Hazaimeh et al v. U.S. Bank National Association et al, No. 3:2014cv00813 - Document 18 (E.D. Va. 2015)
Court Description: MEMORANDUM OPINION. See Opinion for details. Signed by District Judge James R. Spencer on 03/03/2015. (ccol, )
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Hazaimeh et al v. U.S. Bank National Association et al Doc. 18 EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION YAHIA A. HAZAIMEH, et al., Plaintiffs, Civil Action No. 3:14-CV-813 v. U.S. BANK NATIONAL ASSOCIATION, et al., Defendants. MEMORAN D U M OPIN ION THIS MATTER is before the Court on Defendants’ Motion to Dism iss Am ended Com plaint (“Motion”) (ECF No. 12), filed on J anuary 16, 20 15. Plaintiffs filed a response in opposition on February 6, 20 15 (“Opp’n Mem .) (ECF No. 16), and Defendants subsequently filed a reply on February 19, 20 15 (“Reply Mem .”) (ECF No. 17). The parties have not requested a hearing on this m atter, and the Court finds that oral argum ent is unnecessary. See E.D. Va. Loc. Civ. R. 7(J ). For the reasons set forth below, the Motion is GRANTED in part and DENIED in part. I. BACKGROU N D Plaintiffs, Yahia A. Hazaim eh and Karen A. Hazaim eh (collectively, the “Hazaim ehs”), purchased a hom e on J anuary 7, 20 0 9 located at 5113 Futura Avenue, Richm ond, Virginia 23231. On that day, the Hazaim ehs entered into a m ortgage loan in the principal am ount of $ 67,950 , in which they were the borrowers and David L. Holley and Charlotte Y. Holley (collectively, the “Holleys”) were the lenders. The loan was evidenced by a note, signed by the Hazaim ehs, and secured by a deed of trust. (See Am . Com pl. Ex. A.) The deed of trust appointed Robert E. Kane, J r. (“Kane”) and Theodore M. Galanides (“Galanides”) as trustees. On Decem ber 6, 20 0 0 , the Holleys and the Hazaim ehs entered into a “Modification of Note and Deed of Trust” (the “m odification agreem ent”). (Am . Com pl. Ex. B.) The m odification 1 Dockets.Justia.com agreem ent deleted all references to the “balloon paym ent” provided for in the original note and deed of trust. The Holleys subsequently assigned the note, and U.S. Bank asserted rights as holder of the note. U.S. Bank then retained Ocwen as servicer as to the note and the deed of trust. In late 20 11, the Hazaim ehs fell behind in paym ents on the note. In April of 20 12, Ocwen sent a letter to the Hazaim ehs stating that the loan was due to m ature within the next thirty days. (Am . Com pl. Ex. C.) Over the course of 20 12, the Hazaim ehs sent paym ents to Ocwen through MoneyGram , but Ocwen returned those paym ents, asserting that such paym ents were insufficient to cover the balance due on the loan . Additionally over the course of that year, J oylyn D. Givens (“Givens”) m ade telephone calls to Ocwen and Sam uel I. White, P.C. (“White”) on behalf of Karen Hazaim eh. During these calls, Givens would represent herself as being Karen Hazaim eh, with Karen Hazaim eh’s consent. Ocwen representatives allegedly stated that the loan was due and owing for a balloon paym ent and the Hazaim ehs would have to pay off the loan through the balloon paym ent to avoid foreclosure of the residence. Givens disputed with Ocwen that there was a balloon paym ent due and owing on the loan. In April of 20 12, Karen Hazaim eh contacted J am es A. Chisholm , Esquire (“Chisholm ”) regarding the loan. Chisholm provided advice to Karen Hazaim eh about how to handle the ongoing dispute with Ocwen regarding the balloon paym ent, specifically advising her to send to Ocwen a copy of the m odification agreem ent. On August 7, 20 12, Karen Hazaim eh, through Givens, sent to Ocwen a letter enclosing copies of the deed of trust and m odification agreem ent and requested that Ocwen confirm that there was no balloon paym ent on the loan. However, Ocwen never responded. In August of 20 12, U.S. Bank rem oved the original trustees on the deed of trust and appointed White as substitute trustee. (Am . Com pl. Ex. F.) On August 14, 20 12, White sent a letter to the Hazaim ehs, which stated that the Hazaim ehs’ property would be foreclosed upon, and the am ount of the rem aining debt was $ 59,183.13. (Am . Com pl. Ex. G.) The Hazaim ehs 2 responded with a letter asking “how m uch [they] would have to pay to bring [the] note current excluding the balloon paym ent of $ 59,183.13.” (Am . Com pl. Ex. H.) On Septem ber 6, 20 12, the Hazaim ehs, through Givens, sent another letter to White requesting reinstatem ent