IANNUCCI v. ALSTATE PROCESS SERVICE, INC. (W.D.N.C. 9-1-2006)

DENNIS HOWELL, Magistrate Judge

THIS MATTER is before the court on defendants Steve J. Baum, P.C.'s and Deutsche Bank Trust Company Americas' Motion to Dismiss (#15) and defendant Alstate Process Service, Inc.'s Motions to Dismiss (#18). On May 5, 2006, the undersigned entered an Order in accordance with Roseboro v. Garrison, 528 F.2d 309 (4th Cir. 1975), advising plaintiffs, who are proceeding pro se, that dispositive motions had been filed, explaining the nature of the motions, and advising plaintiffs of their duty to respond. Within the time allowed, plaintiffs filed their Response (#25), as well as a Motion for Leave to file an Amended Complaint (#26). Both defendants have opposed the proposed amendment, see docket entries # 27 and #30, and have filed replies to plaintiff's response. See Docket Entries # 28 #29. It appearing that all issues have been fully briefed, and having reviewed the pleadings and arguments, the undersigned respectfully submits the following findings of fact, conclusions of law, and recommendation.

While Roseboro only applies to motions for summary judgment, the undersigned also attempts to advise pro se litigants where motions to dismiss are filed.

FINDINGS AND CONCLUSIONS

I. Background

This action concerns the foreclosure of plaintiffs' home in the State of New York, an action that was commenced some three years before plaintiffs filed this action in this court. The defendants in this action were all involved in the New York foreclosure action: Alstate Process Service, Inc., allegedly served plaintiffs with notice of the foreclosure action; Steven J. Baum, P.C., represented the mortgage holder; and Deutsche Bank held the note. The crux of plaintiffs contention is that they never received notice of the foreclosure proceeding and that defendant Alstate submitted a false affidavit of service to the New York court

Plaintiffs bring this action under 42, United States Code, Section 1983, alleging that defendants conspired to violate their rights to due process as guaranteed by the fifth and fourteenth amendments to the United States Constitution. Defendants have moved to dismiss the complaint arguing that plaintiffs have failed to state a claim against them as they are not state actors, that this court lacks personal jurisdiction over the defendants inasmuch as all of the alleged wrongdoing took place in New York, that this action is barred by the doctrine of res judicata, and that the action is barred by the three year statute of limitations applicable to Section 1983 actions. As to the proposed amendment to the Complaint, defendants argue that it should be denied as futile.

For the reasons discussed below, the undersigned concurs in the arguments of defendants and must recommend that this action be dismissed with prejudice.

II. Standards Applicable to Motions to Dismiss

A. Rule 12(b)(2)

Rule 12(b)(2) provides for dismissal where the court lacks personal jurisdiction over a particular named defendant. In the Fourth Circuit, the standard for deciding a motion based on Rule 12(b)(2) was set forth in Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989), where the appellate court explained that a plaintiff has the burden to prove personal jurisdiction by a preponderance of the evidence. When a factual dispute arises as to whether or not jurisdiction exists, the court may either conduct an evidentiary hearing or defer ruling on the matter until it receives evidence on the jurisdictional issue at trial.Id. When a court decides the issue on the record then before it, the court may consider "the motion papers, supporting legal memoranda, affidavits, other documents, and the relevant allegations of the complaint," and the burden is plaintiff's "to make a mere prima facie showing of jurisdiction to survive the jurisdictional challenge." Clark v. Milam, 830 F.Supp. 316, 319 (S.D.W.Va. 1993) (citations omitted). A court must resolve factual disputes in favor of the party asserting jurisdiction for the limited purpose of the prima facie showing. Bakker, at 676. Such resolution must include construing all relevant pleadings in a light most favorable to the plaintiff, assume the credibility of any affiant, and drawing the most favorable inferences for the existence of jurisdiction. Id.

