HEYMAN et al v. CITIMORTGAGE, INC.

Filing 28

OPINION fld. Signed by Judge Kevin McNulty on 10/9/15. (sr, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

ABRAHAM S. HEYMAN and
GEULA HEYMAN,

Civ. No. 14-1680 (KM)

Plaintiffs,

OPINION

V.

CITIMORTGAGE, INC.,
Defendant.

KEVIN MCNULTY, U.S.D.J.:
Now before the Court is the motion of the defendant, CitiMortgage, Inc.
(“Citi”), to dismiss the amended complaint of the plaintiffs, Abraham and Geula
Heyman (the “Heymans”), pursuant to FED. R. Civ. P. 12(b)(6), for failure to
state a claim that meets the pleading standards of Rules 8(a) and 9(b). The
Heymans brought this action against their mortgage lender, Citi, asserting
claims related to a modification of their mortgage. Finding the original
complaint too generalized and conclusory to put the defendant on notice as to
plaintiffs’ claims, I dismissed it without prejudice. The Heymans have now filed
an amended complaint, and Citi has again moved for dismissal. While the
l
amended complaint is altered in certain respects, the defects in the origina
complaint—despite my fairly specific instructions for amending them—have
gone largely uncorrected. The motion to dismiss the amended complaint will
as to
therefore be granted. I grant the motion with prejudice as to Count I and,
the remainder, without prejudice to the filing of a motion to file a second
amended complaint within 30 days. Familiarity with my earlier opinion is
assumed, and this opinion should be read as a supplement to it.

1

I.

BACKGROUND

The facts underlying the Heymans’ original complaint were set forth in
the Court’s prior opinion. (See Dkt. No. 13 pp. 1-4.) For current purposes, I will
briefly summarize certain relevant facts, as alleged in the amended complaint
and taken as true for purposes of this motion. See pp. 5-6.
The Heymans obtained a mortgage loan from Citi to purchase their
home. (Dkt. No. 21

¶

5) In November of 2012, they asked Citi to modify the

terms of the loan. (Dkt. No. 21

¶

9) The Heymans allege that they were eligible

to have their loan modified under the Home Affordable Modification Plan
(“RAMP”), a federal program designed to help distressed homeowners avoid
foreclosure. (Dkt. No. 21 ¶j 10-11) Under RAMP, participating lenders will
modify the terms of loans for borrowers that meet certain criteria. The borrower
and servicer enter into a “trial period” of three months or more, and if the
borrower meets all of its obligations during the trial period, the proposed loan
modification becomes effective.’
According to the Heymans, Citi first denied the plaintiffs’ HAMP
application without properly reviewing their documents. (Dkt. No. 21 ¶J12-13)
Around January 5, 2013, they reapplied, and in May 2013 Citi approved the
Reymans for trial payments under HAMP. (Dkt. No. 21

15, 19) The Reymans

made an initial trial payment of $3,438.76. (Dkt. No.

22-23) That payment

¶
21 ¶

was due June 1, 2013, but the Heymans made the payment before that date.
Citi deemed this payment to be “too early” to be counted as a trial period
payment, and apparently credited it as an ordinary monthly mortgage
payment. (Dkt. No. 21

¶J

23, 26) The Reymans later made three more

payments, which were counted as trial payments. (Dkt. No. 21 ¶j 24, 28-29) In
August 2013, Citi “offered a permanent modification to Plaintiffs.” (Dkt. No. 21
¶30) The Heymans appealed to Citi for more favorable modification terms and

See Sinclair v. Citi Mortgage, Inc., 519 F. Appx 737, 738 (3d Cir. 2013); Wigod v.
Wells Fargo Bank, N.A., 673 F.3d 547, 554 (7th Cir. 2012).

2

“again asked for HAMP.” According to the Heymans, “Citi never changed its
mind and never reviewed the appeal.” (Dkt. No. 21
¶f 39-40)
A. The Original Complaint and Dismissal

The original complaint contained two counts: (1) wrongful collection
practices and (2) fraud. Its first, prefatory paragraph also listed, without
elaboration, a number of possible causes of action: “wrongful indebtedness,
wrongful collection on a mortgage, slander of title, slander of credit, unjust
enrichment and other rights and remedies.” These, however, were not
separately alleged or made the subject of separate counts. (Dkt. No. 1
¶ 1) Even
for the two identified counts, the complaint cited no statute or other source of
law, leaving the reader to guess as to the nature of the claim.
Citi moved to dismiss the complaint on the grounds that these
generalized and conclusory allegations did not meet the pleading standards of
Rule 8(a) or Rule 9(b). (Dkt. No. 6) I agreed and dismissed the complaint
without prejudice. (Dkt. Nos. 13-14) In doing so, I explicitly advised the
Heymans and their counsel that any amended complaint must properly state
the legal basis of each claim and also allege a factual basis for each claim. (Dkt.
No. 13 p. 6)
B. The Amended Complaint

The Heymans filed an amended complaint on October 21, 2014. (Dkt. No.
21) Like the original complaint, the amended complaint contains counts of (1)
wrongful collection practices and (2) fraud. It retains the prefatory laundry list
of claims (“wrongful indebtedness, wrongful collection on a mortgage, slander
of title, slander of credit, unjust enrichment and other rights and remedies”);
again, these are not broken out into separate counts or tied to any factual
allegations. (See Dkt. No. 21 ¶1.) The amended complaint adds a third count
for “Bankruptcy Violation.” Like the original, the amended complaint cites no
statute or other source of law for any of its claims.

