Berk v. JP Morgan Chase - ED Pa. - September 23, 2011
http://www.paed.uscourts.gov/documents/opinions/11D1079P.pdf
Protection of non-debtors
The FDCPA protects individualswho are not debtors provided “such persons . . . claim they are harmed by proscribed debt collection practices.” Yentin v. Michaels, Louis & Assocs., Inc., Civ. A. No. 11-0088, 2011 WL 4104675 at *17 (E.D. Pa. Sept. 14, 2011) (internal quotation marks omitted); see also H.R. Rep. No. 95-131, at 8 (1977) (“P]eople who do not owe money, but who may be deliberately harassed are the family, employer and neighbors of the consumer . . . are also protected by [the FDCPA].”) Plaintiff here has alleged damages, including his emotional distress, as well as physical symptoms related to his heart condition as a result of the debt collector's conduct.
Intrusion upon seclusion
A claim for intrusion upon seclusion requires a showing of “conduct demonstrating ‘an intentional intrusion upon the seclusion of [a plaintiff’s] private concerns whichwas substantial and
highly offensive to a reasonable person, and [must] aver sufficient facts to establish that the information disclosed would have caused mental suffering, shame or humiliation to a person of
ordinary sensibilities.’” Boring v. Google Inc., 362 Fed. Appx. 273, 278-79 (3d Cir. 2010) (quoting Pro Golf Mfg., Inc. v. Tribune Review Newspaper Co., 809 A.2d 243, 247 (Pa. 2002)).
Pennsylvania has adopted the definition of intrusion upon seclusion as set out inRestatement (Second) of Torts, § 652B. Larsen v. Phila. Newspapers, Inc., 543 A.2d 1181, 1187 (Pa. Super. Ct. 1988).Under this definition, there is no liability for a person who demands payment of a debt unless “the telephone calls are repeated with such persistence and frequency as to amount to a course of hounding the plaintiff, that [it] becomes a substantial burden to his existence, that his privacy is invaded.” Restatement (Second) of Torts, § 652B cmt. d (emphasis added).
The Court finds that Plaintiff alleges sufficient facts to support a claim for intrusion upon seclusion under Pennsylvania law. Plaintiff alleges that Defendants contacted Plaintiff on approximately twenty or more occasions over two years, at three residences, and on four telephone lines. (Am. Compl. ¶ 1.) Plaintiff also alleges that these calls persisted even after Defendants were advised that Nancy Berk was Plaintiff’s former wife and he knew nothing about the alleged debt. (Id. ¶ 142.) These allegations are sufficient to support a claim for intrusion upon seclusion. Compare Desmond v. Phillips & Cohen Assoc., Ltd., 724 F. Supp. 2d 562, 568 (W.D. Pa. 2010) (allowing intrusion upon seclusion claim to go to the jury based on debt collector’s fourteen calls, four letters, and several messages left on the plaintiff’s answering machine, holding that whether the intrusion was “highly offensive to a reasonable person is a question of fact for the jury to decide.”), with Stuart v. AR Res., Inc., Civ. A. No. 10-3520, 2011 WL 904167 (E.D. Pa. March 16, 2011) (dismissing intrusion upon seclusion claimdespite defendant debt collector’s persistent phone calls and profane and abusive language because the of failure to plead the number or substance of calls).
Liability of parent company for acts of subsidiary
The Third Circuit has emphasized that “mere ownership of a subsidiary does not justify the imposition of liability on the parent.” Pearson v. Component Tech. Corp., 247 F.3d 471, 484 (3d Cir. 2001). Instead, parental liability for a subsidiary’s acts is appropriate either when a subsidiary is not a separate and independent corporation, but rather the alter ego of the parent company, or if the subsidiary is an agent for the parent in a specific transaction. Phoenix Canada Oil Co. v. Texaco, Inc., 842 F.2d 1476-77 (3d Cir. 1988). To determine if two corporations are separate, courts consider “adequacy of capitalization, overlapping directorates and officers, separate record keeping, payment of taxes and filing of consolidated returns,maintenance of separate bank accounts, level of parental financing and control over the subsidiary, and subsidiary authority over day-to-day operations.” Id. at 1476.
Chase argues that Berk sets forth no allegations of wrongdoing by Chase Co., but rather he seeks to hold Chase Co. liable for the acts of another. However, Plaintiff alleges both overlapping
officers and authorityover day-to-day operations, aswell as specific actions taken by Chase Co. Berk alleges that he forwarded theMemeger letter to Chase Co.’s general counsel and to amember of the Chase Co. Board of Directors. Plaintiff also alleges that he received a call from Russell, who stated that he was calling at the direction of the Chase Co. general counsel. Plaintiff also alleges a letter that he sent to Chase Co. general counsel, which was responded to by Palladino from Chase Auto Finance. Finally, Plaintiff alleges that the three
Chase Defendants all maintain principal offices at the same location. Plaintiff sufficiently alleges actions undertaken either by or at the direction of Chase Co. Thus, the Court
denies Chase’s motion to dismiss any remaining claims against Chase Co., and Plaintiff’s claim for intrusion upon seclusion against Defendants JPMorgan Chase Bank, N.A. (“Chase Bank”),
JPMorgan Chase & Co. (“Chase Co.”) will remain.
Tuesday, September 27, 2011
Friday, September 23, 2011
Admin. law - finding of fact "wholly inapplicable" to claimant - remand
Spence v. UCBR - Cmwlth. Court - September 23, 2011
Claimant quit her job and applied for UC. The UCBR denied her claim, adopting the referee's findings, and making its own additional finding that the "[Board] after considering the entire record in this matter, concludes that the determination made by the Referee is proper under the [Law]. The Board specifically finds the claimant incredible that the father of her two young children could not watch the children while the claimant worked. Therefore, the Board adopts and incorporates the Referee’s findings and conclusions …."
It is undisputed that Claimant is a single mother of one child and that the finding "directly conflicts with the facts of record." Her appeal is not predicated upon a single erroneous finding that is unnecessary to the ultimate disposition. Claimant appeals because the Order appears wholly inapplicable to her case.
Although the finding set forth by the Board is not necessary to the conclusion regarding eligibility for benefits under Section 402(b) [the case involved a voluntary retirement package], its inclusion calls into question whether the Board was reviewing the record pertaining to Claimant. Where nothing in the body of the Order references Claimant, and the single specific finding does not pertain to Claimant, we must remand to ensure due process. Beddis v. UCBR, 6 A.3d 1053 (Pa. Cmwlth. 2010) (claimant is entitled to due process in UC proceedings); see, e.g., Aluminum Co. of Amer. (Alcoa) v. UCBR, 324 A.2d 854 (Pa. Cmwlth. 1974).
Tuesday, September 20, 2011
UC - offer of suitable work - notice to UCSC - 43 P.S. §802(a)
Barnett v. UCBR - Cmwlth. Court - September 20, 2011 - unreported memorandum decision
http://www.pacourts.us/OpPosting/Cwealth/out/314CD11_9-20-11.pdf
The Employer failed to comply with Section 402(a) of the Law, which states that an employer that offers suitable work to a claimant must notify the UC Service Center “of such offer within seven (7) days after the making thereof.” 43 P.S. §802(a). Claimant does not challenge the finding that Employer’s notice was six days late, i.e., 13 days after it offered Claimant her former job.
