DAVID O. CARTER, District Judge.
Before the Court is a Motion to Dismiss ("Motion") filed by Defendants JPMorgan Chase Bank NA, Chase Home Finance LLC, and Chase Home Finance Inc. (Dkt. 15). After considering the moving, opposing, and replying papers, as well as supplemental briefs, the Court GRANTS IN PART and DENIES IN PART the Motion.
This case involves an issue of first impression,
The gravamen of this putative class action is that Plaintiffs, who are borrowers, sold their home for an amount insufficient to pay off their mortgage — a "short sale" — and eschewed other options like foreclosure because they relied on representations by Defendants promising to release Plaintiffs from the obligation to pay this short sale deficiency. After the short sale, Defendants did not release Plaintiffs but rather sought to collect the short sale deficiency and reported Plaintiffs' failure to pay it to credit reporting agencies.
Defendants are JPMorgan Chase Bank, N.A. ("Defendant Chase NA"), Chase Home Finance LLC ("Defendant Chase LLC"), and Chase Home Finance Inc. (collectively, "Defendants").
Plaintiffs Michael and Naomi Rex ("Plaintiffs") are "borrowers who obtained financing for the purchase of residential housing in California through Defendants' loan services." FAC ¶ 2. In 2006, Plaintiffs "financed the purchase of their home," which was a "single family residence," with a loan from Defendant Chase NA. Id. at ¶ 5. Defendant Chase NA "was the mortgage holder and the mortgage was thereafter held and administered by" Defendant Chase LLC. Id.
In 2009, Plaintiffs experienced "decreased income" and realized they "would not be able to satisfy the monthly payment demands of the mortgage lender." Id. at ¶ 6. At that time, Plaintiffs owed approximately $310,000 on their mortgage. Id. at ¶ 6.
Plaintiffs "initially tried to negotiate a loan modification" with Defendant Chase LLC, but it "was unwilling." Id. at ¶ 8. Plaintiffs "continued to make timely monthly payments on their mortgage." Id.
"Since they were denied a loan modification and they had no other viable financial option, Plaintiffs elected to pursue [a] short sale ... as opposed to allowing the property to go into foreclosure." Id. The FAC defines a "short sale" as "a transaction wherein the selling price of the residence is for an amount insufficient to pay off the amount of the loan on the property leaving the sale `short' of a full payoff of the loan." FAC at ¶ 2.
Defendant Chase LLC informed Plaintiffs that, before it "would approve any short sale, it would be necessary that Plaintiffs be at least thirty days late on their mortgage payments." Id.
"Chase [LLC] agreed to accept [Plaintiffs'] short sale" and "documented the acceptance of the short sale in a letter to
In a letter dated December 10, 2009, attached to the original complaint as Exhibit 2, Defendants state that:
Compl. (Dkt. 1) Ex. 2.
In another December 10, 2009, letter attached to the original Complaint at Exhibit 1, Defendants states that:
Compl. (Dkt. 1) at Ex. 1.
"Within several months" of the short sale, Defendant Chase LLC sought "a deficiency balance of more than $56,000.00 from Plaintiffs." FAC ¶ 41. Defendant Chase LLC "assigned the collection of this unlawfully claimed deficiency balance `debt' to debt collectors," who "have continued to ... pursue collection." Id. at ¶¶ 11, see also id. at ¶ 73(b).
Due to these collection efforts, Plaintiffs "are being forced to, or will be forced to, make payments unauthorized by law and contrary to the express agreement of and representations of Defendant Chase [LLC]." Id. at ¶ 42.
Defendants "[f]alsely and deceptively report[ed]... the deficiencies of Plaintiffs... to credit reporting agencies as `late,' `charged off,' `collection,' or other derogatory status ... when in fact under California Code of Civil Procedure 580b no such personal liability exists." FAC ¶¶ 63, 63(d); see also id. at ¶¶ 73, 73(e).
"As a proximate result of the foregoing, Plaintiffs ... have been damaged and have suffered detriment in that they have been subjected to ... listing of ... unlawful and improperly claimed `debt' with credit reporting agencies." FAC ¶ 46, see also id. at ¶¶ 49, 56. For example, Defendant Chase LLC "caused Plaintiffs ... to suffer and sustain damages in degraded credit
On April 13, 2011, Defendant Chase NA consented to the issuance of and entered into a "Consent Cease and Desist Order" ("2011 Consent Order") issued by the Comptroller of the Currency ("OCC"). Defs.' Request for Judicial Notice ("RJN") (Dkt. 16) Ex. A (2011 Consent Order) at 1. The 2011 Consent Order states that it is "a final order issued pursuant to 12 U.S.C. § 1818(b)." Id. Ex. A at Art. XIII § 2(8).
By entering into this 2011 Consent Order, Defendant Chase NA "committed to taking all necessary and appropriate steps to remedy the ... unsafe or unsound practices identified by the OCC, and to enhance [Defendant Chase NA] residential mortgage servicing and foreclosure processes." Id. Ex. A at 1-2. The Consent Order also states that the Comptroller finds and Defendant Chase NA "neither admits nor denies" that Defendant Chase NA "engaged in unsafe or unsound banking practices." Id. Ex. A at 2-3.
The 2011 Consent Order provides that Defendant Chase NA "shall submit to" the OCC, and, "upon adoption" by the OCC, "implement"
The 2011 Consent Order defines "loss mitigation activities" to "include ... activities related to special forbearances, modifications, short refinances, short sales, cash-for-keys, and deeds-in-lieu of foreclosure." Id. Ex. A at Art. III § (2) (emphasis added).
Defendants have submitted a document titled "June 21, 2012 Financial Remediation Framework" ("2012 Framework"). See Defs.' RJN (Dkt. 16) Ex. G.
The 2012 Framework provides that "independent consultants" for the "mortgage servicers" that entered into the 2011 Consent Order "will use the Framework to recommend remediation" and the mortgage "servicers will prepare remediation plans based on [those] recommendations." Defs.' RJN (Dkt. 16) Ex. G at 1.
The 2012 Framework states that it:
On July 30, 2012, Plaintiffs filed their First Amended Complaint ("FAC"), which brings the following eight claims against all Defendants:
FAC (Dkt. 12).
Plaintiffs'"Prayer for Relief" requests, among other things, remedies such as:
Under Federal Rule of Civil Procedure 12(b)(1), a complaint must be dismissed if the court lacks subject matter jurisdiction to adjudicate the claims. Once subject matter jurisdiction is challenged, the burden of proof is placed on the party asserting that jurisdiction exists. Scott v.
In evaluating a Rule 12(b)(1) motion, the question of whether the court must accept the complaint's allegations as true turns on whether the challenge is facial or factual. A facial attack is one in which subject matter jurisdiction is challenged solely on the allegations in the complaint, attached documents, and judicially noticed facts. Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir.2004). In a facial attack, the moving party asserts that the lack of federal subject matter jurisdiction appears on the "face of the pleadings." Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir.2003). In the case of a facial attack, the court is required to accept as true all factual allegations set forth in the complaint. Whisnant v. United States, 400 F.3d 1177, 1179 (9th Cir.2005).
In contrast, a factual attack (or a "speaking motion") is one in which subject matter jurisdiction is challenged as a matter of fact, and the challenger "disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction." Safe Air, 373 F.3d at 1039. In assessing the validity of a factual attack, the court is not required to presume the truth of the plaintiffs factual allegations. Id. Rather, the court evaluates the allegations by reviewing evidence outside of the pleadings. Id.
Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed when a plaintiffs allegations fail to set forth a set of facts which, if true, would entitle the complainant to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (holding that a claim must be facially plausible in order to survive a motion to dismiss). The pleadings must raise the right to relief beyond the speculative level; a plaintiff must provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)). On a motion to dismiss, this court accepts as true a plaintiff's well-pled factual allegations and construes all factual inferences in the light most favorable to the plaintiff. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir.2008). The court is not required to accept as true legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.
In evaluating a Rule 12(b)(6) motion, review is ordinarily limited to the contents of the complaint and material properly submitted with the complaint. Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir.1994); Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n. 19 (9th Cir.1990). Under the incorporation by reference doctrine, the court may also consider documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading." Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994), overruled on other grounds by 307 F.3d 1119, 1121 (9th Cir.2002).
A motion to dismiss under Rule 12(b)(6) can not be granted based
Additionally, Federal Rule of Evidence 201 allows the court to take judicial notice of certain items without converting the motion to dismiss into one for summary judgment. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir.1994). The court may take judicial notice of facts "not subject to reasonable dispute" because they are either: "(1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R.Evid. 201; see also Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir.2001) (noting that the court may take judicial notice of undisputed "matters of public record"), overruled on other grounds by 307 F.3d 1119, 1125-26 (9th Cir.2002). The court may disregard allegations in a complaint that are contradicted by matters properly subject to judicial notice. Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir.2010).
Dismissal without leave to amend is appropriate only when the court is satisfied that the deficiencies in the complaint could not possibly be cured by amendment. Jackson v. Carey, 353 F.3d 750, 758 (9th Cir.2003); Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.2000) (holding that dismissal with leave to amend should be granted even if no request to amend was made). Rule 15(a)(2) of the Federal Rules of Civil Procedure states that leave to amend should be freely given "when justice so requires." This policy is applied with "extreme liberality." Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir.1990).
