Case 1:15-cv-00293-LTS Document 29 Filed 04/17/15 Page 1 of 1

.
PeRKINSCOle 30 Rockefeller Plaza
22nd rtoor
0 ~1212262.6900
G ~12129771649
New York. NY 10112-0085 perk1nsco1ecom

Gary F. Eisenberg
PHONE (2 I 2) 262-6902
FA X (212) 977-1632
EMAIL GEiscnbcrg@pcrk inscoic.com

Apri l 17, 2015

BYE-FILING AND BY FACSIMILE: (212) 805-0426

The Honorable Laura Taylor Swain , U.S.D.J.

United States District Cou11
Southern District of New York
Daniel Patrick Moynihan Courtho use
500 Pearl Street
New York, NY 10007-1 3 12

Re: Mortgage Resolution Servicing, LLC v. JPMorgan Chase Bank, N.A.,

Civil Action No. 15CV293-LTS-JCF

Dear Judge Swain:

Pursuant to Paragraph 7 of the Court's Initial Conference Order filed on January 22, 2015
(Docket No. 6), counsel for the parties in this action have prepared the enc losed Preliminary Pre-
Trial Statement, w hich we are filing e lectronical ly with the Court's electron ic docket. A
courtesy copy of the Statement is enclosed herewith for Chambers.

We look forward to a ppearing before the Court at the conference scheduled by the Court for next
Friday, April 24, 20 15 at 9:30 a.m.

Respectfully submitted,

~ s: b~ ~/cU--
cc: Robert Wick, Esq.
M ichae l Maya, Esq. (each by email w/ enclosure)

LEGAL 125689642.1
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 1 of 30

UNITED STA TES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK
· · ······· · ··· ······················· ·· ·X
Mortgage Resolution Servicing, LLC; Ist Fidelity Loan :
Servicing, LLC, and S&A Capital Partners, Inc., : No. l 5-CV-293-LTS-JCF

Plaintiffs,
PRELIMINARY PRE-TRIAL
-againsl- STATEMENT

JPMorgan Chase Bank, N.A., Chase Home Finance

LLC, and JPMorgan Chase & Co.,

Defendants.

• • • • • • • • • • • • • • • • • • • • • • • • • • • - • • •••• •••• ·X

Pursuant to this Court's January 22, 20 15 Initial Conference Order, Plaintiffs Mortgage

Resolution Servicing, LLC ("MRS"), Ist Fidelity Loan Servicing, LLC ( Ist Fidelity"), and S&A

Capital Partners, Inc. ("S&A") (collectively, "Plaintiffs" or the ""Schneider Entities") and

Defendants JPMorgan Chase Bank, N.A. ("Chase"). JPMorgan Chase & Co., and Chase Home

Finance LLC, file this Preliminary Pre-Trial Statement. Pursuant 10 the Initial Co11ference Order

and Fed. R. Civ. P. 26(1), Plaintiffs and Defendants conferred via telephone on April 6, 2015 and

subsequently prepared this report.

The pre-trial conference in this mancr is scheduled for April 24. 2015 at I0: 15 a.m. in

Courtroom 12D, 500 Pearl Street, New York. New York 10007.

a. Statement of the Nature or the Action

This is an action commenced by the Schneider Enti ties, who arc in the residenti al

mortgage loan purchasing business. The named defendan ts arc a national bank (.JPMorgan

Chase Bank, N.A.), a former operating subsidiary of the bank that has since been merged into the

bank (Chase Home Finance LLC), and a bank holding company that owns the defendant bank

(JPMorgan Chase & Co.).

OC: 5678799•1
W GAL 125689258.4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 2 of 30

I. Plaintiffs· summary of the nature of the action.

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

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

from Chase commencing in 2005. The aggregate principal amount of the loans and pools

purchased by the Schneider Entities from Chase over time is in excess of $250,000,000 (acqui red

at varying rates of discount 10 principal over time). Federally related mortgages are subject to

review and oversight by federa l regulators. The Complaint alleges a panem of wrongdoing by

Defendants over a period of more than a decade and a half as part of a systemic clrort 10 evade

numerous legal obligations governing federally related first and second lien mortgage loans.

Chase's alleged wrongdoing includes an ongoing pa11em of fraudulent and wrongful

conduct, including, inter a/ia, fraud , breaches of contract and tortious interference with the

contractual 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 law liability, Plaintiffs assen that Chase's

pallem of conduc t constitutes the conduct of an enterprise's affairs through a ·'pattern of

racketeering activity" within the meaning of" RICO, 18 U.S.C. § 1961 (S), in violati on of RICO.

18 U.S.C. § I962(c). Plaintiffs have alleged tl1a1 the pallem of racketeering activi ty is part of a

scheme by Derendants to evade their legal obligations and liabilities wi th respect 10 (a) the

proper servicing of redera.lly related mortgages and (b) requi rements under federal law and

imposed pursuant 10 multiple consent orders, settlements and agreements into which one or more

of the Defendants have entered with various branches of federal and state governments (the

.. Lender Set1lemen1s"). Plainti ffs further allege that, as part of that scheme, Defendants have

2
Ll!GAl.125689258 .1
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 3 of 30

acted to conceal their violations of federal law, including breaches of one or more Lender

Sclllements, and other legal obligations and to pass on liability for those violations Lo Plaintiffs.

Plaintiffs have further alleged that. Lo accomplish th is concealment and imposition of

liabilities upon Plaintiffs. Defendants have improperly established a second set of books (Lhe

"RCV I," "RCV I database," or "RC\/ I SOR"), utilized by a division nol associated with the

servicing of mortgage loans, LO perpetrate this concealment. Plaintiffs have alleged that this use

of the RC\/ I database has led to accumulating violations of laws relating 10 federally related first

and second lien mortgage loans and pools of such loans. Plaimiffs further allege that, over a

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

relating to the RCV I database, Defendants have fonnulated an ongoing scheme Lo impose certain

liabilities upon Plaintiffs in order to deflect them from Defendants. To th is end, Defendants

have, among other things: (I) used Plaintiffs as '·scapegoats•· for --dumping" pools of 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 agreements with Plaintiffs; (2)

utilized Lhe RCV 1 database to evade obligations under one or more Lender Sc11leme111s; (3)

commined torls repeatedly by interfering wi th the Plainli ffs' management and servicing of Lhe

loans they pmchascd and by collecting paymc111s and insurance proceeds on loans sold lo

Plaintiffs,; and (4) improperly notified certain bon·owcrs whose loans Chase had sold 10 the

Schneider Enti ties that the loans had been forgiven, and recorded numerous releases of liens

from other borrowers whose loans Chase had sold LO the Schneider Entities. The lien releases

were part of Defendants' --Pre DO.I Lien Release Project'' and directed purposefully al retaliating

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

3
LEGA!.125689258.4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 4 of 30

Complaint") (partially unsealed on or about November I, 20 13) 1 as relator against Chase

alleging the fil ing of false claims in derogati on of certain obligations under the National

Mortgage Settlemen t Agreement.

Plaintiffs have alleged that they have suffered substanti al damages, including deprivation

of the bcnc11t of the batgain of the value of the loans had Chase not breached ils contractual

duties and committed torts, damages incurred on an ongoing basis because of govemmental

actions to seek to hold Plaintiff liable for the consequences of Chase's wrongful acts, destn1ction

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

Chase), consequential and punitive damages.

