KIMMEL et al v. PHELAN HALLINAN & SCHMIEG, PC et al
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE STEWART DALZELL ON 2/28/12. 2/29/12 ENTERED AND COPIES E-MAILED.(mbh, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
MURRAY H. KIMMEL, et al.
PHELAN HALLINAN &
SCHMIEG, PC, et al.
February 28, 2012
Plaintiffs Murray H. and Dolores T. Kimmel
(collectively, “the Kimmels”) bring suit against defendants
Phelan Hallinan & Schmieg, PC (“PHS”), Deutsche Bank National
Trust Company (“Deutsche Bank”), and America’s Servicing Co.
(“ASC”), alleging federal law violations of the Fair Debt
Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq.,
and the Racketeering Influenced and Corrupt Organizations Act
(“RICO”), 18 U.S.C. § 1961, et seq., as well as state law
violations of the Pennsylvania Fair Credit Extension Uniformities
Act (“FCEUA”), 73 Pa. Cons. Stat. § 2270.1, et seq., the
Pennsylvania Unfair Trade Practices and Consumer Protection Law
(“UTPCPL”), 73 Pa. Cons. Stat. § 201-1, et seq., and common law
claims for fraud and negligent misrepresentation.
suit arises out of efforts by defendants to collect a debt the
Kimmels allegedly owed on a mortgage and note for a property
located in Brigantine, New Jersey.
Defendant PHS filed a motion to dismiss this action for
improper venue, to which ASC and Deutsche Bank added a motion to
dismiss for failure to state a claim that PHS later joined.1
Kimmels responded to these motions and we have entertained
supplemental briefing so that the motions are now ripe for
For the reasons described below, we will deny PHS’s
motion to dismiss for improper venue and grant in part ASC and
Deutsche Bank’s motion to dismiss for failure to state a claim.
We will afford the Kimmels a limited opportunity to amend their
complaint to remedy some of the deficiencies we identify here.
In considering a motion to dismiss for failure to state
a claim under Fed. R. Civ. P. 12(b)(6),2 we must “‘accept all
factual allegations in the complaint as true and give the pleader
the benefit of all reasonable inferences that can be fairly drawn
Ordonez v. Yost, 289 Fed. Appx. 553, 554 (3d Cir.
2008) (quoting Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.
We may “‘consider only allegations in the complaint,
See PHS's Supplemental Brief (docket no. 10) at 2,
We rehearse the standard applicable to a motion to
dismiss for improper venue in Section II.A below.
exhibits attached to the complaint, matters of public record, and
documents that form the basis of a claim,’” Brown v. Daniels, 128
Fed. Appx. 910, 913 (3d Cir. 2005) (quoting Lum v. Bank of
America, 361 F.3d 217, 222 n.3 (3d Cir. 2004)), where a document
forms the basis of a claim if it is “integral to or explicitly
relied upon in the complaint.”
In re Burlington Coat Factory
Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)) (emphasis and
internal quotation marks omitted).
As our Court of Appeals has
explained, this means that we may “consider an undisputedly
authentic document that a defendant attaches as an exhibit to a
motion to dismiss if the plaintiff’s claims are based on the
Pension Benefit Guar. Corp. v. White Consol. Indus.,
Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).
According to the Kimmels, they both reside in
Huntington Valley, Pennsylvania.
PHS, which handles debt
collection matters, has its headquarters in New Jersey.
Bank and ASC handle debt collection matters at their headquarters
in South Carolina.
Pls.’ Compl. ¶¶ 6, 8-10.
The Kimmels allege,
conclusorily, that they are “consumers” and the defendants are
“debt collectors” under the FDCPA, and that the defendants sought
to collect “consumer debt” from the Kimmels.
Id. ¶¶ 7, 11.
The Kimmels claim that on October 19, 2008, ASC sent
them a notice of intention to foreclose in which it represented
that it held a conventional mortgage on real property the
plaintiffs owned in Brigantine, New Jersey (the “property”).
¶¶ 26, 29, 40.
The Kimmels state that they were unaware,
however, of any such mortgage held by ASC as at that time only
WMC Mortgage Corp. (“WMC”) held a mortgage on the property, and
Atlantic County, New Jersey, records allegedly do not reflect
that ASC ever held a mortgage on the property.
Id. ¶¶ 30-31, 35.
ASC’s notice stated that it was attempting to collect a debt the
Kimmels owed, and that it would initiate a foreclosure action
unless the Kimmels cured the alleged default and brought their
Notwithstanding this threat, ASC has never
instituted a foreclosure action against the plaintiffs.
ASC’s letter referred to a different loan number than
that assigned to the note and mortgage WMC held on the property,
and the Kimmels were not aware of any mortgage and note relating
to their property bearing the number ASC listed.
Id. ¶¶ 36-37.
According to the Kimmels, “upon receipt of this letter . . .
Plaintiffs grew very worried they were becoming the victims of a
scam, potentially targeting senior citizens.”
Id. ¶ 38.
The Kimmels aver that in December of 2008, PHS and
Deutsche Bank filed a complaint in foreclosure against them in
the Chancery Division of the Superior Court of New Jersey for
Atlantic County seeking to collect an allegedly defaulted debt
owed on a mortgage and note for the property.
Id. ¶¶ 13-15.
their complaint, PHS and Deutsche Bank pled that WMC had assigned
the mortgage and note on the property to Deutsche Bank on
December 15, 2008, so that Deutsche Bank was now the owner and/or
holder of the mortgage and note and certain amounts were owed to
it as the mortgagee.
Id. ¶¶ 19-20.
The Kimmels maintain that
(1) WMC was the mortgagee on December 16, 2008, (2) no assignment
from WMC to Deutsche Bank had been recorded as of that date, and
(3) such assignment was filed only on January 12, 2009.3
PHS and Deutsche Bank also averred in their complaint
that “‘[n]otice was sent in compliance with the fair foreclosure
act more than 31 days prior to the filing of the within
complaint,’” though neither PHS nor Deutsche Bank sent such a
notice prior to instituting proceedings.
PHS/Deutsche Complaint at 5).
Id. ¶¶ 25-26 (quoting
According to the Kimmels, they
PHS and Deutsche Bank’s complaint did state that
“[t]he assignment is in the process of being recorded.” Ex. A to
Pl.’s Compl. (“PHS/Deutsche Complaint”) at 2.
found this complaint sufficiently confusing that they were forced
to retain counsel.
Id. ¶¶ 16-17.
As for the January 12, 2009 assignment, it was signed
by “‘Judith T. Romano’ as ‘Assistant Secretary and Vice
President’ of Mortgage Electronic Registration Systems Inc. as a
nominee for WMC Mortgage Corp. its successors and assigns,” id. ¶
22 (quoting Ex. B to Pl.’s Compl.), though plaintiffs allege that
Romano did not actually occupy this position and was instead
merely an attorney with PHS.
Id. ¶ 23.
On January 29, 2009, PHS sent two letters to the
Kimmels with conflicting information.
