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Urban v. Federal Home Loan Mortgage Corp.

United States District Court, D. Massachusetts

January 13, 2015

REBECCA URBAN, et al., Plaintiffs,

For Rebecca Urban, et alia, Plaintiff: Carl F. Schmitt, Thomas M. Dillon, Schmitt & Dillon, Lancaster, MA.

For Federal Home Loan Mortgage Corporation, Defendant: James J. Duane, III, LEAD ATTORNEY, Lindsey A. Gil, Peabody & Arnold LLP, Boston, MA.

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Rebecca Urban (" Urban" or " Plaintiff" ), has filed suit against the Federal Home Loan Mortgage Corporation (" FHLMC" or " Defendant" ). Urban asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing and

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violation of Mass.Gen.L. ch. 93A (" Chapter 93A" ).[1]

In ruling on the parties' cross-motions for summary judgment, I noted that Attorney Thomas M. Dillon (" Attorney Dillon" ), who is representing Urban in this case, had inserted himself into the proceedings as a percipient witness, thereby raising the specter of Attorney Dillon being required to withdraw from the case or being disqualified therefrom, in accordance with Rule 3.7 of the Massachusetts Rules of Professional Responsibility. Thereafter, FHLMC filed a motion to disqualify Attorney Dillon and his firm, Schmitt & Dillon, from serving as Urban's trial counsel. Attorney Dillon has agreed to withdraw from his representation as trial counsel and therefore, as to him the motion is allowed. For the reasons set forth below, the motion is denied as to Schmitt & Dillon. FHLMC also requests that the Court find that by raising certain claims in this action, Urban has waived the attorney-client privilege regarding her discussions with her counsel about title insurance. For the reasons set forth below, FHLMC's motion seeking a declaration of an " at issue" privilege waiver is allowed.

Facts Relevant To Disqualification and Privilege Waiver Issues

FHLMC is a publicly traded United States Corporation chartered by an Act of Congress, organized and existing under the Federal Home Loan Mortgage Corporation Act, 12 U.S.C. § 1451, et seq. FHLMC is currently operating under a conservatorship that began on September 6, 2008 and is conducting its business under the supervision of the Federal Housing Finance Agency. As part of its role in Massachusetts, FHLMC acquires titles to properties that served as collateral for defaulted mortgages and sells those properties. In most cases, the properties have been foreclosed on. On April 14, 2010, FHLMC acquired title to a property by foreclosure order located at George Hill Road, in Lancaster, Massachusetts (the " Property" ). FHLMC listed the Property for sale. Urban made an offer to purchase the Property, which was accepted by FHLMC. Harmon Law Offices, P.C. (" Harmon Law" ) represents FHLMC in the acquisition of titles pursuant to the filing of a foreclosure order and subsequent sales of properties in Massachusetts.

FHLMC requires buyers purchasing homes from it to enter into a purchase and sale agreement and related addendums. Urban executed a Standard Form Purchase and Sale Agreement on September 24, 2010. See Statement of Undisp. Facts By Def. Fed. Home Loan Mtg. Corp. (Docket No. 57)(" Def's Factual Statement " ), at Ex F (" P& S" ). Also included was the Addendum #1 to Contract of Sale, which contained the following provisions:

17. Closing Costs/Concessions
c. Purchaser may choose the title insurance company for the closing. If Purchaser agrees to use the title insurance company utilized by the Seller's attorney or agent, the Seller agrees to pay for Purchasers Owner's Title Policy. SELLER WILL NOT BE OBLIGATED TO PAY ANY PORTION OF THE COST OF AN OWNER'S TITLE POLICY IF THE POLICE IS NOT OBTAINED FROM THE TITLE INUSRANCE COMPANY UTILIZED BY SELLER'S ATTORNEY OR AGENT.

See Def's Factual Statement, at Ex E (" Addendum" ). Prior to closing on the Property, Urban, through her attorney,

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Attorney Dillon, notified Harmon Law that, in accordance with Paragraph 17c. of the Addendum (" Paragraph 17c" ), Urban wished to obtain title insurance from the title insurance company utilized by FHLMC's attorney or agent. Harmon Law replied that under Massachusetts law, FHLMC could not provide the title insurance because it would pose a conflict of interest. More specifically, Harmon Law informed Attorney Dillon that where Harmon Law represents FHLMC, it cannot provide the buyer with the title policy as part of the transaction as it is a conflict of interest to represent both parties to a real estate transaction in Massachusetts.

Urban purchased her own title insurance policy and proceeded with the closing, which took place on December 20, 2010. The cost of the title policy was $680 and was listed on the HUD-1 Settlement Statement as charged to Urban. According to Urban's Hud-1 Settlement Statement, $476.00 of the $680.00 paid by Urban for title insurance, issued by the Commonwealth Land Title Insurance Company, was paid to Attorney Dillon's law firm, as a commission. On January 5, 2011, Urban renewed her request that FHLMC purchase the owner's title insurance policy for her. Harmon Law denied the request because of state ethics rules. On January 10, 2011, Urban served a Chapter 93A demand letter on FHLMC.

The parties filed cross-motions for summary judgment and in connection therewith, Urban filed Pl's Statement of Undisputed Material Facts (Docket No. 62). Urban accepted FHLMC's undisputed statement of material facts and " add[ed] the undisputed facts set forth in the Affidavit of Thomas Dillon. ..." Id. Among the additional facts attested to by Attorney Dillon were the following:

1. " I (Attorney Dillon) have personal knowledge of the matters relative [to] Ms. Urban's purchase of [the Property] based on my representation of her in that transaction."
2. The P& S and its Addendum[2] " provided that [FHLMC] would pay for her Owner's Policy of title insurance if she agreed to use the title company utilized its attorney or agent. Ms. Urban wanted to take advantage of this [O]wner's Policy at [FHLMC's] expense because it would substantially reduce her closing costs, and she asked me to request the promised Owner's Policy."
3. " After the signing of the Addendum but before the closing I informed Joe Nolan of [Harmon Law] that Urban agreed to use the title company utilized by its attorney or agent such that [FHLMC] would pay for the Owner's Policy ... Mr. Nolan responded: 'We get this question all the time. [FHLMC] does not honor that provision in Massachusetts. We told them this is a problem, but that is how it is.'"
4. " Ms. Urban closed her purchase of [the Property] on or about December 10, 2010 by accepting a deed to the property. [FHLMC] refused to ...

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