Complaint for Monetary Damages and Other Relief National Consumer Law Center PL94Ch07

Chapter 7 7.1

Overreaching Loan Scheme Involving Multiple Parties

Complaint COMMONWEALTH OF MASSACHUSETTS SUFFOLK, SS. SUPERIOR COURT

Mary Glass, Brenda Old, and Donna Smith Plaintiffs, [vs.] Fast Talking Mortgage Corp., Fast Talking Funding Co., Fast Talking Development, XYZ Financial Trust, David Stevens, Henry Michaels, and Aggressive Mortgage Co. Defendants. COMPLAINT FOR MONETARY DAMAGES AND OTHER RELIEF INTRODUCTION 1. This complaint is filed and these proceedings are instituted under Massachusetts' Consumer Protection Act, G.L. c. 93A; the Consumer Credit Cost Disclosure Act, G.L. c. 140D; and other provisions of the federal and Massachusetts laws enacted for Plaintiffs' benefit. In addition, Plaintiffs seek relief under the common law for breach of contract and fraud. 2. Each plaintiff entered into a consumer loan transaction at a very high interest rate involving one or more of the defendants. Through fraud, misrepresentation, misdisclosure and breach of fiduciary duties, the defendants induced each plaintiff to enter into a loan contract involving onerous terms including excessive interest, costs, prepayment penalties and other fees. Each plaintiff gave a mortgage on her residence in connection with the loan obtained. 3. The defendants then reaped their illegal profits on these loans by arranging to have each plaintiff refinance their first loan through a second loan with a different lender. In order to compound their profits, Defendants charged the plaintiffs substantial commissions for arranging these second loans with the third party lenders. 4. Plaintiff Mary Glass was advanced $12,590.48 by the defendants on March 27, 1990. She then paid Defendants $19,608.72 through a mortgage arranged by the defendants with a third party lender only fifteen days later on April 12, 1990.

5. Plaintiff Brenda Old was advanced no more than $46,726.62 by the defendants on January 25, 1989. Some or all of those amounts were then paid out by Ms. Old to defendant Fast Talking Developers for construction work on her home which was ultimately improperly done. Four months later, on May 24, 1989, Ms. Old repaid $65,814.42 through a mortgage arranged by Defendants with a third party lender. 6. Plaintiff Donna Smith, now 81 years old, has lost her memory of her interactions with the defendants due to heart failure and a stroke. However, paperwork in the transaction indicates that Ms. Smith was advanced no more than $38,985.29 on August 3, 1989. Less than three months later, on October 26, 1989, Defendants were repaid $52,500.46, through a loan arranged by them with a third party lender. 7. The schemes and methods by which the defendants illegally obtained monies from the plaintiffs form the basis of this complaint. JURISDICTION 8. This court has jurisdiction to grant the relief sought by the plaintiffs pursuant to G.L. c. 214 §§ 1, 5, c. 212, §§ 3, 4 c. 231A, §1, and c. 93A, §9. In addition, the court has jurisdiction to grant the relief sought under RICO as established by the United States Supreme Court in Tafflin v. Levitt, 493 U.S. 455 (1990).

PARTIES 9. Plaintiff Mary Glass is the owner of her residence at 10 Main Street, Dorchester, MA. 10. Plaintiff Brenda Old is the owner, with her estranged husband Henry Old, of her residence at 100 Woods Street, Mattapan, MA. 11. Plaintiff Donna Smith is the owner of her residence at 50 Foxboro Street, Dorchester, MA. 12. Defendant Fast Talking Mortgage Co. is a corporation with a business address of 123 Main Street, Brookline MA. On information and belief, defendant Henry Michaels is the president and chief operating officer of Fast Talking Mortgage Corporation.

13. Defendant

Fast Talking Funding, Inc. is a corporation with a business address of 123 Main Street, Brookline MA. On information and belief, defendants David Stevens and Henry Michaels have a financial interest in Fast Talking Funding, Inc. 14. Defendant Fast Talking Developers is a corporation or other business entity which is affiliated with Fast Talking Mortgage Corporation and Fast Talking Funding, Inc. Fast Talking Developers does business at 123 and/or 125 Main Street, Brookline MA. On information and belief, defendants Henry Michaels and David Stevens have a financial interest in Fast Talking Developers. 15. Defendant XYZ Financial Trust Inc. is a corporation with a business address of 125 Main Street, Brookline MA. On information and belief, defendants David Stevens and Henry Michaels are the principals of XYZ Financial Trust Inc. 16. Defendant David Stevens is an attorney whose office and principal place of business is at 125 Main Street, Brookline MA.

17. Defendant Henry Michaels is an individual

whose office and principal place of business is at 125 Main Street, Brookline MA. 18. Defendant Aggressive Mortgage Co. is a corporation doing business at 1000 Brookline Street, Wellesley MA. FACTUAL BACKGROUND 19. Plaintiffs Glass, Old and Smith are homeowners with limited educational background and experience in financial matters. 20. Ms. Glass is 62 years old and she has lived in the home she owns in Dorchester with her disabled 32 year old son for the last 25 years. 21. Ms. Old has lived with her two children in the home she owns in Mattapan for the last 18 years. The home has been in the Old family for at least 28 years. 22. Ms. Smith is 81 years old and she has owned her home in Dorchester for the last 35 years. She presently lives in the home with her adult son, James Smith, who cares for her due to various disabilities related to a stroke.

Facts as to Plaintiff Mary Glass 23. In March 1990, plaintiff Mary Glass contacted defendant Fast Talking Mortgage Co. seeking a loan based on a radio advertisement. 24. In the advertisement, Fast Talking Mortgage Co. represented itself, by statement or implication, as a lender, as if it made loans directly to members of the general public. 25. In the advertisement, Fast Talking Mortgage Co. stated or implied that it would make loans at or below market rates. 26. When Ms. Glass contacted Fast Talking Mortgage Co., she was told that Fast Talking would take her application and make a loan to her. Representatives of Fast Talking stated or implied that the loan would be made at or below market rates. 27. Ms. Glass told Fast Talking that she wanted a loan to refinance her prior mortgage on the residence. 28. Fast Talking did not inform Ms. Glass at the time she made her application that it would act as a loan broker, seek to arrange a loan with a third party lender, and that it would charge Ms. Glass a substantial commission for arranging a loan. 29. Based on these misrepresentations, implications and non-disclosures Ms. Glass believed that she was applying for a loan directly from Fast Talking Mortgage Co. which would be made at or below market rates. 30. In actuality, Fast Talking did not take Ms. Glass's application for a loan made directly by Fast Talking. 31. Instead, defendant Henry Michaels acting for himself and/or defendant Fast Talking Mortgage Corp. and/or defendant Fast Talking Funding Co. set up a loan for Ms. Glass through a different company of which he was also a principal, defendant XYZ Financial Trust. 32. On March 27, 1990, Ms. Glass entered into a loan with XYZ, purportedly for $18,000 at a disclosed annual percentage rate of 21.43% (the "XYZ loan"). Ms. Glass gave XYZ a mortgage on her home in connection with the transaction.

33. XYZ's loan to Ms. Glass was without risk to itself, because XYZ was at all times fully secured by a mortgage on Ms. Glass's home. At all times relevant to the transaction, Ms. Glass's home was worth at least $200,000. 34. At closing of the XYZ loan, various disclosures were made to Ms. Glass pursuant to the Consumer Credit Cost Disclosure Act, G.L. c. 140D, §1 et seq. copies of which are attached hereto and labeled Exhibit A. 35. Of the $18,000, only $12,590.48 was advanced to Ms. Glass or for her benefit. $5,409.52 (30% of the loan proceeds) was retained by XYZ in various fees and closing costs. 36. The $18,000 loan included a charge of $3,000 (16.667% of the loan proceeds) paid to Fast Talking Mortgage Co. (Henry Michaels's company) as a "loan broker" fee. 37. $850 was paid to David Stevens (4.72% of the loan proceeds) as an "attorney fee" and "title exam" charge. 38. On information and belief, XYZ Financial Trust is solely owned by David Stevens and Henry Michaels. 39. Other closing costs in the XYZ loan included: a.

$360.00 representing two points for making the

loan;

b.

$810 for a payment escrow which was not required by the terms of the contract and which account was never created. On information and belief, said escrow was never paid out for Ms. Glass's benefit;

c.

$20 for an assignment and reassignment fee even though the loan was never assigned or reassigned.

d.

$27 for recording the mortgage even though the cost of recording the mortgage was only $20.50.

40. The disclosures made in the XYZ loan inaccurately include the following fees and costs in the amount financed for the loan, even though they should have been included in the finance charge pursuant to G.L. c. 140D, §4: a.

the $3,000 broker fee (G.L. c. 140D, §4(a)(3));

b.

$617.52 in points and prepaid interest (G.L. c.

140D, §(4)(a)(1));

c.

$810 in prepayment escrow (G.L. c. 140D, §4(a)(5));

d.

$850 in attorneys fees and title examination charges paid to the loan company president which were neither bona fide nor reasonable in amount (G.L. c. 140D, §4(e); 209 C.M.R.§32.04(c)(7));

e.

$20 in assignment and reassignment charges which

were not actually

incurred (Id.); and f.

$6.50 in recording fees which were not actually incurred

(Id.).

41. By these misdisclosures, XYZ misrepresented the amount financed to be $18,000.00, when in actuality it was no more than $12,695.98 under the requirements of the law. 42. The annual percentage rate was misrepresented to be 21.43% when in actuality it was 60.5%. 43. The payment schedule for the loan was misrepresented to be 11 payments of $270.00 followed by a balloon payment of $2,970.00, when in actuality the contemplated payment schedule under the note was 11 payments of $270 followed by a balloon payment of $18,887.52. 44. At the closing of the XYZ loan, Ms. Glass discovered that despite her original request to Fast Talking, the XYZ loan did not pay off the first mortgage loan on her home. 45. At the closing of the XYZ loan, Ms. Glass sought to rescind the transaction, because it did not meet her needs by paying off her first mortgage loan. 46. Defendant Stevens told Ms. Glass that she could not obtain a refinancing of the first mortgage on her home unless she followed through with the XYZ loan and then sought refinancing of both loans together. 47. At no time did any defendant disclose the relationship between Fast Talking and XYZ. At no time did any defendant disclose Henry Michaels's relationship to XYZ. At no time did any defendant disclose David Stevens's relationship to XYZ. 48. To the extent, if any, that Fast Talking and/or Henry Michaels acted as a loan broker for the XYZ loan, they misrepresented and/or failed to disclose that they would not seek the best

terms available, in favor of obtaining a loan and a broker's commission from an affiliated company in which they have a financial interest. 49. To the extent, if any, that David Stevens closed the XYZ loan on behalf of the lender in the transaction, he misrepresented and/or failed to disclose his conflict of interest insofar as he has an ongoing significant business interest in the entity, Fast Talking, which, as loan broker, was purporting to act on behalf of the borrower in the transaction. 50. Each and every misrepresentation, misdisclosure and failure to disclose alleged herein was material. 51. Each and every misrepresentation, misdisclosure and failure to disclose alleged herein was made with knowledge and intent to have Ms. Glass enter into a financial transaction which was to her great economic disadvantage and to the great economic advantage of defendants Fast Talking Mortgage, Fast Talking Funding, XYZ, David Stevens, and Henry Michaels. 52. Ms. Glass relied on the defendants' misrepresentations, misdisclosures and failure to disclose material information in entering into the XYZ loan. 53. Due to her lack of education and sophistication in financial matters, Ms. Glass did not understand that the transaction was irregular, oppressive and against her financial interests. 54. Within days of entering into the XYZ loan, Fast Talking, through Henry Michaels, approached Ms. Glass about arranging a refinancing. 55. Within 15 days, Fast Talking had arranged a loan to refinance the XYZ loan and Ms. Glass's first mortgage through another entity ("the third party loan"). 56. The third party loan was made on April 12, 1990. XYZ was repaid $17,358.92 and Fast Talking was paid an additional $2,250 "broker fee" from the proceeds of the third party loan. 57. On information and belief, Ms. Glass could have gotten the same or a similar loan initially without incurring the fees, charges and closing costs of XYZ and Fast Talking in the XYZ transaction.

58. By bifurcating the loan into two transactions, Fast Talking claimed two brokers fees totalling $5,250. In addition, XYZ earned substantial profits for advancing Ms. Glass a limited amount of money for only 15 days. 59. XYZ lent Ms. Glass $12,590.48 on March 27, 1990. The return to the various defendants 15 days later from the third party loan was $19,608.72. This represents an effective annualized return of over 1,300%. 60. The third party loan to Ms. Glass was at an annual percentage rate in excess of 15% and it involved additional substantial closing costs including a $1,750.00 attorney fee to close a $47,000 mortgage. The payments on that loan were further inflated by interest on the amount included in that loan to repay XYZ for the first transaction. 61. Ms. Glass has had trouble making the payments on the third party loan and the lender on that loan is now foreclosing. 62. To the extent, if any, that Fast Talking and Henry Michaels, were acting as a loan broker on Ms. Glass's behalf in the third party loan, they breached their fiduciary duty in the second transaction to get the best loan terms available for Ms. Glass. 63. Ms. Glass has suffered damages from both transactions, including but not limited to, payments made far in excess of what she would have paid if she had never done business with the defendants, as well as severe physical and emotional distress related to the stress of potential imminent loss of her home to foreclosure. 64. On or about December 18, 1992, Ms. Glass, by counsel, rescinded her transaction with XYZ pursuant to her ongoing right of rescission granted by G.L. c. 140D, §10. A copy of the letter rescinding the transaction is attached hereto and marked Exhibit B. 65. By letter to counsel dated December 29, 1992, XYZ refused to rescind the transaction. 66. On or about February 9, 1993, Ms. Glass by counsel, demanded relief pursuant to G.L. c. 93A from defendants Fast Talking Mortgage Corporation, XYZ Financial, Henry Michaels and David Stevens. Copies of those letters are attached hereto as Exhibits C, D, E and F, respectively [not reprinted infra].

67. None of the defendants made a timely written tender of settlement which was reasonable in relation to the injury suffered by Ms. Glass. By letter of March 9, 1993 defendant XYZ denied liability under G.L. c. 93A, but made a offer to settle the case for $250 which was rejected by Ms. Glass. The other defendants did not respond. Facts as to Brenda Old 68. Sometime in January, 1989, Ms. Old's husband, Henry Old, contacted Fast Talking Mortgage Co. in response to a newspaper advertisement offering 24 hour debt consolidation loans. (The Olds have since separated). 69. In the advertisement, Fast Talking Mortgage Co. represented itself, by statement or implication, as a lender, as if it made loans directly to member of the general public. 70. In the advertisement, Fast Talking Mortgage Co. stated or implied that it would make loans at or below market rates. 71. The Olds applied to Fast Talking for a debt consolidation loan, but when they mentioned that they might also need home improvements, Fast Talking arranged a home improvement contract with Fast Talking Developers. 72. The Olds informed Fast Talking Mortgage Co. that they needed new windows and work done on their porch. Fast Talking Mortgage had them sign a home improvement contract for the work. An amount to cover the cost of the home improvement contract was added to the loan request. 73. Neither Fast Talking Mortgage nor Fast Talking Developers informed the Olds at the time they made their application that it would act as a loan broker and that it would charge the Olds a substantial commission for arranging a loan. 74. Based on Fast Talking's misrepresentations, implications and non-disclosures, the Olds believed that they were applying for a loan directly from Fast Talking Mortgage Co. which would be made at or below market rates. 75. In actuality, Fast Talking did not take the Old's application for a loan made directly by Fast Talking.

76. Instead, defendant Henry Michaels acting for himself and/or defendant Fast Talking Mortgage Corp. and/or defendant Fast Talking Funding Co. set up a loan for Ms. Old through a different company, defendant Aggressive Mortgage Co. 77. On information and belief, defendant Aggressive Mortgage had a regular arrangement with defendants Fast Talking, Michaels and Stevens under which defendant Aggressive would make loans to customers generated by Fast Talking, would allow defendant Stevens to arrange the details of the loan terms and would agree to pay Fast Talking and Stevens a substantial commission disguised as loan broker fees and attorney fees respectively. 78. Under the arrangement, the customer would never meet with Aggressive or any employee of Aggressive, but rather Aggressive would utilize defendants Fast Talking, Michaels and Stevens as its agents. 79. Under the arrangement, defendants Fast Talking, Michaels and Stevens were working in the interests of Aggressive to arrange and set up the loan on favorable terms for Aggressive, rather than for the borrower. 80. Despite the arrangement under which Fast Talking, Michaels and Stevens were working for Aggressive, Fast Talking charged the Olds a $6,000 loan broker fee. 81. On January 25, 1989, the loan closing took place at the office of Fast Talking. At closing, defendant Stevens represented that he was acting on behalf of Aggressive. Defendant Michaels or another agent of Fast Talking purportedly represented the Olds. 82. The Olds' loan was purportedly for $55,000.00 at a disclosed annual percentage rate of 20.23%. The Olds gave Aggressive a mortgage on their home in the transaction (the "Aggressive loan"). 83. At closing, the Olds were asked to sign and date various disclosure forms related to the transaction including the disclosures required pursuant to the Consumer Credit Cost Disclosure Act, c. 140D §1 et seq. However, they were not given copies of those documents to take away with them in violation of that law.

