Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_13-cv-00137/USCOURTS-azd-2_13-cv-00137-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1441 Petition for Removal- Fraud

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Calvin L. Raup and Angela J. Raup, 

husband and wife, 

Plaintiffs, 

v. 

Wells Fargo Bank, NA; et al., 

Defendants. 

No. CV-13-00137-PHX-GMS

ORDER 

 Pending before the Court is the Motion to Dismiss of Defendant Wells Fargo 

Bank, N.A. (“Wells Fargo”). (Doc. 14.) For the reasons discussed below, the Motion is 

granted in part and denied in part. 

BACKGROUND 

 Plaintiffs Calvin and Angela Raup are husband and wife who obtained a loan from 

Wells Fargo in March 2006 in the amount of $975,000. (Doc. 14 at 1.) The loan was 

secured by real property located at 7333 N. 2nd Drive, Phoenix, Arizona. (Docs. 7 at 1; 

14 at 1.) After Plaintiffs defaulted on the payment obligation, Wells Fargo appointed 

Michael A. Bosco, Jr. as successor trustee. Bosco subsequently recorded a Notice of 

Trustee’s Sale on the Phoenix property on February 10, 2012. (Doc. 14 at 2.) The 

property has since foreclosed. (Doc. 25 at 6.) 

 Plaintiffs filed suit on January 22, 2013, before the foreclosure sale occurred. 

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(Doc. 1-1 at 1.) They then filed a First Amended Complaint on February 5, 2013, 

asserting a total of eleven claims against Wells Fargo and other unknown parties. (Doc. 

7.) Plaintiffs also moved for a Preliminary Injunction, which this Court denied on 

February 13, 2013. (Doc. 16.) 

 Plaintiffs allege that Wells Fargo entered into a Consent Judgment with the United 

States and other parties in April 2012 that required Wells Fargo to abide by certain 

standards relating to “loss mitigation, loan modification, and foreclosure of Arizona 

consumers’ homes.” (Doc. 7 ¶ 6.) They further allege that Wells Fargo “widely 

promoted” its adherence to the conduct guidelines set out in the Consent Judgment. (Id. at 

¶ 9.) 

 Plaintiffs claim that they contacted Wells Fargo seeking a loan modification on 

September 6, 2011, on the basis of Wells Fargo’s above “promises” regarding loan 

modifications. (Id. ¶¶ 12–13.) They assert that Wells Fargo, through its representatives, 

made a number of statements to Plaintiffs, all of which they allege are untrue. Such 

statements include telling Plaintiffs that they were “qualified for assistance,” that 

corrected monthly billing statements would be provided, that their mortgage was not in 

active foreclosure, that they should ignore letters telling them to make regular mortgage 

payments and setting forth their rights relating to home ownership, and generally 

reassuring Plaintiffs that their request for assistance would be taken care of. (Id. ¶¶ 14–

36.) Plaintiffs assert that in spite of their efforts and the various statements made by 

Wells Fargo representatives, their home has gone into foreclosure and a trustee’s sale has 

been scheduled. (Id. ¶¶ 28–37.) 

 Plaintiffs assert the following causes of actions against Wells Fargo: (1) violation 

of the Arizona Consumer Fraud Act (“CFA”) by conduct, (2) violation of the CFA by 

concealment or suppression of facts, (3) breach of contract, (4) violation of A.R.S. Title 

33 Chapter 6.1, (5) negligent misrepresentation, (6) fraudulent concealment, (7) failure to 

hire, train, or supervise employees, (8) breach of consent judgment, (9) constructive 

fraud, (10) equitable estoppel, and (11) breach of the duty of good faith and fair dealing. 

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(Id. ¶¶ 38–72.) Wells Fargo moves to dismiss the First Amended Complaint in its 

entirety. (Doc. 14.) 

DISCUSSION

I. Legal Standard

To survive dismissal for failure to state a claim pursuant to Federal Rule of Civil 

Procedure 12(b)(6), a complaint must contain more than “labels and conclusions” or a 

“formulaic recitation of the elements of a cause of action”; it must contain factual 

allegations sufficient to “raise a right to relief above the speculative level.” Bell Atl. 

Corp. v. Twombly, 550 U.S. 544, 555 (2007). While “a complaint need not contain 

detailed factual allegations . . . it must plead ‘enough facts to state a claim to relief that is 

plausible on its face.’” Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 

2008) (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the 

plaintiff pleads factual content that allows the court to draw the reasonable inference that 

the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 

(2009) (citing Twombly, 550 U.S. at 556). The plausibility standard “asks for more than a 

sheer possibility that a defendant has acted unlawfully.” Id. When a complaint does not 

“permit the court to infer more than the mere possibility of misconduct, the complaint has 

alleged—but it has not shown—that the pleader is entitled to relief.” Id. at 679 (internal 

quotation omitted). 

