Opinion
C.A. No. N10C-03-191 PLA.
Submitted: August 9, 2010.
Decided: October 22, 2010.
ON PLAINTIFF'S MOTION FOR REARGUMENT, DENIED.
David E. Matlusky, Esq., and Brett Bendistis, Esq., THE MATLUSKY FIRM, LLC, Wilmington, Delaware, Attorneys for Plaintiff.
J. Scott Shannon, Esq., and Artemio C. Aranilla, Esq., MARSHALL, DENNEHEY, WARNER, COLEMAN, GOGGIN, Wilmington, Delaware, Attorneys for Defendant.
Plaintiff Jose Nieves brought individual and proposed class action claims against All Star Title, Inc. ("All Star"), alleging that All Star committed consumer fraud, deceptive trade practices, professional negligence, and breach of contract by conducting settlements on refinanced loans secured by Delaware real property without the participation of a Delaware attorney. Nieves' claims were grounded in the Delaware Supreme Court's In re Mid-Atlantic Settlement Services, Inc. decision, which adopted the conclusions of the Board on the Unauthorized Practice of Law that real estate settlements constitute the practice of law, and that the closing of a loan secured by Delaware real estate generally must be conducted by a Delaware attorney. All Star moved to dismiss Nieves' Complaint for failure to state a claim upon which relief could be granted. Specifically, All Star denied that Nieves' Complaint established that it had breached any legally-recognized duty or caused him cognizable damages. All Star also adopted the position that Nieves' suit constituted an attempt to secure private enforcement of this state's rules against the unauthorized practice of law.
755 A.2d 389, 2000 WL 975062 (Del. May 31, 2000) (TABLE).
By opinion dated July 27, 2010, this Court granted All Star's motion and dismissed all counts of the Complaint. The Court agreed with All Star that each of Nieves' claims attempted to create a vehicle for private enforcement of the prohibitions against the unauthorized practice of law. In reaching this conclusion, the Court noted that although Nieves' Complaint "conclusorily suggests that the loan did not contain agreed-upon terms and that he did not receive all required disclosures, . . . he has not specified the nature of these defects, nor indicated that they caused him any monetary loss or denied him the benefit of the loan." Based upon the fact that Nieves had not alleged "any monetary damages arising from All Star's conduct other than its fees" in response to the motion to dismiss, the Court found that "his essential position is that he and the other members of the proposed class are entitled to relief for All Star's alleged unauthorized practice of law," which could not serve as the basis of a private cause of action under Delaware law.
2010 WL 2977966 (Del. Super. July 27, 2010).
Id. at *2.
Id.
The Court also concluded that each count of the Complaint was defective on the merits. The Court held that Nieves could not proceed under the Delaware Consumer Fraud Act based upon the settlement sheet attached to his Complaint, which indicated that his settlement occurred in Maryland, and that the fees paid to All Star did not include any amounts for an attorney's services. Accordingly, the Court found that Nieves had not satisfied the Consumer Fraud Act's requirement that the allegedly fraudulent conduct occur wholly or partially within Delaware. In addition, the Court concluded he could not establish that All Star misrepresented or omitted a material fact ( i.e., the non-participation of a Delaware attorney) with the intent to induce Nieves' reliance when All Star neither represented that an attorney would be involved in the settlement nor charged him for an attorney's services. Nieves' deceptive trade practices claim failed because of his consumer status, which deprived him of standing to proceed under the Deceptive Trade Practices Act. The remaining counts of the Complaint, alleging professional malpractice and breach of contract, were dismissed based upon Nieves' failures to "[identify] any basis for imposing a duty upon All Star to ensure that he was represented by a Delaware attorney" at settlement and to "[allege] facts to support a causal relationship between All Star's purported breaches and any [resulting] damages."
Id. at *6.
Finally, the Court examined the voluntary payment rule — an issue not explored by either party — and determined that under the facts presented in the Complaint and supportable inferences drawn from them, Nieves was barred from recovering the fees he paid to All Star by the principle that payments made voluntarily, with full knowledge of the facts, cannot generally be recovered based upon the payor's misapprehension of his legal rights or obligations. The Court's analysis of this issue was guided by King v. First Capital Financial Services Corp., in which the Illinois Supreme Court held that the voluntary payment rule required dismissal of a class action claim seeking to recover fees paid by mortgagors to their lenders for document preparation activities performed by non-attorney third parties in contravention of Illinois' rules against the unauthorized practice of law.
