Warren et al v. Bank of America et al

Filing 10

ORDER granting 5 Motion to Dismiss. Signed by Judge B. Avant Edenfield on 5/24/2011. (loh)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
SAVANNAH DIVISION
MICHAEL S. WARREN, and JACK S.
WARREN,
Plaintiffs,
v.

4:11-cv-70

BANK OF AMERICA, and BAC HOME
LOANS SERVICING, LP FKA
COUNTRYWIDE HOME LOANS
SERVICING, LP,
Defendants.
ORDER
I. INTRODUCTION
Plaintiffs Michael S. Warren and Jack
S. Warren ("Plaintiffs") filed a complaint in
the Superior Court of Chatham County
against Defendants Bank of America, N.A.
and BAC Home Loans Servicing, LP
("Defendants"). See Doc. 1-2 at 5.
Plaintiffs allege that Defendants violated
various provisions of the Home Affordable
Modification Program ("HAMP") in Count
I. See id. at 6-8. In Count II, Plaintiffs
allege that Defendants are not entitled to
foreclose on Plaintiffs' property because
Defendants violated various regulations
promulgated under the National Housing
Act ("NHA"). See id. at 8-10. "Count III"
is a demand for declaratory or injunctive
See id. at 10-11.
Defendants
relief.
removed to this Court. See Doc. 1.
Defendants move to dismiss Plaintiffs'
complaint for failure to state a claim upon

which relief can be granted. See Doc. 5;
FED. R. Civ. P. 12(b)(6).
A brief overview of the HAMP is
necessary to understanding the facts of this
case.
During the economic crisis of 2008,
Congress passed the Emergency
Economic Stabilization Act of 2008
("EESA"), to "immediately provide
authority and facilities that the
Secretary of the Treasury can use to
restore liquidity and stability to the
financial system of the United
States." The statute directed the
Secretary to implement a plan to
minimize foreclosures. To that end,
the Department of Treasury, in
conjunction with other government
institutions, created the Making
Home Affordable Program. HAMP
is a component of this initiative.
Zoher v. Chase Home Fin., 2010 WL
4064798, at *2 (S.D. Fla. Oct. 15, 2010)
(internal citation omitted) (quoting 12
U.S.C. § 5201 et seq.)
The HAMP aims to financially assist
three to four million homeowners
who have defaulted on their
mortgages or who are in imminent
risk of default by reducing monthly
payments to sustainable levels.
The HAMP works by providing
financial incentives to participating
mortgage servicers to modify the
terms of eligible loans.
Marks v. Bank of Am., N.A., 2010 WL
2572988, at *5 (D. Ariz. June 22, 2010). To
participate in HAMP, mortgagees enter into

contracts called Servicer Participation
Agreements with the United States
Department of the Treasury.' See Zoher,
2010 WL 4064798, at *1. "When
considering modifications, participating
servicers are obliged to abide by guidelines
set forth by the Secretary of Treasury in the
Home Affordable Modification Program
Guidelines." See Ed. at *2 (citing U.S.
Dep't of the Treasury Guidelines (Mar 4,
2009), available at http ://rohrabacher.house.
gov/UploadedFiles/modification_program
guidelines.pdf (last visited 5/23/11)).

III. ANALYSIS
The parties' briefs are both exemplary
works of legal writing. While Defendants
lucidly make convincing arguments and
highlight pertinent precedent for the Court,
see Does. 5, 9, Plaintiffs responded late with
an almost incomprehensible defense of only
half of their allegations, see Doc. 8.
Defendants filed their motion to dismiss
on March 29, 2011. See Doc. 5. Local Rule
7.5 gives parties fourteen (14) days to
respond. Plaintiffs filed their response
twenty-three (23) days after Defendants
filed their motion. See Doc. 8. "Failure to
respond within the applicable time period
shall indicate that there is no opposition to a
motion." L.R. 7.5. Regarding Plaintiffs'
NHA allegations, the Court need not rely on
the Local Rules' presumption alone.
Plaintiffs' belated response failed to address
any of Defendants' arguments regarding
Plaintiffs' NHA claims. See Doc. 8.

II. STANDARD OF REVIEW
In considering a Federal Rule of Civil
Procedure 12(b)(6) motion, all facts in the
plaintiff's complaint "are to be accepted as
true and the court limits its consideration to
the pleadings and exhibits attached thereto."
GSW, Inc. v. Long Cnty., 999 F.2d 1508,
1510 (11th Cir. 1993). A complaint will not
be dismissed so long as it contains factual
allegations sufficient "to raise a right to
relief above the speculative level." Bell Ail.
Corp. v. Twombly, 550 U.S. 544, 555
(2007); see also Ashcroft v. Iqbal, 129 S. Ct.
1937, 1949 (2009) (claim must have "facial
plausibility"); Edwards v. Prime, Inc., 602
F.3d 1276, 1291 (11th Cir. 2010). However,
contrary to Plaintiffs' argument, see Doc. 8
at 2-3, "Twombly retired the Conley no-setof-facts test." Ashcroft, 129 S. Ct. at 1944.

