United States District Court, W.D. Pennsylvania
ALEXANDRA R. TRUNZO and ANTHONY HLISTA, Plaintiffs,
CITI MORTGAGE, et. al., Defendants.
MARK R. HORNAK, District Judge.
Before the Court are three motions: (1) Defendant CitiMortgage, Inc.'s Motion to Strike Class Allegations, ECF No. 80; (2) Defendant Phelan, Hallinan, and Schmieg, LLP's Motion Pursuant to Federal Rule of Civil Procedure 12(c) to Dismiss Class Action Allegations, ECF No. 100; and (3) Defendant Seterus, Inc.'s Motion to Deny Class Certification, ECF No. 103. The Court has reviewed the Amended Class Action Complaint filed by Plaintiffs Alexandra Trunzo and Anthony Hlista (collectively "Homeowners" or "Plaintiffs"), Defendants' respective Motions, and the corresponding briefs in support and opposition to these Motions. For the reasons that follow, (1) Defendant CitiMortgage, Inc.'s Motion to Strike Class Allegations is granted; (2) Defendant Phelan, Hallinan, and Schmieg, LLP's Motion Pursuant to Federal Rule of Civil Procedure 12(c) to Dismiss Class Action Allegations is denied without prejudice; and (3) Defendant Seterus, Inc.'s Motion to Deny Class Certification is also denied without prejudice.
This Court explained the essential facts surrounding this case in Trunzo v. Citi Mortgage , 876 F.Supp.2d 521 (W.D. Pa. 2012) (" Trunzo I "). They are as follows.
Plaintiffs bring a class-action suit against three defendants who are all related to the collection of payments due under Plaintiffs' mortgage and associated note. These defendants are CitiMortgage ("Citi"), LBPS ("Seterus"),  and Phelan, Hallinan, and Schmieg, LLP ("PHS"). According to the Amended Complaint, the purported class is comprised of all former or current homeowners (sometimes referred to as "Homeowners") who obtained financing secured by a first mortgage on property located within the Commonwealth of Pennsylvania, wherein collection demands on said mortgage loans were made by Defendant Phelan. The class includes, but is not limited to, Homeowners whose Note and Mortgage was serviced by Citi or LBPS. The class excludes Homeowners wherein no payments, or demands for payments, have been made in the past six years.
Pl.'s Am. Class Action Compi. ("Am. Compl."), ECF No. 34, ¶ 31.
Plaintiffs executed a promissory note and mortgage with their original lender, West Penn Financial ("WPF") on August 31, 2007, in order to purchase a house located in Bethel Park, Pennsylvania. Shortly after WPF and Plaintiffs completed their transaction, Plaintiffs received a document entitled "Notice of Assignment, Sale or Transfer of Servicing Rights" ("First Servicing Notice"). Am. Compl. Ex. C, ECF No. 34-3. The First Servicing Notice informed Plaintiffs that, on the same day that Plaintiffs obtained their mortgage from WPF, WPF transferred the servicing rights under the mortgage-i.e. "the right to collect payments"-to Citi. Id. The notice specifically provided that this transfer "does not affect any term or condition of the mortgage instruments, other than terms directly relating to the servicing of your loan." Id.
Plaintiffs also received a document from WPF entitled "Mortgagee Letter, " which announced that Citi was the "new servicer of [Homeowners'] loan" and that all future correspondence and payments should be directed to Citi. Am. Compl. Ex. F, ECF No. 34-6. Similar to the First Servicing Notice, the Mortgagee Letter stated that the transfer of the servicing rights from WPF to Citi "[did] not affect any term or condition of the mortgage instrument." Id. While both the First Servicing Notice and Mortgagee Letter advised that the servicing rights were transferred to Citi on August 31, 2007, Plaintiffs assert that the beneficial interest in their note was acquired, and is currently held, by the Federal National Mortgage Association, colloquially known as "Fannie Mae." Am. Compl. ¶ 4, Ex. E., ECF Nos. 34, 34-5.
Plaintiffs met their payment obligations under their note until June 2010, when they ceased payment and entered into default on their mortgage. In early August 2010, Plaintiffs contacted Citi to negotiate an "alternate arrangement" whereby Plaintiffs would be able to become current on their mortgage. Am. Compl. ¶ 11, ECF No. 34. On August 13, 2010, Plaintiffs received a letter dated August 6, 2010 from Citi requesting certain financial information in order to evaluate whether Plaintiffs would be eligible for a modified repayment schedule, forbearance plan, loan modification, or other alternate method for Plaintiffs to return to good standing on their mortgage. Am. Compl. Ex. I, ECF No. 34-9. Plaintiffs were asked to respond with the requested information by August 16, 2010, which was ten (10) days from the date of the letter.