 When analyzing a complaint for failure to state a claim under Rule 12(b)(6), “[a]ll 

allegations of material fact are taken as true and construed in the light most favorable to 

the nonmoving party.” Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). However, 

legal conclusions couched as factual allegations are not given a presumption of 

truthfulness, and “conclusory allegations of law and unwarranted inferences are not 

sufficient to defeat a motion to dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 

1998). 

/ / / 

/ / / 

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II. Analysis 

A. CFA Violations (Counts One and Two)

 The Arizona CFA grants an implied private right of action against persons who 

violate its provisions. Dunlap v. Jimmy GMC of Tucson, Inc., 136 Ariz. 338, 342, 666 

P.2d 83, 87 (Ct. App. 1983). To prevail on a CFA claim in Arizona, the plaintiff must 

show “(1) a false promise or misrepresentation made in connection with sale or 

advertisement of merchandise, and (2) consequent and proximate injury.” Stratton v. Am. 

Med. Sec., Inc., No. CV-07-1491-PHX-SMM, 2008 WL 2039313 at *7 (D. Ariz. May 12, 

2008) (quoting Kuehn v. Stanley, 208 Ariz. 124, 129, 91 P.3d 346, 351 (Ct. App. 2004)). 

Because claims brought under the CFA involve allegations of fraud, they must be pled 

with particularity. Silving v. Wells Fargo Bank, NA, 800 F. Supp. 2d 1055, 1075 (D. Ariz. 

2011). 

 Wells Fargo first contends that dismissal of these counts is appropriate under Rule 

8(a), which requires “a short and plain statement of the claim showing that the pleader is 

entitled to relief.” Fed. R. Civ. P. 8(a). It argues that Plaintiffs have failed to comply with 

Rule 8(a) because they do not specify which statements in the body of the Complaint 

form the basis of their CFA claims. (Doc. 14 at 6.) It cites cases that have dismissed 

complaints that had “the factual elements of a cause of action present but scattered 

throughout the complaint and not organized into a ‘short and plain statement of the 

claim.’” Sparling v. Hoffman Constr. Co., 864 F.2d 635, 640 (9th Cir. 1988); Daghlan v. 

TBI Mortg. Co., No. CV-12-01415-PHX-NVW, 2013 WL 179452 at *3 (D. Ariz. Jan. 17, 

2013). Here, Plaintiffs specifically set out numerous statements allegedly made by Wells 

Fargo representatives and allege that they were false or misleading. The counts in the 

Complaint asserting CFA violations incorporate those allegations. In addition, they assert 

that they were damaged by those acts and that their home was foreclosed on despite 

assurances by Wells Fargo representatives. The Court does not find their allegations so 

scattered and disorganized as to warrant dismissal under Rule 8(a). 

 Wells Fargo further asserts that Plaintiffs fail to allege fraud with the requisite 

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particularity under Rule 9(b). Rule 9(b) has been interpreted in this Circuit to require the 

pleader to “state the time, place, and specific content of the false representations as well 

as the identities of the parties to the misrepresentation.” Schreiber Distrib. Co. v. ServWell Furniture Co., Inc., 806 F.2d 1393, 1401 (9th Cir. 1986). In addition, the plaintiff 

must “set forth . . . an explanation as to why the disputed statement was untrue or 

misleading when made.” Yourish v. Cal. Amplifier, 191 F.3d 983, 993 (9th Cir. 1999). 

However, the state of mind or scienter of the defendants may be alleged generally. 

Richardson v. Bury, No. CV06-283-TUC-HCE, 2009 WL 1749688 at *7 n.7 (D. Ariz. 

June 19, 2009) (citing Schreiber, 806 F.2d at 1401). 

 Here, Plaintiffs have alleged the dates and specific contents of the claimed 

misrepresentations, as well as specifying whether the statements occurred by letter or by 

phone. However, each of these alleged misstatements is accompanied merely by an 

assertion that the statement was false, without “an explanation as to why [it] was untrue 

or misleading when made.” Yourish, 191 F.3d at 993. The only exception is Paragraph 27 

of the Complaint, in which Plaintiffs allege that Wells Fargo sent them letters advising 

them to make regular mortgage payments, but a Wells Fargo representative told them to 

ignore those letters. (Doc. 7 at ¶ 27.) Construed in the light most favorable to Plaintiffs, 

this allegation sufficiently implies a misrepresentation, as the two statements contradict 

one another—either the statement in the letter or the statement by the Wells Fargo 

representative was false. No other allegation in the complaint explains why the alleged 

misstatements were false. 