This Court has held that strict compliance with the notice provision of Section 402(a) is not required where it would be inconsistent with the objectives of the Law and where the claimant is not prejudiced by the delay. McKeesport Hospital v. UCBR, 619 A.2d 813, 815 (Pa. Cmwlth. 1992). In McKeesport Hospital, notice to the UC Service Center was five days late. This Court held that the notice requirement of Section 402(a) was directory and not mandatory, stating that "we cannot declare claimants to be eligible and grant them benefits merely as a result of rigid application of technical standards where, otherwise, said claimants are clearly ineligible. To do so would be inconsistent with the fundamental purpose and intent of the Act, which is to provide a semblance of economic security to those who are unemployed through no fault of their own. Id. (quoting Barillaro v. UCBR, 387 A.2d 1324, 1328 (Pa. Cmwlth. 1978)).
We explained that Section 402(a) acts as a time bar to an Employer’s recall request only when the delay in notifying the unemployment authorities is so great that it prejudices the claimant. For example, prejudice to a claimant may occur where the claimant receives benefits to which she is not entitled and becomes subject to “no fault recoupment.” Here, Claimant does not claim that she was prejudiced by Employer’s delay; rather, she argues that Section 402(a) demands strict compliance. That is simply not the case, as was established in McKeesport Hospital. Based on this Court’s holding in that case, and the fact that the delay in the present case was only one day longer, we hold that Employer fundamentally complied with Section 402(a)’s notice provision. Claimant, who has neither alleged nor demonstrated she was prejudiced by Employer’s six day delay, may not invoke that notice provision to overcome her ineligibility for benefits.
_________________
The opinion, though not reported, may be cited "for its persuasive value, but not as binding precedent." 210 Pa. Code § 67.55. Citing Judicial Opinions.
http://www.pacourts.us/OpPosting/Cwealth/out/314CD11_9-20-11.pdf
The Employer failed to comply with Section 402(a) of the Law, which states that an employer that offers suitable work to a claimant must notify the UC Service Center “of such offer within seven (7) days after the making thereof.” 43 P.S. §802(a). Claimant does not challenge the finding that Employer’s notice was six days late, i.e., 13 days after it offered Claimant her former job.
This Court has held that strict compliance with the notice provision of Section 402(a) is not required where it would be inconsistent with the objectives of the Law and where the claimant is not prejudiced by the delay. McKeesport Hospital v. UCBR, 619 A.2d 813, 815 (Pa. Cmwlth. 1992). In McKeesport Hospital, notice to the UC Service Center was five days late. This Court held that the notice requirement of Section 402(a) was directory and not mandatory, stating that "we cannot declare claimants to be eligible and grant them benefits merely as a result of rigid application of technical standards where, otherwise, said claimants are clearly ineligible. To do so would be inconsistent with the fundamental purpose and intent of the Act, which is to provide a semblance of economic security to those who are unemployed through no fault of their own. Id. (quoting Barillaro v. UCBR, 387 A.2d 1324, 1328 (Pa. Cmwlth. 1978)).
We explained that Section 402(a) acts as a time bar to an Employer’s recall request only when the delay in notifying the unemployment authorities is so great that it prejudices the claimant. For example, prejudice to a claimant may occur where the claimant receives benefits to which she is not entitled and becomes subject to “no fault recoupment.” Here, Claimant does not claim that she was prejudiced by Employer’s delay; rather, she argues that Section 402(a) demands strict compliance. That is simply not the case, as was established in McKeesport Hospital. Based on this Court’s holding in that case, and the fact that the delay in the present case was only one day longer, we hold that Employer fundamentally complied with Section 402(a)’s notice provision. Claimant, who has neither alleged nor demonstrated she was prejudiced by Employer’s six day delay, may not invoke that notice provision to overcome her ineligibility for benefits.
_________________
The opinion, though not reported, may be cited "for its persuasive value, but not as binding precedent." 210 Pa. Code § 67.55. Citing Judicial Opinions.
Friday, September 16, 2011
disability - ALJ failure to consider, discuss all relevant evidence - Mag. Judge v. ALJ - remand
Miller v. Astrue - ED Pa. - September 2011
According to the Court of Appeals for the Third Circuit, “an ALJ may not reject pertinent or probative evidence without explanation.” Johnson, 529 F.3d at 204. An “ALJ’s failure to explain his implicit rejection of [] evidence or even to acknowledge its presence [is] error.” Cotter, 642 F.2d at 707. Here, the ALJ implicitly rejected evidence provided in Drs. Swamy’s and Hoch’s RFCs that addressed Miller’s ability to sit, stand/walk, and stoop, and was inconsistent with the ALJ’s finding that Miller can perform light work. Additionally, the ALJ failed to acknowledge the existence of other probative medical evidence.
The ALJ’s failure to discuss and/or explain his reasons for rejecting relevant medical evidence makes it impossible to determine whether the ALJ reached the right result in this case.1 See Cotter, 642 F.2d at 706-07 (“[A]n explanation from the ALJ of the reason why probative evidence has been rejected is required so that a reviewing court can determine whether the reasons for rejection were improper.”)
Because it is impossible to know whether the ALJ properly determined that Miller can perform light work, given the ALJ’s treatment of the probative objective medical evidence, I will remand this case to the Commissioner so that the ALJ can properly consider step four.2 On remand, the ALJ must make specific findings as to all of the probative medical evidence and explain the reasons for rejecting any of this evidence.
n. 2 - The Magistrate Judge recommends that I deny Miller’s request for review of the Commissioner’s final decision to deny benefits. This recommendation is not based on the ALJ’s opinion; rather, it is based on evidence that the Magistrate Judge culled from the records Miller submitted to the ALJ, which the ALJ neglected to mention in his opinion. The Magistrate Judge relies on this additional information to fashion an explanation as to why the ALJ concluded that Miller is capable of performing light work, even though this explanation is lacking in the ALJ’s opinion. The Magistrate Judge must have recognized the deficiencies in the ALJ’s opinion and attempted to correct them by providing her own explanation for the ALJ’s opinion based on the additional evidence that she independently gathered from the record. Despite this valiant effort, it was error for the Magistrate Judge to have done so. See Fargnoli, 247 F.3d at 44 n.7 (explaning that a district court can’t attempt to rectify “the ALJ’s failure to consider all of the relevant and probative evidence, . . . by relying on medical records found in its own independent analysis, and which were not mentioned by the ALJ”).
Thursday, September 15, 2011
Consumer - duty of good faith and fair dealing - no indpt. cause of action
Boeynaems v. LA Fitness - ED Pa. - September 12, 2011
Section 205 of the Restatement (Second) of Contracts states that “[e]very contract imposes on each party a duty of good faith and fair dealing in its performance and its enforcement[.]” Kamco Indus. Sales, Inc. V. Lovejoy, Inc., No. 09-1407, 2011 WL 891825, at -24-*7 (E.D. Pa. Mar. 10, 2011) (Pollak, J.) (quoting Ash v. Cont’l Ins. Co., 932 A.2d 877, 884 n. 2 (Pa. 2007)).
Many courts sitting in diversity have predicted that the Pennsylvania Supreme Court will adopt Section 205 to hold that every contract includes an implied duty of good faith and fair dealing. See id. at *8 (collecting cases). However, even the Pennsylvania Supreme Court has recognized a conflict amongst Pennsylvania lower courts regarding whether that implied duty creates a cause of action. Id.
