Bertelsen v. Citimortgage, Inc. et al
ORDER denying 41 Motion for Reconsideration Signed by Magistrate Judge Jeremiah C. Lynch on 4/7/2017. (TCL)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
JONATHAN CHARLES BERTELSEN,
CITIMORTGAGE, INC., and JOHN
By Order entered June 14, 2016, the Court granted Defendant CitiMortgage,
Inc.’s (“Citi”) Fed. R. Civ. P. 12(b)(6) motion to dismiss Plaintiff Jonathan
Bertelsen’s claim alleging Citi violated the Montana Consumer Protection Act.
Bertelsen moves the Court to reconsider its dismissal of that claim. But for the
reasons discussed, the Court declines to reconsider its decision.
The referenced June 14, 2016 Order was entered under the standards
applicable to a Rule 12(b)(6) motion. In sum, those standards require dismissal of
claims if they are not supported by either a cognizable legal theory, or by
sufficient factual allegations under a cognizable legal theory. Balistreri v.
Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990). Rule 12(b)(6)
requires the court to accept all factual allegations in the complaint as true, and to
construe the pleading in the light most favorable to the plaintiff. Knievel v. ESPN,
393 F.3d 1068, 1072 (9th Cir. 2005).
The Court applied the Rule 12(b)(6) standards in dismissing Bertelsen’s
Montana Consumer Protection Act claims. And the Court is mindful of the
standards in assessing whether to reconsider its dismissal of Bertelsen’s claims.
Bertelsen’s claims stem from his efforts to obtain a modification of his
home mortgage loan obligations he owed to Citi, and to avail himself of a loan
assistance program. In general, he alleges Citi provided him misinformation,
inaccurate and inconsistent information, and misleading information relative to his
multi-year efforts to obtain a modification or assistance from potential loan
programs. More specifically, he contends Citi provided such misinformation
relative to: (1) his eligibility for, and the availability of, loan modifications and
assistance programs, (2) the documents he needed to submit in support of his
applications for loan modifications and assistance, and (3) the status, at different
times, of both his applications and Citi’s review of those applications. He alleges
Citi’s conduct led to delays and caused damages to him.
In reviewing Bertelsen’s claims and Citi’s motion to dismiss, the Court
concluded the Montana Consumer Protection Act applies to a lender’s conduct in
Bertelsen’s circumstances. Morrow v. Bank of America, N.A., 324 P.3d 1167,
1184 (Mont. 2014). The Act prohibits “[u]nfair methods of competition and unfair
or deceptive acts or practices in the conduct of any trade or commerce[.]” Mont.
Code Ann. § 30-14-103. An act or practice is deemed “unfair if it ‘offends
established public policy and ... is either immoral, unethical, oppressive,
unscrupulous or substantially injurious to consumers.’” Morrow, 324 P.3d at 1184
In opposing Citi’s motion, Bertelsen argued that Citi’s conduct in allegedly
providing him inconsistent, contradictory, and misleading information relative to
his applications for loan modifications or assistance programs constituted unfair or
deceptive practices as found in Morrow, 324 P.3d at 1184-85. The Court
disagreed, concluding Bertelsen’s legal theory under the Montana Consumer
Protection Act and in reliance upon Morrow was not viable. Specifically,
Bertelsen did not present facts establishing that Citi undertook to provide him
advice in the conduct of his affairs relative to the loan – the cornerstone of the
rationale underlying Morrow.
The holding in Morrow was supported by facts demonstrating the lender
engaged in conduct more culpable than merely providing misinformation to a
borrower that delayed loan modification discussions. Rather, the facts
demonstrated that the misinformation and delays, together with the resulting
growth of the borrowers’ default and arrearages, were rendered unfair and
deceptive only because the lender had first advised and instructed the borrowers
not to make a loan payment, to default on the loan, and to make reduced monthly
payments, thereby causing harm to the borrowers. Morrow, 324 P.3d at 1184-85.
Thus, it was the lender’s initial adverse advice and instructions given to the
borrowers which rendered its subsequent conduct – the delays and inconsistent
communications – unfair or deceptive to the borrowers’ detriment. Id.
In this case, Bertelsen fails to allege any facts plausibly suggesting Citi
undertook to affirmatively advise Bertelsen to take any action to his detriment. It
did not advise Bertelsen to default on his loan payments. In fact, Bertelsen was
already about 60 days in default and behind on his loan payments by the time he
first communicated with Citi. Consequently, the Court concluded the conflicting
information provided by Citi and the resulting delays, standing alone, do not
constitute unfair or deceptive acts.
In its June 14, 2016 Order, the Court further considered the facts and
liability findings in both Olson v. Bank of America, et al., CV 14-160-BLG-CSO,
(D. Mont. 2015) and Jacobson v. Bayview Loan Servicing, LLC, 371 P.3d 397,
(Mont. 2016). But liability existed in those cases under the Montana Consumer
Protection Act, in part, because the lenders had first instructed the borrowers in
those cases to commit an act to the borrowers’ detriment. In Olson the lender had
advised the borrowers to make whatever monthly payment amounts they could,
instructed them to disregard default notices, and misapplied or failed to properly
account for monthly payments it received from the borrowers. (Doc. 29 at 17.)
