Plaintiffs Opposition To Saxon Mortgage Services, Inc.'s Motion To Dismiss Class Action Complaint

Case 2:11-cv-04586-JP Document 26
Filed 11/30/11 Page 1 of 51
IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA
LISA AND SCOTT CAVE, on behalf of themselves and all others similarly situated, Plaintiffs, v. SAXON MORTGAGE SERVICES, INC. and OCWEN LOAN SERVICING, LLC, Defendant. Case No. 2:11-CV-04586-JP Hon. John R. Padova
PLAINTIFFS MEMORANDUM OF LAW IN OPPOSITION TO SAXON MORTGAGE SERVICES, INC.S MOTION TO DISMISS
TABLE OF CONTENTS I. II. III. PRELIMINARY STATEMENT ........................................................................................ 1 STATEMENT OF FACTS ................................................................................................. 6 ARGUMENT .................................................................................................................... 10 A. B. C. Standard of Review ............................................................................................... 10 Plaintiffs Claims Are Based Upon Bilateral TPP Contracts with Saxon Not Claims Under HAMP ............................................................................................ 11 Plaintiffs State a Claim for Breach of the TPP Contract ...................................... 15 1. 2. 3. 4. 5. D. E. The TPP Contract is an Unambiguous Offer and Not Merely a Part of the Application Process .................................................................................. 16 The TPP Contracts Terms Are Sufficiently Definite, and They Follow an Established Modification Formula ............................................................ 21 Plaintiffs Have Adequately Alleged Consideration .................................. 24 Plaintiffs Sufficiently Plead Damages Caused by Saxons Breach of the TPP Contract ............................................................................................. 26 Plaintiffs State a Claim for Breach of the Duty of Good Faith and Fair Dealing ...................................................................................................... 28
Plaintiffs State a Claim for Promissory Estoppel ................................................. 29 Plaintiffs State a Claim Under Pennsylvanias UTPCPL ..................................... 32 1. 2. 3. Saxons Conduct Violates The UTPCPL.................................................. 32 The Economic Loss Doctrine Does Not Affect Plaintiffs UTPCPL Claim ................................................................................................................... 33 Plaintiffs Have Properly Pled Reliance, Deceptive Acts, Duty, Malfeasance and Injury ............................................................................. 37
F.
Plaintiffs State a Viable Claim Under the FCEUA and the FDCPA .................... 39 1. 2. Plaintiffs State a Claim Under the FCEUA .............................................. 39 Plaintiffs FDCPA Claim Should be Upheld ............................................ 41
IV.
CONCLUSION ................................................................................................................. 42
TABLE OF AUTHORITIES Page(s) CASES Adelvision L.P. v. Groff, 859 F. Supp. 797 (E.D. Pa. 1994) ............................................................................................24 Allen v. CitiMortgage, Inc., 2011 WL 3425665 (D. Md. Aug. 4, 2011) ........................................................................13, 31 Arthur v. Maersk, Inc., 434 F.3d 196 (3d Cir. 2006).....................................................................................................42 Astra USA, Inc. v. Santa Clara Cnty., 131 S.Ct. 1342 (Mar. 29, 2011) ...............................................................................................14 Barbera v. TD Bank, 2010 WL 1980319 (E.D. Pa. May 19, 2010) ...........................................................................24 Barinaga v. JPMorgan Chase & Co., 749 F. Supp. 2d 1164 (D. Or. 2010) ........................................................................................25 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) .................................................................................................................11 Belyea v. Litton Loan Servicing, LLP, 2011 WL 2884964 (D. Mass. July 15, 2011) .....................................................................22, 27 Berks Mut. Leasing Corp. v. Travelers Property Cas., 2002 WL 31761419 (E.D. Pa. Dec. 9, 2002) ...........................................................................29 Blackwood v. Wells Fargo Bank, N.A., 2011 WL 1561024 (D. Mass. Apr. 22, 2011) ..........................................................................13 Bolone v. Wells Fargo Home Mortg., Inc., 2011 WL 3706600 (E.D. Mich. Aug. 24, 2011) ................................................................16, 26 Bosque v. Wells Fargo Bank, N.A., 2011 WL 304725 (D. Mass. Jan. 26, 2011) ..................................................................... passim Bourdelais v. J.P. Morgan Chase, 2011 WL 1306311 (E.D.Va. Apr. 1, 2011) .......................................................................15, 18 Boyd v. U.S. Bank, N.A., 2011 WL 1374986 (N.D. Ill. Apr. 12, 2011) ...........................................................................13 ii
Brock v. Thomas, 782 F. Supp. 2d 133 (E.D. Pa. 2011) .......................................................................................34 Brown v. Bank N.Y. Mellon, 2011 WL 206124 (W.D. Mich. Jan. 21, 2011) ............................................................15, 18, 19 Brown v. Phila. Housing Auth., 159 F. Supp. 2d 23 (E.D. Pa. 2001) .........................................................................................25 Cade v. BAC Home Loans Servicing, LP, 2011 WL 2470733 (S.D. Tex. June 20, 2011) ...................................................................12, 25 Cardamone v. U. of Pittsburgh, 384 A.2d 1228 (Pa. Super. Ct. 1978) .......................................................................................24 Chalfin v. Beverly Enters., Inc., 741 F. Supp. 1162 (E.D. Pa. 1989) ..........................................................................................13 Clark v. EMC Mortgage Corp., 2009 U.S. Dist. LEXIS 61181 (E.D. Pa. Jan. 29, 2009) ..........................................................36 Cleveland v. Aurora Loan Servs., LLC, 2011 WL 2020565 (N.D. Cal. May 24, 2011) .........................................................................11 College Loan Corp. v. SLM Corp., 396 F.3d 588 (4th Cir. 2005) ...................................................................................................13 Com. ex rel. Corbett v. Manson, 903 A.2d 69 (Pa. Commw. Ct. 2006) ......................................................................................32 Commw. v. Monumental Properties, Inc., 329 A.2d 812 (Pa. 1974) ..........................................................................................................32 Commw. v. Percudani, 825 A.2d 743 (Pa. Commw. Ct. 2003) ....................................................................................32 Corestates Bank, N.A. v. Cutillo, 723 A.2d 1053 (Pa. Super. Ct. 1999) .......................................................................................16 Costigan v. CitiMortgage, Inc., 2011 WL 3370397 (S.D.N.Y. Aug. 2, 2011) .....................................................................12, 18 Cox v. Mortg. Elec. Registration Sys., Inc., 2011 WL 2600700 (D. Minn. June 30, 2011) ..........................................................................15 Crawfords Auto Center, Inc. v. Penna. State Police, 655 A.2d 1064 (Pa. Commw. Ct. 1995) ..................................................................................23
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Darcy v. CitiFinancial, Inc., 2011 WL 3758805 (W.D. Mich. Aug. 25, 2011) .........................................................13, 20, 29 Durmic v. JP Morgan Chase Bank, N.A., 2010 WL 4825632 (D. Mass. Nov. 24, 2010) .............................................................16, 22, 27 Edwards v. Wyatt, 330 Fed. Appx. 342, 2009 (3d Cir. 2009) ................................................................................23 Edwards v. Wyatt, 335 F.3d 261 (3d Cir. 2003).....................................................................................................30 Erickson v. Long Beach Mortg., 2011 WL 830727 (W.D. Wash. Mar. 2, 2011) ........................................................................30 Ferki v. Wells Fargo, 2010 WL 5174406 (E.D. Pa. Dec. 10, 2010) .....................................................................36, 37 Foman v. Davis, 371 U.S. 178 (1962) .................................................................................................................42 Gaudin v. Saxon Mortg. Services, Inc., 2011 WL 5825144 (N.D. Cal. Nov. 17, 2011) ................................................................ passim Good v. Holstein, 787 A.2d 426 (Pa. Super. Ct. 2001) .........................................................................................40 Gordon v. Pa Blue Shield, 548 A.2d 600 (Pa. Super Ct. 1988) ..........................................................................................38 Grill v. BAC Home Loans Servicing, 2011 WL 127891 (E.D. Cal. Jan. 14, 2011) ..........................................................12, 18, 22, 30 Horowitz v. Federal Kemper Life Assurance Co., 57 F.3d 300 (3d Cir. 1995).......................................................................................................38 In re Bank of Am. HAMP Contract Litig., 2011 WL 2637222 (D. Mass. July 6, 2011) .......................................................................14, 26 In re Estate of Lazarus, 616 A.2d 1023 (Pa. Super. Ct. 1992) .......................................................................................40 In re Ocwen Loan Servicing, LLC Mortg. Servicing Litig., 491 F.3d 638 (7th Cir. 2007) .............................................................................................13, 14 In re Pennsylvania Footwear Corp., 204 B.R. 165 (Bankr. E.D. Pa. 1997) ................................................................................22, 23
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In re Salvador, 2011 WL 1833188 (Bankr. M.D. Ga. May 12, 2011) .................................................18, 21, 24 Ishler v. Chase Home Fin. LLC, 2011 WL 744538 (M.D. Pa. Feb. 23, 2011) ......................................................................20, 27 Keller v. Volkswagen of Am., Inc., 733 A.2d 642 (Pa. Super Ct. 1999) ..........................................................................................33 Kost v. Kozakiewicz, 1 F.3d 176 (3d Cir. 1993).........................................................................................................11 Lasisi v. Bank of Am., 2009 WL 2342640 (E.D. Pa. July 29, 2009) ............................................................................41 Locke v. Wells Fargo Home Mort., 2010 WL 4941456 (S.D. Fla. Nov. 30, 2010)....................................................................24, 30 Lonberg v. Freddie Mac, 776 F. Supp. 2d 1202 (D. Or. 2011) ..................................................................................18, 22 Lyon Fin. Servs. v. Woodlake Imaging, LLC, 2005 U.S. Dist. LEXIS 2011 (E.D. Pa. Feb. 9, 2005) .............................................................28 Mahoney v. Furches, 503 Pa. 60, 468 A.2d 458 (1983) .............................................................................................40 Marks v. Bank of Am., 2010 WL 2572988 (D. Ariz. June 22, 2010) ...........................................................................15 Morales v. Chase Home Fin., LLC, 2011 WL 1670045 (N.D. Cal. Apr. 11, 2011) .............................................................18, 21, 30 Northern Group, Inc. v. Delancey Investment Group. Inc., 1993 WL 488598 (E.D. Pa. Nov. 24, 1993) ............................................................................22 OKeefe v. Mercedes-Benz USA, LLC, 214 F.R.D. 266 (E. D. Pa. 2003) ....................................................................................37 Ording v. BAC Home Loans Servicing, LP, 2011 WL 99016 (D. Mass. Jan. 10, 2011) ...............................................................................13 Phillips v. County of Allegheny, 515 F.3d 224 (3d Cir. 2008).....................................................................................................11 Phipps v. Wells Fargo Bank, 2011 WL 302803 (E.D. Cal. Jan. 27, 2011) ......................................................................20, 27
Power Contracting, Inc. v. Stirling Energy Sys. Inc., 2010 WL 4854072 (W.D. Pa. Nov. 22, 2010) .........................................................................23 Prasad v. BAC Home Loans Servicing, 2010 WL 5090331 (E.D. Cal. Dec. 7, 2010) ...............................................................18, 21, 30 Quinn v. Traditions of Am., L.P., 2010 WL 3239325 (E.D. Pa. Aug. 16, 2010) ....................................................................23, 24 Rackley v. JPMorgan Chase Bank, Nat. Assn, 2011 WL 2971357 (W.D. Tex. July 21, 2011) ........................................................................25 Register v. PNC Fin. Servs. Group, Inc., 477 F.3d 56 (3d Cir. 2007).......................................................................................................11 Rem Coal Co. v. Clark Equipment Co., 563 A.2d 128 (Pa. Super. Ct. 1989) .........................................................................................34 Rivera v. Bank of Am. Home Loans, 2011 WL 1533474 (E.D.N.Y Apr. 21, 2011) ....................................................................12, 15 Santo v. Qualcraft Construction, 2007 WL 5786314 (Pa. Com. Pl. Sept. 2007) .........................................................................38 Sarsfield v. CitiMortgage, Inc., 707 F. Supp. 2d 546 (M.D. Pa. 2010) ......................................................................................37 Seldon v. Home Loan Services, Inc., 647 F. Supp. 2d 451 (E.D. Pa. 2009) .....................................................................32, 36, 37, 41 Sherman v. Litton Loan Servicing, L.P., 2011 WL 2634097 (E.D. Va. July 5, 2011) .............................................................................18 Shurtliff v. Wells Fargo Bank, 2010 WL 4609307 (D. Utah Nov. 5, 2010) .............................................................................18 Simon v. Bank of America, 2010 WL 2609436 (D. Nev. June 23, 2010) ............................................................................12 Singh v. Wells Fargo Bank, 2011 WL 66167 (E.D. Cal. Jan. 7, 2011) ..........................................................................15, 27 Stagikas v. Saxon Mortg. Services, Inc., -- F. Supp. 2d --, 2011 WL 2652445 (D. Mass. July 5, 2011) .................................1, 12, 13, 26 Stolba v. Wells Fargo & Co., 2011 WL 3444078 (D.N.J. Aug. 8, 2011) ...............................................................................15
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Stuart v. AR Resources, Inc., 2011 U.S. Dist. LEXIS 27025 (E.D. Pa. March 15, 2011) ......................................................37 Thomas v. JPMorgan Chase & Co., 2011 WL 3273477 (S.D.N.Y. July 29, 2011) ........................................................12, 18, 19, 28 Torres v. Litton Loan Servicing, L.P., 2011 WL 149833 (E.D. Cal. Jan. 18, 2011) ............................................................................22 Turbeville v. JPMorgan Chase Bank, 2011 U.S. Dist. LEXIS 42290 (C.D. Cal. Apr. 4, 2011) ................................................. passim U.S. Steel Corp. v. U.C.B.R., 858 A.2d 91 (Pa. 2004) ............................................................................................................24 Vassalotti v. Wells Fargo Bank, 732 F. Supp. 2d 503 (E.D. Pa. 2010) .......................................................................................36 Vida v. OneWest Bank, 2010 WL 5148473 (D. Or. Dec. 13, 2010) ............................................................15, 18, 22, 25 Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002)...................................................................................34, 35, 36, 37 Wigod v. Wells Fargo Bank, 2011 WL 250501 (N.D. Ill. Jan. 25, 2011) ........................................................................12, 15 Wright v. Chase Home Finance, LLC, 2011 WL 4101513 (D. Ariz. Sept. 14, 2011)...........................................................................13 STATUTES 73 PA. STAT. 201-2(4)(xxi) ...................................................................................................32, 36 12 U.S.C. 1461 et seq..................................................................................................................14 Employee Retirement Income Security Act, 29 U.S.C. 1132.....................................................14 OTHER AUTHORITIES 3 WILLISTON ON CONTRACTS 7.28 (Thomson Reuters/West 4th ed. 2009) ................................25 1A Corbin on Contracts 204 (1963)............................................................................................31 Fed. R. Civ. P. 8(a) ........................................................................................................................11 Fed. R. Civ. P. 12(b)(6)..................................................................................................9, 11, 21, 22 Fed. R. Civ. P. 15(a) ......................................................................................................................42 vii
REST. 2D CONTRACTS 204 ...........................................................................................................23 REST. 2D CONTRACTS 90 .......................................................................................................30, 31
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I.
