Sypolt v. Talon Group The, No. 2:2007cv01892 - Document 63 (W.D. Wash. 2009)
Court Description: ORDER granting 19 Talon's Motion for Summary Judgment on Plaintiff's "retained interest" claims; finding as moot 54 Motion to Vacate ; finding as moot 55 Motion to Compel; finding as moot 22 Motion for Class Certification by Judge Marsha J. Pechman.(RK)
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Sypolt v. Talon Group The Doc. 63 1 The Honorable Marsha J. Pechman 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 CHRISTOPHER SYPOLT, 10 Plaintiff, 11 12 13 v. THE TALON GROUP, a division of First American Title Insurance Company, a foreign corporation, 14 Defendant. ) ) ) ) ) ) ) ) ) ) ) Case No. C07-1892 MJP ORDER GRANTING DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT 15 16 17 This matter comes before the Court on Defendant’s motion for partial summary judgment. (Dkt. No. 19.) The Court has considered the motion, the response (Dkt. No. 28), 18 19 20 the reply (Dkt. No. 39) and all other pertinent documents in the record. After hearing the parties’ presentations at oral argument on February 9, 2009, the Court indicated it would grant 21 Defendant’s motion. For the reasons set forth below, the Court GRANTS Defendant’s motion 22 for partial summary judgment. 23 24 Background Plaintiff Christopher Sypolt challenges the pooled account practices used by his 25 escrow agent, The Talon Group, in connection with a real estate transaction. (Dkt. No. 22 at 26 27 1.) Defendant The Talon Group (“Talon”) is a division of First American Title Insurance ORDER—1 Dockets.Justia.com 1 2 Company, a subsidiary of The First American Corporation (“FAC”). (Dkt. No. 19 at 1.) Though the Plaintiff’s complaint includes factual allegations relating to Talon’s use of a 3 “wire/express fee,” both parties agree that the present motion only involves Mr. Sypolt’s 4 allegations about Talon’s“retained interest” claims. 5 I. 6 Sypolt-Hauser Transaction Plaintiff’s action arises out of his purchase of a condominium. On June 16, 2005, Mr. 7 Sypolt entered into an agreement to purchase a condominium from Gary and Patricia Hauser 8 9 for $355,000. (Solonti Decl. ¶ 4.) There were several components to the transaction. First, 10 on June 16, 2005, Mr. Sypolt transferred $10,000 in earnest money to his real estate agent, 11 RE/MAX, which held the money in its own trust account. (Id.) Because Talon credited the 12 earnest money against RE/MAX’s commission, the money was not transferred to Talon. (Id.) 13 Second, on July 15, 2005, Mr. Sypolt provided Talon with a $31,054.80 personal check, 14 which Talon deposited into its IOLTA escrow trust account on July 18, 2005 (the following 15 Monday). (Id. ¶ 6.) Third, on July 21, 2005, Talon received two wires from RBC Mortgage 16 17 18 on Mr. Sypolt’s behalf, one for $284,000.00 and another for $35,500.00. (Id. ¶ 7.) These amounts were also held in Talon’s IOLTA escrow trust account. 19 On July 21, 2005, after receiving the two wire transfers, Talon sent the required deeds 20 to a title company and the King County Recorder recorded the documents that afternoon. (Id. 21 22 ¶ 8.) The transaction officially closed when Talon received the recording information from the title company that afternoon. (Id.) On July 22, 2005, Talon issued a number of checks 23 24 25 disbursing the funds. (Id. ¶ 9.) II. Talon’s Challenged Practices 26 Mr. Sypolt claims Talon deceives its clients and uses them as “cogs in a money-making 27 machine.” (Dkt. No. 22 at 1.) First, Plaintiff claims Talon unfairly benefits from the balances ORDER—2 1 2 3 4 5 6 on its pooled accounts by earning“credits” that can be used to offset its fees with its bank. Second, Mr. Sypolt claims that the large balances in the pooled accounts allow Talon to access a line of credit, from which it earns secret profits. a. Earnings Credits Mr. Sypolt challenges the “earnings credits” Talon accumulates based on the balance of its aggregated escrow account. (Dkt. No. 22 at 2.) Earnings credits are monthly rebates 7 