11. Defendants' summary of the nature of the action.

Plaintiffs assert both (I) business tort and breach of contract claims alleged ly arising out

of arms-length commercial dealings between the parties with respect to cc11ain non-performing

mortgage loans that plaintiffs acquired from Chase and (2) RICO , fraud, and other tort claims

based on Chase's alleged attempts to evade and circumvent its obligations to the federal

government under the Lender Setllcments and fedenil law.

Plaimiffs' allegations in this act ion - in particular the allegations relating 10 the Lender

Selllcmcnls, Chase's Recovery One system of record, and Chase' s alleged evasion of its

obliga:ions to the fede ral government - create a substantial overlap between this action and the

False Claims Act action (FCA action) pending in the United States Dis1ric1 Court for the District

of Columbia.2 Furthermore, 1hc judge presiding over the FCA action - Judge Rosemary M .

1 Tha1 comp1afot \\18S filed on May 6, 20 13 and entitled Unite.ti Suire of 1imericll el al. u.r rel. Laurence St.:lweider v.
J.P. M1>rgan Chase Bank. National Association et al., CIA: 3:13- t223-JFA (1he ··FCA Action"). The panial
unsealing was made wi1h consen1 of Mr. Schneider's ac1ing counsel in 1hc District of Sou1h Carolina at 1he lime bu1
Mr. Schneider himself did 1101au1horize or conscn1 to 1ha1 panial unsealing.
'Throughou11his Preliminary Pre-trial Sia1emenl, Chase bases ils discussion of1he FCA action solely on 1hc
unsealed version of the FCA complai111 referenced in subparagraph b below, no11hc scaled, amended version of1ha1
complaint.

4
1.EGAl.12568925S.4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 5 of 30

Collyer - is 1he same judge who presided over entry of the Lender Seulemenl consent decrees

thal are the focus of many or the allegations in this aclion. Chase respectfu ll y submi1s 1ha1 !his

ac1ion should be transferred to the Dis1ric1 of Columbia so that discovery in the two actions may

be coordina1ed before Judge Coll yer.

With respect co the merits of plninti ITs' all egations, Chase denies that it has breached or

evaded any of its obligations under federal law or the Lender Settlements. den ies concealing any

material fac1s from governmental authorities, and avers thal the court-appointed Monitor

overseeing the Lender Settlements has found that Chase fully complied wi lh its Settlement.

With respect to Chase' s dealings wi th plaintiffs specifically, Chase likewise denies any

wrongdo ing. Plaintiff MRS acq uired ecnain distressed mortgage loans from Chase Home

Finance LLC. Alt hough the balance due on the loans in question exceeded one hundred and fifty

mill ion dollars ($150,000,000), MRS paid only S200,000 for the loans - less lhan one cent on 1he

dollar. Consistent with the low price il paid for the loans, MRS agreed in writing that, with

limited exceptions. it was acquiring the loans "AS IS" after an adequate opponunity to conduct

due diligence. Nevertheless, when MRS grew dissaLisficd with the qual ily or the loans and the

records its received from Chase, plaintiffs and !heir principal, Laurence Schneider, fi led 1his

action and the related FCA action. Bolh this action and the FCA ac1ion are based on false and

in0ammatory allegations that appear 10 be calculated 10 pressure Chase into repurchasing the

loans al issue for a wind foll price in excess of the $150,000,000 face va lue of the loans. See

Com plaint -~ 6, 67.

5
Lf:0ALl2 S689258 -I
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 6 of 30

b. Pending Related Criminal or Civil Actio ns

1. Chase 's View.

This action is related to the FCA action that plainti ffs' owner and opera1or is pursu ing in

the Uni ted Stales Dislri cl Court for the District or Columbia. See Compl., U11iled Srares ex rel.

Schneider v. J PMorgan Chase Bank. N. A., No. 1:14-cv-01047-RMC (D.D.C. May 6, 2013)

(··FCA Campi."); see also Order, Uni1ed Simes ex rel. Schneider v. .JPMorgan Chase Bank. N.A ..

No. l: 14-cv-01047-RMC (D.D.C. Nov. 17, 20 14) (pcm1itting filing of an amended complainl

under seal). 3

The operative compl aim in Lhe FCA ac1ion is currentl y subject to a sealing order that

prohibils Chase from describing that complaint. Several areas of substantial overlap between

this action and U1c FCA action arc apparelll, however, from an earlier. unscaled complai nt (U1c

"'FCA Compl.") in that action. These areas of overl ap incl ude plainti ffs' allegations that Chase

conspired and schemed to evade its obligations under federal law and the Lender Settlements.

As is clear from the summaries of the action se1 forth in subparagraph a of this Statement, these

allegati ons play a prominent role in both the origi nal, unscaled FCA compl aint and in the

operative complaim in th is action. A molion has been filed in the FCA action to permit the

unsealing of lhe currently scaled complaint. As soon as that moti on is gramed, Chase wi ll

provide this Court with a copy of the amended FCA complaim and wi ll supplemem its

discussion of the related case issue

Chase plans to file a motion 10 transfer this action 10 the Uni ted States District Court for

the District of Columbia under 28 U.S.C. § 1404(a) after obtai ning relief from the sealing order.

Chase's motion should be granted because Judge Collyer, the judge presiding over the Lender

' The FCA ac1ion was originally filed in the United States DiSlfitt Coun for the Dis1ric1 of South Carolina. h wus
transferred nt Schneider's request 10 the Distric1 of Columbia on June 19, 2014 . Se• Order, United Stc,tes ex rel.
Schneider v. Jl'Morg(lli Chhse Bank. N.A., No. I:14-cv-01047-RMC (D.D.C. June 19, 20 14).

6
L~O AL 125689258.4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 7 of 30

Seulement consent decrees, has extensive experience with, and exclusive jurisdicti on over, those

decrees. Chase's motion also should be granted to avoid the waste or judicial and pa11y

resources that will occur if two heavily overlapping actions proceed in two di fferenl courts under

two different discovery schedules.

To avoid the prospect of duplicative discovery and <luplicmive judicial determinations by

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

until this Court rules on its motion to transfer.

ii. Plainti ffs ' view.

Plaintiffs do not agree that this case is related to the FCA action. Fu rther, given the

pending sealing order. Plaimills do not believe that Chase is permiued to rclcr to the scaled

complaint 's pcndency as a basis for asserting a relationship of the FCA action to this action.

Plaintiffs are reviewing the recent!)' filed unseal ing motion to determine what their response to

that motion will be. To the extent that unseal ing occurs, Plainti ff will supplement its discussion

as 10 the limited relationship between the FCA action and this action.

In any event, under the FCA Campi.. the United States of America is the plaintiff,

through Mr. Schneider individually as the relator. That means that the United States has the right

to control the investigation it is making or the complaint's allegations. the degree to which any

unsealing of the scaled complaint occurs and indeed whether to pursue the FCA action at all. In

addition, the FCA action is an asscnion of damages done to the United States. None of those

factors pcnc1ins 10 the case that the Schneider Entities (nnd nol Mr. Schneider individually) fi led

against Chase that Chase has removed to this Court.

