US Bank National Association v Tait et al

Filing 32

ORDER by U.S. District Judge John C Coughenour granting in part and denying in part Plaintiff's 21 Motion to Dismiss Counterclaims. The only remaining counterclaim is the CPA counterclaim. The TILA claim is DISMISSED WITH PREJUDICE as it is time barred. The other claims, RESPA, ECOA, FHA, Title VI, 42 U.S.C. § 1981, and breach of implied duty of good faith and fair dealing, are DISMISSED. (PM)

THE HONORABLE JOHN C. COUGHENOUR

1
2
3
4
5
6

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

7
8
9

U.S. BANK NATIONAL
ASSOCIATION,

10
Plaintiff,

11
v.

12
13

Defendants.

15

17
18
19
20
21
22
23
24
25
26

ORDER GRANTING IN PART AND
DENYING IN PART PLAINTIFF’S
MOTION TO DISMISS
COUNTERCLAIMS

JOSEPH C. TAIT, et al.,

14

16

CASE NO. C16-767-JCC

This matter comes before the Court on Plaintiff/Counter-Defendant U.S. Bank National
Association’s motion to dismiss counterclaims (Dkt. No. 21). Having thoroughly considered the
parties’ briefing and the relevant record, the Court finds oral argument unnecessary and hereby
GRANTS in part and DENIES in part the motion for the reasons explained herein.

I.

BACKGROUND
A.

Mediation and Judicial Foreclosure Proceedings

On May 16, 2016, Plaintiff/Counter-Defendant U.S. Bank National Association filed a
complaint for judicial foreclosure in King County Superior Court against Defendants/CounterPlaintiffs Joseph C. Tait, Kazumi G. Tait, Discover Bank, and any other unknown parties in
possession or claiming possession. (Dkt. No. 1-7.) The Taits are husband and wife and the record
owners of the real property at issue in the foreclosure action. (Id. at 2; Dkt. No. 19 at 7.)
Discover Bank is a judgment creditor of the Taits and nominal party in this matter. (See Dkt. No.
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 1

1 1-7 at 1.)
2

The dispute centers around a promissory note the Taits executed and delivered to U.S.

3 Bank on December 7, 2004, secured by a deed of trust (Deed) encumbering the property. (See id.
4 at 3.) The Taits promised to pay the principal sum of $235,000.00 together with interest thereon
5 at the rate of 5.625% per annum in monthly installments of $1,372.95. (Id.) Mortgage Electronic
6 Registration Systems, Inc. (MERS) assigned the Deed to U.S. Bank through a written
7 assignment. (Id.) On July 3, 2012, the loan was modified. (Id.) The new loan balance was
8 $236,063.66. (Dkt. No. 19 at 10.) The Taits allege U.S. Bank failed to credit the Taits’ first
9 payment on their modified note and suspended numerous timely payments beginning in 2012,
10 totaling approximately $11,076.74. (Dkt. No. 19 at 10.) The Taits failed to make their monthly
11 payment due on April 1, 2013, and have not made any payments on the loan since. (Dkt. No. 1-7
12 at 3.)
13

In October 2014, the Taits were referred to foreclosure mediation under Washington’s

14 Foreclosure Fairness Act (FFA), Wash. Rev. Code. § 61.24.163 et seq., and submitted their first
15 loan modification application to U.S. Bank. (Dkt. No. 19 at 11; Dkt. No. 19-14 at 2.) The Taits
16 allege U.S. Bank delayed providing required mediation documents for months. (Dkt. No. 19 at
17 12.) On August 7, 2015, U.S. Bank denied the loan modification because “requested documents
18 have yet to be received.” (Dkt. No. 19-11 at 3.) The Taits allege they submitted at least two
19 complete loan modification applications. (Dkt. No. 19-15 at 3.)
20

On September 22, 2015, the parties began a second mediation session. (Dkt. No. 19 at

21 13.) U.S. Bank denied the Taits’ loan modification application for insufficient income on
22 October 23, 2015. (Dkt. No. 19-12 at 3.) However, the Taits allege U.S. Bank acknowledged that
23 it miscalculated the Taits’ income and allowed the Taits to resubmit a loan modification
24 application if the Taits agreed to sign a waiver releasing U.S. Bank of any liability. (Dkt. No. 1925 14 at 3.) On February 10, 2016, the foreclosure mediator issued a bad faith certification against
26 U.S. Bank indicating U.S. Bank “failed to provide timely and/or accurate documents.” (Dkt. No.
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 2

1 19 at 14.)
2

As a result of the default originating in April 2013, U.S. Bank exercised its option in the

3 Deed to declare the whole of the balance and the principal in interest thereon due and payable
4 and filed this action in King County Superior Court. (Dkt. No. 1-7 at 4.) U.S. Bank requested a
5 judgment against the Taits or in the event of nonpayment, a judicial foreclosure sale. (Id. at 4–5.)
6

B.

