JOANNA SEYBERT, District Judge.
Currently pending before the Court is a motion to sever and/or dismiss by defendants Bank of America, N.A.; JPMorgan Chase Bank, N.A.; M&T Bank; Mortgage Investors Corp.; Nationstar Mortgage, LLC; Ocwen Loan Servicing, LLC; PNC Bank National Association; and Wells Fargo Bank, N.A. (collectively "Defendants"). For the following reasons, Defendants' motion is GRANTED.
This action was initially commenced on April 17, 2013 by fifty-four named plaintiffs and "John Roes 1-100" against thirteen defendants. Since then, various parties have been voluntarily dismissed. Presently remaining are claims by plaintiffs Pedro Yanes ("Yanes"), Dulce Alvarez-Cheverez, Michael Ramsay, Joeann Kelly, Ricardo Gomez, Darryl West, Jorge Santiago, Daryll Henry, Sandra Buck, Horacio Elman, Jennifer Brooks, Buddy Cline, Carl Malchow, Alphonzo C. Byrd, Aaron Mathis, Bonita Goodman, Cyndrell Parker, Donald R. Sands, Jr., Robert Wagner, Denise Howard, Ronnie Davis, Sr., Darryl Queen, Melvin Pegues, Edwin Romero, Denise D. Farley-Renkel, Laverne Enger, Maria Elena Ospina, Diana Rodriguez, April Querol, Edgar Caraballo, Jose Figueroa, Jacob Echevarria, Patrick O. Kane, Gregory Serafini, Kim Smith, Kenneth Bywater, Dennis Mintz, Brenda Mintz, Yolette Szatkowski, Melissa Cardilli, Patricia White, Lizbeth Farley, Dameian Flores, Krystal Campbell, Brett Adams, Bernadette Chapman, Dave Krussow, Clarence Evans, Mary Jo Anderson, and John Roes 1-100 (collectively "Plaintiffs") against Defendants as alleged in the Amended Complaint.
Plaintiffs are homeowners who assert that Defendants committed various "illegal" acts in the creation and servicing of their home mortgage loans. (
Although Defendants offered various types of loans, they did not convey the long-term consequences of those loans to Plaintiffs. (Am. Compl. ¶ 43.) For example, Defendants "marginalized" the consequences of negatively amortized loans, downplaying the difficulties of refinancing and the increased amount of principal. (Am. Compl. ¶¶ 44-45.) Despite the disadvantages of certain loans to homeowners, Defendants encouraged their personnel to market them due to the financial benefits they stood to gain. (Am. Compl. ¶¶ 46-49.) According to Plaintiffs, they entered into these loans based upon Defendants' misrepresentations and omissions. (Am. Compl. ¶¶ 49-53.)
Ultimately, Plaintiffs defaulted on their mortgage payments and requested loan modifications through Defendants. (Am. Compl. ¶¶ 2-3.) Defendants ignored Plaintiffs' requests or provided Plaintiffs with application materials for a modification. (Am. Compl. ¶ 4.) They represented to Plaintiffs that after completion of the materials, Plaintiffs would be provided terms to make payments under a "trial modification." (Am. Compl. ¶ 5.) If Plaintiffs made those payments, there would be a permanent modification. (Am. Compl. ¶ 5.)
Plaintiffs allege that they accepted Defendant's loan modification offers and began performance, thus forming a contract. (Am. Compl. ¶ 7.) Specifically, the Amended Complaint asserts that "Plaintiffs either provided all of the requested documentation in support of their loan modification application to Defendants, and otherwise met all the conditions precedent pursuant to a trial modification offer, or attempted to do so in good faith, but faced substantial interference from Defendants." (Am. Compl. ¶ 8.) Where Plaintiffs faced substantial interference, it was because Defendants were essentially "shepherding Plaintiffs into foreclosure" through an "onerous" and "complicated" process. (Am. Compl. ¶ 9.)
Moreover, in instances where Plaintiffs did provide documentation, "Defendants still sent missing documentation requests." (Am. Compl. ¶ 10.) This was so even when Plaintiffs provided the documents on several occasions and was the result of a policy to burden Plaintiffs' compliance with modification terms. (Am. Compl. ¶¶ 10-11.)
In addition, Plaintiffs allege that they were denied trial modifications on baseless claims regarding financial status. (Am. Compl. ¶ 12.) "In cases where trial modification was not given, Defendants either gave no explanation for the denial, or alleged that Plaintiffs did not provide the necessary documentation for processing or review." (Am. Compl. ¶ 13.) Plaintiffs allege that Defendants had a financial incentive to encourage foreclosure or short sale, rather than loan modification. (Am. Compl. ¶¶ 14-16.) Where Plaintiffs were able to meet the conditions of modification, they were given terms to make payments on a trial basis, but ultimately denied permanent modification nonetheless. (Am. Compl. ¶¶ 14-15.) Even "[w]hen a permanent modification was granted, Defendants included such disadvantageous terms that ultimately rendered Plaintiffs' performance impossible . . . ." (Am. Compl. ¶ 17.)
Furthermore, under the Home Affordable Modification Program ("HAMP") lenders must conduct a Net Present Value ("NPV") calculation of the property as modified and unmodified. (Am. Compl. ¶ 23.) "When a modification has an NPV equal to, or greater than, the amount likely to be obtained from sale in foreclosure, lenders must offer a modification. However, Defendants' CDS/CDO ["Credit Debt Swap" and "Collateralized Debt Obligations"] holdings create a financial offset beyond the amount that could reasonably be obtained through sale in foreclosure." (Am. Compl. ¶ 23.) Thus, "Defendants have thus created an alarming conflict of interest as part of their losssharing agreements in the securitization of mortgages, incentivizing them to negotiate with the Plaintiffs in bad faith." (Am. Compl. ¶ 20.) Moreover, Defendants do not set specific standards for determining who will be granted loan modifications. (Am. Compl. ¶ 25.)
