Akil v. Freedom Mortgage Corporation

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UNITED STATES DISTRICT COURT

6 WESTERN DISTRICT OF WASHINGTON

AT TACOMA

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NAKITA AKIL, Case No. 3:25-cv-05048-TMC

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Plaintiff, ORDER GRANTING IN PART AND

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DENYING IN PART MOTION TO

v. DISMISS AND DENYING MOTION FOR

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SANCTIONS

FREEDOM MORTGAGE CORP.,

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Defendant.

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14 I. INTRODUCTION

15 In 2021, Plaintiff Nakita Akil purchased a home with her then-husband in Lakewood,

16 Washington. When the couple divorced, Plaintiff was allowed to retain the home but was

17 required to refinance the property and pay her husband the funds she received from the

18 transaction. Plaintiff reached out to Defendant Freedom Mortgage Corporation, the holder of the

19 home’s mortgage. Plaintiff alleges that, after much back and forth, Defendant refused to provide

20 the information necessary to refinance the home. Consequently, Plaintiff claims she was forced

21 to sell the home quickly to satisfy the requirements of the divorce agreement.

22 Shortly after, Plaintiff sued Defendant, arguing that the company’s failure to notify her of

23 changes to her account and refusal to provide necessary information violated the Washington

24 Consumer Loan Act (CLA) and the Washington Consumer Protection Act (CPA). Dkt. 1-1.

1 Plaintiff also brought a claim for negligent infliction of emotional distress, a consequence of the

2 loss of the home. Id. Defendant moved to dismiss the complaint, claiming that Plaintiff had not

3 met the requirements of a CPA claim or a negligent infliction of emotional distress claim. Dkt. 5.

4 The Court agrees with Defendant as to Plaintiff’s claim for negligent infliction of

5 emotional distress. Still, the Court concludes that Plaintiff may remedy these deficiencies. Thus,

6 the Court GRANTS the motion, Dkt. 5, as to the negligent infliction of emotional distress claim.

7 Plaintiff is granted leave to amend her complaint. The Court DENIES the motion as to Plaintiff’s

8 other claims, finding that Plaintiff has adequately pled her CPA and related CLA claims. If

9 Plaintiff chooses to amend her complaint, she must do so by April 26, 2025.

10 Plaintiff later moved for sanctions under Federal Rule of Civil Procedure 11, arguing that

11 Defendant’s motion to dismiss misstated both the facts and law and ignored controlling case law.

12 Dkt. 15. The Court DENIES Plaintiff’s motion for sanctions, id., concluding that Defendant’s

13 actions do not rise to the high bar for sanctionable conduct.

14 II. BACKGROUND

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A. Factual Background

In September 2021, Plaintiff Nakita Akil bought a home with her then-husband in

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Lakewood, Washington. Dkt. 1-1 ¶ 4.1. Plaintiff, alongside her husband, signed the Deed of

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Trust. Id. ¶¶ 4.15–4.16. The Deed of Trust defined “Borrower” as “Mazi L. Akil and Nakita S.

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Akil, HUSBAND AND WIFE.” Id. ¶ 4.16. The Deed “incorporate[d] the Note and define[d] the

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Note as, ‘the promissory note signed by Borrower and dated September 10, 2021.’” Id. ¶ 4.17.

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The Akils’ marriage did not last. Id. ¶ 4.2. They separated and ultimately finalized their

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divorce on March 23, 2022. Id. The divorce decree entered by the court awarded Plaintiff their

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home in Lakewood. Id. ¶ 4.3. Plaintiff’s husband thus surrendered his interest in the property

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through a quitclaim deed. Id. ¶ 4.4. In return, the decree required that Plaintiff refinance the loan

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1 into her name within seven months and pay her ex-husband $75,000 from the proceeds of the

2 refinancing. Id. ¶ 4.5.

3 Defendant Freedom Mortgage Corporation was the holder of the loan. Id. at 6. On April

4 7, 2022, Plaintiff contacted Defendant to request information about refinancing the loan. Id.

5 ¶ 4.7. Defendant instructed her to mail copies of the divorce decree and quitclaim deed. Id. ¶ 4.8.

6 She did so but did not hear back. Id. In May 2022, Plaintiff again contacted Defendant. Id. ¶ 4.9.

7 Only then did Defendant tell her that “she was no longer an authorized party on the account and

8 that her ex-husband had established a new account password.” Id. No notice was provided before

9 her removal. See id.

10 On June 6, 2022, Plaintiff again called Defendant who told Plaintiff that they could not

11 provide her with the information necessary because her husband had changed the account

12 password. Id. ¶ 4.10. Two days later, Plaintiff again called Defendant who then told her that they

13 could not even discuss the status of the account. Id. ¶ 4.11. On August 11, 2022, Plaintiff tried

14 having her attorney call on her behalf to obtain the information. Id. ¶ 4.12. This too failed. Id. On

15 September 30, 2022, Plaintiff called again, this time to try to make a payment on the loan. Id.

16 ¶ 4.13. Defendant told Plaintiff that she “could not access the account because she did not sign

17 the mortgage loan document, and she was no longer on the account.” Id. ¶ 4.14.

18 Plaintiff alleges that Defendant’s decision to remove her from the account and refusal to

19 provide access prevented her from gathering the information necessary to refinance the home. Id.

20 ¶ 4.9. She tried to contact lenders to refinance, but because she could not provide information

21 about the loan held by Defendant, she alleges that they all refused her. Id. ¶ 4.20.

22 In October 2022, Plaintiff “began to receive notices of a pending foreclosure” because no

23 payments had been made on the loan. See id. ¶ 4.19. And in November 2022, Plaintiff’s ex-

24 husband successfully petitioned the court to force the sale of the home under the divorce decree.

1 Id. ¶ 4.21. The next month, the court directed the house be put on the market. Id. ¶ 4.22. Plaintiff

2 alleges the home—which had to be sold swiftly to satisfy her responsibilities under the decree—

3 was sold at substantially less than market value. Id. ¶ 4.23.

4 After the sale, Plaintiff filed a complaint with the State of Washington Department of

5 Financial Institutions (“DFI”) Division of Consumer Services. Id. ¶ 4.24. DFI responded. Id.

6 They found that Defendant “likely violated the Consumer Loan Act . . . when it failed to provide

7 [Plaintiff] the information that she needed to refinance the mortgage, and when [Defendant]

8 failed to notify [Plaintiff] that she had been removed as an authorized party until she called back

9 asking for an update.” Id.

10 Plaintiff claims that, because of Defendant’s actions, she was “forced to sell the home for

11 less than its fair market value, lost the future equity in her home and incurred additional expenses

12 associated with relocating.” Id. ¶ 4.25. Plaintiff sued Defendant, alleging violations of

13 Washington’s Consumer Protection Act (CPA); violation of the Consumer Loan Act (CLA), a

14 per se violation of the CPA; and negligent infliction of emotional distress. Id. ¶¶ 5.1–7.5.

