Groh v. JPMorgan Chase Bank, N.A.
Filing
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ORDER granting in part 5 Defendant's Motion to Dismiss. Counts I, II, IV, V, VII, and VIII are dismissed. Signed on 1/5/15 by Chief District Judge Greg Kays. (Francis, Alexandra)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
SAM GROH,
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Plaintiff,
v.
JPMORGAN CHASE BANK, N.A.,
Defendant.
No. 14-CV-578-W-DGK
ORDER GRANTING IN PART DEFENDANT’S MOTION TO DISMISS
This case arises out of a lender’s alleged failure to promptly grant a borrower a
permanent loan modification. Plaintiff Sam Groh (“Groh”) alleges Defendant JPMorgan Chase
Bank, N.A. (“Chase Bank”) failed to reduce his monthly payments on his home loan as required
by the parties’ loan workout plan and wrongly reported Groh delinquent to credit reporting
agencies during the loan modification process.
Pending before the Court is Chase Bank’s Motion to Dismiss (Doc. 5). Holding that six
of the Amended Petition’s eight counts do not state a claim upon which relief can be granted, the
Court GRANTS IN PART and DENIES IN PART the motion.
Factual Background
Construing the Complaint liberally and drawing all reasonable inferences in Groh’s favor,
the Court finds the facts to be as follows for purposes of resolving the pending motion to
dismiss:
Chase Bank issued Groh a promissory note (“the Home Loan”) in 2008, secured by a
deed of trust on real property owned by Groh. The Home Loan required Groh to repay the note
in regular installments, with interest and late fees to be charged if Groh did not timely make his
payments.
Groh’s payments on the Home Loan were all timely through 2009, when Groh and Chase
Bank entered into a Home Affordable Modification Program Loan Workout Plan (“Loan
Workout Plan”) in order to reduce Groh’s monthly payments. Under the Loan Workout Plan,
Groh had to make three “trial period” payments in the amount of $1,243.13, to be paid on three
dates in April, June, and July of 2009.
At that time, the parties were to adopt a Loan
Modification Agreement which would set forth a new payment amount for Groh to pay Chase
Bank for the balance of the Home Loan (Doc. 1-1, at 54 (“If [Groh is] in compliance with this
Loan Workout Plan, [then Chase Bank] will provide [Groh] with a Loan Modification
Agreement . . . that would amend and supplement (1) the Mortgage on the Property, and (2) the
Note secured by the Mortgage.”)). The Loan Workout Plan stated that all other provisions of the
Home Loan remained in effect during the trial period. It further stated it would automatically
terminate upon execution of a new loan modification.
Groh timely made all three trial period payments. However, Chase Bank failed to
promptly adopt the Loan Modification Agreement as it had promised under the Loan Workout
Plan. Chase Bank never told Groh what payments he must make going forward, though it did
repeatedly tell him to continue paying monthly installments of $1,243.13. Groh continued
making monthly payments to Chase Bank in that amount, even though the trial period had ended
and was supposed to be superseded by a new Loan Modification Agreement. All told, he made
fifteen monthly payments of $1,243.13 after the trial period concluded.
Although Groh made the required payments, Chase Bank reported to several consumerreporting agencies that Groh was “150 days delinquent” in his payments on the Home Loan.
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After Groh complained to the consumer-reporting agencies that he was not actually delinquent
on anything, the agencies and Chase Bank all refused to correct the error on his credit report.
Before Chase Bank reported Groh was delinquent, he had a good credit history. Because
of his credit history, Groh had expected to receive credit to refinance another piece of land.
After Chase Bank reported Groh’s delinquency and refused to renounce that report, Groh was
denied credit for this property.
Chase Bank eventually finalized Groh’s Loan Modification Agreement in September
2010, making his payments $996.96 per month effective November 1, 2010. In June 2013, Groh
filed this lawsuit (Doc. 1-1 (Amended Petition)).
Standard
Chase Bank moves to dismiss the Amended Petition under Federal Rule of Civil
Procedure 12(b)(6). A complaint must meet two conditions to survive a Rule 12(b)(6) motion.
First, it must “contain sufficient factual matter, accepted as true, to state a claim to relief.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Although the complaint need not make 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 not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Second, the complaint must state a claim for relief that is plausible. Iqbal, 556 U.S. at
678. A claim is plausible when “the court may draw the reasonable inference that the defendant
is liable for the misconduct alleged.” Id. The plaintiff need not demonstrate the claim is
probable, only that it is more than just possible. Id.