84. Of the $55,000, only $46,726.62 was advanced to the Olds or for their benefit. $8,273.38 (15% of the loan proceeds) were paid out in various fees and closing costs. 85. The Aggressive loan was made without risk to Aggressive, because Aggressive was fully secured by a mortgage on the Olds' home. At all times relevant to the transaction, the Olds home was worth at least $141,000. 86. Fast Talking Mortgage Co. received a $6,000.00 (10.9%) commission from the proceeds of the Aggressive loan. 87. David Stevens was paid $1,000.00 from the loan proceeds in attorney fees, for "document preparation" and for a title examination. 88. Aggressive received $1,100 representing two points in the transaction. 89. The loan made by Aggressive was for one year with monthly payments for 11 months of $870.83 and a final balloon payment of $55,870.83 due at the end of the loan term. 90. Fast Talking, Michaels, Stevens and Aggressive knew or should have known that the Olds would not be able to make the balloon payment required at the end of the loan term. That term was included solely in order to insure that the Olds would have to refinance so that Fast Talking, Michaels, Stevens and Aggressive could earn additional sums by refinancing. 91. Fast Talking Developers installed new windows in the Olds' home, but did not complete the porch work according to the contract. 92. The windows were installed improperly so that they are not weathertight. There are gaps at the top and bottoms of the window frames. In addition the windows will not properly lock. 93. Since the windows were installed, they have further deteriorated. They have pulled further away from their frames and some of the locks have come off. 94. The work done by defendant Fast Talking Developers was not performed according to contract and/or in a proper workerlike fashion. 95. Defendant Fast Talking Developers was paid a substantial sum from the proceeds of the Aggressive loan.

96. To the extent, if any, that Fast Talking and Henry Michaels acted as a loan broker for the Aggressive loan, they misrepresented and/or failed to disclose the true nature of their agency relationship with Aggressive. 97. To the extent, if any, that Fast Talking and/or Henry Michaels acted as a loan broker for the Aggressive loan, they misrepresented and/or failed to disclose that they would not seek the best terms available, in favor of obtaining a loan and a commission from a company with which they had an agency relationship. 98. To the extent, if any, that David Stevens closed the loan on behalf of the lender in the transaction, he misrepresented and/or failed to disclose his conflict of interest insofar as he has an ongoing significant business interest in the entity, Fast Talking which, as loan broker, was purporting to act on behalf of the borrower in the transaction. 99. Each and every misrepresentation, misdisclosure and failure to disclose alleged herein was material. 100. Each and every misrepresentation, misdisclosure and failure to disclose alleged herein was made with knowledge and intent to have the Olds enter into a financial transaction which was to their great economic disadvantage and to the great economic advantage of defendants Fast Talking Mortgage, Fast Talking Funding, Fast Talking Developers, Aggressive, David Stevens, and Henry Michaels. 101. The Olds relied on the defendants' misrepresentations, misdisclosures and failure to disclose material information when they entered into the Aggressive loan. 102. Due to their lack of education and sophistication in financial matters, the Olds did not understand that the Aggressive loan was irregular, oppressive and against their financial interests. 103. The Aggressive loan included a term which allowed Aggressive to charge a prepayment penalty in certain circumstances. Under that term, no prepayment penalty was due in the event of prepayment in the first three months of the loan. A prepayment penalty equal to

three months interest (approximately $3,000) was due in the event of prepayment in the 3rd through 9th months of the loan. 104. In early May, 1989, almost immediately after the first three months of the loan had passed, Fast Talking contacted the Olds and offered to arrange refinancing for them to prepay the Aggressive loan with another lender at a lower rate of interest. 105. Within several days, Fast Talking had arranged a refinancing through another entity (the "third party loan"). 106. The third party loan was made on May 24, 1989. Aggressive was repaid $59,814.42 including the prepayment penalty and Fast Talking was paid an additional $6,000 "broker fee" from the proceeds of the third party loan. 107. On information and belief, the Olds could have gotten the same or a similar loan initially without incurring the fees, charges and closing costs of Aggressive in the first transaction. 108. By bifurcating the loan into two transactions Fast Talking claimed two brokers fees totalling $12,000. In addition, Aggressive earned substantial profits for advancing the Olds less than $55,000 for only 4 months. 109. Aggressive lent the Olds $46,726.38 on January 25, 1989. The return to the various defendants four months later, including interim payments made by the Olds, was $67,474.42. This represents an effective annualized return of over 150%. 110. The third party loan was at an annual percentage rate of 18% and involved additional substantial closing costs including an $800 attorney fee to David Stevens to close the second loan. The payments on the third party loan were further inflated by interest payments included in that loan to repay Aggressive for the first transaction. 111. To the extent, if any, that Fast Talking and Henry Michaels, were acting as a loan broker on the Olds' behalf in the third party loan, they breached their fiduciary duty to get the best loan terms available for the Olds.

112. Ms. Old has had trouble making the payments on the second loan and the lender on that loan is now foreclosing. 113. Ms. Old has suffered damages from the transaction including but not limited to payments made far in excess of what she would have paid if she had never done business with the defendants, as well as severe physical and emotional distress related to the stress of potential imminent loss of her home to foreclosure. 114. On or about April 7, 1993, Ms. Old, by counsel, rescinded her transaction with Aggressive pursuant to her ongoing right of rescission granted by G.L. c. 140D, §10 and 15 U.S.C. §1635. A copy of the letter rescinding the transaction is attached hereto and marked Exhibit G [not reprinted infra]. 115. By letter to counsel dated April 28, 1993, Aggressive refused to rescind the transaction. 116. On or about April 7, 1993, Ms. Old, by counsel, demanded relief pursuant to G.L. c. 93A from defendants Fast Talking Mortgage Corporation, Aggressive, Henry Michaels and David Stevens. Copies of those letters are attached hereto as Exhibits H, I, J and K, respectively [not reprinted infra]. 117. None of the defendants made a timely written tender of settlement which was reasonable in relation to the injury suffered by Ms. Old. Defendant David Stevens has denied liability (although said denial was not timely), but has offered to settle Ms. Old's claims for $500, which offer was rejected by Ms. Old. Defendant Aggressive has denied liability under G.L. c. 93A in writing. The other defendants did not respond. Facts as to Plaintiff Donna Smith 118. On information and belief, Fast Talking Mortgage Co. misrepresented or implied to Ms. Smith that it would make a mortgage directly to her rather than act as a loan broker to arrange a mortgage with another lender. 119. On information and belief, Fast Talking Mortgage Co. misrepresented or implied to Ms. Smith that it would make a loan to her at or below market rates.

120. On information and belief, Fast Talking did not inform Ms. Smith at the time she made her loan application that it would act as a loan broker and that it would charge Ms. Smith a substantial commission for arranging a loan. 121. The defendants' misrepresentations, implications and non-disclosures, were designed to lead Ms. Smith to believe that she was applying for a loan directly from Fast Talking Mortgage Co. which would be made at or below market rates. 122. In actuality, Fast Talking did not take Ms. Smith's application for a loan made directly by Fast Talking. 123. Instead, defendant Henry Michaels acting for himself and/or defendant Fast Talking Mortgage Corp. and/or defendant Fast Talking Funding Co. set up a loan for Ms. Smith through defendant Aggressive pursuant to an arrangement identical to that discussed in connection with Ms. Old's transactions in paragraphs 77-79, supra. 124. On August 3, 1989, Ms. Smith entered into a loan, purportedly for $47,000 at a disclosed annual percentage rate of 19.47% (the "Aggressive loan"). The loan was secured by a first mortgage to Aggressive on Ms. Smith's property. 125. At closing of the Aggressive loan, various disclosures were made to Ms. Smith pursuant to the Consumer Credit Cost Disclosure Act, G.L. c. 140D, §1 et seq. copies of which are attached hereto and labeled Exhibit L [not reprinted infra]. 126. Several days after the loan documents were signed by Ms. Smith, but before the proceeds of the loan were distributed, a different set of disclosures were prepared and backdated. Among other things, these disclosures reduced the amount of the proceeds of the loan payable to Ms. Smith by $2,000 and paid that amount over to Fast Talking Mortgage Co. A copy of the backdated loan disclosures are attached hereto and labeled Exhibit M [not reprinted infra]. 127. Of the $47,000, not more than $38,985.29 was advanced to Ms. Smith or for her benefit. $11,914.71 (17% of the loan proceeds) was retained by Aggressive in various fees and closing costs.

128. The $47,000 loan included a charge of $5,000 (10.6% of the loan proceeds) paid to Fast Talking Mortgage as a "loan broker" fee. 129. $1,050 was paid to David Stevens as an "attorney fee." 130. Other closing costs included: a.

$940.00 representing two points for making the loan;

b.

$241.40 for a four month tax escrow even though the

loan was refinanced

within three months with a third party lender. On information and belief, that tax escrow was never paid out; c.

$20 for an assignment and reassignment fee even

though the loan was

never assigned or reassigned; d.

$28 for recording the mortgage even though the cost of recording the mortgage was only $20.50;

e.

$20 for releasing attachments even though the attaching creditors released their own attachments and that money was never paid out;

131. The disclosures made in the Aggressive loan inaccurately include the following fees and costs in the amount financed for the loan, when they should have been included in the finance charge pursuant to c.140D, §4: a.

the $5,000 broker fee (G.L. c. 140D, §4(a)(3));

b.

$1,502.81 in points and prepaid interest (G.L. c. 140D, §(4)(a)(1));

c.

$241.40 in tax escrow (G.L. c. 140D, §4(a)(5));

d.

$1,050 in attorney fees and title examination charges

paid to the loan

company president which were neither bona fide nor reasonable in amount (G.L. c. 140D, §4(e); 209 C.M.R.§32.04(c)(7)); e.

$20 in assignment and reassignment charges which were

not actually incurred

(Id.); and f.

$7.50 in recording fees which were not actually incurred

(Id.).

132. By these misdisclosures, the defendants misrepresented the amount financed to be $47,000.00, when in actuality it was no more than $39,178.29 under the requirements of the law. 133. The annual percentage rate was misrepresented to be 19.47% when in actuality it was 23.48%. 134. To the extent, if any, that Fast Talking and Henry Michaels acted as a loan broker in the Aggressive loan, they misrepresented and/or failed to disclose the true nature of their agency relationship with Aggressive. 135. To the extent, if any, that Fast Talking and/or Henry Michaels acted as a loan broker in the Aggressive loan, they misrepresented and/or failed to disclose that they would not seek the best terms available, in favor of obtaining a loan and a commission from a company with which they had an agency relationship. 136. To the extent, if any, that David Stevens closed the loan on behalf of the lender in the transaction, he misrepresented and/or failed to disclose his conflict of interest insofar as he has an ongoing significant business interest in the entity, Fast Talking which, as loan broker, was purporting to act on behalf of the borrower in the transaction. 137. Each and every misrepresentation, misdisclosure and failure to disclose alleged herein was material. 138. Each and every misrepresentation, misdisclosure and failure to disclose alleged herein was made with knowledge and intent to have Ms. Smith enter into a financial transaction which was to her great economic disadvantage and to the great economic advantage of defendants Fast Talking Mortgage, Fast Talking Funding, Fast Talking Developers, Aggressive, David Stevens, and Henry Michaels. 139. Ms. Smith relied on the defendants' misrepresentations, misdisclosures and failure to disclose material information when she entered into the Aggressive loan. 140. Ms. Smith did not understand that the transaction was irregular, oppressive and against her financial interests.

141. In connection with the transaction, the defendants gave Ms. Smith a notice of right to cancel which did not accurately state Ms. Smith's rights. Additionally, they had Ms. Smith waive her right of rescission. 142. A true and correct copy of the notice of right to cancel given to Ms. Smith in the Aggressive loan is attached as Exhibit N. 143. The defendants illegally deprived Ms. Smith of her right to rescind the transaction by failing to accurately disclose the right and by failing to take those steps required by 209 C.M.R. §32.23(e) to obtain a proper waiver of the right to rescind. 144. Any waiver of the right of rescission signed by Ms. Smith is void and without effect. 145. The Aggressive transaction included an ambiguous term which allowed Aggressive to charge a prepayment penalty in certain circumstances. That term states both that no prepayment penalty was due in the event of prepayment in the first three months of the loan and also, without limitation, that a penalty of three months interest could be charged. 146. On information and belief, within weeks of the transaction, Fast Talking approached Ms. Smith about arranging a refinancing. 147. Within 90 days Fast Talking had arranged a refinancing through another entity (the "third party loan"). 148. The third party loan was made on October 26, 1989. Aggressive was repaid $48,300.46 and Fast Talking was paid an additional $4,200 "broker fee" from the proceeds of the third party loan. 149. On information and belief, Ms. Smith could have gotten the same or a similar loan initially without incurring the fees, charges and closing costs of Aggressive, Fast Talking, Michaels and Stevens in the Grwoth loan. 150. By bifurcating the loan into two transactions, Fast Talking claimed two brokers fees totalling $9,200. In addition, Aggressive earned substantial profits for advancing Ms. Smith a limited amount of money for less than 90 days.

151. Aggressive charged Ms. Smith an undisclosed and illegal prepayment penalty in the transaction. 152. Aggressive lent Ms. Smith $38,985.29 on March 27, 1990. The return to the various defendants less than 90 days later was $52,500.46. This represents an effective annualized return of over 135%. 153. The third party loan to Ms. Smith was at an annual percentage rate in excess of 15% and it involved additional substantial closing costs, including a $700.00 attorney fee to David Stevens who closed the second loan. The payments on the third party loan were further inflated by interest on the amount included in that loan to repay Aggressive for the first transaction. 154. To the extent, if any, that Fast Talking and Henry Michaels, were acting as a loan broker on Ms. Smith's behalf in the third party loan, they breached their fiduciary duty to get the best loan terms available for Ms. Smith. 155. Ms. Smith has had trouble making the payments on the second loan and the lender on that loan is now foreclosing. 156. Ms. Smith has suffered damages from the transactions including, but not limited to, payments made far in excess of what she would have paid if she had never done business with the defendants, as well as severe physical and emotional distress related to the stress of potential imminent loss of her home to foreclosure. 157. On or about April 6, 1993, Ms. Smith, by counsel, rescinded her transaction with Aggressive pursuant to her ongoing right of rescission granted by G.L. c. 140D, §10 and 15 U.S.C. §1635. A copy of the letter rescinding the transaction is attached hereto and marked Exhibit O [not reprinted infra. 158. Aggressive has refused to rescind the transaction. 159. On or about April 8, 1993, Ms. Smith by counsel, demanded relief pursuant to G.L. c. 93A from defendants Fast Talking Mortgage Corporation, Aggressive and Henry Michaels. Copies of those letters are attached hereto as Exhibits P, Q, and R, respectively [not reprinted infra].

160. None of the defendants made a timely written tender of settlement which was reasonable in relation to the injury suffered by Ms. Smith. Defendant Aggressive has denied liability under G.L. c. 93A in writing. CLAIMS I. CLAIMS PURSUANT TO G.L. c. 93A FOR UNFAIR AND DECEPTIVE PRACTICES A. Claims Against Fast Talking Mortgage Co. and/or Fast Talking Funding 161. The conduct of Fast Talking Mortgage Co. and Fast Talking Funding as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it was unfair, deceptive, oppressive, unconscionable, and contrary to public policy and generally recognized standards applicable to the consumer lending business. 162. The conduct of Fast Talking Mortgage Co. and Fast Talking Funding as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it violated existing statutes, rules, regulations or laws, meant for the protection of the public's health, safety or welfare, including but not limited to, G.L. c. 140D and 209 C.M.R. §32.01 et seq. as set forth more fully below. 163. The conduct of Fast Talking Mortgage Co. and Fast Talking Funding as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it violated the requirement of good faith and fair dealing applicable to contracts under G.L. c. 106, §1-203. 164. The conduct of Fast Talking Mortgage Co. and Fast Talking Funding was willful or knowing within the meaning of the Massachusetts Consumer Protection Act, G.L. c. 93A, §9. 165. Each plaintiff suffered damages as aforesaid by virtue of the defendants' violations. Said damages include, but are not limited to, a.

paying fees to the defendants to which Defendants were not entitled;

b.

paying excessive interest and other charges on loans to the defendants and/or their agents and/or their confederates; and

c.

paying interest on loans to third parties which exceed the amounts which would have been due if the defendants had acted properly in the transactions.

