Bishop v. JP Morgan Chase & Co. et al
Filing
42
MEMORANDUM OPINION re 37 MOTION to Strike Allegations Pled in Amended Complaint and to Dismiss the Amended Complaint with Prejudice, or Alternatively, to Stay the Action Pending the Resolution of a Related State Court Action. Signed by Judge Richard G. Andrews on 4/7/2014. (nms)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
WILLIAM EDWARD BISHOP,
Plaintiff,
v.
Civ. No. 13-001-RGA
JP MORGAN CHASE & CO., et al.,
Defendants.
William Edward Bishop, Bear, Delaware. ProSe Plaintiff.
Gary William Lipkin, Esquire, Duane Morris LP, Wilmington, Delaware. Counsel for
Defendants JP Morgan Chase & Co. and JP Morgan Chase Bank National Association.
MEMORANDUM OPINION
7,
April
2014
Wilmington, Delaware
ANDREW~t-f~T
JUDGE:
Plaintiff William Edward Bishop filed this action against Defendants JPMorgan
Chase & Co., JPMorgan Chase Bank, National Association, and John Doe for violating
the Truth-in-Lending Act, 15 U.S.C. § 1601, et seq. 1 (D. I. 1). Chase & Co. and
JPMorgan Bank move to strike allegations pled in the amended complaint, to dismiss
the amended complaint with prejudice or, alternatively, to stay the action pending the
resolution of a related state court action. (D.I. 36, 37). Plaintiff opposes that portion of
Defendants' motion that seeks to strike allegations. (D.I. 39). His response does not
address the other grounds raised in Defendants' motion to dismiss.
BACKGROUND
The present action arises from a pending foreclosure action filed by JPMorgan
Bank in the Superior Court of the State Delaware on November 20,2012. (See D.l. 38,
ex. A). The underlying facts are well-known to the parties and are fully set forth in the
June 21, 2013 Report and Recommendation issued by United States Magistrate Judge
Mary Pat Thynge. (See D.l. 23). The amended complaint contains fifteen counts of
alleged TILA violations relating to the assignment of Plaintiff's mortgage to JPMorgan
Bank. For relief, Plaintiff seeks the amount of the claimed mortgage plus court costs
and expenses. (D.I. 36,
1J 77).
On the same day Plaintiff initiated this action, he filed a
motion to dismiss the foreclosure action arguing the same or similar TILA issues
presented in the federal complaint. (See D.l. 37, ex. B).
Defendants filed a motion to dismiss the original complaint in the instant case on
February 22, 2013, granted by the court on August 5, 2013. (D.I. 27). Plaintiff was
1
For clarity the Court will refer to JPMorgan Chase & Co. as Chase & Co. and
JPMorgan Chase Bank, National Association as JPMorgan Bank.
given leave to amend. Plaintiff appealed the ruling, and the appeal was dismissed for
lack of appellate jurisdiction. On January 24, 2014, Plaintiff filed an amended
complaint. (D.I. 36).
The amended complaint contains some new language but, for the most part, is
identical to the dismissed original complaint. The amended complaint adds statements
regarding Plaintiff's education and employment, that the mortgagee did not comply with
the thirty-day notice for assignments, that the FHA (i.e., Federal Housing
Administration) purchased the mortgage on an unknown date, that "Defendants'
attorneys failed to act by February 10, 2012," and it mentions court ordered mediation.
(See D.l. 36). Defendants seek dismissal pursuant to Fed. R. Civ. P. 12(b)(6) and the
Younger abstention doctrine, see Younger v. Harris, 401 U.S. 37 (1971), and moves to
strike pursuant to Rule 12(f). Plaintiff opposes the motion to strike, and argues that
Defendants improperly included exhibits in an attempt to argue the facts of the case.
(D.I. 39).
