In its Memorandum of Law in support of its Motion, Defendant states that the caption in 1

this matter erroneously names “Wells Fargo Home Loans, Inc.” as the defendant. (Doc. No. 5 at

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MAUREEN DOUGHERTY, :

:

Plaintiff, : CIVIL ACTION

:

v. :

: NO. 04-CV-4820

WELLS FARGO HOME LOANS, INC., :

 :

Defendant. :

SURRICK, J. MARCH 28, 2006

MEMORANDUM & ORDER

Presently before the Court is Motion of Defendant, Wells Fargo Home Mortgage, To

Dismiss The Complaint (Doc. No. 5). For the following reasons, Defendant’s Motion will be

granted in part and denied in part.

I. BACKGROUND

In 1988, Plaintiff executed a mortgage in favor of Weichert Mortgage Company, Inc. On

March 31, 2000, Plaintiff filed a petition for bankruptcy protection in the Eastern District of

Pennsylvania under Chapter 13 of the Bankruptcy Code. In re Dougherty, No. 00-14171 (Bankr.

E.D. Pa. Mar. 31, 2000). On June 30, 2000, G.E. Capital Mortgage Services, Inc. (“G.E.

Capital”), which was servicing Plaintiff’s mortgage, filed a proof of claim in Plaintiff’s

bankruptcy, which was then amended on September 1, 2000. (Doc. No. 1 at Ex. E.) On or about

September 12, 2000, G.E. Capital assigned its mortgage portfolio, including Plaintiff’s mortgage,

to Wells Fargo Home Mortgage (“Defendant” or “Wells Fargo”), a mortgage servicing

company. (Doc. No. 1 ¶ 45.) On October 13, 2000, Plaintiff’s Chapter 13 plan was confirmed. 1

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 1 of 17
1.) Defendant avers that no such entity exists, but that Wells Fargo Home Mortgage, a division

of Wells Fargo Bank, N.A., serviced the loan that is the subject of Plaintiff’s Complaint. (Id.) 

When we refer to “Defendant” or “Wells Fargo” we will be

referring to Wells Fargo Home Mortgage.

2

(Doc. No. 1 ¶ 50.) In December 2001, after Plaintiff fell behind on her mortgage obligations,

G.E Capital filed for relief from the automatic stay in Plaintiff’s bankruptcy. (Doc. No. 1 at Ex.

A.) In February 2002, Plaintiff and G.E. Capital stipulated a resolution of the arrears. (Doc. No.

1 ¶; id. at Ex. B.). 

On March 26, 2004, in response to a request by Plaintiff, Defendant provided a payoff

statement to Plaintiff that included a charge for “Recoverable Corporate Advance” of $3,768.50. 

(Id. at Ex. F.) Plaintiff asserts that “Recoverable Corporate Advance” represents mortgagerelated attorney’s fees and costs, and that at no time prior to this letter did Defendant notify or

indicate to Plaintiff that Plaintiff was being charged these attorney’s fees. (Id. ¶ 54.) Plaintiff

further alleges that $1,317.50 of the Advance is for post-petition bankruptcy fees. (Id. ¶ 59.) On

May 19, 2004, Plaintiff paid Defendant the full amount of its payoff statement, including the

disputed fees. (Id. ¶ 51.) On October 14, 2004, Plaintiff filed this Class Action Complaint

seeking relief for Defendant’s alleged misconduct based upon the following theories: violation

of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692a, et seq. (Count One);

violation of the Bankruptcy Code (Count Two); breach of contract (Count Three); and unfair

trade practices in violation of Pennsylvania law (Count Four). Plaintiff’s bankruptcy was

discharged on November 30, 2004. (Doc No. 7 at 4.)

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 2 of 17
3

II. LEGAL STANDARD

When considering a motion to dismiss a complaint for failure to state a claim pursuant to

Federal Rule of Civil Procedure 12(b)(6), a district court must “accept as true all of the

allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view

them in the light most favorable to the non-moving party.” Rocks v. City of Phila., 868 F.2d 644,

645 (3d Cir. 1989). The court may dismiss a complaint only if “‘it is clear that no relief could be

granted under any set of facts that could be proved consistent with the allegations.’” H. J., Inc. v.

