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EXHIBIT M
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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK
---- ---········------··•·····-·······-·X
Mongage Resolution Servicing, LLC: 1st Fidelity Loan :
Servicing. LLC. and S&A Capital Partners, Inc., : No. I 5-CV-293-LTS-JCF

Plaintiffs,
PRELIMrNARV PRE-TRIA L
-agoinst- : STATEMENT

JPMorgan Chose Banlc, N.A .. Chase Home Finance

LLC. and JPMorgan Chase & Co.,

Defendants.

- - - - - - - - - .• - - - - - - - - - - - - - - - . - - - - - - - - • - - -x

Pursuant 10 this Coun's January 22, 2015 Initial Conference Order, Plaintiffs Mongagc

Resolution Servicing. LLC ("MRS"), Isl Fidelily Loan Servicing, LLC (1st Fideli ty"). and S&A

Capital ?artnors, Inc. (''S&A ") (collectively, "l'loinli ffs" or the "Schneider Enlilics'') and

Defendants JPMorgan Chase Bank, N.A. ("Chase''), JPMorgan Chase & Co.. and Ch:isc llomc

Finance LLC, 111c this Preliminary Pre-Trial Statcmenl. Pursuant to tho Initial Conference Order

and Ped. R. Civ. P. 26(t). Plaimiffs and Defendants conforred via telephone on April 6. 2015 and

subsequently prepared this repon .

·n,c pre-trial confcre~1cc in this matter is scheduled for April 24. 2015 at 10:15 o.m. in

Courtroom 120,500 Pearl Slrcot, New York. New York 10007.

a. Swtcmcnt of the ',uurcoftb c Action

This is on action commenced by the Schneider Entities, \\ho arc in the residential

mortgage loan purchasing business. The named defendants arc o national bank (JPMorgan

Chase l3ank, N.A.), a former opcruting subsidiary of the bank that hus since been merged into the

bank (Chase Mome f'inance LLC). and a bank holding company that O\\~lS the defendant bank

(JPMorgan Chase & Co.).

OC: 5678799•1
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1. Plain1iffs' swnmary nfthc nature of the nction.

As alleged in the second amended complaint (the ~complaint"'). the Schneider Entities

acquired certain federally related firsl and second lien mortgage loans and pools of such loans

from Chase commencing in 2005. l11c aggregate principal amount of the loans nnd pools

purchased by the Schneider Entities from Chase over time is in excess of S250,000,000 (ncquired

al varying rates of discount 10 principal over time). Federally rclmcd mortgages arc subject 10

review and oversight by federal regulators. The Complaint alleges n pattern of wrongdoing by

Defendants over a period of more than a decade and a half as part of a systemic cOort to evade

numerous legal obligations governing federally related lirsl and second lien mo11gnge loans.

Chase·s alleged wrongdoing includes an ongoing pancrn of fraudulent and \\TOngful

conduct, including, lnrer alia. fraud, breaches of contract and tortious interference with the

co111rnctual relationships between the Schneider Entities and the borrowers whose loans Chase

sold to the Schneider Entities.

In addi tion 10 providing a basis for common luw liabili ty, Plaintiffs assen that Chase's

pauern of conduct constitutes the conduct of an enterprise· s uffoirs through n "panern of

racketeering octivily'. ,,ithin the mcuning of RICO. 18 U.S.C. § 1961(5). in violation of RICO.

18 U.S.C. § 1962(c). Pl11intiffs have alleged ll1a1 the pauern ofruckclccring activi ty is part ofa

scheme by Defendants 10 evade their legal obligations and liabilities with respect to (a) the

proper servicing of federally related mortgages and (b) requircmcnls under fcdcml law and

imposed pursuant 10 multiple consen t orders. sculemerus and agreements inlo which one or more

of ll,e Defendants have entered with various brnnchc.-s of federal and slate governments (the

.. Lender Seulemcnts"). PlaintiITs further allege that, tts part of thm scheme, Defendants have

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ac1ed to conceal their violations or federal law, including breach.:s of one or more Lender

Scnlements, nnd other legal obligations and 10 pass on liability for those violaLions 10 Plai111iffs.

Plaintiffs have further alleged lhaL to accomplish !his concealment and imposition of

liabilities upon Plaintiffs. Dcfcndan1s have improperly established a second set of books (the

"RCV I." ·'RCVI dalllbase:· or " RCV I SOR"). uti lized by a division not associated with Lhc

servicing of mortgage loans. to perpetrate this concealment. PlaintifTs have alleged that Lhis usc

of lhc RCV I database has led 10 accumulating violations of laws relating to federally related lirst

and second lien mortgage lonns und pools of such loans. Plaintiffs further aUcgc that, over a

period of years. upon Defendants realizing the potential liabilities stemming from their conduct

relating 10 the RCV I database. Defendants have formulated an ongoing scheme 10 impoS<! c.:rtnin

liabilities u1>0n Plaintiffs in order to deflect them from Dcfcnd,1111s. To this end, Defendants

have. among other things: (I) used Plaintiffs as "scapegoats"' for "dumping" pools or federally

related loans rife with violations stemming from the use of the RCV I database. in the process

breaching representations and warranties under loan purchase ogrc1.:ments with Plaintiffs: (2)

utilized the RCVI database 10 evade obligations under one or more Lilnder Seulements; (J)

committed torts repeatedly by interfering with the Plointi!Ts· management and servicing of the

loans they purchased and by collecting payments and insurance proceeds on loans sold to

Plaintiff's,; 1111d (4 ) impropcdy no1ilicd certnin borrowers whose lonns Chase had sold to the

Schneider Emitics that the loans had been forgiven. and recorded numerous releases of liens

from other borrowers whose loans Chase had sold to the Schneider C:ntities. The lien releases

were part of Defendants' ·'Pre DOJ Lien Rdcosc Project" und dirccu.:d purposefully 01 retaliating

against Mr. Schneider for having lilcd a federal False Claims Act complaint (the "FCA

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Complaint") (partiall y unscaled on or about November I, 2013) 1 as rclator against Chase

alleging the filing of false clni ms in derog,ui on or certain obligotions under the Nm ional

Mortgage Sculement Agreement

Plaintiffs have alleged thm they have sulTercd substantial damages. includi ng deprivation

of the benefi t o f the bru·guin or the v(ll ue o r lite loons had Chase 1101 brcnched its contmctual

duties and committed torts, dnnmgcs incurred on an ongoing basis because or govcmr.1<:·ntal

actions 10 seek to hold PlaintilTlioblc for the consequences ofChase·s wrongful acts, destruction

or Plaintiffs' businesses (causing damages in excess of the value of the loans sold to them by

Chasci consequential and puni ti ve damages.

11 . Defendants' summao• of the nature of the action.

Plnin1i1Ts assen both (I) business ton and brcuch of contract claims allegedly arising out

of an11s-length commercial dealings between the parties with respect 10 certain non-performing

mongtge loans that plaintiffs acquired from Chusc and (2) RICO. fraud. and mhcr ton claims

based on Chase· s alleged a!lcmpts to evade and ci rcumvent i1s obligations 10 the rcderal

goverr.mcnt under the Lender Se1tlcmcnts and fcdcrnl law.

Plaintiffs· allegations in this action - in panicular the allegations relating to the Lender

Seulemcnts. Chase·s Recovery One system of record, and Chase's alleged evasion of its

obtiga:ions to the federal govcrnmcnL - create a substantial overlap between Lhis action and the

False Claims /\ct action (FCA action) pending in the United States District Court for the District

of Cotumbia.2 Furthcm1ore. the judge prcsidins over the FCA nc1ion - Judge Rosemary M

' That complnlm was filed on Mny 6.20 13 nnd entitled U11//ctl Srore of 1lmem·11 ut nl ,•x rd. l.a11re11ce S"/,,,ulder v.
J.P. M11J•gon Chase Bank. Notlonnl 1ls.rt1ci111io11 et al,, CIA: 3: 13- 1223-JFA (1hc "l'CA Ac1ion"). The punial
unsealing wns made with consent or Mr. Schneider's acting counsel in the District ofSoulh Cnrolinn nt lite lime but
Mr. Schneider himself did not aulhori1.c or cons,:nt 101l1a1 pnnial unsealing.
>Througltout this Preliminary Prc-1rial S1n1cment, Ch= b:l:.cs iLt discussion of the FCA nclion solely on the
unsealed vtrsion of the FCA complnint n:rcrenced in subparagraph b below. n01 the seakd. nmended vorsionof1ha1
compkum.

