U.S. Bank N.A. v. Breer, No. 717-10-12 Wncv (Teachout, J., August 3, 2015)

[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the 

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STATE OF VERMONT 

SUPERIOR COURT CIVIL DIVISION 

Washington Unit Docket No. 717-10-12 Wncv 

US Bank National Association, Trustee 

 Plaintiff 

 v. 

Bonnie Breer et al. 

 Defendants 

DECISION 

US Bank’s Motion to Reconsider (MPR #11) 

Ms. Breer’s Motion to Amend (MPR #15) 

 This case began as an ordinary residential foreclosure action filed by Plaintiff US Bank 

National Association as trustee of the securitization trust now holding the note on the mortgage 

loan to Defendant Bonnie Breer. Ms. Breer filed a counterclaim asserting fraudulent 

nondisclosure, consumer fraud, and constructive fraud. The fraud claims are based on Ms. 

Breer’s allegations that US Bank and its predecessors in interest defrauded her by failing to 

disclose a banking industry conspiracy to artificially inflate (by direct manipulation) LIBOR, the 

London Interbank Offered Rate, which in turn inflated the monthly payment on her variable rate 

loan and forced her into default. She also alleges that Wells Fargo Home Mortgage, Inc., which 

originated the loan, failed to disclose to her when buying the home that it is in a high-risk flood 

zone and is worth far less than the purchase price, if it has any resale value at all, and that the 

breach is enforceable against US Bank. She filed an amended counterclaim reframing the 

counterclaim as a class action. 

 US Bank then filed a Rule 12(b)(6) motion to dismiss. It argued that there is no basis for 

imputing knowledge of LIBOR manipulation to Wells Fargo or US Bank, that Wells Fargo had 

no duty to disclose that the house was in a flood zone or may be unmarketable, and that, in all 

events, US Bank is a holder in due course under the UCC and took the note free of any such 

claims or defenses. In a brief entry, the court explained that the Rule 12(b)(6) standard was not 

met because the court, after review of each count, could not “conclude that as to any count, there 

are no facts or circumstances that would entitle Defendant to relief,” and denied the motion in 

total. 

US Bank then filed a motion to reconsider, emphasizing its dismissal arguments and 

further arguing that: (1) the amended counterclaim violates Rule 9 because allegations of fraud 

are not pled with particularity; (2) there is no damages claim against US Bank because the note 

was assigned to US Bank after it was modified into a fixed rate loan; (3) US Bank cannot be held 

liable for ratifying any fraud of its predecessors; and (4) there is no allegation of an agency 

relationship by which a predecessor’s fraud can be attributed to US Bank. 
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 Ms. Breer then filed a second motion to amend the counterclaim, which US Bank 

opposes. The proposed second amended counterclaim retains the class LIBOR-manipulation 

claim. It removes the consumer fraud claim from asserted class status and retains it as a personal 

claim of Ms. Breer’s. It then adds a new class claim. The new claim, as the court understands it, 

is that Wells Fargo, without disclosing the risks to its variable-rate borrowers, overwhelmed the 

national financial markets with adjustable rate, subprime loans with so low a probability of 

performing and in such great volume that the flood of bad debt itself drove interests rates up and 

caused LIBOR to skyrocket, which in turn caused unsustainably high monthly payments for 

variable rate borrowers, and ensured a wave of defaults including Ms. Breer’s. 

 US Bank opposes the amendment for many of the same reasons it originally sought 

dismissal and now seeks reconsideration. It also argues that the new claim, which it 

characterizes as the “predatory lending” claim, is time-barred, the delay in asserting it is 

prejudicial, and the new claim is inadequately pled. 