Defendants advance the following alternative legal theories: (1) 12 U.S.C. § 1818(i)(1) divests this Court of jurisdiction over the entire case; (2) the Court should decline to exercise jurisdiction under either the primary jurisdiction doctrine or deny relief under the equitable abstention doctrine; (3) Plaintiffs lack Article III standing to bring their breach of contract claim and lack statutory standing to bring their UCL claim; (4) Cal.Civ. Proc.Code § 580b does not bar collection of a deficiency after a "short sale"; (5) the Federal Credit Reporting Act, 15 U.S.C. § 1681t(b)(1)(F), preempts Plaintiffs' claims; (6) Plaintiffs have failed to state a claim for breach of contract due to contradictory terms in two letters sent by Defendant and any alleged oral representations are barred by the statute of frauds; (7) Plaintiffs have failed to state a claim for promissory estoppel, promissory fraud, negligent misrepresentation, and a UCL violation due to the contradictory terms in these two letters because Plaintiffs' reliance on one of them was unreasonable; and (8) Plaintiffs' CCRAA claim is too conclusorily pled.
Section 1818(i)(1) of Title 12 of the United States Code provides that federal
This Court holds that Section 1818(i)(1) does not divest a federal court of jurisdiction over a case brought by a non-party to a federal banking agency's consent order where, as here, the consent order requires a defendant to create a plan to redress certain practices and this plan may or may not provide the same relief sought in the case brought by the non-party to the consent order. This Court first discusses the text of Section 1818(i)(1) and its role in the larger tripartite regime of judicial review of federal banking agencies' cease and desist orders. This Court then turns to Defendants' arguments.
Section 1818(i) is one sentence divided by a semicolon. Prior to the semicolon, Section 1818(i) provides the federal courts with jurisdiction in what this Court will refer to as the "Jurisdiction-Granting Clause":
12 U.S.C. 1818(i)(1). After the semicolon, in what this Court will refer to as the "Jurisdiction-Divesting Clause," Section 1818(i)(1) states that, with some exceptions not invoked by any party here:
Id.
As an initial matter, the Court notes that the plain language of Section 1818(i)(1) indicates that the phrase "affect by injunction or otherwise" in the Jurisdiction-Divesting Clause can not have a literal meaning. A literal reading of the Jurisdiction-Divesting Clause would prevent a district court from issuing an injunction to enforce a cease-and-desist order, which would have the absurd result of negating the phrase "require compliance" in the Jurisdiction-Granting Clause. Rather, the "jurisdictional bar of § 1818(i)(1) must ... be read in the context of the entire statute." See In re JPMorgan Chase Mortg. Modification Litig., 880 F.Supp.2d 220, 231 (D.Mass.2012).
"It is significant that there is no provision in [Section 1818] for a non-party to a consent order to challenge findings made pursuant to the Order." In re JPMorgan Chase, 880 F.Supp.2d at 232, "It follows that the jurisdictional bar is not meant to displace a non-party's right to present its claims to a federal court, or the jurisdiction of the court to hear those claims." Id.
Understood in this context, it is clear that the Jurisdiction-Divesting Clause was "not intend[ed] to ... prohibit non-parties from exercising their separate remedies at law." Id. at 231. Rather, "the primary purpose of [Section 1818] is to prevent federal courts from usurping the OCC's power to enforce its own consent orders against parties to the orders." Id. at 231; see also Ridder v. Office of Thrift Supervision, 146 F.3d 1035, 1039 (D.C.Cir. 1998) ("To prevent regulated parties from interfering with the comprehensive powers of the federal banking regulatory agencies, Congress severely limited the jurisdiction of courts to review ongoing administrative proceedings brought by banking agencies.").
Defendants appears to argue that Section 1818(i)(1) divests a federal court of jurisdiction over a case brought by a non-party to a federal banking agency's consent order where, as here, the consent order requires a defendant to create a plan to redress unsound and unsafe practices and this plan may or may not in the future provide the same relief sought by the non-party in its case.
Defendant contends that the "OCC already raised and redressed the same alleged conduct" as in the FAC. Mot. at 15-16. Defendants provides a helpful chart, which attempts to show that the injunctive and monetary relief sought in the FAC overlaps with either: (1) the 2011 Consent Order's requirement that Chase "implement" a "plan" to address its certain practices regarding certain borrowers; or (2) the 2012 Framework
This Court provides a similar chart here, although the Court includes crucial equivocal language regarding the 2011 Consent Order and the 2012 Framework. The Court notes that the 2011 Consent Order defines "loss mitigation activities" to "include... short sales." Defs.' RJN (Dkt. 16) Ex. A at Art. III § (2).
Relief FAC seeks the following 2011 Consent Order requires...
relief...
Injunction prohibiting An injunction prohibiting Defendants Defendant Chase NA "shall submit
language from sending "false," to" the OCC, and, "upon
"confusing, contradictory and erroneous," adoption" by the OCC,
"unconscionable," or "implement"9 the following:
"deceptive[]" communications to
borrowers in connection with
short sales. FAC ¶¶ 58, 73(a)-(d),
74(c), 75(c), 78; id. at 38
(Prayer for Relief ¶¶ 7, 10).
This is one of several forms of
relief Plaintiffs seek for their
Seventh and Eighth Claims.
• "Compliance Program," which
"shall" include "processes to ensure
that... compliance programs
have the requisite authority...
so that... deficiencies" in
Defendant Chase NA's Loss Mitigation
activities are "identified
and promptly remedied." Defs.'
RJN (Dkt. 16) Ex. A at Art. IV,
§§ (1), (1)(o).
• "plan for operation of its management
information system...
to ensure the timely delivery of
complete and accurate information"
regarding "Loss Mitigation
activities." Id. at Art. VIII.
• "plan... for ensuring effective
coordination of communications
with borrowers... related to
Loss Mitigation... and foreclosure
activities." Id. at Art. IX,
§ (1).
Monetary Relief "[M]oney or property" received Defendant Chase NA "shall submit from Plaintiffs by Defendants to" the OCC, and, "upon due to "false[] and deceptive[] adoption" by the OCC, "implement" 10 represent[ations]" about their a "plan" to "reimburs[e] post-short sale deficiency. FAC or otherwise appropriately ¶ 76. remediat[e] borrowers for impermissible or excessive penalties, fees, or expenses, or for other financial injury." Defs.' RJN (Dkt. 16) Ex. A at Art. VII, § (5)(a). Relief FAC seeks the following 2012 Framework states that... relief... Injunction requiring An order requiring: • "independent consultants" for action the "mortgage servicers" that entered into the 2011 Consent Order "will use the Framework to recommend remediation" and the mortgage "servicers will prepare remediation plans based on [those] recommendations." Defs.' RJN (Dkt. 16) Ex. G at 1. • Defendants to "contact all major • the 2012 Framework "provides credit reporting agencies and examples of where compensation notify them that the claimed `deficiency or other remediation is required balances'... are fully for financial injury" that these discharged debts as of the date independent consultants "will allegedly incurred." FAC use." Id. (Prayer for Relief ¶¶ 7, 10) • "recovery of economic damages • One such example is that a sustained... as a result of damage servicer "[s]uspend foreclosure to [Plaintiffs'] credit rating." where appropriate, correct servicer FAC (Prayer for Relief ¶¶ 3-6). record for amounts in error and/or reimburse borrower for amounts paid in error, plus interest; and where required, correct credit reports and pay $500 for credit reporting error." Id. at 5 (text at column "No. 13"). This example appears under the heading "FORECLOSURE IN PROCESS" and describes the "[s]ervicer error" as one "that did not directly cause foreclosure, but did directly result in financial injury to borrower." Id.
Regarding the 2011 Consent Order, the Court concludes that:
Defendants' reliance on the 2011 Consent Order's requirement that Defendants develop a plan is misplaced for two reasons. First, because the 2011 Consent Decree only requires Defendant to craft a plan and implement it, the 2011 Consent Decree does not provide the specific relief the FAC seeks — injunctive and monetary relief — nor does it command that these specific Plaintiffs will obtain such relief. Second, Defendants have cited no authority that any plan approved by the OCC constitutes an "order" for purposes of Section 1818(i)(1). Even assuming that such a plan constitutes part of the 2011 Consent Order, Defendant has not provided this Court with the any such plan. Thus, the Court is left only with the ethereal possibility that Defendants' plan might provide all the relief Plaintiffs seek here. Then again, the plan might not. Indeed, given that Defendants contend in the rest of their Motion that Plaintiffs' claims fail on the merits, the Court would be surprised to learn that Defendants' plan provides exactly the relief that Plaintiffs seek here.
Similarly, regarding the 2012 Framework, the Court concludes that:
First, Plaintiffs do not seek a recommendation from a federal banking agency; Plaintiffs seek the concrete remedy of an injunction and monetary payments. Furthermore, Defendants have cited no authority that any OCC recommendation contained in the 2012 Framework constitutes part of an "order" for purposes of Section 1818(i)(1). Finally, even assuming that such an OCC recommendation constitutes part of the 2011 Consent Order, Defendant has not shown that this recommendation provides the specific relief the FAC seeks — injunctive and monetary relief — nor applies to these specific Plaintiffs, nor that the $500 recommended by the OCC is the maximum that these Plaintiffs could attain.
