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Mills v. Flagstar Bank

United States District Court, E.D. Kentucky, Southern Division, London

February 26, 2018

PAMELA MILLS, Plaintiff,



         This matter is pending for consideration of Defendant Flagstar Bank's (“Flagstar”) motion for judgment on the pleadings and Plaintiff Pamela Mills' motion for leave to file an Amended Complaint. [Record Nos. 9, 13] Mills' original Complaint was filed in the Clay Circuit Court and included four counts: (i) breach of fiduciary relationship; (ii) violations of the Kentucky Consumer Protection Act; (iii) breach of contract; and (iv) fraudulent misrepresentation. [Record No. 1-1] Flagstar removed the matter to this Court and filed a motion for judgment on the pleadings. [Record Nos. 1, 9] Mills now seeks leave to file an Amended Complaint that omits the breach of fiduciary relationship claim and adds factual allegations in support of her remaining counts. [Record No. 13-4] Flagstar opposes this request, contending that the proposed amendment would be futile because the Amended Complaint would not survive its pending motion for judgment on the pleadings. [Record No. 15] The Court agrees, and will grant Flagstar's motion for judgment on the pleadings. Mills' motion for leave to file an Amended Complaint will be denied for the reasons that follow.


         According to the proposed Amended Complaint, Mills purchased a home in 2003 for a total cash purchase price of approximately $75, 000.00. [Record No. 13-4 ¶ 8] She took out a loan in the amount of $76, 000.00, on or about December 30, 2009. The loan was secured by a mortgage on the property. [Id. ¶ 9] The mortgage was assigned to and serviced by Flagstar. [Id. ¶ 13] Mills made timely payments on the note until the summer of 2010. [Id. ¶ 15-16] At that time, she was an employee of the Kentucky Cabinet of Health and Family Services, and received diminished pay due to a State-imposed furlough. [Id. ¶ 15] As a result, Mills was approximately ten days late in submitting one of her payments. [Id. ¶ 15-16] When she tendered the late payment, Mills also included a payment covering the amount which would come due the following month. [Id. ¶ 16-17]

         When the check did not clear her bank account, Mills began making telephone calls to Flagstar to inquire about the receipt of her payments and the status of her mortgage. [Id. ¶ 18] However, she was either unable to talk to a Flagstar representative, or was put on hold by a representative that never returned to the call. Consequently, Mills was unable to obtain the information she requested. [Id.] Flagstar returned Mills' check approximately sixty days after its submission together with a handwritten note indicating that only a payment for three months would be accepted. [Id. ¶ 19]

         Mills received a notice from the Christopher Hill & Associates Law Firm (the “Hill Law Firm”) shortly thereafter, informing her that her mortgage was in default and would be the subject of a foreclosure action. [Id. ¶ 20] Mills called the Hill Law Firm approximately one month after receiving the notice and spoke with Kelly Vaden. [Id. ¶ 21] Vaden informed Mills that, to resolve the foreclosure proceedings, she should apply for a loan modification from Flagstar. [Id. ¶ 22] Mills called the number that the Hill Law Firm provided and requested an application for the loan modification. [Id. ¶ 23] She completed the application and sent it via facsimile to Flagstar along with sixty pages of required information including bank statements and paycheck stubs. [Id. ¶ 24] On several occasions over the next several months, Flagstar told Mills that it had not received this information. As a result, Mills was required to re-send the information multiple times. [Id. ¶¶ 26-27]

         Mills attempted to inquire about the status of her application, but was either unable to connect with a Flagstar representative or was not provided with any substantive information. [Id. ¶ 28] She was never told whether she qualified for a loan modification. [Id. ¶ 29]

         Flagstar pursued a foreclosure action regarding Mills' property during this same time period. [Id. ¶ 30] Mills did not defend in the action because, based on representations made by the Hill Law Firm, by Flagstar's agents, and in Flagstar's loan modification program materials and correspondence, she believed that seeking a loan modification was the proper means to stop the proceeding. [Id. ¶ 32] Flagstar filed a Report of Sale on August 14, 2012, and the foreclosure sale was confirmed by Order dated January 3, 2013, resulting in a deed divesting Mills of her interest in the property. [Id. ¶ 33]

