RICHARD GEORGE; STEVEN LEAVITT; SANDRA LEAVITT; DARRELL DALTON, and all others similarly situated, Plaintiffs-Appellants,
URBAN SETTLEMENT SERVICES, d/b/a Urban Lending Solutions; BANK OF AMERICA, N.A., Defendants-Appellees.
from the United States District Court for the District of
Colorado (D.C. No. 1:13-CV-01819-PAB-KLM)
K. Green (Steve W. Berman, on the briefs), Hagens Berman
Sobol Shapiro, LLP, Seattle, Washington, for Darrell Dalton,
Richard George, and Sandra Leavitt, and Steven Leavitt,
Levenberg, Goodwin Procter LLP, Washington, D.C. (James W.
McGarry, Goodwin Procter LLP, Boston, Massachusetts, Peter
Korneffel, Bryan Cave, LLP, Denver, Colorado, with him on the
brief), for Bank of America, N.A., Defendant-Appellee.
C. Bryce, Ballard Spahr, LLP, Philidelphia, Pennsylvania
(Sarah B. Wallace, Ballard Spahr, LLP, Denver, Colorado, with
him on the brief), for Urban Settlement Services,
BRISCOE, HOLMES, and MORITZ, Circuit Judges.
MORITZ, Circuit Judge.
George, Steven Leavitt, Sandra Leavitt, and Darrell Dalton
appeal the district court's dismissal of their putative
class action against Urban Settlement Services, d/b/a Urban
Lending Solutions (Urban) and Bank of America, N.A. (BOA).
The plaintiffs asserted a claim under the Racketeer
Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.
§§ 1961-1968, against BOA and Urban. They also
brought a promissory estoppel claim against BOA. Both claims
arose from the defendants' allegedly fraudulent
administration of the Home Affordable Modification Program
(HAMP). The district court granted the defendants'
Fed.R.Civ.P. 12(b)(6) motions to dismiss both claims, denied
the plaintiffs' request for leave to amend their first
amended complaint, and dismissed the case.
we conclude that the plaintiffs' first amended complaint
states a facially plausible RICO claim against BOA and Urban
and a facially plausible promissory estoppel claim against
BOA, we reverse and remand for further proceedings. Our
reversal moots the plaintiffs' challenge to the district
court's denial of their request to further amend the
Congress enacted the Emergency Economic Stabilization Act of
2008, it authorized the Secretary of the U.S. Department of
the Treasury to establish the Troubled Asset Relief Program
(TARP) and to purchase troubled assets, including certain
residential mortgages, from financial institutions. See
generally 12 U.S.C. §§ 5201, 5202, 5211.
Consistent with this authority, the Secretary established
HAMP in 2009 to encourage mortgage servicers to modify loan
terms for delinquent borrowers at risk of foreclosure.
condition of receiving TARP funds, BOA was required to
participate in HAMP and to comply with the program
guidelines. These guidelines required BOA to collect
financial information from at-risk borrowers; evaluate
borrowers' eligibility for HAMP loan modifications; place
eligible borrowers on Trial Period Plans (TPPs) so they could
demonstrate their ability to make lower monthly payments; and
permanently modify loans for qualified borrowers who complied
with their individual TPPs.
contracted with various third parties, including Urban, to
implement and administer HAMP. Urban is a "mortgage
solutions provider" that "provides numerous clients
a variety of services, including mortgage fulfillment
services, home retention solutions, appraisals and valuation
services, title and settlement services, and call center
services." App. 170.
four plaintiffs in this action each had a home mortgage
through BOA, each applied for a HAMP loan modification, and
each interacted with BOA and Urban representatives during the
application process. In July 2013, the plaintiffs filed a
putative class action against BOA and Urban, asserting a RICO
claim against both and a promissory estoppel claim against
BOA. In accordance with local rules, the plaintiffs conferred
with the defendants about the claims and about the
defendants' anticipated motions to dismiss. The
plaintiffs amended their complaint in August 2013 to correct
deficiencies the defendants identified.
support their RICO claim, the plaintiffs alleged the
defendants and various other entities formed a RICO
enterprise with the common goal of wrongfully denying HAMP
loan modifications to qualified homeowners. According to the
plaintiffs, BOA and Urban developed a scheme to obstruct and
delay borrowers' HAMP loan modification requests. The
defendants furthered that scheme by denying they had received
application documents they had in fact received and by
misleading borrowers about the status of their applications.
The plaintiffs alleged damages including longer loan payoff
times, increased principal and interest on their loans,
damage to credit reports, and inappropriately charged
processing and late fees associated with delinquency and
plaintiffs also asserted a promissory estoppel claim against
BOA. They alleged that BOA made clear promises-both in TPP
documents and on its website- to provide permanent loan
modifications to qualified borrowers who successfully
completed TPPs. And they alleged that BOA reneged on those
Urban filed separate Rule 12(b)(6) motions to dismiss the
plaintiffs' claims. In moving to dismiss the RICO claim,
BOA argued the plaintiffs failed to plausibly allege the
existence of an enterprise sufficiently distinct from BOA.
