Horne v. Harbour Portfolio VI, LP

304 F.Supp.3d 1332

Demarkus R. HORNE, et al., Plaintiffs,

v.HARBOUR PORTFOLIO VI, LP, et al., Defendants.

CIVIL ACTION NO. 1:17–CV–954–RWS

United States District Court, N.D. Georgia, Atlanta Division.

Signed March 20, 2018

Kristen Elizabeth Tullos, Sarah Bolling Mancini, Atlanta Legal Aid Society, Inc., DeKalb County Regional Office, Decatur, GA Sarah Ilene Stein, Atlanta Legal Aid Society, Inc., Atlanta, GA, Stuart T. Rossman, National Consumer Law Center, Inc., Boston, MA, for Plaintiffs.

Mark E. Rooney, Valerie L. Hletko, Buckley Sandler, LLP, Washington, DC, Dewan Sharmin Arefin, Maurice Wutscher, LLP, Peachtree Corners, GA, David L. Rusnak, Weissman, P.C., Johnny Clifford Waller, Jr., JCWLaw, LLC, Atlanta, GA, David K. Stein, Kara H. Herrnstein, Bricker & Eckler, LLP, Columbus, OH, Mark S. Watson, Watson McCallum, LLP, Macon, GA, Carl von Mehren, von Mehren and Associates, PC, Woodstock, GA, Heather Lynn Stevenson, The Kim Firm, LLC, Alpharetta, GA, for Defendants.

ORDER

RICHARD W. STORY, United States District JudgeThis case comes before the Court on Harbour Defendants' Motion to Dismiss [34], Defendant National Asset Advisors, LLC's Partial Motion to Dismiss [63], and Defendant National Asset Advisors, Inc.'s Motion to Withdraw Answer to Cross Claim of Defendant JCT Capital [74]. After reviewing the record, the Court enters the following Order.

Background¹

This case arises out of contract for deed ("CFD") home purchase transactions extended by Harbour Portfolio VI, LP and Harbour Portfolio VII, LP (the "Harbour Defendants") to the Plaintiffs. Plaintiffs allege that these CFDs contained abusive credit terms. They also allege that the Harbour Defendants intentionally targeted Plaintiffs because of their race and that the Harbour Defendants actions had a disparate impact on Plaintiffs because they are African–American.

The Harbour Defendants purchased all, or nearly all, of its properties from Fannie Mae's portfolio of "real estate owned" properties, which are homes that went through foreclosure but were not purchased by third parties. (Second Am. Compl. ("SAC"), Dkt. [81].) These homes were often in poor or uninhabitable condition, but no repairs were made prior to selling them via the CFDs. (Id. ¶¶ 48–49.) The Harbour Defendants would mark up the sale price of the home to four or five times their purchase price. (Id. ¶ 49.) Under the terms of the CFDs, interest rates were 9.9% or 10% over a 30–year period. (Id. ¶ 50.) The CFDs also put the burden of home repairs, maintenance, property taxes, and homeowner's insurance on the buyer. (Id. ¶ 51.) Each CFD contained a forfeiture clause giving the Harbour Defendants the right, upon default, to elect to cancel the contract, keep all amounts paid, and evict the buyer. (Id.)

Plaintiffs allege that the Harbour Defendants engaged in reverse redlining, the practice of issuing subprime loans to minority communities. (Id. ¶ 34.) They allege that the Harbour Defendants purchased homes located in communities that are majority African–American and designed a marketing scheme to draw primarily African–American buyers. (Id. ¶ 61.) The Harbour Defendants advertised by placing signs in front of the properties and through word of mouth. (Id. ¶¶ 62–64.) The Plaintiffs allege that the people most likely to see the signs or hear about the Harbour Defendants' properties were those already in the neighborhoods, i.e. African–Americans. (Id. ¶ 63.) Plaintiffs rely in large part on statistics to show both that the Harbour Defendants intentionally targeted African–American buyers and that their actions had a disparate impact on African–Americans. (Id. ¶¶ 71–82.)

Plaintiffs now bring multiple claims against the Harbour Defendants and others involved. Relevant to the currently pending motions, some or all of the Plaintiffs bring claims against the Harbour Defendants under the Fair Housing Act, the Equal Credit Opportunity Act, the Georgia Fair Housing Act, the Truth in Lending Act, the Georgia Fair Business Practices Act and the Unfair and Deceptive Practices Towards the Elderly Act, and the Georgia Residential Mortgage Act, and for equitable mortgage, declaratory judgment, unjust enrichment, and malicious eviction. Due to allegations of the mismanagement of escrow funds, Plaintiffs bring a claim against National Asset Advisors, Inc. ("NAA") under the Real Estate Settlement Procedures Act and for equitable mortgage, declaratory judgment, and unjust enrichment. Plaintiffs also bring claims against Harbour Portfolio VII, LP and NAA for breach of contract and breach of the duty of good faith and fair dealing and for negligence based on the escrow mismanagement.

