Morris v. Wells Fargo & Company

Background

Anthony Morris filed a proposed class action against Wells Fargo & Company, Wells Fargo Bank, N.A., and initially Wells Fargo Home Mortgage, Inc. The defendants removed the case from San Francisco Superior Court to federal court. Morris alleged that Wells Fargo wrongly charged borrowers rate-lock extension fees and retained profits or interest earned from those fees instead of returning the money.

Morris alleged that he applied for a mortgage in 2005, was told that his application lacked required documents, and was required to resubmit documents and pay a $4,087.13 rate-lock extension fee. He alleged that he believed he had already submitted the necessary documents and paid the fee because he trusted Wells Fargo’s explanation that he was responsible for the delay. He also relied on allegations from a Wells Fargo employee whistleblower concerning an effort to shift rate-lock extension costs to borrowers.

In an earlier round of the case, the court dismissed the original complaint with leave to amend because Morris had not described the alleged misconduct with enough specificity. Morris then filed an amended complaint against Wells Fargo & Company and Wells Fargo Bank, N.A. He restyled his unjust-enrichment claim as a quasi-contract claim and removed the civil-theft claim.

Issues and analysis

The defendants moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not adequately state a legally recognized claim. They also argued that Rule 9(b), which requires fraud allegations to describe the circumstances with particularity, was not satisfied.

The court took notice of the existence and facial contents of the loan documents under the incorporation-by-reference doctrine, but it did not accept the defendants’ interpretation of disputed statements in those documents as true. The court found that the documents could reasonably support competing interpretations, including whether the fee was an upfront extended-lock fee or a rate-lock extension fee charged after a delay. Resolving that dispute was not appropriate on a motion to dismiss.

The court held that Morris’s amended allegations satisfied Rule 9(b). Although the allegations did not provide extensive details, they identified the alleged statement about missing documentation, the approximate timing of the statement, and why Morris relied on it. The court also rejected the argument that the claims were time-barred. The allegations plausibly indicated that Morris did not discover or suspect Wells Fargo’s alleged wrongdoing when the fee was charged, leaving open the possibility that the filing deadline could be extended based on delayed discovery.

The court further held that the allegations against Wells Fargo & Company were sufficient at the pleading stage. Morris alleged that the company made high-level policy decisions about rate-lock extension fees and that Wells Fargo Bank implemented those decisions with consumers. The court stated that the defendants could raise arguments about the merits of those claims at summary judgment or trial.

Claim-specific rulings

The court denied the motion to dismiss the quasi-contract claim. It found that it was premature to decide whether the rate-lock agreement barred that claim because the parties disputed what the agreement covered and whether Morris’s payment was induced by misrepresentations. The court stated that Morris had sufficiently alleged that the claim was not based on a valid express contract, while expressing skepticism about the theory’s ultimate merits.

The court granted the motion to dismiss the money-had-and-received claim without leave to amend. Morris sought the profits or interest Wells Fargo allegedly earned from retaining the fees. The court concluded that this type of claim could not provide a basis for recovering those profits because the measure of liability for money had and received is the amount the defendant received. The court noted that Morris appeared to have already received a refund of the fee itself and was not seeking that fee through this claim.

The court denied the motion to dismiss the conversion claim. It held that, at the pleading stage, Morris needed to allege only a sum capable of being identified, not the exact dollar amount or a complete calculation. The court found that the alleged profits from the rate-lock extension fees were sufficiently identifiable at this stage, while leaving the actual calculation for possible later proceedings.

Disposition

The court granted in part and denied in part the defendants’ motion to dismiss. It dismissed Morris’s money-had-and-received claim without leave to amend. The order did not dismiss the quasi-contract or conversion claims.