3

Count One alleges that Citi engaged in wrongful collection practices. As
in the original complaint, the Heymans allege that Citi “took a payment of
but
$3,438.76 made as a trial payment and did not count it” as a trial payment
rather applied it to plaintiffs’ pre-modification mortgage payments. (Dkt. No. 21
52) The Heymans also add new allegations that Citi “called [the Heymansi

¶

more than five times a day and more than twenty times a week” and “sent
threatening letters and emails” in aid of collection. (Dkt. No 21 ¶j 62-63)
Certain of the Count One allegations, although asserted under the
heading of “Wrongful Collection Practice,” seem to relate to fraud, so I
summarize them under Count Two.
Count Two contains the Heymans’ explicitly labeled “fraud” allegations.
The amended complaint retains the original complaint’s generalized allegations
that Citi “knew or should have known it was providing a modification that
Plaintiffs could not afford” and “failed to provide a HAMP permanent
modification.” (Dkt. No. 21 ¶ 67, 70) The amended complaint, however,
supplemented those allegations as follows.
The Heymans allege that Citi “called [the loan modification] HAMP, even
though it was not,” because Citi “knew that Plaintiff would not pay an ‘in
house’ or ‘traditional’ modification.” (Dkt. No. 21 ¶f 55-56) Citi “knew or should
have known” that plaintiffs would have rejected the modification if they were
informed it was not a HAMP modification. (Dkt. No. 21 ¶ 69) Citi allegedly
withheld this information in order to get the Heymans to agree to the
modification. (Dkt. No. 21 ¶j 55, 57) Under a HAMP modification, the Heymans
allege, their payments would have been lower and the terms of the permanent
modification would have been more favorable. (Dkt. No. 21 ¶J 59-60)
Count II further alleges that Citi “knowingly and purposely” concealed
from the Heymans that it used an overvalued estimate of their gross income to
calculate the trial modification payments and that it did so “to defraud Plaintiff
into paying the trial modification.” (Dkt. No. 21 ¶J 65-66) They also allege that
Citi did not disclose that it was amortizing the trial payments and permanent
modification payments based on interest and penalties discharged by the
4

plaintiffs’ bankruptcy. (Dkt. No. 21

¶

71) The Heymans allege that because of

“Defendant’s actions, lies, manipulations,” they paid $15,000 to Citi that they
would not have otherwise paid. (Dkt. No. 21 ¶ 74)
Count Three asserts a claim for “Bankruptcy Violation.” The Heymans
allege that Citi knew that their “unsecured debts, including the accrued
interest from the underlying mortgage” had been discharged by their
bankruptcy. Citi nevertheless “calculated the amortization of the trial payments
and modification payments” based on those discharged debts. (Dkt. No. 21
¶J
80-82) Citi “knowingly and purposely did not convey” to the Heymans that it
included those discharged debts in the calculation, causing them to overpay
Citi by $15,000. (Dkt. No. 21 ¶J 84-85)
There are no additional counts alleged in the amended complaint. The
Heymans’ motion papers, however, assert that they intend to allege a claim of
unjust enrichment. (See Dkt. No. 23 pp. 10-11.)
Citi argues that the amended complaint should be dismissed with
prejudice because it is nearly identical to the original and again lacks sufficient
detail to substantiate the claims. (See Dkt. Nos. 22, 26.) The Heymans argue
that they have properly pleaded all three enumerated counts in their amended
complaint as well as a claim for unjust enrichment. (See Dkt. No. 23.)
II.