banks offer escrow companies based on a formula that incorporates the balance of the escrow 8 9 account. (Braakman Decl. ¶¶ 2-3.) Talon uses these credits to pay service charges on its bank 10 accounts (with KeyBank) and, if Talon has left over credits at the end of a given month, it 11 uses them to pay off charges on its other accounts and those of its affiliates. (Id. ¶ 4.) Talon 12 asserts that its earnings credits arrangements are standard and used by other escrow agents 13 and banks across the state and nation. (Id.) 14 b. Low Interest Loans/Line of Credit 15 Sypolt also argues that Talon’s escrow account unfairly provides FAC with a low 16 17 interest line of credit. (Dkt. No. 22 at 3-4.) Pursuant to a Business Loan Agreement between 18 FAC and KeyBank, KeyBank extends a line of credit to FAC based on the average escrow 19 balance of FAC’s subsidiaries. (Braakman Decl. ¶ 5-6.) FAC may only use the line of credit 20 to purchase short-term investments from KeyBank, which it sells monthly to repay amounts 21 22 drawn against the line of credit. (Id.) FAC allocates the income it earns on the short term investments to its subsidiaries based each one’s proportion of the percentage of the average 23 24 25 escrow balance. (Id.) Sypolt claims these two practices are problematic because (1) Talon does not share the 26 proceeds with customers and (2) Talon does not disclose its procedures to its customers. 27 Based on these “retained interest” violations, Sypolt seeks to certify a class to assert claims ORDER—3 1 2 3 based on (1) the Washington Consumer Protection Act, (2) breach of fiduciary duty, (3) breach of duty as agent, (4) unjust enrichment, and (5) breach of contract. (Dkt. No. 22 at 68.) 4 Discussion 5 6 Talon argues that summary judgment is appropriate because Plaintiff lacks standing to sue and, even if he has standing, he cannot allege an injury as required by each cause of 7 action. 8 9 I. Summary Judgment Standard Summary judgment is not warranted if a material issue of fact exists for trial. Warren 10 11 v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995), cert. denied, 516 U.S. 1171 (1996). 12 The underlying facts are viewed in the light most favorable to the party opposing the motion. 13 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). “Summary 14 judgment will not lie if . . . the evidence is such that a reasonable jury could return a verdict 15 for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The 16 17 party moving for summary judgment has the burden to show initially the absence of a genuine 18 issue concerning any material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 159 (1970). 19 However, once the moving party has met its initial burden, the burden shifts to the nonmoving 20 party to establish the existence of an issue of fact regarding an element essential to that party’s 21 22 case, and on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). To discharge this burden, the nonmoving party cannot rely on 23 24 25 26 27 its pleadings, but instead must have evidence showing that there is a genuine issue for trial. Id. at 324. II. Standing A plaintiff has standing when (1) he has“suffered an ‘injury in fact,’”(2) that is causally ORDER—4 1 2 connected to the purportedly offensive conduct, and (3) that injury can be redressed by a “favorable decision.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (citations 3 omitted). Injury in fact is defined as“an invasion of a legally protected interest which is (a) 4 concrete and particularized and (b) ‘actual or imminent.’” Id. at 560 (citations omitted). 5 6 First, Defendant argues Plaintiff lacks standing because, by law, Talon was obliged to place Sypolt’s funds in the IOLTA account. (See Dkt. No. 19 at 7-8.) Defendant’s argument 7 here confuses the interest earned by the Legal Foundation of Washington (“LFW”), pursuant to 8 9 APR 12.1, with the institutional benefits provided by KeyBank. (See Kinkead Decl., Ex. C.) 10 Plaintiff concedes he does not seek the interest on the accounts and the parties agree that 11 earnings credits and lines of credit do not constitute“interest.” (Dkt. No. 28 at 8-9; Dkt. No. 19 12 at 11-12.) Thus, whether Plaintiff has standing to sue for the interest earned is irrelevant to 13 this matter. 