EDWARD M. CHEN, District Judge.
Plaintiff Deborah Tamburri initiated this lawsuit in state court, asserting claims for, inter alia, violation of California Civil Code § 2923.5, violation of the Real Estate Settlement Procedures Act ("RESPA"), unfair business practices, and wrongful foreclosure. Defendant Suntrust Mortgage, Inc. removed the case to federal court, and the next day Ms. Tamburri moved for a temporary restraining order to enjoin the foreclosure sale of her home. This Court granted the motion and, after holding a hearing on June 28, 2010, granted a preliminary injunction enjoining Defendants from foreclosing on her home and requiring Plaintiff to post monthly bond payments. Docket No. 33. All Defendants besides Wells Fargo and Recontrust then moved to dismiss Plaintiff's complaint. Wells Fargo did not appear in this matter and default was entered against it on September 6, 2011. Docket No. 45. Plaintiff moved for default judgment against Wells Fargo, but the Court later granted Wells Fargo's motion to set aside default. Docket No. 82.
The Court previously granted in part and denied in part Defendants Suntrust, MERS, and U.S. Bank's motion to dismiss Plaintiff's First Amended Complaint.
Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss based on the failure to state a claim upon which relief may be granted. See Fed.R.Civ.P. 12(b)(6). A motion to dismiss based on Rule 12(b)(6) challenges the legal sufficiency of the claims alleged. See Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir.1995). In considering such a motion, a court must take all allegations of material fact as true and construe them in the light most favorable to the nonmoving party, although "conclusory allegations of law and unwarranted inferences are insufficient to avoid a Rule 12(b)(6) dismissal." Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir.2009). While "a complaint need not contain detailed factual allegations ... it must plead `enough facts to state a claim to relief that is plausible on its face.'" Id. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "The plausibility standard is not akin to a `probability requirement,' but it asks for more than sheer possibility that a defendant acted unlawfully." Id.
Ms. Tamburri alleges that Defendants SunTrust and Wells Fargo violated 12 U.S.C. § 2605(e) either by failing to properly respond to Plaintiff's Qualified Written Requests ("QWRs") (in the case of Suntrust), or by denying it has an interest in the loan (in the case of Wells Fargo). SAC at 23-24.
As the Court explained in its prior order, "Congress enacted RESPA in 1974 to protect home buyers from inflated prices in the home purchasing process." Schuetz v. Banc One Mortg. Corp., 292 F.3d 1004, 1008 (9th Cir.2002). It sought to implement significant reforms in the real estate settlement process which "are needed to insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process." 12 U.S.C. § 2601. RESPA applies not only to the actual settlement process, however, but also to the servicing of federally related mortgage loans. See, e.g., id. § 2605(e) (imposing requirements on servicers of federally related mortgage loans).
Section 2605(e) is titled "[d]uty of loan servicer to respond to borrower inquiries." It provides in relevant part as follows:
12 U.S.C. § 2605(e). The terms "servicer" and "servicing" are defined in § 2605(i). "The term `servicer' means the person responsible for servicing of a loan (including the person who makes or holds a loan if such person also services the loan)." Id. § 2605(i)(2). "The term `servicing' means receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan ... and making the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the loan." Id. § 2605(i)(3).
Under § 2605(e), a loan servicer has an obligation to act when it receives a QWR from the borrower or borrower's agent "for information relating to the servicing of [the] loan." 12 U.S.C. § 2605(e)(1)(A). Because RESPA does not provide for injunctive relief, see Rivera v. BAC Home Loans Serv., L.P., No. C 10-02439 RS, 2010 WL 2757041, at *4-5, 2010 U.S. Dist. LEXIS 80294, at *12-13 (N.D.Cal. Jul. 9, 2010) (concluding that RESPA claims could not stop a foreclosure because RESPA did not have as a remedy injunctive relief), actual damages and, in the case of a pattern or practice, statutory damages, are the only remedies available when a servicer violates the above provisions. See 12 U.S.C. § 2605(f)(1).
Plaintiff alleges she sent the following QWRs to Defendants:
(1) On November 25, 2009, seven months after receiving a Notice of Default, Plaintiff sent a QWR to SunTrust "in an attempt to gather additional information regarding her loan." SAC ¶ 50. SunTrust did not respond until 27 days later, and its response referenced the wrong borrower's loan. Id. ¶¶ 50-51; see Docket No. 11, Ex. 4 (letter from SunTrust).
(2) On February 9, 2010, Plaintiff sent a QWR to Wells Fargo. Wells Fargo responded by stating that it was "[u]nable to confirm name(s) provided as an active borrower," nor was it able to "verify active mortgage on property address or loan number supplied." SAC ¶ 58.
(3) On March 10, 2011, after receiving a Notice of Trustee's Sale, Plaintiff sent QWRs to SunTrust, MERS, and U.S. Bank.
The Court previously dismissed Plaintiff's RESPA claim as alleged in the First Amended Complaint for failure to allege damages. Defendants, as they argued previously, contend that Plaintiff's claim as alleged in the SAC should be dismissed for the same reasons. First, they argue that Plaintiff's SAC still fails to allege any damages as a result of Defendants' purported RESPA violations. Second, Defendants again claim that Plaintiff's letters are not QWRs because they do not relate to the servicing of the loan as required under § 2605; rather, they merely ask for documentation as to who owns the loan.