Though both letters stated
that plaintiffs owed legal fees and costs of $1,931.68 and
additional fees of $90.00 (albeit without describing how those
amounts had accrued), one letter identified late charges
amounting to $855.68 and an escrow balance of $0.00, while the
other described late charges in the amount of $641.76 and an
escrow balance of $903.03.
Id. ¶¶ 46-48.
The loan number
referred to in each letter was not that associated with the
Kimmels’ mortgage and note with WMC, and the letters required
that payments be made to ASC.
Id. ¶¶ 49-50.
On or about May 5, 2010, Deutsche Bank filed for
summary judgment in its foreclosure action against the Kimmels,
relying on a note and mortgage plaintiffs allegedly signed that
the Kimmels claim include certain discrepancies regarding the
dates of signing and notarization.
Id. ¶¶ 51-54.
also relied upon a “‘Certification of Amount Due and Non-Military
Service’” by Herman John Kennerty, the Vice-President for Loan
Documentation for Wells Fargo Bank N.A., id. ¶ 58 (quoting Ex. D
to Ex. F to Pl.’s Compl. (“Deutsche Bank’s MSJ”)).
certification, however, did not set forth the personal knowledge
he had of plaintiffs’ loan and lacked certain supporting
Id. ¶¶ 59-64.
Despite ASC’s January 29, 2009
letters to the Kimmels, Deutsche Bank’s motion suggested that no
late charges were owed and that late charges would not accrue
beyond the date of the complaint's filing.
Id. ¶¶ 55-56.
June 25, 2010, the Superior Court denied the motion for summary
judgment, and in September of 2010 PHS and Deutsche Bank’s
complaint was dismissed without prejudice.
Id. ¶¶ 67-68.
On October 6, 2010, PHS sent a letter on behalf of
Deutsche Bank and ASC to the Kimmels’ attorney that set forth a
That letter referenced a different account
number than that corresponding to the mortgage plaintiffs had
taken with WMC, id. ¶¶ 69-70, and showed that plaintiffs owed
$4,353.56 in late charges and $1,331.25 for “‘Property
Inspections/BPO,’” though no explanation was provided for how
these charges had accrued.
Id. ¶¶ 71-73 (quoting Ex. J to Pl.’s
On October 7, 2010, PHS sent a letter to the Kimmels on
behalf of ASC and Deutsche Bank entitled “‘Notice of Intent to
Foreclose,’” id. ¶ 75 (quoting Ex. K to Pl.’s Compl.).
letter stated that although Deutsche Bank held a mortgage on the
property, payments should be made to ASC.
Id. ¶ 76.
repeated that plaintiffs owed $4,532.30 in late fees and
$1,331.25 in “‘other charges’” to “‘secure property,’” id. ¶ 78
(quoting Ex. K to Pl.’s Compl.), but the October 6, 2010 letter
had stated that these charges were for “‘Property Inspections/
BPO,’” id. ¶ 78 (quoting Ex. J to Pl.’s Compl.), and Kennerty’s
certification had set forth charges of only $521.25 for
“‘advances to winterize and/or secure property.’”
(quoting Ex. H to Pl.’s Compl.).
Id. ¶ 79
PHS’s letter threatened legal
action if the default amount was not paid within thirty-three
Id. ¶ 81.
On November 15, 2010, Deutsche Bank and PHS filed
another foreclosure complaint against the Kimmels in the Chancery
Division of the Superior Court of New Jersey for Atlantic County.
Id. ¶ 82.
The complaint referenced a note with an initial annual
interest rate of 10.75%, but the Kimmels contend that they never
took out a mortgage at that rate, and Deutsche Bank and PHS
failed to attach any documentation that would permit the Kimmels
to determine if this was in fact their note.
Id. ¶¶ 83-84.
The Supreme Court has explained that “only a complaint
that states a plausible claim for relief survives a motion to
dismiss” pursuant to Rule 12(b)(6), leading a reviewing court to
engage in a “context-specific” inquiry that “requires [it] to
draw on its judicial experience and common sense.”
Iqbal, 129 S. Ct. 1937, 1950 (2009).4
Under this standard, a
The Kimmels observe that “[d]efendants, in their
Motion to Dismiss, attempt to focus this Court’s attention on the
convoluted opinions of Bell Atl. Corp. v. Twombly, 550 U.S. 544
(2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). Twombly
involved a complex antitrust matter alleging parallel business
activities . . . while Iqbal concerned one of our Nation’s most
pressing national security interests.” Pls.’ Mem. of L. in Resp.
to Deutsche Bank & ASC’s Mot. Dismiss (“Pl.’s Mem. II”) at 39.
Notwithstanding plaintiffs’ brave attempt to explain away Twombly
and Iqbal, they remain the seminal cases setting forth the
standard for motions to dismiss for failure to state a claim.
See, e.g., Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.
2009) (“Beginning with the Supreme Court's opinion in Bell
Atlantic Corp. v. Twombly . . . continuing with our opinion in
Phillips, supra, and culminating recently with the Supreme
Court's decision in Ashcroft v. Iqbal . . . pleading standards
have seemingly shifted from simple notice pleading to a more
heightened form of pleading, requiring a plaintiff to plead more
pleading may not simply offer “labels and conclusions,” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007), and
“[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.”
129 S. Ct. at 1949.
Rather, “[f]actual allegations must be
enough to raise a right to relief above the speculative level,”
Twombly, 550 U.S. at 555, which is to say that there must be
“more than a sheer possibility that a defendant has acted
Iqbal, 129 S. Ct. at 1949.
plaintiff must provide “enough facts to raise a reasonable
expectation that discovery will reveal evidence of the necessary
element” of the cause of action.
Phillips v. County of
Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (internal quotation
Defendants advance four arguments under Rule 12(b)(6),
to wit: (1) this matter should be dismissed pursuant to New
Jersey’s Entire Controversy Doctrine5; (2) the applicable statute
than the possibility of relief to survive a motion to dismiss.”).
As our Court of Appeals has explained, “such an
affirmative defense [i.e., the Entire Controversy Doctrine] could
properly be the grounds for a motion to dismiss for failure to
state a claim upon which relief can be granted pursuant to FED.
of limitations bars the Kimmels’ FDCPA, FCEUA, fraud, and
negligent misrepresentation claims; (3) the Kimmels have failed
to state a claim under the FDCPA; and (4) the Kimmels have failed
to allege justifiable reliance, as needed to support claims under
RICO, UTPCPL, and the common law of fraud and negligent
Before examining these arguments, we will first
consider PHS’s motion to dismiss for improper venue under Rule
12(b)(3), which employs a somewhat different standard.