DISCUSSION

A. Count One

-

Wrongful Collection Practice

To survive a motion to dismiss, 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) (internal quotations omitted).
The United States Court of Appeals for the Third Circuit has provided a three
step process for analyzing a Rule 12(b)(6) motion:
To determine whether a complaint meets the pleading standard,
our analysis unfolds in three steps. First, we outline the
5

elements a plaintiff must plead to a state a claim for relief. See
[Iqbal, 556 U.s.] at 675; Argueta, 643 F.3d at 73. Next, we peel
away those allegations that are no more than conclusions and
thus not entitled to the assumption of truth. See Iqbal, 556 U.S.
at 679; Argueta, 643 F.3d at 73. Finally, we look for well-pled
factual allegations, assume their veracity, and then “determine
whether they plausibly give rise to an entitlement to relief.”
Iqbal, 556 U.S. at 679; Argueta, 643 F.3d at 73. This last step is
“a context-specific task that requires the reviewing court to draw
on its judicial experience and common sense.” Iqbal, 556 U.S. at
679.
Bistrian v. Levi, 696 F.3d 352, 365 (3d Cir. 2012).
Despite some additions to their allegations, the amended complaint again
fails to allege facts sufficient to raise a plausible claim of wrongful collection.
Despite explicit instructions in my earlier opinion, the amended complaint still
2
fails to state the legal basis of this claim. My prior opinion generously
hypothesized three possible sources of law: HAMP; the New Jersey Fair Debt
Collection Practices Act (“New Jersey FDCPA”); and the federal Fair Debt
Collection Practices Act (“federal FDCPA”). The Heymans do not dispute that
HAMP is inapplicable because it does not provide for a private right of action.
(See Dkt. Nos. 13 p. 5; 23 p. 11.) There is likewise no indication that the
Heymans intend to assert a claim under the New Jersey FDCPA, N.J. STAT.
3
§ 45:18-1 et seq. They do not refer to that statute in their amended complaint,
and they do not allege that Citi is a “collection agency,” to which the New
4
Jersey statute exclusively applies.
Because the Heymans have counsel, their complaint is not entitled to the liberal
construction given pro se pleadings. See, e.g., Giles v. Keamey, 571 F.3d 318, 322 (3d
Cir. 2009) (citing Haines v. Kemer, 404 U.S. 519, 520-52 1 (1972)). Nevertheless, I have
given it a very liberal interpretation, hypothesizing potential causes of action that have
not been clearly alleged.
3
Nor do they cite it in their motion papers. The Heymans’ opposition brief does
refer in passing to a different New Jersey statute, the Fair Foreclosure Act (Dkt. No. 23
to ascertain. Regardless,
p. 12), but the significance of that single reference is difficult
ment their complaint
as discussed at nn.5 & 8, infra, the Heymans cannot supple
through their briefing for purposes of opposing a 12(b)(6) motion.
4
This may be because, as explained in the prior opinion, Citi is a “bank,” an
entity explicitly excluded from the statute. See Dkt. No. 13 p. 5; see also N.J. STAT.

2

6

That leaves only the federal FDCPA. Though forewarned by my prior
opinion, the Heymans have again failed to make any explicit reference to that
statute in their amended complaint. The amended complaint, moreover, asserts
only diversity jurisdiction, and does not allege that any federal question is
5
presented.
I will nevertheless assume that Count I is intended as a claim under the
federal FDCPA. Once again, however, the complaint fails to state a claim
6
under that statute.
The federal FDCPA covers only “debt collectors”: those who attempt to
recover an amount owed to a third party. It does not cover “creditors”: those
who attempt to recover a debt on their own account. See 15 U.S.C.

§ 1692a(6)(A)( that the term “debt collector” does not include “any officer or
employee of a creditor while, in the name of the creditor, collecting debts for
such creditor); Police v. Nat’l Tax Funding, L.P., 225 F.3d 379, 403 (3d Cir.
2000) (“The FDCPA’s provisions generally apply only to ‘debt collectors.’
Creditors—as opposed to ‘debt collectors’—generally are not subject to the
FDCPA.”) (internal citations omitted); Oppong v. First Union Mortg. Corp., 215
Fed. App’x 114, 118 (3d Cir. 2007) (the “definition of ‘debt collector’ excludes
creditors who attempt to collect their own debts”). Congress’s exclusion of
45:18-6 (the Act “does not apply to
a national bank, or any bank or trust
company duly incorporated under the laws of this state”).

ANN.

...

My prior opinion noted that the original complaint invoked the Court’s diversity
jurisdiction under 28 U.S.C. § 1332 but not its federal question jurisdiction under 28
U.S.C. § 1331. In that opinion, I explicitly instructed counsel that “any amended
complaint should state specifically the basis for federal jurisdiction.” (Dkt. No. 13 p. 5
n.2) The amended complaint, however, contains a jurisdictional statement identical to
that of the original complaint. (See Dkt. No. 21 ¶ 4.)
6
In their papers in opposition to this motion to dismiss, the Heymans for the first
time state that they are relying on the federal FDCPA. (See Dkt. No. 23 pp. 9, 12) They
also attach various documents to their brief. However, as noted in the prior opinion,
on a motion to dismiss pursuant to Rule 12(b)(6), the Court does not consider afterthe-fact allegations or exhibits attached to the motion papers when assessing the
sufficiency of a complaint. See Commw. of Pa. ex rel. Zimmerman v. PepsiCo, Inc., 836
F.2d 173, 181 (3d Cir. 1988) (“It is axiomatic that the complaint may not be amended
by the briefs in opposition to a motion to dismiss.”) (internal quotations omitted). They
would not change the result in any event.
5

