TRUNZO et al vs CITI MORTGAGE et al
Filing
171
OPINION. Signed by Judge Mark R. Hornak on 3/31/14. (bdb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
ALEXANDRA R. TRUNZO and ANTHONY )
HLISTA,
)
)
Plaintiffs,
Civil Action No.2: l1-cv-01124
)
)
)
)
v.
CIT! MORTGAGE, et. al.,
Judge Mark R. Hornak
)
)
Defendants.
)
OPINION
Mark R. Hornak, United States District Judge
Before the Court are three motions: (1) Defendant CitiMortgage, Inc.'s Motion to Strike
Class Allegations, ECF No. 80; (2) Defendant Phelan, Hallinan, and Schmieg, LLP's Motion
Pursuant to Federal Rule of Civil Procedure 12(c) to Dismiss Class Action Allegations, ECF No.
100; and (3) Defendant Seterus, Inc.'s Motion to Deny Class Certification, ECF No. 103. The
Court has reviewed the Amended Class Action Complaint filed by Plaintiffs Alexandra Trunzo
and Anthony Hlista (collectively "Homeowners" or "Plaintiffs"), Defendants' respective
Motions, and the corresponding briefs in support and opposition to these Motions.
For the
reasons that follow, (1) Defendant CitiMortgage, Inc.' s Motion to Strike Class Allegations is
granted; (2) Defendant Phelan, Hallinan, and Schmieg, LLP's Motion Pursuant to Federal Rule
of Civil Procedure 12(c) to Dismiss Class Action Allegations is denied without prejudice; and (3)
Defendant Seterus, Inc.' s Motion to Deny Class Certification is also denied without prejudice.
1
I. BACKGROUND
This Court explained the essential facts surrounding this case in Trunzo v. CUi Mortgage,
876 F. Supp. 2d 521 (W.D. Pa. 2012) ("Trunzo 1'). They are as follows.
Plaintiffs bring a class-action suit against three defendants who are all related to the
collection of payments due under Plaintiffs' mortgage and associated note. These defendants are
CitiMortgage ("Citi"), LBPS ("Seterus"), I and Phelan, Hallinan, and Schmieg, LLP ("PHS").
According to the Amended Complaint, the purported class is comprised of
all former or current homeowners (sometimes referred to as "Homeowners") who
obtained financing secured by a first mortgage on property located within the
Commonwealth of Pennsylvania, wherein collection demands on said mortgage
loans were made by Defendant Phelan. The class includes, but is not limited to,
Homeowners whose Note and Mortgage was serviced by Citi or LBPS. The class
excludes Homeowners wherein no payments, or demands for payments, have
been made in the past six years.
PL's Am. Class Action Compi. ("Am. CompI."), ECF No. 34, ~ 31.
Plaintiffs executed a promissory note and mortgage with their original lender, West Penn
Financial ("WPF") on August 31, 2007, in order to purchase a house located in Bethel Park,
Pennsylvania. Shortly after WPF and Plaintiffs completed their transaction, Plaintiffs received a
document entitled "Notice of Assignment, Sale or Transfer of Servicing Rights" ("First
Servicing Notice"). Am. Compi. Ex. C, ECF No. 34-3. The First Servicing Notice informed
Plaintiffs that, on the same day that Plaintiffs obtained their mortgage from WPF, WPF
transferred the servicing rights under the mortgage-i.e. "the right to collect payments"-to Citi.
Id. The notice specifically provided that this transfer "does not affect any term or condition of
the mortgage instruments, other than terms directly relating to the servicing of your loan." Id.
I
LBPS has since changed its name to "Seterus" and will be referred to as such throughout this Opinion.
2
Plaintiffs also received a document from WPF entitled "Mortgagee Letter," which
announced that Citi was the "new servicer of [Homeowners'] loan" and that all future
correspondence and payments should be directed to Citi. Am. CompI. Ex. F, ECF No. 34-6.
Similar to the First Servicing Notice, the Mortgagee Letter stated that the transfer of the
servicing rights from WPF to Citi "[did] not affect any term or condition of the mortgage
instrument." Id. While both the First Servicing Notice and Mortgagee Letter advised that the
servicing rights were transferred to Citi on August 31, 2007, Plaintiffs assert that the beneficial
interest in their note was acquired, and is currently held, by the Federal National Mortgage
Association, colloquially known as "Fannie Mae." Am. CompI.
~
4, Ex. E., ECF Nos. 34, 34-5.
Plaintiffs met their payment obligations under their note until June 2010, when they
ceased payment and entered into default on their mortgage. In early August 2010, Plaintiffs
contacted Citi to negotiate an "alternate arrangement" whereby Plaintiffs would be able to
become current on their mortgage. Am. CompI.
~
11, ECF No. 34. On August 13, 2010,
Plaintiffs received a letter dated August 6, 2010 from Citi requesting certain financial
information in order to evaluate whether Plaintiffs would be eligible for a modified repayment
schedule, forbearance plan, loan modification, or other alternate method for Plaintiffs to return to
good standing on their mortgage. Am. CompI. Ex. I, ECF No. 34-9. Plaintiffs were asked to
respond with the requested information by August 16,2010, which was ten (10) days from the
date of the letter.
On August 16, 2010, Plaintiffs attempted to remit a payment to Citi, which was refused.
Citi stated that it would not accept Plaintiffs' payment because their mortgage had, at that point,
already been referred for foreclosure. Shortly thereafter, Plaintiffs received a letter dated August
10,2010 from Citi's Foreclosure Department, informing Plaintiffs that their mortgage was still in
3
default and claiming "[a]ll reasonable efforts afforded you to cure this default have failed." Am.
CompI. Ex. J, ECF No. 34-10. The letter further provided that Plaintiffs should refer all future
questions to the law firm handling the foreclosure proceedings, Defendant PHS.
Accordingly, Plaintiffs contacted PHS and inquired about avoiding foreclosure. This
inquiry by Plaintiffs to PHS led to a litany of conflicting reinstatement figures, fees, and costs
that forms the primary nexus of Plaintiffs' Amended Complaint. This series of contradictory
communications began on August 30, 2011, when Plaintiffs received an initial letter from PHS
that contained a total reinstatement amount of $5,204.44 needed for Plaintiffs to become current
on their mortgage. Am. CompI. Ex. K, ECF No. 34-11.
Meanwhile, Citi assigned its servicing rights to Plaintiffs' mortgage to Defendant Seterus
on November 1,2010. Plaintiffs were informed of this transfer via a letter entitled "Transfer of
Servicing Notice" ("Second Servicing Notice"). Am. CompI. Ex. G, ECF No. 34-7. The Second
Servicing Notice contains language similar to that found in the First Servicing Notice, namely
that the transfer "[did] not affect any other terms or conditions of [Plaintiffs'] mortgage other
than the terms directly related to the servicing of [their] mortgage loan." Id. Seterus promptly
mailed Plaintiffs a letter on November 9, 2010 that detailed the total amount of their debt with
fees, $73,611.41, but Seterus did not include in this letter a loan reinstatement amount.
The November 9th letter was followed by: (1) a December 6th letter from Seterus that
included a reinstatement amount with fees, totaling $6,416.09, which was different from the
reinstatement amount of the August 30th letter from PHS; and (2) a December 7th letter from
PHS that included yet a third reinstatement amount with fees, totaling $5,362.59, which was
different from the two prior amounts present in the November 9th and December 6th letters. Am.
CompI. Exs. M, N, 0, ECF. Nos. 34-13,34-14,34-15.
4
After remitting payment to PHS on December 10, 2010, Plaintiffs assert that their
mortgage was current through, but not including, January 1,2011. They received correspondence
from Seterus on December 20, 2010 that seemingly advised Plaintiffs that their payment was
received by PHS, because Plaintiffs' escrow account had been credited. However, Plaintiffs
allege that the December 20th correspondence also included an invoice for January 2011,
whereby Seterus demanded an additional, unauthorized payment of$1,053.50. Am. Compl. ~ 23.
Then, on January 4,2011, Plaintiffs received a response to a "Qualified Written Request"
submitted to Seterus on November 17, 2010. Seterus's response showed that Plaintiffs were, at
this time, current on their mortgage, their escrow account was not overdrawn, and that the
$1,053.50 in attorney fees and mortgage costs had been waived. Despite this account statement,
Plaintiffs claim to have again received an invoice from Seterus in February 2011 that included
this same, supposedly-waived $1,053.50 charge. [d.
~
25. Plaintiffs also contend that Seterus
levied late fees against them when they refused to pay this incorrect charge, which the servicer
has repeatedly declined to waive even though, according to Plaintiffs, Seterus has admitted that
the $1,053.50 was demanded in error.
On August 3, 2011, Plaintiffs filed a class-action complaint in the Court of Common
Pleas of Allegheny County. ECF No. 1-2. Seterus removed Plaintiffs' action to this Court on
September 1, 2011, based on several of Plaintiffs' claims that arise under federal law. ECF No.
1. Citi and PHS timely consented to the removal. ECF Nos. 3, 4. Each of the Defendants
subsequently filed an initial Motion to Dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6), to which Plaintiffs responded by filing an Amended Complaint. ECF Nos. 19,22,24,
34. After all three Defendants filed Motions to Dismiss, this Court granted Defendants' Motions
in part and denied them in part.
5
As a result of this Court's June 25, 2012 Opinion and Order, Plaintiffs' Amended
Complaint was trimmed down to the following four Counts: (l) unjust enrichment against
Seterus (Count II); (2) violations of the federal Fair Debt Collections Practices Act against
Seterus and PHS (Count III); (3) violations of the Pennsylvania Loan Interest and Protection Act
under 41 Pa. Cons. Stat. Ann. § 502 against Seterus and PHS (Count VI); and (4) violations of
the Pennsylvania Unfair Trade Practices and Consumer Protection Law under 73 Pa. Cons. Stat.
Ann. § 201-2(4)(xxi)) (Count VII). See Trunzo 1,876 F. Supp. 2d 521.
On February 1, 2013, this Court granted in part and denied in part Plaintiffs' Motion to
Vacate the Initial Case Management Order in light of the Defendants' respective Motions to
Deny/StrikelDismiss the Trunzo's class allegations. See Order dated Feb. 1, 2013 (text -only
entry). The provisions of subparagraphs 3(e)-(h) inclusive were stayed pending further Order of
this Court. Id On February 26, 2013, this Court granted Plaintiffs' Motion for Reconsideration,
such that the provisions of subparagraph 3(d) of the Initial Case Management Order were also
,
stayed. See Order, ECF No. 141. As a result of these Orders, the following provisions were
stayed: (1) discovery related to class certification; (2) the filing of the parties' expert reports as to
class certification; (3) depositions of class certification experts; (4) the filing of Plaintiffs'
Motion for Class Certification, along with Defendants' Joint Memorandum in Opposition and
any ensuing Reply by Plaintiffs; and (5) a class certification hearing.