PRELIMINARY STATEMENT Defendant Saxon Mortgage Services, Inc.s (Saxon or Defendant) Motion to Dismiss
Plaintiffs Class Action Complaint (Complaint) should be denied in its entirety, because the Complaint sufficiently states claims for breach of contract (Count I), promissory estoppel (Count II), violations of Pennsylvanias Unfair Trade Practices and Consumer Protection Law (UTPCPL) (Count III), Pennsylvanias Fair Credit Extension Uniformity Act (FCEUA) (Count IV), and the Fair Debt Collections Practices Act (FDCPA) (Count V). Saxon recently lost a nearly identical motion to dismiss a substantially similar class action in the Northern District of California. See Gaudin v. Saxon Mortg. Services, Inc., 2011 WL 5825144 (N.D. Cal. Nov. 17, 2011). Saxon also lost a similar motion to dismiss in the District of Massachusetts. Stagikas v. Saxon Mortg. Services, Inc., -- F. Supp. 2d --, 2011 WL 2652445 (D. Mass. July 5, 2011). The outcome here should be no different. Saxon appears oblivious to the hardships of struggling homeowners like Plaintiffs Lisa and Scott Cave, and to its own obligations under the Home Affordable Mortgage Program (HAMP) a federal program intended to ease the national foreclosure crisis (1, 3, 28-40 1) by providing financially distressed homeowners reduced monthly mortgage payments. 2 Saxons indifference is exemplified by its low rate of granting permanent loan modifications, which ranks it among the worst mortgage servicers in the country. As of July 2009, Saxon had modified just
Citations to the Complaint appear herein as __, or __.
Although Saxon contends that its participation in HAMP was voluntary (see Memorandum of Law in Support of Saxon Mortgage Services, Inc.s Motion to Dismiss Plaintiffs Complaint (Def. Mem.) at 6, n. 7), this assertion is immaterial to the disposition of this motion, as it does not alter the fact that Saxon signed the Servicer Participation Agreement (SPA) with the U.S. Department of the Treasury and was obligated to comply with HAMP and its supplemental directives and, more importantly, to discharge faithfully its obligations under TPP Contracts with Plaintiffs and the Class, which it failed to do. 28, 37; a copy of the SPA is attached to the Declaration of Jeanette V. Torti in Support of Saxon Mortgage Services, Inc.s Motion to Dismiss (Torti Decl.) at Ex. 3.
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6 percent of the mortgages it serviced, according to a July 16, 2009 article in The Wall Street Journal, Mortgage Firms Struggle to Redo Hard-Hit Loans. 26 (noting that Saxon had failed to hire adequate, trained staff to deal with the large number of HAMP modifications sought by homeowners). According to an article in ProPublica, No Penalties for Mortgage Company with Worst Loan Mod Backlog, [o]f all the mortgage companies participating in the administrations mortgage modification program, Saxon has the largest proportion of homeowners caught in modification limbo. Id. According to Treasury Department data
through January 30, 2011, Saxon had offered 37,495 trial modifications, but cancelled trials of 21,673 borrowers, or 57.8 percent, and offered permanent modifications to only 12,931 borrowers, or 34.5 percent. Id. Under HAMP guidelines, before any applicant receives a Home Affordable Modification Trial Period Plan (TPP Contract), Saxon is required to conduct a Net Present Value (NPV) test and other financial analyses to determine the borrowers eligibility for a permanent loan modification. If the borrower is pre-qualified (whether on the basis of verbally stated or document-verified financial information), Saxon then offers the borrower a trial modification pursuant to a uniform TPP Contract, which requires the borrower to provide confirmation of the reasons I cannot afford my mortgage payments and documents to permit verification of my income, and to make three timely modified payments. Compl. Ex. A at 1. Saxons TPP Contract promises to provide homeowners permanent loan modifications if they fulfill these obligations under the contract. Specifically, the TPP Contract provides: If I am in compliance with this Trial Period Plan (the Plan) and my representations in Section 1 continue to be true in all material respects, then the Servicer will provide me with a Home Affordable Modification Agreement... Compl. Ex. A at 1 (emphasis added).
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Saxon cannot dispute that Plaintiffs and thousands of other Pennsylvania homeowners who comprise the proposed Class held up their end of this bargain. Specifically, Plaintiffs discharged the duties that they assumed when they accepted Saxons offer by signing the TPP Contract and returning it to Saxon. They did so by: (1) submitting the requested documents to Saxon (often re-submitting multiple copies due to Saxons disorganization and incompetence); and (2) making all of the agreed-upon modified payments in a timely manner during the threemonth trial period. 52-57. However, Saxon breached the express promises it made in the TPP Contract to timely evaluate Plaintiffs for a permanent loan modification and to provide either a permanent HAMP modification or a written denial by the end of the three month trial period. Saxon thus not only breached the TPP Contract but also directly violated HAMP guidelines. 1-4, 48-51, 59-67. Saxons misconduct left Plaintiffs in substantially worse economic circumstances than before they sought modifications, facing substantial arrearages, previously undisclosed fees, imminent foreclosure, depleted savings, damaged credit, and fewer options than if had they not been misled by Saxons promise of a permanent loan modification or prompt written denial after the trial period. 4, 66-67, 95. Instead of abiding by the terms of the TPP Contracts, Saxon delayed the modification process for months, while pocketing Plaintiffs payments. Saxon first argues that Plaintiffs state no claims because there is no private right of action under HAMP. Def. Mem. at 6-8. Contrary to Defendants attempt to recast the Complaint, this lawsuit does not seek to enforce HAMP. This lawsuit arises from Saxons failure to perform its obligations under a bilateral contract the TPP Contract with Plaintiffs. HAMP merely provides the context for the TPP Contract. Thus, Saxons argument about a lack of a private right of action under HAMP is irrelevant. Indeed, federal courts across the country have allowed
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state law claims arising from TPP Contracts and rejected the same argument Saxon proffers here, because HAMP does not preempt state-law actions. On the contrary, the fact that a TPP Contract has a relationship to a federal statute does not require the dismissal of any state-law claims that arise under a TPP Contract. Saxon also attempts to distort the Complaints allegations by asserting (incorrectly) that Plaintiffs claim is that the Trial Period Plan obligated Saxon to provide Plaintiffs with a permanent loan modification as long as they complied with the initial application requirements. Def. Mem. at 2. That is not what Plaintiffs allege. Plaintiffs have alleged that they entered into an enforceable TPP Contract with Saxon, and that they fully performed their obligations under the TPP Contract. 53-56. However, Saxon breached the TPP Contract and the contracts implied covenant of good faith and fair dealing when it failed: (1) to tender an agreement to permanently modify Plaintiffs mortgage in accordance with HAMP guidelines, or (2) if Plaintiffs documents did not verify the income on which the pre-qualification was based, to issue a timely written notification explaining the reason for denying them a permanent modification, as Saxon had promised. 48-51, 59-60, 64, 67. Thus, Plaintiffs state a breach of contract claim. Saxons attempt to undermine Plaintiffs promissory estoppel claim fares no better. Saxon asserts that the TPP Contract does not contain a clear and unambiguous promise to modify, and that Plaintiffs could not reasonably rely on the promises contained in the TPP Contract. Def. Mem. at 18-19. Saxons argument fails, because Plaintiffs sufficiently plead that they relied to their detriment on Saxons definitive promise to provide them a permanent loan modification at the end of their trial period if they had complied with the terms of the TTP Contract and their financial documents verified their pre-qualification or to provide timely
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written notice stating the reason for a denial. 48-51. Thus, Plaintiffs state a claim for promissory estoppel. Next, Saxon stakes out a contradictory position by asserting that because Plaintiffs UTPCPL claim arises from the TPP Contract, this claim is barred by the economic loss doctrine. Def. Mem. at 19-21. Saxon cannot have it both ways. Either the TPP is not a binding contract, in which case the economic loss doctrine does not apply to Plaintiffs UTPCPL claim, or the TPP is a binding contract pursuant to which Plaintiffs may now pursue legal and equitable remedies based on Saxons breach of its essential terms. In either event, Plaintiffs sufficiently allege that Saxon engaged in deceptive and unlawful conduct in violation of the UTPCPL, including: instructing mortgagors to stop making mortgage payments under the false pretense that doing so will not hurt credit scores; failing to properly and timely evaluate borrowers eligibility for a permanent loan modification in accordance with HAMP guidelines; failing to grant promised permanent HAMP loan modifications following mortgagors successful completion of TPP Contract plans; misrepresenting the status of loan modification applications; requesting the same financial information over and over; erecting artificial obstacles in the evaluation process to obstruct, delay, and/or prevent permanent loan modifications; failing to keep accurate records of mortgagor accounts, including accounting for fees, payments, credits, arrearages, and amounts owed; failing to keep accurate records of HAMP applicants scores on NPV tests; failing to provide account information requested by mortgagors; failing to provide adequate explanations of fees charged to mortgagors; charging excessive, unlawful, and unreasonable fees; arbitrarily increasing mortgagor debt obligations; failing to apply mortgagor payments properly; causing improper interest and other fees to accrue; and unlawfully proceeding with foreclosures despite mortgagors compliance with their TPP Contract obligations.
4, 19-22, 110-112. This unlawful conduct caused Plaintiffs the requisite ascertainable loss, and therefore, Plaintiffs have stated a UTPCPL claim. For these and other reasons, Saxons motion should be denied. 5
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II.
STATEMENT OF FACTS On April 13, 2009, Saxon signed a SPA with the U.S. Department of the Treasury to
participate in HAMP, in which Saxon covenanted to comply with HAMPs requirements and to perform loan modification and other foreclosure prevention services described in the program guidelines. 3 28, 37. Under HAMP, the federal government incentivizes participating servicers such as Saxon to make adjustments to existing mortgage obligations in order to make the monthly payments more affordable. 42. However, economic self-interest motivates Saxon to shirk its obligations under HAMP to facilitate permanent loan modifications. 43-47. As a participating servicer, Saxon must evaluate for HAMP eligibility all borrowers who are 60 or more days in default, in imminent default, or who request a loan modification. 4 31. Next, Saxon must determine the borrowers eligibility for a modification based on either recent verbal financial information obtained from the borrower or the borrowers submission of the required documentation to verify the borrowers eligibility and income 5 Id. After obtaining the borrowers financial information, Saxon is required to calculate whether, by applying certain successive steps known as the waterfall, in the stated order of succession, the borrowers total monthly payment can be reduced to 31% of the borrowers monthly gross income. 6 32. If the
The SPA incorporates all guidelines, procedures, and supplemental documentation, instructions, bulletins, frequently asked questions, letters, directives, or other communications, referred to as Supplemental Directives issued by the Treasury, Fannie Mae or Freddie Mac in connection with the duties of Participating Servicers like Saxon. These documents are incorporated by reference in the Complaint. 30-40. The SPA mandates that a Participating Servicer shall perform the activities described in the program documentation for all mortgage loans it services. Id.
