United States District Court, N.D. California
ALICIA HERNANDEZ, EMMA WHITE, KEITH LINDNER, TROY FRYE, COSZETTA TEAGUE, IESHA BROWN, RUSSELL and BRENDA SIMONEAUX, JOHN and YVONNE DEMARTINO, ROSE WILSON, TIFFANIE HOOD, GEORGE and CYNDI FLOYD, DEBORA GRANJA, and DIANA TREVINO, individually and on behalf of all others similarly situated, Plaintiffs,
v.
WELLS FARGO & COMPANY, and WELLS FARGO BANK, N.A., Defendants.
ORDER GRANTING MOTION TO DISMISS AND JUDICIAL
NOTICE
WILLIAM ALSUP UNITED STATES DISTRICT JUDGE
INTRODUCTION
In this
putative class foreclosure action, defendant Wells Fargo
& Company moves to dismiss. For the following reasons,
the motion is GRANTED.
STATEMENT
Defendant
Wells Fargo & Company (WFC) is a financial services
company headquartered in San Francisco, California. The
firm's primary operating subsidiary is Wells Fargo Bank,
N.A. (Bank).
Plaintiffs
all had their mortgage loans serviced by the Bank when they
faced various financial hardships and defaulted on their
loans. Although they sought loan modifications, those
applications were denied (Amd. Compl. ¶¶ 30-33).
At the
time plaintiffs requested loan modifications, defendants
participated in the Home Affordable Modification Program
(HAMP), through which mortgage lenders received stimulus
funds in exchange for issuing loan modifications to qualified
borrowers. Although plaintiffs met the program's
threshold requirements for such a modification, defendants
failed to offer them one. Instead, the Bank foreclosed on
eleven of the named plaintiffs and more than five hundred
other customers who could not make their monthly payments
without a modification. Two plaintiffs, Russell and Brenda
Simoneaux, did not face foreclosure and ultimately paid off
their mortgage (id. ¶¶ 30-34, 109-13).
A 2010
investigation by the Office of Comptroller of the Currency
(OCC) found numerous deficiencies in the Bank's mortgage
modification and foreclosure practices, including that it
failed to devote adequate oversight to its foreclosure
processes, failed to ensure compliance with applicable laws,
and failed to adequately audit its foreclosure procedures.
The Bank and WFC each signed a consent order agreeing to
correct these deficiencies. In its consent order, WFC was
ordered to strengthen its oversight of the Bank's
compliance with HAMP, ensure its audit and compliance
programs were adequately staffed, and to improve the
information and reports that it would regularly review.
WFC's Board of Directors agreed. The Bank's Board of
Directors, made up entirely of WFC board members, agreed to
its consent order as well. However, in June 2015, the OCC
found the Bank and WFC were still not compliant, and that the
Bank failed to detect multiple systematic errors in the
automated decision-making software it used to determine
customers' eligibility for a mortgage modification
(id. ¶¶ 35-47).
In
October 2015, the Bank discovered a calculation
“error” in a software tool it used to determine
whether to issue a mortgage modification. This calculation
error, which underlies the claims in this case, caused
certain fees to be misstated and resulted in incorrect
modification denials. The OCC issued a $70 million penalty.
These errors were not disclosed until 2018. In total, 870
customers were incorrectly denied a loan modification, 545 of
who lost their homes in foreclosure. According to plaintiffs,
these repeated failures to implement adequate testing
procedures - as well as other high-profile scandals that have
roiled the bank in recent years - are emblematic of
defendants' chronic and intentional lack of oversight
(id. ¶¶ 48-69).
In
December 2018, plaintiff Alicia Hernandez filed this putative
nationwide class action, asserting claims for negligence,
conversion, violations of California's Unfair Competition
Law, and violations of the New Jersey Consumer Fraud Act. In
response to a motion to dismiss, Hernandez filed an amended
complaint in February 2019. The operative complaint added 15
new named plaintiffs, added WFC as a new defendant, and added
nine additional claims for relief. WFC now moves to dismiss
the complaint for failure to state a claim (Dkt. Nos. 1, 44,
73). The instant motion is brought only by Wells Fargo &
Company. Wells Fargo Bank, N.A. moved separately to dismiss
(Dkt. No. 59), which was granted in part and denied in part
(Dkt. No. 87). The instant order only addresses the claims
from the parties' Joint Response to the Court's June
3, 2019 Order (Dkt. No. 96). This order follows full briefing
and oral argument.
ANALYSIS
A
complaint must plead “enough facts to state a claim to
relief that is plausible on its face.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has
facial plausibility when its factual allegations, rather than
mere conclusory statements, create the reasonable inference
that the defendant is liable for the misconduct alleged.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A court
ruling on a motion to dismiss must accept factual allegations
in the complaint as true and construe the pleadings in the
light most favorable to the nonmoving party. Manzarek v.
St. Paul Fire & Marine Ins. Co., 519 F.3d 1025,
1030-31 (9th Cir. 2008). Conclusory allegations or
“formulaic recitation of the elements” of a
claim, however, are not entitled to the presumption of truth.
Iqbal, 556 U.S. at 681.
1.
INDIRECT LIABILITY.
A
parent may be vicariously liable for its subsidiary's
actions under an agency ...