L’Esperance v . Mahattan Mortgage 11-cv-555-LM 9/5/12 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Linda L’Esperance
v. Civil N o . 11-cv-555-LM Opinion N o . 2012 DNH 155 Manhattan Mortgage Corporation
O R D E R
Based on the court’s order of June 1 2 , 2012, document n o .
3 2 , this case now consists of Linda L’Esperance’s claims against
Manhattan Mortgage Corporation (“Manhattan”) for: (1) negligent,
fraudulent, or intentional misrepresentation (Count I X ) ; (2)
violation of New Hampshire’s Consumer Protection Act (“CPA”),
New Hampshire Revised Statutes Annotated (“RSA”) chapter 358-A
(Count X ) ; (3) negligence, breach of contract, and breach of the
obligation of good faith and fair dealing (Count X I I ) ; and (4)
negligence (Count XIII). Before the court is L’Esperance’s
motion for default judgment. The court heard oral argument on
August 1 7 , 2012. For the reasons that follow, L’Esperance’s
motion for default judgment is denied.
The Legal Standard
Default has entered. See doc. n o . 3 3 . Thus, Manhattan is
“taken to have conceded the truth of the factual allegations in the complaint as establishing the grounds for liability.”
S.E.C. v . New Futures Trading Int’l Corp., N o . 11–cv–532–JL,
2012 WL 1378558, at *1 (D.N.H. Apr. 2 0 , 2012) (quoting Ortiz–
Gonzalez v . Fonovisa, 277 F.3d 5 9 , 62–63 (1st Cir. 2002)). But,
while “a defaulting party admits the factual basis of the claims
asserted against i t , the defaulting party does not admit the
legal sufficiency of those claims.” 10 James Wm. Moore, Moore’s
Federal Practice § 55.32[1][b] (3d ed. 2011) (citing Quirindongo
Pacheco v . Rolon Morales, 953 F.2d 1 5 , 16 (1st Cir. 1992)).
Accordingly, “[t]he claimant must state a legally valid claim
for relief,” 10 Moore’s, supra, and “[a] court may grant
judgment by default only for relief that may lawfully be granted
on the well-pleaded facts alleged by the claimant,” id.
(emphasis added). Therefore, “a district court may, after entry
of default, still conclude that a complaint fails to state a
claim.” Feliciano–Hernández v . Pereira–Castillo, 663 F.3d 5 2 7 ,
537 n.5 (1st Cir. 2011) (citing Ramos–Falcón v . Autoridad de
Energía Eléctrica, 301 F.3d 1 , 2 (1st Cir. 2002)).
As the court of appeals for this circuit has recently
explained, the process for determining whether a complaint
states a claim involves two steps:
Step one: isolate and ignore statements in the complaint that simply offer legal labels and conclusions or merely rehash cause-of-action elements.
2 [Ocasio-Hernández v . Fortuño-Burset, 640 F.3d 1,] 12 [(1st Cir. 2011)] (discussing, among other cases, Ashcroft v . Iqbal, 556 U.S. 6 6 2 , 129 S . C t . 1937, 1949 (2009), and Bell Atl. Corp. v . Twombly, 550 U.S. 5 4 4 , 555 (2007)). Step two: take the complaint’s well-pled (i.e., non-conclusory, non-speculative) facts as true, drawing all reasonable inferences in the pleader’s favor, and see if they plausibly narrate a claim for relief. Id. (again, discussing Iqbal and Twombly, among others); see also S.E.C. v . Tambone, 597 F.3d 436, 441–42 (1st Cir. 2010) (en banc). Plausible, of course, means something more than merely possible, and gauging a pleaded situation’s plausibility is a “context-specific” job that compels [a court] “to draw on” [its] “judicial experience and common sense.” Iqbal, 129 S . C t . at 1949, 1950. And in performing [its] review, [a court] consider[s] (a) “implications from documents” attached to or fairly “incorporated into the complaint,” (b) “facts” susceptible to “judicial notice,” and (c) “concessions” in plaintiff’s “response to the motion to dismiss.” Arturet–Vélez v . R.J. Reynolds Tobacco Co., 429 F.3d 1 0 , 13 n.2 (1st Cir. 2005); see also Haley v . City of Boston, 657 F.3d 3 9 , 4 4 , 46 (1st Cir. 2011).
