Moore v. Wells Fargo Bank NA

• Court: District Court, E.D. Washington
• Decided: May 20, 2022
• Docket: 1:22-cv-03045
• Status: Unknown

Opinion

1 2

3 4 5 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON 6

7 JAMES BRADLEY MOORE and COLLETTE L.S. MOORE, NO. 1:22-CV-3045-TOR 8 Plaintiffs, ORDER GRANTING IN PART AND 9 DENYING IN PART DEFENDANT’S v. MOTION TO DISMISS 10 WELLS FARGO BANK, N.A., 11 Defendant. 12

13 BEFORE THE COURT is Defendant’s Motion to Dismiss (ECF No. 4). 14 This matter was submitted for consideration without oral argument. The Court has 15 reviewed the record and files herein, the completed briefing, and is fully informed. 16 For the reasons discussed below, Defendant’s Motion to Dismiss (ECF No. 4) is 17 granted in part and denied in part. 18 BACKGROUND 19 This case concerns a dispute over loan modification offers and related 20 interest rates. ECF No. 1-1. On March 2, 2022, Plaintiffs served Defendant with 1 the present the complaint bearing the caption of the Superior Court of Yakima. 2 ECF No. 1 at 2, ¶¶ 1-2. On April 1, 2022, Defendant removed the action to this

3 Court. Id. at 1. The Complaint raises the following causes of action: violation of 4 Washington’s Consumer Protection Act (“CPA”) and negligent misrepresentation. 5 ECF No. 1-1 at 9-10, ¶¶ 5.1-6.5. The following facts are drawn from Plaintiffs’

6 complaint and are accepted as true for the purposes of the present motion. Chavez 7 v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012). 8 In January 2018, Plaintiffs purchased a residential property by executing a 9 promissory note and deed of trust. ECF No. 1-1 at 5, ¶ 4.3. The terms of the note

10 were as follows: $448,400.00 principal, 4.750% interest rate, and a $2,339.07 11 monthly payment. Id. at 5-6, ¶ 4.3. Subsequently, the ownership of the note and 12 deed was transferred to Fannie Mae and servicing of the note was assigned to

13 Wells Fargo. Id. at 6, ¶ 4.4. For two years, Plaintiffs made timely mortgage 14 payments to Wells Fargo. Id. 15 In February 2020, Plaintiff Mr. Moore lost his job due to the COVID-19 16 pandemic. Id., ¶ 4.5. On March 23, 2020, Plaintiffs contacted Wells Fargo to

17 inquire about COVID-19 related hardship programs. Id. On March 31, 2020, 18 Plaintiffs contacted Wells Fargo regarding a refinance of the mortgage. Id. 19 Plaintiffs were approved for a three-month COVID-19 pandemic related

20 1 forbearance, but Plaintiffs submitted several payments during this time in order to 2 not fall behind on the mortgage. Id., ¶¶ 4.5-4.6.

3 In May 2020, Mr. Moore secured a new job and Plaintiffs requested to be 4 taken out of forbearance. Id., ¶ 4.6. Wells Fargo told Plaintiffs they could not 5 cancel the forbearance. Id. Plaintiffs then requested a refinance. Id., ¶ 4.7. Wells

6 Fargo told Plaintiffs they were ineligible due to the forbearance status on the loan, 7 but that Plaintiffs could apply for a loan modification. Id. 8 On July 13, 2020, Plaintiffs submitted a loan modification application. Id., ¶ 9 4.8. On July 23, 2020, Plaintiffs received a letter from Wells Fargo stating that

10 their automated valuation model calculated Plaintiffs’ property value at $480,000. 11 Id., ¶ 4.9. 12 On August 6, 2020, Wells Fargo contacted Plaintiffs, approving the loan

13 modification and asking whether Plaintiffs accepted the modification. Id., ¶ 4.10. 14 Plaintiffs told Wells Fargo they would need to review the documentation before 15 agreeing. Id. at 7, ¶ 4.10. On or about the same date1, Plaintiffs received the letter 16 with the loan modification offer of a $2,528.94 monthly payment with a 3.250%

1 Plaintiffs states the letter was received one day before the phone call on 18 August 5, 2020. There are also two paragraphs labeled 4.10. These appear to be 19 typographical errors. 20 1 interest rate. Id., ¶ 4.10. Plaintiffs were concerned the modification extended the 2 loan’s term by 10 years and did not remove the Private Mortgage Insurance. Id., ¶

3 4.10. Plaintiffs repeatedly tried and failed to get ahold of their single point of 4 contact for Wells Fargo to discuss these concerns. Id. 5 On or about November 4, 2020, Plaintiffs received a letter from Wells Fargo