See HAMP Supplemental Directive 09-01 (SD 09-01), at 1-4 (Apr. 6, 2009), which is incorporated by reference in the Complaint (30), and is attached to the Torti Decl. at Ex. 4.
5
Id. at 5.
See id. at 8-10 (these steps include capitalizing accrued interest and escrow advances, reducing the interest rate, extending the term and re-amortizing the loan (if necessary), and providing a principal forbearance (if necessary). Saxon does not have discretion as to how this formula is applied HAMP
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application of the waterfall produces terms that yield the target 31% monthly mortgage payment, Saxon must perform the NPV test. The NPV test analyzes whether the value of a performing modified loan exceeds the value of foreclosing on the property. 33. If the NPV test yields a positive result, Saxon must offer the borrower a TPP Contract a standardized written contract that Saxon entered into with Plaintiffs and thousands of homeowners for a trial modification of their existing loan. 7 Id. HAMP regulations in effect at all times relevant to this action make clear that Saxon was required to prequalify borrowers for eligibility for a permanent HAMP modification before entering into a TPP Contract. 34. Specifically, the borrower documents a financial hardship either by verbal representations to Saxon, which are later verified with documents as required by the TPP Contract, or by submission of appropriate documents at the outset of the application process. 8 Id. The TPP Contract at the heart of this dispute is a form contract between Plaintiffs and Saxon. See Compl. Ex. A. Each TPP Contract promises that if the borrower complies with its terms and the borrowers representations continue to be true in all material respects, then the borrower will receive a permanent modification of his loan on the same terms. This promise is set forth in the very first sentence of the TPP Contract used by Saxon: If I am in compliance with this Trial Period Plan, and my representations in Section 1 [regarding verification of information] continue to be true in all material respects, then the Lender will provide me with a Home Affordable Modification Agreement (Modification Agreement), as set forth in Section 3... Compl. Ex. A at 1. Section 3 of the TPP Contract reiterates this promise:
rules require servicers to take these enumerated steps in the prescribed order until the target monthly mortgage payment equaling 31% of monthly income is reached).
7
See Id. at 4, 14-15. See Id. at 5.
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If I comply with the requirements in Section 2 and my representations in Section 1 continue to be true in all material respects, the Servicer will send me a Modification Agreement for my signature which will modify my Loan Documents as necessary to reflect this new payment amount and waive any unpaid late charges accrued to date. Id. at 3. The TPP Contract requires that the borrower make three monthly loan payments of a reduced amount as set forth in a schedule in the TPP Contract. Id. at 2. The TPP Contract establishes a timeframe for performance by both parties and states that TIME IS OF THE ESSENCE. 49; Compl. Ex. A 2.A. (emphasis in orig.). Section 2 defines the Modification Effective Date as the first day of the month following the month in which the last Trial Period Payment is due, and defines the Trial Period as ending on the earlier of the Modification Effective Date or the termination of the Trial Period. 9 Id.; Compl. Ex. A at 2. Section 2 also sets out the date and amounts of the required trial period payments due from the borrower. Id. The HAMP program documentation mandates a prompt written determination of eligibility. After the borrower returns a signed TPP Contract and makes the first months payment, the servicer should sign and immediately return an executed copy of the Trial Period Plan to the borrower. 10 50. If the servicer determines that the borrower is not eligible for a permanent modification, the servicer should promptly communicate that determination to the borrower in writing Id. Thus, if the homeowner makes all three of the TPP monthly payments on a timely basis and complies with the documentation requirements, then the HAMP
The HAMP program documentation mandates a prompt written determination of eligibility. After the borrower returns a signed TPP Contract and makes the first months payment, the servicer should sign and immediately return an executed copy of the Trial Period Plan to the borrower. SD 09-01, at 15; Torti Decl. Ex. 4. If the servicer determines that the borrower is not eligible for a permanent modification, the servicer should promptly communicate that determination to the borrower in writing Id. See id. at 15.
10
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guidelines require that the homeowner be offered a permanent modification by the Modification Effective Date or a timely written denial. 48-51. After suffering a financial hardship, Plaintiffs Lisa and Scott Cave applied to Saxon for a HAMP mortgage modification in August 2009. In support of their application, in September 2009, Plaintiffs sent Saxon a package containing all requested financial information and documents, including their Hardship Affidavit. 11 52. After receiving Plaintiffs financial 53. Plaintiffs
documents and Hardship Affidavit, Saxon sent Plaintiffs a TPP Contract.
promptly executed and returned the TPP Contract Saxon offered to them. 56. They made all the payments called for under the TPP Contract, doing so on time, and, at Saxons direction, continued making modified payments long after the trial period ended. 57, 61-62, 64, 67. Based on the language of the TPP Contract and Plaintiffs performance of all of their obligations under the Contract, Saxon was required to tender Plaintiffs a permanent Home Affordable Modification Agreement, as it expressly promised in the TPP Contract. 59-60. The parties agreed that the payment terms for the permanent modification would be determined according to Section 3 of the TPP Contract. Compl. Ex. A. Saxon not only failed to tender permanent HAMP modifications to Plaintiffs by the close of the trial period, it also neglected to send Plaintiffs any written decision within that timeframe, as it was required to do. 64,
Saxon attempts to dispute Plaintiffs factual allegations as to when Plaintiffs first submitted financial documents in support of their HAMP application. Saxon does so by attaching as exhibits to its motion a copy of the TPP Contract and a copy of a Hardship Affidavit signed by Plaintiffs in November 2009. See Def. Mem. at 10 n. 13. Raising this question of fact is improper on a Rule 12(b)(6) motion. Moreover, Saxons exhibits in no way undermine Plaintiffs allegations. The fact that Plaintiffs signed the TPP Contract on November 30, 2009 (see Torti Decl. Ex. 7), is entirely consistent with Plaintiffs allegation that they submitted their financial records before Saxon provided them a TPP Contract. Likewise, the Hardship Affidavit, which appears to have been originally dated September 1, 2009 (and crossed out), then updated on November 30, 2009 (see Torti Decl. Ex. 9), does not prove that Plaintiffs did not submit another Hardship Affidavit on the earlier date, as alleged. Indeed, it is entirely consistent with Plaintiffs allegations that Saxon requested that they re-submit additional copies of previously supplied documents. 57.
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67. Although Saxon claimed that it removed Plaintiffs from HAMP on April 29, 2010 more than five months after the Modification Effective Date as late as July 2010, a Saxon representative advised Plaintiffs that they should continue making modified payments of $1,007.50 per month. 62. Saxons representative admitted to Plaintiffs that it failed to provide written notification of its decision or any basis for its denial. 67. Instead, Saxon harassed Plaintiffs with continuing redundant, ambiguous and threatening demands for documents, and notices of intent to foreclose. 63-65. Not only did Saxon fail to provide Plaintiffs with a loan modification, Saxon frustrated their attempts to obtain relief under Pennsylvanias HEMAP program, which provides funds to discharge past due amounts owed on mortgages. 65-66. Although Plaintiffs qualified for relief under HEMAP, Saxon failed to supply to the Commonwealth of Pennsylvania required information concerning Plaintiffs loan that was readily available to Saxon. Id. As a result of Saxons failure to supply this information, Plaintiffs failed to obtain a HEMAP loan. Id. In order to avoid foreclosure, Plaintiffs accepted an in-house modification offered by Ocwen Loan Servicing, Inc. (Ocwen), which replaced Saxon as Plaintiffs loan servicer on May 16, 2011. 68-71. The terms of the Ocwen modification are substantially inferior to those under HAMP. Specifically, the Ocwen modification calls for a balloon payment at the end of the term of the loan, but does not disclose the amount of this balloon payment or even the method by which this payment will be calculated. 70. III. ARGUMENT A. Standard of Review
A motion to dismiss is defeated where the complaint alleges enough factual matter (taken as true) to suggest that a violation occurred, and a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable. Bell Atl. Corp. v. 10
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Twombly, 550 U.S. 544, 556 (2007) (citation omitted). Under the liberal pleading standard of Fed. R. Civ. P. 8(a), only a short plain statement of the claim showing that the pleader is entitled to relief is required, the purpose of which is to place the opposition on notice of the conduct charged. A courts task in resolving a Rule 12(b)(6) motion is to test the sufficiency of a complaint, not to resolve disputed facts or decide the merits of the case. 12 See Kost v.
Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993); see also Register v. PNC Fin. Servs. Group, Inc., 477 F.3d 56, 61 (3d Cir. 2007) (on a motion to dismiss, [t]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims). Twombly instructs courts to apply a plausibility standard of review under Fed. R. Civ. P. 12(b)(6). 550 U.S. at 553. B. Plaintiffs Claims Are Based Upon Bilateral TPP Contracts with Saxon Not Claims Under HAMP
Defendant argues that because HAMP does not provide a private right of action, Plaintiffs may not bring any common law or statutory claims against Saxon, including their breach of contract, promissory estoppel, UTPCPL, FCEUA and FDCPA claims. Def. Mem. at 6. Saxon is wrong. 13
12
The Court must accept as true all well-pleaded allegations in the complaint and view them in the light most favorable to the plaintiff. Phillips v. County of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008). Saxons cases are not on point. In Cleveland v. Aurora Loan Servs., LLC, 2011 WL 2020565, at *4 (N.D. Cal. May 24, 2011), the court dismissed claims which it believed were based on HAMP having a private right of action, and remanded the case to state court. None of the dismissed claims, which were mostly based on the theory that the plaintiffs were third-party beneficiaries of the SPA between the servicer and the Department of the Treasury, was equivalent to the claims in this case. The case contains no analysis but simply cites other opinions. Likewise, in Simon v. Bank of America, 2010 WL 2609436, at *10 (D. Nev. June 23, 2010), plaintiff sued pro se, using a form complaint, and none of the allegation bore any relationship to this case. In McCurdy v. Wells Fargo Bank, 201 WL 4102943, at *2 (D. Nev. Oct. 18, 2010), plaintiffs advanced the same third-party beneficiary claim, which is not relevant to this case.
13
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First, Saxon raises a red herring by asserting that Plaintiffs lack standing to enforce the terms of the SPA because Plaintiffs are neither parties nor intended third-party beneficiaries of that agreement. Def. Mem. at 6. This argument is superfluous. Plaintiffs have not sued Saxon on the theory that they are intended third-party beneficiaries of the SPA between Saxon and the Treasury Department. Plaintiffs state law claims are based on bilateral TPP Contracts between Saxon and Plaintiffs. Thus, all of the cases Saxon cites on this point are inapposite. 14 Second, Plaintiffs have not brought an action under HAMP. Plaintiffs claims are for breach of contract, promissory estoppel, and violations of the UTPCPL, FCEUA, and FDCPA. Thus, Saxons assertion that the lack of a private cause of action under HAMP bars this suit is wrong. Saxon insists upon advancing this argument here even though it was told by the Stagikas court, That argument is without merit. Stagikas, 2011 WL 2652445, at *4. The Stagikas court observed that, as here, Saxon did not contend that HAMP or the HAMP guidelines preempt state-law contract actions. Id. As such, the Stagikas court ruled that there is no precedent for the proposition that, as a general matter, a contracts relationship to federal law requires the dismissal of any state-law claims that arise under it. Id. Numerous courts across the country have reached the same conclusion. 15
14
The cases Saxon cites in support of its irrelevant SPA argument are: Costigan v. CitiMortgage, Inc., 2011 WL 3370397, at *6 (S.D.N.Y. Aug. 2, 2011); Thomas v. JPMorgan Chase & Co., 2011 WL 3273477, at *9 (S.D.N.Y. July 29, 2011); Rivera v. Bank of Am. Home Loans, 2011 WL 1533474 (E.D.N.Y Apr. 21, 2011); Grill v. BAC Home Loans Servicing, 2011 WL 127891, at *7 (E.D. Cal. Jan. 14, 2011); Wigod v. Wells Fargo Bank, 2011 WL 250501, at *5-*6 (N.D. Ill. Jan. 25, 2011); Cade v. BAC Home Loans Servicing, LP, 2011 WL 2470733, at *2 (S.D. Tex. June 20, 2011).