figures for the loan. Ocwen instructed White to foreclose on the residence, and White subsequently placed a foreclosure advertisem ent in the Richm ond Tim es-Dispatch on October 23, 20 12 and October 30 , 20 12 for foreclosure of the residence on Novem ber 6, 20 12 at 1:0 0 p.m . Karen Hazaim eh learned of the scheduled foreclosure near the en d of October 20 12 after Givens showed her the advertisem ent in the Richm ond Tim es-Dispatch. On October 22, 20 12, Karen E. Dailey, Esquire, an attorney then em ployed by White, wrote a letter to the Hazaim ehs, which stated that White was “requesting reinstatem ent figures so that you m ay know the am ount needed in order to bring your loan current.” (Am . Com pl. Ex. I.) On October 26, 20 12, White purported to provide a reinstatem ent for the loan; however, that letter stated a reinstatem ent figure “good through October 24, 20 12,” a date two days prior to the date of the letter. (Am . Com pl. Ex. J .) On Novem ber 1, 20 12, Givens called White and spoke with a representative of White. Givens provided that representative an e-m ail address for White to use in sending the reinstatem ent am ount for the loan to Karen Hazaim eh. On Novem ber 5, 20 12 at approxim ately 9:30 a.m ., Givens again called White and spoke with another representative. Givens was told that she would be sent an e-m ail with the reinstatem ent am ount; however, she never received an e-m ail. On that sam e day at approxim ately 1:10 p.m ., Givens called Ocwen and spoke with a representative identified as “J aved.” J aved provided to Givens a reinstatem ent am ount of $ 8,441.69. J aved then stated that if Karen Hazaim eh m ade a MoneyGram paym ent in that am ount to Ocwen that day and then called Ocwen and provided the identifying inform ation for that MoneyGram paym ent, then Ocwen would stop the foreclosure sale of the residence 3 scheduled for Novem ber 6, 20 12. Relying on J aved’s statem ent, Karen Hazaim eh, acting through Givens, m ade a paym ent to Ocwen of $ 8,441.69 through MoneyGram , and called Ocwen to notify the servicer of the paym ent. Hazaim eh and Givens spoke to a m ale Ocwen representative (the “5:25 p.m . Ocwen representative”) who acknowledged the MoneyGram paym ent but responded that such paym ent would not stop the foreclosure sale because the Hazaim ehs owed a balloon paym ent on the loan. Givens dem anded to speak with the representative’s supervisor, and Givens and Karen Hazaim eh were subsequently transferred to a fem ale Ocwen representative who identified herself as “Francis.” Francis requested that Karen Hazaim eh fax to her copies of the deed of trust and m odification agreem ent. After faxing over the requested docum ents, Givens and Karen Hazaim eh again called Francis, and Francis assured them that the foreclosure sale had been put on hold and would not proceed on Novem ber 6, 20 12. (See Am . Com pl. Ex. L.) However, the foreclosure did in fact proceed on Novem ber 6, 20 12. White conducted the sale, and U.S. Bank m ade the high bid of $ 62,989, which was significantly less than the $ 117,80 0 fair value of the residence. Title to the residence was subsequently transferred by White to U.S. Bank. (Am . Com pl. Ex. M.) On February 4, 20 13, U.S. Bank filed an unlawful detainer sum m ons against the Hazaim ehs in the General District Court of Henrico County, Virginia. The Court granted judgm ent for possession of the residence to U.S. Bank on May 6, 20 13. The Hazaim ehs then tim ely appealed to the Circuit Court of Henrico County, Virginia, and the Circuit Court affirm ed the judgm ent. U.S. Bank subsequently sought and obtained a writ of possession for eviction of the occupants of the residence, and a final notice for eviction was posted at the residence for a lock-out on October 1, 20 13. The occupants at the tim e, Karen Hazaim eh’s son, daughter, and nephew, m oved out of the residence prior to the lock-out. On Novem ber 6, 20 14, Plaintiffs filed a five-count Com plaint in the Circuit Court of the City of Richm ond, which alleged actual fraud, constructive fraud, breach of the deed of trust, 4 breach of contract, and breach of the im plied covenant of good faith and fear dealing. Defendants rem oved the case to this Court on Decem ber 3, 20 14, and filed their first m otion to dism iss on Decem ber 10 , 20 14. Plaintiffs then filed an Am ended Com plaint on Decem ber 31, 20 14, thereby m ooting the Defendants’ original m otion to dism iss. (See O., J anuary 