Sullivan et al v. JP Morgan Chase Bank, NA, No. 2:2010cv00384 - Document 16 (E.D. Cal. 2010)
Court Description: ORDER granting in part and denying in part 7 Motion to Dismiss signed by Judge Garland E. Burrell, Jr on 6/29/10: Plaintiffs are granted ten (10) days from the date on which this order is filed to file a First-Amended Complaint. (Kaminski, H)
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Sullivan et al v. JP Morgan Chase Bank, NA Doc. 16 1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE EASTERN DISTRICT OF CALIFORNIA 7 8 ROBERT SULLIVAN; MARLENE SULLIVAN, 9 Plaintiffs, 10 v. 11 12 JP MORGAN CHASE BANK, NA, and DOES 1 through 100, inclusive, 13 Defendant. ) ) ) ) ) ) ) ) ) ) ) ) 2:10-cv-00384-GEB-EFB ORDER GRANTING AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 14 15 Defendant moves for dismissal of Plaintiffs’ Complaint under 16 Federal Rule of Civil Procedure 12(b)(6) (“Rule 12(b)(6)”), arguing 17 Plaintiffs have failed to allege sufficient facts to state viable 18 claims. For the reasons stated below, the motion is granted and denied 19 in part. 20 I. LEGAL STANDARD 21 A Rule 12(b)(6) dismissal motion tests the legal sufficiency 22 of the claims alleged in the complaint. Novarro v. Black, 250 F.3d 729, 23 732 (9th Cir. 2001). 24 statement of the claim showing that the pleader is entitled to relief 25 . . . .” 26 defendant fair notice of what the [plaintiff’s] claim is and the grounds 27 upon which relief rests . . . .” 28 U.S. 544, 555 (2007). A pleading must contain “a short and plain Fed. R. Civ. P. 8(a)(2). The complaint must “give the Bell Atlantic Corp. v. Twombly, 550 1 Dockets.Justia.com 1 Dismissal of a claim under Rule 12(b)(6) is appropriate only 2 where the complaint either 1) lacks a cognizable legal theory, or 2) 3 lacks factual allegations sufficient to support a cognizable legal 4 theory. Balistreri v. Pacific Police Dept., 901 F.2d 696, 699 (9th Cir. 5 1988). To avoid dismissal, the plaintiff must allege “only enough facts 6 to state a claim to relief that is plausible on its face.” 7 U.S. at 547. Twombly, 550 8 In deciding a Rule 12(b)(6) motion, the material allegations 9 of the complaint are accepted as true and all reasonable inferences are 10 drawn in favor of the plaintiff. 11 956 (9th Cir. 2009). 12 conclusions are entitled to a presumption of truth. 13 Iqbal, 129 S. Ct. 1937, 1949-50 (2009); Twombly, 550 U.S. at 555. See al-Kidd v. Ashcroft, 580 F.3d 949, However, neither conclusory statements nor legal See Ashcroft v. 14 If a Rule 12(b)(6) motion is granted, the “district court 15 should grant leave to amend even if no request to amend the pleadings is 16 made, unless it determines that the pleading could not possibly be cured 17 by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 18 (9th Cir. 2000)(quoting Doe v. U.S., 58 F.3d 484, 497 (9th Cir. 1995)). 19 Defendant’s motion includes a request that the Court take 20 judicial notice of two Deeds of Trust recorded on December 3, 2007 with 21 the Nevada County Recorder. (Defendant’s Request for Judicial Notice 22 (“RJN”) Exs. 1-2.) Plaintiffs do not oppose Defendant’s request. 23 “As a general rule, a district court may not consider any 24 material beyond the pleadings in ruling on a Rule 12(b)(6) motion.” 25 v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (quotations 26 and citation omitted). 27 subject to judicial notice. Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th 28 Cir. 2007). A matter Lee However, a court may consider matters properly may be judicially 2 noticed if it is either 1 “generally known within the territorial jurisdiction of the trial court” 2 or “capable of accurate and ready determination by resort to sources 3 whose accuracy cannot reasonably be questioned.” 4 Fed. R. Evid. 201(b). Since the Deeds of Trust are publically recorded documents, 5 they may be judicially noticed. 6 Corp., 797 F. Supp. 790, 792 (1992)(taking judicial notice of documents 7 in a county’s public record, including deeds of trust). 8 Defendant’s request that these documents be judicially noticed is 9 granted. 