In sum, Section 1818(i)(1) does not divest this court of jurisdiction because Defendants have not provided the legal authority or evidence to show that the relief in the FAC "affect[s] by injunction or otherwise" or "modif[ies]" the 2011 Consent Order. See 12 U.S.C. § 1818(i)(1).
This Court's conclusion is supported by the only published opinion to address the same jurisdictional argument advanced by the same Defendant
In In re JPMorgan Chase, the court held that Section 1818(i)(1) did not divest that court of jurisdiction. Id. at 231-33. The plaintiff-homeowners brought suits against Defendant Chase NA under four of the same causes of action brought in this case and based on similar factual allegations as in the present case, namely:
In In re JPMorgan Chase, Defendant Chase NA argued that Section 1818(i)(1) divested the court of jurisdiction because ruling on the plaintiffs' claims for breach of contract and other state consumer protection law violations would "affect" the "enforcement of an OCC consent order" within the meaning of Section 1818(i)(1). Id. at 231.
The court rejected Defendant's argument, reasoning that Section 1818(i)(1) "is not meant to displace a non-party's right to present its claims to a federal court" because the 2011 Consent Order is "abundantly clear" that the Order itself and the plan it requires banks to create and implement do "not establish an exclusive remedy for plaintiffs' financial injuries." Id. at 233. In addition, the court noted that its holding was consistent with "the OCC's
Thus, regarding the breach of contract claim, the court held that Section "1818 does not preclude the court from acting to remedy the breach as the result would not be inconsistent with the Consent Order." Id. at 232. Similarly, regarding the "state consumer protection act claims, the [Consent] Order is clear that its enforcement is not affected by compliance with state laws — indeed, the Order requires Chase to comply with all applicable federal and state laws." Id. Finally, the Court concluded that, at most, any recovery plaintiffs obtained through the plan mandated by the 2011 Consent Order would prohibit plaintiffs from "obtaining a duplicative recovery, an issue that will not arise until the claims here are finally adjudicated and any off-set can be calculated." Id.
In short, In re JPMorgan Chase held that Section 1818(i)(1) does not divest the court of jurisdiction because adjudication of the plaintiffs' claims would not affect the 2011 Consent Order's requirement that Defendant Chase NA develop a plan. Id. Given that In re JPMorgan Chase involved the substantially similar acts as those allegedly done by Defendants here, four of the same causes of action as those at issue here, and the same 2011 Consent Order at issue here, this Court finds In re JPMorgan Chase to be indistinguishable. Furthermore, this Court is highly persuaded by In re JPMorgan Chase given that it is a published opinion replete with cogent reasoning and numerous citations to authority.
Furthermore, Defendants' argument is contrary to the legislative history of Section 1818(i). In 1989, Congress gave Section 1818(i) greater teeth as part of several reforms to "aggressively respond[] to the public perception ... that financial institutions... were playing fast and loose with the law and the public purse, courtesy of deposit insurance." John J. Byrne et. al., Examining the Increase in Federal Regulatory Requirements and Penalties: Is Banking Facing Another Troubled Decade?, 24 Cap. U.L.Rev. 1, 2 (1995) (citing Section 1818(i) as part of a "new regime" where "more individuals are subject to civil money penalties," "the penalties are significantly larger," and "the kinds of activities which may give rise to a [penalty] have been expanded."). These reforms reflected the philosophy that "a terrified banker was going to be a better banker." Id.
Defendants' interpretation of Section 1818(i) would require this Court to read a regulatory statute designed to strike fear in the hearts of the banking industry as actually creating a jurisdictional mechanism by which banks can escape millions of dollars of liability in consumer class actions. Essentially, Defendants' rule allows any defendant-bank to insulate itself from liability for practices that violate state contract and consumer laws simply by entering into an OCC consent order which requires the defendant-bank to develop a plan. Under Defendants' rule, the defendant-bank could then use its promise to make a plan to divest courts of jurisdiction over numerous consumer lawsuits, even if the defendant-bank implements a plan that denies the very relief that plaintiffs seek in those lawsuits. Defendants' interpretation is, frankly, absurd because the purpose
In sum, the Court refuses to read a regulatory statute designed to curb bad banking practices as providing those very banks with a jurisdictional mechanism to avoid liability.
All of Defendants' published cases holding that Section 1818(i)(1) divested a court of jurisdiction are distinguishable because in these cases the relief sought was either: (1) expressly banned by a federal banking agency's order
Indeed, the court in In re JPMorgan Chase distinguished several of these cases on similar grounds in rejected the same jurisdictional argument advanced by the same Defendant here. See 880 F.Supp.2d at 232-33 (distinguishing American Fair Credit Association); id. at 232 n. 16 (distinguishing MCorp Financial); id. at 233 n. 18 (distinguishing Henry).
Defendants also rely on Bakenie v. JPMorgan Chase Bank, N.A., in which a court in this district accepted a similar jurisdictional argument advanced by the same Defendant Chase NA about the same 2011 Consent Order. See SACV 12-60 JVS MLGX, 2012 WL 4125890 (C.D.Cal. Aug. 6, 2012) (J. Selna). In Bakenie, the court held that Section 1818(i)(1) divested the court of jurisdiction because Plaintiffs' UCL claim would "affect ... enforcement of the 2011 Consent Order. Id. at *3. The plaintiffs' UCL claim was "based on
This Court declines to follow Bakenie and instead follows In re JPMorgan Chase.
Thus, this Court finds the cases cited by Defendants to be either distinguishable or unpersuasive.
In sum, the Court holds that Section 1818(i)(1) does not divest a federal court of jurisdiction over a case brought by a non-party to a federal banking agency's consent order where, as here, the consent order requires a defendant to create a plan to redress certain practices and this plan may or may not provide the same relief sought in the case brought by the non-party to the consent order. Thus, the Court DENIES Defendants' Motion to the extent it seeks dismissal based on 12 U.S.C. § 1818(i)(1) divesting this Court of jurisdiction.
Defendants alternatively argue that this Court should decline to exercise jurisdiction under either the primary jurisdiction doctrine or deny relief under the equitable abstention doctrine. The Court declines to do so.
The primary jurisdiction doctrine is a "prudential doctrine" under which courts "may" decide that "the initial decisionmaking responsibility should be performed by the relevant agency rather than the courts." Davel Communications, Inc. v. Qwest Corp., 460 F.3d 1075, 1086-87 (9th Cir.2006). Whether to invoke the primary jurisdiction doctrine is "committed to the sound discretion of the court." Syntek Semiconductor Co., Ltd. v. Microchip Technology Inc., 307 F.3d 775, 781 (9th Cir.2002).
Defendants appear to address only the third factor by invoking a statute which provides that "[a]ny national banking association may make ... loans ... on interests in real estate, subject to section 1828(o) of this title and such restrictions and requirements as the [OCC] may prescribe by regulation or order." See 12 U.S.C. § 371(a); Mot. at 18. Section 1828(o) provides for the creation of "uniform regulations prescribing standards for extensions of credit that are ... secured by liens on interests in real estate." See 12 U.S.C. § 1828(o)(1)(a).
The Court fails to see what "issue" in this case "has been placed by Congress within the jurisdiction" of the OCC, much less why the resolution of any such issue requires the OCC's "expertise or uniformity in administration." See Davel, 460 F.3d at 1086-87. The FAC brings exclusively state law claims, such as breach of contract and UCL violations, for which the OCC has no special administrative jurisdiction or expertise. Rather, both the OCC itself and California courts have recognized that a "number of state laws," such as California's UCL, "prohibit unfair or deceptive acts or practices, and such laws may be applicable to insured depository institutions." See Smith v. Wells Fargo Bank, N.A., 135 Cal.App.4th 1463, 1479, 38 Cal.Rptr.3d 653 (2005).
Furthermore, as Plaintiffs note, Plaintiffs' CCRAA claim is expressly exempted from federal preemption.
Thus, the Court declines to invoke the primary jurisdiction doctrine.
Under the equitable abstention doctrine, a court has the discretion to refrain from awarding relief for a UCL claim in the rare instance where: (1) such relief would "interfere with" a government agency's "administration of" its regulations to such an extent that the court "risk[s] throwing the entire complex economic arrangement out of balance"; and (2) the "public's need for" the relief "is not so great as to warrant judicial interference in the administrative scheme designed to address those needs." Shamsian v. Department of Conservation, 136 Cal.App.4th 621, 643, 39 Cal.Rptr.3d 62 (2006). The "underlying rationale" of the equitable abstention doctrine is that, "because the remedies available under the UCL ... are equitable in nature, courts have the discretion to abstain from employing them." Desert Healthcare Dist. v. PacifiCare FHP, Inc., 94 Cal.App.4th 781, 795, 114 Cal.Rptr.2d 623 (2001).
