Busch et al v. Wells Fargo Home Mortgage, Inc. et al

Filing 19

MEMORANDUM OPINION & ORDER: 1. Dfts' motion to Dismiss 9 is DENIED as to Counts IV, VII and IX, and GRANTED as to Counts I, II, III, V, VI and VII. 2. Plaintiff's motion for S/J on Liability and Attorney's fee 12 is DENIED AS PREMATURE. 3. Dfts shall file an Answer to the remaining allegations within 10days of the entry of this Order. Signed by Judge Joseph M. Hood on 01/09/2017.(LC)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
KEVIN M. BUSCH and
LESLIE J. BUSCH,

)
)
)
)
)
)
)
)
)
)

Plaintiffs,
v.
WELLS FARGO HOME MORTGAGE
INC. and WELLS FARGO BANK, N.A.
Defendants.

Action No. 5:16-cv-210-JMH

MEMORANDUM OPINION
AND ORDER

****
I. INTRODUCTION

This matter is before the Court upon the Motion to Dismiss

[DE 9] filed by Defendants Wells Fargo Home Mortgage Inc. and Wells
Fargo Bank, N.A (collectively, “Wells Fargo”).

Plaintiffs Kevin

M. Busch and Leslie J. Busch (collectively, “the Busches”) have
filed a Response in Opposition [DE 11] to the Motion, as well as
their own Motion for Partial Summary Judgment [DE 12] on the issues
of liability and attorney’s fees.

Both Motions are now fully

briefed [DE 14, 17, 18] and ripe for the Court’s review.

For the

reasons stated herein, Wells Fargo’s Motion to Dismiss will be
GRANTED IN PART AND DENIED IN PART and the Busches’ Motion for
Partial Summary Judgment will be DENIED AS PREMATURE.

1

II. FACTUAL AND PROCEDURAL BACKGROUND
In March 2014, Wells Fargo Bank loaned the Busches $40,000 to
finance the purchase of an investment property, located at 3570
Niagara Drive in Lexington, Kentucky.

[DE 9-3].

The Busches, in

return, executed a Promissory Note, secured by a Mortgage on the
property, in favor of Wells Fargo Bank.

[DE 9-2, 9-3].

In the

Note, the Busches promised to repay the loan at an interest rate
of 4.75% over a thirty year period by making monthly payments of
principal, interest, and miscellaneous “other charges.”
3].

[DE 9-

Wells Fargo Home Mortgage, Inc., a division of Wells Fargo

Bank, serviced the loan.
The

Note

stated

[DE 1-1, p. 3, ¶ 5].
that

these

monthly

payments,

$339.30, would be due on the first day of each month.1
10, 9-3 at 1].

totaling
[DE 1-1 at

Wells Fargo would apply each monthly payment “as

of its scheduled date … to interest before Principal.”2

If, at

any time, Wells Fargo did not receive a full monthly payment within
fifteen calendar days after the due date, it would assess a late

1

The Busches owed $208.66 in principal and interest, plus $130.64 in escrow
funds, bringing their total monthly payment to $339.30. [DE 1-1 at 10, 9-3 at
1].
2 The Mortgage similarly stated that “payments accepted and applied by Lender
shall be applied in the following order of priority: (a) interest due under the
Note; (b) principal due under the Note; (c) amounts due [for escrow items].”
[DE 9-2 at 5].
It further provided that “[a]ny remaining amounts shall be
applied first to late charges, second to any other amounts due under this
Security Instrument, and then to reduce the principal balance of the Note.”
[Id.].
However, “[a]ny application of payments, insurance proceeds, or
Miscellaneous Proceeds to principal due under the Note shall not extend or
postpone the due date, or change the amount, of the Periodic Payments.” [Id.].

2

charge against the Busches, amounting to 5% of the overdue payment
of principal and interest.

[Id. at 2].

Failure to pay the full

amount of each monthly payment on the due date would result in
default.

[Id.].

In the event of default, Wells Fargo had the right to notify
the Busches that, if the overdue amount is not paid by a certain
date, they may have to pay immediately the full amount of the
principal that has not been paid and all interest owed on that
amount.

[Id.].

However, even if Wells Fargo decided not to take

such steps upon default, it retained the right to do so if the
Busches defaulted at a later time.

[Id.].

In addition to the payment procedures described above, the
Busches enjoyed the right to make prepayments on the principal.
Specifically, the Note provided as follows:
4.

