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Hoffmann v. Wells Fargo Bank, N.A.

United States District Court, E.D. Pennsylvania

March 17, 2017



          Gerald Austin McHugh United States District Judge

         In 2012, Wells Fargo brought a mortgage foreclosure action against Sonya Hoffmann, but lost following a bench trial. In 2016, it sued her again on the same debt, prompting Hoffmann to file the present action, in which she charges (for a second time) that Wells Fargo and its lawyers violated various consumer protection laws. Before me now are Motions to Dismiss filed by Wells Fargo and its co-defendants. The main issue is whether the verdict in Hoffmann's favor in the 2012 foreclosure action had a claim preclusive effect that would render subsequent attempts to collect on the debt unlawful. Because I find that Wells Fargo had a colorable, albeit uncertain, legal basis for bringing the second foreclosure action, and because the defendants in this case refrained from abusive, oppressive, or unconscionable conduct in their attempts at debt collection, all but two of Hoffmann's claims fail.

         I. BACKGROUND

         A. Prior Litigation and Pending Foreclosure Action

         In August, 1998, Plaintiff Sonya Hoffmann borrowed $39, 784 from Avstar Mortgage to purchase a house in Darby, Pennsylvania. Accordingly, she executed a promissory note (Note) and a mortgage (Mortgage) to Avstar, its successors and assigns. Over the next twelve-odd years, the Mortgage and Note frequently changed hands, until, after at least five assignments, it came into the possession of Defendant Wells Fargo.

         Hoffmann's legal troubles with Wells Fargo date back to May 2012, when Wells Fargo accelerated her outstanding debt and brought a foreclosure action against her in Pennsylvania state court seeking recovery of $33, 076.30 (2012 Foreclosure). During the 2012 Foreclosure trial, Wells Fargo's counsel, Defendant Phelan Hallinan Diamond & Jones (PHDJ), revealed for the first time that the previous holders of Hoffmann's mortgage had made two unrecorded assignments of that instrument to the Government National Mortgage Associations (Ginnie Mae). This revelation led Hoffmann in 2013 to sue Wells Fargo and PHDJ in federal court. There, she argued that the unrecorded assignments to Ginnie Mae deprived Wells Fargo of valid title to the Mortgage and that Wells Fargo and PHDJ's attempt to foreclose therefore violated the Fair Debt Collection Practices Act (FDCPA) and the Pennsylvania Unfair Trade Practices and Consumer Protection Law


         In March 2013, while Hoffmann's federal suit was pending, the state court resolved the 2012 Foreclosure in her favor. However, the court's decision was based on Wells Fargo's failure to satisfy its evidentiary burden by producing a witness at trial who could authenticate the Note-a holding that shed no light on the legal significance of the unrecorded assignments to Ginnie Mae.

         The federal action therefore moved forward.

         By late 2015, the case had proceeded to discovery and PHDJ had retained Kenneth Goodkind, and his firm, Flaster/Greenberg. In preparing PHDJ's defense, Goodkind deposed Hoffmann on November 13, 2015. During her deposition testimony, Hoffmann told Goodkind that she was working to connect buyers and sellers of Treaty of Versailles-or “Versailles”-Bonds.[2]When Goodkind pressed for details, Hoffmann revealed that she would soon receive “over $100, 000” for her brokerage services. This prompted the following exchange:

Q. Do you have any plans for that money?
Mr. Pearson [(Hoffmann's counsel)]: Objection, beyond the scope of discovery.
Q. You can answer.
A. Yeah, to pay my bills.
Mr. Pearson: Objection.
Q. Do you intend to pay your mortgage arrears?
A. Yes.
Q. Have you notified Wells about that?
A. No.
Q. Have you notified anybody on the lender's side or Phelan about that?
A. No.
Q. And this could happen as soon as --- it could happen this year?
A. Yes.

