FLORES et al v. HSBC et al

Filing 24

OPINION. Signed by Judge Dennis M. Cavanaugh on 6/28/12. (jd, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

JESUS and LIGAYA FLORES, RAUL
and MARLENE ISIP, JUAN MUNOZ,
PEDRO LOPEZ, SANDRIA MERIDA,
JOSE RODRIGUEZ, SUSAN
HALEDONE, MAXIMO and SUZETTE
NAPULI, CESAR PALLAZHCO,
Plaintiffs,
v.
HSBC, ABC COMPANY 1-10,

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Hon. Dennis M. Cavanaugh

OPINION
Civil Action No. 11-CV-05525 (DMC)(JAD)

Defendant.

DENNIS M. CAVANAUGH, U.S.D.J.
This matter comes before the Court upon motion by Defendant HSBC (“Defendant” or
“HSBC”) to dismiss Plaintiffs’ Jesus and Ligaya Flores (the “Flores”), Raul and Marlene Isip (the
“Isips”), Juan Munoz (“Munoz”), Pedro Lopez (“Lopez”), Sandria Merida (“Merida”), Jose
Rodriguez (“Rodriguez”), Susan Haledone (“Haledone”), Maximo and Suzette Napuli (the
“Napulis”), and Cesar Pallazhco (“Pallazhco”)(collectively “Plaintiffs”) Complaint, pursuant to FED.
R. CIV. P. 12(b)(6). Pursuant to FED. R. CIV. P. 78, no oral argument was heard. After considering
the submissions of all parties, it is the decision of this Court for the reasons herein expressed that
Defendant’s motion to dismiss is granted.
I.

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BACKGROUND1

The facts set-forth in this Opinion are taken from the Parties’ statements in their
respective moving papers.

This case arises out of the alleged predatory lending practices perpetrated by Defendants
during mortgage transactions entered into with Plaintiffs on their subject properties. Pls.’ Compl. ¶
2. Plaintiffs allege numerous Federal and State law claims, including but not limited to the Federal
Truth in Lending Act and Regulation Z, the Federal Real Estate Settlement Procedures Act, the
Home Ownership and Equity Protection Act, the Federal Racketeer Influenced and Corrupt
Organizations Act, the Fair Debt Collection Practices Act, the Fair Credit Report Act, State and
Federal High Cost Loan Statutes, the New Jersey Consumer Fraud Act, the New Jersey Lenders’
Liability Law, the New Jersey RICO statutes, breach of contract, fraud and misrepresentation,
negligence, among others. Pls.’ Compl. ¶ 2. Defendant HSBC (“HSBC”) is a mortgage loan
originator in the United States and is named in the Complaint as a parent company of its acquired
lenders or subsidiaries residential mortgage-lending operations, as well as on the belief that HSBC
directed, participated in and/or influenced the setting and establishing of credit-relating policies and
underwriting guidelines and practices used by each of the other Defendants. Pls.’ Compl. ¶ 11.
Plaintiffs’ Complaint provides ABC Company 1-10 as the alleged subsidiaries of HSBC. Pls.’
Compl. ¶ 13.
The Complaint in the instant matter was filed following the dismissal of the class action suit
in Almazan, et al v. 1st 2nd Mortg. Co. Of N.J., Inc., et al., Civ.A.No. 10-1336, ECF No. 191. The
complaint in Almazan was dismissed without prejudice on the grounds that Plaintiffs failed to
adequately put any Defendants on notice of any specific claims. (Civ.A.No. 10-1336, Opinion
adopting Report and Recommendation June 2, 2011, at p. 7, ECF No. 185). Specifically, the Court
noted that Plaintiffs’ Complaint “[did] not inform any reader what the Defendants did wrong, to
whom they did it, or when they did it.”Id. Plaintiffs were directed to re-file separate complaints
against only those defendants that were involved in their respective loans. Further, Plaintiffs were
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admonished, under the principles of Younger Abstention, to consider the existence of any pending
state foreclosure, or federal bankruptcy proceedings, in determining whether to file a federal law suit.
Id. at 9. Finally, the Court found Defendants’ arguments regarding Plaintiffs’ counsel’s failure to
comply with the Local Civil Rule 11.2, which directs a party to disclose whether the matter in
controversy is the subject of any other action pending in any court, were well founded. Id. The Court
warned that “[a] second round of non-compliance with that Rule will result in sanctions upon the
filing of the appropriate motions.” Id.
For the following reasons, this Court finds that Plaintiffs have failed to adequately plead a
claim upon which relief can be granted and Defendants Motion to Dismiss is granted.
II.

