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Mortgage Resolution Servicing, LLC v. Jpmorgan Chase Bank, N.A.

United States District Court, S.D. New York

February 13, 2017

JPMORGAN CHASE BANK, N.A., et al., Defendants.


          LAURA TAYLOR SWAIN United States District Judge.

         Before the Court is a motion by Defendants JPMorgan Chase Bank, N.A., JPMorgan Chase & Co., and Chase Home Finance, LLC (collectively, “Chase” or “Defendants”), to dismiss counts four through nine of the operative Third Amended Complaint (docket entry no. 67 (“TAC”)). (See docket entry no. 76.) Those counts allege conversion, tortious interference, fraud, negligent misrepresentation, slander of title, and a civil RICO conspiracy. (TAC ¶¶ 164-220.) The Court has jurisdiction of this action pursuant to 28 U.S.C. § 1331 (with respect to the civil RICO count) and 28 U.S.C. § 1332 (with respect to all other claims). The Court has carefully considered all of the parties' submissions, and for the reasons stated below, the motion to dismiss is granted as to count four (conversion), count five (tortious interference), count eight (slander of title), and count nine (civil RICO), and denied as to count six (fraud) and count seven (negligent misrepresentation).


         The following facts relevant to the disposition of the instant motion are drawn from the TAC and are assumed to be true for the purposes of this motion to dismiss.

         Plaintiffs Mortgage Resolution Servicing, LLC (“MRS”), S&A Capital Partners, Inc. (“S&A”), and 1st Fidelity Loan Servicing, LLC (“1st Fidelity” and, collectively with MRS and S&A, “Plaintiffs”), are in the business of purchasing from financial institutions and servicing portfolios of nonperforming residential mortgage loans. (TAC ¶¶ 11-12.) All three companies are Florida corporations whose president is Laurence Schneider. (TAC ¶¶ 2-4.) S&A and Chase entered into a Master Mortgage Loan Sale Agreement (the “MMLSA”) in approximately April 2005. (TAC ¶¶ 13-14.) S&A and 1st Fidelity bought loans from Chase pursuant to the MMLSA from 2005 through 2010. (TAC ¶¶ 14-17.)

         In 2008, Eddie Guerrero, a Loss Recovery Supervisor at Chase, contacted Schneider to discuss Chase's interest in selling a portfolio of first-lien residential mortgage loans. (TAC ¶ 19.) Guerrero represented that this set of loans included mortgages on low-value properties in areas experiencing a significant housing crisis as well as some more valuable loans that had erroneously been charged off by Chase. (TAC ¶¶ 19-20.) Schneider provided Chase with an application to purchase the pool of loans. (TAC ¶ 21.)

         In October 2008, Guerrero sent Schneider preliminary information on the loan portfolio, but the information was incomplete. (TAC ¶ 22.) A more complete spreadsheet (though one still missing some information) was sent to Schneider in November 2008. The November 2008 spreadsheet indicated that the portfolio included 5, 785 first-lien mortgages with an aggregate balance of approximately $230 million. (TAC ¶ 24.) Chase represented that the reason for the missing information in the November spreadsheet was that Chase was still processing information it received during its acquisition of Washington Mutual, Inc. (TAC ¶ 26.)

         In December 2008, Schneider told Guerrero that he would not make an offer to purchase the mortgage portfolio. (TAC ¶ 29.) In response, Guerrero offered to sell the portfolio for $200, 000. (TAC ¶ 30.) Based on an analysis of the November data set, which included several loans Schneider believed to be valuable, Schneider agreed to purchase the portfolio for $200, 000. (Id.) On December 22, 2008, Schneider formally communicated an offer to purchase a $100 million portfolio of first-lien mortgages, [1] and sent a cashier's check for $200, 000 to Chase the following day. (TAC ¶¶ 32-33.)

         On February 4, 2009, Chase sent Schneider a Mortgage Loan Purchase Agreement (the “MLPA”), which contract would govern the sale of the mortgage portfolio. (TAC ¶ 35.) The February 4 draft of the MLPA contained a placeholder for “Exhibit A”, which was to list the mortgages being sold. (Id.) The draft did, however, represent that Chase would be conveying 4, 271 loans with an aggregate balance of $172, 093, 033.13.[2] (Id.) Chase told Schneider that the final version of Exhibit A would not be provided until after the MLPA was signed. (TAC ¶ 36.)

         The final version of the MLPA, signed by Chase and MRS, was sent to Schneider on February 25, 2009. (TAC ¶¶ 37-38.) The final MLPA provided for the sale of 3, 529 mortgages with an aggregate balance of $156, 324, 399.24 (per the nomenclature used by the TAC, the “MRS Loans”). (TAC ¶ 38.) The TAC alleges that Chase included an additional $56 million in mortgages above Schneider's $100 million purchase offer, without requesting any additional consideration, was that Chase knew that the MRS Loans had been serviced in violation of state and federal law, and Chase was therefore transferring to MRS a significant set of liabilities. (TAC ¶¶ 40-41.) The TAC alleges that this represented a violation of the MLPA's representations and warranties, which provided that the mortgages complied with applicable laws. (TAC ¶¶ 41-43.) The TAC alleges that the allegedly false statements made by Chase prior to the signing of the MLPA represent both fraudulent inducement and negligent misrepresentation. (TAC ¶¶ 176-192.)

         On February 25, 2009, after the MLPA had been fully executed, Chase sent Schneider the list of mortgages that was Exhibit A to the agreement. (TAC ¶ 46.) The version of Exhibit A Schneider received was missing significant data, however, including the outstanding balance of the loans and the addresses of the mortgaged properties. (TAC ¶ 46.) Chase represented to Schneider that the missing information was due to Chase's difficulty in converting information from Washington Mutual's system, as had been the case with the November 2008 data set. (TAC ¶ 47.) MRS was forced to spend its own resources to complete the information for the Exhibit A mortgages. (TAC ¶ 49.)

         The TAC alleges that the list of mortgages contained in Exhibit A violated multiple provisions, representations, and warranties contained in the MLPA. As relevant to the instant motion to dismiss, the TAC alleges:

• Chase never provided a complete Exhibit A, and its representations that the reason Exhibit A was incomplete was due to Washington Mutual's systems were false because none of the MRS Loans contained in Exhibit A had been ...

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