6 stating that their automated valuation model calculated the property value at 7 $577,600. ECF No. 1-1 at 7, ¶ 4.11. On or about November 6, 2020, Plaintiffs 8 received a letter from Wells Fargo with a loan modification offer for a trial period 9 plan for monthly payments of $2,974.86 with a 4.75% interest rate. ECF No. 1-1

10 at 7, ¶ 4.12. 11 On or about December 23, 2020, Plaintiffs received a loan modification 12 offer from Wells Fargo for a trial period plan for monthly payments of $2,940.16

13 with a 4.75% interest rate. ECF No. 1-1 at 7, ¶ 4.14. 14 On or about April 6, 2021, Plaintiffs received a letter from Wells Fargo 15 stating that their automated valuation model calculated the property value at 16 $622,100. ECF No. 1-1 at 7, ¶ 4.15. On or about April 7, 2021, Plaintiffs received

17 a loan modification offer from Wells Fargo for a trial period plan for monthly 18 payments of $2,995.21 with a 4.75% interest rate. ECF No. 1-1 at 8, ¶ 4.16. 19 On or about June 8, 2021, Plaintiffs sent a Notice of Error letter to Wells

20 Fargo stating that the valuations of their home were grossly overinflated and 1 requesting that Wells Fargo obtain an exterior BPO, appraisal, or other more 2 accurate method than the computer-generated value. ECF No. 1-1 at 8, ¶ 4.17. On

3 or about July 6, 2021, Plaintiffs received a response from Wells Fargo declining 4 their request to order a new appraisal. ECF No. 1-1 at 8, ¶ 4.18. 5 On or about October 2021, Plaintiffs sent another Notice of Error letter to

6 Wells Fargo that included two comparable market analyses from local Yakima 7 realtors listing the property in October 2021 as $528,915 and $575,000. ECF No. 8 1-1 at 8, ¶ 4.19. 9 The Fannie Mae Servicing Guide provides that if borrower’s loan-to-value

10 ratio is higher than 80%, the borrower will be offered an interest rate at the lesser 11 of the Fannie Mae Modification Interest Rate and the contractual interest rate in the 12 loan modification. ECF No. 1-1 at 8, ¶ 4.20. If the loan-to-value ratio is less than

13 80%, the borrower will be offered the contractual interest rate in the loan 14 modification. Id. During the relevant period, Plaintiffs had a loan-to-value ratio 15 greater than 80%. ECF No. 1-1 at 9, ¶ 4.22. 16 Plaintiffs believe Wells Fargo overinflated the value of the home resulting in

17 Plaintiffs not being offered the Fannie Mae Modification Interest Rate in the 18 Servicing Guide. ECF No. 1-1 at 9, ¶ 4.23. Plaintiffs received damage to their 19 credit, lost money disputing Wells Fargo’s valuations, and incurred other monetary

20 damages. ECF No. 1-1 at 9, ¶ 4.24. 1 DISCUSSION 2 A. Motion to Dismiss Standard

3 Federal Rule of Civil Procedure 12(b)(6) provides that a defendant may 4 move to dismiss the complaint for “failure to state a claim upon which relief can be 5 granted.” A motion to dismiss for failure to state a claim will be denied if the

6 plaintiff alleges “sufficient factual matter, accepted as true, to ‘state a claim to 7 relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 8 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 9 While the plaintiff’s “allegations of material fact are taken as true and

10 construed in the light most favorable to the plaintiff” the plaintiff cannot rely on 11 “conclusory allegations of law and unwarranted inferences … to defeat a motion to 12 dismiss for failure to state a claim.” In re Stac Elecs. Sec. Litig., 89 F.3d 1399,

13 1403 (9th Cir. 1996) (citation and brackets omitted). That is, the plaintiff must 14 provide “more than labels and conclusions, and a formulaic recitation of the 15 elements.” Twombly, 550 U.S. at 555. 16 When deciding, the Court’s review is limited to the complaint, documents

17 incorporated into the complaint by reference, and judicial notice. Metzler Inv. 18 GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1061 (9th Cir. 2008) (citing 19 Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)). Defendant

20 requests the Court take judicial notice of three documents: the note, deed, and 1 assignment of the deed of trust. ECF No. 5. While these documents appear to be 2 subject to judicial notice, the Court need not consider them where the documents

3 are not relevant to resolving the issues presented in this motion. 4 B. Consumer Protection Act 5 Defendant asserts Plaintiffs failed to state a claim under the CPA by failing

6 to allege an unfair or deceptive act, causation, and any act that would affect the 7 public interest. ECF No. 4 at 4-6. 8 The Washington Consumer Protection Act (“CPA”) prohibits “[u]nfair 9 methods of competition and unfair or deceptive acts or practices in the conduct of

