MERGLIANO et al v. MGC MORTGAGE, INC.
Filing
21
MEMORANDUM AND/OR OPINION RE: AMENDED MOTION FOR LEAVE TO AMEND THE COMPLAINT (DOC. #14). SIGNED BY HONORABLE CYNTHIA M. RUFE ON 10/26/2011. 10/27/2011 ENTERED AND COPIES E-MAILED.(tomg, )
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
__________________________________________
:
PIA & NICHOLAS MERGLIANO,
:
Plaintiffs,
:
CIVIL ACTION
:
v.
:
NO. 11-2223
:
MGC Mortgage, Inc.,
:
Defendant.
:
__________________________________________:
MEMORANDUM OPINION AND ORDER
RUFE, J.
October 26, 2011
Before the Court is Plaintiffs’ Amended Motion for Leave to Amend the Complaint.1 For
the reasons that follow, the Motion will be granted in part and denied in part. Plaintiffs are
granted leave to amend to add the proposed additional claims against Defendant MGC Mortgage,
Inc. (“MGC”) only.
I. BACKGROUND
Plaintiffs Pia and Nicholas Mergliano, husband and wife, allege that Defendant MGC
assumed servicing of their mortgage loan in March 2010 and thereafter began unlawful collection
practices in violation of the Fair Debt Collection Practices Act2 (“FDCPA”).3 According to
Plaintiffs, MGC incorrectly determined that the mortgage was in arrears and, beginning in May
2010, demanded that Plaintiffs pay $3,800 in addition to their regular monthly mortgage
1
Doc. No. 14.
2
15 U.S.C. § 1692 et seq.
3
Compl. ¶¶ 12, 23, 26-30.
1
payments.4 Although Plaintiffs concede that they were in arrears on their 2009 property and
school taxes “prior to the events described [in the Complaint],” they assert that they consistently
paid their insurance premiums and monthly mortgage payments at all times and were not in
arrears at the time MGC began its attempt to collect additional sums.5 The Complaint contains
two counts: Count I alleges a violation of the FDCPA and Count II alleges defamation.
On September 9, 2011, Plaintiffs filed a Motion for Leave to Amend the Complaint.6 On
September 26, 2011, Plaintiffs filed an Amended Motion for Leave to Amend the Complaint,
thereby rendering the initial Motion to Amend moot.7 Plaintiffs submit that, since the time the
Complaint was filed, new facts have come to light which support the assertion of additional
claims, the deletion of others, and the addition of a new defendant, LPP Mortgage, Ltd. (“LPP”),
the alleged holder of Plaintiffs’ mortgage.
II. LEGAL STANDARD
Rule 15(a) of the Federal Rules of Civil Procedure permits amendment of pleadings with
leave of court, and directs that courts “should freely give leave when justice so requires.”8 The
Third Circuit instructs courts to grant leave unless: (1) an amendment would be futile or there has
been undue delay in the amendment; (2) the court finds bad faith or dilatory motive by the
moving party; (3) an amendment would cause prejudice to the non-moving party; or (4) the
4
Compl. ¶¶ 14 .
5
Compl. ¶¶ 10, 18.
6
Doc. No. 10.
7
Doc. No. 14.
8
Fed. R. Civ. P. 15(a) .
2
moving party has demonstrated repeated failure to cure deficiency by amendments previously
allowed.9 The liberal right to amend applies equally to complaints and answers.10
In the instant case, discovery just commenced, Plaintiffs have not before amended the
Complaint, and MGC has not asserted that it would be prejudiced by an amendment. MGC
argues that Plaintiffs filed the Amended Motion to Amend after MGC submitted its response to
the initial Motion to Amend “presumably” because Plaintiffs reviewed MGC’s response and
determined that the initial Motion to Amend was insufficient. Based on this assumption, MGC
argues that Plaintiffs filed the Amended Motion in bad faith. This argument is speculative at best
and will not serve as the basis for a denial of the Amended Motion to Amend here.11 Thus, the
only potential basis for denial of leave to amend is futility.
