Clemens v. J.P. Morgan Chase National Corporate Services, Inc. et al, No. 3:2009cv03365 - Document 56 (N.D. Cal. 2009)
Court Description: ORDER - CORRECTED ORDER Granting 30 32 Defendants' Motions to Dismiss (Correction in bold on page 8, line 25). Signed by Judge Edward M. Chen on 12/1/2009. (emcsec, COURT STAFF) (Filed on 12/1/2009)
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Clemens v. J.P. Morgan Chase National Corporate Services, Inc. et al Doc. 56 1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 8 MONICA CLEMENS, 9 Plaintiff, For the Northern District of California United States District Court 10 11 No. C-09-3365 EMC CORRECTED ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS v. J.P. MORGAN CHASE NATIONAL CORPORATE SERVICES, INC., et al., (Docket Nos. 30, 32) 12 Defendants. (Correction in bold on page 8, line 25) 13 ___________________________________/ 14 15 16 Plaintiff Monica Clemens has filed suit against Defendants JPMorgan Chase Bank, N.A. 17 (“JPMorgan”) and First American Title Insurance Company (“FAT”), asserting three causes of 18 action: (1) violation of the Truth in Lending Act (“TILA”) and its implementing regulation, known 19 as Regulation Z1; (2) violation of California Civil Code § 2953.52; and (3) violation of California 20 Business & Professions Code § 17200. Both Defendants have filed motions to dismiss the FAC. 21 Having considered the parties’ briefs and accompanying submissions, as well as all other evidence 22 of record, the Court hereby GRANTS both Defendants’ motions. As discussed below, dismissal of 23 some of the claims shall be with prejudice but, for other claims, Ms. Clemens shall be given leave to 24 amend. 25 26 27 28 1 In her first amended complaint (“FAC”), Ms. Clemens has formally pled two separate causes of action, one for violation of TILA and the other for violation of Regulation Z. However, as noted above, Regulation Z is simply TILA’s implementing regulation. See McCoy v. Chase Manhattan Bank, USA, 559 F.3d 963, 964 (9th Cir. 2009) (noting that Regulation Z was adopted by the Federal Reserve Board to implement TILA). Therefore, the Court addresses the two causes of action as one. Dockets.Justia.com 1 2 In her FAC, Ms. Clemens alleges that, in 2004, she purchased certain real property located in Marin County. See FAC ¶ 16. Ms. Clemens was able to purchase the property by obtaining a “no 4 doc” loan. See FAC ¶ 17. According to Ms. Clemens, she thought she had a long-term fixed rate 5 loan, as reflected by the Truth in Lending Statement, but, approximately twenty-one months later, 6 she was notified by the servicer of the loan that the interest rate on the loan was going to adjust to 7 10%. See FAC ¶ 18. Ms. Clemens therefore was forced to refinance the loan. Ultimately, she 8 refinanced three times, all in the year 2006: “(1) to refinance out of the current loan; (2) to refinance 9 into a negative amortized loan which adjusted upward 3 times in 30 days; and (3) to refinance into a 11 For the Northern District of California FACTUAL & PROCEDURAL BACKGROUND 3 10 United States District Court I. seven year fixed rate subprime note.” FAC ¶ 18. Although not entirely clear based on the allegations in the FAC, Ms. Clemens represented at 12 the hearing on Defendants’ motions that the lender on the original refinance loan was Capital One; 13 that one of the subsequent lenders was GMAC; and that the final lender was JPMorgan. The Court 14 takes judicial notice of two publicly recorded deeds of trust which reflect that Ms. Clemens had two 15 different loans with JPMorgan. See Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001) 16 (noting that a court may take judicial notice of matters of public record); Docket No. 30 (RJN, Exs. 17 1-2) (deeds of trust). Fidelity National Title Company was the trustee for the first deed of trust; 18 Douglas E. Miles was the trustee on the second deed of trust. See Docket No. 30 (RJN, Exs. 1-2). 