Perryman v. Litton Loan Servicing, LP et al, No. 3:2014cv02261 - Document 100 (N.D. Cal. 2014)

Court Description: ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS by Judge Jon S. Tigar granting in part and denying in part 37 Motion to Dismiss; granting 43 Motion to Dismiss; granting in part and denying in part 44 Motion to Dismiss. (wsn, COURT STAFF) (Filed on 10/1/2014)

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Perryman v. Litton Loan Servicing, LP et al Doc. 100 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 MARGO PERRYMAN, Case No. 14-cv-02261-JST Plaintiff, 8 v. 9 10 LITTON LOAN SERVICING, LP, et al., Defendants. ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS Re: ECF Nos. 37, 43, 44. United States District Court Northern District of California 11 12 I. INTRODUCTION In this proposed class action challenging Defendants’ practices of instituting lender-placed 13 14 insurance (“LPI”), the four named defendants -- Southwest Business Corporation (“Southwest”), 15 Litton Loan Servicing, LP (“Litton”), Ocwen Loan Servicing, LLC (“Ocwen”), and American 16 Security Insurance Company (“ASIC”) -- have filed three separate motions to dismiss. ECF Nos. 17 37, 43 & 44. The matter came for hearing on August 21. 18 II. BACKGROUND 19 A. Procedural History 20 Plaintiff Margo Perryman (“Plaintiff” or “Perryman”) filed a proposed class action 21 complaint in May 2014. Class Action Complaint (“Compl.”), ECF No. 1. The complaint brings 22 twelve causes of action: for “honest services fraud” against Defendants Litton and Southwest 23 under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), for honest services 24 fraud against Defendants Ocwen and ASIC, for mail and wire fraud under RICO against Litton 25 and Southwest, for mail and wire fraud against Ocwen and ASIC, for conspiracy to violate RICO 26 against Defendants Litton and Southwest, for conspiracy to violate RICO against Defendants 27 Ocwen and ASIC, for breach of fiduciary duty against Litton and Ocwen, for aiding and abetting a 28 breach of fiduciary duty against Southwest and ASIC, for “breach of contract, including breach of Dockets.Justia.com 1 the implied covenant of good faith and fair dealing” against Litton and Ocwen, for unjust 2 enrichment against all Defendants, for conversion against Litton and Ocwen, and for violation of 3 California’s Unfair Competition Law (“UCL”), Cal. Bus & Prof. Code §§ 17200, et seq, against 4 all Defendants. 5 Defendant ASIC filed a motion to dismiss on June 20. Motion to Dismiss Class Action 6 Complaint by Defendant American Security Insurance Company (“ASIC Mot.”), ECF No. 37. 7 Defendant Southwest filed a motion to dismiss on June 30, and Defendants Litton & Ocwen 8 jointly filed a third motion to dismiss the same day. Southwest Business Corporation’s Motion to 9 Dismiss (“Southwest Mot.”), ECF No. 43; Litton Loan Servicing, LP’s and Ocwen Loan 10 Servicing, LLC’s Motion to Dismiss (“Litton & Ocwen Mot.”), ECF No. 44. United States District Court Northern District of California 11 B. Allegations in the Complaint 12 Plaintiff Perryman’s home is secured by a deed of trust signed by her and by lender 13 Fremont Investment & Loan. ¶ 33,1 and Deed of Trust, Exh. A to Compl. Under the deed of trust, 14 Plaintiff is required to insure the property against the risks of fires, floods and/or other hazards. 15 Id. If Plaintiff fails to maintain the required coverage, the deed of trust allows the lender to obtain 16 the required insurance coverage at Plaintiff’s expense. Id. This is a common practice known as 17 “lender-placed insurance” (“LPI”). ¶¶ 1, 4. Specifically, section 5 of Plaintiff’s deed of trust, entitled “property insurance,” states: 18 19 Borrower shall keep the improvements now existing or hereafter erected on the Property insured against loss by fire, hazards included within the term “extended coverage,” and any other hazards including, but not limited to, earthquakes and floods, for which Lender requires insurance. This insurance shall be maintained in the amounts (including deductible levels) and for the periods that Lender requires. What Lender requires pursuant to the preceding sentences can change during the term of the Loan. 20 21 22 23 24 [. . .] 25 If Borrower fails to maintain any of the coverages described above, Lender may obtain insurance coverage, at Lender’s option and Borrower’s expense. Lender is under no obligation to purchase any 26 27 28 1 All “¶” citations are to the operative complaint. 2 particular type or amount of coverage. Therefore, such coverage shall cover Lender, but might or might not protect Borrower, Borrower’s equity in the Property, or the contents of the Property, against any risk, hazard or liability and might provide greater or lesser coverage than was previously in effect. Borrower acknowledges that the cost of the insurance coverage so obtained might significantly exceed the cost of insurance that Borrower could have obtained. Any amounts disbursed by Lender under this Section 5 shall become additional debt of Borrower secured by this Security Instrument. These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment. 1 2 3 4 5 6 7 8 Deed of Trust § 5. The deed goes on to provide that if the “Borrower fails to perform the 9 covenants and agreements contained in this Security Instrument . . . then Lender may do and pay for whatever is reasonable or appropriate to protect Lender’s interest in the Property and rights 11 United States District Court Northern District of California 10 under this Security Instrument, including protecting and/or assessing the value of the Property, and 12 securing and/or repairing the Property.” Deed of Trust § 9. “Any amounts disbursed by Lender 13 under this Section 9 shall become additional debt of Borrower secured by this Security 14 Instrument.” Id. On February 22, 2011, Litton was the servicer of Plaintiff’s loan. ¶ 34. On that date, 15 16 Plaintiff received a letter on Litton’s letterhead, stating that Plaintiff’s home was in a flood zone 17 and that she was required by her deed of trust to provide proof of flood insurance. Id.2 Plaintiff 18 does not dispute that she never provided such proof of insurance.3 Subsequently, Plaintiff 19 received other letters on Litton letterhead, stating that flood insurance had been placed on her 20 property and that her escrow account had been charged for the premium. ¶¶ 35-36. 21 On October 14, 2011, Litton and Ocwen sent Plaintiff a notice stating that effective 22 November 1, 2011, Litton would transfer the servicing of Plaintiff’s account to Ocwen. ¶ 37. “On 23 November 2, 2011, Litton sent Plaintiff a notice stating that due to the transfer of Plaintiff’s 24 25 26 27 28 Plaintiff alleges that it was “Southwest, using Litton letterhead,” who sent this letter. For reasons more fully discussed infra at III-B, the Court does not consider this a well-pled allegation entitled to a presumption of truth. 3 Plaintiff does not, at least in this lawsuit, dispute that she was required under her deed of trust to purchase flood insurance and that her lenders were entitled to purchase it and charge her at least some amount for the cost of obtaining flood insurance if she failed to do so. 3 2 1 account to Ocwen, her flood insurance was cancelled effective November 1, 2011, but that an 2 earned premium of $463.43 was charged to her account for the time the policy was in force.” Id. 3 Litton sent subsequent notices to Plaintiff that it had established new LPI on her home with insurer 4 ASIC, and charged her escrow account for those premiums. ¶¶ 38-41. Plaintiff alleges that every time Southwest or ASIC force-places an insurance policy on 6 one of Litton or Ocwen borrowers’ properties, they also kick back a portion of the premium to 7 Litton, Ocwen, or one of their affiliates. ¶¶ 108-110, 119-122. Litton and Ocwen perform no 8 work and provide no services to earn the “costs” or “expenses.” ¶ 9. Instead, Southwest and 9 ASIC make these payments to Litton and Ocwen for the sole purpose of securing the privilege of 10 force-placing insurance on a designated portion of Litton and Ocwen’s portfolio. Id. “As a result 11 United States District Court Northern District of California 5 of these practices, borrowers often end up paying two to ten times as much for force-placed 12 insurance than for insurance they could get on the open market.” ¶ 15. 13 C. 14 In addition to the complaint, the parties have proposed that the Court also consider the 15 16 Requests for Judicial Notice following documents, to which the opposing party has not objected: Exhibits to the Declaration of Rebecca Voyles (“Voyles Decl.”), ECF Nos. 37-1 through 17 37-4. These are public records of form and premium rate filings made to and approved by 18 the California Department of Insurance, which are public records noticeable pursuant to 19 Rule 201(b) of the Federal Rules of Evidence. See Leghorn v. Wells Fargo Bank, N.A., 20 950 F. Supp. 2d 1093, 1106 (N.D. Cal. 2013). The documents can also be considered to 21 the extent they are relevant to a dispute over Plaintiff’s Article III standing and the Court’s 22 subject-matter jurisdiction. See Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th 23 Cir.2004) (“In resolving a [Rule 12(b)(1)] factual attack on jurisdiction, the district court 24 may review evidence beyond the complaint without converting the motion to dismiss into a 25 motion for summary judgment.”); see also Kingman Reef Atoll Investments, L.L.C. v. 26 United States, 541 F.3d 1189, 1196-97 (9th Cir. 2008) “[I]n general, a district court is 27 permitted to resolve disputed factual issues bearing upon subject matter jurisdiction in the 28 context of a Rule 12(b)(1) motion”). 