Case Information
UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA CHRISTOPHER BAINBRIDGE, ET :
AL., : CIVIL ACTION NO. 3:16-CV-0411 Plaintiffs : (Judge Nealon) :
v. :
:
OCWEN LOAN SERVICING, LLC, :
ET AL., :
Defendants :
MEMORANDUM
Plaintiffs, Christopher and Kelly Bainbridge, filed an amended complaint against Defendants U.S. Bank, N.A. as Trustee for the C-BASS Mortgage Loan Trust Asset-Back Certificates, Series 2007-CB6 (“U.S. Bank”); Udren Law Offices, P.C. (“Udren”); and Ocwen Loan Servicing, LLC (“Ocwen”) (collectively “Defendants”). (Doc. 14). Plaintiffs allege that Ocwen and Udren violated the Fair Debt Collection Practices Act,15 U.S.C. § 1692, et seq. (“FDCPA”). (Id. at pp. 5-6). Plaintiffs also claim that Defendants made wrongful use of civil proceedings in violation of 42 Pa. C.S.A. § 8351, et seq. (“Dragonetti Act”), and violated the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-1, et seq. (“UTPCPL”). (Id. at pp. 6-9). On May 6, 2016, Udren filed a motion to dismiss the amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) and brief in support. (Docs. 21, 22). On May 16, 2016, U.S. Bank and Ocwen filed a motion to dismiss the amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) and brief in support. (Docs. 23, 24). On June 6, 2016, Plaintiffs filed their brief in opposition to the motions to dismiss. (Doc. 27). On June 20, 2016, Defendants filed a joint reply brief. (Doc. 28). As a result, the aforementioned motions to dismiss are ripe for disposition. For the reasons set forth below, Defendants’ respective motions to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) will be denied in part and granted in part.
I. STANDARD OF REVIEW
As stated, both motions to dismiss have been brought pursuant to Federal
Rule of Civil Procedure 12(b)(6). See (Docs. 21-24). “This rule provides for the
dismissal of a complaint, in whole or in part, if the plaintiff fails to state a claim
upon which relief can be granted.” Suessenbach Family v. Access Midstream,
‘calls for enough fact[s] to raise a reasonable expectation that discovery will reveal
evidence of’ necessary elements of the plaintiff’s cause of action.” Suessenbach
Family,
231 (3d Cir. 2008)).
“Generally, the court should grant leave to amend a complaint before
dismissing it as merely deficient.” Aspinall v. Thomas,
II. FACTUAL ALLEGATIONS
Pursuant to the above-discussed motion to dismiss standard of review, all facts are taken from Plaintiffs’ amended complaint, (Doc. 14), unless otherwise noted.
On February 7, 2008, Plaintiffs became the owners of the property located at 25 5th Street, Hawley, Pennsylvania 18428. (Id. at p. 2). “On or about March 28, 2007, Plaintiffs initiated a mortgage loan with Defendants’ predecessor, Imperial Lending, LLC.” (Id.). On or about November 4, 2010, Plaintiffs filed Chapter 13 bankruptcy in the United States District Court for the Middle District of Pennsylvania. (Id. at p. 3). On October 12, 2011, “Ocwen filed a Transfer of Claim document reflecting transfer of servicing rights” regarding Plaintiff’s loan “from Litton Loan Servicing, L.P. to Ocwen.” (Id.). Ocwen “acquired the servicing rights to the mortgage debt disputed herein from Litton Loan Servicing when alleged to be in default.” (Id. at p. 2).
On July 18, 2013, U.S. Bank filed a motion in Plaintiffs’ bankruptcy action “for relief from the stay alleging plaintiffs had not made post-petition monthly mortgage payments beginning February 1, 2013.” (Doc. 14, p. 3). On August 8, 2013, the United States Bankruptcy Court for the Middle District of Pennsylvania “entered an order granting US Bank relief from the stay due to plaintiffs’ bankruptcy counsel failing to respond to the motion without the knowledge of the plaintiffs.” (Id.).
On June 26, 2014, “Defendants filed a complaint in mortgage foreclosure against Plaintiffs in Wayne County, Pennsylvania Court of Common Pleas.” (Id.). In that foreclosure action, “Defendants alleged . . . that plaintiffs had not made post-petition monthly mortgage payments beginning” on September 1, 2013. (Id.). Defendants “alleged that the aforesaid mortgage was in default in that the payment due on or about September 1, 2013, and alleged that all subsequent payments had not been made.” (Id.). Plaintiffs “never missed a single payment after relief was granted to” U.S. Bank in the Plaintiffs’ bankruptcy action until “Ocwen began returning plaintiffs’ payments in January 2014.” (Id.). Ocwen returned these payments “despite Plaintiffs having copies of checks and bank statements evidencing payment for every month alleged unpaid.” (Id.). Additionally, “Defendants cashed the checks.” (Id.).
Defendants instituted the underlying mortgage foreclosure action against Plaintiffs “without investigating the claimed default.” (Id. at p. 4). Subsequent to the complaint being filed in the underlying mortgage foreclosure action, Plaintiffs “continually informed Defendants of their mistake.” (Doc. 14, p. 4). Defendants, however, continued to pursue the foreclosure action. (Id.). On March 13, 2015, in the Wayne County Court of Common Pleas, the Honorable Raymond L. Hamill entered a verdict in favor of Plaintiffs and against Defendants in the underlying foreclosure action. (Id.).
On or about October 7, 2015, Plaintiffs “received a discharge of their chapter 13 bankruptcy wherein they had paid $12,600 in pre-petition arrears to Ocwen and its predecessor servicer, Litton.” (Id.). On or about that same date, Ocwen filed “a Response under BR 3002.1(g)” in Plaintiffs’ bankruptcy action “alleging a post-petition mortgage loan default by plaintiffs for the months [of] December 1, 2013 through October 1, 2015 in the total amount of $36,851.75.” (Id.).
Based on the foregoing, “Plaintiffs’ credit has been damaged causing them to be unable to purchase a new truck . . . [and they] also have been forced to rent rather than purchase a new home because they cannot qualify for an affordable mortgage.” (Id.). Moreover, Plaintiffs spent “approximately $7,000 to retain attorneys” for their representation in the underlying mortgage foreclosure action. (Id.).
III. DISCUSSION
A. FDCPA
Both motions currently before the Court argue that Plaintiffs’ FDCPA claims concerning the underlying foreclosure action are barred by the FDCPA’s one (1) year statute of limitations. (Doc. 22, p. 7); (Doc. 24, pp. 1, 5, 6-8). According to Udren, “Plaintiffs claim that ‘Defendants’ violated the FDCPA by falsely filing a foreclosure action to take Plaintiffs’ home and that ‘Defendants’ sent in and out-of-court correspondence concerning the amounts due.” (Doc. 22, p. 7). However, Udren states that Plaintiffs provide “[n]o further specification.” (Id.). Furthermore, Udren argues that since the FDCPA has a one-year (1) statute of limitations, “only alleged FDCPA violations occurring after March 8, 2015 are actionable in this proceeding.” (Id.). Udren notes that the relevant “Foreclosure Action was filed on June 26, 2014,” and “Plaintiffs filed an Answer on September 26, 2014.” (Id.). Udren claims that the “[t]rial occurred [on] March 3, 2015.” (Id.). Thus, Udren concludes, “[t]he alleged communications by Udren ‘in and out of court’ would have had to occur after March 8, 2015 to fall within the statute of limitations.” (Id.). But, according to Udren, “[b]ecause all the conduct complained of possibly attributable to Udren occurred more than one (1) year before all of the above dates, it is not actionable under the FDCPA.” (Id.). Udren also argues that while Plaintiffs “make unsupported assertions that the purported FDCPA violations continued through the ‘present date,’” they “cannot maintain a ‘continuation of violation’ theory to somehow toll the date of accrual of their FDCPA claim beyond June 26, 2014, the date of commencement of the mortgage foreclosure action or service of the Complaint on August 26, 2014.” (Doc. 22, p. 8). Udren claims that “[i]t is well-settled that a specific date is affixed for the accrual of a purported FDCPA violation . . . and the subsequent course of litigation is not actionable under a ‘continuing violation’ theory in the context of the FDCPA.” (Id.) (quoting Schaffhauser v. Citibank (S.D.) N.A., 340 F. App’x 128, 130 (3d Cir. 2009); citing Parker v. Pressler & Pressler, LLP, 650 F. Supp. 2d 326, 341 (D.N.J. 2009)).
