiffs commenced an action in the Illinois District Court

against eighteen mortgage loan originators and loan servicers, including Ditech.10 In the Third

Amended Complaint filed therein, Plaintiffs asserted six different causes of action under various

legal theories and statutes: the Stored Communications Act (“SCA”); the Gramm-Leach-Bliley

Act; the Fair Credit Reporting Act; the Declaratory Judgment Act (“DJA”); the Real Estate

Settlement Procedures Act (“RESPA”); and for unjust enrichment.11 In support of those claims,

the Illinois Plaintiffs alleged that Ditech and the other Illinois Defendants improperly

disseminated their private and confidential information, which they allegedly obtained while

servicing the plaintiffs’ mortgages.12 The Illinois Plaintiffs, including the Claimant, abandoned

9 As discussed below, in applying Rule 12(b)(6) to the Davis Claims, the Court tests the legal sufficiency of the

Claims. Accordingly, in resolving the Objection, the Court assumes the truth of the well plead facts in support of the

Davis Claims. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see also Roth v. Jennings, 489 F.3d 499, 509 (2d Cir.

2007) (“In any event, a ruling on a motion for dismissal pursuant to Rule 12(b)(6) is not an occasion for the court to

make findings of fact.”). In support of the Davis Claims and the Objection, both the Claimant and Estate

Representatives rely on documents of record in the Illinois District Court litigation including Claimant’s appeals.

The Estate Representatives request the Court to take judicial notice of certain of those documents. See Request at 1-

3. It is well settled that in resolving a Rule 12(b)(6) motion, the court “may take notice of proceedings in other

courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at

issue.” St. Louis Baptist Temple, Inc. v. FDIC, 605 F.2d 1169, 1172 (10th Cir.1979); Kasey v. Molybdenum Corp. of

America, 336 F.2d 560, 563 (9th Cir. 1964) (where parties had history of litigation in state court, court took “judicial

notice of . . . officially reported decisions and refers to them for a better understanding of the complicated factual

situation here existing.”); Wingate v. Gives, 05 Civ. 1872 (LAK), 2016 WL 519634, at *1 (S.D.N.Y. Feb. 5, 2016)

(court took judicial notice of facts in reported state court decisions); Church of Scientology Int’l v. Time Warner,

Inc., 806 F.Supp. 1157, 1159 n.2 (S.D.N.Y.1992) (court took judicial notice of reported decisions dealing with

Scientology organizations). See also Glob. Network Commc’ns, Inc. v. City of New York, 458 F.3d 150, 156 (2d Cir.

2006) (stating that on a motion to dismiss for failure to state a claim a court may consider materials extrinsic to the

pleadings, if the materials are integral to the complaint or matters subject to judicial notice). The matters at issue in

the Davis Unsecured Claims mirror those at issue and finally resolved against the Claimant in the Illinois District

Court litigation. The documents cited by the Claimant and Estate Representatives directly bear on the matters at

issue in the Objection. Thus, subject to the standards applicable to Rule 12(b)(6) motions, the Court takes judicial

notice of the documents that the Claimant and Estate Representatives rely on in support of their respective positions

in this matter. As necessary, the Court cites those documents herein.

10 See Glover, et al. v. Bank of Am. Corp., et al., Case No. 1:16-cv-05993 (N.D. Ill. June 8, 2016) (“Davis I”).

11 See Davis I, Docket No. 189, Third Amended Complaint (the “Third Amended Complaint”).

12 See id., Docket No. 213, Order at 2 (“Davis I Dismissal Order”).

the claims under SCA, RESPA, and DJA. On September 25, 2017, the Illinois District Court

granted the defendants’ motion to dismiss the remaining claims in the Third Amended Complaint

on the grounds that the Illinois Plaintiffs failed to state claims upon which relief could be

granted.13 The Illinois District Court entered a judgment in favor of defendants. No party

appealed the Davis I Dismissal Order, although the Claimant filed a motion for reconsideration

which the Illinois District Court denied after a hearing.14 Thereafter, the case was closed.

