Proctor v. Metropolitan Money Store Corp.

• Court: U.S. District Court — District of Maryland
• Writing for the Court: Roger W. Titus
• Citation: Proctor v. Metropolitan Money Store Corp., 645 F.Supp.2d 464 (D. Md. 2009)
• Decision Date: 13 August 2009
• Docket Number: Civil Action No. RWT-07-1957.
• Parties: Melvin J. PROCTOR, et al., Plaintiffs, v. METROPOLITAN MONEY STORE CORP., et al. Defendants.

645 F.Supp.2d 464

Melvin J. PROCTOR, et al., Plaintiffs, v. METROPOLITAN MONEY STORE CORP., et al. Defendants.

Civil Action No. RWT-07-1957.

United States District Court, D. Maryland.

August 13, 2009.

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Scott C. Borison, Janet Sue Legg, Legg Law Firm LLC, Frederick, MD, Peter A. Holland, The Holland Law Office PC, Annapolis, MD, Phillip R. Robinson, Civil Justice Inc., Baltimore, MD, for Plaintiffs.

Leticia Nicholls, Takoma Park, MD, pro se.

Sidney S. Friedman, Rosemary E. Allulis, Weinstock Friedman and Friedman PA, Baltimore, MD, Erwin Roderick E. Jansen, Jr., The Law Offices of Erwin R. E. Jansen LLC, Lanham, MD, for Defendants.

Joy Jenis Jackson, Boyds, MD, pro se.

MEMORANDUM OPINION

ROGER W. TITUS, District Judge.

Plaintiffs brought this action against numerous Defendants, who are legal entities and persons associated with them, who are alleged to have been involved in a mortgage foreclosure rescue scam. Plaintiffs allege that their status as homeowners with substantial equity in their homes, but who were nevertheless facing foreclosure, made them targets of Defendants' promise of credit repair and foreclosure avoidance, which, in actuality, involved fraudulent representations and transactions designed to siphon off the equity in the homeowners' homes, thus leaving them in a far worse position than before.

This matter has come before the Court on numerous occasions and, thus, the Court need not repeat the entire factual and procedural of the case. See Proctor v Metro. Money Store Corp., 579 F.Supp.2d 724 (D.Md.2008). Rather, the pertinent procedural history is that on September 30, 2008, the Court issued a Memorandum Opinion [Paper No. 143] that dismissed all counts of the Plaintiffs' First Amended Complaint against Defendants Alexander J. Chaudhry and Ali Farahpour and granted Plaintiffs leave to file a Second Amended Complaint against those Defendants along with a renewed motion to certify a class against the Defendants, appoint a class representative, and appoint class counsel. Id. In dismissing the First Amended Complaint in general against Farahpour and Count VII against Chaudhry, the Court found that the Plaintiffs had not sufficiently alleged what each of those Defendants had done to fulfill their respective roles in the scheme. Id. at 744-45.

Plaintiffs filed their Second Amended Complaint [Paper No. 150] on November 14, 2008, along with their Amended Motion to Certify Class [Paper No. 151]. On January 9, 2009, Chaudhry and Farahpour filed their Motions to Dismiss the Second Amended Complaint as well as their Motion to Stay Class Proceedings and Opposition to the Plaintiffs' Amended Motion to Certify Class [Paper Nos. 162, 163, 164, & 165], which were opposed by the Plaintiffs [Paper No. 175].

On January 22, 009, Chaudhry and Farahpour filed Counterclaims against the Plaintiffs for fraud, fraudulent concealment, negligent misrepresentation, fraudulent misrepresentation, and civil conspiracy to commit mortgage fraud. [Paper No. 166]. Plaintiffs moved to dismiss and strike the Counterclaims [Paper Nos. 166 & 171], which Chaudhry and Farahpour opposed [Paper Nos. 173 & 174].

A hearing was held on July 6, 2009 on all of the pending motions, and on the following day, the Court entered an order filed on July 8, 2009 that disposed of all of the motions for reasons stated on the record and "that will follow in an opinion to be filed." The Court now enters that Opinion.

ANALYSIS

Chaudhry and Farahpour have moved to dismiss the Second Amended Complaint on the following grounds: (1) Plaintiffs have failed to plead fraud with the particularity that is required under Fed.R.Civ.P. 9(b); and (2) Plaintiffs have failed to state a claim for RICO (Counts I-III), RESPA (Count IV), PHIFA (Count V), and gross negligence (Count VI) against Chaudhry and Farahpour.

