Kramer v. Ocwen Loan Servicing LLC et al
Filing
25
ORDER granting #13 Motion to Dismiss for Failure to State a Claim. Signed by Judge David G Campbell on 5/8/2014.(DGC, nvo)
1
WO
2
3
4
5
6
IN THE UNITED STATES DISTRICT COURT
7
FOR THE DISTRICT OF ARIZONA
8
9
James Kramer,
No. CV-13-01415-PHX-DGC
Plaintiff,
10
11
v.
12
ORDER
Ocwen Loan Servicing LLC, et al.,
13
Defendants.
14
15
Defendants Ocwen Loan Servicing, LLC (“Ocwen”) and Litton Loan Servicing,
16
LP (“Litton”) (collectively, “Defendants”) have filed a motion to dismiss. Doc. 13. The
17
motion is fully briefed and no party has requested oral argument. For the reasons set
18
forth below, the Court will grant the motion.
19
I.
Background.
20
On June 24, 2013, Plaintiff James Kramer instituted this action in Maricopa
21
County Superior Court asserting thirteen counts, including (1) violation of A.R.S. § 44-
22
1522 by conduct, (2) violation of A.R.S. § 44-1522 by omission, (3) breach of contract,
23
(4) violation of A.R.S. Title 31, Chapter 6.1, (5) negligent misrepresentation,
24
(6) fraudulent concealment, (7) failure to hire, train or supervise employees, (8) breach of
25
Consent Judgment, (9) constructive fraud, (10) equitable estoppel, (11) promissory
26
estoppel, (12) violation of the duty of good faith and fair dealing, and (13) common law
27
fraud. Defendants removed the case to federal court pursuant to 28 U.S.C. § 1441(b) on
28
July 15, 2013.
1
On or about July 11, 2005, Kramer obtained an interest-only variable-rate first and
2
second lien mortgage loan in the amount of $352,000, secured by a Deed of Trust
3
recorded against real property located at 2678 North 133rd Drive, Phoenix, Arizona (the
4
“Property”). Kramer alleges that Litton solicited him to engage in a loan modification
5
sometime in March 2009. Doc. 1 at 13. Litton allegedly knew the loan as modified was
6
unattainable and designed to fail. Kramer asserts that Litton made misrepresentations
7
and concealed material facts, including that Kramer would relinquish rights against the
8
entity that originally helped him obtain a subprime mortgage. Id. Without notice to
9
Kramer, the first lien mortgage servicing was transferred to Ocwen in March 2009. Id. at
10
14.
11
In December 2011, Kramer alleges that he was attracted to Ocwen’s website,
12
which offered rapid loan modifications. Id. After completing the online application,
13
Kramer eventually received a phone call from Ocwen declining his application because
14
Ocwen did not believe that Kramer’s business generated only $3,500 in personal income
15
per month. Id. Kramer received no assistance in preparing documents, was never offered
16
assistance of counsel, and his application was declined because Ocwen explained that he
17
“didn’t need [the modification].” Id. On June 12, 2012, Kramer alleges that he again
18
applied to Ocwen for a loan modification and was again refused without written
19
documentation. Id. at 15.
20
Kramer missed payments on the mortgage and was served with foreclosure
21
notices. Id. He alleges that he was not provided any alternative options. Id. With the
22
help of a real estate agent, Kramer put the property on the market, seeking to mitigate his
23
loss in a short sale. Id. He was forced to disclose severe structural damage and settling
24
due to subsurface weakness. Id. Nevertheless, Kramer asserts that he was able to find a
25
buyer willing to pay fair market value. Id. On May 1, 2013, Ocwen refused to permit the
26
sale, explaining that the offer “was not sufficient.” Id.
27
On May 15, 203, Ocwen hired a third party to perform a Broker’s Price Option
28
(“BPO”). Id. at 16. As a result of the BPO, Ocwen stated that it would only approve an
-2-
1
offer between $250,000 and $255,000. Id. On May 22, 2013, Kramer and his agent
2
negotiated a higher offer at $233,000 from a prospective buyer, but Ocwen refused to
3
consider it. On June 10, 2013, Ocwen advised Kramer that the requirement for a short
4
sale had risen to $260,000, which was “far above fair market value.” Id.
Kramer alleges that despite his efforts to pursue his rights under state and federal
5
6
law, Defendants now threaten to foreclose on the property. Id.
