United States District Court, E.D. Pennsylvania
R. BARCLAY SURRICK, District Judge.
Presently before the Court are (1) the Motion of Defendants Federal National Mortgage Association and Wells Fargo Bank, N.A. to Dismiss Plaintiffs' Amended Complaint (ECF No. 34), and (2) Motion of Defendants MortgageIT, Inc. and Deutsche Bank, AG to Dismiss Plaintiffs' Amended Complaint (ECF No. 35). For the following reasons, Defendants' Motions will be granted in part, and denied in part.
A. Factual Background
This case arises out of a dispute related to Plaintiffs' home mortgage. Plaintiffs Pietro and Jean Marie Barbieri, husband and wife, allege in the Amended Complaint that, in October 2005, they received a home equity loan from Defendant MortgageIT Inc. ("MortgageIT"), which was secured by Plaintiffs' home located at 1111 Fielding Drive, West Chester, Pennsylvania. (Am. Compl. ¶ 20, ECF No. 33.) MortgageIT was acquired by Defendant Deutsche Bank AG ("Deutsche Bank") on or about January 3, 2007. ( Id. ¶ 26.) At some point after securing the loan, Plaintiffs received a notice of assignment of the loan to Defendant Wells Fargo Bank ("Wells Fargo"). ( Id. ¶ 29.) Plaintiffs do not recall exactly when they received notice of the loan assignment, nor do they recall to whom the loan was assigned. ( Id. ¶ 31.) Plaintiffs later discovered in 2008 that the loan had been assigned either to Defendant Wells Fargo or to Defendant Federal National Mortgage ("Fannie Mae"), or to both, under terms and conditions unknown to Plaintiffs. ( Id. )
Plaintiffs allege that "[o]n or before October 2008, the Defendants Fannie Mae and/or Wells Fargo and through unidentified individuals ... without the consent or notice to the Plaintiffs, unilaterally changed the terms and conditions of the Mortgage agreement." ( Id. ¶ 32.) Plaintiffs further allege that despite repeated requests for information on the "new terms" of the "amended Mortgage agreement, " Defendants have refused to provide the requested information. ( Id. ¶¶ 33-34.) From November 2008 until the present, Plaintiffs have not received any statements from any of the Defendants regarding the obligations owed. ( Id. ¶ 38.)
The Amended Complaint describes communications between Plaintiffs and Defendants that occurred in May through June of 2009. Specifically, Plaintiffs allege that, in April 2009, an unidentified representative from Wells Fargo informed Plaintiffs that Wells Fargo had no interest in the Mortgage and that all inquiries regarding the Mortgage should be directed to Fannie Mae. ( Id. ¶ 37.) On April 16, 2009 and April 29, 2009, Plaintiffs were informed by Fannie Mae representatives named Raymond and Kobi that Plaintiffs' loan and Mortgage were "in good order and current." ( Id. ¶ 38.) The representatives also informed Plaintiffs that "the loan was in some form of forbearance program and that all further information must come from the Defendant Wells Fargo." ( Id. ¶ 39.) Kobi and Raymond informed Plaintiff that admission into the forbearance program requires the borrower to make the request and sign documents. ( Id. ¶ 41.) Plaintiffs claim that they never requested information related to the forbearance program, nor signed or even received documentation concerning a loan modification. ( Id. ¶ 43.)
In May 2009, a Wells Fargo representative named "Bamien" informed Plaintiffs that they could temporarily suspend making mortgage payments since their mortgage had been assigned to the "Obama Financial Recovery Project" and the processing of documents for such project was pending. ( Id. ¶¶ 43-46.) Bamien informed Plaintiffs that "until [they] receive the terms of [their] new mortgage, [they] are not required to make payments, " and that this is why Plaintiffs were not receiving statements. ( Id. ¶¶ 45.) Plaintiffs have received no documents regarding the terms of their new mortgage from Defendants. ( Id. ¶ 46.) Plaintiffs claim that they never requested to be placed into this project and advised Bamien that the placement was done without their knowledge or consent. ( Id. ¶ 44.) On June 16, 2009, Wells Fargo advised Plaintiffs by letter that, pursuant to their request, the loan modification had been cancelled. ( Id. ¶ 48.) On June 21, 2009, Defendants placed Plaintiffs into foreclosure and accelerated the mortgage payments. ( Id. ¶ 49.) Plaintiffs allege that, despite numerous requests to provide them with the terms of the mortgage modification and a statement of accounts, Defendants continue to refuse to provide this information. ( Id. ¶ 51.)
Plaintiffs further allege that, in June 2009, Defendants "enter[ed] false and misleading information to at least one of several credit-reporting entities." ( Id. ¶ 54.) Finally, Plaintiffs allege that despite advising Defendants that Plaintiff Jean Marie Barbieri was represented by counsel-her husband, Plaintiff Pietro Barbieri-Wells Fargo continued to contact with her directly. ( Id. ¶ 53.)