10 See W. Fed. Sav. & Loan Ass’n v. Heflin Therefore, III. BACKGROUND 11 Plaintiffs obtained two loans from Defendant around November 12 of 2007, which were secured by their home in Grass Valley, California. 13 (Compl. ¶¶ 6, 45.) The loans were memorialized in Promissory Notes 14 secured by Deeds of Trust on the property. (Id. ¶ 45.) The Deeds of 15 Trust identify Defendant as the lender. (RJN, Exs. 1-2.) 16 Plaintiffs allege Defendant directed them into unaffordable 17 loans and subsequently misrepresented that permanent loan modifications 18 would be made. (Id. ¶¶ 11-49.) Specifically, Plaintiffs allege Defendant 19 represented that “the loan[s were] the best loan[s] available on the 20 market,” 21 income,” over appraised the value of the property, and did not disclose 22 “to plaintiffs their likely inability to make the monthly payments due 23 on 24 approached Defendant to modify the terms of their loans to reduce their 25 monthly 26 modification would be put in place;” Plaintiffs’ monthly payments were 27 reduced for six months, but no permanent modification was made. (Id. ¶¶ 28 (Id. ¶¶ 18-20.) the procured loan[s].” payments, the (Id. it loans ¶¶ on 12.) “false information Plaintiffs “misrepresented... 3 also that of allege a plaintiff’s when permanent they loan 1 IV. DISCUSSION 2 Plaintiffs allege ten claims 3 Complaint under federal and state law. 4 1. against Defendant in their Truth in Lending Act Claims 5 Defendant argues Plaintiffs’ Truth in Lending Act (“TILA”) 6 claims should be dismissed. Specifically, Defendant contends Plaintiffs’ 7 TILA damages claim is barred by the applicable one-year statute of 8 limitations, and Plaintiffs’ TILA rescission claim is defective because 9 Plaintiffs failed to allege “the ability to tender or reinstate the 10 subject loan transactions.” (Def.’s Mot. to Dismiss (“Mot.”) 2:8-9, 11 2:22-23.) Plaintiffs counter their damages claim should not be dismissed 12 because they have alleged sufficient facts to show the statute of 13 limitations 14 (“Opp’n”) 15 “tender” is not an element required to be plead, and in the alternative, 16 they have sufficiently alleged the tender element. (Opp’n 3:20-22.) 17 a. is equitably 2:17-25.) tolled. Plaintiffs (Pls.’ also Opp’n rejoin to that Mot. their to Dismiss ability to TILA Damages Claim 18 TILA “requires creditors to provide borrowers with clear and 19 accurate disclosures of terms dealing with things like finance charges, 20 annual percentage rates of interest, and the borrower’s rights.” 21 v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998)(citing 15 U.S.C. §§ 1631, 22 1632, 1635, 1638)). 23 subjects a lender to “statutory and actual damages traceable to a 24 lender’s failure to make the requisite disclosures . . . .” 25 15 U.S.C. § 1640(e)). 26 within which a claim for damages “may be brought.” 27 “[A]s a general rule[, this] limitations period starts [to run] at the 28 consummation of the transaction.” King v. California, 784 F.2d 910, 915 Beach Failure to satisfy TILA’s disclosure requirements Id. (citing TILA imposes a one-year statute of limitations 4 15 U.S.C. § 1640(e). 1 (9th Cir. 1986). 2 the appropriate circumstances, suspend the limitations period,” such as 3 when the borrower did not have reasonable opportunity to discover the 4 alleged fraud or nondisclosures that form the basis of the plaintiff’s 5 TILA claim. Id. 6 However, “the doctrine of equitable tolling may, in “Because the applicability of [equitable tolling] often 7 depends upon matters outside the pleadings, it is not generally amenable 8 to resolution on a Rule 12(b)(6) motion.” 9 U.S., 68 F.3d 1204, 1206 (9th Cir. Supermail Cargo, Inc. v. 1995)(quotations and citation 10 omitted). Nonetheless, when a plaintiff fails to allege any facts 11 demonstrating the TILA violations alleged could not have been discovered 12 by due diligence during the one-year statutory period, equitable tolling 13 should 14 appropriate. 