Further. the action pending before this Coun is not one brought to enforce the Lender

Settlements. The causes of action that Plaintiffs have asserted arise ou t of transactions between

7
l£GALl2568112;S.4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 8 of 30

Chase and PlainliITs. The damages 1ha1 Plain1iffs alleged in this action are damages that

Plaintiffs have suffered, 1101 that the United S1a1es bas suffered. Plainti ffs' causes of action are

independent of the FCA action and this action is properly venued in New York. Whi le certain

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

obligations under the Lender Sc1tlcmen1s arc relevant to demonstrate motive, intent and a panern

of wrongful conduct by Chase 1hm Plaintiffs alleged has damaged Plaintiffs, the plaintiffs in the

two actions arc different, as arc the damages and the very party with standing lo pursue each

action.

Chase may have polilical influence with the United States that may aflcct the FCA

action. Whether or 1101 that is lhe case, Chase should have no right to use political influence lo

affect a private civil action between priva1e actors. ll would be grossly unfair to wrap the

Schneider Entities' action in lhis Court into lhe FCA action, when the pace of the two actions

proceeding will be different in each case. Thus, there is li11le or no cfliciency 10 be gained by

transferring this case to Washington D.C. For this and other reasons, Plaintiffs intend lo oppose

Chase' s motion 10 transfer.

c. Statement of Each P arty's Positi on as lo the Basis of this Court's Juris diction

The parti es agree 1ha1 this Court has jurisdiction over this action pursuanl to 28 U.S.C.

§ I331 (federal question jurisdiction), 28 U.S.C. § 1332 (diversity jurisdiction), and I8 U.S.C.

§ I964(c) (RlCO). With respect lo federal question and RICO jurisdiction, Plaintiffs have

asserted a RICO claim under I8 U.S.C. § I962(c). See Complaint ~ 240-50. Wi th respect lo

diversity jurisdiction, the plaintiffs arc ci tizens of Florida, see id. ~ 7-9, the defendants arc

citizens of Delaware, New York, and Ohio, see Notice of Removal al 2 n. l , and Plaintiffs seek

more than $156 million in damages, see Complaint ~ii 6, 67.

8
LEGAi.i 25689258.,
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 9 of 30

d. Statement or All Material Uncontested or Ad mitted Facts

Plaintiffs have alleged what they believe to be the material facts in their Second

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

progress has been limited by the lact 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 anticipa tes that it ,,~II admit that the parties had arms-
length commercial dealings wi th each other and will deny all allegations or wrongdoing in the

complaint.

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

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

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

2015 10 answer or otherwise move in response 10 the Complaint. Chase plans lo respond by

moving to transfer and to dismiss. Plaintiff plans to oppose both motions.

c. Statement of All Unco ntes ted Legal Issues

The parties incorporate by reference the information sel forth in subparagraphs d. f and g

of this Repori, which frame the legal and factual issues requiring decision to the best of the

parties' present ability. The parties further advise the Court that they are not aware of material

uncontested legal allegations at this time other than allegations relating 10 subject matter

jurisdiction.

f. Statement of All Legal Issues to be Decided by the Co urt

Without waiving any rights, claims. or defenses, including with respect to the proper

articu lation of the clements or plaintiffs' causes of action. Chase, as defendant, based on its

in itial review or the Complaint, has identified the following legal issues that may requi re

decision by the Cmn1:

9
L.E0ALl 2S6892SS,J
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 10 of 30

• Breach of Contract (Claim One): Whether Chase failed lo deli ver loans that

sati sfied the requirements of the alleged contract and whether a valid purchase

agreement was fom1cd.

• Promisso r v Estoppcl (Claim Two). Whether plaintiffs can use the promissory

cstoppcl doctrine to vary the terms of a wrillen agreement, whether C hase made a

specific and definite promise 1hal it breached, and whether plainti ffs detrimentally

relied on such a prom ise and sullcrcd unconscionable injury as a resu IL

• Conversion (Claim Three). Whether plaintiffs' conversion claim is duplicative

of their breach of contract claim, whether a conversion claim will lie if no

phys ical properly was converted, and whether plainti ffs have plcd the elements of

conversion.

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

dismissed because plainti ffs and defendants were not competitors. but were in a

vertical business relationship, and whether an unfair competition claim lies

outside the contex t of trademark infringement.

• Unjust Enrichm ent (Claim Five). Whether this claim is duplicative of

plainti ffs• breach of contract claim, and whether plainti ffs have adequately

alleged that Chase was enriched ·'unjustly.'·

• Tortiou s I nterference with Contractual Relations (Claim Six). Whether

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

breach of contract wi thout justification. whether an actual breach of contract

occurred, and whether damages resulted therefrom.

• Fraud and Fraudulent Omiss ion (Claim Seve n). Whether 'this claim is

10
LEGAi.i 25689258.4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 11 of 30

duplica1ive of plaintiffs' breach of con1rac1 claim. whe1hcr lhe claim has been

pied wilh the specilicity required by Rule 9(b). and, wi1h respect 10 the fraudulcn1

omi ssion component of the claim, whether Chase owed a fiduciary duty lO

plaintiffs.

• Negligent Misrepresentation (C J;iim Eight). Whether 1his c laim is duplica1ive

of plaintiffs' breach of contract claim, and whether plaintiffs have alleged the

exis1ence of a specia l relationship of trust be1ween 1he parties 1ha1 cou ld suppon a

claim of negligent m isreprescn1a1ion.

• Defamation {Claim Nin e). Whether plaintiffs have adequa1ely iden1ified a false

statement regarding plaintiffs thal Chase published lhat caused plaintifls special

harm. whelher this claim is barred by the applicable s1atute of limitations, and

whelher plain1iffs have alleged lhc lactS necessary lo supporl punitive damages.

• Sland er of Title (C laim T en). Whether plainlirfs have adequately alleged the

exis1encc of a commun ication reasonably calcula1ed lO cause harm. that plainliffs

suffered specia l damages, or that Chase's aclions caused a prospective sale 10 be

10s1 because of a cloud on plaintills' ti lie.

• Negligence {Claim Eleven). Whe1her 1his claim should be dismissed under the

economic loss ru le or because the relationship between 1he parties did 1101 give

rise lo a duty independent o r their contractual relai ionship.

• RICO (C laim Twelve). Whether the Complaini adequately alleges a RICO

.. person .. distinct from the alleged ·•enlerprise," whelher plainti ffs have adequalely

alleged 1he scienler eleme111 of ma il and wire fraud with the spcci Ii city under Rule

9(b), and whelher plaintiffs' allegaiions arc sul'liciem to show that 1he alleged

11
U!OA~l2S6892S8.-I
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 12 of 30

RICO emerprise proximately caused their alleged damages.

• N.,J. Consumer Fraud Act {Claim Thirteen). Whether New Jersey law applies

under the applicable choice of law rules, and whether plaintiffs have adequately

alleged the elements of this cause of action.