6
II. DISCUSSION
a. Defendant Citi's Motion to Strike Class Allegations
Defendant Citi requests that the Court strike the class allegations against it contained in
Plaintiffs' Amended Complaint pursuant to Federal Rule of Civil Procedure 23(d)(l )(D). "The
class action is an exception to the usual rule that litigation is conducted by and on behalf of the
individual named parties only." Wal-Mart Stores v. Dukes, 131 S. Ct. 2541, 2550 (2011)
(quotation marks omitted). "To invoke this exception, every putative class action must satisfy
the four requirements of Rule 23(a) and the requirements of either Rule 23(b)(l),(2), or (3)."
Marcus v. BMW ofNorth America, LLC, 687 F.3d 583,591 (3d Cir. 2012) (citing Fed. R. Civ. P.
23(a)-(b)). To satisfy Rule 23(a),
(l) the class must be "so numerous that joinder of all members is impracticable"
(numerosity); (2) there must be "questions of law or fact common to the class"
(commonality); (3) "the claims or defenses of the representative parties" must be
"typical of the claims or defenses of the class" (typicality); and (4) the named
plaintiffs must "fairly and adequately protect the interests of the class" (adequacy
of representation, or simply, adequacy).
In re Cmty. Bank ofN Va., 622 F.3d 275,291 (3d Cir. 2010) (quoting Fed. R. Civ. P. 23).
As for the latter part of the Rule 23 analysis, Plaintiffs seek to certify their purported
class under both Rule 23(b)(2) and Rule 23(b)(3). See Am. Compl.
~
30. Rule 23(b)(2) provides
that "[a] class action may be maintained if Rule 23(a) is satisfied and if ... (2) the party
opposing the class has acted or refused to act on grounds that apply generally to the class, so that
final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a
whole."
Fed. R. Civ. P. 23(b)(2).
Rule 23(b)(3) provides that "[a] class action may be
maintained if Rule 23(a) is satisfied and if ... (3) the court finds that the questions of law or fact
common to class members predominate [predominance] over any questions affecting only
7
individual members, and that a class action is superior [superiority] to over available methods for
fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).
Under Rule 23( d)( 1)(D), a court may "require that the pleadings be amended to eliminate
allegations about representation of absent persons and that the action proceed accordingly." Fed.
R. Civ. P. 23(d)(1)(D). However, courts grant motions to strike under Rule 23(d)(1)(D) before
class discovery only in "the rare few [cases] where the complaint itself demonstrates that the
requirements for maintaining a class action cannot be met." Goode v. LexisNexis Risk & Info.
Analytics Grp., Inc., 284 F.R.D. 238, 246 (E.D. Pa. 2012) (quoting Landsman & Funk P.e. v.
Skinder-Strauss Associates, 640 F.3d 72, 93 n.30 (3d Cir. 2011
», and "no amount of discovery
will demonstrate that the class can be maintained," id. at 245; see also Doninger v. Pac. Nw.
Bell, Inc., 564 F.2d 1304, 1313 (9th Cir. 1977) (holding that class certification was properly
denied without discovery where plaintiffs could not make a prima facie showing of Rule 23' s
prerequisites or that discovery measures were not likely to produce persuasive information
substantiating the class action allegations); Woodard v. FedEx Freight East, Inc., 250 F.R.D.
178, 182 (M.D. Pa. 2008) (noting that a "district court will strike class allegations without
permitting discovery or waiting for a certification motion where the complaint and any affidavits
clearly demonstrate that the plaintiff cannot meet the requirements for a class action").
As the Supreme Court has noted:
Sometimes the issues are plain enough from the pleadings to determine whether
the interests of the absent parties are fairly encompassed within the named
plaintiff's claims, and sometimes it may be necessary for the court to probe behind
the pleadings before coming to rest on the certification question.
General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147, 160 (1982). "The plaintiff
bears the burden of advancing a prima facie showing that the class action requirements of
Fed.R.Civ.P. 23 are satisfied or that discovery is likely to produce substantiation of the class
8
allegations." Mantolete v. Bolger, 767 F.2d 1416, 1424 (9th Cir. 1985). Absent such a showing,
a trial court's refusal to allow class discovery is not an abuse of discretion. Id. 2
Here, Defendant Citi requests that the Court strike all class allegations in Plaintiffs'
Amended Complaint with respect to Citi. See Def.'s Mot. to Strike Class Allegations, ECF No.
80. In Trunzo I, this Court dismissed all of the claims against Chi except for Count VII, which
alleges that Citi violated the catch-all provision of the Pennsylvania Unfair Trade Practices and
Consumer Protection Law ("UTPCPL"), 73 Pa. Con. Stat. Ann. § 201-2(4)(xxi).
As an initial matter, this Court agrees that the allegations in Plaintiffs' Amended
Complaint make clear that Plaintiffs' purported class cannot be certified under Rule 23(b)(2). As
Plaintiffs concede, see PIs.' Br. in Opp'n at 7 n.6, nowhere in Plaintiffs' Amended Complaint
have they requested any "final injunctive or corresponding declaratory relief3 respecting the class
as a whole." See Fed. R. Civ. P. 23(b)(2). Rather, Plaintiffs request the following relief in the
remaining Counts of their Amended Complaint: restitution, an accounting, and constructive trust
2 Plaintiffs filed a Notice of Supplemental Authority at ECF No. 162, among many other such Notices, bringing to
the Court's attention Durso v. Samsung Electronics America, Inc., 2013 WL 5947005, *4 (D. New Jersey 2013), in
which the United States District Court for the District of New Jersey concluded that a motion to strike was
premature when it was filed before the plaintiffs' class certification motion was filed. However, the Durso court
still recognized that "a defendant may move to strike class action allegations prior to discovery in cases "where the
complaint itself demonstrates that the requirements for maintaining a class action cannot be met." Id at *3 (citing
Landsman & Funk PC, 640 F.3d at 93 n.30). This Court does not find the Durso court's "premature motion to
strike" analysis persuasive, as the Durso court characterizes a motion to strike class allegations under Federal Rule
of Civil Procedure 23 as, "for all practical purposes, identical to an opposition to a motion for class certification."
Id at *4. That is not necessarily so. An opposition to a motion for class certification does not per se entail the
argument that "no amount of discovery will demonstrate that the class can be maintained," Goode, 284 F.R.D. at
246, and that the district court can "strike allegations without permitting discovery or waiting for a certification
motion where the complaint and any affidavits clearly demonstrate that the plaintiff cannot meet the requirements
for a class action," Woodard, 250 F.R.D. at 182. Rather, this narrow premise is the province of a defendant's
motion to strike. Plaintiffs also filed a Notice of Supplemental Authority at ECF No. 151 for Rodriguez v. Nat'l City
Bank, 726 F.3d 372 (3d Cir. 2013), and Hayes v. Wal-Mart Stores. Inc., 725 F.3d 349 (3d Cir. 2013), citing these
cases for the proposition that class discovery is important. While that is undoubtedly true in certain circumstances,
the purpose of a motion to strike class allegations is for the defendant to allege, in those "rare cases," that the
complaint itself demonstrates that the requirements for maintaining a class action cannot be met, such that class
discovery is unnecessary.
"Declaratory relief 'corresponds' to injunctive relief when as a practical matter it affords injunctive relief or serves
as a basis for later injunctive relief." Fed. R. Civ. P. 23(b)(2) Advisory Committee Note.
3
9
in Count II; statutory damages, attorney's fees, and costs under the Federal Fair Debt Collection
Practices Act in Count III; statutory damages, attorney's fees, costs, and expenses under the
Pennsylvania Loan Interest and Protection Act in Count VI; and statutory damages, attorney's
fees, and costs under the UTPCPL in Count VII.
Rule 23(b )(2) certifications do "not extend to cases in which the appropriate final relief
relates exclusively or predominantly to money damages." Fed. R. Civ. P. 23(b)(2) Advisory
Committee Note. Accordingly, the Supreme Court has held that claims for monetary relief
cannot be certified under Rule 23(b)(2) where "the monetary relief is not incidental to injunctive
or declaratory relief' and "each class member would be entitled to an individualized award of
monetary damages." Wal-Mart Stores, 131 S. Ct. at 2557. The named Plaintiffs' Amended
Complaint does not request injunctive or corresponding declaratory relief of any kind. Thus,
Plaintiffs cannot seek to certify their purported class under Rule 23(b)(2).
b. Plaintiffs' class allegations are deficient under Rule 23(a)(3) and Rule
23(b)(3) because Plaintiffs' UTPCPL claim against Citi is not typical of the
putative class and individual issues predominate.
It is also plain from the face of Plaintiffs' Amended Complaint that Plaintiffs' purported
class fails under the antecedent typicality requirement of Rule 23(a)(3), as well as under the
predominance requirement of Rule 23(b)(3). As explained above, "sometimes the issues are
plain enough from the pleadings to determine whether the interests of the absent parties are fairly
encompassed within the named plaintiffs claims." Falcon, 457 U.S. at 160. "The plaintiff bears
the burden of advancing a prima facie showing that the class action requirements of Fed.R.Civ.P.
23 are satisfied or that discovery is likely to produce substantiation of the class allegations."
Mantolele, 767 F.2d at 1424 (emphasis added). Absent such a showing, a trial court's refusal to
allow class discovery is not an abuse of discretion. Id
10
In Plaintiffs' Amended Complaint, Plaintiffs define the putative class as:
all former or current homeowners (sometimes referred to as "Homeowners") who
obtained financing secured by a first mortgage on property located within the
Commonwealth of Pennsylvania, wherein collection demands on said mortgage
loans were made by Defendant Phelan. The class includes, but is not limited to,
Homeowners whose Note and Mortgage was serviced by Citi or LBPS. The class
excludes Homeowners wherein no payments, or demands for payments, have
been made in the past six years.
Am. CompI.
