Opinion
3:21-cv-00541-JR
08-26-2021
TRACIE ALLEN, Plaintiff, v. LOANDEPOT.COM, LLC, Defendant.
FINDINGS AND RECOMMENDATION
Jolie A. Russo United States Magistrate Judge
Defendant loanDepot.com, LLC moves to dismiss plaintiff Tracie Allen's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF 7. Defendant also filed a request for judicial notice of two documents related to plaintiff's complaint. ECF 8. For the reasons stated below, defendant's motion to dismiss should be granted in part and denied in part, and the request to take judicial notice should be denied.
BACKGROUND
This dispute arises out of plaintiff's rejected mortgage loan application from loanDepot. Plaintiff frames five causes of action to redress the denial of her loan application, which she alleges was done nefariously and based on her sex, race, or marital status. Plaintiff alleges claims under the Fair Housing Act, 42 U.S.C. §§ 3601, et. seq. (“FHA”); the Oregon Unfair Trade Practices Act, ORS 646.605, et seq. (“UTPA”); the Oregon Mortgage Lender Law, ORS 86A.095-.198, et seq. (“OMLL”); the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691, et. seq. (“ECOA”); and a common law fraud claim.
Plaintiff's journey to purchase a home began in 2015 when the City of Portland accepted plaintiff into the North/Northeast Initiative DPAL (“N/NE Initiative”), a program intended to reverse the effects of eminent domain and other gentrifying forces by providing up to $100,000.00 in down payment assistance to people whose families were formerly established in North and Northeast Portland neighborhoods. ECF 1 ¶ 5. Because of her family's history in those neighborhoods, plaintiff qualified for the Preference Policy. ECF1 ¶ 5. Between 2015 and late 2018, plaintiff was attending college, working, and improving her credit, with the goal of buying her first home. ECF ¶ 5. In addition to the N/NE Initiative, plaintiff applied and was qualified for $20,000.00 in forgivable down-payment assistance through the NeighborhoodLIFT program. ECF 1 ¶ 6. Around 2018, she started working with a loanDepot loan officer and applied for home financing. ECF 1 ¶ 6. She entered into an earnest money agreement on March 1, 2020, which a scheduled closing date of May 18, 2020, which was within the deadline for the NeighborhoodLIFT program. ECF 1 ¶ 7. A condition of buying the home was that plaintiff had to obtain conventional (rather than FHA) financing, which plaintiff communicated to loanDepot's loan officer. ECF 1 ¶ 8. Plaintiff alleges the loanDepot officer told her she was pre-approved for both conventional and FHA financing and assured her that he would be able to line up her loan by her deadline. ECF 1 ¶ 8. However, in April 2020, loanDepot's loan officer told plaintiff that she was only qualified under the FHA, making it impossible for her to purchase the home. ECF 1 ¶ 9. On May 4, 2020, loanDepot sent plaintiff a denial letter for both conventional and FHA financing. ECF 1 ¶ 10. Although plaintiff was able to obtain an extension of the NeighborhoodLIFT closing deadline to June 2020, she could not secure alternative financing quickly enough to access the $20,000.00 in NeighborhoodLIFT funds. ECF 1 ¶ 11. Plaintiff alleges damages of $20,000 in NeighborhoodLIFT funds and the inspection fees she had paid. ECF1 ¶ 11. She also seeks non-economic damages “as a result of the failed transaction” of at least $50,000. ECF 1 ¶ 12. Approximately four months after loanDepot denied plaintiff's loan application, she qualified to buy the same home with a conventional loan through a different mortgage lender. ECF 1 ¶ 13. Plaintiff alleges loanDepot “has engaged in a pattern of providing misleading and incompetent loan origination services to other single African American women.” ECF 1 ¶ 14 As a result, plaintiff alleges that “[l]oanDepot discriminated against her in the provision of services connected to the sale of housing, based on her race, marital status, and sex.” Id.