STANDARDS OF REVIEW
Under Rule 12(b)(6), a motion to dismiss may be granted only if, accepting the
well-pleaded allegations in the complaint as true and viewing them in the light most
favorable to the plaintiff, a court concludes that those allegations "could not raise a
claim of entitlement to relief." Bell At/. Corp. v. Twombly, 550 U.S. 544, 558 (2007). "In
deciding motions to dismiss pursuant to Rule 12(b)(6), courts generally consider only
the allegations in the complaint, exhibits attached to the complaint, matters of public
record, and documents that form the basis of a claim." Lum v. Bank of Am., 361 F.3d
217, 221 n.3 (3d Cir. 2004).
2
A well-pleaded complaint must contain more than mere labels and conclusions.
See Ashcroft v. Iqbal, 556 U.S. 662 (2009). The assumption of truth is inapplicable to
legal conclusions or to "[t]hreadbare recitals of the elements of a cause of action
supported by mere conclusory statements." Iqbal, 556 U.S. at 678. When determining
whether dismissal is appropriate, the court must take three steps: "(1) identify[] the
elements of the claim, (2) review[] the complaint to strike conclusory allegations, and
then (3) look[] at the well-pleaded components of the complaint and evaluat[e] whether
all of the elements identified in part one of the inquiry are sufficiently alleged." Malleus
v. George, 641 F .3d 560, 563 (3d Cir. 2011 ). Elements are sufficiently alleged when
the facts in the complaint "show" that the plaintiff is entitled to relief. Iqbal, 556 U.S. at
679 (quoting Fed. R. Civ. P. 8(a)(2)). Deciding whether a claim is plausible will be a
"context-specific task that requires the reviewing court to draw on its judicial experience
and common sense." /d. Because Plaintiff proceeds prose, his pleading is liberally
construed and his Complaint, "however inartfully pleaded, must be held to less stringent
standards than formal pleadings drafted by lawyers." Erickson v. Pardus, 551 U.S. 89,
94 (2007) (internal quotation marks omitted).
Rule 12(f) provides that "[t]he court may strike from a pleading an insufficient
defense or any redundant, immaterial, impertinent, or scandalous matter." "The
purpose of a motion to strike is to clean up the pleadings, streamline litigation, and
avoid unnecessary forays into immaterial matters." Natale v. Winthrop Res. Corp.,
2008 WL 2758238, at *14 (E.D. Pa. 2008) (internal quotation marks omitted).
Immateriality has ben defined as "any matter having no value in developing the issues
of a case." In re Catanella & E.F. Hutton and Co. Sec. Litig., 583 F. Supp. 1388, 1400
3
(E.D. Pa. 1984) (citation omitted). Relief under Rule 12(f) is generally disfavored and
will be denied unless the allegations "have no possible relation to the controversy and
may cause prejudice to one of the parties, or if the allegations confuse the issues in the
case." /d. (internal quotation marks omitted).
DISCUSSION
Younger Abstention
The Court turns first to Defendants' motion to dismiss based upon the Younger
abstention doctrine. See Younger v. Harris, 401 U.S. 37 (1971 ). Plaintiff filed this
action for violations of the TILA. He seeks compensatory damages in the form of the
"amount of the claimed mortgage." Under the Younger abstention doctrine, a federal
district court must abstain from hearing a federal case which interferes with certain state
proceedings. See Younger v. Harris, 401 U.S. 37 (1971 ). Under Younger, federal
courts are prevented from enjoining pending state proceedings absent extraordinary
circumstances. 2 Middlesex Cnty. Ethics Comm. v. Garden State Bar Ass'n, 457 U.S.
423, 437 (1982). Abstention is appropriate only when: (1) there are ongoing state
proceedings that are judicial in nature; (2) the state proceedings implicate important
state interests; and (3) the state proceedings provide an adequate opportunity to raise
the federal claims. Lazaridis v. Wehmer, 591 F.3d 666, 670 (3d Cir. 201 0). The
doctrine applies to proceedings until all appellate remedies have been exhausted,
2
The Younger abstention doctrine provides that federal courts are not to interfere
with pending state criminal proceedings. The Younger doctrine has been extended to
civil cases and state administrative proceedings. Middlesex County Ethics Comm. v.