Although Plaintiff has added new allegations of harm to her RESPA claim, the Court finds that Plaintiff has still not alleged any actual, cognizable damages resulting from Defendants' failure to respond to QWRs. As the Court previously explained, Plaintiff's "statement that she was harmed by not knowing the true owner of Note and `whether her payments have been properly applied,' FAC ¶ 47, is insufficient to allege the pecuniary harm required by the statute." Docket No. 82 at 12; Tamburri, 2011 WL 6294472 at *8; Lal v. American Home Servicing, Inc., 680 F.Supp.2d 1218, 1223 (E.D.Cal.2010) ("[T]he Court rejects, as a matter of law, Plaintiffs' argument that they were harmed by not being able to name the real party of interest in this suit. Under RESPA, a borrower may not recover actual damages for nonpecuniary losses."); Ash v. OneWest Bank, FSB, 2:09-CV-00974FCD/DAD, 2010 WL 375744, at *6 (E.D.Cal. Jan. 26, 2010) ("[P]laintiffs' vague claim that they suffered harm because they were unable to name the real party in interest to this suit is insufficient to demonstrate that they suffered actual damages as a result of defendant's failure to respond to the QWR."); Fullmer v. JPMorgan Chase Bank, NA, 2:09-CV-1037 JFM, 2010 WL 95206, at *6 (E.D.Cal. Jan. 6, 2010) (same).
Plaintiff's allegations in the SAC, while more detailed, still relate solely to Plaintiff's desire to "obtain information of the ownership of her loan." SAC ¶ 4; see also id. ¶ 5. As the Court has already found, such allegations are insufficient to state a claim for damages caused by Defendants' purported RESPA violations because such damages are outside the scope of RESPA. Any damages — whether monetary or emotional — purportedly resulting from Plaintiff's lack of knowledge as to the owner of her loan are not plausibly related to her RESPA claim, because § 2605 relates only to the servicing of a loan, not to its ownership or validity. Docket No. 82 at 12-13; Tamburri, 2011 WL 6294472 at *8; see Consumer Solutions REO, LLC v. Hillery, 658 F.Supp.2d 1002, 1014 (N.D.Cal.2009) ("That a QWR must address the servicing of the loan, and not its validity, is borne out by the fact that § 2605(e) expressly imposes a duty upon the loan servicer, and not the owner of the loan."). Because RESPA is not designed to cover disputes over the ownership and validity of a loan, Plaintiff's purported damages arising from such disputes are not cognizable under RESPA.
In contrast, cases in which courts have found properly alleged damages involve concrete harm caused by the RESPA violation itself, not harm generally resulting from a plaintiff's default and foreclosure process. For example, in Johnson v. HSBC Bank USA, Nat. Ass'n, 3:11-CV-2091-JM-WVG, 2012 WL 928433 (S.D.Cal. Mar. 19, 2012), the plaintiff alleged, inter alia, that a new servicer had refused to honor a loan modification plan adopted by
Unlike these cases, Plaintiff has not alleged harm that derives from any failure to respond to the QWRs, rather than from her own default or from disputes over the loan's ownership or validity. See Allen v. United Financial Mortg. Corp., 660 F.Supp.2d 1089, 1097 (N.D.Cal.2009) (dismissing RESPA claim with prejudice where plaintiff had "not actually attempted to show that the alleged RESPA violations caused any kind of pecuniary loss (indeed, his loss of property appears to have been caused by his default)") (emphasis added). As with her FAC, Plaintiff's SAC has not alleged, e.g., "that she attempted to make a payment that was not properly credited, thus leading to Plaintiff's default." Docket No. 82 at 13; Tamburri, 2011 WL 6294472 at *8. Indeed, Plaintiff could not so allege because she admits that she sent the QWRs only after she had missed payment(s) and had received a Notice of Default. See SAC ¶¶ 44, 46, 50-51, 58, 69-70. Because the SAC's "allegations indicate that [P]laintiff sent [the QWR] after she had already defaulted on her loan ... [it] fail[s] to allege facts plausibly showing that any claimed damages for fees, interest, and penalties incurred because of her default were the consequence of any alleged RESPA violation." Obot v. Wells Fargo Bank, N.A., C11-00566 HRL, 2011 WL 5243773 (N.D.Cal. Nov. 2, 2011); Durland v. Fieldstone Mortg. Co., 10CV125 JLS CAB, 2011 WL 805924 (S.D.Cal. Mar. 1, 2011) ("Without more, allegations of fees assessed, negative credit reporting, and emotional distress are insufficient to state a claim. Plaintiff fails to establish any causal relation between the alleged pecuniary losses and Litton's failure to respond to his informational requests.") (internal citations omitted). Plaintiff does not allege that her QWRs sought information about such alternatives to foreclosure and so there is no claim of harm related to foreclosure that is plausibly and proximately caused by Defendant's failure to respond. See Docket No. 11, Ex. 7 (March 11, 2012 QWR requesting information about "documents and documentation supporting [] collection and enforcement efforts," including "documents in support of the enforcement of [Ms. Tamburri's] Promissory Note ... and the Deed of Trust").
