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Murray H. Kimmel, et al. v. Phelan Hallinan & Schmieg

February 28, 2012


The opinion of the court was delivered by: Dalzell, J.


Plaintiffs Murray H. and Dolores T. Kimmel (collectively, "the Kimmels") bring suit against defendants Phelan Hallinan & Schmieg, PC ("PHS"), Deutsche Bank National Trust Company ("Deutsche Bank"), and America's Servicing Co. ("ASC"), alleging federal law violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692, et seq., and the Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq., as well as state law violations of the Pennsylvania Fair Credit Extension Uniformities Act ("FCEUA"), 73 Pa. Cons. Stat. § 2270.1, et seq., the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 Pa. Cons. Stat. § 201-1, et seq., and common law claims for fraud and negligent misrepresentation. The Kimmels' suit arises out of efforts by defendants to collect a debt the Kimmels allegedly owed on a mortgage and note for a property located in Brigantine, New Jersey.

Defendant PHS filed a motion to dismiss this action for improper venue, to which ASC and Deutsche Bank added a motion to dismiss for failure to state a claim that PHS later joined.*fn1 The Kimmels responded to these motions and we have entertained supplemental briefing so that the motions are now ripe for disposition. For the reasons described below, we will deny PHS's motion to dismiss for improper venue and grant in part ASC and Deutsche Bank's motion to dismiss for failure to state a claim. We will afford the Kimmels a limited opportunity to amend their complaint to remedy some of the deficiencies we identify here.

I. Factual Background

In considering a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6),*fn2 we must "'accept all factual allegations in the complaint as true and give the pleader the benefit of all reasonable inferences that can be fairly drawn therefrom.'" Ordonez v. Yost, 289 Fed. Appx. 553, 554 (3d Cir. 2008) (quoting Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993)). We may "'consider only allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a claim,'" Brown v. Daniels, 128 Fed. Appx. 910, 913 (3d Cir. 2005) (quoting Lum v. Bank of America, 361 F.3d 217, 222 n.3 (3d Cir. 2004)), where a document forms the basis of a claim if it is "integral to or explicitly relied upon in the complaint." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)) (emphasis and internal quotation marks omitted). As our Court of Appeals has explained, this means that we may "consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document." Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).

According to the Kimmels, they both reside in Huntington Valley, Pennsylvania. PHS, which handles debt collection matters, has its headquarters in New Jersey. Deutsche Bank and ASC handle debt collection matters at their headquarters in South Carolina. Pls.' Compl. ¶¶ 6, 8-10. The Kimmels allege, conclusorily, that they are "consumers" and the defendants are "debt collectors" under the FDCPA, and that the defendants sought to collect "consumer debt" from the Kimmels. Id. ¶¶ 7, 11.

The Kimmels claim that on October 19, 2008, ASC sent them a notice of intention to foreclose in which it represented that it held a conventional mortgage on real property the plaintiffs owned in Brigantine, New Jersey (the "property"). Id. ¶¶ 26, 29, 40. The Kimmels state that they were unaware, however, of any such mortgage held by ASC as at that time only WMC Mortgage Corp. ("WMC") held a mortgage on the property, and Atlantic County, New Jersey, records allegedly do not reflect that ASC ever held a mortgage on the property. Id. ¶¶ 30-31, 35. ASC's notice stated that it was attempting to collect a debt the Kimmels owed, and that it would initiate a foreclosure action unless the Kimmels cured the alleged default and brought their account current. Notwithstanding this threat, ASC has never instituted a foreclosure action against the plaintiffs. Id. ¶¶ 32-34. ASC's letter referred to a different loan number than that assigned to the note and mortgage WMC held on the property, and the Kimmels were not aware of any mortgage and note relating to their property bearing the number ASC listed. Id. ¶¶ 36-37. According to the Kimmels, "upon receipt of this letter . . . Plaintiffs grew very worried they were becoming the victims of a scam, potentially targeting senior citizens." Id. ¶ 38.

