SCHMIDT et al v. WELLS FARGO BANK, N.A.
OPINION. Signed by Judge William J. Martini on 9/14/17. (gh, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
Civ. No. 2:17-cv-01708 (WJM)
DEBORAH SCHMIDT AND JAMES
WELLS FARGO BANK, N.A.,
WILLIAM J. MARTINI, U.S.D.J.:
Plaintiffs Deborah and James Schmidt filed this action on March 14, 2017, against
Wells Fargo in connection with Plaintiffs’ home loan modification agreement. The
complaint alleges that Wells Fargo made misrepresentations to Plaintiffs about their
eligibility for a more favorable loan modification; that it misapplied at least one mortgage
payment, without explanation; that it failed to provide information about its servicing of
Plaintiffs’ loan; and that it violated federal law by using an automatic dialing system to
repeatedly contact Mrs. Schmidt by phone without her consent. The matter now comes
before the Court on Wells Fargo’s motion to dismiss the complaint for failure to state a
claim pursuant to Federal Rule of Civil Procedure 12(b)(6). There was no oral argument.
See Fed. R. Civ. P. 78(e). For the following reasons, Wells Fargo’s motion to dismiss is
GRANTED in part and DENIED in part.
Plaintiffs Deborah and James Schmidt purchased their house in Randolph, New
Jersey in 2002 by money mortgage with BNY Company LLC. Complaint (“Compl.”) ¶ 2.
On August 29, 2007, Plaintiffs refinanced their house with Defendant Wells Fargo Bank
at an annual interest rate of 6.375%. Certification of Aaron M. Bender in Support of
Defendant’s Motion to Dismiss (the “Bender Cert.”) Ex. B. Plaintiffs made timely
mortgage payments through 2008 and 2009 despite serious financial difficulty. Compl. ¶
4. They were eventually granted a 6-month moratorium on payments from January to June
of 2010. Id. Plaintiffs allege they made timely payments from July 1, 2010 through January
On April 9, 2009, and December 22, 2009, Plaintiffs applied for a modification
under the Home Affordable Mortgage Program (“HAMP”), a federal program launched in
the wake of the 2008 financial crisis to help distressed home owners avoid foreclosure. See
Heyman v. Citimortgage, Inc., 2014 WL 4637034, at *1 (D.N.J. 2014). Plaintiffs were
denied HAMP modifications both times, because they were not yet three months behind
on their mortgage payments. Compl. ¶ 4. Plaintiffs allege that on February 19, 2010,
“Darian at Wells Fargo . . . suggested that since by then plaintiffs were behind almost 3
payments, they should request a HAMP modification.” Compl. ¶ 4. Deborah Schmidt
submitted a HAMP modification request on March 15, 2010. Id. at 6. Plaintiffs were again
denied a HAMP modification—this time because Wells Fargo wanted to monitor the
progress of Deborah’s new business before determining eligibility for a modification. Id.
at ¶ 7. Meanwhile, Plaintiffs were given an additional six-month moratorium and instructed
by Wells Fargo employee Ben Montang to apply for reconsideration at the end of the
moratorium. They did so, but were denied again for a HAMP modification. Id.
Although Plaintiffs were deemed ineligible for the HAMP program, they agreed to
a “non-HAMP” loan modification on October 9th, 2012. Plaintiffs assert that the terms of
the modification were unfavorable and that they agreed only out of desperation in order to
avoid foreclosure. Wells Fargo allegedly failed to provide Plaintiffs with an amortization
schedule or to answer questions about the loan structure despite numerous attempts by
Deborah Schmidt to communicate with Wells Fargo by phone and in person. Compl. ¶ 24.1
Plaintiffs allege that on January 27, 2012, Wells Fargo refused to accept Plaintiffs’
mortgage payments. Compl. ¶ 4(c). Debora Schmidt made several in-person visits to one
of Defendant’s locations but was unable to “straighten out the issue of the misapplied
payment.” Compl. ¶ 15. According to the complaint, all payments between August 2012
and August 2016 were timely made. Compl. ¶ 19. They fell behind on their mortgage in
September, 2016 but were again denied a modification.2 Plaintiffs received a foreclosure
notice on January 15, 2016. Compl. ¶ 19. Plaintiffs insist that all payments were made
timely between August 2012 and January 2016. Id. Plaintiffs brought this action on March
14, 2017. A foreclosure complaint was brought against them on March 22, 2017, in the
Morris County Superior Court of New Jersey Chancery Division. Bender Cert. Ex A. The
complaint further alleges that between January 2013 and January 2017 Plaintiffs received
a torrent of “robo-calls” concerning Plaintiffs’ debt to Plaintiffs’ home and cell phones.