Garden State Bar Ass'n, 457 U.S. 423 (1982); Huffman v. Pursue Ltd., 420 U.S. 592
(1975).
4
unless the matter falls within one of the Younger exceptions. 3 Huffman v. Pursue Ltd.,
420 U.S. 592, 608 (1975).
Defendants argue that the Younger requisites have been met and, therefore,
dismissal is appropriate. In the pending foreclosure action, Plaintiff raised the same or
similar TILA issues in his motion to dismiss the foreclosure action as in the instant
action. Here, Plaintiff does not seek injunctive relief, only monetary damages. Under
Younger, district courts have the power to dismiss claims for injunctive or declaratory
relief because courts control the granting of discretionary relief as courts sitting in
equity. See Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 719-20 (1996). If the
Younger abstention applies to actions for damages, it requires a temporary stay; it is
impermissible to dismiss actions for damages that were not cognizable in ongoing state
proceedings. See id. Indeed, "the District Court has no discretion to dismiss rather
than to stay claims for monetary relief that cannot be redressed in the state
proceeding." Deakins v. Monaghan, 484 U.S. 193, 202 (1988).
Based upon the foregoing, the Court will deny the motion to dismiss based upon
the Younger abstention doctrine. 4
Motion to Strike References to Settlement
3
Exceptions to the Younger doctrine exist where irreparable injury is "both great
and immediate," Younger, 401 U.S. at 46, where the state law is "flagrantly and patently
violative of express constitutional prohibitions," id. at 53, or where there is a showing of
"bad faith, harassment, or ... other unusual circumstances that would call for equitable
relief." /d. at 54.
4
The Court does not address the issue of staying the matter, given that
Defendants' motion to dismiss will be granted on other grounds. See pp. 8-11, infra.
5
Defendants argue that paragraphs 31, 32, 42, 45, 50, 59, and 72 of the
amended complaint refer to statements made by their employee Dan Calhoun during
settlement negotiations. Therefore, Defendants move to strike the allegations pursuant
to Rule 12(f) and Fed. R. Evid. 408. Defendants rely upon emails (D. I. 38, ex. I) to
support their motion. Plaintiff argues that Defendants improperly attached exhibits in an
attempt to argue facts.
A motion to strike is decided "on the basis of the pleadings alone." DeLa Cruz v.
Piccardi Press, 521 F. Supp. 2d 424, 429 (E.D. Pa. 2007). Matters outside the
pleadings normally are not considered on a Rule 12(f) motion. See United States v.
Sensient Colors, Inc., 580 F. Supp. 2d 369, 374 (D.N.J. 2008). Thus, the Court will
determine the present motion to strike on the basis of the pleadings alone.
Rule 408 prohibits the admission of "evidence concerning settlement or
compromise of a disputed claim, where the evidence is offered to establish liability, or
the validity or amount of the claim." Affiliated Mfrs., Inc. v. Aluminum Co. of Am., 56
F.3d 521, 527 (3d Cir. 1995); see Fed. R. Evid. 408. The purpose behind Rule 408 is
the "promotion of the public policy favoring the compromise and settlement of disputes
that would otherwise be discouraged with the admission of such evidence." Steak Umm
Co., LLC v. Steak 'Em Up, Inc., 2009 WL 3540786, at *3 (E.D. Pa. 2009) (quoting
Manko v. United States, 87 F.3d 50, 54 (2d Cir. 1996)). Litigation need not be
threatened to trigger application of Rule 408. /d. (stating that "dispute" as employed in
Rule 408 includes "both litigation and less formal stages of a dispute"). Rather, the
party seeking protection of the rule must show that there is an actual dispute or
difference of opinion between the parties regarding the validity or amount of the claim.
