R Mora et al v US Bank et al, No. 2:2015cv02436 - Document 57 (C.D. Cal. 2015)
Court Description: ORDER GRANTING DEFENDANT'S MOTION TO DISMISS WITH LEAVE TO AMEND 43 by Judge Dean D. Pregerson. The Court GRANTS Defendant's Motion to Dismiss. Plaintiffs have leave to amend the HBOR claim under 2924.11(d) and any UCL claim as it relates to a violation of HBOR, as detailed above. The Second Amended Complaint shall be filed within fourteen (14) days from the date of this order. IT IS SO ORDERED. (lom)
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R Mora et al v US Bank et al Doc. 57 1 2 O 3 4 NO JS-6 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 R. MORA; L. MORA, 12 Plaintiffs, 13 14 15 16 17 v. US BANK also known as US BANK, N.A. also known as US BANK HOME MORTGAGE also known as US BANK. N.A., INC., Defendants. ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 15-02436 DDP (AJWx) ORDER GRANTING DEFENDANT’S MOTION TO DISMISS WITH LEAVE TO AMEND [Dkt. No. 43] 18 Presently before the Court is Defendant US Bank’s Motion to 19 20 Dismiss Plaintiffs’ First Amended Complaint. 21 Having considered the parties’ submissions, the Court adopts the 22 following order. 23 I. 24 (Dkt. No. 43.) BACKGROUND The facts of this case are laid out in the Court’s Order 25 granting Defendant’s previous Motion to Dismiss with leave for 26 Plaintiffs to amend. 27 Amended Complaint alleging four causes of action against Defendant 28 based on the Equal Credit Opportunity Act, California’s Homeowner (Dkt. No. 30.) Plaintiffs then filed a First Dockets.Justia.com 1 Bill of Rights and unfair competition laws, and for declaratory 2 relief. 3 II. 4 Defendant has again moved to dismiss the complaint. LEGAL STANDARD A 12(b)(6) motion to dismiss requires a court to determine the 5 sufficiency of the plaintiff's complaint and whether or not it 6 contains a “short and plain statement of the claim showing that the 7 pleader is entitled to relief.” 8 Rule 12(b)(6), a court must (1) construe the complaint in the light 9 most favorable to the plaintiff, and (2) accept all well-pleaded Fed. R. Civ. P. 8(a)(2). Under 10 factual allegations as true, as well as all reasonable inferences 11 to be drawn from them. 12 F.3d 979, 988 (9th Cir. 2001), amended on denial of reh’g, 275 F.3d 13 1187 (9th Cir. 2001); Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th 14 Cir. 1998). 15 See Sprewell v. Golden State Warriors, 266 In order to survive a 12(b)(6) motion to dismiss, the 16 complaint must “contain sufficient factual matter, accepted as 17 true, to ‘state a claim to relief that is plausible on its face.’” 18 Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009) (quoting Bell Atl. 19 Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 20 “[t]hreadbare recitals of the elements of a cause of action, 21 supported by mere conclusory statements, do not suffice.” 22 678. 23 legal theory or sufficient facts to support a cognizable legal 24 theory.” 25 1104 (9th Cir. 2008); see also Twombly, 550 U.S. at 561-63 26 (dismissal for failure to state a claim does not require the 27 appearance, beyond a doubt, that the plaintiff can prove “no set of 28 facts” in support of its claim that would entitle it to relief). However, Id. at Dismissal is proper if the complaint “lacks a cognizable Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 2 A 1 complaint does not suffice “if it tenders ‘naked assertion[s]’ 2 devoid of ‘further factual enhancement.’” 3 (quoting Twombly, 550 U.S. at 556). 4 plausibility when the plaintiff pleads factual content that allows 5 the court to draw the reasonable inference that the defendant is 6 liable for the misconduct alleged.” 7 as true “legal conclusions merely because they are cast in the form 8 of factual allegations.” 9 F.3d 1136, 1139 (9th Cir. 2003). 