S. KATO CREWS, Magistrate Judge.
This Recommendation addresses PNC Financial Services Group, Inc., PNC Bank, N.A., and PNC Mortgage's ("Defendants") Motion to Dismiss Amended Complaint ("Motion to Dismiss"). [ECF. #40.] It also addresses Plaintiff Elet Valentine's ("Valentine") Opposed Request to File 2nd Amended Complaint and Add Defendants ("Motion to Amend"). [ECF. #67.] These motions were referred to the magistrate judge for a recommendation. [ECF. #41 & ECF. #68.] The Court has reviewed both motions, the related briefing, and the governing law. Oral argument will not materially assist this Court's analysis. For the following reasons, the Court RECOMMENDS the Motion to Dismiss be GRANTED in part and DENIED in part, and the Motion to Amend be DENIED.
The Court is recommending that Defendants' Motion to Dismiss be granted in part and denied in part. Specifically, the Court recommends that Valentine's breach of contract claims as they pertain solely to Defendants' alleged failure to properly apply loan payments be allowed to proceed. The Court concludes the Amended Complaint fails to state any other plausible claims for relief, and therefore, the Court recommends dismissal of the other claims in the Amended Complaint.
Regarding Valentine's Motion to Amend, the Court reviewed the proposed Second Amended Complaint and has determined it does not comply with Fed. R. Civ. P. 8, which requires a short and plain statement of the claims. Additionally, the proposed amendments in the Second Amended Complaint would be futile because they do nothing to cure the deficiencies in the Amended Complaint—therefore, the Second Amended Complaint would be subject to dismissal for the same reasons the Court recommends granting (in part) the Motion to Dismiss. For these reasons, the Court recommends denying the Motion to Amend.
The Parties will have 14 days after service of this Recommendation to file specific written objections to this Recommendation with Judge Arguello for her review. Judge Arguello may either adopt this Recommendation or reject this Recommendation and issue an order based on her own findings and conclusions. Should Judge Arguello adopt this Recommendation, then the case will proceed on the allegations in the Amended Complaint, and only on the claim for breach of contract based on Defendants' alleged failure to properly apply or credit loan payments.
Valentine proceeds pro se in this matter. She brought this action alleging 11 claims for relief related to Defendants' handling of her residential mortgage loan, which resulted in Colo. R. Civ. P. 120 proceedings in state court (the "Rule 120 Proceeding"). On August 1, 2018, the state trial court issued an order authorizing the foreclosure sale of Valentine's home pursuant to C.R.S. § 38-38-101 et seq. Valentine then initiated this action and requested the entry of a temporary restraining order and preliminary injunction to stop the foreclosure. [ECF. #6.] Defendants voluntarily agreed to forego the sale at least until a ruling on Valentine's request for injunctive relief. [ECF. #20.]
On September 28, 2018, this Court recommended that Valentine's request for a preliminary injunction and restraining order be denied. [ECF. #42.] The District Judge adopted this recommendation. [ECF. #71.] Thereafter, Defendants proceeded with the foreclosure sale on November 29, 2018, and the state district court entered an Order Approving Sale on December 21, 2018.
The 11 claims for relief in the Amended Complaint include: (1) equitable tolling; (2) breach of promissory note; (3) breach of deed of trust; (4) unjust enrichment; (5) fraud in the inducement; (6) fraudulent concealment; (7) fraudulent misrepresentation; (8) vicarious liability; (9) abuse of process; (10) unfair and deceptive acts or practices under the Colorado Consumer Protection Act; and (11) extreme and outrageous conduct. [ECF #36.] Generally, these claims arise out of allegations that, for at least a ten-year period, Defendants failed to properly apply, or otherwise account for, her monthly mortgage payments; inflated her account with improper and unexplained additional fees and charges; improperly instigated state court foreclosure proceedings; and, by their handling of her account, violated certain federal and state laws and breached provisions of the promissory note and deed of trust. [See generally ECF #36.]
Defendants move to dismiss all 11 claims. They argue the Amended Complaint should be dismissed under the Rooker-Feldman doctrine and because Valentine has failed to state claims upon which relief could be granted. [ECF. #40.] In addition to filing a Response to the Motion to Dismiss,
A federal court must construe a pro se plaintiff's pleadings "liberally" and hold the pleadings "to a less stringent standard than formal pleadings filed by lawyers." Smith v. United States, 561 F.3d 1090, 1096 (10th Cir. 2009). But the court "will not supply additional factual allegations to round out a plaintiff's complaint or construct a legal theory on plaintiff's behalf." Id. (citing Whitney v. New Mexico, 113 F.3d 1170, 1173-74 (10th Cir. 1997)). The Tenth Circuit has suggested:
Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir. 1991). However, it is not "the proper function of the district court to assume the role of advocate for the pro se litigant." Id.; see also Dunn v. White, 880 F.2d 1188, 1197 (10th Cir. 1989) ("[W]e will not supply additional facts, nor will we construct a legal theory for plaintiff that assumes facts that have not been pleaded.").
