Mosquea et al v. Bank of America, N.A.
Filing
12
ORDER granting in part and denying in part 9 --motion to dismiss. Signed by Judge Steven D. Merryday on 2/1/2018. (BK)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
GIL A. MOSQUEA and
DIGNA M. MOSQUEA,
Plaintiffs,
v.
CASE NO. 8:17-cv-2551-T-23TGW
BANK OF AMERICA, N.A.,
Defendant.
____________________________________/
ORDER
Almost a decade ago, the Treasury Department introduced the Home
Affordable Modification Program, which required a participating bank to “use
reasonable efforts” to modify the mortgage of a person in default or reasonably likely
to default. The United States agreed to compensate the bank for part of the loss
attributable to each modification. (Complaints at ¶¶ 10–11) Under the program, an
eligible mortgagor agreed to pay a reduced note for a “trial period” of three months;
if the mortgagor paid each month, the modification became permanent. (Complaints
at ¶ 12) Bank of America participated in the program and received tens of thousands
of requests for modification.
Between 2009 and 2012, hundreds (or more) of mortgagors sued Bank of
America for allegedly failing to diligently process the mortgagors’ requests for
modification. (Complaints at ¶ 31) Also, many of the mortgagors alleged that Bank
of America misrepresented or failed to disclose important information about the
program. The Judicial Panel on Multi-District Litigation centralized the actions in In
re: Bank of America Home Affordable Modification Program (HAMP) Contract Litigation
(1:10-md-2193-RWZ) (D. Mass. Oct. 12, 2010) (the MDL).
A year after the MDL began, a relator sued Bank of America in the Eastern
District of New York and alleged a scheme to defraud the United States. United
States ex rel. Gregory Mackler v. Bank of America, N.A. (1:11-cv-3270-SLT) (E.D.N.Y.
July 7, 2011). The complaint, which remained under seal until February 24, 2012,
alleged that Bank of America misled borrowers about their eligibility for the program
and about the status of their loan-modification requests. Later in 2012, the United
States intervened and voluntarily dismissed the action because of a settlement with
Bank of America.
Between October 30, 2017, and November 3, 2017, more than seventy
plaintiffs sued Bank of America in separate actions in the Middle District of Florida
and alleged common law fraud. Although differing in minor respects, the
complaint — which copy swaths from the qui tam complaint — appear materially
identical. Each complaint alleges four misrepresentations or omissions between 2009
and 2012: First, Bank of America failed to mention that a “reasonably foreseeable”
danger of default might qualify a mortgagor for modification; second, Bank of
America stated that the mortgagor failed to provide Bank of America with the
documents necessary to complete the modification; third, Bank of America orally
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told the mortgagor that Bank of America approved the requested modification; and
fourth, Bank of America charged a “fraudulent” inspection fee. This order describes
the respective allegations as the foreseeable-default claim, the document claim, the
oral-approval claim, and the inspection-fee claim.
Moving to dismiss the actions under Rule 12(b)(6), Federal Rules of Civil
Procedure, Bank of America argues that the four-year fraud limitation, the “banking
statute of frauds,” and the economic-loss rule bar the claims. Also, Bank of America
argues that the claims violate Rule 9(b), which requires a plaintiff to allege “with
particularity the circumstances constituting fraud.” Because the complaints appear
materially identical and because the motions assert the same arguments, this order
resolves the motion to dismiss in each action.1
DISCUSSION
I. The applicable limitation
Section 95.11(3)(j), Florida Statutes, provides a four-year limitation for fraud.
Under Section 95.031(2)(a), the time within which to sue begins when the plaintiff
discovers the fraud or reasonably should have discovered the fraud through due
diligence. A claim warrants dismissal only if the expiration of the limitation is
“apparent from the face of the complaint.” La Grasta v. First Union Secs., Inc.,
1
This order applies to Gonzalez, 5:17-cv-519; Varela-Pietri, 8:17-cv-2534; Salazar, 8:17-cv2535; Diaz, 8:17-cv-2537; Rostgaard, 8:17-cv-2538; Mosquea, 8:17-cv-2551; Peralta, 8:17-cv-2580;
Rodriguez, 8:17-cv-2583; Ruiz, 8:17-cv-2586; Santos, 8:17-cv-2588; Acosta, 8:17-cv-2592; Blanco, 8:17cv-2593; Garcia, 8:17-cv-2602; Zalazar, 8:17-cv-2603; Perez, 8:17-cv-2623; Moncada, 8:17-cv-2625;
Espinel, 8:17-cv-2628; Ocampo, 8:17-cv-2631; Carmenates, 8:17-cv-2635.
