DEHART et al v. US BANK, N.A. ND et al
Filing
18
OPINION. Signed by Judge Jerome B. Simandle on 8/18/2011. (TH, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
JONATHAN DEHART & DENISE
DEHART,
HON. JEROME B. SIMANDLE
Civil No. 10-5869 (JBS/KMW)
Plaintiffs,
v.
OPINION
US BANK, N.A. ND, et al.
Defendants.
APPEARANCES:
Lewis G. Adler, Esq.
LAW OFFICE OF LEWIS ADLER
26 Newton Avenue
Woodbury, NJ 08096
Counsel for Plaintiffs
Sheila Raftery Wiggins, Esq.
DUANE MORRIS, LLP
744 Broad Street
Suite 1200
Newark, NJ 07102
Counsel for Defendant U.S. Bank, N.A. ND
Arthur N. Chagaris, Esq.
BEATTIE PADOVANO, LLC
50 Chestnut Ridge Road
P.O. Box 244
Montvale, NJ 07645
Counsel for Defendant Foreclosure Management Company
Dashika R. Wellington, Esq.
WILENTZ, GOLDMAN & SPITZER, P.A.
Two Penn Center Plaza
Suite 910
Philadelphia, PA 19102
Counsel for Defendant Udren Law Offices, PC
SIMANDLE, District Judge:
I.
INTRODUCTION
This putative class action involving allegedly improper
fees charged for mortgage reinstatement or payoff is before the
Court on three motions to dismiss the Complaint for failure to
state a claim pursuant to Fed. R. Civ. P. 12(b)(6). [Docket Items
7, 8, & 9.]
Defendants seek dismissal of Plaintiffs’ numerous
state and federal claims.
This Opinion will address, inter alia,
the New Jersey Entire Controversy Doctrine, the Colorado
River abstention doctrine, the necessity of alleging damages in
contractual causes of action, the New Jersey Consumer Fraud Act,
the New Jersey Truth-in-Consumer Contract Warranty and Notice
Act, and the Federal Debt Collection Practices Act.
The Court
has addressed the many arguments raised by the parties, and will
grant in part and deny in part the motions of Defendant
Foreclosure Management Company and U.S. Bank, N.A. ND [Docket
Items 8 & 9], but will deny in its entirety the motion of Udren
Law Offices, PC [Docket Item 7] because the Court finds that
Plaintiffs have stated a claim for recovery under the Fair Debt
Collection Practices Act.
II.
BACKGROUND
Plaintiffs in this action are Jonathan and Denise DeHart
(“Plaintiffs”), and Defendants are U.S. Bank, N.A. ND (“U.S.
Bank”), Foreclosure Management Company (“FMC”), and Udren Law
2
Offices, PC (“Udren”).
The following facts are taken from the
Complaint and the attached exhibits or from matters of public
record and must be assumed true for purposes of these Rule
12(b)(6) motions.
On November 1, 2005, Plaintiffs executed a mortgage and note
for the purchase of a residential property located at 188 S.
Monmouth Court in Thorofare, New Jersey, originated by non-party
Wilmington Finance in the amount of $260,000.
Compl. Ex. A.
Compl. ¶ 11;
Less than four years later, Plaintiffs apparently
fell behind on their mortgage payments, and the mortgage went
into default on April 1, 2009.
Compl. ¶ 12.
On August 19, 2009, Defendant Udren sent Plaintiffs a notice
of intention to foreclose, which stated that the mortgage was in
default, and explained that Plaintiffs had a right to cure the
default by paying the missed payments and late fees, in the
amount of $19,625.13, up to 30 days later.
Compl. Ex. A.
In
response, Plaintiffs requested statements documenting the amount
necessary to reinstate the mortgage and the amount that would be
necessary to pay off the mortgage in its entirety.1
1
On September
This request by Plaintiffs was not attached to Plaintiffs’
Complaint, but the Court infers the existence of this letter
based on the fact that Exhibits B and C attached to the Complaint
-- Defendants’ subsequent September 10, 2009 letters -- begin
with the phrase “as requested.” Compl. Exs. B & C.
3
10, 2009,2 Plaintiffs received two separate notices from Udren: a
reinstatement notice and a payoff notice, both stating that the
notices were regarding "U.S. Bank Consumer Finance" loans.
Compl. Exs. B & C.
Plaintiff alleges that these letters were
sent “on behalf of USB [Defendant U.S. Bank].”
Compl. ¶ 15.
The
Complaint also alleges that Plaintiffs' mortgage was assigned to
Defendant U.S. Bank eleven days later, on September 21, 2009.
Compl. ¶ 14.
The September 10 payoff and reinstatement notices
included the charges that Plaintiffs allege were excessive and/or
misleading.
Specifically, the reinstatement and payoff notices each
state an amount that, if payed after September 18, 2009, but
prior to September 28, 2009, purportedly would either reinstate
or pay off the mortgage and thereby prevent foreclosure.
Exs. B & C at 1.
Compl.
The reinstatement amount was listed as
$26,129.36 and the payoff amount was listed as $274,607.86.
at 2.
Id.
Thus, the letters suggest that were Plaintiffs to attempt
2
The Complaint reports the date of this letter as
“September 10, 2010" but the Court understands Plaintiffs to mean
that the letters were received in 2009 rather than 2010 for two
reasons. First, Plaintiff attached copies of the letters at
issue, which prominently bear the date “September 10, 2009."
Second, the Court notes that the Complaint itself was filed on
September 9, 2010, which would have made the allegation of
receiving the letters on September 10, 2010 impossible at the
time it was alleged. Thus, the Court deems the allegation of
September 10, 2010 to be a typographical error. Defendants note
this error and suffered no prejudice as a result. See, e.g.,
Udren Mot. to Dismiss at 2 n.2.
4
to reinstate or pay off their mortgage on September 19, 2009,
they would have been required to pay the additional fees listed
on the notices.
The total amounts listed were subdivided into
component charges in the form of payments or total principal owed
on the mortgage as well as late charges and other fees.
Id.
Both the reinstatement and payoff notices include five line items
marked as "anticipated" for charges related to court fees and
filing fees.
Id.
In addition, both notices also included a line
item marked "notice of intention - prepare and send" charged at
$100, and "attorney foreclosure fee" charged at $500.
Id.
Neither of these lines were marked "anticipated."
The notices also included some caveats below the list of
charges and fees.
On the reinstatement notice, below the list of
fees are two notations of dates.
The notice states that
THIS AMOUNT IS GOOD THRU 09/28/2009 **
** Please refer to the Notice of Intention
letter for reinstatement amount prior to
9/18/2009.
Compl. Ex. B at 2.