Similarly, U.S. Bank and Ocwen argue that Plaintiffs’ FDCPA claims are barred by the FDCPA’s one-year (1) statute of limitations. (Doc. 24, p. 6). In particular, U.S. Bank and Ocwen claim that since the instant action was instituted on March 8, 2016, “no action taken prior to March 8, 2015 may form the basis of their claims against Ocwen and U.S. Bank.” (Id.). According to U.S. Bank and Ocwen, even assuming, without deciding, that the limitations period began to run in September 2014, when Plaintiffs were served with the foreclosure complaint, the Plaintiffs’ “FDCPA claims, premised on improper or ‘false’ allegations included in the Foreclosure Action, are clearly time-barred.” (Doc. 24, p. 7).
U.S. Bank and Ocwen also claim that “[a]ny acts taken or statements made
by Ocwen or U.S. Bank in the course of the Foreclosure Action do not constitute
‘continuing violations’ of FDCPA that would re-start the limitations period.” (Id.)
(citing Schaffhauser,
Plaintiffs respond by arguing that their FDCPA claims concerning the underlying mortgage foreclosure action should be considered ripe when the foreclosure verdict was handed down in the underlying state court litigation. (Doc. 27-1, pp. 4-9). Plaintiffs ask the Court to craft “an exception” which would toll “the FDCPA claim from the time of filing or answer given the unique concerns of ripeness, judicial economy and important state interests involved in determining real property issues.” (Id. at p. 5).
In support of their request that the Court adopt this exception to the
FDCPA’s statute of limitations, Plaintiffs first argue that judicial economy will be
served by adopting this exception to the FDCPA’s statute of limitations. (Id.).
According to Plaintiff, “[t]he reasoning employed by Federal Courts considering
abstention from state court determinations provides a foundation for [P]laintiff[s’]
ripeness arguments.” (Doc. 27-1, p. 5). Plaintiffs claim that courts within the
Third Circuit that have considered “Younger abstention issues abstain where real
property issues are involved.” (Id. at p. 6). Moreover, Plaintiffs state that
“[a]nother category of cases appropriate for abstention involves ‘considerations of
[wise] judicial administration, giving regard to conservation of judicial resources
and comprehensive disposition of litigation.’” (Id.) (second alteration and
emphasis in original) (quoting Colo. River Water Conservation Dist. v. United
States,
According to Plaintiffs, the “Colorado River abstention provides that, under
‘exceptional circumstances,’ a federal court may abstain from its otherwise
‘virtually unflagging obligation’ to assert jurisdiction over a case because (1) there
is a parallel case in state court, and (2) after ‘careful[ly] balancing’ a series of
factors, maintaining the federal case would be a waste of judicial resources.” (Id.)
(alteration in original) (quoting Moses 4 H Cone Mem’l Hosp. v. Mercury Constr.
Corp.,
According to Plaintiffs, the argument put forth by Defendants “requires any foreclosure defendant opposing foreclosure for lack of a defaulted debt to file a parallel concurrent action to toll the FDCPA statute of limitations despite all Colorado River and Younger abstention factors arguing for federal court abstention.” (Id. at p. 8). Moreover, Plaintiffs contend that: Extending the Motion’s argument to the instant case’s facts would have resulted in the consequent squandering of not only the state court’s resources spent for years on a meritless state foreclosure claim, but would also have squandered the resources of the federal court to carry the FDCPA action on its docket as an active matter for such time.
(Id.). Plaintiffs also claim that:
filing of an FDCPA claim in federal court against the foreclosing parties and their counsel within one (1) year of the foreclosure action’s filing or service without regard for disposition of whether the debt is owed increases the danger of the borrower and his counsel having Rule 11 sanctions threatened thereby increasing the likelihood of multiplying the litigation.
(Doc. 27-1, p. 9).
Plaintiffs also make clear that they are not alleging a continuing violation theory under the FDCPA. (Id.). According to Plaintiffs: The case law underlying the Motion’s argument that an FDCPA claim is broadly tolled by the initiation or service of the foreclosure complaint should be distinguished because it does not involve foreclosure or standing defense in the respective underlying collection actions as discussed above.
(Id.).
Initially, the Court notes that Plaintiffs’ FDCPA claims are based on two (2) sections of the FDCPA and concern actions allegedly taken in two (2) separate legal proceedings. (Doc. 14, pp. 5-6). First, Plaintiffs contend that Ocwen violated 15 U.S.C. § 1692e(2)(A) of the FDCPA on October 7, 2015, when it “falsely fil[ed] a Response in the bankruptcy when no post-petition payments were due.” (Id. at p. 5). Second, Plaintiffs allege that Ocwen and Udren violated section 1692e(2)(A) when they “falsely fil[ed] a foreclosure action to take [Plaintiffs’] home when [Plaintiffs] were not contractually in default under the Note for payments due.” (Doc. 14, p. 5). Notably, Plaintiffs also allege generally that “Defendants violated § 1692f by engaging in unfair or unconscionable means to collect or attempt to collect a debt by the aforesaid conduct.” (Id. at p. 6). As to Plaintiff’s FDCPA claims, Defendants’ respective motions focus on Plaintiffs’ allegations concerning the Defendants’ filing of the underlying foreclosure action and, importantly, do not address Plaintiffs’ claim regarding the “Response” allegedly filed by Ocwen on October 7, 2015, in the “bankruptcy.” See (Doc. 22, pp. 2, 7-8); (Doc. 24, pp. 1-2, 6-7). Consequently, Plaintiffs’ FDCPA claims under sections 1692e(2)(A) and 1692f based on the “Response” allegedly filed by Ocwen in the “bankruptcy” will be allowed to proceed.
However, Plaintiffs’ claim that Ocwen and Udren violated sections 1692e(2)(A) and 1692f of the FDCPA when they filed the underlying mortgage foreclosure action will not proceed. Pursuant to section 1692k(d) of the FDCPA, “[a]n action to enforce any liability created by this title . . . may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within one [(1)] year from the date on which the violation occurs.” 15 U.S.C. § 1692k(d). Here, Plaintiffs filed their original complaint on March 8, 2016. Therefore, under section 1692k(d), Plaintiffs’ FDCPA claims which occurred before March 8, 2015, will be time barred.
To determine whether Plaintiffs’ FDCPA claims concerning the underlying
mortgage foreclosure action are time barred, the Court must first decide when
those claims began to accrue under the FDCPA’s statute of limitations. According
to the plain language of the FDCPA, the statute of limitations begins to accrue
“from the date on which the violation occurs.” 15 U.S.C. § 1692k(d). This plain
reading is consistent with decisions reached by the United States Court of Appeals
for the Third Circuit and the district courts within that jurisdiction. For example,
in Schaffhauser v. Citibank, the Third Circuit noted that “[a]n action under the
FDCPA must be brought ‘within one year from the date on which the violation
occurs.’”
A number of district courts within the Third Circuit have found the Third
Circuit’s non-precedential decision in Schaffhauser to be persuasive, specifically
to the extent it determined that the participation in the underlying state court
action did not qualify as a continuing violation. For example, in Toritto v.
Portfolio Recovery Assocs., LLC,
The Court of Appeals and numerous District Courts have recognized that the one year statute of limitations associated with the FDCPA commences upon the invocation of the underlying foreclosure litigation and is not generally saved by the continuing litigation doctrine.
Id. at *11-12 (citing Schaffhauser,
In Brown v. Udren Law Offices PC, however, the United States District
Court for the Eastern District of Pennsylvania distinguished the Third Circuit’s
decision in Schaffhauser.
Here, Plaintiffs allege, in relevant part, that Defendants violated section 1692e(2)(A) of the FDCPA when “[b]oth defendants[, Ocwen and Udren,] falsely fil[ed] a foreclosure action to take plaintiff[s’] home when plaintiffs were not contractually in default under the Note for payments due.” (Doc. 14, p. 5). Plaintiffs also allege that “Defendants violated § 1692f by engaging in unfair or unconscionable means to collect or attempt to collect a debt by the aforesaid conduct.” (Id. at p. 6). As alleged, the Defendants filed the complaint in the underlying mortgage foreclosure action on “June 26, 2014.” (Id. at p. 3). As a result, even using June 26, 2014, as the latest available date for statute of [1]
limitations purposes, Plaintiffs’ FDCPA claims based on the filing of the underlying mortgage foreclosure action is barred by the FDCPA’s one-year statute of limitations. [2]
While Plaintiffs’ FDCPA claims concerning the underlying state foreclosure action are barred by the one-year statute of limitations, Plaintiffs request that the Court find that Plaintiffs are entitled to equitable tolling of the FDCPA’s statute of limitations. In particular, Plaintiffs argue that the statute of limitations for FDCPA claims which require the determination of the ultimate issue already before a state court, and thus are subject to federal abstention, be tolled during the pendency of that state court action. See (Doc. 27-1, pp. 4-9). In essence, Plaintiffs are asking the Court to carve out an exception to the FDCPA’s statute of limitations based on an after the fact determination as to whether abstention would have applied had Plaintiffs filed a federal complaint alleging the FDCPA claims at issue during the pendency of the state court proceeding. See (Id.).