It is an abuse of discretion to use the equitable abstention doctrine to deny relief where plaintiffs' claims require the court "to perform the basic judicial functions of contractual and statutory interpretation,"
In Arce, the court reversed the lower court's dismissal of a UCL claim under the equitable abstention doctrine where the defendant allegedly breached its contracts and violated certain California statutes requiring parity in medical treatment, even though a government agency offered an "administrative process by which" the putative class could seek relief. Arce v. Kaiser Foundation Health Plan, Inc., 181 Cal.App.4th 471, 499-503, 104 Cal.Rptr.3d 545 (2010). The court reasoned that equitable abstention was inappropriate because resolution of the breach of contract claims merely required the lower court to "interpret the relevant terms of the contract" and decide whether the defendant's acts were authorized by the contract. Id. at 500, 104 Cal.Rptr.3d 545. Similarly, resolution of the statutory claims merely required the lower court to "interpret the relevant provisions of the" statutes and decide whether these statutes required defendant to act. Id. at 500, 104 Cal.Rptr.3d 545. Finally, the court rejected the defendant's argument that abstention was warranted due to the availability an "administrative process by which" the putative class could seek relief because the prospect of the agency acting "at a future time" in a manner "bearing on pending legal issues does not mean that a court should abstain from adjudicating a presently justiciable controversy." Id. at 502, 104 Cal.Rptr.3d 545.
As in Arce, Plaintiffs' putative class action brings a UCL claim and alleges that Defendants breached their contracts and violated certain California statutes, and Defendants respond by invoking the equitable abstention doctrine. As in Arce, resolution of Plaintiffs' claims merely require this Court to "interpret the relevant terms of the contract" and "interpret the relevant provisions of the" statutes. Id. at 500, 104 Cal.Rptr.3d 545. Like in Arce, Defendants contend that there is an "administrative process by which" the putative class may be able to seek relief, namely, the plan which Defendants are required to create pursuant to the 2011 Consent Order. See id. at 502, 104 Cal.Rptr.3d 545. However, as in Arce, this Court rejects Defendants' argument because the fact that the OCC or some plan it adopts "may, at some future time," require Defendants to provide the relief that Plaintiffs seek here "does not mean that a court should abstain from adjudicating a presently justiciable controversy." Id. at 502, 104 Cal.Rptr.3d 545.
Finally, this Court is nonplussed that a multi-billion-dollar corporation would invoke an equitable doctrine against borrowers who have lost their homes so as to avoid liability for allegedly imposing illegal contracts on these borrowers and engaging in unfair debt collection practices. Defendant is a corporation with enough resources to have survived the recent recession, which is the largest economic downturn since the Great Depression. Plaintiffs are individuals who could not afford to make their mortgage payments and so were forced to sell their home in a short sale. The Court fails to see how the equities of the situation dictate denying Plaintiffs relief.
Thus, this Court holds that equitable abstention is inappropriate and that Plaintiffs "are entitled to a timely determination
In sum, the Court refuses to exercise its discretion to decline jurisdiction under the primary jurisdiction doctrine or deny relief under the equitable abstention doctrine. Thus, the Court DENIES Defendants' Motion to the extent it seeks dismissal based on the primary jurisdiction or equitable abstention doctrines.
This case raises an issue of first impression,
The parties dispute whether California Civil Procedure Code Section 580b applies to short sales. The Court first provides the text, legislative history, and purpose of Section 580b and then turns to Defendants' arguments.
Under California law, a "creditor must rely upon his security before enforcing the debt," and "[i]f the security is insufficient, his right to a judgment against the debtor for the deficiency may be limited or barred by sections ... 580b, [and other sections] ... of the Code of Civil Procedure." Roseleaf Corp. v. Chierighino,
Section 580b and other sections barring collection of deficiencies are commonly referred to as "antideficiency statutes." Bank of Am. v. Graves, 51 Cal.App.4th 607, 611, 59 Cal.Rptr.2d 288 (1996). These anti-deficiency statutes are "construed liberally to effectuate the legislative purposes underlying them." Id. at 611 n. 3, 59 Cal.Rptr.2d 288.
California Civil Procedure Code § 580b is titled "Purchase money mortgages, etc.; no deficiency judgment." Section 580b provides in relevant part that: "No deficiency judgment shall lie in any event after a sale of real property for failure of the purchaser to complete his contract of sale ... under a deed of trust or mortgage on a dwelling ... given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling." Cal.Civ.Proc.Code § 580b (emphasis added).
The California legislature enacted Section 580b to "counteract" a common phenomena "during the great depression" whereby a "mortgagee was able to purchase the subject real property at the foreclosure sale at a depressed price far below its normal fair market value and thereafter to obtain a double recovery by holding the debtor for a large deficiency." Cornelison v. Kornbluth, 15 Cal.3d 590, 600, 125 Cal.Rptr. 557, 542 P.2d 981 (1975); see also Cal. Stat. c. 642, § 5 (1933).
Section 580b was amended in 1963 to add, among other things, a clause extending Section 580b to the kind of real property at issue in this case, namely, a "dwelling for not more than four families ... occupied, entirely or in part, by the purchaser." See Barash v. Wood, 3 Cal.App.3d 248, 251, 83 Cal.Rptr. 153 (1969); Cal. Stat. c. 2158, § 1 (1963).
In interpreting Section 580b, the California Supreme Court and lower courts have consistently rejected any interpretations that undermine the purpose of the statute. See e.g., DeBerard Properties v. Lim, 20 Cal.4th 659, 663, 85 Cal.Rptr.2d 292, 976 P.2d 843 (1999) (rejecting interpretation that would allow creditor to "circumvent" Section 580b and thus "flout" its "purpose").
The California legislature passed Section 580b for "two reasons": (1) to "stabilize[] purchase money secured land sales [prices] by [preventing] overvaluing the property"; and (2) ensure "purchasers as a class are harmed less than they might otherwise be during a time of economic decline" because "if property values drop
These two public policy goals are achieved by shifting the risk of falling property prices to the lender. As the California Supreme Court explained:
DeBerard Properties v. Lim, 20 Cal.4th 659, 663-64, 85 Cal.Rptr.2d 292, 976 P.2d 843 (1999).
Defendants contend that Section 580b applies only to foreclosure sales or, alternatively, at least does not apply to short sales. Reply at 5:3-4.
This Court rejects Defendants arguments and instead concludes that Section 580b applies regardless of the mode of sale. First, the Court defines short sales and foreclosures sales and summarizes some motivations for entering into each one. Next, the Court rejects Defendants' interpretation because it: (1) is contrary to Section 580b's plain language; (2) undermines Section 580b's purpose of land price stabilization; and (3) is not supported by either the plain language or legislative history of another anti-deficiency statute, Section 580e, that Defendants invoke to argue that Plaintiffs' interpretation of 580b would render 580e superfluous.
The primary difference between the two modes of sale discussed in this Order is that a short sale is a sale of property by the borrower with the lenders' consent that is voluntarily entered into by the borrower, whereas a foreclosure sale is a sale by the lender that is involuntarily entered into by the borrower.
A "foreclosure sale" is the "sale of mortgaged property, authorized by a court decree or a power-of-sale clause, to satisfy the debt." Black's Law Dictionary (9th ed. 2009). A "power-of-sale clause" is a "provision in a mortgage or deed of trust permitting the [lender] to sell the property without court authority if the payments are not made." Id. In short, because a foreclosure sale is accomplished due to a court order or a clause within the mortgage, the sale itself is done by the lender and involuntarily entered into by the borrower.
In contrast, the "short sale" is the "voluntary" sale of mortgaged property by the borrower where the borrower "secures the agreement of the [lender] to release the mortgage upon a bona fide sale to a third party for an agreed upon price below the mortgage loan balance." 2 The Law of Real Estate Financing § 12:10, Short sales. "If the voluntary sales efforts fail, presumably the [lender] could proceed to foreclosure or attempt a restructuring of the loan." Id. The short sale alleged here occurred when Plaintiffs sold their home
The "part of a debt secured by mortgage not realized from sale of mortgaged property" is frequently described as a "deficiency." In re Prestige Ltd. P'ship-Concord, 223 B.R. 203, 209 (Bankr.N.D.Cal. 1998) (defining deficiency in the context of Section 580b) aff'd by 234 F.3d 1108 (9th Cir.2000); see also Cornelison v. Kornbluth, 15 Cal.3d 590, 603, 125 Cal.Rptr. 557, 542 P.2d 981 (1975) (defining a deficiency as "the difference between the fair market value of the property held as security and the outstanding indebtedness [at the time of sale].").
A "short sale" has advantages to both borrowers and lenders and is but one "alternative" that borrowers have "when a home is facing foreclosure."
The plain language of 580b shows that its application is not limited only to foreclosure sales or any other specific mode of sale.
First, reading Section 580b as applying only to foreclosure sales or any other specific mode of sale is contrary to the express language of the statute. Section 580b provides that "[n]o deficiency judgment shall lie in any event after a sale of real property." Cal.Civ.Proc.Code § 580b (emphasis added). The phrase "in any event" and the lack of adjectives modifying the phrase "a sale" evinces the intent to have the statute apply broadly to all types of sales.