As the undersigned discussed at length recently, concerning claims by contracting parties, in Goleman v. York Intern. Corp., No. 11–1328, 2011 WL 3330423 (E.D. Pa. Aug. 3, 2011) (Baylson, J.), “[u]ntil the Pennsylvania Supreme Court holds otherwise, this Court is inclined to conclude there is no independent cause of action for breach of a duty of good faith and fair
dealing.” Id. at *6-7 (citing Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 617 (3d Cir. 1995)). See also LSI Title Agency, Inc. v. Evaluation Servs., Inc., 951 A.2d 384, 391
(Pa. Super. Ct. 2008) (“This court finds that Pennsylvania law would not recognize a claim for breach of [a] covenant of good faith and fair dealing as an independent cause of action separate
from the breach of contract claim since the actions forming the basis of the breach of contract claim are essentially the same as the actions forming the basis of the bad faith claim.”). The
Court concludes, instead, that “a breach of the implied covenant of good faith and fair dealing merges with a breach of contract claim.” Zaloga v. Provident Life and Accident Ins. Co. of Am.,
671 F. Supp. 2d 623, 631 (M.D. Pa. 2009) (Kosik, J.) (citing Meyer v. Cuna Mut. Group, No. 03-CV-602, 2007 WL 2907276, at *14-15 (W.D. Pa. Sept. 28, 2007)). Consistent with the Court’s interpretation of Pennsylvania law, the Boeynams Plaintiffs have, in fact, subsumed their allegations of Defendant’s breach of the implied duty of good faith and fair dealing within their breach of contracts claims.
Plaintiffs’ allegations regarding the breach of this implied duty simply incorporate by reference the allegations supporting the breach of contract claims and Plaintiffs allege no additional facts in support. The Court has determined that Boeynams and the Cohens have failed to state a claim for breach of contract and, thus, cannot raise an independent claim for the breach of the implied duty of good faith and fair dealing. To the extent that Silver has stated a claim for breach of contract and attempts to rely on those identical facts in support for a contractual good faith claim, this Court concludes that such a claim must merge with Silver’s breach of contract claim.
While Florida law recognized an implied covenant of good faith and fair dealing associated with every contract, “a breach of this covenant – standing alone – does not create an independent cause of action.” Intertape Polymer Corp. v. Inspired Technologies, Inc., No. 6:09-cv-289-Orl-GAP-GJK, 2010 WL 2776510, at *4 (M.D. Fla. July 14, 2010) (Presnell, J.) (citing Centurion Air Cargo v. UPS Co., 420 F.3d 1146, 1151 (11th Cir. 2005)). Such a claim must not only attach to the “performance of a specific contractual obligation,” Onuss Ortak Nokta Uluslararasi Haberlesme Sistem Servis Bilgisayar Yazilim Danismanlik ve Dis Ticaret Limited Sirketi v. Terminal Exchange, LLC, No. 09-80720-CIV-MARRA, 2010 WL 935972, 3 (S.D. Fla. Mar. 10, 2010) (Marra, J.) (citing Centurion Air, 420 F.3d at 1151; Snow v. Ruden, McClosky, Smith, Schuster & Russell, P.A., 896 So. 2d 787, 792 (Fla. Dist. Ct. App. 2005)), it “cannot be advanced when the allegations underlying that claim are duplicative of the allegations supporting the breach of contract claim[,]” id. (citing Enola Contracting Svcs, Inc. v. URS Group, Inc., No. 5:08cv2-RS-EMT, -26- 2008 WL 1844612, at* 3 (N.D. Fla. Apr. 23, 2008); Trief v. Am. Gen.Life Ins. Co., 444 F. Supp. 2d 1268, 1270 (S.D. Fla. 2006); Shibata v. Lim, 133 F. Supp. 2d 1311, 1319 (M.D. Fla. 2000)).
Saturday, September 03, 2011
UC - vol. quit - pension reduction speculative
PHA v. UCBR - Cmwlth Court - August 31, 2011
The Philadelphia Housing Authority (Employer) petitions for review of an order of the Unemployment Compensation Board of Review (Board) finding James T. DiGiacomo (Claimant) eligible for unemployment compensation (UC) benefits pursuant to Section 402(b) of the Unemployment Compensation Law1 (Law).
The Board granted UC benefits on the basis that a substantial reduction would have occurred to Claimant’s pension benefits had he not voluntarily resigned.
Because we conclude that the projections about Claimant’s future pension benefits were speculative, we reverse.
UC - indpt. contractor
SkyHawke Technologies v. UCBR - Cmwlth. Court - August 31, 2011
http://www.pacourts.us/OpPosting/Cwealth/out/1691CD10_8-31-11.pdf
SkyHawke Technologies LLC, (SkyHawke) petitions for review of the Order of the Unemployment Compensation Board of Review (Board), which affirmed the Unemployment Compensation Referee‟s (Referee) determination that Ross A. Gershel (Claimant) was not ineligible for unemployment compensation (UC) benefits under Sections 402(h) and 4(l)(2)(B) of the Unemployment Compensation Law (Law).
SkyHawke argues that the Board erred as a matter of law in finding Claimant eligible for UC benefits because Claimant was not an employee, but a self-employed, independent contractor and, therefore, ineligible for UC benefits.
For the following reasons, we reverse the Order of the Board.
http://www.pacourts.us/OpPosting/Cwealth/out/1691CD10_8-31-11.pdf
SkyHawke Technologies LLC, (SkyHawke) petitions for review of the Order of the Unemployment Compensation Board of Review (Board), which affirmed the Unemployment Compensation Referee‟s (Referee) determination that Ross A. Gershel (Claimant) was not ineligible for unemployment compensation (UC) benefits under Sections 402(h) and 4(l)(2)(B) of the Unemployment Compensation Law (Law).
SkyHawke argues that the Board erred as a matter of law in finding Claimant eligible for UC benefits because Claimant was not an employee, but a self-employed, independent contractor and, therefore, ineligible for UC benefits.
For the following reasons, we reverse the Order of the Board.
Friday, August 26, 2011
claim preclusion - res judicata
Tobias v. Halifax Township - Cmwlth. Court - August 26, 2011
http://www.pacourts.us/OpPosting/Cwealth/out/1912CD10_8-26-11.pdf
Under the doctrine of res judicata, or claim preclusion, an action is barred because it is grounded, either in whole or in part, upon a claim which was the subject of a prior adjudication by a court of competent jurisdiction. R/S Financial Corp. v. Kovalchick, 552 Pa. 584, 588, 716 A.2d 1228, 1230 (1998).
Therefore, if a court renders a final judgment on the merits, res judicata will preclude any future suit between the parties on the same cause of action, or concerning any claims which could have been litigated during the first proceeding. Id. See also Callowhill Center Associates, LLC v. Zoning Board of Adjustment, City of Philadelphia, 2 A.3d 802, 809 (Pa. Cmwlth. 2010).
http://www.pacourts.us/OpPosting/Cwealth/out/1912CD10_8-26-11.pdf
Under the doctrine of res judicata, or claim preclusion, an action is barred because it is grounded, either in whole or in part, upon a claim which was the subject of a prior adjudication by a court of competent jurisdiction. R/S Financial Corp. v. Kovalchick, 552 Pa. 584, 588, 716 A.2d 1228, 1230 (1998).
Therefore, if a court renders a final judgment on the merits, res judicata will preclude any future suit between the parties on the same cause of action, or concerning any claims which could have been litigated during the first proceeding. Id. See also Callowhill Center Associates, LLC v. Zoning Board of Adjustment, City of Philadelphia, 2 A.3d 802, 809 (Pa. Cmwlth. 2010).
In order for the doctrine of res judicata to apply four conditions must concur:
(1) identity of the thing sued upon or for;
(2) identity of the cause of action;
(3) identity of the persons and parties to the action; and
(4) identity of the quality or capacity of the parties.
