901 F. Supp. 2d 509
D.N.J.2012Background
- Plaintiffs Giles and Spivey sue ten defendants including Phelan Hallinan & Schmieg firms and Wells Fargo entities for alleged abusive foreclosure practices under RICO, NJCFA, and UTPCPL.
- Claims center on inflated default management fees and use of allegedly fraudulent documents and improper standing to prosecute foreclosures in NJ and PA.
- Spivey (PA) and Giles (NJ) faced foreclosure actions; Spivey later filed Chapter 13 bankruptcy and later had a proof of claim and plan incorporating challenged fees.
- Giles faced a New Jersey foreclosure where the lender/assignment history and standing were disputed; the property was eventually foreclosed and then the action was dismissed.
- Allegations include use of false signatures/notarizations, and post-foreclosure fee invoicing described as junk or inflated by the plaintiffs.
- Court addresses procedural posture: motions to dismiss/strike; determines Spivey claims barred by bankruptcy and NJCFA claims barred by the New Jersey litigation privilege; Giles RICO claims are stricken to be repled in a Second Amended Complaint.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Bankruptcy bar on Spivey claims | Spivey can pursue bankruptcy-related inflated-claims claims here. | Bankruptcy law bars challenges to inflated proofs of claim in district court. | Spivey claims barred; dismissed with prejudice. |
| NJCFA claims barred by New Jersey litigation privilege | NJCFA claims are not shielded by privilege. | NJCFA claims are barred as within the litigation privilege scope. | Giles NJCFA claims barred by litigation privilege. |
| RICO claims against Giles dismissed or stricken | RICO claims adequately pleaded against multiple defendants. | Amended complaint is prolix, immaterial, and fails Rule 8/9(b); strike warranted. | Giles RICO claims stricken without prejudice to repleading in a Second Amended Complaint. |
| Rooker-Feldman applicability to Spivey and Giles | States' judgments can be challenged via federal action. | Doctrine bars direct review of state judgments; but not challenges to actions/defendants’ conduct. | Rooker-Feldman does not bar the claims here. |
| Assignment challenges barred | Plaintiffs may challenge mortgage assignments affecting their titles. | Non-parties and lack of standing preclude challenges to assignments not party to the action. | Assignments to which plaintiffs were not parties dismissed with prejudice. |
Key Cases Cited
- Great Western Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159 (3d Cir.2010) (Rooker-Feldman framework and independent-injury analysis; state judgments not always bar federal claims)
- Loigman v. Twp. Comm. of the Township of Middletown, 889 A.2d 426 (N.J. 2006) (litigation privilege broadly applicable; abrogation not favored)
- Peterson v. Ballard, 679 A.2d 648 (N.J.Super.Ct.App.Div.1995) (litigation privilege elements and broad applicability)
- Gonzalez v. Wilshire Credit Corp., 25 A.3d 1103 (N.J. 2011) (post-foreclosure credit extensions; limits on using privilege to shield litigation-related acts)
- Rhodes v. Diamond, 433 F.App’x 78 (3d Cir.2011) (bankruptcy proceedings; inflated proofs of claim context)
- In re Abramson, 313 B.R. 195 (Bankr. W.D. Pa.2004) (bankruptcy objection process governs inflated-claim remedies)
- Lance v. Dennis, 546 U.S. 459 (S. Ct.2006) (Rooker-Feldman narrow interpretation)
- Howlett By and Through Howlett v. Rose, 496 U.S. 356 (S. Ct.1990) (state-law traditions cannot bar federal liability in certain contexts)
- In re Sabertooth, LLC, 443 B.R. 671 (Bankr.E.D.Pa.2011) (distinguishes independent claims from challenge to judgments)