6, 20 15, ECF No. 11.) The three-count Am ended Com plaint alleges actual fraud (count one), constructive fraud (count two), and breach of the im plied covenant of good faith and fair dealing (count three). Defendants subsequently filed the instant Motion to Dism iss on J anuary 16, 20 15. II. LEGAL STAN D ARD Rule 12 of the Federal Rules of Civil Procedure allows a defendant to raise a num ber of defenses to a com plaint at the pleading stage, including failure to state a claim . A m otion to dism iss for failure to state a claim upon which relief can be granted challenges the legal sufficiency of a claim , rather than the facts supporting it. Fed. R. Civ. P. 12(b)(6); Goodm an v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 20 0 7); Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). A court ruling on a Rule 12(b)(6) m otion m ust accept all of the factual allegations in the com plaint as true, see Edw ards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999); W arner v. Buck Creek N ursery , Inc., 149 F. Supp. 2d 246, 254– 55 (W.D. Va. 20 0 1), in addition to any provable facts consistent with those allegations, Hishon v. King & Spalding, 467 U.S. 69, 73 (1984), and m ust view these facts in the light m ost favorable to the plaintiff, Christopher v. Harbury , 536 U.S. 40 3, 40 6 (20 0 2). To survive a m otion to dism iss, a com plaint m ust contain factual allegations sufficient to provide the defendant with “notice of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Tw om bly , 550 U.S. 544, 555 (20 0 7) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Rule 8(a)(2) requires the com plaint to allege facts showing that the plaintiff’s claim is plausible, and these “[f]actual allegations m ust be enough to raise a right to relief above the speculative level.” Tw om bly , 550 U.S. at 555 & n.3. In other words, the plaintiff’s com plaint m ust consist of m ore than “a form ulaic recitation of the elem ents of a cause of action” or “naked 5 assertion[s] devoid of further factual enhancem ent.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (20 0 9) (citations om itted). The Court need not accept legal conclusions that are presented as factual allegations, Tw om bly , 550 U.S. at 555, or “unwarranted inferences, unreasonable conclusions, or argum ents,” E. Shore Mkts., Inc. v. J.D. Assocs. Ltd. P’ship, 213 F.3d 175, 180 (4th Cir. 20 0 0 ). Further, in ruling on a m otion to dism iss, “a court m ay consider official public records, docum ents central to plaintiff’s claim , and docum ents sufficiently referred to in the com plaint so long as the authenticity of these docum ents is not disputed.” W itthohn v. Federal Ins. Co., 164 F. App’x 395, 396 (4th Cir. 20 0 6) (citations om itted); see also Sec’y of State for Defence v. Trim ble N avigation Ltd., 484 F.3d 70 0 , 70 5 (4th Cir. 20 0 7) (internal citations om itted) (“We m ay consider docum ents attached to the com plaint, as well as those attached to the m otion to dism iss, so long as they are integral to the com plaint and authentic.”). III. D ISCU SSION ( 1) Claim 1: Plain tiffs H ave Faile d to Ple ad an Actio n able Claim fo r Frau d ( Co u n ts I an d II) ( a ) Pla in t iffs ’ Cla im s fo r Fr a u d Ar e Ba r r e d b y t h e Eco n o m ic Lo s s R u le The econom ic loss rule “is intended to preserve the bedrock principle that contract dam ages be lim ited to those ‘within the contem plation and control of the parties in fram ing their agreem ent.’” City of Richm ond, Va. v. Madison Mgm t. Grp., Inc., 918 F.2d 438, 446 (4th Cir. 1990 ) (quoting Kam lar Corp. v. Haley , 299 S.E.2d 514, 517 (Va. 1983)). The rule bars parties from recovering in tort “sim ply by recasting a contract claim as a tort claim .” W ay tec Elecs. Corp. v. Rohm and Haas Elec. Materials, LLC, 459 F. Supp. 2d 480 , 491 (W.D. Va. 20 0 6); see also Tidew ater Beverage Servs., Inc. v. Coca Cola Co., Inc., 90 7 F. Supp. 943, 948 (E.D. Va. 1995) (citing Madison Mgm t. Grp., Inc., 918 F.2d at 447) (the econom ic loss rule protects only those defendants who have breached only contractual duties). The Suprem e Court of Virginia has stated, The law of torts is well equipped to offer redress for losses suffered by reason of a 6 ‘breach of som e duty im posed by law to protect the broad interests of social policy.’ [citation om itted] Tort law is not designed, however, to com pensate parties for losses suffered as a result of a breach of duties assum ed only by agreem ent. That type of com pensation necessitates an analysis of the dam ages which were within the contem plation of the parties when fram ing their agreem ent. It rem ains the particular province of the law of contracts. Sensenbrenner v. Rust, Orling & N eale, Architects, Inc., 374 S.E.2d 55, 58 (Va. 1988). “In other words, if the defendant breaches a duty owned [sic] to the plaintiff only through a contractual agreem ent, the plaintiff m ay not recover purely econom ic losses in a related tort action against the defendant.” Tidew ater Beverage Servs., Inc., 90 7 F. Supp. at 947– 48. The Fourth Circuit has clearly defined when the econom ic loss rule should not apply. In Madison the Court stated, The rule’s purpose therefore is not im plicated where close inspection of the plaintiff’s case reveals a genuine foundation for a tort claim . In such situations, there is no risk that a plaintiff will be pursuing a tort rem edy when in fact he should be confined to a contract rem edy. Thus, if, when the surface is scratched, it appears that the defendant has breached a duty im posed by law, not by contract, the econom ic loss rule should not apply. Madison M gm t. Grp., Inc., 918 F.2d at 446. In this case, Defendants argue that “[i]f there was any prom ise m ade by Defendants, it appears that the prom ises were of a contractual nature,” (Mem . in Supp. of Mot. at 7), and therefore “Plaintiffs could not have a claim for fraud and are left with, if anything, a claim for breach of an agreem ent,” (id. at 8). However, the Court finds that “[t]he case at bar does not involve any such attem pt to dress up a contract claim in a fraud suit of clothes.” Madison Mgm t. Grp., Inc., 918 F.2d at 447 (citation and internal quotation m arks om itted). Rather, Plaintiffs have alleged that Defendants violated a duty im posed by tort law, i.e., the duty not to com m it fraud. Id. Specifically, Plaintiffs allege that Defendants knew at the tim e of the alleged m isrepresentation that the foreclosure would not be halted. See id. In their reply, Defendants attem pt to distinguish Bennett v. Bank of Am ., N .A., No. 3:12CV34-HEH, 20 12 WL 1354546 (E.D. Va. Apr. 18, 20 12), from the instant case by asserting that here Plaintiffs’ argum ent is centered on Defendants’ failure to “uphold their end of the 7 contract.” (Reply Mem . at 4.) Sim ilar to Bennett, 20 12 WL 1354546, at *9, in this case Defendants did not have a contractual duty to cancel the foreclosure of Plaintiffs’ hom e. Plaintiffs explicitly adm it this in their opposition m em orandum . (Opp’n Mem . at 12.) However, contrary to Defendants’ argum ent, Plaintiffs are not alleging a failure to uphold the contract; rather, as stated above, they are alleging a violation of the independent duty not to com m it fraud. “Accordingly, [] Defendants are not entitled to the protection of the econom ic loss rule, which protects only those defendants who have breached only contractual duties.” Madison Mgm t. Grp., Inc., 918 F.2d at 447. ( b ) A Cla im Pr o m is e s fo r Fr a u d Ca n n o t b e Pr e d ica t e d U p o n Fu t u r e To plead actual fraud under Virginia law, a plaintiff m ust assert six elem ents: (1) a false m isrepresentation, (2) of m aterial fact, (3) m ade intentionally and knowingly, (4) with intent to m islead, (5) reliance by the party m isled, and (6) resulting dam age to the party m isled.” State Farm Mut. Auto Ins. Co. v. Rem ley , 618 S.E.2d 316, 321 (Va. 20 0 6). To state a cause of action for constructive fraud, a plaintiff is required to “plead that the false representation was m ade innocently, or negligently, while all other elem ents [of fraud] rem ain the sam e.” Sales v . Kecoughtan Housing Co., Ltd., 690 S.E.2d 91, 94 (Va. 20 10 ) (citation om itted). Additionally, and m ore im portantly for purposes of Defendants’ Motion, “a fraud claim m ust be based on the m isrepresentation of a present or pre-existing fact.” Albanese v. W CI Com m unities, Inc., 530 F. Supp. 2d 752, 770 (E.D. Va. 20 0 7) (citations om itted). A fraud claim cannot be prem ised “on unfulfilled prom ises or statem ents about future events.” Id. (citations om itted). In other words, “[a] prom ise to perform an act in the future is not, in a legal sense, a representation as that term is used in the fraud context.” Lissm ann v. Hartford Fire Ins. Co., 848 F.2d 50 , 53 (4th Cir. 1988) (citing Soble v. Herm an, 9 S.E.2d 459 (Va. 1940 )). Otherwise, “[w]ithout that rule alm ost every breach