Similarly, below the list of fees on the
payoff notice is the notice that
THIS AMOUNT IS GOOD THRU 9/28/2009 **
** Please note that if this loan is to payoff
prior to the Notice of Intention letter
expiring on 9/18/2009, the attorney fees and
costs listed on this quote will become
non-recoverable.
Compl. Ex. C at 2.
Additionally, immediately below the list of
charges and applicable dates on both letters is the note that
5
“ANY ITEM MARKED ANTICIPATED, IF NOT ACTUALLY EXPENDED, WILL BE
REFUNDED TO MORTGAGOR IMMEDIATELY.”
Compl. Exs. B & C at 2.
Plaintiffs allege that two charges included in the notices
that were not marked as anticipated (for preparing the notice of
intention and for the attorney foreclosure fee -- amounting to
$600), were not permitted under New Jersey law, and therefore
breached Plaintiff's mortgage contract and violated several state
and federal statutes.
Plaintiffs claim that the New Jersey Fair
Foreclosure Act (“FFA”) of N.J. Stat. Ann. § 2A:50-57 prohibits
the mortgagee from imposing court costs or fees related to a
foreclosure proceeding prior to actually filing for foreclosure,
citing to Spencer Savings Bank, SLA v. Shaw, 949 A.2d 218 (N.J.
Super. App. Div. 2008).
Thus, because Defendants stated that
fees and costs not marked “anticipated” would be charged
immediately after the expiration of the 30-day notice of intent
to foreclose period, and not necessarily after filing a
foreclosure action, the letters were an attempt to collect fees
before they were permitted to be collected under state law.
Plaintiffs allege that they never actually paid any of the
allegedly illegal charges, nor were they able to cure the
default.
Compl. ¶ 23.
On October 5, 2009, after Plaintiffs
apparently took no action to reinstate or pay off the mortgage,
Defendants filed a complaint for foreclosure in the Superior
Court of New Jersey, Chancery Division.
6
Compl. ¶ 22; Udren Mot.
Dismiss. Ex. C.
Div.)
See Docket No. F-052956-09 (N.J. Super. Ct. Ch.
Plaintiffs Jonathan and Denise DeHart, defendants in the
state foreclosure action, have not contested the state
foreclosure action, and U.S. Bank eventually requested entry of
default on January 21, 2010.
Udren Mot. Dismiss. Ex. C.
U.S.
Bank moved for entry of final judgment on June 29, 2010, though
the chancery court has apparently not yet entered final judgment
in the foreclosure action.3
Id.
On September 9, 2010, Plaintiffs filed their Complaint in
this action in the Superior Court of New Jersey, Gloucester
County, seeking recovery on nine counts:
(1) (against U.S. Bank) breach of contract;
(2) (against U.S. Bank) breach of the duty of good faith and
fair dealing;
(3) (against U.S. Bank) violation of the New Jersey Fair
Foreclosure Act of N.J. Stat. Ann. § 2A:50-57(b)(3);
(4) (against U.S. Bank) violation of New Jersey State Court
3
The Court notes that Defendants Udren and FMC state in
their briefs that final judgment was entered on May 3, 2010.
Udren Br. at 13; FMC Br. at 5. However, both Defendants support
this factual proposition merely by citation to a May 3, 2010
notice from U.S. Bank to the DeHarts warning that U.S. Bank will
move for entry of final judgment in May of 2010. Udren Mot.
Dismiss Ex. D. Additionally, Defendant U.S. Bank states, in
contrast, that as of the filing of the present motion, final
judgment has not been entered in the state foreclosure action.
U.S. Bank Br. at 8. Thus, for the purposes of this motion to
dismiss, the Court will assume that final judgment has not been
entered in the foreclosure action.
7
Rules 4:42-9(a)(4) and 4:42-10(a);
(5) (against U.S. Bank) violation of various New Jersey
statutes regarding excessive taxed costs;
(6) (against U.S. Bank and FMC) violation of the New Jersey
Consumer Fraud Act of N.J. Stat. Ann. § 56:8-2 et seq.;
(7) (against U.S. Bank) violation of the New Jersey Truthin-Consumer Contract, Warranty and Notice Act of N.J. Stat. Ann.
§ 56:12-1;
(8) (against U.S. Bank and FMC) violation of N.J. Stat. Ann.
§ 12A:9-210, a provision of the Uniform Commercial Code requiring
that an accurate statement of account be provided upon request;
and
(9) (against all three Defendants) violation of the Federal
Fair Debt Collection Practices Act (“FDCPA”) of 15 U.S.C. § 1692
et seq.
On November 12, 2010, Defendant Foreclosure Management
Company removed the action to this Court. [Docket Item 1.]
All
three Defendants subsequently moved to dismiss the Complaint for
failure to state a claim under Fed. R. Civ. P. 12(b)(6).
Items 7, 8 & 9.]
[Docket
In addition to arguing that Plaintiffs'
Complaint fails to state a claim in any of its nine counts,
Defendants also argue that the action must be dismissed pursuant
to the New Jersey Entire Controversy Doctrine, and Defendant U.S.
Bank argues that the Court should abstain pursuant to the
8
Colorado River abstention doctrine.
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
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. 8(a) and
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
9
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
plaintiff shows entitlement by using the facts
in his complaint.
Id.
B.
Analysis
1.
Preclusion and Abstention
The Court will first address the two arguments put forward
by Defendants that the Court should not or can not hear the case
in its entirety.
a.
Entire Controversy Doctrine
All three Defendants argue that the present action is barred
by the New Jersey Entire Controversy Doctrine.
The Entire
Controversy Doctrine, codified in Rule 4:30A of the New Jersey
Court Rules, is a New Jersey state law doctrine that is an
“idiosyncratic” form of claim preclusion with a slightly broader
scope, but the same basic elements as traditional claim
preclusion.
See generally Rycoline Products, Inc. v. C & W
Unlimited, 109 F.3d 883 (3d Cir. 1997).
The Doctrine is
applicable in federal court by virtue of the Full Faith and
Credit Act, 28 U.S.C. § 1738.
Rycoline at 887.
10
Additionally,
the Doctrine is applicable in the foreclosure context.
See In re
Mullarkey, 563 F.3d 215, 228 (3d Cir. 2008); N.J. Court Rule
4:64-5.
Defendants argue that Plaintiffs’ action is barred by the
Entire Controversy Doctrine because all of Plaintiff’s claims
could have been brought as defenses or counter-claims in the
first-filed state foreclosure action.
Plaintiffs respond that
the Entire Controversy Doctrine is not applicable because
Plaintiffs’ claims are not “germane” to the state foreclosure
action, citing Jackson v. Midland Funding, LLC, 754 F. Supp. 2d
711, 714 (D.N.J. 2010).
The Court, however, finds that the Entire Controversy
Doctrine is inapplicable in this case for a more fundamental
reason.