4 1 The Declaration of Ronald K. Wilson (“Wilson Decl.”), and exhibits A-J thereto. These 2 are ASIC’s records of correspondence sent on Ocwen letterhead to Perryman (ECF No. 37- 3 5). ASIC argues that these are noticeable because the complaint refers to correspondence 4 sent by the servicers to Perryman, and no party contests the letters’ authenticity. ASIC 5 Mot., at 3, n. 1 (citing Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1160 (9th Cir. 6 2012)). While Plaintiff objects to the Court considering very similar correspondence 7 submitted by Litton & Ocwen during the period that Southwest allegedly was the insurer 8 on her home, see infra, Plaintiff has not disputed the authenticity of the correspondence 9 submitted by ASIC and she has not objected to the Court considering it. To the contrary, she quotes extensively from the declaration and attached letters in her opposition brief, 11 United States District Court Northern District of California 10 arguing that they support the viability of her claims. Plaintiff’s Opposition to American 12 Security Insurance Company’s Motion to Dismiss (“Opp. to ASIC”), ECF No. 53, at 13 10:18-24, 11:27, 12:18-13:6, 16:6-19, 22:19-25. 14 Paragraphs 17-21 of the Wilson Declaration, and Exhibit J thereto, which provide 15 additional information about ASIC’s rate filings with the California Department of 16 Insurance. This information can be considered to the extent it is relevant to the Court’s 17 consideration of Plaintiff’s standing. 18 The declaration of Plaintiff Margo Perryman (ECF No. 55). Plaintiff submitted this 19 document solely to dispute the noticeability of documents submitted by Litton & Ocwen, 20 and the Court addresses it more fully infra. 21 22 23 Several other documents which can be considered to the extent they are relevant to ASIC’s standing argument, and/or because they are appropriately noticeable public records: o Exhibits A-B to ASIC’s Request for Judicial Notice (“ASIC RJN”), copies of a 24 publicly filed order issued by the California State Insurance Commissioner, and a 25 publicly filed order entered by the Superior Court of the State of California for the 26 County of San Diego in Conley v. Norwest Mortgage Inc., Case No. N73741 on 27 January 10, 2000 (ECF No. 38). 28 o The Declaration of Kevin Vennefron (“Vennefron Decl.”), and Exhibit A thereto, a 5 1 filing by American Modern Home Insurance Company with the California 2 Department of Insurance (ECF No. 45). 3 o Exhibits A-E to Plaintiff’s Request for Judicial Notice: a copy of a publicly filed 4 Consent Order, Fannie Mae’s December 18, 2013 Servicing Guide, pages of a 5 February 26, 2014 Consent Judgment filed in the United States District Court for 6 the District of Columbia, and pages of Fannie Mae’s March 14, 2012 Single Family 7 2012 Servicing Guide (ECF No. 56). 8 9 10 o Exhibits 1 & 2 to Litton & Ocwen’s Request for Judicial Notice, copies of complaints filed in other courts (ECF No. 63). Litton & Ocwen have also requested judicial notice of the declaration of Kevin Flannigan United States District Court Northern District of California 11 (“Flannigan Decl.”) and exhibits thereto, which are Ocwen’s records of correspondence sent to 12 and from Perryman regarding her obligation to purchase flood insurance. ECF No. 44-1. Litton & 13 Ocwen argue that the Court can consider these documents because they are incorporated by 14 reference in the complaint. Litton & Ocwen Mot., at 4, n. 1. But the complaint nowhere refers to 15 correspondence sent by Perryman. Therefore, the Court will not consider Exhibits B, E, G, K, M, 16 N, O or P to the Flannigan Declaration. 17 As for the documents sent to Perryman, Plaintiff does not oppose the Court considering 18 four letters which are specifically mentioned in the complaint, Exhibits A, D, H and J to the 19 Flannigan Declaration. Plaintiff’s Opposition to Litton Loan Servicing, LP’s and Ocwen Loan 20 Servicing, LLC’s Motion to Dismiss (“Opp. to Litton & Ocwen”), at 6 (ECF No. 52). She 21 opposes the Court taking notice of other letters sent to Plaintiff, Exhs. C, F, I, L, Q and R to 22 Flannigan Decl., which she argues are not referenced in the complaint. But in fact, the complaint 23 alleges that Defendants sent out “boilerplate ‘cycle letters’” to borrowers, and that representations 24 in those letters contained material omissions and misrepresentations which form the basis of her 25 claims. ¶¶ 6-7, 13, 65, 188. Plaintiff did not object to the noticeability of similar letters attached 26 as exhibits to the Wilson Declaration. Since the complaint refers to Defendants’ correspondence 27 to her regarding their LPI practices, since those materials are central to her misrepresentation- 28 based claims, and because Plaintiff does not dispute the letters’ authenticity, the Court will 6 1 consider them. See Davis, 691 F.3d at 1160. 2 In addition, while Plaintiff does not dispute the authenticity of a June 16, 2011 letter, Exh. 3 J to Flannigan Decl., Plaintiff contests the authenticity of a “certificate of insurance” that Litton & 4 Ocwen claim were included as an attachment to that letter. Opp. to Litton & Ocwen, at 6:17-24. 5 Plaintiff’s counsel argues that “[t]his document is not in Plaintiff’s records and Plaintiff questions 6 its authenticity.” Id. But Plaintiff produces no evidence supporting her counsel’s statement -- in 7 the Perryman Declaration, she says nothing about her record-keeping habits and whether the 8 attachment is within her records. The Perryman Declaration provides additional evidence Plaintiff 9 argues is probative of whether Southwest was the insurer of her property, but this “is a matter unrelated to . . . [the documents’] authenticity—i.e., whether the documents are ‘what its 11 United States District Court Northern District of California 10 proponent claims.’” Davis, 691 F.3d at 1161 (citing Las Vegas Sands, LLC v. Nehme, 632 F.3d 12 526, 533 (9th Cir.2011). The Court will consider both the Perryman Declaration and Exhibit J to 13 the Flannigan Declaration in conjunction with this motion. Finally, after briefing was complete, on the morning of the hearing of the motion to 14 15 dismiss, Plaintiff requested judicial notice of an August 4, 2014 public letter from the New York 16 State Department of Financial Services to the General Counsel of Ocwen Financial Corporation. 17 ECF No. 70. The Court will not consider this document because it was filed in violation of Civil 18 Local Rule 7-3, which, with exceptions that do not apply here, precludes the filing of 19 supplementary materials “without prior Court approval.” Civil L.R. 7-3(d). Had Plaintiff sought 20 leave of Court, the Court could take notice of the existence of the letter pursuant to Rule 201(b) of 21 the Federal Rules of Evidence, but could not assume the truth of facts asserted by the letter’s 22 author, since those facts are subject to reasonable dispute. The letter is therefore of little probative 23 value. 24 D. Legal Standards 25 ASIC moves to dismiss under both Rule 12(b)(1) and Rule 12(b)(6) of the Federal Rules of 26 Civil Procedure. 27 1. 28 12(b)(1) A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) tests the subject 7 1 matter jurisdiction of the Court. When subject matter jurisdiction is challenged, “the party seeking 2 to invoke the court’s jurisdiction bears the burden of establishing that jurisdiction exists.” Scott v. 3 Breeland, 792 F.2d 925, 927 (9th Cir. 1986); see also Kokkonen v. Guardian Life Ins. Co. of Am., 4 511 U.S. 375, 377 (1994). “[I]n general, a district court is permitted to resolve disputed factual 5 issues bearing upon subject matter jurisdiction in the context of a Rule 12(b)(1) motion unless ‘the 6 jurisdictional issue and the substantive issues are so intermeshed that the question of jurisdiction is 7 dependent on decision of the merits.’” Kingman Reef Atoll Investments, L.L.C., 541 F.3d at 8 1196-97 (9th Cir. 2008) (quoting Thornhill Publ’g Co. v. Gen. Tel. & Elecs. Corp., 594 F.2d 730, 9 735 (9th Cir.1979)). “Article III’s case-or-controversy requirement . . . provides a fundamental limitation on a 10 United States District Court Northern District of California 11 federal court's authority to exercise jurisdiction . . . [and] ‘the core component of standing is an 12 essential and unchanging part of the case-or-controversy requirement of Article III.’ ” Nuclear 13 Info. & Res. Serv. v. Nuclear Regulatory Comm’n, 457 F.3d 941, 949 (9th Cir. 2006) (quoting 14 Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). 2. 15 12(b)(6) “A district court’s dismissal for failure to state a claim under Federal Rule of Civil 16 17 Procedure 12(b)(6) is proper if there is a ‘lack of a cognizable legal theory or the absence of 18 sufficient facts alleged under a cognizable legal theory.’” Conservation Force v. Salazar, 646 F.3d 19 1240, 1242 (9th Cir. 2011) (quoting Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 20 1988)). 21 On a motion to dismiss, courts accept the material facts alleged in the complaint, together 22 with reasonable inferences to be drawn from those facts, as true. Navarro v. Block, 250 F.3d 729, 23 732 (9th Cir. 2001). However, “the tenet that a court must accept a complaint’s allegations as true 24 is inapplicable to threadbare recitals of a cause of action’s elements, supported by mere conclusory 25 statements.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “[T]o be entitled to the presumption of 26 truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause of 27 action, but must contain sufficient allegations of underlying facts to give fair notice and to enable 28 the opposing party to defend itself effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 8 1 2011). To survive a motion to dismiss, a plaintiff must plead “enough facts to state a claim to 2 3 relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). 4 “[T]he factual allegations that are taken as true must plausibly suggest an entitlement to relief, 5 such that it is not unfair to require the opposing party to be subjected to the expense of discovery 6 and continued litigation.” Starr, 652 F.3d at 1216. E. 8 Assuming Plaintiff has standing, see Part III-A, infra, the Court has subject-matter 9 jurisdiction over Plaintiff’s RICO claims pursuant to 28 U.S.C. § 1331 and 18 U.S.C. § 1964. The 10 Court also has jurisdiction over the entirety of the Complaint pursuant to the Class Action Fairness 11 United States District Court Northern District of California 7 Act of 2005, 28 U.S.C. §§ 1332(d)(2) and (6), because Plaintiff seeks to certify a class whose 12 aggregate claims exceed $5 million, exclusive of interest and costs, and because at least one 13 member of the proposed class is a citizen of a different state than the Defendants. 