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Darling v. Western Thrift & Loan
Citations: 600 F. Supp. 2d 189; 2009 U.S. Dist. LEXIS 13396; 2009 WL 426290Docket: CV-06-123-B-W
Court: District Court, D. Maine; February 20, 2009; Federal District Court
Homeowners Joseph and Roxanne Darling filed a lawsuit against Western Thrift Loan, their mortgage broker, claiming fraud and violations of consumer protection laws related to an adjustable-rate mortgage that unexpectedly became more expensive. The Darlings refinanced their mortgage in 2005, borrowing $266,250 instead of the original $190,000, under the impression that they secured a favorable interest rate structure. However, the interest rate escalated more rapidly than anticipated, resulting in negative amortization. After dismissing claims against IndyMac Bank and their individual mortgage broker, Paul Mikhail, the Darlings focused their case on Western, alleging breaches under the Truth in Lending Act, Maine’s Unfair and Deceptive Practices Act, negligent misrepresentation, breach of fiduciary duty, and malicious conduct. Western Thrift Loan moved for summary judgment on all claims. The Magistrate Judge recommended that the federal claim be dismissed, but suggested maintaining state law claims due to genuine issues of material fact. The District Court affirmed this recommendation, granting summary judgment on the federal claim while exercising supplemental jurisdiction over the state claims. The Court noted the comprehensive review of facts and the addressing of each claim by the Magistrate Judge in the recommended decision. Western is granted summary judgment on the Truth in Lending Act (TILA) claim due to a one-year statute of limitations, as acknowledged by the Plaintiffs. The Court finds the claim time-barred and agrees with the Magistrate Judge's conclusion. Following this, the Court must determine whether to exercise supplemental jurisdiction over remaining state law claims since the sole federal claim has been dismissed. The Court references 28 U.S.C. 1367, which allows for supplemental jurisdiction when state and federal claims arise from a common nucleus of operative fact. It concludes that the state law tort claims and the time-barred TILA claim are related, stemming from the IndyMac loan transaction, thus permitting the exercise of supplemental jurisdiction. Western raises six objections regarding the Magistrate Judge's recommendations on the remaining claims, starting with a general objection that the summary judgment record was inadequately cited. The Court considers this objection throughout its review, viewing facts in favor of the Darlings. Specifically, regarding the Darlings' fraud allegations, Western argues they lack specificity as required by Federal Rule of Civil Procedure 9(b) and claims the Magistrate Judge did not address this issue. State law dictates the burden of proof for fraud, while Federal Rule of Civil Procedure 9(b) governs pleading requirements in diversity suits, mandating that allegations of fraud or mistake be stated with particularity, including details such as the time, place, and content of the alleged misrepresentation. The First Circuit identifies three purposes for Rule 9(b): to notify defendants, to prevent frivolous claims, and to protect defendants from reputational harm. The Darlings' allegations against Western and Mr. Mikhail, which include misrepresentations about the variable interest rate and compensation, meet the minimal requirements of Rule 9(b). Western's objections, asserting inadequate notice and disputing the allegations, are overruled, as they had sufficient information to respond meaningfully to the Darlings' claims. To establish a fraud claim, the Darlings must demonstrate a false representation of material fact made knowingly or recklessly, intended to induce reliance, and that they justifiably relied on it, resulting in damage. The Magistrate Judge found a genuine dispute over whether Mr. Mikhail knowingly provided false information about the loan terms, leading to economic harm. The Court affirms this determination and separately considers issues related to the materiality of representations made by Mr. Mikhail and the Darlings' reliance on those representations. The Darlings acknowledged that Mr. Mikhail did not explicitly state that their loan's interest rate would remain unchanged in the first year, but rather that their payment amount would remain fixed. During a phone call at the loan closing, Mr. Mikhail confirmed that the paperwork reflected a one percent interest rate as he had previously described. The Darlings' testimonies indicate that Mr. Mikhail reassured them about the loan terms, suggesting they could trust his explanation despite any inconsistencies in the documents. They assert that he indicated the one percent rate would be valid