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Jones v. Caliber Home Loans, Inc.

United States District Court, M.D. Louisiana

July 24, 2019




         This matter is before the Court on the Motion to Dismiss[1] filed by Defendant, Caliber Home Loans, Inc. (“Defendant”), pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted. Plaintiff, Larry Jones (“Plaintiff”), filed an Opposition[2] to this motion, to which Defendant filed a Reply.[3] For the following reasons, Defendant's motion shall be granted.

         I. BACKGROUND

         Plaintiff, an African-American home owner, contacted Defendant to inquire about refinancing his thirty-year mortgage in order to lower his interest rate and monthly payments.[4] Defendant's employee informed Plaintiff that Defendant could refinance his mortgage at a lower rate.[5] Pursuant to this conversation, Defendant mailed Plaintiff a refinancing agreement, which Plaintiff then signed and returned. Upon receiving his mortgage statement, Plaintiff realized that, not only was the loan he received not the type he has anticipated, but he also realized that the mortgage agreement Defendant had on file was not the one that he had signed. He claims that Defendant simply retained the signature page from the original agreement and switched out the remaining pages.

         Plaintiff alternatively alleges he was “steered” into a sub-prime loan and away from a prime rate loan. Plaintiff's credit score is 685-690; he claims that a score over 650 qualifies a borrower for a prime rate loan. He further claims Defendant gave him a sub-prime mortgage loan, knowing “he will have the least ability to repay” it, [6] because he is African-American[7] and an “unsophisticated borrower.”[8] Plaintiff further alleges that Defendant disguised itself as a traditional lender to build trust, misrepresented or did not disclose the complex terms of the loan, and engaged in unlawful business acts by misrepresenting a sub-prime loan as the best loan for him.[9] As a result of these acts, Plaintiff claims he suffered harm to his financial and overall wellbeing.[10]

         Additionally, Plaintiff claims that these acts were fraudulent[11] and resulted in Defendant being unjustly enriched.[12] Plaintiff further claims that Defendant discriminated against him in the following ways: (1) on the basis of race in making available residential real estate transactions, or in the terms or conditions of such transactions, in violation of the Fair Housing Act (FHA), 42 U.S.C. § 3605(a); (2) on the basis of race in the terms, conditions, or privileges of sale of a dwelling, in violation of FHA, 42 U.S.C. § 3604(b); (3) on the basis of race with respect to credit transitions, in violation of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. § 1691(a)(1); (4) a pattern or practice of resistance to the full enjoyment of rights granted by FHA, 42 U.S.C. §§ 3601-3619 and the ECOA, 15 U.S.C. § 1691; and (5) in a denial of rights granted by the FHA to groups of persons that raise an issue of general public importance. Plaintiff also claims violations of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 1983; Unfair and Deceptive Acts or Practices (UDAP), Credit Services Act (CSA), and Unfair Trade Practices Act and Consumer Protection Law (UTPCPL).[13] Defendant now moves to dismiss Plaintiff's Complaint.

         Defendant seeks dismissal of all claims. In Defendant's Memorandum in Support of Caliber's Motion to Dismiss, [14] it contends that Plaintiff's unjust enrichment and state claims fail under Louisiana law, that his FHA and ECOA claims fail as a matter of law, and that his remaining claims[15] fail to meet basic pleading requirements.

         Defendant cites La. R.S. § 6:1122[16] and related jurisprudence in arguing that Plaintiff's state law claims must fail because an oral agreement or an unproduced refinance agreement do not meet the requirements necessary to maintain the action. Defendant contends Plaintiff's claim for unjust enrichment fails for several reasons. First, it failed to meet all the required elements[17] of the claim. Specifically, Plaintiff alleged that he signed a credit agreement, which shows the presence rather than the required “absence of justification or cause for the enrichment and impoverishment.”[18] Second, the signed agreement is a valid juridical act and any unjust enrichment cannot result from a valid juridical act.[19] Finally, because Plaintiff's allegations sound in tort, he is precluded from bringing a claim under a theory of unjust enrichment.[20]

