Patterson v. NewRez LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF WEST VIRGINIA

WILLIAM PATTERSON and

ERICA PARENTI,

Plaintiffs,

v. CIVIL ACTION NO. 1:21CV126

(Judge Keeley)

NEWREZ LLC f/k/a NEW PENN

FINANCIAL, LLC d/b/a SHELLPOINT

MORTGAGE SERVICING; US BANK

TRUST NATOINAL ASSOCIATE AS OWNER

TRUSTEE FOR VRMA ASSET TRUST; and

KAY DAVID

Defendants.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

Seeking to avoid foreclosure of their home, the plaintiffs,

William Patterson (“Patterson”) and Erica Parenti (“Parenti”)

(collectively, “the Plaintiffs”), sued the defendants, NewRez LLC

f/k/a New Penn Financial LLC d/b/a Shellpoint Mortgage Servicing

(“Shellpoint”), US Bank Trust National Association as Owner

Trustee for VRMTG Asset Trust (“US Bank Trust”), and Kay David

(“David”) for predatory lending and abusive loan servicing

practices regarding their mortgage (Dkt. No. 5 at 5). They filed

suit in the Circuit Court of Monongalia County, West Virginia on

August 17, 2021. Id. at 1. On the following day, when the

foreclosure sale was scheduled to occur, the state court granted

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

the Plaintiffs’ emergency motion for a preliminary injunction. Id.

at 32-34.

On September 17, 2021, Shellpoint and US Bank Trust (“the

corporate defendants”) removed the case to this Court based on

diversity of citizenship between themselves and the Plaintiffs

(Dkt. No. 1 at 3-8). Pursuant to Federal Rule of Civil Procedure

12(b)(6), they jointly moved to dismiss the Plaintiffs’ complaint

(Dkt. No. 6). On October 8, 2021, pursuant to 28 U.S.C, § 1447,

the Plaintiffs moved to remand the case to state court (Dkt. No.

9).

The issues in dispute have been fully briefed, and the Court

has heard oral argument on the pending motions. After careful

consideration, for the reasons that follow the Court DENIES the

Plaintiffs’ motion to remand (Dkt. No. 9), DISMISSES David as a

defendant, and GRANTS-IN-PART and DENIES-IN-PART the corporate

defendants’ motion to dismiss (Dkt. No. 6).

I. Factual Allegations

As it must, the Court construes the following facts in the

light most favorable to the Plaintiffs. See De'Lonta v. Johnson,

708 F.3d 520, 524 (4th Cir. 2013). In 2005, the Plaintiffs received

a plot of land from Erica Parenti’s family on which they planned

to build a home (Dkt. No. 5 at 5-6). They obtained a $100,000 loan

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

with a 30-year term and 5.75% interest rate from First United Bank.

Id. at 6. Shortly thereafter, the Parenti family placed a second

deed of trust and a $35,000 lien on the Plaintiffs’ land. Id. at

7. Later, in December 2005, using a $65,000 loan with a 6.89%

interest rate from BB&T, Patterson financed the purchase of an

adjoining property. Id.

In 2007, in an effort to lower their monthly expenses, the

Plaintiffs responded to an advertisement by Advanced Financial

Services, Inc. (“AFS”) and decided to consolidate and refinance

their First United and BB&T loans. Id. On June 26, 2007, the

defendant David, a notary, came to the Plaintiffs’ home to close

that loan. Id. at 8. She instructed them where to sign the loan

documents but “did not provide a meaningful opportunity for [them]

to understand the transaction.” Id.

The Plaintiffs’ newly consolidated loan was in the amount of

$185,000, with an interest rate of 6.875% and a 30-year term. Id.

It also included a “settlement charge” of $9,432.02 and a “cash

out” of $8,108.63, which were unanticipated charges that increased

the amount of money the Plaintiffs owed. Id. at 7. Following

consolidation, the First United lien was paid and released, and

the BB&T lien was paid, but not released. Id. The Parenti family

lien, however, was neither paid nor released. Id.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

Almost nine (9) years later, on February 10, 2016, the

Plaintiffs modified their consolidated loan to extend its term for

an additional forty (40) years, and also to add Parenti as a

borrower. Id. A month later, Patterson lost his job and,

eventually, the Plaintiffs were unable to make their monthly loan

payments. Id. Their loan had been in arrears for six (6) months

when Shellpoint began servicing it on June 16, 2017. Id.

In order to bring the loan current, Shellpoint instructed

Parenti to apply for a loan modification, which she did. Id. at 9.

And although the Plaintiffs repeatedly submitted certain documents

in support of their loan modification, Shellpoint ultimately

denied their application for lack of documentation on April 2,

2018. Id.

After that denial, the Plaintiffs reapplied for a loan

modification, but Shellpoint again denied their application for

lack of documentation in December 2018. Id. Finally, on February

27, 2019, Shellpoint denied the Plaintiffs’ third application

based on their failure to meet the requirements for assistance.

Id. at 10. The Plaintiffs contend that none of these denials

contained the disclosures required by law. Id.

Although the Plaintiffs continued to request assistance in an

effort to bring their loan current, Shellpoint refused to speak

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

with Parenti and failed to respond to the Plaintiffs’

correspondence. Id. Shellpoint also refused the Plaintiffs’ offers

to make lump sum payments on the loan while applications to modify

their loan payments were pending, nor would it inform the

Plaintiffs of the total amount they were in arrears. Id. at 11.

On September 30, 2019, the corporate defendants sought

judgment in state court directing release of the three prior deeds

of trust on the Plaintiffs’ property resulting from the First

United loan, the BB&T loan, and the Parenti family loan. Id. at

12. Although they named both the Plaintiffs and the Parenti family

as defendants, they only notified the Parenti family of the suit.

Id. The Plaintiffs nevertheless learned of the action and contacted

the corporate defendants, who advised that they need not respond

to the petition. Id.

The Parenti family deed of trust had been filed after the

First United deed of trust, but before the AFS deed of trust. Id.

at 12-13. Although no proceeds from the Plaintiffs’ consolidated

loan had ever gone toward satisfying the outstanding Parenti family

loan, the corporate defendants nevertheless represented to the

state court that the First United loan, the BB&T loan, and the

Parenti family loan each had been paid in full. Id. Eventually, on

February 11, 2021, the state court granted default judgment against

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

the Plaintiffs and the Parenti family and released all three deeds

of trust. Id.