Stevenson v. Silverman, 417 Pa. 187, 190, 208 A.2d 786, 787-788 (1965); Swift v. Radnor Township, 983 A.2d 227, 232 (Pa. Cmwlth. 2009).
Generally, a cause of action will be considered identical when the subject matter and the ultimate issues are the same in both proceedings. Swift, 983 A.2d at 232.
Finally, it is well-settled that res judicata will not be "defeated by minor differences of form, parties, or allegations, when these are contrived only to obscure the real purpose, -- a second trial on the same cause between the same parties." Stevenson, 417 Pa. at 192, 208 A.2d at 788 (quoting Hochman v. Mortgage Finance Corporation of Pennsylvania, 289 Pa. 260, 263, 137 A. 252, 253 (1927)).
Res judicata bars all causes of action that were either raised or could have been raised during a prior proceeding. R/S Financial Corp., 552 Pa. at 588, 716 A.2d at 1230 (emphasis added).
Thursday, August 25, 2011
foreclosure mills - duty of attorneys to determine evid. support for pleadings
In re Taylor - 3d Cir. - August 2, 2011
http://www.ca3.uscourts.gov/opinarch/102154p.pdf
http://www.ca3.uscourts.gov/opinarch/102154p.pdf
In this Ch. 13 proceeding, the court upheld the bankruptcy court's imposition of sanctions on a creditor's attorney and law firm and the creditor, HSBC, for filing a proof of claim in a Ch. 13 proceeding without adequately determining if the allegations in their filings had "evidentiary support." In that they did not, the court stated "the attorney essentially abdicated her professional judgment to a black box." [emphasis added]
This case is an unfortunate example of the ways in which overreliance on computerized processes in a high-volume practice, as well as a failure on the part of clients and lawyers alike to take responsibility for accurate knowledge of a case, can lead to attorney misconduct before a court.
In the debtors' bankruptcy petition, they listed the bank HSBC, which held the mortgage on their house, as a creditor. In turn, HSBC filed a proof of claim with the bankruptcy court.
HSBC attorneys filed two pleadings in the bankruptcy court—(1) the request for relief from the automatic stay which would have permitted HSBC to pursue foreclosure proceedings despite the Taylors‟ bankruptcy filing and (2) the response to the debtors' objection to HSBC‟s proof of claim.
HSBC retained the Udren Firm to seek relief from the stay. Mr. Udren is the only partner of the Udren Firm; Ms. Doyle, who appeared for the Udren Firm in the case, is a managing attorney at the firm, with twenty-seven years of experience. HSBC does not deign to communicate directly with the firms it employs in its high-volume foreclosure work; rather, it uses a computerized system called NewTrak (provided by a third party, LPS) to assign individual firms discrete assignments and provide the limited data the system deems relevant to each assignment. The firms are selected and the instructions generated without any direct human involvement. The firms so chosen generally do not have the capacity to check the data (such as the amount of mortgage payment or time in arrears) provided to them by NewTrak and are not expected to communicate with other firms that may have done related work on the matter. Although it is technically possible for a firm hired through NewTrak to contact HSBC to discuss the matter on which it has been retained, it is clear from the record that this was discouraged and that some attorneys, including at least one Udren Firm attorney, did not believe it to be permitted. In this case, NewTrak provided the Udren Firm with only the loan number, the debtors' name and address, payment amounts, late fees, and amounts past due. It did not provide any correspondence with the Taylors concerning a dispute about the debtors' liability to HSBC for flood insurance payments and coverage that HSBC procured over the debtors' objection.
The law firm filed requests for admissions (RFAs), to which the debtors did not respond. Even so, the bankruptcy court denied the request to enter the RFAs as evidence, noting that the firm "closed their eyes to the fact that there was evidence that . . . conflicted with the very admissions that they asked me [to deem admitted]. They . . . had that evidence [that the assertions in its motion were not accurate] in [their] possession and [they] went ahead like [they] never saw it." . . . The court noted: Maybe they have somebody there churning out these motions that doesn‟t talk to the people that—you know, you never see the records, do you? Somebody sends it to you that sent it from somebody else. . . . "I really find this motion to be in questionable good faith," the court concluded.
Rule 9011 of the Federal Rules of Bankruptcy Procedure, the equivalent of Rule 11 of the Federal Rules of Civil Procedure, requires that parties making representations to the court certify that "the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support." Fed. R. Bank. P. 9011(b)(3).12 A party must reach this conclusion based on "inquiry reasonable under the circumstances." Fed. R. Bank. P. 9011(b). The concern of Rule 9011 is not the truth or falsity of the representation in itself, but rather whether the party making the representation reasonably believed it at the time to have evidentiary support. In determining whether a party has violated Rule 9011, the court need not find that a party who makes a false representation to the court acted in bad faith. "The imposition of Rule 11 sanctions . . . requires only a showing of objectively unreasonable conduct." [citations omitted] While Rule 9011 "does not recognize a „pure heart and empty head‟ defense,". . . a lawyer need not routinely assume the duplicity or gross incompetence of her client in order to meet the requirements of Rule 9011. It is therefore usually reasonable for a lawyer to rely on information provided by a client, especially where that information is superficially plausible and the client provides its own records which appear to confirm the information.
However, the attorney's behavior was unreasonable, both as a matter of her general practice and in ways specific to this case. First, reasonable reliance on a client's representations assumes a reasonable attempt at eliciting them by the attorney. That is, an attorney must, in her independent professional judgment, make a reasonable effort to determine what facts are likely to be relevant to a particular court filing and to seek those facts from the client. She cannot simply settle for the information her client determines in advance—by means of an automated system, no less—that she should be provided with. Yet that is precisely what happened here.
The attorney;'s reliance on HSBC was particularly problematic because she was not, in fact, relying directly on HSBC. Instead, she relied on a computer system run by a third-party vendor. She did not know where the data provided by NewTrak came from. She had no capacity to check the data against the original documents if any of it seemed implausible. And she effectively could not question the data with HSBC. In her relationship with HSBC, the attorney essentially abdicated her professional judgment to a black box. [emphasis added]
We appreciate that the use of technology can save both litigants and attorneys time and money, and we do not, of course, mean to suggest that the use of databases or even certain automated communications between counsel and client are presumptively unreasonable. However, Rule 11 requires more than a rubber-stamping of the results of an automated process by a person who happens to be a lawyer. Where a lawyer systematically fails to take any responsibility for seeking adequate information from her client, makes representations without any factual basis because they are included in a "form pleading" she has been trained to fill out, and ignores obvious indications that her information may be incorrect, she cannot be said to have made reasonable inquiry. Therefore, we find that the bankruptcy court did not abuse its discretion in imposing sanctions on the creditor's attorney and law firm.
--------------------
There is a similar duty of inquiry by attorneys under Pa. R.Civ. P. 1023.1, which says that
(a) Rules 1023.1 through 1023.4 do not apply to disclosures and discovery requests, responses, objections and discovery motions that are subject to the provisions of general rules.
(b) Every pleading, written motion, and other paper directed to the court shall be signed by at least one attorney of record in the attorney’s individual name, or, if the party is not represented by an attorney, shall be signed by the party. This rule shall not be construed to suspend or modify the provisions of Rule 1024 or Rule 1029(e).
(c) The signature of an attorney or pro se party constitutes a certificate that the signatory has read the pleading, motion, or other paper. By signing, filing, submitting, or later advocating such a document, the attorney or pro se party certifies that, to the best of that person’s knowledge, information and belief, formed after an inquiry reasonable under the circumstances,
(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation,
(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification or reversal of existing law or the establishment of new law,
(3) the factual allegations have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and
(4) the denials of factual allegations are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.
