SHINN et al v. CHAMPION MORTGAGE et al

Filing 27

LETTER OPINION (Fein Motion to dismiss). Signed by Judge William J. Martini on 11/25/09. (gh, )

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY
MARTIN LUTHER KING JR. FEDERAL BLDG. & U. S . COURTHOUSE 5 0 W A L N U T STREET, P. O . BOX 419 N E W A R K , NJ 07101-0419 ( 9 7 3 ) 645-6340

WILLIAM J. MARTINI JUDGE

LETTER OPINION
N o v e m b e r 25, 2009 L e w is G. Adler L a w Office of Lewis Adler 2 6 Newton Avenue W o o d b u ry, NJ 08096 A tto r n e y s for Plaintiffs D e n n is J. Drasco L u m , Drasco & Positan, LLC 1 0 3 Eisenhower Parkway R o s e la n d , NJ 07068 A tto r n e y s for Defendant Fein, Such, Kahn & Shepard, PC Re: Shinn et al. v. Champion Mortgage et al. Civil Action No. 09-CV-00013 (WJM)

D e a r Litigants: T h is matter comes before the Court on the Motion to Dismiss of Defendant Fein, S u c h , Kahn & Shepard, P.C. ("Fein"), pursuant to Federal Rule of Civil Procedure 1 2 (b )(6 ). Oral arguments were not held. Fed. R. Civ. P. 78. For the reasons set forth b e lo w , Defendant Fein's motion is GRANTED with prejudice. I. BACKGROUND P la in tif f s Stanley and Catherine Shinn ("the Shinns") obtained a mortgage from D e f e n d a n t Champion Mortgage Company, Inc. ("Champion"). Cmplt. ¶ 13. Champion is 1

a non-depository licensed lender, licensed in the State of New Jersey, and a division of K e y Bank USA, N.A. ("Key Bank"). Cmplt. ¶¶ 2, 14. Key Bank is a national bank c h a rte re d in Ohio. Cmplt. ¶ 7. Fein is a law firm retained by Champion with offices in N e w Jersey. Cmplt. ¶ 3. T h e mortgage was in the amount of $102,000 and was obtained for the purchase of P la in tif f s ' home in Oaklyn, NJ. Cmplt. Ex. B; Id. ¶ 1. The mortgage contract was e x e c u te d on April 23, 2001. Cmplt. ¶ 13. By October 2004, the Shinns had begun to m iss payments. Cmplt. ¶ 15. On February 22, 2005, Champion, represented by Fein, in itia te d foreclosure proceedings against the Shinns. Cmplt. ¶ 16. On that same day, C h a m p io n also sent Plaintiffs a letter offering to reinstate the original mortgage and a b s ta in from going forward with the foreclosure in exchange for a reinstatement fee in the a m o u n t of $7,981.07 (the "reinstatement fee"). Cmplt. ¶ 17. The reinstatement fee was b ro k e n down as follows: $4,190.55 in principal and interest, $209.55 in late fees, $377.19 in deferred late fees, $60 in non-sufficient fund charges, $550.68 for a corporate advance b a la n c e , and $2,593.10 in attorney's fees and costs. Cmplt. Ex. A. The letter specified th a t the reinstatement fee would have to be paid by March 7, 2005, or new figures would n e e d to be obtained. Id. O n June 22, 2005, Champion sent the Shinns a letter and contract (the " F o rb e a ra n c e Agreement") adjusting the amount of the reinstatement fee to $12,905.24, w ith a required down payment of $7,000, presumably because the Shinns had not paid by th e March 7, 2005 deadline. Cmplt. Ex. B. The document was on Champion letterhead a n d is silent as to whether or not it was prepared with Fein's assistance. Id. The F o rb e a ra n c e Agreement also clearly states that "Champion Mortgage is a debt collector a tte m p tin g to collect a debt and any information obtained will be used for that purpose." Id . The terms of the Forbearance Agreement were approved by Champion's mitigation lo s s manager and agreed to by the Shinns. Cmplt. ¶ 19. There are no allegations by any p a rty that the Forbearance Agreement is in default, and according to the Complaint, it has b e e n paid in full. Id. There is no additional information about the status of the Shinns' re in s ta te d mortgage. O n January 2, 2009, the Shinns filed a complaint with this Court again Champion, K e y Bank, and Fein. They seek to bring the matter as a class action. The complaint c o n ta in s eleven counts total, three of which are brought again Fein: (1) negligence (Count II), (2) breach of the duty of good faith and fair dealing (Count III), and (3) unjust e n ric h m e n t (Count IV). Specifically, Plaintiffs allege that Champion and Fein "have e n g a g e d in a uniform scheme and course of conduct to inflate their profits by charging a n d collecting various fees not authorized by the loan documents or applicable law," in c lu d in g attorneys' fees and costs in excess of those actually incurred. Cmplt. ¶ 20. The c o m p la in t contains few additional or supporting factual details. The gravamen of P la in tif f s ' claims against Fein appears to relate to the law firm's representation of C h a m p io n with respect to preparing the foreclosure and forbearance documents. 2