Borrower’s Right to Prepay

I have the right to make payments of Principal at
any time before they are due. A payment of Principal
only is known as a “Prepayment.”
When I make a
Prepayment, I will tell the Note Holder in writing that
I am doing so.
I may not designate a payment as a
Prepayment if I have not made all the monthly payments
due under the Note.
I may make a full Prepayment or partial Prepayments
without paying a Prepayment charge.
The Note Holder
will use my Prepayments to reduce the amount of Principal
that I owe under this Note. However, the Note Holder
may apply my Prepayment to the accrued and unpaid
interest on the Prepayment amount, before applying my
Prepayment to reduce the Principal amount of the Note.
3

If I make a partial Prepayment, there will be no changes
in the due date or in the amount of my monthly payment
unless the Note Holder agrees in writing to those
changes.
[Id.].
In July 2015, the Busches mailed Wells Fargo separate checks
to cover monthly payments on the Note through the end of 2016.
[DE 1-1, p. 3, ¶ 6].

Wells Fargo misapplied those advance

payments, and as a result, later returned them to Kevin Busch.3
[Id.].

In October 2015, Plaintiffs paid $605 for an appraisal of

the investment property, hoping to refinance the Note.
p. 4, ¶ 10].

[DE 1-1,

The Busches “were unable to refinance the Note at

that time due to the misapplied payments by Wells Fargo which
harmed their credit scores.”4

[Id.].

That same month, Kevin Busch mailed Wells Fargo a single check
in the amount of $4,779.44.

[DE 11-1].

At the bottom of this

check, he wrote “14 payments per schedule 11/2015 through 12/2016.”
[Id.].

Although Wells Fargo applied $678.60 total to the November

and December 2015 payments, it applied the remaining $4,100.84 to

3

According to the Complaint, “[t]his was the second time that Wells Fargo had
misapplied payments, the first occurring some years prior and being resolved
over the phone.” [DE 1-1, p. 3, ¶ 7].
4 Although the Complaint is unclear on this point, the Busches were presumably
unable to refinance in October 2015 because Wells Fargo misapplied the July
2015 payments.
[DE 1-1, p. 4, ¶ 6-10].
After all, the Busches were not
considered in default due to misapplication of the October 2015 payment until
January 2016, as explained infra. [Id.].

4

the

principal

only,

rather

than

principal, interest, and escrow.

twelve

monthly

payments

of

[DE 1-1, p. 3, ¶ 8].

The Busches, believing that Wells Fargo had applied the funds
to cover twelve monthly payments, did not submit a periodic payment
for January 2016.5
deemed

the

[DE 1-1, p. 4, ¶ 9].

Busches

delinquent

on

As a result, Wells Fargo

their

Note

payments,

determination that adversely affected their credit scores.
at p. 4, ¶ 10].

[Id.

In February 2016, the Busches attempted to

refinance their mortgage through People’s Exchange Bank.
p. 4, ¶ 11].

a

[Id. at

On February 19, 2016, the Bank denied the Busches’

application, citing their latest credit report, which reflected
their delinquent status on the Wells Fargo account.

[Id.; DE 1-1

at 11-14].
The Busches promptly retained counsel to address this issue.
[DEs 1-1 at 18-21; 11-4].
the

three

major

credit

On February 24, 2016, counsel notified
reporting

agencies

Busches’ credit information was incorrect.

(“CRAs”)

[DE 11-4].

contacted Wells Fargo about the issue that same day.
18-21].

that

the
She

[DE 1-1 at

On March 2, 2016, counsel received a letter from Wells

Fargo, stating in pertinent part:

5 Although

the Busches assumed that the payments had been processed according
to their specifications, a statement dated 11/02/15 indicates that their next
payment was due on 01/01/16. [DE 1-1 at 10].

5

Thank you for contacting us. We’re writing to let you
know that we’ve received the inquiry you sent on behalf
of Kevin M. Busch and Leslie J. Busch. We previously
received a similar inquiry and it’s currently being
reviewed.
We expect to complete our research and provide you with
the results on or before March 14, 2016. In the event
additional time is needed we will contact you.

[DE 11-5].
On March 17, 2016, the Busches’ attorney again contacted Wells
Fargo about the issue, expressing the following concerns:
As you are aware, we had instituted an investigation
with the three major credit bureaus as to Wells Fargo
Bank’s misapplication of funds to my clients’ account.
I received today dispute resolutions from Equifax
indicating at page 10 of Kevin’s credit report that Wells
Fargo is still reporting a delinquency from January
2016. As we discussed on the phone, Wells Fargo is aware
that this information is incorrect.
Leslie’s credit
report contains like information. This is to request
that Wells Fargo correct said information consistent
with my previous conversations with you.
You have
indicated that Wells Fargo will correct all information
by March 30, 2016.

[DE 1-1 at 17].

Despite its assurances, Wells Fargo allegedly

“failed to correct the misapplied payment and continued to make
such inaccurate reports to the three major credit bureaus.”

