Opinion
Civil Action 22-cv-03168-NYW-MDB
04-19-2024
GENARO R. ROLDAN, and CLAUDIA S. ROLDAN, Plaintiffs, v. NEWREZ, LLC, Defendant.
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Maritza Dominguez Braswell United States Magistrate Judge
This matter is before the Court on Plaintiffs Genaro R. Roldan and Claudia S. Roldan's Motion to Leave to File an Amended Complaint. ([“Motion to Amend”], Doc. No. 34.) Defendant NewRez, LLC has responded. ([“Response”], Doc. No. 36. Plaintiffs have not replied and the time to do so has passed. For the reasons set forth herein, the Court RECOMMENDS the Motion to Amend be DENIED.
PRO SE SUMMARY
The Court recommends denying your Motion to Amend because the alleged claims are not likely to survive dismissal, making amendment futile. First, as to the fraudulent misrepresentation, fraudulent inducement, and negligent misrepresentation claims, your broad assertions lack sufficient support to show, with particularity, what fraud or misrepresentation Defendant committed. Second, your Fair Credit Reporting Act claim cannot withstand dismissal because the statutory sections you cite do not give rise to a viable claim under the circumstances alleged here. Finally, to the extent you argue Defendant violated additional federal and state laws-your factual allegations are insufficient to support those claims. This is only a high-level summary of this Court's decision and does not contain all the relevant information. The Court's full decision is set forth below, along with details about your right to object to this decision.
BACKGROUND
In 2021, Plaintiffs entered into a $353,479 loan agreement with Universal Lending Corporation to purchase property located in Colorado Springs. (Doc. No. 36 at 9, Ex. 1 (Notice of Assignment); Doc. No. 34-1 at ¶¶ 6-8.) Plaintiffs allege they made a down payment of $15,000 on the loan and made 15 monthly payments “of roughly $2,182.” (Doc. No. 34-1 at ¶¶ 7-8,12.) Plaintiffs also signed a note and deed of trust to secure the loan. (Id. at ¶¶ 8-10.) On June 2, 2021, Plaintiffs received notice that Defendant would be servicing the loan. (Id. at ¶ 12.)
Because the Notice of Assignment is relevant to this case and a public record, the Court takes judicial notice of the Deed. See Hodgson v. Farmington City, 675 Fed.Appx. 838, 840-41 (10th Cir. 2017) (courts may take judicial notice of public records).
On December 22, 2022, Plaintiffs filed a complaint against Defendant. (Doc. No. 5.) In their complaint, Plaintiffs did not explicitly state any causes of action, but did allege Defendant violated numerous state and federal laws, including the Fair Debt Collection Practices Act, the Truth in Lending Act, Colorado's enacted version of the Uniform Commercial Code, and committed constructive fraud. (See id. at ¶¶ 6-27.) Shortly after, Defendant filed a Motion to Dismiss, arguing Plaintiffs failed to state a claim for relief. (Doc. No. 8 at 1.)
On July 27, 2023, this Court recommended dismissal of all claims. (Doc. No. 28.) Specifically, the Court recommended dismissing claims brought pursuant to the Truth in Lending Act and Fair Debt Collection Practice with prejudice, while recommending that the Uniform Commercial Code and constructive fraud claims be dismissed without prejudice. (See id. at 14.)
On August 23, 2023, the presiding judge adopted this Court's recommendation and directed Plaintiffs to file a Motion for Leave to File an Amended Complaint by September 22, 2023. (Doc. No. 32.)
On September 18, 2023, Plaintiff filed the instant Motion to Amend, seeking to add claims for breach of fiduciary duty, “intention or negligent misrepresentation[,]” and “fraud in the inducement[.]” (Doc. No. 34-1 at 6-8.) In support of their claims, Plaintiffs allege:
• the deed of trust “is evidence that Defendant was not a true party of interest from July 2021 through November of 2022 thereby violating Colorado Revised Statutes §6-10108” (Id. at ¶ 20);
• Defendant “fraudulently misrepresented their standing[,]” and “furnished deceptive forms and fictitious obligations as monthly statements” (Id. at ¶¶ 21, 23);
• “Defendant has defamed Plaintiff by reporting later payments to third party credit reporting agencies” (Id. at ¶ 24); and
• “Defendant's fraudulent activities” caused Plaintiffs to suffer “mental stress and anguish[.]” (Id. at ¶ 25.)
The Proposed Amended Complaint also reintroduces several allegations and claims already addressed and dismissed by the court. (See generally id.)