Specifically, there is no evidence in the record before
this Court demonstrating that final judgment has been entered in
the first-filed state foreclosure action.
The Third Circuit has
held that, as a species of res judicata, the Entire Controversy
Doctrine is inapplicable prior to entry of final judgment in the
first-filed action.
Rycoline at 889 (“we hold that the Entire
Controversy Doctrine does not preclude the initiation of a second
litigation before the first action has been concluded.”).
See
also Youssef v. Department of Health & Senior Svcs., Slip Op.
2011 WL 1444226 at *2 (3d Cir. Apr. 15, 2011) (reversing
dismissal based on the Entire Controversy Doctrine because “as a
11
variant of res judicata, [the Entire Controversy Doctrine]
requires the existence of a prior judgment that is final, valid,
and on the merits”) (internal quotations omitted).
If the New
Jersey chancery court has not entered final judgment in the
foreclosure action, then there is no prior judgment.
Thus,
because there is no evidence of a prior final judgment on the
merits in Plaintiffs’ underlying foreclosure action, the Court
must deny the application of the Entire Controversy Doctrine
here.4
b.
Colorado River abstention
In addition to the Entire Controversy Doctrine, Defendant
U.S. Bank argues that the Court should abstain from exercising
jurisdiction in this matter pursuant to the Colorado River
abstention doctrine.
The Colorado River abstention doctrine,
named after the Supreme Court case of Colorado River Conservation
District v. United States, 424 U.S. 800 (1976), exists for the
rare circumstance where a federal court runs the risk of entering
4
The Court notes that the Third Circuit has not yet
addressed whether the Entire Controversy Doctrine could apply
after the final judgment has been entered in an action that was
initially filed while the first action was still pending. See
Rycoline at 889 n.2 (“We do not reach the additional question of
whether, where two actions are pending simultaneously, the Entire
Controversy Doctrine may be raised at the time one action is
concluded to preclude completely the other action.”); Youssef at
*2 (same). Because final judgment has not yet been entered in
the state court foreclosure action here, however, the issue is
not currently before the Court, and it will therefore not address
it at this time.
12
a judgment that could conflict or interfere with a parallel state
court judgment.
See Moses H. Cone Mem. Hosp. v. Mercury Const.
Corp, 460 U.S. 1, 15-16 (1983).
However, for a district court to
abstain under this doctrine, the circumstances must be truly
exceptional because federal courts have a “virtually unflagging
obligation . . . to exercise the jurisdiction given them.”
Colorado River, 424 U.S. at 817 (internal quotations omitted).
The threshold requirement for application of the abstention
doctrine is that the two actions must be “truly duplicative”, or
abstention will not be warranted.
Trent v. Dial Medical of
Florida, Inc., 33 F.3d 217, 223 (3d Cir. 1994) (superseded by
statute on other grounds).
Cases are sufficiently parallel
usually only when they involve the same parties and claims.
Id.
Thus, “when a federal court case involves claims that are
distinct from those at issue in a state court case, the cases are
not parallel and do not justify Colorado River abstention.”
Id.
at 224.
In the present case, the Court finds that the actions are
not parallel.
The state foreclosure action involves U.S. Bank
seeking a judgment of foreclosure on property subject to a
mortgage.
The federal action, by contrast, seeks only damages
for various debt collection practices but does not seek to
invalidate the foreclosure proceeding.
Unlike in St. Clair v.
Wertzberger, 637 F. Supp. 2d 251 (D.N.J. 2009), the Plaintiffs in
13
federal court here are not asserting the FDCPA as a defense to
the foreclosure proceeding.
Therefore, even if Plaintiffs
prevail on their damages claims in this Court while U.S. Bank
succeeds in obtaining a judgment of foreclosure in the state
court, the two judgments would not necessarily be inconsistent or
conflict with each other.
Thus, the Court will not abstain from
exercising jurisdiction under the Colorado River doctrine.
2.
Agency and Vicarious Liability
As the Court has determined that neither the Entire
Controversy Doctrine nor the Colorado River doctrine apply in
this case, it must turn to assessing whether Plaintiffs have
sufficiently alleged any claims for relief sufficient to survive
Defendants’ Rule 12(b)(6) motion.
The Court will begin by
addressing the argument put forward by Defendant U.S. Bank
regarding vicarious liability, and then proceed through assessing
whether each of Plaintiffs’ claims survives.
Defendant U.S. Bank argues that Plaintiffs do not allege
sufficient facts to assert any claims against it on the basis of
a theory of vicarious liability.
U.S. Bank argues that
Plaintiffs’ claims all stem from the two September 10, 2009
letters which were sent by Defendant Udren, and that Plaintiff
additionally alleges that the mortgage was not assigned to U.S.
Bank until eleven days later on September 21, 2009.
Compl. ¶ 14.
Thus, U.S. Bank concludes, Plaintiffs have not shown an
14
entitlement to relief against U.S. Bank because they have not
alleged that U.S. Bank took any direct action toward Plaintiffs
or that U.S. Bank directed the conduct of Udren in drafting the
letters or sending them to Plaintiffs.
In general, a plaintiff alleging liability on the basis of
respondeat superior must ultimately prove (and therefore has the
burden of alleging) “(1) that a master-servant relationship
existed and (2) that the tortious act of the servant occurred
within the scope of that employment.”
Wiatt v. Winston & Strawn,
LLP, Civ. No. 10-6608, 2011 WL 2559567, at *8 (D.N.J. June 27,
2011) (quoting Carter v. Reynolds, 815 A.2d 460, 463 (N.J.
2003)).
The Court concludes, based on all of the allegations in the
Complaint and its attached exhibits, that for purposes of
surviving a Rule 12(b)(6) motion, Plaintiffs have sufficiently
alleged both the existence of a master-servant relationship and
that the acts of Udren complained of by Plaintiffs occurred
within the scope of that employment.
First, Plaintiffs allege
that the September 10 notices were sent from Udren “on behalf of
USB.”
Second, the attached letters themselves both begin with
the remark “RE: US Bank Consumer Finance Loan” and bear the note
“the above cure amount must be made by ***CASHIER’S CHECK,
CERTIFIED CHECK OR MONEY ORDER payable to US Bank Consumer
Finance.”
Compl. Ex. B at 1.
15
The Court finds that it is a reasonable inference from these
allegations that Defendant Udren was in an agency relationship
with U.S. Bank at the time the letters were written and that
sending the letters to Plaintiffs was within the scope of that
relationship.
There is no other reasonable explanation why Udren
would demand that any reinstatement or payoff check be made out
to U.S. Bank other than that Udren was acting at the behest of
U.S. Bank to collect such checks.
See Rickenbach v. Wells Fargo
Bank, N.A., 635 F. Supp.2d 389, 399-400 (D.N.J. 2009) (holding
that, on nearly identical allegations of agency, defendant bank
“cannot escape liability for conduct of their alleged agent”).