Am. Compl. Ex. 12 at *20.[3]

         By January 2016, having heard nothing more from Hoffmann regarding her Versailles Bond income, Goodkind sent an e-mail to Hoffmann's lawyer, David Pearson. Under the heading “PRIVILEGED AND CONFIDENTIAL SETTLEMENT COMMUNICATION, ” Goodkind wrote:

Your client mentioned at her deposition that she anticipated receiving a six figure payment around the start of the new year from the Treaty of Versailles bond work she does, and that she would be able to use those funds to cure her defaults . . . Please . . . let me know what she is willing to offer in settlement.

Am. Compl. Ex. 3 at 3. Pearson responded that “in the typical settlement, the defendant agrees to pay the plaintiff, not the other way around, ” id. at 2, and the matter of Hoffmann's Versailles Bond income eventually was dropped.

         In March 2016, with the 2013 federal action still unresolved but entering its endgame, Wells Fargo sent Hoffmann a letter titled “Notice of Intention to Foreclose” (Notice Letter). The letter warned that Wells Fargo planned to again initiate foreclosure proceedings unless Hoffmann tendered within 30 days a lump-sum payment of $32, 351.63.[4] When Hoffmann failed to cure her default as directed by the Notice Letter, Wells Fargo made good on its threat.

         As in 2012, Wells Fargo retained PHDJ to bring a foreclosure action against Hoffmann. PHDJ began by sending Hoffmann a letter dated April 13, 2016 (Debt Validation Letter). In that letter, PHDJ explained that it was a debt collector acting on behalf of Wells Fargo, and listed Hoffmann's total outstanding debt as $57, 619.91-the sum of her unpaid principal balance and late charges, as well as interest and escrow advances that had been accruing since July 2011. The letter also warned that unless Hoffmann disputed the validity of her debt, PHDJ would commence an in rem action to foreclose on the Darby property. It does not appear that Hoffmann submitted any dispute to PHDJ, and the latter filed a foreclosure complaint on April 29, 2016 (2016 Foreclosure).[5]

         B. Wells Fargo's Monthly Billing Notices and Credit Reporting Practices

         Although the 2012 and 2016 Foreclosures sought to recover Hoffmann's entire outstanding principal balance, Wells Fargo continued to send Hoffmann monthly billing notices following the commencement of both actions. Hoffmann submits one such notice, dated June 16, 2016 (June Notice), as a representative of the set. The June Notice lists monthly scheduled payments of principal, interest, and escrow advances in the amounts of $130.41, $134.27, and $581.59, respectively. It further warns that these payments will be added to the “Total payment due 7/01/16, ” which is listed as $35, 466.71.[6]

         Consistent with these notices, at all relevant times, it was Wells Fargo's practice to inform Equifax and other Credit Reporting Agencies (CRAs) that Hoffmann had failed each month to tender her scheduled mortgage payment. The CRAs duly included a record of each missed payment on Hoffmann's credit report. In early June 2016, Hoffmann sent Equifax a “Request for Research Form, ” notifying it of a dispute concerning the information on her credit report that had been provided by Wells Fargo. In a section of the form titled “Reason for Dispute, ” Hoffmann checked a box labeled “other” and wrote “see attached court ruling, ” meaning the decision in the 2012 Foreclosure. The Research Request Form thus made clear that Hoffmann's dispute had something to do with the 2012 Foreclosure, but otherwise offered no insight into the nature of her objections.

         Nevertheless, Equifax alerted Wells Fargo to the existence of Hoffmann's dispute. In response, Wells Fargo verified Hoffmann's account information and made a note reflecting the fact that the information that it provided to Equifax was in dispute. Equifax then sent Hoffmann a report summarizing the resolution of her research request. Regarding the information provided by Wells Fargo, the report explained:

We have researched the credit account. . . . The results are: We verified that this item belongs to you. Additional information has been provided from the original source regarding this item. If you have additional questions about this item please contact: Wells FARGO Home Mortgage, PO Box 10335, DES MOINES IA 50306-0335 Phone: (800) 288-3212

Am. Compl. Ex. 10.