10 Iqbal, 556 U.S. at 678 “A claim has facial Id. The Court need not accept Warren v. Fox Family Worldwide, Inc., 328 III. DISCUSSION 11 A. 12 In their First Amended Complaint (“FAC”), Plaintiffs claim Violation of Equal Credit Opportunity Act (“ECOA”) 13 that Defendant “discriminated against Plaintiffs in violation of 14 the ECOA by, with knowledge of their minority status, less than 15 $50,000 annual income, declining income and wealth, L. MORA’s 16 receipt of public assistance, L. MORA’s lack of work, the 17 business’s loss of income, mounting bills, and threat to 18 Plaintiffs’ income going forward, insisting on full and immediate 19 payment of a mortgage balance, on pain of foreclosure.” 20 40.) 21 that “had a disparate impact on Hispanics in general, and 22 Plaintiffs, in particular, and which caused Plaintiffs to have to 23 fend off two foreclosures, file two bankruptcies, incur attorney’s 24 fees, suffer damage to credit, creditworthiness, and reputation, 25 emotional distress, and further damages within the jurisdiction of 26 this court, according to proof.” (FAC ¶ Plaintiffs allege that Defendant enforced certain policies (Id.) 27 Plaintiffs allege that Defendants were acting pursuant to 28 three policies and that these policies “were either explicitly 3 1 intended to, or which had the effect of, denying mortgage loan 2 modification relief to Plaintiffs as Hispanics, and to other 3 Hispanics.” 4 as ‘Manufacture Default,’ which consisted of refusing to 5 affirmatively (i.e., without solicitation) offer relief, such as 6 loan modification or short sale, to those with incomes of under 7 $50,000 between 2007 and 2012.” 8 The second policy, “Policy No. 2, known as ‘Do Not Negotiate,’ 9 which consisted of refusing to negotiate in good faith, when (FAC ¶ 15.) The first, “Policy I was informally known (Id. ¶ 16 (emphasis omitted).) 10 approached [by] borrowers who earned under $50,000 per year, and 11 who sought to renegotiate their mortgage.” 12 omitted).) 13 known as ‘Seek Foreclosure Against Those to whom no Affirmative 14 Relief was Offered, and to Whom Renegotiation was Denied,’ which 15 would be implemented upon those whom BANK refused to affirmatively 16 offer loan modification, or whom it rejected for loan modification 17 or other relief.” 18 (Id. ¶ 17 (emphasis The third and final policy, “Policy No. 3, informally (Id. ¶ 18 (emphasis omitted).) Plaintiffs rely on these policies as a basis for their 19 disparate impact claim, but do not have proof that the policies 20 exist. 21 policies] can be gleaned from” facts found in their attached 22 exhibits. 23 the court accepts as true Plaintiffs’ allegations of material fact. 24 Instead, Plaintiffs contend that “[t]he existence of [the (Id. ¶¶ 16-18.) Because this is a motion to dismiss, In Defendant’s Motion to Dismiss (“MTD”), Defendant argues 25 “that Plaintiffs’ FAC fails to sufficiently allege (1) actual 26 disparate impact and (2) facts demonstrating a causal connection 27 between the alleged Policies and the purported disparate impact.” 28 (MTD at 11:5-7.) Defendant also argues that “nowhere in the FAC do 4 1 Plaintiffs state their basis for asserting the existence of the 2 purported Policies.” 3 Plaintiffs have suffered no actual damages caused by US Bank 4 because “Plaintiffs have no right to a loan modification or short- 5 sale.” 6 (Id.) Defendant further argues that (Id. at 12:4-6.) The ECOA provides that “[i]t shall be unlawful for any 7 creditor to discriminate against any applicant, with respect to any 8 aspect of a credit transaction (1) on the basis of race, color, 9 religion, national origin, sex or marital status, or age . . .; (2) 10 because all or part of the applicant’s income derives from any 11 public assistance program.” 