B. Rule 12(b)(6) Standard

Where a defendant contends that a plaintiff has failed to state a cognizable claim, Rule 12(b)(6) authorizes dismissal based on a dispositive issue of law. Neitzke v. Williams, 490 U.S. 319, 109 S.Ct. 1827, 1832 (1989); Hishon v. King Spalding, 467 U.S. 69, 73 (1984); Conley v. Gibson, 355 U.S. 41 (1957). As the Court discussed in Neitzke:

This procedure [for dismissal], operating on the assumption that the factual allegations in the complaint are true, streamlines litigation by dispensing with needless discovery and fact finding. Nothing in Rule 12(b)(6) confines its sweep to claims of law which are obviously insupportable. On the contrary, if as a matter of law "it is clear that no relief could be granted under any set of facts . . . a claim must be dismissed, without regard to whether it is based on outlandish legal theory. . . . What Rule 12(b)(6) does not countenance are dismissals based on a judge's disbelief of a complaint's factual allegations."

Id., at 1832 (citation omitted). Dismissal of a complaint is proper under Rule 12(b)(6) where it is clear that no set of facts consistent with the allegations in the plaintiffs' complaint could support the asserted claim for relief. Taubman Realty Group LLP v. Mineta, 320 F. 3d 475, 479 (4th Cir. 2003); Migdal v. Rowe Price-Fleming Intl Inc., 248 F. 3d 321, 325-36 (4th Cir. 2001).

While the court accepts factual allegations in the complaint as true and considers the facts in the light most favorable to a plaintiff in ruling on a motion to dismiss, a court "need not accept as true unwarranted inferences, unreasonable conclusions, or arguments." Eastern Shore Mkt.'s Inc. v. J.D. Assoc.'s, LLP, 213 F. 3d 175, 180 (4th Cir. 2000).

The presence of a few conclusory legal terms does not insulate a complaint from dismissal under Rule 12(b)(6) when the facts alleged in the complaint cannot support the legal conclusion. And although the pleading requirements of Rule 8(a) are very liberal, more detail often is required than the bald statement by plaintiff that he has a valid claim of some type against defendant. This requirement serves to prevent costly discovery on claims with no underlying factual or legal basis.

Migdal, at 326 (citations and internal quotations omitted). In addition, a court cannot "accept as true allegations that contradict matters properly subject to judicial notice or by exhibit." Venev v. Wyche, 293 F. 3d 726, 730 (4th Cir. 2002) (citations and internal quotations omitted). For the limited purpose of ruling on defendants' motions, the court has accepted as true the facts alleged by plaintiffs in the complaint and will view them in a light most favorable to plaintiffs.

III. Section 1983

Plaintiffs cite 42, United States Code, Section 1983 in both their Complaint and their proposed amendments to their Complaint as the source of their right to proceed in this court against these private defendants. Section 1983 provides in pertinent part, as follows:

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.

42 U.S.C. § 1983. Section 1983 was enacted to override certain kinds of state laws; to provide a remedy where state law was inadequate; to provide a federal remedy where state remedy, though adequate in theory, was not available in practice; and to provide a remedy in federal courts supplementary to any state remedy. Monroe v. Pape, 365 U.S. 167 (1961), overruled in part by Monell v. Department of Social Servs., 436 U.S. 658 (1978). Section 1983 is not jurisdictional, but simply creates a cause of action. Hagans v. Lavine, 415 U.S. 528 (1974). It provides no substantive rights, merely a remedy. Chapman v. Houston Welfare Rights Org., 441 U.S. 600 (1979).

The burden is on the party asserting federal jurisdiction, the plaintiffs, to show that a substantial federal question exists.Goldsmith v. Mayor of Baltimore, 845 F.2d 61 (4th Cir. 1988). A claim is insubstantial if it is obviously without merit or clearly foreclosed by authoritative precedent. Crosby v. Holsinger, 816 F.2d 162 (4th Cir. 1987).