That Plaintiff additionally alleged that the mortgage was
not officially assigned to U.S. Bank until shortly after the date
of the letters is not necessarily inconsistent with this
allegation as Plaintiffs clearly allege that U.S. Bank directed
the sending of the letters to Plaintiffs, which could have been
done in anticipation of the assignment of the mortgage.
For
purposes of the present motion, the allegation that Udren acted
as an agent of U.S. Bank is plausible.
Thus, the Court will not
dismiss Plaintiffs’ claims against U.S. Bank on the basis of a
failure to sufficiently allege an agency relationship.
Should
facts be uncovered in discovery that demonstrate the absence of
such an agency relationship, nothing in this Opinion prevents
Defendants U.S. Bank (or FMC, who do not raise this argument
16
here) from raising the issue in a motion for summary judgment.
3.
Counts I through VI
The first six counts of the Complaint seek to recover
damages on a variety of theories, from breach of express contract
to violation of the NJCFA.
The Court will grant Defendants’
motions to dismiss with regard to these six claims because all of
them require Plaintiffs to have suffered damages or an
ascertainable loss, which Plaintiffs have not alleged.
Indeed,
as recounted above, Plaintiffs expressly allege that they “have
made no payments on the illegal charges. . . .”
Compl. ¶ 23.
As
will be explained below, this failure to allege damages or any
ascertainable loss is fatal to the first six counts of
Plaintiffs’ Complaint.
a.
Contract claim
Count I of the Complaint alleges that U.S. Bank breached
Plaintiffs’ note and mortgage contracts by demanding amounts not
due under either the contracts or applicable law.
Defendant U.S.
Bank argues that this count must be dismissed because, first,
Plaintiffs have not alleged a specific duty under any contract
that was breached.
Second, Plaintiffs fail to allege that they
suffered any damages as a result of this alleged breach of
contract.
The Court agrees with Defendant.
A party claiming
breach of contract has the burden of alleging and, ultimately,
proving all elements of its cause of action, including breach and
17
damages.
Video Pipeline Inc. v. Buena Vista Home Entm’t, Inc.,
275 F. Supp. 2d 543, 566 (D.N.J. 2003) (holding that New Jersey
contract law requires proof that “(1) a valid contract existed
between plaintiff and defendant; (2) plaintiff breached the
contract; (3) defendant performed its obligations under the
contract; and (4) defendant was damaged as a result of the
breach”).
See also, Coyle v. Englander’s, 488 A.2d 1083, 1088
(N.J. Super. App. Div. 1985) (listing essential elements of
breach of contract claim as “a valid contract, defective
performance by the defendant, and resulting damages.”).
Defendant argues that Plaintiffs have not pointed to any portion
of a contract that was breached, but merely alleged, in
conclusory fashion, that “USB has breached their contracts with
the plaintiffs and members of the class” because it “imposed or
collected amounts that are not due and owing by contract or
applicable law.”
Compl. ¶¶ 27-28.
Secondly, Defendant argues
that, as Plaintiffs have alleged that they did not pay any of the
fees listed in the September 10 notices, Plaintiffs have alleged
no damages.
Plaintiffs respond to Defendant’s argument regarding breach
by stating simply that “the fact that the Defendant overcharged
the Plaintiffs is a breach of the contract” without pointing to
any provision in the contract that limits the fees that Defendant
can collect from Plaintiffs.
The Court therefore finds that
18
Plaintiffs’ breach of contract claim fails for failing to meet
the notice pleading standards of Rule 8, Fed. R. Civ. P.
Plaintiffs respond to Defendant’s damages argument by citing
to the New Jersey statute governing fraud in the execution of a
contract, N.J. Stat. Ann § 2A:32-1, for the proposition that
Plaintiffs need not allege that they suffered any damages on a
breach of contract claim.
The Court finds that this statutory
provision is not applicable to Plaintiffs’ claim for breach of
contract, which arises under New Jersey’s interpretation of
common law.
Therefore, Plaintiff’s breach of contract claim will
be dismissed.
b.
Duty of good faith and fair dealing
Plaintiffs’ second claim is for damages resulting from
Defendant U.S. Bank’s alleged breach of the duty of good faith
and fair dealing.
Plaintiffs allege that Defendant breached the
duty of good faith and fair dealing as codified in the Uniform
Commercial Code, N.J. Stat. Ann. § 12A:1-203, by attempting to
collect fees to which it was not entitled under New Jersey law or
contract and that Plaintiffs consequently “have been damaged”.
Compl. ¶ 33.
Defendant responds, again, with multiple reasons why
Plaintiffs’ count fails to state a claim.
First, Defendant
argues that the New Jersey statutory duty of good faith and fair
dealing cited by Plaintiffs does not provide a private right of
19
action.
Secondly, Defendant argues that Plaintiffs have not
alleged any specific duty that was breached.
Finally, Defendant
argues that Plaintiffs fail to state a claim because they have
not sufficiently alleged that they suffered any damages (by
virtue of their allegation that they have not paid any of the
allegedly improper fees).
Plaintiffs do not respond to the argument regarding the lack
of a private right of action under the statutory duty cited in
the Complaint.
The Court therefore grants Defendant’s motion to
dismiss on this basis as uncontested.
With regard to Defendant’s damages argument, the Court
likewise agrees with Defendant.
Damage is an element of the
claim which Plaintiff must allege to survive Defendant’s motion
to dismiss.
Wade v. Kessler Institute, 778 A.2d 580, 590 (N.J.
Super. App. Div. 2001) (holding that plaintiff must prove
elements of breach, proximate cause, and damages to recover under
the implied covenant of good faith and fair dealing).
Plaintiffs’ opposition brief does not clarify the matter by
pointing to some allegation of specific damage for this breach in
their Complaint.
Instead, Plaintiffs oppose this argument by
claiming that they are not required to allege damages to survive
a Defendant’s motion to dismiss, citing to Barrows v. Chase
Manhattan Mortgage Corp., 465 F. Supp. 2d 347, 366 (D.N.J. 2006).
The Barrows court denied a Rule 12(b)(1) motion to dismiss for
20
lack of standing on a similar claim of breach of the implied duty
of good faith and fair dealing.
Id.
(“Plaintiff's contention
that Defendants had a duty to insure the propriety of any attempt
to collect attorneys fees negates Defendants' argument that
Plaintiff needed to have actually paid such fees.”)
The Court
interprets Plaintiffs’ argument to mean that if the plaintiff in
Barrows had sufficiently alleged injury-in-fact to satisfy the
requirements of standing, then Plaintiffs here must have also
sufficiently alleged damages to survive a Rule 12(b)(6) motion.
The Court rejects this argument.
