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Martino v. Seterus, Inc.

United States District Court, D. Connecticut

July 23, 2018

TERESA MARTINO, Plaintiff,
v.
SETERUS, INC., Defendant.

          RULING RE: MOTION TO DISMISS (DOC. NO. 47)

          JANET C. HALL JANET C. HALL UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         The plaintiff, Teresa Martino, filed the Amended Complaint on November 6, 2017. See Amended Complaint (“Am. Compl.”) (Doc. No. 30). In it, Martino brings three claims against the defendant Seterus, Inc. (“Seterus”) for breach of contract, negligence, and violation of the Connecticut Unfair Trade Practices Act (“CUTPA”). See id. Seterus filed a Motion to Dismiss the Amended Complaint on January 15, 2018. See Motion to Dismiss (“Mot. to Dismiss”) (Doc. No. 47).

         For the reasons set forth below, the Motion to Dismiss is GRANTED IN PART AND DENIED IN PART.

         II. FACTS

         The Amended Complaint alleges the following facts.[1] Teresa Martino entered into a mortgage agreement with Bank of America, Inc. (“Bank of America”) regarding the loan on her home, which was purchased in 2000. See Am. Compl. at ¶¶ 8-9. In 2014, Martino began facing financial hardship and fell behind on her mortgage payments. See id. at ¶ 10. In February 2015, Martino applied for a loan modification with Bank of America. See id. at ¶ 12. Martino alleges that she completed the Trial Period Plan and followed Bank of America's instructions in order to finalize her loan modification (“June 2015 Agreement”), but Bank of America claimed that it never received the signed June 2015 Agreement.[2] See id. at ¶¶ 12-23. In October 2015, Bank of America told Martino it would not honor the June 2015 Agreement. See id. at ¶ 26. At Bank of America's instruction, Martino submitted a new application for loan modification. See id. at ¶ 27.

         In November 2015, Bank of America notified Martino that her loan would be transferred to Seterus for servicing on December 1, 2015. See id. at ¶ 29. In December 2015, Bank of America sent Martino a letter acknowledging that she had submitted all necessary documents to be considered for a modification. See id. at ¶ 30. However, Bank of America did not inform Seterus of the history and status of Martino's loan or of her completed application for loan modification when it transferred the loan to Seterus. See id. at ¶ 31. Martino communicated this information to Seterus and alleges that Seterus “either did not receive documentation of Ms. Martino's loan history and failed to follow up with Bank of America to obtain it, or it refused to review and acknowledge the documentation it received.” See id. at ¶ 32.

         Seterus refused to acknowledge the June 2015 Agreement or Martino's reapplication for a loan modification submitted to Bank of America. See id. at ¶ 33. Martino reapplied for loan modification assistance with Seterus and completed the Trial Period Plan in February 2016. See id. at ¶¶ 34-35. Seterus offered Martino a permanent Loan Modification Agreement in May 2016, with monthly payments of $1, 367.08. See id. at ¶ 36. Martino was unhappy with the terms of the modification and spent several months negotiating for a shorter repayment period. See id. She alleges that Seterus representatives repeatedly assured her that she would have the option to modify her loan according to her desired terms, but Seterus ultimately refused to offer such a modification. See id. During the negotiations, Martino made at least one payment on the mortgage on June 27, 2016. See id. at ¶ 38. When Seterus refused to offer her desired terms, Martino signed and returned the Loan Modification Agreement (“August 2016 Agreement”) in August 2016. See id. at ¶¶ 37-39. Seterus refused to accept the signed August 2016 Agreement and sent Martino a fresh copy of the Loan Modification Agreement (“October 2016 Agreement”) to be signed and returned by October 19, 2016. See id. at ¶ 40.

         In September 2016, Seterus placed Martino on another Trial Period Plan (“September Trial Plan”). See id. at ¶ 41. When Martino asked Seterus how much she should pay, a Seterus representative told her to pay $1, 349.75, as detailed in the September Trial Plan. See id. at ¶ 42. Martino made that payment under the September Trial Plan on October 3, 2016. See id. The October 2016 Agreement was signed by Martino on October 17, 2016, and by Seterus on October 20, 2016. See Id. at ¶¶ 44-45.

