Belknap et al v. Bank of America Corporation

Filing 12

Memorandum Opinion and Order: Defendant's motion to dismiss Counts 1, 3 and 4 of plaintiffs' complaint is granted. Defendant's motion to dismiss Counts 2 and 5 of the complaint is denied without prejudice. In keeping with the p rovisions of Rule 15 and exercise of the Court's discretion, plaintiffs are granted leave to file a first amended complaint as described herein. Plaintiffs shall file their first amended complaint by April 17, 2015. (Related Doc. No. 9 .) Judge Sara Lioi on 3/27/2015. (P,J)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
DOUGLAS BELKNAP, et al.,

PLAINTIFFS,
vs.

BANK OF AMERICA CORP.,
AKA BANK OF AMERICA, N.A.,

DEFENDANT.

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CASE NO. 1:14-cv-1540

JUDGE SARA LIOI

MEMORANDUM OPINION AND
ORDER

Presently before the Court is the motion of defendant Bank of America to
dismiss plaintiffs’ complaint for failure to state a claim. (Doc. No. 9.) Plaintiffs have opposed
the motion (Doc. No. 10), and defendant has replied (Doc. No. 11). For the reasons contained
herein, defendant’s motion to dismiss is granted in part, and denied in part without prejudice.
I. BACKGROUND
Plaintiffs Douglas and Shandra Belknap bring this action against Bank of
America (the “bank”) in connection with a line of credit and mortgage executed in favor of
Countrywide Home Loans on April 20, 2007, with respect to property plaintiffs own in Gates
Mills, Ohio. (Doc. No. 1 [Compl.] ¶¶ 11-12.) After these documents were executed, the bank
acquired Countrywide.
On July 17, 2012, a complaint in foreclosure was filed against plaintiffs in the
Cuyahoga County Court of Common Pleas by Citibank. Citibank serviced plaintiffs’ loan, but
is not a defendant in this lawsuit. (Id. ¶¶ 14-15.) Plaintiffs engaged in loss mitigation and loan

modification with the bank, and the foreclosure complaint was dismissed on December 11,
2012. (Id. ¶ 16.)
Plaintiffs were concerned that their loan had not been permanently modified
and, through counsel, sent a Qualified Written Request and Notice of Error/Request for
Information (“QWR”) to the bank. (Id. ¶¶ 18-20.) Plaintiffs claim that they received an
insufficient response to the QWR, remain unable to remit full payment to the bank, and
continue “to suffer from Bank of America’s inability to respond to the qualified written request
or complete loan modification.” (Id. ¶ 22.)
Based on these facts, plaintiffs assert a five count complaint. Count 1 for
violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq.;
Count 2 for violation of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §
2605; Count 3 for violation of the Truth in Lending Act/Regulation X and Z violations
(“TILA”); Count 4 for negligent servicing under the National Mortgage Settlement Consent
Judgment; and Count 5 for fraud, including the bank’s “pattern and practice” of
misrepresenting the status of plaintiffs’ mortgage account and denying plaintiffs the
opportunity to reinstate the loan. (Compl. ¶¶ 23-57.) Defendant contends that plaintiffs’ entire
complaint should be dismissed pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure for failure to state a claim.
In opposing defendant’s motion as to Count 1, plaintiffs expressly concede that
their complaint fails to state a claim under the Fair Debt Collections Practices Act:
Plaintiffs would concede based upon the evidence and allegations in support
provided by [the bank] in their Motion to Dismiss that [the bank] owns the note
they are attempting to collect that Plaintiffs’ Claim under the Fair Debt
Collection Practices Act is barred.
(Opp’n at 74.)
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Without arguing the law, plaintiffs simply assert that their RESPA claim (Count
2), and fraud claim (Count 5), both state plausible claims for relief under the Iqbal/Twombly
standard. With respect to the fraud claim, plaintiffs “concede the allegations in the complaint
are not the most artfully drawn, [but] the Plaintiffs have pled beyond mere notice a
demonstrable pattern of acts by [the bank]” sufficient to pass the Iqbal/Twombly test for fraud.
(Opp’n at 76.)
In opposing the bank’s motion, plaintiffs concede that neither Count 3 nor
Count 4 state a claim but, as part of their opposition, request leave to amend to assert different
claims. Plaintiffs have not filed a motion for leave to amend or filed a proposed amended
complaint.
Specifically, plaintiffs state that “[t]he Third Claim for Relief is improperly
classified as a TILA violation and should fail as a matter of law.” But while improperly pled as
a TILA claim, plaintiffs contend that the claim “should be allowed to be amended and
reclassified as a claim under RESPA.” (Opp’n at 76.)
With respect to the bank’s motion to dismiss Count 4, plaintiffs state that:
Upon review of [the bank’s] Motion to Dismiss, Plaintiff would concede that
the controlling language of the National Mortgage Settlement may indicate that
there is no private right of action. However Plaintiff[s] would request an
opportunity to amend their pleadings as the allegations in this claim may have
given rise to a properly pled breach of contract claim.
(Opp’n at 76.)

