Fountain et al v. JPMorgan Chase Bank, N.A.
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT re: 22 . Signed by JUDGE SUSAN OKI MOLLWAY on 5/24/2017. (afc)"Defendants' motion to dismiss is granted without a hearing. Gi ven Plaintiffs' second motion for leave to file a Second Amended Complaint, the Clerk of Court shall refrain from closing this case at this time." CERTIFICATE OF SERVICEParticipants registered to receive el ectronic 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
ROSITA FOUNTAIN et al.,
JP MORGAN CHASE BANK, N.A.;
JOHN DOES 1-50; JANE DOES 150; DOE PARTNERSHIPS 1-50;
DOE CORPORATIONS 1-50; DOE
ENTITIES 1-50; AND DOE
GOVERNMENTAL UNITES 1-50,
CIVIL NO. 15-00119 SOM/RLP
ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS PLAINTIFF’S
FIRST AMENDED COMPLAINT
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS PLAINTIFF’S FIRST
Defendant JP Morgan Chase Bank, N.A., initiated, then
voluntarily dismissed, a state judicial foreclosure action
against Plaintiffs Rosita and Leslie Fountain, (collectively, the
The Fountains ultimately sold their house and paid
the balance of the loan owed to Chase.
The Fountains now assert
claims against Chase concerning their unsuccessful attempt to
modify their loan before the foreclosure action was filed. See
First Amended Complaint, ECF No. 16.
On September 21, 2015, this court stayed this action
before ruling on the present motion to allow the Hawaii Supreme
Court to rule on an issue at the heart of this action.
10, 2017, the court reopened the case in light of the Hawaii
Supreme Court’s issuance of its ruling in Hungate v. Law Office
of David B. Rosen, 139 Haw. 394, 411, 391 P.3d 1, 18 (2017).
Pursuant to Local Rule 7.2(d), the court, proceeding
without a hearing, grants Chase’s motion to dismiss.
The Fountains got a loan from Long Beach Mortgage
Company, secured by a mortgage on their home in Mililani on the
west side of Oahu.
Chase allegedly purchased the loan and
accompanying mortgage, and thereafter collected payments from the
See ECF No. 16, PageID #s 302, 304.
It appears that, in 2010, the Fountains ran into
They applied for a mortgage modification
through the federally funded Making Home Affordable Program.
ECF No. 16-1, PageID #s 340-42, 345.
They describe that program
as offering incentives for modifying certain mortgages by
reducing a borrower’s monthly loan payments to an affordable
See Complaint, ECF No. 16, PageID # 305.
The Fountains’ mortgage was not modified, and on April
15, 2013, Chase filed a foreclosure action against them in Hawaii
See Docket Sheet, U.S. Bank Nat’l Ass’n v.
Fountain, et al., 1CC13-1-001123, ECF No. 22-2, PageID # 459.
The foreclosure action was voluntarily dismissed after the
Fountains sold their home and paid off the loan.
See ECF No. 22-
2, PageID # 460 (docket sheet indicating dismissal); ECF No. 22-3
(warranty deed from the Fountains).
The Fountains now allege that, in handling their loan
modification application, Chase failed to meet its obligations as
lender and servicer of their mortgage.
They claim that Chase
breached industry standards established in the “National Mortgage
Settlement,” an agreement that the attorneys general of Hawaii
and 48 other states and the District of Columbia reached with the
five largest banks and mortgage servicers, including Chase
(collectively, the “Banks.”).
See First Amended Complaint, ECF
No. 16, PageID # 310-13.
The Fountains say that the National Mortgage Settlement
was memorialized in a Consent Judgment filed in the United States
District Court for the District of Columbia in 2012.
agreement allegedly provided various benefits and relief to
borrowers whose loans were owned or serviced by the Banks.
Settlement also allegedly required the Banks to adhere to various
See First Amended Complaint, ECF No. 16,
PageID # 307-08; ECF No. 16-2 (copy of Consent Judgment).
The First Amended Complaint contains three counts:
breach of the implied covenant of good faith and fair dealing
(Count I); tortious breach of the covenant of good faith and fair
dealing (Count II), and unfair and deceptive consumer practices
See ECF No. 16, PageID #s 310-15.
claim that the wrongdoing alleged in all three counts involved
violations of the terms of the National Mortgage Settlement.1
See id., PageID #s 312-15.