To extent Chase raises these legal issues, whether by motion to dismiss or otherwise,

Plaintiffs agree that they will constilllle contested legal issues that will require the Court's

determination. To the extent that Chase asserts other contested legal issues in addi tion 10 the

ones it sets forth above, those other issues wi ll consti tute legal issues that will require the Court's

detennination. Plainti!Ts reserve the right lO respond, refute and rebut any legal issue that Chase

may contest but at this stage is only aware of the contested legal issues that Chase has set forth

above.

g. Each Party's Statement· of Materi al Disputed Facts

The parties dispute all material allegations of wrongdoing in this action, including but not

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

Lender Settlements or under federal law, (2) whether Chase concealed its Recovery One system

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

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

whether Chase claimed credit under the Lender Settlemems for releasing liens owned by

plainti!Ts. (6) whether Chase materially interfered with the relationship between plaintiffs and the

relevant borrowers on loans ucqu ired by plaintiffs, (7) whether Chase's alleged misconduct

injured Plaintiffs, and (8) such other disputed matters as may emerge from discovery. motions

practice, or Chase's answer.

h. Schneider Enti ties' Statement of the Legal Basis of Each Cause of Actio n Asserted

1. Breach of Contract

12
1£0Al.12S68925S.a
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 13 of 30

Under New York law, the essential elements ror a claim of breach of contract are (I) the

existence of a contract; (2) the plaintiff's performance under the comract; (3) the defondanrs

breach or that contract; and (4) resulting damages. See JP Morgan Chase v. J.H. Elec. of Ne111

York. Inc., 69 A.D.3d 802, 803,893 N.Y.S.2d 237. 239 (2010); 511 W. 232nd Owners Corp. v.

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

Lhal Defendants breached their warranties and obligations 10 PlaintifTMRS w1der the MLPA, and

also breached the implied covenant of good faith and fair dealing that exists in the MLPA.

thereby causing damages to Plaintiffs.

ii. Promissorv Estoppcl

To state a claim for promissory csloppcl, a party must allege (I) a clear and unambiguous

promise made by the defendan t, (2) plainLirrs reasonable reliance upon defendant's promise, and

(3) resulting injury. See ll1fa v. Zamir, 55 A.D.3d 508, 509, 869 N.Y.S.2d 390, 391 (2008). The

Complaint alleges that Defendants arc liable for promissory cstoppel as a result of their promise

to deliver a materially complete Exhibit A to Plaintiffs.

111 . Conversion

The clemen ts of conversion arc ( I) plainti fl's possessory right or inlcrcsl in the property

and (2) derendant' s dominion over the property or interference with it. in derogation of plainti ff's

rights. Colavilo v. Ne111 York Organ Donor Ne/work. Inc., 8 N.Y.3cl 43, 50, 860 N.E.2d 713

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

among other th ings, Defendants presenting themselves as the valid lienholders for loans sold 10

PlaintifTs, collecting payments on previously sold loans. and releasing liens on sold loans.

iv. Unfair Competition

The tort of unfa ir competition is "broad and flexible," and encompasses a wide range of

13
LE0ALl25689258.4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 14 of 30

conduct, but the ·'essence or the claim is 1hai the defendant has misappropriated the labors and

expenditures of another" in bad faith for its own commercial advantage. Laser Diode Array. Inc.

v. Paradigm Lasers, Inc., 964 F. Supp. 90, 95 (W.D.N. Y. 1997) (internal quotations and citations

omi11cd). The Complaint alleges that Defendants arc liable to Plaintiffs for 1hc tort of unfair

co111pe1i1ion because by sending and record ing lien releases for loans sold 10 Plain1itls,

Defendants have unfai rly misappropriated Plaintiffs' properly and have represented 10 bon-owers

and the public that Defendants are the valid licnholders and arc entitled to release liens that

actually belong 10 Plaintiffs.

V. Unjust Enrichment

··Under New York law. the basic clements of an unj ust enrichment claim arc: •I)

defendant was enriched; 2) such enrichment was al the expense of the plaintiff; and 3) 1he

circumstances were such that in equity and good conscience the defendant should make

restitution."' Finkelstein v. Mardkha, 495 F. Supp. 2d 329, 344 (S.D.N. Y. 2007) (quoting Chase

i\tfanha11cm Bank v. Banque Intra, S.A .. 274 F.Supp. 496. 499 (S.D.N.Y. 1967). The Complaint

alleges that Defendants were unjustly enriched at Plaintiffs' expense because Defcndants have

received benefits related 10 loans sold 10 Plaintiffs and (ailed 10 satisfy liabilities that were

saddled upon Plaintiffs as a resull of Defendants' conduct.

VI. Tortious lnterlerence with Contractual Relations

·'The elements of tonious interference wi th contractual relations are ( I) the existence of a

contract between 1he plaintiff and a 1hird party, (2) 1he defendant's knowledge or the contract. (3)

the defendant's intentional inducement of the third party to breach or oLherwise render

perfom1ancc impossible, and (4) damages to the plaintiff." Bc,yside Carting. Inc. 11. Chic

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

14
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 15 of 30

Defendants are liable for tortious interference with contractual relations as a result or Defendants

releasing liens on loans sold lO Plaintiffs, wrongly notifYing bon·owers that their loans had been

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

owners of certain loans sold to Plaintiffs.

vii. Fraud and Fraudulent Omission

Under New York law, the clements of fraud are "(I) a misrepresentation or omission of

material fact; (2) made deliberately or knowingly (with scienter); (3) with the intent to defraud;

(4) reasonable reliance on the representation; and (5) pecuniary damages or loss.'' M & T

Mortgage Corp. v. White, 736 F. Supp. 2d 538, 560-6 1 (E.D.N. Y. 20 10). To prevail on a claim

for fraudulent omission. a plaintiff must also show that the defendant was under a duty to

disclose the material information. P.T. Bank Ce111. Asia v. ABN AMRO Bank N.V., 301 A.D.2d

373,376, 754 N.Y.S.2d 245. 250 (2003). That du ty can arise where "the party to be charged has

superior knowledge or means or knowledge, such that the transaction without disclosure is

rendered in11crently unfair." Miele v. Am. Tobacco Co.. 2 A.D.3d 799, 803, 770 N.Y.S.2d 386,

391 (2003). The Complaint alleges that Defendants are liable to Plaintiffs for fraud and

fraudu lent omission for false representations and omissions made during the negotiation and

execution of the MLPA. The Complaint has set forth false representations and the intentional

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

assertions contai ned in the first 149 paragraphs of the Complaint.

v111. Negligent Misrepresentation

A claim for negligent misrepresentation requires the plaintiff to demonstrate (I) the

existence of a special relationship imposing a duty on the defendant to impart correct information

lo the plaintiff; (2) that the inl'ormaii on was incorrect: and (3) reasonable reliance on the

15
L~GAl.12S6892S8.4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 16 of 30

infonnation. Abu Dhabi Commercial Bank 11. 1\lforgan S1anley & Co. Inc., 9 10 F. Supp. 2d 543,

546 (S.D.N. Y. 2012). Courts have found a special relationship and duty ''where defendants

sought to induce plaintiffs into a business transaction by making certain statements or providing

specific infonnation with the intent that plaintiffs rely on those statements or information." id., or

where persons possess unique or specialized expertise or arc in a special posi tion of confidence

and trust, Kimmell v. Schaefer, 89 N.Y.2d 257,263,675 N.E.2d 450,454 (1996), or where '"the

party 10 be charged has superior knowledge or means of knowledge, such that the transaction

without disclosure is rendered inherently unfoir." Miele, 2 i\.D.3d at 803. 770 N.Y.S.2d at 391.