Therefore, the Court finds that Plaintiff's SAC is as deficient as her FAC with respect to her RESPA claim. Accordingly, the Court
Plaintiff's RESPA claim was her only federal cause of action alleged in the SAC. However, the Court exercises supplemental jurisdiction over her remaining state law claims. 28 U.S.C. § 1367(c)(3). Given the multiple rounds of briefing the Court has already entertained in this matter and the fact that it has already been pending for approximately one year, the Court finds that remand at this stage in the litigation would not serve the principles of "judicial economy, convenience, fairness, and comity," and therefore exercises its discretion to entertain Plaintiff's state law claims. See Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988).
In this round of 12(b)(6) briefing, Defendants make the new argument that Plaintiff's state law claims are preempted under the National Bank Act ("NBA"), 12 U.S.C. § 21. 12 C.F.R. § 34.4, promulgated by the Office of Comptroller of Currency ("OCC"), contains a preemption provision. That provision states:
12 C.F.R. § 34.4(a)(10). The regulation also contains an exception clause, which states,
12 C.F.R. § 34.4(b). As the Supreme Court has explained, "Federally chartered banks are subject to state laws of general application in their daily business to the extent such laws do not conflict with the letter or the general purposes of the NBA." Watters v. Wachovia Bank, N.A., 550 U.S. 1, 11, 127 S.Ct. 1559, 167 L.Ed.2d 389 (2007). The preemption provision thus embodies conflict, not field, preemption.
Defendants cite to only one case holding that the NBA has preemptive effect over certain California laws relating to foreclosure. See Acosta v. Wells Fargo Bank, N.A., C 10-9910JF (PVT), 2010 WL 2077209 (N.D.Cal. May 21, 2010). In Acosta, Judge Fogel analogized the NBA to the Home Owners' Loan Act ("HOLA"), which some courts have found to preempt
However, the analogy between the NBA and HOLA is flawed. Unlike the NBA, which contains only a conflict preemption clause, HOLA contains a broad field preemption clause. Specifically, 12 C.F.R. § 560.2(a) provides, in relevant part,
12 C.F.R. § 560.2(a) (emphasis added). In addition, § 560.2(b) provides,
12 C.F.R. § 560.2(b)(10) (emphasis added). Section 560.2(c) provides a savings clause:
In order to determine whether a claim is preempted under HOLA, OTS prescribes the following process:
Parcray v. Shea Mortg. Inc., CV-F09-1942OWW/GSA, 2010 WL 1659369, at *7-8 (E.D.Cal. Apr. 23, 2010) (quoting OTS, Final Rule, 61 Fed.Reg. 50951, 50966-50967 (Sept. 30, 1996) (emphasis added)). Thus, the savings clause comes into play only if the law at issue is not listed in the preemption section.
Such broad preemption language is absent from the NBA. In contrast to 12 C.F.R. § 502.2(b) of the OTS/HOLA regulations which broadly declares categories of state law that are preempted per se, 12 C.F.R. § 34.4(b) declares categories that are not preempted if they have an incidental effect on bank's lending powers. Indeed, the Ninth Circuit has concluded that, while the OTS/HOLA regulations described above permit a court to consider the savings clause of § 560.2(c) only if the law at issue does not fall within the express preemption provisions of § 560.2(b), the OCC/NBA regulations "require[] the court to consider both the express preemption and savings clauses together" in the first instance. Aguayo v. U.S. Bank, 653 F.3d 912, 922 (9th Cir.2011) (emphasis added) (internal citations omitted).
As the Ninth Circuit held in Aguayo v. U.S. Bank, "while the OTS [HOLA] and the OCC [NBA] regulations are similar in many ways, the OCC has explicitly avoided full field preemption in its rulemaking and has not been granted full field preemption by Congress." 653 F.3d at 921-22 (internal citations omitted). "Because of this difference in field preemption, courts have been cautious in applying OTS analysis to OCC regulations." Id. at 922 (internal citations omitted). HOLA's strict field preemption analysis therefore bears little relation to the NBA's more flexible conflict preemption analysis. See also Gerber v. Wells Fargo Bank, N.A., CV 11-01083-PHX-NVW, 2012 WL 413997 (D.Ariz. Feb. 9, 2012) ("[T]he [NBA] rule only preempts the types and features of state laws pertaining to making loans and taking deposits that are specifically listed in the regulation.") (quoting OCC Interpretive Letter No. 1005, 2004 WL 3465750 (June 10, 2004) (emphasis added); citing Martinez v. Wells Fargo Home Mortg., Inc., 598 F.3d 549, 555 (9th Cir.2010) ("The [NBA] (and OCC regulations thereunder) does not `preempt the field' of banking.")).
The distinction between HOLA's field preemption, on the one hand, and NBA's mere conflict preemption, on the other, renders cases construing HOLA preemption inapposite to the question of whether NBA preemption applies. It is likely for this reason that almost no courts have addressed NBA preemption in the context of foreclosure litigation, despite the growing body of foreclosure cases circulating through the state and federal court systems.