On October 25, 2017, the Claimant and most of the other Illinois Plaintiffs in Davis I

sued most of Illinois Defendants (including Ditech) in the Illinois District Court in Davis II.15 On

November 20, 2017, Ditech was served with the Davis II complaint.16 On December 5, 2017,

before the time could expire for Ditech to file an answer as set forth in the Federal Rules of Civil

Procedure, the Illinois District Court conducted a status conference in Davis II. At that

conference, the Claimant conceded that the relief sought in the Davis II complaint was similar to

the relief sought by the Illinois Plaintiffs in the Davis I complaint, and that Davis II was based on

the original facts in Davis I.17 After hearing from the parties and admonishing the plaintiffs for

“filing the same thing over and over again,”18 the Illinois District Court sua sponte dismissed the

Davis II complaint, with prejudice.19

13 Id. at 4-6.

14 Davis I, Docket No. 219, Minute Entry.

15 See Davis, et al. v. Bank of Am. Corp., et al., Case No. 1:17-cv-07714 (N.D. Ill. Oct. 25, 2017) (“Davis II”).

16 See id., Docket No. 73, Return of Service.

17 See id., Docket No. 83, Transcript of Proceeding from Hearing held December 5, 2017, at 7:23-8:4 (“Davis II

Tr.”).

18 Id. at 12:11-12.

19 Id. at 28:2-12; see also Davis II, Docket No. 69, Judgment.

On December 27, 2017, Claimant, acting pro se filed a Notice of Appeal on behalf of

herself and the Illinois Plaintiffs party to Davis II.20 On June 25, 2018, the Seventh Circuit Court

of Appeals dismissed the case holding that Claimant, a non-lawyer, could not litigate on behalf

of the Illinois Plaintiffs in federal court.21 As to Claimant’s own appeal, the circuit court found

that the “appellate submissions do not contain any coherent argument for our review.”22 On July

17, 2018, the circuit denied the Claimant’s motion for rehearing on Davis III.23 On August 8,

2018, Claimant and eighteen of her co-plaintiffs again appealed the Davis III dismissal.24 On

March 5, 2019, the Seventh Circuit dismissed the appeal as untimely.25 On March 14, 2019, the

Seventh Circuit denied a subsequent motion for rehearing.26 On June 10, 2019, the Claimant and

others filed a petition for writ of certiorari at the United States Supreme Court.27 On November

18, 2019, certiorari was denied.28 On January 13, 2020, a subsequent motion for rehearing on the

denial was also denied.29

20 See Davis v. Bank of America Corp., et al., No 17-3656 (7th Cir. 2017) (“Davis III”).

21 Davis v. Bank of Am. Corp., 727 F. App’x 880, 881 (7th Cir. 2018).

22 See id. at 881.

23 Davis v. Bank of Am. Corp., No. 17-3656, 2018 U.S. App. LEXIS 19798, at *2 (7th Cir. July 17, 2018).

24 Steven Davis v. Bank of Am. Corp., et al., Case No. 18-2702, Docket No. 1 (7th Cir. Aug. 8, 2018) (“Davis IV”).

25 See id. at Docket No. 35.

26 Id. at Docket No. 39.

27 See Steven E. Davis, et al., Petitioners v. Bank of America Corporation, et al., Case No. 19-332 (“Davis V”).

28 Id.

29 Id.

Debtors Bankruptcy Cases

On February 11, 2019, Ditech Holding Corporation (f/k/a Walter Investment

Management Corp.) and certain of its affiliates (“Debtors”) filed petitions for relief under

Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in this Court. The

Debtors remained in possession of their business and assets as debtors and debtors in possession

pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On February 22, 2019, the Court

entered an order fixing April 1, 2019 at 5:00 p.m. (prevailing Eastern Time) as the deadline for

each person or entity, not including governmental units (as defined in section 101(27) of the

