Pamela Owen. Civil Rights. Motion to Dismiss for Failure to State a Claim by Defendants Fhfa and Freddie Mac. Document No. 40

7/24/2019 Pamela Owen. Civil Rights. Motion to Dismiss for Failure to State a Claim by Defendants Fhfa and Freddie Mac. D

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FEDERAL HOUSING FINANCE AGENCYS AND FEDERALHOME LOAN MORTGAGE CORPORATIONS JOINTMOTION TO DISMISS PLAINTIFFS COMPLAINT- 1Case No. 3:15-cv-05375-BHS

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422 W. Riverside Avenue, Suite 1100 Phone: 509.624.5265

Spokane, Washington 99201-0300 Fax: 509.458.2728

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The Honorable Benjamin H. Settle

UNITED STATES DISTRICT COURTWESTERN DISTRICT OF WASHINGTON

AT TACOMA

PAMELA S. OWEN,

Plaintiff,vs.

FEDERAL HOUSING FINANCE AGENCY;FEDERAL HOME LOAN MORTGAGECORPORATION; MTC FINANCIAL, INC.,dba TRUSTEE CORPS; BISHOP,MARSHALL & WEIBEL, P.S.; CHUCK E.ATKINS, in his official capacity as ClarkCounty Sheriff,

Defendants.

Case No. 3:15-cv-05375-BHS

FEDERAL HOUSING FINANCEAGENCYS AND FEDERAL HOMELOAN MORTGAGE CORPORATIONSJOINT MOTION TO DISMISSPLAINTIFFS COMPLAINT

NOTE ON MOTION CALENDAR:November 6, 2015

I.INTRODUCTION

Plaintiffs1Complaint constitutes a futile attempt to stave off a prior eviction action filed

by the lawful owner of the property, defendant Federal Home Loan Mortgage Corporation

("Freddie Mac"); it should be dismissed with prejudice. Plaintiff defaulted on a mortgage loan,

and in due course the property was sold at a lawful trustees sale to Freddie Mac, which

subsequently filed an unlawful detainer action against Plaintiff. Rather than challenge the

1Hereinafter, Plaintiff shall refer to Pamela S. Owen.

Case 3:15-cv-05375-BHS Document 40 Filed 10/14/15 Page 1 of 20


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foreclosure in that action, Plaintiff instead waited until judgment was issued against her, then

filed unsuccessful post-judgment motions and the instant suit. Plaintiffs attempt to side-step

the judgment in the unlawful detainer action should be rejected for a number of independent

reasons.

First, the Federal Housing Finance Agency ("FHFA" or the "Agency") is not subject to

this Courts jurisdiction because Plaintiff failed to serve the Agency. Second, Plaintiffs claims

are barred; she should have raised the claims asserted here in the unlawful detainer action; thus,

res judicata principles bar her from raising these claims here. Third, even if Plaintiff could

properly bring the instant claims, they fail as a matter of law. The Complaint contains scattered,

general allegations of wrongdoing concerning the foreclosure, as well as an attack upon the

involvement of Mortgage Electronic Registrations Systems, Inc. ("MERS") in her loan.

Plaintiff challenges the appearance of MERS on her Deed of Trust, which she argues is a result of

Freddie Mac and FHFAs conspiracy to manipulate the Washington Deed of Trust Act, rendering

the foreclosure void. But not only does the Complaint omit allegations of specific wrongdoing by

Freddie Mac or the Agency, Plaintiffs premise is wrong: It is well -settled under Washington law

that MERS can be appointed as a nominee by the beneficiary, and that MERS can also record an

assignment on behalf of the beneficiary lender. Further, Plaintiff, as a borrower who is not a party to

the assignment, lacks standing to challenge it. As to Plaintiffs constitutional claims under Section

1983, they also fail because neither Freddie Mac nor FHFA is subject to such a claim, and even if

they were, Plaintiff cannot establish a constitutional violation based upon an unspecified

"conspiracy to manipulate the Washington Deed of Trust Act." Accordingly, Plaintiffs Complaint

fails as a matter of law to state a viable claim and must be dismissed with prejudice.



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II. FACTS

On November 4, 2005, Plaintiff took out a $208,250 loan from Landmark Mortgage (the

"Loan") to purchase the property located at 3912 NE 57th Ave., Vancouver, WA 98661 (the

"Property"). ECF No. 2-3 (the "Compl."), Ex. 5. The Loan was secured by a Deed of Trust on the

Property recorded on November 15, 2006 that lists Fidelity National Title as the trustee and MERS

as the beneficiary, acting solely as nominee for lender and its successors and assigns. Id., Ex. 4. On

October 17, 2011, MERS, on behalf of the beneficiary, issued an Assignment of Deed of Trust,

evidencing that the interest in the Deed of Trust had been assigned to Bank of America, N.A.