7

creditors was intentional; it was based on the premise that “creditors are
generally presumed to restrain their abusive collection practices out of a desire
to protect their corporate goodwill.” Pollice, 225 F.3d at 403 (quoting Aubert v.
American Gen. Fin., Inc., 137 F.3d 976, 978 (7th Cir. 1998)); see also S. Rpt.
No. 95-382, 95th Cong., 1st Sess., reprinted in 1977 U.S. Code Cong. & Admin.
News 1695, 1696.
The “debt collector” requirement and “creditor” exclusion were central to
my dismissal of Count I of the original complaint. (See Dkt. No. 13 pp. 5-6) As
explained in my prior opinion, the “debt collector” requirement is fundamental;
to state a federal FDCPA claim, a complaint must adequately allege that the
defendant is a debt collector. Astarita v. Solomon & Solomon, PC, 12-cv-5670,
2013 WL 1694807 at *2 (D.N.J. Apr. 18, 2013) (“[Tb

state a claim under the

FDCPA, a plaintiff must plead sufficient facts showing that. the defendant
collecting the debt is a debt collector.”); Grant v. JPMorgan Chase Bank, 12-cv. .

06248, 2013 WL 1558773 at *2 (D.N.J. Apr. 10, 2013).
The amended complaint does not respond to that dismissal by alleging
that Citi is a third-party debt collector. Indeed, it reaffirms that Citi is in effect
the lender or creditor. (Dkt. No. 21 ¶5 (“Defendant Bank financed Plaintiffs[’]
purchase of their home.”)); see McLaughlin v. HSBC Group, No. 12-cv-7734,
2013 WL 6054815, at *34 (D.N.J. Nov. 15, 2013)(dismissing FDCPA claim
where “the Amended Complaint itself confers creditor status on Defendants
when it alleges that ‘Plaintiffs obtained [the] mortgage from [them]’”). Instead,
the amended complaint attempts to patch over the legal deficiency by alleging
that Citi “held itself out as a Debt Collector” and described itself as a debt
collector in disclaimers contained in phone calls and correspondence. (Dkt. No.
21 ¶j 43-46; emphasis added) These additions do not save Count I.

An entity that services the loan for the actual lender (setting aside the situation
where an already-defaulted loan is referred to it for collection) is regarded as a
creditor, not a debt collector. See Stolba v. Wells Fargo & Co., No. 10-cv-60 14, 2011
WL 3444078, at *2 (D.N.J. Aug. 8, 2011).
8

The Heymans do not contend that the Citi is a debt collector—only that
Citi warned the Heymans that it was. As I read the FDCPA, however, it does
not impose its burdens via estoppel; it requires that the defendant be a debt
collector in fact. It states that “[a] debt collector may not engage in any conduct
the natural consequence of which is to harass, oppress, or abuse any person in
connection with the collection of a debt.” 15 U.S.C.

§ 1692d. Debt collectors are

those “in any business the principal purpose of which is the collection of any
debts
owed or due another.” Id. § 1692a(6). The case law is generally in
...

accord. See, e.g., Barber v. Rubin Lublin, LLc, No. 13-cv-975, 2013 WL
6795 158, at *10 (N.D. Ga. Dec. 20, 2013) (dismissing claim because defendant
was not a debt collector and noting that “[t]he relevant test of whether an entity
is a debt collector under the FDCPA is whether the statutory definition applies,
not whether the entity has ever stated in a document that it is a debt collector”)
(internal quotations omitted); Garrett v. BNC Mortg., Inc., 929 F.2d 1120, 1127
(D. Cob. 2013)(”[T]he fact that an entity identifies itself as a debt collector, or
tells a consumer that it is attempting to collect a debt, is not sufficient on its
own to bring that entity within the purview of the FDCPA.”); cf Goodson v.
Bank of Am., N.A., 600 F. App’x 422, 431-32 (6th Cir. 2015)(on summary
judgment, considering whether a debt collector had been engaged in “debt
collection activity,” finding a FDCPA disclaimer “legally irrelevant” and noting
that it “does not automatically trigger the protections of the FDCPA”) (internal
quotations and citations omitted). If an entity is not a debt collector,
statements or disclaimers do not make it so, or bring it within the scope of the
federal FDCPA.
8
Count I must therefore be dismissed. In section lIE, infra, I discuss
whether that dismissal should be with or without prejudice.

S
The papers do not disclose why (assuming it occurred) Citi would have
identified itself as a debt collector. Possible explanations include an overabundance of
caution, or overlawyering. For present purposes, it does not matter.

