Source: https://casetext.com/case/george-v-urban-settlement-servs-1?resultsNav=false
Timestamp: 2019-03-23 23:00:30
Document Index: 656015766

Matched Legal Cases: ['§ 1961', '§ 1964', '§ 1962', '§ 1962', '§ 1961', '§ 1962', '§ 1961', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1961', '§ 1341', '§ 1961']

George v. Urban Settlement Servs, 833 F.3d 1242 | Casetext
George v. Urban Settlement Servs.
833 F.3d 1242 (10th Cir. 2016)
ReadReadAttorney AnalysesAnalyses1lockCiting BriefsBriefs1lockCiting CasesCiting Cases65
Georgev.Urban Settlement Servs.
UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUITAug 15, 2016
Kevin K. Green (Steve W. Berman, on the briefs), Hagens Berman Sobol Shapiro, LLP, Seattle, Washington, for Darrell Dalton, Richard George, and Sandra Leavitt, and Steven Leavitt, Plaintiffs–Appellants. Keith Levenberg, Goodwin Procter LLP, Washington, D.C. (James W. McGarry, Goodwin Procter LLP, Boston, Massachusetts, Peter Korneffel, Bryan Cave, LLP, Denver, Colorado, with him on the brief), for Bank of America, N.A., Defendant–Appellee. Martin C. Bryce, Ballard Spahr, LLP, Philadelphia, Pennsylvania (Sarah B. Wallace, Ballard Spahr, LLP, Denver, Colorado, with him on the brief), for Urban Settlement Services, Defendant–Appellee.
Kevin K. Green (Steve W. Berman, on the briefs), Hagens Berman Sobol Shapiro, LLP, Seattle, Washington, for Darrell Dalton, Richard George, and Sandra Leavitt, and Steven Leavitt, Plaintiffs–Appellants.
Keith Levenberg, Goodwin Procter LLP, Washington, D.C. (James W. McGarry, Goodwin Procter LLP, Boston, Massachusetts, Peter Korneffel, Bryan Cave, LLP, Denver, Colorado, with him on the brief), for Bank of America, N.A., Defendant–Appellee.
Martin C. Bryce, Ballard Spahr, LLP, Philadelphia, Pennsylvania (Sarah B. Wallace, Ballard Spahr, LLP, Denver, Colorado, with him on the brief), for Urban Settlement Services, Defendant–Appellee.
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), 18 U.S.C. §§ 1961 –1968, against BOA and Urban. They also brought a promissory estoppel claim against BOA. Both claims arose from the defendants' allegedly fraudulent administration of the Home Affordable Modification Program (HAMP). The district court granted the defendants' Fed. R. Civ. P. 12(b)(6) motions to dismiss both claims, denied the plaintiffs' request for leave to amend their first amended complaint, and dismissed the case.
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. The court denied the plaintiffs' request to amend their first amended complaint and dismissed the case. The plaintiffs appeal.
The district court didn't address the defendants' arguments that the plaintiffs failed to sufficiently plead a pattern of racketeering activity.
We review a Rule 12(b)(6) dismissal de novo. Childs v. Miller , 713 F.3d 1262, 1264 (10th Cir. 2013). We accept a plaintiff's well-pleaded factual allegations as true and determine whether the plaintiff has provided “enough facts to state a claim to relief that is plausible on its face.” Hogan v. Winder , 762 F.3d 1096, 1104 (10th Cir. 2014) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). In determining the plausibility of a claim, we look to the elements of the particular cause of action, keeping in mind that the Rule 12(b)(6) standard doesn't require a plaintiff to “set forth a prima facie case for each element.” Khalik v. United Air Lines , 671 F.3d 1188, 1192–93 (10th Cir. 2012). See also Kan. Penn Gaming, LLC v. Collins , 656 F.3d 1210, 1215 (10th Cir. 2011) (noting that “[t]he nature and specificity of the allegations required to state a plausible claim will vary based on context”). Rather, a claim is facially plausible if the plaintiff has pled “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Hogan , 762 F.3d at 1104 (quoting Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ).
“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 18 U.S.C. § 1964(c) (providing private right of action and treble damages for § 1962(c) violations). The plaintiffs assert that BOA and Urban violated § 1962(c), which makes it “unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.” The plaintiffs identify both BOA and Urban as RICO “persons.”
Neither BOA nor Urban disputes that it is a “person” for RICO purposes. See 18 U.S.C § 1961(3) (defining “person” to “include[ ] any individual or entity capable of holding a legal or beneficial interest in property”).
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 18 U.S.C. § 1962(c) ; Robbins v. Wilkie , 300 F.3d 1208, 1210 (10th Cir. 2002).