         Martino alleges that Seterus did not honor the executed October 2016 Agreement, however, and continued to require Martino to make payments under the September Trial Plan amount. See id. at ¶ 46. Martino made two more payments under the September Trial Plan and completed the plan in December 2016. See id. at ¶ 47. Seterus, however, refused to offer Martino a modification after completion of the September Trial Plan because her loan had already been modified by the October 2016 Agreement. See id. at ¶ 48. In January 2017, Seterus began refusing Martino's mortgage payments and demanding back payments. See id. at ¶ 49. On March 1, 2017, Seterus initiated a foreclosure action against Martino. See id. at ¶ 50.

         The Amended Complaint contains six counts. Counts One, Two, and Three against defendant Bank of America were dismissed with prejudice on February 9, 2018. See Stipulation of Dismissal (Doc. No. 57). Thus, Seterus is the only remaining defendant in the case. Count Four alleges that Seterus breached the October 2016 Agreement. Count Five alleges that Seterus negligently breached its duty of care “to evaluate and process homeowners' loan modification applications in a timely and accurate manner.” See id. at ¶¶ 90-95. Count Six alleges that Seterus violated CUTPA by engaging in a number of unfair and deceptive acts. See id. at ¶¶ 96-111.

         III. LEGAL STANDARD

         Federal Rule of Civil Procedure 8(a) requires a complaint to plead “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a). Under Rule 12(b)(6), to survive a motion to dismiss for failure to state a claim, that plain statement must allege facts sufficient to state a plausible claim for relief. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While this plausibility standard does not require probability, it is not satisfied by “a sheer possibility that a defendant has acted unlawfully” or by facts that are “merely consistent with a defendant's liability.” Id. (internal quotation marks omitted).

         In deciding a motion to dismiss under Rule 12(b)(6), the court must accept all material factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. See Hemi Grp., LLC v. City of New York, 559 U.S. 1, 5 (2010); Jaghory v. N.Y. State Dep't Educ., 131 F.3d 326, 329 (2d Cir. 1997). However, the court is not required to accept as true a “legal conclusion couched as a factual allegation.” Papasan v. Allain, 478 U.S. 265, 286 (1986). In those instances, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. The court may consider “only the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the pleadings and matters of which judicial notice may be taken.” Samuels v. Air Trans. Local 504, 992 F.2d 12, 15 (2d Cir. 1993)).

         IV. DISCUSSION

         Seterus argues first that the court should abstain from deciding the case under the Colorado River doctrine because of a pending foreclosure action against Martino in state court. See Memorandum in Support of Motion to Dismiss (“Mem. in Supp.”) (Doc. No. 47-1) at 8-10. Seterus then argues that, if the court declines to abstain, it should dismiss Counts Four, Five, and Six for failure to state a claim upon which relief can be granted, pursuant to Rule 12(b)(6). See id. at 10-19.

         A. Colorado River Abstention

         Seterus argues that the court should abstain from deciding this case because there is a pending foreclosure action in state court (the “State Action”).[3] See Mem. in Supp. at 8-10; Fannie Mae v. Martino, NNH-CV17-6068631-S (Conn. Super. Ct.). Seterus argues that the State Action and the case before this court are parallel and that the Colorado River abstention factors weigh in favor of abstention. See Mem. in Supp. at 8-10. Martino argues that the factors weigh against abstention, emphasizing that her rights cannot be adequately protected in state court. See Memorandum in Opposition to Motion to Dismiss (“Mem. in Opp.”) (Doc. No. 53) at 7-12.

         “Abstention from the exercise of federal jurisdiction is the exception, not the rule.” Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 813 (1976). “Generally, as between state and federal courts, the rule is that ‘the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction . . . .'” Id. at 817 (citation omitted). This is because of the “virtually unflagging obligation of the federal courts to exercise the jurisdiction given to them.” Id. Colorado River, however, permits “an extraordinary and narrow exception” when there are contemporaneous parallel proceedings in state court and abstention would serve “wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.” Id. at 813.

         In order for abstention under Colorado River to be justified, courts must first determine that the concurrent proceedings in state and federal court are parallel. See Dittmer v. Cty. of Suffolk, 146 F.3d 113, 117-18 (2d Cir. 1998). “Suits are parallel when substantially the same parties are contemporaneously litigating substantially the same issue in another forum.” Id. at 118 (quoting Day v. Union Mines Inc., 862 F.2d 652, 655 (7th Cir. 1988)). If the proceedings are parallel, the court must then weigh six factors:

(1) the assumption of jurisdiction by either court over any res or property;
(2) the inconvenience of the federal forum;
(3) the avoidance of piecemeal litigation;
(4) the order in which jurisdiction was obtained;
(5) whether state or federal law supplies the rule of decision; and
(6) whether the state court proceeding will adequately protect the rights of the party seeking to invoke federal jurisdiction.