MOTION TO DISMISS

A.

LEGAL STANDARD
1.

Standard of Review for Motion to Dismiss for Lack of Subject Matter
Jurisdiction Pursuant to Rule 12(b)(6)

In deciding a motion under Rule 12(b)(6), a district court is “required to accept as true all
factual allegations in the complaint and draw all inferences in the facts alleged in the light most
favorable to the [Plaintiff].” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008). “[A]
complaint attacked by a ... motion to dismiss does not need detailed factual allegations.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, the 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.” Id. (internal citations omitted). “[A court
is] not bound to accept as true a legal conclusion couched as a factual allegation.” Papasan v. Allain,
478 U.S. 265, 286 (1986). Instead, assuming that the factual allegations in the complaint are true,
those “[f]actual allegations must be enough to raise a right to relief above a speculative level.”
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Twombly, 550 U.S. at 555.
“A complaint will survive a motion to dismiss if it contains sufficient factual matter to ‘state
a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing
Twombly, 550 U.S. at 570). “A claim has facial plausibility when the pleaded factual content allows
the court to draw the reasonable inference that the defendant is liable for misconduct alleged.” Id.
“Determining whether the allegations in a complaint are ‘plausible’ is a ‘context-specific task that
requires the reviewing court to draw on its judicial experience and common sense.” Young v.
Speziale, 2009 WL 3806296, *3 (D.N.J. Nov. 10, 2009) (quoting Iqbal, 129 S.Ct. at 1950).
“[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged–but it has not ‘shown’–that the pleader is entitled to relief.”
Iqbal, 129 S.Ct. at 1950.
2.

FED. R. CIV. P. 9(b)

Fraud-based claims are subject to FED. R. CIV. P. 9(b). Dewey v. Volkswagon, 558 F. Supp.
2d 505, 524 (D.N.J. 2008) (“[New Jersey Consumer Fraud Act] claims ‘sounding in fraud’ are
subject to the particularity requirements of Federal Rule of Civil Procedure 9(b).”). Under Rule 9(b),
“[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting
fraud or mistake.” A plaintiff must state the circumstances of the alleged fraud “with sufficient
particularity to place the defendant on notice of the ‘precise misconduct with which [it is] charged.’”
Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007) (citing Lum v. Bank of America, 361
F.3d 217, 223-224 (3d Cir. 2004). To satisfy this standard, the plaintiff must plead or allege the date,
time and place of the alleged fraud or otherwise inject precision or some measure of substantiation
into a fraud allegation.” Id.
B.

DISCUSSION
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1.

Pleading Sufficiency of Plaintiffs’ Complaint Under Rules 8(a) and 9(b)

