Imad Alshaibani v. Litton Loan Servicing LP , 528 F. App'x 462 ( 2013 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 13a0551n.06
No. 12-4071 FILED
Jun 05, 2013
UNITED STATES COURT OF APPEALS DEBORAH S. HUNT, Clerk
FOR THE SIXTH CIRCUIT
IMAD ALSHAIBANI and TIFFANY BAILEY, )
) ON APPEAL FROM THE
Plaintiffs-Appellants, ) UNITED STATES DISTRICT
) COURT FOR THE
v. ) SOUTHERN DISTRICT OF
) OHIO
LITTON LOAN SERVICING, LP, )
) OPINION
Defendant-Appellee. )
BEFORE: BOGGS and COLE, Circuit Judges; and QUIST, District Judge.*
QUIST, District Judge.
Plaintiffs, Imad Alshaibani and Tiffany Bailey, appeal the district court’s order dismissing
their claims pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. For the
following reasons, we affirm the district court’s order.
BACKGROUND
Plaintiffs’ claims arise out of a mortgage loan they obtained in 2001. According to Plaintiffs’
amended complaint, Plaintiffs obtained the loan from Magellan Mortgage Corp. on October 22,
2001. The mortgage has been assigned several times, and Plaintiffs believe that Wells Fargo Bank,
N.A., is the current owner. At an unknown point in time, Litton Loan Servicing became the loan
servicer. Plaintiffs allege that they made timely payments to Litton and, on more than one occasion,
*
The Honorable Gordon J. Quist, United States District Judge for the Western District of
Michigan, sitting by designation.
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paid Litton an amount in excess of their regular monthly payment. Plaintiffs allege, upon
information and belief, that Litton failed to apply their payments in the manner required by the
mortgage. Plaintiffs further allege that Litton improperly charged them various fees, including
“corporate fees,” “forbearance suspense” fees, and late fees.
Plaintiffs sued Litton in Ohio state court, alleging several grounds for relief, including: (i)
breach of contract; (ii) breach of the implied covenant of good faith and fair dealing; (iii) unjust
enrichment; (iv) negligent accounting; and (v) violation of the Ohio Consumer Sales Practices Act
(OCSPA), Ohio Rev. Code § 1345.01 et seq. Plaintiffs’ primary allegation was that Litton failed to
apply their payments in the manner required by the mortgage. Litton removed the case to federal
court on the basis of diversity jurisdiction and moved to dismiss the complaint or, in the alternative,
for a more definite statement. In response, Plaintiffs filed an amended complaint, in which they
added allegations that Litton improperly charged Plaintiffs certain fees. Litton again moved to
dismiss for failure to state a claim or, in the alternative, for a more definite statement. The district
court granted Litton’s motion to dismiss, primarily on the basis that Plaintiffs failed to plead
sufficient factual content to adequately support their claims. This appeal followed.
DISCUSSION
We review de novo a district court’s order granting a motion to dismiss for failure to state
a claim under Federal Rule of Civil Procedure 12(b)(6). Casias v. Wal-Mart Stores, Inc., 695 F.3d
428, 435 (6th Cir. 2012). A complaint must provide “a short and plain statement of the claim
showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Detailed factual allegations
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are not required, but “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’
requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of
action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Papasan v.
Allain, 478 U.S. 265, 286 (1986)). We must accept all of Plaintiffs’ well-pleaded factual allegations
as true and construe them in a light most favorable to Plaintiffs to determine whether the complaint
establishes a valid basis for relief. See Bower v. Fed. Express Corp., 96 F.3d 200, 203 (6th Cir.
1996). However, this rule does not apply to legal conclusions or unwarranted factual inferences.
Severe Records, LLC v. Rich, 658 F.3d 571, 578 (6th Cir. 2011). The complaint must contain
“enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. “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). Although the plausibility standard is not equivalent to a “‘probability
requirement,’ . . . it asks for more than a sheer possibility that a defendant has acted unlawfully.”
Id. (quoting Twombly, 550 U.S. at 556). “[W]here the well-pleaded facts do not permit the court to
infer more than the mere possibility of misconduct, the complaint has alleged—but it has not
‘show[n]’—‘that the pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2))
(second alteration in original).
1. Breach of Contract
To prevail on a breach-of-contract claim under Ohio law, a plaintiff must allege “the
existence of a contract, performance by the plaintiff, breach by the defendant, and damage or loss
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to the plaintiff.” Doner v. Snapp, 649 N.E.2d 42, 44 (Ohio Ct. App. 1994) (citing 2 Ohio Jury
Instructions (1993)). The district court held that Plaintiffs’ breach-of-contract claim fails to state a
claim because Plaintiffs’ allegations fail to establish that they had a contract with Litton and because
the allegations regarding Litton’s breach are merely vague legal conclusions that fall short of
Twombly’s plausibility standard.
As an initial matter, the district court erred in concluding that Plaintiffs failed to allege the
existence of a contract. Paragraph 20 of the mortgage provides, in relevant part1:
If the Note is sold and thereafter the Loan is serviced by a Loan Servicer other than
the purchaser of the Note, the mortgage loan servicing obligations to Borrower will
remain with the Loan Servicer or be transferred to a successor Loan Servicer and are
not assumed by the Note purchaser unless otherwise provided by the Note purchaser.
