STRANSKY v. PENNYMAC HOLDINGS, LLC et alBRIEF in OppositionD.N.J.March 20, 2019 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY PETR STRANSKY, Plaintiff, vs. PENNYMAC HOLDINGS, LLC, et al.; Defendants. Docket No. 3:18-cv-15929 BRIEF OF PLAINTIFF IN OPPOSITION TO THE MOTIONS TO DISMISS BY ALL DEFENDANTS Rubenstein Business Law 250 Pehle Avenue, Ste 200 Saddle Brook, NJ 07763 DAVID RUBENSTEIN, ESQ. Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 1 of 21 PageID: 1085 2 Of Counsel and On the Brief Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 2 of 21 PageID: 1086 3 PRELIMINARY STATEMENT This Opposition is being submitted in response to the two Motions to Dismiss submitted collectively by all Defendants. Contrary to Defendants’ assertions, this lawsuit has nothing to do with the Foreclosure Judgment from state court. Plaintiff is not seeking to overturn the foreclosure judgment, and has not made that claim in the Amended Complaint. The basis of this lawsuit is to seek money damages for the wrongful actions of the Defendants – as confirmed by the Appellate Division – who adjudicated that the Defendants wrongfully tried to collect on payments for Lot 28 and then foreclosed on Lot 28 when the Mortgage plainly indicated that Lot 28 was not to be included. According to the Appellate Division’s Decision filed April 1, 2018, the Final Judgment in the state foreclosure case was vacated as a result of the Defendants’ misrepresentation to the Court that Lot 28 was included in the foreclosure even though the Mortgage expressly stated the opposite. Defendants’ fraud included filing false Lis Pendens and false Certifications of Diligent Inquiry to the Court claiming that Lot 28 was included in the Mortgage when that Lot clearly was not. “The affidavit or certification of diligent inquiry required by Rule 4:64-1 and Rule 4:64-2 reflects the attorney’s reasonable, good faith compliance with the law, as it exists at the time of the document’s execution.” US Bank Nat. Ass'n v. Guillaume, 38 A.3d 570, 209 N.J. 449 (2012). This requirement was added because Lenders and their attorneys were engaging in fraudulent conduct involving foreclosures, and this requirement was added to create a safeguard to protect homeowners from these fraudulent practices. Id. However, in this case, these safeguards were abandoned by zealous Defendants and their attorneys who tried to collect payments for Lot 28 and then filed false pleadings in Court Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 3 of 21 PageID: 1087 4 alleging that Lot 28 was included in the Mortgage. Had it not been for the Appellate Division, the Defendants would have wrongfully foreclosed on Plaintiff’s property. Now that the Defendants were caught red-handed, the Plaintiff is asking this Court to hold the Defendants accountable for the hell they put him through for 4 years. Instead, the Defendants seek to point fingers elsewhere and try to drown the Court in non-relevant exhibits in the hope of creating enough confusion to distract the Court from the issues raised in Plaintiff’s Amended Complaint. The fact is that the Appellate Division confirmed that the Defendants’ actions were wrongful and without merit. Accordingly, this Motion to Dismiss should be denied. STATEMENT OF FACTS Plaintiff hereby references and incorporates the Certification of Petr Stransky. LEGAL STANDARD Every complaint must comply with the pleading requirements of the Federal Rules of Civil Procedure. Rule 8 requires that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” “Specific facts are not necessary; the statement need only ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’” Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (citations omitted). In determining the sufficiency of a complaint, the Court must be mindful to accept its factual allegations as true, James v. City of Wilkes–Barre, 700 F.3d 675, 679 (3d Cir.2012), and Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 4 of 21 PageID: 1088 5 to construe it liberally in favor of the plaintiff. See Haines v. Kerner, 404 U.S. 519, 520–21, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972). In general, where a complaint subject to statutory screening can be remedied by amendment, a district court should not