Katz v. Deluca

1

BRYAN R. KATZ, et al., Plaintiffs v. TIMOTHY S DELUCA, et al., Defendants

Civil Action No. 23-1188

United States District Court, E.D. Pennsylvania

May 13, 2024

MEMORANDUM

PRATTER, J.

We can only play the cards we are dealt, and the plaintiffs in this case were dealt a $2,000 breach-of-contract action. As part of a $725,000 real estate transaction, Bryan Katz and Kristine Concepcion unexpectedly incurred a roughly $2,000 fee that allegedly should have been covered by either the seller or their title insurer. Frustrated by the inaction of their title insurer, they brought suit. However, the plaintiffs have breathtakingly overstated the scope of their claims. This straightforward case concerning a relatively modest sum has yielded a 104-page, 410-paragraph second amended complaint alleging over $75,000 in damages, most of which come in the form of unreasonably high attorneys' fees, and 12 counts, including four violations of the Real Estate Settlement Procedures Act and one violation of the Racketeer Influenced and Corrupt Organizations Act.

The Court is unmoved by this effort to transform a simple contractual dispute into a complex and highly speculative conspiracy. The cards are down, and they are not hard to decipher. Because the Court lacks jurisdiction over $2,000 breach-of-contract cases, and the plaintiffs' federal claims either fail to state a claim or are time-barred, the Court dismisses this case for lack of subject matter jurisdiction.

Background

Brian Katz and Kristine Concepcion bought property in Haddonfield New Jersey in 2020. They signed an “Agreement of Sale” for the property on October 19, 2020, and the non-party seller, Timothy DeLuca,^[1] signed the following day. Closing occurred on December 7, 2020, The plaintiffs engaged defendant CC Philly Real Estate Realty, which does business as Keller Williams Philly (“KW Philly”), as their broker, and KW Philly referred the plaintiffs to Great American Abstract, LLC (“Great American”) for title insurance and escrow services. Upon making the referral, KW Philly disclosed that it “may have a business relationship with Great American” on an Affiliated Business Disclosure Form that also listed Great American's rates and stated in clear, capitalized language that the buyers did not have to hire Great American. Mr. Katz and Ms. Concepcion signed this disclosure form and hired Great American.

Before selling the property at issue to the plaintiffs, Mr. DeLuca had made improvements to the property, adding to its value. New Jersey assesses an Affordable Housing Development Fee which taxes developers when their construction work adds value to New Jersey properties. When Mr. DeLuca paid the associated Affordable Housing Development Fee on October 15 2020, the amount he paid towards that fee-$2,500-was allegedly a “bogus” underestimate. Great American discovered that the Affordable Housing Development Fee had been underpaid by performing a “tax and assessments search” on October 21, This search disclosed that $4,507.81 was still outstanding on the Affordable Housing Development Fee.^[2] However, this $4,500 fee is not the subject of the present action: Mr. DeLuca paid that fee in November 2020.

The plaintiffs seem to aver that the $4,500 discovered by Great American's tax and assessments search should have put Great American and KW Philly on notice of the fact that, in the future, there would be a further, additional tax assessment under the Affordable Housing Development Fee. See Second Am. Compl. ¶¶ 137-39, Doc. No, 39 (hereinafter “SAC”). Because Great American was allegedly the “in-house” title company for KW Philly, and Great American and KW Philly “regularly conduct business in the State of New Jersey,” the plaintiffs aver that both entities had either actual or constructive knowledge of the outstanding Affordable Housing Development Fee after Great American's tax and assessments search. Still, neither Great American nor KW Philly informed the buyers of the results of Great American's tax and assessments search, even though they were in contact with the buyers about other matters relating to an inspection. The defendants did, however, instruct Mr. DeLuca to satisfy all outstanding obligations on the property, and on November 20, Mr. DeLuca complied and paid the $4,507.81 owed under the Affordable Housing Development Fee.