("BANA"). Id., Ex. 7. BANA later recorded an Appointment of Successor Trustee, appointing co-

defendant MTC Financial, Inc. d/b/a Trustee Corps ("MTC") as the trustee of the Deed of Trust.

Id., Ex. 8.

Thereafter, on or about April 22, 2014, BANA, as the beneficiary of the Deed of Trust,

issued a written Notice of Default.2 A Notice of Trustees Sale was later recorded by MTC.

Compl., Ex. 3. MTC held the trustees sale on January 16, 2015, at which time the Property was

purchased by Freddie Mac. Compl., Ex. 2 (Trustees Deed Upon Sale). On or about April 2, 2015,

Freddie Mac initiated an unlawful detainer action against Plaintiff relating to the Property. See

Compl, Ex. 13 (Unlawful Detainer Complaint). Freddie Mac obtained a writ of restitution in that

matter, directing the Sheriff of Clark County to deliver possession of the Property to Freddie Mac.

Compl., Ex. 18. On April 13, 2015 and April 23, 2015, respectively, Plaintiff filed post-judgment

motions raising the same issues she asserts here: a Motion to Vacate Judgment and to Stay

Enforcement of Judgment and Writ of Restitution and Motion to Quash Service of Summons.

Declaration of Jody M. McCormick ("McCormick Dec."), Exs. C & D. Both were denied.

2While Plaintiff does not attach the Notice of Default to her Complaint, it is referenced at p. 2of the Notice of Trustees Sale which is attached as Exhibit 3.



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Plaintiff filed the instant Complaint in Clark County Superior Court on May 7, 2015 seeking

money damages and restoration of the property to her. The matter was subsequently removed to

instant Court. ECF 1. Both MTC and Bishop Marshall & Weibel, P.S. ("BMW") have filed a

Motion to Dismiss Plaintiffs Complaint, while co-defendant Sheriff Chuck E. Atkins has filed an

Answer. ECF 10-11, 21. The Court responded by issuing an Order granting MTCs and BMWs

Motions to Dismiss. ECF 37. Plaintiffs alleges: 1) a violation of the Washington Consumer

Protection Act ("CPA"); and 2) a violation of 42 U.S.C. 1983. Both claims fail.

III. EVIDENCE RELIED UPON

This Motion to Dismiss relies upon the allegations in the Complaint and the undisputed

recorded documents, of which the Court may take judicial notice.3

IV. ISSUE

Whether the Court should dismiss the Complaint in its entirety for failure to state a

claim upon which relief can be granted as to Defendants.

V. ARGUMENT

A. Legal Standard

Federal Rule of Civil Procedure 8(a)(2) requires a plaintiff to provide "a short and plain

statement of the claim showing that [he] . . . [is] entitled to relief to give the defendant[s] fair

notice of what the . . . claim is and the grounds upon which it rests." Bell Atl. Corp. v.

3 The Court may take judicial notice of publicly recorded documents and may consider thedocuments without turning this motion into a motion for summary judgment. See, e.g., Parrinov. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998) ("A court may consider evidence on which thecomplaint necessarily relies if: (1) the complaint refers to the document; (2) the document is

central to the Plaintiffs claim; and (3) no party questions the auth enticity of the copy attachedto the 12(b)(6) motion.").



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Twombly, 550 U.S. 544, 545 (2007). Claims that fail to meet this standard must be dismissed

under F.R.C.P 12(b)(6).

These Rules require that a complaint contain sufficient factual allegations, which,

accepted as true, state a claim for relief "that is plausible on its face." Ashcroft v. Iqbal, 556

U.S. 662, 129 S. Ct. 1937, 1949 (2009). To survive a motion to dismiss under Rule 12(b)(6),

the Plaintiff must provide more than just "labels and conclusions"; rather, he must provide the

grounds of his entitlement to relief. Twombly, 550 U.S. at 555; see alsoIqbal, 129 S. Ct. at

1949-50 ("threadbare recitals of the elements of a cause of action, supported by mere

conclusory statements do not suffice[;] only a complaint that states a plausible claim for relief

survives a motion to dismiss."). While legal conclusions may establish the complaints basic

framework, "they must be supported by factual allegations." Id. at 1950. Where it is clear

amendment would be futile, the court may dismiss the Complaint without leave to amend. See

Havas v. Thorton, 609 F.2d 372 (9th Cir. 1979).

B. FHFA Is Not Subject to This Courts Jurisdiction Because Plaintiff Failed to Serve

FHFA.