In deciding a motion under Fed. R. Civ. P. 12(b)(6), the Court must "accept as true all well-pleaded factual allegations . . . and view these allegations in the light most favorable to the plaintiff." Casanova v. Ulibarri, 595 F.3d 1120, 1124-25 (10th Cir. 2010) (quoting Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009)). But the Court is not "bound to accept as true a legal conclusion couched as a factual allegation." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In addition, when considering a Rule 12(b)(6) motion, the court may consider exhibits attached to the complaint without converting the motion to a motion for summary judgment under Fed. R. Civ. P. 56. See Hall v. Bellmon, 935 F.2d 1106, 1112 (10th Cir. 1991); Fed. R. Civ. P. 10(c).
To survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 678 (internal quotation marks omitted). A claim is plausible when the plaintiff "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. This standard requires more than the mere possibility that a defendant has acted unlawfully. Id. Facts that are "merely consistent" with a defendant's liability are insufficient. Id. "[T]o state a claim in federal court, a complaint must explain what each defendant did to [the plaintiff]; when the defendant did it; how the defendant's actions harmed [the plaintiff]; and what specific legal right the plaintiff believes the defendant violated." Nasious v. Two Unknown B.I.C.E. Agents, 492 F.3d 1158, 1163 (10th Cir. 2007).
The Court's ultimate duty is to "determine whether the complaint sufficiently alleges facts supporting all the elements necessary to establish an entitlement to relief under the legal theory proposed." Forest Guardians v. Forsgren, 478 F.3d 1149, 1160 (10th Cir. 2007). "Nevertheless, the standard remains a liberal one, and `a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that recovery is very remote and unlikely.'" Morgan v. Clements, No. 12-cv-00936-REB-KMT, 2013 WL 1130624, at *1 (D. Colo. Mar. 18, 2013) (quoting Dias v. City & County of Denver, 567 F.3d 1169, 1178 (10th Cir. 2009)).
Rule 15(a) provides that "[t]he court should freely give leave [to amend a pleading] when justice so requires." Fed. R. Civ. P. 15(a)(2).
Foman v. Davis, 371 U.S. 178, 182 (1962). "The purpose of the Rule is to provide litigants the maximum opportunity for each claim to be decided on its merits rather than on procedural niceties." Minter v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th Cir. 2006) (citations and internal quotation marks omitted).
"A proposed amendment is futile if the complaint, as amended, would be subject to dismissal." Full Life Hospice LLC v. Sebelius, 709 F.3d 1012, 1018 (10th Cir. 2013) (internal quotation marks omitted). In determining whether a proposed amendment should be denied as futile, the court must analyze a proposed amendment as if it were before the court on a motion to dismiss under Rule 12(b)(6). Hunt v. Riverside Transp., No. 11-2020-DJW, 2012 WL 1893515, at *3 (D. Kan. May 23, 2012). The defendant bears the burden of showing futility. Hunt, 2012 WL 1893515, at *3; see also Carefusion 213, LLC v. Prof'l Disposables, Inc., No. 09-2616-KHV-DJW, 2010 WL 4004874, at *5 (D. Kan. Oct. 12, 2010).
Defendants argue the Amended Complaint should be dismissed in its entirety because it seeks appellate-like review of the state court's Rule 120 Order, and therefore, is barred by the Rooker-Feldman doctrine.
The Circuit noted the Rooker-Feldman doctrine "does not deprive a federal court of jurisdiction to hear a claim just because it could result in a judgment inconsistent with a state-court judgment." Id. at 1174. It clarified that "[w]hat is prohibited under Rooker-Feldman is a federal action that tries to modify or set aside a state-court judgment because the state proceedings should not have led to that judgment." Id. (emphasis in original). "In other words, an element of the claim must be that the state court wrongfully entered its judgment." Id. at 1174.
The Court reviewed the Amended Complaint and does not read it to allege that the state district court wrongfully issued its orders in the Rule 120 Proceeding. Nor does the Amended Complaint specifically seek to invalidate the state district court's orders issued in those proceedings. Consequently, the Court concludes the Rooker-Feldman doctrine does not apply and affords no basis for dismissal of the Amended Complaint.
The Amended Complaint asserts two breach of contract claims. As the Court understands these claims, one alleges that Defendants breached the Promissory Note (Claim Two) by failing to properly apply loan payments and violating provisions of the Housing and Urban Development ("HUD") guidelines. The second breach of contract claim alleges that Defendants breached the Deed of Trust (Claim Three) in various ways. Defendants contend that Valentine failed to allege sufficient facts to establish any breach of contract.
