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Kautsman v. Carrington Mortgage Services LLC

United States District Court, W.D. Washington, Seattle

January 23, 2018

NIKOLAY KAUTSMAN, et al., Plaintiffs,



         This matter comes before the Court on Defendants' motion to dismiss (Dkt. No. 63) Plaintiffs' Third Amended Complaint (Dkt. No. 60). Having considered the parties' briefing and the relevant record, the Court GRANTS in part and DENIES in part Defendants' motion (Dkt. No. 63) for the reasons explained herein.

         I. BACKGROUND

         Plaintiffs obtained a loan from Countrywide Bank to finance a 2006 purchase of residential real property in King County, Washington. (Dkt. No. 60 at 10-11.) The loan is governed by an Adjustable Rate Note, requiring the periodic payment of interest and principal, and secured by a Deed of Trust recorded against the property. (Dkt. Nos. 60-1, 60-2.) Two provisions contained in the Deed of Trust are at issue. The first, entitled “Preservation, Maintenance and Protection of the Property; Inspections, ” permits the “Lender or its agent” to “enter and inspect” the exterior of the property. (Dkt. No. 60-2 at ¶ 7.) The second, entitled “Protection of Lender's Interest in the Property and Rights Under the Security Agreement, ” permits the “Lender” to take certain actions if the borrower abandons the property or violates covenants in the Deed of Trust. (Id. at ¶ 9.) A failure to make periodic payments would be such a violation. (Id. at ¶ 1.) In the event of an abandonment or violation, the lender may “do and pay for whatever is reasonable or appropriate to protect Lender's interest in the Property” including “entering the property to make repairs, change locks, replace or board up doors and windows, drain water from pipes . . . and have utilities turned on or off.” (Id. at ¶ 9.)

         Defendant Carrington Mortgage Services, LLC (“CMS”) began servicing Plaintiffs' Note in 2013. (Dkt. No. 60 at 2, 16). Defendant Carrington Home Solutions, L.P. (“CHS”) is a CMS affiliate who contracts with CMS to provide various services, including home inspections on properties where the borrower is behind on his or her payments, and re-keying and winterizing abandoned properties pending foreclosure proceedings. (Id. at 3, 6, 7.) CMS deems a property to be abandoned based on the results of CHS's inspections. (Id.)

         Plaintiffs assert that after they fell behind on their Note payments, CMS instructed CHS to inspect their property, which CHS did on March 18, 2013, finding it vacant. (Id. at 17.)[1] CMS then instructed CHS to enter, re-key, and winterize the property. (Id. at 17-18.) The winterizing consisted of turning off utilities, taping over sinks and appliances, and “other steps that impaired the use of the property.” (Id.) Plaintiffs received no notice of these activities. (Id. at 18.) They only discovered the “intrusion” when they attempted to show the property to a prospective tenant “on or about” March 27, 2013. (Id. at 18.) Plaintiffs allege the prospective tenant “more likely than not” would have rented the property had Plaintiffs been able to show it, but because Plaintiffs could not, their “credibility” with the prospective tenant was lost. (Id.) Plaintiffs replaced the lock, reversed CHS's winterization efforts, and eventually moved into the property themselves. (Id. at 18-19.) CHS continued to periodically inspect the property, but did not again attempt to re-key or winterize it. (Id.) CMS added the amount it owed to CHS for services rendered to Plaintiffs' outstanding note balance: $15 per inspection, $65 for re-rekeying, and $175 for winterizing. (Id. at 19-20.)

         Plaintiffs assert that Defendants' inspection, re-key, and winterization activities were unnecessary and that this is a common practice by Defendants. (Id. at 3-7.) According to Plaintiffs, Defendants engage in these activities (1) in an effort to inflate the fees they charge and (2) to drive borrowers to abandon their homes, thereby reducing lenders' barriers to foreclosure proceedings. (Id.) Plaintiffs allege that between 2010 and 2016, CMS inspected and re-keyed the homes of numerous Washington borrowers before foreclosure proceedings commenced. (Id. at 24-25.) Accordingly, Plaintiffs bring this suit as a class action. (See generally Dkt. No. 60.)

