Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES NEWS—E.D. Cal.: Mortgage holders successfully alleged deceptive modification scheme by bank, (May 22, 2014)

By Greg Hammond, J.D.

JPMorgan Chase Bank, N.A. was not entitled to dismissal of two residential mortgage holders’ California Unfair Competition Law (UCL) claim regarding a mortgage modification scheme, the federal district court in Sacramento has ruled. In reaching its decision to deny Chase’s motion to dismiss the UCL claim, the district court determined that the customers had proper standing, had a proper claim based on an “unlawful, unfair, or fraudulent business act or practice,” and were rightfully not seeking damages under the UCL (Ferguson v JPMorgan Chase Bank, N.A., May 20, 2014, Mueller, K).

Background. Robert and Nancy Ferguson had a residential mortgage loan with Chase. After Robert Ferguson lost his employment in 2008, the Fergusons contacted Chase to inquire about mortgage modification options. At that time, a Chase representative told the Fergusons that they “should easily qualify for a modification” and “that there was no need to sell the Subject Property.” However, Chase told the Fergusons on multiple occasions that they needed to stop paying their premiums in order for the modification to be completed. After the Fergusons stopped paying their premiums in 2009, the modification process was completed and the Fergusons’ monthly mortgage payments were reduced from $2,890.39 to $1,394.

However, the Fergusons received an additional letter from Chase, informing them they have been approved for a Trial Plan Agreement that could allow a permanent workout solution upon completion of the plan. The Fergusons promptly submitted the requested documentation and made timely mortgage payments. In October 2009, the Fergusons were informed that their modification was denied. When they attempted to reapply for a modification in early 2010, they were told that Chase had already begun the foreclosure process, and the Fergusons were consequently forced to sell their property. They estimated that they had approximately $200,000 in equity when they began the modification process, but only had roughly $80,000 in equity when the property was sold.

The Fergusons brought seven claims against Chase, including allegations that Chase violated the UCL under California’s Business and Professions Code. The case was before the district court on Chase’s motion to dismiss the Fergusons’ first amended complaint.

UCL claim. In support of its motion, Chase argued that the Fergusons’ UCL claim must be dismissed because: (1) they lack standing to bring such a claim; (2) they do not meet any of the alternative grounds for a UCL claim; and (3) their allegations do not support relief under the UCL. The court disagreed, noting that the Fergusons alleged sufficient injury in fact to have standing to bring a UCL claim. In addition, because the Fergusons’ unfair completion claim is partially based on their intentional misrepresentation claim, which the court previously found to be viable, the court determined that they properly asserted a UCL claim based on an “unlawful, unfair, or fraudulent business act or practice.” Lastly, the court found that the Fergusons were rightfully not seeking damages under the UCL, but were only seeking “restitution and disgorgement.” Consequently, the motion to dismiss the Fergusons’ UCL claim was denied, and the remainder of the motion to dismiss was partially granted and partially denied.

The case number is 2:14-CV-00328-KJM-KJN.

Attorneys: Danny A. Barak (United Law Center) for Robert Ferguson. Jennifer Marie Porter (Keesal Young & Logan) for JPMorgan Chase Bank, NA.

Companies: JPMorgan Chase Bank, NA

Cases: StateUnfairTradePractices CaliforniaNews