12 claim for disparate impact discrimination under . . . the ECOA a 13 plaintiff must plead (1) the existence of outwardly neutral 14 practices; (2) a significantly adverse or disproportionate impact 15 on persons of a particular type produced by the defendant’s 16 facially neutral acts or practices; and (3) facts demonstrating a 17 causal connection between the specific challenged practice or 18 policy and the alleged disparate impact.” 19 Capital, No. C 09-03658 CRB, 2010 WL 3385046, at *3 (N.D. Cal. Aug. 20 26, 2010). 21 existence of outwardly neutral policies and that such policies have 22 had a disparate negative impact on [a class] generally and [the 23 plaintiff] specifically.” 24 15 U.S.C. § 1691(a). “To state a Hernandez v. Sutter W. This standard requires a plaintiff to plead “the Id. at *4. Here, in granting Plaintiffs leave to amend their complaint, 25 the Court stated, “Plaintiffs can state a disparate impact claim 26 only if they can allege facts (1) allowing an inference that the 27 income threshold actually has a disparate impact, and (2) showing 28 that Plaintiffs themselves were subject to the policy and harmed by 5 1 it.” 2 earned under $50,000, thus bringing them within the scope of the 3 alleged polices. 4 to plead facts that would support the conclusion that the alleged 5 income policy had a disparate impact. 6 (Dkt. No. 30 at 19.) Plaintiffs have now pled that they (FAC ¶ 16(A)(iii).) But Plaintiffs have failed Plaintiffs quote a report titled “From Foreclosure to Re- 7 Redlining: How America’s largest financial institutions devastated 8 California communities,” for the proposition that “the default rate 9 for African American and Latino homeowners (was) more than twice 10 that of whites, and that approximately two-thirds of all 11 foreclosures in California have been among African American, Latino 12 and Asian American borrowers.” 13 Although this report provides evidence that minorities have a 14 higher rate of foreclosures in California, it does not show that 15 this higher rate of foreclosures is a result of Defendant’s alleged 16 policies. 17 (without any indication which particular pages or sections in the 18 hundreds of pages of appended material they intend to refer), and 19 state, “This is the very essence of disparate impact.” 20 (FAC ¶ 39 (citing Ex. 14 at 19).) Plaintiffs also cite Exhibits 11, 12, 13, and 16 (Id.) But Plaintiffs merely allege, in conclusory language, that 21 Defendant’s polices had a disparate impact on Plaintiffs. 22 kind of conclusory allegation is insufficient at this stage; 23 Plaintiffs must plead facts that “show ‘a significant disparate 24 impact on a protected class caused by a specific, identified . . . 25 practice or selection criterion.’” 26 Funding, Inc. 633 F. Supp. 2d 922, 927 (N.D. Cal. 2008) (quoting 27 Stout v. Potter, 276 F.3d 1118, 1121 (9th Cir. 2002)). 28 That Ramirez v. Greenpoint Mortg. Further, Plaintiffs’ reliance on their attached exhibits 6 1 is misplaced. 2 proposition that “in the Los Angeles market, about 20% more 3 Hispanics were denied refinance” in support of their disparate 4 impact claim. 5 modifications are not the same thing, see 12 C.F.R. § 226.20, and 6 Plaintiffs here sought to modify their loan as a result of 7 financial hardship. 8 modify rather than refinance their loan, the attached statistical 9 studies regarding refinancing are insufficient to state a claim. 10 For example, Plaintiffs cite to Exhibit 14 for the (FAC ¶ 17.) However, refinancing and loan (FAC ¶ 4.) Because Plaintiffs were seeking to Specifically, Plaintiffs rely heavily on Exhibits 13 and 14 to 11 show that Defendant’s policies had a disparate impact on Hispanic 12 borrowers. 13 clear that they do not support the conclusions alleged by 14 Plaintiffs. 15 conventional home loans and refinancing to minorities, but it does 16 not discuss loan modifications. 