To maintain a breach of contract claim, a plaintiff must establish (1) the existence of a contract; (2) performance by the plaintiff or justification for nonperformance; (3) failure to perform by the defendant; and (4) resulting damage to the plaintiff. W. Distrib. Co. v. Diodosio, 841 P.2d 1053, 1058 (Colo. 1992); see also Williams v. Owners Ins. Co., 621 F. App'x 914, 918 (10th Cir. 2015).
First, with respect to Valentine's allegations that Defendants breached the Deed of Trust by failing to properly calculate escrow charges, collecting unwarranted late fees and escrow deficiencies, and failing to refund excess escrow payments, the Court finds that these allegations are conclusory and devoid of sufficient factual allegations to state a plausible claim for relief.
The Court also recommends dismissing Valentine's claim that Defendants breached the Deed of Trust by giving her inaccurate monthly statements and failing to provide her with an escrow analysis or shortage notices. [See ECF. #36 at pp. 27-31.] The Amended Complaint does not identify the relevant provisions of the applicable contract that Defendants are alleged to have breached. Arrow Elecs., Inc. v. Syntellus Dataworks, LLC, No. 12-CV-01052-PAB-MJW, 2013 WL 1768687, at *3 (D. Colo. Apr. 24, 2013); see also Stender v. Gerardi, No. 07-cv-02503-EWN-MJW, 2008 WL 4452117 (D. Colo. Sept.30, 2008) (plaintiffs failed to state a claim for breach of contract "because they have not adequately indicated which provisions of which contracts allegedly contain such rights") (citing Parrish v. Nat'l Football League Players Ass'n, 534 F.Supp.2d 1081, 1094 (N.D. Cal. 2007) ("[t]o plead the legal effect of a contract" in place of its actual language, plaintiffs must "allege the substance of its relevant terms")). Furthermore, the Court has reviewed the and Deed of Trust in its entirety and could not identify any contractual obligations which would obligate Defendants to take these actions. [ECF. #40-2.]
The Amended Complaint also alleges that Defendant breached both the Promissory Note and the Deed of Trust by accelerating the loan and initiating foreclosure proceedings in violation of HUD regulations. HUD regulations, however, "do not, on their own, establish a private cause of action." Christenson v. Citimortgage, Inc., No. 12-cv-02600-CMA-KLM, 2013 WL 5291947, at *7 (D. Colo. Sept. 18, 2013) (citing Anderson v. U.S. Dept. of Housing and Urban Dev., 701 F.2d 112, 114 (10th Cir. 1983)). Rather, these regulations are conditions that "must occur prior to the lender being able to accelerate and foreclose the debt and [] the borrower may use any failure to comply with the regulations as a shield in the subsequent foreclosure case." Id. (internal quotation marks and citations omitted).
Here, the Promissory Note states that HUD regulations "will limit Lender's rights to require immediate payment in full in the case of payment defaults." [ECF. #40-1 at p.3.] It also states that acceleration is not authorized "when not permitted by HUD regulations." [Id.] Similarly, the Deed of Trust says: "In many circumstances regulations issued by the [Secretary of HUD] will limit Lender's rights, in the case of payment defaults, to require immediate payment in full and foreclose if not paid. This Security Instrument does not authorize acceleration or foreclosure if not permitted by regulations of the Secretary." [ECF. #40-2 at p.6.] Thus, these provisions are conditions precedent to Defendants' ability to commence foreclosure. Valentine could have asserted failures of these conditions precedent in defense of the Rule 120 Proceedings, but she may not assert them here "as the basis for an affirmative breach of contract claim." Christenson, 2013 WL 5291947, at *7. Thus the Court recommends that this aspect of her breach of contract claims be dismissed.
Finally, the Amended Complaint alleges that Defendants breached the Promissory Note and Deed of Trust by failing to properly credit and apply her payments to the loan as required by these documents. [ECF. #36 at pp. 21-24.] In their Response, Defendants argue that these allegations are refuted by documents attached to the Amended Complaint and urge the Court to compare Valentine's allegations with the payment history documents. [ECF. #40 at pp. 12-13.] The Court declines to so. Such an intensive inquiry is inherently factual and more properly addressed in a motion for summary judgment. Furthermore, it is not entirely clear that Valentine's allegations are meant to be inclusive of all the uncredited payments, or merely a sample of such conduct. [See ECF. #36 at pp.21-24.]
Defendant also contends that Valentine's allegations regarding damages are only generally alleged and appear to be a result of the foreclosure, as opposed to Defendants' failure to apply loan payments. [ECF. #40 at p.14.] The Court disagrees. In her Amended Complaint, Valentine alleges that Defendants' failure to properly credit her payments resulted in the imposition of late charges, additional interest, and other penalties. [ECF. #36 at p.24, ¶122.] Though Valentine has not alleged the precise extent of the damages, the Court finds that there is a more than speculative chance that such damages flowed from Defendant's alleged breach. For the purposes of overcoming a motion to dismiss, the Court concludes that Valentine has plausibly alleged a breach of contract claim on this narrowed issue and recommends that it be permitted to proceed.
