Walkup v. Santander Bank, N.A.
147 F. Supp. 3d 349
E.D. Pa.2015Background
- In 2005 Plaintiffs obtained a $730,000 mortgage; they later defaulted and the loan servicing ended up with Sovereign (merged into Santander) and sub-servicer PHH.
- Plaintiffs allege PHH told them they could not get a HAMP modification unless they were in default, and that PHH requested they not make payments and repeatedly re-submit paperwork to keep modification applications active.
- Plaintiffs submitted multiple modification applications, incurred late fees and higher interest, and allege defendants profited from processing requests; they do not assert entitlement to a HAMP modification.
- Plaintiffs filed state claims for violations of the FCEUA and the UTPCPL (via UTPCPL remedial provision) and for breach of the implied covenant of good faith and fair dealing; case removed to federal court and defendants moved to dismiss under Rule 12(b)(6).
- The court accepted Plaintiffs’ amended complaint as operative but found the factual allegations contradicted by the pleading (timing of defaults and “years” of applications), and concluded Plaintiffs failed to plausibly plead justifiable reliance or ascertainable contractual damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do Plaintiffs’ claims depend on HAMP and are they preempted/foreclosed because HAMP provides no private right? | Walkup: claims are state-law (FCEUA/UTPCPL/contract) not a HAMP private right claim. | Santander/PHH: Plaintiffs’ theory is a "back-door" HAMP claim and thus fails. | Court: HAMP’s lack of private remedy does not preempt or bar state-law claims; defendants’ preemption argument fails. |
| Do Plaintiffs adequately plead UTPCPL standing (ascertainable loss) and justifiable reliance? | Walkup: late fees, increased interest, credit damage and emotional harms flowed from defendants’ deceptive conduct, supporting UTPCPL relief. | Defs: alleged harms are not actionable (emotional/credit reputational); any monetary losses were not caused by justifiable reliance on defendants. | Court: Only late fees/interest could be monetary loss, but Plaintiffs failed plausibly to plead justifiable reliance; UTPCPL/FCEUA claims dismissed. |
| Do alleged direct communications while Plaintiffs were represented by counsel support an FCEUA private claim? | Walkup: PHH’s direct contact violated FCEUA and contributed to their harms. | Defs: even if communications violated FCEUA, Plaintiffs did not rely on them to remain in default; they were harassing, not inducements. | Court: Communications did not plausibly cause or extend default; that theory fails. |
| Does Plaintiffs’ breach of implied covenant claim state contract damages? | Walkup: defendants’ deceptive practices breached the covenant causing late fees, emotional distress and credit harm. | Defs: damages alleged (emotional distress, shame) are not recoverable contract damages; no plausible foreseeability of such reliance. | Court: Plaintiffs failed to plead recoverable contract damages (no physical injury, no foreseeable monetary losses proven); claim dismissed. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (establishes plausibility standard for pleadings)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must allege enough facts to be plausible)
- Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir.) (HAMP does not create a private right nor preempt state-law claims)
- Weinberg v. Sun Co., Inc., 777 A.2d 442 (Pa. 2001) (UTPCPL requires ascertainable loss for private actions)
- Yocca v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425 (Pa. 2004) (reasonable/justifiable reliance required under UTPCPL)
- Bennett v. A.T. Masterpiece Homes at Broadsprings, LLC, 40 A.3d 145 (Pa. Super. 2012) (post-1996 UTPCPL catch-all covers "deceptive" conduct without common-law fraud elements)
- Fowler v. UPMC Shadyside, 578 F.3d 203 (3d Cir. 2009) (standard for reviewing factual allegations on a motion to dismiss)
- Schmidt v. Skolas, 770 F.3d 241 (3d Cir. 2014) (documents integral to the complaint may be considered on Rule 12(b)(6) motion)