Accord Kennedy v. Wells Fargo Bank, N.A., 2011 WL 4526085, at *2 (C.D. Cal. Sept. 28, 2011) (Defendants lead argument is that Plaintiffs claims are unenforceable claims under the HAMP program or are preempted under conflict preemption. Neither argument is valid.); Wright v. Chase Home Finance, LLC, 2011 WL 4101513, at *2 (D. Ariz. Sept. 14, 2011) (lack of private right of action under HAMP did not preclude mortgagor from asserting state law claims); Darcy v. CitiFinancial, Inc., 2011 WL 3758805, at *4 (W.D. Mich. Aug. 25, 2011) (HAMP does not preempt or otherwise generally preclude a claim for breach of TPP Contract); Allen v. CitiMortgage, Inc., 2011 WL 3425665, at *5 (D. Md. Aug. 4, 2011) (HAMP does not preclude borrowers from asserting state law claims involving TPP Contracts); Fletcher
15
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As the court in Bosque put it: the fact that a TPP has a relationship to a federal statute and regulations does not require the dismissal of any state-law claims that arise under a TPP. Bosque v. Wells Fargo Bank, N.A., 2011 WL 304725, at *5 (D. Mass. Jan. 26, 2011). Were the law otherwise, a court would not be able to enforce any contract touching on issues of federal law if that federal law was devoid of a private right of action. That is not the case. 16 For instance, the Seventh Circuit has recognized that a state contract claim that incidentally touches on issues that are subject to federal regulation is generally not preempted. See In re Ocwen Loan Servicing, LLC Mortg. Servicing Litig., 491 F.3d 638, 643-44 (7th Cir. 2007). In Ocwen, the Seventh Circuit addressed the question of whether the Home Owners Loan Act (HOLA), 12 U.S.C. 1461 et seq., and Office of Thrift Supervision (OTS) regulations promulgated thereunder, preempted state contract law claims. The court noted that HOLAs preemptive force gave OTS the exclusive authority to regulate the savings and loan industry in the sense of ... prescribing certain terms in mortgages, among other things, but that the OTS has no power to adjudicate disputes between the S&Ls and their customers, and HOLA creates no private right
v. OneWest Bank, FSB, -- F. Supp. 2d --, 2011 WL 2648606, at *4 (N.D. Ill. June 30, 2011) (fact that HAMP did not provide a private right of action did not preclude mortgagor from bringing state law claims); Blackwood v. Wells Fargo Bank, N.A., 2011 WL 1561024, at *8 (D. Mass. Apr. 22, 2011) (regardless whether there is a private right of action under HAMP, it is not inconsistent with the HAMP program to allow a [state law] claim to proceed the HAMP statutory scheme does not preclude a [state law] action); Boyd v. U.S. Bank, N.A., 2011 WL 1374986, at *3 (N.D. Ill. Apr. 12, 2011) (holding that a plaintiff may predicate state claims on violations of HAMP, which does not allow for private enforcement); Turbeville v. JPMorgan Chase Bank, 2011 U.S. Dist. LEXIS 42290, at *7 (C.D. Cal. Apr. 4, 2011) (rejecting defendants argument that HAMPs lack of private right of action bars suit to enforce TPP Contract); Ording v. BAC Home Loans Servicing, LP, 2011 WL 99016, at *7 (D. Mass. Jan. 10, 2011) (the lack of a private cause of action under HAMP ... does not automatically dispose of the [consumer protection act] claim); Bosque, 2011 WL 304725, at *5 (Whether HAMP creates a private right of action or a cognizable property interest is not the issue in this case. Their claims arise under defendants alleged failure to comply with its contractual obligations in the TPPs.). See, e.g., College Loan Corp. v. SLM Corp., 396 F.3d 588, 598 (4th Cir. 2005) (relying on the Higher Education Act standards to establish breach of contract claim was not an impermissible effort to assert a private right of action under the act); Chalfin v. Beverly Enters., Inc., 741 F. Supp. 1162, 1178 (E.D. Pa. 1989) (allowing claim for breach of nursing home residents contract made in context of federal and state healthcare laws that did not contain a private right of action).
16
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to sue to enforce the provisions of the statute or the OTSs regulations. Id. at 643. Against this background of limited remedial authority, the court held that HOLA did not preempt basic state common-law type remedies for people harmed by the actions of S&Ls, because, among other things, [i]t would be surprising for a federal regulation to forbid the homeowners state to give the homeowner a defense based on the mortgagees breach of contract. Id. at 643-44. The court noted that while that type of preemptive force was possible, it was rare, and limited to exceptional statutes such as the Employee Retirement Income Security Act, 29 U.S.C. 1132. Id. at 644. Saxons reliance on Astra USA, Inc. v. Santa Clara Cnty., 131 S.Ct. 1342, 1347-1348 (Mar. 29, 2011), is misplaced. The court in In re Bank of Am. HAMP Contract Litig., 2011 WL 2637222, at *3 (D. Mass. July 6, 2011), rejected this precise argument, because in Astra, the contracts at issue were created pursuant to a statutorily-created federal program, and the contracts incorporated the statutory language. By contrast, in the case of the TPP Contract, no such incorporation occurred, as the HAMP statute contained no direction as to how the program was to be implemented. Bank of Am., 2011 WL 2637222, at *3. Instead, [t]he TPPs, not the statute, supplied the contractual provision allegedly breached Id. The remaining cases relied upon by Saxon in support of its no private right of action under HAMP argument are cases where Saxon itself was not a party, are not binding on this Court, and either involved different factual allegations or legal claims. 17 For example, in some of these cases the plaintiffs claimed that the TPP Contract entitled them to an automatic permanent HAMP modification. See, e.g., Bourdelais, 2011 WL 1306311, at *4. Such is not the
See Bourdelais v. J.P. Morgan Chase, 2011 WL 1306311, at *4 (E.D.Va. Apr. 1, 2011); Wigod v. Wells Fargo Bank, N.A., 2011 WL 250501, at *4-*5 (N.D. Ill. Jan. 25, 2011); Singh v. Wells Fargo Bank, 2011 WL 66167, at *7 (E.D. Cal. Jan. 7, 2011); Vida v. OneWest Bank, 2010 WL 5148473, at *4-*5 (D. Or. Dec. 13, 2010).
17
14
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claim here. As in Bank of Am. and Bosque, Plaintiffs claim is that they are entitled to the tender of a permanent modification only if they complied with the terms of the TPP Contract, which they did, and that they are entitled to a decision by [Saxon] as to whether they will receive a permanent modification by the modification effective date specified in section 2 of the TPP, which Saxon failed to provide. Bosque, 2011 WL 304725, at *4; see also 67. Other cases cited by Saxon are factually distinguishable because the plaintiff received a timely denial of a permanent HAMP modification, see Wigod, 2011 WL 250501, at *8; Vida, 2010 WL 5148473, at *4, which is not the case here. Indeed, the court in Vida noted that it did not agree with Defendants premise that they are wholly immunized for their conduct so long as the subject transaction is associated with HAMP. Id. at *5. Still other cases cited by Saxon are easily differentiated. 18 unsupported. C. Plaintiffs State a Claim for Breach of the TPP Contract Thus, Defendants no private right of action under HAMP argument is
Plaintiffs state a breach of contract claim by pleading: (1) the existence of a contract, including its essential terms (see 1, 48-50, 52-59, 89-91, 94); (2) a breach of a duty imposed by the contract (see 1, 4, 51, 60, 62-67, 92-93); and (3) resultant damages (see 4, 65-66, 70-71, 95-96). See Corestates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa. Super. Ct. 1999) (stating the elements of a breach of contract claim). Saxon cannot dispute that Plaintiffs adequately plead each element. Instead, Saxon rehashes the same flawed arguments that it made in Gaudin,
Brown v. Bank N.Y. Mellon, 2011 WL 206124, at *6 (W.D. Mich. Jan. 21, 2011), upheld misrepresentation and intentional infliction of emotional distress claims, but dismissed a breach of contract claim because there was no cause of action under HAMP for denial of a loan modification, which is not the same as Plaintiffs claim here. Marks v. Bank of Am., 2010 WL 2572988, at *6 (D. Ariz. June 22, 2010), dismissed a claim of third-party beneficiary status under an SPA a claim not made in this case. Stolba v. Wells Fargo & Co., 2011 WL 3444078 (D.N.J. Aug. 8, 2011), dismissed a breach of contract claim because the TPP Contract does not guarantee a permanent modification, which is not what Plaintiffs allege here. Cox v. Mortg. Elec. Registration Sys., Inc., 2011 WL 2600700 (D. Minn. June 30, 2011), is inapposite because there was no claim for breach of a TPP Contract.
18
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and Saxon ignores the numerous cases that have concluded that the TPP Contracts are enforceable contracts. 19 1. The TPP Contract is an Unambiguous Offer and Not Merely a Part of the Application Process
Saxon first asserts that Plaintiffs have not stated a breach of contract claim because the TPP Contract does not make an unconditional offer to modify their mortgage permanently. Def. Mem. at 8. Saxon made the identical argument in Gaudin, and it was rejected because Saxon signed the TPP Contract and returned it the borrower, as it did here. See 54-55. The second paragraph of the TPP Contract provides: I understand that after I sign and return two copies of this Plan to the Lender, the Lender will send me a signed copy of this Plan, if I qualify for the Offer or will send me written notice that I do not qualify for the Offer. This plan will not take effect unless and until both I and the Lender sign it and Lender provides me with a copy of this Plan with the Lender's signature. Compl. Ex. A (emphasis added). Here, the TPP Contract was signed both by Plaintiffs and by Saxon, thus demonstrating that Saxon found the Caves qualified for a permanent modification. See Gaudin, 2011 WL 5825144, at *2 ([T]he TPP indicates that while it may initially be presented to the borrower only as an offer to determine eligibility, once the lender returns a signed copy of it to the borrower (rather than notifying the borrower that he or she does not qualify for the Offer), then the borrowers eligibility for permanent modification has been determined). Saxons argument also ignores Plaintiffs allegations that Saxon promised that if Plaintiffs fully performed their obligations under the TPP, then Saxon would either permanently
19
See, e.g., Bolone v. Wells Fargo Home Mortg., Inc., 2011 WL 3706600, at *5 (E.D. Mich. Aug. 24, 2011) (holding that TPP is a valid contract); Turbeville, 2011 U.S. Dist. LEXIS 42290, at *11 (TPP Contract constitutes a valid contract); Bosque, 2011 WL 304725, at *5 (TPP Contracts were offers by mortgage lenders to contract, and homeowners signatures and monthly payments constituted acceptance of those offers); Durmic v. JP Morgan Chase Bank, N.A., 2010 WL 4825632, at *4 (D. Mass. Nov. 24, 2010) (holding that the TPP Contracts are binding contracts).
16
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modify their loan or give them a prompt written determination explaining why they did not qualify for a permanent modification. 20 See 2, 48-50, 73. Indeed, the proposed class is defined to include Pennsylvania homeowners who entered into TPP Contracts with Defendants and have not received a permanent Home Affordable Modification and did not receive a timely written notification to borrower explaining the reason for denying the permanent modification. 2, 73 (emphasis added). Saxon does not dispute that it promised to provide Plaintiffs a timely determination but failed to do so. See Fletcher, 2011 WL 2648606, at *5 (rejecting an identical challenge to a breach of a TPP Contract claim where the defendant, like Saxon, failed to acknowledge the plaintiffs claim that TPP obligated the lender, in a timely manner, to consider and determine eligibility for permanent HAMP modification). Likewise, the cases Saxon cites in support of its guaranteed modification argument are inapposite, because the plaintiffs in those cases did not allege that the TTP obligated the lender to provide a timely written decision of HAMP eligibility. 21 Instead of dealing with Plaintiffs actual allegations, Saxon attempts to misdirect the Court by characterizing the TPP Contract as part of the HAMP application process and resorts to relying on extraneous documents, such as the TPP cover letter and the Hardship Affidavit, to
20
Saxon breached the TPP Contract by stringing the Caves along in a trial modification for approximately eight months before a Saxon representative advised them over the phone that they were denied a permanent modification. See 64, 67.
The cases cited by Saxon are: Grill, 2011 WL 127891, at *4; Costigan, 2011 WL 3370397, at *6; Lonberg v. Freddie Mac, 776 F. Supp. 2d 1202, 1209 (D. Or. 2011); Thomas, 2011 WL 3273477, at *8-9; Morales v. Chase Home Fin., LLC, 2011 WL 1670045, at *5 (N.D. Cal. Apr. 11, 2011); Sherman v. Litton Loan Servicing, L.P., 2011 WL 2634097, at *8 (E.D. Va. July 5, 2011); Brown, 2011 WL 206124, at *3; Vida, 2010 WL 5148473, at *6; In re Salvador, 2011 WL 1833188, at *8 (Bankr. M.D. Ga. May 12, 2011); Bourdelais, 2011 WL 1306311, at **4-5; Prasad v. BAC Home Loans Servicing, 2010 WL 5090331, at *4 (E.D. Cal. Dec. 7, 2010); Shurtliff v. Wells Fargo Bank, 2010 WL 4609307, at *3 (D. Utah Nov. 5, 2010).
