United States District Court, D. Nebraska
JUSTIN E. RIDDLE and ERIN M. RIDDLE, Plaintiffs,
CHARTERWEST BANK, a Nebraska Corporation, and FEDERAL RESERVE BANK OF KANSAS CITY, Defendants.
MEMORANDUM AND ORDER
M. GERRARD UNITED STATES DISTRICT JUDGE.
case is based on the denial of a residential home loan for
property in Omaha, Nebraska. Filing 1-1 at 2. The plaintiffs,
Justin and Erin Riddle, were the prospective borrowers, and
CharterWest Bank was the prospective lender. See
filing 1-1 at 2. Generally, the Riddles allege they tried to
withdraw their application to switch to another lender, and
that CharterWest wrongfully retaliated against them by
quickly denying their application and falsely reporting the
denial to the Federal Housing Administration (FHA) as
"denied due to unpaid child support." Filing 1-1 at
the Court are motions to dismiss filed by CharterWest (filing
13) and the Federal Reserve Bank of Kansas City (filing 7).
CharterWest's motion will be granted in part and denied
in part, and the Federal Reserve's motion will be granted
in its entirety.
April and May 2016, the Riddles and CharterWest were engaged
in the process of gathering the documentation necessary for
an FHA home loan. Seefiling 1-1 at 19, 21-22, 35-37.
But an issue arose out of Justin's child support
obligation. Filing 1-1 at 3. Pursuant to a child custody
order, Justin's ex-wife legally had sole custody of their
daughter. Filing 1-1 at 4. But due to circumstances that
prevented Justin's ex-wife from exercising custody, the
two had come to an informal arrangement whereby their
daughter lived with Justin, and his ex-wife arranged every
few months to clear his accrued child support arrearage.
Filing 1-1 at 4.
Riddles' mortgage loan officer, Grant Whitehead,
explained in a May 12, 2016 email to Justin that because
child support liens have priority over new liens, including
mortgages, "this needs to be addressed prior to closing
or paid at closing." Filing 1-1 at 4, 24. Justin
replied, explaining the situation and offering further
evidence if required. Filing 1-1 at 4, 25; see
filing 1-1 at 39. In an email the next day, Justin told
Whitehead that his ex-wife would provide a notarized
statement waiving his child support obligation, and clear his
balance. Filing 1-1 at 4, 26.
same time, Justin was generally frustrated with CharterWest,
believing that Whitehead had been rude to him and that
CharterWest was being deliberately difficult.
Seefiling 1-1 at 4, 27. So, on May 12, he sent an
email explaining his dissatisfaction and advising CharterWest
that if they could get their deal closed by May 18, then the
Riddles would work with CharterWest; otherwise, the Riddles
would "take [their] approval to a different lender"
and expect a refund of CharterWest's fees. Filing 1-1 at
4, 27. Later that day, Justin emailed asking for a copy of
the Riddles' file. Filing 1-1 at 28. Whitehead promised
to email the documents. Filing 1-1 at 29.
13, the Riddles contacted Whitehead's manager, Gary
Walters, and said they no longer wanted to deal with
Whitehead. Filing 1-1 at 5. The Riddles contacted another
lender and provided their file. Filing 1-1 at 5. On May 16,
at 4:13 p.m., Justin emailed CharterWest asking for his FHA
case number so he could transfer to the other lender. Filing
1-1 at 31. At 4:17 p.m., Gary Walters at CharterWest sent
Justin a letter informing him that CharterWest would
"not be able to approve" the Riddles' loan.
Filing 1-1 at 33-34. The letter advised that the loan was a
"higher risk" according to the FHA underwriting
system, and that
Child Support is not paid as agreed. The decree we have
states you are to pay monthly $417. We noted the payment
history but it does not match the decree and therefore
translates into delinquent payments. We would need something
from the court documenting the agreement you have to pay
accordingly to the history. We CANNOT just take your word for
it. It does not work that way on FHA loans. If we cannot get
anything then we can submit it without it but it will hurt
your chances for approval.
Filing 1-1 at 34. The letter further advised that the Riddles
would need at least 2 months of house payments in reserve in
their checking account, and that 2015 tax transcripts would
be required. Filing 1-1 at 34. (These requirements appear to
be contrary to earlier representations from Whitehead that
only a 1 month reserve would be necessary. Filing 1-1 at 35.)
Riddles proceeded with their new lender, but were informed by
the new lender that there was a problem: their loan could not
be approved because on May 17, CharterWest had "put a
credit reject code in the comments section in the
system" indicating that their loan application had been
denied because of unpaid child support. Filing 1-1 at 6. On
June 16, the Riddles contacted Walters and asked that the
credit reject code be removed because (1) CharterWest should
not have denied their loan after they withdrew their
application and (2) they had provided all the child support
documentation CharterWest had asked for. Filing 1-1 at 7.
