Linda Moravec Varga v. Wells Fargo Bank, N.A. et al

Filing 31

MINUTES (IN CHAMBERS) ORDER RE PLAINTIFF'S MOTION TO REMAND 12 , DEFENDANTS' MOTION TO DROP DEFENDANT WELLS FARGO & CO. 15 , AND DEFENDANTS' MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 16 by Judge Dolly M. Gee: In light of th e foregoing, the Court issues the following rulings: 1. The Court GRANTS Defendants' MTS and STRIKES the FAC's claims against WF & Co.; 2. The Court DENIES Plaintiffs' MTR; 3. The Court DENIES Defendants' Request for Judicial No tice as MOOT; 4. The Court GRANTS Defendants' MTD as to all claims, with leave to amend; 5. By no later than 21 days from the date of this Order, Plaintiff shall file an amended complaint or notify Defendants that she does not intend to amend; and 6. Defendants shall file their response within 21 days from the date of service of an amended complaint. IT IS SO ORDERED. (See order for details.) (kti)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

Date

CV 16-9650-DMG (KSx)

Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

Present: The Honorable

September 12, 2017
Page

1 of 14

DOLLY M. GEE, UNITED STATES DISTRICT JUDGE

KANE TIEN
Deputy Clerk

NOT REPORTED
Court Reporter

Attorneys Present for Plaintiff(s)
None Present

Attorneys Present for Defendant(s)
None Present

Proceedings: IN CHAMBERS - ORDER RE PLAINTIFF’S MOTION TO REMAND [12],
DEFENDANTS’ MOTION TO DROP DEFENDANT WELLS FARGO &
CO. [15], AND DEFENDANTS’ MOTION TO DISMISS FOR FAILURE
TO STATE A CLAIM [16]
On November 18, 2016, Plaintiff Linda Moravec Varga, on behalf of herself and all
persons similarly situated, filed a class action complaint (“Complaint”) in Los Angeles County
Superior Court against Wells Fargo Home Mortgage, Inc. Removal Notice, Ex. A [Doc. # 1-1.]
On December 30, 2016, Wells Fargo Bank, N.A. (“Wells Fargo Bank”), removed the state court
action to this Court, asserting that it had erroneously been sued as Wells Fargo Home Mortgage,
Inc., and that jurisdiction was proper under the Class Action Fairness Act (“CAFA”) in part
because Wells Fargo Bank is a citizen of South Dakota and Plaintiff is a citizen of California.
Removal Notice [Doc. # 1].
On January 30, 2017, Plaintiff filed a First Amended Complaint (“FAC”), which added
Wells Fargo & Co. (“WF & Co.”) as a new Defendant, and claimed that WF & Co. is a citizen of
California. [Doc. # 11.]
On January 30, 2017, Plaintiff also filed a Motion to Remand the case to state court,
arguing that CAFA’s local controversy and home state controversy exceptions apply given WF
& Co.’s joinder as a Defendant (“MTR”).1 [Doc. # 12.] On February 17, 2017, Defendants filed
a Motion to Drop WF & Co. under Federal Rule of Civil Procedure 21 [Doc. # 15] and a
Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6) (“MTD”) [Doc. # 16], along
with a Request for Judicial Notice [Doc. # 16-2].
On August 1, 2017, the Court construed Defendants’ Motion to Drop as a Motion to
Strike WF & Co. from the FAC under 28 U.S.C. § 1447(e) (“MTS”), and requested that the
1

Each of these exceptions requires the presence of at least one defendant who is a citizen of the State in which the
action was originally filed. See 28 U.S.C. § 1332(d)(4)(A)–(B) (2012).

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CIVIL MINUTES—GENERAL

Initials of Deputy Clerk KT

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

CV 16-9650-DMG (KSx)

Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

Date

September 12, 2017
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parties submit supplemental briefing on whether granting that motion would be appropriate
under the statute. [Doc. # 28.]
All of these motions are now fully briefed. Having duly considered the parties’ written
submissions, the Court now renders its decision.
I.
FACTUAL ALLEGATIONS2
In July of 2003, Plaintiff secured a home loan in the amount of $733,000 from Wells
Fargo Home Mortgage, Inc., which later merged into Defendant Wells Fargo Bank on May 8,
2004. FAC at ¶¶ 3, 26, Ex. 4. Plaintiff executed a Promissory Note and an Adjustable Rate
Rider “to evidence an indebtedness . . . in the original principal amount of $733,000 . . . .” FAC
at ¶ 26. Plaintiff also executed a Deed of Trust on the Subject Property to secure the loan. Id.
The Promissory Note states that Plaintiff will pay a fixed annual interest rate of 4.875%
for ten years, beginning September 1, 2003. FAC, Ex. 4. Paragraph 4(A) of the Promissory
Note states that Plaintiff’s interest rate “will change on the first day of August, 2013, and the
adjustable interest rate . . . may change on that day every 12th month thereafter.” Id. That
Paragraph also provides that “[t]he date on which [the] initial fixed interest rate changes to an
adjustable rate, and each date on which [the] adjustable interest rate could change, is called a
‘Change Date.’” Furthermore, Paragraph 4(E) of the Promissory Note provides that the “new
interest rate will become effective on each Change Date.” Id. Paragraph 4(F) of the Promissory
Note states that Plaintiff will receive notice of changes to her interest rate (“Notice of Changes”)
“before the effective date of any change,” which will include “the amount of [the] monthly
payment, any information required by law . . . and also the title and telephone number of a
person who will answer any question [Plaintiff] may have regarding the notice.” FAC, Ex. 4.
Plaintiff received Notices of Changes in 2013, 2014, and 2015, respectively, that each
erroneously omitted the title and telephone number of a person who would answer any question
Plaintiff had regarding the Notice of Changes. See FAC at ¶¶ 48–49.
Plaintiff received the 2015 Notice of Changes in or about June of that year, which stated
that her interest rate would increase from 2.875% to 3.000%.3 FAC at ¶ 37. Because this Notice
2

As noted infra Part III, for the purpose of deciding Defendants’ MTD, the Court accepts as true the FAC’s factual
allegations.
3
Plaintiff apparently avers that only the 2015 Notice of Changes resulted in an increase in her interest payments.
See, e.g., FAC at ¶ 49 (“Plaintiff paid the increased monthly payments from September 1, 2015 and thereafter until
the loan was paid in full.”).
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Initials of Deputy Clerk KT

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

CV 16-9650-DMG (KSx)

Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

Date

September 12, 2017
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of Changes omitted the aforementioned title and telephone number information, Plaintiff alleges
that the notice was “ineffective in increasing [her] monthly payment under the Wells Fargo
mortgage loan” and that Defendants4 were not entitled to the increased payments that they
“demanded” and actually did “receive[] from Plaintiff[.]” See id. at ¶¶ 37–38. In addition,
Plaintiff alleges that because she was not provided with a title and a telephone number to call,
she “had no choice but to, and did, contact [Defendants] through the telephone number (866)
234-8271, provided in the box labeled ‘Account Information’ located in the top right corner of
the Payment Increase Notice.” Id. at ¶ 43. She further claims that, at an unspecified point in
time, she “incurred costs and fees to refinance the . . . loan[] with a different lender, so as to
avoid future (illegal) payment increases.” See FAC at ¶ 49.
Defendants allegedly had “actual knowledge that [they] [were] not entitled to such
increased payments” because they were aware that they failed to provide the title and telephone
number of a person to contact, but continued to falsely represent to Plaintiff that they were
entitled to the increased payments. Id. By requesting increased payments, Plaintiff contends that
Defendants engaged in false and fraudulent representations and, as a result, were unjustly
enriched. Id. at ¶ 41. Further, Plaintiff contends that because Defendants obtained “such monies
unlawfully, under false pretenses and by fraud,” it “constituted theft as well.” Id. at ¶ 45.
On the basis of these allegations, Plaintiff seeks relief on the following six causes of
action: (1) fraud; (2) treble damages under California Penal Code § 496; (3) negligent
misrepresentation; (4) breach of contract; (5) breach of implied covenant of good faith and fair
dealing; and (6) violation of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof.
Code § 17200 et seq. See FAC at 25–44. Further, Plaintiff seeks to represent a class of
Defendants’ customers “who are citizens of the State of California, who had an Adjustable-Rate
Mortgage . . . residential loan with [Defendants] that increased in interest rate or payments at
least one time on or after January 1, 2012[,]” and who did not receive a notice that included the
aforementioned title and telephone number information. See FAC at ¶ 50.
II.
PLAINTIFF’S MOTION TO REMAND AND DEFENDANTS’ MOTION TO STRIKE
Since Plaintiff’s MTR and Defendants’ MTS concern the Court’s jurisdiction over the
instant case, the Court addresses these motions first.