         Defendant insists that Plaintiff's ECOA and FHA claims fail as a matter of law because Plaintiff has not and cannot plead discrimination.[21] Since Plaintiff was granted a loan, his discrimination claim under ECOA[22] and FHA cannot stand. Further, Defendant maintains that Plaintiff cannot meet the FHA requirement that Defendant discriminated in “making available” services[23] because Plaintiff alleged that a loan was made available to him.[24] Plaintiff not only failed to plead that race was a plausible factor for the discrimination in the loan process, but his allegations also demonstrate that Defendant had incentive to offer all applicants sub-prime loans.[25] Moreover, Plaintiff failed to satisfy-or even allege-either disparate treatment or disparate impact, which are requirements for an ECOA and FHA claim.[26]

         Plaintiff opposes[27] Defendant's motion and contends that Defendant's memorandum “misses the mark on all respects: it overstates the pleading requirements for an action in Federal Court, makes inappropriate factual arguments and baseless conclusions, and seeks to introduce arguments which are, in any event, irrelevant to the issues raised in Plaintiff's complaint.”[28] Plaintiff contends that he satisfied the pleading requirements laid out in Twombly and Iqbal.[29] Specifically, Plaintiff maintains that the Complaint clearly stated that:

(1)Plaintiff agreed to and was sent mortgage documents to sign containing a thirty year mortgage agreement; 2) Plaintiff signed said documents and mailed them back to Defendant; 3) Plaintiff received his billing statement for said mortgage and noticed a discrepancy; 4) Plaintiff requested from the Defendant a copy of said documents he signed; and 5) Plaintiff realized that the copy of the documents that Defendant sent him were not the documents Plaintiff had been originally sent when he signed the original mortgage contract.[30]

         Plaintiff further contends that he did not simply rely on legal conclusions but instead satisfied the Rule 9(b) particularity standard when he described “the particular circumstances” surrounding events that led him to be a “victim of a fraudulent ‘bait and switch' scheme.”[31] Plaintiff avers that he and “Defendant orally agreed to a contract [that] was reduced to writing[, ] . . . signed[, ] . . . and thereafter Defendant fraudulently switched out the documents, ” retaining only the signature page.[32] The Court now turns to a discuss of the applicable law.


         A. Rule 12(b)(6) Motion to Dismiss

         When deciding a Rule 12(b)(6) motion to dismiss, the “court accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.”[33] The Court may consider “the complaint, its proper attachments, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.”[34] “To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead ‘enough facts to state a claim to relief that is plausible on its face.'”[35] In Bell Atlantic Corp. v. Twombly, the United States Supreme Court set forth the basic criteria necessary for a complaint to survive a Rule 12(b)(6) motion to dismiss.[36] “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”[37] A complaint is also insufficient if it merely “tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'”[38] However, “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”[39] In order to satisfy the plausibility standard, the plaintiff must show “more than a sheer possibility that a defendant has acted unlawfully.”[40] “Furthermore, while the court must accept well-pleaded facts as true, it will not ‘strain to find inferences favorable to the plaintiff.'”[41] On a motion to dismiss, courts “are not bound to accept as true a legal conclusion couched as a factual allegation.”[42]

         B. FHA and ECOA Claims

         The FHA addresses discrimination in housing. Under the FHA, it is unlawful “[t]o discriminate against any person in the terms, conditions, or privileges . . . in the provision of services or facilities in connection therewith, because of race.”[43] It also prohibits businesses that engage in real estate transactions from discriminating “in making available such a transaction, or in the terms or conditions of such a transaction, because of race . . .”[44] Under this title, “residential real estate-related transaction” is defined as “[t]he making or purchasing of loans or providing other financial assistance.”[45] Courts generally give an expansive interpretation to discrimination under the FHA; “to state a claim under the Act, it is enough to show that race was a consideration and played some role in a real estate transaction.”[46]

