George v. Urban Settlement ServicesGeorge v. Urban Settlement Services
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Richard George, Steven Leavitt, Sandra Leavitt, and Darrell Dalton appeal the district court‘s dismissal of their putative class action against Urban Settlement Services; d/b/a Urban Lending Solutions (Urban) and Bank of America, N.A. (BOA). The plaintiffs asserted a claim under the Racketeer Influenced and Corrupt Organizations Act (RICO),
Because we conclude that the plaintiffs’ first amended complaint states a facially plausible RICO claim against BOA and Urban and a facially plausible promissory estoppel claim against BOA, we reverse and remand for further proceedings. Our reversal moots the plaintiffs’ challenge to the district court‘s denial of their request to further amend the complaint.
Background
When Congress enacted the Emergency Economic Stabilization Act of 2008, it authorized the Secretary of the U.S. Department of the Treasury to establish the Troubled Asset Relief Program (TARP) and to purchase troubled assets, including certain residential mortgages, from financial institutions. See generally
As a condition of receiving TARP funds, BOA was required to participate in HAMP and to comply with the program guidelines. These guidelines required BOA to collect financial information from at-risk borrowers; evaluate borrowers’ eligibility for HAMP loan modifications; place eligible borrowers on Trial Period Plans (TPPs) so they could demonstrate their ability to make lower monthly payments; and permanently modify loans for qualified borrowers who complied with their individual TPPs.
BOA contracted with various third parties, including Urban, to implement and administer HAMP. Urban is a “mortgage solutions provider” that “provides numerous clients a variety of services, including mortgage fulfillment services, home retention solutions, appraisals and valuation services, title and settlement services, and call center services.” App. 170.
The four plaintiffs in this action each had a home mortgage through BOA, each applied for a HAMP loan modification, and each interacted with BOA and Urban representatives during the application process. In July 2013, the plaintiffs filed a putative class action against BOA and Urban, asserting a RICO claim against both and a promissory estoppel claim against BOA. In accordance with local rules, the plaintiffs conferred with the defendants about the claims and about the defendants’ anticipated motions to dismiss. The plaintiffs amended their complaint in August
To support their RICO claim, the plaintiffs alleged the defendants and various other entities formed a RICO enterprise with the common goal of wrongfully denying HAMP loan modifications to qualified homeowners. According to the plaintiffs, BOA and Urban developed a scheme to obstruct and delay borrowers’ HAMP loan modification requests. The defendants furthered that scheme by denying they had received application documents they had in fact received and by misleading borrowers about the status of their applications. The plaintiffs alleged damages including longer loan payoff times, increased principal and interest on their loans, damage to credit reports, and inappropriately charged processing and late fees associated with delinquency and default.
The plaintiffs also asserted a promissory estoppel claim against BOA. They alleged that BOA made clear promises—both in TPP documents and on its website—to provide permanent loan modifications to qualified borrowers who successfully completed TPPs. And they alleged that BOA reneged on those promises.
BOA and Urban filed separate
The district court granted both motions, concluding the plaintiffs failed to plausibly allege (1) Urban‘s participation in the conduct of the enterprise and (2) the existence of an enterprise separate and distinct from BOA and its agents.1 The court denied the plaintiffs’ request to amend their first amended complaint and dismissed the case. The plaintiffs appeal.
Discussion
We review a
I. The district court erred in dismissing the plaintiffs’ RICO claim.
The plaintiffs argue that the factual allegations in their first amended complaint state a facially plausible RICO claim
“RICO provides a private right of action in federal court for individuals injured in their business or property through fraudulent conduct.” Robert L. Kroenlein Trust ex rel. Alden v. Kirchhefer, 764 F.3d 1268, 1274 (10th Cir. 2014). See
Thus, to avoid dismissal, the plaintiffs must plausibly allege that BOA and Urban each (1) conducted the affairs (2) of an enterprise (3) through a pattern (4) of racketeering activity. See
A. The plaintiffs sufficiently allege the existence of a RICO enterprise that is distinct from BOA.
The plaintiffs characterize the district court‘s conclusion that the alleged enterprise was insufficiently distinct from BOA as contrary to legal precedent and public policy. The plaintiffs argue that because they alleged an association-in-fact enterprise consisting of numerous independently owned and operated companies, the alleged enterprise is sufficiently distinct from BOA.
BOA, on the other hand, argues the district court properly concluded that the plaintiffs failed to plead a sufficiently distinct enterprise because (1) the alleged enterprise consists solely of BOA‘s own employees and agents and (2) the plaintiffs don‘t allege that the enterprise conducted any affairs other than BOA‘s own.
