Thurman et al v. Wells Fargo Home Mortgage, et al

Filing 62

ORDER by Judge John C Coughenour; The Court GRANTS Wells Fargo's 43 motion for summary judgment on the Thurmans' CPA claim, and DISMISSES that claim with prejudice. The Court DENIES as moot Wells Fargo's 39 motion for summary judgment on the counterclaim. The Court also DENIES as moot the Thurmans' 57 motion to set aside the order of default. The Court DIRECTS the Clerk to seal Dkt. Nos. 47-51, 58. (TF)

THE HONORABLE JOHN C. COUGHENOUR

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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FLOYD THURMAN and GLENDA
THURMAN,

ORDER
Plaintiffs,

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v.

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WELLS FARGO HOME MORTGAGE,
WELLS FARGO BANK, N.A.,
Defendant.

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CASE NO. C12-1471-JCC

This matter comes before the Court on (1) Defendant Wells Fargo Bank, N.A.‘s motions

17 for summary judgment on Plaintiffs Floyd and Glenda Thurman‘s Washington Consumer
18 Protection Act (―CPA‖) claim and on its own breach of contract counterclaim (Dkt. Nos. 39, 43),
19 (2) the Thurmans‘ motion to set aside the order of default entered against them (Dkt. No. 57),
20 and (3) Wells Fargo‘s request for sanctions against the Thurmans and to strike and seal the
21 papers they filed in response to its motions for summary judgment. Having thoroughly
22 considered the parties‘ briefing and the relevant record, the Court finds oral argument
23 unnecessary and hereby GRANTS Wells Fargo‘s motion for summary judgment on the
24 Thurmans‘ CPA claim (Dkt. No. 43), STRIKES Wells Fargo‘s counterclaim, DENIES as moot
25 Wells Fargo‘s motion for summary judgment on its counterclaim (Dkt. No. 39), VACATES the
26 order of default against the Thurmans (Dkt. No. 38), DENIES as moot their motion to set aside

ORDER
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1 the order of default (Dkt. No. 57), DENIES Wells Fargo‘s request for sanctions, and GRANTS
2 Wells Fargo‘s request to strike from the record the Thurmans‘ references to confidential
3 settlement communications and to seal their opposition papers.
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I.

APPLICABLE LAW
Under Washington‘s Foreclosure Fairness Act (―FFA‖), if a borrower is referred to

6 foreclosure mediation, the beneficiary on the deed of trust must transmit certain documents to the
7 mediator and the borrower and attend a mediation session. Wash. Rev. Code § 61.24.163(1)–(3),
8 (5), 7(b), 8(a). The borrower and the beneficiary have a duty to mediate in good faith; failure to
9 timely participate in mediation without good cause and failure to provide the documentation
10 required before mediation may constitute a violation of this good-faith mediation duty. Id.
11 § 61.24.163(10)(a)–(b). A borrower can assert a beneficiary‘s violation of its good-faith duty as a
12 basis to enjoin the beneficiary‘s non-judicial foreclosure sale of the borrower‘s home. Id.
13 § 61.24.163(14)(a). However, ―[i]n any action to enjoin the foreclosure, the beneficiary is
14 entitled to rebut the allegation that it failed to act in good faith,‖ and ―[t]he mediator‘s
15 certification that the beneficiary failed to act in good faith during mediation does not constitute a
16 defense to a judicial foreclosure . . . .‖ Id. § 61.24.163(14)(a)–(b) (emphasis added). A violation
17 of the FFA duty of good faith is also actionable as an unfair or deceptive act in trade or
18 commerce under the CPA. Id. § 61.24.135(2)(a). The elements of a CPA claim are ―(1) unfair or
19 deceptive act or practice; (2) occurring in trade or commerce; (3) public interest impact; (4)
20 injury to plaintiff in his or her business or property; (5) causation.‖ Hangman Ridge Training
21 Stables, Inc. v. Safeco Title Ins. Co., 719 P.2d 531, 533 (Wash. 1986).
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Summary judgment is proper when there is no genuine issue as to any material fact and