A. Plaintiffs Cannot Enforce Any

Alleged Violation of HAMP
Guidelines
In Count I, Plaintiffs allege that
Defendants violated various provisions of
HAMP. Plaintiffs lack standing to assert
this claim as a breach of contract action and
HAMP created neither an express nor
implied private right of enforcement.

1. Plaintiffs lack standing to state a
breach of contract claim
Plaintiffs attempt to enforce the HAMP
Agreements between Defendants and the
United States Department of Treasury as a
third-party beneficiary. See Doc. 1-2 at 6-8.
But see Doc. 8 (Plaintiffs argue on page 6

1 Defendants' Servicer Participation Agreements

("HAMP Agreements") are available at
http ://www.treasury.gov/initiatives/financialstability/housing-programs/mha/Pages/default. aspx
(follow "Contracts & Agreements" hyperlink; then
follow each Defendant's hyperlink)
2

that "Defendant [sic] is not arguing a 3rd
party beneficiary status to HAMP," but then
expend two pages arguing Congress
intended HAMP to benefit them).

intended for his benefit. See Danjor, Inc. v.
Corp. Constr., Inc., 272 Ga. App. 695, 697
(2005).
The mere fact that he would benefit
incidentally from performance of the
agreement is not alone sufficient.
There must be a promise by the
promisor to the promisee to render
some performance to a third person,
and it must appear that both the
promisor and the promisee intended
that the third person should be the
beneficiary.

Plaintiffs referenced general HAMP
agreements in their complaint, but failed to
attach copies of the Defendants' contracts.
See Doc. 1-2 at 7. Ordinarily this might
require the Court to ignore such contracts in
ruling on Defendants' motion to dismiss.
See Wilchombe v. TeeVee Toons, Inc., 555
F.3d 949, 959 (11th Cir. 2009). But the
Court takes judicial notice of the
Defendants' HAMP Agreements' terms
because they are publicly available and their
contents are "capable of accurate and ready
determination by resort to sources whose
accuracy cannot reasonably be questioned."
See FED. R. EVID. 201; Cnty. of Santa Clara
v. Astra USA, Inc., 401 F. Supp. 2d 1022,
1024 (N.D. Cal. 2005). Therefore, the Court
may consider these contracts without
treating Defendants' motion as one for
summary judgment. See Garfield v. NDC
Health Corp., 466 F.3d 1255, 1260 n.2 (11th
Cir. 2006) (considering matters outside the
pleadings without converting motion to
summary judgment where documents were
public records).

Id. (quoting Rowe v. Akin & Flanders, Inc.,

240 Ga. App. 766, 768 (1999)). Generally,
"government contracts that benefit members
of the public are assumed to create
incidental beneficiaries `absent a clear intent
to the contrary. " Zoher v. Chase Home
Fin., 2010 WL 4064798, at *5 (S.D. Fla.
Oct. 15, 2010) (quoting Marks v. Bank of
Am., N.A., 2010 WL 2572988, at *3 (D.
Ariz. June 22, 2010)); see also Roberts v.
Cameron-Brown Co., 556 F.2d 356, 361-62
(5th Cir. 1977) (finding that a mortgagor
was "at most" an incidental third party
beneficiary of a contract between the
government
and
mortgagees);
RESTATEMENT (SECOND) OF CONTRACTS

"The question of whether, for standing
purposes, a non-party to a contract has a
legally enforceable right is a matter of state
law." AT&T Mobility, LLC v. Nat'l Ass'n
for Stock Car Auto Racing, Inc., 494 F.3d
1356, 1360 (11th Cir. 2007) (citing Miree v.
DeKalb Cnty., 433 U.S. 25, 28 (1977)).