The Taits’ Counterclaims

7

On May 25, 2016, the Taits filed a notice of removal (Dkt. No. 1) and filed an answer to

8 the complaint (Dkt. No. 19) on June 24, 2016. In their answer, the Taits also filed counterclaims
9 against U.S. Bank. (Id. at 15–31.) The Taits essentially allege U.S. Bank’s delay in processing
10 the Taits’ loan modification application caused the Taits to owe more than they should on the
11 loan. (Id.) The Taits allege eight counterclaims against U.S. Bank in connection with the
12 foreclosure proceedings during mediation: (1) violation of the Washington Consumer Protection
13 Act (CPA); (2) violation of the Truth in Lending Act (TILA); (3) violation of the Real Estate
14 Settlement Procedures Act (RESPA); (4) violation of the Equal Credit Opportunity Act (ECOA);
15 (5) violation of the Fair Housing Act (FHA); (6) violation of their “civil rights” under 42 U.S.C.
16 § 2000d; (7) violation of 42 U.S.C. § 1981; and (8) breach of the implied duty of good faith and
17 fair dealing. (Id.) U.S. Bank filed a motion to dismiss the counterclaims for failure to state claims
18 upon which relief can be granted. (Dkt. No. 21.)
19 II.

DISCUSSION

20

A.

21

A defendant may move for dismissal when a plaintiff “fails to state a claim upon which

Fed. R. Civ. P. 12(b)(6) Standard

22 relief can be granted.” Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss, a complaint must
23 contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its
24 face. Ashcroft v. Iqbal, 556 U.S. 662, 677–78 (2009). A claim has facial plausibility when the
25 plaintiff pleads factual content that allows the court to draw the reasonable inference the
26 defendant is liable for the misconduct alleged. Id. at 678. The plaintiff is obligated to provide
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 3

1 grounds for his entitlement to relief that amount to more than labels and conclusions or a
2 formulaic recitation of the elements of a cause of action. Bell Atl. Corp. v. Twombly, 550 U.S.
3 544, 545 (2007). “[T]he pleading standard Rule 8 announces does not require ‘detailed factual
4 allegations,’ but it demands more than an unadorned, the-defendant-unlawfully-harmed-me
5 accusation.” Iqbal, 556 U.S. at 678. A dismissal under Fed. R. Civ. P. 12(b)(6) “can [also] be
6 based on the lack of a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696,
7 699 (9th Cir. 1988).
8

B.

Consumer Protection Act Counterclaim

9

The Taits allege U.S. Bank “violated its duty to mediate in good faith and committed a

10 per se violation” of the CPA, Wash Rev. Code § 19.86, et seq. (Dkt. No. 19 at 15.) In order to
11 recover under the CPA, a plaintiff must prove “(1) unfair or deceptive act or practice;
12 (2) occurring in trade or commerce; (3) public interest impact; (4) injury to plaintiff in his or her
13 business or property; (5) [and] causation.” Hangman Ridge Training Stables, Inc. v. Safeco Title
14 Ins. Co., 719 P.2d 531, 533 (Wash. 1986) (en banc).
15

U.S. Bank does not dispute, for purposes of its motion to dismiss the counterclaims, that

16 the Taits have provided sufficient allegations on the first three elements of a CPA claim. (Dkt.
17 No. 21 at 5-6.) The Court agrees. However, U.S. Bank argues the Taits have not sufficiently pled
18 the elements of injury or causation. To prove causation, the “plaintiff must establish that, but for
19 the defendant's unfair or deceptive practice, the plaintiff would not have suffered an injury.”
20 Indoor Billboard/Wash., Inc. v. Integra Telecom of Wash., Inc., 170 P.3d 10, 22 (2007). The
21 Taits allege their injury occurred in the form of a “far more expensive mortgage because [U.S.
22 Bank’s] delay permitted the loans [sic] principle [sic] to bloat by operation of the accrual of
23 capitalization of interest, fees, charges, and fines.” (Dkt. No. 19 at 16–17.) U.S. Bank argues the
24 Taits’ injury was self-inflicted and caused by their default, not U.S. Bank’s bad faith during
25 mediation, and therefore causation is not met. (Dkt. No. 21 at 6–7; Dkt. No. 24 at 5–6.) At this
26 stage of the litigation, the Court need not determine which of the parties’ allegations are true as
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 4

