Datt et al v. Wells Fargo Bank, N.A., No. 5:2019cv01216 - Document 29 (N.D. Cal. 2019)
Court Description: ORDER granting 8 Motion to Dismiss; denying 21 Motion for Leave to File. Signed by Judge Edward J. Davila on November 5, 2019.The Clerk shall close the file.(ejdlc2S, COURT STAFF) (Filed on 11/5/2019)
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Datt et al v. Wells Fargo Bank, N.A. Doc. 29 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 KANTA DATT, et al., 8 Case No. 5:19-cv-01216-EJD Plaintiffs, 9 v. 10 WELLS FARGO BANK, N.A., 11 United States District Court Northern District of California Defendant. ORDER GRANTING DEFENDANT’S MOTION TO DISMISS; DENYING PLAINTIFF’S MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT Re: Dkt. Nos. 8, 21 12 Plaintiffs Kanta and Ram Datt allege that Defendant Wells Fargo Bank fraudulently, 13 14 negligently, and willfully caused Plaintiffs to pay excessive mortgage and interest payments. See 15 Complaint (“Compl.”), Dkt. 1. Plaintiffs, however, have already litigated most of the claims 16 arising from the alleged overcharging in state court and are thus foreclosed from relitigating them 17 again. The claim not previously litigated is time-barred.1 The Court finds this motion suitable for 18 consideration without oral argument. See N.D. Cal. Civ. L.R. 7-1(b). Having considered the 19 Parties’ papers, Defendant’s motion to dismiss is GRANTED with prejudice and Plaintiff’s 20 motion for leave to file an amended complaint is DENIED. 21 22 23 24 25 26 27 28 1 This should not be construed as making a judgment about the scope of res judicata. Plaintiffs’ Fair Credit Reporting Act (“FCRA”) claim could also be dismissed on res judicata grounds since it arises out of the same transaction or occurrence and thus could have been raised in the earlier state action. See Allen v. McCurry, 449 U.S. 90, 95 (1980) (“Under res judicata, a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action. . . . The federal courts generally have also consistently accorded preclusive effect to issues decided by state courts.” (emphasis added)). That issue, however, was not briefed by the Defendant and so the Court does not address it. See Neff v. Flagstar Bank, FSB, 520 F. App’x 323, 326–27 (6th Cir. 2013) (holding district court erred by raising res judicata defense sua sponte). Case No.: 5:19-cv-01216-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS; DENYING PLAINTIFF’S MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT 1 Dockets.Justia.com I. 1 A. Factual Background 2 On August 14, 2007, Plaintiffs took out a 30-year mortgage from World Savings Bank. 3 4 Compl. at 2.2 Wachovia acquired World Savings Bank on December 31, 2008, then Wells Fargo 5 acquired Wachovia. Id.; see also Scott G. Alvarez, The Acquisition of Wachovia Corporation by 6 Wells Fargo & Company, FED. RES. (Sept. 1, 2010), https://www.federalreserve.gov/newsevents/ 7 testimony/alvarez20100901a.htm. In December 2009, Plaintiffs and Defendant entered into a loan 8 modification agreement, which lowered the loan balance. Compl. at 3. The term of the modified 9 loan was forty years, with the payments during the first five years set as “interest only.” Id. Around 2012, Plaintiffs defaulted on their loan by failing to make two payments. Id. 10 United States District Court Northern District of California BACKGROUND 11 Plaintiffs claim they made-up the delinquent loan payments in 2013 and made all scheduled loan 12 payments until the loan was paid off in 2018. Id. In January 2016, Plaintiffs attempted to 13 refinance their loan. Id. Defendant, however, advised them that because they missed two 14 payments in the past 24 months, they were ineligible to refinance the loan. Id. Plaintiffs and/or 15 their agents then began “calling Defendant to determine why Defendant had reported their 16 payments as being late, when all payments since the modification had been timely to the best of 17 Plaintiffs’ knowledge.” Id. Plaintiffs allegedly possessed documentation showing the same. Id. 18 Plaintiffs then attempted to refinance their loan at another institution but were denied due to the 19 late payments on their credit report. Id. Plaintiffs allege that Defendant eventually “confirmed that there was an accounting error 20 21 made and Plaintiffs had not actually missed or made any late payments,” but still refused to 22 correct the problems so that Plaintiffs could complete the refinance. Id. at 4. The 2016 error, thus, 23 24 25 26 27 28 2 As noted by Defendant, Plaintiffs’ Complaint does not comply with Federal Rule of Civil Procedure 10(b), which states that “[a] party must state its claims or defenses in numbered