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Collyer - is the same judge who presided over cn1ry or the Lender Se11le111en1 consent decrees

tha1 are the focus of many or the allegations in this action. Chase respectfu lly submits 1h01 1his

action should be transferred to 1hc Dislric1 of Co1umbia so that disco,•ery in the two actions may

be coordinated before Judge Collyer.

With rc~pcc1 10 the merits of plointiffs' oll cgu1ions, Chase denies 1hat it has br<J:tchccl or

evaded any of i1s obliga1ions under federal law or the Lender Sculcmen1s. denies concealing any

ma1eria.J fact.s from govemmen1al authorities. and avers 1ha1 the cour1-appoin1ed Monilor

overseeing 1hc Lender Set1kme111s has found that Chuse fully complied wi th its Scmlemcnt.

With rcspcc1 10 Chase's dealings wi1h plaimifTs specifically. Chase likewise denies any

wrongdoing. Plaintiff N!RS acquired certain dis1rcssed mortgage loans from Chase I lome

Finance I.LC. /\hhough 1hc balance due on 1hc loans in ques1ion exceeded one hundred and li tly

million dollars ($150,000.000). MRS paid only $200,000 for the loans - less than one ccnl on the

dollar. Consis1ent with Lhc low price it paid for 1he loans, MRS ngrced in ,vri1ing thnI, with

limited exceptions. it was acquiring the loans ..AS rs·· after an adequa1e oppomini1y 10 conduct
due diligence. Ncverlhcless, when MRS grew tlissu1islicd wi1h the quoli1y or the loans nnd lhe

records itS received from Chase. plain1iffs and 1heir principal. Laurence Sclmeider, liled 1his

action and 1hc rela1cd FCA action. Both this action and lbe FCA ac1ion are based on fnlsc and

innammaiory alli:ga1ions 1hm appco r 10 be calculated 10 pressure Chase into repurchasi ng 1be

loans at issue for a windfall price in excess of 1hc S 150,000,000 face value of 1he loans. See

Complain1 ' 6, 67.

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b. Pending Related Criminnl or Civ il Actions

i. Chase's View.

ll1is action is related 10 the FCA action 1h01 plaintiffs' owner and operator is pursuing in

the United S1a1es District Coun for the District of Columbia. Sett Com pl.. United Sttttes ex rel.

Schneider v. JPMtJrgan Clw.w /Jtmk. N.A .. No. l :14-cv-O1O47-RMC (D.D.C. May 6, 20 13)

(.. FCA Compl."): see ttlso Order. U11ited Stares ex rel Schneider,. Jl'Morgan Chase Bonk, N.A ..

No. l :14-cv-O1O47-Ri\lJC (D.D.C. No\. 17. 2014) (permitting filing of an amended complaint

under scal). 3

111c operative complaint in the FCA action is eurrcntly subject 10 a sealing order 1ha1

prohibits Chase from describing 1ha1 complaint. Several area.~ of substantial O\<erlap between

ihis action and the FCA action ure apparent, however, from an earlier, unsealed complaint (the

"FCA Comp! ...) in that action. These areas of' ovcrla1> include plain tiffs' allegations that Chase

conspired and schemed 10 evade its obligations untlcr federal law and the Lender Sculcmcnts.

As is clear from the summaries or the action sci forth in subparagraph n of this S1a1emen1. these

allegations play u promincnl role in both the original, unscaled FCA complaint and in the

operative complaint in this action. A motion has been filed in the FCA action 10 permi t ihc

unsealing of the currently scnled complaint. As soon as 1ha1 motion is granted, Chase will

provide 1his Court with a copy of the amended FCA complaint and wi ll supplcmelll its

discussion of the related case issue

Chase plans 10 file a motion 10 transfer this action 10 the United States District Court for

the District of Columbia under 28 U.S.C. § 14O4(a) nflcr obtai ning relief from the sealing order.

Chasc·s moti on should be granted because Judge Collyer. 1Jie j udge presiding over the Lender

1
The FCA 11c1ion wns originally riled on rhc Uni1cd S1111cs Diwict Coun for the Dis1ric1 or Sou1h Carolina. h 1<:is
1ransrcrre<1 nt Schneider's requcs110 rhc Disrricl ofColumbln oo June 19, 2014. Seu Order, U11it,;,/ Stt11~s a rel.
Sclmelder 1•. JPM11rgu11 Chase 8t111/t. N.,I , No. l:14-cv-01047•R.MC (D.D.C. June 19, 2014).

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Settlemen1 consent decrees. has extensive experience with. and exclusive jurisdic1ion over, those

decrees. Chase's mo1ion als1) should be gra n1cd to avoid the wus1c or judicial and party

resources 1ha1 will occur if two hca,'ily overlapping actions proceed in two different couns under

1wo diITcrcnt discovery schedules.

To avQid 1he prospect or duplica1ivc discovery and duplicmivc judicial determinations by

two different courts. Chase respectfully submits that discovery in this action should be stayed

until Lhis Coun rules on its motion 10 transfer.

ii. Ploi111iffs' view.

Plaintiffs do not agree 1ha1 this case is related 10 Lhe FCA action. Further. given 1he

pending scaling order, Plaintiffs do not believe thlll Chase fa pcrmiued 10 refer 10 the scaled

compluin1·s pcndcncy as a basis for asserting a relationship or the FC/\ action to this action.

Plaintiffs arc reviewing the rcccnlli• lilcd unsealing motion 10 determine what their response 10

thnt motion will be. To the extent 1ha1 unsealing occurs, Plaintiff will supplement its discussion

as to the limited relationship between the FCA nclion and Lhis action.

In any event. under the FCf\ Comp!.. the United States or America is the plaintiff,

through Mr. Schneider individually as the rclator. Thnt means that the United States has the right

Lo control the investigaLion it is mo.king of the complaint"s allegations. the degree to which any

unsealing of the seulcd co111plai111 occurs and indeed whether to pursue the FCA action a1all. In

addiLion. the FCA action is an 11sscnio11 of damages done Lo Lhe United States. None of those

factors pcnaiiis tu the case 1h01 the Schneider Entities (and not Mr. Sclmcidcr individu:1lly) liled

against Chase 1ha1 Chase has removed 10 this Court.

Funher, the action pending before this Court is not one brought Lo enforce 1hc Lender

Senlcmcnts. 111c causes of acLion that Plaintiffs have asserted arise out of transactions between

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Chase and PIClimiffs. The dmnnges that Plaintil'ls alleged in this c1ction are damages 1ha1

Plaintiffs have suffered, not that the United States has suffered. Plaintiffs' causes of action arc

independent of the FCA action and !his action is properly venucd in New York. While cenain

facts relating 10 Plaintiffs' allegations that Chase has engaged in systemic cffons 10 avoid its

obligations under the Lender Scule111cn1s arc rclevun1 to demonstrate moti ve. intent and a pattern

of ,,Tongful conduct by Chase that Plaintiffs alleged hos damaged Plaintiffs, the plaintiffs in the

1wo actions nr~ different. as arc the damages and the very party with standing lo pursue each

action.

Chase may have political influence with the United Stales that may affect the FC/\

action. \Vhctber or not thn1 is 1hc case. Chase should have no right 10 use political influence 10

affect a private c ivil action between private actors. It would be grossly unfair 10 wrnp the

Schneider Enntics· action in this Court imo the FC/\ action, when the pace of the two actions

proceeding will be different in each case. Thus, there is linle or no cfliciency 10 be gained by

1ranstcrring this case to Washington D.C. For 1his and other reasons, Plaintiffs intend to oppose

Chase's motion to transfer.

c. Srntc menl o f E.'lch 1·•n rl)•'s P osi tion as to the [l:lsis of this Court 's J urisdiction

TI1e panics agree that this Coun has jurisdiction over this net ion pursuant 10 28 U.S.C.