of contract could be claim ed to be fraud.” Id. 8 However, one exception to this general rule is “when a prom isor m akes a prom ise intending not to perform , this prom ise constitutes a m isrepresentation of present fact if the prom isor intended that the prom isee act to his detrim ent.” Albanese, 530 F. Supp. 2d at 770 (citing Colonial Ford Truck Sales, Inc. v. Schneider, 325 S.E.2d 91, 94 (Va. 1985)); see also Tidew ater Beverage Servs., Inc., 90 7 F. Supp. at 947 (“The alleged m isrepresentation is not sim ply a prom ise to do som ething in the future; it is, instead, a deliberate m isstatem ent of an existing fact related to Defendant’s present intentions.”). “Under no circum stances, however, will a prom ise of future action support a claim of constructive fraud.” Supervalu, Inc. v. Johnson, 666 S.E.2d 335, 342 (Va. 20 0 8) (citations om itted). In Matanic v. W ells Fargo Bank, N .A., No. 3:12CV472, 20 12 WL 4321634 (E.D. Va. Sept. 19, 20 12), Plaintiff alleged that a representative of the Defendant told him that Defendant would be willing to stop the foreclosure proceedings if Plaintiff provided federal tax inform ation. Id. at *6. Plaintiff alleged that such statem ents were false because Defendant intended to foreclose on the hom e regardless of whether or not tax docum entation was received. Id. “Taking this allegation as true, [the district court found that] it satisfies the requirem ent that the prom ise be false at the tim e the prom isor m ade the statem ents.” Id.; see also Albay ero v. W ells Fargo Bank, N.A., No. 3:11CV20 1-HEH, 20 11 WL 4748341, at *5 (E.D. Va. Oct. 5, 20 11). Therefore, the Court ultim ately denied the Defendant’s m otion to dism iss. Plaintiffs’ Am ended Com plaint identifies two statem ents which they allege constitute actual fraud. See Lissm ann, 848 F.2d at 53 (“The threshold inquiry with fraud looks to what representation was allegedly m ade.”). The first statem ent was m ade on Novem ber 5, 20 12 by an Ocwen representative who identified him self as “J aved.” (Am . Com pl. ¶ 43.) Specifically, the Am ended Com plaint alleges, “J aved . . . stated that if Karen Hazaim eh m ade a MoneyGram paym ent of $ 8,441.69 to Ocwen that day [Novem ber 5, 20 12] and then called Ocwen and provided to Ocwen the identifying inform ation for that MoneyGram paym ent, then Ocwen would stop the foreclosure sale of the residence scheduled for Novem ber 6, 20 12.” (Id.) Plaintiffs 9 allege that J aved’s assurance was intentionally false and fraudulent when m ade as “Ocwen and U.S. Bank intended to foreclose on the residence on Novem ber 6, 20 12 whether or not Karen Hazaim eh m ade the MoneyGram paym ent . . . .” (Id. at ¶ 45.) The second fraudulent statem en t was m ade by a fem ale representative who identified herself as “Francis.” (Id. at ¶ 58.) After Karen Hazaim eh, through Givens, faxed copies of the deed of trust and m odification agreem ent to Ocwen at the num ber provided by Francis, (id. at ¶ 60 ), Francis “stated that the foreclosure sale had been put on hold and would not proceed on Novem ber 6, 20 12, (id. at ¶ 61). Plaintiffs allege that such statem ent was also intentionally false and fraudulent when m ade. (Id. at ¶ 63.) This latter statem ent is also the basis for Plaintiffs’ constructive fraud claim . (See id. at ¶ 95.) First, the alleged m isrepresentation m ade by “Francis” where she stated “the foreclosure sale had been put on hold” m ay be classified as a statem ent of present fact, and thus m ay form the basis of both the actual and constructive fraud claim s.1 See Supervalu, Inc., 666 S.E.2d at 368. Second, the statem ent m ade by “J aved,” although concerning a future event, m ay be classified as a m isrepresentation as Plaintiffs have pleaded, “Ocwen and U.S. Bank intended to foreclose on the residence on Novem ber 6, 20 12 whether or not Karen Hazaim eh m ade the Money Gram paym ent of $ 8,441.69.” (Am . Com pl. ¶ 45.) Taking these allegations as true, the Court can reasonably infer that J aved m ade the statem ent intending not to perform – thus constituting a m isrepresentation of present fact. Albanese, 530 F. Supp. 2d at 770 . For those reasons, the Court finds that Plaintiffs have adequately pleaded their fraud claim s. ( c) Pla in t iffs ’ Alle g e d D a m a g e s Ar e To o Sp e cu la t iv e a n d D id N o t R e s u lt Fr o m t h e Alle g e d M is r e p r e s e n t a t io n Under Virginia law, a plaintiff alleging fraud “m ust prove dam ages which are caused by his detrim ental reliance on a defendant’s m aterial m isrepresentation.” Murray v. Hadid, 385 1 In their reply, Defendants argue that Plaintiffs fail to account for the full context of Francis’ statem ent. (Reply Mem . at 5.) The Amended Com plaint alleges, in full, that Francis stated “the foreclosure had been put on hold and w ould not proceed on N ovem ber 6, 20 12.” (Am . Com pl. ¶ 61) (em phasis added). However, this Court in Matanic, when faced with a sim ilar m isrepresentation of halting a foreclosure if Plaintiff provided federal tax inform ation, denied a m otion to dism iss Plaintiff’s constructive fraud claim . 