Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Cal. App. Ct.: Unfair business practices claims against CitiMortgage will move forward, (May 29, 2014)

By Greg Hammond, J.D.

A consumer has sufficiently alleged standing and that CitiMortgage, Inc. has engaged in unfair and fraudulent acts or practices in relation to a failed loan modification and eventual foreclosure, the California appellate court has found. Consequently, the trial court’s order sustaining CitiMortgage’s demurrer of the consumer’s unfair business practices claim was reversed, and CitiMortgage will face allegations that it violated section 17200 of California’s Business & Professions Code (Rufini v CitiMortgage, Inc., May 28, 2014, Siggins, P).

Background. James Rufini took out a $600,000 loan with CitiMortgage in 2007, for the purchase of his home. However, after he separated from his fiancée, Rufini sought and was approved for a loan modification. CitiMortgage informed him that the permanent modification would occur after making timely trial payments for three months. Although Rufini made the timely payments, CitiMortgage never granted the permanent loan modification. Instead, CitiMortgage returned Rufini’s checks for the modified monthly payments and informed Rufini that the foreclosure would not take place until a certain date. According to the record, the CitiMortgage representative assigned to Rufini’s file informed him that CitiMortgage knew the loan would be foreclosed, but nevertheless misled Rufini and sent him additional documents, even though there was no intention of modifying his loan. Consequently, Rufini filed suit against CitiMortgage, alleging unfair business practices, among other claims. However, the trial court sustained CitiMortgage’s demurrer, without leave to amend Rufini’s complaint. Rufini appealed.

Unfair business practices. According to the appellate court, section 17200 of California’s Business & Professions Code allows civil recovery in the event of “any unlawful, unfair or fraudulent business act or practice.” Although CitiMortgage alleged that the trial court properly sustained the demurrer because Rufini failed to properly allege a predicate act involving a violation of a different statute, the appellate court disagreed, noting that section 17200 creates three types of unfair competition-acts or practices, which are those that are unlawful, unfair, or fraudulent. Consequently, the allegation in Rufini’s complaint were sufficient to support his unfair competition law action based on underlying claims of fraud, negligent misrepresentation, breach of contract, and promissory estoppel.

CitiMortgage also argued that Rufini lacked standing to bring his unfair competition claim and that the unfair competition law only applied to ongoing conduct. However, the court was not persuaded. Specifically, the court reasoned that because Rufini alleged CitiMortgage’s unfair and deceptive practices deprived him of other ways of avoiding foreclosure, causing the loss of his property and the equity he had in it, he satisfied the standing requirements under section 17200. In addition, because section 17200 was amended to apply to any unlawful “act or practice,” the court found that the statute permits an unfair competition claim for a single instance of unfair conduct. Consequently, the appellate court found that the trial court erroneously sustained CitiMortgage’s demurrer of Rufini’s section 17200 cause of action.

The case number is A138480.

Attorneys: Richard Philip Sax for James Rufini. Peter Joseph Salmon (Pite Duncan LLP) for CitiMortgage Inc.

Companies: CitiMortgage Inc.

Cases: StateUnfairTradePractices CaliforniaNews