BOWLER, United States Magistrate Judge.
Pending before this court is a motion to dismiss filed by defendant Federal National Mortgage Association ("Fannie Mae"). (Docket Entry # 18). After conducting a hearing, this court took the motion under advisement. The complaint raises a single cause of action under section nine of Massachusetts General Laws chapter 93A ("chapter 93A").
In conducting a Fed.R.Civ.P. 12(b)(6) ("Rule 12(b)(6)") analysis, a court "accept[s] as true all well pleaded facts in the complaint and draw[s] all reasonable inferences in favor of the plaintiffs." Gargano v. Liberty International Underwriters, Inc., 572 F.3d 45, 48 (1st Cir. 2009). To survive dismissal, "the complaint must allege `a plausible entitlement to relief.'" Fitzgerald v. Harris, 549 F.3d 46, 52 (1st Cir.2008). While "detailed factual allegations" are not required, "a plaintiff's obligation to provide the `grounds' of his `entitlement for relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); Maldonado v. Fontanes, 568 F.3d 263, 266 (1st Cir.2009). In addition, "a well-pleaded complaint may succeed even if. . . actual proof of those facts is improbable." Bell Atlantic v. Twombly, 550 U.S. at 556, 127 S.Ct. 1955.
In evaluating a Rule 12(b)(6) motion, the court may consider a limited category of documents outside the complaint without converting the motion into one for summary judgment. Such documents include public records and documents sufficiently referred to in the complaint. See Butler v. Balolia, 736 F.3d 609, 611 (1st Cir.2013) (supplementing facts in complaint "by examining `documents incorporated by reference into the complaint, matters of public record, and facts susceptible to judicial notice'"); Freeman v. Town of Hudson, 714 F.3d 29, 36 (1st Cir.2013) (court may consider "`official public records; documents central to plaintiffs' claim; and documents sufficiently referred to in the complaint'") (ellipses and internal brackets omitted); Giragosian v. Ryan, 547 F.3d 59, 65-66 (1st Cir.2008) (can consider documents relied on in complaint, public records and other documents subject to judicial notice). The complaint refers to the Fannie Mae Single Family Servicing Guide, a document central to the chapter 93A claim, and identifies its internet address.
"Exhibits attached to the complaint are" also "properly considered part of the pleading `for all purposes,' including Rule 12(b)(6)." Trans-Spec Truck Service, Inc. v. Caterpillar Inc., 524 F.3d 315, 321 (1st Cir.2008). In the event "`a written
Plaintiffs George J. Charest and Paula M. Charest ("the Charests") own property located in Groveland, Massachusetts ("the property"). In 2008, they refinanced a mortgage on the property in the amount of $230,000 ("the mortgage"). (Docket Entry # 1-1, ¶ 19). At the time, the Charests' credit scores were approximately 706 and the property's value was $445,000. (Docket Entry # 1-1, ¶ 19).
"Fannie Mae is the investor [which] owns the Charests' mortgage." (Docket Entry # 1-1, ¶ 3). Throughout the relevant time period, GMAC Mortgage, LLC ("GMAC") serviced the mortgage under a form mortgage selling and servicing contract ("servicing contract") with Fannie Mae.
The servicing contract required GMAC to manage the property "according to the terms of the mortgage and [Fannie Mae's] Guides." (Docket Entry # 14). In return for servicing and managing the property in accordance with the Guides, GMAC received compensation.
In 2010, the Charests "fell behind on their mortgage" because of medical expenses. (Docket Entry # 1-1, ¶¶ 20-21). As a result, GMAC, on behalf of Fannie Mae, offered "to consider [the Charests] for a loan modification" under RAMP. (Docket Entry # 1-1, ¶ 21). In a November 30, 2010 letter to GMAC, the Charests requested that all further communications from Fannie Mae and GMAC be directed to their attorney. (Docket Entry # 1-1, ¶ 50). Fannie Mae and GMAC "acknowledged receiving this request on December 10, 2010," and sent the Charests a letter stating that, "`[W]e updated our records to reflect you are represented by counsel.'" (Docket Entry # 1-1, ¶ 50). Notwithstanding this request, GMAC, on behalf of Fannie Mae, continued to send letters directly to the Charests in January, February and March 2011.