23 the moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(a); see Fed. R.
24 Civ. P. 50(a) (court may grant judgment as a matter of law if ―a reasonable jury would not have a
25 legally sufficient evidentiary basis to find for the party on that issue‖). The party moving for
26 summary judgment has the burden of demonstrating the absence of a genuine issue of material

ORDER
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1 fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has satisfied its
2 burden, the burden shifts to the non-moving party to designate ―specific facts showing that there
3 is a genuine issue for trial.‖ Id. at 324. In deciding a motion for summary judgment, a court
4 draws all inferences in the light most favorable to the party opposing the motion. Blair Foods,
5 Inc. v. Ranchers Cotton Oil, 610 F.2d 665, 668 (9th Cir. 1980).
Ordinarily, ―[t]he court should freely give leave [to amend a pleading] when justice so

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7 requires.‖ Fed. R. Civ. P. 15(a)(2). However, when a party moves to amend a pleading after the
8 pleading-amendment deadline, it first ―must show good cause for not having amended [its]
9 complaint[] before the time specified in the scheduling order expired.‖ Coleman v. Quaker Oats
10 Co., 232 F.3d 1271, 1294 (9th Cir. 2000); see Fed. R. Civ. P. 16(b)(4) (scheduling order ―may be
11 modified only for good cause‖). ―This standard ‗primarily considers the diligence of the party
12 seeking the amendment.‘‖ Coleman, 232 F.3d at 1294 (quoting Johnson v. Mammoth
13 Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992)). Where a party moves to amend its
14 complaint after the pleading-amendment deadline, but does not specifically request that the
15 Court modify its scheduling order, the Court need not construe the motion as a motion to amend
16 the scheduling order; it may instead simply deny the motion as untimely. Id. at 608–09; see, e.g.,
17 id. at 608 (―court may deny as untimely a motion filed after the scheduling order cut-off date
18 where no request to modify the order has been made‖) (citing U.S. Dominator, Inc. v. Factory
19 Ship Robert E. Resoff, 768 F.2d 1099, 1104 (9th Cir. 1985)); Atwell v. City of Surprise, 440 F.
20 App‘x 585, 586 (9th Cir. 2011) (district court did not abuse its discretion in denying plaintiff‘s
21 request for leave to amend complaint; plaintiff ―should have requested a modification of the
22 district court‘s scheduling order before he requested leave to [amend]‖) (citing Johnson, 975
23 F.2d at 608–09).
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II.

THE THURMANS’ CPA CLAIM
In their complaint, the Thurmans allege that Wells Fargo violated its duty to mediate with

26 them in good faith when it allegedly failed to submit the required documents in advance of an

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1 FFA mediation session scheduled with the Thurmans, failed to appear for the mediation, and
2 failed to pay its share of the mediation fee, which the mediator found to constitute a violation of
3 the good-faith duty. (Dkt. No. 1 Ex. A at 6 ¶¶ 4.18, 4.20–4.21; id. at 9–10.) They further allege
4 that this FFA violation ―constitutes a per se violation of the [CPA].‖ (Id. at 8 ¶ 6.4.) They seek an
5 injunction against the non-judicial foreclosure sale of their home, ―[a]n award of damages in an
6 amount to be proven at trial‖ and ―treble damages, costs, and reasonable attorney‘s fees.‖ (Id. at
7 8 ¶ 7.1.) While the Thurmans‘ complaint is devoid of any allegations of how Wells Fargo‘s
8 conduct harmed them, their theory of injury—revealed in discovery—is that if Wells Fargo had
9 mediated with them in good faith, (1) they would have secured a favorable loan modification and
10 (2) they wouldn‘t have had to pay a lawyer to attend the mediation session. (Dkt. No. 46 Ex. E.)
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Wells Fargo moves for summary judgment on the Thurmans‘ CPA claim. It argues there

