BRIAN W. AND CARLA, et al v. RESIDENTIAL FUNDING COMPANY, LLC, et al
Filing
610
MEMORANDUM AND OPINION relating to 605 Court Order granting Defendants' Motion to Dismiss/Lack of Jurisdiction, and Order on Motion to Dismiss for Failure to State a Claim 516 and 520 .. Signed by Judge Arthur J. Schwab on 06/27/2013. (lmt)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
IN RE:
COMMUNITY BANK OF
NORTHERN VIRGINIA
MORTGAGE LENDING
PRACTICES LITIGATION
)
)
)
)
)
MDL No. 1674
Civ. Action Nos.
02-1201, 03-425,
05-688, 05-1386
ELECTRONICALLY FILED
MEMORANDUM OPINION
This matter is before the Court on Defendants’ Motions to Dismiss. Doc. nos. 516 and
520. Plaintiffs have filed a putative class action alleging that Defendants’ issuance of second
mortgages violated, inter alia, the Real Estate Settlement Practices Act, 12 U.S.C. § 2601, et seq.
(“RESPA”), the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601, et seq., as amended by the
Home Ownerships Equity Protection Act (“HOEPA”), 15 U.S.C. § 1639 et seq. and the
Racketeering Influenced Corrupt Organizations Act, 18 U.S.C. §§ 1961, et seq. (“RICO”).
Defendant Federal Deposit Insurance Corporation (“FDIC”), as receiver for the
Guarantee National Bank of Tallahassee (“GNBT”), has filed a Motion to Dismiss pursuant to
Fed.R.Civ.P. 12(b)(1), 12(b)(6), 12(b)(7), 12(f), 15, 19(a) and 23(d)(1)(D) and 12 U.S.C.
§§ 1821 and 1825 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989,
Pub.L. 101-73, 103 Stat. 183 (1989) (“FIRREA”).1 Doc. no. 516.
1
As noted, Defendant FDIC filed its Motion, in part, pursuant to F.R.Civ.P. 12(f), which is a Motion to
Strike. Because this Court granted Defendant FDIC’s Motion to Dismiss, the Court will not address the
Motion to Strike in this Opinion.
1
Defendant PNC has filed a Fed.R.Civ.P. 12(b)(6) Motion arguing that Plaintiffs have
failed to state a claim upon which relief can be granted. Doc. no. 520. Defendant PNC further
seeks dismissal of certain named Plaintiffs’ claims against it for lack of standing.
Both
Defendants also argue that other named representatives’ claims should be dismissed for failure to
join their spouses, who, Defendants claim, are indispensable parties. Defendants jointly further
contend that Plaintiffs’ claims under RESPA and RICO should be dismissed pursuant to
Fed.R.Civ.P. 12(b)(6) for failure to state a claim.
The Court has reviewed the following: (1) the FDIC’s Motion to Dismiss for Lack of
Jurisdiction and Motion to Dismiss/Strike Plaintiffs’ Class Action Claims and Certain Prayers for
Relief Against the FDIC and its Brief in Support (doc. nos. 516, 517); (2) PNC’s Motion to
Dismiss for Failure to State a Claim and its Brief in Support (doc. nos. 520, 521); (3) Plaintiffs’
Briefs in Opposition to each of the Motions (doc. nos. 539, 540, respectively); (4) the Reply
Brief filed by the FDIC and PNC as to PNC’s Motion to Dismiss (doc. no. 548); (5) the Reply
Brief filed by the FDIC as to the FDIC’s Motion to Dismiss and Motion to Dismiss/Strike (doc.
no. 549); (6) Plaintiffs’ Sur-Reply Brief as to PNC’s Motion to Dismiss (doc. no. 554); (7)
Plaintiffs’ Sur-Reply Brief as to the FDIC’s Motion to Dismiss and Motion to Dismiss/Strike
(doc. no. 561); and (8) a transcript of the September 18, 2012, oral argument related to the
above-referenced Motions (doc. no. 591); as well as (9) all supplemental authority filed by the
parties related to these Motions (doc. nos. 562, 565, 573, 577-579, 594, 598, 599, 600, 602, and
603).
2
The Court ordered the parties to attend a status conference on June 12, 2013. On June 5,
2013, the Court notified the parties that any new argument pertaining to the Motions to Dismiss
should be made orally during the status conference. Upon hearing no new arguments, the Court
ruled on these Motions and entered an Order disposing of them. Doc. no. 605. Set forth below
is the Court’s reasoning for each ruling in that Order (doc. no. 605), which is incorporated post,
as if fully set forth herein.
I. BACKGROUND
The parties and the Court are conversant in the procedural and factual background of this
case. The United States Court of Appeals for the Third Circuit has previously set forth, in detail,
the convoluted procedural history of these cases. See In re Cmty. Bank of N. Va., 622 F.3d 275,
279–90 (3d Cir. 2010); In re Cmty. Bank of N. Va., 418 F.3d 277, 283–98 (3d Cir. 2005). After
the latest remand, Chief Judge Lancaster, who had been assigned these cases, In re Cmty. Bank
of N. Va. Mortgage Lending Practices Litig., 368 F.Supp. 2d 1354, 1355 (J.P.M.L. 2005), issued
a Case Management Order (doc. no. 506). Thereafter, Plaintiffs filed a Joint Consolidated
Amended Complaint (doc. no. 507), Defendants filed Motions to Dismiss (doc. nos. 516 & 520),
and Chief Judge Lancaster heard argument thereon. See doc. no. 591. After Chief Judge
Lancaster’s untimely death, the Judicial Panel on Multidistrict Litigation re-assigned these cases
to this Court. In re Cmty. Bank of N. Va. Mortgage Lending Practices Litig., MDL 1674
(J.P.M.L. May 17, 2013). All references to actions taken by “this Court” prior to May 17, 2013,
refer to actions taken by Chief Judge Lancaster.
3
The following facts are taken from the Joint Consolidated Amended Complaint (doc. no.
507), and are accepted as true solely for the purposes of this Memorandum Opinion. Other facts
relevant to this Court’s decision are set forth in context as necessary.
In the late 1990s, an organization run by David Shumway, Devan Shumway, and Randy
Bapst founded an organization to originate and sell second mortgages to investors.
This
organization partnered with Defendant PNC (then known as the Community Bank of Northern
Virginia (“CBNV”), a regulated depository institution), to originate second mortgages, charge
origination fees, and then sell them almost immediately to investors such as the Residential
Funding Corporation (“RFC”). The Joint Consolidated Amended Complaint alleges that the
issuance of these second mortgages violated RESPA, TILA/HOEPA, and RICO.
A. CBNV and GNBT
CBNV is a Virginia Corporation with its principal place of business in Virginia and, as a
lender, made approximately 22,810 of the loans at issue here.
CBNV is now known as PNC
National Bank. GNBT was a national bank with its principal place of business in Tallahassee,
Florida. GNBT made at least 21,725 of the loans at issue here. GNBT was closed by the Office
of Comptroller of Currency in 2004. The FDIC was substituted for GNBT in this litigation in
2004. Facts regarding the FDIC receivership relevant to these Motions are set forth, infra, at
section C.
B. Representative Plaintiffs
Named as representative Plaintiffs are: Ruth J. Davis, Phillp F. and Jeannie C. Kossler,
Brian W. and Carl M. Kessler, Patrice Porco, Thomas T. Mathis, Stephen R. and Amy L. Haney,
4
John and Rebecca Picard, William and Ellen Sabo, Russell and Kathleen Ulrich, Nora H. Miller,
Robert A. and Rebecca A. Clark, Edward R. Kruszka, Jr., Tina Merl Boor, Martin J. Baratz, Clell
L. Hobson, Rosa Kelly Parkinson, John and Kathy Nixon, Brian Cartee, Mack and Robin
Dorman, Jerome and Charetta Roberts, Melba Brown, Flora A. Gaskin, Roy Lee and Ruthie Mae
Logan, Shawn and Lorene Starkey, John and Rowena Drennen, Richard Montgomery, and
Tammy and David Waseem.
1.
Ruth Davis
Ms. Davis had a CBNV loan, which closed on February 22, 1999. According to the Joint
Consolidated Amended Complaint, this was the date she was first given her TILA and HOEPA
disclosures. The principal balance of her loan was $24,100.00 to be repaid, with an interest rate
of 13.75% (APR of 15.456%), monthly for 24 years. Ms. Davis executed a deed of trust that
granted CBNV a security lien in residential real estate subject to one or more prior mortgage
loans. Several fees were itemized on the HUD-1 settlement statement given to Ms. Davis.
Among those fees were the “Section 800” fees contained in Line Nos. 801 (a “Loan Origination
Fee”), 802 (a “Loan Discount”), 804 (“Credit Report”), and 807 (a “Flood Certification Fee”).
