UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Ralph Faiella
v. Civil No. 16-cv-088-JD Opinion No. 2017 DNH 250 Federal National Mortgage Association
O R D E R
Ralph Faiella brought a plea of title action in state court
against Federal National Mortgage Association (“Fannie Mae”) and
Green Tree Servicing LLC, now known as Ditech Financial LLC
(“Ditech”), which was removed to this court. Following prior
motion practice, Faiella’s remaining claims are for negligent
misrepresentation and deceit against Fannie Mae. Fannie Mae
moves for summary judgment on both claims and moves to strike
Faiella’s requests for certain damages and attorney’s fees.
Faiella objects.
Fannie Mae also moves to strike certain statements in the
affidavit Faiella filed in support of his opposition to Fannie
Mae’s motion for summary judgment. Faiella did not file an
objection to this motion.
I. Motion to Strike
In support of his objection to Fannie Mae’s motion for
summary judgment, Faiella attached his own affidavit. Doc. no.
87-2. In that affidavit, Faiella asserts numerous details concerning the servicing of his loan by Ditech, including his
interactions with his account representative, Latosha C.1 Fannie
Mae moves to strike several of Faiella’s statements, arguing
that they are not admissible. Faiella objects.
Whether an affidavit is admissible for summary judgment
purposes is governed by Federal Rule of Civil Procedure 56.
Under Rule 56, “[a]n affidavit or declaration used to support or
oppose a motion must be made on personal knowledge, set out
facts that would be admissible in evidence, and show that the
affiant or declarant is competent to testify on the matters
stated.” Fed. R. Civ. P. 56(c)(4). “[P]ersonal knowledge is
the touchstone” of the admissibility analysis. Perez v. Volvo
Car Corp., 247 F.3d 303, 315–16 (1st Cir. 2001). In addition,
an affidavit’s statements “must concern facts as opposed to
conclusions, assumptions, or surmise” to be admissible. Id. at
316. Finally, because Rule 56 “requires a scalpel not a butcher
knife,” a court must only strike the portions of an affidavit
that are inadmissible, while crediting the remaining portions.
HMC Assets, LLC v. Conley, No. CV 14-10321-MBB, 2016 WL 4443152,
at *2 (D. Mass. Aug. 22, 2016) (quoting Perez, 247 F.3d at 315).
Faiella’s second amended complaint uses the names 1
“Latasha” and “Latosha” to refer to his account representative at Ditech. For consistency, the court will adopt the spelling Latosha.
2 Fannie Mae has identified several statements in Faiella’s
affidavit that it contends are inadmissible. Several of those
statements concern Faiella’s personal knowledge of his
interactions with Ditech and its representatives and are,
therefore, likely admissible under Rule 56. Nevertheless, other
statements appear to be inadmissible.
For example, Faiella makes statements about the internal
workings of Ditech’s servicing systems without explaining how
that information is within his personal knowledge. Further,
Faiella asserts that the repayment amount on his mortgage
statement was incorrect, which is a conclusion that is
unsupported by any facts in the record. In any case, the court
need not parse the affidavit because, as discussed below, the
challenged statements are not material to the court’s resolution
of Fannie Mae’s summary judgment motion.
II. Motion for Summary Judgment
Fannie Mae moves for summary judgment on Faiella’s
remaining negligence and deceit claims, arguing that they are
barred by the economic loss doctrine and the Merrill doctrine.
Alternatively, Fannie Mae moves to strike Faiella’s claims for
certain damages. Faiella objects, contending that his claims
are not barred by either doctrine. In addition, Faiella argues
3 that he is entitled to emotional distress damages based on the
underlying conduct alleged in the case.
On November 14, 2017, Fannie Mae notified the court of its
intent to reply to Faiella’s objection. In a procedural order,
the court granted Fannie Mae leave to file a reply no later than
November 27, 2017 and leave for Faiella to file a surreply no
later than December 7, 2017. Doc. no. 91. As the record in
this case demonstrates, the plaintiff’s counsel repeatedly has
missed deadlines and filed “emergency” motions for extensions of
time. Because of that pattern and the resulting delay in the
case, the court ordered that the deadlines for defendants’ reply
and for the plaintiff’s surreply were “ABSOLUTE.” Doc. no. 91
at 1. The parties did not object to the absolute deadlines.