14 III. ANALYSIS The three motions raise numerous shared, and other distinct, grounds for dismissal. The 15 16 Jurisdiction Court addresses each in turn. 17 A. The Filed-Rate Doctrine 18 All Defendants challenge the sufficiency of the complaint by invoking the “filed rate 19 doctrine.” Defendant ASIC moves pursuant to Rule 12(b)(1) of the Federal Rules of Civil 20 Procedure, arguing that under the doctrine, Plaintiff lacks Article III standing to bring any of her 21 claims. Defendants Southwest and Litton & Ocwen move to dismiss pursuant to Rule 12(b)(6), 22 arguing that because of the doctrine, the complaint fails to state a claim. Because Article III 23 standing is a threshold jurisdictional question, the Court will address this argument first, assuming 24 arguendo that if the doctrine applies, it deprives Plaintiff of Article III standing. See Steel Co. v. 25 Citizens for a Better Env., 523 U.S. 83, 94 (1998).4 26 27 28 4 In fact, however, the Court doubts that, even when the doctrine does apply, it is an issue of standing as opposed to the merits of the claim. The Court is aware that at least district court has characterized the filed-rate doctrine as an issue of standing. Morales v. Attorneys’ Title Ins. Fund, 9 1 “The filed rate doctrine, also known as the ‘Keogh doctrine,’ is a judicially created concept 2 which originated in Keogh v. Chicago & Northwest Railway, 260 U.S. 156 (1922).” Allan 3 Kanner, The Filed Rate Doctrine and Insurance Fraud Litigation, 76 N.D. L. REV. 1, 32 (2000). 4 The doctrine “arises from decisions interpreting federal statutes that give federal agencies 5 exclusive jurisdiction to set rates for specified utilities, originally through rate-setting procedures 6 involving the filing of rates with the agencies.” E. & J. Gallo Winery v. Encana Corp., 503 F.3d 7 1027, 1033 (9th Cir. 2007). “At its most basic, the filed rate doctrine provides that state law, and 8 some federal law (e.g. antitrust law), may not be used to invalidate a filed rate nor to assume a rate 9 would be charged other than the rate adopted by the federal agency in question.” Wah Chang v. Duke Energy Trading & Mktg., LLC, 507 F.3d 1222, 1225 (9th Cir. 2007) (quoting Transmission 11 United States District Court Northern District of California 10 Agency v. Sierra Pac. Power Co., 295 F.3d 918, 929–30 (9th Cir. 2002). “It has generally been 12 recognized that there are three ‘purposes’ or ‘governmental interests’ which justify or support the 13 14 15 16 17 18 19 20 21 Inc., 983 F. Supp. 1418, 1429 (S.D. Fla. 1997). “[T]here is, however, persuasive case law which holds that the filed rate doctrine is not a subject matter jurisdiction issue, but is rather a defense on the merits.” Hoover v. HSBC Mortgage Corp. (USA), __ F.Supp.2d __, No. 3:13-cv-149 MAD/DEP, 2014 WL 1280441, at *8 (N.D.N.Y. Mar. 27, 2014) (citing Curtis v. Cenlar FSB, No. 13-cv-3007 DLC, 2013 WL 5995582, at *2 (S.D.N.Y. Nov. 12, 2013). Defendants “reason that because . . . [the plaintiff] loses on the merits, he has not suffered any ‘cognizable injury that is traceable to the acts of the . . . defendants and he lacks standing to sue them.’” Curtis, 2013 WL 5995582, *2. “But this reasoning would allow any Rule 12(b)(6) motion to be restyled as a Rule 12(b)(1) standing motion.” Id. “While standing and merits questions frequently overlap, standing is fundamentally about the propriety of the individual litigating a claim irrespective of its legal merits, while a Rule 12(b)(6) inquiry is concerned with the legal merits of the claim itself.” Id. (emphases in the original). “Here, the defendants are not contending that . . . [the plaintiff] is the wrong individual to bring these legal claims; they are arguing that the claims are simply not legally cognizable.” Id. 22 23 24 25 26 27 28 ASIC has not directed the Court to any Ninth Circuit authority directly addressing this question. In 2007, the Ninth Circuit applied the doctrine in considering the appeal of a filed-rate doctrine dismissal which had been entered pursuant to Rule 12(b)(1). Wah Chang v. Duke Energy Trading & Mktg., LLC, 507 F.3d 1222, 1225 (9th Cir. 2007). But more recently, the Ninth Circuit considered a filed-rate doctrine dismissal that had been entered under Rule 12(b)(6). Carlin v. DairyAmerica, Inc., 705 F.3d 856, 866-67 (9th Cir. 2013) cert. denied, 134 S. Ct. 116 (U.S. 2013). Whether or not Plaintiff’s claims fail because of the filed-rate doctrine, the Court sees nothing about her relationship to her asserted harm that deprives this Court of jurisdiction to address the question she presents for adjudication. Ultimately, the Court need not decide the question in this motion because the Court concludes, even after considering all relevant evidence and assuming the burden is properly placed on Plaintiff, that the filed-rate doctrine does not bar Plaintiff’s claims. 10 1 filed rate doctrine”: (1) the fact that “federal law require[s] the primacy of filed rates and tariffs,” 2 (2) “federal preemption (or the supremacy of federal law),” and (3) “deference to federal agency 3 expertise (or primary jurisdiction).” Carlin v. DairyAmerica, Inc., 705 F.3d 856, 867-69 (9th Cir. 4 2013) cert. denied, 134 S. Ct. 116 (U.S. 2013). 5 Notwithstanding the “expansive reading and application” the filed rate doctrine has been 6 given in this circuit, id. at 869, every court in this district to address the issue has concluded that 7 the filed-rate doctrine does not bar LPI claims like the ones brought in this action. Cannon v. 8 Wells Fargo Bank, N.A., No. 12-1376 EMC, 2014 WL 324556, at *4-6 (N.D. Cal. Jan. 29, 2014); 9 Cannon v. Wells Fargo Bank, N.A., 917 F.Supp.2d 1025, 1036-38 (N.D. Cal. 2013); Ellsworth v. U.S. Bank, N.A., 908 F.Supp.2d 1063, 1081-83 (N.D. Cal. 2012); Leghorn, 950 F.Supp.2d at 11 United States District Court Northern District of California 10 1115-1116; Ellsworth v. U.S. Bank, N.A., __ F.Supp.2d __, No. 12-02506 LB, 2014 WL 1218833, 12 at *17-18 (N.D. Cal. Mar. 21, 2014). 13 Defendants argue that the filed rate doctrine applies here because the charges applied to 14 Plaintiff’s escrow account are consistent with the amounts the California Department of Insurance 15 has approved as reasonable insurance rates under California law. See Cal. Ins. Code § 1861.05(a). 16 Defendants have submitted evidence, undisputed by Plaintiff, that this is true. Defendants argue 17 that the filed rate doctrine requires this court to dismiss all of Plaintiff’s claims, state and federal, 18 since they would interfere with California’s regulatory authority. 19 But the Ninth Circuit has described the filed rate doctrine as “a judicial creation that arises 20 from decisions interpreting federal statutes that give federal agencies exclusive jurisdiction to set 21 rates . . ..” Carlin, 705 F.3d at 867 (quoting E. & J. Gallo Winery, 503 F.3d at 1033 (emphases 22 added). The initial rationale for the doctrine was that “federal law required the primacy of filed 23 rates and tariffs,” and after this basis for the rule was established, there developed “two additional 24 and related justifications for the doctrine, i.e., federal preemption (or the supremacy of federal 25 law) and deference to federal agency expertise (or primary jurisdiction).” Carlin, 705 F.3d at 868 26 (emphases added). None of these three rationales are directly implicated when the agency 27 regulating rates is a state agency. 28 In all of the Supreme Court and Ninth Circuit cases cited by Defendants, courts applied the 11 1 filed-rate doctrine because protecting a federal agency’s regulatory authority was necessary to 2 effectuate the purposes of a federal statute. See Keogh, 260 U.S. at 160 (interpreting the 3 Interstate Commerce Act and the regulatory authority of the Interstate Commerce Commission); 4 Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409, 411-12 (1986) (same); Wah 5 Chang, 507 F.3d at 1224 (9th Cir. 2007) (considering “tariffs approved by the Federal Energy 6 Regulatory Commission”). Carlin considered the U.S. Department of Agriculture’s regulatory 7 authority under the federal Agricultural Marketing Agreement Act and the Dairy Market 8 Enhancement Act - and found that, even then, the filed rate doctrine did not preempt all arguably 9 inconsistent state-law claims. 705 F.3d at 858-63, 882. 10 When a federal statute grants strong and pervasive authority to a federal agency, it is United States District Court Northern District of California 11 understandable why courts interpret the statute to supersede other laws that would stand in the 12 statute’s way. Inconsistent state laws are preempted under the Supremacy Clause, and 13 inconsistent federal laws are interpreted to be subordinate to the “stronger” statute. But it is 14 unclear why the California Insurance Commissioner’s regulatory authority would impede the 15 otherwise appropriate reach of a federal statute. By arguing that California’s state-law regulatory 16 authority bars even otherwise valid federal RICO claims, Defendants’ arguments would seem to 17 stand the Supremacy Clause on its head. 18 Several out-of-circuit cases have held that since utility regulation is an area of traditional 19 state authority, even a federal law like RICO must be interpreted to be consistent with a state 20 regulatory scheme absent a clear statement that Congress intended to alter the traditional federal- 21 state balance. Wegoland, Ltd. v. NYNEX Corp., 806 F. Supp. 1112, 1115-16 (S.D.N.Y. 1992) 22 aff’d, 27 F.3d 17 (2d Cir. 1994) (“Keogh’s rationale applies equally strongly where state law 23 creates a state agency and statutory scheme pursuant to which the state agencies determine 24 reasonable rates”); Taffet v. S. Co., 967 F.2d 1483, 1494 (11th Cir. 1992) (filed rate doctrine 25 “applies with equal force to preclude recovery under RICO whether the rate at issue has been set 26 by a state rate-making authority or a federal one”); H.J. Inc. v. Nw. Bell Tel. Co., 954 F.2d 485, 27 495 (8th Cir. 1992) (“allowing a RICO action . . . would similarly disrupt the state administrative 28 process and constitute a ‘collateral attack on a rate order,’ contrary to state law”) (quoting H.J., 12 1 Inc. v. Nw. Bell Corp., 420 N.W.2d 673, 677 (Minn. Ct. App. 1988)). These cases are not binding 2 on courts in this circuit, and this Court does not find them persuasive. 