Compl. ¶ 22.
According to Plaintiffs, the modification did not include a late-fee waiver that had been
promised by Wells Fargo. Compl. ¶ 24(b). However, it is unclear how this assertion fits into
On May 11, 2015, Defendant assigned the mortgage to HSBC Bank, USA (“HSBC”). Bender
Cert. Ex. C. Wells Fargo continued as the loan’s servicer.
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint,
in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted.
The moving party bears the burden of showing that no claim has been stated. Hedges v.
United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion to dismiss under
Rule 12(b)(6), a court must take all allegations in the complaint as true and view them in
the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975);
Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir.
Although a complaint need not contain detailed factual allegations, “a plaintiff’s
obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels
and conclusions, and a formulaic recitation of the elements of a cause of action will not
do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Factual allegations must be
sufficient to raise a plaintiff’s right to relief above a speculative level, to make it “plausible
on its face.” See id. at 570; see also Umland v. PLANCO Fin. Serv., Inc., 542 F.3d 59, 64
(3d Cir. 2008). 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.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550
U.S. at 556). While “[t]he plausibility standard is not akin to a ‘probability requirement’ .
. . it asks for more than a sheer possibility.” Iqbal, 129 S.Ct. at 1949 (2009).
The Court addresses each of Plaintiffs’ five Counts in order. Count 1 alleges that
Wells Fargo violated the Real Estate Settlement Procedures Act (RESPA) by failing to
respond to a written request for information about Plaintiffs’ 2012 loan modification. Count
2 alleges that Wells Fargo committed fraud by misrepresenting to Plaintiffs that they were
ineligible for a modification under the Home Affordable Mortgage Program (HAMP),
forcing Plaintiffs to sign a predatory loan modification instead. Count 3 alleges that Wells
Fargo breached the covenant of good faith and fair dealing implied in the parties’ loan
modification agreement. Count 4 alleges slander of credit. And Count 5 alleges that Wells
Fargo violated the Telephone Consumer Protection Act (TCPA) by repeatedly using an
automatic dialing system to contact Plaintiff Deborah Schmidt regarding late mortgage
payments. Plaintiffs’ TCPA claim plausibly states a basis for relief; Counts 1 through 4 do
A. Plaintiffs’ RESPA Claim
Congress passed RESPA “to insure that consumers throughout the Nation are
provided with greater and more timely information on the nature and costs of the [real
estate] settlement process and are protected from unnecessarily high settlement charges
caused by certain abusive practices that have developed in some areas of the country.” 12
U.S.C.A. § 2601 (West). The statute requires a servicer to acknowledge and respond to any
“qualified written request” 3 for information made by a borrower. The servicer must make
any appropriate corrections to the borrower’s account or otherwise conduct an investigation
into the error and provide the borrower with a written explanation or clarification. 12 §
U.S.C.A. § 2605(e) (West). According to the complaint, Wells Fargo failed to respond to
a qualified written request by Plaintiffs regarding a payment which the bank failed to credit
to their mortgage account.
The Court finds that Plaintiffs’ RESPA claim fails to put Wells Fargo on “fair notice
of the . . . ‘grounds’ on which the claim rests.” Bell Atlantic Corp. et al. v. Twombly et al.,
550 U.S. 544, 555 n. 3 (2007). Although Plaintiffs contacted Wells Fargo on numerous
occasions regarding the unapplied payment, the complaint does not specify if and when
Plaintiffs sent the bank a “qualified written request.” The Court is unable to infer that Wells
Fargo failed to satisfy its requirements under RESPA if the complaint does not allege facts
indicating that such requirements were triggered by a qualified written request. Plaintiffs’
RESPA claim fails.
B. Common Law Fraud
In New Jersey, fraud consists of: “(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.” Gennari v. Weichert Co. Realtors, 691 A.2d 350 (N.J. 1997) (citing
Jewish Ctr. Of Sussex Cnty. v. Whale, 432 A.2d 521 (1981)). The heightened pleading
standard under Federal Rule of Civil Procedure 9 requires that a complaint “state with
particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). Although HAMP
does not create a private cause of action, it does not preempt state law claims that arise
from the HAMP loan modification process. Wigod v. Wells Fargo Bank, N.A., 673 F.3d
547, 555 (7th Cir. 2012).
