Opinion ID: 2751916
Heading Depth: 3
Heading Rank: 1

Heading: Foley's Contract Claims (Counts One and Four)

Text: We begin by addressing Foley's claims for breach of contract and breach of the implied covenant of good faith and fair dealing. First, we explain how the trial judge applied the incorrect standard of review, and why this error warrants a remand of these contract-based claims. Then, we discuss why we are also unmoved by Wells Fargo's alternate proposed grounds for affirming the dismissal of these claims. In so doing, we address Wells Fargo's apparent misapprehension of Foley's pleaded grievances--an issue raised in both parties' briefs and relevant to Wells Fargo's assertion that certain arguments brought by Foley's counsel on appeal are waived.
We start our analysis by laying out the appropriate standard of review for a Rule 12(b)(6) motion to dismiss for failure to state a claim. A court's goal in reviewing a Rule 12(b)(6) motion is to determine whether the factual allegations in the plaintiff's complaint set forth a plausible claim upon which relief may be granted. Woods v. Wells Fargo Bank, N.A., 733 F.3d 349, 353 (1st Cir. 2013). The court must take all of the pleaded factual allegations in the complaint as true. Watterson, 987 F.2d at 3. Barring narrow exceptions, courts tasked with this feat usually consider only the complaint, documents attached to it, and -12- documents expressly incorporated into it. Id. Thus, a primary purpose of a Rule 12(b)(6) motion is to weed out cases that do not warrant reaching the (oftentimes) laborious and expensive discovery process because, based on the factual scenario on which the case rests, the plaintiff could never win. In short, plaintiffs are not required to submit evidence to defeat a Rule 12(b)(6) motion, but need only sufficiently allege in their complaint a plausible claim. Compare that to a Rule 56 motion for summary judgment, where the court must determine whether there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Defendants typically bring Rule 56 motions after some, if not all, of the discovery process has concluded because to prevail on the motion, the movant must direct the court to specific, admissible evidence in the record in order to show that the other side could not win at trial. See Fed. R. Civ. P. 56(c). Sometimes, though, waiting until after discovery is over to dispose of a claim on summary judgment is an asinine exercise, if defendants possess some document that could help a court do so earlier on in the life of the case. Promoting judicial efficiency, the Rules account for circumstances like these and allow district courts the leeway to consider documents outside the complaint (as well as the narrow exceptions we identified above) by converting a defendant's Rule 12(b)(6) motion into a Rule 56 motion. Fed. R. -13- Civ. P. 12(d). This conversion need not be express, but the court must give both sides a reasonable opportunity to present all the material that is pertinent to the motion. Id.; Bartlett v. Dep't of the Treasury (I.R.S.), 749 F.3d 1, 12 (1st Cir. 2014). Given that procedural framework, we discuss why, in our view, the district court in the instant case converted Wells Fargo's motion to dismiss Foley's contract-based claims into a motion for summary judgment--though not expressly--and did so improperly, warranting a remand of those claims.7 The motion to dismiss proceedings before the district court provide the backdrop for our analysis. The class action settlement agreement required that Wells Fargo consider Foley for a HAMP and MAP2R modification. As far as we can tell, neither party has disputed that fact throughout the life of this case. 7 Foley does not cite Rule 12(d) in his briefing. We, however, consider the issue of the district court's improper conversion of the motion to dismiss sufficiently raised. Foley asserts that the district court misapplied the standard of review for a motion to dismiss in reaching its ultimate conclusion that Wells Fargo performed its obligation under the settlement agreement to consider Plaintiff for MAP2R. He argues that the district court's conclusion that Wells Fargo actually met its obligation to consider Mr. Foley for MAP2R is wholly unsupported by the available evidence, which raises unresolved factual questions about how and when Mr. Foley was considered for a loan modification. Foley's counsel crystalized these contentions at oral argument, comparing the district court's treatment of the case to a summary judgment hearing, and noting that it remained a disputed issue of fact whether Foley was considered for a modification, despite the contents of the July 30 letter. -14- But the parties diverge on whether Foley, in drafting his pro se complaint, understood the extent of Wells Fargo's obligations under the settlement agreement. As Wells Fargo explained in its motion to dismiss, it interpreted Foley's allegations to amount to a grievance [] that he was not approved for a loan modification. But, Wells Fargo urged, nothing in the Settlement Agreement required Wells Fargo to approve