The Complaint alleges that Defendants arc liable for negligent misrepresentation related to

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

MRS trndcr the MLPA and Defendants' pervasive violations or federal, state and local consumer

protection and loan servicing laws in relation to those loans. As is Lhe case with PlaintiITs' fraud

and fi'audulent omission coun ts, Plaintiffs have set forth in the Complaint with specificity in

ample detail how Chase made a series of these misrepresentat ions and omissions.

ix. Defamation

The elements of a claim for defamation arc ( I) a raise statement, (2) pub lished without

privilege or authorization 10 a third party, (3) constituting fnuh as judged by. a minimum, a

negligence standard , and (4) the statement either causes special harm or constitutes defamation

per sc. Epifani v. Johnson, 65 A.D.3d 224, 233 (App. Div. 2d Dep't. 2009). In a commercial

context, a statement is defamatory per se when it " impugns the basic integrity or

creditworthiness o fa business." Celle 11. Filipino Reponer E111erprises, Inc.. 209 F.3d 163, 180

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

Inc. 11. Vang11(lrc/ Recording Soc'y, Inc. , 226 N.E.2d 542 (N. Y. 1967). The Complaint alleges

16
LEG,\LllH,1>'9258 ~
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 17 of 30

that Defendants arc liable lo Plainliffs for defamation relaling io Defe ndants· communications to

borr:>wers infonn ing borrowers that their debts had been cancelled or that Defendants owned

certain loans so ld lo Plaintiffs, or that Defendam's collection agencies were lhe auihorized agents

for service of lhose loans, as well as Dcfcndanls' recording of lien releases on properties sold to

Pl~intiffs. The Compl.iint furlher alleges 1ha1 1hese statements necessarily communicated to

bormwers, falsely, that the Schneider Entities, in lrying 10 collecl these dates, had been

wrongfully anempting to collect on debts lhal had been forgiven or on debts where Plainliffs had

no right lo collccl.

X. Slander of Title

The basic e lemenlS of a claim for slander of' lille are "( I) a communication falsely casling

doubt on the validity of complainant's title, (2) reasonably calcu lated lo cause ham,, and (3)

rcsulling in specia l damages.'· Kamat v. K11rtha, 2008 WL 5505880 at •9 (S.D.N. Y. Apr. 14,

2008). A communication is reasonably calculated to cause harm when made with ··a reck less

disregard for ils truth or falsily." Id. Special damages are economic or pecuniary loss, including

lost profits. Wolf St. Supermarkels. Inc. v. McParlla11d, 108 A.O.2d 25, 32,487 N.Y.S.2d 442,

448 (1985). The Complaint alleges thal Defendants have slandered Plaintiffs' tillc 10 the loans

that Plaintiffs purchased from Defendants by, among other things, (I} sending communications

l0 borrowers o f those loans falsely infonning 1he borrowers 1hat their dcbl had been cancelled,

(2) recording lien releases on loans sold to Plaintiffs, and (3) fa lsely informing borrowers lhat

Defendants own certain loans sold to Plnintiffs. The Complai n1 further alleges 1hat Defendants'

false stalemcnts were reasonably calculated to cause ham, to Plaintiffs because Defendants knew

thal lhey had conveyed interesl in these loans to Plaintiffs and thal Plaintiffs would be harmed by

statements suggesting thal Plainliffs did not in facl own the loans, because collecting the loans

17
LEGM.125689258.4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 18 of 30

would become more di flicuh.

XI. Negligence

"To establish a negligence cause of acti on. a plaintiff must dcmonsrrale ( I) Lhe existence

of a duly on the defendant 's part to the plaintiff; (2) a breach of that dury and (3) injury 10 the

plaintiff as a result thereof." Nttughrighr v. Weiss, 857 F. Supp. 2d 462, 472 (S.D.N.Y. 2012).

Couns have found a duty exis1s where persons possess unique or speciali zed expertise, or are in

a special position of confidence and trust with the injured pany. See Kimmell v. Schaefer. 89

N.Y.2d 257. 263,675 N.E.2d 450,454 ( 1996). The Complaint alleges that Dcfendams are liable

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

Plainti ffs purchased from Defendams falsely info1111ing the borrowers that their debt had been

cancelled, (2) recording lien releases on loans Defendants sold to Plaintiffs, and (3) falsely

infonning borrowers that Defendants own certain loans sold to Plaintiffs. Plaintiffs further

allege that Defendants owed a common-law duly or care 10 Plainli Ffs to exercise reasonable care

and skill in perforrning Defendants' eomract obligations. Plainti_ffs funher allege 1hat

Defendants owed a duty of care 10 Plaintiffs by virtue of being in a special position of confidence

and trusl on account of the long-standing business relationship between Pia inti ffs and Defendants

and Plaintiffs' dependence on Chase for the viability or Plainli ffs' business model. Plaintiffs

have alleged that they have suffered damages proximately caused by Defcndams' negligence.

XII. Civil RICO: I8 U.S.C. § I 962{c)

The elements ofa RICO claim under 18 U.S.C. § 1962(c) under are··( ]) conduct, (2) of

an enterprise, (3) through a paucm, (4) of racketeering ac1ivi1y.•· Sedima, S.P.R.L. v. /mrex Co. ,

473 U.S. 479, 496, ( 1985). The Complaint alleges that Defendants caused harm to Plaintiffs in

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

18
LEOAl. l 25689258A
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 19 of 30

Plaintiffs, Detcndants and homeowners. and using the enterprise to, among other things, further

Defendants' scheme to relieve themselves of their legal obligations and liabilities and to conceal

their improper receipt of credit under applicable laws and the Lender Seulements, by defrauding

Lhc Schneider Entities and making misrepresentations to homeowners. Defendants participated in

the enterprise through a pa11crn of mail fraud, wire fraud, and obstruction orjustiee that affected

interstate commerce. Pursuant to the Court's Scheduling Order, Plaintiffs previously submi t1ed a

detailed RICO state1111ent selling forth the details of the enterprise, predicate acts. pallern of

racketeering activity and damages. Plaintiffs respectfully refer the Court to the RICO statement

for a detailed statement of Plaintiffs' basis for asserting that Defendants arc liable to Plaintiffs

for RJCO violations.

x111. Consumer Fraud Act: N.J.S.A. § 56:8-1 ct seq.

To prove a claim under the Consumer Fraud Act, a plaintiff must show 1) unlawfu l

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

the unlawful conduc, and the ascc11ainable loss. Bos/and v. Wamock Dodge, Inc., 197 N.J. 543.

557, 964 A.2d 74 1, 749 (2009). The Complaint alleges that Defendants arc liable to Plaintiffs

for violations of the New Jersey Consumer Fraud Act by virtue or engaging in the sale or

advertisement or a11y merchandise or real estate through unlawful and unconscionable

commercial practices directed at consumers in New Jersey.

xiv. Successor Liabilitv

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

debts; (2) transactions undertaken to defraud creditors; (3) a buyer who de facto merged with a

seller; or (4) a buyer that is a mere continuation of a seller.'' Donald Deem & Sons. Inc. v.