This comprises the allegations in the Amended Complaint that relate specifically to Defendants' conduct. A large part of Plaintiffs' Amended Complaint is general allegations about the "serial bad acts" perpetrated by Defendants against their mortgage clients generally. (Am. Compl. ¶¶ 3-15, 58-61, 79-112.) Plaintiffs refer to and incorporate allegations made by parties in three matters that are completely unrelated to this case: (1) a False Claims Act lawsuit brought by the United States Attorney's Office for the Southern District of New York against Deutsche Bank and MortgageIT (the "False Claims Act Matter"); (2) a putative class action against Wells Fargo and J.P. Morgan Chase related to fraudulent practices in home mortgage servicing (the "Class Action Matter"); and (3) an adversary proceeding in an individual debtor's Chapter 13 bankruptcy case in Louisiana (the "Bankruptcy Matter"). Many of the paragraphs in the Amended Complaint, in fact, are lifted verbatim from documents related to these three actions. Although it is not entirely clear from Plaintiff's pleadings, which, at times, are incoherent, Plaintiffs seem to suggest that Defendants' conduct as it relates to them is part of a larger conspiracy to defraud home mortgage borrowers and the federal government by falsely certifying that their loans were eligible for FHA insurance, fraudulently inducing borrowers to go into default, collecting money from the Government when those loans went into default, and assessing default-related fees against the borrowers.
B. Procedural History
Plaintiffs commenced this action on July 20, 2009, alleging the following claims: breach of contract (Count I); fraud and misrepresentation (Count II); "Violation of the [sic] Title 12 and 15" (Count III); defamation by credit report (Count IV); and "Violation of 26 CFR 1.6001" (Count V). (Compl., ECF No. 1) On October 10, 2009, Defendants filed a joint motion to dismiss Plaintiffs' complaint. (ECF No. 13.) On November 17, 2009, Plaintiffs filed a motion requesting leave to amend the complaint to assert claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c). (ECF No. 16.) On July 27, 2012, we granted Plaintiffs' request to amend the complaint to assert additional causes of action. (July 27 Mem. & Order, ECF Nos. 30, 31.)
On August 13, 2012, Plaintiffs filed the Amended Complaint. In addition to the claims asserted in their original complaint, the Amended Complaint also alleges the following: a substantive RICO claim under 18 U.S.C. § 1962(c) (Count VI); a claim for RICO conspiracy, under 18 U.S.C. § 1962(d) (Count VII); and a claim for unjust enrichment (Count VIII). (Am. Compl.) Attached to the Amended Complaint are multiple letters that Pietro Barbieri wrote to representatives of Defendants seeking information about his loans. Plaintiffs also submit as exhibits, the complaints filed in the False Claims Act Matter and the Class Action Matter, as well as the bankruptcy court's opinion in the Bankruptcy Matter.
On August 27, 2012, Defendants Wells Fargo and Fannie Mae filed a Motion to Dismiss the Amended Complaint. (Wells Mot., ECF No. 34.) On September 10, 2012, Defendants MortgageIT and Deutsche Bank filed a Motion to Dismiss the Amended Complaint. (Deutsche Mot., ECF No. 35.) Attached to Defendants' Motions are copies of the Note, the Mortgage, and the Residential Loan Application executed by Plaintiff Jean Marie Barbieri. (Wells Mot. Exs. 1-3; Deutsche Mot. Exs. 1-3.) On October 3, 2012, Plaintiffs filed a Response to Defendants' Motions to Dismiss. (Pls.' Resp., ECF No. 37.) On October 31, 2012, Defendants filed Replies. (Wells Reply, ECF No. 40; Deutsche Reply, ECF No. 39.)
II. LEGAL STANDARD
Under Federal Rule of Civil Procedure 8(a)(2), "a pleading that states a claim for relief must contain a short and plain statement of the claim showing that the pleader is entitled to relief." Failure to state a claim upon which relief can be granted is basis for dismissal of the complaint. Fed.R.Civ.P. 12(b)(6). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint that merely alleges entitlement to relief, without alleging facts that show entitlement, must be dismissed. See Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009). "This does not impose a probability requirement at the pleading stage, ' but instead simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element." Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556). "A complaint may not be dismissed merely because it appears unlikely that the plaintiff can prove those facts or will ultimately prevail on the merits." McTernan v. City of York, 564 F.3d 636, 646 (3d Cir. 2009).
In determining whether dismissal is appropriate, courts use a two-part analysis. Fowler, 578 F.3d at 210. First, courts separate the factual and legal elements of the claim and accept all of the complaint's well-pleaded facts as true. Id. at 210-11. Next, courts determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a "plausible claim for relief." Id. at 211. Given the nature of the two-part analysis, "[d]etermining whether a complaint states a plausible claim for relief will... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'" See McTernan v. City of York, 577 F.3d 521, 530 (3d Cir. 2009) (quoting Iqbal, 556 U.S. 663-64). When considering a Rule 12(b) motion to dismiss, we must "accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the non-moving party." Rocks v. City of Phila., 868 F.2d 644, 645 (3d Cir. 1989).