RICO broadly defines “enterprise” as “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.”
The plaintiffs allege the enterprise‘s common purpose in this case was “to extend as few permanent HAMP modifications as possible while providing BOA a justification to claim that borrowers had not fulfilled their [TPPs] or were otherwise ineligible for HAMP modifications.” App. 156. According to the plaintiffs, BOA and Urban maintained the key relationship among the numerous entities associated with the enterprise.3 BOA contracted with
The district court concluded the plaintiffs failed to allege that BOA is sufficiently distinct from that association-in-fact enterprise. In reaching that conclusion, the court first found that BOA, its subsidiary BAC Home Loans, and BOA‘s employees couldn‘t form a RICO enterprise because they have a parent corporation-subsidiary relationship. Next, the court determined that Urban and its employees were BOA‘s agents, who did nothing more than follow BOA‘s instructions. Similarly, the court found that the other alleged members of the enterprise were merely BOA‘s agents and that BOA retained them to conduct BOA‘s affairs rather than the enterprise‘s.
We disagree. We recognize that
Finally, it‘s true that a defendant corporation, acting through its subsidiaries, agents, or employees typically can‘t be both the RICO “person” and the RICO “enterprise.” See Brannon, 153 F.3d at 1149 (collecting cases); Bd. of Cty. Comm‘rs of San Juan Cty., 965 F.2d at 886 (“[O]fficers and employees of an organization cannot, in the ordinary course of their duties, constitute an association in fact separate from the organization itself.“). See also In re ClassicStar Mare Lease Litig., 727 F.3d 473, 493 (6th Cir. 2013) (noting that a parent corporation and its subsidiaries don‘t ordinarily satisfy the distinctness requirement); Fitzgerald v. Chrysler Corp., 116 F.3d 225, 226-28 (7th Cir. 1997) (concluding that because “an employer and its employees cannot constitute a RICO enterprise,” a “manufacturer plus its dealers and other agents (or any subset of the members of the corporate family) do not constitute” a RICO enterprise).
Here, the district court relied on Brannon and Fitzgerald to conclude that BOA wasn‘t sufficiently distinct from the enterprise. But our review of those cases reveals that neither supports the district court‘s conclusion. In Brannon, the plaintiffs alleged in two separate counts that (1) a bank holding company was the RICO enterprise and the holding company‘s subsidiary was the RICO person conducting the enterprise‘s affairs; and conversely that (2) the holding company‘s subsidiary was the RICO enterprise and the holding company was the RICO person conducting the enterprise‘s affairs. 153 F.3d at 1145-46. Similarly, in Fitzgerald, the plaintiffs alleged that the Chrysler Corporation was
Focusing primarily on the parent-subsidiary relationship, this court in Brannon and the Seventh Circuit in Fitzgerald concluded that the plaintiffs in those cases failed to allege RICO enterprises sufficiently distinct from the RICO persons and therefore affirmed the district courts’
In contrast, the plaintiffs here allege an association-in-fact enterprise. They don‘t contend that either a parent corporation or its subsidiary corporation is the enterprise. Rather, they assert that BOA and Urban—two separate legal entities—joined together, along with several other entities, to form and conduct the affairs of the BOA-Urban association-in-fact enterprise. The plaintiffs further allege that BOA conducted the enterprise‘s affairs, rather than BOA‘s own affairs, by acting in concert with Urban and other members of the enterprise to implement and execute a scheme to fraudulently deny HAMP loan modifications to qualified borrowers.
Moreover, BOA‘s act of contracting with Urban to provide HAMP-related services didn‘t somehow render Urban a BOA subsidiary, a BOA agent, or even part of the BOA corporate family. Instead, the plaintiffs assert that BOA and Urban remained separate legal entities in distinct lines of business. Specifically, BOA is a mortgage lender whose services extend well beyond participation in HAMP, while Urban is a limited liability corporation that provides mortgage-related services to numerous clients, including BOA. Further, the plaintiffs allege that each entity performed distinct roles within the enterprise while acting in concert with other entities to further the enterprise‘s common goal of wrongfully denying HAMP applications.