 Plaintiffs argue in their Response that Wells Fargo “intentionally misrepresent[s]” 

the claims in the Complaint. Thus, for example, they assert that their allegation of the 

falsity of Wells Fargo’s promise to supply corrected billing statements is supported by 

the fact that Wells Fargo in fact never provided any billing statements. (Doc. 22 at 7.) 

While Wells Fargo may have failed to provide billing statements, this fact was not 

alleged in the First Amended Complaint, and thus is not an assertion that the Court must 

accept or consider in deciding the Motion to Dismiss. Plaintiffs’ allegation in their 

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Response that Wells Fargo knew that those statements had never been provided is of no 

avail—in deciding a Motion to Dismiss, the Court looks at the Complaint, not other 

pleadings. Thus, Wells Fargo’s Motion to Dismiss is granted on Plaintiffs’ CFA claim for 

failure to comply with Rule 9(b) for all allegations except the ones set forth in Paragraph 

27 of the First Amended Complaint. 

 Wells Fargo further argues that Plaintiffs failed to adequately plead reliance, 

which is an element of the CFA claim. Peery v. Hansen, 120 Ariz. 266, 269, 585 P.2d 

574, 577 (Ct. App. 1978). However, Plaintiffs do allege that they relied on the numerous 

false statements by Wells Fargo set out in the Complaint, albeit not specifically in the 

sections asserting their CFA claims. Plaintiffs assert that they relied on Wells Fargo’s 

representations in Paragraphs 53 and 57 of the Complaint. (Doc. 7 ¶¶ 53, 57.) Though 

these paragraphs are found in sections pleading negligent misrepresentation and 

fraudulent concealment, respectively, they assert reliance on the same statements that 

form the basis of Plaintiffs’ CFA claims. Thus, Plaintiffs have plausibly alleged that they 

relied on Wells Fargo’s representations so that they may overcome the Motion to Dismiss 

on this ground. 

 Finally, Wells Fargo asserts that Plaintiffs’ CFA claims should be dismissed 

because they do not assert that the alleged misstatements were made in connection with 

“the sale or advertisement of merchandise.” (Doc. 14 at 8.) However, under Arizona law, 

a loan is construed as a “sale” for the purposes of the CFA. Villegas v. Transamerica Fin. 

Services, Inc., 147 Ariz. 100, 102, 708 P.2d 781, 783 (Ct. App. 1985). Plaintiffs have 

pled that Wells Fargo’s misstatements were made in relation to their loan. (See generally 

Doc. 7 ¶¶ 14–36.) In addition, they specifically pled that Wells Fargo “widely promoted” 

their new practices pursuant to the consent judgment relating to loan modification and 

foreclosure. (Id. ¶ 9.) Under Arizona law, this qualifies as an “advertisement” for the 

purposes of the CFA. Villegas, 708 P.2d at 783–84. Plaintiffs’ pleadings are thus 

sufficient to overcome a Motion to Dismiss on this ground. 

 Plaintiffs’ conclusory allegations that Wells Fargo’s statements were false fail to 

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state a claim under the CFA for all misstatements except those set out in Paragraph 27 of 

the First Amended Complaint. Thus, Plaintiffs’ CFA claims are dismissed under Rule 9 

as to all except for those predicated on the statements described in Paragraph 27. 

B. Breach of Contract (Count Three)

 Under Arizona law, a breach of contract claim contains three elements: “an 

agreement, the right to seek relief, and breach by a defendant.” Narramore v. HSBC Bank 

USA, N.A., No. 09-CV-635-TUC-CKJ, 2010 WL 2732815 at *4 (D. Ariz. July 7, 2010). 

A plaintiff must also allege that it was damaged as a result of the breach. Id. Wells Fargo 

asserts that Plaintiffs’ claim should be dismissed because it fails to allege any agreement 

with specificity. 

 Plaintiffs’ Complaint alleges a general “contractual relationship which 

incorporated all aspects of Plaintiffs’ financial life.” (Doc. 7 ¶ 46.) This allegation fails to 

state with specificity which agreement forms the basis of Plaintiffs’ breach of contract 

claim or how Wells Fargo breached such an agreement. Combing through the facts 

alleged in the “Background” section of the Complaint reveals two potential contracts on 

which Plaintiffs could base their allegation, but Plaintiffs fail to adequately state a claim 

for either of them. 

 The Complaint states that the Deed of Trust is “the controlling contractual 

document.” (Id. ¶ 26.) The Court will treat the Deed of Trust as a document within the 

Complaint for the purposes of this Motion to Dismiss because the Complaint specifically 

refers to it, it is central to Plaintiffs’ breach of contract claim, and the parties do not 

question its authenticity. Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). Plaintiffs 

claim that the Deed of Trust sets out in Paragraphs 19 and 22 “the various rights and 

duties of the parties relating to loss mitigation and foreclosure.” Plaintiffs allege that 

Wells Fargo violated all of these “rights and duties.” (Doc. 7 ¶ 26.) 