19 The Court also takes judicial notice of additional public records. Those records reflect as 20 follows: On or about February 27, 2009, a notice of default was recorded with respect to the first 21 JPMorgan loan. See Docket No. 30 (RJN, Ex. 3) (notice of default). Subsequently, on April 1, 22 2009, there was a substitution of trustee for the first loan. Thus, First American Loanstar Trustee 23 Services -- which also operates under the name FAT, see https://www.loanstartrustee.com (last 24 visited on 11/23/2009) -- became the trustee for the first loan. See Docket No. 30 (RJN, Ex. 4) 25 (substitution of trustee). Several days later, on or about April 9, 2009, JPMorgan assigned the first 26 loan to Bank of America, N.A. See Docket No. 30 (RJN, Ex. 5) (assignment of deed of trust). Then, 27 on or about May 28, 2009, a notice of trustee’s sale was recorded in connection with the first loan, 28 as requested by FAT. See Docket No. 30 (RJN, Ex. 6) (notice of trustee’s sale). Although the 2 1 notice indicated that the sale would take place on June 17, 2009, the parties agree that no sale took 2 place on that date and that Ms. Clemens remains the owner of the property. 3 4 she informed JPMorgan that she was under extreme financial duress and also asked it for a loan 5 modification. See FAC ¶ 25. Ms. Clemens also alleges that, in March 20092 and again in April 6 2009, i.e. after the notice of default was recorded, she asked for a loan modification. See FAC ¶ 25. 7 JPMorgan, however, failed to respond to her until on or about May 15, 2009. See FAC ¶¶ 27, 36. 8 By that time, however, Ms. Clemens had lost her job. See FAC ¶ 32 (alleging that she was laid off 9 on March 12, 2009). On or about the same day, FAT entered the real property at issue without 10 notifying Ms. Clemens and changed the locks on the doors. See FAC ¶ 29. 11 For the Northern District of California United States District Court According to Ms. Clemens, prior to the recording of the notice of default in February 2009, 12 II. A. 13 DISCUSSION Legal Standard In evaluating a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a 14 court must accept as true all well-pled allegations in the complaint and view them in the light most 15 favorable to the plaintiff. See Moss v. United States Secret Serv., 572 F.3d 962, 967-68 (9th Cir. 16 2009). Generally, a court “may not consider any material beyond the pleadings.” Lee, 250 F.3d at 17 688. However, there are two exceptions to this rule. First, a court may take judicial notice of 18 matters of public record. See id. at 688-89. Second, a court may consider documents which are not 19 attached to the pleadings but on which the plaintiff’s complaint necessarily relies and whose 20 authenticity is not contested. See id. at 688. 21 For a complaint to survive a motion to dismiss, the nonconclusory factual content of the 22 complaint (plus reasonable inferences from that content) and that of the documents which a court 23 may consider must plausibly suggest a claim entitling the plaintiff to relief. See id. at 969. 24 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. The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where 25 26 27 2 28 In the FAC, Ms. Clemens actually refers to March 2008 but this appears to be a typographical error. 3 1 a complaint pleads facts that are 'merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief. 2 3 Id. (quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)); see also Bell Atlantic Corp. v. 4 Twombly, 550 U.S. 544, 556-57 (2007). 5 B. For the Northern District of California United States District Court 6 Claim for Violation of TILA and Regulation Z The purpose underlying TILA is “to assure a meaningful disclosure of credit terms so that 7 the consumer will be able to compare more readily the various credit terms available to him and 8 avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit 9 billing and credit card practices.” 15 U.S.C. § 1601. A claim under the TILA may be brought 10 against a creditor, see id. §§ 1635, 1640, or an assignee of the creditor. See id. § 1641 (providing for 11 assignee liability). TILA defines creditor as follows: 12 The term “creditor” refers only to a person who both (1) regularly extends, whether in connection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement. 13 14 15 16 17 Id. § 1602(f). 18 1. 19 In her FAC, Ms. Clemens asserts that both FAT and JPMorgan have violated TILA and its First Amendment Title Insurance Company 20 implementing regulation (i.e., Regulation Z). With respect to FAT, the Court concludes that Ms. 21 Clemens has failed to state a claim for relief as required by Rule 12(b)(6). As noted above, only 22 creditors or assignees of creditors may be sued. It is clear, based on the allegations in the FAC, that 23 FAT is neither. Rather, FAT’s only role in the underlying events has been as trustee for the first 24 deed of trust. Accordingly, the Court dismisses the TILA/Regulation Z claim against FAT with 25 prejudice. 