The Kimmels aver that in December of 2008, PHS and Deutsche Bank filed a complaint in foreclosure against them in the Chancery Division of the Superior Court of New Jersey for Atlantic County seeking to collect an allegedly defaulted debt owed on a mortgage and note for the property. Id. ¶¶ 13-15. In their complaint, PHS and Deutsche Bank pled that WMC had assigned the mortgage and note on the property to Deutsche Bank on December 15, 2008, so that Deutsche Bank was now the owner and/or holder of the mortgage and note and certain amounts were owed to it as the mortgagee. Id. ¶¶ 19-20. The Kimmels maintain that

(1) WMC was the mortgagee on December 16, 2008,

(2) no assignment from WMC to Deutsche Bank had been recorded as of that date, and

(3) such assignment was filed only on January 12, 2009.*fn3 Id. ¶¶ 18, 20-21. PHS and Deutsche Bank also averred in their complaint that "'[n]notice was sent in compliance with the fair foreclosure act more than 31 days prior to the filing of the within complaint,'" though neither PHS nor Deutsche Bank sent such a notice prior to instituting proceedings. Id. ¶¶ 25-26 (quoting PHS/Deutsche Complaint at 5). According to the Kimmels, they found this complaint sufficiently confusing that they were forced to retain counsel. Id. ¶¶ 16-17.

As for the January 12, 2009 assignment, it was signed by "'Judith T. Romano' as 'Assistant Secretary and Vice President' of Mortgage Electronic Registration Systems Inc. as a nominee for WMC Mortgage Corp. its successors and assigns," id. ¶ 22 (quoting Ex. B to Pl.'s Compl.), though plaintiffs allege that Romano did not actually occupy this position and was instead merely an attorney with PHS. Id. ¶ 23.

On January 29, 2009, PHS sent two letters to the Kimmels with conflicting information. Though both letters stated that plaintiffs owed legal fees and costs of $1,931.68 and additional fees of $90.00 (albeit without describing how those amounts had accrued), one letter identified late charges amounting to $855.68 and an escrow balance of $0.00, while the other described late charges in the amount of $641.76 and an escrow balance of $903.03. Id. ¶¶ 46-48. The loan number referred to in each letter was not that associated with the Kimmels' mortgage and note with WMC, and the letters required that payments be made to ASC. Id. ¶¶ 49-50.

On or about May 5, 2010, Deutsche Bank filed for summary judgment in its foreclosure action against the Kimmels, relying on a note and mortgage plaintiffs allegedly signed that the Kimmels claim include certain discrepancies regarding the dates of signing and notarization. Id. ¶¶ 51-54. Deutsche Bank also relied upon a "'Certification of Amount Due and Non-Military Service'" by Herman John Kennerty, the Vice-President for Loan Documentation for Wells Fargo Bank N.A., id. ¶ 58 (quoting Ex. D to Ex. F to Pl.'s Compl. ("Deutsche Bank's MSJ")). Kennerty's certification, however, did not set forth the personal knowledge he had of plaintiffs' loan and lacked certain supporting documentation. Id. ¶¶ 59-64. Despite ASC's January 29, 2009 letters to the Kimmels, Deutsche Bank's motion suggested that no late charges were owed and that late charges would not accrue beyond the date of the complaint's filing. Id. ¶¶ 55-56. On June 25, 2010, the Superior Court denied the motion for summary judgment, and in September of 2010 PHS and Deutsche Bank's complaint was dismissed without prejudice. Id. ¶¶ 67-68.

On October 6, 2010, PHS sent a letter on behalf of Deutsche Bank and ASC to the Kimmels' attorney that set forth a payoff balance. That letter referenced a different account number than that corresponding to the mortgage plaintiffs had taken with WMC, id. ¶¶ 69-70, and showed that plaintiffs owed $4,353.56 in late charges and $1,331.25 for "'Property Inspections/BPO,'" though no explanation was provided for how these charges had accrued. Id. ¶¶ 71-73 (quoting Ex. J to Pl.'s Compl.).

On October 7, 2010, PHS sent a letter to the Kimmels on behalf of ASC and Deutsche Bank entitled "'Notice of Intent to Foreclose,'" id. ¶ 75 (quoting Ex. K to Pl.'s Compl.). This letter stated that although Deutsche Bank held a mortgage on the property, payments should be made to ASC. Id. ¶ 76. The letter repeated that plaintiffs owed $4,532.30 in late fees and $1,331.25 in "'other charges'" to "'secure property,'" id. ¶ 78 (quoting Ex. K to Pl.'s Compl.), but the October 6, 2010 letter had stated that these charges were for "'Property Inspections/ BPO,'" id. ¶ 78 (quoting Ex. J to Pl.'s Compl.), and Kennerty's certification had set forth charges of only $521.25 for "'advances to winterize and/or secure property.'" Id. ¶ 79 (quoting Ex. H to Pl.'s Compl.). PHS's letter threatened legal action if the default amount was not paid within thirty-three days. Id. ¶ 81.