In addition, there were several “Section 1100” fees contained in Line Nos. 1101 (a “Settlement
Fee”), 1102 (“Abstract or Title Search”), 1103 (“Title Examination”), 1111 (“Overnight Fee”),
and 1112 (“Processing Fee”). Ms. Davis was given a Federal Truth in Lending Disclosure
Statement that identified her Finance Charge as $63,971.58 and her APR as 15.46%. Ms. Davis
filed for personal bankruptcy on April 15, 2005. She did not schedule this action in her petition.
5
2.
Phillp F. and Jeannie C. Kossler
The Kosslers had a CBNV loan, which closed on or about July 28, 1998. According to
the Joint Consolidated Amended Complaint, this was the date the Kosslers were first given their
TILA and HOEPA disclosures. The principal balance of their loan was $30,000.00 to be repaid
with an interest rate of 12.99% (APR of 14.817%) monthly for 15 years. The Kosslers executed
a deed of trust that granted CBNV a security lien in residential real estate subject to one or more
prior mortgage loans. Several fees were itemized on the HUD-1 settlement statement given to
the Kosslers. Among those fees were the “Section 800” fees contained in Line Nos. 801 (a
“Loan Origination Fee”), 804 (“Credit Report”), and 808 (“Document Review”). In addition,
there were several “Section 1100” fees contained in Line Nos. 1101 (a “Settlement or Closing
Fee”), 1102 (“Abstract or Title Search”), 1103 (“Title Examination”), and 1111 (“Signing
Agent”).
The Kosslers were given a Federal Truth in Lending Disclosure Statement that
identified their Finance Charge as $40,938.40 and their APR as 14.817%.
3.
Brian W. and Carl M. Kessler
The Kesslers had a CBNV loan, which closed on or about April 30, 1999. According to
the Joint Consolidated Amended Complaint, this was the date the Kesslers were first given their
TILA and HOEPA disclosures. The principal balance of their loan was $33,000.00 to be repaid,
with an interest rate of 14.75% (APR of 17.841%), monthly for 15 years. The Kesslers executed
a deed of trust that granted CBNV a security lien in residential real estate subject to one or more
prior mortgage loans. Several fees were itemized on the HUD-1 settlement statement given to
the Kesslers. Among those fees were the “Section 800” fees contained in Line Nos. 801 (a
6
“Loan Origination Fee”), 802 (“Loan Discount”), 807 (“Application Fee”), and 811
(“Underwriting Fee”). In addition, there were several “Section 1100” fees contained in Line
Nos. 1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title Search”), 1103 (“Title
Examination”), 1111 (“Overnight Fee”), and 1112 (“Document Review”). The Kosslers were
given a Federal Truth in Lending Disclosure Statement that identified their Finance Charge as
$53,587.45 and their APR as 17.841%.
4.
Patrice Porco
Patrice Porco had a GNBT loan which closed on or about September 9, 2000. According
to the Joint Consolidated Amended Complaint, this was the date she was first given her TILA
and HOEPA disclosures. The principal balance of her loan was $29,800.00 to be repaid, with an
interest rate of 12.99% (APR of 16.71%), monthly for 15 years. Ms. Porco executed a deed of
trust that granted GNBT a security lien in residential real estate subject to one or more prior
mortgage loans. Several fees were itemized on the HUD-1 settlement statement given to Ms.
Porco. Among those fees were the “Section 800” fees contained in Line Nos. 801 (a “Loan
Origination Fee”), 802 (“Loan Discount”), 811 (“Underwriting Fee”), and 813 (“Application
Fee”). In addition, there were several “Section 1100” fees contained in Line Nos. 1101 (a
“Settlement or Closing Fee”), 1102 (“Abstract or Title Search”), 1103 (“Title Examination”),
1111 (“Overnight Fee”), 1112 (“Document Review”), and 1113 (“Processing Fee”). Ms. Porco
was given a Federal Truth in Lending Disclosure Statement that identified her Finance Charge as
$43,024.86 and her APR as 16.7196%.
7
5.
Thomas T. Mathis
Thomas T. Mathis had a GNBT loan which closed on or about June 7, 2001. According
to the Joint Consolidated Amended Complaint, this was the date he was first given his TILA and
HOEPA disclosures. The principal balance of his loan was $25,000.00 to be repaid, with an
interest rate of 14.99% (APR of 17.24%), monthly for 25 years. Mr. Mathis executed a deed of
trust that granted GNBT a security lien in residential real estate subject to one or more prior
mortgage loans. Several fees were itemized on the HUD-1 settlement statement given to Mr.
Mathis. Among those fees were the “Section 800” fees contained in Line Nos. 801 (a “Loan
Origination Fee”), 804 (“Credit Report”), 811 (“Underwriting Fee”), and 812 (“Flood
Certification Fee”). In addition, there were several “Section 1100” fees contained in Line Nos.
1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title Search”), 1103 (“Title
Examination”), 1111 (“Overnight Fee”), 1112 (“Document Review”), and 1113 (“Processing
Fee”). Mr. Mathis was given a Federal Truth in Lending Disclosure Statement that identified his
Finance Charge as $74,020.58 and their APR as 17.2411%. Mr. Mathis filed for personal
bankruptcy on April 29, 2004. He did not schedule this action in his petition.
6.
Stephen R. and Amy L. Haney
Stephen R. and Amy L. Haney had a GNBT loan which closed on May 23, 2001.
According to the Joint Consolidated Amended Complaint, this was the date the Haneys were first
given their TILA and HOEPA disclosures. The principal balance of their loan was $24,500.00 to
be paid monthly for 15 years. The Joint Consolidated Amended Complaint does not indicate the
interest rate or APR. The Haneys executed a deed of trust that granted GNBT a security lien in
8
residential real estate subject to one or more prior mortgage loans. Several fees were itemized on
the HUD-1 settlement statement given to the Haneys. Among those fees were the “Section 800”
fees contained in Line Nos. 801 (a “Loan Origination Fee”), 802 (“Loan Discount”), 804
(“Credit Report”), 811 (“Underwriting Fee”), and 812 (“Flood Certification Fee”). In addition,
there were several “Section 1100” fees contained in Line Nos. 1101 (a “Settlement or Closing
Fee”), 1102 (“Abstract or Title Search”), 1103 (“Title Examination”), 1111 (“Overnight Fee”),
1112 (“Document Review”), and 1113 (“Processing Fee”). The Haneys were given a Federal
Truth in Lending Disclosure Statement that identified their Finance Charge as $31,996.99 and
their APR as 15.0957%. The Haneys filed for personal bankruptcy on June 2, 2009. They did
not schedule this action in their petition.
7.
John and Rebecca Picard
John and Rebecca Picard had a CBNV loan which closed on November 30, 1999.
According to the Joint Consolidated Amended Complaint, this was the date the Picards were first
given their TILA and HOEPA disclosures. The principal balance of the loan was $47,900.00 to
be repaid monthly for 15 years. The interest rate was 14.99% (APR of 18.416%). The Picards
executed a deed of trust that granted CBNV a security lien in residential real estate subject to one
or more prior mortgage loans. Several fees were itemized on the HUD-1 settlement statement
given to the Picards. Among those fees were the “Section 800” fees contained in Line Nos. 801
(a “Loan Origination Fee”), 802 (“Loan Discount”), 803 (“Appraisal Fee”), 807 (“Application
Fee”), and 811 (“Underwriting Fee).
In addition, there were several “Section 1100” fees
contained in Line Nos. 1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title Search”),
9
1103 (“Title Examination”), 1111 (“Overnight Fee”), 1112 (“Document Review”), and 1113
(“Processing Fee”). The Picards were given a Federal Truth in Lending Disclosure Statement
that identified their Finance Charge as $79,767.89 and their APR as 18.416%.
8.
William and Ellen Sabo
William and Ellen Sabo had a CBNV loan which closed on or about October 15, 1999.
According to the Joint Consolidated Amended Complaint, this was the date the Sabos were first
given their TILA and HOEPA disclosures. The principal balance of their loan was $35,000.00 to
be paid over 15 years. The interest rate was 14.75% (APR of 17.390%). The Sabos executed a
deed of trust that granted CBNV a security lien in residential real estate subject to one or more
prior mortgage loans. Several fees were itemized on the HUD-1 settlement statement given to
the Sabos. Among those fees were the “Section 800” fees contained in Line Nos. 801 (a “Loan
Origination Fee”), 808 (“Application Fee”), and 809 (“Underwriting Fee”). In addition, there
were several “Section 1100” fees contained in Line Nos. 1101 (a “Settlement or Closing Fee”),
1102 (“Abstract or Title Search”), 1103 (“Title Examination”), 1111 (“Overnight Fee”), and
1112 (“Document Review”). The Sabos were given a Federal Truth in Lending Disclosure
Statement that identified their Finance Charge as $56,211.00 and their APR as 17.39%. Ms.