The district court held nothing in this provision renders the loan servicer a party to the note. Rather,
the court concluded, this provision merely acknowledges the payee’s right to sell the servicing rights
separate from the ownership of the note. However, this analysis ignores the plain language stating
that the loan servicer assumes the loan-servicing obligations if the loan is subsequently serviced by
a party other than the purchaser of the note. Under these circumstances, Litton, as the assuming
party, would be bound by the note and mortgage. See Premier Capital, L.L.C. v. Baker, 972 N.E.2d
1
The district court properly considered the mortgage provision in deciding the motion to
dismiss because the mortgage is central to Plaintiffs’ claims and Plaintiffs attached a copy of the
mortgage to their amended complaint. See Bassett v. NCAA, 528 F.3d 426, 430 (6th Cir. 2008)
(“When a court is presented with a Rule 12(b)(6) motion, it may consider the Complaint and any
exhibits attached thereto, public records, items appearing in the record of the case and exhibits
attached to defendant’s motion to dismiss so long as they are referred to in the Complaint and are
central to the claims contained therein.” (citation omitted)).
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1125, 1136 (Ohio Ct. App. 2012) (“It is well settled that an assignment does not cast any affirmative
liability upon the assignee of the contract unless the assignee assumes those obligations.”) (citations
omitted); see also 6 Am. Jur. 2d Assignments § 128 (2013) (“An assignee is subject to the
obligations imposed by the contract when he or she assumes those obligations, either expressly or
impliedly.” (footnotes omitted)).
Nonetheless, we conclude that the district court correctly determined that Plaintiffs’ naked
allegation that Litton “breached the terms of the Mortgage by, including but not limited to, failing
to apply Plaintiff’s [p]ayments in accordance with the terms of the [m]ortgage,” is simply a legal
conclusion couched as a factual allegation. As a practical matter, Plaintiffs’ factually unadorned
allegation that Litton misapplied their payments does no more to render their claim plausible than
would a simple legal conclusion that Litton breached the mortgage. See Iqbal, 556 U.S. at 679.
2. Breach of the Implied Covenant of Good Faith and Fair Dealing
The district court properly dismissed Plaintiffs’ claim for breach of the implied covenant of
good faith and fair dealing because, under Ohio law, a breach-of-contract claim subsumes any claim
for breach of the duty of good faith and fair dealing. Lakota Local Sch. Dist. Bd. of Educ. v.
Brickner, 671 N.E.2d 578, 583–84 (Ohio Ct. App. 1996). Because Plaintiffs’ breach-of-contract
claim fails to state a claim, their claim for breach of the implied covenant of good faith and fair
dealing likewise fails. Moreover, Plaintiffs’ factual allegations under this claim are no less legal
conclusions than their factual allegations for their breach-of-contract claim and, thus, provide no
factual support for their deficient breach-of-contract claim.
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3. Unjust Enrichment
A claim for unjust enrichment arises when a party retains money or benefits that, in justice
and equity, belongs to another. Liberty Mut. Ins. Co. v. Indus. Comm’n of Ohio, 532 N.E.2d 124,
125 (Ohio 1988). In their unjust-enrichment claim, Plaintiffs allege that they conferred benefits upon
Litton by making certain payments in addition to the regular payments they owed under the
mortgage, and that Litton retained the benefit of these payments by failing to apply them in
accordance with the loan documents. This claim is simply a repackaging of Plaintiff’s breach-of-
contract claim and fails under Twombly and Iqbal for the same reasons. Therefore, the district court
properly dismissed Plaintiff’s unjust-enrichment claim.
4. Negligent Accounting
Plaintiff’s negligent accounting claim is the quintessential “the-defendant-unlawfully-
harmed-me accusation” mentioned in Iqbal. 556 U.S. at 678. Plaintiffs allege the mere elements
of a negligence claim—Litton owed Plaintiffs a duty to properly account for and apply their
payments and Litton breached this duty, thereby causing Plaintiffs damage. Accordingly, the district
court did not err in dismissing the negligence claim.
5. OCSPA Claim
The district court dismissed Plaintiffs’ OCSPA claim on alternate grounds. First, the court
concluded that the transaction between Plaintiffs and Litton is excluded from the coverage under the
OCSPA because the “consumer transaction” at issue is a mortgage contract with a bank. As such,
the court reasoned, the transaction is excluded under Ohio Revised Code § 1345.01(A) as a
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transaction between a financial institution and its customers. The district court further concluded
that even if the OCSPA applies, Plaintiffs have failed to allege facts to establish a plausible claim
that Litton violated the OCSPA.
The Ohio Supreme Court’s recent decision in Anderson v. Barclay’s Capital Real Estate,
Inc., __ N.E.2d __, 2013 WL 2097556 (Ohio May 14, 2013), is dispositive of Plaintiffs’ OCSPA
claim. The Ohio Supreme Court held in Anderson that servicers of residential mortgage loans are
not covered by the OCSPA because loan servicing is not a “consumer transaction” under Ohio
Revised Code § 1345.01(A), see id. at *3–4, and such entities are not “engaged in the business of
effecting or soliciting consumer transactions” for purposes of Ohio Revised Code § 1345.01(C), see
id. at *5–6. Therefore, Plaintiffs’ claim fails as a matter of law.
CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s order granting Litton’s motion
to dismiss.
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