United States District Court, D. Hawaii
JEFFERY S. HAMILTON, and KALEIMAEOLE NOLA LINDSEY LATRONIC, individually and on behalf of all others similarly situated, Plaintiffs,
FORECLOSURE EXPEDITORS/INITIATORS, LLC, a Washington limited liability company, and NORTHWEST TRUSTEE SERVICES, INC., a Washington corporation, et al., Defendants.
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS' MOTION TO DISMISS
DERRICK K. WATSON UNITED STATES DISTRICT JUDGE.
Northwest Trustee Services, Inc. (“NWTS”) and
Foreclosure Expeditors/Initiators, LLC (“FEI”),
entities that assisted mortgagees in the non-judicial
foreclosures of Plaintiffs' mortgages, seek dismissal of
the claims against them for wrongful foreclosure, violations
of Hawai‘i Revised Statutes (“HRS”) §
480-2, and intentional interference with prospective economic
advantage. Defendants contend that, as agents of the
foreclosing mortgagees, they owed no direct duties to
Plaintiffs during the course of foreclosure proceedings to
ensure that Plaintiffs' properties sold at the best
possible price, and that they are not liable under the
relevant statutes or in tort.
because no private cause of action exists against a
mortgagee's agent based on alleged violations of the
non-judicial foreclosure statute, HRS Chapter 667, and
Hawai‘i courts have yet to recognize such a cause of
action under the common law, Plaintiffs' wrongful
foreclosure claim is dismissed. Second, Plaintiffs
sufficiently allege that NWTS and FEI's conduct
“occurred in the course of ‘trade or
commerce'” with Plaintiffs, as is necessary to
sustain a claim for unfair or deceptive acts or practices
(“UDAP”) and unfair methods of competition
(“UMOC”) under Section 480-2. Finally,
Plaintiffs' claim for intentional interference with
prospective economic advantage fails to state a claim under
the circumstances alleged and is therefore dismissed.
these reasons, Defendants' Motion to Dismiss (Dkt. No.
68) is GRANTED as to Plaintiffs' wrongful foreclosure and
intentional interference with prospective economic advantage
causes of action. The Motion is DENIED, however, with respect
to Plaintiffs' HRS § 480-2 claims.
their First Amended Complaint (“FAC”), filed on
April 24, 2013, Plaintiffs Hamilton and Latronic,
individually and on behalf of others similarly situated,
allege that NWTS and FEI, plus several law
firms and individual attorneys, violated state law during the
course of non-judicial foreclosure proceedings. They allege that
NWTS is a Washington corporation that assists mortgagees in
foreclosing real property mortgages in the States of Alaska,
Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon,
and Washington. FAC ¶ 6. FEI is described in the FAC as
a Washington limited liability company that publishes, posts,
and serves foreclosure notices and conducts foreclosure
auctions in non-judicial foreclosure proceedings involving
NWTS, Routh Crabtree Olsen, P.S. (“RCO”), and RCO
Hawaii, LLLC's clients in the State of Hawaii. FAC ¶
9. FEI is not a law firm, and neither it nor its members or
managers is licensed to practice law in the State of Hawaii.
FAC ¶ 9. Plaintiffs do not bring any claims against the
and Latronic each executed mortgages to purchase real
property in Hawaii, FAC ¶¶ 31, 147, and each
mortgage included a power-of-sale clause that stated:
“If Lender invokes the power of sale, Lender shall give
Borrower notice of sale . . . Lender shall publish a notice
of sale and shall sell the Property at the time and place and
under the terms specified in the notice of sale.” FAC
¶¶ 33, 147. Countrywide Home Loans, Inc., the
mortgagee under the Hamilton Mortgage, recorded the
“Notice of Mortgagee's Intention to Foreclose Under
Power of Sale” on or around October 14, 2008, and the
non-judicial foreclosure sale of Hamilton's property took
place on February 4, 2009. FAC ¶¶ 36, 38, 62. U.S.