While the Barrows court
may have found that injury-in-fact was alleged on the different
facts present in that case, the court did not address the issue
of what allegations would be sufficient to plead damages.
Indeed, the Barrows court expressly reserved judgment on the
issue of whether the plaintiff’s claim could survive a motion to
dismiss on 12(b)(6) grounds.
Id. (“The Court issues no opinion
on whether that claim will survive a motion to dismiss by
Chase”).
Thus, in the instant matter, this Court finds no
reasoning in Barrows to persuade it to disregard the basic
requirement that a plaintiff claiming breach of the duty of good
faith and fair dealing must allege that such a breach has damaged
him or her to survive a motion to dismiss.
The Court must
therefore grant Defendant’s motion to dismiss Plaintiffs’ second
count.
21
c.
Counts III, IV and V
Plaintiffs’ third, fourth and fifth counts allege violations
of, respectively: the New Jersey Fair Foreclosure Act (“FFA”) of
N.J. Stat. Ann. § 2A:50-57(b)(3); New Jersey Court Rules 4:429(a)(4) and 4:42-10(a); and excessive taxed costs in violation of
three New Jersey statutes §§ 2A:15-13, 22A:2-8, and 22A:2-10.
Defendant U.S. Bank argues that all three of these claims should
be dismissed because none provides a private right of action.
This Court has concluded in another action that the FFA and Court
Rules provide no private right of action.
Supp. 2d at 399-400.
Rickenbach, 635 F.
Plaintiffs’ only opposition to these
arguments is that violations of these provisions are actionable
through the New Jersey Consumer Fraud Act.
Thus, the Court
concludes that, to the extent Plaintiffs seek recovery for
violations of these provisions, it is only as a standard of
conduct to be redressed through the NJCFA, as discussed next.
Consequently, the Court will dismiss Counts III, IV and V.
d.
New Jersey Consumer Fraud Act
Plaintiffs’ Count VI alleges violation of the New Jersey
Consumer Fraud Act.
Plaintiffs claim that both Defendants U.S.
Bank and FMC committed unconscionable business practices in
violation of the NJCFA which resulted in an ascertainable loss in
the amount of $600.
Both Defendants argue that Plaintiffs’ claims under the
22
NJCFA must be dismissed because Plaintiffs have not sufficiently
alleged that they suffered an ascertainable loss.
To state a
claim under the NJCFA, a private plaintiff must allege (1)
unlawful conduct by the defendants; (2) an ascertainable loss on
the part of the plaintiff; and (3) a causal relationship between
the defendants’ unlawful conduct and the plaintiff’s
ascertainable loss.
See Cox v. Sears Roebuck & Co., 647 A.2d
454, 462-465 (N.J. 1994).
Defendants argue that, due to Plaintiffs’ allegation that
they have not paid any of the allegedly improper fees requested
by Defendants, they cannot maintain a claim under the NJCFA.
Defendants note that very similar NJCFA claims have been
dismissed in this District on this basis in the past.
See e.g.,
Skypala v. Mortgage Elec. Registration Sys., Inc., 655 F. Supp.
2d 451, 459 (D.N.J. 2009) (dismissing claim of NJCFA violation
because, inter alia, plaintiff failed to adequately allege
ascertainable loss and “[a]t no point in the Complaint does
Plaintiff allege that he actually paid the fees discussed”.).
See also Barrows, 465 F. Supp. 2d 347, 361 (“because Plaintiff
did not pay any attorneys' fees or costs, she has not sustained
any ascertainable loss.”).
Plaintiffs oppose Defendants’ arguments regarding
ascertainable loss by claiming that they are not required to
plead that they actually paid any money in order to allege
23
ascertainable loss under the NJCFA.
Plaintiffs attempt to
support this proposition by citing to Cox v. Sears Roebuck & Co.
647 A.2d 454 (N.J. 1994).
Plaintiffs characterize the holding of
Cox as stating that “[t]he law requires that the loss be
quantifiable to be an ascertainable loss.
The law does not
require the consumer to have paid the false debt.”
Opposition to U.S. Bank’s Mot. Dismiss at 21.
Pls.’ Br. in
The Court finds no
support for this proposition in either Cox or in logic itself.
The Court finds that Plaintiffs’ characterization of the
holding in Cox is inaccurate.
In Cox, a plaintiff sued a
contractor for making faulty repairs to plaintiff’s home, for
which plaintiff did not fully pay.
647 A.2d at 457.
The New
Jersey Supreme Court found that plaintiff had proven an
ascertainable loss that could be measured according to the amount
the jury had found he would be required to pay to fix the faulty
repairs.
Id. at 465.
In other words, the court found that the
plaintiff had actually suffered an economic loss to his property
in an amount that could be measured, even if it was not
necessarily measured according to the original contract price
which Plaintiff did not pay.
Thus, it is incorrect for
Plaintiffs to claim that Cox holds that they need not allege that
they have suffered any monetary loss.
By contract to the Cox plaintiff, the Deharts in the instant
case have not suffered any monetary loss at all.
24
At most,
Plaintiffs seem to suggest that the demand for allegedly improper
fees and costs was itself a loss that is recoverable under the
NJCFA.
It is well established that damages for emotional
distress alone are not recoverable as an ascertainable loss under
the NJCFA.
See Cole v. Laughrey Funeral Home, 869 A.2d 457, 463
(N.J. Super. App. Div. 2005).
Thus, the Court first finds that
Plaintiffs have not suffered an ascertainable loss under the
NJCFA if they have not paid for anything and have not alleged
that they will be obligated to pay anything improper in the
future.
As Plaintiffs readily admit that they have not paid the
$600 they allege Defendants have wrongfully charged, they have
not stated a claim for relief under the NJCFA.
Consequently,
Count VI will be dismissed.
4.
Truth-in-Consumer Contract, Warranty and Notice Act
Count VII of the Complaint alleges that Defendant U.S. Bank
violated the New Jersey Truth-in-Consumer Contract, Warranty and
Notice Act (“TCCWNA”) codified at N.J. Stat. Ann. § 56:12-1 et
seq.
Plaintiffs allege that the September 10, 2009 reinstatement
and payoff notices sent on Defendant’s behalf included excessive
fees and costs of at least $600, in violation of the TCCWNA.
The relevant portion of the TCCWNA provides that
No seller, lessor, creditor, lender or bailee
shall in the course of his business offer to
any consumer or prospective consumer or enter
into any written consumer contract or give or
display any written consumer warranty, notice
or sign . . . which includes any provision
25
that violates any clearly established legal
right of a consumer . . . as established by
State or Federal law at the time the offer is
made or the consumer contract is signed or the
warranty,
notice or
sign
is
given or
displayed.
N.J. Stat. Ann § 56:12-15.