PHS’s Motion to Dismiss for Improper Venue
Fed. R. Civ. P. 12(b)(3) provides that “a party may
assert the following defenses by motion: . . . (3) improper
In ruling on a Rule 12(b)(3) motion, “[w]e accept as
R. CIV. P. 12(b)(6).” Rycoline Prods., Inc. v. C & W Unltd., 109
F.3d 883, 886 (3d Cir. 1997). However, “if a statute of
limitations ‘bar is not apparent on the face of the complaint,
then it may not afford the basis for a dismissal of the complaint
under Rule 12(b)(6).’ This holding applies not only to a statute
of limitations defense, but also to any affirmative defense
raised pursuant to Rule 8(c), including res judicata and the
Entire Controversy Doctrine.” Id. (quoting Bethel v. Jendoco
Constr. Corp., 570 F.2d 1168, 1174 (3d Cir. 1978)). We will thus
consider only allegations in the Kimmels’ complaint and
undisputed documents relied upon therein in determining whether
the entire controversy doctrine bars their claims.
true all of the allegations in the complaint, unless those
allegations are contradicted by the defendants’ affidavits.”
Bockman v. First Am. Mktg. Corp., 2012 WL 171972, at *1 n.1 (3d
As our Court of Appeals has explained, “the
defendant should ordinarily bear the burden of showing improper
venue in connection with a motion to dismiss.”
Myers v. Am.
Dental Ass’n, 695 F.2d 716, 725 (3d Cir. 1982).
In its motion, PHS explains that “[a]s is set forth in
the accompanying certification of Vladimir V. Palma, Esq., a
partner in PHS-NJ, PHS-NJ is a New Jersey professional
corporation which handles matters exclusively in New Jersey and
whose only offices are in New Jersey.”
Mot. Dismiss (“PHS’s Br.”) at 1.
PHS’s Br. in Supp. of
According to PHS, it “has no
contacts with Pennsylvania, and most assuredly does not reside in
Pennsylvania,” and “[o]ne can scour the complaint looking for any
reference to PHS-NJ even doing anything in Pennsylvania, but to
Id. at 3.
PHS further avers that “the real property
in question is located in New Jersey, as are the mortgage and the
foreclosure action, and . . . the putative causes of action are
based on events alleged to have occurred or originated in New
Id. at 4.
PHS thus concludes that “venue lies in New
Jersey” and “dismissal is an appropriate remedy here, where the
impropriety of the venue is manifest.”
The Kimmels respond that PHS did have at least five
contacts with Pennsylvania.
They are6: (1) “[t]he Notice of
Intention to Foreclose upon which Defendant PHS relied in
paragraph 9 of its complaint . . . was sent to Plaintiffs’
Pennsylvania address by Defendant America’s Servicing Co.,” Pls.’
Mem. I at 2; (2) “[t]his complaint was served on Plaintiffs, as
set forth in the Summons prepared by Defendant PHS, at their
residence in Huntington Valley, Pennsylvania,” id.; (3) “PHS
filed an Assignment of the mortgage to Deutsche” that “was signed
by one of its own attorneys, Judith T. Romano, in Philadelphia,
Pennsylvania,” id.; (4) “PHS also sent correspondence to
While none of these allegations is contained in the
complaint, each is evidenced by documents the complaint relied
upon, so that we will consider them in ruling on PHS’s motion to
dismiss. In addition to these allegations, the Kimmels assert
that “PHS explicitly addressed many of its [dunning] letters to
Plaintiffs to their Huntington Valley, Pennsylvania residence,”
Pls.’ Mem. in Resp. to PHS’s Mot. Dismiss (“Pls.’ Mem. I”) at 6
(citing Exs. 2 and 4 to Pls.’ Compl.), and that “PHS’s website
also reflects that it conducts business in both Pennsylvania,
with an office in Philadelphia, and in New Jersey.” Id. at 7.
The former statement is not supported by the exhibits to which
plaintiffs point, which are devoid of recipient addresses. The
latter statement is neither alleged in the complaint nor
supported by documents relied upon in the complaint. We will
thus ignore both statements.
Plaintiffs” that “reflected conspicuously at the top that it
represented ‘Lenders in Pennsylvania and New Jersey,’” id.; and
(5) “[i]n its Motion for Summary Judgment, Defendant PHS relied
upon correspondence sent from Defendant ASC to Plaintiffs . . .
at their residence in Pennsylvania.”
Id. at 3.
argue that PHS “has availed itself to the Eastern District of
Pennsylvania,” id. at 6, and that venue is proper here.
Under 28 U.S.C. § 1391(b),
A civil action may be brought in -(1)
a judicial district in which any
defendant resides, if all defendants are
residents of the State in which the
district is located;
a judicial district in which a
substantial part of the events or
omissions giving rise to the claim
occurred, or a substantial part of
property that is the subject of the
action is situated; or
if there is no district in which an
action may otherwise be brought as
provided in this section, any judicial
district in which any defendant is
subject to the court’s personal
jurisdiction with respect to such
Section 1391(d) further provides that
For purposes of venue under this chapter, in
a State which has more than one judicial
district and in which a defendant that is a
corporation is subject to personal
jurisdiction at the time an action is
commenced, such corporation shall be deemed
to reside in any district in that State
within which its contacts would be sufficient
to subject it to personal jurisdiction if
that district were a separate State, and, if
there is no such district, the corporation
shall be deemed to reside in the district
within which it has the most significant
As Judge Baylson has explained, “Pennsylvania has more than one
Therefore, to determine if venue is proper in this
Court, one must analyze whether, treating the Eastern District of
Pennsylvania as though it were its own state, the Eastern
District of Pennsylvania could exercise personal jurisdiction
over [the defendant].”
Dellget v. Wolpoff & Abramson, L.L.P.,
2007 WL 4142769, at *2 (E.D. Pa. 2007).
Our Court of Appeals has
summarized the personal jurisdiction inquiry as follows:
In determining whether there is specific
jurisdiction, we undertake a three-part
inquiry. First, the defendant must have
purposefully directed its activities at the
forum. Second, the litigation must arise out
of or relate to at least one of those
activities. And third, if the first two
requirements have been met, a court may
consider whether the exercise of jurisdiction
otherwise comports with fair play and
D’Jamoos ex rel. Estate of Weingeroff v. Pilatus Aircraft Ltd.,
566 F.3d 94, 102 (3d Cir. 2009) (brackets, quotation marks, and
internal citations omitted).
In this case, three of the five contacts that the
Kimmels point to do not support personal jurisdiction over PHS in
this District: PHS cannot be said to have “purposefully directed
its activities” toward this forum merely because it twice relied
upon communications that another party -- ASC -- directed here,
or because its letterhead included the statement “Representing
Lenders in Pennsylvania and New Jersey.”
But PHS did
purposefully direct its activities toward this District by
serving a complaint upon the Kimmels in Huntington Valley,
Pennsylvania, and by executing in Philadelphia the assignment of
a mortgage the Kimmels executed.
Furthermore, these activities
give rise (in part) to the Kimmels’ claims under federal and
state law and were sufficiently substantial as to make the
exercise of jurisdiction “comport with fair play and substantial
Id. at 102.