Following the state court’s action, on May 26, 2021, pursuant

to the federal Real Estate Settlement Procedures Act and the West

Virginia Consumer Credit Protection Act, the Plaintiffs sent a

request for information, notice of error, and notice of opportunity

to cure to Shellpoint. Id. at 13. Shellpoint partially responded

to this request and attempted to charge the Plaintiffs a processing

fee to avoid foreclosure. Id. Ultimately, however, after

Shellpoint refused to enter into a repayment plan with them, the

Plaintiffs filed suit in order to avoid foreclosure. Id.

The complaint asserts that although US Bank Trust claims to

have been assigned the loan and Shellpoint claims to be the

servicer of the loan neither can establish the proper chain of

title authorizing them to foreclose on the loan. Id. at 8. It

alleges twelve causes of action against the defendants, including

illegal mortgage, unauthorized practice of law, unconscionability,

fraud, action to quiet title, joint venture and agency,

misrepresentations, unconscionable conduct, refusal to apply

payments, fraud, tortious interference with contract, and breach

of contract.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

II. Plaintiffs’ Motion to Remand

Following removal by the corporate defendants, the Plaintiffs

moved to remand the case to state court on the basis that (1) the

corporate defendants failed to obtain David’s consent to removal,

and (2) the Plaintiffs and David, all of whom are West Virginia

residents, are not diverse (Dkt. No. 9). The corporate defendants

oppose remand, asserting that the Plaintiffs fraudulently joined

David as a defendant (Dkt. No. 13 at 3).

A. Rule of Unanimity

Pursuant to 28 U.S.C. § 1446(b), a defendant must file its

notice of removal within 30 days following receipt of the initial

pleading or summons, and “all defendants who have been properly

joined and served must join in or consent to the removal of the

action.” Here, as the Plaintiffs contend, the corporate defendants

did not satisfy this so-called rule of unanimity (Dkt. No. 9-1 at

4-5). Although each defendant accepted service on August 19, 2021

(Dkt. No. 5 at 2), the corporate defendants did not obtain David’s

consent prior to filing their notice of removal on September 17,

2021 (Dkt. Nos. 1 at 9-10; 13 at 3). Typically, this omission would

require remand, but the corporate defendants contend they are

exempt from this requirement because the Plaintiffs fraudulently

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

joined David as a defendant when they filed suit (Dkt. No. 1 at 9-

10; 13 at 3).

B. Fraudulent Joinder

It is axiomatic that when an action is removed from state

court the receiving federal district court must determine whether

it has original jurisdiction over the plaintiff’s claims. Kokkonen

v. Guardian Life Ins. Co. Of Am., 511 U.S. 375, 377 (1994)

(“Federal courts are courts of limited jurisdiction” and possess

“only that power authorized by Constitution and statute.”). If

removal is based on diversity of citizenship under 28 U.S.C. §

1332, the removing party bears the burden of establishing that

“the amount in controversy exceeds the sum or value of $75,000,

exclusive of interests and costs, and is between citizens of

different states.” 28 U.S.C. § 1332. Courts should resolve any

doubt “about the propriety of removal in favor of retained state

court jurisdiction.” Marshall v. Manville Sales Corp., 6 F.3d 229,

232-33 (4th Cir. 1993).

The Plaintiffs concede that the amount in controversy

requirement has been satisfied because they owe more than $75,000

towards the consolidated loan (Dkt. No. 1 at 4). They also agree

that diversity exists between them and the corporate defendants;

they are citizens of West Virginia, Shellpoint is a citizen of

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

Delaware and New York,1 and US Bank Trust is a citizen of Delaware2

(Dkt. Nos. 5 at 6; 1 at 5-6). But they argue that the Court lacks

jurisdiction to hear the case because defendant David is a citizen

of West Virginia (Dkt. No. 9-1 at 5-6). The corporate defendants

contend that the Court should disregard David’s citizenship,

claiming she has been fraudulently joined (Dkt. No. 1 at 6-9).

The doctrine of fraudulent joinder is a narrow exception to

the requirement of complete diversity. Jackson v. Allstate Ins.

Co., 132 F. Supp. 2d 432, 433 (N.D.W. Va. 2000). When applicable,

it allows the Court to disregard the citizenship of, and dismiss,

a non-diverse defendant. Mayes v. Rapoport, 198 F.3d 457, 461 (4th

Cir. 1999)). Thus, if the doctrine applies the Court may retain

jurisdiction even though a non-diverse party has been named a

defendant. Jackson, 132 F. Supp. 2d at 433.

The removing party bears the “heavy burden of showing that

there is no possibility of establishing a cause of action against

[a] non-diverse party” by clear and convincing evidence. Jackson,

132 F. Supp. 2d at 433 (citing Hartley v. CSX Transp. Inc., 187

F.3d 422, 424 (4th Cir. 1999)). Alternatively, the removing party

1 Shellpoint is a Delaware limited liability company whose members

include Delaware limited liability companies and a Delaware corporation

with a principal place of business in New York (Dkt. No. 5 at 6).

2 US Bank Trust is a national association with its principal place of

business in Delaware (Dkt. No. 5 at 6).

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

can establish that “there has been outright fraud in the

plaintiff’s pleading of jurisdictional facts.” Pritt v. Republican

Nat. Committee, 1 F. Supp. 2d 590, 592 (S.D.W. Va. 1998).

The standard for fraudulent joinder is more favorable to a

plaintiff than the standard for dismissal on a Rule 12(b)(6)

motion. Mayes, 198 F.3d at 464. “Plaintiff need only have a slight

possibility of a right to relief against a non-diverse defendant

for jurisdiction to be improper in federal court. If a court

identifies a glimmer of hope for the plaintiff's claim, then the

jurisdictional inquiry ends.” Bledsoe v. Brooks Run Mining Co.,

LLC, 2011 WL 5360042, at *1 (S.D.W. Va. Nov. 4, 2011) (citation

omitted). The Court must resolve all issues of fact and law in the

plaintiff’s favor, but in doing so “is not bound by the allegations

of the pleadings.” Marshall, 6 F.3d at 232-33; AIDS Counseling and

Testing Ctrs. v. Grp. W Television, Inc., 903 F.3d 1000, 1004 (4th

Cir. 1990). Instead, it can consider “the entire record, and

determine the basis of joinder by any means available.” Id. at

1004 (internal citation omitted).