Bankruptcy Code) to file a proof of claim in the Chapter 11 Cases (the “General Bar Date”).30

Thereafter, the Court extended the General Bar Date for consumer borrowers, twice, and

ultimately to June 3, 2019 at 5:00 p.m. (prevailing Eastern Time).31

On September 26, 2019, the Debtors confirmed their Third Amended Plan,32 and on

September 30, 2019, that plan became effective.33 The Plan Administrator is a fiduciary

appointed under the Third Amended Plan who is charged with the duty of winding down,

dissolving and liquidating the Wind Down Estates.34 The Consumer Claims Representative is a

fiduciary appointed under the Third Amended Plan who is responsible for the reconciliation and

30 See Order Establishing Deadline for Filing Proofs of Claim and Approving the Form and Manner of Notice

Thereof [ECF No. 90].

31 See Order Further Extending General Bar Date for Filing Proofs of Claim for Consumer Borrowers Nunc Pro

Tunc [ECF No. 496].

32 See Third Amended Joint Chapter 11 Plan of Ditech Holding Corporation and its Affiliated Debtors [ECF No.

1326] (the “Third Amended Plan”); Order Confirming Third Amended Joint Chapter 11 Plan of Ditech Holding

Corporation and its Affiliated Debtors [ECF No. 1404].

33 Notice of (I) Entry of Order Confirming Third Amended Joint Chapter 11 Plan of Ditech Holding Corporation

and its Affiliated Debtors, (II) Occurrence of Effective Date, and (III) Final Deadline for Filing Administrative

Expense Claims [ECF No. 1449].

34 See Third Amended Plan, Art. I, ¶¶ 1.130, 1.184, 1.186.

resolution of Consumer Creditor Claims and distribution of funds to holders of Allowed

Consumer Creditor Claims in accordance with the Third Amended Plan.35

Pursuant to the Confirmation Order, the Court set the deadline for asserting

Administrative Expense Claims to thirty-five (35) days from the date of service of the

Confirmation Order. Under the Third Amended Plan, the Plan Administrator, on behalf of each

of the Wind Down Estates, is authorized to object to all Administrative Expense Claims, Priority

Tax Claims, Priority Non-Tax Claims, and Intercompany Claims; and the Consumer Claims

Representative has the exclusive authority to object to all Consumer Creditor Claims. See Third

Amended Plan, Art. VII, § 7.1.

The Proofs of Claims

The Claimant timely filed the Davis Claims. In short, the substance of those claims is as

follows:

Claims Nos. 155 and 874 are general unsecured claims filed on March 11, 2019

and April 8, 2019, respectively, by Claimant as the “representative” of the Illinois

Plaintiffs. Both claims state the basis of the claim as “civil matter” and neither

claim quantifies the amount of the claim. Claim No. 155 attaches a motion for

summary judgment filed by the Claimant in the Seventh Circuit related to the

Davis IV set of appeals. Claim No. 874 did not attach any supporting

documentation.

Claims Nos. 1028 and 1207 are general unsecured claims filed on April 17, 2019

and April 23, 2019, respectively, by Claimant as the “representative” of the

Illinois Plaintiffs. Both claims state that the basis of the claim as “civil matter”

and both claims quantify the amount of the claim at $700,000. The Claimant did

not attach supporting documentation to either claim.

Claim No. 2526 is an administrative expense claim filed on October 21,

2019, by Claimant as the “pro se representative” for the class. This claim, in the

amount of $3,550, seeks reimbursement for “traveling and preparation expenses”

related to the above four proofs of claim. This amount consists of $1,800 as

compensation for 72 hours of researching and preparing motions, as well as

$1,750 in traveling expenses (including airfare, hotels, taxi fares, and meals)

apparently related to the proofs of claim.