[DE

1-1, p. 4, ¶ 13-14].
Finally, on May 3, 2016, Kati Negron, Executive Resolution
Specialist with Wells Fargo’s Customer Care and Recovery Group,

6

sent

counsel

a

“inadvertently

letter,

applied

admitting

[the

that

Busches’

Wells

periodic

Fargo

payments]

had
to

principal and interest.” [DE 1-1 at 22]. Negron stated that Wells
Fargo had “reapplied the funds to future payments with an effective
date of February 18, 2016,” meaning that a monthly payment would
not be due until January 1, 2017.6

[Id.].

She also indicated that

Wells Fargo had notified the three major credit bureaus of the
situation and asked them to adjust the Busches’ credit scores
accordingly.

[Id.].

She cautioned the Busches that it could take

the CRAs up to 90 days to adjust their reports.

[Id.].

Negron

then informed the Busches that Wells Fargo had declined their
request for payment of $8,905 to compensate them for the cost of
the October 2015 appraisal, attorney’s fees, lost wages, and
emotional distress.

[Id.].

On May 27, 2016, the Busches filed suit against Wells Fargo
in Fayette Circuit Court, asserting the following claims: (1)
violations

of

the

Fair

Credit

Reporting

Act;

(2)

breach

of

contract; (3) unjust enrichment; (4) negligence; (5) violations of
the

Kentucky

Consumer

Protection

Act;

(6)

intentional

and

6 In

her letter, Negron stated that more than nine payments would have to be
processed in “multiple transactions.” [DE 1-1 at 22]. The Busches sent their
check to Wells Fargo’s lockbox location. [Id.]. Because the lockbox location
is not a processing center, Wells Fargo’s “representatives [we]re unable to
process the multiple payment transaction as requested.”
[Id.].
Negron
explained that, “[i]f the customer desires to continue to pay in this manner,
we can accommodate that. We simply need to validate his request and we will
add an indicator on the account to ensure the funds are processed according to
their specifications.” [Id.].

7

negligent

infliction

of

emotional

distress;

(7)

tortious

interference with a contract or prospective business relationship;
(8) punitive damages; and (9) attorney’s fees.

[DE 1-1].

Wells

Fargo promptly filed a Notice of Removal, observing that this Court
had federal question jurisdiction over the claim for violations of
the Fair Credit Reporting Act and supplemental jurisdiction over
the state law claims.

[DE 1].

The parties then filed the instant

Motion to Dismiss and Motion for Partial Summary Judgment.

[DE 9,

12].
III. ANALYSIS
A. Motion to Dismiss
1. 

Standard of Review7

A Complaint consists of a “short and plain statement of the
claim showing that the pleader is entitled to relief.”
Civ. P. 8(a)(2).

Fed. R.

“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 Twombly v. Bell Atl.

7

Although Wells Fargo styled its submission as a Motion to Dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(6), the Busches insist that the Motion
must be treated as a Motion for Summary Judgment because Wells Fargo has
presented matters outside the pleadings to the Court for consideration. See
Fed. R. Civ. P. 12(d). Specifically, the Busches note that Wells Fargo attached
copies of the Note and Mortgage to the Motion to Dismiss. However, the Sixth
Circuit has held that “when a document is referred to in the pleadings and is
integral to the claims, it may be considered without converting a motion to
dismiss into one for summary judgment.” Commercial Money Ctr. v. Ill. Union
Ins. Co., 508 F.3d 327, 335-36 (6th Cir. 2007). Such is the case here. Thus,
the Court will evaluate Defendants’ Motion to Dismiss under the Rule 12(b)(6)
standard.

8

Corp., 550 U.S. 544, 570 (2007)); see also Fed. R. Civ. P.
12(b)(6).

“A claim has facial plausibility when the plaintiff

pleads factual content that allows the court to draw the reasonable
inference that a defendant is liable for the misconduct alleged.”
Id. “[A] formulaic recitation of the elements of a cause of action
will not do.”

Twombly, 550 U.S. at 555.

2.

Violations of the Fair Credit Reporting Act

The

Fair

Credit

Reporting

Act

(“FCRA”)

“require[s]

that

credit reporting agencies [CRAs] adopt reasonable procedures for
meeting the needs of commerce for consumer credit, personnel,
insurance, and other information in a manner which is fair and
equitable to the consumer.”

15 U.S.C. § 1681(b).

Consistent with

this goal, the FCRA imposes several duties on furnishers of
information to CRAs.

See 15 U.S.C. § 1681s-2.

This case focuses on the duties set forth in 15 U.S.C. §
1681s-2(b).8 If a CRA receives notice of a dispute over information
included in a credit report, it must notify the furnisher of the
information within five days.

