Smith v. Wells Fargo Bank, N.A., 3:15-cv-89 (SRU)

158 F.Supp.3d 91

Allyson Smith, Plaintiff,

v.Wells Fargo Bank, N.A., Defendant.

No. 3:15-cv-89 (SRU)

United States District Court, D. Connecticut.

Signed January 29, 2016

Randall S. Newman, Randall S. Newman, P.C., New York, NY, Steven Berglass, Seeley & Berglass, New Haven, CT, for Plaintiff.

David M. Bizar, Seyfarth, Shaw, LLP, Boston, MA, for Defendant.

RULING ON DEFENDANT'S MOTION TO DISMISS

Stefan R. Underhill, United States District Judge

This case arises out of a mortgage refinancing agreement between Allyson Smith and Wells Fargo, N.A. Smith seeks to enforce her right to rescission under the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601, et seq. , and receive damages for Wells Fargo's failure to honor her request for rescission. Smith also seeks damages under the Connecticut Unfair Trade Practices Act (“CUTPA”), Conn. Gen. Stat. § 42-110a, et seq., alleging that Wells Fargo engaged in deceptive acts or practices in connection with the refinancing agreement.

Wells Fargo moves to dismiss Smith's second amended complaint (“SAC”) in its entirety. It argues that Smith's TILA claims should be dismissed because she was given adequate notice of her right to rescind and failed to exercise that right within the allotted three-day period. Wells Fargo asserts that Smith's CUTPA claims should be dismissed because Smith has failed to adequately allege a deceptive act or practice. Furthermore, to the extent that CUTPA requires Wells Fargo to provide additional disclosures, such a requirement would be preempted by TILA, the National Banking Act (“NBA”), and the Real Estate Settlement Practices Act (“RESPA”).

For the following reasons, I grant Wells Fargo's motion to dismiss. Smith has failed to plead facts indicating that she exercised her right to rescission before that right had expired. Furthermore, Smith cannot make out a CUTPA claim because she fails to allege a deceptive act or practice. To the extent that CUTPA would require disclosures in excess of those required by TILA, NBA and RESPA, those claims are preempted.

I. Background

Allyson Smith filed the instant action against Wells Fargo Bank, N.A., on January 21, 2015. Counts I and II allege violations of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601, et seq. Count III alleges a violation of the Connecticut Unfair Trade Practices Act (“CUTPA”), Conn. Gen. Stat. § 42-110a, et seq. Through those claims, Smith seeks to enforce her right to rescind the consumer credit transaction, void the security interest in her home, and recover statutory damages, actual damages, punitive damages, and reasonable attorneys' fees and costs.

Smith's claims arise out of a refinancing agreement between her and Wells Fargo. Beginning in February 2012, Smith and Wells Fargo conversed about Smith's eligibility to refinance her current mortgage (“Raveis Loan”) through the Home Affordable Refinance Program (“HARP”). As a result of those discussions, Wells Fargo sent Smith a “Close at Home® Mortgage Kit” (“Mortgage Kit”) on March 9, 2012.

The Mortgage Kit included: (1) a Note from Smith to Wells Fargo, dated March 31, 2012, in the principal amount of $126,648.85; (2) an Open-End Mortgage Deed from Smith to Wells Fargo, dated March 31, 2012; (3) two copies of a “Notice of Right to Cancel,” providing that Smith had three business days from the date of the transaction or until March 29, 2012, whichever occurred later, to rescind the refinancing agreement; (4) a Federal Truth-in-Lending Disclosure Statement dated March 8, 2012; (5) a HUD-1 Settlement Statement (“HUD-1”), which identified the “Settlement Date” as March 31, 2012, and contained the amount of escrow balance that the refinanced loan would require; (6) a two-page letter from Kristie Lewis, a representative of Wells Fargo (“Lewis Letter”), which stated that “[t]here are no closing costs or hidden fees with the Wells Fargo Three-Step Refinance SYSTEM .”; and (7) a one-page document titled “Frequently Asked Questions About the Wells Fargo Three-Step Refinance SYSTEM ®,” which provided that a “standard fee associated with the recording of the satisfaction of your existing mortgage will be included in the total payoff of your existing loan.”

Smith alleges that she executed all of the documents in the Mortgage Kit on March 13, 2012, and returned them to Wells Fargo soon thereafter. On March 30, 2012, Wells Fargo notified Smith that she had been approved for the loan and that Smith could skip her interest payment on the Raveis Loan, due April 1, 2012.

Smith alleges that the principal balance on the Raveis Loan as of March 30, 2012, was $125,957.92. The amount that Wells Fargo financed was $126,648.85, which represented the principal balance on the Raveis loan and an additional $690.93. Smith alleges that the $690.93 amount represents $53 for a recording fee and $637.93 for the April 1, 2012, interest payment on the Raveis Loan.

