Charest v. Federal National Mortgage Ass'n
9 F. Supp. 3d 114
D. Mass.2014Background
- George and Paula Charest refinanced their Groveland, MA home in 2008; Fannie Mae owned the loan and GMAC serviced it under a written servicing contract that incorporated Fannie Mae’s servicing guides (including HAMP/RAMP obligations).
- Beginning in Dec. 2010 the Charests submitted multiple HAMP/RAMP modification applications through GMAC; they allege GMAC repeatedly misrequested documents, miscalculated income, made incorrect eligibility representations (e.g., that they did not occupy the home), offered an unaffordable in‑house modification, and denied otherwise eligible modifications.
- The Charests assert a single claim under Mass. Gen. Laws ch. 93A against Fannie Mae, alleging vicarious liability for GMAC’s misconduct.
- Fannie Mae moved to dismiss under Fed. R. Civ. P. 12(b)(6) (failure to plead a viable Chapter 93A claim, HAMP guidelines inapplicable to Fannie Mae) and 12(b)(7) (failure to join GMAC as a required party under Rule 19); GMAC filed for bankruptcy, creating an automatic stay that makes joinder infeasible.
- The court considered the servicing contract and Fannie Mae’s servicing Guide on the Rule 12(b)(6) record and denied Fannie Mae’s motion to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs plausibly plead a Chapter 93A claim based on HAMP/RAMP-related misconduct | Charests: GMAC (acting for Fannie Mae) engaged in a pattern of misrepresentations, repeated document requests, income miscalculation, denial on false grounds, and dilatory conduct causing economic injury | Fannie Mae: technical HAMP deviations do not create Chapter 93A liability; Fannie Mae is not a servicer and HAMP obligations target servicers | Court: Allegations (pattern of misrepresentations, failure to correct errors, dilatory conduct, unaffordable offer causing fees/bankruptcy filing) survive Rule 12(b)(6) as plausible Chapter 93A claims |
| Whether Fannie Mae can be held vicariously liable for GMAC’s servicing conduct | Charests: servicing contract and Guides show Fannie Mae delegated servicing duties to GMAC and retained control—agency exists so vicarious Chapter 93A liability may attach | Fannie Mae: it is the investor/owner, not the servicer; HAMP obligations apply to servicers, not lenders | Court: Facts permit inference of an agency relationship (actual/apparent authority via servicing contract and Guides); Fannie Mae not insulated from Chapter 93A on agency theory at pleading stage |
| Whether plaintiffs adequately allege damages and causation under Chapter 93A | Charests: economic injury—attorney fees, costs, bankruptcy filing, lost opportunities—caused by defendants’ misconduct | Fannie Mae: no cognizable injury caused by its conduct | Court: Alleged economic injuries (legal fees, costs, bankruptcy) are sufficient at pleading stage to allege Chapter 93A injury and causation |
| Whether GMAC is a required/indispensable party under Rule 19 so case must be dismissed under Rule 12(b)(7) | Fannie Mae: GMAC (the primary actor) is required; joinder is necessary but infeasible (bankruptcy) so dismissal warranted | Charests: principal/agent and joint tortfeasor rules mean GMAC is not required; plaintiffs can obtain complete relief against Fannie Mae; indemnity issues do not compel dismissal | Court: GMAC is not a Rule 19(a) required party; joinder is infeasible due to automatic stay, but balancing under Rule 19(b) favors proceeding without GMAC; dismissal not warranted |
Key Cases Cited
- Bell Atlantic v. Twombly, 550 U.S. 544 (plaintiff must plead facts showing plausible entitlement to relief)
- Gargano v. Liberty Int’l Underwriters, Inc., 572 F.3d 45 (First Circuit summary of Rule 12(b)(6) standards)
- Young v. Wells Fargo Bank, N.A., 717 F.3d 224 (Chapter 93A analysis in HAMP context; examples of cognizable economic injury)
- Eaton v. Federal Nat. Mortg. Ass’n, 462 Mass. 569 (agency principles applied to Fannie Mae context)
- Rule v. Fort Dodge Animal Health, Inc., 607 F.3d 250 (clarifying Chapter 93A injury as economic injury)
- Picciotto v. Continental Cas. Co., 512 F.3d 9 (framework for Rule 19 required‑party analysis)
- Bacardi Int’l Ltd. v. V. Suarez & Co., Inc., 719 F.3d 1 (practical, fact‑intensive Rule 19 inquiry)
- Austin v. Unarco Indus., Inc., 705 F.2d 1 (principle that joint tortfeasors/principal‑agent are not ordinarily indispensable under Rule 19)