Lenhard v. CitiMortgage, Incorporated

Filing 18

ORDER granting in part and denying in part 9 Motion to Dismiss. COUNTS II, IV, VI, AND VIII-XIV ARE DISMISSED IN THEIR ENTIRETY AND WITH PREJUDICE; COUNT V IS DISMISSED WITH PREJUDICE (SEE ORDER); granting 15 Motion to Amend/Correct. Signed by District Judge Julian Abele Cook. (KDoa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

ELIZABETH LENHARD,
Plaintiff,
v.
Case No. 11-11810
Honorable Julian Abele Cook, Jr.

CITIMORTGAGE, INC.,
Defendant.

ORDER
This case involves a contention by the Plaintiff, Elizabeth Lenhard, that the Defendant,
CitiMortgage, Inc., violated several federal and state laws in connection with a mortgage
transaction and subsequent foreclosure proceedings against her property.
Currently pending before the Court are two formal requests for relief; namely, (1) a motion
to dismiss by CitiMortgage, and (2) a motion for leave to file an amended complaint by Lenhard.
I.
On August 12, 2003, Lenhard obtained a loan from a non-party lender in the sum of $90,000
that had been secured by a mortgage on a parcel of property in Warren, Michigan. Three days later
(August 15th), this mortgage was assigned to the ABN AMRO Mortgage Group, Inc. (“ABN
AMRO”). In September of 2007, CitiMortgage, by virtue of its subsequent merger with ABN
AMRO, became the successor mortgagor. It is also the servicer of the loan. When Lenhard
experienced a downward change in her financial circumstances, she submitted a loan modification
application to CitiMortgage in April 2010, which was ultimately rejected. Lenhard alleges that,
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around the time that she submitted the loan modification application, her monthly escrow payment
was inexplicably increased by approximately $80 even though neither her insurance rates nor taxes
had increased. She acknowledges that her (1) last payment to CitiMortgage was tendered in
September of 2010, and (2) account became delinquent in November of the same year. Her account
was subsequently referred for foreclosure. Lenhard also alleges that, in March of 2011, she
submitted a qualified written request, pursuant to Real Estate Settlement Procedures Act
(“RESPA”), 12 U.S.C. § 2601 et seq., to CitiMortgage, but that it failed to adequately and properly
respond. This lawsuit followed.
II.
When considering a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil
Procedure, a district court accepts the plaintiff’s well-pleaded allegations as true and construes each
of them in a light that is most favorable to it. Bennett v. MIS Corp., 607 F.3d 1076, 1091 (6th Cir.
2010). However, this assumption of truth does not extend to the plaintiff’s legal conclusions
because “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009). The complaint
“must contain either direct or inferential allegations respecting all material elements to sustain a
recovery under some viable legal theory.” Bishop v. Lucent Techs., Inc., 520 F.3d 516, 519 (6th Cir.
2008) (citation and internal quotation marks omitted).
In order to survive an application for dismissal, the complaint must allege “enough facts to
state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
570 (2007). To meet this standard, the “plaintiff [must] plead[ ] factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129