The complaint alleges that Wells Fargo knowingly misrepresented that Plaintiffs
were ineligible for a HAMP modification, and that in reasonably relying on this
misrepresentation Plaintiffs accepted a “non-HAMP” modification under inferior terms.
Compl. ¶ 30. The bare allegation that “defendant felt free to lie to [Plaintiffs] and tell them
they were not [eligible]” when in fact Plaintiffs were eligible for a HAMP modification
does not “state with particularity the circumstances constituting fraud.” F.R.C.P. 9(b). The
Court cannot discern from the complaint what Wells Fargo specifically lied about. To hold
otherwise would expose loan servicers to allegations of fraud every time a borrower’s
The statute defines “qualified written request” as:
[A] written correspondence . . . that includes, or otherwise enables the servicer to identify,
the name and account of the borrower; and includes a statement of the reasons for the belief
of the borrower, to the extent applicable, that the account is in error or provides sufficient
detail to the servicer regarding other information sought by the borrower. 12 U.S.C.A. §
request for HAMP modification is denied. The Court must heed Rule 9’s instruction that a
“a part must state with particularity the circumstances constituting fraud.” Fed. R. Civ. P.
C. Breach of Contract – Good Faith and Fair Dealing
To state a claim for breach of contract, a plaintiff must allege (1) the existence of a
valid contract, (2) that the opposing party failed to perform under the contract, and (3) that
the breach caused the plaintiff to sustain damages. See, e.g., EnviroFinance Group, LLC.
v. Envtl. Barrier CO., LLC., 440 N.J. Super. 325, 346 (N.J. Super. Ct. App. Div. 2015).
Further, “[a] covenant of good faith and fair dealing is implied in every contract in New
Jersey.” Wilson v. Amerada Hess Corp., 773 A.3d 1121, 1126 (2001). See Palisades
Property, *561 Inc. v. Bruneti, 44 N.J. 117, 130, 207 A.2d 522, 560-61 (1965). In other
words, “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.” Wilson, 77 A.3d at 1126.
The covenant reflects the principal that performance should be consistent with “the
reasonable expectations of the parties.” Id. at 1130.
Plaintiffs allege that Wells Fargo breached the contract by failing to provide certain
information about the terms of the 2012 loan modification, including an amortization
schedule for “step” payments, a basis for the calculation of a back-end balloon payment,
and an explanation for the allocation of initial and trial payments. The complaint also
alleges that Wells Fargo refused to credit a payment and instead erroneously asserted that
Plaintiffs were a month behind in payments. Compl. ¶ 31. Assuming that this conduct
amounts to a breach of the implied covenant of good faith and fair dealing, it is not at all
clear from the face of the complaint how such a breach caused Plaintiffs to sustain damages.
Either way, Plaintiffs would presently be in default and facing foreclosure. Without a
causal relationship between a breach and damages, Plaintiffs cannot sustain a claim for
breach of contract. See e.g., EnviroFinance Group LLC., 113 A.2d at 345.
D. Slander of Credit
Slander of credit—a species of defamation law— consists of the “the publication,
or communication to a third person, of false statements concerning the plaintiff, his
property, or his business.” Sarlo v. Wells Fargo Bank, N.A., 175 F.Supp.3d 412, 427
(D.N.J. 2015) (citing F.D.I.C. v. Bathgate, 27 F.3d 850, 871 (3d. Cir. 1994)). Plaintiffs
allege that Wells Fargo falsely reported to credit bureaus that Plaintiffs defaulted in August
2016, when in fact Plaintiffs did not default until September 2016. Compl. ¶ 33.
Plaintiffs’ claim is preempted by the Fair Credit and Reporting Act (FCRA). “No
requirement or prohibition may be imposed under the laws of any State with respect to
subject matter regulated under [the FCRA], relating to the responsibilities of persons who
There is no need to address Wells Fargo’s statute-of-limitations or causation arguments at this
furnish information to consumer reporting agencies.” 15 U.S.C.A. § 1681t(b)(1)(F). “That
admonishment leaves no room for state law claims against furnishers of information . . .
regardless of whether those claims are couched in terms of common law or state statutory
obligations.” Burrell v. DFS Serv., 753 F.Supp.2d 438, 451 (D.N.J. 2010); Edwards v.
