Salvati sued Deutsche Bank, Bank of America, OneWest Bank, and
a law firm (McCabe), largely based on the validity of the pre-foreclosure
notice he was sent, the foreclosure complaint filed against him, and the demand
for attorneys' fees and other legal expenses contained in that complaint. The
magistrate judge recommended granting defendants’ motion to dismiss in part and
denying it in part.
Salvati refinanced with New Century, taking out a first and
second mortgage, only the first of which is at issue here. New Century
allegedly filed for bankruptcy in 2007, and though there was no assignment on
file at the county recorder, Salvati subsequently began receiving statements
from Countrywide. BOA bought Countrywide
and continued to service the loan. Over
four years after New Century filed for bankruptcy, it somehow assigned the
mortgage to Deutsche Bank in September 2011.
At some point, Salvati defaulted. McCabe sent him a notice in May 2011
indicating the lender’s intention to accelerate the balance of the loan, as
required by law before foreclosure. Salvati alleged that the notice was
defective in many ways, including that it was sent by McCabe instead of the
mortgagee and that it failed to inform him of his rights to attempt to
refinance or restructure the loan. The notice listed Deutsche Bank as the
lender, even though the mortgage wasn’t yet assigned to Deutsche Bank.
In February 2012, McCabe allegedly filed a foreclosure
complaint against him, bumping up his initial $139,200 loan to $206,611.64 as
the total of principal, interest, attorney's fees, late charges, corporate
advances, and escrow advances. Salvati
alleged that the complaint unlawfully failed to indicate on what date the
amounts were due and owing; failed to itemize the amounts, including the
attorney’s fees; failed to allege the attorney’s fees were based on actual work
performed/costs incurred; and failed to attach supporting documents. He alleged
that his current account balance was overstated, reflecting unauthorized fees.
He filed a class action on behalf of Pennsylvania consumers, alleging claims
based on various debt-specific laws as well as on the Pennsylvania Unfair Trade
Practices and Consumer Protection Law. I will focus only on the UTPCPL.
Salvati alleged that the defendants violated the UTPCPL by
overcharging and/or misrepresenting the amounts owed by homeowners in the
putative class. BOA argued that the
claim should be dismissed because Salvati failed to allege a fraudulent or
deceptive act or that he justifiably relied on any such act.
Salvati failed to state a claim that BOA represented “that
goods or services have sponsorship, approval, characteristics, ingredients,
uses, benefits or quantities that they do not have,” since he only alleged that
he paid improper fees. However, the UTPCPL also bars “any other fraudulent or
deceptive conduct which creates a likelihood of confusion or of
misunderstanding.” This encompasses a
wide range of conduct, as long as an act or practice “has the capacity or
tendency to deceive.” Here, the
allegedly defective notice was submitted on BOA’s behalf, and BOA verified the
allegations in the foreclosure complaint, including the representation that
allegedly illegal and/or unauthorized attorneys' fees and other costs were due
and owing. “These alleged misrepresentations clearly have the capacity to
deceive and, thus, run afoul of the UTPCPL. Moreover, having alleged that he
paid at least a portion of the illegal fees, it is reasonable to infer that Mr.
Salvati did so in reliance on the misrepresentation that attorneys' fees and
other legal expenses were due and owing.”
So, was that enough to infer that he suffered an
ascertainable loss as a result of his reliance?
He alleged that he’d paid at least part of his allegedly overstated
balance, which was enough to allege ascertainable loss “in the form of an
increased mortgage balance which increased the encumbrance on his property.”
The same arguments applied to Deutsche Bank. Here, the allegation was that the notice was
sent on Deutsche’s behalf when it wasn’t yet assigned the loan, and that the
alleged assignment by a bankrupt entity couldn’t have taken place. The foreclosure complaint listed Deutsche as
the plaintiff and indicated that McCabe was its attorney. Thus, the allegedly
false/deceptive representations in the foreclosure complaint about the fees
owed were attributable to Deutsche.
McCabe argued that UTPCPL claims couldn’t be brought against
attorneys for claims arising out of the practice of law. Beyers v. Richmond, 937 A.2d 1082 (Pa. 2007),
in which the Pennsylvania Supreme Court found that collecting and distributing
settlement proceeds fell within the boundaries of “practicing law” and was
within the exclusive power of the Supreme Court to regulate, so the UTPCPL did
not apply. However, the Court distinguished the case before it from cases in
which the misconduct wasn’t related to the practice of law or legal
representation, including a case in which a lawyer was sued for his role in
commencing allegedly unwarranted eviction proceedings on behalf of his landlord
client in order to extort money from the plaintiff that he did not owe. That case found that debt collection was an
act in trade or commerce to which the UTPCPL applied. Here, Salvati didn’t allege that McCabe’s
misconduct was committed during the course of practicing law but, rather, contends
only that McCabe filed the foreclosure complaint on behalf of Deutsche and that
it violated the UTPCPL by overcharging and or misrepresenting the amount that
Salvati owed. This was a challenge not
to the adequacy of McCabe’s legal representation but rather to the propriety of
its debt collection practices and thus should survive a motion to dismiss.
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