Schatz v . Rep. State L’ship Comm., 669 F.3d 5 0 , 55-56 (1st Cir.
2012) (footnote and parallel citation omitted).
Background
Given the court’s obligation to determine whether any of
L’Esperance’s claims would pass muster under Rule 12(b)(6) of
the Federal Rules of Civil Procedure (“Federal Rules”), the
following background is drawn from L’Esperance’s amended
complaint, document n o . 2 0 .
In the portion of her complaint that identifies the
parties, L’Esperance alleges that “Manhattan Mortgage . . .
3 transacted business with [her] . . . by sending her an
application for their services to assist in acquiring a loan
modification, . . . [making] misrepresentations regarding the
quality and nature of the services they could and would deliver,
and accepting [her] fee for said service, which as alleged
below, was never delivered.” Am. Compl. ¶ 2 0 . The “General
Allegations” section of her complaint includes the following:
Defendant Manhattan Mortgage Corporation held itself out as having the willingness and ability to assist the Plaintiff in acquiring a loan modification after her efforts with her lenders had failed. Defendant Manhattan Mortgage Corporation specifically represented that i t , through its staff, employees, agents, and/or representatives had an intrinsic working knowledge of the mortgage industry, modifications, federal funding and criteria for modifications, the Plaintiff’s lender in particular, and specifically that it could successfully effectuate a modification of the Plaintiff’s loans. Based on these promises, and this agreement, the Plaintiff paid Manhattan Mortgage Corporation in the order of $2,195.00 for their represented services. However, Manhattan Mortgage failed to effectuate a modification, and failed to appeal the initial disapproval, despite their contract and express promises that they could and would carry this out on the Plaintiff’s behalf.
Id. ¶ 4 4 . That is the full extent of the complaint’s factual
allegations concerning Manhattan. However, a document titled
“Site Check Draft Authorization” (hereinafter “authorization
form”) that was executed by L’Esperance and attached to her
motion for default judgment provides as follows:
4 The services MANHATTAN MORTGAGE CORPORATION shall provide are, but may not be limited t o : preparing a loan modification package, preparing financial information, telephoning, faxing and negotiating a potential loan modification request. . . .
MANHATTEN MORTGAGE CORPORATION . . . makes no guarantees, representations, specific performance, or outcome of a loan modification request made to a lender. I understand and agree that no loan modification guarantees have been promised to m e , verbally or in writing, and that final approval of any loan modification request(s) MANHATTAN MORTGAGE CORPORATION submits on my behalf is subject to lender guidelines, acceptance and approval.
Pl.’s Mot. Default J., Ex. A (doc. n o . 3 4 - 2 ) , at 2 . Given that
L’Esperance has brought a claim for breach of contract, and the
authorization form is the agreement between L’Esperance and
Manhattan, that document is fairly incorporated into
L’Esperance’s complaint. See Bedall v . State S t . Bank & T r .
Co., 137 F.3d 1 2 , 17 (1st Cir. 1998) (“When . . . a complaint’s
factual allegations are expressly linked to – and admittedly
dependent upon – a document (the authenticity of which is not
challenged), that document effectively merges into the pleadings
and the trial court can review it in deciding a motion to
dismiss under Rule 12(b)(6).”) (citations omitted).
Discussion
Having described the relevant legal standard, and the facts
of this case, the court turns to each of the four counts in
L’Esperance’s complaint that assert claims against Manhattan.
5 A . Count IX
Count IX is L’Esperance’s misrepresentation claim. In i t ,
she asserts:
Manhattan Mortgage Corporation made statements regarding [its] abilities, knowledge, competence, and intentions of successfully accomplishing a loan modification for the Plaintiff that were made with the purpose of inducing the Plaintiff into paying for such proffered services, including but not limited to all promises as outlined in the general allegations portion of this Writ. The Defendants knew or should have known that such representations were false. The Plaintiff reasonably and justifiably relied on such statements to her detriment.
Am. Compl. ¶ 105. The “promises” outlined in the general
allegations portion of the complaint are those described in
paragraph 4 4 , which is quoted above, in full. Count IX fails to
state a misrepresentation claim against Manhattan for several
reasons.
First, at least with respect to a claim for intentional
misrepresentation, L’Esperance is obligated to “state with
particularity the circumstances constituting fraud.” Fed. R.