First, there is a question as to whether equitable tolling is available under the present circumstances. Specifically, “[e]quitable tolling is appropriate only [2] Plaintiffs also allege in their amended complaint that “Defendants violated § 1692f by engaging in unfair or unconscionable means to collect or attempt to collect a debt by the aforesaid conduct.” (Doc. 14, p. 6). To the extent that Plaintiffs are claiming that Defendants alleged actions during the underlying mortgage foreclosure action can support a claim under section 1692f of the FDCPA, that claim is also time barred.
when the statutory time limit is not jurisdictional.” Shivone v. Washington Mut.
Bank, F.A.,
“The doctrine of equitable tolling is only applicable when timely filing was
prevented by extraordinary or sufficiently inequitable circumstances, and in that
regard, equitable tolling should be sparingly applied by courts.” Coles, 2015 U.S.
Dist. LEXIS 98628, at *10 (citing Santos v. United States,
However, Plaintiffs’ amended complaint does not support a determination that Plaintiffs were prevented from timely filing their FDCPA claim by an extraordinary or sufficiently inequitable circumstance. Further, the amended complaint shows that Plaintiffs were not prevented from ascertaining the viability of their FDCPA claim concerning the underlying mortgage foreclosure action within the limitations period by any fraud or concealment done by Defendants. Rather, quite the opposite. The basis of Plaintiffs’ claims hinge on their allegation that:
Plaintiffs never missed a single payment after relief was granted to defendant US Bank in the bankruptcy until defendant Ocwen began returning plaintiffs’ payments in January 2014 despite Plaintiffs having copies of checks and bank statements evidencing payment for every month alleged unpaid. Furthermore, Defendants cashed the checks.
(Doc. 14, pp. 3-4). Notably, Plaintiffs continue by alleging that “[e]ven after the complaint in foreclosure was filed, and Plaintiffs continually informed Defendants of their mistake, Defendants pursued their meritless claim.” (Id. at p. 4). These allegations run opposite to any argument that Defendants prevented Plaintiffs from ascertaining the viability of their FDCPA claim concerning the underlying mortgage foreclosure action within that Act’s limitations period. Thus, even if the Court were to find that equitable tolling is allowed in FDCPA actions, Plaintiffs’ request to apply equitable tolling to their FDCPA claims concerning their underlying mortgage foreclosure action is denied.
Furthermore, Plaintiffs’ equitable tolling argument relies on the speculative conclusion that the Court would have found that this case was subject to federal abstention. Moreover, had Plaintiffs filed a complaint within the applicable statute of limitations, and during the pendency of the state court proceeding, the Court may have issued a stay, as opposed to dismissing the federal case. Also, adopting the mechanism proposed by Plaintiffs most likely would not avoid an abstention determination and, thus, conserve judicial resources. Rather, as would be the case here if Plaintiffs’ argument was accepted, such a principle would just prolong that determination until the defendants move for relief under Federal Rule of Civil Procedure 12(b). Since the abstention determination most likely would be made regardless of when the federal complaint is filed, the Court does not find it necessary to prolong such a determination and, simultaneously, create a new equitable tolling exception to the FDCPA’s statute of limitations.
Additionally, as noted, the accrual date for causes of action concerning
prosecutions of underlying state court actions concerning a “debt” has been
determined to be, at the latest, when the consumer is served with the complaint
and summons in that action. See Schaffhauser,
Based on these reasons, it is determined that Plaintiffs’ request for this Court to apply an equitable tolling exception to the FDCPA’s statute of limitations will be denied. Therefore, Plaintiffs’ FDCPA claims based upon Plaintiffs’ underlying mortgage foreclosure action are barred by the FDCPA’s statute of limitations and, thus, will be dismissed. Additionally, since amendment of these claims would be futile, leave to amend will not be granted. As a result, Plaintiffs’ FDCPA claims concerning the underlying mortgage foreclosure action will be dismissed with prejudice. Finally, as noted above, Plaintiffs’ FDCPA claims based on the “Response” allegedly filed by Ocwen in the “bankruptcy,” see (Doc. 14, p. 5), will be allowed to proceed.
B. State Law Claims
i. Wrongful Use of Civil Proceedings Plaintiffs also claim that Defendants wrongfully used civil proceedings against them in violation of Pennsylvania’s Dragonetti Act, 42 P A . C ON . S TAT . A NN . §§ 8351-8354. (Doc. 14, p. 6). As noted, Plaintiffs allege that “Defendants caused the underlying mortgage foreclosure litigation to be instituted against Plaintiffs.” (Id.). Further, Defendants allegedly “commenced, continued and/or prosecuted underlying litigation . . . against the Plaintiffs without probable cause.” (Id.). According to Plaintiffs, the “underlying litigation was commenced and continued by Defendants and against Plaintiffs with malice and/or reckless indifference to the rights and interest of Plaintiffs.” (Id.). Further, the underlying litigation “was terminated in Plaintiffs’ favor, by way of the entry of an Order of the Court . . . .” (Doc. 14, p. 6).
Udren argues that Plaintiff’s Dragonetti claim “cannot be maintained when Plaintiffs failed to contest a final Bankruptcy Court Order, failed to properly assert their defenses in state court pleadings, and [fails] by their own pleaded admissions and filings.” (Doc. 22, p. 8). Udren continues by arguing that “Plaintiffs cannot show, inter alia, that Udren acted in a grossly negligent manner or lacked probable cause because the mortgage default was established conclusively by the [Order on U.S. Bank’s Motion for Relief from Automatic Stay], Confirmed Plan and their admissions.” (Id. at p. 9). According to Udren, “[t]he [Order on U.S. Bank’s Motion for Relief from Automatic Stay] and Confirmed Plan conclusively establish that the Plaintiffs failed to maintain both post-petition and pre-petition mortgage obligations.” (Id.). Udren argues that “Plaintiffs are bound by these facts.” (Id.).
Specifically, Udren contends that the Order on U.S. Bank’s Motion for
Relief from Automatic Stay “conclusively establishes the Plaintiff’s post-petition
mortgage default.” (Id.). Udren states that 11 U.S.C. § 362(d) “authorizes the
court to grant relief from the automatic stay, in the form of an order ‘terminating,
annulling, modifying or conditioning’ the automatic stay, for ‘cause.’” (Id.)
(quoting 11 U.S.C. § 362(d)). Thus, according to Udren, section 362(d) requires
the moving party to satisfy their initial burden to “demonstrate cause for relief.”
(Doc. 22, p. 10) (citing In re Ward,
Udren also argues that “the Confirmed Plan to cure the default proposed by Plaintiffs in their bankruptcy and subsequently confirmed by Court Order is binding and conclusive upon Plaintiffs.” (Id.) (emphasis in original). Udren contends that Plaintiffs are bound by the Confirmed Plan, “which provide[s] that Plaintiffs owed US Bank pre-petition arrears[footnote omitted] of $14,607.81.” (Id.). Udren points out that “Plaintiffs admit in their Amended Complaint that they only paid ‘$12,600 in pre-petition arrears’ through bankruptcy, leaving a deficiency of $2,007.81.” (Doc. 22, pp. 10-11) (citing Doc. 22-1). Therefore, Udren concludes, “Plaintiffs . . . admit they have not cured the pre-petition amounts through bankruptcy.” (Id. at p. 11). As a result, Udren argues that since the “[p]re- and post-petition payment defaults are conclusively established through the record . . . [it] cannot be held liable under Dragonetti for representing a lender that commence[d] a lawsuit against borrowers with an established default.” (Id.) (citing Docs. 22-1, 22-3, 22-6).
Udren also claims that “judicial estoppel ‘applies to preclude a party from
assuming a position in a legal proceeding inconsistent with one previously
asserted.’” (Id.) (quoting Oneida Motor Freight Inc. v. United Jersey Bank, et al.,
Plaintiffs confusingly and unartfully state, “Plaintiffs never missed a single payment after relief was granted to defendant US Bank in the bankruptcy until defendant Ocwen began returning plaintiffs’ payments in January 2014despite [sic] Plaintiffs having copies of checks and bank statements evidencing payment for every month alleged unpaid.” (Id.) (citing Doc. 22-1).
