CARRIER et al v. BANK OF AMERICA, N.A. et al

Filing 45

OPINION. Signed by Judge Renee Marie Bumb on 1/31/2014. (drw) (Main Document 45 replaced on 1/31/2014) (dd).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE

MARK E. CARRIER and RUTH
CARRIER,
Plaintiffs,
v.

Civil No. 12-104 RMB/JS
[Docket No. 24]
OPINION

BANK OF AMERICA, N.A., et al.,
Defendants.
LUIS NIEVES,
Plaintiff,
Civil No. 12-7702 RMB/JS
v.
[Docket No. 5]
BANK OF AMERICA, N.A., et al.,
Defendants.
ALLEN DIKKER,
Plaintiffs,
Civil No. 12-7755 RMB/JS
v.
[Docket No. 6]
BANK OF AMERICA, N.A., et al.,
Defendants.

MICHAEL CARELLI,
Plaintiff,
Civil No. 12-7701 RMB/JS
v.
[Docket No. 5]
BANK OF AMERICA, N.A., et al.,
Defendants.
MARY DEBONIS,
Plaintiff,
Civil No. 12-7945 RMB/JS
v.
[Docket No. 5]
BANK OF AMERICA, N.A., et al.,
Defendants.
ARMANDO GARCIA,
Plaintiff,
Civil No. 12-7946 RMB/JS
v.
[Docket No. 6]
BANK OF AMERICA, N.A., et al.,
Defendants.

2

KRZYSZTOF KOWALCZYK
Plaintiff,
Civil No. 12-7947 RMB/JS
v.
[Docket No. 5]
BANK OF AMERICA, N.A., et al.,
Defendants.
DILCIA MENDEZ,
Plaintiff,
Civil No. 12-7949 RMB/JS
v.
[Docket No. 5]
BANK OF AMERICA, N.A., et al.,
Defendants.
JUNG LIM,
Plaintiff,
Civil No. 12-7948 RMB/JS
v.
[Docket No. 5]
BANK OF AMERICA, N.A., et al.,
Defendants.

APPEARANCES:
Michael D. Shaffer, Esq.
SHAFFER & GAIER, LLC
1628 JFK Blvd
Suite 400
Philadelphia, PA 19103
Attorney for Plaintiffs
3

Diane A. Bettino, Esq.
Kellie A. Lavery, Esq.
Mark S. Melodia, Esq.
REED SMITH, LLP
136 Main Street
Suite 250
Princeton, NJ 08543
Attorneys for Defendants
BUMB, United States District Judge:
This matter comes before the Court upon several motions by
Defendant Bank of America, N.A. and its predecessor, Countrywide
Home Loans Servicing, L.P. (“Countrywide”), (hereinafter the
“Defendant”), to dismiss Plaintiffs’ Complaints in the abovecaptioned nine related cases.1

For the reasons set forth below,

these motions shall be granted.

Background2

I.

Because all of the Plaintiffs’ Complaints3 in the abovecaptioned matters are substantially identical, the Court will

1

Plaintiffs originally filed these nine actions as one
consolidated case. Following oral argument on the Defendant’s
first motion to dismiss in 12-104 [Docket No. 7], this Court
ordered that the matters should be severed in the hopes that the
Plaintiffs would put forth specific allegations as to each
Plaintiff.
2

This Court will accept the Plaintiffs’ well-pled
allegations as true for purposes of this motion to dismiss.
Bistrian v. Levi, 696 F.3d 352, 358 n.1 (3d Cir. 2012).
3

See

In Carrier, 12-104, the Plaintiffs have filed an Amended
4

set forth the facts similar to each Complaint.4
The Plaintiffs in all nine matters are citizens of New
Jersey who allege they were “victims of Countrywide’s negative
amortization loan scheme.”

Pls.’s Br. at 2.

To effectuate this

alleged scheme, Plaintiffs aver that “Countrywide employees
marketed, sold or negotiated the terms of the mortgage loans
through its origination channels either directly to consumers or
indirectly by working with mortgage brokers or mortgage
bankers,” and that those brokers “were acting as agents of
Countrywide . . . as Countrywide was the party that was
offering, approving and funding the loan product to the
Homeowners.”

Amended Complaint (“Amend. Compl.”) at ¶¶ 10-11.

Complaint. For ease of reference this Court will refer
generally to the allegations contained in that Amended
Complaint, as the parties have treated that matter as the lead
case for purposes of these motions and the motion papers in all
matters are nearly identical. See Pls.’ Reply Br. at 2 n. 1
(“The citations are to the Amended Complaint in Carrier but the
allegations are the same in all of the eight other causes of
action”). Arguments specific to only certain Plaintiffs are
addressed infra at 29.
4

The similarity of these allegations is bolstered by the
fact that the Plaintiffs have filed only one opposition brief,
uniform in each of the above-captioned matters. See No. 12-104,
Pls.’ Br. at p. 2: “Since the arguments are virtually identical
in all of the cases, Plaintiff will file one response and
incorporate by reference all of the arguments set forth in this
Memorandum of Law in the other right matters.”
5

Plaintiffs further allege that the Defendant maintains
“sophisticated electronic databases” by and through which
corporate management obtained financial information needed to
solicit loan products that were “predatory, misleading and
fraudulent.”