§ 313 cmt. a ("government contracts often
benefit the public, but individual members
of the public are treated as incidental
beneficiaries unless a different intention is
manifested").
Every court that has examined whether
Congress intended to endow mortgagors
with third party beneficiary rights to enforce
HAMP has held it did not. See, e.g., Villa v.
Wells Fargo Bank, N.A., 2010 WL 935680,

Under Georgia law, a third party
beneficiary only has standing if it clearly
appears from the contract that it was
3

at *23 (S.D. Cal. Mar. 15, 2010); Marks,
2010 WL 2572988, at *2; Hoffman v. Bank
of Am., N.A., 2010 WL 2635773, at *34
(N.D. Cal. June 30, 2010). But see Reyes v.
Saxon Mortg. Servs., Inc., 2009 WL
3738177, at * (S.D. Cal. Nov. 5, 2009)
(finding third party beneficiary rights in
2009, but the same judge has since reversed
course and held that mortgagors lack
standing to enforce the HAMP, see Villa,
2010 WL 935680, at *7).

HAMP requirements such as the
evaluation of borrower eligibility.
Id. (citing Supplemental Directive 2009-01,
at 13-14, 19-21, 25-26 (Apr. 6, 2009),
available at https://www.hmpadmin.com/
portal/programs/docs/hampservicer/sd09O 1
.pdf; Supplemental Directive 2009-06 (Sept.
11, 2009) (last visited 5/23/11), available at
https://www.hmpadmin.com/portal/news/
docs/2009/hampupdate09 11 09.pdf) (last
visited 5/23/11) (internal citation and
quotation omitted).

The HAMP Agreements do not disclose
any clear intent to make all mortgagors
intended beneficiaries. Therefore, Plaintiffs
are mere incidental beneficiaries and lack
standing to enforce the HAMP Agreements
on a breach of contract theory.

Congress's delegation of compliance
authority to Freddie Mac undermines any
argument that it also intended to deputize
mortgagors as private attorneys general to
enforce the HAMP. See Marks, 2010 WL
2572988, at *6.

2. No private right of action exists
under HAMP

"[T]here is [also] no implied right of
action under HAMP." Zoher, 2010 WL
4064798, at *3

"HAMP does not expressly create a
cause of action." Zoher, 2010 WL 4064798,
at *3 Instead, Congress delegated
enforcement authority to Freddie Mac. See
Marks, 2010 WL2572988, at *6 (citing U.S.
Dep't of Treasury, Supplemental Directive
2009-08, at 4 (Nov. 3, 2009), available at
https://www.hmpadmin.com/portal/news/
docs/2009/hampupdate 11 0309a.pdf
(last
visited 5/23/11)).

In determining whether a private
remedy is implicit in a statute not
expressly providing one, several
factors are relevant. First, is the
plaintiff one of the class for whose
especial benefit the statute was
enacted that is, does the statute
create a federal right in favor of the
plaintiff? Second, is there any
indication of legislative intent,
explicit or implicit, either to create
such a remedy or to deny one?
Third, is it consistent with the
underlying purposes of the
legislative scheme to imply such a
remedy for the plaintiff? And
finally, is the cause of action one
traditionally relegated to state law, in

The HAMP requires mortgagees to
collect, retain, and transmit
mortgagor and property data to
Freddie Mac in order to ensure
compliance with the program. As
the compliance officer, Freddie Mac
is charged with conducting
independent compliance assessments
including evaluation of documented
evidence to confirm adherence . . . to
4

an area basically the concern of the
States, so that it would be
inappropriate to infer a cause of
action based solely on federal law?

provision of one method of enforcing a
substantive rule suggests that Congress
intended to preclude others." Alexander v.
Sandoval, 532 U.S. 275, 290 (2001).

Cort v. Ash, 422 U.S. 66, 78 (1975) (internal
quotation and citation omitted). But see
Transamerica Mortg. Advisors, Inc. v.
Lewis, 444 U.S. 11, 23-24 (1979) (holding
that all four factors are not entitled to equal
weight and that "[flhe central inquiry
remains whether Congress intended to
create, either expressly or by implication, a
private cause of action").

"Next, [Plaintiffs'] proposed cause of
action would not further the underlying
legislative scheme." Marks, 2010 WL
2572988, at *7
Finding an implied private right of
action for mortgagors would
discourage servicers from
participating in the program because
they would be exposed to significant
litigation expenses. Moreover, by
creating a compliance vehicle
through Freddie Mac and by
including reporting requirements,
"the HAMP Guidelines already
designated a scheme to correct fl any
mortgagee wrongdoing."

There is no implied right of action to
enforce EESA or HAMP. First, "EESA was
not passed for the 'especial benefit' of
homeowners at risk of foreclosure; rather,
the statute was designed to 'address largescale economic phenomena affecting not
only [distressed] homeowners, but also
financial institutions and homeowners at
large." Zoher, 2010 WL 4064798, at *3
(quoting Marks, 2010 WL 2572988, at *6).
"The economic stimulus effort attempts to
promote the welfare of foreclosure parties
generally, but it does not connote the power
to delay foreclosure." Marks, 2010 WL
2572988, at *6.