10 any trade or commerce.” RCW 19.86.020. “Any person who is injured in his or 11 her business or property by a violation of RCW 19.86.020 … may bring a civil 12 action” to recover actual damages. RCW 19.86.090. To establish a non-per se

13 CPA claim, the plaintiff need not have a contractual or non-adversarial relationship 14 with the defendant. Panag v. Farmers Ins. Co. of Washington, 166 Wash. 2d 27, 15 41-42 (2009). 16 To prevail on such a CPA claim, “the plaintiff must prove an (1) unfair or

17 deceptive act or practice; (2) occurring in trade or commerce; (3) public interest 18 impact; (4) injury to plaintiff in his or her business or property; [and] (5) 19 causation.” Klem v Washington Mut. Bank, 176 Wash. 2d 771, 782 (2013)

20 (quoting Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash. 1 2d 778, 780 (1986)). The “trade or commerce” and “injury” elements are not in 2 dispute. See ECF No. 4 at 5-6.

3 1. Unfair or Deceptive Act or Practice 4 Under the first element, the plaintiff can demonstrate a deceptive act if the 5 “alleged act had the capacity to deceive a substantial portion of the public” even if

6 there was no intent to deceive. Merriman v. Am. Guarantee & Liab. Ins. Co., 198 7 Wash. App. 594, 628 (2017) (quoting Hangman Ridge, 105 Wash. 2d at 785). A 8 plaintiff can demonstrate an unfair act if the act “(1) causes or is likely to cause 9 substantial injury which (2) consumers cannot avoid, and (3) is not ‘outweighed by

10 countervailing benefits.’” Id. (quoting Klem, 176 Wash. 2d at 787). Whether an 11 act constitutes an unfair or deceptive practice is a question of law. Columbia 12 Physical Therapy, Inc., P.S. v. Benton Franklin Orthopedic Assocs., P.L.L.C., 168

13 Wash. 2d 421 (2010). 14 Defendant asserts Plaintiffs allege no unfair or deceptive act where Plaintiffs 15 cannot assert a contractual right to which Plaintiffs are entitled. See ECF Nos. 4, 9 16 (arguing Defendant is not required to offer a loan modification under any specific

17 terms and Plaintiffs are unable to enforce rights under Fannie Mae servicing 18 guidelines). Plaintiffs need not assert a contractual right to state a claim under the 19 CPA. Plaintiffs’ allegation that Defendant overinflated the property value,

20 rendering them ineligible for lower interest rates for which they would otherwise 1 be eligible, has the capacity to deceive a substantial portion of the public and/or is 2 likely to cause substantial injury that Plaintiffs could not avoid without any clear

3 countervailing benefits. Merriman, 198 Wash. App. at 628. Defendant dismisses 4 Plaintiffs’ over-inflation allegation as a bare assertion. ECF No. 9 at 4. To the 5 contrary, Plaintiffs allege they provided Defendant with two comparable market

6 analyses that list the property value well under Defendant’s valuations, thereby 7 supporting their claim that Defendant over-inflated the property value. ECF No. 1- 8 1 at 8, ¶ 4.19. The Court finds that Plaintiffs adequately allege an unfair or 9 deceptive act to support their CPA claim.

10 2. Public Interest 11 Under the third element, “[o]rdinarily, a breach of a private contract 12 affecting no one but the parties to the contract is not an act or practice affecting the

13 public interest.” Hangman Ridge, 105 Wash. 2d at 790. However, a plaintiff can 14 establish that the private “lawsuit would serve the public interest by showing a 15 likelihood that other plaintiffs have been or will be injured in the same fashion.” 16 Trujillo v. Nw. Tr. Servs., 183 Wash. 2d 820, 835 (2015) (internal citations

17 omitted). To assess the public interest in a private dispute, courts are guided by 18 “(1) whether the defendant committed the alleged acts in the course of his/her 19 business, (2) whether the defendant advertised to the public in general, (3) whether

20 the defendant actively solicited this particular plaintiff, and (4) whether the 1 plaintiff and defendant have unequal bargaining positions.” Id. at 836. No one 2 factor is dispositive. Id.

3 Defendant’s relevant services affects homeowners in Washington. ECF No. 4 1-1 at 9, ¶ 5.5. Plaintiffs can establish public interest under the aforementioned 5 factors in a private dispute; the allegations show the acts were committed within

6 the course of Defendant’s business and it appears based on the allegations that 7 Plaintiffs and Defendant have unequal bargaining power. Trujillo, 183 Wash. 2d at 8 836. The Court finds that Plaintiffs adequately allege a public interest to support 9 their CPA claim.