~
31. To satisfy Rule 23(a), the defined class must meet the Rule's requirements of
numerosity, commonality, typicality, and adequacy of representation. See In re Cmty, Bank ofN
Va., 622 F.3d at 291. Further, Rule 23(b)(3) sets forth that:
A class action may be maintained if Rule 23(a) is satisfied and if:
(3) the court finds that the questions of law or fact common to class members
predominate over any questions affecting only individual members, and that a
class action is superior to other available methods for fairly and efficiently
adjudicating the controversy. The matters pertinent to these findings include:
(A) the class members' interests in individually controlling the prosecution or
defense of separate actions;
(B) the extent and nature of any litigation concerning the controversy already
begun by or against class members;
(C) the desirability or undesirability of concentrating the litigation of the
claims in the particular forum; and
(D) the likely difficulties in managing a class action.
Fed. R. Civ. P. 23(b)(3) (emphasis added).
Citi avers that Plaintiffs' class allegations are
deficient under Rule 23(a)(3) because Plaintiffs' claim is not typical of the putative class, and
Plaintiffs' class allegations are deficient under Rule 23(b )(3) because individual issues
predominate. The essence of Citi's whole argument is that the named Plaintiffs' "allegations
give rise to defenses possessed by Citi that are unique to the named Plaintiffs' specific
circumstances
in particular, defenses concerning the elements of causation and deceptive
conduct." Mem. in Supp. of CitiMortgage Inc's Mot. to Strike Class Allegations ("Def. 's Mem.
11
in Supp."), ECF No. 81, at 1. "Those defenses are based on Plaintiffs' own allegations,4 which
show that their particular alleged harm (a December 2010 payment of $5,362.59) occurred as a
result of what Plaintiffs allege happened at a time when Citi had nothing to do with Plaintiffs'
mortgage." Id at 1-2. Citi further avers that the named Plaintiffs' purported class cannot be
certified under Rule 23(b)(2) because Plaintiffs are not requesting any "final injunctive or
corresponding declaratory relief," id at 4; see Fed. R. Civ. P. 23(b)(2), and Plaintiffs' purported
class fails under the antecedent typicality requirement of Rule 23(a)(3) and the predominance
requirement of Rule 23(b)(3).
Plaintiffs, on the other hand, contend that "dismissal of the class allegations at this early
stage would prevent the Trunzos from developing a class record through discovery," that Citi's
"causation defense" and "justifiable reliance" defense are without merit, and that "the deceptive
conduct pled ... preceded the initiation of the foreclosure process, and began in August of 20 10
when the Trunzos contacted Citi to negotiate an alternative arrangement whereby they would be
able to come current on their mortgager,] ... [and] instead of waiting to receive the Trunzos'
financial information as requested, Citi promptly referred the Trunzos' delinquent debt to Phelan
who immediately made its allegedly unauthorized and illegal attorneys' fee and costs demands."
PIs.' Substituted Br. in Opp'n to Citi's Mot. for a Protective Order ("PIs.' Br. in Opp'n"), ECF
No. 118, at 14,22.
Plaintiffs assert that they pled two types of UTPCPL losses in their Amended Complaint:
"first, when a charge was incurred (with or without payment), it resulted in an automatic lien on
their property. The Trunzos were, therefore, automatically injured by an ascertainable loss of the
value of their property." Id at 5 (citing Burns v. Pa. Department o/Correction, 544 F.3d 279,
4 In this way, these are really not "defenses," but are, in reality, arguments that the Amended Complaint itself lacks
the necessary plausible allegations that would support all the necessary elements of the substantive claim for relief.
12
286-87 (3d Cir. 2008)). Second, Plaintiffs aver that "during the foreclosure process the Trunzos
also incurred an ascertainable loss of money ... result[ing] from the payment of the foreclosure
related charges." Id
Citi counters that it is not arguing that the ultimate validity of its "defenses" can (or even
must) be determined based on the face of Plaintiff's Amended Complaint, as Plaintiffs represent,
see id at 14, but that "[i]t is clear, however, from the complaint itself and its attached exhibits
that Citi has individualized causation defenses based on the unique circumstances concerning
Plaintiffs' loan." Def.'s Resp. in SUpp. of Mot. to Strike Class Allegations ("Def.'s Resp."),
ECF No. 136, at 6. "Whether those defenses ultimately succeed will be decided at a later date,
but because those individual defenses will be the focus of the litigation going forward, this case
cannot proceed as a class action." Id The Court will address the elements of Rule 23, as they
pertain to Plaintiffs' class claim against Citi, seriatim.
1. Rule 23(a)
a. Numerosity
"There is no minimum number of members needed for a suit to proceed as a class
action," but "generally if the named plaintiff demonstrates that the potential number of plaintiffs
exceeds 40, the first prong of Rule 23(a) has been met." Marcus, 687 F.3d at 595 (internal
citation omitted). Plaintiffs allege in their Amended Complaint that "[t]he exact number of
Homeowners is unknown, but is believed to include well over 10,000." Am. CompI.
Court therefore finds that the numerosity requirement of Rule 23(a) could be met.
13
~
32. The
b. Commonality
The commonality requirement is satisfied "if the named plaintiffs share at least one
common question of fact or law with the grievances of the prospective class." Rodriguez v. Nat'l
City Bank, 726 F.3d 372, 380 (3d Cir. 2013). In Wal-Mart Stores, Inc. v. Dukes, the United
States Supreme Court explained that a plaintiff attempting to satisfy the commonality
requirement must demonstrate that the claims of the proposed class members "depend upon a
common contention" that is "capable of classwide resolution." 131 S. Ct. at 2551. In order for a
"contention" to constitute a "common question," it must yield the same answer with respect to
each member of the proposed class. Id; id at 2556 ("for purposes of Rule 23(a)(2), even a
single common question will do"). Here, inasmuch as the question of whether Citi "engag[ed] in
any other fraudulent or deceptive conduct which creates a likelihood of confusion or of
misunderstanding" would be a factual and legal claim common to the entire class, this criterion
could be met (as the parties do not contest). See Johnston v. HBO Film Mgmt., Inc., 265 F.3d
178, 184 (3d Cir. 2001); Lester v. Percudani, 217 F.R.D. 345, 349-50 (M.D. Pa. 2003).
c. Typicality
"The concepts of typicality and commonality are closely related and often tend to
merge." Marcus, 687 F.3d at 598 (citing Baby Neal v. Casey, 43 F.3d 48, 56 (3d Cir. 1994)).
Indeed, "[b]oth serve as guideposts for determining whether under the particular circumstances
maintenance of a class action is economical and whether the named plaintiff s claim and the
class claims are so interrelated that the interests of the class members will be fairly and
adequately protected in their absence."
Id (citing Falcon, 457 U.S. at 157).
"Typicality,
however, derives its independent legal significance from its ability to screen out class actions in
which the legal or factual position of the representatives is markedly different from that of other
14
members of the class even though common issues oflaw or fact are present." Marcus, 687 F.3d
at 598 (internal quotations omitted).
To determine whether a named plaintiff is markedly different from the class as a whole,
courts engage in a comparative analysis that addresses three distinct, though related, concerns:
(1) The claims of the class representative must be generally the same as those
of the class in terms of both (a) the legal theory advanced and (b) the factual
circumstances underlying that theory; (2) the class representative must not be
subject to a defense that is both inapplicable to many members of the class
and likely to become a major focus of the litigation; and (3) the interests and
incentives of the representative must be sufficiently aligned with those of the
class.
In re Schering Plough Corp. ERISA Lilig., 589 F.3d 585, 597 (3d Cir. 2009). Although varying
factual circumstances among class members will not always preclude the finding of typicality,
Newton v. Merrill Lynch, 259 F .3d 154, 184 (3d Cir. 2001), typicality will be defeated where "a
class representative is subject to unique defenses which threaten to become the focus of the
litigation," Schering Plough, 589 F.3d at 598; Porter v. Nationscredit Consumer Disc. Co., 229
F.R.D. 497, 499 (E.D. Pa. 2005) (denying certification ofUTPCPL claim), aff'd, 285 Fed. Appx.
871 (3d Cir. 2008).
Indeed, the Third Circuit has "explained the rationale behind this principle, noting that
the 'challenge presented by a defense unique to a class representative' is that 'the representative's
interests might not be aligned with those of the class, and the representative might devote time
and effort to the defense at the expense of issues that are common and controlling for the class.'"
Schering Plough, 589 F.3d at 598 (citing Beck v. Maximus. Inc., 457 F.3d 291, 297 (3d Cir.
2006)). In the end, the typicality requirement is not satisfied unless the "alleged cause of (the]
injuries is some common wrong" applicable to all class members. Baby Neal. 43 F.3d at 58
(citing Falcon, 457 U.S. at 157-59).
15
Here, Plaintiffs' purported class, as it relates to the only remaining allegations against
Citi for violations of the UTPCPL, fails to meet the typicality standard because the legal theories
controlling the potential class members' claims are not, and would not be, consistent class-wide. 5
Citi has identified individualized causation issues (lack of causation and intervening causes)
arising from the specific circumstances of the named Plaintiffs' claim which demonstrate that
their claim is not typical of the putative class.
The UTPCPL is Pennsylvania's consumer protection law. Bennett v. A. T Masterpiece
Homes at Broadsprings, LLC, 40 A.3d 145, 151 (Pa. Super. Ct. 2012). Its purpose is to prevent
"[un]fair methods of competition and unfair or deceptive acts or practices in the conduct of any
trade or commerce," as defined by the Act. Id; 73 Pa. Cons. Stat. Ann. § 201-3. After this
Court's decision in Trunzo I, § 201-2(4)(xxi), also known as the "catchall provision," is the only
UTPCPL provision remaining in this case under Count VII. Section 201-2(4)(xxi)'s reach is
expansive, in that it encompasses a wide range of circumstances, given that a defendant need
only engage in "any other fraudulent or deceptive conduct which creates a likelihood of
confusion or of misunderstanding" for liability to attach.
73 Pa. Cons. Stat. Ann. § 201
2(4)(xxi).
As Chi emphasized at the Motion to Dismiss stage of this case, Citi was not an original
signatory to the note and mortgage. However, as this Court noted in Trunzo I, "the Third Circuit
in In re Smith, 866 F.2d 576 (3d Cir. 1989), emphasized that a district court should not limit the
UTPCPL's application to only those circumstances where the unfair or deceptive conduct
induced the consumer to make the initial purchase." Trunzo I, 876 F. Supp. 2d at 543 (citing In
Plaintiffs contend that "this Honorable Court would not have denied Citi's Fed.R.Civ.P. 12(b) Motion to Dismiss
under the UTPCPL claims" "if Citi's asserted defenses can be determined based on the face of the Trunzos'
Complaint without discovery." However, as this Court noted in Trunzo 1, "[t]he propriety of class action treatment
for the claims that will survive the various Motions to Dismiss [was] not currently before the Court." Trunzo 1,876
F. Supp. 2d at 527.
5
16
re Smith, 866 F.2d at 576). To interpret the statute otherwise "would insulate all kinds of
practices from the UTPCPL, such as debt collection, which occur[ s] after entering an agreement
and which w[as] not a basis for the original agreement." Id.