6
See Dna/ v. PB Amoco Corp., 134 F. App'x 515, 518 (3d Cir. 2005).
Rule 408 is a rule of evidence that does not generally govern pleadings. See
Steak Umm Co., 2009 WL 3540786, at *3 (denying motion to strike complaint and
declining to decide whether allegations referencing settlement could be held
inadmissible at trial or summary judgment). However, some courts have applied Rule
408 to strike allegations in pleadings that clearly disclose the substance of settlement
negotiations. See, e.g., Ciolli v. lravani, 625 F. Supp. 2d 276,
285~86
(E.D. Pa. 2009)
(striking references to settlement discussions in complaint where plaintiff consistently
characterized such discussions as settlement negotiations).
In their motion, Defendants contend the amended complaint discloses the
substance of settlement communications that allegedly occurred during the State
foreclosure action, noting that Defendants attempted to work with Plaintiff in obtaining a
loan modification. Newly added paragraph 72 of the amended complaint contains two
references to court ordered mediation that took place on January 15, 2014. (See D.l.
38,
1f 72).
One sentence indicates that Plaintiff attended the mediation but no
employee or specially designated lender representative appeared. The other sentence
refers to an attorney who attended the mediation and stated that he was unsure if the
note was owned by the FHA. The remainder of the paragraph discusses a potential
loan modification but does not indicate its relation to settlement negotiations.
In addition, Defendants contend that paragraphs 31, 32, 42, 45, 50, 59, and 72
of the amended complaint refer to statements made by its employee Dan Calhoun
during settlement negotiations. While the foregoing paragraphs refer to statements
7
made by Calhoun, they make no mention that the information was obtained during
settlement negotiations.
At this juncture, based upon the existing record, the Court is unable to determine
whether the statements complained of by Defendants constitute settlement negotiations
that trigger application of Rule 408. Therefore, the Court will deny Defendants' motion
to strike, without prejudice to Defendants' rights to later seek to exclude this evidence
by filing a motion in limine prior to trial. See, e.g., Bailey-P. V.S. Oxides, LLC v. S & K
Packaging, Inc., 2009 WL 4256605, at *2 (W.O. Pa. 2009)
Failure to Cure Pleading Defects
Counts One through Three. 15 U.S.C. § 1641(a). Under§ 1641(a), the TILA
imposes assignee liability only if a violation is "apparent on the face of the disclosure
statement." Ramadan v. Chase Manhattan Corp., 229 F.3d 194, 197 (3d Cir. 2000). In
the instant case, counts one through three of the original complaint were dismissed with
leave to amend. In dismissing the counts, the Court noted that notwithstanding mere
legal conclusions, counts one through three failed to proffer any facts to plead a claim
under§ 1641 (a) for inaccurateness or incompleteness on the face of the disclosure.
The amended complaint did not cure the pleading deficiencies in counts one through
three. Therefore, the Court will grant Defendants' motion to dismiss counts one through
three.
Count Four.§ 1641(d)(1}. Section 1641(d)(1) only applies to loans that qualify
under the Home Ownership Equity Protection Act. The Court dismissed count four of
the original complaint as it failed to plead adequate facts to trigger HOEPA. The
8
amended complaint did not cure the pleading deficiencies in count four. Therefore, the
Court will grant Defendants' motion to dismiss count four.
Counts Five through Eight,§ 1641(e). Section 1641(e) provides that an action
for damages against the assignee of a loan secured by real property can be maintained
only if the alleged violations are "apparent on the face" of the TILA disclosure. The
Court dismissed counts five through eight of the original complaint for failing to include
a factual basis to state a claim for an incomplete or inaccurate disclosure statement
based on fraud. The amended complaint did not cure the pleading deficiencies in
counts five through eight. Therefore, the Court will grant Defendants' motion to dismiss
counts five through eight.