Despite that order, the plaintiff’s counsel filed his
surreply on December 11, several days after the court’s absolute
deadline of December 7. Because plaintiff failed to meet the
deadline as ordered, the court will not consider plaintiff’s
surreply. Therefore, the court will rule on the pending motion
for summary judgment based on the record as of December 5, 2017.
Legal Standard
Summary judgment is appropriate where the moving party
“shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.”
4 Fed. R. Civ. P. 56(a). “A dispute is ‘genuine' if the record
permits a sensible factfinder to decide it in either party's
favor.” Eldridge v. Gordon Bros. Grp., L.L.C., 863 F.3d 66, 77
(1st Cir. 2017). “And a fact is ‘material' if its existence or
nonexistence ‘might affect the outcome of the suit under the
governing law.’” Id. (quoting Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986)). In conducting its review, the court
draws “all reasonable inferences in favor of the nonmoving party
while ignoring conclusory allegations, improbable inferences,
and unsupported speculation.” Young v. Wells Fargo Bank, N.A.,
828 F.3d 26, 31 (1st Cir. 2016) (internal quotation marks
omitted). Where, as here, the party moving for summary judgment
bears the burden of proof on an issue, it “cannot attain summary
judgment unless the evidence [it] provides on that issue is
conclusive.” Asociacion de Suscripcion Conjunta del Seguro de
Responsabilidad Obligatorio v. Juarbe-Jimenez, 659 F.3d 42, 50
(1st Cir. 2011).
Factual Background
In July 2007, Faiella obtained a loan secured by a mortgage
on a condominium property in Plaistow, New Hampshire. The note,
which was originally payable to Bank of America, N.A., was
subsequently assigned to Fannie Mae. In September 2013, Ditech
began servicing the mortgage loan on behalf of Fannie Mae.
5 A. Foreclosure
Faiella fell behind on his mortgage payments in the middle
of 2015. Faiella then received a letter from Ditech informing
him that he should contact his “special point of contact,”
Latosha C., to obtain a correct reinstatement amount. At around
the same time, Fannie Mae’s counsel sent Faiella a foreclosure
notice informing him that a foreclosure sale had been scheduled
for October 16, 2015.
Faiella called Latosha C. on September 9, 2015. Latosha C.
informed Faiella that he could cure the default by sending
Ditech a payment for $6,167. Faiella sent a check for the
reinstatement amount that Latosha C. had provided. On September
28, 2015, Faiella received a letter from the bank returning his
check and informing him that the payment was for the incorrect
amount. The letter also directed Faiella to contact Latosha C.
to obtain the correct reinstatement amount on his loan.
As directed, Faiella again contacted Latosha C. Latosha C.
informed Faiella that the amount of his payment was correct but
that the check was returned because it was a personal check, not
a cashier’s check. Faiella then obtained a cashier’s check for
the quoted reinstatement amount of $6,167.21. Faiella sent the
cashier’s check to Ditech through overnight mail several days
before the scheduled foreclosure.
6 Despite Faiella’s attempts to cure his loan, Fannie Mae
foreclosed on the property on the scheduled date. Faiella did
not learn that the foreclosure had taken place until after it
had been completed. Following the foreclosure, Faiella received
a letter returning the cashier’s check and directing him to
obtain a reinstatement amount from Latosha C.
B. Ditech’s Servicing Obligations
At the time of the foreclosure, Ditech was required to
service Faiella’s loan pursuant to Fannie Mae’s Single Family
Servicing Guide. Doc. no. 64-2, at ¶ 6. That guide contains
several relevant requirements concerning Ditech’s performance of
its servicing duties. Under the guide, Ditech was required to
service mortgage loans “in a sound, businesslike manner,” and in
accordance with applicable laws and good judgment. See Doc. No.
64-7 at 7; see also at 99 (requiring compliance with all
“federal, state, and local laws”). Further, Ditech was required
to “have effective processes to promptly address borrower
inquiries (relating to both current and delinquent mortgage
loans),” id. at 74, and to “protect against fraud,
misrepresentation, or negligence by any parties involved in the
mortgage loan servicing process.” Id. at 76. Finally, Ditech
was also required to develop a quality control program
concerning its delinquency management and default prevention to
7 guard against misrepresentation and ensure that its representa-
tions to borrowers complied with applicable laws. Id. at 228-
29.