Because the corporate defendants have not alleged outright

fraud in the Plaintiffs’ pleading, they must show by clear and

convincing evidence that there is no possibility that the

Plaintiffs can establish a cause of action against David.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

C. No Possibility of Relief Against David

David is named as a defendant in Counts One through Six of

the complaint, which state claims for illegal mortgage,

unauthorized practice of law, unconscionability, fraud, action to

quiet title, and joint venture and agency (Dkt. No. 5 at 10-14).

The corporate defendants contend that only Count 2, alleging the

unauthorized practice of law, is properly asserted against David

(Dkt. No. 1 at 5-9) and they challenge this claim, first on the

basis that it is time-barred, and second that, as pleaded, David’s

actions do not constitute the practice of law under governing West

Virginia law (Dkt. No. 13 at 4-7). The Court will address each of

these arguments in turn.

i. Timeliness

Countering the corporate defendants’ argument that their

unauthorized practice of law claim against David is time-barred

(Dkt. No. 13 at 6-7), the Plaintiffs contend that the Court should

not consider the timeliness of their claim because it is an

affirmative defense that has been waived by David, or alternatively

find that their claim is timely under the doctrine of laches. They

argue that the corporate defendants cannot challenge their

unlawful practice of law claim as untimely because only David, the

party affected by the claim, may raise this affirmative defense

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

and she has waived the right to do so (Dkt. No. 9-1 at 7). In

support, they rely on dicta from a West Virginia case, Kinsinger

v. Pethel, 766 S.E.2d 410 (W. Va. 2014).

In Kinsinger, after the respondent transferred assets out of

a marital Thrift Savings Plan (“TSP”), the petitioner, his former

wife, sought to hold him in contempt of a Qualified Domestic

Relations Order (“QRDO”) entered by the family court. Id. at 412.

The family court declined to hold the respondent in contempt

because the petitioner had not timely filed the QDRO.3 Id. The

circuit court affirmed this ruling as a proper application of the

doctrine of laches. Id. at 413. The petitioner appealed this

decision to the Supreme Court of Appeals of West Virginia, which

reversed the lower courts’ decisions, finding an erroneous

application of the doctrine of laches where neither court had made

the requisite determinations of harm or prejudice to the

respondent. Id. at 413, 415.

In a footnote, the Supreme Court observed in passing that the

order of the family court had not discussed the doctrine of laches

3 Specifically, the parties had agreed in a final order of divorce that

the petitioner would receive half of the funds in a TSP if she prepared

a QRDO. Id. at 412. Three years later, the respondent withdrew all funds

from the marital TSP and opened a new TSP. Id. Three years after that,

and six years after the entry of the divorce order, the petitioner

finally filed a QRDO seeking her portion of the TSP funds. Id.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

because the respondent had never asserted it as a defense. Id. at

n.3. And the same footnote stated that “the doctrine of laches is

moot unless the affected party raises it as a defense,” id. at

n.3, citing State, Dep't of Health & Hum. Res., Child Advoc. Off.

on Behalf of Robert Michael B. v. Robert Morris N., 466 S.E.2d

827, 834 (W. Va. 1995) (holding that, because a petitioner had not

pleaded or proven the defense of laches before a family law master,

he could not raise the defense for the first time on appeal).

The Plaintiffs suggest that both Kinsinger and Michael B. bar

the corporate defendants from raising the defense of laches where

David failed to do so. But neither Kinsinger nor Michael B.

addresses whether a defendant may assert the doctrine of laches on

another party’s behalf where it stands to benefit from the defense.

And neither contains a syllabus point requiring that a particular

defendant must assert the defense. Rather, these cases instruct

(1) that a court may not to raise the doctrine of laches sua

sponte, and (2) that a defendant cannot raise the defense of laches

for the first time on appeal.

Neither scenario exists here. The Court has not raised the

doctrine sua sponte. Moreover, the corporate defendants stand to

benefit from application of the doctrine given that whether Count

2 has been timely asserted is determinative of their fraudulent

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

joinder argument. Therefore, the defense of laches is timely and

may properly be asserted by the corporate defendants in this case.

Other federal courts in West Virginia have reached the same

conclusion in similar circumstances. See, for example, May v.

Nationstar Mortg., LLC, No. 3:12-CV-43, 2012 WL 3028467, at *1

(N.D.W. Va. July 25, 2012), where, in order to establish

fraudulently joinder, the defendant mortgage company argued that

the plaintiff’s unauthorized practice of law claim against the

individual defendant was time-barred.

During oral argument in this case, the Plaintiffs attempted

to distinguish May, asserting that, unlike the individual

defendant there, David has appeared and filed an answer in this

case. Although the parties dispute whether David actually has

appeared in this case,4 the Court need not resolve the question

since the individual defendant in May had appeared by counsel,

consented to removal of the case to federal court, and moved to

dismiss the plaintiffs’ claims. See May, No. 3:12-CV-43, Dkt. Nos.

16, 17, 28.

4 Upon being served with the summons and complaint in this case, David

responded to several of the Plaintiffs’ allegations via letter to the

Plaintiffs’ counsel. Counsel in turn mailed David’s letter to the Circuit

Clerk of Monongalia County “in the event that the Court wishe[d] to

consider it as an Answer in this litigation” (Dkt. No. 5 at 2, 44, 45).

Thereafter, the Clerk filed this letter as “Answer of M. Kay David (pro

se).” Id.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

The Court turns next to the timeliness of the Plaintiffs’

unauthorized practice of law claim, under either the applicable

statute of limitations or the doctrine of laches. “A claim seeking

damages for the unauthorized practice of law is governed by a two-

year statute of limitations.” Heavener v. Quicken Loans, Inc., No.

