COONEY et al v. BAC HOME LOANS SERVICING, LP et al
Filing
16
OPINION FILED. Signed by Judge Jerome B. Simandle on 6/22/11. (js)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
PATRICK COONEY & CARLEEN
COONEY,
HON. JEROME B. SIMANDLE
Civil No. 10-4066 (JBS/JS)
Plaintiffs,
v.
OPINION
BAC HOME LOANS SERVICING, LP &
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.,
Defendants.
APPEARANCES:
Lewis G. Adler, Esq.
LAW OFFICE OF LEWIS ADLER
26 Newton Avenue
Woodbury, NJ 08096
Counsel for Plaintiffs
Mariah E. Murphy, Esq.
BALLARD SPAHR LLP
210 Lake Drive East
Suite 200
Cherry Hill, NJ 08002-1163
Counsel for Defendants
SIMANDLE, District Judge:
I.
INTRODUCTION
This putative class action involving allegedly improper
fees charged for mortgage reinstatement is before the Court on
two motions of the Defendants to dismiss the Complaint pursuant
to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
[Docket Items 6 & 7.]
The principal issue is whether the
Complaint alleges a basis upon which any of the identified fees
is improper.
Because it does not, as explained below, the
Complaint will be dismissed.
II.
BACKGROUND
Like many American families in recent years, Plaintiffs
Patrick and Carleen Cooney fell behind on their mortgage
payments.
(Compl. ¶ 2.)
Under New Jersey law, homeowners must
be given the opportunity to reinstate their delinquent mortgage
before a foreclosure order is entered.
2A:50-57(b)(3).
See N.J. Stat. Ann. §
On January 22, 2010, Defendant BAC Home Loans
Servicing, LP sent Plaintiffs a reinstatement quote letter at
Plaintiffs' request, which stated that the Plaintiffs owed an
estimated $13,136.62 in order to bring their loan current if they
paid in full on January 25, 2010.
(Id. ¶ 14; Compl. Ex. A.)
The
letter itemized various fees and past due payments, including
$1,050 in legal fees and costs through January 22, 2010, and $578
in anticipated additional legal fees and costs through January
25, 2010.
(Id.)
The letter gave Plaintiffs explicit notice that
the $578 in additional fees was based on anticipated steps that
may occur in the foreclosure process before January 25, 2010.
(Id.)
Plaintiffs eventually paid $13,136.62 to reinstate their
loan, including $1,638 in attorneys' fees and costs ($1,050 +
2
$578).
(Compl. ¶¶ 17-18; Ex. B.)1
Plaintiffs allege that the
mortgage and note were recorded in the name of Defendant Mortgage
Electronic Registration Systems, Inc. (MERS) and that the
reinstatement process was performed by BAC for MERS because
"[t]he loan was serviced by BAC for MERS." (Compl. ¶¶ 10, 12.)
The Complaint gets one critical and publicly available fact
wrong:
it alleges that no foreclosure complaint was filed by BAC
— thus calling into question what legal fees could have been
properly charged to Plaintiffs — but the public record shows that
on January 14, 2010, Defendant BAC Home Loan Servicing filed a
foreclosure action, which Plaintiffs now do not dispute.
See BAC
Home Loan Servicing LP v. Patrick and Carleen Cooney, No. L-108010, (N.J. Sup. Ct. Chancery D).2
When Plaintiffs paid their
1
Plaintiffs paid with a bank check issued on February 1,
2010, making the payment at least 6 days after the reinstatement
quote's estimated payment as of January 25, 2010. (Id.)
2
This action, filed by attorney Lewis Adler, is one of a
several actions he has filed on behalf of New Jersey homeowners
seeking class action status to challenge an allegedly widespread
practice of charging improper fees. In each of these nearlyidentical actions, Adler drafts pleadings containing few or no
allegations explaining why the fees are improper, contradicts the
publicly available facts, and in some cases admits to not even
knowing precisely what fees were charged even though he declares
them improper. See Rivera v. Washington Mut. Bank, 637 F. Supp.
2d 256, 258 (D.N.J. 2009); Martino v. Everhome Mortg., 639 F.