dismiss the complaint with prejudice, but should permit the amendment. Denton v. Hernandez, 504 U.S. 25, 34, 112 S.Ct. 1728, 118 L.Ed.2d 340 (1992); Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir.2002) (noting that leave to amend should be granted “in the absence of undue delay, bad faith, dilatory motive, unfair prejudice, or futility of amendment”). LEGAL ARGUMENT POINT I DEFENDANTS’ MOTION TO DISMISS SHOULD BE DENIED BECAUSE THE STATUTE OF LIMITATIONS DOES NOT BAR PLAINTIFF’S CLAIM UNDER THE FAIR DEBT COLLECTION PRACTICES ACT "The FDCPA is a consumer protection statute that prohibits certain abusive, deceptive, and unfair debt collection practices." Marx v. Gen. Revenue Corp., 133 S. Ct. 1166, 1171 n.1, 185 L. Ed. 2d 242 (2013). It "authorizes any aggrieved person to recover damages from 'any debt collector who fails to comply with any provision of the FDCPA." Id. (quoting 15 U.S.C. § 1692k(a)). The FDCPA imposes a one-year statute of limitations from the date of the alleged violation. 15 U.S.C. §1692k(d); see Glover v. FDIC, 698 F.3d 139, 145 (3d Cir. 2012). Brown v. Udren Law Offices PC, No. 11-cv-2697, 2011 U.S. Dist. LEXIS 102004, 2011 WL 4011411, at *5-6 (E.D. Pa. Sept. 9, 2011) ("Conduct which independently violates the FDCPA, however, is actionable if it falls within the limitations period, even if undertaken in pursuit of Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 5 of 21 PageID: 1089 6 litigation that was filed outside the limitations period."), and Jones v. Inv. Retrievers, LLC, No. 10-cv-1714, 2011 U.S. Dist. LEXIS 44138, 2011 WL 1565851, at *3 (M.D. Pa. Apr. 25, 2011) ("[A]ctions occurring within the limitations period are not necessarily off-limits under the FDCPA just because the actions fall within the scope of a lawsuit which was filed outside the limitations period."). In Jones, the plaintiff alleged that defendants violated the FDCPA when they "failed to provide her with documents supporting alleged entitlement to payment, failed to provide her attorney with documents upon request, [and] indicated that they did not have supporting documentation verifying the debt." 2011 U.S. Dist. LEXIS 44138, 2011 WL 1565851, at *4. All these actions occurred within the one-year statute of limitations but also took place within the state action, which commenced outside the statute of limitations. Id. The court concluded that "it is not clear on the face of the complaint that any possible violation of the FDCPA would relate back to the filing of the lawsuit; i.e., that these were simply new communications about old claims. Thus, dismissal [pursuant to Rule 12(b)(6)] on the basis of the statute of limitations is inappropriate." Id. Brown followed the rational in Jones and denied the defendants' motion to dismiss because the plaintiff's complaint "was filed within one year of the most recent alleged FDCPA violation." Brown, 2011 U.S. Dist. LEXIS 102004, 2011 WL 4011411, at *6. The plaintiff's theory was not one that rested on the defendants' mere continued participation in the underlying state litigation, it was the fact that the defendants allegedly committed acts, "which independently violates the FDCPA" even though those acts may have been "undertaken in pursuit of litigation that was filed outside the limitations period." Id. Here, the Defendants claim that the Plaintiff’s FDCPA claim fails because the initial Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 6 of 21 PageID: 1090 7 Foreclosure Action was filed in 2014. Yet, that is not the allegations that were plead in the Amended Complaint. As the Amended Complaint states: 59. In its actions to collect the alleged debt, Defendants violated the FDCPA in the following ways: a. Falsely representing the amount of the debt owed by Plaintiff on at least twenty (20) separate occasions from 2014 to 2018 by sending monthly statements to collect on debt owed for Lot 28, in violation of 15 U.S.C. §1692e(2)(A); b. Using false representations and deceptive means in attempts to collect on Plaintiffs’ debt, in violation of 15 U.S.C. §1692e(10); Here, the Amended Complaint details how the violations were independent of the foreclosure action filed in state court. Since the violations were independent and were continuing through 2018, the