Vargas et al v. Bank of America, N.A. et al, No. 3:2012cv02247 - Document 9 (S.D. Cal. 2013)
Court Description: ORDER Granting with Leave to Amend 5 Defendant's Motion to Dismiss for Failure to State a Claim. If Plaintiffs decide to file an amended complaint, they must do so by April 22, 2013. Signed by Judge M. James Lorenz on 4/2/2013. (sjt)
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Vargas et al v. Bank of America, N.A. et al Doc. 9 1 2 3 4 5 6 7 8 9 10 UNITED STATES DISTRICT COURT 11 SOUTHERN DISTRICT OF CALIFORNIA 12 13 14 15 16 17 18 19 BRENDA VARGAS, et al., ) Case No. 12-cv-2247-L(MDD) ) Plaintiffs, ) ORDER GRANTING ) DEFENDANT’S MOTION TO v. ) DISMISS WITH LEAVE TO AMEND ) [DOC. 5] BANK OF AMERICA, N.A., ) ) Defendant. ) ) ) On July 18, 2012, Plaintiffs Brenda Vargas and Joel Diaz commenced this action in the 20 San Diego Superior Court against Defendant Bank of America, N.A. (“BANA”) for violations of 21 the Rosenthal Fair Debt Collection Practices Act (“Rosenthal Act” or “RFDCPA”), violations of 22 California Business and Professions Code § 17200, and defamation. On September 14, 2012, 23 Defendant removed the action to this Court. Defendant now moves to dismiss the complaint. 24 Plaintiffs oppose. 25 The Court found this motion suitable for determination on the papers submitted and 26 without oral argument. See Civ. L.R. 7.1(d.1). (Doc. 8.) For the following reasons, the Court 27 GRANTS WITH LEAVE TO AMEND Defendant’s motion to dismiss. 28 // 12cv2247 Dockets.Justia.com 1 I. BACKGROUND 2 On May 4, 2006, Plaintiffs received a loan in the amount of $76,756.00 from 3 Countrywide to help purchase a condominium located in Chula Vista, California. (Compl. ¶¶ 4 14–15.) There were two original purchase-money loans for the property because it was an 5 “80/20” purchase, “that was broken up into the amounts of $309,096 and $76,756.” (Id. ¶ 16.) 6 Countrywide Home Loans, Inc. originated both loans. (Def.’s RJN Exs. 1–2.) 7 On May 19, 2009, a notice of default was recorded in the amount of $8,494.44. (Def.’s 8 RJN Ex. 3.) On September 20, 2011, the property was sold in a non-judicial foreclosure sale. 9 (Compl. ¶ 18.) At all times, Plaintiffs used the property as a single-family unit, and the property 10 was “owner occupied” and never refinanced. (Id. ¶ 19.) 11 Since the foreclosure, Plaintiffs allege that “Defendants [sic] has been inaccurately 12 reporting monthly to the consumer credit reporting agencies a full balance owed which is 13 inaccurate and has had an extremely detrimental effects [sic] on the Plaintiffs’ credit.” (Compl. 14 ¶ 22.) 15 On July 18, 2012, Plaintiffs commenced this action in the San Diego Superior Court 16 against Defendant for violations of the RFDCPA, violations of California Business and 17 Professions Code § 17200, and defamation. On September 14, 2012, Defendant removed the 18 action to this Court. Defendant now moves to dismiss the complaint. Plaintiffs oppose. 19 20 II. LEGAL STANDARD 21 The court must dismiss a cause of action for failure to state a claim upon which relief can 22 be granted. Fed. R. Civ. P. 12(b)(6). A motion to dismiss under Rule 12(b)(6) tests the legal 23 sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The court 24 must accept all allegations of material fact as true and construe them in light most favorable to 25 the nonmoving party. Cedars-Sanai Med. Ctr. v. Nat’l League of Postmasters of U.S., 497 F.3d 26 972, 975 (9th Cir. 2007). Material allegations, even if doubtful in fact, are assumed to be true. 27 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, the court need not “necessarily 28 assume the truth of legal conclusions merely because they are cast in the form of factual 12cv2247 2 1 allegations.” Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) 2 (internal quotation marks omitted). In fact, the court does not need to accept any legal 3 conclusions as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 4 “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed 5 factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitlement to relief’ 6 requires more than labels and conclusions, and a formulaic recitation of the elements of a cause 7 of action will not do.” Twombly, 550 U.S. at 555 (internal citations omitted). Instead, the 8 allegations in the complaint “must be enough to raise a right to relief above the speculative 9 level.” Id. