WILLIAM D. QUARLES, JR., District Judge.
Shahed Farasat sued Wells Fargo Bank, N.A. ("Wells Fargo") for fraud and contract claims. Pending is Wells Fargo's motion to dismiss for failure to state a claim. For the following reasons, Wells Fargo's motion will be granted.
Farasat owns and resides at 110 Hawthorne Avenue in Baltimore, Maryland.
In December 2008, Farasat contacted Wells Fargo about his mortgage and was told that he needed to miss payments to be eligible for repayment assistance.
In April 2009, Farasat fell behind on his mortgage payments. Id. ¶ 17. On September 15, 2009, foreclosure proceedings began in the Circuit Court for Baltimore County, Maryland. See ECF Nos. 1-6, 5-4 at 2. In April 2010,
On May 1, 2010, Farasat submitted a HAMP application to Wells Fargo. Id. ¶ 22. In the following months, Wells Fargo requested additional documentation, "promising" that it would continue to process the application. Id. ¶ 25.
On September 30, 2010, Farasat submitted another HAMP application. Id. ¶ 27; see ECF No. 1-10 (application).
Farasat included in the application his lease with Karen Merkle. Id. at 21-24. The lease purported to rent 110 Hawthorne Avenue to Merkle starting on October 1, 2010. Id. at 21. The paragraph entitled "Additions and/or Exceptions" listed "1/2 Basement and Attic space as needed." Id. at 24. Neither "Additions" nor "Exceptions" is circled or struck through. Cf. id. The lease also provided that all notices to Farasat were to be served at "110 Hawthorne Ave." Id. The lease had no provision for continued occupancy by Farasat.
On October 25, 2010, Wells Fargo denied modification under HAMP, stating Farasat "d[id] not live in the property as
On November 9, 2010, Wells Fargo directed the substitute trustees to sell the home at a foreclosure sale. ECF No. 1 ¶ 36. On December 29, 2010, after retaining counsel, Farasat filed exceptions to the sale. Id. ¶ 37; ECF No. 1-14. On March 16, 2011, Farasat counterclaimed against Wells Fargo alleging grounds substantially similar to this case. See ECF No. 5-3. On June 23, 2011, the substitute trustees moved to withdraw the report of sale and dismiss the case without prejudice. ECF Nos. 1 ¶ 38, 1-13. The circuit court granted the motion and closed the case.
On May 11, 2012, Farasat sued Wells Fargo in this Court, alleging that Wells Fargo never intended to modify his mortgage and was simply seeking late fees and penalties. See ECF No. 1 ¶¶ 5-6. Farasat seeks specific performance and damages on the grounds of: (1) violations of the Maryland Consumer Protection Act,
On June 8, 2012, Wells Fargo moved to dismiss, arguing that the pending state court action required dismissal, and Farasat failed to state a claim. ECF No. 5. On June 25, 2012, Farasat opposed the motion, ECF No. 7, and on July 11, 2012, Wells Fargo replied, ECF No. 8.
Under Fed.R.Civ.P. 12(b)(6), an action may be dismissed for failure to state a claim upon which relief can be granted. Rule 12(b)(6) tests the legal sufficiency of a complaint, but does not "resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir.2006).
The Court bears in mind that Rule 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief." Migdal v. Rowe Price-Fleming Int'l Inc., 248 F.3d 321, 325-26 (4th Cir.2001). Although Rule 8's notice-pleading requirements are "not onerous," the plaintiff must allege facts that support each element of the claim advanced. Bass v. E.I. Dupont de Nemours & Co., 324 F.3d 761, 764-65 (4th Cir.2003). These facts must be sufficient to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
This requires that the plaintiff do more than "plead[] facts that are `merely consistent with a defendant's liability'"; the facts pled must "allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955).
Fed.R.Civ.P. 9(b) requires that "the circumstances constituting fraud be stated with particularity." The rule "does not require the elucidation of every detail of the alleged fraud, but does require more than a bare assertion that such a cause of action exists." Mylan Labs., Inc. v. Akzo, N.V., 770 F.Supp. 1053, 1074 (D.Md.1991). To satisfy the rule, a plaintiff must "identify with some precision the date, place, and time of active misrepresentations or the circumstances of active concealments, specifying which Defendant ... is ... supposedly responsible for those statements or omissions." Johnson v. Wheeler, 492 F.Supp.2d 492, 509 (D.Md.2007).
