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Topchian v. JPMorgan Chase Bank, N.A.

Court of Appeals of Missouri, Western District, First Division

November 21, 2017


         Appeal from the Circuit Court of Jackson County, Missouri The Honorable Patrick W. Campbell, Judge.

          Before: Cynthia L. Martin, Presiding Judge, and James Edward Welsh and Karen King Mitchell, Judges.

          Karen King Mitchell, Judge.

         Samvel Topchian appeals the judgment of the Circuit Court of Jackson County, Missouri, granting summary judgment to JPMorgan Chase Bank, N.A. (Chase), Martin, Leigh, Laws & Fritzlen, PC (MLLF), and Select Portfolio Servicing, Inc. (SPS) on Topchian's claims of breach of contract (against Chase), violations of the Missouri Merchandizing Practices Act (MMPA) (against Chase, MLLF, and SPS), and common law fraud (against Chase). In granting Chase's motion for summary judgment, the circuit court concluded that Topchian's claims were precluded by a judgment implementing the settlement of a federal class action and that a collateral attack on that judgment was inappropriate. In granting MLLF's and SPS's motions for summary judgment, the circuit court held that those parties were released from Topchian's MMPA claims by the prior judgment. On appeal, Topchian argues that the circuit court erred in granting summary judgment because: (1) the class action judgment was entered without personal jurisdiction over Topchian or adequate notice to him, (2) Topchian was denied adequate representation by counsel for the class, (3) Topchian was denied adequate representation by class representatives, (4) the class action settlement was the product of fraud, and (5) the claims released by the class action judgment are different from the claims Topchian asserts in this case. Finding that summary judgment is appropriate, we affirm.


         On or about September 1, 2005, Topchian borrowed $221, 000, as evidenced by a 30-year deed of trust bearing his signature and referencing a promissory note he signed to document the loan. Chase serviced the loan at all times relevant to the events forming the basis of Topchian's claims. Topchian experienced financial difficulties, and, beginning in 2009, he participated in a Stated-Income Trial Period Plan (TPP) under the Home Affordable Modification Program (HAMP). The TPP required Topchian to submit "trial plan" payments to Chase as a prerequisite to a possible permanent loan modification. Topchian made trial payments under the TPP from May to December 2009. In December 2009, Topchian received a "Home Affordable Modification Agreement" from Chase. That Agreement stated that it would not take effect unless certain preconditions were satisfied, including (1) timely payments by Topchian, (2) continued accuracy of representations he had made, and (3) receipt by Topchian of a copy of the Agreement bearing Chase's signature. It is undisputed that Topchian never received a copy of the Agreement signed by Chase.[2]

         Pursuant to the TPP, Topchian made payments at the lower, modified rate throughout 2010, but, beginning in January 2011, Chase refused to accept his payments. Previously, on June 8, 2010, Chase had sent Topchian a letter stating, "we are not considering your request for a modification because you notified us that you are withdrawing your request or you have failed to accept the Trial Period Plan or Home Affordable Modification within the required time period." Then, in December 2010, Chase apparently contacted Topchian to update his paperwork so he could receive a signed copy of the modification from Chase. Again on February 9, 2011, Chase informed him, "We are writing about your request for a permanent loan modification on the account above. We are unable to offer you a modification through [HAMP] at this time." On August 19, 2011, and August 22, 2011, Chase again provided the same written notice of modification denial to Topchian.

         MLLF signed an engagement letter with Chase on April 12, 2011, agreeing to act as attorney for Chase, represent it in bankruptcy and foreclosure matters, and provide legal services and representation. MLLF, as Chase's attorney and trustee, sent correspondence to Topchian regarding his failure to make payments pursuant to the original note. Specifically, on February 6, 2012, MLLF sent Topchian a letter stating "[MLLF] has been retained by JPMorgan Chase Bank, National Association to act as trustee to foreclose the above Deed of Trust." Then on February 29, 2012, MLLF sent Topchian a "Notice of Trustee's Sale" signed by MLLF as "Successor Trustee."[3] There has been no foreclosure sale on the property securing Topchian's loan.