III. DISCUSSION
“The standard of legal sufficiency set forth in Fed. R. Civ. P. 12(b)(6) determines whether
a proposed amendment would be futile.”12 Accordingly, a court may deny a request for leave to
amend based on futility only where the complaint, as amended, would fail to state a claim upon
which relief could be granted.13 In determining whether the proposed amendment states a
9
Long v. W ilson, 393 F.3d 390, 400 (3d Cir. 2004) (citing Lundy v. Adamar of N.J., Inc., 34 F.3d 1173,
1196 (3d Cir. 1994)).
10
Long, 393 F.3d at 400 (citing Heyl & Patterson Int’l, Inc. v. F.D. Rich Housing of V.I., Inc., 663 F.2d
419, 425 (3d Cir. 1981)).
11
W hile courts include bad faith as a factor, it is rarely invoked as the sole reason for denying amendment
and often arises when delay is unexplained or amendment is prejudicial. See, e.g., Nat’l Bank of W ash. v. Pearson,
863 F.2d 322, 328 (4th Cir. 1988) (inferring ill motive when motion to amend was filed 4 years after initial
counterclaim without excuse for delay). Here, the Motion comes very early in the litigation and MGC does not
assert it would be prejudiced by the amendment.
12
Anderson v. City of Philadelphia, 65 F. App’x 800, 801 (3d Cir. 2003).
13
Id.
3
plausible claim, the court must consider only those facts alleged in the proposed amended
complaint, accepting the allegations as true and drawing all logical inferences in favor of
Plaintiffs.14 Courts are not, however, bound to accept as true legal conclusions couched as
factual allegations.15 If the Court finds that the proposed amended complaint does not contain
“enough facts to state a claim to relief that is plausible on its face,”16 amendment would be futile
and the request for leave to amend should be denied. Conversely, if the court determines that the
proposed amended complaint states a claim which is plausible on its face, amendment would not
be futile and the request for leave to amend will be granted.
In the instant action, Plaintiff seeks leave to amend to (1) add LPP Mortgage, Ltd.
(“LPP”) as a defendant; (2) add a cause of action under the Fair Credit Extension Uniformity Act
(“FCEUA”)17 against MGC and LPP; and (3) add a cause of action under Pennsylvania’s Unfair
Trade Practices and Consumer Protection Law (“UTPCPL”)18 against MGC and LPP. The Court
will address the amendments pertaining to proposed defendant LPP, before addressing the
amendments pertaining to MGC
14
ALA, Inc. v. CCAIR, Inc., 29 F.3d 855, 859 (3d Cir. 1994); Farzan v. United Parcel Serv., Inc., No. 101417, 2011 W L 3510860, at *1 (D.N.J. Aug. 8, 2011); Fay v. Muhlenberg Coll., No. 07-4516, 2008 W L 205227, at
*2 (E.D. Pa. Jan. 24, 2008).
15
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 564 (2007).
16
Id. at 570.
17
73 Pa. Stat. Ann. § 2270.1 et seq.
18
73 Pa. Stat. Ann. §§ 201-1 to 205-10.
4
A.
The Addition of Claims Against LPP
If the claims Plaintiffs propose to add against LPP fail to state a claim, then the addition
of LPP as a defendant will not be permitted. The Court will therefore assess the viability of the
proposed claims to determine whether Plaintiffs should be granted leave to amend to add LPP as
a defendant. The proposed amended complaint adds two claims against LPP: one for a violation
of the FCEUA and the other for a violation of the UTPCPL. Plaintiffs have failed to allege
sufficient facts to state a claim that is plausible on its face under either statute.19
1.
The FCEUA
The Pennsylvania FCEUA “establishes what shall be considered . . . unfair or deceptive
acts or practices with regard to the collection of debts.”20 The statute applies both to debt
collectors and creditors and, with respect to the latter, prohibits deceptive communication by a
creditor to a borrower in connection with the collection of a debt.21 In the proposed amended
complaint, Plaintiffs allege that LPP violated the FCEUA when it “falsely claimed ownership” of
Plaintiffs’ loan, despite its defective chain of title.22 According to Plaintiffs, the following acts of
LPP “constitute numerous and multiple violations” of the FCEUA and the UTPCPL:
a) Engaging in conduct the natural consequence of which is to harass, oppress
or abuse any person in connection with the collection of a debt; b) The use of
19
See Twombly, 550 U.S. at 570 (holding that plaintiff must allege “enough facts to state a claim to relief
that is plausible on its face,” to withstand a motion to dismiss).