Pls.’ Br. at 3, citing Amend. Compl. ¶¶ 12-32.

Defendant is alleged to have implemented this deceptive scheme
by: “(a) advertising that it was the nation’s largest lender and
could be trusted by consumers; (b) encouraging borrowers to
refinance who obtained purchase money financing with complicated
mortgage instruments like hybrid adjustable rate mortgage or
payment option adjustable rate mortgages that were difficult for
consumers to understand; (c) marketing these complex loan
products to consumers by emphasizing the very low initial
“teaser” or “fixed” rates while obfuscating or misrepresenting
the latter steep monthly payments and interest rate increases or
risks of negative amortization; and (d) routinely soliciting
borrowers to refinance only a few months after Countrywide or
other loan brokers with whom it had business partnerships and
sold them loans, commonly called loan flipping.”

Amend. Compl.

at ¶ 18.
Plaintiffs further allege that “Countrywide directly and
indirectly motivated its branch managers, loan officers and
6

brokers to market loans that would earn the highest premiums on
the secondary markets without regard to borrowers’ ability to
repay.”

Id. at ¶ 31.

In addition, Plaintiffs allege that

Countrywide “used the ‘stated income’ method of underwriting,
meaning that rather than document the borrowers’ income with tax
returns, paystubs, etc., they would simply ‘state’ the income,
often using a significantly higher income than the borrower
actually had.”

Id. at ¶ 10.

Several paragraphs in the Amended Complaint describe the
Countrywide payment option adjustable rate mortgage – i.e., “pay
option ARM,” which Plaintiffs allege was “financially risky,”
“difficult for borrowers to understand,” and “resulted in
negative amortization.”

Pls.’ Br. at 3; Amend. Compl. at ¶ 34.

Countrywide enticed consumers to the pay option ARM by offering
“a very low ‘teaser’ rate – often as low as 1% -- for an
introductory period . . . . At the end of the introductory
period, the interest rate increases dramatically.”

Amend.

Compl. at ¶ 34.
Plaintiffs also allege that the loan documents provided by
Countrywide were deceptive “as the only initial monthly payment
amount that appeared anywhere in [the] loan documents was the
minimum payment amount” and “[e]ven the Adjustable Rate Rider to
7

the Mortgage and the actual Note . . . listed the minimum
payment and the minimum payment rate, rather than the rate that
it would adjust to in one to three months.”

Id. at ¶¶ 44 & 46.

Moreover, Plaintiffs allege that Countrywide’s closing documents
violate the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et
seq., because the Plaintiffs “could not accurately calculate an
APR because certain adjustments, balance increases and intereston-interest calculations were not accounted for in the APR as
presented.”

Id. at ¶ 48.

The brokers5 in Plaintiffs’ transactions are alleged to have
been Countrywide’s “business partners” who “misrepresented or
obfuscated the true terms of the pay option ARMs.”

Id. at ¶ 49.

The brokers mentioned in Plaintiffs’ complaints are alleged to
have partnered with Countrywide “to perpetrate the fraud” and
were given marketing and advertising materials “that pushed the
Defendant Broker[s] to sell the negative amortization loans to
Plaintiff.”

Id. at ¶¶ 61 & 63.

In addition, the brokers are

alleged to have - at the specific instruction of Countrywide a) informed the Plaintiffs that the negative amortization loan
was a sound financial product with little to no risk to the
borrower; b) instructed the borrowers that this was the best
5

It does not appear that any brokers have been served by
the Plaintiffs.
8

loan that they qualified for when in fact that was not true, and
c) instructed the borrowers to simply pay the lowest amount
possible and then Countrywide would simply refinance the
mortgage at the appropriate time.

Id. at ¶ 76.

It is further alleged that both Countrywide and the brokers
“knew or should have known that all of the foregoing statements
were false and fraudulent and that the Plainitff[s] would rely
upon these statements when they were made.”

Id. at ¶ 77.

Finally, Plaintiffs aver that the brokers “at the specific
direction of Countrywide inflated the income without the
[Plaintiffs’] knowledge thereby allowing borrowers to qualify
for a loan that Defendants knew . . . was economically
unfeasible to [P]laintiffs.”

Id. at ¶ 79.

Based on the above, Plaintiffs have asserted claims for
fraud, fraud in the inducement, under the New Jersey Consumer
Fraud Act, promissory estoppel, breach of implied covenant of
good faith and fair dealing, negligent misrepresentation, New
Jersey and Federal Racketeer Influenced and Corrupt
Organizations Act claims, civil conspiracy, and for declaratory
relief.

Defendant has moved to dismiss Plaintiffs’ claims in

all nine above-captioned matters.

For the reasons discussed

below, Defendant’s motion will be granted.
9

II.

Standard

To withstand a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6), “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009)(quoting Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 570 (2007)).

“A claim has facial plausibility when the

plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.”

Id. at 663.

“[A]n unadorned, the-

defendant-unlawfully harmed-me accusation” does not suffice to
survive a motion to dismiss.

Id. at 678. “[A] plaintiff's

obligation to provide the 'grounds' of his 'entitle[ment] to
relief' requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will
not do." Twombly, 550 U.S. at 555 (quoting Papasan v. Allain,
478 U.S. 265, 286 (1986)).

“Threadbare recitals of the elements

of a cause of action, supported by mere conclusory statements,
do not suffice.”