Supp. 2d 484, 486 (D.N.J. 2009); Perkins v. Washington Mut., FSB,
655 F. Supp. 2d 463, 465 (D.N.J. 2009); Skypala v. Mortgage Elec.
Registration Sys., Inc., 655 F. Supp. 2d 451, 460 (D.N.J. 2009);
Ogbin v. Citifinancial Mortg. Co., Inc., Slip Copy, 2009 WL
4250036 (D.N.J. Nov. 19, 2009); Coleman v. Chase Home Finance,
LLC, Civil No. 08-2215, 2009 WL 3806417 (D.N.J. Nov. 10, 2009).
Although each of these actions has been dismissed, the majority
3
reinstatement fees, BAC dismissed the foreclosure action.
The Complaint brings eight claims for relief.
Count I is a
breach of contract claim, in which Plaintiffs argue that BAC and
MERS breached an unspecified part of the mortgage agreement
because the reinstatement letter charged fees not due and owing.
Count II is a claim that charging these fees breached the duty of
good faith and fair dealing.
Count III claims that the Fair
Foreclosure Act, N.J. Stat. Ann. § 2A:50-57(b)(3) prohibits the
charging of these fees and costs to the extent they exceed that
allowed by statute and court rules, which is either directly
actionable or an unconscionable business practice in violation of
New Jersey's Consumer Fraud Act, N.J. Stat. Ann. § 56:8-2.
Count
IV claims that the costs and fees were in excess of the amount
allowed pursuant to New Jersey Court Rule 4:42-9(a)(4) and 4:4210(a).
This Count also includes a paragraph stating that this
violation, if not directly actionable, is actionable under the
Fair Foreclosure Act or the Consumer Fraud Act.
Count V contends
that the fees and costs were in excess of what is allowed under
provisions of three state statutes, N.J. Stat. Ann. §§ 22A:2-10,
22A:2-8, and 2A:15-13, either directly providing for a claim or
substantiating a claim under the Consumer Fraud Act.
Count VI
based on deficiencies common to them all, Mr. Adler continues to
file nearly-identical actions in the apparent hope that each new
Judge will see the matter differently. The Court will, of
course, consider this Complaint on its own merits, but the course
of conduct is relevant as explained below.
4
brings a claim under the Consumer Fraud Act based on the
allegations in the other counts.
Count VII brings a claim under
the Truth-in-Consumer Contract, Warranty and Notice Act, N.J.
Stat. Ann. § 56:12-1 alleging that including excessive fees in
the reinstatement letter violates the Act.
And, finally, Count
VIII brings a claim under the Uniform Commercial Code for
providing an inaccurate statement of account in violate of N.J.
Stat. Ann. § 12A:9-210.
BAC brings a motion to dismiss, contending that it was
permitted by the mortgage contract and applicable law to charge
for legal fees and costs, and that, to the extent Plaintiffs
intended to challenge the propriety of particular constituent
parts of the "legal costs," these claims should be dismissed as
too vaguely pleaded to provide adequate notice.
MERS joins this
motion and separately moves to dismiss contending that no
actionable conduct has been alleged with respect to MERS.3
III.
DISCUSSION
A.
Standard of Review
In order to give Defendant fair notice, and to permit early
dismissal if the complained-of conduct does not provide adequate
3
Because the Court will dismiss the Complaint for failure
to state a claim based on the reasons provided in BAC's motion,
the Court need not yet reach the question of whether the
Complaint's allegations regarding MERS are sufficient to
implicate it as the principal whose agent, BAC, allegedly
committed the wrongful conduct at issue in this case.
5
grounds for the cause of action alleged, a complaint must allege,
in more than legal boilerplate, those facts about the conduct of
each defendant giving rise to liability.
Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007); Fed. R. Civ. P. 11(b)(3).
These factual allegations must present a plausible basis for
relief (i.e., something more than the mere possibility of legal
misconduct).
See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1951 (2009).
In its review of a motion to dismiss pursuant to Rule
12(b)(6), Fed. R. Civ. P., the Court must "accept all factual
allegations as true and construe the complaint in the light most
favorable to the plaintiff."
Phillips v. County of Allegheny,
515 F.3d 224, 231 (3d Cir. 2008) (quoting Pinker v. Roche
Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)).