Nw. Bell Tel. Co., 492 U.S. 229, 249 (1989) (quoting Hishon v. King & Spalding, 467 U.S. 69,

73 (1984)). When considering a motion to dismiss, we need not credit a plaintiff’s “bald

assertions” or “legal conclusions.” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir.

1997) (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1429-30 (3d Cir.

1997)).

Generally, when a defendant moves to dismiss a complaint and submits documents

outside the complaint for consideration, the court should convert the motion into one for

summary judgment. See Fed. R. Civ. P. 12(c); Angelino v. The N.Y. Times Co., 200 F.3d 73, 88

(3d Cir. 2000). However, the Third Circuit has determined that “a court may consider an

undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if

the plaintiff’s claims are based on the document.” Pension Benefit Guar. Corp. v. White Consol.

Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993). Here, the parties both agreed to the submission

of the underlying mortgage instrument upon which Plaintiff has based some of her claims. 

Because the mortgage document is integral to the complaint, we will consider it in deciding

Defendants’ motion to dismiss. See Gurfein v. Sovereign Group, 826 F. Supp. 890, 898 (E.D.

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 3 of 17
 Section 506(b) provides, in pertinent part: 2

To the extent that an allowed secured claim is secured by property the value of

which . . . is greater than the amount of such claim, there shall be allowed to the

holder of such claim, interest on such claim, and any reasonable fees, costs, or

charges provided for under the agreement or state statute under which such claim

arose.

11 U.S.C. § 506(b). 

4

Pa. 1993); see also Hudson United Bank v. LiTenda Mortgage Corp., 142 F.3d 151, 154 n.5 (3d

Cir. 1998) (district court properly considered evidence attached by defendant and relied on by

both parties when it granted defendant’s motion to dismiss).

III. LEGAL ANAYLSIS

A. Count Two: Section 506 of the Bankruptcy Code

In Count Two of her Complaint, Plaintiff alleges that § 506(b) of the Bankruptcy Code

requires that any bankruptcy-related attorney’s fees and costs assessed by Defendant after the

bankruptcy petition is filed are not allowed without application to and approval by the

bankruptcy court. (Doc. No. 1 at 23.) Plaintiff contends that because Defendant did not seek 2

nor receive such approval from the bankruptcy court, the attorney’s fees that Defendant charged

to Plaintiff are not permitted under the Code. Plaintiff further contends that this Court should use 

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 4 of 17
 Section 105 provides, in pertinent part:

3

The court may issue any order, process, or judgment that is necessary or

appropriate to carry out the provisions of this title. No provision of this title

providing for the raising of an issue by a party in interest shall be construed to

preclude the court from, sua sponte, taking any action or making any

determination necessary or appropriate to enforce or implement court orders or

rules, or to prevent an abuse of process.

11 U.S.C. § 105.

 Plaintiff’s counsel in Joubert and Plaintiff’s counsel here are the same. 4

5

its powers pursuant to § 105 of the Code to essentially create a private right of action for § 3

506(b). 

The Third Circuit recently addressed this very issue in the case of Joubert v. ABN AMRO

Mortgage Group, Inc. (In re Joubert), 411 F.3d 452 (3d Cir. 2005), a case that is strikingly

similar to the instant case. In Joubert, the plaintiff paid a “corporate advance balance” in 4

connection with her mortgage obligations to the defendant, and alleged that this balance

represented the defendant’s post-petition, pre-confirmation attorney’s fees. Id. at 454. The

plaintiff in Joubert contended that the defendant mortgage company had failed to provide written

notice of the fees, thus depriving the plaintiff of bankruptcy court oversight of the reasonableness

of the fee. Id. The plaintiff argued that the fees violated § 506(b) and that the court should imply

a private right of action for this violation through § 105(a). Id. The Third Circuit observed that §

105(a) “has a limited scope,” and “does not ‘create substantive rights that would otherwise be

unavailable under the Bankruptcy Code.’” Id. at 455 (quoting In re Cont’l Airlines, 203 F.3d 203

(3d Cir. 2000)). The Court noted that the typical challenge to creditor collection efforts occurs

post-discharge, thus arising under 11 U.S.C. § 524. Id. However, the plaintiff in Joubert

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 5 of 17
6

challenged the collection of attorney’s fees which were first disclosed in the interim between

confirmation and discharge. See id. Thus, § 524 could not be used as a vehicle for relief, and

relief was sought under §§ 105(a) and 506(b). The Third Circuit concluded that the difference in

the timing of the disclosure does not control the outcome. Relying on case law regarding

challenges under § 524, the Court determined that § 105(a) “does not afford debtors a private

cause of action to remedy alleged violations of § 506(b).” Id. Clearly, Joubert is controlling

here. Accordingly, Count Two of Plaintiff’s Complaint does not state a claim for which relief

can be granted. Count Two will be dismissed. 