Iqbal, 556 U.S. at 678.

In reviewing a plaintiff’s allegations, the district court
“must accept as true all well-pled factual allegations as well
10

as all reasonable inferences that can be drawn from them, and
construe those allegations in the light most favorable to the
plaintiff.”
2012).

Bistrian v. Levi, 696 F.3d 352, 358 n.1 (3d Cir.

Only the allegations in the complaint, and “matters of

public record, orders, exhibits attached to the complaint and
items appearing in the record of the case” are taken into
consideration. Oshiver v. Levin, Fishbein, Sedran & Berman, 38
F.3d 1380, 1384 n.2 (3d Cir. 1994)(citing Chester County
Intermediate Unit v. Pennsylvania Blue Shield, 896 F.2d 808, 812
(3d Cir. 1990)).

III. Analysis
The Defendant argues that the Plaintiffs’ Complaints lack
the specificity needed to sustain their fraud-based claims –
i.e., “Plaintiffs fail to identify any false statements by
Defendant” and, as such, Plaintiffs’ fraud claims must be
dismissed.

Def.’s Br. at 2.

Defendant further argues that

“[a]ll of Plaintiffs’ subsequent claims are derivative of their
fraud claims because they each depend upon fraudulent
misrepresentations as an essential element.”

Id.

Finally,

Defendants argue that Plaintiffs’ New Jersey and Federal RICO
claims are barred by the applicable four year statutes of
11

limitation and must be dismissed.

This Court will address each

of the Plaintiffs’ claims in turn.6

a) Fraud, Fraud in the Inducement & New Jersey Consumer
Fraud Act (“NJCFA”)
In order to satisfy the heightened pleading standard
expressed under Federal Rule of Civil Procedure Rule 9(b), the
plaintiff must plead with particularity the circumstances
constituting a fraud.

Fed. R. Civ. P. 9(b).

This can be

accomplished by pleading “the date, time, and place” of the
fraud or otherwise injecting “precision or some measure of
substantiation into the allegations.”

Slimm v. Bank of Am.

Corp., No. 12-5846, 2013 U.S. Dist. LEXIS 62849, at * 46-47
(D.N.J. May 2, 2013)(quoting Frederico v. Home Depot, 507 F. 3d
188, 200 (3d Cir. 2007)).

A plaintiff alleging fraud must state

the circumstances of the fraud with “sufficient particularity to
place the defendant on notice of the precise misconduct with
which he is charged.”

Lum v. Bank of America, 361 F.3d 217,

223-24 (3d Cir. 2004).

In other words, the Rule “requires

plaintiffs to plead the who, what, when, where, and how: the
6

Per page 9, footnote 3 of Plaintiffs’ opposition papers,
Plaintiffs have withdrawn their promissory estoppel claims
without prejudice; the Court need not address the merits of the
Defendant’s arguments regarding the same.
12

first paragraph of any newspaper story.”

In re Advanta Corp.

Sec. Litig., 180 F.3d 535, 534 (3d Cir. 1999).

This standard

applies to all of Plaintiffs’ claims sounding in fraud – i.e.,
fraud, fraud in the inducement, and their claims under the
NJCFA.
To allege fraud in New Jersey, a plaintiff must plead “(1)
a material misrepresentation of a presently existing or past
fact; (2) knowledge or belief by the defendant of its falsity;
(3) an intention that the other person rely on it; (4)
reasonable reliance thereon by the other person; and (5)
resulting damages.” Banco Popular No. Am. v. Gandi, 184 N.J.
161, 876 A.2d 253, 260 (N.J. 2005).

Similarly, a claim for

fraud in the inducement involves “(1) a material
misrepresentation of a presently existing or past fact, (2) made
with knowledge of its falsity and (3) with the intention that
the other party rely thereon, (4) resulting in reliance by that
party to his detriment.”

Am. Fin. Res., Inc. v. Countrywide

Home Loans Servicing, No. 12-7141, 2013 U.S. Dist. LEXIS 180132,
at * 29 (D.N.J. Dec. 23, 2013).
Like common law claims for fraud and fraud in the
inducement, claims under the NJCFA are subject to the heightened
pleading requirements of Rule 9(b), discussed above.
13

FDIC v.

Bathgate, 27 F.3d 850, 876 (3d Cir. 1994).

In order to state a

NJCFA claim, a plaintiff must show three elements: (1) unlawful
conduct by the defendant; (2) an ascertainable loss by
plaintiff; and (3) a causal relationship between the unlawful
conduct and the ascertainable loss.

See Francis E. Parker Mem.

Home, Inc. v. Georgia-Pacific LLC, 945 F. Supp. 2d 543, 558
(D.N.J. 2013)(citing International Union of Operating Engineers
Local No. 68 Welfare Fund v. Merck & Co., 192 N.J. 372, 929 A.
2d 1076 (2007)).
Defendant argues that all of Plaintiffs’ claims sounding
in fraud fail because the Plaintiffs have not specifically
alleged any specific material misrepresentation made by
Defendant with the level of specificity required under Rule 9(b)
– i.e., the “who, what, where and when” of the alleged material
misrepresentation, which is a key element to both the fraud and
fraud in the inducement claims.