Second, had the California legislature wished to limit the application of Section 580b to only certain modes of sale, it could have used the limiting language it adopted in other anti-deficiency statutes. For example, the phrase "in any event after a sale" in Section 580b stands in stark contrast to Section 580d, which applies only where the real property "has been sold by the mortgagee or trustee under power of sale contained in the mortgage or deed of trust." See Cal.Civ.Proc.Code § 580d
Third, given the lack of limitations on the mode of a sale in Section 580b, it is unsurprising that several California courts and the Ninth Circuit have expressly rejected Defendants' first argument that 580b applies only after a foreclosure sale. See e.g., Frangipani v. Boecker, 64 Cal.App.4th 860, 862-64, 75 Cal.Rptr.2d 407 (1998) (holding that Section 580b barred beneficiary of "junior purchase money trust deed" from collecting deficiency where property was "not foreclosed" because beneficiary "cancel[ed] the notice of foreclosure"); Venable v. Harmon, 233 Cal.App.2d 297, 302, 43 Cal.Rptr. 490 (1965) (holding that Section 580b applied and "the fact that there has not been a prior sale is of no moment"); Hersch & Co. v. C & W Manhattan Assocs., 700 F.2d 476, 478 (9th Cir.1983) (discussing Venable and stating that "it is controlling authority that § 580b applies notwithstanding the absence of a prior sale").
Finally, while there does not appear to be any binding authority addressing whether Section 580b applies to short sales, at least one unpublished California Court of Appeal case has recently followed Frangipani to suggest that it does. See Wright v. Gerson, 2002 WL 1360014, *1, *4, 2002 Cal.App. Unpub. LEXIS 5686, *1, *12 (Cal.App. 4th Dist. June 24, 2002) (affirming "judgment for [borrower], finding Code of Civil Procedure section 580b ... precluded [lender] from recovering the balance due on the contract once [borrower]... sold the property to a third party"). In Wright, as in the present case, the borrower sold the property "to avoid the prospect of a foreclosure," but the "sale proceeds" were "not ... sufficient to pay the entire amount owed." Id. at *2, 2002 Cal.App. Unpub. LEXIS 5686, at *5. The court rejected the same argument advanced by Defendants here, namely, that "section 580b is inapplicable because ... there was no foreclosure sale or resort to the security." Id. at *4, 2002 Cal.App. Unpub. LEXIS 5686, at *12.
Thus, this Court rejects Defendants' interpretation as contrary to the plain language of Section 580b.
As previously noted, "Section 580b places the risk of inadequate security on the purchase money mortgagee" in order to accomplish the twin purposes of "stabiliz[ing] purchase money secured land sales" prices by discouraging the mortgagee "from overvaluing" the land and ensuring that a borrowers'"loss is limited" if property values drop. DeBerard Properties v. Lim, 20 Cal.4th 659, 663, 85 Cal.Rptr.2d 292, 976 P.2d 843 (1999).
In DeBerard, the California Supreme Court held that these purposes of Section 580b are so vital to "stabiliz[ing] the state's economy" that Section 580b can not be waived by contract "in exchange for new consideration following the original purchase money sale." Id. at 659, 668-69, 85 Cal.Rptr.2d 292, 976 P.2d 843. In DeBerard, after the original purchase money
Defendants' interpretation of Section 580b as not applying to the short sales in this case would result in exactly the kind of end-run around Section 580b that DeBerard rejected. As in DeBerard, after the original purchase money sale, Plaintiffs attempted to renegotiate their obligations with Defendants. Just as the vendor in DeBerard argued that the parties' assent to a waiver in the foreclosure agreement exempted the sale from Section 580b, Defendants here contend that the parties' assent to a short sale exempts the sale from Section 580b. Yet, like the vendors in DeBerard, Defendants here could have pursued a foreclosure sale due to Plaintiffs' defaulting on their mortgage; Defendants simply opted for the convenience of a short sale.
In sum, this Court rejects Defendants' interpretation because it would undermine the purpose of Section 580b by essentially allowing every lender to avoid the statute's protections by contracting for a short sale in lieu of a foreclosure sale.
Defendants contend that interpreting Section 580b as applying to short sales would render another anti-deficiency statute, Section 580e, superfluous. While it is unclear whether Defendants rely solely on Section 580e's legislative history or also on its plain language, the Court concludes that neither support Defendants' argument.
Section 580e bars deficiencies where there is "a deed of trust or mortgage for a dwelling of not more than four units" if:
Cal.Civ.Proc.Code 580e(a)(1), (a)(2) (emphasis added).
The plain language of Section 580b and 580e show that Plaintiffs' interpretation of
Regarding the types of loans to which each statute applies, Section 580b applies only to "purchase money"
Regarding the modes of sale to which each statute applies, Section 580b states that it applies to "a sale," whereas Section 580e places specific limits on the mode of sale. As previously noted, Section 580b expressly states that it applies to "a sale." Cal.Civ.Proc.Code § 580b. In contrast, Section 580e states that it applies where "the trustor or mortgagor sells the dwelling for a sale price less than the remaining amount of the indebtedness outstanding at the time of sale, in accordance with the written consent of the holder of the deed of trust or mortgage." Cal.Civ.Proc.Code 580e(a)(1), (a)(2).
In addition, interpreting Section 580e as applying to more types of loans than 580b but to fewer modes of sale than Section 580b is consistent with the format of another anti-deficiency statute, Section 580d. Both Section 580d and 580e contain a broad definition of the type of loan to which they apply.
The Court summarizes the relevant differences in the types of loans and modes of sale of the three anti-deficiency statutes discussed here as follows:
Section 580b Section 580e Section 580d
applies to... applies to... applies to...
Type "Purchase money mortgages, "a note secured by a deed "a note secured solely by a
of loan etc.," which includes of trust or mortgage... deed of trust or mortgage...
a "deed of trust or [except that this] section [except that this]
mortgage on a dwelling... does not apply to any deed shall not apply to any
given to a lender of trust, mortgage... issued deed of trust, mortgage,...
to secure repayment of a by the Commissioner to be issued[] by
loan which was in fact of Corporations, or which the Commissioner of Corporations,
used to pay all or part of is made by a public or that is made
the purchase price of that utility..." Cal.Civ. by a public utility...."
dwelling." Cal.Civ.Proc. Proc.Code § 580d. Cal.Civ.Proc.Code
Code § 580b. § 580e(a)(1), (d)(2).
The California Supreme
Court interprets this
phrase to mean a "standard
purchase money
mortgage or deed of trust
transaction" or a "variation"
on that type of transaction
for which applying
Section 580b "serves the
purposes of section 580b."
DeBerard Properties, Ltd.
v. Lim, 20 Cal.4th 659, 665
(1999).
Mode "a sale." Cal.Civ.Proc. "[property] sold by the "the trustor or mortgagor
of sale Code § 580b. mortgagee or trustee under sells the dwelling for a
power of sale contained sale price less than the remaining
in the mortgage or amount of the indeed
of trust." Cal.Civ. debtedness outstanding at
Proc.Code § 580d. the time of sale." Cal.Civ.
Proc.Code § 580e(a)(1).
The shorthand term for The shorthand term for
this type of transaction in this type of transaction in
Section 580d is a "nonjudicial Section 580e is a "short
foreclosure []." sale. " Espinoza v. Bank
Nat'l Enterprises, Inc. v. of Am., N.A., 823
Woods, 94 Cal.App.4th F.Supp.2d 1053, 1057
1217, 1231 (2001); (S.D.Cal.2011).
Roseleaf Corp. v.
Chierighino, 59 Cal.2d 35,
43 (1963) ("[S]ection
580d... applies if the
property is sold under a
power of sale, but not if
the property is foreclosed
and sold by judicial action").
In sum, this Court concludes that the plain language of Section 580b and 580e show that Plaintiffs' interpretation of Section 580b would not render the Section 580e superfluous because Section 580e applies to more types of loans than 580b but to fewer modes of sale than Section 580b.
Defendants appear to argue that Section 580e was enacted to remedy Section 580b's failure to apply to short sales. Defendants' argument is squarely contradicted by the legislative history of Section 580e, which shows that the California legislature passed that statute to expand the type of mortgages to which anti-deficiency protections applied, not the modes of sale. Section 580e was first passed in 2010 and amended in 2011. See Stats.2010, c. 701 (S.B.931), § 1; Stats.2011, c. 82 (S.B.458), § 1.
First, the legislative history of Section 590e shows the California legislature knew Section 580b applied to short sales. For example, the section of the Senate Floor Analyses devoted to "[e]xisting law" states that "Code of Civil Procedure 580b ... provide[s] protection to a purchase money note that becomes the subject of a ... short sale."
Second, the legislative history of Section 580e reveals that Section 580e was enacted to extend anti-deficiency protections beyond the purchase money loans covered by Section 580b to include non-purchase money loans. As the Assembly Floor Analysis expressly states: "[a]ccording to the author... [t]he purpose of this proposed legislation is primarily to protect distressed homeowners who have non-purchase money recourse loans on residential property...."