However, the UTPCPL's expansive reach is not limitless. The UTPCPL does not impose
liability on a loan assignee absent claims of an assignee's wrongdoing. Murphy v. FD.lC., 408
Fed. Appx. 609, 611 (3d Cir. 2010); Williams v. Nat'! Sch. of Health Tech., Inc., 836 F. Supp.
273, 283 (E.D. Pa.1993) (noting that the UTPCPL "does not impose liability on parties who have
not themselves committed wrongdoing."); Roche v. Sparkle City Realty, 2009 WL 1674417, at
*4 (E.D. Pa. 2009) ("[N]umerous courts have found that loan assignees cannot be held liable
under the UTPCPL without allegations that they specifically committed wrongdoing.").
Moreover, the UTPCPL contains a "stringent causation requirement" mandating that
Plaintiffs allege and prove that Citi' s actions caused their alleged losses. See Williams v. Empire
Funding Corp., 227 F.R.D. 362, 366 (E.D. Pa. 2005); see also Hunt v. Us. Tobacco Co., 538
F.3d 217, 221 (3d Cir. 2008) (noting that the Pennsylvania Supreme Court has "categorically and
repeatedly stated that, due to the causation requirement in the Consumer Protection Law's
standing provision, 73 Pa. Cons. Stat. § 201·9.2(a) (permitting suit by private plaintiffs who
suffer loss 'as a result of the defendant's deception), a private plaintiff pursuing a claim under
the statute must prove justifiable reliance.,,).6
Plaintiffs contend that Hunt v. U.S. Tobacco Co., as a pre-Bennett Third Circuit interpretation of Pennsylvania
law, is outdated, given the Bennett court's seminal ruling that "deceptive conduct which creates a likelihood of
confusion or misunderstanding can constitute a cognizable claim under Section 20 1·2(4)(xxi)," and that "heightened
'fraud pleading' standards are not required to maintain a cause of action under the 'catch-all' section of the
UTPCPL." Based on Bennett, Plaintiffs in essence aver that reliance is not an element of a "catch-all" provision
claim when deceptive conduct is alleged under the UTPCPL. However, Bennett was silent on whether reliance is
still an element of a deceptive conduct UTPCPL claim (there being multiple elements of common law fraud), and in
fact cites approvingly to three cases where reliance is indeed a recognized element of such a claim. See Bennett, 40
A.3d at 153 (citing Schnell v. Bank ofNew York Mellon, 828 F. Supp. 2d 798 (E.D. Pa. 2011); Vassalotti v. Wells
Fargo Bank, NA., 732 F. Supp. 2d 503, 510 n. 7 (B.D. Pa. 2010); Seldon v. Home Loan Services, Inc., 647 F. Supp.
2d 451,469 (E.D. Pa. 2009)); see also Weinberg v. Sun Co, Inc., 777 A.2d 442, 446 (Pa. 2001) (recognizing that
6
17
To maintain any private action under the UTPCPL, Plaintiffs must allege and prove that
they sustained an "ascertainable loss of money or property ... as a result of' the defendant's
allegedly deceptive conduct. 73 Pa. Cons. Stat. Ann. § 201-9.2 (emphasis added); see Williams,
227 F.R.D. at 371 (a private UTPCPL plaintiff must "establish that defendant's purportedly
unlawful conduct caused a definable loss of money or property"). Moreover, in the context of
class litigation, it is well-settled that "a plaintiff must have standing to represent a class by
showing that he has been personally injured and not than an injury has been suffered by other
unidentified members of the class." Warth v. Seldin, 422 U.S. 490, 502 (1975)).
justifiable reliance is a required element in all [footnote continued from previous page] private actions seeking
money damages under the UTPCPL); Yocca v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425, 438-39 (Pa. 2004)
(same); Toy v. Metro. Life Ins. Co., 928 A.2d 186,203 (Pa. 2007) (same). Indeed, while the Bennett court held that
"heightened fraud pleading standards are not required to maintain a cause of action under the catch-all section of the
UTPCPL," Bennett did not specify whether that lower standard does or does not include individual reliance.
Notably, post-Bennett, the Pennsylvania Superior Court has recognized that the UTPCPL plaintiff must still prove
justifiable reliance and causation, because the legislature "never intended [the] statutory language directed against
consumer fraud to do away with the traditional common law elements of reliance and causation." DeArmitt v. New
York Life Ins. Co., 73 A.3d 578, 592 (Pa. Super. Ct. 2013); see also Kern v. Lehigh Valley Hasp., Inc., 2013 WL
5925741, at *3 (Pa. Com. PI. 2013) ("it is apparent that the Supreme Court of Pennsylvania has not wavered in its
holding that reliance is an element required under the UTPCPL and that the DeArmitt case, which ... was decided
by the same Court as Bennett, concurs with the Supreme Court's previous holdings on the issue of reliance"). On
January 30, 2014, the Pennsylvania Supreme Court granted allowance for appeal in Grimes v. Enterprise Leasing of
Philadelphia, 2014 WL 349263 (Jan. 302014) on this key issue, certifying for appeal "whether the Superior Court
erred when it held that a private plaintiff who alleges deceptive conduct under the UTPCPL's catch-all provision 73
P.S. § 201-2(4)(xxi) need not allege and prove justifiable reliance, contrary to the decisions of this court, earlier
decisions of the Superior Court, and federal decisions construing the UTPCPL."
Plaintiffs filed a related Notice of Supplemental Authority at ECF No. 160, noting the case of Belmont v.
MB Investment Partners, Inc., 708 F.3d 470, 497-499 (3d Cir. 2013), and contending that the Belmont court
"retreated" from Hunt's UTPCPL decision when it observed that "[i]t appears that a UTPCPL claim based on
deceptive conduct differs from a claim based on fraudulent conduct in that a plaintiff does not need to prove all of
the elements of common-law fraud or meet the particularity requirement of Federal Rule of Civil Procedure 9(b)."
Id at 498 n. 33. However, Hunt analyzed and concluded, after reading the "stringent causation requirement" of the
UTPCPL together with the statute's catch-all provision, that justifiable reliance is part and parcel with causation
under the UTPCPL, and must be considered when a court analyzes whether a private plaintiff has established that its
loss was suffered "as a result of' the defendant's deception. Hunt, 538 F.3d at 221 (citing 73 Pa. Cons. Stat. Ann. §
201-9.2(a». This Court does not find any "retreat" from Hunt by the Belmont court; rather, the Belmont court
plainly recognized that "[a]s a threshold issue, neither [one of the plaintiffs] have stated a UTPCPL claim against
[the defendant] because they have not alleged any conduct on his part, deceptive or otherwise, that caused them to
invest in North Hills." Belmont, 708 F.3d at 499 (citing Weinberg v. Sun Co., 777 A.2d 442, 446 (Pa. 2001) (noting
that a UTPCPL plaintiff must demonstrate that he justifiably relied on the defendant's deceptive practice and that he
suffered harm as a result of that reliance».
18
Here, Plaintiffs' purported class, as it pertains to Plaintiffs' UTPCPL claims against Citi,
fails to meet the typicality standard because the legal theories and defenses controlling the
potential class members' claims are not, and would not be, consistent class-wide. In addition,
Citi has an individualized lack-of-causation argument arising from the specific circumstances of
named Plaintiffs' claim, which further demonstrates that the named Plaintiffs' claim is not
typical of the putative class.
Plaintiffs' defined class is comprised of homeowners "who obtained financing secured by
a first mortgage on property" in Pennsylvania, "wherein collection demands on said mortgage
loans were made by Defendant [PHS]," and the "class includes, but is not limited to,
Homeowners whose Note and Mortgage was served by Citi or [Seterus]." Am. CompI.,r 31.
In their Amended Complaint, Plaintiffs allege in Count VII that (1) Citi "violated the
UTPCPL by misrepresenting the amount that Homeowners owed, as set forth in the previous
allegations," Id. at
,r
85; and (2) that "Homeowners paid the misrepresented and overcharged
amounts in whole or part[, and t]he fact of the Homeowners' payments, in part for the
unauthorized charges added to their debt, establish the requisite 'reliance' on Defendants'
misrepresentations," id. at
~
87.
As for damages, Plaintiffs claim that "Homeowners have
suffered damages as a result of the overcharges and misrepresentations and overcharges made by
Defendants, including, inter alia, payment of excessive and improper charges, including the
unauthorized acceleration related foreclosure fees and costs. Named Homeowners paid some or
all o/these unauthorized charges." Id. at, 88 (emphasis added).
As to Citi, the named Plaintiffs do not allege that they made any payment in response to
the August 30, 2010 letter they received while Citi still held the servicing rights to their loan.
See Am. Compi. 'If'lf 13, 14. Rather, Plaintiffs assert that their alleged harm, their December 10,
19
2010 payment of$5,362.59, was allegedly in response to a December 7,2010 letter sent to them
by Seterus, which occurred more than a month after Citi transferred its servicing rights to Seterus
on November 1, 2010. See PIs.' Am. CompI.
~'116,
19, 20.
Plaintiffs have alleged no facts to suggest that they sustained, as the UTPCPL requires, an
"ascertainable loss of money or property ... as a result
0/' Citi's allegedly deceptive conduct.
See 73 Pa. Cons. Stat. Ann. § 201-92 (emphasis added).
As to any UTPCPL claims, the
allegations in Plaintiffs' Amended Complaint simply set forth that Plaintiffs' purported harm,
their December 10, 2010 payment, was not caused by Citi, but was allegedly in response to a
letter sent to them by Seterus more than a month after Citi had transferred its servicing rights to
Seterus.
Accordingly, Citi argues that under the allegations in Plaintiffs' own Amended
Complaint, "that [Citi's] transfer of servicing rights on November 1 and the letters purportedly
sent by or on behalf of the transferee, [Seterus], are superseding or intervening causes that cut off
any causal connection between actions purportedly on behalf of Citi in August 2010 and the
damages plaintiffs allegedly incurred in December 2010." This critical causation issue is likely
to become a "major focus of the litigation," Schering Plough, 589 F.3d at 599, such that "the
representative might devote time and effort to the defense at the expense of issues that are
common and controlling for the class," Beck, 457 F.3d at 296; see also Baynes v. George E.
