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Freedom Mortgage Corp. v. Loancare, LLC

United States District Court, D. New Jersey, Camden Vicinage

September 23, 2019

FREEDOM MORTGAGE CORPORATION, Plaintiff/Counterclaim Defendant,
LOANCARE, LLC Defendant/Counterclaim Plaintiff.

          LANDMAN CORSI BALLAINE & FORD, P.C. Jerry A. Cuomo, Esq.; Alexander B. Imel, Esq.; Timothy J. Collazzi, Esq.; Mark S. Landman, Esq. (pro hac vice) Counsel for Freedom Mortgage Corp.

          FRIEDMAN KAPLAN SEILER & ADELMAN LLP By: Robert J. Lack, Esq.; Ricardo Solano Jr., Esq. Counsel for LoanCare, LLC

          BOIES SCHILLER FLEXNER LLP By: Stuart H. Singer, Esq. (pro hac vice); Sabria A. McElroy, Esq. (pro hac vice); Pascual A. Oliu, Esq. (pro hac vice); Evan Ezray, Esq. (pro hac vice) Counsel for LoanCare, LLC



         This matter comes before the Court upon a Motion to Dismiss [Dkt. No. 101], filed by Plaintiff/Counterclaim Defendant Freedom Mortgage Corporation (“Freedom”) seeking dismissal of Count One (Fraudulent Inducement), Count Two (Conversion Before Termination), Count Three (Conversion After Termination), and Count Five (Unjust Enrichment) from the Second Amended Counterclaim (“SAC”)[Dkt. No. 90], filed by Defendant/Counterclaim Plaintiff LoanCare, LLC(“LoanCare”). Because Virginia law governs the dispute between the parties, [1]Freedom contends that LoanCare’s fraudulent inducement, conversion, and unjust enrichment claims are subsumed by LoanCare’s Breach of Contract claim (Count Four) under Virginia’s “source of duty” rule. For the reasons stated herein, the Motion to Dismiss will be GRANTED IN PART, as to Count Two, but DENIED IN PART, as to Count One, Count Three, and Count Five.


         For approximately 15 years, LoanCare, a mortgage subservicer, worked with Freedom, a full-service residential mortgage lender, to service various mortgage loans. From February 1, 2010 through June 30, 2016, the terms of the parties’ relationship were governed by the Amended and Restated Subservicing Agreement (the “Subservicing Agreement” or “Agreement”). In January 2016, Freedom advised LoanCare that it planned to terminate the Subservicing Agreement on June 30, 2016.

         In anticipation of the termination date, Freedom instructed LoanCare to transfer any loans that it was servicing back to Freedom by May 3, 2016. Accordingly, in early May 2016, Freedom allegedly told LoanCare to transfer funds from shared custodial accounts back to Freedom. Based on these instructions, LoanCare scheduled various wire transfers and Automated Clearing House (“ACH”) debits, totaling $111, 715, 004.26, to remit the funds back to Freedom from the custodial accounts. Meanwhile, unbeknownst to LoanCare, Freedom allegedly worked directly with the banks to seize and block LoanCare’s access to these very same accounts. When it came time to execute the scheduled transfers, LoanCare was unable to access the custodial accounts and the banks defaulted to pulling the full $111, 715, 004.26 from LoanCare’s own cash accounts.

         LoanCare alleges that Freedom, effectively, collected the requested funds twice: once from the custodial accounts and once from LoanCare’s own accounts. LoanCare states that it eventually recovered $89, 021, 242.09, but that Freedom continues to unlawfully withhold funds totaling $22, 693, 762.17. See SAC, at ¶ 66. Additionally, LoanCare contends that it was forced to borrow millions of dollars, with interest, to cover the shortfalls caused by Freedom’s actions. Id. at ¶ 64.

         In May 2016, Freedom commenced this suit against LoanCare, claiming, among other things, breach of contract, unjust enrichment, and other misconduct by LoanCare. On July 8, 2016, LoanCare filed an Answer and Counterclaim to Freedom’s Complaint [Dkt. No. 17]. Subsequently, LoanCare filed an Amended Counterclaim on June 4, 2018 [Dkt. No. 68]. After Freedom moved for Judgment on Pleadings [Dkt. No. 56], this Court issued an Opinion and Order on November 30, 2018 [Dkt. Nos. 83, 84], dismissing LoanCare’s fraud, tort, and unjust enrichment claims from the Amended Counterclaim. On December 31, 2018, LoanCare filed the SAC. Now, this matter comes before the Court upon Freedom’s Motion to Dismiss [Dkt. No. 101], once again asking the Court to dismiss LoanCare’s fraud, tort, and unjust enrichment claims, as repleaded in the SAC.


         To withstand a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 662. “[A]n unadorned, the defendant-unlawfully-harmed-me accusation” does not suffice to survive a motion to dismiss. Id. at 678. “[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.” Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)).

         In reviewing the non-moving party’s allegations, the district court “must accept as true all well-pled factual allegations as well as all reasonable inferences that can be drawn from them, and construe those allegations in the light most favorable to the plaintiff.” Bistrian v. Levi, 696 F.3d 352, 358 n.1 (3d Cir. 2012). When undertaking this review, courts are limited to the allegations found in the complaint, exhibits attached to the complaint, matters of public record, and undisputedly authentic documents that form the basis of a claim. See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997); Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).

         III. ...

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