15 B. Procedural Background

16 Plaintiff first filed her case in Pierce County Superior Court. Dkt. 1 at 1. Defendant

17 removed the case to this court on January 20, 2025 based on diversity jurisdiction. Id. at 2–3. On

18 January 31, 2025, Defendant moved to dismiss Plaintiff’s complaint. Dkt. 5. Defendant argued

19 that plaintiff had failed to adequately plead various elements of her CPA claims. Id. at 3–8. And

20 Defendant argued that Plaintiff’s negligent infliction of emotional distress claim did not plead

21 that Defendant owed Plaintiff a duty. Id. at 9–10. Plaintiff responded on March 7, 2025, see

22 Dkt. 12, and Defendant replied on March 14, see Dkt. 13.

23 On March 18, 2025, Plaintiff’s counsel moved for sanctions against Defense counsel.

24 Dkt. 15. Defendant responded on April 2, 2025. Dkt. 19. Plaintiff’s counsel offered two reasons

1 for sanctions. First, Plaintiff’s counsel claimed that Defendant’s motion to dismiss

2 “misrepresented that Plaintiff had not alleged a per se unfair trade practice, which she had.”

3 Dkt. 16 ¶ 4. Second, Plaintiff’s counsel argued that Defense counsel “misrepresented that a

4 plaintiff bringing a non-per se CPA claim based on an ‘unfair’ act or practice must establish that

5 the alleged act ‘had the capacity to deceive a substantial portion of the public,’ which is an

6 incorrect statement of law that has been directly addressed by Washington’s Supreme Court.” Id.

7 In Defendant’s reply to Plaintiff’s response on the motion to dismiss, Defendant corrected the

8 alleged factual misrepresentation. Id. ¶ 6 (citing Dkt. 13 at 6 n.2). Plaintiff’s Counsel no longer

9 moves for sanctions on this issue. Id. ¶ 4. Plaintiff seeks sanctions only for the “incorrect

10 statement of law.” Id. ¶ 7.

11 Both motions have been fully briefed and are ripe for the Court’s consideration.

12 III. LEGAL STANDARD

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A. Jurisdictional Analysis

Before addressing each motion’s merits, the Court must confirm that it has subject matter

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jurisdiction over the parties’ claims. See United Invs. Life Ins. Co. v. Waddell & Reed Inc., 360

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F.3d 960, 966–67 (9th Cir. 2004) (“[A] district court’s duty to establish subject matter

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jurisdiction is not contingent upon the parties’ arguments. . . .” and it has an obligation to

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establish subject matter jurisdiction “sua sponte, whether the parties raised the issue or not.”).

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“[T]he burden of establishing [jurisdiction] rests upon the party asserting jurisdiction.”

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Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citation omitted).

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Defendant alleges in its notice of removal that the Court has diversity jurisdiction under 28

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U.S.C. § 1332(a). Dkt. 1 at 2–3.

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The Court has diversity jurisdiction over this action because the amount in controversy

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exceeds $75,000 and the opposing parties are citizens of different states. Defendant is a New

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1 Jersey corporation with its principal place of business in Florida. Id. at 2. Plaintiff is a citizen of

2 Washington. Id. There is complete diversity of citizenship between the opposing parties. See 28

3 U.S.C. § 1332(c); Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir.

4 2006).

5 The amount in controversy requirement is also met. The mortgage loan at issue had an

6 original principal amount of $543,945. Dkt. 1 at 3 (citing Dkt. 1-1 ¶ 4.17). In her complaint,

7 Plaintiff alleges that due to Defendant’s actions, she “was forced to sell the home for less than its

8 fair market value, lost the future equity in her home and incurred additional expenses associated

9 with relocating. She also incurred the expense of having the situation investigated by an

10 attorney.” Dkt. 1-6 ¶ 4.25. Plaintiff also seeks damages for emotional distress, treatment for

11 medically diagnosed anxiety, treble damages under the Washington Consumer Protection Act,

12 and attorney’s fees. Id. ¶¶ 7.4–8. This is sufficient to conclude that the amount in controversy

13 exceeds $75,000.

14 Because the Court is sitting in diversity, substantive claims are governed by state law.

15 Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938).

16 B. Motion to Dismiss

17 Federal Rule of Civil Procedure 8(a)(2) requires that a complaint contain “a short and

18 plain statement of the claim showing that the pleader is entitled to relief.” Under Federal Rule of

19 Civil Procedure 12(b)(6), the Court may dismiss a complaint for “failure to state a claim upon

20 which relief can be granted.” Rule 12(b)(6) motions may be based on either the lack of a

21 cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.

22 Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citation

23 omitted). To survive a Rule 12(b)(6) motion, the complaint “does not need detailed factual

24 allegations,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007), but “must contain sufficient

1 factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face,’” Boquist v.

2 Courtney, 32 F.4th 764, 773 (9th Cir. 2022) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678

3 (2009)). “A claim is facially plausible ‘when the plaintiff pleads factual content that allows the

4 court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’”

5 Id. (quoting Iqbal, 556 U.S. at 678).

6 The Court “must accept as true all factual allegations in the complaint and draw all

7 reasonable inferences in favor of the nonmoving party,” Retail Prop. Tr. v. United Bhd. of

8 Carpenters & Joiners of Am., 768 F.3d 938, 945 (9th Cir. 2014), but need not “accept as true a

9 legal conclusion couched as a factual allegation,” Twombly, 550 U.S. at 555. “[A] plaintiff’s

10 obligation to provide the grounds of his entitlement to relief requires more than labels and

11 conclusions, and a formulaic recitation of the elements of a cause of action will not do.”

12 Twombly, 550 U.S. at 555 (internal quotation marks omitted). “Threadbare recitals of the

13 elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal,

14 556 U.S. at 678.

15 C. Rule 11 Sanctions

16 Rule 11 authorizes courts to impose various sanctions to “deter baseless filings and curb

17 abuses.” Bus. Guides, Inc. v. Chromatic Commc’ns Enters., Inc., 498 U.S. 533, 553 (1991)

18 (citation omitted). An attorney is subject to Rule 11 sanctions “when he presents to the court

19 ‘claims, defenses, and other legal contentions . . . [not] warranted by existing law or by a

20 nonfrivolous argument for the extension, modification, or reversal of existing law or the

21 establishment of new law[.]’” Holgate v. Baldwin, 425 F.3d 671, 675–76 (9th Cir. 2005)

22 (quoting Fed. R. Civ. P. 11(b)(2)). “A party violates Federal Rule of Civil Procedure 11(b) by

23 submitting pleadings for an improper purpose or making claims or factual contentions without

24 legal or evidentiary support.” Simmonds v. Credit Suisse Sec. (USA) LLC, No. C12-1937-JLR,

1 2013 WL 2319401, at *2 (W.D. Wash. May 28, 2013). Rule 11 is meant “to address frivolous or

2 abusive filings.” Ringgold-Lockhart v. Cnty. of Los Angeles, 761 F.3d 1057, 1065 (9th Cir.