Based on the allegations in plaintiffs’
complaint and supporting documents, we are satisfied that if this
District were a State, we would have personal jurisdiction over
We will consequently deny PHS’s motion to dismiss for
improper venue pursuant to Rule 12(b)(3).7
New Jersey’s Entire Controversy Doctrine
Deutsche Bank and ASC explain in their motion to
dismiss, Deutsche Bank & ASC’s Mem. in Supp. of Mot. Dismiss
(“Deutsche/ASC’s Mem.”) at 5-6, that
Each of Plaintiffs’ causes of action is based
upon or arises out of Deutsche Bank’s and
ASC’s alleged wrongful conduct in connection
with the foreclosure actions in New Jersey
state court. Because Plaintiffs were aware
of their claims at the time of the
foreclosure actions and the claims are
germane to those actions, Plaintiffs are
barred from asserting them in this action
under New Jersey’s entire controversy
doctrine and their Complaint must be
dismissed in its entirety with prejudice.
PHS joins in Deutsche Bank and ASC’s motion to dismiss.
Suppl. Br. in Supp. of Mot. Dismiss (“PHS’s Suppl. Br.”) at 2
The Kimmels respond that the entire controversy
doctrine does not apply here because “[t]he facts Defendant
We stop short of finding venue here to be proper
since we have not been asked to determine whether Deutsche Bank
and ASC are present here as § 1391(b)(1) requires, and have not
considered whether venue is appropriate here under § 1391(b)(2),
as the Kimmels alternatively contend.
Deutsche needs [sic] to prove on behalf of its client, Deutsche,
in the state-court foreclosure action are not the same facts
Plaintiffs have to prove to satisfy their claims . . . growing
out of Defendants Deutsche and ASC’s deceptive, harassing and
unfair collection practices.” Pls.’ Mem. II at 7; see also Pls.’
Br. in Resp. to PHS’s Suppl. Br. (“Pls.’ Mem. III”) at 5 (same
regarding claims against PHS).
The Kimmels further aver that the
doctrine is inapposite because “the Third Circuit has invariable
[sic] held that the Entire Controversy Doctrine does not apply
when multiple cases involving the same or related claims are
Pls.’ Mem. II at 8 (internal quotation
In response, PHS recently sent us a letter in which it
[T]he New Jersey Superior Court foreclosure
action, Deutsche Bank, Trustee v. Kimmel,
(No. 56519-10, Chancery, Atlantic County),
which was pending when the motions to dismiss
were filed in this Court, was recently
dismissed without prejudice to refiling a new
foreclosure case at any time provided that
certain discovery is first provided to
Kimmel. (It is anticipated that foreclosure
litigation will resume shortly.)
PHS’s Letter, Jan. 11, 2012 (“PHS’s Letter”) at 1.
Our Court of Appeals has observed that “[a]lthough
sometimes approached as if they belong to two different families,
New Jersey’s Entire Controversy Doctrine and traditional res
judicata principles are blood relatives.
The Entire Controversy
Doctrine is essentially New Jersey’s specific, and idiosyncratic,
application of traditional res judicata principles.”
109 F.3d at 886.
The doctrine “is an extremely robust claim
preclusion device that requires adversaries to join all possible
claims8 stemming from an event or series of events in one suit.”
Paramount Aviation Corp. v. Agusta, 178 F.3d 132, 135 (3d Cir.
According to the New Jersey Supreme Court, the doctrine’s
purposes are threefold: “(1) the need for complete and final
The doctrine appears to have evolved over the years,
particularly with respect to the requirement that parties join
claims against adversaries not already present in the original
litigation. Thus, the New Jersey Supreme Court explained in 1995
that “[o]riginally, the doctrine mandated joinder of only those
claims arising from the same overall transaction involving the
parties already named in the lawsuit. . . . In 1989, however,
this Court extended the entire controversy doctrine to mandate
joinder of all parties with a material interest, one that can
affect or be affected by the judicial outcome of a legal
controversy.” DiTrolio v. Antiles, 662 A.2d 494, 502 (N.J. 1995)
(internal quotation marks omitted). In 1999, our Court of
Appeals observed that “[u]ntil quite recently the entire
controversy doctrine required party as well as claim joinder.
The party joinder aspect of the doctrine, the focus of the lion’s
share of the criticism, has now been eliminated.” Paramount
Aviation Corp. v. Agusta, 178 F.3d 132, 135 n.1 (3d Cir. 1999).
disposition through the avoidance of piecemeal decisions; (2)
fairness to parties to the action and those with a material
interest in the action; and (3) efficiency and the avoidance of
waste and the reduction of delay.”
DiTrolio, 662 A.2d at 502.
The entire controversy doctrine is codified at New
Jersey Rule of Court 4:30A, which provides that
Non-joinder of claims required to be joined
by the entire controversy doctrine shall
result in the preclusion of the omitted
claims to the extent required by the entire
controversy doctrine, except as otherwise
provided by R. 4:64-5 (foreclosure actions)
and R. 4:67-4(a) (leave required for
counterclaims or cross-claims in summary
Leaving aside the exception for foreclosure actions -- to which
we will turn in a moment -- “[i]n determining whether successive
claims constitute one controversy for purposes of the doctrine,
the central consideration is whether the claims against the
different parties arise from related facts or the same
transaction or series of transactions.”
DiTrolio, 662 A.2d at
However, “[t]he entire controversy doctrine does not
require commonality of legal issues.
Rather, the determinative
consideration is whether distinct claims are aspects of a single
larger controversy because they arise from interrelated facts.”
Id. at 504.
Since “[t]he polestar of the application of the rule
is judicial fairness,” id. at 505 (quotation marks omitted), the
doctrine “does not apply to unknown or unaccrued claims,” id..
Instead, a court should “focus on the litigation posture of the
respective parties and whether all of their claims and defenses
could be most soundly and appropriately litigated and disposed of
in a single comprehensive adjudication.”
Id. at 507.
Furthermore, “[a]s an equitable doctrine, [the doctrine’s]
application is flexible, with a case-by-case appreciation for
fairness to the parties”, Paramount Aviation, 178 F.3d at 137.
Rule 4:64-5, for its part, provides that
Unless the court otherwise orders on notice
and for good cause shown, claims for
foreclosure of mortgages shall not be joined
with non-germane claims against the mortgagor
or other persons liable on the debt. Only
germane counterclaims and cross-claims may be
pleaded in foreclosure actions without leave
of court. . . .
In construing an earlier version of this rule, the Superior Court
of New Jersey explained in 1975 that “[t]he use of the word
‘germane’ in the language of the rule undoubtedly was intended to
limit counterclaims in foreclosure actions to claims arising out
of the mortgage transaction which is the subject matter of the
Leisure Tech.-Ne., Inc. v. Klingbeil
Holding Co., 349 A.2d 96, 98 (N.J. Super. 1975).
But the court
also noted that the “doctrine to which we have referred above
requires a liberal rather than a narrow approach to the question
of what issues are ‘germane.’”
Id. at 99.
The parties have not briefed us on the appropriate law
they believe should apply to this case.
assume that Pennsylvania law applies.