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358 F.3d 840, 845 (11th Cir. 2004). Determining when a plaintiff reasonably should
have discovered fraud often requires fact-finding. Puchner v. Bache Halsey Stuart, Inc.,
553 So. 2d 216, 217 (Fla. 3d DCA 1989) (Ferguson, J.) (collecting decisions).
Asserting without citation to authority that this order “can take judicial
notice” of the “HAMP Supplemental Directive” (Motions at pp. 9–10), Bank of
America argues that the Treasury Department’s publication of the “Supplemental
Directive” permitted the plaintiffs “to discover [] for [them]selves” the program’s
eligibility requirements. (Motions at p. 10) But an order resolving a motion to
dismiss typically evaluates only the complaint and an “instrument” that is attached to
the complaint or to the motion to dismiss, that is central to the plaintiff ’s claim, and
that is indisputably authentic. Horsley v. Feldt, 304 F.3d 1125, 1133–35 (11th Cir.
2002). Neither alleged in, nor attached to, a complaint or a motion, the
“Supplemental Directive” warrants no consideration at this moment.2
Also, the decisive and disputed fact in this instance is not the existence of the
document or the details or truth or accuracy of the document’s content but the effect,
if any, of the “Supplemental Directive” in notifying the plaintiffs about Bank of
America’s alleged misrepresentation and consequently triggering the applicable
limitation. Nothing in the complaints suggests that Bank of America directed the
plaintiffs’ attention to the Treasury Department’s website, nothing in the complaints
2
A footnote in Bank of America’s motions links to the document, which is hosted on the
website “hmpadmin.com.” The website describes itself as an “administrative website for servicers.”
“Servicers” means banks, not consumers.
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alleges a basis to impute to every mortgagor knowledge of the content of the
“Supplemental Directive,” and nothing in the complaints shows that, even if directed
to the website, a reasonably diligent mortgagor would locate the “Supplemental
Directive” on the Treasury Department’s website (for example, nothing in the
complaints shows the prominence or obscurity of the document on the website). In
this circumstance, the effect of the “Supplemental Directive” is not a subject for
judicial notice.
Additionally, a review of the “Supplemental Directive” establishes no
reasonable expectation by Bank of America that a mortgagor will read and
comprehend the document. In fact, the second page of the “Supplemental Directive”
— a lengthy document replete with financial and legal jargon but lacking a
plain-and-simple summary to aid the understanding of a mortgagor — states that the
Treasury Department published the document to “help servicers implement” the
program. “Servicers” are banking professionals and not unsophisticated mortgagors.
In sum, the “Supplemental Directive” fails at this time for several reasons to establish
the expiration of the fraud limitation.
Citing Westchester Corp. v. Peat, Marwick, Mitchell & Co., 626 F.2d 1212
(5th Cir. 1980), which resolves a limitation dispute by summary judgment, Bank of
America argues that “other borrowers [] managed to” sue Bank of America several
years ago and that the plaintiffs “could have done likewise.” (Motions at p. 10)
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Although suggesting some tardiness, the pendency of the MDL is not equivalent to a
bar by the applicable limitation.
In several actions, the limitation bars the inspection-fee claim. A reasonably
diligent mortgagor regularly reviews his statements to confirm that a bank charged no
improper fee. If the review reveals an impermissible charge, the reasonably diligent
mortgagor inquires promptly about the charge rather than waiting years to sue. In
nine actions, the plaintiffs fail to allege that the bank charged an inspection fee after
2012; the four-year limitation bars the inspection-fee claim in these actions.3 In four
actions, the plaintiffs allege that Bank of America last charged an inspection fee in
2013; a limitation might bar these claims, but the plaintiffs’ failure to allege the day of
the fee precludes that determination.4 In the remaining actions, the four-year
limitation appears not to bar the inspection-fee claim.
II. “Banking statute of frauds”
Section 687.0304, Florida Statutes, requires that a signed and written
document evidence an agreement “to lend or forbear repayment of money, goods, or
things in action, to otherwise extend credit, or to make any other financial
accommodation.” A debtor cannot successfully sue a creditor over a credit
3
8:17-cv-2635, Doc. 1 at ¶ 52 (no fee after 2010); 8:17-cv-2631, Doc. 1 at ¶ 52 (no fee after
2010); 8:17-cv-2602, Doc. 1 at ¶ 53 (no fee after 2010); 8:17-cv-2592, Doc. 1 at ¶ 52 (no fee after
2010); 8:17-cv-2588, Doc. 1 at ¶ 52 (no fee after 2012); 8:17-cv-2583, Doc. 1 at ¶ 52 (no fee after
2010); 8:17-cv-2580, Doc. 1 at ¶ 52 (no fee after 2011); 8:17-cv-2534, Doc. 1 at ¶ 52 (no fee after
2012); 8:17-cv-2551, Doc. 1 at ¶ 52 (no fee after 2010).