3
In reviewing the complaint, the court construes it liberally and draws all reasonable
inferences from the facts in the plaintiff’s favor. Smithrud v. City of St. Paul, 746 F.3d 391, 395
(8th Cir. 2014). The court generally ignores matters outside the pleadings. Id.
Discussion
Groh’s Amended Petition charges eight counts. Chase Bank argues that each count fails
to state a claim for relief under Rule 12(b)(6).
I. Groh’s negligent misrepresentation claim is based on a contract, and so must be
dismissed.
Count I asserts a claim for negligent misrepresentation against Chase Bank for not
following through on its contractual promise to offer Groh a permanent loan modification. “The
mere breach of a promise or failure to perform does not constitute a misrepresentation of fact”
absent an allegation that the promisor did not presently intend to perform. Titan Constr. Co. v.
Mark Twain Kan. City Bank, 887 S.W.2d 454, 459 (Mo. Ct. App. 1994).
Here, Chase Bank promised Groh that so long as he complied with the Loan Workout
Plan’s terms, it would provide him with a loan modification. Groh complied with his obligations
under the Loan Workout Plan, but Chase Bank did not offer Groh a permanent modification until
fifteen months later.
This alleged misrepresentation is merely a breach of contract claim by another name,
which cannot support a negligent misrepresentation claim. See id. Insofar as the Amended
Petition alleges that the misrepresentations come from Chase Bank’s verbal representations that
Groh could continue paying the lower trial period amounts after the Loan Workout Plan expired,
such claims are barred by the statute of frauds. See Mo. Rev. Stat. § 432.045(2) (“A debtor may
not maintain an action upon or a defense to a credit agreement unless the credit agreement is in
writing, provides for the payment of interest or for other consideration, and sets forth the relevant
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terms and conditions . . . .”); see also Wivell v. Wells Fargo Bank, N.A., No. 12-3457-CV-SDGK, 2013 WL 3665529, at *7–8 (W.D. Mo. July 12, 2013), rev’d in part on other grounds, No.
13-2763, 2014 WL 6463030 (8th Cir. Nov. 19, 2014) (“Wivell II”).1
Because the Amended Petition does not identify any misrepresentation sufficient to
support a claim of negligent misrepresentation, Chase Bank’s motion to dismiss Count I is
granted.
II. Because an express contract existed, Groh cannot make a claim for unjust
enrichment.
In Count II, the Amended Petition alleges that Chase Bank was unjustly enriched by
requiring Groh to pay an amount in excess of the amount specified in the Loan Modification
Agreement and by collecting interest and late fees from Groh.
To state a claim for unjust enrichment, a plaintiff must plead that: “(1) [he] conferred a
benefit on the defendant; (2) the defendant appreciated the benefit; and (3) the defendant
accepted and retained the benefit under inequitable and/or unjust circumstances.” Hargis v. JLB
Corp., 357 S.W.3d 574, 586 (Mo. 2011). Missouri law does not recognize an unjust enrichment
claim based on an express contract. Topchian v. JPMorgan Chase Bank, N.A., 760 F.3d 843,
854 (8th Cir. 2014) (citing Howard v. Turnbull, 316 S.W.3d 431, 436 (Mo. Ct. App. 2010)).
Groh challenges payments he made between the time the Loan Workout Plan expired,
and the time the parties consummated the Loan Modification Agreement. Because the Loan
Workout Plan covered only three specific payments to be made at three specific times, all other
payment obligations were covered by the underlying Home Loan. These provisions obligated
1
Groh has attached a “Statement of Eligibility for Loan Modification” (Doc. 9-1) to his suggestions in opposition to
demonstrate that he and Chase Bank modified the terms of the Home Loan in writing. This letter was not part of the
Amended Petition, so cannot be considered with the pending motion. See Smithrud, 746 F.3d at 395. Instead, the
Court analyzes only the Amended Petition, which alleges only that Chase Bank “told” Groh to continue making
monthly installments of $1,243.13 (Doc. 1-1, at 9)—again, an oral contract barred by the statute of frauds.
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Groh to pay interest and late fees for underpayments. Thus, Groh’s unjust enrichment claim is
predicated on an express contract, the Home Loan. Because an express contract existed, Groh’s
claim of unjust enrichment fails. See id.