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S. Ct. at 1949. In essence, “[a] pleading that states a claim for relief must contain . . . a short and
plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
When considering a 12(b)(6) motion, “documents attached to the pleadings become part of
the pleading and may be considered.” Commercial Money Ctr., Inc. v. Ill. Union Ins. Co., 508 F.3d
327, 335 (6th Cir. 2007) (citing Fed. R. Civ. P. 10(c)); see also Amini v. Oberlin Coll., 259 F.3d
493, 502 (6th Cir. 2001) (“In determining whether to grant a Rule 12(b)(6) motion, the court
primarily considers the allegations in the complaint, although matters of public record, orders, items
appearing in the record of the case, and exhibits attached to the complaint, also may be taken into
account.” (emphasis omitted)). Moreover, “documents that a defendant attaches to a motion to
dismiss are considered part of the pleadings if they are referred to in the . . . complaint and are
central to [the plaintiff’s] claim.” Weiner, D.P.M. v. Klais & Co., 108 F.3d 86, 88 n.3 (6th Cir.
1997); see also Bassett v. NCAA, 528 F.3d 426, 430 (6th Cir. 2008). Supplemental documents
attached to the motion to dismiss do not convert the pleading into one for a summary judgment
when the documents do not “rebut, challenge, or contradict anything in the plaintiff’s complaint.”
Song v. City of Elyria, 985 F.2d 840, 842 (6th Cir. 1993) (citing Watters v. Pelican Int’l, Inc., 706
F. Supp. 1452, 1457 n.1 (D. Colo. 1989)).
III.
Lenhard’s complaint contained fifteen separate counts against CitiMortgage. However, in
response to the arguments raised by CitiMortgage in its motion to dismiss, she has agreed to
dismiss the following claims without prejudice: (1) Count II (equitable, declaratory, and injunctive
relief); (2) Count IV (violations of Michigan foreclosure law); (3) Count VI (violations of the
Michigan Consumer Protection Act, Mich. Comp. Laws § 445.901 et seq.); (4) Count VIII
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(intentional infliction of emotional distress); (5) Count IX (negligence); (6) Count X (negligence
per se); (7) Count XI (defamation by libel); (8) Count XII (negligence - malicious statutory libel);
(9) Count XIII (violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692a(6)); and
(10) Count XIV(violations of the Michigan Occupational Code, Mich. Comp. Laws § 339.901(b)).
Lenhard also agreed to dismiss Count V, in which she alleged violations of the Michigan Mortgage
Brokers, Lenders, and Servicers Licensing Act (“MMBLSLA”), Mich. Comp. Laws § 445.1651
et seq., but only to the extent that it alleges fraud or misrepresentation. Lenhard has not provided
any reason as to why the dismissal should be without prejudice. She acknowledges that no
controversy remains with respect to any of these claims. Moreover, it is evident from a reading of
the allegations that these identified counts fail to state a claim. Hence, the Court does not perceive
any reason why the dismissal of these claims should operate as anything other than an adjudication
on the merits. Therefore, these counts (as well as the relevant allegations in Count V) are dismissed
with prejudice.
CitiMortgage submits that Lenhard’s remaining claims1 should be disposed of in the same
manner, in that they consist merely of conclusory recitations of the elements of the respective
causes of action, and therefore lack sufficient factual content to survive the Twombly and Iqbal
analysis. Lenhard disputes this contention by pointing to the relevant allegations in the complaint
and stating that certain necessary and specific factual allegations can be inferred from the
complaint. In the alternative, she asks the Court for authority to amend her complaint to plead her
claims with greater specificity. This request was supplemented by her subsequent filing of a motion
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The remaining counts are based upon (1) RESPA, 12 U.S.C. § 2601 et seq.; (2) breach
of contract/wrongful foreclosure; (3) MMBLSLA, Mich. Comp. Laws § 445.1651 et seq.; (4) the
Fair Credit Reporting Act, 15 U.S.C. § 1681s-2(b), 1681n, and 1681o; and (5) the Equal Credit
Opportunity Act, 15 U.S.C. 1691 et seq.
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for leave to file an amended complaint.
CitiMortgage is correct when it argues that many of Lenhard’s claims do not provide a
specific factual basis for the claimed violations. See Iqbal, 129 S. Ct. at 1949-50 (“Threadbare
recitals of the elements of a cause of action, supported by mere conclusory statements, do not
suffice.”). The Court does not believe that it - or CitiMortgage - should be in the position of having
to infer that which could and should be specifically alleged. Thus, the Court turns to Lenhard’s
request to amend her complaint.2
IV.
The Federal Rules of Civil Procedure provide that, unless an amendment is filed under
circumstances that are not applicable here, a party may amend a pleading only with the consent of
the opposing party or the specific authority of the court. Fed. R. Civ. P. 15(a). This Rule is to be
construed liberally, and the court “should freely give leave when justice so requires.” Fed. R. Civ.
P. 15(a)(2). The Supreme Court, speaking of the Federal Rules generally as well as of Rule 15 in
particular, has stated that it is “entirely contrary to the spirit of the Federal Rules of Civil Procedure
for decisions on the merits to be avoided on the basis of [ ] mere technicalities.” Foman v. Davis,
371 U.S. 178, 181 (1962); see also Jet, Inc. v. Sewage Aeration Sys., 165 F.3d 419, 425 (6th Cir.
1999) (citation omitted) (“[T]he thrust of Rule 15 is . . . that cases should be tried on their merits
rather than the technicalities of pleadings.”). The underlying purpose of allowing parties to amend
their pleadings is to permit the issues to be tried on the merits. Foman, 371 U.S. at 182 (“If the
underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he
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The text of this order may seem familiar to Lenhard’s counsel. He engaged in a similar
course of action and raised identical (or virtually identical) arguments in a different matter before
this Court, Washburn v. Am. Home Mortgage Serv., Inc., No. 11-12890 (E.D. Mich.).
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ought to be afforded an opportunity to test his claim on the merits.”).
The Supreme Court has articulated several factors that are relevant to the propriety of
granting a request for leave to amend. “In the absence of any apparent or declared reason - such as
undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue
of allowance of the amendment, futility of amendment, etc. - the leave sought should, as the rules
require, be ‘freely given.’” Foman, 371 U.S. at 182; see also Commercial Money Ctr., Inc. v. Ill.
Union Ins. Co., 508 F.3d 327, 346 (6th Cir. 2007) (“Factors that may affect that determination
include undue delay in filing, lack of notice to the opposing party, bad faith by the moving party,
repeated failure to cure deficiencies by previous amendment, undue prejudice to the opposing party,
and futility of the amendment.”).
Here, these factors support granting Lenhard’s request. Her request to amend was first made
in her response brief - not even four months after the filing of the initial complaint3 and before any
discovery had taken place or amendment deadlines, Fed. R. Civ. P. 16(b)(3)(A), had elapsed. Her
request does not appear to be the result of bad faith or a dilatory motive.4 Moreover, inasmuch as
this is her first request to amend her complaint, there has been no failure to cure deficiencies by
amendments previously allowed. While granting her request may, by necessity, delay an ultimate
resolution of the issues and cause CitiMortgage to incur some additional costs, this does not
3