1 to what caused the Taits’ injury of an increased principal. The Court looks only at the face of a
2 complaint to decide a motion to dismiss. Van Buskirk v. Cable News Network, Inc., 284 F.3d
3 977, 980 (9th Cir. 2002). The Taits have alleged enough facts to survive a motion to dismiss
4 because they have provided facts to support each element of a CPA claim, including causation
5 and injury. Therefore, U.S. Bank’s motion is DENIED as to the CPA counterclaim.
6

C.

Truth in Lending Act Counterclaim

7

The Taits allege various violations of TILA, 15 U.S.C. § 1601 et seq., including: (1) U.S.

8 Bank misapplying or improperly suspending payments made by the Taits between 2012 and
9 March 2013, (Dkt. No. 19 at 18–19); (2) “U.S. Bank’s mute and un-collaborative appearance at
10 foreclosure mediation,” (Id. at 20–21); and (3) U.S. Bank’s failure to give proper notice of the
11 Taits’ right to rescind the transaction, (Id. at 19–20). The Taits seek damages and rescission of
12 the contract.
13

1.

14

Improperly Suspended Payments and Mediation Proceedings

U.S. Bank argues the Taits’ first two TILA violations are outside the statute of

15 limitations, and in the alternative, fail to state a claim on which relief can be granted. (Dkt. No.
16 21 at 7–8.) Any action for damages under TILA must be brought “within one year from the date
17 of the occurrence of the violation.” 15 U.S.C. § 1640(e). Here, the Taits made their last payment
18 in March 2013 (Dkt. No. 1-7 at 3) and began mediation in October 2014 (Dkt. No. 19-14 at 2).
19 However, they did not file these counterclaims until August 2016. Therefore, any damages
20 claims based on alleged misappropriations of the payments or mediation bad faith are time
21 barred.
22

The Taits argue under these circumstances equitable tolling is available because of U.S.

23 Bank’s alleged false communications and because the payment application issues were discussed
24 during the foreclosure mediation. (Dkt. No. 23 at 8.) The Taits argue “it would not have made
25 sense, and may have well been deemed bad faith, for the Taits to have initiated litigation” while
26 the parties were still in foreclosure mediation. (Id.) A court will apply equitable tolling to TILA
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 5

1 claims for damages “in situations where, despite all due diligence, the party invoking equitable
2 tolling is unable to obtain vital information bearing on the existence of the claim.” Cervantes v.
3 Countrywide Home Loans, Inc., 656 F.3d 1034, 1045 (9th Cir. 2011) (citing Socop–Gonzalez v.
4 I.N.S., 272 F.3d 1176, 1193 (9th Cir. 2001)). In general, plaintiffs must allege “circumstances
5 beyond their control” to meet this standard. Id. See, e.g., Hubbard v. Fidelity Fed. Bank, 91 F.3d
6 75, 79 (9th Cir. 1996) (per curium) (declining to toll TILA statute of limitations when “nothing
7 prevented [the mortgagor] from comparing the loan contract, [the lender’s] initial disclosures and
8 TILA’s statutory and regulatory requirements”).
9

Here, the Taits’ argument that the foreclosure mediation prevented them from bringing

10 the damages claims does not meet this high standard because the mediation commenced after the
11 TILA claim was already untimely. Accordingly, the Taits’ claims that U.S. Bank violated TILA
12 by misapplying or improperly suspending payments and with mediation bad faith are
13 DISMISSED WITH PREJUDICE.
14
15

2.