Procedural Background
In February 2016, Faiella brought a plea of title action in
state court against Fannie Mae and Ditech, asserting a wrongful
foreclosure claim and seeking damages for economic harm and
emotional distress. The defendants removed the case to this
court. Faiella amended his complaint on March 30, 2016. See
doc. no. 9. The amended complaint, unlike the original
complaint, did not contain any claims for damages against Fannie
Mae and Ditech. Rather, the amended complaint asserted a sole
claim for wrongful foreclosure against both defendants and
sought a declaration that the foreclosure was void, along with
attorney’s fees. In his amended complaint, Faiella explained
that he intended to file a separate action against Fannie Mae
and Ditech to quiet title and seek damages based on the wrongful
foreclosure. Id. at 1 n.1.
Ditech moved to dismiss the wrongful foreclosure claim
against it. Doc. no. 14. The court granted Ditech’s motion to
dismiss, concluding that no wrongful foreclosure claim could lie
against Ditech because it was not the entity that foreclosed on
8 Faiella’s property. Doc. no. 20.2 Because the wrongful
foreclosure claim was the only claim alleged against Ditech,
Ditech was dismissed from the case.
In July 2016, Fannie Mae filed a motion to rescind its
foreclosure deed and to restore Faiella’s original mortgage.
Doc. no. 25. Fannie Mae argued that if its requested relief
were granted, Faiella would still be in default but could remedy
that default under the terms of the mortgage. Faiella objected,
asserting that Fannie Mae’s requested relief would cause him to
waive his unasserted claims for damages3 and would leave Faiella
with a defaulted mortgage that he could not afford to pay. Doc.
no. 29.
The court denied Fannie Mae’s motion to rescind the
foreclosure deed because Fannie Mae had not brought a claim for
affirmative equitable relief and had failed to demonstrate that
such relief was warranted. Doc. no. 32. In addition, the court
observed that during the hearing on Fannie Mae’s motion to
rescind its foreclosure deed, Faiella had requested leave to
amend his complaint to assert damages claims against Fannie Mae.
The court granted Faiella’s oral motion, concluding that
2 In this order, the court also denied Faiella’s motion to remand the action back to state court.
3 Faiella apparently did not assert his claims for damages in state court as he had represented in his amended complaint.
9 “[g]iven the early posture of this case, the court grants
Faiella leave to file an amended complaint asserting his damages
claims against Fannie Mae.” Id. at 4-5.
The second amended complaint was docketed on October, 12,
2016. Doc. no. 40. That complaint asserted claims against
Fannie Mae and Ditech for violation of 12 C.F.R. § 1026.41,
deceit, negligent misrepresentation, violation of the Fair Debt
Collection Practices Act, violation of the New Hampshire Unfair,
Deceptive, or Unreasonable Collection Practices Act, and
violation of the New Hampshire Consumer Protection Act. Fannie
Mae moved to dismiss the statutory claims against it, arguing
that each of them failed as a matter of law. Ditech moved to
strike all claims against it, arguing that the court had only
granted Faiella leave to amend his complaint to assert claims
against Fannie Mae.
The court granted Fannie Mae’s motion to dismiss. Doc. no.
50. In addition, the court granted Ditech’s motion to strike,
concluding that it had “granted Faiella a limited opportunity to
amend his complaint to assert damages claims against Fannie
Mae,” and “that Faiella did not seek leave to add claims against
Ditech, and no such opportunity was granted.” Id. at 6.
Accordingly, the court struck Faiella’s claims against Ditech
from the second amended complaint.
10 Following the court’s order on Faiella’s motion to strike,
Faiella did not seek leave to amend his complaint to assert
damages claims against Ditech. Accordingly, the remaining
claims in this case are Faiella’s claims against Fannie Mae for
negligent misrepresentation and deceit.
Discussion
Faiella’s claims against Fannie Mae for deceit and
negligent misrepresentation are based on Ditech’s representation
that he should contact his account representative, Latosha C.,
who could provide him with the correct reinstatement amount.