In December 2010, the Charests submitted their first application to GMAC for a loan modification under RAMP. (Docket Entry # 1-1, ¶ 29). Under the RAMP servicing guide in effect at the relevant time,
After a servicer receives financial documents, the servicer must apply a number of steps to arrive at a monthly mortgage payment ratio that is "as close as possible to 31 percent." The Guide, § 610.03.06.
The Charests submitted another application to GMAC in April 2011.
As one of the reasons to deny the loan modification, Fannie Mae advised the Charests that they did not live at the property. (Docket Entry # 1-1, ¶ 32). As previously indicated, eligibility for a loan modification under RAMP requires that "the mortgage loan" be secured by the "borrower's principal residence" and that the property "not be vacant or condemned." The Guide, § 610.01. The statement was incorrect because "the Charests have lived in their home continually since 1978." (Docket Entry # 1-1, ¶ 32).
In May 2011, GMAC, on behalf of Fannie Mae, stated that it would not allow a forbearance of the principal "as part of a loan modification." (Docket Entry # 1-1, ¶¶ 26, 28). As part of the standard waterfall procedure, however, "[i]f necessary, the servicer must provide for principal forbearance to achieve the target monthly mortgage payment ratio."
In July 2011, the Charests submitted a third application for a loan modification. (Docket Entry # 1-1, ¶ 34). The application contained all required documentation. (Docket Entry #1-1, ¶ 34). In August 2011, GMAC, on behalf of Fannie Mae, denied the application for the stated reason
Throughout these loan applications, the Charests timely provided GMAC with the required loan documents requested by GMAC and Fannie Mae.
At this time and in lieu of providing a loan modification under HAMP, Fannie Mae, through GMAC, offered the Charests an "in-house" loan modification that they could not afford.
A few weeks later, GMAC, on behalf of Fannie Mae, "informed the Charests that regardless of its own error, it would not provide them with the modification." (Docket Entry # 1-1, ¶ 41). GMAC also advised "the Charests that their debt-to-income ratio was too high." (Docket Entry # 1-1, ¶ 41-42). GMAC then resumed collection activities. (Docket Entry # 1-1, ¶ 41).
In an effort to reduce their debt-to-income ratio, the Charests filed for bankruptcy in January 2012. (Docket Entry # 1-1, ¶ 42). After the bankruptcy filing, Fannie Mae, through GMAC, again denied
GMAC, on behalf of Fannie Mae, scheduled foreclosure sales of the property for January 13, 2011, May 16, 2011, June 1, 2011, and January 19, 2012. (Docket Entry # 1-1, ¶ 46-48). At these times, the Charests' applications for a RAMP loan modification "were under consideration." (Docket Entry # 1-1, ¶ 46, 48). RAMP guidelines dictate that, "servicers should not proceed with a foreclosure sale until the borrower has been evaluated for the program and, if eligible, an offer to participate in RAMP has been made." The Guide, § 610.04.04. There is no indication that a foreclosure sale took place. In fact, the complaint notes that a new servicer, Ocwen Loan Servicing, LLC ("Ocwen"), took over the servicing of the Charests' mortgage in February 2013. (Docket Entry # 1-1, ¶ 17).
In May 2012, Residential Capital, LLC and certain of its affiliates, including GMAC, filed a voluntary petition for relief under chapter ¶ of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. The filing triggered the automatic stay under ¶ U.S.C. § 362(a).
(Docket Entry # 19-1).
Fannie Mae seeks to dismiss the chapter 93A claim because: (1) it did not engage in any unfair or deceptive acts or practices; (2) it is not liable for violating HAMP guidelines because they pertain to loan servicers; and (3) the purportedly unfair or deceptive acts did not cause the Charests any damages. Fannie Mae additionally seeks dismissal under Fed.R.Civ.P. 12(b)(7) ("Rule 12(b)(7)") for failure to join GMAC as "a necessary and indispensable party." (Docket Entry # 19).