The Fountains seek money damages, punitive damages,
attorneys’ fees and costs, and other unspecified relief.
id., PageID #s 315-16.
Under Rule 12(b)(6) of the Federal Rules of Civil
Procedure, the court’s review is generally limited to the
contents of a complaint.
Sprewell v. Golden State Warriors, 266
F.3d 979, 988 (9th Cir. 2001); Campanelli v. Bockrath, 100 F.3d
1476, 1479 (9th Cir. 1996).
If matters outside the pleadings are
considered, the Rule 12(b)(6) motion is treated as one for
See Keams v. Tempe Tech. Inst., Inc., 110 F.3d
44, 46 (9th Cir. 1997); Anderson v. Angelone, 86 F.3d 932, 934
The Fountains raise alleged violations of industry
standards set forth in the National Mortgage Settlement in each
of the three counts. See ECF No. 16, PageID #s 311-12, 14. The
Fountains do not appear to be asserting an independent cause of
action for breach of the National Mortgage Settlement. If the
Fountains are attempting to assert an independent cause of action
under the National Mortgage Settlement, this court questions
whether such a private right of action exists. See, e.g., In re
Rivera, 2015 WL 1515572, *8 n.11 (Bankr. N.D. Cal. Mar. 30, 2015)
(holding that no private right of action exists under National
Mortgage Settlement); Fleshman v. Wells Fargo Bank, N.A., 27 F.
Supp. 3d 1127, 1135-36 (D. Or. 2014) (same); Lawrence v. Wells
Fargo Bank, N.A., 2014 WL 2705425, at *6 (N.D. Cal. June 13,
(9th Cir. 1996).
However, the court may take judicial notice of
and consider matters of public record without converting a Rule
12(b)(6) motion to dismiss into a motion for summary judgment.
See Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir.
2001); Emrich v. Touche Ross & Co., 846 F.2d 1190, 1198 (9th Cir.
On a Rule 12(b)(6) motion to dismiss, all allegations
of material fact are taken as true and construed in the light
most favorable to the nonmoving party.
Fed’n of African Am.
Contractors v. City of Oakland, 96 F.3d 1204, 1207 (9th Cir.
However, conclusory allegations of law, unwarranted
deductions of fact, and unreasonable inferences are insufficient
to defeat a motion to dismiss.
Sprewell, 266 F.3d at 988; Syntex
Corp. Sec. Litig., 95 F.3d 922, 926 (9th Cir. 1996).
Dismissal under Rule 12(b)(6) may be based on either:
(1) lack of a cognizable legal theory, or (2) insufficient facts
under a cognizable legal theory.
Balistreri v. Pacifica Police
Dept., 901 F.2d 696, 699 (9th Cir. 1988) (citing Robertson v.
Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir.
“[T]o survive a Rule 12(b)(6) motion to dismiss,
factual allegations must be enough to raise a right to relief
above the speculative level, on the assumption that all the
allegations in the complaint are true even if doubtful in fact.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal
quotation marks omitted); accord Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (“[T]he pleading standard Rule 8 announces does not
require ‘detailed factual allegations,’ but it demands more than
an unadorned, the-defendant-unlawfully-harmed-me accusation”).
“While a complaint attacked by a Rule 12(b)(6) motion to dismiss
does not need detailed factual allegations, a plaintiff’s
obligation to provide the ‘grounds’ of his ‘entitlement to
relief’ requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will
Twombly, 550 U.S. at 555.
The complaint must “state a
claim to relief that is plausible on its face.”
Id. at 570.
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.”
556 U.S. at 678.
Requests for Judicial Notice.
As a preliminary matter, the court addresses Chase’s
requests for judicial notice of (1) the state court docket sheet
in the state foreclosure action against the Fountains, see ECF
No. 22-1, PageID # 443 n.4, and (2) the Warranty Deed recorded in
the Bureau of Conveyances of the State of Hawaii as Document No.
T-8899103, see id., PageID # 444. n.5.