Id.
828 N.E.2d 1155 (Ill. 2005).
Nieves has moved for reargument of the Court's decision, alleging that the Court misunderstood the underlying facts, which led it to render a decision based upon inapplicable law. Specifically, Nieves asserts that full discovery in this case would have established the following facts:
(1) The terms of the promissory note and mortgage executed at closing, as well as the funds disbursed, "greatly changed at the closing table and Plaintiff did not have adequate representation to advise him of his rights going forward";
(2) The funds disbursed at closing and settlement charges were altered after closing occurred, and he did not receive "a true and correct Truth in Lending statement or a statutory Three Day Right of Rescission";
(3) He "was later forced to refinance his loan again with another lender, which resulted in additional settlement charges"; and
(4) "Plaintiff's refinance was conducted in Delaware," despite the settlement sheet listing the location of the closing as Baltimore, Maryland.
Pl.'s Mot. for Reargument 2-3.
Nieves suggests that the above facts were "referenced" in his pleadings, such that the Court should not have dismissed his Complaint and must reverse its prior decision "in order to adjudicate this matter on the true and correct circumstances of the refinance." Nieves also disputes the Court's conclusion that he failed to demonstrate that All Star owed a duty to notify borrowers of their rights under Mid-Atlantic, because "Plaintiff was unaware that an attorney would not be present at closing until the moment the closing began," thus placing him at a "serious disadvantage."
Id. at 2.
Id. at 3.
In response, All Star denies that Nieves has met his burden to establish that reargument would be appropriate. All Star contends that Nieves' motion impermissibly presents new arguments that could have been raised in response to its motion to dismiss and also rehashes positions that were already raised and addressed by the Court's decision. Furthermore, All Star disputes that the factual allegations not considered by the Court in its decision would have changed the outcome of its motion to dismiss, given that the Court found dismissal was merited on several alternative grounds.
A motion for reargument pursuant to Superior Court Civil Rule 59(e) will be granted only if "the Court has overlooked a controlling precedent or legal principles, or the Court has misapprehended the law or facts such as would have changed the outcome of the underlying decision." A motion for reargument is not an opportunity for a party to rehash arguments already decided, to present new arguments not previously raised, or to offer new evidence that could reasonably have been presented prior to the Court's decision. Such tactics frustrate the efficient use of judicial resources, place the opposing party in an unfair position, and stymie "an orderly process of reaching closure on the issues."
Kennedy v. Invacare, Inc., 2006 WL 488590, at *1 (Del. Super. Jan. 31, 2006) (citation omitted).
Plummer v. Sherman, 2004 WL 63414, at *2 n. 7 (Del. Super. Jan. 14, 2004); see also Hennegan v. Cardiology Consultants, P.A., 2008 WL 4152678, at *1 (Del. Super. Sept. 9, 2008) (citing Denison v. Redefer, 2006 WL 1679580, at *2 (Del. Super. Mar. 31, 2006)); Kennedy, 2006 WL 488590, at *1.
Plummer, 2004 WL 63414, at *2.
The Court readily agrees with Nieves that certain of the factual allegations presented in his motion for reargument might have affected the outcome of its decision. Nieves' present allegations that he incurred expenses associated with a further refinancing of the loan to correct errors made by All Star and that he was charged amounts that differed from the closing costs itemized on his settlement statement would likely have altered the analyses of his claims for consumer fraud, negligence, and breach of contract had they been raised prior to the Court's decision. As noted in the previous opinion, the Court "strongly suspects that public policy concerns would deny All Star the benefit of the voluntary payment rule in a suit for negligence or breach of contract brought by a plaintiff whose loan preparation or settlement process was materially affected by its `inexpert' practice of law such that the borrower suffered damages [other than the fee charged for the defendant's services]." Nieves' ability to demonstrate "unfair or deceptive merchandising practices in the conduct of . . . trade or commerce in part or wholly within this State" under the Delaware Consumer Fraud Act would obviously be affected by his new assertion that the closing on his loan occurred in Delaware, and not, as the settlement statement indicates, in Maryland. Finally, the Court's conclusion that each of Nieves' claims in essence attempted to craft a private cause of action for the unauthorized practice of law was premised upon the fact that Nieves had not "alleged any monetary damages arising from All Star's conduct other than its fees" and did not "indicate[] that [All Star's alleged failures] caused him any monetary loss or denied him the benefit of the loan."