26 /// 27 /// 28 /// 4 1 2. 2 For the Northern District of California United States District Court 3 JPMorgan a. Liability for Capital One Loan As for JPMorgan, it has extended two loans to Ms. Clemens and thus does appear to be a 4 creditor for purposes of TILA.3 At the hearing, Ms. Clemens argued that JPMorgan should be held 5 accountable not only for the loans that it extended but also for the original loan that she had with 6 Capital One because, when JPMorgan provided refinancing, it thereby “absorbed” the Capital One 7 loan. The Court disagrees. In providing refinancing, JPMorgan did not thereby become an assignee 8 of the Capital One loan. While the refinancing may have been used to pay off the Capital One loan, 9 what JPMorgan offered Ms. Clemens were new loans with new terms. Therefore, to the extent Ms. 10 Clemens argues that JPMorgan is liable for any inaccurate disclosures by Capital One, that part of 11 the TILA/Regulation Z claim is dismissed with prejudice. 12 13 b. Statute of Limitations To the extent Ms. Clemens argues that the two loans extended by JPMorgan violated TILA 14 and Regulation Z, she fails to state a claim for relief. Based on the allegations in the FAC, the 15 claims are time barred. 16 Under TILA, a plaintiff may sue for damages and/or rescission. Each remedy has its own 17 statute of limitations. For a claim for damages, a consumer has one year from the date of 18 consummation of the transaction to bring suit. See id. § 1640(e); King v. California, 784. F.2d 910, 19 915 (9th Cir. 1986). For a claim for rescission, a consumer has only three days following 20 consummation to cancel the transaction. See id. § 1635(a). However, “[a] borrower’s right of 21 rescission is extended from three days to three years if the lender (1) fails to provide notice of the 22 borrower’s right of rescission or (2) fails to make a material disclosure.” Reagen v. Aurora Loan 23 Servs., 2009 U.S. Dist. LEXIS 104757, at *16 (E.D. Cal. Nov. 10, 2009) (citing 12 C.F.R. § 24 226.23(a)(3)). “The term ‘material disclosures’ means the required disclosures of the annual 25 percentage rate, the finance charge, the amount financed, the total payments, the payment schedule, 26 27 28 3 At the very least, JPMorgan has not asserted that it is not a creditor for purposes of the statute. 5 1 and the disclosures and limitations referred to in § 226.32 (c) and (d).” 12 C.F.R. § 226.23(a)(3) 2 n.48. For the Northern District of California United States District Court 3 In the instant case, the two loans with JPMorgan were consummated in September 2006. See 4 Docket No. 30 (RJN, Exs. 1-2) (deeds of trust). Because Ms. Clemens did not initiate this lawsuit 5 until June 2009, almost three years later, the claim for damages, which has a one-year statute of 6 limitations, is clearly time barred. In her papers, Ms. Clemens argues that the limitations period 7 should be equitably tolled but her argument is unavailing. She fails to allege facts establishing 8 entitlement to any such tolling. Allegations describing difficulty with identifying Capital One as the 9 lender for her original loan, see FAC ¶ 47, are immaterial to any claim against JPMorgan. As noted 10 above, JPMorgan is not an assignee of the Capital One loan. To the extent Ms. Clemens contends 11 that the JPMorgan loans were lending violations “committed in plain sight,” Docket No. 44 (Opp’n 12 at 10), then Ms. Clemens should have known of the violations at the outset of the loans. See King, 13 784 F.2d at 915 (holding that “ the doctrine of equitable tolling may, in the appropriate 14 circumstances, suspend the limitations period until the borrower discovers or had reasonable 15 opportunity to discover the fraud or nondisclosures that form the basis of the TILA”). 16 As for the rescission claim, as noted above, a consumer typically has only three days 17 following consummation to cancel the loan unless, e.g., material disclosures were not provided in 18 which case the limitations period is extended to three years. Because Ms. Clemens did not file suit 19 until June 2009, she must have pled that material disclosures, as defined by 12 C.F.R. § 226.23(a)(3) 20 n.48, were not provided or she is time barred. In the FAC, Ms. Clemens fails to allege that 21 JPMorgan failed to make material disclosures as defined by 12 C.F.R. § 226.23(a)(3) n.48. 