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IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

KEVIN HOCKENBERRY and :

JUDY HOCKENBERRY, :

Plaintiffs, :

: No. 4:04-CV-1062

v. :

: (Judge McClure)

DIVERSIFIED VENTURES, INC., :

d/b/a FORWARD FINANCIAL :

COMPANY, et al., :

Defendants. :

M E M O R A N D U M

June 20, 2005

BACKGROUND:

Plaintiffs Kevin and Judy Hockenberry, husband and wife, initiated this civil

action by filing a praecipe for a writ of summons with the Court of Common Pleas

for Centre County on December 1, 2003. Plaintiffs subsequently alleged in their

eight-count complaint that the above-named defendants colluded to overcharge

plaintiffs for certain services and fees in connection with plaintiffs’ purchase of real

property and a mobile home on or about December 1, 1997. Plaintiffs allege two

violations of the Racketeering Influenced and Corrupt Organizations Act (RICO),

18 U.S.C. § 1961 et seq. (Counts I & II), a violation of the Pennsylvania Unfair

Trade Practices and Consumer Protection Law (UTPCPL), 73 P.S. § 201 et seq.

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(Count III), an agency liability claim against Diversified Ventures, Inc. based on the

allegedly fraudulent acts of its agent, Gene J. De Feudis (Count IV), a common law

fraud claim (Count V), a breach of fiduciary duty claim against G&M Land

Development, Inc. and MDM Group (Count VI), a civil conspiracy claim (Count

VII), and a claim for punitive damages (Count VIII).

The action was removed to this court on or about May 12, 2004. 

Subsequently, numerous defendants filed motions to dismiss pursuant to Federal

Rule of Civil Procedure 12(b)(6). By Memorandum & Order dated November 17,

2004, the court dismissed all of plaintiffs’ claims as to certain defendants and

directed plaintiffs to file an amended complaint.

Following the filing of plaintiffs’ amended complaint on December 17, 2004,

various defendants filed a total of three motions to dismiss plaintiffs’ amended

complaint pursuant to Rule 12(b)(6). Moving defendants all argue that plaintiffs’

claims are barred by the applicable statutes of limitations or are not pled with

sufficient particularity.

Now, for the following reasons, the court will grant the motions in part and

deny them in part.

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DISCUSSION:

I. Standard of Review

The court will only dismiss claims pursuant to Rule 12(b)(6) if “it is clear that

no relief could be granted under any set of facts that could be proved consistent

with the allegations.” Hishon v. King & Spaulding, 467 U.S. 69, 73 (1984); Doe v.

Delie, 257 F.3d 309, 313 (3d Cir. 2001). A claim will survive a motion to dismiss if

plaintiffs allege sufficient facts to put defendants on notice of the essential elements

supporting the claim. Langford v. City of Atlantic City, 235 F.3d 845, 847 (3d Cir.

2000).

When reviewing a Rule 12(b)(6) motion, the court must accept as true all

factual allegations of the complaint and draw all reasonable inferences in the light

most favorable to plaintiffs. Morganroth & Morganroth v. Norris, McLaughlin, &

Marcus, P.C., 331 F.3d 406, 411 (3d Cir. 2003). The court, however, need not

“credit bald assertions or legal conclusions improperly alleged in the complaint.” 

In Re Rockefeller Ctr. Props., Inc. Sec. Litig., 311 F.3d 198, 216 (3d Cir. 2002).

 Defendants bear the ultimate burden of demonstrating that no relief could be

granted. Gould Elecs., Inc. v. United States, 220 F.3d 169, 178 (3d Cir. 2000).

II. Brief Statement of Relevant Facts

We briefly reiterate the concise material facts of this case:

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Sometime in 1997, plaintiffs sought to purchase real property and a mobile

home in Centre County, Pennsylvania. Plaintiffs and the sellers, the latter of whom

are not parties to this action, agreed on a purchase price of $25,000. 