II.

A N A L Y S IS A. S ta n d a r d of Review In evaluating a motion to dismiss under Fed. R. Civ. P. 12(b), all allegations in the c o m p la in t must be taken as true and viewed in the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels & Casino Resorts, Inc., v. M ira g e Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998). When deciding a Rule 12(b)(6) m o tio n to dismiss for failure to state a claim, a court may consider only the complaint, e x h ib its attached to the complaint, matters of public record, and undisputedly authentic d o c u m e n ts if the plaintiff's claims are based upon those documents. See Pension Benefit G u a r . Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). If, after v ie w in g the allegations in the complaint in the light most favorable to the plaintiff, it a p p e a rs that no relief could be granted "under any set of facts that could be proved c o n s is te n t with the allegations," a court may dismiss a complaint for failure to state a c la im . Hishon v. King & Spalding, 467 U.S. 69, 73 (1984). Although a complaint does not need to contain detailed factual allegations, "the `g ro u n d s ' of [the plaintiff's] `entitlement to relief' requires more than labels and c o n c lu s io n s , and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965, 167 L. Ed. 2d 929 (2007). Thus, th e factual allegations must be sufficient to raise a plaintiff's right to relief above a s p e c u la tiv e level. See id. at 1964-65. Furthermore, although a court must view the a lle g a tio n s as true in a motion to dismiss, it is "not compelled to accept unwarranted in f e re n c e s , unsupported conclusions or legal conclusions disguised as factual a lle g a tio n s ." Baraka v. McGreevey, 481 F. 3d 187, 211 (3d Cir. 2007). B. C o u n t II­ Negligence T h e complaint alleges that Fein was negligent with respect to servicing Plaintiffs' m o rtg a g e loan. Cmplt. ¶ 44. However, Plaintiffs' negligence claim fails with respect to F e in , because Fein did not owe Plaintiffs a duty. T o state a claim for negligence, a plaintiff must show: (1) the existence of a duty o f care owed by the defendant to the plaintiff, (2) a breach of that duty by the defendant, (3 ) injury or damages to the plaintiff, and (4) that the injuries were proximately caused by th e defendant's breach. See Anderson v. Sammy Redd and Associates, 278 N.J.Super. 50, 5 6 (App. Div. 1995). The existence of the duty necessary to support a negligence claim is a question of law to be determined by the court. Id. Plaintiff cannot demonstrate that Fein owed the Shinns a duty of care. Plainly, th e re was no contractual relationship between Plaintiffs and Fein. As Plaintiffs correctly o b s e rv e , there are certain circumstances in which an attorney may owe a duty of care to a n o n -c lie n t with whom there is no contractual relationship. See Restatement (Third) of the L a w Governing Lawyers § 51(2000); Banco Popular North America v. Gandi, 184 N.J. 1 6 1 , 179-180 (2005) (finding that an attorney may owe a duty of care to a non-client 3

