Fountain et al v. JPMorgan Chase Bank, N.A.

Filing 53

ORDER DENYING PLAINTIFFS ROSITA FOUNTAIN AND LESLIE FOUNTAIN'S MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT re: 45 . Signed by MAGISTRATE JUDGE RICHARD L. PUGLISI on 6/23/2017. (afc)CERTIFICATE OF SERVI CEParticipants 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 will be served by first class mail on June 26, 2017.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
ROSITA FOUNTAIN, ET AL.,

)
)
Plaintiffs,
)
)
vs.
)
)
JPMORGAN CHASE BANK, N.A., ET )
AL.,
)
)
)
Defendants.
______________________________ )

CIVIL NO. 15-00119 SOM-RLP
ORDER DENYING PLAINTIFFS ROSITA
FOUNTAIN AND LESLIE FOUNTAIN’S
MOTION FOR LEAVE TO FILE SECOND
AMENDED COMPLAINT

ORDER DENYING PLAINTIFFS ROSITA FOUNTAIN AND LESLIE
FOUNTAIN’S MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT
Before the Court is Plaintiffs Rosita Fountain and
Leslie Fountain’s Motion for Leave to File Second Amended
Complaint, filed May 17, 2017 (“Motion”).

ECF No. 45.

Defendant

JPMorgan Chase Bank, N.A. filed its Opposition to the Motion on
May 31, 2017.

ECF No. 49.

The Fountains filed their Reply on

June 20, 2017, after the Court granted them leave to file a late
reply.

ECF Nos. 51, 52.

The Court found this matter suitable

for disposition without a hearing pursuant to Local Rule 7.2(d).
ECF No. 46.

After carefully reviewing the submissions of the

parties and the relevant legal authority, the Court DENIES the
Motion.
BACKGROUND
In 2005, the Fountains obtained a loan from Long Beach
Mortgage Company, secured by a mortgage on their home in
Mililani, Hawaii.
Complaint, ¶ 2.

See ECF No. 45-2, Proposed Second Amended

Defendant JP Morgan Chase Bank, N.A., (“JPMC”)

serviced the Fountains’ mortgage.

Id. ¶¶ 3, 41.

The Fountains

allege that JPMC failed to meet its obligations as servicer of
their mortgage in handling their loan modification requests.
¶¶ 45, 47, 48, 62.

Id.

The Fountains’ mortgage was not modified, and

a foreclosure action was filed against them in Hawaii state
court.

See ECF No. 48 at 2.

The foreclosure action was

voluntarily dismissed after the Fountains sold their home and
paid off the loan.

See id.

In their First Amended Complaint, the Fountains
asserted the following claims against JPMC:

breach of implied

covenant of good faith and fair dealing, tortious breach of the
covenant of good faith and fair dealing, and unfair and deceptive
consumer practices.

Id.

On May 24, 2017, the district court

dismissed all three claims asserted in the First Amended
Complaint.

ECF No. 48.
In the present Motion, the Fountains seek leave to file

a Second Amended Complaint asserting four claims against JPMC:
unfair and deceptive acts or practices with respect to loan
servicing, breach of contract, violation of the Fair Debt
Collection Practices Act, and tortious interference with a
business relationship transcending the contract.
2.

See ECF No. 45-

In opposition, JPMC argues that the proposed claims are

futile, that the Fountains delayed in bringing the proposed
claims, that JPMC would be prejudiced by further amendment, and
that the Fountains’ conduct evidenced bad faith.
2

See ECF No. 49.

DISCUSSION
Under Rule 15(a)(2) “a party may amend its pleading
only with the opposing party’s written consent or the court’s
leave.”

Fed. R. Civ. P. 15(a)(2).

Rule 15(a)(2) states that

leave to amend should be freely given when justice so requires.
Id.

Whether to grant leave to amend is within the court’s

discretion.

Foman v. Davis, 371 U.S. 178, 182 (1962).

In

determining whether to grant leave to amend, courts consider
several factors including undue delay, whether the opposing party
will be prejudiced, futility of the amendment, and bad faith by
the movant.