Plaintiffs assert the following causes of action: (1) Count One: Breach of Contract; (2) Count Two: Breach of the Implied Covenant of Good Faith and Fair Dealing; (3) Count Three: Promissory Estoppel; (4) Count Four: Fraudulent Concealment; (5) Count Five: Fraud for Demanding and Collecting Monthly Note Payments under False Pretenses; (6) Count Six: Violations of State Consumer Protection Statutes; (7) Count Seven: Violations of the Federal Truth in Lending Act ("TILA"); (8) Count Eight: Unjust Enrichment; (9) Count Nine: Fraud in the Inducement; and (10) Count Ten: Violations of the Real Estate Settlement Procedures Act ("RESPA").
Defendants now move to sever Plaintiffs' claims and to dismiss the Amended Complaint. The Court will first address the issue of severance before turning to Defendants' motion to dismiss.
Rule 20(a)(1) permits the joinder of multiple plaintiffs in an action if: "(A) they assert any right to relief jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and (B) any question of law or fact common to all plaintiffs will arise in the action." FED. R. CIV. P. 20(a)(1). These elements are preconditions and both must be met for joinder to be proper.
In determining whether claims arise out of the same "transaction" or "occurrence" under Rule 20(a), "courts are to look to the logical relationship between the claims and determine `whether the essential facts of the various claims are so logically connected that considerations of judicial economy and fairness dictate that all the issues be resolved in one lawsuit.'"
Here, the claims of Plaintiffs—forty-nine individuals with properties in numerous states—do not arise out of the same transaction or occurrence. Plaintiffs raise several arguments in opposition, primarily asserting that, to the extent that courts have severed claims in mortgage-related cases, those cases involve loan origination and not loan modification. The Court disagrees.
Recently, the undersigned issued an Order severing the plaintiffs in an action involving claims regarding mortgage loan modification and the same Plaintiffs' counsel.
The Court takes this opportunity to note that several courts across this District have ordered severance in similar actions—and rejected similar arguments in opposition—involving Plaintiffs' counsel.
Finally, even if Plaintiffs satisfied Rule 20(a), the Court would reach the same result in exercising its discretion under Rule 21 of the Federal Rules of Civil Procedure. Rule 21 provides, in relevant part, that "[o]n motion or on its own, the court may at any time, on just terms, add or drop a party . . . [and] sever any claim against any party." FED. R. CIV. P. 21.
In deciding whether to sever a claim under Rule 21, courts generally consider, in addition to the preconditions set forth in Rule 20(a): "[1] whether settlement of the claims or judicial economy would be facilitated; [2] whether prejudice would be avoided if severance were granted; and [3] whether different witnesses and documentary proof are required for the separate claims."
Here, Plaintiffs' individual claims will require distinct witnesses and documentary proof.
Defendants further move to dismiss all of Yanes's claims with prejudice pursuant to Federal Rules of Civil Procedure 8(a)(2), 9(b), and 12(b)(6).
Pursuant to Rule 8(a)(2) of the Federal Rules of Civil Procedure, a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Under the now well-established
This "plausibility standard," which governs motions to dismiss under Rule 12(b)(6), is governed by "[t]wo working principles."
To state a claim sounding in fraud or mistake, Rule 9(b) of the Federal Rules of Civil Procedure imposes a heightened pleading standard: "[A] party must state with particularity the circumstances constituting fraud or mistake." FED. R. CIV. P. 9(b). The Second Circuit has read Rule 9(b) to require that a complaint "(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent," in order to survive a motion to dismiss.
Defendants preliminarily assert that the Amended Complaint should be dismissed because Plaintiffs have provided only a generalized pleading that "lumps together" Plaintiffs' individualized claims against separate defendants. (Defs.' Br. at 9 (citation and internal quotation marks omitted). The Court agrees.
Having severed all of the claims except those of plaintiff Yanes, the deficiencies of the Amended Complaint are apparent. In the fifty-six page Amended Complaint, the only allegations specific to Yanes are:
(Am. Compl. ¶ 60.)
However, the Amended Complaint alleges various scenarios, some of which necessarily do not apply to Yanes. By way of example, Plaintiffs, individually, were at different stages in the loan modification process—some made requests for materials that were denied, some attempted to provide documentation and others were successful in so doing, and some even made modification payments on a trial basis. (
In fact, the Amended Complaint is replete with legal conclusions and bare recitations of legal elements, rather than factual allegations.
Given the sheer lack of factual allegations, the Court will grant Yanes leave to replead.
For the foregoing reasons, Defendants' motion to sever and to dismiss is GRANTED. The claims of all Plaintiffs, with the exception of the claims of first-named plaintiff Pedro Yanes, are SEVERED pursuant to Rules 20 and 21 of the Federal Rules of Civil Procedure and are DISMISSED WITHOUT PREJUDICE to commencing separate actions. Any plaintiff wishing to commence a separate action must do so within thirty (30) days of the date of this Memorandum and Order. Additionally, the statute(s) of limitations for any claims are tolled for a period of thirty (30) days from the date of this Memorandum and Order.
Moreover, Defendants' motion to dismiss the Amended Complaint as to Yanes's claims is GRANTED. However, his claims are DISMISSED WITHOUT PREJUDICE and with leave to replead. If Yanes wishes to file a Second Amended Complaint, he must do so within thirty (30) days of the date of this Memorandum and Order. If he does not do so, his claims will be dismissed with prejudice and the case will be closed.
SO ORDERED.