On August 16, 2010, Plaintiffs attempted to remit a payment to Citi, which was refused. Citi stated that it would not accept Plaintiffs' payment because their mortgage had, at that point, already been referred for foreclosure. Shortly thereafter, Plaintiffs received a letter dated August 10, 2010 from Citi's Foreclosure Department, informing Plaintiffs that their mortgage was still in default and claiming "[a]ll reasonable efforts afforded you to cure this default have failed." Am. Compl. Ex. J, ECF No. 34-10. The letter further provided that Plaintiffs should refer all future questions to the law firm handling the foreclosure proceedings, Defendant PHS.
Accordingly, Plaintiffs contacted PHS and inquired about avoiding foreclosure. This inquiry by Plaintiffs to PHS led to a litany of conflicting reinstatement figures, fees, and costs that forms the primary nexus of Plaintiffs' Amended Complaint. This series of contradictory communications began on August 30, 2011, when Plaintiffs received an initial letter from PHS that contained a total reinstatement amount of $5, 204.44 needed for Plaintiffs to become current on their mortgage. Am. Compl. Ex. K, ECF No. 34-11.
Meanwhile, Citi assigned its servicing rights to Plaintiffs' mortgage to Defendant Seterus on November 1, 2010. Plaintiffs were informed of this transfer via a letter entitled "Transfer of Servicing Notice" ("Second Servicing Notice"). Am. Compl. Ex. G, ECF No. 34-7. The Second Servicing Notice contains language similar to that found in the First Servicing Notice, namely that the transfer "[did] not affect any other terms or conditions of [Plaintiffs'] mortgage other than the terms directly related to the servicing of [their] mortgage loan." Id . Seterus promptly mailed Plaintiffs a letter on November 9, 2010 that detailed the total amount of their debt with fees, $73, 611.41, but Seterus did not include in this letter a loan reinstatement amount.
The November 9th letter was followed by: (1) a December 6th letter from Seterus that included a reinstatement amount with fees, totaling $6, 416.09, which was different from the reinstatement amount of the August 30th letter from PHS; and (2) a December 7th letter from PHS that included yet a third reinstatement amount with fees, totaling $5, 362.59, which was different from the two prior amounts present in the November 9th and December 6th letters. Am. Compl. Exs. M, N, 0, ECF. Nos. 34-13, 34-14, 34-15.
After remitting payment to PHS on December 10, 2010, Plaintiffs assert that their mortgage was current through, but not including, January 1, 2011. They received correspondence from Seterus on December 20, 2010 that seemingly advised Plaintiffs that their payment was received by PHS, because Plaintiffs' escrow account had been credited. However, Plaintiffs allege that the December 20th correspondence also included an invoice for January 2011, whereby Seterus demanded an additional, unauthorized payment of $1, 053.50. Am. Compl. ¶ 23.
Then, on January 4, 2011, Plaintiffs received a response to a "Qualified Written Request" submitted to Seterus on November 17, 2010. Seterus's response showed that Plaintiffs were, at this time, current on their mortgage, their escrow account was not overdrawn, and that the $1, 053.50 in attorney fees and mortgage costs had been waived. Despite this account statement, Plaintiffs claim to have again received an invoice from Seterus in February 2011 that included this same, supposedly-waived $1, 053.50 charge. Id. ¶ 25. Plaintiffs also contend that Seterus levied late fees against them when they refused to pay this incorrect charge, which the servicer has repeatedly declined to waive even though, according to Plaintiffs, Seterus has admitted that the $1, 053.50 was demanded in error.
On August 3, 2011, Plaintiffs filed a class-action complaint in the Court of Common Pleas of Allegheny County. ECF No. 1-2. Seterus removed Plaintiffs' action to this Court on September 1, 2011, based on several of Plaintiffs' claims that arise under federal law. ECF No. 1. Citi and PHS timely consented to the removal. ECF Nos. 3, 4. Each of the Defendants subsequently filed an initial Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), to which Plaintiffs responded by filing an Amended Complaint. ECF Nos. 19, 22, 24, 34. After all three Defendants filed Motions to Dismiss, this Court granted Defendants' Motions in part and denied them in part.