15 Cir. 2003)(dismissing TILA claim, despite request for equitable tolling, 16 because plaintiff was in possession of all loan documents and did not 17 allege any concealment or other conduct that would have prevented 18 discovery of the alleged TILA violations during the one year limitations 19 period). not be applied and dismissal at the pleading stage is See Meyer v. Ameriquest Mortg. Co., 342 F.3d 899, 902 (9th 20 Plaintiffs allege Defendant violated TILA as follows: by 21 failing to give Plaintiffs “the mortgage documents,” “disclosures,” and 22 “notices” “until after the settlement had taken place;” failing to group 23 together and segregate the required disclosures; and “inflat[ing] the 24 acceleration fees.” (Compl. ¶ 65.) Further, Plaintiffs allege “the facts 25 surrounding this loan transaction were purposefully hidden to prevent 26 [them] from discovering the true nature of the transaction and the 27 documents involved therein....” (Id. 28 these TILA violations were “all discovered within the past year, such 5 ¶ 43.) Plaintiffs also allege 1 that any applicable statute of limitations are extended or should be 2 extended pursuant to the equitable tolling doctrine....” (Id. 3 Plaintiffs’ conclusory concealment ¶ 49.) allegations are 4 insufficient to show the statute of limitations period is equitably 5 tolled. The TILA violations about which Plaintiffs complain occurred at 6 or prior to the closing of Plaintiffs’ loan transactions in November of 7 2007, more than two years before the commencement of this action. 8 Plaintiffs 9 Defendant’s alleged TILA violations within the one year statutory fail to allege what prevented them from discovering 10 period. 11 WL 1854108, at *2 (E.D. Cal. May 6, 2010)(citing Adams v. SCME Mortgage 12 Bankers, Inc., No. CIV 1:09-201 LJO SMS, 2009 WL 1451715, at *9 (E.D. 13 Cal. 14 plaintiff failed to allege facts explaining how she was prevented from 15 comparing her loan documents and disclosures with TILA statutory and 16 regulatory requirements)). Therefore, Plaintiffs’ TILA damages claim is 17 dismissed. 18 See Ahmad v. World Savings Bank, No. CIV 2:09-520 GEB KJM, 2010 May b. 22, 2009)(finding equitable tolling inapplicable since TILA Rescission Claim 19 Defendant’s motion to dismiss Plaintiffs’ TILA rescission 20 claim is based on its argument that Plaintiffs have not alleged their 21 ability to tender the property or its reasonable value, which Defendant 22 alleges is required to state a TILA rescission claim. However, Defendant 23 fails to provide binding authority to support its position that a 24 plaintiff’s ability to tender must be alleged at the pleading stage. 25 Therefore, Defendant’s motion to dismiss Plaintiffs’ TILA rescission 26 claim is denied. 27 /// 28 /// 6 1 2. The Rosenthal Act 2 Defendant seeks dismissal of Plaintiffs’ Rosenthal Fair Debt 3 Collections Practices Act (“Rosenthal Act”) claim, arguing mortgage 4 loans are not debt under the Act, and Plaintiffs failed to allege which 5 sections 6 allegations asserted in support of this claim.” (Mot. 4:11-12, 4:20-22.) 7 Plaintiffs’ Rosenthal Act claim alleges only that “Defendants 8 Aurora and Homecomings are debt collectors within the meaning of the 9 Rosenthal Act.”(Compl. ¶ 72.) However, these defendants are not named in 10 the caption or elsewhere in the complaint. Since Plaintiffs did not 11 allege the only named defendant is a “debt collector,” the claim’s 12 sufficiency is not analyzed, and it is dismissed. 13 3. of the Act Defendant violated “beyond the boilerplate Negligence 14 Defendant argues Plaintiffs’ negligence claim should be 15 dismissed because it is barred by the applicable statute of limitations, 16 and Plaintiffs have not alleged facts showing that Defendant owed them 17 a duty of care. (Mot. 5:4-5, 6:4-8.) 18 a. Duty of Care 19 The elements of a negligence claim are, 1) defendant owed 20 plaintiff a duty of care, 2) defendant breached that duty, 3) the breach 21 was the proximate or legal cause of the resulting injury, and 4) 22 plaintiff was damaged. Ladd v. County of San Mateo, 12 Cal.4th 913, 917 23 (1996). The existence of a Defendant's legal duty is a question of law 24 to be determined by the court. Kentucky Fried Chicken of California, 25 Inc. v. Sup. Ct., 14 Cal.4th 814, 819 (1997). 26 Under California law, “as a general rule, a financial 27 institution owes no duty of care to a borrower when the institution’s 28 involvement in the loan transaction does not exceed the scope of its 7 1 conventional role as a mere lender of money.” Nymark v. Heart Fed. Sav. 2 & Loan Ass’n, 231 Cal. App. 3d 1089, 1096 (1991). 