3 2014).

4 Rule 11 sanctions are “an extraordinary remedy” and thus “reserved for the rare and

5 exceptional cases where the action is clearly frivolous, legally unreasonable or without legal

6 foundation, or brought for an improper purpose.” Lee v. Pow Ent., Inc., No. 20-55928, 2021 WL

7 5768462, at *2 (9th Cir. Dec. 6, 2021) (cleaned up).

8 IV. DISCUSSION – MOTION TO DISMISS

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A. Plaintiff has adequately pled a violation of the CLA, a per se violation of the CPA.

1. Plaintiff is a borrower under the CLA.

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The Court first turns to Plaintiff’s allegations under the CLA and CPA. Defendant argues

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that Plaintiff cannot bring a CLA claim because Plaintiff has “failed to establish that she was a

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‘borrower.’” Dkt. 5 at 6. Defendant contends that because Plaintiff was not on the Note

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incorporated in the Deed of Trust, she is not a borrower. Id. Defendant cites to the Black’s Law

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Dictionary definition of borrower. Id. at 7. And Defendant cites the Washington Revenue Code,

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though not to the relevant portions of the CLA. Id. The cases that Defendant cites do not address

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the CLA either. Id. at 6–7.

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Yet Plaintiff brings her claim under the CLA. Dkt. 1-1 ¶¶ 6.1–6.6. And, as Defendant

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acknowledges, this provision requires that, “to prevail on her CLA claim, Plaintiff must establish

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that she is, in fact, a borrower under the CLA.” Dkt. 13 at 3 (emphasis added).

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The structure of the CLA and principles of statutory interpretation support this

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conclusion. The Court’s “fundamental purpose in construing a statute is to ascertain and carry

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out the intent of the legislature.” Matter of Marriage of Cardwell, 16 Wn. App. 2d 90, 98, 479

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P.3d 1188 (2021). Courts applying Washington law “derive legislative intent solely from the

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1 plain language of the statute, considering the text of the provision, the context of the statute,

2 related provisions, amendments, and the statutory scheme as a whole.” PeaceHealth St. Joseph

3 Med. Ctr. v. Dep’t of Rev., 196 Wn.2d 1, 7–8, 468 P.3d 1056 (2020). Thus, “[i]t is an axiom of

4 statutory interpretation that where a term is defined we will use that definition.” United States v.

5 Hoffman, 154 Wn. 2d 730, 741, 116 P.3d 999 (2005), as amended (Aug. 25, 2005) (citing

6 Cowiche Canyon Conservancy v. Bosley, 118 Wn. 2d 801, 813, 828 P.2d 549 (1992)). Only if a

7 term is undefined will a court rely on the plain and ordinary meaning. See id.

8 The CLA defines a borrower as:

9 [A]ny person who consults with or retains a licensee or person subject to this

chapter in an effort to obtain, or who seeks information about obtaining a loan,

10 regardless of whether that person actually obtains such a loan. “Borrower”

includes a person who consults with or retains a licensee or person subject to this

11 chapter in an effort to obtain, or who seeks information about obtaining a

residential mortgage loan modification, regardless of whether that person actually

12 obtains a residential mortgage loan modification.

RCW 31.04.015(4). A “residential mortgage loan modification” means a “change in one or more

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of a residential mortgage loan’s terms or conditions. Changes to a residential mortgage loan’s

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terms or conditions include but are not limited to forbearances; repayment plans; changes in

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interest rates, loan terms, or loan types; capitalizations of arrearages; or principal reductions.”

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RCW 31.04.015(25). And “residential mortgage loan modification services” include

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“negotiating, attempting to negotiate, arranging, attempting to arrange, or otherwise offering to

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perform a residential mortgage loan modification for compensation or gain.” RCW

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31.04.015(26). These services “also include[] the collection of data for submission to an entity

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performing mortgage loan modification services.” Id.

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The legislature expressly incorporated these definitions into the other portions of the

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statute. Under the definitions section of the CLA, RCW 31.04.015, the legislature wrote: “The

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definitions set forth in this section apply throughout this chapter unless the context clearly

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1 requires a different meaning.” Accordingly, it is the above definition of borrower—not one

2 derived from a dictionary or unrelated case law—that controls Plaintiff’s status here.

3 Under this definition, Plaintiff has sufficiently pled that she is a borrower. Plaintiff

4 “consulted with [Defendant] to obtain information necessary to obtain a loan” satisfying the

5 CLA’s definition of “borrower.” Dkt. 1-1 ¶ 6.3. She sought a residential mortgage loan

6 modification—refinancing the loan held by Defendant. Id. at 6. This is plainly within the CLA

7 definition of residential mortgage loan modifications and services.

8 2. There is no private right of action under the CLA, but Plaintiff may bring her CLA

claim through the CPA.

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Defendant next claims that even if Plaintiff is a borrower, Plaintiff cannot bring a CLA

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claim because there is no private right of action under the CLA. Dkt. 5 at 6. Defendant is correct

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that the CLA does not afford a private right of action. Est. of Brantner v. Ocwen Loan Servicing,

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LLC, No. C17-582 TSZ, 2021 WL 3053055, at *4 (W.D. Wash. July 20, 2021) (quoting RCW

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31.04.208); see also Saepoff v. HSBC Bank USA as Tr. for Ace Sec. Corp. Home Equity Loan Tr.

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2007-WM2, No. 20-36031, 2022 WL 1500799, at *1 (9th Cir. May 12, 2022) (“Saepoff’s

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standalone Consumer Loan Act claim fails because there is no private right of action for

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violations under § 31.04.027.”).

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But private actions are cognizable under the CLA through the CPA. Under the CPA, a

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“per se unfair trade practice exists when a statute which has been declared by the Legislature to

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constitute an unfair or deceptive act in trade or commerce has been violated.” Ride the Ducks

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Seattle LLC v. Ride the Ducks Int’l LLC, 647 F. Supp. 3d 1049, 1058 (W.D. Wash. 2022)

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(quoting Hangman Ridge Training Stables v. Safeco Title Ins. Co., 105 Wn.2d 778, 786, 719

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P.2d 531(Wash. 1986)). The CLA provides that “[a]ny violation of this chapter is not reasonable

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in relation to the development and preservation of business and is an unfair and deceptive act or

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1 practice and unfair method of competition in the conduct of trade or commerce in violation of

2 RCW 19.86.020.” Est. of Brantner, 2021 WL 3053055, at *4 (quoting RCW 31.04.208)

3 (emphasis added). The Washington legislature thus intended that a violation of the CLA create a

4 basis for a per se CPA claim. See id.