B. Count One: Section 1692 of the FDCPA 

1. Preclusion

In Count One of the Complaint, Plaintiff alleges that Defendant has violated both § 1692e

and § 1692f of the FDCPA. In response, Defendant asserts that Count One must be dismissed

because the FDCPA claim is precluded by the Bankruptcy Code. 

“When two federal statutes address the same subject in different ways, the right question

is whether one implicitly repeals the other . . . . It takes either irreconcilable conflict between the

statutes or a clearly expressed legislative decision that one replace the other.” Randolph v. IMBS,

Inc., 368 F.3d 726, 730 (7th Cir. 2004). The Third Circuit has not addressed the issue of whether

claims under the FDCPA are precluded by the Bankruptcy Code. We will, therefore, look to the

case law in other jurisdictions. 

There appears to be no unanimity among the courts on the issue of the Code’s preclusive

effect on FDCPA claims. In Diamante v. Solomon & Solomon, P.C., No. 99-1339, 2001 WL

1217226 (N.D.N.Y. Sept. 18, 2001), a bankruptcy court determined that the defendant had

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 6 of 17
7

violated the injunction provision of 11 U.S.C. § 524 when it froze the plaintiff’s bank account. 

Plaintiff brought an action in the district court contending that the defendant had violated the

FDCPA. After examining the case law on the issue, the Diamante court concluded that the Code

precluded Plaintiff’s FDCPA claim. The court noted that § 524 of the Code, the violation of

which was the basis for the FDCPA claim, provided for a specific remedy for violations of that

provision—a civil contempt proceeding—and that to allow the plaintiff to circumvent that

provision and its remedy by bringing an FDCPA claim “would directly contravene the

Bankruptcy Code’s remedial scheme.” Id. at *7. Other courts have come to the same conclusion

where the collection occurred post-discharge. See Walls v. Wells Fargo Bank, 276 F.3d 502, 510

(9th Cir. 2002) (plaintiff’s FDCPA claim, based on an alleged violation of § 524, “necessarily

entails bankruptcy-laden determinations”; to permit a claim under FDCPA “would allow through

the back door what [plaintiff] cannot accomplish through the front door—a private right of action

[under § 524]”); Kibler v. WFS Fin., Inc., No. 00-5217, 2000 WL 1470655 (C.D. Cal. Sept. 13,

2000). However, the instant case does not involve § 524 of the Bankruptcy Code. The

disclosure and collection of the improper fees both occurred prior to Plaintiff’s discharge from

bankruptcy. 

In the case of Randolph v. IMBS, Inc., the Seventh Circuit addressed the question of

whether an FDCPA claim was precluded where it was based upon the automatic stay provision of

§ 362 of the Bankruptcy Code. The district court had held that remedies under the Bankruptcy

Code are the only recourse against post-bankruptcy debt-collection efforts, so that the Code

trumps the FDCPA when they deal with the same subject. Randolph, 368 F.3d at 728. The

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 7 of 17
8

Seventh Circuit disagreed. Setting forth its own analysis, the Court noted that there was no

irreconcilable conflict between the Code and the FDCPA:

It would be better to recognize that the statutes overlap, each with coverage that

the other lacks—the Code covers all persons, not just debt collectors, and all

activities in bankruptcy; the FDCPA covers all activities by debt collectors, not

just those affecting debtors in bankruptcy. Overlapping statutes do not repeal one

another by implication; as long as people can comply with both, then courts can

enforce both.

Id. at 731; see also Wagner v. Ocwen Fed. Bank, No. 99-5404, 2000 WL 1382222, at *2 (N.D.

Ill. Aug. 28, 2000) (“[Plaintiff’s FDCPA] claim can be determined without doing violence to the

Bankruptcy Code’s purpose of adjudicating all claims in a single proceeding. . . . [Plaintiff] has

not attempted to bypass any remedies provided to her under the Code while her bankruptcy

petition was pending . . . .”). In support of its position, the Randolph court further noted that the

purposes of the two statutes are different: the FDCPA “regulates how debt collectors interact

with debtors” whereas the Bankruptcy Code regulates “what assets are made available to which

creditors and how much is left for debtors.” Randolph, 368 F.3d at 731. 