The Court should dismiss the Complaint as to FHFA pursuant to Rule 12(b)(5) because

Plaintiff failed to serve FHFA. FHFA is a federal agency and thus must be served in

accordance with Rule 4(i)(2) of the Federal Rules of Civil Procedure. See 12 U.S.C. 4511

(establishing FHFA as an independent federal agency to regulate and oversee government-

sponsored entities including Freddie Mac); Rule 4(i)(2) (describing required service of process

upon agencies of the United States). Rule 4(i)(2) requires a plaintiff to deliver the summons

and complaint to the U.S. attorney for the district where the action is brought; send a copy by

registered or certified mail to the Attorney General for the United States; and send a copy by

registered or certified mail to FHFA itself. See Rule 4(i)(1), 4(i)(2); Rangel v. United States,



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No. 09-3061, 2010 WL 3715489, *1-2 (E.D. Wa. 2010) (dismissing complaint against federal

agencies for failing to comply with Rule 4(i)).

Plaintiff admittedly has not served FHFA in accordance with Rule 4(i), instead claiming

to have accomplished service upon FHFA by delivering a copy of the Complaint to the

Washington Secretary of State. SeeECF Nos. 31, 35. Plaintiff asserts that such service satisfies

RCW 23B.18.040, but does not explain how that provisionwhich governs service upon

nonresident corporate holders of security interests in mortgagesapplies to FHFA or exempts

Plaintiff from her obligations to serve FHFA pursuant to the Federal Rules. See RCW

23B.18.010; RCW 23B.18.040. It does neither. Moreover, although under no obligation to do

so, FHFA (through its counsel) twice informed Plaintiff that she had not properly served FHFA

and offered to accept service on the condition that Plaintiff stipulate setting a reasonable

briefing schedule for FHFA to respond to her claims; Plaintiff refused. See McCormick Dec. at

Exs. A & B (attaching August 4, 2015 and September 30, 2015 correspondence from Plaintiff

rejecting Freddie Macs and FHFAs offers to stipulate).

Because Plaintiff failed to serve FHFA, the Court cannot properly exercise jurisdiction

over FHFA and should dismiss the allegations against it under Rule 12(b)(5).4 See Rangel,

2010 WL 3715489, at *1 ("In order for the court to exercise jurisdiction over a defendant, the

defendant must be served properly."). Further, a dismissal with prejudice is appropriate here,

where the Complaint suffers from additional defects fatal to Plaintiffs claims. See Sanchez v.

Drug Enforcement Administration, 2:14-cv-236, 2015 WL 2453452, at *3 (E.D. Wash. May 22,

4 Regardless of service defects, Plaintiffs claims are independently subject to dismissal forthe additional reasons stated herein. See infra, Sections C-E.



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2015) (dismissing complaint against DEA with prejudice because of "other deficiencies in the

complaint");see infra, Sections C-E.

C. Plaintiffs Claims Challenging Freddie Macs Entitlement to Possession of the

Property Are Barred By Res Judicata.

To the extent that Plaintiffs assertions were, or could have been, raised in the Unlawful

Detainer action, they are barred by the doctrine of res judicata. Res judicata bars the re-

litigation of claims that were raised, or could have been raised, in a previous litigation that was

resolved on the merits. "Under the doctrine of res judicata, no party may re-litigate claims and

issues that were litigated, or might have been litigated, in a prior action." Pederson v. Potter,

103 Wash. App. 62, 69, 11 P.3d 833 (2000) (quotation omitted). The doctrine applies "where a

prior final judgment is identical to the challenged action in (1) subject matter, (2) cause of

action, (3) persons and parties, and (4) the quality of the persons for or against whom the claim

is made." Id. (quotation omitted); see also Pedrina v. Chun, 97 F.3d 1296, 1301 (9th Cir.

1996) ("In determining whether a prior state court action bars a subsequent federal action, the

federal court must look to the res judicata principles of the state court in which the judgment

was rendered."). Here, Plaintiff are attempts to defend her right to possession of the property by

raising questions about, inter alia, the foreclosure, the validity of Freddie Macs title to the

Property, and the propriety of eviction procedures. Id., 1.16-1.29. Plaintiff is questioning

whether Freddie Mac is entitled to possession of the propertythe very same issues which the

state court conclusively addressed in its making factual findings concerning ownership of the

property and in issuing its Judgment for Writ of Restitution Only. See McCormick Dec., Ex E.

Plaintiff could have raised a number of the instant claims in her Motion to Vacate Judgment,

which the Court denied following briefing and a hearing on April 17, 2015, or in her Motion to

Quash. See McCormick Dec., Exs. D & E. Accordingly, as to Plaintiffs claims is entitled to



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possession of the property, these claims could have been raised or were raised in the Unlawful

Detainer action. They are barred.5

D. Plaintiffs Attempt to Challenge MERS Involvement In Her Deed of Trust Is

Without Merit and Cannot Support a CPA Claim

Plaintiff seeks to void the foreclosure sale because of the appearance of MERS in her

Deed of Trust ("DOT"), and based on its actions in assigning the DOT to BANA. See Compl.,

1.9-1.15, 1.27-1.28. Plaintiff appears to assert that their DOT was defective because of

MERS involvement, and also asserts that the Assignment of her DOT by MERS was improper,

hence everything that flowed therefrom was also ineffective, including the Appointment of

Successor Trustee and subsequent sale. Id., 5.5-5.15.11, 5.18. But Plaintiffs challenge to

MERS appearance on her DOT is time-barred. Moreover, to the extent she challenges the

validity of the subsequent assignment of her DOT, Plaintiff lacks standing to challenge any

assignment to which she was not a party. Finally, the mere appearance of MERS on her DOT

does not support her claim for violation of the CPA, and indeed Washington law makes it clear

that nothing that was done here was actionable.