IV. Discussion

A. The New York Proceedings

As discussed above, plaintiffs owned a home in the State of New York and the mortgage on that home was held by Deutsche Bank's predecessor in interest. On June 4, 2002, Baum, as counsel for Deutsche Bank, commenced foreclosure proceedings against plaintiffs by the filing of a Notice of Pendency of Action, a Summons, and a Complaint in the state court located in Dutchess County, New York. See Docket Entry 18, Exs. 1.1-1.3. Such home was located at 48 Killearn Road, Millbrook, New York. Gerald Scully, a process server employed by defendant Alstate submitted in that action affidavits stating that he had served both of the plaintiffs with the Summons and Complaint by attaching them to the door of the residence on June 11, 2002, and by mailing such process to the property on June 18, 2002, all in accordance with New York law permitting such method of service. CPLR § 308(4) ("nail and mail" service). Docket Entry 18, Exs. 1.4-1.5. Mr. Scully also averred in his affidavit of service that neither of the plaintiffs were in active military service based on a conversation with a neighbor, a Mr. Leggio. Id.

After plaintiffs failed to respond to Complaint for forfeiture, a New York court entered judgment of foreclosure and sale on October 9, 2002, and directed that the property be sold by a court appointed referee. Id., at Ex. 1.6. On November 12, 2002, an employee of Baum served plaintiffs with a Notice of Sale by mail, informing them that the property was to be sold December 6, 2002. Id., Ex. 1.7. On December 6, 2002, Deutsche Bank was the high bidder at $447,185.12, which was an amount which left no surplus or deficiency. Id., at Ex. 1.8. That same day, the referee transferred the property to Deutsche Bank by way of a "Referee's Deed." Id., Ex. 1.9. Following the sale, plaintiffs were served with a Notice to Quit Premises on January 2, 2003, which was personally delivered, id., and thereafter Deutsche Bank sought an Order directing the sheriff to place Deutsche Bank in possession. Id. Such Order was entered by the state court on January 24, 2003. Id., Ex. 1.10.

On February 18, 2003, plaintiffs made their first appearance in the foreclosure proceedings, there through counsel, who filed a motion to show cause why the foreclosure sale should not be vacated. Id., Ex. 1.11. An affidavit which accompanied that motion provided that the plaintiffs first learned of the foreclosure when they were personally served with the Notice to Quit Premises on January 2, 2003. Id., Ex. 1.13 1.14. In the affidavits that accompanied the motion to vacate, plaintiffs asserted that they had not been served with the Summons and Complaint in the foreclosure action, they questioned the veracity of Mr. Scully, and they submitted an affidavit from Mr. Leggio, which denied he had ever spoken with Mr. Scully. Id., Ex. 1.12. The facts reported in Mr. Scully's affidavit were not disputed, i.e., that plaintiffs resided in that home and were not in active military service.

The issue raised by plaintiffs in their motion to vacate was actually litigated in the state courts of New York. On February 27, 2003, the state court entered a Show Cause Order setting the issue for hearing. Id., Ex. 1.15. Deutsche Bank denied plaintiffs' allegation that they had not received either the formal or actual notice of foreclosure proceedings, id., Ex. 1.16, and Baum submitted evidence that the plaintiffs had contacted their firm in June 2002 seeking reinstatement figures for their loan. Id.

The dispute concerning notice was resolved by the parties and the state court through entry of a Stipulated Order. Id., Ex. 1.17. Such Order provided that the plaintiffs had until June 30, 2003, to either sell or refinance their property, id., and absent such action, a warrant of eviction would issue from the court without further stay. Id.

Rather than comply with the terms of the Stipulated Order, plaintiffs filed for bankruptcy protection in the Southern District of New York under Chapter 7 of the bankruptcy Code on June 27, 2003. See Docket Entry 16, Ex. A to Aff. of Harrod. Such petition failed to include in the schedule of assets the property or the chose in action this action represents. See id., Schedules A, B, C to Ex A.

On July 14, 2003, Deutsche Bank filed an application with the Bankruptcy Court seeking relief from the automatic stay for the purpose of evicting plaintiffs from the property. Id., Ex. B. Even though plaintiffs opposed that motion through counsel, the Bankruptcy Court granted the relief on September 2, 2003. Id., at Ex. D.