20
73 Pa. Stat. Ann. § 2270.2.
21
73 Pa. Stat. Ann. § 2270.4; see also Garczybski v. Countrywide Home Loans, Inc., 656 F. Supp. 2d 505,
515 (E.D. Pa. 2009).
22
Revised Proposed Am. Compl. ¶¶ 22-25.
5
false, deceptive or misleading representations or means in connection with the
collection of a debt; c) Making false, deceptive, or misleading representations
with regard to the character, amount or legal status of the alleged debt; d) The
use of false representation or deceptive means to collect a debt or obtain
information about a consumer; e) The use of unfair or unconscionable means to
collect or attempt to collect an alleged debt; f) Attempting to collect any amount
not authorized by agreement or permitted by law.23
These allegations, although detailed, represent only a formulaic recitation of prohibited
debt collection practices under the FCEUA.24 They are merely examples of the types of
communication which constitute a violation of the FCEUA, not factual allegations which support
Plaintiffs’ FCEUA claim. Despite correctly identifying those communications which violate the
FCEUA, Plaintiffs have failed to allege facts from which the Court can infer that LPP engaged in
such communications with Plaintiffs here. The proposed amended complaint does not identify a
23
Revised Proposed Am. Compl. ¶ 46(a)-(f).
24
Section 2270.4(b) of the FCEUA provides:
[I]t shall constitute an unfair or deceptive debt collection act or practice under this act if a creditor
violates any of the following provisions:
...
(4) A creditor may not engage in any conduct the natural consequence of which is to harass,
oppress or abuse any person in connection with the collection of a debt. . . .
...
(5) A creditor may not use any false, deceptive or misleading representation or means in
connection with the collection of any debt. W ithout limiting the general application of the
foregoing, the following conduct is a violation of this paragraph:
...
(ii) The false representation of the character, amount or legal status of any debt.
...
(x) The use of any false representation or deceptive means to collect or attempt to collect any
debt or to obtain information concerning a consumer.
...
(6) A creditor may not use unfair or unconscionable means to collect or attempt to collect any
debt. W ithout limiting the general application of the foregoing, the following conduct is a
violation of this paragraph:
(i) The collection of any amount, including any interest, fee, charge or expense incidental to the
principal obligation, unless such amount is expressly authorized by the agreement creating the
debt or permitted by law.
(emphasis added).
6
single communication between Plaintiffs and LPP, much less one that amounts to an attempt to
collect a debt.25 It contains only conclusory allegations that LPP “falsely claimed ownership” of
Plaintiffs’ loan and that LPP engaged in the types of communication which violate the FCEUA.
These allegations are not sufficient to meet the plausibility standard of Twombly. Thus, the
addition of a FCEUA claim against LPP would be futile.
2.
The UTPCPL
The Pennsylvania UTPCPL prohibits “unfair methods of competition” and “unfair or
deceptive acts or practices,” and provides a private cause of action for persons who suffer loss
resulting from these deceptive acts.26 To state a claim under the UTPCPL, a plaintiff must allege
that the defendant engaged in deceptive conduct and that plaintiff, in justifiably relying on such
conduct, suffered an ascertainable loss.27 “[A] plaintiff must allege with particularity the
elements necessary to support a violation . . . as to a particular Defendant.”28 Here, the proposed
amended complaint does not contain facts which support a claim for a violation of the UTPCPL,
much less facts which state this claim with particularity. Plaintiffs do not allege with
particularity that LPP engaged in deceptive conduct. As with the FCEUA claim, Plaintiffs do not
identify any specific communication or representation that LPP made to them, that deceived them
and caused them ascertainable loss. The proposed amendment would therefore be futile.
25
See Hartman v. Deutsche Bank Nat’l Trust. Co., No. 07-5407, 2008 W L 2996515, at *3-4 (E.D. Pa.
Aug. 1, 2008); see also Garczynski v. Countrywide Home Loans, Inc., 656 F. Supp. 2d 505, 515 (E.D. Pa. 2009).