 Paragraph 19 sets out the borrower’s right to reinstate after acceleration if certain 

conditions are met. The right is conditioned on the borrower paying off all sums due 

under the Deed of Trust and Note, curing any other defaults under the agreements, and 

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paying all expenses incurred in the enforcement of the Deed of Trust. (Doc. 14-A ¶ 19.) 

Plaintiffs do not allege that Wells Fargo violated this right in their Complaint. The 

Complaint alleges that Plaintiffs attempted to obtain information about the reinstatement 

amount from third party Tiffany & Bosco, but that this information was not provided. 

This does not state a claim against Wells Fargo. Plaintiffs do not allege that Wells Fargo 

committed any wrongdoing in connection with the reinstatement information. 

Furthermore, nothing in Paragraph 19 of the Deed of Trust places a duty on Wells Fargo 

to provide information regarding reinstatement after acceleration. As such, Plaintiffs have 

failed to adequately allege that Wells Fargo breached Paragraph 19 of the Deed of Trust. 

 Paragraph 22 requires the lender to provide the borrower with notice prior to 

acceleration. (Id. ¶ 22.) It also requires the lender to give written notice to the trustee, and 

requires the trustee to record a notice of sale in the county where the property is located. 

(Id.) However, the Complaint does not allege that Wells Fargo failed to provide notice to 

either Plaintiffs or the trustee as required by the Deed of Trust. Nor does it allege that the 

trustee failed to record a notice of sale. Thus, Plaintiffs have failed to state a claim on the 

ground that Wells Fargo violated Paragraph 22 of the Deed of Trust. 

 The Complaint also alleges that Wells Fargo offered, and Plaintiffs accepted, a 

loan modification “relating to loss mitigation and foreclosure” and that this modification 

was incorporated into the “existing contractual relationship of the parties.” Plaintiffs do 

not set out the terms of the alleged loan modification or explain how Wells Fargo 

breached it. Plaintiffs’ bare allegation that “[t]he subsequent breach of the modified terms 

of the contract by [Wells Fargo] caused damage to Plaintiffs” is a legal conclusion that 

need not be accepted as true on a motion to dismiss. Lacking any factual allegations 

setting out the terms of the loan modification or how Wells Fargo violated them, the 

Complaint fails to “permit the court to infer more than the mere possibility of 

misconduct.” Iqbal, 556 U.S. at 679. Plaintiffs have thus failed to state a breach of 

contract claim on these allegations. 

 Plaintiffs argue in their Response that Wells Fargo also breached Paragraph 16 of 

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the Deed of Trust, which incorporates Arizona state law’s requirement that a lender 

“must attempt to contact the borrower to explore options to avoid foreclosure.” A.R.S. § 

33-807.01. However, Plaintiffs fail to make such allegations in the Complaint. Moreover, 

Plaintiffs allege throughout their Complaint that Wells Fargo communicated with them 

repeatedly regarding a potential loan modification to avoid foreclosure. Plaintiffs have 

thus failed to state breach of contract claim against Wells Fargo. Wells Fargo’s Motion to 

Dismiss Count Three of the First Amended Complaint is granted. 

C. Violation of A.R.S. Title 33 Chapter 6.1 (Count Four)

 Chapter 6.1 of Title 33 of the Arizona Revised Statutes contains twenty-four 

sections relating to Deeds of Trust. These sections cover everything from appointing 

successor trustees to the disposition of proceeds from a trustee’s sale. See A.R.S. § 33-

801 et seq. Plaintiffs do not specify which section of Chapter 6.1 Wells Fargo violated. 

As such, there can be no claim, as the Court cannot discern whether Plaintiffs have 

adequately plead the elements of the cause of action when Plaintiffs do not specify which 

cause of action they bring. Thus, Plaintiffs have failed to set forth factual allegations 

sufficient to “raise a right to relief above the speculative level.” Twombly, 550 U.S. at 

555. 

 Plaintiffs argue that the Complaint’s specific reference to “requirements as to 

notice and procedure for loss mitigation and foreclosure” are sufficient to put Wells 

Fargo and the Court on notice of the section of Chapter 6.1 on which Plaintiffs base their 

claim. In fact, the language referred to by Plaintiffs is general and vague, and Chapter 6.1 

contains multiple provisions that might encompass Plaintiffs’ allegations. Plaintiffs 

further argue that it is “ludicrous” for Wells Fargo to suggest that it does not have fair 

notice of their Chapter 6.1 claim, and point to an article published by Wells Fargo’s 

counsel in which they discuss A.R.S. § 33-807.01, the section on which Plaintiffs 

apparently rely (though they failed to specify this in their Complaint). However, the fact 

that a defendant’s counsel is aware of a statute does not mean that the defendant is placed 

on sufficient notice of all possible claims that may be brought against it pursuant to that 

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statute. Plaintiffs’ argument that their general reference to Chapter 6.1 is sufficient to put 

Wells Fargo and the Court on notice of the specific section on which they intend to rely is 

without merit. They have failed to state a claim under Title 33, Chapter 6.1 of the 

Arizona Revised Statutes, and Count Four of their Complaint is dismissed. 