9

B. Count Two

-

Fraud

Count II is entitled “Fraud.” Though the amended fraud allegations are
slightly improved, I still find them wanting.
A complaint alleging fraud, in addition to meeting the usual
requirements of Rule 8(a) (see pp. 5-6, supra), must satisfy the heightened
pleading requirements of FED. R. Civ. P. 9(b). A fraud complaint must “state
with particularity the circumstances constituting fraud or mistake,” although
“[m]alice, intent, knowledge, and other conditions of a person’s mind may be
alleged generally.” FED. R. Civ. P. 9(b). That heightened Rule 9(b) pleading
standard requires the plaintiff to “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) (internal quotations and citation omitted). At a minimum,
the plaintiff must provide one of two things: either
(1) “all of the essential factual background that would accompany ‘the
first paragraph of any newspaper story’ that is, the ‘who, what, when, where
and how’ of the events at issue,” In re Suprema Specialties, Inc. Sec. Litig., 438
-

F.3d 256, 276 (3d Cir. 2006) (quoting In re Burlington Coat Factory Sec. Litig.,
114 F.3d 1410, 1422 (3d Cir. 1997)); or
(2) some “alternative means of injecting precision and some measure of
substantiation into their allegations of fraud,” Seville Indus. Machinery v.
Southmost Machinery, 742 F.2d 786, 791 (3d Cir. 1984).
The purpose of Rule 9(b) is to “provide notice of the ‘precise misconduct’
with which defendants are charged and to prevent false or unsubstantiated
charges.” Rob v. City Investing Co. Liquidating Trust, 155 F.3d 644, 658 (3d Cir.

1998) (internal citations omitted). It is in the nature of some frauds, however,
that their details may remain concealed even at the time the complaint is filed.
Courts should therefore “apply the rule with some flexibility and should not
require plaintiffs to plead issues that may have been concealed by the
defendants.” Id.
10

The Heymans’ amended complaint, like the original, does not specify the
legal basis for their fraud claim. In my prior opinion, I hypothesized two
possibilities: (1) common law fraud and (2) the New Jersey Consumer Fraud
Act (“CFA”), N.J. STAT. ANN.

§

56:8-1 et seq. So advised, the plaintiffs have failed

to include in their amended complaint (or motion papers) any reference to the
CFA. I am left to assume that a common law tort claim of fraud is intended.
The amended complaint retains the generalized statements of
malfeasance presented in the original complaint. I found those statements
insufficient under Rule 8(a) and 9(b) pleading standards. (See Dkt. No. 13 p. 8;
No. 21 ¶f 72-73 (alleging that the defendant “took money from Plaintiffs under
false pretenses” and “acted in bad faith.”))
The amended complaint adds some more specific allegations. As noted
above (pp. 4—5, supra), the fraud-related allegations are distributed over
Counts One and Two, but I analyze them together here. There appear to be two
strains to the fraud claim: an affirmative misrepresentation theory and an
omission theory.
The misrepresentation theory of fraud is that Citi disguised a non-HAMP
modification as a HAMP modification to entice the Heymans to agree to it. Citi
“knew that Plaintiff would not pay an ‘in house’ or ‘traditional’ modification,” so
Ciii “provided the modification and called it RAMP, even though it was not a
RAMP modification.” (Dkt. No. 21

¶J

55-56) If the modification had been a true

HAMP modification, say the Heymans, the trial payments would have been
lower and the permanent modification offer would have been more to their
liking. (Dkt. No. 21

¶

59)

The omission theory of fraud is that Citi intentionally overstated the
Heymans’ gross income when it calculated their modified payments, that Citi
withheld this information from the Heymans, and that Citi did this
intentionally “in order to defraud Plaintiff into paying the trial modification.”
(Dkt. No. 21

¶f

64-69) The Heymans also weave their bankruptcy-related

allegations (separately alleged in Count Three) into Count Two, alleging that
Citi also “failed to let Plaintiffs know that it was amortizing the trial payments
11

and permanent modification payments based on accrued interest and penalties
that was already discharged by Plaintiff’s bankruptcy.” (Dkt. No. 21 ¶ 71)
Because of Citi’s fraudulent behavior, the Heymans allegedly overpaid “more
than $15,000 to Defendant.” (Dkt. No. 21 ¶ 74) That $15,000 figure, also cited
in Count Three, is not explained any further. (See Dkt. No. 21

¶

85.)