4
8:17-cv-2628; 8:17-cv-2537; 8:17-cv-2586; 8:17-cv-2623.
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agreement absent the signed and written document. In addition to precluding an
action for breach of contract, Section 687.0304 bars a fraud claim based on a
creditor’s representation that the creditor will accommodate a debtor’s inability to
pay a debt in accord with the agreed schedule. See, e.g., Coral Reef Land Dev., LLC v.
Duke Realty Ltd. P’ship, 45 So. 3d 897 (Fla. 3d DCA 2010) (Salter, J.); 940 Lincoln
Road Assocs., LLC v. 940 Lincoln Road Enter., Inc., --- So. 3d ---, 2017 WL 6598582
(Fla. 3d DCA Dec. 27, 2017) (Scales, J.).
Bank of America argues (Motions at pp. 6–8) that the statute of frauds bars all
four claims, and the plaintiffs fail to respond to Bank of America’s argument. In this
instance, only the oral-approval claim appears an attempt to enforce an oral credit
agreement.5 The remaining claims appear based on a duty other than under an oral
credit agreement. For example, the plaintiffs infer fraud from Bank of America’s
charging an inspection fee purportedly prohibited by a Department of Housing and
Urban Development guideline. (Complaints at ¶¶ 70–73)
III. Economic-loss rule
Bank of America argues (Motions at pp. 10–12) that the economic-loss rule
bars a fraud claim resulting from the same facts as a breach-of-contract claim. But
Tiara Condo. Ass’n Inc. v. Marsh & McLennan Co., Inc., 110 So. 3d 399 (Fla. 2013), finds
the economic-loss rule inapplicable to a tort action based on a purported
5
Also, no well-pleaded facts substantiate the conclusion that each approval was false.
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misrepresentation or omission attendant to the formation or negotiation of a contract.
See Tiara Condo. Ass’n, 110 So. 3d at 412–14 (Canady, J., dissenting) (explaining that
Tiara Condo Association effectively extinguishes the distinction under Florida law
between contract and tort).
IV. Rule 9(b)
To state a claim for fraud, a plaintiff must plead facts sufficient to show that
the defendant knowingly misrepresented or omitted a material fact, that the
defendant intended the plaintiff’s reliance on the misstatement or omission, that the
plaintiff reasonably relied on the misstatement or omission, and that the plaintiff
suffered consequent harm. Lance v. Wade, 457 So. 2d 1008, 1011 (Fla. 1984)
(describing the elements of fraud). Except for the foreseeable-default claim, which
satisfies Rule 9(b), the complaints fail to plead with particularity facts that
substantiate the fraud claims.
A. Foreseeable-default claim
Bank of America allegedly misrepresented to the plaintiffs that a modification
requires a default and “advised [the plaintiffs] to refrain from making [] regular
mortgage payments.” (Complaints at ¶ 37) In fact, either a default or a “reasonably
foreseeable” likelihood of default allegedly qualifies a mortgagor for a modification.
(Complaints at ¶ 37) Each complaint alleges the name of the Bank of America
employee who omitted to mention the foreseeable-default qualification and the day
on which the employee failed to disclose that fact. Allegedly relying on Bank of
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America’s statements, the plaintiffs purportedly “refrained from making their regular
mortgage payments.” (Complaints at ¶ 39)
Without citing authority that permits considering the “Supplemental
Directive” in resolving a motion to dismiss, Bank of America again mentions the
“Supplemental Directive” and argues that “HAMP’s requirements were public
knowledge.”6 (Motions at p. 13 (italics omitted)) Although the evidence might show
the unreasonableness of the plaintiffs’ reliance on Bank of America’s purported
misrepresentation, the plaintiffs state a claim based on Bank of America’s omitting to
mention that a reasonably foreseeable likelihood of default might qualify a mortgagor
for a modification. Also, Bank of America argues (Motions at p. 13) that the
plaintiffs fail to plead damages, but the plaintiffs allege, for example, the loss of home
equity.7 (Complaints at ¶ 39)
B. Document claim
After the plaintiffs applied for a modification, Bank of America allegedly
told the plaintiffs that the application “was stale” and requested that the plaintiffs
apply again. (Complaints at ¶ 41) The plaintiffs allege the conclusion that “these
representations were false” but allege no well-pleaded and specific facts to show the
6
From the other side of its mouth, Bank of America argues that it owed no duty to disclose
accurately and completely the loan-modification requirements. (Motions at pp. 14–15)
7
Bank of America correctly observes that a mortgagor in jeopardy of default likely would
lose home equity no matter what Bank of America said (or failed to say), but that damages argument
requires evidence.