         Similar in scope, the Equal Credit Opportunity Act (ECOA) was legislated in response to creditor's unequal treatment towards women, minorities, and elderly persons. The relevant portion states that it is “unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction . . . on the basis of race.”[47] In order to state a claim for relief under the ECOA, Plaintiff's complaint “must plausibly allege that (1) [Plaintiff is] an “applicant”; (2) [Defendant is] a “creditor”; and (3) [Defendant] discriminated against [Plaintiff] with respect to any aspect of a credit transaction on the basis of the plaintiff's membership in a protected class.”[48] Under this statute, Plaintiff, a “first-time home refinancer, ”[49] qualifies as an “applicant, ”[50] and Defendant, a business that provides mortgage refinancing, qualifies as a “creditor.”[51]

         Under the FHA or the ECOA, discrimination based on race can be “demonstrated by either ‘a showing of a significant discriminatory effect' or ‘proof of discriminatory intent,' that is disparate impact or discriminatory treatment.”[52] A subcategory of these is the practice of “redlining” and “reverse-redlining.” Plaintiff's pleadings do little to clarify under which theory he is pursuing his claims; nevertheless, he failed to satisfy the requirements of any single theory.

         1. Disparate Impact

         “[D]isparate-impact claims ‘involve [policies or] practices that are facially neutral in their treatment of different groups but that in fact fall more harshly on one group than another and cannot be justified by business necessity.'”[53] In order to claim disparate impact, Plaintiff must “identify a ‘specific test, requirement, or practice' that is responsible for the disparity.”[54] Plaintiff failed to identify any such practice or policy or provide any factual contention that one might exist. Rather, he simply alleged that Defendant “mastermind[ed] and participat[ed] in an undisclosed, systematic scheme.”[55] Thus, plaintiff failed to allege any specific policies[56] or facts, but rather “tender[ed] ‘naked assertion[s]' devoid of ‘further factual enhancement.'”[57]

         Further, Defendant contends Plaintiff's claim fails because he did not allege that “[D]efendant's policies [have a] ‘disproportionately adverse effect on minorities.'”[58]Rather, Plaintiff only alleged that an impact was felt by “all borrowers of sub prime loans.”[59] Again, Plaintiff failed to state his claim with enough “factual enhancement”[60] to survive a motion to dismiss. Plaintiff did not claim that all African-Americans were discriminated against, just himself. Further, Plaintiff abandoned this claim as he failed to respond to Defendant's arguments with any support whatsoever, a violation of Rule 7(f) of the Local Rules of the United States District Court for the Middle District of Louisiana.[61]

         2. Disparate Treatment

         While Plaintiff's discrimination claim resonates more in a theory of disparate treatment than disparate impact, it still falls short of stating a claim. A claimant can establish a racial discrimination complaint under the FHA and ECOA “by showing disparate treatment, ”[62] which is “deliberate discrimination”[63] that results in treating some people “less favorably than others because of a protected trait.”[64] “In order to make out a [disparate treatment] claim under either the FHA or the ECOA, a plaintiff must articulate facts which, if taken as true, would demonstrate that actions were taken against him as a result of race.”[65] “There can be no liability without a finding that the protected trait (e.g. race) motivated the challenged action.”[66] Plaintiff offered only vague and conclusory allegations which are legally insufficient to establish a claim for disparate treatment.

         Moreover, Defendant contends that, because Plaintiff's allegations demonstrate that he was granted a loan, a discrimination claim under the FHA or ECOA fails as a matter of law.[67] The cases Defendant relies upon[68] in support of this contention are distinguishable in the Court's view. Here, Plaintiff does not allege that he was denied a loan;[69] he does allege that the agreement he signed included the less favorable terms at issue.[70] Nevertheless, the plain language of the statutes illustrate that the denial of a loan is not always the dispositive factor; rather, discrimination in the terms, conditions, or any aspect of a credit transaction is still actionable under the ECOA and FHA.[71]

         Defendant also notes that Plaintiff failed to adequately allege disparate treatment because he failed to “allege that white or non-minority applicants received more favorable terms.”[72] While this is one method of stating a claim, it is not the only one. To state a claim under the FHA or ECOA, a claimant must only “articulate facts which, if taken as true, would demonstrate that actions were taken against him as a result of racial . . . discrimination.”[73]