3 imposed upon the lender, however, in certain circumstances, such as 4 where “the lender’s activities exceed those of a conventional lender.” 5 Osei v. Countrywide Home Loans, 2010 WL 727831, at *6. “In California, 6 the test for determining whether a financial institution owes a duty of 7 care to a borrower-client ‘involves the balancing of various factors, 8 among which are [1] the extent to which the transaction was intended to 9 affect the plaintiff, [2] the foreseeability of harm to him, [3] the A duty of care can be 10 degree 11 closeness of the connection between the defendant's conduct and the 12 injury 13 conduct, and [6] the policy of preventing future harm.’” Nymark, at 1098 14 (quoting Connor v. Great Western Sav. & Loan Assn. 69 Cal.2d 850, 865 15 (1968)). of certainty suffered, [5] that the the moral plaintiff blame suffered attached to injury, the [4] the defendant's 16 Plaintiffs allege Defendant negligently directed them into a 17 loan for which they “[were] not qualified . . . [and that was] not in 18 [their] best interests based upon [their] income and the true value of 19 the Property;” directed them “into a loan transaction that [they] may 20 not have otherwise qualified for by industry standards, resulting in 21 excessive fees... and payments in excess of [their] ability to pay;” and 22 “failed to abide by TILA and RESPA laws.” (Compl. ¶¶ 78-80.) Plaintiffs' 23 negligence claim also incorporates all earlier allegations. (Compl. ¶ 24 76.) 25 Plaintiffs argue in their Opposition that a number of the 26 incorporated allegations support a finding that Defendant owed them a 27 duty of care. Specifically, Plaintiffs argue Defendant owed them a duty 28 of care 1) not to falsify their income and over appraise the property 8 1 for the purpose of directing them into unfavorable loans, and 2) “not to 2 misinform [them] about the loan modification process.” (Opp'n 6:23-7:5, 3 7:15-17.) 4 Plaintiffs have provided no authority to support their 5 argument that lenders owe borrowers a duty of care not to misinform 6 them 7 allegations that Defendant misrepresented to them that a permanent loan 8 modification would be put into place are insufficient to form the basis 9 of a negligence claim. about the loan modification process. Therefore, Plaintiffs’ 10 However, Defendant has not shown Plaintiffs’ allegations that 11 it falsified their income and the subject property’s value during the 12 loan application process fall within its traditional role as a money 13 lender. 14 negligence claim. See Watkinson v. Mortgageit, Inc., No. 10-cv-327-IEG, 15 2010 16 overstating Plaintiff's income and the value of the property on the loan 17 application knowing both to be false stated a negligence claim). 18 WL b. Therefore, 2196083, these at *8-9 allegations (S.D. Cal. are June sufficient 1, to state 2010)(holding a that Statute of Limitations 19 Under California law, negligence claims have a two year 20 statute of limitations. Cal. Code of Civ. Proc. § 355.1. Since the loans 21 at issue were entered into in November of 2007, and Plaintiffs filed 22 their Complaint in December of 2009, Defendant argues Plaintiffs' 23 negligence claim is barred by the statute of limitations. (Mot. 5:9-10.) 24 Plaintiffs respond, arguing their negligence claim did not “accrue” when 25 the loan documents were signed. (Opp’n 5:21-22.) 26 The statute of limitations for Plaintiffs’ negligence claim 27 did not begin to run until the claim "accrued." Cal. Code Civ. Proc. § 28 312. A claim “accrues” upon the occurrence of the claim's last essential 9 1 element. Norgart v. Upjohn Co., 21 Cal.4th 383, 397 (1999). “When 2 damages are an element of a cause of action, the cause of action does 3 not accrue until the damages have been sustained. Mere threat of future 4 harm, not yet realized, is not enough.” City of Vista v. Robert Thomas 5 Securities, Inc., 84 Cal.App.4th 882, 886 (2000). 6 Plaintiffs’ allegations support the inference that they did 7 not experience any injury until they were unable to make their mortgage 8 payments 9 Countrywide in the Home spring of Loans, 2009. 