Defendant responds that the Court should reject the proposed amendments as futile. (Doc. No. 36 at 3.) Specifically, Defendant argues Plaintiffs' misrepresentation/fraudulent inducement, negligent misrepresentation, Fair Credit Reporting Act [“FCRA”], and remaining claims either lack sufficient factual support or fail as a matter of law. (Id. at 3-6.) The Court addresses each argument below.
LEGAL STANDARDS
When a party files a motion to amend after the deadline for amendment of pleadings expires, courts often analyze the motion under a two-step inquiry. First, a court considers whether the moving party has demonstrated good cause to amend the Scheduling Order pursuant to Rule 16(b) of the Federal Rules of Civil Procedure. See Gorsuch, Ltd., B.C. v. Wells Fargo Nat'l Bank Assoc., 771 F.3d 1230, 1240 (10th Cir. 2014). Next, a court weighs whether the amendment should be allowed pursuant to Rule 15(a). Id.
In this case, the presiding judge directed Plaintiffs to file a Motion for Leave to File an Amended Complaint by September 22, 2023. (Doc. No. 32.) Thus the Rule 16(b) standard, which concerns scheduling deadlines, is either inapplicable or satisfied because the District Judge has contemplated amendment at this juncture.
Rule 15(a) provides that leave to amend “shall be freely given when justice so requires.” Fed.R.Civ.P. 15(a)(2). A general presumption exists in favor of allowing a party to amend its pleadings, see Foman v. Davis, 371 U.S. 178, 182 (1962), and the non-moving party bears the burden of showing that the proposed amendment is improper. Openwater Safety IV, LLC v. Great Lakes Ins. SE, 435 F.Supp.3d 1142, 1151 (D. Colo. 2020). However, the Court may refuse leave to amend “upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment.” Maloney v. City of Pueblo, 323 F.R.D. 358, 360 (D. Colo. 2018) (quoting Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993). Whether to allow an amendment is within the trial court's discretion. Tesone v. Empire Mktg. Strategies, 942 F.3d 979, 990 (10th Cir. 2019).
A proposed amendment is futile if the amended complaint would be subject to dismissal. Openwater Safety IV, 435 F.Supp.3d at 1151. To withstand a motion to dismiss, the complaint, when taken as true and in the light most favorable to the plaintiff, “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Thus, the crux of a court's analysis on a motion to amend, especially when futility of amendment is argued, is “not whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002) (quotation omitted).
In applying these principles, this Court is mindful Plaintiffs proceed pro se and thus affords their papers and filings a liberal construction. Smith v. Allbaugh, 921 F.3d 1261, 1269 (10th Cir. 2019). But the Court cannot and does not act as their advocate, United States v. Griffith, 928 F.3d 855, 864 n.1 (10th Cir. 2019), and applies the same procedural rules and substantive law to Plaintiffs as to a represented party. See Requena v. Roberts, 893 F.3d 1195, 1205 (10th Cir. 2018); Dodson v. Bd. of Cnty. Comm'rs, 878 F.Supp.2d 1227, 1236 (D. Colo. 2012). Additionally, “even though pro se parties generally should be given leave to amend, it is appropriate to dismiss without allowing amendment where it is obvious that the plaintiff cannot prevail on the facts [they] ha[ve] alleged and it would be futile to give [them] an opportunity to amend.” Knight v. Mooring Cap. Fund, LLC, 749 F.3d 1180, 1190 (10th Cir. 2014) (quotation omitted).
ANALYSIS
I. Fraudulent Misrepresentation and/or Fraudulent Inducement Claims
Plaintiffs first contend Defendant engaged in fraudulent misrepresentation and/or fraudulent inducement by “fraudulently misrepresent[ing] their standing” and providing “deceptive forms and fictitious obligations as monthly statements[.]” (Doc. No. 34-1 at ¶¶ 21, 23). Plaintiffs also generally argue “Defendant's fraudulent activities” caused them to suffer “mental stress and anguish[.]” (Id. at ¶ 25). In response, Defendant asserts Plaintiffs have not adequately alleged the time, location, or exact content of Defendant's allegedly false representations, nor have they identified who made those representations. (Doc. No. 36 at 3.)