Additionally, the plaintiffs suggest that the relationship between BOA and Urban enhanced the enterprise‘s ability to thrive and avoid detection. For instance, according to the plaintiffs, BOA publicly represented its compliance with HAMP guidelines while simultaneously implementing and enforcing procedures among its own employees to delay and deny HAMP applications. Meanwhile, the plaintiffs suggest that BOA enlisted Urban—a third-party vendor—to (1) “serve[] as a ‘black-hole’ for the documents that borrowers sent in the course of trying to obtain permanent loan modifications,” App. 112; (2) create internal databases for scattering documents so it would appear that borrowers failed to provide requested documents; and (3) make it easier to conceal the enterprise‘s activities. See In re ClassicStar Mare Lease Litig., 727 F.3d at 492 (recognizing that “corporate defendants are distinct from RICO enterprises when they are functionally separate, as when they perform different roles within the enterprise or use their separate legal incorporation to facilitate racketeering activity“). See also Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256, 262-64 (2d Cir. 1995) (concluding that individual defendant and his two corporations in distinct lines of business were necessarily distinct from each other as well as from the alleged association-in-fact enterprise).
We conclude these allegations are sufficient to plausibly allege that BOA is both
B. The plaintiffs sufficiently allege Urban‘s participation in the conduct of the alleged enterprise.
Next, the plaintiffs challenge the district court‘s conclusion that they failed to adequately plead Urban‘s participation in the conduct of the alleged enterprise. Urban urges us to affirm the district court‘s ruling, arguing that the plaintiffs’ allegations show only that BOA assigned certain tasks to Urban, that BOA directed Urban‘s performance of those tasks, and that Urban merely provided its regular services to BOA by performing those tasks.
RICO requires a showing that the defendant “conduct[ed] or participate[d], directly or indirectly, in the conduct of [the] enterprise‘s affairs.”
As we‘ve discussed, the plaintiffs allege BOA and Urban formed an association-in-fact enterprise to pursue the common goal of wrongfully denying HAMP modification loans to eligible borrowers. Further, they allege that BOA delegated certain tasks to Urban and directed or supervised Urban‘s performance of those tasks.
Here, after discussing Reves’ operation and management test, the district court misidentified the relevant question as: “whether, as an outside contractor having no official position within the enterprise, Urban [was] nonetheless liable for having an association with and exerting control over the enterprise.” App. 257. Citing the principle from BancOklahoma that a corporate defendant isn‘t liable under RICO simply for providing its regular services to a RICO enterprise, the district court then reasoned that the plaintiffs’ allegations demonstrated, at most, that Urban provided its regular services to BOA, at BOA‘s direction, and did not operate or manage the enterprise‘s affairs.
Because the plaintiffs allege an association-in-fact enterprise composed primarily of BOA and Urban, the district court mistakenly characterized Urban as an “outside contractor having no official position” in the enterprise. Id. While Urban had no official position in BOA, as we‘ve discussed, BOA was not the alleged enterprise. The district court then compounded this error by concluding that the plaintiffs’ allegations showed that Urban
On appeal, Urban mentions the district court‘s conclusion that Urban was an “outsider” that merely provided its regular services to BOA. But in urging us to affirm the district court‘s ruling, Urban primarily argues that the plaintiffs’ allegations show only that Urban performed tasks at BOA‘s direction. The plaintiffs, on the other hand, suggest that Urban‘s role in the enterprise exceeded that of simply performing tasks as directed by BOA. They contend that Urban‘s role in the enterprise was that of a lower-rung participant knowingly carrying out BOA‘s orders. In support, the plaintiffs cite Reves, 507 U.S. 170, 113 S.Ct. 1163, United States v. Hutchinson, 573 F.3d 1011 (10th Cir. 2009), Resolution Trust Corp. v. Stone, 998 F.2d 1534 (10th Cir. 1993), and two cases from other circuits—Ouwinga v. Benistar 419 Plan Services, Inc., 694 F.3d 783 (6th Cir. 2012), and MCM Partners, Inc. v. Andrews-Bartlett & Associates, Inc., 62 F.3d 967 (7th Cir. 1995).
As we‘ve noted, Reves clarified that even “lower rung participants in the enterprise who are under the direction of upper management” may be held liable under RICO if they have “some part” in operating or managing the enterprise‘s affairs. 507 U.S. at 179, 184, 113 S.Ct. 1163. Applying this principle in Hutchinson, we concluded that three individuals who collectively engaged in dealing narcotics out of the same motel were members of an association-in-fact enterprise and that one of those dealers conducted the enterprise‘s affairs when he acted under the direction of other dealers but also exercised discretion and disciplined his own underlings. 573 F.3d at 1033-35. Similarly, in Resolution Trust we noted that the essence of the alleged association-in-fact enterprise was the fraudulent and deceptive sale of enhanced automobile receivables. And we concluded that a defendant corporation participated in the conduct of that alleged enterprise‘s affairs through its employees’ and officers’ acts of signing checks, guaranteeing loans to further the enterprise, and entering into a funding agreement to help the enterprise purchase automobile loans that would be repackaged as receivables. 998 F.2d at 1542.
