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Berlin v. Bank of America, N.A.

United States District Court, D. Columbia.

April 24, 2015

DONALD MARSHALL BERLIN, et al., Plaintiffs,
BANK OF AMERICA, N.A., Defendant

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For DONALD MARSHALL BERLIN, KIMBERLEY LAFARGE BERLIN, Plaintiffs: Benjamin R. Prinsen, PRO HAC VICE, KRAVIT, HOVEL & KRAWCZYK, Milwaukee, WI; Steven Michael Oster, OSTER LAW FIRM, Washington, DC.


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JAMES E. BOASBERG, United States District Judge.

Plaintiffs Donald and Kimberley Berlin bring this suit alleging that they suffered a nightmarish ordeal when trying to wrap up their affairs with Defendant Bank of America, N.A. According to the Berlins, they had enjoyed a long and positive relationship with the Bank until it closed its Premier Banking Centers for high-net-worth individuals such as themselves. At that point, they were forced into the Bank's regular service channels, and when they sought to wind down their various accounts, the Bank's incompetence or bad faith made doing so nearly impossible. For one thing, Plaintiffs discovered that the Bank had prepared and recorded their loan documents with numerous errors. As they attempted to resolve those issues, the Bank filed wrongful foreclosure actions against their properties and reported negative and inaccurate credit information regarding their accounts. Although Defendant admitted that these actions were taken in error and repeatedly agreed to

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fix its mistakes, it continually failed to do so. Indeed, according to Plaintiffs, BANA still furnishes inaccurate credit information and still has not corrected defects in certain of their loan documents. Their experience was made all the more frustrating by the flood of robo-calls, notices of default, debt-collection notices, and other communications that the Berlins received and that the Bank repeatedly promised would stop but did not. The Berlins' security clearances and Mr. Berlin's professional license were also adversely affected as a direct result of BANA's actions.

Finally at their wits' end, they filed this suit alleging violations of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and various state-law torts. Defendant now moves to dismiss all seven counts, raising a congeries of different arguments. As a few gain traction, the Court will grant the Motion in part, but deny it in the main.

I. Background

Distilling the central allegations in Plaintiffs' Amended Complaint is no easy task. They filed a 41-page, mostly single-spaced pleading that is often heavy on detail yet light on clarity. The Court understands that the Berlins may be frustrated; assuming that the facts alleged are true -- as it must at this stage -- they endured an infuriating experience as a result of Bank of America's pure incompetence or bad faith. Future pleadings and briefs must, however, provide a clearer picture of the chronology and arrangements that are central to their claims, and they must more specifically link particular actions to the corresponding counts. With that counsel, the Court will now lay out the key facts insofar as it is able to discern them.

For many years, the Berlins " enjoyed an enduring and profitable relationship" with Bank of America. See Am. Compl., ¶ 16. Indeed, Plaintiffs and companies that Mr. Berlin owned " had several millions of dollars in assets, investments, loans, credit cards, and other kinds of accounts at BANA." Id. The " lending relationship" involved, among other things, " multiple residential home mortgages and multiple home equity lines of credit" for several properties located in D.C. and Virginia. Id., ¶ 17. But the relationship between Plaintiffs and the Bank eventually soured.

According to the Berlins, the " seminal event" took place in April 2009, when BANA closed its Premier Banking Centers. See id., ¶ 1. The PBCs had given the Bank's " high net-worth customers a single point of contact, where all of its customer needs would be met and serviced through a dedicated team of professional bankers." Id. When BANA terminated the PBCs " [w]ithout notice to the Berlins," id., ¶ 18, it " forced [them] into its regular service and process channels." Id., ¶ 19. These " proved wholly inefficient and ineffective" for resolving numerous problems that arose with respect to their loans, and made it " extremely difficult (if not impossible) for [them] to unwind their relationships with BANA and . . . move all of their loans and assets to different institutions." Id.

For instance, in early 2010, they sought to " negotiate the satisfaction" of a loan related to property at 1051 North Stuart Street in Arlington, Virginia. See id., ¶ ¶ 17, 25. As it turns out, the original loan documents " contained numerous errors." Id., ¶ 25(a). Plaintiffs thus attempted to remedy the defects with the Bank. In the course of working out a resolution, however, the Bank compounded their problems by " mistakenly and inappropriately [giving] notice of foreclosure and/or fil[ing] a foreclosure action" against the property. Id., ¶ 25(b). While it subsequently withdrew the action, it continued to report negative credit information to consumer-reporting

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agencies (CRAs) about the foreclosure. See id.