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.” 18 U.S.C. § 1961(4). The plaintiffs rely on the latter part of this definition, alleging that BOA, Urban, and others formed an association-in-fact enterprise. See Boyle v. United States , 556 U.S. 938, 946, 129 S.Ct. 2237, 173 L.Ed.2d 1265 (2009) (explaining that an association-in-fact enterprise has “a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise's purpose”).
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. BOA contracted with Urban “to provide HAMP-related ministerial services,” App. 108, and delegated several tasks to Urban. And while the plaintiffs allege that BOA directed Urban's HAMP-related activities, they further assert that Urban exercised broad discretion to manage and operate its portion of the enterprise. Finally, in pleading longevity, the plaintiffs allege BOA and Urban began conducting the affairs of the enterprise in 2009 and continued to do so in 2013 when the plaintiffs filed their complaint.
The plaintiffs allege several other entities associated with the alleged enterprise including BOA's subsidiary, BAC Home Loans Servicing, LP; certain named BOA and Urban officers and employees; Sykes Enterprises, Inc. and Wingspan Portfolio Advisors, two entities that BOA retained to communicate with customers seeking loan modifications and to process applications; two law firms BOA used to facilitate home foreclosures after BOA allegedly wrongfully denied loan modifications; and Stewart Lender Services, an entity BOA retained to process documents mailed to and received from homeowners.
We disagree. We recognize that § 1962(c) requires that the “person” conducting the enterprise's affairs be distinct from the “enterprise.” Cedric Kushner Promotions, Ltd. v. King , 533 U.S. 158, 160, 121 S.Ct. 2087, 150 L.Ed.2d 198 (2001) ; see Bd. of Cty. Comm'rs of San Juan Cty. v. Liberty Grp. , 965 F.2d 879, 885 & n.4 (10th Cir. 1992) (collecting cases and noting predominant view that § 1962(c) “require[s] that the ‘person’ and the ‘enterprise’ engaged in racketeering activities be different entities”). And we further recognize that a plaintiff must demonstrate that the defendant conducted the affairs of the enterprise rather than simply conducting the defendant's own affairs. Brannon v. Boatmen's First Nat. Bank of Okla. , 153 F.3d 1144, 1146 (10th Cir. 1998).
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).
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' Rule 12(b)(6) dismissals of the plaintiffs' RICO claims. See Brannon , 153 F.3d at 1145–49 (holding that “a parent-subsidiary corporate relationship standing alone” is not sufficient to “invoke RICO liability”); Fitzgerald , 116 F.3d at 226–28 (holding that a “manufacturer plus its dealers and other agents, (or any subset of the members of the corporate family), do not constitute an enterprise within the meaning of [RICO]”).
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).
B. The plaintiffs sufficiently allege Urban's participation in the conduct of the alleged enterprise.
RICO requires a showing that the defendant “conduct[ed] or participate[d], directly or indirectly, in the conduct of [the] enterprise's affairs.” 18 U.S.C. § 1962(c). This, in turn, requires a showing that the defendant “participate[d] in the operation or management of the enterprise itself.” Reves v. Ernst & Young , 507 U.S. 170, 185, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993). Under Reves' operation or management test, the defendant must have “some part in directing” the enterprise's affairs. Id. at 179, 113 S.Ct. 1163. But importantly, the defendant need not have “primary responsibility for the enterprise's affairs,” “a formal position in the enterprise,” or “significant control over or within an enterprise.” Id. at 179 & n.4, 184, 113 S.Ct. 1163. Instead, even “lower rung participants in the enterprise who are under the direction of upper management” may be liable under RICO if they have “some part” in operating or managing the enterprise's affairs. Id. at 179, 184, 113 S.Ct. 1163. See also BancOklahoma Mortg. Corp. v. Capital Title Co. , 194 F.3d 1089, 1100 (10th Cir. 1999) (applying Reves ). Nevertheless, a defendant must do more than simply provide, through its regular course of business, goods and services that ultimately benefit the enterprise. Id. at 1101–02.
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).
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 Rule 12(b)(6) dismissal of the plaintiff's § 1962(c) RICO claim, the Seventh Circuit extensively considered Reves ' suggestion that even lower-rung participants can operate or manage an enterprise. The court noted that the complaint identified both exhibition contractors as members of the alleged association-in-fact enterprise. And it reasoned that even if both contractors reluctantly participated in the enterprise or acted at the direction of upper management, “they still knowingly implemented management's decisions, thereby enabling the enterprise to achieve its goals.” Id. at 969, 978–79. Based on its conclusion that the plaintiff sufficiently alleged that both contractors conducted the enterprise's affairs, the Seventh Circuit reversed the dismissal of the RICO claim. Id. at 979.
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 Rule 12(b)(6) motion to dismiss. Id.
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 18 U.S.C. § 1962(c). And as in those cases, we conclude the plaintiffs here have alleged facts regarding Urban's conduct of the enterprise's affairs that—while they may require fleshing out at the discovery stage—are sufficient to withstand dismissal.