12 is no evidence in the record to support the Thurmans‘ theory of injury and causation because (1)
13 the Thurmans were not eligible for a loan modification under the Home Affordable Mortgage
14 Program (―HAMP‖) or Wells Fargo‘s Mortgage Assistance Program 2 (―MAP2R‖), and (2) they
15 would have paid an attorney to attend the mediation session even if Wells Fargo had mediated in
16 good faith. The Thurmans were ineligible for a HAMP modification, Wells Fargo argues,
17 because HAMP requires a maximum unpaid principal loan balance of $729,750, and the
18 Thurmans‘ loan balance exceeded that sum. (Dkt. No. 45 at 3–4 ¶¶ 12–13 & Ex. B at 5.) And the
19 Thurmans were ineligible for a MAP2R modification, Wells Fargo argues, because MAP2R
20 requires a showing by applicants that they intend to remain living in the property securing the
21 loan for more than one year (id. at 4–5 ¶¶ 15–16), and the Thurmans had no intention of doing
22 so, as evidenced by the fact that they listed the property securing the loan for sale from June
23 2011 to January 2012 (Dkt. No. 44 at 2 ¶ 5; Dkt. No. 45 at 5 ¶ 17 & Ex. C) and for rent from
24 October of 2011 to January of 2012 (Dkt. No. 44 at 2 ¶ 6). Even if the Thurmans were eligible
25 for a MAP2R modification, Wells Fargo argues, they wouldn‘t have qualified for one because
26 they couldn‘t have achieved the required debt to income level, and the net present value test for

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1 their hypothetical modified loan was negative. Since there is no record evidence to support the
2 injury and causation elements of the Thurmans‘ CPA claim, Wells Fargo argues, it is entitled to
3 summary judgment. See Johnson v. Camp Auto., Inc., 199 P.3d 491, 493 (Wash. Ct. App. 2009)
4 (―The failure to establish any of the elements is fatal to a CPA claim.‖).
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The Thurmans raise a number of meritless arguments in response, none of which raises a

6 genuine issue of fact as to injury or causation. First, they point the Court to an assurance of
7 discontinuance entered into between the State of Washington and Wells Fargo‘s predecessor, in
8 which it agreed, ―on an ongoing basis,‖ to ―offer Eligible Borrowers affordable loan
9 modifications in accordance with‖ certain provisions. (Dkt. No. 49-1 at 10.) The Thurmans argue
10 that ―they are third-party beneficiaries of this agreement and should have been provided a
11 modification of their loan a year before they requested an FFA mediation,‖ and yet they ―do not
12 appear to have received any of the notices referred to in the agreement.‖ (Dkt. No. 58 at 2.) Even
13 if a private right of action based on an alleged violation of the assurance of discontinuance were
14 available—and it is not1—the Thurmans utterly failed to plead such a claim in their complaint.
15 The Thurmans ask the Court to let them amend their complaint to add such allegations. The
16 Court DENIES this request. Any amendment would be futile because a violation of the assurance
17 of discontinuance does not create a private right of action. In any event, the Thurmans failed to
18 move to modify the scheduling order to allow a pleading amendment past the deadline and have
19 failed to show good cause for such a modification. See Fed. R. Civ. P. 16(b)(4); Coleman, 232
20 F.3d at 1294; Johnson, 975 F.2d at 608–09.
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The Thurmans also claim that their loan broker over-stated their income on their loan