for one year and implied that any potential rate increases would be minimal. The Court found that there is a genuine issue of material fact regarding whether Mr. Mikhail misled the Darlings about the loan terms and whether he was aware of the inaccuracies in his statements. The Darlings' reliance on Mr. Mikhail's representations raises questions of justifiable reliance, which the Magistrate Judge deemed a factual issue appropriate for jury determination. Western contends that the Darlings' admissions regarding their understanding of the loan documents negate any claim of reliance on Mr. Mikhail's representations. However, the Court noted that Mrs. Darling was aware they were entering an adjustable-rate loan, indicating she understood the interest rate would not remain at one percent indefinitely. Mrs. Darling signed the Adjustable Rate Rider on May 1, 2005, acknowledging that the interest rate could change as early as July 1, 2005, with a maximum rate of 9.95%. Despite her deposition testimony indicating an understanding of the adjustable rate provisions, she claimed that Mr. Mikhail assured her the rate would remain stable for the first year and would only increase by a maximum of one-tenth of a percent annually thereafter. This discrepancy suggests that Mrs. Darling's understanding of the loan terms diverged from the written documents, prompting her and her husband to contact Mr. Mikhail during the closing for clarification. They indicated they did not fully comprehend the loan documents, relying instead on Mr. Mikhail's representations that the documents reflected their original agreement. To avoid summary judgment, the Darlings must show that their reliance on Mr. Mikhail's statements was justified. Maine law allows reliance on fraudulent misrepresentation without independent verification, unless the plaintiff knows the representation is false or its falsity is obvious. Western contends that the Darlings cannot claim fraud regarding terms they understood, arguing that reliance on oral representations is unjustified when contradicted by written terms. This stance is challenged by a precedent case (Ferrell v. Cox), where the court found that reliance on oral assurances could be justified even in the presence of a written document, as long as the representations were made in the context of the agreement. The jury could reasonably conclude that Ferrell was unaware of the falsehood of Cox's representations, as the Darlings, lacking expertise in mortgage matters, were misled by Mr. Mikhail's statements about their loan paperwork and the one percent loan they believed they were signing. At the closing, they discovered for the first time that IndyMac was the lender, which may have led them to assume Mr. Mikhail had a better understanding of the loan terms and future interest rate adjustments. The court found a genuine issue of material fact concerning the Darlings' justifiable reliance on this information, as well as potential pecuniary damages resulting from accepting less favorable loan terms than those allegedly promised by Mr. Mikhail. Western's argument that the Darlings suffered no damages because they extracted cash from their home equity was rejected, with the court overruling Western's objections to the Magistrate Judge's findings on the fraud claim. Regarding the Darlings' negligent misrepresentation claim, the court noted that it overlaps significantly with the fraud claim, establishing liability for those who provide false information in business dealings if they do not exercise reasonable care. The court similarly overruled Western's objections to the negligent misrepresentation claim. In the Darlings' second cause of action under Maine's Unfair Trade Practices Act (UTPA), they allege that Western and Mr. Mikhail violated the UTPA by receiving a Yield Spread Premium Fee of $6,989 without disclosing it as a broker's fee and misleading them about the loan terms, including the interest rate. In its motion for summary judgment, Western contested all claims, referencing the Unfair Trade Practices Act (UTPA), which prohibits unfair methods of competition and deceptive acts in trade. According to the UTPA, an act or practice is deemed unfair if it likely causes substantial consumer injury that cannot be reasonably avoided and is not outweighed by benefits to consumers or competition. Deceptive acts involve material misrepresentations or omissions that can mislead consumers, determined without regard to the defendant's intent. The definitions of "unfair" and "deceptive" are factual questions assessed on a case-by-case basis. The Magistrate Judge noted that genuine issues of fact regarding the Darlings' fraud and negligent misrepresentation claims were sufficient to deny summary judgment on the UTPA claim, highlighting that providing false information about loan terms could