D. Negligent Misrepresentation (Count Five) 

 Arizona recognizes the tort of negligent misrepresentation as set out in the 

Restatement (Second) of Torts. McAlister v. Citibank (Ariz.), a Subsidiary of Citicorp, 

171 Ariz. 207, 215, 829 P.2d 1253, 1261 (Ct. App. 1992). Negligent misrepresentation is 

defined as supplying “false information for the guidance of others in their business 

transactions” in the course of the tortfeasor’s business, profession, employment, or any 

other transaction in which he has a pecuniary interest. St. Joseph’s Hosp. & Med. Ctr. v. 

Reserve Life Ins. Co., 154 Ariz. 307, 312, 742 P.2d 808, 813 (1987). Recovery is limited 

to the persons or limited group of persons “for whose benefit and guidance [the 

tortfeasor] intends to supply the information.” Id. Liability is limited in scope “because it 

is premised on the reasonable expectations of a foreseeable user of information supplied 

in connection with commercial transactions.” Id. at 813–14. 

 As discussed above, Plaintiffs allege a number of false statements throughout the 

body of the Complaint, and the count of negligent misrepresentation incorporates these 

allegations. The allegations are set forth succinctly in apparently chronological order. 

Thus, this count will not be dismissed for failure to set forth “a short and plain statement 

of the claim.” Nevertheless, for the same reasons as discussed above, Plaintiffs have 

failed to allege anything more than conclusory statements regarding the falsity of the 

majority of the enumerated statements. However, as before, Plaintiffs have plausibly pled 

the falsity of the statements set out in Paragraph 27, alleging that Wells Fargo advised 

them by letter to keep making payments on their mortgage while telling them via 

representative to ignore those letters. Plaintiffs’ negligent misrepresentation claims are 

thus dismissed as to all allegations except those set out in Paragraph 27. 

 Wells Fargo also argues that Plaintiffs failed to allege that they justifiably relied 

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on the misstatements. However, the Complaint expressly states that “Plaintiffs justifiably 

relied upon the Bank’s representations.” (Doc. 7 ¶ 53.) Wells Fargo points to no authority 

stating that reliance must be more specifically pled. Their Motion to Dismiss on this 

ground is therefore denied. 

 Wells Fargo finally argues that Plaintiffs have failed to allege that they were 

harmed by the alleged misrepresentations. However, the Complaint states that the 

misrepresentations “resulted in damage to Plaintiffs.” (Id. ¶ 54.) Plaintiffs further allege 

that Wells Fargo has begun foreclosure proceedings on their home, presumably due to the 

conflicting statements Plaintiffs received regarding whether to continue making regular 

payments. (Id. ¶¶ 27, 30, 37.) Wells Fargo asserts, without authority, that this cannot 

constitute harm because Plaintiffs allege that the foreclosure has not yet occurred. (Doc. 

14 at 11.) However, in its Reply, Wells Fargo acknowledges that the foreclosure has 

since occurred. Plaintiffs have thus sufficiently pled damages for the purposes of their 

negligent misrepresentation claim. The Motion to Dismiss is therefore denied, but only as 

to the claim supported by the allegations set forth in Paragraph 27 of the Complaint. The 

negligent misrepresentation claim is otherwise dismissed. 

E. Fraudulent Concealment (Count Six)

 Arizona recognizes the tort of fraudulent concealment as set out in the 

Restatement (Second) of Torts. Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement 

Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 496, 38 P.3d 12, 34 (2002). 

The tort is defined as concealing or by other action intentionally preventing a party to a 

transaction from acquiring material information. Id. 

 Though Plaintiffs describe a number of allegedly false statements throughout the 

Complaint, they do not allege that Wells Fargo intentionally concealed any material fact 

from them. Plaintiffs’ argue in their Response that Wells Fargo failed to fulfill a number 

of duties set out in the Consent Judgment. (Doc. 22 at 12.) The only duty they 

specifically allege is the duty to communicate. (Id.) Plaintiffs incorrectly state that the 

existence of a duty to communicate, in and of itself, is sufficient to give rise to liability 

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for fraudulent concealment. However, as discussed above, the tort of fraudulent 

concealment contains several elements, including concealment of a material fact. 