1. Plaintiffs Challenge To MERS Appearanceon Her Deed of Trust is Time-Barred

To the extent Plaintiffs claims are based on MERS being named as beneficiary in a

nominee capacity in her DOT, such an argument fails. The DOT that names MERS was

5The inclusion of FHFA, Bishop Marshall & Weibel, P.S. and Sheriff Chuck E. Atkins in theinstant action does not violate the doctrines requirement that the persons or parties in both

actions be identical or in privity. In order to show privity between a non-party and a party toformer litigation, the party who asserts that the matter is barred by claim preclusion mustdemonstrate that the nonparty's interests and rights were represented and protected in the prioraction. Pedrina v. Chun, 97 F.3d at 1301. Here, these three defendants adopt the sameposition as Freddie Mac concerning Plaintiff lack of entitlement to possession of the property.Thus, Freddie Mac adequately represented these parties rights concerning this issue in the state

court litigation.



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executed by Plaintiff in November 7, 2005. The statute of limitations for a claim for violation

of the CPA is four years. See RCW 19.86.120. Accordingly, Plaintiffs CPA claim is time-

barred to the extent that she relies on MERS inclusion on her DOT. The DOT was executed in

2005 and her CPA claim based on MERS involvement on her DOT would have expired at the

latest four years later, in November, 2009. Because courts lack subject matter jurisdiction to

hear claims brought outside the limitations period, Miguel v. Country Funding Corp., 309 F.3d

1161, 1164 (9th Cir. 2002), Plaintiffs CPA claim fails.

2. Plaintiff Lacks Standing to Challenge the Validity of the Assignment of the

Deed of Trust

Borrowers, as non-parties to an assignment, lack standing to challenge the validity of the

assignment. See Ukpoma v. U.S. Bank Natl Assn, No. 12-CV-0184-TOR, 2013 U.S. Dist.

LEXIS 66576, at *13 (E.D. Wash. 2013) ("Even assuming for the sake of argument that the

assignments in question were fraudulently executed, Plaintiff, as a third party, lacks standing to

challenge them."); Borowski v. BNC Mortgage, Inc., No. C12-5876, 2013 U.S.Dist. LEXIS

122104, at *13 (W.D. Wash. 2013) ("[B]orrowers, as third parties to the assignment of their

mortgage (and securitization process), cannot mount a challenge to the chain of assignments

unless a borrower has a genuine claim that they are at risk of paying the same debt twice if the

assignment stands."). Further, an assignment is not a requirement to foreclose in Washington.

See St. John v. Northwest Trustee Services, Inc., No. C11-5382BHS, 2011 WL 4543658 at *3

(W.D.Wash., 2011).

Accordingly, Plaintiffschallenge the validity of the Assignment of the Deed of Trust,

and argument that her entire loan and the subsequent trustees sale are void as a result, fails.



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3. PlaintiffsMERS Allegations Cannot Support a Claim for Violation of the

CPA

Plaintiffs argument in support of her claim for violation of the CPA is based on a

misunderstanding ofBain v. Mortg. Elec. Registration Systems, Inc., 175 Wash.2d 83, 104, 285

P.3d 34 (2012). Plaintiffs reliance on MERS inclusion on her DOT, and on a purportedly

defective assignment of the DOT to support a CPA claim is misplaced.

UnderBain, Plaintiffs are still required to prove each of the elements of a private CPA

claim: (1) an unfair or deceptive act or practice; (2) that occurs in trade or commerce; (3) an

impact on the public interest; (4) injury to the plaintiff in his or her business or property; and (5)

a causal link between the unfair or deceptive act and the injury suffered. Hangman Ridge

Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 785 (1986). Whether a

defendants conduct is an unfair or deceptive act or practice is a question of law. Micro

Enhancement Intern., Inc. v. Coopers & Lybrand, LLP, 110 Wn. App. 412, 438, 40 P.3d 1206

(2002). An unfair or deceptive act or practice requires the plaintiff to prove that the act "had the

capacity to deceive a substantial portion of the public." Burns v. McClinton, 135 Wn. App. 285,

302-03 (2006). The first two elements of a CPA claim may be satisfied by establishing that the

alleged act constitutes a per se unfair act or practice, which exists when a statutory violation has

been "declared by the Legislature to constitute an unfair or deceptive act in trade or commerce."

