Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—E.D. Mich.: Foreclosure after failed loan modification was not an unfair trade practice, (Jul 12, 2016)

By Glenn Sulzer, J.D.

A claim that a bank used a promised loan modification as a deceptive means to foreclose on a residential property was not cognizable under Michigan law as an unfair trade practice, according to a federal district court in Detroit, Michigan (Lucido v. U.S. Bank National Association, July 11, 2016, Lawson, D.).

Failed loan modification. Plaintiffs Sebastian and Kris Lucido defaulted on their obligations under a residential mortgage held by U.S. Bank in 2014. They maintained that U.S. Bank had promised to consider them for a loan modification or financial accommodation between the fall of 2014 and a sheriff’s sale of the property in March 2015. However, no modification agreement was consummated or signed.

U.S. Bank continued with the foreclosure by advertisement. The foreclosure notice was published in a local paper for four successive weeks and also annexed to the property in a conspicuous place. However, the plaintiffs contended that the foreclosure was deficient because the bank did not post a foreclosure notice on the property within the applicable 15-day statutory time frame.

The plaintiffs further charged that U.S. Bank intentionally did not post the foreclosure notice in order to prevent them from entering into a loan modification. In addition, it was alleged that the bank used the loan modification process to deceive the plaintiffs and execute the foreclosure.

The bank purchased the property at the sheriff’s sale in March 2015. The plaintiffs subsequently filed suit in September 2015, alleging (among other claims) that the bank had engaged in an unfair trade practice. In response, U.S. Bank filed a motion to dismiss.

Unfair trade practice. Initially, the court noted that, in order to survive a motion to dismiss, a plaintiff must plead sufficient facts to state a plausible claim to relief. Accordingly, conclusions stated in a complaint must be plausibly supported by pleaded facts.

The court then concluded that the plaintiffs’ claim of an unfair trade practice did not state a cause of action. The plaintiffs did not specifically identify the cause of action. Moreover, the court stressed, Michigan common law does not provide an independent cause of action for a deceptive acts or unfair trade practices.

The court speculated that the plaintiffs were actually alleging a violation of the Michigan Consumer Protection Act (MCPA). However, the court explained, the MCPA does not apply to claims arising out of residential mortgage loan transactions. Accordingly, the plaintiffs’ claim of an unfair trade practice was not cognizable under Michigan law. Therefore, the bank’s motion to dismiss was granted.

The case is No. 15-13697.

Attorneys: Darwyn P. Fair (Darwyn P. Fair & Associates) for Sebastian Lucido. Bonsitu A. Kitaba (Dykema Gossett PLLC) for U.S. Bank National Association.

Companies: U.S. Bank National Association

Cases: StateUnfairTradePractices MichiganNews