35 Id., Art. I, ¶ 1.41.

Claims Procedures Order

On November 19, 2019, the Court entered the Claims Procedures Order. Under that

order, the Estate Representatives are authorized to file Omnibus Objections seeking reduction,

reclassification, or disallowance of Claims on the grounds set forth in Bankruptcy Rule 3007(d)

and additional grounds set forth in the Claims Procedures Order. See Claims Procedures Order ¶

2(i)(a)-(h). A properly filed and served response to an Objection gives rise to a “Contested

Claim” that will be resolved at a Claim Hearing. Id. ¶ 3(iv). The Estate Representatives have the

option of scheduling the Claim Hearing as either a “Merits Hearing” or a “Sufficiency Hearing.”

Id. ¶ 3(iv)(a),(b). A “Merits Hearing” is an evidentiary hearing on the merits of a Contested

Claim. A “Sufficiency Hearing” is a non-evidentiary hearing to address whether the Contested

Claim states a claim for relief against the Debtors. The legal standard of review that will be

applied by the Court at a Sufficiency Hearing is equivalent to the standard applied by the Court

upon a motion to dismiss for failure to state a claim upon which relief can be granted. Id. ¶

3(iv)(a).

The Objection

In the Objection, the Estate Representatives challenge the sufficiency of the Davis Claims

and contend that they fail to state claims for relief, and, accordingly, by application of Rule

12(b)(6), the Court must disallow and expunge those claims. They assert that the Davis

Administrative Expense Claim fails to state a claim for relief against Ditech because, as a matter

of law, it does not qualify as an administrative expense under section 503 of the Bankruptcy

Code. The Estate Representatives contend that the Court must disallow and expunge the Davis

Unsecured Claims because they are barred by application of the doctrine of res judicata because

on the face of those claims, it is clear that they are merely a rehash of the claims dismissed with

prejudice by the Illinois District Court in Davis I and Davis II, and finally disallowed by the

Seventh Circuit Court of Appeals in Davis III and Davis IV and the Supreme Court in Davis V.

In her Response, the Claimant does not address the Estate Representative’s objection to

the Davis Administrative Expense Claim. She contends that the Davis Unsecured Claims are

valid and that Ditech defaulted under the Federal Rules of Civil Procedure when it failed to

respond to the complaint filed in Davis II and instead commenced its bankruptcy case. See

Response at 2. She also asserts that she was directed by the Court to file the Davis Claims and

having done so, the Estate Representatives now seek to deprive her and her constituents of their

due process merely because they are pro se parties. Id. at 3. Finally, she states that the Davis

Unsecured Claims constitute prima facie evidence of the validity and amount of the claim and

asserts that she has provided sufficient evidence to support the Davis Unsecured Claims. Id. at 3.

The Court considers those matters below.

Applicable Legal Standards

Under section 502(a) of the Bankruptcy Code, “a claim ... proof of which is filed under

section 501 of this title, is deemed allowed, unless a party in interest ... objects.” 11 U.S.C. §

502(a). The filing of a proof of claim constitutes “prima facie evidence of the validity and

amount of a claim.” Fed. R. Bank. P. 3001(f). If an objection refuting at least one of the claim’s

essential allegations is asserted, the claimant has the burden to demonstrate the validity of the

claim. See, e.g., Rozier v. Rescap Borrower Claims Tr. (In re Residential Capital, LLC), 15 Civ.

3248(KPF), 2016 WL 796860, at *9 (S.D.N.Y. Feb. 22, 2016); Hasson v. Motors Liquidation

Co. (In re Motors Liquidation Co.), No. 09-50026, 2012 WL 1886755, at *3 (S.D.N.Y. May 12,

2012); In re Oneida Ltd., 400 B.R. 384, 389 (Bankr. S.D.N.Y. 2009), aff’d sub nom. Peter J.

Solomon Co., L.P. v. Oneida, Ltd., No. 09-cv-2229, 2010 WL 234827 (S.D.N.Y. Jan. 22, 2010).