On November 15, 2010, Deutsche Bank and PHS filed another foreclosure complaint against the Kimmels in the Chancery Division of the Superior Court of New Jersey for Atlantic County. Id. ¶ 82. The complaint referenced a note with an initial annual interest rate of 10.75%, but the Kimmels contend that they never took out a mortgage at that rate, and Deutsche Bank and PHS failed to attach any documentation that would permit the Kimmels to determine if this was in fact their note. Id. ¶¶ 83-84.

II. Analysis

The Supreme Court has explained that "only a complaint that states a plausible claim for relief survives a motion to dismiss" pursuant to Rule 12(b)(6), leading a reviewing court to engage in a "context-specific" inquiry that "requires [it] to draw on its judicial experience and common sense." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009).*fn4 Under this standard, a pleading may not simply offer "labels and conclusions," Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007), and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 129 S. Ct. at 1949. Rather, "[f]actual allegations must be enough to raise a right to relief above the speculative level," Twombly, 550 U.S. at 555, which is to say that there must be "more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 129 S. Ct. at 1949. Essentially, a plaintiff must provide "enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element" of the cause of action. Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (internal quotation marks omitted).

Defendants advance four arguments under Rule 12(b)(6), to wit: (1) this matter should be dismissed pursuant to New Jersey's Entire Controversy Doctrine*fn5 ; (2) the applicable statute of limitations bars the Kimmels' FDCPA, FCEUA, fraud, and negligent misrepresentation claims; (3) the Kimmels have failed to state a claim under the FDCPA; and (4) the Kimmels have failed to allege justifiable reliance, as needed to support claims under RICO, UTPCPL, and the common law of fraud and negligent misrepresentation.

Before examining these arguments, we will first consider PHS's motion to dismiss for improper venue under Rule 12(b)(3), which employs a somewhat different standard.

A. PHS's Motion to Dismiss for Improper Venue

Fed. R. Civ. P. 12(b)(3) provides that "a party may assert the following defenses by motion: . . . (3) improper venue." In ruling on a Rule 12(b)(3) motion, "[w]e accept as true all of the allegations in the complaint, unless those allegations are contradicted by the defendants' affidavits." Bockman v. First Am. Mktg. Corp., 2012 WL 171972, at *1 n.1 (3d Cir. 2012). As our Court of Appeals has explained, "the defendant should ordinarily bear the burden of showing improper venue in connection with a motion to dismiss." Myers v. Am. Dental Ass'n, 695 F.2d 716, 725 (3d Cir. 1982).

In its motion, PHS explains that "[a]s is set forth in the accompanying certification of Vladimir V. Palma, Esq., a partner in PHS-NJ, PHS-NJ is a New Jersey professional corporation which handles matters exclusively in New Jersey and whose only offices are in New Jersey." PHS's Br. in Supp. of Mot. Dismiss ("PHS's Br.") at 1. According to PHS, it "has no contacts with Pennsylvania, and most assuredly does not reside in Pennsylvania," and "[o]ne can scour the complaint looking for any reference to PHS-NJ even doing anything in Pennsylvania, but to no avail." Id. at 3. PHS further avers that "the real property in question is located in New Jersey, as are the mortgage and the foreclosure action, and . . . the putative causes of action are based on events alleged to have occurred or originated in New Jersey." Id. at 4. PHS thus concludes that "venue lies in New Jersey" and "dismissal is an appropriate remedy here, where the impropriety of the venue is manifest." Id.

The Kimmels respond that PHS did have at least five contacts with Pennsylvania. They are*fn6 : (1) "[t]he Notice of Intention to Foreclose upon which Defendant PHS relied in paragraph 9 of its complaint . . . was sent to Plaintiffs' Pennsylvania address by Defendant America's Servicing Co.," Pls.' Mem. I at 2; (2) "[t]his complaint was served on Plaintiffs, as set forth in the Summons prepared by Defendant PHS, at their residence in Huntington Valley, Pennsylvania," id.; (3) "PHS filed an Assignment of the mortgage to Deutsche" that "was signed by one of its own attorneys, Judith T. Romano, in Philadelphia, Pennsylvania," id.; (4) "PHS also sent correspondence to Plaintiffs" that "reflected conspicuously at the top that it represented 'Lenders in Pennsylvania and New Jersey,'" id.; and (5) "[i]n its Motion for Summary Judgment, Defendant PHS relied upon correspondence sent from Defendant ASC to Plaintiffs . . . at their residence in Pennsylvania." Id. at 3. Plaintiffs thus argue that PHS "has availed itself to the Eastern District of Pennsylvania," id. at 6, and that venue is proper here.

Under 28 U.S.C. § 1391(b), A civil action may be brought in --(1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located;

(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is ...

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