House v. Cal State Mortgage Company Inc et al, No. 1:2008cv01880 - Document 49 (E.D. Cal. 2009)

Court Description: Memorandum Decision and ORDER GRANTING IN PART with Leave to Amend and DENYING IN PART Defendants Cal State Mortgage Co., Cal State Home Loans, and Alexander Gomez's 25 Motion to Dismiss First Amended Complaint and Defendant Murphy Sabatino's 30 Motion to Dismiss First Amended Complaint signed by Judge Oliver W. Wanger on 7/9/2009. Amended Complaint due by 8/5/2009. (Sant Agata, S)

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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT FOR THE 7 EASTERN DISTRICT OF CALIFORNIA 8 9 10 JOSEPHINE HOUSE, by her guardian ad litem, PUBLIC GUARDIAN OF STANISLAUS COUNTY, 11 12 Plaintiff, 13 vs. 14 15 CAL STATE MORTGAGE CO., et al., 16 Defendants. 17 18 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. CV-F-08-1880 OWW/GSA MEMORANDUM DECISION AND ORDER GRANTING IN PART WITH LEAVE TO AMEND AND DENYING IN PART DEFENDANTS CAL STATE MORTGAGE CO., CAL STATE HOME LOANS, AND ALEXANDER GOMEZ'S MOTION TO DISMISS FIRST AMENDED COMPLAINT (Doc. 25) AND DEFENDANT MURPHY SABATINO'S MOTION TO DISMISS FIRST AMENDED COMPLAINT (Doc. 30) 19 On December 5, 2008, Plaintiff Josephine House, by her 20 guardian ad litem, Public Guardian of Stanislaus County, 21 commenced this action. Plaintiff is proceeding pursuant to the 22 First Amended Complaint (FAC) filed on February 9, 2009. 23 A. FIRST AMENDED COMPLAINT. 24 The FAC alleges that Plaintiff resided with her sister, Joan 25 House, in a home in Turlock, California that they inherited from 26 1 1 their parents. 2 the Fair Housing Act, 42 U.S.C. § 3602(h); is disabled within the 3 meaning of California Fair Employment and Housing Act (FEHA), 4 California Government Code § 12955.3; is a dependent adult within 5 the meaning of California Welfare & Institutions Code § 15610.23; 6 that her home is a dwelling under the Fair Housing Act, 42 U.S.C. 7 § 3602(B) and a housing accommodation under FEHA, Government Code 8 § 12927(d). 9 unable to care for her property or transact business because of 10 her disability and has had physical or mental limitations that 11 restrict her ability to carry out normal activities or to protect 12 her rights. 13 Plaintiff is handicapped within the meaning of Plaintiff is alleged, since 1998, to have been Defendants include Alexander Gomez, a licensed real estate 14 broker and president, owner, operator and designated broker of 15 Defendants Cal State Home Loans and Cal State Mortgage Co., Inc. 16 The FAC alleges that each of these defendants is a creditor or 17 lender within the meaning of California Financial Code § 4970(g) 18 and Home Ownership and Equity Protection Act, 15 U.S.C. § 1639 et 19 seq., Defendants also are Benjamin Capital, Inc., whose 20 designated officer-broker was Defendant Murray Sabatino, a real 21 estate broker licensed by the California Department of Real 22 Estate. 23 owner-operator of Benjamin Capital, Inc. who personally 24 participated in placing the loans at issue and acted as a broker 25 on behalf of Benjamin Capital and who received a commission, 26 along with Cal State, for each loan extended to Plaintiff. Defendant Larry Menton is alleged to have been the 2 1 Plaintiff is informed and believes that Defendant Menton was not 2 licensed as a broker by the Department of Real Estate at the time 3 the loans were made to Plaintiff.1 4 The FAC alleges: 5 A. INTRODUCTION 14. Defendants individually and through their agents, have engaged in a continuing pattern or practice of unlawful conduct, including, but not limited to: 6 7 8 a. Otherwise making unavailable a dwelling because of disability; 9 b. Imposing discriminatory terms and conditions in connection with the provision of home loans because of disability; 10 11 12 c. Discriminating in the provision of real estate services because of disability; 13 14 d. Charging and collecting excessive and unlawful fees and commission in connection with the provision of home loans; 15 16 e. Charging excessive and unlawful interest in connection with the provision of home loans; 17 18 f. Failing or refusing to make proper disclosures in connection with the provision of home loans; 19 20 g. Breaching their fiduciary duties; and, 21 22 h. Wrongfully depriving a dependent 23 24 25 26 1 Defaults have been entered against Defendants Benjamin Capital, Inc., and Larry Menton. Also named as a Defendant is Joan House because she is a co-owner of the Turlock home and an indispensable party. Plaintiff does not seek monetary damages against Joan House. 3 1 2 3 4 5 6 adult of property. 15. Each of these unlawful practices was committed by each defendant, acting individually or through his or its agents, as part of a scheme to target, defraud, and injure a poor, disabled, dependent person whose dwelling had appreciated by stripping her home of equity. B. JOSEPHINE HOUSE INHERITS HER PARENTS HOUSE AND GETS A MORTGAGE LOAN. 7 8 9 10 16. Josephine House and her sister inherited their parents home, located at 2025 Zinfandel Lane in Turlock. The Turlock home was and remains Plaintiff s only home. Josephine House is poor because of her disabilities. She receives only $700 per month in supplemental security income. 11 12 13 14 15 17. Plaintiff and her sister, after inheriting the home, obtained a $10,000 mortgage loan in order to renovate the kitchen. The plaintiff and her sister were unable to keep up the payments on that loan, and by 2005, they faced foreclosure. C. BENJAMIN CAPITAL SETS UP AND CAL STATE MAKES PREDATORY LOANS TO THE HOUSE SISTERS. 16 17 18 19 20 18. An employee or agent of Benjamin Capital arranged for the House sisters to obtain a mortgage loan from Cal State in June, 2005. Defendants took advantage of the Plaintiff s disability and financial hardship by placing her in a new, larger and more expensive mortgage, even though they knew that Plaintiff lacked the financial resources to repay that loan. 21 22 23 24 25 26 19. The plaintiff and her sister obtained a mortgage loan from Cal State on June 27, 2005. This closed-end loan was misrepresented by the defendants as a home equity line of credit and was predatory. It was a five-year, interest-only loan, with a balloon payment greater than the amount financed. The loan amount financed was $22,306.00, of which $11,182.76 was deducted to pay off the outstanding mortgage and an additional 4 1 2 3 4 5 $8,000.00 to pay off unsecured debt. The APR was 20.995%. The finance charge was $25,863.78. The monthly, interest only payments, were $335.43, and ran from August 1, 2005, to July 1, 2010. The balloon payment in the amount of $28,379.41 would come due on July 1, 2010. Defendants, as part of this transaction, skimmed excessive, unearned and unlawful fees, commissions and charges from the loan proceeds. 6 7 8 9 10 11 12 13 14 15 16 17 20. Less than six months later, defendants gave another even larger and more expensive loan to the plaintiff and her sister. The plaintiff and her sister obtained the current mortgage loan from Cal State on December 7, 2005. This closed-end loan was misrepresented as a home equity line of credit and is predatory. It is a five-year, interest-only loan, with a balloon payment greater than the amount financed. The loan amount financed is $40,353.52, of which $28,742.75 was deducted to pay off the first Cal State mortgage loan. The APR is 18.941%. The finance charge is $41,619.85. The monthly, interest-only payments are $549.19, and run from February 1, 2006, to January 1, 2011. The balloon payment in the amount of $49,571.16. comes due on January 1, 2011. Defendants, as part of this transaction, failed to provide the plaintiff with proper notice of her right to cancel the loan and skimmed unearned, excessive and unlawful fees, commissions and charges from the loan proceeds. 18 19 20 21 22 23 24 25 26 21. Each of these mortgage loans was predatory, arranged by Benjamin Capital, Inc., Larry Menton and/or Murphy Sabatino and their agents, and extended by Cal State to the plaintiff and her sister as part of defendants scheme to collect excessive and unlawful fees, commissions and charges, excessive and unlawful interest, and was calculated to strip equity from the Turlock home. 22. Defendants knew or should have known that Josephine House was disabled, dependent, restricted in her ability to carry out normal activities or protect her rights, and Defendants knew or should have known that the 5 1 2 3 4 5 6 7 plaintiff and her sister could not afford to repay either of the Cal State loans and that their conduct was likely to harm the plaintiff. Defendants and/or their agents made material misrepresentations to the plaintiff, on and before July 1, 2005 and December 15, 2005, the dates that each of these loans closed, claiming that each of these loans was in her best interest and that the fees, commission, charges and interest assessed were lawful. Josephine House reasonably relied upon defendants and their agents misrepresentations, and has suffered injury as a result. 8 9 D. THE COUNTY APPOINTS CONSERVATORS FOR THE HOUSE SISTERS. 12 23. The Superior Court for Stanislaus County appointed the County s Public Guardian as conservator for Josephine House, and a private conservator for Joan House, in January 2008. 13 E. HOUSE RESCINDS THE CAL STATE LOAN. 14 24. Josephine House rescinded the Cal State loans on November 21, 2008. 10 11 15 F. DEFENDANTS INJURED PLAINTIFF. 16 17 18 19 20 21 25. The plaintiff, because of defendants' unlawful acts or practices, has suffered from emotional distress, and attendant bodily injury, has suffered violation of her rights, loss of dignity, embarrassment and otherwise has sustained injury and harm. Plaintiff has also suffered economic losses due to defendants predatory lending. Plaintiff accordingly is entitled to compensatory damages. 25 26. Defendants, in doing the acts of which plaintiff complains, acted with knowledge, intent, oppression, fraud and malice, and with wanton and conscious or reckless disregard of the federally and state protected rights of plaintiff. Plaintiff, accordingly, is entitled to punitive damages. 