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Charles A. Zanger, Jr v. Bank of America

August 10, 2011


The opinion of the court was delivered by: Kugler, United States District Judge:

NOT FOR PUBLICATION (Doc. Nos. 19, 23)


This is a dispute regarding allegedly misappropriated escrow funds. Currently before the Court are Defendants' motions to dismiss Plaintiff's claim under the New Jersey Racketeer Influenced and Corrupt Organizations Act ("NJ RICO"), N.J. Stat. Ann. § 2C:41-1, et seq. (Doc. Nos. 19, 23). Because Plaintiff fails to allege that Defendants engaged in "a pattern of racketeering activity" under NJ RICO, the Court grants Defendants' motions to dismiss Count IX of the Amended Complaint.


In May 2009, Plaintiff Charles A. Zanger, Jr., executed a note and granted a mortgage in favor of NVR Mortgage Finance, Inc. ("NVR"). Pursuant to the note's terms, NVR agreed to lend Plaintiff approximately $205,535.00 for the purchase of a condominium unit located in Cinnaminson, New Jersey. In exchange, Plaintiff agreed to repay the principal amount plus interest at a rate of four and one-half percent per year for thirty years. The note also requires Plaintiff to make monthly escrow payments to NVR so that NVR could pay Plaintiff's quarterly real estate property taxes and purchase any insurance that required by the mortgage agreement. The mortgage requires Plaintiff to purchase flood insurance if the property is located in a Special Flood Hazard Area (a "flood zone") as designated by the Federal Emergency Management Agency ("FEMA").

NVR transferred the note and mortgage to Defendant Bank of America, N.A. ("BOA"). The mortgage is serviced by Defendant BAC Home Loans Servicing, LP ("BAC"), which is a subsidiary of BOA. In September 2009, BAC retained Defendant Landsafe Flood Determination, Inc. ("Landsafe"), a wholly owned BOA subsidiary, to determine whether Plaintiff's property was within a flood zone. Landsafe determined that Plaintiff's property is within a flood zone even though the FEMA map shows that the property is not in a flood zone. In October 2009, based on Landsafe's determination, BAC notified Plaintiff that it had purchased flood insurance for the property and deducted approximately $2,008.27 from Plaintiff's escrow funds to pay for the insurance.

In November 2009, Cinnaminson Township notified Plaintiff that he owed $3,398.33 in past due property taxes. The township further notified Plaintiff that it would sell his property at a tax sale in December 2009 if he did not pay the taxes plus $57.71 in interest. In order to avoid the tax sale, Plaintiff paid the outstanding taxes and interest. Plaintiff alleges that Defendants were required to pay the property taxes from the escrow funds and that the funds would have been sufficient to pay the taxes if Defendants had not used the escrow funds to improperly purchase flood insurance.

Plaintiff originally filed the Complaint in the Superior Court of New Jersey in April 2010. Defendants removed the matter to this Court in May 2010. In November 2010, the Court granted Plaintiff leave to amend the Complaint to add Landsafe as a defendant. Plaintiff asserts various claims against Defendants, including breach of contract, bad faith, violations of several statutes governing mortgage brokers and escrow agents, negligence, breach of fiduciary duty, and violations of NJ RICO. Plaintiff's NJ RICO claim is based on Defendants' alleged fraud regarding the purchase of flood insurance from Plaintiff's escrow funds. Specifically, Plaintiff alleges that Defendants committed theft by deception as prohibited by N.J. Stat. Ann. § 2C:20-4. Defendants now move to dismiss Plaintiff's NJ RICO claim for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).*fn2 The parties have submitted their respective briefs and the motion is ripe for review.


A.Rule 12(b)(6)

Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss an action for failure to state a claim upon which relief can be granted. With a motion to dismiss, "'courts accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.'" Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (quoting Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)). In other words, a complaint survives a motion to dismiss if it contains sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In addition to the allegations of the complaint, a court may consider matters of public record, documents specifically referenced in or attached to the complaint, and documents integral to the allegations raised in the complaint. Mele v. Fed. Reserve Bank of N.Y., 359 F.3d 251, 255 n.5 (3d Cir. 2004).

In determining whether a complaint states a plausible claim for relief, a court must conduct a two-part analysis. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009); Fowler, 578 F.3d at 210-11. First, the court must separate factual allegations from legal conclusions. Iqbal, 129 S. Ct. at 1949. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. Second, the court must determine whether the factual allegations are sufficient to show that the plaintiff has a "plausible claim for relief." Id. at 1950. Determining plausibility is a "context-specific task" that requires the court to "draw on its judicial experience and common sense." Id. A complaint cannot survive where a court can only infer that a claim is merely possible rather than plausible. See id.

B.Rule 9(b)

A plaintiff who asserts a NJ RICO claim predicated on fraud must comply with Rule 9(b)'s heightened pleading standard. See Construcciones Haus Soceidad v. Kennedy Funding Inc., No. 07-0392, 2008 U.S. Dist. LEXIS 33685, at * 5 (D.N.J. April 24, 2008) ("To properly plead a NJ RICO claim asserting a fraudulent predicate act, a party must comply with Rule 9(b), which requires that such allegations be pled with particularity."). Rule 9(b) provides that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b). Pursuant to Rule 9(b), a plaintiff must plead the circumstances of the alleged fraud with particularity sufficient to put the defendant on notice of the "precise misconduct with which [it is] charged." Lum v. Bank of Am., 361 F.3d 217, 223-24 (3d Cir. 2004). A plaintiff may satisfy that requirement in two ways. Id. at 224. First, a plaintiff can meet the requirement "by pleading the date, place or time of the fraud." Id. Second, the plaintiff may use an "alternative means of injecting precision and some measure of substantiation into their allegations of fraud." Id. (citing Seville Indus. Mach. v. Southmost Mach., 742 F.2d 786, 791 (3d Cir. 1984)). Rule 9(b)'s heightened pleading standard is meant "to place the defendants ...

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