4

As discussed infra Part II.1, much of the FAC indiscriminately attributes purported misconduct to both Defendants
Wells Fargo Bank and WF & Co.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

CV 16-9650-DMG (KSx)

Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

Date

September 12, 2017
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Title 28 U.S.C. § 1447(e) provides that “[i]f after removal the plaintiff seeks to join
additional defendants whose joinder would destroy subject matter jurisdiction, the court may
deny joinder, or permit joinder and remand the action to the State court.” Under this provision,
the decision whether to permit a plaintiff to join a non-diverse party is committed to a federal
district court’s sound discretion. Newcombe v. Adolf Coors Co., 157 F.3d 686, 691 (9th Cir.
1998). When exercising that discretion, courts consider six factors:
(1) whether the party sought to be joined [i]s needed for just adjudication and
would be joined under Federal Rule of Civil Procedure 19(a); (2) whether the
statute of limitations would preclude an original action against the new defendants
in state court; (3) whether there has been unexplained delay in requesting joinder;
(4) whether joinder is intended solely to defeat federal jurisdiction; (5) whether
the claims against the new defendant appear valid; and (6) whether denial of
joinder will prejudice the plaintiff.
McGrath v. Home Depot USA, Inc., 298 F.R.D. 601, 607 (S.D. Cal. 2014) (quoting IBC
Aviation Servs., Inc. v. Compania Mexicana de Aviacion, S.A. de C.V., 125 F. Supp. 2d 1008,
1011 (N.D. Cal. 2000)). Courts have construed § 1447(e) as authorizing district courts to utilize
this six-factor test to determine whether to strike non-diverse parties who are added after
removal. See, e.g., San Jose Neurospine v. Cigna Health & Life Ins. Co., No.16-CV-05061LHK, 2016 WL 7242139, at *7, *13 (N.D. Cal. Dec. 15, 2016) (citing Clinco v. Roberts, 41 F.
Supp. 2d 1080, 1088 (C.D. Cal. 1999)).
1.

Whether the Party Sought to Be Joined Is Needed for Just Adjudication

Plaintiff contends that the FAC asserts “[s]ubstantive allegations against” WF & Co. such
that its presence is required to secure complete relief. See Supp. Opp’n at 3–4. In particular,
Plaintiff claims that Paragraphs 5 and 6 of the FAC “set out the Wells Fargo trademarks owned
and controlled by [WF & Co.],” and that Paragraphs 13 and 14 “allege misleading
misrepresentations as a factual predicate for the state causes of action that follow.” See id. at 3.
Plaintiff also argues that she cannot obtain complete relief without WF & Co.’s presence because
she needs to obtain injunctive relief to “cur[e] misrepresentations in the use of its name[.]” See
id. at 4. Additionally, Plaintiff contends that all of the causes of action in the FAC are alleged
against both Wells Fargo Bank and WF & Co. See id. at 3–4.
The Court does not find Plaintiff’s arguments to be persuasive. First, the FAC’s
allegations do not indicate that “there is a high degree of involvement by [W&F Co.] in the
occurrences that gave rise to the plaintiff’s cause of action.” McGrath, 298 F.R.D. at 608.
CV-90

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

CV 16-9650-DMG (KSx)

Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

Date

September 12, 2017
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Although Plaintiff does vaguely claim that she relied on WF & Co.’s trademark “to inform her
that she was entering into a contract with [WF & Co.][,]” see FAC at ¶ 13, this assertion is belied
by the fact that she did not name WF & Co. as a Defendant until after this action was removed to
federal court.5 See Compl. at ¶¶ 2–5 (naming only “Wells Fargo Home Mortgage, Inc.” and
“Does 1 through 25” as Defendants); see also MTR at 1 (suggesting that Plaintiff was not aware
of WF & Co.’s identity until after Defendant Wells Fargo Bank had listed WF & Co. in a notice
of interested parties). Further, the only misrepresentations that Plaintiff specifically identifies in
connection with her six causes of action or her class action allegations pertain to the omission of
the title and telephone information from the Notices of Changes. See FAC at ¶¶ 59h–i, 71, 87,
93, 108–15, 123, 135–37. An order “prohibiting [Defendants] from continuing to violate [their]
obligations under Par. 4(F) of the Promissory Note and Adjustable Rate Rider” is the only
specific type of injunctive relief that is requested in the FAC. See id. at 45. Thus, even applying
the generous assumption that Plaintiff’s claims somehow concern WF & Co.’s ownership and/or
licensing of its trademark, it is not the “gravamen” of the instant action. See McGrath, 298
F.R.D. at 608 (focusing on “[t]he gravamen of Plaintiff’s action”).
Second, the fact that the FAC indiscriminately attributes purported misconduct to both
Wells Fargo Bank and WF & Co. does not establish that the latter must remain a party for there
to be a just adjudication of this action. See, e.g., FAC ¶ 7 (collectively referring to Defendants
Wells Fargo Bank and WF & Co. as “WELLS FARGO”); id. at ¶ 27 (“WELLS FARGO is the
servicer of an adjustable rate mortgage governed by the terms of the Loan Documents, all of
which were executed by Plaintiff as borrower”). The FAC apparently acknowledges that the two
Defendants had different roles, identifying WF & Co. as the owner of the “WELLS FARGO(R)
box logo” and the “mark WELLS FARGO(R)[,]” see id. at ¶¶ 5, 20, and Wells Fargo Bank “as a
provider of residential and mortgage loan servicing[.]” See id. at ¶ 2; see also Compl. at ¶ 2
(averring that Wells Fargo Home Mortgage, Inc., whose successor-in-interest is Wells Fargo
Bank, was Plaintiff’s loan servicer “at all relevant times discussed [t]herein”). Yet, it appears
that the FAC does not otherwise differentiate between Defendants because: (1) Wells Fargo
Bank is a wholly-owned subsidiary of WF & Co. such that the latter has “ownership and
financial control” over the former, see FAC at ¶¶ 15–16; (2) Wells Fargo Bank constitutes much
of WF & Co.’s consolidated assets, revenues, and net income, see id. at ¶ 17; and (3) the two
Defendants share four corporate officers.6 See id. at ¶ 18. Nevertheless, under the state law that
5