§ 1331 (federal question jurisd iction), 28 U.S.C. § 1332 (diversity jurisdiction), and 18 U.S.C.

§ 1964(c) (RICO). With respect 10 federal question and RICO jurisdiction. Plnintiffs have

asserted a RICO claim under 18 U.S.C. § l962(c). See Complain! ' 240-50. \1/ith respect 10

diversity juri5diction. the plaintiffs are citizens or Florida, see id. 1 7-9, the defendants arc

citizens or DeJnwarc, New York. and Ohio, .ree Notice of Removal at 2 n. l. and Plaintiffs seek

more lhan S 156 million in damages. see Complaint ' 6, 67.

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d. Statement of ,\II Material Unconteslctl or Admillcd Pncts

Plaintiffs hove alleged what they believe to be the mot.:rial facts in their Second

Amended Complaint. Although Chase is investigating the allegations in that Complaint. its

progress has been limited by the fact that many of those allegations concern events that occurred

several years ago and involve Chase employees that have either passed away or left the bank

Based on its investigation to date, Chase anticipates that it will admit that the parties had nrms-

lcngLh commercial dealings with each other und will deny all allegations of wrongdoing in 1he

complaint.

The parties anticipate that the contours of the disputes of fact in the action "ill be further

clarified in Chase' s answer if its motion 10 dismiss is denied. Pursuant to the Court's memo

endorsement dated March 11 , 20 15 (the "March 2015 Endorsement"), Chase has until April 30,

2015 to answer or otherwise move in response to the Complaint. Chose plans to respond by

moving 10 1ra11sfer and 10 dismiss. Plaintiff plans to oppose both motions.

c. Statement of All Uncontested Legal Issues

The parties incorporate by reference the information set forth in subparngraphs d, f and g

of th is Repori, which frame the legal and fuctua l issues requiring decision lo the best of the

parties' present ability. 111c parties further advise the Court that they ore 1101 aware of matcrinl

uncontested legal allega1io11s nl this time other than allcgruions relating to subject mailer

jurisdiction.

f. Statement of All Lcgnl Issues to he Decided by the Co urt

Without waiving m1y rights. claims, or defenses. including wi th rcspcct to the proper

articulation of the clements of plaintiffs' cuuscs of action. Chase, as dcfcndanL based on its

initial review of the Complaint. has idemilied the folto,,~ng legal issues that may require

decision by the Court:

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• Breach of Contmcl (Clnim One): Whether Chase failed IO deli ver loons that

sa tisfied the requirements of the ullcgcd contract 11nd whether a valid purchase

agreement wa.~ fanned.

• Promisson• [stoup cl (Claim T" o). Whether plaintiffs can use the promissory

cstoppcl doctrine lo vary the terms or a written agreement. whether Chase made a

specific and definite promise that it breached, and \\hethcr plaintiffs detrimcnmlly

relied on such a promise and suffered unconscionable injul') as a rcsu It.

• Conversion (Cloim Three). Whether plai ntiffs' conversion claim is duplicative

of their breach of contract claim. whether a conversion claim \\~II lie if no

physical property wns converted, and whether plaintiffs have pied the elements of

conversion.

• Unfnir Competition (Claim Four). Whether plaintiffs' claim should be

dismissed because plaintiffs and defendants were not competitors, but were in a

vertical business rchuionship, and whether an unfair competition claim lies

outside the comexl or trademark infringement.

• Un just Enrichme111 (Claim Fh·c). Whether this claim is duplica11vc of

plaintiffs· breach of contract claim. and whc1hcr plninlilTs have adequately

nllcged that Cllilsc was enriched ·'u1tj ustly.'·

• Torti ous Jnt crforcnce with Conlru cl ual Rcl:Hions (Claim Six}. Whether

plaintiffs have adequately alleged that Chase induced or procured a third-party

brc;1ch of con1rnc1 wilho111 justification. whether an actual breach of contracl

occurred. and whether damages resulted therefrom.

• Frnud a.nd Fruudulcot Omission (Claim Seven). Whether this claim is

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duplicative of plnintilTs· breach of cont:rllct claim, whether the claim has been

pied with the specificity required by Ruic 9(b). and, \\ith respect 10 the fraudulent

omission component of the claim, whether Chase owed a liduciary duty to

plaintiffs.

• Negligent Misreprcscntntion (Clnim Eight). Whether this clulm is duplicative

of plaintiffs' breach of contract claim. and whether plaintilTs have alleged the

existence of a special relationship of trust between the panics that could suppon a

claim of negligent misrepresentation.

• Defamation {Claim inc). Whether plainti11s have adequately idcntilicd a truse

statement regarding plaintiffs that Chase published that caused plalntilTs special

hann. whether this claim is burred by the applicable stotutc of' limitations. and

whl!thcr plainti ffs have alleged the fi1c1s necessary to suppon punitive damages.

• Slander of Title (Claim Te n). Whether plaintiffs have adequately alleged the

existence of a communication reasonably calculated to cause hnnn. that plaintiffs

sulTcred special damugcs, or that Chase's actions caused a prospective sale to be

lost because ofa cloud on plaintiffs' title.

• Negligence (Claim ~~lcvcn). Whether this claim should hi: dismissed under the

economic loss ru le or because 1he relat ionship between the pnrtics did not give

rise to a duty independent of their contractual relationship.

• RI CO (Claim Twelve}. Wh.:thcr the Complaint adequately alleges a RICO

..person" disLinct from the alleged ··enterprise," whether plnintiffs have adequately

alleged the scientcr clement of muil and wire fr.iud with the SP<,>eilicity under Ruic

9(b), and whether plaintiffs' allcgntions arc suflicicm to show that the alleged

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RICO enterprise proximately caused their alleged damages.

• N.. I. Consumer Fraud Act (Claim Thirteen). Whether New Jersey law applies

under the applic.ablc choice of law rules. and whether plaintiffs have adcqua1cly

alleged the elcmen1s or 1his cause of nction.

To cx1en1 Chase raises these legal issues. whether by motion to dismiss or otherwise.

Plaintiffs agree that they will constitute contested legal issues that will require the Coun's

dctcnnination. To the ex1e111 1h111 Chase assens other contested l.:gal issues in addition to the

ones it sets forth ubove, those other issues wi ll C(lf1Stilute legal issues that will require the Court's

determination. Plaintiffs reserve the right 10 respond. refute and rebut any legal issue 1hut Chase

may comest but at thjs stage is only aware or the contested legal issues that Chase has set fonh

above.

g. Each Pnrty's Statement (>f Mal'erial Disputed Facts

The p:irties dispute all material allegations of wrongdoing in this action. including but not

limited to (I) whether Chase breached or evaded its obligations 10 the government under the

Lender Sc11leme111s or under l'cdcnil law. (2) whether Chase concealed its Recovery One sys1c111

of record from the government, (3) whether Chase made allegedl)' defamatory statements

regarding plnintifTs. (4) whether Chase collected payments on loans owned by plaintiffs, (5)

whether Chase claimed credit under the Lender Settle1m:nts for releasing liens owned by

plaintiffs. (6) whether Chase matcriall)' interfered with the relationship between plaintiffs and tbe

relevant borrowers on loans acquired by plaintiffs. (7) whether Chase's alleged misconduct

injured Plaintiffs, and (8) such 01her disputed maucrs ns may emerge from discovery, motions

practi ce. or Chase's answer,

h. Schneider Entities' St:llcmenl oftbc Lcgnl Bas is ofEnch Cnusc of Action Assert ed

i. Drench of Con1rnc1

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Under New York law, the cssc:n1ial clcmcms for a claim of breach of con1mc1 ore (I) lhe

exis1cncc of n con1rnc1; (2) 1hc plain1i!Ts pcrfonnnnce under lhe con1rac1; (3) 1hc dcfendant"s

brcuch of thal con1rac1: and (4) rcsuhing damages. See JP Aforgafl C/i(lse 1•. J./1. l':lec. of New