Udren continues by contending that Plaintiffs’ wrongful use of civil proceedings claim should be dismissed because even if the Court assumes “the absence of judicial admission of default by Plaintiffs in the bankruptcy proceeding, Plaintiffs’ failure to effectively raise or plead defenses in the Foreclosure Action further buffers Udren from liability.” (Doc. 22, p. 12). According to Udren, Plaintiffs did not plead any facts in the foreclosure action “which would have placed Udren on notice that Plaintiffs’ claim of payment demanded investigation.” (Id.). Udren argues that in Pennsylvania the defense of payment “must be pled in New Matter or waived.” (Id.) (citing Pa.R.C.P. 1030(a), (b); Pa.R.C.P. 1033(a)). Udren claims that “Plaintiffs waived their claim of payment for failure to raise it as a defense in the foreclosure and cannot establish that Udren’s primary purpose for which the proceedings were brought was not ‘that of securing the proper discovery, joinder of parties or adjudication of the claim on which the proceedings were based.’” (Id.).
Finally, Udren argues that “Plaintiffs prevailed at trial not because the Plaintiffs proved they were ‘current’ or the foreclosure was wrongful; rather, because US Bank failed to meet its burden of proof because business records were determined to be embedded with hearsay.” (Id.). Merely prevailing at trial, according to Udren, “does not support a Dragonetti claim . . . .” (Id.).
U.S Bank and Ocwen likewise move to dismiss Plaintiffs’ Dragonetti Act claim. (Doc. 24, pp. 8-11). According to U.S. Bank and Ocwen, Plaintiffs’ “Dragonetti Act claim fails for two reasons: (1) defendants had probable cause to commence the Foreclosure Action; and (2) the [Plaintiffs] failed to allege that defendants commenced the Foreclosure Action for an improper purpose.” (Doc. 24, p. 8).
In regards to their first point, U.S. Bank and Ocwen argue that “[t]he
publicly-filed bankruptcy records demonstrate that Ocwen and U.S. Bank had
probable cause to initiate the Foreclosure Action.” (Id.). Specifically, “[t]he MFR
Order and Confirmed Plan establish that the [Plaintiffs] failed to maintain both
post-petition and pre-petition mortgage obligations.” (Id. at p. 9). According to
U.S Bank and Ocwen, “[t]he MFR Order, in particular, establishes [Plaintiffs]
post-petition mortgage default.” (Id.). U.S. Bank and Ocwen state that “[t]he
Bankruptcy Code authorizes the court to grant relief from the automatic stay, in
the form of an order ‘terminating, annulling, modifying or conditioning’ the
automatic stay, for ‘cause.’” (Id.) (quoting 11 U.S.C. § 362(d)). “Under §
326(d),” U.S. Bank and Ocwen assert, “the party seeking relief from the stay has
an initial burden to demonstrate cause for relief.” (Id.) (citing In re Ward, 837
F.2d at 128). Additionally, U.S. Bank and Ocwen state that “[a] bankruptcy
court’s order granting relief from the automatic stay constitutes a final order.”
(Id.) (citing In re Comer,
In regard to the “Confirmed Plan,” U.S. Bank and Ocwen argue that it
“binds” Plaintiffs. (Id.). According to U.S. Bank and Ocwen, “[a] confirmed plan
constitutes a new contract between the debtor and creditors.” (Id.) (citing In re
Pabilla,
Additioanlly, U.S. Bank and Ocwen seek dismissal of Plaintiff’s Dragonetti claim because Plaintiffs failed to allege that the primary purpose for the foreclosure action was for a purpose other than adjudicating the foreclosure action. (Id.). Specifically, U.S. Bank and Ocwen argue that the Plaintiffs do “not allege any facts, or even legal conclusions, regarding the defendants’ alleged primary purpose in bringing the Foreclosure Action.” (Id.). While U.S. Bank and Ocwen acknowledge that Plaintiffs do allege that Defendants “did not properly investigate their claims before asserting them,” they claim that Plaintiffs “do not state that [U.S. Bank and Ocwen] initiated the Foreclosure Action for an improper purpose.” (Id.). According to U.S. Bank and Ocwen, “[t]he gist of the claim is that defendants were incorrect to assert [Plaintiffs] were in default, not that defendants initiated the Foreclosure Action for a purpose other than the relief sought on the face of their pleadings.” (Doc. 24, p. 10).
Plaintiffs respond by arguing that “[n]o pleading filed or ruling entered in either Plaintiffs’ Bankruptcy or the Foreclosure Action substantively bars Plaintiffs’ Dragonetti claim . . . .” (Doc. 27-1, p. 9). Initially, Plaintiff claims that since “none of [Defendants’] Exhibits A through J are attached by plaintiffs as Exhibits to their complaint” and the motions are brought under Federal Rule of Civil Procedure 12(b)(6), all of Defendants’ “exhibits are procedurally defective and should be stricken.” (Id. at p. 10). Additionally, according to Plaintiffs, “[n]otwithstanding the procedurally defective nature of the Exhibits, Movant’s arguments based thereon are substantively unavailing.” (Id.). In particular, Plaintiffs claim that the “Exhibits are irrelevant to a determination of Plaintiffs’ Dragonetti claim premised on the continued prosecution of the foreclosure action without probable cause . . . .” (Id.).
Plaintiffs then address the argument advanced by U.S. Bank and Ocwen that the bankruptcy filings, specifically the Confirmed Plan, bar the Dragonetti claim. (Id. at pp. 10-11). According to Plaintiffs, the “Plan is irrelevant to determining any post-petition default by plaintiffs to support probable cause to prosecute the 2014 foreclosure action by defendants three (3) years later.” (Id. at p. 10). Defendants, in their joint reply addressing Plaintiffs’ Dragonetti claim, first contend that the exhibits they attached to their respective filings are properly before the Court because “a court may also consider public documents and prior judicial proceedings in evaluating a motion to dismiss” and Plaintiffs “expressly reference many of the documents attached to Defendants’ motions in their amended complaint.” (Doc. 28, p. 5). Defendants then argue that Plaintiffs’ “miss the point” on the impact of the “MFR Order.” (Id. at pp. 5-6). In particular, Defendants state that “not only did the MFR Order establish the [Plaintiffs’] default, but that it gave Defendants probable cause to file the Foreclosure Action.” (Id. at p. 6). “After all,” Defendants continue, “the motion for relief from the automatic stay alleged that [Plaintiffs] had post-petition arrears, and [Plaintiffs], who were represented by counsel in the bankruptcy action, did not contest that point, and allowed the MFR Order to be entered.” (Id.). “In short, when Defendants told the bankruptcy court that [Plaintiffs] were behind in their mortgage payments, [Plaintiffs] stayed silent, allowing the bankruptcy judge to enter a final order that expressly permitted the Foreclosure Action to be filed.” (Id.). As a result, Defendants argue, Plaintiffs’ Dragonetti claim should be barred because the foreclosure action was brought for a proper purpose. (Id.).
Turning first to the exhibits attached to Defendants’ respective briefs in
support, it should be noted that “[t]o decide a motion to dismiss, courts generally
consider only the allegations contained in the complaint, exhibits attached to the
complaint and matters of public record.” Schmidt v. Skolas,
2007) (quoting In re Burlington Coat Factory Sec. Litig.,
n.1 (3d Cir. 2014). Moreover, “[t]aking judicial notice of the existence of other
proceedings does not convert a motion to dismiss into a motion for summary
judgment as long as the court does not take judicial notice of those proceedings to
find facts.” In re Able Labs. Sec. Litig.,
“The rationale underlying this exception is that the primary problem raised
by looking to documents outside the complaint–lack of notice to the plaintiff–is
dissipated ‘where plaintiff has actual notice . . . and has relied upon these
documents in framing the complaint.’” In re Burlington Coat Factory Sec. Litig.,
Defendants have attempted to incorporate a number of documents into the
motion to dismiss record which they contend are relevant to Plaintiffs’ Dragonetti
claim. See (Doc. 22); (Doc. 24). First, of those documents produced by
Defendants for purposes of their respective motions to dismiss, Plaintiffs
specifically cited to the following in their amended complaint: 1) U.S. Bank’s
motion for relief from stay filed on July 18, 2013, in the Plaintiffs’ action in the
United States Bankruptcy Court for the Middle District of Pennsylvania; 2) an
August 8, 2013 order issued by the Bankruptcy Court; 3) Defendants’ June 26,
2014 foreclosure complaint filed against Plaintiffs in the Court of Common Pleas
of Wayne County, Pennsylvania; 4) the March 13, 2015 verdict rendered in the
underlying mortgage foreclosure action; 5) Plaintiffs’ discharge received in the
bankruptcy action for their payment of $12,600 in pre-petition arrears to Ocwen;
and 6) Ocwen’s October 7, 2015 response filed in the bankruptcy action, which
alleged that Plaintiffs’ had a post-petition mortgage loan default from December 1,
2013 through October 1, 2015 in the total amount of $36,851.75. See (Doc. 14,
pp. 3-4). Plaintiffs’ discussion of these documents establishes that they were at
the very least aware of their existence at the time they filed their amended
complaint. Moreover, if this Court did not consider the aforementioned
documents invoked by Plaintiffs’ in their amended complaint such an action
would “raise the concerns addressed in Pension Benefit[], 998 F2d at 1196.”