The Fourth Claim in the Amended Complaint is for unjust enrichment. "Unjust enrichment is a quasi-contractual, equitable remedy designed to undo a benefit conferred on one party at the unfair expense of another party. To prevail on an unjust enrichment claim, a plaintiff must prove that (1) the defendant received a benefit (2) at the plaintiff's expense (3) under circumstances that would make it unjust for the defendant to retain the benefit without commensurate compensation." Pulte Home Corp. v. Countryside Cmty. Ass'n, Inc., 382 P.3d 821, 833 (Colo. 2016) (citing Lewis v. Lewis, 189 P.3d 1134, 1141 (Colo. 2008)).
Subject to two exceptions not applicable here, a party cannot recover for unjust enrichment when an express contract covers the subject of the alleged quasi-contractual obligation.
Here, Valentine alleges that Defendants were unjustly enriched when they "deviated from the mortgage agreement" and misapplied her mortgage payments, resulting in unwarranted fees, interest, and costs. [ECF. #36 at pp.40-41.] The Deed of Trust and Promissory Note directly address Defendants' obligations and responsibilities for applying loan payments and servicing the loan. Thus, the Amended Complaint fails to allege a plausible unjust enrichment claim, and the claim should be dismissed.
Defendants contend that Valentine's fraud-based claims are barred by the economic loss rule. Whether Colorado's economic loss rule bars a claim is a question of law. Standard Bank, PLC v. Runge, Inc., 443 F. App'x 347, 349 (10th Cir. 2011). The rule "serves to maintain a distinction between contract and tort law." Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256, 1262 (Colo. 2000). Tort obligations arise from duties imposed by law; contract obligations arise from promises made between parties. Level 3 Commc'ns, LLC v. Liebert Corp., 535 F.3d 1146, 1162 (10th Cir. 2008) (citing Town of Alma, 10 P.3d 1256, 1262 (Colo. 2000)).
Under Colorado law, the economic loss rule provides that a "party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a breach absent an independent duty of care under tort law." Standard Bank, PLC, 443 F. App'x at 349. To determine whether the economic loss rule is applies, courts must focus "on the source of the duty alleged to have been breached." Id. at 351. A duty arising in tort must be "sufficiently independent of the contract to preclude application of the economic loss rule." Id. A tort duty that is sufficiently independent of a contract must arise from a source other than the relevant contract, and must not be a duty also imposed by the contract. Registry Sys. Int'l, Ltd. v. Hamm, No. 08-cv-00495-PAB-MJW, 2010 WL 326327, at *10 (D. Colo. Jan. 20, 2010) (citing Haynes Trane Serv. Agency, Inc. v. Am. Standard, Inc., 573 F.3d 947, 962 (10th Cir. 2009)). Courts consider three factors when determining the source of the duty at issue: (1) whether the relief sought in tort is the same as the relief sought for breach of contract; (2) whether there is a recognized duty in tort; and (3) whether the tort duty differs in any way from the contractual duty. BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66, 74 (Colo. 2004) (citing Grynberg v. Agri Tech., Inc., 10 P.3d 1267, 1269-70 (Colo. 2000)).
In this case, Valentine's fraud claims allege that Defendants concealed or misrepresented the fact that they were misapplying her loan payments. [ECF. #36 at pp.42-49.] The Court finds that these allegations do not support independent fraud claims because they are "predicated upon the mere nonperformance of a promise or contractual obligation"—namely Defendants' alleged failure to apply loan payments in accord with the requirements of the Promissory Note and Deed of Trust. H & H Distrib., Inc. v. BBC Int'l, Inc., 812 P.2d 659, 662 (Colo. App. 1990). Any obligations Defendants had to properly apply and credit loan payments arose from the contracts between the parties. The economic loss rule therefore applies and bars the claims for fraudulent concealment and fraudulent misrepresentation.
A different analysis applies to the fraudulent inducement claim. As the Court understands this claim, Valentine alleges she was fraudulently induced into entering loan modification agreements "on the assumption that her payments were being applied appropriately." [ECF. #36 at p.43.] Under a liberal reading, this claim seems to allege pre-contractual conduct that induced Valentine to enter these loan modification agreements. As a result, the economic loss rule does not apply to this claim. Makoto USA, Inc. v. Russell, 250 P.3d 625, 628 (Colo. App. 2009) ("pre-contractual claims of fraudulent inducement might be considered independent of the contract—and hence not barred by the economic loss rule.").