Plaintiffs’ First Amended Complaint does not allege that Wells Fargo intentionally 

concealed any information, or that any such information was material. Thus, their 

fraudulent concealment claim is dismissed. 

F. Failure to Hire, Train, or Supervise Employees (Count Seven) 

 In Arizona, the “failure to hire” tort has only been discussed in the context of job 

applicants bringing suits against prospective employers, and Arizona courts have 

specified that the Arizona Civil Rights Act does not create common law action for 

wrongful failure to hire. Burris v. City of Phoenix, 179 Ariz. 35, 43, 875 P.2d 1340, 1348 

(Ct. App. 1993). Plaintiffs do not cite to any case law that supports a failure to hire claim 

on the facts of this case. Because a wrongful failure to hire claim does not apply to this 

context, Plaintiffs’ claim on that theory is dismissed. 

 “For an employer to be held liable for the negligent hiring, retention, or 

supervision of an employee, a court must first find that the employee committed a tort.” 

Kuehn v. Stanley, 208 Ariz. 124, 130, 91 P.3d 346, 352 (Ct. App. 2004). Here, Plaintiffs 

have not alleged that any individual employee of Wells Fargo committed a tort. Though 

the allegations set out in Paragraph 27 indicate that a false statement was made, either in 

the letter or in the Wells Fargo’s employee’s statement, the Complaint does not specify 

which of the two was false. Thus, Plaintiffs have failed to allege with sufficient 

specificity which Wells Fargo employee committed a tort, much less what tort it was, or 

how Wells Fargo was negligent in hiring, training, or supervising the unidentified 

employee. As such, their claim that Wells Fargo failed to properly hire, train, or supervise 

employees fails. Count Seven is dismissed in its entirety. 

G. Violation of Consent Judgment (Count Eight) 

 Plaintiffs attach to their Complaint a copy of the Consent Judgment entered into 

by Wells Fargo, the United States, the fifty states, and the District of Columbia. (Doc. 7-

1.) The Court will consider this external document on the Motion to Dismiss without 

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converting it into a motion for summary judgment because it was attached to the 

Complaint and also because it was incorporated by reference in the Complaint. United 

States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). The Consent Judgment also 

incorporates in its terms a separate document called the Enforcement Terms. (Doc. 7-1 at 

4, ¶ 6.) Plaintiffs do not attach the Enforcement Terms to their Complaint, but rely on its 

terms and do not contest its authenticity in making their argument in Response. (See Doc. 

22 at 13.) As such, the Court will also analyze the Enforcement Terms in deciding this 

Motion, without converting it to a summary judgment motion. 

 Plaintiffs allege that they are entitled to damages because of Wells Fargo’s 

violation of the Consent Judgment. However, the Consent Judgment expressly limits 

enforcement of its terms to the parties to the consent judgment and provides that suit may 

only be brought in the U.S. District Court for the District of Columbia. (Doc. 14-E at E14, ¶¶ J-1, J-2.) Plaintiffs are not a party to the consent judgment, and thus do not have 

standing to enforce it against Wells Fargo. 

 Plaintiffs point to a section in the Consent Judgment that states that “[n]othing in 

this Section shall limit the availability of remedial compensation to harmed borrowers as 

provided in Section E.5.” (Id. at E-14, ¶ J-3.) However, Section E.5 does not provide that 

any harmed borrower can bring suit against Wells Fargo to enforce the Consent 

Judgment. (Id. at E-11, ¶ E-5.) Rather, Section E.5 places the burden on Wells Fargo to 

“remediate any material harm to particular borrowers identified through work conducted 

under the Work Plan.” (Id.) It does not give Plaintiffs the right to sue to Wells Fargo for 

violations of the Consent Judgment. As such, Wells Fargo’s Motion to Dismiss is granted 

for Count Eight of the First Amended Complaint. 

H. Constructive Fraud (Count Nine)

 Arizona defines the tort of constructive fraud as “a breach of legal or equitable 

duty which, irrespective of the moral guilt or intent of the party charged, the law declares 

fraudulent because of its tendency to deceive others, to violate public or private 

confidence, or to injure public interests.” Rhoads v. Harvey Publications, Inc., 145 Ariz. 

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142, 148, 700 P.2d 840, 846 (Ct. App. 1984). For the cause of action to arise, “a 

relationship, akin to a fiduciary relationship must exist.” McAlister, 829 P.2d at 1261. 

The requisite relationship approximates “business agency, professional relationship, or 

family tie.” Rhoads, 700 P.2d at 847. If a “relationship of trust and confidence exists 

between [the] two parties so that one of the places a peculiar reliance in the 

trustworthiness of another, the latter is under a duty to make a full and truthful disclosure 

of all material facts and is liable for misrepresentation or concealment.” Id. at 846–47. 