Alternatively, if Groh means to base this claim on a breach of the oral modification, the
statute of frauds bars his claim on that basis. See Mo. Rev. Stat. § 432.045(2). Accordingly,
Count II is dismissed.
III. The Amended Petition states a claim under the FCRA for failing to investigate
Groh’s complaint regarding his credit report.
Count III alleges a violation of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C.
§§ 1681–1681x. Groh claims that Chase Bank violated the FCRA by failing to investigate and
review its report that Groh was 150 days delinquent on his Home Loan.
Under the FCRA, if an entity furnishes credit information about a consumer to a
consumer-reporting agency, and that agency notifies the furnisher that the consumer is disputing
the information’s accuracy, then the furnisher must review the accuracy of the information it
provided. 15 U.S.C. § 1681s-2(b). Specifically, the furnisher must conduct an investigation,
review all of the relevant information provided by the alerting consumer-reporting agency, and
report the results of the investigation back to the consumer-reporting agency. Id. § 1681s2(b)(1)(A)–(C).
Here, Chase Bank reported to consumer-reporting agencies that Groh was 150 days
delinquent on the Home Loan. Groh notified these consumer-reporting agencies that he was not
actually delinquent on any loan; these agencies in turn informed Chase Bank that Groh was
disputing its report. Chase Bank did not investigate the claim. This was a violation of the
FCRA.
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Chase Bank argues that such an investigation would have been fruitless because its
“investigation would have determined the report was accurate” (Doc. 6, at 11), but the FCRA’s
plain language does not permit a furnisher to escape its Section 1681s-2(b) obligations solely
because it believes an investigation would confirm its initial impressions about a consumer’s
creditworthiness. Count III states a claim, and Chase Bank’s motion to dismiss Count III is
denied.
IV. Because Chase Bank had legal justification to report Groh’s delinquency report, the
Amended Petition fails to state a claim for intentional interference with credit
expectancy.
Count IV is a claim of intentional interference with credit expectancy. Groh argues that
he was denied credit to refinance a separate real property he owns because Chase Bank had
falsely reported to consumer-reporting agencies that Groh was delinquent on his Home Loan.
To survive a motion to dismiss a claim of intentional interference with credit expectancy,
a plaintiff must plead: “(1) a valid credit expectancy; (2) defendant’s knowledge of the
expectancy; (3) a denial of credit induced or caused by defendant’s intentional interference;
(4) absence of justification; and (5) damages.” Bell v. May Dep’t Stores Co., 6 S.W.3d 871, 876
(Mo. 1999). Chase Bank argues the Amended Petition fails to plead the fourth element.
The absence of justification means the defendant had no legal right to take the actions
about which the plaintiff complains. Hibbs v. Berger, 430 S.W.3d 296, 318 (Mo. Ct. App.
2014). There is no justification for independently wrongful acts, which include acts wrongful by
statute. Cent. Trust & Inv. Co. v. Signalpoint Asset Mgmt., LLC, 422 S.W.3d 321, 324 (Mo.
2014).2
2
Although Hibbs and Signalpoint concerned intentional interference with business expectancy and not, as here,
intentional interference with credit expectancy, the latter tort is a species of the former. See Bell, 6 S.W.3d at 876.
Therefore, intentional interference with business expectancy cases are instructive in analyzing intentional
interference with credit expectancy.
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Groh argues that because Chase Bank did not have any legal justification for reporting
him delinquent, because the FCRA prohibits a furnisher of information from reporting or failing
to correct credit information it knows or learns to be false. See 15 U.S.C. § 1681s-2(a)(1), (2).
However, Groh’s delinquency report was true. The Loan Workout Plan allowed Groh to make
three reduced payments on the Home Loan. The Loan Workout Plan expressly disclaimed
modification of the Home Loan, admonishing Groh that the original loan documents remained in
effect. After Groh finished making his three reduced payments, then, he had to return to paying
the higher amount required under the Home Loan. Instead, Groh continued paying the trial
period amounts, which were lower than those he was contractually required to make. Thus when
Chase Bank reported Groh “delinquent”, such a statement was not false. See Webster’s Third
New International Dictionary 597 (2002) (defining “delinquent” as “in arrears in payment of
debt or interest thereon”). Nor can Groh claim that his oral modification to the Loan Workout
Plan altered the terms of the Loan Workout Plan, because of the statute of frauds. See Mo. Rev.