As set out in the complaint and reiterated in the Charests' memorandum, Fannie Mae, though GMAC, purportedly violated chapter 93A because it: (1) misrepresented their eligibility for loan modifications; (2) intentionally miscalculated their income; (3) promised them a modification that it never provided; (4) repeatedly requested
Addressing Fannie Mae's first argument entails examining GMAC's conduct under chapter 93A. Chapter 93A "proscribes `unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.'" Juarez v. Select Portfolio Servicing, Inc., 708 F.3d 269, 280 (1st Cir.2013) (quoting chapter 93A, section 2). "`A practice is unfair if it is within the penumbra of some common-law, statutory, or other established concept of unfairness; is immoral, unethical, oppressive, or unscrupulous; and causes substantial injury.'" Young v. Wells Fargo Bank, N.A., 717 F.3d at 240 (chapter 93A claim alleging HAMP violations) (quoting Linkage Corp. v. Trustees of Boston University, 425 Mass. 1, 679 N.E.2d 191, 209 (1997)). The "crucial factors" in determining whether an act or practice is "unfair" are "the nature of [the] challenged conduct" as well as the "purpose and effect of that conduct." Massachusetts Employers Ins. Exchange v. Propac-Mass, Inc., 420 Mass. 39, 648 N.E.2d 435, 438 (1995). A practice is deceptive "`if it "could reasonably be found to have caused a person to act differently from the way he or she otherwise would have acted."'" Aspinall v. Philip Morris Companies, Inc., 442 Mass. 381, 813 N.E.2d 476, 486 (2004) (brackets omitted). Here, the alleged violations concern misrepresentations during the Charests' attempts to procure a loan modification under HAMP beginning in December 2010 and continuing until early 2012.
HAMP is a federal program "`that incentivizes lenders and loan servicers to offer loan modifications to eligible homeowners.'" Wilson v. HSBC Mortgage Services, Inc., 744 F.3d 1, 6 (1st Cir.2014) (quoting Young v. Wells Fargo Bank, N.A., 717 F.3d at 228). The "ultimate goal" of the program "is to encourage "`mortgage holders to renegotiate the loans in order to reduce a homeowner's mortgage payments to sustainable levels, without discharging any of the underlying debt.'"" Id. (quoting Young v. Wells Fargo Bank, N.A., 717 F.3d at 228); Orozco v. GMAC Mortgage, LLC, 2012 WL 4581092, at *2 (D.Mass. Oct. 1, 2012) (HAMP's goal is to provide "relief to borrowers who have defaulted or are likely to default by reducing mortgage payments to sustainable levels, without discharging any of the underlying debt"). As noted previously, the servicing contract between Fannie Mae and GMAC incorporated "Fannie Mae's Guides to Lenders." (Docket Entry # 14, p. 22). The Guide in effect at the relevant time states that "servicers must participate in HAMP." The Guide, § 610.
Chapter 93A liability does not require the violation of a statute, let alone a guideline, to create liability. See Young v. Wells Fargo Bank, N.A., 717 F.3d at 240 ("[v]iolation of a statute is not a necessary element of a Chapter 93A claim" inasmuch as the law "`creates new substantive rights and . . . makes conduct unlawful which was not'" previously unlawful); see also Okoye v. Bank of New York Mellon, 2011 WL 3269686, at *7 (D.Mass. July 28,
HAMP guidelines impose a series of detailed obligations on participating servicers such as GMAC in processing an application for a loan modification.
In contrast, a bank's "history of being nonresponsive to the plaintiffs' efforts to obtain a loan modification" coupled with a prior effort that "yielded higher monthly payments, an error that [the bank] made little or no effort to fix," would satisfy the plausibility standard under Rule 12(b)(6). Id. at 263 (allowing plaintiffs leave to amend chapter 93A claim to set out facts to support allegation that servicer mishandled and unfairly disregarded application) (emphasis in original). Likewise, allegations that a bank's history of requiring a borrower to resubmit the same documents to support a HAMP loan modification coupled with repeatedly changing bank officials in charge of the requested modification and then closing the file on the pretext of an inability to contact the borrower survive a motion to
During the Charests' application processes, GMAC required unnecessary information and documents it already possessed, miscalculated Paula M. Charest's income, repeatedly misrepresented the Charests' eligibility for a loan modification and denied applications based on incorrect facts.