Plaintiffs’ Complaint suffers from many of the same pleading deficiencies that were noted
in the Almazan case, and must therefore be dismissed. As previously noted, this Court explained
that the complaint in Almazan “[did] not inform any reader what the Defendants did wrong, to whom
they did it, or when they did it.” Although Plaintiffs have cured the “who” deficiencies by filing a
separate complaint against those defendants who were allegedly involved in their respective loans,
Plaintiffs’ Complaint in this action remains deficient regarding the “what” and “when” of Defendants
alleged conduct. Such pleading deficiencies fail to properly place Defendants on notice of “any
specific acts that it or [its subsidiaries] committed during the course of its mortgage transactions with
Plaintiffs.” Gutierrez v. TD Bank, No. 11-5533, 2012 U.S. Dist. LEXIS 10724, at *11. (D.N.J. Jan.
27, 2012).
The only specific allegations raised against Defendant HSBC with respect to each Plaintiff
are as follows: HSBC was in a line of lenders/servicers that provided Jesus and Ligaya Flores with
a mortgage origiprovided by Opteum Financial Services, LLC; HSBC Bank USA, NA was among
the lenders and/or assignees that provided Pedro Lopez with a mortgage originally provided by
Montgomery Mortgage Capital Corporation of New Jersey; that Plaintiff Sandra Merida refinanced
her home with a mortgage from HSBC together with their successors and assigns, and such lenders
would later declare the mortgage in default; Fabian Cortez refinanced his residence with a mortgage
secured through HSBC and MERS, Inc. and the mortgagees would later declare the mortgage in
default on 7/1/2010; Rodriguez Jose Susan Haledon refinanced their residence with a first mortgage
from HSBC on 5/29/2008, the mortgage was provided by HSBC in a line of lenders, the funding fees
for the transaction included two broker fees, one of which was paid to HSBC for $4,343 outside of
closing, and HSBC received a Commitment Fee of $525; and HSBC was among the other
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banks/lenders/assignees involved in a mortgage secured by Pallazhco Cesar from IndyMac Federal
and the lenders would later declare the mortgage in default on 11/8/2008. No specific factual
allegations against HSBC were provided for Plaintiffs Raul and Marlene Isip2 or Juan Munoz.3 The
only other actual facts that Plaintiffs allege concern the mortgages received by Plaintiffs on their
respective homes. The remainder of the allegations against Defendants are aptly designated by
Plaintiffs as “general” as they provide no specific conduct on the part of Defendants.
As a preliminary matter, and as highlighted above, this Court notes that Plaintiffs’ Complaint
contains a dearth of specific allegations regarding the conduct of HSBC or its purported subsidiaries.
Rather, Plaintiff provides a series of vague legal conclusions couched as factual allegations which
are plainly insufficient to survive a motion to dismiss. Notably, the Third Circuit has held that
“[a]lthough a plaintiff may use legal conclusions to provide the structure for the complaint, the
pleading’s factual content must independently ‘permit the court to infer more than the mere
possibility of misconduct.’” Guirguis v. Movers Specialty Servs., 346 Fed. App’x. 774, 777 (3d Cir.
2009), citing Iqbal, 129 S.Ct. at 1950. Here, Plaintiffs’ Complaint is almost entirely a recitation of
legal conclusions closely mirroring the language of the statutes they claim Defendants violated.
Indeed, Plaintiff’s Complaint does more to inform this Court of the state of the law than it does to
inform the Court of the facts upon which Plaintiffs’ claims are based. Such pleading leaves this
Court unable to discern the appropriate causes of action for which Defendants might plausibly be

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In fact, no factual allegations whatsoever were provided regarding Raul and Marlene
Isip. The allegation that the Isip Plaintiffs “[h]ave a similar situation with the rest of Plaintiffs
given here” is woefully insufficient and clearly cannot serve as a basis for any claims for relief.
3

Plaintiffs allege that the Munoz mortgage was secured from WMC Mortgage Corp. and
Defendant HSBC was not among those named as the Lenders and/or Assignees for the loan.
Rather, Plaintiffs named “WMC Mortgage Corp., MERS, Inc., US National Bank, Homeq Loan
Servicing/GMAC Bank FSB, and their successors & assigns.”
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held accountable.

Moreover, such pleading leaves this Court with the impression that either

Plaintiffs are unable to identify the true nature of the causes of action they allege, or that Plaintiffs
allege that Defendants have violated each of the noted statutes in virtually every way conceivable.
Plaintiffs must provide some grounds upon which this Court may assess the sufficiency of each of
the provided claims, yet they have failed do more than vaguely allege that Defendant was a
participant at some time in one Plaintiff’s mortgage transaction. Pleading the details of Plaintiffs
loans with only a general allegation that Defendants were somehow involved is plainly insufficient.
Accordingly, this Court finds that the entirety of Plaintiffs’ Complaint fails to plead with the
requisite particularity to satisfy even the liberal pleading standards of Rule 8(a), let alone the
heightened pleading standard for Plaintiffs’ fraud-based allegations under Rule 9(b).
In further support of dismissal, this Court refers to the Opinion of Honorable Jose Linares,
Gutierrez v. TD Bank, No. 11-5533, 2012 U.S. Dist. LEXIS 10724 (D.N.J. Jan. 27, 2012), in which
the Court dismissed a complaint similar to that in issue here.4