B. The Nature of this Action

This action was filed February 9, 2006. After being evicted from their home in New York, plaintiffs apparently moved their residence to Arden, North carolina, which is within the Asheville Division of the Western District of North Carolina. As was raised before the state courts of New York, all of plaintiffs claims herein are based on Alstate's alleged non-service, or alleged fraudulent service, of the summons and complaint and Baum' alleged non-service of a copy of the Default Judgment, all in the New York foreclosure proceeding. Reading the Complaint in a light most favorable to plaintiffs, they contend that "[o]ur due process regarding a fair foreclosure procedure was denied leaving us with no viable options." Complaint.

C. Discussion of Motions to Dismiss

Proceeding under Rules 12(b)(2) and 12(b)(6), defendants contend that this action must be dismissed with prejudice for a number of reasons:

(1) this court lacks personal jurisdiction over defendants;

(2) plaintiffs fail to state a cognizable claim under Section 1983;

(3) this action is barred by the doctrine of res judicata; and

(4) this action is barred by the statute of limitations.

Defendants are correct on each point, and the contentions will be discussed briefly seriatim.

1. Personal Jurisdiction

Defendants contend that the action should be dismissed because they do not have the requisite minimum contacts with the State of North Carolina that would justify the exercise of personal jurisdiction them. At the constitutional level, whether or not to exercise jurisdiction over a defendant is a question of fairness.International Shoe Co. v. Washington, 326 U.S. 310, 317-20 (1945). However, determining what is fair requires review of the quantity and quality of the defendant's contacts with the forum state. Perkins v. Benquet Mining Co., 342 U.S. 4376 (1952). Constitutional concerns only arise where jurisdiction is allowed pursuant to a state's long-arm statute. As the Court of Appeals for the Fourth Circuit has stated:

[W]hen evaluating the propriety of jurisdiction obtained pursuant to a long-arm statute, a two-step analysis is normally required. First, we must determine whether the statutory language applies to the defendant; second, if the statutory language applies, we must determine whether the statutory assertion of jurisdiction is consistent with the due process clause of the Constitution.

English Smith v. Metzger, 901 F.2d 36, 38 (4^th Cir. 1990) (citation omitted).

In considering defendants' motions to dismiss, analysis begins with the two-step approach furnished by the circuit court. The North Carolina Supreme Court has held that the state's jurisdictional statute applies to a defendant who meet the minimal contacts requirement of International Shoe Co. v. Washington, supra. See Dillon v. Numismatic Funding Corp., 291 N.C. 674 (1977); see also Western Steer-Mom Pops v. FMT Invs., Inc., 578 F. Supp. 260, 264 (W.D.N.C. 1984). The two-pronged approach approved by the circuit in English Smith "collapses into the question of whether (the Defendants have) the minimum contacts with North Carolina." Fieldcrest Mills, Inc. v. Mohasco Corp., 442 F. Supp. 424, 426 (M.D.N.C. 1977).

There are five factors used in determining whether the long-arm statute and minimum contacts have been satisfied:

(1) quantity of the contacts;

(2) nature and quality of the contacts;

(3) source and connection of the cause of action to the contacts;

(4) interest of the forum state; and

(5) convenience.

Western Steer-Mom Pops v. FMT Invs., Inc., supra, at 264; see Fieldcrest Mills, Inc. v. Mohasco Corp., supra, at 427; see also N.C. Gen. Stat. § 1-75.4(5) (North Carolina long-arm statute).

The burden is on plaintiffs to establish that the long-arm statute provides for jurisdiction over these defendants. Marion v. Long, 72 N.C. App. 585, cert. denied, 313 N.C. 604 (1985). Therefore, the materials and arguments submitted by plaintiffs and defendants has been reviewed in light of the five considerations found in Western Steer-Mom Pops v. FMT Invs., Inc., supra.

a. Quantity of Contacts

Plaintiffs have alleged and argued absolutely no contacts between these defendants and the State of North Carolina. Close review of all the materials reveals that all relevant events occurred in the State of New York and that defendants Baum and Alstate simply do not conduct their professions in the State of North Carolina. No evidence has been produced by the Plaintiffs that the defendant Deutche Bank conducts business in North Carolina. Plaintiffs decision to relocate to North Carolina does not bring with it jurisdiction over parties to a dispute that appears to have been fully contained within the boundaries of the State of New York. The undersigned finds no contacts.

