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Gene W. Salvati, Olivia Jones, Individually and On Behalf of v. Deutsche Bank National Trust Company

March 28, 2013

GENE W. SALVATI, OLIVIA JONES, INDIVIDUALLY AND ON BEHALF OF OTHER SIMILARLY SITUATED FORMER AND CURRENT HOMEOWNERS IN PENNSYLVANIA,
PLAINTIFFS,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, N.A., BANK OF AMERICA HOME LOANS SERVICING A SUBSIDIARY OF BANK OF AMERICA, N.A., ONEWEST BANK, F.S.B., AND MCCABE, WEISBERG & CONWAY, P.C.
DEFENDANTS.



The opinion of the court was delivered by: Arthur J. Schwab United States District Judge

ELECTRONICALLY FILED

MEMORANDUM OPINION

I. INTRODUCTION

This purported class action lawsuit stems from the initiation of allegedly illegal foreclosure proceedings and the charging of prohibited fees by and/or on behalf of Defendants Deutsche Bank National Trust Company, N.A. ("Deutsche Bank"), Bank of America Home Loans Servicing ("BOA"), OneWest Bank, F.S.B. ("OneWest") and McCabe, Weisberg & Conway, P.C. ("McCabe") (collectively, "Defendants"), after Plaintiff Gene W. Salvati ("Plaintiff" or "Salvati") defaulted on his home mortgage loan. Presently before the Court are three motions to dismiss: the first one was filed on behalf of BOA (Doc. No. 10); the second was filed on behalf of Deutsche Bank (Doc. No. 12); and the third one was filed on behalf of McCabe (Doc. No. 14). Plaintiff filed Briefs in Opposition to each Motion to Dismiss (Doc. Nos. 31, 32, and 33, respectively), and on February 1, 2013, United States Magistrate Judge Maureen P. Kelly issued a Report and Recommendation (Doc. No. 46), recommending that this Court grant in part and deny in part each of the three Motions to Dismiss.

Each of the parties subsequently filed Objections to the Magistrate Judge's Report and Recommendation. See Doc. No. 47 (Objections filed by Plaintiff); Doc. No. 48 (Objections filed by BOA); Doc. No. 49 (Objections filed by McCabe); and Doc. No. 50 (Objections filed by Deutsche Bank). Responses in Opposition to the various Objections were also filed. See Doc. No. 53 (McCabe's Response to Plaintiff's Objections); Doc. No. 54 (BOA's Response to Plaintiff's Objections); Doc. No. 55 (Plaintiff's Response to BOA's, McCabe's, and Deutsche Bank's Objections); and Doc. No. 56 (Deutsche Bank's Response to Plaintiff's Objections).

Without filing a Motion seeking leave to do so, Plaintiff filed: (1) a "Supplement to his Response in Opposition" wherein he noted that he had made two omissions in his Responses to Defendants BOA's, Deutsche Bank's and McCabe's Objections, and (2) a "Notice of Supplemental Authority." Doc. nos. 57 and 58, respectively. Similarly, BOA filed a "Response to [Salvati's] Notice" (doc. no. 59) without seeking leave of Court.*fn1 These matters are now ripe for adjudication.

II. RELEVANT FACTUAL AND PROCEDURAL HISTORY

Because the Court writes primarily for the parties and because the Magistrate Judge's Report and Recommendation discusses the facts of this case as pled in the Complaint in sufficient detail, this Court will not repeat all of the facts here. Particularly relevant to all the parties' Objections, however, are the following allegations set forth in the Complaint which bear repeating:

FACTS PERTAINING TO BOTH MR. SALVATI AND MS. JONES

33. Mr. Salvati and Ms. Jones' respective current account balances (payoff amount) continue to be overstated. Each of their accounts currently reflects paid and unpaid foreclosure-related attorneys' fees and legal expenses allegedly incurred and un-incurred by the Defendants. Mr. Salvati and Ms. Jones each have paid at least a portion of the illegal charges to their respective accounts.