3 Even assuming that the Ninth Circuit would follow this line of authority, however, the 4 question of whether the filed-rate doctrine applies turns on the extent of the state regulatory 5 scheme. “Overbroad application of the filed rate doctrine is especially inappropriate where 6 regulators have limited jurisdiction.” Jim Rossi, Why the Filed Rate Doctrine Should Not Imply 7 Blanket Judicial Deference to Regulatory Agencies, ADMIN. & REG. L. NEWS, Fall 2008, at 11, 12. 8 The question is one of state-law statutory interpretation, and it depends upon how broadly the state 9 intends for its regulatory authority to reach. When state-law regulatory authority provides the basis of the filed rate doctrine, the doctrine should be based on a careful analysis of the text and 11 United States District Court Northern District of California 10 purpose of the underlying state law, rather than blanket application of the filed rate doctrine to all 12 challenges which touch a regulated industry. Otherwise, a court might end up curtailing a state’s 13 valid laws in order to preserve a regulatory authority that the state does not even exercise. In 14 addition, while “[t]he filed rate doctrine has been given an expansive reading and application in 15 this Circuit,” the Ninth Circuit has also held that in a given arena, it is “‘open to repudiation by the 16 . . .’” relevant agency. Carlin, 705 F.3d at 869 (quoting Verizon Del., Inc. v. Covad Commc’ns 17 Co., 377 F.3d 1081, 1089 (9th Cir. 2004)). 18 Here, the California Insurance Commissioner has specifically disclaimed any authority to 19 regulate the conduct challenged in the complaint. In 2001, California Superior Court Judge David 20 Moon stayed a very similar LPI case and sought guidance from the Insurance Commissioner 21 regarding actions Judge Moon understood to fall within the Commissioner’s authority to regulate. 22 Exh. A to Plaintiffs’ RJN, at 3; In the Matter of the Rates, Rating Plans, or Rating Systems of 23 American Security Insurance Company, Cal. Ins. Comm. No. OV-01-01-8309 (Apr. 18, 2001) 24 (emphasis added). “Petitioners and Judge Moon . . . asked whether the rates approved by the 25 Department of Insurance ‘include charges which are improperly passed on by lenders to FPI 26 purchasing borrowers.’” Id. at 6. The Insurance Commissioner responded that he “cannot 27 address” that question. Id. “Insofar as Petitioners ask the Department to decide whether premium 28 charges ‘are improperly passed on’ to Petitioners, the Commissioner cannot and does not express 13 1 an opinion.” Id. “The jurisdiction of the Commissioner extends to issues concerning the 2 reasonableness of insurance rates vis-à-vis Respondent as the Insurer and Norwest as the insured.” 3 Id. “The Department has no jurisdiction to decide the scope of charges which would be 4 reasonable as between a lender and its borrower.” Id. 5 In other words, another court already attempted to defer to the Insurance Commissioner on 6 exactly the type of claim before this court, and the Commissioner refused to accept the offered 7 deference. It is for this reason that courts of this district held that the filed-rate doctrine does not 8 bar claims brought by homeowners, because “they are not the ratepayers.” Ellsworth 2014 WL 9 1218833. Defendants argue that Plaintiff cannot avoid the filed rate doctrine by merely describing 11 United States District Court Northern District of California 10 her suit as a challenge to the servicer’s behavior rather than the reasonableness of the insurance 12 rate. They argue that “[t]he underlying conduct does not control whether the filed rate doctrine 13 applies.” Coll v. First Am. Title Ins. Co., 642 F.3d 876, 890 (10th Cir. 2011). “Rather, the focus . 14 . . is the impact the court’s decision will have on agency procedures and rate determinations.” Id. 15 Defendants argue that the doctrine applies whenever “it would be necessary for this court to 16 determine a reasonable rate and subtract it from the premium.” Decambaliza v. QBE Holdings, 17 Inc., No. 13-cv-286, 2013 WL 5777294, at *7 (W.D. Wis. Oct. 25, 2013). The doctrine bars all 18 claims “which necessarily hinge on a claim that the . . . approved rate was too high and would, 19 therefore, undermine . . . [the agency’s] . . . authority.” Wah Chang, 507 F.3d at 1225-26. But if 20 the Insurance Commissioner felt that allowing civil actions of this type would undermine the 21 agency’s authority to regulate insurance rates, he would have seized the opportunity to express an 22 opinion about the reasonableness of rate pass-alongs when asked directly to do so. The Court will 23 not be more concerned with the agency’s authority than the agency is itself. 24 Just as Plaintiff may not re-characterize the nature of her action to avoid the filed rate 25 doctrine, neither can Defendants re-characterize the nature of Plaintiff’s claim. Plaintiff does not 26 dispute the reasonableness of rates charged for insurance. She disputes the amount of that rate 27 which can be passed on to her under the terms of her contract with Defendants. 28 To see the truth of this, imagine Plaintiff’s breach of contract were much stronger. 14 1 Imagine the deed of trust unambiguously promised that the servicers would pass along no more 2 than $100 of the annual premium to the lender if insurance were force-placed. And then imagine 3 the servicers actually assessed the escrow account a $300 premium, in clear breach of their 4 promise, but still at a rate lower than the one approved by the Insurance Commissioner. Would 5 Defendants still object that her breach of contract claim would be barred? After all, refunding her 6 the $200 she would clearly be owed in that situation would require a court to “determine a 7 reasonable rate and subtract it from the premium.” 8 9 It is true that in Wah Chang, the Ninth Circuit held that a retailer at one remove from the regulated purchase could not challenge the reasonableness of a filed rate. 507 F.3d at 1226-27. But Plaintiff is not a retailer purchasing a regulated product who seeks to challenge the regulated 11 United States District Court Northern District of California 10 price of that commodity. The more reasonable reading of Wah Chang is that wholesale and retail 12 customers were both within the intended ambit of the federal regulatory scheme at issue in that 13 case. The Court doubts that the Ninth Circuit intended from this holding to insulate all regulated 14 parties from liability if they passing along the costs of the regulated rate to others in ways that are 15 unlawful. In any case, Wah Chang did not involve an agency that had clearly repudiated any 16 jurisdiction over the actions the plaintiff had sought to challenge. Plaintiff cannot be deprived of 17 her claims by a state regulatory scheme that makes no effort to regulate the actions in question. 18 The filed rate doctrine does not bar Plaintiff’s claims. 19 B. 20 Plaintiff alleges that “[s]ince at least 2011, Litton was a party to a purchase agreement with Claims against Southwest 21 Defendant Southwest Business Corporation,” through which Southwest was “given the exclusive 22 right to force insurance on property securing a loan within the portfolio when a borrower’s 23 insurance lapses or the lender determines the borrower’s existing insurance is inadequate.” ¶ 6. 24 Plaintiffs also allege that it was Southwest, “using Litton letterhead,” who sent notices to Plaintiff 25 advising her of her obligation to provide proof of flood insurance, and then, when she did not 26 comply, advising her that it would charge her for lender-placed insurance. ¶¶ 34-36, 108. 27 28 But it appears from the record that Southwest was not the insurer of Plaintiff’s property. An Ocwen employee with knowledge of Ocwen’s business records has declared that the true and 15 1 correct copy of the June 26, 2011 letter referenced in the complaint included an attached 2 “Evidence of Flood Insurance,” which states that American Modern Home, not Southwest, was 3 the insurer placed on the property. Flannigan Decl. ¶¶ 1-5, 15, and Exh. J thereto. The letter, 4 which Plaintiff does not dispute is authentic, lists an insurance certificate number of 5 “LLW001121,” and a coverage amount of $63,138.75. Exh. J to Flannigan Decl. The same 6 certificate number and coverage amount appear on the Certificate of Insurance. Id. Plaintiff argues that the authenticity of the certificate of insurance is in question, but her 7 8 only evidence of that is her declaration that she “recently contacted Ocwen and asked them what 9 company issued the force-placed insurance policy on my home when Litton serviced my loan in 2011,” and that “[t]he Ocwen representative informed me ‘SWBC,’ or Southwest Business 11 United States District Court Northern District of California 10 Corporation, issued the insurance policy.” Perryman Decl. ¶ 2. This is inadmissible hearsay, no 12 foundation has been laid for the basis of the unnamed Ocwen representative’s knowledge, and 13 Perryman’s declaration does not provide any further details regarding the date of the call and to 14 whom Perryman spoke. At oral argument, Plaintiff’s counsel conceded that “it looks like we got the wrong 15 16 insurer.” The Court finds that, when considered together with other documents appropriately 17 considered on a motion to dismiss, the complaint does not allege facts from which it is plausible to 18 infer that Southwest is responsible for the actions challenged in the complaint. Since this entitles 19 Southwest to dismissal of all claims asserted against it, the Court does not further consider any 20 other Southwest arguments for dismissal. 