b. Nature and Quality of the Contacts

The nature and quality of the contacts of the defendant Baum can be described as non existent, for the defendant Alstate as little and for the defendant Deutche Bank as unknown.

c. Source and Connection of the Action to the Contacts

All actions appear to have occurred in New York with no connection to North carolina.

d. Interest of the Forum State

The intent of the North Carolina long-arm statute is to assert in personam jurisdiction to the full extent permitted by the Due Process Clause of the United States Constitution. Kaplan School Supply Corp. v. Henry Wurst, Inc., 56 N.C. App. 567, cert.denied, 306 N.C. 385 (1982). There is a mandate that the North Carolina long-arm statute be given liberal construction, thereby favoring the finding of personal jurisdiction. F.D.I.C. v. Kerr, 637 F. Supp. 828 (W.D.N.C. 1986). As exhibited in the long-arm statute, North Carolina has a substantial interest in the execution of contracts within this state, promises of services to be rendered in this state, solicitation of business within the state, and goods or intellectual property being licensed or sold to corporate residents of the state. See N.C. Gen. Stat. §§ 1-75.4(5)(a), et seq. None of those having occurred in North Carolina, the only interest this court can fathom that North Carolina would have is to afford the judgment of the courts of the State of New York full faith and credit as also provided by the United States Constitution.

e. Convenience

Whether the travel required in this case will be by or on behalf of defendants from New York to North Carolina, or by plaintiffs vice versa, the court is aware of the considerable distance and cost involved.

f. Summary as to Personal Jurisdiction

It appearing that plaintiffs cannot satisfy the minimal requirements of North Carolina's long-arm statute, the court need not conduct further inquiry inasmuch as plaintiffs' assertion of jurisdiction in this matter could, in no way, satisfy the requirements of minimum contacts because the exercise of such jurisdiction would "offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).

The undersigned will, therefore, respectfully recommend that defendants' motions to dismiss this action for lack of personal jurisdiction be granted and that this action be dismissed in its entirety. Lacking personal jurisdiction, the court need not address the remaining arguments for dismissal. In an abundance of caution, however, the undersigned will briefly discuss the remaining arguments.

2. Failure to State a Cognizable Claim Under Section 1983

Defendants next allege that defendants fail to state a cognizable claim under Section 1983. Specifically, defendants argue that service of process by a private process server does not amount to state action.

Section 1983 does not provide a universal remedy for all disputes between parties. A defendant charged with deprivation of a constitutional right must be state actor or act in concert with a state actor. Although private use of state-sanctioned private remedies does not rise, by itself, to a level of state action, state action is present when private parties make extensive use of state procedures with overt, significant assistance of state officials. Georgia v. McCollum, 60 U.S.L.W. 4574, 4577 (U.S. 1992); Tulsa Professional Collection Servs., Inc. v. Pope, 485 U.S. 478 (1988); Jones v. Poindexter, 903 F.2d 1006 (4th Cir. 1990) (illegal use of state process to enforce judgment is not state action).

In the Fourth Circuit, there are only four circumstances in which a private party can be deemed to be a state actor, and the only circumstance that has any application in this case is the third, which provides, as follows: "when the state has delegated a traditionally and exclusively public function to a private actor." DeBauche v. Trani, 191 F.3d 499 (1999) (citation an corresponding quotation marks omitted). In this case, plaintiff has alleged two acts: (1) defective service of the summons and complaint by Alstate; and (2) failure to service notice of the default judgment by Baum.

As to the service of the summons, there is some authority, albeit dated, that service of the summons by a private process server amounts to state action. Not surprisingly, this precedent is from a federal court in New York: "[u]nlike most functions involved in the conduct of a lawsuit by private parties, the service of summons is essentially and traditionally a public function." United States v. Wiseman, 445 F.2d 792, 796 (2d Cir. 1971). If Wiseman can be read for finding that service of the summons is a public function, then the same language clearly eliminates "most [other] functions involved in the conduct of a lawsuit," which would include service of pleadings and Orders after the Complaint.