Urging us to distinguish these cases, Urban suggests that (1) Urban had less autonomy than the lower-rung narcotics dealer in Hutchinson and (2) BOA and Urban‘s business relationship doesn‘t mirror the close corporate relationship between the enterprise members in Resolution Trust. But Urban‘s attempts are unavailing. As the plaintiffs argue, both of these cases demonstrate that a plaintiff can easily satisfy Reves’ operation and management test by showing that an enterprise member played some part—even a bit part—in conducting the enterprise‘s affairs.
We also find instructive the two out-of-circuit cases cited by plaintiffs, Ouwinga and MCM Partners. In MCM Partners, the plaintiff alleged that two exhibition contractors, a rental equipment company, and the principals of all three entities formed an association-in-fact enterprise whose alleged purpose was to make the rental equipment company, OG, the exclusive provider of certain services at a Chicago venue. 62 F.3d at 969-70, 977-78. On appeal from the district court‘s
Similarly, in Ouwinga, the Sixth Circuit concluded that the plaintiffs plausibly alleged that various defendants who had no part in designing the alleged enterprise‘s fraudulent plan nevertheless conducted the enterprise‘s affairs by knowingly marketing a tax-benefit plan to investors, providing incomplete and misleading legal opinions about the viability of that plan, and misrepresenting the plan as a tax-saving device. 694 F.3d at 791-93. In rejecting the district court‘s conclusion that the plaintiffs’ allegations failed to satisfy Reves’ operation or management test, the court noted that whether the defendants did more than conduct their own affairs was “a matter to be fleshed out in discovery” and held that the plaintiffs’ allegations were sufficient to withstand a
As in Ouwinga and MCM Partners, we are tasked with deciding whether the plaintiffs’ allegations are sufficient to withstand a motion to dismiss—not whether the plaintiffs can ultimately establish that Urban conducted or participated, directly or indirectly, in the conduct of the enterprise‘s affairs sufficient to satisfy
Namely, in paragraph 80 of their first amended complaint4 the plaintiffs offer specifics regarding Urban‘s actions to further the enterprise‘s goals. For example, the plaintiffs assert that Urban created internal systems for receiving and processing borrower documents, communicating with borrowers, and dispersing received documents over multiple databases to make it appear that borrowers failed to provide requested documents. Moreover, the plaintiffs assert that Urban decided whether to steer borrowers toward HAMP or other BOA loan modification programs; determined which applications to deny to meet BOA‘s processing quotas and timeframes; created and implemented methods for closing files in a manner that could be justified if audited; and delegated tasks to Urban employees to meet BOA‘s production targets for denying applications.
Contrary to Urban‘s position, these allegations plausibly assert that Urban played some part in directing the enterprise‘s affairs, regardless of whether BOA directed some or all of Urban‘s activities. See Ouwinga, 694 F.3d at 792 (explaining that having “some part in directing the enterprise‘s affairs ... can be accomplished either by making decisions on behalf of the enterprise or by knowingly carrying them out” (quoting United States v. Fowler, 535 F.3d 408, 418 (6th Cir. 2008))).
Thus, we conclude that at this stage of the litigation, the plaintiffs have sufficiently alleged Urban‘s participation in the conduct of the alleged enterprise.
C. The plaintiffs sufficiently allege that BOA and Urban engaged in a pattern of racketeering activity.
Alternatively, both defendants argue that even if we conclude that the plaintiffs’
Although the district court declined to decide this issue, the defendants accurately note that we may affirm the district court‘s
As defined in
Here, the plaintiffs allege that BOA and Urban committed several acts of mail and wire fraud while conducting the affairs of the BOA-Urban enterprise between 2009 and 2013. To support the mail and wire fraud allegations, the plaintiffs must plausibly allege “the existence of a scheme or artifice to defraud or obtain money or property by false pretenses, representations or promises,” and that BOA and Urban communicated, or caused communications to occur, through the U.S. mail or interstate wires to execute that fraudulent scheme. Tal v. Hogan, 453 F.3d 1244, 1263 (10th Cir. 2006) (quoting Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 892 (10th Cir. 1991)). And because
The plaintiffs generally allege that BOA and Urban developed and implemented a scheme to feign BOA‘s compliance with HAMP guidelines while permanently modifying as few loans as possible. According to the plaintiffs, the enterprise‘s dilatory tactics and wrongful denial of HAMP loan modifications defrauded borrowers of money. The plaintiffs specifically allege BOA profited from the fraud by improperly charging fees associated with delinquent loans and by “push[ing] homeowners into in-house modifications” that carried higher interest rates than those associated with HAMP loan modifications. App. 98. The plaintiffs allege that BOA and Urban fraudulently used the mail and wires to further this scheme by making false state
BOA argues that most of the plaintiffs’ allegations are too “vague and generic” to satisfy
The plaintiffs generally maintain that their allegations are sufficiently specific to apprise both defendants of the time, place, and contents of the allegedly false misrepresentations made by BOA and Urban employees, thus satisfying
We agree with the defendants that not all of the plaintiffs’ allegations satisfy
But in other allegations, the plaintiffs identify BOA employees by name, specify the dates when those employees made allegedly false statements, identify the actions the plaintiffs took in reliance on those misrepresentations, detail the injuries they suffered as a result, and explain how those misrepresentations furthered the enterprise‘s ultimate goal of denying HAMP applications.