paragraphs.” Even after Defendant notified Plaintiffs of this requirement, Plaintiffs submitted an amended complaint without numbered paragraphs. See Motion for Leave to File an Amended Complaint, Dkt. 22, Ex. A. Due to the lack of numbered paragraphs, the Court cites to the Complaint by page number. Case No.: 5:19-cv-01216-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS; DENYING PLAINTIFF’S MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT 2 1 continued to cause Plaintiffs to pay a higher interest rate and more money per month because it 2 prevented them from refinancing. Id. It also caused Plaintiffs to be charged “excess late penalties 3 and fees.” Id. 4 5 $750,388.68 in April 2018 as full payment of the loan. Id. Plaintiffs claim the $750,388.68 was 6 inflated due to the allegedly incorrect accounting of Plaintiff’s loan. Id. at 5. 7 United States District Court Northern District of California Ultimately, Plaintiffs were able to refinance with Chase Bank. Defendants accepted Plaintiffs assert three claims in their first complaint: (1) fraud, (2) violations of the FCRA, 8 and (3) violations of the Home Owners Loan Act (“HOLA”); they seek to recover punitive 9 damages based on the fraud claim. See generally Compl. In their amended complaint, Plaintiffs 10 continue to seek punitive damages and assert four claims: (1) fraud, (2) violations of the FCRA, 11 (3) negligence, and (4) violations of California Business & Professions Code § 17200 et seq. Dkt. 12 22, Ex. A. 13 14 B. Procedural History On March 6, 2019, Plaintiffs filed this action. See Dkt. 1. About a month later, on April 4, 15 2019, Defendant filed a Motion to Dismiss Plaintiffs’ Complaint. Motion to Dismiss (“Mot.”), 16 Dkt. 8. On April 18, 2019, Plaintiffs filed an opposition to this motion. Opposition/Response re 17 Motion to Dismiss (“Opp.”), Dkt. 18. Defendant filed a reply. Reply re Motion to Dismiss 18 (“Reply”), Dkt. 19. 19 On September 25, 2019, Plaintiffs filed a motion for leave to file an amended complaint. 20 Notice of Motion and Motion for Leave to File First Amended Complaint (“Mot. AC”), Dkt. 21, 21 22. Defendant filed an opposition to this motion. Opposition re Motion for Leave to File (“Opp. 22 AC”), Dkt. 27. Plaintiffs did not submit a reply. See N.D. Cal. Civ. L.R. 7-3(c) (requiring reply 23 be filed within 7 days after the opposition was due). 24 Before Plaintiffs initiated this action, they pursued an action in state court. On December 25 29, 2017, the state court granted Defendant’s motion for summary adjudication on Plaintiffs’ fraud 26 and Section 17200 claims and request for punitive damages. Declaration of Alejandro E. Moreno 27 28 Case No.: 5:19-cv-01216-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS; DENYING PLAINTIFF’S MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT 3 1 (“Moreno Decl.”), Dkt. 27, Ex. 3 at 2. On January 2, 2018, the state court granted Defendant’s 2 motion for summary adjudication on Plaintiffs’ negligence claim. Id. Additionally, on January 3 26, 2018, the state court dismissed Defendant, with prejudice and entered judgment in Defendant’s 4 favor for all causes of action raised in the complaint (fraud, negligence, violations of Section 5 17200, and punitive damages). Id. II. 6 A. Motion to Dismiss 7 To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain sufficient factual 8 United States District Court Northern District of California LEGAL STANDARDS 9 matter, accepted as true, to “state a claim for relief that is plausible on its face.” Ashcroft v. Iqbal, 10 556 U.S. 662, 678 (2009) (discussing Federal Rule of Civil Procedure 8(a)(2)). A claim has facial 11 plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable 12 inference that the defendant is liable for the misconduct alleged. Id. The requirement that the 13 court must “accept as true” all allegations in the complaint is “inapplicable to legal conclusions.” 14 Id. 15 Dismissal can be based on “the lack of a cognizable legal theory or the absence of 16 sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 17 F.2d 696, 699 (9th Cir. 1990). A statute-of-limitations defense, if “apparent from the face of the 18 complaint,” may be raised in a motion to dismiss. Seven Arts Filmed Entm’t Ltd. v. Content 19 Media Corp. PLC, 733 F.3d 1251, 1254 (9th Cir. 2013). When a claim or portion of a claim is 20 precluded as a matter of law, that claim may be dismissed pursuant to Rule 12(b). See 21 Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 975 (9th Cir. 2010) (discussing Rule 12(f) 22 and noting that 12(b)(6), unlike Rule 12(f), provides defendants a mechanism to challenge the 23 legal sufficiency of complaints). 