Section 502(b) sets forth the grounds for disallowing a properly filed proof of claim. See 11

U.S.C. § 502(b); see also Travelers Cas. and Sur. Co. of Am. v. Pacific Gas and Elec. Co., 549

U.S. 443, 449 (2007) (“But even where a party in interest objects [to a claim], the court ‘shall

allow’ the claim ‘except to the extent that’ the claim implicates any of the nine exceptions

enumerated in § 502(b)”).

In filing the Objection to the Davis Claims, the Estate Representatives initiated a

contested matter. See Fed. R. Bankr. P. 3007 advisory committee’s note (“[t]he contested matter

initiated by an objection to a claim is governed by Rule 9014.”). See also In re Tender Loving

Care Health Servs., Inc., 562 F.3d 158, 162 (2d Cir. 2009) (stating that “when a debtor files an

objection to a claim, the objection has initiated a contested matter.”) Bankruptcy Rule 9014

governs contested matters. The rule does not explicitly provide for the application of Rule

7012.36 However, Bankruptcy Rule 9014 provides that a bankruptcy court “may at any stage in a

particular matter direct that one or more of the other Rules in Part VII shall apply.” Fed. R.

Bankr. P. 9014. The Court did so here. Under the Claims Procedures Order, the legal standard of

review the Court applies at a Sufficiency Hearing is equivalent to the standard applied by the

Court under Rule 12(b)(6) on a motion to dismiss for failure to state a claim upon which relief

could be granted. See Claims Procedure Order ¶ 3(iv)(a). See also In re 20/20 Sport, Inc., 200

B.R. 972, 978 (Bankr. S.D.N.Y. 1996) (“In bankruptcy cases, courts have traditionally

analogized a creditor’s claim to a civil complaint [and] a trustee’s objection to an answer. . . ”).

In applying Rule 12(b)(6) to the Davis Claims, the Court assesses the sufficiency of the

facts alleged in support of the claims in light of the pleading requirements under Rule 8(a) of the

36 As noted, Bankruptcy Rule 7012 incorporates Rule 12.

Federal Rules of Civil Procedure.37 Rule 8(a)(2) states that a claim for relief must contain “a

short and plain statement of the claim showing that the pleader is entitled to relief[.]” Fed. R.

Civ. P. 8(a)(2). To meet that standard, the Davis Claims “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) (“Iqbal”) (citations omitted); accord Bell Atlantic Corp. v. Twombly, 550 U.S.

544, 570 (2007) (“Twombly”). “A claim has facial plausibility when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Iqbal, 556 U.S. at 678; accord Twombly, 550 U.S. at 570. To satisfy Rule

12(b)(6), the “pleadings must create the possibility of a right to relief that is more than

speculative.” Spool v. World Child Int’l Adoption Agency, 520 F.3d 178, 183 (2d Cir. 2008)

(citation omitted). In considering whether that standard is met for a particular claim, the court

must assume the truth of all material facts alleged in support of the claim and draw all reasonable

inferences in the claimant’s favor. See ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98

(2d Cir. 2007). However, the court “need not accord ‘legal conclusions, deductions or opinions

that are couched as factual allegations . . . a presumption of truthfulness.’” Hunt v. Enzo

Biochem, Inc., 530 F.Supp.2d 580, 591 (S.D.N.Y. 2008) (quoting In re NYSE Specialists Sec.

Litig., 503 F.3d 89, 95 (2d Cir. 2007)). In short, “[i]n ruling on a motion pursuant to Fed. R. Civ.

P. 12(b)(6), the duty of a court is merely to assess the legal feasibility of the complaint, not to

assay the weight of the evidence which might be offered in support thereof.” DiFolco v. MSNBC

Cable L.L.C., 622 F.3d 104, 113 (2d Cir. 2010) (citation and internal quotation marks omitted).