Urban, on the other hand, argued the plaintiffs failed to
sufficiently allege Urban participated in the conduct of the
enterprise. And both defendants argued the plaintiffs failed
to plausibly allege a pattern of racketeering activity.
district court granted both motions, concluding the
plaintiffs failed to plausibly allege (1) Urban's
participation in the conduct of the enterprise and (2) the
existence of an enterprise separate and distinct from BOA and
its agents. The court denied the plaintiffs'
request to amend their first amended complaint and dismissed
the case. The plaintiffs appeal.
review a Rule 12(b)(6) dismissal de novo. Childs v.
Miller, 713 F.3d 1262, 1264 (10th Cir. 2013). We accept
a plaintiff's well-pleaded factual allegations as true
and determine whether the plaintiff has provided "enough
facts to state a claim to relief that is plausible on its
face." Hogan v. Winder, 762 F.3d 1096, 1104
(10th Cir. 2014) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). In determining the
plausibility of a claim, we look to the elements of the
particular cause of action, keeping in mind that the Rule
12(b)(6) standard doesn't require a plaintiff to
"set forth a prima facie case for each element."
Khalik v. United Air Lines, 671 F.3d 1188, 1192-93
(10th Cir. 2012). See also Kan. Penn Gaming, LLC v.
Collins, 656 F.3d 1210, 1215 (10th Cir. 2011) (noting
that "[t]he nature and specificity of the allegations
required to state a plausible claim will vary based on
context"). Rather, a claim is facially plausible if the
plaintiff has pled "factual content that allows the
court to draw the reasonable inference that the defendant is
liable for the misconduct alleged." Hogan, 762
F.3d at 1104 (quoting Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009)).
The district court erred in dismissing the plaintiffs'
plaintiffs argue that the factual allegations in their first
amended complaint state a facially plausible RICO claim
against both BOA and Urban and that the district court
therefore erred in dismissing that claim.
provides a private right of action in federal court for
individuals injured in their business or property through
fraudulent conduct." Robert L. Kroenlein Trust ex
rel. Alden v. Kirchhefer, 764 F.3d 1268, 1274 (10th Cir.
2014). See 18 U.S.C. § 1964(c) (providing
private right of action and treble damages for § 1962(c)
violations). The plaintiffs assert that BOA and Urban
violated § 1962(c), which makes it "unlawful for
any person employed by or associated with any enterprise
engaged in, or the activities of which affect, interstate or
foreign commerce, to conduct or participate, directly or
indirectly, in the conduct of such enterprise's affairs
through a pattern of racketeering activity or collection of
unlawful debt." The plaintiffs identify both BOA and
Urban as RICO "persons."
to avoid dismissal, the plaintiffs must plausibly allege that
BOA and Urban each (1) conducted the affairs (2) of an
enterprise (3) through a pattern (4) of racketeering
activity. See 18 U.S.C. § 1962(c); Robbins
v. Wilkie, 300 F.3d 1208, 1210 (10th Cir. 2002).
The plaintiffs sufficiently allege the existence of a RICO
enterprise that is distinct from BOA.
plaintiffs characterize the district court's conclusion
that the alleged enterprise was insufficiently distinct from
BOA as contrary to legal precedent and public policy. The
plaintiffs argue that because they alleged an
association-in-fact enterprise consisting of numerous
independently owned and operated companies, the alleged
enterprise is sufficiently distinct from BOA.
the other hand, argues the district court properly concluded
that the plaintiffs failed to plead a sufficiently distinct
enterprise because (1) the alleged enterprise consists solely
of BOA's own employees and agents and (2) the plaintiffs
don't allege that the enterprise conducted any affairs
other than BOA's own.
broadly defines "enterprise" as "any
individual, partnership, corporation, association, or other
legal entity, and any union or group of individuals
associated in fact although not a legal entity." 18
U.S.C. § 1961(4). The plaintiffs rely on the latter part
of this definition, alleging that BOA, Urban, and others
formed an association-in-fact enterprise. See Boyle v.
United States, 556 U.S. 938, 946 (2009) (explaining that
an association-in-fact enterprise has "a purpose,
relationships among those associated with the enterprise, and
longevity sufficient to permit these associates to pursue the
plaintiffs allege the enterprise's common purpose in this
case was "to extend as few permanent HAMP modifications
as possible while providing BOA a justification to claim that
borrowers had not fulfilled their [TPPs] or were otherwise
ineligible for HAMP modifications." App. 156. According
to the plaintiffs, BOA and Urban maintained the key
relationship among the numerous entities associated with the
enterprise. BOA contracted with Urban "to provide
HAMP-related ministerial services, " App. 108,
and delegated several tasks to Urban. And while the
plaintiffs allege that BOA directed Urban's HAMP-related
activities, they further assert that Urban exercised broad
discretion to manage and operate its portion of the
enterprise. Finally, in pleading longevity, the plaintiffs
allege BOA and Urban began conducting the affairs of the
enterprise in 2009 and continued to do so in 2013 when the
plaintiffs filed their complaint.