Sabo filed for personal bankruptcy on December 13, 2007. She did not schedule this action in
her petition.
9.
Russell and Kathleen Ulrich
Russell and Kathleen Ulrich had a GNBT loan which closed on or about August 8, 2000.
According to the Joint Consolidated Amended Complaint, this was the date the Ulriches were
10
first given their TILA and HOEPA disclosures.
The principal balance of their loan was
$46,850.00 to be paid over 25 years. The interest rate was 12.99% (APR of 15.469%).
The
Ulriches executed a deed of trust that granted GNBT a security lien in residential real estate
subject to one or more prior mortgage loans.
Several fees were itemized on the HUD-1
settlement statement given to the Ulriches. Among those fees were the “Section 800” fees
contained in Line Nos. 801 (a “Loan Origination Fee”), 802 (“Loan Discount”), 807
(“Application Fee”), and 811 (“Underwriting Fee”). In addition, there were several “Section
1100” fees contained in Line Nos. 1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title
Search”), 1103 (“Title Examination”), 1111 (“Overnight Fee”), 1112 (“Document Review”), and
1113 (“Processing Fee”). The Ulriches were given a Federal Truth in Lending Disclosure
Statement that identified their Finance Charge as $118,324.73 and their APR as 15.49%. Mrs.
Ulrich filed for personal bankruptcy on February 26, 2007. She did not schedule this action in
her petition.
10.
Nora H. Miller
Nora H. Miller had a CBNV loan which closed on or about April 30, 1999. According to
the JOINT CONSOLIDATED AMENDED COMPLAINT, this was the date she was first given
her TILA and HOEPA disclosures. The principal balance of her loan was $34,000.00 to be paid
over 15 years. The interest rate was 12.50% (APR of 15.590%). Ms. Miller executed a deed of
trust that granted CBNV a security lien in residential real estate subject to one or more prior
mortgage loans. Several fees were itemized on the HUD-1 settlement statement given to the Ms.
Miller. Among those fees were the “Section 800” fees contained in Line Nos. 801 (a “Loan
11
Origination Fee”), and 802 (“Loan Discount”). In addition, there were several “Section 1100”
fees contained in Line Nos. 1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title
Search”), 1103 (“Title Examination”), 1111 (“Overnight Fee”), and 1112 (“Document Review”).
Ms. Miller was given a Federal Truth in Lending Disclosure Statement that identified her
Finance Charge as $46,332.99 and her APR as 15.59%. Ms. Miller filed for personal bankruptcy
on August 15, 2003 and August 20, 2009. She did not schedule this action in either petition.
11.
Robert A. and Rebecca A. Clark
Robert A. and Rebecca A. Clark had a GNBT loan which closed on or about March 20,
2001. According to the Joint Consolidated Amended Complaint, this was the date the Clarks
were first given their TILA and HOEPA disclosures. The principal balance of their loan was
$27,500.00 to be paid over 10 years. The interest rate was 11.99% (APR of 16.0042%). The
Clarks executed a deed of trust that granted GNBT a security lien in residential real estate subject
to one or more prior mortgage loans. Several fees were itemized on the HUD-1 settlement
statement given to the Clarks. Among those fees were the “Section 800” fees contained in Line
Nos. 801 (a “Loan Origination Fee”), 802 (“Loan Discount”), 804 (“Credit Report”), 811
(“Underwriting Fee”), and 812 (“Flood Certification Fee”). In addition, there were several
“Section 1100” fees contained in Line Nos. 1101 (a “Settlement or Closing Fee”), 1102
(“Abstract or Title Search”), 1103 (“Title Examination”), 1111 (“Overnight Fee”), 1112
(“Document Review”), and 1113 (“Processing Fee”). The Clarks were given a Federal Truth in
Lending Disclosure Statement that identified their Finance Charge as $23,785.92 and their APR
12
as 16.0042%. The Clarks filed for personal bankruptcy on April 28, 1997 and July 16, 2009.
They did not schedule this action in either petition.
12.
Edward R. Kruszka, Jr.
Edward R. Kruszka, Jr. had a GNBT loan which closed on or about May 5, 2001.
According to the Joint Consolidated Amended Complaint, this was the date he was first given his
TILA and HOEPA disclosures. The principal balance of his loan was $20,100.00 to be paid over
20 years. The interest rate was 16.99% (APR of 19.772%). Mr. Kruska executed a deed of trust
that granted GNBT a security lien in residential real estate subject to one or more prior mortgage
loans. Several fees were itemized on the HUD-1 settlement statement given to Mr. Kruszka.
Among those fees were the “Section 800” fees contained in Line Nos. 801 (a “Loan Origination
Fee”), 802 (“Loan Discount”), 804 (“Credit Report”), 807 (“Application Fee”), 810 (“E
Appraisal”), and 811 (“Underwriting Fee”). In addition, there were several “Section 1100” fees
contained in Line Nos. 1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title Search”),
1103 (“Title Examination”), 1111 (“Overnight Fee”), 1112 (“Document Review”), and 1113
(“Processing Fee”). Mr. Kruszka was given a Federal Truth in Lending Disclosure Statement
that identified his Finance Charge as $53,198.40 and his APR as 19.722%. Mr. Kruszka filed for
bankruptcy on May 24, 2002. He did not schedule this action in his petition.
13.
Tina Merl Boor
Tina Merl Boor, formerly known as Tina Merl, had a CBNV loan which closed on or
about December 9, 2000. According to the Joint Consolidated Amended Complaint, this was the
date she was first given her TILA and HOEPA disclosures. The principal balance of her loan
13
was not included in the Joint Consolidated Amended Complaint. Several fees were itemized on
the HUD-1 settlement statement given to Ms. Boor. Among those fees were the “Section 800”
fees contained in Line Nos. 801 (a “Loan Origination Fee”), 802 (“Loan Discount”), 808
(“Lender Document Review Fee”), 810 (“Lender Underwriting Fee”), and 811 (“Document
Review”). In addition, there were several “Section 1100” fees contained in Line Nos. 1101 (a
“Settlement or Closing Fee”), 1102 (“Abstract or Title Search”), 1103 (“Title Examination”),
and 1105 (“Document Preparation”). The Joint Consolidated Amended Complaint contains no
information regarding the Finance Charge, nor does it contain any information regarding the
APR. Ms. Boor field for bankruptcy on August 20, 2007. She did not schedule this action in
her petition.
14.
Martin J. Baratz
Martin J. Baratz had a GNBT loan which closed on or about January 16, 2002.
According to the Joint Consolidated Amended Complaint, this was the date he was first given his
TILA and HOEPA disclosures. The Joint Consolidated Amended Complaint contains no further
allegations regarding Mr. Baratz’s loan.
15.
Clell L. Hobson
Clell L. Hobson had a CBNV loan which closed on or about May 2, 2001, via FedEx
delivery with return, pre-paid, next-day return envelope. According to the Joint Consolidated
Amended Complaint, this was the date he was first given his TILA and HOEPA disclosures.
The principal balance of his loan was $55,500.00 to be paid over 20 years. The interest rate was
17.75% (APR of 19.904%). Mr. Hobson executed a deed of trust that granted CBNV a security
14
lien in residential real estate subject to one or more prior mortgage loans. Several fees were
itemized on the HUD-1 settlement statement given to Mr. Hobson. Among those fees were the
“Section 800” fees contained in Line Nos. 801 (a “Loan Origination Fee”), 802 (“Loan
Discount”), 808 (“Lender Document Review”), 809 (“Lender Underwriting Fee”), and 810
(“Lender Application Fee”). In addition, there were several “Section 1100” fees contained in
Line Nos. 1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title Search”), 1103 (“Title
Examination”), and 1105 (“Document Preparation”). Mr. Hobson was given a Federal Truth in
Lending Disclosure Statement that identified his Finance Charge as $152,996.30 and his APR as
19.904%. The Joint Consolidated Amended Complaint further alleges that other aspects of the
notices given to Mr. Hobson violated HOEPA. Mr. Hobson filed for personal bankruptcy on
December 2, 2002. He did not schedule this claim in his petition.
16.
Rosa Kelly Parkinson
Rosa Kelly Parkinson, then known as Rosa Kelly, had a GNBT loan which closed on or
about Septmber 27, 2000 via a courier who obtained the execution of the loans in a public library
near Decatur, George. According to the Joint Consolidated Amended Complaint, this was the
date she was first given her TILA and HOEPA disclosures. The principal balance of her loan
was $51,000.00 to be paid over 25 years. The interest rate was 13.99% (APR of 16.532%).
Captain Kelly executed a deed of trust that granted GNBT a security lien in residential real estate
subject to one or more prior mortgage loans.
