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Hetzel v. JPMorgan Chase Bank, N.A.

United States District Court, E.D. North Carolina, Eastern Division

February 14, 2017

PAUL B. HETZEL, Plaintiff,



         This matter is before the Court on defendant JPMorgan Chase Bank, N.A.'s ("Chase") motion for summary judgment [DE 115] and motion to strike [DE 113] and plaintiffs motion for protective order [DE 107] and motion for discovery sanctions [DE 109]. The motions are ripe for adjudication, and a hearing was held on February 3, 2017, in Raleigh, North Carolina. For the reasons stated herein, Chase's motion for summary judgment is granted in part and denied in part, Chase's motion to exclude is granted, plaintiffs motion for discovery sanctions is denied, and plaintiffs motion for protective order is denied as moot.


         This case arises out of what plaintiff alleges is a botched real estate transaction. In 2009, plaintiff owned three properties located at 201 Salter Path Road in Pine Knoll Shores, North Carolina ("Salter Path Road Property"), 160 Acton Road ("Acton Road Property") in Annapolis, Maryland, and 140 Spa Drive ("Spa Drive Property") also in Annapolis Maryland. In May 2009, all three properties were subject to loans with Chase, with outstanding principal balances totaling over $3 million. At that time, plaintiff had a good credit score and was current on all three loans with Chase. He then developed a plan to refinance all three properties with Merrill Lynch in order to save over $130, 000 per year in interest payments.[1] Plaintiff initiated his plan to refinance all three properties starting with the Spa Drive Property in May, 2009.

         According to plaintiff, Chase misapplied the proceeds from that refinancing, resulting in the Salter Path Road Property being paid off instead of the Spa Drive Property as planned. Because plaintiff was under the impression it had been satisfied, he stopped paying Chase's Spa Drive Property mortgage in May 2009. Subsequently, that loan fell into arrears and foreclosure was set to commence as of August 2009. As a result, plaintiffs strong credit score was severely impacted, which he argues thus delayed and eventually destroyed his plan to refinance all three properties at lower interest rates which then would have allowed him to keep the properties. Plaintiff claims that his credit score was so severely impacted that he was no longer under consideration for any sort of refinance from any company. Plaintiff alleges this is a negligent action, but also admits that his credit score was restored within a few months of the misreported statement when Chase sent in a correction.

         When Mr. Hetzel learned of the misapplication of funds to the Salter Path Road Property, he contacted Chase, arguing that Chase had a duty to correct the misapplication or assist plaintiff in obtaining alternative financing for his mortgage loans. According to evidence from discovery, Chase appears to have resolved the mistaken payoff by August. Representatives from Chase allegedly promised plaintiff that, should he be unable to obtain refinancing with Merrill Lynch, then Chase would refinance the loan at the same terms promised by Merrill Lynch. Plaintiff claims that Chase also assured him that if he could not obtain financing to refinance the Salter Path Road and Acton Road properties, Chase would modify those loans.

         In March 2010, Chase sent payment for a flood insurance policy on behalf of plaintiff to the wrong address, causing the policy to lapse and resulting in a premium increase from $348 to $7, 500 per year. At this time plaintiff allegedly threatened to sue, but was talked out of by Chase's promises to fix the flood insurance issue and cover the difference in payments and give him the loan modifications it had promised. Finally, plaintiff asserts that Chase refused to refinance the two other loans it had with plaintiff and refused to allow plaintiff to subdivide and sell portions of one of his properties as it promised, causing those properties to fall into foreclosure.


         Motion to Strike

         The Court will first address defendant Chase's motion to exclude the expert report, opinion, and testimony of plaintiff s witness, Andrew L. Kadala pursuant to Rule 702 of the Federal Rules of Evidence and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). Chase seeks to strike or exclude Mr. Kadala as an expert, arguing that Mr. Kadala is not qualified to opine as an expert in consumer mortgage lending and servicing and that his opinions are irrelevant legal opinions.

         Plaintiffs claims in this case largely rest on his allegations that Chase had a duty to correct the misapplication or assist plaintiff in obtaining alternative financing for his mortgage loans, and that Chase breached this duty to the detriment of plaintiff. In support of these allegations, plaintiff intends to have Mr. Kadala, a securities investment advisor with Wells Fargo Advisors, testify as to the duty Chase owed plaintiff and any breaches thereof.

         Federal Rule of Evidence 702 provides that "if the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue, " "[a] witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise." Fed.R.Evid. 702. The Court serves as the gatekeeper for all expert testimony to make sure it is based on sound, reliable theory and does not constitute rank speculation. Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 141 (1999). The expert testimony is considered reliable only if the expert is qualified to render the opinion and the expert's underlying methodology is scientifically valid. Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589-90 (1993). The expert's testimony is relevant only if the expert properly applies that methodology or reasoning to the facts in issue. Id. at 591-93. The expert must explain how and why he has reached the conclusion being proffered and must have as a basis more than a subjective belief or speculation. Kumho Tire, 526 U.S. at 152.