7
The Court notes that Kramer’s counsel has established a pattern of submitting near
8
identical complaints on behalf of his clients in state and federal court. Through this
9
method of “template pleading,” counsel drafts complaints that assert the same claims,
10
make the same arguments, and reflect minimal adjustments based on factual differences
11
between each client’s case. See, e.g., Raup v. Wells Fargo Bank, NA, No. CV-13-00137-
12
PHX-GMS, Doc. 1; Ripa v. Fed. Nat’l Mortg. Ass’n, No. CV-13-01612-PHX-DGC,
13
Doc. 1. Almost all of the claims asserted using counsel’s templates have been dismissed.
14
II.
Legal Standard.
15
When analyzing a complaint for failure to state a claim to relief under Rule
16
12(b)(6), the well-pled factual allegations are taken as true and construed in the light
17
most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th
18
Cir. 2009). Legal conclusions couched as factual allegations are not entitled to the
19
assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are
20
insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec.
21
Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). To avoid a Rule 12(b)(6) dismissal, the
22
complaint must plead enough facts to state a claim to relief that is plausible on its face.
23
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This plausibility standard “is not
24
akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a
25
defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at
26
556). “[W]here the well-pleaded facts do not permit the court to infer more than the mere
27
possibility of misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the
28
pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
-3-
1
III.
Analysis.
2
A.
Claims Relying on Consent Judgment.
3
Kramer attaches to his complaint and incorporates by reference a copy of a 2012
4
Consent Judgment entered into by Bank of America Corporation, Bank of America, N.A.,
5
BAC Home Loans Servicing, I.P f/k/a/ Countrywide Home Loans Servicing, LP,
6
Countrywide Home Loans, Inc., Countrywide Financial Corporation, Countrywide
7
Mortgage Ventures, LLC, Countrywide Bank, FSB, the United States, 49 states, and the
8
District of Columbia. Doc. 1 at 19, 28. Kramer also attaches a document containing
9
settlement terms intended to accompany the Consent Judgment. Doc. 1 at 37. The Court
10
will consider these documents on the motion to dismiss without converting it to a motion
11
for summary judgment because they are attached to the complaint and incorporated by
12
reference. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).
13
Defendants argue that the Consent Judgment cannot be enforced against them for
14
two reasons: Defendants were not parties to the Consent Judgment, and the Consent
15
Judgment can be enforced only by the United States District Court for the District of
16
Columbia. Doc. 13 at 3; Doc. 1 at 28, 32. Although Kramer relies heavily on the
17
Consent Judgment as a basis for his claims, he does not argue that the Consent Judgment
18
can actually be enforced against Defendants. Doc. 20 at 7. He argues that the judgment
19
“can be evidence as to the other counts including setting standards of care, addressing
20
prior actions and showing industry standards.” Id. Later in his brief, Kramer argues that
21
Defendants’ actions “violate the terms of the 2012 Consent Judgment as to conduct
22
remedies promised by Defendants.” Id. at 15. None of Kramer’s arguments rebut
23
Defendants’ assertion that the Consent Judgment cannot be enforced against them, and
24
the Court concludes that it cannot. The Court must dismiss Count 8 in its entirety and
25
Counts 1, 7, 9, 11 to the extent they rely on the Consent Judgment.
26
B.
Fraud Claims (Counts 1, 2, 5, 6, 9, 12).
27
Plaintiff has asserted several fraud-related claims including violations of Arizona’s
28
Consumer Fraud Act (A.R.S. § 44-1522) by conduct and omission, negligent
-4-
1
misrepresentation, fraudulent concealment, constructive fraud, and common law fraud.
2
See Doc. 1 at 19-23, 25. Although each of these claims has unique elements, they share
3
one common requirement – each must be pled with particularity as required by Rule 9(b).
4
See Silving v. Wells Fargo Bank, NA, 800 F. Supp. 2d 1055, 1075 (D. Ariz. 2011) (noting
5
that a plaintiff must plead a claim under Arizona’s Consumer Fraud Act with
6
particularity); Neilson v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101, 1141 (C.D.
7
Cal. 2003) (“It is well established in the Ninth Circuit that both claims for fraud and
8
negligent misrepresentation must meet Rule 9(b)’s particularity requirements.”); 389
9
Orange St. Partners v. Arnold, 179 F.3d 656, 663 (9th Cir. 1999) (requiring that a state
10
law claim for fraudulent concealment be pled with particularity under Rule 9(b)); Vess v.