Notice of Right to Rescind

U.S. Bank argues the Taits’ third TILA violation is also outside the statute of limitations,

16 and in the alternative, fails to state a claim on which relief can be granted. (Dkt. No. 21 at 8.)
17 Normally, a borrower may rescind a loan subject to TILA within three days of the consummation
18 of the transaction. 15 U.S.C. § 1635(a); 12 C.F.R. § 226.23(a)(3). However, if a lender has failed
19 to provide required notices of a borrower’s right to cancel the transaction, the borrower has three
20 years to exercise her right to rescind from the date of the consummation of the transaction.
21 15 U.S.C. § 1635(f); 12 C.F.R. § 226.23(a)(3). Here, the Taits’ original loan was consummated
22 in December 2004 and the loan modification was consummated in July 2012. (Dkt. No. 1-7 at 3.)
23 However, they did not file these counterclaims until August 2016. Therefore, the rescission claim
24 is time barred even if U.S. Bank failed to provide notice of the right to cancel.
25

The Taits argue under these circumstances equitable tolling is available for the rescission

26 claim. (Dkt. No. 23 at 8.) The Taits cite Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct.
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 6

1 790 (2015), for the proposition that rescission after the three-year statute of limitations period is
2 permitted. However, the Taits blatantly misstate the holding. The Supreme Court in Jesinoski
3 addressed the issue of whether a borrower exercises the right to rescind by providing written
4 notice to her lender, or whether a borrower must also file a lawsuit before the three-year period
5 elapses. The Court held that only notice to the lender is required. Jesinoski, 135 S. Ct. at 793.
6 Here, the Taits do not allege any facts that they gave U.S. Bank notice of their intent to rescind.
7 Further, the Supreme Court held 15 U.S.C. § 1635(f) “permits no federal right to rescind
8 defensively or otherwise, after the 3-year period of § 1635(f) has run.” Beach v. Ocwen Fed.
9 Bank, 523 U.S. 410, 419 (1998). “Section 1635(f) is therefore not merely a statute of
10 limitations—it completely extinguishes the underlying right itself.” McOmie-Gray v. Bank of
11 Am. Home Loans, 667 F.3d 1325, 1329 (9th Cir. 2012). Therefore, the Taits’ equitable tolling
12 arguments carry no weight. Accordingly, the Taits’ claim that U.S. Bank violated TILA with its
13 failure to give proper notice of the Taits’ right to rescind is DISMISSED WITH PREJUDICE.
14

D.

15

The Taits allege various violations of RESPA, 12 U.S.C. § 2601 et seq., including

Real Estate Settlement Procedures Act Counterclaim

16 (1) U.S. Bank did not respond to a Qualified Written Request (QWR) for information from the
17 Taits within sixty days and (2) U.S. Bank engaged in a pattern or practice of non-compliance
18 with the requirements of the mortgage servicer provisions, as evidenced by their bad faith
19 certification during mediation. (Dkt. No. 19 at 24.)
20
21

1. Qualified Written Request Response
U.S. Bank argues the QWR response allegation does not state a claim for relief. (Dkt. No.

22 21 at 9.) RESPA requires loan servicers like U.S. Bank to respond to a QWR from a borrower
23 for information within sixty days. 12 U.S.C. § 2605(e)(2)(C). A QWR must be a “written
24 correspondence, other than notice on a payment coupon or other payment medium supplied by
25 the servicer, that—includes . . . the name and account of the borrower” and “a statement of
26 reasons for the belief of the borrower. . . that the account is in error.” 12 U.S.C. § (e)(1)(B). The
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 7

1 Taits do not allege any facts that they made a QWR. Instead, the Taits attempt to argue the FFA
2 is the “functional equivalent” of RESPA’s Qualified Written Request procedure (Dkt. No. 19 at
3 24) and comparison of the two “reveals that compliance with one means compliance with the
4 other, and a violation of one is the violation of the other.” (Dkt. No. 23 at 11.) Under this
5 analysis, U.S. Bank’s alleged failure to provide the documents required under the FFA is a
6 violation of RESPA. The Taits cite no authority where courts have construed the statutes as
7 functional equivalents. Further, the Court finds that a plain language reading of the statutes does
8 not provide such a connection. FFA disclosures are for the purpose of loan modification, not loan
9 servicing like RESPA. Therefore, the Taits’ RESPA claim for failure to respond to a QWR is
10 DISMISSED.
11
12

2. Non-compliance with Mortgage Servicer Provisions
U.S. Bank argues no provision of RESPA has anything to do with foreclosure mediations,

13 and therefore the Taits’ claim that U.S. Bank violated RESPA during the foreclosure mediation
14 fails to state a plausible claim for relief. (Dkt. No. 21 at 10.) The Taits argue “U.S. Bank violated
15 RESPA, 12 U.S.C. § 2605(e)(2)(A), by refusing to make appropriate corrections to the Taits’
16 account in response to the requests to do so at the third and last foreclosure mediation.” (Dkt. No.
17 19 at 24.) However, section 2605(e)(2)(A) requires that the borrower make a QWR before any
18 corrections to the account of the borrower can be made. It is undisputed that the Taits never
19 made a QWR. Therefore, the Taits’ RESPA claim for non-compliance with mortgage servicer
20 provisions fails to state a plausible claim and is DISMISSED.
21

E.