At closing on December 7, 2020, the buyers were presented with a “uniform combined settlement statement.” This document included various charges and taxes, but it did not mention that an additional $2,062.47 was owed under the Affordable Housing Development Fee. This is because a tax collector for the Borough of Haddonfield did not generate an invoice reflecting that $2,067.47 was still due under the Affordable Housing Development Fee until two days after closing, on December 9. The plaintiffs nonetheless maintain that KW Philly and Great American should have been aware of that forthcoming invoice before it was produced.;

Mr. DeLuca was notified of this outstanding $2,062.47 fee by a letter he received on December 31. Mr. DeLuca also confirmed the existence of this outstanding fee with the Borough's tax collector by phone. Mr. DeLuca informed the tax assessor that Great American had handled the title transfer, and on January 4, 2021, Great American was informed of the outstanding Affordable Housing Development Fee.

Mr. DeLuca had clearly refused to pay the $2,000 fee by February 22. On February 25, the plaintiffs first asked Great American to indemnify them for this fee. By March 9, 2021, the plaintiffs had expressly made a claim with Great American for coverage of the $2,000 fee. The plaintiffs also contend that Great American was contractually bound to retain an attorney to compel the payment of this fee by Mr. DeLuca.

Great American did not respond to the plaintiffs' communications for months. However, after the plaintiffs received a second delinquency notice in mid-June and sent it to Great American, Great American contacted Mr. DeLuca and threatened to retain an attorney to recover the fee. That same day, an employee of Great American sent Mr. Katz an email, stating: “I believe that this would be covered by a claim -1 will check in on that and get back to you.”^[3] Between June 2021 and April 2022, the plaintiff-buyers sent Great American quite a few emails about this outstanding fee, to which Great American was not consistently responsive. The upshot of these communications is that Mr. DeLuca did not pay, and Great American neither followed up on its threat to retain an attorney nor covered the outstanding fee itself. In October 2022, the plaintiff-buyers retained counsel, who also emailed Great American about the Affordable Housing Development Fee to no avail.

Dissatisfied with Great American's response, the plaintiffs filed the present lawsuit in March 2023. The plaintiffs' original complaint named three defendants-Mr, DeLuca, DJSE Equities, and Great American-and alleged three counts-common law fraud, one violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), and breach of an insurance contract. The plaintiffs filed their first amended complaint in May 2023 and, for the first time, alleged violations of the Real Estate Settlement Procedures Act (RESPA). The operative pleading in this matter is the plaintiffs' second amended complaint, which names only KW Philly and Great American as defendants. The second amended complaint avers 12 counts: (1) Breach of Insurance Contract against Great American, (2) Insurance Bad Faith against Great American, (3) Violations of Pennsylvania's Unfair Trade Practices and Consumer Protection Law (UTPCPL) against Great American, (4) Breach of Fiduciary Duty against Great American, (5-7) three Violations of RESPA against Great American, (8) Enterprise/Triangular Liability against KW Philly, (9) Violations of the Pennsylvania UTPCPL against KW Philly, (10) Breach of Fiduciary Duty against KW Philly, (11) Violations of RESPA against Great American and KW Philly, and (12) RICO Violations against Great American and KW Philly.

KW Philly and Great American filed motions to dismiss the second amended complaint, and the Court held oral argument on these motions in November 2023, The Court grants the motions to dismiss insofar as they request dismissal of the plaintiffs' federal claims and finds that the plaintiffs have failed to plead jurisdictional damages sufficient to invoke the Court's diversity jurisdiction. The Court declines to take supplemental jurisdiction over the plaintiffs' state-law claims and dismisses this case for lack of subject matter jurisdiction.

Legal Standard

Pleadings in federal court must contain “a short and plain statement of the claim showing that the pleader is entitled to relief” Fed. R. Civ. P, 8(a)(2). Although “Rule 8 marks a notable and generous departure from the bypertechnical, code-pleading regime of a prior era, ... it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). Thus, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678 (citing Bell Atl. Corp, v. Twombly, 550 U.S. 544, 555 (2007).

At the motion to dismiss stage, the Court must generally accept factual allegations contained in the complaint as true, but the Court is “not compelled to accept unsupported conclusions and unwarranted inferences, or a legal conclusion couched as a factual allegation.” Baraka v McGreevey, 481 F.3d 187, 195 (3d Cir. 2007) (internal citations and quotation marks omitted). “To survive a motion to dismiss, a complaint must contain sufficient factual matter . . . to state a claim to...