Similarly, in Jacobson the lender affirmatively instructed the borrowers to go into
default by stopping payments on their loan which would allow the borrowers to
qualify for a loan modification. (Doc. 29 at 18-19.) Consequently, the Court
concluded the lender’s affirmative conduct in Olson and Jacobson advising the
borrowers to take some action to their detriment was a significant fact supporting
liability in those cases. (Doc. 29 at 20.) Because the lenders in those cases
undertook to affirmatively advise the borrowers to undertake specific conduct
regarding their loans, the lenders’ misrepresentations subjected the lenders to
liability under the Montana Consumer Protection Act.
Here, Citi did not affirmatively undertake to provide advice to Bertelsen
instructing him to take any particular action to his detriment. Therefore, the Court
concluded, based on Morrow, Olson, and Jacobson, that absent detrimental advice
from Citi, Citi’s provision of confusing or conflicting information to Bertelsen
regarding the status of his loan application, what he needed to do to support his
loan application, and his ability to possibly obtain a loan modification, standing
alone, did not support Citi’s liability under the Montana Consumer Protection Act.
(Doc. 29 at 20.)
Bertelsen now moves the Court to reconsider the dismissal of his claims
under the Montana Consumer Protection Act based on a Consent Order issued
against Citi on January 23, 2017, by the United States Consumer Financial
Protection Bureau (“Bureau”), In the Matter of: CitiMortgage, Inc, File No. 2017CFPB-0005. (Doc. 34-1.) The Consent Order addressed conduct in which Citi
had engaged towards borrowers who had submitted applications for loss
mitigation options as alternatives to Citi’s foreclosure on the borrowers’ loans and
property. The Bureau found Citi had instructed borrowers they were required to
submit numerous documents in support of their loss mitigation applications which
were either (1) not relevant to, or actually necessary for support of, the borrowers’
applications, or (2) documents which the borrowers had previously submitted.
(Doc. 34-1 at 5-7.) The Bureau concluded Citi’s conduct in that regard constituted
deceptive practices in violation of the federal Consumer Financial Protection Act
at 12 U.S.C. §§ 5531(a) and 5536(a)(1) which prohibit “unfair, deceptive, or
abusive” acts or practices. (Doc. 34-1 at 7-8.)
Bertelsen requests the Court reconsider its dismissal of his claims under the
Montana Consumer Protection Act based on a combination of the following: (1)
the Bureau’s decision finding similar conduct by Citi in providing misinformation
to borrowers was deceptive, and (2) the Montana Supreme Court would likely
adopt the Bureau’s interpretation of the federal Consumer Financial Protection
Act’s proscription against unfair or deceptive acts or practices. Bertelsen does not
argue that the Bureau’s decision constitutes evidence relevant to the issues
presented for resolution in this case. Instead, Bertelsen only suggests the Court
should find the Bureau’s decision persuasive in assessing whether Citi’s alleged
conduct in this matter does or does not constitute unfair or deceptive acts or
Bertelsen suggests the Montana Supreme Court would adopt the Bureau’s
interpretation because he believes the Montana Consumer Protection Act requires
consideration of the Bureau’s decision. Specifically, “in construing 30-14-103
due consideration and weight shall be given to the interpretations of the federal
trade commission and the federal courts relating to section 5(a)(1) of the Federal
Trade Commission Act (15 U.S.C. § 45(a)(1)), as amended.” Mont. Code Ann. §
30-14-104(1). See also Rohrer v. Knudson, 203 P.3d 759, 763-64 (Mont. 2009).
But the Consumer Financial Protection Bureau is not part of the federal
trade commission – it is an agency within the Federal Reserve System. 12 U.S.C.
§ 5491(a). Furthermore, the Bureau’s decision interpreted the federal Consumer
Financial Protection Act, not the Federal Trade Commission Act.
Nonetheless, taking into account the due consideration and weight
otherwise required by Mont. Code Ann. § 30-14-104, such consideration and
weight given to the Bureau’s decision does not persuade the Court to reconsider
The Bureau’s assessment of what constitutes a deceptive practice is, of
course, not controlling here. Moreover, the Bureau’s decision is not persuasive.
The Court’s decision dismissing Bertelsen’s claims was based on prevailing
decisional law established by the Montana Supreme Court in both Morrow and
Jacobson – cases in which the lenders had first instructed the borrowers to stop
making their loan payments and caused the borrowers to default on their loans to
their detriment. That conduct rendered the lender’s subsequent provision of
misinformation to the borrower unfair and deceptive in violation of the Montana
Consumer Protection Act. Nothing in the Bureau’s decision suggests the Court’s
analysis of Morrow and Jacobson was flawed, or that the Court’s reliance upon
Morrow and Jacobson was misplaced.
Consequently, the Court finds Bertelsen’s motion for reconsideration is not
persuasive, and IT IS HEREBY ORDERED the motion is DENIED.
DATED this 7th day of April, 2017.
Jeremiah C. Lynch
United States Magistrate Judge
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