Several fees were itemized on the HUD-1
settlement statement given to Captain Parkinson. Among those fees were the “Section 800” fees
contained in Line Nos. 801 (a “Loan Origination Fee”), 802 (“Loan Discount”), 807
15
(“Application Fee”), and 811 (“Underwriting Fee”). In addition, there were several “Section
1100” fees contained in Line Nos. 1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title
Search”), 1103 (“Title Examination”), 1112 (“Document Review”), and 1113 (“Processing
Fee”). Captain Kelly was given a Federal Truth in Lending Disclosure Statement that identified
her Finance Charge as $109,105.81 and her APR as 16.532%. The Joint Consolidated Amended
Complaint further alleges that other aspects of the notices given to Captain Kelly violated
HOEPA and Georgia law.
17.
John and Kathy Nixon
John and Kathy Nixon had a CBNV loan which closed on or about February 2, 2001, via
FedEx to their home in Florida. According to the Joint Consolidated Amended Complaint, this
was the date the Nixons were first given their TILA and HOEPA disclosures. The principal
balance of their loan was $49,999.00 to be paid over 25 years. The interest rate was 18.25%
(APR of 20.261%). The Nixons executed a deed of trust that granted CBNV a security lien in
residential real estate subject to one or more prior mortgage loans. Several fees were itemized on
the HUD-1 settlement statement given to the Nixons. Among those fees were the “Section 800”
fees contained in Line Nos. 801 (a “Loan Origination Fee”) and 807 (“Application”).
In
addition, there were several “Section 1100” fees contained in Line Nos. 1101 (a “Settlement or
Closing Fee”), 1102 (“Abstract or Title Search”), 1103 (“Title Examination”), and 1105
(“Document Preparation”). The Nixons were given a Federal Truth in Lending Disclosure
Statement that identified their Finance Charge as $185,347.31 and their APR as 20.261%. The
16
Joint Consolidated Amended Complaint further alleges that other aspects of the notices given to
the Nixons violated HOEPA.
18.
Brian Cartee
Brian Cartee had a GNBT loan which closed on or about February 25, 2002. According
to the Joint Consolidated Amended Complaint, this was the date he was first given his TILA and
HOEPA disclosures, via FedEx. The principal balance of his loan was $29,500.00 to be paid
over 15 years. The interest rate was 12.750% (APR of 15.556%). Mr. Cartee executed a deed
of trust which granted GNBT a security lien in residential real estate subject to one or more prior
mortgage loans. Several fees were itemized on the HUD-1 settlement statement given to Mr.
Cartee. Among those fees were the “Section 800” fees contained in Line Nos. 801 (a “Loan
Origination Fee”), 802 (“Loan Discount”), 808 (“GA State Tax Fee”), and 810 (“Lender
Application Fee”). In addition, there were several “Section 1100” fees contained in Line Nos.
1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title Search”), 1103 (“Title
Examination”), and 1113 (“Processing Fee”). Mr. Cartee was given a Federal Truth in Lending
Disclosure Statement that identified his Finance Charge as $40,694.64 and his APR as
15.5596%. The Joint Consolidated Amended Complaint further alleges that other aspects of the
notices given to Mr. Cartee violated HOEPA.
19.
Mack and Robin Dorman
Mack and Robin Dorman had a GNBT loan which closed on or about February 11, 2002.
According to the Joint Consolidated Amended Complaint, this was the date the Dormans were
first given their TILA and HOEPA disclosures, which arrived via FedEx delivery. The principal
17
balance of their loan was $29,600.00 to be paid over 10 years. The Joint Consolidated Amended
Complaint does not identify the interest rate but alleges that the APR was 16.4352%. The
Dormans executed a deed of trust that granted GNBT a security lien in residential real estate
subject to one or more prior mortgage loans.
Several fees were itemized on the HUD-1
settlement statement given to the Dormans. Among those fees were the “Section 800” fees
contained in Line Nos. 801 (a “Loan Origination Fee”), 802 (“Loan Discount”), 808 (“GA State
Tax Fee”), and 810 (“Lender Application Fee”). In addition, there were several “Section 1100”
fees contained in Line Nos. 1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title
Search”), 1103 (“Title Examination”), and 1113 (“Processing Fee”). The Dormans were given a
Federal Truth in Lending Disclosure Statement that identified their Finance Charge as
$40,694.64 and their APR as 16.4532%. The Joint Consolidated Amended Complaint further
alleges that other aspects of the notices given to the Dormans violated HOEPA.
20.
Jerome and Charetta Roberts
Jerome and Charetta Roberts had a GNBT loan which closed on or about October 9,
2000. According to the Joint Consolidated Amended Complaint, this was the date the Roberts
were first given their TILA and HOEPA disclosures via courier to Mr. Roberts’ place of work.
The principal balance of their loan was $39,00.00 to be paid over 25 years. The interest rate was
14.99% (APR of 17.828%).
The Roberts executed a deed of trust which granted GNBT a
security lien in residential real estate subject to one or more prior mortgage loans. Several fees
were itemized on the HUD-1 settlement statement given to the Roberts. Among those fees were
the “Section 800” fees contained in Line Nos. 801 (a “Loan Origination Fee”), 802 (“Loan
18
Discount”), 811 (“Underwriting Fee”), and 813 (“Application Fee”). In addition, there were
several “Section 1100” fees contained in Line Nos. 1101 (a “Settlement or Closing Fee”), 1102
(“Abstract or Title Search”), 1103 (“Title Examination”), 1112 (“Document Review”), and 1113
(“Processing Fee”). The Roberts were given a Federal Truth in Lending Disclosure Statement
that identified their Finance Charge as $116,570.41 and their APR as 17.828%. The Joint
Consolidated Amended Complaint further alleges that other aspects of the notices given to the
Roberts violated HOEPA and Georgia law.
21.
Flora A. Gaskin
Flora A. Gaskin had a GNBT loan which closed on or about August 8, 2001. According
to the Joint Consolidated Amended Complaint, this was the date she was first given her TILA
and HOEPA disclosures via a courier who conducted the closing. The principal balance of their
loan was $30,000.00 to be paid over 15 years. The interest rate was 15.99% (APR of 17.965%).
Ms. Gaskin executed a deed of trust that granted GNBT a security lien in residential real estate
subject to one or more prior mortgage loans.
Several fees were itemized on the HUD-1
settlement statement given to Ms. Gaskin. Among those fees were the “Section 800” fees
contained in Line Nos. 801 (a “Loan Origination Fee”), 805 (“Application Fee”), 810
(“Underwriting Fee”), and 811 (“Lender Document Review Fee”). In addition, there were
several “Section 1100” fees contained in Line Nos. 1101 (a “Settlement or Closing Fee”), 1102
(“Abstract or Title Search”), 1103 (“Title Examination”), and 1105 (“Document Preparation
Fee”). Ms. Gaskin was given a Federal Truth in Lending Disclosure Statement that identified
19
her Finance Charge as $49,435.17 and her APR as 17.965%. The Joint Consolidated Amended
Complaint further alleges that other aspects of the notices given to Ms. Gaskin violated HOEPA.
22.
Melba Brown
Melba Brown had a CBNV loan which closed on or about August 12, 2000. According
to the Joint Consolidated Amended Complaint, this was the date she was first given her TILA
and HOEPA disclosures via courier. The principal balance of her loan was $30,000.00 to be
paid over 15 years. The interest rate was 17.450% (APR of 20.704%). Ms. Brown executed a
deed of trust that granted CBNV a security lien in residential real estate subject to one or more
prior mortgage loans. Several fees were itemized on the HUD-1 settlement statement given to
Ms. Brown. Among those fees were the “Section 800” fees contained in Line Nos. 801 (a “Loan
Origination Fee”), 802 (“Loan Discount”), 804 (“Credit Report”), 808 (“Lender Underwriting
Fee”), and 810 (“Lender Document Review Fee”). In addition, there were several “Section
1100” fees contained in Line Nos. 1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title
Search”), 1103 (“Title Examination”), and 1111 (“Disbursement Fee”). Ms. Brown was given a
Federal Truth in Lending Disclosure Statement that identified her Finance Charge as $58,774.00
and her APR as 20.704%. The Joint Consolidated Amended Complaint further alleges that other
aspects of the notices given to Ms. Brown violated HOEPA. Ms. Brown filed for personal
bankruptcy on August 24, 2005. She did not schedule this action in her petition.
23.
Mr. and Mrs. Roger Turner
Mr. and Mrs. Roger Turner first mentioned in the Joint Consolidated Amended
Complaint at paragraph 339, had a GNBT loan that closed on or about October 10, 2000.
20
According to the Joint Consolidated Amended Complaint, this was the date the Turners were
first given their TILA and HOEPA disclosures via courier. The principal balance of their loan
was $16,200.00 to be paid over 25 years. The interest rate was 14.375% (APR of 18.033%).