Defendants assert that WF & Co. did not own the trademark that Wells Fargo Bank actually used in connection
with its mortgage servicing. See, e.g., Reply re MTS at 10 (citing inter alia, Coffrey Decl. at ¶ 3). Given the
Court’s disposition of Defendants’ MTS, the Court need not resolve that factual issue or otherwise determine
whether evidence outside the FAC may be considered when ruling on Defendants’ MTS.
6
The FAC also alleges in a conclusory fashion that WF & Co. “directs [Wells Fargo Bank’s] daily affairs,” and the
two Defendants “had an interrelation of pertinent operations” and “centralized control of consumer lending[.]” See
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

CV 16-9650-DMG (KSx)

Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

Date

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governs Plaintiff’s claims, these allegations are not sufficient to justify imputing Wells Fargo
Bank’s actions to WF & Co. Cf. Sonora Diamond Corp. v. Superior Court of Tuolumne Cty., 83
Cal. App. 4th 523, 538, 549 (2000) (“Ordinarily, a corporation is regarded as a legal entity,
separate and distinct from its stockholders, officers and directors, with separate and distinct
liabilities and obligations. . . . [T]hat the directors and officers [of the parent and its subsidiary]
were interlocking is insufficient to rebut the presumption that each common officer or director
wore the appropriate ‘hat’ when making corporate and operational decisions for the respective
entities.”). Accordingly, this factor weighs in favor of striking WF & Co. from the FAC. Cf.
McGrath, 298 F.R.D. at 608 (finding that this factor weighed against joining certain non-diverse
employees of a defendant in part because the operative pleading “contain[ed] no allegations by
the individual [d]efendants outside the scope of their employment”).
2.

Statute of Limitations

In the MTS filed on February 17, 2017, Defendants allege that Plaintiff’s claims for fraud
are time-barred because she filed her original complaint on November 18, 2016. Plaintiff started
receiving Notices of Changes in June 2013, and fraud claims are subject to a three-year statute of
limitations.7 See MTS at 11 (citing, inter alia, Cal. Civ. Proc. Code § 338). Defendants do not
contend that any other claim is time-barred.
In her supplemental opposition, Plaintiff chooses not to address the statute of limitations
argument. See Suppl. Opp’n at 6 (emphasis added) (“Aside from its Statue [sic] of Limitations
argument, which plaintiff has not commented on, defendants fail on all the 1447 (e) factors.”).
Notwithstanding the parties’ paltry briefing on this factor, the Court need not address it
because other factors weigh in favor of striking WF & Co. from the FAC.

FAC at ¶¶ 15–16. Further, the FAC claims that the two Defendants utilized “shared branding[.]” See id. at ¶ 15.
Nonetheless, Plaintiff’s briefing does not even argue that these allegations establish that Wells Fargo Bank’s actions
may be imputed to WF & Co. under the alter ego doctrine or under any related theory. Rather, Plaintiff focuses
primarily on the allegations discussed in the text accompanying this footnote, see, e.g., Opp’n to MTS at 5, and also
apparently contends that Wells Fargo Home Mortgage, Inc.’s merger with Wells Fargo Bank was a “sham” intended
to provide a basis for removal. See Suppl. Opp’n at 2–3.
7
Defendants raise the same argument in their MTD. See MTD 8–9. Nonetheless, the Court rejects that argument
for the reasons discussed infra Part III.3.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

CV 16-9650-DMG (KSx)

Date

September 12, 2017

Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

3.