21 C. Breach of Contract / Breach of the Covenant of Good Faith and Fair Dealing 22 The complaint brings a claim for “breach of contract, including breach of the implied 23 covenant of good faith and fair dealing” against Defendants Litton and Ocwen. Plaintiff alleges 24 breach of sections 3, 5 and 9 of the deed of trust. ¶¶ 158-60.5 Section nine provides that “Lender may do and pay for whatever is reasonable or 25 26 appropriate to protect Lender’s interest in the property and rights under this Security Instrument,” 27 5 28 In her opposition brief, Plaintiff also suggests Litton and Ocwen breached section 14 of the deed of trust, but the Court does not consider this argument since it is not in her complaint. 16 1 and section five, which gives the lender the right to impose LPI, states that “Borrower 2 acknowledges that the cost of the insurance coverage so obtained might significantly exceed the 3 cost of insurance that Borrower could have obtained.” Plaintiff alleges that at least some of the 4 charges applied to her account were neither attributable to any actual costs incurred by the lender 5 in obtaining insurance, nor to any costs charged by the insurer for valuable services in providing 6 insurance coverage. She alleges that what Defendants deemed the “cost” of the insurance charged 7 by the insurers was an amount essentially fixed between the insurer and the lender, who were free 8 to set any price as the “cost” of insurance since they knew that neither of them would be ultimately 9 responsible for paying it. Under one plausible reading of the contractual language, a reasonable borrower would not have understood herself to be agreeing to pay these types of charges when she 11 United States District Court Northern District of California 10 agreed to be held responsible for the “cost of the insurance coverage.” 12 Moreover, even if Litton and Ocwen’s alleged actions do not violate the express terms of 13 the deed of trust, Plaintiff has plausibly alleged actions that could be considered a breach of the 14 covenant of good faith and fair dealing. “The covenant of good faith finds particular application 15 in situations where one party is invested with a discretionary power affecting the rights of another. 16 Carma Developers (Cal.), Inc. v. Marathon Dev. California, Inc., 2 Cal. 4th 342, 372 (1992). 17 “Such power must be exercised in good faith.” Id. To the extent that Litton & Ocwen had 18 discretion within the contract to assess a cost of acquiring insurance against Plaintiff’s escrow 19 account, Plaintiff has plausibly alleged that, by conspiring with insurers to fix an artificial “cost” 20 of acquiring insurance, Litton & Ocwen failed to exercise that discretion in good faith. Accord 21 Leghorn, 950 F. Supp. 2d at 1120; Ellsworth v. U.S. Bank, N.A., 908 F. Supp. 2d at 1085; 22 McNeary-Calloway v. JP Morgan Chase Bank, N.A., 863 F. Supp. 2d 928, 956 (N.D. Cal. 2012). 23 Litton & Ocwen move to dismiss all claims in the complaint “for the reasons stated by the 24 Seventh, Tenth and Eleventh Circuits,” citing Cohen v. American Sec. Ins. Co., 735 F.3d 601 (7th 25 Cir. 2013), Feaz v. Wells Fargo Bank, N.A., 745 F.3d 1098 (11th Cir. 2014), and Anapoell v. 26 American Express Bus. Fin. Corp., No. 2:07-cv-198-TC, 2008 WL 2225849 (D. Utah 2008), aff’d, 27 No. 08-4114, 2009 WL 766532, at *2 (10th Cir. Mar. 24, 2009) (unpublished). These three circuit 28 court decisions affirmed the dismissal of contractual claims in similar situations, on the grounds 17 1 that nothing in the lenders’ contracts prohibited them from receiving fees or commissions from the 2 insurers whose policies they required plaintiffs to buy. See, e.g., Cohen, 735 F.3d at 612. 3 Plaintiff argues that Cohen is distinguishable. As she reads Cohen, the court understood the plaintiffs in that case to be merely “calling” the commissions “kickbacks,” without explaining 5 why they deserved that designation. Perryman argues that the Cohen plaintiffs did not allege 6 specifically that the “commissions” the insurers paid to the lender were unearned payment, paid by 7 the insurer solely for the purposes of being the designated forced-place insurer for a portion of the 8 servicer’s portfolio. But it appears from the underlying complaint in that case that the plaintiff in 9 Cohen did make that allegation, if perhaps in not so many words. Exh. 1 to Litton & Ocwen’s 10 RJN. In any case, it is doubtful that these allegations would have made much difference in the 11 United States District Court Northern District of California 4 Cohen court’s analysis, since Cohen held that “[t]he defining characteristic of a kickback is 12 divided loyalties,” and the lender “was not subject to divided loyalties; rather, it was subject to an 13 undivided loyalty to itself, and it made this clear from the start.” 735 F.3d at 611. Plaintiff does 14 successfully distinguish the case insofar as her complaint alleges that Defendants made material 15 misstatements, ¶¶ 108-110, 119-22, which the Cohen plaintiffs did not. Id. at 613 16 Feaz is more distinguishable, since the opinion itself did not directly engage the argument 17 that the lender breached its mortgage agreement by entering into agreements with insurers that set 18 artificial “costs” of insurance. Feaz only considered the question of whether the lender breached 19 the contract “by demanding more flood insurance than the Secretary of HUD requires and by 20 force-placing the insurance when she failed to get it.” 745 F.3d at 1104. It echoed Cohen’s 21 conclusion that kickbacks require divided loyalty, but only in concluding that the plaintiffs had 22 failed to plead a claim of breach of fiduciary duty. (The Court agrees with that conclusion, see 23 infra, at III-E.) As for Anapoell, Plaintiff concedes it is indistinguishable and urges the Court not 24 to follow it. 25 Considering the cases as a group, and to the extent they are on all fours, this court does not 26 follow them. The Court agrees that the payments might not be appropriately characterized as 27 “kickbacks,” since that term usually requires divided loyalty. However, it does not necessarily 28 follow from this that that the payments were contractually authorized or assessed in conformance 18 1 with the covenant of good faith. The aspect of the three opinions Litton & Ocwen most urge this 2 Court to apply is their conclusion that since the deed of trust advised Plaintiff that the cost of LPI 3 might be significantly higher, and since nothing in the deed of trust specifically prohibited the 4 receipt of commissions and fees as part of the “cost” of insurance, Defendants’ actions were 5 authorized under the contract as a matter of law. 6 But, as Plaintiff argues, if this were the rule, “it would grant unfettered license to mortgage servicers to mark-up the charges for force-placed insurance with no limit whatsoever.” Opp. to 8 Litton & Ocwen, at 12. Under this reasoning, “Litton and Ocwen could pay ASIC $100 for a 9 policy on Plaintiff’s property, charge Plaintiff $1,000, and pocket the difference.” Id. This Court 10 declines to adopt a rule that leads to such a strained reading of the covenant of good faith and fair 11 United States District Court Northern District of California 7 dealing. 12 Litton and Ocwen resist that logical extension of their argument, but not persuasively. 13 They reply that Plaintiff’s hypothetical would not be permitted under Anapoell, because “Anapoell 14 holds [only] that a creditor can pass on the entire insurance premium charged by the insurance 15 provider.” Litton & Ocwen Reply, at 9. “Anapoell did not argue that defendant bought insurance 16 for one price and then charged him more than that.” Id. Such an action, Litton & Ocwen 17 presumably concedes, would not be permissible. But the only differences between that action and 18 Plaintiff’s allegations are formalistic. Plaintiff alleges that Litton and Ocwen arranged with the 19 insurers to set what would they would deem the “insurance premium charged by the insurance 20 provider.” To adjust the hypothetical from Plaintiff’s opposition brief, the complaint alleges, in 21 effect, that Litton and Ocwen agreed with ASIC that insurance normally costing $100 on the open 22 market, should be characterized as costing $1,000, and passed along to Plaintiff to pay. 23 If the deed of trust were interpreted to provide lenders with limitless discretion to set any 24 amount as the “cost” of insurance, through any means, the contract would be unconscionable. 25 Therefore, Litton & Ocwen’s discretion to assess costs must be limited in some way to the 26 reasonable understanding contracting parties would ascribe to the words of the deed. The Court 27 cannot determine as a matter of law that the under all plausible interpretations of the contract, the 28 charges Defendant are alleged to have assessed were authorized by the contract. The breach of the 19 1 covenant claim is especially inappropriate for Rule 12 motion practice, since it could hinge on as- 2 yet undiscovered factual evidence. See Reiydelle v. J.P. Morgan Chase Bank, N.A., No. 12-cv- 3 06543-JCS, 2014 WL 312348, at *13 (N.D. Cal. Jan. 28, 2014). 4 Litton & Ocwen additionally urge dismissal since the lender who signed her deed of trust 5 was Fremont Investment & Loan, and Plaintiff has failed to plausibly allege that Litton and 6 Ocwen became parties to her contract with Fremont. Plaintiff alleges that Litton and Ocwen 7 became the servicers of her loan. It is plausible to infer that “a servicer can stand in the shoes of 8 the party to the contract to the extent that rights are assigned.” Ellsworth, 2014 WL 1218833, at * 9 20. The Complaint plausibly alleges that this occurred. Indeed, it is somewhat implausible that the servicers acquired the rights to enforce the 11 United States District Court Northern District of California 10 lender’s rights under the deed of trust without becoming parties to the contract. But the Court 12 need not decide the question now; whether or not Litton and Ocwen have become parties to the 13 deed of trust is “a fact issue.” Ellsworth, 2014 WL 1218833, at * 20. Plaintiff must produce 14 evidence to prove Litton and Ocwen are parties to the contract, but there is nothing implausible 15 about the allegation. 