21
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contradict the express terms of the TPP. Def. Mem. at 8-9. Saxon used the same tactic in Gaudin, and it was rejected because the TPP by its terms represents an integrated agreement, and Saxon has not shown that it can be modified by, or must be construed in light of, anything in the cover letter. Gaudin, 2011 WL 5825144, at *3 (emphasis added). Regardless of where the TPP Contract fell in the overall HAMP process, its language contains an unambiguous offer and the Complaint adequately alleges Plaintiffs acceptance by signing the TPP Contract and by performance. See 53-58. The very first sentence of the TPP Contract used by Saxon states: If I am in compliance with this Trial Period Plan (the Plan) and my representations in Section 1 continue to be true in all material respects, then the Servicer will provide me with a Home Affordable Modification Agreement (Modification Agreement), as set forth in Section 3, that would amend and supplement (1) the Mortgage on the Property, and (2) the Note secured by the Mortgage. Compl. Ex. A (emphasis added). Section 3 of the TPP Contract repeats this promise: If I comply with the requirements in Section 2 and my representations in Section 1 continue to be true in all material respects, the Servicer will send me a Modification Agreement for my signature which will modify my Loan Documents as necessary to reflect this new payment amount and waive any unpaid late charges accrued to date. Compl. Ex. A (emphasis added). 22 Saxon ignores the above-quoted provisions of the TPP Contract, and instead claims that 2.F. and G. provide it unfettered discretion as to whether to offer a permanent modification.
22
Cases cited by Saxon that have dismissed a breach of contract claim under a TPP Contract generally have not discussed the language of 3 of the TPP, quoted above, or addressed whether conflicting language in the TPP created ambiguity. See, e.g., Brown v. Bank of N.Y. Mellon, 2011 WL 206124, at *3 (W.D. Mich. Jan. 21, 2011) (citing only 2.F. and 2.G. of the TPP, which provide that loan documents will not be modified if lender does not send the borrower a Modification Agreement); Thomas v. JPMorgan Chase & Co., 2011 WL 3273477, at *8 (S.D.N.Y. July 29, 2011) (citing language similar to 3 in the TPP preamble and acknowledging that it is misleading, but failing to cite 3. However, on the basis of language in 2, without any further discussion of conflicting terms, holding that the TPP is not a binding contract for mortgage modification).
18
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The Gaudin court explicitly rejected Saxons interpretation of 2.F. of the TPP Contract, which provides that the Loan Documents will not be modified and the Plan will terminate if, among other things, the lender does not provide a fully executed copy of this Plan and the Modification Agreement. Gaudin stated that Saxons reading of 2.F. conflicts with the clear tenor of the remainder of the [TPP] document and would render the other agreement promises illusory. Gaudin, 2011 WL 5825144, at *4. The court concluded that while 2.F. may give rise to ambiguity, it does not provide the lender unbridled discretion as to whether or not it will provide an executed copy of a modification agreement upon satisfaction of all other conditions of the TPP. Id. Likewise, the court in Turbeville rejected Saxons suggested interpretation of 2.G. of the TPP Contract. 23 Turbeville concluded that 2.G. does not give lenders discretion to reject homeowners who completed the trial successfully. 2011 U.S. Dist. LEXIS 42290, at *11. On the contrary, 2.G. merely provides servicers discretion to deny a permanent modification if the homeowner does not comply with the TPP Contract. Id. Turbeville held that such discretion to assess the borrowers compliance with the TPP has no bearing on whether it constitutes a valid contract. Id. At most, Saxon offers an alternative interpretation of the TPP Contract, which does not entitle Defendant to a dismissal. Id.; see also Darcy, 2011 WL 3758805, at *6 (denying motion to dismiss a claim for breach of a TPP Contract where [t]he parties attempts to support their positions with references to portions of the agreement highlight the fact that some of the terms conflict with others.).
23
The TPP Contract at 2.G., inter alia, provides: I understand that the Plan is not a modification of the Loan Documents and that the Loan Documents will not be modified unless and until (i) I meet all of the conditions required for modification, (ii) I receive a fully executed copy of a Modification Agreement . . . I further understand and agree that the Lender will not be obligated or bound to make any modification of the Loan Documents if the Lender determines that I do not qualify or if I fail to meet any one of the requirements under this Plan.
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Saxon also argues that under the HAMP program guidelines in effect prior to June 2010, some borrowers were given TPP Contracts on the basis of verbal representations before they were determined to be eligible for permanent loan modifications, and that the Department of Treasury thereafter issued a Supplemental Directive to end that practice. Saxon contends that this change in HAMP rules contradicts the notion that borrowers who were offered TPPs before June 2010 were guaranteed [a] permanent modification simply by making the reduced trial payments. Def. Mem. at 10. Saxon made this exact argument in Gaudin, and the court rejected it because this change in policy appears to reflect a recognition that the language of the TPPs reflect a promise to provide modifications if borrowers complied with the TPP Contracts terms. Gaudin, 2011 WL 5825144, at *3. Finally, Saxon asserts that Plaintiffs do not allege that they qualified for a permanent modification under HAMP. 24 See Def. Mem. at 11. Obviously, the determination as to whether Plaintiffs qualify under HAMP is a factual question that is not a proper basis for a Rule 12(b)(6) motion. Furthermore, this argument ignores the fact that the TPP Contract specifies that TIME IS OF THE ESSENCE (Compl. Ex. A), and that if Plaintiffs indeed did not qualify, Saxon was obligated to issue a timely written denial by the end of the three-month trial period, but failed to do so in breach of the TPP Contract. 25 Otherwise, Saxon would be entitled to an indefinite and open-ended period of time in which to decide whether to tender a permanent HAMP
24
Saxons reliance on Phipps v. Wells Fargo Bank, 2011 WL 302803, at *11 (E.D. Cal. Jan. 27, 2011), is unavailing because plaintiff did not make TPP Contract-based claims, but rather asserted that he was a third-party beneficiary of the SPA (a claim not made here). Ishler v. Chase Home Fin. LLC, 2011 WL 744538, at *6 (M.D. Pa. Feb. 23, 2011), is likewise inapposite because plaintiff did not allege a breach of the TPP Contract, let alone a failure to provide a timely written determination of eligibility for a permanent modification. See HAMP FAQs Q2314 at 28 (Servicers are reminded, pursuant to Supplemental Directive 09-07, to complete their assessment of borrower eligibility and notify the borrower of the eligibility determination within 30 calendar days of receiving all required borrower documentation.). The HAMP FAQs can be found at: https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/hampfaqs.pdf.
25
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modification a result that is clearly at odds with the TPP Contracts provisions stating that TIME IS OF THE ESSENCE and imposing a finite three-month trial period. 49-51; Compl. Ex. A. 2. The TPP Contracts Terms Are Sufficiently Definite, and They Follow an Established Modification Formula
Saxon asserts that the TPP Contract lacks essential terms of a modification, and thus is not an enforceable contract. Def. Mem. at 11. Saxon is wrong. The TPP Contract expressly promises to modify Plaintiffs loan permanently or provide a timely written denial, if Plaintiffs fulfill the TPP Contracts conditions, leaving nothing for the parties to negotiate. 26 There is no essential term that is indefinite, vague, or unclear in the contract. 27 See Kennedy, 2011 WL 4526085, at *2 (The terms of the [TTP] contract are not indefinite or uncertain; the TPP spells out explicitly the obligations of each party.); Bosque, 2011 WL 304725, at *6 (the TPP contains all essential and material terms necessary to govern the trial period repayments and the parties related obligations.); Durmic, 2010 WL 4825632, at *4 (finding any purported ambiguity of the TPP Contract to be an issue as to the intent of the parties, which cannot be resolved on a Rule 12(b)(6) motion).
As in Bosque, Plaintiffs [here] do not argue, however, that the TPP is a contract for a permanent loan modification. Instead, plaintiffs theory is that the TPP is a contract governing the three-month trial period, and that compliance with its obligations entitles plaintiffs to either (1) a new contract with a permanent loan modification or (2) a decision on whether plaintiffs are entitled to the permanent modification by the modification effective date stated in the TPP. Bosque, 762 F. Supp. 2d at 352.
27
26
Defendants footnote 16 cites In re Salvador, 2011 WL 1833188 (Bankr. M.D. Ga. May 12, 2011), Prasad v. BAC Home Loans Servicing, 2010 WL 5090331 (E.D. Cal. Dec. 7, 2010), Morales v. Chase Home Fin., LLC, 2011 WL 1670045 (N.D. Cal. Apr. 11, 2011), Lonberg v. Freddie Mac, 776 F. Supp. 2d 1202 (D. Or. 2011), Torres v. Litton Loan Servicing, L.P., 2011 WL 149833 (E.D. Cal. Jan. 18, 2011), Grill v. BAC Home Loans Servicing, LP, 2011 WL 127891 (E.D. Cal. Jan. 14, 2011), and Vida v. One West Bank, F.S.B., 2010 WL 5148473 (D. Or. Dec. 13, 2010) for the proposition that the TPP is not a contract between plaintiff and mortgage servicer to modify a mortgage. These cases are not on point. Plaintiffs do not allege such a contract. Plaintiffs allege instead that pursuant to the TPP, Saxon is obligated, after the three months of trial payments, to modify the mortgage or to give a written denial.
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The TPP Contract, at a minimum, is a binding agreement that provides definite terms for each partys conduct during the trial period. See Belyea v. Litton Loan Servicing, LLP, 2011 WL 2884964, at *8 (D. Mass. July 15, 2011) (TPP Agreement is a contract governing each partys conduct in the three-month trial period, under which the Plaintiffs are obliged to provide specific financial information and make payments in a specific amount and Litton is specifically obligated to provide a decision by the modification effective date). Contrary to Saxons contention that the TPP Contract must include the terms of a permanent modification (Def. Mem. at 11), there is no requirement that every term and condition of an agreement be set forth in a contract. [I]t is well settled that the terms of a contract need not be expressed with complete exactness. In re Pennsylvania Footwear Corp., 204 B.R. 165, 175 (Bankr. E.D. Pa. 1997) (citing Kirk v. Brentwood Manor Homes, Inc., 159 A.2d 48, 51 (Pa. Super. Ct. 1960)). Where parties manifest an intent to be bound by the terms of an agreement and consideration is adequate, the terms of that agreement are important only to the extent that the court may fashion a remedy for its breach and provide an appropriate remedy. See Northern Group, Inc. v. Delancey Investment Group. Inc., 1993 WL 488598, at *1 (E.D. Pa. Nov. 24, 1993) (denying motion to dismiss). Moreover, Pennsylvania law does not favor, but leans against the destruction of contracts because of uncertainty. Therefore, the courts will, if possible, so construe the contract as to carry into effect the reasonable intention of the parties if that can be ascertained. Pennsylvania Footwear, 204 B.R. at 175 (quoting Rossmassler v. Spielberger, 112 A. 876, 880 (Pa. 1921)). A court may infer unexpressed provisions of a contract from the writing or from external facts. The REST. 2D CONTRACTS 204 provides, [w]hen the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term which is
22
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essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court. 28 Here, the TPP Contract promises to provide a permanent loan modification under a predetermined HAMP formula. Specifically, Saxon is required to use a Standard Modification Waterfall for setting loan terms, which clearly dictates the terms of the permanent loan modification. See 32-34 (citing HAMP rules applicable at all times relevant to this action). That waterfall a combination decision tree and underwriting process sets the new loan balance, interest rate, maturity date, amount of any principal forbearance, and other loan terms. 29 Id. Thus, HAMP rules provide a detailed method for determining the terms of a Home
Affordable Modification Agreement. This determination is a matter of arithmetic under the HAMP formula, not renegotiation, and is consistent with an intent to be bound. In fact, Saxon is required to arrive at those terms even before it offers Plaintiffs a TPP Contract. See SD 09-01, at 19, 20, 29, 33-35; Torti Decl. Ex. 4. Thus, the TPP Contract sufficiently sets forth its essential terms. 30
28
Pennsylvania Courts routinely follow REST. 2D CONTRACTS 204. See, e.g., Edwards v. Wyatt, 330 Fed. Appx. 342, 349, 2009 WL 1395472, at *6 (3d Cir. May 20, 2009) (relying on REST. 2D CONTRACTS 204 in supplying missing terms to handshake agreement); Crawfords Auto Center, Inc. v. Penna. State Police, 655 A.2d 1064, 1069 (Pa. Commw. Ct. 1995) (we are guided by section 204 of the Restatement (Second) of Contracts).