Fannie Mae next seeks to dismiss the chapter 93A claim because it is not a servicer of the loan.
An agency relationship arises from a ""`manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.'"" Eaton v.
The authority of an agent may be actual or apparent. See Theos & Sons, Inc. v. Mack Trucks, Inc., 431 Mass. 736, 729 N.E.2d 1113, 1120 (2000) ("principal has liability for the agent's acts toward third parties only if the agent was acting with the actual or apparent authority of the principal in that transaction"). "Actual authority, either express or implied, is the agent's power to affect the principal's relations with third parties as manifested to the agent by the principal." Id. Apparent authority results through "`written or spoken words or any other conduct of the principal which, reasonably interpreted, causes a third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him.'" Licata v. GGNSC Malden Dexter LLC, 466 Mass. 793, 801 (Mass.2014). Ordinarily, the existence of an agency relationship is "a question of fact for the jury. . . [t]o be determined from all the evidence and reasonable inferences to be drawn therefrom." White's Farm Dairy, Inc. v. De Laval Separator Company, 433 F.2d 63, 66 (1st Cir.1970); Stern v. Lieberman, 307 Mass. 77, 29 N.E.2d 839, 842 (1940) ("[p]roof of agency is ordinarily a question of fact").
Undeniably, HAMP guidelines encourage loan servicers as opposed to lenders to enter into loan modifications with eligible borrowers. See Young v. Wells Fargo Bank, N.A., 717 F.3d at 228-229. Here, Fannie Mae is not a loan servicer and is not subject to the HAMP guidelines on the basis that it is a servicer. In the context of actual authority, however, "the agent acts as the extension of the will of his principal." Kansallis Finance Ltd. v. Fern, 659 N.E.2d at 734. "Typically, a mortgage servicer acts as the agent of the mortgagee to effect collection of payments on the mortgage loan." R.G. Fin. Corp. v. Vergara-Nunez, 446 F.3d 178, 187 (1st Cir.2006) (internal bracket omitted). Viewing the facts in the Charests' favor, Fannie Mae owns the mortgage and, as such, has the authority to service the mortgage. It delegated that authority to GMAC. GMAC consented to act on behalf of Fannie Mae by entering into the servicing contract. Fannie Mae's liability is not imposed because it is the investor and owner of the mortgage. Rather, it is imposed based on the authorized conduct of GMAC, as the designated servicer and agent of Fannie Mae.
The Rule 12(b)(6) record contains additional facts that give rise to an agency relationship with respect to the servicing transactions and the misrepresentations at issue. Quoting the servicing contract between GMAC and Fannie Mae, it sets out "the basic rules governing the servicing of mortgages that we purchase" and the servicing
Although RAMP guidelines do not create a private right of action against the servicer or the lender, see Kozaryn v. Ocwen Loan Servicing, LLC, 784 F.Supp.2d at 102 ("RAMP does not provide a private cause of action") (collecting cases), they do provide a basis, under limited circumstances, to impose liability under chapter 93A against the servicer.
Fannie Mae also argues that the Charests fail to show they suffered any injury or damages caused by the unfair or deceptive acts or practices. The Charests submit that they experienced "economic injury" as a result of Fannie Mae's conduct. (Docket Entry # 21).
Chapter 93A provides a "right of action to any person `who has been injured by another person's use or employment of any method, act or practice declared to be unlawful" under the statute. Hershenow v. Enterprise Rent-A-Car Company of Boston, Inc., 445 Mass. 790, 840 N.E.2d 526, 532 (2006); Rule v. Fort Dodge Animal Health, Inc., 607 F.3d 250, 253 (1st Cir.2010) ("chapter 93A provides a cause of action for a plaintiff who `has been injured' by `unfair or deceptive acts or practices'") (quoting sections 9(1) and 2(a) with citations omitted). After surveying Massachusetts case law, the First Circuit in Rule concluded that, "the most recent" Massachusetts Supreme Judicial Court cases "appear to have returned to the notion that injury under chapter 93A means economic injury in the traditional sense." Rule v. Fort Dodge Animal Health, Inc., 607 F.3d at 255. Examples of such injuries in the context of a chapter 93A claim based on mishandling a forbearance agreement and a borrower's attempts to obtain a permanent loan modification under HAMP include a loss of equity in the borrower's "home and damage to her credit and her ability to obtain loans or credit in the future" as well as an "increase in interest rates she will have to pay on any existing or future loans and credit card accounts." Young v. Wells Fargo Bank, N.A., 717 F.3d at 241.