11
Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (“It is established law, in
12
this circuit and elsewhere, that Rule 9(b)’s particularity requirement applies to state-law
13
causes of action.”).
14
Rule 9(b) imposes a heightened pleading standard for fraud claims: “In alleging
15
fraud . . . , a party must state with particularity the circumstances constituting fraud[.]”
16
Fed. R. Civ. P. 9(b). A plaintiff “must state the time, place, and specific content of the
17
false representations as well as the identities of the parties to the misrepresentation.”
18
Schreiber Distrib. Co. v. Serv-Well Furniture Co., Inc., 806 F.2d 1393, 1401 (9th Cir.
19
1986); see also Vess, 317 F.3d at 1106 (“Averments of fraud must be accompanied by the
20
who, what, where, and how of the misconduct charged.”). “[A] plaintiff must set forth
21
more than the neutral facts necessary to identify the transaction. The plaintiff must set
22
forth what is false or misleading about a statement, and why it is false.” Vess, 317 F.3d at
23
1106 (internal quotations omitted) (emphasis in original).
24
Kramer has failed to plead his fraud claims with particularity. Most of Kramer’s
25
fraud allegations refer generally to “Defendants” and do not specify the defendants to
26
which he is referring. Kramer’s complaint alleges that Litton contacted him and solicited
27
a loan modification that was unattainable and designed to fail, and which ultimately did
28
fail. Doc. 1 at 13; Doc. 20 at 10-11. The complaint also alleges that Litton “committed
-5-
1
misrepresentations and concealed material facts, including that the loan modification
2
included relinquishing rights as to illegal acts by Defendants.” Doc. 1 at 13. Elsewhere
3
in his complaint, Kramer alleges that Ocwen refused to cooperate in his attempts to
4
secure a loan modification and otherwise mitigate his losses. Id. at 14-18. But Kramer
5
fails to provide sufficient facts regarding the who, what, when, where, and how of the
6
alleged misconduct. Vess, 317 F.3d at 1016. Although Kramer’s pleadings occasionally
7
identify a specific defendant who is associated with a particular type of fraud, Kramer
8
fails to identify the person who made the alleged false statement, when or where it was
9
made, or why it was untrue or misleading at the time it was made. Yourish v. California
10
Amplifier, 191 F.3d 983, 993 (9th Cir. 1999). Kramer’s complaint appears to allege
11
generally that Defendants failed to deliver high-quality loan modification and loss
12
mitigation services as promised in their advertising and solicitations. It is this failure
13
Kramer believes gives rise to fraud liability. General allegations such as these do not
14
satisfy the pleading requirements of Rule 9(b).
15
Kramer’s complaint contains other fatal errors with respect to Count Nine. Under
16
Arizona law, a relationship “akin to a fiduciary relationship must exist” for a constructive
17
fraud cause of action to arise. McAlister v. Citibank, 829 P.2d 1253, 1261 (Ariz. Ct. App.
18
1992). Kramer appears to contend that such a relationship exists here, “arising from the
19
initial loan origination, the relationship between the parties, the parties joint venture at
20
avoiding foreclosure . . . , the Arizona statutes . . . [and] the 2012 Consent Judgment[.]”
21
Doc. 1 at 23. Kramer is incorrect. Neither Arizona law nor the Consent Judgment
22
provides that a fiduciary relationship exists between lenders and mortgagors. See Valley
23
Nat’l Bank of Phoenix v. Elect. Dist. No. 4, 367 P.2d 655, 662 (Ariz. 1961) (“[T]he
24
relationship between a Bank and an ordinary depositor, absent any special agreement, is
25
that of debtor and creditor.”); McAlister, 829 P.2d, 1253; Urias v. PCS Health Sys., 118
26
P.3d 29 (Ariz. Ct. App. 2005) (holding that a debtor/creditor relationship does not create
27
a fiduciary duty). Further, contractual relationships alone do not give rise to fiduciary
28
duties. Cook v. Orkin Exterminating Co., 258 P.3d 149, 152 (Ariz. Ct. App. 2011)
-6-
1
(“[C]ommercial transactions do not create a fiduciary relationship unless one party agrees
2
to serve in a fiduciary capacity.”). Kramer has not alleged that Defendants ever agreed to
3
serve in a fiduciary capacity. Counts 1, 2, 5, 6, 9, and 12 must be dismissed.
4
C.
Contract Claims (Count 3 and the Unnumbered Count).
