Wells Fargo Bank, N.A. v. Burger et al
Filing
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ORDER GRANTING PLAINTIFF/COUNTCLAIM DEFENDANT WELLS FARGO BANK N.A.'S MOTION TO DISMISS COUNTERCLAIM re 27 . Signed by JUDGE J. MICHAEL SEABRIGHT on 9/23/13. (gls, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
WELLS FARGO BANK, N.A.,
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Plaintiff,
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vs.
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KIMBERLY L. BURGER; THE
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ASSOCIATION OF APARTMENT )
OWNERS OF PACIFIC SHORES;
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AND DOES 1-20,
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Defendants.
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_______________________________ )
KIMBERLY L. BURGER,
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Counterclaim Plaintiff, )
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vs.
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WELLS FARGO BANK, N.A.,
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Counterclaim Defendant. )
_______________________________ )
CIVIL NO. 12-00585 JMS-KSC
ORDER GRANTING
PLAINTIFF/COUNTERCLAIM
DEFENDANT WELLS FARGO BANK,
N.A.’S MOTION TO DISMISS
COUNTERCLAIM
ORDER GRANTING PLAINTIFF/COUNTERCLAIM DEFENDANT
WELLS FARGO BANK, N.A.’S MOTION TO DISMISS COUNTERCLAIM
I. INTRODUCTION
On June 27, 2012, Wells Fargo Bank, N.A. (“Wells Fargo”) filed a
Complaint to Foreclose in the Second Circuit Court of the State of Hawaii alleging
that Kimberly L. Burger (“Burger”) is in default on her mortgage on real property
located at 2219 South Kihei Road #B202, Kihei, Hawaii 96753 (the “subject
property”). Burger removed Wells Fargo’s Complaint to this court and filed a
Counterclaim asserting that Wells Fargo engaged in an unfair or deceptive act or
practice (“UDAP”) in violation of Hawaii Revised Statutes (“HRS”) § 480-2 when
it failed to comply with HRS § 667-17, which requires any attorney seeking to
foreclose on a residential property to submit an affirmation that verifies the
accuracy of the documents submitted.
Currently before the court is Wells Fargo’s Motion to Dismiss, which
argues that Burger cannot base a UDAP claim on a violation of HRS § 667-17.
Based on the following, the court agrees and GRANTS Wells Fargo’s Motion to
Dismiss.
II. BACKGROUND
On June 27, 2012, Wells Fargo filed a Complaint to Foreclose on the
subject property in the Second Circuit Court in the State of Hawaii. Doc. No. 1-1,
Burger Ex. A. The Complaint alleges that on September 21, 2006, Wells Fargo
and Burger entered into a mortgage agreement where Burger executed and
delivered an Adjustable Rate Note to Wells Fargo, which was secured by a
mortgage on the subject property. Id. ¶¶ 2, 7. On March 9, 2012, Burger allegedly
defaulted on the mortgage and Wells Fargo sought to foreclose. Id. ¶ 11. The
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Complaint seeks to foreclose the mortgage on the subject property and obtain other
just relief, including attorneys’ fees, costs, and expenses. Id. at 5.
On October 30, 2012, Burger removed the action to this court
pursuant to 28 U.S.C. §§ 1332, 1441, and 1446. Doc. No. 1, Burger’s Notice of
Removal.
On November 2, 2012, Burger filed a Counterclaim against Wells
Fargo alleging that Wells Fargo committed a UDAP by failing to comply with
HRS § 667-17. Doc. No. 4. Specifically, Burger asserts that HRS § 667-17
requires an attorney to submit an affirmation verifying the accuracy of the
documents submitted in a judicial foreclosure. Id. ¶ 11. Burger alleges that Wells
Fargo’s practice of filing a Complaint to Foreclose without an attorney affirmation
is likely to mislead reasonable consumers “into believing that [Wells Fargo] has
performed an initial review of the mortgage, note, chain of assignments, schedule
of payments, etc.” Id. ¶ 18. As a result of allegedly being misled by Wells Fargo’s
actions, Burger asserts that she suffered “financial damages, including but not
limited to attorneys fees and costs in defending this action, in an amount to be
determined at trial.” Id. at 4.
On January 15, 2013, Wells Fargo filed a Motion to Dismiss Burger’s
Counterclaim. Doc. No. 27-1. Burger filed an Opposition on July 9, 2013, Doc.
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No. 46; and Wells Fargo filed a Reply on July 29, 2013. Doc. No. 47. A hearing
was held on August 26, 2013. At the August 26, 2013 hearing, the court directed
the parties to submit supplemental briefing addressing whether a violation of HRS
§ 667-17 is in “trade or commerce” as required by HRS § 480-2. See Doc. No. 49.
Burger submitted her supplemental opposition on September 16, 2013, Doc. No.
54, and Wells Fargo submitted its supplemental reply on September 19, 2013.
Doc. No. 55.
III. STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss
a claim for “failure to state a claim upon which relief can be granted[.]” A Rule
12(b)(6) dismissal is proper when there is either a “‘lack of a cognizable legal
theory or the absence of sufficient facts alleged.’” UMG Recordings, Inc. v.
