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Michael Soto, et al v. Quicken Loans

December 14, 2010


The opinion of the court was delivered by: Pisano, District Judge.


This is an action brought by Plaintiffs Michael Soto and Desiree Collazo-Soto (together, "Plaintiffs") against defendants Quicken Loans, Inc. ("Quicken"); Merill Lynch Mortgage Lending ("MLML") and others alleging numerous statutory and common law claims arising from the refinancing of a residential mortgage loan. MLML and Quicken (together "Defendants") have moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons below, the motions are granted in part and denied in part.

I. Background*fn1

According to the complaint, Plaintiff's are the owner of residential property located at 43 Washington Avenue, Old Bridge, New Jersey. In December 2006, Plaintiffs refinanced the existing mortgage loan on this property in order to consolidate that loan with the outstanding balance on their home equity line of credit. Plaintiffs "refinanced their loan with the same lender and loan officer as their two prior refinances, Quicken and Edward Berger." Am. Compl. ¶ 14. Closing took place at Plaintiffs' home on December 9, 2006, with a notary acting as the settlement agent. Plaintiff executed a note in the amount of $380,000 in favor of Quicken and executed a mortgage to secure payment of the note. Sometime thereafter the mortgage and loan was assigned to MLML.

According to Plaintiffs, they expressly requested a fixed rate loan, but "the lender provided an adjustable rate mortgage." Am. Compl. ¶ 17. More specifically, Plaintiffs obtained "a negative amortization loan that would be fixed for the first 5 years with a 10-year interest-only payment feature." Am. Comp. ¶ 22. In making such a loan to Plaintiffs, it is alleged that "[t]he defendants failed to provide what was promised." Id. ¶ 26.

As best as the Court can discern from the Amended Complaint, which defendant MLML aptly describes as relying substantially upon "half-formed allegations, bald conclusions and legal non-sequiturs," Reply at 2, all defendants are alleged to have taken certain actions to deceive and mislead Plaintiffs about the loan terms. For example, Quicken allegedly falsely represented to Plaintiffs the interest rate of the loan and the total amount that would be financed, and its loan officer did not adequately explain to Plaintiffs the terms of their loan. Am. Compl. ¶ 19. It is further alleged that "defendants" did not provide Plaintiffs with appropriate disclosures and "made fraudulent representations about the terms of the loan to plaintiff to induce them to refinance the mortgage on their house." Id. ¶ 33. The crux of Plaintiffs' claim appears to be that when they entered into the transaction they were not aware of the negative amortization feature of their loan, and Plaintiffs discovered sometime after the loan closed that they were "going backward each month and thus owing more than they originally borrowed." Id. ¶ 34.

The complaint alleges the following fifteen counts against all defendants in the action:

(1) violation of the Truth In Lending Act ("TILA"), 15 U.S.C § 1602; (2) violation of the New Jersey Consumer Fraud Act, N.J.S.A. § 56:8-1, et seq.; (3) violation of New Jersey's Racketeer Influenced Corrupt Organizations act ("RICO"), N.J.S.A. § 2C:41-1, et seq.; (4) fraud; (5) "unconscionability"; (6) negligence; (7) unjust enrichment; (8) breach of contract; (9) violation of the Real Estate Settlement Practice Act, 12 U.S.C. § 2601 et seq.; (10) "negligence of settlement agent and other Defendants"; (11) breach of fiduciary duty; (12) breach of duty of good faith and fair dealing; (13) violation of New Jersey's law against discrimination; (14) violation of the New Jersey Home Ownership Security Act, N.J.S.A. § 46:10B-22; (15) violation of the Home Ownership Equity Protection Act ("HOEPA"), 15 U.S.C. § 1639. MLML and Quicken have moved for dismissal of all counts pursuant to Federal Rule of Civil Procedure 12(b)(6).

II. Legal Discussion

A. Motion to Dismiss Standard

Under Federal Rule of Civil Procedure 12(b)(6), a court may grant a motion to dismiss if the complaint fails to state a claim upon which relief can be granted. The Supreme Court refashioned the standard for addressing a motion to dismiss under Rule 12(b)(6) in Bell Atl. Corp. v. Twombly, 550 U.S. 544, 562, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The Twombly Court stated that, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, ... a plaintiff's obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do[.]" Id. at 555 (internal citations omitted); see also Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir.2007) (stating that standard of review for motion to dismiss does not require courts to accept as true "unsupported conclusions and unwarranted inferences" or "legal conclusion[s] couched as factual allegation[s]." (internal quotation marks omitted)). Therefore, for a complaint to withstand a motion to dismiss under Rule 12(b)(6), the "[f]actual allegations must be enough to raise a right to relief above the speculative level, ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact) ..." Twombly, 550 U.S. at 555 (internal citations and footnote omitted).

More recently, the Supreme Court has emphasized that, when assessing the sufficiency of a civil complaint, a court must distinguish factual contentions and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). A complaint will be dismissed unless it "contain[s] sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. at 1949 (quoting Twombly, 550 U.S. at 570). This "plausibility" determination will be "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Fowler v. UPMC Shadyside, 578 F.3d 203, 2009 WL 2501662, *5 (3d Cir. August 18, 2009) (citations omitted).

B. Analysis

1. TILA Claim (Count I);*fn1 HOEPA Claim (Count IX)

TILA requires lenders to provide borrowers with specific disclosures with respect to certain terms of their loans. 15 U.S.C. § 1638. "Regulation Z" describes the material disclosures that lenders must make "clearly and conspicuously in writing, in a form that the consumer may keep." 12 C.F.R. § 226.17(a)(1). Plaintiffs' TILA and HOEPA claims found in Count I and XV of their complaint are governed by the time limit for a borrowers' right to rescind pursuant to 15 U.S.C. § 1635(f) and the time limitation for seeking damages for civil liability under 15 U.S.C. § 1640(e). For individuals seeking rescission, TILA mandates that "an obligor's right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property whichever occurs first." 15 U.S.C. § ...

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