A defendant who violates the TCCWNA
can liable for a $100 civil penalty or for plaintiff’s actual
damages. N.J. Stat. Ann. § 56:12-17.
Defendant argues that Plaintiffs’ claim under the TCCWNA
should be dismissed for several reasons.
First, Defendant argues
that Plaintiffs’ claim fails because the September 10 letters do
not qualify as consumer contracts under the statute.
Second,
Defendant argues that Plaintiffs did not qualify as “consumers”
when they received the letters.
Finally, Defendant argues that
the content of the letters does not violate the statute because
the charges did not violate a clearly established right of
Plaintiffs at the time they were received.5
5
Defendant also argues that Plaintiffs’ claim under the
TCCWNA should be dismissed as impermissibly vague under Rule
8(a), Fed. R. Civ. P., for not stating which specific provision
of the TCCWNA Defendant’s conduct allegedly violated.
Plaintiffs’ response muddies the issue further by claiming,
confusingly, that “Plaintiffs have a cause of action under NJSA
56:12-14 which prohibits the inclusion of a clause which waives
the Plaintiff’s right.” As Defendant points out in reply,
Plaintiffs appear to have intended to refer to § 56:12-16, which
provides in part that “No consumer contract, warranty, notice or
sign, as provided for in this act, shall contain any provision by
which the consumer waives his rights under this act.” The Court
does not understand what this provision has to do with
Plaintiffs’ claim that the September 10 letters, by charging
allegedly excessive fees and costs, violated the statute.
However, the Court finds the Complaint sufficiently clearly
26
With regard to Defendant’s first argument, Plaintiffs oppose
dismissal by insisting that the letters need not qualify as a
consumer contract because they qualify as “notices” under the
statute.
The TCCWNA is violated when a defendant (“seller,
lessor, creditor, lender or bailee”) offers or enters into a
written consumer contract or gives or displays “any written
consumer warranty, notice or sign” that violates the statute’s
provisions.
§ 56:12-15.
Thus, Defendant’s insistence that the
claim be dismissed because the letters are not contracts is an
incorrect reading of the statute.
New Jersey Courts have found
the statute applies to more than merely contracts, but also to
warranties, notices or signs.
See Smith v. Vanguard Dealer
Svcs., L.L.C., 2010 WL 5376316 at *2 (N.J. Super. App. Div. Dec.
21, 2010) (construing TCCWNA to apply to the display of a
warranty).
Defendant offers no argument that the letters do not fall
within the meaning of “notices” as intended by the statute, and
the Court will not supply any sua sponte.
Thus, because a plain
reading of the statute demonstrates that the statute contemplates
claims based on notices as well as contracts, the Court will not
identifies the claim and the legal remedy sought as to satisfy
the notice pleading requirements of Rule 8(a), especially as
Defendant clearly identified § 56:12-15 as the relevant provision
to Plaintiffs’ claim. As the Court will dismiss this claim for
other reasons, explained below, the Court need not dismiss the
claim as failing to give Defendant notice of the claim, despite
the incoherence of Plaintiffs’ response.
27
dismiss the claim on this basis.
However, Plaintiffs do not respond to Defendant’s other two
arguments: that Plaintiffs are not “consumers” under the statute,
and that the charges in the letters did not violate Plaintiffs’
rights at the time they were sent.
Defendant contends that to
state a claim under the TCCWNA, Plaintiffs must be “consumers” as
defined under the statute, and that the notice must violate a
clearly established right at the time it was sent.
Defendant
argues that Plaintiffs do not allege that they were consumers
when they were sent the September 10 notices.
A consumer is
defined in the statute as “any individual who buys, leases,
borrows, or bails any money, property or service which is
primarily for personal, family or household purposes.”
Defendant
argues that, because the September 10 notices were offered only
to provide current and potential future charges of reinstating
and paying off the mortgage, they were not offered to “consumers”
within the meaning of the statute.
Additionally, Defendant argues that the September 10 notices
both clearly state that, for reinstatement and payoff balance
prior to September 18, 2009, no attorney fees or costs would be
charged, and Plaintiffs should refer to the notice of intent to
foreclose for appropriate balances.
Thus, Defendant argues, to
the extent that Plaintiff claims the fees and costs charged in
the September 10 notices were excessive in violation of a clearly
28
established right, they were expressly not excessive at the time
they were sent and received, prior to September 18.
The Court agrees with Defendant to the extent that to state
a claim under the TCCWNA, Plaintiffs must allege that they were
consumers and that the notices violated clearly established
rights at the time they were sent.
While potentially meritorious
arguments may exist to overcome Defendant’s arguments to dismiss
on these grounds, the Court will not fill in opposition on an
issue that is not opposed by a party who is represented by
counsel.
Consequently, the Court will dismiss Count VII without
prejudice to refiling an amended complaint that cures these
pleading failures.
5.
Statement of Account per N.J. Stat. Ann § 12A:9-210
Plaintiff’s eighth count concerns the codification of a
portion of the Uniform Commercial Code governing secured
transactions.
Specifically, N.J. Stat. Ann. § 12A:9-210 states
that a debtor such as Plaintiffs can make a “request regarding a
statement of account,” meaning that the secured party on the
debt, such as Defendant U.S. Bank, must “approve or correct a
statement indicating what the debtor believes to be the aggregate
amount of unpaid obligations secured by collateral as of a
specified date. . .”
N.J. Stat. Ann. § 12A:9-210(a)(4).
A
defendant who violates this provision can liable for $500 in
statutory damages.
N.J. Stat. Ann. § 12A:9-625(f).
29
Plaintiffs allege that the September 10, 2009 reinstatement
and payoff notices were an “inaccurate account for the payoff and
reinstatement of their mortgage.”
Compl. ¶ 62.
The parties do not cite any legal authority interpreting
this provision of the statute, and the Court can find none in its
own research.
Thus, the Court will be limited in its
interpretation of the statute to its understanding of the plain
meaning of the statute’s language.
See N. J. Stat. Ann. § 1:1-1
(“In the construction of the laws and statutes of this state ...
words and phrases shall be read and construed with their context,
and shall, unless inconsistent with the manifest intent of the
legislature or unless another or different meaning is expressly
indicated, be given their generally accepted meaning, according
to the approved usage of the language.”)
Defendants FMC and U.S. Bank move to dismiss this claim on
multiple grounds.
FMC moves to dismiss on the ground that it is
not the secured party, and that the statute therefore does not
apply to it.
Plaintiff consents to dismissal of the claim
against FMC on this basis, so the Court will grant FMC’s motion
on this Count.
Defendant U.S. Bank moves to dismiss for three reasons.
First, U.S. Bank argues that Plaintiffs do not allege that their
request for payoff and reinstatement information constituted a
“request regarding a statement of account” as defined in § 12A:9-
30
210(a)(4).