24 B. Res Judicata 25 Under res judicata, a final judgment on the merits of an action precludes the parties or their 26 privies from relitigating issues that were or could have been raised in the earlier action. Allen, 449 27 28 Case No.: 5:19-cv-01216-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS; DENYING PLAINTIFF’S MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT 4 1 U.S. at 95. Federal courts must afford state court judgments the same preclusive effect as the 2 judgment would have in that state’s own courts. Clements v. Airport Auth. Of Washoe Cty., 69 3 F.3d 321, 326 (9th Cir. 1995). This reduces unnecessary litigation, fosters reliance on 4 adjudication, and promotes comity between the state and federal courts. Allen, 449 U.S. at 95–96. 5 Res judicata is an affirmative defense—the defendant must affirmatively assert res judicata or else 6 it may be waived. See Fed. R. Civ. Pro. 8(c)(1). C. Motion for Leave to File an Amended Complaint United States District Court Northern District of California 7 8 In determining whether leave to amend is appropriate, the district court considers “the 9 presence of any of four factors: bad faith, undue delay, prejudice to the opposing party, and/or 10 futility.” Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001) (noting 11 amendments should be granted with “extreme liberality”); Fed. R. Civ. Pro. 15(a) (2) (court 12 should freely allow amendment when “justice so requires.”). If leave to amend would be futile, 13 the court may deny leave. See Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990) (“It 14 is not an abuse of discretion to deny leave to amend when any proposed amendment would be 15 futile.”). III. 16 DISCUSSION3 A. Previously Litigated State Law Claims/Amended Complaint Motion 17 As stated above, three out of the four claims asserted in Plaintiffs’ Amended Complaint are 18 19 barred by res judicata—the fraud, Section 17200, and negligence claims and the request for 20 punitive damages have already been litigated. Opp. AC at 3. Because Defendant did not assert res 21 judicata in its first responsive pleading, it may be argued that Defendant waived res judicata.4 See 22 23 24 25 26 27 28 3 Plaintiffs no longer allege the HOLA claim in their amended complaint. To the extent the claim is still at issue, the Court agrees with Defendant that HOLA does not create a private cause of action for Plaintiffs’ claims. Mot. at 10. Thus, this claim must be DISMISSED with prejudice as amending it would be futile. See Burns Int’l, Inc. v. W. Sav. & Loan Ass’n, 978 F.2d 533, 536 (9th Cir. 1992) (holding private HOLA cause of action unnecessary); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 338 (9th Cir. 1996) (dismissal with prejudice permissible if amendment would be futile). 4 Plaintiffs did not submit a reply and so they did not respond to Defendant’s use of res judicata. Case No.: 5:19-cv-01216-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS; DENYING PLAINTIFF’S MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT 5 1 Fed. R. Civ. P. 8(c)(1). Plaintiff, however, just asserted the negligence and Section 17200 claims; 2 thus, Defendant could not have raised the defense of res judicata earlier for these claims. As to the fraud claim and request for punitive damages, Defendant asserted res judicata as United States District Court Northern District of California 3 4 soon as it discovered the earlier state-court litigation. Thus, there was no undue delay or bad faith. 5 Opp. AC at 3. Further, no prejudice to Plaintiffs would result by allowing Defendant to assert res 6 judicata; it will cause “no delay in the proceedings and require[s] no additional discovery.” 7 Owens, 244 F.3d at 712; Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 986 8 (9th Cir. 1999). Finally, it would not be futile for the Court to consider the res judicata defense 9 because the state court has already litigated the exact issues at hand; there is no need to relitigate 10 them again. See Allen, 449 U.S. at 95 (noting res judicata’s importance in relieving parties of the 11 cost and vexation of multiple lawsuits, conserving judicial resources, and preventing inconsistent 12 decisions). This Court will thus consider Defendant’s res judicata argument. Cf. Owens, 244 F.3d 13 at 712 (considering res judicata defense in absence of bad faith, undue delay, prejudice to the 14 opposing party, and/or futility). The amended complaint is virtually identical to the complaints filed in the state court 15 16 action. Compare Moreno Decl., Ex. 1 at 7, with Dkt. 22, Ex. A at ECF 13. Both the state court 17 action and this action are based on the same operative facts—both allege causes of actions for 18 fraud, negligence, and a Section 17200 violation arising from Defendant’s alleged erroneous 19 processing of the same mortgage payment. See Moreno Decl., Ex. 1 ¶¶ 6–13, 26, 32, 39; Id., Ex. 20 2, ¶¶ 27–33; Page v. United States, 729 F.2d 818, 820 (D.C. Cir. 1984) (“The judgment bars any 21 further claim based on the same ‘nucleus of facts,’ . . . .”). The state court entered a Judgment of 22 Dismissal, with prejudice, as to the fraud, Section 17200, negligence, and punitive damages issues. 