Trial lawyers in North Carolina know that winning a motion to dismiss under Rule 12(b)(6) in Superior Court can be as elusive as a double rainbow. Should you be one of those defendants who is so lucky as to win a motion to dismiss, a recent decision by the Court of Appeals highlights how important it is to use care in crafting the order granting your victory. Sometimes brevity is not your friend.
Taylor v. Bank of America, N.A. (“Taylor”) was one of numerous cases against Bank of America alleging bad loan modification practices under the Home Affordable Modification Program (HAMP). In fact, between 2011 and 2014, suits against BOA were brought by the Federal Government and forty-nine states for conduct related to HAMP. Around the time the plaintiffs in Taylor filed their complaint, the BOA was defending at least thirteen other actions raising essentially identical claims in the wake of the dismissal of a multi-district class action on commonality grounds. See In re Bank of America Home Affordable Modification Program (HAMP) Contract Litigation, M.D.L. No. 10-2193-RWZ.
Taylor was designated by the parties in thirteen other suits as a test case for briefing on Bank of America’s motion to dismiss premised on the statute of limitations and the doctrines of res judicata and/or collateral estoppel. BOA filed a three-page motion and a twenty-five-page memorandum in support of the motion. R. 634 Paras. 3, 5; R. Supp. 25. The trial court’s hearing for Bank of America’s motion to dismiss and plaintiffs’ cross motion for partial summary judgment spanned over three hours and resulted in 120 pages of transcript. R. 663–787. Following the hearing, the trial court granted BOA’s motion.
A simple two-page order was entered dismissing the case. The order provided no findings of fact. Consistent with common practice, the order recited that the trial court reviewed the record, including the complaint, motions, briefs and attached exhibits along with cited case law, and the arguments from the hearing, and it concluded that all of the Plaintiff’s claims were “barred by the applicable statutes of limitation,” and “the claims of all Plaintiffs who were parties to foreclosure proceedings were barred by the doctrines of res judicata and collateral estoppel.” R. 655.
An appeal predictably followed. Initially, the Court of Appeals affirmed the decision of the trial court. See Taylor v. Bank of America, N.A., __ N.C. App. __, 852 S.E.2d 447 (2020). After this decision, the Court of Appeals did something even more rare than a trial court allowing a motion to dismiss. It granted the Plaintiffs’ petition for rehearing. See Taylor v. Bank of America, N.A., No. COA20-160-2 (N.C. Ct. App. Oct. 5, 2021). Following rehearing of the appeal, the Court of Appeals held, “[t]he order granting Defendant’s motion to dismiss does not state upon what basis the court made its decision, and as such, this Court cannot properly review whether the trial court correctly granted Defendant’s motion.” Id. at ¶ 9. Consequently, it remanded the case to the trial court for additional proceedings. Id. at ¶ 11.
The Court, on rehearing, took issue with the order’s lack of discussion of whether it was appropriate to consider plaintiffs’ claims together in light of the dismissal of class action allegations due to lack of commonality. Id. Moreover, the Court expressed concern that the trial court considered facts outside of the complaint, which is improper under Rule 12(b)(6). Id. Because the order did not state the specific grounds for granting the motion to dismiss, the Court of Appeals held that it could not determine (having heard the case twice) the reason behind the grant, and therefore it could not conduct an appropriate review, necessitating remand. Id at ¶¶ 9–10.
Practitioners will note that North Carolina Rule of Civil Procedure 52 only requires decisions on motions to include findings of fact upon a party’s request. Taylor seems to indicate that when preparing a proposed order of dismissal the order needs to demonstrate the basis for the grant, otherwise, a trial court win could still lead to a remand.