FDCPA is timely under the Statute of Limitations. Based on the case law in the Third Circuit in Brown and Jones, the Motion to Dismiss must be denied. POINT II DEFENDANTS’ MOTION TO DISMISS SHOULD BE DENIED BECAUSE THE PLAINTIFF’S CLAIMS ARE NOT BARRED BY LITIGATION PRIVILEGE Under New Jersey law, in order to be shielded by the litigation privilege, the Defendants must prove that the communication was “(1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve objects of the litigation; and (4) that have some connection or logical relation to the action." Williams v. BASF Catalysts LLC, 765 F.3d 306, 319 (3d Cir. 2014) (quoting Loigman v. Twp. Comm. of Middletown, 185 N.J. 566, 585, 889 A.2d 426 (2006)); Rickenbach v. Wells Fargo Bank, N.A., 635 F. Supp. 2d Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 7 of 21 PageID: 1091 8 389, 401, 402 (D.N.J. 2009). However, like the Noerr-Pennington doctrine, the litigation privilege is not absolute. Dello Russo v. Nagel, 358 N.J. Super. 254, 266, 817 A.2d 426 (App. Div. 2003) (noting that the privilege does not provide a shield from professional discipline for an attorney's unethical conduct or for malicious prosecution); Rickenbach, 635 F. Supp. 2d at 402 (noting that malicious prosecution claims are an exception from the litigation privilege shield). The litigation privilege also does not cover communications in furtherance of a litigation that is pretextual. NVR, Inc. v. Davern, No. 15-5059, 2016 U.S. Dist. LEXIS 164983, 2015 WL 7013459, at *4 (D.N.J. Nov. 30, 2016). In Davern, the employing company alleged in its counterclaims that the litigation was meant to damage its position in the market and to get the company to fire the plaintiff's ex-employee. Id. The plaintiff's motion to dismiss the counterclaims was denied. Here, the Plaintiff has properly plead malicious prosecution, which is an exception to the Litigation Privilege doctrine and have identified that the attempt to include Lot 28 was a pretext. The Defendants instituted or caused to be instituted a foreclosure suit against Plaintiff to wrongfully foreclose on Lot 28. That lawsuit was known as PennyMac Holdings, LLC v. Stransky, F-9316-14. Such suit resulted in Plaintiff suffering a special grievance because Defendants interfered with his property by filing a Lis Pendens to cloud its title. The Appellate Division determined that the Defendants wrongfully foreclosed on Lot 28 because they had no claim to Lot 28. The Defendants’ underlying suit to foreclose on Lot 28 lacked reasonable or probable cause because the Mortgage clearly identified the Plaintiff’s property as Lot 29 only. The Defendants, including McNeill, Powers, Trainor, Kelly, and O’Donnell, filed false and misleading pleadings for the express purpose of obtaining a Final Judgment over Plaintiff. It is clear from the evidence that the Defendants acted in bad faith and maliciously sought to Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 8 of 21 PageID: 1092 9 foreclose on Lot 28 even though PennyMac had no legal right to foreclose upon Lot 28. The Defendants attempts to claim that Lot 28 was included in the Mortgage was a pretext to steal all of Plaintiff’s property wrongfully and unjustly to enrich themselves and their client. Accordingly, litigation privilege does not apply to the claims raised by Plaintiff and the Motion to Dismiss should be denied. POINT III DEFENDANTS’ MOTION TO DISMISS SHOULD BE DENIED BECAUSE THE PLAINTIFF’S CLAIMS ARE NOT BARRED BY NOERR PENNINGTON DOCTRINE Noerr-Pennington provides broad immunity from liability to those who petition the government, including administrative agencies and courts, for redress of their grievances. Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510, 92 S. Ct. 609, 30 L. Ed. 2d 642 (1972). Although Noerr-Pennington is a powerful shield, it is not absolute. Noerr itself recognized "[t]here may be situations" in which a petition "is a mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor and the application of the Sherman Act would be justified." Noerr, 365 U.S. at 144. And so spawned the "sham" exception. Two Supreme Court cases have explored the contours of this exception. In California Motor, the respondents, a group of highway carriers, alleged that the petitioners, another group of highway carriers, engaged in anticompetitive conduct by instituting state and federal proceedings to defeat the respondents' applications for operating rights. 