Equal Credit Opportunity Act Counterclaim

22

The Taits allege various violations of ECOA, 15 U.S.C. § 1691 et seq., based on the fact

23 that they applied for a loan modification, were denied the modification, and were therefore
24 entitled to a notification of an adverse action. (Dkt. No. 19 at 25.) They further allege that U.S.
25 Bank’s unexplained suspended expenses were effectively adverse actions in that they increased
26 the amount of the unpaid principal balance. (Id.)
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 8

1

ECOA was enacted to protect credit applicants from discrimination on the basis of race,

2 color, religion, national origin, sex, or age. 15 U.S.C. § 1691(a). Here, the Taits merely state they
3 are members of a protected racial class because Mrs. Tait is Japanese and Mr. Tait is Puerto
4 Rican. (Dkt. No. 19 at 27; Dkt. No. 23 at 18.) These are conclusory statements and insufficient to
5 state a plausible claim of race discrimination because Taits have made no allegations that these
6 alleged adverse actions were grounded in discrimination.
7

Moreover, if an applicant is denied credit, ECOA requires that the creditor provide a

8 statement of reasons for its “adverse action.” 15 U.S.C. § 1691(d)(2). An adverse action is
9 defined in part as “a denial or revocation of credit.” 15 U.S.C. § 1691(d)(6). However, an
10 adverse action does not include “a refusal to extend additional credit under an existing credit
11 arrangement where the applicant is delinquent or otherwise in default.” Id. 1 Here, it is undisputed
12 that when U.S. Bank denied the Taits’ loan modification, the Taits were in default and had not
13 made a payment on the loan since March 2013. Therefore, the Taits fail to state a plausible
14 adverse action grounded in discrimination and their ECOA claim is DISMISSED.
15

F.

Fair Housing Act Counterclaim

16

The Taits allege U.S. Bank violated FHA because it refused to negotiate in good faith

17 during the foreclosure mediation and the “only real offer U.S. Bank ever made was a take-it-or18 leave-it offer which would saddle the Taits with an ambiguously bloated principal . . . and a
19 waiver releasing U.S. Bank from the substantial liability of its unlawful behavior created.” (Dkt.
20 No. 19 at 26.) The Taits allege this caused them a loss of rights under “Freddie Mac and the
21
22
23
24
25
26

1

In their response to U.S. Bank’s motion to dismiss, the Taits claim that a Federal Reserve
Board opinion letter determined that a home loan modification is in fact a credit application
under ECOA. (Dkt. No. 23 at 13.) However, the letter actually states the Making Homes
Affordable Modification Program “requires an adverse action notice when a creditor declines an
application for an extension of credit from a borrower that is not currently delinquent or in
default on that loan.” Federal Reserve Board, Opinion Letter on Mortgage Loan Modifications
and Regulation B’s Adverse Action Requirement (Dec. 4, 2009), http://www.federalreserve.gov/
boarddocs/caletters/2009/0913/caltr0913.htm (emphasis added). The Taits again blatantly
obfuscate the governing law by citing sources out of context.
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 9

1 MHA Program.” (Id.)
2

FHA, 42 U.S.C. § 3601 et seq., prohibits discrimination by providers of housing on the

3 basis of race, color, religion, sex, national origin, familial status, or disability. The Taits seem to
4 allege a disparate treatment claim. To state a FHA disparate treatment claim, the Taits must
5 allege: (1) they are a member of a protected class; (2) they attempted to engage in a “real estate6 related transaction” with U.S. Bank; (3) U.S. Bank refused to transact business with the Taits
7 despite their qualifications; and (4) U.S. Bank transacted business with a similarly situated
8 parties during a period relatively near the time U.S. Bank refused the Taits. Gamble v. City of
9 Escondido, 104 F.3d 300, 305 (9th Cir. 1997).
10

The Taits argue that Swierkiewicz v. Sorema, N.A., 534 U.S. 506 (2002), which deals with