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, 10 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 129 S. Ct. at 11 1949 (citing Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff 12 pleads factual content that allows the court to draw the reasonable inference that the defendant is 13 liable for the misconduct alleged.” Id. “The plausibility standard is not akin to a ‘probability 14 requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” 15 Id. A complaint may be dismissed as a matter of law either for lack of a cognizable legal theory 16 or for insufficient facts under a cognizable theory. Robertson v. Dean Witter Reynolds, Inc., 749 17 F.2d 530, 534 (9th Cir. 1984). 18 Generally, courts may not consider material outside the complaint when ruling on a 19 motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 20 (9th Cir. 1990). However, documents specifically identified in the complaint whose authenticity 21 is not questioned by parties may also be considered. Fecht v. Price Co., 70 F.3d 1078, 1080 n.1 22 (9th Cir. 1995) (superceded by statutes on other grounds). Moreover, the court may consider the 23 full text of those documents, even when the complaint quotes only selected portions. Id. It may 24 also consider material properly subject to judicial notice without converting the motion into one 25 for summary judgment. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). Both parties 26 request judicial notice for certain documents. (Docs. 5-2, 6-1.) Neither party opposes. 27 Accordingly, the Court GRANTS the parties’ requests. 28 12cv2247 3 1 III. DISCUSSION 2 A. 3 The Rosenthal Act states that all debt collectors must comply with the Federal Debt The Rosenthal Act 4 Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692b–1692j. Cal. Civ. Code § 1788.17. 5 “The [FDCPA] prohibits debt collector[s] from making false or misleading representations and 6 from engaging in various abusive and unfair practices.” Heintz v. Jenkins, 514 U.S. 291, 292 7 (1995). To be liable for an FDCPA violation, a defendant must, as a threshold matter, be a “debt 8 collector” within the meaning of those acts. Id. at 294. The Rosenthal Act incorporates the 9 substantive provisions of the FDCPA. See, e.g., Dupuy v. Weltman, Wienberg & Reis Co., 442 10 F. Supp. 2d 822, 825 n.1 (N.D. Cal. 2006); Edstrom v. All Servs. & Processing, No. C04-1514, 11 2005 WL 645920, at *5 (N.D. Cal. Feb. 22, 2005). 12 Under the FDCPA, a debt collector is “any person who uses any instrumentality of 13 interstate commerce or the mails in any business the principal purpose of which is the collection 14 of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or 15 due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6). This definition includes “any 16 creditor who, in the process of collecting his own debts, uses any name other than his own which 17 would indicate that a third person is collecting or attempting to collect such debts.” Id. § 18 1692a(6). The FDCPA does not, however, cover “the consumer’s creditors, a mortgage 19 servicing company, or any assignee of the debt, so long as the debt was not in default at the time 20 it was assigned.” Nool v. HomeQ Servicing, 653 F. Supp. 2d 1047, 1053 (E.D. Cal. 2009) 21 (quoting Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985)); see also 15 U.S.C. § 22 1692a(4) (defining “creditor”). Consequently, a loan servicer is not a debt collector if it 23 acquired the loan before the borrower was in default. See Schlegel v. Wells Fargo Bank, N.A., 24 799 F. Supp. 2d 1100, 1103-04 (N.D. Cal. 2011). 25 Here, Defendant appears to argue that it is not a debt collector but rather a loan servicer. 26 (Def.’s Mot. 4:16–5:2.) Plaintiffs respond by arguing that Defendant is a debt collector within 27 the definition presented in Pittman v. Barclays Capital Real Estate, Inc., No. 09 CV 0241, 2009 28 WL 1108889 (S.D. Cal. Apr. 24, 2009) (Miller, J.). (Pl.’s Opp’n 5:7–13.) They go on to present 12cv2247 4 1 a quote purportedly from Pittman that defines a debt collector as “‘a person’ the ‘principal 2 purpose’ of whose business is the collection of debts (whether on behalf of himself or others).” 3 (Id.) However, Plaintiffs’ quote does not appear anywhere in Pittman. See Pittman, 2009 WL 4 1108889, at *3. Without more, Plaintiffs fail to adequately address the threshold issue of 5 whether Defendant is a debt collector under the Rosenthal Act and FDCPA. See Heintz, 514 6 U.S. at 294. 7 Because Plaintiffs fail to present any reason to find that Defendant is a debt collector, the 8 Court cannot conclude that Defendant is a debt collector under the Rosenthal Act and FDCPA. 9 Accordingly, the Court DISMISSES WITHOUT PREJUDICE Plaintiffs’ Rosenthal Act cause 10 of action. 