See

15 U.S.C. §§ 1681s-2(b),

8 Subsection

(b) is not the only section of § 1681s-2 that regulates the conduct
of furnishers of information.
Subsection (a) sets forth a duty to provide
accurate information to the CRAs. However, that section is only enforceable by
government officials. Morgan v. HSBC Mortg. Servs., Inc., 930 F. Supp. 2d 833,
837 (E.D. Ky. 2013) (citing 15 U.S.C. § 1681s-2(d)).
Subsection (b), by
contrast, “does allow a consumer to bring a private cause of action against a
furnisher of credit information for either negligent, § 1681o, or willful, §
1681n, violations of the FCRA.” Stafford v. Cross Country Bank, 262 F. Supp.
2d 776, 782 (W.D. Ky. 2003). Thus, § 1681s-2(b) is the focus of this Court’s
analysis.

9

1681i(a)(2).

The furnisher then has thirty days to investigate

the disputed information, review relevant information provided by
the CRAs, and report the result of its investigation to the CRAs.
See 15 U.S.C. §§ 1681s-(2)(b)(1)(A)-(E) (identifying the duties of
a furnisher of information upon notice of dispute), 1681i(a)(1)
(establishing the thirty day investigation window).
bring

suit

against

furnishers

of

information

negligent violations of these duties.

Consumers may

for

willful

or

See 15 U.S.C. § 1681s-2(b)

(citing §§ 1681n, 1681o).
The

Complaint

otherwise

states

misapplied

the

that

“Wells

Busches’

Fargo

payments,

negligently
then

inaccurate and incorrect information to the [CRAs].”
6, ¶ 31].

or

furnished
[DE 1-1, p.

The Busches “reported Wells Fargo’s error to the [CRAs]

and further complied with all applicable statutory provisions.”
[Id. at p. 6, ¶ 32].

However, Wells Fargo continued to provide

inaccurate information to the CRAs “after notice and confirmation
of errors.”

[Id. at p. 6, ¶ 31-32].

Wells Fargo contends that the Busches have failed to state a
claim upon which relief may be granted because they did not allege
that the CRAs notified Wells Fargo of the dispute over their credit
report.

Absent such notice, Wells Fargo contends that its duties

under § 1681s-2(b) could not have been triggered, and thus, it
cannot be held liable for violations of those duties.

10

After all,

“a furnisher of credit information … has no responsibility to
investigate a credit dispute until after it receives notice of a
dispute from a consumer reporting agency.”

Stafford, 262 F. Supp.

2d at 784 (observing further that, “[u]nder the statutory language,
notification from the consumer is not enough”).
Although the Complaint contains no specific allegations that
the CRAs notified Wells Fargo of the dispute, it does indicate
that the Busches contacted the CRAs with concerns about their
credit report, thereby requiring the CRAs to notify Wells Fargo of
the dispute within five days.
1681i(a)(2).

Moreover,

See 15 U.S.C. §§ 1681s-2(b),

correspondence

between

the

parties

indicates that Wells Fargo did communicate with the CRAs during
that time period.

[DE 1-1 at 17-24].

Thus, the Court may draw

the reasonable inference that the CRAs notified Wells Fargo of the
dispute, triggering its obligations under § 1681s-2(b) and making
dismissal inappropriate at this juncture.

See Eddins v. Cenlar,

964 F. Supp. 2d 843, 848 (W.D. Ky. 2013) (finding that, while the
plaintiff had yet to provide “affirmative evidence” that the
defendant, a furnisher of information, had been in contact with a
credit reporting agency, correspondence attached to the complaint
was sufficient to show that such notice was plausible).
Nevertheless, Wells Fargo insists that this claim must be
dismissed because the Busches have not demonstrated that they

11

incurred actual damages.

This argument proceeds on the assumption

that the Busches have only plead a claim for negligent violations
of the FCRA.

See Beaudry v. TeleCheck Servs., Inc., 579 F.3d 702,

705 (6th Cir. 2009) (noting that § 1681n “permits a negligence
claimant to recover only actual damages, costs and attorney’s
fees”).

Although the Busches do not confirm or dispute this

characterization of their FCRA claim, the Court is not yet inclined
to impose the limitations suggested by Wells Fargo.

After all,

the Complaint states that Wells Fargo “negligently or otherwise”
violated the FCRA, and requests punitive damages, which are only
recoverable in connection with willful violations of the FCRA.
Bach v. First Union Nat’l Bank, 149 F. App’x 354, 364 (6th Cir.
2005).
However, even if the Court were to read the Busches’ claim as
one for negligent violations of the FCRA, dismissal would still be
inappropriate. Wells Fargo insists that the Busches incurred their
damages, which consist of the cost of the home appraisal, the cost
of hiring an attorney, lost wages, and emotional distress, well
before its FCRA duties were triggered. Thus, Wells Fargo concludes
that the Busches’ damages cannot be tied to a subsequent violation
of those duties.

However, the Court sees no basis for concluding

that the Busches suffered no emotional distress after Wells Fargo
began investigating the dispute.

12

In fact, the inverse seems more

plausible.

After all, Wells Fargo received notice of the dispute

between February 24, 2016 and March 2, 2016.