Where, as here, the Claimant is proceeding pro se, the Court will liberally construe the Davis

Claims, although those claims must nonetheless be supported by specific and detailed factual

37 Rule 8 is incorporated herein pursuant to Bankruptcy Rule 7008.

allegations that provide a fair understanding for the basis of the claim and the legal grounds for

recovery against a debtor. Kimber v. GMAC Mortgage, LLC (In re Residential Capital, LLC),

489 B.R. 489, 494 (Bankr. S.D.N.Y. 2013) (citing Iwachiw v. New York City Bd. of Elections,

126 Fed. Appx. 27, 29 (2d Cir. 2005)).

Res judicata and claim preclusion bar the “relitigation ... of claims that were, or could

have been, brought in an earlier litigation between the same parties or their privies.” Bank of N.Y.

v. First Millennium, Inc., 607 F.3d 905, 919 (2d Cir.2010). The doctrine of res judicata is

applicable to motions under Rule 12(b)(6). “Dismissal under Rule 12(b)(6) on res

judicata grounds is appropriate when the elements of res judicata are apparent on the face of the

pleadings.” Murry v. Gen. Servs. Admin., 553 Fed. Appx. 362, 364 (5th Cir.2014) (citation

omitted). See also Freeman v. Sikorsky Aircraft Corp., 151 Fed. App’x 91, 92 (2d Cir. 2005)

(noting that the affirmative defense of res judicata may be raised in a Rule 12(b)(6) motion

“when all of the relevant facts are shown by the court’s own records.” (quoting Day v.

Moscow, 955 F.2d 807, 811 (2d Cir.1992)).

Discussion

The Davis Unsecured Claims

In the Davis I and Davis II complaints, the Claimant and Illinois Plaintiffs asserted that

Ditech and the Illinois Defendants violated various federal statutes when they disseminated their

customers’ private information that they obtained in their capacity as servicers of their loans.38

The Illinois District Court rejected those contentions. In dismissing the Davis I Third Amended

Complaint, pursuant to Rule 12(b)(6), it found that the complaint contained “page after page of

38 See Third Amended Complaint at ¶¶ 1-3; see also Davis II, Docket No. 1, Complaint at ¶1; Reply ¶¶ 1, 4, 5.

generalized recriminations, but no allegations tethered to any Plaintiff [or] Defendant.”39 In sua

sponte dismissing the Davis II complaint, with prejudice, pursuant to Rule 12(b)(6), the court

admonished the plaintiffs for “filing the same thing over and over again,”40 after the Claimant

conceded that the relief she sought in the Davis II complaint, was similar to the relief sought by

the Illinois Plaintiffs in the Davis I complaint, and that Davis II was based on the original facts in

Davis I.41 The Seventh Circuit Court of Appeals affirmed the district court’s dismissal of all

claims against Ditech under Rule 12(b)(6) in Davis II, finding the claims insufficient as a matter

of law.42 The Supreme Court denied Claimant’s petition for a writ of certiorari in Davis V.43

Federal law determines the preclusive effect of a federal judgment. Marvel Characters,

Inc. v. Simon, 310 F.3d 280, 286 (2d Cir. 2002); PRC Harris, Inc. v. Boeing Co., 700 F.2d 894,

896 n.1 (2d Cir. 1983). Res judicata “bars later litigation if an earlier decision was (1) a final

judgment on the merits, (2) by a court of competent jurisdiction, (3) in a case involving the same

parties or their privies, and (4) involving the same cause of action.” EDP Med. Computer Sys.,

Inc. v. United States, 480 F.3d 621, 624 (2d Cir.2007) (quoting In re Teltronics Servs., Inc., 762

F.2d 185, 190 (2d Cir.1985)). The Court considers whether the doctrine of res judicata is

applicable to this case.

