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Fountain v. JPMorgan Chase Bank, N.A.

United States District Court, D. Hawaii

June 23, 2017

ROSITA FOUNTAIN, Plaintiffs,
v.
JPMORGAN CHASE BANK, N.A., Defendants.

          ORDER DENYING PLAINTIFFS ROSITA FOUNTAIN AND LESLIE FOUNTAIN'S MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT

          Richard L. Puglisi United States Magistrate Judge

         Before the Court is Plaintiffs Rosita Fountain and Leslie Fountain's Motion for Leave to File Second Amended Complaint, filed May 17, 2017 (“Motion”). ECF No. 45. Defendant JPMorgan Chase Bank, N.A. filed its Opposition to the Motion on May 31, 2017. ECF No. 49. The Fountains filed their Reply on June 20, 2017, after the Court granted them leave to file a late reply. ECF Nos. 51, 52. The Court found this matter suitable for disposition without a hearing pursuant to Local Rule 7.2(d). ECF No. 46. After carefully reviewing the submissions of the parties and the relevant legal authority, the Court DENIES the Motion.

         BACKGROUND

         In 2005, the Fountains obtained a loan from Long Beach Mortgage Company, secured by a mortgage on their home in Mililani, Hawaii. See ECF No. 45-2, Proposed Second Amended Complaint, ¶ 2. Defendant JP Morgan Chase Bank, N.A., (“JPMC”) serviced the Fountains' mortgage. Id. ¶¶ 3, 41. The Fountains allege that JPMC failed to meet its obligations as servicer of their mortgage in handling their loan modification requests. Id. ¶¶ 45, 47, 48, 62. The Fountains' mortgage was not modified, and a foreclosure action was filed against them in Hawaii state court. See ECF No. 48 at 2. The foreclosure action was voluntarily dismissed after the Fountains sold their home and paid off the loan. See id.

         In their First Amended Complaint, the Fountains asserted the following claims against JPMC: breach of implied covenant of good faith and fair dealing, tortious breach of the covenant of good faith and fair dealing, and unfair and deceptive consumer practices. Id. On May 24, 2017, the district court dismissed all three claims asserted in the First Amended Complaint. ECF No. 48.

         In the present Motion, the Fountains seek leave to file a Second Amended Complaint asserting four claims against JPMC: unfair and deceptive acts or practices with respect to loan servicing, breach of contract, violation of the Fair Debt Collection Practices Act, and tortious interference with a business relationship transcending the contract. See ECF No. 45-2. In opposition, JPMC argues that the proposed claims are futile, that the Fountains delayed in bringing the proposed claims, that JPMC would be prejudiced by further amendment, and that the Fountains' conduct evidenced bad faith. See ECF No. 49.

         DISCUSSION

         Under Rule 15(a)(2) “a party may amend its pleading only with the opposing party's written consent or the court's leave.” Fed.R.Civ.P. 15(a)(2). Rule 15(a)(2) states that leave to amend should be freely given when justice so requires. Id. Whether to grant leave to amend is within the court's discretion. Foman v. Davis, 371 U.S. 178, 182 (1962). In determining whether to grant leave to amend, courts consider several factors including undue delay, whether the opposing party will be prejudiced, futility of the amendment, and bad faith by the movant. Id. As discussed below, the Court finds that the claims asserted in the Proposed Second Amended Complaint are futile and, therefore, leave to amend is DENIED. Because the Court finds that the proposed claims are futile, the Court does not address the other arguments raised in JPMC's Opposition.

         A. Futility

         An amendment is futile if “no set of facts can be proved under the amendment to the pleadings that would constitute a valid and sufficient claim or defense.” Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988). Here, JPMC argues that all of Plaintiffs' proposed claims are futile. See ECF No. 49 at 14-23.

         1. Proposed Claim for Unfair and Deceptive Acts or Practices with Respect to Loan Servicing (Count I)

         In the Proposed Second Amended Complaint, the Fountains assert a claim for unfair and deceptive consumer practices with respect to loan servicing in violation of Hawaii Revised Statutes Section 480-2. See ECF No. 45-2, Proposed Second Amended Complaint, ¶¶ 85-100. To state a claim for unfair and deceptive acts or practices, the Fountains must plausibly allege (1) that they are consumers, (2) that JPMC engaged in an unfair or deceptive act or practice, and (3) that they suffered an injury resulting in damages. See Compton v. Countrywide Fin. Corp., 761 F.3d 1046, 1056 (9th Cir. 2014). For purposes of a Section 480-2 claim, a mortgage loan secured by a residence is “conduct of any trade and commerce” involving “consumers.” Haw. Cmty. Fed. Credit Union v. Keka, 94 Haw. 213, 227 (Haw. 2000).

         The district court dismissed the Section 480-2 claim in the First Amended Complaint holding that the Fountains failed to allege facts sufficient to support the claim. See ECF No. 48 at 12-15. The district court noted that the First Amended Complaint alleged that JPMC violated Section 480-2 by failing to timely and accurately respond to foreclosure alternative options, charging excessive or improper fees for default-related services, failing to properly oversee the corporate procedures in review of loan modification requests, providing blank, incorrect, and incomplete documents in response to loan modification requests, providing borrowers false or misleading information in response to borrower complaints, and failing to maintain appropriate staffing, training, and quality control systems. Id. at 15. The district court held that the Fountains' allegations were insufficient to suggest an unfair act or practice because the Fountains failed to allege how the actions of JPMC offended established public policy or were “oppressive, unscrupulous or substantially injurious to customers.” Id. (quoting State ex rel. Bronster v. United States Steel Corp., 82 Haw. 32, 51 (Haw. 1996)). The district court also stated that the allegations failed demonstrate a deceptive act. Id. The district court concluded that the “bare assertions” regarding JPMC's loan servicing conduct contained in the First Amended Complaint failed to allege sufficient facts to state a claim. Id.

         In the Proposed Second Amended Complaint, the Fountains allege many of the same facts regarding JPMC's purportedly unfair and deceptive loan servicing activities. Compare ECF No. 45-2 ¶¶ 48, 62 with ECF No. 16 ¶¶ 41, 46. For the same reasons as detailed in the district court's prior order, these “bare assertions” are insufficient to state a claim under Section 480-2. In addition to the facts previously alleged, the Fountains allege several new facts: that JPMC failed to “properly file mortgage documents” with the Bureau of Conveyances; that JPMC “lo[st] documents provided to them by the Fountains”; and that JPMC failed “to observe corporation formalities regarding the chain of title.” See ECF No. 45-2 ¶¶ 1, 12, 44, 47, 54, 58, 62, 88, 90, 119. Although these facts were not previously alleged, these facts are also not sufficient to state a claim under Section 480-2. As with the Fountains' prior allegations, the new allegation may show JPMC's sloppiness or error, but they do not, without more, demonstrate an unfair or deceptive practice. See ECF No. 48 at 13. None of the new allegations show that JPMC's actions were “immoral, unethical, oppressive, unscrupulous or substantially injurious.” See Bronster, 82 Haw. at 51. Further, the Fountains fail to allege how JPMC's alleged actions have “the capacity or tendency to mislead or deceive.” See Courbat v. Dahana Ranch, Inc., 111 Haw. 254, 261 (Haw. 2006). The ...


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