The Court "should hesitate to dismiss a complaint under Rule 9(b) if [it] is satisfied (1) that the defendant has been made aware of the particular circumstances for which [it] will have to prepare a defense at trial, and (2) that [the] plaintiff has substantial prediscovery evidence of those facts." Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir.1999).
Wells Fargo argues that this case should be dismissed because there is an action with "virtually identical allegations of fact and asserted claims" pending in state court. ECF No. 5-2 at 4-5. Farasat asserts that Wells Fargo was not a party to the suit in which he brought the counterclaim, and the counterclaim itself was "likely dismissed by operation of law." ECF No. 7-1 at 22. Wells Fargo responds that Farasat's factual assertions about the state case are incorrect. ECF No. 8 at 2-3.
Farasat is factually incorrect; Wells Fargo was involved in the state case. Wells Fargo Home Mortgage, Inc., acknowledged by Farasat as Wells Fargo's predecessor by merger, see ECF No. 1 ¶ 11, is named in Farasat's counterclaim. See, e.g., ECF No. 5-3 at 2. Farasat's challenge to the pendency of the state court action appears to have merit. The circuit court's docket sheet shows the case as "Closed/Active" and there have been no filings or rulings since July 5, 2011, when the substitute trustees' motion to dismiss the case without prejudice was granted. See ECF No. 5-4 at 9. The counterclaim was closed the same day. Id. at 8.
Wells Fargo's argument fails, notwithstanding the status of the circuit court case. Wells Fargo relies upon Hyman v. City of Gastonia, 466 F.3d 284 (4th Cir. 2006) for the principle that this Court must dismiss this case because there is a pending state court action. ECF No. 5-2 at 2. Wells Fargo's characterization of Hyman is incorrect.
In Hyman the district court originally dismissed the case for insufficient service of process. Hyman, 466 F.3d at 286. The plaintiff appealed the dismissal to the Fourth Circuit. Id. While the appeal was pending, the plaintiff filed a second action against the same defendant in the same district court. Id. The court dismissed the second case under North Carolina law, which permits abatement as an affirmative defense if "a substantially identical, earlier-filed action is pending on appeal." Id.
Contrary to Wells Fargo's position, and decided 14 days after Hyman, Great American Insurance Co. v. Gross, 468 F.3d 199 (4th Cir.2006) held that, absent exceptional circumstances, "the pendency of an action in state court is no bar to proceedings in federal court concerning the same matter." Id. at 206. In deciding whether to abstain in favor of the state-court litigation, the Court considers six factors:
Id. at 207-08. Assuming that the state court litigation is still pending, few factors favor abstention.
Wells Fargo seeks dismissal of all counts arguing that HAMP does not provide a private right of action. ECF No. 5-2 at 6. It also asserts that the individual claims also fail. Id. at 8-17.
Wells Fargo first argues HAMP does not provide a private right of action. Id. at 6. Farasat asserts that, simply because Wells Fargo's actions occurred in connection with HAMP, it is not shielded from state tort liability. ECF No. 7-1 at 4.
Wells Fargo is correct that there is no private right of action under HAMP. See, e.g., Allen v. CitiMortgage, Civil No. CCB-10-2740, 2011 WL 3425665, at *4 (D.Md. Aug. 4, 2011). This does not mean, however, that Wells Fargo is "wholly immunized for [its] conduct so long as the subject of the transaction is associated with HAMP." Vida v. OneWest Bank, FSB, Civ. No. 10-987-AC, 2010 WL 5148473, at *5 (D.Or. Dec. 13, 2010). State law claims may be proper vehicles for bringing claims associated with HAMP. See Allen, 2011 WL 3425665, at *5. The Court will analyze each of Farasat's claims, which are brought under state law. See Legore v. OneWest Bank, FSB, 898 F.Supp.2d 912, 917-18, Civ. No. L-11-0589,
Farasat's theory of the case is that Wells Fargo did not process his application under the HAMP guidelines but simply denied it to get various service fees. See ECF No. 1 at ¶¶ 5-6. Farasat describes the proposition that 110 Hawthorne Avenue was not his primary residence as a "bogus assertion." E.g., ECF No. 1 ¶ 34. Wells Fargo asserts that its interpretation that the lease indicates that Farasat no longer occupied the house was not unreasonable. E.g., ECF No. 5-2 at 12.