The Third Circuit Court of Appeals instructs district courts
to conduct a two-part analysis when presented with a motion to
dismiss for failure to state a claim upon which relief may be
granted.
Fowler v. UPMC Shadyside, 578 F.3d 203, 210-211 (3d
Cir. 2009) (citations omitted).
The analysis should be conducted
as follows:
(1) the Court should separate the factual and
legal elements of a claim, and the Court must
accept all of the complaint's well-pleaded
facts as true, but may disregard any legal
conclusions; and (2) the Court must then
determine whether the facts alleged in the
complaint are sufficient to show that the
plaintiff has a plausible claim for relief, so
the complaint must contain allegations beyond
plaintiff's
entitlement
to
relief.
A
6
plaintiff shows entitlement by using the facts
in his complaint.
Id.
B.
Analysis
Plaintiffs seek to invoke Rule 56(d), Fed. R. Civ. P., to
defer consideration of this motion until they conduct discovery.4
However, this rule applies to summary judgment, in order to give
a plaintiff the opportunity to adequately conduct discovery to
respond to a defendant's evidence.
P.5
See Rule 56(d), Fed. R. Civ.
It does not apply to a motion to dismiss, because it is the
plaintiff's burden to plead a plausible basis for relief before
discovery.
In addition to the obvious inapplicability of Rule 56(d),
the basis for the request reveals how flawed this Complaint is.
Plaintiffs argue that the motion to dismiss is premature because
they have not yet learned through discovery what fees they were
charged.
(Pls.' Br. 3.)
This is tantamount to an admission that
their Complaint should be dismissed, because they admit that
4
Rule 56(d) superseded old Rule 56(f) by amendment
effective December 1, 2010.
5
The Rule states: "If a nonmovant shows by affidavit or
declaration that, for specified reasons, it cannot present facts
essential to justify its opposition, the court may: (1) defer
considering the motion or deny it; (2) allow time to obtain
affidavits or declarations or to take discovery; or (3) issue any
other appropriate order." Rule 56(d), Fed. R. Civ. P.
7
their allegations, which are that these fees were improper, are
without sufficient basis in known facts.
Indeed, the Complaint appears to be little more than a
generic document with a handful of allegations pasted into it
that may or may not be applicable to this specific case.
The
Complaint contains numerous instances of the phrase "if
applicable" after an allegation that plainly does not apply, or
the language "including but not limited to."
(E.g., Compl. ¶
20a.)6
As explained below, none of the allegations presently
pleaded in the Complaint provides a plausible basis for relief.
1.
Breach of Contract
The contract, which is relied upon and integral to the
Complaint, empowers BAC to collect "foreclosure costs and
reasonable and customary attorney's fees and expenses properly
associated with the foreclosure proceeding" in the event of
resinstatement.
(Murphy Decl. Ex. C ¶ 10.)
no part of the mortgage that is breached.
Count I identifies
The Count could
therefore be dismissed on this basis alone. See Skypala, 655 F.
Supp. 2d at 460 (dismissing breach of contract claim because
6
The Complaint has a separate section of class
allegations. The generic allegations described here are
contained in the section nominally involving the named
Plaintiffs' particular allegations.
8
"Plaintiff does not point to any provision of the contract
'specifically'").
Furthermore, the Complaint does not even
identify the allegedly breaching fees with enough specificity for
the Court (or Defendants) to assess whether the alleged breach
states a claim on its own review of the contract.
The only
specific argument the Court can ascertain is that BAC charged for
fees not actually incurred, but there is no factual allegation
that the $578 in anticipated additional legal fees and costs
through January 25, 2010 was not actually incurred as of that
date.
This claim will therefore be dismissed.
2.
Derivative claims
Claims II, III, VI, VII, and VIII are not standalone claims
as the laws cited provide no substantive standard for assessing
the propriety of any fees.
Count II does not contend that the
law of good faith and fair dealing itself provides a basis for
assessing when a fee is improper.
Under the law cited in Count
III, costs and attorneys' fees required for reinstatement "shall
not exceed the amount permitted under the Rules Governing the
Courts of the State of New Jersey."
Id.
Count VI is a Consumer
Fraud Act claim assuming the charges are unlawful.