Aside from the one case Defendants cite which, in this Court's view, erroneously applies the HOLA preemption analysis in the context of the NBA, Defendants provide no other authority for the proposition that Plaintiff's state law claims, including § 2923.5, are preempted by the NBA. The few courts that have examined the NBA's application to state foreclosure laws have concluded that "state laws regulating foreclosure are [] not preempted by NBA." Gerber v. Wells Fargo Bank, N.A., CV 11-01083-PHX-NVW, 2012 WL 413997, at *8 (D.Ariz. Feb. 9, 2012). Gerber reached this conclusion after an extensive analysis of the NBA's preemption provisions, and concluded that "there has never been a federal presence [] sufficient to displace the various types of state statutes governing foreclosure procedures. Indeed, foreclosure
The Court finds Gerber persuasive and adopts its reasoning with respect to Plaintiff's state law claims asserted here, including under § 2923.5. As the Supreme Court has explained, the NBA leaves national banks "subject to the laws of the State," and banks "are governed in their daily course of business far more by the laws of the State than of the nation." Atherton v. FDIC, 519 U.S. 213, 222, 117 S.Ct. 666, 136 L.Ed.2d 656 (1997) (quoting Nat'l Bank v. Commonwealth, 76 U.S. 353, 362, 9 Wall. 353, 19 L.Ed. 701 (1869)). The Supreme Court has also noted the states' longstanding interest in regulating the foreclosure process, and has imposed a clear statement rule on any statutes that could potentially be construed to impinge on that interest. See BFP v. Resolution Trust Corp., 511 U.S. 531, 541-44, 114 S.Ct. 1757, 128 L.Ed.2d 556 (1994) (describing long history of state regulation of the foreclosure process and declining to read a provision of the Bankruptcy Code as disrupting "the ancient harmony that foreclosure law and fraudulent conveyance law ... have heretofore enjoyed").
The OCC itself has confirmed that state foreclosure laws are not generally within the scope of NBA preemption. See Bank Activities and Operations; Real Estate Lending and Appraisals, 69 Fed.Reg. 1904-01, at 1912 & n. 59 (Jan. 23, 2004) (OCC final rule describing state foreclosure laws as generally among laws that "do not attempt to regulate the manner or content of national banks' real estate lending, but that instead form the legal infrastructure that makes it practicable to exercise a permissible Federal power").
If there were any doubt as to whether preemption under HOLA was equivalent to preemption under the NBA, the recent Dodd-Frank legislation lays such doubt to rest. The Dodd-Frank Act changed the above-described HOLA preemption analysis and mandates that HOLA preemption would now follow the more lenient NBA conflict preemption standard. See Settle v. World Sav. Bank, F.S.B., ED CV 11-00800 MMM, 2012 WL 1026103, at *13 (C.D.Cal. Jan. 11, 2012) ("The Dodd-Frank Act provides that HOLA does not occupy the field in any area of state law and that preemption is governed by the standards applicable to national banks.") (quoting Davis v. World Savings Bank, FSB, 806 F.Supp.2d 159,
Under NBA conflict preemption, Plaintiff's § 2923.5 claim does not impose any constraints on banks' lending or servicing powers. Rather, it "only incidentally affect[s] the exercise of national banks' real estate lending powers" by requiring certain procedural hurdles before a bank may foreclose on real property and transfer said property to a new owner. See 12 C.F.R. § 34.4(b) (exempting from NBA preemption any state laws that incidentally affect banks and concern, inter alia, contracts, torts, rights to collect debts, or acquisition and transfer of real property); Mabry v. Superior Court, 185 Cal.App.4th 208, 231, 110 Cal.Rptr.3d 201 (2010) (finding that § 2923.5 does not create a right to loan modification and that failure to comply with its requirements can only result in a delay in foreclosure).
Other cases are in accord and confirm that Plaintiff's state common law claims are similarly outside the scope of NBA preemption. See, e.g., Lucia v. Wells Fargo Bank, N.A., 798 F.Supp.2d 1059, 1065-66 (N.D.Cal.2011) (White, J.) (finding that UCL, state contract, and Rosenthal Act claims arising out of failed modifications of home mortgage loans under HAMP were not preempted because the "theories upon which the claims are based do not necessarily impinge upon the bank's obligations under the NBA" because they are "state laws of general application"); Sutcliffe v. Wells Fargo Bank, N.A., 283 F.R.D. 533, 554, 2012 WL 1622665, at *23 (N.D.Cal. 2012) (same); see also Gutierrez v. Wells Fargo & Co., C07-05923 WHA, 2010 WL 1233885 (N.D.Cal. Mar. 26, 2010) (finding that UCL claims based on banks' alleged deceptive business practices related to fees and other servicing conduct are not preempted when they do not challenge "a bank's right to establish a fee," but rather challenge, e.g., "a bank's right to deceive or unfairly induce customers into paying them") (citing Martinez v. Wells Fargo Home Mortg., Inc., 598 F.3d 549, 555 (9th Cir.2010) ("State laws of general application, which merely require all businesses (including national banks) to refrain from fraudulent, unfair, or illegal behavior, do not necessarily impair a bank's ability to exercise its [federally-authorized] powers.")).