Id.

As discussed below, the Court finds that the

claims asserted in the Proposed Second Amended Complaint are
futile and, therefore, leave to amend is DENIED.

Because the

Court finds that the proposed claims are futile, the Court does
not address the other arguments raised in JPMC’s Opposition.
A.

Futility

An amendment is futile if “no set of facts can be
proved under the amendment to the pleadings that would constitute
a valid and sufficient claim or defense.”

Miller v.

Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988).

Here,

JPMC argues that all of Plaintiffs’ proposed claims are futile.
See ECF No. 49 at 14-23.
1.

Proposed Claim for Unfair and Deceptive Acts or

Practices with Respect to Loan Servicing (Count I)
In the Proposed Second Amended Complaint, the Fountains
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assert a claim for unfair and deceptive consumer practices with
respect to loan servicing in violation of Hawaii Revised Statutes
Section 480-2.

See ECF No. 45-2, Proposed Second Amended

Complaint, ¶¶ 85-100.

To state a claim for unfair and deceptive

acts or practices, the Fountains must plausibly allege (1) that
they are consumers, (2) that JPMC engaged in an unfair or
deceptive act or practice, and (3) that they suffered an injury
resulting in damages.

See Compton v. Countrywide Fin. Corp., 761

F.3d 1046, 1056 (9th Cir. 2014).

For purposes of a Section 480-2

claim, a mortgage loan secured by a residence is “conduct of any
trade and commerce” involving “consumers.”

Haw. Cmty. Fed.

Credit Union v. Keka, 94 Haw. 213, 227 (Haw. 2000).
The district court dismissed the Section 480-2 claim in
the First Amended Complaint holding that the Fountains failed to
allege facts sufficient to support the claim.
12-15.

See ECF No. 48 at

The district court noted that the First Amended Complaint

alleged that JPMC violated Section 480-2 by failing to timely and
accurately respond to foreclosure alternative options, charging
excessive or improper fees for default-related services, failing
to properly oversee the corporate procedures in review of loan
modification requests, providing blank, incorrect, and incomplete
documents in response to loan modification requests, providing
borrowers false or misleading information in response to borrower
complaints, and failing to maintain appropriate staffing,
training, and quality control systems.
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Id. at 15.

The district

court held that the Fountains’ allegations were insufficient to
suggest an unfair act or practice because the Fountains failed to
allege how the actions of JPMC offended established public policy
or were “oppressive, unscrupulous or substantially injurious to
customers.”

Id. (quoting State ex rel. Bronster v. United States

Steel Corp., 82 Haw. 32, 51 (Haw. 1996)).

The district court

also stated that the allegations failed demonstrate a deceptive
act.

Id.

The district court concluded that the “bare

assertions” regarding JPMC’s loan servicing conduct contained in
the First Amended Complaint failed to allege sufficient facts to
state a claim.

Id.

In the Proposed Second Amended Complaint, the Fountains
allege many of the same facts regarding JPMC’s purportedly unfair
and deceptive loan servicing activities.
¶¶ 48, 62 with ECF No. 16 ¶¶ 41, 46.

Compare ECF No. 45-2

For the same reasons as

detailed in the district court’s prior order, these “bare
assertions” are insufficient to state a claim under Section 4802.

In addition to the facts previously alleged, the Fountains

allege several new facts:

that JPMC failed to “properly file

mortgage documents” with the Bureau of Conveyances; that JPMC
“lo[st] documents provided to them by the Fountains”; and that
JPMC failed “to observe corporation formalities regarding the
chain of title.”
88, 90, 119.

See ECF No. 45-2 ¶¶ 1, 12, 44, 47, 54, 58, 62,

Although these facts were not previously alleged,
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these facts are also not sufficient to state a claim under
Section 480-2.

As with the Fountains’ prior allegations, the new

allegation may show JPMC’s sloppiness or error, but they do not,
without more, demonstrate an unfair or deceptive practice.
ECF No. 48 at 13.