Defendant also argues that the

Plaintiffs’ conclusory allegations as to an agency relationship
between Countrywide and the brokers are insufficient and,
therefore, Plaintiffs have failed to attribute any alleged
misrepresentations or other unlawful conduct to the Defendant as
required under all three fraud-based claims.

14

In response, Plaintiffs assert that the following
allegations contain the requisite specificity to survive the
instant motion:


The Defendant Broker, at the specific instruction of
Countrywide, informed the Plaintiffs that the Negative
Amortization loan was a sound financial product with little
to no risk to the borrower. Further, at the direction of
Countrywide, the Defendant Broker instructed the borrowers
that this was the best loan that they qualified for when in
fact that was not true. Moreover, the Defendant broker, at
the direction of Countrywide instructed the borrowers to
simply pay the lowest amount possible and then Countryside
would simply refinance the mortgage at the appropriate
time.



Defendant Broker and Countrywide knew or should have known
that all of the foregoing statements were false and
fraudulent and the Plaintiff would rely upon these
statements when they were made.



Countrywide paid the Broker monies to originate this loan.



The Broker at the specific direction of Countywide inflated
the income without the Borrowers knowledge thereby allowing
borrowers to qualify for a loan that the Defendants knew
that was economically unfeasible to the Plaintiffs.

Pls.’ Br. at 14.
This Court agrees with Defendant that the Plaintiffs’
allegations lack the “the date, time, and place” of the fraud or
other requisite “precision or some measure of substantiation”
required to survive the instant motion.

Slimm v. Bank of Am.

Corp., No. 12-5846, 2013 U.S. Dist. LEXIS 62849, at * 46-47
(D.N.J. May 2, 2013)(quoting Frederico v. Home Depot, 507 F. 3d
15

188, 200 (3d Cir. 2007)).

A review of the Amended Complaint

reveals that Plaintiffs have not provided specifics as to who
made these alleged statements other than the generic “Defendant
Broker,” or when such statements were purportedly made.
Moreover, the Plaintiffs have failed to plead adequate
facts sufficient to tie any alleged misrepresentations by the
“Defendant Brokers” to the Defendant via agency.

The sum and

substance of Plaintiffs’ allegations with respect to alleged
agency is that the brokers “were acting as agents of
Countrywide,” that “Countrywide partnered with the Defendant
Broker[s] to perpetrate the fraud,” and the brokers made
misrepresentations at the “specific instruction” of Defendant.
See Amend. Compl. at ¶ ¶ 11, 61 & 76.

A plaintiff may not

conclusively assert that a party was another party's agent
without sufficient factual allegations.

See TBI Unlimited, LLC

v. Clearcut Lawn Decisions, LLC, 2013 U.S. Dist. LEXIS 41206,
*10 (D.N.J. 2013)(“A plaintiff may not simply assert in
conclusory terms that a party is another party's agent for
purposes of vicarious liability.”);

Seltzer v. I.C. Optics,

Ltd., 339 F. Supp. 2d 601, 609 (D.N.J. 2004)(sufficient pleading
of agency required facts about control and consent to support

16

allegations of an agency relationship between subsidiary and
parent corporations).
Because Plaintiffs have pointed to no evidence of an
express agency relationship,7 Plaintiffs must show the existence
of an “apparent agency” relationship to impute the alleged false
statements made by the brokers to the Defendant.

See Huelas v.

Wells Fargo, No. 11-7250, 2012 U.S. Dist. LEXIS 110578, at *2-3
(D.N.J. Aug. 7, 2012)(discussing agency relationship in mortgage
transaction context).

To demonstrate the existence of apparent

agency, Plaintiffs must establish that: “(1) the appearance of
authority has been created by the conduct of the alleged
principal and not solely by the conduct of the putative agent;
(2) a third party has relied on the agent's apparent authority
to act for a principal; and (3) the reliance was reasonable
under the circumstances.”

Id. at *12 (citing Mayflower Transit,

LLC v. Prince, 314 F. Supp. 2d 362, 374 (D.N.J. 2004)).
Again, instead of presenting factual allegations in support
of an agency relationship, Plaintiffs instead recite legal
conclusions that the brokers “were acting as agents of

7

“Agency requires more than mere authorization to assert a
particular interest. ‘An essential element of agency is the
principal’s right to control the agent’s actions.’”
Hollingsworth v. Perry, 133 S. Ct. 2652, 2666 (2013)(quoting 1
Restatement (Third) of Agency §1.01, Comment f (2005)).
17

Countrywide,” which is insufficient under the dictates of Iqbal.
See Garczynski v. Countrywide Home Loans, 656 F. Supp. 2d 505,
512 (E.D. Pa. 2009)(finding that plaintiffs’ conclusory
allegation that a broker “acted as an agent for Defendant
Countrywide” was “insufficient to support a conclusion that
[broker] was an agent of Countrywide and that Countrywide may be
liable for her conduct.”); see also TBI Unlimited, LLC, 2013
U.S. Dist. LEXIS 41206, *12-14 (D.N.J. 2013)(“the Complaint
makes no showing that apparent authority existed as Plaintiff
alleges no facts to show that the actions of [Defendant] misled
the public into believing that Clear Cut was its agent”).
Finally, Plaintiffs seek to support their fraud claims on
the grounds that the Truth in Lending Act (“TILA”), 15 U.S.C. §
1601 et seq., disclosure statements presented to Plaintiffs were
allegedly not consistent with the mortgage notes and that those
TILA disclosure statements are “false and misleading.”
Plaintiffs cannot assert a cause of action under TILA because,
as they admit, the statute of limitations has expired.
Br. at 15, n. 4.