The Turners executed a security deed for the benefit of GNBT. This security deed granted
GNBT a security lien in residential real estate subject to one or more prior mortgage loans.
Several fees were itemized on the HUD-1 settlement statement given to the Turners. Among
those fees were the “Section 800” fees contained in Line Nos. 801 (a “Loan Origination Fee”),
807 (“Application Fee”), and 811 (“Underwriting Fee”). In addition, there were several “Section
1100” fees contained in Line Nos. 1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title
Search”), 1103 (“Title Examination”), 1111 (“Overnight Fee”), 1112 (“Document Review Fee”),
and 1113 (“Processing Fee”). The Turners were given a Federal Truth in Lending Disclosure
Statement that identified their Finance Charge as $46,731.38 and their APR as 18.033%. The
Joint Consolidated Amended Complaint further alleges that other aspects of the notices given to
the Tuners violated HOEPA.
24.
Roy Lee and Ruthie Mae Logan
Roy Lee and Ruthie Mae Logan had a GNBT loan which closed on or about July 11,
2001. According to the Joint Consolidated Amended Complaint, this was the date the Logans
were first given their TILA and HOEPA disclosures via courier who conducted the closing. The
principal balance of their loan was $18,600.00 to be paid over 10 years. The interest rate was
11.99% (APR of 15.692%). The Logans executed a security deed in favor of GNBT. The
security deed granted GNBT a security lien in residential real estate subject to one or more prior
21
mortgage loans. Several fees were itemized on the HUD-1 settlement statement given to the
Logans. Among those fees were the “Section 800” fees contained in Line Nos. 801 (a “Loan
Origination Fee”), 804 (“Credit Report”), 811 (“Underwriting Fee”), and 812 (“Flood
Certification Fee”). In addition, there were several “Section 1100” fees contained in Line Nos.
1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title Search”), 1103 (“Title
Examination”), 1111 (“Overnight Fee”), 1112 (“Document Review”), and 1113 (“Processing
Fee”). The Logans were given a Federal Truth in Lending Disclosure Statement that identified
their Finance Charge as $15,904.64 and their APR as 15.6972%. 2 The Joint Consolidated
Amended Complaint further alleges that other aspects of the notices given to the Logans violated
HOEPA.
25.
Shawn and Lorene Starkey
Shawn and Lorene Starkey had a GNBT loan which closed on or about October 31, 2001.
According to the Joint Consolidated Amended Complaint, this was the date the Starkeys were
first given their TILA and HOEPA disclosures.
The principal balance of their loan was
$30,300.00 to be paid over 15 years. The interest rate was 11.99%.
The Starkeys executed a
deed of trust for the benefit of GNBT. The deed of trust granted GNBT a security lien in
residential real estate subject to one or more prior mortgage loans. Several fees were itemized on
the HUD-1 settlement statement given to the Starkeys. Among those fees were the “Section
800” fees contained in Line Nos. 801 (a “Loan Origination Fee”), 802 (“Loan Discount”), 804
2
The Court notes that the Joint Consolidated Amended Complaint indicates in one place that the APR is
15.692%, and in another place the APR is 15.6972%.
22
(“Credit Report”), 811 (“Underwriting Fee”), and 812 (“Flood Certification Fee”). In addition,
there were several “Section 1100” fees contained in Line Nos. 1101 (a “Settlement or Closing
Fee”), 1102 (“Abstract or Title Search”), 1103 (“Title Examination”), 1111 (“Overnight Fee”),
1112 (“Document Review”), and 1113 (“Processing Fee”). The Starkeys were given a Federal
Truth in Lending Disclosure Statement that identified their Finance Charge as $39,391.81 and
their APR as 14.9528%. The Starkeys filed for personal bankruptcy on May 13, 2005. They did
not schedule this action in their petition.
26.
John and Rowena Drennen
John and Rowena Drennen had a GNBT loan which closed on or about July 28, 2001.
According to the Joint Consolidated Amended Complaint, this was the date they were first given
their TILA and HOEPA disclosures. The principal balance of their loan was $47,100.00 to be
paid over 25 years. The interest rate was 15.99% (APR of 18.6284%). The Drennens executed
a deed of trust for the benefit of GNBT. This deed of trust granted GNBT a security lien in
residential real estate subject to one or more prior mortgage loans. Several fees were itemized on
the HUD-1 settlement statement given to the Drennens. Among those fees were the “Section
800” fees contained in Line Nos. 801 (a “Loan Origination Fee”), 802 (“Loan Discount”), 804
(“Credit Report”), 811 (“Underwriting Fee”), 812 (“Flood Certification Fee”), and 813 (“E
Appraisal Fee”). In addition, there were several “Section 1100” fees contained in Line Nos.
1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title Search”), 1103 (“Title
Examination”), 1111 (“Overnight Fee”), 1112 (“Document Review”), and 1113 (“Processing
Fee”). The Drennens were given a Federal Truth in Lending Disclosure Statement that identified
23
their Finance Charge as $150,605.00 and their APR as 15.49%. The Drennens filed for personal
bankruptcy on October 19, 2004, and Ms. Drennen filed for bankruptcy on August 4, 2005. This
action was not scheduled in either petition. According to Plaintiffs, Ms. Drennen has reopened
her bankruptcy, and the trustee has abandoned this claim to her.
27.
Richard Montgomery
Richard Montgomery, had a GNBT loan which closed on or about November 16, 2001.
According to the Joint Consolidated Amended Complaint, this was the date he was first given
his TILA and HOEPA disclosures. The principal balance of his loan was $81,000.00 to be paid
over 15 years. The interest rate was 13.2483% (APR of 18.6284%). Mr. Montgomery executed
a deed of trust for the benefit of GNBT. This trust granted GNBT a security lien in residential
real estate subject to one or more prior mortgage loans. Several fees were itemized on the HUD1 settlement statement given to Mr. Montgomery. Among those fees were the “Section 800”
fees contained in Line Nos. 801 (a “Loan Origination Fee”), 802 (“Loan Discount”), 804
(“Credit Report”), 812 (“Flood Certification Fee”), and 813 (“E Appraisal”). In addition, there
were several “Section 1100” fees contained in Line Nos. 1101 (a “Settlement or Closing Fee”),
1102 (“Abstract or Title Search”), 1103 (“Title Examination”), 1111 (“Overnight Fee”), 1112
(“Document Review”), and 1113 (“Processing Fee”). Mr. Montgomery was given a Federal
Truth in Lending Disclosure Statement that identified his Finance Charge as $92,588.65 and his
APR was 13.248%.
24
28.
Tammy and David Wasem
Tammy and David Wasem had a CBNV loan which closed on or about August 9, 2001.
According to the Joint Consolidated Amended Complaint, this was the date the Wasems were
first given their TILA and HOEPA disclosures.
The principal balance of their loan was
$47,000.00 to be paid over 15 years. The interest rate was 14.5% (APR of 15.456%).
The
Wasems executed a deed of trust for the benefit of CBNV. This deed of trust granted CBNV a
security lien in residential real estate subject to one or more prior mortgage loans. Several fees
were itemized on the HUD-1 settlement statement given to the Wasems. Among those fees were
the “Section 800” fees contained in Line Nos. 801 (a “Loan Origination Fee”), 805 (“Application
Fee”), and 810 (“Underwriting Fee”). In addition, there were several “Section 1100” fees
contained in Line Nos. 1101 (a “Settlement or Closing Fee”), 1102 (“Abstract or Title Search”),
1103 (“Title Examination”), 1105 (“Document Preparation”), and 1112 (“Document Review”).
The Wasems were given a Federal Truth in Lending Disclosure Statement that identified their
Finance Charge as $60,683.67 and their APR as 14.527%.
C. Facts related to FDIC Appointment as Receiver for GNBT
The FDIC was appointed as receiver for GNBT in 2004. The FDIC published notice of
its appointment in the newspapers local to the GNBT headquarters in Florida. The FDIC further
sent notice to Plaintiffs’ counsel. Plaintiffs’ counsel filed three claims post receivership. On
June 14, 2004, Plaintiffs’ counsel filed three (3) proofs of claim. The first proof of claim was
filed as a class claim on behalf of a class of unnamed borrowers of GNBT, as defined by the first
settlement agreement approved by this Court on December 4, 2003. This claim was disallowed
25
by the non-action of the FDIC 180 days after it was filed on December 11, 2004. The second
proof of claim was filed on behalf of a class of borrowers as defined by Civil Action No. 021201. This claim was denied on November 22, 2004. The third proof of claim was filed on
behalf of the putative class in Phipps v. GNBT, Case No. 03-420 (W.D. Mo., April 3, 2003).