404 U.S. at 509. The Court held that the complaint demonstrated a sham because it contained allegations that respondents "sought to bar their competitors from meaningful access to adjudicatory tribunals Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 9 of 21 PageID: 1093 10 and . . . to usurp that decisionmaking process" by "institut[ing] the proceedings and actions . . . with or without probable cause, and regardless of the merits of the cases." Id. at 512 (internal quotation marks omitted). In other words, the allegations, if proven, showed that the "administrative and judicial processes have been abused." Id. at 513. The Court returned to the exception in Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 113 S. Ct. 1920, 123 L. Ed. 2d 611 (1993). There, after the respondents filed a single copyright suit against the petitioners, the petitioners responded with an antitrust action, dubbing the copyright suit a sham. The Supreme Court outlined a two-part definition of sham litigation. Id. at 60. First, "the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits." Id. The existence of probable cause to institute the legal proceeding irrefutably demonstrates that the antitrust plaintiff has not proved the objective prong. Id. at 63. If the antitrust plaintiff fails to satisfy the objective prong, the analysis ends and the defendant is immune from suit. Only if the underlying litigation is objectively meritless does the court address the second factor: the litigant's subjective motivations. Id. at 60. Under this second part of the test, the court asks whether "the baseless lawsuit conceals an attempt to interfere directly with the business relationships of a competitor . . . through the use [of] the governmental process—as opposed to the outcome of that process—as an anticompetitive weapon." Id. at 60-61 (citations and internal quotation marks omitted). The Defendants instituted or caused to be instituted a sham foreclosure suit against Plaintiff to wrongfully foreclose on Lot 28. That lawsuit was known as PennyMac Holdings, LLC v. Stransky, F-9316-14. Such suit resulted in Plaintiff suffering a special grievance because Defendants interfered with his property by filing a Lis Pendens to cloud its title. The Appellate Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 10 of 21 PageID: 1094 11 Division determined that the Defendants wrongfully foreclosed on Lot 28 because they had no claim to Lot 28. The Defendants’ underlying suit to foreclose on Lot 28 lacked reasonable or probable cause because the Mortgage clearly identified the Plaintiff’s property as Lot 29 only. The Defendants, including McNeill, Powers, Trainor, Kelly, and O’Donnell, filed false and misleading pleadings for the express purpose of obtaining a Final Judgment over Plaintiff. It is clear from the evidence that the Defendants acted in bad faith and maliciously sought to foreclose on Lot 28 even though PennyMac had no legal right to foreclose upon Lot 28. Therefore, the Noerr Pennington doctrine does not apply, and the Motion to Dismiss must be denied. POINT IV DEFENDANTS’ MOTION TO DISMISS SHOULD BE DENIED BECAUSE THE PLAINTIFF’S CLAIMS ARE NOT BARRED BY THE ENTIRE CONTROVERSY DOCTRINE, RES JUDICATA, AND COLLATERAL ESTOPPEL Defendants argue that the entire controversy doctrine bar the Plaintiff’s claims. However, the claims Plaintiff raises here were not addressed or resolved in that action, as they were not germane to the foreclosure. Thus, the arguments by Defendants that Plaintiff’s claims are precluded must fail. New Jersey Court Rule 4:64-5 provides that unless the court otherwise orders on notice and for good cause shown, claims for foreclosure of mortgages shall not be joined with non- germane claims. R.4:64-5. In other words, only germane counterclaims and defenses may be pleaded in a foreclosure action and the court will reject those that are non-germane. Germane is a term defined in Leisure Technology v. Klingbeil as meaning those claims arising out of the mortgage foreclosed. Leisure Technology v. Klingbeil, 349 A.2d 96, 97 (App. Div. 