Analysis

The Harbour Defendants have filed a motion to dismiss the twelve claims brought against it. NAA has filed a motion to dismiss Counts Seven, Eight, Nine and Eleven and a partial motion to dismiss Counts Ten and Twelve. Defendant NAA has also filed a Motion to Withdraw Answer to Cross Claim of Defendant JCT Capital [74], which the Court GRANTS as unopposed. The Court will now address the pending motions to dismiss.

I. Legal Standard

Federal Rule of Civil Procedure 8(a)(2) requires that a pleading contain a "short and plain statement of the claim showing that the pleader is entitled to relief." While this pleading standard does not require "detailed factual allegations," "labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not do." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). In order to withstand a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Id. (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ). A complaint is plausible on its face when the plaintiff pleads factual content necessary for the court to draw the reasonable inference that the defendant is liable for the conduct alleged. Id.

At the motion to dismiss stage, "all well-pleaded facts are accepted as true, and the reasonable inferences therefrom are construed in the light most favorable to the plaintiff." Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1273 n.1 (11th Cir. 1999). However, the same does not apply to legal conclusions set forth in the complaint. Sinaltrainal v. Coca–Cola Co., 578 F.3d 1252, 1260 (11th Cir. 2009) (citing Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 ). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. Furthermore, the court does not "accept as true a legal conclusion couched as a factual allegation." Twombly, 550 U.S. at 555, 127 S.Ct. 1955.

II. The Harbour Defendants' Motion to Dismiss

A. Statute of Limitations

The Harbour Defendants argue that Plaintiffs' claims are time barred and should therefore be dismissed at this stage. When "noncompliance with the statute of limitations is apparent on the face of the complaint," a claim may be dismissed at the pleading stage. Omar ex rel. Cannon v. Lindsey, 334 F.3d 1246, 1251 (11th Cir. 2003). The Harbour Defendants argue that many of Plaintiffs' claims, listed in Appendix A of their motion to dismiss, are time barred because the alleged wrongful conduct occurred at loan origination, and the amount of time that elapsed from the date of loan origination to the date of filing this lawsuit exceeds the allowable period under the relevant statute of limitations. (App. A, Dkt. [34–2].)

"The continuing violation doctrine applies to the continued enforcement of a discriminatory policy, and allows a plaintiff to sue on otherwise time-barred claims as long as one act of discrimination has occurred during the statutory period." City of Miami v. Bank of Am. Corp., 800 F.3d 1262, 1284 (11th Cir. 2015), vacated and remanded on other grounds, ––– U.S. ––––, 137 S.Ct. 1296, 197 L.Ed.2d 678 (2017) (internal quotations and alterations omitted). In Havens Realty Corp. v. Coleman, 455 U.S. 363, 102 S.Ct. 1114, 71 L.Ed.2d 214 (1982), the Supreme Court applied the continuing violation doctrine in the context of a Fair Housing Act ("FHA") claim. Three plaintiffs brought suit for discrimination under the FHA. One plaintiff, an African–American man, was turned away from the defendant's apartment complex during the limitations period. Two other plaintiffs, a white tester and an African–American tester, attempted to obtain housing in the complex but not within the limitations period. The Court allowed all three claims to proceed.

"Where the challenged violation is a continuing one, the staleness concern disappears." Id. at 380, 102 S.Ct. 1114. A "wooden application" of the statute of limitations in this context "only undermines the broad remedial intent of Congress embodied in the [Fair Housing] Act." Id. Thus "where a plaintiff, pursuant to the Fair Housing Act, challenges not just one incident of conduct violative of the Act, but an unlawful practice that continues into the limitations period, the complaint is timely when it is filed within [the limitations period, starting at] the last asserted occurrence of that practice." City of Miami, 800 F.3d at 1285 (quoting Havens, 455 U.S. at 380–81, 102 S.Ct. 1114 ).

Plaintiffs have, at this time, alleged an unlawful practice in which the Harbour Defendants engaged in a pattern of discriminatory lending. They allege that the Harbour Defendants targeted African–Americans for predatory contracts for deeds by purchasing homes in predominately African–American census tracts and advertising in a way to target African–Americans. While each CFD may not be identical, "the essential discriminatory practice has remained the same ...." Id. They have also alleged that this unlawful practice continued into the relevant limitations periods when Plaintiff Jackie Brown's loan was originated on April 15, 2015. This is enough to...