26
73 Pa. Stat. Ann. §§ 201-2(4), 201-9.2.
27
Caroselli v. Allstate Prop. & Cas. Ins. Co., No. 10-1671, 2010 W L 3239356, at *7 (E.D. Pa. Aug. 16,
28
Hartman, 2008 W L 2996515, at *4 (internal quotation and citation omitted).
2010).
7
Since the proposed amendments do not state plausible claims against LPP, the Court will
deny the request for leave to amend to add such claims against LPP and to add LPP as a
defendant.
B.
The Addition of Claims Against Defendant MGC
MGC is a named party to this litigation. The Complaint contains two claims against
MGC: one for a violation of the FDCPA (Count I) and the other for defamation (Count II). The
proposed amendment seeks only to substitute a FCEUA claim and a UTPCPL claim for the
defamation claim. With respect to debt collectors,29 where a plaintiff states a claim for a
violation of the FDCPA, he has also stated a claim for a violation of the Pennsylvania FCEUA,30
and, in stating a claim for a violation of the FCEUA, has also stated a claim for a violation of the
Pennsylvania UTPCPL.31 Since the Complaint contains a claim for a violation of the FDCPA,
the proposed addition of a FCEUA and a UTPCPL claim will not be futile so long as Count I
states a claim under the FDCPA.
The purpose of the FDCPA is “to eliminate abusive debt collection practices by debt
collectors, to insure that those debt collectors who refrain from using abusive debt collection
29
Plaintiffs allege that MGC is a debt collector here.
30
73 Pa. Stat. Ann. § 2270.4(a) (“It shall constitute an unfair or deceptive debt collection act or practice
under this act if a debt collector violates any of the provisions of the Fair Debt Collection Practices Act.”).
31
73 Pa. Stat. Ann. § 2270.5(a) (“If a debt collector or creditor engages in an unfair or deceptive debt
collection act or practice under this act, it shall constitute a violation of the . . . Unfair Trade Practices and Consumer
Protection Law.”). This is not necessarily the case for creditors. See, e.g., Van Veen v. AT&T Corp., No. 10-1635,
2011 W L 4001004, at *6 (E.D. Pa. May 25, 2011) . The UTPCPL requires that a plaintiff state with particularity the
elements necessary to support a violation as to a particular defendant. Garczyzinski v. Countrywide Home Loans,
Inc., 656 F. Supp. 2d 505, 515 (E.D. Pa. 2009). Unlike the allegations pertaining to LPP, the allegations pertaining
to MGC are specific in time and content, and are sufficient to state a claim with particularity as to MGC.
8
practices are not competitively disadvantaged, and to promote consistent State action to protect
consumers against debt collection abuses.” 32 The FDCPA applies to “debt collectors,” which are
defined as follows:
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.
. . . The term does not include-...
(B) any person while acting as a debt collector for another person, both of whom
are related by common ownership or affiliated by corporate control, if the person
acting as a debt collector does so only for persons to whom it is so related or
affiliated and if the principal business of such person is not the collection of
debts;
...
(F) any person collecting or attempting to collect any debt owed or due or
asserted to be owed or due another to the extent such activity . . . (iii) concerns
a debt which was not in default at the time it was obtained by such person.33
MGC contends that is not a debt collector within the meaning of the FDCPA because it is
“affiliated with” LPP, the holder of the mortgage and loan at issue, and because, at the time it
began servicing the loan, MGC did not treat the loan as being in default. Plaintiffs disagree. At
this stage of the proceedings, Plaintiffs’ factual allegations must be accepted as true and the
relationship between the parties has not been fully exposed through discovery. Plaintiffs have
alleged sufficient facts to support the inference that MGC is a debt collector. Whether the claims
will ultimately prove true is not the question presently before the Court. The Court will therefore
grant Plaintiffs’ request for leave to amend to add both a FCEUA claim and a UTPCPL claim
32
15 U.S.C.§ 1692(e).
33
15 U.S.C.§ 1692a(6).
9
against MGC.
IV. CONCLUSION
For the foregoing reasons, the Amended Motion to Amend will be granted in part and
denied in part. Plaintiffs are granted leave to amend to add the proposed additional claims
against Defendant MGC only.
An appropriate Order follows.
10
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