The Section 580e legislative purpose of extending protections to non-purchase money mortgages is confirmed by a letter from the bill's sponsor "to clarify [her] intent in authoring Senate Bill 931," which states that, "the purpose of this proposed legislation is to protect distressed home-owners
Thus, this Court concludes that the plain language and legislative history of Section 580e shows that this statute was enacted to expand the type of mortgages to which anti-deficiency protections applied, not the modes of sale.
In sum, this Court holds, on an issue of first impression, that California Civil Procedure Code Section 580b applies to bar a deficiency after a short sale, that is, a borrower's sale of her home for an amount insufficient to pay off her mortgage done after defaulting on her mortgage and with the consent of her lender.
Defendants contend that Plaintiffs lack Article III standing and UCL statutory standing. The Court rejects the both contentions.
Article III of the United States Constitution requires a plaintiff to have "standing" to bring her claim. Gest v. Bradbury, 443 F.3d 1177, 1181 (9th Cir. 2006). One of the standing requirements is that a plaintiff has suffered an "injury in fact," meaning an injury that is: (1) concrete and particularized; and (2) actual or imminent, not conjectural or hypothetical. Id.; Friends of the Earth v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 180-81, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000).
Defendants trot out the ubiquitous canard that Plaintiffs lack Article III standing. This time, the argument is stylized as follows: Plaintiffs alleges that Defendants' breach of the contract — namely, the failure to honor the letter (Exhibit 2) releasing Plaintiffs from paying the short sale deficiency — will result in Defendants demanding payments from Plaintiffs, yet "Plaintiffs fail to allege that they actually made any such payments." See Mot. at 20; see also FAC ¶ 42 ("[Plaintiffs] are being forced to, or will be forced to, make payments unauthorized by law and contrary to the express agreement of and representations of Defendant Chase.").
Defendants' argument fails because an Article III injury exists where there is a dispute between parties as to the amount one owes under a contract, regardless of whether that amount has been "paid or not." DiCarlo v. St. Mary Hosp., 530 F.3d 255, 263 (3d Cir.2008) (rejecting defendants'"argument that [p]laintiffs breach of contract claim fails because, not having paid the ... charges, [p]laintiff has suffered no damages"). The injury exists because an obligation under a contract "is incurred, whether paid or not." See id.
Here, the FAC pleads a sufficient Article III injury because Defendants allegedly "breached the agreement ... by seeking a deficiency balance of more than $56,000.00 from Plaintiffs and further instituting collection efforts against Plaintiffs." FAC ¶ 41. Such allegations demonstrate a dispute between parties as to the amount
In addition, while Defendants do not appear to direct their Article III standing argument to any claims other than that for breach of contract, the Court notes that doing so would be futile. To the extent Defendants challenge Plaintiffs' statutory claims, Defendants are wrong on the law because the injury required by Article III can exist solely by virtue of "statutes creating legal rights, the invasion of which creates standing." Edwards v. First American Corp., 610 F.3d 514, 517 (9th Cir.2010).
Thus, this Court DENIES Defendants' Motion to the extent it seeks dismissal due to Plaintiffs' lack of Article III standing.
UCL statutory standing can be satisfied where "a person ... has suffered injury in fact and has lost money or property as a result of the unfair competition." Cal. Bus. & Prof.Code § 17204. There are "innumerable ways" in which "lost money or property" can be shown, including where plaintiffs: "(1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary." Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 323, 120 Cal.Rptr.3d 741, 246 P.3d 877 (2011).
Here, Plaintiffs here have established UCL statutory standing by alleging Defendants' "perpetration of [c]redit [r]eports containing inaccurate erroneous information regarding `due and owing' debts." See White, 462 F.Supp.2d at 1080. For example, regarding their Promissory Estoppel claim, Plaintiffs contend that, "[a]s a proximate result of the foregoing, Plaintiffs... have been damaged and have suffered detriment in that they have been subjected to ... listing of ... unlawful and improperly claimed `debt' with credit reporting agencies." FAC ¶ 46. Regarding the Promissory Fraud and Negligent Misrepresentation claims, Plaintiffs contend that they "have had their credit injured by Defendant Chase [LLC] by having ... uncollectible alleged `debt' listed on their credit reports." Id. ¶¶ 49, 56. Regarding their CLRA claim, Plaintiffs allege that Defendant Chase LLC "caused Plaintiffs... to suffer and sustain damages in degraded credit histories." Id. ¶ 60. Finally, regarding the UCL claim, Plaintiffs contend that Plaintiffs'"harm includes injury due to "damage to [Plaintiffs'] credit reports and credit ratings." Id. ¶¶ 74(b), 75(b).).
Defendants contend, however, that Plaintiffs have failed to establish UCL statutory standing because Plaintiffs failed to allege that they have incurred any fees or interest as a result of Defendants allegedly reporting false information to credit reporting agencies and because Plaintiffs fail to allege that they have made any payments towards the short sale deficiency. Mot. at 20; Reply at 9.
Given that the Ninth Circuit and published district court cases have recognized that damage to credit alone satisfies UCL statutory standing, the Court declines to follow Defendants' unpublished cases suggesting otherwise. None of Defendants' cases distinguished the cases cited above. Furthermore, there are several reasons to doubt the validity of the cases on which Defendants rely. For example, Defendant cites Gerber v. Citigroup, Inc., which held that the pro se plaintiff lacked UCL statutory standing because the relief he sought did not satisfy the "limited" definition of "[r]estitution under the UCL." See CIV S07-0785WBSJFMPS, 2009 WL 248094, *7 (E.D.Cal. Jan. 29, 2009). Yet, two years later, the California Supreme Court held that "ineligibility for restitution is not a basis for denying standing under [UCL] section 17204" and "disapprove[d] those cases that have concluded otherwise." Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 337, 120 Cal.Rptr.3d 741, 246 P.3d 877 (2011).
Finally, Defendants fourth case reached its conclusion due to the plaintiffs lack of evidence at summary judgment, whereas Plaintiffs here need only present plausible allegations, not evidence, to survive Defendants' Motion. See Wright v. Gen. Motors Acceptance Corp., 09CV2666 JM AJB, 2012 WL 253157, *5 (S.D.Cal. Jan. 25, 2012) (granting defendant summary judgment because plaintiff "simply fails to identify any evidence or testimony that his economic injury was either the result of" defendants' "reporting of the deficiency to credit reporting agencies").
Alternatively, Plaintiffs have shown UCL statutory standing because they allege they were induced to "enter into a transaction, costing money or property, that would otherwise have been unnecessary." See Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 323, 120 Cal.Rptr.3d 741, 246 P.3d 877 (2011). Defendants' alleged contract with Plaintiffs to release them from paying the short sale deficiency was a transaction that was unnecessary because, as Plaintiffs contend and as this Court concludes in this Order, California Civil Procedure Code Section 580b already barred the collection of a deficiency after a short sale. Plaintiffs' allegation, supported by Exhibits 1 and 2, show that Defendant conditioned the short sale on Plaintiffs' payment of $3,000 to Defendants, and such payment of $3,000 certainly constitutes lost money.
Thus, the Court DENIES Defendants' Motion to the extent it seeks dismissal of the UCL claim for failure to establish statutory standing.
Defendants contend that the Federal Credit Reporting Act ("FCRA"), Section 1681t(b)(1)(F), preempts "all of Plaintiffs' claims, other than [their] CCRAA claim." Mot. at 21. The Court first reviews the relevant statutory provisions and then discusses Defendants' argument as it applies to different portions of the FAC.
The FCRA has three relevant provisions, detailed below, dubbed by this Court as: (1) Section 1681t(b)(1)(F) Preemption Provision; (2) Section 1681t(b)(1)(F)(ii) Preemption Exception; and (3) Section 1681s-2(b)(1) Responsibility.
Section 1681t(b)(1)(F) provides that, with some exceptions, "[n]o requirement or prohibition may be imposed under the laws of any State ... with respect to any subject matter regulated under ... section 1681s-2 ... relating to the responsibilities of persons who furnish information to consumer reporting agencies." 15 U.S.C. § 1681t(b)(1)(F) (emphasis added).
One relevant "except[ion]" to the Section 1681t(b)(1)(F) Preemption Provision is that it "shall not apply ... with respect to section 1785.25(a) of the California Civil Code (as in effect on September 30, 1996)." 15 U.S.C. § 1681t(b)(1)(F)(ii).
The FCRA requires credit reporting agencies to adopt "reasonable procedures related to the collection, communication, and use of consumer credit information to ensure fair and accurate credit reporting." Miller v. Bank of Am., Nat. Ass'n, 858 F.Supp.2d 1118 (S.D.Cal.2012); 15 U.S.C. § 1681e. As part of this goal, the FCRA sets forth "[r]esponsibilities of furnishers of information to consumer reporting agencies." 15 U.S.C. § 1681s-2; Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1154 (9th Cir.2009).
The responsibility at issue in the present case is a furnisher's responsibility to "report" to credit reporting agencies that "information is incomplete or inaccurate," where the furnisher has "receiv[ed] a notice of dispute" as to that information. See 15 U.S.C. § 1681s-2(b)(1); Gorman, 584 F.3d at 1154.