To state a claim for common law fraud by misrepresentation, a plaintiff
must allege five elements: “(1) a material misrepresentation or omission of a
presently existing or past fact; (2) knowledge or belief by the defendant of its
falsity or knowing the omission to be material; (3) intention that the other
person rely on it; (4) reasonable reliance thereon by the other person; and (5)
*3
resulting damages.” Cafaro v. HMC, No. 07-cv-2793, 2008 WL 4224801, at
(D.N.J. Sept. 8, 2008) (citing Gennari v. Weichert Co. Realtors, 148 N.J. 582,
610 (1997)). For an omission to have constituted fraud, the defendant must
have had a duty to disclose the withheld information. Stockroom, Inc. v.
Dydacomp Dev. Corp., 941 F.2d 537, 546 (D.N.J. 2013) (citing Perri v.
*5 (N.J. Super. Ct. App. Div. Jan.
Prestigious Homes, Inc., 2012 WL 95564, at
13, 2012); see also Weintraub v. Krobatsch, 64 N.J. 445, 455-56, 317 A.2d 68
(1974).
As to the misrepresentation theory, the amended complaint comes closer
than the original complaint to alleging the required elements. It identifies a
misstatement: that Citi, or someone at Citi, “called [the modificationj RAMP,
even though it was not.” (Dkt. No. 21 ¶ 56) It alleges that Citi knew this was
not truly a RAMP modification, but “disguised” its nature “for the intended
purpose of soliciting money from Plaintiff.” (Dkt. No. 21

¶f

54, 57) Citi did this

because it knew that the Heymans would not agree to a “traditional”
modification. The Heymans allege that they “tr[iedl to comply with the alleged
HAMP modification.” (Dkt. No. 21 ¶ 58) From such facts a diligent reader might
extract the implication that the misstatement was material, that Citi intended
the Heymans to rely on it, and that they did rely. (Dkt. No. 21

¶

55) The

amended complaint further alleges that RAMP trial payments would have been

12

lower and the proposed permanent modification more favorable. Though
imprecise, this may be construed as an allegation of damages. (Dkt. No 21

¶

59)
Even viewed in a generous light, however, the allegations of the amended
complaint fall short of stating a fraud claim. Particularly when viewed through
the lens of Rule 9(b), they lack the necessary who, what, where, when, and
how. Thus “FED. R. Civ. P. 9(b) requires, at a minimum, that the plaintiff
identify the speaker of allegedly fraudulent statements.” Klein v. General
Nutrition Co., Inc., 186 F.3d 338, 345 (3d Cir.1999); F.D.I.C. v. Bathgate, 27
F.3d 850, 876 (3d Cir. 1994).9 Like the original complaint, the amended
complaint fails to identify the speaker of the alleged misstatement. The only
potentially relevant person identified is Patricia Ruiz, who is described as the
“point of contact on the file” at Citi. (Dkt. No. 21

¶

16) Completely absent,

however, are allegations about who uttered the alleged misstatement(s), what
they said, when they said it, and where they said it. The allegation is simply
that Citi, a corporate entity, misled the plaintiffs, presumably through some
unspecified employee, by means of some unspecified statement(s), at some
unspecified time and place.
The omission theory, too, lacks the specificity required by Rule 9(b). Its
allegations fail to address an essential element: namely, that Citi had a duty to
disclose the information it allegedly withheld (the amount of gross income and
outstanding debts it used to calculate the Heymans’ loan modification
payments).’° In any event, this omission theory depends to some degree on the
As explained in the prior opinion, where a plaintiff cannot be expected to have
personal knowledge of certain details of the alleged fraud, the plaintiff must allege that
the necessary information lies within the defendant’s exclusive control, and provide
some facts to establish the basis for that allegation. See Dkt. No. 13 p. 9 n.4;
Frederico, 507 F.3d at 201 n. 11. Here, the plaintiffs allege that misrepresentations
were made directly to them; they provide no reason why they cannot allege the
particulars.
9

Properly pleading that element might open up other issues, such as materiality
and reliance (given that the Heymans presumably knew the amount of their income
and debts, but accepted the terms of the trial modification and made payments
pursuant to it). I do not reach such issues, but merely flag them for the parties.
10

13

misrepresentation theory, which is being dismissed. Presumably, the
permissibility of the calculation of payments would depend on whether the
workout was, or was supposed to be, under the HAMP program. So any
amended version of the omission theory should be pleaded in the context of an
amended misrepresentation theory.
In short, because certain elements of fraud are simply not alleged, and
those that are alleged are not presented in sufficient detail to comply with Rule
9(b), Count Two will be dismissed.
C. Count Three

-

Bankruptcy Violation

The amended complaint contains a new count, not alleged in the original
complaint, opaquely titled “Bankruptcy Violation.” Again, the complaint does
not identify any source of law for the claim. The amended complaint alleges
that the Heymans filed for bankruptcy and that “[a]1l of Plaintiff’s unsecured
debts, including the accrued interest from the underlying mortgage, were
discharged.” (Dkt. No. 21 ¶ 80) Citi allegedly “knew about the discharge” but
intentionally incorporated this discharged interest obligation into the
calculation of the modified payments, causing the Heymans to overpay Citi
more than $15,000. (Dkt. No. 21

¶f 82-85)