COUNT I

Defendants . . . Violated Act 6 by charging and/or collecting Prohibited Foreclosure-Related Attorneys' fees and Legal Expenses in Violation of Act 6

74. The unauthorized attorneys' fees and legal expenses that Defendants demanded and/or collected are recoverable under the Act 6 . . . §502. Named Plaintiffs, Mr. Salvati and Ms. Jones paid some portion or all of these unauthorized charges.

Doc. No. 1-1. In addition, although the Complaint in this matter was originally filed by Plaintiffs Gene Salvati and Olivia Jones, individually, and on behalf of others similarly situated, Ms. Jones passed away on June 22, 2012. On October 9, 2012, the claims brought on her behalf were dismissed.*fn2 See 10/9/2012 Text Order.

III. STANDARD OF REVIEW

Parties' objections to a United States Magistrate Judge's Report and Recommendation require the Court to perform a de novo review of the contested portions of the Report. Sample v. Diecks, 885 F.2d 1099, 1106 n. 3 (3d Cir. 1989) (citing Fed.R.Civ.P. 72(b); 28 U.S .C. § 636(b)(1)(c)).

IV. DISCUSSION

Each of Magistrate Judge Kelly's recommendations to which Objections were made by a party will be addressed below.

A. Bank of America ("BOA")

1. Count I -- Act 6: Pennsylvania Loan Interest and Protection Law

a. Section 406 Claim

Section 406 provides that "no residential mortgage lender shall contract for or receive attorney's fees from a residential mortgage debtor" except in certain circumstances not relevant here. 41 Pa. Stat. Ann. § 406. Because Plaintiff pled no facts to support a finding that BOA could be considered a residential mortgage lender (see Doc. No. 1-1, generally), and because he also failed to address BOA's argument in its Brief in Support of its Motion to Dismiss that it was not a residential mortgage lender (see Doc. Nos. 11 and 32, generally), the Magistrate Judge found that a Section 406 claim could not lie against BOA, and recommended that this Court dismiss that portion of Count I. See Doc. No. 46, pp. 6-8. No party raised an Objection to this portion of the Magistrate Judge's Report and Recommendation. Accordingly, the determination of Magistrate Judge Kelly will be affirmed and the Report and Recommendation recommending that this Court grant BOA's Motion to Dismiss as to Plaintiff's Section 406 will be adopted by this Court.

b. Section 502 Claim

Section 502 provides in relevant part: "[a] person who has paid . . . charges prohibited or in excess of those allowed by this act or otherwise by law may recover triple the amount of such excess . . . charges in a suit of law against the person who has collected such excess . . . charges . . . ." BOA argued that because Plaintiff had not actually paid any improper charges or fees that he could not succeed on a Section 502 claim. As noted by Magistrate Judge Kelly and as quoted above, however, Salvati's Complaint states otherwise. See Doc. No. 1-1, ¶¶ 33, 74. Because the motion before the Magistrate Judge was filed pursuant to Fed. R. Civ. P. 12(b)(6), and because the Complaint contained the above-quoted allegations, Plaintiff stated a plausible Section 502 claim against BOA under the Iqbal/Twombly standard. As such, the Magistrate Judge recommended that BOA's Motion to Dismiss the Section 502 claim be denied. Doc. No. 46, pp. 8-10.

BOA has objected to this portion of Magistrate Judge Kelly's Report, arguing that the allegations in Plaintiff's Complaint upon which the Magistrate Judge relied in recommending that BOA's Motion to Dismiss the Section 502 claim be denied, are false. See Doc. No. 48, p. 2. BOA further suggests that Salvati "recanted" the above-quoted allegations in his Brief in Opposition to BOA's Motion wherein he states that "[i]n Mr. Salvati's individual case, he suffered a loss of property but not a loss of money . . . ." Doc. No. 32, p. 2.