Shelter Capital Partners, LLC, 718 F.3d 1006, 1014 (9th Cir. 2013) (quoting
Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990)).
“To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)); see also Weber v. Dep’t of Veterans Affairs,
521 F.3d 1061, 1065 (9th Cir. 2008). This tenet -- that the court must accept as
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true all of the allegations contained in the complaint -- “is inapplicable to legal
conclusions.” Iqbal, 556 U.S. at 678. Accordingly, “[t]hreadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Id. (citing Twombly, 550 U.S. at 555); see also Starr v. Baca, 652 F.3d
1202, 1216 (9th Cir. 2011) (“[A]llegations in a complaint or counterclaim may not
simply recite the elements of a cause of action, but must contain sufficient
allegations of underlying facts to give fair notice and to enable the opposing party
to defend itself effectively.”).
Rather, “[a] claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing
Twombly, 550 U.S. at 556). In other words, “the factual allegations that are taken
as true must plausibly suggest an entitlement to relief, such that it is not unfair to
require the opposing party to be subjected to the expense of discovery and
continued litigation.” Starr, 652 F.3d at 1216. Factual allegations that only permit
the court to infer “the mere possibility of misconduct” do not show that the pleader
is entitled to relief as required by Rule 8. Iqbal, 556 U.S. at 679.
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IV. ANALYSIS
Burger bases her UDAP claim on an alleged violation of HRS § 66717, which provides in relevant part: “[a]ny attorney who files on behalf of a
mortgagee seeking to foreclose on a residential property under this part shall sign
and submit an affirmation that the attorney has verified the accuracy of the
documents submitted, under penalty of perjury and subject to applicable rules of
professional conduct.” For several reasons, this claim fails.
First, a threshold requirement for a UDAP claim is that the conduct at
issue be in “trade or commerce.” Specifically, HRS § 480-2 provides, in relevant
part: “[u]nfair methods of competition and unfair or deceptive acts or practices in
the conduct of any trade or commerce are unlawful.” HRS § 480-2(a) (emphasis
added). In Cieri v. Leticia Query Realty, Inc., the Hawaii Supreme Court
addressed the meaning of “trade or commerce” as used in HRS § 480-2, and found
persuasive a line of cases interpreting the phrase “trade or commerce” to mean acts
or practices perpetrated in a “business context.” 80 Haw. 54, 60-66, 905 P.2d 29,
35-41 (1995). In adopting this interpretation of HRS § 480-2’s “trade or
commerce” language, Cieri held:
[W]e similarly interpret HRS § 480-2 to require that, in
order to fall within the purview of HRS chapter 480, a
claim for alleged unfair and deceptive acts or practices
against [a defendant] must stem from a transaction
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involving “conduct in any trade or commerce,” similar to
the Massachusetts courts’ definition of the concept of
“business context.” The question whether a transaction
occurs within a “business context,” thus implicating the
applicability of HRS chapter 480 to an individual
[defendant], must be determined on a case-by-case basis
by an analysis of the transaction.
Id. at 65, 905 P.2d at 40. Cieri reasoned that if claims were not required to meet
the “threshold issue” of establishing conduct in trade or commerce, it would detract
from “HRS chapter 480’s focus on trade, commerce, and business.” Id. at 63, 905
P.2d at 38.
Applying this reasoning, courts have determined that steps taken in
pursuit of litigation are not in the business context. See Dalesandro v. Longs Drug
Stores Cal., Inc. 383 F. Supp. 2d 1244, 1250-51 (D. Haw. 2005) (“The activity the
parties were engaged in -- negotiating the production of documents for settlement
purposes prior to the inception of litigation -- occurred in preparation for litigation,
not in trade or commerce.”); State, Office of Atty. Gen. v. Shapiro & Fishman, LLP,
59 So.3d 353, 356 (Fla. Dist. Ct. App. 2011) (concluding that Attorney General’s
subpoena is more akin to conduct in the processing of legal claims, as opposed to
traditional notions of trade or commerce); Pursell v. First Am. Nat’l Bank, 937
S.W.2d 838, 842 (Tenn. 1996) (holding that a bank’s and company’s actions with
regard to repossession of collateral securing loan did not affect conduct of trade or
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commerce within meaning of Tennessee Consumer Protection Act); Begelfer v.
Najarian, 409 N.E.2d 167 (Mass. 1980) (finding that “defendants’ pursuit of their
contractual and legal remedies” was not engaging in “trade or commerce,” and the
demand for payment under a note did not constitute an “unfair or deceptive act”).
The court finds these cases persuasive and determines that Wells Fargo’s alleged
conduct does not fall within the scope of HRS § 480-2.
In opposition, Burger argues that Wells Fargo’s actions constitute
engaging in “trade or commerce” because seeking foreclosures is part of its
business. Doc. No. 54, Suppl. Opp’n at 1. Although Wells Fargo may certainly be
forced to seek foreclosures in the course of its business as mortgage lender and
mortgage loan servicer, as explained above, engaging in litigation is not “trade or
commerce” as contemplated by HRS § 480-2. Rather, Wells Fargo is in the
business of mortgage lending, and this judicial foreclosure falls outside of this
lending activity.