166. The defendants' refusal to grant relief upon demand was in bad faith with knowledge or reason to know that the act or practice complained of violated G.L. c. 93A, §2. B. Claims Against Henry Michaels 167. The conduct of defendant Michaels as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it was unfair, deceptive, oppressive, unconscionable, and contrary to public policy and generally recognized standards applicable to the consumer lending business. 168. The conduct of defendant Michaels as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it violated existing statutes, rules, regulations or laws, meant for the protection of the public's health, safety or welfare, including but not limited to, G.L. c. 140D and 209 C.M.R. §32.01 et seq. as set forth more fully below. 169. The conduct of defendant Michaels as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it violated the requirement of good faith and fair dealing applicable to contracts under G.L. c. 106, §1-203. 170. In addition to his own conduct, defendant Michaels, is liable as principal for the conduct of Fast Talking Mortgage Co., Fast Talking Funding Co., and XYZ. 171. The conduct of defendant Michaels was willful or knowing within the meaning of the Massachusetts Consumer Protection Act, G.L. c. 93A, §9. 172. Each plaintiff suffered damages as aforesaid by virtue of defendant Michaels's violations. Said damages include, but are not limited to, a.

paying fees to the defendants to which Defendants were not entitled;

b.

paying excessive interest and other charges on loans to the defendant and/or his agent and/or his confederates; and

c.

paying interest to third parties on loans which exceed the amounts which would have been due if the defendant had acted properly in the transactions.

173. The defendant's refusal to grant relief upon demand was in bad faith with knowledge or reason to know that the act or practice complained of violated G.L. c. 93A, §2. C. Claims Against XYZ Financial Trust 174. The conduct of XYZ Financial Trust as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it was unfair, deceptive, oppressive, unconscionable, and contrary to public policy and generally recognized standards applicable to the consumer lending business. 175. The conduct of XYZ Financial Trust as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it violated existing statutes, rules, regulations or laws, meant for the protection of the public's health, safety or welfare, including but not limited to, G.L. c. 140D and 209 C.M.R. §32.01 et seq. as set forth more fully below. 176. The conduct of XYZ Financial Trust as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it violated the requirement of good faith and fair dealing applicable to contracts under G.L. c. 106, §1-203. 177. The conduct of XYZ Financial Trust was willful or knowing within the meaning of the Massachusetts Consumer Protection Act, G.L. c. 93A, §9. 178. Plaintiff Glass suffered damages as aforesaid by virtue of the defendants' violations. Said damages include, but are not limited to, a. paying fees to the defendants to which Defendants were not entitled; b. paying excessive interest and other charges on loans to the defendants and/or their agents and/or their confederates; and

c. paying interest on loans which exceed the amounts which would have been due if the defendants had acted properly in the transactions. 179. The defendant's refusal to grant relief upon demand was made in bad faith with knowledge or reason to know that the act or practice complained of violated G.L. c. 93A, §2. D. Claims Against Aggressive Mortgage Co. 180. The conduct of Aggressive Mortgage Co. as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it was unfair, deceptive, oppressive, unconscionable, and contrary to public policy and generally recognized standards applicable to the consumer lending business. 181. The conduct of Aggressive Mortgage Co. as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it violated existing statutes, rules, regulations or laws, meant for the protection of the public's health, safety or welfare, including but not limited to, G.L. c. 140D and 209 C.M.R. §32.01 et seq. as set forth more fully below. 182. The conduct of Aggressive Mortgage Co. as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it violated the requirement of good faith and fair dealing applicable to contracts under G.L. c. 106, §1-203. 183. The conduct of Aggressive Mortgage Co. was willful or knowing within the meaning of the Massachusetts Consumer Protection Act, G.L. c. 93A, §9. 184. Plaintiffs Old and Smith suffered damages as aforesaid by virtue of the defendant's violations. Said damages include, but are not limited to, a.

paying fees to the defendants to which Defendants were not entitled;

b.

paying excessive interest and other charges on loans to the defendants and/or their agents and/or their confederates; and

c.

paying interest on loans which exceed the amounts which would have been due if the defendants had acted properly in the transactions.

185. The defendant's refusal to grant relief upon demand was made in bad faith with knowledge or reason to know that the act or practice complained of violated G.L. c. 93A, §2. E. Claims Against David Stevens 186. The conduct of defendant Stevens as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it was unfair, deceptive, oppressive, unconscionable, and contrary to public policy and generally recognized standards applicable to the consumer lending business. 187. The conduct of defendant Stevens as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it violated existing statutes, rules, regulations or laws, meant for the protection of the public's health, safety or welfare, including but not limited to, G.L. c. 140D and 209 C.M.R. §32.01 et seq. as set forth more fully below. 188. The conduct of defendant Stevens as aforesaid violated the Massachusetts Consumer Protection Act, G.L. c. 93A, §2 and applicable regulations including 940 C.M.R. §3.16, in that it violated the requirement of good faith and fair dealing applicable to contracts under G.L. c. 106, §1-203. 189. In addition to his own conduct, defendant Stevens, is liable as principal for the conduct of XYZ. 190. The conduct of defendant Stevens was willful or knowing within the meaning of the Massachusetts Consumer Protection Act, G.L. c. 93A, §9. 191. Each plaintiff suffered damages as aforesaid by virtue of the defendant Stevens's violations. Said damages include, but are not limited to, a.

paying fees to the defendants to which Defendants were not entitled;

b.

paying excessive interest and other charges on loans to the defendant and/or his agent and/or his confederates; and

c.

paying interest on loans which exceed the amounts which would have been due if the defendant had acted properly in the transactions.

192. The defendant's refusal to grant relief upon demand was in bad faith with knowledge or reason to know that the act or practice complained of violated G.L. c. 93A, §2. II. BREACH OF FIDUCIARY DUTY AGAINST FAST TALKING MORTGAGE CO., FAST TALKING FUNDING AND HENRY MICHAELS 193. Fast Talking Mortgage Co., Fast Talking Funding Co. and Henry Michaels maintain that they acted in each transaction on behalf of the plaintiff as a loan broker. 194. To the extent, if any, that any defendant acted as a loan broker in any transaction, that defendant breached its fiduciary duty in that transaction, by a.

failing to seek and obtain loans on the best terms available;

b.

failing to disclose its financial relationship to the lender(s) from whom it obtained loans;

c.

failing to disclose financial interests adverse to those of each plaintiff; and

d.

failing to otherwise act in good faith and in the interest of each plaintiff.

195. Plaintiffs were damaged by the defendants' breach of fiduciary duty. III. INTENTIONAL MISREPRESENTATION AND FRAUD 196. In the course of the transactions, each defendant made one or more misrepresentations and/or failed to make accurate representations and/or failed to provide material information about the transactions as set forth more fully above. 197. Said misrepresentations and failure to make accurate representations were made knowingly or with reason to know that Plaintiffs would rely thereon. 198. Said misrepresentations and failure to make accurate representations were material to the transactions. 199. Said misrepresentations and failure to make accurate representations were made with intent that the plaintiffs rely thereon. 200. Plaintiffs did reasonably rely. 201. Plaintiffs were damaged thereby.

IV. NEGLIGENCE 202. In the course of the transactions, each defendant made one or more statements about the nature and terms of the transaction which were inaccurate. 203. Each defendant stood in a relationship to the plaintiffs under which they owed that plaintiff a duty of care to provide accurate information about the transactions. 204. The defendants failed to exercise reasonable care to provide the plaintiffs with accurate material information about the transaction which they knew or had reason to know that the plaintiffs would want. 205. Plaintiffs were injured in each transaction by defendants failure to provide accurate information. 206. Defendants' negligence was the proximate cause of Plaintiffs' injuries. V. BREACH OF CONTRACT AND WARRANTY CLAIMS ON BEHALF OF BRENDA OLD AGAINST FAST TALKING DEVELOPERS, FAST TALKING MORTGAGE CO. AND FAST TALKING FUNDING 207. At all times relevant hereto, Fast Talking Developers acted as agent for Fast Talking Mortgage Co. and/or Fast Talking Funding. 208. Fast Talking Developers failed to provide goods and services for Ms. Old's home according to contract. 209. Fast Talking Developers failed to complete the work called for under the contract. 210. Fast Talking Developers knew or had reason to know that Ms. Old was relying on its skill or judgment to select and furnish suitable goods under the contract. 211. Said goods were not fit for the purposes intended. 212. The goods and services provided to Ms. Old did not meet the standards set for like goods and services passing in trade. 213. Fast Talking Developers breached written and implied warranties made in connection with its contract to perform work on Brenda Old's home. 214. Ms. Old suffered damages which were proximately caused by Defendants' breaches.

VI. CIVIL RICO 215. Defendants Fast Talking Mortgage Co., Fast Talking Funding, Henry Michaels, David Stevens, XYZ Financial Trust and Aggressive Mortgage Co. are individuals or entities capable of holding a legal or beneficial interest in property and as such are persons as defined by 18 U.S.C. §1961(3). 216. Fast Talking Mortgage Co. and Fast Talking Funding are enterprises within the meaning of 18 U.S.C. §1961(4). 217. Fast Talking Mortgage Co. and Fast Talking Funding engage in or conduct activities which affect interstate commerce, including, but not limited to, arranging loans with out of state lenders. 218. Fast Talking Mortgage and/or Fast Talking Funding served as an umbrella for the activities of the various defendants who sought to obtain profits from Plaintiffs and others through fraud and other illegal conduct. 219. Defendants Michaels, Stevens, XYZ, Aggressive, Fast Talking Mortgage and Fast Talking Funding participated in the affairs of the enterprise through a pattern of racketeering activity or collection of unlawful debt in violation of 18 U.S.C. §1962(c), including, but not limited to: a.

collecting interest at a rate which is more than twice the enforceable rate from each of the plaintiffs and others;

b.

fraudulently misrepresenting their right to collect fees from the plaintiffs, including, in particular their right to broker fees, attorney fees, points and other charges from the proceeds of the loan in violation of the Consumer Credit Cost Disclosure Act, G.L. 140D, §1 et seq.;

c.

fraudulently misrepresenting the true cost of credit in connection with each loan made to the plaintiffs;

d.

making fraudulent advertising claims concerning the nature and terms of the loan transactions;

e.

fraudulently seeking to obtain multiple commissions and payoff of prior loans from the plaintiffs so that they could realize illegal profits;

f.

backdating documents prepared in connection with the transactions;

g.

fraudulently misrepresenting to Plaintiffs and others the terms of various loan transactions for the purpose of concealing the disadvantageous nature of the transactions.

220. The defendants have acquired funds through the aforesaid racketeering activity which they have invested in the enterprise in violation of 18 U.S.C. §1962(a). 221. The defendants have conspired to participate in the affairs of the enterprise through a pattern of racketeering activity and collection of unlawful debt in violation of 18 U.S.C. §1962(d). 222. The defendants regularly use the United States mails in furtherance of said pattern of racketeering activity and collection of unlawful debt and to otherwise defraud Plaintiffs including, but not limited to, obtaining credit information, contracts and payments by mail, mailing collection letters, mailing checks to distribute proceeds of the transactions, and mailing various credit applications and other documents. 223. The defendants regularly use the interstate telephone system in furtherance of said pattern of racketeering activity and collection of unlawful debt and to otherwise defraud the Plaintiffs including, but not limited to, making calls soliciting business and refinancing and making calls to obtain credit information and to arrange appointments to close loans. 224. Defendants' use of the mail and telephone as set forth above constitutes indictable mail fraud as defined by 18 U.S.C. §1341 and indictable wire fraud as defined by 18 U.S.C. §1343. 225. The actions of the various defendants constitute a "pattern of racketeering activity" as defined by 18 U.S.C. §1961(5). 266. The plaintiffs were damaged by said violations of law.

VII. CLAIMS UNDER THE CONSUMER CREDIT COST DISCLOSURE ACT, G.L. §140D A. For Mary Glass Against XYZ 227. At all times relevant hereto defendant XYZ was a creditor within the meaning of the Consumer Credit Cost Disclosure Act ("CCCDA"), M.G.L. c. 140D, §1 et seq. 228. Plaintiff Glass's transaction with XYZ was a consumer credit transaction within the meaning of the CCCDA. 229. In connection with the transaction, XYZ failed to provide Ms. Glass with a disclosure statement in conformity with the CCCDA. 230. The disclosure statement provided by XYZ to Ms. Glass fails to accurately set forth the finance charge, amount financed, annual percentage rate, total of payments and payment schedule in the transaction. 231. By reason of Defendants' failure to provide a proper disclosure statement, Ms. Glass retained a right to rescind the transaction for four years from the date of the transaction. 232. Ms. Glass properly exercised her right to rescind the transaction in a timely fashion. 233. Pursuant to G.L. c. 140D §10(b) Ms. Glass is entitled to a refund of all finance charges paid in connection with the transaction. 234. Ms. Glass is entitled to an award of $2,000.00 statutory damages together with actual damages, costs and attorney fees for XYZ's failure make proper disclosures and to effectuate rescission of the transaction in conformity with the CCCDA. B. For Brenda Old and Donna Smith Against Aggressive 235. At all times relevant hereto defendant Aggressive was a creditor within the meaning of the Consumer Credit Cost Disclosure Act ("CCCDA"), M.G.L. c. 140D, §1 et seq. 236. Plaintiffs Old and Smith entered into transactions with Aggressive which were consumer credit transactions within the meaning of the CCCDA. 237. In connection with the transactions, Aggressive failed to provide Ms. Old and Ms. Smith with a disclosure statement in conformity with the CCCDA. 238. Ms. Old did not receive a completed disclosure statement or notice of right to cancel.

239. The disclosure statement provided by Aggressive to Ms. Smith fails to accurately set forth the finance charge, amount financed, annual percentage rate, total of payments and payment schedule in the transaction. 240. The notice of right to cancel provided by Aggressive to Ms. Smith did not accurately set forth Ms. Smith's cancellation rights and Aggressive improperly induced Ms. Smith to waive her rights. 241. By reason of Defendants' failure to provide proper disclosure statements and notices of right to cancel, Ms. Old and Ms. Smith retained a right to rescind their transactions for four years from the date of the transaction. 242. Ms. Old and Ms. Smith properly exercised their right to rescind their transactions in a timely fashion. 243. Pursuant to G.L. c. 140D §10(b) Ms. Old and Ms. Smith are entitled to a refund of all finance charges paid in connection with their transactions. 244. Ms. Old and Ms. Smith are each entitled to an award of $2,000.00 statutory damages together with actual damages, costs and attorney fees for Aggressive's failure make proper disclosures and to effectuate rescission of the transaction in conformity with the CCCDA. REQUESTS FOR RELIEF The plaintiffs request that this Court: a. assume jurisdiction of this proceeding; b. award damages, multiple damages, costs and attorney fees against defendants Fast Talking Mortgage, Fast Talking Funding, Michaels, Stevens, XYZ and Aggressive pursuant to G.L. c. 93A; c. award damages, multiple damages or other enhanced damages, costs and attorney fees against defendants Fast Talking Mortgage, Fast Talking Funding and Michaels for breach of fiduciary duty;

d. award damages, multiple damages or other enhanced damages, costs and attorney fees against defendants Fast Talking Mortgage, Fast Talking Funding, Michaels, Stevens, XYZ and Aggressive for intentional misrepresentation and fraud; e. award damages, costs and attorney fees against defendants Fast Talking Mortgage, Fast Talking Funding, Michaels, Stevens, XYZ and Aggressive for negligence; f. award damages, costs and attorney fees against defendants Fast Talking Developers, Fast Talking Mortgage and Fast Talking Funding in favor of Brenda Old for breach of contract and breach of warranty; g. award damages, multiple damages, costs and attorney fees against defendants Fast Talking Developers, Fast Talking Mortgage, Fast Talking Funding, Aggressive, XYZ, Michaels and Stevens pursuant to RICO; h. declare that each plaintiff validly rescinded her transaction with XYZ or Aggressive; i. award each plaintiff $2,000.00 in statutory damages together with actual damages, costs and attorney fees for Defendants' failure to effectuate rescission and for Defendants' disclosure violations pursuant to the CCCDA; j. order that XYZ and Aggressive return all finance charges paid to them in connection with each transaction pursuant to the CCCDA; k. award such other relief as the Court deems appropriate and just. Dated: Counsel for the Plaintiffs

7.2

Request for Production of Documents1 COMMONWEALTH OF MASSACHUSETTS SUFFOLK, SS.SUPERIOR COURT

C.A. NO.

