The facts, and all inferences drawn therefrom, viewed in the light most favorable to plaintiffs, are as follows. Plaintiffs claim that they are the victims of a fraudulent scheme involving twenty-four properties and numerous parties. In each case, the parcel of land was conveyed twice. In the first transaction, an entity controlled by one of the perpetrators purchased the property for at or near market value. The buyer then resold the property to another perpetrator. The purchase price in this second transaction was from two to four times greater than the price paid in the first.
Plaintiffs claim that the second purchaser in each case then submitted a false and fraudulent mortgage loan application to plaintiff Mortgagelinq. In reliance upon those applications, Mortgagelinq approved loans for 70% of the second purchase price and advanced funds accordingly. Also in each case, one of the title company defendants provided title insurance in connection with the property transfer, examined the title to the property, submitted a title report, and, through their settlement clerks, conducted closings in each of the 24 transaction pairs. Plaintiffs assert that in each case, both the first and second transactions occurred at the same time and place, and that in
several cases the second transaction was actually closed out of order, before the first. In virtually every instance, plaintiffs claim, the purchaser in the second transaction transferred the property back to the seller in the second transaction for one dollar.
Each of the 24 mortgages was sold by Mortgagelinq to the Federal Home Loan Mortgage Corporation ("Freddie Mac").
Plaintiffs filed suit in the United States District Court for the Eastern District of Pennsylvania ("Federal Court") on or about March 13, 1991, asserting claims based upon negligence, breach of contract, breach of fiduciary duty, fraud and violations of the United States Racketeer Influenced and Corrupt Organizations Statute, 18 U.S.C.A. s. 1962 et seq. Plaintiffs amended the complaint on or about April 24, 1991 to name additional defendants but then removed references to the defendants in the New Jersey action. The federal action is, at this time, scheduled for trial some time in July.
On or about February 12, 1992, plaintiffs filed suit in the Superior Court of New Jersey. Plaintiffs named the movants and other defendants, claiming violations of the New Jersey Racketeering and Corrupt Organizations statute, N.J.S.A. 2C:41-1 et seq., misrepresentation, fraud, negligence, negligent supervision, wrongful notary services, breach of fiduciary duty, breach of contract, bad faith, and other claims. Pursuant to New Jersey Court Rule 4:5-1, plaintiffs certified under oath that the "matter in controversy is not the subject of any other pending action in any other court or of a pending arbitration proceeding". At that time, the federal action was pending in Pennsylvania.
Subsequent to the New Jersey filing, several defendants in the federal action moved to compel joinder of additional parties or, in the alternative, for leave to implead additional defendants, seeking to bring the movants and the other New Jersey
defendants into the federal case. Plaintiffs, for reasons that are still disputed and not material here, vigorously opposed that joinder motion. The motion was denied by the Hon. Norma Shapiro by an order dated April 15, 1992. The denial was based at least in part on the fact that the time period for joinder under F.R.Civ.P. 22 had expired and that the court had previously stated that it intended to follow the rule's provisions literally.*fn1
This Court is satisfied that plaintiffs knew of their causes of action against the moving parties at least as early as the filing date of the federal action and certainly when they amended that complaint. In dispute still, is the question of whether the plaintiffs opposed the joinder motion because settlement talks were in progress or because Mortgagelinq's trial counsel in Pennsylvania had previously represented one of the movants. That question, however, is not material for purposes of resolving the instant motions. The court is also satisfied that the subject matter is identical in both suits and that plaintiffs affirmatively chose to bifurcate from the federal action trial of the causes against the New Jersey defendants despite this fact.
Defendants Lawyers' Title Insurance Corporation, Continental Title Insurance Company and Elizabeth Kehoe have all moved the court to dismiss plaintiffs' complaints in their entirety for violation of the entire controversy doctrine ("doctrine"). The facts and legal arguments cited by each of the movants are identical. The ...