district court concluded the plaintiffs failed to allege that
BOA is sufficiently distinct from that association-in-fact
enterprise. In reaching that conclusion, the court first
found that BOA, its subsidiary BAC Home Loans, and BOA's
employees couldn't form a RICO enterprise because they
have a parent corporation-subsidiary relationship. Next, the
court determined that Urban and its employees were BOA's
agents, who did nothing more than follow BOA's
instructions. Similarly, the court found that the other
alleged members of the enterprise were merely BOA's
agents and that BOA retained them to conduct BOA's
affairs rather than the enterprise's.
disagree. We recognize that § 1962(c) requires that the
"person" conducting the enterprise's affairs be
distinct from the "enterprise." Cedric Kushner
Promotions, Ltd. v. King, 533 U.S. 158, 160 (2001);
see Bd. of Cty. Comm'rs of San Juan Cty. v. Liberty
Grp., 965 F.2d 879, 885 & n.4 (10th Cir. 1992)
(collecting cases and noting predominant view that §
1962(c) "require[s] that the 'person' and the
'enterprise' engaged in racketeering activities be
different entities"). And we further recognize that a
plaintiff must demonstrate that the defendant conducted the
affairs of the enterprise rather than simply conducting the
defendant's own affairs. Brannon v. Boatmen's
First Nat. Bank of Okla., 153 F.3d 1144, 1146 (10th Cir.
it's true that a defendant corporation, acting through
its subsidiaries, agents, or employees typically can't be
both the RICO "person" and the RICO
"enterprise." See Brannon, 153 F.3d at
1149 (collecting cases); Bd. of Cty. Comm'rs of San
Juan Cty., 965 F.2d at 886 ("[O]fficers and
employees of an organization cannot, in the ordinary course
of their duties, constitute an association in fact separate
from the organization itself."). See also In re
ClassicStar Mare Lease Litig., 727 F.3d 473, 493 (6th
Cir. 2013) (noting that a parent corporation and its
subsidiaries don't ordinarily satisfy the distinctness
requirement); Fitzgerald v. Chrysler Corp., 116 F.3d
225, 226-28 (7th Cir. 1997) (concluding that because "an
employer and its employees cannot constitute a RICO
enterprise, " a "manufacturer plus its dealers and
other agents (or any subset of the members of the corporate
family) do not constitute" a RICO enterprise).
the district court relied on Brannon and
Fitzgerald to conclude that BOA wasn't
sufficiently distinct from the enterprise. But our review of
those cases reveals that neither supports the district
court's conclusion. In Brannon, the plaintiffs
alleged in two separate counts that (1) a bank holding
company was the RICO enterprise and the holding company's
subsidiary was the RICO person conducting the
enterprise's affairs; and conversely that (2) the holding
company's subsidiary was the RICO enterprise and the
holding company was the RICO person conducting the
enterprise's affairs. 153 F.3d at 1145-46. Similarly, in
Fitzgerald, the plaintiffs alleged that the Chrysler
Corporation was a RICO person conducting the affairs of an
enterprise composed of Chrysler's subsidiaries,
Chrysler's independent automobile dealers, and various
trusts controlled by Chrysler. 116 F.3d at 226.
primarily on the parent-subsidiary relationship, this court
in Brannon and the Seventh Circuit in
Fitzgerald concluded that the plaintiffs in those
cases failed to allege RICO enterprises sufficiently distinct
from the RICO persons and therefore affirmed the district
courts' Rule 12(b)(6) dismissals of the plaintiffs'
RICO claims. See Brannon, 153 F.3d at 1145-49
(holding that "a parent-subsidiary corporate
relationship standing alone" is not sufficient to
"invoke RICO liability"); Fitzgerald, 116
F.3d at 226-28 (holding that a "manufacturer plus its
dealers and other agents, (or any subset of the members of
the corporate family), do not constitute an enterprise within
the meaning of [RICO]").
contrast, the plaintiffs here allege an association-in-fact
enterprise. They don't contend that either a parent
corporation or its subsidiary corporation is the enterprise.
Rather, they assert that BOA and Urban-two separate legal
entities- joined together, along with several other entities,
to form and conduct the affairs of the BOA-Urban
association-in-fact enterprise. The plaintiffs further allege
that BOA conducted the enterprise's affairs, rather than
BOA's own affairs, by acting in concert with Urban and
other members of the enterprise to implement and execute a
scheme to fraudulently deny HAMP loan modifications to
BOA's act of contracting with Urban to provide
HAMP-related services didn't somehow render Urban a BOA
subsidiary, a BOA agent, or even part of the BOA corporate
family. Instead, the plaintiffs assert that BOA and Urban
remained separate legal entities in distinct lines of
business. Specifically, BOA is a mortgage lender whose
services extend well beyond participation in HAMP, while
Urban is a limited liability corporation that provides
mortgage-related services to numerous clients, including BOA.
Further, the plaintiffs allege that each entity performed