22 More specifically, in the FAC, Ms. Clemens alleges that the Truth in Lending Statement for 23 “loan one” did disclose that the interest rate was adjustable but it did not disclose that it would 24 increase to the rate of 10%. FAC ¶ 46. She also alleges that the Truth in Lending Statement for the 25 “second loan” did disclose an adjustable interest rate but it did not “show the negative amortized 26 variable rate.” FAC ¶ 46. As a preliminary matter, the Court notes that it is not clear that either of 27 these Truth in Lending Statements pertained to the JPMorgan loans as opposed to, e.g., the Capital 28 One loan or the GMAC loan. 6 For the Northern District of California United States District Court 1 Even if they did, 12 C.F.R. § 226.23(a)(3) n.48 does not require disclosure of specific 2 interest rates. Rather it requires disclosure of, e.g., the annual percentage rate. See Smith v. 3 Anderson, 801 F.2d 661, 663 (4th Cir. 1986) (noting that “‘APR’ likewise differs from the general 4 definition of interest rate because it considers, by definition, a broader range of finance charges 5 when determining the total cost of credit as a yearly rate”); see also Jordan v. Paul Fin., LLC, No. C 6 07-04496 SI, 2009 U.S. Dist. LEXIS 56701, at *17 (N.D. Cal. July 1, 2009) (indicating that “only 7 one of the required disclosures regarding variable-rate loans -- that the transaction contains a 8 variable-rate feature -- is considered ‘material’ such that it triggers the extended rescission period”). 9 Moreover, courts have held that (1) while “[t]he disclosure for certain variable rate transactions 10 ‘must be provided at the time of the application form is provided or before the consumer pays a 11 non-refundable fee, whichever is earlier,’” there is no requirement that the disclosure must be in the 12 Truth in Lending Statement itself, Reagen v. Aurora Loan Servs., No.: 1:09-cv-00839-OWW-DLB, 13 2009 U.S. Dist. LEXIS 107495 , at *3 (E.D. Cal. Nov. 18, 2009) (quoting 12 C.F.R. § 226.10), and 14 (2) 12 C.F.R. § 226.23(a)(3) n.48 does not require disclosure of the risk of negative amortization. 15 See id. at *4; Jordan, 2009 U.S. Dist. LEXIS 56701, at *18-19. Since there was no alleged failure to 16 disclose material terms by JPMorgan, the statute of limitations bars the rescission claim. 17 The Court therefore dismisses the TILA/Regulation Z claim against JPMorgan as time 18 barred. However, the dismissal shall be without prejudice -- i.e., the Court shall give Ms. Clemens 19 an opportunity to amend the claim, bearing in mind that the amended complaint must contain 20 allegations establishing that the claim, whether for damages or rescission, is not time barred. 21 Should Ms. Clemens amend her TILA/Regulation Z claim seeking the remedy of rescission, 22 the Court notes, for Ms. Clemens’s benefit, that Bank of America now appears to be the owner of 23 the first JPMorgan loan and related first deed of trust, having been assigned such by JPMorgan. See 24 Docket No. 30 (RJN, Ex. 5) (assignment of deed of trust). Thus, to the extent that Ms. Clemens 25 seeks return of the property as part of the rescission, it may be necessary to join the Bank of 26 America. See Fed. R. Civ. P. 19(a). Of course, Ms. Clemens may still have a partial rescission 27 remedy with respect to JPMorgan since it appears to be the owner of the second loan and related 28 second deed of trust. Moreover, if the first loan is rescinded, then JPMorgan may have to return 7 For the Northern District of California United States District Court 1 finance charges paid by Ms. Clemens. See Barrett v. JP Morgan Chase Bank, N.A., 445 F.3d 874, 2 878 (6th Cir. 2006) (“[T]he Act gives the borrower who rescinds an eligible loan transaction the 3 right to void the security interest and the right to recover statutorily identified finance charges 4 incurred in the transaction.”); Semar v. Platte Valley Fed. Sav. & Loan Ass’n, 791 F.2d 699, 702 5 (9th Cir. 1986) (“Under a TILA rescission, the security interest is dissolved, the lender returns the 6 borrower’s payments, and the borrower returns the loan proceeds, less any ‘finance or other 7 charge.’”); Riopta v. Amresco Residential Mortg. Corp., 101 F. Supp. 2d 1326, 1336 (D. Haw. 1999) 8 (“[B]ecause the Court has found rescission appropriate, the Court concludes that Plaintiffs are 9 entitled to recover all finance and interest charges associated with the mortgage.”). 