23 Moreno Decl., Ex. 3 at 2. Thus, because the state court proceeding involved the same parties and 24 same claims, res judicata applies and Plaintiffs are foreclosed from relitigating the already-decided 25 claims. 26 27 28 Accordingly, because res judicata bars the fraud, Section 21700, negligence and punitive Case No.: 5:19-cv-01216-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS; DENYING PLAINTIFF’S MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT 6 1 damages claims from being relitigated, granting Plaintiffs leave to amend would be futile. 2 Defendant’s motion to dismiss as to these claims is GRANTED and Plaintiffs’ motion for leave to 3 file an amended complaint is DENIED. 4 United States District Court Northern District of California 5 B. The FCRA Claim Plaintiffs also assert a FCRA claim. They argue that Defendant violated the FCRA when it 6 made the January 2016 computation errors. Compl. at 6–7. Defendant argues the FCRA claim is 7 time-barred because the statute of limitations has expired. Mot. at 5. 8 The FCRA claim is subject to a two-year statute of limitations. The claim must be brought 9 within “2 years after the date of discovery by the plaintiff of the violation that is the basis for such 10 liability.” 15 U.S.C. § 1681p. The two-years limitation period begins when the consumer 11 discovers the alleged violation, not when the consumer discovers that the alleged violation affords 12 him legal recourse. See Mack v. Equitable Ascent Fin., LLC, 748 F.3d 663, 665 (5th Cir. 2014). 13 Plaintiffs, in response, argue that their FCRA cause of action accrued each time Plaintiffs made a 14 loan payment to Wells Fargo. Opp. at 3. Plaintiffs, however, assert no precedent indicating the 15 “continuous accrual doctrine” applies to FCRA claims. Id. In fact, contrary to Plaintiffs’ 16 assertion, precedent from this Circuit indicates a contrary rule. See Syed v. M-I, LLC, 853 F.3d 17 492, 507 (9th Cir. 2017) (holding statute of limitations runs on an FCRA claim on the date the 18 violation was discovered by the plaintiff). 19 Here, Plaintiffs concede that they discovered the FCRA violation in January 2016. See 20 Compl. at 3 (“Plaintiffs and/or their agents began calling Defendant to determine why Defendant 21 had reported their payments as being late, when all payments since modification had been made 22 timely to the best of Plaintiff’s knowledge.” (emphasis added)). The FCRA violation, thus, began 23 to accrue on January 2016 when Plaintiff first learned of Defendant’s alleged mistake. See Reply 24 at 3. Any extra amounts Plaintiffs may have paid on their loan installment are injuries stemming 25 from Defendant’s alleged computation errors, i.e., the mistakes Plaintiffs learned about in January 26 2016. Thus, Plaintiffs have not identified new FCRA violations because the entire claim is based 27 28 Case No.: 5:19-cv-01216-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS; DENYING PLAINTIFF’S MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT 7 1 on the initial “erroneous” reporting of late loan payments. Accordingly, Plaintiffs’ “date of 2 discovery” of the FCRA violation was in January 2016 and thus Plaintiffs needed to bring a FCRA 3 claim no later than January 2018. Instead, the claim was filed March 6, 2019, which is over a year 4 too late. Thus, because the FCRA claim is time-barred, amendment would be futile. Accordingly, 5 Defendant’s motion to dismiss is GRANTED as to this claim and Plaintiffs’ request for leave to 6 amend is DENIED. 7 8 9 10 United States District Court Northern District of California 11 12 13 IV. CONCLUSION For these reasons, Defendant’s Motion to Dismiss is GRANTED and Plaintiff’s Motion for Leave to File an Amended Complaint is DENIED. The Clerk shall close the file. IT IS SO ORDERED. Dated: November 5, 2019 ______________________________________ EDWARD J. DAVILA United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case No.: 5:19-cv-01216-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS; DENYING PLAINTIFF’S MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT 8
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