Hughes,
Additionally, the pertinent exhibits at issue were filed in judicial
proceedings. See (Docs. 22-4, 22-6, 22-7, 24-3, 24-4, 24-5); In re Bainbridge, No.
10-9019 (Bankr. M.D. Pa. filed Nov. 4, 2010). As discussed above, “[t]o resolve a
12(b)(6) motion, a court may properly look at public records, including judicial
proceedings, in addition to the allegations in the complaint.” S. Cross Overseas
Agencies,
(W.D. Mo. 1944)). Notably, “if facts that are alleged to be true in a complaint are
contradicted by facts that can be judicially noticed, the contradicted facts in the
complaint are not to be deemed as true upon consideration of the motion to
dismiss.” Smith v. Litton Loan Servicing, LP,
Therefore, based on the foregoing, it is determined that the aforementioned exhibts attached to Defendants respective briefs in support will be considered in reaching a determination concerning the instant motions to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) challenging, inter alia, Plaintiffs’ Dragonetti claims. Thus, with that in mind, the Court will now turn to the merits of the respective argument advanced by Defendants concerning Plaintiffs’ Dragonetti claims.
“The Dragonetti Act codifies the common law tort of wrongful use of civil
proceedings in Pennsylvania.” Schmidt v. Currie,
A Dragonetti Act claim for wrongful use of civil proceedings has five elements, that: (1) the current plaintiff prevailed in the underlying actions; (2) the defendants acted in a grossly negligent manner or without probable cause; (3) the defendant had an improper purpose in pursuing the underlying action; (4) the proceedings terminated in favor of the plaintiff; and (5) the plaintiff was harmed.
The Bobrick Corp. v. Santana Prods., Inc.,
A person who takes part in the procurement, initiation or continuation of civil proceedings against another has probable cause for doing so if he reasonable believes in the existence of the facts upon which the claim is based, and either (1) reasonably believes that under those facts the claim may be valid under the existing or developing law; (2) believes to this effect in reliance upon the advice of counsel, sought in good faith and given after full disclosure of all relevant facts within his knowledge and information; or (3) believes as an attorney of record, in good faith that his procurement, initiation or continuation of a civil cause is not intended to merely harass or maliciously injure the opposite party.
42 P A . C ON . S TAT . A NN . § 8352. “The existence of probable cause does not
automatically defeat a Dragonetti Act claim” because gross negligence can also
serve as a basis for liability in a Dragonetti Act claim. Peek v. Whittaker, 2014
U.S. Dist. LEXIS 70461, at *15-16 (W.D. Pa. May 22, 2014) (citing Buchleitner v.
Perer,
The United States Court of Appeals for the Third Circuit has stated that “a
party seeking redress under [the] Dragonetti [Act] bears a heavy burden.” U.S.
Express Lines Ltd. v. Higgins,
Turning first to Defendants respective arguments concerning the impact of
the Bankruptcy Court’s grant of relief from automatic stay, it is determined that
these contentions are without merit. Relief from the automatic stay in a
bankruptcy action is governed by 11 U.S.C. § 362(d). Pursuant to section
362(d)(1), relief from the stay shall be granted “for cause, including the lack of
adequate protection of an interest in property of such party in interest.” In re
Stone Res., Inc.,
As for Defendants’ respective arguments that Plaintiffs’ Dragonetti claims should be dismissed because of the Confirmed Plan dated April 15, 2011, see (Doc. 22, pp. 10-11); (Doc. 24, pp. 9-10), those contentions also are without merit. As stated, Defendants argue that Plaintiffs’ admission that they only paid $12,600.00 of the “$14,607.81” pre-petition arrears establishes a deficiency of approximately $2,000.00. (Id.). This deficiency, according to Defendants, shows that Plaintiffs admit that “they have not cured the pre-petition amounts through bankruptcy.” (Doc. 22, p. 11); (Doc. 24, pp. 9-10). However, what the Defendants leave out of this argument is a mention of the Plaintiffs’ allegation concerning the Bankruptcy Court’s October 7, 2015 discharge of Plaintiffs’ “chapter 13 bankruptcy.” See (Doc. 14, p. 4). Specifically, as alleged by Plaintiffs in their amended complaint, on October 7, 2015, they “received a discharge of their chapter 13 bankruptcy wherein they had paid $12,600 in pre-petition arrears to Ocwen and its predecessor servicer, Litton.” (Id.). Moreover, Plaintiffs allege [3]
that they “never missed a single payment after relief was granted to defendant US Bank in the bankruptcy until defendant began returning plaintiffs’ payments in January 2014 despite Plaintiffs having copies of checks and bank statements evidencing payments for every month alleged unpaid.” (Id. at pp. 4-5). Thus, [3] “The discharge of a debt operates as an injunction against efforts to collect the discharged debt, and a discharge voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged.” 8B C.J.S. B ANKRUPTCY § 1075 (March 2017).
taking these allegations as true and construing all inferences in the light most favorable to the non-moving party, Plaintiffs’ allegation that they paid “$12,600” in pre-petition arrears does not establish, as a matter of law, that Plaintiffs’ have failed to state a Dragonetti claim upon which relief may be granted. Therefore, Defendants’ respective arguments based upon the Confirmed Plan issued on April 15, 2011, will be denied.
As noted, Udren also claims that Plaintiffs have failed to state claim under
Dragonetti because judicial estoppel applies. See (Doc. 22, pp. 11-12). However,
this claim also fails. “Judicial estoppel is a fact-specific, equitable doctrine,
applied at courts’ discretion.” In re Kane,
Udren’s claim that Plaintiffs failed to “effectively raise or plead defenses in
the Foreclosure Action further buffers [it] from liability,” (Id.), also does not
establish that its entitled to dismissal of Plaintiffs’ Dragonetti claim. According to
Udren, “[t]here are no facts pleaded of record in the foreclosure which would have
placed Udren on notice that Plaintiffs’ claim of payment demanded investigation.”
(Id.). However, “[i]n an action for mortgage foreclosure, the entry of summary
judgment is proper if the mortgagors admit that the mortgage is in default, that
they have failed to pay interest on the obligation, and that the recorded mortgage is
in the specified amount.” Cunningham v. McWilliams,
As for Defendants U.S. Bank and Ocwen’s claim that Plaintiffs have failed
to allege that Ocwen or U.S. Bank filed the underlying mortgage foreclosure
action for an improper purpose, that claims is also without merit. (Id. at pp. 10-
11). “An improper purpose is ‘a purpose other than that of securing the proper
discovery, joinder of parties or adjudication of the claim in which the proceedings
are based.’” Montgomery v. Midland Credit Mgmt., 2014 U.S. Dist. LEXIS
100327, at *22 (E.D. Pa. June 19, 2014) (quoting 42 Pa. C.S.A. § 8351(a)(1)).
However, “a claim for wrongful use of civil proceedings will lie ‘if the trier of fact
could reasonably conclude that the defendant initiated the underlying lawsuit
without probable cause.’” Perelman,
276, 295 (E.D. Pa. 2009) (Noting that an improper purpose can be inferred where
an action is filed without justification and “whether an alleged purpose is improper
is an issue for the jury to decide.”) (quoting Broadwater,
Based on the foregoing, Plaintiffs’ Dragonetti claim has survived all challenges raised by Defendants. Therefore, those portions of Defendants’ respective motions seeking dismissal of Plaintiffs’ Dragonetti claim will be denied.
ii. UTPCPL Claim
Plaintiffs also allege that Defendants violated the UTPCPL. (Doc. 14, pp.
6-8). According to Plaintiffs:
US Bank, through authorized agents and employees but not limited to co-defendant Ocwen, and Ocwen, through authorized agents and employees including but not limited to co-defendant Udren failed to state material facts or otherwise misstated, misrepresented, or omitted the true facts concerning or related to the status of the Loan that tended to deceive and/or did in fact deceive plaintiffs . . . .