3:12-CV-68, 2013 WL 2444596, at *5 (N.D.W. Va. June 5, 2013)

(citing W. Va. Code § 51-2-12)). Here, as the corporate defendants

assert, the Plaintiffs’ claim is time-barred where their loan

closing occurred in 2007 but they failed to bring their claim until

2021.

Laches applies to claims seeking equitable relief. See Syl.

Pt. 2, Condry v. Pope, 166 S.E.2d 167, 167 (W. Va. 1969); Dunn v.

Rockwell, 689 S.E.2d 255, 266 (W. Va. 2009). For laches to bar a

claim, a defendant must prove that it has been prejudiced by the

plaintiff’s lack of diligence in bringing the action. See White v.

Daniel, 909 F.2d 99, 102 (4th Cir. 1990).

Count 2 of the Plaintiffs’ complaint seeks an injunction

against David to prevent her from committing further acts

constituting the unauthorized practice of law (Dkt. No. 5 at 13).

As the claim has been pleaded in equity, under West Virginia law

the doctrine of laches applies. Dunn, 689 S.E.2d at 255.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

Courts in this District have recognized that, because “equity

follows the law,” they may presume that a defendant would be

prejudiced by a plaintiff's failure to bring an equitable claim

within the statute of limitations applicable to an analogous action

at law. May, 2012 WL 3028467, at *7 (citing Consolidation Coal Co.

v. Consolidation Coal Co., Inc., 228 F. Supp. 2d 764, 768–69

(N.D.W. Va. 2001)). This rule has been applied to presume prejudice

in circumstances similar to those in this case. See, e.g., May,

2012 WL 3028467, at *1 (“Because May failed to file the instant

action until almost eight years after the closing, this Court

presumes that Chambers would be prejudiced by allowing May to seek

equitable relief on a claim for the unauthorized practice of

law.”); Heavener v. Quicken Loans, Inc., No. 3:12-CV-68, 2013 WL

2444596, at *5 (N.D.W. Va. June 5, 2013) (“Plaintiff waited almost

five years after he executed the loan documents at issue before

filing this action. This Court presumes that Defendant Quicken

Loans would be prejudiced by allowing Plaintiff to seek equitable

relief on a claim for the unauthorized practice of law.”); Litten

v. Quicken Loans, Inc., No. 1:13CV192, 2013 WL 6001256, at *6

(N.D.W. Va. Nov. 12, 2013) (presuming that the defendant would be

prejudiced by allowing the plaintiffs to seek equitable relief for

fraud nearly six years after they received a copy of all signed

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

loan documents and four years after the analogous statute of

limitations would have expired).

Here, the passage of time is lengthy. It has been more than

fourteen (14) years since David’s unauthorized practice of law

allegedly occurred. Moreover, David has had no connection to the

Plaintiffs or their consolidated loan since 2007. Thus, applying

a presumption that she would be prejudiced if the Plaintiffs were

permitted to pursue equitable relief on such a stale claim is

reasonable. Based on this presumption, the court concludes that

the Plaintiffs’ claim against David for the unauthorized practice

of law is time-barred under the doctrine of laches.5

5 The Plaintiffs argue, for the first time in their reply brief, that

the Court should reject the corporate defendants’ timeliness challenge

to Count 2 based on the common defense rule. (Dkt. No. 15 at 6). Because

“[t]he ordinary rule in federal courts is that an argument raised for

the first time in a reply brief or memorandum will not be considered,”

Clawson v. FedEx Ground Package Sys., Inc., 451 F. Supp. 2d 731, 734 (D.

Md. 2006), the Court is not required to address this argument. Even so,

it lacks merit.

The common defense rule provides that “removal of a state claim is

impermissible when the legal theory upon which the defendant's claim of

fraudulent joinder is predicated is a common defense that equally

disposes of all defendants to the suit.” McDowell Pharmacy, Inc. v. W.

Virginia CVS Pharmacy, L.L.C., No. 1:11-CV-0606, 2012 WL 2192167, at *5

(S.D.W. Va. June 14, 2012). Notably, the Fourth Circuit has not adopted

this rule. But the Fifth Circuit has explained the rule thusly:

[W]hen, on a motion to remand, a showing that compels a

holding that there is no reasonable basis for predicting that

state law would allow the plaintiff to recover against the

in-state defendant necessarily compels the same result for

the nonresident defendant, there is no improper joinder;

there is only a lawsuit lacking in merit. In such cases, it

makes little sense to single out the in-state defendants as

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

ii. No Possibility of Relief Under West Virginia Law

Even had the Plaintiffs timely filed their unauthorized

practice of law claim against David, it would not be viable under

governing West Virginia law. It is undisputed that David is a non-

attorney notary who conducted the closing of the consolidated loan

at the Plaintiffs’ home (Dkt. No. 5 at 6). Her only task was to

direct them where to sign the documents. Id. She answered no

questions. And, because she could not answer their questions, the

Plaintiffs now claim that they were deprived of a meaningful

opportunity to understand the transaction. Id. at 13. At bottom,

whether David’s alleged actions constitute the unauthorized

practice of law turns on which advisory opinion from the Unlawful

Practice of Law Committee (“UPLC”) of the West Virginia State Bar

governs this case.

In 2003, the UPLC issued Advisory Opinion 2003-01, addressing

“whether real estate closings conducted by lay persons constitute

“sham” defendants and call their joinder improper. In such

circumstances, the allegation of improper joinder is actually

an attack on the merits of plaintiff's case ...

Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568, 574 (5th Cir. 2004).

But the common defense rule does not bar the corporate defendants

from arguing that Count 2 against David is untimely under the doctrine

of laches. Such challenge is not an attack on the merits of the

Plaintiffs’ case against the corporate defendants and the Plaintiffs

have made clear that David is the only defendant against whom Count 2

has been asserted.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

the unauthorized practice of law” (Dkt. No. 9-4 at 3). It stated

that a lay person is deemed to be practicing law whenever she (1)

advises another in any matter involving the application of legal

principles to facts, purposes, or desires; (2) prepares legal

documents for another; or (3) represents the interest of another

before a judicial tribunal. Id. at 4. The UPLC also noted that a

variety of activities may occur at a real estate closing, including

“[a]ttending the closing and obtaining appropriate signatures on

documents” and “attending the closing and answering buyer and/or

seller questions about documents and/or the transaction.” Id. It

then concluded that “generally, real estate closings constitute

the practice of law,” and that lay persons conducting real estate

closings have engaged in the unauthorized practice of law. Id. at

5.