26 27. There now exists an actual controversy 22 23 24 6 1 2 3 4 5 6 7 8 9 between the parties regarding defendants' duties under the federal and state lending and fair housing laws. Plaintiff, accordingly, is entitled to declaratory relief. 28. Defendants, unless enjoined, will continue to engage in the unlawful acts and the pattern or practice of discrimination described above. Plaintiff has no adequate remedy at law. Plaintiff is now suffering and will continue to suffer irreparable injury from defendants' acts and their pattern or practice of unlawful conduct and discrimination against persons with disabilities unless relief is provided by this Court. Plaintiff, accordingly, is entitled to injunctive relief. 10 The FAC alleges ten claims for relief: 11 12 First Claim for Relief - discriminatory housing practices in violation of the Fair Housing Act, 42 U.S.C. § 3601 (FHA); 13 14 15 16 17 Second Claim for Relief - unlawful practices in violation of the Home Ownership and Equity Protection Act of 1994, 15 U.S.C. § 1639 et seq. (HOEPA); Third Claim for Relief - unlawful practices in violation of Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq. (RESPA); 18 19 Fourth Claim for Relief - unlawful practices in violation of the Truth in Lending Act, 15 U.S.C. § 1601 et seq. (TILA); 20 21 22 23 24 Fifth Claim for Relief - unlawful practices in violation of California Covered Loans Act, California Financial Code § 4970 et. seq. (CCLA); Sixth Claim for Relief - discriminatory housing practices in violation of FEHA, California Government Code § 12955 et seq. (FEHA); 25 Seventh Claim for Relief - Fraud; 26 7 1 2 3 4 5 6 Eighth Claim for Relief - breach of fiduciary duty in violation of California Business and Professions Code § 10176; Ninth Claim for Relief - dependent person abuse in violation of California Welfare and Institutions Code §§ 15610 et seq. and 15657; Tenth Claim for Relief - pattern or practice of unlawful conduct in violation of California Business and Professions Code § 17200. 7 The FAC prays for compensatory, statutory and punitive damages 8 according to proof. The FAC also prays for a judgment that: 9 10 2. Declares that defendants have violated the provisions of the applicable federal and state laws; 11 12 13 14 15 3. Enjoins all unlawful practices complained about and imposes affirmative injunctive relief requiring defendants, their partners, agents, employees, assignees, and all persons acting in concert or participating with them, to take affirmative action to address the effect of their unlawful and discriminatory conduct; 17 4. Awards up to three times the amount of actual damages to plaintiff against each defendant pursuant to Civil Code § 3345. 18 The FAC also prays for attorneys fees and costs and all such 19 other relief as the Court deems just. 16 20 Defendants Gomez, Cal State Home Loans and Cal State 21 Mortgage Co., Inc., move to dismiss the FAC for failure to state 22 a claim upon which relief can be granted as barred by the 23 applicable statutes of limitation; that mortgage lenders do not 24 owe borrowers a fiduciary duty; and for failure to satisfy the 25 pleading requirements for fraud set forth in Rule 9(b), Federal 26 Rules of Civil Procedure. Defendant Sabatino moves to dismiss 8 1 the FAC as barred by the applicable statutes of limitation; for 2 failure to satisfy Rule 9(b); that the Fifth Claim for Relief 3 fails to allege facts sufficient to establish that the loan is a 4 covered loan under California Financial Code § 4970; that 5 Plaintiff failed to seek administrative relief pursuant to FEHA 6 as to the Sixth Claim for Relief and failed to establish that her 7 FEHA claim is based upon the requisite housing accommodations 8 governed by the California Government Code; and that the Eighth 9 Claim for breach of fiduciary duty under California Business and 10 Professions Code does not provide a private right of action. 11 Cal State Defendants join Sabatino s motion to dismiss. 12 B. GOVERNING STANDARDS. 1. 13 14 The Motion to Dismiss - Rule 12(b)(6). A motion to dismiss under Rule 12(b)(6) tests the 15 sufficiency of the complaint. Novarro v. Black, 250 F.3d 729, 16 732 (9th Cir.2001). Dismissal of a claim under Rule 12(b)(6) is 17 appropriate only where it appears beyond doubt that the 18 plaintiff can prove no set of facts in support of his claim which 19 would entitle him to relief. 20 46 (1957). 21 complaint lacks a cognizable legal theory or where the complaint 22 presents a cognizable legal theory yet fails to plead essential 23 facts under that theory. 24 Inc., 749 F.2d 530, 534 (9th Cir.1984). 25 dismiss under Rule 12(b)(6), the court must assume the truth of 26 all factual allegations and must construe all inferences from Conley v. Gibson, 355 U.S. 41, 45- Dismissal is warranted under Rule 12(b)(6) where the Robertson v. Dean Witter Reynolds, 9 In reviewing a motion to 1 them in the light most favorable to the nonmoving party. 2 Thompson v. Davis, 295 F.3d 890, 895 (9th Cir.2002). 3 legal conclusions need not be taken as true merely because they 4 are cast in the form of factual allegations. 5 Inc., 349 F.3d 1191, 1200 (9th Cir.2003). 6 should grant a motion to dismiss if plaintiffs have not pled 7 enough facts to state a claim to relief that is plausible on its 8 face. Williams ex rel. Tabiu v. Gerber Products Co., 523 F.3d 9 934, 938 (9th Cir.2008), quoting Bell Atlantic Corp. v. Twombley, However, Ileto v. Glock, A district court 10 550 U.S. 544, 570 (2007). Factual allegations must be enough 11 to raise a right to relief above the speculative level. Id. 12 While a complaint attacked by a Rule 12(b)(6) motion to dismiss 13 does not need detailed factual allegations, a plaintiff s 14 obligation to provide the grounds of his entitlement to 15 relief requires more than labels and conclusions, and a 16 formulaic recitation of the elements of a cause of action will 17 not do. 18 plausibility when the plaintiff pleads factual content that 19 allows the court to draw the reasonable inference that the 20 defendant is liable for the misconduct alleged. 21 plausibility standard is not akin to a probability requirement, 22 but it asks for more than a sheer possibility that a defendant 23 has acted unlawfully, 24 are merely consistent with a defendant s liability, it stops 25 short of the line between possibility and plausibility of 26 entitlement to relief. Id. at 557. Bell Atlantic, id. at 555. Id. A claim has facial Id. at 556. The Where a complaint pleads facts that 10 In Ashcroft v. Iqbal, ___ 1 U.S. ___, 129 S.Ct. 1937 (2009), the Supreme Court explained: Two working principles underlie our decision in Twombley. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitations fo the elements of a cause of action, supported by mere conclusory statements, do not suffice ... Rule 8 marks a notable and generous departure from the hyper-technical, codepleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss ... Determining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense ... But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not show[n] - that the pleader is entitled to relief. .... 2 3 4 5 6 7 8 9 10 11 12 13 14 In keeping with these principles, a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are wellpleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. 15 16 17 18 19 20 21 Immunities and other affirmative defenses may be upheld on 22 a motion to dismiss only when they are established on the face of 23 the complaint. 24 Cir.1999); Jablon v. Dean Witter & Co., 614 F.2d 677, 682 (9th 25 Cir. 1980) 26 consider the facts alleged in the complaint, documents attached See Morley v. Walker, 175 F.3d 756, 759 (9th When ruling on a motion to dismiss, the court may 11 1 to the complaint, documents relied upon but not attached to the 2 complaint when authenticity is not contested, and matters of 3 which the court takes judicial notice. 4 F.3d 699, 705-706 (9th Cir.1988). 2. 5 6 Parrino v. FHP, Inc, 146 Rule 9(b). Rule 9(b) requires that, in all averments of fraud, the 7 circumstances constituting fraud be stated with particularity. 8 One of the purposes behind Rule 9(b) s heightened pleading 9 requirement is to put defendants on notice of the specific 10 fraudulent conduct in order to enable them to adequately defend 11 against such allegations. See In re Stac Elec. Litig., 89 F.3d 12 1399, 1405 (9th Cir.1996). Furthermore, Rule 9(b) serves to 13 deter the filing of complaints as a pretext for the discovery of 14 unknown wrongs, to protect [defendants] from the harm that comes 15 from being subject to fraud charges, and to prohibit plaintiffs 16 from unilaterally imposing upon the court, the parties and 17 society enormous social and economic costs absent some factual 18 basis. Id. 19 Rule 9(b) requires that allegations of fraud be specific 20 enough to give defendants notice of the particular misconduct 21 which is alleged to constitute the fraud charged to that they can 22 defend against the charge and not just deny that they have done 23 anything wrong. 24 F.Supp.2d 846, 855 (C.D.Cal.2004); see also Neubronner v. Milkin, 25 6 F.3d 666, 671 (9th Cir.1993). 26 allegations must state the time, place and specific content of Celado Int l., Ltd. v. Walt Disney Co., 347 As a general rule, fraud 12 1 the false representations as well as the identities of the 2 parties to the misrepresentation. 3 Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir.1986). 4 explained in Neubronner v. Milken, supra, 6 F.3d at 672: Schreiber Distrib. v. ServAs This court has held that the general rule that allegations of fraud based on information and belief do not satisfy Rule 9(b) may be relaxed with respect to matters within the opposing partys knowledge. In such situations, plaintiffs cannot be expected to have personal knowledge of the relevant facts ... However, this exception does not nullify Rule 9(b); a plaintiff who makes allegations on information and belief must state the factual basis for the belief. 5 6 7 8 9 10 11 C. STATUTES OF LIMITATIONS. 