22 application and that they were ―issu[ed] a ‗Pick a Payment‘ loan when Plaintiffs[] sought a
23 ‗conventional‘ loan‖—both allegedly ―act[s] of fraud which also give[] rise to a CPA claim.‖
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(Dkt. No. 49-1 at 26 (―No Third Party Beneficiaries Intended. This Assurance is not
26 intended to confer upon any person any rights or remedies, including rights as a third party
beneficiary,‖ or ―to create a private right of action . . . .‖); see id. at 9–10.)
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1 (Dkt. No. 58 at 12.) Again, the Thurmans alleged nothing to this effect in their complaint, and
2 only lack of diligence can explain their failure to raise these fraud claims sooner. These
3 allegations are simply not a part of this lawsuit, and they do nothing to rebut Wells Fargo‘s
4 showing of an absence of evidence to support the injury and causation elements of the claim that
5 is a part of this lawsuit—the Thurmans‘ CPA claim.
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The Thurmans claim there is a genuine dispute of fact as to ―whether Wells Fargo

7 actually owns the subject Note and the beneficial interest in the subject Deed of Trust to even
8 have standing to mediate a modification of the obligation in the first place,‖ and whether ―the
9 Note held by Wells Fargo is in fact the original note as claimed by [Wells Fargo].‖ (Id. at 7.) The
10 Court fails to understand the Thurmans‘ argument. The Thurmans‘ CPA claim is premised on the
11 fact that Wells Fargo is the lawful owner of the note and beneficiary on the deed of trust. If it
12 isn‘t, then Wells Fargo would not have been in a position to modify (and cannot be held to have
13 injured the Thurmans by failing to modify) their loan at the FFA mediation session. In other
14 words, if Wells Fargo is not the beneficiary, then it never had a duty to mediate in good faith,
15 and the Thurmans‘ lawsuit is moot. Manufacturing a dispute of fact on the issue of note
16 ownership or Wells Fargo‘s beneficiary status does not help the Thurmans defeat Wells Fargo‘s
17 motion for summary judgment.
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The Thurmans argue that ―[v]alid questions of material fact exist[] on a number of

19 grounds, including . . . whether Plaintiffs had sufficient means to fund a modification of the
20 obligation‖ and ―as to the calculations used by Wells Fargo to conclude that Plaintiffs would not
21 have [qualified] for a modification of their loan . . . .‖ (Dkt. No. 58 at 7.) But the Thurmans fail
22 to point to any evidence that puts into dispute Wells Fargo‘s predicate assertion of fact that the
23 Thurmans were not eligible for a HAMP or MAP2R modification in the first place because their
24 unpaid principal balance exceeded HAMP‘s limit and they had no intention of staying in their
25 home for more than one year. See Fed. R. Civ. P. 56(c)(1). If the Thurmans were never
26 eligible—and they have pointed to no evidence tending to show that they were—then the

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1 accuracy or transparency of Wells Fargo‘s qualification calculations is irrelevant.
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The Thurmans also cite as ―injury‖ the fees they incurred in participating in the mediation

3 of this lawsuit, which the Court ordered earlier this year. But those fees are not injuries caused
4 by Wells Fargo‘s alleged failure to mediate in good faith; they are attorneys‘ fees and costs
5 recoverable only if the Thurmans prevail on their CPA claim. See, e.g., Gray v. Suttel & Assocs.,
6 No. 09-251, 2012 U.S. Dist. LEXIS 43885 at *20 (E.D. Wash. Mar. 28, 2012) (―[T]ime and
7 financial resources expended to . . . pursue a WCPA claim do not satisfy the WCPA‘s injury
8 requirement.‖); Coleman v. Am. Commerce Ins. Co., No. 09-5721, 2010 U.S. Dist. LEXIS
9 97757, at *10 (W.D. Wash. Sept. 17, 2010) (―The cost of having to prosecute a CPA claim is not
10 sufficient to show injury to business or property.‖).
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The Thurmans argue that Wells Fargo‘s alleged failure to mediate in good faith somehow