(Doc. 14, p. 7). Plaintiffs claim that Defendants’ unfair or deceptive acts include, but are not limited to, the following:
(a) Represented that an accurate accounting of plaintiffs’ loan had been made and reviewed thereafter in the course of the foreclosure; (b) By the filing of the underlying action represented that plaintiffs were in default under the terms of the Note and Mortgage; (c) By the filing of the underlying litigation represented that defendants were entitled to foreclose and sell plaintiffs’ home at sheriff’s sale without first properly accounting for plaintiffs’ payments under the loan; (d) By the filing of the underlying litigation represented that the underlying foreclosure was lawful.
(Id.). Plaintiffs allege that “[i]t is unreasonable to conclude that a national bank like US Bank and a national mortgage servicer like Ocwen does not intend for its customers to rely upon its communications about their account–especially when,” according to Plaintiffs, “the communications involve seeking to sell plaintiffs’ home as in the underlying action and the defendants collectively fail to acknowledge or review their errors and instead simply ratify their continued wrongful conduct as in this matter.” (Id.). Plaintiffs claim that they “reasonably relied upon the material acts and actions of defendants as exemplified by their retaining counsel to defendant the underlying litigation.” (Doc. 14, p. 7). Plaintiffs state that:
[b]ut for defendants and their respective agents’ and employees’ acts and omissions and disregard for its won records reflecting default by plaintiffs when plaintiffs’ regular payments were cashed by Ocwen for nearly a year after a date of default alleged in the underlying litigation resulting in conflicting and otherwise incorrect accounting of plaintiffs’ loan, plaintiffs would not have sustained any damages and losses.
(Id. at p. 8).
Based on the foregoing, Plaintiffs claim that Defendants violated section 201-3 of the UTPCPL. (Id.). Specifically, Plaintiffs allege that Defendants violated section 201-3 when they “engaged in fraudulent or deceptive conduct which created a likelihood of confusion or of misunderstanding as to a default under the terms of the Note and mortgage entitling defendants to file the foreclosure.” (Id.) (citing 73 P.S. § 201-2(4)(xxi)). Also, Plaintiffs allege that Defendants violated section 201-3 of the UTPCPL when they:
misrepresented the characteristics or benefits of the loan accounting of the loan rendered to plaintiffs as being inaccurate when the loan’s servicing and accounting was defective resulting in false allegations of default and false legal claims of right to sell plaintiffs’ home under the terms of the Note and Mortgage.
(Doc. 14, p. 8) (citing 73 P.S. § 201-2(4)(v)).
The UTPCPL is “a remedial statute intended to protect consumers from
unfair or deceptive [business] practices or acts . . . .” Balderston v. Medtronic
Sofamor Danek, Inc.,
the UTPCPL provides a private cause of action to “[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.”
Id. at *10-11 (quoting 73 P.S. § 201-9.2(a)). “To maintain a private right of action
under the UTPCPL, a plaintiff must demonstrate (1) ‘ascertainable loss of money
or property, real or personal,’ [73 P.S.] § 201-9.2(a), (2) ‘as a result of’ the
defendant’s prohibited conduct under the statute.” Laymark v. Bank of Am., N.A.,
Defendants move to dismiss Plaintiffs’ UTPCPL claims. See (Docs. 21, [4] 23). In particular, Udren argues that Plaintiffs have failed to plead an ascertainable loss of money or property, real or personal, and justifiable reliance, both of which are required to successfully prosecute a UTPCPL action. (Doc. 22, [4] Udren also argues that Plaintiffs’ claim pursuant to the Fair Credit Extension Uniformity Act (“FCEUA”), 73 P A . C ON . S TAT . A NN . § 2270.1 et seq., should be dismissed because it is expressly excluded from liability under the FCEUA. (Doc. 22, p. 13). Notably, however, Plaintiffs have withdrawn their FCEUA claim. See (Doc. 14, pp. 6-8); (Doc. 27-1, p. 13). Consequently, to the extent that Udren moves for dismissal of Plaintiffs’ withdrawn FCEUA claim, it will be dismissed as moot.
p. 13). As for justifiable reliance, Udren argues that:
Plaintiffs do no assert one iota of a fact supporting justifiable reliance or specific harm therefrom, rather, they baldly claim that they were “unable to buy a new truck,” they “have been forced to rent rather than purchase a new home because they cannot qualify for an affordable mortgage” their credit was damaged and they hired an attorney to defend the foreclosure action.
(Doc. 22, p. 14). Udren claims that “[t]here is absolutely no nexus between any alleged representation of Udren and the alleged (and unascertainable) harm by Plaintiffs.” (Id.). Therefore, Udren concludes, “Plaintiffs’ claims for purported violations of the UTPCPL . . . should be dismissed.” (Id.).
Finally, Udren argues that “the economic loss doctrine precludes Plaintiffs’ right to recovery under the UTPCPL, and, therefore, the FCEUA.” (Id.). According to Udren, “[h]ere, the determination of whether Udren violated the UTPCPL turns on whether Plaintiffs, as they allege, were current under the terms of the Note and Mortgage.” (Id. at p. 15). “Since any claims based on alleged misrepresentations are necessarily interwoven with the mortgage and note themselves,” Udren concludes, “Plaintiff[s’] UTPCPL claim is barred by the economic loss doctrine.” (Id.).
U.S. Bank and Ocwen argue that there are two (2) reasons why Plaintiffs’ UTPCPL claim should be dismissed. (Doc. 24, pp. 11-14). Specifically, U.S. Bank and Ocwen assert that Plaintiffs’ UTPCPL claim is barred by the economic loss doctrine and judicial privilege. (Doc. 24, pp. 11-14).
Turning first to U.S. Bank and Ocwen’s argument concerning the economic loss doctrine, they claim that “the determination of whether Ocwen and U.S. Bank violated the UTPCPL turns on whether [Plaintiffs], as they allege, were current under the terms of the mortgage loan, i.e., the parties’ written agreement.” (Id. at p. 12). According to U.S. Bank and Ocwen, “all of the factual allegations contained within Count III relate to the servicing of [Plaintiffs’] mortgage loan and whether their payment were appropriately accounted for under the terms of the parties’ loan agreement.” (Id.). U.S. Bank and Ocwen conclude that “[b]ecause any claims based on defendants’ alleged misrepresentations regarding the mortgage loan’s accounting are necessarily interwoven with the mortgage loan, the UTPCPL claim is barred by the economic loss doctrine.[footnote omitted]” (Id. at p. 13). Additionally, U.S. Bank and Ocwen argue that Plaintiffs’ “claim of emotional distress” fails to “salvage their UTPCPL claim because such alleged damages are not compensable under the UTPCPL.” (Id. at p. 13 n.4).
U.S. Bank and Ocwen then argue that Plaintiffs’ UTPCPL claim is also barred by judicial privilege. (Id. at p. 13). According to U.S. Bank and Ocwen, “[t]his case is no different” than Schwartz v. OneWest Bank, FSB, 614 F. App’x 80, 81-82 (3d Cir. 2015) (non-precedential), which, these Defendants contend, resulted in the Third Circuit finding that the “UTPCPL claim, among others, was barred by Pennsylvania’s judicial privilege doctrine.” (Doc. 24, p. 14). U.S. Bank and Ocwen claim that “[a]ll of the factual allegations relating to the UTPCPL describe statements made by defendants in the Foreclosure Action.” (Id.). In particular, Plaintiffs:
allege that Ocwen and U.S. Bank violated the UTPCPL by “[r]epresent[ing] that an accurate account of plaintiffs’ loan had been made and reviewed thereafter in the course of the foreclosure” and “[b]y the filing of underlying action represented that plaintiffs were in default [and] that defendants were entitled to foreclose [and] that the underlying foreclosure was lawful.”
(Id.) (emphasis and alteration in original). “As such,” these U.S. Bank and Ocwen conclude, “the allegations that underpin the UTPCPL claim are the statements and claims made by Ocwen and/or U.S. Bank in the course of the underlying foreclosure litigation, whether in pleadings, other court submissions, or out-of- court discussions regarding this matter.” (Id.). Therefore, U.S. Bank and Ocwen conclude, “[a]s the Third Circuit held in Schwartz, such statements are absolutely privileged under Pennsylvania law, and the UTPCPL claim must fail for this reason.” (Id.).
Plaintiffs respond by first addressing Udren’s argument based on justifiable reliance. (Doc. 27-1, p. 14). According to Plaintiffs, they “justifiably relied on [Udren’s] misrepresentations of a default in the Foreclosure Action because they hired counsel to oppose it.” (Id.). Plaintiffs continue by asserting that they “were forced to depend upon the Foreclosure Action complaint’s misrepresentation of default by paying defense counsel to file an answer in defense to prevent a default judgment that would result in loss of their home.” (Id.). Plaintiffs claim that “such reliance was forced rather than seduced by Ocwen does not make it any less reliance or any less justified.” (Id.). Further, Plaintiffs argue that they “otherwise clearly allege damages from such misrepresentations being the legal fees and costs paid to defend the Foreclosure Action, emotional and credit damage from therefrom.” (Id.).