To plead a viable claim for fraudulent misrepresentation or fraudulent inducement, a plaintiff must sufficiently plead: (1) defendant made a fraudulent misrepresentation of fact or knowingly failed to disclose a fact that defendant had a duty to disclose; (2) the fact was material; (3) plaintiff relied on the misrepresentation or failure to disclose; (4) plaintiff's reliance was justified; and (5) damages. Granite Southlands Town Center, LLC v. Provost, 445 Fed.Appx. 72, 75 (10th Cir. 2011); see also Dean v. Wright Med. Tech., Inc., 593 F.Supp.3d 1086, 1096 (D. Colo. 2022) (same elements applied for fraudulent misrepresentation). Importantly, because the elements require allegations of fraud, Plaintiffs are subject to Rule 9's particularity requirement. See Dean, 593 F.Supp.3d at 1094. Thus, Plaintiffs “must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. Pro. 9(b).
In support of their fraud allegations, Plaintiffs allege that from July 2021 to November 2022, Defendant “collected 15 monthly payments of roughly $2,182” despite not being “a party of interest[.]” (Doc. No. 34-1 at ¶¶ 20-22.) Although Plaintiffs broadly assert Defendant “fraudulently misrepresented their standing[,]” “furnished deceptive forms and fictitious obligations as monthly statements[,]” and otherwise generally committed “fraudulent activities”-these allegations do not specify when and where these alleged misrepresentations occurred or what specific circumstances give rise to fraud. (Id. at ¶¶ 20-25.) Nowhere do Plaintiffs quote specific statement(s) attributed to Defendant, nor do they provide any identifying information regarding when, to whom, or in what manner Defendant allegedly made the statements. See Koch v. Koch Indus., Inc., 203 F.3d 1202, 1237 (10th Cir. 2000) (finding allegations insufficient under Rule 9(b) where the complaint “did not state that the [p]laintiffs' allegations of fraud were based on information and belief” or “set forth any factual basis to support such a belief”). In other words, these bare and conclusory allegations are insufficient “to afford defendant fair notice of [ ] plaintiff's claim[s] and the factual ground upon which it is based” and cannot satisfy Rule 9(b). Dean, 593 F.Supp.3d at 1094 (quotation omitted); see also Koch, 203 F.3d at 1237. Because Plaintiffs' fraudulent misrepresentation and fraudulent inducement claims would be subject to dismissal, amendment is futile.
II. Negligent Misrepresentation Claim
Plaintiffs also contend Defendant committed negligent misrepresentation, asserting that the deed of trust “is evidence that Defendant was not a true party of interest from July 2021 through November of 2022 thereby violating Colorado Revised Statutes [sic] §6-10-108[.]”(Doc. No. 34-1 at ¶ 20.) Defendant argues Plaintiffs' allegations do not comply with Rule 9(b). (Doc. No. 36 at 5.) And that, in any case, Plaintiffs “cannot base their claim on the fact [Defendant] did not become the record deed of trust beneficiary until November 2022 since the deed of trust transfers with the note automatically.” (Id.)
Aside from this broad allegation, Plaintiffs do not expound on how Defendant allegedly violated C.R.S. 6-10-108. See Ashcroft, 556 U.S. 662, 678. The Court finds this conclusory allegation falls short of stating a viable claim for relief, and thus, allowing any amendment on this issue would be futile.
The elements of a negligent misrepresentation claim are: (1) one in the course of their business, profession or employment; (2) made a misrepresentation of a material fact, without reasonable care; (3) for the guidance of others in their business transactions; (4) with knowledge that their representations will be relied upon by the injured party; and (5) the injured party justifiably relied on the misrepresentation to their detriment. Allen v. Steele, 252 P.3d 476, 482 (Colo. 2011).
Here, Plaintiffs have not alleged with sufficient particularity the second element of negligent misrepresentation-that Defendant misrepresented a material fact. Plaintiffs offer only vague assertions, devoid of specific factual allegations explaining which, if any, alleged misrepresentation was made to them personally. But as noted above, “mere conclusory statements, do not suffice.” Ashcroft, 556 U.S. 662, 678. Rather, at a minimum, Rule 9(b) requires that Plaintiffs set forth the “what, when, where, and how” of the alleged fraud. Dean, 593 F.Supp.3d at 1096.
As with the fraudulent misrepresentation claim, the negligent misrepresentation claim is subject to Rule 9's particularity requirement, because the claim is “based on the same set of alleged facts[.]” Hardy v. Flood, 2018 WL 1035085, at *3 (D. Colo. Feb. 23, 2018) (quotation omitted); see also Dean, 593 F.Supp.3d at 1094 (“plaintiff's claims for negligent misrepresentation and fraudulent misrepresentation both require plaintiff to plead with particularity that defendant made false statements that plaintiff reasonably relied upon.”). Thus, Plaintiffs “must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. Pro. 9(b).