12 Initially, Defendants moved to dismiss the HOEPA, RESPA, 13 TILA, and FEHA claims (Second, Third, Fourth, and Sixth Claims 14 for Relief) on the ground that they were barred by the one-year 15 statutes of limitations applicable to those claims, the FHA 16 (First Claim for Relief) as barred by the two-year statute of 17 limitations, and the CCLA and fraud claims (Fifth and Seventh 18 Claims for Relief) as barred by the three-year statute of 19 limitations applicable to those claims. 20 alleges that Plaintiff obtained the First Loan on June 27, 2005 21 and the Second Loan on December 7, 2005 and contending that 22 Plaintiff did not file this action until December 8, 2008, 23 Defendants argued that all of these claims for relief are time- 24 barred. 25 26 Noting that the FAC The docket initially showed that this action was commenced on December 8, 2008. However, on May 7, 2009, after the motions 13 1 to dismiss had been filed, a Clerk s Notice of Docket Correction 2 was filed: The Date Filed date for 1 Complaint and 2 Motion to Appoint Guardian Ad Litem has been changed to reflect the actual date filed date, 12/5/2008. Initial filing fee in this matter tendered on 12/5/2008. 3 4 5 6 To the extent Defendants motions to dismiss were based on the 7 December 8, 2008 filing date for the Complaint, the motions to 8 dismiss are DENIED. 9 Plaintiff argues that those claims for relief subject to a 10 three-year statute of limitations with respect to the December 11 2005 Loan are not time-barred because of the allegation in 12 Paragraph 22 of the FAC the December 2005 Loan closed on December 13 15, 2005. 14 Plaintiff acknowledges that the statute of limitations for 15 damages under HOEPA and TILA (Second and Fourth Claims for 16 Relief) is one-year. 17 for rescission under HOEPA and TILA is three years, 15 U.S.C. § 18 1635(f), and contends that Defendants motions to dismiss fail to 19 acknowledge the rescission remedy available to Plaintiff. 20 She asserts that the statute of limitations Defendants reply that the FAC does not seek rescission of 21 the loans and refer to the only allegation in the FAC mentioning 22 rescission, i.e., Paragraph 24, where Plaintiff avers that she 23 rescinded the Cal State loans on November 21, 2008. 24 The FAC does not seek rescission under HOEPA or TILA. There 25 is no claim for rescission in the FAC nor does the prayer for 26 relief seek rescission. If Plaintiff intends to seek rescission 14 1 under HOEPA or TILA, Plaintiff must amend to so allege. 2 Plaintiff argues that FHA, HOEPA, RESPA and TILA claims 3 (First, Second, Third, and Fourth Claims for Relief) are subject 4 to equitable tolling. 5 910, 915 (9th Cir.1986), cert. denied, 484 U.S. 802 6 (1987)(equitable tolling available in a TILA action); Brewer v. 7 IndyMac Bank, 609 F.Supp.2d 1104, 1118 (E.D.Cal.2009)(equitable 8 tolling available in a RESPA action); Matthews v. New Century 9 Mortg. Corp., 185 F.Supp.2d 874, 883 (S.D.Ohio 2002)(applying See King v. State of California, 784 F.2d 10 equitable tolling to a FHA claim); In re Community Bank of 11 Northern Virginia, 418 F.3d 277, 305 (3rd Cir.2005)(equitable 12 tolling available to HOEPA claim). 13 equitable tolling has been applied where mental incompetence is 14 shown, see Stoll v. Runyon, 165 F.3d 1238, 1242 (9th Cir.1999),2 15 refers to the allegations in Paragraph 4 of the FAC: Plaintiff, noting that Josephine House, since at least 1998, has been unable to care for her property or transact business because of her disability. Josephine House, at all times relevant to this action, has had physical or mental limitations that restrict her ability to carry out normal activities or to protect her rights. 16 17 18 19 20 Plaintiff also refers to the allegation in Paragraph 23 that the 21 Public Guardian was appointed as conservator for Plaintiff in 22 23 24 25 26 2 Plaintiff also cites Brockamp v. United States, 67 F.3d 260, 263 (9th Cir.1995), rev d on other grounds, 519 U.S. 347 (1997) as authority that mental incompetence constitutes a ground of equitable tolling. However, the Supreme Court reversed the Ninth Circuit, holding that the statutory limitations period on tax refund claims does not authorize equitable tolling and was not equitably tolled by a taxpayers mental disabilities. 15 1 January 2008. 2 sufficiently plead equitable tolling of the applicable statutes 3 of limitations 4 These allegations, Plaintiff contends, for the FHA, HOEPA, RESPA and TILA claims. Defendants reply that these allegations do not sufficiently 5 allege equitable tolling based on mental incapacity. 6 cite Robles v. Leppke, 2007 WL 2462058 (E.D.Cal.2007), where 7 Judge Ishii, in adopting a recommendation of dismissal for 8 failure to state a claim, stated: 9 10 11 12 13 14 15 16 17 18 19 20 Defendants Equitable tolling may be applied when extraordinary circumstances beyond a plaintiff s control made it impossible to file a claim on time. Stoll v. Runyon, 165 F.3d 1238, 1242 (9th Cir.1999). Mental incapacity and the effect it has upon the ability to file a lawsuit is an extraordinary circumstance beyond a plaintiff s control. Id. The objections allegations alone are insufficient to establish a valid claim for equitable tolling because they are vague and unsupported by any medical diagnosis or other evidence showing Plaintiff s mental or medical state during the limitation period. See Grant v. McDonnell Douglas Corp., 163 F.3d 1136, 1138 (9th Cir.1998)(holding letter from psychologist inadequate basis for equitable tolling); Stoll v. Runyon, 165 F.3d 1238, 1242 (9th Cir.1999)(stating that equitable tolling is proper where overwhelming evidence demonstrates that complainant was completely disabled during the limitations period. 21 Both Grant and Stoll, relied upon by Judge Ishii, involved 22 review of summary judgments, not the adequacy of pleading. 23 Defendants also cite Miller v. Rosenker, 578 F.Supp.2d 67 24 (D.D.C.2008), which did involve a motion to dismiss. However, in 25 that case, the plaintiff alleged that he suffered from severe 26 16 1 panic disorder and depression, which the District Court concluded 2 is not evidence of the type of total incapacity necessary to 3 warrant equitable tolling, id. at 72, and did not allege that he 4 had been adjudged incompetent or had a guardian appointed for 5 him. 6 Id. The Court finds that the FAC does not allege specific facts 7 from which it may be inferred that Plaintiff is entitled to 8 equitable tolling of the statutes of limitation based on mental 9 disability. No specific facts are alleged concerning the nature 10 of Plaintiff s mental disability or her status as a dependent 11 adult. 12 outside the scope of the limitations period, fails to demonstrate 13 that Plaintiff is entitled to equitable tolling based on mental 14 incapacity at the time the loans were obtained. The appointment of a conservator in January 2008, 15 Regardless of equitable tolling, Plaintiff further argues 16 that the HOEPA and TILA rescission claims (Second and Fourth 17 Claims for Relief) are not barred by the statute of limitations 18 because the loans were not consummated until January 2008, when 19 Plaintiff was appointed a conservator. 20 U.S.C. § 1635(f): An obligor s right of rescission shall expire 21 three years after the date of consummation of the transaction 22 .... 23 consummation as the time that a consumer becomes contractually 24 obligated on a credit transaction. 25 Grant, 890 F.2d 118, 120 (9th Cir.1989): 26 Plaintiff refers to 15 Regulation Z, 12 C.F.R. § 226.2(a)(13), defines As explained in Jackson v. When a consumer becomes contractually 17 obligated is, in turn, determined by looking to state law: 1 2 1. State law governs. When a contractual obligation on the consumer s part is created is a matter to be determined under applicable law; Regulation Z does not make this determination. A contractual commitment agreement, for example, that under applicable law binds the consumer to the credit terms would be consummation. Consummation, however, does not occur merely because the consumer has made some financial investment in the transaction ... unless, of course, applicable law holds otherwise. 3 4 5 6 7 8 9 10 12 C.F.R. Pt. 225, Supp.1 (Official Staff Interpretations), Commentary 2(a)(13). 11 12 California Civil Code § 1550 sets forth the elements of a 13 contract: 14 15 It is essential to the existence of a contract that there should be: 16 1. Parties capable of contracting; 17 2. Their consent; 18 3. A lawful object; and 19 4. A sufficient cause or consideration. 20 California Civil Code § 1556 provides that [a]ll persons are 21 capable of contracting, except ... persons of unsound mind .... 22 23 24 25 26 Plaintiff cites California Civil Code § 39: (a) A ... contract of a person of unsound mind, but not entirely without understanding, made before the incapacity of the person has been judicially determined, is subject to rescission, as provided in Chapter 2 (commencing with Section 1688) of Title 5 of Part 2 of Division 3. 18 (b) A rebuttable presumption affecting the burden of proof that a person is of unsound mind shall exist for purposes of this section if the person is substantially unable to manage his or her own financial resources or resist fraud or undue influence. Substantial inability may not be proved solely by isolated incidents of negligence or improvidence. 1 2 3 4 5 6 Plaintiff also cites California Civil Code § 1689(b)(7): 7 A party to a contract may rescind the contract in the following cases: 8 ... 9 (7) Under the circumstances provided for in Section[] 39 .... 10 11 Relying on Paragraph 4 of the FAC, Plaintiff contends that 12 she has alleged sufficient facts to raise the presumption that 13 she lacked capacity to consummate the loans at the times they 14 were obtained for the purpose of her HOEPA and TILA claims. 15 Plaintiff argues that the earliest date on which both loans were 16 consummated for these purposes was January 2008" and that 17 Defendants cannot establish any statute of limitation bar to 18 Plaintiff s TILA and HOEPA claims. 19 Again, Defendants point out that the FAC does not allege any 20 claims for rescission. 