The terms of the lease are clear. The lease states that Farasat leased "the premises located at 110 Hawthorne Ave. in the city of Pikesville, MD" to Merkle. ECF No. 1-10 at 21. Nothing in the lease states that Farasat would retain any part of the premises for residential purposes. Cf. id. at 21-24. The location where notice to Farasat was to be served is listed as "110 Hawthorne Ave." Id. at 24 ¶ 28. The only part of the lease that imposed limitations on Merkle's use is paragraph 27 headed "Additions and/or Exceptions" with the words "½ Basement and Attic as needed." Id. ¶ 27. Whether this provision is meant to be an "Addition" or "Exception" is unclear; neither word is circled or struck through. Cf. id.
Farasat claims that Wells Fargo misinterpreted the lease as indicating that he was not resident there. ECF No. 7-1 at 7. Specifically, he asserts that "[t]he express terms of the lease ... made it clear that [Farasat] would continue to use `½ Basement' as his residence, and would further use `Attic space as needed.'" Id.
One of the HAMP eligibility criteria is that the property be — and remain — owner-occupied.
Farasat alleges numerous statements made by Wells Fargo in violation of
In asserting that the MCPA is preempted by the NBA, Wells Fargo relies, without analysis, on Wittenberg v. First Independent Mortgage Co., 2011 WL 1357483 (N.D.W.Va. Apr. 11, 2011), which held, with little discussion, that the NBA preempted West Virginia's Consumer Protection Statute. ECF No. 5-2 at 13; see Wittenberg, 2011 WL 1357483, at *14. In O'Neal v. Capital One Auto Finance, Inc., 2011 WL 4549148 (N.D.W.Va. Sept. 29, 2011), the same court considered the preemption issue and rejected Wittenberg's analysis. See O'Neal, 2011 WL 4549148, at *2-7. Other courts have also rejected Wells Fargo's preemption argument for state consumer protection laws.
Under Watters v. Wachovia Bank, N.A., 550 U.S. 1, 127 S.Ct. 1559, 167 L.Ed.2d 389 (2007), "[f]ederally chartered banks are subject to state laws of general application in their daily business to the extent such laws do not conflict with the letter or the general purposes of the NBA." Id. at 11, 127 S.Ct. 1559. The MCPA applies generally to commercial practices, not only to banks. See Md.Code Ann. Com. Law § 13-301. Under Matters, the MCPA as a statute of general application is not preempted. See Sutcliffe, 283 F.R.D. at 554-55.
To bring an action under the MCPA, Farasat must allege "(1) an unfair or deceptive practice or misrepresentation that (2) is relied upon, and (3) causes [him] actual injury." Stewart v. Bierman, 859 F.Supp.2d 754, 768 (D.Md.2012) (citing Lloyd v. Gen. Motors Corp., 397 Md. 108, 916 A.2d 257, 277 (2007)).
Farasat alleges six misrepresentations, which must be analyzed under Fed. R.Civ.P. 9(b). See Spaulding v. Wells Fargo Bank, N.A., Civ. No. GLR-11-2733, 2012 WL 3025116, at *6 (D.Md. July 23, 2012). The first two are statements by Wells Fargo, in December 2008 and March 2009, that Farasat needed to miss mortgage payments to qualify under HAMP. ECF No. 1 ¶¶ 56.1-56.2. These statements were made before Farasat had missed a payment on his mortgage in April 2009. See id.; id. ¶ 17. The HAMP guidelines require the mortgage loan to be delinquent or default to be reasonably foreseeable. ECF No. 1-8 at 32. If the borrower is current, the mortgage servicer determines whether default is imminent. Id. at 49. When current on his loan, Farasat was told that he needed to miss payments, as contemplated by the HAMP guidelines. He has not shown the misrepresentation required under the MCPA. See Stewart, 859 F.Supp.2d at 769.
Farasat also claims that Wells Fargo made a false statement in saying that he was in default and starting the foreclosure procedure because he was entitled to a HAMP modification. ECF No. 1 ¶ 56.6. Farasat's conclusion is incorrect — the documentation showed that he was not entitled to a modification. Farasat has not alleged misrepresentation.
