Morris v. Wells Fargo & Company

Background

Anthony Morris brought a putative class action against Wells Fargo & Company and Wells Fargo Bank, N.A. The lawsuit concerns rate-lock extension fees, which extend the period during which a quoted mortgage interest rate remains protected from market changes.

Morris alleges that Wells Fargo had a policy of charging borrowers for these fees when borrowers caused delays but absorbing the fees when Wells Fargo caused the delays. He also alleges that Wells Fargo limited refunds to situations involving its own willful misconduct. According to the amended complaint, Wells Fargo told Morris during the 2005 closing process that his loan application lacked required documents and that he therefore had to resubmit them and pay a $4,087.13 rate-lock extension fee. Morris alleges that he paid because he believed Wells Fargo was applying its stated policy fairly. He later received a refund of the fee but seeks profits or interest Wells Fargo allegedly earned from the money.

The court had previously dismissed Morris’s original complaint with leave to amend because his allegations about the exact nature of the alleged misconduct were too vague and conclusory. Morris then filed an amended complaint against Wells Fargo & Company and Wells Fargo Bank, N.A., restyled his unjust-enrichment claim as a quasi-contract claim, and removed his civil-theft claim.

Court’s analysis

Loan documents and incorporation by reference

The defendants asked the court to consider Morris’s loan documents and treat them as contradicting his allegations. They relied especially on a document called a “Price Range Protection Confirmation/Rate Lock Agreement,” which stated that the extended lock fee was $4,087.13 and that the rate lock expired on August 10, 2005. The defendants argued that the document showed Morris paid an upfront fee and that his loan closed before the expiration date.

The court took judicial notice of the existence of the loan documents and their contents on their face, but declined to accept the defendants’ interpretation of disputed statements in those documents as true. Morris disputed that he requested the transaction described in the document and offered another interpretation of when and why it was executed. The court held that resolving those competing interpretations was improper on a motion to dismiss.

Particularity of the allegations

The defendants argued that the amended complaint failed to meet Rule 9(b), which requires allegations of fraud to describe the circumstances of the alleged fraud with particularity. The court held that Morris had supplied enough additional detail, including the alleged false statement, its approximate timing and circumstances, and the reasons he relied on it. The court therefore denied the motion to dismiss on this ground.

Claims against Wells Fargo & Company

The defendants argued that Morris had not adequately alleged how Wells Fargo & Company, which they described as a holding company that did not make loans or deal directly with customers, was involved. The court relied on Morris’s allegations that Wells Fargo & Company made high-level policy decisions about rate-lock extension fees and that Wells Fargo Bank implemented those decisions at the consumer level. The court held that these allegations were sufficient to allow the claims against Wells Fargo & Company to proceed and denied dismissal on this ground.

Statute of limitations

The defendants argued that Morris’s allegations showed he suspected the alleged wrongdoing in 2005 and therefore made his claims untimely. The court disagreed. Accepting the allegations as true and drawing reasonable inferences in Morris’s favor, the court found it plausible that he believed he had submitted the necessary documents but still trusted Wells Fargo’s representation that a paperwork problem made him responsible for the delay. The court denied dismissal based on the statute of limitations, leaving possible tolling for later factual development.

Quasi-contract claim

The defendants argued that an express rate-lock agreement barred Morris’s quasi-contract claim. Morris responded that his payment was induced by misrepresentations and that the agreement either was invalid or addressed a different fee. The court found it premature to decide whether the agreement barred the claim. It denied the motion to dismiss the quasi-contract claim.

Money-had-and-received claim

The court granted dismissal of Morris’s claim for money had and received. It explained that this type of claim generally measures liability by the amount the defendant received. Morris sought the profits or interest Wells Fargo allegedly earned from retaining the rate-lock extension fees, rather than the fee itself, which the opinion states appeared to have been refunded. The court held that this theory did not provide a remedy under a money-had-and-received claim and dismissed that claim without leave to amend.

Conversion claim

The defendants argued that Morris had not identified a definite sum for his conversion claim because he sought all profits earned on the allegedly wrongfully obtained fees. The court held that, at the motion-to-dismiss stage, Morris only had to allege a sum capable of being identified, not calculate the exact amount before obtaining evidence. It found his allegations sufficient and denied the motion to dismiss the conversion claim. Whether the profits can ultimately be identified was left for a later stage, such as summary judgment.

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. It denied dismissal of the quasi-contract and conversion claims and denied dismissal based on the defendants’ arguments concerning Rule 9(b), Wells Fargo & Company’s involvement, and the statute of limitations. The court also set a case management conference for January 14, 2025, and directed the parties to file a joint case management statement by January 7, 2025.