In adjudicating a motion to dismiss brought under Rule
12(b)(6) of the Federal Rules of Civil Procedure, a court may
“take judicial notice of ‘matters of public record[,]’” as long
as the facts noticed are not “subject to reasonable dispute.”
Intri–Plex Techs., Inc. v. Crest Grp., Inc., 499 F.3d 1048, 1052
(9th Cir. 2007).
Matters of public record that may be judicially
noticed include documents filed with courts, “both within and
without the federal judicial system, if those proceedings have a
direct relation to the matters at issue.”
United States ex rel.
Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d
244, 248 (9th Cir. 1992).
The court may also take judicial
notice of records of government agencies.
See Dent v. Holder,
627 F.3d 365, 371-72 (9th Cir. 2010) (taking judicial notice of
This court takes judicial notice of the state court
docket sheet in U.S. Bank Nat’l Ass’n v. Fountain, 1CC13-1001123, see ECF No. 22-2, PageID #s 459-60, because the document
is publicly available, and the Fountains have not objected to
Chase’s request that it be judicially noticed.
In addition, this
court was able to independently verify that the document is
publicly available via the Hawaii State Judiciary records
(search “Case ID” for “1CC13-1-001123”; click on “Document List”)
(last visited May 23, 2017).
The court also takes judicial notice of the Warranty
Deed through which the Fountains transferred their interest in
the property, see ECF No. 22-3, PageID #s 461-67, because it is
filed with a government agency, and the Fountains have not
objected to Chase’s request that it be judicially noticed.
The Court Dismisses the Breach of the Implied
Covenant of Good Faith and Fair Dealing Claims
Asserted in Counts I and II of the First Amended
Counts I and II of the First Amended Complaint assert
breaches of the implied covenant of good faith and fair dealing.
To the extent these claims are asserted under section
490:1-304 of Hawaii Revised Statutes, part of Hawaii’s version of
the Uniform Commercial Code, the claims fail.
states, “Every contract or duty within this chapter imposes an
obligation of good faith in its performance and enforcement.”
is not at all clear that Chase’s alleged failure to process a
loan modification request falls within Hawaii’s Uniform
But even if the court accepts the Fountain’s
argument that Chase “interfered with . . . [their] right to
receive the benefits of the [Mortgage] contract by knowingly
interfering with the loan modification process,” no independent
claim for a breach of the duty of good faith and fair dealing in
violation of section 490:1-304 exists.
section clearly states:
The comment to that
The section does not support an independent
cause of action for failure to perform or
enforce in good faith. Rather, this section
means that a failure to perform or enforce,
in good faith, a specific duty or obligation
under the contract, constitutes a breach of
that contract or makes unavailable, under the
particular circumstances, a remedial right or
Haw. Rev. Stat. § 490:1-304, cmt. 1.
Accordingly, this court has
held that section 490:1-304 does not create an independent cause
See Lynch v. Fed. Nat'l Mortg. Ass'n, 2016 WL
6776283, at *9 (D. Haw. Nov. 15, 2016); Agbannaoag v. Ocwen Loan
Servicing, LLC, 2016 WL 6436620, at *6 (D. Haw. Oct. 25, 2016);
Courter v. Karolle, 2013 WL 2468360, at *11 (D. Haw. June 6,
2013); Stoebner Motors, Inc. v. Automobili Lamborghini S.P.A.,
459 F. Supp. 2d 1028, 1037-38 (D. Haw. 2006).
Even if section 490:1-304 is inapplicable, this court
applies the principle that “every contract contains an implied
covenant of good faith and fair dealing that neither party will
do anything that will deprive the other of the benefits of the
See Best Place v. Penn Am. Ins. Co., 82 Haw. 120,
124, 920 P.2d 334, 338 (1996) (citations omitted).
in this district have characterized such claims for breaches of
the implied covenant of good faith and fair dealing as claims for
the tort of bad faith.
See Ramelb v. Newport Lending Corp., 2014
WL 229186, *3 (D. Haw. Jan. 14, 2014); Tedder v. Deutsche Bank
Nat'l Trust Co., 863 F. Supp. 2d 1020, 1039 (D. Haw. 2012);
Phillips v. Bank of Am., 2011 WL 240813, *5 (D. Haw. Jan. 21,
“In Best Place, the Hawaii Supreme Court noted that
although Hawai`i law imposes a duty of good faith and fair
dealing in all contracts, whether a breach of this duty will give
rise to a bad faith tort cause of action depends on the duties
inherent in a particular type of contract.”
