Gress v. Freedom Mortg. Corp.

• Citation: 386 F.Supp.3d 455
• Decision Date: 26 June 2019
• Docket Number: 1:19-cv-375
• Parties: Michael J. GRESS and Brandy L. Gress and on behalf of themselves and all others similarly situated, Plaintiffs, v. FREEDOM MORTGAGE CORPORATION, Defendant.
• Court: U.S. District Court — Middle District of Pennsylvania

386 F.Supp.3d 455

Michael J. GRESS and Brandy L. Gress and on behalf of themselves and all others similarly situated, Plaintiffs,

v.FREEDOM MORTGAGE CORPORATION, Defendant.

1:19-cv-375

United States District Court, M.D. Pennsylvania.

Filed June 26, 2019

Bradley F. Silverman, Pro Hac Vice, Douglas Gregory Blankinship, Pro Hac Vice, Todd S. Garber, Pro Hac Vice, Finkelstein Blankinship Frei-Pearson & Garber, LLP, White Plains, NY, Matthew David Schultz, Pro Hac Vice, William F. Cash, III, Pro Hac Vice, Levin, Papantonio, Thomas, Mitchell, Rafferty & Proctor PA, Pensacola, FL, Gary F. Lynch, Carlson Lynch, LLP, Pittsburgh, PA, for Plaintiffs.

Brian M. Serafin, Pro Hac Vice, Jason W. McElroy, Timothy Patrick Ofak, Weiner Brodsky Kider PC, Washington, DC, for Defendant.

MEMORANDUM & ORDER

John E. Jones III, United States District Judge Plaintiffs Michael and Brandy Gress ("Plaintiffs") bring this class action against Defendant Freedom Mortgage Corporation ("Defendant") on behalf of a multi-state putative class claiming breach of contract (Count I); violation of various state consumer protection statutes¹ on behalf of the multi-state putative class (Count II); violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. §§ 201-1, et seq. , on behalf of the Pennsylvania cases (Count III); violation of the Pennsylvania Fair Credit Extension Uniformity Act ("FCEUA"), 73 P.S. § 2270.1, et seq. , on behalf of the Pennsylvania cases (Count IV); and unjust enrichment on behalf of the Pennsylvania cases (Count V). Plaintiffs filed their Complaint on March 5, 2019. (Doc. 1). Presently pending before the Court is Defendant's Motion to Dismiss pursuant to Rules 12(b)(1), 12(b)(2), and 12(b)(6) of the Federal Rules of Civil Procedure, filed on April 17, 2019. (Doc. 21). The Motion has been fully briefed, (Docs. 22, 26, 27), and is ripe for review.

I. FACTUAL BACKGROUND

We take the following facts from Plaintiffs' Complaint and assume them to be true, as we must.

On May 30, 2017, Plaintiffs purchased a home in Mercersburg, Pennsylvania, and executed a mortgage agreement on behalf of their lender. (Doc. 1 at ¶ 50). The loan and mortgage were later assigned to Defendant. (Id. at ¶ 51). The mortgage instrument was a form document that included the following provision:

If (a) Borrower fails to perform the covenants and agreements contained in this Security Agreement, (b) there is a legal proceeding that might significantly affect Lender's interest in the Property and/or rights under this Security Agreement (such as a proceeding in bankruptcy, probate, for condemnation or forfeiture, for enforcement of a lien which may attain priority over the Security Instrument or to enforce laws or regulations), or (c) Borrower has abandoned the Property, then Lender may do and pay for whatever is reasonable or appropriate to protect Lender's interest in the Property and rights under this Security Agreement, including protecting and/or assessing the value of the Property, and securing and/or repairing the Property.

(Id. at ¶ 56). Plaintiffs suffered financial difficulties, which resulted in a missed mortgage payment in 2017. (Id. at ¶ 58). Despite falling behind, however, Plaintiffs made subsequent monthly payments on October 31, 2017, November 30, 2017, January 6, 2018, and February 21, 2018. (Id. at ¶ 59). Plaintiffs also contacted Defendant about the default and notified Defendant that they intended to become current on the mortgage and still occupied the house. (Id. at ¶ 60). Defendant ordered a property inspection of Plaintiffs' home and assessed a fee of $15 against Plaintiffs for the inspection on February 21, 2018. (Id. at ¶¶ 62-63). Plaintiffs paid the $15 fee on March 31, 2018. (Id. at ¶ 66).

Plaintiffs continued to make monthly payments on March 31, 2018, April 30, 2018, May 31, 2018, and June 30, 2018. (Id. at ¶ 67). Thereafter, Plaintiffs again suffered a financial setback and missed a mortgage payment that had been due on August 1, 2018, followed by a late payment on September 14, 2018, for the payment due on September 1, 2018. (Id. at ¶ 69). As before, Plaintiffs contacted Defendant about the defaults and reiterated that they intended to bring themselves current on the loan and that they continued to occupy the residence. (Id. at ¶ 70). Plaintiffs and Defendant also discussed a potential loan modification. (Id. at ¶ 71). On October 10, 2018, Plaintiffs sent Defendant a loan modification application. (Id. at ¶ 72). Defendant ordered three more property inspections and assessed $15 fees for the inspections to Plaintiffs on August 21, 2018, October 1, 2018, and October 31, 2018. (Id. at ¶¶ 74-75). Plaintiffs paid these fees on February 7, 2019. (Id. at ¶ 78). The fees assessed for each of the four property inspections appeared on account statements Plaintiffs received from Defendant. (Id. at ¶¶ 79-80). The statements included the assessed fees in the amount owed by Plaintiffs on their mortgage. (Id. at ¶ 80).

