Davis v. Wells Fargo — civil — vacate in part — Jordan

The Third Circuit vacated in part in this messy civil appeal arising out of a foreclosure dispute between a homeowner, Wells Fargo bank, and an insurer. The court affirmed dismissal of the homeowner’s claims against Wells Fargo on claim preclusion and statute-of-limitations grounds. But the court reversed the dismissal of claims against the insurer. The district court had dismissed the case on standing grounds because the homeowner sued the wrong corporate entity, but the Third Circuit explained that “this case is not about standing at all” and that whether plaintiff sued the right defendant should have been decided under Rule 12(b)(6), not 12(b)(1). The opinion gives a lucid analysis of when each rule applies and why it matters.

While affirming dismissal of the claims against Wells Fargo, the court included this striking footnote:

Although we affirm the District Court’s dismissal of Davis’s claims against Wells Fargo, we would be remiss if we did not add a note about the disturbing allegations he has made. If they are true, the bank locked Davis out of his home before starting foreclosure proceedings, initiated a series of fraudulent assignments of the mortgage, and obtained insurance on the Property as part of a kickback scheme with the insurer while Davis paid excessive premiums. Although the insurance should have covered the leak and damage to the wall, Wells Fargo allegedly settled the damage claim for a payment of $317 – for roof repairs – but then took no action to actually repair the roof. And all of this took place during and around the time that Davis was serving three years of active duty in the United States Army in a time of war.

When asked about those facts during oral argument, Wells Fargo did not dispute their veracity, nor did its counsel seem particularly concerned about the brazenly exploitative character of the alleged actions of the bank. In one telling portion of the argument, when asked whether the bank had the right to make an insurance claim, take money for a roof repair, and then pocket that money and not make the repair, all while knowing the result could be further deterioration and structural damage to the Property, counsel said simply, “that is what the mortgage gives them the right to do.” See Oral Argument, http://www2.ca3.uscourts.gov/oralargument/audio/15-2658Davisv.WellsFargo.mp3, at 19:13-19:38 (argued March 2, 2016). If the allegations are true, they raise serious questions about bad faith that we are not now in a position to address. Suffice it to say, however, that although we affirm the dismissal of Davis’s claims, we hope the allegations of the amended complaint do not reflect Wells Fargo’s actual business practices.

Congratulations, Wells Fargo and counsel on your appellate victory!

Joining Jordan were Greenberg and Scirica. Arguing counsel were Earl Raynor for the homeowner, Stacey Scrivani of Stevens & Lee for Wells Fargo, and Matthew Faranda-Diedrich of Dilworth Paxson for the insurer.