Defendant cites cases in footnote 17 where the alleged contract is contingent upon events coming to pass. See Power Contracting, Inc. v. Stirling Energy Sys. Inc., 2010 WL 4854072, at *4-5 (W.D. Pa. Nov. 22, 2010); Quinn v. Traditions of Am., L.P., 2010 WL 3239325, at *3 (E.D. Pa. Aug. 16, 2010). Here the contract is to modify the mortgage or to notify plaintiff in writing after three months of correct, on-time payments. There are no contingencies. Defendants footnote 18 cites cases concerning the Pennsylvania standard for an enforceable contract. The TPP contract meets this standard. See Quinn, 2010 WL 3239325, at *3; Barbera v. TD Bank, 2010 WL 1980319, at *2 (E.D. Pa. May 19, 2010); Salvador, 2010 WL 1833188, at **6-7; Locke v. Wells Fargo Home Mort., 2010 WL 4941456, at *4 (S.D. Fla. Nov. 30, 2010).
30
29
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3.
Plaintiffs Have Adequately Alleged Consideration
Saxon claims that the TPP Contract lacks adequate consideration. See Def. Mem. at 1214. Saxon is wrong. Plaintiffs sufficiently allege that the TPP Contract is supported by
consideration, both in the form of a benefit to the promisor and in the form of a detriment to the promisee. 31 A fundamental axiom of contract law is that any bargained-for exercise, such as forbearance of a legal right, is valid consideration. U.S. Steel Corp. v. U.C.B.R., 858 A.2d 91, 105 (Pa. 2004) (citing REST. 2D CONTRACTS 71); see also Cardamone v. U. of Pittsburgh, 384 A.2d 1228, 1232 (Pa. Super. Ct. 1978) (Valid consideration confers a benefit upon the promisor or causes a detriment to the promisee and must be an act, forbearance or return promise bargained for and given in exchange for the original promise.). The main thrust of Saxons consideration argument is that Plaintiffs modified trial period payments cannot represent consideration because they do not represent anything other than a preexisting obligation to pay. 32 See Def. Mem. at 13. Saxon made the same pre-existing duty argument in Gaudin, and it was rejected. On the contrary, the Gaudin court concluded that by promising to comply with the terms of the TPP, Gaudin exposed herself to greater liability for interest and late charges should permanent modification not be consummated. Gaudin, 2011 WL 5825144, at *4 (holding that the TPP was supported by consideration).
Saxon insinuates that it must receive windfall revenues for consideration in the TPP Contract to suffice. Def. Mem. at 13. However, that is not the measure of valid consideration the slightest benefit or detriment is adequate. See Adelvision L.P. v. Groff, 859 F. Supp. 797, 804 (E.D. Pa. 1994) (Detriment to the promisee is sufficient in the legal sense if at the request of the promisor and upon the strength of that promise, the promisee performs any act which causes the promisee the slightest trouble or inconvenience, and which the promisee is not otherwise obliged to perform.). Saxon fails to apprehend the extremely narrow scope of the pre-existing duty exception, which is inapplicable to this case. See 3 WILLISTON ON CONTRACTS 7.28 (Thomson Reuters/West 4th ed. 2009) (When a debtor and a creditor agree that an interest bearing debt shall be extended for a fixed time, the promise of each is consideration for the promise of the other.).
32
31
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The Northern District of Illinois reached the same conclusion as Gaudin, that a borrower making reduced TPP payments suffers a detriment that constitutes consideration, because the borrower is not relieved of her ultimate obligation to pay back the debt she did not pay as a result of those reductions, nor was she relieved of the consequences of failing to pay her full monthly payments during those months. Fletcher, 2011 WL 2648606, at *5. As a result, the Fletcher court found that the plaintiff incurred fees and probably increased the total amount that she would end up paying over the life of the loan. Thus, it is unfair to categorize Fletchers promise to pay reduced monthly payments solely as a pre-existing duty. Id. 33 Saxon does not dispute that, in addition to making trial period payments, the TPP Contract required Plaintiffs to: (1) provide extensive financial information that was not required under their original mortgages; 34 (2) make representations in a hardship affidavit concerning their personal circumstances; 35 (3) make payments into newly established escrow accounts; 36 and
33
The cases Saxon cites are easily distinguished and far less compelling than Gaudin and Fletcher, which squarely address the TPP Contract at issue here: (i) Vida v. OneWest Bank, F.S.B., 2010 WL 5148473, at *3-*5 (D. Or. Dec. 13, 2010), rests primarily on the flawed premise that because HAMP does not provide a private right of action, a plaintiff may not bring a breach of contract action; (ii) Barinaga v. JPMorgan Chase & Co., 749 F. Supp. 2d 1164, 1169 (D. Or. 2010), and Brown v. Phila. Housing Auth., 159 F. Supp. 2d 23, 27 (E.D. Pa. 2001), do not involve HAMP TPP Contracts; (iii) Cade v. BAC Home Loans Servicing, LP, 2011 WL 2470733, at *2 (S.D. Tex. June 20, 2011), is off point because it analyzes whether making trial period payments constitutes detrimental reliance for an estoppel claim rather than a breach of contract claim; and (iv) Rackley v. JPMorgan Chase Bank, Nat. Assn, 2011 WL 2971357, at *4 (W.D. Tex. July 21, 2011), considered only the TPP payments in its consideration analysis, whereas Plaintiffs allegations are not so limited. See 57-58.
See SD 09-01, at 2; Torti Decl. Ex. 4 at 2 (The borrower documents a financial hardship and represents that (s)he does not have sufficient liquid assets to make the monthly mortgage payments by completing a Hardship Affidavit and provides the required income documentation.).
35
34
See id.
36
See id. (The borrower agrees to set up an escrow account for taxes and hazard and flood insurance prior to the beginning of the trial period if one does not currently exist).
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(4) undergo credit counseling if Saxon so requested. 37 See 57-58. However, Saxon contends that these additional obligations, which were not required of Plaintiffs by their original mortgage agreement, also do not constitute consideration. See Def. Mem. at 14. Saxon made the same argument in Stagikas, and it was rejected. See Stagikas, 2011 WL 2652445, at *5 (under the TPP, plaintiffs were required to provide documentation of their current income, make legal representations about their personal circumstances, and agree to undergo credit counseling if requested) (quoting Durmic, 2010 WL 4825632, at *3); Bosque, 2011 WL 304725, at *6 (same); Bank of Am., 2011 WL 2637222, at *4 (same); Kennedy, 2011 WL 4526085, at *2 (same); Bolone, 2011 WL 3706600, at *5 (same). See also Turbeville, 2011 U.S. Dist. LEXIS 42290, at *12 ([b]ecause consideration encompasses any detriment to the promisee, no matter how small, Plaintiffs adequately plead consideration for the TPP Agreement.). Thus, Plaintiffs sufficiently plead consideration. 4. Plaintiffs Sufficiently Plead Damages Caused by Saxons Breach of the TPP Contract
Saxon asserts that Plaintiffs have not alleged cognizable harm caused by Saxons breach of the TPP Contract. Def. Mem. at 15. The same argument has been rejected by numerous courts. 38 For instance, in Fletcher, 2011 WL 2648606, at *6, the court found that plaintiff had sufficiently alleged damages resulting from the lenders breach of an identical TPP
37
See id. at 11 (The borrower must represent in writing in the HAMP documents that (s)he will obtain such counseling.).
See, e.g., Belyea, 2011 WL 2884964, at *9 (complaint sufficiently alleged damages, both in terms of accrued of fees and charges in the period during which Litton allegedly should have tendered a permanent loan modification or at least a decision, and in terms of relief foregone by the Plaintiffs during that same period.); Bosque, 762 F. Supp. 2d at 352 (alleged damages in the form of accrual of fees and charges in the period during which defendant should have tendered a permanent loan modification or at least a decision, sufficient to state a breach of contract claim); Durmic, 2010 WL 4825632, at *3 (Plaintiffs have pled [damages by alleging] that with each passing month, their original loan documents remain in effect, subjecting them to the accrual of charges, a further risk of delinquency, damage to their credit ratings, and a heightened risk of eventually losing their homes to foreclosure.).
38
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Contract in the form of fees, charges, accrued interest, and damage to her credit reports. The lender argued, as Saxon does here, that such costs were merely the result of the mortgagor missing payments prior to entering into the TPP or making reduced payments pursuant to the TPP. Id. The Fletcher court rejected this argument, holding that plaintiffs allegation that she suffered these damages, at least in part, as a result of the time she spent waiting for a response from the lender while it failed to consider her HAMP application, was sufficient damage to support a breach of contract claim. 39 Id. Here, Plaintiffs allege that Saxons breach of the TPP Contract has caused them damages in the form of increased interest payments, longer loan payoff times, higher principal balances, deterrence from seeking other remedies, damage to their credit, late fees, escrow charges, inspection charges, and additional income tax liability. See 4, 63, 66-67, 95. Thus, the damages claimed by the Caves are nearly identical to those alleged in Fletcher, Belyea, Bosque, and Durmic, and are sufficient to state a breach of contract action. Saxon disingenuously asserts that Plaintiffs should not be allowed to recover these damages because, although the TPP allowed Plaintiffs to make reduced payments, it did not require them to do so. Def. Mem. at 16. Saxon disregards that Plaintiffs have alleged that they were instructed by Saxon to make modified payments for months beyond the Modification Effective Date. See 62. A case cited by Saxon supports the proposition that a borrower may reasonably rely upon and follow the instructions of his/her mortgage servicer. An instruction
This Court should follow Fletcher, Belyea, Bosque, and Durmic, rather than the cases cited by Saxon, which are distinguishable. Singh, 2011 WL 66167, at *7, and Phipps v. Wells Fargo Bank, N.A., 2011 WL 302803, at *6 (E.D. Cal. Jan. 27, 2011), are inapposite because the borrowers brought breach of contract claims as alleged third-party beneficiaries of the SPA, which is an entirely different theory than the instant case. Moreover, it does not appear that the plaintiff in Phipps even entered into a TPP Contract. See Phipps, 2011 WL 302803, at *3. Ishler v. Chase Home Finance LLC, 2011 WL 744538, at *6 (M.D. Pa. Feb. 23, 2011), is off point because it involves a claim of common law fraud rather than breach of the TPP Contract.
39
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by a bank not to pay may reasonably be understood by a borrower as a representation that nonpayment is acceptable to the bank and will not have negative consequences. Thomas v.
JPMorgan Chase & Co., 2011 WL 3273477, at *10 (S.D.N.Y. July 29, 2011) (citation omitted). Thus, Plaintiffs sufficiently allege damages caused by Saxon. 5. Plaintiffs State a Claim for Breach of the Duty of Good Faith and Fair Dealing
Saxon attempts to avoid responsibility for its breach of the implied duty by repeating its refrain that the TPP Contract is not an enforceable contract. Def. Mem. at 17. This tactic failed in Gaudin, as it should here. See Gaudin, 2011 WL 5825144, at *5 (While the breach of the covenant of good faith and fair dealing claim may be subsumed in or duplicative of a breach of contract claim, in light of the conclusion that the TPP may provide a basis to proceed in contract, Saxons substantive arguments against it fail.). Saxon does not dispute that parties to a contract are subject to an implied duty of good faith and fair dealing. See, e.g., Lyon Fin. Servs. v. Woodlake Imaging, LLC, 2005 U.S. Dist. LEXIS 2011, at *21 (E.D. Pa. Feb. 9, 2005) (recognizing that [i]n Pennsylvania, a covenant of good faith and fair dealing is implied in every contract.). The covenant is violated where any party to a contract evades the spirit of the bargain, acts with a lack of diligence, willfully renders imperfect performance, abuses the power to specify terms, interferes with or fails to cooperate in the other partys performance, or exercises contractually authorized discretion in an unreasonable manner. Berks Mut. Leasing Corp. v. Travelers Property Cas., 2002 WL
31761419, at *3 (E.D. Pa. Dec. 9, 2002) (citing Somers v. Somers, 613 A.2d 1211, 1213 (Pa. Super. Ct. 1992) (citing REST. 2D CONTRACTS 205 cmt. d (1981)). Saxon erroneously suggests that Plaintiffs are attempting to use the implied duty to read into the TPP a promise to permanently modify their loan. Def. Mem. at 17. That is not the 28
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case. Plaintiffs allege that Saxon, in bad faith, deprived them of the reasonably expected fruits of the TPP Contract, including protection from foreclosure during the trial period, a permanent HAMP modification at the end of three month trial period with all arrearages capitalized, late fees and penalties waived and affordable monthly payments instituted, or a timely written denial explaining why they did not qualify. Compl. Ex. A. To secure those fruits, Plaintiffs had to comply with the TPP Contract. Id. As in Bosque, Plaintiffs have alleged a series of defendants actions and omissions that undermined its ability to perform under the TPP [Contract] and meet plaintiffs performance expectations. Bosque, 2011 WL 304725, at *7. See also Darcy, 2011 WL 3758805, at *7 (complaint stated a claim for breach of duty of good faith and fair dealing by lenders inaction, lack of timely verification that borrower qualified under the TPP, and failure to timely provide a permanent HAMP modification). Plaintiffs further allege that Saxon undermined their ability to satisfy the requirement to provide income verification by failing to hire sufficient staff, repeatedly requesting documents it had already received, and not responding to borrowers inquiries. 41-47, 51, 60-67. Saxons unjustified failure to timely provide a permanent HAMP modification agreement or a written denial made it impossible for Plaintiffs to know what was required of them after the end of the trial period, and specifically whether their continued compliance would eventually net them the benefit of their bargain (a permanent modification, albeit late) or would merely result in deeper financial distress. Thus, Plaintiffs state a claim for breach of the implied covenant. D. Plaintiffs State a Claim for Promissory Estoppel
Saxon moves for dismissal of Plaintiffs promissory estoppel claim on grounds that the TPP Contract does not contain a clear and unambiguous promise to modify, and that Plaintiffs
29
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could not reasonably rely on the promises contained in the TPP Contract. Def. Mem. at 18-19. Saxon is wrong. Pennsylvania has adopted the approach to promissory estoppel established in REST. 2D CONTRACTS 90, which permits a plaintiff to recover where the following criteria are met: 1) the promisor made a promise that he should have reasonably expected to induce action or forbearance on the part of the promisee; 2) the promisee actually took action or refrained from taking action in reliance on the promise; and 3) injustice can be avoided only by enforcing the promise. Edwards v. Wyatt, 335 F.3d 261, 277 (3d Cir. 2003) (citing Crouse v. Cyclops Industries, 745 A.2d 606, 610 (Pa. 2000)). Under REST. 2D CONTRACTS 90, any action or forbearance on the part of the promisee is sufficient to establish detriment in the context of promissory estoppel. Saxon contends that there is no clear and definite promise contained in the TPP Contract that Defendant would modify Plaintiffs loans. Def. Mem. at 18. Again Saxon misconstrues the Complaint and ignores the provisions of the TPP Contract and HAMP, which unambiguously require Defendant to provide a timely written notification to the borrower in the event of a denial. 49-50. Contrary to Saxons contention, this promise to notify is sufficiently clear and definite for purposes of promissory estoppel. 40 Saxons promise reasonably induced Plaintiffs action making the modified payments, among other things which constitute reliance on Saxons promises. 48-51. It was reasonable for Plaintiffs to believe that Saxon would give them a determination no later than the Modification Effective Date, as specified in 2 the TPP Contract. 49. This reliance was not unreasonable even after the initial three-month trial period, given Saxons repeated assurances that Plaintiffs were still being considered for a permanent
Cases cited by Saxon, including Grill, 2011 WL 127891, at *8, Morales, 2011 WL 1670045, at *8-*9, Erickson v. Long Beach Mortg., 2011 WL 830727, at *6 (W.D. Wash. Mar. 2, 2011), Prasad, 2010 WL 5090331, at *5, and Locke v. Wells Fargo Home Mortg., 2010 WL 4941456, at *4 (S.D. Fla. Nov. 30, 2010), do not support Defendants position, because these decisions are based on the assumption that the plaintiff alleged that the TPP Contract guarantees a modification if the borrower provides requested documents and makes all TPP payments. That is not what Plaintiffs allege here.