Hangman Ridge, 105 Wn. 2d at 78586. A per se unfair trade practice requires the legislature

to "specifically define[] the exact relationship between a statute and the CPA . . . ." Anderson

v. Valley Quality Homes, Inc., 84 Wn. App. 511, 516 (1997) (quoting Hangman Ridge, 105

Wn.2d at 787). Such per se unfair practices are limited to specific legislative declarations that

violation of the underlying statute constitutes an unfair or deceptive act or practice. See id. at

518.



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Plaintiffs challenges MERS involvement on her DOT generally, as well as its actions

in recording an assignment of the DOT. However, under Washington law, the mere appearance

of MERS on a deed of trust does not create actionable injury, nor does it provide grounds to

quiet title to property. Washington law is clear that it is not an assignment which grants the right

to foreclose, rather it is the status as the holder of the Note.

TheBaincourt considered and rejected plaintiffs argument that he should be entitled to

quiet title to the property on the ground that MERS was listed on his deed of trust as a

beneficiary. See Bain v. Metro Mortg. Grp., Inc., 175 Wash. 2d 83, 105 (Wash. 2012). In

addition, Judge Leighton of the Western District recently addressed a similar case where the

plaintiff argued that the holder of the note could not seek to foreclose because the deed of trust

had been assigned by MERS:

Here, Plaintiff's claims arise from a fundamental misunderstanding of the law.U.S. Bank is the beneficiary of the deed because it holds Plaintiff's note, notbecause MERS assigned it the deed. Under Washington law, a beneficiary is bydefinition the party holding the note: " Beneficiary means the holder of theinstrument or document evidencing the obligations secured by the deed of trust."Wash. Rev. Code 61.24.005(2). This rule, however, is merely the codification ofthe longstanding principle that "the deed follows the debt." See Restatement(Third) of Property (Mortgages) 5.4(a). . . . In sum, possession of the notemakes U.S. Bank the beneficiary; the assignment merely publicly records thatfact. Because U.S. Bank is the proper beneficiary, it is empowered to initiateforeclosure following Plaintiff's default.

Lynott v. Mortgage Electronic Registration Systems, Inc., 2012 WL 5995053 at *2 (W.D. Wash.

2012). Hence, Bain does not stand for the proposition that a deed of trust is unenforceable

simply because it names MERS as a beneficiary. See Zhong v. Quality Loan Service Corp. of

Wash., 2013 WL 5530583, at *3 (W.D. Wash. 2013) (determining that "Bainalso held that a

deed of trust naming MERS as a beneficiary is not automatically unenforceable). Indeed, the

Deed of Trust remains valid and enforceable by the holder of the Note even where a violation of



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the Deed of Trust occurs. See, e.g., Walker v. Quality Loan Service Corp. of Wash., 308 P.3d

716, 729 (Wash. App. Div. 1 2013) (rejecting the argument that designation of an ineligible

beneficiary "standing alone, renders [a deed of trust] void");Borowski v. BNC Morg., 2013 WL

4522253, at *5 (W.D. Wash. 2013) (finding that "a violation of the Deed of Trust Act should

not result in a void deed of trust").Other Washington federal cases have similarly concluded

that merely listing MERS as beneficiary, or MERS assigning a deed of trust does not extinguish

the borrowers duty to repay, nor does it destroy defendants interests in the property. See

Wilson v. Bank of America, N.A., et al, 2013 WL 275018 at *(W.D. Wash. 2013) ("Even if

MERS were a sham beneficiary, [plaintiffs lender] would still be entitled to repayment of the

loans and would be [a] proper part[y] to initiate foreclosure after the plaintiffs defaulted on their

loans."); Order Granting Defendants Motion for Summary Judgment, Dietz v. Quality Loan

Service Corp. of Wash., Case No. C13-5948 RJB (W.D. Wash. October 20, 2014) (the mere

inclusion of MERS in a loan transaction is not actionable under Washington law, quotingBain).

In the wake ofBain, Washington courts have frequently rejected the conclusory MERS-

based allegations Plaintiff offers here, where plaintiffs fail to allege facts showing that MERS

had a causal role in their claimed injuries. See, e.g., Kullman v. Northwest Trustee Services,

Inc., No. 12cv5852RBL, 2012 WL 5922166, at *2 (W.D. Wash. 2012) ("Plaintiffs have

failed to allege any prejudice arising from MERS role in the foreclosure. Plaintiffs admit

default and seek to generate controversy where none exists."); Burkart v. Mortgage Elec.

Registration Sys., Inc., C11-1921RAJ, 2012 WL 4479577, at *5 (W.D. Wash. 2012) (Jones, J.)