Although Wells Fargo

promised to correct the information by March 30, 2016, further
correspondence indicates that it did not rectify the situation
until May 3, 2016. Because “[a]ctual damages may ‘include recovery
for emotional distress and humiliation,’” the Court need not
consider the viability of the Busches’ other requested categories
of damages at this juncture.

Lewis v. Ohio Prof’l Elec. Network,

LLC, 248 F. Supp. 2d 693 (S.D. Ohio 2003).

The Busches have

succeeded in stating a claim upon which relief may be granted.
Wells Fargo’s Motion to Dismiss is denied as to the Busches’ FCRA
claim.
3.

Breach of Contract

“Under Kentucky law, a cause of action for breach of contract
must state ‘the contract, the breach and the facts which show the
loss or damage by reason of the breach.’”

9

Shane v. Bunzl Distrib.

USA, Inc., 200 F. App’x 397, 402 (6th Cir. 2006) (quoting Fannin
v. Commercial Credit Corp., 249 S.W.2d 826, 827 (Ky. 1952)).

“If

a plaintiff fails to attach the alleged contract to the complaint,
or proffer the language of the allegedly breached contractual

9

“A federal court exercising supplemental jurisdiction over state law claims
is bound to apply the law of the forum state to the same extent as if it were
exercising its diversity jurisdiction.”
Super Sulky, Inc. v. U.S. Trotting
Ass’n, 174 F.3d 733, 741 (6th Cir. 1999). Thus, the Court will apply Kentucky
law in evaluating each of the Busches’ state law claims.

13

provision, then he fails to state a breach of contract claim.”
Barbourville Diagnostic Imaging Ctr. v. Philips Med. Sys., Inc.,
Civ. A. No. 12-191-GFVT, 2013 WL 4459860, at *4 (E.D. Ky. Aug. 16,
2013) (citing Northampton Rest. Grp., Inc. v. FirstMerit Bank,
N.A., 492 F. App’x 518, 521-22 (6th Cir. 2012); Shane, 200 F. App’x
at 401-02).
The Complaint alleges that Wells Fargo “breached the contract
by misapplying payments and by providing inaccurate information to
the three major credit bureaus concerning the Busches’ account.”
[DE 1-1, p. 5, ¶ 18].
rely

on

the

fact

As evidence of a breach, the Busches simply

that

Wells

Fargo

later

acknowledged

their

“mistake,” applied the funds as the Busches intended, and notified
the credit bureaus that the Busches were current on their payments.
[DE 11 at 3-6].
While Wells Fargo concedes that it attempted to accommodate
the Busches’ payment preferences, it insists that this breach of
contract claim fails because it had no contractual obligation to
process the Busches’ check as advance monthly payments of interest,
principal, and escrow. [DE 9 at 6-9].
the

Promissory

position.

Note

and

Mortgage,

The Court, having reviewed
agrees

with

Wells

Fargo’s

While the Note and Mortgage grant the Busches the right

to make prepayments on principal, so long as they were identified
in writing, there is no contractual language indicating that they

14

enjoyed a similar right to make advance monthly payments.

There

is certainly no suggestion that the Busches may use handwritten
instructions to deviate from the payment procedures set forth in
the Note and Mortgage.

Because the Busches did enjoy such rights,

Wells Fargo did not have a contractual obligation to process the
Busches’

payments

as

instructed.

Absent

such

a

contractual

obligation, the Busches cannot sustain their breach of contract
claim.
Similarly, the Note and Mortgage do not contain any provisions
restricting or regulating Wells Fargo’s communications with the
CRAs.
CRAs

Without such provisions, Wells Fargo’s contact with the
cannot

Accordingly,

amount
the

to

a

breach

of

the

Note

Busches’

breach

of

contract

and
claim

Mortgage.
must

be

dismissed.
4.

Unjust Enrichment

An unjust enrichment claim consists of three elements: “(1)
benefit conferred upon defendant at plaintiff’s expense; (2) a
resulting

appreciation

of

benefit

by

defendant;

and

(3)

inequitable retention of benefit without payment for its value.”
Jones v. Sparks, 297 S.W.3d 73, 78 (Ky. Ct. App. 2009); see also
Javier Steel Corp. v. Cent. Bridge Co., 353 S.W.3d 356, 359 (Ky.
Ct. App. 2011).

“The claim for unjust enrichment is a legal

fiction created to permit recovery where equity says there should
15

be recovery, although there is no recovery in contract.”