         Viewing Plaintiff's Complaint in the light most favorable to him, and taking all of his well-pled claims as true for purposes of this motion, the Court finds that Plaintiff has failed to support his claims with any factual support that would raise such claims above mere speculation.[74] Further, in his Opposition, Plaintiff utterly failed to address or support any claim for disparate treatment. Under applicable jurisprudence, that claim is abandoned as a matter of law.[75]

         3. Reverse Redlining

         Courts in some jurisdictions have begun to recognize not only redlining-the process of denying credit to group based on location-but also reverse redlining as a legally cognizable theory of recovery under the ECOA or FHA. Reverse redlining is “a lending scheme that targets low-income minorities, offering them exorbitantly high interest rate loans in large amounts, even though they do not have the ability to repay, thereby approving a loan designed to fail, and resulting in loss of the home through foreclosure.”[76] A reverse redlining claimant must allege:

(1) that [he] is a member of a protected class; (2) that [he] applied and was qualified for a loan; (3) that the loan was given on grossly unfavorable terms; and (4) that the lender either intentionally targeted her for unfair loans or currently makes loans on more favorable terms to others.[77]

         In the present case, Plaintiff alleged the first and second elements when he stated that he is African-American, and he applied (and was qualified for) mortgage refinancing.[78] For the third element, he alleged he was given a sub-prime rate loan that included rates worse than a prime rate loan. However, Plaintiff failed to provide any factual details beyond his own credit score which was accompanied by a legal conclusion that his score qualified him for more favorable terms.[79] Further, Plaintiff failed to adequately plead the fourth element as Plaintiff did not allege that Defendant took any positive actions towards inducing him into taking out a loan he could not afford but argues, instead, that he reached out to Defendant in hopes of attaining refinancing. Because Plaintiff's allegations demonstrate that he sought out the loan, and Defendant did not actively induce him to do so, Plaintiff has failed to plead the required elements and cannot state a claim for reverse redlining. Any claim for reverse redlining is dismissed with prejudice.

         The Court also notes that Plaintiff's Opposition argument fails to substantively address Defendant's motion under these statutes. To the extent Plaintiff seeks to amend his Complaint via his Opposition memoranda by alleging new factual allegations that were not previously pled, the Court will not consider these allegations.[80] The law is well-settled that arguments in a brief are not a substitute for properly pleaded allegations: “it is axiomatic that a complaint cannot be amended by briefs in opposition to a motion to dismiss.”[81] Further, these allegations refer to Countrywide Financial who is not a party to this case. Plaintiff claims:

Furthermore the former Chairman and CEO of Caliber, Joe Anderson, was previously in charge of Countrywide Financials Consumer Markets Division, which had a troubled history.
Plaintiff contends that, through discovery, it will be revealed that Joe Anderson brought a plethora of former Countrywide Financial executives to Caliber Home Loans, Inc.
Through discovery Plaintiff wants to investigate whether said executives instituted at Caliber some of the same practices that had previously ensnared Countrywide Financial.[82]

         These statements are inappropriate for several reasons. First, the statements demonstrate that Plaintiff's allegations against Defendant Caliber are rooted in speculation surrounding allegations not pled, but believed, about Countrywide National. Further, Plaintiff's claim that discovery is necessary to meet his pleading requirement has been foreclosed by the Supreme Court: “Rule 8 marks a notable and generous departure from the hypertechnical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.”[83]

         With respect to race, Plaintiff submits two paragraphs regarding a bank's purported requirement to collect borrower race and ethnicity data and then ostensibly argues that the Defendant failed to collect such data.[84] In no way does this strained argument transform Plaintiff's pleadings to allege that Plaintiff himself was actually targeted and discriminated against on the basis of his race. Moreover, Plaintiff's response is inadequate as a matter of law as it is not responsive to the elements necessary to be pled to state claims under the FHA or the ECOA.

