Mashrique v. JPMorgan Chase Bank, N.A.

Background

Najia Mashrique, proceeding without an attorney, challenged foreclosure proceedings involving a 2007 home loan secured by a deed of trust. She alleged that she made her last mortgage payment in July 2019. JPMorgan Chase Bank, N.A. serviced the loan until it transferred servicing to Select Portfolio Services in October 2019.

Mashrique previously sued Chase and SPS in California state court in 2020. She voluntarily dismissed that earlier action with prejudice. She later filed this federal action, asserting claims including breach of contract, breach of the duty of good faith and fair dealing, negligence, fraudulent and negligent misrepresentation, fraudulent concealment, declaratory relief, and violation of California Business and Professions Code section 17200 et seq. She also alleged additional facts concerning payment increases, a purported homeowner-assistance or home-retention program, and later consequences such as negative credit reporting and a lost career opportunity.

The court granted defendants’ requests for judicial notice of the earlier complaint and the dismissal. It denied requests to take judicial notice of or incorporate a settlement agreement and a forensic audit report.

Claim Preclusion

Claim preclusion is a rule that generally prevents a party from relitigating a claim that was or could have been litigated in an earlier proceeding. Applying California law, the court held that the claims seeking relief for harms arising from Mashrique’s 2019 default on the 2007 loan involved the same underlying injury and alleged wrong as the earlier case. The court explained that using different legal theories, requesting different remedies, or adding facts does not avoid claim preclusion when the claims concern the same harm.

The court also held that Mashrique’s voluntary dismissal of the earlier action with prejudice operated as a final judgment on the merits and that the parties were the same in both actions. Accordingly, defendants met their burden to show that claims seeking damages for harms arising from the 2019 default were barred by claim preclusion.

The court did not find that claim preclusion barred allegations concerning later, separate agreements or arrangements, including the alleged homeowner-assistance or home-retention program. The court stated, however, that those allegations still failed to state a claim.

Failure to State a Claim

A motion under Federal Rule of Civil Procedure 12(b)(6) tests whether a complaint contains enough factual allegations to support a reasonable inference that the defendant is liable. The court concluded that Mashrique had not alleged facts showing that Chase could be liable for conduct involving a later program or plan because Chase stopped servicing the loan in October 2019 and the complaint did not allege Chase’s involvement afterward.

As to SPS, the court concluded that Mashrique did not identify the alleged misrepresentations underlying a negligent-misrepresentation claim. The court also stated that fraud-based claims must identify the essential details of the alleged misconduct, including who made the statements, what was said, when and where it occurred, and how it was misleading. The court therefore concluded that the claims not barred by claim preclusion were insufficiently pleaded.

Disposition

The court granted defendants’ separate motions to dismiss. It also granted Mashrique leave to amend because the court could not say that amendment would be futile. Mashrique was permitted to file a third amended complaint by June 12, 2023. The order stated that failure to amend by that date may result in dismissal with prejudice.