17 acknowledges that “California cities experienced fewer loan 18 modifications per number of foreclosed loans than the U.S. as a 19 whole,” this does not support Plaintiffs’ disparate impact claim. 20 (See Ex. 14 at 31.) 21 little data on loan modification available, and no where does it 22 state that Hispanics received fewer loan modifications as compared 23 to other borrowers. 24 always indicate which parts of the exhaustive amount of exhibits 25 attached to their FAC actually do support their arguments. 26 e.g., FAC ¶ 17(C) (simply stating, “the recorded statistics fully 27 support this; Exh. 13.”).) However, when the Court reviewed the exhibits, it was Exhibit 13 discusses Defendant’s denial of Additionally, while Exhibit 14 Instead, Exhibit 14 states that there is very (Id. at 30.) Further, Plaintiffs do not 28 7 (See, 1 For the reasons discussed above, Plaintiffs have failed to 2 sufficiently plead facts that would support a disparate impact 3 claim. 4 neutral policies, Plaintiffs fail to state facts that show these 5 policies disproportionately impacted Hispanic borrowers. 6 Therefore, Plaintiffs, ECOA claim must be dismissed. Although Plaintiffs have pled the existence of facially 7 B. 8 Plaintiffs also allege Defendant violated the California 9 Violation of Homeowner Bill of Rights Homeowner’s Bill of Rights (“HBOR”) under California Civil Code 10 section 2924.11(a). 11 Dismiss, the Court dismissed Plaintiffs’ Homeowner’s Bill of Rights 12 Claims without prejudice. 13 pleadings could be amended to state a claim for damages (if the 14 Defendant forecloses) or for injunctive relief (if Plaintiffs 15 pursue some sort of foreclosure alternative with Defendant).” 16 (Dkt. No. 30 at 13.) 17 In granting Defendant’s first Motion to The Court acknowledged that “the In the FAC, Plaintiffs pled under California Civil Code 18 section 2924.11(a), which concerns recording a notice of default 19 after a short sale was approved. 20 only notice of default . . . was recorded in July of 2011.” 21 at 13.) 22 approval to a short sale of the subject property” in March 2014 23 (see FAC ¶ 12), the notice of default was recorded before the short 24 sale was approved and therefore Plaintiffs’ claim under Civil Code 25 section 2924.11(a) cannot stand. 26 Defendant points out that “the (MTD Because Plaintiffs state that Defendant “gave written Plaintiffs accept Defendant’s statement about the timing of 27 the notice of default and request to change the claim to a 28 violation of Civil Code section 2924.11(d) in their Opposition to 8 1 the Motion to Dismiss. (Opp’n Mot. Dismiss at 14:6-10.) 2 2924.11(d) concerns the failure to rescind or cancel a notice of 3 default after a short sale has been approved. 4 “record a rescission of a notice of default or cancel a pending 5 trustee’s sale” after “the short sale has been approved by all 6 parties and proof of funds or financing have been provided to” the 7 lender. 8 pled sufficient facts to state a claim under Civil Code section 9 2924.11(d) because they fail to show that they provided proof of Cal. Civ. Code § 2924.11(d). Section A lender must Here, Plaintiffs have not 10 funds or financing to Defendant, thus requiring Defendant to 11 rescind the notice of default. 12 is dismissed with leave to amend as to § 2924.11(d) if Plaintiffs 13 have facts to show that they did offer the necessary proof. 14 C. Therefore, Plaintiffs’ HBOR claim Violation of California Unfair Competition and Unfair Trade Practices Law 15 Plaintiffs additionally bring a cause of action for violation 16 of California’s unfair competition law (“UCL”) under California 17 Business and Professions Code section 17200. (FAC at 24:15-17.) 18 Plaintiffs contend that Defendant’s “refusal to grant relief on the 19 mortgage loan, and their fraudulent, unfair, and dishonest behavior 20 connected with this refusal, in violation of the ECOA, and the 21 Homeowner Bill of Rights, constitutes unfair conduct and unfair 22 business practices.” (FAC ¶ 60.) 