Vill. of Westfield v. Welch's, 170 F.3d 116, 121 (2d Cir. 1999). “The weight to be given any one factor may vary greatly from case to case, depending on the particular setting of the case.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16 (1983). However, the balance is “heavily weighted in favor of the exercise of jurisdiction.” Id. Therefore, courts should abstain under the Colorado River doctrine “only in the exceptional circumstances where the order to the parties to repair to the state court would clearly serve an important countervailing interest.” Colorado River, 424 U.S. at 813.

         In this case, both parties' Memoranda focus on the analysis of the six Colorado River factors, but do not address whether the state foreclosure action and the case before this court are parallel. However, the court must first address the threshold issue of whether the cases are parallel. See Dittmer, 146 F.3d at 118 (“[A] finding that the concurrent proceedings are ‘parallel' is a necessary prerequisite to abstention under Colorado River.”); Mazuma Holding Corp. v. Bethke, 1 F.Supp.3d 6, 20 (E.D.N.Y. 2014) (“If a court finds that the federal and state cases are not parallel, ‘Colorado River abstention does not apply, whether or not issues of state law must be decided by the federal court.'” (citation omitted)).

         As stated above, “[s]uits are parallel when substantially the same parties are contemporaneously litigating substantially the same issues in another forum.” Dittmer, 146 F.3d at 118. “In determining whether two actions are parallel for purposes of Colorado River abstention, ‘a court may consider whether the actions involve the same (i) parties, (ii) subject matter, and (iii) relief requested.'” Gov't Employees Ins. Co. v. Leica Supply, Inc., No. 11-CV-3781 (KAM) (VVP), 2014 WL 1311544, at *4 (E.D.N.Y. Mar. 28, 2014) (citation omitted)); see National Union Fire Ins. Co. of Pittsburgh, PA v. Karp, 108 F.3d 17, 22 (2d Cir. 1997) (“Federal and state proceedings are ‘concurrent' or ‘parallel' for purposes of abstention when the two proceedings are essentially the same; that is, there is an identity of parties, and the issues and relief sought are the same.”).

         District courts in this Circuit have interpreted the Second Circuit's guidance in Dittmer and National Union Fire Insurance to not require “complete identity” or “perfect symmetry” of parties and issues, however. See, e.g., Server v. Nation Star Mortg., LLC, No. 3:16-CV-1582 (VLB), 2017 WL 3097493, at *3 (D. Conn. July 20, 2017); Gudge v. 109 Rest. Corp., 118 F.Supp.3d 543, 547 (E.D.N.Y. 2015). “[T]he parallel litigation requirement is satisfied when the main issue in the case is the subject of already pending litigation.” Server, 2017 WL 3097493, at *3 (citation omitted). Nonetheless, “resolution of the state action must dispose of all claims presented in the federal case.” DDR Constr. Servs., Inc. v. Siemens Indus., Inc., 770 F.Supp.2d 627, 644 (S.D.N.Y. 2011). “When ‘the nature of the claims' in question differs, cases are not parallel despite ‘the fact that both actions arise out of a similar set of circumstances.'” Id. at 645.

         In this case, the parties in the State Action and in the case before this court are not identical, but they are substantially the same. Although Fannie Mae is a party in the State Action but not in this case, and Seterus is a party in this case but not in the State Action, Seterus is the servicer for the mortgage on behalf of Fannie Mae, the mortgagor. See Transcript, May 1, 2018 (“5/1/18 Tr.”) (Doc. No. 88) at 4. The court concludes that Fannie Mae and Seterus share an identity of interests for the purpose of issues related to Martino's mortgage and foreclosure and therefore are substantially the same party. See Sitgraves v. Fed. Home Loan Mortg. Corp., 265 F.Supp.3d 411, 413 (S.D.N.Y. 2017) (“Although [the plaintiff] argues the actions are not parallel because Freddie Mac is a party here but not in the State Action, she cannot contest that BANA is substantially the same as Freddie Mac.”); Austin v. Everbank, No. 16-CV-00058-KG-LF, 2016 WL 9777221, at *6 n.3 (D.N.M. Sept. 30, 2016) (“In this federal action, Intervenor Fannie Mae is a party in privity of contract with Defendant Everbank through the fee simple interest Fannie Mae acquired in the foreclosure sale of the subject property.”).