Analysis 

 The Vermont Supreme Court has been clear that the pleading standard in Vermont is 

exceptionally minimal. See Bock v. Gold, 2008 VT 81, ¶ 4, 184 Vt. 575 (“the threshold a 

plaintiff must cross in order to meet our notice-pleading standard is ‘exceedingly low’”); Colby 

v. Umbrella, Inc., 2008 VT 20, ¶ 13, 184 Vt. 1 (“The complaint is a bare bones statement that 

merely provides the defendant with notice of the claims against it.”). Most of US Bank’s 

dismissal arguments attempt to point out perceived “missing” allegations or establish that the 

allegations that exist cannot as a matter of law support the purported claim. In a case with 

straightforward facts and conventional claims, such arguments might properly lead to dismissal 

even under Vermont’s Rule 12(b)(6). The counterclaim in this case, on the other hand, is based 

on a complex set of factual circumstances and the claim is novel. Such claims are better 

“explored in the light of facts as developed by the evidence.” Alger v. Dep’t of Labor & Indus., 

2006 VT 115, ¶ 12, 181 Vt. 309. Whatever merit the counterclaim may prove to have once those 

facts are developed, dismissal is inappropriate at the notice pleading stage. 

 This is so despite the assertions of fraud and the higher pleading standard of Rule 9(b). 

While US Bank objects that Ms. Breer has not pled fraud with adequate particularity, the rule 

itself contains no standard by which particularity is measured. As Ms. Breer points out, 

allegations of nondisclosure inevitably will be more opaque than allegations of affirmative 

misrepresentation. The most commonly asserted rationale for the higher pleading standard in 

Rule 9(b) is that it “is necessary to safeguard potential defendants from lightly made claims 

charging the commission of acts that involve some degree of moral turpitude,” the idea being 

that it “encourages a greater degree of pre-institution investigation” by the plaintiff. Wright & 

Miller, 5A Fed. Prac. & Proc. Civ. § 1296 (3d ed.) (WL updated April 2015). The allegations of 

fraud in this case, even if novel, do not on their face appear to be the product of abusive 

speculation as opposed to the good-faith investigations of her counsel. 

 Finally, the court notes that US Bank in fact seeks dismissal due to the perceived lack of 

particularity. Rule 9(b), however, is a pleading standard—it is not a rule of dismissal. “Courts 

infrequently dismiss with prejudice for a failure to plead with sufficient particularity, at least not
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without providing an opportunity to replead. To impose such a drastic sanction for a pleading 

defect arguably is at odds with the liberal approach the federal rules as a whole take to the 

pleading phase of litigation and could lead to injustice.” Id. (footnotes omitted). The court is not 

persuaded that US Bank’s Rule 9(b) arguments support dismissal in this case. 

 Vermont’s amendment standard also is liberal. “[A]mendments to the pleadings are 

freely allowed where there is no prejudice to the parties and when the proposed amendment is 

not obviously frivolous or dilatory.” Desrochers v. Perreault, 148 Vt. 491, 493 (1987). US 

Bank argues that the amendment should be denied because: (1) the claims it contains are futile; 

(2) the newly pleaded claim should have been pled long ago; (3) the newly pleaded claim 

expands the scope of needed discovery; and (4) the newly pleaded claim will further delay the 

resolution of this case and thus prejudice US Bank.

 For the reasons the amended counterclaim is not subject to dismissal, the court rejects the 

futility argument. Otherwise, though US Bank filed this case in October 2012, it is a complex 

case that remains in its early stages; the issues are being joined, refined, and clarified. The 

amendment does not come so late as to warrant rejecting it merely due to lateness and there is no 

showing that any expansion in the scope of discovery will cause prejudice. The amendments 

proposed are not based on new facts or law but rather are reasonably related to the claims 

originally asserted. 

US Bank also argues that any delay amounts to prejudice because Ms. Breer is using this 

litigation as a foil to live in the mortgaged premises for “free.” If Ms. Breer has ceased making 

payments, doing so merely increases the deficiency owed to US Bank when or if it eventually 

recovers. To the extent that some or all of any such deficiency is uncollectible, it is an ordinary 

incident of foreclosure litigation. There is no colorable argument that the amendment is an abuse 

of process designed to forestall an inevitable foreclosure. 

ORDER 

 For the foregoing reasons, US Bank’s motion to reconsider is denied and Ms. Breer’s 

motion to amend is granted. 

 Dated at Montpelier, Vermont this 3rd day of August 2015. 

 _____________________________ 

 Mary Miles Teachout 

 Superior Judge