mislead consumers. The Court agreed and incorporated its analysis of the related misrepresentation claims. Regarding the Darlings' allegations about Western's compensation, Western argued that Mr. Mikhail did not receive a Yield Spread Premium (YSP) directly from them, and any compensation was disclosed by IndyMac. The Darlings acknowledged they did not pay Mr. Mikhail directly and noted that broker compensation is typically not paid by borrowers. However, they claimed a lack of understanding about how compensation was structured. Mrs. Darling testified that Mr. Mikhail assured her there would be no fees listed on their documents and that he would be compensated through a third party. The critical issue remains whether the Darlings were aware of Western's receipt of the YSP from IndyMac, and if their lack of awareness is material under the UTPA. Molly Graham, IndyMac's Rule 30(b)(6) designee, testified that the Darlings' file included "Lender's Closing Instructions" revealing the yield spread premium (YSP). However, Graham did not attend the closing, and the document did not specify the source of YSP funds. Roxanne Darling exhibited confusion regarding the YSP during her deposition. Joseph Darling acknowledged seeing loan documents mentioning broker compensation but was referencing a separate fixed-rate loan with his ex-wife, not the current case. The Court identifies a genuine factual dispute about the Darlings' knowledge of Western receiving a YSP from IndyMac. Even if disclosed, questions remain about the completeness and accuracy of such disclosures. Mr. Mikhail, the broker, confirmed he did not receive payment directly from the Darlings but failed to explain to them the mechanism of how he was compensated through the loan. Evidence suggests the Darlings may not have fully understood the economic implications of the YSP, raising a genuine issue regarding potential misinformation about its existence and nature. This misinformation is considered material under both substantive and procedural law, as it could influence consumer decisions and impact litigation outcomes. Under the Unfair Trade Practices Act (UTPA), an act is considered deceptive if it involves a material misrepresentation or omission that is likely to mislead reasonable consumers. Mr. Mikhail allegedly misled the Darlings by claiming they would not pay for his services, which could confuse consumers regarding broker compensation. This creates a genuine factual question about the deception related to the Yield Spread Premium (YSP). The Darlings assert that Western and Mr. Mikhail acted as their fiduciaries and breached their duties by accepting the YSP without disclosure, failing to provide clear loan terms, and guiding the Darlings into a transaction contrary to their interests. Western counters with arguments for summary judgment, stating that the Darlings could have declined to sign documents at closing, undermining claims of a power imbalance necessary for fiduciary relationships under Maine law. They also argue that Mr. Darling's familiarity with financial matters negates the existence of fiduciary duties and assert a lack of causation between any alleged breach and damages, claiming the loan terms were understood and the YSP was disclosed. The Magistrate Judge found a genuine issue regarding the fiduciary relationship, noting the Darlings' reliance on Mr. Mikhail, who reassured them of their misunderstanding of the loan documents, suggesting a potential fiduciary duty. Western's objections to this finding are not convincing enough to reject the Magistrate Judge's recommendation, as the Darlings' failure to counter Western's supplemental statement of fact does not preclude the existence of a fiduciary relationship. Thus, the court disagrees with Western's argument that the absence of an agency relationship negates the fiduciary duty claim. The Court will not accept mere assertions or conclusions at the summary judgment stage. Determining whether Western and Mr. Mikhail acted as agents for the Darlings or had a confidential or fiduciary relationship involves factual questions. The existence of a fiduciary duty, however, is a legal question. Even if the Darlings admit certain facts, other compelling evidence may indicate an agency or fiduciary relationship that prevents summary judgment. Importantly, a lack of an agency relationship does not exclude the possibility of a fiduciary relationship. To assess a principal's vicarious liability, it is established that a principal is liable for an agent's actions but not for those of an independent contractor. Agency is defined as a fiduciary relationship formed by one party consenting to act on behalf of another, while a fiduciary relationship involves actual trust and confidence along with a significant disparity of power between the parties. In this case, the