Bank, the assignee of the Latronic Mortgage, recorded its
first “Notice of Mortgagee's Intention to Foreclose
Under Power of Sale” on April 8, 2010, which was
cancelled and followed by a subsequent Notice of Sale,
recorded on May 13, 2010. FAC ¶ 152. The non-judicial
foreclosure sale of Latronic's property took place on
June 16, 2010. FAC ¶ 169.
allege that their foreclosing mortgagees contracted with NWTS
to assist in foreclosing on the Hamilton and Latronic
mortgages, and NWTS, in turn, arranged for its
“affiliated law firm, RCO, to represent the foreclosing
mortgagees in connection with the non-judicial foreclosures
of those mortgages.” FAC ¶¶ 36,
According to Plaintiffs, “NWTS authorized, ordered,
directed, and/or reviewed and consented to the acts,
policies, and practices of Defendants RCO and RCO Hawaii in
connection with the non-judicial foreclosures of mortgages
held by NWTS's clients.” FAC ¶ 37. NWTS
arranged for FEI to publish the Notices of Sale as required
by HRS § 667-5, FAC ¶¶ 46, 161, but charged
the foreclosing mortgagee amounts higher than what was
actually paid to publish the Notices of Sale in newspapers of
general circulation in the counties where the properties were
located, without the mortgagees' knowledge or consent.
FAC ¶¶ 50, 163.
allege numerous improprieties on the part of NWTS and FEI
during the course of the non-judicial foreclosures of their
properties, including: violating the terms of sale in the
Notices of Sale,  such as the published auction date and
time; failing to orally announce and publish postponement
notices of public auctions, and; using an FEI representative,
who was not a licensed Hawaii attorney, to conduct the
auctions. FAC ¶¶ 52-87, 165-77. Plaintiffs allege
that their properties would have sold for higher prices at
auction if the Notices of Sale had truthfully advertised the
terms of sale. FAC ¶ 80. Generally, Plaintiffs allege
three causes of action: (1) wrongful foreclosure; (2)
violations of HRS § 480-2(a); and (3) intentional
interference with prospective economic advantage
(“IIPEA”). FAC ¶¶ 209-10. “As
redress for Defendants' repeated violations of [HRS]
§ 480-2(a), wrongful foreclosure, and tortious
interference with the prospective economic advantage of
Plaintiffs, ” each demands, “inter alia,
damages, treble damages, punitive damages, reasonable
attorneys' fees, and costs.” FAC ¶ 210.
Defendants' Motion To
and FEI seek dismissal, arguing that they cannot be liable
for the wrongful foreclosure or HRS Chapter 480 claims
against them as a matter of law because, as agents of a
foreclosing mortgagee, they owe no duty by statute or under
the common law to mortgagors. Plaintiffs counter that they
state cognizable claims both under the relevant statutes and
also because a non-attorney agent owes a duty to use
reasonable means to maximize the sales price when choosing to
actively participate in a non-judicial foreclosure.
Defendants also move to dismiss Plaintiffs' IIPEA cause
of action as untimely and for failure to state a claim, which
Plaintiffs did not oppose.
Rule of Civil Procedure 12(b)(6) authorizes the Court to
dismiss a complaint that fails “to state a claim upon
which relief can be granted.” A Rule 12(b)(6) dismissal
is proper when there is either a “‘lack of a
cognizable legal theory or the absence of sufficient facts
alleged.'” UMG Recordings, Inc. v. Shelter
Capital Partners, LLC, 718 F.3d 1006, 1014 (9th Cir.
2013) (quoting Balistreri v. Pacifica Police
Dep't, 901 F.2d 696, 699 (9th Cir. 1990)).
to Ashcroft v. Iqbal, “[t]o 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.'” 555 U.S. 662, 678
(2009) (quoting Bell Atlantic Corp. v. Twombly, 550
U.S. 554, 570 (2007)). “[T]he tenet that a court must
accept as true all of the allegations contained in a
complaint is inapplicable to legal conclusions.”