Holley

Performance Prods., Inc. v. Keystone Auto. Operations, Inc., Civ.
A. No. 1:09-cv-00053-TBR, 2009 WL 3613735, at *5 (W.D. Ky. Oct.
29, 2009) (citing Perkins v. Daugherty, 722 S.W.2d 907, 909 (Ky.
Ct. App. 1987)).
Although

Federal

Rule

of

Civil

Procedure

8(d)(3)

allows

parties to “state as many separate claims or defenses as it has,
regardless

of

consistency,”

federal

courts

within

the

Sixth

Circuit have dismissed unjust enrichment claims that were premised
on the same facts underlying a breach of contract claim, relying
on the Kentucky rule that “’[t]he doctrine of unjust enrichment
has no application in a situation where there is an explicit
contract which has been performed.’”

See, e.g., Poynter v. Ocwen

Loan Servicing, LLC, Civ. A. No. 3:13-cv-773-DJH-CHL, 2016 WL
5380926, at *6 (W.D. Ky. Sept. 23, 2016) (quoting Codell Constr.
Co. v. Kentucky, 566 S.W.2d 161, 165 (Ky. Ct. App. 1977)).
The Complaint states that the Busches “tendered value and
benefit to Wells Fargo in the form of early payment as permitted
by the Note, and Wells Fargo has had the use of those funds, i.e.,
the time-value of money, since that time.”
They

further

assert

that

“Wells

Fargo

[DE 1-1, p. 5, ¶ 21].
failed

to

properly

credit/apply the payments” and that “[i]t would be inequitable for
Wells Fargo to retain the funds.”

16

[Id. at p. 5, ¶ 22-23].

Wells Fargo urges the Court to dismiss the Busches’ unjust
enrichment claim as duplicative of the breach of contract claim,
relying

heavily

on

the

reasoning

set

forth

in

Poynter.

By

contrast, the Busches insist that their claim should be preserved
because the Federal Rules of Civil Procedure allow them to plead
claims in the alternative.
The Busches’ argument suffers from a fatal flaw.

Even if the

Federal Rules of Civil Procedure permit alternative pleading, the
Busches have failed to actually plead separate claims.

Instead,

they have simply repackaged their breach of contract claim.

The

Complaint does not indicate that the Busches had any extracontractual dealings with Wells Fargo.

Instead, it relies on the

terms of the Note and Mortgage in stating the unjust enrichment
claim,

suggesting

that

entire relationship.

these

documents

governed

the

parties’

Because the Busches’ unjust enrichment claim

is predicated on the same facts underlying their breach of contract
claim, it must be dismissed.
5.

Negligence

A negligence claim “requires proof that (1) the defendant
owed the plaintiff a duty of care, (2) the defendant breached the
standard by which his or her duty is measured, and (3) consequent
injury.”

Pathways, Inc. v. Hammons, 113 S.W.3d 85, 88 (Ky. 2003).

As the Court of Appeals of Kentucky has observed:
17

The failure to perform a contractual obligation
typically does not give rise to a cause of action in
tort … However, if a plaintiff can establish the
existence of an independent legal duty, he may maintain
an action in tort even though the acts complained of
also constitute a breach of contract.

Mims v. Western-Southern Agency, Inc., 226 S.W.3d 833, 836 (Ct.
App. Ky. 2007) (quoting Jones v. Hartford Life and Accident Ins.
Co., 443 F. Supp. 2d 3, 5 (D.D.C. 2006)).
The Complaint simply asserts that Wells Fargo owed the Busches
a duty of care and “breached its duty by failing to properly apply
payments

to

the

Note,

and

by

further

furnishing

information to the three major credit bureaus.”

inaccurate

[DE 1-1, p. 6, ¶

26-27].
Wells Fargo contends that this claim must be dismissed because
it only owed the Busches contractual duties, as set forth in the
Note and Mortgage.

Because Wells Fargo did not owe the Busches an

independent duty, it concludes that the Busches cannot sustain
this negligence claim.

In response, the Busches insist that Wells

Fargo did owe them an independent duty, noting that Kentucky law
requires banks to act in good faith and exercise ordinary care in
the handling of customer accounts.
908 S.W.2d 679 (Ky. Ct. App. 1995).

18

Christie v. First Am. Bank,

Although Christie does acknowledge the existence of such
duties in handling customer accounts, the court ultimately holds
that the duties do not apply to the calling of demand notes and
declined to discuss “the issue of whether the duty of good faith
applies to other types of loan transactions.”

Id.

Thus, Christie

does not decide whether the duties of good faith and ordinary care
apply to mortgage transactions or credit reporting procedures.
Because the Busches have not offered any other cases to establish
that Wells Fargo owed them any duties independent of the Note and
Mortgage, their breach of contract claim must be dismissed.10
6.

Violations of the Kentucky Consumer Protection Act

The Kentucky Consumer Protection Act (“KCPA”) protects “[a]ny
person who purchases or leases goods or services primarily for
personal, family, or household purposes” from “unfair, false,
misleading, or deceptive acts or practices in the conduct of any
trade or commerce.”

Ky. Rev. Stat. Ann. § 367.220(1), 367.170.