Notably, the advisory opinion recognized that some clerical

functions may occur during a closing, including “simple execution

of documents.” Id. at 4-5. It then concluded that “in general,

legal principles are applied to the factual situation to determine

if and how the transaction should be conducted[,]” because “it is

inherent at the closing itself that buyers and sellers will have

questions about the transaction and documents, which answers

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

necessarily go to their respective legal rights and obligations.

Such answers are advising on legal matters.” Id.

Later, in 2010, after receiving numerous complaints regarding

the practice of law by lay persons at real estate closings, the

UPLC issued Advisory Opinion 2010-002, clarifying that some

activities routinely performed in real estate settings by non-

lawyers constituted the practice of law. In doing so, it adopted

a Stipulation and Agreed Order in the case of McMahon v. Advanced

Title Services, No. 01–C–121 (Cir. Ct. Brooke Co., Mar. 31, 2010),

which incorporated and clarified the 2003 principles as follows:

It is the practice of law for a person to conduct a real

estate closing (including “witness-only” or “witness”

closings) for mortgage financing or real estate

transaction, to or for the general consumer public or

any third-party when part of his or her responsibilities

as closing agent consist of: (1) explaining,

interpreting, giving an opinion and/or advising another

on the meaning of terms of principles (legal or

otherwise) relevant to the mortgage transaction, or in

matters involving the application of legal principles to

particular facts, purposes, or desires; (2) instructing

clients in the manner in which to execute legal

documents; or (3) preparing the HUD-1 Settlement

Statement, and at times, other instruments related to

mortgage loans and transfers of real property . . . .

Id. at 15. Significantly, “the settlement agent may not present

important legal documents to the seller, buyer, borrower, and/or

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

lender at closing without legal questions being asked and without

giving legal advice.” Id. at 16.

The Plaintiffs rely on both the 2003 and 2010 advisory

opinions to argue that David’s alleged actions constitute the

practice of law (Dkt. No. 9-1 at 9-11). The corporate defendants,

however, contend that, under the 2003 advisory opinion, David

performed only clerical tasks (Dkt. No. 13 at 5-6). Because it

agrees with the corporate defendants that the 2010 advisory opinion

is not retroactive, May, 2012 WL 3028467, at *7, the Court must

assess David’s actions as the closing agent in 2007 under the

standard articulated in the 2003 advisory opinion.

Other courts in this district have considered this question.

In May v. Nationstar Morg., LLC, the plaintiff alleged that the

defendant was a notary who instructed them where to sign, notarized

the loan documents, but could not answer their questions about the

documents. 2012 WL 3028467 at *7. The court concluded that the

plaintiffs had no possible claim for the unauthorized practice of

law because these services were ministerial rather than legal. Id.

Likewise, in Shelton v. Wells Fargo Bank, the court concluded that

the defendant, who had served as the closing agent on the

plaintiff’s loan, had not engaged in the practice of law where the

plaintiff “set forth no evidence that she ever asked or that the

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

defendants ever provided any legal advice at the closing.” 2010 WL

10152301 (N.D.W. Va. 2010).

Here, the Plaintiffs allege that David, a “notary public who

engages in real estate closings,” “simply instructed [them] where

to sign the documents and did not provide a meaningful opportunity

for [them] to understand the transaction.” But under the 2003

advisory opinion such allegations do not constitute a claim against

David for the unauthorized practice of law because they allege

only that she completed ministerial tasks. There is no allegation

that she advised the Plaintiffs on the law or about their rights

and obligations under the loan. And even if such ministerial tasks

arguably constitute the practice of law under the 2010 advisory

opinion, they clearly do not do so under the 2003 advisory opinion.

The Plaintiffs therefore have no possibility of relief against

David for the unauthorized practice of law in connection with the

2007 loan closing at issue in this case.

iii. Other Counts Against David

The Plaintiffs nevertheless contend they have other viable

claims against David. These include illegal mortgage (Count 1),

unconscionability (Count 3), fraud (Count 4), action to quiet title

(Count 5), and joint venture and agency (Count 6) (Dkt. No. 9-1 at

n.1). The parties’ arguments in this regard focus on whether the

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

Plaintiffs have pleaded a viable claim against David for joint

venture and agency. The Plaintiffs argue that, “as a joint venturer

or agent in the origination of the loan,” David participated “in

a scheme to induce Plaintiffs into the illegal loan based on

fraudulent and illegal conduct.” Id. The corporate defendants

contend that, although not properly alleged in the complaint, the

Plaintiffs are attempting to “use this joint venture theory as a

way to back-door other claims against David in order to avoid

federal court jurisdiction” (Dkt. No. 13) (cleaned up). They

contend that, on close examination of the facts, it is impossible

to establish that an agency relationship existed between either of

them and David pointing to the obvious facts that David closed the

consolidated loan in 2007, Shellpoint did not begin servicing the

loan until 2017, and US Bank Trust was not assigned the loan until

2021 (Dkt. No. 13 at 7-8).

Federal Rule of Civil Procedure 12(b)(6) allows a defendant

to seek dismissal if a complaint does not state a claim upon which

relief can be granted. “[A] complaint must contain ‘enough facts

to state a claim to relief that is plausible on its face.’”

Anderson, 508 F.3d at 188 n.7 (quoting Twombly, 550 U.S. at 547).

To satisfy this standard, a complaint must contain “more than

labels and conclusions, and a formulaic recitation of the elements

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550

U.S. 544, 555 (2007).