LEGAL STANDARD
When the plaintiff “fails to state a claim upon which relief can be granted, ” the court must dismiss the action. Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss, the complaint must allege “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). For the purposes for the motion to dismiss, the complaint is liberally construed in favor of the plaintiff and its allegations are taken as true. Rosen v. Walters, 719 F.2d 1422, 1424 (9th Cir. 1983). Regardless, bare assertions that amount to just a “formulaic recitation of the elements” of a claim “are conclusory and not entitled to be assumed true.” Ashcroft v. Iqbal, 556 U.S. 662, 680-81 (2009). Rather, to state a plausible claim for relief, the complaint “must contain sufficient allegations of underlying facts” to support its legal conclusions. Starr v. Bacca, 652 F.3d 1202, 1216 (9th Cir. 2011).
DISCUSSION
I. Request for Judicial Notice
The Court first addresses defendant's request for judicial notice because the facts contained in these documents inform much of defendant's briefing and argument on the motion to dismiss. Under Federal Rule of Evidence 201, a court may only take judicial notice of adjudicative facts that are not subject to reasonable dispute. Adjudicative facts are generally facts about the parties and their activities, businesses, and properties, usually answering the questions of who did what, where, when, how, why, with what motive or intent; adjudicative facts are roughly the kind of facts that go to a jury in a jury case. Marshall v. Sawyer, 365 F.2d 105, 111 (9th Cir. 1966). As Rule 201(b) makes clear, adjudicative facts are not subject to reasonable dispute when they are either: 1) generally known within the territorial jurisdiction of the trial court; or 2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.
In its request for judicial notice, defendant has not identified any specific adjudicative facts that would be appropriate for judicial notice under FRE 201. Instead, defendant asks the Court to take judicial notice of two documents attached as Exhibits 1 and 2 to its request. When a party fails to identify any specific adjudicative facts contained in a document that are appropriate for judicial notice, a court may only take judicial notice of the fact that a document exists; it may not take judicial notice of any disputed facts contained in the document. Lee v. City of Los Angeles, 250 F.3d 668, 689-90 (9th Cir. 2001); see also Kesey, LLC v. Francis, 2009 U.S. Dist. LEXIS 28078, 44 (D. Or. April 3, 2009), adopted by Kesey LLC v. Francis, 2009 U.S. Dist. LEXIS 38239 (D. Or. May 5, 2009) (following Lee). The Court has broad discretion to make these determinations. See Wright & Miller, 5C Fed. Prac. & Proc. Civ. § 1366, at 159 (3d ed. 2004) (“As the language of [Rule 12(b)(6)] suggests, federal courts have complete discretion to determine whether or not to accept the submission of any material beyond the pleadings that is offered in conjunction with a Rule 12(b)(6) motion and rely on it, thereby converting the motion, or to reject it or simply not consider it.”).
And, although defendant argues the documents are incorporated in plaintiff's complaint, the two documents defendant proposes to be judicially noticed are not sufficiently incorporated in the complaint to warrant judicial notice. The mere mention of a document in a pleading is not sufficient to incorporate the contents of the document by reference into the complaint. As the Ninth Circuit has held, “the mere mention of the existence of a document is insufficient to incorporate the contents of the document by reference.” U.S. v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003) (citations omitted). Rather, the pleading must reference a document “extensively” and the document must “form the basis of” or be “integral to” the plaintiff's claim. Id. And, crucially, incorporation by reference is appropriate only where no party questions the authenticity of the documents in question. Branch, 14 F.3d at 454; Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006).
Under the Ninth Circuit's standard, the Court should decline judicial notice of either document. Defendant has attached a pre-qualification letter that purports to preapprove plaintiff for a $250,000.00 loan, and a statement of credit denial, purportedly denying plaintiff credit for the loan. ECF 8, Exs. 1, 2. Plaintiff mentions both a pre-approval letter and a “denial letter” in her complaint. ECF 1 ¶¶ 7, 10. However, as noted above, the mere mention of these documents is insufficient, on its own, to allow the court to find the documents incorporated by reference. Plaintiff does not refer to either document “extensively, ” and neither document forms the basis of plaintiff's claim. Instead, these two documents are a small part of the narrative by which plaintiff explains that she began working with defendant to obtain financing. Moreover, nothing in the record makes it clear that either document is the document plaintiff refers to in her complaint.