Xonitek Sys. Corp.. 656 F. Supp. 2d J 14. 329 (N.D.N. Y. 2009). The Complaint alleges that JP

19
LEGAL1256S92S8.4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 20 of 30

Morgan Chase is liable for all damages to Plaintiffs caused by Chase 1-Iome Finance as a result of

the Defendants' merger.

i. Cbasc's Statement of the Legal Basis of Each Defense Asserted

Chase intends to move lo dismiss the Complaint on the grounds set forth in ihe

letter or April 7, 20 I5 from Robert D. Wick, counsel for Chase, to Gary F. Eisenberg, counsel

for plaintiffs, anached 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 material

allegations of the Complaint are false and that plaintiffs cannot meet their burden of proof on the

elements of thei r claims for rel ief as set forth in Exhibit A hereto and subparagraphs rand/or h

above.4

Chase reserves the right to assen additional defenses, including defcnscs on which

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

the defenses or ratification. estoppel, statute or limitations (see. e.g., N. Y.C.P.L.R. 2 I5(3): Fla.

Stat. Ann. § 95. 11(g)), Iaches, and failure to mi ti gate if discovery reveals that plaintiffs accepted

the loans that it now claims are non-co11fom1 ing, filed this lawsuit only after they became

dissatisfied in hindsight with their abili ty 10 collect on the loans at issue, failed to take

appropriate steps wi th respect to the loans, waited 100 long to file their claims, and/or that the

passage of time or plaintiffs' conduct has eroded the value of the loans at issue.

J· Statement of th e Mcas ur·c of Proof

Plainti lTs ordinari ly will bear the burden of proof on their claims, and Plaintiffs must

prove their claims by a preponderance of the evidence.

Defendants ordinarily will bear the burden or proof of any artim1ative defenses and must

'Chase docs not necessarily accept or endorse plaintiffs' statement ol'thc clcmenis of their claims or plaintiffs'
choice of law analysis with respect to Ll1cir claims.

20
LEOI\L 125689258.4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 21 of 30

prove such defenses by a preponderance of the evidence.

k. Amendments to Pleadin gs and/or Addi tion or Substi tution of Parties

Apart from Chase 's obliga1ion 10 answer if i1s motion 10 dismiss is denied, the parties do

not current ly anticipate amending the pleadings or add ing or substituti ng any parties. The parties

reserve the right 10 amend the plead ings and j oin additional pnrtics as discovery proceeds in

accordance with the Federal Ru les of Civil Procedure and 1he Local Rules.

I. Trial or the Case by a Mngistn1te J udge

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

m. Fed. R. Civ. P. 26(a) Disclosures

Initial disclosures have not yet been made. Plaintiffs prop()Se making such disclosures

within a week of the April 24, 20 15 conference. Chase proposes maki ng such disclosur~s within

fourteen days of a decision on its motion 10 translcr.

n. Discove ry
Plai ntiffs contend that it would be el1icien1 to begin discovery shon ly, notwi thstanding

any motion to dismiss that Chase may lile.

Chase contends that discovery should be coordinated with discovery in the FCA action

because the two cases will involve overlapping discovery if they proceed beyond motions l0

dismiss. For 1hal reason, Chase respectfully suggests that discovery should be deferred unti l a

ruling on its motion to transfer. Plaintiffs disagree that discovery in th is ae1ion should be stayed

for the reasons set forth in subparagraph b above.

The par1ies propose that 1he fact discovery cu1off be set nine months after ihe date of a

ruling on Chase' s anticipated motion to transfer.

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

dismiss stage include (i) the parties' communica1ions and dealings with each other respect to the

21
LEOAL l2 S6S9l58 4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 22 of 30

non-performing mortgage loans at 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 Seulcments, (iv) plaintiffs' allegations that Chase

breached or evaded its obligations under the Lender Settlements and/or under federal law as

alleged in the Complaint, (v) the alleged defamatory statements that the Complaint attributes to

Chase, and (vi) the damages allegedly suffered by plaintiffs. The parties reserve the right to

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

o. Expert Discovery
PlaintilTs anticipate that expert testimony may be presented on the issues of damages and

servicing standards. lf the case is not ended through motions practice, Defendants anticipate that

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

plaintiffs submit expert testimony.

Plaintiffs propose 1ha1 FRCP 26(a)(2)(D) apply 10 the timing of disclosure of any expert

opinions upon which a party wishes to rely at tria l, namely, that (i) experts should be disclosed in

an expert report at least 90 days before the date set for trial or for the case to be ready for trial; or

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

identified by another party under FRCP 26(a)(2)(B) or (C). with in 30 days a11er the other party's

disclosure. Fu rther, experts should be made available for depositions no later than 45 days

before trial. Other than as provided in FRCP 26(a)(2)(D), Plai111iff prnposes that the same

disclosure schedule apply 10 all panics.

Defendants propose that plaintifls' expert disclosures be due 90 days before the discovery

cutoff and that Chase's expert disclosures be due 45 days before the discovery cutoff.

Defendants respectl'ully submit that plaintiffs' expert disclosures should be made first because

22
LEGALl2S6892S8.4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 23 of 30

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

the claims and contentions to which they arc responding to before they can craft relevant expert

disclosures.

p. Lim itations on Dis covery

Plaintiffs propose that the lirnit or IO depositions per side be lifted to accommodate the

need to depose the numerous Chase employees involved in the creation and maintenance of the

poo l of loans sold to Plaintiffs; the creation of the RCVI database; the negotiati on and execution

of the MLPA; Chase' s subsequent refusal 10 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, includ ing its attempts to collect on sold loans. Chase's use of sold loans to evade

obligations created by, and claim credits under, ihc Lender Settlements; and other disputed

issues. Plaintiffs believe that deferral of discovery in this action to the schedu le of discovery in

the FCA action is unwarranted.

Defendants respecLfully submit tliat deposition discovery in this action should be deferred

and coordinated with deposi tions in the FCA action. which is likely to involve a large degree or

overlapping deposition discovery, especially if such discovery is as ,,~de-ranging as plaintiffs

contend that it should be. To the extent that this action is not transferred to the District of

Columbia and discovery goes forward in this Court, defendants submit that the presumptive limit

or IO depositions should not be Ii ~ed at this time. Rather, plaintiffs should move the Court for

relief From the limit once they have taken initial discovery and depositions pursuant to the

procedures or this Court.

q. Settlement

The parties engaged in pre-suit sc1tlcmcn1 discussions that did not result in a sen lemcnt.

The pai1ies do not have plans to discuss settlement at the current time, but do not rule out further

23
L£0AL1 25689258.4
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 24 of 30

discussions following motions practice and/or discovery.

r. Trial

Plaimiffs have requested a trial by jury. Defendants reserve their rights \\rith respect 10

whether plaintiffs arc enti tled to a jury trial. At this point, without the benefit of rulings on pre-

ITial motions or discovery, ii is premature 10 nn1icipotc how long it will take LO try the case, bul

plaintiffs anticipate that al least two weeks will be required. Chase anticipates that one week is

likely to be sufficient.

s. Other Cou rt Orders

·n,c parties anticipate that they will jointly propose an agreed protective order to govern

the use of any confidential documents produced in discovery. The parties do not currently

envision seeking any other orders under Federal Rules of Civi l Procedure 26(e), 16(b), or 16(c)

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

warrant.