They also provided Walters with documentation that child
support had been waived and no support was owed. Filing 1-1
at 7, 38-41. Walters replied refusing the Riddles'
request. Filing 1-1 at 7, 42. Justin asked Walters to explain
how CharterWest's decision to deny the loan had been made
without the information that had been requested, and Walters
again stated that only a court order waiving Justin's
child support obligation would have been satisfactory. Filing
1-1 at 7, 44. Justin asked Walters to show when a court order
was requested of them. Filing 1-1 at 7, 45. Walters did not
respond. Filing 1-1 at 7.
Riddles emailed Walters and the bank branch manager
indicating their intent to appear at the branch in the
morning with their documentation. Filing 1-1 at 8, 46. They
were met by sheriff's deputies who said that CharterWest
had reported a threat, and were directed to leave the
property. Filing 1-1 at 8. The Riddles lodged complaints with
the FHA and Consumer Financial Protection Bureau, which were
referred to the Federal Reserve's consumer affairs
department. Filing 1-1 at 10. The Federal Reserve rejected
the Riddles' complaint. Seefiling 1-1 at 10-11.
Riddles sued CharterWest in Douglas County District Court, on
September 13, 2017, asserting claims for breach of fiduciary
duty, tortious interference with a business relationship, and
fraud. Filing 15 at 3-5. CharterWest moved to dismiss
pursuant to Neb. Ct. R. Pldg. § 6-1112(b)(6), and the
district court entered an "Order of Dismissal Without
Prejudice" on November 8, dismissing the Riddles'
complaint without prejudice and granting leave to file an
amended complaint within 14 days. Filing 15 at 6-8.
Riddles did not file an amended complaint within 14 days.
Instead, on December 13, they filed a new complaint asserting
the same claims and some new ones, including the Federal
Reserve as a new defendant. Filing 1-1. On January 16, 2018,
the Federal Reserve removed the complaint to this Court.
Filing 1. On January 30, CharterWest filed its motion to
dismiss (filing 14). On February 2, the Douglas County
District Court entered a "Nunc Pro Tunc Order of
Dismissal Without Prejudice" which again dismissed the
complaint without prejudice, but omitted the language
allowing leave to file an amended complaint. Filing 20-1.
STANDARD OF REVIEW
complaint must set forth a short and plain statement of the
claim showing that the pleader is entitled to relief.
Fed.R.Civ.P. 8(a)(2). This standard does not require detailed
factual allegations, but it demands more than an unadorned
accusation. Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). The complaint need not contain detailed factual
allegations, but must provide more than labels and
conclusions; and a formulaic recitation of the elements of a
cause of action will not suffice. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). For the purposes of a
motion to dismiss a court must take all of the factual
allegations in the complaint as true, but is not bound to
accept as true a legal conclusion couched as a factual
survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6),
complaint must also contain sufficient factual matter,
accepted as true, to state a claim for relief that is
plausible on its face. Iqbal, 556 U.S. at 678. A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged. Id. Where the well-pleaded facts do not
permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged-but has not shown-that
the pleader is entitled to relief. Id. at 679.
whether a complaint states a plausible claim for relief will
require the reviewing court to draw on its judicial
experience and common sense. Id. The facts alleged
must raise a reasonable expectation that discovery will
reveal evidence to substantiate the necessary elements of the
plaintiff's claim. See Twombly, 550 U.S. at 545.
The court must assume the truth of the plaintiff's
factual allegations, and a well-pleaded complaint may
proceed, even if it strikes a savvy judge that actual proof
of those facts is improbable, and that recovery is very
remote and unlikely. Id. at 556.
deciding a motion to dismiss under Rule 12(b)(6), the Court
is normally limited to considering the facts alleged in the
complaint. If the Court considers matters outside the
pleadings, the motion to dismiss must be converted to one for
summary judgment. Fed.R.Civ.P. 12(d). However, the Court may
consider exhibits attached to the complaint and materials
that are necessarily embraced by the pleadings without
converting the motion. Mattes v. ABC Plastics,
Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003). Documents
necessarily embraced by the pleadings include those whose
contents are alleged in a complaint and whose authenticity no
party questions, but which are not physically attached to the
pleading. Ashanti v. City of Golden Valley, 666 F.3d
1148, 1151 (8th Cir. 2012). The Court may also take notice of
public records. Levy v. Ohl, 477 F.3d 988, 991 (8th
Riddles' complaint asserts six claims for relief: (1)
breach of fiduciary duty; (2) tortious interference with a
business relationship; (3) fraud; (4) violation of the Fair
Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et
seq.; (5) "willful noncompliance"; and (6)
conspiracy. CharterWest and the Federal Reserve each move to
dismiss the complaint. See filing 8 at 3-11; filing
14 at 10-18. The Court will consider their arguments
noted, CharterWest argues that the Riddles' claims are
insufficiently pled. Filing 14 at 10-18. But initially, the
Court must address CharterWest's argument that the
Riddles' claims are barred by res judicata.
Seefiling 14 at 3-7.
judicata, or claim preclusion, operates to preclude a
party from relitigating the same cause of action.
Lundquist v. Rice Mem'l Hosp., 238 F.3d 975, 977