Defendant has also failed to adequately authenticate either exhibit. The Ninth Circuit requires that “[i]f the documents are not physically attached to the complaint, they may be considered if the documents' authenticity ... is not contested and the plaintiff's complaint necessarily relies on them.” Lee, 250 F.3d at 688 (internal quotation marks omitted). Here, plaintiff contests the documents' authenticity. See ECF 13. Therefore, even if plaintiff relies on these documents in her complaint, they are not appropriate for judicial notice. The two exhibits appear to be the defendant's business records, but have not yet been produced to the plaintiff. And because no foundation has been established by a witness with knowledge and no context is provided that could assure this document is the one that plaintiff alleges was given to her, the authenticity of these document is in question, making them unsuitable for judicial notice.
Ultimately, defendant has not identified any adjudicative facts not subject to reasonable dispute contained in either document of which the Court could take judicial notice pursuant to FRE 201. There simply is not enough in the current record for the court to draw any adjudicative facts that are not subject to reasonable dispute. The Court should therefore deny defendant's request for judicial notice.
II. Plaintiff's Claim
1. Plaintiff's FHA Claim
Plaintiff first alleges that loanDepot “unlawfully discriminated against plaintiff on the basis of race and sex” and “engaged in discriminatory housing practices” in violation of the FHA when it denied plaintiff's loan application. ECF 1 ¶ 18. Because of this plaintiff alleges she incurred damages, and should be awarded punitive damages, costs, and attorney's fees. ECF 1 ¶¶ 19-20.
Under the FHA, it is “unlawful for any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin.” 42 U.S.C. § 3605. To state a claim under the FHA, “the plaintiff[] must plead that (1) [she was] a member of a protected class; (2) [she] attempted to engage in a ‘real estate-related transaction' with [the defendant], and met all relevant qualifications for doing so; (3) [the defendant] refused to transact business with the plaintiff[] despite [her] qualifications; and (4) the defendant[] continued to engage in that type of transaction with other parties with similar qualifications.” Bojorquez v. Wells Fargo Bank, NA, 2013 WL 6055258, at *6 (D. Or. Nov. 7, 2013).
Defendant moves to dismiss the FHA claim because plaintiff does not plead that she “met all relevant qualifications” for the loan at the start of this case. Not so. Under the FHA, all that is required for a plaintiff to plausibly allege she “met all relevant qualifications” for a loan is to plead sufficient factual information “to infer without speculating that she qualified.” Colquitt v. Manufacturers & Traders Tr. Co., 2016 WL 1276095, at *4 (D. Or. Apr. 1, 2016); Cederberg v. N.W. Priority CU, 2018 WL 1513663, at *3 (D. Or. Mar. 27, 2018). Here, plaintiff alleges she gave defendant's loan originator accurate credit and income information, and that she was qualified for home financing with defendant based on those qualifications. ECF 1 ¶ 7. The bank pre-approved plaintiff for the loan, and the loan officer allegedly assured plaintiff he would “be able to line up her loan by the [PCRI] deadline.” Id. ¶ 8. The fact that plaintiff qualified for financing with a different lender to buy the same home just four months later also supports a plausible inference that she was qualified and creditworthy for a loan from loanDepot. Id. ¶ 13. Therefore, because plaintiff pled sufficient facts to plausibly allege she met the relevant qualifications for the loan at issue, defendant's motion to dismiss plaintiff's FHA claim should be denied.
