Page 12 - John Hundley 2012

the temporary program than she was required under the original mortgage and note. Consideration
was found in Wigod’s agreeing to open new escrow accounts, to undergo credit counseling, and to
provide and vouch for financial information.

Promissory Estoppel Claim Sustained. In the alternative, the court said
plaintiff could rely upon a promissory estoppel theory. “Promissory estoppel makes a
promise binding where ‘all the other elements of a contract exist, but consideration is
lacking,’” it said, citing Dumas v. Infinity Broadcasting Co., 416 F.3d 671 (7th Cir.
2005). In place of consideration, promissory estoppel requires detrimental reliance,
but that was found in plaintiff’s foregoing the opportunity to use other remedies to save
her home and in her devoting her resources to making the payments under the temporary program
rather than attempting to sell her home or defaulting.

Negligence, Negligent Misrepresentation Claims Rejected. Next plaintiff argued that
defendant had negligently hired and supervised its HAMP employees in an effort to sabotage the
program. The court found this claim barred under the “economic loss” doctrine of Illinois tort law. In a
potentially significant passage, the court recognized that Illinois has exceptions to the economic loss
doctrine, but it ruled that such exceptions must stem from “an extra-contractual duty between the
parties” – of which the court found none in the HAMP context. A claim that defendant had made
negligent misrepresentations was rejected for the same reason.

Fraud Claims Sustained. Plaintiff also argued defendant committed fraud, a recognized
exception to the economic loss doctrine. Noting Wigod claimed that Wells Fargo “made and broke
promises of permanent modifications to her and to thousands of other potential class members as
well,” the court said such a widespread pattern of deception could reasonably be considered a scheme
actionable under Illinois law on promissory fraud (discussed in Sharp Thinking No. 59 (March 2012)).

The court also sustained plaintiff’s claim under the ICFDBPA. Noting that intent to deceive is not a
requirement under this act (see Sharp Thinking No. 19 (April 2009)), the court said Wigod alleged
practices which were both deceptive and unfair under that act. It rejected an argument plaintiff suffered
no “actual pecuniary loss” because her plan payments were less than the original mortgage required.

Preemption Arguments Rejected. Finally, defendant argued that plaintiff’s state-law causes
of action were preempted by federal law. Citing In re Ocwen Loan Servicing, LLC Mortg. Servicing
Litigation, 491 F.3d 638 (7th Cir. 2007), the court first rejected an argument that the federal government
had intended to preemptively occupy the entire field of mortgage lending
regulation. Next defendant argued that preemption had to be found because
federal regulation “conflicts” with the state causes of action. This theory too was
rejected by the court. Noting that Wigod’s claims were derived from the federal
program, the court ruled that allowing them to proceed “would not create state-
law duties for servicing home mortgages, let alone ones that ‘actually conflict’”
with federal law. Rebuffing defendant’s claim that it might be subject to
inconsistent duties, the court said that “the state-law duty allegedly breached is
imported from and delimited by federal standards established in HAMP’s program guidelines. . . . So
long as state laws do not impose substantive duties that go beyond HAMP’s requirements, loan
servicers need only comply with the federal program to avoid incurring state-law liability.”

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