Pls.’

That the Plaintiffs’ claims sounding in fraud

are sustained by alleged TILA violations is, again, only
supported by Plaintiffs’ vague conclusory allegations – e.g.,

18

“Plaintiffs’ Note and TILA statement are misleading, fraudulent
and even contradict one another.”

Amend. Compl. at ¶ 70.

To use TILA as a way to sustain a claim here (either via
fraud, fraud in the inducement or under the New Jersey Fraud
Claims Act, as discussed further below) requires Plaintiffs to
be able to plead with the requisite particularity and to satisfy
all of the elements of those claims.

For reasons already

discussed above, Plaintiffs have failed to provide any factual
support with respect to how the TILA disclosures are incorrect
or how the individual Plaintiffs were misled by the TILA
disclosure statements other than vague assertions.8
As such, all of Plaintiffs’ claims sounding in fraud fail
to meet the dictates of Rule 9(b).

Moreover, Plaintiff’s NJCFA

claim is further eviscerated by the very terms of the Amended
Complaint:

Plaintiffs state that the suffered an

“unascertainable loss” by virtue of the alleged NJCFA violation,
(Amend. Compl. at ¶99), but to sustain a NJCFA claim expressly
requires that Plaintiffs suffer an “ascertainable” loss.
8

See

This Court need not address Plaintiffs’ other assertions
regarding alleged TILA violations (e.g., that the documents do
not recognize the homeowner’s option to make interest only
payments or that the TILA Disclosure Statement does not
recalibrate the loan to reflect the true payments being made)
because such assertions constitute claims properly brought under
TILA and, as admitted by Plaintiffs, such claims are timebarred.
19

Francis E. Parker Mem. Home, Inc., 945 F. Supp. 2d 543, 558
(D.N.J. 2013).

Therefore, Plaintiffs’ fraud, fraud in the

inducement, and NJCFA claims shall be dismissed.

b) Breach of Good Faith and Fair Dealing
All contracts in New Jersey contain an implied covenant of
good faith and fair dealing.

Black Horse Lane Assoc., L.P. v.

Dow Chem. Corp., 228 F.3d 275, 288 (3d Cir. 2000).

The covenant

operates to ensure that “neither party shall do anything which
will have the effect of destroying or injuring the right of the
other party to receive the fruits of the contract.”

Sons of

Thunder, Inc. v. Borden, Inc., 690 A.2d 575, 587, 148 N.J. 396
(1997).

“A party to a contract breaches the covenant if it acts

in bad faith or engages in some other form of inequitable
conduct in the performance of a contractual obligation.”
Horse Lane Assoc., L.P., 228 F.3d at 288.

Black

In addition “[t]he

Supreme Court of New Jersey has clearly held that bad motive is
‘essential’ to a claim for breach of the implied covenant of
good faith and fair dealing.”

Vasaturo Bros. v. Alimenta

Trading-USA, No. 09-2049, 2011 U.S. Dist. LEXIS 80026, at * 1314 (D.N.J. July 22, 2011).

20

Plaintiffs’ only averments with respect to this Count are
to incorporate prior allegations by reference and to
conclusively allege that “Defendant[‘s] actions as stated herein
were in violation of that implied covenant of good faith and
fair dealing.”

Amend. Compl. at ¶ 106.

Plaintiffs’ opposition

brief to the instant motion does little to clarify the basis of
their claim other than to say: “Defendants knew these loans were
‘toxic’ and doomed for default, but purposely mislead [sic]
Plaintiffs into believing that their loan was affordable when,
in fact, it was not.”

Pls.’ Br. at 18.

Beyond conclusory assertions that the loans were “doomed
and toxic,” the Plaintiffs have not provided any factual grounds
to sustain this claim and Defendant’s motion to dismiss will be
granted.

See Iqbal, 556 U.S. at 679 (“a court considering a

motion to dismiss can choose to begin by identifying pleadings
that, because they are no more than conclusions, are not
entitled to the assumption of truth.

While legal conclusions

can provide the framework of a complaint, they must be supported
by factual allegations.”).

Moreover, this Court agrees with the

Defendant that there are no allegations that the Plaintiffs did
not receive the loan funds due under the terms of the contract
and, therefore, Plaintiffs have not properly alleged that
21

Defendant engaged in conduct either “destroying or injuring the
right of the other party to receive the fruits of the contract.”
Sons of Thunder, Inc., 690 A.2d at 587.

c) Negligent Misrepresentation
In order to state a negligent misrepresentation claim, a
plaintiff must allege that: (1) the defendant negligently
provided false information; (2) the plaintiff was a reasonably
foreseeable recipient of that information; (3) the plaintiff
justifiably relied on the information; and (4) the false
statements were a proximate cause of the plaintiff's damages.
Prudential Ins. Co. of Am. v. Goldman, Sachs & Co., 12-6590,
2013 U.S. Dist. LEXIS 50788, 2013 WL 1431680, at *27-28 (D.N.J.
Apr. 9, 2013)(citing McCall v. Metro. Life Ins. Co., 956 F.
Supp. 1172, 1186 (D.N.J. 1996)).
The entirety of Plaintiffs’ argument in support of a
negligent misrepresentation claim is:
Plaintiffs have stated that the loan documents were
misleading and fraudulent in their nature, and that the
deception was intentional. At the very least, Plaintiffs
have alleged that the Defendant[s] knew or should have
known that the loans were deceptive and misleading, and
therefore, Plaintiffs have set forth a claim for
negligent misrepresentation.

