320 F.R.D. 125
E.D. Va.2017Background
- Plaintiffs Jeffrey and Karen Wilkins obtained a mortgage in 2006 secured by a Deed of Trust with a VA Rider; foreclosure sale occurred November 4, 2014.
- Plaintiffs sued in federal court alleging breach of the Deed of Trust (accepted industry standards) and breach of the covenant of good faith and fair dealing related to alleged "dual tracking" (foreclosure while a loan modification was pending).
- Plaintiffs previously filed and amended complaints; the Court dismissed an earlier pleading but later denied a 12(b)(6) motion as to the first amended complaint. Defendants filed counterclaims.
- Plaintiffs moved for leave to file a second amended complaint after receiving evidence of a July 17, 2014 denial letter and alleging additional facts about phone calls, faxed documents, and a loan-modification application submitted between October 28 and November 1, 2014 (one week before foreclosure).
- Defendants opposed amendment on grounds of prejudice, Plaintiffs’ alleged bad faith/delay, and futility—arguing Plaintiffs still cannot show a modification application was "pending" at foreclosure under applicable standards (citing Regulation X timelines).
- The Court found the proposed amendment raised no new legal theories, was timely (well before trial), and plausibly alleged facts supporting a dual-tracking theory, so amendment was not prejudicial, in bad faith, or futile.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether leave to amend should be granted under Fed. R. Civ. P. 15(a) | Wilkins seeks to add facts about late-October/early-November 2014 communications and submissions showing a pending loan-modification application | Wells Fargo/White argue amendment is prejudicial, in bad faith/dilatory, and Plaintiffs had multiple prior chances to plead | Granted: amendment allowed—no undue prejudice, bad faith, or new legal theory; filed well before trial |
| Whether amendment would be prejudicial or made in bad faith | Amendment adds factual detail to same legal theory (dual tracking) | Defendants claim delay has been costly and repeated pleading changes show bad faith | Denied as to Defendants’ claim: delay alone insufficient; no improper purpose; not prejudicial given timing |
| Whether proposed amendment is futile because it fails to allege a pending application at time of sale | Wilkins alleges servicer accepted last-minute submission and never sent written denial, so modification was pending at sale | Defendants argue Regulation X requires submission >37 days before sale to be considered "pending," so no dual tracking here | Amendment not futile: court must accept plausible factual allegations and not resolve factual disputes now; allegations sufficient to survive futility review |
| Whether accepted industry standards (basis for breach claim) require a longer timeline than Plaintiffs allege | Plaintiffs assert accepted industry standards prohibit dual tracking and servicer's conduct violated those standards | Defendants contend Regulation X timelines should control and Plaintiffs can’t meet them | Court declined to resolve factual/legal dispute now; permitted amendment to let parties litigate the issue later |
Key Cases Cited
- Johnson v. Oroweat Foods Co., 785 F.2d 503 (4th Cir. 1986) (leave to amend should be freely given; delay alone is not sufficient to deny amendment)
- Foman v. Davis, 371 U.S. 178 (1962) (court may deny amendment for undue delay, bad faith, prejudice, or futility)
- Steinburg v. Chesterfield Cnty. Planning Comm’n, 527 F.3d 377 (4th Cir. 2008) (standards for denying amendment when prejudicial or futile)
- Laber v. Harvey, 438 F.3d 404 (4th Cir. 2006) (factors for denying leave to amend)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for surviving a motion to dismiss)
- Perkins v. United States, 55 F.3d 910 (4th Cir. 1995) (amendment is futile if proposed pleading could not withstand a motion to dismiss)
- U.S. ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451 (4th Cir. 2013) (bad faith and repeated pleading failures as grounds to deny leave to amend)