2010 WL (Compl. ¶¶ 18-20.) 727831, at *9 See (holding Osei v. similar 10 allegations supported that the plaintiff’s negligence claim did not 11 “accrue” until plaintiff’s loan payments exceeded his ability to pay). 12 Therefore, Defendant has not shown that Plaintiffs’ negligence claim is 13 barred by the applicable statute of limitations. 14 For the stated reasons, Defendant’s motion 15 Plaintiffs’ negligence claim is granted and denied in part. 16 4. to dismiss RESPA 17 Defendant seeks dismissal of Plaintiffs' section 2605 Real 18 Estate Settlement Procedures Act ("RESPA") claim, arguing Plaintiffs' 19 "conclusory allegations... are wholly insufficient to put Defendants on 20 notice as to what conduct forms the basis of the RESPA claim." (Mot. 21 6:16-17.) 22 Plaintiffs allege the following in support of their RESPA 23 claim: “Defendants violated RESPA at the time of the closing of the Loan 24 subject to this Complaint by failing to correctly and accurately comply 25 with one or more of the disclosure requirements provided therein.” 26 (Compl. ¶¶ 86-87.) This allegation is conclusory and does not identify 27 what information, if any, Defendant failed to disclose or inaccurately 28 10 1 disclosed. 2 allegations insufficient to state a section 2605 RESPA claim). 3 See Champlaie, Defendant also 2009 argues WL 3429622, Plaintiffs’ at *17 RESPA (finding claim same should be 4 dismissed since "Plaintiff fails to allege any damage” resulting from a 5 purported RESPA violation. (Mot. 6:19.) 6 Plaintiffs must allege actual harm to plead a section 2605 7 RESPA claim. Pok v. Am. Home Mortgage Servicing, Inc., No. CIV 2:09-2385 8 WBS EFB, 2010 WL 476674, at *5 (E.D. Cal. Feb. 3, 2010); see also Lal v. 9 Am. Home Servicing, Inc., 680 F. Supp. 2d 1218, 1223 (E.D. Cal. 2010). 10 Further, “[t]he loss alleged must be related to the RESPA violation 11 itself....[A]llegations made under a separate cause of action are 12 insufficient to sustain a RESPA claim for actual damage.... Nor does 13 simply having to file suit suffice as a harm warranting actual damages.” 14 Lal, 680 F.Supp.2d at 1223. 15 Here, Plaintiffs allege “[a]s a result of Defendant’s failure 16 to comply with RESPA, Plaintiff has suffered and continues to suffer 17 damages and costs of suit.” (Compl. ¶ 88.) “Even under a liberal 18 pleading standard for harm, this level of generality fails.” 19 WL 476674, at *5 (finding same allegation of harm insufficient to state 20 a section 2605 claim for actual damages). Therefore, Plaintiffs’ RESPA 21 claim is dismissed. 22 5. Pok, 2010 Breach of Fiduciary Duty 23 Defendant seeks dismissal of Plaintiffs’ breach of fiduciary 24 duty claim, arguing a lender does not owe a fiduciary duty to a borrower 25 under California law. (Mot. 7:11-14.) 26 In California, to state a claim for breach of fiduciary duty, 27 a plaintiff must allege: (1) the existence of a fiduciary relationship; 28 11 1 (2) the breach of that relationship; and (3) damage proximately caused 2 thereby. Roberts v. Lomanto, 112 Cal. App. 4th 1553, 1562 (2003). 3 Plaintiffs allege Defendant “is the lender of the loan which 4 is 5 circumstances[,] 6 [transaction] and there is no fiduciary relationship between the borrower 7 and lender.” Oaks Mgmt. Corp. v. Superior Court, 145 Cal. App. 4th 453, 8 466 (2006). “A commercial lender is entitled to pursue its economic 9 interest in a loan transaction. the subject of this action.” (Compl. ¶ 8.) “Absent special . . . a loan transaction is [an] at arms-length This right is inconsistent with the 10 obligations of a fiduciary, which require that the fiduciary knowingly 11 agree to subordinate its interests to act on behalf of and for the 12 benefit of another.” Gonzalez v. First Franklin Loan Services, No. 1:09- 13 CV-00941 AWI-GSA, 2010 WL 144862, at *13 (E.D. Cal. Jan. 11, 2010)(citing 14 Nymark, 231 Cal.App.3d at 1093, n. 1). 15 Plaintiffs’ allege in their fiduciary duty claim: 16 19 Defendants were agents for the Plaintiff by express and implied contract and by operation of law. [¶] Plaintiff[s] employed Defendant as [their] agents for the purpose of obtaining a loan for the Property. [¶] Defendants... owed a fiduciary duty to the Plaintiff to act primarily for [their] benefit....” 