Darlings are suing Western based on Mr. Mikhail's actions while securing a loan, alleging that a fiduciary relationship may simplify proving fraud. Their claim hinges on Mr. Mikhail's failure to disclose critical loan terms, which constitutes an alternative liability theory. For a failure to disclose to qualify as misrepresentation, the plaintiff must demonstrate either active concealment or a relationship imposing a duty to disclose. If a fiduciary duty is established, it must be shown that Mr. Mikhail intentionally withheld material information to induce reliance, resulting in harm. The Court must now examine Western's argument regarding the absence of evidence for a fiduciary relationship. The record suggests that the Darlings placed significant trust in Mr. Mikhail, indicating a disparity of influence. On March 3, 2005, Mr. Mikhail provided them with a Truth in Lending Act Disclosure Notice regarding a one percent loan he claimed to be securing for them. He assured the Darlings that they could rely on this disclosure and that the final loan would closely resemble it. When they expressed skepticism about the one percent rate, Mr. Mikhail reiterated his explanations, encouraging them to trust him. He dismissed concerns about the Mortgage Loan Origination Agreement, labeling it as "just legal stuff" and insisted they should sign it without worry, claiming there were no broker fees involved. Mrs. Darling recounted that Mr. Mikhail consistently reassured her regarding discrepancies in the documents, emphasizing his expertise. After reviewing the loan documents and expressing concerns about whether the one percent loan was actually secured, Mr. Mikhail assured them that they misunderstood the paperwork, reinforcing their trust. He also claimed that the interest rate on their loan would not increase significantly, leading them to sign the Adjustable Rate Rider, which allowed for a maximum interest rate of 9.95%. The Court aligns with the Magistrate Judge's view that it is reasonable to infer the Darlings' trust in Mr. Mikhail was influenced by his perceived superior knowledge of mortgage transactions. In contrast, Western's argument that the Darlings were not obligated to sign the documents and could rescind the loan post-closing fails, as it contradicts the notion of a significant disparity in influence and trust between the parties. The Darlings, Joseph and Roxanne, allege that Mr. Mikhail, a representative from Western Thrift, exerted undue influence over their understanding of loan terms, implying a potential fiduciary relationship. It is inferred that had the Darlings sought independent counsel, they would not have signed the loan documents or would have rescinded the agreement within the designated three-day period. Their subsequent review of the paperwork raises questions about their decision-making process. The court finds that genuine issues of material fact exist regarding the Darlings' fraudulent nondisclosure claims, leading to the overruling of Western's objections to the Magistrate Judge's recommendations. Regarding the malice claim, the court interprets it as a request for punitive damages, which cannot stand alone as a basis for liability. However, there is a possibility that Mr. Mikhail's actions, if found disingenuous or self-serving, could support a finding of implied malice for punitive damages. Thus, the court denies summary judgment for Western on most of the Darlings' claims, affirming the Magistrate Judge's recommendations while granting summary judgment only on the Truth in Lending Act (TILA) claim. The request for oral argument by Western is also denied. Facts are based on the parties' statements of material facts as required by Local Rule 56, which outlines procedures for summary judgment motions. Disputes are resolved in favor of the non-movants, Joseph and Roxanne Darling, with the recognition that not all facts are undisputed by Western Thrift. In early 2005, the Darlings sought financial opportunities, including refinancing their home in West Gardiner, Maine. Joseph has a high school education, while Roxanne attended college briefly. Joseph possessed some knowledge of adjustable rate mortgages and was aware of market fluctuations in interest rates. The Darlings were introduced to Paul Mikhail by Albert Myer, who suggested they contact Mikhail regarding favorable mortgage options, including a one-percent mortgage. The Darlings were interested in this loan to expedite home payoff, fund renovations, and join Pinnacle Quest. In February 2005, they reached out to Western Thrift and Mikhail based on Myer’s recommendation; neither party approached them beforehand. Mikhail spent considerable time discussing loan options with the Darlings, whom he deemed "great clients," although they did not meet until a year post-loan closure. Mikhail reviewed the