Zoher, 2010 WL 4064798, at *4 (quoting
Marks, 2010 WL 2572988, at *7).
"Finally, controversies involving real
property and contract claims are generally
relegated to state law." Id. (internal
quotation omitted); see also Roberts v.
Cameron-Brown Co., 556 F.2d 356, 361-62
(5th Cir. 1977) ("[Mortgage foreclosure has
traditionally been a matter for state courts
and state law.").

"Second, there was no legislative intent
to create a cause of action." Zoher, 2010
WL 4064798, at *3 "[Legislative history
indicates that the right to initiate a cause of
action lies with the Secretary via the
Administrative Procedure Act." Marks,
2010 WL 2572988, at *7
Further,
Congress's delegation of exclusive
enforcement authority to Freddie Mac belies
any intent to allow such an implied cause of
action.
See id. at *6.
"The express

Neither EESA nor HAMP provide a
private cause of action. Defendants' motion
to dismiss, see Doc. 5, is GRANTED with
respect to Count I.
B. Plaintiffs failed to sufficiently
allege a violation of the NHA
It is also doubtful that a private right of
action exists for individual mortgagors to
5

enforce NHA regulations. See, e.g., Roberts
at 361 ("No evidence exists demonstrating
that Congress intended to create a private
cause of action under the National Housing
Act."); see also Deubert v. Gulf Fed. Say.
Bank, 820 F.2d 754, 758-59 (5th Cir. 1987)
("Our examination of the Cort factors leads
us to conclude that no private cause of
action can be implied from the National
Housing Act."); Moses v. Banco Mortg. Co.,
778 F.2d 267, 272 n.2 (5th Cir. 1985)
(holding that no implied private right of
action exists under the NHA and noting that
"[t]he District of Columbia, First, Sixth and
Ninth Circuits have held that the Housing
Act and regulations promulgated thereunder
do not satisfy the four-part Cort test, and
thus have refused to create a right of action
for private parties who wish to sue to
enforce
the
statute
or regulations
promulgated
thereunder")
(citations
omitted).

AU. Corp. v. Twombly, 550 U.S. 544, 555
(2007)). "A pleading that offers 'labels and
conclusions' or 'a formulaic recitation of the
elements of a cause of action will not do.'
Nor does a complaint suffice if it tenders
'naked assertion[s]' devoid of 'further
factual enhancement. "'
Id. (citation
omitted).
Plaintiffs' complaint includes only two
specific factual allegations: (1) Plaintiffs
received a letter dated December 29, 2010,
by which the Defendants notified Plaintiffs
of their intent to foreclose; and (2) a
foreclosure sale was set for February 1,
2011. See Doc. 1-2 at 6. Plaintiffs do not
allege a property address, a loan number, a
loan agreement, that a foreclosure occurred,
or any specific facts indicating how
Defendants violated NHA regulations. See
Doc. 1-2at5-11.
Plaintiffs complaint does not "state a
claim to relief that is plausible on its face."
Twombly, 550 U.S. at 570. Defendants'
motion to dismiss, see Doc. 5, is
GRANTED with respect to Count II.

Some courts have, however, allowed
plaintiffs to assert non-compliance with
NHA regulations as an affirmative defense
to foreclosure. See, e.g., Wells Fargo Home
Mortg., Inc. v. Neal, 922 A.2d 538, 551
(Md. 2007); Lacy-McKinney v. Taylor Bean
& Whitaker Mortg. Corp., 937 N.E.2d 853,
864 (Ind. Ct. App. 2010). Georgia courts
have yet to rule on the issue.

C. Plaintiffs' Prayers for Declaratory
or Iniunctive Relief are Dismissed
Plaintiffs separately plead their prayers
for relief as "Count III." Because Plaintiffs
failed to sufficiently plead the substance of
any claim against Defendants, they are not
entitled to any type of relief. "Count III" is
DISMISSED.

But the Court need not reach either of
these issues because Plaintiffs have failed to
sufficiently plead this Count. See Ashcroft
v. Iqbal, 129 S. Ct. 1937, 1949 (2009).
Federal Rule of Civil Procedure Rule 8
"does not require 'detailed factual
allegations,' but it demands more than an
unadorned,
the-defendant-unlawfullyharmed-me accusation." Id. (quoting Bell
6

IV. CONCLUSION
Defendants' motion to dismiss, see Doc.
5, is GRANTED. Plaintiffs' case is
DISMISSED.

This 24th day of May 2011.

H, AVANT
UNITE.. STATES DISTRICT COURT

SOUTHERN DISTRICT OF GEORGIA

7