NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FILED
FOR THE NINTH CIRCUIT
OCT 25 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
BANK OF AMERICA, N.A., No. 14-35428
Plaintiff-counter- D.C. No. 1:11-cv-00656-EJL
defendant-Appellee,
v. MEMORANDUM*
NANCY K. ENRIGHT; LEE P.
ENRIGHT,
Defendants-counter-
claimants-Appellants,
MERRILL LYNCH PIERCE FENNER &
SMITH, INC., successor by merger to
Bank of America Investment Services,
Inc.,
Counter-defendant-Appellee.
Appeal from the United States District Court
for the District of Idaho
Edward J. Lodge, District Judge, Presiding
Argued and Submitted October 4, 2016
Seattle, Washington
Before: W. FLETCHER, GOULD, and N.R. SMITH, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Plaintiffs Nancy and Lee Enright appeal from the district court’s order
granting a motion to dismiss for failure to state a claim pursuant to Federal Rule of
Civil Procedure 12(b)(6) by defendants Bank of America, N.A. (Bank of America)
and Merrill Lynch Pierce Fenner & Smith, Inc. (Merrill Lynch). We have
jurisdiction under 28 U.S.C. § 1291 and we affirm.
The present litigation began when Bank of America filed a complaint seeking
a deficiency judgment against the Enrights in Idaho state court in November 2011.
The Enrights removed the case to federal court. After obtaining leave to amend,
they filed an amended counterclaim against Bank of America and a claim adding
Merrill Lynch, a defendant as a successor-by-merger to Banc of America
Investment Services, Inc. Bank of America and Merrill Lynch filed a joint motion
to dismiss for failure to state a claim, which the district court granted with
prejudice. The parties later stipulated to an entry of judgment in favor of Bank of
America on the deficiency claim. The Enrights appealed, challenging the district
court’s dismissal with prejudice.
We review a district court’s grant of a motion to dismiss de novo. Cervantes
v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1040 (9th Cir. 2011). “To
survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v.
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Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 570 (2007)).
The Enrights allege six causes of action against Bank of America and Merrill
Lynch: breach of fiduciary duty; constructive fraud; fraud by failure to disclose;
intentional misrepresentation; negligence; and breach of implied covenant of good
faith and fair dealing.
1. Fiduciary duty. Under Idaho law, a party claiming a breach of fiduciary
duty must show the defendant was “in a superior position to the other and that such
a position enables him to exercise influence over one who reposes special trust and
confidence in him,” and the “facts and circumstances must indicate that the one
reposing the trust has foundation for his belief that the one giving advice or
presenting arguments is acting not in his own behalf, but in the interests of the other
party.” High Valley Concrete, L.L.C. v. Sargent, 234 P.3d 747, 752 (Idaho 2010)
(internal quotations omitted). The Enrights failed to plead facts to support their
conclusory allegation that Robert Corker, an employee of Bank of America and/or
Banc of America Investment Services, was acting as their financial advisor. See
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (“labels and
conclusions,” standing alone, are insufficient to state a claim). The only
relationship between the parties established by the facts as pleaded was that
between a lender and a borrower. A lender-borrower relationship, however, does
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not give rise to fiduciary duties under Idaho law. See Black Canyon Racquetball
Club, Inc. v. Idaho First Nat’l Bank, N.A., 804 P.2d 900, 905 (Idaho 1991).
2. Constructive fraud. “[C]onstructive fraud comprises all acts, omissions
and concealments involving a breach of legal or equitable duty, trust, or confidence,
which result in damage to another.” Doe v. Boy Scouts of America, 356 P.3d 1049,
1054-55 (Idaho 2015) (citing McGhee v. McGhee, 353 P.2d 760, 762 (Idaho 1960)).
Relationships recognized by Idaho law as giving rise to a constructive fraud claim
include those between a lawyer and client, High Valley, 234 P.3d at 754, fiancees,
McGhee, 353 P.2d at 762, and tenants-in-common, Watts v. Krebs, 962 P.2d 387,
391-92 (Idaho 1998). The Enrights have failed to plead facts sufficient to establish
such a “relationship of trust and confidence” between themselves and Corker as an
agent of Bank of America and/or Banc of America Investment Services. See High
Valley, 234 P.3d at 752.