Faiella alleges that this was a misrepresentation because
Latosha C., in fact, did not have access to the correct
reinstatement amount. Faiella further alleges that Latosha C.
provided him the incorrect reinstatement amount. Faiella
alleges no misconduct or wrongdoing by Fannie Mae in support of
his deceit and negligent misrepresentation claims. Therefore,
Faiella seeks to hold Fannie Mae indirectly liable for the
conduct of Ditech, its servicer.
Fannie Mae moves for summary judgment on Faiella’s claims
based on the economic loss doctrine and the Merrill doctrine.
In addition, Fannie Mae moves to strike Faiella’s requests for
emotional distress damages, punitive damages, loss of consortium
11 damages, and attorney’s fees, arguing that those damages and
fees are not available under Faiella’s claims.
Faiella objects, contending that neither the economic loss
doctrine nor the Merrill doctrine are applicable to his claims.
Faiella also contends that he is entitled to emotional distress
damages because Ditech’s conduct shocks the conscience.
I. Merrill Doctrine
Fannie Mae contends that Faiella’s claims against it should
be dismissed under the Merrill doctrine because, even if Ditech
provided Faiella false information or improperly serviced his
loan, Fannie Mae did not authorize Ditech to do so. In
response, Faiella contends that the Merrill doctrine is
inapplicable to his claims.
A. Legal Framework
The Merrill doctrine derives its name from Federal Crop.
Ins. Corp. v. Merrill, 332 U.S. 380 (1947). In Merrill, an
agent for the Federal Crop Insurance Company (“FCIC”), a
government-owned corporation, erroneously informed the
plaintiffs that their crops were insurable under the Federal
Crop Insurance Act and its accompanying regulations. Id. at
382-83. When the plaintiffs sought recovery under their
insurance contract, the FCIC refused to pay based on the
operative regulations. Id. at 383. The plaintiffs brought
12 suit, and the state court found the FCIC liable based on the
theory that a private insurance company, under similar
circumstances, would be bound by its agent’s actions. Id.
On appeal, the Supreme Court concluded that the FCIC could
not be bound by its agent’s representations or estopped from
enforcing its regulations. Id. at 384-85. The Court assumed
that the plaintiffs could recover against a private insurance
company but emphasized that the FCIC was not an ordinary private
entity. Id. at 383-84. The Court reasoned that the “Government
may carry on its operations through conventional executive
agencies or through corporate forms especially created for
defined ends.” Id. at 384. In support of its conclusion that
the FCIC, as a federal instrumentality, could not be held liable
for its agents’ representations, the Court stated that
“[w]hatever the form in which the Government functions, anyone
entering into an arrangement with the Government takes the risk
of having accurately ascertained that he who purports to act for
the Government stays within the bounds of his authority.” Id.
Based on Merrill, “most courts . . . have held that a
federal government entity cannot be held responsible for the
unauthorized acts of an agent.” Cannon v. Wells Fargo Bank
N.A., 917 F. Supp. 2d 1025, 1034–35 (N.D. Cal. 2013). For
example, the First Circuit has stated that “doctrines such as
estoppel and apparent authority are not available to bind the
13 federal sovereign.” United States v. Ellis, 527 F.3d 203, 208
(1st Cir. 2008) (assessing whether government could be bound by
promise) (quoting United States v. Flemmi, 225 F.3d 78, 85 (1st
Cir. 2000)). The rationale for the Merrill rule against
estoppel rests on separation of powers and public policy
principles. Mendrala, 955 F.2d at 1140. As the District Court
of Maine has observed, the primary policy underlying the Merrill
doctrine is that Congress has the power “to impose limits on
what its creations may do.” Dupuis v. Fed. Home Loan Mortg.
Corp., 879 F.Supp. 139, 145 (D. Me. 1995).
B. Application
Here, Fannie Mae argues that it is protected under the
Merrill doctrine because it is a federal instrumentality and
because Ditech lacked authority from Fannie Mae to provide
Faiella incorrect information or otherwise improperly service
his loan. In support, Fannie Mae points to the provisions in
its Family Servicing Guide that required Ditech to service its
loans in a reasonable and legal manner and to protect against
misrepresentation. Fannie Mae also argues that there is no
allegation in the operative complaint that it expressly
authorized Ditech to provide Faiella with false information.