10 As a final point, the Court notes that it is not, at this juncture, ruling on JPMorgan’s 11 contention that the TILA/Regulation Z rescission claim should be dismissed because Ms. Clemens 12 has failed to allege that she has the ability to tender the loan proceeds. See Docket No. 30 (Mot. at 13 7). Compare Garcia v. Wachovia Mortg. Corp., No. 2:09-cv-03925-FMC-FMOx, 2009 U.S. Dist. 14 LEXIS 99308, at *10 (C.D. Cal. Oct. 14, 2009) (stating that “ the majority of Courts to address the 15 issue recently have required that borrowers allege an ability to tender the principal balance of the 16 subject loan in order to state a claim for rescission under TILA”), with Singh v. Washington Mut. 17 Bank, No. C-09-2771 MMC, 2009 U.S. Dist. LEXIS 73315, at *7-11 (N.D. Cal. Aug. 19, 2009) 18 (rejecting JPMorgan’s contention that rescission claim should be dismissed because plaintiffs did 19 not allege they have the ability to repay the funds they received under the loan); ING Bank v. Ahn, C 20 09-995 TEH, 2009 U.S. Dist. LEXIS 60004, at *5-6 (N.D. Cal. July 13, 2009) (stating that 21 “Yamamoto did not hold that a district court must, as a matter of law, dismiss a case if the ability to 22 tender is not pleaded[;] [r]ather, all of these cases indicate that it is within the trial court’s discretion 23 to choose to dismiss where the court concludes that the party seeking rescission is incapable of 24 performance”). Given the case law cited above, however, Ms. Clemens is forewarned that, if she is 25 not able to allege and demonstrate an ability to tender the principal balance, she will not be entitled 26 to rescission. 27 28 8 1 B. 2 Claim for Violation of California Civil Code § 2923.52 The California Foreclosure Prevention Act postpones a notice of sale under a deed of trust 3 for certain loans for ninety days. See Cal. Civ. Code § 2923.52. Postponement is required only 4 where all of the following conditions exist: 5 (1) The loan was recorded during the period of January 1, 2003, to January 1, 2008, inclusive, and is secured by residential real property. (2) The loan at issue is the first mortgage or deed of trust that the property secures. (3) The borrower occupied the property as the borrower’s principal residence at the time the loan became delinquent. (4) The notice of default has been recorded on the property. 6 7 8 9 11 For the Northern District of California United States District Court 10 12 Id. Ms. Clemens contends that, in her case, all four conditions are satisfied and that Defendants 13 violated § 2923.52 by attempting to go to a trustee sale before the ninety-day postponement required 14 by that section. See FAC ¶ 64. The problem for Ms. Clemens is that, even if all four conditions are 15 met, the statute is not applicable to her case because it did not become operative until June 15, 16 2009,4 see Kamp v. Aurora Loan Servs., No. SACV 09-00844-CJC (RNBx), 2009 U.S. Dist. LEXIS 17 95245, at *7 (C.D. Cal. Oct. 1, 2009); see also http://www.corp.ca.gov/fsd/cfp/default.asp (last 18 visited 11/23/2009) – i.e., after the notice of default and notice of sale were already issued in the 19 instant case. 20 The Court also notes that, with respect to JPMorgan, dismissal of the § 2923.52 claim is 21 appropriate on an independent ground. As JPMorgan points out, § 2923.52 contains an applied-for 22 exception to the ninety-day moratorium which allows a mortgage loan servicer to apply for an 23 exemption. See Cal. Civ. Code § 2923.52(b) (“This section does not apply to loans serviced by a 24 25 26 27 28 4 Section 2923.52 specifically provides that it does not become operative until ““14 days after the issuance of regulations . . . by the commissioner pursuant to subdivision (d) of Section 2923.53.” See Cal. Civ. Code § 2923.52(d); see also id. § 2923.53(k) (defining commissioner). Section 2923.53(d) in turn provides that “[t]he commissioner shall adopt, no later than ten days after this section takes effect, . . . regulations to clarify the application of this section and Section 2923.52.” Id. § 2923.53(d). The regulations were issued on June 1, 2009, see 10 Cal. Code Regs. § 2031.1 et seq., and fourteen days thereafter is June 15. 