2. Plaintiff's ECOA Claim
Under the ECOA, “[i]t shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction . . . on the basis of race . . . sex or marital status . . . .” 15 U.S.C. § 1691(a)(1). To state a claim for violations of ECOA a plaintiff “must allege facts that plausibly suggest: (1) the plaintiff was a member of a protected class; (2) the plaintiff applied for credit from defendants; and (3) the plaintiff was denied credit on the basis of his or her protected class.” Egbukichi v. Wells Fargo Bank, NA, 184 F.Supp.3d 971, 980 (D. Or. 2016) (emphasis added).To allege denial on the basis of a protected classification, a plaintiff must plausibly allege she was qualified for credit, and was denied credit despite being otherwise qualified. Blair v. Bank of Am., N.A., 2012 WL 860411, *13 (D. Or. Mar.13, 2012) (citation omitted)
In its motion to dismiss defendant again argues that plaintiff fails to plead she was “qualified” to receive credit from loanDepot at the time of her application and was denied despite being qualified. But, as described above, plaintiff adequately pled facts to plausibly suggest she was qualified: her creditworthiness, pre-approval, representations from loanDepot's loan officer, and her ability to obtain a similar loan from another lender months after loanDepot's denial. ECF 1 ¶¶ 7, 8, 13. Defendant relies exclusively on the contents of documents outside the pleadings to argue plaintiff cannot state a claim. ECF 7 at 12. Because these documents are not subject to judicial notice, and, because plaintiff otherwise plausibly alleges the elements of a ECOA claim, defendant's motion to dismiss should be denied.
3. Plaintiff's Oregon UTPA Claim
To state a claim under the UTPA, plaintiff must allege: (1) a violation of § 646.608(1); (2) causation; (3) damages; and (4) willfulness by loanDepot. Colquitt v. Manufacturers & Traders Tr. Co., 144 F.Supp.3d 1219, 1231 (D. Or. 2015). Plaintiff alleges loanDepot made two “actionable misrepresentations . . . about the nature and qualities of the loan transaction, in violation of ORS 646.608(e) and (k)” to meet the first element of a UTPA claim. ECF 1 ¶ 23. Section 646.608 provides that violations include: (e) Represent[ations] that real estate, goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, quantities or qualities that the real estate, goods or services do not have or that a person has a sponsorship, approval, status, qualification, affiliation, or connection that the person does not have. Subsection (k) holds as a violation: Mak[ing] false or misleading representations concerning credit availability, or the nature of the transaction or obligation incurred. “Oregon's UTPA is violated ‘when the person committing the violation knew or should have known' the conduct was a violation.” Bromfield v. HSBC Bank Nev., 2014 WL 183895, at *5 (D. Or. Jan. 13, 2014). Thus, to state a claim under § 646.608(1)(k), plaintiff must plausibly allege that defendant knew or should have known that a representation it made regarding credit availability, the nature of a transaction, or an obligation incurred, was misleading or not true. See id.
Defendant argues that plaintiff's UTPA claim must be dismissed because the “misrepresentations” plaintiff challenges “are not misrepresentations at all under Oregon law.” ECF 17 at 7, n.2. The motion to dismiss does not elaborate on this point beyond conclusorily suggesting that because plaintiff cannot plead fraud, the alleged “misrepresentations” cannot form the basis of a UTPA claim. ECF 7 at 10. Defendant cites no Oregon law for this proposition, nor could the Court locate any relevant law. Instead, the Court finds the complaint directly pleads a misrepresentation about credit availability (that loanDepot could secure plaintiff's financing in time for her to meet the PCRI deadline). See, e.g., State ex rel. Redden v. Willamette Recreation, Inc., 54 Or.App. 156, 159-60, 634 P.2d 286 (1981). This is just the type of “misrepresentation” section 646.608 contemplates. Defendant cites no other reason for this claim to be dismissed, therefore, defendant's motion to dismiss the UTPA claim should be denied.