The parties nonetheless managed to come to an agreement in late April 2010, under which the Berlins would pay off the loan in full and, in exchange, the Bank would " forgive any and all late fees, costs, and legal fees, remediate any and all negative, derogatory, or adverse information associated with [their] credit as a result of the Bank's misconduct, and remove any reference to the wrongful foreclosure action filed against the property and provide documentation supporting [their] assertion that it was, in fact, wrongly filed." Id., ¶ 25(c). Of course, like all of the Berlins' dealings with the Bank during this period, finalizing this agreement was not without problems. BANA, for example, was supposed to " send[] the final closing figures and executed agreement" at least two days in advance of the scheduled closing date of April 28, 2010. Id., ¶ 25(d). It was reminded of this " in writing" and " on many occasions," id., but it did not send the documents in time. See id., ¶ 25(e). The parties, consequently, had to reschedule the closing, and the Berlins had to have their own counsel draw up the final documents. See id. Because of the Bank's lack of follow through, finalizing this agreement was done at considerable " additional time and expense to the Berlins." Id., ¶ 25(f). Unfortunately, Plaintiffs' efforts to finalize the deal were also for naught. While they satisfied their half of the bargain to pay off the remainder of the loan, the Bank was in " repeated violation" of the agreement and its " written representations that [it] would correct [their] credit reports." Id. Any steps that BANA did take to correct the information proved futile. According to Plaintiffs, " Although BANA issued 'override letters' and 'final determination letters,' in an attempt to stop furnishing erroneous and misleading information to the CRAs, the internal BANA credit reporting systems reversed these determinations and continued to furnish inaccurate and misleading negative credit information." Id., ¶ 25(g). When Plaintiffs informed the CRAs about the inaccurate information, and the CRAs then notified BANA of the disputes, the Bank still " failed to conduct a proper investigation and [it] continued to furnish inaccurate and misleading negative credit information to the CRAs." Id. In fact, it is the Berlins' belief that BANA continues to convey erroneous credit information to the CRAs about the foreclosure action filed against the Stuart Street property, and that this false information is also still maintained in various databases that obtain information from CRAs. See id., ¶ 25(i).

The headaches only continued with Plaintiffs' attempts to resolve their home-equity lines of credit (HELOCs). The documentation for one such loan, which they had taken out to make legally required renovations on one of their properties, " contained multiple errors." Id., ¶ 26(a). " During the course of rigorous permit and inspection proceedings" related to the renovations, " D.C. inspectors found that the official documents created by BANA and filed with the Recorder's Office in Washington D.C. all contained incorrect information regarding the address, description, and ownership of the property." Id. Because of these defects, " officials refused to 'close out' the [construction] permits and licenses," and " the Berlins could not obtain a legal occupancy permit in 2010 and 2011." Id.

In March 2012, Plaintiffs and BANA representatives discussed the possibility of a settlement agreement under which the Berlins would pay off the notes on their two home-equity loans in exchange for resolving " any pending issues" on the loans.

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Id., ¶ 26(b). The Bank's representatives " accepted this proposal and began drafting and discussing a Global Settlement Agreement" similar to the one the parties negotiated for the Stuart Street loan. Id. Despite the apparent agreement, however, the Bank was extremely unresponsive in its dealings with Plaintiffs. For several months, the Berlins made numerous attempts to " obtain complete, accurate pay off amounts" for these loans but " with rare exception, were met with either (a) apologies for failing to answer . .., (b) no response at all, or (c) claims that the issue was resolved by way of a settlement." Id., ¶ 26(c). Defendant, however, refused to provide written confirmation that the claims had been resolved or any documentation showing the amount that Plaintiffs had paid on the notes. See id. Luckily for the Berlins, in September 2012, federal regulators ordered the Bank to write off these loans -- although they still have not received an accurate " paid in full" note. See id., ¶ 26(d)-(e).

Their troubles, regrettably, did not end there. They suffered similar ordeals with respect to two other loans that, to this day, remain unresolved. The first, entered into in March 2005, was for the purchase of property located at 21851 Laurel Wood Court in Leesburg, Virginia. See id., ¶ ¶ 17, 29. The second, executed in July 2006, was for the purchase of property located at 105 E Street S.E. in Washington. See id., ¶ ¶ 17, 30. The documents related to both contained errors, but were, nevertheless, recorded with the respective Registers of Deeds in Virginia and D.C. See id., ¶ ¶ 29, 30.