2010 WL 2977966, at *8.
See 6 Del. C. § 2512.
2010 WL 2977966, at *2.
It is because the allegations presented in Nieves' motion for reargument would have substantially affected the previous motion that the Court is both surprised and dismayed that they were not raised in his Complaint or, at the latest, in his response to All Star's motion to dismiss or a separate motion to amend the Complaint. As to the crucial assertions that settlement occurred in Delaware and that All Star's alleged misconduct caused Nieves to incur expenses in obtaining a further refinance, the Court cannot agree with Nieves' suggestion that it "failed to consider facts which were referred to in Plaintiff's pleadings" and thereby erred in dismissing his claims. Rather, Nieves has presented new arguments and allegations upon his motion for reargument which go beyond what could reasonably have been inferred from his Complaint or his response to All Star's motion to dismiss.
Pl.'s Mot. for Reargument 2.
Several of the factual allegations emphasized in Nieves' motion for reargument — such as his claim that he did not receive a proper Truth in Lending Act statement or Right of Rescission notice — were pled in his Complaint and considered by the Court in its decision, albeit without the context provided by the new allegations regarding fees that departed from the amounts listed on the settlement sheet and Nieves' subsequent refinancing of his loan.
Plaintiff's motion for reargument misconstrues Delaware's pleading standards. While most claims, including those brought by Plaintiff, are governed by a permissive notice pleading standard, the necessary "notice" entails more than informing a defendant that it has been sued for a particular cause of action. The plaintiff is not required to plead evidence, but the complaint must place the defendant on fair notice of "what the plaintiff's claim is and the grounds upon which it rests." Thus, notice pleading does not relieve a plaintiff of the obligation to plead all elements of his claim. For instance, where damages constitute an essential element of a cause of action, the complaint must contain factual allegations supporting the existence of legally cognizable damages.
Heaney v. New Castle County, 1993 WL 331044 (Del. Super. July 30, 1993) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).
See E.I. Du Pont de Nemours and Co. v. Admiral Ins. Co., 1994 WL 465547 (Del. Super. Aug. 3, 1994).
In deciding a motion to dismiss, the Court will not consider "conclusory allegations that lack specific supporting factual allegations." Although "the plaintiff is entitled to all reasonable inferences that logically flow from the face of the complaint," the Court need not "accept every strained interpretation of the allegations proposed by the plaintiff." Furthermore, dismissal will be appropriate "if allegations in the complaint or in the exhibits incorporated into the complaint effectively negate the claim as a matter of law."
Ramunno v. Cawley, 705 A.2d 1029, 1034 (Del. 1998).
Malpiede v. Townson, 780 A.2d 1075, 1083 (Del. 2001).
Id.
The sole reference to All Star's conduct necessitating further refinances is contained in paragraph 36 of the Complaint, under the Deceptive Trade Practices Act claim brought on behalf of the proposed class. That paragraph states that "Plaintiffs . . . in some cases, were forced to refinance out of the loan provided by Defendant due to lack of attorney disclosure." All Star's motion to dismiss preceded class certification, and the Complaint nowhere alleged that Nieves was among those "cases" within the proposed class in which the absence of a Delaware attorney resulted in a refinancing of the affected loan. Even more notably, Nieves did not make such an argument in response to All Star's motion. To the contrary, Nieves' response seemed to confirm that he did not experience or allege economic harm other than the fees charged by All Star. That response stated as follows:
Pl.'s Compl. ¶ 36.