Assuming arguendo that the 1971 decision in Wiseman still has force after the United States Supreme Court held in 1982 that "private misuse of a state statute does not describe conduct that can be attributed to the State," Lugar v. Edmonson oil Co., Inc., 457 U.S. 922, 940 (1982), the court has looked to Fourth Circuit precedent to determine to what extent private service of a summons constitutes a public function. In Wilkins v. Rogers, 581 F.2d 399 (4^th Cir. 1978), the Court of Appeals for the Fourth Circuit addressed the holding of Wiseman, finding as follows:

And, while Nathan Rosen and Knight may have acted with requisite state action in their capacities as process servers, United States v. Wiseman, 445 F.2d 792 (2d Cir. 1971), they have not deprived Mrs. Wilkins of any right secured to her by the Constitution and laws of the United States. Wilkins alleges that Nathan Rosen failed to serve her with a copy of the complaint in Suit 1, and that Sheriff Knight failed to "make a proper return of service" in Suit 3. But the record indicates that no default judgment was entered against Wilkins in Suit 1; pursuant to a stipulation, she answered and counterclaimed to the complaint. The record also indicates that Rogers filed an answer to Wilkins' complaint in Suit 3, and issue was joined in the consolidated hearing before the Special Master. This is not a case involving "sewer service." Mrs. Wilkins had notice and opportunity to be heard on all claims. In fact, she prevailed in the hearing before the Special Master on both her claim to title of the real estate and her claim to personal property held by Rogers.

Id., at 405. Having taken judicial notice of the pleadings in the New York action, plaintiffs, without any doubt, were in fact heard on their claims and entered into a Stipulated order upon advise of their own counsel, and a Stipulated Order was agreed to and entered which provided them the opportunity redeem their property and avoid foreclosure. Thus, as in Wilkins, defendants cannot state a claim that they have been deprived of any constitutional right protected by the United States Constitution, especially due process, inasmuch as the state court record is clear that plaintiffs had not only notice and an opportunity to be heard, they actually obtained substantial relief from the state court.

Having carefully considered plaintiffs' Section 1983 claims against these defendants, plaintiffs have failed to allege facts even under the broadest interpretation of current law that could support a finding in their favor. The undersigned will, therefore, alternatively recommend that defendants' motions to dismiss the Complaint under Rule 12(b)(6) be granted, and that plaintiffs' claims be dismissed with prejudice.

3. Res Judicata

Defendants have also moved to dismiss this action as barred by the doctrine of res judicata, inasmuch as the state courts of New York have already considered plaintiffs' contentions concerning the alleged lack of service of the summons and lack of provision of a copy of the default judgment. The doctrine of res judicata, or claim preclusion, holds that once a claim has been litigated and resolved, it may not be reasserted elsewhere. It bars attempts to relitigate or restate claims that have been resolved in another court proceeding, even where that claim is reasserted as a federal tort. HMK Corp. v. Walsey, 637 F. Supp. 710, 716-18 (E.D. Va. 1986), aff'd, 828 F.2d 1071 (4th Cir. 1987), cert. denied, 484 U.S. 1009 (1988). Plaintiffs cannot now convert into a Section 1983 claim their previously resolved state-law claims concerning service of process and mesne pleadings. Indeed, plaintiffs entered into a Stipulated Order which provided them with substantial relief from the courts of New York. See Docket Entry 16, Ex. 1.17.

Under Martin v. American Bancorporation Retirement Plan, 407 F.3d 643, 650 (4^th Cir. 2005), res judicata applies where there is a final judgment on the merits of the claim in a prior suit, there is an identity of the cause of action in both suits, and there is an identity of the parties. Id. The Stipulated Order satisfies the first requirement, Harnett v. Billman, 800 F.2d 1308, 1312 (4^th Cir. 1986), the claims in the state court and here are all based on the same alleged wrongful occurrence, id., at 1314, which satisfies the second requirement, and all the parties (or their privies) are present in this action, which takes care of the third requirement. The undersigned will, therefore, respectfully recommend in the alternative that this action be dismissed with prejudice inasmuch as plaintiffs' claims are barred by the doctrine of res judicata.