Although the Court construes the Davis Unsecured Claims liberally, the pro se Claimant

is not exempt from the rules of res judicata. See Birl v. Estelle, 660 F.2d 592, 593 (5th

Cir.1981) (“The right of self-representation does not exempt a party from compliance with

39 See Davis I Dismissal Order at 2.

40 See Davis II Tr. at 12:11-12.

41 Id. at 7:23-8:4.

42 See Davis v. Bank of Am. Corp., et al., 727 F. App’x 880, 881 (7th Cir. 2018); Davis IV, Docket No. 35.

43 See Davis V, Docket at 1.

relevant rules of procedural and substantive law. One who proceeds pro se with full knowledge

and understanding of the risks involved acquires no greater rights than a litigant represented by a

lawyer, unless a liberal construction of properly filed pleadings be considered an enhanced

right.”) (internal citations omitted). See Traguth v. Zuck, 710 F.2d 90, 95 (2d Cir. 1983)

(“Petitioner [appearing pro se] is not, however, excused ‘from compliance with relevant rules of

procedural and substantive law.’”).

Dismissal of an action under Rule 12(b)(6) is a judgment on the merits. See Berrios v.

N.Y.C. Hous. Auth., 564 F.3d 130, 134 (2d Cir. 2009) (“As the sufficiency of a complaint to state

a claim on which relief may be granted is a question of law, the dismissal for failure to state a

claim is a final judgment on the merits and thus has res judicata effects.”). The first element of

res judicata is satisfied because the Illinois District Court dismissed the Third Amended

Complaint in Davis I, pursuant to Rule 12(b)(6), and sua sponte dismissed the complaint in

Davis II, (which was virtually identical to the Third Amended Complaint) with prejudice,

pursuant to Rule 12(b)(6). In Davis III and Davis IV, the Seventh Circuit upheld the dismissal in

Davis II, and in Davis V, the Supreme Court denied review of Davis IV.

The second element of res judicata is also satisfied because the Illinois District Court had

subject matter jurisdiction to adjudicate the claims in Davis I and Davis II, see 11 U.S.C. § 1331

(federal question) and 28 U.S.C. § 1367 (supplemental jurisdiction over state law claims), and

the Seventh Circuit Court of Appeals had jurisdiction to adjudicate the appeal of Davis II. See

28 U.S.C. § 1291.

Finally, the third and fourth elements of res judicata are satisfied because Ditech is a

named defendant in Davis I and Davis II, and the claims at issue in Davis I and Davis II are

identical to one another, and identical to the claims that the Claimant asserts in support of the

Davis Unsecured Claims. In the Davis Unsecured Claims, the Claimant asserts “civil litigation”

as the basis of her claims and annexes papers that she filed in Davis IV in support of her appeal

from Davis II. Moreover, in her Response, the Claimant cites to the Illinois District Court

actions, as the basis for the Davis Unsecured Claims. Response at 2. Accordingly, the

requirements of res judicata are satisfied herein.

Even if the Davis Unsecured Claims could be construed as asserting claims that are

different from the claims at issue in Davis I and Davis II, application of the doctrine of res

judicata nonetheless would bar the Claimant from asserting those claims herein. That is because

the Davis Unsecured Claims arise out of the facts underlying Davis I and Davis II, and the

doctrine of res judicata bars the Claimant from asserting new claims based on those facts. See

Bank of New York v. First Millennium, Inc., 607 F.3d 905, 918 (2d Cir. 2010) (“Otherwise

known as res judicata, claim preclusion bars a subsequent action—involving either the same

plaintiffs or parties in privity with those plaintiffs— from asserting claims that were, or could

have been, raised in a prior action that resulted in an adjudication on the merits.”); Acosta-Pelle

v. New Century Fin. Servs. Inc., No. 09 CIV. 2631(SAS), 2009 WL 4927634, at *2 (S.D.N.Y.

Dec. 17, 2009) (“When a claim has been fully litigated, the doctrine of claim preclusion

generally bars the future litigation both of that claim and of any closely related claims.”).