20 (Compl. ¶¶ 90, 92, 94.) These allegations are conclusory and insufficient 21 to support the existence of a fiduciary relationship between Plaintiffs 22 and Defendant. Therefore, Plaintiffs’ breach of fiduciary duty claim is 23 dismissed. 24 6. 17 18 Fraud 25 Defendant seeks dismissal of Plaintiffs’ fraud claim, arguing 26 it fails to comply with Federal Rule of Civil Procedure 9(b)(“Rule 27 9(b)”)’s heightened pleading standard. (Mot. 9:1.) 28 12 1 Under California law, the elements of a fraud claim are: (1) 2 misrepresentation 3 nondisclosure); (2) knowledge of falsity; (3) intent to induce reliance; 4 (4) justifiable reliance; and (5) resulting damage. Engalla v. Permanente 5 Medical Group, Inc., 15 Cal.4th 951, 974 (1997). (including, false representation, concealment, or 6 A claim for fraud in federal court must satisfy Rule 9(b)’s 7 heightened pleading requirements. See Vess v. Ciba-Geigy Corp., 317 F.3d 8 1097, 1103 (9th Cir. 2003). This rule provides that “[i]n alleging fraud 9 or mistake, a party must state with particularity the circumstances 10 constituting fraud or mistake.” 11 “time, place, and specific content of the false representations as well 12 as the identities of the parties to the misrepresentations.” 13 KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007)(quoting Edwards v. Marin 14 Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)). The required specificity includes the Swartz v. 15 Plaintiffs' following allegations support their fraud claim: 16 The material representations made by Defendants in connection with the said loan were false. [¶] Defendants knew that these material representations were false when made, or these material representations were made with reckless disregard for the truth. Defendants intended that Plaintiff rely on these material representations. Plaintiff reasonably relied on said representations. [And a]s a result of Plaintiff['s] reliance, he was harmed and suffered damages.... 17 18 19 20 21 22 (Compl. ¶¶ 103-107.) 23 These allegations are conclusory and do not provide the 24 specificity required by Rule 9(b). Plaintiffs argue, however, that their 25 fraud claim nonetheless satisfies Rule 9(b) because it incorporates all 26 earlier allegations by reference, and that certain of these incorporated 27 allegations satisfy Rule 9(b)'s requirements. (Opp'n 9:24-10:4.) Contrary 28 to Plaintiffs’ contention, the incorporated 13 allegations are also 1 inadequate to allege fraud since they fail to identify the time, date, 2 and place of the alleged misrepresentation(s) or the identity of who made 3 them. Therefore, Plaintiffs’ fraud claim is dismissed. 4 7. 5 Defendant California Business & Professions Code § 17200 argues Plaintiffs' California Business and 6 Professions Code section 17200 (“§ 17200") claim should be dismissed 7 because Plaintiffs' allegations are conclusory, and Plaintiffs have not 8 alleged they suffered "an injury in fact" and "lost either money or 9 property" as a result of any § 17200 violation. 10 (Mot. 9:19-9:21, 10:25- 11:1.) 11 California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 12 17200, prohibits “unlawful, unfair or fraudulent” business acts and 13 practices. Because "unfair competition" is defined in the disjunctive, 14 the 15 prohibiting 16 "fraudulent." Cel-Tech Communic’ns, Inc. v. Los Angeles Cellular Tel. 17 Co., 20 Cal. 4th 163, 180 (1999). “By proscribing ‘any unlawful’ business 18 practice, section 17200 ‘borrows' violations of other laws and treats 19 them 20 independently actionable.” statute as establishes practices unlawful three that practices separate are that either the types actionable "unfair," unfair conduct, "unlawful," competition law or makes Id. (citation omitted). 21 To state a § 17200 claim, Plaintiff must allege he 22 injury in fact and has lost money or property.” Cal. Bus. & Prof. Code 23 § 17204. 24 expended money due to the defendant’s acts of unfair competition, 2) lost 25 money or property; or 3) been denied money to which he or she has a 26 cognizable claim.” Hall v. Time Inc., 158 Cal.App.4th 847, 854 (2008). 