Brown v. First Tenn. Bank Nat'l Ass'n

• Citation: 753 F.Supp.2d 1249
• Decision Date: 20 November 2009
• Docket Number: Civil Action File No. 1:09–CV–0679–BBM.
• Parties: Andrew BROWN, individually, and on behalf of a class of all persons similarly situated, Plaintiff,v.FIRST TENNESSEE BANK NATIONAL ASSOCIATION, individually and d/b/a First Horizon Home Loans, Defendant.
• Court: U.S. District Court — Northern District of Georgia

753 F.Supp.2d 1249

Andrew BROWN, individually, and on behalf of a class of all persons similarly situated, Plaintiff,

v.FIRST TENNESSEE BANK NATIONAL ASSOCIATION, individually and d/b/a First Horizon Home Loans, Defendant.

Civil Action File No. 1:09–CV–0679–BBM.

United States District Court, N.D. Georgia, Atlanta Division.

Nov. 20, 2009.

Dustin Thomas Brown, James Clay Fuller, Jason Lance Crawford, Daughtery, Crawford, Fuller & Brown LLP, Benjamin Arthur Land, Jerry Alan Buchanan, Buchanan & Land, Columbus, GA, for Plaintiff.Irene C. Freidel, Stacey L. Gorman, K & L Gates, LLP, Boston, MA, Christopher Scott Anulewicz, Balch & Bingham, Atlanta, GA, for Defendant.

ORDER

BEVERLY B. MARTIN, District Judge.

This matter is before the court on two Requests for Judicial Notice [Doc. Nos. 9, 26], a Motion to Dismiss Plaintiff's Class Action Complaint [Doc. No. 10], and a Motion to Dismiss the First Amended Complaint [Doc. No. 24], all filed by Defendant First Tennessee Bank National Association (“First Tennessee”), which does business as First Horizon Home Loans (“First Horizon”). ¹ Plaintiff Andrew Brown (“Mr. Brown”) has filed Plaintiff's Motion for Hearing [Doc. No. 23].²

I. Factual and Procedural Background

On a motion to dismiss, the court accepts as true all factual allegations set out in the plaintiff's complaint. See Lotierzo v. Woman's World Med. Ctr., Inc., 278 F.3d 1180, 1182 (11th Cir.2002). The following overview of the facts is derived from the Amended Complaint, and does not constitute findings of fact by the court.

Mr. Brown resides in Fayetteville, Georgia. (Am. Compl. ¶ 1.) On February 26, 2007, First Horizon through its settlement agent, closed a Department of Veterans Affairs (“VA”) Interest Rate Reduction Refinancing Loan (“IRRRL”), secured by Mr. Brown's Fayetteville residence. ( Id. ¶¶ 1, 28.) During the closing, the settlement agent provided Mr. Brown with a HUD–1 form, with no indication that Mr. Brown was charged either settlement or attorneys' fees. The HUD–1 did show that Mr. Brown was charged $775 as an abstract or title search fee. ( Id. ¶¶ 29–30.)

Despite what was written on the face of the document, Defendant, through its agent, did charge Mr. Brown settlement, closing, and attorneys' fees, none of which could “lawfully be charged to the borrower in connection with a VA IRRRL.” ( Id. ¶ 10.) Specifically, First Horizon's acts violated 38 C.F.R. § 36.4312(d), which limits the charges that a lender can levy against a veteran-borrower for this type of loan. First Horizon disguised its violation of federal regulations by bundling the unlawful fees into the title examination fee. ( Id. ¶ 30.) This was “done for the express purpose of shifting the settlement closing and/or attorney[s'] fee, which may not be charged to the borrower under federal law, to the veteran-borrower[.]” ( Id.) “This improper ‘bundling’ ... is part of Defendant's regular way of doing business as an ongoing entity.” ( Id.) Not only did its closing agents conceal the unlawful character of these charges, but First Horizon executed a required VA certification that stated it did not charge Mr. Brown any fees in excess of those permitted by federal regulations. ( Id. ¶¶ 31, 32); see also 38 C.F.R. § 36.4312(a). Mr. Brown says that First Horizon harmed him by “illegally requir[ing] [him] to pay for fees that federal law specifically prohibits lenders from charging such borrowers.” (Am. Compl. ¶ 37.) In return, First Horizon profited through the acquisition of new business and because it “gained the improper attorney[s'] fees that were bundled into [Mr. Brown's] title examination charges.” ( Id. ¶ 39.)