Defendant violated the Supreme Court's Mid-Atlantic Opinion and these facts alone should defeat Defendant's Motion to Dismiss. Defendant repeatedly requests a showing of harm in its motion; however, the harm to Plaintiff, and likely other Delaware homeowners transacting business with Defendant, is clear. Plaintiff was charged excessive fees for a service he did not receive and Plaintiff seeks recovery of those fees due to Defendant's failure to comply with Delaware law. . . . Plaintiff's claim is distinguishable from all past claims regarding the [ Mid-Atlantic] Opinion . . . Plaintiff is not seeking to rescind or invalidate the underlying mortgage, but is seeking recovery of excessive fees charged by Defendant for services that were bargained for and required by law, but not provided by Defendant at Plaintiff's real estate closing.
Pl.'s Resp. to Def.'s Mot. to Dismiss 2, 4 (emphasis added).
Similarly, the settlement statement designating Baltimore, Maryland, as the place of settlement was an exhibit to the Complaint filed by Nieves. Prior cases have made clear that a plaintiff proceeding under the Delaware Consumer Fraud Act must plead facts in his Complaint supporting that the alleged wrongdoing occurred "in part or wholly within this State." Nothing in the Complaint or Nieves' response to the motion to dismiss indicated that the settlement occurred in Delaware, and Plaintiff's own exhibit conveyed information negating an element of his consumer fraud claim.
See Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 901 A.2d 106, 117 (Del. 2006) (affirming dismissal of count brought under Delaware Consumer Fraud Claim Act where plaintiff's complaint did not allege that any of the alleged wrongful conduct occurred in Delaware); Marshall v. Priceline.com Inc., 2006 WL 3175318, at *2 (Del. Super. Oct. 31, 2006).
Although factual allegations are not precisely "evidence," Nieves' motion runs afoul of the rule against utilizing a motion for reargument to present new arguments or new evidence that could reasonably have been presented before the Court's ruling. There is a difference between drawing reasonable inferences from the allegations presented in a Complaint and inferring the existence of allegations never raised. Nieves argues that he "referenced damages in his pleading and will prove damages once full discovery has been conducted" and that the Court "dismissed Plaintiff's claims on the basis that Plaintiff did not specify damages." However, what led to the dismissal of Plaintiff's claims was not a failure to reference any damages, but rather Plaintiff's repeated references to a non-recoverable item (All Star's fees) as "the harm" resulting from All Star's conduct. Likewise, accepting arguendo Nieves' current contention that the closing occurred in Delaware, he failed to allege that fact in his Complaint and neglected to explain that his own exhibit contained inaccurate information regarding this material point. Thus, the Court is satisfied that it did not "misapprehend" the facts in rendering its decision and did not err in failing to assume the existence of allegations that were neither made nor reasonably supported by Plaintiff's Complaint and his response to the motion to dismiss.
Pl.'s Mot. for Reargument 2.
This case aptly illustrates the threats to fairness and judicial resources that would emerge if the Court permitted parties to use Rule 59(e) as a vehicle to introduce evidence or arguments that could have been raised prior to the challenged ruling. All Star prepared and filed a motion that presented colorable arguments in favor of dismissal of the Complaint served upon it. In reaching its decision on that motion, the Court relied upon Nieves' factual allegations and exhibits, as well as the reasonable inferences to be drawn therefrom, and addressed the arguments presented in Nieves' response. The Court's opinion required extensive research, particularly as the Court located authorities from other jurisdictions that had not been raised by either party.
At best, Nieves' motion for reargument suggests that the time and energy expended by the Court in completing its twenty-four-page opinion was little more than a wild goose chase through a factual and legal landscape that does not actually reflect the reality of the dispute between the parties. Reopening the decision to account for claims and arguments that could have been raised before the Court undertook that effort would undermine the incentives correctly placed upon litigants to ensure that they present thorough pleadings and arguments within the timeframes set forth by the Superior Court's Civil Rules and Civil Case Management Plan.
Even more troubling, if parties aggrieved by a dismissal or summary judgment are permitted to introduce new evidence and arguments via a Rule 59(e) motion, they may be tempted to manufacture allegations that address or circumvent the Court's rationale to prolong the life of an otherwise doomed case as a means of gaining leverage against the opposition. The Court does not suggest that the motion under consideration in this case was occasioned by anything other than innocent failures to plead relevant facts in Nieves' Complaint and to muster complete arguments in response to All Star's motion to dismiss. Nevertheless, the risk that such procedural machinations could occur — and the difficulty in separating innocent omissions from fabrications — prevents this Court from granting a motion for reargument based upon evidence, allegations, or arguments that should have been raised previously.
