In Giles v. Phelan, Hallinan & Schmieg, No. 11-6239, 2013 U.S. Dist. LEXIS 78161 (D.N.J. June 4, 2013), the United States District Court for the District of New Jersey ruled on several novel issues. Relying on cases outside of the jurisdiction due to the absence of binding precedent in New Jersey, the court found that the New Jersey litigation privilege does not bar federal statutory claims and, therefore, refused to dismiss a claim brought by borrowers against a mortgage servicer and its foreclosure counsel for violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962(c) (RICO). However, in recognizing that the Noerr-Pennington doctrine has expanded beyond its antitrust origins, the court held that the doctrine was a complete defense to a class action alleging RICO violations against the law firm of Phelan, Hallinan & Schmieg, for bringing an allegedly fraudulent foreclosure suit.
By way of background, on Feb. 16, 2007, the Phelan firm filed a foreclosure action against plaintiffs Charles and Diane Giles. While the plaintiffs admitted that they had defaulted on their loan, they maintained that the suit was fraudulent because Phelan incorrectly named Wachovia Bank as the foreclosure plaintiff. On June 5, 2007, the Superior Court, Chancery Division for Ocean County entered a default judgment against the plaintiffs and ordered a foreclosure sale of the plaintiffs' home. The plaintiffs retained counsel and applied for a stay of the sheriff's sale in order to privately sell their home. The plaintiffs then discovered that Wachovia was not the proper foreclosing entity because it had divested its interest in the plaintiffs' mortgage over a year before filing the foreclosure complaint.