Faiella does not dispute that Ditech lacked actual
authority to provide him false information or commit the
14 servicing errors at issue in this case.4 Rather, Faiella asserts
that the Merrill doctrine is inapplicable here for three
principal reasons. First, Faiella argues that the principle of
estoppel does allow for federal instrumentalities to be held
responsible for the unauthorized acts of their agents in certain
circumstances. Second, Faiella contends that Fannie Mae has not
demonstrated that it is a federal instrumentality under the
Merrill doctrine. Third, Faiella argues that the Merrill
doctrine does not apply to tort claims.
1. Federal Instrumentality
Faiella contends that Fannie Mae has not presented evidence
demonstrating that it should be considered a federal
instrumentality for the purposes of the Merrill doctrine. In
response, Fannie Mae argues that it is a federal instrumentality
under the Merrill doctrine because of its governmental purpose.
“Classification as a government entity in [the Merrill]
context turns on whether estoppel would thwart congressional
intent.” Paslowski, 129 F.Supp.2d at 800 (quoting Mendrala, 955
F.2d at 1140). Accordingly, courts have concluded that an
entity is a federal instrumentality under the Merrill doctrine
where Congress created the entity to serve an important
4 Faiella argues that Ditech possessed apparent authority to commit the alleged servicing errors at issue. Doc. no. 87-1 at 12-14.
15 governmental objective or purpose. Paslowski, 129 F.Supp.2d at
800-01 (citing cases).
Fannie Mae was created by federal statute in 1938 for the
purpose of providing stability in the secondary market for
residential mortgages, increasing liquidity in mortgage
investments, and promoting access to mortgage credit for
consumers. Perry Capital LLC v. Mnuchin, 864 F.3d 591, 599
(D.C. Cir. 2017) (citing 12 U.S.C. § 1716); see also 12 U.S.C.
§§ 1716b & 19 (describing Fannie Mae’s secondary market
operations). Although Fannie Mae was initially government-
owned, Congress converted Fannie Mae into a “Government-
sponsored private corporation” in 1968. Lightfoot v. Cendant
Mortg. Corp., 137 S. Ct. 553, 557 (2017) (describing history of
Fannie Mae). Despite this conversion, Fannie Mae’s “charter,
and therefore its function ..., were unchanged.” Herron, 861
F.3d at 168 (quoting DeKalb County v. Federal Housing Finance
Agency, 741 F.3d 795, 797 (7th Cir. 2013)).
Based on its government-sponsored status, numerous courts
have concluded that Fannie Mae is a federal instrumentality
under the Merrill doctrine and, for that reason, cannot be
liable for the unauthorized acts of its servicers. Gray v.
Seterus, Inc., 233 F. Supp. 3d 865, 870 (D. Or. 2017); Toler v.
PHH Mortg. Corp., No. 6:12-6032, 2014 WL 1266838, at *3 (W.D.
Ark. Mar. 26, 2014) (dismissing claims against Fannie Mae);
16 Cannon v. Wells Fargo Bank N.A., 917 F. Supp. 2d 1025, 1035
(N.D. Cal. 2013) (dismissing claims against Fannie Mae); Hinton
v. Fed. Nat. Mortg. Ass'n, 945 F. Supp. 1052, 1060 (S.D. Tex.
1996), aff'd, 137 F.3d 1350 (5th Cir. 1998). Moreover, several
other courts have concluded that the Federal Home Loan Mortgage
Corporation (“Freddie Mac”), another government-sponsored entity
with similar governmental objectives, is a federal
instrumentality under the Merrill doctrine.5
Nevertheless, Faiella contends that Fannie Mae has not
demonstrated that it is a federal instrumentality for the
purposes of the Merrill doctrine. In support, Faiella cites
U.S. ex rel. Adams v. Aurora Loan Servs., Inc., 813 F.3d 1259,
1261–62 (9th Cir. 2016), and Herron v. Fannie Mae, 861 F.3d 160,
167 (D.C. Cir. 2017). Those cases, however, do not address
whether Fannie Mae is a federal instrumentality under the
Merrill doctrine but instead assess whether Fannie Mae qualifies
as a federal entity for different purposes. See Aurora 813 F.3d
at 1261–62 (9th Cir. 2016) (Fannie Mae not a federal entity for
5 See, e.g., Mendrala v. Crown Mortg. Co., 955 F.2d 1132, 1141 (7th Cir. 1992)(concluding that the Merrill doctrine barred claims against the Freddie Mac based on the actions of its servicer); McCauley v. Thygerson, 732 F.2d 978, 982 (D.C. Cir. 1984); Johnson v. Federal Home Loan Mortg. Corp., 2013 WL 2445367, at *4 (W.D. Wash. June 5, 2013); Paslowski v. Standard Mortg. Corp. of Georgia, 129 F. Supp. 2d 793, 804-05 (W.D. Pa. 2000).