Mason Funeral Home, Inc., 2011 WL 2181469, at *6 (W.D. Pa. June 2, 2011) ("the damages
recoverable under the UTPCPL must be 1) reasonably foreseeable to the defendant at the time of
the transaction, and 2) proximately caused by the defendant's actions"); Caruso v. Celsius
Insulation Res., Inc., 101 F.R.D. 530, 535 (M.D. Pa. 1984) ("examples of individual questions
that we find are not readily susceptible of common treatment are ... the existence of superseding
and intervening causes.").
20
Plaintiffs cite to Bartholomew v. Fischl, 782 F.2d 1148, 1153 (3d Cir. 1986), for the
proposition that Citi is nevertheless liable if its conduct triggered the chain of events that
ultimately caused Plaintiffs' harm. PIs.' Br. in Opp'n at 15-16. However, Bartholomew is a §
1983 case, not a UTPCPL case, and accordingly, no mention is made in Bartholomew about the
"stringent causation requirement" of the UTPCPL, and to the Court's knowledge Bartholomew
has never been cited in a UTPCPL case on the issue of causation. See generally Bartholomew,
782 F.2d 1148. Yet, even the Bartholomew court makes clear that a discriminatory employment
policy or an official interpretation of it in a § 1983 case must still be the proximate cause of the
plaintiffs alleged injury. Id. at 1153.
Even if this Court were to entertain Plaintiffs' Bartholomew "start the ball rolling"
theory, Plaintiffs' Amended Complaint and its attached exhibits demonstrate that the claims
against Citi present the unique causation issues as to the named Plaintiffs that Seterus's allegedly
wrongful conduct was not a "continuation" of Citi's foreclosure conduct because Plaintiffs did
not make "payments based on Citi's charges after Seterus acquired the accounts." See PIs.' Br.
in Opp'n at 16.
This is demonstrated by the various letters that Defendants sent to Plaintiffs that are at
issue in this case, and upon which Plaintiffs rely in their Amended Complaint. As Citi explains,
the August 30, 2010 letter allegedly sent on Citi's behalf listed charges of $138 for Property
Inspections/BPO, Am. Compl. Ex. K, while the letter sent on Seterus's behalf on December 7,
2010 -
which resulted in the payment that allegedly injured the Plaintiffs, Am. Compl.
~
19
20,27, -listed "$0.00" for Property Inspections and BPO, Am. Compl. Ex. O. Similarly, Citi's
August 30 letter listed $160 for Prothonotary costs, $75 for Sheriff costs, $225 for additional
foreclosure costs, and $700 for attorney's fees. Am. Compl. Ex. K. The December 7 Seterus bill
21
that Plaintiffs actually paid listed "$0.00" for each of these categories. Am. CompI. Ex. O. And
while Citi's August 30 letter listed $143.04 for late charges, Seterus's December 7 letter listed
$96 in late charges. Am. CompI. Exs. K, O. Plaintiffs allege that Seterus's December 7 late
charges of $96 were "actually fees for unreasonable serial inspections," Am. Compi. ~ 20, but
there is no such allegation about the $143.04 in late charges in Citi's August 30 letter. See also
Trunzo I, 876 F. Supp. 2d at 529 (explanatory table).
As Citi notes, "[b]y Plaintiffs' own allegations, the amounts listed in the August 30 letter
were never paid. Rather, Plaintiffs paid different amounts, not sought in the August 30 letter, to
Seterus in December 2010
well after Citi transferred the servicing rights for Plaintiffs' loan to
Seterus." Def.'s Resp. in SUpp. at 4 (citing Am. CompI.
~
16; Trunzo I, 876 F. SUpp. 2d at 529).
It follows that even if this Court were to entertain Plaintiffs' "continuing conduct" or "start the
ball rolling" theories or Plaintiffs' unpled "automatic lien" theory (as explained below), any
purported lien based on the August 30 letter, having been effectively eliminated by Seterus's
December 7 letter, plainly evidences what Citi has identified as unique causation issues with the
Plaintiffs' claims.
In their Brief in Opposition, Plaintiffs assert a new, never-before-pled "automatic lien"
theory, contending that every time Citi levied a charge or fee on the Plaintiffs, that charge
"resulted in an automatic lien on their property" and that lien purportedly represented an
"ascertainable loss of the value of their property" recoverable through a UTPCPL action. Apart
from the fact that Plaintiffs have failed to cite any Pennsylvania state law on point with regard to
an automatic lien theory under the UTPCPL that would classify the mere charging of fees as an
"ascertainable loss of money or property, real or personal," see 73 Pa. Cons. Stat. Ann. § 201
9.2, Plaintiffs cannot, in effect, amend their Amended Complaint via their Brief in Opposition to
22
Citi's Motion to Strike. See, e.g., Pennsylvania ex rei. Zimmerman v. PepsiCo., Inc., 836 F.2d
173, 181 (3d Cir.1988) (a plaintiff may not amend her complaint through arguments in a brief in
opposition to a motion for summary judgment; "it is one thing to set forth theories in a brief, it is
quite another to make proper allegations in a complaint"); McKivitz v. Twp. of Stowe, 769 F.
Supp. 2d 803,836 n. 26 (W.D. Pa. 2010).
In Paragraph 87 of their Amended Complaint, Plaintiffs do aver that "they suffered
damages as a result of the overcharges . . . including, inter alia, payment of excessive and
improper charges." Am. Compl.
~
87. However, Plaintiffs' use of the term "inter alia" hardly
puts Citi on notice sufficient to satisfy the requirements of Federal Rule of Civil Procedure 8, let
alone the pleading standards enunciated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007), and Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009)/ or even the even more stringent class
action pleading requirements of In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305,
309-12,316 (3d Cir. 2008).
The Court notes that Plaintiffs have filed numerous notices of supplemental authority in support of this unpled
automatic lien theory. See in re Estate Landis, 2014 WL 169842 (Pa. Super. 2014) (ECF No. 170) (lien is a
constitutionally protected property interest under the Fifth Amendment of the United States Constitution); Knight v.
Springfield, 2013 WL 6224622 (Pa. Super. 2013) (ECF No. 169) (the economic loss doctrine is not applicable to
UTPCPL claims); D'Agostino v. Maldonado, 78 A.3d 527 (N.J. 2013) (ECF No. 157) (interpreting New Jersey's
unfair trade practices statute); Salvati v. Deutsche Bank Nat. Trust Co.) NA., 2013 WL 1314777 (W.D. Pa. 2013)
(ECF No. 147) (the named Plaintiffs disagreeing with the Salvati court's conclusion that an unpaid fee is not an
ascertainable loss).
1
As noted in footnote 5, above, on January 30, 2014, the Pennsylvania Supreme Court granted allowance for
appeal in Grimes v. Enterprise Leasing ofPhi/adelphia to resolve the issue of "[w]hether the Superior Court erred
when it held [in Grimes] that a plaintiff may satisfy the UTPCPL's 'ascertainable loss' requirement by voluntarily
hiring an attorney and allegedly incurring litigation costs to challenge allegedly wrongful conduct, even where, as
here, the plaintiff paid no money to the defendant as a result of that conduct." Grimes v. Enter. Leasing Co. of
Philadelphia, 84 A.3d 1058 (Pa. 2014); but see generally 73 Pa. Stat. Ann. § 201·9.2 (setting forth that "the court
may award to the plaintiff, in addition to other relief provided in this section, costs and reasonable attorney fees,"
after providing that H[a]ny person who purchases or leases goods or services primarily for personal, family or
household purposes and thereby suffers any ascertainable loss of money or property, real or personal, as a result of
the use or employment by any person of a method, act or practice declared unlawful by section 31 of this act, may
bring a private action to recover actual damages or one hundred dollars ($100), whichever is greater").
Regardless of the Pennsylvania Supreme Court's ultimate decision in Grimes, Plaintiffs, as explained
above, never pled an "automatic lien" theory, and cannot, in effect, amend their Amended Complaint via their Brief
in Opposition to Citi's Motion to Strike.
23
This Court concludes that typicality is lacking because, based on Plaintiffs' own
pleading, there are necessarily individualized causation issues as to Citi under the "stringent
causation requirement" of the UTPCPL, and the circumstances of the named Plaintiffs' claim, as
pled by Plaintiffs, demonstrate that the named Plaintiffs' UTPCPL claim against Citi could not
be typical of the purported class claims for the purpose of class-wide adjudication under Rule
23(a)(3).
d. Adequacy
The final requirement under Rule 23(a) is that the named plaintiff must be able to "fairly
and adequately protect the interests of the class. Fed. R. Civ. P. 23(a)(4). The "adequacy"
inquiry has two components: first, the adequacy inquiry "tests the qualifications of the counsel to
represent the class; second, it seeks to "uncover conflicts of interest between named parties and
the class they seek to represent." In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 521 (3d
Cir. 2004). While the parties do not affirmatively dispute this Rule 23(a) requirement, this Court
concludes that given "the challenge presented by a defense unique to a class representativeL] the
representative's interests might not be aligned with those of the class, and the representative
might devote time and effort to the defense at the expense of issues that are common and
controlling for the class," such that, as to Count VII against Citi, the named Plaintiffs are not an
adequate representative of the purported class. See Beck, 457 F.3d at 301 ("A proposed class
representative is neither typical nor adequate if the representative is subject to a unique defense
that is likely to become a major focus of the litigation.").
24
2. Rule 23(b)(3)
a. Predominance
Plaintiffs "must satisfy the four requirements of Rule 23( a) and the requirements of either
Rule 23(b)(1),(2), or (3)."
Marcus, 687 F.3d at 591.
Even if Plaintiffs had satisfied the
typicality and adequacy prerequisites of Rule 23(a), which they have not, Plaintiffs fail to satisfy
the predominance requirement of Rule 23(b)(3). Rule 23(b)(3) provides that "[a] class action
may be maintained if Rule 23(a) is satisfied and if ... (3) the court finds that the questions oflaw
or fact common to class members predominate [predominance] over any questions affecting only
individual members, and that a class action is superior [superiority] to other available methods
for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b).
"Predominance tests whether proposed classes are sufficiently cohesive to warrant
adjudication by representation." In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d at 310
11 (internal quotations omitted) (citing Amchem Products, Inc. v. Windsor, 521 U.S. 591, 623
(1997». This is "a standard far more demanding than the commonality requirement of Rule
23(a)." Id. at 311 (internal quotations omitted). Simply put, "[i]ssues common to the class must
predominate over individual issues." Id. (citing In re Prudential Ins. Co. Am. Sales Practice
Litig, 148 F.3d 283,313-14 (3d Cir. 1998)).