4. Statute of Limitations

There is no federal statute of limitations for Section 1983 actions, and state statutes provide the relevant period. Burnett v. Grattan, 468 U.S. 42 (1984). The state statute governing personal injury must be applied to all Section 1983 claims.Wilson v. Garcia, 471 U.S. 261 (1985). Where a state provides multiple limitations periods for personal injuries, the general or residual period applies. Owens v. Okure, 488 U.S. 235 (1989). A three-year statute of limitations applies to any personal injury not covered by another limitation in North Carolina. N.C. Gen. Stat. § 1-52(5); National Advertising Co. v. City of Raleigh, 947 F.2d 1158 (4th Cir. 1991), cert. denied, 60 U.S.L.W. 3782 (U.S. 1992); Cole v. Cole, 633 F.2d 1083, 1091-92 (4th Cir. 1980). By plaintiffs' own verified admissions, they knew on January 2, 2003, that a foreclosure action had been commenced against them, that judgment had been entered against them by default, and that their house had been sold. Docket Entry 18, Ex. 1.13. Inasmuch as they filed such affidavits in state court, plaintiffs are now barred under the doctrine of judicial estoppel from asserting to the contrary.

In King v. Herbert J. Thomas Mem. Hosp., 159 F.3d 192 (4th Cir. 1998), the appellate court held that

Judicial estoppel, an equitable doctrine that prevents a party who has successfully taken a position in one proceeding from taking the opposite position in a subsequent proceeding, is recognized to protect the integrity of the judicial system. Acting on the assumption that there is only one truth about a given set of circumstances, the courts apply judicial estoppel to prevent a party from benefiting itself by maintaining mutually inconsistent positions regarding a particular situation. As we have previously observed, the doctrine is invoked to prevent a party from "playing fast and loose with the courts," from "blowing hot and cold as the occasion demands," or from attempting "to mislead the [courts] to gain unfair advantage." As an equitable doctrine, judicial estoppel is invoked in the discretion of the district court and with the recognition that each application must be decided upon its own specific facts and circumstances.

Id., at 196 (citations omitted). Because the law assumes "that there is only one truth about a given set of circumstances," id., the Court of Appeals for the Fourth Circuit has adopted the doctrines of judicial estoppel and quasi estoppel to prevent litigants from benefiting from inconsistent factual positions, which not only make a mockery out of the courts, but would put in jeopardy the full faith and credit afforded to earlier decisions.

In a recent decision, the Court of Appeals for the Fourth Circuit in National Union Fire Ins. Co. of Pittsburgh, Inc. v. Manufacturers and Traders Trust Co., 2005 WL 670617 (4^th Cir. March 23, 2005), recited the elements of judicial estoppel:

Due to the limitations of electronic filing, a copy of such unpublished decision is placed in the docket through reference to the Westlaw citation.

The doctrine of judicial estoppel has three necessary elements:

(1) The party to be estopped must be asserting a position that is factually incompatible with a position taken in a prior judicial or administrative proceeding; (2) the prior inconsistent position must have been accepted by the tribunal; and (3) the party to be estopped must have taken inconsistent positions intentionally for the purpose of gaining unfair advantage.

But "judicial estoppel will not be applied where the party's inconsistent positions resulted from inadvertence or mistake."

Id., 2005 WL, at 2 (citing King, supra). The judicial estoppel doctrine prohibits a litigant from asserting inconsistent positions in different legal proceedings. In prohibiting such conduct, the doctrine serves dual purposes:

First, the doctrine seeks to preserve the sanctity of the oath by demanding absolute truth and consistency in all sworn positions. Preserving the sanctity of the oath prevents the perpetuation of untruths which damage public confidence in the integrity of the judicial system. Second, the doctrine seeks to protect judicial integrity by avoiding the risk of inconsistent results in two proceedings.

Bates v. Long Island R.R. Co., 997 F. Supp. 1028, 1038 (2d Cir. 1993). "The [judicial estoppel] doctrine is invoked to prevent a party from `playing fast and loose with the courts,' from `blowing hot and cold as the occasion demands,' or from attempting `to mislead the courts to gain an unfair advantage.'"King, supra, at 196.