1

Note that similar discovery requests made to the attorney and to Aggressive are not reprinted infra.

Mary Glass, Brenda Old, and Donna Smith Plaintiffs, [vs.] Fast Talking Mortgage Corp., Fast Talking Funding Co., Fast Talking Development, XYZ Financial Trust, David Stevens, Henry Michaels, and Aggressive Mortgage Co. Defendants.

PLAINTIFFS' FIRST REQUEST FOR PRODUCTION OF DOCUMENTS

TO:

James Jones Esquire 100 Boston Street Newton, MA

Attorney for Defendant XYZ Financial Trust

Plaintiffs request, pursuant to Fed. R. Civ. P. 34 that defendants produce a copy of each of the following documents to be sent to the office of plaintiffs' attorney: Gary Klein, Esquire, National Consumer Law Center, 18 Tremont Street, Boston, MA 02108.

DEFINITIONS As used herein the following terms shall have the following meaning: A.

"Documents" means all writings of any kind, including the originals and all

nonidentical copies, whether different from the originals by reason of any notation made on such

copies or otherwise, including but not limited to correspondence, memoranda, notes, diaries, desk or other calendars, statistics, charts, summaries, pamphlets, books, interoffice and intraoffice communications, notations of any sort of conversations, written agreements, bulletins, printed matter, computer printouts, teletypes, telefax, invoices, worksheets, all drafts, alterations, modifications, changes and amendments of any of the foregoing, graphic or oral records or representations of any kind (including, without limitation, tapes, cassettes, discs, recordings and computer memories). B.

The term "transaction" shall include all activities by and between any plaintiff and

any defendant related to a loan which is referenced in the amended complaint filed in this matter. C.

The term "subject property" shall refer to any plaintiff's residence.

D. The term "you" or "your" shall refer to the defendant to whom these requests are directed. All requests shall be deemed to include any documents made by, held by or maintained in the files of any predecessor, successor, employee, agent or assignee of any defendant.

INSTRUCTIONS E.

If your response to any request herein is that the documents are not in your

possession or custody, describe in detail the unsuccessful efforts you made to locate the records. F.

If your response to any request herein is that the documents are not in your

control, identify who has control and location of the records. G.

If a request herein for production seeks a specific document or an itemized

category which is not in your possession, control or custody, provide any documents you have that contain all or part of the information contained in the requested document or category. H.

Identify the source of each of the documents you produce. REQUESTS FOR PRODUCTION

l.

All contracts between any plaintiff and any defendant including notes, judgment

notes, security agreements, mortgages, and insurance agreements related to any transaction.

2.

All disclosure statements or other notices given to any plaintiff related to any

transaction. 3.

All documents provided to any plaintiff describing the terms of any transaction.

4. All notices of right to cancel given to any plaintiff in connection with any transaction. 5.

The loan application, loan worksheet, application worksheet or other document

used in considering the application of any plaintiff for a loan. 6.

The settlement statement, commitment letter and any worksheet or other

document used to prepare the federal disclosure statement in any transaction. 7.

All letters, notices and forms relating to defendants' intention to foreclose on any

subject property. 8.

All ledger cards, ledger sheets or other documents reflecting payments made, and

charges and costs incurred in any transaction. 9.

All written communications either by or to any plaintiff.

10.

All telephone log sheets, internal memoranda, notes or other documents

concerning any transaction prepared or reflecting activity on any plaintiff's account. 11.

All documents recording, reflecting or otherwise relating to visits which any

plaintiff or anyone acting on their behalf made to your office in connection with any transaction. 12.

All documents you rely on for assessing attorneys fees and costs on the plaintiffs

in this matter, including but not limited to fee agreements, contracts, bills, timesheets, attorney work records, canceled checks and other documents supporting fees assessed for an attorney in connection with closing any transaction. 13. All documents defendants rely on for payment of document preparation fees in any transaction. 14. All documents defendants rely on for payments made to any entity, including any plaintiff, in connection with any transaction including, but not limited to, contracts, bills, canceled checks and other back-up documentation for such payment.

15. All documents relating to any fees, commissions or other payment to any third party in connection with any transaction whether or not such payment was charged to any plaintiff. 16. All documents relating to any fees, commissions or payments received by any defendant in connection with any transaction from anyone other than a plaintiff. 17. All contracts, agreements, correspondence, records of communication or other documents reflecting interaction with any loan broker who was paid in any transaction. 18. All documents your employees or agents had received from you or any third party at the time of any transaction concerning the requirements of the federal Truth-in-Lending Act or the state Consumer Credit Cost Disclosure Act. 19. All documents relating to any internal inspection procedures you used at the time of any transaction to insure that your employees or agents were complying with the Truth-inLending Act and the state Consumer Credit Cost Disclosure Act. 20. A copy of the outside and inside front and back of the file folder on any of plaintiff's loan accounts. 21. Copies of both sides of each and every check issued or received in connection with any transaction. 22. All documents reflecting commissions and/or bonuses paid to any individual including, but not limited to, payments to your employees, agents and any loan broker in connection with any transaction. 23. All contracts, agreements, correspondence, records of telephone conversations, memoranda or other documents reflecting communication between you and any other defendant involved in this matter related to any transaction, subject property or plaintiff in this case. 24. All contracts, agreements, correspondence, records of telephone conversations, memoranda and other documents reflecting communication between you and any person or entity who loaned money to any plaintiff whether or not such person or entity is a defendant in this case.

25. All documents related in any way to any criteria or system used to determine any plaintiff's credit worthiness. 26. All documents used in choosing, determining, setting, changing or adjusting the interest rate in any transaction, including any documents related to how the amount of the interest rate relates to any plaintiff's individual circumstances. 27. All documents related in any way to any terms required as a condition for entering into a loan agreement with any plaintiff. 28. All of the above enumerated documents with respect to any previous or subsequent transaction with any plaintiff. 29.

All documents from whatever source relating in any way to the fair market value

of any subject property. 30. All advertisements sent to any plaintiff by mail and the transcript of any telephone advertisements or other solicitation made directly to any plaintiff at any time. 31. The text of any published advertisement you used in any print or electronic media between January 1, 1988 and December 31, 1992. 32. The results of all title and lien searches of any subject property. 33. All documents related to establishment, maintenance, collection or disbursement of an escrow in any transaction. 34. All mortgages, security agreements or other documents reflecting security interests held by third parties such as your creditors in any mortgage and/or note executed by any plaintiff in any transaction. 35. All corporate records maintained by you which reflect: a.

the identity of your corporate officers, executives or shareholders for any period of time since the corporation was formed;

b.

any financial relationship between your corporation and any other corporation, individual or other entity; and

c.

any agreements, financial relationship or any other connection between your corporation and any other defendant in this lawsuit.

36. All contracts, agreements, memoranda of understanding or any other document reflecting an agreement between you and any other defendant whether or not such agreement relates to this case. 37. All bank records of any accounts held by you at any time since January 1, 1989. 38.

Any and all documents which you intend to use or introduce at trial.

Dated:

7.3

Motion for Remand

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS Mary Glass, Brenda Old, and Donna Smith Plaintiffs, [vs.] Fast Talking Mortgage Corp., Fast Talking Funding Co., Fast Talking Development, XYZ Financial Trust, David Stevens, Henry Michaels, and Aggressive Mortgage Co. Defendants. C.A. No. 93-XXXXXX PLAINTIFFS' MOTION FOR REMAND Now come the plaintiffs in the above matter, pursuant to 28 U.S.C. §1441(c), or alternatively, 28 U.S.C. §1367(c), and hereby request that the Court remand this matter to the Superior Court of the Commonwealth of Massachusetts. In support of their motion plaintiffs state the following:

1. Plaintiffs commenced this litigation on or about May 21, 1993 by filing of a complaint in the Suffolk County, Massachusetts Superior Court. The complaint was amended in that court as of right on or about July 14, 1993. 2. Plaintiffs' amended complaint states seven causes of action, six of which are entirely state law claims. 3. Plaintiffs' state law claims are based on defendants' violations of the Massachusetts consumer protection statute, M.G.L. ch. 93A; state common law claims of breach of fiduciary obligation, misrepresentation, fraud and negligence; state law claims of breach of warranty and contract; and defendants' violations of the Massachusetts consumer credit cost disclosure act, M.G.L. 140D. 4. Plaintiffs' one federal claim derives from the civil remedies provisions of the Racketeering Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §1964. 5. On August 18, 1993, defendant Aggressive Mortgage Co. (Aggressive) removed the litigation to this Court, pursuant to 28 U.S.C. §1441 and § 1446. 6. Plaintiffs' RICO claim is a cause of action related to, but separate and independent from plaintiffs' state law claims. Plaintiffs' state law claims predominate in this action. 7. Alternatively, plaintiffs' RICO claim derives from the same acts and omissions by the defendants which form the basis of plaintiffs' state law claims and the state law claims predominate in this action. 8. Plaintiffs' state law claims involve complex and unique questions of Massachusetts law. 9. Reasons of comity, fairness and judicial economy require that all of plaintiffs' claims, including their one federal claim, be tried and resolved in the Massachusetts courts. 10. In further support of this motion, plaintiffs hereby submit their Memorandum in support thereof. 11. The undersigned counsel hereby certify that they conferred with all other counsel in this matter and have attempted in good faith, but failed, to resolve or narrow the issues herein.

REQUEST FOR ORAL ARGUMENT 12. If any party files opposition to this motion, the plaintiffs request oral argument on the matter before the Court.

WHEREFORE, plaintiffs request that this Court exercise its discretion pursuant to 28 U.S.C. §1367(c) and/or §1441(c) and remand all matters in this action to the Massachusetts Superior Court. Alternatively, they request a remand of all state law matters to the state court. Dated: Counsel for the Plaintiffs

7.4

Memorandum for Remand UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

Mary Glass, Brenda Old, and Donna Smith Plaintiffs, [vs.] Fast Talking Mortgage Corp., Fast Talking Funding Co., Fast Talking Development, XYZ Financial Trust, David Stevens, Henry Michaels, and Aggressive Mortgage Co. Defendants. C.A. No. 93-XXXXXX PLAINTIFFS' MEMORANDUM IN SUPPORT OF THEIR MOTION FOR A REMAND TO STATE COURT I. INTRODUCTION This memorandum is submitted in support of the plaintiffs' Motion for a Remand. The motion asks the Court to exercise the discretionary remand authority granted pursuant to 28 U.S.C. §1441(c) and §1367(c) (hereinafter "§1441" and §1367") and return this litigation to the state court from which defendant Aggressive Mortgage Company (hereinafter "Aggressive")

removed it. Under either statute, the fact that state law questions predominate in the case, as well as reasons of comity, fairness and judicial economy, all compel a remand. The plaintiffs ask the Court to remand the entire matter to the state court. Alternatively, they ask that they be permitted to try the state law questions in that forum. II. PROCEDURAL AND FACTUAL BACKGROUND The plaintiffs began this litigation on or about May 21, 1993 by filing their complaint in the Suffolk County, Massachusetts Superior Court. The complaint was amended as of right in that court on July 14, 1993. In their complaint, they allege a complex home mortgage loan scheme in which the defendants conspired to defraud them. The complaint asserts that defendant Fast Talking Mortgage Corporation (hereinafter "Fast Talking Mortgage") misrepresented itself as a home mortgage lender when it in fact was acting as a mortgage broker on behalf of Aggressive and defendant XYZ Financial Trust. In the case of plaintiff Mary Glass, the actual mortgage lender was defendant XYZ Financial Trust (hereinafter "XYZ"). In the case of plaintiffs Brenda Old and Donna Smith, the actual mortgage lender was Aggressive. Each plaintiff complains that Fast Talking Mortgage arranged loans with Aggressive and XYZ on terms that were unconscionable, terms that included exorbitant interest rates, negative amortization, and so-called "balloon payments" requiring immediate refinancing. In each case, the plaintiffs assert that Fast Talking Mortgage negligently and fraudulently misrepresented the amounts financed in the loans, to the benefit of Aggressive and XYZ. In each case, the plaintiffs were charged excessive fees for the closing of the loans, including "brokers fees" paid to Fast Talking Mortgage and excessive attorneys fees. In each case, Fast Talking Mortgage arranged for immediate refinancing of the loans with third party lenders, causing the plaintiffs to incur prepayment penalties and substantial, duplicate and excessive costs associated with prepayment of the Aggressive and XYZ loans. By obtaining financing from third parties (in each case within four months of their original loans) the defendants obtained profits ranging from 150% to

1,300% annualized return on the amount they invested. In each case, the plaintiffs now face imminent sale of their homes by foreclosure of the third party loans arranged by the defendants. One example of the defendants' modus operandi from a myriad alleged in the complaint is as follows: at the closing of the loan in favor of plaintiff Donna Smith, the defendant Aggressive Mortgage Co. gave Ms. Smith loan disclosures indicating that a $3,00.001 [sic] broker fee would be paid from the proceeds of the loan to the defendant Fast Talking Mortgage Co. At that closing, the defendant Fast Talking Mortgage Co. was purportedly acting as Ms. Smith's agent in its capacity as "loan broker." The defendant David Stevens was purportedly acting as Aggressive's agent as "closing attorney." A subsequent list of disbursements provided by Mr. Stevens to Fast Talking indicated that a $5,000 broker fee was actually paid by Aggressive to Fast Talking from the proceeds of the loan. Perhaps this is less surprising in view of the fact that Mr. Stevens, Aggressive's attorney, was then also a principal of Fast Talking. Ms. Smith was not only responsible to repay the $5,000 she supposedly borrowed to pay Fast Talking as her loan broker, but also she was on the hook to repay it with over 20% interest to Aggressive. The plaintiffs' amended complaint states seven causes of action, six of which are entirely state law claims. The state law claims are based on Defendants' violations of the Massachusetts consumer protection statute, M.G.L. ch. 93A; state common law claims of breach of fiduciary obligation, misrepresentation, fraud and negligence; state law claims of breach of warranty and contract; and Defendants' violations of the Massachusetts Consumer Credit Cost Disclosure Act, M.G.L. ch. 140D. [See Am. Complaint, Counts I through V, and Count VI.] Plaintiffs' one federal claim derives from the civil remedies provisions of the Racketeering Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §1964. [See Am. Complaint at Count VI.] The plaintiffs allege inter alia that the defendants, including Aggressive, have participated in the affairs of an enterprise (Fast Talking Mortgage Co. or Fast Talking Funding) through a pattern of racketeering activity or collection of unlawful debt in violation of 18 U.S.C. §1962(c). Plaintiffs further allege that Defendants have conspired in violation of 18 U.S.C. §1962(d) and have

invested income from their activities in violation of 18 U.S.C. §1962(a). The pattern of racketeering activities and the collection of unlawful debt which form the basis of the RICO count of the complaint are based on the same conduct which is alleged in the other counts of the complaint as the basis for the state law causes of action. Thus, the plaintiffs' state law and RICO claims are intimately related and inseparably linked. III. ARGUMENT Aggressive's petition for removal, with its citation to 28 U.S.C. §1441, makes only the most general reference to the statutory basis for removing this case to federal court. The petition does cite the Court's federal question jurisdiction over the RICO claim as grounds for the removal. [See Petition for Removal at page 1.] See also 28 U.S.C. §1331. The petition does not, however, recite any basis for this Court's jurisdiction over the plaintiff's state law claims, and the plaintiffs can only assume that Aggressive views the state law issues as nonremovable. Aggressive's removal petition can therefore fairly be characterized as predicated on §1441(c), which states: Whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of [Title 28] is joined with one or more otherwise nonremovable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates. The plaintiffs readily admit that the Court's federal question jurisdiction extends to the RICO claim. They do not concede the jurisdiction that Aggressive's petition fails to assert, that is, jurisdiction over the state law issues as supplemental or "pendant" claims under 28 U.S.C. §1367(a). For purposes of argument, however, the plaintiffs ask the Court to exercise its discretion to remand this case on alternative theories. On the one hand, they contend that a remand is appropriate and necessary under the provisions of §1441(c) which grants the Court discretionary authority to "remand all matters in which state law predominates." Alternatively, assuming, arguendo, the supplemental jurisdiction of the Court over the state law claims,