9 1 mortgage loan servicer if that mortgage loan servicer has obtained a temporary or final order of 2 exemption pursuant to Section 2923.53 that is current and valid at the time the notice of sale is 3 given.”). Upon receipt of an initial application for exemption, the commissioner shall issue a 4 temporary order of exemption; if the commissioner ultimately concludes that the servicer has a 5 comprehensive loan modification program that meets certain requirements, then the commissioner 6 will issue a final order of exemption. See id. § 2923.53(b)(3). For the Northern District of California United States District Court 7 JPMorgan has provided evidence establishing that it was granted an exemption. See Docket 8 No. 30 (RJN, Ex. 8) (listing JPMorgan as one of the banks exempted from § 2923.52).5 Although 9 Ms. Clemens is correct in noting that JPMorgan was not recognized as an exempt organization until 10 June 15, 2009,6 that fact is immaterial because it simply reflects that JPMorgan has been exempt 11 since the date that § 2923.52 became operative. 12 Accordingly, the Court dismisses the § 2923.52 claim against both FAT and JPMorgan with 13 prejudice. 14 C. 15 Claim for Violation of California Business & Professions Code § 17200 California Business & Professions Code § 17200 prohibits unfair competition, which is 16 defined as, inter alia, “any unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & 17 Prof. Code § 17200. Defendants make several challenges to the § 17200 pled by Ms. Clemens in her 18 FAC. 19 First, Defendants argue that Ms. Clemens lacks standing to bring the claim. Under § 17204 20 of the Code, only “a person who has suffered injury in fact and has lost money or property as a result 21 of the unfair competition” has standing to bring suit. Id. § 17204. According to Defendants, Ms. 22 Clemens lacks standing because there has been no foreclosure as of yet and she is still the owner of 23 the real property at issue. The Court does not agree. It is undisputed that foreclosure proceedings 24 25 26 27 5 This list is published online. See Dep’t of Corp., Exemptions under Department of Corporations, Nov. 18, 2009, http://www.corp.ca.gov/FSD/CFP/default.asp (last visited 11/23/2009). The Court takes judicial notice of this official government publication. Ms. Clemens has not disputed its accuracy. 6 28 JPMorgan was given temporary exemption on June 15, 2009. Later, it received permanent exemption on July 7, 2009. See Docket No. 30 (RJN, Ex. 8). 10 1 were initiated which put Ms. Clemens’s interest in the property in jeopardy; this fact is sufficient to 2 establish standing as this Court has previously held. See Sullivan v. Washington Mut. Bank, FA, No. 3 C-09-2161 EMC, 2009 U.S. Dist. LEXIS 104074, at *13 (N.D. Cal. Oct. 23, 2009). 4 Second, Defendants contend that, standing aside, the § 17200 claim must be dismissed 5 because the statute bars only unlawful, unfair, or fraudulent business practices, not isolated acts, and 6 Ms. Clemens has not alleged any pattern or course of conduct by either FAT or JPMorgan. The 7 Court finds this argument unavailing as well. Section 17200 by its terms bars not only unlawful or 8 unfair business practices but also unlawful or unfair business acts. See Cal. Bus. & Prof. Code § 9 17200. A California Court of Appeal has specifically explained that, 14 [i]n response to the California Supreme Court’s 1988 ruling that a ‘business practice’ under Business and Professions Code section 17200 must encompass more than a single transaction, the Legislature amended the statute in 1992 to provide that “unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice. . . .” The California Supreme Court has interpreted the 1992 amendment as overruling that part of Van De Kamp that interpreted the statute to require more than a single “act.” Accordingly, under the current version of the statute, even a single act may create liability. 15 UFW of Am. v. Dutra Farms, 83 Cal. App. 4th 1146, 1163 (2000); see also Klein v. Earth Elements, 16 Inc., 59 Cal. App. 4th 965, 969 n.3 (1997) (stating that “[t]he plain meaning of the amendment, as 17 enacted, is that the UCA now covers single acts of misconduct”). 11 For the Northern District of California United States District Court 10 12 13 18 Third, Defendants argue that, to the extent Ms. Clemens asserts unlawful business practices, 19 the § 17200 claim must fail because both the TILA and § 2953.52 claims have been dismissed. 