"Predominance will not be met where class members' claims would lead to disparate
applications of legal rules, including matters of causation, comparative fault, and the types of
damages available to each plaintiff." Porter v. Nationscredit Consumer Discount Co., 229
F.RD. 497, 498 (E.D. Pa. 2005) (analyzing purported UTPCPL class and denying class
certification); see also Lester v. Percudani, 217 F.RD. 345, 353 (M.D. Pa. 2003) (denying class
certification for a UTPCPL claim because "[a]Ithough the fraudulent acts themselves may be
25
common to the proposed class, issues of causation and proof of damages mandate the conclusion
that individual issues will predominate in a class action of this type"). Ultimately, "[i]f proof of
the essential elements of the cause of action requires individual treatment, then class certification
is unsuitable." Id. (quoting Newton v. Merrill Lynch, 259 F.3d 154,172 (3d Cir. 2001)).
Here, the unique causation issues as to Chi and the named Plaintiffs (lack of causation
and intervening causes), as discussed in this Court's analysis of typicality, preclude satisfaction
of the predominance requirement of Rule 23(b)(3).
The catch-all provision under which
Plaintiffs bring their UTPCPL claim against Citi requires proof of "fraudulent or deceptive
conduct which creates a likelihood of confusion or of misunderstanding." 73 Pa. Cons. Stat.
Ann. § 201-9.2.
As to Citi's purportedly deceptive conduct, the named Plaintiffs' own allegations plainly
demonstrate the individual issues present. Plaintiffs allege that Citi "violated the UTPCPL by
misrepresenting the amount that Homeowners owed, as set forth above in the previous
allegations." Am. Compi.
~
8.
However, as analyzed above with respect to typicality, the
allegations in Plaintiffs' Amended Complaint plainly set forth that Plaintiffs' purported harm,
their December 10, 2010 payment, was not caused by Citi, but was allegedly was in response to a
letter sent to them by Seterus, more than a month after Citi had transferred its servicing rights to
Seterus.
Accordingly, lack of causation will be a critical issue in this case because of the
"stringent causation requirement" of the UTPCPL, and Plaintiffs' failure to plead that their harm,
that December 10 payment to Seterus, occurred "as a result of' Citi' s conduct.
Indeed,
"although the fraudulent acts themselves may be common to the proposed class, issues of
causation ... mandate the conclusion that individual issues will predominate in a class action of
this type." See Lester, 217 F.R.D. at 353. Therefore, as to Plaintiffs' only remaining class
26
allegations against Citi, Plaintiffs' have failed to satisfy the predominance requirement of Rule
23(b)(3). In light of the highly-individualized inquiries that will be necessary, this Court also
concludes that, looking at Plaintiffs' Amended Complaint alone, a class action against Citi under
the UTPCPL is not "superior to other available methods for fairly and efficiently adjudicating the
controversy." See Fed. R. Civ. P. 23(b)(3).
For each, and all, of these reasons, Citi's Motion to Strike Class Allegations is therefore
granted. s
Plaintiffs' Motion to Compel Defendant, Citi, To Produce Documents and for Enforcement of
Fed.R.Civ.P.26(a)(I) as Interpreted by LCvR23, ECF No. 122, is rendered moot by this Opinion. In their Motion,
Plaintiffs represent that the Trunzo's Request for Production of Documents is or is likely to lead to relevant class
information relating to (I) Citi's alternative payment arrangement conduct; (2) Citi's refusal to accept a monthly
payment conduct; and (3) Citi's mislabeling and overcharging of foreclosure costs and fees conduct. PIs.' Br. in
Supp., ECF No. 123, at I. Plaintiffs contend that Citi "failed to satisfy its initial disclosure obligations with respect
to the class allegations and its class defenses under Fed.R.Civ.P.26(a)(I)(A)(ii)," PIs.' Br. in Supp. at 4-5, which
requires that "a party must, without awaiting a discovery request, provide to the other parties: a copy - or a
description by category and location - of all documents, electronically stored information, and tangible things that
the disclosing party has in its possession, custody, or control and may use to support its claims or defenses." Fed. R.
Civ. P. 26(a)(1 )(A)(ii); see also LCvR 23(B) ("for any action sought to be maintained as a class action, the initial
disclosures provided by all parties pursuant to Fed. R. Civ. P. 26(a)(I) shall include disclosures regarding the class
certification allegations and any defenses thereto").
According to Plaintiffs, "[n]ot a single document was produced about its standardized computer programs,
which would show how its computer programs determined foreclosure fees and costs for the Trunzos and other
homeowners in Pennsylvania." PIs.' Br. in Supp. at 5. Simply put, Plaintiffs aver that "Citi provided the same
documents that it would have provided if the Trunzos had filed an individual action and, even then, it omitted many
documents (including its standard practices and policies) that are or that could lead to relevant evidence with respect
to the Trunzo's individual claims," concluding that "[s]uch discovery is ultimately necessary for this Honorable
Court to determine the existence or non-existence of common questions of law and fact with regard to the putative
class." fd at 8-9.
Citi counters that "[u]nder Plaintiffs' interpretation of Rule 26(a)(l) and Local Rule LCvR 23(B), a party's
initial disclosure obligations would be so broad as to purportedly require the party to automatically disclose any
documents that relate in any way to the allegations of the complaint and any possible defenses." Def.'s Resp., ECF
No. 134, at I. To the contrary, Citi avers that Rule 26(a)(l) "requires only that Citi make certain disclosures
concerning 'its claims or defenses' not Plaintiffs' claims - and LCvR 23(B) simply provides that this obligation
applies to class certification 'defenses.''' fd at 1-2. Regardless, Citi asserts that Plaintiffs do not need any class
discovery to respond to Citi's Motion to Strike, given that "no discovery is needed to consider and decide Citi's
Motion to Strike[] because Citi's motion is based on the allegations of the complaint and the exhibits attached to the
complaint." fd at 8. Citi points out that even in the face of a Motion to Strike, the Court suggested that Plaintiffs
prepare a Rule 30(b)6) Notice of Deposition that would include a "tight and focused" list of topics relevant to their
response to Citi's Motion to Strike, a suggestion that Plaintiffs have not followed. fa. at 7 n.6.
This Court agrees with Citi. As set forth above, the premise of a motion to strike class allegations is that
"no amount of discovery will demonstrate that the class can be maintained." See Goode, 284 F.R.D. at 245;
Landsman & Funk p.e, 640 F.3d at 93 n.30. By virtue of this Court's granting ofCiti's Motion to Strike, grounded
27
h. PHS's Motion for Judgment on the Pleadings under Rule 12(c)
Defendant PHS contends that it is entitled to judgment on the pleadings with respect to
the class allegations set forth in Paragraphs 30 through 44 of Plaintiffs' Amended Complaint.
Def.'s Mot. Pursuant to Fed. R. Civ. P. 12(c) to Dismiss (,'PHS's Mot. for J.") at 2. Under Rule
12(c), "[a]fter the pleadings are closed--but early enough not to delay trial--a party may move for
judgment on the pleadings." Fed. R. Civ. P. 12(c). A motion for judgment on the pleadings
pursuant to Federal Rule of Civil Procedure 12(c) is governed by the same standards as a motion
to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). See Turbe v. Gov't ofthe Virgin
Islands, 938 F.2d 427, 428 (3d Cir. 1991). Accordingly, this Court must accept all allegations of
the Amended Complaint as true and draw all reasonable inferences in favor of Plaintiffs.
In Trunzo I, this Court ruled on PHS's Motion to Dismiss under Rule 12(b)(6), ECF No.
35, and denied PHS's Motion to Dismiss Count III of Plaintiffs' Amended Complaint; dismissed
with prejudice all of Plaintiffs' claims against PHS that relied on the Pennsylvania Fair Credit
Extension Uniformity Act ("FCEUA"); denied PHS's Motion to Dismiss Count VI of Plaintiffs'
Amended Complaint, and denied PHS's Motion to Dismiss Count VII of Plaintiffs' Amended
Complaint. Here, PHS has filed a Motion for Judgment on the Pleadings to dismiss Plaintiffs'
Amended Complaint as to Counts III, VI, and VII, which is governed by the same standard as
PHS's Motion to Dismiss Plaintiffs' Amended Complaint already ruled upon in Trunzo J. See
Turbe, 938 F.2d at 428. Therefore, to the extent that PHS moves for Judgment on the Pleadings
as to Counts III, VI, and VII, this Court denies PHS's Motion for the same reasons as before.
However, while PHS titles its motion, "Motion for Judgment on the Pleadings," its
motion is plainly written as a motion to strike class allegations because PHS contends that "a
in its analysis and review of the allegations in Plaintiffs' own Amended Complaint and its attached exhibits, and the
necessary result of these analyses, Plaintiffs' Motion to Compel, ECF No. 122, is rendered moot.
28
defendant may move to dismiss class allegations pnor to discovery where the complaint
demonstrates that the requirements for maintaining a class action cannot be met." Def.'s Mem.
of Law in Supp. of Mot. for 1. on the Pleadings to Dismiss Pis.' Class Action Allegations
("Def. 's Mem. in Supp. "), ECF No 101, at 6-7.
Indeed, PHS avers that on its face, Plaintiffs'
Amended CO,mplaint demonstrates that (1) Plaintiffs' claims are not typical of the purported
class, id at 7; and (2) Plaintiffs are not adequate representatives of the purported class, id at 12.
Therefore, based on PHS's motion, this Court will embark on an analysis of whether Plaintiffs'
class allegations as to PHS can be stricken prior to the completion of class certification
discovery, based solely on the allegations set forth in Plaintiffs' Amended Complaint.
1. Typicality
PHS avers that Plaintiffs' purported class fails the typicality requirement of Rule 23(a)
because PlaintifTs, as class representatives, are subject to unique defenses "that threaten[] to play
a major role in the litigation."
Id at 8.
These defenses are (1) "[Plaintiffs] initiated the
communication at issue" under the FDCP A § 1692e claims; (2) "[wlith respect to the Act 6
claims, they are subject to the defense ... that no action lies against an attorney under Sections
404 and 406 of the Act;" and (3) that "the unique circumstances of substantial attorney
involvement by Messrs. Vitek and Malakoff present additional unique defenses" that extend to
"all aspects of claims of deception under" the UTPCPL, as well as under the FDCP A, which
"would not be subject to the 'least sophisticated consumer standard' but rather, the 'competent
lawyer standard. '" Id at 9-11.