Defendants argue that "all of Plaintiffs' claims, other than [their] CCRAA claim," are preempted by the Section 1681t(b)(1)(F) Preemption Provision because the non-CCRAA claims are "based on allegations that Chase allegedly supplied inaccurate credit information to credit reporting agencies." Mot. at 21. As discussed below, Defendants' argument relies on an unfair characterization of the FAC and the bases of Plaintiffs' claims.
First, the Court concludes that Plaintiffs' UCL and Rosenthal FDCPA claims are preempted only to the extent that Plaintiffs' Rosenthal Act and UCL claims arise from Defendants' inaccurate reporting as described in FAC Paragraphs 63(d) and 73(e). Second, the Court holds that a breach of contract claim is not, as a matter of law, preempted by the Section 1681t(b)(1)(F) Preemption Provision. Finally, regarding the remaining claims, the Court concludes that the allegations of Plaintiffs' injury due to Defendants' false reporting to credit reporting agencies and request for a remedy for that injury do not show that these remaining claims themselves are preempted by the Section 1681t(b)(1)(F) Preemption Provision.
Defendants contend that the following allegations indicate that Plaintiffs' claims are preempted:
Defendants cite Miller v. Bank of America, which held that Section 1681t(b)(1)(F) preempted Plaintiff's UCL claim where the plaintiff alleged that "defendant reported inaccurate information to the credit reporting agencies and failed to conduct a reasonable investigation after being notified that Plaintiff disputed the report." Miller v. Bank of Am., Nat. Ass'n, 858 F.Supp.2d 1118, 1124 (S.D.Cal.2012). These allegations comprised the totality of plaintiffs claim under the unlawful prong UCL claim, which in turn was "predicate[d]" on defendant's violation of the FCRA, 15 U.S.C. § 1681s-2. Given that the UCL claim was predicated entirely on the FCRA violation, the court reasoned that "allegations against [d]efendant ... relate exclusively to the responsibilities of furnishers of credit information as set forth under sections 1681-2[]." Id. Because Plaintiffs' UCL claim related "exclusively" to these responsibilities, Section 1681t(b)(1)(F) preempted Plaintiff's UCL claim. Id.
This Court concludes that this case is far more like Guillen than Miller. First, while all cases are facially similar in that they involve allegations that defendant-banks reported inaccurate information to credit reporting agencies, only in Miller did these allegations comprise the entirety of the preempted claim. See Miller, 858 F.Supp.2d at 1124. In contrast, both in Guillen and the present case, the plaintiffs' claims include additional allegations of "conduct aris[ing] from the role of [d]efendants as `debt collectors' ... rather than ... as a `furnisher' of credit information." See Guillen, 2011 WL 4071996 at *7. Specifically, both Guillen and the present case allege that the defendants attempted to collect the debt that they falsely reported to the credit reporting agencies. See id. (defendant-bank "ultimately referred one of the delinquent mortgages ... for collections"); FAC ¶ 11 (Defendant Chase LLC "assigned the collection of this unlawfully claimed deficiency balance `debt' to debt collectors," who "have continued to ... pursue collection"), 73(b) (Defendants were "[u]ndertaking collection efforts").
Furthermore, unlike in Miller, Plaintiffs' UCL claim here is predicated in part on Plaintiffs' CCRAA claim, which survives Defendant's motion because this Court in this Order rejects Defendants' challenges to Plaintiffs' CCRAA claim. See Montgomery v. PNC Bank, N.A., C-12-2453 S.C. 2012 WL 3670650, *5 (N.D.Cal. Aug. 24, 2012) (denying motion to dismiss to the extent it sought dismissal of UCL claim, reasoning that a claim for "violation of the California UCL is not preempted [by Section 1681t(b)(1)(F)] because it is predicated on [defendant's] alleged violation of California Civil Code section 1785.25(a)," a CCRAA claim).
However, the Court agrees with Defendants that Section 1681t(b)(1)(F) Preemption Provision preempts Plaintiff's Rosenthal Act and UCL claim only to the extent these claims are based on the specific allegations quoted above in FAC Paragraphs 63(d) and 73(e) regarding Defendants' inaccurate reporting. The Section 1681t(b)(1)(F) Preemption Provision applies because the allegations show that the parts of these claims that are based on these allegations are: (1) "relating to the responsibilities of persons who furnish information to consumer reporting agencies";
Thus, the Court GRANTS Defendants' Motion only to the extent that Plaintiffs' Rosenthal Act and UCL claims arise from Defendants' inaccurate reporting as described in FAC Paragraphs 63(d) and 73(e) and quoted in this Order. The Court DENIES the Motion to the extent it seeks dismissal of the Rosenthal Act and UCL claims under a theory of preemption based on any other allegations.
Defendants contend that the following allegation shows that Plaintiffs' Breach of Contract claim is preempted by the Section 1681t(b)(1)(F) Preemption Provision:
FAC ¶ 41.
Neither party provided case law specifically addressing Section 1681t(b)(1)(F) preemption of breach of contract claims. This Court's own research reveals that the few courts to address the issue hold that a "breach of contract claim ... is not preempted by the FCRA." Spencer v. Nat'l City Mortg., 831 F.Supp.2d 1353, 1356, 1364 (N.D.Ga.2011) (holding Section 1681t(b)(1)(F) did not preempt claim, despite plaintiffs allegation "she suffered approximately $116,997 in damages as a result of [defendant's] false negative reporting to the [credit reporting agencies]").
These courts reason that a breach of contract claim is not preempted by the Section 1681t(b)(1)(F) Preemption Provision because that provision "prohibits only legal duties `imposed under the laws of any State,'" whereas "requirements voluntarily assumed by contract are not imposed under state law." Leet v. Cellco P'ship, 480 F.Supp.2d 422, 432 (D.Mass.2007) (denying motion to dismiss because a "breach of contract claim is not preempted by the FCRA," Section 1681t(b)(1)(F)); Kavicky v. Wash. Mut. Bank, F.A., No. 3:06cv01812, 2007 WL 1341345, at *2 (D.Conn. May 5, 2007) ("[T]he FCRA does not preempt breach of contract claims."); cf. Cipollone v. Liggett Group, Inc., 505 U.S. 504, 515, 525-26, 526 n. 24, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992) (holding that provision in 15 U.S.C. § 1334(b) stating that "[n]o requirement or prohibition ... shall be imposed under State law with respect to the advertising or promotion of" a product did not preempt a claim for breach of express warranty because such a claim is "imposed by the warrantor" and "common understanding dictates that a contractual requirement, although only enforceable under state law, is not `imposed' by the State, but rather is `imposed' by the contracting party upon itself").
Defendants have cited no authority holding that the Section 1681t(b)(1)(F) Preemption Provision preempts a breach of contract claim. Given Defendants' absence of authority and the excellent reasoning of courts reaching the opposite conclusion urged by Defendants, this Court follows the authorities cited above and holds that a "breach of contract claim ... is not preempted by the FCRA." Spencer v. Nat'l City Mortg., 831 F.Supp.2d 1353, 1356, 1364 (N.D.Ga.2011).
Thus, this Court DENIES Defendants' Motion to the extent it seeks to dismiss Plaintiffs' Breach of Contract Claim as preempted by Section 1681t(b)(1)(F).
Defendants contend that the following allegations indicate that Plaintiffs' claims are preempted:
As previously noted, the Section 1681t(b)(1)(F) Preemption Provision preempts only a "requirement or prohibition... imposed under the laws of any State...." 15 U.S.C. § 1681t(b)(1)(F). A state law "damages remedy itself is not a `requirement or prohibition'" within the meaning of the Section 1681t(b)(1)(F) Preemption Provision. Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1171 (9th Cir.2009) (holding that Section 1681t(b)(1)(F) did not preempt California claim).
A remedy provided by California law is not a "requirement" because a "requirement" is "a rule of law that must be obeyed." Gorman, 584 F.3d at 1171 (quoting Bates v. Dow Agrosciences LLC, 544 U.S. 431, 445, 125 S.Ct. 1788, 161 L.Ed.2d 687 (2005)). In contrast, under California law, a remedy creates no rule of law to be obeyed; a remedy simply redresses a violation of a rule of law. See e.g., Kirby v. Immoos Fire Protection, Inc., 53 Cal.4th 1244, 1256, 140 Cal.Rptr.3d 173, 274 P.3d 1160 (2012) (distinguishing between the "gravamen" of a California claim — which is a "violation" of an "obligation" — and its "remedy" — such as a monetary award); cf. Cipollone v. Liggett Group, Inc., 505 U.S. 504, 515, 526 n. 24, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992) (reasoning that statutory phrase "[n]o requirement or prohibition... shall be imposed under State law" did not preempt "common-law remedy" because statute did not refer to "`liability' imposed under state law ... but instead... only a `requirement or prohibition' imposed under state law").
Essentially, Defendants argument would require this Court to hold that allegations of injury due to Defendants' false reporting to credit reporting agencies of a short sale deficiency debt and a request for a remedy for that injury constitute a "requirement or prohibition" within meaning of the Section 1681t(b)(1)(F) Preemption Provision.