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Timeliness

Defendants initially state in their MTS that “Plaintiff has not unduly delayed in adding
[WF & Co.] to the action.” See MTS at 11. Plaintiff apparently relies on this statement in her
supplemental opposition by quoting this admission and refraining from arguing the issue further.
See Suppl. Opp’n at 4. Yet, for the first time in their supplemental reply, Defendants claim that
Plaintiff’s amendment was untimely for the purpose of this analysis because: (1) she filed it two
and a half months after filing her original pleading and one month after removal, and (2) she did
not explain why she could not have known before the amendment the basis of her claims against
WF & Co. See Suppl. Reply at 7.
Because other factors weigh in favor of striking WF & Co., the Court need not further
address this factor or the propriety of Defendants’ raising an argument for the first time in its
supplemental reply.
4.

Whether Joinder Is Intended Solely to Defeat Federal Jurisdiction

In determining whether a plaintiff intended to join a non-diverse defendant simply to
defeat federal jurisdiction, courts weigh several considerations, including: (1) whether the
plaintiff was aware of the removal at the time he or she filed the amended complaint, (2) whether
the amendment’s changes are minor or insignificant, and (3) whether the plaintiff provided an
explanation for waiting to assert claims against a non-diverse defendant. See San Jose
Neurospine, 2016 WL 7242139, at *10–11 (collecting cases).
Here, Plaintiff was aware of removal when she added WF & Co. as a Defendant, given
that she filed the FAC approximately one month after Wells Fargo Bank filed the Removal
Notice. Further, apart from the FAC’s inclusion of the seemingly vacuous allegations against
WF & Co., discussed supra Part II.1, and the deletion of a cause of action under California Civil
Code § 1770, there appear to be no significant changes relating to WF & Co.’s purported liability
for any wrongdoing.8 Compare FAC at 1–46, with Compl. at 1–40. Lastly, Plaintiff has
provided no explanation for failing to join WF & Co. before this action was removed to federal

8

Plaintiff does not explicitly address this § 1447(e) factor in her briefing concerning the MTS. See Opp’n at 2–7;
Suppl. Opp’n at 1–6. In Plaintiff’s MTR, however, she claims that her amendments to the original complaint fall
into two categories: “1) Plaintiff’s substitution of DOE 1 for [WF & Co.]; and 2) Amendments to clarify
jurisdictional issues.” See MTR at 4. Further, Plaintiff attached to her opposition to Defendants’ MTD a document
that purports to show the differences between the original complaint and the FAC; this document confirms the
Court’s observations made in the text accompanying this footnote. See Opp’n re MTD at 4, Ex. 4.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

CV 16-9650-DMG (KSx)

Date

Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

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court. These considerations give rise to the inference that Plaintiff joined WF & Co. solely for
the purpose of defeating the Court’s jurisdiction.
5.

Validity of the Claims Against the New Defendant

For the same reasons that the first factor weighs in favor of striking WF & Co. from the
FAC, this factor likewise supports that result. See McGrath, 298 F.R.D. at 608–09 (noting that
the analysis of the first factor overlaps with the fifth factor). Specifically, the FAC’s allegations
against WF & Co. are weak because they either do not appear to support Plaintiff’s causes of
action or are entirely derivative of Wells Fargo Bank’s purported misconduct.
6.

Prejudice to Plaintiff

Plaintiff asserts that if WF & Co. is stricken from the FAC, she will be unable to obtain
“complete injunctive relief” presumably because she could not obtain a court order “curing the
misrepresentations in the use of [Defendants’] name[.]” See Suppl. Opp’n at 4, 6. Nonetheless,
the Court found in connection with the first factor that Plaintiff’s causes of action focus primarily
(if not exclusively) on the omission of the title and telephone information from the Notices of
Changes, and not on WF & Co.’s ownership and licensing of the trademark. The procedural
history also renders dubious Plaintiff’s assertion that she relied upon any such trademark.
Therefore, the Court concludes that Plaintiff would not be prejudiced if WF & Co. is no longer a
party to this action.
In sum, the majority of the § 1447(e) factors weigh in favor of striking WF & Co. from
the action, and the Court finds that there are no factors weighing against that outcome. Thus, the
Court GRANTS Defendants’ MTS and STRIKES the FAC’s claims against WF & Co.
Furthermore, because Plaintiff’s MTR is predicated on the inclusion of WF & Co. as a
Defendant in this matter, the Court also DENIES Plaintiff’s MTR.
III. DEFENDANTS’ MOTION TO DISMISS
1.