As discussed above, varying factual circumstances among class members will not always
preclude typicality, Newton, 259 F.3d at 184, but typicality will be defeated where "a class
representative is subject to unique defenses which threaten to become the focus of the litigation,"
29
Porter, 229 F.R.D. at 499. Ultimately, the typicality requirement is not satisfied unless the
"alleged cause of [the] injuries is some common wrong" applicable to all class members. Baby
Neal, 43 F.3d at 58.
Here, although class certification discovery has been stayed short of its completion, and
neither Plaintiffs' motion for class certification nor any class expert reports have been filed, PHS
avers that Plaintiffs' factual circumstances leading up to the events that triggered Plaintiffs'
claims are so different from the other class members that Plaintiffs' claims and the class claims
are not so related that "the interests of the class members will be fairly and adequately protected
in their absence." Marcus, 687 F.3d at 598. However, this Court concludes that at this stage of
the litigation, Plaintiffs have sufficiently plead in their Amended Complaint, as to each claim
against PHS, that PHS has allegedly committed a "common wrong" applicable to all class
members, see Baby Neal, 43 F.3d at 58.
Plaintiffs allege that PHS (l) "charge[d] and/or collect[ed] legally and contractually
unauthorized charges or fees that were misrepresented to Homeowners in violation of the
FDCPA," PIs.' Am. CompI.
~
36(3); (2) "violate[d] the LIPA, 41 P.S. § 404 and 41 P.S. § 406
when they collected prohibited foreclosure related fees and costs," id. at
~
36(6); and (3) that
"violate[d] the Unfair Trade Practices and Consumer Protection Law . . . when they []
misrepresented the amount Homeowners owed and charged and collected excessive charges," id.
at
~
36(7). As the Third Circuit noted in Marcus, "[i]f a plaintiffs claim arises from the same
event, practice or course of conduct that gives rises to the claims of the class members, factual
differences will not render that claim atypical if it is based on the same legal theory as the claims
of the class." Marcus, 687 F.3d at 598 (citing Hoxworth v. Blinder, Robinson & Co., 980 F.2d
912, 923 (3d Cir.l992)).
This Court concludes that PHS has not advanced an argument
30
sufficient to demonstrate that class discovery will necessarily fail to illuminate any further
evidence of a relation between the class claims and those of the named Plaintiffs sufficient to
satisfY the typicality requirement of Rule 23(a).
As for PHS's alleged "unique defenses," the Court begins its discussion with Plaintiffs'
claims under Act 6.
Post-Trunzo I, the only remaining Act 6 claims against PHS are for
violations of § 502 of the Act. See Order dated June 25, 2012, ECF No. 75. Therefore, PHS's
contention that "they are subject to the defense ... that no action lies against an attorney under
Sections 404 and 406 of LIP A" is inapposite. See Rothlein v. Portnoff Law Associates, Ltd. ,9 81
9 In Rothlein, the Pennsylvania Supreme Court concluded that Act 6's § 502, the Act's remedy provision, does not
permit recovery for harm that extends beyond the subject matter of the statute - charges or fees incurred for the loan
or use of money. Rothlein, 81 A.3d at 825 (also filed as a Notice of Supplemental Authority by Plaintiffs at ECF
No. 167). PHS contends that in Rothlein, the Pennsylvania Supreme Court "specifically held" that § 502 is not a
substantive provision of Act 6, when while analyzing § 502, the court discussed the "substantive provisions of the
Act" as sections 201, 301, 401, 401.1, 402, 403, 404, 405, 406, 407, 408, 501. See ECF No. 168 at 1 (citing
Rothlein, 81 A.3d at 823). This Court disagrees with PHS's reading of Rothlein. The Rothlein court did not go as far
as to say that § 502 was not a substantive provision of Act 6, nor did the Rothlein court change the status quo of the
law at the time of this Court's decision in Trunzo 1. See, e.g., Glover v. Udren, 2013 WL 6237990 (W.D. Pa. Dec. 3,
2013) (post-Rothlein class certification decision involving underlying claim Act 6 claim for unauthorized charges
under 502). In Rothlein the court analyzed § 502 specifically to determine whether, in the context of the other
substantive provisions of the Act, recovery under § 502 was also limited to claims involving charges or fees incurred
"for the loan or use of money." Rothlein, 81 A.3d at 823-24. Notably, the Rothlein court also characterized § 501 as
a "substantive provisions of the Act," despite the placement of § 501 under "Article 5 Remedies and Penalties" - just
like § 502. These Rothlein ingredients aside, Rothlein has never been cited for the proposition that PHS claims. For
further analysis on the distinction between § 502 and §§ 404 and 406, this Court directs the parties to its Trunzo J
analysis of claims under § 502 versus §§ 404 and 406.
Defendants argue that section 502 is, like 404 and 406, applicable only to "residential mortgage
lenders." The Court again finds the Glover decision instructive as Judge Mitchell resolved this
very same dispute regarding section 502 in the context of a motion to dismiss. Section 502
provides that a person who has paid charges in violation of Act 6 or otherwise by law can recover
against "the person who has collected such excess interest or charges." § 502 (emphasis added).
As noted by the Glover court, the Pennsylvania legislature's use of the term "person" in section
502 as opposed to the phrase "residential mortgage lender" in sections 404 and 406 is significant.
Glover, 2010 WL 5829248, at *7. Act 6 defines the term "person" broadly, providing that it
includes, but is not limited to, "residential mortgage lenders" and encompasses individuals,
corporations, business trusts, estate trusts, partnerships, and all other legal entities. § 101.
Therefore, all three Defendants fall within this definition and are subject to section 502's
prohibitions.
Trunzo v. CUi Mortgage, 876 F. Supp. 2d 521,541 (W.D. Pa. June 25,2012); but see Buffone v. Udren Law Offices,
P.c., 2012 WL 9189624, at *4 CPa. Com. PI. June 25,2012). The Buffone court rejected the argument that the term
"residential mortgage lender" used in § 406 was intended to have the same meaning as the word "person" used in §
502, and concluded that because § 406 applies only to residential mortgage lenders, and since defendant was not a
31
A.3d 816,825 (Pa. 2013) (recognizing recovery against an attorney or law firm under § 502 for
claims arising from the loan or use of money).
PHS also contends that the named Plaintiffs "initiated the communication at issue, a
defense which every Court ruling on the issue to date on the merits has held precludes the
maintenance of an FDCPA action." Def.'s Mem. in Supp. at 9. As to their FDCPA claim
against PHS, Plaintiffs aver that "the law firm made false representations about the "character,
amount, or legal status" of Plaintiffs' debt and attempted to collect amounts under Plaintiffs'
note and mortgage that were not "expressly authorized by the agreement creating the debt or
permitted by law." Am. Compl. ,,60-61. PHS argued in their Motion to Dismiss that it could
not be held liable under the FDCPA because the statute requires an attempt to collect a debt, and
their letters were merely responses to Plaintiffs' requests for information, not "collection" or
"dunning" letters. Mem. of Law in SUpp. of PHS's Mot. to Dismiss Am. Compl. at 9, ECF No.
36.
However, this Court already explained in Trunzo 1 that the Court did "not find that the
aforementioned cases [referenced by PHS in support of its position] stand for the proposition that
any and all responses to a consumer-initiated communication automatically fall outside of the
reach of the FDCPA.
Responsive communications from debt collectors can easily be both
informational and attempts to collect a debt." Trunzo 1, 876 F. Supp. 2d at 536. Indeed, "PHS's
response letter [Plaintiffs' inquiry on how to avoid foreclosure] . . . was far more than
informational. Though the letter does contain the language 'in accordance with your recent
request,' it also provides the following disclaimer: 'Please be advised that this firm is a debt
residential mortgage lender, the court would dismiss plaintiffs' claims for failure to plead any violations of Act 6
that would allow recovery under § 502. Buffone, 2012 WL 9189624, at *4. However, Buffone is distinguishable
because here, Plaintiffs are claiming a broader scope of unauthorized charges than those in Buffone, which solely
related to allegedly unauthorized attorney's fees.
32
collector attempting to collect a debt. Any information received will be used for that purpose.'"
Id. "Notably, the FDCPA mandates just a disclaimer when a debt collector is in the process of
collecting a debt. PHS's use of this disclosure language demonstrates that the August 30th letter
was a response to a consumer inquiry as well as a collection attempt." Id. at 536-37.
PHS next avers that they have a unique defense of settlement, based on correspondence
between Attorney Malakoff and PHS. See Def.'s Mem. in Supp. at 2, 10. In support of this
proposition, PHS cites to a December 8, 2011 email from Attorney Malakoff to PHS, wherein
Mr. Malakoff writes, "[t]hank you for the December 7,2010 offer to resolve this matter." See id.
at 2 (citing Def.'s Ex. B, ECF No. 101, at 27).
This email was not cited to in Plaintiffs'
Amended Complaint, nor was it attached to the Amended Complaint itself, but seems to have
been provided to Plaintiffs as part of the parties' initial disclosures.
That PHS now rests its argument for its "unique defense" of settlement on a document
produced during preliminary discovery serves only to underscore that at this stage of the
litigation, prior to the termination of class certification discovery, this Court's analysis of
whether Plaintiffs' purported class satisfies the Rule 23(a) requirement of typicality will benefit
from further class certification discovery and cannot be determined on the face of Plaintiffs'
Amended Complaint alone, as would be necessary for this Court to grant PHS's motion to strike
Plaintiffs' class allegations at this juncture. See Landsman & Funk PC, 640 F.3d at 93 n.30
(ultimately, "this case is not among the rare few where the complaint itself demonstrates that the
requirements for maintaining a class action cannot be met.") (emphasis added). 10
10 PHS cites Steinhardt Grp. Inc. v. Citicorp, 126 F.3d 144, 145 (3d Cir. 1997), among other cases, for the
proposition that "the Court may also consider any undisputedly authentic document that a defendant attaches as
exhibits to the motion," but the Steinhardt court makes clear that the defendant may do so only "if the plaintiffs
claims are based on the document." Id. Here, that is not the case.
33
Finally, PHS contends that "Plaintiffs have alleged a claim under Section 1692e which
would be subject to the defense that communications to an attorney are either not actionable or
are held to a 'competent attorney' standard." Def.'s Mem. in SUpp. at 11. Plaintiffs bring
FDCPA claims under 15 U.S.C. § 1692f(1) and § 1692e(2)(A). Section 1692f(1) allows a debt
collector to collect only those debts that are "expressly authorized by the agreement creating the
debt or permitted by law." When pursuing such authorized debts, § 1692e(2)(A) provides that
the collector may not use any "false, deceptive, or misleading representations ... in connection
with the collection of any debt," nor misrepresent the "character, amount, or legal status of any
debt."