("If the Burkarts want to plead one or more claims based on MERS' improper designation as the

beneficiary in their deed of trust, they must provide sufficient allegations to establish that they

have been injured."); See also Peterson v. Citibank, N.A., No. 671774I, 2012 WL 4055809,



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at *4 (Wash. Ct. App. 2012) ("the Petersons have failed to plead facts demonstrating that their

alleged injuries would not have occurred but for MERS actions; regardless of MERS conduct

as the beneficiary under the deed of trust, the Petersons property would still have been

foreclosed upon based on their failure to make payments on the loan.").

Plaintiff has not alleged prejudice resulting from MERS involvement in her loan, much

less any damages resulting from MERS assignment of the DOT. Rather, Plaintiffs allegations

reveal that she defaulted and failed to cure her default, which resulted in a sale of the Property

to Freddie Mac. Thus, any harm she has suffered was not caused by anything that MERS has

done, but rather flowed from Plaintiffs default. It follows that Plaintiffs challenges to

BANAs right to appoint a new trustee and the subsequent foreclosure must also fail, as they are

predicated on the same meritless MERS-based arguments. BANAs ability to appoint a

successor trustee was based on its status as the Note holder and beneficiary of Plaintiffs loan

and not upon anything recorded by MERS. As such, the resulting trustees sale was not

defective simply because of the assignment of the DOT which was recorded by MERS. Rather,

that document merely put the public on notice of what was already true as a matter of law, that

BANA was the beneficiary of Plaintiffs Loan because it held the Note. Finally, it bears noting

that Plaintiff has alleged no facts that are capable of supporting any claim that Freddie Mac and

FHFA conspired to manipulate the Washington Deed of Trust Act. A borrower is not permitted

simply to rely on "labels and conclusions"; rather, she must provide the grounds of her

entitlement to relief, which she has failed to do.

Accordingly, Plaintiffs CPA claim must be dismissed insofar as her claims are based on

legally untenable challenges to MERS status as nominee beneficiary under her Deed of Trust



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and its actions in recording an assignment of that interest. Plaintiff has not established the

elements of such a claim, and there can be no question that Plaintiff has not been harmed here.

E. Plaintiffs Section 1983 Claim Fails.

1. Neither Freddie Mac Nor FHFA Is Subject to Plaintiffs 1983 Claim.

To establish a Section 1983 violation, a plaintiff must establish: (1) that the conduct

complained of was committed by a person acting under color of state law; and (2) that the

conduct deprived plaintiff of a federal constitutional or statutory right. Patel v. Kent School

Dist., 648 F.3d 965, 971 (9th Cir. 2011). While Plaintiffs allegations are somewhat opaque,

their gist seems to be that through a purported "conspiracy to manipulate the Washington Deed

of Trust Act," Freddie Mac and FHFA violated Plaintiffs "constitutional right to contract" and

due process rights. Compl. 22-23. However, Freddie Mac is a private entity that does not act

under color of state law.

Section 1983 is "generally not applicable to private parties," Kirtley v. Rainey, 326 F.3d

1088, 1092 (9th Cir. 2003), such as Freddie Mac. See Am. Bankers Mortgage Corp. v. Fed.

Home Loan Mortgage Corp., 75 F.3d 1401, 1408 (9th Cir. 1996) (approvingly citing a district

court holding that ("Freddie Mac [is a] private corporation rather than [a] government agency").

It is well established that Freddie Mac is not a federal agency, see, e.g., id., Mik v. Fed. Home

Loan Mortg. Corp., 743 F.3d 149, 168 (6th Cir. 2014); Syriani v. Freddie Mac Multiclass

Certificates, Series 336, 2012 WL 6200251, 4 (C.D. Cal. 2012), and Plaintiff could not

seriously claim that Freddie Mac is part of the state government.

Neither is Freddie Mac acting under color of state law. Plaintiff has not alleged

sufficient facts under any of the four tests that courts employ to determine whether a private

actor acts under color of state law; namely, a sufficiently close nexus between Freddie Mac and



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the state government; a position of interdependence between these two actors; the state

governments endowment of governmental powers or functions to Freddie Mac; or any coercive

influence or significant encouragement of the state government in Freddie Macs actions. Nor

could Plaintiff do so. Section 1983 liability for a constitutional violation cannot be based on

Freddie Macs "participat[ion] in the Trustees sale," as Plaintiff alleges. Compl. 3.29.

Invoking a state-law non-judicial foreclosure process does not constitute action under color of

state law. See Apao v. Bank of N.Y., 324 F.3d 1091, 1095 (9th Cir.2003) (holding that non-

judicial foreclosure procedures "slip under" Section 1983s state action requirement "for want of

direct state involvement");Northrip v. Fed. Natl Mortg. Assn, 527 F.2d 23, 2829 (6th Cir.

1975) (rejecting the argument "that state action exists because of the involvement of a state

official"namely, the sheriffin a non-judicial foreclosure procedure). As the Court recently

recognized when rejecting Plaintiffs 1983 claim against MTC Corporation, "the states

statutory authorization of self-help provisions is not sufficient to convert private conduct into

state action." ECF 37 at pg. 5 (citing Apao, 324 F.3d at 1094). Accordingly, Freddie Macs

purchase of the Property at the foreclosure sale and initiation of the subsequent unlawful

detainer action cannot establish Section 1983 liability.