when both the attorney knew or should have known that the non-client might rely on the a tto rn e y's work and the non-client did rely); see also Petrillo v. Bachenberg, 139 N.J. 4 7 2 , 483 (1995) (stating that a lawyer may owe a non-client a duty of care, but only if the la w ye r invites or acquiesce in the non-client's reliance so as to "cabin the lawyer's duty, s o the resulting obligation is fair to both lawyers and the public). However, such circumstances are not pled here. The letter pertaining to the re in s ta te m e n t fee was on Champion letterhead, as was the Forbearance Agreement. The F o rb e a ra n c e Agreement also clearly stated that any information obtained was to be used f o r the specific purpose of collecting a debt. The Shinns do not allege, nor is it re a s o n a b le to believe, that Fein, a law firm representing the Shinns' adversary, would h a v e invited the Shinns to rely on its representations or calculations. Further, the Shinns d o not allege, nor is it reasonable to believe, that Fein should have known the Shinns m ig h t rely on its representations or calculations. See Perkins v. Washington Mutual, FSB, 2 0 0 9 WL 2835781 (D.N.J.) (finding that, in highly similar circumstances, an attorney re p re se n tin g a defendant mortgage company in an action brought by dissatisfied mortgage h o ld e rs did not owe the non-client mortgage holders a duty of care because it was "simply n o t plausible that the attorney invited Plaintiffs to rely" on his work nor was it plausible to believe that "the attorney should have knows Plaintiffs would rely" on his work). To f in d a duty of care in this factual situation would not comport with the need for fairness s e t out in the Restatement and echoed in New Jersey law. Therefore, the claim fails to s ta te a claim for negligence and must be dismissed as to Defendant Fein. C. C o u n t III­ Breach of the Duty of Good Faith and Fair Dealing C o u n t III alleges that Fein breached the duty of good faith and fair dealing owed to P la in tif f s . Cmplt. ¶ 51. While New Jersey recognizes an implied duty of good faith and f a ir dealing in every contract, there can be no such duty in the absence of a contract. See G r y g o r c e w ic z v. Schweitzer-Manduit Intern., Inc., 2009 WL 235623, at *2 (D.N.J.) (b e c a u s e the duty of good faith and fair dealing exists as the result of parties entering into a contract, "it is axiomatic that a contract must exist" before a court will infer this c o v e n a n t); see also Noye v. Hoffmann-La Roche Inc., 238 N.J.Super 430, 434 (App. Div. 1 9 9 0 ) (without a contract, the duty of good faith and fair dealing cannot be implied). H e re , Fein represented the Shinns' adversary, Champion Mortgage. Plainly, there w a s no contractual relationship between Fein and the Shinns. Nor do the Shinns allege th e existence of any quasi-contractual relationship. Without a contract, there can be no b re a c h of the duty of good faith and fair dealing. Therefore, this claim fails to state a c la im for relief and must also be dismissed with respect to Fein. D. C o u n t IV­ Unjust Enrichment T h e final claim brought against Fein is unjust enrichment. Plaintiffs allege that F e in has "collected monies that are not due and owing under applicable contract law 4

because the contract or other applicable law does not permit" such fees and charges, and th a t Fein has been unjustly enriched by this conduct. Cmplt. ¶¶ 55-57. This claim also f a ils , for multiple reasons. In New Jersey, the common law doctrine of unjust enrichment "requires that p la in tif f show that it expected remuneration from defendant at the time it performed or c o n f e rre d a benefit on defendant and that the failure of remuneration enriched defendant b e yo n d its contractual rights." VRG Group v. GKN Realty Corp., 135 N.J. 539, 555 (1 9 9 4 ). Here, as already established, there was no contractual relationship between Fein a n d the Shinns, nor do Plaintiffs allege any kind of quasi-contractual relationship with F e in . M o re o v e r, the Complaint does not allege that the Shinns ever paid any fees to Fein a t all. As stated, the mortgage contract was between the Shinns and Champion, and th e re f o re all payments were made from the Shinns directly to Champion.1 Plaintiffs make n o allegations that they ever made any payments to Fein. Thus, any alleged overcharges w e re paid to Champion, not to Fein. This claim must also be dismissed against Fein. III. C O N C L U S IO N F o r the reasons stated above, Defendant Fein's Motion to Dismiss is GRANTED a n d Plaintiffs' complaint against Defendant Fein is DISMISSED with prejudice. An a p p ro p ria te order follows.

/s/ William J. Martini WILLIAM J. MARTINI, U.S.D.J.

Additionally, the mortgage foreclosure proceeding was resolved in an out of court settlement. Therefore, to the extent that the Shinns claim attorneys' fees charged by Champion were in excess of the amount permitted by statute in foreclosure proceedings, it does not even appear that any legal fees were ever paid for foreclosure proceedings. 5

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