Plaintiffs ask the Court to "decline to exercise supplemental jurisdiction" pursuant to §1367(c) because their case "raises... complex issue[s] of state law" and because the state law claims "substantially predominate over" the federal claims. The "separate and independent" causes of action referenced in §1441(c) are distinguished from §1367(a) pendant claims in that the latter "derive from a common nucleus of operative fact," see Carnegie-Mellon University v. Cohill, 484 U.S. 348, 349; 108 S.Ct. 614, 618 (1988) (citations omitted), while the former are characterized by the "singularity of harm suffered by an injured plaintiff." New England Concrete Pipe v. D/C Systems of New England, Inc., 658 F.2d 867, 872 (1st Cir. 1981). The distinction is, of course, crucial for determining the statutory basis for the Court's exercise of remand authority. Nevertheless, the striking similarity in the language of each statute, and the near-identical jurisprudential policies that they are intended to support require a remand of this case under either statute. Section 1441(c) "confers considerable discretion" on the district courts to remand entire cases involving federal questions "where state law claims are found to predominate." See Moralez v. Meat Cutters Local 539, 778 F. Supp. 368, 370 (E.D. Mich. 1991) and the authorities collected therein. The exercise of that discretion is informed by the complexity of the state law claims, the extent to which they "would require more judicial resources to adjudicate than their federal counterparts" and whether "the majority of the claims... are based on state law." Id at 370. See also Moore v. DeBiase, 766 F. Supp. 1311, 1319 (E.D.N.J. 1991). Moreover, "[r]emoval statutes... are to be strictly construed in order to further principles of judicial economy and comity." Santiago v. Barre Nat., Inc., 795 F. Supp. 508, 511 (D. Mass. 1992). Those principles apply whether a remand is mandated by law, Santiago v. Barre Nat., Inc., supra, or permitted as discretionary under §1441(c). Moralez v. Meat Cutters Local 539, supra at 778 F. Supp. 371, n. 4. Similar policies ground the exercise of District Court discretion under §1367(c). The language of the section itself identifies the complexity and predominancy of state law issues as two reasons warranting remand. See 28 U.S.C. §1367(c)(1) and (2). In addition, "a court has

discretion to remand [under §1367(c)] in cases where it best serves the `principles of economy, convenience, fairness, and comity which underlie the pendant jurisdiction doctrine.'" Administaff, Inc. v. Kaiser, 799 F. Supp. 685, 689 (W.D. Tex. 1992), quoting Carnegie-Mellon University v. Cohill, supra at 108 S.Ct. 619. See also Masdea v. Scholz, 742 F. Supp. 713, 716717 (D. Mass. 1990). Such policies, applied to the circumstances of this case, compel a remand. The plaintiffs' state law claims are complex, involving the interplay of the Massachusetts Consumer Credit Cost Disclosure Act ("CCCDA"), M.G.L. ch. 140D, the Commonwealth's consumer protection laws, M.G.L.ch. 93A, and state common law questions of breach of contract and warranty, fraud, misrepresentation, and negligence. The CCCDA, for example, has almost never been interpreted on an issue of substance by the Massachusetts courts. Six of the seven causes of action recited in the complaint are founded on state law. The plaintiffs' RICO claim derives in part from the allegation that the defendants' violation of Massachusetts law makes the underlying loans that are subject of the case "unlawful debt" within the meaning of 18 U.S.C. §1962. Prior to removal, the Superior Court issued a Tracking Order fixing a comprehensive and complete schedule aimed at moving the case to a resolution by July 15, 1994.2 The case remains at its formative stages, mitigating any possibility of prejudice to any party. Thus, every principle embodied in the provisions of §1441(c) and §1367(c) weighs in favor of remand. The plaintiffs make two final observations in support of their motion. First, nearly every court construing §1367(c) and §1441(c) understands that these statutes permit a district court grant the relief sought here, that is, to remand the entire case to the state court from which it was removed, including the related federal claims. Indeed, the procedural posture of Holland v. World Omni Leasing, Inc., 764 F. Supp. 1442 (N.D. Ala. 1991) is virtually identical to this case. There, as here, the plaintiff's action was based on state claims of fraud, and included only one

2

A copy of the Tracking Order is attached to this memorandum [not reprinted infra]. Such orders are required in Massachusetts by Second Amended Standing Order 1-88.

federal claim, under RICO.3 There, as here, the "plaintiffs' RICO claim [was] so intertwined with and indistinguishable from, their state law claims as to be very difficult, if not impossible to treat separately." Id at 1444. In deciding to remand the entire case to the state court, RICO claim included, the district court observed, "If this court should retain only the RICO claim, there would invariably be a race-to-judgment between the federal court and the state court, and the first court to decide its case might create a serious res judicata problem for the other court." Id. Similar concerns motivated district courts in other venues to remand entire cases involving both federal and state law claims. See, e.g., Alexander by Alexander v. Goldome Credit Corp., 772 F. Supp. 1217, 1225 (M.D. Ala. 1991) ("Allowing for remand of the entire case [under §1441(c)] allows a court to avoid piecemeal litigation and to properly limit those cases removed to federal court to those that truly present federal issues."), Moralez v. Meat Cutters Local 539, supra and Moore v. Debiase, supra (to same effect), and Administaff, Inc. v. Kaiser, supra (same result under §1367).4 Last, the plaintiffs anticipate that Aggressive will claim that their motion is barred by the thirty day time limit on requests for remand in 28 U.S.C. §1447(c). By its terms, that time limit applies only to motions for remand "on the basis of any defect in removal procedure." The plaintiffs assert no such defect here. In fact, district courts confronting this issue view §1367(c) and §1441(c) remands as separate and distinct from the kinds of remands authorized by §1447(c). Accordingly, they decline to impose the thirty day bar. See, e.g., Moore v. DeBiase, supra at 766 F. Supp. 1315 (§1441) and Administaff, Inc. v. Kaiser, supra at 799 S. Supp. 690 (§1367). There is no time bar to the plaintiffs' motion for a remand in this case. CONCLUSION

3

The Supreme Court has held that a state court has inherent jurisdiction to resolve a federal RICO claim. Tafflin v. Levitt, 493 U.S. 455 (1990). 4

Alternatively, the Motion for a Remand asks this Court to remand the state law questions in the event that the entire case is not remanded.

Based on the foregoing facts, law and argument, the plaintiffs ask this Court to exercise its discretion and remand the entire case to the Massachusetts courts. In the alternative, they request a remand of their state law claims. Respectfully submitted,

Dated: Counsel for the Plaintiffs

7.5

Memorandum in Opposition to Defendant's Motion to Dismiss

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS Mary Glass, Brenda Old, and Donna Smith Plaintiffs, [vs.] Fast Talking Mortgage Corp., Fast Talking Funding Co., Fast Talking Development, XYZ Financial Trust, David Stevens, Henry Michaels, and Aggressive Mortgage Co. Defendants. C.A. No. 93-XXXXXX PLAINTIFFS' OPPOSITION TO MOTION OF AGGRESSIVE MORTGAGE CO. TO DISMISS AMENDED COMPLAINT The plaintiffs, by counsel, oppose the Motion of Aggressive Mortgage Co. to dismiss the amended complaint and in support of their opposition offer the attached memorandum of law. Plaintiffs request that Aggressive's Motion be denied or in the alternative that they be permitted to amend their complaint and/or to complete discovery. This is a complicated case involving unsophisticated plaintiffs, and facts and documents which are uniquely within the control of the various defendants. The complaint nevertheless alleges adequate facts to support each claim, fully alleges the legal predicates to each cause of action, and is within all applicable statutes of limitations.

DATE:

7.6

Memorandum Opposing Motion to Dismiss UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

Mary Glass, Brenda Old, and Donna Smith Plaintiffs, [vs.] Fast Talking Mortgage Corp., Fast Talking Funding Co.,

Fast Talking Development, XYZ Financial Trust, David Stevens, Henry Michaels, and Aggressive Mortgage Co. Defendants. C.A. No. 93-XXXXXX PLAINTIFFS' MEMORANDUM IN OPPOSITION TO MOTION OF DEFENDANT AGGRESSIVE MORTGAGE CO. TO DISMISS AMENDED COMPLAINT INTRODUCTION This is a case in which defendant Aggressive Mortgage Co. and its codefendants have moved past the cutting edge of predatory high rate mortgage lending into an abyss of unfair and deceptive practices, misrepresentations and outright fraud. Their scheme as applied to each of the plaintiffs (and others whose cases have come to light since the amended complaint was filed) involved three essential elements. First, each case involved a fully secured home mortgage loan to one of the plaintiffs at a disclosed interest rate in excess of 18%. Second, in each case, the defendants acting in concert, by misrepresentation, fraud and failure to disclose, jacked up the cost of the loan beyond the disclosed rate by illegally including various costs and fees payable to them in the proceeds of the loan. Finally, the defendants illegally realized their returns by pressing a quick refinancing on the plaintiffs in order to implicate hidden prepayment penalties and to obtain a new set of fees from the proceeds of the refinanced loans.5 Ultimately, the defendants returns on their fully secured real estate loans to the plaintiffs ranged from 135% to 1,300%. Aggressive, by a process of selectively reading the complaint, attempts to paint itself as isolated from various illegal acts.6 Aggressive would ask the court to ignore the allegations that 5

Each loan was refinanced by a third party in a transaction arranged by the defendants within four months. 6

Even if Aggressive's motion to dismiss were granted in its entirety, a substantial portion of the amended complaint would survive. These include all claims in favor of plaintiff Mary Glass breach of fiduciary duty claims on behalf of all plaintiffs and breach of warranty claims on behalf of Brenda Old.

it employed a supposed loan broker, Fast Talking Mortgage Co., and a closing attorney as its agents to arrange and close the loans. The loan broker, which purported to act as a representative of the plaintiff, and the closing attorney, which acted as a representative of Aggressive were, in fact, business partners who acted together on behalf of Aggressive.7 All of the alleged misrepresentations made to plaintiffs Old and Smith, including those in Aggressive's own paperwork,8 were made in the name of Aggressive. Finally, Aggressive asks this court to ignore that for plaintiff Donna Smith, the entire scheme was commenced and completed within the four year statute of limitations which is applicable to most of her claims. The limitations period on the balance of Ms. Smith's claims has not run because of the discovery rule and/or because of the defendants' fraudulent concealment of the gravamen of those claims. For plaintiff Brenda Old, the defendants' scheme was completed upon refinancing within the four year limitations period, thus rendering inapplicable Aggressive's statute of limitations defense on most of the four year claims. Similarly, the limitations defense is inapplicable on the balance of Ms Old's claims, because of the discovery rule and/or fraudulent concealment and/or the separate accrual rule.9 SUMMARY OF FACTS Aggressive and its codefendants worked together in a scheme by which they set up real estate secured loans for unsophisticated minority borrowers at high rates with thousands of dollars of hidden profits. They then arranged for a refinancing of their loans within a very short term so that they could exit with cash while the plaintiffs were left on the hook to repay the third party lenders. 7

No other representatives of Aggressive ever met with the plaintiffs.

8

It appears likely that the paperwork in the loan was prepared by defendant Stevens on behalf of Aggressive. However, discovery may show otherwise. In any event, Aggressive can hardly disavow responsibility for misrepresentations and misstatements made in writing in the loan documents. 9

Cynically, Aggressive also argues that the refinancing by which it realized its illegal profits and prepayment penalties cuts off plaintiffs' rights to claim damages. That argument not only lacks merit on the law, but also, if accepted, would create tremendous additional incentives to cover up wrongdoing by refinancing.

The defendants lent Ms. Glass a total of $12,590.48 in March 1990 and were repaid $19,608.72 less than 15 days later. [Am. Complaint at ¶59.] This represents an annualized return of over 1,300%. The defendants lent Ms. Old $46,726.38 in January, 1989 and were repaid $67,474.42 less than four months later. [Am. Complaint at ¶109.] This represents an annualized return of over 150%.10 The defendants lent Ms. Smith a total of $38,985.29 on March 27, 1990 and were repaid $52,500.46 less than three months later. [Am. Complaint at ¶152.] This represents an annualized return of over 135%. In each case, the plaintiff remains responsible to a third party lender for the amount repaid to the defendants and each is facing or has faced foreclosure by that third party lender. The specifics of the scheme by which the defendants profited at the plaintiffs' expense are complex. In each case, the defendants went to great lengths to hide their relationships, their mathematical machinations and their misrepresentations. For example, defendants purported to charge two points in making each loan. [Am. Complaint ¶¶40, 88, 130.] The law requires that the points be disclosed as an element of the plaintiffs' finance charge rather the amount financed. G.L. c. 140D, §4(a)(1). This requirement is intended to allow a borrower to understand the true cost of borrowing money. The defendants turned this requirement on its head. Although they initially disclosed the points as a finance charge, review of the actual disbursements show that they deducted a second set of two points from the amount financed. [Am. Complaint ¶¶40, 88, 130; see, e.g., Exhibits L, M].11 They thus misrepresented the amount financed in their

10

The defendants' return on the Old transactions was actually far higher, when one takes into account that one of the defendants purported to perform home improvements which were paid for from the proceeds of the loan. The home improvements were either not completed or done in an improper and unworkerlike fashion. [Complaint at ¶91-95, 207-214]. 11

For the purposes of the motion to dismiss, the allegations of the complaint must be accepted as true. However, as Aggressive points out in its memorandum in support of its motion at footnote 6, one need only perform certain calculation based on the documents in order to test the allegations. Exhibit L shows prepaid interest and points included in the finance charge. It is necessary to review Exhibit M "Disbursements" to understand Aggressive's misrepresentation. There, it is clear that the points and prepaid interest are included in the $47,000 amount financed. (It is also clear that the disclosed "broker fee" somehow was increased from $3,00.001 [sic] to $5,000 and that this cost of credit was also improperly included in the amount financed for the transaction.)

disclosure statement and effectively charged four points rather than two. (They similarly misrepresented and double charged substantial amounts of prepaid interest.) Moreover, since points, unlike interest, are considered earned when the loan is made, they recovered the entire four points when they arranged early refinancing through the third party lender.12 For the sake of clarity, other specific allegations of the complaint supporting Plaintiffs' claims will be discussed below in the context of responses to arguments made by Aggressive in favor of dismissal. ARGUMENT I. Plaintiffs' Amended Complaint Sufficiently States Claims on Which Relief Should Be Granted A. Governing Legal Standard "Summary disposition" for failure to state a claim upon which relief can be granted "is disfavored and the burden is on the moving party" to show the legal insufficiency of the claims asserted in a plaintiff's complaint. Johnsrud v. Carter, 629 F.2d 29, 33 (3rd Cir. 1980). See also Atlantic Health Care Benefits Trust v. Foster, 809 F. Supp. 365, 369 (M.D. Pa. 1992). Aggressive's burden in this regard is considerable. A dismissal is warranted under Rule 12(b)(6) only if it "appears beyond a reasonable doubt that the plaintiff can prove no set of facts that would entitle him to relief," Andujar v. City of Boston, 760 F. Supp. 238, 240 (D. Mass. 1991), and "only if it clearly appears, according to the facts alleged, that the plaintiff cannot recover on any viable theory." Correa-Martinez v. Arrillaga-Belendez, 903 F.2d 49, 52 (1st Cir. 1990). In deciding such a motion, a "Court must accept the facts set forth in the plaintiff's amended complaint as true, and must draw all reasonable inferences in the plaintiff's favor." Andujar v. City of Boston, supra. See also Correa-Martinez v. Arrillaga-Belendez, supra; The Dartmouth Review v. Dartmouth College, 889 F.2d 13, 16 (1st Cir. 1989); Bergeson v. Franchi, 783 F.

12

This is but one example of the financial chicanery at issue in this case from a myriad alleged in the complaint.

Supp. 713, 715 (D. Mass. 1992); In re Healthco Intern., Inc. Securities Litigation, 777 F. Supp. 109, 112-113 (D. Mass. 1991).

B. Aggressive's Role as a Knowing Participant in a Scheme of Fraud

Aggressive's argument in favor of dismissal ignores a central allegation of the amended complaint: that the lender's business relationships with the other defendants were arranged for the very purpose of defrauding individuals like Brenda Old and Donna Smith. [See Am. Complaint ¶77 (allegations as to Ms. Old) and ¶123 (allegations as to Ms. Smith).] In this regard, the complaint specifically alleges that Aggressive was a knowing and willing participant in the fraudulent scheme. Id. It states with particularity that Fast Talking Mortgage acted as Aggressive's agent in perpetrating the fraud. [See Am. Complaint at ¶¶78-79, 96-97, 100 (Ms. Old) and at ¶123 (Ms. Smith).] Finally, it offers extensive detail about the substantial benefit Aggressive received at the expense of the plaintiffs. [See, e.g., Am. Complaint ¶88 (points paid to Aggressive by Ms. Old); ¶90 (unconscionable loan terms imposed on Old for Aggressive's benefit); ¶103-106 (unconscionable prepayment penalty paid by Old to Aggressive); ¶109 (inaccurate disclosures made to Smith, improperly increasing annual percentage rate); ¶145 (unconscionable prepayment penalty paid by Smith to Aggressive).] "It is settled law in Massachusetts that an employer may be held vicariously liable" for a wrong committed by "an agent or employee within the scope of the employment." Veranda Beach Club v. Western Sur. Co., 936 F.2d 1364, 1376 (1st Cir. 1991):

[C]onduct of an agent is within the scope of the employment if it is of the kind he is employed to perform; if it occurs substantially within the authorized time and space limits; and it is motivated, at least in part, by a purpose to serve the employer.