Indeed, as noted above, if the Court accepted Defendant's arguments, it would be questionable whether any of California's (or other states') foreclosure laws could avoid preemption. Yet federal law provides no legal framework for foreclosure.
Accordingly, the Court
California Civil Code § 2923.5(a)(1) provides that "[a] mortgagee, trustee, beneficiary, or authorized agent may not file a notice of default pursuant to Section 2924 until 30 days after initial contact is made as required by paragraph (2) or 30 days after satisfying the due diligence requirements as described in subdivision (g)." Cal. Civ.Code § 2923.5(a)(1) (emphasis added). Under paragraph (2), "[a] mortgagee, beneficiary, or authorized agent shall contact the borrower in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure." Id. § 2923.5(a)(2). Under subdivision (g), "[a] notice of default may be filed ... when a mortgagee, beneficiary, or authorized agent has not contacted a borrower as required by paragraph (2) of subdivision (a) provided that the failure to contact borrower occurred despite the due diligence of the mortgagee, beneficiary, or authorized agent." Id. § 2923.5(g) (emphasis added).
In the instant case, Ms. Tamburri asserts that Defendants violated § 2923.5(a)(1) because they failed to contact her prior to filing the notice of default on June 9, 2010. SAC at 20, ¶ 2. Defendants again argue that Ms. Tamburri has failed to state a claim under this cause of action because the SAC's allegations demonstrate that SunTrust complied with the statute. Mot. to Dismiss at 7-9. However, Defendants' motion to dismiss is foreclosed by two of this Court's prior rulings: its order granting a preliminary injunction, see Order Granting PI, Docket No. 33, at 4-6, and its order denying Defendants' previous motion to dismiss this same claim, Docket No. 82 at 9. In its Order Granting PI, the Court held that "Ms. Tamburri has raised at least a serious question whether Suntrust violated § 2923.5." Docket No. 33 at 5. That there are competing declarations on the merits of whether Defendants complied with § 2923.5, see id. at 5 ("Here, the Court is faced with two competing declarations — one from Ms. Tamburri and one from Suntrust/Defendants — as to whether Suntrust in fact contacted Ms. Tamburri as required by § 2923.5."), does not establish that Plaintiff has failed to state a claim. Id. ("[C]ontrary to what Suntrust contends, the fact of such a declaration (even one signed under oath), while perhaps fulfilling one of the statutory requirements under § 2923.5, does not bar the homeowner from disputing the facts asserted in the declaration."). Rather, under 12(b)(6) standards, taking Plaintiff's allegation as true, Defendants' motion to dismiss should be denied.
In addition, that the SAC contains allegations that Plaintiff attempted to contact Suntrust numerous times about her alternatives to foreclosure and certain personnel recommended she send a hardship letter does not negate her claim. See SAC ¶¶ 44-45, 59; Mot. to Dismiss at 8. Plaintiff's allegations — that she attempted to seek a loan modification or other alternative, and that Suntrust was nonresponsive and simply gave her the run-around — do not differ substantially from her FAC's allegations as they relate to this claim. Compare FAC ¶ 30, with SAC ¶ 59 (both alleging that Plaintiff was "passed along between different representatives, none of which informed her of her options"). Similarly,
Accordingly, the Court
The Court previously dismissed Plaintiff's fraud claim with leave to amend, finding that she had failed to satisfy the Rule 9(b) requirement that "a party must state with particularity the circumstances constituting fraud or mistake." Defendants now renew their motion to dismiss with respect to the SAC, arguing that Plaintiff still has not adequately alleged damages, that some allegations in her FAC contradict those in her SAC, that she fails to meet the particularity requirements, and that she cannot demonstrate Defendants had exclusive knowledge of the information at issue. Mot. to Dismiss at 17-19.
"[T]he required elements for claims for fraud [are]: (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or scienter); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." In re Estate of Young, 160 Cal.App.4th 62, 79, 72 Cal.Rptr.3d 520 (2008) (internal quotation marks omitted).
Plaintiff's SAC contains far more detail than her FAC. The FAC included only two substantive paragraphs regarding the fraud allegations. It pointed only to general assertions that Suntrust has made in "numerous documents" regarding its purported ownership of Plaintiff's Note, and later Wells Fargo's purported ownership of the loan, which seemed at odds with other information in Plaintiff's possession regarding the latest assignment of the loan to U.S. Bank. FAC ¶ 56. The only other allegations in the fraud section of the FAC related to Plaintiff's claimed detrimental reliance, FAC ¶ 57 (alleging reliance based on Plaintiff continuing to contact Suntrust with questions about her loan, rather than contacting Wells Fargo and/or U.S. Bank), and harm, id. (alleging harm if Wells Fargo or U.S. Bank holds the Note because Plaintiff has been unable to speak with them about her options to avoid foreclosure). The Court held that such allegations were insufficient to describe any elements of fraud. Docket No. 82 at 14.