Jou v. Nat’l
Interstate Ins. Co. of Haw., 114 Haw. 122, 129, 157 P.3d 561, 568
(Haw. App. 2007).
“The court concluded that special
characteristics distinguished insurance contracts from other
contracts and justified the recognition of a bad faith tort cause
of action for the insured in the context of first- and
third-party insurance contracts.”
characteristics included the public interest in insurance
contracts, the nature of insurance contracts, and the inequity in
bargaining power between the insurer and the policyholder.”
(alterations, quotation marks, and citation omitted).
Although Hawaii courts recognize bad faith as an
independent tort in the context of an insurance contract, see
Best Place, 82 Haw. at 128, 920 P.2d at 342, the tort has not
been recognized in Hawaii based on a mortgage loan contract.
Lynch v. Fed. Nat'l Mortg. Ass'n, 2016 WL 6776283, at *9 (D. Haw.
Nov. 15, 2016); Fleck v. CitiMortgage, Inc., 2015 WL 2188595, *3
(D. Haw. May 8, 2015); Ramelb, 2014 WL 229186, *3; Newcomb v.
Cambridge Home Loans, Inc., 861 F. Supp. 2d 1153, 1165 (D. Haw.
2012); Phillips, 2011 WL 240813, *5.
This court agrees that it
is unlikely that the Hawaii Supreme Court would recognize the
tort of bad faith in the context of a mortgage loan contract.
See Francis v. Lee Enters., 89 Haw. 234, 238, 971 P.2d 707, 711
(1999) (“Other jurisdictions recognizing the tort of bad faith
. . . limit such claims to the insurance context”); Best Place,
82 Haw. at 132, 920 P.2d at 346 (“The policy considerations
surrounding the adoption of the tort of bad faith in the
insurance context are atypical and will not necessarily extend to
all types of contracts.”).
Accordingly, to the extent the Fountains are asserting
an independent cause of action for an alleged breach of the duty
of good faith and fair dealing (Count I) and to the extent they
are asserting the tort of bad faith (Count II), the claims are
The Court Dismisses Count III, Which Asserts a
Claim of Unfair and Deceptive Consumer Practices.
Count III of the First Amended Complaint asserts a
violation of section 480-2(a) of the Hawaii Revised Statutes,
which states, “Unfair methods of competition and unfair or
deceptive acts or practices in the conduct of any trade or
commerce are unlawful.”
Two distinct causes of action exist
under section 480–2: claims alleging unfair methods of
competition and claims alleging unfair or deceptive acts or
See Haw. Med. Ass'n v. Haw. Med. Serv. Ass’n, 113
Haw. 77, 110, 148 P.3d 1179, 1212 (2006).
The Fountains assert
only an unfair or deceptive acts or practices claim.
To state a claim for unfair and deceptive acts or
practices, the Fountains must plausibly allege (1) that they are
consumers, (2) that Chase violated section 480-2(a) of Hawaii
Revised Statutes by engaging in an unfair or deceptive act or
practice, and (3) that they suffered an injury resulting in
See Compton v. Countrywide Fin. Corp, 761 F.3d 1046,
1056 (9th Cir. 2014).
In Hawaii Community Federal Credit Union
v. Keka, 94 Haw. 213, 227, 11 P.3d 1, 15 (2000), the Hawaii
Supreme Court noted that a mortgage loan secured by a residence
is “conduct of any trade and commerce” involving “consumers” for
purposes of a section 480-2 claim.
The Fountains concede that Count III of their First
Amended Complaint is deficient.
See ECF No. 32, PageID # 694
(“The Fountains have filed a Motion for Leave to File a Second
Amended Complaint to address the deficiencies in their Unfair and
Deceptive Acts or Practices (‘UDAP’) claim.”).
with this concession.
The court agrees
Although the First Amended Complaint
alleges facts supporting the Fountains’ status as consumers by
virtue of their status as loan borrowers, the First Amended
Complaint fails to allege facts sufficient to support an unfair
or deceptive trade practice claim.