According to Plaintiffs, the Bank's " failure to record accurate documents and it [ sic ] subsequent failures to correct the documents are in breach of its agreements with [them]." Id., ¶ 31. Since April 2009, they have tried again and again to have the Bank fix its mistakes, but to little avail. See id., ¶ 32. For instance, " [f]rom 2009 through late 2011, BANA prepared numerous loan modifications in an attempt to correct the material and substantive errors in the Berlins' loan documents." Id., ¶ 35(a). " Despite warnings from [Plaintiffs] that these documents still contained errors, BANA demanded that they be signed and returned." Id. Based on these errors, the Registers of Deeds rejected the documents or recorded them, yet again, with mistakes. See id. The parties, consequently, had to go through numerous iterations of revising the documents, see id., and the Berlins had to " expend legal, accounting, and other time and expense" with each new version. See id., ¶ 35(b). Despite all of this, the Bank has still not corrected these documents. See, e.g., ¶ 35(b)(7)-(8).

The Bank's alleged conduct over the years would have driven any sane person up the wall. It filed multiple wrongful foreclosure actions against Plaintiffs' properties, based in part on erroneous documents that it had prepared. See id., ¶ 35(g). Although it " subsequently retracted each of these inappropriate foreclosure actions, admitting that they should not have been filed," these actions " cost the Berlins a significant amount of time and money defending and investigating the[] claims." Id. The Bank also reported inaccurate and misleading negative credit information to CRAs about these foreclosures, and its attempts to cease providing such information were ineffectual, largely because its own software repeatedly overrode prior attempts to correct the information. See id., ¶ ¶ 25(b), 35(g)(iii). As if that were not enough, the Bank " continued to threaten foreclosure actions against the underlying properties . . . even as the Berlins and their counsel negotiated a good faith resolution to these issues and [even] after BANA represented that it would put

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a hold on any such correspondences." Id., ¶ 35(g)(ii).

Resolving these issues was made all the more difficult by the Bank's " process driven system that inhibited any form of meaningful communications." Id., ¶ 35(i). Plaintiffs often did not receive responses to their " reasonable requests for status updates," see, e.g., id., ¶ 35(i)(1), and had to deal with " long delays" when seeking to obtain " even the most basic loan information." Id., ¶ 35(j). They received notices from third parties " threatening collection actions" despite the Bank's assurances that such communications would stop, see id., ¶ 35(m), and they were inundated with " robo calls" even after BANA said there would be no more. See id., ¶ 35(o). The Bank, additionally, sent " computer generated and/or non-responsive correspondence" in response to their " requests for information and materials." Id., ¶ 36. These communications stated, among other things, that the Berlins were seeking to sell their properties, to be evaluated for short sales, and to obtain help from the Bank's remedial help program when they were not. Id., ¶ ¶ 36, 37.

In addition to the sheer frustration that they had to endure, Plaintiffs sustained a variety of injuries as a result of BANA's conduct. " The errors and other deficiencies in the loan documents," for instance, " appeared on the Berlins' credit reports and negatively impacted their security clearance[s] associated with their work for the United States." Id., ¶ 35(d). Mr. Berlin was also unable to renew one of his professional licenses due to the errors. Specifically, he used their E Street property as the legal address for his D.C. Private Detective License. See id., ¶ 35(b)(4). In October 2012, he was told that he could not renew it until the E Street property had an occupancy permit. See id. Because of the defects in the loan documents, however, he and his wife were unable -- and, in fact, remain unable -- to secure an occupancy permit for the property. See id. As a result, he still has not obtained a renewed license. See id.

Having finally grown tired of their fruitless attempts to resolve these issues, the Berlins filed this suit on July 31, 2014. They assert several claims in their Amended Complaint, including that BANA: breached the contracts that it had formed with them; breached the covenants of good faith and fair dealing implied in each of those contracts; made fraudulent and/or negligent misrepresentations in its dealings; violated the Fair Credit Reporting Act; and is bound by principles of promissory estoppel. Plaintiffs seek a host of remedies including invalidation of the remaining loan agreements on the E Street and Laurel Wood Court properties, an injunction compelling the Bank to correct the negative credit information, an award of money damages, and attorney fees and costs. Defendant now moves to dismiss the Amended Complaint on the ground that it fails to state a claim for relief.

II. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), the Court must dismiss a claim for relief when the complaint " fail[s] to state a claim upon which relief can be granted." In evaluating a motion to dismiss, the Court must " treat the complaint's factual allegations as true and must grant plaintiff the benefit of all inferences that can be derived from the facts alleged." Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113, 342 U.S.App.D.C. 268 (D.C. Cir. 2000) (citation and internal quotation marks omitted); see also Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A court need not accept as true, however, " a legal conclusion couched as a factual allegation," nor an inference unsupported by the facts set forth in the

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complaint. Trudeau v. FTC, 456 F.3d 178, 193, 372 U.S.App.D.C. 335 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)). Although " detailed factual allegations" are not necessary to withstand a Rule 12(b)(6) motion, Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), " a complaint must contain sufficient factual matter, [if] accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 678 (internal quotation omitted). A plaintiff may survive a Rule 12(b)(6) motion even if " recovery is very remote and unlikely," but the facts alleged in the complaint " must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555-56 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)).