Id. Accordingly, “[t]hreadbare recitals of the
elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Id. (citing
Twombly, 550 U.S. at 555). Rather, “[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.” Id. (citing Twombly, 550
U.S. at 556). Factual allegations that only permit the court
to infer “the mere possibility of misconduct” do
not constitute a short and plain statement of the claim
showing that the pleader is entitled to relief, as required
by Rule 8(a)(2). Id. at 679.
detailed below, the Court grants Defendants' Motion with
respect to any wrongful foreclosure claim because: (1) NWTS
and FEI, as agents, are not liable for alleged violations of
HRS §§ 667-5 and 667-7 based on the Hawai‘i
Supreme Court's recent decision in Hungate v. Law
Office of David B. Rosen, 139 Hawai‘i 394, 391
P.3d 1 (2017); and (2) the Court declines to recognize a
private cause of action in tort against a mortgagee's
agent for wrongful foreclosure in the first instance.
Plaintiffs' claims under HRS § 480-2, however,
sufficiently allege that NWTS and FEI's conduct
“occurred in the course of ‘trade or
commerce'” with Plaintiffs, and Defendants'
Motion is therefore denied with respect to Plaintiffs'
UDAP and UMOC claims. Finally, because the FAC fails to
allege facts supporting the necessary prospective economic
relationship between Plaintiffs and a third party, the IIEPA
claim is dismissed for failure to state a claim.
Plaintiffs Fail To State A Cognizable Wrongful Foreclosure
Claim Against Non-Mortgagees NWTS And FEI
allege statutory and common law wrongful foreclosure claims,
which Defendants seek to dismiss based upon the recent
holding in Hungate, which Defendants claim limits
such causes of action to foreclosing mortgagees. Having
examined the relevant statutes, their legislative history,
and instructive case law on the foreclosure of mortgages, the
Court concludes that Plaintiffs may not sustain a wrongful
foreclosure claim under either the former non-judicial
foreclosure statute or in tort as against NWTS and FEI. The
Court discusses each in turn.
Plaintiffs Fail To State A Wrongful Foreclosure Claim For
Alleged Violations Of Former HRS §§ 667-5 et
allege that NWTS and FEI violated the version of HRS
§§ 667-5 and 667-7 in effect at the time of their
respective foreclosures. See, e.g., FAC ¶¶
57, 67, 165, 167, 168, 170, 171. Defendants seek dismissal of
the statutory wrongful foreclosure claim, arguing that no
private right of action exists to enforce the provisions of
former Chapter 667 against them because they were not the
foreclosing mortgagee. The Court agrees.
the stay of proceedings in this matter, the Hawai‘i
Supreme Court recognized the existence of a wrongful
foreclosure action under HRS Chapter 667 Part I against
foreclosing mortgagees in Hungate v. Law Office of David
B. Rosen, 139 Hawai‘i 394, 391 P.3d 1 (2017). The
Hawai‘i Supreme Court decided, however, that
“those statutory provisions do not create a private
right of action against the attorney of a foreclosing
mortgagee. [It] conclude[d] [that] Hungate does not have a
cause of action against [attorney] Rosen under former HRS
§ 667-5 and his claims against Rosen based upon the
mortgage's power of sale clause cannot stand.”
Hungate, 139 Hawai‘i at 402, 391 P.3d at 9.
here, as in Hungate, contend that Defendants owe
them statutory duties under HRS §§ 667-5 and 667-7:
the “question raised here is whether the requirements
of former HRS § 667-5 and former HRS § 667-7 impose
duties that may be enforced against the [agent] of a
foreclosing mortgagee under a private right of action.”
Hungate, 139 Hawai‘i at 405, 391 P.3d at 12.
The Court, guided by the Hawai‘i Supreme Court's
analysis in Hungate with respect to a
mortgagee's attorney, answers the question in the
determining whether a private right of action exists under a
statute, Hawai‘i courts consider the following
(1) whether the plaintiff is “one of the class for
whose especial benefit the statute was enacted”; (2)
whether there is “any indication of legislative intent,
explicit or implicit, either to create such a remedy or to
deny one”; and (3) whether a private cause of action
would be “consistent with the underlying purposes of
the legislative scheme to imply such a remedy for the
plaintiff.” Whitey's Boat Cruises, [Inc. v.