11 pleading standards for discrimination cases, and Gilligan v. Jamco Dev. Corp., 108 F.3d 246 (9th
12 Cir. 1997), should guide the Court in its analysis of whether the Taits state a claim upon which
13 relief can be granted. (Dkt. No. 23 at 14–15.) However, these cases were decided years before
14 Iqbal and Twombly and are entirely inapplicable now. The Supreme Court confirmed that
15 Swierkiewicz did not undermine the fact that a complaint must still be plausibly pled. Twombly,
16 550 U.S. at 546. Further, at least one post-Twombly case interprets Gilligan as meaning that the
17 plaintiff need not prove a prima facie case, but must still plead the general elements. Taylor v.
18 Accredited Home Lenders, Inc., 580 F. Supp. 2d 1062, 1068 (S.D. Cal. 2008). The Court adopts
19 this holding.
20

Here, the Taits merely state they are members of a protected racial class because Mrs.

21 Tait is Japanese and Mr. Tait is Puerto Rican. (Dkt. No. 19 at 27; Dkt. No. 23 at 18.) There are
22 no allegations U.S. Bank continued to engage in this type of transaction with other parties with
23 similar qualifications. Without more, the Taits fail to state a plausible FHA claim and it is
24 DISMISSED.
25

G.

Title VI, 42 U.S.C. § 2000d Counterclaim

26

The Taits allege U.S. Bank “took measures to conceal the real owner and beneficiary
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 10

1 from the Taits.” (Dkt. No. 19 at 27.) The Taits believe there was no assignment from Freddie
2 Mac to U.S. Bank, yet U.S. Bank has held itself out to be the beneficiary. (Id.) In connection
3 with this concealment, the Taits allege U.S. Bank “effectively excluded the Taits from
4 participation in, and denied the benefits of their options under” the federal Making Home
5 Affordable Program because of the Taits’ race, color, or national origin. (Id.)
6

Title VI of the Civil Rights Act provides that “[n]o person in the United States shall, on

7 ground of race, color, or national origin, be excluded from participation in, be denied benefits of,
8 or be subjected to discrimination under any program or activity receiving Federal financial
9 assistance.” 42 U.S.C. § 2000d. To survive a motion to dismiss, the Taits must allege facts that
10 U.S. Bank is engaging in racial discrimination and U.S. Bank is the recipient of federal funding.
11 Fobbs v. Holy Cross Health Sys. Corp., 29 F.3d 1439, 1447 (9th Cir. 1994), overruled on other
12 grounds by Daviton v. Columbia/HCA Healthcare Corp., 241 F.3d 1131 (9th Cir. 2001). A
13 private individual may sue to enforce Title VI only in instances of intentional discrimination.
14 Alexander v. Sandoval, 532 U.S. 275, 281 (2001).
15

The Taits do not allege in their counterclaims that U.S. Bank receives federal funds.

16 Further, the Taits fail to make any allegations that racial bias motivated US Bank’s decision to
17 deny their participation in the Making Homes Affordable Program. This is fatal to their Title VI
18 claim. Therefore, the Taits’ Title VI claim is DISMISSED.
19

H.

42 U.S.C. § 1981 Counterclaim

20

The Taits allege U.S. Bank “violated its duty to comply with all servicing laws,

21 regulations, and guidelines, thereby eliminating the Taits’ ability to enforce the Deed of Trust.”
22 (Dkt. No. 19 at 27.)
23

42 U.S.C. § 1981 prohibits racial discrimination in the formation of contracts solely due

24 to ancestry or ethnic characteristics. Saint Francis Coll. v. Al-Khazraji, 481 U.S. 604, 613
25 (1987). Therefore, a section 1981 claim may be based only on race. Id. To sufficiently allege the
26 prima facie case, the Taits must plead facts that plausibly establish U.S. Bank’s intentional
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 11

1 discrimination interfered with the Taits’ right to contract freely without racial discrimination. See
2 Gen. Bldg. Contractors Ass’n Inc. v. Pennsylvania, 458 U.S. 375, 391 (1982); 42 U.S.C. § 1981.
3 Here, the Taits merely state they are members of a protected racial class because Mrs. Tait is
4 Japanese and Mr. Tait is Puerto Rican. (Dkt. No. 19 at 27; Dkt. No. 23 at 18.) These again are
5 merely conclusory statements and insufficient to state a plausible claim of intentional race
6 discrimination. Therefore, the Taits’ 42 U.S.C. § 1981 claim is DISMISSED.
7

I.