The Kimmels apparently
Deutsche Bank and ASC note
only that “[w]ith respect to the elements of the common law
claims, because there is no actual conflict between Pennsylvania
and New Jersey law, the Court need not engage in a choice-of-law
analysis,” Deutsche/ASC’s Mem. at 8 n.7 -- thus forgetting that
the Kimmels have also asserted claims under Pennsylvania’s
UTPCPL9 and FCEUA.
Until we receive briefing from the parties to
the contrary, we will assume that Pennsylvania law applies.
can determine whether the entire controversy doctrine applies to
this matter without reaching a conclusion as to the substantive
law to apply more generally.
As our Court of Appeals has
explained, “federal courts should apply the general rule that the
preclusive effect of a judgment is determined by the preclusion
Deutsche Bank and ASC note that “it appears the
Plaintiffs are attempting to avail themselves of Pennsylvania law
. . . . and have asserted a claim under Pennsylvania’s UTPCPL,”
Deutsche/ASC’s Mem. at 8, but provide us with no analysis of
whether this choice of law is appropriate.
law of the issuing court.”
Paramount Aviation, 178 F.3d at 135.
Since defendants seek to preclude the Kimmels’ claims based upon
proceedings before the Chancery Division of the New Jersey
Superior Court, we will entertain defendants’ arguments as to the
entire controversy doctrine’s application to this case.
The Kimmels spill much ink attempting to convince us
that their claims in this suit do not constitute part of the same
controversy as the claims in the suits Deutsche Bank and PHS
allegedly filed against them in the New Jersey Chancery Division
in December of 2008 and November of 2010.
They largely ignore
the special test -- based on whether claims are “germane” -- that
should be applied to foreclosure actions under the entire
Thus, the Kimmels aver that
In the foreclosure actions, the facts alleged
on behalf of Defendant Deutsche were as
follows: Plaintiffs executed to WMC Mortgage
Corp. a Note; Plaintiffs executed to MERS10 a
mortgage; and Plaintiffs defaulted in making
payments. The facts Defendant Deutsche11
needs to prove on behalf of its client,
Deutsche, in the state-court foreclosure
action are not the same facts Plaintiffs have
to prove to satisfy their claims under the
This appears to be an error, as no allegation has
been made in this action respecting any entity called “MERS”.
This appears to be another error. The Kimmels
likely intended to refer to “Defendant PHS” here.
FDCPA, the FCEUA, the UTCPL [sic], RICO,
fraud, and negligent misrepresentation,
growing out of Defendants Deutsche and ASC’s
deceptive, harassing and unfair collection
practices. Thus, the two independent sets of
facts cannot be said to arise from a ‘core
set of facts’ discussed in DiTrolio.
Pls.’ Mem. II at 7 (citations omitted).
Kimmels’ (largely conclusory) reasoning, it appears to us that
their claims here do form part of the same controversy as the
claims defendants have asserted in the New Jersey courts and, in
fact, are “germane” under Rule 4:64-5 and Leisure Technology.
As that decision explained, claims are “germane” to the
extent they “aris[e] out of the mortgage transaction which is the
subject matter of the foreclosure action.”
349 A.2d at 98.
The Kimmels appear to believe that claims
predicated upon a debt collector’s allegedly deceptive
communications cannot arise out of the same set of facts as a
mortgage foreclosure action, arguing that “[p]ractices utilized
by a debt collector in seeking to collect a debt can not be said
to be the same facts as defaulting on a mortgage and note.”
Pls.’ Mem. I at 13.
Decisions from the District of New Jersey
make plain that this is not true.
See, e.g., Venner v. Bank of
Am., 2009 WL 1416043 (D.N.J. 2009) (Simandle, J.) (applying
entire controversy doctrine to bar FDCPA claim based upon
defendant’s alleged demand for excessive mortgage fees following
foreclosure); Oliver v. Am. Home Mortg. Servicing, Inc., 2009 WL
4129043 (D.N.J. 2009) (Hillman, J.) (applying entire controversy
doctrine to bar FDCPA claim based upon defendant’s alleged demand
for excessive reinstatement fees during foreclosure proceedings).
In this case, all of the Kimmels’ claims essentially
arise from the defendants' communications in which they
represented that the Kimmels (1) owed certain amounts (2) under a
mortgage bearing certain loan numbers (3) to certain entities.
The Kimmels allege that these representations were deceptive and
Since it is the underlying mortgage transactions here
that determine (1) whether the Kimmels owe any amounts, (2) the
loan numbers associated with these debts, and (3) to whom these
amounts are owed -- and hence whether the communications at issue
were indeed deceptive -- it is impossible to conclude that the
Kimmels’ claims do not “aris[e] out of the mortgage transaction
which is the subject matter of the foreclosure action.”
Technology, 349 A.2d at 98.
Indeed, in Coleman v. Chase Home
Fin., 446 Fed. Appx. 469, 472 (3d Cir. 2011), which featured an
analogous situation where a plaintiff asserted claims for
misrepresentation and unfair and deceptive assessment and
collection of fees, our Court of Appeals noted that
Here, Coleman's claims arose directly out of
a reinstatement quote that was provided to
her as an alternative to a foreclosure sale,
and the excessive fees allegedly charged by
Chase would not have been charged but for the
foreclosure action. Accordingly, Coleman's
causes of action arose out of and were
germane to the original foreclosure action.
While the Kimmels’ claims appear to be germane to the
controversy between the parties in New Jersey’s Chancery
Division, we cannot apply the entire controversy doctrine to
foreclose these claims due to the status of the proceedings in
Applying principles analogized from the doctrine of
res judicata, our Court of Appeals has squarely held that “the
Doctrine does not preclude the initiation of a second action
while a prior action is still pending.”
Rycoline, 109 F.3d at
As the Court explained, id. at 889,
One of the prerequisites to the application
of res judicata in New Jersey, as elsewhere,
is the existence of a prior judgment that is
final, valid, and on the merits. . . .
Although the Entire Controversy Doctrine is
not identical to traditional res judicata
principles, defendants have pointed to no
authority for the proposition that some
measure of finality is any less necessary for
application of the Doctrine than it is for
application of res judicata.
District courts have thus asserted that to apply the entire
controversy doctrine, “‘the judgment in the prior action must be
valid, final, and on the merits.’”
Venner, 2009 WL 1416043, at
*2 (D.N.J. 2009) (quoting Stolinski v. Pennypacker, 2008 WL
5136945, at *13 (D.N.J. 2008) (quoting Watkins v. Resorts Int'l
Hotel & Casino, Inc., 591 A.2d 592, 599 (1991)).
It is important to recall that Watkins and Stolinski
described the elements of claim preclusion under federal and New
Though these courts noted the relationship between
res judicata and the entire controversy doctrine, they never
stated that the two doctrines were identical.