Plaintiffs then address Udren’s argument that they have failed to sufficiently plead ascertainable loss. (Id.). In particular, Plaintiffs claim that Grimes, a case cited by Udren, is distinguishable from the present circumstances. (Id. at pp. 14- 15). In particular, Plaintiffs argue that Grimes is inapplicable because, unlike
Grimes, which rejected a plaintiff’s claim that legal fees incurred bringing a UTPCPL claim satisfies the ascertainable loss requirement, Plaintiffs are claiming the legal fees incurred from the underlying foreclosure action as damages. (Id.). Plaintiffs state that “[u]nlike Grimes, however, no facts in the instant case support plaintiffs were spinning novel legal theories to manufacture a default of their mortgage loan to provoke a foreclosure showdown with Ocwen as a pretext to file the instant litigation.” (Doc. 27-1, pp. 14-15). “Accordingly,” Plaintiffs argue, “the holding of Grimes should be restricted to facts where a UTPCPL consumer has some meaningful choice as to manufacture of their litigation costs in an underlying action rather than the UTPCPL defendant in an underlying action manufacturing those costs by its actions leaving the consumer no choice but to incur legal costs to combat a wrong.” (Id. at p. 15). Moreover, “[t]his formulation
is otherwise consistent with the statutory language of the UTPCPL which explicitly provides that any person who suffers an ascertainable loss ‘may bring a private action to recover actual damages.’” (Id.).
In regards to the argument that their UTPCPL claims are barred by the
United States Court of Appeals’ decision in Werwinski v. Ford Motor Co., 286
F.3d 661, 671 (3d Cir. 2002), and the economic loss doctrine, Plaintiffs claim that
Defendants’ reliance “upon Werwinski is misplaced insofar as the Third Circuit
Court of Appeals’ projection of the Pennsylvania Supreme Court’s decision on
gist of the action/economic loss doctrine is no longer controlling given that” the
Supreme Court of Pennsylvania has “issued a ruling on application of this doctrine
which permits tort claims for fraudulent contract performance.” (Doc. 27-1, p. 16)
(citing Bruno v. Erie Ins. Co.,
“In Bruno,” Plaintiffs state, “homeowner insureds sued their insurer, Erie Insurance Company, for negligently performing under the applicable homeowners’ insurance policy covering mold remediation expenses.” (Doc. 27-1, p. 16). “Erie had informed the plaintiffs that the suspected mold was harmless, causing plaintiffs to continue residing in the home during renovations until the mold later proved toxic, causing plaintiffs significant respiratory illness including throat cancer.” (Id.). According to Plaintiffs, “[t]he relevant issue on appeal was whether the Brunos’ negligence claim, based on Erie’s representation that the mold was harmless, was barred by the gist of the action doctrine.” (Id.). Plaintiff continues by noting that the Supreme Court of Pennsylvania “conceded that Erie was under a contractual obligation to investigate the alleged mold . . . .” (Id.). However, the Supreme Court of Pennsylvania:
held that the gist of the action doctrine did not apply because Erie acted negligently in fulfilling its contractual obligations, and this negligence “concerns Erie’s alleged breach of a general social duty, not a breach of any duty created by the insurance policy itself.”
(Id. at pp. 16-17). Plaintiffs contend that “[t]his represents a break with the
[Pennsylvania] Superior Court’s holding in eToll, Inc. v. Elias/Savion Adver.,
Inc.,
Bruno recognizes that, while a contract establishes a relationship between parties, it does not provide an exhaustive basis for the source of duties owed by the parties, and that a contractual relationship does not necessarily preclude the existence of extra-contractual duties that may be imposed by common law or statute.
(Id.).
Turning to this matter, Plaintiffs contend that the economic loss doctrine should not apply here because “Ocwen, and Udren, in its capacity as the agent of Ocwen had a duty to avoid unfair and deceptive practices in the latter’s performance of services under the mortgage contract with plaintiffs.” (Id.). As to the impact of judicial privilege on the viability of their UTPCPL claim, Plaintiffs argue that the Court should not follow the United States Court of Appeals for the Third Circuit’s decision in Schwartz. (Id. at pp. 17-18). The Court will address the issues of justifiable reliance and judicial privilege in turn. [5] [5] As discussed in more detail below, since justifiable reliance and judicial privilege are dispositive, the Court will not render a decision on the Defendants’ respective arguments concerning the application of the economic loss doctrine to this case or Udren’s argument that Plaintiffs failed to sufficiently plead ascertainable loss.
a. Justifiable Reliance
As stated, Udren notes that “[i]n order to proceed under the UTPCPL’s
private right of action, a plaintiff must plead that he or she ‘suffer[ed]’ and
‘ascertainable loss of money or property, real or personal,” (Doc. 22, p. 13)
(quoting 73 P.S. § 201-9.2(a)). Additionally, Udren also correctly notes that for
Plaintiffs to defeat the instant motion to dismiss as to their UTPCPL claims they
must sufficiently plead “justifiable reliance under the statute to satisfy this
stringent causation requirement.” (Id.) (citing Yocca,
(Doc. 22, pp. 13-14). According to Udren, “[t]here is absolutely no nexus between any alleged representation of Udren and the alleged (and unascertainable) harm by Plaintiffs.” (Id.). As a result, Udren argues, Plaintiffs’ UTPCPL claims should be dismissed.
A review of the amended complaint reveals that Plaintiffs have failed to sufficiently plead that they justifiably relied on a miscommunication or deceptive communication to their detriment. Rather, the basis of Plaintiffs’ UTPCPL claim hinges on the fact that they did not rely on the alleged misrepresentations of Udren. Rather, according to Plaintiff, they “reasonably relied upon the material acts and actions of defendants as exemplified by their retaining counsel to defend the underlying litigation.” (Doc. 14, p. 7). Plaintiffs further allege that:
But for defendants and their respective agents’ and employees’ acts and omissions and disregard for its own records reflecting default by plaintiffs when plaintiffs’ regular payments were cashed by Ocwen for nearly a year after a date of default alleged in the underlying litigation resulting in conflicting and otherwise incorrect accounting of plaintiffs’ loan, plaintiffs would not have sustained any damages and losses.
(Id. at p. 8). As these allegations show, Plaintiffs do not allege that they ever
thought the communications relevant to their UTPCPL claims were accurate.
Instead, as stated, this matter is centered on Plaintiffs’ alleged unwillingness to
believe the allegations advanced by the Defendants in the underlying mortgage
foreclosure case. See Warren v. Wells Fargo Bank, N.A., 2016 U.S. Dist. LEXIS
21253, at *9-10 (W.D. Pa. Feb. 22, 2016); Williams v. EMC Mortg. Corp., 2013
U.S. Dist. LEXIS 63426, at *17 (E.D. Pa. May 3, 2013) (“The plaintiff claims he
kept trying to make his regular mortgage payments even after the alleged
misrepresentations so it appears he did not rely on the alleged misrepresentations
in a way that altered his behavior.”). Importantly, “‘[w]hether reliance on an
alleged misrepresentation is justified depends on whether the recipient knew or
should have known that the information supplied was false.’” Davis v. Bank of
Am., N.A.,
2002)). “A plaintiff ‘is not justified in relying upon the truth of an allegedly
fraudulent misrepresentation if he knows it to be false or if its falsity is obvious.’”
Davis,
Here, Plaintiffs allege that “[e]ven after the complaint in foreclosure was filed, and Plaintiffs continually informed Defendants of their mistake, Defendants pursued their meritless claim.” (Doc. 14, p. 4). This theory is continued by Plaintiffs in their brief in opposition to the motions to dismiss at bar. According to Plaintiffs, “[t]hey did not rely upon the truth of the Foreclosure Action’s misrepresentations as one dictionary definition of ‘rely’ would permit, i.e. to ‘place confidence in’ and act accordingly.” (Doc. 27-1, p. 14). Thus, based upon the facts alleged in their amended complaint, Plaintiffs have failed to sufficiently allege that they justifiably relied on the communications relevant to their UTPCPL claims. As a result, Plaintiffs’ UTPCPL claims against Udren will be dismissed.
