Arau v. Rocket Mortgage, LLC

Background

Jose Arau, proceeding without a lawyer, sued Treasury Secretary Janet Yellen and other United States Treasury employees, Rocket Mortgage, LLC, Mortgage Electronic Registration Systems, Inc., Lakeview Servicing, and Frank La Salla. The complaint asserted claims for quiet title, an accounting, and a “restraint of trade” concerning the mortgage loan on Arau’s property in Berkeley, California.

The court found the complaint difficult to understand. As the court understood it, Arau alleged that he had discharged his mortgage debt by sending bonds to the Depository Trust and Clearing Corporation, which he believed was supposed to send funds to the United States Treasury for payment to the holder of the debt. The court understood Arau to be relying on his birth certificate and related documents as the basis for that alleged payment.

Legal standard

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. The court explained that a complaint must contain enough factual allegations to make liability plausible, rather than merely possible. It also stated that courts read complaints filed without a lawyer liberally, while not accepting unsupported legal conclusions or allegations contradicted by judicially noticeable facts.

Court’s analysis

The court characterized Arau’s legal theory as a version of a “redemption scam” theory—the belief that a person can redeem bonds from the government by filing forms or using an instrument connected to a birth certificate. Relying on cited authorities, the court described that theory as lacking a legal foundation.

Because the redemption theory underlay Arau’s claims, the court concluded that the complaint failed to state a claim for relief. The quiet-title claim failed because Arau did not allege facts showing that his mortgage debt had been discharged. The accounting claim failed because Arau did not allege facts showing that an amount was due to him that could be determined through an accounting.

The court also addressed the alleged restraint of trade under federal antitrust law. It stated that a Sherman Act claim requires allegations of an agreement or conspiracy among separate persons or entities, an intent to harm or restrain competition, and actual injury to competition. The court found that Arau provided no facts supporting a relationship among the defendants.

Disposition

The court granted the defendants’ motions to dismiss. It dismissed Arau’s redemption-theory-based claims without leave to amend because amendment would be futile. The court also denied Arau’s “Order to Show Cause Why Quiet Title Should Not Issue” for the reasons stated in the order.

The court allowed Arau to file an amended complaint by July 17, 2023, if he believed he could state claims based on a different, viable theory. The order stated that failing to file by that deadline would result in judgment being entered against him on the complaint, and it vacated the scheduled July 6, 2023 hearing.