16 17 Plaintiff’s complaint states a claim for breach of contract and breach of the covenant of good faith and fair dealing. 18 D. RICO 19 “The RICO statute sets out four elements: a defendant must participate in (1) the conduct 20 of (2) an enterprise that affects interstate commerce (3) through a pattern (4) of racketeering 21 activity or collection of unlawful debt.” Eclectic Properties East, LLC v. Marcus & Millichap Co., 22 751 F.3d 990, 997 (9th Cir. 2014) (citing 18 U.S.C. § 1962(c)). “Racketeering activity, the fourth 23 element, requires predicate acts.” Eclectic Properties, 751 F.3d at 997. “In addition, the conduct 24 must be (5) the proximate cause of harm to the victim.” Id. (citing Sedima, S.P.R.L. v. Imrex Co., 25 Inc., 473 U.S. 479, 496-97 (1985)). 26 Plaintiff’s complaint brings three types of RICO cause of action, each of which are 27 asserted against two pairs of Defendants. The first, third and fifth causes of action are asserted 28 against Defendants Litton and Southwest, and the second, fourth and sixth causes of action are 20 1 asserted against Defendants Ocwen and ASIC. In the first two causes of action, Plaintiff asserts 2 the underlying predicate act of honest services fraud, and in third and fourth causes of action, she 3 asserts the underlying predicate act of mail and wire fraud. Plaintiff’s fifth and sixth causes action 4 are for a RICO conspiracy pursuant to 18 U.S.C § 1962(d) against both pairs of Defendants. Defendants argue that Plaintiff’s complaint fails as a matter of law to establish a pattern of 5 6 racketeering activity, to allege the existence of an enterprise, to allege conduct that caused 7 proximate harm to the victim, and to allege the existence of a conspiracy. 1. 8 Racketeering Activity Counts one and two plead the “predicate act” of honest services fraud pursuant to 18 9 U.S.C. § 1346. Counts three and four plead the “predicate act” of mail and wire fraud pursuant to 11 United States District Court Northern District of California 10 18 U.S.C. §§ 1341 and 1343. The Court addresses each in turn. a. 12 Honest Services Fraud RICO’s honest services fraud prohibition “covers only bribery and kickback schemes.” 13 14 Skilling v. United States, 561 U.S. 358, 368 (2010). ASIC moves to dismiss, invoking the 15 Seventh and Eleventh Circuit’s conclusions that kickbacks require divided loyalty, and lenders do 16 not owe their primary loyalty to borrowers. Feaz, 745 F.3d at 1110; Cohen, 735 F.3d at 611. 17 While Feaz and Cohen were not RICO cases, this basic principle is well established in RICO case 18 law. 19 The theory of honest services fraud under RICO “had its genesis in prosecutions involving 20 bribery allegations.” Skilling, 561 U.S. at 408. “Honest services mail and wire fraud cases ‘rel[y] 21 on the idea that a public official acts as trustee for the citizens and the State . . . and thus owes the 22 normal fiduciary duties of a trustee, e.g., honesty and loyalty to them.’” United States v. Garrido, 23 713 F.3d 985, 992 (9th Cir. 2013) cert. denied, 134 S. Ct. 1333, (U.S. 2014) (citing United States 24 v. Kincaid–Chauncey, 556 F.3d 923, 939 (9th Cir. 2009). 25 However, while initially “these cases . . . involved bribery of public officials, . . . courts 26 also recognized private-sector honest-services fraud.” Skilling, 561 U.S. at 401. The theory 27 behind private-sector honest services fraud, for example in the case of a company who bribes 28 another company’s employees to turn against their employer, is that “‘when one tampers with [the 21 1 employer-employee] relationship for the purpose of causing the employee to breach his duty [to 2 his employer,] he in effect is defrauding the employer of a lawful right.” Skilling, 561 U.S. at 401 3 (quoting United States v. Procter & Gamble Co., 47 F.Supp. 676, 678 (D. Mass. 1942)). “‘The 4 actual deception that is practised is in the continued representation of the employee to the 5 employer that he is honest and loyal to the employer’s interests.’” Skilling, 561 U.S. at 401 6 (quoting Procter & Gamble Co., 47 F.Supp. at 678) (spelling in the original); see also United 7 States v. Schwartz, 785 F.2d 673, 680 (9th Cir. 1986) (private-sector honest-services fraud applies 8 when a union official has been influenced to “compromise his integrity and position”). 9 For this reason, not all acts of misrepresentation can be described as a deprivation of honest services. “[A] breach of a fiduciary duty is an element of honest services fraud under 18 11 United States District Court Northern District of California 10 U.S.C. §§ 1341 and 1346.” United States v. Milovanovic, 678 F.3d 713, 722 (9th Cir. 2012) (en 12 banc), as amended (May 22, 2012), cert. denied, 133 S. Ct. 929 (U.S. 2013). A relationship 13 meeting this definition “is not limited to a formal ‘fiduciary’ relationship well-known in the law, 14 but also extends to a trusting relationship in which one party acts for the benefit of another and 15 induces the trusting party to relax the care and vigilance which it would ordinarily exercise.” Id. 16 at 724; see also United States v. deVegter, 198 F.3d 1324, 1328-29 (11th Cir. 1999) (“the breach 17 of loyalty by a private sector defendant must in each case contravene—by inherently harming— 18 the purpose of the parties’ relationship”). The duty can extend to employees as well as to “other 19 persons who assume a legal duty of loyalty comparable to that owed by an officer or employee to 20 a private entity.” Milovanovic, 678 F.3d at 724 (quoting U.S. v. Williams, 441 F.3d 716, 723-24 21 (9th Cir. 2006)). 22 It is not plausible to infer from the facts of the complaint that Plaintiff and any of the 23 Defendants had developed “a trusting relationship in which one party acts for the benefit of 24 another and induces the trusting party to relax the care and vigilance which it would ordinarily 25 exercise.” Milovanovic, 678 F.3d at 724. Plaintiff seeks damages for how she claims to have 26 been wrongly deprived of payments she believes her contract did not compel her to make. She 27 does not plausibly allege that she was deprived of the services of one she believed to be “honest 28 and loyal to” her interests. Skilling, 561 U.S. at 401 (quoting Procter & Gamble Co., 47 F.Supp. 22 1 at 678). 2 Plaintiff argues that her claims are analogous to those in Milovanovic since that case also 3 involved an arm’s-length commercial relationship. The defendants in that case were independent 4 contractors working for a translation service agency, “which itself contracted to provide 5 translation services to government agencies” administering tests for trucking licenses. 678 F.3d at 6 718. The translators solicited and accepted bribes to assist applicants in cheating on the exams. 7 Id. The Ninth Circuit concluded that “an agency relationship or a relationship of trust existed 8 between the State of Washington and [defendants].” Id. at 724. The defendants would have been 9 in an agency relationship to the state had they been directly employed by the state, and the Ninth Circuit held that that analysis was not altered by the fact that the translators were independent 11 United States District Court Northern District of California 10 contractors rather than full-time employees. Id. at 725. 12 But the mortgage servicers in this case were not Plaintiff’s agents in any comparable way. 13 Perryman did not hire the mortgage servicers, even indirectly, to serve as agents of her interest. 14 They certainly did not owe her the type of “legal duty of loyalty comparable to that owed by an 15 officer or employee to a private entity.” Id. at 724. As a general matter, “[n]o fiduciary duty 16 exists between a borrower and lender in an arm’s length transaction.” Ragland v. U.S. Bank Nat. 17 Assn., 209 Cal. App. 4th 182, 206 (2012). If even that normal relationship creates an agency 18 relationship creating a duty of honest services, then it is hard to imagine what types of contractual 19 relationships would not be considered to impose quasi-fiduciary duties upon the contracting 20 parties, subjecting them to prosecution under a statute designed to punish public corruption. 21 Plaintiff cites no authority demonstrating that honest-services fraud extends to situations 22 like this one, in which all the allegations of the complaint indicate the parties had an arm’s-length 23 commercial relationship, which was not comparable to an employment or other agency 24 relationship, and in which neither reposed trust in, nor professed a duty of loyalty to, the other. 25 Plaintiff fails to state a claim of honest services fraud. 26 27 28 b. Mail and Wire Fraud “The mail and wire fraud statutes . . . contain three elements: (A) the formation of a scheme to defraud, (B) the use of the mails or wires in furtherance of that scheme, and (C) the 23 1 specific intent to defraud.” Eclectic Properties East, 751 F.3d at 997 (citing Schreiber Distrib. Co. 2 v. Serv-Well Furniture Co., Inc., 806 F.2d 1393, 1399 (9th Cir. 1986)). “The intent to defraud 3 may be inferred from a defendant’s statements and conduct.” Eclectic Properties East, 751 F.3d at 4 997 (quoting United States v. Peters, 962 F.2d 1410, 1414 (9th Cir. 1992)). “In the absence of 5 direct evidence of intent, the party asserting fraud must first prove ‘the existence of a scheme 6 which was reasonably calculated to deceive persons of ordinary prudence and comprehension,’ 7 and then, ‘by examining the scheme itself’ the court may infer a defendant's specific intent to 8 defraud.” Eclectic Properties East, 751 F.3d at 997 (internal citations omitted). 