10 3. Causation 11 A plaintiff can establish causation by showing “the deceptive act or practice 12 proximately caused injury to the plaintiff’s ‘business or property.’” Panag, 166

13 Wash. 2d at 63-64. “Where a more favorable loan modification would have been 14 granted but for [wrongful conduct], the borrower may have suffered an injury to 15 property within the meaning of the CPA.” Frias v. Asset Foreclosure Servs., Inc., 16 181 Wash. 2d 412, 431-32 (2014).

17 Plaintiffs allege they received damage to their credit, lost money disputing 18 the valuations, and incurred other monetary damages during the loan modification 19 process that would not have occurred but for Defendant’s valuations. ECF No. 1-1

20 1 at 8-10, ¶¶ 4.17-4.24, 5.7. The Court finds that Plaintiffs adequately allege 2 causation to support their CPA claim.

3 In sum, accepting the allegations as true, Plaintiffs have stated a claim for 4 relief under the CPA that is plausible on its face. Iqbal, 556 U.S. at 678. 5 Defendant’s motion to dismiss the CPA claim is denied.

6 C. Negligent Misrepresentation 7 Defendant asserts Plaintiffs failed to state a claim for negligent 8 misrepresentation on the grounds that the complaint fails to plead the existence of a 9 false statement, Plaintiffs did not rely on any false statement, there are no

10 allegations Defendant negligently transmitted the results of the valuations, and 11 there is no proximate causation as a matter of law. ECF No. 4 at 8-9. 12 To prove a claim for negligent misrepresentation, a plaintiff must show by

13 clear, cogent, and convincing evidence that (1) the defendant in the course of its 14 business, profession, or employment, supplies false information for the guidance of 15 others in their business transactions, (2) the defendant knew or should have known 16 the information supplied was to guide the plaintiff in their business transaction, (3)

17 the defendant was negligent in obtaining or communicating the false information, 18 (4) the plaintiff reasonably relied on the information, and (5) the false information 19 proximately caused the plaintiff damages. Ross v. Kirner, 162 Wash. 2d 493, 499-

20 500 (2007) (internal citation omitted). 1 Plaintiffs adequately allege Defendant supplied Plaintiffs with false 2 information about the valuations of their property and their qualification for a

3 lower interest rate, knew it was supplied for loan modification offer, was negligent 4 in obtaining or communicating the information, and the information proximately 5 caused their damages. ECF No. 1-1 at 10, ¶¶ 4.23-4.24, 6.1-6.5. However, beyond

6 a bare assertion, Plaintiffs do not allege they reasonably relied on the valuations, as 7 evidenced by the allegations that Plaintiffs did not accept any of the loan 8 modification offers and Plaintiffs’ damages arose in part by disputing the 9 valuations. Id. at 7-8, ¶¶ 4.10-4.19. Accepting the allegations as true, the lack of

10 reasonable reliance is fatal to Plaintiffs’ negligent misrepresentation claim. 11 Defendant’s motion to dismiss this claim is granted. 12 D. Leave to Amend

13 Rule 15(a)(2) instructs courts to “freely give leave [to amend] when justice 14 so requires.” “This policy is to be applied with extreme liberality.” Eminence 15 Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (internal citation 16 and quotation marks omitted). However, a court may deny leave to amend “due to

17 undue delay, bad faith or dilatory motive on the part of the movant, repeated 18 failure to cure deficiencies by amendments previously allowed, undue prejudice to 19 the opposing party…, and futility of amendment.” Zucco Partners, LLC v.

20 Digimarc Ltd., 552 F.3d 981, 1007 (9th Cir. 2009) (internal citation and quotation 1 || marks omitted). Federal Rule of Civil Procedure 15(a) governs amendment of the 2|| pleadings prior to the court’s filing of a pretrial scheduling order. Johnson v. 3}| Mammoth Recreations, Inc., 975 F.2d 604, 607-08 (9th Cir. 1992). 4 Here, Rule 15(a) applies where the Court has yet to file a pretrial scheduling 5|| order in this case. As this case is in its early stages, the Court finds that justice 6|| requires that Plaintiffs be able to freely amend their complaint. 7|| ACCORDINGLY, IT IS HEREBY ORDERED: 8 1. Defendant’s Motion to Dismiss (ECF No. 4) is GRANTED in part and 9 DENIED in part. Count Two for Negligent Misrepresentation is 10 DISMISSED. 11 2. Plaintiffs are granted leave to AMEND their complaint within 21 days 12 of this Order. 13 The District Court Executive is directed to enter this Order and furnish copies to counsel. 15 DATED May 20, 2022.

17 a be : es Kes ro THOMAS O. RICE 18 United States District Judge

19 20

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S