For example, the plaintiffs allege that Steven and Sandra Leavitt received a HAMP application packet by mail on November 3, 2011, and returned requested documents to BOA eight days later. The plaintiffs allege that “[o]ver the next several months, the Leavitts called [BOA employee] Mr. Delgadillo at least 1-2 times each week to inquire as to the status of their application” and that “[t]hey were repeatedly told, in telephone communications, that their application was ‘under review’ and that they could expect to hear back from BOA any day.” App. 130. The plaintiffs allege these statements “were knowingly and intentionally false.” Id.
Similarly, the plaintiffs allege that BOA sent Richard George TPP documents in June 2010. The documents set forth TPP terms and stated that if George satisfied those terms, then BOA would provide a HAMP modification. According to the plaintiffs, George returned the signed and notarized TPP agreement to “BAC Home Loans Servicing at an address in Broomfield, Colorado“; confirmed delivery of the agreement through a Federal Express tracking number; made all TPP payments on time; and fulfilled other TPP requirements. App. 138. Yet, according to the plaintiffs, “BOA sent Mr. George a Notice of Intent to Accelerate his loan dated January 4, 2011,” and “[o]n January 30, 2011[,] Mr. George spoke to a [customer service] representative named Rosario, who stated their system did not show him to be in modification; claimed that BOA never received” the TPP agreement; “and claimed that the financial documents BOA requested had not been received.” Id. at 139. The plaintiffs allege Rosario‘s “statements were knowingly and intentionally false, and made over interstate wires.” Id. The plaintiffs also allege that on certain dates in February and March 2013 either George or his wife spoke with “the designated case manager, Mariah Williams,” about their application and that Williams provided conflicting information, sometimes in the same phone call, about whether BOA had or hadn‘t received necessary paperwork. Id. at 140.
We conclude that these allegations satisfy
As Urban points out, the plaintiffs fail to name Urban as the sender of misleading mailings or identify Urban employees as voicing misrepresentations over the phone. And, as Urban suggests, the plaintiffs’ allegations that Urban engaged in racketeering activity largely “rely on misrepresentations allegedly made by BOA or its employees,” rather than by Urban or its employees. Urban Br. 24.
We recognize that accusations against BOA dominate the plaintiffs’ complaint, while specific accusations against Urban are sparse. Nonetheless, as the plaintiffs point out, they specifically allege that “[w]hen answering calls from customers, Urban employees identified themselves as being from BOA“; that “Urban employees were given titles and email addresses suggesting that they were employed by Bank of America“; and that “[b]orrowers were under the false impression that they were speaking to and corresponding with BOA
Under the particular circumstances of this case, we conclude that the plaintiffs’ allegations, at this stage and taken as a whole, sufficiently apprised Urban of its alleged role in the overall scheme to defraud borrowers and of its involvement in the alleged predicate acts of mail and wire fraud. See Williams v. Duke Energy Int‘l, Inc., 681 F.3d 788, 803 (6th Cir. 2012) (”
Reviewing the plaintiffs’ entire complaint and taking all of their allegations as true, as we must, Hogan, 762 F.3d at 1104, we conclude that the plaintiffs’ allegations satisfy
D. Conclusion
Because the plaintiffs sufficiently allege the existence of a RICO association-in-fact enterprise distinct from BOA, Urban‘s participation in the conduct of that enterprise, and that both defendants engaged in a pattern of racketeering activity, we reverse the district court‘s dismissal of the plaintiffs’ RICO claim and remand for further proceedings.
II. The district court erroneously dismissed the plaintiffs’ promissory estoppel claim.
Next, the plaintiffs argue the district court erred in ruling that they failed to plausibly allege a promissory estoppel claim against BOA. Specifically, the plaintiffs contend they sufficiently alleged this claim when they described BOA‘s unambiguous promises to provide permanent HAMP loan modifications for eligible borrowers and BOA‘s failure to follow through on those promises.