Darlings' credit score, confirmed their qualification for the one-percent loan program, and informed them of its terms: a one-year fixed rate followed by potential annual adjustments of no more than 0.1%. He also outlined that they could take $75,000 in cash from the refinance and pay off the loan at $800 monthly over 10 to 12 years. The Darlings aimed to use part of the loan proceeds for Pinnacle Quest membership and home renovations. The Darlings sought a low-interest loan to reduce their loan term and maintain monthly payments around $800. They used at least $24,000 from their IndyMac Bank loan to pay for a membership in Pinnacle Quest, which they could not have afforded without refinancing. In 2005, they could not have completed a standard refinance for the borrowed amount. On March 3, 2005, Mikhail provided a preliminary TILA Disclosure Notice for a one-percent loan, indicating it would change if they borrowed more. The Darlings believed this loan was what Mikhail was arranging and relied on the assumption that the final loan terms would be similar to the preliminary notice. The disclosed one-percent loan required 359 monthly payments of $643.28, with a final payment of $642.89. Mikhail reassured them that the loan would not rise significantly in interest and suggested an additional monthly payment to pay off the loan sooner. Despite their concerns about the loan terms being "too good to be true," Mikhail consistently reiterated his explanations. He only discussed the one-percent loan option and did not claim it would remain at one percent indefinitely; the Darlings understood the interest rate would eventually change. Their minimum payment was approximately $856.00 for the first year. On February 9, 2005, they signed a loan application based on their provided information, and on March 3, 2005, they signed a Mortgage Loan Origination Agreement with Western Thrift, which differed from earlier representations by Mikhail. The Darlings were initially concerned about discrepancies between the Loan Origination Agreement and Mikhail's representations. Mikhail dismissed their concerns, describing the agreement as "just a total legal document" and urged them to sign without further questions. After signing a disclosure on March 3, 2005, the Darlings opted to secure a larger loan of $266,250 from IndyMac Bank, despite preliminary documents indicating a loan of only $200,000 without a cash-out component. Roxanne Darling understood the difference between preliminary and final documents but was reassured by Mikhail that the final loan would closely resemble the earlier disclosure. At the closing on May 12, 2005, attended only by the Darlings and a Yankee Title representative, they signed several documents, including an adjustable-rate note, without prior knowledge of IndyMac Bank, having dealt only with Mikhail. The closing documents revealed terms that differed significantly from what Mikhail had described. When Roxanne sought clarification during the closing, Mikhail reaffirmed that it was a "one percent loan," which led the Darlings to proceed with signing the paperwork based on his assurances. They did not fully comprehend Mikhail's role in the transaction, believing he worked for IndyMac Bank and would be compensated by Pinnacle Quest. Importantly, neither Western nor Mikhail received direct payment from the Darlings for this loan transaction. Any funds received by Western or Mikhail related to the Darlings' loan transaction were disclosed in the closing paperwork provided by IndyMac Bank. Joseph Darling acknowledged that the paperwork mentioned broker compensation, but he and his wife did not fully understand the disclosures. They were led to believe by Mikhail that his fees were covered by Pinnacle Quest. Mikhail did not make any direct representations to Joseph, who relied on information provided by Roxanne Darling. Joseph was present during Roxanne's deposition and found her testimony credible. He did not prioritize understanding the mortgage payoff duration, as he planned to refinance within a year, and admitted he failed to read the closing documents. Roxanne understood that signing the closing documents meant they were agreeing to an adjustable-rate mortgage and recognized that the interest rate could change, starting as early as July 1, 2005. Despite this, Mikhail assured her that he had never seen rates increase by more than one-tenth of a percentage point annually. The closing documents indicated a loan amount of $266,250, due by June 1, 2035, with provisions for changing the interest rate and monthly payment, and included a broker compensation fee of $6,909.06 and a processing fee of $350 for Western. The documents allowed for negative amortization. The day after closing, the Darlings were contacted by Yankee Title to sign revised documents, including a new TILA