Id., quoting Wang Laboratories, Inc. v. Business Incentives, Inc., 398 Mass. 854, 501 N.E.2d 1163, 1166 (1986).

There can be no doubt that Brenda Old and Donna Smith have alleged sufficient facts in their complaint to tie Aggressive to the fraudulent scheme that harmed them. They have stated Aggressive's knowledge of and participation in the fraud. They described the agency relationship between Aggressive and Fast Talking Mortgage. There can be no dispute that the applications for, the consummation of, and the refinancing of the Aggressive loans were all activities that Fast Talking Mortgage was authorized to perform on Aggressive's behalf. The amended complaint describes with particularity the benefits Aggressive received in the transaction from excessive interest rates, points and pre-payment penalties.13 Thus, the plaintiffs have alleged sufficient facts in their complaint to establish Aggressive's liability as the principal on whose behalf Fast Talking Mortgage acted.

C. Counts III and IV of the Amended Complaint: Fraud and Misrepresentation; Negligent Misrepresentation

To succeed on a claim of [intentional or negligent] misrepresentation, a plaintiff must show that "the defendant made a false representation of a material fact with knowledge of its falsity for the purpose of inducing the plaintiff to act thereon, and that the plaintiff relied upon the representation as true and acted upon it to his damage ...." [The] plaintiff does not have to prove an actual intent to deceive, ...and "nothing is clearer than the fact that under Massachusetts law plaintiffs need not prove that [the defendant] knew his statements to be false ...."

13

"[A] principal is liable for the fraud of its agent ... even where the principal does not benefit from the fraud." In re 604 Columbus Ave. Realty Trust, 119 B.R. 350, 374 (Bankr. D. Mass. 1990). Here, of course, Aggressive reaped substantial benefit from East Coast Mortgage's fraudulent representations on its behalf.

Logan Equipment Corp. v. Simon Aerials, Inc., 736 F. Supp. 1188, 1199 (D. Mass. 1990) (citations omitted).14

In this case, the plaintiffs' Amended Complaint is replete with allegations of the false representations of the defendants, including Aggressive.15 Fast Talking Mortgage's false statements that it was a lender instead of a broker for Aggressive, and its implied representations that it would obtain loans on the best possible terms, provided the bait that lured the plaintiffs to the transactions. [See Am. Complaint at ¶69-70, 73-79 (Ms. Old) and ¶118-123 (Ms. Smith).] In the case of Brenda Old, Fast Talking Mortgage's failure to provide an disclosure about the terms of the loans, in particular, the failure to describe the short term balloon payment and the hidden pre-payment penalties, induced a substantial loss on her part and a substantial gain to Aggressive. [Am. Complaint at ¶¶83, 89, 103-109.] Similar misdisclosures induced Donna Smith to close on her mortgage loan. These misdisclosures included misrepresentations about fees payable to Aggressive, the actual interest rate paid to Aggressive, the balloon payment and pre-payment penalty, the right to rescind, and the collection of a tax escrow payment for an account that was never created. [Am. Complaint at ¶¶125-126, 130-134, 141-144, 145.] Again, these misrepresentations induced Ms. Smith to make the loans and caused her substantial loss, to Aggressive's gain. [See Am. Complaint at ¶¶101, 139.] Further, Fast Talking charged the plaintiffs "loan broker" fees in each transaction, a direct representation that it was acting as plaintiffs' broker. [Am. Complaint ¶¶80, 128.] Neither Fast Talking nor defendant Stevens, who undisputedly represented Aggressive at the loan closings, disclosed to the plaintiffs that Stevens was a principal of Fast Talking. [Am. Complaint ¶¶14, 7714

The courts tend to treat intentional misrepresentation and negligent misrepresentation as one and the same. Logan Equipment Corp., supra. The principal distinction between the two torts seems to be that a misrepresentation is negligent, instead of intentional, "if a statement which is susceptible of knowledge is made as of one's knowledge, and is false." Briggs v. Carol Cars, Inc., 407 Mass. 391, 553 N.E.2d 930, 933 (1990). 15

As previously argued, Aggressive's status as a knowing participant in a scheme in which East Coast Mortgage acted as its agent makes it liable to the plaintiffs for fraud. See, Veranda Beach Club v. Western Sur. Co., supra.

79, 98, 136.] Additionally, no defendant disclosed that Fast Talking was acting as Aggressive's agent. [Am. Complaint ¶77-79, 81, 96, 97, 123, 134, 135.] For both of the plaintiffs, the complaint states these facts with particularity and specificity. The plaintiffs have stated a claim for fraud and intentional misrepresentation, and for negligent misrepresentation.

D. Count IV: Violations of the Massachusetts Consumer Credit Cost Disclosure Act

Notwithstanding Aggressive's arguments to the contrary, the plaintiffs' amended complaint alleges specific facts which constitute violations of the Massachusetts Consumer Credit Cost Disclosure Act ("CCCDA"), M.G.L. ch. 140D, §1, et seq. For example, the complaint states, with respect to Ms. Old, that Fast Talking Mortgage and Aggressive failed to provide her with a copy of the requisite disclosure statements at any time before or after the making of the Aggressive loan. [See Am. Complaint at ¶83.] That failure, which Aggressive does not dispute, is a violation of the disclosure provisions of the CCCDA and the corresponding regulations issued by the Massachusetts Division of Banks and Loan Agencies. See M.G.L. ch. 140D, §10. See also 290 C.M.R. §32.19(a) (lender must physically deliver disclosure statement to borrower within three days of application for loan, or before consummation, whichever is earlier). That violation is not remedied by Ms. Old's admission that she signed the disclosure statement. [Am. Complaint at ¶83.] Signing "does no more than create a rebuttable presumption of delivery ..." M.G.L. ch. 140D, §10(c). At this stage of the litigation, where Ms. Old's allegations that she received no disclosure statement must be taken as true, Aggressive is in no position to argue that she has failed to state a claim under the Massachusetts CCCDA. See Kaminski v. Shawmut Credit Union, 494 F. Supp. 723 (D. Mass. 1980) (construing disclosure provisions of M.G.L. ch. 140C, predecessor statute to current CCCDA).

Similar, more obvious CCCDA violations are evident in the Smith loan. Paragraph 131 of the amended complaint provides a detailed analysis of the misdisclosures made with respect to the following amounts improperly included in the amount financed, in violation of G.L. ch. 140D, §4:

a.

$5,000 broker's fee for an entity which acted as Aggressive's agent;

b.

$1,502.81 in points and prepaid interest;

c.

$241.40 for a non-existent tax escrow account;

d.

excessive attorney fees and title examination charges in the amount of $1,050;

e.

$20 in false assignment charges; and

f.

$7.50 in false recording fees.16

There can be no question that Ms. Smith's CCCDA claims are sufficient to withstand the motion to dismiss. Richardson v. Merchants National Bank, 602 F. Supp. 20, 21 (E.D. Pa. 1984).

E. Count I: Plaintiffs' Massachusetts Consumer Protection Claims

Brenda Old and Donna Smith's claims under M.G.L. ch. 93A are predicated on three patterns of conduct by Aggressive and the other defendants: 1) "unfair, deceptive, oppressive, [and] unconscionable conduct;" 2) violations of the CCCDA and corresponding agency regulations; and 3) Defendants' violations of the statutory obligation to undertake and perform contracts in "good faith" under M.G.L. ch. 106, §1-203. [See Am. Complaint at ¶¶180-182]. By

16

Aggressive's argument that the points and prepaid interest assessed as part of the Smith loan were properly disclosed simply misunderstands the complaint. See, Aggressive memorandum at note 6. Exhibit L to the amended complaint plainly shows those charges to be disclosed as both part of the "amount financed" and part of the "finance charge". Such treatment of the points is the equivalent of double payment. It is an act specifically prohibited by CCCDA regulations. See, 290 C.M.R. §32.18(b)(2). Similarly, with respect to the attorneys fees, the non-existent tax escrow account, the assignment charges and recording fees imposed on Ms. Smith in the loan, Aggressive simply ignores the crucial allegation that these charges were excessive and unnecessary and therefore not "bona fide and reasonable", in violation of 209 C.M.R. §32.04(c)(7). See, Amended Complaint at par. 131.

law, violation of the CCCDA is a per se violation of the Commonwealth's consumer protection laws. M.G.L. ch. 140D, §34; Kaminski v. Shawmut Credit Union, supra at 494 F. Supp. 730. Since the plaintiffs have sufficiently stated CCCDA claims against Aggressive, they have also stated a sufficient claim under this component of their consumer protection theories.17 A similar analysis supports continued assertion of those chapter 93A claims predicated on Aggressive's fraud and misrepresentation. The courts consistently hold that such acts violate Massachusetts consumer protection laws whether those acts are deliberate, Veranda Beach Club Ltd. Partnership v. Western Sur. Co., supra at 936 F.2d 1385-1386; or negligent, Jurgens v. Abraham, 616 F. Supp. 1381, 1386 (D. Mass. 1985); Evans v. Yegen Assoc., Inc., 556 F. Supp. 1219, 1227 (D. Mass. 1982). Principals such as Aggressive are, of course, liable for the consumer protection wrongs of their agents in the same way they are liable for other employee misconduct. Comm. v. Colonial Motor Sales, Inc., 11 Mass. App. Ct. 800, 420 N.E.2d 20 (1981); Picciuto v. Dwyer, 32 Mass. App. Ct. 137, 586 N.E.2d 38 (1992). Thus, the prong of the plaintiffs' chapter 93A claim that is founded on Aggressive's fraud must survive the motion to dismiss because those misrepresentations are precisely the unfair, unconscionable conduct the law is meant to prohibit. Water v. Min, Ltd., 412 Mass. 64, 587 N.E.2d 231, 233-234 (1992). Finally, chapter 93A protects a consumer's right to good faith and fair dealing in any contractual relationship, Burnham v. Mark IV Homes, Inc., 387 Mass. 575, 441 N.E.2d 1027, 1031 (1982), an interest also safeguarded by M.G.L. ch. 106, §2-103. Taken as a whole, the amended complaint describes Aggressive's failure to deal in good faith. There is no basis for dismissing this part of Plaintiffs' chapter 93A claim.

17

By regulation, violation of any law intended to protect the health, safety and welfare of the Massachusetts public is also a consumer protection violation. See, 940 C.M.R. §3.16(b). See also, M.G.L. ch. 93A, §2(c) (authorizing Massachusetts Attorney General to promulgate consumer protection regulations). The Attorney General rule buttresses the plaintiffs' argument that violation of the CCCDA is a chapter 93A violation. See, Purity Supreme, Inc. v. Atty. General, 380 Mass. 762, 407 N.E. 2d 297 (1980) (attorney General may promulgate and enforce chapter 93A regulations); Montanez v. Bagg, 24 Mass. App. Ct. 954, 510 N.E.2d 298 (1987) (Attorney General rules are privately enforceable by injured consumer).

II. Plaintiffs' Complaint Meets the Pleading Requirements of Rule 9(b)

Civil Rule 9(b) states, in relevant part, that "[i]n all averments of fraud... the circumstances constituting the fraud... shall be stated with particularity. Malice, intent, knowledge and other condition of mind of a person may be averred generally." See Fed. R. Civ. Proc. 9(b).18 "To satisfy Rule 9(b), the complaint must specify the time, place and content of each alleged false misrepresentation.... The purpose of the Rule is to provide defendants with notice of the grounds of a plaintiff's complaint.... A complaint must provide some factual support for the allegations of fraud." Cannistraci v. Dean Witter Reynolds, Inc., 796 F. Supp. 619, 623 (D. Mass. 1992), citing Wayne Inv., Inc. v. Gulf Oil Corp., 739 F.2d 11, 13 (1st Cir. 1989) and Romani v. Shearson Lehman Hutton, 929 F.2d 875, 878 (1st Cir. 1991). In the context of a RICO claim, the rule also requires a plaintiff to state the time, place and content of any alleged mail and wire fraud. New England Data Services, Inc. v. Becher, 829 F.2d 286, 291 (1st Cir. 1987). There can be no real dispute that the plaintiffs' complaint meets the specificity requirements of the rule. Their earlier remarks bear repeating here. Aggressive's business relationships with the other defendants were arranged for the very purpose of defrauding individuals like Brenda Old and Donna Smith. [See Am. Complaint ¶77 (allegations as to Ms. Old) and ¶123 (allegations as to Ms. Smith).] In this regard, the complaint specifically alleges that Aggressive was a knowing and willing participant in the fraudulent scheme. Id. It states with particularity that Fast Talking Mortgage acted as Aggressive's agent in perpetrating the fraud. [See Am. Complaint at ¶¶78-79 and 96-97, 100 (Ms. Old) and at ¶123 (Ms. Smith). The

18

As in the context of motion to dismiss under Rule 12(b)(6), a court faced with a motion to dismiss under Rule 9(b) "must accept the factual allegations set forth in the complaint as true and must draw all reasonable inferences in favor of the plaintiff... [T]he complaint should not be dismissed unless it appears beyond a doubt that the plaintiff can prove no set of facts which would entitle him to relief." Driscoll v. Landmark Bank for Savings, 758 F. Supp. 48, 51 (D. Mass. 1991).

complaint describes the closings of four loans in which Aggressive was involved: 1) the closing of the first Old loan with Aggressive on January 25, 1989 at the offices of Fast Talking Mortgage, at which numerous false and misleading statements were made; 2) the closing of the second Old loan on May 24, 1989 at which the Aggressive loan was paid off and Aggressive reaped a substantial benefit at the expense of Ms. Old; 3) the closing of the first Smith loan with Aggressive on August 3, 1989 at the offices of Fast Talking Mortgage, at which numerous false and misleading statements were made; and 4) the closing of the second Smith loan on October 26, 1989 at which the Aggressive loan was paid off and Aggressive reaped a substantial benefit at the expense of Ms. Smith. [See Am. Complaint ¶¶81-106 (Old loan) and ¶¶124-148 (Smith loan).] It is evident that the "time, place and content of each alleged false representation" is set out in painful detail in the plaintiffs' complaint. Cannistraci v. Dean Witter Reynolds, Inc., supra. Cognizant of their concomitant duty to be "simple, concise and direct" in their pleadings, as required by Rule 8, they have provided more than ample "factual support for their allegations of fraud." Id. See also 5 C. Wright and A. Miller, Federal Practice and Procedure, §1298 ("It is inappropriate to focus exclusively on the fact that Rule 9(b) requires particularity in pleading fraud. This is too narrow and fails to take account of the general simplicity and flexibility contemplated by the rules.") Indeed, if the Court somehow concludes that the pleadings are insufficient, substantial justice requires that the plaintiffs have an opportunity to amend their complaint to correct any deficiencies. New England Data Services, Inc. v. Becher, supra at 829 F.2d 291; Bio Vita, Ltd., v. Rausch, 759 F. Supp. 33, 38 (D. Mass. 1991). Ms. Smith and Ms. Old's opposition to Aggressive's motion to dismiss makes that alternative request. III. The Elements of Plaintiffs' RICO Claims Are Sufficiently Pled A. Plaintiffs have adequately alleged mail and wire fraud. Plaintiffs Glass, Old, and Smith have alleged in sufficient detail the commission by defendants of indictable mail fraud as defined by 18 U.S.C. § 1341 and indictable wire fraud as