1975). As Plaintiffs acknowledge in their brief, the entire controversy doctrine Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 11 of 21 PageID: 1095 12 extends only to claims that are germane to the foreclosure action. See In re Mullarkey, 536 F.3d 215, 299 (3d Cir. 2008). The concept of germaneness is relevant to application of the doctrines of entire controversy doctrine, res judicata, and collateral estoppel. Delacruz v. Alfieri, 447 N.J. Super.1, 12, 145 A.3d 695 (Law Div. 2015). In a foreclosure action, a lender need only prove the right to foreclose and the amount due on the mortgage. Central Penn Nat. Bank v. Stonebridge Ltd., 185 N.J. Super 289, 302 (Ch. Div. 1982); Great Falls Bank v. Pardo, 263 N.J.Super. 388, 394, 622 A.2d 1353 (Ch.Div.1993), aff'd, 273 N.J.Super. 542, 642 A.2d 1037 (App.Div.1994) (“The only material issues in a foreclosure proceeding are the validity of the mortgage, the amount of the indebtedness, and the right of the mortgagee to resort to the mortgaged premises.”). Thus, the claims brought in this present Law Division Action are not germane to the foreclosure. Id.; R. 4:64-5 (precluding non-germane claims from being joined in a mortgage foreclosure proceeding). Since non-germane claims and defenses cannot properly be involved in a foreclosure action, Plaintiffs' claims were not considered or ruled upon in the prior foreclosure action. Therefore, Plaintiffs’ claims are not precluded. See Copeland v. Bank of America, 2007 WL 2215362 (App. Div. 2007) (referring to judge's ruling that non-germane issues were not barred by res judicata and collateral estoppel, and recognizing “plaintiff's continuing ability to pursue any 'non-germane claims' that were not resolved as issues addressed in the earlier foreclosure proceedings”). POINT V DEFENDANTS’ MOTION TO DISMISS SHOULD BE DENIED BECAUSE THE PLAINTIFF’S CLAIMS ARE NOT BARRED BY LACK OF FEDERAL JURISDICTION Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 12 of 21 PageID: 1096 13 The Defendants argue that the Federal Courts do not have jurisdiction to hear this case based on various doctrines which state that where a state court proceeding is pending, no federal court proceeding should take place. This argument is disingenuous because the Defendants are responsible for making this case a federal action because Defendants are the parties who removed the case. The Plaintiff originally filed this case in state court and the Defendants decided to remove it to federal court. Now, the Defendants are contending that the Federal Court lacks jurisdiction to hear the case after originally arguing that the case should be removed to federal court because federal jurisdiction existed. The Defendants cannot have it both ways. It is clear that the Defendants are raising this argument without merit and solely in an effort to delay and hinder this lawsuit. This lawsuit has nothing to do with the Foreclosure Judgment and is not seeking to overturn the foreclosure judgment. The basis of this lawsuit is to seek money damages for the wrongful actions of the Defendants – as confirmed by the Appellate Division – who confirmed that the Defendants wrongfully tried to collect on payments for Lot 28 and then foreclosed on Lot 28 when the Mortgage plainly indicated that Lot 28 was not included. According to the Appellate Division’s Decision filed April 1, 2018, the Final Judgment in the state foreclosure case was vacated as a result of the Defendants’ misrepresentation to the Court that Lot 28 was included in the foreclosure even though the Mortgage expressly stated the opposite. Defendants’ fraud included filing false Lis Pendens and false Certifications of Diligent Inquiry to the Court claiming that Lot 28 was included in the Mortgage when that Lot clearly was not. “The affidavit or certification of diligent inquiry required by Rule 4:64-1 and Rule 4:64-2 reflects the attorney’s reasonable, good faith compliance with the law, as it exists at Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 13 of 21 PageID: 1097 14 the time of the document’s execution.” US Bank Nat. Ass'n v. Guillaume, 38 A.3d 570, 209 N.J. 449 (2012). This requirement was added because Lenders and their attorneys were engaging in fraudulent conduct involving foreclosures, and