A brief summation of the most

relevant conclusions drawn from the Gutierrez opinion is provided in further support of the instant
decision.5
Based on virtually identical allegations advanced as those provided in the instant suit, Judge
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The facts and circumstances of the instant action are remarkably similar to those
addressed by Hon. Jose Linares in the case of Gutierrez v. TD Bank, No. 11-5533, 2012 U.S.
Dist. LEXIS 10724 (D.N.J. Jan. 27, 2012). In fact, both the filing of the instant Complaint as
well as that of the Gutierrez was the result of the dismissal and directive of the Almazan case
discussed previously. Even more remarkable is the fact that the counts alleged in Gutierrez are
identical to those alleged here, down to their numeric order. Judge Linares expressed concern
that This Court finds that the discussion provided in the Gutierrez opinion aptly addresses the
concerns raised with the instant Complaint.
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As this Court finds that the motion to dismiss should be granted for the reasons herein
expressed, the Court declines to address the statute of limitations argument raised by Defendant
and addressed by Judge Linares in the Gutierrez opinion. Similarly, this Court declines to address
the arguments raised by Defendants concerning abstention.
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Linares found that Plaintiffs’ complaint failed to comply with the pleading requirement of Rule 8(a).6
Notably, Judge Linares found that “as a general matter, the paragraphs in the complaint [did] not
adequately put Defendant [ ] on notice of any specific claims linked to specific acts that it or the John
Doe Defendants committed during the course of its mortgage transactions with the Plaintiffs.”
Gutierrez v. TD Bank, 2012 U.S. Dist. LEXIS 10724, at * 11. Rather, the Court found that the
specific facts provided concerning the mortgage transactions between Defendant and Plaintiffs were
“scarce,” “while the Complaint extensively states and restates legally conclusory statements
regarding Defendant’s wrongful conduct as defined exclusively within the terms of the relevant
statutes or case law authority.”Id. at *17. Finally, the Court took issue with the fact that Plaintiffs’
opposition failed to cite to any paragraphs in the complaint “wherein facts relevant to their alleged
claims are discernable.” Id. at *18. Each of the deficiencies noted above are present in the instant
Complaint and therefore warrant dismissal.
With respect to the Gutierrez plaintiff’s fraud-based claims, Judge Linares addressed the
argument, similarly raised here, that the requirements of Rule 9(b) should be relaxed for

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A summary of the deficiencies of the Complaint dismissed in Gutierrez demonstrates
that they are virtually identical to those raised here. In relevant part, Judge Linares commented:
Plaintiffs do not indicate, for example: which exact disclosures required by law were not
provided; the nature and extent of any credit reporting which occurred by Defendants in
violation of federal law; what, if anything, was inaccurate about such reporting; the
substance of any written notices to Plaintiffs which violated their rights under state law;
which terms of any contract were breached by Defendants; the nature of the emotional
distress suffered by Plaintiffs; what, if any, benefit Defendants may have obtained due to
alleged inaccuracies represented to Plaintiffs as amounts owed for any loans; what
representations, if any, Plaintiffs made to Defendants regarding their financial
circumstances and their “ability to repay” justifying their allegations regarding
Defendants predation, and so on.”
Gutierrez, 2012 U.S. Dist. LEXIS 10724, at * 17-18.