Stolinski, 2008 WL
5136945, at *13; Watkins, 591 A.2d at 598-99.
that a prior judgment be “on the merits” appears to contradict
the New Jersey Supreme Court’s conclusions in DiTrolio, 662 A.2d
at 507 (quoting Cogdell v. Hosp. Ctr. at Orange, 560 A.2d 1169,
1177 (N.J. 1989)), where it held that “mandatory joinder is
appropriate to further ‘[j]udicial economy and efficiency -- the
avoidance of waste and delay.’ . . . [T]he consideration of
inefficiency and waste of judicial resources is not negated by
the fact that a prior action did not proceed to trial or a
judgment on the merits.”
Whatever indeterminacy may exist as to
what precise degree of finality must exist to warrant application
of the entire controversy doctrine, it appears certain enough
that the action must have been resolved with some finality.
Based on the allegations in the Kimmels’ complaint, and the
undisputed documents relied upon therein, the actions PHS and
Deutsche Bank instituted against the Kimmels in New Jersey do not
display the requisite finality to warrant precluding the Kimmels’
According to plaintiffs’ complaint, PHS and Deutsche
Bank filed a complaint in foreclosure against them in the
Superior Court of Atlantic County, Chancery Division, on December
16, 2008, Pls.’ Compl. ¶ 14; Ex. A to Pls.’ Compl.
complaint was dismissed without prejudice in September of 2010.
Id. ¶ 68.
Then, on November 15, 2010, PHS and Deutsche Bank
filed another foreclosure complaint against the Kimmels in the
Id. ¶ 83; Ex. L to Pls.’ Compl.
According to PHS,
that action “was recently dismissed without prejudice to refiling
a new foreclosure case at any time provided that certain
discovery is first provided to Kimmel.
(It is anticipated that
foreclosure litigation will resume shortly.)”
PHS Letter at 1.
PHS attaches to this letter an Order of Dismissal from the
Superior Court of Atlantic County, Chancery Division.
Order, the Honorable William C. Todd, III, on November 29, 2011,
held that “Plaintiff’s Complaint is dismissed without prejudice
based upon plaintiff’s repeated failure to comply with the
Court’s prior Orders requiring the production of written
discovery,” and that “[t]he dismissal noted above is without
prejudice to plaintiff’s right to file a new Complaint for
foreclosure at any time,” provided that PHS first certifies that
it has provided all court-ordered discovery and certifications.
Ex. 1 to PHS’s Letter ¶¶ 1-2.
The Kimmels appear to concede that
PHS and Deutsche Bank’s foreclosure suit had been dismissed in
state court, see Pls.’ Mem. III at 6, so that we may consider
this fact as an undisputed matter of public record.
But even upon consideration of this recent development
in the state court litigation, it remains true that these
proceedings fail to demonstrate the degree of finality that
Rycoline demands as a predicate for application of the entire
Judge Todd’s Order makes clear that the
action between the parties may resume at any time, and PHS itself
suggests that litigation “will resume shortly.”
precise requirements a prior judgment must satisfy to apply the
entire controversy doctrine may be unclear, there can be no doubt
that -- despite Judge Todd’s dismissal without prejudice -- the
prior proceedings between PHS and Deutsche Bank and the Kimmels
in state court have not been resolved with anything approaching
the finality Rycoline demands.
PHS argues that the November 29, 2011 dismissal without
prejudice brings the facts of this case close to those in
In that case, our Court of Appeals noted that “the
Chancery Court entered a judgment of dismissal without prejudice
in the foreclosure action.”
446 Fed. Appx. at 470.
procedural history of that case was complex and the Court
“discuss[ed] the facts only to the extent necessary for the
resolution of the issues raised on appeal,” id., so that it is
difficult to determine just how analogous the facts here are to
those in Coleman.
Importantly, our Court of Appeals reported
that “the foreclosure action became final on January 20, 2006,”
id. at 472, suggesting that the prior proceeding there had been
resolved with a finality that readily distinguishes Coleman from
In any event, Coleman is a non-precedential opinion.
To the extent it conflicts with Rycoline's finality requirement - and we do not believe that it does -- we must follow Rycoline.
Because the prior proceedings between the parties in
New Jersey state court have not resulted in a final resolution,
we decline to apply the entire controversy doctrine to preclude
the Kimmels’ claims in this action.
The Applicable Statutes of Limitations
Deutsche Bank and ASC next argue that “because
Plaintiffs were served no later than February 29, 2009" in the
underlying state proceedings, Deutsche/ASC’s Mem. at 9,
“[p]laintiffs’ claims against Deutsche Bank and ASC are barred by
the FDCPA’s one year statute of limitations.”
Id. at 10. They
further assert that the Kimmels’ “FCEUA, fraud and negligent
misrepresentation claims . . . arose in 2008 when the Kimmels
received the Notices,” id. at 10-11, so that those claims are
barred by the applicable two-year statute of limitations.
Finally, Deutsche Bank and ASC suggest that “the Kimmels cannot
allege a continuing violation of the FDCPA with respect to the
foreclosure actions in order to bring their claims within the
statute of limitations.”
Id. at 10.
Because these arguments
fail comprehensively to address the Kimmels’ allegations of
wrongdoing or the complexities of the continuing violations
doctrine, we decline to dismiss any claims on these bases.
To begin, the Kimmels have alleged that PHS, Deutsche
Bank, and ASC committed a number of acts within the one- and twoyear statute of limitations.
ASC and Deutsche Bank do not bother
to consider these acts, instead pretending that the only
actionable allegations in the Kimmels’ complaint regard notices
sent or proceedings instituted in 2008 and 2009, and that
plaintiffs' claims should be wholly dismissed as a result.
certainly possible that claims based on acts that allegedly took
place outside the statute of limitations period may be subject to
But we will not carry the burden for ASC and Deutsche
Bank to identify which actions may have fallen outside the
limitations period and hence which parts of which counts should
More importantly, the interaction of the FDCPA and the
continuing violations doctrine in this Circuit is complex.
Court of Appeals has explained that under the continuing
violations doctrine, “when a defendant’s conduct is part of a
continuing practice, an action is timely so long as the last act
evidencing the continuing practice falls within the limitations
period; in such an instance, the court will grant relief for the
earlier related acts that would otherwise be time barred.”
Brenner v. Local 514, United Bhd. of Carpenters & Joiners of Am.,
927 F.2d 1283, 1295 (3d Cir. 1991).
But ASC and Deutsche Bank
cite Schaffhauser v. Citibank (S.D.) N.A., 340 Fed. Appx. 128,
131 (3d Cir. 2009), in which our Court of Appeals explained that
the plaintiffs had “offer[ed] no support for their contention
that participation in ongoing debt collection litigation
qualifies as a ‘continuing violation’ of the FDCPA,” so that the
Court “decline[d] to extend the doctrine to the circumstances of
More recently, in Peterson v. Portfolio Recovery
Assocs., 430 Fed. Appx. 112, 115 (3d Cir. 2011), our Court of
Appeals suggested that “[w]ithout commenting on any implications
that § 1692g(a) claims, standing alone, might have for § 1692g(b)
claims, we do not believe that the former are subject to a socalled ‘continuing violations’ rule.”