5 Thus, violations of the CLA are cognizable as unfair and deceptive acts under the CPA.

6 See, e.g., Buehler v. Nationstar Mortage LLC, No. 3:24-CV-05759-DGE, 2024 WL 5074946, at

7 *9 (W.D. Wash. Dec. 10, 2024) (citation omitted) (“[T]he claimed CLA violations are alleged in

8 support of a CPA claim, which would be an actionable claim.”); Russell v. WADOT Cap., Inc.,

9 No. C22-0531JLR, 2024 WL 4451541, at *20 (W.D. Wash. Oct. 9, 2024), motion to certify

10 appeal denied, No. C22-0531JLR, 2024 WL 4665566 (W.D. Wash. Nov. 4, 2024) (similar).

11 Defendant concedes that “a plaintiff can rely on a violation of the CLA to establish a per

12 se violation of the CPA.” Dkt. 13 at 6. Still Defendant argues that “Plaintiff’s claim fails as a

13 matter of law,” because she is not a borrower under the CLA. Id.; see also id. at 5 (“Plaintiff

14 cannot rely on Freedom’s alleged violation of the CLA to establish any of the essential elements

15 of her CPA claim because, as noted above, her CLA claim fails as a matter of law because she is

16 not a borrower.”). But, as explained above, Plaintiff is a borrower under the CLA, and she has

17 sufficiently pled a CLA violation. Defendant’s argument fails.

18 B. Plaintiff has sufficiently pled a per se violation of the CPA.

19 The Court turns to the CPA’s elements. The CPA requires that a plaintiff prove “(1) an

20 unfair or deceptive act or practice, (2) occurring in trade or commerce, (3) affecting the public

21 interest, (4) injury to a person’s business or property, and (5) causation.” Ride the Ducks Seattle

22 LLC, 647 F. Supp. 3d at 1054 (citing Panag v. Farmers Ins. Co. of Wash., 166 Wn.2d 27, 37,

23 204 P.3d 885 (2009). The first three elements “may be established by a showing that the alleged

24 act constitutes a per se unfair trade practice.” Est. of Coineandubh v. Boeing Emps. Credit

1 Union, No. 3:19-CV-05527-RBL, 2019 WL 3859726, at *5 (W.D. Wash. Aug. 16, 2019)

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(quoting Hangman Ridge, 105 Wn. 2d at 786).1

3 Plaintiff has sufficiently pled a CLA violation, satisfying the first three elements of a

4 CPA claim. As explained above, Plaintiff has shown that she is a borrower under the CLA. See,

5 supra, section IV.A.1. Plaintiff has also pled that Defendant is a residential mortgage loan

6 servicer, subject to the requirements of the law. RCW 31.04.015(18)(a), (25)–(26); Dkt. 1-1

7 ¶¶ 4.6, 6.2. And Plaintiff has also shown that she was pursuing information necessary for a loan

8 modification. See RCW 31.04.015(25); Dkt. 1-1 ¶ 4.6. The complaint explains that Plaintiff

9 sought to refinance the loan—altering the loan terms and repayment plan—to satisfy the

10 requirements of the divorce decree. RCW 31.04.015(25); Dkt. 1-1 ¶ 4.5–4.6.

11 Plaintiff claims that Defendant violated RCW 31.04.290. Dkt. 1-1 ¶ 6.1. The provision

12 requires that a residential loan servicer “[m]ust provide a written statement to the borrower

13 within fifteen business days of receipt of a written request from the borrower.”

14 RCW 31.04.290(1)(d)(ii). And the residential loan servicer must “[p]romptly correct any errors

15 and refund any fees assessed to the borrower resulting from the servicer’s error.”

16 RCW 31.04.290(1)(e).

17 Plaintiff’s complaint explains that she first tried to contact Defendant and obtain the

18 necessary information on or about April 7, 2022. Dkt. 1-1 ¶¶ 4.6–4.7. Defendant instructed her to

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20 1 Some courts have held that a per se violation satisfies only the first two prongs of a CPA claim.

But the CLA, like other statutes, contains “declarations of public policy which meet the per se

21 public interest requirement.” In re Bryce, 491 B.R. 157, 185 (Bankr. W.D. Wash. 2013). The

CLA also explains that “the practices governed by this chapter are matters vitally affecting the

22 public interest for the purpose of applying the consumer protection act” and it violates the CLA

to “[d]irectly or indirectly engage in any unfair or deceptive practice toward any person[.]”

23 Sutter v. Glob. Equity Fin., Inc., No. 2:22-CV-00105-MKD, 2023 WL 3872202, at *3 (E.D.

Wash. June 7, 2023) (first citing RCW 31.04.208; and then citing RCW 31.04.027(1)(b)).

24 Accordingly, under the CLA, prong three would also be satisfied.

1 mail copies of the divorce decree and quitclaim deed to the company. Id. ¶ 4.8. Plaintiff did so,

2 but had not heard back from Defendant by May, and contacted Defendant again. Id. ¶¶ 4.8–4.9.

3 In fact, Plaintiff alleges that she called Defendant multiple times between April and September

4 2022. Id. ¶ 4.6. And she claims Defendant never provided the relevant information. Id. ¶ 4.20.

5 Plaintiff has thus adequately pled that Defendant violated RCW 31.04.290 by failing to provide

6 necessary loan information within fifteen days of her request.

7 The Court thus moves on to the two remaining CPA elements. The fourth element

8 requires that the plaintiff prove “injur[y] to a person’s business or property.” RCW 19.86.090.

9 “Nothing in this language requires that the plaintiff must be a consumer or in a business

10 relationship with the actor.” Panag, 166 Wn.2d at 39. The injuries compensable under the CPA

11 are “relatively expansive.” Frias v. Asset Foreclosure Servs., Inc., 181 Wn.2d 412, 431, 334 P.3d

12 529 (2014). The injury requirement may be satisfied by proof that the plaintiff’s “property

13 interest or money is diminished because of the unlawful conduct even if the expenses caused by

14 the statutory violation are minimal.” Panag, 166 Wn.2d at 57 (citation omitted). This may

15 include “[i]nvestigative expenses, taking time off from work, travel expenses, and attorney

16 fees[.]” Walker v. Quality Loan Serv. Corp., 176 Wn. App. 294, 320, 308 P.3d 716 (2013), as

17 modified (Aug. 26, 2013). But the injury element is not satisfied by personal injuries such as

18 “mental distress, embarrassment, and inconvenience,” or “the financial consequences of such

19 personal injuries.” Frias, 181 Wn.2d at 431.