17 purposes of False Claims Act); Herron, 861 F.3d at 167 (Fannie
Mae not a government actor for constitutional purposes). As
Faiella concedes, however, the tests for determining whether an
entity is a federal instrumentality differ depending on the
context in which the issue is addressed. Doc. no. 87-1 at 10
n.8; see also Mendrala, 955 F.2d at 1139–40 (concluding that
Freddie Mac is a federal entity under Merrill but not under the
Federal Tort Claims Act). Accordingly, Faiella has presented no
authority supporting his assertion that Fannie Mae is not a
federal instrumentality under the Merrill doctrine.
Because Fannie Mae was designed for an important
governmental objective and because it is still pursuing that
objective, it is a federal instrumentality for the purpose of
the Merrill doctrine.
2. Estoppel Against the Government
Faiella argues that even if Fannie Mae is a federal
instrumentality, it can still be estopped under certain
circumstances. In support, Faiella cites several cases
supporting the proposition that estoppel and apparent authority
are valid bases to bind a federal entity. Recent case law from
the Supreme Court and the First Circuit, however, has emphasized
that estoppel against the government is exceedingly rare. See
Office of Personnel Management v. Richmond, 496 U.S. 414, 421-23
18 (1990); Nagle v. Acton-Boxborough Reg'l Sch. Dist., 576 F.3d 1,
4-6 (1st Cir. 2009). The First Circuit has held that if
estoppel against the government is to occur, the party seeking
to assert estoppel “must show that the government engaged in
affirmative misconduct.” Shafmaster v. United States, 707 F.3d
130, 136 (1st Cir. 2013).
Although “affirmative misconduct” has not been defined, it
is generally understood to require more than “careless
statements.” Nagle, 576 F.3d at 5–6. In other words,
“affirmative misconduct requires something more than simple
negligence.” Dantran, Inc. v. U.S. Dept. of Labor, 171 F.3d 58,
67 (1st Cir. 1999).
Here, there is no evidence in the record that Fannie Mae
authorized or affirmatively encouraged Ditech to improperly
service Faiella’s loan. Although Faiella argues that Fannie Mae
failed to prevent Ditech’s alleged servicing violations, that
conduct, even if true, fails to demonstrate that Fannie Mae
engaged in any affirmative misconduct. See Mendrala, 955 F.2d
at 1141 (Freddie Mac’s failure to prevent misrepresentations
from servicer was not affirmative misconduct); see also
Paslowski, 129 F. Supp. 2d 793, 800 n. 11 (W.D. Pa. 2000) (no
affirmative misconduct to estop Freddie Mac where servicer acted
19 outside its authority).6 Finally, there is no evidence in the
record that would support an inference that Ditech’s alleged
misrepresentations were the result of affirmative misconduct as
opposed to carelessness. Accordingly, the court concludes that
this is not a case where estoppel is applicable to bind a
federal instrumentality.
3. Application to Tort Claims
Faiella argues that the Merrill doctrine applies only to
contract claims, not tort claims. In response, Fannie Mae
argues that the Merrill doctrine does apply to tort claims.
6 The only evidence that Faiella submitted in support of his argument that Fannie Mae should be estopped is a consent decree from April 2015 arising out of a litigation between Ditech and the Consumer Financial Protection Bureau. Doc. no. 89. Faiella briefly argues that the consent decree provided Fannie Mae “notice that Green Tree had a pattern of making false statements to borrowers similar to above.” Doc. no. 87-1 at 13. As discussed above, the failure to prevent an agent’s misrepresentation does not, generally, constitute affirmative misconduct. In any case, Faiella, does not explain how any portion of the consent decree, a sixty-five page document, provides notice of the alleged misrepresentations in this case. This is especially problematic because the consent decree states that Ditech “neither admits nor denies any of the allegations in the Complaint, except as specifically stated in this order.” Doc. no. 89 at ¶ 3. Therefore, the court does not credit the consent decree as evidence of any wrongdoing on the part of Ditech or Fannie Mae. See Quasebarth Quasebarth v. Green Tree Servicing, LLC, No. 4:14-CV-223 (CDL), 2016 WL 427087, at *3 (M.D. Ga. Feb. 3, 2016) (declining to credit consent decree between the CFPB and Ditech because the order contained no admissions of guilt and was inadmissible under the Federal Rules of Evidence).