disclosure statement and a good faith estimate. Signing prior disclosures at or after closing is a common practice in the lending industry. These documents, prepared before closing, stated that the Truth in Lending Disclosure was not a contract or a commitment to lend. Roxanne sought clarification from Mikhail about these new documents, who dismissed them as mere "legal stuff" and reassured her that the loan remained at one percent. In June 2005, the Darlings received their first monthly statement from IndyMac Bank, which Mikhail instructed them to "disregard." In August 2005, three months post-closing, the Darlings discovered their loan was negatively amortizing and contacted IndyMac Bank for clarification. Mikhail at IndyMac did not respond to their calls. Shortly after the Darlings' inquiry, IndyMac offered to connect them with a loan officer, which they declined, seeking alternative solutions. Western Thrift, acting as a broker, proposed to refund the Darlings $6,989.06 for broker services they never directly paid. On August 30, 2005, the Darlings filed a complaint with the Maine State Office of Consumer Credit Regulation against Western and Mikhail regarding their mortgage. By April 2006, nearly one year after closing, the Darlings attempted to exercise their right of rescission, seeking to annul the loan, retain their property, and eliminate their $75,000 obligation. Over two and a half years later, they had not pursued refinancing due to the ongoing lawsuit. The Darlings have claimed damages between $30,000 and $50,000 from the negative amortization and indicated potential future damages. As of September 17, 2007, they were current on their mortgage payments. The Darlings' amended complaint includes six causes of action: a violation of the Truth in Lending Act (TILA) for improper disclosures, a claim under Maine's Unfair and Deceptive Trade Practices Act, breach of fiduciary duties, fraud, negligent misrepresentation, and "malice." Western's motion for summary judgment seeks to dismiss all claims, asserting that the TILA claim is time-barred, as the TILA mandates specific disclosures from creditors to borrowers in credit transactions. Creditors may face civil liability under the Truth in Lending Act (TILA) for failing to provide required disclosures, as outlined by Regulation Z from the Federal Reserve Board. Western Thrift contends it cannot be held liable under TILA because it acted solely as a broker and not as a creditor. Additionally, Western Thrift argues the claim is barred by TILA's one-year statute of limitations, starting from the date the borrower discovers the violation. The TILA provision allows actions to be initiated in any competent jurisdiction within one year of the violation, with equitable tolling available if the plaintiff could not have reasonably discovered the necessary information to pursue the claim. The Darlings closed on their IndyMac loan on May 12, 2005, and filed their lawsuit on October 3, 2006, over 16 months later. Evidence shows they were aware of the loan's negative amortization by August 2005 and had already filed a complaint with the Maine State Office of Consumer Credit Regulation by August 30, 2005. Thus, the Darlings had discovered the alleged fraud by that date, making their TILA claim time-barred, regardless of Western Thrift's status as a creditor. The case also presents genuine issues of material fact regarding the Darlings' supplemental state law claims, which center on their reliance on false assurances from the mortgage broker about obtaining a desirable loan. The broker led them to believe they were eligible for a one percent loan, which influenced their decision to proceed with the application. When presented with a loan package that differed from the broker's representations, the Darlings initially hesitated but ultimately proceeded based on the broker's reassurances. This record suggests sufficient evidence exists to dispute the elements of their state law tort claims, particularly concerning fraud and negligent misrepresentation, which require differing standards of proof. Fraud requires proof of five elements: (1) a false representation by the other party, (2) concerning a material fact, (3) made knowingly or with reckless disregard for its truth, (4) intended to induce reliance, and (5) justifiable reliance by the harmed party resulting in damage. Negligent misrepresentation involves (1) supplying false information in the course of business and (2) justifiable reliance by the plaintiff leading to financial harm. The case presents evidence questioning whether the broker knowingly misrepresented loan terms to induce reliance, which resulted in economic harm, satisfying the criteria for both fraud and negligent misrepresentation. In the context of Maine's Unfair Trade Practices Act (UTPA), the provision of false