[emphasis added]
(d) If, after notice and a reasonable opportunity to respond, the court determines that subdivision (c) has been violated, the court may, subject to the conditions stated in Rules 1023.2 through 1023.4, impose an appropriate sanction upon any attorneys, law firms and parties that have violated subdivision (c) or are responsible for the violation.
Wednesday, August 17, 2011
UC - voluntary retirement
Oliver v. UCBR - Cmwlth. Court - August 17, 2011
Claimant voluntarily quit his employer with the Phila. Housing Authority because he believed that his pension and health benefits might be reduced as a result of the ongoing negotiations between his union and the Employer. However, the pension figures were speculative, as the pension plan was still the subject of negotiations between Union and Employer at the time he left his job. Pacini v. UCBR, 518 A.2d 606, 608-09 (Pa. Cmwlth. 1986) (affirming the denial of unemployment benefits where the claimant voluntarily retired before the ratification of a new CBA in order to protect a potential reduction in pension and salary; the proposed reductions were too speculative and insubstantial to create a necessitous and compelling cause); Duquesne Light Company v. UCBR, 436 A.2d 257, 259 (Pa. Cmwlth. 1981) (claimant’s voluntary retirement on the ground that, under his existing labor contract, his fringe benefits would have been frozen if he worked past age sixty-five was not a necessitous and compelling cause, where the employer’s discussions with the union about fringe benefits "were not final decisions, but proposals")
Moreover, Claimant, who was only 47 years old when he retired, admitted that his pension benefits would have been greater had he worked until age fifty-five and that continuing work was available to him. Claimant also admitted that the pension he received upon retirement was reduced, in part, because he retired early. Under these circumstances, the court found that there was substantial evidence to support the UCBR’s conclusion that Claimant lacked a necessitous and compelling cause to retire. Claimant who voluntarily terminates his employment has the burden of proving that a necessitous and compelling cause existed for the termination. Petrill v. UCBR, 883 A.2d 714, 716 (Pa. Cmwlth. 2005). To receive unemployment benefits following voluntary retirement, a claimant must establish that he acted with ordinary common sense in retiring and made a reasonable effort to preserve his employment. Id.
Tuesday, August 16, 2011
UC - appeal - nunc pro tunc - pro se litigant
Miller v. UCBR - Cmwlth. Court - August 11, 2011 - unreported memorandum opinion
Section 501(e) of the Unemployment Compensation Law (Law), 43 P.S. §821(e), requires appeals of Bureau determinations to be filed within 15 days of the mailing date of the determination or the date on which the determination becomes final. After the 15-day appeal period has expired, the Referee and the Board do not have jurisdiction to consider the appeal. Darroch v. UCBR, 627 A.2d 1235, 1237 (Pa. Cmwlth. 1993).
The UCBR may consider an untimely appeal on a nunc pro tunc basis. UCBR v. Hart, 348 A.2d 497, 498 (Pa. Cmwlth. 1975). The burden to establish the right to nunc pro tunc relief is a heavy one because the statutory time limit established for appeals is mandatory. Blast Intermediate Unit No. 17 v. UCBR, 645 A.2d 447, 449 (Pa. Cmwlth. 1994). An appellant may satisfy this heavy burden by showing: (1) fraudulent, wrongful or negligent conduct on the part of the administrative agency; or (2) non-negligent conduct beyond the appellant’s control that caused the delay. Bass v. Commonwealth, 485 Pa. 256, 259-260, 401 A.2d 1133, 1135 (1979).
According to Claimant, his lack of legal counsel caused a misunderstanding concerning the timeliness of his appeal. "While sympathetic to pro se litigants, this Court has held, repeatedly, that 'any layperson choosing to represent himself in a legal proceeding must, to some reasonable extent, assume the risk that his lack of expertise and legal training will prove his undoing.' " Vann v. UCBR, 508 Pa. 139, 148, 148, 494 A.2d 1081, 1086 (1985). Simply put, Claimant has not carried his heavy burden to show that he is entitled to appeal the Board’s order nunc pro tunc. Claimant cannot rely on his lack of legal counsel as an excuse for not taking earlier action since "Claimant assumed the risk that his lack of expertise and legal training would prove his undoing." . . . Vann, 508 Pa. 139, 148, 494 A.2d 1081, 1086.
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The opinion, though not reported, may be cited "for its persuasive value, but not as binding precedent." 210 Pa. Code § 67.55. Citing Judicial Opinions.
Monday, August 15, 2011
mandamus - peremptory mandamus
Board of Commissioners v. Kantner - Cmwlth. Court - August 15, 2011
A writ of mandamus is an extraordinary remedy which seeks to compel official performance of a ministerial act or mandatory duty. Rosario v. Beard, 920 A.2d 931, 934 (Pa. Cmwlth. 2007). A writ of mandamus may be issued only where there is a clear legal right to relief in the plaintiff, a corresponding duty in the defendant and a lack of any other appropriate or adequate remedy. McGill v. Pennsylvania Department of Health, 758 A.2d 268, 270 (Pa. Cmwlth. 2000).
The Pennsylvania Rules of Civil Procedure permit the entry of peremptory mandamus [i.e., without a hearing] as follows:
At any time after the filing of the complaint, the court may enter judgment if the right of the plaintiff thereto is clear. Judgment shall not be entered without prior notice to all parties unless the exigency of the case is such as to require action before notice, in which event notice shall be given as soon as possible.
PA. R.C.P. No. 1098. When considering whether or not to grant peremptory mandamus, the Court is to "use the same standard which governs the disposition of summary judgment motions." Salem Township Municipal Authority, 820 A.2d at 892. Thus, judgment as a matter of law is appropriate if "there is no genuine issue of any material fact as to a necessary element of the cause of action or defense which could be established by additional discovery or expert report…." Pa. R.C.P. No. 1035.2(1). "A fact is material if it directly affects the disposition of a case." Mann v. City of Philadelphia, 563 A.2d 1284, 1286 (Pa. Cmwlth. 1989).
Thursday, August 11, 2011
admin. law - hearsay
Sule v. Philadelphia Parking Authority - Cmwlth. Court - August 11, 2011
The court reversed the imposition of a fine on a cab driver who was alleged to have violated an admin. executive order prohibiting cab drivers from refusing to accept or discouraging the use of credit cards by customers. The case arose when a customer complained about the cab driver allegedly discouraging her from using a credit card to pay for her fare. The Parking Authority's only evidence was hearsay -- the customer's written complaint, and an investigator's statement of what the customer told him -- to which the cab driver did not object.
The court's discussion included the following:
As a general rule, the Pennsylvania Rules of Evidence are not applicable to hearings conducted before Commonwealth agencies. 2 Pa. C.S. §505. Nevertheless, it is well-settled that hearsay evidence, properly objected to, is not competent evidence to support a determination of an agency. Chapman v. UCBR, 20 A.3d 603, 610, n.8 (Pa. Cmwlth. 2011). Under the so-called Walker rule, however, if hearsay evidence is admitted without objection, it will be given its natural probative effect and may support a finding by the agency, if it is corroborated by any competent evidence in the record. Walker v. UCBR, 367 A.2d 366, 370 (Pa. Cmwlth. 1976) (emphasis added). One example of "competent evidence" that would corroborate hearsay evidence are admissions of a party. Chapman, 20 A.3d at 610, n.8; see also PA. R.E. 803(25).The cab driver did not admit the allegations of wrongdoing. Furthermore, the Authority could not use its investigator's hearsay testimony about what customer said to him to corroborate the customer's written statement. Hearsay cannot corroborate hearsay. See J.K. v. Department of Public Welfare, 721 A.2d 1127, 1133 (Pa. Cmwlth. 1998)(noting substantial evidence did not exist because there was no non-hearsay evidence to corroborate hearsay testimony); Walker, 367 A.2d at 370 (requiring hearsay to be corroborated by competent evidence in the record). If the Authority wished to base its case solely upon the customer's written statement and her account of the incident, then it should have either arranged for her to be present at the hearing or to testify by phone. In short, the Hearing Officer erred by basing his factual findings solely upon the customer’s uncorroborated, out-of-court statement.