Our Court of Appeals’s jurisprudence thus suggests only
that participation in debt collection litigation does not qualify
as a continuing violation under the FDCPA; it does not hold that
the continuing violations doctrine is inapplicable to all FDCPA
To be sure, the Kimmels allege acts other than PHS's and
Deutsche Bank's prosecution of the foreclosure actions within the
one-year FDCPA limitations period.
But the parties have not
briefed us on whether, based upon these or any other acts, the
continuing violations doctrine might bring the Kimmels’ FDCPA
claims within the statute of limitations.
We decline to take up
this analysis without further comment from the parties.
ASC and Deutsche Bank have focused their statute of
limitations arguments on a narrow subset of the acts the Kimmels
These defendants assert that (1) the Kimmels’ claims
arise only from the mailing of notices to plaintiffs and the
institution of actions against them in 2008 and 2009, and (2) the
Kimmels could only conceivably toll the FDCPA’s statute of
limitations by making the legally insupportable claim that the
continuing violations doctrine applies to the prosecution of a
But these arguments fail to consider the
full breadth of the Kimmels’ complaint.
We also note that the
parties have not briefed us in any way on how the continuing
violations doctrine might apply to the Kimmels’ FCEUA, fraud, and
negligent misrepresentation claims.
Given the incomplete nature
of the briefing we have received, we will not at this time
dismiss any of the Kimmels’ claims based on the applicable
statutes of limitations.
Plaintiffs’ Failure To State a Claim Under The FDCPA
Deutsche Bank and ASC also assert that the Kimmels’
FDCPA claims should be dismissed for failure to state a claim.
They advance two grounds: (1) “the Kimmels have failed to plead
the requisite facts to establish that the debt at issue qualifies
as a debt under the FDCPA,” Deutsche/ASC’s Mem. at 16; and (2)
“Plaintiffs have failed to allege requisite elements . . . and
the requisite facts to support those claims.”
Id. at 29.
With respect to the first argument, Deutsche Bank and
ASC contend that to plead a claim under the FDCPA, “a debtor must
aver that the debt is one that arises out of a consumer
transaction ‘in which the money, property, insurance, or services
which are the subject of the transaction are primarily for
personal, family, or household purposes, whether or not such
obligation has been reduced to judgment.’”
Id. at 16 (quoting
Kimmel v. Cavalry Portfolio Servs., LLC, 2011 WL 2039049, at *2
(E.D. Pa. 2011) (Buckwalter, J.) (quoting 15 U.S.C. § 1692a(5))).
It is true that nowhere in their complaint do the
Kimmels concretely12 allege that the obligation which defendants
sought to collect qualified as “debt” under the FDCPA.
although they allege that defendants “attempted to collect a debt
allegedly owed on a Mortgage and Note held by WMC Mortgage Co.
(‘WMC’) for a property located at 4609 Harbor Beach Blvd.
Brigantine, New Jersey, 08203,” Pls.’ Compl. ¶ 13, the Kimmels
never explain their own relationship to this property other than
to allege that ASC’s October 19, 2008 notice “list[ed] the
As we have already observed, the Kimmels assert in
conclusory fashion that the defendants “sought to collect a
consumer debt” from them. Id. ¶ 11.
address of Plaintiffs’ property in Brigantine, New Jersey.”
The Kimmels do aver in their briefs that
[T]he mortgage for the property in
Brigantine, New Jersey appears only to have
one purpose based on the substance of the
transaction and the borrower’s purpose in
obtaining the loan. This purpose was to
finance the purchase of a vacation home for
the Kimmels in Brigantine. . . . Plaintiffs
were clearly restricted from using the
property as a rental or a timeshare by the
Second Home Rider, and rental and timeshare
are the only practical business uses of a
property located in a residential
Pls.’ Mem. II at 22-23 (citing Ex. G to Pls.’ Compl. at 25-26).
We may consider the “Second Home Rider” to which the Kimmels
refer as a document of undisputed authenticity upon which they
relied (if implicitly) in their complaint.
It provides that
Borrower shall occupy, and shall only use,
the Property as Borrower’s second home.
Borrower shall keep the Property available
for Borrower’s exclusive use and enjoyment at
all times, and shall not subject the Property
to any timesharing or other shared ownership
arrangement or to any rental pool or
agreement that requires Borrower either to
rent the Property or give a management firm
or any other person any control over the
occupancy or use of the Property.
Ex. G to Pls.’ Compl. at 25.
Murray M. Kimmel (and his counsel)
have made this type of argument before, contending in Kimmel,
2011 WL 2039049, at *3, that “the restrictions contained in the
credit card agreement are evidence of his purpose -- rather than
the lender’s purpose.”
Judge Buckwalter rejected that argument,
explaining that “the terms of the agreement and the manner in
which the card was actually used are two separate issues,” id. at
We similarly conclude that the terms of the Second Home
Rider and the use to which the property in Brigantine, New Jersey
was actually put are distinct from one another.
As the complaint currently stands, it fails to allege
that the obligation at issue here was a “debt” within the FDCPA's
We will accordingly grant Deutsche Bank and ASC’s motion
to dismiss Count I.
Were the Kimmels to amend their complaint to
allege that they used this property exclusively as a vacation
home, they would satisfy this element of the FDCPA for pleading
We will grant them leave to do so.
Such amendment would only address the complaint’s
deficiency with respect to pleading the nature of the underlying
Regarding Deutsche Bank and ASC’s second
argument -- that the Kimmels have failed adequately to allege a
violation of the FDCPA -- the Kimmels respond that they “have
properly alleged the requisite elements of each of their causes
of action and the requisite facts to support those claims.”
Pls.’ Mem. II at 40.
It is true that the Kimmels’ complaint does
not present the usual deficiencies that often prompt dismissal
under Iqbal and Twombly.
Many of their factual allegations are
concrete, rather than “[t]hreadbare recitals of the elements of a
cause of action, supported by mere conclusory statements.”
Iqbal, 129 S. Ct. at 1949.
But the Kimmels simply recite an
array of factual allegations and then declaim that “[i]n its
actions to collect a disputed debt, Defendant violated the FDCPA
in one or more of the following ways,” Pls.’ Compl. ¶ 86, before
listing eleven provisions of the FDCPA that defendants allegedly
As our Court of Appeals has explained, a plaintiff must
“provide a defendant the type of notice of claim which is
contemplated by Rule 8,” Phillips, 515 F.3d at 232.
does not meet this requirement by propounding a mass of factual
allegations and then enumerating a laundry list of statutory
provisions that a defendant allegedly violated.
Kimmels elect to amend their complaint, they must link each
alleged violation of the FDCPA to the predicate factual
The Kimmels add the allegation that defendants
“act[ed] in an otherwise deceptive, unfair and unconscionable
manner and fail[ed] to comply with the FDCPA,” Pls.’ Compl. ¶
86(l). This only increases the indeterminacy of their complaint.
allegations giving rise to the violation in order to state a
claim under Fed. R. Civ. P. 8.