loan information could also be deemed an "unfair or deceptive" practice if it misleads consumers acting reasonably. The determination of whether a trade practice is deceptive is a factual question. A misrepresentation about loan terms is likely material and misleading, assuming reliance is justified. Regarding fiduciary duty, establishing such a relationship requires evidence of trust and a significant disparity in influence between the parties. Mere creditor-debtor or mortgagor-mortgagee relationships do not establish a fiduciary duty. The mortgage broker's relationship with the consumer is not inherently fiduciary without evidence of trust placement and influence disparity. The Darlings' claims of inexperience are insufficient on their own; however, they have presented evidence suggesting they placed trust in the broker based on his assurances, supporting a potential finding of a fiduciary relationship. The Darlings' reliance on a broker's assurances, despite their skepticism about the loan's terms, may support a finding of a fiduciary duty due to the broker's significant influence over their decision-making. The broker's experience in securing mortgage loans and his representations regarding the reliability of a contractor created a disparity in knowledge. In the case of Morris v. Resolution Trust Corp., a plaintiff's verdict was upheld based on the plaintiff's trust in a loan officer's reassurances, despite her expressed concerns. Similar circumstances are present with the Darlings, who, despite doubts upon reviewing the loan terms, placed their trust in the broker's superior understanding of the loan paperwork. This reliance raises questions about the justifiability of their trust, especially since they received proper disclosures at closing that contradicted the broker's claims about a "one percent loan." Additionally, they had the opportunity to review the documents and rescind the loan. Ms. Darling acknowledged understanding certain warnings about potential interest rate fluctuations in the loan documents at closing. Western Thrift argues for summary judgment based on these points, including the applicability of the parol evidence rule, which does not affect the dispute between the Darlings and Western Thrift according to legal precedent. The parol evidence rule is inapplicable in this case since the Darlings are not attempting to challenge the validity of the IndyMac mortgage or assert any prior agreements that alter its terms. Instead, the plaintiff seeks to present evidence of false and fraudulent representations made to induce the execution of the mortgage. The issue of justifiable reliance is a factual question, requiring the court to evaluate the Darlings' perception that their mortgage terms contradicted the broker's assurances regarding interest rate stability. The court must determine whether consumers aware of suspiciously favorable offers should be barred from legal action upon confirming their suspicions, as this could protect mortgage brokers from accountability for misleading representations. The question of malice, pertinent to claims for punitive damages, hinges on whether the conduct was driven by actual or implied malice, with precedents suggesting that misleading advice motivated by self-interest can establish grounds for such damages. The court retains broad discretion to assert supplemental jurisdiction over related claims under 28 U.S.C. 1367(a), allowing for a comprehensive adjudication of all claims within the same constitutional case, as supported by the Supreme Court's interpretation in Exxon Mobil Corp. v. Allapattah Services Inc. Section 1367(a) of the U.S. Code provides broad supplemental jurisdiction over claims related to a case in which a district court has original jurisdiction. The Court had original jurisdiction in this case due to federal questions arising from the Truth in Lending Act (TILA) claims. It can also exercise supplemental jurisdiction over related state law claims, even if the amount in controversy does not meet diversity requirements, as long as the federal and state claims share a common nucleus of operative fact. The justification for exercising this jurisdiction includes considerations of judicial economy, convenience, and fairness to litigants. The district court may decline supplemental jurisdiction under 28 U.S.C. 1367(c) if: 1) the claim involves a novel or complex state law issue; 2) the state claim predominates over the federal claim; 3) all original jurisdiction claims have been dismissed; or 4) there are other compelling reasons. The parties have not contested the continuation of supplemental jurisdiction, likely preferring resolution within the current action. The court possesses broad discretion in this matter and is likely to be upheld in its decision. It is recommended that the court retain supplemental