Citibank suggests that the Heymans may intend to assert a claim under
the discharge provision of the Bankruptcy Code, 11 U.S.C. § 524. If so, there is
a temporal problem with such a theory: Citi’s trial modification had already
been completed by August 2013, but the discharge of debts in bankruptcy did
not allegedly occur until 2014. (Dkt. No. 21 ¶J 29-30, 79) More fundamentally,
the theory is invalid as a matter of law; there is no separate right of action for a
violation of the discharge-of-debts provision. See In re Joubert, 411 F.3d 452,
455-56 (3d Cir. 2005) (citing holdings of other circuits that there is no private
right of action under § 524 in support of its holding that there is no private
right of action under § 506); Perkins v. AT&T Mobility, LLC, 2011 U.S. Dist.
LEXIS 16614, at *2 (D.N.J. Feb. 17, 201 1)(because “there is no private right of
14

action for violation of [the discharge provision]

...

[a debtor’s lone remedy is a

contempt proceeding in bankruptcy court”) (citing Joubert); Owens v. JP
Morgan Chase Bank, No. 12-cv-1081, 2013 WL 2033149, at *5 (W.D. Pa. May
14, 2013)(noting that there is no private right of action under 11 U.S.C. 524);
§
Henderson v. Weinstein & Riley, P.S., PC., No. 1 1-cv-2607, 2011 WL 6826117,
at *2 (D.N.J. Dec. 27, 201 1)(applying the reasoning of Joubert and the cases it

relied upon and noting that “District Courts in this Circuit have
concluded
that no private cause of action exists pursuant to Section 524(a)(2)”) (citing
...

Townsend v. M&TMortg. Corp., No. 09-cv-1866, U.S. Dist. LEXIS 62331 at *9
(M.D. Pa. June 22, 2010)). In short, if the Heymans believe Citi has violated an
order of the bankruptcy court, their remedy lies there, if anywhere. (See Dkt.
No. 23 p. 14.))”
At any rate, the Heymans’ allegations of “Bankruptcy Violation” are too
vague to state a viable cause of action under the standards of Rules 8(a) and
12(b)(6). Count Three is dismissed for failure to state a claim.

The Heymans’ motion papers (See Dkt. No. 23 p. 14), but not their complaint,
cite 11 U.S.C. § 362(A)(1), which (to simplify) governs the automatic stay that attaches
when a bankruptcy petition is filed:
(a) Except as provided in subsection (b) of this section, a petition filed under
section 301, 302, or 303 of this title, or an application filed under section 5(a)(3)
of the Securities Investor Protection Act of 1970, operates as a stay, applicable
to all entities, of—
(1) the commencement or continuation, including the issuance or
employment of process, of a judicial, administrative, or other
action or proceeding against the debtor that was or could have
been commenced before the commencement of the case under this
title, or to recover a claim against the debtor that arose before the
commencement of the case under this title
11 U.S.C. § 362(a)(1). The amended complaint, however, says nothing about the
automatic stay. Rather, without specifying any statute, it repeatedly cites the 2014
“discharge” of debts in bankruptcy. At any rate, the plaintiffs do not specify how the
modification of their payment terms would constitute a judicial or other proceeding
that would violate the stay.
15

D. Unjust Enrichment
In their briefing, the Heymans argue that they have sufficiently alleged a
and
claim of unjust enrichment. The words “unjust enrichment,” unexplained
unadorned, are embedded in a list in the prefatory paragraph 1 of the
ful
Complaint: “This matter is an Action for wrongful indebtedness, wrong
ent
collection on a mortgage, slander of title, slander of credit, unjust enrichm
and other rights and remedies....” (See Dkt. No. 1 ¶ 1.) They reappear in a
s
similar list in the prayer for relief. The amended complaint, however, contain
only the three counts discussed above; there is no separate count of unjust
enrichment. And even on the unwarranted assumption that the complaint
it.
contains a claim for unjust enrichment, I would be constrained to dismiss
12
Under New Jersey law, to establish unjust enrichment, a plaintiff must
show (1) “that defendant received a benefit” and (2) “that retention of that
135
benefit without payment would be unjust.” VRG Corp. v. GKN Realty Corp.,
N.J. 539, 554 (1994) (internal citations omitted); Alboyacian v. BPProds. N.
*4 (D.N.J. Nov. 22, 2011). The
Am., 01-cv-5143, 2011 WL 5873039, at
amended complaint does not contain such allegations. The closest the
ions
Heymans come to alleging unjust enrichment are their generalized allegat
that they overpaid Citi as a result of fraud.
The Heymans attempt in their brief to bolster the claim of unjust
enrichment. (See Dkt. No. 21 pp. 10-11.) But as discussed at nn. 2, 5, & 8,
supra, and in the Court’s previous opinion, a court considering a motion to
dismiss will not consider allegations in the briefs, but only the allegations of
d
the complaint (and any documents relied on in the complaint or attache
thereto). (See Dkt. No. 13 pp. 8-9 n.3)