As a result of this Court's June 25, 2012 Opinion and Order, Plaintiffs' Amended Complaint was trimmed down to the following four Counts: (l) unjust enrichment against Seterus (Count II); (2) violations of the federal Fair Debt Collections Practices Act against Seterus and PHS (Count III); (3) violations of the Pennsylvania Loan Interest and Protection Act under 41 Pa. Cons. Stat. Ann. § 502 against Seterus and PHS (Count VI); and (4) violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law under 73 Pa. Cons. Stat. Ann. § 201-2(4)(xxi)) (Count VII). See Trunzo I , 876 F.Supp.2d 521.
On February 1, 2013, this Court granted in part and denied in part Plaintiffs' Motion to Vacate the Initial Case Management Order in light of the Defendants' respective Motions to Deny/Strike/Dismiss the Trunzo's class allegations. See Order dated Feb. 1, 2013 (text-only entry). The provisions of subparagraphs 3(e)-(h) inclusive were stayed pending further Order of this Court. Id On February 26, 2013, this Court granted Plaintiffs' Motion for Reconsideration, such that the provisions of subparagraph 3(d) of the Initial Case Management Order were also, stayed. See Order, ECF No. 141. As a result of these Orders, the following provisions were stayed: (1) discovery related to class certification; (2) the filing of the parties' expert reports as to class certification; (3) depositions of class certification experts; (4) the filing of Plaintiffs' Motion for Class Certification, along with Defendants' Joint Memorandum in Opposition and any ensuing Reply by Plaintiffs; and (5) a class certification hearing.
a. Defendant Citi's Motion to Strike Class Allegations
Defendant Citi requests that the Court strike the class allegations against it contained in Plaintiffs' Amended Complaint pursuant to Federal Rule of Civil Procedure 23(d)(1)(D). "The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only." Wal-Mart Stores v. Dukes , 131 S.Ct. 2541, 2550 (2011) (quotation marks omitted). "To invoke this exception, every putative class action must satisfy the four requirements of Rule 23(a) and the requirements of either Rule 23(b)(1), (2), or (3)." Marcus v. BMW of North America, LLC , 687 F.3d 583, 591 (3d Cir. 2012) (citing Fed.R.Civ.P. 23(a)-(b)). To satisfy Rule 23(a),
(1) the class must be "so numerous that joinder of all members is impracticable" (numerosity); (2) there must be "questions of law or fact common to the class" (commonality); (3) "the claims or defenses of the representative parties" must be "typical of the claims or defenses of the class" (typicality); and (4) the named plaintiffs must "fairly and adequately protect the interests of the class" (adequacy of representation, or simply, adequacy).
In re Cmty. Bank of N. Va. , 622 F.3d 275, 291 (3d Cir. 2010) (quoting Fed.R.Civ.P. 23).
As for the latter part of the Rule 23 analysis, Plaintiffs seek to certify their purported class under both Rule 23(b)(2) and Rule 23(b)(3). See Am. Compl. ¶ 30. Rule 23(b)(2) provides that "[a] class action may be maintained if Rule 23(a) is satisfied and if... (2) the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole." Fed.R.Civ.P. 23(b)(2). Rule 23(b)(3) provides that "[a] class action may be maintained if Rule 23(a) is satisfied and if... (3) the court finds that the questions of law or fact common to class members predominate [predominance] over any questions affecting only individual members, and that a class action is superior [superiority] to over available methods for fairly and efficiently adjudicating the controversy." Fed.R.Civ.P. 23(b)(3).
Under Rule 23(d)(1)(D), a court may "require that the pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly." Fed.R.Civ.P. 23(d)(1)(D). However, courts grant motions to strike under Rule 23(d)(1)(D) before class discovery only in "the rare few [cases] where the complaint itself demonstrates that the requirements for maintaining a class action cannot be met." Goode v. LexisNexis Risk & Info. Analytics Grp., Inc. , 284 F.R.D. 238, 246 (E.D. Pa. 2012) (quoting Landsman & Funk P.C. v. Skinder-Strauss Associates , 640 F.3d 72, 93 n.30 (3d Cir. 2011)), and "no amount of discovery will demonstrate that the class can be maintained, " id. at 245; see also Doninger v. P. Nw. Bell, Inc. , 564 F.2d 1304, 1313 (9th Cir. 1977) (holding that class certification was properly denied without discovery where plaintiffs could not make a prima facie showing of Rule 23's prerequisites or that discovery measures were not likely to produce persuasive information substantiating the class action allegations); Woodard v. FedEx Freight East, Inc. , 250 F.R.D. 178, 182 (M.D. Pa. 2008) (noting that a "district court will strike class allegations without permitting discovery or waiting for a certification motion where the complaint and any affidavits clearly demonstrate that the plaintiff cannot meet the requirements for a class action").