22

Pls.’ Br. at 19.

Again, Plaintiffs provide only insufficient

legal conclusions in support of this claim.

Also, for reasons

discussed at length above Plaintiffs have not attributed false
and misleading statements to the Defendant via agency and,
therefore, the negligent misrepresentation claim must be
dismissed.

d) New Jersey & Federal RICO
“The statute of limitations in New Jersey for civil
liability claims under New Jersey’s RICO statute is four years
after the commission of the offense.”

Lutzky v. Deutsche Bank

Nat’l Trust Co., No. 09-3886, 2009 U.S. Dist. LEXIS 100062, at *
10 (D.N.J. Oct. 27, 2009).

Like New Jersey, Federal RICO law is

also governed by a four year statute of limitations.

See Forbes

v. Eagleson, 228 F.3d 471, 483 (3d Cir. 2000)(citing Agency
Holding Corp. v. Malley-Duff Assocs., 483 U.S. 143, 156 (1987)).
In determining when a RICO claim accrues, courts in the Third
Circuit apply the injury discovery rule “whereby a RICO claim
accrues when plaintiffs knew or should have known of their
injury.”

Mathews v. Kidder Peabody & Co., 260 F.3d 239, 252 (3d

Cir. 2001)(emphasis added).

The Court must first perform “an

objective inquiry to determine when plaintiffs should have known
23

of the basis of their claims. . . .”

Cetel v. Kirwan Financial

Group, Inc., 460 F. 3d 494, 507 (3d Cir. 2006).
In cases alleging analogous facts, courts have held, where
all of a plaintiffs’ clams stemmed from the terms of and
execution of their mortgage loan, that “Plaintiffs could have
easily discovered the improper conduct at the time of the
execution of the mortgage simply by reviewing the documents
relating to the mortgage if they had exercised ‘reasonable
diligence and intelligence.’”

Lutzky v. Deutsche Bank Nat’l

Trust Co., No. 09-3886, 2009 U.S. Dist. LEXIS 100062, at * 18
(D.N.J. Oct. 27, 2009).
Both Plaintiffs’ New Jersey and Federal RICO claims must be
dismissed under the relevant statutes of limitation as untimely.
All of the above-captioned matters were filed in 2012 – well
after the applicable four year statute of limitations expired
based on the loan origination date for each Plaintiff:
PLAINTIFFS

ORIGINATION DATE

SOL TERMINATION

12-104 - Carrier

11/1/06

11/1/10

12-7702 - Nieves

6/14/06

6/14/10

12-7755 - Dikker

6/27/06

6/27/10

12-7701 - Carelli

6/23/06

6/23/10

12-7945 - Debonis

3/28/07

3/28/11
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12-7946 - Garcia

February/March 2007

Feb/Mar 2011

12-7947 - Kowalczyk

9/18/06

9/18/10

12-7949 - Mendez

7/5/06

7/5/10

12-7948 - Lim

6/16/05

6/16/09

Plaintiffs argue that their respective RICO claims “did not
accrue until the Plaintiffs were put into foreclosure.”
Br. at 22.

Pls.’

However, Plaintiffs could have discovered the

alleged basis for their injury at or near the origination date
of their respective loans through the exercise of reasonable
diligence, especially in light of Plaintiffs’ assertions that
the documents presented at closing were “contradictory.”
Defendants have carried their burden under the inquiry
notice analysis to show the existence of “storm warnings” –
i.e., “information or accumulation of data that would alert a
reasonable person to the probability that misleading statements
or significant omissions had been made.”
507 (internal quotations omitted).

Cetel, 460 F. 3d at

Accepting Plaintiffs’

assertions about the TILA documents as conflicting with the
mortgage notes and their contentions that the Defendant offered
the mortgage at a very low “teaser” rate that would increase
dramatically at the end of an introductory period – Plaintiffs
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should have known whether at closing or, at the latest, a few
months thereafter, when the “teaser” rate expired.

See Pls.’

Br. at 4.
In response, the Plaintiffs have failed to carry their
burden to show that they “heed[ed] the storm warnings, [and]
exercised reasonable diligence but were unable to find and avoid
the storm.”

Cetel, 460 F.3d at 507.

As all of these matters

were not filed until 2012 – more than four years after the loan
origination dates or, being more generous to Plaintiffs, the
expiration of the “teaser” rates; Plaintiffs’ New Jersey and
Federal RICO claims will be dismissed as time-barred.

e) Civil Conspiracy
To state a claim for civil conspiracy, Plaintiffs must
allege four essential elements: “(1) a combination of two or
more persons; (2) a real agreement or confederation with a
common design; (3) the existence of an unlawful purpose, or of a
lawful purpose to be achieved by unlawful means; and (4) proof
of special damages.”