20 12 WL 4321634, at *7. Based on that precedent, the Court sim ilarly finds that Plaintiffs have adequately pleaded a constructive fraud claim . 10 S.E.2d 898, 90 3 (Va. 1989) (citing W inn v. Aleda Const. Co., 315 S.E.2d 193, 195 (Va. 1984)). Plaintiffs claim that if they had not relied on Defendants’ alleged m isrepresentations on Novem ber 5, 20 12, they “would have had recourse to stop the foreclosure and could and would have successfully stopped the foreclosure [which occurred on Novem ber 6, 20 12].” (Am . Com pl. ¶ 71.) Specifically, Plaintiffs allege that Karen Hazaim eh would have contacted Chisholm for assistance in stopping the foreclosure sale and Chisholm would have acted, if necessary to stop the foreclosure, to ensure that Karen Hazaim eh was able to file a Chapter 13 bankruptcy with a plan to sell the residence to pay off the loan or cure the arrearage. (Id.) Defendants argue that Plaintiffs’ claim that they would have been able to stop the foreclosure in one day is entirely speculative. (Mem . in Supp. of Mot. at 6.) The district court in Matanic, under sim ilar factual circum stances, denied the Defendant’s m otion to dism iss after finding “skeletal allegation of dam ages” sufficient to survive such m otion. Matanic, 20 12 WL 4321634, at *6. The Plaintiff in that case alleged two m isrepresentations, one occurring on Decem ber 13, 20 11 and the other on Decem ber 14, 20 11, regarding halting the foreclosure on Plaintiff’s property if certain federal tax inform ation was received. Id. Defendants proceeded with the foreclosure on Decem ber 15, 20 11. Id. The Plaintiff claim ed dam ages as a result of his reliance on defendant’s m isrepresentation, nam ely that he did not obtain private counsel who could have stopped the foreclosure sale. Id.; see also Thom as v. Bank of Am ., N.A., No. 4:12cv143, at *8– 9 (E.D. Va. Mar. 19, 20 13) (holding that Plaintiffs adequately pleaded reliance and dam ages on Defendants’ m isrepresentations by alleging that Plaintiffs did not obtain counsel to stop the foreclosure sale and Plaintiffs could have stopped the foreclosure by filing for bankruptcy). Based on Matanic, Plaintiffs have sufficiently stated a claim to survive this stage of the litigation process. // // // 11 ( d ) Pla in t iffs ’ Fr a u d Lim it a t io n s Cla im s Ar e Ba r r e d by t h e St a t u t e o f If all facts necessary for such a defense clearly appear on the face of the com plaint, then“[t]he statute of lim itations is an affirm ative defense that m ay be raised in a Rule 12(b)(6) m otion to dism iss for failure to state a claim .” United States v. Kivanc, 714 F.3d 782, 789 (4th Cir. 20 13) (citing Dean v. Pilgrim ’s Pride Corp., 395 F.3d 471, 474 (4th Cir. 20 0 5)). In a federal diversity action, state law governs the existence and interpretation of any statute of lim itations. Va. Im ports, Inc. v. Kirin Brew ery of Am ., LLC, 296 F. Supp. 2d 691, 699 (E.D. Va. 20 0 3). Virginia law sets a two-year lim itations period for claim s of fraud and constructive fraud. Va. Code § 8.0 1-243 (“[E]very action for dam ages resulting from fraud, shall be brought within two years after the cause of action accrues.”). Va. Code § 8.0 1-249 provides that a cause of action shall be deem ed to accrue “when such fraud . . . is discovered or by the exercise of due diligence reasonably should have been discovered.” Va. Code § 8.0 1-249(1). To exercise due diligence, the plaintiff bears the burden of proving that he used “‘[s]uch a m easure of prudence, activity, or assiduity, as is properly to be expected from , and ordinarily exercised by, a reasonable and prudent [person] under the particular circum stan ces; not m easured by any absolute standard, but depending on the relative facts of the special case.’” Va. Im ports, Inc., 296 F. Supp. 2d at 699 (quoting STB