14 Second, Defendant argues Plaintiff lacks standing because he has no legally protected 15 interest in the earnings credits or the line of credit profits. (Dkt. No. 39 at 5.) Plaintiff asserts 16 17 that, because LFW only has standing to sue for interest, but not earnings credits of line of 18 credit profits, he must have standing to assert the claims. (Dkt. 28 at 10.) The mere fact that 19 LFW lacks standing does not confer standing to Mr. Sypolt. In Washington Legal Foundation 20 v. Legal Foundation of Washington, the Ninth Circuit described earnings credits in the 21 22 context of First and Fifth Amendment challenges to the use of IOLTA accounts. 271 F.3d 835, 858 (9th Cir. 2001) (en banc) (plaintiffs challenging the decision to stop the use of 23 24 25 earning credits). The court described earnings credits as“nothing but incentive payments to repeat customers, the escrow companies” which are “never the property of the escrow 26 companies’ customers.” Id. at 859-60 (further holding that customers could not sustain a 27 takings claim based on the escrow company’s loss of earnings credits). Though their opinion ORDER—5 1 2 3 is not binding on this court, Washington’s LPO Board has identified the non-interest benefits closing firms receive as“discretionary on the part of the banks and would not otherwise be available to the clients making the deposits.” (Kinkead Decl., Ex. D at 7.) 4 5 6 Mr. Sypolt does not have standing to sue for “retained interest”benefits. Because earnings credits are a function of the relationship between the bank and the escrow company, Mr. Sypolt would never be able to earn them individually. He has failed to describe how he 7 suffers from Talon’s relationship with KeyBank. Thus, Plaintiff cannot articulate a legally 8 9 protectable interest sufficient to confer standing. The earnings credits analysis is equally 10 applicable to the context of line of credit benefits. Like earnings credits, a line of credit arises 11 out of the escrow company’s relationship with the bank and would not otherwise be available 12 to an individual customer like Mr. Sypolt. 13 III. 14 Washington CPA Claim/Breach of Contract/Unjust Enrichment Even if Mr. Sypolt had standing to sue for the non-interest benefits Talon earned, 15 Defendant is entitled to summary judgment on Plaintiff’s CPA, contract, and unjust 16 17 enrichment claims. 18 First, under the Consumer Protection Act, a plaintiff must demonstrate“a loss of use of 19 property which is causally related to an unfair or deceptive act.” Mason v. Mortgage America, 20 Inc., 114 Wn.2d 842, 854 (1990); see also Hangman Ridge Training Stables, Inc. v. Safeco 21 22 Title Ins. Co., 105 Wn.2d 778, 792 (1986) (“The fourth element of a private CPA action requires a showing that plaintiff was injured in his or her business or property.” (citing RCW 23 24 25 19.86.090)). Second, a breach of contract is actionable where the contract “imposes a duty, the duty is breached, and the breach proximately causes damage to the claimant.” Northwest 26 Independent Forest Mfrs. V. Department of Labor and Industries, 78 Wn.App. 707, 712 27 (1995); see also Norm Advertising v. Monroe Street Lumber Co., 25 Wn.2d 391, 398 (1946). ORDER—6 1 2 In general, each breach of a contract gives rise to cause of action, even if a plaintiff has not suffered any actual damage. See Jacob’s Meadow Owner’s Ass’n v. Plateau 44 II, LLC, 139 3 Wn.App. 743, 754 (2007) (citations omitted). However, in a suit for damages only, a Court 4 may dismiss a breach of contract claim where damages have not been suffered. Id. Third, a 5 claim for unjust enrichment can be sustained only where (1) a benefit is conferred on one 6 party by the claimant, (2) the defendant receives the benefit knowingly, and (3) the defendant 7 retains