In the case at bar, the Charests filed for bankruptcy to satisfy GMAC's
Fannie Mae submits that GMAC is a required party within the meaning of Rule 19 and that joinder is not feasible. Fannie Mae therefore moves to dismiss this action under Rule 12(b)(7). The Charests maintain that Rule 19 does not require the joinder of a principal and its agent and that joint tortfeasors are not required parties under Rule 19.
Rule 19 involves situations in which "a lawsuit is proceeding without a party whose interests are central to the suit." Bacardi International Ltd. v. V. Suarez & Co., Inc., 719 F.3d 1, 9 (1st Cir.2013); Picciotto v. Continental Casualty Co., 512 F.3d 9, 15 (1st Cir.2008). The analysis is "fact-bound and driven by the nature of the issues" in the case. Bacardi International Ltd. v. V. Suarez & Co., Inc., 719 F.3d at 9-10. It also entails "a practical determination" based on factors that vary with each case, "`some such factors being substantive, some procedural, some compelling by themselves, and some subject to balancing against opposing interests.'" Picciotto v. Continental Casualty Co., 512 F.3d at 16 (quoting Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 119, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968)). Overall, a court must consider the policies underlying Rule 19 in the course of the analysis. Id. at 15. Such policies include "`the public interest in preventing multiple and repetitive litigation, the interest of the present parties in obtaining complete and effective relief in a single action, and the interest of absentees in avoiding the possible prejudicial effect of deciding the case without them.'" Id. (quoting Acton Co. v. Bachman Foods, Inc., 668 F.2d 76, 78 (1st Cir.1982)).
As set out in the text of the rule, the analysis is threefold. First, the court determines if the absent party is a "required party" under Rule 19(a). Second, the court ascertains whether joinder of the required party "is feasible." Fed.R.Civ.P. 19(b). Third, if joinder of the required party is not feasible, the court undertakes an equitable balancing of certain factors to "determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed." Fed.R.Civ.P. 19(b). Succinctly stated, Rule 19:
Picciotto v. Continental Casualty Co., 512 F.3d at 15 (quoting former Rule 19 prior to 2007 amendment).
Fed.R.Civ.P. 19(a)(1). Subsection (a)(1)(A) focuses on the ability to accord complete relief "among those already parties" in the suit. Bacardi International Ltd. v. V. Suarez & Co., Inc., 719 F.3d at 10 (emphasis in original). The two alternative means to qualify as a "required party" in subsection (a)(1)(B) concern "protecting the interests of the absent party." Id.
Examining Rule 19(a)(1)(A) and as correctly pointed out by Fannie Mae, the facts revolve around the conduct of GMAC in servicing the Charests' mortgage. See Z & B Enterprises, Inc. v. Tastee-Freez Intern., Inc., 162 Fed.Appx. 16, 19-20 (1st Cir.2006) ("virtually all of the affirmative acts that caused harm to the Plaintiffs were done by ATF or JF," purported agents of the defendant in contract dispute).
Fannie Mae's reliance on Z & B because the court found "that agents were necessary parties under Fed.R.Civ.P. 19(a)" (Docket Entry # 19, p. 15) (emphasis added), however, is incorrect. The plaintiffs in Z & B did "not put forth any evidence of an agency relationship between" the defendant and the absent parties. Id. at 19; see Scott v. First American Title Ins. Co., 2007 WL 1303004, at *2-3 (D.N.H. May 3, 2007) (distinguishing Z & B because "court did not find, as First American represents, that JF and ATF were necessary parties because they were Tastee—Freez's agents and were responsible for the actions that formed the basis of the plaintiffs' claims"). In contrast, the basis of liability here is the existence of a viable agency relationship between Fannie Mae and GMAC.