20 Although the Merrill case involved a defense to a contract
claim, courts have applied the Merrill doctrine to bar both
contract and tort claims. See Restatement (Third) Of Agency §
2.03 (2006)(“The Merrill doctrine has been extended beyond
contract claims . . . .”); Seterus, 233 F. Supp. 3d at 870
(dismissing statutory tort claims against Fannie Mae based on
Merrill doctrine); Toler, 2014 WL 1266838, at *3 (dismissing
tortious interference with contractual relations claims based on
Merrill doctrine); Cannon, 917 F. Supp. 2d at 1035 (dismissing
statutory tort claim and breach of fiduciary duty claim against
Fannie Mae and observing that “the Merrill doctrine has been
applied to both contract and tort-based claims”); Deerman v.
Fed. Home Loan Mortg. Corp., 955 F. Supp. 1393, 1400-01 (N.D.
Ala. 1997) (dismissing statutory tort claim under the Merrill
doctrine), aff’d sub nom. Deerman v. Fed. Home Loan Mortg., 140
F.3d 1043 (11th Cir. 1998); Paslowski, 129 F. Supp. 2d at 804
(dismissing statutory tort claim against Freddie Mac based on
Merrill doctrine).
In support of his argument that the Merrill doctrine does not
apply to tort claims, Faiella cites Bowen v. Ditech, 2:16-cv-
00195-JAW, 2017 WL 4158601 (D. Me. 2017). Faiella argues that
Bowen is “a good example of the cases that have held that the
Merrill Doctrine applies to contract claims; not to torts.” In
Bowen, the court concluded that Fannie Mae could be vicariously
21 liable based on its servicer’s conduct. Id. at 16. The
defendants in Bowen, however, never raised the Merrill doctrine
as a defense, and, as a result, the court in Bowen did not
consider whether the doctrine applied to the tort claims alleged
there. Id. Therefore, Bowen does not support Faiella’s
assertion that the Merrill doctrine is inapplicable to tort
claims.7
Accordingly, the court concludes that the Merrill doctrine
applies to Faiella’s tort claims. Because Fannie Mae is a
federal instrumentality and because it is undisputed that Fannie
Mae did not authorize Ditech to commit the servicing errors at
issue, Fannie Mae is protected under the Merrill doctrine.
Therefore, Fannie Mae is entitled to summary judgment on
Faiella’s claims for negligent misrepresentation and deceit.
II. Economic Loss Doctrine and Motion to Strike
Because Fannie Mae is entitled to summary judgment under
Merrill doctrine on Faiella’s remaining claims, the court need
7 Faiella also cites Charest v. FNMA, 9 F.Supp.3d 114, 127- 28 (D. Mass. 2014) and Cremaldi v. Wells Fargo Bank, N.A., 2017 WL 1190377, at *17 (D. Mass. Mar. 30, 2017) in support of his argument that the Merrill doctrine cannot be applied to tort claims. In both of those cases, however, the defendant did not raise, and the court did not consider, whether the Merrill doctrine applied.
22 not address Fannie Mae’s remaining arguments concerning the
economic loss doctrine and the availability of certain damages.
Conclusion
For the foregoing reasons, Fannie Mae’s motion for summary
judgment (doc. no. 64) is granted and Fannie Mae’s motion to
strike portions of Ralph Faiella’s affidavit (doc. no. 93) is
denied as moot.
The clerk shall close the case and enter judgment in
accordance with this order.
SO ORDERED.
__________________________ Joseph A. DiClerico, Jr. United States District Judge
December 13, 2017
cc: Benjamin M. Greene, Esq. Amy B. Hackett, Esq. David Himelfarb, Esq. William C. Sheridan, Esq.