United States District Court, D. Hawaii
ORDER DENYING PLAINTIFFS ROSITA FOUNTAIN AND LESLIE
FOUNTAIN'S MOTION FOR LEAVE TO FILE SECOND AMENDED
Richard L. Puglisi United States Magistrate Judge
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.
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
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.
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.
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
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.
Proposed Claim for Unfair and Deceptive Acts or Practices
with Respect to Loan Servicing (Count I)
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).
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.
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 ...