York. Inc.. 69 A.D.3d 802. 803, 893 N. Y.S.2d 237. 239 (20 I0): 511 1./( 232nd Owners Corp. 1••

.Jennifer Ne(l/ry Co., 98 N. Y.2d 144. 154, 773 N.E.2d 496, 501 (2002). The Complaint alleges

that Dcfcndanls breached their warrnmics and obligmions to Plain1iffMRS u11dcr lhc MLPA. and

also breached the implied covena111 of good fni1h and fair dealing 1ha1 exists in 1hc MLPA,

thereby causing damages to Plain1i1Ts.

ii. Promissorv Es1oppel

To stale n claim for promissory cstopr>el. a party mus1 allege (I} a clear and unambiguous

promise made by 1he defendant, (2) plai111itrs reasonable reliance upon defendant's promise, and

(3) rcsul1ing injury. See A1:fa v. Zamir, 55 A.D.3d 508. 509. 869 N. Y.S.2d 390. 391 (2008). The

Complaim alleges that Dcfcndanls arc liable for promissory estoppel as a resull of their promise

10 deliver a materially comple1e Exhibi1 A 10 Plain1iffs.

Ill, Conversion

The clements of conversion arc (I) plaintifl's posscssory righ1 or in1ercs1 in the property

and (2) defendan t's dominion over the property or in1erfcrencc with it, in dcrogmion ofplaintill's

righ1s. Colavito 11. New York Orgc,11 Donor Ne1work, Inc., 8 N.Y.3d 43. 50, 860 N.E.2d 713

(2006). The Complaint alleges Lhnt Defendants have converted Plain1iffs' property by virtue of,

among 01her things, Defendants presenting themselves as lhe valid licnholdcrs for loans sold 10

Ploin1iffs. collcc1.ing payments on previously sold loons. and releasing liens on sold lonns.

i"• Unfuir Competition

!'he tort of unfair compc1i1ion is "broad and flexible," and cncompnsscs a wide range of

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conduc1. bu1 1bc '·essence or 1hc claim is 1ha1 1he defendant has misappropriated 1hc labors and

expenditures of another~ in bad faith for its own commercial advantage. laser Dint/I! Array, Inc

v. Par<uligm La:;e1·:;, Inc., 964 F. Supp. 90. 95 (W. D.N. Y. 1997) (in1crnul quotations and citations

omiucd). The Compl aint alleges that Delcndan1s arc liable lo Pl11i111i1Ts for 1hc 1ort of unlair

compc1i1ion because by sending ond recording lien rdcascs for loWJs sold 10 Plaintiffs.

Defendants have unfairly misappropriated Plain1iffs' propcny and have represented 10 borrowers

and 1hc public !hat DcfcndaniS arc the valid lienholdcrs and arc cn1ltled to rclcasc liens 1hm

ac1ually belong 10 Ploinliffs.

V. Uniust Enrichmem

··Under New York law, the basic clements of an unjust cnrichmcnt claim nee: ·I)

defcndnnl was enriched; 2) such cnrichmcn1 was a1 the expense of the plai1,ti lT; and 3) r.hc

circumstances wen: such that in equi1y and good conscience the defendant should make

res1itu1ion:·• Finkdstein "· ,\lar<lk/1(1, 495 F. Supp. 2d 329. 344 (S.D.N. Y. 2007) (quoting Ch,,se

Manha/Ian Bank v. Btmque Imm, S_.1l.. 274 F.Supp. 496, 499 (S.D.N. Y. I967). The Complaint

alleges that DefendnnLS were unju~11)' enriched a1 I)loin1irrs· expense because Dclcndants have

recci\Cd benefits related 10 loans sold to Plaintiffs and failed to sa1isfy liabilities that were

sadd led upon Plaintiffs as a result o f Defendants' conduct.

vL Tanious lmerfcn:ncc with Contractual Relations

·•·n1eclcmcn1s oftonious interference wilh contractual relations are (I) the existence ofo

contract between lhc plaintiff and a third pony. (2) the dcfcndan1's knowledge o f1hc contract. (3)

the defendant" s intentional induccmcm of r.hc lhird pany 10 breach or otherwise render

performance impossible, and (4) damages 10 the pluin1ift:" 8(1yslde Carting, Inc. v. Chic

Cleaners. 240 A.D.2d 687. 688. 660 N. Y.S.2d 23, 24 (1997). The Complaint alleges that

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Defendants arc liable for 1onious interference with con1rac1ual relations ns a resull of Defendants

rclcnsing liens on loans sold 10 Plaintiffs. wrongly notifying borrowers 1hn1 1hcir loans had been

discharged or forgiven, and falsely informing borrowers in writing 1h01 Defendants are the

owners of cenain loans sold 10 Plaintiffs.

viL Fraud and Fraudulent Omission

Under New York law, Lhe clements of fraud are ·'(I) a misrepresentation or omission of

material fact; (2) made dclibcrn1cly or knowingly (with scienter); (3) with 1hc intc111 10 defraud;

(4) reasonable reliance on tl1c representation: and (5) pecuniary damages or loss."' M & 1"

Mortgage Corp. ,,. White. 736 F. Supp. 2d 538, 560-61 (E.0.N.Y. 2010). To prevail on a claim

for fraudulent omission, a plai111ifT must also show that lhc defendant was under a duty to

disclose the material information. P. T. Bank Cent. Asia v. ABN AMI(() Bank N, V.. 301 A.D.2d

373. 376. 754 N.Y.S.2d 245,250 (2003). That t.luly con arise where "lhc party to be charged has

superior knowledge or means of knowledge. such that the transaction without disclosure is

rendered inherently unfair." Miele 11. Am. Tohucco Co.. 2 A.0.Jd 799. 803. 770 N.Y.S.2d 386,

391 (2003). The Complaint alleges that Dcfcndttnls are liable 10 Plaintiffs for fraud nnd

fraudu lent omission for false representat ions 11nd omissions made during the negotiation and

execution of the M LPA. The Complaint hos sci fortl1 false reprcscn1a1ion$ and the intentional

nature of them with specificity in ample detail in the over fifty pages of foctually specific

asscnions contained in the first 149 paragraphs of the Complaint.

viii. Negligent Misrepresentation

A claim for negligent misrepresentation requires 1hc plaimiff to demonstrate {I) the

existence of a special rclntionship imposing a duty on the defendant to impurt correct information

to the plaintiff; (2) that the informntion wns incorrect: and (3) reasonable reliance on the

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infom1ation. 11h11 Dhabi Commeri:/ol Bank,,. Morgan Stanley & Co. Inc.• 910 F. Supp. 2d 543.

546 (S.D.N. Y. 2012). Couns have found a special relationship and duty .. when: defendants

sought to induce plaintiffs into a business transaction by making certain statements or pro,•iding

spccllic infonnation with the intent that plaintiffs rely ,m those statements or inlonnation.'· id., or

where persons possess unique or spcciali:r.cd expertise or are in a special position of confidence

and trust, Kimmell v. Schaefer. 89 N. Y.2d 257. 263, 675 N.E.2d 450. 454 ti 996). or where '·the

party 10 be charged has superior kno" ledge or means of knowledge. such thlll the transaction

without disclosure is rendered inhcrcntl)• unfair.~ Miele, 2 A.D.3d at 803, 770 N. Y.S.2d at 391.

·1nc Complaint alleges that Dcfcndnnts arc liable for negligent misrepresentation rclmcd 10

misrepresentations and omissions regarding the nature and quality of the loans sold to Plaintiff

MRS und<.lr the MLPA and Defendants' pervttsive violations or federal, state and local consumer

protection and loan servicing laws in rclu1ion 10 those loans. As is the case with Plaintiris' fraud

ond J'mudule111 omission counts, Ph1intiffs hove set forth in the Complaint with specificity in

ample detail how Chase made a series of 1hcsc misrepresentations and omissions.