3. Fraud by failure to disclose. The Enrights allege Bank of America and
Banc of America Investment Services committed fraud by failing to disclose: the
relationship between Corker, their alleged investment advisor, and Bank of
America; the relationship between Banc of America Investment Services, Corker’s
employer, and Bank of America; the compensation Corker received for procuring
the Enrights’ business; and the riskiness of the loan. “A duty to disclose exists in
the following circumstances: ‘(1) if there is a fiduciary or other similar relation of
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trust and confidence between the two parties; (2) in order to prevent a partial
statement of the facts from being misleading; or (3) if a fact known by one party
and not the other is so vital that if the mistake were mutual the contract would be
voidable, and the party knowing the fact also knows that the other does not know
it.’ ” James v. Mercea, 277 P.3d 361, 365-66 (Idaho 2012) (quoting Sowards v.
Rathbun, 8 P.3d 1245, 1250 (Idaho 2000)). None of these circumstances are
present: no relationship of trust and confidence existed between the Enrights and
Corker; no partial statement would have misled the Enrights as to Corker’s
employer or compensation structure; and the Enrights have failed to allege that
Bank of America or Merrill Lynch knew, and knew the Enrights did not know, a
fact “so substantial and fundamental” to the loan agreements as to defeat their
purpose. See Primary Health Network, Inc. v. State, Dep't of Admin., 52 P.3d 307,
312 (Idaho 2002).
4. Intentional Misrepresentation. The Enrights allege that three statements
made by Corker, as an employee of Bank of America and/or Banc of America
Investment Services, were fraudulent: (1) a statement that the Enrights “qualified”
for two mortgages and a line of credit; (2) a statement that the Enrights could repay
their loans through the sale of their property in Idaho, which would occur within
two years; and (3) a threat to foreclose on the property in Idaho if the Enrights did
not make interest-only payments on the loan with their IRA funds. “In order to
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prevail on a fraud claim [under Idaho law], a plaintiff must show: (1) a statement or
a representation of fact; (2) its falsity; (3) its materiality; (4) the speaker's
knowledge of its falsity; (5) the speaker's intent that there be reliance; (6) the
hearer's ignorance of the falsity of the statement; (7) reliance by the hearer; (8)
justifiable reliance; and (9) resultant injury.” King v. Lang, 42 P.3d 698, 703-04
(Idaho 2002). The Enrights failed to show the statements meet the first two criteria.
The first statement was not false. The Enrights did qualify for the loans because
they actually entered into those loans, a fact the counter-complaint concedes. The
other two statements are opinions or predictions as to future events, which “cannot
form the basis of a fraud claim.” Country Cove Dev., Inc. v. May, 150 P.3d 288,
294 (Idaho 2006).
5. Negligence. The Enrights allege that Bank of America and Banc of
America Investment Services were negligent in issuing loans to them in light of
their financial situation, and in advising them to use IRA funds to make payments
on the two mortgages after their line of credit was exhausted. The injuries alleged
by the Enrights are solely economic. Under Idaho law, an action in negligence will
not lie for purely financial injuries unless the plaintiff and defendant have a “special
relationship” under Idaho law. Duffin v. Idaho Crop Imp. Ass’n, 895 P.2d 1195,
1200-01 (Idaho 1995). A “special relationship” arises where a “professional or
quasi-professional performs personal services” or where “an entity holds itself out
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to the public as having expertise regarding a specialized function.” Blahd v.
Richard B. Smith, Inc., 108 P.3d 996, 1001 (Idaho 2005). No Idaho cases support
the Enrights’ claim that they had a “special relationship” with Bank of America or
Banc of America Investment Services on the facts as pleaded in the
countercomplaint. Cf. Black Canyon Racquetball Club, Inc. v. Idaho First Nat’l
Bank, N.A., 804 P.2d 900 (Idaho 1991) (no “special relationship” exists between a
commercial borrower and lender). The Enrights are therefore barred by the
economic loss rule from stating a claim for negligence.
6. Finally, the Enrights claim that Bank of America breached its implied
covenant of good faith and fair dealing. “Good faith and fair dealing are implied
obligations of every contract,” Luzar v. Western Surety, 692 P.2d 337, 340 (Idaho
1984), but these duties “arise[] only in connection with terms agreed to by the
parties,” Idaho First Nat’l Bank v. Bliss Valley Foods, 824 P.2d 841, 863 (Idaho
1991) (quoting Badgett v. Security State Bank, 807 P.2d 356, 360 (Wash. 1991)).
The Enrights do not identify any terms of their loan agreements with Bank of
America that were breached. The district court was therefore correct to dismiss this
claim.
Because the Enrights failed to plead facts sufficient to support their claims
for relief, the district court did not err in dismissing with prejudice.
AFFIRMED.
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