9 ASIC and Litton & Ocwen move to dismiss on the grounds that Plaintiff has failed to allege a scheme reasonably calculated to deceive from which the Court can infer a specific intent 11 United States District Court Northern District of California 10 to defraud. The Court finds that it can plausibly infer a scheme to defraud from the allegations in 12 the complaint and other noticeable records. In addition to representing the charges as the “cost” of 13 obtaining substitute coverage in the deed of trust, Defendants sent other communication through 14 the mail which could be reasonably construed as continuing to represent to Plaintiff that the 15 charges she ran the risk of incurring would be attributable to the Defendants’ actual costs of 16 obtaining substitute insurance. It appears that some of those communications did specifically 17 warn Perryman that choosing not to get her own insurance would be a bad deal for her, in ways 18 that tend to indicate Defendants were not trying to induce her to default on her coverage 19 obligations. But it still could be the case that the overall intent of the Defendants’ representations 20 were calculated to misrepresent the nature of the cots the lenders would pass along to lenders 21 under the LPI clause. Accord Cannon, 2014 WL 324556, at *2-3. Whether or not Defendants 22 made material misrepresentations, and whether they intentionally created a scheme to defraud, are 23 questions of fact. 24 3. 25 Enterprise “To establish an ‘enterprise,’ Plaintiff must plead the existence of a ‘person’ and an 26 ‘enterprise’ that are distinct from one another.” Living Designs, Inc. v. E.I. Dupont de Nemours 27 & Co., 431 F.3d 353, 361 (9th Cir. 2005). ASIC and Litton & Ocwen argue that Plaintiff has 28 failed to plead the existence of a RICO enterprise, and has also failed to plead that Defendants 24 1 2 conducted the affairs of the enterprise. The allegations of the complaint are sufficient to plead the existence of an ongoing 3 organization, formal or informal,” and to plead that “the various associates function as a 4 continuing unit.” United States v. Turkette, 452 U.S. 576, 580, 583 (1981); accord Cannon, 2014 5 WL 324556, *3. Plaintiff alleges an ongoing collusive relationship between the insurers and the 6 servicers in which they agreed to misrepresent the nature of the LPI charges at the lender’s 7 expense for their collective benefit. There is nothing defective about the nature of this allegation. 8 The complaint alleges that this association between the Defendants is arranged for the overall 9 benefit of this informal association and is independent from each Defendant’s independent business interests. While Plaintiff does not know, and could not reasonably be expected to know, 11 United States District Court Northern District of California 10 the exact names of every entity involved in this arrangement, the complaint satisfies Rule 9(b) 12 because the “allegations of fraud” are “‘specific enough to give defendants notice of the particular 13 misconduct which is alleged to constitute the fraud charged so that they can defend against the 14 charge and not just deny that they have done anything wrong.’” Bly-Magee v. California, 236 15 F.3d 1014, 1019 (9th Cir. 2001) (quoting Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993)). 16 4. Injury 17 Only a “person injured in his business or property by reason of a violation of section 1962 18 of this chapter may sue” under 18 U.S.C. § 1964(c). This provision requires that “the defendant’s 19 violation was a ‘but for’ cause of plaintiff's injury, and also “requires the plaintiff to establish 20 proximate cause in order to show injury ‘by reason of’ a RICO violation.” Bridge v. Phoenix 21 Bond & Indem. Co., 553 U.S. 639, 654 (2008) (quoting Holmes v. Sec. Investor Prot. Corp., 503 22 U.S. 258, 268 (1992)). 23 Defendants argue that Plaintiff has not shown that Defendants’ actions proximately caused 24 Plaintiff any RICO injury, primarily relying on Cohen’s conclusion that the similar LPI theory of 25 damages in that case -- “that had she known the charges were really kickbacks, she would have 26 breached her contractual duty to pay” – was “senseless.” 735 F.3d at 614. “Losing an opportunity 27 to breach a contract cannot constitute a cognizable fraud harm.” Id. 28 Cohen was not a RICO case. But in any event, in this case, the Court concludes supra that 25 1 Plaintiff could potentially show that she suffered harm by being assessed charges that were not 2 within the scope of her contract. Moreover, Perryman could conceivably have declined to enter 3 into the deed of trust in the first place had she known that the types of LPI penalties she ran the 4 risk of incurring were attributable not the servicers’ costs but rather to the servicers and insurers’ 5 manipulation of the market for insurance. She alleges RICO injury. 5. 6 7 Conspiracy “Section 1962(d) of Title 18 makes it unlawful to ‘conspire to violate’ RICO, which makes 8 it unlawful, among other things, ‘for any person employed by or associated with any enterprise 9 engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of 11 United States District Court Northern District of California 10 racketeering activity’” Smith v. United States, 133 S. Ct. 714, 719, n.3 (2013). Plaintiff alleges 12 that, in addition to violating RICO’s prohibition of honest services and mail and wire fraud, the 13 parties engaged in a conspiracy to violate RICO. 14 Litton, Ocwen and ASIC move to dismiss this claim because Plaintiff has failed to plead 15 any initial RICO violation Defendants could have conspired to violate. For reasons discussed 16 supra, the Court disagrees. ASIC also argues that the complaint fails to allege sufficient facts 17 about the details of the conspiracy, or ASIC’s awareness of the scheme. The Court finds the 18 allegations of the complaint sufficient to allege that the parties conspired to violate RICO. 19 E. Breach of Fiduciary Duty 20 Plaintiff alleges that Defendants Litton and Ocwen breached their fiduciary duty to 21 Plaintiff, and that Defendants ASIC and Southwest aided and abetted that breach. ASIC, Litton 22 and Ocwen move to dismiss both of these claims on the grounds that Litton and Ocwen do not 23 owe Plaintiff a fiduciary duty. 24 As a general rule, “[t]he relationship between a lending institution and its borrower-client 25 is not fiduciary in nature.” Nymark v. Heart Fed. Sav. & Loan Assn., 231 Cal. App. 3d 1089, 26 1093, n. 1 (1991) (citing Price v. Wells Fargo Bank 213 Cal.App.3d 465, 476-78 (1989), overruled 27 on other grounds by Riverisland Cold Storage, Inc. v. Fresno–Madera Production Credit 28 Association 55 Cal.4th 1169, 1182 (2013)). “[A] financial institution owes no duty of care to a 26 1 borrower when the institution’s involvement in the loan transaction does not exceed the scope of 2 its conventional role as a mere lender of money.” Nymark, 231 Cal.App.3d at 1096; see also 3 Rufini v. CitiMortgage, Inc., 227 Cal. App. 4th 299, 312, 173 (2014), as modified on denial of 4 reh’g (July 22, 2014) (“Rufini’s factual allegations do not show that CitiMortgage’s activities 5 went beyond its conventional role as a mere lender of money and therefore do not establish the 6 existence of a fiduciary duty.”). 7 Defendants argue that Plaintiff has not pled facts demonstrating that the lenders and the 8 servicers exceeded their customary roles. Plaintiff counters that she has alleged the servicers 9 exceeded their customary role – by making the challenged LPI assessments to her escrow account. But when California courts refer to a lender becoming a fiduciary by “exceed[ing] its customary 11 United States District Court Northern District of California 10 role,” they are referring to the formation of the relationship between the lender and borrower, not 12 to later acts that the lender seeks to challenge in a civil action. For example, in Ragland, the Court 13 of Appeal found that a lender had not established a fiduciary relationship by telling a lender “not 14 to make her April 2008 loan payment in order to be considered for a loan modification,” since 15 “[t]his advice was directly related to the issue of loan modification and therefore fell within the 16 scope of Downey Savings’s conventional role as a lender of money.” 209 Cal. App. 4th at 206-07. 17 The Court of Appeal distinguished this situation from Barrett v. Bank of America, 183 Cal.App.3d 18 1362, 1369 (1986), in which a loan officer gave a borrower “extensive financial and legal advice” 19 not directly related to furthering the bank’s own interest. Ragland, 209 Cal. App. 4th at 207. 20 As applied here, the complaint contains no allegations from which this court could infer a 21 similar relationship was created between the parties in which Defendants were advising Plaintiff 22 or holding themselves out as an agent of her will or a guardian of her interests. The servicers’ 23 interests in servicing the loan, and the institution of LPI, were for the servicers and the bank’s 24 interests, not Plaintiff’s. 25 Plaintiff argues that Litton and Ocwen owed her a fiduciary duty by managing her escrow 26 account. California courts have held than “an escrow holder is an agent and fiduciary of the 27 parties to the escrow,” but they have also said that the “agency created by the escrow is limited— 28 limited to the obligation of the escrow holder to carry out the instructions of each of the parties to 27 1 the escrow.” Summit Fin. Holdings, Ltd. v. Cont’l Lawyers Title Co., 27 Cal. 4th 705, 711 2 (2002), as modified on denial of reh’g (May 15, 2002) (citations omitted). In none of the cases 3 cited by Plaintiff did a California court recognize a breach of fiduciary duty claim against a lender 4 by a borrower who was party to a traditional lender-borrower relationship. “It is not uncommon 5 for a lending institution to handle escrow functions.” Peterson Dev. Co. v. Torrey Pines Bank, 6 233 Cal. App. 3d 103, 117 (1991) (citing 2 Miller & Starr, Cal. Real Estate (2d ed. 1989) § 5.1, p. 7 395). If this fact alone transformed an otherwise normal lender-borrower relationship into an 8 interaction amongst fiduciaries, it would substantially undermine the well-established principle 9 that there can be no viable breach of fiduciary duty claim arising out of an “an arm’s-length, adverse, ‘normal commercial banking transaction.’” Peterson Dev. Co., 233 Cal. App. 3d at 117 11 United States District Court Northern District of California 10 (quoting Mitsui Manufacturers Bank v. Superior Court, 212 Cal.App.3d 726, 729, (1991); see also 12 Peterson Dev. Co., 233 Cal. App. 3d at 119 (“In Copesky[ v. Superior Court, 229 Cal.App.3d 103, 13 119 (1991),] with respect to the normal commercial banking context, we cautioned against the 14 ‘loose characterization’ of financial relationships as ‘fiduciary, quasi-fiduciary or fiduciary like’, 15 commenting that with respect to ordinary banking transactions, ‘the bank is in no sense a true 16 fiduciary.’”) 