III. Analysis

The Berlins' Amended Complaint includes seven counts, which the Court will address in turn. Before doing so, it notes that BANA's Motion did not address which jurisdiction's law should govern the Court's analysis of Plaintiffs' common-law claims. In their Opposition, Plaintiffs asserted that claims related to the E Street property are governed by District of Columbia law, and those related to the Laurel Wood Court property are controlled by Virginia law. See Opp. at 8. They did not, however, indicate which law should apply to claims arising out of the Stuart Street loan agreement, the HELOCs, or the parties' subsequent settlement agreements. BANA again failed to address the issue in its Reply, though it did insert a handful of citations to Virginia cases. Without the benefit of the parties' addressing the issue, the Court reserves judgment on which law governs the various agreements and analyzes the claims, where appropriate, under the laws of both jurisdictions.

A. Count I: Declaratory Judgment

Plaintiffs' first count is styled as a claim for " declaratory judgment." See Am. Compl., ¶ ¶ 54-61. In it, the Berlins seek a declaration under the Declaratory Judgment Act, 28 U.S.C. § § 2201-02, that their " loan agreements . . . are null and void and that [they] are discharged from any and all liability." Id., ¶ 55. As Defendant rightly points out, however, that Act does not provide a stand-alone cause of action; it, instead, authorizes a form of relief. See Ali v. Rumsfeld, 649 F.3d 762, 778, 396 U.S.App.D.C. 381 (D.C. Cir. 2011); see also, e.g., Smirnov v. Clinton, 806 F.Supp.2d 1, 11 (D.D.C. 2011) (" The Declaratory Judgment Act . . . is not 'an independent source of federal jurisdiction'[; ] . . . [r]ather, the statute merely creates a remedy in cases otherwise within the Court's jurisdiction." ) (quoting C & E Servs., Inc. of Wash. v. D.C. Water & Sewer Auth., 310 F.3d 197, 201, 354 U.S.App.D.C. 1 (D.C. Cir. 2002)). To the extent Plaintiffs seek to assert a cause of action for " declaratory judgment," it is dismissed. They may, however, retain it as a form of requested relief. BANA's further assertion that such relief is unwarranted here, see Mot. at 4-5, is premature.

B. Count II: Breach of Contract

Plaintiffs' second count alleges that BANA breached the E Street and Laurel Wood Court loan agreements, as well as numerous other written and oral contracts under which the Bank had agreed to correct the deficient loan documents and to cease providing inaccurate information to credit agencies. See Am. Compl., ¶ ¶ 62-68. Defendant's Motion raises myriad challenges to the sufficiency of these claims. The Court, thankfully, need not address each of the asserted bases for Plaintiffs' breach-of-contract count, which are rather difficult to tease apart, because as long as they have stated a claim in

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relation to one of their purported contracts, the count may remain. It is clear that they have made out such a claim for BANA's failure to remedy mistakes in their loan documents in accordance with the parties' agreements that it would do so in return for Plaintiffs' paying off certain loans.

The elements of a breach-of-contract claim are virtually the same under D.C. and Virginia law. In the District, " a party must establish (1) a valid contract between the parties; (2) an obligation or duty arising out of the contract; (3) a breach of that duty; and (4) damages caused by breach." Brown v. Sessoms,774 F.3d 1016, 1024, 413 U.S.App.D.C. 328 (D.C. Cir. 2014) (quoting Tsintolas Realty Co. v. Mendez,984 A.2d 181, 187 (D.C. 2009)) (internal quotation marks omitted). Virginia similarly requires " (1) a legally enforceable obligation of a defendant to a plaintiff; (2) the defendant's violation or breach of that obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation." Filak v. George,267 Va. 612, 594 S.E.2d 610, 614 (Va. 2004). The requirements for a valid contract are also largely the same -- namely, there must be an offer and acceptance related to lawful subject matter and consideration. See, e.g., Window Specialists, Inc. v. Forney Enterprises, Inc.,26 F.Supp.3d 52, 57 (D.D.C. 2014) (Under D.C. law, " [t]he essential elements of a contract are 'competent parties, lawful subject matter, legal consideration, mutuality of assent and mutuality of obligation." ) (quoting Henke v. United States ...

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