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Johnson v. Nationstar Mortgage, LLC

United States District Court, W.D. Kentucky, Owensboro Division

August 8, 2017

JOHN D. JOHNSON and LISA R. JOHNSON PLAINTIFFS
v.
NATIONSTAR MORTGAGE, LLC DEFENDANT

          MEMORANDUM OPINION AND ORDER

          Joseph H. McKinley, Jr., Chief Judge

         This matter is before the Court on Defendant Nationstar Mortgage, LLC's motion to dismiss for failure to state a claim. (DN 5.) Fully briefed, this matter is ripe for decision.

         I. Background

         Plaintiffs John and Lisa Johnson acquired property in Hawesville, Kentucky, in 2002. (Pl.'s First Am. Compl. [DN 1-3, at 75-87] ¶ 3.) They executed a mortgage on this property in favor of Countrywide Bank, FSA, in 2007. (Id. ¶ 4.) This mortgage was eventually transferred to Defendant Nationstar Mortgage, LLC (“Nationstar”) in 2013. (Id. ¶¶ 13-14.) Following the transfer of the mortgage, Nationstar repeatedly failed to correctly account for whether the Johnsons had made payments in a timely fashion or whether they had paid the correct amount, which required the Johnsons to undertake efforts to correct these errors. (Id. ¶¶ 26, 33, 35.)

         In October 2016, the Johnsons were contacted by agents from New Cingular Wireless (“Cingular”), who were inquiring about leasing a portion of the Johnson's property to construct a cell phone tower. (Id. ¶ 42.) Any such agreement would have required the consent of Nationstar, as the property was subject to their mortgage. (Id.) A Cingular representative informed the Johnsons that Nationstar was reporting that the Johnsons had not made their mortgage payments for October and November of that year, despite the fact that these payments had been made. (Id.) On December 5, 2016, Nationstar requested the following from Cingular in regards to their interest in leasing a portion of the mortgaged property: a $250 subordination fee, a complete/recorded copy of the lease agreement, an application for release of security, a survey/drill site map that shows the location of the distance of the house and the oil and gas operation, and a letter from an appraiser indicating the impact the operation will have on the value of the property.[1] (Id. ¶ 45.) Subsequently, on December 14, 2016, Cingular advised the Johnsons that it was no longer interested in placing a cell phone tower on their property, as “they could not deal with” Nationstar. (Id. ¶ 49.)

         The Johnsons filed this action in Daviess Circuit Court on March 23, 2017, initially asserting a single claim of negligent interference with a contractual relationship. (Pl.'s Compl. [DN 1-3, at 2-11].) Nationstar moved to dismiss the action, on the grounds that Kentucky does not recognize such a tort. (Def.'s Mot. to Dismiss [DN 1-3, at 17-20].) The Johnsons also moved to amend their complaint. On May 30, 2017, the state court granted the Johnsons' motion to amend their complaint and denied Nationstar's motion to dismiss. (State Court Orders [DN 1-3, at 88-89].) The Johnsons' first amended complaint asserts five claims: tortious interference with a contractual relationship (Count I), negligent misrepresentation (Count II), violations of the Kentucky Consumer Protection Act (Count III), entitlement to recover damages for state statutory violations (Count IV), and violations of the Fair Debt Collection Practices Act (Count V). (Pl.'s First Am. Compl. [DN 1-3, at 75-87] ¶ ¶ 50-70.) Nationstar then removed to this Court (DN 1) and filed a motion to dismiss for failure to state a claim. (DN 5.)

         II. Standard of Review

         Upon a motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6), a court “must construe the complaint in the light most favorable to plaintiffs, ” League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007) (citation omitted), “accept all well-pled factual allegations as true, ” id., and determine whether the “complaint . . . states a plausible claim for relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Under this standard, the plaintiff must provide the grounds for its entitlement to relief, which “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A plaintiff satisfies this standard only when it “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. A complaint falls short if it pleads facts “merely consistent with a defendant's liability” or if the alleged facts do not “permit the court to infer more than the mere possibility of misconduct.” Id. at 678-79. Instead, a complaint “must contain a ‘short and plain statement of the claim showing that the pleader is entitled to relief.'” Id. at 677 (quoting Fed.R.Civ.P. 8(a)(2)). “But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         III. Discussion

         A. Count I - Tortious Interference With A Contractual Relationship

         Count I of the First Amended Complaint alleges that the “negligent record keeping” of Nationstar caused it to report incorrect information regarding the Johnsons' mortgage to Cingular, and that this incorrect information caused the Johnsons to lose the proposed contract with Cingular for the lease. (Pl.'s First Am. Compl. [DN 1-3, at 75-87] ¶ 51.) Nationstar has moved to dismiss this count, arguing that Kentucky does not recognize a tort for negligent interference with business relations, and that the Johnsons have not alleged the existence of a contract. The Johnsons argue in opposition that Kentucky courts do recognize business torts grounded in negligent conduct.

         In Kentucky, there are a number of distinctions among the so-called “business torts” that require attention in this case. Under Kentucky law, tortious conduct is actionable both when there is a contract that the defendant causes not to be performed, and when there is a business relationship, expectancy, or advantage that the defendant causes the plaintiff to lose. See CMI, Inc. v. Intoximeters, Inc., 918 F.Supp. 1068, 1079 (W.D. Ky. 1995) (citing Restatement (Second) of Torts § 766).) Here, the Johnsons did not have a contract with Cingular; the first amended complaint alleges that Cingular did not enter into the lease because of the conduct of Nationstar. Therefore, the Johnsons can only recover for tortious interference with a prospective business advantage.

         However, Kentucky case law also establishes that “[t]ortious interference liability ‘is predicated upon an intentional interference, '” rather than one grounded in negligence. Ventas, Inc. v. Health Care Property Investors, Inc., 635 F.Supp.2d 612, 621 (W.D. Ky. 2009) (citing Carmichael-Lynch-Nolan Advert. Agency, Inc. v. Bennett & Assocs., Inc., 561 S.W.2d 99, 102 (Ky. Ct. App. 1977)). See also Byers v. Toyota Motor Mfg., Ky. Inc., 172 F.3d 47, at *2 (6th Cir. 1999) (Table) (“as a general rule, tortious interference with contractual relations requires an intentional interference and . . . generally there is no liability for a negligent interference with a contract”) (citing Kentucky law). Therefore, the Johnsons may only assert one claim against Nationstar: intentional interference with a prospective business advantage.

         For such a claim to survive a motion to dismiss, the Johnsons must assert six elements: “(1) the existence of a valid business relationship or its expectancy; (2) [the defendant's] knowledge thereof; (3) [the defendant's] intentional act of interference; (4) their improper motive; (5) causation; and (6) special damages.” Ventas, 635 F.Supp.2d at 621. Nationstar has argued that the Johnsons do not allege any ...


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