Smith alleges that the escrow balance on the Raveis Loan was $2,118.35. The new escrow balance on the refinanced loan, Smith contends, was $2,613.90.

On October 21, 2014, Smith notified Wells Fargo of her desire to rescind the refinanced loan. A week later, Wells Fargo notified Smith that it would not honor her request. Shortly after receiving the notice, Smith filed the instant action.

II. Standard of Review

A motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) is designed “to assess the legal feasibility of a complaint, not to assay the weight of evidence which might be offered in support thereof.” Ryder Energy Distribution Corp. v. Merrill Lynch Commodities, Inc. , 748 F.2d 774, 779 (2d Cir.1984). Thus, when deciding a motion to dismiss, the court must accept the material facts alleged in the complaint as true, draw all reasonable inferences in favor of the plaintiff, and decide whether it is plausible that the plaintiff has a valid claim for relief. Ashcroft v. Iqbal , 556 U.S. 662, 678–79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ; Leeds v. Meltz , 85 F.3d 51, 53 (2d Cir.1996).

Under Twombly, “[f]actual allegations must be enough to raise a right to relief above the speculative level,” and assert a cause of action with enough heft to show entitlement to relief and “enough facts to state a claim to relief that is plausible on its face.” 550 U.S. at 555, 570, 127 S.Ct. 1955 ; see also Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 (“While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”). The plausibility standard set forth in Twombly and Iqbal obligates the plaintiff to “provide the grounds of his entitlement to relief” through more than “labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Twombly , 550 U.S. at 555, 127 S.Ct. 1955 (quotation marks omitted). Plausibility at the pleading stage is nonetheless distinct from probability, and “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of [the claims] is improbable, and ... recovery is very remote and unlikely.” Id. at 556, 127 S.Ct. 1955 (quotation marks omitted).

III. Discussion

Plaintiff Allyson Smith brings three claims against defendant Wells Fargo. Count I of the second amended complaint (“SAC”) alleges that Wells Fargo should be forced to comply with her October 21, 2014, notice of rescission and terminate the loan agreement. She argues that her right to rescission was extended from three days to three years because Wells Fargo failed to provide adequate notice of her right to rescind as provided by 15 U.S.C. § 1635 (TILA). Count II alleges that, under 15 U.S.C. § 1640 and § 1635, Wells Fargo is liable for damages incurred by Smith as a result of the failure to honor her timely request to rescind. The parties agree that, if Smith was within her right to rescind on October 21, 2014, Count II is uncontested. Finally, Count III alleges that, notwithstanding her right to rescind, Wells Fargo violated the Connecticut Unfair Trade Practices Act (“CUTPA”) by promising “no closing costs or hidden fees” when it had in fact included certain non-itemized costs. As part of Smith's CUTPA claim, she also alleges that Wells Fargo misrepresented the amount of escrow that she was required to pay as part of the refinancing agreement. I will address each claim in turn.

A. Claim I: Enforcement of Rescission

The Truth in Lending Act (“TILA”) was passed to ensure a “meaningful disclosure of credit terms ... and to protect the consumer against inaccurate and unfair credit billing and credit card practices.” Lahoud v. Countrywide Bank FSB , No. 3:07–cv–01616 (DJS), 2012 WL 1067391, at *7 (D.Conn. Mar. 30, 2012) (quoting 15 U.S.C. § 1601(a) ). As a mechanism of protecting consumers, TILA and the regulations implemented by the Federal Reserve Board give consumers three business days to rescind a loan that uses their principal dwelling as security. Id. ; 15 U.S.C. § 1635(a) ; 12 C.F.R. § 226 (“Regulation Z”).¹

In addition to giving a borrower the right to rescind the transaction within three business days of its consummation, the lender must also provide conspicuous notice of that right. See Lahoud , 2012 WL 1067391, at *7. To do so, the lender must “clearly and conspicuously disclose” the actual date that the rescission period expires. 12 C.F.R. § 226.23(b)(1)(v). Whether notice is “conspicuous” is a matter of law that is assessed using an objective standard. Lahoud , 2012 WL 1067391, at *7. If the lender fails to provide the requisite notice, the borrowers' right to rescind extends from three business days to three years. 15 U.S.C. § 1635(f).

In the instant case, the parties do not dispute that Wells Fargo provided conspicuous notice of Smith's right to rescind. Wells Fargo notified Smith that she had until March 29, 2012, to rescind the agreement. However, Smith contends that the notice was inadequate because it provided an incorrect date.

For the...