20 Plaintiff has pled that she “lost equity in the home that would have been realized had she

21 not been forced to sell; investigation costs incurred to understand her rights relative to the

22 mortgage and information regarding the home; fees and interest incurred because she was unable

23 to make timely payments on the home, which she paid upon the sale of the home; damage to her

24 credit rating; moving costs and rental costs that would not have otherwise been incurred; and,

1 other quantifiable damages due to the loss of the home and her reputation.” Dkt. 1-1 ¶ 5.10.

2 Courts have long held that “loss of use of property which is causally related to an unfair or

3 deceptive act or practice is sufficient injury to constitute the fourth element” of a CPA violation.

4 Spicher v. Am. Fam. Mut. Ins. Co., S.I., No. C22-1116 MJP, 2023 WL 5634210, at *4 (W.D.

5 Wash. Aug. 31, 2023) (quoting Mason v. Mortg. Am., Inc., 114 Wn.2d 842, 854, 792 P.2d 142

6 (1990)). “The injury element will be met if the consumer’s property interest or money is

7 diminished because of the unlawful conduct even if the expenses caused by the statutory

8 violation are minimal.” Id. (quoting Mason, 114 Wn.2d at 854). The loss of Plaintiff’s home, and

9 the related costs, are injuries under the CPA.

10 Plaintiff has also pled that she incurred “the expense of having the situation investigated

11 by an attorney.” Dkt. 1-1 ¶ 4.25. She explains in the complaint that she had her attorney call on

12 her behalf to try to gather the necessary information from Defendant. Id. ¶ 4.12. Though

13 attorneys’ fees incurred in bringing a CPA claim do not qualify as a compensable injury,

14 expenses incurred to investigate a CPA claim may qualify if they are “beyond the expenses of

15 litigating her personal injury claim.” Spicher, 2023 WL 5634210, at *4 (quoting Panag, 166

16 Wn.2d at 62–65). These investigatory costs also qualify as injuries under the CPA. Thus, the

17 fourth element of a CPA claim is satisfied.

18 The Court moves onto the fifth and final element: causation. “A causal link is required

19 between the unfair or deceptive acts and the injury suffered by plaintiff.” Hangman Ridge, 105

20 Wn.2d at 793. The Washington Supreme Court has imposed a proximate cause standard,

21 meaning that, to prove causation, the “plaintiff must establish that, but for the defendant’s unfair

22 or deceptive practice, the plaintiff would not have suffered an injury.” WPI 15.01.5 Indoor

23 Billboard/Wash., Inc. v. Integra Telecom of Wash., Inc., 162 Wn.2d 59, 84, 170 P.3d 10 (2007).

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1 Here too, Plaintiff has adequately pled causation. Plaintiff has explained that, but for

2 Defendant’s refusal to give her access to the account and her loan information, she would have

3 been able to refinance the home. Dkt. 1-1 ¶¶ 4.19–4.20, 4.25. She notes that she tried to contact

4 “other lenders to refinance the home, but she was unable to refinance because [Defendant] would

5 not provide her access to the account.” Id. ¶ 4.20. Defendant even concedes “without a refinance,

6 there would be no funds available to the Plaintiff to satisfy her obligations under the divorce

7 degree.” Dkt. 13 at 4. Thus, this final element is satisfied.

8 Plaintiff has sufficiently pled a per se violation of the CPA by pleading her CLA claim

9 and the remaining elements. Defendant’s motion to dismiss this claim is DENIED.

10 C. Plaintiff has also pled a general violation of the CPA.

11 “In addition to establishing a per se violation of the CPA, a plaintiff may establish that an

12 act was ‘unfair or deceptive’ although not prohibited by statute.” Sutter, 2023 WL 3872202, at

13 *6 (citing Klem v. Washington Mut. Bank, 176 Wn.2d 771, 785, 295 P.3d 1179 (2013)). Having

14 already found the final two factors satisfied, the Court now examines the first three. If Plaintiff

15 cannot satisfy one of these requirements, then her general CPA claim will fail. Hunter v. Bank of

16 Am., N.A., No. C16-1718 RAJ, 2019 WL 1115258, at *4 (W.D. Wash. Mar. 11, 2019) (quoting

17 Sorrel v. Eagle Healthcare, Inc., 110 Wn. App. 290, 298, 38 P.3d 1024 (2002) (“Failure to

18 satisfy even one of the elements is fatal to a CPA claim.”)).

19 The first element requires “an unfair or deceptive act or practice.” Hangman Ridge, 105

20 Wn.2d at 780. The element may be satisfied one of three ways: a per se violation of a statute (as

21 explained above), “an act or practice that has the capacity to deceive substantial portions of the

22 public, or an unfair or deceptive act or practice not regulated by statute but in violation of public

23 interest.” Klem, 176 Wn.2d at 787.

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1 But Defendant makes a more binary argument, claiming that Plaintiff “may satisfy the

2 first element by pleading either that the defendant engaged in an act or practice which has a

3 capacity to deceive a substantial portion of the public, or is a per se unfair trade practice.” Dkt. 5

4 at 4. Defendant thus argues that Plaintiff must satisfy the “substantial portion of the public” test

5 for a deceptive act. Id. And Defendant maintains that Plaintiff has failed to do so. Id. at 5

6 (“Specifically, Plaintiff failed to show how this extremely narrow factual scenario–Freedom not

7 providing account information to her when she is not a party to the Note–has the capacity to

8 injure a substantial portion of the general public.”); see also Dkt. 13 at 8.

9 In 2013, the Washington Supreme Court rejected such an argument. In Klem v.

10 Washington Mutual Bank, the Court explained:

11 The “or” between “unfair” and “deceptive” is disjunctive. Washington’s CPA is

modeled after federal consumer protection laws and incorporates many of

12 provisions of the federal acts. . . . The legislature declared the CPA was intended

“to complement the body of federal law governing restraints of trade, unfair

13 competition and unfair, deceptive, and fraudulent acts or practices in order to

protect the public and foster fair and honest competition.” . . . The Washington

14 Legislature instructed courts to be guided by federal law in the area. . . . Current

federal law suggests a “practice is unfair [if it] causes or is likely to cause

15 substantial injury to consumers which is not reasonably avoidable by consumers

themselves and not outweighed by countervailing benefits.”

16

. . .

17

Our statute clearly establishes that unfair acts or practices can be the basis for a

CPA action.

18

176 Wn. 2d at 787 (cleaned up). The Klem court even more clearly stated, “[t]o resolve any

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confusion, we hold that a claim under the Washington CPA may be predicated upon a per se

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violation of statute, an act or practice that has the capacity to deceive substantial portions of the

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public, or an unfair or deceptive act or practice not regulated by statute but in violation of public

22

interest.” Id. Accordingly, Plaintiff may choose to plead that Defendant committed a deceptive

23

act or an unfair act. See id. She is not limited to only the former. See id.