Namely, in paragraph 80 of their first amended complaint 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.
Urban contends that the plaintiffs assert legal conclusions encompassing Reves ' general principles but that they fail to assert supporting factual allegations. Notably, Urban fails to address the specific allegations in paragraph 80 of the first amended complaint.
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) )).
C. The plaintiffs sufficiently allege that BOA and Urban engaged in a pattern of racketeering activity.
Although the district court declined to decide this issue, the defendants accurately note that we may affirm the district court's Rule 12(b)(6) dismissal on any ground sufficiently supported by the record. See GF Gaming Corp. v. City of Black Hawk , 405 F.3d 876, 881–82 (10th Cir. 2005). Nevertheless, we disagree with their assertions that the plaintiffs fail to adequately plead a pattern of racketeering activity.
As defined in 18 U.S.C. § 1961(1)(B), “racketeering activity” includes indictable acts of mail and wire fraud as prohibited under 18 U.S.C. §§ 1341 and 1343, respectively. To establish a pattern of racketeering activity, the plaintiffs must allege at least two predicate acts. See 18 U.S.C. § 1961(5) (requiring at least two predicate acts to establish “pattern of racketeering activity”); Garrett v. Selby Connor Maddux & Janer , 425 F.3d 836, 838 (10th Cir. 2005). But, “while two acts are necessary, they may not be sufficient” to establish a pattern. Sedima, S.P.R.L. v. Imrex Co., Inc. , 473 U.S. 479, 496 n. 14, 105 S.Ct. 3292, 87 L.Ed.2d 346 (1985). See Resolution Trust Corp. , 998 F.2d at 1543 (explaining that the pattern element requires plaintiff to show “a relationship between predicates” and “the threat of continuing activity” (quoting H.J. Inc. v. Nw. Bell Tel. Co. , 492 U.S. 229, 239, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989) )).
In addition to acts of mail and wire fraud, the plaintiffs also allege acts of extortion—another RICO predicate act. Because we conclude that the plaintiffs plausibly allege at least two predicate acts of mail and wire fraud, we find it unnecessary to consider the sufficiency of their extortion allegations.
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 Fed. R. Civ. P. 9(b) requires a plaintiff to plead mail and wire fraud with particularity, the plaintiffs must “set forth the time, place and contents of the false representation, the identity of the party making the false statements and the consequences thereof.” Koch v. Koch Indus. , 203 F.3d 1202, 1236 (10th Cir. 2000) (quoting In re Edmonds , 924 F.2d 176, 180 (10th Cir. 1991) ).
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 Rule 9(b)'s pleading standard. In specific response to BOA's argument, the plaintiffs assert that BOA “cherry-picked certain allegations, and ignored countless others” to support its position that the plaintiffs fail to satisfy Rule 9(b). Aplt. Reply Br. 10. And in response to Urban's argument, the plaintiffs assert that when “some facts are peculiarly within the opposing party's control,” the plaintiff “may not be able to allege the full factual circumstances without first conducting discovery.” Aplt. Reply Br. 15. The plaintiffs point out that “a key part of the enterprise[']s scheme was to keep Urban's identity secret by having employees represent themselves as BOA employees, and making Urban documents appear to come from BOA's ‘Office of the President.’ ” Aplt. Reply Br. 17. The plaintiffs argue that, under these circumstances and without further discovery, they have made their allegations regarding Urban's fraudulent acts as specific as possible.
Rule 9(b)'s purpose is “to afford [a] defendant fair notice” of a plaintiff's claims and the factual grounds supporting those claims. Schwartz v. Celestial Seasonings, Inc. , 124 F.3d 1246, 1252 (10th Cir. 1997). And, as the plaintiffs assert, in determining whether a plaintiff has satisfied Rule 9(b), courts may consider whether any pleading deficiencies resulted from the plaintiff's inability to obtain information in the defendant's exclusive control. See, e.g. , Emery v. Am. Gen. Fin., Inc. , 134 F.3d 1321, 1323 (7th Cir. 1998) (suggesting that “Rule 9(b) is relaxed upon a showing” that plaintiff is unable to obtain essential information in defendant's possession without pretrial discovery); In re Burlington Coat Factory Sec. Litig. , 114 F.3d 1410, 1418 (3d Cir. 1997) (explaining that Rule 9(b)'s “normally rigorous particularity rule has been relaxed somewhat where the factual information is peculiarly within the defendant's knowledge or control” but that “even under a relaxed application of Rule 9(b)... [p]laintiffs must accompany their legal theory with factual allegations that make their theoretically viable claim plausible”); Scheidt v. Klein , 956 F.2d 963, 967 (10th Cir. 1992) (“Allegations of fraud may be based on information and belief when the facts in question are peculiarly within the opposing party's knowledge and the complaint sets forth the factual basis for the plaintiff's belief.”).