Nevertheless, the Court recommends that this claim also be dismissed. To state a claim for fraud, Valentine must establish that (1) the defendant made a false representation of material fact; (2) the one making the representation knew that it was false; (3) the person to whom the representation was made was ignorant of the falsity; (4) the representation was made with the intention that it be acted upon; and (5) the reliance resulted in damage to the plaintiff. Coors v. Sec. Life of Denver Ins. Co., 112 P.3d 59, 66 (Colo. 2005). Here, the Amended Complaint fails the heightened pleading requirements of Fed. R. Civ. P. 9(b), which requires claims of fraud to be plead with particularity. The Amended Complaint does not allege, with any particularity, the specific misrepresentations of fact, when they were made, who made them, how they were false, or allegations that these alleged misrepresentations were made with the intent of inducing her into the loan modifications. Thus, the Amended Complaint fails to allege a plausible claim for fraudulent inducement.
Plaintiff's eighth claim is titled "Vicarious Liability—Doctrine of Respondeat Superior." [ECF. #36 at p.49.] "The doctrine of respondeat superior is based on the theory that the employee is the agent of the employer." Daly v. Aspen Ctr. for Women's Health, Inc., 134 P.3d 450, 452 (Colo. App. 2005) (citing Connes v. Molalla Transp. Sys., Inc., 831 P.2d 1316, 1320-21 (Colo. 1992)). It requires "a master-servant relationship in which the employer has the right to control the employee's performance." Id. (citing Grease Monkey Int'l, Inc. v. Montoya, 904 P.2d 468, 472-73 (Colo. 1995); W. Seavey, Handbook of the Law of Agency § 84.C (1964) (Seavey)).
On this claim, the Amended Complaint alleges that Defendants are responsible for unnamed employees' failures to properly apply loan payments, violations of company policies, and violations of federal regulations. [ECF. #36 at pp.49-52.] This claim, however, does not contain sufficient factual allegations to state a plausible claim under Iqbal. 556 U.S. at 678 ("a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face"). The Amended Complaint contains no factual allegations, beyond mere conclusory statements, regarding who these employees are, what regulations they violated, what actions form the basis of the alleged violations, or whether these employees acted within the scope of their employment.
As the Court understands her claim for abuse of process, Valentine contends that Defendants "abused" the Rule 120 Proceedings because she was not in default, or alternatively, was only in default because of Defendants' wrongful actions. This, however, does not state a plausible claim for abuse of process.
"To state a claim for abuse of process under Colorado law, the Plaintiff must show: (i) that the Defendants invoked a judicial process; (ii) that they did so with an ulterior purpose; (iii) that their use of the process was in a manner that was inconsistent with its proper use; and (iv) that the Plaintiff suffered damage as a result." Tara Woods Ltd. P'ship v. Fannie Mae, 731 F.Supp.2d 1103, 1122 (D. Colo. 2010) (citing Moore v. Western Forge Corp., 192 P.3d 427, 438 (Colo. App. 2007)). "If the action is confined to its regular and legitimate function in relation to the cause of action stated in the complaint, there is no abuse." Inst. For Prof'l Dev. v. Regis College, 536 F.Supp. 632, 635 (D. Colo. 1982).
Here, Valentine alleges that the foreclosure was premised on defaults that resulted from Defendants' improper actions. [ECF. #36 at pp.52-57.] According to the Amended Complaint, however, Defendants initiated the foreclosure proceedings to sell the home and satisfy the debt. [See id. at ¶¶23, 158, 160.] This is the intended purpose of a foreclosure proceeding. Tara Woods Ltd. P'ship, 731 F.Supp.2d at 1123 ("The purpose of foreclosure is to ensure that the lender receives full payment of the debt or, in the alternative, to take possession of the collateral and is the first step in obtaining an excess judgment against the borrower personally.").
Even if the Court broadly construed these allegations as also stating an ulterior motive by Defendants, "the presence of an ulterior motive does not give rise to a cause of action where the process is otherwise invoked for its normal purpose." Id. The allegations in the Amended Complaint confess that Defendants invoked the Rule 120 Proceeding for its intended purpose: to collect amounts Defendants believed were owed on the loan. The Amended Complaint, therefore, does not state a cognizable claim for abuse of process.
The Amended Complaint also contains a claim under the Colorado Consumer Protection Act ("CCPA"). The CCPA was enacted by the Colorado legislature to provide a remedy against consumer fraud. W. Food Plan, Inc. v. Dist. Ct., 598 P.2d 1038, 1041 (Colo. 1979). To establish a claim under the CCPA, a plaintiff bears the burden to show: (1) the defendant engaged in an unfair or deceptive trade practice; (2) the challenged practice occurred in the course of defendant's business, vocation, or occupation; (3) the plaintiff suffered injury in fact to a legally protected interest; (4) the challenged practice caused the plaintiff's injury; and (5) the challenged practice significantly impacts the public as actual or potential consumers of the defendant's goods, services, or property. Rhino Linings USA, Inc. v. Rocky Mountain Rhino Lining, Inc., 62 P.3d 142, 146-47 (Colo. 2003). The entire claim fails if one element of the claim is not met. See Coors v. Sec. Life of Denver Ins. Co., 91 P.3d 393, 399 (Colo. App. 2003) (stating that because the "significant public impact" element of the CCPA claim could not be proven as a matter of law, the court would not address whether the plaintiff had established element one of the CCPA), rev'd in part on other grounds, 112 P.3d 59 (Colo. 2005).