 Here, Plaintiffs allege that the requisite relationship existed between themselves 

and Wells Fargo by citing to four sources of trust and confidence: “the initial contractual 

relationship between the parties, the parties [sic] joint venture at avoiding a foreclosure . . 

. , the Arizona statutes . . . , [and] the conduct remedies [from the Consent Judgment].” 

(Doc. 7 at ¶ 65.) Plaintiffs further allege that Wells Fargo’s breach of the duty “would 

tend to deceive and cause injury to the public interest.” (Id.) 

 As an initial matter, neither Arizona law nor the Consent Judgment provides that a 

heightened relationship, akin to a fiduciary relationship, exists between lenders and 

mortgagors. See Gould v. M & I Marshall & Isley Bank, 860 F. Supp. 2d 985, 989 (D. 

Ariz. 2012) (“[I]t is well settled in Arizona that a mortgage lender does not owe a 

fiduciary duty to a borrower.). Nor do mere contractual relationships, without more, give 

rise to fiduciary duties. Cook v. Orkin Exterminating Co., Inc., 227 Ariz. 331, 334, 258 

P.3d 149, 152 (Ct. App. 2011) (“[C]ommercial transactions do not create a fiduciary 

relationship unless one party agrees to serve in a fiduciary capacity.”). Plaintiffs have not 

alleged that Wells Fargo ever agreed to serve in a fiduciary capacity. 

 Plaintiffs allege that they and Wells Fargo were in a joint venture for the purpose 

of avoiding foreclosure. “Joint venture” is a technical legal term—it is defined under 

Arizona law as “when two or more parties agree to pursue a particular enterprise in the 

hope of sharing a profit.” Ellingson v. Sloan, 22 Ariz. App. 383, 386, 527 P.2d 1100, 

1103 (1974). Five elements must be present to establish a joint venture: (1) a contract, (2) 

a common purpose, (3) a community of interest, (4) an equal right of control, and (5) 

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participation in both profits and losses. Id. Plaintiffs’ allegation that they were in a joint 

venture with Wells Fargo is a legal conclusion that need not be accepted as true on a 

Motion to Dismiss. Further, the factual allegations set forth in the body of the Complaint 

do not support the existence of a joint venture. Plaintiffs allege that they entered into a 

contract to modify the contract terms of their loan. (Doc. 7 at ¶ 26.) They do not, 

however, allege that the contract was entered into for the common purpose of pursuing a 

profit. Nor do any of the allegations support the conclusion that Plaintiffs and Wells 

Fargo would both participate and share profits and losses in the joint venture of avoiding 

a foreclosure. As such, Plaintiffs have failed to allege facts that would support the 

existence of a joint venture. 

 Plaintiffs also seem to contend that a special relationship exists between them and 

Wells Fargo because Wells Fargo’s alleged breach would injure the public interest. This 

argument conflates two elements of the constructive fraud claim—in order for a duty to 

arise, a special relationship must exist, and in order for that duty to be breached and the 

breach to constitute fraud, the action must harm the public interest. The allegation that 

Wells Fargo’s actions harm the public interest does not support the claim that Wells 

Fargo owed a special, fiduciary duty to Plaintiffs. 

 Plaintiffs argue in their Response that by supplying loan-related information and 

telling Plaintiffs to ignore legal notices, Wells Fargo formed a de facto attorney-client 

relationship with them. (Doc. 22 at 13–14.) An attorney-client relationship can be formed 

without express mutual consent between the parties. Paradigm Ins. Co. v. Langerman 

Law Offices, P.A., 200 Ariz. 146, 148, 24 P.3d 593, 595 (2001). The relationship arises 

when: “(1) a person manifests to a lawyer the person’s intent that the lawyer provide 

legal services for the person; and . . . (2) the lawyer manifests to the person consent to do 

so.” Id. (quoting Restatement (Third) of the Law Governing Lawyers § 14). Here, 

however, Plaintiffs have alleged neither of the two elements. Plaintiffs have not even 

alleged that any of the Wells Fargo representatives with whom they communicated were 

lawyers or that Plaintiffs believed them to be lawyers. Nor have they alleged that they 

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manifested intent for any of the representatives to provide legal services and the 

representatives consented. As such, Plaintiffs’ assertion that a de facto attorney-client 

relationship formed is not supported by factual allegations in the Complaint. 

 Plaintiffs have not alleged any facts that would plausibly support the element of 

the heightened, fiduciary relationship necessary to the constructive fraud cause of action. 

Thus, they have failed to state a constructive fraud claim and Wells Fargo’s Motion to 

Dismiss is granted on Count Nine. 