Count VII
brings a claim under the Truth-in-Consumer Contract, Warranty and
Notice Act, N.J. Stat. Ann. § 56:12-1 based on the assumption
that the charges are improper.
And Count VIII assumes that the
accounting of unpaid obligations was inacccurate.
9
Thus, whether
the Complaint states a claim or not rests on whether the
Complaint adequately alleges that these fees violate the only
substantive standards laid out in the Complaint:
Counts IV and
V, which are now examined.
3.
New Jersey Court Rules
Count IV claims that the costs and fees were in excess of
the amount allowed pursuant to New Jersey Court Rule 4:42-9(a)(4)
and 4:42-10(a).
New Jersey Court Rule 4:42-9(a)(4) explains how
to calculate the costs to be taxed in a foreclosure action.7
Rule 4:42-10(a) provides that the court or clerk may tax as part
of the taxable costs all legal fees and reasonable charges
necessarily incurred for title searches.
Although these Rules do not apply by their own terms since
they limit the taxed costs at final judgment in a foreclosure
action, by operation of the Fair Foreclosure Act, the Rules
provide a cap on the amount of court costs and attorneys fees
that a mortgagee may charge for reinstatement.
See N.J. Stat.
Ann. § 2A:50-57(b)(3) (permitting "costs, if any, and attorneys'
fees in an amount which shall not exceed the amount permitted
under the Rules Governing the Courts of the State of New
Jersey").
Since the context of the Fair Foreclosure Act is that
7
The amount depends on the debt owed by the defendant.
$5,000 or less means 3.5% in fees but not less than $75; $5,000 $10,000 means 1.5%, with any excess over $10,000 at 1%, but not
to exceed $7,500.
10
these fees will be charged prior to final judgment in a
foreclosure action, it is clear that these fees are permissible
once the costs are actually incurred, but before final judgment.
Plaintiffs do not contend that the amounts of the fees
violated the specific provisions, and it appears to the Court
that they do not.8
Instead, Plaintiffs contend that since no
foreclosure action was filed, there can be no fees incurred in
such an action.
(Compl. ¶ 39.)
Since this allegation
contradicts the undisputed public record, it cannot be credited.
Claims based on that allegation must therefore be dismissed.
4.
New Jersey Statutes
Count V contends that the fees violate provisions of three
New Jersey Statutes.
However, unlike the Rules Governing the
Courts of the State of New Jersey which are used by the Fair
Foreclosure Act to cap fees charged for reinstatement, these
statutes are entirely inapplicable.
N.J. Stat. Ann. § 22A:2-10 awards certain statutory costs
"upon the completion and determination of" foreclosure actions.
It does not prohibit other mechanisms of fee-shifting.
8
N.J.
The loan statement attached to Plaintiffs' complaint
indicates an outstanding principal balance of $275,060.47 was
owing as of February 19, 2010. (Compl. Ex. C.) Therefore, even
if this was the entire sum owed in the foreclosure action, under
Rule 4:42-9(a)(4)'s calculations for fees in foreclosure cases,
the permissible fees would have been $2,900.59, far exceeding the
amount actually charged.
11
Stat. Ann. § 22A:2-8 provides for various costs that "a party to
whom costs are awarded or allowed by law or otherwise in any
action, motion or other proceeding, in the Law Division or
Chancery Division of the Superior Court is entitled to include,"
without specifying any amounts.
And N.J. Stat. Ann. § 2A:15-13
provides that the fee for recording a notice of lis pendens shall
be taxable as a part of the costs in the action.
Even if these statutes applied to limit the fees and costs
that may be permissibly charged for reinstatement of a delinquent
mortgage, the Complaint offers no allegations as to how these
statutes were violated.
See Martino, 639 F. Supp. 2d at 493
(dismissing almost identical count for because "[i]t is nothing
more than a laundry list of various statutory fees that may be
charged in the New Jersey State foreclosure process, along with a
generic allegation that Defendants' charges were in excess of
those allowed by law").
It is not clear to the Court how or why
any of the fees would fall afoul of these statutes, and therefore
the Complaint fails to provide adequate notice to Defendants of
the basis for the claim.