Even assuming the Amended Complaint sufficiently alleged the first four elements, the Court would nevertheless recommend dismissal because the Amended Complaint fails to allege a significant public impact. See Crowe v. Tull, 126 P.3d 196, 204 (Colo. 2006) ("The crux of a CCPA claim is a deceptive trade practice, which, by definition, must be intentionally inflicted on the consumer public."). Considerations relevant to whether a challenged practice significantly impacts the public include: "(1) the number of consumers directly affected by the challenged practice, (2) the relative sophistication and bargaining power of the consumers affected by the challenged practice, and (3) evidence that the challenged practice has previously impacted other consumers or has the significant potential to do so in the future." Ivar v. Elk River Partners, LLC, 705 F.Supp.2d 1220, 1241-42 (D. Colo. 2010) (internal quotation marks and citations omitted).
The Amended Complaint contains no allegations regarding the number of consumers directly affected by Defendants' alleged deceptive trade practices, the relative bargaining power of these consumers, or how the challenged practice has either previously impacted other consumers or has the potential to impact a significant number of customers in the future. Indeed, the CCPA claim only involves alleged misconduct and contractual breaches regarding Valentine's private loan. See Alpine Bank v. Hubbell, 555 F.3d 1097, 1113 (10th Cir. 2009) (affirming summary judgement on CCPA claim as "the record includes no evidence that the challenged practice has previously impacted other consumers or has the significant potential to do so in the future.") (internal quotation marks and citation omitted). As a result, this claim is not plausible on its face.
Under Colorado law, an entity that recklessly or intentionally engages in extreme and outrageous conduct can be held liable for damages if the victim experiences severe emotional distress. See Coors Brewing Co. v. Floyd, 978 P.2d 663, 665 (Colo. 1999). "Although the question of whether conduct is outrageous is generally one of fact to be determined by a jury, it is first the responsibility of a court to determine whether reasonable persons could differ on the question." Culpepper v. Pearl St. Bldg., Inc., 877 P.2d 877, 883 (Colo. 1994).
To state a claim for outrageous conduct under Colorado law, a plaintiff must allege that (1) the defendant engaged in extreme and outrageous conduct, (2) the defendant did so recklessly or with the intent of causing the plaintiff severe emotional distress, and (3) the conduct did indeed cause the plaintiff severe emotional distress. Llewellyn v. Shearson Fin. Network, Inc., 622 F.Supp.2d 1062, 1068-69 (D. Colo. 2009) (citing Green v. Qwest Servs. Corp., 155 P.3d 383, 385 (Colo. App. 2006)). Colorado courts have erected a high bar for alleging an outrageous conduct claim. See Coors, 979 P.2d at 665. To rise to the level of "extreme and outrageous" conduct, Plaintiffs "must allege behavior that is extremely egregious." Id. at 666. The alleged behavior must be "atrocious and utterly intolerable in a civilized community." First Nat'l Bank v. Collins, 616 P.2d 154, 156 (Colo. App. 1980). "Mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities are insufficient." Archer v. Farmer Bros. Co., 70 P.3d 495, 499 (Colo. App. 2002).
Here, the Amended Complaint alleges that Defendants' "willful and wonton [sic] conduct is solely responsible for the severe emotion[al] distress that Ms. Valentine has endured over the 15 years of the servicing issues of [her] loan." [ECF. #36 at p.66.] It further alleges that the "loss of enjoyment of her home has caused [her] extreme fright, grief, shame, humiliation, embarrassment, anger, and sick with worry." [Id.]
The Court concludes that as a matter of law, these allegations fail to meet the requisite high standard for a claim of outrageous conduct. While the Court recognizes the emotional impact of Defendants' decision to foreclose on Valentine's home, not every action which causes emotional distress supports a claim of outrageous conduct. Rather, the Court is "required to look at [Defendant's] conduct itself and not simply the consequences of that conduct." Green, 155 P.3d 387. A comparison of Defendants' alleged conduct with conduct that has been regarded as outrageous in other cases shows that reasonable persons could not differ in deciding that the conduct alleged here falls short of the high standard required to maintain this claim for relief. See Pearson v. Kancilia, 70 P.3d 594 (Colo. App. 2003) (finding outrageous conduct where a male chiropractor threatened to stop treating a patient if she did not continue to have sex with him and to fire an employee if she did not also continue to have sex with him); Rugg v. McCarty, 476 P.2d 753, 756 (Colo. 1970) (finding outrageous conduct where a creditor engaged in a continuous campaign of harassment via telephone, mail, and threats to garnish wages); Meiter v. Cavanaugh, 580 P.2d 399 (Colo. App. 1978) (finding outrageous conduct where an attorney belligerently refused to vacate premises for subsequent tenant, without regard for her poor medical condition, and implied he had special influence in judicial proceedings).
