Morris v. Wells Fargo & Company

Background

Anthony Morris brought a proposed class action against Wells Fargo & Company, Wells Fargo Bank, N.A., and Wells Fargo Home Mortgage, Inc. The defendants removed the case from San Francisco Superior Court to federal court under the Class Action Fairness Act.

Morris alleged that the defendants wrongfully charged borrowers rate-lock extension fees (RLEFs), which extend the period during which a quoted mortgage interest rate remains protected from market changes. According to the complaint, Wells Fargo had a policy of charging borrowers for these fees when borrowers caused closing delays, while absorbing the fees when Wells Fargo caused the delays. Morris also alleged that Wells Fargo limited refunds to situations involving its own willful misconduct.

Morris alleged that he applied for a mortgage in early 2005 and was charged $4,087.13 at closing in or around August 2005. He alleged that Wells Fargo later sent him a refund check in 2021, which he viewed as an admission that the original charge was wrongful. He asserted claims for unjust enrichment, money had and received, conversion, and civil theft on behalf of himself and proposed classes.

Defendants’ Motion and Judicial Notice

The defendants moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. They argued that the claims were time-barred and that Morris had not alleged specific facts showing wrongful conduct. Morris argued that the claims were timely under the delayed-discovery doctrine, which can postpone when a claim begins running until the plaintiff discovers or has reason to discover the alleged injury.

The court granted the defendants’ request for judicial notice. It took notice of a Federal Reserve webpage concerning Wells Fargo & Company, a publicly filed merger agreement involving Wells Fargo Home Mortgage, Inc. and Wells Fargo Bank, N.A., and a November 22, 2021 letter concerning Morris’s RLEF refund. The court treated the refund letter as incorporated into the complaint because the complaint referred to it extensively and relied on it as the foundation of the claims.

Statute of Limitations

The court denied the motion to dismiss on statute-of-limitations grounds. It found that Morris plausibly alleged that he could not discover or suspect the alleged wrongdoing until receiving the refund in 2021. The court concluded that factual development could show that the delayed-discovery doctrine applied. It also said the allegations did not establish at this stage that Morris necessarily could have determined in 2005 which party caused any closing delay or that the RLEF charge was wrongful.

Parties

The defendants argued that the complaint improperly referred generally to “Wells Fargo” instead of identifying which entity took which actions. Morris did not oppose dismissal of Wells Fargo Home Mortgage, Inc. from the action. The court therefore considered only whether Wells Fargo & Company should be dismissed.

The court denied the motion to dismiss Wells Fargo & Company from the action. It found that Morris had minimally connected that entity to the alleged misconduct by alleging that it made policy decisions concerning RLEF charges and refunds. The court cautioned that any amended complaint must identify what each defendant allegedly did rather than relying on generalized references to “Wells Fargo.”

State-Law Claims and Disposition

The court held that each of Morris’s four claims required allegations of wrongful conduct and that the complaint’s allegations did not satisfy Federal Rules of Civil Procedure 8(a) and 9(b). Rule 9(b) requires fraud-based allegations to describe the circumstances of the alleged fraud in detail.

The court found that the complaint did not provide enough detail about the parties’ conduct during the mortgage transaction, whether closing was delayed beyond the rate-lock period, who contributed to any delay, what representations were made about the application-processing time, or why those representations were misleading. The court also found that the complaint relied too heavily on the later refund, an unidentified refund policy, and a consent decree without pleading particular facts showing RLEF-related wrongdoing.

The court granted the defendants’ motion to dismiss Morris’s claims with leave to amend. The court’s conclusion also granted the defendants’ request for judicial notice. Any amended complaint was due within 21 days of the order.