“Promissory estoppel is an extension of the basic contract principle that one who makes promises must be required to keep them.” Schulz v. City of Longmont, 465 F.3d 433, 438 n.8 (10th Cir. 2006) (quoting Patzer v. City of Loveland, 80 P.3d 908, 912 (Colo. App. 2003)). Under Colorado law,6 the elements of promissory estoppel are: (1) a promise, (2) that the promisor should have expected would induce action or forbearance by the promisee, (3) that the promisee did, in fact, reasonably rely on to the promisee‘s detriment, and (4) that must be enforced to prevent injustice. Id.
Although BOA argued below that the plaintiffs failed to plausibly allege the first three elements of their promissory estoppel claim, the district court concluded that the plaintiffs failed to sufficiently plead the first element—a promise—and didn‘t rule on whether the plaintiffs sufficiently pled other elements. Specifically, the court concluded that BOA made no clear and unam
The plaintiffs, on the other hand, argue they sufficiently allege all four elements of their promissory estoppel claim. They specifically argue that the district court‘s conclusion that they failed to sufficiently allege a clear and ambiguous promise is contrary to the weight of authority from circuit courts that have addressed that element in similar cases.
A. The plaintiffs sufficiently allege a promise.
A plaintiff asserting promissory estoppel must ultimately establish that the defendant made a “clear and unambiguous” promise. G & A Land, LLC v. City of Brighton, 233 P.3d 701, 704 (Colo. App. 2010) (quoting Hansen v. GAB Bus. Servs., Inc., 876 P.2d 112, 114 (Colo. App. 1994)).
Here, the plaintiffs allege that BOA clearly and unambiguously promised, on its website and in TPP documents, that it would provide permanent HAMP loan modifications to eligible borrowers who complied with TPPs. Specifically, the plaintiffs allege that BOA‘s website indicated, “If you successfully make your payments during the 3-month trial period, and the documentation provided supports the initial review, we will sign off and your modification will become permanent.” App. 93 (emphasis omitted).7
Further, the plaintiffs allege BOA made the same promises to George in June 2010 and to the Leavitts in March 2012, when BOA sent them TPP documents. Specifically, the plaintiffs assert that BOA sent George a cover letter promising,
After you successfully complete your [TPP] by making timely payments and returning the [TPP] Agreement, we will send you additional documents. These documents will include a Partial Claim and FHA-Home Affordable Modification Agreement that you will need to sign and return before your loan will be permanently modified.
Id. at 137.
The plaintiffs allege BOA sent the Leavitts a similar cover letter promising, “After you successfully complete your [TPP] by making timely payments and returning the Trial Period Plan Agreement, we will send you documentation that describes all of the terms of your permanent loan modification.” Id. at 131. BOA also sent George and the Leavitts TPP agreements which indicated in Section 1,
If I am in compliance with this [TPP] (the “Plan“) and my representations in Section 1 continue to be true and correct in all material respects, then the Servicer will provide me with a Partial Claim and FHA-Home Affordable Modification Agreement (“Modification Agreement“), as set forth in Section 3, that would bring my loan current and amend and
supplement (1) the Mortgage or Deed of Trust on the Property, and (2) the Note secured by the Mortgage or Deed of Trust.
Id. at 186, 194.
In turn, Section 3 of both TPP agreements stated, in part:
If I comply with the requirements in Section 2 and my representations in Section 1 continue to be true and correct and fulfill all my obligations in Section 4, the Servicer will send me a Partial Claim, which will cure my default, and Modification Agreement for my signature, which will modify my Loan Documents as necessary to reflect this new payment amount and waive any unpaid late charges accrued to date.
Id. at 188, 196.
At least three of our sister circuits have found nearly identical language in TPP documents sufficiently clear to constitute an enforceable promise. See, e.g., Corvello v. Wells Fargo Bank, N.A., 728 F.3d 878, 880-85 (9th Cir. 2013) (reversing
The district court acknowledged Wigod, Corvello, and Young. But it suggested that other circuits have reached the opposite conclusion, generating a circuit split. See App. 266-68 (citing Bloch v. Wells Fargo Home Mortg., Inc., 755 F.3d 886 (11th Cir. 2014); Freitas v. Wells Fargo Home Mortg., Inc., 703 F.3d 436 (8th Cir. 2013); DeLuca v. CitiMortgage, 543 Fed.Appx. 194 (3d Cir. 2013) (unpublished); Miller v. Chase Home Fin., LLC, 677 F.3d 1113 (11th Cir. 2012); Pennington v. HSBC Bank USA, N.A., 493 Fed.Appx. 548 (5th Cir. 2012) (unpublished)).