12 ―forced [them] to file a Chapter 13 bankruptcy to stay [the scheduled trustee‘s] sale of their
13 property,‖ that they ―stand to lose in excess of $100,000.00 in equity in their home if the loan is
14 not modified and the property sold at trustee‘s sale,‖ and that such events pose the risk of ―injury
15 to [their] creditworthiness.‖ (Dkt. No. 58 at 9–10.) Again, these arguments wrongly assume that
16 good-faith mediation would have resulted in a loan modification and a cancellation of the
17 scheduled trustee‘s sale.
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The Thurmans confusingly assert, ―Wells Fargo would have this Court believe that the[]

19 only means by which it could modify Plaintiffs‘ loan was through HAMP.‖ (Id. at 10.) But Wells
20 Fargo discusses the Thurmans‘ ineligibility for both HAMP and MAP2R in its briefing.
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Finally, the Thurmans argue that Wells Fargo ―should be barred from profiting from its

22 ‗bad faith.‘‖ (Id. at 11.) The relevant inquiry, though, is not whether Wells Fargo ―profited‖ from
23 any failure to mediate in good faith, but rather whether the Thurmans were injured by that
24 alleged conduct. The Thurmans appear to believe that a beneficiary‘s breach of its duty of good
25 faith somehow automatically entitles the borrower to a loan modification. That is not the law.
26 See Wash. Rev. Code § 61.24.163(14).

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The Thurmans have failed to rebut Wells Fargo‘s showing of an absence of evidence of

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2 injury and causation—two elements crucial to the Thurmans‘ CPA claim. Accordingly, the Court
3 GRANTS summary judgment for Wells Fargo on that claim and DISMISSES it with prejudice.
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III.

WELLS FARGO’S BREACH OF CONTRACT COUNTERCLAIM
The Thurmans served Wells Fargo on August 10, 2012. (Dkt. No. 1 at 1 ¶ 1.) Wells

6 Fargo removed the action to this Court later that month. In October, the Court held a status
7 conference and established case management dates, including a deadline to amend pleadings of
8 January 4, 2013 and a trial date of September 30, 2013. (Dkt. No. 11.) Wells Fargo did not file
9 an answer to the Thurmans‘ complaint; instead, on November 1, it filed a motion to dismiss.
10 (Dkt. No. 13.) The Court denied that motion on January 2, 2013. (Dkt. No. 22.) Wells Fargo had
11 14 days from that date—i.e., until January 16, 2013—to file its answer, but failed to do so. See
12 Fed. R. Civ. P. 12(a)(4)(A). However, the Thurmans neither objected nor filed a motion for
13 default. See Boudreau v. United States, 250 F.2d 209, 211 (9th Cir. 1957) (―[I]t is the plaintiff‘s
14 duty to expedite the case to its final determination and if he allows delay in the filing of the
15 answer he cannot complain of it.‖). On May 14, Wells Fargo filed an answer to the Thurmans‘
16 complaint and a counterclaim for breach of contract. (Dkt. No. 33.)
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When Wells Fargo added its counterclaim to this lawsuit, it did not move for a

18 modification of the scheduling order—which established a cutoff date of January 4, 2013 for
19 adding claims—and it did not make any showing of ―good cause for not having [added its
20 counterclaim] before the time specified in the scheduling order expired.‖ Coleman, 232 F.3d at
21 1294; see Fed. R. Civ. P. 16(b)(4). Accordingly, the Court DENIES Wells Fargo‘s implicit
22 motion to add its counterclaim as untimely, see Johnson, 975 F.2d at 608, and STRIKES the
23 counterclaim (Dkt. No. 33 at 5–6 ¶¶ 1–7). Even if the Court were to construe Wells Fargo‘s
24 filing of its counterclaim as a motion to modify the scheduling order to allow it to add its
25 counterclaim, the Court would reach the same result. Wells Fargo knew all the facts underlying
26 its breach of contract claim the moment the Thurmans filed suit. Only a lack of diligence can