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1 Plaintiff’s complaint is not entirely clear on which path she chose. Plaintiff notes that

2 Defendant’s “acts described herein are unfair or deceptive.” Dkt. 1-1 ¶ 5.7. And she writes that

3 Defendant’s “unfair acts or practices occurred in trade or commerce and were capable of injuring

4 a substantial portion of the public.” Id. ¶ 5.8. Yet in her response to Defendant’s motion to

5 dismiss, Plaintiff appears to claim only an unfair act or practice. Dkt. 12 at 10–15. The Court

6 thus considers only this path.

7 The CPA does not define unfair. Klem, 176 Wn.2d at 785 (“[B]ecause the act does not

8 define ‘unfair’ or ‘deceptive,’ this court has allowed the definitions to evolve through a ‘gradual

9 process of judicial inclusion and exclusion.’”) (quoting Saunders v. Lloyd’s of London, 113

10 Wn.2d 330, 344, 779 P.2d 249 (1989)). The Washington Supreme Court has, however,

11 “recognized that ‘[b]y broadly prohibiting ‘unfair or deceptive acts or practices in the conduct of

12 any trade or commerce,’ the legislature intended to provide sufficient flexibility to reach unfair

13 or deceptive conduct that inventively evades regulation.’” Greenberg v. Amazon.com, Inc., 3

14 Wn.3d 434, 454, 553 P.3d 626 (Wash. 2024), as amended (Aug. 16, 2024) (quoting Panag, 166

15 Wn.2d at 49); see also Klem, 176 Wn.2d at 786 (“Given that there is ‘no limit to human

16 inventiveness,’ courts, as well as legislatures, must be able to determine whether an act or

17 practice is unfair or deceptive to fulfill the protective purposes of the CPA.”). Some courts have

18 tried to provide guidance, holding that a practice may be unfair if it “causes or is likely to cause

19 substantial injury to consumers which is not reasonably avoidable by consumers themselves and

20 not outweighed by countervailing benefits.” Ride the Ducks, 647 F. Supp. 3d at 1055 (quoting

21 Klem, 176 Wn.2d at 787).

22 A plaintiff “may satisfy the first element of a private CPA claim—an unfair or deceptive

23 act—in a number of ways.” Greenberg, 3 Wn.3d at 481 (Madsen, J., concurring). A plaintiff may

24 allege that an act “is in violation of the public interest.” Id. (first citing Klem, 176 Wash.2d at

1 787, 295 P.3d 1179; and then citing 16 David K. DeWolf & Keller W. Allen, Washington

2 Practice: Tort Law and Practice § 8:5, at 445–46 (5th ed. 2023–24)). Or a plaintiff may claim

3 that an act is “unethical, oppressive, or unscrupulous[.]” Id. (quoting Magney v. Lincoln Mut.

4 Sav. Bank, 34 Wash. App. 45, 57, 659 P.2d 537 (1983)). A plaintiff may also allege that the acts

5 “cause or are likely to cause ‘substantial injury to consumers which is not reasonably avoidable

6 by consumers themselves and not outweighed by countervailing benefits’ to consumers or to

7 competition.” Id. (quoting Klem, 176 Wash.2d at 787). “In short, plaintiffs may demonstrate an

8 unfair act or practice by relying on a variety of factors, outlined in both Washington and federal

9 law.” Id.

10 Plaintiff has done so here. Plaintiff explains that Defendant removed her access to the

11 loan information, failed to notify her of the password change, refused to provide her loan

12 information, and refused to accept loan payments—even after she provided a copy of her divorce

13 decree and her ex-husband’s quit-claim deed. Dkt. 1-1 ¶¶ 4.6–4.14. Not all of these acts violate

14 the CLA’s provisions under RCW 31.04.290 (requirements for written detailed information). But

15 they are still unfair under the various frameworks above. For example, in her opposition,

16 Plaintiff argues that “FMC services thousands of mortgages. Its actions alleged here are a part of

17 its common practice when servicing loans. Therefore, its actions have the capacity to injure other

18 persons.” Dkt. 12 at 14 (citing Dkt. 1-1 ¶ 5.9). In its briefing Defendant claims that the acts

19 involved could only ever hurt Plaintiff because it is undisputed that “other members of the public

20 (i.e., third parties) would certainly not be entitled to” Plaintiff’s account information. Dkt. 5 at 5.

21 Defendant misconstrues Plaintiff’s claim. Plaintiff does not maintain that Defendant should have

22 released her information to others. Rather, she argues that the practices that harmed her—such as

23 failing to notify a party on an account that they have been removed by another party, Dkt. 1-1

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1 ¶ 4.9—may also injure others. Such a practice could substantially injure other consumers who

2 hold loans with Defendant. See Greenberg, 2 Wn.3d at 481.

3 Because Plaintiff has satisfied the first CPA element, the Court turns to the second.

4 Whether an act “occurred in trade or commerce” is a much simpler question. The Legislature has

5 broadly defined the terms “trade” and “commerce” to include “the sale of assets or services, and

6 any commerce directly or indirectly affecting the people of the state of Washington.” Hangman,

7 105 Wn.2d at 785 (quoting RCW 19.86.010(2)). “The CPA, on its face, shows a carefully drafted

8 attempt to bring within its reaches every person who conducts unfair or deceptive acts or

9 practices in any trade or commerce.” Id. (citation omitted). Defendant provides loan services in

10 the Washington market. See Dkt. 1-1 ¶ 4.6, 5.9. Thus, Defendant’s acts occurred in the loan

11 servicing market and in “trade or commerce.” The second element is satisfied.

12 Finally, the Court turns to the third element: public interest. In Estate of Brantner v.

13 Ocwen Loan Servicing, LLC, the court explained that private disputes can garner public interest

14 if “additional plaintiffs have been or will be injured in exactly the same fashion,” as measured by

15 several factors: “(i) whether the alleged acts were committed in the course of the defendant’s

16 business; (ii) whether the defendant advertised to the public in general; (iii) whether the

17 defendant actively solicited the particular plaintiff, thereby indicating potential solicitation of

18 others; and (iv) whether the plaintiff and the defendant occupy unequal bargaining positions.”

19 No. C17-582 TSZ, 2021 WL 3053055, at *12 (W.D. Wash. July 20, 2021) (citing Hangman

20 Ridge, 105 2d at 790–91). The factors “are neither conjunctive nor dispositive; not all need be

21 met and no one factor alone decides the issue.” Id.

22 Defendant’s acts were committed in the course of its business. Defendant is a loan

23 servicer, whom Plaintiff alleges serves “thousands of mortgages.” Dkt. 1-1 ¶ 5.9. Defendant’s

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1 actions here were committed while servicing the mortgage on Plaintiff’s home. See id. ¶¶ 4.6–

2 4.14.

3 Plaintiff and Defendant also did not occupy equal bargaining positions. Plaintiff required

4 the information to refinance the loan on her home, which she needed to do by a predetermined

5 deadline to satisfy the divorce decree. See id. ¶¶ 4.6–4.9, 4.19–4.20.