this requirement was added to create a safeguard to protect homeowners from these fraudulent practices. Id. However, in this case, these safeguards were abandoned by zealous Defendants and their attorneys who tried to collect payments for Lot 28 and then filed false pleadings in Court alleging that Lot 28 was included in the Mortgage. Had it not been for the Appellate Division, the Defendants would have wrongfully foreclosed on Plaintiff’s property. Now that the Defendants were caught red-handed, the Plaintiff is asking this Court to hold the Defendants accountable for the hell they put him through for 4 years. Instead, the Defendants seek to point fingers elsewhere and try to drown the Court in non-relevant exhibits in the hope of creating enough confusion to distract the Court from the issues raised in Plaintiff’s Amended Complaint. The fact is that the Appellate Division confirmed that the Defendants’ actions were wrongful and without merit. Accordingly, this Motion to Dismiss should be denied. POINT VI DEFENDANTS’ MOTION TO DISMISS SHOULD BE DENIED BECAUSE THE PLAINTIFF’S CLAIMS ARE VIABLE The Plaintiff’s Amended Complaint contains counts for Fraud, Violation of the FDCPA, Breach of the Covenant of Good Faith and Fair Dealing, Malicious Prosecution, and Infliction of Emotional Distress. All of these claims are viable on this record. A. Fraud A claim for common law fraud must contain the following elements: (1) a material Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 14 of 21 PageID: 1098 15 misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting damages. Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997). As identified in the Amended Complaint, 35. At all times relevant, before, during, and after the underlying litigation, Defendants made representations to the Plaintiff and to the Court that PennyMac was entitled to foreclose on Lot 28 belonging to the Plaintiff even though Lot 28 was never part of any Mortgage. 36. These representations are enumerated in detail and with specificity in Paragraphs 12- 33 of this Amended Complaint, including the fact that Defendants McNeill, Powers, Trainor, Kelly, and O’Donnell filed false and misleading pleadings for the express purpose of obtaining a Final Judgment over Plaintiff. 37. These representations were false and Defendants knew these to be false. 38. These representations were made in bad faith and with actual malice. 39. The lower Court relied upon these misrepresentations in awarding Final Judgment against the Plaintiff on Lots 28 and 29, which was later reversed on Appeal when the Appellate Division confirmed that Lot 28 was not to be included in the Final Judgment. 40. The Defendants’ attempts to claim that Lot 28 was included in the Mortgage was a pretext to wrongfully and unjustly enrich themselves and their client. 41. As a direct and proximate result of the Defendants’ Fraud, Plaintiff has suffered substantial damages. The Plaintiff has plead all the elements of fraud, and has done so with particularity by Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 15 of 21 PageID: 1099 16 referencing paragraphs 12-33. Defendants ignore this fact, and argue that no specifics have been provided solely in an effort to delay and hinder this litigation. Just because the Defendants do not like the facts pled does not provide legal grounds to dismiss them. Accordingly, the Motion to Dismiss should be denied. B. FDCPA The issue of whether the FDCPA is time-barred is already addressed in Point I above. Regarding the issue of whether the Defendants are debt collectors under the FDCPA, the Amended Complaint. Defendants argued in its Motion to Dismiss that Blank Rome and its attorneys are exempt from liability under this act because they are not debt collectors. The Defendant argues that, relying on the principal purpose test in Tepper v. Amos Financial, LLC, 2018 WL 3733862 (2018), the FDCPA does not apply because Wells Fargo’s principal purpose is not to collect on debts. Yet, the Tepper case only deals with the first half of the definition of debt collector under the FDCPA. According to 15 USC 1692a(6), the term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. (emphasis added). The second half of the definition defines debt collectors