In sum, the Court holds that the allegations identified in this subsection are regarding the scope of Plaintiffs' injury and remedy for this injury, and thus are not a "requirement or prohibition" within meaning of the Section 1681t(b)(1)(F) Preemption Provision. Cf. Gorman, 584 F.3d at 1171. Therefore, the Court DENIES Defendants Motion to the extent it seeks dismissal of Plaintiffs' Promissory Estoppel, Promissory Fraud, Negligent Misrepresentation, CLRA, and UCL claims as preempted by Section 1681t(b)(1)(F).
Defendant argues that Plaintiffs have failed to state a claim for breach of contract because the letter ("Exhibit 2") containing the term that was purported breached is contradicted by another letter ("Exhibit 1") and any oral contract is barred by the statute of frauds. See Mot. at 23. Based on this first argument, Defendants next contend that Plaintiffs' reliance on Exhibit 2 is unreasonable, resulting in a failure to state a claim for promissory estoppel, promissory fraud, negligent misrepresentation. Id.
Defendants argue that Plaintiffs have failed to state a claim for breach of contract because the term that was allegedly breached — Defendants' agreement to release Plaintiffs of the short sale deficiency — is not in any contract. Mot. at 22-23. Defendants attack the two bases for Plaintiffs' breach of claim: (1) a December 10, 2009, letter sent by Defendant Chase LLC to Plaintiffs, attached to the Original complaint as Exhibit 2 ("Exhibit 2"); and (2) oral statements.
Regarding a contract based on Exhibit 2, Defendant argues that Exhibit 2 does not create a contract term releasing Plaintiffs' short sale deficiency because Exhibit 2 is contradicted by another letter dated the same day, which is attached to the original complaint as Exhibit 1 ("Exhibit 1").
However, a contradiction between Exhibits 1 and 2 does not assist Defendants because, absent additional evidence of the parties' intent that resolves the contradiction, the contract will be construed against the drafter — in this case, Defendants. See Cal. Civ.Code § 1654; Hartley v. Superior Court, 196 Cal.App.4th 1249, 1258, 127 Cal.Rptr.3d 174 (2011) ("We construe ambiguities against ... the drafting party.").
Regarding a contract based on Defendants' oral representations, Defendants contends that such an oral contract for land would violate California's statute of frauds.
Defendants' argument fails because Exhibit 2 brings this case out of the statute of frauds. California's statute of
Thus, the Court DENIES Defendants' Motion to the extent it seeks dismissal for failure to state a claim for breach of contract.
Defendants next contend that Plaintiffs fail to state a claim for promissory estoppel, promissory fraud, negligent misrepresentation, and a UCL violation because Plaintiffs' reliance on Exhibit 2 was unreasonable. Yet, Exhibit 2 by itself appears to release Plaintiffs from any short sale deficiency. Given that Exhibit 1 at best creates an ambiguity that must be construed against Defendant as drafter, Plaintiffs' reliance on Exhibit 2 and any oral representations by Defendants was not unreasonable. Cf. April Enterprises, Inc. v. KTTV, 147 Cal.App.3d 805, 817, 195 Cal.Rptr. 421 (1983) (construing contract terms that were "inherently contradictory" against defendant and holding that plaintiff could this state a claim for "breach of implied covenant of fair dealing in a contract").
Furthermore, even if Plaintiffs' breach of contract claim fails, this does not mean that Plaintiffs' remaining claims fail per se because "certain types of misrepresentations outside of a contract still may create liability even in the face of unambiguous contractual provisions." See In re Facebook PPC Adver. Litig., 5:09-CV-03043-JF, 2010 WL 5174021 (N.D.Cal. Dec. 15, 2010).
Thus, the Court DENIES Defendants' Motion to the extent it seeks dismissal for failure to state a claim for promissory estoppel, promissory fraud, negligent misrepresentation, and a UCL violation.
A plaintiff may bring a claim under the CLRA when "any person" uses a statutorily prohibited trade practice "in a transaction ... which results in the sale or lease of goods or services to any consumer." Id. at § 1770. The CLRA defines "services" as "work, labor, and services for other than a commercial or business use, including services furnished in connection with the sale or repair of goods." Id. at 1761(b).
Defendant cites Fairbanks v. Superior Court, in which the California Supreme Court recently held that a life insurance contract was not a "service" under the CLRA because an "insurer's contractual obligation to pay money under a life insurance policy is not work or labor, nor is it related to the sale or repair of any tangible chattel." See 46 Cal.4th 56, 61, 92 Cal.Rptr.3d 279, 205 P.3d 201 (2009) (emphasis added). In addition, Defendants' Motion cites a case interpreting Fairbanks to preclude a CLRA claim where the defendant-lender allegedly was "demanding money to which it is not entitled and trying to enforce a rescinded loan" because these allegations "challenged only the validity of the mortgage loan and not any nonancillary services related to the loan." Consumer Solutions REO, LLC v. Hillery, 658 F.Supp.2d 1002, 1015, 1017 (N.D.Cal.2009).
However, Defendants' summary of the law is incomplete, as even after Fairbanks, "courts in this district have concluded that the CLRA does indeed apply to a real estate transaction" where the lenders' interaction with the borrower goes beyond a contract to extent credit. See Hernandez v. Sutter W. Capital, C 09-3658 CRB, 2010 WL 539133, *4 (N.D.Cal. Feb. 8, 2010); Becker v. Wells Fargo bank, N.A., Inc., 2:10-CV-02799 LKK, 2011 WL 1103439, *13 (E.D.Cal. Mar. 22, 2011) (dismissing CLRA claim based on Fairbanks, but distinguishing case from those where "the defendant provided additional services over and above the extension of credit") adopted in relevant part by 2011 WL 3319577 (E.D.Cal. Aug. 1, 2011).
This Court follows the line of cases holding that a defendant-lenders' "advising plaintiffs and managing their loan, constitute[] `services' as defined by § 1761(b)." Hernandez v. Hilltop Fin. Mortg., Inc., 622 F.Supp.2d 842, 851 (N.D.Cal.2007) (holding that defendant-lender provided a "service" within the meaning of the CLRA where, "in an effort to create an appropriate refinancing package, plaintiffs met with defendants' agent three times before finally agreeing on a payment plan that plaintiffs and defendants found acceptable"); see also Hernandez v. Sutter W. Capital, C 09-3658 CRB, 2010 WL 539133, *4 (N.D.Cal. Feb. 8, 2010) (denying dismissal of CLRA claim because defendant-lender provided a "service" within the meaning of the CLRA where plaintiff with minimal English proficiency obtained refinancing due to Defendants' "Spanishspeaking agents and employees ... [who] communicated with Plaintiff in Spanish"); Jefferson v. Chase Home Finance LLC, No. C06-6510, 2007 WL 1302984, *3 (N.D.Cal. May 3, 2007) (noting that the loan transactions between a mortgage finance company and the plaintiff involved "more than the provision of a loan; they also include [the] financial services [of managing the loan]"); Knox v. Ameriquest Mortgage Co., No. C05-00240, 2005 WL 1910927, *4 (N.D.Cal. Aug. 10, 2005) (noting that, in the context of predatory lending allegations, "California courts generally find financial transactions to be subject to the CLRA").
This Court is persuaded by the reasoning in these cases, which explain that, in "similar matters involving financial transactions, the California Supreme Court and intermediate appellate divisions have found
However, Plaintiffs have not identified in their Opposition any allegations which would differentiate this case from Fairbanks, namely, allegations that Defendants' interaction with Plaintiffs went beyond a contract to pay money. Thus, the Court GRANTS Defendants' Motion to the extent it seeks to dismiss Plaintiffs' CLRA claim. However, the Court DISMISSES WITHOUT PREJUDICE so that Plaintiff may amend, if possible, to include allegations indicating that Defendants' interaction with Plaintiffs in forming the short sale contract went beyond the creation of an "obligation to pay money." Cf. Fairbanks, 46 Cal.4th at 61, 92 Cal.Rptr.3d 279, 205 P.3d 201.
Defendants contend that Plaintiffs' CCRAA fails to identify a specific credit report that contains an inaccuracy, and thus is conclusory. Mot. at 25. This argument fails because Plaintiffs need not plead the specific report to put Defendants on notice of the basis of their claim.
It is quite apparent from the FAC that the basis for Plaintiffs' CCRAA claim is the Defendants are reporting to credit reporting agencies some or all of a $56,000 debt that Plaintiffs contend they do not owe. The FAC alleges that Defendants are impermissibly seeking "a deficiency balance of more than $56,000.00 from Plaintiffs and further instituting collection efforts against Plaintiffs." FAC ¶ 41. The FAC also alleges that Defendants are "reporting purchase money loans ... to consumer credit agencies as `late,' charged off,' `collection' or other derogatory status." Id. at ¶ 66. Such allegations are all that is required to meet the notice pleading standard.
Thus, the Court DENIES Defendants' Motion to the extent it seeks dismissal of Plaintiffs' CCRAA claim as too conclusorily pled.
For the reasons stated above, the Court:
Plaintiffs shall file a First Amended Complaint, if at all,
Cal.Civ.Proc.Code § 580b.
15 U.S.C. § 1681t; see also Montgomery v. PNC Bank, N.A., C-12-2453 S.C. 2012 WL 3670650, *5 (N.D.Cal. Aug. 24, 2012).