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II. DISCUSSION
A. Standard of Review
1. Rule 12(b)(6)
A Rule 12(b)(6) motion to dismiss tests the sufficiency of each claim in
plaintiffs’ complaint. The sufficiency of a pleading is tested against the notice pleading
requirements of Fed. R. Civ. P. 8. Rule 8(a)(2) requires that a pleading contain “a short and
plain statement of the claim showing that the pleader is entitled to relief[.]” The factual
allegations in a pleading must be sufficient to “raise a right to relief above the speculative
level[.]” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929
(2007) (citing authorities). In order to survive defendant’s motion, plaintiffs’ complaint must
“state a claim to relief that is plausible on its face” when the factual allegations in the
complaint are accepted as true. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L.
Ed. 2d 868 (2009) (quoting Twombly, 550 U.S. at 570). In other words, plaintiffs’ complaint
must “contain either direct or inferential allegations respecting all material elements to sustain
a recovery under some viable legal theory.” DiGeronimo Aggregates, LLC, v. Zelma, 763 F.3d
506, 509 (6th Cir. 2014), cert. denied, 135 S. Ct. 980, 2015 WL 133025 (U.S. Jan 12, 2015),
(quoting Handy-Clay v. City of Memphis, Tenn., 695 F.3d 531, 538 (6th Cir. 2012) (internal
quotations marks and citation omitted)).
2. Rule 15
The Court construes plaintiffs’ statements in their opposition as a motion for
leave to amend portions of their claims. Motions for leave to file an amended complaint are
reviewed pursuant to Rule 15(a)(2) of the Federal Rules of Civil Procedure, which provides
that leave to amend should be freely given when justice so requires. Leave to amend is
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appropriately denied under a number of circumstances, including bad faith, undue delay,
dilatory motives, undue prejudice to the opposing party, repeated failure to cure deficiencies in
prior amendments, and futility. Glazer v. Chase Home Fin. LLC, 704 F.3d 453, 458 (6th Cir.
2013) (quoting Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 9 L. Ed. 2d 222 (1962)).
Courts should freely give leave to amend in the absence of these factors. Foman, 371 U.S. at
182.
The Sixth Circuit has held that “where a more carefully crafted complaint might
state a claim, a plaintiff must be given at least one chance to amend the complaint before the
district court dismisses the action with prejudice.” U.S. ex rel. Bledsoe v. Cmty. Health Sys.,
Inc., 342 F.3d 634, 644 (6th Cir. 2003) (quoting EEOC v. Ohio Edison Co., 7 F.3d 541, 546
(6th Cir. 1993)). This “one chance to amend” may be warranted even if plaintiff fails to file a
motion to amend. Id. at 644-45 (amendment permitted without motion to particularize
allegations for purposes of complying with Rule 9(b)); Empire Title Servs., Inc. v. Fifth Third
Mortg. Co., 298 F.R.D. 528, 531 (N.D. Ohio 2014) (“[T]he Sixth Circuit has recognized that
‘at least three circuits have held that if a complaint is vulnerable to a motion to dismiss, a
district court must first permit the plaintiff to file a curative amendment, even if the plaintiff
does not seek leave to amend.’ [Brown v. Matauszak, 415 F. App’x 608,] 615 (6th Cir. 2011)
(emphasis in original).”).
B. Analysis
Plaintiffs expressly concede that their claim for violation of the Fair Debt
Collection Practices Act in Count 1 of the complaint is barred because the bank, having
acquired the loan by merger, is collecting its own debt and is not a debt collector within the
meaning of the statute. See 15 U.S.C. § 1692a(6). Accordingly, plaintiffs have failed to state a
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claim as to Count 1, and defendant’s motion to dismiss Count 1 of plaintiff’s complaint is
GRANTED.
With respect to Count 3, plaintiffs concede that they have improperly asserted a
TILA claim. With respect to their negligent servicing claim—Count 4—plaintiffs concede that
“the controlling language of the National Mortgage Settlement may indicate that there is no
private right of action.” Accordingly, plaintiffs have failed to state a claim as to Count 3—
TILA, and Count 4—Negligent Servicing under the National Mortgage Settlement, and
defendant’s motion to dismiss Counts 3 and 4 of plaintiffs’ complaint is GRANTED.
In conceding Counts 3 and 4, plaintiffs seek leave to “reclassify” their former
TILA claim as a RESPA claim, and to plead a breach of contract claim, although their basis for
doing so is very thinly described and a proposed amended complaint has not been filed.
Defendant contends that permitting plaintiffs to amend would be futile because “their claims
fail as a matter of law, no matter what title they are given[]”and would not withstand a motion
to dismiss. (Reply at 80.) This may ultimately prove true, but in the absence of a proposed
amended complaint, the Court is reluctant to conclude at this time that the amended pleading, if
filed, will fail as a matter of law.
Although not without limits, curing deficiencies in a pleading by way of
amendment conserves the Court’s resources and “is an accepted and expeditious way to more
quickly reach the merits of a dispute.” In re Bill of Lading Transmission and Processing Sys.
Patent Litig., MDL Docket No. 1:09-md-2050, Nos. 2:08-cv-862 (D. Utah), 1:09-cv-532, 09cv-144 (D. Minn.), 1:09-cv-531, 2010 WL 9459056, at *3 (S. D. Ohio July 15, 2010) (denying
motions for judgment on the pleadings and granting leave to file amended pleadings). While