5
Plaintiff asserts two contract claims: breach of contract and breach of the duty of
6
good faith and fair dealing. A breach of contract claim contains three elements: (1) the
7
existence of a contract, (2) its breach, and (3) resulting damages. Chartone, Inc. v.
8
Bernini, 83 P.3d 1103, 1111 (Ariz. Ct. App. 2004). Arizona law implies a duty of good
9
faith and fair dealing in every contract, which prohibits either party from acting to
10
“impair the right of the other to receive benefits which flow from their agreement or
11
contractual relationship.” Rawlings v. Apodaca, 726 P.2d 565, 569 (Ariz. 1986). Parties
12
may “breach [the] duty of good faith without actually breaching an express covenant in
13
the contract.” Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons Local
14
No. 395 Pension Trust Fund, 38 P.3d 12, 29 (Ariz. 2002).
15
Defendants argue that Kramer’s claim for breach of contract is meritless because
16
Kramer is the party in breach. Doc. 13 at 6. Defendants assert that Kramer was in
17
default of his loan because he failed to “repay the loan pursuant to the terms of the
18
parties’ agreements,” and did not obtain loss mitigation assistance from Defendants
19
because he “fail[ed] to timely return completed loss mitigation applications for
20
[Defendants’] consideration.” Id.; Doc. 22 at 5. Although it is generally true that the
21
party who first breaches a contract may not sue on the other party’s subsequent non-
22
performance, see QC Construction Products, LLC v. Cohill’s Building Specialties, Inc.,
23
423 F. Supp. 2d 1008, 1013 (D. Ariz. 2006) (citing Restatement (Second) of Contracts
24
§ 237 (1979)), mortgage agreements often secure rights for the borrower, such as a right
25
of redemption, that become operative upon default. Defendants’ argument that Kramer
26
defaulted on the mortgage and that he failed to secure a loan modification from Ocwen
27
does not necessarily dispose of the breach of contract claim.
28
Kramer’s complaint states:
-7-
1
The documents developed by the parties in the origination of
the loan and mortgage which are the subject of this litigation
were incorporated into a mortgage note, a deed of trust and
other contracts, and include promises as to loss mitigation,
loan modification, payment, collection, and foreclosure,
which both parties understood to be subject to modification as
required by economic circumstances.
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Doc. 1, at 20. This paragraph refers to the loan origination contract between the parties.
That contract, embodied in the Note and Deed of Trust, is the only contract specifically
identified in the complaint. Kramer does not explain, however, how the actions of
Defendants breached the Note and Deed of Trust. Indeed, Kramer makes reference to the
Deed of Trust only once in his complaint, and has neither attached a copy nor identified
any relevant sections. Kramer does not allege any particular breach of that contract, nor
does he allege any benefit under that contract that was impaired. Kramer does allege
generally that “Defendants” made false statements and concealed information from him,
but nothing in the Deed of Trust guarantees Kramer the right to receive truthful
information about the loan modification process. Kramer has failed to identify benefits
due under the loan origination contract or how Defendants impaired those benefits with
the requisite specificity.
He has also failed to state a claim that either Defendant
breached the contract of the duty of good faith and fair dealing with regard to the
contract. As such, the Court will dismiss both contract claims.
D.
Violation of A.R.S. Title 33 Chapter 6.1 (Count 4).
Count 4 asserts that Defendants violated “AR.S. (sic) Title 33 Chapter 6.1.”
Chapter 6.1 of Title 33 of the Arizona Revised Statutes contains several sections related
to Deeds of Trust. The chapter covers everything from appointing successor trustees to
the disposition of proceeds from a trustee’s sale. See A.R.S. § 33-801 et seq. Kramer
does not specify what section of Chapter 6.1 Defendants violated, but he contends in his
response that his complaint “referred to former A.R.S. § 33-807.01.” (Doc. 20 at 14).
Section 33-807.01 provides in relevant part:
28
-8-
1
For a property with a first deed of trust recorded on or after
January 1, 2003 through December 31, 2008, if the borrower
occupies the property as the borrower’s principal residence,
before a trustee may give notice of a trustee’s sale for the
property pursuant to section 33-808, the lender must attempt
to contact the borrower to explore options to avoid
foreclosure at least thirty days before the notice is recorded.