4. Plaintiff's Oregon's OMLL Claim
A party may bring a private action under ORS 86A.151 against a person that employs, or should have employed, a mortgage loan originator “if the person engages in a residential mortgage transaction in which the person ... (b)(A)(i) Makes an untrue statement of a material fact; or (ii) Omits from a statement a material fact that would make the statement not misleading in light of the circumstances under which the person makes the statement[.]” Or. Rev. Stat. 86A.151. See Taylor v. Gorilla Capital, Inc., 2018 WL 3186946, at *4 (D. Or. June 28, 2018). Plaintiff alleges that “[a]s described particularly above” loanDepot “transacted business as a mortgage banker or mortgage broker by means of an untrue statement of a material fact . . . .” or loanDepot “employed a device, scheme or artifice to defraud the plaintiff, or knowingly made untrue statements of material fact or to omit to state a material fact . . . .” ECF 1 ¶¶ 34-35. Defendant again argues that because the alleged misrepresentations are not “actionable” (i.e. the basis for a fraud claim), plaintiff's OMLL claim must be dismissed. ECF 17 at 7, n.2. As with defendant's UPTA argument, this has no basis in Oregon law, and defendant does not cite any case law in support of its argument. Because plaintiff's complaint plausibly alleges the elements of a claim under the OMLL, defendant's motion should be denied as to the OMLL claim as well.
5. Plaintiff's Fraud Claim
To establish a claim for fraud under Oregon law, a plaintiff must show: (1) the defendant made a material representation that was false; (2) the defendant knew that the representation was false; (3) the defendant intended the plaintiff to rely on the misrepresentation; (4) the plaintiff justifiably relied on the misrepresentation; and (5) the plaintiff was damaged because of that reliance. Claus v. Columbia State Bank, 2019 WL 5624754, at *5 (D. Or. Oct. 30, 2019) (citing Horton v. Nelson, 252 Or.App. 611, 616 (2012)). Here, plaintiff alleges that loanDepot made two false representations: the loan officer's alleged (1) “instruction to plaintiff that it was safe to incur inspection costs because she would be approved for a conventional loan;” and (2) “statement that [loanDepot] could provide her with financing in time to qualify her to obtain NeighborhoodLIFT funds . . . .” ECF 1 ¶ 27.
Assuming loanDepot advised plaintiff that it was “safe to incur inspection costs” when she had not yet been approved for a loan and it “could provide her with financing in time to qualify her to obtain NeighborhoodLIFT funds, ” such representations concern an alleged failure to perform a promise relating to future action or conduct, which cannot constitute a fraudulent misrepresentation under Oregon law. See, e.g., Butte Motor Co. v. Strand, 225 Or. 317, 321 (1960) (“[T]he failure to perform a promise relating to future action or conduct does not constitute fraud.”); Hill Meat Co. v. Sioux-Preme Packing Co., 2009 WL 1346606, at *7 (D. Or. May 13, 2009) (“Harm caused by a breach of a promise is actionable through a breach of contract action, not a fraud claim.”). Furthermore, loanDepot's alleged representation that it was “safe” for plaintiff to incur inspection costs was a statement of opinion that is not actionable under Oregon law. See Jeska v. Mulhall, 71 Or.App. 819, 821 (1985).
An exception to this general rule applies when a false statement of value is made by someone in a fiduciary or “confidential” relationship with the plaintiff. Jeska, 71 Or.App. at 821-22. As there was no fiduciary duty owed by loanDepot to plaintiff, see Leif v. Umpqua Bank, 2017 WL 1758094, at *5 (D. Or. Feb. 15, 2017), report and recommendation adopted, 2017 WL 1788659 (D. Or. May 4, 2017) (“lenders do not have a fiduciary duty towards borrowers”), and plaintiff does not allege any such fiduciary relationship, such statement of opinion is not actionable as a matter of law.
A fraud claim under Oregon law cannot rely upon a broken promise or another party's statement of opinion. Because the alleged fraudulent statements were, at worst, unfulfilled promises or statements of the loanDepot loan officer's opinion, the Court should dismiss plaintiff's fraud claim for failure to plead a fraudulent misrepresentation under Oregon law.
RECOMMENDATION
For the foregoing reasons, defendant's motion to dismiss (ECF 7) should be granted in part as to plaintiff's fraud claim, and denied in part as to the remainder of plaintiff's claims. Defendant's request that the court take judicial notice (ECF 8) should be denied.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties shall have fourteen (14) days within which to file a response to the objections. Failure to timely file objections to any factual determination of the Magistrate Judge will be considered as a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to this recommendation.