         The plaintiff's Memorandum in Opposition to the Motion to Dismiss contains no argument that Fannie Mae and Seterus are not substantially the same party. See Mem. in Opp. at 7-12. At a hearing on the Motion to Dismiss, Martino advanced for the first time the argument that Fannie Mae may try to avoid liability for Seterus's misconduct, such as by arguing that Seterus acted outside the scope of its agency. See 5/1/18 Tr. at 26-27. Martino's representation to the court was equivocal at best, merely hypothesizing as to what Fannie Mae may possibly argue. See id. (stating that “[w]e think it is possible in the foreclosure case Fannie Mae might try to avoid liability for the misconduct on the part of Seterus” (emphasis added)). Martino did not articulate any basis for believing that Fannie Mae would actually make such an argument or have grounds to do so. See id. (arguing to the contrary that “we think that legal strategy ultimately would not be successful for them”). The court considers it telling that counsel for Martino, rather than clearly stating that Seterus and Fannie Mae are not substantially the same party, was merely able to state that “we're not certain they are the same for purposes of the foreclosure action.” See id. Without more, Martino's brief and unsubstantiated statements at the hearing are insufficient to persuade the court that Fannie Mae and Seterus have divergent interests such that they are not substantially the same party for purposes of the mortgage and foreclosure.

         The more difficult question here is whether the issues and relief are substantially the same. The Complaint in the State Action seeks foreclosure of Martino's property for default on the mortgage. See Fannie Mae v. Martino, Complaint. In her state court Answer, Martino does not raise any special defenses or counterclaims. See Fannie Mae v. Martino, Answer (“State Action Answer”) (Doc. No. 102.00). Prior to issuing this Ruling, the court gave Martino an opportunity to move to amend her Answer in the State Action to add as counterclaims the Counts before this court. See Order (Doc. No. 76). However, Martino represented that she elected not to move to amend her Answer. See Response to Order (Doc. No. 80). Thus, as the cases currently stand, the State Action does not address the same issues and relief as this case because the relief at issue in the State Action is only foreclosure (or defense against foreclosure), while the relief at issue in this case includes damages for breach of contract, negligence, and violation of CUTPA. Cf. Gov't Employees Ins., 2014 WL 1311544, at *4.

         A number of other Circuits have held that whether the state and federal proceedings are parallel is determined by comparing “the issues in the federal action to the issues actually raised in the state action, not those that might have been raised.” Baskin v. Bath Twp. Bd. of Zoning Appeals, 15 F.3d 569, 572 (6th Cir. 1994); see also Kelly v. Maxum Specialty Ins. Grp., 868 F.3d 274, 285 (3d Cir. 2017); Fru-Con Const. Corp. v. Controlled Air, Inc., 574 F.3d 527, 535 (8th Cir. 2009); Fox v. Maulding, 16 F.3d 1079, 1081 (10th Cir. 1994); Crawley v. Hamilton Cty. Comm'rs, 744 F.2d 28, 31 (6th Cir. 1984) (“While it may be true . . . that [the state action] could be modified so as to make it identical to the current federal claim, that is not the issue here. The issue is whether [the state action], as it currently exists, is a parallel, state-court proceeding.”). A few district courts in this Circuit have followed these other Circuits. See Dalzell Mgmt. Co. v. Bardonia Plaza, LLC, 923 F.Supp.2d 590, 598-99 (S.D.N.Y. 2013); State Farm Mut. Auto. Ins. Co. v. Schepp, 616 F.Supp.2d 340, 347-48 (E.D.N.Y. 2008). Under this approach, it is evident that this case and the State Action would not be parallel proceedings and therefore that abstention under Colorado River would not be justified.

         However, the court is hesitant to follow this approach and end the analysis there because no Second Circuit case has adopted such an approach with approval. Rather, language in Telesco v. Telesco appears to indicate that the Second Circuit, in determining whether proceedings are parallel, is willing to consider whether the state proceeding could be amended or modified to include the omitted claims raised before the federal court. See Telesco v. Telesco Fuel & Masons' Materials, Inc., 765 F.2d 356, 362-63 (2d Cir. 1985). In Telesco, the plaintiff's federal complaint raised a new legal theory based on the existence of a de facto partnership between the parties and a new affirmative claim for reinstatement. See id. at 362. The Second Circuit nonetheless held that the proceedings were parallel because, “in its essential elements the same cause of action, regardless of theory or pleadings, ...


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