23 Defendant argues that Plaintiffs fail to state a claim for 24 unfair competition because they “fail to properly allege the 25 violation of any other law” and “to whatever extent Plaintiffs 26 attempt to bring claims under the UCL’s ‘unfair’ or ‘fraudulent’ 27 28 9 1 prong, their UCL claim is inadequately pled.” 2 15:5-6.) 3 (MTD at 14:24-25, The UCL “is not confined to anticompetitive business 4 practices, but is also directed toward the public’s right to 5 protection from fraud, deceit, and unlawful conduct. 6 California courts have consistently interpreted the language of 7 section 17200 broadly.” 8 App. 4th 499, 519 (1997) (citations omitted). 9 the UCL when they engage in an “act or practice [that] is unlawful, Thus, Hewlett v. Squaw Valley Ski Corp., 54 Cal. A defendant violates 10 unfair, fraudulent or in violation of section 17500.” 11 Chevrolet v. General Motors Acceptance Corp., 72 Cal. App. 4th 861, 12 878 (1999). 13 17200 are any practices forbidden by law . . . . [The statute] 14 ‘borrows’ violations of other laws and treats them as unlawful 15 practices independently actionable under section 17200 et seq.’” 16 (Id. at 880 (quoting Hewlett, 54 Cal. App. 4th at 531-532).) 17 South Bay “‘The ‘unlawful’ practices prohibited by . . . section Here, Plaintiffs cannot rely on the unlawful prong of the UCL 18 because they have failed to allege facts sufficient to show 19 Defendant violated any law. 20 claims fail, they cannot state a claim for violation of the UCL 21 based on the unlawful prong. 22 given leave to amend their HBOR claims, leave to amend is granted 23 here under the unlawful prong of the UCL. 24 Because Plaintiffs’ ECOA and HBOR But because Plaintiffs have been Additionally, Plaintiffs have not sufficiently pled facts to 25 support a claim for violation of the UCL under the “unfair” or 26 “fraudulent” prong. 27 “requires a showing [that] members of the public ‘are likely to be 28 deceived.’” Establishing a claim for fraud under the UCL South Bay Chevrolet, 72 Cal. App. 4th at 888 (quoting 10 1 Saunders v. Superior Court, 27 Cal. App. 4th 832, 839 (1994)). 2 Plaintiffs have merely alleged that Defendants’ “fraudulent, 3 unfair, and dishonest behavior connected with this refusal . . . 4 constitutes unfair conduct and unfair business practices.” 5 60.) 6 Additionally, in Plaintiffs’ Opposition, they indicate that their 7 UCL claim is based on “Defendant’s breach of law” and therefore the 8 Court need not address further the claims as they relate to the 9 unfair or fraudulent prong. (FAC ¶ This conclusory statement is insufficient to support a claim. (Opp’n Mot. Dismiss at 14:22.) 10 D. 11 Plaintiffs also seek declaratory relief for “a judicial 12 determination of their rights, including their right to amend this 13 First Amended Complaint to add further civil rights and/or other 14 relief.” 15 “granted leave to amend the complaint solely as to the disparate 16 impact claim under ECOA and any related claim under Cal. Bus. & 17 Prof. Code § 17200.” 18 not granted leave to amend with respect to a claim for declaratory 19 relief, this cause of action is dismissed. 20 IV. 21 Declaratory Relief (FAC ¶ 66.) However, as discussed above, Plaintiffs were (Dkt. No. 30 at 20.) Because Plaintiffs were CONCLUSION For the reasons stated above, the Court GRANTS Defendant’s 22 Motion to Dismiss. Plaintiffs have leave to amend the HBOR claim 23 under 2924.11(d) and any UCL claim as it relates to a violation of 24 HBOR, as detailed above. 25 filed within fourteen (14) days from the date of this order. 26 IT IS SO ORDERED. 27 Dated: November 2, 2015 The Second Amended Complaint shall be DEAN D. PREGERSON United States District Judge 28 11
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