I. Standard of Review

A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) tests the sufficiency of the complaint. Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1969, 167 L.Ed.2d 929 (2007), the Supreme Court declared the "retirement" of the long-cited "no set of facts" standard first announced in Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).¹ The Court in Twombly looked instead to whether the Petitioner alleged "enough facts to state a claim to relief that is plausible on its face." Id. at 1974 (observing that "[p]etitioner's obligation to provide grounds for his entitlement to relief requires more than labels and conclusions, and formalistic recitation of the elements of a cause of action will not do"). In sum, "factual allegations must be enough to raise a right to relief above a speculative level." Id. at 1965; see also Ashcroft v. Iqbal, 556 U.S. ___, 129 S.Ct. 1937, 1949-50, 173 L.Ed.2d 868 (2009) (holding that "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.").

No matter the standard used, the Court must consider all well-pled allegations in a complaint as true, see Albright v. Oliver, 510 U.S. 266, 268, 114 S.Ct. 807, 127 L.Ed.2d 114 (1994), and must construe factual allegations in the light most favorable to the plaintiff, see Lambeth v. Bd. of Comm'rs of Davidson County, 407 F.3d 266, 268 (4th Cir.2005). Nevertheless, the Court is not required 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), conclusory allegations devoid of any reference to actual events, United Black Fire-fighters v. Hirst, 604 F.2d 844, 847 (4th Cir.1979), or "allegations that are merely conclusory, unwarranted deductions of fact or unreasonable inferences," Veney v. Wyche, 293 F.3d 726 (4th Cir.2002).

II. The Requirement of Federal Rule of Civil Procedure 9(b) that Fraud Be Pleaded with Particularity

Chaudhry and Farahpour argue that Plaintiffs have still not cured the deficiencies present in their prior two complaints because the Second Amended Complaint fails to plead the alleged fraud committed by those two Defendants with the requisite degree of particularity required under Fed.R.Civ.P. 9(b).

Fed.R.Civ.P. 9(b) provides that "[i]n alleging fraud . . . a party must state with particularity the circumstances constituting fraud. . . ." In alleging fraud, the complaint must allege the "time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby." Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir.1999).

When mail and wire fraud are asserted as predicate acts in a civil RICO claim, each must be pled with particularity, pursuant to Rule 9(b). See Scott v. WFS Fin., Inc., Civil Action No. 2:06cv349, 2007 WL 190237, at *5 (E.D.Va. Jan. 18, 2007) (citing Menasco, Inc. v. Wasserman, 886 F.2d 681, 684 (4th Cir.1989)). "Rule 9(b) requires pleading the time, place, and content of the false representations, the person making them, and what that person gained from them." Id. (citing Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir.1999)). "However, `[a] court should hesitate to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the defendant has been made aware of the particular circumstances for which he will have to prepare a defense at trial, and (2) that plaintiff has substantial prediscovery evidence of those facts.'" Id.

Both mail and wire fraud have similar core elements that must be proven: (1) defendant's knowing participation in a scheme to defraud; and (2) the mails or interstate wire facilities were used in the furtherance of the scheme, but they need not be an essential element of the scheme. Choimbol v. Fairfield Resorts, Inc., 428 F.Supp.2d 437, 443 (E.D.Va.2006); United States v. ReBrook, 58 F.3d 961, 966 (4th Cir.1995). A "scheme to defraud" includes "a scheme or artifice to deprive another of the intangible right of honest services." 18 U.S.C. § 1346. The mailings or wirings do not have to contain the mispresentations that defrauded the plaintiff, but must merely be in furtherance of the fraudulent, material mispresentation upon which the plaintiff relied to his detriment and may even include mailings and wirings directed at nonparties. Kerby v. Mortgage Funding Corp., 992 F.Supp. 787, 798-99 (D.Md. 1998); GE Investment Private Placement Partners II v. Parker, 247 F.3d 543, 548-49 (4th Cir.2001).

In a factually analogous case, the United States District Court for the Eastern District of Virginia held that plaintiffs, who brought an action arising out of a alleged mortgage foreclosure rescue scam, met the particularity requirement of Rule 9(b) in the complaint's allegations regarding the predicate acts of mail and wire fraud. Williams v. Equity Holding Corp., 498 F.Supp.2d 831, 842 (E.D.Va.2007). Specifically, the district court noted that plaintiffs' "broad alleg[ations]" that defendants used the mails and interstate telephone system "in furtherance of said pattern of racketeering activity and collection of unlawful debt and to otherwise defraud plaintiffs" coupled with plaintiffs' recitation of an "outline [of] the alleged scheme to defraud them of their home and pled a time frame for the scheme, specific persons, entities, and times connected with the fraud, and the general contents of the alleged fraudulent communications between defendants and the Williams" sufficed to meet the requirements of Rule 9(b). The district court found that these factual allegations sufficed "to put defendants on notice of the circumstances for which they will...