Michael Willner v. James Dimon
2017 U.S. App. LEXIS 2737
| 4th Cir. | 2017Background
- Michael and Marguerite Willner refinanced their Lorton, VA home in 2006 with Washington Mutual (WMB/WMBFA); Mr. Willner signed the note, Mrs. Willner did not, but both signed the deed of trust. WMB sold/securitized the note into a WaMu trust.
- WMB failed in Sept. 2008; FDIC became receiver and entered a Purchase and Assumption Agreement with Chase (Chase became servicer); trustee for the trust later became U.S. Bank.
- The Willners defaulted in 2011, sought loan modification, were denied, and faced foreclosure/auction notices; Mr. Willner filed bankruptcy in Dec. 2012.
- In 2014 the Willners (pro se) sued Chase, U.S. Bank, Select Portfolio Servicing and others, asserting 27 counts including declaratory relief declaring no right to foreclose, breach of contract, fraud, negligence, unjust enrichment, and conspiracy.
- The district court dismissed most counts for lack of subject-matter jurisdiction under FIRREA (failure to exhaust administrative claims against the failed institution) and dismissed two counts (constructive fraud and negligence) for failure to state a claim.
- On appeal the Fourth Circuit affirmed: most claims were barred by FIRREA’s exhaustion/jurisdictional bar; the remaining tort claims failed as a matter of Virginia law; the court also found no abuse of discretion in denying leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether claims challenging right to foreclose are barred by FIRREA exhaustion | Willners: claims (declaratory, breach) are against Chase/U.S. Bank’s independent misconduct or are affirmative defenses, so FIRREA doesn’t apply | Defendants: claims are functionally based on WMB’s acts/omissions and thus must be exhausted under FIRREA §1821(d) | Count 1,2,5 and many others dismissed for lack of jurisdiction under FIRREA (claims were functionally against WMB and unexhausted) |
| Whether declaratory relief is a "claim" resolvable in FIRREA administrative process | Willners: declaratory requests are not the type of claims FIRREA covers (not claims for payment) | Defendants: FIRREA authorizes FDIC to resolve declaratory/injunctive claims; such relief is within administrative powers | Court: Declaratory-judgment requests are "claims" under FIRREA if resolvable administratively; thus exhaustion required |
| Whether alleged defenses (e.g., fraud, defects) qualify as affirmative defenses exempting FIRREA | Willners/Mr. Willner: various counts are defenses to foreclosure/proof of claim and thus outside FIRREA | Defendants: these are independent claims seeking relief and thus within FIRREA’s scope | Court: Doctrinally rejects broad Bolduc approach; if remedy sought is a FIRREA-claim (not mere defense), exhaustion applies — Counts 6–9,16–19 treated as claims and barred; only Count 3 initially characterized differently |
| Whether constructive fraud and negligence claims (Counts 14 & 15) survive Rule 12(b)(6) | Willner: alleged false statements and servicing misconduct support constructive fraud and a tort duty (including a duty based on "recoupment" claim) | Defendants: allegations fail Rule 9(b)/Twombly/Iqbal and Virginia law bars tort claims that are merely negligent breach of contract; no independent duty to modify loan or seek equitable relief | Court: Count 14 (fraud) dismissed for failure to plead particularity and material misrepresentation; Count 15 (negligence) dismissed because no freestanding duty in Virginia (recoupment does not create new tort duty) |
Key Cases Cited
- Kerns v. United States, 585 F.3d 187 (4th Cir.) (standard for accepting factual allegations at motion-to-dismiss stage)
- Elmco Props., Inc. v. Second Nat’l Fed. Sav. Ass’n, 94 F.3d 914 (4th Cir. 1996) (FIRREA creates absolute, jurisdictional administrative-exhaustion requirement)
- Am. Nat’l Ins. Co. v. F.D.I.C., 642 F.3d 1137 (D.C. Cir.) (treating FIRREA exhaustion scope and functional tests for claims against assuming banks)
- Rundgren v. Washington Mut. Bank, FA, 760 F.3d 1056 (9th Cir.) (claims functionally based on failed bank are subject to FIRREA exhaustion; rejecting expansive affirmative-defense exception)
- Westberg v. F.D.I.C., 741 F.3d 1301 (D.C. Cir.) (declaratory relief obtainable through FIRREA administrative process; functional analysis)
- Dittmer Properties, L.P. v. F.D.I.C., 708 F.3d 1011 (8th Cir.) (FDIC as receiver has power to enforce or refrain from enforcing notes; declaratory relief may affect receiver’s powers)
- Tri-State Hotels, Inc. v. F.D.I.C., 79 F.3d 707 (8th Cir.) (declaratory-judgment actions are covered by FIRREA)
- Bolduc v. Beal Bank, SSB, 167 F.3d 667 (1st Cir.) (narrower view that some preemptive suits may be treated as defenses — distinguished and not followed)