27 Plaintiffs' only allegation specifying the conduct underlying 28 the § 17200 claim is that “Plaintiff is informed and believes, that “suffered A plaintiff suffers an “injury in fact” when he or she has “1) 14 1 Defendants' acts, as alleged herein, constitute unlawful, unfair, and/or 2 fraudulent business practices, as defined in the California Business and 3 Professions Code § 17200 et seq.” (Compl. ¶ 111.) 4 This allegation sufficiently states a § 17200 claim for 5 unlawful business practices since Defendant’s dismissal motion is denied 6 as to Plaintiffs’ TILA rescission and negligence claims. Defendant has 7 not shown that these claims do not provide “unlawful” predicate activity 8 that may support Plaintiffs’ § 17200 claim. Further, since Plaintiffs 9 allege they have suffered monetary losses as a result of Defendant's 10 unlawful conduct, including the expenditure of a down payment and ongoing 11 loan payments, they have adequately alleged that they suffered an "injury 12 in fact." (Compl. ¶¶ 37, 38, 40, 68 and p. 29:20-21.) Therefore, 13 Defendant’s motion to dismiss Plaintiffs' § 17200 claim is denied. 14 8. Breach of Contract 15 Defendant seeks dismissal of Plaintiffs' breach of contract 16 claim, arguing "[t]hough Plaintiffs contend [the parties] entered into 17 a written agreement, Plaintiffs fail to identify the agreement,” allege 18 its terms, or any facts which establish that Defendant breached "the 19 purported agreement." (Mot. 11:12-16.) 20 In California, "[a] cause of action for breach of contract 21 requires proof of the following elements: (1) existence of the contract; 22 (2) plaintiff's performance or excuse for nonperformance; (3) defendant's 23 breach; and (4) damages to plaintiff as a result of the breach." 24 Firefighters v. Maldonado, 158 Cal. App. 4th 1226, 1239 (2008). 25 Plaintiffs identify the Promissory Notes as the CDF written 26 agreements at issue in their opposition to the motion. (Opp'n 11:22-24.) 27 Plaintiffs allege Defendant violated these agreements as follows: 28 15 1 [B]y failing to exercise reasonable efforts and due diligence as promised resulting in Plaintiff entering into a loan that was not in his best interests. Defendants also breached their agreement with Plaintiff by committing the acts stated herein, including but not limited to failing to submit an accurate loan application, failing to supervise, failing to provide loan documents for Plaintiff['s] review prior to closing, and failing to explain the loan documents to the Plaintiff. 2 3 4 5 6 7 (Compl. ¶ 118.) However, Plaintiffs do not allege that the promissory 8 notes imposed such obligations on Defendant. See Quintero Family Trust 9 v. Onewest Bank F.S.B., No. 09-CV-1561-IEG (WVG), at *13 (S.D. Cal. Jan. 10 27, 2010)(citing Frances T. v. Vill. Green Owners Ass'n, 42 Cal.3d 490, 11 512-513 (1986))(dismissing breach of contract claim based upon Promissory 12 Note and Deed of Trust where the plaintiffs did not allege which specific 13 provisions in the agreements imposed the duties upon defendants alleged 14 by plaintiff). 15 Plaintiffs also argue that Defendant's alleged oral 16 misrepresentations that it would permanently modify their loans support 17 their breach of contract claim. (Opp'n 11:24-25.) However, under the 18 breach of contract claim, Plaintiff alleges only that the parties entered 19 into a “written agreement.” (Compl. ¶ 116.) Plaintiffs did not allege the 20 existence 21 contract claim is dismissed. 22 9. of any oral agreement. Therefore, Plaintiffs’ breach of Breach of Implied Covenant of Good Faith & Fair Dealing 23 Defendant seeks dismissal of Plaintiffs’ breach of the covenant 24 of good faith and fair dealing claim, arguing Plaintiffs have not alleged 25 a “special relationship” between the parties necessary to recover tort 26 damages, and Plaintiffs failed to allege two of the requisite elements 27 of this claim. (Mot. 12:13-14, 12:22-23, 12:27-28.) Plaintiffs respond 28 16 1 with the conclusory argument that “there is a special relationship 2 between the parties." (Opp’n 12:21-24.) 3 “There is an implied covenant of good faith and fair dealing 4 in every contract that neither party will do anything which will injure 5 the right of the other to receive the benefits of the agreement.” 