Plaintiffs applied to defendant Mobile Masters Financial for a purchasemoney mortgage loan. Allegedly, at settlement, numerous additional and heretofore

undisclosed fees appeared on the HUD-1 settlement sheet, including additional fees

to be paid to Robert M. Melhorn, appraiser, attorneys’ fees to Goodge, Makoul &

Cohen, a conveyancing fee to Miller & Miller, and title insurance fees to Parkway

Abstract. Ultimately, plaintiffs borrowed about $38,521.40, with the sales price

listed as $41,000 instead of $25,000. 

Following settlement, plaintiffs allegedly learned that numerous defendants

operated under fictitious names and through layered entities. Plaintiffs also

allegedly learned that various defendants colluded to defraud buyers like plaintiffs

by overcharging for services and fees associated with real estate transactions. 

III. Defendants’ Motions

Defendants attack plaintiffs’ claims on the grounds that they are untimely, not

pled with sufficient particularity, or are otherwise not cognizable. We address each

claim or set of claims separately.

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A. Federal RICO Claims

As we stated in our earlier memorandum and order, RICO claims are subject

to a four-year statute of limitations. Agency Holding Corp. v. Malley-Duff &

Assoc., Inc., 483 U.S. 143, 156 (1987). In this circuit, the statute of limitations

begins to run from when plaintiffs knew or should have known of their injury and

when plaintiffs knew or should have known the source of that injury. Forbes v.

Eagleson, 228 F.3d 471, 485 (3d Cir. 2000); accord Prudential Ins. Co. v. U.S.

Gypsum Co., 359 F.3d 226, 233 (3d Cir. 2004). 

Plaintiffs plainly knew or should have known of their injury and source of

that injury when they signed the HUD-1 form on December 1, 1997. That form

listed all of the amounts to be paid, and to whom. If any improper amounts were

being paid to certain parties, plaintiffs would know, or should have known, simply

be looking at and signing the form. Plaintiffs apparently conceded this point, as

they did in opposing the motions to dismiss their original complaint, insofar as they

only argue that the statute of limitations should be equitably tolled.

Equitable tolling of the statute of limitations may be appropriate if plaintiffs

adequately allege that: (1) defendants engaged in affirmative acts of concealment

designed to mislead the plaintiffs regarding facts supporting their claims; (2)

plaintiffs exercised reasonable diligence to uncover facts supporting their claims;

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and (3) plaintiffs were not aware, nor should they have been aware, of facts

supporting their claim until a time within the limitations period measured backwards

from the filing of their complaint. See Forbes, 228 F.3d at 486-87; accord

Prudential Ins., 359 F.3d at 237-38. Allegations of fraudulent concealment must be

pled with sufficient particularity. See Fed. R. Civ. P. 9(b); Byrnes v. DeBolt

Transfer, Inc., 741 F.2d 620, 626 (3d Cir.1984).

Assuming, arguendo, that defendants actively misled plaintiffs regarding the

facts supporting their claims and that plaintiffs used reasonable diligence to

investigate their claim, the first and third elements, plaintiffs still fail to allege any

facts regarding the third element. With respect to the third element, plaintiffs were

aware, or should have been aware, of the facts supporting their claim by June of

1999 at the latest. Plaintiffs learned something was amiss with their mortgage when

they attempted to refinance in or about May of 1999. (See Am. Compl., Rec. Doc.

No. 36, at ¶78.) They filed a consumer complaint against one defendant, G & M,

with the Attorney General’s Office shortly thereafter. (Id. at ¶79.) G &M

responded to the complaint by letter dated June 1, 1999. (Id. at ¶81.)

So, if plaintiffs somehow never knew of their injury and source of their injury

after making mortgage payments for one and one-half years, they knew of their

injury and source of their injury by May or, at the latest, June of 1999. In which

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case, the four-year statute of limitations ran until June of 2003, six months before

plaintiffs filed their praecipe for a writ of summons on December 1, 2003. Thus,

plaintiffs’ RICO claim are time-barred.