This Court notes for the record, however, that Salvati did not "recant" any allegation set forth in his Complaint; thus, the assertions that both Ms. Jones and he paid a portion of the allegedly illegal fees charged remain viable allegations. This Court notes that Salvati indicated in his Brief in Opposition to BOA's Motion to Dismiss that he did not suffer a loss of money, only a loss of property; however, that lone comment was made under the heading, "Statement of Facts" and was not re-raised, or otherwise addressed in any argument made by Salvati. Id. Moreover, Salvati's arguments in all three briefs he filed in opposition to the various Defendants' Motions to Dismiss contain equivocal statements regarding "payments." See Doc. No. 32, p. 11 (Mr. Salvati and some of the other homeowners were not only charges and liened, but paid some or all of the unauthorized and/or illegal foreclosure fees and costs."); Doc. No. 31, pp. 5-6, 12, 15 (arguing that Salvati has properly pled "payment" and that charges were paid); Doc. No. 33, pp. 12-13, 17 (quoting the allegations in the Complaint that "Homeowners paid the misrepresented and over charged amounts" and that those illegal charges were paid to McCabe).

Now, in his Objections to Magistrate Judge Kelly's Report and Recommendation, Salvati states that he "wishes to clarify that, as a result of the foreclosure proceeding against him, he did not personally pay any money to the Defendants," and that the apparent confusion stemmed from the fact that Ms. Jones, a named plaintiff at the commencement of this action, passed away. Doc. No. 47, pp. 6-7. The suggestion is that, despite his completely contrary allegations in the Complaint, that "Mr. Salvati and Ms. Jones each have paid at least a portion of the illegal charges," those assertions pertain only to Ms. Jones. Doc. No. 1-1, ¶¶ 33, 74.

The "confusion," therefore, is actually an express factual conflict created by Salvati's Complaint -- which was signed by his attorney, Michael Malakoff, and verified by Salvati himself -- and his subsequent filings signed by Mr. Malakoff, which was compounded by Salvati's failure to file an Amended Complaint upon the death of Ms. Jones. Given that the fact at issue is the ultimate and dispositive fact as to the Section 502 claim, Salvati's prior equivocation regarding whether or not he personally paid any of the illegal fees charged appears disingenuous.

As a general matter, a district court ruling on a motion to dismiss may not consider matters extraneous to the pleadings. Angelastro v. Prudential-Bache Sec., Inc., 764 F.2d 939, 944 (3rd Cir. 1985). However, the Court of Appeals for the Third Circuit has held that there are exceptions to the general rule. For example, if a document is integral to, or explicitly relied upon in a Complaint (seeIn re Burlington Coat Factory Securities Litigation, 114 F.3d 1410, 1426 (3d Cir. 1997)), the Court may consider it. Similarly, a Court 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 Ben. Guar. Corp. v. White Consol. Industries, Inc., 998 F.2d 1192, 1196 (3d Cir. 1993). The Court is also permitted to take judicial notice of "certain matters outside the body of the complaint itself, such as exhibits attached to the complaint and [other] facts of which the court will take judicial notice." See Pryor v. National Collegiate Athletic Ass'n, 288 F.3d 548, 560 (3d Cir. 2002) (quoting 62 Fed. Proc., L. Ed. § 62:520). A judicially noticed fact is a fact that is not established by admissible evidence but may be accepted by the Court because the fact is generally known within the trial Court's territorial jurisdiction, or because its validity can be determined from sources whose accuracy cannot be reasonably questioned. See Fed. R. Evid. 201(b).

The Court of Appeals has expressed that its rationale underlying these exceptions is that "the primary problem raised by looking to documents outside the complaint -- lack of notice to the plaintiff -- is dissipated '[w]here plaintiff has actual notice . . . and has relied upon these documents in framing the complaint.'" Burlington, 114 F.3d at 1426.

Here, Salvati has made statements to this Court in his Brief in Opposition to BOA's Motion to Dismiss (Doc. No. 32), and in his Objections to the Report and Recommendation (Doc. No. 47), that have been signed by counsel. Under Rule 11(b):

(b) Representations to the Court. By presenting to the court a pleading, written motion, or other paper--whether by signing, filing, submitting, or later advocating it--an attorney or unrepresented party certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:

(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery.

Fed. R. Civ. P. 11(b)(3).

Thus, notwithstanding that Salvati's statements to this Court in a public record (i.e. his Objections to the Magistrate Judges Report and Recommendation, doc. no. 47) contradict an operative fact in the Complaint upon which his Section 502 claim is based, the Court finds that these statements constitute factual ...


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