See

None of the new allegations show that JPMC’s

actions were “immoral, unethical, oppressive, unscrupulous or
substantially injurious.”

See Bronster, 82 Haw. at 51.

Further,

the Fountains fail to allege how JPMC’s alleged actions have “the
capacity or tendency to mislead or deceive.”

See Courbat v.

Dahana Ranch, Inc., 111 Haw. 254, 261 (Haw. 2006).

The

allegations in the Proposed Second Amended Complaint do not
provide sufficient detail to determine whether JPMC’s actions
were unfair or deceptive.

Accordingly, the Court DENIES the

Fountains’ request for leave to assert a claim for unfair and
deceptive consumer practices with respect to loan servicing in
violation of Hawaii Revised Statutes Section 480-2 because such
amendments would be futile.
2. Proposed Claim for Breach of Contract (Count II)
In the Proposed Second Amended Complaint, the Fountains
assert a claim for breach of contract against JPMC.
45-2 ¶¶ 103-111.

See ECF No.

To state a claim for breach of contract, the

Fountains must plausibly allege (1) the contract at issue;
(2) the parties to the contract; (3) whether the Fountains
performed under the contract; (4) the particular provision of the
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contract allegedly violated; (5) when and how JPMC allegedly
breached the contract; or (6) how the Fountains were injured.
See Velez v. The Bank of N.Y. Mellon, No. CIV.10-00468 JMS/KSC,
2011 WL 572523, at *3 (D. Haw. Feb. 15, 2011).
Here, the allegations in the Proposed Second Amended
Complaint are insufficient to state a claim for breach of
contract because they do not identify a contract that the
Fountains entered into with JPMC.
serviced their mortgage.

The Fountains allege that JPMC

ECF No. 45-2 ¶ 3.

allege that they had a contract with JPMC.

The Fountains do not
Instead, the

Fountains allege that JPMC “acted with all of the same rights and
responsibilities of the Lender and therefore should be held at
the same accountability as the Lender in regards to the Mortgage
contract.”

Id. ¶ 59.

The Fountains allege that JPMC violated

the terms of the mortgage by failing to mitigate damages as
required by section 20 of the mortgage.

Id. ¶¶ 45, 56.

The

Fountains also allege that JPMC “breached their contract with the
Fountains” by failing to “responsibly handle the loan
modification process, [] timely respond to loan modification
requests, [] maintain accurate account information, charging of
fraudulent fees, requesting excessive documentation, requesting
documents that had already been received, providing misleading
information, and fail[ing] to properly remediate inaccuracies in
the Fountains’ account.”

Id. ¶ 104.
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Because the Fountains do

not allege that they had a contractual relationship with JPMC,
their claim for breach of contract must fail.

See Conder v. Home

Sav. of Am., 680 F. Supp. 2d 1168, 1174 (C.D. Cal. 2010) (holding
that the plaintiff failed to state a claim for breach of contract
against a loan servicer because there was no contractual
privity).

Accordingly, the Court DENIES the Fountains’ request

for leave to amend to assert a claim for breach of contract
because such amendments would be futile.
3. Proposed Claim for Violation of the Fair Debt
Collection Practices Act (Count III)
The Fountains seek leave to assert a claim for
violation of the Fair Debt Collection Practices Act (“FDCPA”)
against JPMC.

See ECF No. 45-2 ¶¶ 112-115.

The Fountains allege

that JPMC violated the FDCPA “by using abusive, deceptive, and
unfair debt collection practices.”

Id. ¶ 113.

Generally, the

FDCPA prohibits “debt collectors” from engaging in various
abusive and unfair practices in collecting debts.
Heintz v. Jenkins, 514 U.S. 291, 292 (1995).

See, e.g.,

To be liable for

violating the FDCPA, a defendant must be a “debt collector” under
the statute.

Id. at 294.

Here, the allegations in the Proposed Second Amended
Complaint are insufficient to state a claim for violation of the
FDCPA because JPMC is not a debt collector.

“[C]ourts have

consistently held that the FDCPA does not apply to, among others,
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mortgage servicing companies, or assignees of the mortgage debt,
if the debt was not in default at the time the debt was
obtained.”