We agree with the defendants that not all of the plaintiffs' allegations satisfy Rule 9(b)'s pleading requirements. For instance, the plaintiffs only generally allege that Darrell Dalton, sometimes on specific dates, made phone calls to BOA, spoke with unidentified BOA employees who made false representations to him via phone, and received letters through the mail from BOA containing false and misleading statements. These general allegations don't suffice. See Koch , 203 F.3d at 1236 (explaining Rule 9(b)'s pleading requirements).
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) (“Rule 9(b) does not require omniscience; rather the Rule requires that the circumstances of the fraud be pled with enough specificity to put defendants on notice as to the nature of the claim.” (quoting Michaels Bldg. Co. v. Ameritrust Co., N.A., 848 F.2d 674, 680 (6th Cir. 1988) )).
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 Rule 9(b)'s requirements and plausibly allege that both BOA and Urban engaged in a pattern of racketeering activity.
II. The district court erroneously dismissed the plaintiffs' promissory estoppel claim.
“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, 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.
The plaintiffs asserted a promissory estoppel claim against BOA on behalf of class members from several different states, including Colorado, and asserted that each state's law governing promissory estoppel was substantially similar. The district court applied Colorado law to the promissory estoppel claim, and the parties do the same in their appellate briefs. Thus, we have applied Colorado law to the promissory estoppel claim.
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).
The plaintiffs incorporate screenshots of the BOA website and refer in the first amended complaint to TPP document provisions, but the plaintiffs don't attach any TPP documents to the complaint. But because those documents are included in the appellate record and BOA doesn't dispute their authenticity, we may consider them. See Toone v. Wells Fargo Bank, N.A. , 716 F.3d 516, 521 (10th Cir. 2013) (pointing out that the court may consider, in evaluating a Rule 12(b)(6) motion, “documents referred to in the complaint [and] central to the plaintiff's claim [if] the parties do not dispute the documents' authenticity” (quoting Gee v. Pache c o , 627 F.3d 1178, 1186 (10th Cir. 2010) )).
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.
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 Rule 12(b)(6) dismissal of promissory estoppel and breach of contract claims); Young v. Wells Fargo Bank, N.A. , 717 F.3d 224, 234, 242 (1st Cir. 2013) (vacating Rule 12(b)(6) dismissal of breach of contract claim); Wigod v. Wells Fargo Bank, N.A. , 673 F.3d 547, 554, 558, 561–63 (7th Cir. 2012) (reversing Rule 12(b)(6) dismissal of promissory estoppel and breach of contract claims).
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)).
Initially, we agree with the plaintiffs that the district court erred in suggesting the existence of a circuit split on this issue. 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”).
That being said, the district court's rationale is consistent with that of several other district courts. See Sutcliffe v. Wells Fargo Bank, N.A. , 283 F.R.D. 533, 549–50 (N.D. Cal. 2012) (collecting cases and noting split of authority among district courts as to whether TPP documents create an enforceable contract for a permanent loan modification).
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”).
B. The plaintiffs sufficiently allege reasonable and detrimental reliance.
Because it found no clear and unambiguous promises in TPP documents, the district court didn't consider BOA's arguments that the plaintiffs' factual allegations failed to support the remaining elements of their promissory estoppel claim. On appeal, BOA renews only its argument that the plaintiffs didn't sufficiently plead reasonable and detrimental reliance. Exercising de novo review, we consider this argument to determine whether we can affirm the district court's dismissal of the promissory estoppel claim on a ground other than the one cited by the district court. See GF Gaming Corp. , 405 F.3d at 881–82 (noting we may affirm a district court's Rule 12(b)(6) dismissal on any ground sufficiently supported by the record).
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.
Based on the plaintiffs' first amended complaint, it doesn't appear that BOA sent the same TPP documents to the fourth plaintiff, Darrell Dalton. But the plaintiffs allege BOA made similar promises to Dalton, both orally and in writing, and that Dalton repeatedly entered into and complied with the terms of his TPPs in his attempt to obtain an “internal modification” rather than a HAMP loan modification. App. 146. They further allege Dalton relied on BOA's promises and suffered the same injuries as the other plaintiffs. Despite some distinctions between Dalton's and the other plaintiffs' interactions with BOA, our analysis and conclusions regarding the promissory estoppel claim apply equally to all of the plaintiffs.
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 modification. Consequently, she wasn't eligible for modification. Id. at 551, 556. Even if we agreed with that rationale, it wouldn't apply here; the plaintiffs allege that BOA sent them modification agreements after the plaintiffs complied with the terms of their TPPs, thereby confirming the plaintiffs' eligibility for permanent loan modifications.
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.