Burger also relies on In re Kekauoha-Alisa, 674 F.3d 1083, 1092 (9th
Cir. 2012), which affirmed the bankruptcy court’s determination that a failure to
properly announce the postponement of a nonjudicial foreclosure was a deceptive
act in violation of HRS § 480-2. In re Kekauoha-Alisa is distinguishable -- it did
not involve a judicial foreclosure as is at issue in this action, much less compliance
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with HRS § 667-17. Further, beyond the differences between non-judicial versus
judicial foreclosures, a failure to comply with postponement requirements is one of
the chapter 667 violations that the Hawaii Legislature has recognized as an unfair
or deceptive act or practice under HRS § 480-2. Specifically, HRS § 667-60 sets
forth a list of thirteen chapter 667 violations that constitute an unfair or deceptive
act or practice under § 480-2, and compliance with postponement requirements of
HRS § 667-28 is one of them. See HRS § 667-60(2). That a violation of § 667-17
is not included in this list of per se violations provides further support that the
Hawaii Legislature did not view the attorney affirmation as being in trade or
commerce. See Korean Buddhist Dae Won Sa Temple of Haw. v. Sullivan, 87
Haw. 217, 233, 953 P.2d 1315, 1331 (1998) (applying statutory canon of
“expressio unius est exclusio alterius, meaning that the mention of one thing
implies the exclusion of another,” to determine that roof was in violation of
applicable zoning laws); see also 2A Norman J. Singer & J.D. Shambie Singer,
Sutherland Statutes & Statutory Construction § 47:23 (7th ed. 2012) (“It has also
been assumed when the legislature expresses things through a list, the court
assumes that what is not listed is excluded.”). The court therefore finds that an
alleged violation of HRS § 667-17 is distinctly outside the “business context” -- the
decision not to have an attorney verify the submitted documents occurs in
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conjunction with the filing of a judicial foreclosure action, not in the “business
context” or “trade or commerce.”
Second, the court finds that Burger cannot establish that Wells Fargo
engaged in a practice likely to mislead consumers. See Tokuhisa v. Cutter Mgmt.
Co., 122 Haw. 181, 194-95, 223 P.3d 246, 259-60 (2009) (holding that a claimant
must show (1) a representation, omission, or practice that (2) is likely to mislead
consumers acting reasonably under the circumstances where (3) the representation,
omission, or practice is material). Wells Fargo filed this action to foreclose on
June 28, 2012, one day before § 667-17 became effective. See Doc. No. 1-1,
Burger Ex. A. As a result, Wells Fargo had no duty to file an affirmation at the
time of filing this action, and Burger similarly had no basis, as a consumer, to
expect that Wells Fargo would submit an affirmation when no law mandated such a
requirement. And although § 667-17 applies retroactively such that Wells Fargo
will need to comply with § 667-17 before obtaining relief, Wells Fargo’s actions
can hardly be seen as deceptive when (1) the complaint was filed the day before
§ 667-17 became effective; (2) HRS § 667-17 is silent as to when Wells Fargo
must file an affirmation; and (3) in any event, the court would not grant foreclosure
relief before Wells Fargo submits an attorney affirmation as now required by law.
See 2012 Haw. Sess. Laws, Act 182, § 67.
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For the foregoing reasons, Burger cannot assert a UDAP claim based
on HRS § 667-17. The court GRANTS Wells Fargo’s Motion to Dismiss.
When dismissing the complaints of pro se litigants, the court abides
by the principle that pro se litigants are “entitled to notice of the complaint’s
deficiencies and an opportunity to amend prior to dismissal of the action,”
“[u]nless it is absolutely clear that no amendment can cure the [complaint’s]
defect[s].”1 Lucas v. Dep’t of Corr., 66 F.3d 245, 248 (9th Cir. 1995); see also
Lopez v. Smith, 203 F.3d 1122, 1126 (9th Cir. 2000) (en banc).
Here, any amendment to Burger’s Counterclaim would be futile. No
amount of “artful pleading” can cure the fatal, glaring flaw in Burger’s argument -an alleged violation of HRS § 667-17 does not give rise to a UDAP claim under
HRS § 480-2. This dismissal is without leave to amend.
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Although the Counterclaim was filed by an attorney, Burger has since elected to
proceed pro se.
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V. CONCLUSION
For the foregoing reasons, the court GRANTS Wells Fargo’s Motion
to Dismiss without leave for Burger to amend.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, September 23, 2013.
/s/ J. Michael Seabright
J. Michael Seabright
United States District Judge
Kimberly L. Burger v. Wells Fargo Bank, N.A., Civ. No. 12-00585 JMS-KSC, Order Granting
Plaintiff/Counterclaim Defendant Wells Fargo Bank, N.A.’s Motion to Dismiss Counterclaim.
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