In this case, Defendant Wells Fargo does not point to any specific, applicable provision of

the Code that directly conflicts with the FDCPA, such that Defendant would be unable to comply

with both provisions. We can see little justification for concluding that preclusion is necessary in

this instance. 

Plaintiff also argues that her claims under the FDCPA are premised on the imposition and

collection of charges done “outside of and in disregard of the bankruptcy procedure,” in contrast

to those cases in which courts ruled in favor of preemption where the alleged misconduct

occurred in and during the bankruptcy proceedings themselves. (Doc. No. 7 at 5.) For instance,

in Gray-Mapp v. Sherman, 100 F. Supp. 2d 810 (N.D. Ill. 1999), the debtor brought a claim

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 8 of 17
9

under the FDCPA based on a creditor’s filing of an allegedly inflated proof of claim during the

bankruptcy. The Gray-Mapp court held that the Code was the exclusive remedy for such a claim. 

Id. at 811; see also Baldwin v. McCalla, Raymer, Padrick, Cobb, Nichols & Clark, L.L.C., No.

98-4820, 1999 WL 284788 (N.D. Ill. Apr. 26, 1999). The implication of Plaintiff’s argument is

that, should we allow Plaintiff’s FDCPA claims to go forward, they will not interfere with the

administration of her bankruptcy, especially considering that she received a discharge from the

bankruptcy court on November 30, 2004. The court in Molloy v. Primus Auto. Fin. Servs., 247

B.R. 804 (C.D. Cal. 2000), reached such a conclusion. In Molloy, the court held that Plaintiff’s

FDCPA claim was not precluded by the Bankruptcy Code. The court distinguished those cases

involving allegations of misconduct during the bankruptcy proceedings, where allowing an

FDCPA claim to go forward “could potentially undermine the Bankruptcy Code’s specific

provisions for administration of the debtor’s estate.” Id. at 820. The Molloy court observed that

the plaintiff’s FDCPA claim was premised solely on the defendant’s debt collection activities

“outside of and in disregard of the bankruptcy proceeding.” Id. While the Molloy case dealt with

a debtor who had already been discharged by the time the alleged debt collection misconduct had

occurred, we are satisfied that Defendant’s alleged misconduct here, post-confirmation, is

sufficiently removed from Plaintiff’s bankruptcy proceedings so that there is no risk of

undermining the Code’s provisions for the administration of the debtor’s estate. 

For these reasons, we will deny Defendant’s request to dismiss Plaintiff’s FDCPA claims

on grounds of preclusion. 

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 9 of 17
10

2. Section 1692f

Even though Plaintiff’s FDCPA claims are not precluded by the Bankruptcy Code,

Plaintiff’s Complaint does not state a violation of § 1692f. Section 1692f provides, in pertinent

part: 

A debt collector may not use unfair or unconscionable means to collect or attempt

to collect any debt. Without limiting the general application of the foregoing, the

following conduct is a violation of this section: (1) The collection of any amount

(including any interest, fee, charge, or expense incidental to the principal

obligation) unless such amount is expressly authorized by the agreement creating

the debt or permitted by law.

15 U.S.C. § 1692f. Paragraph 7 of Plaintiff’s mortgage instrument provides, in pertinent part:

If . . . there is a legal proceeding that may significantly affect Lender’s rights in

the Property (such as a proceeding in bankruptcy . . . ), then Lender may do and

pay for whatever is necessary to protect the value of the Property and Lender’s

rights in the Property. Lender’s actions may include . . . paying reasonable

attorney’s fees . . . .

Any amounts disbursed by Lender under this paragraph 7 shall become additional

debt of Borrower secured by this Security Instrument. Unless Borrower and

Lender agree to other terms of payment, these amounts shall bear interest from the

date of disbursement at the Note rate and shall be payable, with interest, upon

notice from Lender to Borrower requesting payment.