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falsity of Bank of America’s statements. See United States ex rel. Clausen v. Lab. Corp.
of America, Inc., 290 F.3d 1301, 1313 (11th Cir. 2002) (“If Rule 9(b) is to carry any
water, it must mean that an essential allegation and circumstance of fraudulent
conduct cannot be alleged in such [a] conclusory fashion.”). To substantiate the
conclusory allegation of falsity, the plaintiffs append to, and cite in, the complaints
several affidavits from an unrelated action. In the affidavits, Bank of America
employees discuss generally the bank’s purported paperwork practices, but the
affidavits say nothing specifically about the plaintiffs’ applications. Lacking
well-pleaded and specific facts that show the falsity of Bank of America’s
representations, the document claim violates Rule 9(b)’s requirement that the
plaintiffs allege “with particularity the circumstances constituting fraud.”8
C. Inspection-fee claim
Although difficult to understand, the complaints appear to allege that Bank
of America defrauded the plaintiffs by charging an inspection fee prohibited by the
Department of Housing and Urban Development’s guidelines. (Complaints at ¶¶ 52,
53, 70–74) The plaintiffs offer no explanation how an inspection fee constitutes a
“statement” or “omission,” how an inspection fee induces reliance, and how a
person reasonably relies on an inspection fee. Also, the plaintiffs fail to identify with
particularity the fraudulent charges (for example, the complaints allege neither the
8
Also, most of the complaints fail to identify the employee who misrepresented the status of
the plaintiffs’ documents, and several complaints fail to identify the day of the misrepresentation.
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days nor the amounts of the improper fees).9 See, e.g., Burgess v. Religious Tech. Ctr.,
Inc., 600 Fed.Appx. 657 (11th Cir. Sept. 2, 2016) (affirming the dismissal of a
complaint that failed to allege the day of the purported misrepresentations).
V. Preemption
Finally, Bank of America argues that the fraud claims amount to an
“impermissible attempt to enforce HAMP guidelines.” (Motions at pp. 24–25) In
Miller v. Chase Home Fin., LLC, 677 F.3d 1113 (11th Cir. 2012), the plaintiff sued a
bank for failing to approve a requested modification to which the plaintiff perceived
an entitlement under the program. Miller holds that Congress conferred through the
program no private right to sue a bank for allegedly violating the program’s
requirements. 677 F.3d at 1116. In these actions, the foreseeable-default claim
alleges not that Bank of America violated the program’s requirements but that Bank
of America omitted to mention a material fact to the plaintiffs. Bank of America’s
argument fails to mention preemption, but the persuasive weight of authority
confirms no preemption by the program of a state-law fraud claim. See, e.g., Wigod v.
Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) (Hamilton, J.); Mathis v.
Nationstar Mortg., Ltd., 2012 WL 6162233 (S.D. Ala. Dec. 11, 2012) (Steele, C.J.).
9
To the extent the plaintiffs allege that Bank of America “fraudulently applied” a trial
payment to an inspection fee, no well-pleaded and specific facts support that allegation.
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CONCLUSION
Each motion to dismiss is GRANTED-IN-PART and DENIED-IN-PART.
Section 687.0304 bars each oral-approval claim. Also, each document claim violates
Rule 9(b)’s particularity requirement, and each inspection-fee claim violates both
Rules 8(a) and 9(b). Each plaintiff states a claim based on Bank of America’s
omitting to inform the plaintiff that a reasonably foreseeable likelihood of default
qualifies a mortgagor for a modification.10
ORDERED in Tampa, Florida, on February 1, 2018.
10
The plaintiffs originally sued in one action, 8:17-cv-1534, but the presiding judge severed
the claims and required the plaintiffs to sue separately. Before the severance, Bank of America
moved to dismiss under Rule 12(b)(6), and the plaintiffs amended the complaint. Consequently the
complaints discussed in this order, which differ materially from the amended complaint in 8:17-cv1534, represent the plaintiffs’ second attempt to cure the defects identified by Bank of America. The
plaintiffs, who neither move for leave to amend nor request in the responses leave to amend, may
not attempt a third time to cure the pleading defects.
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