6 And, despite Defendant’s contention that their actions are obviously limited to Plaintiff

7 and could never reoccur, see Dkt. 5 at 5, the Court disagrees. Defendant argues that “Plaintiff

8 failed to show how this extremely narrow factual scenario–Freedom not providing account

9 information to her when she is not a party to the Note–has the capacity to injure a substantial

10 portion of the public.” Id. Defendant explains, “it cannot be disputed that other members of the

11 public (i.e., third parties) would certainly not be entitled to account information regarding the

12 Property” and thus “at best, the only person that could arguably be harmed by Freedom’s actions

13 is the Plaintiff[.]” Id. But common sense dictates that additional plaintiffs could be injured in

14 identical fashion. The concern is not whether the public could access Plaintiff’s loan information.

15 The concern is that a loan holder may not be told that they have been removed from their account

16 promptly, Dkt. 1-1 ¶ 4.9, that a loan holder may be unable to gather information necessary to

17 refinance, id. ¶ 4.19, and that Defendant may refuse to comply with the CLA’s information

18 requirements, id. ¶ 6.1.

19 Thus, the Court finds that Plaintiff has also sufficiently pled a CPA claim not reliant on a

20 CLA violation. The motion to dismiss is DENIED.

21 D. Plaintiff has not pled all the elements of a negligent infliction of emotional distress

claim.

22

Defendant also moves to dismiss Plaintiff’s claim for negligent infliction of emotional

23

distress. “A plaintiff may recover on a claim for negligent infliction of emotional distress by

24

1 proving negligent conduct, which consists of the familiar elements of duty, breach, proximate

2 cause, and harm, as well as that the resulting emotional distress is (1) within the scope of

3 foreseeable harm of the negligent conduct, (2) a reasonable reaction given the circumstances, and

4 (3) manifest by objective symptomatology.” Vargas Ramirez v. United States, 93 F. Supp. 3d

5 1207, 1235–36 (W.D. Wash. 2015) (first citing Schmidt v. Coogan, 181 Wn.2d 661, 335 P.3d

6 424 (2014); and then citing Kumar v. Gate Gourmet Inc., 180 Wn.2d 481, 325 P.3d 193 (2014)).

7 Defendant’s argument focuses largely on duty. Defendant maintains that 1) the duty

8 arises from a contract between the parties, and that 2) such a duty cannot support a claim in tort.

9 Dkt. 5 at 9. Defendant explains that Plaintiff alleges in the Complaint that the company “held the

10 mortgage on the home owned by Ms. Akil. This created a professional duty of care toward

11 Ms. Akil.” Id. (quoting Dkt. 1-1 ¶ 7.1). Defendant concludes that this is an express “admission

12 that any duty owed to Plaintiff by Freedom existed via the contractual relationship between the

13 parties.” Id.

14 Defendant is correct that Plaintiff cannot rely on the contract as the basis for duty. The

15 mortgage agreement is a contract. See Garand v. JPMorgan Chase Bank, 532 F. App’x 693, 696

16 (9th Cir. 2013) (“the rights and obligations of the parties are dictated by express contracts—the

17 first mortgage note and deed of trust.”). And, under Washington law, a breach of contract does

18 not give rise to a tort action. Millheisler v. Lincoln High Sch., No. C07-5716RJB, 2008 WL

19 4443818, at *13 (W.D. Wash. Sept. 24, 2008). “Only ‘if a duty exists independently of the

20 performance of the contract’ can a contract provide the basis for a tort claim.” Id. (quoting

21 American Nursery Prods., Inc. v. Indian Wells Orchards, 115 Wn.2d 217, 230, 797 P.2d 477

22 (1990)). Also known as the independent duty doctrine, this rule “prevents [p]laintiffs in a

23 contractual relationship with [a] defendant from bringing claims for injuries from a breach of a

24 tort law duty of care that do not arise independently of the contract.” Andersen v. Lewis

1 McChord Communities LLC, No. 3:21-CV-05391-DGE, 2022 WL 874774, at *5 (W.D. Wash.

2 Mar. 24, 2022). The Washington Supreme Court “has applied this doctrine sparingly.” Id. (citing

3 Elcon Const., Inc. v. E. Washington Univ., 273 P.3d 965, 969 (Wash. 2012)).

4 Plaintiff’s complaint fails to offer an alternative basis for duty. The complaint explains,

5 without incorporating or referencing previous paragraphs, that Defendant “held the mortgage on

6 the home owned by Ms. Akil. This relationship created a professional duty of care toward Ms.

7 Akil.” Dkt. 1-1 ¶ 7.1. Thus, Plaintiff alleges duty arising out of the contract, and no more. She

8 does not plead an injury that arises independently from the terms of the contract that gives rise to

9 an independent duty.

10 In her response, Plaintiff argues that, under Washington law, duty may be established

11 based on a statutory violation. See, e.g., Nienaber v. Overlake Hosp. Med. Ctr., 733 F. Supp. 3d

12 1072, 1086 (W.D. Wash. 2024) (discussing statutory duty of health care providers to protect

13 private health information). Still, Plaintiff has not pled that a statutory violation is the basis for

14 Defendant’s duty, even though she raised it in her response to Defendant’s motion. The Court

15 thus cannot find that such a relationship existed based on the face of the complaint.

16 Because the Court cannot find that Plaintiff has adequately pled the first element of her

17 negligent infliction of emotional distress claim, the motion to dismiss the claim is GRANTED.

18 This claim is DISMISSED without prejudice, and Plaintiff is granted leave to amend if she so

chooses.

19

V. DISCUSSION – RULE 11 SANCTIONS

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A. Plaintiff has satisfied Rule 11’s safe harbor requirement.

21

Rule 11(c) authorizes the court to award sanctions subject to certain conditions. One such

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condition is the 21-day “safe harbor” laid out in Rule 11(c)(2). The rule clarifies that a “motion

23

must [first] be served under Rule 5, but it must not be filed or be presented to the court if the

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1 challenged paper, claim, defense, contention, or denial is withdrawn or appropriately corrected

2 within 21 days after service or within another time the court sets.”

3 In Plaintiff’s motion, counsel certifies that he complied with Rule 11(c)(2). Dkt. 15 at 8.

4 Plaintiff’s counsel explains that he served the motion on Defendant’s counsel on February 24,

5 2025. Id. Plaintiff’s counsel sent the draft motion by both email and by regular mail. Dkt. 16 ¶ 2;

6 Dkt. 17 at 3. Plaintiff’s counsel did not file the motion until March 18, 2025. Dkt. 15 at 8. Thus,

7 twenty-one days had passed between the service of the motion and its filing. Accordingly, Rule

8 11(c)(2) is satisfied.