IX . Defamation

The clements of a claim for dd111na1ion ari: (I) a false stmemc111, (2) published without

privilege or au1horiza1ion to a third pnrl)', (3) constituting fault as judged by, n minimum, a

negligence s1andard, and (4) the s1a1cmc111 either causes special harm or co11s1itu1cs defamation

per sc. l:.j1ifimi v. .Johnson, 65 A.O.3d 224, 233 (App. Div. 2d Dep'l. 2009). In a commercial

context, a statement is defammory per sc when ii '"impugns the basic i111cgri1y or

creditworthiness of a business." Celle 1•. Filipino Reporter Enterprises. luc. . 209 JZ.3d 163. 180

(2d Cir. 2000). Special harm includes lost business caused by the statements. Squirl! Records,

Inc. 1•. Vcmgucwd Recording Soc 'y, Inc:., 226 N.E.2d 542 (N. Y. 1967). 111c Complainl alleges

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Lhn1 Defendants arc liable 10 PlaintilTs for dcfammion relating to Dcfcndnn1s· communica1ions 10

borrowers infom1ing borrowers that their debts hnd been cancelled or 1hn1 Defendants owned

certain loans sold 10 Plaintiffs. or 1ha1 Dcfcndn111·s collec1ion agencies were the authorized agents

for ~rvice of those loans, as well as Defondan1s' recording of lien releases on properties sold 10

Plaintiffs. l11c Cumplaint furlht:r allege:, 111.11 1he,;c statements nccc:ssorily communica1c:d to

borrowers, falsely. lhal 1he Schneider Entities, in trying 10 collcc1 these dales, had been

wrongli.1lly a11emp1ing 10 eollcc1 on dcb1s 1ha1 hud been forgiven or on debts \vhcrc Plain1UTs had

no righ1 to collect.

x. Slander of Tille

The basic elements of a claim for slander of title are ..( I) a communicn1inn falsely casting

doubt on the validity of' complainant's 1itlc, (2) reasonably calculmcd 10 cause harm, and (3)

resulting in special damages:' Kamat ,,. K11nlw. 2008 WL 5505880 al •9 (S.D.N. Y. Apr. 14,

200S). A conununica1ion is reasonably calculatl.-d to cause harm when m:ide with --a reckless

disregard for its truth or falsity:• /tl Special damages arc economic or pecuniary loss, including

lost profits. Wolf SI. S11pur111arke1s, Inc. 1•. Mcl'artlwul, I 08 AD.2d 25, 32, 487 N. Y.S.2d 412.

448 ( 1985), The Complaint alleges that Dc!cnda111s have slandered Plaintiils' iillc 10 the loans

that Plaintifls purchased from Defendants by. among other 1hings, ( I) sending communications

10 borrowers of those loans falsely informing the borrowers that their debt had been cancelled,

(2) recording lien releases on loans sold to Plaintiffs, and (3) falsely informing borrowers 1ha1

Defendants o""' certain loans sold lo Plointifl's. The Complaint further ollcucs thaL Defcndan1s'

fuls? s1a1emcn1s were reasonably calcula1cd 10 cause ham1 10 Plaintiffs because Defendants knew

that ihey had conveyed interest in these loans 10 Plaintiffs and thal Plaintiffs would be ham1cd by

stal~menLS suggesting thnt PlaintifTs did not in fact own the loans. because collecting 1hc loans

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would become more d i mcult.

xi. Neuligenee

'·To cstabl ish a negligence cau~-e of acLion. a plaintiff must demonstrate (I) the existence

of a duty on the defendant's part to the plaintilT; (2) a breach of 1hut duty and (3) injury to the

plaintiff as n result thereof." Nm1ghrl}(hl v. Weiss, 857 F. Supp. 2d 462, 472 (S.D.N.Y. 2012).

Couns have found a duty exists where persons possess unique or specialized expcnise. or are in

a special position of confidence and trust with thc injured pa11y. See Kimmell ,,. Schal!fer. 89

N.Y.2d 257,263,675 N.E.2d 450,454 ( 1996). The Complaint alleges thnt Dclcndnnts ore liable

10 Plaintiffs for negligence in (I) sending communications 10 borrowers of those loans that

Plaintiffs purchased from Defendants falsely infom1ing the borrowers that their debt hod been

cancelled. (2) recording lien releases oa loru1s Defendants sold 10 Plaintiffs, and (3) falsely

informing borrowers that Defc11da111s own certuin loans sold to Plaintiffs. Plainti!Ts further

allege that Defendants owed a common-law duty of c.arc to Plaintiffs to exercise reasonable care

and skill in performing Dcfcnd,tnts' contract obligations. PlaintilTs l1111her allege that

Defendants owed a duty of cure 10 Pluintifts by virtue of being in a spccinl position ofconlidcnce

and lrust on account of the long-sumding business relationship between Plaintiffs and Defendants

and Plaintiffs' dependence on Chase for the \'iability of PlaintilTs' business model. PlaintilTs

have alleged 1hat 1hcy have suffered damages proxinuuely caused by Dclcndon1s' negligence.

XII. Civil RICO ; 18 U.S.C. § I962(c)

The clements ofa RJCO claim under IS U.S.C. § 1962(c) under arc "(I) conduct. l2) of

an enterprise, (3) through a paucrn, (4) of racketeering activi ty." Si!d/1110, S.l'.R.l. ,,. !11ll'ex Co ..

473 U.S. 479,496, ( 1985). Tbe Complaint alleges thut Defendants caused ham110 Plaintiffs in

violating RICO by conducting and pa11icipating in the affairs of an enterprise consisting of

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Plaintiffs, Defendants and homeowners. and using the enterprise to, among other things, funhcr

De fondants' scheme to relieve themselves of their legal obl igalions and liabilities and 10 conceal

their improper receipt of credit under appl icable laws and the Lender Sculcmcnts, by defrauding

the Schneider Entities am! making misrepresentations 10 homeowners. Defendants panicipatcd in

the enterprise through o pattern of mail fraud, wire fraud, and obstruction of justice that affected

interstate commerce. Pursuant to the Coun·s Scheduling Order, Plaintiffs previously submiucd n

detailed RICO stmcmen1 setting forth the dcia il s of 1he enterpri se, prcd icmc acts, pancm of"

racketeering ac1ivi1y and dmnagcs. Plaintiffs respectfully refer 1be Court 10 the RICO s101cment

for a detoilcd statement of Plaintiffs' basis for assening that Defendants arc liable to Plaintiffs

for RICO violations.

xiii. Consumer Fraud Act: N.J.S./\. § 56:8-1ct seq.

To prove a claim under 1hc Consumer rraud Act. a plaintiff must show I ) unlawful

conduct by defendant; 2) an ascertainable loss by plaintiff: and 3) a causal relationship between

the unlawful conduct nnd the asccnainable los). Boslcmd ,,. Wamack Dodgl!. Inc.. 197 N.J. 543.

557. 964 A.2d 741, 749 (2009). The Complt1in1 alleges that Defendants ure liable to Plaintiffs

for violations o r the New Jersey Consumer Fmud /\ct by vinuc o f' cng,1ging in the sale or

advcrtiscmcnl of any mcrchnndisc or real estate through unlawful and unconscionnblc

commercial practices directed at consumers in New Jersey.

xiv. Successor Liability

Successor liability occurs in cases involving ( I ) a buyer who fonnull)' assumes a seller's

deb1s: (2) transactions unch:rt:1ken to clcfrm1d creditors; (3) a buyer who de facto merged with a

seller; or (4) a buyer that is a mere continuation of a seller." Dono/ti Dean & Sonr. Inc. 1•.

