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Franceski v. Freedom Mortgage Corp.

United States District Court, D. New Jersey

June 27, 2019

BARBARA FRANCESKI, Plaintiff,
v.
FREEDOM MORTGAGE CORPORATION and NYCB MORTGAGE COMPANY, LLC, Defendants.

          ROBERT A. FAGELLA ZAZZALI, FAGELLA & NOWAK, KLEINBAUM & FRIEDMAN, PC Attorney for Plaintiff Barbara Franceski.

          DAVID G. MURPHY REED SMITH LLP Attorney for Defendant Freedom Mortgage Corporation.

          OPINION

          NOEL L. HILLMAN, U.S.D.J.

         This case concerns an alleged violation of the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. § 2601, et seq. (“RESPA”) and a breach of contract by Defendants in relation to payment of property taxes. Presently before the Court is Defendant Freedom Mortgage Corporation's (“FMC” or “Freedom”) Motion to Transfer. For the reasons stated herein, this Court will grant, in part, Defendant's Motion to Transfer and stay this action pending the decision of the Eastern District of Virginia.

         BACKGROUND

         This Court takes its facts from Plaintiff's complaint and the filings in the Eastern District of Virginia actions of relevance to this decision. The facts of the case are relatively straightforward. Plaintiff owns a residential property in Alexandria, Virginia where she resides. The property is subject to a mortgage loan. Prior to October 31, 2017, Defendant NYCB Mortgage Company, LLC (“NYCB”) was the lender and servicer of the mortgage. As part of the agreement, Plaintiff agreed to make payments into an escrow account held by NYCB which was to be used to pay Alexandria City property taxes.

         Alexandria City property taxes are paid in two installments, with the first installment due by June 15 and the second due by November 15. NYCB timely paid the first installment from the escrow account. Effective October 31, 2017, NYCB transferred the loan and servicing of the loan to FMC. NYCB did not pay the second installment that was due by November 15. FMC took over the mortgage and servicing of the mortgage on November 1, 2017 and directed Plaintiff to make payments to it going forward. Plaintiff did so for the month of November. But, FMC did not pay the Alexandria City property tax by November 15, 2017. This resulted in tax penalties assessed by Alexandria City and reduced the benefit Plaintiff could claim on her federal tax return. FMC eventually paid the tax and penalty on March 26, 2018.

         Two weeks before, on March 12, 2018, Rodney Harrell filed a class action complaint against FMC in the Eastern District of Virginia, Alexandria Division (the “Harrell Action”), which can be found at docket number 1:18-cv-00275-AJT-TCB. The Harrell Action asserts allegations nearly identical to those asserted in the instant case. In the Harrell Action, Mr. Harrell's mortgage was transferred from NYCB to FMC effective October 31, 2017, NYCB paid the June Alexandria City tax installment, and FMC failed to pay the November Alexandria City tax installment which caused a penalty to be assessed and Mr. Harrell to pay more in federal taxes. (Def.'s Mot. to Transfer, Ex. A ¶¶ 5-20.) The Harrell Action includes three counts: (1) violation of RESPA, 12 U.S.C. § 2605(g), (2) breach of contract, and (3) negligence. (Def.'s Mot. to Transfer, Ex. A, ¶¶ 33-54.)

         Motion practice proceeded in the Harrell Action, with Mr. Harrell filing a Motion to Certify the Class on April 30, 2018 and FMC filing a Motion to Dismiss for Lack of Personal Jurisdiction and Failure to State a Claim on May 4, 2018. On July 18, 2018 the Harrell Action was dismissed by the Honorable Anthony J. Trenga. Importantly, Judge Trenga dismissed the case for failure to state a claim, and did not address the merits of the class certification motion nor the merits of the personal jurisdiction arguments asserted by FMC.

         On August 16, 2018, Mr. Harrell filed a motion for reconsideration.[1] On the same day, Stacey Chittick filed a class action complaint against FMC and NYCB in the Eastern District of Virginia, Alexandria Division (the “Chittick Action”), which can be found at docket number 1:18-cv-01034-AJT-MSN. Again, the Chittick Action asserts allegations nearly identical to those asserted in the instant case.

         In the Chittick Action, Ms. Chittick's mortgage was transferred from NYCB to FMC effective October 31, 2017, NYCB paid the June Alexandria City tax installment, and FMC failed to pay the November Alexandria City tax installment which caused a penalty to be assessed and Ms. Chittick to pay more in federal taxes. (Def.'s Mot. to Transfer, Ex. B ¶¶ 6-16.) The Chittick Action includes two counts: (1) violation of RESPA, 12 U.S.C. § 2605(g) and (2) breach of contract. (Def.'s Mot. to Transfer, Ex. B, ¶¶ 38-55.)

         It was only on September 17, 2018 that the instant action was filed. Like the Harrell and Chittick Actions, Plaintiff's complaint alleges FMC's failure to pay the Alexandria City property tax is (1) a violation of RESPA, 12 U.S.C. § 2605(g), and (2) a breach of contract.

         Most importantly, all three actions purport to be nationwide class actions against FMC. The class and sub-class definitions, respectively, in the three cases are as follows:

All natural persons residing in the United States (including all territories and other political subdivisions of the United Sates) who (a) had a residential mortgage loan from any lender on real property within the United States or its territories or other political subdivisions; (b) had escrow agreements requiring Freedom to remit either property taxes or hazard insurance premiums or both to the applicable local jurisdictions or insurance carriers from the property owner's escrow account; and (c) have not had their local property taxes paid or hazard insurance premiums paid or both pursuant to the referenced escrow agreements in a timely manner.
* * *
All natural persons residing in the United States (including all territories and other political subdivisions of the United Sates) who (a) had a residential mortgage loan from any lender on real property within the United States or its territories or other political subdivisions; (b) had escrow agreements requiring Freedom to remit property taxes to the applicable local jurisdictions from the property owner's escrow account; and (c) lost their 2017 local property tax deduction on their federal and/or state tax returns due to Freedom's failure to pay his/her/their local property taxes in 2017.

(Def.'s Mot. to Transfer, Ex. A ¶¶ 56-57);

All natural persons residing in the United States (including all territories and other political subdivisions of the United Sates) who (a) had a residential mortgage loan obtained for primarily nonbusiness purposes from any lender on real property within the United States or its territories or other political subdivisions; (b) for which Freedom or NYCB were the mortgage loan servicer; and (c) for which Freedom and/or NYCB failed to remit property taxes ...

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