Wednesday, August 10, 2011
UC - willful misconduct - loss of drivers license
Galiyas v. UCBR - Cmwlth. Court - August 10, 2011 - unreported memoradum decision
Where one of the requirements for employment is the possession of a driver’s license, and there is a connection between the work to be performed and the necessity to have a driver’s license, the employee is ineligible for unemployment compensation benefits where he or she loses the license as a result of a DUI.
- Williams v. UCBR, 651 A.2d 708, 710 (Pa. Cmwlth. 1994) (citing Varmecky v. UCBR, 432 A.2d 635 (Pa. Cmwlth. 1981)); see also Manross v. UCBR 572 A.2d 49 (Pa. Cmwlth. 1990) (holding that a truck driver, who was convicted for DUI while off-duty and relied upon a valid driver’s license to perform his job, was ineligible for unemployment compensation benefits pursuant to willful misconduct under Section 402(e) of the Law)
- Kelly v. UCBR, 747 A.2d 436 (Pa. Cmwlth. 2000) (holding that claimant’s testimony that she did some driving to pick up meals for the prison, as a corrections officer, was sufficient to establish willful misconduct to disqualify her from receiving unemployment benefits after her driver’s license was suspended as a result of a DUI).
Because Claimant was required to maintain a valid driver’s license in order to perform her job, and her license was suspended for one year when she pled guilty to DUI, the Board correctly found Claimant ineligible for benefits based on willful misconduct.
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The opinion, though not reported, may be cited "for its persuasive value, but not as binding precedent." 210 Pa. Code § 67.55. Citing Judicial Opinions.
Consumer Protection/UDAP - Pa. CPL not pre-empted by federal law - lender failed to give notice of right to cancel
Tellado v. IndyMac Mortgage Services - ED Pa. - July ___, 2011
Plaintiffs, Spanish-speaking homeowners, got a loan with Defendant in a transaction that took place at their home. They were not given a notice of their right to cancel the transaction, required under the Pennsylvania Consumer Protection Law, 73 P.S. sec. 201-7, nor were they given any documents in Spanish, their primary language.
The court held that the state CPL claim was not pre-empted by
- the federal Home Owners Loan Act (HOLA) and regulations, 12 CFR 545.2, citing Binetti v. WAMU, 446 F.Supp. 2d 217 (SDNY 2006), Poskin v. TD Banknorth, N.A., 687 F. Supp. 2d 530 (W.D. Pa. 2009), and Reyes v. Premier Home Funding, Inc., 640 F. Supp. 2d. 1147 (N.D.Cal. 2009)
- the federal Truth in Lending Act, citing Jamal v. WMC Mort. Corp., 2005 US Dist. Lexis 5076 (ED Pa. 2005)
The court held that plaintiffs stated a claim under the Pa. Consumer Protection Law and that, because of the lack of notice of right to cancel, the court orded the contract canceled, directed defendants to refund all payments made by Plaintiffs, and directed defendants to terminate any security interest they had taken in the home.
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UC - willful miscoduct - asking for substantial loan from subordinates
Weingard v. UCBR - August 10, 2011
Claimant committed willful misconduct by asking for a loan of $1,000 from subordinate employees whom he supervised.
- remoteness in time - The court rejected the argument that employer waiting too long before firing him (3 weeks) - employer conducted an investigation during that time
- rule violation - The court accepted claimant's argument that employer had not established a rule violation. To establish a rule violation, it is the employer’s burden to establish the existence of the rule and that the claimant was aware of the rule. Here, Employer does not have a specific rule prohibiting employees from engaging in loan transactions with each other. The rule in question, which prohibits "operating or acting in any manner that is contrary to the best interests of Employer," is so general as to be meaningless to this appeal. See UCBR v. Bacon, 361 A.2d 505, 507 (Pa. Cmwlth. 1976) (employer did not show conscious disregard of a policy that "actually sets no real standards of behavior or expectations of the employee which we could say that this claimant had consciously violated.") Claimant testified that he did not know there was a policy prohibiting him from soliciting loans from co-workers, and he did not believe that asking another employee for a loan harmed Employer’s interest in any way. Employer provided no evidence to the contrary. We conclude that the Board erred in determining that Claimant knowingly violated a work policy.
- willful misconduct - The court held that claimant's conduct did violate the standards of behavior which the employer had a right to expect of an employee, citing Ravenell v. UCBR, 377 A.2d 1297 (Pa. Cmwlth. 1977), where the manager of elderly, low-income housing borrowed money from a tenant. As there, the claimant here abused his position of authority and power by using his position of authority in an unseemly way. He may not have used overt threats or direct coercion, but that fact is not dispositive of the issue. Claimant held the upper hand in the relationship with the employees he supervised. His request for a loan made at least one employee uncomfortable enough to report Claimant’s request to Claimant’s supervisor. There is unspoken, and implicit, coercion when a boss makes a request for a significant loan of an employee under his supervision. Claimant’s misuse of his position as a supervisor violated the standards of behavior his Employer had a right to expect. Claimant’s importuning of subordinates for a loan constituted willful misconduct
Monday, August 08, 2011
UC - willful misconduct - violation of employer rules
Gibbs v. UCBR - Cmwlth. Court - August 5, 2011 - unpublished memorandum opinion.
http://www.pacourts.us/OpPosting/Cwealth/out/2122CD10_8-5-11.pdf
This opinion (which upheld a denial of benefits) contains a summary of some of the factors that may beinvolved in a work-rule violation case.
http://www.pacourts.us/OpPosting/Cwealth/out/2122CD10_8-5-11.pdf
This opinion (which upheld a denial of benefits) contains a summary of some of the factors that may beinvolved in a work-rule violation case.
If an employer alleges that a claimant committed willful misconduct by violating a work rule, the employer must establish the existence of a reasonable work rule and that the claimant knowingly violated the work rule. Williams v. UCBR, 596 A.2d 1191, 1193 (Pa. Cmwlth. 1991) (citing Connelly v. UCBR, 450 A.2d 245 (Pa. Cmwlth. 1982)); BK Foods, Inc. v. UCBR, 547 A.2d 873, 875 (Pa. Cmwlth. 1988).
A work rule can be conveyed orally, but any requests for conduct expressed to an employee by an employer must not contradict the employer’s written policies. LeGare v. UCBR, 498 Pa. 72, 77-79, 444 A.2d 1151, 1153-54 (1982); see, e.g., Williams, 596 A.2d at 1191, 1192 (finding claimant ineligible for UC benefits when claimant was informed of a new parking policy, and violated that policy after repeated warnings); Teasley v. UCBR, 431 A.2d 1155, 1157 (Pa. Cmwlth. 1981) (finding claimant ineligible for UC benefits when claimant violated a rule which was orally conveyed individually and at staff meetings); McAlister v. UCBR, 395 A.2d 660, 661 (Pa. Cmwlth. 1978) (finding claimant ineligible for UC benefits when claimant took ten vacation days when told by employer to take eight).