In addition to the Rule 8(a)(2) general pleading standard, the Federal Rules of Civil Procedure also require a heightened pleading standard for specific actions. In particular, when a litigant alleges fraud, he or she must do so "with particularity." Fed.R.Civ.P. 9(b). Rule 9(b) commands that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Id. Pursuant to this heightened pleading standard, plaintiffs must "plead with particularity the circumstances' of the alleged fraud in order to place the defendants on notice of the precise misconduct with which they are charged, and to safeguard defendants against spurious charges of immoral and fraudulent behavior." Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984). This requires a description of the "who, what, when, where and how of the events at issue." In re Rockefeller Ctr. Props., Inc. Secs. Litig., 311 F.3d 198, 217 (3d Cir. 2002) (internal quotation marks and citation omitted). Rule 9(b) is generally considered satisfied when a defendant has "fair notice" of the charges against it. United States v. Kensington Hosp., 760 F.Supp. 1120, 1126 (E.D. Pa. 1991).
Defendants seek dismissal of all eight counts asserted by Plaintiffs. In addition to making specific arguments with respect to each count, Defendants contend that the Amended Complaint, in general, lacks the factual specificity to meet the basic federal pleading requirements. Defendants state that Plaintiffs improperly rely upon allegations contained in unrelated matters that have nothing to do with the conduct at issue in this case. We will address each of Plaintiffs' claims.
A. RICO and RICO Conspiracy (Counts VI and VII)
Plaintiffs assert RICO claims in Counts VI and VII of the Amended Complaint. Specifically, Plaintiffs allege that Defendants are enterprises that engaged in racketeering activity involving "conceal[ing] assessments of unlawfully marked up fees on the accounts of borrowers who have mortgage loans administered by" them. (Am. Compl. ¶¶ 79-99.) Plaintiffs allege that the predicate acts that make up the pattern of racketeering activity are Defendants' violation of the mail and wire fraud statutes, 18 U.S.C. § 1341, and 18 U.S.C. § 1343, respectively. Finally, Plaintiffs assert in Count VII that Defendants conspired to violate RICO.
Defendants contend that Counts VI and VII should be dismissed because (1) Plaintiffs lack standing to assert RICO claims, (2) Plaintiffs have failed to allege the requisite elements to state a RICO claim, and (3) Plaintiffs fail to allege an agreement necessary to maintain a RICO conspiracy claim.
1. Standing to Assert RICO Claims
In addition to the Article III constitutional and prudential requirements to establish standing to assert a claim, plaintiffs asserting RICO claims must satisfy additional standing criteria set forth in 18 U.S.C. § 1964(c). Maio v. Aetna, 221 F.3d 472, 482 (3d Cir. 2000). Section 1964(c) states that "[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter... may sue therefore in any appropriate United States district court...." 18 U.S.C. § 1964(c). From this language, the Third Circuit has deduced two threshold requirements for civil RICO plaintiffs to establish that they have standing: (1) the plaintiff suffered an injury to business or property; and (2) the plaintiff's injury was proximately caused by the defendant's RICO violation. Maio, 221 F.3d at 483. After reviewing the Amended Complaint and Plaintiffs' response in opposition to Defendants' Motions to Dismiss, we are persuaded that Plaintiffs do not have standing to assert RICO claims.
Injury to business or property requires "a concrete financial loss and not mere injury to a valuable intangible property interest, " id., which can be "satisfied by allegations and proof of actual monetary loss, i.e., an out-of-pocket loss.'" Walter v. Palisades Collection, LLC, 480 F.Supp.2d 797, 804 (E.D. Pa. 2007) (quoting Maio, 221 F.3d at 483). Prospective damages are not sufficient to satisfy the standing requirements. Id. In other words, to qualify as a "concrete financial loss, " the plaintiff's injury cannot be speculative or contingent on future events. FL Receivables Trust 2002-A v. Bagga, 2005 U.S. Dist. LEXIS 3697, at *9-10 (E.D. Pa. Mar. 8, 2005) (citing Maio, 221 F.3d at 495); see also Walter, 480 F.Supp.2d at 804 ("RICO liability cannot attach to future contingent damages.").
Plaintiffs concede that they have not yet suffered quantifiable damages. (Pls.' Resp. 2 ("Plaintiffs have no quantifiable damages."); id. at 3 ("In truth, the only damages that the Plaintiffs can quantify is the emotional distress caused by not knowing how much we actually owe and why.").) The crux of Plaintiffs' RICO claim is that Defendants fraudulently and deceptively caused borrowers to go into default and then assessed fees and costs against the borrowers. Yet, nowhere do Plaintiffs allege that they themselves paid default-related servicing fees or charges to Defendants. Nor do Plaintiffs allege that they have ever been assessed these fees or charges. Instead, Plaintiffs allege generally that borrowers have been charged fees as a result of Defendants' fraudulent conduct. Plaintiffs only speculate that they too have ...