         Over a year and a half later, the Consumer Financial Protection Bureau (“CFPB”) found that Flagstar had committed unfair acts or practices by impeding the borrowers' access to loss mitigation. [Record No. 13-7] Flagstar entered into a Consent Order with the CFPB on September 24, 2014, in which the CFPB found, in relevant part, that Flagstar: (i) failed to review loss mitigation applications within a reasonable time; (ii) withheld information the borrowers needed to complete their loss mitigation applications; (iii) improperly denied borrower requests for loan modifications and violated loss mitigation provisions found in federal regulations; and (iv) committed deceptive acts and practices regarding its borrowers. [Id.; see also Record No. 13-4, ¶ 36] Flagstar agreed to pay $27.5 million to approximately 6, 500 consumers whose loans it serviced, with at least $20 million to be distributed to approximately 2, 000 consumers who were foreclosed upon as of September 4, 2014. [Record No. 13-7, ¶¶ 7, 106-110] Flagstar also agreed to help the CFPB determine the identity and location of the affected customers and create and maintain business records of the type of loan Flagstar serviced, the affected customers' information, and the status of the loan as of 2014. [Id.; see also Record No. 13-4, ¶ 39]

         Mills received a letter from the CFPB dated October 2, 2015, informing her that she was identified as a borrower entitled to compensation under the settlement between Flagstar and the CFPB, and enclosing a check in the amount of $9, 994.28. [Record No. 13-4, ¶ 37; Record No. 13-8] She received a second letter from the CFPB dated June 20, 2017, which included a check in the amount of $1, 894.83. [Record No. 13-4, ¶ 37; Record No. 13-9] Both letters advised Mills that “[c]ashing the check enclosed does not stop you from making any legal claims that may be available to you.” [Record Nos. 13-8, 13-9]

         Mills alleges that she did not know that she may have any claim against Flagstar until receiving the letters from the CFPB, and that the payments she received failed to make her whole. [Id. ¶ 40-41] Mills filed the action in the Clay Circuit Court on September 28, 2017. [Record No. 1-1] Flagstar then removed the matter to this Court and filed a motion for judgment on the pleadings. [Record Nos. 4, 9] Mills now seeks leave to file an Amended Complaint asserting three counts: (i) violations of the KCPA; (ii) breach of contract; and (iii) fraudulent misrepresentation. [Record No. 13-4, ¶¶ 42-74]


         Under Rule 15(a)(2) of the Federal Rules of Civil Procedure, the Court may allow a party to amend a complaint without the other party's consent, and should freely grant leave “when justice so requires.” However, the Court need not grant a motion for leave to amend a complaint under Rule 15 if the amendment would be futile. Miller v. Calhoun Cnty., 408 F.3d 803, 817 (6th Cir. 2005); see also Riverview Health Inst. LLC v. Med. Mut. of Ohio, 601 F.3d 505, 519 (6th Cir. 2010) (citing Foman v. Davis, 178');">371 U.S. 178, 182 (1962)). Futility exists if “the proposed amendment would not permit the complaint to survive a motion to dismiss.” Miller, 408 F.3d at 817 (citing Neighborhood Dev. Corp. v. Advisory Council on Historic Pres., 632 F.2d 21, 23 (6th Cir. 1980)).

         The same standard of review applies to motions for judgment on the pleadings under Rule 12(c) and motions to dismiss under Rule 12(b)(6). See Roth v. Guzman, 650 F.3d 603, 605 (6th Cir. 2011); Horen v. Bd. of Educ. of Toledo City School Dist., 594 F.Supp.2d 833, 841 (N.D. Ohio 2009). Under that standard, the Court must determine whether the complaint alleges “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 Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The plausibility standard is met “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).

         Although the subject complaint need not contain “detailed factual allegations” to survive a motion to dismiss, the “plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (internal quotation marks and citation omitted). Further, while the Court is required to accept all of the plaintiff's factual allegations as true, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678.

         In general, where “matters outside the pleadings are presented to and not excluded by the court, the motion will be treated as one for summary judgment under Rule 56.” Fed.R.Civ.P. 12(d). However, a court may consider “exhibits attached to the complaint, public records, items appearing in the record of the case and exhibits attached to the defendant's motion to dismiss so long as they are referred to in the complaint and are central to the claims therein without converting the motion to one for ...

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