         Here, plaintiff has failed to meet his burden to demonstrate that Mr. Kadala is qualified to provide testimony on the appropriate procedures that allegedly should have been followed in this case. Mr. Kadala is an experienced securities investment broker but has no discernible experience in consumer or residential mortgage lending and servicing. See Hardin v. Ski Venture, Inc., 50 F.3d 1291, 1296 (4th Cir. 1995) (experience in ski safety policies and testimony in other ski accident cases did not qualify expert to opine about snowmaking machine safety); Thomas J. Kline, Inc. v. Lorillard, Inc., 878 F.2d 791, 799-800 (4th Cir. 1989) (expert with MBA and experience analyzing companies' business health not qualified to give antitrust testimony where she had no specific education or experience in antitrust matters); Estate of Richard Myers v. Wal-mart Stores, Inc., 2011 WL 1366459, *3 (E.D. N.C. April 11, 2011) (architect with no specific experience in parking lot design not qualified to offer expert testimony on parking lot design). Similar to these cases, Mr. Kadala's securities investment industry experience without specific experience in residential mortgage lending and servicing does not qualify him to offer expert testimony on various legal duties Chase owed to plaintiff as the loan servicer of plaintiff s residential mortgage loans or to explain how Chase breached a duty of care owed plaintiff. This Court finds that Mr. Kadala is not qualified as an expert on mortgage lending practices and policies and cannot testify as such.

         Plaintiff asserts that the real issue in this case, and the issue upon which Mr. Kadala will testify, is a bank's obligation to correct mistakes it makes. Nonetheless, plaintiff still has not demonstrated Mr. Kadala's expertise in this subject, a subject which plaintiff has not defined with any particularity. Mr. Kadala's opinion is not based upon his presumed knowledge of a bank's obligation to correct its mistakes, nor any understanding and detailed experience in mortgage servicing and the mistakes that might occur in such an industry, but instead in his experience in banking financial services industry. For the reasons discussed above, this does not demonstrate that Mr. Kadala is qualified to speak to this issue, and plaintiff has not convinced the Court that Mr. Kadala's opinion is based in anything more than subjective belief or speculation.

         Nonetheless, even assuming Mr. Kadala is qualified to opine to this issue, plaintiff still has not demonstrated that Mr. Kadala's opinions will assist the trier of fact in this case. Generally speaking, legal conclusions and standards are considered improper expert testimony because they do not assist the fact finder. United States v. Offill, 666 F.3d 168, 175 (4th Cir. 2011) (explaining that legal conclusions should be handled by the judge except in cases that "involve highly technical legal issues"). Mr. Kadala's opinions are largely conclusory-in effect simply stating that Chase owed a duty and breached that duty-and are therefore little more than formulaic recitations of impermissible legal conclusions. What constitutes a legal duty and whether there was a breach of that duty under North Carolina law is a legal issue for the Court to instruct the jury on.

         For these reasons, the Court finds that Mr. Kadala is not qualified to provide opinion testimony, and further that his testimony will not assist the trier of fact. For these reasons, Chase's motion to exclude the testimony of Mr. Kadala will be granted.

         Motion for Summary Judgment

         A motion for summary judgment may not be granted unless there are no genuine issues of material fact for trial and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477U.S. 317, 323 (1986). If that burden has been met, the non-moving party must then come forward and establish the specific material facts in dispute to survive summary judgment. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986). In determining whether a genuine issue of material fact exists for trial, a trial court views the evidence and the inferences in the light most favorable to the nonmoving party. Scott v. Harris, 550 U.S. 372, 378 (2007). However, "[t]he mere existence of a scintilla of evidence" in support of the nonmoving party's position is not sufficient to defeat a motion for summary judgment; "there must be evidence on which the [fact finder] could reasonably find for the [nonmoving party]." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). Speculative or conclusory allegations will not suffice. Thompson v. Potomac Elec. Power Co., 312 F.3d 645, 649 (4th Cir. 2002).

         Equitable Estoppel

         The applicable statute of limitations for plaintiffs negligence, breach of fiduciary duty, implied covenant of good faith, and breach of contract claims are each three years. N.C. Gen. Stat. § 1-52; Harold v. Dowd,561 S.E.2d 914, 917 ( N.C. App. 2002); Toomer v. Branch Banking & Trust Co.,614 S.E.2d 328, 335 ( N.C. App. 2005); Rolfes v. Decision One Mortg. Co., 2011 U.S. Dist. LEXIS 57457 at *3 (E.D. N.C. May 27, 2011); N.C. Gen. Stat. ยง 1-52(1). The limitations period for ...

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