as those who “regularly” collect on debts owed. The Third Circuit already dealt with this situation in Oppong v. First Union Mortgage Corp., 215 Fed. Appx. 114 (3d Cir. 2007). In Oppong, Wells Fargo argued that it was exempt under the F.D.C.P.A. because it Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 16 of 21 PageID: 1100 17 was not a debt collector. The Court rejected that argument because the definition of debt collector under Section 1692a(6) includes those who “regularly collects or attempts to collect…the debts of another.” Thus, a business may be a “debt collector” because it “regularly” engages in the collection of debts, regardless if in that specific case it was collecting on the debts of another. Id. The Court noted that the declaration by Wells Fargo representative, Kristina Nagel, submitted to the District Court along with the renewed summary judgment motion showed that, only a small percentage of cases involved collections of debts that were acquired by Wells Fargo when the borrower was in default. However, the District Court was correct to conclude that Wells Fargo is a debt collector under the F.D.C.P.A. because it “regularly” collects debts owed to another. Id. As the Court stated: In Crossley v. Lieberman, 868 F.2d 566, 570 (3d Cir.1989), we found that an attorney who had a long-term relationship with four creditor clients and filed 175 foreclosure or other collection suits in an eighteen-month period “regularly” collected debts owed to another. According to the certification of Kristina Nagel, Wells Fargo acquires approximately 89 home mortgages that are in default in a typical three-month period. (Ex. T.) Thus, in a typical eighteen-month period, it appears that Wells Fargo acquires 534 mortgages in default. Presumably Wells Fargo attempts to collect these debts, meaning that they attempt to collect *120 three times the number of debts as the lawyer in Crossley, who we found to regularly collect debts. See 828 F.2d at 570. Because Wells Fargo, “the nation's leading originator of mortgages,” (Appellee Br. at 30), is clearly a much larger operation than Lieberman's law firm, its debt collection activities represent a smaller proportion of its revenues. However, this disparity in size, by itself, is not dispositive of whether Wells Fargo “regularly” collects debts. See Goldstein, 374 F.3d at 63 (“[D]ebt collection constituting 1% of the overall work or revenues of a very large entity may, for instance, suggest regularity, whereas such work constituting 1% of an individual lawyer's practice might not.”). Oppong v. First Union Mortgage Corp., 215 Fed. Appx. at 114. In that case, Wells Fargo argued that because the proportion of its business that involves Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 17 of 21 PageID: 1101 18 collecting debts is so small in relation to its other business of originating mortgages, as a matter of law it does not “regularly” collect debts. However, the Court noted that there was no case law to support Wells Fargo’s position. Furthermore, such argument was contradicted by decisions in the 5th , 9th and 2nd Circuits. The Fifth Circuit, in Garrett v. Derbes, 110 F.3d 317, 318 (5th Cir.1997), held that “if the volume of a person's debt collection services is great enough, it is irrelevant that these services only amount to a small fraction of his total business activity.” The Ninth Circuit, without inquiring into the proportion of its business consisted of debt collection activities, found that Western Union “regularly” collected debts because it engaged in debt collection in the usual course of its business. Romine v. Diversified Collection Services, Inc., 155 F.3d 1142, 1146 (9th Cir.1998). And the Second Circuit recently overturned a district court that had found in favor of Wells Fargo's position. In Goldstein v. Hutton, Ingram, Yuzek, Gainen, Carroll & Bertolotti, 374 F.3d 56, 62-63 (2d Cir.2004), the Second Circuit held that a law firm was “regularly” engaged in debt collection by assessing “facts closely relating to ordinary concepts of regularity” regardless of whether the entity derives significant portion of its business from debt collection. Here, Blank Rome’s website indicates that it “We have extensive experience representing consumer mortgage originators, correspondent lenders, mortgage servicers, and investors.” See https://www.blankrome.com/industries/consumer-financial-services/consumer- finance-litigation. It is clear that Blank Rome represents these mortgage lenders and services for the purposes of collecting on debts, just as it has in this case. This applies to the law firm as well as its employees who act on their behalf. Blank Rome has not submitted a Certification disavowing its role as a debt collector. Therefore, they satisfy the standard because they regularly collect debts on behalf of their clients. Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 18 of 21 PageID: 1102 19 C. Breach of Covenant of Good Faith and Fair Dealing “A party's performance under a contract may breach ... [the] covenant [of good faith and fair dealing] even though that performance does not violate a pertinent express term,” Wilson v. Amerada Hess Corp., 168 N.J. 236, 245, 773 A.2d 1121 (2001) (citation omitted). “The duty of good faith and fair dealing cannot alter the clear terms of an agreement and may not be invoked to preclude a party from exercising its express rights under such an agreement.” DiCarlo v. St. Mary Hosp., 530 F.3d 255, 267 (3d Cir.2008) (internal quotations and citations omitted). Here, the Defendants breached the covenant of good faith and fair dealing because they misrepresented their ability to collect on Lot 28 when they knew or should have known that Lot 28 was not part of the Mortgage. Plaintiff alleged this was done in bad faith and with improper motive. There is no Certification from anyone from Pennymac or any of the other Defendants to refute these allegations. Some of the Defendants claim that they are not liable under this section because they were not parties to the Mortgage. Yet, all the Defendants acted on behalf of Pennymac in their collection efforts. Since Pennymac claimed to be the holder of the loan and all the other Defendants acted on their behalf to wrongfully foreclose on Lot 28, all the Defendants are liable for this breach of good faith. D. Emotional Distress Defendants claim that Plaintiff failed to allege any emotional distress. Clearly, Defendants have not bothered to read the Amended Complaint and instead chose to file this Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 19 of 21 PageID: 1103 20 Motion solely to delay and hinder the litigation. As the Amended Complaint states: 65. The actions of Defendants have resulted in Plaintiff being forced to file defensive actions with the court, that were by majority ignored due to Defendant’s fraudulently modified documents. 66. Plaintiff suffered not only personal embarrassment by the listing of his property for Sheriff’s Sale, but undue emotional distress at losing Lot 28, which was unmortgaged property that should never have been included in the Complaint. 67. Defendants intentionally, knowingly and recklessly misrepresented to the Courts the property that was actually mortgaged between Plaintiff and Defendant. In fact, this was false, and Defendant knew this to be false. 68. Defendant's conduct – fraudulently seeking to include Lot 28 of 763 Squankum Yellowbrook Road, Howell, NJ 07727 - was fraudulent, outrageous and extreme. 69. Such conduct was undertaken with the specific intent of inflicting emotional distress on the Plaintiff. Defendants’ conduct was fraudulent, outrageous and extreme. 70. The Defendants attempts to claim that Lot 28 was included in the Mortgage was a pretext to steal all of Plaintiff’s property wrongfully and unjustly to enrich themselves and their client. As a result of Defendant's actions, the Plaintiff suffered severe emotional distress. 71. Plaintiff continues to suffer substantial damages to date. Just because the Defendants do not like the facts pled does not provide legal grounds to dismiss them. Accordingly, the Motion to Dismiss should be denied. CONCLUSION Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 20 of 21 PageID: 1104 21 For the all of the aforementioned reasons, the Motion to Dismiss should be denied. Rubenstein Business Law Attorneys for Plaintiff Dated: March 19, 2019 By:_ s/David Rubenstein David Rubenstein, Esq. Case 3:18-cv-15929-MAS-LHG Document 30 Filed 03/20/19 Page 21 of 21 PageID: 1105