The First Circuit in Z & B also determined that it could not grant "complete relief" because the plaintiffs were seeking
Rule 19(a)(1) implicates not only the relief afforded existing parties but also the public's interest "in avoiding repeated lawsuits on the same essential subject matter." Fed.R.Civ.P. 19, Advisory Committee Notes, 1996 Amendment (discussing subsection 19(a)(1)). The court in Z & B was primarily concerned with avoiding repeated lawsuits on the same subject matter. Z & B Enterprises, Inc. v. Tastee-Freez Intern., Inc., 2006 WL 123775, at *4. Here, a second lawsuit on the same subject matter is unlikely. A future indemnity suit by Fannie Mae involves a different cause of action.
Finally, the fact that Fannie Mae, if deemed liable, may seek indemnity against the absentee party, GMAC, does not deny the Charests complete relief. GMAC and Fannie Mae's joint liability does not affect the Charests' ability to obtain complete relief against Fannie Mae. For example, in Austin v. Unarco Industries, Inc., 705 F.2d 1 (1st Cir.1983), the court explained that, if the plaintiff prevailed on appeal, "she will be able to assert her full claim against Raybestos, leaving Raybestos to proceed against Unarco for contribution." Id. at 5 (allowing appeal to proceed against Raybestos without Unarco). Because "Rule 19(a)(1) is concerned only with those who are already parties," the fact that an existing party's dispute with the absent party is left unresolved does not make the absent party a required party. MasterCard International Inc. v. Visa International Service Association, Inc., 471 F.3d 377, 385 (2nd Cir.2006); see Bacardi International Ltd. v. V. Suarez & Co., Inc., 719 F.3d at 10 (citing and quoting MasterCard, 471 F.3d at 385, in parenthetical for this principle). Here too, the Charests and Fannie Mae can fully resolve their dispute between each other without GMAC as a party.
GMAC is also not a "required party" under Rule 19(a)(1)(B)(i). First,
In addition, "an absent party's interests cannot be harmed or impaired if they are identical to those of a present party." Id. (discussing Pujol v. Shearson/Am. Express, Inc., 877 F.2d 132, 135 (1st Cir. 1989)). Fannie Mae and GMAC have virtually identical interests in avoiding chapter 93A liability. If present, GMAC, like Fannie Mae, would argue that it did not violate the HAMP guidelines and did not engage in any misrepresentations or miscalculate the Charests' income during the application processes.
Fannie Mae argues that GMAC's absence impairs its ability to settle a subsequent claim by the Charests. (Docket Entry # 19, § II(B)). Impairing an absent party's ability to settle another lawsuit undeniably constitutes a valid consideration in the Rule 19(a)(1)(B)(i) calculus. Id. ("[s]ettlement position is a valid consideration in the practical inquiry required by" Rule 19(a)(1)(B)(i)). Because Fannie Mae has virtually identical interests to those of GMAC, however, proceeding without GMAC does not impair or impede its ability to settle a future suit. See Bacardi Intern. Ltd. v. V. Suarez & Co., Inc., 719 F.3d at 11; National Association of Chain Drug Stores v. New England Carpenters Health Benefits Fund, 582 F.3d 30, 43-44 (1st Cir.2009) ("interests of the absent pharmacies and PBMs have been vigorously addressed by arguments and evidence from pharmacy interests who were and are present"); cf. Picciotto v. Continental Casualty Co., 512 F.3d at 16.
Furthermore, what Fannie Mae fails to point out is that GMAC's May 2012 bankruptcy filing more than likely discharges any pre-petition suit by the Charests based on facts that occurred in 2010, 2011 and early 2012. See Vil v. Poteau, 2013 WL 3878741, at *7-10 (noting "general rule" that "debts that arose prior to the filing of the bankruptcy petition are eligible for discharge" and finding prior cause of action seeking equitable and monetary relief against debtor dischargeable). In light of the foregoing, disposing of this action in the absence of GMAC does not "as a practical matter impair or impede [GMAC's] ability to protect" its interest within the meaning of Rule 19(a)(1)(B).