Xo11itek Sys. Corp., 656 F. Supp. 2d 314. 329 (N.D.N.Y. 2009). The Complaint alleges that JP

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Morgan Chase is liable for all damages to Plaintiffs caused by Chase Home Finance as a resuh of

the Defendants' merger.

i. Chase's Stnt cment of the Lcgn l Oasis of E:ich Defense Asserted

Chase intends to move to dismiss the Complaint on th.: grounds set forth in the

lcucr of April 7. 2015 from Robert D. Wick, counsel for Chase, to Gary F. Eisenberg. counsel

for plaintiffs. annched as Exhibit A hereto. If the case proceeds beyond the motion to dismiss

stage. Chase anticipates that it wi ll defend the case principally on the ground that the matcriol

allegmions of the Complaint arc false and thut plaintiffs cannot meet their burden of proof on tl1c

elements of their claims for relief as set fonh in E.xhibit A hereto and subpnragraphs f and/or h

above:
Chase reserves the right to assert additional defenses, including defenses on which

it may bear the burden of proof. at a later stage of the proceedings. Such defenses may include

the defenses of rutilication. estoppel, statute of limitations (see. e.g., N. Y.C.P.L.R. 215(3); r:1a.

Stat. Ann. § 95. I l(g)), !aches. and failure to mitigotc if discovery reveals that plaintiffs accepted

the loans that it now claims are non-confom1ing, liled this lawsu it only after they became

dissatisfied in hindsight with their abili ty lo collect on the loons at issue. foiled 10 lake

uppropriate steps with respect 10 the loans. waited too long 10 lile their claims. and/or that the

passage of time or plaintiO's' conduct has eroded the volue of the loans at issue.

j. Statement or the Measure of Proof

Plaintiffs ordinarily wi ll bear the burden of proor on their claims. and Plaintiffs must

prove their c laims by a preponderance of the evidence.

Defendanis ordinarily will bear the burden of proof of any affirrnutive defenses and must

'Chase docs no1 neccssnrily ~cc,:pt or cndom: plnintiO's' smcmcnl of the demcnts orthclr claims or plainiirrs·
choice of law onrtlysis with rc,spcc1 lO 1heir claims.

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prove such defenses by a preponderance oftbc evidence.

k. Amendments to Plcndiu gs nnd/or Addition or Substitution of Pnrlics

Apan from Chase's obligation 10 answer if its mo1ion 10 dismiss is denied. 1he panics do

not currently nnticipate amending the pleadings or adding or subs1i1uting any parties. The panics

reserve 1hc right 10 amend 1hc plcnd ings and join udditionol p01·1ic$ 11s discover)' prQcced8 In

accordance with the Federal Rules of Civil Procedure nnd tl1e Local Rules.

I. Trinl of the Case by n Magistrate Judi:c

The parties do not consent to trial of the cusc by a Magistrale Judge.

m. Fed. R. Civ. P. 26(a) Disclosu res

Initial disclosures have 1101 ye1 been made. Plaintiffs propose making such di.closures

within a week of the April 24, 20 15 conference. Chase proposes mo king such disclm,-un:s within

founcen days of a decision on its motion 10 transfer.

n. Dii.co,•cl')'

Plain1im; contend thm it would be efficicn1 to begin discovery shortly. n01wi1hs1nnding

any mo1io11 10 dismiss that Chose may file.

Chase contends 1ha1 discovery should be coordinated with discovery in the FCJ\ nction

because the two cases will involve overlapping discovery if they proceed beyond mo1ions to

dismiss. For that reason, Chos..: rcs1>cc1tull y suggests that discovery should be delcrrc<l until a

ruling on its motion 10 transfer. Plaintiffs disagree that discovery in this action should be stayed

for the retisons set forth in subparagraph b abo,·c.

The panics propose thnt the litc1 discovery cutoff be set nine months after the dmc of a

ruling on Chase's anticipated motion to transfer.

Issues on which discovery may be sought if the case proceeds beyond the motion 10

dismiss stage include (i) the panics' communications and dealings with each other respect to the

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non-performing mortgage loans al issue in the Complaint, (ii) the parties' communications and

dealings with the borrowers on those loans, (iii) plaintiffs' allegations regarding Chase·s

Recovery One system of record and the Lender Sclllements. (iv) plaintiffs' allegat ions that Chase

breached or evaded its obligations under 1hc Lender Sculemcnts and/or under federal law as

alleged in the Complaint, (v) the alleged defamatory statements that the Complaim auributcs 10

Chase, and (vi) the damages :1l1egedly suffered by plaintiffs. The parties reserve the right 10

seek discovery as may be appropriate based on nny issues that emerge as the litigation develops.

o. Expert Discovery

Plaintiffs amicipate that expert 1<:stimon) may be presented on the issues of damages and

servicing standards. If the case is not ended through motions practice. Ocli:ndants anticipate that

they may present expert testimony on damages and on any other subject matter on which

plaintiffs submit expert 1est.i111ony.

Plaintiffs propose that rRCP 26(a)(2)(0) apply to the timing of disclosure of any expert

opinions upon which a pnrty wishes 10 rely at trial, namely. that (i) cxpcrt.s should be disclosed in

an expert repon at lcost 90 days before the date set for trial or for the case 10 be rend)• for trial; or

(ii) if the evidence is intended solely 10 con1rnclic1 or rebut evidence on the same subject mailer

identified by another pany under FRCP 26(n)(2)(8) or (C). within 30 days oiler the other pany's

disclosure. Funhcr, ci,;p;:ns should be made available for depositions no later than -15 days

before trial. Other thtm as provided in FRCP 26(a)(2)(D). Plaintiff proposes that the same

disclosure sched L1lc apply 10 all parties.

Defendants propose that plaintiffs' expert disclosures be due 90 d11ys before the discovery

cutoff nnd that Chasc·s expen disclosures be due 45 days before the discovery cutoff.

Defendants rcspcctfolly submit that plnin1itrs· expert disclosures should be made first because

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plaintiffs bear the burden of proof on their claims, and any defense experts will need notice of

the claims and contentions 10 which they ure responding 10 before lhcy can craft relevant expert

disc losurcs.

p. Limitations on DisCO\'Cr )'

Plaintiffs propose that the limit of IO depositions per side be lifted to accommodate the

need 10 depose the numerous Chase employees involved in the creation and ma intcnnnce of the

pool of loans sold 10 Pl11intiffs; the creation of the RCVl database: the negotiation and execution

of the MLPA: Chase's subsequent refusal to provide a complete Exhibit A; Chase's failure to

service the loans sold to Plaintiffs; Chase's release of liens on sold loans; Chase's collection

practices. including its attempts to collect on sold loans. Chase's use of sold loans 10 evade

obligations created by. and claim credits under, the Lender Settlements: and other disputed

issues. Plaintiffs believe that deferral of discovery in this action to the schedule or discovery in

the f'CA action is unwarranted.

Defendants respectfully submit that deposition discovery in this action should be deferred

and coordinated with depositions in the FCA action. which is likely to invoh•c a large degree of

overlapping deposition discovery. especially if such disco,·ery is as wide-ranging as plaintiffs

contend 1hat it should be. To the ex tent that this action is not transferred to the District of

Columbia nnd discovery goes forward in this Court, defendants submit that !he presumpti\'e Limit

or 10 depositions should not be lifted at this time. Rather. plain1ins should move the Court for

relief from the limit once they hove taken initial discovery 11nd depositions pursuant to the

procedures oflhis Court.

q. Settlement

The parties engaged in pre-suit settlement discussions 1hn1 did not result in a settlement.