A joint venture “is an association of two or more persons to

carry out a single business enterprise for profit, for which

purpose they combine their property, money, effects, skill[,] and

knowledge.” Armor v. Lantz, 535 S.E.2d 737, 742 (W. Va. 2000)

(quoting Price v. Halstead, 355 S.E.2d 380, 384 (W. Va. 1987)). To

be a member of a joint venture an individual must make some

contribution to the enterprise and assert some control over the

venture. Bennett v. Lending Sols. Inc., 2011 WL 4596973, at *3

(S.D.W. Va. Sept. 30, 2011) (citations omitted). Each member of a

joint venture is liable for unlawful acts of the other members if

committed within the scope of the venture and with the other

members’ implied consent. Short v. Wells Fargo Bank Minn., N.A.,

401 F. Supp. 2d 549, 563 (S.D.W. Va. 2005).

In their motion to remand, the Plaintiffs argue that

Defendant David had an agreement with the lender to

engage in the business enterprise of the closing the

loan at issue; that Defendant David shared in the profits

of this enterprise with the lender, that is, the fees

collected for closing the loan; that Defendant David

used her purported “skill” as the loan closer to carry

out the enterprise; and that the actions were done with

a joint purpose to further the enterprise of the loan

closing.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

(Dkt. No. 9-1 at n.1). But their complaint is devoid of any facts

to support a joint venture claim against David. From the bare

allegation that the defendants’ “single business enterprise” was

“the closing of the sale and financing of the home at issue in

this case,” the Plaintiffs conclusively assert that “the acts of

[David] were conducted as part of the principal-agency

relationship between the Defendants” (Dkt. No. 5 at 15-16). The

remaining allegations in the complaint merely recite the elements

of a joint venture claim.

The corporate defendants persuasively argue that there is no

evidence of any affiliation between David and either of them, or

that she acted as their agent at a loan closing a decade before

either was connected to the Plaintiffs’ loan. David may have been

an agent of AFS, the loan originator, but AFS is not a defendant

in this action. The Plaintiffs thus have failed to plausibly plead

a joint venture and agency claim against David.

There being no possibility of relief against David, the Court

concludes she has been fraudulently joined and that the corporate

defendants were not required to obtain her consent to remove this

case. It therefore DENIES the Plaintiffs’ motion to remand (Dkt.

No. 9), and will dismiss David as a defendant from this action,

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

disregard her West Virginia citizenship, and retain jurisdiction

over this case. Mayes, 198 F.3d at 461.

III. Corporate Defendants’ Motion to Dismiss

The Court turns next to consider the corporate defendants’

motion to dismiss. Shellpoint has moved to dismiss Counts 1 through

6, while US Bank Trust seeks to dismiss the entire complaint (Dkt.

No. 6). The Plaintiffs assert that the Court should deny the

corporate defendants’ motions under the law of the case doctrine

(Dkt. No. 10 at 2, 12-13).

A. Law of the Case Doctrine Inapplicable

When the state court granted the Plaintiffs’ emergency motion

seeking a preliminary injunction to prevent the sale of their

property, it adopted the following language proposed by the

Plaintiffs:

Plaintiffs have demonstrated a likelihood of success on

the merits on the claims set forth in their Complaint,

including their assertions that the foreclosure is

improper because there is not adequate chain of title,

the deed of trust is void due to fraud,

unconscionability, and/or illegality; and that the

continued delinquency leading to the foreclosure was

caused by Defendants’ actions.

(Dkt. No. 5 at 30). The Plaintiffs contend that this language

precludes the corporate defendants’ challenges to their complaint.

The Court disagrees.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

A preliminary injunction preserves the status quo between the

parties until a trial on the merits can be held. Ne. Nat. Energy

LLC v. Pachira Energy LLC, 844 S.E.2d 133, 141 (W. Va. 2020). Under

West Virginia law, when granting or refusing a request for an

injunction, state courts must consider the circumstances

surrounding the case, including “the nature of the controversy,

the object for which the injunction is being sought, and the

comparative hardship or convenience to the respective parties

involved in the award or denial of the writ.” Syl. Pt. 4, State ex

rel. Donley v. Barker [Baker], 164 S.E. 154 (W. Va. 1932). To

balance the hardship to the parties, courts also must consider

“(1) the likelihood of irreparable harm to the plaintiff without

the injunction; (2) the likelihood of harm to the defendant with

an injunction; (3) the plaintiff’s likelihood of success on the

merits; and (4) the public interest.” State ex rel. E. End Ass'n

v. McCoy, 481 S.E.2d 764, 778–79 (W. Va. 1996).

The law of the case doctrine recognizes that “when a court

decides upon a rule of law, that decision should continue to govern

the same issues in subsequent stages in the same case.” Arizona v.

California, 460 U.S. 605, 618 (1983). But because this doctrine

was “crafted with the course of ordinary litigation in mind,”

Arizona, 460 U.S. at 618–19, it does not bar courts from assessing

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

“past holdings based on a different procedural posture” or from

applying the proper standard of review at a subsequent stage of

the litigation. Graves v. Lioi, 930 F.3d 307, 341 (4th Cir. 2019).

Relevant to this case, courts have “refuse[d] to apply the law-

of-the-case-doctrine to a ruling at the preliminary injunction

stage unless the ruling was based on a pure issue of law.” Wells

Fargo Bank, Nat'l Ass'n v. Worldwide Shrimp Co., 2017 WL 7689635,

at *6 (N.D. Ill. Dec. 29, 2017) (collecting cases).

In this case, the law of the case doctrine does not prevent

the Court from ruling on the corporate defendants’ motion to

dismiss. In the first place, the state court’s decision to grant

the Plaintiffs’ request for a preliminary injunction occurred at

a time when the Plaintiffs were threatened with foreclosure of

their property. That decision thus was not a purely legal decision

to which the law of the case doctrine applies. Wells Fargo Bank,

2017 WL 7689635, at *6.

Moreover, the law of the case doctrine does not prevent the

Court from applying the proper legal standard when reviewing a

motion to dismiss, even though a preliminary injunction is in

place. Graves, 930 F.3d at 341. Here, the pending motions present

questions distinct from those addressed by the state court.

Although the state court weighed the Plaintiffs’ chance of success

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

on the merits of their claims as a factor in deciding whether to

grant a preliminary injunction, it further considered the exigent

circumstance of the impending sale of their property and the

increased risk of irreparable harm they faced. McCoy, 481 S.E.2d

at 778–79. In contrast, this Court must determine the viability of

the Plaintiffs’ claims under both substantive and procedural law

and address the corporate defendants’ challenges to the merits of

the complaint.