The Davis Administrative Expense Claim

The Bankruptcy Code accords priority to “administrative expenses” including “the actual,

necessary costs and expenses of preserving the estate, including . . . wages, salaries and

commissions for services rendered after the commencement of the case.” 11 U.S.C. §§

503(b)(1)(A). “[A]n expense is administrative only if it arises out of a transaction between the

creditor and the bankrupt’s trustee or debtor in possession, . . . and only to the extent that the

consideration supporting the claimant’s right to payment was both supplied to and beneficial to

the debtor-in-possession in the operation of the business.” Trustees of Amalgamated Ins. Fund v.

McFarlin’s, Inc., 789 F.2d 98, 101 (2d Cir. 1986) (citations and quotations omitted). See also In

re Hostess Brand, Inc., 499 B.R. 406, 411-12 (S.D.N.Y. 2013). The Claimant has the burden to

demonstrate her right to administrative priority. See, e.g., In re Bethlehem Steel Corp., 479 F.3d

167, 172 (2d Cir. 2007) (“The burden of proving entitlement to priority payment as an

administrative expense . . . rests with the party requesting it.” (citing Woburn Assocs. V. Kahn (In

re Hemingway Transp., Inc.), 954 F.2d 1, 5 (1st Cir. 1992)); In re Drexel Burnham Lambert Grp.

Inc., 134 B.R. 482, 489 (Bankr. S.D.N.Y. 1991) (“The burden of establishing entitlement to

priority rests with the claimant and should only be granted under extraordinary circumstances . . .

when the parties seeking priority have sustained their burden of demonstrating that their services

are actual and necessary to preserve the estate.”)

Claimant contends that she incurred expenses totaling $3,550 in preparing various filings

in connection with these Chapter 11 Cases, including $1,750 in expenses to travel to appear at

hearings. See Davis Administrative Expense Claim at 1. The Claimant’s Administrative Expense

Claim is simply not an allowable administrative expense claim under sections 503 and 507 of the

Bankruptcy Code. The asserted administrative expenses were clearly not costs incurred to

preserve the Debtors’ estates but rather they were costs expended by Claimant (individually) to

participate in these Chapter 11 Cases. Claimant has not demonstrated any grounds for according

this claim administrative priority status so the Court expunges this claim. See In re Ditech

Holding Corp., No. 19-10412 (JLG), 2020 WL 3635547, at *9 (Bankr. S.D.N.Y. July 3, 2020)

(disallowing the administrative expense claim on the basis that it is not for costs incurred to

preserve the Debtors’ estates but rather costs expended by the Claimants to participate in these

Chapter 11 Cases); In re Grubb & Ellis Co., 478 B.R. 622, 625 (Bankr. S.D.N.Y. 2012) (denying

administrative expense claims of real estate agents for commissions received by debtor realtor

post-petition for sales that agents procured prepetition); In re Sound Radio, Inc., 145 B.R. 193

(Bankr. D.N.J. 1992) (finding that the Chapter 11 debtor’s shareholders conferred no “significant

and demonstrable benefit” upon estate and creditors due to their participation in bankruptcy

proceeding and the “shareholders’ participation was for their own ‘aggrandizement.’”); Matter of

D’Lites of Am., Inc., 108 B.R. 352 (Bankr. N.D. Ga. 1989) (finding that the expenses incurred by

creditor’s employees, for laundry bills, express mail, phone bills, meals, drinks, and petty cash,

were not “actual and necessary” expenses of preserving estate and the actual, necessary expenses

incurred by creditor in making substantial contribution to estate.).

Conclusion

Based on the foregoing, the Court sustains the Objection and disallows and expunges the

Davis Claims.

IT IS SO ORDERED.

Dated: New York, New York

May 12, 2021

/s/ James L. Garrity, Jr.

Hon. James L. Garrity, Jr.

U.S. Bankruptcy Judge