Nieves also contends that the Court should have permitted him leave to amend his Complaint or denied All Star's motion to dismiss altogether in favor of full discovery, which would have allowed him to develop the facts related to his damages. In his response to All Star's motion, Nieves sought further discovery, or "[in] the alternative . . . the opportunity to amend [his] Complaint should this Court require additional information." However, Nieves never filed a motion for leave to amend pursuant to Civil Rule 15. As discussed above, Nieves' pleadings and his argument in opposition to dismissal did not give the Court a basis to suspect that he would allege economic damages beyond the fees referred to in his response, nor that he would dispute the portion of the settlement statement attached to his Complaint that named Maryland as the location of the loan settlement. These allegations relate to information within Nieves' knowledge that did not require any discovery. When All Star moved to dismiss his claims, Nieves was on notice that the sufficiency of his Complaint was at issue. His failure to address the deficiencies in his Complaint by a motion to amend, a more thorough responsive filing, or both may have been a misstep on his part, but it does not imply that the Court erred in relying upon those allegations and arguments that were timely presented to it.
Pl.'s Resp. to Def.'s Mot. to Dismiss 3.
Finally, Nieves requests that the Court reconsider its dismissal of his consumer fraud claim in view of the fact that "Plaintiff was unaware that an attorney would not be present at closing until the moment the closing began" and that All Star "never informed Plaintiff prior to the settlement that an attorney would not be at closing and that it was Plaintiff's responsibility to find his own attorney, if that is in fact the law." This argument revisits points Nieves already raised in response to All Star's motion to dismiss. As the Court explained in its opinion:
Pl.'s Mot. for Reargument 3.
Notably, the settlement statement lists no attorney's fees, and indicates that none of the All Star charges included amounts attributable to an attorney's work. By his Complaint, Nieves does not allege that All Star represented to him that its services were performed by an attorney, or that All Star prevented him from obtaining representation by a Delaware lawyer. . . . Mid-Atlantic requires a Delaware attorney's participation in closing and certain drafting and title-related activities, but it stops short of imposing an obligation on the lender or settlement agent to ensure that the borrower receives representation or is notified of his rights. Nieves has not identified, nor has the Court been able to locate, any basis for enforcing such an obligation upon a non-attorney settlement agent through a private cause of action. . . . Plaintiff clearly sees such a duty as a natural extension of the Mid-Atlantic holding, but it is not an extension this Court has the authority to enact.
2010 WL 2977966, at *5-6, *8.
Nieves still has not alleged any material misrepresentation or concealment by which All Star intended to induce him to forego hiring a Delaware attorney, nor has he offered any legal authority establishing that All Star was under a duty to inform him prior to closing that a Delaware attorney would not participate in the settlement. Since Nieves' rehashed argument has not established that the Court overlooked controlling law or misapprehended the law or the facts on this point, the Court must deny reargument.
The Court does note that it also concluded in its opinion that All Star's representations that the closing would be "completed within the guidelines of Delaware law" could not be construed as a misrepresentation of material fact "when the services provided by All Star resulted in a valid mortgage with no prejudice to Nieves' interests." Id. at *5 (emphasis added). Obviously, the damages allegations raised in Plaintiff's motion for reargument would likely have affected the Court's holding on that issue had they been adequately and timely pled.
As in its prior opinion, however, the Court concludes by emphasizing that in denying relief to Nieves, it does not imply that he is without recourse. The Court previously noted that Nieves' allegations could provide the basis for filing a complaint with the Board on the Unauthorized Practice of Law. Moreover, as this opinion should make clear, the Court's earlier decision dismissing Nieves' Complaint addressed the allegations and arguments fairly presented to it at that time; its rationale would not necessarily apply to a complaint incorporating the factual allegations described in Nieves' motion for reargument. However, as discussed herein, Nieves' arguments for reconsideration in this case rely upon positions and allegations that should have been raised prior to the Court's decision, as well as positions already addressed in the Court's previous opinion.
Accordingly, Nieves' motion for reargument must be DENIED.
IT IS SO ORDERED.