Mktg. Corp. v. Zolfaghari, 393 S.E.2d 394, 397 (Va. 1990 )). Defendants argue “that on October 23, 20 12 or October 30 , 20 12, Plaintiffs knew, or by the exercise of due diligence reasonably should have known, of any alleged m isrepresentations in the April 20 12 letter or the foreclosure advertisem ents, and that the foreclosure of their property would take place on Novem ber 6, 20 12.” (Mem . in Supp. of Mot. at 11.) However, Defendants argum ent m isconstrues the relevant facts. Plaintiffs allege that representatives of the Defendants m ade two fraudulent statem ents, both occurring on Novem ber 5, 20 12. Plaintiffs did not discover the fraud however until the following day– Novem ber 6, 20 12– when the foreclosure sale proceeded as scheduled. Based on the April 20 12 letter or the October 20 12 12 foreclosure advertisem ents, Plaintiffs m ay have been aware of the scheduled foreclosure, but this does not equate to Plaintiffs’ discovery of the claim ed fraudulent m isrepresentations. Accordingly, Plaintiffs properly filed their Com plaint two years later on Novem ber 6, 20 14. Plaintiffs’ claim s therefore are not barred by the statute of lim itations. For the aforem entioned reasons, the Motion is DENIED as to Claim 1. ( 2 ) Claim 2 : Plain tiffs H ave Faile d to Ple a d a Claim fo r Bre ach o f th e Im p lie d W arran ty o f Go o d Faith an d Fair D e alin g ( Co u n t III) Plaintiffs recognize that U.S. Bank did not have a contractual duty to stop the foreclosure of their hom e, but they argue that U.S. Bank did have the discretion to stop the foreclosure. (Am . Com pl. ¶ 10 1.) Plaintiffs contend that in exercising such discretion, U.S. Bank acted with bad faith and unfair dealing. (Id. at ¶ 10 3.) “In Virginia, every contact contains an im plied covenant of good faith and fair dealing.” Enom oto v. Space Adventures, Ltd., 624 F. Supp. 2d 443, 450 (E.D. Va. 20 0 9) (citations om itted). To establish a claim for breach of the im plied covenant of good faith, a plaintiff m ust prove (1) a contractual relationship between the parties, and (2) a breach of the im plied covenant. Id. (citing Charles E. Brauer Co., Inc. v. NationsBank of Va., N.A., 466 S.E.2d 38 2, 386 (Va. 1996)). But this im plied covenant is not recognized “in contracts outside of those governed by the Uniform Com m ercial Code (“U.C.C.”), and the U.C.C. ‘expressly excludes the transfer of realty from its provisions.’” Harrison v. U.S. Bank Nat’l Ass’n, No. 3:12-cv0 0 224, 20 12 WL 2366163, at * (E.D. Va. J une 20 , 20 12) (quoting Greenw ood Assocs., Inc. v. Crestar Bank, 448 S.E.2d 399, 40 2 (Va. 1994)); see also Va. Code § 8.9A-10 9(d)(11) (“This title does not apply to the creation or transfer of an interest in or lien on real property, including a lease or rents thereunder . . . .”). Thus, as a result Plaintiffs in this case are barred by statute from arguing that Defendants breached the im plied covenant of good faith and fair dealing.2 For that 2 Even if Plaintiffs were not barred by statute, Plaintiffs could still not m ake out a claim for breach of the im plied covenant of good faith and fair dealing. The Note explicitly states that the borrower will enter default if he does “not pay the full am ount of each m onthly paym ent on the date it is due.” It is undisputed that in late 20 11, Plaintiffs fell behind in paym ents on the note. (Am . Com pl. ¶ 19.) “Thus, [Defendants’] 13 reason, the Court GRANTS the Motion as to Claim 2, and accordingly DISMISSES Count Three of the Am ended Com plaint. ( 3 ) Claim 3 : An y State Law Claim s Aris in g Fro m Fu rn is h in g In fo rm atio n to Cre d it Re p o rtin g Age n cie s are Barre d Pu rs u a n t to 15 U .S.C. § 16 8 11t( b) ( 1) ( F) Plaintiffs’ Am ended Com plaint alleges that “Ocwen and U.S. Bank . . . wrongfully reported to credit bureaus that there had been a valid foreclosure of the residence, which dam aged Karen Hazaim eh’s credit rating, causing her econom ic harm .” (Am . Com pl. ¶ 79.) Defendants argue that “[t]o the extent Plaintiffs’ Com plaint could be interpreted as asserting state law claim s for the furnishing or reporting of inform ation to credit reporting agencies, all such state law claim s– whether com m on law or statutory– are barred by express federal preem ption under section 1681t(b)(1)(F) of the [Fair Credit Reporting Act (“FCRA”)].” (Mem . in Supp. of Mot. at 13.) Plaintiffs on the other hand contend that they have not averred a claim under the FCRA nor are the