United States District Court, W.D. Washington, Seattle
THOMAS S. ZILLY, District Judge.
THIS MATTER comes before the Court on a motion for summary judgment, docket no. 72, brought by defendant Wells Fargo Bank, N.A. ("Wells Fargo"). Having reviewed all papers filed in support of, and in opposition to, Wells Fargo's motion,  the Court enters the following Order.
Plaintiffs Campidoglio LLC, Carmen LLC, and San Marco LLC are Washington limited liability companies that each own a multi-family residential property subject to a deed of trust securing an adjustable-rate mortgage ("ARM") promissory note executed in favor of World Savings Bank, FSB ("World Savings"). See Exs. 25-30 to Dolan Decl. (docket no. 87); Complaint at ¶¶ 11-13, Ex. 1 to Notice of Removal (docket no. 1-1). Each note indicates a maximum interest rate of 11.95%, as well as a minimum interest rate, which is 2.65% on the two loans issued in 2004, and 4.11% on the third loan, which originated in 2006. Exs. 25-27 to Dolan Decl. The interest rate for each loan is calculated as the sum of (i) the "stated margin, " which for all three loans is 2.65%, and (ii) the "current index, " which may vary from month to month. Id.
When the loans were made in 2004 and 2006, the "current index" was the "weighted average of the interest rates in effect as of the last day of each calendar month on the deposit accounts of the federally insured depository institution subsidiaries... of Golden West Financial Corporation ("GDW")." Id. At that time, World Savings was a subsidiary of GDW, and the "current index" described in the notes was the GDW "cost of savings" index or GDW COSI. GDW and World Savings were subsequently purchased by Wachovia Corporation ("Wachovia"), and World Savings changed its name to Wachovia Mortgage, FSB. See Dolan Decl. at ¶ 2 & Ex. 24.
In July 2007, plaintiffs were notified that, because the GDW COSI would no longer be available, it would be replaced with either the Wachovia COSI or, at the borrower's election, the Wachovia certificates of deposit index ("CODI"). Ex. B to Complaint (docket no. 1-1 at 42-44). Plaintiffs did not elect the CODI. The Wachovia COSI became the applicable "current index" for the loans at issue sometime between September 15 and October 14, 2007, depending on each plaintiff's billing cycle. Id. The substitution was pursuant to the following language contained in each note:
The Lender may choose an alternative index to be the Index if the Index is no longer available.... The selection of the alternative index shall be at the Lender's sole discretion. The alternative index may be a national or regional index or another type of index approved by the Lender's primary regulator. The Lender will give notice to the Borrower of the alternative index.
Exs. 25-27 to Dolan Decl.
As a result of a later merger, Wachovia Mortgage, FSB converted to a national bank with the name Wells Fargo Bank Southwest, National Association. Ex. 23 to Dolan Decl. It then merged into Wells Fargo Bank, N.A., the only remaining defendant in this action. See id. ; see also Ex. 24 to Dolan Decl. In October 2009, plaintiffs received notice that the Wachovia COSI would be replaced with the Wells Fargo COSI in December 2009. Ex. C to Complaint (docket no. 1-1 at 46-47). In May 2012, plaintiffs filed a putative class action in King County Superior Court, alleging that one or both index substitutions constituted a breach of contract, a breach of the covenant of good faith and fair dealing, a violation of Washington's Consumer Protection Act ("CPA"), and unjust enrichment. Complaint at ¶¶ 78-126. Wells Fargo timely removed the case to this Court, and now moves for summary judgment in its favor on all of these claims.
A. Standard for Summary Judgment
The Court shall grant summary judgment if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323 (1986). A fact is material if it might affect the outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248 (1986). To survive a motion for summary judgment, the adverse party must present affirmative evidence, which "is to be believed" and from which all "justifiable inferences" are to be favorably drawn. Id. at 255, 257. When the record,  however, taken as a whole, could not lead a rational trier of fact to find for the non-moving party, summary judgment is warranted. See Celotex , 477 U.S. at 322.
B. Use of Alternative Index
The Home Owners' Loan Act of 1933 ("HOLA") was enacted in the midst of the Great Depression to restore the public's confidence in savings and loan associations by inter alia implementing centralized regulation according to nationwide "best practices." Silvas v. E*Trade Mortg. Corp. , 514 F.3d 1001, 1004 (9th Cir. 2008); see also Fidelity Fed. Sav. & Loan Ass'n v. de la Cuesta , 458 U.S. 141 (1982). In 1989, HOLA was substantially amended by the Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA"), Pub. L. No. 101-73, 103 Stat. 183 (1989), and the powers and duties of the regulatory agency created by HOLA were transferred to the Department of Treasury's Office of Thrift ...