The parties do not have pl ans 10 discuss settlement at the current time. but do not rule out funhcr

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discussions following motions pr:ictice and/or discovery.

r. Tri nl

Plainliffs have requested a trial by ju,·y. Defendants reserve their riglus with respecl to

whether plaintiffs arc entitled to a jury trial. At this point. without the benefit of rulings on pre•

trial motions or disco"cry, ii is premature to nnticipotc bow long it will toke 10 11')' the c~c, b\11

plain1i1Ts anticipate that at least lwo weeks will be required. Chase anticipates that one week is

likely lo be sufficient.

s. Other Court Orders

The parties anticipate that the) "'ill jointly propose ao agreed protective order 10 govern

the use of any conlidcntial documents produced in discovery. TI1c parties do not currently

envision seeki ng any other orders wider Federal Rules of Civil Procedure 26(c). 16(b), or 16(c)

but reserve the right to seek such an order if circumstances occurring during discovery so

,varrJnt

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Dalcd: April 17, 20 15 PERKfNS COIE LLP

By:/s/ Garv F. Eisenberg

Gary F. Eisenberg, Esq.
30 Rockcfell.:r Plaza
22nd Floor
New York, NY 10112-0085
212.262.6900

J\uomcy for Plaintiffs

Dated: April 17. 2015 COVINGTON & BURLING LLP

B),:J."'l.____ _ __
Robert D. Wick. Esq.
One CityCentcr
850 Tenth Street. NW
Wushinglon. DC 2000 I
202.662.6000

AnomC) for Defendnms

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COVINGTON Covington & tturHnQ U.P

Ont-ChyCen1c.or
HUINQ aou,IILS I.OhOO'-' lflW YO!IUC
8SO Tcmh Slrt-ct, NW
IAH DIIGO S-'IH ,AAtlCIICO 110\Jt..
\Vu1hln-1on, UC 20001••HJ56
IKAN'G.M.-,, SILICON VALLlV WAfj,nNOION'
·r , 1202 o,26000

By EmaiJ April 7, 2015

Gary Frederick Eisenberg

Perkins Coic LLP
30 Rockefeller Pluzu 22nd Floor
New York, NY 10112
geisenbcrg@pcrlcinscoie.com

Re: Mortgage Resolution Servicing, LLC et al. u. JPMorgan

ChaRe Bank. N.A., et al., S.O.N.Y. Case No.1:15-cv-293
( LTS)(JCI~)

Dear Mr. Eisenberg:

r wrilc on behalf of JPMorgnn Chose Bonk, N.A., Chusc Home r:'inunce, LLC, and
JPM organ Chaso & Co. pursunnl to Pnrl A.2.b(i)(A) of ,fudge Swnin'• ln,lividunl Practices Rules,
which requires the parties to exchange letters before o motion lo dismiss is filed.

Motion to Transfer

As you know, Chase anticipntcs filing n motion to transfer this action to the
United States Dislrict Court for the District of Columbia, where a rein led qui lnm action, U.S., el
al. ex rel. Schneider u. .J.P. Mo,.gan Chasellmrk, el al., 1:14-cv-1O47-RMC, is pending. Transfer
would serve the interests of justice because this case presents issues of fact und low that also arc
presented in lhc qui tam action.

The interests ofjustice and efficiency would be served by coordinating the two
actions before II single judge who has expertise and experience with the NMS ond who could
adopt a discovc.ry schedule thal avoids piecemeal litigation and duplk-ati\'C discovery.
rurlhcnnore, Mr. Schneider contended in his motion to transfer his qui tom oction to D.C. lhat
actions relating lo the NMS "must" be heard in the ~-curt that entered the NMS consent decree.

We undcrs1und Lhat Plaintiffs ,,ill oppose this motion.

u. Motion to .Dismiss
Chase intends to move to dismiss this action on grounds likely to include tbc
following, among others:

All comm on law claims. Plaintiffs' common law claims arc defective because
plaintiffs do not identify which state's common law they seek to im•oke and because one or more
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April 7, 2015
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daims nrc pleaded in a conclusory, bare-bones manner that does not satisfy the rec1uiremcnts of
Ruic 8(a).

Breach of Contract (Claim One). The breach o f conu·uct claim should be

dismissed under the plain language of the controcl, which slates, among other things, Lhot
M.R.S. has hod an adequate opportunity to conduot due diligence und ogrccs to accept the loans
at is.we ·os is." Furthermore, the amended complaint does not clearly nllege that a contract was
formed.

Pro m issory Estoppel (Claim Two ). Plaintiffs' promissory cstoppcl claim

should be dismissed because it is duplicative of pluiutiffs' breach of controct claim, because
plaintiffs fail to allege that Chase mudc a definite nnd specific promise which plaintiffs relied
upon, and because plaintiffs have not adequately alleged that the injury suffered was
unconscionable. See G1·ossman v. New )'ork life /11s. Ca., 935 N.Y.S.2d 643,645 (NX. App.
Div. 2011) (promissory cstappel claims that nrlsc out of the same subject matter as cantrnct
claims are defective); Weaver u. 1'own a/North Castle, 2015 WL 505219, ot •4 (N.Y. Sup. Jnn.
30, 2015) ("To establish promissory cstoppe~ a pnrty must show it relied upon another's clear
and unambiguous promise"); '/'omc v. State Fan11 l"il'c cmd Gas. Co., 125 So. 3d 864, 867 (Fla.
App. Dist. 2013) (to su pport II promissory estoppcl clnim, Lbe p rom ise musl be "entirely dclinilc
as to lenns nnd time"); AHA Sales, Inc. 11. Creative Bt,th Pl'ods., Inc., 867 N.Y.S.2d 169, 18 1
(N.Y. App. Div. 200S) ("[T]he doctrine of promissory cstoppel is limited lo cases where the
promiscc suffered an 'uncons(:ionablc injury.'~); Dun1111. B&H ASSOC$,, 743 N.Y.S.2d 546. 548
(N.Y. App. Di,·. 2002) (dismissal of promissory cstoppcl claim proper when "plaintiff did not
proffer facts that would support a finding Lhat the failure to enforce O nlleged agreement would
result in unconscionable injury").

Convers ion (Cluim T hree), Plaintiffs' claim for ci:,1wcrsio11 s hould be

dismissed because it is based on the same facts us the breach o f contruct claim a nd bccuusc
plaintiffs have no l adequately alleged the elements of conversion. Orok Edem v. Grandbellu
Intern., Inc., 988 N.Y.S.2d 244,245 (N.Y. App. Dh•. 2014); Belford Trucking Co. v. Zagar, 243
So. 2d 646, 648 (Fin. Dist. Ct. App. 1970) ("an action in Lort is inappropriate where the basis of
the suil is a contract, either e.~prcss or implied").

Unfair Co mpe titi on (Claim Four) . The complaint d ocs not adequately
nllcge the clements of an unfoir compclition clnim. Among other d eficiencies, plain tiffs' claim
foils under New York law because plaintiffs allege lo hm,e been injured by defendants in their
capacity as plaintiffs' supplier, not ns dieir competitor. See Roy Export Co. Est. of Vaduz,
Uecl,ten.~tein v. Columbia Broacfoasting Sys., Inc., 672 F.2d 1095, 1105 (2d Cir. 1982).
Plaintiffs' claims fail under Florida law because, lo the extent that Florido law recognizes such a
cause of action, it does so only in connection with trademark infringement. See Harr v. W. Fla.
Seafood, Inc., 521 So. 2d 349,351 (Fin. Dist. Ct. App. 1988).

U njust Enric hme nt (Claim Five). This claim should be dismissed because it
is duplicative of plaintiffs' breuch of contract claim, and because plaintiffs have not adequately
alleged tlmt Chnsc was enriched ·unjustly.'' Corsello 11. \lerizo11 N .l'., Inc.. 967 N.E.2d 11n, 1185
(N.Y. 2012); Diamond ·s• Dev. Corp. v. Mercantile &111k, 989 So. 2d 696,697 (Fin. Dil.'l. Ct.
App. 2008).
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Ga11• I;iscnbOl'g
April 7, :!015
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Tortious ln lcrferenec wiU, Contractual Relations (Claim Six). To make

out a claim for tortious interference with contractual relations, plaintiffs must allege; (1) the
existence of n volid contract between plaintiff and 1\ third party, (2) dcfcndanl's knowledge of
that contract, (3) defendant's intentional procurement of the lh il'd-porly b1-euch of contract
without justificutioo, (4) actual breach of the contract, ond (5) damages resu lting therefrom.
Lama Ho/cling Co. u. Smith Barney, Inc., 668 N.E.2d 1370, 1375 (N.Y. 1996); Chicago Title Ins.
Co. u. Alday-Dono/son Title Co. of Florida, Tnc., 832 So. 2d 810,814 (Flo. OisL CL. App. 2002).
Plaintiffs ho,·e not adequately nllcged the third, fourth and fifth clements.