Turning to the final means to establish "required party" status, subsection (B)(ii) contains the same modifying language as subsection (B)(i), to wit, that the "person claims an interest relating to the subject of the action." Fed.R.Civ.P. 19(a)(1)(B). Here again, GMAC did not file a notice or otherwise assert an interest relating to this action. See Bacardi Intern. Ltd. v. V. Suarez & Co., Inc., 719 F.3d at 12.
Rule 19(a)(1)(B)(ii) also protects the existing parties against "inconsistent obligations," not inconsistent adjudications. See id. "Inconsistent obligations occur when a party is unable to comply with one court's order without breaching another court's order concerning the same incident." Delgado v. Plaza Las Americas, Inc., 139 F.3d 1, 3 (1st Cir.1998);
In addition, "where two suits arising from the same incident involve different causes of action, defendants are not faced with the potential for double liability because separate suits have different consequences and different measures of damages." Id. This action and a future indemnity action involve different causes of action. Furthermore, the likelihood that Fannie Mae will lose an indemnity suit is extremely low because of the broad language in the indemnity provision. See Bacardi Intern. Ltd. v. V. Suarez & Co., Inc., 719 F.3d at 13 (risk "there would be inconsistent results is low because of the deferential manner in which the FAA requires arbitral awards to be reviewed"). Fannie Mae's ability to proceed with an indemnity suit against GMAC also requires lifting the automatic stay. In sum, GMAC is not a required party within the meaning of Rule 19(a).
Although this ends the matter, this court nevertheless addresses the remaining criteria to complete the record. With respect to feasibility, GMAC is presently subject to an automatic stay in the bankruptcy proceeding. The parties agree that the automatic stay makes a joinder of GMAC not feasible. (Docket Entry # 21, p. 15);
Because the joinder of GMAC, a required party, is not feasible, this court turns to "whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed."
Fed.R.Civ.P. 19(b). A court may also "take into account other considerations" if relevant to the "`equity and good conscience'" inquiry. B. Fernandez & HNOS, Inc. v. Kellogg USA, Inc., 516 F.3d 18, 23 (1st Cir.2008). This "fact-intensive analysis" involves a "`balancing of competing interests'" that is "`steeped in pragmatic considerations.'" In re Olympic Mills Corp., 477 F.3d 1, 9 (1st Cir.2007); accord B. Fernandez & HNOS, Inc. v. Kellogg USA, Inc., 516 F.3d at 23.
Ordinarily, "joint tortfeasors are not considered indispensable parties under federal law."
In this case, the extent to which a judgment may prejudice the existing parties or GMAC is not substantial. The prejudice to GMAC is either insufficient, see Pujol v. Shearson American Exp., Inc., 877 F.2d at 136, or inherent in the principle of joint and several liability, see Austin v. Unarco Industries, Inc., 705 F.2d at 5. At present, GMAC is also subject to the automatic stay in the event Fannie Mae seeks indemnity from GMAC due to an adverse judgment in this action.
Fannie Mae submits that GMAC's wrongdoing is the basis for the Charests' suit which results in prejudice to GMAC "by an adjudication of its conduct while it was not a party." (Docket Entry # 19, p. 17). It is true that GMAC's conduct forms the primary basis to impose liability on Fannie Mae which, in turn, may support a finding that GMAC is indispensable. See H.D. Corp. of Puerto Rico v. Ford Motor Co., 791 F.2d 987, 993 (1st Cir.1986) (Ford has "substantial interest in the outcome of the dispute" and "plaintiffs' commonwealth law claims are largely directed against" it);
Fannie Mae also maintains that GMAC is prejudiced because Fannie Mae "could terminate its contract with GMAC." (Docket Entry # 19, p. 17). Ocwen is the current servicer of the Charests' mortgage. (Docket Entry # 1-1, ¶ 17). As such, there is no contract regarding the servicing of the Charests' mortgage to terminate. In fact, all servicing rights of Fannie Mae owned mortgages previously handled by GMAC transferred to Ocwen no later than February 2013. (Docket Entry # 1-1, ¶ 17); see In re Residential Capital, LLC, No. 12-12020 (Bankr.S.D.N.Y. Nov. 21, 2012) (Docket Entry # 2246).