40
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loan modification, while Saxon strung them along in a trial modification far beyond the threemonth period prescribed in the TPP Contract. 57, 61-67. Plaintiffs relied on Saxons promises to their detriment, incurring additional debt, inflated fees and negative credit reporting. 41 4, 63, 95. Had Plaintiffs known Saxon would not honor its promises, and that they would end up in a far worse position than if they had never sought a HAMP modification from Saxon, they could have pursued other alternatives, including a short sale or refinancing. The Kennedy court upheld virtually identical promissory estoppel claims, holding: [T]he TPP includes a clear and unambiguous promise that Plaintiffs loan would be modified if she complied with its terms. Plaintiff alleges that she relied on that promise and suffered negative effects Kennedy, 2011 WL 4526085, at *3. The court concluded that, This reliance
appears, at this stage, to have been reasonable and foreseeable. Id.; see also Fletcher 2011 WL 2648606, at *6 (plaintiff stated claim for promissory estoppel by alleging reliance on the promise to consider her HAMP application and give her a timely response); Allen v. CitiMortgage, Inc., 2011 WL 3425665, at *8 (D. Md. Aug. 4, 2011) (denying motion to dismiss promissory estoppel claim where plaintiffs alleged that they would have pursued other options, such as restricting debt through bankruptcy or selling their home, if they had known that CitiMortgage would report them as delinquent to credit reporting agencies for making lower monthly payments under the TPP); Turbeville, 2011 U.S. Dist. LEXIS 42290, at *18 (plaintiffs suffered detriment because they could have pursued other means of curing their default if they had been given a decision by the end of the three-month trial period). Accordingly, Plaintiffs sufficiently plead promissory estoppel.
The effect of REST. 2D CONTRACTS 90 is that a promise without any agreed consideration (agreed equivalent in exchange) is made enforceable by reason of a substantial change of position in reasonable reliance on it. (Emphasis added). See also 1A Corbin on Contracts 204 (1963).
41
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E.
Plaintiffs State a Claim Under Pennsylvanias UTPCPL 1. Saxons Conduct Violates The UTPCPL
Saxon claims that Plaintiffs UTPCPL claims should be dismissed. Def. Mem. at 19. To the contrary, Plaintiffs have met all the requirements for a valid claim under the UTPCPL. The UTPCPL prohibits any person from engaging in fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding. 73 PA. STAT. 201-2(4)(xxi). At least some courts have held that the statute requires that plaintiffs rely on defendants unfair or deceptive acts or practices and requires that plaintiffs reliance on those deceptive acts caused their harm. 42 See, e.g., Seldon v. Home Loan Services, Inc., 647 F. Supp. 2d 451, 465-66 (E.D. Pa. 2009). The Pennsylvania Supreme Court has ruled that the UTPCPLs expansive provisions reflect the legislative judgment that unfairness and deception in all consumer transactions must be halted. These sections of the [UTPCPL] ... are to be liberally construed... Commw. v. Monumental Properties, Inc., 329 A.2d 812, 817 (Pa. 1974). Likewise, the Superior Court has ruled that the UTPCPL is to be liberally construed in order to effectuate the legislatures goal of consumer protection. Keller v. Volkswagen of Am., Inc., 733 A.2d 642, 646 (Pa. Super Ct. 1999). Plaintiffs have enumerated in detail Saxons unfair and deceptive acts on which Plaintiffs relied and by which they were deceived. 54-74. See p. 5 above. Plaintiffs claim that Defendants conduct in offering Plaintiffs a TPP Contract and then stringing Plaintiffs along, urging them to make the modified payments long after the three months were completed,
The better view is that justifiable reliance is not required under the post-1996 version of the UTPCPL, which included deceptive conduct as being sufficient to state a claim under the UTPCPL. After the 1996 amendment, a number of courts found that, since deceptive conduct now was sufficient to state a claim under the UTPCPL, proof of reliance is unnecessary. See e.g., Com. ex rel. Corbett v. Manson, 903 A.2d 69 (Pa. Commw. Ct. 2006) (no proof of reliance necessary); Commw. v. Percudani, 825 A.2d 743, 746-47 (Pa. Commw. Ct. 2003) (holding that the post-1996 version of the CPL did not require a plaintiff to plead reliance).
42
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deliberately not notifying Plaintiffs that they had been rejected for a permanent HAMP modification, and then charging them late fees and penalties, is deceptive conduct. 3-4. Plaintiffs relied on Saxon, whose employees told Plaintiffs to continue to pay the modified amount. 62. This reliance caused Plaintiffs loss. This pattern of corporate conduct violates the UTPCPL. Saxons behavior is an unconscionable commercial practice designed to deceive persons who are struggling to pay their mortgages, with the objective of maximizing fees and penalties that will be paid to Saxon. 20, 23-25, 40-47, 110-112. Saxon sent the Caves a loan modification package that provided for a modified mortgage payment of $1,007.50 to be paid on September 1, October 1, and November 1, 2009. 52-53. The Caves paid this monthly amount on a timely basis for nearly a year. 57, 64. The HAMP program mandates that the borrower be given a prompt written determination of eligibility. 50. Saxon did not inform the Caves in writing that their HAMP application was rejected. The Caves first discovered that their application had been rejected in October 2010, when Saxon sent the Caves a notice that their account was past due by $23,210.64, an amount that included the full rather than modified mortgage payments, late fees, escrow charges and inspection charges. 63-64. The Caves had relied on Saxon when it told them to pay only the modified amount, $1,007.50 per month, not realizing that Saxon was charging them fees and penalties for underpaying each month. 62. Saxon took advantage of the Caves reliance, causing severe damages to the Caves. 70. This is the precise kind of deception that the UTPCPL was designed to prevent or punish. 2. The Economic Loss Doctrine Does Not Affect Plaintiffs UTPCPL Claim
Saxon claims that its deliberately deceptive practices do not violate the UTPCPL because of the economic loss doctrine. Def. Mem. at 20-21. The economic loss doctrine prohibits 33
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plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract. Werwinski v. Ford Motor Co., 286 F.3d 661, 671 (3d Cir. 2002) (citations omitted). Accordingly, there must be a contract for the economic loss doctrine to be applicable. Brock v. Thomas, 782 F. Supp. 2d 133, 143 (E.D. Pa. 2011) (application of economic loss doctrine limited to losses that flow from a contract). Saxon denies that the TPP is a contract between Saxon and the Caves. Def. Mem. at 8-16. Either there is a contract, and Plaintiffs contract claims are viable, or, as Defendant claims, the TPP is merely an application. If the product here is the TPP application, Plaintiffs UTPCPL claims could not be precluded by the economic loss doctrine, since Saxon would have committed a tort, not a breach of contract, by deceiving the Caves through the application, not the contract. Accordingly, Saxons claim that there is no contract, and its claim that Plaintiffs UTPCPL allegations are precluded because there is a contract, are inconsistent and untenable. Indeed, even though there is a contract, as Plaintiffs have clearly alleged ( 48-58), the economic loss doctrine will not prevent Plaintiffs from recovering under the UTPCPL. The Caves losses are not economic losses since, as the economic loss theory requires, they do not involve injury to the product itself. See Rem Coal Co. v. Clark Equipment Co., 563 A.2d 128, 134 (Pa. Super. Ct. 1989) (tort theories do not apply when a product malfunctions where the only resulting damage is to the product itself.) Accordingly, this case is easily distinguishable from the product liability case described in Werwinski, 286 F.3d at 664, the only Third Circuit ruling on the application of the economic loss doctrine to the UTPCPL. 43 Werwinski was a putative class action against Ford, relating to defective transmission components installed in Ford vehicles that caused owners expensive
43
The appellate courts in Pennsylvania have not ruled on the issue of whether the economic loss doctrine is applicable to UTPCPL claims.
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repairs. The Werwinski plaintiffs alleged that Ford deceived them by selling them vehicles with known defective transmissions in violation of the UTPCPL. The lower court and the Third Circuit found that the claims were merely warranty claims because of the economic loss doctrine, relying on decisions from other states. Id. at 675-679. Under Werwinski, the economic loss doctrine is applicable if the need for a remedy in tort is reduced when the only injury is to the product itself and the product has not met the customers expectations... Id. at 671 (citing E. River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 872 (1986)). Whereas, in Werwinski, the product was a Ford that had a defective transmission, here, the product is a service a contract to qualify for a loan modification. The injury is not to the product, it is to the Caves, who paid extra charges, penalties, and interest, and suffered other damages as a result of Saxons deceptive practices. 112. In a case with facts similar to the facts at hand, where plaintiffs were trying to get a mortgage modification the repayment plan Judge Yohn found that plaintiffs alleged a viable [UTPCPL] claim on the basis of misrepresentations involving the repayment plan ... the court finds that given the dire financial circumstances that allegedly drove plaintiffs to enter the repayment plan, plaintiffs relied on defendants representation that payments under the plan would remain at $700. Selden, 647 F. Supp. 2d at 471. The Selden court found that Plaintiffs, as the Caves here, had set forth a series of financial and other losses that resulted from their reliance on defendants false statements about the repayment plans fixed payment amounts and payment period. On the basis of defendants misrepresentations about the repayment plan, plaintiffs have set forth the required elements for a viable claim of deceptive conduct under the catch all provision of the UTPCPL, 73 PA. STAT. 201-2(4)(xxi). Id.
