Charlotte McCauley v. Home Loan Investment Bank, FSB
710 F.3d 551
4th Cir.2013Background
- McCauley financed her WV home using Ocean Bank’s loan, after an appraisal she claims overstated value.
- Closing was allegedly rushed, with insufficient explanation of loan documents, and the loan carried an exploding ARM.
- McCauley later filed state-law claims for unconscionability (Count I) and fraud (Count II) against Home Loan and Deutsche Bank.
- District court dismissed as preempted under HOLA and 12 C.F.R. § 560.2; case removed to federal court.
- On appeal, court analyzes HOLA preemption framework and whether Counts I–II are preempted or not, then reviews pleading standards.
- Court ultimately affirms dismissal of unconscionability, reverses dismissal of fraud, and remands for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are unconscionability claims preempted by HOLA §560.2? | McCauley contends not preempted; the claim should be viewed holistically. | Home Loan/Deutsche Bank argue all aspects fall within §560.2(b) preempted categories. | Unconscionability preempted; Count I dismissed. |
| Is McCauley’s fraud claim preempted by HOLA §560.2? | Fraud not within §560.2(b); not preempted and should proceed. | Fraud relates to lending standards and may be preempted under §560.2(c)/(b). | Fraud claim not preempted; Count II survives. |
| Does McCauley plead fraud with sufficient particularity under Rule 9(b)? | Complaint provides time, place, contents, actor, and effect of the misrepresentation. | Banks contend lack of particularity and plausibility. | Rule 9(b) satisfied; fraud claim plausibly stated. |
| Is McCauley’s fraud claim plausibly stated under Rule 12(b)(6) and post-Iqbal standards? | Fraud elements alleged: misrepresentation by Ocean Bank, reliance, damages. | Argument focuses on insufficiency or implausibility of lender’s fraud motivation. | Fraud claim survives as pleaded. |
| Can McCauley proceed against Deutsche Bank on the fraud claim? | Derivative liability may extend to Deutsche Bank as holder; facts against Ocean Bank implicated standard of fraud. | Defendant argues lack of direct participation by Deutsche Bank in alleged fraud. | Fraud claim not dismissible to the extent it may proceed against Deutsche Bank; remand for development. |
Key Cases Cited
- United States v. Locke, 529 U.S. 89 (2000) (strong federal presence supports preemption when regulating area of national banking)
- de la Cuesta, 458 U.S. 141 (1982) (federal regulation can preempt state law; regulation treated like statute)
- Auer v. Robbins, 519 U.S. 452 (1997) (deference to agency interpretation of its own regulation)
- In re Ocwen Loan Servicing, LLC Mortg. Servicing Litig., 491 F.3d 638 (7th Cir. 2007) (state deceptive practices not preempted where not directly regulating core lending)
- Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001 (9th Cir. 2008) (OTS framework and preemption scope for federally regulated savings institutions)
- Harrison v. Westinghouse Savannah River Co., 176 F.3d 776 (4th Cir. 1999) (fraud pleadings must give fair notice of circumstances)
- Folio v. City of Clarksburg, 655 S.E.2d 143 (W.Va. 2007) (fraud elements under state law; standard for state claims)