Legal Standard

Federal Rule of Civil Procedure 8(a)(2) requires a pleading that states a claim for relief
contain “‘a short and plain statement of the claim showing that the pleader is entitled to relief,’ in
order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it
rests.’” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355
U.S. 41, 47 (1957)). While a pleading need not contain “detailed factual allegations,” it must
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

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Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

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contain “more than labels and conclusions” or “a formulaic recitation of the elements of a cause
of action.” Id. (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). The pleading must
articulate “enough facts to state a claim to relief that is plausible on its face.” Id. at 570.
Under Rule 12(b)(6), a party may seek dismissal of a claim for failure to state a claim
upon which relief can be granted. A court may grant such a dismissal only where the pleading
party fails to present a cognizable legal theory or to allege sufficient facts to support a cognizable
legal theory. Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir.
2010). In evaluating the sufficiency of a pleading, as discussed supra, courts generally must
accept all factual allegations as true. Legal conclusions, in contrast, are not entitled to the
assumption of truth. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at
555).
Should a court dismiss certain claims, it must also decide whether to grant leave to
amend. “Courts are free to grant a party leave to amend whenever ‘justice so requires,’ and
requests for leave should be granted with ‘extreme liberality.’” Moss v. U.S. Secret Serv., 572
F.3d 962, 972 (9th Cir. 2009) (citation omitted) (quoting Fed. R. Civ. P. 15(a)(2)); Owens v.
Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001)). “Leave to amend should be
granted unless the district court ‘determines that the pleading could not possibly be cured by the
allegation of other facts.’” Knappenberger v. City of Phoenix, 566 F.3d 936, 942 (9th Cir. 2009)
(quoting Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc)).
2.

Defendants’ Request for Judicial Notice

In support of their MTD, Defendants request judicial notice of two documents that they
claim are Plaintiff’s 2013 and 2014 Notices of Changes. See Req for Judicial Notice at 1–2, Exs.
A–B. As the remainder of this Order indicates, the Court need not rely upon the two documents
to resolve the MTD. Therefore, the Court DENIES Defendants’ Request for Judicial Notice as
moot.
3.

Claims for Fraud and Negligent Misrepresentation

Defendants contend that Plaintiff’s claims for fraud and negligent misrepresentation fail
because they are predicated on only Defendant Wells Fargo Bank’s obligations under the Note.
See MTD at 7–8. Under California law, “[a]n omission to perform a contract obligation is never
a tort, unless that omission is also an omission of a legal duty.” Erlich v. Menezes, 21 Cal. 4th
543, 551 (1999) (quoting Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503,
515 (1994)) (internal quotation marks omitted). Erlich listed several examples of contract cases
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Initials of Deputy Clerk KT

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

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Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

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in which courts permitted plaintiffs to recover tort damages, and observed that “[i]n each of these
cases, the duty that gives rise to tort liability is either completely independent of the contract or
arises from conduct which is both intentional and intended to cause harm.” See id. at 551–52
(collecting cases). Elrich further stated that “[c]ourts should be careful to apply tort remedies
only when the conduct in question is so clear in its deviation from socially useful business
practices that the effect of enforcing such tort duties will be . . . to aid rather than discourage
commerce.” See id. at 554 (quoting Freeman & Mills, Inc. v. Belcher Oil Co., 11 Cal. 4th 85,
109 (1995) (Mosk, J., concurring and dissenting)).
Plaintiff contends that the misrepresentations in question were “separate and apart from
the written provisions of her Note” and “came in the form of demanding and receiving increased
payments from the Plaintiff as well as Plaintiff’s conversations with Wells Fargo employees[.]”
See Opp’n to MTD at 11. She also points out that the FAC alleges that the “unlawful, unfair, and
fraudulent business practices of [Defendants] . . . presents a continuing threat to members of the
public in that [Defendants] ha[ve] yet to disavow the conduct described [in the FAC].” See id.
(quoting FAC at ¶ 131).
These allegations are not sufficient to demonstrate that Plaintiff can overcome
California’s bar on recovering in tort for the breach of a contractual obligation. Even though the
misrepresentations in question were not in the Promissory Note itself, they pertain to Defendant
Wells Fargo Bank’s obligations under the Promissory Note to provide Plaintiff with a Notice of
Changes. See, e.g., FAC at ¶¶ 26–30, 42. Therefore, Plaintiff fails to demonstrate that “the duty
that gives rise to tort liability is . . . completely independent of the contract . . . .” See Erlich, 21
Cal. 4th at 551–52. Further, Plaintiff’s conclusory allegation of “unlawful, unfair, and fraudulent
business practices” does not provide sufficient detail for the Court to conclude “that the conduct
in question is so clear in its deviation from socially useful business practices that the effect of
enforcing such tort duties will be . . . to aid rather than discourage commerce.” See id. at 554.
Thus, the Court GRANTS Defendants’ MTD on Plaintiff’s claims for fraud and negligent
misrepresentation. Because it is not clear to the Court that the aforementioned deficiency cannot
possibly be cured by the allegation of additional facts, Plaintiff shall be afforded leave to amend
these claims.
Leave to amend might not be warranted had these claims been time-barred.
Notwithstanding Defendants arguments to the contrary, MTD at 8–9, however, the Court cannot
conclude at this juncture that these two claims are barred by the applicable statute of limitations.
As Plaintiff points out in her opposition, the statute of limitations on these claims does not begin
to run until all of the elements of the cause of action have transpired. See Opp’n to MTD at 11–
13; Remus Films, Ltd. v. William Morris Agency, Inc., 244 Cal. App. 2d 763, 768–69 (1966)
CV-90