Counts Nine through Fourteen. 1I 1641 (g). Section 1641 (g) provides that a new
assignee of a loan must notify the borrower within thirty days of the transfer. Actual
damages are required for a claim under this section. See Val/ies v. Sky Bank, 591 F.3d
152, 157 (3d Cir. 2009). To prove actual damages, a plaintiff must demonstrate he
suffered a loss because he detrimentally relied on an inaccurate or incomplete
disclosure. /d. at 157-58. To recover actual damages, a borrower must show that he:
(1) read the TILA disclosure statement; (2) understood the disclosed charges; (3) would
have sought a lower price if the disclosure statement had been accurate; and (4) would
have obtained a lower price. /d. at 155.
The court dismissed counts nine through fourteen in the original complaint after
concluding that the costs as alleged (see D.l. 1, 1f51 a. through e.) are not the type
related to a violation under 1f1641(g). In addition, counts nine through fourteen were
9
dismissed on the basis that the original complaint failed to alleged detrimental reliance
and a factual basis demonstrating the disclosure was inaccurate or incomplete under
§ 1641(g).
The amended complaint adds, repeatedly, that Defendants failed to provide the
thirty-day notification. It contains additional damages for the cost of an appeal to the
United States Court of Appeals, interest accumulating at a substantially higher rate than
current modified rates, and emotional torment. (D.I. 36,
1f 51
f. through h.). The added
damages, however, do not suffice as "actual damages" under the TILA. See Bradford
v. HSBC Mort. Corp., 280 F.R.D. 257, 262 (E.D. Va. 2012) (fees incurred in pursuing a
claim are not actual damages); see also Che v. Aurora Loan Services, LLC, 847 F.
Supp. 2d 1205, 1209 (C.D. Cal. 2010) (rejecting plaintiff's speculative argument that
foreclosure constituted "actual damages" to establish liability under Section 1641 (g)).
Further, the amended complaint did not cure the pleading deficiencies in counts nine
through fourteen, Plaintiff having failed to allege his damages were the result of
detrimental reliance. Therefore, the Court will grant Defendants' motion to dismiss
counts nine through fourteen.
Count Fifteen.
'U 1641 (f).
Section 1641 (f) provides that "[u]pon written request by
the obligor, the servicer shall provide the obligor, to the best knowledge of the servicer,
with the name, address, and telephone number of the owner of the obligation or the
master servicer of the obligation." 15 U.S.C. § 1641 (f). Count 15 of the original
complaint was dismissed on the grounds that it contained no viable claim under
§ 1641 (f).
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As discussed, the amended complaint contains few changes. The amendments
failed to cure the pleading deficiencies in count fifteen. For example, count fifteen does
not provide factual allegations to support a claim under § 1641 (f), even considering the
allegations that a transfer to the FHA was concealed by Defendants. The unsupported
allegations and legal conclusions cannot survive Defendants' motion to dismiss.
Therefore, the Court will grant Defendants' motion to dismiss count fifteen.
CONCLUSION
The Court will grant Defendants' motion to dismiss on the grounds that the
amended complaint fails to state a claim upon which relief may be granted. 5 The Court
will deny Defendants' motion to dismiss on the remaining grounds, and will deny the
motion to strike. Plaintiff was provided an opportunity to amend to cure his pleading
defects, yet he failed to do so. Because Plaintiff failed in his attempt to remedy the
defects in his complaint, despite notice and his familiarity with the pleading
requirements, granting him a second opportunity to amend his complaint would be
futile. Jones v. Camden City Bd. of Educ., 499 F. App'x 127, 129 (3d Cir. 2012) (citing
Grayson v. Mayview State Hasp., 293 F.3d 103, 108 (3d Cir. 2002) and Foman v.
Davis, 371 U.S. 178, 182 (1962)). An appropriate order will be entered.
5
Since the amended complaint makes no allegations against the John Doe
defendant, see D.l. 36 at 9, 1J20, it will be dismissed in relation to John Doe also.
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