Relying on some of these cases, the district court interpreted the TPP documents here as conditional because they contain language indicating that the TPP itself did not modify the loan, that BOA retained discretion to decline the plaintiffs’ requests for modifications if they failed to comply with the TPPs, and that BOA alternatively retained discretion to determine whether the plaintiffs complied with the TPPs. The district court reasoned that this qualifying language undermined the plaintiffs’ allegations that the TPP documents contain clear and unambiguous promises to provide permanent loan modifications.
Initially, we agree with the plaintiffs that the district court erred in suggesting the existence of a circuit split on this issue.8 Instead, our examination of the cases the district court relied on reveals that other circuits have declined to find clear and unambiguous promises when considering documents or circumstances that differ significantly from those present in Wigod, Corvello, and Young. See Bloch, 755 F.3d at 889 (concluding that letter stating plaintiffs “might be eligible for trial modification under HAMP” was not a binding promise to provide permanent HAMP loan modification); Freitas, 703 F.3d at 440-41 (affirming dismissal of promissory estoppel claim without citing or analyzing any specific TPP language when plaintiff admitted that bank never provided a consistent answer regarding loan modification); Miller, 677 F.3d at 1116-17 (rejecting promissory estoppel claim based on defendant‘s alleged promise to permanently modify loan because plaintiff‘s allegations suggested defendant only promised to temporarily modify terms of loan); Pennington, 493 Fed.Appx. at 551, 556 (affirming dismissal of promissory estoppel claim because bank conditioned statement that plaintiff would be approved on her inability to make loan payments; noting that plaintiff‘s reliance on conditional promise was “especially improper” because she admitted in her complaint that she had the financial ability to make her payments). And while the remaining case the district court relied on generally supports the district court‘s rationale, the opinion also expressly disavows that it has any precedential value. See DeLuca, 543 Fed.Appx. at 196-97 (relying on qualifying language in TPP documents to reject promissory estoppel claim but explicitly stating in body of opinion that opinion lacks any precedential value and was written “only for the parties“).
In sum, the cases the district court characterized as reaching the opposite conclusion regarding the existence of a promise rely on decidedly different facts than those in Wigod, Corvello, and Young. Moreover, we find the reasoning of Wigod, Corvello, and Young persuasive. Notably, in all three of those cases the courts analyzed language nearly identical to language in the TPP documents that BOA sent to the Leavitts and George. And all three courts rejected the specific argument BOA makes here—that it made no clear and unambiguous promises in TPP documents because conditional language in the TPP documents provided that BOA “remained free to decline to offer permanent modifications” (1) if the plaintiffs failed to satisfy TPP requirements or (2) if the plaintiffs’ representations concerning their eligibility didn‘t remain “true and correct in all material respects.” BOA Br. 35. See Corvello, 728 F.3d at 883 (rejecting defendant‘s argument that conditional language in TPP document could “convert a purported agreement setting forth clear obligations into a decision left to the unfettered discretion of the loan servicer“); Young, 717 F.3d at 235 (rejecting defendants’ interpretation of TPP agreement as conditional because that interpretation “would permit [defendants] to exercise an unfettered right to withhold a permanent modification offer for an uncertain period of time after the modification effective date has passed, thereby erasing the benefits to the plaintiff of her compliance with the TPP“); Wigod, 673 F.3d at 565 (stating that while bank may have retained “some limited discretion to set the precise terms of an offered permanent modification, it was certainly required to offer some sort of good-faith permanent modification“).
Similarly, we conclude that the language in BOA‘s TPP documents clearly and unambiguously promises to provide permanent HAMP loan modifications to borrowers who comply with the terms of their TPPs. And this is true regardless of whether those TPP documents state that promise inversely—i.e., that if the borrowers fail to comply with TPP terms, BOA will not modify the loan. Moreover, the fact that the TPP further requires the borrower to sign a modification agreement before BOA will permanently modify the loan does not render BOA‘s promise to modify the loan if the borrower complies with all other TPP terms any less clear. Thus, we conclude the plaintiffs plausibly allege that BOA made clear and unambiguous promises—in TPP documents and on its website—to provide permanent HAMP loan modifications for eligible borrowers who complied with TPPs.
