Brown v. Wells Fargo Bank, N.A.
869 F. Supp. 2d 51
D.D.C.2012Background
- Brown sued Wells Fargo for fraud and CPPA violations related to World Savings Bank’s Pick-A-Pay mortgage refinancing in 2007; Wells Fargo is the successor to World Savings Bank.
- Brown alleges misrepresentation of income/assets, coercive closing, undisclosed payments/negative amortization, and that the Pick-A-Pay product is illegal.
- Wells Fargo moves to dismiss under Rule 12(b)(6) arguing HOLA preemption and a related class-action settlement precludes certain counts.
- OTS regulations under HOLA, particularly 12 C.F.R. § 560.2, preempt various lending-related state-law claims; the court applies an as-applied analysis.
- The court determines HOLA preempts most but not all of Brown’s claims, allowing some affirmative misrepresentation/CPPA claims to survive; class-preclusion defenses require more showing of notice, which the record lacks at this stage.
- Conclusion: dismissal granted in part and denied in part; only affirmative misrepresentation and fraud claims survive as to specific paragraphs noted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HOLA preempts Brown’s claims. | Brown contends not preempted; claims fall under general law. | Wells Fargo argues claims fall under § 560.2(b) and § 560.2(a) and are preempted. | Partially preempted; some misrepresentation/CPPA claims survive staying within § 560.2(c). |
| Whether Brown’s misrepresentation of income/assets is preempted. | Misrepresentation is not a regulated disclosure rule; incidental to lending. | Such misrepresentation affects lending and is preempted by § 560.2(b). | Not preempted; affirmative misrepresentation claim survives. |
| Whether other Brown claims related to disclosures/loan terms are preempted. | Claims rely on general law; not to impose new lending rules. | Preempted as they would impose new requirements on lenders. | Preempted; these claims are dismissed. |
| Whether class-action settlement precludes Brown’s Counts I and III. | Brown may not be bound due to insufficient notice to her. | Settlement precludes claims under res judicata if properly notice and opt-out occurred. | Not proven; insufficient notice to Brown; claim preclusion not applicable at this stage. |
Key Cases Cited
- Fidelity Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141 (U.S. 1982) (OTS preemption of state lending laws acknowledged)
- Ocwen Loan Servicing, LLC, Mort. Servicing Litig., 491 F.3d 638 (7th Cir. 2007) (HOLA preemption does not extinguish state remedies for fraud; as-applied approach used)
- Davis v. World Savings Bank, F.S.B., 806 F. Supp. 2d 159 (D.D.C. 2011) (fraud claims may be preempted; loan-document linkage considered)
- Casey v. Financial Services, Inc., Casey, 583 F.3d 594 (9th Cir. 2009) (as-applied preemption approach in HOLA cases outlined)