Plaintiffs are, therefore, bound by their own admissions, and for this suit to have been timely, it must have been filed not later than January 3, 2006 (January 2, 2006, was a federal holiday), making the February 9, 2006, filing beyond the three year statute of limitations. The undersigned will, therefore, recommend in the alternative that this action be dismissed with prejudice as time barred.

D. Discussion of Motion to Amend Complaint

In partial response to the motions to dismiss, plaintiffs also moved under Rule 15, Federal Rules of Civil Procedure, to amend their Complaint. Plaintiffs state that while the substantive claims for relief under the fifth and fourteenth amendments would remain unchanged, they wish to amend the Complaint to allege that Baum's failure to serve them with notice of the default in the state court proceeding was in accordance with New York procedural law, thereby adding to their claim that Baum acted under color of state law. Apparently, plaintiffs gleaned this additional factual allegation from Baum's argument that it had no obligation under state law to serve a notice of default on a party that has defaulted in litigation. Defendants have opposed the proposed amendment arguing that it is futile.

The court notes that plaintiffs proposition that failure to serve a party who is in default with notice of the default can somehow rise to either state action or a constitutional violation is not supported by citations to any statute or case law. Even the Federal Rules of Civil Procedure provide that "[n]o service need be made on parties in default for failure to appear. . . ." Fed.R.Civ.P. 5(a). Inasmuch as the United States Supreme Court has final approval on the Federal Rules, plaintiffs avenue of reason would appear to be a dead end inasmuch as obedience to the rules laid out by our highest court simply cannot be the basis for state action or constitutional violation.

The undersigned's review of plaintiffs' proposed amendments reveals that they are not in conformity with the requirements of Rule 15(a), Federal Rules of Civil Procedure, inasmuch as such amendments would prejudice the nonmoving party by requiring them to expend additional resources on claims that are patently not viable.

Rule 15(a) of the Federal Rules of Civil Procedure provides that when a party seeks leave to amend a complaint "leave shall be freely given when justice so requires." Foman v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962), mandates a liberal reading of the rule's direction for "free" allowance: motions to amend are to be granted in the absence of a "declared reason" "such as undue delay, bad faith or dilatory motive . . ., repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party . . ., futility of amendment, etc." In Davis v. Piper Aircraft Corp., 615 F.2d 606, 613 (4th Cir. 1980), we noted that under Foman a lack of prejudice would alone ordinarily warrant granting leave to amend and that mere delay absent any resulting prejudice or evidence of dilatoriness was not sufficient justification for denial.

Ward Electronics Service, Inc. v. First Commercial Bank, 819 F.2d 496, 497 (4th Cir. 1987). The undersigned will, therefore, respectfully recommend to the district court that plaintiffs' Motion to Amend be denied.

RECOMMENDATION

IT IS, THEREFORE, RESPECTFULLY RECOMMENDED that (1) plaintiffs' Motion for leave of Court to Amend Original Complaint (#26) be DENIED; (2) defendants Steve J. Baum, P.C.'s and Deutsche Bank Trust Company Americas' Motion to Dismiss (#15) be GRANTED; (3) defendant Alstate Process Service, Inc.'s Motions to Dismiss (#18) be GRANTED, (4) that this action be DISMISSED WITHOUT PREJUDICE inasmuch as this court lacks personal jurisdiction over defendants; (5) in the alternative, this action be DISMISSED WITH PREJUDICE (a) for plaintiffs' failure to state a cognizable claim under Section 1983; and/or (b) as this action is barred by the doctrine of res judicata; and/or (c) as this action is barred by the statute of limitations. The parties are hereby advised that, pursuant to 28, United States Code, Section 636(b)(1)(C), written objections to the findings of fact, conclusions of law, and recommendation contained herein must be filed within fourteen ( 14) days of service of same. Failure to file objections to this Memorandum and Recommendation with the district court will preclude the parties from raising such objections on appeal. Thomas v. Arn, 474 U.S. 140 (1985), reh'g denied, 474 U.S. 1111 (1986); United States v. Schronce, 727 F.2d 91 (4th Cir.), cert. denied, 467 U.S. 1208 (1984).