As the Supreme Court has noted:
Sometimes the issues are plain enough from the pleadings to determine whether the interests of the absent parties are fairly encompassed within the named plaintiff's claims, and sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question.
General Telephone Co. of the Southwest v. Falcon , 457 U.S. 147, 160 (1982). "The plaintiff bears the burden of advancing a prima facie showing that the class action requirements of Fed.R.Civ.P. 23 are satisfied or that discovery is likely to produce substantiation of the class allegations." Mantolete v. Bolger , 767 F.2d 1416, 1424 (9th Cir. 1985). Absent such a showing, a trial court's refusal to allow class discovery is not an abuse of discretion. Id. 
Here, Defendant Citi requests that the Court strike all class allegations in Plaintiffs' Amended Complaint with respect to Citi. See Def.'s Mot. to Strike Class Allegations, ECF No. 80. In Trunzo I , this Court dismissed all of the claims against Citi except for Count VII, which alleges that Citi violated the catch-all provision of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 Pa. Con. Stat. Ann. § 201-2(4)(xxi).
As an initial matter, this Court agrees that the allegations in Plaintiffs' Amended Complaint make clear that Plaintiffs' purported class cannot be certified under Rule 23(b)(2). As Plaintiffs concede, see Pls.' Br. in Opp'n at 7 n.6, nowhere in Plaintiffs' Amended Complaint have they requested any "final injunctive or corresponding declaratory relief respecting the class as a whole." See Fed.R.Civ.P. 23(b)(2). Rather, Plaintiffs request the following relief in the remaining Counts of their Amended Complaint: restitution, an accounting, and constructive trust in Count II; statutory damages, attorney's fees, and costs under the Federal Fair Debt Collection Practices Act in Count III; statutory damages, attorney's fees, costs, and expenses under the Pennsylvania Loan Interest and Protection Act in Count VI; and statutory damages, attorney's fees, and costs under the UTPCPL in Count VII.
Rule 23(b)(2) certifications do "not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages." Fed.R.Civ.P. 23(b)(2) Advisory Committee Note. Accordingly, the Supreme Court has held that claims for monetary relief cannot be certified under Rule 23(b)(2) where "the monetary relief is not incidental to injunctive or declaratory relief' and "each class member would be entitled to an individualized award of monetary damages." Wal-Mart Stores , 131 S.Ct. at 2557. The named Plaintiffs' Amended Complaint does not request injunctive or corresponding declaratory relief of any kind. Thus, Plaintiffs cannot seek to certify their purported class under Rule 23(b)(2).
b. Plaintiffs' class allegations are deficient under Rule 23(a)(3) and Rule 23(b)(3) because Plaintiffs' UTPCPL claim against Citi is not typical of the putative class and individual issues predominate.
It is also plain from the face of Plaintiffs' Amended Complaint that Plaintiffs' purported class fails under the antecedent typicality requirement of Rule 23(a)(3), as well as under the predominance requirement of Rule 23(b)(3). As explained above, "sometimes the issues are plain enough from the pleadings to determine whether the interests of the absent parties are fairly encompassed within the named plaintiffs claims." Falcon , 457 U.S. at 160. "The plaintiff bears the burden of advancing a prima facie showing that the class action requirements of Fed.R.Civ.P. 23 are satisfied or that discovery is likely to produce substantiation of the class allegations." Mantolete , 767 F.2d at 1424 (emphasis added). Absent such a showing, a trial court's refusal to allow class discovery is not an abuse of discretion. Id.
In Plaintiffs' Amended Complaint, Plaintiffs define the putative class as:
all former or current homeowners (sometimes referred to as "Homeowners") who obtained financing secured by a first mortgage on property located within the Commonwealth of Pennsylvania, wherein collection demands on said mortgage loans were made by Defendant Phelan. The class includes, but is not limited to, Homeowners whose Note and Mortgage was serviced by Citi or LBPS. The class excludes Homeowners wherein no payments, or demands for payments, have been made in the past six years.
Am. Compl. ¶ 31. To satisfy Rule 23(a), the defined class must meet the Rule's requirements of numerosity, commonality, typicality, and adequacy of representation. See In re Cmty, Bank of N Va. , 622 ...