defined by 18 U.S.C. § 1343. Their complaint describes the specifics of six fraudulent loans, including two made by defendant Aggressive Mortgage Company, Inc., which closed on the following six dates: March 27, 1990 [See Am. Complaint ¶32], April 12, 1990 [See Am. Complaint ¶56], Jan. 25, 1989 [See Am. Complaint ¶81], May 24, 1989 [See Am. Complaint ¶106], August 3, 1989 (See Am. Complaint ¶124), and October 26, 1989 [See Am. Complaint ¶148.] In addition, the defendants were engaged in a nearly identical fraudulent loan scheme involving Samuel and Shirley Jones, who are the plaintiffs in another lawsuit C.A. No. 93-53226 pending in the state Superior Court for Suffolk county. A copy of the complaint in that matter is attached as Appendix I. Defendant Aggressive Mortgage Co., Inc. made a fraudulent loan on September 15, 1989 to the Joneses. A further loan was made to the Joneses as part of a common fraudulent scheme on December 12, 1989. [See Appendix I.] The plaintiffs in the instant case have further alleged in their amended complaint that Defendants, in connection with each of these loans, regularly used the United States mails and interstate telephone system in furtherance of a pattern of racketeering activity. Such use included, but was not limited to, obtaining credit information, sending and receiving contracts and payments by mail, mailing collection letters, mailing checks to distribute the proceeds of the transactions, mailing credit applications, making calls soliciting business and refinancing, and making calls to obtain credit information and to arrange appointments to close loans. [See Am. Complaint ¶¶219-223.] The amended complaint contains substantial detail, under the circumstances, as to the time, place and content of the defendants' acts of mail and wire fraud. If this court should determine that the allegations of mail and wire fraud made by plaintiffs Glass, Old, and Smith are insufficiently specific, Plaintiffs request that they be granted an opportunity for discovery, in accordance with the First Circuit Court of Appeals' holding in Feinstein v. Resolution Trust Corp., 942 F.2d 34 (1st Cir. 1991) that under "certain circumstances in the RICO context where ... the specific allegations of the plaintiffs make it likely that the defendant used interstate mail or telecommunications, and that the specific information as to use is likely in the exclusive control of the defendant, the court should make a

determination as to whether an opportunity for discovery should be allowed." Feinstein, 942 F.2d at 43, citing New England Data Services, Inc. v. Becher, 829 F.2d 286, 290 (1st Cir. 1987). In this case, the defendants clearly have exclusive control over information pertaining to the exact dates, locations, and content of each of the acts of mail and wire fraud alleged by the plaintiffs, and, accordingly, an opportunity for discovery should be granted. B. Plaintiffs Have Sufficiently Pled a RICO "Pattern" As a Matter of Law. Plaintiffs have adequately alleged that the actions of the various defendants, including defendant Aggressive Mortgage Co., Inc., constitute a "pattern of racketeering activity" as defined by 18 U.S.C. § 1961(5) and 18 U.S.C. § 1962 and clarified by the Supreme Court in H.J. Inc. v. Northwestern Bell Telephone, 492 U.S. 229, 109 S.Ct 2893, 106 L.Ed.2d 195, on remand 734 F.Supp. 879 (Minn. 1989). Plaintiffs have met the Supreme Court's test for alleging a RICO "pattern of racketeering activity" as set forth in H.J. Inc. v. Northwestern Bell Telephone Co., and adopted by the First Circuit Court of Appeals. Fleet Credit Corp. v. Sion, 893 F.2d 441 (1st Cir. 1990). The Supreme Court held in H.J. Inc. that a pattern of racketeering activity is not established merely by proving two predicate acts, but also by showing that the predicate acts of racketeering activity are related and that they amount to or pose a threat of continued criminal activity. Plaintiffs Glass, Old, and Smith have shown that defendant Aggressive Mortgage Company, Inc. participated in the commission of many more than two acts of mail and wire fraud, which are statutorily defined predicate acts of racketeering activity. 18 U.S.C.§§ 1961(1) and (5).19 [See Am. Complaint at ¶¶220-225.] In addition, as required by the Supreme Court, they have demonstrated that the predicate acts "are related, and that they amount to or pose a threat of continued criminal activity." H.J. Inc., 492 U.S. 239 (emphasis in original).

19

18 U.S.C. § 1961(5) states that a "pattern" of racketeering activity requires "at least two acts of racketeering activity" within a ten-year period.

According to the Supreme Court, relatedness is established if the predicate acts "have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events." H.J. Inc., 492 U.S. 229, 240 (1989) (quoting the Dangerous Special Offender Sentencing Act, 18 U.S.C. § 3575(e)). Plaintiffs have satisfied the relatedness requirement, because they have shown that Defendants' many fraudulent uses of the mails and telephone system as to each of the named plaintiffs were all part of a common fraudulent scheme to exploit unwary, unsophisticated home-owners. See H.J. Inc. 109 S.Ct 2893, 2906 (1989); Fleet Credit Corp. v. Sion, 893 F.2d 441, 445 (1st Cir. 1990); Phelps v. Wichita Eagle-Beacon, 886 F.2d 1262 (10th Cir. 1989); George v. Blue Diamond Petroleum, 718 F.Supp. 539 (W.D.La.1989). Moreover, by repeatedly and fraudulently obtaining early repayment involving unconscionable profits, the enterprise was able to consistently obtain new victims by reinvesting in the enterprise. [Am. Complaint ¶220.] In addition to showing relatedness, Plaintiffs have also demonstrated that the defendants' predicate acts of mail and wire fraud amounted to continued criminal activity. In the alternative, Plaintiffs have demonstrated that Defendants' predicate acts of mail and wire fraud pose a threat of continued criminal activity. H.J. Inc., 492 U.S. at 242. The predicate acts committed by the defendants, including the commission of predicate acts by defendant Aggressive Mortgage Co., Inc., amount to continued criminal activity, defined by the Supreme Court in H.J. Inc. as "a series of related predicates extending over a substantial period of time." Id. Defendant Aggressive Mortgage Co., Inc. participated in the commission of multiple predicate acts of wire and mail fraud from at least January 1989, when Aggressive made a loan to plaintiff Old. [See Am. Complaint ¶85.] Thereafter, the defendants were involved in at least five other fraudulent loans, each entailing many related acts of wire and mail fraud, to the plaintiffs in this case, including another loan by Aggressive to plaintiff Smith in August 1989. [Am. Complaint ¶124.] The enterprise then continued to operate at least through the loan arranged for plaintiff Glass in April 1990. [Am. Complaint ¶56.] As part of the same common scheme and pattern of racketeering activity, the defendants arranged for other fraudulent loans,

each involving multiple acts of mail and wire fraud, to Samuel and Shirley Jones. Aggressive made these loans on September 15, 1989 and December 12, 1989. [See Appendix I.] This long and steady series of related predicate acts of mail and wire fraud extended for over fifteen months, and clearly constituted the type of "long-term criminal conduct" defined by the Supreme Court in H.J. Inc. as amounting to "continued criminal activity" and satisfying the H.J. court's test for a RICO pattern of racketeering activity. H.J. Inc., 492 U.S. at 242. See also Fleet Credit Corp. v. Sion, 893 F.2d 441, 446 (1st Cir. 1990). Even if this court determines that the period over which the defendants committed the predicate acts of wire and mail fraud was too brief for those acts to amount to "continued criminal activity," Plaintiffs Glass, Old, and Smith have satisfactorily demonstrated that the defendants' predicate acts pose a threat of continuing criminal activity, since such racketeering activity "by its nature projects into the future with a threat of repetition." H.J. Inc., 492 U.S. at 241. The H.J. court stated that "the threat of continuity may be established by showing that the predicate acts or offenses are part of an ongoing entity's regular way of doing business." Id. at 242. See also Fleet Credit Corp., 893 F.2d at 447-448 (1st Cir. 1990). The commission of mail and wire fraud is a necessary part of the defendants' regular, ongoing business of arranging fraudulent consumer loan transactions, since such transactions require frequent use of the mails and interstate telephone system.20

C. Defendant Aggressive Mortgage Company, Inc. Was Properly Included as a RICO Defendant Defendant Aggressive Mortgage Company, Inc. was properly included as a RICO defendant, even though it did not participate in every incident giving rise to the pattern of racketeering activity. Civil RICO liability proscribing the conduct of an enterprise through a pattern of racketeering activity requires only that a named defendant participate in the

20

Fast Talking Mortgage Co. continues to advertise to this day and arranged a loan for Samuel and Shirley Doe as recently as March 1, 1991. [See Appendix I].

commission of two or more sufficiently related and continuous predicate acts. 18 U.S.C. § 1961(1), 1962(c). See Fleet Credit Corp. v. Sion, 893 F.2d 441, 444 (1st Cir. 1990); Feinstein v. Resolution Trust Corp., 942 F.2d 34, 41 (1st Cir. 1991); Miranda v. Ponce Federal Bank, 948 F.2d 41, 45 (1st Cir. 1991). A defendant can thus be included in a multi-party RICO case even if it was involved only with some of the conduct creating the pattern. One court has held that, under RICO, a defendant need not even personally commit the predicate acts, provided there is sufficient evidence to connect him to a RICO enterprise. Casperone v. Landmark Oil & Gas Corp., 819 F.2d 112 (5th Cir. 1987). Plaintiffs Glass, Old, and Smith have clearly demonstrated the requisite causal connection between the racketeering predicates committed by defendant Aggressive Mortgage Company, Inc. and their injuries. Miranda v. Ponce Federal Bank, 948 F.2d 41, 46 (1st Cir. 1991). Aggressive also argues that the RICO claim is deficient because Fast Talking Funding and Fast Talking Mortgage Co. cannot be both a RICO enterprise and a RICO defendant. Even if Aggressive is correct in that position, its argument is no basis to dismiss Aggressive as a RICO defendant.21 Aggressive has no standing to raise these issues on behalf of the Fast Talking entities.

D. Acts Committed by Aggressive that Do Not Injure the Plaintiffs May Be Alleged to Be Part of the RICO Pattern Aggressive committed predicate acts of wire and mail fraud which harmed people other than Plaintiffs Glass, Old, and Smith. [See Appendix I.] Plaintiffs Glass, Old, and Smith may nevertheless plead these predicate acts as part of the pattern of racketeering activity, since a plaintiff need only have been injured by one of the predicate acts engaged in by the defendant.

21

An entity cannot normally be a RICO "person" and a RICO "enterprise". Miranda v. Ponce Federal Bank, 948 F.2d 41, 44-45 (1st Cir. 1991). That case can arguably be read for the proposition that the same entity cannot be the sole RICO enterprise and the sole defendant. Nevertheless, upon completion of discovery concerning the nature and organization of the East Coast entities, plaintiffs will be able to amend to accurately describe one as the RICO defendant and the other as the enterprise.

Town of Kearney v. Hudson Meadow Urban Renewal Corp., 829 F.2d 1263 (3rd Cir. 1987);22 Zee-Bar, Inc. - N.H., et al v. Kaplan, 792 F.Supp. 895 (1st Cir. 1992); Marshall v. Ilsley Trust Co. v. Pate, 819 F.2d 806 (7th Cir. 1987). Defendant Aggressive Mortgage Company, Inc.'s commission of predicate acts of wire and mail fraud which injured Samuel and Shirley Jones are part of the pattern of related, continuous acts of racketeering activity pled by the named plaintiffs in the instant case. Since the predicate acts related to Samuel and Shirley Jones were uncovered only after the Amended Complaint was filed, if the court deems it necessary, those predicate acts can be added here by amendment.23 E. Plaintiffs Have Properly Pled "Collection of Unlawful Debt." 18 U.S.C. 1962(c) makes actionable either a "a pattern of racketeering activity" or "collection of unlawful debt." Separate and apart from the question of whether the plaintiffs have pled a pattern of racketeering activity is whether the defendants collected an unlawful debt. See Bandas v. Citizens State Bank of Silver Lake, 412 N.W. 2d 818 (Minn. Ct. App. 1987), remanded on other gds., 425 N.W.2d 803 (Minn. 1988), cert. denied 488 U.S. 943 (1988). Collection of unlawful debt is defined to include a usurious debt which is unenforceable in whole or in apart as to interest or principal, and where the interest rate is at least twice the enforceable rate. 18 U.S.C. §1961(6). See Sundance Land v. Community First Fed. Savings & Loan, 840 F.2d 653 (9th Cir. 1988). Under Massachusetts law, the enforceable interest rate in a transaction is limited to the rate provided by the governing contract. For the transactions at issue here, that rate varies, but is

22

"Reading into a statute a requirement that a civil plaintiff prove injury from the entire pattern rather than from any predicate act would ... be inconsistent with the core congressional purposes behind its enactment. For example, if an organized crime group were to operate a protection racket, extorting money from each merchant in a community, then each merchant's injury would be separate, and, therefore, under the district court's reasoning, none could recover." 829 F.2d at 1268. 23

Given the difficulty of identifying low-income individuals harmed by defendant's scheme, if the court concludes that the plaintiffs have alleged insufficient predicate acts, discovery should be permitted in order to identify the full scope of the defendants' racketeering activities.

no more than 22%. The allegations of the complaint are that the defendants actually collected anywhere from 135% to 1,300% from each plaintiff, rates which are far more than twice the enforceable rate. [Am. Complaint ¶¶59, 109, 152.] Even if the court finds that a pattern of racketeering activity has not been properly pled, the RICO claim cannot be dismissed because the defendants have collected unlawful debt within the meaning of RICO.

IV. Plaintiffs' Causes Of Action Are Not Time Barred by Application of the Statute of Limitations Aggressive argues that Brenda Old's claims alleging Defendants' violations of M.G.L. c. 93A, M.G.L. c. 140D and Civil RICO as well as her claims alleging fraud, misrepresentation, and negligence are barred by the applicable statutes of limitations. Likewise, Aggressive alleges that the claims of fraud, misrepresentation and negligence raised by plaintiff Donna Smith are time barred. Aggressive does not seek dismissal of Donna Smith's claims alleging violation's of M.G.L. c. 93A, M.G.L. c. 140D, or Civil RICO on the grounds that they are barred by the statute of limitations. Aggressive's assertion that certain claims of Brenda Old are barred by the statute of limitations is apparently based upon the assumption that the limitations period began to run against the plaintiffs as of the signing of the original loan documents. Aggressive's argument must fail as to Brenda Old's 93A and RICO claims, because pursuant to Massachusetts and Federal law, these claims did not accrue until Ms. Old was injured, upon repayment by entering into the third party loan. This occurred within the four year limitations period. The balance of the claims for which Aggressive seeks dismissal on limitations grounds are within the statute of limitations based upon the discovery rule and/or due to tolling based on fraudulent concealment.

A. The Four Year Limitations Period on Ms. Old's UDAP and RICO Claims Runs from May 26, 1989; the Action Was Timely Filed on May 21, 1993 The heart of the plaintiffs' case under 93A and RICO is that the defendants made a series of misrepresentations and committed a series of unfair and deceptive practices in order to set up the plaintiffs for the coup de grace - that is, a third party loan arranged by the defendants so that they could realize their profits and leave the plaintiffs holding the bag. Although each act was directed individually at inflating the proceeds of the third party refinancing, the significant unfair trade practice and the RICO injuries were caused by arranging for the plaintiffs to obtain a third party loan to pay the defendants. For Brenda Old, this did not occur until May 26, 1989, within the four year statute of limitations for UDAP and RICO.24 B. The Balance of the Claims Are Timely by Virtue of the Discovery Rule, Tolling Based on Defendants' Fraudulent Concealment of Their Misdeeds and/or the Separate Accrual Rule

Aggressive argues that all causes of action accrued when the first set of loan documents were signed. They rely on Lynch v. Signal Finance Co. of Quincy, 367 Mass. 503 (1975). There are several reasons why the Lynch case is distinguishable from the case at bar. First, the Lynch court carefully narrowed its decision to exclude the question of limitations in rescission cases. The Lynch court dealt solely with the limitations based on Truth-in-Lending statutory damages. Second, the Lynch court found no fiduciary duty or positive acts of fraudulent concealment. In the case at bar, both have been pled and must be assumed to exist for the purposes of this motion. For example, the broker who was allegedly working for the plaintiffs was an agent of Aggressive. This and other information was fraudulently withheld from the plaintiffs. Third, the Lynch case is distinguishable because in that case apparently the "nondisclosures" could have been 24

Aggressive does not contend that Ms. Smith's claims for UDAP and RICO are barred by the four year statute of limitations. For Ms. Smith, both the initial Aggressive loan and the third party refinancing occurred within four years prior to commencement of the suit.

discovered by "...mathematical computations from the known data..." Id. at 508. As is spelled out in detail below, this is not true in the case at bar. Massachusetts and Federal law provide for exceptions to the usual statute of limitations in three situations. In the first situation, under the "discovery rule," the limitations period does not commence until the facts forming the basis of a cause of action can be discovered by the plaintiff.

In the second situation, the fraudulent concealment exception, the statute of limitations is tolled when the wrongdoer has concealed the relevant facts from the plaintiff. See Puritan Medical Center, Inc. v. Cashman, 413 Mass. 167, 596 N.E. 2d 1004 (1992) (discussing both the Massachusetts Discovery Rule and fraudulent concealment exceptions). The third exception is the rule of "separate accrual." This rule provides that a separate cause of action accrues for each illegal act at the time when the claimant discovered or should have discovered than she had been injured. See Rodriguez v. Banco Central, 917 F.2d. 664 (1st Cir. 1990). These three exceptions frequently overlap, as in the present case, where the injuries to plaintiffs Old and Smith did not happen until months after the initial loan documents were signed, they could not have discovered their injury until that time, and the defendants, including Aggressive, fraudulently concealed the causes of action from the plaintiffs thereby tolling the statutes of limitations.