claim s relating to lender credit reporting preem pted by the FCRA. (Opp’n Mem . at 17.) The FCRA “was enacted to ensure privacy and accuracy with regards to credit reporting and contains two clauses which preem pt individuals from bringing certain actions against consum er reporting agencies . . ., those who furnish consum er credit inform ation . . ., and/ or users of such consum er credit inform ation.” Joiner v. Revco Discount Drug Centers, Inc., 467 F. Supp. 2d 50 8, 512 (W.D.N.C. 20 0 6).3 The first preem ption clause, Section 1681h(e), states Except as provided in sections 1681n and 1681o of this title, no consum er m ay bring any action or proceeding in the nature of defam ation, invasion of privacy, or negligence with respect to the reporting of inform ation against any consum er reporting agency, any user of inform ation, or any person who furnishes inform ation to a consum er reporting agency, based on inform ation disclosed pursuant to section 1681g, 1681h, or 1681m of this title, or based on inform ation disclosed by a user of a consum er report to or for a consum er against whom the contractual right to foreclose on the property vested at the tim e of Plaintiffs’ default. Accordingly, the actions taken by Defendants m erely am ounted to an exercise of their contractual rights.” Albay ero, 20 11 WL 4748341, at *6. Plaintiffs even acknowledge that this Court has previously held that sim ilar fraud claim s do not constitute a breach of the com m on law im plied covenant of good faith and fair dealing. (Opp’n Mem . at 19.) 3 U.S. Bank states that it is a “furnisher” of inform ation under the FCRA. (Reply Mem . at 7.) 14 user has taken adverse action, based in whole or in part on the report except as to false inform ation furnished with m alice or willful intent to injure such consum er. 15 U.S.C. § 1681h(e). The FCRA’s other preem ption clause, § 1681t, provides that “[n]o requirem ent or prohibition m ay be im posed under the laws of any State with respect to any subject m atter regulated under . . . section 1681s– 2 of this title, relating to the responsibilities of persons who furnish inform ation to consum er reporting agencies . . . .” 15 U.S.C. § 1681t(b)(1)(F). Section 1681s-2 provides in turn, “A person shall not furnish any inform ation relating to a consum er to any consum er reporting agency if the person knows or has reasonable cause to believe that the inform ation is inaccurate.” 15 U.S.C. § 1681s-2(a)(1)(A). Although the Fourth Circuit has not conclusively ruled on the issue, seven of the nine district courts in the Fourth Circuit have reconciled the apparent conflict between these two preem ption provisions by adopting the “‘statutory approach’– holding that § 1681t(b)(1)(F) only applies to state statutory claim s and that § 1681h(e) only addresses state com m on law claim s.” Bourdelais v. JPMorgan Chase Bank, N .A., 3:10 CV670 , 20 12 WL 540 40 84, at *7 (E.D. Va. Nov. 5, 20 12) (citing seven cases). In applying this approach to the present case, Plaintiffs’ com m on law claim s of fraud and breach of the im plied covenant of good faith are subject to § 1681h(e) of the FCRA, not § 1681t(b)(1)(F). See id. Further, § 1681h does not preem pt Plaintiffs’ credit dam ages claim s, as these claim s are part of Plaintiffs’ com m on law allegations and do not relate to defam ation, invasion of privacy, or negligence. See 15 U.S.C. § 1681h(e). In an attem pt to avoid this inevitable conclusion, Defendants assert that “Plaintiffs attem pt to disguise a plain action for defam ation as an action for fraud and breach of the im plied covenant of good faith and fair dealing.” (Mem . in Supp. of Mot. at 6.) Defendants however fail to provide the Court with any further analysis or citation in support of adding these com m on law claim s into the general category of defam atory actions. Thus, the Court finds that the FCRA does not preem pt Plaintiffs’ com m on law claim s, and accordingly the Motion is DENIED as to Claim 3. 15 IV. CON CLU SION For the foregoing reasons, the Motion is GRANTED in part and DENIED in part. Specifically, the Motion is GRANTED as to Claim 2 and DENIED as to Claim s 1 and 3. Let the Clerk send a copy of this Mem orandum Opinion to all counsel of record. An appropriate Order will issue. _____________________/s/__________________ James R. Spencer Senior U. S. District Judge ENTERED this _ _ 3rd_ _ day of March 20 15. 16
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