This case was dismissed by the United States District Court for the Western District of Missouri
on September 17, 2003, several months prior to the claim being filed. Phipps v. GNBT, 2003
WL 2214964. This claim was denied by the FDIC on November 2, 2004. The dismissal of the
case was upheld by the Court of Appeals for the Eighth Circuit on July 28, 2005. Phipps v.
FDIC, 417 F.3d 1006 (8th Cir. 2005).
II. STANDARD OF REVIEW
A. Rule 12(b)(1)
A party may move for dismissal pursuant to Fed.R.Civ.P. 12(b)(1) based on lack of
subject matter jurisdiction. When analyzing a Rule 12(b)(1) challenge, the Court must first
determine whether the moving party is making a facial or factual jurisdictional attack. CNA v.
U.S., 535 F.3d 132, 139 (3d Cir. 2008). “If [it] is a facial attack, the court looks only at the
allegations in the pleadings and does so in the light most favorable to the [non-moving party].”
U.S. ex rel. Atkinson v. Pa. Shipbuilding Co., 473 F.3d 506, 513 (3d Cir. 2007). However, if it is
a factual jurisdictional attack, where the moving party argues that the Court lacks jurisdiction
based on evidence outside of the pleadings, the Court may “consider and weigh evidence outside
the pleadings . . . .” Id. at 514. A jurisdictional challenge is a factual challenge if “it concerns
not an alleged pleading deficiency, but rather the actual failure of [the non-moving party’s]
26
claims to comport with the jurisdictional prerequisites.” Id.
Under these circumstances, the
Court is not “confined to the allegations in [the . . .] complaint,” and the Court is “entitled to
independently evaluate the evidence to resolve disputes over jurisdictional facts.” S.R.P. ex rel
Abunabba v. U.S., 676 F.3d 329, 332 (3d Cir. 2012).
Here, Defendant FDIC makes a factual challenge to this Court’s subject matter
jurisdiction as to Plaintiffs’ claims against it. Thus, the Court is free to consider and weigh
evidence outside the pleadings.
B. Rule 12(b)(6)
Federal Courts require notice pleading, rather than the heightened standard of fact
pleading when evaluating a motion brought pursuant to Fed.R.Civ.P. 12(b)(6). Fed.R.Civ.P.
8(a)(2) requires only “‘a short and plain statement of the claim showing that the pleader is
entitled to relief’ in order to ‘give defendant fair notice of what the . . . claim is and the grounds
on which it rests.’” Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 555 (2007) (quoting Conley v.
Gibson, 355 U.S. 41, 47 (1957)).
After the United States Supreme Court decided Twombly and Ashcroft v. Iqbal, 556 U.S.
662 (2009), the United States Court of Appeals for the Third Circuit explained that a District
Court must engage in analysis of the following three steps to test the sufficiency of a Complaint:
First, the court must take note of the elements a plaintiff must plea
to state a claim. Second the court should identify allegations that,
because they are no more than conclusions, are not entitled to the
assumption of truth. Finally, where there are well-pleaded factual
allegations, a court should assume their veracity and the determine
whether they plausibly give rise to an entitled for relief.
27
Connelly v. Steel Valley Sch. Dist., 706 F.3d 209, 212 (3d Cir. 2013) (citation omitted).
The third step of this analysis requires this Court to consider the specific nature of the
claims presented and to determine whether the facts pled to substantiate the claims are sufficient
to show a “plausible claim for relief.” Covington v. Int’l Ass’n of Approved Basketball Officials,
710 F.3d 114, 118 (3d Cir. 2013). “While legal conclusions can provide the framework of a
Complaint, they must be supported by factual allegations.” Iqbal, 556 U.S. at 664.
This Court may not dismiss a Complaint merely because it appears unlikely or
improbable that Plaintiff can prove the facts alleged or will ultimately prevail on the merits.
Twombly, 550 U.S. at 563, n. 8. Instead, this Court must ask whether facts alleged raise a
reasonable expectation that discovery will reveal evidence of the necessary elements. Id. at 556.
Generally speaking, a Complaint that provides adequate facts to establish “how, when, and
where” will survive a Motion to Dismiss. Fowler v. UPMC Shadyside, 578 F.3d 203, 212 (3d
Cir. 2009). In short, a Fed.R.Civ.P. 12(b)(6) Motion to Dismiss should not be granted if a party
alleges facts which could, if established at trial, entitle that party to relief. Twombly, 550 U.S. at
563, n. 8.
In addition, Defendants challenge the standing of some of the named representatives.
The doctrine of standing “focuses on the party seeking to get his complaint before a federal court
and not on the issues he wishes to have adjudicated.” In re Majestic Star Casino, --- F.3d ---,
2013 WL 2162781 (3d Cir. May 21, 2013) (quoting Valley Forge Christian Coll. v. Ams. United
For Separation of Church & State, Inc., 454 U.S. 464, 484(1982)) (internal quotation marks
omitted). It “involves both constitutional limitations on federal-court jurisdiction and prudential
28
limitations on its exercise.” Id. at *6, (citation and internal quotations omitted). “One of those
prudential limits demands that the plaintiff generally . . . assert his own legal rights and interests,
and [ ]not rest his claim to relief on the legal rights or interests of third parties.” Id.
C. Failure to Join Indispensable Parties - 12(b)(7) and 19(a)
A movant must show that the plaintiff has failed to join a party under Fed.R.Civ.P. 19 in
order to prevail on a Fed.R.Civ.P. 12(b)(7) Motion to Dismiss. Fed.R.Civ.P. 19(a) states, in
material part, that the following are:
(a) Persons Required to Be Joined if Feasible.
Required Party. A person who is subject to service of
process and whose joinder will not deprive the court of
subject-matter jurisdiction must be joined as a party if:
(A) in that person’s absence, the court cannot
accord complete relief among existing parties; or
(B) that person claims an interest relating to the
subject of the action and is so situated that
disposing of the action in the person's absence may:
as a practical matter impair or impede the person's
ability to protect the interest; leave an existing party
subject to a substantial risk of incurring double,
multiple, or otherwise inconsistent obligations
because of the interest.
F.R.Civ.P. 19(a).
When reviewing a motion brought pursuant to Fed.R.Civ.P. 12(b)(7), the Court must
accept the allegations in the Complaint as true and draw all reasonable inferences in favor of the
non-moving party. Pittsburgh Logistics Sys., Inc. v. C.R. England, Inc., 699 F.Supp.2d 613, 618
(W.D. Pa. 2009). In addition, a Court may consider “relevant, extra-pleading evidence” during
29
its evaluation of a Fed.R.Civ.P. 12(b)(7) motion. Citizen Band Potawatomi Indian Tribe of OK
v. Collier, 17 F.3d 1292, 1293 (10th Cir. 1994). Defendants argue that some of the named
representatives have failed to join their spouses who, they argue, must be joined if feasible.
III. FDIC MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION
The FDIC took over as receiver for GNBT in 2004. The FDIC argues that several
Plaintiffs, who have loans that originated with GNBT, failed to file a claim with the FDIC as
required by the Financial Industry Reform and Recovery Act, (“FIRREA”), 12 U.S.C. § 1821.
The FDIC argues that Plaintiffs’ claims are barred by their failure to exhaust administrative
remedies. Although the FDIC does acknowledge that seven Plaintiffs filed claims, the FDIC
notes that it disallowed those claims. Even if any one of those claims should be allowed, the
FDIC argues that FIRREA does not allow those seven Plaintiffs to pursue their administrative
claims on a class-wide basis.
Plaintiffs contend that FIRREA does allow claims to be administratively pursued on a
class-wide basis. In the alternative, Plaintiffs argue that the FDIC should be estopped from
asserting this defense at this juncture, because of its continued participation in this litigation, and
because of its failure to provide Plaintiffs with sufficient notice of the receivership.
A. Failure to Exhaust Administrative Remedies Generally
“FIRREA, which was passed in response to the savings and loan crisis of the 1980s,
gives the FDIC the authority to act as a receiver or conservator for failed institutions.” Tellado v.
IndyMac Mtg. Svcs., 707 F.3d 275, 279, (3d Cir. 2013).
“The statute also creates an
administrative claims process for institutions in receivership and limits judicial review of certain
30
claims.” Id., citing 12 U.S.C. § 1821(d)(3)-(13). The United States Court of Appeals for the
Third Circuit interpreted Section 1821(d)(13) to be “a statutory exhaustion requirement: in order
to obtain jurisdiction to bring a claim in federal court, one must exhaust administrative remedies
by submitting the claim to the receiver in accordance with the administrative scheme for
adjudicating claims detailed in Section 1821(d).” Id., (citing Nat’l Union Fire Ins. Co. v. City
Sav., F.S.B., 28 F.3d 376, 383 (3d Cir. 1991)). The District Court has jurisdiction to review the
claim de novo only after a claim has been filed with the FDIC and processed. Rosa v. Resolution
Trust Corp., 938 F.2d 383, 392, n. 11.