B. Timeliness of Counts 1, 3, 4, and 5

The corporate defendants challenge the timeliness of the

Plaintiffs’ claims for illegal mortgage (Count 1),

unconscionability (Count 3), fraud (Count 4), and to quiet title

(Count 5) (Dkt. No. 7 at 4-7). While they initially asserted that

these claims were barred by the relevant statutes of limitation,

they now agree with the Plaintiffs that, because each has been

styled as a contract defense seeking equitable relief, the doctrine

of laches applies (Dkt. Nos. 10 at 13; 14 at 4). As discussed

earlier, for the Plaintiffs’ claims to be barred by laches the

corporate defendants must establish (1) that the Plaintiffs lacked

diligence in bringing their claims, and (2) that they have

detrimentally changed their position based on this delay. See Dunn,

689 S.E.2d at 267.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

i. Delay

The corporate defendants assert unreasonable delay because it

has been fourteen (14) years since the Plaintiffs became aware or

should have become aware of the terms of their loan and any

defenses to that contract (Dkt. No. 14 at 4-5). The Plaintiffs

contend their delay was not unreasonable because they brought their

claims in response to the corporate defendants’ attempt to

foreclose on their home (Dkt. No. 10 at 16–18).

Although the Plaintiffs clearly have delayed in asserting

their rights, such delay is not so unreasonable as to bar their

claims. In West Virginia, foreclosures sales by trustees may occur

without judicial interference because such non-judicial

foreclosures are “more time efficient and economical.” Lucas v.

Fairbanks Cap. Corp., 618 S.E.2d 488, 490 (W. Va. 2d005). To halt

a non-judicial foreclosure sale, homeowners must file suit

requesting equitable relief. Chandler v. Greenlight Fin. Servs.,

No. 2:20-CV-00217, 2021 WL 1202078, at *10 (S.D.W. Va. Mar. 30,

2021) (citing Lucas, 618 S.E.2d at 490). Here, the Plaintiffs

attempted to halt the sale of their property by utilizing the only

means available to them under law – filing suit and asserting

equitable defenses to their mortgage contract.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

Moreover, even though the Plaintiffs have made various

attempts to avoid foreclosure by non-legal means, Shellpoint

allegedly thwarted their every effort. For example, at

Shellpoint’s instruction, the Plaintiffs submitted three loan

modification applications between July 2017 and February 2019

(Dkt. No. 5 at 8-10). They allege that Shellpoint denied their

first two applications for specious reasons, and when it finally

denied their third application in February 2019 stated only that

the Plaintiffs “[had] not [met] the requirements to qualify” for

a modification. Id. Moreover, while their loan modification

applications were pending, the Plaintiffs offered to make lump sum

payments to bring their loan current, but Shellpoint refused these

payments and would not inform them of the total amount due on their

loan. Id. at 11.

The Plaintiffs further allege that, in September 2019,

Shellpoint filed suit to clear the liens on the Plaintiffs’

property without properly obtaining service of process on them.

Id. at 12. After they learned about the lawsuit from the Parenti

family, the Plaintiffs contacted Shellpoint, who “falsely advised

[them] that they did not need to worry about or respond to the

lawsuit.” Id. Following this, Shellpoint misrepresented the status

of the Parenti family loan to the state court in order to obtain

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

a default judgment against the Plaintiffs. Id. at 12-13.

Thereafter, the Plaintiffs sent a request for information, notice

of error, and notice of opportunity to cure to Shellpoint, and

brought suit only after Shellpoint scheduled the sale of their

property. Id. at 13.

Although fourteen (14) years have passed since the closing of

the Plaintiffs’ loan, under the facts pleaded in their complaint

they have not unreasonably delayed asserting their breach of

contract defenses. As permitted under West Virginia law, they

brought an injunction action to halt foreclosure of their property

after long seeking to avoid foreclosure by non-litigation means.

ii. Prejudice

Nor can the corporate defendants establish the requisite

prejudice resulting from any delay by the Plaintiffs. The West

Virginia Supreme Court of Appeals “has consistently emphasized the

necessity of a showing that there has been a detrimental change of

position in order to prove laches.” Dunn, 689 S.E.2d at 267

(citations omitted). According to the Plaintiffs, the corporate

defendants not only have not been prejudiced by any delay but

rather have benefitted because they have continued to collect their

loan payments (Dkt. No. 10 at 16–18). The corporate defendants

counter that the law presumes prejudice because the analogous

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

statutes of limitation for the Plaintiffs’ claims have expired

(Dkt. No. 14 at 4-5).

Under the circumstances of this case, the Court declines to

apply the presumption of prejudice to these claims. In contrast to

defendant David, who had undertaken no action concerning the

consolidated loan since 2007, Shellpoint has actively serviced the

Plaintiffs’ loan since 2017, US Bank Trust has held the loan since

at least 2021, and both sought to foreclose on the loan.

Furthermore, the corporate defendants have not suffered a

detrimental change of position based on the Plaintiffs’ delay.

During oral argument, they could point only to the passage of time

as evidence of prejudice, but such delay alone does not bar

equitable relief under the doctrine of laches. See Syl. Pt. 1,

State ex rel. Smith v. Abbot, 418 S.E.2d 575, 576 (W. Va. 1992).

Therefore, because they have failed to clearly demonstrate any

detrimental change in their positions, the corporate defendants

cannot establish that the Plaintiffs claims in Counts 1, 3, 4, and

5 are barred by the doctrine of laches.

C. Count 2: Unauthorized Practice of Law

The corporate defendants next assert that Count 2 should be

dismissed against them because it relates only to David (Dkt. No.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

7 at 7). The Plaintiffs agree. In light of its earlier ruling

dismissing David, the Court will dismiss Count 2 in its entirety.

D. Count 6: Joint Venture and Agency

The corporate defendants also contend that the Plaintiffs

have failed to state any facts in support of the claims asserted

in Count 6 (Dkt. No. 7 at 7-8). The title of Count 6, “joint

venture and agency,” indicates the Plaintiffs’ intent to assert

these two independent theories of liability in a single count.