jurisdiction to efficiently resolve the dispute within the ongoing civil action. The court recommends granting Western Thrift's motion for summary judgment in part, favoring the TILA claim, while denying the remainder of the motion. Parties have ten days to file objections to the magistrate judge's recommendations for de novo review, or they waive the right to appeal. Western did not assert a Rule 9(b) defense in its responses to the Darlings' amended complaints. Additionally, Western contends that the parol evidence rule prevents the introduction of evidence regarding Mr. Mikhail's alleged misrepresentations, a position the Court finds unmeritorious, aligning with the Magistrate Judge's ruling. The Law Court has established that a signed agreement contradicting prior oral statements does not preclude a fraud claim; parol evidence can demonstrate that a signed document does not reflect the parties' true intentions, particularly regarding fraudulent inducement. In a deposition, there is ambiguity in the Darlings' understanding of Mr. Mikhail's statements about their loan terms, particularly regarding whether the payment amount or interest rate would change. Despite the confusion, the Darlings have accepted Western's statement of material fact as true, negating further inquiry into that specific issue. Western also objects to the term "one percent loan," claiming vagueness. This term, however, is familiar to both parties but understood differently. For this ruling, the "one percent loan" refers to the Darlings' interpretation, which includes a fixed interest rate of one percent for the first year, followed by a variable rate not exceeding an increase of one-tenth of a percent per year, based on the March 3, 2005 Truth in Lending Act Disclosure Notice. Mikhail informed the Darlings about an option ARM with a start rate of one percent, which would only remain at that rate for one month. Western objects to the relevance and foundation of this statement but the Court overrules the objection, determining that the information is pertinent as it may support the Darlings' claim of justified reliance on Mikhail's representations. Maine law distinguishes between fraud that invalidates a contract and fraud actionable as deceit, as established in Kuperman v. Eiras. Rescission can occur without actual damages being proven. The Darlings' intentions regarding rescission remain unclear, preventing the court from deciding whether they must demonstrate pecuniary damages. The Darlings seek various forms of relief, including an order for Western to assume their obligations to IndyMac and to rescind the loan transaction, while retaining their property and $75,000 without any liabilities. Western contests the necessity of disclosures to the Darlings, arguing they are not creditors under the Truth in Lending Act (TILA), but the court finds no support for the claim that exemption from TILA absolves Western from adhering to state law against unfair or deceptive practices. Pinnacle Quest, which the Darlings aimed to join through mortgage refinancing, conducted seminars on investment opportunities. The closing involved only the Darlings and a representative from Yankee Title. Paul Mikhail, the mortgage broker, and IndyMac Bank are no longer defendants in the case. Western Thrift claims responsibility for Mikhail’s actions but denies any wrongdoing. The record does not clarify this responsibility. Additionally, the plaintiffs' statement of material facts began at paragraph 73, following the defendants' 72 paragraphs, leading to a dispute over the accuracy of paragraph numbering. Defendants seek to strike a sentence from paragraph 73 stating the plaintiffs' lack of sophistication in financial matters. Defendants' request to exclude a statement due to contradiction with prior deposition testimony is denied; the statement is omitted because it is deemed conclusory. Pinnacle Quest is identified as an entity that conducted seminars promoting investment opportunities. Western Thrift's objection to including Mikhail's statements to the Darlings, based on the parol evidence rule, is overruled. This evidence is not intended to modify the contract but to demonstrate potential misrepresentation regarding the contract's nature. Western Thrift contests Roxanne Darling's claim that only one loan was discussed, while Mikhail asserts multiple discussions. The objection to her affidavit is rejected as it does not clearly contradict her deposition testimony, except for one specific paragraph which is excluded. Western Thrift also argues that there are no damages and that the Darlings failed to mitigate them by refinancing. However, this argument mischaracterizes the record, and while there may be issues with damage mitigation, Western Thrift does not sufficiently justify entitlement to judgment as a matter of law.