NOT FOR PUBLICATION FILED

UNITED STATES COURT OF APPEALS JUN 4 2019

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

DIANA NICHOLS, No. 17-35556

Plaintiff-Appellant, D.C. No. 2:14-cv-01796-RSM

v.

MEMORANDUM*

FEDERAL DEPOSIT INSURANCE

CORPORATION, as receiver for Washington Mutual Bank,

Defendant-Appellee.

Appeal from the United States District Court for the Western District of Washington Ricardo S. Martinez, Chief District Judge, Presiding

Argued and Submitted May 17, 2019 Seattle, Washington

Before: KLEINFELD and FRIEDLAND, Circuit Judges, and PAULEY, ** District Judge.

Plaintiff-Appellant Diana Nichols appeals the district court’s grant of

summary judgment to Defendant-Appellee the Federal Deposit Insurance

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable William H. Pauley III, United States District Judge for the Southern District of New York, sitting by designation. Corporation (“FDIC”) in its capacity as receiver for Washington Mutual Bank

(“WaMu”). Reviewing de novo, we hold that none of Nichols’s claims presents a

genuine question of material fact sufficient to survive summary judgment, and we

therefore affirm. See Pavoni v. Chrysler Grp., LLC, 789 F.3d 1095, 1098 (9th Cir.

2015).

1. The record shows no genuine dispute of material fact whether Nichols

received all of the disclosures mandated by the Truth In Lending Act (“TILA”)

when she closed on her 2005 mortgage with WaMu. See 15 U.S.C. § 1638 (2005);

12 C.F.R. § 226.18 (2005). Nichols’s contention that she did not receive the

TILA-mandated disclosure that her variable-rate mortgage could cause her loan to

negatively amortize is belied by the warning in the closing documents that “[t]he

principal balance on your loan can increase even though you are making the

required monthly payments.” See 15 U.S.C. § 1638(a)(14) (2005); 12 C.F.R. §

226.19(b) (2005). Each of the other applicable TILA provisions was satisfied by

WaMu’s use of the model forms promulgated by the Federal Reserve, which was

responsible at the time for implementing TILA. See 12 C.F.R. pt. 226 app. H-15

(2005). And contrary to Nichols’s assertions, WaMu was not required to send her

TILA disclosures at least three days before the loan’s consummation; that

provision was only applicable to loans with an interest rate far higher than that of

2 the loan Nichols obtained. See 15 U.S.C. § 1639(b) (2005).

2. The record shows no genuine dispute of material fact whether WaMu

breached its contract with Nichols.1 There is no question that WaMu paid Nichols

the full sum owed under the mortgage note. It therefore performed its contractual

obligations fully; Nichols does not identify and we cannot discern any additional

contractual term that WaMu might have breached. See Nw. Indep. Forest Mfrs. v.

Dep't of Labor & Indus., 899 P.2d 6, 9 (Wash. Ct. App. 1995). Likewise, because

Washington recognizes the duty of good faith and fair dealing “only ‘in relation to

performance of a specific contract term,’” Keystone Land & Dev. Co. v. Xerox

Corp., 94 P.3d 945, 949 (Wash. 2004) (quoting Badgett v. Sec. State Bank, 807

P.2d 356, 360 (Wash. 1991)), WaMu cannot have breached that duty. Nichols’s

theory on this claim appears to be that WaMu had a duty to adhere to the alleged

misrepresentations by its employee Sean O’Connor prior to the closing, but that

has nothing to do with WaMu’s performance under any “specific term” of the

contract itself.

3. There is no genuine dispute of material fact as to whether WaMu

breached a duty of care owed to Nichols, so her negligence claims cannot survive

1 The parties do not dispute the district court’s determination that Washington law governs, so we apply the law of that state to Nichols’s non-federal claims.

3 summary judgment.

If Nichols is alleging that WaMu sold her an unconscionable loan and was

therefore negligent, her claim is barred by the independent duty rule because there

was indisputably a contract governing the loan and no separate, independent duty.

See Eastwood v. Horse Harbor Found., Inc., 241 P.3d 1256, 1264 (Wash. 2010).

If Nichols is alleging that WaMu and O’Connor negligently misrepresented

the terms of her loan to induce her to sign the note, she has not established a

genuine question of material fact as to her reasonable reliance—a required element

of a negligent misrepresentation claim—on any such misrepresentation. See

Donatelli v. D.R. Strong Consulting Eng’rs, Inc., 312 P.3d 620, 625 & n.3 (Wash.

2013). Nichols acknowledged that she realized at the closing that the loan’s terms

were different from those that O’Connor had described, undermining any

contention that she relied on them.

Even if Nichols continued to rely on O’Connor’s representations after that

point, her reliance was not reasonable. She had the full terms of the loan in front

of her, along with various disclosures that described the risk of negative

amortization and that there could be a penalty for prepayment. She signed all of

these, indicating that she received them. Furthermore, an attorney apparently

explained many of these terms to Nichols and advised her that she did not have to

sign the documents and that she was entitled to a three-day rescission period if she

4 did sign. Given all this information and her failure to exercise the rescission option

within three days, Nichols has no claim to reasonable reliance on O’Connor’s prior

statements about the mortgage.

4. Because reasonable reliance is also an element of fraud, Stiley v.

Block, 925 P.2d 194, 204 (Wash. 1996), summary judgment is appropriate on that

claim as well.

5. There is no genuine question of material fact that Nichols’s contract

with WaMu was enforceable, and she therefore cannot recover in unjust

enrichment. See Young v. Young, 191 P.3d 1258, 1262 (Wash. 2008). Nichols

raises the contractual defenses of unconscionability and duress. Neither has merit.2

Her loan’s terms, although unfavorable to her, do not shock the conscience.

She was represented by counsel throughout the closing and had a reasonable

opportunity to review the loan documents and decide whether to sign them. And

WaMu did not commit any legally cognizable wrongful act that would amount to

2 We do not consider these doctrines as freestanding claims because we agree with the district court that they are solely defenses to contract and do not support a cause of action. To the extent that Nichols seeks a declaratory judgment declaring the 2005 loan unenforceable based on unconscionability or duress, that aspect of her case is moot. Because Nichols is no longer adhering to the terms of the 2005 loan, but is instead bound by the terms of the modified loan with her current loan servicer, there is no live controversy about enforceability of the 2005 loan agreement for us to adjudicate. See Matt v. HSBC Bank USA, N.A., 783 F.3d 368, 373 (1st Cir. 2015).

5 duress; “[t]he mere fact that a contract is entered into under stress or pecuniary

necessity is insufficient.” Retail Clerks Health & Welfare Tr. Funds v. Shopland

Supermarket, Inc., 640 P.2d 1051, 1054 (Wash. 1982).3

AFFIRMED.

3 Because we may affirm on any ground supported by the record, see Cassirer v. Thyssen-Bornemisza Collection Found., 862 F.3d 951, 974 (9th Cir. 2017), cert. denied, 138 S. Ct. 1992 (2018), we do not reach whether Nichols’s subsequent ratification of her initial mortgage documents bars the current action.

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