FHFA is likewise not subject to Plaintiffs 1983 claim as regulator of Freddie Mac.

Plaintiff argues that FHFA "acts under color of state law when regulating the activities of

Defendant Freddie Mac in the mortgage markets in the State of Washington." Compl. 3.11.

But federal agencies, including FHFA, are immune from claims under Section 1983 because

"[a] federal agency is not a person within the meaning of [Section 1983]." Jachetta v. United

States, 653 F.3d 898, 908 (9th Cir. 2011). Indeed, FHFA, as the federal agency that regulates

Freddie Mac, enjoys sovereign immunity from claims under Section 1983 as well as a broad set



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of claims against federal agencies. Id. at 908 (federal government "may not be sued without its

consent and . . . the existence of consent is a prerequisite for jurisdiction."); see also Settles v.

United States Parole Commn, 429 F.3d 1098, 1106 (D.C. Cir. 2005) (holding that, "as an arm

of the federal sovereign," Parole Commission is immune from 1983 claim); Cobb v. Dept. of

Education, 487 F.Supp.2d 1049, 1055 (D. Minn. 2007) (rejecting 1983 claim against the

Department of Education Office of Civil Rights because "the federal agency itself is immune

from suit."). FHFAs authorizing statute contains no waiver of sovereign immunity, see

generally12 U.S.C. 4511 et seq., and Plaintiffs 1983 claim is therefore barred.6 See Jones v.

Fulwood, 860 F.Supp.2d 16, 21 (D.D.C. 2012) (holding that claims against the United States

Parole Commission were precluded by the doctrine of sovereign immunity).

While Plaintiff appears to sue FHFA only as regulator for Freddie Mac, see Complaint

3.11, FHFA acts in another capacity as wellas Freddie Macs Conservator. Even if Plaintiff

had sued FHFA as Conservator, that claim too would fail. In mid-2008, Congress created

FHFA and empowered it to act as conservator or receiver of Freddie Mac in certain

circumstances of financial crisis, and in September 2008, FHFAs Director placed Freddie Mac

into conservatorship. 12 U.S.C. 4617 et seq. As Conservator, "immediately succeed[ed]" by

operation of law to "all rights, titles, powers, and privileges of [Freddie Mac]." Id. at

6 Plaintiff could not avoid FHFAs sovereign immunity by restyling her Section 1983 claimas aBivens claim. See Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403U.S. 38 (1971). First,Bivensclaims are permitted only against federal officers (not agencies)acting in their individual (not official) capacity. Correctional Servs. Corp. v. Malesko, 534 U.S.

61, 69-70 (2001) ([T]o allow aBivens claim against a federal agency would be the eviscerationof the Bivens remedy, rather than its extension) (internal citation omitted); Kaiser v. BlueCross of California, 347 F.3d 1107, 1117 (9th Cir. 2003). Plaintiff has alleged no such facts.Second, while sovereign immunity does not apply where federal officials' actions are ultra viresor where the statute or order conferring power upon the officer to take action . . . is c laimed tobe unconstitutional, the Complaint contains no facts supporting such a claim. Al-Nashiri v.

MacDonald, 741 F.3d 1002, 1008 (9th Cir. 2013).



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4617(b)(2)(A). Accordingly, the Conservator "steps into the shoes" of private corporation

Freddie Mac. Herron v. Fannie Mae, 857 F. Supp. 2d 87, 96 (D.D.C. 2012) (stating that

similarly situated Fannie Mae "was a private entity; when FHFA took over as conservator of

Fannie Mae, it stepped into Fannie Maes private role."). Accordingly, FHFA as Conservator is

a private actor for purposes of constitutional claims. Id. at 95 (rejecting Bivens claim against

FHFA because "the federal agency in its guise as a conservator or receiver of a private

corporation is not a government actor" for such a claim); see also Parra v. Fed. Natl Mortg.

Corp., No. CV-13-4031, 2013 WL 5638824, *3 (C.D. Cal. Oct. 16, 2013) (agreeing with

Herron); Fannie Mae v. Mandry, No. 12-13236, 2013 WL 687056, at *1 (E.D. Mich. 2013)

("Fifth Amendment claims asserted against FHFA and Fannie Mae are dismissed because

Fannie Mae and FHFA are not government actors that can be held liable for constitutional

violations."). This uniform precedent confirms that FHFA as Conservator is not a government

actor for purposes of Plaintiffs Section 1983 claim.

2. Regardless, Plaintiff Failed to Allege That Freddie Mac or FHFA Deprived

Her of a Federally Protected Right.