F raud and frau dulent Om iss ion (Claim Seven). Plaintiffs' fraud claim
should be dismissed because ii merely r~tatc.~ plointiffs' breach of contract claim. First Ba11k of
the Am. v. Motor Co,· Funding, /11c., 690 N.Y.S.2d 17, 20-21 (N.Y. Ap1>. Div. 1999). In addition,
plaintiffs hove foiled adequately to allege f:rnudulcnt Intent or to pleatl fraud with the specificity
required b)· Rule 9(b). Finally, plnintiffa;' fraud claim foils because the domoges alleged arc no
different than those resulting from the ulleged bl'Cllch of contract. See 101-ch/ig/11 Loan Serus.,
Ll,C u. Column Fin., Inc., No. 11 Ch•. 7426 (RWS), 2012 WL 3065929, at •9-10 (S.O.N.Y. July 25,
2012); Argonaut Deu. Groirp. lnc. u. SWH Ftmding Corp., 150 F. Supp. :?d 1357, 1363 (S.D. Flo.
2001).

Plaintiffs' fraudulcnl omission claim fai ls because it requires tliat the defendants
owe a fiduciary duty to plaintiffs. Mandarin Tmding, Ltd. u. WildcnsteiJt, 944 N.E.2d 1104,
1108 (N.Y. 2ou). "[A] convcntionol business rclntionsbip, without more, does not become a
fiduciary rclntionship by mere allegution.• K.,\'l.l•. /Abs. Ud_ u. Hopper, 830 F. Supp. 159, 168
(E.O.N.Y. 1993).

Negligent Mi s representation (Claim Eight). As with plaintiffs' fraud

claim, plaintiffs' negligent misrepresentation clulm is precluded because "the only fraud charged
rclolcs to a breach of contract." R.H. Damon & Co. u. Softkcy Software Prods., Inc., 811 F.
Supp. 986,992 (S.D.N.Y. 1993). Plaintiffs' negligent misrepresentation claim also should be
dismissed lx!c:tuse plaintiffs foil to allege the exis1cnce of a special relationship of trust apart
from "the trust and reliance between nn ordinary buyer and seller," a necessary clement of this
claim. Silva Fun Worldwide, Ltd. v. Gaming Lottery Corp., No. 96 CIV 3231 (RPP), 1998 WL
167330, nt •1 I (S.D.N.Y. Apr. 8, 1998).

Defamation (Claim Nine). In t>rdcr lo make out a cluim for tlcfamatlon,

plaintiffs must allege l.hnt defendants (1) made a fulse stolcment, (2) published the statement
without pri\ilcge or autJ,ori7.nlion to a third party, nnd (3) that tl1e stntemenl caused special
harm or constitutes defamation per sc. Salvatore u. Kumar, 845 N.Y.S.2d 384,388 (N. \'. App.
Div. 2007); Nln~ LLC u. Baker, 61 So. 3d 1249, 1252 (Fla. Dist. Ct. App. 2001). The alleged
false slotemcnt must be ·of and concerning• plaintiff lo qualify as defomution. Springer u.
Viking Press, 458 N.E.2tl 1256, 1257 (N.Y. 1983). Plaintiffs have noL ldeotilied a fal5e statement
that dcfcndunts published rega rding plaintiffs that caused them specia l harm. In addition,
plaintiffs' defamation cla im was broughL after the one yeur statute of limilutions for such claims
in New York. see N.Y.C.P.L.R. 215(3} (McKinney 2006) and after tl1e two yeur statute of
limitations for such claims in Flt>rido, see Flo. SI.at. Ann.§ 95.11(g) (West 2013).
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Plaintiffs' punith·e damages claims must also be dismissed because they have
failed to allege the fncts necessary to support this damages theory. See Ray u. Park View
Nursing Home, Inc.. 692 N.Y.S.2d 686. 689 {N.Y. App. Div. 1999); Cook u. De/tone,, 753 F.2d
1552, 1563(11th Cir. 1985).

Slander of Titl e (Claim Ten). To pre,·ail on a claim of slander of title,

plaintiff must plead that t here has been (1) a communication falsely casting doubt on validity of
plaintiffs title, (2) Lhc communication was rcusonnbly calculated to cause harm , and (3) the
communication caused special damages. 39 Ctillc{Je Poi11t Corp. u. Tra11spac Capital Corp., 810
N.Y.S.2d 520,521 {N.Y. App. Div. 2006). Plaintiffs have not adequately ollcgcd the second and
third elements of the cu use of action. Additionally, 1,luintiffs have failed to nllugc (as they musl)
thnt defendants' actions have caused a prospective sole to be lost "because of the cloud on
plaintiffs title." See Hanbidge u. Hunt, 583 N.Y.S.2d 288,289 {N.Y. App. Div. 1992).

Negligence (Claim Eleven). Pl:1intiffs'ncgligcnceclaim should be dismissed

under the ceonomic loss rule and because the rclntionship between the parties "docs not give
rise to a duty independent of the contractual rclutionship." Abc,cus Federal Saui11gs Bank u.
AD1'Scc. Servs .. fnc., 967 N.E.2d 666, 684-85 (N,Y. 2012); C/ark-Pitzpatrick. lnc. u. Long
ls/and R. Co., 516 N.E.2d 190, 193-94 (N.Y. 1987); Eye Care lnter11., Inc, u. U11dcrliill, 92 F.
Supp. 2d 1310, 1315 (M.D. Fin. 2000).

RJCO (Cl ai m Twelve). Plaintiffs' !UCO claim foils, among other reasons,
because:

• The amended complaint does not allege u IUCO "person" distinct from the alleged
"enterprise.· Reed Const. Dain fnc. u. McGraw-Hill Co., 745 F. Supp. 2d 343,350
{S. D.N .Y. 2010). A subsidiary "cannot be considered distinct from the parent
corporaliun." Tri, Although plaintiff~• amended com plaint alleges that plaintiffs and
homeowners ore !l)U rt of Lhc alleged ente rprise, il docs not adequately allege that tliose
entities arc port of the enterprise under U.S. u. 1'urkelte, 452 U.S. 576 (1981).

• Plaintiffs ha\'C not adequately alleged the scicotcr element of mail and wire fraud. At
most they nllegc negligence, not specific intent to defraud. 111 addition, plaintiffs have
not adequately alleged mail or wire fraud with the specificity required by Ruic 9(b).

• Plaintiffs hn\'e not adequate.I)• asserted thnt the alleged RICO enterprise proximately
caused their nllcged damages. See f-lemi Group. LLC u. City ofNew York, 559 U:S. 9
(2010).

N ..J. Consumer Fraud Act (Clnim Thirteen). New ,Jersey low does no t
apply to plaintiffs' consumer protection clnims. 0cc.ouse these clnims sound in tort, Florida law
would apply. See 111 1·c Grand 'f1ieft Auto Vide,, Came Consumer Litig. , 251 F.R.D. 139, 148
(S.D.N.Y. 2008). In oddition, plaintiffs have not adequately alleged th<? clements of a New
,Jersey Consumer Fraud Act claim.
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April 7, 2015
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rn. Schedule
Chase anticipates asking the cou rt to defer the April 24 conference until the
motion to t l'ansfcr is decided.

Chase also anticipates seeking a motion to dismiss briefing schedule providing

that the molion lo transfer would be briefed first nnd that Chase's motion to dismiss would be
due within 30 days after a decision on 1hc motion to transfer.

Please let us know when you if you nre available to meet and confer regarding this
letter on April 8 at 4:30 p.m. If not please propose on alternative time.

Sincerely,

/s/ Robert D. Wick