the benefit under inequitable circumstances. Dragt v. Dragt/DeTray, LLC, 139 Wn. 8 9 App. 560, 576 (2007) (citation omitted). In short, all three causes of action require that Mr. Sypolt demonstrate some form of 10 11 actual damage or injury. The Court is persuaded by the Ninth Circuit’s description of non- 12 interest benefits as “never the property of the escrow companies’ customers.” Washington Legal 13 Foundation, 271 F.3d at 858. Mr. Sypolt could not earn these credits on his own and he 14 cannot describe any out-of-pocket loss from Talon’s retention of these benefits. He does not 15 describe what he would have done differently if he had known Talon’s practices. Plaintiff 16 17 cannot demonstrate that a material issue of fact exists as to an essential element of these 18 claims; Defendant is entitled to summary judgment. See Celotex, 477 U.S. at 323-24. 19 IV. 20 21 22 Duty as Fiduciary/Agent Similarly, even if Plaintiff had standing to sue, Talon is entitled to summary judgment on Mr. Sypolt’s breach of duty claims. The Washington Supreme Court defined the fiduciary nature of an escrow agent in National Bank of Washington v. Equity Investors. 81 Wn.2d 23 24 25 26 27 886, 910 (1973). The court described the relationship as follows: As agent, trustee or holder, the escrow holder owes a fiduciary duty to his principals in the same way that all agents are held to such standards. The escrow agent’s duties and limitations are defined, however, by his instructions . . . . As a general rule, the escrow holder must act strictly in accordance with the provisions of the escrow agreement . . . In his fiduciary capacity, he must ORDER—7 conduct the affairs with which he is entrusted with scrupulous honesty, skill, and diligence. 1 2 Id. (internal citations omitted). In Denaxas v. Standstone Court of Bellevue, L.L.C., the 3 Washington Supreme Court reiterated this standard while ruling against a plaintiff who could 4 5 6 7 not“allege any deviation from the agreed-upon instructions.” 148 Wn.2d 654, 663 (2003) (en banc). Plaintiff urges the Court to emphasize the“scrupulous honesty”aspect of the 8 relationship above all others. It is not apparent from the briefing or argument, however, how 9 Talon’s failure to describe its non-interest benefits falls short of this standard. Moreover, as 10 Denaxas makes clear, the relevant inquiry is determining whether the Talon deviated from its 11 escrow agreement. In pertinent part, the escrow agreement provides that“the closing agent’s 12 13 fee is intended as compensation for the services set forth in these instructions.” (Weaver Decl., 14 Ex. 5.) Mr. Sypolt implies that, because Talon earned non-interest benefits, their fee cannot 15 be fairly described as compensatory. This would require too narrow a reading of 16 “compensation,” particularly in light of the other “services” outlined in the contract. Id. Mr. 17 18 Sypolt has not demonstrated any deviation from the contract or pointed to any provision of the contract that was dishonest. Thus, Plaintiff cannot demonstrate that Talon breached a duty as 19 20 fiduciary or agent. Defendant is entitled to summary judgment. Conclusion 21 22 Though Plaintiff might believe Talon’s practices are unfair, he has not articulated an 23 injury that would either confer standing or preserve his claims past summary judgment. The 24 Court ORDERS as follows: 25 1. The Court GRANTS Defendant’s motion for partial summary judgment. (Dkt. No. 26 19.) Plaintiff’s“retained interest” claims are dismissed with prejudice. 27 ORDER—8 1 2 3 2. Plaintiff’s motion for class certification (Dkt. No. 22) is MOOT. 3. Plaintiff’s motion to compel (Dkt. No. 55) is MOOT. 4. The parties’ joint motion to vacate and reset the case schedule is MOOT. 4 It is SO ORDERED. The Clerk is directed to transmit a copy of this Order to all counsel of 5 record. 6 Dated this 25th day of February, 2009. 7 A 8 9 Marsha J. Pechman United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 ORDER—9
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