         Meanwhile, in October 2011, cases in which various plaintiffs had sued Chase in separate lawsuits in 2010 and 2011 were consolidated into a multi-district class action lawsuit styled JPMorgan Chase Mortgage Modification Litigation, MDL Docket No. 2290, Case No. 1:11-md-02290-RGS, in the United States District Court for the District of Massachusetts. The consolidated actions pertained to Chase's handling of mortgage borrowers' requests for modifications of their loans. Following consolidation, plaintiffs filed an amended class action complaint on January 20, 2012. Part I of the class action complaint asserted claims for breach of contract and violations of state consumer protection statutes arising from Chase's alleged breach of TPP agreements under HAMP. Specifically, in Part I, the plaintiffs alleged that

[i]n their TPP Agreements, proffered under HAMP, . . . Chase set forth a finite "trial period, " and promised that successful compliance with the [A]greement would result in the tender of a permanent loan modification. Plaintiffs, for their part, have fully complied with these [A]greements by submitting the required documentation and making payments. Despite Plaintiffs' full performance, Chase has failed to meet its contractual obligation to tender promised permanent modifications, or even to notify Plaintiffs by the trial period deadline that they would not be receiving a permanent modification.

         Part III of the class action complaint included three underlying complaints involving claims that Chase breached final loan modification agreements either by continuing to treat the accounts as if no modification had occurred or by canceling the modifications without notice several months after the modifications had been granted.[4] Part III set out claims for breach of contract and violations of state consumer protection laws, including the MMPA, arising from Chase's failure to honor such modification agreements. The class action complaint specifically referenced the MMPA because two of the named plaintiffs were residents of Missouri. The class action complaint also alleged violations of common law.

         On June 15, 2012, Topchian filed a pro se petition in the Small Claims Court of the Circuit Court of Jackson County, Missouri, seeking $3 million in damages from Chase for breach of contract. His petition was in the form of a letter that set out detailed facts but did not provide any legal basis for his claims. Chase removed the case to the U.S. District Court for the Western District of Missouri on the basis of diversity jurisdiction. Chase then filed a motion to dismiss or, in the alternative, a motion for a more definite statement. The district court denied the motion to dismiss but granted the motion for a more definite statement, directing Topchian to amend his petition. His amended petition included some additional facts, but no legal theories, and Chase moved to dismiss the amended petition under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. The district court granted the motion to dismiss and later denied Topchian's motion for reconsideration. He appealed the dismissal of his amended petition to the U.S. Court of Appeals for the Eighth Circuit. While Topchian's appeal was pending, his current attorneys agreed to represent him. The Eighth Circuit reversed, in part, and remanded the district court's grant of Chase's motion to dismiss, finding that Topchian had stated a claim for breach of contract. Topchian v. JPMorgan Chase Bank, N.A., 760 F.3d 843, 851 (8th Cir. 2014).[5]

         While Topchian's pro se case was pending, SPS became the sub-servicer of Topchian's loan on May 3, 2013, under a Limited Power of Attorney. At that point, SPS became Chase's true and lawful Attorney-In-Fact with respect to Topchian's loan.

         In November 2013, the class representatives and Chase reached a Settlement Agreement in the federal class action, for which they jointly sought the court's approval. Consistent with the class action complaint, the Settlement Agreement included assertions that Chase "breached agreements with the Plaintiffs by failing to provide a modification of Plaintiffs' loans under HAMP . . . and "breached the terms of permanent loan modifications." The court held a preliminary approval hearing on December 5, 2013, which included evidence and argument by class counsel and Chase. The next day, the court issued a Preliminary Approval Order directing implementation of the Settlement Agreement and certifying a class for that purpose. The Preliminary Approval Order directed that notice be sent to Chase borrowers who were identified as potentially being in the class. Topchian was on the list of potential class members, and notice of the settlement was mailed to him. He admitted receiving the notice in January 2014.

         The notice Topchian received (Class Notice) was titled "NOTICE OF PROPOSED SETTLEMENT OF CLASS ACTION LAWSUIT RELATED TO YOUR JPMORGAN CHASE LOAN MODIFICATION." The Class Notice stated, "You are a 'Settlement Class Member' if:

(1) your loan is serviced by Chase and you participated in a [TPP] extended by Chase under the [HAMP] . . ., and
(2) you made timely and sufficient trial payments required by the TPP, and
(3) your property has not been foreclosed, and
(4) you have either (a) not received a permanent loan modification eligibility decision since the start of your trial period described in your . . . TPP, or (b) you did receive an eligibility decision denying the loan for permanent modification during or after your trial period described in your . . . TPP, and
(5) you are not currently a debtor in bankruptcy proceedings.[6]

         In a later section titled "Who Represented Me?" the Class Notice stated, "The following Plaintiffs have or had mortgage loans that were serviced by Chase and also sought (or sought and obtained) permanent loan modifications from Chase." (Emphasis added.)

