United States District Court, E.D. Wisconsin
MICHAEL A. HURLEY and CAROL J. HURLEY, Plaintiffs,
DITECH FINANCIAL LLC, Defendant.
ORDER GRANTING MOTION TO DISMISS (DKT. NO.
PAMELA PEPPER United States District Judge.
Michael and Carol Hurley have filed an amended complaint
against defendant Ditech Financial LLC, alleging violation of
loss mitigation regulations, equitable estoppel, interference
with contract, and violation of Wis.Stat. §224.77. Dkt.
No. 14. The defendant filed a motion to dismiss for failure
to state a claim. Dkt. No. 15. For the reasons explained
below, the court grants the motion to dismiss.
March 4, 2014, the defendant obtained a default foreclosure
judgment against the plaintiffs. Dkt. No. 14 at ¶4; Dkt.
No. 17 at 1. The sheriff's sale occurred nine months
later. Dkt. No. 16 at 2; Dkt. No. 16-1. On September 15,
2015-nine months after the sheriff's sale-the plaintiffs
asked the defendant for a loan modification. Dkt. No. 14 at
¶7. The defendant denied the request the next day, and
filed a motion to confirm the sheriff's sale.
Id. at ¶8. The plaintiffs objected to that
motion. Id. at ¶10.
months after the plaintiffs first asked for the loan
modification, the defendant inquired whether the plaintiffs
were still interested in the modification. Id. at
¶12. The plaintiffs responded affirmatively, and asked
for the appropriate paperwork. Id. at ¶13. They
submitted the paperwork the next day. Id. at
¶14. On January 18, 2016 (about two months later), the
defendant requested new copies of the plaintiffs' bank
statements, indicating that the copies the plaintiffs
previously had provided were not legible. Id. at
¶17. The plaintiffs provided the new bank statements by
January 21, 2016. Id. at 18. In a letter dated
February 15, 2016, the defendant denied the loan modification
request. Id. at ¶23; see Dkt. No. 1-1.
The letter stated that the plaintiffs had been evaluated for
several different loan modification options. Dkt. No. 1-1 at
2. The letter went on to give specific reasons why the
plaintiffs were denied- mostly due to their failure to meet
certain eligibility criteria. Id.
this chain of events, the defendant repeatedly rescheduled
the hearing on its motion to confirm sale. Dkt. No. 14 at
¶¶11, 15, 21, 22. The plaintiffs filed this suit on
November 18, 2016. Dkt. No. 1. The Wisconsin court confirmed
the sale on November 28, 2016. Dkt. No. 17 at 2.
first cause of action alleges that the defendant acted
contrary to 26 U.S.C. §2605(f) and 12 C.F.R.
§1204.41-a federal statute and a federal regulation.
Dkt. No. 14 at 5. This court has jurisdiction over that cause
of action under 28 U.S.C. §1331. The amended complaint
asks the court to exercise supplemental jurisdiction over the
state law causes of action under 28 U.S.C. §1367. Dkt.
No. 14 at 1. If the plaintiffs' federal question claim
survives, §1367 would give the court jurisdiction over
the state law claims, should the court choose to exercise it.
order to survive a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6), “a pleading must contain a
‘short and plain statement of the claim showing that
the pleader is entitled to relief.'” Ashcroft
v. Iqbal, 556 U.S. 662, 677-78 (2009)(quoting
Fed.R.Civ.P. 8(a)(2)). Under this standard, “a
plaintiff still must provide only ‘enough detail to
give the defendant fair notice of what the claim is and the
grounds upon which it rests, and, through his allegations,
show that it is plausible, rather than merely speculative,
that he is entitled to relief.” Tamayo v.
Blagojevich, 526 F.3d 1074, 1083 (7th Cir.
2008)(citations omitted). “A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678, (quoting Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
their first cause of action, the plaintiffs allege
“violation of loss mitigation regulations.” Dkt.
No. 14 at 3. They allege that the defendant did not exercise
due diligence in collecting the documents needed for the
plaintiffs' modification application, and that it
misapplied the “FNMA HAMP” program guidelines.
Id. at 3-4. (While the plaintiffs do not decode this
alphabet soup, the court assumes that they refer to the
Federal National Mortgage Association, also known as
“Fannie Mae, ” and its Home Affordable
Modification Program, known as “HAMP.”) They
allege that the defendant's actions (or inaction)
violated 26 U.S.C. §2605(f) and 12 C.F.R. §1024.41.
Dkt. No. 14 at ¶25.
second cause of action alleges equitable estoppel, asserting
that the plaintiffs relied on the defendant's
representation that it would review their modification
application in a timely manner. Id. at
¶¶36-38. The third cause of action alleges that the
defendant interfered with their contract with Fannie
Mae/FNMA. Id. at ¶¶40-45. Finally, the
plaintiffs allege that the defendant violated the mortgage
banker regulations of Wis.Stat. §224.77. Id. ...