24
LEOALl lS689258.~
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 25 of 30

Dated: April 17, 2015 PERKJNS COlE LLP

By:h/ Garv F. Eisenberg

Gary r-. Eisenberg, Esq.
30 Rockefeller Plaza
22nd Floor
New York, NY 101 12-0085
2 12.262.6900

Attomey for Plaintiffs

Dated: Apri l 17. 2015 COVINGTON & BURLING LLP

By:'"'
/s/' - - - - - -
Robcrt D. Wick. Esq.
One CityCentcr
850 Tenth Street, NW
Washington. DC 2000 I
202.662.6000

Auomey for Defendants

LEO,\L 125689258.-1
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 26 of 30

CO VI NGTON Co"lng:too S.· Burling 1.tP

One CJtyCenttr
ee,,1HO 11lV$ULS I.ONOON 44i'VI YOPI( 850 Tenth St~el, NW
OH DIIEGO SAN P~ANCISCO HOUL Washington, l)C 20001··1956
SHANGHAI SILICO ~ Y-'L Ll: Y WASHINCHO N T • I 202 6&2 6000

By Email April 7, 2015

Gary Frederick Eisenberg

Perkins Coic LLP
30 Rockefeller Plaza 22nd Floor
New York, l\'Y 10112
geisenberg@perkinscoie.com

Re: Mor·tgage Resolution Se1·uicing, LLC et al. u. JPMo,·gan

Chase Bank, N.A., et al., S .D.N.Y. Case No. 1:15-cv-293
(LTS)(JCF)

Dear Mr. Eisenberg:

I write on bchalr of JPMorgan Chase Bank, N.A., Chase Home Finance, LLC, and
JPM organ Chase & Co. pursuant to Part A.2.b(i)(A) of Judge Swain's ln<lividunl Prnctices Rules,
which requires the pa1t ies to exchange letters before a motion to dismiss is filed.

I. Motion to Ti-ansfer

As you know, Chase anticipates tiling a motion to transfer this action to the
United States District Court for the District of Columbia, where a related qui tam action, U.S., et
al. ex rel. Schneider u. J.P. Morgcm Chase Bank, et al., 1:14-cv-1047-RMC, is pending. Transfer
would serve the interests of justice because this case presents issues of fact and law that also are
presented in the qui tam action.
The interests of justice and efficiency would be served by coordinating the two
actions before a s ingle judge who has expertise and experience "~th the NMS and who could
adopt a discovery schedule that avoids piecemeal litigation and duplicative discovery.
Furthermore, Mr. Schneider contended in his motion to transfer his qui tam action to D.C. that
actions relating to the NMS "must" be heard in the cou rt that entered the NMS consent decree.

We understand that Plaintiffs will oppose this motion.

II. Motion to Dismiss

Chase intends to move to dismiss this action 0 11 grounds likely to include the
following, among others:
All common law claims. Plaintiffs' common law claims are defective because
plaintiffs do not identify which state's common law they seek to invoke and because one or more
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 27 of 30

COVINGTON

Gucy Eisenberg
April 7, 2015
Pagc2

claims are pleaded in a conclusory, bare-bones manner that does not satisfy the requirements of
Rule 8(a).
Breach o f Contract (Claim On e). The breach of contract claim should be
dismissed under the plain language of the contract, which states, among other things, that
M.R.S. has had an adequate opportunity to conduct due diligence and agrees to accept the loans
at issue "as is." Furthermore, the amended complaint does not clearly allege that a contract was
fonncd.
P r o missor y Estoppcl (Claim Two ) . Plaintiffs' promissory estoppel claim
should be dism issed because it is duplicative of plaintiffs' breach of contract claiJn, because
plaintiffs fail to al lege that Chase made a definite and specific promise which plaintiffs relied
upon, and because plaintiffs have not adequately alleged that the injury suffered was
unconscionable. See Grossman u. New York Life Ins. Co., 935 N.Y.S.2d 643,645 (N.Y. App.
Div. 2011) (prom issory cstoppel claims that arise out of the same subject matter as contract
claims are defective); Weaver 11. Town of No,.//1 Costle, 2015 WL 505219, al •4 (N .Y. Sup. Jan.
30, 2015) ("To establish promissory estoppel, a party must show it relied upon another's clear
and unambiguous promise"); Tome u. State Farm Fire and Cas. Co., 125 So. 3d 864,867 (Fla.
App. Dist. 2013) (to support a promissory estoppel claim, the promise must be "entirely definite
as to terms and time"); AHA Sales, Inc. u. Creative Bath Prods., Inc., 867 N.Y.S.2d 169,181
(N.Y. App. Div. 2008) ("[T]he doctrine or promissory cstoppel is limited to cases where the
prom isec suffered an 'unconscionable injury.'"); D111111 u. B&H Assocs., 743 N.Y.S.2d 546, 548
(N.Y. App. Div. 2002) (dismissal or promissory estoppcl claim proper when "plaintiff did not
proffer facts that wou ld support a finding that the failure to enforce Oalleged agreement would
resu lt in unconscionable injury").
Conver s io n (Ch1im T hree). Plaintiffs' claim for conversion should be
dismissed because it is based on the same focts as the breach of contract claim and because
plaintiffs have not adequately alleged the clements of conversion. Orok Edem u. Grcmdbeile
lntem., Inc., 988 N.Y.S.2d 244,245 (N.Y. App. Div. 2014); Belford Trucking Co. u. Zagar, 243
So. 2d 646, 648 (Fla. Dist. Ct. App. 1970) ("an action in tor t is inappropriate where the basis of
the suit is a contract, either express or implied").
U n fa ir Co mpetition (Claim Fo ur) . The complaint does not adequately
allege the elements of an unfair competition claim. Among other deficiencies, plaintiffs' claim
fails under New York law because plaintiffs allege to have been injured by defendants in their
capacity as plaintiffs' supplier, not as their competitor. See Roy Export' Co. Est. of Vaduz,
Liechtenstein u. Columbia Broadcasting Sys., Inc., 672 F.2d 1095, nos (2d Cir. 1982).
Plaintiffs' claims fail under Florida law because, to the extent that Florida law recognizes such a
cause of action, it does so only in connection with trademark infringement. Seel-Jar,· u. W. Fla.
Seafood, lnc., 521 So. 2d 349,351 (Fla. Dist. Ct. App. 1988).

Unjus t Enric hme nt (Claim Five). This claim should be d ismissed because it
is duplicative of plaintiffs' breach of conll·act claim, and because plaintiffs have not adequately
alleged that Chase was enriched "unjustly." Corsello u. Ve1·izo11 N.Y., Inc., 967 N.E.2d 1177, u85
(N.Y. 2012); Diamond "S" Deu. Corp. u. iV/ercantile Bank, 989 So. 2d 696,697 (Fla. Dist. Ct.
App. 2008).
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 28 of 30

COVINGTON

Gar,• Eisenberg
Ap1il 7, 2015
Page3

Tortious Interference with Contractual Relations (Claim Six). To make

out a claim for tort ious interference with contractual relntions, plaintiffs must allege: (1) the
existence of a valid contract between plaintiff and a third party, (2) defendant's knowledge of
that contract, (3) defendant's intentional procurement of Lhe th ird-party breach of contract
" ~thoutjustification, (4) actual breach of the contract, and (5) damages resulting therefrom.
Loma Holding Co. v. Smith Bamey, inc., 668 N.E.2d 1370, 1375 (N .Y. 1996); Chicago Title ins.
Co. v. Alday-Donalson Title Co. of Florida, Inc., 832 So. 2d 810, 8 14 (Fla. Dist. Ct. App. 2002).
Plaintiffs have not adequately alleged the third, fourth and fifth elements.