The Court of Appeals of Kentucky has held that the KCPA does not
apply to real estate transactions by an individual homeowner.
Craig v. Keene, 32 S.W.3d 90, 91 (Ky. 2000).

Moreover, it has

defined the term “real estate transaction” as “encompass[ing] any
transaction touching upon or involving real estate.”

Todd v. Ky.

10

 Even if such a duty existed, the Busches’ negligence claim would likely be
preempted by the FCRA. See Morgan, 930 F. Supp. 2d at 838.

19

Heartland Mortg., Inc., 2003 WL 21770805, at *3 (Ky. Ct. App. Aug.
1, 2003).
The Complaint simply alleges that “Wells Fargo’s actions as
heretofore described constitute violations of the KCPA.”
1, p. 7, ¶ 36].

[DE 1-

Wells Fargo, relying on Craig and Todd, insists

that its business with the Busches qualifies as a “real estate
transaction.”

Thus, it concludes that its actions cannot amount

to KCPA violations.

Although the Busches argue that KRS § 367.320

evinces a contrary intent to include real estate transactions in
the KCPA, the provisions of that statute are limited to servicers
of high-cost home loans.

Nothing in the Complaint suggests that

the Busches’ loan qualifies as such.

Their KCPA claim must be

dismissed.
7.

Intentional
Distress

and

Negligent

Infliction

of

Emotional

Under Kentucky law, “[o]ne who by extreme and outrageous
conduct

intentionally

or

recklessly

causes

severe

emotional

distress to another is subject to liability for such emotional
distress, and if bodily harm to the other results from it, for
such

bodily

harm.”

See

Restatement

(Second)

of

Torts

46.

Outrageous conduct “is a deviation from all reasonable bounds of
decency and is utterly intolerable in a civilized community.”
Craft v. Rice, 671 S.W.2d 247, 250-51 (Ky. 1984).

20

In this case, the Complaint merely cites the elements of an
intentional infliction of emotional distress claim and generally
alleges that Wells Fargo acted outrageously in misapplying their
payment and inaccurately reporting their credit score to the CRAs.
[DE

1-1,

p.

7,

¶

38-40].

“[S]uch

conduct

is

certainly

not

desirable, but it does not deviate from all reasonable bounds of
decency, and is a far cry for outrage.”
at

840.

Moreover,

there

is

no

Morgan, 930 F. Supp. 2d

suggestion

that

Wells

Fargo

undertook such conduct with the intent to cause severe emotional
distress.

See, e.g., Ramey v. St. Claire Med. Ctr., No. 2003-CA-

000476-MR, 2004 WL 2481393, at *5 (Ky. Ct. App. Nov. 5, 2004)
(dismissing an intentional infliction of emotional distress claim
based in part on a lack of evidence that the defendant’s employees
intended to cause emotional distress to the plaintiff).

Thus, the

Court concludes that the Busches have failed to state a claim for
intentional infliction of emotional distress.
A claim for negligent infliction of emotional distress is
“analyzed

in

accordance

with

common

law

negligence:

(1)

the

defendant must have owed a duty of care to the plaintiff; (2) which
it breached; (3) legally causing; (4) injury to the plaintiff.”
Jackson

v. Steele, Civ. A. No. 11-72-DLB-EBA, 2014 WL

at *12 (E.D. Ky. June 19, 2014) (citing

Osbourne

2801337,

v. Keeney, 399

S.W.3d 1, 17 (Ky. 2012)). Because the Court has already found that

21

Wells Fargo did not owe the Busches any duties independent of the
Note and Mortgage, the Busches cannot sustain their claim for
negligent

infliction

of

emotional

distress.

Dismissal

is

therefore appropriate as to both claims.
8.

Tortious Interference with a Contract or Prospective
Business Relationship

Tortious

interference

with

a

contract

consists

of

the

following elements: “(1) the existence of a contract; (2) that the
defendant had knowledge of the contract; (3) that the defendant
intended

to

cause

a

breach

of

that

contract;

(4)

that

the

defendant’s actions did indeed cause a breach; (5) that damages
resulted to the plaintiff; and (6) that the defendant had no
privilege or justification to excuse its conduct.”

Snow Pallet,

Inc. v. Monticello Banking Co., 367 S.W.3d 1, 5-6 (Ky Ct. App.
2012).
By contrast, “[t]ortious interference with a prospective
business advantage does not require the existence of a contract.”
Id. at 6.

It simply requires proof of the following elements: (1)

the existence of a valid business relationship or expectancy; (2)
that the defendant was aware of this relationship or expectancy;
(3) that the defendant intentionally interfered; (4) that the
motive behind the interference was improper; (5) causation; and
(6) special damages.”

Id.