21 argue that the FAC fails to allege facts that she was of unsound 22 mind. 23 24 25 26 See discussion supra. Defendants further Defendants contend: There is only the claim that she had physical or mental limitations that restrict her ability to carry out normal activities to protect her rights. ... This broad statement lacks any reference to Ms. House s ability to manage her finances, or her ability to resist fraud or undue influence. As such, the Court 19 must speculate that Ms. House is entitled to the rebuttable presumption, and speculation is not permissible. 1 2 3 The FAC does not allege specific facts from which it may be 4 inferred that Plaintiff was incapable of entering into the loan 5 contracts in July and December 2005. 6 Plaintiff s mental disability are alleged; the allegations that 7 Plaintiff was mentally disabled and is a dependent adult are 8 conclusory. 9 No facts describing Plaintiff argues that Defendants refusal to rescind 10 Plaintiff s loans constitutes an independent TILA violation. 11 Plaintiff refers to the allegation in Paragraph 24 of the FAC 12 that she rescinded the Cal State loans on November 21, 2008. 13 [Presumably, the TAC means that the Public Guardian rescinded the 14 loans]. 15 F.3d 1161, 1165 (9th Cir.2002) as holding that [w]hen a creditor 16 refuses to cancel a loan after receiving timely notice of 17 rescission, the creditor violates TILA. 18 IndyMac Bank, supra, 609 F.Supp.2d at 1114: Plaintiff cites Miguel v. Country Funding Corp., 309 See also Brewer v. 22 Where a creditor refuses to cancel a loan after receiving timely notice of rescission, the creditor violates TILA ... Pursuant to 15 U.S.C. § 1640(e), the obligor has one year from the date of refusal to file suit for damages arising out of the failure to rescind. 23 Plaintiff contends that [i]t can be inferred from the complaint 24 that the Defendants failed to cancel the loans after Ms. House 25 rescinded them, therefore, the complaint alleges an independent 26 claim under 15 U.S.C. subdivision 1640(e). 19 20 21 20 1 However, as Defendants reply, no where does the FAC allege 2 that Defendants refused to cancel the loans after Plaintiff 3 timely and properly rescinded them. 4 proceed with this claim, she must allege it. 5 If Plaintiff intends to Plaintiff argues that the statutes of limitations applicable 6 the supplemental state law claims are tolled pursuant to 7 California Code of Civil Procedure § 352(a). 8 9 10 11 Section 352(a) provides: If a person entitled to bring an action ... is, at the time the cause of action accrued ... insane, the time of the disability is not part of the time limited for the commencement of the action. 12 Insanity, for purposes of Section 352, is defined as a 13 condition of mental derangement which renders the sufferer 14 incapable of caring for [her] property or transacting business, 15 or understanding the nature or effects of [her] acts. DeRose v. 16 Carswell, 196 Cal.App.3d 1011, 1027 (1987), quoting Hsu v. Mt. 17 Zion Hospital, 259 Cal.App.2d 562, 571 (1968). 18 refers to California Welfare and Institutions Code § 15610.23(a): 19 Dependent adult means any person between the ages of 18 and 64 years who resides in this state and who has physical or mental limitations that restrict his or her ability to carry out normal activities or to protect his or her rights, including, but not limited to, persons who have physical or mental abilities that have diminished because of age. 20 21 22 23 Plaintiff also 24 Defendants reply that the allegations in Paragraph 4 are the 25 quintessential example of legal conclusions cast in the form of 26 factual allegations. 21 1 Defendants are correct that no facts are alleged from which 2 it may be inferred that Plaintiff is insane within the meaning 3 of Section 352 or is a dependent adult within the meaning of 4 Section 15610.23(a). 5 6 7 Plaintiff argues her fraud claim (Seventh Claim for Relief) is timely under the discovery rule. Pursuant to California Code of Civil Procedure § 338(d), a 8 claim for relief on the ground of fraud is not deemed to have 9 accrued until the discovery, by the aggrieved party, of the facts 10 11 constituting the fraud. With regard to the December 2005 loan, Plaintiff refers to 12 the allegation in Paragraph 22 that Defendants and/or their 13 agents made material misrepresentations to the plaintiff, on and 14 before July 1, 2005 and December 15, 2005, the dates that each of 15 these loans closed, claiming that each of these loans was in her 16 best interest and that the fees, commission, charges and interest 17 assessed were lawful. 18 contention that Plaintiff necessarily knew the terms of the 19 December 2005 loan at the time she obtained it and agreed to its 20 terms is unavailing: 21 22 23 Plaintiff contends that Defendants Defendants cannot assume that Plaintiff must have had knowledge of the loan terms when the loans were entered into on 2005 [sic], solely because the complaint filed on her behalf by her guardian ad litem ... in 2008, recited the loan terms. 24 Plaintiff argues that she is entitled to the delayed 25 discovery rule with respect to the July 2005 loan. 26 22 1 2 3 As explained in General Bedding Corp. v. Echevarria, 947 F.2d 1395, 1397 (9th Cir.1991): Discovery, for purposes of § 388(4) [now § 388(d)], is not limited to actual knowledge: 4 5 6 7 8 9 10 11 12 13 14 The rule is that the plaintiff must plead and prove the facts showing: (a) Lack of knowledge. (b) Lack of means of obtaining knowledge (in the exercise of reasonable diligence the facts could not have been discovered at an earlier date). (c) How and when he did actually discover the fraud or mistake. Under this rule constructive and presumed notice or knowledge are the equivalent to knowledge. So, when the plaintiff has notice or information of circumstances to put a reasonable person on inquiry, or has the opportunity to obtain knowledge from sources open to his investigation (such as public records or corporation books) the statute begins to run. 15 16 17 ... Thus, plaintiff has discovered its claim under § 338(4) [now § 388(d)], and the statute begins to run, when it has actual or constructive notice of its claims. 18 A plaintiff whose complaint shows on its face that his claim 19 would be barred without the benefit of the discovery rule must 20 specifically plead facts to show (1) the time and manner of 21 discovery and (2) the inability to have made earlier discovery 22 despite reasonable diligence. 23 show diligence, and conclusory allegations will not withstand 24 demurrer. E-Fab, Inc. v. Accountants, Inc. Services, 153 25 Cal.App.4th 1308, 1319 (2007). 26 The burden is on the plaintiff to The FAC does not comply with these pleading requirements 23 1 with regard to the July 2005 loan. Plaintiff cites Lee Myles 2 Associates Corp. v. Paul Rubke, Enterprises, Inc., 557 F.Supp.2d 3 1134, 1138 (S.D.Cal.2008), wherein the District Court ruled: The 4 Complaint does not allege when Plaintiff discovered the alleged 5 fraud or when it could have discovered it. 6 Defendants contend the fraud claim is untimely, their motion to 7 dismiss is denied. 8 9 To the extent The District Court is not bound by a decision of another District Court. The requirements for application of the 10 discovery rule in California are clear; Plaintiff must make the 11 requisite allegations. 12 13 Defendants motion to dismiss the FAC as barred by the statute of limitations is GRANTED WITH LEAVE TO AMEND. 14 D. COMPLIANCE WITH RULE 9(b). 15 Defendants move for dismissal of the fraud claim (Seventh 16 Claim for Relief) on the ground that the FAC does not comply with 17 the requirements of Rule 9(b). 18 19 20 21 22 23 24 25 26 The Seventh Claim for Relief, after incorporating all preceding allegations, alleges: 42. Defendant Menton engaged in the fraudulent acts and practices alleged above and misrepresented the costs and nature of the loans obtained by Plaintiff from Cal State in July 2005 and December 2005. 43. Plaintiff is informed and believes that defendant Gomez knowingly misrepresented, and/or knowingly permitted, approved, or ratified the misrepresentation of a close-end loan as an open-end loan for both the July 2005 loan and December 2005 loan in order to maximize fees, commissions, interest and 24 1 costs otherwise prohibited by law. 2 44. Cal State engaged in the fraudulent acts and practices alleged above and knowingly concealed the terms of the loans and the costs associated with the loans obtained in July 2005 and December 2005. Plaintiff is informed and believes that Cal State knowingly placed her into a loan they knew or should have known she could not afford to repay and knew or should have known that she would face foreclosure. Defendants in so doing collected excessive and unlawful fees, commissions, interest and costs and stripped equity from Plaintiff s home. 3 4 5 6 7 8 9 10 11 12 13 45. Plaintiff is informed and believes that defendant Murphy Sabatino participated by telephone, on or about November, 2005, in making a loan to the plaintiff and misrepresenting and/or concealing its terms. Plaintiff is further informed and believes that defendant Sabatino aided and abetted defendant Menton in collecting and charging commissions in violation of state law on both of the loans extended by Cal State. 14 15 16 17 18 19 20 46. Defendants Menton and Cal State and their agents knew or should have known that Plaintiff was a dependent adult as described above. 47. Each Defendant injured plaintiff by committing fraud against her, a disabled person, in violation of California Civil Code §§ 1571, 1573, and 1575, among other statutes. Plaintiff, citing Moore v. Kayport Package Express., Inc., 21 885 F.2d 531, 540 (9th Cir.1989), and Swartz v. KPMG LLP, 476 22 F.3d 756, 764 (9th Cir.2007), argues that exceptions to 23 application of Rule 9(b) have been recognized where it is unjust 24 to require the Plaintiff to plead the requisite facts. 25 26 In Moore v. Kayport Package Express, the Ninth Circuit discussed the particularity requirements in allegations of 25 1 corporate fraud under Section 10(b) and Rule 10b-5. 2 complaint alleged that defendants had fraudulently inflated the 3 market price of securities before plaintiffs bought them. 4 Defendants challenged the allegations because they were based on 5 information and belief, and failed to specify the conduct of each 6 defendant. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 The The Ninth Circuit ruled: In Wool, we explained that allegations of fraud based on information and belief usually do not satisfy the particularity requirements under rule 9(b) ... However, the rule may be relaxed as to matters within the opposing party s knowledge. For example, in cases of corporate fraud, plaintiffs will not have personal knowledge of all of the underlying facts ... In such cases, the particularity requirement may be satisfied if the allegations are accompanied by a statement of the facts on which the belief is founded. ... Instances of corporate fraud may also make it difficult to attribute particular fraudulent conduct to each defendant as an individual. To overcome such difficulties in cases of corporate fraud, the allegations should include the misrepresentations themselves with particularity and, where possible, the roles of the individual defendants in the misrepresentations .... In the present case, the prospectuses are not specifically identified as to content, date, or author. The complaint does not specify which plaintiff received which prospectus, or which plaintiff(s) made purchases through the stockbroker defendants, or which securities the investors allegedly purchased. The investors allegations do not adequately state the facts on which their belief is founded, and thus fail to satisfy even the relaxed standard in Wool ... Moreover, unlike the situation in Wool, the accountant, lawyer and stockbroker defendants in this case are not a narrowly defined group of corporate officers or directors who are alleged to have had day-to-day control over the fraudulent entities or their finances. 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 In Swartz v. KPMG LLP, the Ninth Circuit ruled: Swartz s original complaint included several allegations detailing the time, place, and content of representations made by KPMG and B & W to Swartz. No one disputes that Swartz satisfied his pleading burden with respect to those defendants. Rather, Presidio and DB claim that because the complaint failed to specify any false representations made by them, it failed the Rule 9(b) standard. Swartz argues that since DB and Presidio would be liable for the misrepresentations of their co-conspirators, and since he plea a conspiracy, the allegations concerning the KPMG and B & W misrepresentations are sufficient .... First, there is no absolute requirement that where several defendants are sued in connection with an alleged fraudulent scheme, the complaint must identify false statements made by each and every defendant. Participation by each conspirator in every detail in the execution of the conspiracy is unnecessary to establish liability, for each conspirator may be performing different tasks to bring about the desired result. ... On the other hand, Rule 9(b) does not allow a complaint to merely lump multiple defendants together but require(s) plaintiffs to differentiate their allegations when suing more than one defendant ... and inform each defendant separately of the allegations surrounding his alleged participation in the fraud. ... In the context of a fraud suit involving multiple defendants, a plaintiff must, at a minimum, identif[y] the role of [each] defendant [] in the alleged fraudulent scheme. .... 21 Relying on these cases, Plaintiff argues: 22 23 24 25 26 Defendants argument that the Plaintiff, a dependent adult, must recall the actual time and place of each statement is indicative of their persistent failure to acknowledge the allegations of Plaintiff s mental disability. It would be unjust to allow the Cal State Defendants to use the same disability that allowed them to take advantage of Ms. House 27 in the first place to also prevent her from asserting a claim against them. 1 2 As Defendants reply, the cases upon which Plaintiff relies 3 do not constitute authority excusing Plaintiff from compliance 4 with the requirements of Rule 9(b). The requirements were 5 relaxed in very specific circumstances and did not excuse the 6 requirements in their entirety. While the FAC alleges that 7 Plaintiff is mentally disabled, no details of her disability are 8 given, other than that they are serious enough to justify the 9 appointment of a public conservator in January 2008. If 10 Plaintiff cannot remember when alleged misrepresentations were 11 made or who made them, Plaintiff cannot state a claim for relief 12 for fraud. 13 Plaintiff nonetheless argues that the FAC satisfies Rule 14 9(b) s specificity requirements because the FAC alleges facts 15 specific enough to give Defendants notice of the particular 16 misconduct that is alleged to constitute the fraud. Plaintiff 17 argues that the failure of the FAC to allege the specific 18 statements made, when and where the statements were made, and by 19 whom should be disregarded: 20 21 22 23 24 First, it would require the Court to ignore a critical fact in this case, i.e., that Plaintiff is a dependent adult with limited mental capacity ... Second, when multiple defendants are involved in an alleged fraudulent scheme there is no absolute requirement that the Plaintiff must identify false statements made by each and every defendant. 25 The Cal State Defendants reply that the allegations of the 26 28 1 2 3 4 5 6 7 8 9 10 FAC do not pass muster: Merely explaining that Cal State was the lender in both transactions is insufficient, where there are no allegations explaining the misrepresentations that Cal State purportedly made ... Ms. House does allege that Cal State knowingly concealed the terms of the loans and the costs associated with the loans obtained in July 2005 and December 2005[,] but this statement fails to allege how Cal State accomplished this alleged concealment. What did Cal State tell Ms. House, who said it, when did they say it, where did they saw it, and how does it follow that the terms were concealed when they were disclosed to Ms. House in writing? These are all details that are necessary to state a claim for fraud, but Ms. House has pled none of this information .... 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Ms. House s allegations related to Defendant Alexander Gomez do not fill this void, for numerous reasons. First, Plaintiff alleges that Defendant Gomez misrepresented that the loans were open-ended, but she does so on information and belief ... [F]raud allegations on information and belief are only permissible where the information is solely within the opposing party s knowledge ... If Defendant Gomez in fact made such a statement to Plaintiff, then it is not solely within Cal State s knowledge. As such, Plaintiff s allegation on information and belief does not suffice. Second, even if the statements were appropriately pled as being within Plaintiff s knowledge, they are lacking the requisite information. They do not specify when, where, or to whom Defendant Gomez purportedly made the statements, nor do they explain the falsity of the statements ... Plaintiff s Complaint [sic] asks the Court to take it for granted that Cal State had contact with Plaintiff and made misrepresentations directly to her, but her Complaint [sic] contains no facts which support this. The Cal State Defendants further reply that the FAC does not explain each defendants role in the allegedly fraudulent 29 1 conduct: This omission is critical because, as the lender, Cal State normally does not communicate directly with the borrower. Ordinarily, the borrower communicates only with the mortgage broker. The only allegations specific to the Cal State Defendants fail to identify when, where, or to whom the purported misrepresentations were made ... This lack of specificity is most likely the result of the fact that Ms. House never communicated with Cal State, other than through the written loan agreement. Additionally, these allegations fail to explain how a false misrepresentation occurred when the true terms of the loans were disclosed to Ms. House in writing ... Plaintiff claims that [i]t is not necessary for Plaintiff to allege that the terms of the loan documents were altered in order for there to be a misrepresentation[,] but this fact is fundamental to Plaintiff s claim because it goes to the falsity requirement ... How can there have been a false representation if Ms. House agreed to the terms of the loans and those terms did not subsequently change? This omission renders Plaintiff s claim incomplete. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 The Cal State Defendants motion to dismiss the Seventh Claim 17 for Relief 18 LEAVE TO AMEND. 19 for failure to comply with Rule 9(b) is GRANTED WITH As to Defendant Sabatino, Plaintiff refers to the 20 allegations that Sabatino is a licensed real estate broker and 21 the designated officer-broker of Benjamin Capital and that 22 Benjamin Capital, Larry Menton and/or Sabatino arranged the loans 23 at issue, that Defendants, including Sabatino misrepresented that 24 the loans were in her best interest and that the fees, 25 commissions, charges and interest were lawful, and that Sabatino, 26 on information and belief, participated by telephone in November 30 1 2005 in making the loan for Plaintiff and misrepresenting and/or 2 concealing its terms. 3 are sufficient to identify the circumstances of Sabatino s fraud 4 because Sabatino filed an Answer to the FAC. Plaintiff argues that these allegations 5 Defendant Sabatino replies that, if the November 2005 6 telephone call actually occurred, Plaintiff is required to plead 7 the details of the phone call, i.e., what was said, what 8 purported representations were made, and why they were false. 9 argues that the filing of the Answer generally denying 10 Plaintiff s allegations does not negate his motion to dismiss 11 based on non-compliance with Rule 9(b). 12 He 15(a)(3), Federal Rules of Civil Procedure: Sabatino refers to Rule Unless the court orders otherwise, any required response to an amended pleading must be made within the time remaining to respond to the original pleading or within 10 days after service of the amended pleading, whichever is later. 