20 Here, the Court agrees. Where there is no predicate law violation, there is no unlawful business 21 practice or act for purposes of § 17200. See Distor v. US Bank Na, No. C 09-02086 SI, 2009 U.S. 22 Dist. LEXIS 98361, at *20-22 (N.D. Cal. Oct. 22, 2009).7 23 24 This leaves only the issue of whether Ms. Clemens has adequately alleged an unfair business act. Defendants argue that Ms. Clemens has failed to state a claim for relief because she has not 25 7 26 27 28 The Court agrees with the Distor court that, if a TILA claim is barred by the statute of limitations, then it may not be used as a predicate UCL violation. See Distor, 2009 U.S. Dist. LEXIS 98361, at *21; see also Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001 (9th Cir. 2008), 1007 n.3 (9th Cir. 2008) (noting that “[a]n attempt by Appellants to go outside the congressionally enacted limitation period of TILA is an attempt to enforce a state regulation in an area expressly preempted by federal law”). 11 1 alleged unfairness as defined by the California Supreme Court in Cel-Tech Communications, Inc. v. 2 Los Angeles Cellular Telephone Co., 20 Cal. 4th 163 (1999) -- i.e., “the word ‘unfair’ in [§ 17200] 3 means conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit 4 of one of those laws because its effects are comparable to or the same as a violation of the law, or 5 otherwise significantly threatens or harms competition.” Id. at 187. Cel-Tech, however, was a § 6 17200 case involving competitors, not one involving a consumer as here. See id. at 187 n.12 7 (emphasizing that “[t]his case involves an action by a competitor alleging anticompetitive practices” 8 and that “[o]ur discussion and this test are limited to that context”; adding that “[n]othing we say 9 relates to actions by consumers”). For the Northern District of California United States District Court 10 Since Cel-Tech, “[t]he California courts have not yet determined how to define ‘unfair’ in the 11 consumer action context.” Lozano v. AT&T Wireless Servs., 504 F.3d 718, 736 (9th Cir. 2008). 12 Some courts have adopted the Cel-Tech standard. Others have not and continued to use instead the 13 more generous balancing approach that preceded Cel-Tech -- i.e., balancing the harm to the 14 consumer against the utility of the defendant’s practice. Still others have adopted a middle ground. 15 See id.; see also Camacho v. Automobile Club of S. Cal., 142 Cal. App. 4th 1394, 1402 (2006) 16 (indicating that the balancing approach is too amorphous, but also rejecting the proposition that, in a 17 consumer case, a practice is unfair only if tethered to specific constitutional, statutory or regulatory 18 provisions). Under the middle ground test, there is unfairness where (1) the consumer injury is 19 substantial; (2) the injury is not outweighed by any countervailing benefits to consumers or 20 competition; and (3) the injury is one that the consumer could not reasonably have avoided. See id. 21 at 1403. The Ninth Circuit has expressed some doubt about the middle ground test. See Lozano, 22 504 F.3d at 736 (agreeing that the balancing approach seems to have rejected as a result of Cel-Tech 23 but expressing disagreement with the middle ground test, at least based on the circumstances before 24 the court). 25 For purposes of this opinion, the Court need not make any conclusion about what is the 26 appropriate test for unfairness in a consumer case because, even if the Court were to adopt the 27 balancing approach – which is most favorable to Ms. Clemens – she still fails to state a claim for 28 relief. 12 For the Northern District of California United States District Court 1 With respect to JPMorgan, the thrust of Ms. Clemens’s unfairness claim is that JPMorgan 2 failed to respond to her multiple requests for loan modification (e.g., in December 2008 and in 3 March and April 2009) until on or about May 15, 2009, at which point she had already lost her job. 4 See FAC ¶¶ 25, 32, 100. However, Ms. Clemens has failed to explain why JPMorgan had a duty to 5 offer a loan modification. Cf. Maguca v. Aurora Loan Servs., No. SACV 09-1086 JVS (ANx), 2009 6 U.S. Dist. LEXIS 104251, at *7 (C.D. Cal. Oct. 28, 2009) (noting that plaintiff did not identify under 7 what duty defendant was required to give a loan modification or forbearance; acknowledging 8 plaintiff’s suggestion that defendant had a duty to do so as a recipient of funds from the federal 9 Troubled Asset Relief Program, but noting that plaintiff did not “explain how receipt of TARP funds 10 gives rise to a cause of action against the recipient by a borrower”); Mertan v. American Home 11 Mortg. Servicing, Inc., No. SACV 09-723 DOC (PJWx), 2009 U.S. Dist. LEXIS 99024, at *28-29 12 (C.D. Cal. Oct. 13, 2009) (rejecting plaintiffs’ assertion that defendants were unjustly enriched 13 because they received TARP funds but did not provide plaintiffs with a loan modification; noting 14 that money conferred on defendants came from the federal government, not plaintiffs). This is 15 particularly true, if as found herein, Ms. Clemens has not stated a legal claim against JPMorgan 16 under any applicable statute such as TILA or California Civil Code § 2932.52. 