him. In response, Foley argued to the district court in his written opposition to the motion to dismiss that Wells Fargo misunderstood the nature of his allegations, and that in fact, he pleaded that Wells Fargo did not consider him for a modification, as required by the settlement agreement, and did not comply with the agreement's other procedural mandates. In its order, the district court agreed with Foley and held that defendant reads the complaint too narrowly. In fact, plaintiff asserts not only that defendant failed to provide him a MAP2R modification, but also that it failed to even consider him for one. Similarly, as to the claim for breach of the implied covenant of good faith and fair dealing, the court found that Foley's allegations that defendant's inability to communicate effectively about MAP2R prevented plaintiff from being considered for such a modification could state a claim for breach of the implied covenant of good faith and fair dealing. -15- And so it seems the district court concluded that Foley successfully pleaded both a breach of the settlement agreement and a breach of the implied covenant of good faith and fair dealing. Thus, on a Rule 12(b)(6) motion, the district court's inquiry should have ended. Unfortunately, the district court's inquiry did not start and end with the pleadings. Recall that Wells Fargo submitted during the injunction proceedings a letter dated July 30, 2013. In that letter, Wells Fargo explained that Foley was denied HAMP and MAP2R because he did not fit within the income guidelines for those programs. Relying on that letter, the district court dismissed Foley's breach of contract claim because it appears that defendant performed its obligation under the settlement agreement to consider plaintiff for MAP2R. The court also dismissed the good faith and fair dealing claim on the theory that defendant did consider plaintiff for MAP2R, and its poor communication does not appear to have ultimately and substantially interfered with plaintiff's rights under the contract. Thus, despite identifying the correct standard of review for a Rule 12(b)(6) motion (and its requirement that the court be limited to considering the complaint and its attachments), the district court side-stepped the standard, relied on a document extraneous to the pleadings, and decided Foley's claims on the merits. That series of events, in our estimation, -16- equates to converting a motion to dismiss into a motion for summary judgment. Still, Rule 12(d) says the district court would have been permitted to make this conversion if it had given the parties a reasonable opportunity to present materials pertinent to the motion. Fed. R. Civ. P. 12(d). Alas, the court did not. Discovery never started in this case, and, as Foley noted during the injunction hearing, Wells Fargo possessed the information he would need to determine whether the bank fairly reviewed his eligibility for a modification. When discovery has not begun and the nonmovant has had no reasonable opportunity to obtain and submit additional evidentiary materials to counter the movant's [evidence], conversion of a Rule 12 motion to a Rule 56 motion is inappropriate. Whiting v. Maiolini, 921 F.2d 5, 7 (1st Cir. 1990). Foley was given no opportunity, let alone a reasonable one, to collect and present evidence that would contradict Wells Fargo's. Foley had no way to even challenge whatever numbers the bank used to make its calculations. Thus, Foley was provided no reasonable opportunity to gather or present actual evidence pertinent to his claims. We recognize that we have extended leniency toward a district court's failure to provide express notice of its intention to convert a motion to dismiss when such failure was harmless. See Boateng v. InterAmerican Univ., Inc., 210 F.3d 56, 60-61 (1st Cir. -17- 2000). But we treat[] any error in failing to give express notice as harmless when the opponent has . . . had an opportunity to respond to [the relied-upon evidence]. Bartlett, 749 F.3d at 12 (quoting Boateng, 210 F.3d at 60). And, as we discussed above, it appears from the court's decision that Foley's claims would have survived, had the court applied the correct standard of review. Strikingly here, the judge also specifically told the parties at the injunction hearing that he was not hearing them on the motion to dismiss and rather, would resolve that motion on the papers. Based on this representation, Foley had no reason to know the court would be considering documents filed by Wells Fargo in opposition to the injunction motion to resolve the motion to dismiss. In its written decision, the court also explicitly penalized Foley because he offered no evidence to refute the representations Wells Fargo made in the July 30 letter. If Foley had some notice of the court's thinking, he may have attempted to provide such evidence (keeping in mind the practical limitations Foley faced even accessing relevant information without discovery). This record makes abundantly clear that the district court's conversion to a summary judgment motion was premature, and