The final alleged misrepresentation by Wells Fargo was its January 10, 2012 letter stating that Farasat had not submitted sufficient documentation to be considered for a HAMP modification. ECF No. 1 ¶ 56.5. Farasat misstates Wells Fargo's letter, which did not say that he did not supply sufficient documentation, but that he "did not provide [Wells Fargo] with all of the information needed within the required time frame." ECF No. 1-16. Further, nothing connects the January 10, 2012 letter with HAMP or the documentation submitted in 2010.
Farasat alleges that (1) Wells Fargo made false representations that it would process his application under HAMP, (2) Wells Fargo intended to defraud him, and (3) he reasonably relied on the misrepresentation by trying to modify his mortgage, not retaining counsel, and not trying to sell his home. ECF No. 1 ¶¶ 60-63. Wells Fargo argues that Farasat cannot show that (1) it knowingly misrepresented the property's occupancy, (2) he relied on Wells Fargo's reason for denial of his HAMP application, (3) that the representation was for the purpose of defrauding, and (4) the exhibits provided by Farasat show that the representations were not misrepresentations. ECF No. 5-2 at 16.
To establish fraud, a plaintiff must show that
Farasat alleges that Wells Fargo promised to process his application under HAMP and that it would modify the loan if he met the eligibility criteria. ECF No. 1 ¶¶ 67-68. Farasat further alleges that "[h]ad Wells Fargo kept its promises, and processed the application and made a decision thereon pursuant to the HAMP Guidelines, Mr. Farasat would have been issued a TPP." Id. ¶ 70. Wells Fargo argues that it processed the application, and Farasat was ineligible for the modification. ECF No. 5-2 at 9.
The doctrines of promissory estoppel and implied-in-fact contracts provide avenues of recovery for plaintiffs when there is a failure of the traditional contract elements. See Cnty. Comm'rs of Caroline Cnty. v. J. Roland Dashiell & Sons, Inc., 358 Md. 83, 747 A.2d 600, 606 (2000). If Wells Fargo had a contractual obligation to evaluate Farasat's application through either an implied-in-fact contract or promissory estoppel, it kept its promise. As discussed above, Wells Fargo's determination that Farasat did not live in the property as his primary residence was not unreasonable. See supra Part II.B. Wells Fargo did not modify Farasat's loan because he did not appear to meet the eligibility criteria. See ECF No. 1-8 at 32. Farasat cannot prevail under a promissory estoppel or implied-in-fact contract theory on the facts alleged. These claims will be dismissed.
Farasat alleges that Wells Fargo owed him a tort duty as his mortgage servicer and breached that duty by failing to properly process his application and modify his mortgage. ECF No. 1 ¶¶ 41, 76-77. Wells Fargo asserts that it owed Farasat no duty and that, even if it did, there was no breach. ECF No. 5-2 at 11-12. Farasat responds that a bank owes a duty to its loan customer. ECF No. 7-1 at 20-21.
To prevail upon a claim of negligence, the plaintiff must show that (1) the defendant had a duty to the plaintiff, (2) the defendant breached the duty, (3) the plaintiff suffered actual loss, and (4) the loss was proximately caused by the breach. Rosenblatt v. Exxon Co., U.S.A., 335 Md. 58, 642 A.2d 180, 188 (1994).
Farasat asserts that Wells Fargo owed him a duty under Jacques v. First National Bank of Maryland, 307 Md. 527, 515 A.2d 756 (1986). ECF No. 7-1 at 20. Wells Fargo disagrees. ECF No. 8 at 10-11.
In Jacques, a case involving an unusually structured bank loan application, the Maryland Court of Appeals held that a contract may give rise to a bank's tort duty to a loan applicant. See Jacques, 515
For the reasons stated above, Wells Fargo's motion to dismiss will be granted.
Also under the HAMP Guidelines, Wells Fargo was required to obtain a credit report for Farasat to verify his occupancy. See ECF No. 1-8 at 52. "If the credit report is inconsistent with other information provided by the borrower, the servicer must use good business judgment in reconciling the inconsistency." Id. The record does not contain a credit report or any allegation about one. Generally, courts do not second guess "business judgments." See Shenker v. Laureate Educ., Inc., 411 Md. 317, 983 A.2d 408, 424 (2009) (describing the business judgment rule).