I. Equitable Estoppel (Count Ten)

 Arizona defines equitable estoppel as “an affirmative misrepresentation of a 

present fact or state of facts and detrimental reliance by another thereon.” Tiffany Inc. v. 

W. M. K. Transit Mix, Inc., 16 Ariz. App. 415, 419, 493 P.2d 1220, 1224 (1972). In 

Arizona, equitable estoppel “is available only as a defense, while promissory estoppel can 

be used as a cause of action for damages.” Id. However, Arizona courts have allowed 

claims based on equitable estoppel to continue as promissory estoppel claims if the 

plaintiffs adequately alleged the elements of promissory estoppel. Gorman v. Pima Cnty., 

230 Ariz. 506, 287 P.3d 800, 804 n.4 (Ct. App. 2012). “The critical distinction between 

the two is that equitable estoppel refers to reliance on a misrepresentation of some present 

or past fact, whereas ‘promissory estoppel rests upon a promise to do something in the 

future.’” Id. (citing Trollope v. Koerner, 106 Ariz. 10, 18, 470 P.2d 91, 99 (1970)). 

Otherwise, “promissory estoppel includes all elements of equitable estoppel.” Id. 

 Estoppel as a cause of action contains three elements: “(1) the party to be estopped 

commits acts inconsistent with a position it later adopts; (2) reliance by the other party; 

and (3) injury to the latter resulting from the former’s repudiation of its prior conduct.” 

Id. Here, Plaintiffs allege reliance and injury in the section of their Complaint asserting 

equitable estoppel as a cause of action. (Doc. 7 at ¶ 69.) However, in alleging the first 

element, they refer generally to the factual allegations made in the Background section of 

their Complaint. (Id.) 

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Wells Fargo are in Paragraph 27, where Plaintiffs allege that they received letters from 

Wells Fargo advising them to continue making regular mortgage payments, while also 

receiving advice from a Wells Fargo representative to ignore those letters. (Id. at ¶ 27.) 

The rest of the Complaint conclusorily alleges that Wells Fargo representatives made 

statements that were false, without specifying subsequent inconsistent actions or 

positions taken by Wells Fargo. As such, Plaintiffs have stated a claim of promissory 

estoppel only as to the factual allegations set out in Paragraph 27 of the Complaint. Wells 

Fargo’s Motion to Dismiss is granted to the extent the action for estoppel relies on other 

factual allegations in the Complaint. 

H. Breach of Duty of Good Faith and Fair Dealing (Count Eleven) 

The duty of good faith and fair dealing is implied in every contract. Rawlings v. 

Apodaca, 151 Ariz. 149, 726 P.2d 565, 569 (1986). That duty prohibits either party from 

acting “to impair the right of the other to receive the benefits which flow from their 

agreement or contractual relationship.” Id. “[B]ecause a party may be injured when the 

other party to a contract manipulates bargaining power to its own advantage, a party may 

nevertheless breach its duty of good faith without actually breaching an express covenant 

in the contract.” Wells Fargo Bank v. Ariz. Laborers, Teamsters and Cement Masons 

Local No. 395 Pension Trust Fund, 201 Ariz. 474, 491, 38 P.3d 12, 29 (2002). 

 Here, Plaintiffs have failed to identify any benefit under the Deed of Trust or the 

alleged loan modification contract that was impaired by Wells Fargo. The closest that 

they come is their allegations regarding their right to reinstatement as set forth in the 

Deed of Trust. As discussed above, however, Plaintiffs did not allege that Wells Fargo 

impaired this right—they alleged that the trustee, Tiffany & Bosco, failed to provide 

information regarding the reinstatement amount. (Doc. 7 at 33.) They do not allege that 

Wells Fargo had anything to do with this failure to provide information. 

 Plaintiffs’ assertions throughout the Complaint generally allege that Wells Fargo 

made a wealth of false statements to them regarding the status of their loan modification 

application (though they do not specify how those statements were false). Nothing in the 

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Deed of Trust or the alleged loan modification contract, however, guarantees Plaintiffs 

the right to receive truthful information about the loan modification process. Thus, 

Plaintiffs have failed to state a claim that Wells Fargo breached of the duty of good faith 

and fair dealing. 

IT IS THEREFORE ORDERED that the Motion to Dismiss of Defendant Wells 

Fargo Bank, N.A. (Doc. 14) is GRANTED as to Counts 3, 4, 5, 6, 7, 8, 9, and 11 of the 

First Amended Complaint. However, the Motion to Dismiss is DENIED as to Counts 1, 

2, and 10, but only to the extent that those Counts rely on the allegations set forth in 

Paragraph 27 of the First Amended Complaint. 

 Dated this 25th day of June, 2013. 

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