Oates v. Wells Fargo Bank, N.A.

• Decision Date: 31 July 2012
• Docket Number: Civil Action No. 12–1177.
• Citation: 880 F.Supp.2d 620
• Parties: Thomas A. OATES, Jr., Plaintiff, v. WELLS FARGO BANK, N.A., Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

880 F.Supp.2d 620

Thomas A. OATES, Jr., Plaintiff,

v.WELLS FARGO BANK, N.A., Defendant.

Civil Action No. 12–1177.

United States District Court, E.D. Pennsylvania.

July 31, 2012.

George C. Zumbano, John E.D. Larkin, Gawthrop Greenwood PC, West Chester, PA, for Plaintiff.

Christine M. Kovan, Stevens & Lee PC, King of Prussia, PA, Steven J. Adams, Stevens & Lee, Reading, PA, for Defendant.

MEMORANDUM

EDUARDO C. ROBRENO, District Judge.

Thomas A. Oates, Jr. (“Plaintiff”) brings this civil action against Wells Fargo Bank, N.A. (“Defendant”), for violations of the Fair Credit Reporting Act (“FCRA”), the Fair Debt Collection Practices Act (“FDCPA”), and Pennsylvania law. Defendant removed from the Court of Common Pleas for Chester County, Pennsylvania, and moved to dismiss Plaintiff's Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) and (6). For the reasons that follow, the Court will grant in part and deny in part the Motion to Dismiss.

I. BACKGROUND

Because the facts of this case occur in the foreground of a complex regulatory scheme involving a national flood insurance program, a discussion of the facts follows an explanation of that statutory and regulatory scheme.

A. National Flood Insurance Act of 1968 and Subsequent Amendments

Congress enacted the National Flood Insurance Act of 1968 (“NFIA”) to share the risk of flood losses by establishing a national flood insurance program. See42 U.S.C. § 4001(a) (2006). Congress amended the NFIA to require property owners assisted by federal programs or federally insured institutions to obtain flood insurance if the subject property is located in a special flood hazard area (“SFHA”).¹See Flood Disaster Protection Act of 1973 (“FDPA”) § 102, 42 U.S.C. § 4012a (2006). And Congress further amended the NFIA to require lenders to notify purchasers of property, in writing, within a reasonable time before signing the purchase agreement, that the property is located in a SFHA.² National Flood Insurance Reform Act of 1994 (“Reform Act”) § 527, 42 U.S.C. § 4104a(a)(1); 12 C.F.R. § 339.9(a).

If the lender determines at any time during the term of a loan that the property securing the loan is either not covered by flood insurance or is covered inadequately, the lender must notify the borrower that the borrower should obtain insurance at the borrower's expense. 42 U.S.C. § 4012a(e)(1); 12 C.F.R. § 339.7. If the borrower fails to purchase flood insurance coverage within forty-five days after the lender provides notice, the lender must purchase flood insurance on behalf of the borrower and may charge the borrower any associated costs of premiums and fees. 42 U.S.C. § 4012a(e)(2); 12 C.F.R. § 339.7. Lenders may rely on a third party to determine whether a property falls within a SFHA but “only to the extent that such person guarantees the accuracy of the information.” 42 U.S.C. § 4104b(d) (2006). Finally, the borrower and lender may jointly request the Administrator of the Federal Emergency Management Agency (“Director”) to review whether a property is located in a SFHA. Id. § 4012a(e)(3).

A federal agency may assess a civil penalty against a lender demonstrating a pattern or practice of failing to provide notice or purchase flood insurance coverage as required. Id. § 4012a(f)(2)(B). And the Reform Act protects lenders, in certain circumstances, from liability under state law when the lender purchases flood insurance on behalf of a borrower:

Notwithstanding any State or local law, for purposes of this subsection, any regulated lending institution that purchases flood insurance or renews a contract for flood insurance on behalf of or as an agent of a borrower of a loan for which flood insurance is required shall be considered to have complied with the regulations issued under subsection (b) of this section.

Id. § 4012a(f)(6).

B. Facts

On June 29, 2007, Defendant loaned Plaintiff $241,500. Compl. ¶¶ 4–5, ECF No. 1. The loan was secured by a mortgage on real property and improvements located at 1019 Kimberton Road, West Pikeland Township, Pennsylvania (“the Property”).³Id. By the time of closing on June 27, 2007, Defendant obtained a flood zone certification that the Property was not located within a SFHA. Id. ¶ 8. Plaintiff commenced making monthly payments on the loan. Id. ¶ 9.