Plaintiffs 1983 claim is deficient not only because neither Freddie Mac nor FHFA is

subject to such a claim, but also because she fails to establish they have deprived her of a

constitutionally protected right. See Patel, 648 F.3d at 971. While the theory behind Plaintiffs

allegations is difficult to discern, Plaintiff appears to ground her 1983 claim in a purported

conspiracy by Freddie Mac and FHFA "to manipulate Washingtons Deed of Trust Act," which

she claims led to the wrongful foreclosure, the unlawful detainer action, and the subsequent

improperly issued and delivered Writ of Restitution. Compl. 6.9-6.11. Those actions

purportedly deprived her of her "constitutional right to contract," her property rights, and her

due process rights. Compl. 1.6, 1.29, 3.29, and 6.5.



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However, because Plaintiffs underlying theorythat Freddie Mac and FHFA conspired

to manipulate the Washington Deed of Trust Actis deficient, see supra, Sections C-D,

Plaintiff also cannot establish a constitutional violation based on the alleged misconduct.

Plaintiff alleges no specific facts connecting Freddie Mac or FHFA to the purported conspiracy

to manipulate state law.7 While the Complaint is littered with references to constitutional rights

the Defendants purportedly violated, including the "right to contract" and "right to be safe and

secure in her home," Plaintiff alleges no facts relevant to any such violation. See U.S. Const.,

Art. I, 10 (prohibition on states enacting legislation that "impairs the Obligation of Contract");

id. at Amend. IV (prohibition on unreasonable searches and seizures). Further, other than

stating that Freddie Mac "participat[ed] in the trustees sale," she has alleged no facts

connecting Freddie Mac of FHFA to her claimed due process violations, instead offering only

threadbare, conclusory assertions that the other Defendants undertook these alleged actions as

part of a conspiracy with FHFA and Freddie Mac. See Compl. 6.9-6.11. Plaintiffs purported

injury is simply "too remote a consequence" of any conduct by FHFA or Freddie Mac to

support liability under Section 1983. See Martinez v. State of Cal., 444 U.S. 277, 285 (1980);

cf. Order at 4-5 (dismissing Plaintiffs claims against MTC because MTCs participation in the

foreclosure was too remote from alleged due process violation).

///

///

///

7 Moreover, even if FHFA as Conservator could be held liable for a Section 1983 violation,which it cannot, the purported misconduct Plaintiff ascribes to Freddie MacFreddie Macsdrafting the state foreclosure formsoccurred prior to the Conservatorship, and prior toFHFAs existence, which makes it impossible to hold FHFA so liable.



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VI. CONCLUSION

For all these reasons, Plaintiffs Complaint fails to state a single viable cause of action

against Freddie Mac or FHFA. Defendants respectfully request that the Court grant their

Motion to Dismiss the Complaint with prejudice pursuant to F. R. Civ. P. 12(b)(6).

Respectfully submitted this 14thday of October, 2015.

WITHERSPOON KELLEY

s/Jody M. McCormickJody M. McCormick WSBA # 26351422 W. Riverside Ave., Suite 1100

Spokane, WA 99201-0300Phone: 509-624-5265Fax: [email protected] for Defendants Federal Home Loan MortgageCorporation and Federal Housing Finance Agency



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FEDERAL HOUSING FINANCE AGENCYS AND FEDERALHOME LOAN MORTGAGE CORPORATIONS JOINTMOTION TO DISMISS PLAINTIFFS COMPLAINT- 20

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CERTIFICATE OF SERVICE

I hereby certify that on the 14thday of October, 2015,

1. I caused to be electronically filed the foregoing FEDERAL HOUSING

FINANCE AGENCYS AND FEDERAL HOME LOAN MORTGAGE CORPORATIONSJOINT MOTION TO DISMISS PLAINTIFFS COMPLAINTwith the Clerk of the Court usingthe CM/ECF System which will send notification of such filing to the following:

Michael Steven DeLeo [email protected], [email protected]

Barbara L Bollero [email protected], [email protected]

William P. Richardson [email protected],[email protected],[email protected]

Pamela S. Owen [email protected], [email protected],[email protected]

David A Weibel [email protected]

2. I hereby certify that I have mailed by United States Postal Service the foregoingdocument to the following non-CM/ECF participants at the address listed below: None.

3. I hereby certify that I have mailed by United States Postal Service the foregoingdocument to the following CM/ECF participants at the address listed below: None.

4. I hereby certify that I have hand-delivered the foregoing document to thefollowing participants at the addresses listed below: None.

s/Jody M. McCormick

Jody M. McCormick WSBA # 26351WITHERSPOON KELLEY422 W. Riverside Ave., Suite 1100Spokane, WA 99201-0300Phone: 509-624-5265Fax: [email protected]

mailto:[email protected]:[email protected]:[email protected]

Documents

Pamela Owen. Civil Rights. Motion to Dismiss for Failure to State a Claim by Defendants Fhfa and Freddie Mac. Document No. 40