Turning to the instant matter, of the forty three (43) named Plaintiffs, only twenty-five
(25) had loans that were originated by GNBT. Of these 25, as set forth above, only a handful
filed claims with the FDIC post-receivership. Therefore, the question becomes, whether these
claims satisfy the administrative exhaustion requirement and, if so, can they constitute class
claims under FIRREA.
As to the first question, the FDIC disallowed the claims of the seven named
representatives who filed claims. The FDIC argues that after the disallowance, FIRREA requires
Plaintiffs to take some affirmative action to continue their pre-receivership lawsuits. Plaintiffs
contend that they are not required to take any affirmative action. Rather, Plaintiffs argue that the
expiration of the claims period, which accompanies the stay is, in itself, a continuation of the
action as defined by the statute.
No authority from the Court of Appeals for the Third Circuit defines the term “continue”
under FIRREA. However, persuasive authority suggests that Plaintiffs have failed to comply
31
with 12 U.S.C. § 1821(d)(6)(B), which requires Plaintiffs to “continue an action commenced
before the appointment of a receiver” after the notice of disallowance. See Holmes v. FDIC, 861
F.Supp.2d 955 (E.D. Wis. 2012); and Dougherty v. Deutsche Bank Nat., 2011 WL 3565079
(E.D. Pa. Aug. 12, 2011).
B. Exhaustion - Class Claims
Moreover, pursuant to FIRREA, claims cannot be filed on a class-wide basis. The FDIC
argues that FIRREA, by its silence on class claims, is analogous to the Bankruptcy Code, and
therefore, impliedly prohibits class-wide claims. The GNBT Plaintiffs contend that, pursuant to
Rule 23, class-wide claims can be properly maintained on a class-wide basis. In the alternative,
the GNBT Plaintiffs contend that if class-wide claims are held to be improper, the FDIC should
not be allowed to pursue this defense because the FDIC failed to provide the individual notice
required by FIRREA. The GNBT Plaintiffs argue that the FDIC must mail individual notice to
each GNBT class member and then accept otherwise untimely claims.
The Court finds that neither FIRREA nor Rule 23 authorize claims against the FDIC to
be filed on a class-wide basis. With regard to FIRREA itself, the Court of Appeals for the Third
Circuit has suggested in other contexts that “in the absence of more specific legislative authority,
in interpreting FIRREA we will apply the definition of ‘claim’ . . . contained in the Bankruptcy
Code . . . .” Nat’l Union Fire Ins. Co. v. City Sav., F.S.B., 28 F.3d 376, 386-87 (3d Cir. 1994).
The Court of Appeals suggested, in an unpublished decision, that claims may not be filed on a
class-wide basis under the Bankruptcy Code. In re W.R. Grace & Co., 316 Fed. Appx. 134 (3d
Cir. 2009). In W.R. Grace, the Court reasoned that “the authority to act for a class pursuant to
32
Rule 23 does not imply any authorization to file a proof of claim for an individual in bankruptcy
proceedings.” Id. at 136.
Further, the Rules Enabling Act prohibits the Federal Rules from expanding any
substantive rights. The Rules Enabling Act, which gives the judicial branch the power to
promulgate the Federal Rules of Civil Procedure, requires that these rules “not abridge, enlarge,
or modify any substantive right.” 28 U.S.C. § 2072. If read as the Plaintiffs suggest, Rule 23
would effectively trump FIRREA’s administrative scheme and thereby effectively abridge
FIRREA and enlarge the class members rights against the FDIC. As a matter of first impression,
the Court finds that, like the Bankruptcy Code, FIRREA does not authorize the pursuit of claims
on a class-wide basis.
C. Waiver Based on Estoppel and Lack of Notice
Plaintiffs argue that the FDIC should be estopped from raising its attack on subject matter
jurisdiction because of the FDIC’s continued participation in this litigation. This argument is
specious. It is well established that this Court’s “subject matter jurisdiction cannot be expanded
to account for the parties’ litigation conduct.” Grupo Dataflux v. Atlas Global Group, L.P., 541
U.S. 567, 570 (2004) (internal quotations and citations omitted); see also Insurance Corp. of
Ireland, Ltd. v. Campagnie des Bauxites de Guinee, 456 U.S. 694 (1982); and American Fire &
Casualty Co. v. Finn, 341 U.S. 6 (1951).
It is equally well established that if, at any time prior to final judgment, it appears that
there is no longer subject matter jurisdiction, a Court must immediately dismiss the action and, in
33
fact, is powerless to do otherwise. As the Supreme Court has stated, in two cases nearly 100
years apart:
[T]he rule, springing from the nature and limits of the judicial
power of the United States is inflexible and without exception,
which requires this court, of its own motion, to deny its
jurisdiction, and, in the exercise of its appellate power, that of all
other courts of the United States, in all cases where such
jurisdiction does not affirmatively appear in the record.
Insurance Corp. of Ireland, Ltd., 456 U.S. at 702, quoting Mansfield, Coldwater & Lake
Michigan Ry. v. Swan, 111 U.S. 379, 382 (1884).
Plaintiffs argue in the further alternative that the FDIC failed to give the individual notice
required by FIRREA. Plaintiffs argue, therefore, that they should be excused from exhausting
their administrative remedies.
The FDIC argues that it provided notice by: (1) publishing notice of the receivership in a
Tallahassee, Florida area newspaper; (2) mailing notice of the receivership to the class members’
attorneys and to the opt out Plaintiffs’ attorneys; and (3) substituting itself for GNBT in this
action.
The Court of Appeals for the Third Circuit has not addressed this issue. Under FIRREA,
there are two separate and distinct procedures for notice – one governing notice of the
receivership, and the other governing notice of the claims’ bar date and the need to file claims
with the receiver.
34
When the FDIC takes over a failed bank as a receiver, FIRREA mandates that the FDIC
must first give notice that it has been so appointed. 12 U.S.C. § 1821(d)(5)(C)(ii). Then, the
receiver must notify creditors that they must “present their claims, together with proof” by a
specified date. 12 U.S.C. §§ 1821(d)(3)(B)(1), 1821(d)(3)C). Courts that have addressed the
issue have consistently interpreted the two provisions as separate requirements having separate
remedies. See infra.
Section 1821(d)(5)(C)(ii)(I) provides that the receiver may not disallow a claim as
untimely if “the claimant did not receive notice of the appointment of the receiver in time to file
such claim before” the bar date. Section 1821(d)(5)(C)(ii)(I). Importantly, this section does not
proscribe the form of notice necessary to satisfy this provision. There is no dispute that the
FDIC did mail notice to class counsel upon being appointed receiver for GNBT.
Section 1821(d)(3)(C), requiring notice to creditors, applies only to the creditors’ need to
file claims with the FDIC before the bar date. FIRREA requires that the FDIC “promptly
publish a notice to the depository institution’s creditors to present their claims, together with
proof, to the receiver by a date specified in the notice,” followed by republication approximately
one or two months later. 12 U.S.C. § 1821(d)(3)(B). It must also mail a similar notice “to any
creditor shown on the institution’s books . . . .” Section 1821(d)(3)(C). The statute does not
provide any penalties if the FDIC fails to comply with the notice requirements.
Plaintiffs argue that the individual GNBT claimants both appeared on the banks’ books
and, because Plaintiffs were members of a then certified class, were easily discoverable by the
FDIC. Under § 1821(d)(5), they argue, the claims of absent members cannot be disallowed
35
because Plaintiffs received no notice of the bar date. Plaintiffs further argue that due process
requires that they should be given individual notice consistent with Rule 23.
Most Courts that have considered the notice provisions of FIRREA have compared
§ 1821(d)(3)(C) to § 1821(d)(5) and concluded that, because the latter contains a statutory
penalty for failure to comply and the former does not, Congress did not intend to provide a
remedy for violations of § 1821(d)(3)(C). See Freeman v. FDIC, 56 F.3d 1394, 1402 (D.C. Cir.
1995); Intercontinental Travel Mktg. v. FDIC, 45 F.3d 1278 (9th Cir. 1994);
Meliezer v.
Resolution Trust Corp. 952 F.2d 879, 882-82 (1st Cir. 1992).
Further, the remedy provided by § 1821(d)(5) for claimants has been construed as
requiring only actual notice of the receivership, rather than mailed individual notice.
Substitution of the receiver into a pending lawsuit has been held to be sufficient actual notice to
parties in that action. See Tri-State Hotels v. FDIC, 79 F.3d 707, 716 (8th Cir. 1996) (exhaustion
of administrative remedies not required when claimant had actual notice); Freeman, 56 F.3d at
1404 (actual notice of receivership put plaintiffs on inquiry notice of claims bar date); and
Intercontinental Travel Mktg., 45 F.3d at 1281 (stipulation of substitution provided notice of
receivership). Publication in local newspapers is sufficient notice of the receivership. Tillman v.