13 14 15 16 Sabatino cites General Mills, Inc. v. Kraft Foods Global, Inc., 17 495 F.3d 1378, 1380-1381 (Fed.Cir.2007), which states that a 18 defendant facing a deadline to file an answer to the amended 19 pleading may do so without jeopardizing the right to file a 20 motion to dismiss. 21 Defendant Sabatino s motion to dismiss the Seventh Claim for 22 Relief for failure to comply with Rule 9(b) is GRANTED WITH LEAVE 23 TO AMEND. 24 Defendants further argue that the specificity requirements 25 of Rule 9(b) should apply to all of the claims for relief alleged 26 31 1 in the FAC. 2 F.Supp.2d 992, 997-998 (N.D.Cal.2007): 3 4 5 Defendants cite Stickrath v. Globalstar, Inc., 527 Fraud is not an essential element of either a UCL or CLRA claim, but that does not mean that heightened pleading never applies to such claims. Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1103 (9th Cir.2003). To the contrary: 6 7 8 9 10 11 12 13 14 15 16 17 18 19 In cases where fraud is not a necessary element of a claim, a plaintiff may choose nonetheless to allege in the complaint that the defendant has engaged in fraudulent conduct. In some cases, the plaintiff may allege a unified course of fraudulent conduct and rely entirely on that course of conduct as the basis of a claim. In that event, the claim is said to be grounded in fraud or to sound in fraud, and the pleading of that claim as a whole must satisfy the particularity requirement of Rule 9(b) .... In other cases, however, a plaintiff may choose not to allege a unified course of fraudulent conduct in support of a claim, but rather to allege some fraudulent and some non-fraudulent conduct. In such cases, only the allegations of fraud are subject to Rule 9(b) s heightened pleading requirements. 20 Id. at 1103-04. 21 Plaintiffs thus correctly argue that Rule 9(b) does not necessarily apply to allegations of non-fraudulent conduct. However, they fail to persuade the Court that their allegations are not based on a unified course of fraudulent conduct. Id. at 1103. Plaintiffs allege that Defendants failed to disclose material information about the quality of its service and also made affirmative misrepresentations about that quality. The alleged omissions and 22 23 24 25 26 32 1 2 3 4 5 misrepresentations in this case therefore go hand in hand, with all of the allegations related to how Defendants advertised its service. Accordingly, this Court concludes that the heightened pleading requirements of Rule 9(b) apply to Plaintiffs claims in their entirety. Plaintiff argues that the FAC does not rely entirely on a 6 course of fraudulent conduct as the basis for her claims and, 7 therefore, she is not required to comply with Rule 9(b) as to any 8 claims for relief other than the Seventh Claim for Relief. 9 Plaintiff cites Vess v. Ciby-Geigy, supra, 317 F.3d at 1104, 10 where in cases where a plaintiff does not allege a unified course 11 of fraudulent conduct, the Ninth Circuit cited Ross v. Bolton 904 12 F.2d 819, 823 (2nd Cir.1990), that [t]o require that non-fraud 13 allegations be stated with particularity merely because they 14 appear in a complaint alongside fraud averments ... serves no 15 similar reputational-preserving function, and would impose a 16 burden on plaintiffs not contemplated by the notice pleading 17 requirements of Rule 9(b). 18 19 20 21 22 23 24 25 26 As Defendants reply, the ten claims for relief alleged in the FAC are all premised on the same factual allegations: Plaintiff points to no facts in her Opposition which reveal a separate basis for her non-fraud claims; this is because the facts alleged by Plaintiff in her Complaint [sic], which are incorporated into every single claim, all revolve around the alleged misrepresentations that were made by one or all of the defendants ... In other words, Plaintiff uses the same facts to support her fraud claim that she uses for all her other claims. Although Ms. House adds more detailed allegations to her fraud claim that do not exist in her general background, the 33 general facts still all turn on the Defendants purported misrepresentations, and therefore sound in fraud. 1 2 3 4 Defendants motions to dismiss on this ground are GRANTED WITH LEAVE TO AMEND. 5 E. FIFTH CLAIM FOR RELIEF - VIOLATION OF CCLA. 6 Defendants move to dismiss the Fifth Claim for Relief for 7 violation of California Covered Loans Act, California Financial 8 Code § 4970 et seq. on the ground that the FAC alleges no facts 9 establishing that the loan at issue is actually a covered loan 10 11 12 13 14 as defined by Section 4970(b): Covered loan means a consumer loan in which the original principal balance of the loan does not exceed the most current conforming loan limit for a single-family first mortgage loan established by the Federal National Mortgage Association in the case of a mortgage or deed of trust, and where one of the following conditions are met: 15 16 17 18 19 20 21 22 (1) For a mortgage or deed of trust, the annual percentage rate at consummation of the transaction will exceed by more than eight percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor. (2) The total points and fees payable by the consumer at or before closing for a mortgage or deed of trust will exceed 6 percent of the total loan amount. 23 Defendants cite Pottinger v. Accredited Home Lenders, Inc., 24 2009 WL 616445 (E.D.Cal.2009), which dismissed a claim for 25 violation of Section 4970 because Plaintiff alleged no facts 26 34 1 indicating that the loan qualified as covered under the 2 section. 3 what the actual points and fees were, what the conforming loan 4 limits for a single-family residence were at the time of the 5 loans, or what the Treasury yields were at the time of the 6 loans. 7 8 Defendants argue that there is no indication in the FAC Plaintiff asserts that the FAC alleges facts from which it may be inferred that the loans were covered; Plaintiff s Complaint provides [Defendants] with the dates, annual percentage rate and the amounts financed of each loan (FAC ¶¶ 19, 20). The allegations in the complaint, read with Subdivision 4790(b) ... establish that the July and December loans meet the statutory definition of covered loans because they have annual percentage rates exceeding eight percentage points of the yield on Treasury Securities at the time relevant to this action and the loans do not exceed the conforming loan limit set by Fannie Mae. 9 10 11 12 13 14 15 Defendants motion to dismiss the Fifth Claim for Relief is 16 GRANTED WITH LEAVE TO AMEND. Plaintiff must allege the specific 17 facts from which it may be inferred that the loans at issue were 18 covered loans within the meaning of the statute. 19 F. SIXTH CLAIM FOR RELIEF - VIOLATION OF FEHA. 20 Defendants move to dismiss the Sixth Claim for Relief for 21 discriminatory housing practices in violation of FEHA, California 22 Government Code §§ 12955 et seq. on various grounds. 23 1. Failure to Exhaust Administrative Remedies. 24 Defendants, citing Rojo v. Kliger, 52 Cal.3d 65, 83 (1990), 25 an employment discrimination case, move to dismiss the Sixth 26 35 1 Claim for Relief on the ground that Plaintiff has not alleged 2 exhaustion of administrative remedies. 3 However, as Plaintiff notes, Government Code § 12989.1 4 provides that an aggrieved person may commence a civil action 5 for discriminatory housing practice whether or not a complaint 6 has been filed under this part and without regard to the status 7 of any complaint. 8 Defendants motion to dismiss on this ground is DENIED. 2. 9 Government Code § 12955(i). 10 Defendants move to dismiss the Sixth Claim for Relief to the 11 extent the FAC purports to state a claim for violation of Section 12 12955(i), making it unlawful: For any person or other organization or entity whose business involves real estaterelated transactions to discriminate against any person in making available a transaction, or in the terms and conditions of a transaction, because of ... disability. 13 14 15 16 Defendants argue that the FAC contains no allegations that 17 Defendants discriminated against Plaintiff in the terms and 18 conditions of the Cal State loans based on her claimed protected 19 status: The Cal State loans were in fact made available to 20 Plaintiff, and Plaintiff has not alleged that the terms were any 21 different because of her disabled status. 22 Plaintiff argues that Paragraphs 14 and 18-22 allege that 23 Defendants imposed discriminatory terms and conditions with the 24 provision of the loans and discriminated in the provision of real 25 estate services because of her disability. 26 36 Plaintiff cites 1 Matthews v. New Century Mortgage Corp., 185 F.Supp.2d 874, 885- 2 887 (S.D.Ohio 2002) and Hargraves v. Capital City Mortgage Corp., 3 140 F.Supp.2d 7, 19-22 (D.D.C.2000), for the proposition that 4 making predatory loans with unfair terms and conditions targeted 5 at protected classes of persons violates the FHA. 6 cites California Government Code § 12955.6: Nothing in this part 7 shall be construed to afford to the classes protected under this 8 part, fewer rights or remedies that the federal Fair Housing Act 9 Amendments Act of 1988 ... and its implementing regulations (24 10 11 12 13 14 15 16 17 18 19 Plaintiff C.F.R. 100.1 et seq. .... Matthews discussed a claim of reverse redlining in violation of the FHA: Reverse redlining is the situation in which a lender unlawfully discriminates by extending credit to a neighborhood or class of people (typically living in the same neighborhood) on terms less favorable than would have been extended to people outside the particular class at issue ... In like fashion, the Plaintiffs in this case allege that New Century violated the FHA by granting them a loan on grossly unfair terms based on their age, sex and marital status, and that such terms would not have been extended to credit applicants who were not elderly, unmarried women. 