In her Complaint, Plaintiff alleges that the attorney’s fees and costs that Defendant charged her

should have been approved by the bankruptcy court, and that the fees were “above and beyond”

reasonable. (Doc. No. 1 ¶¶ 6-7.) She contends that the imposition and collection of these

disputed fees, without bankruptcy approval, violates § 1692f(1). (Id. ¶ 84. ) 

In Dawson v. Dovenmuehle Mortgage, Inc., No. 00-6171, 2002 WL 501499 (E.D. Pa.

Apr. 3, 2002), plaintiff’s counsel made a similar claim against a mortgage company on behalf of

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 10 of 17
 Again, Plaintiff’s counsel here and plaintiff’s counsel in Dawson are the same. 5

Moreover, Dawson is also a class action complaint.

 The FDCPA does not apply to debt collectors. According to the statute, a “debt 6

collector” does not include “any person collecting or attempting to collect any debt owed or due

or asserted to be owed or due another to the extent such activity . . . (iii) concerns a debt which

was not in default at the time it was obtained by such person . . . .” 15 U.S.C. § 1692a(6)(F). In

Dawson, the court noted that the FDCPA applies to a mortgage servicing company only where

the mortgage at issue was already in default at the time when servicing began. Dawson, 2002

WL 501499, at *5. Because the plaintiff in Dawson alleged that he was current with his

mortgage obligation and that the assignment to the defendant occurred before any default, the

statute did not apply. Id. Here, Plaintiff alleges that when G.E. Capital assigned its mortgage

portfolio to Defendant Wells Fargo, Plaintiff’s loan was in default, and thus Defendant does not

fall into this exception to the definition of debt collector in the FDCPA. (Doc. No. 1 ¶ 46.) As

evidence of this, Plaintiff refers to the proof of claim that G.E. Capital filed in Plaintiff’s

bankruptcy on June 30, 2000. Defendant does not refute this point. Although some courts have

held that mortgage servicing companies are not debt collectors and are thus statutorily exempt

from FDCPA liability, see, e.g., Zlupko v. Wash. Mut. Bank, No. 02-1179, 2004 WL 2297400, at

*2 n.2 (E.D. Pa. Oct. 13, 2004); Scott v. Wells Fargo Home Mortgage Inc., 326 F. Supp. 2d 709,

718 (E.D. Va. 2003), for the purposes of this Memorandum, we will assume that Defendant is a

debt collector as defined in the FDCPA, such that § 1692 applies. 

11

a debtor. Plaintiff alleged that the defendant mortgage company had violated § 1692f by 5

unlawfully billing the plaintiff for attorney’s fees incurred in relation to the bankruptcy

proceeding. Id. at *1. The defendant mortgage company contended that it was entitled to

recover any attorney’s fees that were necessary to be incurred in accordance with the mortgage,

that the legal fees were expressly authorized by the language in the mortgage, and that charging

the plaintiff for the attorney’s fees without bankruptcy court approval was lawful and in

compliance with the language in the mortgage instrument. Id. at *2. The language in paragraph

7 of the mortgage instrument at issue in Dawson is identical to the language cited above. The

Dawson court held that § 1692f did not apply to the defendant mortgage company, because it was

not a “debt collector” as defined in the statute. Id. at *5. The court also noted that “the 6

language in paragraph 7 of the instrument could not be in violation of 15 U.S.C. § 1692f(1),

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 11 of 17
12

since in interpreting the language in paragraph 7 courts have concluded that the language permits

a mortgagee to charge a mortgagor for the mortgagee’s attorneys’ fees and other expenses

incurred during the mortgagor’s bankruptcy.” Id. at *5 (citing In re Trabal, 254 B.R. 99, 103

(Bankr. D.N.J. 2000)). We agree. 

Here, Plaintiff contends that Defendant violated § 1692f(1) by charging her for fees,

including pre- and post-confirmation attorney’s fees, which were incurred post-petition and

which were never brought before the bankruptcy court for approval. (Doc. No. 7 at 3-4.) 

However, paragraph 7 expressly authorizes Defendant to pay costs to protect the value of the

mortgaged property, including attorney’s fees, and to charge Plaintiff for such fees. Plaintiff’s

contention that the attorney’s fees were not reasonable is more properly addressed in her breach

of contract claim. See Dawson, 2002 WL 501499, at *6. Because Plaintiff’s FDCPA claim is

based on fees incurred during Plaintiff’s bankruptcy, and because those fees were charged

pursuant to paragraph 7 of the underlying mortgage document, her claim will be dismissed. 