         Plaintiffs filed a Class Action Complaint and First Amended Class Action Complaint in state court against CMS, asserting CMS's actions were unlawful and resulted in injury. (Dkt. No. 1-2.) CMS removed the matter to this Court and moved for partial judgment on the pleadings under Federal Rule of Civil Procedure 12(c). (Dkt. No. 17.) This Court granted the motion, dismissing some of Plaintiffs' claims without prejudice and with leave to amend. (Dkt. No. 26.) Plaintiffs filed a Second Amended Class Action Complaint, alleging additional facts supporting their claims, dropping a claim, adding a claim, and naming CHS as a defendant. (Dkt. No. 44). The Court granted CMS's subsequent motion to dismiss the Second Amended Complaint, dismissing all claims against CMS and CHS without prejudice and with leave to amend. (Dkt. No. 54.)

         Plaintiffs then brought a Third Amended Class Action Complaint, asserting the same claims as the Second Amended Complaint, but adding additional facts.[2] (Dkt. No. 60.) Plaintiffs alleged the following: Defendants' re-key and winterization activities represent a CPA violation; CMS's inspection activities represent a CPA violation; Defendants were unjustly enriched by the fees they charged for the inspection, re-key, and winterization activities; CMS breached its contract with Plaintiffs; and CMS violated its duty of good faith and fair dealing with Plaintiffs. (Id. at 28-44.) Defendants move to dismiss, asserting Plaintiffs' Third Amended Complaint adds “mostly irrelevant or conclusory allegations, ” and Plaintiffs “fail to overcome the deficiencies of their prior complaints.” (Dkt. No. 63 at 2.)


         A. Legal Standard

         A defendant may move to dismiss when a plaintiff “fails to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Under Rule 12(b)(6), the Court accepts all factual allegations in the complaint as true and construes them in the light most favorable to the nonmoving party. Vasquez v. L.A. County, 487 F.3d 1246, 1249 (9th Cir. 2007). However, to survive a motion to dismiss, a plaintiff must cite facts supporting a “plausible” cause of action. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). A claim has “facial plausibility” when the party seeking relief “pleads factual content that allows the Court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 672 (2009) (internal quotations omitted). Although the Court must accept as true a complaint's well-pleaded facts, “conclusory allegations of law and unwarranted inferences will not defeat an otherwise proper motion to dismiss.” Vasquez, 487 F.3d at 1249 (quotation omitted). “Dismissal for failure to state a claim is appropriate only if it appears beyond doubt that the non-moving party can prove no set of facts in support of his claim which would entitle him to relief.” Id. (quotation omitted).

         B. CPA Violations

         A properly pled CPA violation requires facts demonstrating the following elements: (1) an unfair or deceptive act or practice, (2) occurring in trade or commerce, (3) impacting the public interest, (4) that causes injury to business or property, and (5) causation. Hangman Ridge Training Stables v. Safeco Title Ins. Co., 719 P.2d 531, 533 (Wash. 1986). In moving to dismiss, Defendants assert Plaintiffs failed to adequately plead the first element-an unfair or deceptive act or practice. (Dkt. No. 63 at 8-11.) An act is per se unfair or deceptive if it violates a statute that declares the conduct at issue to be unfair or deceptive. Hangman Ridge, 719 P.2d at 535. Otherwise, “a plaintiff must show the conduct is ‘unfair' or ‘deceptive' under a case-specific analysis of those terms.” Mellon v. Regl. Tr. Services Corp., 334 P.3d 1120, 1126 (Wash.App. 2014). “[A]n act or practice can be unfair without being deceptive.” Klem v. Washington Mutual Bank, 295 P.3d 1179, 1187 (Wash. 2013). “[A] ‘practice is unfair [if it] causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and is not outweighed by countervailing benefits [to consumers or to competition][3].'” Id. (alteration in ...

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