Second, U.S. Bank argues that, even if such a request
were to be construed as a § 12A:9-210(a)(4) request, the
September 10, 2009 reinstatement and payoff notices were accurate
at the time they were sent and received, because they explicitly
stated that the fees and costs were not payable until at least
September 18, 2009.
Finally, Defendant argues that § 12A:9-210
only governs a statement of principal and interest owed, but does
not govern any statement of additional fees.
Plaintiffs respond in opposition only to the last of these
three arguments.
The Court agrees with Plaintiffs that the
statute, which requires a statement of the “aggregate amount of
unpaid obligations secured by collateral,” includes statements of
fees or costs which may be added to the principal and interest
for complete payoff or reinstatement.
However, Plaintiffs do not respond to Defendant’s argument
regarding their failure to allege that they sent a “request
regarding a statement of account” as defined under the statute.
This omission is fatal to Plaintiffs’ claim.
The statute, by its
own terms, only obligates a secured party to approve or correct a
statement made by the debtor of the debtor’s understanding of his
or her obligations.
The statute does not appear to cover, for
example, a statement of account provided by the secured party
sent at the debtor’s request for a simple balance-due statement.
Thus, unless Plaintiffs allege that they sent to Defendant “a
31
statement indicating what the debtor believes to be the aggregate
amount of unpaid obligations,” the statute is not implicated.
In the present case, Plaintiffs allege only that they
received an inaccurate account of the payoff and reinstatement
notices.
They do not allege what they sent to Defendant to
request this statement, nor do they attach to the Complaint a
copy of their request.
They have attached copies of the
September 10, 2009 letters, which begin only with the phrase “As
requested.”
Compl. Exs. B & C.
This is not enough to allege
that the request was a “request regarding a statement of account”
as defined in § 12a:9-210(a)(4).
Therefore, the Court will
dismiss Count VIII without prejudice.
6.
The Fair Debt Collection Practices Act
Plaintiffs’ final count is that all three defendants
violated the Fair Debt Collection Practices Act (“FDCPA”), 15
U.S.C. §§ 1692e and 1692f.
Defendant Udren moves to dismiss this
count on the ground that the September 10, 2009 letters were, as
a matter of law, not misleading and did not take or threaten to
take any action not allowed by law.
Defendants FMC and U.S. Bank
join in Udren’s motion on this basis and Defendant U.S. Bank
similarly argues that the letters were accurate at the time they
were sent.
In addition, Defendant U.S. Bank moves to dismiss the
claim on three other separate grounds: (1) it was not a debt
collector within the definition of that term under the FDCPA on
32
September 10, 2009; (2) U.S. Bank did not communicate with
Plaintiffs directly; and (3) Plaintiffs themselves initiated the
contact with U.S. Bank.
Because the Court finds that Plaintiffs
have sufficiently alleged a violation of the FDCPA in this case,
the Court will deny Defendants’ motions to dismiss this final
count.
Plaintiffs claim that the September 10, 2009 letters stated
that after September 18, 2009, without regard to the filing of
any foreclosure action, attorney fees and costs in the amount of
$600 would become due and would be required to be paid by
Plaintiffs in order to reinstate or pay off their mortgage.
Plaintiffs further claim that such fees and costs are, under the
NJ FFA, not recoverable until after a foreclosure action has been
filed, citing to Spencer Savings Bank, SLA v. Shaw, 949 A.2d 218
(N.J. Super. App. Div. 2008).
Thus, Plaintiffs claim,
Defendants’ letters constituted: (1) the false representation of
the amount of debt Plaintiffs owed as of September 19, 2009, in
violation of 15 U.S.C. § 1692e(2)(A); (2) the false
representation of compensation which may be lawfully received as
of September 19, 2009, in violation of § 1692e(2)(B); and (3) an
effort to collect an amount not permitted under agreement or by
law in violation of § 1692f(1).
The FDCPA was enacted “to eliminate abusive debt collection
practices, to ensure that debt collectors who abstain from such
33
practices are not competitively disadvantaged, and to promote
consistent state action to protect consumers.”
Jerman v.
Carlisle, McNellie, Rini, Kramer & Ulrich LPA, --- U.S. ---, 130
S. Ct. 1605, 1608 (2010) (citing 15 U.S.C. § 1692(e)).
The Act
creates a private cause of action to recover for violations of
the Act actual damages as well as statutory damages up to $1,000
for individual actions as well as costs and reasonable attorney’s
fees.
§ 1692k(a).
The Act also sets statutory limits on class
actions in the amount of the lesser of either $500,000 or 1% of
the violating debt collector’s net worth.
§ 1692k(a)(2).
The Third Circuit instructs that, in light of the remedial
nature of the FDCPA, courts are to construe its language broadly
so as to effect its purpose.
450, 453 (3d Cir. 2006).
Brown v. Card Serv. Ctr., 464 F.3d
Thus, the Court applies a “least-
sophisticated debtor” standard when analyzing claims of
misleading communications, which is to “ensure that the FDCPA
protects all consumers, the gullible as well as the shrewd.
This
standard is consistent with the norms that courts have
traditionally applied in consumer-protection law.”
quotations omitted).
Id. (internal
However, application of the “least-
sophisticated debtor” standard does not require the Court to
credit unreasonable interpretations.
“[W]e note that although
the ‘least sophisticated debtor’ standard is a low standard, it
‘prevents liability for bizarre or idiosyncratic interpretations
34
of collection notices by preserving a quotient of reasonableness
and presuming a basic level of understanding and willingness to
read with care.’”
Lesher v. Law Offices Of Mitchell N. Kay, PC,
--- F.3d ---, 2011 WL 2450964 at *3 (3d Cir. June 21, 2011).
With this standard in mind, the Court finds that Plaintiffs in
the instant case have alleged that Defendants’ statements were
sufficiently misleading as to survive Defendants’ motions to
dismiss.
Defendants argue that the September 10, 2009 letters were
not, as a matter of law, misleading and could not reasonably be
interpreted as attempts to collect amounts not permitted by law.
Defendants point out that the letters all clearly indicate that
the fees and costs listed in the September 10 letters would not
be recoverable until after September 18, as was stated in the
August 19, 2009 notice of intent to foreclose.
Further,
Defendants argue, they were authorized to charge attorney fees
and costs once foreclosure proceedings were initiated, which in
fact took place promptly thereafter, on October 5, 2009.
The Court finds, however, that under the least-sophisticated
debtor standard, a reasonable unsophisticated debtor could
interpret these letters to state that if Plaintiffs were to
attempt to reinstate or pay off their mortgage on September 19,
2009, they would have been required to pay the $100 notice of
intention fee and the $500 attorney foreclosure fee, which were
35
debts Defendants were prohibited from collecting or demanding at
that time under state law.