Klohs v. Wells Fargo Bank, N.A., 901 F. Supp. 2d

1253, 1258 (D. Haw. 2012) (collecting cases); see also 15 U.S.C.
§ 1692a(6).

The Fountains do not allege that JPMC became the

servicer of their mortgage after it was in default.

Because JPMC

is not a debt collector under the FDCPA, the Fountains’ claim for
violation of the FDCPA must fail.

See Kohls, 901 F. Supp. 2d at

1258 (“nothing in the Complaint alleges that the loan is in
default, much less was in default when Wells Fargo obtained
servicing rights.

Thus, given the clear weight of authority,

Wells Fargo is not (or was not) a ‘debt collector’ within the
meaning of the FDCPA”).

Accordingly, the Court DENIES the

Fountains’ request for leave to amend their complaint to assert a
claim for violation of the FDCPA because such amendments would be
futile.
4. Proposed Claim for Tortious Interference With a
Business Relationship Transcending the Contract (Count IV)
It is unclear in the Proposed Second Amended Complaint
the precise claim that the Fountains are seeking to assert in
Count IV.

See ECF No. 45-2 ¶¶ 116-120.

The Fountains allege

that JPMC “committed a tort by interfering with a business
relationship” and also allege that “committing this tort . . . is
a tortious violation of the breach of contract.”
9

Id. ¶ 117.

To

the extent the Fountains are attempting to assert a tortious
breach of contract claim, such claim must fail because Hawaii
does not recognize a claim for tortious breach of contract.

See

Francis v. Lee Enters., 89 Haw. 234, 238-39 (Haw. 1999);
Kapunakea Partners v. Equilon Enters. LLC, 679 F. Supp. 2d 1203,
1218-19 (D. Haw. 2009).
To the extent the Fountains are attempting to assert a
claim for tortious interference with a business relationship,
that claim also fails.

To state a claim for tortious

interference, the plaintiff must plausibly allege:

“(1) the

existence of a valid business relationship . . .; (2) knowledge
of the relationship . . . by the defendant; (3) a purposeful
intent to interfere with the relationship . . .; (4) legal
causation between the act of interference and the impairment of
the relationship . . . ; and (5) actual damages.”

Bodell Constr.

Co. v. Ohio Pac. Tech, Inc., 458 F. Supp. 2d 1153, 1163 (D. Haw.
2006) (citing Robert’s Haw. Sch. Bus, Inc. v. Laupahoehoe Transp.
Co., 91 Haw. 224, 258 (Haw. 1999)).
all of the required elements.

The Fountains fail to allege

The Fountains allege that JPMC

interfered with the Fountains’ “performance by knowingly
providing inaccurate account information and misleading loan
modification attempts when [JPMC] lost documentation, provided
approvals with incorrect loan numbers and property address, and
informed the Fountains they were sending specific documents to
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complete the Fountains loan modification and instead sending
blank documents to restart the process.”

ECF No. 45-2 ¶ 119.

However, the Fountains do not allege any facts regarding the
business relationship that JPMC allegedly interfered with, JPMC’s
purposeful intent to interfere with that relationship, or the
legal causation between the purported interference and the
impairment of the relationship.

Because the Fountains fail to

allege all of the required elements, their claim for tortious
interference must fail.

Accordingly, the Court DENIES the

Fountains’ request for leave to amend their complaint to assert a
claim for tortious interference with a business relationship
because such amendments would be futile.
CONCLUSION
The Court DENIES Plaintiffs Rosita Fountain and Leslie
Fountain’s Motion for Leave to File Second Amended Complaint.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, JUNE 23, 2017.

_____________________________
Richard L. Puglisi
United States Magistrate Judge

FOUNTAIN, ET AL. V. JPMORGAN CHASE BANK, N.A., ET AL.; CIVIL NO.
15-00119 SOM-RLP; ORDER DENYING PLAINTIFFS ROSITA FOUNTAIN AND LESLIE
FOUNTAIN’S MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT

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