If an employer satisfies its burden of proof, the burden then shifts to the claimant to establish good cause for violating the rule. Frumento v. UCBR, 466 Pa. 81, 87, 351 A.2d 631, 634 (1976). A claimant establishes good cause when "the action of the employee is justifiable or reasonable under the circumstances." Id.
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The opinion, though not reported, may be cited "for its persuasive value, but not as binding precedent." 210 Pa. Code § 67.55. Citing Judicial Opinions.
Tuesday, August 02, 2011
federal courts - right to proceed anonymously
This 3d Cir. case has an extensive discussion of the right to proceed anonymously. The court adopts the test set out in Doe v. Provident Life and Acc. Ins. Co., 176 F.R.D. 464, 467 (E.D. Pa. 1997).
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John Doe v. Megless, et al. - Third Cir. - August 1, 2011
The court upheld the lower court's denial of plaintiff's request to proceed anonymously against school officials sent out an email to a list of public officials and private citizens instructing them "if you see this person in or around the district schools, please contact the police." The email allegedly included a flyer attachment, which used Doe‟s real name and stated: "[Doe] has been known to hang around schools in Upper Merion and other townships." The message urged people stop and investigate if they saw plaintiff. It also contained his picture, his home address, the make, model, and license plate number of his vehicle, and his Pennsylvania driver‟s license number. He asserts that the email was intended to (1) characterize him as a dangerous and potentially mentally unstable pedophile,1 (2) authorize all recipients to stop and detain Doe on sight, and (3) authorize all recipients to investigate him.
"[O]ne of the essential qualities of a Court of Justice [is] that its proceedings should be public.". . . .Courts have explained that Federal Rule of Civil Procedure 10(a) illustrates "the principle that judicial proceedings, civil as well as criminal, are to be conducted in public." . . ."Identifying the parties to the proceeding is an important dimension of publicness. The people have a right to know who is using their courts." . . . .And, defendants have a right to confront their accusers. . . . A plaintiff‟s use of a pseudonym "runs afoul of the public‟s common law right of access to judicial proceedings."
While not expressly permitted under Federal Rule of Civil Procedure 10(a), in exceptional cases courts have allowed a party to proceed anonymously. . . . That a plaintiff may suffer embarrassment or economic harm is not enough. . . . Instead, a plaintiff must show "both (1) a fear of severe harm, and (2) that the fear of severe harm is reasonable." . . . Examples of areas where courts have allowed pseudonyms include cases involving "abortion, birth control, transexuality, mental illness, welfare rights of illegitimate children, AIDS, and homosexuality."
While we have affirmed district courts‟ decisions on motions to proceed anonymously, we have never set out a test for courts to apply to determine if a litigant‟s reasonable fear of severe harm outweighs the public‟s interest in open judicial proceedings. . . . Many of our sister courts of appeals have provided such guidance [citing cases]. . . When a litigant sufficiently alleges that he or she has a reasonable fear of severe harm from litigating without a pseudonym, courts of appeals are in agreement that district courts should balance a plaintiff‟s interest and fear against the public‟s strong interest in an open litigation process. . . . While the courts of appeals have agreed that district courts should apply a balancing test, each case presents a slightly different list of factors for courts to consider. While one could conclude that there is a conflict as a result of the different factors, each court has agreed that their list of factors is not exhaustive. . . .Further, each court agrees that the purpose of the balancing test is to allow a district court to determine whether a litigant has a reasonable fear of severe harm that outweighs the public‟s interest in open litigation. . . .
Courts within our circuit have been balancing these competing interests for the last fifteen years without our guidance. [citations omitted] . . . . They have primarily relied on a test for the use of pseudonyms set forth in Doe v. Provident Life and Acc. Ins. Co., 176 F.R.D. 464, 467 (E.D. Pa. 1997). That case set forth a non-exhaustive list of factors to be weighed both in favor of anonymity and also factors that favor the traditional rule of openness. Id. The factors in favor of anonymity included:
"(1) the extent to which the identity of the litigant has been kept confidential; (2) the bases upon which disclosure is feared or sought to be avoided, and the substantiality of these bases; (3) the magnitude of the public interest in maintaining the confidentiality of the litigant‟s identity; (4) whether, because of the purely legal nature of the issues presented or otherwise, there is an atypically weak public interest in knowing the litigant‟s identities; (5) the undesirability of an outcome adverse to the pseudonymous party and attributable to his refusal to pursue the case at the price of being publicly identified; and (6) whether the party seeking to sue pseudonymously has illegitimate ulterior motives." Id. at 467-68.
On the other side of the scale, factors disfavoring anonymity included: "(1) the universal level of public interest in access to the identities of litigants; (2) whether, because of the subject matter of this litigation, the status of the litigant as a public figure, or otherwise, there is a particularly strong interest in knowing the litigant‟s identities, beyond the public‟s interest which is normally obtained; and (3) whether the opposition to pseudonym by counsel, the public, or the press is illegitimately motivated." Id. The Provident Life Court noted that its list of factors is not comprehensive, and that trial courts "will always be required to consider those [other] factors which the facts of the particular case implicate.". . . District courts have applied these nine factors successfully and without further guidance.
As district courts have been able to apply the Provident Life test and it does not conflict with the tests that have been adopted by our sister circuits, we see no value in upsetting its application. Accordingly, we endorse it.
Friday, July 29, 2011
HAMP - promissory estoppel - agreement to negotiate - D. Mass.
Dixon v. Wells Fargo - D. Mass - July 22, 2011 -
The gravamen of the complaint is that Wells Fargo promised to engage in negotiations to modify plaintiffs'loan, provided that they took certain “steps necessary to enter into a mortgage modification.” On the basis of Wells Fargo’s representation, plaintiffs stopped making payments on their loan and submitted the requested financial information - only to learn subsequently that the bank had initiated foreclosure proceedings against them. They contend that Wells Fargo ought have anticipated their compliance with the terms of its promise to consider them for a loan modification. Not only was it reasonable that they would rely on the promise, but also their reliance left them considerably worse off, for by entering into default they became vulnerable to foreclosure.
Plaintiffs have made clear that they do not seek specific performance of a promised loan modification. They admit that there was no guarantee of a modification by Wells Fargo, only a verbal commitment to determine their eligibility for a modification if they followed the bank’s prescribed steps. Thus, the plaintiffs’ request that Wells Fargo be held to its promise to consider them for a loan modification is not a covert attempt to bind the bank to a final agreement it had not contemplated. There is no risk that this Court, were it to uphold the promissory estoppel claim, would be “trapping” Wells Fargo into a vague, indefinite, and unintended loan modification masquerading as an agreement to agree.
Furthermore, because the parties had not yet begun to negotiate the terms of a modification, the Court questions whether Wells Fargo’s promise ought even be characterized as a preliminary agreement to agree. Instead, it more closely resembles an “agreement to negotiate.” . . . . (“[T]he question here is simply whether U.S. Bank made and kept a promise to negotiate with Aceves, not whether . . . the bank promised to make a loan or, more precisely, to modify a loan.”).
Wells Fargo made a specific promise to consider the plaintiffs’ eligibility for a loan modification if they defaulted on their payments and submitted certain financial information. . . . See Burton & Andersen, supra §8.2.2, at 332-33 (recognizing that, while there is no general duty to negotiate in good faith, public policy favors imposing noncontractual liability “when one person wrongfully harms another” by making a promise intended to induce reliance); Lucian Arye Bebchuk & Omri Ben-Shahar, Precontractual Reliance, 30 J. Legal Stud. 423, 424 (2001) (“A party may be liable for the other party’s reliance costs on three possible grounds: if it induced this reliance through misrepresentation, if it benefited from the reliance, or if it made a specific promise during negotiations.”); Farnsworth, supra at 236 (referring to the “specific promises that one party makes to another in order to interest the other party in the negotiations” as a “common basis for precontractual liability”).