11 12 B. 13 California’s Unfair Competition Law (“UCL”) prohibits “any unlawful, unfair or California Business and Professions Code § 17200 14 fraudulent business act or practice . . . .” Cal. Bus. & Prof. Code § 17200. This cause of action 15 is generally derivative of some other illegal conduct or fraud committed by a defendant. Khoury 16 v. Maly’s of Cal., Inc., 14 Cal. App. 4th 612, 619 (1993). Plaintiffs allege that Defendant 17 violated the § 17200 by “violating California Civil Code § 1681s-2 nine times, thereby engaging 18 in unfair, fraudulent, unlawful business practices.” (Compl. ¶ 33.) Because this cause of action 19 derives from the Rosenthal Act cause of action that was dismissed above, the Court also 20 DISMISSES WITHOUT PREJUDICE Plaintiffs’ § 17200 cause of action. 21 22 C. 23 “Defamation is an invasion of the interest in reputation.” Smith v. Maldonado, 72 Cal. Defamation Per Se 24 App. 4th 637, 645 (1999). “The tort involves the intentional publication of a statement of fact 25 that is false, unprivileged, and has a natural tendency to injure or which causes special damage.” 26 Id. “Publication means communication to some third person who understands the defamatory 27 meaning of the statement and its application to the person to whom reference is made.” Id. 28 “Publication need not be to the ‘public’ at large; communication to a single individual is 12cv2247 5 1 sufficient.” Id. 2 California Civil Code § 45a sets forth the elements for defamation per se: “A libel which 3 is defamatory of the plaintiff without the necessity of explanatory matter, such as an inducement, 4 innuendo or other extrinsic fact, is said to be a libel on its face. Defamatory language not 5 libelous on its face is not actionable unless the plaintiff alleges and proves that he has suffered 6 special damage as a proximate result thereof.” Where a plaintiff can prove libel per se, damage 7 to reputation is presumed, so that the plaintiff need not introduce evidence of actual damages to 8 recover compensatory, or, in appropriate cases, punitive damages. Barnes-Hind, Inc. v. Superior 9 Court, 181 Cal. App. 3d 377, 382 (1986). 10 “[California Civil Procedure Code] Section 580b, by its own terms eliminates a creditor’s 11 ability to seek a deficiency judgment, but it does not eliminate the underlying debt.” Herrera v. 12 LCS Fin. Servs. Corp., No. C09-02843, 2009 WL 2912517, at *8 (N.D. Cal. Sept. 9, 2009) 13 (emphasis added). “The fact of that debt’s existence may be entirely theoretical, given that 14 section 580b closes the courthouse door on any creditor’s collection efforts against the 15 mortgagor. However, the claim that section 580b erases the debt . . . must fail as a matter of 16 law.” Id. 17 Defendant argues that Plaintiffs cannot satisfy the falsity requirement by simply stating 18 that the credit reporting was “inaccurate.” (Def.’s Mot. 7:8–25.) In response, Plaintiffs argue 19 that § 580(b) “clearly decrees” that Plaintiffs’ post-foreclosure balance should be zero, and as a 20 result, “[b]y stating not only a balance due but a past due amount as well, and by reporting this 21 past due amount and total amount due to the Credit Reporting Agencies,” they adequately allege 22 that Defendant knowingly published false statements to others. (Pls.’ Opp’n 7:12–24.) Plaintiffs 23 appear to presume that § 580b erases their debt and, because under their interpretation of § 580b 24 that they owe nothing to Defendant, reporting a debt to the credit reporting agencies is 25 tantamount to publishing a false statement. (See id.) But Plaintiffs are mistaken. 26 Section 580b does not erase Plaintiffs’ debt. See Herrera, 2009 WL 2912517, at *8. 27 Rather, it eliminates a creditor’s ability to seek a deficiency judgment. Cal. Civ. Proc. Code § 28 580b. Thus, without more, § 580b does not serve as a proper basis to support Plaintiffs’ 12cv2247 6 1 defamation cause of action. See Cal. Civ. Proc. Code § 580b; Herrera, 2009 WL 2912517, at 2 *8; Smith, 72 Cal. App. 4th at 645. Additionally, § 580b does not prohibit or even discuss 3 reporting debts to credit reporting agencies. See Cal. Civ. Proc. Code § 580b. It is not clear 4 from Plaintiffs’ complaint that Defendant violated § 580b in any way. 5 Accordingly, the Court DISMISSES WITHOUT PREJUDICE Plaintiffs’ defamation 6 per se cause of action. 7 8 IV. CONCLUSION & ORDER 9 In light of the foregoing, the Court GRANTS WITH LEAVE TO AMEND Defendant’s 10 motion to dismiss, and DISMISSES the complaint in its entirety. (Doc. 5.) If Plaintiffs decide 11 to file an amended complaint, they must do so by April 22, 2013. 12 IT IS SO ORDERED. 13 14 DATED: April 2, 2013 15 16 17 COPY TO: M. James Lorenz United States District Court Judge HON. MITCHELL D. DEMBIN 18 UNITED STATES MAGISTRATE JUDGE 19 ALL PARTIES/COUNSEL 20 21 22 23 24 25 26 27 28 12cv2247 7
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