Her subsequent motion for leave to amend was filed less than six months after she
commenced this litigation.
4

Although CitiMortgage suggests otherwise, the Court is not persuaded. Lenhard stands
by the sufficiency of the pleading with respect to the remaining claims in the original complaint,
but seeks leave to amend in the event that the Court would otherwise be inclined to grant a
motion to dismiss for insufficient pleading.
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constitute an “undue” prejudice in that Lenhard seeks only to clarify her pleadings rather than, for
example, adding several new and unanticipated claims at a late stage of the litigation.
The Court notes that CitiMortgage, in arguing that Lenhard’s proposed amendment would
be futile, has essentially engaged in a renewed argument in support of its motion to dismiss - but
this time, supported by several additional pieces of evidence that, it argues, demonstrate that
Lenhard cannot prevail on her claims as initially pleaded or as amended. However, some of this
evidence may not properly be considered by the Court in analyzing a Rule 12(b)(6) motion, and the
Court does not believe that the futility prong of the amendment analysis calls for a full-blown
adjudication of the merits of the underlying claims, especially such an adjudication aided by
evidence that would not be considered on a motion to dismiss. Thus, CitiMortgage’s argument is
insufficient to overcome the presumption in favor of amendment.
For these reasons, the Court will grant Lenhard’s request to amend the complaint with
respect to the five remaining counts.
V.
For the reasons that have been set forth above, CitiMortgage’s motion to dismiss (ECF No.
9) is granted in part and denied in part. Specifically, (1) Counts II, IV, VI, and VIII-XIV are
dismissed in their entirety and with prejudice; (2) Count V is dismissed with prejudice to the extent
that it alleges fraud and/or misrepresentation; and (3) Lenhard’s motion for leave to amend her
complaint (ECF No. 15) is granted with respect to the remaining claims.

IT IS SO ORDERED.

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Date: March 8, 2012

s/Julian Abele Cook, Jr.
JULIAN ABELE COOK, JR.
U.S. District Court Judge

CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing Order was served upon counsel of record via the Court's ECF System to their respective
email addresses or First Class U.S. mail to the non-ECF participants on March 8, 2012.

s/ Kay Doaks
Case Manager

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