Plaintiff's SAC now provides significant detail as to Defendants' purported misrepresentations, including dates, the names of persons with whom Plaintiff spoke, and the content of their communications. See SAC at 29-32. Specifically, Plaintiff asserts that Suntrust employees repeatedly told her (e.g., on February 19, 2009, April 11, 2011, and April 15, 2011) that Wells Fargo owned her loan. SAC at 29 ¶ 3, 31 ¶ 9. In addition, Suntrust's counsel continued to assert that Wells Fargo owned the loan at the hearing on the motion for a preliminary injunction. Id. at 31 ¶ 9; see Transcript, Docket No. 34, at 21. Plaintiff asserts that Suntrust also recorded a false Notice of Default and Notice of Trustee's
In contrast, Plaintiff alleges that Wells Fargo repeatedly denied any interest in her loan (e.g., in a January 2010 letter). Id. at 29 ¶ 4. However, Wells Fargo was the master servicer on her loan and Plaintiff alleges, on information and belief, that Wells Fargo was attempting to foreclose on her home while it represented to her that it had no interest in her loan. Id. at 31-32 ¶¶ 8-10.
Plaintiff asserts that both Defendants' statements were false, as Wells Fargo is not the owner of her loan, but it is the master servicer of the loan. Id. at 60 ¶ 6. Plaintiff further asserts that each entity misrepresented who owned her loan in an attempt to deceive her because they could thereby collect "additional compensation pursuant to the terms of the pooling and servicing agreement in which plaintiff's loan is placed." Id. at 30 ¶¶ 5-6; see also id. ¶¶ 24-29, 42 (alleging that servicers derive greater fees from defaulted loans and delays in the loan modification and foreclosure process than they do if they grant loan modification). She claims that she suffered emotional and economic damages because she had no accurate information as to who she should contact to avoid foreclosure, and merely got the "brush-off" from Suntrust when she attempted to negotiate with it. See id. at 31-32 ¶¶ 7-10.
To the extent Defendants argue Plaintiff's FAC conflicts with her SAC, and therefore the Court should disregard portions of the SAC, such an argument does not have merit. Defendants contend that while the SAC states Suntrust represented that Wells Fargo owned Plaintiff's loan, the FAC states that Suntrust held itself out as the owner of the loan. Mot. to Dismiss at 17-18; FAC ¶ 56; SAC at 29 ¶ 3. However, there is no conflict between the two complaints because each asserts that Suntrust made both of those statements; i.e., that Suntrust sometimes held itself out as the owner of the loan, and that at other times it said Wells Fargo was the owner. Compare FAC ¶ 56 ("Suntrust has repeatedly asserted that they are the holders of the plaintiff's Note, ... [h]owever, less than three months ago, Suntrust stated that Wells Fargo was the holder of the plaintiff's Note."), with SAC at 29-31 ¶¶ 3, 7, 9 (juxtaposing the same contradictory facts).
With respect to Defendant Suntrust, Plaintiff's SAC meets the particularity requirement as she now alleges "the who, what, when, where, and how of the misconduct charged." Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir.2009) (quotations omitted). In addition, she offers general allegations that point to scienter, such as Suntrust's purported incentive to increase its own fees by obstructing Plaintiff's efforts to salvage her home and loan.
Although it is a close call, in this case, Plaintiff has alleged a plausible theory that Suntrust, through its misrepresentations, repeatedly gave Plaintiff the run-around such that there was no available servicer (or other entity) with whom she could explore options to avoid foreclosure. For example, Plaintiff alleges that Suntrust repeatedly told her it had no control over whether or not to grant her a loan modification, and that it was up to Wells Fargo to make such a decision. SAC ¶ 59. In that scenario, knowing what entity did actually have control over the decision (whether that entity was the servicer, the owner, or something else) would be useful to a homeowner, and it would be reasonable for a homeowner to rely on the servicer's statements that it did not have the
As for Defendant Wells Fargo, some of Plaintiff's allegations appear less plausible. Specifically, Plaintiff provides little factual support for her claim that Wells Fargo was, on information and belief, attempting to foreclose on her home despite its representations that it had no interest in said loan. See SAC at 31 ¶ 9. There is no indication in the SAC that Wells Fargo had any involvement in the foreclosure process. Plaintiff provides no facts to indicate when, where, how, and through whom Wells Fargo somehow acted to exercise the power of sale over her home. Plaintiff's allegations that Wells Fargo falsely denied an interest in her loan despite its status as the master servicer, on the other hand, is sufficient to state a fraud claim along the lines described above with respect to Suntrust.
Accordingly, the Court
This Court has already denied Defendants' previous motion to dismiss Plaintiff's wrongful foreclosure claim, except to the extent that it was predicated on Defendants' purported failure to produce the original note. Docket No. 82 at 23 ("[T]he Court DENIES the motion to dismiss the wrongful foreclosure claim insofar as it is based on Plaintiff's allegations that the wrong party initiated foreclosure without any interest in the subject property. However, the Court GRANTS the motion to dismiss in part insofar as it is predicated on Defendants' not physically producing the note."). Defendants' new motion to dismiss largely re-hashes their old arguments that a recorded assignment is not required, that Plaintiff cannot show Defendants lacked authority to initiate foreclosure, and that Plaintiff has not adequately pled prejudice. See Mot. to Dismiss at 9-12. The Court has already rejected these claims. Docket No. 82 at 20-22 (rejecting argument relating to recording assignment because Plaintiff adequately alleged that parties initiating foreclosure had no authority to foreclose); id. at 22-23 (rejecting prejudice argument).
