In essence, the [complaint] alleges that the entire mortgage industry is engaged in a massive racketeering scheme designed to mislead mortgagors, the public, and various government entities in order to illegally foreclose on homes.
The crux of Plaintiffs’ allegations is that (1) Defendants used the [Mortgage Electronic Registration System (“MERS”)] system to conceal transfers of Plaintiffs’ mortgages among various companies, which transfers did not comply with state law; (2) as a result, the chains of title to the mortgages were broken; and (3) when Plaintiffs’ homes were ultimately foreclosed upon, the entities that initiated those foreclosure proceedings (a) used false and misleading documents and affidavits to do so, and (b) did not hold valid title to the mortgages in question, thus rendering those foreclosures invalid.
Judge Seibel found that the claims were an improper collateral attack on the state court judgments in the underlying foreclosure actions, and were therefore barred under the Rooker-Feldman doctrine:
Any finding in Plaintiffs’ favor on their RICO claims here necessarily entails a finding that the foreclosure judgments in question were wrongfully granted and are void. Whether those foreclosure judgments are susceptible to collateral attack based on Defendants’ alleged fraud involve questions of res judicata and collateral estoppel which I need not reach; Rooker-Feldman asks only whether such attacks may be brought in federal court rather than the state court in which the judgments complained of were rendered. In this case, Rooker-Feldman divests this Court of subject matter jurisdiction to entertain the allegations in the Complaint.
She also found that there were insufficient allegations of a RICO “enterprise”:
Nothing in the Complaint indicates that these Defendants, who are all competitors in the mortgage industry, are in fact working together towards a common goal of any kind. The Complaint merely alleges the roles each entity played in the legitimate mortgage industry, which is most accurately described as parallel activity among competitors — not coordinated activity to jointly achieve a common fraudulent purpose. The allegation that each of the Defendants uses the MERS system to further its own business goals is insufficient to plausibly support the existence of a RICO enterprise; inside traders all use the stock market to further their unlawful goals, but that alone does not plausibly lead to the conclusion that they are all working together as part of a single enterprise in furtherance of a larger fraudulent scheme.