Civ. P. 9 ( b ) ; see also Tessier v . Rockefeller, 162 N.H. 3 2 4 , 332
(2011) (“In order to withstand a motion to dismiss, the
plaintiff must specify the essential details of the fraud, and
specifically allege the facts of the defendant’s fraudulent
actions.”) (quoting Jay Edwards, Inc. v . Baker, 130 N.H. 4 1 , 46-
47 (1987)) (emphasis in Jay Edwards). “To satisfy [the]
6 particularity requirement [under the Federal Rules], the pleader
must set out the ‘time, place, and content of the alleged
misrepresentation with specificity.’” Tambone, 597 F.3d at 442
(quoting Greebel v . FTP Software, Inc., 194 F.3d 185, 193 (1st
Cir. 1999)). L’Esperance’s allegations of who said what to whom
fall far short of the specificity necessary to state a claim for
intentional misrepresentation under the Rule 9(b) pleading
standard. And, those allegations are probably inadequate to
state a claim for negligent misrepresentation under the Rule
8(a)(2) pleading standard. Moreover, to the extent that
L’Esperance’s misrepresentation claim is based on a supposed
statement by Manhattan “that it could successfully effectuate a
modification of [her] loans,” Am. Compl. ¶ 4 4 , that allegation
cannot stand in the face of the authorization form, in which
L’Esperance acknowledged that Manhattan had made no guarantees
concerning the outcome of its attempt to secure a modification
of her mortgage loan. See Schatz, 669 F.3d at 56 n.3 (“the
documents [fairly incorporated into a complaint] may trump the
complaint’s allegations if a conflict exists”) (citing Clorox
C o . P.R. v . Proctor & Gamble Commercial Co., 228 F.3d 2 4 , 32
(1st Cir. 2000)).
Beyond that, it is not at all clear that L’Esperance has
adequately alleged that any of the statements on which she
7 relies are false statements, which is a necessary element of a
claim for either intentional or negligent misrepresentation.
Based upon paragraph 44 of her amended complaint, L’Esperance
appears to allege that Manhattan made false statements when it
said that: (1) it had the willingness and ability to assist her
in acquiring a loan modification; (2) it had an intrinsic
knowledge of the mortgage industry and the modification process;
and (3) it could successfully effectuate a modification of her
mortgage. But, she does not allege any facts which, if proven,
would render any of those statements false at the time they were
made. That i s , she alleges no facts concerning Manhattan’s
actual willingness and ability to assist her in getting a loan
modification, and no facts concerning Manhattan’s actual
knowledge of the mortgage industry and the modification process.
Regarding the alleged promise of a successful outcome,
L’Esperance alleges no facts that, if proven, would demonstrate
that when Manhattan made that promise, it had no intention of
keeping i t , which is a necessary element of a misrepresentation
claim based on a promise. See Thompson v . H.W.G. Grp., Inc.,
139 N.H. 6 9 8 , 701 (1995) (“A promise . . . will only give rise
to a claim of misrepresentation i f , at the time it was made, the
defendant had no intention to fulfill the promise.”) (citation
omitted).
8 Instead of making the requisite factual allegations,
L’Esperance appears to rely exclusively on Manhattan’s lack of
success in securing a modification of her mortgage, and its
failure to appeal the initial disapproval of her request for a
modification, as proof of the falsity of Manhattan’s statements.
That is not enough, especially in light of L’Esperance’s express
acknowledgment, in the authorization form, that Manhattan made
no promises about the outcome of its attempt to secure a
modification.1
Finally, the complaint falls short with regard to alleging
the requisite state(s) of mind of the speaker(s) responsible for
the alleged misrepresentations. As explained in the court’s
order dismissing the claims against the other defendants,
allegations of scienter are necessary to state a claim for
intentional misrepresentation. See L’Esperance v . HSBC Consumer
Lending, Inc., N o . 11-cv-555-LM, 2012 WL 2122164, at *13 (D.N.H.
June 1 2 , 2012). As with L’Esperance’s allegations against those
1 With respect to Manhattan’s alleged failure to appeal, the court notes that appealing an initial adverse decision is not one of the services Manhattan promised to perform in the authorization form, and L’Esperance makes no specific allegation that Manhattan ever promised to file an appeal. Moreover, by analogy to the elements of a claim for legal malpractice, it would seem that a failure to appeal would only cause injury if the appeal was likely to have succeeded, and L’Esperance makes no allegations concerning the merits of her modification request or the chances of a successful appeal of the initial denial.