         C. The Present Action

         Hoffmann's previous federal action finally came to an end on August 2, 2016, when I entered summary judgment for PHDJ on all remaining claims. With the ink barely dry on that Order, Plaintiff initiated the present action on August 8, 2016. Plaintiff now argues that the 2012 Foreclosure had a claim preclusive effect that barred subsequent attempts to collect on her debt. On this theory, she maintains that Goodkind violated various provisions of the FDCPA and UTPCPL when he tried to induce Plaintiff to settle her debt during and shortly after her November 2015 deposition. Plaintiff brings similar FDCPA and UTPCPL claims against PHDJ and Wells Fargo. Plaintiff also argues that Wells Fargo misrepresented the status of her debt, both by failing to notify Equifax and other CRAs that the debt was in dispute following the 2012 Foreclosure, and by sending Plaintiff monthly notices even after it had terminated her right to make monthly payments by accelerating her debt. Finally, Plaintiff maintains that Wells Fargo violated the Fair Credit Reporting Act because it did not adequately investigate her dispute concerning the information it provided to Equifax.

         Defendants now move to dismiss Plaintiff's claims pursuant to Rule 12(b)(6). For the reasons that follow, Defendants' Motions to Dismiss are granted in all respects, except as to Plaintiff's claim against Goodkind and Flaster/Greenberg arising under 15 U.S.C. § 1692g, and her claim against Wells Fargo under § 1692e(8).

         II. STANDARD

         A complaint is properly dismissed under Rule 12(b)(6) when it fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). In considering a 12(b)(6) motion, the court must first separate the factual and legal elements of a claim, accepting as true all well-pleaded facts while disregarding any legal conclusions. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). The court must then “determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a ‘plausible claim for relief.'” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)).


         A. FDCPA Claims

         Congress enacted the FDCPA to “eliminate abusive debt collection practices by debt collectors, ” and “to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged.” 15 U.S.C. § 1692(e).

To prevail on an FDCPA claim, a plaintiff must prove that (1) she is a consumer, (2) the defendant is a debt collector, (3) the defendant's challenged practice involves an attempt to collect a ‘debt' as the Act defines it, and (4) the defendant has violated a provision of the FDCPA in attempting to collect the debt.

Jensen v. Pressler & Pressler, 791 F.3d 413, 417 (3d Cir. 2015). The parties seem to agree that Plaintiff is a consumer within the meaning of the FDCPA, but they dispute whether Plaintiff has satisfied the other three elements of her FDCPA claims. Because Plaintiff's FDCPA claims vary by defendant, I discuss separately her allegations against Goodkind and Flaster/Greenberg, PHDJ, and Wells Fargo.

         1. FDCPA Claims Against Goodkind and Flaster/Greenberg

         Plaintiff's FDCPA claims against Goodkind and his firm, Flaster/Greenberg, arise from Goodkind's questions during the November 13, 2015 deposition and from his follow-up e-mails to Plaintiff's counsel in January 2016. Plaintiff describes these actions as “conduct the natural consequence of which is to harass, oppress, or abuse in connection with the collection of a debt.” Am. Compl. at 9 (quoting 15 U.S.C. § 1692d). Plaintiff also brings claims under § 1692e, which prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt”; and § 1692f, which prohibits the use of “unfair or unconscionable means” to collect a debt, including the “collection of any amount . . . unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” Finally, Plaintiff characterizes Goodkind's deposition questions and follow-up e-mails as “initial communications” within the meaning of § 1692g. As such, Plaintiff maintains that Goodkind was required to send within five days a written notice detailing various specified information regarding the debt.

         Goodkind first argues that Plaintiff's Amended Complaint fails to establish that he or Flaster/Greenberg engaged in any debt collection activity, or were debt collectors within the meaning of the statute. Lacking these requisite elements of an FDCPA claim, Goodkind argues that Plaintiff's Amended Complaint must be dismissed. I disagree.

         a. Debt ...

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