Richard v. Caliber Home Loans, Inc., 2:15-cv-02647

Plaintiff Dennis G. Richard sued Caliber Home Loans and others alleging TILA, RESPA, and FDCPA violations and that defendants continued to charge fees waived by two prior settlement agreements.
Defendants answered and asserted seven counterclaims, including fraud in the inducement, breach and rescission of the first settlement agreement.
Defendants moved for leave to file an amended answer and counterclaims to dismiss Counts III (fraud in the inducement), V (breach—first settlement), and VI (rescission—first settlement).
Plaintiff opposed the amendment, arguing prejudice and raising a separate Motion for Sanctions under Fed. R. Civ. P. 11, contending the fraud claims were baseless and asserted in bad faith.
Defendants agreed to dismiss the specified counts with prejudice, and defended the remaining fraud-based counterclaim as legally viable under promissory fraud based on facts about counsel’s knowledge of delinquency and the settlement text.
Magistrate Judge Deavers recommended granting leave to amend (dismissing the three counts with prejudice) and denying Plaintiff’s sanctions motion, finding Defendants’ fraud allegations objectively reasonable.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether leave to amend counterclaims should be granted	Amendment is prejudicial because defendants could reassert dismissed claims later	Defendants will dismiss the specified counts with prejudice; amendment narrows issues and causes no additional discovery burden	Granted: Amendment allowed; Counts III, V, VI to be dismissed with prejudice
Whether dismissal of certain counterclaims would cause undue delay or require extra resources	Dismissal would be prejudicial and burdensome	Dismissal reduces issues and will not require Plaintiff to expend additional resources	Held: No undue prejudice or delay; amendment appropriate
Whether defendants’ fraud-based counterclaims warrant Rule 11 sanctions	Fraud claims lack factual or legal basis and were brought in bad faith	Fraud claim rests on promissory fraud theory; factual support exists (knowledge of delinquency, settlement language); objectively reasonable to plead	Denied: Sanctions not appropriate; conduct objectively reasonable
Whether Defendants’ pleading was frivolous under existing precedent	Plaintiff asserts no reasonable chance of success on fraud claims	Defendants cite legal theory and facts supporting in-camera review and pleading	Held: Not frivolous; reasonable argument to pursue claims

Seals v. Gen. Motors Corp., 546 F.3d 766 (6th Cir. 2008) (factors for leave to amend include undue delay, bad faith, prejudice, futility)
Phelps v. McClennan, 30 F.3d 658 (6th Cir. 1994) (prejudice inquiry focuses on additional resources and delay caused by amendment)
First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501 (6th Cir. 2002) (court’s inherent authority to award fees for bad-faith litigation)
Simon DeBartolo Group, L.P. v. Richard E. Jacobs Group, Inc., 186 F.3d 157 (2d Cir. 1999) (standard for Rule 11 frivolousness requires no reasonable argument to extend or modify the law)
Ridder v. City of Springfield, 109 F.3d 288 (6th Cir. 1997) (Rule 11 sanctions assessed by objective reasonableness standard)