Equable Ascent, FNCL, LLC., 2012 WL 1340123, at * 7 (D.N.J. Apr. 16, 2012) (“This
Court has adopted a total pre-emption approach.”); Henderson v. Equable Ascent Fin. LLC,
2011 WL 5429631 (D.N.J. Nov.4, 2011) (“This Court finds the ‘total preemption’ approach
. . . to be most faithful to the plain language and intended scope of Section
1681t(b)(1)(F).”); Nonnenmacher v. Capital One, 2011 WL 1321710 (D.N.J. Mar. 31,
2011) (“By enacting Section 1681t(b)(1)(F), Congress ‘wanted to eliminate all causes of
action relating to the responsibilities of persons who furnish information to consumer
reporting agencies.’”)(citations omitted). Plaintiffs’ slander-of-credit claim is
E. Telephone Consumer Protection Act
The Telephone Consumer Protection Act (TCPA) prohibits “any call (other than a
call made for emergency purposes or made with the prior express consent of the called
party) using any automatic telephone dialing system or an artificial or prerecorded voice .
. . to any telephone number assigned to a . . . cellular telephone service . . . .” 47 U.S.C.A.
§ 227 (b)(1)(A)(iii). The TCPA creates a private cause of action for actual monetary
damages and statutory damages in the amount of $500 for each violation. § 227 (b)(3)(B).5
The complaint alleges that Deborah Schmidt received many calls on her home and
cell phones from Wells Fargo advising her that Plaintiffs were late on a payment, when in
fact they were not. Compl. ¶ 34. Plaintiffs allege that the calls were made using an
automatic telephone dialing system, beginning in early January of 2013 and ending in
January 2017. Id. at ¶ 22. According to Plaintiffs, some of these calls were made even after
Mrs. Schmidt asked to be removed from the automatic dialing list. Compl. ¶ 22.
Wells Fargo argues that the complaint fails to specify the number of calls made or
dates on which they occurred. Id. Further, Wells Fargo argues that Plaintiffs consented to
receiving phone calls by providing their home and cell phone numbers in connection with
the loan process. Memo. Supp. Wells Fargo’s Mot. Dismiss 18. It cites to the Sixth
Circuit’s decision in Hill v. Homeward for the proposition that “when [a borrower] gives
his creditor his cellphone number in connection with a debt he owes . . . this constitutes
‘prior express consent’ to be called on that number about the debt.” 799 F.3d 544, 548 (6th
The Court finds that Plaintiffs have adequately stated a claim under the TCPA.
Wells Fargo does not deny that it contacted Plaintiffs using an “automatic telephone dialing
system.” Plaintiffs are not required at this stage of litigation to specify the exact dates and
Treble damages are available at the court’s discretion for willful or knowing violations. §
times of each call; that information will be more accessible to Plaintiffs in discovery. See
Stewart v. T-Mobile USA, Inc., 124 F.supp.3d 729, 733 (D.S.C. 2015) (“[The] Complaint
need not allege the exact dates and times of the calls in order to notify T–Mobile of its
purported violations of the TCPA.”). Cf. Owens v. Starion Energy, Inc., 3:16-cv-01912
(VAB), 2017 WL 2838075, at *6 (“District courts throughout the country have consistently
held that a complete telephone number is not required at this stage.”).
The argument that Plaintiffs consented to the calls rings hollow. Assuming that
Plaintiffs initially gave express written consent by providing their phone numbers in their
loan modification application, see Certification of Aaron M. Bender, Ex. F. A, the
complaint clearly states that Mrs. Schmidt instructed Wells Fargo to be removed from the
automatic dialing list. Compl. ¶ 22. The Court must assume that this assertion is true. See
Armstrong Surgical Str., Inc., v. Armstrong Cty. Mem’l Hosp., 185 F.3d 154, 165 n. 1 (3d
Cir. 1999) (“In ruling on a motion to dismiss, the court must accept the well pleaded facts
as true and resolve them in the light most favorable to the plaintiff.”). Under these
circumstances, consent is treated as revoked. See Gager v. Dell Fin. Servs., LLC, 727 F.3d
265, 272 (3d Cir. 2013) (denying a 12(b)(6) motion and holding that “the TCPA provides
consumers with the right to revoke their prior express consent to be contacted on cellular
phones by autodialing systems.”); Watkins v. Wells Fargo Bank, N.A., Civ. No. 15-5712
(RMB/KMW), 2017 WL 2399086, at *6-7 (D.N.J. June 2, 2017). Wells Fargo’s motion to
dismiss the TCPA claim is denied.
For the foregoing reasons, Defendants’ motion to dismiss the complaint pursuant to
Rule 12(b)(6) is GRANTED in part and DENIED in part. Counts 1 through 4 are
DISMISSED without prejudice. The motion is denied with respect to Count 5, which
adequately states a claim under the Telephone Consumer Protection Act.
/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
September 14, 2017
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