The Kimmels’ Failure To Plead Justifiable Reliance
Finally, Deutsche Bank and ASC claim that “Plaintiffs’
claims for violation of the Pennsylvania UTPCPL, fraud and
negligent misrepresentation should be dismissed for failure to
allege justifiable reliance,” Deutsche/ASC’s Mem. at 24, and that
with respect to the Kimmels’ RICO claims14 they “have failed to
allege any facts upon which they relied let alone justifiably.”
Id. at 27.
The Kimmels respond that
Plaintiffs have been able to successfully
allege facts that show that they justifiably
relied on the material misrepresentations.
In particular, Plaintiffs have stated that
they became confused by the varying amounts
set forth for securing the property in
Defendants’ correspondence and pleadings, and
that Plaintiffs also were unaware of what
these amounts were billed for as Defendants
Though the Kimmels’ complaint suggests that they
predicate their 18 U.S.C. § 1962(c) claim upon “numerous
violations of extortion, mail fraud,” Pls.’ Compl. ¶ 114(a), they
clarify in their response to Deutsche Bank and ASC’s motion that
“the racketeering activity’ [sic] at issue here is mail fraud.”
Pls.’ Mem. II at 37. Similarly, although the complaint appears
to allege a claim under § 1962(d) for “conspiring to violate any
provisions of 18 U.S.C. § 1962,” Pls.’ Compl. ¶ 114(b), the
Kimmels admit that they “have not specific plead [sic] violations
of § 1962(d) in their Complaint, and instead have only enumerated
violations under § 1962(c).” Pls.’ Mem. II at 39.
provided no explanation. Furthermore,
Plaintiffs have also averred that they were
so confused as to what the state complaints
at issue actually stated about the amount
owed, due to these misrepresentations in the
documents, that they had to hire counsel to
help them understand the documents.
Pls.’ Mem. II at 38 (internal citations omitted).
There can be little doubt that the Kimmels’ UTPCPL,
fraud, and negligent misrepresentation claims oblige them to
allege justifiable reliance upon wrongful conduct or a
Indeed, the Kimmels concede this point.
Pls.’ Mem. II at 28 (describing justifiable reliance element of
UTPCPL claim), id. at 32 (describing justifiable reliance prong
of common law fraud claim), id. at 34 (describing justifiable
reliance requirement of negligent misrepresentation claim).
also Yocca v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425, 438
(Pa. 2004) (“To bring a private cause of action under the UTPCPL,
a plaintiff must show that he justifiably relied on the
defendant's wrongful conduct or representation.”); Colaizzi v.
Beck, 895 A.2d 36, 39 (Pa. Super. 2006) (“[T]o establish common
law fraud, a plaintiff must prove . . . justifiable reliance by
the party defrauded upon the misrepresentation.”); Gibbs v.
Ernst, 647 A.2d 882, 890 (Pa. 1994) (“The elements which must be
proven for [negligent misrepresentation] to be shown [include] .
. . . [that] injury must result to the party acting in
justifiable reliance on the misrepresentation.”).
As for RICO claims predicated upon alleged mail fraud,
Judge Robreno has insightfully canvassed the caselaw from this
and other Circuits on the proximate causation element of such
As he observed, “[w]hether reliance is necessary to
establish proximate cause continues to be unsettled law,” but
“the majority of circuit courts and district courts within this
circuit to address the issue have held that it is.”
Palisades Collection, LLC, 480 F. Supp. 2d 797, 806 (E.D. Pa.
In Judge Robreno’s view, this stance “gets it right”
since “[i]t is a matter of basic logic that a misrepresentation
cannot cause, much less proximately cause, injury, unless someone
relies upon it.”
Id. at 807 (internal quotations marks omitted).
We too are convinced that this is the correct view, and the
Kimmels appear to agree.
Pls.’ Mem. II at 37-38 (“[T]o plead an
instance of mail fraud, a plaintiff must allege a scheme to
defraud where the defendant made a material misrepresentation of
fact . . . on which the plaintiff justifiably relied to its
detriment.”) (internal quotation marks omitted).
The Kimmels suggest that they have alleged justifiable
reliance on defendants’ alleged misrepresentations and wrongful
actions because they were confused by their conduct, which led
them to retain an attorney.15
But the Kimmels also admit that
“upon receipt of [the October 19, 2008] letter from Defendant
ASC, Plaintiffs grew very worried they were becoming the victims
of a scam,” Pls.’ Compl. ¶ 38.
They further allege that they
contested the foreclosure proceedings PHS and Deutsche Bank
instituted against them, and have to date convinced a New Jersey
court to deny a motion for summary judgment and to dismiss
without prejudice two actions filed against them.
complaint thus suggests that they understood -- from the receipt
of their very first communications from any of the defendants -that what they identify as “misrepresentations” were indeed false
-- and as our Court of Appeals has made clear, “there can be no
misrepresentation if the plaintiff knows the representation to be
Walter, 480 F. Supp. 2d at 808 (emphasis in original)
We note that each of the claims discussed in this
section also requires a plaintiff to allege that he suffered an
injury as a result of his justifiable reliance. In the RICO
context, this injury must be “‘a concrete financial loss.’”
Walter, 480 F. Supp. 2d at 804 (quoting Maio v. Aetna, Inc., 221
F.3d 472, 483 (3d Cir. 2000). The hiring of counsel, by itself,
does not constitute an injury, although the payment of fees to an
attorney may satisfy this requirement. See id. (“The payment of
legal fees can be actionable injuries under RICO.”). Notably,
the Kimmels have not alleged that they paid any fees -- or indeed
are even obliged to pay any -- to the counsel that their
confusion allegedly compelled them to retain.
(citing Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140
F.3d 494, 528-29 (3d Cir. 1998); Lundy v. Hochberg, 79 Fed. Appx.
503 (3d Cir. 2003)).
More to the point, the Kimmels’ conduct
following the defendants’ allegedly wrongful actions was, in
Judge Robreno’s trenchant words, “the opposite of reliance; it’s
After being (falsely) told they were liable on the
debt, they hired lawyers and fought (and won) the lawsuits.”
While “confusion” may describe the emotion the Kimmels
felt upon receiving communications from the defendants, it does
not describe what they then did.
Their actions are the focus of
the “justifiable reliance” prongs of the UTPCPL, RICO, and the
law of fraud and negligent misrepresentation.
When we focus on
the Kimmels’ documented actions it becomes plain that, far from
relying on the defendants’ alleged misrepresentations and
wrongful conduct, they instead contested these representations in
court, so far with success.
The Kimmels have thus failed to allege justifiable
reliance as their UTPCPL, RICO, fraud, and negligent
misrepresentation claims require.
In light of their own account
of their actions, it is clear that it would be futile for them to
attempt to amend the complaint to remedy this defect.
thus grant Deutsche Bank and ASC’s motion to dismiss Counts III,
IV, V, and VI of the Kimmels’ complaint with prejudice.
BY THE COURT:
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