9 other defendants, she has not adequately alleged scienter with
respect to Manhattan. Similarly, allegations concerning a
failure to exercise reasonable care before making a statement
are necessary to state a claim for negligent misrepresentation.
See id. at * 1 4 . Here, too, L’Esperance’ complaint misses the
mark.
Because L’Esperance has not alleged misrepresentation with
adequate specificity, because she has not actually alleged a
false statement of fact, and because her complaint does not
contain adequate allegations regarding the state(s) of mind of
the relevant speaker(s), who remain unidentified, she has failed
to state a claim for misrepresentation. As a consequence, she
is not entitled to default judgment on the misrepresentation
claim she asserts in Count IX.
B . Count X
Count X is L’Esperance’s claim under the CPA, that
Manhattan “held its services out to be of a standard and
quality, based on expertise and unique knowledge, when such
services were not of said standard or quality.” Am. Compl. ¶
108(f). The CPA does, indeed, make it unlawful for a person to
“[r]epresent that . . . services are of a particular standard,
quality, or grade . . . if they are of another,” RSA 358-A:2,
VII. L’Esperance, however, makes no factual allegations
10 concerning: (1) what Manhattan said about its expertise and
unique knowledge; or (2) the actual level of Manhattan’s
expertise and knowledge. Without allegations about what
Manhattan said, or the actual state of Manhattan’s expertise and
knowledge, L’Esperance has not alleged a false representation
concerning the standard and quality of the services Manhattan
provided to L’Esperance. L’Esperance is not entitled to default
judgment on the claim she asserts in Count X because she does
little more than recite the elements of her cause of action, and
“a formulaic recitation of the elements of a cause of action
will not do” to state a claim on which relief can be granted.
United Auto. Workers of Am. Int’l Union v . Fortuño, 633 F.3d 3 7 ,
41 (1st Cir. 2011) (quoting Iqbal, 556 U.S. at 6 7 8 ) ; see also
Schatz, 669 F.3d at 55 (explaining that when ruling on Rule
12(b)(6) motions, courts should “isolate and ignore statements
in the complaint that . . . merely rehash cause-of-action
elements”).
C . Count XII
In Count X I I , L’Esperance asserts a claim under three
separate legal theories. Specifically, she claims that
Manhattan’s
failure to acquire the modification as required under the contract was in breach of contract, in breach of the Defendant’s obligations to deal fairly and in good
11 faith with the Plaintiff, and/or was the result of the Defendant’s direct or vicarious liability of its agents/employees/representative’s negligence within the scope of employment and in connection with the rendering of the contracted services and in failing to take a timely appeal.
Am. Compl. ¶ 117. L’Esperance has failed to state a claim for
breach of contract because the contract on which she is suing
expressly disclaims any guarantee concerning the outcome of
Manhattan’s attempt to secure a modification of L’Esperance’s
mortgage. That i s , the contract did not require Manhattan to
acquire a modification. L’Esperance has failed to state a claim
for negligence because the only duties she alleges Manhattan
breached are those it assumed under its agreement with her, and
in New Hampshire, “[a] breach of contract standing alone does
not give rise to a tort action.” Bennett v . ITT Hartford Grp.,
Inc., 150 N.H. 753, 757 (2004) (citing Lawton v . Great Sw. Fire
Ins. Co., 118 N.H. 6 0 7 , 613 (1978)).
L’Esperance’s claim for breach of the obligation of good
faith and fair dealing is also fatally flawed. According to the
New Hampshire Supreme Court:
In every agreement, there is an implied covenant that the parties will act in good faith and fairly with one another. Livingston v . 18 Mile Point Drive, 158 N.H. 619, 624 (2009). In New Hampshire, there is not merely one rule of implied good-faith duty, but a series of doctrines, each of which serves a different function. Id. The various implied good-faith obligations fall into three general categories: (1)
12 contract formation; (2) termination of at-will employment agreements; and (3) limitation of discretion in contractual performance. Id.