20 21 22 23 24 25 26 ... The elements of a reverse redlining claim brought under the FHA, 42 U.S.C. § 3605, are a variation of the elements that typically must be shown for a claim of discrimination under § 3605. A plaintiff invoking § 3605 must demonstrate the same factors that she would have to demonstrate for a Title VII claim. See Babin, 18 F.3d at 346 (finding that the plaintiffs must show: (1) that they were members of a protected class; (2) that they attempted to engage in a real estaterelated transaction with the defendant and 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 met all relevant qualifications for doing so; (3) that defendant lender refused to transact business with the plaintiffs despite their qualifications; and (4) that the defendant lender continued to engage in that type of transaction with other parties with similar qualifications). To set forth a cognizable reverse redlining claim under § 3605, essentially the same elements must be established, except that the plaintiff need not show that the lender refused to transact business, but only that the lender refused to transact business on fair terms. Specifically, to establish a prima facie case of discrimination in violation of § 3605 based on reverse redlining, the plaintiff must show: (1) that she is a member of a protected class; (2) that she applied for and was qualified for loans; (3) that the loans were given on grossly unfavorable terms; and (4) that the lender continues to provide loans to other applicants with similar qualifications, but on significantly more favorable terms ... In the alternative, if the plaintiff presents direct evidence that the lender intentionally targeted her for unfair loans on the basis of sex and marital status, the plaintiff need not also show that the lender makes loans on more favorable terms to others. See Hargraves, 140 F.Supp.2d at 20 (finding that such a requirement would allow an injustice to continue so long as it was visited exclusively on one class of people). This Court finds that the Plaintiffs have alleged sufficient facts to survive the motion to dismiss their claim under § 3605. First, the Plaintiffs clearly are members of a protected class. Second, they applied for and were qualified for loans. Third, the Plaintiffs have alleged that New Century gave them their loans on grossly unfavorable terms. Finally, while the Defendant is correct that the Plaintiffs have not alleged that other similarly situated people were given loans on more favorable terms, the Plaintiffs have nonetheless presented a cognizable claim, as they allege and may be able to show directly that New Century 38 intentionally targeted them for unfair loans on the basis of their sex and marital status, thus eliminating the necessity of proving the fourth element of the prima facie case. 1 2 3 Although the FAC does not allege that Defendants provided 4 loans to other applicants with similar qualifications, but on 5 significantly more favorable terms, the FAC does allege in 6 Paragraph 15 that [e]ach of these unlawful practices was 7 committed by each defendant ... as part of a scheme to target ... 8 a poor, disabled, dependent person whose dwelling had appreciated 9 by stripping her home of equity. There are no other specific, 10 factual allegations that Defendants targeted Plaintiff or others 11 for allegedly grossly unfair loans on the basis of disability, 12 e.g., whether Defendants contacted Plaintiff and others with 13 mental disabilities in order to make these loans. 14 Defendant Sabatino argues that he was the designated officer 15 for Benjamin Capital, the loan broker: 16 [M]ortgage brokers do not set the loans. Thus, to the extent any discriminatory terms exist, those been determined by Cal State, not Sabatino. Defendant Sabatino did any loan with plaintiff. 17 18 19 20 terms of would have defendant not make Sabatino s argument ignores the conclusory allegations in 21 Paragraphs 10 and 11 that each defendant was the agent of the 22 other and that Defendants conspired to violated federal and state 23 laws. 24 specificity is required. 25 26 Because Rule 9 applies to conspiracy claims, heightened Sabatino replies by referring to Plaintiff s citation to California Government Code § 12927(h)(2), contending that 39 1 Plaintiff made no reference to the statute applying to 2 refinancing loans. 3 Section 12927(h)(2) provides: Real estate-related transactions include any of the following: 4 5 6 7 8 (1) The making or purchasing of loans or providing other financial assistance that is for the purpose of purchasing, constructing, improving, repairing, or maintaining a dwelling, or that is secured by residential real estate. (2) The selling, brokering, or appraising of residential real property. 9 Sabatino cites no authority that FEHA does not apply to the 10 refinancing of residential real estate loans and the statute is 11 broad enough to cover such transactions. 12 Plaintiff further argues that the FAC states a claim for 13 violation of Sections 12955(g) and (k): 14 It shall be unlawful: 15 ... 16 18 (g) For any person to aid, abet, incite, compel, or coerce the doing of any of the acts or practices declared unlawful in this section, or attempt to do so. 19 ... 20 (k) To otherwise make unavailable or deny a dwelling based on discrimination because of ... disability .... 17 21 22 Plaintiff refers to the allegations in Paragraph 15 that 23 each of the unlawful practices alleged in Paragraph 14 was 24 committed by each defendant, acting individually or through his 25 or its agents, as part of a scheme to target, defraud, and injure 26 a poor, disabled, dependent person whose dwelling had appreciated 40 1 2 by stripping her home of equity. However, as Sabatino replies, the FAC fails to allege 3 specific facts from which it may be inferred that he aided or 4 abetted or conspired with the other defendants to violate FEHA. 5 With respect to Section 12955(k), Plaintiff, relying on 6 Paragraph 14, argues that the loans arranged by Defendant 7 Sabatino, in concert with Defendants Benjamin Capital and Menton 8 and extended by the Cal State Defendants, imposed excessive and 9 illegal charges, fees and other terms and conditions that will 10 11 inevitably deprive Ms. House of her property. Plaintiff s reliance on Section 12955(k) to state a claim is 12 without merit. 13 $10,000 dollar loan because she was facing foreclosure due to her 14 inability to pay that prior loan. 15 and none has been located that her position is a valid 16 construction of Section 12955(k). 17 18 19 20 21 Plaintiff owns her home; she refinanced a prior Plaintiff cites no authority Defendants motion to dismiss the Sixth Claim for Relief is GRANTED WITH LEAVE TO AMEND. G. EIGHTH CLAIM FOR BREACH OF FIDUCIARY DUTY. 1. Cal State Defendants. The Cal State Defendants move to dismiss the Eighth Claim 22 for Relief for breach of fiduciary duty in violation of 23 California Business and Professions Code § 10176 on the ground 24 that these defendants did not owe Plaintiff a fiduciary duty as 25 lenders of the loans. 26 Cal.App.3d 465, 476 (1989): See Price v. Wells Fargo Bank, 213 41 It has long been regarded as axiomatic that the relationship between a bank and its depositor arising out of a general deposit is that of a debtor and creditor. ... A debt is not a trust and there is not a fiduciary relation between a debtor and creditor as such. ... The same principle should apply with even greater clarity to the relationship between a bank and its loan customers. 1 2 3 4 5 6 Plaintiff does not dispute this law. However, citing inter 7 alia, Saunders v. Superior Court, 27 Cal.App.4th 832, 846 (1994), 8 Plaintiff argues that the Cal State Defendants may be liable for 9 the claim of breach of fiduciary duty on the ground of aiding and 10 11 abetting. Saunders, citing Rest.2d Torts, § 876, held that 12 [l]iability may also be imposed on one who aids and abets the 13 commission of an intentional tort if the person (a) knows the 14 other s conduct constitutes a breach of duty and gives 15 substantial assistance or encouragement to the other to so act 16 .... 17 Plaintiff refers to the allegations in Paragraph 5 that 18 Defendant Gomez is a licensed real estate broker and contends 19 that, therefore, he is fully aware of the duty a real estate 20 broker owes to his or her client. 21 allegations in Paragraph 12: 22 23 24 Plaintiff also refers to the Plaintiff is informed and believes that each defendant (except Joan House) knew that the other defendants conduct breached their duty to plaintiff and each defendant gave substantial assistance or encouragement to the other defendants conduct. 25 Plaintiff contends that she has pled sufficient facts alleging 26 42 1 that the Cal State Defendants were aware that Defendants 2 Sabatino, Benjamin Capital and its agent Menton owed a fiduciary 3 duty to the Plaintiff and that their conduct breached the duty 4 owed to Plaintiff. 5 in Paragraphs 19-21 of the FAC: 6 7 8 9 10 11 12 13 14 15 Plaintiff further refers to the allegations 19. The plaintiff and her sister obtained a mortgage loan from Cal State on June 27, 2005. This closed-end loan was misrepresented by the defendants as a home equity line of credit and was predatory. It was a five-year, interest-only loan, with a balloon payment greater than the amount financed. The loan amount financed was $22,306.00, of which $11,182.76 was deducted to pay off the outstanding mortgage and an additional $8,000.00 to pay off unsecured debt. The APR was 20.995%. The finance charge was $25,863.78. The monthly, interest only payments, were $335.43, and ran from August 1, 2005, to July 1, 2010. The balloon payment in the amount of $28,379.41 would come due on July 1, 2010. Defendants, as part of this transaction, skimmed excessive, unearned and unlawful fees, commissions and charges from the loan proceeds. 16 17 18 19 20 21 22 23 24 25 26 20. Less than six months later, defendants gave another even larger and more expensive loan to the plaintiff and her sister. The plaintiff and her sister obtained the current mortgage loan from Cal State on December 7, 2005. This closed-end loan was misrepresented as a home equity line of credit and is predatory. It is a five-year, interest-only loan, with a balloon payment greater than the amount financed. The loan amount financed is $40,353.52, of which $28,742.75 was deducted to pay off the first Cal State mortgage loan. The APR is 18.941%. The finance charge is $41,619.85. The monthly, interest-only payments are $549.19, and run from February 1, 2006, to January 1, 2011. The balloon payment in the amount of $49,571.16. comes due on January 1, 2011. Defendants, as part of this transaction, failed to provide the plaintiff with proper notice of her right to 43 1 2 3 4 5 6 7 cancel the loan and skimmed unearned, excessive and unlawful fees, commissions and charges from the loan proceeds. 