Importantly, it was not a promise made in exchange for a bargained-for legal detriment, as there was no bargain between the parties; rather, the legal detriment that the plaintiffs claim to have suffered was a direct consequence of their reliance on Wells Fargo’s promise. . . . Under the theory of promissory estoppel, “[a] negotiating party may not with impunity break a promise made during negotiations if the other party has relied on it.” Farnsworth, supra at 236. Promissory estoppel has developed into “an attempt by the courts to keep remedies abreast of increased moral consciousness of honesty and fair representations in all business dealings.” . . . . While it began as “a substitute for (or the equivalent of) consideration” in the context of an otherwise binding contract,. . . . “promissory estoppel has come to be a doctrine employed to rescue failing contracts where the cause of the failure is not related to consideration,” . . .. It now “provides a remedy for many promises or agreements that fail the test of enforceability under many traditional contract doctrines,” . . . but whose enforcement is “necessary to avoid injustice,” Restatement (Second) of Contracts § 90, comment (b).
Admittedly, the courts of Massachusetts have yet to formally embrace promissory estoppel as more than a consideration substitute.. . . Nonetheless, without equivocation, they have adopted section 90 of the Restatement (Second) of Contracts, which reads, “A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.” . . . .Nowhere in the comments to section 90 nor in section 2 of the Restatement, which defines the word “promise,” is there an explicit “requirement that the promise giving rise to the cause of action must be so comprehensive in scope as to meet the requirements of an offer that would ripen into a contract if accepted by the promisee.” . . . In fact, the Restatement “has expressly approved” promissory estoppel’s use to protect reliance on indefinite promises. . . .
Massachusetts’s continued insistence that a promise be definite - at least to a degree likely not met in the present case - is arguably in tension with its adoption of the Restatement’s more relaxed standard. This tension is not irreconcilable, however. Tracing the development of promissory estoppel through the case law reveals a willingness on courts’ part to enforce even an indefinite promise made during preliminary negotiations where the facts suggest that the promisor’s words or conduct were designed to take advantage of the promisee. The promisor need not have acted fraudulently, deceitfully, or in bad faith. . . . Rather, “[f]acts falling short of these elements may constitute conduct contrary to general principles of fair dealing and to the good conscience which ought to actuate individuals and which it is the design of courts to enforce.” . . . As the Supreme Judicial Court remarked in an early promissory estoppel case:
[I]t is not essential that the representations or conduct giving rise to [the doctrine’s] application should be fraudulent in the strictly legal significance of that term, or with intent to mislead or deceive; the test appears to be whether in all the circumstances of the case conscience and duty of honest dealing should deny one the right to repudiate the consequence of his representations or conduct; whether the author of a proximate cause may justly repudiate its natural and reasonably anticipated effect; fraud, in the sense of a court of equity, properly including all acts, omissions, and concealments which involve a breach of legal or equitable duty, trust, or confidence, justly reposed, and are injurious to another or by which an undue and unconscientious advantage is taken of another. Id. at 525 . . . .
Typically, where the Massachusetts courts have applied the doctrine of promissory estoppel to enforce an otherwise unenforceable promise, “there has been a pattern of conduct by one side which has dangled the other side on a string.”
In the present case, Wells Fargo convinced the plaintiffs that to be eligible for a loan modification they had to default on their payments, and it was only because they relied on this representation and stopped making their payments that Wells Fargo was able to initiate foreclosure proceedings. While there is no allegation that its promise was dishonest, Wells Fargo distinctly gained the upper hand by inducing the plaintiffs to open themselves up to a foreclosure action. In specifically telling the plaintiffs that stopping their payments and submitting financial information were the “steps necessary to enter into a mortgage modification,” Wells Fargo not only should have known that the plaintiffs would take these steps believing their fulfillment would lead to a loan modification, but also must have intended that the plaintiffs do so. The bank’s promise to consider them for a loan modification if they took those steps necessarily “involved as matter of fair dealing an undertaking on [its] part not to [foreclose] based upon facts coming into existence solely from” the making of its promise.
As the cases reveal, where, like here, the promisor opportunistically has strung along the promisee, the imposition of liability despite the preliminary stage of the negotiations produces the most equitable result. This balancing of the harms “is explicitly made an element of recovery under the doctrine of promissory estoppel by the last words of [section 90 of the Restatement], which make the promise binding only if injustice can be avoided by its enforcement.” . . . Binding the promisor to a promise made to take advantage of the promisee is also the most efficient result.. . . . In cases of opportunism, “[the] willingness to impose a liability rule can be justified as efficient since such intervention may be the most cost-effective means of controlling opportunistic behavior, which both parties would seek to control ex ante as a means of maximizing joint gains. Because private control arrangements may be costly, the law-supplied rule may be the most effective means of controlling opportunism and maximizing joint gain.”. . . .
[R]eliance-based recovery in such instances offers the most equitable and efficient result without “distort[ing] the incentives to enter negotiations” in the first place. . . . This Court, therefore, holds that the complaint states a claim for promissory estoppel: Wells Fargo promised to engage in negotiating a loan modification if the plaintiffs defaulted on their payments and provided certain financial information, and they did so in reasonable reliance on that promise, only to learn that the bank had taken advantage of their default status by initiating foreclosure proceedings. Assuming they can prove these allegations by a preponderance of the evidence, their damages appropriately will be confined to the value of their expenditures in reliance on Wells Fargo’s promise.
Without question, this is an uncertain result. But the “type of life-situation” out of which the plaintiffs' case arises - a devastating and nationwide foreclosure crisis that is crippling entire communities - cannot be ignored. . . . Distressed homeowners are turning to the courts in droves, hoping for relief for what they perceive as misconduct by their mortgage lenders. Many of these cases are factually similar, if not identical to, the plaintiffs’ case. Yet, with the notable exception of three Massachusetts federal district court cases, virtually no other court has upheld a claim for promissory estoppel premised on such facts. . . .To the extent that today’s result is an anomaly, this Court has sought to explain its decision “openly and with respect for precedent, not by sleight of hand.” . . . . It is the view of this Court that “[f]oreclosure is a powerful act with significant consequences,” Ibanez, 458 Mass. at 655 (Cordy, J., concurring), and where a bank has obtained the opportunity to foreclose by representing an intention to do the exact opposite - i.e., to negotiate a loan modification that would give the homeowner the right to stay in his or her home - the doctrine of promissory estoppel is properly invoked under Massachusetts law to provide at least reliance-based recovery.
Without guidance from another court within the First Circuit and without clear direction from other federal and state courts across the nation, this Court agrees with Judge Posner’s conclusion that, especially because the Home Owners’ Loan Act (“HOLA”), 12 U.S.C. §§ 1461-1700 (HOLA), and its implementing regulations, 12 C.F.R. §§ 500-99, does not give a private right of action, Congress could not have intended to deny all traditional state-law avenues of recourse to consumers who are harmed by the unseemly conduct of lenders. This Court, therefore, holds that the Dixons’ promissory estoppel claim, rooted in the common law and with no ambition of regulating lending, is not barred by HOLA.
Plaintiffs' counsel Gerald A. Phelps, Law Office of Gerald A. Phelps, 11 Lamppost Drive, Halifax, MA 02338 781-754-0825 lawgap@verizon.net
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