Defendants raise one new argument that warrants further analysis. Specifically, Defendants argue that Plaintiff's claim as against MERS specifically fails. See Mot. to Dismiss at 9. Defendants are correct that Plaintiff's SAC does not state a wrongful foreclosure claim as against MERS because there is no plausible allegation that MERS either initiated foreclosure or lacked authority to do so, as MERS was the original beneficiary under the Deed of Trust. See Docket No. 82 at 20-21; SAC ¶ 39 (MERS was listed as the beneficiary on the Deed of Trust), ¶ 60 (Notice of Default issued by U.S. Bank and Recontrust), ¶ 61 (MERS purportedly assigned its interest to U.S. Bank). Thus, while other entities may have wrongfully initiated foreclosure, there are no allegations that MERS acted when it lacked authority to do so. Accordingly, Plaintiff's wrongful foreclosure claim as against MERS is dismissed.
Accordingly, the Court
The Court previously dismissed Plaintiff's quiet title claim with leave to amend, finding that she had failed to allege "allege that she is the rightful owner as she admits that she is in default," she "fail[ed] to specify what adverse claims, and by which Defendants, she seeks to quiet title against," and she failed to allege "that U.S. Bank or any other Defendant currently has no valid interest in the property." Docket No. 82 at 24. Plaintiff's SAC is nearly identical to the FAC with respect to the quiet title claim; the only difference is that the SAC seeks to quiet title "subject to the valid existing encumbrances that are on the property." SAC at 32 ¶ 2.
Plaintiff's cited authority, Dimock v. Emerald Properties LLC, does not mandate otherwise. 81 Cal.App.4th 868, 878-79, 97 Cal.Rptr.2d 255 (2000) ("Because Dimock was not required to rely upon equity in attacking the deed, he was not required to meet any of the burdens imposed when, as a matter of equity, a party wishes to set aside a voidable deed.... [T]he trial court is instructed to enter
The Court previously dismissed Plaintiff's negligence claim on the grounds that Plaintiff failed to allege a viable duty of care and failed to allege physical damages. Docket No. 82 at 26. Plaintiff's SAC is identical to her FAC with respect to the negligence claim, and her allegations regarding emotional damages do not address the Court's concern that physical damages were required. Id. Accordingly, the Court
The Court previously dismissed Plaintiff's declaratory relief claim as duplicative because it merely requested an injunction and a "declaration that Plaintiff is the prevailing party." FAC at 14; Docket No. 82 at 27. However, Plaintiff's SAC includes substantial additions, including a claim under Cal.Code Civ. P. § 1060 for a declaration of the parties' rights and duties under the deed of trust. SAC at 34. Specifically, Plaintiff seeks a declaration that the substitutions, notices of default, and notices of trustee's sale are invalid, and that Defendants have no legal right to institute foreclosure proceedings. SAC at 35. Thus, with this additional detail, Plaintiff has stated a valid declaratory relief claim.
Defendants' claim that because Plaintiff has defaulted, her declaratory relief claim fails as a matter of law, is without merit. See Mot. to Dismiss at 23. That Plaintiff has defaulted does not answer the question of whether these Defendants have any valid interest in the property conferring upon them the right to institute foreclosure. Defendants also appear to assert that there is no current controversy between the parties, despite the fact that they dispute Plaintiff's allegations as to their lack of authority to foreclose. Indeed, Defendants assert in the alternative that the declaratory relief claim is duplicative, which would seem to indicate that a controversy exists between the parties as covered by other claims in this action. Moreover, as Plaintiff points out, Cal.Code Civ. P. § 1062 specifically allows for declaratory relief as a cumulative remedy.
Accordingly, the Court
The Court previously denied Defendants' motion to dismiss Plaintiff's § 17200 claim insofar as it was based on her § 2923.5 claim, and granted the motion as to any other bases for the claim. Docket No. 82 at 29. However, the Court noted that Plaintiff may be able to amend her complaint to state a claim based on, e.g., Plaintiff's allegation that she "was essentially given the run-around from Suntrust when she attempted to get information about her loan." Id. at 28-29. Plaintiff's SAC alleges a UCL claim against all Defendants
The Court has already rejected Defendants' arguments that Plaintiff lacks standing to assert a UCL claim because she is unable to establish causation or damages. See Docket No. 82 at 28. Accordingly, the Court does not revisit these arguments here except with respect to Plaintiff's new allegation regarding Recontrust, addressed below.