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circumstances where factual information is exclusively within the opposing party’s knowledge or
control. The Court found the rule cited by Plaintiffs to be inapplicable under the circumstances, and
this Court agrees. As noted by Judge Linares,
Plaintiffs need only state with particularity the who, what, when and where of the false
misrepresentations or omissions made by Defendants based on their familiarity with said
misrepresentations as experienced by them in the mortgage transactions . . .
Id. at 25-26 (emphasis added). There, as here, “those facts are both within the Plaintiffs’ control and
need not be enumerated in every detail or with respect to each and every instance to meet the
heightened pleading standard for fraud-based claims.” Id. Just as the Gutierrez plaintiff was not
relieved of its obligation to plead claims of fraud with specificity under Rule 9(b), Plaintiffs here will
not be so relieved.
Finally, this Court notes that several of the claims common to both the Gutierrez and the
instant action were dismissed in Gutierrez as not cognizable as a matter of law. 2012 U.S. Dist.
LEXIS 10724, at *35. Such claims include (1) furnishing inaccurate information to credit agencies
(Count 5); (2) failure to correct inaccurate reporting (Count 6); (3) failure to provide required notices
and disclaimers (Count 7); (4) predatory and negligent lending (Counts 10 and 28); (5) New Jersey
Licensed Lenders Act (Count 11); and (6) unfair business practices (count 16). The Court in
Gutierrez found that the aforementioned counts should be dismissed on the grounds that they were
redundant or failed to cite to any law or statute supporting a claim independent of the claims already
raised.7 The Court therefore dismissed the aforementioned claims without prejudice “to Plaintiffs’
amendment of any claims asserted therein which do not duplicate other claims already stated in
Plaintiff’s compliant.” Id. at *40. This Court echoes the conclusions drawn in Gutierrez regarding
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With respect to Plaintiffs’ New Jersey Licensed Lenders Act claim, the Court dismissed
the count with prejudice on the grounds that Defendant was a federally chartered bank and was
therefore exempt from liability under the Act. Id. at *39.
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the aforementioned claims in further support of its decision to dismiss the Complaint in this action.
2.

Piercing the Corporate Veil

The factual deficiencies of Plaintiffs’ Complaint similarly render it unable to hold HSBC
liable as parent company for any alleged wrongs committed by its subsidiaries. Under New Jersey
law “piercing the corporate veil is an equitable remedy through which the Court may impose liability
on an individual or an entity normally subject to the limited liability protections of the corporate
form.” The Mall at IV Grp. Props., L.L.C. v. Roberts, No. 02-4692, 2005 WL 3338369 at *3 (D.N.J.
Dec.8, 2005). To pierce the corporate veil two elements must be shown: (1) There must be such a
unity of interest and ownership that the separate personalities of the corporation and the individual
no longer exist and (2) circumstances must be such that adherence to the fiction of separate corporate
existence would sanction a fraud or promote an injustice. Roberts, 2005 WL 3338369, at *3. Piercing
the corporate veil is an extraordinary measure and will only be permitted where the elements have
been adequately pled. See Wrist Worldwide Trading GMBH v. MV Auto Banner, No. 10-2326, 2011
WL 5414307, at *5-6 (D.N.J. Nov. 4, 2011)(“Parroting of the alter-ego factors alone is insufficient
to satisfy the required pleading standards.”)
In Craig v. Lake Asbestos of Quebec, Ltd., 843 F.2d 145 (3d Cir. 1988) the Third Circuit
listed six non-binding factors to serve as a guide to determine the unity of interest prong: gross
undercapitalization; failure to observe corporate formalities and nonpayment of dividends; the
insolvency of the debtor corporation at the time; siphoning of funds of the corporation by the
dominant stockholder; non-functioning of other officers or directors; absence of corporate records;
and whether the corporation is merely a facade for the operations of the dominant stockholder or
stockholders. The standard to establish the fraud or injustice element is less exacting, as a plaintiff
need not prove a common law fraud but must demonstrate that the defendants, via the corporate
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form, perpetrated a fraud, injustice or the like. Chen v. HD Dimension, Corp., No. 10-863, 2010 WL
4721514 at *4 (D.N.J. Nov. 15, 2010).
Here, the Plaintiffs allege that the promotion of an injustice would occur if the corporate veil
is not pierced. Plaintiffs’ allegations only provide facts which may be construed to satisfy the fraud
or injustice prong, but fail to allege any facts to establish a unity of interest and ownership between
HSBC and its subsidiaries. Given that piercing the corporate veil is an extraordinary measure and
will only be allowed where the elements are adequately pleaded in the Complaint, piercing the
corporate veil shall not be permitted in the instant case.
III.

CONCLUSION

Accordingly, as we find that Plaintiffs have failed to state a claim upon which relief can
be granted, Defendant’s motion to dismiss is granted without prejudice.

S/ Dennis M. Cavanaugh
DENNIS M. CAVANAUGH, U.S.D.J.

Date:
cc:

June 28 . 2012
All Counsel of Record
Hon. J. A. Dickson, U.S.M.J.
File

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