B. The plaintiffs sufficiently allege reasonable and detrimental reliance.
Because it found no clear and unambiguous promises in TPP documents, the
The plaintiffs allege they reasonably relied to their detriment on BOA‘s promise to provide a permanent loan modification and that BOA could reasonably foresee their reliance. Specifically, the plaintiffs allege the Leavitts and George complied with the terms of their TPPs by making lower mortgage payments and by fulfilling other requirements. And they point out that BOA eventually sent permanent loan modification offers to the Leavitts and George. According to the plaintiffs, this indicates BOA determined that (1) the plaintiffs were eligible for permanent modifications and (2) they complied with the terms of their respective TPPs.
Nevertheless, BOA didn‘t permanently modify the plaintiffs’ loans. Instead, according to the plaintiffs, after the Leavitts returned their signed and notarized modification documents, BOA sold the Leavitts’ loan to another servicer in November 2012 without reflecting any modification. Similarly, George returned his signed and notarized modification documents in March 2013. But the plaintiffs allege that as of August 2013, BOA continued to send George “false and often conflicting information ... regarding the status of [his] loan, and any modification.” App. 141. Because BOA never permanently modified their loans, the plaintiffs allege the lower payments they made in reliance on BOA‘s promise and in compliance with their obligations under the TPPs resulted in longer payoff times, higher principal balances, increased accrued interest, and additional charges and fees related to delinquency and default.9
Relying on Pennington v. HSBC Bank USA, N.A., 493 Fed.Appx. 548 (5th Cir. 2012) (unpublished), BOA reasserts that even if it made promises in TPP documents, it “expressly conditioned [those promises] upon [plaintiffs‘] compliance with TPP requirements and [plaintiffs‘] representations remaining true and correct throughout the trial period.” BOA Br. 40-41. Thus, BOA maintains, it was unreasonable for the plaintiffs to rely on those conditional promises. But we‘ve rejected BOA‘s argument that it made no clear and unambiguous promises. And, in any event, Pennington doesn‘t support BOA‘s argument. There, the court found it unreasonable for the plaintiff to rely on any bank promise to modify her loan because she admitted in her complaint that she never fell behind on mortgage payments before applying for a permanent HAMP loan
Relying again on Pennington, BOA argues that the plaintiffs can‘t show detrimental reliance simply by asserting they made payments under their TPPs because the plaintiffs already were obligated to make even higher payments under their original mortgage terms. See Pennington, 493 Fed.Appx. at 557 (concluding that plaintiff‘s payment of lower TPP payments didn‘t demonstrate detrimental reliance because those payments “were just applied to the loan“). But even if we were to find persuasive Pennington‘s conclusion that it is insufficient for plaintiffs to claim detrimental reliance based on making lower payments to comply with TPPs, the plaintiffs allege more than that here. As noted, the plaintiffs allege that their decision to comply with their TPP obligations by submitting lower payments also resulted in “longer loan payoff times, higher principal balances, improper negative reporting to credit bureaus,” and various improperly assessed and unnecessary fees, charges, and costs. App. 166.
Again, we find Wigod‘s reasoning persuasive. Like the plaintiffs here, the plaintiff in Wigod alleged that her mortgage servicer unambiguously promised to permanently modify her loan if she complied with the terms of her TPP. And, like the plaintiffs here, the plaintiff in Wigod also alleged “that she relied on that promise to her detriment by foregoing the opportunity to use other remedies to save her home ... and by devoting her resources to making the lower monthly payments under the TPP Agreement rather than attempting to sell her home or simply defaulting.” Wigod, 673 F.3d at 566. The Seventh Circuit found the plaintiff‘s allegations sufficiently alleged reasonable and detrimental reliance, reasoning, “A lost opportunity can constitute a sufficient detriment to support a promissory estoppel claim.” Id.
We agree. Taking all of their allegations as true, we conclude that the plaintiffs sufficiently allege that they reasonably relied on BOA‘s unambiguous promises and consequently lost opportunities to pursue other remedies. Ultimately, the plaintiffs allege their compliance with their individual TPPs, along with BOA‘s failure to follow through on its promises to permanently modify their loans, left plaintiffs in worse financial positions relative to their mortgages. Under these circumstances, we further conclude that the plaintiffs sufficiently allege reasonable and detrimental reliance and that their allegations, as a whole, “present a facially plausible claim of promissory estoppel.” Wigod, 673 F.3d at 566. Accordingly, we reverse the district court‘s dismissal of that claim.
Conclusion
The district court erred, both in dismissing the plaintiffs’ RICO claim against BOA and Urban and in dismissing the plaintiffs’ promissory estoppel claim against BOA. Accordingly, we reverse the district court‘s order and remand for further proceedings. Finally, we dismiss as moot the plaintiffs’ challenge to the district court‘s denial of their request to further amend the complaint.