Stat. § 432.045(2). Because the report was true, Chase Bank did not lack legal justification for
reporting Groh delinquent and interfering with a credit expectancy.
Moreover, to the extent this claim is based on Chase Bank’s FCRA violation, it still fails.
Chase Bank’s alleged refusal to investigate the accuracy of its delinquency report did violate a
statute, see 15 U.S.C. § 1681s-2(b)(1)(A)–(C), and so was independently wrongful. However,
Chase Bank’s failure to investigate did not cause the interference and damages alleged by Groh;
it was Chase Bank’s reporting of delinquency in the first place.
Because the Amended Petition does not plead that Chase Bank lacked legal justification
for reporting Groh delinquent, Count IV fails to state a claim against Chase Bank.
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V. Because Groh was delinquent on his Home Loan payments, Chase Bank did not
defame him by reporting his delinquency to consumer-reporting agencies.
Count V is a state law claim of defamation against Chase Bank for publishing a false
report to consumer-reporting agencies that Groh was 150 days delinquent. A defamation claim
requires that the defamatory statement is false. State ex rel. BP Prods. N. Am. Inc. v. Ross, 163
S.W.3d 922, 929 (Mo. 2005). As explained above, Chase Bank’s delinquency report was not
false. Therefore, Count V does not state a claim and Chase Bank’s motion to dismiss this count
is granted.
VI. The Amended Petition pleads that Chase Bank breached the Loan Workout Plan by
failing to promptly modify Groh’s Home Loan.
In Count VI, Groh alleges Chase Bank committed a breach of contract by failing to
execute a permanent loan modification agreement immediately after Groh finished satisfactorily
paying his trial period payments under the Loan Workout Plan.3 A breach of contract claim has
four elements: “(1) the existence of a valid contract; (2) the rights and obligations of each party;
(3) a breach; and (4) damages.” Kieffer v. Icaza, 376 S.W.3d 653, 657 (Mo. 2012). Chase Bank
grounds its dispute in the second and third elements, arguing that Groh “does not and cannot
allege a single Loan Workout Plan provision which Chase Bank breached.” (Doc. 6, at 17).
“When a contract does not specify a time period for performance, performance must be
made within a reasonable time.” Hemsath v. City of O’Fallon, 261 S.W.3d 1, 6 (Mo. Ct. App.
2008). And “[w]hen performance of a duty under a contract is due[,] any non-performance is a
3
The explicit basis for the breach of contract claim in the Amended Petition is that Chase Bank failed to inform
Groh of the amount owed under the trial period and the new amount to be paid after the trial period ended. This
allegation is contradicted by the Loan Workout Plan, which nowhere carries these requirements. However, the
Amended Petition elsewhere pleads facts indicating that an alternative basis for a breach of contract claim is Chase
Bank’s failure to promptly modify Groh’s Home Loan. Because Rule 12(b)(6) requires a court to view the “wellpleaded facts alleged in the complaint, not the legal theories of recovery . . . identified therein,” the Court considers
this alternative basis. Topchian, 760 F.3d at 848.
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breach.” Harris v. Desisto, 932 S.W.2d 435, 444 (Mo. Ct. App. 1996) (quoting Restatement
(Second) of Contracts § 235(2) (1979)).
The Loan Workout Plan stated that so long as Groh complied with its terms, Chase Bank
“will provide [Groh] with a Loan Modification Agreement . . . that would amend and supplement
(1) the Mortgage on the Property, and (2) the Note secured by the Mortgage.” (Doc. 1-1, at 54).
Groh complied with all conditions of the Loan Workout Plan. When he timely tendered his third
and final trial payment to Chase Bank by July 2009, Groh was entitled to a permanent loan
modification agreement.
However, Chase Bank did not extend to Groh a permanent loan
modification agreement until September 2010, which could be seen as an unreasonable delay in
performance. This would be a breach of the Loan Workout Plan. Count VI thus states a claim.
Chase Bank challenges the Amended Petition’s summary allegation that Groh complied
with all conditions precedent to its loan modification obligation.
Chase Bank argues that
Twombly and Iqbal require more detailed factual allegations about how Groh followed all of the
other terms of the Loan Workout Plan. However, “[i]n pleading conditions precedent, it suffices
to allege generally that all conditions precedent have occurred or been performed.” Fed. R. Civ.
P. 9(c). Therefore, the Amended Petition’s general allegation survives Rule 12(b)(6).
The Court denies Chase Bank’s motion on this ground.