“‘The question of whether a practice constitutes an
unfair or deceptive trade practice is ordinarily a question of
Hungate v. Law Office of David B. Rosen, 139 Haw. 394,
410, 391 P.3d 1, 17 (2017) (quoting Balthazar v. Verizon Haw.,
Inc., 109 Hawai‘i 69, 72 n.4, 123 P.3d 194, 197 n.4 (2005)).
First Amended Complaint alleges that Chase sent the Fountains a
loan modification document that had prefilled blanks with the
wrong property address and wrong loan numbers and that were not
PageID # 314.
See First Amended Complaint, ECF No. 16,
It also alleges that Chase requested an additional
signature on a completed application but then sent the Fountains
a blank form, rather than the one that simply needed the
Id., PageID # 315.
Even if these allegations might
show sloppiness or error, they do not, without more, suggest any
“unfair” act or practice.
Something is unfair if it “offends
established public policy, . . . is immoral, unethical,
oppressive, unscrupulous or substantially injurious to
State ex rel. Bronster v. United States Steel Corp.,
82 Haw. 32, 51, 919 P.2d 294, 313 (1996).
Haw. at 411, 391 P.3d at 18.
Accord Hungate, 139
It is not clear how the alleged
actions meet any of those criteria.
Nor do the Fountains
demonstrate a “deceptive” act or practice, which is one that has
“the capacity or tendency to mislead or deceive.”
Dahana Ranch, Inc., 111 Haw. 254, 261, 141 P.3d 427, 434 (2006);
see also Hungate, 139 Haw. at 411, 391 P.3d at 18 (2017) (“A
deceptive act or practice is (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.” (alterations
and citation omitted)).
The First Amended Complaint alleges that Chase failed
“to review and respond responsibly to the FOUNTAINS[’] loan
PageID # 314.
See First Amended Complaint, ECF No. 16,
This allegation could involve actions that were
“unscrupulous or substantially injurious to consumers.”
there is insufficient factual detail to determine that, if true,
the alleged actions were unfair or deceptive.
In addition, the
term “responsibly” needs context to provide any notice at all to
Chase of exactly what it allegedly did wrong.
As the Supreme Court noted in Twombly, 550 U.S. at 555,
“to survive a Rule 12(b)(6) motion to dismiss, factual
allegations must be enough to raise a right to relief above the
speculative level, on the assumption that all the allegations in
the complaint are true even if doubtful in fact.”
allegation that Chase failed to review and respond responsibly to
a loan modification request does not “raise a right to relief
above the speculative level.”
It amounts to little more than “an
unadorned, the-defendant-unlawfully-harmed-me accusation.”
Iqbal, 556 U.S. at 678.
The First Amended Complaint specifically alleges that
Chase violated Section 480-2(a) of Hawaii Revised Statutes by
a. failing to timely and accurately respond
to foreclosure alternative options;
b. charging excessive or improper fees for
c. failing to properly oversee the corporate
procedures in review of loan modification
d. providing blank, incorrect, and
incomplete documents in response to loan
e. providing borrowers false or misleading
information in response to borrower
f. failing to maintain appropriate staffing,
training, and quality control systems.
See ECF No. 16, PageID # 310.
These bare assertions that Chase
has violated the law similarly fail to allege sufficient facts to
“raise a right to relief above the speculative level.”
550 U.S. at 555.
The reference to “excessive or improper fees,”
for instance, includes no suggestion as to the nature of the fees
involved, much less as to what made them improper or excessive.
Similarly, the reference to “false or misleading information” is
in the nature of a misrepresentation allegation that fails to
identify the specific statements in issue.”
Defendants’ motion to dismiss is granted without a
Given Plaintiffs’ second motion for leave to file a
Second Amended Complaint, the Clerk of Court shall refrain from
closing this case at this time.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, May 24, 2017.
/s/ Susan Oki Mollway
Susan Oki Mollway
United States District Judge
Fountain, et al. v. JP Morgan Chase, Civ. No. 15 00119 SOM/RLP; ORDER GRANTING
DEFENDANT’S MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT
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