Plaintiffs briefly argue the deed of trust is evidence that Defendant was not a real party in interest because Defendant did not become the record deed of trust beneficiary until November 22, 2022. (Doc. No. 34-1 at ¶ 26.) But Colorado law makes clear that the deed of trust transfers with the note automatically. Indeed, assignment of “the note itself is all that must be done. It is unnecessary to have any separate document purporting to transfer or assign the mortgage on the real estate, for it will follow the obligation automatically.” In re Cannady, 621 B.R. 16, 30 (Bankr. D. Colo. 2020) (quoting Columbus Investments v. Lewis, 48 P.3d 1222, 1226 n. 4 (Colo. 2002); see also Patrick v. Bank of N.Y. Mellon, 502 Fed.Appx. 744, 750 (10th Cir. 2012) (“any deficiency in the Assignment is immaterial because the beneficial interest in a deed of trust follows the note; assignment of a deed of trust is not required”). Thus, this argument and the related factual allegations do not save Plaintiff's claim. Because Plaintiffs have failed to adequately plead all elements of negligent misrepresentation, the related amendment would be futile.
III. FCRA Claim
Plaintiffs also appear to allege a violation of the FCRA because Defendant purportedly defamed Plaintiffs by “reporting later payments to third party credit reporting agencies.” (Doc. No. 34-1 at ¶ 24.) Defendant contends Plaintiffs fail to state a valid FCRA claim because section 1681s-2(a) does not afford a private cause of action, and section 1681s-2(b) requires Plaintiffs to first file a dispute with a credit reporting agency, which Plaintiffs do not allege occurred here. (Doc. No. 36 at 5.) The Court agrees with Defendant.
The FCRA regulates the collection, dissemination, and use of consumer credit information in the United States. See 15 U.S.C. § 1681, et seq. Pursuant to 1681s-2(a), entities furnishing information to consumer reporting agencies, like Defendant, have certain responsibilities. 15 U.S.C. § 1681s-2(a). However, section “1681s-2(a) provides no private cause of action.” Pinson v. Equifax Credit Info. Servs., Inc., 316 Fed.Appx. 744, 751 (10th Cir. 2009); see also Sanders v. Mountain Am. Fed. Credit Union, 689 F.3d 1138, 1147 (10th Cir. 2012) (“right of action is limited to claims against the credit reporting agency; it does not extend to furnishers”). Indeed, “subsection (c) eliminates remedies to consumers for violations of subsection (a), and subsection (d) provides that the duties imposed under subsection (a) can be enforced only by government agencies and officials.” Donna v. Countrywide Mortg., No. 14-cv-03515-CBS, 2015 WL 9456325, at *5 (D. Colo. Dec. 28, 2015) (quotation omitted).
Section 1681s-2(b) on the other hand, does create a private cause of action for consumers against a furnisher of credit information, but it requires that furnishers conduct an investigation only “[a]fter receiving notice pursuant to section 1681i(a)(2) of this title of a dispute” concerning the accuracy of information provided to a consumer reporting agency. 15 U.S.C. § 1681s-2(b)(1). And 1681i(a)(2), in turn, requires that a consumer reporting agency provide a furnisher with notice of a dispute. See 15 U.S.C.A. § 1681i (a)(2) (“the agency shall provide notification of the dispute to any person who provided any item of information in dispute.” (emphasis added).) In other words, the 1681s-2(b) obligation arises only after the furnisher receives notice of a dispute from a credit reporting agency-notice received directly from the consumer does not trigger the furnishers' duties. See also Aklagi v. Nationscredit Financial, 196 F.Supp.2d 1186, 1193-94 (D. Kan. 2002) (“[U]nder the plain language of the statute, the duty of a furnisher of credit information to investigate a credit dispute is triggered only after the furnisher receives notice of the dispute from a consumer reporting agency, not just the consumer”).
The Proposed Amended Complaint does not indicate Defendant received notice of a dispute from a credit reporting agency. See Pinson, 316 Fed.Appx. at 750-51 (affirming dismissal of FCRA claim for failure to allege a credit reporting agency notified furnisher of information that its information was in dispute). It does not even allege Plaintiffs themselves provided notice, though if they had, “notice of a dispute received directly from the consumer does not trigger furnishers' duties under subsection (b)[.]” Byrd v. GMAC Mortg., LLC, No. 1:19-cv-00651-DDD-STV, 2019 WL 10270261, at *2 (D. Colo. Nov. 22, 2019) (quotation omitted).
In sum, because Plaintiffs do not have a private cause of action under subsection (a) and because they do not allege Defendants were notified about disputed information provided to a credit reporting agency, they cannot plausibly state a valid FCRA claim against Defendant.