B. State Law Claims

Plaintiffs also allege a number of state law claims. We will continue to

exercise jurisdiction over these claims, see 28 U.S.C. § 1367(c), because the

court’s familiarity with the case will speed resolution of this matter and will

conserve judicial resources.

1. Violation of the Pennsylvania Unfair Trade Practices Law (Count III)

A claim brought under Pennsylvania’s Unfair Trade Practices and Consumer

Protection Law (UTPCPL), 73 P.S. § 201 et seq., is subject to a six-year statute of

limitations. See Santana Products, Inc. v. Bobrick Washroom Equip., Inc., 401

F.3d 123, 138-39 (3d Cir. 2005); In re Cabbagestalk, 272 B.R. 865, 866 (W.D. Pa.

2002). Even using December 1, 1997 as the date the limitations period began to

run, the action was timely filed as to this claim on December 1, 2003. 

The UTPCPL prohibits the use of “unfair methods of competition” and

unfair or deceptive acts or practices” involved in a transaction between the parties

that constitutes “trade or commerce.” See 73 P.S. § 201-3. A wide range of

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activities constitute “unfair or deceptive acts or practices.” See 73 P.S. § 201-

2(4)(i)-(xxi). Plaintiffs do not plead which subsections they bring suit under; in

their brief they argue that their complaint establishes that defendants violated the

UTPCPL by advertising goods or services with intent not to sell them as

advertised, see 73 P.S. § 201-2(4)(ix), by making solicitations for sales of services

without expressly stating the nature of the services, see 73 P.S. § 201-2(4)(xvii),

and by “engaging in any other fraudulent or deceptive conduct which creates a

likelihood of confusion or misunderstanding,” see 73 P.S. § 201-2(4)(xxi).

The exact elements of UTPCPL claims based on the above subsections are

still unclear. It is sometimes stated that the common law elements of fraud must be

pled to establish a violation of UTPCPL based on subsection (xxi). See, e.g.,

Piper v. American Nat’l Life Ins. Co., 228 F. Supp. 2d 553, 560 (M.D. Pa. 2002). 

A liberal reading of other authority suggests something less than all the elements of

fraud, such as scienter, is necessary for UTPCPL claims based on other

subsections, or even on “deceptive acts” under subsection (xxi) instead of “fraud.” 

See Santana Products, 401 F.3d at 136-37. Regardless of which subsection

plaintiffs bring their suit under, however, they must allege that they justifiably relied

on defendants’ wrongful conduct or representation and that they suffered harm as a

result. Yocca v. Pittsburgh Sports, Inc., 854 A.2d 425, 438 (Pa. 2004). 

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We do not explore the precise contours of plaintiffs’ UTPCPL claim

because the allegations of their complaint, if true, sufficiently state a UTPCPL claim

with enough particularity to put defendants on notice of the operative events

underlying this claim. A liberal reading of plaintiffs’ complaint reveals that,

allegedly, plaintiffs justifiably relied on the misstatements and/or deceptive acts of

defendants and they suffered harm as a result. This adequately states a claim under

the UTPCPL. Cf. Tran v. Metropolitan Life Ins. Co., – F.3d –, 2005 WL 1229696

(3d Cir. May 25, 2005) (remanding UTPCPL claims where insurance agent misled

plaintiff as to terms of life insurance policy, who justifiably relied on agent’s

representations).

2. Common Law Fraud (Count V)

Pennsylvania has a two-year statute of limitations for common law fraud

claims. See 42 Pa. C.S.A. § 5524(7). The statute of limitations begins to run from

the moment the right to bring an action arises, regardless of lack of knowledge,

mistake, or misunderstanding. See Calle v. York Hosp., 232 F. Supp. 2d 353, 359-

60 (M.D. Pa. 2002); Fine v. Checcio, 870 A.2d 850, 857 (Pa. 2005). The statute of

limitations may be tolled under either the discovery rule or the doctrine of

fraudulent concealment. Under the discovery rule, the statute of limitations “does