With regard to § 1692f(I), "the 'competent attorney standard' d[oes] not apply to the
debtor's § 1692f(1) claim because the only inquiry under § 1692f(1) is whether the amount
collected was expressly authorized by the agreement creating the debt or permitted by law."
Simon v. FIA Card Services, NA., 732 F.3d 259, 269-70 (3d Cir. 2013) (citing Allen ex reI.
Martin v. LaSalle Bank, NA., 629 F.3d 364,368 (3d Cir. 2011)). As for Plaintiffs' §1692e(2)(A)
claims against PHS, the Simon court noted that in Allen it "did not articulate a competent
attorney standard for FDCPA claims arising out of communications to a consumer's attorney,"
and instead relied on its reasoning in Allen to support rejecting the "competent attorney" standard
for claims under FDCPA provisions where the "inquiry did not tum on the reader's
sophistication." Simon, 732 F.3d at 269-70.
Therefore, unlike the stringent, clear-cut, and well-established causation requirement of
the UTPCL that this Court discussed in its analysis of Citi's Motion to Strike, this Court
concludes that the difference in factual circumstances between communications made to a
consumer rather than an attorney, and the Third Circuit's declination in Simon to once and for all
34
articulate a 'competent attorney standard' under the FDCPA that would affirmatively direct the
analysis for such communications to a different path than that for communications to a
consumer, do not present such a "unique defense" that "threatens to become the focus of the
litigation." See Porter, 229 F.R.D. at 499; see also Wright, 2010 WL 786536, at
* 4 ("As the
parties recognize, the United States Court of Appeals for the Third Circuit has not yet spoken to
whether communications between debt collectors and debtors' attorneys are actionable under the
FDCPA, and there is not consensus among the other circuits that have addressed the issue.").
2. Adequacy
PHS avers that the named Plaintiffs are not adequate representatives of the class because
(1) the proposed class would "improperly include those consumers who received validation
notices and did not dispute the debt, and thus are ineligible to bring suit against PHS, and those
who do not have the unique issues such as communications initiated by the consumer,
communications between the alleged debt collector and counsel for the consumer, and cases
involving a prima facie claim of settlement;" and (2) that Pennsylvania Rule of Professional
Conduct 3.7 prohibits a lawyer from acting as an advocate at trial in which the lawyer is likely to
be a necessary witness." Jd. at 13.
As discussed earlier, the "adequacy" inquiry has two components: first, the adequacy
inquiry "tests the qualifications of the counsel to represent the class; second, it seeks to "uncover
conflicts of interest between named parties and the class they seek to represent." In re Warfarin
Sodium Antitrust Lttig., 391 F.3d at 521. PHS does not contest the former requirement. Rather,
PHS seems to aver that conflicts of interest bar Plaintiffs' purported class from meeting the
adequacy requirement.
35
PHS's validation-notice argument that there "is no allegation that any other borrowers in
the putative class initiated communication prior to the initial communication by PHS and the
mailing of a Validation Notice" touches instead on the typicality of Plaintiffs' allegations with
respect to PHS, and PHS's attempt to demonstrate via purportedly differing factual
circumstances that, on the face of Plaintiffs' Amended Complaint, typicality is clearly precluded
and class certification discovery is wholly unnecessary.
As this Court noted above, such
differing factual circumstances are insufficient at this point, prior to the completion of class
certification discovery, for this Court to conclude that those Rule 23(a) requirements are not met.
As for PHS's second point, disqualification of counsel is considered a drastic measure
that should only be imposed when necessary. See
E.E.o.c.
v. Hora, Inc., 239 Fed. Appx. 728,
731 (3d Cir. 2007). The party seeking disqualification of opposing counsel bears the burden of
establishing that continued representation would be impermissible under the Rules of
Professional Conduct. Martin v. Turner, 2011 WL 717682, at *2 (E.D. Pa. 2011) (internal
quotation omitted). PHS avers that Pennsylvania Rule of Professional Conduct 3.7 "prohibits a
lawyer from acting as an advocate at trial in which the lawyer is likely to be a necessary
witness[,]" such that [w]here class counsel is a necessary witness, this precludes him from
adequately representing the proposed class as class counsel."
Rule 3.7, titled "Lawyer as Witness," sets forth that
(a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be
a necessary witness unless:
(l) the testimony relates to an uncontested issue;
(2) the testimony relates to the nature and value of legal services rendered in the
case; or
(3) disqualification of the lawyer would work substantial hardship on the client.
(b) A lawyer may act as advocate in a trial in which another lawyer in the lawyer's
firm is likely to be called as a witness unless precluded from doing so by Rule 1.7
or Rule 1.9.
36
Pa. R. Profl Conduct 3.7(a) (emphasis added). By its terms, Rule 3.7(a) only prohibits a party's
lawyer likely to be a necessary witness from action as "advocate at trial." See id.; Evans v.
Chichester Sch. Dist., 533 F. Supp. 2d 523, 539 (B.D. Pa. 2008) (holding that "Rule 3.7 only
pertains to counsel's actions at trial"). PHS's contention that where "class counsel is a necessary
witness, this precludes him from adequately representing the proposed class as class counsel," is
premature at this pre-trial stage of the litigation, where class discovery has not ended and
Plaintiffs have not yet filed a Motion for Class Certification. See also Lazy Oil Co. v. Wifco
Corp., 166 F.3d 581, 589 (3d Cir. 1999) ("the conflict rules do not appear to be drafted with
class action procedures in mind and may be at odds with the policies underlying the class action
rules."
This Court concludes that any analysis regarding the nexus between Plaintiffs' counsel as
potentially necessary witnesses and the adequacy of the named Plaintiffs as representatives of the
class will be reviewed at the end of class discovery and in conjunction with the class certification
hearing, when the Court makes its ultimate determination as to whether or not to certify
Plaintiffs' purported class. For these reasons, PHS's Motion for Judgment on the Pleadings is
denied, but without prejudice to the assertion of similar arguments at a later, more appropriate,
stage of the case.
37
c. Seterus's Motion to Deny Class Certification
Also before this Court is Defendant Seterus's Motion to Deny Class Certification, based
on Seterus's contention that (1) Plaintiffs' purported class includes uninjured individuals who
have no claim against Seterus; (2) the class fails to meet Rule 23(a)'s commonality and typicality
prerequisites; and (3) the class fails to meet the criteria of either Rule 23(b)(2), because Plaintiffs
seek monetary damages, or Rule 23(b)(3), because individualized issues predominate.
Post- Trunzo 1, three Counts remain against Defendant Seterus: Count II for Unjust
Enrichment, Count III for Violation of the FDCP A; Count VI for Violation of § 502 of the
Pennsylvania Loan Interest Protection Act; and Count VII for Violations of the UTPCPL. As
this Court discussed above, Rule 23(b)(2) is inapplicable to this case because Plaintiffs are not
requesting any "final injunctive or corresponding declaratory relief."
See Fed. R. Civ. P.
23(b)(2). Accordingly, Plaintiffs cannot certify their class under Rule 23(b)(2).
Contrary to Defendants Citi and PHS, Defendant Seterus does not style its motion as a
motion to strike class allegations before the parties resume and conclude class discovery. Rather,
Seterus squarely avers that the putative class should not be certified because it fails to satisfy the
Rule 23 requirements of commonality, typicality, and predominance, and because the putative
Class includes persons who have suffered no injuries.
With regard to this latter argument, which ties in with the requirements of commonality,
typicality, and predominance, Plaintiffs' counter that "[i]t is far more likely that because of
Seterus' unauthorized and/or illegal foreclosure cost practices and policies, thousands of
homeowners were the recipients of the same demanded charges that were charged and liened on
the Trunzos' property[,] some of which were paid." Pis.' Br. in Opp'n to Mot. to Den. Class
Certification ("PIs.' Br. in Opp'n") at 1O. As a result, "[ c]lass discovery is also required to
38
obtain information about Seterus' practice and policies about intentionally mislabeled fees," and
"is also required to identify and establish Seterus' standardized practice and policies with respect
to those Seterus related claims this Court held were viable." Id. at 17.
Plaintiffs filed a Motion to Vacate the Initial Case Management Order, ECF No. 139,
given that this Court had under its advisement the Defendants' motions to strike and dismiss
Plaintiffs' class allegations, motions which primarily rested on Defendants' argument that it was
clear from the face of Plaintiffs' Amended Complaint and its attached submissions that Plaintiffs
could not meet the requirements of a class action under Federal Rule of Civil Procedure 23. This
Court granted in part and denied in part Plaintiffs' Motion to Vacate, such that the provisions of
subparagraphs 3(d)-(h), inclusive, of the Court's Case Management Order, ECF No. 94, were
"stayed pending further Order of this Court." See Order dated Feb. 1, 2013; ECF No. 141. This
stayed discovery related to class certification; the filing of Plaintiffs' and Defendants' expert
reports as to class certification; all depositions of class certification experts; the filing of
Plaintiffs' Motion for Class Certification and Defendants' ensuing Joint Memorandum in
Opposition and Plaintiffs' ensuing Reply; and the parties' class certification hearing.
This Court concludes that it is not "clear from [Plaintiffs' Amended Complaint] itself that
the requirements for maintaining a class action [against Seterus] cannot be met, see Goode, 184
F.R.D. at 238, and that "no amount of discovery will demonstrate that the class can be
maintained, id. at 245; Woodard, 250 F.R.D. at 182. Indeed, as to Seterus, the issues are not
"plain enough from the pleadings to determine whether the interests of the absent parties are
fairly encompassed within the named plaintiffs' claims," see Falcon, 457 U.S. at 160, nor does
Seterus even assert that "no amount of discovery will demonstrate that the class can be
maintained." Therefore, it is "necessary for the court to probe behind the pleadings before
39
coming to rest on the certification question." Id. This Court denies, without prejudice, Seterus's
Motion to Deny Class Certification for its reassertion at the conclusion of class discovery.
III. CONCLUSION
For the foregoing reasons, (1) Defendant CitiMortgage, Inc.' s Motion to Strike Class
Allegations is granted; (2) Defendant Phelan, Hallinan, and Schmieg, LLP's Motion Pursuant to
Federal Rule of Civil Procedure 12(c) to Dismiss Class Action Allegations is denied without
prejudice; and (3) Defendant Seterus, Inc.'s Motion
0
Deny Class Certification is also denied
without prejudice. An appropriate Order will foil w.
Dated: March 31, 2014
cc: All counsel of record
arkR. Hornak
United States District Judge
40
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