On August 9, 2007, Defendant obtained a second flood zone certification that the Property was located in a SFHA. Id. ¶¶ 11–12. Accordingly, Defendant advised Plaintiff that the Property was in a SFHA and that Plaintiff must obtain flood insurance on the Property. Id. ¶ 13.

Defendant acquired flood insurance on the Property and assessed the premiums paid to the monthly loan payments. Id. ¶¶ 14, 36. Plaintiff refused to pay the additional flood insurance premiums because he believed the second flood zone certification to be in error.⁴Id. ¶ 15.

In 2008, however, Defendant reported to certain credit reporting agencies that Plaintiff was in default or late in making payments on the loan. Id. ¶ 18. And on August 2, 2010, Defendant initiated a mortgage foreclosure action against Plaintiff because the loan was in default. Id. ¶ 19–20. Both actions were the result of the additional insurance premium charges Defendant assessed, which, Plaintiff contends, were erroneous. Id. ¶ 17–34. Plaintiff continued to make monthly payments on the loan less any premiums assessed for the flood insurance policy.⁵Id. ¶ 36.

Plaintiff suffered damages in the form of costs for obtaining a surveyor and providing information to Defendant that the Property was not in a SFHA, unreimbursed and improperly assessed flood insurance premiums, attorney's fees and costs, and lost profits relating to Plaintiff's business, Tom Oates Automotive Center, arising from Plaintiff's inability to obtain financing because of alleged inaccuracies in Plaintiff's credit report. Id. ¶¶ 32–37.

II. PROCEDURAL HISTORY

On August 2, 2011, Plaintiff commenced this action against Defendant in the Court of Common Pleas of Chester County, Pennsylvania. Plaintiff alleges the following six counts: violation of the FCRA (Count I); violation of the FDCPA (Count II); libel (Count III); negligence (Count IV); breach of contract (Count V); and breach of warranty of good faith (Count VI).

On March 6, 2012, Defendant removed to the U.S. District Court for the Eastern District of Pennsylvania invoking the Court's federal-question and diversity jurisdiction.⁶See28 U.S.C. §§ 1331, 1332(a), 1441(b).

On March 13, 2012, Defendant moved to dismiss the Complaint in its entirety. Mot. to Dismiss 1, ECF No. 5. Plaintiff responded. Pl.'s Resp. 1, ECF No. 6. On July 27, 2012, the Court held a hearing on the Motion. The Motion is now ripe for disposition.

III. LEGAL STANDARD

A party may move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When considering such a motion, the Court must “accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the non-moving party.” DeBenedictis v. Merrill Lynch & Co., 492 F.3d 209, 215 (3d Cir.2007) (internal quotation marks omitted). To withstand a motion to dismiss, the complaint's “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). This “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. Although a plaintiff is entitled to all reasonable inferences from the facts alleged, a plaintiff's legal conclusions are not entitled to deference and the Court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986).

The pleadings must contain sufficient factual allegations so as to state a facially plausible claim for relief. See, e.g., Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir.2009). “ ‘A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’ ” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 677, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). In deciding a Rule 12(b)(6) motion, the Court limits its inquiry to the facts alleged in the complaint and its attachments, matters of public record, and undisputedly authentic documents if the complainant's claims are based upon these documents. See Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir.1994); Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.1993).

IV. DISCUSSION

Defendant moves to dismiss all claims in the Complaint for failure to state a claim upon which relief can be granted. Defendant moves to dismiss Plaintiff's demand for lost profits for lack of jurisdiction. For the reasons provided, the Court will grant in part and deny in part the Motion to Dismiss.

A. Flood Disaster Protection Act Preemption

First, Defendant argues that the FDPA preempts Plaintiff's state and federal claims. The Third Circuit has not addressed whether there is an express or implied right of action for violations of the flood zone determination and notification requirements of the FDPA. Congress did not expressly confer a private right of action in the FDPA. And courts that have considered the issue have concluded that no private right of action exists. See, e.g., Lukosus v. First Tenn. Bank Nat'l Ass'n, 89 Fed.Appx. 412, 412 (4th Cir.2004) (per curiam).

None of Plaintiff's claims is for a violation of the FDPA; therefore, whether FDPA confers a private right of action is not principally at issue here. Rather, Defendant contends that Plaintiff cannot bring a state cause of action based on a violation of the FDPA. The Pennsylvania courts have not ruled on this...