Because none of the claims in the Complaint allege a clear
substantive basis for finding the fees charged to be improper,
the Complaint must be dismissed.
5.
Clarifications made in opposition brief
12
The Complaint brings no count pursuant to, or citing FHA
regulations.
Nevertheless, in their opposition to this motion,
Plaintiffs raise for the first time an FHA regulation regarding
fees as their basis for their conclusion that the fees were
improper.
24 C.F.R. § 203.552(b).
The regulation permits the
charging of certain reasonable fees and costs, including fees for
foreclosure not completed because of a reinstatement of the
account, id. § 552(a)(9), but states that "Directors of HUD Area
and Insuring Offices are authorized to establish maximum fees and
charges which are reasonable and customary in their areas."
at 552(b).
Id.
Plaintiffs then assert, with no citation, that the
applicable maximum is $1,350.
Plaintiffs also seek to introduce
in their opposition evidence that BAC refunded $538 of the
reinstatement payment as having been improperly charged, an
allegation nowhere made in the Complaint.
And they also try to
incorporate their allegation involving the failure to credit late
charge payments into their causes of action that do not refer to
this conduct in the Complaint.
None of these constructive amendments of the Complaint are
permissible, since these bases for legal relief were not
adequately pleaded.
Commonwealth of Pa. ex rel. Zimmerman v.
PepsiCo, Inc., 836 F.2d 173, 181 (3d Cir. 1988) (noting that it
is axiomatic that a plaintiff cannot amend complaint via an
13
opposition to a motion to dismiss).9
However, these arguments do
convince the Court that dismissal should be without prejudice.
See Alston v. Parker, 363 F.3d 229, 235 (3d Cir. 2004) ("We have
held that even when a plaintiff does not seek leave to amend, if
a complaint is vulnerable to 12(b)(6) dismissal, a District Court
must permit a curative amendment, unless an amendment would be
inequitable or futile.").10
While Defendants contend that there
is no private right of action conferred by the FHA regulations,
this does not mean that the violation of those regulations cannot
provide a cause of action under other statutes.
The question is
not presented by the Complaint, so it is undecided.
If the HUD maximum is in fact $1,350, Plaintiffs should
allege this in the proposed pleadings or cite to the relevant law
in a proposed amended complaint, and state clearly under what law
or laws Plaintiffs bring claims for violation of the FHA
9
Plaintiffs acknowledge that some of these facts are
outside the scope of the Complaint, but contend that since
Defendant BAC also raised issues outside the scope of the
Complaint, Plaintiffs are permitted to do so. But everything
Defendant relied upon is properly considered on a motion to
dismiss. See In re Burlington Factory Sec. Litig., 114 F.3d
1410, 1426 (3d Cir. 1997) (quoting Shaw v. Digital Equip. Corp.,
82 F.3d 1194, 1220 (1st Cir. 1996)).
10
If Plaintiffs decide to continue to retain Mr. Adler to
file their amended pleadings, then Mr. Adler should take care in
drafting the proposed pleadings to avoid continuing to make the
errors he has been alerted to by this and other opinions. At
some point, such errors and disregard for the modern pleadings
standards will begin to evince bad faith on his part.
14
regulation.
Similarly, if Plaintiffs seek to base their claims
on the refund of $538, they should allege the fact of the refund
as their basis for believing they were overcharged, and explain
precisely in their proposed Amended Complaint which counts are
based upon that conduct of overcharging and then refunding.
Finally, if the failure to credit the late charges is being used
as a basis for any of the Counts, Plaintiffs should explain which
Counts and how this failure to credit the late charges violates
each specific law cited.
IV.
CONCLUSION
Plaintiffs' scattershot Complaint does not, as currently
pleaded, put Defendants on fair notice of the basis for its
conclusions that the fees charged to Plaintiffs are improper.
Because it appears that Plaintiffs may have some relevant
allegations that they failed to include, the Court will permit
them to move to file an amended pleading under Rule 15(a), Fed.
R. Civ. P., within twenty-one (21) days of the entry of the
accompanying Order.
The accompanying Order will be entered.
June 22, 2011
Date
s/ Jerome B. Simandle
JEROME B. SIMANDLE
United States District Judge
15
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?