         Accordingly, as amendment would be futile and Plaintiff has largely abandoned the FHA and the ECOA claims for failing to substantively oppose, Plaintiff's FHA and ECOA claims are dismissed with prejudice.

         C. State Law Claims - Fraud and Unjust Enrichment

         Defendant contends Plaintiff's state law claims of fraud and unjust enrichment are precluded under the Louisiana Credit Agreement Statute, codified at La. R.S. 6:1122, which expressly prohibits an action against a creditor based on an oral credit agreement. This statute operates as a “statute of frauds” for the credit industry.[85] The purpose of the statute is “to prevent potential borrowers from bringing claims against lenders based on oral agreements.”[86] “In an action by a creditor, the debtor shall not assert a defense based on the terms and conditions of a credit agreement, unless the agreement is in writing, expresses conditions, sets forth the relevant terms and conditions, and is signed by the creditor and the debtor.”[87]

         Defendant maintains that, because the parties have a valid credit agreement, and Plaintiff's state law claims seek to recover for promised credit terms that are not memorialized therein, the Credit Agreement Statute precludes Plaintiff's state law claims. At first glance, the Court is inclined to agree. However, Plaintiff's argument is not simply that the written agreement does not comport with the alleged oral promises; rather, Plaintiff challenges the authenticity of the document itself by alleging that he did not sign the second agreement but that Defendant attached his signature page from a previous agreement. Indeed, La. R.S. 6:1122.1 provides defenses to written credit agreements: “Nothing in this Section shall limit the debtor's ability to assert a defense of forgery, identity theft, mistaken identity, lack of authorization, lack of contractual capacity, or payment of the debt.”[88] The Court finds that Plaintiff's scant allegations may trigger this defense.

         Nevertheless, Plaintiff's allegations of fraud fail to satisfy the Rule 9 particularity requirement. Rule 9(b) requires a party alleging fraud or mistake to “state with particularity the circumstances constituting fraud or mistake.”[89] “A dismissal for failure to plead fraud with particularity as required by Rule 9(b) is a dismissal on the pleadings for failure to state a claim under Rule 12(b)(6).”[90] In other words, “Rule 9(b) requires ‘the who, what, when, where, and how' to be laid out.”[91] The fraud allegations in Plaintiff's Complaint are woefully insufficient to meet this standard. However, as Plaintiff has not sought leave to amend his Complaint in this matter, the Court will grant leave to amend his fraud claim.

         The Federal Rules of Civil Procedure provide that “leave to amend shall be freely given when justice so requires.”[92] Moreover, “courts should ordinarily grant a plaintiff at least one opportunity to amend before dismissing a complaint with prejudice for failure to state a claim.[93] Where the Court has found that amendment is futile, or Plaintiff abandoned his claims, amendment will not be allowed.

         Turning to Plaintiff's claim for unjust enrichment, the Court finds that this claim must be dismissed with prejudice. La. C.C. art. 2298 expressly states that the remedy of unjust enrichment “is subsidiary and shall not be available if the law provides another remedy for the impoverishment or declares a contrary rule.”[94] A plaintiff is precluded from seeking recovery under a theory of unjust enrichment if he pleads another cause of action, regardless of whether the plaintiff is successful on the other theory of recovery.[95] Thus, if the law provides a plaintiff with another remedy, the plaintiff “has failed to state a cause of action in unjust enrichment.”[96] Plaintiff has clearly pled a host of other causes of action in this case; thus, he has no viable claim for unjust enrichment, and this claim is dismissed with prejudice.

         D. Miscellaneous Claims [97]

         Although Plaintiff fails to plead the following causes of action or provide any factual support for seeking relief thereunder, Plaintiff's “Prayer for Relief” seeks relief under the following laws/statutes: Title VII of the Civil Rights Act of1964 42 U.S.C. § 1983, Unfair and Deceptive Acts or Practices (UDAP), Credit Services Act (CSA), Unfair Trade Practices Act and Consumer Protection Law (UTPCPL).[98] The Court agrees with ...

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