17 The Court acknowledges that some courts have found at least some states’ breach of 18 fiduciary duty laws sufficient to give rise to a viable claim in similar situations. See Cannon, 917 19 F.Supp.2d at 1055. But this Court finds that under California law, the complaint does not allege 20 facts from which it is plausible to infer that the lender and Plaintiff had established a fiduciary 21 relationship. Accord Gustafson v. BAC Home Loans Servicing, LP, No. SACV 11-915-JST 22 ANX, 2012 WL 7051318, at *7-9 (C.D. Cal. Dec. 20, 2012); Lane v. Wells Fargo Bank, N.A., No. 23 12-cv-4026 WHA, 2013 WL 269133, at *10 (N.D. Cal. Jan. 24, 2013); Hudson v. Wells Fargo 24 Bank, N.A., No. 11-cv-3966 JCS, 2011 WL 5882880, at *8 (N.D. Cal. Nov. 23, 2011). From this 25 “[i]t follows logically that a loan servicer has no fiduciary duty to a borrower when its 26 involvement in the transaction does not exceed the scope of its conventional role as a loan 27 servicer.” Huerta v. Ocwen Loan Servicing, No. 09-cv-05822 JF, 2010 WL 728223, at *4 (N.D. 28 Cal. Mar. 1, 2010). The claim of “aiding and abetting a breach of fiduciary duty” must therefore 28 1 fail as well. 2 F. Unjust Enrichment 3 Plaintiff pleads a cause of action for “unjust enrichment.” In California “[t]here is no 4 cause of action for unjust enrichment. Rather, unjust enrichment is a basis for obtaining restitution 5 based on quasi-contract or imposition of a constructive trust.” Myers-Armstrong v. Actavis 6 Totowa, LLC, 382 Fed. Appx. 545, 548 (9th Cir. 2010) (unpublished) (citing McKell v. 7 Washington Mut., Inc., 142 Cal.App.4th 1457, 1489 (2006)); see also Hill v. Roll Intl. Corp, 195 8 Cal.App.4th 1295, 1307 (2011) (“Unjust enrichment is not a cause of action, just a restitution 9 claim”). 10 Moreover, since Plaintiff has pled other claims for which restitution is a remedy, “any United States District Court Northern District of California 11 unjust enrichment ‘claim’ would be purely duplicative.” Id. Finally, an action in quasi-contract 12 “does not lie when an enforceable, binding agreement exists defining the rights of the parties,” 13 which Plaintiff claims there is in pleading her breach of contract claim. Paracor Fin., Inc. v. Gen. 14 Elec. Capital Corp., 96 F.3d 1151, 1167 (9th Cir. 1996). 15 Plaintiff’s unjust enrichment claim fails as a matter of law. 16 G. 17 Plaintiff’s twelfth claim for relief arises under California’s Unfair Competition Law 18 (“UCL”), Cal. Bus & Prof. Code § 17200, et seq., which has three prongs, prohibiting “unlawful,” 19 “unfair,” and “fraudulent” practices. Since Plaintiff has validly pled a RICO claim, she has pled a 20 UCL claim under the “unlawful” prong. Defendants move to dismiss this claim insofar as it 21 alleges a “fraudulent” practice, since they maintain that the alleged representations were not 22 misstatements. The Court rejects that argument for the same reasons discussed supra. 23 UCL Defendants also moved to dismiss the UCL claim under the “unfair” prong for two 24 additional reasons. First, they argue that courts reject such “unfair” claims where the consumer 25 could reasonably have avoided the challenged harm by taking alternative action. See Davis, 691 26 F.3d at 1170 (rejecting “unfair” prong claim where plaintiff was warned that credit card 27 “restrictions might apply” and “had the opportunity to cancel the account for a full refund”). 28 Plaintiff, of course, had the opportunity to purchase insurance at her own cost and could therefore 29 1 could have avoided the LPI charges. While the Court has some sympathy for this argument, the 2 wrong Plaintiff seeks to redress is the harm of expecting that she would, if she defaulted on her 3 obligation, only be charged the costs the servicers actually incurred in seeking replacement 4 insurance. She could not reasonably have avoided that harm without knowing how the Defendants 5 allegedly conspired to set the rates for LPI. 6 ASIC also cites those California courts which have interpreted an “unfair practices” claim 7 to “require that the public policy which is a predicate to the action must be ‘tethered’ to specific 8 constitutional, statutory or regulatory provisions.” In re Ins. Installment Fee Cases, 211 Cal. App. 9 4th 1395, 1418 (2012) (quoting Gregory v. Albertson’s, Inc., 104 Cal. App. 4th 845, 853 (2002)). 10 ASIC notes that Plaintiff’s complaint fails to cite any such specific provision to which her United States District Court Northern District of California 11 UCL claim is tethered. In her opposition brief, Plaintiff cites 12 U.S.C. § 2605(m), which 12 provides that “All charges, apart from charges subject to State regulation as the business of 13 insurance, related to force-placed insurance imposed on the borrower by or through the servicer 14 shall be bona fide and reasonable.” 15 ASIC objects that this argument does not appear in the complaint. A plaintiff may not seek 16 to incorporate new facts into her complaint during motion practice, but she certainly may make 17 legal argument supporting the viability of her claims. Citing the provision to which her claim is 18 tethered is legal argument, not factual allegation. While it is probably better practice to cite in the 19 complaint the specific constitutional, statutory or regulatory provisions underlying an “unfair 20 practices” claim, it may be done in an opposition brief rather than in the complaint itself. 21 H. Conversion 22 Litton & Ocwen move to dismiss Plaintiff’s cause of action for conversion. “Conversion is 23 the wrongful exercise of dominion over the property of another.” Mendoza v. Continental Sales 24 Co., 140 Cal. App. 4th 1395, 1404-05 (2006). Here, the property Plaintiff claims Litton & Ocwen 25 have wrongfully exercised dominion over is money. “Money cannot be the subject of a cause of 26 action for conversion unless there is a specific, identifiable sum involved, such as where an agent 27 accepts a sum of money to be paid to another and fails to make the payment.” PCO, Inc. v. 28 Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, 150 Cal. App. 4th 384, 395 30 1 (2007) (quoting McKell v. Washington Mutual, Inc., 142 Cal. App. 4th 1457, 1491 (2006). 2 “California cases permitting an action for conversion of money typically involve those who have 3 misappropriated, commingled, or misapplied specific funds held for the benefit of others,” while 4 “actions for the conversion of money have not been permitted when the amount of money 5 involved is not a definite sum.” PCO, Inc., 150 Cal. App. 4th at 396. Here, Plaintiff cites no definite sum, and appears to regard the property that is subject to 6 her conversion claim to be coterminous with her immediate damages. ¶ 1, 17. In PCO, the Court 8 of Appeal “reject[ed]” the contention that the actual amount owed “is properly for a jury to 9 determine,” and held that where a plaintiff “could only estimate the amount of cash,” summary 10 adjudication of plaintiff’s conversion claim was warranted. 150 Cal.App.4th at 395, 397. In her 11 United States District Court Northern District of California 7 opposition, Plaintiff fails to respond to the implications PCO and related California case law have 12 on her conversion claim. While she argues that two courts of this district have allowed conversion 13 claims to proceed past the pleading stage in LPI cases, it does not appear that either court had 14 occasion to consider the argument Litton & Ocwen raise here. See Lane, 2013 WL 269133, at 15 *11; Cannon, 917 F.Supp.2d at 1053-54. 16 Plaintiff fails to plead a viable claim of conversion. 17 I. 18 Finally, Litton & Ocwen moves to dismiss the claims against Ocwen, since Plaintiff is Claims against Ocwen 19 suing Ocwen “in its capacity as successor in interest to Litton,” ¶ 3, and Defendants argue she has 20 failed to allege sufficient facts in support of that allegation. Plaintiff alleges that “Litton transferred the servicing rights to this loan to Ocwen,” ¶ 3, 21 22 that Ocwen’s parent company purchased Litton and agreed to certain indemnification provisions 23 for the benefit of Litton, including claims arising out of the force-placed practices complained of 24 in this action, ¶ 24, and that Litton transferred and merged its servicing operations with Ocwen, ¶¶ 25 3, 37. Proving that Ocwen has become Litton’s successor will require proof, of course, but there 26 is nothing implausible about the allegations in the complaint. 27 IV. 28 CONCLUSION Southwest’s motion to dismiss is GRANTED. All causes of action are DISMISSED 31 1 2 WITHOUT PREJUDICE to the extent they are pled against Defendant Southwest. Litton & Ocwen’s motion, and ASIC’s motion, are GRANTED IN PART and DENIED IN 3 PART. The tenth claim for relief, for unjust enrichment, is DISMISSED WITH PREJUDICE, 4 since the Court concludes that it fails as a matter of law. The first, second, seventh, eighth, and 5 eleventh claims for relief are DISMISSED WITHOUT PREJUDICE. Plaintiff has leave to re- 6 assert those claims for relief in an amended complaint if she can allege additional facts not pled in 7 the operative complaint which remedy the deficiencies identified in this order. Plaintiff must file 8 any such amended complaint within 21 days of this order. Failure to meet this deadline or comply 9 with the Court’s order may result in dismissal with prejudice of those claims pursuant to Rule 41(b) of the Federal Rules of Civil Procedure. Plaintiff must, with any amended complaint, 11 United States District Court Northern District of California 10 include a separate document detailing the new factual allegations she has added to the complaint 12 to overcome the deficiencies described in this order. 13 14 15 16 IT IS SO ORDERED. Dated: October 1, 2014 ______________________________________ JON S. TIGAR United States District Judge 17 18 19 20 21 22 23 24 25 26 27 28 32

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