1. The Discovery Rule as Applied to This Case

Massachusetts has long recognized that "[w]hile the Legislature has established a time limit within which tort actions must be brought, it has left for judicial determination the time when [sq]the cause of action accrues.'" Cannon v. Sears, Roebuck & Co., 374 Mass. 739 (1978), quoting Hendrickson v. Sears, 365 Mass. 83, 88 (1974). In determining when the cause of action accrues, Massachusetts courts have adopted the Discovery Rule which recognizes that where a cause of action is "inherently unknowable" the statue of limitations does not begin to run until "a plaintiff knows or reasonably should have known that he has been injured as a result of conduct

of the defendant." Errichiello v. Eli Lilly & Co., 618 F. Supp. 484 (D. Mass. 1985); see also International Mobiles Corp. v. Corroon, 29 Mass. App. Ct. 215, 560 N.E. 2d 122 (1990). A plaintiff is required to use "reasonable diligence" or the diligence exercised by a "reasonably prudent person" to determine whether or not a cause of action exists. Prescott v. Morton Intern., Inc., 769 F. Supp. 404, 408 (D. Mass. 1990), quoting 2 Milgrim § 7.04[2], 7-62. See also Pessotti v. Eagle Mfg. Co., 774 F. Supp. 669 (D. Mass. 1990). Even before applying this rule to the facts in the instant case, we must consider the nature of the action, and some of the facts surrounding the transactions. Ms. Old entered into the loan transaction by signing several documents of which she was not even provided copies to take away from the loan closing. [See Am. Complaint ¶83.] This act alone violates the Massachusetts and federal law but more importantly it deprived Ms. Old of the ability to discover her injury or her causes of action against Aggressive Mortgage Co. In Ms. Smith's case, she was provided with copies of the disclosures at the time of closing. However, several days after the loan closing she was presented with a different set of disclosures which were backdated and which reduced the amount of money which in the transaction for her benefit. [See Am. Complaint ¶126.] Even if Ms. Old and Ms. Smith had been provided with accurate documents as required by law, the disclosure sheets presented figures which require the use of a financial calculator or actuarial table to determine accuracy. In the off chance that Ms. Old, Ms. Smith or a "reasonably prudent person" had come armed with such technical devices and had the wherewithal to understand how to use them, only some of the misdisclosures could have been discovered because of fraudulent concealment of relevant facts as discussed below. In addition, a large number of the disclosures made require knowledge which goes beyond the disclosure document. For example, Aggressive included a $28.00 fee for recording the mortgage although the cost of recording a mortgage is only $20.50. Similarly, there was a $20.00 fee for releasing attachments, although attaching creditors release their own attachments so that Aggressive paid nothing. To charge a `reasonably prudent person' with the ability to know the aforementioned subtleties of financial transactions would be an unbearable burden.

Unlike the situation in Lynch supra at 508, "...mathematical computations from the known data...," without knowledge of the technicalities of the relevant disclosure laws, would not have uncovered these irregularities in the loans. Given the complex, detailed numerical transactions at issue in this case, the causes of action were "inherently unknowable" to Ms. Old, Ms. Smith and any "reasonably prudent person." Furthermore, many of the unfair trade practices in the transactions could not have been discovered until after Aggressive was paid off within the four year limitation period applicable to claims under M.G.L. 93A. For example, two points were charged at the outset of the loans, likewise in Ms. Smith's loan there was an assignment fee and a reassignment fee and a four month tax escrow charged at the outset of the loan. Assuming, arguendo, that these charges could be legitimately charged in certain circumstances, for example if the loan was sold on the secondary market25 or if the loan was assigned and reassigned, or if the loan were held for four months, the charges were not legitimate in these situations because the acts required to legitimize the charges never happened. To require a [sq]reasonably prudent person' to have the ability to possess this knowledge is nothing less than requiring her to see into the future. As such, the statutes of limitations for Ms. Old's 93A claims did not begin to run until May 26, 1989, and this action was filed on May 21, 1993 which is within the four year statute of limitations. For these reasons and others set out below, Ms. Old's causes of action are within the applicable stautes of limitations. The causes of action asserted by Ms. Old and Ms. Smith against defendant Aggressive did not accrue until they "knew or reasonably should have known that they had been injured as a result of conduct of the defendant." See Errichiello v. Eli Lilly & Co. supra. In the instant case, the plaintiffs could not have known of their injuries until they consulted a professional with legal expertise in this area.26 Prior to consulting a professional, the plaintiffs had no way of knowing 25

In instances where a loan is sold on the secondary market charging up to two points may be legitimate. Commissioner on Banks and Banking Administrative Bulletin 13-5. 26

See Franklin v. Albert, 381 Mass. 611 (1980). In that case the court held that the statute of limitations on a medical malpractice case did not begin to run until the plaintiff discovered the

that they had been injured by defendant Aggressive.27 That time is well within even the applicable three year statute of limitations for fraud. 2. Application of the Fraudulent Concealment Doctrine to This Case

Massachusetts General Law chapter 260 § 12 states in full:

If a person liable to a personal action fraudulently conceals the cause of such action from the knowledge of the person entitled to bring it, the period prior to the discovery of his cause of action by the person so entitled shall be excluded in determining the time limited for the commencement of the action.

The test set out by Massachusetts courts for a finding of fraudulent concealment requires some positive step by the defendants; mere silence is not enough.28 See Tagliente v. Himmer, 949 F.2d 1 (1st Cir. 1991). Positive acts leading to a finding of fraudulent concealment have been interpreted by several courts to include: false representations made negligently or with the intent to mislead, see Nash v. Trustees of Boston University, 776 F. Supp. 73 (D.R.I. 1990); submission of false assessor's plans, see Kozdras v.Land/Vest Properties, Inc., 413 N.E. 2d 1105 (1980); partial and ambiguous statements, see V.S.H. Realty, Inc. v. Texaco, Inc., 757 F.2d 411 (1st Cir.

injury. In making this discission the court overruled a prior decision in Capucci v. Barone 266 Mass. 578 (1929), which held the limitations period began to run at the time that the malpractice occurred, stating; "[n]o suggestion was offered as to how an injured plaintiff could pursue his theoretical right of action before he had a chance to discover he had been injured." Franklin at 614. 27

. Both Ms. Smith and Ms. Old sought assistance in late 1992 or early 1993. They both went to a social service agency knowledgeable in loan transactions, for reasons unrelated to the Aggressive loans. The exact dates that they first sought assistance is not clear at this time, as both were referred for legal assistance from that social services agency. 28

. If a fiduciary relationship exists between the parties, however, mere silence may be sufficient. See Connelly v. Bartlett, 286 Mass. 311 (1934); see also Stetson v. French, 321 Mass. 195 (1947).

1985); submitting misleading sales records, Blanchette v. Cataldo, 734 F.2d. 869 (1st Cir. 1984); and half truths, Maxwell v. Ratcliffe, 254 N.E. 2d 250 (1969). Aggressive knew or should have known when it presented the loan documents to Ms. Smith and the Olds that the loans were not in compliance with state and federal laws. Aggressive's positive actions included preparing the documents, or the information which went onto the documents, in such a way to as to fraudulently conceal the true interest rate, finance charges, and other fees and charges from the plaintiffs. [Am. Complaint ¶¶81-90 and 95-109 as to plaintiff Brenda Old and Am. Complaint ¶¶124-139 as to plaintiff Donna Smith]. In Ms. Old's case, she was not even provided a copy of the documents to take away with her to scrutinize for compliance with the law. In the case of Donna Smith, Aggressive required that she execute a waiver of her right to rescind. [Am. Complaint ¶¶141, 143, 144.] In doing so, Aggressive fraudulently concealed the availability of Ms. Smith's rights. Furthermore, Aggressive and its agents Fast Talking Mortgage Corp, Henry Michaels, and David Stevens actively misrepresented and fraudulently concealed their financial interest and business relationship with one another. [Am. Complaint ¶¶77-79, 81, 96-98, 123, 134-136.] It is of special importance that information about the agency relationship between Aggressive and Fast Talking was fraudulently concealed. That information was material for two reasons. First, since the "broker" was working for Aggressive rather than the plaintiff, it was illegal to include its fees in the principal of the loan as if it were a payment arranged between Fast Talking and the borrower. More importantly, absent agency, Aggressive could not be sued based on Fast Talking's actions. Fraudulent concealment of the agency relationship hid all of the causes of action against Aggressive until multiple plaintiffs came forward so as to indicate the pattern of activities and relationships between the defendants. These positive acts by the defendants to conceal material elements of their scheme tolled the statute of limitations. No plaintiff could have independently discovered the relationships and pattern of activities which establish Defendants' fraudulent conduct.

Finally, it should be pointed out that the court in Wise v. Hubbard, 769 F.2d 1 (1st Cir. 1985), relied on the Lynch decision to determining whether "positive acts" had been taken in the context of fraudulent concealment. The Wise court held that the defendant applying for a patent using his name as the sole inventor was not a positive act sufficient to sustain a cause of action for fraudulent concealment. Similarly, the Wise court found no fiduciary relationship existed between the parties as to require disclosure without inquiry. In the case at bench, there were sufficient positive acts, and a fiduciary duty did exist between the plaintiffs and Fast Talking, the entity which, by its misrepresentation, was claiming to act as a loan broker on the plaintiff's behalf. Ironically, it is this fiduciary duty which was grossly violated by failure to disclose an agency relationship with Aggressive. Moreover, unlike, the Wise case where "there were no material disputed issues of fact," the facts giving rise to Plaintiffs claims of fraudulent concealment have been pled and must be accepted as true for the purposes of this motion. 3. Application of the Separate Accrual Rule to This Case

The First Circuit Court of Appeals has adopted the Second Circuit's "separate accrual" rule. See Rodriguez v. Banco Central, 917 F.2d 664 (1st Cir. 1990). As applied to RICO cases this rule provides

each time a plaintiff suffers an injury caused by a violation of 18 U.S.C. § 1962, a cause of action to recover damages based on that injury accrues to plaintiff at the time he discovered or should have discovered the injury.

Id. at 665-666, quoting Bankers Trust Co. v. Rhoades, 859 F 2d. 1096 at 1102 (2nd Cir. 1988). Application of this rule to the facts of this case yields Ms. Old a four year limitations period which expired on May 26, 1993. These limitation periods are based on the dates that the Aggressive scheme was completed, or when Aggressive was paid off by third party lenders. It was at this time that

Aggressive also collected large prepayment penalties. It was upon this payment to Aggressive that Ms. Old and Ms. Smith "realized" their injuries. Examples of these injuries included the four month tax escrow which was withheld from the funds of Ms. Smith's loan, the assignment and reassignments fees, and, as to both Ms. Smith and Ms. Old's loans, the points paid. A full discussion of these charges and their impact on the plaintiffs' ability to discover their injuries is set out above. If the injuries could not have been realized until the scheme was complete and Aggressive was paid off, pursuant to the "separate accrual" rule, the limitations period could not begin to run until May 26, 1989 for Brenda Old and or October 26, 1989 for Ms. Donna Smith.

V. Payment of the Loans Does Not Terminate the Consumer's Right to Rescind Under the Consumer Credit Cost Disclosure Act The Consumer Credit Cost Disclosure Act (CCCDA), M.G.L. c. 140D, makes express provisions for termination of a consumer's right to rescind, as well as for waiver of the right to rescind. An unconditional right to rescind may be exercised by midnight of the third business day following either the consummation of the transaction, or the delivery of the required information and rescission forms together with a statement containing all required material disclosures. M.G.L. c. 140D § 10(a). However, if the creditor does not meet its obligations under CCCDA, then the right to rescind can extend to four years. M.G.L. c. 140D § 10(f). According to the statute and regulations, the extended right to rescind may only be terminated in one of three ways: (1) the expiration of four years after consummation of the transaction; (2) the sale of the property; or (3) the transfer of all of the consumer's interest in the property. M.G.L. c. 140D § 10(f); 209 CMR 32.15(a)(3). Finally, the consumer may, in a written and signed statement, waive or modify the right to rescind if the extension of credit is needed to meet a bona fide personal financial emergency. 209 C.M.R. 32.15(e). If the consumer does not expressly waive the right to rescind and if that right does not terminate in any of the three stated ways, the right to rescind is not extinguished. The language

of the statute and regulations is plain; the principle of statutory construction, "expressio unius est exclusio alterius," clearly applies. In other words, statutory expression of one thing is an implied exclusion of other things omitted from the statute. Middlesex County v. City of Newton, 434 N.E.2d 1297, 13 Mass. App. 538 (1982), review denied, 440 N.E.2d 1176, 386 Mass. 1104. When Congress enacted the federal Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq., after which the CCCDA was modeled, they set out the express conditions under which rescission rights would terminate. Congress, and the Massachusetts legislature, did not choose to make payment or refinancing of a loan one of those conditions by which that right would be extinguished, despite the contrary holding in King v. State of California, 784 F.2d 910 (9th Cir. 1986). Aggressive's reliance on King is, at best, tenuous. In King, the plaintiff was attempting to reverse dismissal of her case, with prejudice, by the District Court. She had failed to appear for a hearing on the motion to dismiss, and failed timely to apply for a continuance or to submit papers in opposition to the motion -- even after already having received one extension of time to respond. While the Court of Appeals reviewed the case on the merits, Id. at 912, it did so with the knowledge of Plaintiff's procedural failings and without the benefit of opposition papers to inform its decision. The Court dismissed the issue of recision of one of Plaintiff's loans that had been refinanced simply, without any further analysis, by stating that there was nothing left to rescind. Id. at 913. In its haste to dispense with the recision issue, the Court in King ignored a fundamental precept of statutory construction. That is, that language of a statute may not be enlarged or limited by construction unless its object and plain meaning so require. Johnson's Case, 64 N.E. 2d 94, 318 Mass. 741 (1946). It is a function of the court to construe a statute as written, and an event or contingency for which no provision is made does not justify judicial legislation. Prudential Ins. Co. of America v. City of Boston, 340 N.E.2d 858, 369 Mass. 542 (1976). The statute and regulation governing the termination of the extended right of recision are clear on

their face, and do not include the repayment or refinancing of the loan in question among the enumerated ways for termination of that right. Other courts that have examined the issue of rescindability more closely than the court in King have reached different conclusions. A series of bankruptcy cases illustrate the irrelevance of refinancings to the ability of a consumer to rescind a secured loan on account of truth in lending violations by the creditor. See In re Tucker, 74 B.R. 923 (Bankr. E.D. Pa. 1987) (court said that debtor seeking to rescind only the final loan in a series of refinancings, also was entitled to rescind earlier refinanced loans) (emphasis added); Abele v. Mid-Penn Consumer Discount, 77 B.R. 460 (E.D. Pa. 1987), aff'd mem., 845 F.2d 1009 (3rd Cir. 1988) (debtor's right to rescind loan transactions was not extinguished on payment of earlier loans); In re Milbourne, 108 B.R. 522 (Bankr. E.D. Pa. 1989) (four out of a series of seven loan transactions, including refinancings, were properly rescindable); In re Steinbrecher, 110 B.R. 155 (Bankr. E.D. Pa. 1990) (loans two through four, which included refinancings, were not exempt transactions for purposes of rescission). In a non-bankruptcy case, Mayfield v. Vanguard Sav. & Loan Ass'n, 710 F. Supp. 143 (E.D. Pa. 1989), the consumer plaintiff was permitted to rescind her two loans from the defendant - the second being a refinancing of the first. The holdings of In re Tucker, Abele, In re Milbourne, In re Steinbrecher, and Mayfield make good sense on policy grounds as well. Absent such holdings, there would be nothing to prevent a lender from covering up errors or deliberate fraud and avoiding liability by engaging in quick refinancing schemes. There is no reason that Aggressive or any other lender should benefit from obtaining repayment by refinancing, especially where as here, it participated in arranging the refinancing. Disclosure requirements are intended "to protect the consumer against inaccurate and unfair credit billing and ... practices." 15 U.S.C. 1601(a). For this reason, courts have construed TILA (and its state counterparts by analogy) as a remedial statute, interpreting it liberally for the consumer. Riggs v. Government Employees Financial Corp., 623 F.2d 68, 70-71 (9th Cir. 1980).

Finding an implied termination of remedies based upon refinancing would frustrate the purposes behind the Act. CONCLUSION For all the foregoing reasons, the motion of Aggressive Mortgage Co. to dismiss the amended complaint should be denied. In the alternative, the plaintiffs should be given an opportunity to amend the complaint either before or after completing discovery.

Dated: Counsel for the Plaintiffs