As to the existence of prejudice to the existing parties if a judgment were to render in GMAC's absence, the Charests may obtain injunctive relief in the absence of GMAC because Fannie Mae is the lender and Ocwen is now the servicer that would process any future HAMP loan modification application. See generally In re Olympic Mills Corp., 477 F.3d at 10-11 (plaintiff's request for injunctive relief to rescind contract to which absent party was signatory "heavily" favors characterizing absent party as indispensable). GMAC's bankruptcy filing likely bars any direct action against GMAC on the part of the Charests.
Rule 19(b) also implicates "the defendant's interest in avoiding multiple litigation, inconsistent relief, or sole responsibility for a liability it shares with another." In re Olympic Mills Corp., 477 F.3d at 9. As to Fannie Mae, a judgment rendered in GMAC's absence does not subject it to multiple liability or, as previously discussed, inconsistent obligations. Although Fannie Mae may share full responsibility for GMAC's conduct if it cannot later recover indemnity, Fannie Mae can guard against that result by vigorously pursuing its defenses in this action. The relatively limited kinds of chapter 93A suits that survive motions to dismiss where, as here, the misconduct involves HAMP guidelines and loan applications, see Okoye v. Bank of New York Mellon, 2011 WL 3269686, at *9, also reduces the likelihood that Fannie Mae will incur sole liability.
With respect to Rule 19(b)(2), limiting relief provides a basis to lessen the prejudice. See B. Fernandez & Hnos., Inc. v. Kellogg USA, Inc., 440 F.3d 541, 547 (1st Cir.2006). In the case at bar, tailoring the chapter 93A relief would not reduce the foregoing prejudice, which, in any event, is not substantial.
The third factor "encompasses `the interest of the courts and the public in complete, consistent, and efficient settlement of controversies.'" Picciotto v. Continental Cas. Co., 512 F.3d at 18 (quoting Provident Tradesmens Bank, 390 U.S. at 111, 88 S.Ct. 733); see B. Fernandez & HNOS, Inc. v. Kellogg USA, Inc., 516 F.3d at 25 ("judgment is `adequate'" under Rule 19(b)(3) "if it furthers the public interest in `complete, consistent, and efficient' resolution of controversies"); In re Olympic Mills Corp., 477 F.3d at 9 (absent party not indispensable due in part to "completely different" causes of action in the two proceedings). The chapter 93A suit involves a different cause of action than a future indemnity suit in the event the Charests recover and the automatic stay is lifted. Accordingly, there is little, if any, risk of inconsistency. For the same reason, an efficient settlement of any such future suit is not significantly impacted by a judgment rendered without GMAC as a party. Although the two suits overlap factually because they involve GMAC's conduct in processing the Charests' loan applications, the legal issues in an indemnity suit concern the reach and scope of the language in the indemnity provision and the intent of the contracting parties. See MacGlashing v. Dunlop Equipment Co., Inc., 89 F.3d 932, 940-941 (1st Cir.1996); see generally Riva v. Ashland, Inc., 2013 WL 1222393, at *9 (D.Mass. March 26, 2013). There is little possibility of inconsistent judgments. Cf. B. Fernandez & HNOS, Inc. v. Kellogg USA, Inc., 516 F.3d at 26 (proceeding without absent party "would unnecessarily create the possibility of inconsistent judgments").
The fourth factor encompasses considering "whether there is any assurance that the plaintiff, if dismissed, could sue effectively in another forum where better joinder would be possible." Fed.R.Civ.P. 19, Advisory Committee Notes, 1966 Amendment. Fannie Mae argues that plaintiff has an adequate remedy because "the U.S. Department of Treasury and/or FNMA could file suit
Balancing the four factors and finding no other concern relevant to the analysis, "in equity and good conscience," Rule 19(b), this suit should proceed among the
In accordance with the foregoing discussion, the motion to dismiss (Docket Entry # 18) is
940 C.M.R. § 8.06(15).
The Guide, § 610.03.04.
Okoye v. Bank of New York Mellon, 2011 WL 3269686, at *9.