Morganroth & Morganroth v. Norris,

McLaughlin & Marcus, P.C., 331 F.3d 406, 414 (3d Cir. 2003).
Plaintiffs’ civil conspiracy claim must be dismissed
because, similar to the discussion of agency above, Plaintiffs
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have only asserted bare allegations and legal conclusions
unsubstantiated by facts in support of the alleged “agreement”
or “common design” between Defendant and another party – e.g.,
the brokers.

Moreover, it is not even clear from Plaintiffs’

Amended Complaint or opposition brief who the Defendant is
alleged to have conspired with: “Defendants [sic] actions. . .
were done in combination with two or more parties acting in
concert,” Amend. Compl. at ¶ 123, “Defendants conspired to bring
to bear these deceptive loans products.”

Pls.’ Br. at 19.

Thus, Plaintiffs’ civil conspiracy claims fail.

f) Declaratory Relief
Plaintiffs ask this Court to mark the mortgages at issue as
“void, satisfied, and dismissed, and declare the title to the
within real [properties] free and clear of any encumbrances held
by Defendants” based on “the unclean hands violation of the New
Jersey Consumer Fraud Act.”

Amend. Compl. at ¶ 128.

Because the claims for declaratory relief are grounded on
the NJCFA claims, which have been dismissed for the reasons
discussed above, the request for declaratory relief is similarly
dismissed.

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g) Plaintiff-Specific Arguments
The Defendant makes two additional arguments as to three
specific Plaintiffs: DeBonis – Civil No. 12-7945, Garcia – Civil
No. 13-7946, and Mendez – Civil No. 12-7949, based on the fact
that those particular Plaintiffs are currently subject to
foreclosure proceedings in state court.

The Plaintiffs’ reply

brief also asserts a separate argument regarding Plaintiff Jung
Lim, Civil No. 12-7948.

The Court will address these specific

arguments below.
(1)

Younger Abstention

Defendant contends that the claims by DeBonis – Civil No.
12-7945, Garcia – Civil No. 13-7946, and Mendez – Civil No. 127949 must be dismissed because each of those Plaintiffs is
currently a defendant in a pending foreclosure matter in New
Jersey Superior Court.

As such, Defendant contends that

Plaintiffs’ claims must be dismissed pursuant to the doctrine
developed in Younger v. Harris, 401 U.S. 37 (1971).
In Younger, the Court held that “federal courts should
abstain from enjoining state criminal prosecutions, because of
principles of comity and federalism, unless certain
extraordinary circumstances exits.”
143, 154 (3d Cir. 2004).

Marran v. Marran, 376 F.3d

The Younger abstention doctrine has
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been extended to “particular state civil proceedings that are
akin to criminal prosecutions, or that implicate a State’s
interest in enforcing the orders and judgments of its courts.”
Sprint Communs., Inc. v. Jacobs, 134 S. Ct. 584, 588
(2013)(citing New Orleans Public Service, Inc. v. Council of
City of New Orleans, 491 U.S. 350, 368 (1989)(other internal
citations omitted)) (hereinafter “NOPSI”).

The Court in Sprint

sought to “clarify and affirm that Younger extends to the three
exceptional circumstances identified in NOPSI, but no further.”
In Sprint, the Court also further clarified its ruling in
Middlesex County Ethics Comm. v. Garden State Ethics Comm. v.
Garden State Bar Ass’n, 457 U.S. 423 (1982)(“Middlesex”), and
held that, when that decision is divorced from its quasicriminal context, courts have wrongly used it to extend the
Younger doctrine whenever three conditions are met: “(1) there
is an ongoing state judicial proceeding, which (2) implicates
important state interests, and (3) . . . provide[s] an adequate
opportunity to raise [federal] challenges.”

Id. at 593.

Such a

reading of Middlesex incorrectly extends Younger “to virtually
all parallel state and federal proceedings, at least where a
party could identify a plausibly important state interest.” Id.
Importantly, the Court further stated that the “even in the
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presence of parallel state proceedings, abstention from the
exercise of federal jurisdiction is the exception, not the
rule.”

Id. at 593 (internal quotation marks omitted).

In support of its Younger argument, the Defendant cites
cases decided prior to the Supreme Court’s recent decision in
Sprint that are seemingly undercut by the Supreme Court’s
clarification of both the Younger doctrine and its decision in
Middlesex.

For example, Defendants rely on Gray v. Pagano, 287

Fed. Appx. 155 (3d Cir. 2008), and progeny.

In Gray, the Third

Circuit held that the Younger abstention was applicable where
there was an ongoing state foreclosure proceeding because of the
three conditions articulated in Middlesex.
To rely on Middlesex in the instant matter would improperly
divorce the Middlesex holding from its quasi-criminal context –
a strategy rejected by the Supreme Court in Sprint.

As such,

and mindful of the admonition in Sprint that “federal courts are
obliged to decide cases within the scope of federal
jurisdiction” and that “[a]bstention is not in order simply
because a pending state-court proceeding involves the same
subject matter,” Sprint 134 S. Ct. at 588, this Court will
decline to apply the Younger abstention to the instant matter.

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(2)

Entire Controversy Doctrine

With respect to the three Plaintiffs subject to foreclosure
actions in state court, the Defendant also avers that their
claims must be dismissed under New Jersey’s Entire Controversy
Doctrine.