3. Section 1692e

Section 1692e provides: “A debt collector may not use any false, deceptive, or

misleading representation or means in connection with the collection of any debt.” 15 U.S.C. §

1692e. Unlike § 1692f, this provision of the FDCPA does not contain an exception for collection

of amounts expressly authorized by the agreement creating the debt. Thus, “[e]ven if attorneys’

fees are authorized by contract . . . and even if the fees are reasonable, debt collectors must still

clearly and fairly communicate information about the amount of the debt to debtors.” Fields v.

Wilber Law Firm, 383 F.3d 562, 565 (7th Cir. 2004). Plaintiff alleges Defendant violated §

1692e by using false representations and means in connection with the collection of illegal

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 12 of 17
13

attorney’s fees, including “sub silentio” accumulation of the fees, the use of deceptive phrases

such as “recoverable corporate advances,” the failure to provide notice of such charges, and the

failure to obtain bankruptcy court approval of such charges. (Doc. No. 1 ¶¶ 79-85.) 

In Fields, the plaintiff’s account balance, as stated by the defendant in a communication

to plaintiff, exceeded the plaintiff’s principal obligation because it included attorney’s fees, but

nowhere did the defendant explain to the plaintiff that such fees were included in the balance. 

Fields, 383 F.3d 566. The Seventh Circuit observed that an unsophisticated consumer could

reasonably be confused by this tactic, noting that “[i]t is unfair to consumers under the FDCPA

to hide the true character of the debt, thereby impairing their ability to knowledgeably assess the

validity of the debt.” Id. The Fields court advised that a defendant debt collector could avoid

violation of § 1692e by itemizing the various charges that comprise the total amount of the debt. 

Id. In the case at bar, Defendant did itemize the charges to Plaintiff, although the attorney’s fees

and costs at issue were not identified as such. Instead, they were listed as “recoverable corporate

advances.” (Doc. No. 1 at Ex. F.) Describing the contested fees as “recoverable corporate

advances” may be confusing and deceptive to an unsophisticated consumer. Cf. Singer v. Pierce

& Assocs., P.C., 383 F.3d 596, 598 (7th Cir. 2004) (defendant did not violate § 1692e where

attorney’s fees were separately listed and identified in loan payoff letter). See generally Porter v.

Fairbanks Capital Corp., No. 01-9106, 2003 WL 21210115, at *5 (N.D. Ill. May 21, 2003)

(denying motion to dismiss claim alleging violation of § 1692e based on attorney’s fees listed

under category of “recoverable corporate advances”). Plaintiff has sufficiently stated a claim

under § 1692e. 

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 13 of 17
14

C. Counts Three and Four: State Law Claims

Count Three of Plaintiff’s Complaint alleges that Defendant breached its contract with

Plaintiff by charging Plaintiff for the allegedly unreasonable and unnecessary attorney’s fees, by

failing to obtain bankruptcy court approval for such fees, and by failing to provide Plaintiff with

notice of the charges. (Doc. No. 1 ¶¶ 97-105.) Count Four alleges that Defendant engaged in

unfair trade practices in violation of Pennsylvania’s Unfair Trade Practices and Consumer

Protection Law (“UTPCPL”), 73 Pa. Cons. Stat. § 202.1 et seq., and Pennsylvania’s Fair Credit

Extension Uniformity Act, 73 Pa. Cons. Stat §§ 2270.4 and 2270.5. (Id. ¶¶ 106-113.) 

Defendant makes two arguments for dismissing Plaintiff’s state law claims. First,

Defendant contends that these claims should be dismissed for lack of subject matter jurisdiction. 

(Doc. No. 5 at 13.) However, because we have determined that Plaintiff has stated a claim for

relief under federal law, 15 U.S.C. § 1692e, we will exercise supplemental jurisdiction over her

state law claims. See 28 U.S.C. § 1367(a) (“[T]he district courts shall have supplemental

jurisdiction over all other claims that are so related to claims in the action within such original

jurisdiction that they form part of the same case or controversy . . . .”). 