Napali-Kauai Boat Charters, Inc., ] 110 Hawai‘i
302, 312, 132 P.3d 1213, 1223 (2006). While each factor is
relevant, “the key factor” is whether the
legislature “intended to provide the plaintiff with a
private right of action.” Id. at 313 n.20, 132
P.3d at 1224 n.20; see also Touche Ross & Co. v.
Redington, 442 U.S. 560, 575, 99 S.Ct. 2479, 61 L.Ed.2d
82 (noting that the three factors used to assess whether a
private cause of action may be implied from statutory
language ultimately “are ones traditionally relied upon
in determining legislative intent”).
Hungate, 139 Hawai‘i at 406, 391 P.3d at 13.
the case in Hungate, with respect to the first
factor, Plaintiffs are members of the class for whose special
benefit HRS §§ 667-5 and 667-7 were enacted because
“the statute was amended to benefit the ‘party in
breach of the mortgage agreement.' H. Stand. Comm. Rep.
No. 1192, in 2008 House Journal, at 1450. As the part[ies] in
breach of the mortgage contract, [Hamilton and Latronic]
fall within the class for whom the statute was
enacted.” Hungate, 139 Hawai‘i at 406,
391 P.3d at 13.
second factor considers whether there is “any
indication of legislative intent, explicit or implicit,
either to create such a remedy or to deny one.”
Whitey's Boat Cruises, Inc., 110 Hawai‘i
at 312, 132 P.3d at 1223. As was the case in
Hungate, former “HRS § 667-5 and its
legislative history are silent as to whether the legislature
intended to create a cause of action on behalf of the
mortgagor against the mortgagee's [agent].”
Hungate, 139 Hawai‘i at 406, 391 P.3d at 13.
The Court finds that the legislative history as a whole lacks
any clear statement of intent to allow private causes of
action for violations of Sections 667-5 and 667-7 under the
particular circumstances alleged by Plaintiffs.
“[I]mplying a private right of action on the basis of
[legislative] silence is a hazardous enterprise, at
best.” Hungate, 139 Hawai‘i at 406, 391
P.3d at 13 (quoting Touche Ross & Co, 442 U.S.
at 571) (alteration in Hungate). See also Muegge
v. Wal-Mart Stores, Inc., 2013 WL 253531, at *3 (D. Haw.
Jan. 22, 2013) (No private right of action created where
“[n]either the statute nor its legislative history
expressly indicates that the legislature intended to provide
a private cause of action for violations of section 291-58.
The committee reports concerning the enactment of the statute
are silent as to whether the legislature intended a private
cause of action.”). In short, Plaintiffs have not
established that the legislature intended to create private
right of action for enforcement of Sections 667-5 or 667-7.
Hungate court's examination of the third factor,
“the underlying purposes of the legislative scheme,
” revealed that, while “amendments to the
foreclosure process set forth in HRS chapter 667 Part I were
intended to ‘expand the rights of mortgagors,
'” Hungate, 139 Hawai‘i at 406, 391
P.3d at 13 (quoting Kondaur Capital Corp. v.
Matsuyoshi, 136 Hawai‘i 227, 239, 361 P.3d 454,
466 (2015)), they were not intended to regulate the conduct
of attorneys. Id. at 406, 391 P.3d at 13.
Hungate further detailed the history of the 2008
amendment as follows, noting its particular purpose to set
additional burdens on the mortgagee to protect the mortgagor,
rather than to regulate attorney conduct-
a close reading of the legislative history of the 2008
amendment shows it was enacted to set additional burdens on
the mortgagee to protect the mortgagor; the statute was not
amended to regulate attorneys representing mortgagees. The
amendment's structure or scheme attempted “to
streamline and ensure transparency in the non-judicial
foreclosure process by requiring a foreclosure mortgagee to
provide pertinent information regarding the property ...