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repeated failures to cure the deficiencies of a pleading can be a basis for denying leave to
amend, in this case, the complaint has not been previously amended.
Plaintiffs’ response to defendant’s motion to dismiss was timely, although the
Court is concerned about the apparent lack of analysis that went into selecting the claims
originally asserted and that the plaintiffs have readily conceded are not viable. But at this point,
there is no evidence of bad faith or dilatory motives behind plaintiffs’ request to amend.
Further, at this early stage of the litigation, the Court can discern no undue prejudice to
defendant by permitting the amendment because the original complaint is sufficient to put the
bank on notice of the claims against it.
Accordingly, consistent with Rule 15 and the law of the Sixth Circuit, the Court
concludes that plaintiffs should be given an opportunity file an amended complaint. Plaintiffs
have not asked for leave to amend counts 2 and 5, although they have suggested that the TILA
claim in Count 3 should really be recast as a RESPA claim, so it is possible that they intend to
amend their RESPA claim in Count 2. In any event, the Court believes that the most efficient
way to proceed is to address counts 2 and 5 at the same time as any additional claims that
plaintiffs believe, in good faith, may be asserted. Accordingly, defendant’s motion to dismiss
counts 2 and 5 of the complaint is denied without prejudice, and defendant shall have the
opportunity to file a motion to dismiss the amended complaint, if appropriate.
III. CONCLUSION
For the reasons contained herein, defendant’s motion to dismiss Counts 1, 3 and
4 of plaintiffs’ complaint is GRANTED. Defendant’s motion to dismiss Counts 2 and 5 of the
complaint is denied without prejudice.

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In keeping with the provisions of Rule 15 and exercise of the Court’s discretion,
plaintiffs are granted leave to file a first amended complaint as described herein. Plaintiffs
shall file their first amended complaint by April 17, 2015.
IT IS SO ORDERED.

Dated: March 27, 2015
HONORABLE SARA LIOI
UNITED STATES DISTRICT JUDGE

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