Defendant also argues that the state law claims should be dismissed with prejudice

because they are preempted by the Bankruptcy Code. Federal preemption of state law generally

breaks down into three categories. First, Congress can make its intent known through explicit

statutory language. English v. Gen. Elec. Co., 496 U.S. 72, 78 (1990). In the absence of such

language, “state law is pre-empted where it regulates conduct in a field that Congress intended

the Federal Government to occupy exclusively.” Id. at 79. However, “courts should not lightly

infer preemption.” Int’l Paper Co. v. Ouellette, 479 U.S. 481, 491 (1987). “Finally, state law is

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 14 of 17
15

pre-empted to the extent that it actually conflicts with federal law.” English, 496 U.S. at 79. The

Supreme Court has thus found preemption “where state law stands as an obstacle to the

accomplishment and execution of the full purposes and objectives of Congress.” Id. (internal

quotations omitted).

In support of its argument for preemption, Defendant cites to the Sixth Circuit’s decision

in Pertuso v. Ford Motor Credit Co., 233 F.3d 417 (6th Cir. 2000). In that case, the defendant

solicited a reaffirmation agreement from the plaintiffs during the plaintiffs’ Chapter 7

bankruptcy. The plaintiffs signed the agreement and later received their discharge in bankruptcy. 

Id. at 420. Later still, the plaintiffs brought a class action against the defendant, alleging

violations of 11 U.S.C. §§ 524 and 362, and asserting a state law claim of unjust enrichment. Id.

The Sixth Circuit observed that courts have typically deemed state law unjust enrichment claims

to be preempted. Id. at 426. The Pertuso court went on to conclude that the plaintiffs’ state law

claim presupposed a violation of the Bankruptcy Code, and that permitting state law causes of

action “would undermine the uniformity the Code endeavors to preserve, and would stand as an

obstacle to the accomplishment and execution of the full purposes and objectives of Congress.”

Id. at 426 (internal citations omitted.)

Defendant’s reliance on Pertuso is misplaced. As an initial matter, contrary to

Defendant’s assertions, Plaintiff’s state law claims do not presuppose violations of the

Bankruptcy Code. Consequently, there is no risk of conflict between enforcement of the state

laws and enforcement of the federal bankruptcy laws. Indeed, merely because a Plaintiff brings a

state law claim in the context of a bankruptcy matter does not justify preemption of those claims,

particularly where the underlying facts of the state law claim are not based on a violation of the

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 15 of 17
16

Code. See, e.g., Patterson v. Chrysler Fin. Co. (In re Patterson), 263 B.R. 82 (Bankr. E.D. Pa.

2001) (addressing debtor’s claims based on Pennsylvania’s UTPCPL); Dukes v. Firstrust Bank &

Blvd. Mortgage Co. (In re Dukes), Nos. 91-05339, 96-1004, 1997 WL 860676 (Bankr. E.D. Pa.

Nov. 7, 1997) (same). 

In addition, Defendant’s alleged misconduct occurred after Plaintiff’s Plan had been

confirmed by the bankruptcy court and the bulk of the bankruptcy proceedings had already

occurred. There is thus little risk that allowing Plaintiff’s state law claims for breach of contract

and unfair trade practices to go forward will disrupt the uniform application of the federal

bankruptcy laws or contravene congressional purpose. This is in contrast to those cases in which

the alleged misconduct occurred early on in bankruptcy proceedings. See, e.g., Abramson v.

Federman & Phelan, LLP (In re Abramson), 313 B.R. 195, 198 (Bankr. W.D. Pa. 2004).

We therefore conclude that Defendant’s Motion to Dismiss must be denied with respect

to Plaintiff’s state law claims. 

An appropriate Order follows.

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 16 of 17
IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MAUREEN DOUGHERTY, :

:

Plaintiff, : CIVIL ACTION

:

v. :

: NO. 04-CV-4820

WELLS FARGO HOME LOANS, INC., :

 :

Defendant. :

ORDER

AND NOW, this 28 day of March, 2006, upon consideration of the Motion of th

Defendant, Wells Fargo Home Mortgage, To Dismiss The Complaint (Doc. No. 5) and Plaintiff’s

Answer (Doc. No. 7), it is ORDERED that Defendant’s Motion is GRANTED in part and

DENIED in part as follows: 

1. Count One is DISMISSED to the extent that it sets forth a claim based on § 1692f.

2. Count Two is DISMISSED in full. 

IT IS SO ORDERED.

BY THE COURT:

S/ R. Barclay Surrick

_____________________

R. Barclay Surrick, Judge

Case 2:04-cv-04820-RBS Document 9 Filed 03/28/06 Page 17 of 17