First Horizon's misrepresentation of the nature of the fees and its unlawful certification of the HUD–1 were integral elements of a pattern of activity designed “to defraud United States military veteran-borrowers who are led to believe that they are being charged only lawful and authorized charges when, in fact, they are being charged illegal and unauthorized charges.” ( Id. ¶ 68.) “[First Horizon] has committed more than forty and perhaps thousands of the predicate acts ... in furtherance of [a] scheme to charge U.S. military veteran-borrowers illegal charges in connection with VA IRRRLs.” ( Id. ¶ 58.) To perpetuate this scheme, First Horizon and its agents make use of U.S. mail and wires. ( Id. ¶ 68.)

Mr. Brown alleges that First Horizon's actions form a “regular, systematic, and continuous” pattern of unlawful activity that First Horizon implements today and that will likely continue into the future. ( Id. ¶¶ 68, 71.) On March 11, 2009, Mr. Brown filed suit against First Horizon. On May 13, First Horizon filed a motion to dismiss and a request for judicial notice. Mr. Brown amended his Complaint on June 4, 2009, and filed a motion for hearing twelve days later. In his Amended Complaint, Mr. Brown alleges the following counts: (1) violations of Georgia's Racketeer Influenced and Corrupt Organizations Act (“Georgia RICO”), O.C.G.A. § 16–14–1, et seq.; (2) punitive damages for state RICO liability; (3) violations of the federal Civil Racketeer Influenced and Corrupt Organizations Act (“federal RICO”), in violation of 18 U.S.C. § 1962(c); and (4) federal RICO conspiracy, in violation of 18 U.S.C. § 1962(d). As relief, Mr. Brown seeks: (1) damages caused by the fraudulent scheme; (2) special damages; (3) interest on loan principal attributable to the fee that First Horizon allegedly should have borne; (4) RICO penalties, including treble damages, attorneys' fees and costs of litigation, pursuant to O.C.G.A. § 16–14–6(c) for the state claims; and (5) uncapped punitive damages, pursuant to O.C.G.A. § 51–12–5.1(f), as to the state claims.

First Horizon filed its Motion to Dismiss First Amended Complaint and its second Request for Judicial Notice on June 18, 2009.

II. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), a court may grant a motion to dismiss when a complaint fails to state a claim upon which relief can be granted. To withstand a motion to dismiss, a complaint need not contain “detailed factual allegations,” but must “ ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). The court must determine whether the plaintiff “has alleged enough facts to suggest, raise a reasonable expectation of, and render plausible” the claims. Watts v. Fla. Int'l Univ., 495 F.3d 1289, 1296 (11th Cir.2007). The court construes the complaint in the plaintiff's favor, and accepts the facts it alleges as true. M.T.V. v. DeKalb County Sch. Dist., 446 F.3d 1153, 1156 (11th Cir.2006). However, “a formulaic recitation of the elements of a cause of action will not do,” Twombly, 550 U.S. at 555, 127 S.Ct. 1955, as “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, ––– U.S. ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). Thus, a wholly conclusory statement of a claim cannot, without more, survive a motion to dismiss. See Weissman v. Nat'l Ass'n of Sec. Dealers, Inc., 500 F.3d 1293, 1303 (11th Cir.2007) (citation omitted).

III. AnalysisA. Federal RICO Claims

First Horizon argues that Mr. Brown's federal RICO claims (Counts III and IV) are defective as alleged and therefore must be dismissed. It asserts that Mr. Brown has failed to adequately allege the existence of (1) a pattern of racketeering activity, (2) an enterprise, or (3) a conspiracy to violate the RICO statute's substantive provisions. Accordingly, Mr. Brown has not stated a claim for violations of 18 U.S.C. § 1962(c)-(d) and the claims must be dismissed.

In relevant part, federal RICO prohibits the following activities:

(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.

(d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.

18 U.S.C. § 1962(c)-(d). To establish liability under § 1962(c), a plaintiff must prove: “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985) (footnote omitted).

First Horizon first argues that Mr. Brown has not alleged sufficient facts to establish racketeering activity. The Code defines “pattern of racketeering activity” as “at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity.” 18 U.S.C. § 1961(5). Section 1961 defines “racketeering activity” by listing a series of predicate acts that satisfy the statutory standard. These include: “any act which is indictable under ... section 1341 (relating to mail fraud) [or] section 1343 (relating to wire fraud)” of Title 18 of the United States Code. 18 U.S.C. § 1961(1)(B).³

Mr. Brown identifies mail and wire fraud as the racketeering activity on which his federal RICO claims are based and, therefore, must allege facts sufficient to satisfy the elements of these offenses. Accordingly, to survive a motion to dismiss, he must allege that First Horizon “(1) intentionally participate[d] in a scheme to defraud another of money or property and (2) use[d] the mails [and] wires in furtherance of that scheme.” Pelletier v. Zweifel, 921 F.2d 1465, 1498 (11th Cir.1991) (citation omitted). Because First Horizon has not contested the...