that the failure to expressly convert the motion to dismiss was not harmless. We must also address another wrinkle in this procedurally complicated matter. Both Wells Fargo and the district court have suggested that the July 30 letter was proper to consider on a Rule -18- 12(b)(6) motion because, even though it was not attached to the complaint, it was a part of the pleadings. Courts are permitted, in some instances, to consider on a Rule 12(b)(6) motion documents that were not attached to the complaint. We have found these narrow exceptions to include documents the authenticity of which are not disputed by the parties; . . . documents central to plaintiffs' claim; or . . . documents sufficiently referred to in the complaint. Watterson, 987 F.2d at 3. In its decision, the district court relied on the theories that Foley did not contest the authenticity of the letter and that he referred to the letter in his complaint. Wells Fargo further asserts that the letter was integral to Foley's pleading. But we are not so convinced. Concerning the first category (documents of undisputed authenticity), we reiterate that Foley had no opportunity to challenge the document in question. What's more, Foley made clear on the record during the preliminary injunction hearing that he was suspicious of the document. The July 30 letter was an exhibit to an affidavit submitted in opposition to the injunction motion, and the affiant, Wells Fargo Operations Analyst Michael Dolan, attested that the letter was a true and accurate copy. Foley told the court during the evidentiary hearing that Dolan was not trustworthy and not -19- believable, based on, according to Foley, findings by a judge in another matter that Dolan's statements were unreliable. Foley, in fact, labeled the affidavit itself faulty. It follows that Foley called into question the integrity of the attached documents, the authenticity of which Dolan attested to. As to the second category (documents central to the claims), we do not see how the letter is integral to any of Foley's claims. Most especially, the surviving contract claims revolve around Wells Fargo's alleged failure to fairly consider Foley's modification eligibility over the course of the year and a half prior to the letter's existence. Finally, as to the third category (documents sufficiently referred to in the complaint), the district court recognized in its order that Foley had not yet received the letter when he filed his complaint.8 The closest the complaint comes to referencing the letter is in relaying Forbes's July 30, 2013 statement that Foley would be receiving detailed modification letters in a few days. Foley could not have sufficiently referred to a document he had yet seen, or the existence of which he had yet learned. Thus, the July 30 letter was not a part of Foley's pleadings. 8 While the order states that the letter was something that defendant had not yet seen (emphasis added), given the context of the discussion, we assume this was a stenographic error and the court intended to say that plaintiff had not seen the letter. -20- Given all of these considerations, we conclude that the district court erroneously converted Wells Fargo's motion to dismiss into a motion for summary judgment without providing Foley a reasonable opportunity to present material pertinent to the motion.
Wells Fargo also argues that regardless of the July 30 letter, dismissal of the contract claims was proper on two other grounds: (1) the breach of the implied covenant claim is preempted by the federal Home Owners Loan Act (HOLA), and (2) neither contract claim was sufficiently pleaded in the complaint. We quickly dispense of the first argument. The district court did not address this potential alternative ground for dismissal, and we also decline to delve into it. See Town of Amherst, N.H. v. Omnipoint Commc'ns Enters., Inc., 173 F.3d 9, 16 (1st Cir. 1999) (declining to affirm dismissal on an alternative ground not addressed by the district court); Pilgrim Badge & Label Corp. v. Barrios, 857 F.2d 1, 4 (1st Cir. 1988) (same); see also Clifford v. M/V Islander, 751 F.2d 1, 9 n.4 (1st Cir. 1984) (Without the benefit of any district court . . . legal discussion concerning these matters, it would be idle for us to comment further about them.). Given, however, that the district court's decision did at least to some extent speak to Foley's pleadings, we will address -21- Wells Fargo's sufficiency argument.9 In sum, we conclude that Foley did state a claim for both of his contract-based causes of action.
In analyzing whether a complaint has stated a claim sufficient to satisfy Rule 12(b)(6), we [s]et[] aside any statements that are merely conclusory, and, as we touched on above, look at the factual allegations to determine if there exists a plausible claim upon which relief may be granted. Woods, 733 F.3d at 353. We make reasonable inferences, drawn from the alleged facts, in the pleader's favor. Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011). And we construe pro se complaints, like Foley's, liberally. Erickson v. Pardus,