In their papers, the Heymans argue that they have sufficiently alleged a claim of
unjust enrichment under New York law. (Dkt. No. 21 p. 8) Because they have not
New
brought to the Court’s attention any significant difference between New York and
t of laws
Jersey law as to the elements of unjust enrichment, I do not perform a conflic
analysis.
12

16

This amended complaint falls far short of stating a claim for unjust
enrichment. There is no such count; there is no statement of even the
bare
legal elements of such a claim; there is no connection drawn between the
facts
alleged and the elements of unjust enrichment. The claim of unjust
enrichment, to the extent it was alleged at all, is dismissed.
E. Dismissal With or Without Prejudice

Citi has argued that the Court should dismiss the Heymans’ entire
amended complaint with prejudice. I will dismiss Count I with prejudice.

As to

the remaining counts I will permit the Heymans to move for leave to submit
a
second amended complaint within 30 days.
Amendments are freely granted under FED. R. CIV. P. 15(a)(2), to ensure
that plaintiffs’ contentions are tested on the merits. Forrnan v. Davis, 371
U.S.
178, 182 (1962). Accordingly, an initial dismissal based on Rule 12(b)(6),
applying the standards of Rules 8(a) and 9(b), will ordinarily be ordered withou

t
prejudice. See Aiston v. Parker, 363 F.3d 229, 235 (3d Cir. 2004) (where
a
complaint is dismissed on Rule 12(b)(6) grounds “a District Court must
permit
a curative amendment, unless an amendment would be inequitable or futile”
);
In re NAHC, Inc. Sec. Litig., 306 F.3d 1314, 1332 (3d Cir. 2002) (“[Njormally
,
leave to amend is granted when a complaint is dismissed on Rule 9(b)
failure to
plead with particularity grounds.”) (internal quotations omitted); 5A CHAR
LEs
ALAN WRIGHT, ARTHUR

R. MILLER, EDWARD H. CooPER, FEDERAL PRAcTIcE AND
PROCEDURE § 1300 (3d ed.).

This of course is the second, not the first, dismissal of the Heymans’
complaint (setting aside the new bankruptcy count). Where the plainti
ff has
already had two chances, it is easier for the court to conclude that further
amendment would be futile. See Vurimindi v. City of Philadelphia, 521
F. App’x
62, 65 (3d Cir. 2013) (dismissal with prejudice was appropriate where
“[tihe
District Court provided [plaintiff] with multiple opportunities to amend
his
complaint and gave him specific instructions as to what must be include
d in
17

of
order to state a claim for relief,” and he failed to do so); Phillips v. County
2013 WL
Allegheny, 515 F.3d 224, 245 (3d Cir. 2008); see, e.g., McLaughlin,
ment
6054815 at *3.4 (dismissing FDCPA claim with prejudice because amend
ant was a
would be “futile” where plaintiff’s allegations made clear that defend
creditor and not a debt collector).
be
As to Count I, I am satisfied that any further attempt to amend would
Citi is a
futile as a matter of law. The amended complaint fails to allege that
federal
“debt collector,” an essential element of a cause of action under the
allege that
FDCPA. That is no mere deficiency of pleading; the Heymans cannot
ions of
Citi is a debt collector, because that would contradict the central allegat
of their
their complaint. The entire premise of their case is that the purchase
loan on
home was financed by Citi as lender. Citi attempted to collect the
behalf of itself, not a third party. The complaint (in both its original and
Nos. 21 ¶J
amended form) alleges this unequivocally and repeatedly. (See Dkt.
r, not a
5, 7, 19, 30; 1 ¶{ 5, 7, 19, 27.) By statutory definition, Citi is a credito
e a
debt collector, and accordingly is not subject to the federal FDCPA. Becaus
the
second opportunity to amend would be futile, I will dismiss Count I,
wrongful collection claim, with prejudice.
not,
As for Counts II and III, I will give plaintiffs one more chance. I will
however, authorize an amended pleading in advance. I will dismiss these
counts without prejudice to the submission of a motion for leave to amend
within 30 days after the date of this Order. Any such motion shall be
complaint. I
accompanied by a copy of the Heymans’ proposed second amended
in
reiterate: any second amended complaint shall plead its causes of action
relies,
separate counts, shall identify the source of law upon which each count
cause
and shall allege facts in support of each of the essential elements of each
of action.

18

III.

CONCLUSION

For the foregoing reasons, Citi’s motion to dismiss the complaint is
GRANTED. The Heymans’ complaint will be DISMISSED: as to Count I, with
prejudice; as to the remaining counts, without prejudice to the filing of a
motion to file a second amended complaint within 30 days. An appropriate
order is filed separately.

Dated: October 9, 2015
Newark, New Jersey

KEVIN MCNULTY
United States District Ju

19