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Smith v. Flagstar Bank, F.S.B.

United States District Court, E.D. Virginia, Richmond Division

March 17, 2015

JAMES B. SMITH, Plaintiff,
FLAGSTAR BANK, F.S.B., Defendant.


JAMES R. SPENCER, Senior District Judge.

THIS MATTER is before the Court on the Motion of Defendant, Flagstar Bank, F.S.B., to Dismiss Amended Complaint Pursuant to Fed.R.Civ.P. 12(b)(6) ("Motion") (ECF No. 13). Plaintiff filed a response in Opposition on January 21, 2105 ("Opp'n Mem.") (ECF No. 14), and Defendant subsequently filed a reply on January 30, 2015 ("Reply Mem.") (ECF No. 18).[1] A hearing was held on Friday, March 13, 2015. For the reasons set forth below, the Motion is GRANTED in part and DENIED in part.


a. Factual Background

Plaintiff, James B. Smith ("Smith" or "Plaintiff"), owned a home located at 17137 Claiborne Street, Richmond, Virginia 23220. On February 4, 2009, Smith entered into a home mortgage loan in the amount of $224, 257.00, in which he was the borrower and Defendant, Flagstar Bank, F.S.B. ("Flagstar" or "Defendant"), was the lender. The loan was evidenced by a note signed by Smith and secured by a deed of trust.

On August 2, 2011, Smith called Flagstar for the purpose of pursuing a Home Affordable Modification Program ("HAMP") loan modification.[2] Under this program, the federal government incentivized participating servicers to enter into agreements with struggling homeowners to make adjustments to existing mortgage obligations in order to make the monthly payments more affordable. Flagstar was a participant in HAMP. At the time Smith called Flagstar, he was one day in arrears as to the August 2011 payment on the note. Smith spoke to a Flagstar representative who told Smith that he could not qualify for a HAMP loan modification unless Smith fell at least 30 days in arrears on the note.

Based on that conversation, Smith stopped making payments on the note and fell more than 30 days behind. Because of his late payments, Flagstar then made negative credit reports to credit reporting agencies, which caused a significant reduction in Smith's credit score. Recently, Flagstar has sent notices to Smith indicating that Flagstar is near a decision to seek foreclosure on Smith's home.

b. Procedural Background

On September 10, 2014, Smith commenced the underlying state court action in the Circuit Court for the City of Richmond, and on September 30, 2014, the Summons and Complaint were served on the Secretary of the Commonwealth of Virginia. The original five-count Complaint alleged (1) actual fraud; (2) constructive fraud; (3) breach of the implied covenant of good faith under the Uniform Commercial Code; (4) breach of the implied covenant of good faith and fair dealing under common law; and (5) seeks declaratory judgment to enjoin Flagstar from foreclosing on the home. In his prayer for relief, Smith requested a judgment for compensatory damages and $350, 000 in punitive damages as well as reasonable attorney's fees. Flagstar removed the case to this Court on October 30, 2014 (ECF No. 1) and subsequently filed a Motion to Dismiss. On December 10, 2014, Smith filed an Amended Complaint, thus mooting the original Motion to Dismiss. The Amended Complaint alleges the same five counts as identified above. Flagstar then filed its present Motion to Dismiss the Amended Complaint.


Rule 12 of the Federal Rules of Civil Procedure allows a defendant to raise a number of defenses to a complaint at the pleading stage, including failure to state a claim. A motion to dismiss for failure to state a claim upon which relief can be granted challenges the legal sufficiency of a claim, rather than the facts supporting it. Fed.R.Civ.P. 12(b)(6); Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007); Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). A court ruling on a Rule 12(b)(6) motion must accept all of the factual allegations in the complaint as true, see Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999); Warner v. Buck Creek Nursery, Inc., 149 F.Supp.2d 246, 254-55 (W.D. Va. 2001), in addition to any provable facts consistent with those allegations, Hishon v. King & Spalding, 467 U.S. 69, 73 (1984), and must view these facts in the light most favorable to the plaintiff, Christopher v. Harbury, 536 U.S. 403, 406 (2002).

To survive a motion to dismiss, a complaint must contain factual allegations sufficient to provide the defendant with "notice of what the... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Rule 8(a)(2) requires the complaint to allege facts showing that the plaintiff's claim is plausible, and these "[f]actual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555 & n.3. In other words, the plaintiff's complaint must consist of more than "a formulaic recitation of the elements of a cause of action" or "naked assertion[s] devoid of further factual enhancement." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citations omitted). The Court need not accept legal conclusions that are presented as factual allegations, Twombly, 550 U.S. at 555, or "unwarranted inferences, unreasonable conclusions, or arguments, " E. Shore Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000).

Further, in ruling on a motion to dismiss, "a court may consider official public records, documents central to plaintiff's claim, and documents sufficiently referred to in the complaint so long as the authenticity of these documents is not disputed." Witthohn v. Federal Ins. Co., 164 F.Appx. 395, 396 (4th Cir. 2006) (citations omitted); see also Sec'y of State for Defence v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007) (internal citations omitted) ("We may consider documents attached to ...

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