III. Remaining Claims
Finally, the Court turns to the remaining contentions in the Proposed Amended Complaint concerning Defendant's purported violations of various state and federal statutes. (See generally Doc. No. 34.) Plaintiffs broadly assert Defendant violated various sections of the Uniform Commercial Code, the Truth in Lending Act, engaged in unfair and deceptive trade practices, passed “fictitious obligations[,]” defamed Plaintiffs, and breached their fiduciary duty.
But Plaintiffs have failed to state a claim for relief that is plausible on its face. See Ashcroft, 556 U.S. at 678. Plaintiffs conclusorily argue Defendant committed numerous state and federal violations, but their arguments and conclusory statements are unsupported by factual allegations. This Court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Id. And although this Court is required to liberally construe pleadings drafted by self-represented plaintiffs, this does not relieve Plaintiffs of the “burden of alleging sufficient facts on which a recognized legal claim could be based.” See Requena, 893 F.3d at 1205 (quotation omitted). This is especially true given that in all other respects, the Proposed Amended Complaint closely resembles the original complaint, wherein all claims were dismissed.
Moreover, this Court previously recommended that Plaintiffs' Truth in Lending Act [“TILA”] claims be dismissed because Plaintiffs did not hold a rescission right to the residential mortgage loan in question and any additional TILA claims were time-barred. (Doc. No. 28 at 67.) Now Plaintiffs reassert and reargue “their Right of Rescission/Right to Cancel pursuant to 12 CFR § 1635 and 15 USC § 1635 for fraud[.]” (Doc. No. 34-1 at ¶ 18.) This claim suffers from the same defect as before-as a matter of law Plaintiffs cannot hold a rescission right to a residential mortgage loan. See 12 C.F.R. § 1026 (implementing section 1635's direction that residential mortgage transactions are excluded from the right to rescind). In the Court's view,
Plaintiffs' TILA claim rehashes the same allegations that were previously recommended for dismissal, and, despite some minor alterations, remains substantially similar in nature. Allowing the proposed amendment would essentially amount to relitigating claims that have already been addressed by the Court.
Even granting Plaintiffs the benefit of liberal construction, amendment here would be futile as none of Plaintiffs' conclusory allegations plausibly suggest that Defendant could be liable for the alleged federal and state violations. The Court therefore recommends denying the Motion to Amend.
CONCLUSION
For the foregoing reasons, the Court RECOMMENDS that the Motion to Amend be DENIED.
ADVISEMENT TO THE PARTIES
Within fourteen days after service of a copy of the Recommendation, any party may serve and file written objections to the Magistrate Judge's proposed findings and recommendations with the Clerk of the United States District Court for the District of Colorado.
28 U.S.C. 636(b)(1); Fed.R.Civ.P. 72(b); In re Griego, 64 F.3d 580, 583 (10th Cir. 1995). A general objection that does not put the district court on notice of the basis for the objection will not preserve the objection for de novo review. “[A] party's objections to the magistrate judge's report and recommendation must be both timely and specific to preserve an issue for de novo review by the district court or for appellate review.” U.S. v. One Parcel of Real Prop. Known As 2121 East 30th Street, Tulsa, Okla., 73 F.3d 1057, 1060 (10th Cir. 1996). Failure to make timely objections may bar de novo review by the district judge of the magistrate judge's proposed findings and recommendations and will result in a waiver of the right to appeal from a judgment of the district court based on the proposed findings and recommendations of the magistrate judge. See Vega v. Suthers, 195 F.3d 573, 579-80 (10th Cir. 1999) (a district court's decision to review a magistrate judge's recommendation de novo despite the lack of an objection does not preclude application of the “firm waiver rule”); One Parcel of Real Prop., 73 F.3d at 1059-60 (a party's objections to the magistrate judge's report and recommendation must be both timely and specific to preserve an issue for de novo review by the district court or for appellate review); Int'l Surplus Lines Ins. Co. v. Wyo. Coal Ref. Sys., Inc., 52 F.3d 901, 904 (10th Cir. 1995) (by failing to object to certain portions of the magistrate judge's order, cross-claimant had waived its right to appeal those portions of the ruling); Ayala v. U.S., 980 F.2d 1342, 1352 (10th Cir. 1992) (by their failure to file objections, plaintiffs waived their right to appeal the magistrate judge's ruling); but see, Morales-Fernandez v. INS, 418 F.3d 1116, 1122 (10th Cir. 2005) (firm waiver rule does not apply when the interests of justice require review).