Birch Broad., Inc. v . Capitol Broad. Corp., 161 N.H. 1 9 2 , 198
(2010) (parallel citation omitted). While L’Esperance broadly
alleges that Manhattan breached its obligation to deal with her
fairly and in good faith, she elaborates no further, and does
not indicate which good faith obligation(s) Manhattan failed to
fulfill.
Plainly, this case does not involve the second category of
good faith and fair dealing, which pertains to discharge from
at-will employment. To the extent that L’Esperance asserts a
claim based on the first category, any such claim fails as a
result of her failure to allege scienter. See L’Esperance, 2012
WL 2122164, at *18-19. That leaves the third category.
In its landmark opinion on the implied covenant of good
faith and fair dealing, the New Hampshire Supreme Court
described the rule underlying the limitation of discretion in
contract performance:
[U]nder an agreement that appears by word or silence to invest one party with a degree of discretion in performance sufficient to deprive another party of a substantial proportion of the agreement’s value, the parties’ intent to be bound by an enforceable contract raises an implied obligation of good faith to observe reasonable limits in exercising that discretion,
13 consistent with the parties’ purpose or purposes in contracting.
Centronics Corp. v . Genicom Corp., 132 N.H. 133, 143 (1989).
As a preliminary matter, the court is far from certain that
the agreement on which L’Esperance bases her claim “allow[ed] or
confer[ed] upon [Manhattan] a degree of discretion in
performance tantamount to a power to deprive [L’Esperance] of a
substantial proportion of the agreement’s value.” Centronics,
132 N.H. at 144. To the contrary, in the authorization form,
Manhattan represented that it would prepare a loan modification
package and financial information. Pl.’s Mot. for Default J.,
Ex. A (doc. n o . 3 4 - 2 ) , at 2 . If the agreement had given
Manhattan the power to do nothing at all, or next to nothing, at
its own discretion, and if L’Esperance had alleged that
Manhattan had done nothing, then perhaps L’Esperance would have
stated a claim. But, the agreement itself demonstrates that
Manhattan did not have the degree of discretion described in
Centronics, and L’Esperance does not allege that Manhattan did
nothing. Rather, she only alleges that despite Manhattan’s
efforts, she did not receive a loan modification and that
Manhattan did not appeal the lender’s denial of a loan
modification.
14 L’Esperance may believe that she was deprived of a
substantial proportion of the agreement’s value because she did
not get a loan modification. But, the authorization form made
it abundantly clear that the agreement’s value was the effort
made by Manhattan, not the success of those efforts, which was
beyond Manhattan’s control, as was also stated in the
authorization form. And, with regard to Manhattan’s decision
not to appeal the initial denial of L’Esperance’s application
for a modification, L’Esperance has alleged no facts tending to
show that there even was an appeal process or that Manhattan’s
decision not to appeal was not reasonable under the
circumstances. It could hardly be said that Manhattan did not
reasonably exercise its discretion in contract performance by
deciding not to file an appeal if such an appeal was unlikely to
succeed, and L’Esperance makes no factual allegations concerning
the relative strength of the appeal it says Manhattan should
have pursued. In sum, L’Esperance has not stated a claim for
the third kind of breach of the implied covenant of good faith
and fair dealing.
Having failed to state a claim for breach of contract,
negligence, or breach of the implied covenant of good faith and
fair dealing, L’Esperance is not entitled to a default judgment
on Count XII.
15 D. Count XIII
Count XIII is L’Esperance’s claim that Manhattan is liable
to her in negligence because it “breached its duty of reasonable
care to [her] in failing to deliver the services for which it
was hired.” Am. Compl. ¶ 123. Count XIII does not state a
claim because, as the court has already noted, “[a] breach of
contract standing alone does not give rise to a tort action.”
Bennett, 150 N.H. at 757 (citation omitted). Because
L’Esperance has failed to state a claim for negligence, she is
not entitled to a default judgment on Count XIII.
Conclusion
For the reasons described above, L’Esperance’s motion for
default judgment, document no. 34, is denied. The clerk of the
court shall enter judgment in accordance with this order and
close the case.
SO ORDERED.
(^f /y J _ Landya l^eCa^terty United StatWMagistrate Judge September 5, 2012 cc: Jason D. Gregoire, Esq. Michael R. Stanley, Esq. Shenanne Ruth Tucker, Esq. John-Mark Turner, Esq.