Compare Armor, 535 S.E.2d at 742 (defining “joint venture” under

West Virginia law), with General Elec. Credit Corp. v. Fields, 133

S.E.2d 780, 783 (W. Va. 1963) (setting forth the determinative

characteristics of a principal-agent relationship). Their

pleading, however, primarily addresses the existence of a joint

venture between Shellpoint and US Bank Trust and makes only passing

reference to the existence of an agency relationship between them.

See Dkt. No. 5 at 17-18. Based on this pleading, as well as the

parties’ briefing and oral argument, the Court construes Count 6

to assert only a claim for joint venture and will address the

corporate defendants’ arguments seeking dismissal of Plaintiffs’

agency claim in connection with its consideration of Counts 7, 8,

9, 10, and 12.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

Whether the Plaintiffs have plausibly pleaded the existence

of a joint venture between Shellpoint and US Bank Trust related to

the consolidated loan origination or closing in June 2007 depends

on whether their complaint contains any factual allegations beyond

the mere recitation that they formed a “single business enterprise”

to “clos[e] . . . the sale and financ[e] . . . the home at issue

in this case” (Dkt. No. 5 at 17). Because Shellpoint did not begin

servicing the loan until 2017, and the deed of trust was not

assigned to US Bank Trust until 2021, the corporate defendants

clearly could not have been involved in any joint venture in 2007.

The Plaintiffs assert that

[d]efendants US Bank and Shellpoint have one or more

agreements to engage in the business enterprise of

collecting on the subject account; said Defendants

shared in the profits of this enterprise; said

Defendants each used its purported skill and knowledge

to carry out the enterprise (that is, the ownership and

servicing of the loan); and that the actions were done

with a joint purpose to further then enterprise of

generating profits from collection on the subject

mortgage (and others contained in the same pool).

(Dkt. No. 10 at 20). But in a footnote to their briefing, they

concede that their “pleading could have been clearer on this

issue.” Id. at n.6. They further assert that “[d]iscovery will

demonstrate that Defendant US Bank expected Defendant Shellpoint

to follow its loan serving guidelines and other requirements set

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

forth in a servicing agreement, and in some circumstances,

delegated authority to it to engage in servicing practices to

maximize return on the investment in the loan pool.” Id. at 20.

Even so, the Plaintiffs’ complaint is devoid of sufficient facts

to support the existence of a joint venture between Shellpoint and

US Bank Trust in 2007.

E. Counts 7, 8, 9, 10, and 12 against US Bank Trust

In its motion to dismiss the remaining claims related to

illegal loan servicing, US Bank Trust argues that the Plaintiffs

have failed to allege that it engaged in any wrongdoing in this

regard (Dkt. No. 7 at 8-9). The Plaintiffs acknowledge they did

not plead that US Bank took any action constituting illegal loan

servicing, but they argue they have sufficiently pleaded an agency

relationship between US Bank Trust as the principal and Shellpoint

as its servicing agent, and that discovery will disclose a

servicing agreement between the corporate defendants granting

Shellpoint the authority to act for, and under the instruction of,

US Bank Trust (Dkt. No. 10 at 21-23). They also contend that,

because they have challenged US Bank’s authority to collect on the

loan for lack of chain of title, issues of fact exist that must be

developed in discovery. Id. at 22.

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

Under West Virginia law, a principal may be held liable for

the acts of its agent. Syl. Pt. 3, Jarvis v. Modern Woodmen of

Am., 406 S.E. 2d 736 (W. Va. 1991). Four general factors determine

whether a master-servant relationship exists under the doctrine of

respondeat superior: “(1) Selection and engagement of the servant;

(2) Payment of compensation; (3) Power of dismissal; and (4) Power

of control. Finally, “[p]roof of an express contract of agency is

not essential to the establishment of the relation. It may be

inferred from the facts and circumstances, including conduct.”

Fields, 133 S.E.2d at 783.

In their complaint, the Plaintiffs have alleged that the

corporate defendants were agents of and acted under the control of

each other, and that “Shellpoint claims to be the servicer” of the

Plaintiffs’ loan and that US Bank Trust “purports to be the holder”

of their loan. In Warden v. PHH Mortgage Corporation, a similar

allegation was found sufficient to plausibly plead an agency

relationship between a loan servicer and a mortgage holder. 2010

WL 3720128, at *4 (N.D.W. Va. Sept. 16, 2010). “In the instant

case, the plaintiffs allege that PHH serviced a loan held by Fannie

Mae, and did so as an agent. Accepting these allegations as true,

the Court finds that PHH could have plausibly acted as Fannie Mae's

agent. Whether Fannie Mae had some degree of control over the

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

conduct and activities of PHH is a question to be answered in

discovery. At this stage, however, the plaintiffs have

sufficiently pled the existence of agency.” Id.

As in Warden, the Plaintiffs here have plausibly pleaded an

agency relationship between US Bank Trust and Shellpoint based on

the nature of their relationship as loan holder and loan servicer,

respectively. Warden, at *4 (“By its very nature, a servicer acts

as the agent of a loan holder by collecting payments due under the

loan and providing other services upon the default of the

borrower.”).

IV. Conclusion

For the reasons discussed, the Court:

1. DISMISSES all claims against defendant David with

prejudice;

2. DENIES the Plaintiffs’ motion to remand;

3. DENIES the corporate defendants’ motion to dismiss

Counts 1, 3, 4, and 5;

4. GRANTS the corporate defendants’ motion to dismiss Count

2 with prejudice;

5. GRANTS the corporate defendants’ motion to dismiss Count

6 without prejudice; and

MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFFS’

MOTION TO REMAND [DKT. NO. 9], DISMISSING CLAIMS AGAINST

DEFENDANT DAVID, AND GRANTING-IN-PART AND DENYING-IN-PART

THE CORPORATE DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 6]

6. DENIES US Bank Trust’s motion to dismiss Counts 7, 8, 9,

10, and 12.

It is so ORDERED.

The Clerk SHALL transmit copies of this Order to counsel of

record by electronic means.

DATED: January 25, 2022

/s/ Irene M. Keeley

IRENE M. KEELEY

UNITED STATES DISTRICT JUDGE