22

The Busches allege that they “attempted to refinance the Note
and

were

denied

refinancing

with

another

lender

due

inaccurate, untruthful credit reporting by Wells Fargo.”
1, p. 8, ¶ 43].

to

the

[DE 1-

They further state that Wells Fargo’s actions

“were intentional, wrongful, improper, and constitute tortious
interference with a contract or prospective business advantage.”
[Id. at p. 8, ¶ 44].
While

the

Busches

insist

that

these

allegations

are

sufficient to satisfy Rule 8’s liberal pleading standard, Wells
Fargo argues that this claim must be dismissed because it consists
of nothing more than threadbare conclusions.

Having reviewed the

allegations set forth in the Complaint, the Court agrees with Wells
Fargo.

The conduct described in the Complaint does not suggest

that Wells Fargo knew about the Busches’ efforts to refinance or
intentionally interfered with those efforts.

Accordingly, these

claims must be dismissed.
9.

Punitive Damages and Attorney’s Fees

The FCRA allows a successful claimant to recover attorney’s
fees in cases of negligent or willful noncompliance.
F.3d at 705.

Beaudry, 579

While punitive damages may also be awarded under the

FCRA, they are limited to cases of willful noncompliance.
149 F. App’x at 364.

23

Bach,

In this case, the Court already found that the Busches have
stated a claim for FCRA violations.

It also declined to decide

whether that claim is essentially one for negligent or willful
violations of the FCRA.

Given the viability of this claim,

dismissal of the Busches’ request for attorney’s fees and punitive
damages is inappropriate at this juncture.
B.

Motion for Partial Summary Judgment
Summary judgment is appropriate when there is no genuine

dispute as to any material fact and the movant is entitled to
judgment as a matter of law.

Fed. R. Civ. P. 56(a).

Although a

party may move for summary judgment at any time, the opposing party
may ask the Court to defer or deny the Motion, allow time for
discovery, or issue any other appropriate order.
56(d)(1)-(3).

Fed. R. Civ. P.

In order to succeed on such a motion, the opposing

party must “show[] by affidavit or declaration that, for specified
reasons,

it

position.”
The

cannot

present

facts

essential

to

justify

its

Id.

Busches

argue

that

summary

judgment

is

appropriate

because “[i]t is undisputed that the violation at issue took months
to remedy, more than the 30-day “investigation” period provided
for under the FCRA and only because of assistance of a lawyer at
significant expense.”

[DE 12-1, p. 2, ¶ 5].

They further assert

that “[i]t is undisputed that the remaining elements of an FCRA
24

claim are met” and that “[t]he only element that Defendants have
contested is whether they received notice from the credit bureaus
of the violation.” [Id. at p. 2, 6]. Because Defendants attempted
to remedy the situation, the Busches conclude that they received
notice of the dispute, thus establishing that element.
In response, Wells Fargo contends that summary judgment is
premature and that discovery is needed to defend the remaining
FCRA claim.

[DE 17].

In support of this assertion, Wells Fargo’s

attorney has filed a Rule 56(d) affidavit, indicating that Wells
Fargo intends to serve subpoenas on the credit reporting agencies
to determine how they processed information, what reports they
made, how the Busches communicated with them, when they received
updated information from Wells Fargo, and when they actually
updated that information.
Having

reviewed

the

[DE 17-1, p. 3, ¶ 6].
parties’

submissions,

inclined to agree with Wells Fargo.

the

Court

is

Although the record, as

developed, indicates that the credit reporting agencies likely
notified Wells Fargo of the dispute and that Wells Fargo eventually
remedied the situation, it remains unclear whether any of Wells
Fargo’s actions during that time period amounted to violations of
the FCRA’s investigation and reporting requirements.
Court

finds

that

there

are

genuine

issues

of

Thus, the

material

fact

requiring discovery, and thus, summary judgment is premature at

25

this juncture.

Because the Busches’ request for attorney’s fees

is tied to the outcome of their FCRA claim, summary judgment on
that issue must also be denied.
III. CONCLUSION
Accordingly, for the reasons stated herein,
IT IS ORDERED as follows:
(1)

Defendants’ Motion to Dismiss [DE 9] is hereby DENIED as
to Counts IV (Fair Credit Reporting Act Violation), VII
(Punitive Damages), and IX (Attorney’s Fees) and GRANTED
as

to

Counts

Enrichment),

I

III

(Breach

of

(Negligence),

Contract),
V

II

(Kentucky

(Unjust
Consumer

Protection Act Violation), VI (Intentional and Negligent
Infliction of Emotional Distress), and VII (Tortious
Interference

with

Contract

or

Prospective

Business

Relationship);
(2)

Plaintiffs’ Motion for Summary Judgment on Liability and
Attorney’s Fees [DE 12] is hereby DENIED AS PREMATURE;
and

(3)

Defendants

shall

file

an

Answer

to

the

remaining

allegations in the Complaint within ten (10) days of the
date of entry of this Order.
This the 9th day of January, 2017.
26

27