In this case, Valentine's allegations suggest no more than the possibility that Defendants breached the Promissory Note and Deed of Trust and wrongfully initiated foreclosure. See Tatten v. Bank of Am. Corp., 912 F.Supp.2d 1032, 1043-44 (D. Colo. 2012) (failure to grant a loan modification and alleged negligent misrepresentation did not rise to the level of outrageous conduct); Ramsey v. Citibank, N.A., No. 10-cv-02653-WYD-CBS, 2011 WL 4485918, at *5 (D. Colo. Sept. 28, 2011) (foreclosure action did not rise to the level of intentional infliction of emotional distress). The alleged conduct simply does not "go beyond all possible bounds of decency" or rise to the level of being "atrocious. . . and utterly intolerable in a civilized community." Destefano v. Grabrian, 763 P.2d 275, 286 (Colo. 1988). To be sure, courts in Colorado frequently dismiss outrageous conduct claims by borrowers against mortgagees or servicers. See, e.g. Hewitt v. Pitkin Cty. Bank & Trust Co., 931 P.2d 456, 459 (Colo. App. 1995) (no outrageous conduct claim where plaintiff alleged that a bank "accepted loan payments from him and then reneged on its promise not to commence foreclosure proceedings against him, and instead commenced such proceedings the very next day"); Christenson v. Citimortgage, Inc., No. 12-cv-02600-CMA-KLM, 2013 WL 5291943, at **18-19 (D. Colo. June 17, 2013), report and recommendation rejected in part on other grounds, 2013 WL 5291947 (D. Colo. Sept. 18, 2013) (allegations do not rise to the level of extreme or outrageous conduct despite the "inconvenience, pain, and suffering the threat of losing their home may have caused.").
The Court concludes that, as a matter of law, the Amended Complaint fails to state a cognizable claim of outrageous conduct and recommends that this claim be dismissed.
On December 12, 2018, Valentine filed a Motion to Amend seeking to file a Second Amended Complaint ("SAC").
Rule 8 requires a plaintiff to provide "a short and plain statement of the claim showing that the pleader is entitled to relief," with allegations that are "simple, concise, and direct." Fed. R. Civ. P. 8(a)(2), (d)(1). The purpose of this rule is self-evident. A pleader must "present his claims discretely and succinctly, so that, his adversary can discern what he is claiming and frame a responsive pleading, the court can determine which facts support which claims and whether the plaintiff has stated any claims upon which relief can be granted, and, at trial, the court can determine that evidence which is relevant and that which is not." T.D.S. Inc. v. Shelby Mut. Ins. Co., 760 F.2d 1520, 1543 n.14 (11th Cir. 1985).
Valentine seeks to add several new defendants to this action. But her allegations are insufficient to support claims against them. Rather than specify what each new defendant did to her; when they did it; how their respective actions harmed her; and what specific legal right they violated, the SAC generally groups all Defendants (old and new) together under the single moniker of "Defendants." This is insufficient to allege plausible claims against the new Defendants, and therefore, the Court recommends denying the Motion to Amend insofar as it seeks to add these Defendants. Nasious, 492 F.3d at 1163.
The SAC's proposed second claim for breach of contract (promissory note) is deficient in the same way her contract claims are deficient in the Amended Complaint. Although she adds several broad allegations of wrongdoing on the part of Defendants, the SAC nevertheless fails to include any further factual detail or support about these alleged misdeeds. [ECF. #67-1 at pp.19-31.] As they were in the Amended Complaint, Valentine's new allegations are little more than legal conclusions masquerading as fact and are insufficient to maintain a claim and allowing Valentine to amend this claim would be futile. Iqbal, 556 U.S. at 678 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.").
The SAC's proposed third claim for breach of contract (deed of trust) spans over 100 pages and consists of over 400 separate paragraphs. It also incorporates by reference the entirety of the 666 paragraph SAC. The massive length of this claim evidences a failure to comply with Rule 8. See Mann v. Boatright, 477 F.3d 1140, 1148 (10th Cir. 2007) (affirming dismissal of 99-page complaint because "[i]n its sheer length, [plaintiff] has made her complaint unintelligible `by scattering and concealing in a morass of irrelevancies the few allegations that matter'" (citation omitted)); Schupper v. Edie, 193 F. App'x 744, 745-46 (10th Cir. 2006) (unpublished) (affirming dismissal of 38-page complaint plus 120 pages of exhibits as "overly long" and "prolix"); Luciano v. Perez, No. 06-cv-01284-PSF-PAC, 2007 WL 1306476, at *2 (D. Colo. May 3, 2007) (a complaint did not comply with Rule 8 where it contained hyperbole, redundancies, and "astoundingly long" sentences that neither the court nor the opposing party could understand.)