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The same thing applies to Plaintiffs here. They relied on Saxons deceptive assurances that they should continue to pay $1,007.50 a month on their mortgage, and they suffered severe financial problems because of this deception. Although Seldon was decided well after
Werwinski, the economic loss doctrine is not dispositive because there is no product that malfunctions, and the repayment plan at issue causes harm to plaintiffs, not to itself. See also Vassalotti v. Wells Fargo Bank, 732 F. Supp. 2d 503 (E.D. Pa. 2010) (summary judgment ruling for plaintiff on claim that Wells Fargo violated UTCPCL by sending befuddling letters to plaintiff about plaintiffs loan modification agreements, on which plaintiff relied and which caused ascertainable loss to plaintiff); Clark v. EMC Mortgage Corp., 2009 U.S. Dist. LEXIS 61181, at *28 (E.D. Pa. Jan. 29, 2009) (where plaintiffs paid the modified amounts on their HAMP agreement for two years, and then the mortgage servicer refused to recognize the HAMP modification, the court found no basis to dismiss Plaintiffs UTPCPL claim.) Each of these cases was decided after the Third Circuits Werwinski decision, but in each case this Court found valid UTPCPL claims. 44
Defendant cites a number of cases that fail to acknowledge or even address the distinction between damage to the product itself and damage to the plaintiff. In Ferki v. Wells Fargo, 2010 WL 5174406 (E.D. Pa. Dec. 10, 2010), a contract case in which defendant liquidated plaintiffs stock, defendant bank was contractually bound to notify plaintiff if the stock depreciated to the point where the bank had the right to liquidate it. The bank failed to notify plaintiff, and plaintiff lost his life savings. The court reluctantly found that plaintiff had suffered only economic loss pursuant to Werwinski, and granted the motion to dismiss the UTPCPL count. Defendant also cites Sarsfield v. CitiMortgage, Inc., 707 F. Supp. 2d 546 (M.D. Pa. 2010), where plaintiffs sued their mortgage lender for its inaccurate escrow account disclosure statement issued to plaintiff before the mortgage was signed. The court, reluctantly, found that the disclosure statement was a part of the mortgage contract, and therefore the Third Circuits decision in Werwinski applied. The court in Sarsfield admitted that it believes that the Third Circuits interpretation of Pennsylvania law in Werwinski was incorrect for the reasons stated by Judge Van Antwerpen ... in OKeefe v. MercedesBenz USA, LLC, 214 F.R.D. 266, 275 (E. D. Pa. 2003). Sarsfield, 707 F. Supp. 2d. at 557. However, Sarsfield, like Ferki, did not consider the clear difference between a car whose transmission self-destructs a clear breach of warranty issue and an unconscionable commercial practice designed to deceive persons who are struggling to pay their mortgages.
44
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Finally, as explained in section F.1. on pp. 39-41 of this Memorandum, Saxon has violated the FCEUA. The breach of the FCEUA is a per se violation of the UTPCPL. See e.g. Seldon, 647 F. Supp. 2d at 471; Stuart v. AR Resources, Inc., 2011 U.S. Dist. LEXIS 27025, at *13-14 (E.D. Pa. March 15, 2011) (Section 2270.5(a) of the FCEUA states, If a debt collector or creditor engages in an unfair or deceptive debt collection act or practice under this act, it shall constitute a violation of the UTPCPL). Accordingly, Saxon has violated the UTPCPL by violating the FCEUA. Such a violation cannot be negated by the economic loss doctrine. 3. Plaintiffs Have Properly Pled Reliance, Deceptive Acts, Duty, Malfeasance, and Injury
Defendant claims that Plaintiffs have not pled reliance, which it claims is required by the UTPCPL. Plaintiffs have enumerated in detail the unfair and deceptive acts that the Caves relied on, and were deceived by. See 54-74, 101-103; see also above pp. 29-31. Saxon also claims that it bore no duty pursuant to the TPP to provide permanent loan modifications to Plaintiffs. Def. Mem. at 21. This argument reflects a misunderstanding of Plaintiffs claim, as described above. Plaintiffs allege that, in addition to many duties under the HAMP regulations, Saxon had a duty to notify Plaintiffs, in writing, after three months of payments pursuant to the TPP, whether they would be given a permanent HAMP modification. 30-39, 50, 73. Saxon breached this affirmative duty and urged Plaintiffs to continue to pay the modified amount, all the while assessing fees because Plaintiffs were not making their full mortgage and escrow payments under the unmodified mortgage. This deliberate and deceptive behavior, urging plaintiffs to pay the modified amount, while secretly assessing fees and extra charges, is exactly the kind of deceptive behavior that forms the basis of a UTPCPL claim. 61-64.
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Defendants cite Gordon v. Pa. Blue Shield, 548 A.2d 600, 604 (Pa. Super Ct. 1988) and Horowitz v. Federal Kemper Life Assurance Co., 57 F.3d 300, 307 (3d Cir. 1995), claiming that Saxon was guilty of only nonfeasance, rather than misfeasance, and therefore could not be liable under the UTPCPL. Def. Mem. at 21-22. In Gordon and Horowitz, defendant insurer refused to pay insurance benefits. Neither Gordon nor Horowitz is dispositive here, because Saxon
affirmatively urged Plaintiffs to continue paying the modified amounts, while secretly assessing fees over and above the payments required by the mortgage. 45 This was an affirmative act of deception, and thus misfeasance. 62-63. Defendant also argues that Saxons late fees and penalties are not damages under the UTPCPL, but legitimate charges under the Plaintiffs loan documents. Def. Mem. at 22.
However, under the circumstances, these charges were not legitimate. Saxon sent the Caves a loan modification package that provided for a modified mortgage payment of $1,007.50 per month. 53. The Caves understood that if they were awarded a HAMP modification, fees and the full amount of payments under the unmodified mortgage would be waived. 48. The Caves paid the new required amount timely for many months without receiving any notice that they were past due or being charged fees. 63-64. HAMP mandates that the borrower be given a prompt written determination of eligibility. 50. Saxon did not inform the Caves that they were ineligible for a HAMP modification, until after Saxon sent the Caves a notice that their account was past due by $23,210.64, an amount that included the full amount due to date under the unmodified mortgage, late fees, escrow charges and inspection charges, none of which would have accrued if they had been given a permanent HAMP modification, or if they had been informed they were denied by the Modification
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Santo v. Qualcraft Construction, 2007 WL 5786314 (Pa. Com. Pl. Sept. 2007) is inapposite. The contract showed that the lender had no duty to inspect construction, so plaintiff had no UTPCPL claim.
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Effective Date.
63.
The Caves damages include increased fees, late charges and other
payments over and above the mortgage payments. 41-47, 112. Moreover, Saxon caused further losses by failing to provide the Commonwealth of Pennsylvania with required information for Plaintiffs HEMAP loan application. 65-66. Contrary to Defendants
assertions, Plaintiffs have pled losses caused by Defendants deceptive behavior. F. Plaintiffs State a Viable Claim Under the FCEUA and the FDCPA 1. Plaintiffs State a Claim Under the FCEUA
Defendant claims that Plaintiffs claim under the FCEUA should be dismissed because Plaintiffs mortgage is a purchase money mortgage. Def. Mem. at 23. Plaintiffs mortgage is not a purchase money mortgage. The term purchase money mortgage is not defined in the statute. However, Blacks Law Dictionary, 6th Ed. West Publishing Co., 1990 defines purchase money mortgage as: Any mortgage given to secure a loan for the purpose of acquiring the land on which the mortgage is given; more particularly, a mortgage given to the seller of land to secure payment of a portion of the purchase price. A mortgage given concurrently with the conveyance of land, by the vendee to the vendor, on the same land, to secure the unpaid balance of the purchase price. (Emphasis added). Blacks also defines purchase money mortgage as: A mortgage or security device taken back to secure the performance of an obligation incurred in the purchase of the property. (Emphasis added). These definitions encompass the idea that in a purchase money mortgage the seller of the land takes back all or some of the purchase price, so that the seller effectively becomes the mortgage lender. This is clearly not the situation with the Caves mortgage, which came from
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Saxon Mortgage Inc., a company in the business of mortgage lending, not the seller of the property. The Pennsylvania Supreme and Superior Courts have used the term purchase money mortgage to refer to a transaction where the seller of land lends money to the buyer, so the buyer can buy the land. See Mahoney v. Furches, 468 A.2d 458, 459 (Pa. 1983) (This action arises out of a land sale and purchase money mortgage between the two parties. Appellees, [the Furches] sold to Appellant [Mahoney] certain lands which they owned in Lancaster County and personally financed the sale.). See also In re Estate of Lazarus, 616 A.2d 1023, 1024, (Pa. Super. Ct. 1992) (two separate companies each execute agreements of sale on property, where part of the sale price would be paid outright and the rest would be paid to the seller, Lazarus, in monthly installments in the form of a purchase money mortgage); Good v. Holstein, 787 A.2d 426, 428 (Pa. Super. Ct. 2001) (Blue Mack, Inc. bought real estate from Mrs. Smiths, Inc. The parties executed a purchase money mortgage whereby Mrs. Smiths financed the conveyance in the amount of $340,000.00). Defendant cites an unpublished magistrate judges decision that relies on an unrelated Pennsylvania statute. To the contrary, the common law use of the term purchase money mortgage is dispositive, establishing that the Caves mortgage was not a purchase money mortgage, but a mortgage from a third-party mortgage lender. Defendant also claims that Plaintiffs fail to allege that any conduct described in the Complaint occurred in connection with the collection of a debt. Def. Mem. at 24. The complaint alleges that Saxon informed Plaintiffs that they owed $23,210.64, which was past due. 63-64. This was an untrue statement made to collect a debt, and it was a demand for payment of the alleged arrears on Plaintiffs mortgage. Defendants citation to Lasisi v. Bank of Am.,
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2009 WL 2342640 (E.D. Pa. July 29, 2009), is unavailing. In Lasisi, plaintiffs pleading was woefully inadequate. Here, Plaintiffs have made specific allegations of Saxons demand for payment of amounts that were not owed. Finally, Saxon claims that Plaintiffs have alleged no facts to establish that Saxon intended to mislead Plaintiffs. To the contrary, Saxon failed to tell Plaintiffs that they had been denied a permanent HAMP modification and failed to warn them that they (allegedly) were in arrears. Saxon then demanded $23,210.64, which included fees that Saxon could not have collected if it had timely informed the Caves they were rejected for a HAMP modification. Given Saxons track record, see 17-26, there is ample evidence that Saxon intended to collect as much in fees as it could. Further, the cases cited by Saxon lack the specific allegations that Plaintiffs have presented here. Accordingly, the FCEUA claim should be upheld. See Seldon, 647 F. Supp. at 465 (denying motion to dismiss FCEUA claim, because defendants gave a false impression about the amount of the debt and used false and deceptive collection methods.) 2. Plaintiffs FDCPA Claim Should be Upheld
Finally, Saxon claims that Plaintiffs FDCPA claim should be dismissed. Saxon claims that it was not a debt collector, because a debt collector is one who collects a debt held by another entity. Although Saxon Mortgage, Inc. was the company that originated the Caves mortgage in 2005 (see Torti Decl. Ex. 1), a different company, Saxon Mortgage Services, Inc., the Defendant here, was the servicer. See 1. Saxon Mortgage Inc. sold the mortgage to a thirdparty. By the time of the events related here (2009-2010), the mortgage was held by Deutsche Bank Trust Company Americas, as Trustee for Saxon Asset Securities Trust 2005-4. 54. Accordingly, Defendant Saxon Mortgage Services, Inc. was a debt collector on behalf of a trustee who represented a mortgage securitization trust. In any case, this Court must accept as
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true Plaintiffs allegation that Saxon was a debt collector under FDCPA. 126. Whether or not Saxon was a debt collector is a disputed factual issue that should not be decided on this motion to dismiss. IV. CONCLUSION For the foregoing reasons, Defendants motion to dismiss should be denied in its entirety. In the alternative, Plaintiffs should be granted leave to amend to cure any deficiency. 46 Dated: November 30, 2011 BERGER & MONTAGUE, P.C. By: /s/ Todd S. Collins Todd S. Collins Eric Lechtzin 1622 Locust Street Philadelphia, PA 19103 Telephone: 215-875-3000 Facsimile: 215-875-4613 E-mail: tcollins@bm.net E-mail: elechtzin@bm.net Ann Miller ANN MILLER, LLC The Benjamin Franklin 834 Chestnut Street, Suite 206 Philadelphia, PA 19107 Telephone: 215-238-0468 Facsimile: 215-574-0699 E-mail: am@attorneyannmiller.com Attorneys for Plaintiffs and the Class
46
Fed. R. Civ. P. 15(a) provides that leave shall be freely given when justice so requires. The Supreme Court has instructed that leave to amend should be freely granted [I]n the absence of ... undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party ... futility of amendment, etc. Foman v. Davis, 371 U.S. 178, 182 (1962); see also Arthur v. Maersk, Inc., 434 F.3d 196, 204 (3d Cir. 2006) (reversing District Courts denial of leave to amend).
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Plaintiffs Opposition To Saxon Mortgage Services, Inc.'s Motion To Dismiss Class Action Complaint

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IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA

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REST. 2D CONTRACTS 204 ...........................................................................................................23 REST. 2D CONTRACTS 90 .......................................................................................................30, 31

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Citations to the Complaint appear herein as __, or __.

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See Id. at 4, 14-15. See Id. at 5.

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documents and Hardship Affidavit, Saxon sent Plaintiffs a TPP Contract.

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Citations to the Complaint appear herein as , or .