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not begin to run until the injured party discovers or reasonably should discover that

he has been injured and that his injury has been caused by another party's

conduct.” Fine v. Checcio, 870 A.2d at 859. The doctrine of fraudulent

concealment, “provides that the defendant may not invoke the statute of limitations,

if through fraud or concealment, he causes the plaintiff to relax his vigilance or

deviate from his right of inquiry into the facts.” Fine, 870 A.2d at 860. Similar to

the discovery rule, “[a] statute of limitations that is tolled by virtue of fraudulent

concealment begins to run when the injured party knows or reasonably should

know of his injury and its cause.” Id. at 861.

Plaintiffs base their common law fraud claim on the same occurrences as

their RICO claims. As discussed in the context of the RICO claims, plaintiffs

knew or should have known their injury and source of their injury by June of 1999,

at the latest. Thus, even if the two-year statute of limitations was tolled under either

the discovery rule or the doctrine of fraudulent concealment, the limitations period

ended June of 2001, some two and one-half years before plaintiffs filed their

praecipe for a writ of summons on December 1, 2003. Plaintiffs’ common law

fraud claim, therefore, is time-barred.

3. Agency Liability for Fraudulent Representations (Count IV)

An agency liability claim based on fraudulent misrepresentation is governed

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by the two-year statute of limitations for fraud claims. See 42 Pa. C.S.A.

§ 5524(7); Powell v. First Republic Bank, 274 F. Supp. 2d 660, 677 (E.D. Pa.

2003). Accordingly, this claim is time-barred for the same reasons as plaintiffs’

common law fraud claim.

4. Breach of Fiduciary Duty (Count VI)

The two-year statute of limitations governs breach of fiduciary duty claims

as well. See In re Mushroom Transp. Co., Inc., 382 F.3d 325, 336 (3d Cir. 2004). 

Consequently, this claim is time-barred for the same reasons as plaintiffs’ common

law fraud claim.

5. Civil Conspiracy (Count VII)

The two-year statute of limitations governs civil conspiracy claims. See

Calihan v. A.E.V., Inc., 182 F.3d 237, 246 n.7 (3d Cir. 1999). Consequently, this

claim is time-barred for the same reasons as plaintiffs’ common law fraud claim.

6. Punitive Damages (Count VIII)

Typically, a claim for punitive damages is derivative of a tort claim, not

available in contract. See Haugh v. Allstate Ins. Co., 322 F.3d 227, 235 (3d Cir.

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2003). The UTPCPL, the basis for the only remaining claim, permits recovery of

treble damages in some circumstances, see 73 P.S. § 201-9.2(a), but such damages

are not the equivalent of punitive damages. See Samuel-Bassett v. KIA Motors

America, Inc., 357 F.3d 392, 401-02 (3d Cir. 2004). Consequently, we will dismiss

plaintiffs’ punitive damages claim without prejudice to their ability to recover under

the UTPCPL’s treble damages provision, if applicable.

CONCLUSION:

All counts will be dismissed except the UTPCPL claim. An appropriate

order follows.

 s/ James F. McClure, Jr. 

James F. McClure, Jr.

United States District Judge

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IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

KEVIN HOCKENBERRY and :

JUDY HOCKENBERRY, :

Plaintiffs, :

: No. 4:04-CV-1062

v. :

: (Judge McClure)

DIVERSIFIED VENTURES, INC., :

d/b/a FORWARD FINANCIAL :

COMPANY, et al., :

Defendants. :

O R D E R

June 20, 2005

For the reasons set forth in the accompanying memorandum,

IT IS ORDERED THAT:

1. Defendants’ motions to dismiss (Rec. Doc. Nos. 41, 42, & 49), are

granted in part and denied in part.

2. All counts of the amended complaint are dismissed as time-barred

except count III (alleged violation of the Pennsylvania Unfair Trade Practices and

Consumer Protection Law (UTPCPL)).

 s/ James F. McClure, Jr. 

James F. McClure, Jr.

United States District Judge

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