17 As for FAT, Ms. Clemens appears to argue unfairness based on (1) improper surveillance by 18 FAT and (2) FAT’s thereafter entering her property to change the locks on the doors without 19 notifying her.8 Ms. Clemens has failed to establish facial plausibility for her claim of improper 20 surveillance. As noted above, facial plausibility requires “more than a sheer possibility that a 21 defendant has acted unlawfully. Where a complaint pleads facts that are ‘merely consistent with’ a 22 defendant’s liability, it stops short of the line between possibility and plausibility of entitlement to 23 relief.” Moss, 572 F.3d at 969. As for the claim that FAT improperly entered Ms. Clemens’s 24 property, even if such conduct were unfair for purposes of § 17200, the statute provides for only 25 limited remedies – i.e., injunctive relief and restitution. Ms. Clemens does not allege that this 26 27 28 8 At the hearing on Defendants’ motions, Ms. Clemens argued that, because of the improper surveillance, FAT knew when she would not be home and therefore changed the locks on the doors when she was not present. 13 1 conduct is ongoing and does not appear to be seeking either of these remedies. Instead she seems to 2 be asking for compensatory damages for the alleged unfair conduct, a remedy not available under § 3 17200. See Kaldenbach v. Mutual of Omaha Life Ins. Co., 178 Cal. App. 4th 830, 847 (2009) 4 (noting that “only equitable remedies are available (e.g., injunction, restitution) [under the UCL], 5 and damages are not an available remedy”). For the Northern District of California United States District Court 6 As a final point, the Court notes that, in her papers, Ms. Clemens appears to argue that 7 Defendants engaged in unlawful conduct by not giving her notice of the default and/or notice of the 8 sale as required by California Civil Code § 2924 et seq. See Docket No. 44 (Opp’n at 2). This 9 contention, however, was not made in the FAC and therefore the Court does not consider it. In fact, 10 the Court notes that the FAC suggests to the contrary since Ms. Clemens alleges that she received 11 “notices of foreclosure.” FAC ¶ 26. 12 Accordingly, the Court dismisses the § 17200 claim against both FAT and JPMorgan. The 13 dismissal shall be without prejudice so that Ms. Clemens will have an opportunity to amend the 14 claim. The Court advises Ms. Clemens that, should she amend to assert unfairness based on the 15 failure to provide her with notice of the default and/or notice of the sale, she must have a good faith 16 belief that there was such a failure. In the absence of a good faith belief, she may be subject to 17 sanctions pursuant to Federal Rule of Civil Procedure 11. 18 This order disposes of Docket Nos. 30 and 32. 19 20 IT IS SO ORDERED. 21 22 Dated: December 1, 2009 23 _________________________ EDWARD M. CHEN United States Magistrate Judge 24 25 26 27 28 14 1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 8 MONICA CLEMENS, 9 Plaintiff, v. CERTIFICATE OF SERVICE 11 For the Northern District of California United States District Court 10 No. C-09-3365 EMC J.P. MORGAN CHASE NATIONAL CORPORATE SERVICES, INC., et al., 12 Defendants. 13 ___________________________________/ 14 15 16 I, the undersigned, hereby certify that I am an employee in the U.S. District Court, Northern 17 District of California. On the below date, I served a true and correct copy of the attached, by placing 18 said copy/copies in a postage-paid envelope addressed to the person(s) listed below, by depositing 19 said envelope in the U.S. Mail; or by placing said copy/copies into an inter-office delivery 20 receptacle located in the Office of the Clerk. 21 23 Monica Clemens 101 Anza Vista San Francisco, CA 94115 415/271-6990 carealestate007@yahoo.com 24 Dated: December 1, 2009 22 RICHARD W. WIEKING, CLERK 25 26 27 28 By: /s/ Leni Doyle Deputy Clerk
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