Watoshina Compton v. Countrywide Financial Corp
2014 U.S. App. LEXIS 14977
9th Cir.2014Background
- Compton appeals district court dismissal of a UDAP claim under Hawaii Rev. Stat. § 480-2(d).
- Complaint centers on BAC misrepresentations and delays during attempted loan modification from 2009–2010.
- Compton alleges BAC misled her about modification eligibility and forebearance, and repeatedly changed requirements.
- Foreclosure notice was issued August 26, 2010, with later denial of a fourth modification and ineligibility for a fifth.
- District court dismissed UDAP claim for failure to state a claim; the Ninth Circuit reverses and remands.
- Court clarifies that pleading UDAP claims against lenders does not require showing a common-law duty of care by the lender to the borrower.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Compton states a UDAP claim under 480-2/480-13. | Compton alleges unfair/deceptive acts in loan modification process. | BAC claims no duty or unfair practice within lender’s ordinary role. | Yes; UDAP claim plausibly alleged deception and damages. |
| Whether a lender must owe a separate duty of care to state UDAP claim. | Duty not required; statutory breach suffices. | Duty of care outside ordinary lending, per Nymark line of cases. | District court erred; no duty-of-care requirement governs UDAP claim. |
| Whether complaint adequately alleges injury and damages. | Costs, delays, and time spent modify- ing caused damages. | Damages not sufficiently linked to UDAP acts. | Damages adequately alleged; injury shown by transaction costs and wasted effort. |
| What is the proper standard of review and sufficiency for UDAP claim under Rule 12(b)(6). | Complaint meets plausibility standard; enough facts alleged. | Lender cannot be liable absent extraordinary duty. | De Novo review; complaint survives as plausible under Iqbal/Twombly. |
| Do Hawaii cases require avoidance of common-law fault analysis in UDAP claims against lenders? | Plain language supports statutory duty; Keka supports independent duty. | Some district cases rely on common-law duty. | Keka supports independent duty not required; UDAP triggered by misrepresentation. |
Key Cases Cited
- Ai v. Frank Huff Agency, Ltd., 61 Haw. 607 (Haw. 1980) (liberal construction of 480-2 to deter unfair practices)
- Keka v. Hawaii, 94 Haw. 213 (Haw. 2000) (deceptive loan negotiations can violate 480-2 without enhanced duty)
- Zanakis-Pico v. Cutter Dodge, Inc., 98 Haw. 309 (Haw. 2002) (unsuccessful modification claims still may support damages; private injury element)
- Courbat v. Dahana Ranch, Inc., 111 Haw. 254 (Haw. 2006) (deceptive acts analyze materiality; objective test for likely deception)
- Jenkins v. Commonwealth Land Title Ins. Co., 95 F.3d 791 (9th Cir. 1996) (damages may be pleaded as direct result of UDAP violations)
- Twombly v. Bell Atl. Corp., 550 U.S. 544 (U.S. 2007) (claim must be plausible, not merely conceivable)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading must show plausible entitlement to relief)
- Verity Int'l, Ltd., 443 F.3d 48 (2d Cir. 2006) (material deception assessed to consumers)
- Davis v. Wholesale Motors, Inc., 86 Haw. 405 (Ct. App. 1997) (damages need only be shown as caused by violation)
- Nymark v. Heart Fed. Sav. & Loan Ass’n, 231 Cal. App. 3d 1089 (Cal. App. 1991) (duty-of-care analysis not controlling for UDAP claims)