21. Each of these mortgage loans was predatory, arranged by Benjamin Capital, Inc., Larry Menton and/or Murphy Sabatino and their agents, and extended by Cal State to the plaintiff and her sister as part of defendants scheme to collect excessive and unlawful fees, commissions and charges, excessive and unlawful interest, and was calculated to strip equity from the Turlock home. 8 Plaintiff argues that the Cal State Defendants provided 9 encouragement to the Broker Defendants in breaching their 10 fiduciary duty by providing excessive commissions for each loan 11 the brokers obtained from the Plaintiff. 12 Defendants reply that the FAC does not satisfy the 13 requirements set forth in Twombley: 14 15 16 17 18 19 20 This allegation does not explain how or why Cal State was aware of the Broker Defendants fiduciary relationship with Ms. House, nor does it provide any specific facts substantiating Plaintiff s claim that Cal State provided excessive commission [sic] to the Broker Defendants. There are no amounts listed to demonstrate whether the actual commissions paid were substantial, or enough to amount to encouragement. Paragraph 11 of the FAC alleges that Defendants conspired to 21 violate federal and state laws and that [t]he fiduciary duty 22 owned by any one defendant to plaintiff therefore was owed by 23 each defendant to plaintiff. 24 As Defendants reply, a party, such as Cal State, will not be 25 held liable for conspiracy where the party could not be in 26 violation of the underlying act. 44 In Saunders, the Rest. 2d 1 Torts, provides that liability may be imposed against an aider 2 and abettor of an intentional tort who gives substantial 3 assistance to the other in accomplishing a tortious result and 4 the person s own conduct, separately considered, constitutes a 5 breach of duty to the third person. [Emphasis added]. 6 Plaintiff does not rely on this basis for aider and abettor 7 liability, there are the allegations in Paragraph 11. 8 cite Doctor s Co. v. Superior Court, 49 Cal.3d 39, 47 (1989): Although Defendants 18 [T]he Gruenberg-Wise rule does not preclude the subjection of agents to conspiracy liability for conduct which the agents carry out as individuals for their individual advantage and not solely on behalf of the principal ... The limited nature of that rule is also consistent with two cases ... In each of those cases a plaintiff, defrauded by means of one defendant s violation of a fiduciary duty, was allowed to recover against another defendant who, though not subject to the fiduciary s duty, had conspired in the fraud. Since the nonfiduciary defendants had acted not simply as agents or employees of the fiduciary defendants but rather in furtherance of their own financial gain, they could not have been relieved from liability under the GruenbergWise rule. 19 Relying on Plaintiff s assertion in her opposition brief that the 20 Cal State Defendants provided encouragement to the Broker 21 Defendants in breaching their fiduciary duty by providing 22 excessive commissions for each loan, Defendants argue that 23 Plaintiff s position forecloses the possibility that Cal State 24 was acting for their own individual advantage, as this statement 25 explains that the Broker Defendants are the ones who obtained 26 excessive commissions, not Cal State. 9 10 11 12 13 14 15 16 17 45 1 2 The Cal State Defendants motion to dismiss is GRANTED WITH LEAVE TO AMEND. 2. 3 4 Defendant Sabatino. Defendant Sabatino moves to dismiss the Eighth Claim for 5 breach of fiduciary duty in violation of California Business and 6 Professions Code § 10176 on the ground that Section 10176 does 7 not provide a private right of action. 8 Business and Professions Code § 10176 provides: The commissioner may, upon his or her own motion, and shall, upon the verified complaint in writing of any person, investigate the actions of any person engaged in the business or acting in the capacity of a real estate licensee within this state, and he or she may temporarily suspend or permanently revoke a real estate license at any time where the licensee, while a real estate licensee, in performing or attempting to perform any of the acts within the scope of this chapter has been guilty of any of the following: [list of prohibited actions or omissions]. 9 10 11 12 13 14 15 16 Defendant Sabatino cites, inter alia, Walters v. Marler, 83 17 Cal.App.3d 1 (1978). In Walters, Walters, the buyer of improved 18 real estate, retained Leseman, a real estate agent with Lampliter 19 Realty, whose broker of record was Proulx. After purchasing the 20 residence, Walters discovered that only a small portion of the 21 residence was located on the designated lot. Walters sued the 22 seller, the seller s broker and agent, and Lampliter, Leseman and 23 Proulx. Based on evidence that Proulx was the president of 24 Lampliter and its qualifying real estate broker and that Leseman 25 was a real estate broker employed by Lampliter, Walters contended 26 46 1 that, as the qualifying broker for Lampliter, Proulx was 2 individually liable for his negligence in the performance of his 3 duty to supervise. 4 argument: 6 7 8 9 10 11 12 13 14 15 16 18 The Court of Appeal rejected the Despite this evidence of negligence on Proulx part, Proulx may not be held individually liable to Walters for injuries sustained as a result of Leseman s misrepresentations. The noncontractual rights and liabilities of a real estate broker are governed and determined by the general laws of agency ... In the instant case, Leseman was undeniably an agent for both Walters and Lampliter; however, he was not an agent for Proulx. Any action by the qualifying broker, Proulx, must be regarded as an action by the corporation and not by the broker as an individual. Thus, as an agent of the corporation, Proulx owed a duty to Lampliter to supervise the work of Lampliter employees. Proulx may therefore be liable to Lampliter in an action for indemnification. However, Proulx owed no duty to Walters to supervise Leseman s work; he therefore may not be held personally liable to Walters for Leseman s negligent misrepresentation. 5 17 Id. at 35. Id. Plaintiff responds that Defendant s argument that California 19 does not recognize a private right of action directly against a 20 corporate officer-broker for alleged violations of Section 11076 21 is misleading. 22 Cal.3d 773, 782 (1979): 23 24 25 26 Plaintiff cites Wyatt v. Union Mortgage Co., 24 A mortgage loan broker is customarily retained by a borrower to act as the borrower s agent in negotiating an acceptable loan. All persons engaged in this business in California are required to obtain real estate licenses ... Thus, general principles of agency (Civ. Code, §§ 2228 and 2322 ...) 47 6 combine with statutory duties created by the Real Estate Law (see Bus. & Prof. Code, § 10176, subds. (a), (i)) to impose upon mortgage loan brokers an obligation to make a full and accurate disclosure of the terms of a loan to borrowers and to act always in the utmost good faith toward their principals. The law imposes on a real estate agent the same obligation of undivided service and loyalty that it imposes on a trustee in favor of his beneficiary. 7 Plaintiff refers to the allegations in Paragraph 6 that Defendant 8 Sabatino was the designated officer-broker of Defendant Benjamin 9 Capital, Inc. and in Paragraph 21 that the loans were arranged 10 by Benjamin Capital, Inc., Larry Menton and/or Murphy Sabatino 11 and their agents. 12 11-14 that Defendant Sabatino failed to provide full and accurate 13 disclosures of the loan terms and conspired to violate state and 14 federal laws. 15 sufficient to state a claim for breach of fiduciary duty based on 16 general principles of agency and violation of statutory duties 17 created by the Real Estate Law, that together allow for 18 individual private rights of action. 19 is not asserting a claim against Defendant Sabatino based solely 20 on his position as the designated officer-broker of Benjamin 21 Capital, Inc. or solely under Section 10176. 22 that Defendant Sabatino is liable because he was the only 23 defendant licensed to act as the broker for the loans and, 24 referring to Paragraph 45, was personally involved in the 25 transactions. 26 Relief does not rest solely on a violation of Section 11076 and 1 2 3 4 5 Plaintiff refers to allegations in Paragraphs Plaintiff contends that she has alleged facts Plaintiff contends that she Plaintiff asserts Plaintiff reiterates that the Eighth Claim for 48 1 will amend to reflect this if necessary. Defendant Sabatino s motion to dismiss is GRANTED WITH LEAVE 2 3 TO AMEND. The Eighth Claim for Relief allages that [e]ach 4 Defendant injured plaintiff by breaching his or its fiduciary 5 duty in violation of California Business and Professions Code § 6 10176. CONCLUSION 7 8 For the reasons stated: 9 1. 10 Defendants motions to dismiss are GRANTED IN PART WITH LEAVE TO AMEND AND DENIED IN PART as set forth above: a. Defendants motion to dismiss the FAC as barred by the statute of limitations is granted with leave to amend; 11 12 b. Defendants motion to dismiss the FAC for noncompliance with Rule 9(b) is granted with leave to amend; 13 14 c. Defendants motion to dismiss the Fifth Claim for Relief is granted with leave to amend; 15 16 d. Defendants motion to dismiss the Sixth Claim for Relief is granted with leave to amend; 17 18 e. Defendants motion to dismiss the Eighth Claim for Relief is granted with leave to amend. 19 20 2. 21 Plaintiff shall file a Second Amended Complaint in 22 accordance with the rulings in this Memorandum Opinion and Order 23 within twenty (20) days of its filing date. 24 IT IS SO ORDERED. 25 Dated: 668554 July 9, 2009 /s/ Oliver W. Wanger UNITED STATES DISTRICT JUDGE 26 49

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