Fraud and Fraudulent Omission (Claim Seven). Plaintiffs' fraud claim

should be dismissed because it mcre.ly restates plaintiffs' breach of contract claim. First Bank of
the Am. v. Motor Car Funding, inc., 690 N.Y.S.2d 17, 20-21 (N.Y. App. Div. 1999). In addition,
plaintiffs have foiled adequately to allege fraudulent intent or to plead fraud with the specificity
required by Ruic 9(b). Finally, plaintiffs' fraud cla im fails because the damages alleged are no
different than those resulting from the alleged breach of contract. See To,·chlight Loan Servs.,
LLCu. Column Fin., Inc., No. 11 Civ. 7426 (RWS), 2012 WL3065929, at •9-10 (S.O.N.Y. July 25,
2012); J\rgonaut Dev. Group, Inc. v. SWH Funding Corp., 150 F. Supp. 2d 1357, 1363 (S.D. Fla.
2001).
Plaintiffs' fraudulent omission claim fai ls because it requ ires that the defendants
owe a fiduciary duly to plaintiffs. Mandarin "f)·ading, Ltd. v. Wilde11stei11 , 944 N.E.2d 1104,
1108 (N.Y. 2011). "[A) conventional business relationship, without more, does not become a
fiduciary relationship by mere allegation." K.M.L. Labs. Uc/. v. Hopper, 830 F. Supp. 159, 168
(E.D.N.Y. 1993).
Negligent Mis representation (Claim Eight). As with plaintiffs' fraud
claim, plaintiffs' negligent misrepresentation claim is precluded because "the only fraud charged
relates to a breach of contract." R.H. Damon & Co. v. Softkey Software Prods., file., Su F.
Supp. 986, 992 (S.D.N.Y. 1993). Plaintiffs' negligent misrepresentation claim also should be
dismissed because plaintiffs fail to allege the existence of a special relationship of trust apart
from "the trust and reliance between an ordinary buyer and seller," a necessary element of th is
claim. Silva Fun Worldwide, T.td. v. Gaming Lottery Corp., No. 96 CIV 3231 (RPP), 1998 WL
167330, al *n (S.D.N.Y. Apr. 8, 1998).
Defamation (Claim Nine). In order to make out a claim for defamation,
plaintiffs must allege that defendan ts (1) made a false statement, (2) published the statement
without privilege or authorization to a third party, and (3) that the statement caused special
harm or conslitutes defamation per se. Salvatore v. Kumar, 845 N.Y.S.2d 384,388 (N.Y. App.
Div. 2007); NITV, LLC v. Baker, 61 So. 3d 1249, 1252 (Fla. Dist. Ct. App. 2001). The alleged
false statement must be "of and concerning" plaintiff to qualify as defamation. Springer v.
Viking Press, 458 N.E.2d 1256, 1257 (N.Y. 1983). Plaintiffs have not identified a false statement
that defendants published regarding plaintiffs that caused them specia l harm. In addition,
plaintiffs' defamat ion claim was brought a~er the one year statu te of limitations for such e.laims
in New York, see N.Y.C.P.L.R. 215(3) (McKinney 2006) and after the two year statute of
limitations for such claims in Florida, see Fla. Slat. Ann. § 95. 11(g) (West 2013).
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 29 of 30

COVINGTON

Gary Eisenberg
April 7, 2015
l'agc4

Plaintiffs' !Punitive damages claims must also be dismissed because they have
failed to allege the facts n.ecessary to support this damages thco1y. See Rey u. Park View
Nursing Home, file., 692 N.Y.S.2d 686,689 (N.Y. App. Div. 1999); Cook u. Deltona, 753 F.2d
1552, 1563(11th Cir. 1985).
Slander of Title (Claim Ten). To pre,·ail on a claim of slander of title,
plaintiff must plead that there has been (1) a communication falsely casting doubt on validity of
plaintiffs title, (2) the communication was reasonably calculated to cause harm, and (3) the
communication caused special damages. 39 College Point Corp. u. Transpac Capital Corp., 810
N.Y.S.2d 520,521 (N.Y. App. Div. 2006). Plaintiffs have not adequately alleged the second and
third elements of the cause of action. Additionally, plaintiffs have failed to allege (as they must)
that defendants' actions have caused a prospective sale to be lost "because of the cloud on
plaintiff's title." See Hanbidge u. Hunt, 583 N.Y.S.2d 288,289 (N.Y. App. Div. 1992).

Negligence (Claim Eleven). Plaintiffs' negligence claim should be dismissed

under the economic loss rule and because the relationship between the parties "does not give
rise to a duty independent of the contractual relationship." Abacus Federczl Saui11gs Bank u.
ADTSec. Serus., Tnc., 967 N.E.2d 666, 684-85 (N.Y. 2012); Clark-Fitzpatrick, Tnc. u. Long
Island R. Co., 516 N.E.2d 190, 193-94 (N.Y. 1987); Eye Care Tntem., Inc. u. Underhill, 92 F.
Supp. 2d 1310, 1315 (M.D. Fla. 2000).
!UCO (Clai m Twelve). Plaintiffs' RICO claim fails, among other reasons,
because:
• The amended complaint does not allege a RlCO ·'person" distinct from the al leged
"enterprise." Reed Const. Data Inc. u. McGrnw-Hi/1 Co., 745 F. Supp. 2d 343,350
(S.D.N .Y. 2010). A subsid iary "cannot be considered distinct from the parent
corporation." Td. Although plaintiffs' amended complaint alleges that plaintiffs and
homeowners arc !Part of the allcgt.-d enterprise, it docs not adequately allege that those
entities arc part of the enterprise under U.S. u. 1'urkette, 452 U.S. 576 (1981).

• Plaintiffs have not adequately alleged the scienter element of mail and wire fraud. Al
most they allege negligence, not specific intent to defraud. In addition, plaintiffs bave
not adequately aneged mail or wire fraud with thespeci lfoity required by Rule 9(b).

• Plaintiffs have not adequately asserted t hat the alleged RJCO enterprise proximately
caused their alleged damages. See Hemi Group, LLC u. City of New York, 559 U.S. 9
(2010).
N ..J. Consumer Fraud Act (Claim Thirteen). New Jersey law does not
apply to plaintiffs' consumer protection claims. Because these claims sound in tort, Florida law
would apply. See 111 re Grand Theft Auto Video Game Consumer· Utig., 251 F.R.D. 139, 148
(S.D.N.Y. 2008). In addition, plaintiffs have not adequately alleged the elements of a New
Jersey Consumer Fraud Act claim.
 Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 30 of 30

COV I NGTON

Gary Eisenberg
Apl'il 7, 2015
Pages

III. Sch edule

Chase anticipates asking the cou rt 10 defer the April 24 conference until the
motion lo transfer is decided.

Chase also anticipates seeking a motion to dismiss briefing schedule providing

that the motion to transfer would be briefed first and that Chase's motion to dismiss wou ld be
due within 30 days after a dee.is ion on the motion to transfer.
Please let us know when you if you are available to meet and confer regarding this
letter on April 8 at 4:30 p.m. If not please propose an alternative time.

Sincerely,

/s/ Robert D. Wick