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
A.R.S. § 33-807.01(A) (repealed Jan. 1, 2014). The Court can find no allegations in the
complaint that clearly support a cause of action arising under this statute. Instead of
alleging facts demonstrating that the Defendants failed to contact him within thirty days
before notice was recorded, Kramer’s complaint cites Arizona case law stating that
“[b]anks are required to provide a foreclosure process which provides Plaintiffs with ‘not
[just] procedural, but [also] fundamental fairness,’” and concludes that “Defendants
herein failed to do so, in violation of Arizona statute and common law.” Doc. 1 at 21
(citing In re Krohn, 52 P.3d 774, 779 (Ariz. 2002)). Plaintiff has failed to state a claim
under Title 33, Chapter 6.1 of the Arizona Revised Statutes. Accordingly, Count 4 will
be dismissed.1
E.
Failure to Hire, Train, or Supervise (Count 7).
Arizona law does not provide a cause of action for failure to hire. See Burris v.
City of Phoenix, 875 P.2d 1340, 1348 (Ariz. Ct. App. 1993) (noting that “no state or
federal court has recognized the tort of wrongful failure to hire”). Kramer cites no case
law that would support such a claim on the facts of this case.
An employer’s liability for “negligent hiring, retention, or supervision of an
employee” depends on whether a court “first finds that the employee committed a tort.”
Kuehn v. Stanley, 91 P.3d 346, 352 (Ariz. Ct. App. 2004). Kramer does not allege in his
complaint that an employee of either Defendant committed a tort, nor how Defendants
25
26
27
28
1
To the extent Kramer advances a “show me the note” argument, courts have
routinely held that such argument lacks merit and that the foreclosing party is not
required to produce a physical copy of the original promissory note. See Dumont v.
HSBC Mortg. Corp., USA, No. CV-10-1106-PHX-MHM, 2010 WL 3023885, at *3 (D.
Ariz. Aug. 2, 2010); Diessner v. Mortg. Elec. Registration Sys., 618 F. Supp. 2d 1184,
1187-88 (D. Ariz. 2009).
-9-
1
were negligent in hiring, training, or supervising such an employee. He states in his
2
response that he “alleged that employees committed numerous torts” (Doc. 20 at 15), but
3
the Court cannot find any such allegation in the complaint (see Doc. 1 at 22). Plaintiff
4
has failed to state a claim for negligent hiring, retention, or supervision of an employee
5
and the Court will therefore dismiss Count 7.
6
F.
Equitable and Promissory Estoppel (Counts 10 and 11).
7
Equitable estoppel requires “an affirmative misrepresentation of a present fact or
8
state of facts and detrimental reliance by another thereon.” Tiffany Inc. v. W. M. K.
9
Transit Mix, Inc., 493 P.2d 1220, 1224 (Ariz. Ct. App. 1972). It is generally “available
10
only as a defense, while promissory estoppel can be used as a cause of action for
11
damages.” Id. Arizona courts have treated claims for equitable estoppel as claims for
12
promissory estoppel where plaintiffs have adequately alleged the elements of promissory
13
estoppel. Gorman v. Pima Cnty., 287 P.3d 800, 804 n.4 (Ariz. Ct. App. 2012). “The
14
critical distinction between the two is that equitable estoppel refers to reliance on a
15
misrepresentation of some present or past fact, whereas ‘promissory estoppel rests upon a
16
promise to do something in the future.’” Id. (internal citation omitted). Aside from that
17
difference, “promissory estoppel includes all elements of equitable estoppel.” Id.
18
Estoppel contains three elements: “(1) the party to be estopped commits acts
19
inconsistent with a position it later adopts; (2) reliance by the other party; and (3) injury
20
to the latter resulting from the former’s repudiation of its prior conduct.” Id. at 804-05.
21
Plaintiff alleges that he “relied and acted upon . . . false facts and concealment to his
22
detriment and was damaged thereby[.]” Doc. 1 at 24. Kramer’s complaint does not set
23
forth any factual allegations that demonstrate any inconsistent acts by Defendants. The
24
closest Kramer comes to alleging facts supporting estoppel is his assertion that
25
“Defendants promised full compliance with the [Consent Judgment], and Arizona statute
26
and common law, upon which promises Defendants should have foreseen [Kramer]
27
would rely[.]” Doc. 1 at 24. This statement is nothing more than an attempt to shoehorn
28
facts pled to support fraud claims into a claim for estoppel. Kramer has not identified
- 10 -
1
any inconsistent act by either Defendant. As such, Counts 10 and 11 will be dismissed.
2
IT IS ORDERED that Defendants’ Motion to Dismiss (Doc. 13) is granted.
3
Dated this 8th day of May, 2014.
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
- 11 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?