Breach of Implied Duty of Good Faith and Fair Dealing Counterclaim

8

The Taits allege U.S. Bank breached its implied duty of good faith and fair dealing

9 arising from the Note and Deed. (Dkt. No. 19 at 18.) The Taits allege various violations of this
10 duty including (1) the beneficiary declaration signed by U.S. Bank in 2014 is ambiguous and
11 (2) U.S. Bank failed to process the Taits’ loan modification request. (Dkt. No. 19 at 29.)
12

Under Washington law, “[t]here is in every contract an implied duty of good faith and

13 fair dealing” that “obligates the parties to cooperate with each other so that each may obtain the
14 full benefit of performance.” Rekhter v. State, Dep’t of Soc. & Health Servs., 323 P.3d 1036,
15 1041 (Wash. 2014) (citing Badgett v. Sec. State Bank, 807 P.2d 356 (1991)). It is possible to
16 breach the implied duty of good faith even while fulfilling all of the terms of the written contract.
17 Id. However, “the duty [of good faith and fair dealing] arises only in connection with terms
18 agreed to by the parties.” Id. (citing Johnson v. Yousoofian, 930 P.2d 921, 924 (Wash. Ct. App.
19 1996)). If there is no contractual duty, there is nothing that must be performed in good faith. Id.
20
21

1. Ambiguous Note
As to the first alleged breach, the Taits cite to paragraph 22 of the Deed as the contract

22 term that was violated. (Dkt. No. 19 at 28–29.) This paragraph states, in relevant part:
23
24
25

If Lender invokes the power of sale, Lender shall give written notice to the
Trustee of the occurrence of an event of default and of the Lender’s election to
cause the Property to be sold. Trustee and Lender shall take such action regarding
notice of sale and shall give such notices to Borrower and to other persons as
Applicable Law may require.

26 (Dkt. No. 1-7 at 23.) The Taits seem to claim that, by failing to mention MERS and Freddie Mac,
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 12

1 the Note is ambiguous and thus in violation of paragraph 22. (Dkt. No. 19 at 29.) However, these
2 facts do not support a plausible claim of a breach because they have nothing to do with
3 paragraph 22’s contractual duties.
4

2. Loan Modification

5

As to the second alleged breach, the Taits cite paragraph 19 of the Deed as the contact

6 term that was violated. (Dkt. No. 19 at 29.) This paragraph deals with the Taits’ right to reinstate
7 after acceleration. (Dkt. No. 1-7 at 21.) The paragraph states, in relevant part, if “Borrower meets
8 certain conditions, Borrower shall have a right to have this Security Instrument discontinued.”
9 (Id.) These conditions include payment of all sums due, cure of all defaults of covenants, and
10 payment of all expenses incurred. (Id.) The Taits allege “[b]y never properly processing the
11 Tait’s [sic] modification application, U.S. Bank blocked the Taits from obtaining the
12 modification that would have cured the default.” (Dkt. No. 19 at 29.) However, paragraph 19
13 does not contain a contractual right to modification. The Taits do not allege any other facts that
14 indicate there is such a right elsewhere in the Deed. Further, even if paragraph 19 applied to this
15 allegation, the Taits allege no facts that they have met the conditions required. Without a
16 contractual right, there is no implied duty of good faith. As such, the Taits do not state a
17 plausible claim on which relief can be granted.
18

Therefore, the Taits’ claim for a breach of the implied duty of good faith and fair dealing

19 is DISMISSED.
20 III.

CONCLUSION

21

For the foregoing reasons, U.S. Bank’s motion to dismiss counterclaims (Dkt. No. 21) is

22 GRANTED in part and DENIED in part. The only remaining counterclaim is the CPA
23 counterclaim. The TILA claim is DISMISSED WITH PREJUDICE as it is time barred. The
24 other claims, RESPA, ECOA, FHA, Title VI, 42 U.S.C. § 1981, and breach of implied duty of
25 good faith and fair dealing, are DISMISSED.
26

///
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 13

1

DATED this 21st day of September 2016.

2
3
4

A

5
6
7

John C. Coughenour
UNITED STATES DISTRICT JUDGE

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF’S MOTION TO DISMISS
COUNTERCLAIMS
PAGE - 14