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1 explain its decision to wait nine months before asserting it. See, e.g., In re W. States Wholesale
2 Natural Gas Antitrust Litig., 715 F.3d 716, 737 (9th Cir. 2013) (―district court did not abuse its
3 discretion in concluding that the Plaintiffs were not diligent in seeking to amend their complaints
4 to add federal antitrust claims‖ ―because they had known since 2007 . . . that federal antitrust
5 claims may be viable‖). In light of the foregoing, the Court VACATES the order of default
6 against the Thurmans for their failure to timely answer Wells Fargo‘s counterclaim (Dkt. No. 38)
7 and DENIES as moot the Thurmans‘ motion to set aside the order of default (Dkt. No. 57) and
8 Wells Fargo‘s motion for summary judgment on its counterclaim (Dkt. No. 39).
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In response to Wells Fargo‘s motions for summary judgment, the Thurmans filed several

10 papers referencing the parties‘ confidential mediation discussions (and their version of what
11 transpired therein). The Court GRANTS Wells Fargo‘s request (Dkt. Nos. 53, 59) to STRIKE
12 from the record those references to confidential mediation communications and to SEAL the
13 Thurmans‘ response papers. See Local Civ. R. W.D. Wash. 39.1(a)(6) (―[A]ll ADR proceedings
14 under this rule, including communications, statements, disclosures and representations made by
15 any party, attorney or other participant in the course of such proceeding, shall, in all respects, be
16 confidential, and shall not be reported, recorded, placed in evidence, disclosed to anyone not a
17 party to the litigation, made known to the trial court or jury, or construed for any purpose as an
18 admission or declaration against interest.‖). The Court DENIES Wells Fargo‘s motion to impose
19 sanctions on the Thurmans for their violation of Local Civil Rule 39.1‘s confidentiality
20 requirement and for their habit to date of failing to comply with the Local Civil Rules and the
21 Federal Rules of Civil Procedure. As the Court‘s discussion supra shows, Wells Fargo‘s track
22 record of following deadlines and abiding by the Federal Rules also falls short of spotless. The
23 Court would also note that neither party bothered, after the Court-ordered mediation on April 30,
24 to ensure that written notice was provided to the Court stating when the mediation occurred and
25 whether the case was resolved. See Local Civ. R. W.D. Wash. 39.1(c)(7).
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1 IV.

CONCLUSION

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For the foregoing reasons, the Court GRANTS Wells Fargo‘s motion for summary

3 judgment on the Thurmans‘ CPA claim (Dkt. No. 43), DISMISSES that claim with prejudice,
4 STRIKES Wells Fargo‘s counterclaim for breach of contract, DENIES as moot Wells Fargo‘s
5 motion for summary judgment on the counterclaim (Dkt. No. 39), VACATES the order of
6 default against the Thurmans on the counterclaim (Dkt. No. 38), DENIES as moot their motion
7 to set aside the order of default (Dkt. No. 57), DENIES Wells Fargo‘s request for sanctions, and
8 GRANTS its request to strike from the record the Thurmans‘ references to confidential
9 settlement communications and to seal the papers the Thurmans filed in response to Wells
10 Fargo‘s motions for summary judgment. The Court DIRECTS the Clerk to seal these papers
11 (Dkt. Nos. 47–51, 58).
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The only claim remaining is the Thurmans‘ claim to enjoin the non-judicial foreclosure

13 sale of their home. Wells Fargo states that it ―is not pursuing non-judicial foreclosure ( . . .
14 because it is instead pursuing a judgment on the Note), so that aspect of Plaintiffs‘ complaint is
15 moot.‖ (Dkt. No. 43 at 8.) Unless and until the Thurmans move to dismiss their action for an
16 injunction, however, that claim (and only that claim) remains. As for a ―judgment on the Note,‖
17 Wells Fargo will have to pursue that claim in a separate judicial foreclosure action.
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DATED this 2nd day of August 2013.

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John C. Coughenour
UNITED STATES DISTRICT JUDGE

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ORDER
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