The Court finds this allegation to be
sufficient to state a claim for a violation of both § 1692e(2) as
well as § 1692f(1).
Defendants’ arguments that Plaintiffs cannot
recover because they did not, in fact, attempt to pay these
amounts, nor allege that these additional charges were the reason
they failed to reinstate or pay off the mortgage are irrelevant;
the statute permits recovery of statutory damages even without a
showing of actual damages.
§ 1692k.
Thus, the Court will deny
Defendants’ Udren and FMC’s motions to dismiss this count.
Defendant U.S. Bank makes three additional arguments for
dismissal of this count.
First, Defendant argues that it was not
a debt collector within the definition of that term under the
FDCPA on September 10, 2009.
Defendant argues that, according to
the facts alleged in the Complaint, Defendant U.S. Bank was not
assigned the mortgage until September 21, 2009, after the
September 10 letters were sent.
Therefore, Defendant argues,
Plaintiff has not alleged sufficient facts to establish that U.S.
Bank was a debt collector of these debts at the time the letters
were sent.
The Court has already held that Plaintiffs have
sufficiently alleged the existence of an agency relationship
between Defendants Udren and U.S. Bank to establish a theory of
vicarious liability on the part of U.S. Bank for its agent’s
actions.
See, supra, section III.B.2.
36
Additionally, the Third
Circuit has held that the principal of an agent that is acting as
a debt collector can be vicariously liable for the agent’s
violations of the FDCPA if the principal is itself a debt
collector.
Pollice v. National Tax Funding, L.P., 225 F.3d 379,
404 (3d Cir. 2000).
Thus, the only question before the Court is
whether U.S. Bank was acting as a “debt collector” as that term
is defined under the statute at the time it engaged Udren to
attempt to collect Plaintiffs’ debts.
The FDCPA defines “debt collector” as
any person who uses any instrumentality of
interstate commerce or the mails in any
business the principal purpose of which is the
collection of any debts, or who regularly
collects or attempts to collect, directly or
indirectly, debts owed or due or asserted to
be owed or due another.
15 U.S.C. § 1692a(6).
Additionally, an assignee of a debt “may
be deemed a ‘debt collector’ if the obligation is already in
default when it is assigned.”
Pollice, 225 F.3d at 403.
Plaintiffs have alleged that their mortgage was in default as
early as April of 2009.
Thus, the Court finds that Plaintiffs
have sufficiently alleged that Defendant U.S. Bank was acting as
a debt collector when its agent sent the September 10, 2009
letters to Plaintiffs.
If on September 10, 2009, U.S. Bank was
not yet the assignee of the debt, then it was acting to collect
the debt of another, and it therefore fits within the definition
of § 1692a(6).
If it was attempting to collect the debt in
37
anticipation of the assignment, after which it would clearly have
become a debt collector pursuant to Pollice, it would surely have
been a debt collector prior to such assignment.
Consequently,
the Court will deny Defendant U.S. Bank’s first argument for
dismissal.
Secondly, Defendant U.S. Bank argues that it escapes
liability because it did not communicate with Plaintiffs
directly.
The Court has already found that Defendant can be held
vicariously liable for its agent’s actions, and will therefore
deny this second argument.
Third, Defendant U.S. Bank argues that it escapes liability
under the FDCPA because Plaintiffs themselves initiated the
contact with U.S. Bank.
On this point the Court again agrees
with Plaintiffs that the facts as alleged in the Complaint do not
support Defendant’s argument.
Defendant cites to Gorham-DiMaggio
v. Countrywide Home Loans, Inc., Civ. No. 05-0583, 2005 WL
2098068 at *2 (N.D.N.Y. Aug. 30, 2005) for the proposition that
communication that was initiated by the debtor is not actionable
under the FDCPA.
The Court finds that, to the extent that Gorham-DiMaggio is
persuasive authority, it is factually inapplicable here.
As
Plaintiff’s attachments demonstrate, the initial contact with
Plaintiffs came from the debt collector Udren in the form of a
notice of intention to foreclose.
38
Compl. Ex. A.
In response to
that notice, Plaintiffs requested additional payoff and
reinstatement information, which Udren, acting as Defendant U.S.
Bank’s agent, sent on September 10, 2009.
Compl. Exs. B & C.
As
the court in Gorham-DiMaggio explained, “the purpose of § 1692 is
to ensure that communications initiated by the debt collector
(not the consumer) are not abusive, deceptive, or unfair.”
(emphasis added).
Id.
In the present case, it is clear that the
communications in this matter were initiated by the debt
collector Udren here.
Thus, the Court will deny Defendant U.S.
Bank’s motion to dismiss Plaintiff’s FDCPA claim.
7.
Class action allegations
Finally, Defendant Udren additionally seeks to dismiss
Plaintiffs’ class action allegations on the grounds that they
have not sufficiently alleged that they are members of any
potential class because they have not sufficiently stated a claim
for recovery under any asserted theory.
As the Court has now
concluded that Plaintiffs have sufficiently stated a claim under
the FDCPA, the Court will deny Defendant’s motion to dismiss
Plaintiffs’ class action allegations with regard to their seeking
to pursue a class action for violations of the FDCPA.
To the
extent that Defendant Udren additionally seeks the dismissal of
the class claims on the basis that Plaintiffs’ allegations do not
prove the Fed. R. Civ. P. 23 factors, the Court finds that such
an argument is not ripe for decision on a Rule 12(b)(6) motion to
39
dismiss, as Plaintiffs have not yet had the opportunity to
conduct class discovery with regard to their FDCPA claim.
IV.
CONCLUSION
Plaintiffs have raised several claims for relief in the
present action.
The Court finds that Plaintiffs have
sufficiently stated a claim under the FDCPA, and that their claim
is not subject to dismissal under the New Jersey Entire
Controversy Doctrine or the Colorado River abstention doctrine.
Because the Court finds that Plaintiffs have not alleged
damages or any ascertainable loss, the Court will grant
Defendants’ motions to dismiss Counts I - VI of the Complaint.
Additionally, because the Court finds that Plaintiffs have not
sufficiently alleged the required elements for recovery under the
TCCWNA or the UCC, the Court will similarly dismiss Counts VII
and VIII without prejudice.
However, because the Court finds that Plaintiffs have
sufficiently alleged the existence of an agency relationship
between Defendants U.S. Bank and Udren, and because the Court
finds that the September 10, 2009 letters sent to Plaintiffs by
Udren on behalf of U.S. Bank could be considered misleading under
the least-sophisticated debtor standard applied in this Circuit,
the Court will deny Defendants’ motion to dismiss Count IX of the
Complaint.
40
The accompanying Order will be entered.
August 18, 2011
Date
s/ Jerome B. Simandle
JEROME B. SIMANDLE
United States District Judge
41
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