         The Class Notice included an opt-out procedure and stated, "If you do not opt out, you will be bound by this Settlement." The Class Notice outlined the release of claims effectuated by the settlement, and advised class members as follows:

If you, or someone acting on your behalf, are currently litigating claims against Defendants or other released parties that are the same as or similar to those addressed here, you will be barred from pursuing the claims released by the Settlement unless you validly opt out, as described [herein].[7]
Unless you exclude yourself, you will be part of the Settlement Class, and that means that any claims you have about Chase's consideration of, and other conduct in connection with, your request to have your home mortgage loan modified will be fully and completely resolved, and that you cannot sue, continue to sue, or be part of any other lawsuit against Chase about Chase's handling of your request for a loan modification.
If you want to keep the right to sue or continue to sue Chase, on your own, about Chase's handling and consideration of your request for a loan modification, you must exclude yourself from the Settlement Class in this case.

         The Class Notice provided detailed instructions for opting out and announced the opt-out deadline of March 18, 2014, in bold typeface. Topchian did not opt out because he did not interpret the "Settlement Class, " as described in the Class Notice, to include individuals like himself who allegedly had received permanent loan modifications that were subsequently breached by Chase. Therefore, he saw no need to take any action in response to the Class Notice. To support his decision not to act, Topchian now relies on the Eighth Circuit's opinion in Topchian v. JPMorgan Chase Bank, N.A., 760 F.3d 843 (8th Cir. 2014), reversing the district court's grant of Chase's motion to dismiss Topchian's pro se case because he had pleaded sufficient facts to state a claim for breach of contract against Chase.[8]

         In other relevant sections, the Class Notice included instructions for objecting to all or any part of the Settlement Agreement while still remaining a member of the class and directed recipients to the settlement website for a complete copy of the Settlement Agreement. The Class Notice also stated,

If you have your own attorney, you may wish to have him or her review this Notice to get advice about how to proceed. This is particularly true if you have litigation pending on any subject including mortgage modification and/or foreclosure against Chase. . . . You have the right to consult with your own attorney, at your own expense, before deciding how best to proceed.

         Finally, the Class Notice explained that, after final approval of the settlement, Chase would send all class members an invitation letter explaining "the process for making a new application for a mortgage modification based on your current circumstances." Other benefits provided by the Settlement Agreement, and listed in the Class Notice, included free debt and credit management counseling, foreclosure stays during the application process, and waiver of certain previously assessed fees in those cases where a new loan modification is approved.

         The class action court held a Final Fairness Hearing on May 7, 2014, following which the court entered a Final Approval Order, Final Judgment, and Order of Dismissal with Prejudice. The class action judgment, which included the same definition of "Settlement Class, " set forth several findings relevant to this case. First, the court found that the Settlement "Agreement is the product of good faith, arm's-length negotiations by Parties, with the substantial involvement of an independent, nationally respected mediator, and that each Party was represented by experienced counsel." Next, the court found that it had "subject matter jurisdiction over the Action, and, for purposes of this settlement only, personal jurisdiction over all the Parties, including all Settlement Class Members." In approving the Settlement Agreement, the court found the Agreement to be "in all respects, fair, just, reasonable, and adequate to the Settlement Class Members." Finally, the court found that the Class Notice "was provided to the Settlement Class consistent with the Preliminary Order and that it was the best notice practicable and fully satisfied the requirements of the Federal Rules of Civil Procedure, due process, and applicable law."

         With respect to fees, costs, and awards, the class action judgment approved attorneys' fees and costs in the amount of $9.5 million and an incentive award of $3, 500 to each Class Representative. The class action court determined that those amounts were appropriate based on the following findings:

(1) The [S]ettlement provides substantial benefits for the class.
(2) The settlement award of attorneys' fees and expenses is within the range of reasonable fees for similar class action settlements.
(3) The requested fees are substantially below the total lodestar fees of Class Counsel, based on declarations submitted to the Court.
(4) The litigation raised numerous questions of law and fact, Class Counsel were opposed by highly skilled defense counsel, the litigation was intensely contested through the completion of the Settlement Agreement, and there was substantial risk that Plaintiffs would not prevail on some or all of their claims.
(5) The Settlement was negotiated at arm's-length and without collusion, with the assistance of highly ...

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