333 Conn. 769
Conn.2019Background
- Plaintiffs defaulted on a residential mortgage and spent ~5 years submitting at least nine HAMP/workout applications while Bank of America (servicer) allegedly delayed, misrepresented, requested duplicate documents, issued erroneous denials, changed contacts, and poorly participated in ~18 foreclosure mediations.
- Bank withdrew an initial foreclosure, later filed a second foreclosure, and ultimately granted a permanent modification that increased principal by capitalizing attorney fees, default fees and excess interest.
- Plaintiffs sued for CUTPA violations and negligence, alleging systemic departure from HAMP, RESPA/Regulation X, a 2011 OCC consent order, the national mortgage settlement, and Connecticut foreclosure‑mediation statutes.
- Trial court granted Bank’s motion to strike both counts. The Connecticut Supreme Court reversed as to CUTPA (claim survives) and affirmed as to negligence (no common‑law duty; negligence per se not properly pleaded).
- Court framed CUTPA analysis via the FTC “cigarette rule” (public‑policy penumbra; immoral/unscrupulous conduct; substantial injury) and analyzed duty in negligence using foreseeability plus policy factors (participant expectations; encourage participation; avoid litigation; other jurisdictions).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether alleged loan‑modification conduct states a CUTPA claim | Allegations show systematic, intentional departure from HAMP/RESPA/consent‑order/settlement/mediation duties amounting to unfair or deceptive trade practices | Loan‑modification/negotiation conduct is adversarial/contractual, not CUTPA‑actionable; allowing suits would chill workouts and increase litigation | Yes. Allegations meet cigarette‑rule criteria; CUTPA claim survives motion to strike |
| Whether Bank owed a common‑law duty of care in processing loan‑modification applications | Duty arises from statutes, Regulation X, HAMP participation, consent order and national settlement and from foreseeable harm of mishandled reviews | No common‑law duty; borrower‑lender/servicer relationship is contractual/arm’s‑length; imposing duty would chill servicer participation and create broad litigation exposure | No. Court declines to recognize a new duty; negligence claim properly stricken |
| Whether plaintiffs pleaded negligence per se based on RESPA/mediation statutes | Plaintiffs alleged breach of federal regulations and state statutes caused injuries, so negligence per se applies | Plaintiffs never specifically pleaded negligence per se or identified statutory provisions — the theory was not distinctly raised below | Not considered on appeal: negligence per se was not properly pleaded or raised before trial court |
| Whether plaintiffs can enforce benefits of consent orders/national settlement (standing) | Plaintiffs contend these instruments reflect public policy and standards enforceable via CUTPA/negligence theories | Consent decrees/settlements do not create private enforcement rights for incidental third‑party beneficiaries; recognizing such enforcement would undermine settlements | Court treated the instruments as sources of public policy for CUTPA analysis but rejected using them to create a common‑law duty or private enforcement in negligence context |
Key Cases Cited
- Artie’s Auto Body, Inc. v. Hartford Fire Ins. Co., 317 Conn. 602 (Conn. 2015) (describes CUTPA private cause and remedial purpose)
- Ulbrich v. Groth, 310 Conn. 375 (Conn. 2013) (adopts FTC cigarette‑rule criteria for unfairness under CUTPA)
- Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) (state consumer‑protection claim viable where servicer mishandled HAMP modifications)
- MacKenzie v. Flagstar Bank, FSB, 738 F.3d 486 (1st Cir. 2013) (HAMP/servicer participation does not create common‑law duty of care)
- Miller v. Chase Home Finance, LLC, 677 F.3d 1113 (11th Cir. 2012) (recognizing negligence claims from HAMP could chill servicer participation)
- Normand Josef Enters., Inc. v. Connecticut Nat’l Bank, 230 Conn. 486 (Conn. 1994) (banks and banking activities fall within CUTPA)