George v. Urban Settlement Services
833 F.3d 1242
| 10th Cir. | 2016Background
- Plaintiffs (George, Leavitt couple, Dalton) each applied for HAMP loan modifications from Bank of America (BOA); BOA contracted Urban Settlement Services (Urban) to help administer HAMP.
- Plaintiffs allege BOA and Urban formed an association‑in‑fact enterprise to delay/deny HAMP permanent modifications, mislead borrowers about application status, and mishandle documents.
- Named harms include longer payoff times, increased principal/interest, credit damage, and improper fees.
- Plaintiffs sued under RICO § 1962(c) (mail/wire fraud predicates) against BOA and Urban and asserted promissory estoppel against BOA; the district court dismissed both claims under Rule 12(b)(6).
- The Tenth Circuit reviewed de novo and reversed: it held the complaint plausibly alleged (1) an enterprise distinct from BOA, (2) Urban’s participation in conducting the enterprise, (3) a pattern of racketeering through mail/wire fraud allegations sufficient under Rule 9(b) at this stage, and (4) promissory estoppel based on clear TPP/website promises and plausible detrimental reliance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs plausibly alleged an association‑in‑fact RICO enterprise distinct from BOA | Alleged BOA, Urban, and others formed an association‑in‑fact with a common purpose to minimize permanent modifications; members were separate entities performing distinct roles | BOA: alleged enterprise is just BOA + agents/subsidiaries (not distinct); actions were BOA’s own affairs | Reversed: allegations plausibly allege an association‑in‑fact enterprise distinct from BOA (functional separateness, distinct roles, longevity) |
| Whether Urban participated in conducting/operating the enterprise (Reves test) | Urban knowingly carried out and implemented processes (document systems, steering, denial quotas) and thus had “some part” in directing enterprise affairs | Urban: merely a contractor performing tasks at BOA’s direction; provided ordinary services | Reversed: complaint alleges sufficient factual detail (paragraph 80) that Urban had a part in operating/managing the enterprise to survive dismissal |
| Whether plaintiffs pleaded a pattern of racketeering (mail/wire fraud predicates; Rule 9(b)) | Alleged multiple misrepresentations about document receipt, application status, and eligibility communicated by mail/wire; RICO predicates span 2009–2013 | Defendants: allegations are vague, many fraud specifics tie only to BOA not Urban; Rule 9(b) not met | Reversed: taking all allegations together and allowing limited Rule 9(b) relaxation where facts are within defendants’ control, plaintiffs plausibly alleged predicates and a pattern at Rule 12(b)(6) stage |
| Whether BOA made a clear, unambiguous promise and plaintiffs reasonably/detrimentally relied (promissory estoppel) | TPPs and BOA website promised permanent modification if trial payments and documentation satisfied; plaintiffs made payments and complied, suffered foreseeable losses and lost other remedies | BOA: TPPs are conditional/left to servicer discretion; reliance unreasonable; payments not detrimental because obligations already existed | Reversed: TPP/website language is a clear promise to modify if conditions met; plaintiffs plausibly alleged reasonable, detrimental reliance (lost opportunities, worsened loan positions) |
Key Cases Cited
- Boyle v. United States, 556 U.S. 938 (association‑in‑fact enterprise elements)
- Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (person must be distinct from enterprise under § 1962(c))
- Reves v. Ernst & Young, 507 U.S. 170 (operation-or-management test for RICO § 1962(c))
- H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (pattern of racketeering requires relationship and threat of continuity)
- Brannon v. Boatmen’s First Nat. Bank of Okla., 153 F.3d 1144 (10th Cir.) (parent/subsidiary relationships and enterprise distinctness)
- BancOklahoma Mortg. Corp. v. Capital Title Co., 194 F.3d 1089 (10th Cir.) (Reves applied; providing ordinary services insufficient)
- Ouwinga v. Benistar 419 Plan Servs., Inc., 694 F.3d 783 (6th Cir.) (lower‑level participants may satisfy Reves if knowingly implementing scheme)
- In re ClassicStar Mare Lease Litig., 727 F.3d 473 (6th Cir.) (corporate defendants functionally separate from enterprises when performing different roles)
- Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir.) (TPP language can create enforceable promise; promissory estoppel and detrimental reliance)
- Corvello v. Wells Fargo Bank, N.A., 728 F.3d 878 (9th Cir.) (TPP language can be a promise enforceable on promissory estoppel theory)
- Young v. Wells Fargo Bank, N.A., 717 F.3d 224 (1st Cir.) (similar conclusion on TPP promises)