Resolution Trust Corp., 37 F.3d 1032, 1036 (4th Cir. 1994) (holding that evidence of publication
in local newspapers precludes defense of lack of notice of receivership). Further, notice was
given to class counsel for a then certified class. Although Plaintiffs attempt to argue that
individual notice to each class member was required, this argument makes no sense under
FIRREA or the Rules of Professional Conduct. Counsel for the FDIC was almost certainly
36
barred by the Rules of Professional Conduct from directly communicating with absent class
members. At that time, they were adverse parties the FDIC knew to be represented after Rule 23
certification. Instead, the FDIC sent notice to Plaintiffs’ counsel. Accordingly, Plaintiffs’
argument that they should be excused from FIRREA’s administrative exhaustion requirement
due to lack of notice is without merit.
IV. ALL DEFENDANTS’ MOTIONS TO DISMISS FOR FAILURE TO STATE A CLAIM
A. Personal Bankruptcies - Lack of Standing
Defendants argue that seventeen (17) out of forty-three (43) named representatives have
filed for personal bankruptcy and failed to list this action as an asset of the bankruptcy estate.
Plaintiffs concede that these representatives have filed for bankruptcy. Plaintiffs further concede
that their failure to list this action as an asset means they are not the “real party in interest.”
Killmeyer v. Ogelbay Norton Company, 817 F.Supp.2d 681 (W.D. Pa. 2011).
However, Plaintiffs contend, that they should be given time to reopen their bankruptcies,
and substitute the bankruptcy trustee as the real party in interest. Plaintiffs request that this
Court wait until final judgment to require Plaintiffs to reopen their bankruptcy proceedings. This
would be unprecedented.
Plaintiffs submit that one representative plaintiff, Rowena Drennen, has reopened her
bankruptcy and that the Trustee has abandoned this claim to her. On this record, it appears that
Ms. Drennen may have successfully reopened the relevant bankruptcy proceeding, and therefore,
may be the real party in interest for her claim. Accordingly, her individual claim survives at this
37
juncture. The remainder of the claims of those Plaintiffs who are not the real parties in interest
are dismissed.
B. Loans Not Originated or Assigned to Defendants
Plaintiffs concede that they lack standing against some Defendants, and therefore, they
concede that they can only pursue claims against those Defendants who either originated or were
assigned their loans. Accordingly, all Plaintiffs’ claims against a Defendant that did not issue or
otherwise acquire their loans are dismissed for lack of standing.
C. RESPA
Defendants contend that Plaintiffs have failed to state a claim for RESPA violations.
Defendants argue that Plaintiffs’ claims regarding discount fees are not settlement services under
RESPA.
Defendants further argue that Plaintiffs’ RESPA claim fails because there is no
allegation that the fees were split among entities. Defendants also contend that Plaintiffs’
arguments in support of their kickback claims fail.
Plaintiffs allege RESPA violations related to two different sections of the statute, which
govern two different types of fees. Broadly speaking, the fees are: (1) loan origination and other
loan fees and (2) title fees. The first are often referred to as “Section 800” fees, based upon the
section of the HUD - 1 form where they are located. The other type of fee is a “Section 1100”
fee.
In Freeman v. Quicken Loans, 132 S.Ct. 2034 (2012), the United States Supreme Court
held that “Section 2607 (b) [which governs Section 1100 fees] unambiguously covers only a
settlement service provider’s splitting of a fee with one or more other person; it cannot be
38
understood to reach a single provider’s retention of an unearned fee.” Id. at 2040 (footnote
omitted). Defendants contend that this holding is fatal to Plaintiffs’ Section 1100 claims.
Plaintiffs only real response appears to be that the majority of their RESPA claims are Section
800 claims. Accordingly, pursuant to Freeman, Plaintiffs’ Section 1100 claims, which allege
only a single provider’s retention of an unearned fee, are properly dismissed.
D. Failure to Join Spouses
Defendants argue that Plaintiffs Edward Kruszka and Richard Montgomery should be
dismissed pursuant to Fed.R.Civ.P. 12(b)(7) because their spouses have not been joined.
Plaintiffs contend that Defendants have failed to meet their burden of proving that spouses are
“necessary and indispensable parties” whose joinder is not feasible under Rule 19. “The moving
party bears the burden of showing that a non-party is both necessary and indispensable.”
Pittsburgh Logistics Systems, Inc. v. C.R. England, Inc., 669 F.Supp.2d 613, 618 (W.D. Pa
2009).
The plain language of Rule 19(a) supports Defendants’ position. Plaintiffs have not
joined the spouses of Mr. Kruszka and Mr. Montgomery, nor have they identified why joinder is
not feasible. Accordingly, their claims are dismissed.
E. Timeliness - RESPA and TILA
1. One Year Statute of Limitations
Much ink has been spilled on this issue. Defendants argue that Plaintiffs did not file any
case within the one-year statute of limitations applicable to RESPA actions and to TILA actual
damages actions under § 1640(e) of that statute. Plaintiffs contend that the Court of Appeals
39
comments, albeit in dicta, regarding the applicability and interplay of the relation-back theory
and class action tolling make this issue inappropriate for resolution on a Fed.R.Civ.P. 12(b)(6)
Motion.
Plaintiffs further point to recent decisions which hold that, under the proper
circumstances, Plaintiffs would be entitled to equitable tolling: Riddle v. Bank of America, No.
12-cv-1740, 2013 WL 1482668 (E.D. Pa. April 11, 2013); Barlee v. First Horizon National
Corp., No. 12-cv-3045, 2013 WL 1389747 (E.D. Pa. Apr. 5, 2013); and Barlee v. First Horizon
National Corp., No. 12-cv-3045, 2013 WL 706091 (E.D. Pa. Feb. 27, 2013). The Court of
Appeals for the Third Circuit observed in this case that “because the question of equitable tolling
generally requires consideration of evidence beyond the pleadings, such tolling is not generally
amenable to resolution on a Rule 12(b)(6) Motion.” In re Community Bank, 622 F.3d 275, 30102 (3d Cir. 2010). Accordingly, this part of Defendants’ Motion to Dismiss is denied, without
prejudice to Defendants’ right to assert this defense on a fully developed record.
2. Rescission
Defendants argue that Plaintiffs have failed to state a claim for rescission under § 1635(f)
of TILA because: (1) rescission is subject to a statute of repose which cannot be tolled for any
reason; (2) the right to rescind is barred by Plaintiffs’ refinancing of the loans at issue; and
(3) Plaintiffs have failed to tender back.
As to the latter two arguments, evaluation of these claims would require an inquiry into
factual issues outside the allegations of the Joint Consolidated Amended Complaint. Plaintiffs
contend that Defendants Rule 12(b)(6) Motions on this issue should be denied.
40
With regard to the issue of equitable tolling, Plaintiffs contend they are seeking to apply
class action, or American Pipe tolling (see American Pipe and Constr. Co. v. Utah, 414 U.S. 538
(1974)), which they argue can trump a statute of repose. On this issue, the Court of Appeals for
the Third Circuit recently held that a TILA claim for rescission need not be filed in Court within
three (3) years, but rather, the plaintiffs need only provide written notice to their lender within
three years. Sherzer v. Homestar Mtg Services, 707 F.3d 255 (3d Cir. 2013).
In order to evaluate this Motion, the Court would be required to engage in a detailed
analysis of whether, and when, each putative class member who seeks rescission provided
written notice to their lender. This inquiry is not appropriate for resolution on a Motion to
Dismiss. Accordingly, this part of Defendants’ Motion to Dismiss is denied, without prejudice
to Defendants’ right to assert this defense on a fully developed record.
F. TILA and RICO
Defendants argue that Plaintiffs have failed to state a claim upon which relief can be
granted under either TILA or RICO. Plaintiffs contend that there are numerous factual issues in
dispute on this issue which preclude granting a Rule 12(b)(6) Motion to Dismiss. In this case,
the Court of Appeals has repeatedly emphasized that a statute of limitations defense should not
be evaluated at this stage of the pleadings. See, In re Community Bank of Northern Virginia,
622 F.3d 275, 292-93 (3d Cir. 2010). Accordingly, this part of Defendants’ Motion to Dismiss is
denied, without prejudice to Defendants’ right to assert this defense on a fully developed record.
41
V. CONCLUSION
For the reasons set forth above, the Court entered its Order (doc. no. 605), on the thenpending Motions to Dismiss (doc. nos. 516 and 520), on June 12, 2013.
incorporated by reference as if fully set forth herein.
s/ Arthur J. Schwab
Arthur J. Schwab
United States District Judge
cc: All Counsel of Record
42
That Order is
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?