Murphy v. Federal Deposit Insurance Corp.
- Summarized by George Utlik , Capital One
- 15 years 3 months ago
- Citation:
- Murphy v. Fed. Deposit Ins. Corp., No. 09-1843, 2010 WL 4780380 (3d Cir. Nov. 24, 2010) (Not Selected for Publication in the Federal Reporter).
- Tag(s):
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- Ruling:
- The Court of Appeals for the Third Circuit held that the Plaintiffs' remaining claims against the Defendant, a later assignee of a residential mortgage loan, asserted under the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 Pa. Stat. Ann. § 211, were properly dismissed, and any amendment to their complaint would be futile, because the Plaintiffs could never allege that their loan was not subject to the Truth in Lending Act ("TILA") and because TILA precluded the Defendant from incurring assignee liability for the wrongs of others.
- Procedural context:
- Appeal from an order of the United States District Court for the Eastern District of Pennsylvania granting the Defendant's motion to dismiss the Plaintiffs' complaint and denying the Plaintiffs' motion for partial reconsideration and for leave to file an amended complaint.
- Facts:
- Plaintiffs Edward and Sandra Murphy commenced a lawsuit solely against Washington Mutual Home Loans, Inc. ("WaMu") alleging multiple types of wrongdoing arising out of the origination and servicing of a residential mortgage loan they entered into with non-party Gateway Funding Diversified Mortgage Services, L.P. ("Gateway Funding"). The mortgage loan was assigned to WaMu, which has been in the receivership of the Federal Deposit Insurance Corporation (“FDIC”) since September 25, 2008.
Three months after filing their complaint, the Plaintiffs filed an amended complaint against Wells Fargo Bank, N.A. (“Wells Fargo”), a later assignee of the mortgage loan. The amended complaint asserted sixteen (16) claims against Wells Fargo on the basis of assignee liability. The Plaintiffs alleged that their loan was assigned to Wells Fargo at some point after the events surrounding the Plaintiffs’ allegations (described above) took place and that, consequently, Wells Fargo became liable as a matter of law for wrongs committed by Gateway Funding and WaMu. At no point did Plaintiffs allege that Wells Fargo independently committed any wrongs.
In granting Wells Fargo’s motion to dismiss the Plaintiffs’ amended complaint, the District Court explained that the Plaintiffs had not alleged any facts that supported the sixteen (16) claims they asserted against Wells Fargo. Following the District Court’s dismissal of their complaint, the Plaintiffs filed a motion for partial reconsideration and for leave to file an amended complaint. In denying the Plaintiffs’ motion, the District Court noted that the Plaintiffs had done nothing more than re-assert the same arguments the District Court had already rejected and that the amendments Plaintiffs sought would be futile, meaning that the amended complaint would not give them valid claims on which relief could be granted. The District Court also granted the Plaintiffs’ request to discontinue without prejudice their claims against WaMu/FDIC, so only the Plaintiffs’ claims against Wells Fargo remained.
On appeal to the Court of Appeals for the Third Circuit, the Plaintiffs made two arguments. First, with regard to their remaining claims asserted under the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 Pa. Stat. Ann. § 211, they argued that the District Court had erred in dismissing their amended complaint for lack of specificity. Second, they asserted that the District Court had abused its discretion in refusing to grant the Plaintiffs’ request to file an amended complaint. Specifically, they argued that amendment would not be futile because, pursuant to the Federal Trade Commission’s Rule Concerning the Preservation of Consumers’ Claims and Defenses (the “FTC Holder Rule”), assignee holders of mortgages are subject to the same liability as the lenders with whom their loans originated.
The Court of Appeals for the Third Circuit affirmed the District Court’s order and concluded that the District Court (i) had not erred in dismissing the Plaintiffs’ complaint and (ii) had not abused its discretion in denying the Plaintiffs’ request for leave to amend. The Court of Appeals held that the UTPCPL, the sole legal basis for the Plaintiffs’ appeal, does not impose liability on assignees. Further, the Court of Appeals concluded that the Plaintiffs’ reliance on the FTC Holder Rule was misplaced for two reasons. First, the rule, which requires certain language be included in “consumer credit contracts,” does not apply to mortgage loans. Second, even if notice had mistakenly been included in the Plaintiffs’ mortgage note pursuant to the FTC Holder Rule, assignee liability provisions of the Truth in Lending Act (“TILA”) would trump the rule and preclude Wells Fargo fro incurring liability for the wrongs of others. Without the FTC Holder Rule, Plaintiffs had no UTPCPL claim, and any amendment to their complaint would be futile because they could never allege that their mortgage loan was not subject to TILA.
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