Clearly, based upon the facts alleged in the amended complaint, no set of facts can be alleged under these circumstances which would allow Plaintiffs to obtain relief against Udren under the UTPCPL. Specifically, Plaintiffs will be unable to sufficiently plead that they justifiably relied on the communications relevant to their UTPCPL claims against Udren to establish that they are entitled to relief for those claims. As a result, amendment will not be allowed as to these claims because any such amendment would be futile. Therefore, Plaintiffs’ UTPCPL claims against Udren will be dismissed with prejudice.
b. Judicial Privilege
To the extent that U.S. Bank and Ocwen argue that Plaintiffs’ UTPCPL
claims should be dismissed because they are barred by Pennsylvania’s judicial
privilege doctrine, (Doc. 24, pp. 2, 13-14), their motion will be granted. As stated,
U.S. Bank and Ocwen argue that “[t]his case is no different” than Schwartz v.
OneWest Bank, FSB,
In response, Plaintiffs claim that “[t]he jurisprudence of the Third Circuit in Schwartz is clearly unsound and should not be followed.” (Doc. 27-1, p. 17). According to Plaintiffs, “[l]itigation privilege, a doctrine based in common law, does not overcome statutory directives of the legislature.” (Doc. 27-1, p. 17). “Hence,” Plaintiffs continue, “1 Pa. Code § 1504 holds that a statutory remedy is always preferred over common law . . . .” (Id.). Plaintiffs contend that “[t]he [6]
Third Circuit in Schwartz based its holding barring UTPCPL claims upon four (4) case decisions involving a litigation privilege bar to only common law claims.” (Id.). Specifically, Plaintiffs state that “General Refractories Company involved claims of Abuse of Process, for which the appeals court reversed and remanded for amendment of the complaint, and barred the common law conspiracy claim.” (Id. at pp. 17-18). Plaintiffs continue by stating that the Pennsylvania Superior Court “cases of Binder v. Triangle Publ’ns, Inc. and Richmond v. McHale, involved common law claims of defamation that were barred by the privilege.” (Id. at p. 18). “After discussing these cases,” Plaintiffs contend, the Third Circuit in Schwartz went “on to make this erroneous broad brush conclusion of law to bring non-defamation claims under the litigation privilege.” (Id.).
[6] As quoted by Plaintiffs, section 1504 states: In all cases where a remedy is provided or a duty is enjoined or anything is directed to be done by any statute, the directions of the statute shall be pursued, and no penalty shall be inflicted, or anything done agreeably to the common law, in such cases, further than shall be necessary for carrying such statute into effect.
1 P A . C ONS . S TAT . A NN . § 1504; (Doc. 27-1, p. 17).
Plaintiffs also take issue with the Third Circuit’s reliance on Moses v.
McWilliams,
Although the judicial privilege most often bars defamation suits, Pennsylvania courts have applied the privilege broadly to confer “immunity from civil liability in the context of judicial proceedings.”
(Id.). “However,” Plaintiffs argue, “the Moses Court was holding nothing of this
kind. Indeed, while the Moses holding did apply judicial immunity to constrain a
statutory right[footnote omitted], it did so in the factual/legal context of a
defamation claim.” (Id.) (citing Moses,
In Schwartz, a plaintiff “brought Pennsylvania state law claims against” the defendant, which included, inter alia, a claim under the UTPCPL. Schwartz, 614 F. App’x at 81. The plaintiff’s UTPCPL claim in Schwartz was “based on statements [the defendant] made in connection with foreclosure proceedings on [the plaintiff’s] property.” Id. “The District Court dismissed [the plaintiff’s] claims, holding that [the defendant’s] statements were protected by Pennsylvania’s absolute judicial privilege and that [the plaintiff’s] abuse of process claim was inadequately pled.” Id. The Third Circuit noted that:
all of [the plaintiff’s] claims arise from the foreclosure action and communications that occurred in connection with that action, namely the foreclosure complaint, the related sale notices posted as a result of the state court judgment in the foreclosure action, see P A . R. C IV . P. 3129.1, and communications between [the defendant’s] and [the plaintiff’s] attorneys that directly pertained to the foreclosure action.
Schwartz,
Here, Plaintiff alleges that the UTPCPL was violated when Defendants: failed to state material facts or otherwise misstated, misrepresented, or omitted the true facts concerning or related to the status of the Loan that tended to deceive and/or did in fact deceive plaintiffs as described herein including but not limited to: (a) Represented that an accurate accounting of plaintiffs’ loan had been made and reviewed thereafter in the course of the foreclosure; (b) By the filing of the underlying action represented that plaintiffs were in default under the terms of the Note and Mortgage; (c) By the filing of the underlying litigation represented that defendants were entitled to foreclose and sell plaintiffs’ home at sheriff’s sale without first properly accounting for plaintiffs’ payments under the loan; (d) By the filing of the underlying litigation represented that the underlying foreclosure was lawful.
(Doc. 14, p. 7). Plaintiffs continue by claiming that “[i]t is not unreasonable to conclude that a national bank like US Bank and a national mortgage servicer like Ocwen does not intend for its customers to rely upon its communications about their account . . . .” (Id.). “[E]specially,” Plaintiffs continue, “when the communications involve seeking to sell plaintiffs’ home as in the underlying action and the defendants collectively fail to acknowledge or review their errors and instead simply ratify their continued wrongful conduct as in this matter.” (Id.). According to Plaintiffs, they “reasonably replied upon the material acts and actions of defendants as exemplified by their retaining counsel to defend the underlying litigation.” (Id.). Further, Plaintiffs allege that “[b]ut for” Defendants’:
acts and omissions and disregard for its own records reflecting default by plaintiffs when plaintiffs’ regular payments were cashed by Ocwen for nearly a year after a date of default alleged in the underlying litigation resulting in conflicting and otherwise incorrect accounting of plaintiffs’ loan, plaintiffs would not have sustained any damages and losses.
(Doc. 14, p. 8).
However, following the Third Circuit’s persuasive decision in Schwartz, it is determined that Plaintiffs’ UTPCPL claim against U.S. Bank and Ocwen will be dismissed on the ground that it depends on communications protected by Pennsylvania’s judicial privilege. As was the case in Schwartz, the communications at issue in Plaintiffs’ UTPCPL claim concern the arguments advanced in favor of obtaining a mortgage foreclosure judgment. See (Id. at pp. 7- 8). Therefore, such communications were pertinent and material to the redress or relief sought in that foreclosure action. As a result, following the Third Circuit’s well reasoned decision in Schwartz, the Court will dismiss Plaintiffs’ UTPCPL claims against U.S. Bank and Ocwen under Pennsylvania’s judicial privilege doctrine.
Further, since it is determined that judicial privilege applies to and bars Plaintiffs’ UTPCPL claims against U.S. Bank and Ocwen concerning communications made during the course of a judicial proceeding, and there being no indication that Plaintiffs are seeking relief under the UTPCPL for communications made beyond the course of a judicial proceeding, see (Doc. 14, p. 7), leave to amend these claims will not be allowed because such amendment would be futile. As a result, Plaintiffs’ UTPCPL claims against U.S. Bank and Ocwen will be dismissed with prejudice.
IV. CONCLUSION
Based on the foregoing, Defendants’ respective motions to dismiss Plaintiffs’ FDCPA claims concerning Plaintiffs’ underlying mortgage foreclosure action will be granted. As a result, Plaintiffs’ FDCPA claims concerning their underlying mortgage foreclosure action, see (Doc. 14, pp. 5-6), will be dismissed
because they are barred by the FDCPA’s statute of limitations. As for Defendants’ respective motions to dismiss Plaintiffs’ state law claims, those motions will be denied in part and granted in part. In particular, Defendants’ respective motions to dismiss Plaintiffs’ Dragonetti claims will be denied. However, Defendants’ respective motions to dismiss Plaintiffs’ UTPCPL claims will be granted and, thus, those claims will be dismissed. Lastly. Plaintiffs’ FDCPA and UTPCPL claims will be dismissed with prejudice because granting leave to amend those claims would be futile.
An appropriate Order follows.
/s/ William J. Nealon United States District Judge
Notes
[1] The Court notes that the allegations of the amended complaint provide June 26, 2014, as the latest possible date upon which the Plaintiff can rely for purposes of the FDCPA’s statute of limitations. See (Doc. 14, p. 4). However, in Udren’s brief in support it identifies August 26, 2014, as the date upon which Plaintiffs were served with the complaint in the underlying mortgage foreclosure action. (Doc. 22, p. 8). In Ocwen and U.S. Bank’s brief in support, those Defendants state that the Plaintiffs “were served with the Foreclosure Action around September 2014, given that they answered the complaint late in that month and did not assert any service of process objections.” (Doc. 24, p. 7). Thus, even if the Court were to take a date “around September 2014,” Plaintiffs’ FDCPA claims based on the underlying mortgage foreclosure action would be time barred.