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Jamie H. & Donna L. Lorah, Individually and On Behalf of All Those Similarly Situated v. Suntrust Mortgage

December 17, 2010



Presently before the Court is Defendant's Motion to Dismiss (Docket No. 20). For the reasons that follow, the Motion will be granted in its entirety.

I. Background

On February 8, 2008, Plaintiffs Jamie and Donna Lorah ("Plaintiffs"), on behalf of themselves and purportedly on behalf of others similarly situated, filed a Class Action Complaint in the Court of Common Pleas, Berks County, Pennsylvania. Defendant SunTrust Mortgage, Inc. ("SunTrust") timely removed the action to this Court on February 13, 2008, and Plaintiffs filed a motion to remand on March 13, 2008. After denying Plaintiffs' remand motion on February 18, 2009, the Court ordered Plaintiffs to respond to SunTrust's then-pending Motion to Dismiss. Rather than file a response, on March 3, 2009, Plaintiffs filed their First Amended Complaint ("Amended Complaint"). SunTrust moved to dismiss the Amended Complaint (Docket No. 20), Plaintiffs responded (Docket No. 23), and SunTrust replied (Docket No. 27).

On March 18, 2010, the Court placed this matter on its civil suspense docket pending the decision of the U.S. Court of Appeals for the Third Circuit in Jones v. ABN Amro Mortgage Group, Inc., et al., 606 F.3d 119 (3d Cir. 2010).*fn1 The Court returned this suit to its active docket upon notice of that decision, and it ordered the parties to submit supplemental briefing concerning the impact of Jones on resolution of the Motion. Thereafter, Plaintiffs and SunTrust filed, respectively, a Response to Defendant's Notice of Supplemental Authority (Docket No. 32) and a Supplemental Brief in Support of Dismissal (Docket No. 33).

II. Standard

In deciding a motion to dismiss pursuant to Rule 12(b)(6), courts must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (internal quotation and citation omitted). After the Supreme Court's decision in Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 555 (2007), "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 556). This standard, which applies to all civil cases, "asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 129 S.Ct. at 1949. Accord Fowler v. UPMC Shadyside, 578 F.3d 203, 210- 211 (3d Cir. 2009) ("All civil complaints must contain more than an unadorned, the-defendant-unlawfully-harmed-me accusation.") (internal quotation omitted).*fn2

III. Discussion

1. Jones and Lorah

In September of 2007, the Joneses, represented by the same counsel as now represent the Lorahs, filed a putative class action against SunTrust, Countrywide, and other lenders alleging negligence and fraudulent misrepresentation. The Joneses then filed an Amended Complaint that abandoned the fraudulent misrepresentation claim and asserted claims for negligence and violation of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605 (2010) ("RESPA"). The Amended Complaint sought a declaratory judgment on the theory that various Snyder Entities were, together, the lenders' loan "servicer."*fn3

Joneses an integrated "Equity Slide Down Mortgage" product. In order to refinance with the "Equity Slide Down Mortgage" product, the Joneses signed two sets of documents at two different closings. The first set of documents consisted of a mortgage and note between the Joneses and SunTrust (the "SunTrust Mortgage"), a traditional mortgage lender. The SunTrust Mortgage was legitimate and provided the requisite funds for the mortgage. There was no reference in the documents relating to the SunTrust Mortgage to Snyder's product, the Equity Slide Down Mortgage. Six days after the Joneses completed the transaction with SunTrust, Snyder presented the Joneses with the second set of documents which consisted of a purported "mortgage" and "note" between the Joneses and the Snyder Entities. This transaction purported to "convert" the terms of the SunTrust Mortgage to a lower interest rate and lower monthly payments. The Snyder Entities offered the lower interest rate if the Joneses "pre-paid a large portion of the principal balance" to the Snyder Entities. SunTrust, however, was not a party to this transaction and signed none of the documents. The Joneses made the large cash prepayment that Snyder requested. As a result, the interest rate and monthly payments on the "Equity Slide Down Mortgage" product were lower than those required under the SunTrust Mortgage. The Joneses' obligations to SunTrust, however, remained unchanged. Indeed, the document the Joneses signed with SunTrust provides "If I make a partial Prepayment, there will be no changes in ... the amount of my monthly payment unless [SunTrust] agrees in writing to those changes." However, the documents the Joneses signed with the Synder Entities did make changes. Significantly, as the complaint states, the Snyder Entities "dictate[d] that all monthly payments were to be remitted to them," and, at the Snyder Entities' request, the Joneses signed a change-of-address form instructing SunTrust to direct all future correspondence to the Snyder Entities. This effectively forestalled communication between the Joneses and SunTrust.

Meanwhile, the Snyder Entities remitted to SunTrust the full monthly payments due on the Joneses' SunTrust Mortgage. According to the Joneses' counsel, the Snyder Entities did so by using the funds accumulated by the large prepayments to make up for the shortfall in what the Joneses were paying monthly under the "Equity Slide Down Mortgage" product. In 2005, the Joneses SunTrust and other named lenders moved to dismiss for failure to state a claim. The Honorable James Giles, U.S.D.J., granted the lenders' motion to dismiss and denied the Joneses' request for leave to amend. The putative class was never certified, and the Joneses appealed.

The U.S. Court of Appeals for the Third Circuit affirmed the dismissal. The decision of the Court of Appeals was straightforward, and it turned on the central allegations that the Snyder Entities were "loan servicers" under RESPA and/or common law agents of the defendants. Id. at 124-26. In short order, the Third Circuit concluded that Plaintiff's factual averments were insufficient to support the allegation that the Snyder Entities were loan servicers under the definition set forth in RESPA given the nature of the Ponzi scheme in question and the terms of the loans made by the defendants. Id. at 124-25. Furthermore, the Third Circuit concluded that the Plaintiffs had "point[ed] to no action" of the defendant lenders which suggested an agency relationship with the Snyder Entities. Id. at 125. Indeed, the Court explicitly stated: "We do not suggest that there may not be an instance in which the actions of the original lender clothe another with apparent authority as a 'servicer.' This is not such a case."

Id. at 125 n.4 (emphasis added). Finally, the Third Circuit affirmed the denial of leave to amend the complaint for a second time as both futile and inequitable. Id. at 125-26.

Now, in the instant matter, Plaintiffs bring claims on their own behalf and on behalf of a putative class which consists of "all persons who used Image Masters, Inc. as a loan servicer at the direction of OPFM, Inc. for purposes of loan payments and prepayments relating to a mortgage loan from ...

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