6 Comunale v. Traders & General Ins. Co., 50 Cal.2d 654, 658 (1958). 7 implied covenant “rests upon the existence of some specific contractual 8 obligation. 9 covenants or promises of the contract, not to protect some general public 10 policy interest not directly tied to the contract’s purpose.” Racine 11 Laramie, Ltd. v. Dept. of Parks & Recreation, 11 Cal.App.4th 1026, 1031 12 (1992). The implied covenant “cannot impose substantive duties or limits 13 on the contracting parties beyond those incorporated in the specific 14 terms of [the parties’] agreement.” McClain v. Octagon Plaza, LLC, 159 15 Cal.App.4th 784, 799 (2008). 16 require parties to negotiate in good faith prior to any agreement.” 17 McClain, 159 Cal. App. 4th at 799. The [It] is read into contracts in order to protect the express Further, the implied covenant “does not 18 Since the implied covenant is based in contract, compensation 19 for its breach is almost always limited to contractual remedies. Foley 20 v. Interactive Data Corp., 47 Cal.3d 654, 684 (1988). 21 only available when "the parties are in a ‘special relationship’ with 22 ‘fiduciary characteristics.’” 23 307 F.3d 944, 955 (9th Cir. 2002)(applying California law)(citing Mitsui 24 Mfrs. Bank v. Superior Court, 212 Cal. App. 3d 726, 730 (1989)). “A 25 central test of whether a lender is subject to this tort is whether there 26 is a fiduciary relationship in which the financial dependence or personal 27 security by the damaged party has been entrusted to the other.” 28 (quotations and citations omitted). Tort remedies are Pension Trust Fund v. Federal Ins. Co., 17 Id. 1 Plaintiffs allege in this claim that “a duty of good faith and 2 fair dealing was implied by law into the contract at issue in this action 3 at its inception." (Compl. ¶ 122.) Plaintiffs further allege Defendant 4 breached this duty as follows: 5 a. By failing to pay at least as much in regards to Plaintiffs' interests as to Defendants' interests; 6 b. Failing to disclose to Plaintiff the true nature of the loan that is the subject of this action; 7 8 c. Failing to give Plaintiff the requisite notice and disclosures. 9 10 (Compl. ¶123.) However, Plaintiffs do not allege the terms of the 11 contract(s) entered into between the parties or how Defendant’s conduct 12 frustrated any of its specific provisions. 13 alleged facts supporting the existence of any “special relationship” 14 between the parties, or that they "did all, or substantially all of the 15 significant things that the contract required them to do." (Judicial 16 Council of California Civil Jury Instruction No. 325, Dec. 15, 2009 ed.) 17 Moreover, to the extent Plaintiffs' claim is based upon conduct occurring 18 during pre-loan negotiations, the implied covenant does not apply. 19 Therefore, Plaintiffs' claim for breach of the implied covenant of good 20 faith and fair dealing is dismissed. 21 10. Further, Plaintiffs have not Injunctive Relief 22 Defendant seeks dismissal of Plaintiffs’ claim for “injunctive 23 relief,” arguing Plaintiffs have failed to state a single cause of 24 action, therefore they have not alleged that they will prevail on the 25 merits at trial. (Mot. 13:9-12.) 26 Under federal law, an injunction is a remedy, not a claim in 27 and of itself. See Curtis v. Option One Mortg. Corp., No. 109-cv-1608 AWI 28 SMS, 2010 WL 599816, at *13 (E.D. Cal. Feb. 18, 2010)(citing Washington 18 1 Toxics Coalition v. Environmental Protection Agency, 413 F.3d 1024, 1034 2 (9th Cir. 2005). Similarly, under California law, an injunction is a 3 remedy, not a cause of action. Id. (citing Shamsian v. Atlantic Richfield 4 Co., 107 Cal.App.4th 967, 985 (2003)). Therefore, Plaintiffs’ purported 5 “cause of action” for injunctive relief is dismissed. 6 IV. CONCLUSION 7 For the stated reasons, Defendant’s motion to dismiss is 8 granted and denied in part. Plaintiffs are granted ten (10) days from the 9 date on which this order is filed to file a First-Amended Complaint. 10 Dated: June 29, 2010 11 12 13 GARLAND E. BURRELL, JR. United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19
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