9 B. Defendant’s actions did not violate Rule 11.

10 As explained above, Plaintiff’s counsel initially moved for sanctions on two grounds.

11 First, Plaintiff argued, Defendant’s motion to dismiss “misrepresented that Plaintiff had not

12 alleged a per se unfair trade practice, which she had.” Dkt. 16 ¶ 4. And second, Plaintiff

13 maintained that Defense counsel “misrepresented that a plaintiff bringing a non-per se CPA

14 claim based on an ‘unfair’ act or practice must establish that the alleged act ‘had the capacity to

15 deceive a substantial portion of the public,’”—an “incorrect statement of law that has been

16 directly addressed by Washington’s Supreme Court.” Id. Defendant has since corrected the first

17 issue. Id. ¶ 6. Plaintiff’s Counsel has thus abandoned this claim. Id. Plaintiff now only seeks

18 sanctions for the “incorrect statement of law.” Id. ¶ 7.

19 Under Rule 11, a party can argue that a claim is unwarranted by existing law. “Under this

20 approach, a pleading or motion is not ‘warranted by law’ where no ‘plausible, good faith

21 argument can be made by a competent attorney’ in support of the proposition asserted.’”

22 Holmberg v. Vail, No. C11-5449 BHS/KLS, 2012 WL 380043, at *4 (W.D. Wash. Jan. 3, 2012),

23 report and recommendation adopted, No. C11-5449BHS, 2012 WL 380002 (W.D. Wash. Feb. 6,

24 2012) (quoting Paciulan v. George, 38 F. Supp. 2d 1128, 1144 (N.D. Cal. 1999)). Alternatively,

1 a party can argue that a claim or motion is made for an improper purpose or is frivolous. G.C.

2 and K.B. Investments, Inc. v. Wilson, 326 F.3d 1096, 1109. The standard governing both the

3 “improper purpose” and “frivolous” inquiries is objective. Id. “[T]he subjective intent of the . . .

4 movant to file a meritorious document is of no moment. The standard is reasonableness. The

5 ‘reasonable man’ against which conduct is tested is a competent attorney admitted to practice

6 before the district court.” Id. (quoting Zaldivar v. City of Los Angeles, 780 F.2d 823, 830 (9th

7 Cir. 1986)).

8 Plaintiff argues that Defendant “misrepresents Washington law regarding” the CPA.

9 Dkt. 15 at 2. Plaintiff claims that Defendant cites only “14-year-old unpublished cases” that “are

10 not good law.” Id. And Plaintiff contends that Defendant “omitted controlling precedent from the

11 Washington Supreme Court” in doing so. Dkt. 20 at 1. Plaintiff explains that, despite

12 Defendant’s contentions to the contrary, the first element of a CPA claim can be established by

13 showing that an act is either unfair or deceptive. Dkt. 15 at 3. Plaintiff claims that Defense

14 counsel’s arguments were not made in good faith for changing or extending the law and were

15 “rather a mischaracterization of established precedent.” Id. at 7. Plaintiff concludes that Defense

16 counsel thus violated Rule 11 by “fail[ing] to conduct a reasonable inquiry into the legal

17 principles governing this case[.]” Id.

18 Defense counsel’s response offers some clarity into these alleged misstatements of law.

19 Dkt. 19. Defendant acknowledges that Plaintiff has three paths to choose from to allege a CPA

20 claim: a per se unfair act, an unfair act, or a deceptive act. Dkt. 19 at 5 (“Indeed, both parties

21 agree that ‘[a] claim under the Washington CPA may be predicated upon a per se violation of

22 statute, an act or practice that has the capacity to deceive substantial portions of the public, or an

23 unfair or deceptive act or practice not regulated by statute but in violation of public interest.’”)

24 (quoting Young v. Toyota Motor Sales, U.S.A., 442 P.3d 5, 10 (Wash. Ct. App. 2019), aff’d, 472

1 P.3d 990 (Wash. 2020)). This concession reiterates what Defendant wrote in its reply brief:

2 “Plaintiff has not adequately pled, and therefore has not established, that Freedom’s conduct was

3 unfair or deceptive.” Dkt. 13 at 6. Defendant has not argued that Plaintiff can only plead a

4 “deceptive practice.” See id. Rather, Defendant urges the Court that Plaintiff is alleging a

5 deceptive act and that the deceptive act’s “substantial portion of the public test” is appropriate

6 here. Dkt. 19 at 6.

7 Thus, it appears Defendant did not attempt to misstate or mischaracterize the law.

8 Instead, Defendant seems to have misunderstood Plaintiff’s complaint. As discussed above,

9 Plaintiff’s complaint looks as if it alleges both that Defendant committed an unfair act and that

10 the act was deceptive. Dkt. 1-1 ¶ 5.7. Plaintiff argues in her complaint that Defendant’s acts

11 “described herein are unfair or deceptive.” Id. She also states that Defendant’s “unfair acts or

12 practices occurred in-trade or commerce and were and are capable of injuring a substantial

13 portion of the public.” Id. ¶ 5.8. Accordingly, Defendant’s argument that Plaintiff did not

14 adequately plead a deceptive act is not frivolous or in bad faith. See id. Plaintiff, after all, does

15 not clearly choose a path to plead her CPA claim in her complaint. See id. ¶ 5.1–5.11. The Court

16 will not sanction Defendant for this mistake.

17 As Defendant points out, “a simple misreading or misinterpretation of Plaintiff’s

18 complaint does not evidence” that Defendant’s motion violated Rule 11. Dkt. 19 at 6 n.1.

19 Holmberg, 2012 WL 380043, at *4. Defendant does not make a “pure heart, empty head”

20 defense. Dkt. 20 at 5 (citing Bus. Guides, Inc. v. Chromatic Commc’ns Enter., Inc., 892 F.2d

21 802, 811 (9th Cir. 1989), aff’d, 498 U.S. 533 (1991)). Defendant argues that it reasonably

22 misunderstood Plaintiff’s complaint and responded accordingly. Wilson, 326 F.3d at 1109

23 (“[T]he subjective intent of the . . . movant to file a meritorious document is of no moment. The

24 standard is reasonableness. The ‘reasonable man’ against which conduct is tested is a competent

l attorney admitted to practice before the district court.”) (citation omitted). In the context of

2 || Plaintiff's complaint, this argument is persuasive enough to avoid sanctions under Rule 11.

3 Thus, the Court DENIES the motion for sanctions.

4 VI. CONCLUSION

5 For these reasons, the motion to dismiss (Dkt. 5) is GRANTED in part and DENIED in

6 || Part as set forth above. The motion for sanctions (Dkt. 15) is DENIED. If Plaintiff wishes to file

7 an amended complaint, she must do so by April 26, 2025.

g Dated this 11 day of April, 2025.

Zig OS

10 Tiffany Cartwright

United States District Judge

1]

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ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS AND DENYING MOTION