VII. Count VII fails because the declaratory judgment does not seek to settle any
particular legal relations.
Count VII seeks a declaratory judgment that Chase Bank “damaged” Groh’s
creditworthiness as a result of reporting false information to credit agencies (Doc. 1-1, at 19). A
district court may, at its discretion, issue a declaratory judgment to “declare the rights and other
legal relations of any interested party.” 28 U.S.C. § 2201(a); see Medtronic, Inc. v. Mirowski
Family Ventures, LLC, 134 S. Ct. 843, 849 (2014) (characterizing this statute as procedural and
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thus applicable in federal court). A declaratory judgment is appropriate only for disagreements
that “have taken on fixed and final shape so that a court can see what legal issues it is deciding,
what effect its decision will have on the adversaries, and some useful purpose to be achieved in
deciding them.” Pub. Serv. Comm’n v. Wycoff Co., 344 U.S. 237, 239, 244 (1952) (rejecting a
proposed declaratory judgment that a company’s movement of film and newsreels within Utah
constituted interstate commerce, because such a declaratory judgment was insufficiently concrete
and divorced of any particular context); see also Aetna Life Ins. Co. v. Haworth, 300 U.S. 227,
239–41 (1937) (linking declaratory judgments to the constitutional requirement of an actual case
or controversy).
Here, a declaratory judgment that Chase Bank “damaged” Groh’s creditworthiness does
not fix or settle any identifiable rights or legal relations. The Court cannot foresee what effect its
decision might have on the parties, and discerns no useful purpose to granting the declaratory
judgment outlined by Groh. See Wycoff, 344 U.S. at 244. Accordingly, Chase Bank’s motion to
dismiss Count VII is granted.
VIII. The MMPA claim fails because Chase Bank did not make a promise to permanently
modify the Home Loan at the time it issued the Home Loan.
In Count VIII, Groh alleges Chase Bank violated the Missouri Merchandising and
Practices Act (“MMPA”), Mo. Rev. Stat. § 407.020, a state consumer protection statute. Groh
alleges that Chase Bank violated the MMPA by not timely finalizing the Loan Modification
Agreement after the Loan Workout Plan’s trial period concluded.4
To establish an MMPA claim, a plaintiff must allege that he suffered an ascertainable
loss of money or property because the defendant used or employed “any deception, fraud, false
4
The Amended Petition alleges other theories for how Chase Bank violated the MMPA, but these theories are all
based on the oral modification of the Loan Workout Plan and are so are barred by the statute of frauds. See Mo.
Rev. Stat. § 432.045(2).
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pretense, false promise, misrepresentation, [or] unfair practice,” or concealed, suppressed, or
omitted “any material fact[,] in connection with the sale or the advertisement of any merchandise
in trade or commerce.” Mo. Rev. Stat. § 407.020(1). A defendant’s actions violate the MMPA
“whether committed before, during or after the sale, advertisement or solicitation.” Id.
Here, the merchandise sale at issue is the original Home Loan; the Amended Petition
does not allege that the Loan Workout Plan was a separate sale. Groh’s loan modification
allegations do not relate to any acts or omissions connected to that original sale. Rather, Groh’s
claims are related to the Loan Workout Plan, which was signed well after Chase Bank issued
Groh the Home Loan. Because the Amended Petition does not allege that Chase Bank made any
promises or claims about future loan modifications at the time it made the Home Loan, and
because Count VIII does not state a claim. See Wivell II, 2014 WL 6463030, at *8 & n.2;
Watson v. Wells Fargo Home Mortg., Inc., 438 S.W.3d 404, 407–08 & n.2 (Mo. 2014) (“The
loan modification negotiations, however, were not ‘in connection with’ the sale of this loan
because that was not a service the lender agreed to sell or the borrower agreed to buy when the
parties agreed to the loan.”). Chase Bank’s motion to dismiss this claim is granted.
Conclusion
The Court finds that the Amended Petition states some claims upon which relief can be
granted. Chase Bank’s Motion to Dismiss (Doc. 5) is GRANTED IN PART and DENIED IN
PART. Counts I, II, IV, V, VII, and VIII are DISMISSED.
IT IS SO ORDERED.
Date: January 5, 2015
/s/ Greg Kays
GREG KAYS, CHIEF JUDGE
UNITED STATES DISTRICT COURT
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