Plaintiffs aver that thousands of other borrowers around the country are also being charged for these property inspection fees by Defendant. (Id. at ¶ 82). According to Plaintiffs, Defendant automates the ordering and performance of property inspections. (Id. at ¶ 17). Defendant's computer system automatically searches for accounts that have been in default for a particular period and orders property inspections of the mortgaged properties. (Id. at ¶ 18). The only factor determining when the computer will order a property inspection is the length of time an account has been in default, not whether an inspection is reasonable or appropriate under the circumstances, according to Plaintiffs. (Id. at ¶¶ 19, 21). Once ordered, an inspector drives by the property to determine whether it has been abandoned and then electronically sends inspection reports back to Defendant's computer system. (Id. at ¶¶ 25, 26). These inspections occur even when Defendant knows or should know that the property is not abandoned. (Id. at ¶ 28). The system continues to order inspections of the same properties, sometimes monthly, until the borrower becomes current on the loan. (Id. at ¶ 33).

II. DISCUSSION

Defendant moves to dismiss Plaintiffs' Complaint pursuant to Rule 12(b)(1) (lack of subject matter jurisdiction), Rule 12(b)(2) (lack of personal jurisdiction), and Rule 12(b)(6) (failure to state a claim upon which relief can be granted) of the Federal Rules of Civil Procedure. As to Rule 12(b)(1), lack of subject matter jurisdiction, Defendant argues that Plaintiffs lack standing to represent out-of-state putative class members for violations of other states' laws. As to Rule 12(b)(2), Defendant argues that out-of-state putative class members lack personal jurisdiction over Defendant in Pennsylvania. Finally, Defendant argues that, for a variety of reasons, Plaintiffs have failed to adequately plead a claim for relief under Rule 12(b)(6). We will begin with Defendant's standing argument under Rule 12(b)(1).

A. Rule 12(b)(1) – Lack of Standing

1. Standard of Review

On a Rule 12(b)(1) motion, a court must first determine if the motion is a "facial" or a "factual" attack. Constitution Party of Pa. v. Aichele , 757 F.3d 347, 357 (3d Cir. 2014). A facial attack "considers a claim on its face" and argues that the claim "is insufficient to invoke the subject matter jurisdiction of the court." Id. at 358. With a facial attack, "the court must only consider the allegations of the complaint and documents referenced therein and attached thereto, in the light most favorable to the plaintiff." Id. (quoting In re Schering Plough Corp. Intron , 678 F.3d 235, 243 (3d Cir. 2012) ). With a factual attack, by contrast, "a court may weigh and ‘consider evidence outside the pleadings.’ " Id. (quoting Gould Elecs. Inc. v. United States , 220 F.3d 169, 176 (3d Cir. 2000) ). Standing is "properly brought pursuant to Rule 12(b)(1), because standing is a jurisdictional matter." Id. at 357 (quoting Ballentine v. United States , 486 F.3d 806, 810 (3d Cir. 2007) ).

2. Discussion

Defendant's motion is properly understood as a facial attack. Thus, we consider whether Plaintiffs' allegations and attached documents establish the necessary standing in the light most favorable to Plaintiffs.

Defendant does not challenge Plaintiffs' standing to assert their own claims under Pennsylvania law. Rather, Defendant challenges their standing to assert claims on behalf of out-of-state putative class members who would potentially have claims arising under the laws of other states. We concede that this is a murky area of law lacking Third Circuit precedent and populated by the divergent conclusions of district courts.

Article III standing requires an "injury in fact," a causal connection between the injury and conduct complained of, and redressability. Lujan v. Defenders of Wildlife , 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). As noted, there appears to be no dispute that Plaintiffs have standing to state their own claims under Pennsylvania law. Furthermore, there is no indication that Plaintiffs are attempting to allege that they can recover under the laws of other states. Finally, Defendant is not articulating a challenge to the potential standing, or lack thereof, of putative class members. Rather, Defendant essentially suggests that Plaintiffs may not allege the claims of out-of-state putative class members on their behalf because Plaintiffs do not personally have standing for those claims.

Several of our sister courts within the Third Circuit have agreed with Defendant's position. See In re Insulin Pricing Litig. , 3:17-cv-699, 2019 WL 643709 (D.N.J. Feb. 15, 2019) ; In re Niaspan Antitrust Litig. , MDL No. 2460, 2015 WL 8150588 (E.D. Pa. Dec. 8, 2015) ; In re Wellbutrin XL Antitrust Litig. , 260 F.R.D. 143 (E.D. Pa. 2009). Other courts within our Circuit have taken Plaintiffs' perspective. See In re Generic Pharmaceuticals Pricing Antitrust Litig. ,...