Shaw v. CitiMortgage, Inc.
3:13-cv-00445
D. Nev.Feb 5, 2015Background
- Shaw obtained a 2003 residential loan secured by a note and deed of trust; loan later transferred from Lehman Brothers to Bank of New York Mellon (BNY) under a pooling and servicing arrangement.
- Shaw made payments through servicers including Aurora and CitiMortgage; in May 2011 Shaw alleges he and CitiMortgage entered a binding loan modification reducing payments.
- CitiMortgage allegedly repudiated the May 2011 modification twice, sent an alternate modification in July 2011, then resumed accounting as if the May 2011 modification remained in effect; after a December 2011 repudiation Shaw stopped payments and CitiMortgage initiated nonjudicial foreclosure.
- Shaw sued for declaratory relief, breach of contract, breach of implied covenant of good faith and fair dealing, fraudulent and negligent misrepresentation, interference with prospective economic advantage, and a RESPA violation.
- BNY and CitiMortgage moved to dismiss; court granted dismissal in part, dismissed BNY from the case, and dismissed Shaw’s fraud claims for failure to plead with particularity, but otherwise allowed several claims to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge assignment to BNY | Shaw contends assignment from Lehman to BNY was invalid and seeks declaratory relief | BNY argues borrower lacks standing to challenge PSA-based transfers | Dismissed BNY; borrower lacks standing to challenge assignment under PSA (Wood controlling) |
| Validity/enforceability of May 2011 loan modification | Shaw alleges a final, binding May 2011 modification that CitiMortgage repudiated | CitiMortgage disputes existence/consideration for modification and seeks dismissal | Not resolved on 12(b)(6); claim survives because factual dispute and pleading is sufficient at this stage |
| Breach of implied covenant / breach of contract | Shaw asserts CitiMortgage breached the modification and duties under the contract | CitiMortgage argues no enforceable modification (lack of consideration), attack more appropriate for summary judgment | Claims for breach of contract and implied covenant survive the motion to dismiss |
| Fraudulent and negligent misrepresentation | Shaw alleges misrepresentations about reinstating/modifying loan | CitiMortgage contends Shaw failed to plead fraud with particularity under Rule 9(b) | Fraud and negligent misrepresentation dismissed for failure to plead with requisite particularity |
| Interference with prospective economic advantage (short sale) | Shaw says CitiMortgage requested a short sale and then ignored offers forwarded to counsel | CitiMortgage says servicers have no duty to approve short sales | Claim survives because Shaw alleges CitiMortgage created a duty by requesting he list as a short sale and to forward offers |
| RESPA § 2605(k) violation | Shaw alleges he sent a qualified written request and CitiMortgage failed to provide owner/assignee contact info | CitiMortgage argues relevant contact info is its own and disputes sufficiency; factual question | RESPA claim survives at pleading stage; fact issue not resolved on motion to dismiss |
Key Cases Cited
- Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) (pleading must contain plausible factual content; legal conclusions not entitled to assumed truth)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for complaint beyond labels and conclusions)
- Wood v. Germann, 331 P.3d 859 (Nev. 2014) (homeowner who is not party or intended third-party beneficiary to PSA lacks standing to challenge assignment)
- Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097 (9th Cir. 2008) (Rule 8(a)(2) notice pleading standard applied in Ninth Circuit)
- Moss v. U.S. Secret Serv., 572 F.3d 962 (9th Cir. 2009) (court may disregard bare assertions and legal conclusions at pleading stage)