As discussed above regarding Plaintiff's fraud claim, Plaintiff's SAC provides significantly more detail with respect to her communications with Suntrust and its allegedly fraudulent conduct. In addition, unlike her fraud claim, a UCL claim based on the same conduct need not allege that Suntrust's statements were "actually false, known to be false by the perpetrator [or] reasonably relied upon by a victim who incurs damages." Makreas v. First Nat. Bank of N. California, 856 F.Supp.2d 1097, 1102 (N.D.Cal.2012) (quoting In re Tobacco II Cases, 46 Cal.4th 298, 312, 93 Cal.Rptr.3d 559, 207 P.3d 20 (2009)). Instead, Plaintiff need only allege that "members of the public are likely to be deceived" by Suntrust's conduct. Id. Thus, according to the above analysis, Plaintiff has adequately stated a claim under the UCL based on Suntrust's alleged misleading statements as to who owned her loan, who had the power to determine whether Plaintiff could receive a loan modification, and what Plaintiff needed to do to obtain such a loan modification (i.e., Suntrust's allegedly misleading and deceptive conduct in continuing to request the same documents from Plaintiff over and over, with no intention of substantively addressing her requests). Plaintiff's allegations with respect to Wells Fargo's statements are similarly specific and likewise state a claim.
Plaintiff's second UCL theory, Defendants' improper backdating of the Substitution of Trustee to give U.S. Bank apparent authority to foreclose, states a claim for the same reason that Plaintiff's wrongful foreclosure claim survives dismissal. See Makreas, 856 F.Supp.2d at 1102 ("Plaintiff alleges that the substitution of trustee was wrongfully backdated. If true, recording [a] document with falsified information on it, is sufficient to state a claim under the fraudulent prong of Section 17200.").
However, Plaintiff's third UCL theory, Recontrust's continual advertising of Plaintiff's foreclosure after this Court's preliminary injunction went into effect, is flawed because it is unclear what damage such conduct caused Plaintiff. While she alleges emotional damages, she does not allege any loss of money or property — either threatened or realized — as a result of Recontrust's advertising. See Cal. Bus. & Prof.Code § 17204 (requiring a private litigant to have "suffered injury in fact and [] lost money or property as a result of the unfair competition" in order to bring a UCL claim); Cf. Sullivan v. Washington Mut. Bank, FA, C-09-2161 EMC, 2009 WL 3458300, at *4 (N.D.Cal. Oct. 23, 2009) (finding standing where "foreclosure proceedings have been initiated which puts her interest in the property in jeopardy"). Accordingly, the Court will dismiss this UCL claim.
In conclusion, the Court
Defendants also renew their motion to strike Plaintiff's request for punitive damages. The Court previously granted the motion to strike because it had dismissed Plaintiff's fraud claim. Docket No. 82 at 31.
As noted in the Court's order, California Civil Code § 3294 defines when punitive damages are available for a violation of state law. The statute states in relevant part:
Cal. Civ.Code § 3294.
In the instant case, as noted above, Plaintiff has stated a claim for fraud which would, if successful, support her request for punitive damages. Although Plaintiff has not plead facts to support § 3294(b), courts have held that such pleading is not required in federal court. See Taheny v. Wells Fargo Bank, N.A., CIV. S-10-2123-LKK, 2011 WL 1466944, at *4 (E.D.Cal. Apr. 18, 2011) ("Although Section 3294 provides the governing substantive law for punitive damages, California's heightened pleading standard irreconcilably conflicts with Rules 8 and 9 of the Federal Rules of Civil Procedure — the provisions governing the adequacy of pleadings in federal court.") (quoting Clark v. Allstate Ins. Co., 106 F.Supp.2d 1016, 1018 (S.D.Cal.2000)). In addition, as the Taheny court noted, the Ninth Circuit has held that a claim for consequential damages is neither immaterial nor impertinent, and should not be stricken on a Rule 12(f) motion. See id. (citing Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 974 (9th Cir.2010) ("The claim for damages is not immaterial, because whether these damages are recoverable relates directly to the plaintiff's underlying claim for relief ... the claim for damages is not impertinent, because whether these damages are recoverable pertains directly to the harm being alleged.") (internal citations omitted)). Treating the motion to strike as a motion to dismiss does not help Defendants because, as discussed above, Plaintiff provides allegations that would support a finding of fraud or malice. Cf. Parker v. Fid. Sec. Life Ins. Co., CIV. F 06-654 AWI DL, 2006 WL 2190956, at *6 (E.D.Cal. Aug. 1, 2006) (dismissing prayer for punitive damages under 12(b)(6) standard "because the complaint is devoid of factual allegations that show oppression, fraud, and/or malice"). Accordingly, striking or dismissing Plaintiff's punitive damages claim is not warranted. Defendants' motion to strike is
For the foregoing reasons, the Court hereby orders as follows:
(1) Defendants' motion to dismiss Plaintiff's RESPA claim is
(2) Defendants' motion to dismiss Plaintiff's § 2923.5 claim is
(3) Defendants' motion to dismiss Plaintiff's fraud claim is
(4) Defendants' motion to dismiss Plaintiff's wrongful foreclosure claim is
(5) Defendants' motion to dismiss Plaintiff's quiet title claim is
(6) Defendants' motion to dismiss Plaintiff's negligence claim is
(7) Defendants' motion to dismiss Plaintiff's declaratory relief claim is
(8) Defendants' motion to dismiss Plaintiff's UCL claim is
(9) Defendants' motion to strike is
This Order disposes of Docket No. 95.
IT IS SO ORDERED.