During oral argument on the Defendant’s first motion

to dismiss [Civil Action No. 1201-04, Docket No. 7], the Court
discussed both the implications of both the Entire Controversy
and Rooker-Feldman doctrines with respect to these Plaintiffs.
At this juncture, the Court will deny the aspects of
Defendant’s motion relying on the Entire Controversy doctrine;
almost one year has passed since the Defendant filed the instant
motions asserting that these Plaintiffs’ claims are barred
because of the pending foreclosures.

Because of this extended

time lapse, this Court is uncertain as to the status of the
foreclosure actions in state court – i.e., whether or not they
are still pending.

Therefore, it is unclear to this Court which

doctrine would be more properly applied at this point – the
Entire Controversy Doctrine or Rooker-Feldman.

(3)

Claims by Plaintiff Jung Lim

In their opposition brief, the Plaintiffs note that
“Defendants have alleged that Plaintiff, Jung Lim’s claims are
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barred by the Statute of Limitations.”

The Court was not able

to locate this argument in the Defendant’s current motion papers
filed in the Lim matter, Civil No. 12-7947; instead, this
argument was presented in the Defendant’s first motion to
dismiss when the Plaintiffs’ claims were still consolidated
Civil No. 12-104, Docket No. 7].

This Court agrees that any

claims asserted by Plaintiff Lim would be time-barred under the
six year statute of limitations applicable to fraud and breach
of contract claims.

See Lunn v. Prudential Ins. Co. of Am., 283

Fed. Appx. 940, 942 (3d Cir. 2008)(statute of limitations for
fraud and breach of is six years); NN&R, Inc. v. One Beacon Ins.
Group, 362 F. Supp. 2d 514, 521 (D.N.J. 2005) (statute of
limitations for NJCFA is six years); Curtis v. Treloar, 1998
U.S. Dist. LEXIS 23822, at * 25 (D.N.J. Aug. 31, 1998)(six year
statute of limitations for negligent misrepresentation claim).
For the reasons stated above with respect to the RICO
claims, Plaintiffs’ claims accrued on or near the loan
origination date, which, for Plaintiff Lim was June 16, 2005.
Because the six year statute of limitations expired in 2011 and
Plaintiff Lim’s case was not filed until 2012, this Court finds
that all claims by Plaintiff Lim are time-barred as they are all
based on or derive from the time-barred fraud, breach of
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contract, negligent misrepresentation, and/or RICO claims and
must be dismissed with prejudice.

h) Leave to Amend
Plaintiffs have already filed an Amended Complaint in the
Carrier matter, 12-104.

Where a plaintiff has already amended

the complaint or defendants have filed a responsive pleading,
the plaintiff may further amend the complaint only with leave of
the court. Fed. R. Civ. P. 15(a); Shane v. Fauver, 213 F.3d 113,
115 (3d Cir. 2000).

Leave to amend is inappropriate where it

would cause undue delay, the amendment is motivated by bad faith
or a dilatory motive, the amendment would cause prejudice, or
the amendment is futile.

In re Burlington Coat Factory Sec.

Litig., 114 F.3d 1410, 1434 (3d Cir. 1997). “Futility” means
that the complaint, as amended, would fail to state a claim upon
which relief could be granted under the Rule 12(b)(6) standard.
Id. (citing 3 Moore's at ¶ 15.08[4], at 15-81 (3d ed. 2000)).
Leave to amend is rarely applied sua sponte.

Fletcher-

Harlee Corp. v. Pote Concrete Contractors, Inc., 482 F.3d 247,
252 (3d Cir. 2007).

In Fletcher-Harlee, the Third Circuit held

that "in ordinary civil litigation it is hardly error for a
district court to enter final judgment after granting a Rule
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12(b)(6) motion to dismiss when the plaintiff has not properly
requested leave to amend its complaint." Id. at 253; see id. at
252-53 (stating that the court "rarely applied the sua sponte
amendment rule outside of the context of a civil rights case . .
. . In non-civil rights cases, the settled rule is that properly
requesting leave to amend a complaint requires submitting a
draft amended complaint.").
While the Plaintiffs have not requested leave to amend, out
an abundance of caution, this Court will permit Plaintiffs to
file for leave to amend only as to the Counts where an amended
version of the complaint would not necessarily be futile in
light of this Court’s decision – i.e., Plaintiffs cannot seek
leave to amend with respect to their RICO causes of action as
those actions are clearly time-barred or with respect to
Plaintiff Lim.

IV.

Conclusion

For the reasons set forth above, this Court will grant
Defendant’s motion to dismiss Plaintiffs’ Complaints in all of
the above-captioned matters.

The Plaintiffs will have thirty

(30) days to move for leave to amend their respective Complaints
as to all counts except Counts VII and VII (NJ RICO and Federal
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RICO).

All claims asserted by Plaintiffs DeBonis – Civil No.

12-7945, Garcia – Civil No. 13-7946, and Mendez – Civil No. 127949 are dismissed without prejudice pending further briefing on
the status of those Plaintiffs’ foreclosure proceedings.
Finally, all claims asserted by Plaintiff Lim – Civil No. 127948 are dismissed with prejudice.

An accompanying Order will

issue this date.

s/Renée Marie Bumb_________
RENÉE MARIE BUMB
United States District Judge

Dated:

January 31, 2014

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