Further, this proposed claim—like its predecessor—alleges a variety of breach of contract claims. But given the way this count is organized, it is nearly impossible to identify which allegations are meant to support the various alleged breaches of contract. See, e.g., Bickerstaff Clay Prods. Co. v. Harris Cty., 89 F.3d 1481, 1485 n.4 (11th Cir.1996) ("The complaint is a typical shotgun pleading, in that some of the counts present more than one discrete claim for relief."). In this regard, many of the allegations are confusing, redundant, contain multiple cross-references to documents of unknown origin, and are presented with such little context as to be nearly nonsensical. [See ECF. #67-1 at pp.32-145.] These allegations simply do not lend themselves to stating a plausible claim for breach of contract related to the Deed of Trust. See Mwangi v. Norman, No. 16-cv-0002-GPG, 2016 WL 153220, at *1 (D. Colo. Jan. 13, 2016) ("Prolix, vague, or unintelligible pleadings violate Rule 8.").
In recommending the partial grant of the Motion to Dismiss, the Court concluded that the Deed of Trust and Promissory Note cover Defendants' obligations for applying loan payments and servicing the loan, and therefore, Valentine could not state a plausible claim for unjust enrichment. Valentine's proposed amendments do nothing to alter the Court's conclusion. [ECF. #67-1 at pp.145-46.] The SAC alleges that the applicable contracts do not permit Defendants to use a suspense account. Even if this is true, Defendants' obligations in this regard still arise from the express contracts. Thus, allowing this amendment to the unjust enrichment claim would be futile.
The SAC alleges—in addition to the prior allegations—that Defendants fraudulently removed monthly payments from the mortgage account and concealed the fact that they were doing so. [ECF. #67-1 at p.152.] Even with the new allegations, the Court concludes that her claims for fraudulent concealment and fraudulent misrepresentation would be barred by the economic loss rule. These new allegations are also predicated upon the nonperformance of a contractual obligation, namely Defendants' alleged failure to apply loan payments as agreed in the contracts. The Court, therefore, recommends that Valentine not be permitted to amend these claims because the amendments would be futile based on application of the economic loss rule.
These new allegations also fail to state a claim for fraudulent inducement. As with the Amended Complaint, the proposed claim does not add any allegation that Defendants' made misrepresentations with the intent of inducing her into the loan modifications. Consequently, amendment of this claim would also be futile and should not be allowed.
There is no substantive difference in the SAC's proposed vicarious liability claim, and the prior version. [Compare ECF. #36 at pp.49-52 with ECF. #67-1 at pp.158-61.] The proposed claim still lacks sufficient specificity and factual allegations beyond the vague and conclusory, to identify the offending employees, their respective actions, and so on. See, supra Section C.1.e.
The SAC's proposed claim for abuse of process alleges that Defendants used the Rule 120 Proceeding to conceal their mismanagement of Valentine's loan account. [ECF. #67-1 at p.163.] These (or this) amendments would be futile, however, even taking this new allegation as true. The SAC specifically alleges Defendants also initiated the foreclosure proceedings to obtain both an Order of Sale and the proceeds from the sale. [Id. at p. 165.] This is the specific purpose of a foreclosure, and therefore, the amended claim would be subject to dismissal. Tara Woods Ltd. P'ship, 731 F.Supp.2d at 1123 ("the presence of an ulterior motive does not give rise to a cause of action where the process is otherwise invoked for its normal purpose"). Thus, the proposed amendment to the claim should be denied.
The SAC's new allegations regarding the CCPA claim still do not establish that Defendants' trade practices "significantly impacts the public." In addressing this element, the SAC alleges that Defendants' "pattern of behavior has not ceased since . . . March 31, 2011." [ECF. #67-1 at p.174.] Even if true, this longstanding pattern of behavior is alleged only with respect to Valentine's loan. Because she has still failed to allege a critical element of a claim under the CCPA, amendment is futile and her request should be denied. See Coors, 91 P.3d at 399 (where one element of a CCPA claim is not met, the entire claim fails).
The SAC makes not material or substantive changes to this claim. The conduct at the core of this claim remains Defendants' initiation of an allegedly wrongful foreclosure. [ECF. #67-1 at pp.175-76.] The Court has already concluded that such conduct does not rise to the level of extreme and outrageous conduct, and therefore, recommends that Valentine's request to amend this claim be denied. See, supra Section C.1.h.
The Court RECOMMENDS the Motion to Dismiss be GRANTED in part and DENIED in part. Specifically, the Court RECOMMENDS that Valentine's breach of contract claim based solely on the theory that Defendants failed to properly apply and credit her loan payments be permitted to proceed. The Court RECOMMENDS that the remaining claims in the Amended Complaint be dismissed.
The Court also concludes that the proposed Second Amended Complaint fails to cure the deficiencies of the Amended Complaint and FURTHER RECOMMENDS that the Motion to Amend be DENIED.