CIVIL MINUTES—GENERAL

Initials of Deputy Clerk KT

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

CV 16-9650-DMG (KSx)

Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

Date

September 12, 2017
Page

11 of 14

(holding that the statute of limitations applicable to claims of fraud or mistake begins to run
“when all of the elements of the cause of action come into existence”). Further, Defendants
concede that each cause of action requires, inter alia, the existence of a misrepresentation that
ultimately results in harm. See MTD at 10. Here, Plaintiff claims that “[i]n or about June 2015,”
she received a Notice of Changes that informed her of that her interest payments would be
increased.9 See, e.g., FAC at ¶¶ 37–38, 112. Because this action was filed in state court on
November 18, 2016, see Compl. at 1, the Court cannot conclude on this record that the
applicable three-year statute of limitations bars Plaintiff’s claims for fraud and negligent
misrepresentation. See Cal. Civ. Proc. Code § 338(d) (“Within three years: . . . [a]n action for
relief on the ground of fraud or mistake. The cause of action in that case is not deemed to have
accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or
mistake.”).
4.

Claim for Treble Damages Under Cal. Penal Code § 496

There are three essential elements of a violation of California Penal Code § 496(a): “1)
The property must have been obtained by theft; 2) The defendant must have bought or received
such property, or the defendant must have concealed or withheld such property from the owner;
3) The defendant must have known at the time he committed one of the acts specified above that
the property had been obtained by theft.” People v. Wielograf, 101 Cal. App. 3d 488, 493 n.1
(1980). Further, California Penal Code § 496(c) provides that “[a]ny person who has been
injured by a violation of subdivision (a) . . . may bring an action for three times the amount of
actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney’s fees.”
Plaintiff’s claim under California Penal Code § 496 is premised on her assertion that
Defendant Wells Fargo Bank was not entitled to collect higher interest payments from her
because the Notice of Change did not satisfy a “condition precedent”—i.e., the inclusion of the
requisite title and telephone information. See, e.g., Opp’n at 14. Specifically, Plaintiff relies
upon Paragraph 4(F), which provides in pertinent part that “[t]he Note Holder will deliver or
mail to” Plaintiff a Notice of Change “before the effective date of any change.” See FAC, Ex. 4
(emphasis added); FAC at ¶ 28 (relying upon this language). Paragraph 4(F) also provides that
the Notice of Change “will include” inter alia “the title and telephone number of a person who
will answer any question [Plaintiff] may have regarding the [Notice of Change].” See FAC, Ex.
4.
9

Although Plaintiff also contends that the 2013 and 2014 Notices of Changes each failed to include the title and
telephone information, she does not aver that those purported misrepresentations increased her interest payments.
See, e.g., FAC at ¶¶ 48–49.
CV-90

CIVIL MINUTES—GENERAL

Initials of Deputy Clerk KT

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

CV 16-9650-DMG (KSx)

Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

Date

September 12, 2017
Page

12 of 14

On the other hand, Defendants essentially argue that delivery to Plaintiff of a compliant
Notice of Change is merely an event that ought to occur before the Change Date, but is not a
condition precedent to an effective increase in the interest rate. See, e.g., MTD at 5. This
interpretation is predicated upon Paragraph 4(A)’s definition of the “Change Date” as August 1,
2013 and every 12th month thereafter, and on Paragraph 4(E)’s provision that the “new interest
rate will become effective on each Change Date.” See MTD at 2–5, 14–18 (emphasis added);
FAC, Ex. 4 (emphasis added).
Even assuming arguendo that Plaintiff’s interpretation of the Promissory Note is the
correct one, Defendant Wells Fargo Bank would not be liable for violating California Penal Code
§ 496 because Plaintiff does not show that this Defendant ”must have known at the time [it]
committed one of the acts [in question] that the property had been obtained by theft.” See
Wielograf, 101 Cal. App. 3d at 493 n.1. Wells Fargo Bank’s construction of the Promissory
Note, which would have entitled it to increase Plaintiff’s interest payments, is at least plausible
on its face. In fact, at least one decision arising from the analogous context of California’s
Homeowner Bill of Rights (“HBOR”) lends support to that interpretation. See Shupe v.
Nationstar Mortg. LLC, 231 F. Supp. 3d 597, 602–03 (E.D. Cal. 2017). In Shupe, the federal
district court concluded that the plaintiffs did not adequately allege a cause of action for
monetary and injunctive relief under HBOR arising out the defendants’ failure to provide “a
single point of contact . . . in relation to a request for a mortgage modification” because the
plaintiffs had not shown that this violation of HBOR was “material”—i.e., that it “affected their
loan obligations or the modification process.” See id. Such decisions support Defendant Wells
Fargo Bank’s belief that the mere failure to provide the title and telephone number information
required by Paragraph 4(F) did not preclude it from increasing Plaintiff’s interest rate.
Therefore, Plaintiff fails to state a claim for relief under California Penal Code § 496.
5.

Claims for Breach of Contract, Breach of Covenant of Good Faith & Fair Dealing,
and Violating the UCL

Defendants advance several independent arguments to support their contention that
Plaintiff’s breach of contract claim should be dismissed, including (inter alia) the contention that
she acquiesced in Defendant Wells Fargo Bank’s interpretation of the contract by not objecting
to the 2013 and 2014 Notices of Changes that omitted the title and telephone information. See
MTD at 18–19 (citing, inter alia, FAC at ¶ 111 (“WELLS FARGO failed to provide the
foregoing [information] to Plaintiff in any of the three Notices of Changes Plaintiff received in
2013, 2014, and 2015.”)). Defendants further contend that Plaintiff’s claims for breach of
covenant of good faith & fair dealing and violating the UCL both fail as a matter of law. See
MTD at 20–24.
CV-90

CIVIL MINUTES—GENERAL

Initials of Deputy Clerk KT

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

CV 16-9650-DMG (KSx)

Date

Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

September 12, 2017
Page

13 of 14

Notwithstanding the fact that Defendants clearly identify each of these arguments with
separate headings and/or subheadings in their MTD, see id. at 18–19, 20–24, Plaintiff’s
opposition does not address any of them. See Opp’n to MTD at 1–18. Therefore, the Court
GRANTS Defendants’ motion insofar as it seeks dismissal of Plaintiff’s claims for breach of
contract, breach of covenant of good faith & fair dealing, and violation of the UCL. See
Stichting Pensioenfonds ABP v. Countrywide Fin. Corp., 802 F. Supp. 2d 1125, 1132 (C.D. Cal.
2011) (quoting Sportscare of America, P.C. v. Multiplan, Inc., No. 2:10–4414, 2011 WL 589955,
at *1 (D.N.J. Feb. 10, 2011)) (“[I]n most circumstances, failure to respond in an opposition brief
to an argument put forward in an opening brief constitutes waiver or abandonment in regard to
the uncontested issue.”); see also Preciado v. L.A. Unified Sch. Dist., No. 13-4466, 2014 WL
559372, at *2 (C.D. Cal. Feb. 12, 2014) (citing C.D. Cal. L.R. 7-12) (failure to oppose “may be
deemed consent to the granting or denial of the motion”).10
III.
CONCLUSION 
In light of the foregoing, the Court issues the following rulings:
1. The Court GRANTS Defendants’ MTS and STRIKES the FAC’s claims against WF &
Co.;
2. The Court DENIES Plaintiffs’ MTR;

10

Seven days before the date originally scheduled for the hearing on Defendants’ MTD and seven days after
Defendants filed their reply brief, Plaintiff filed objections to the Request for Judicial Notice, wherein she argued
that the Court should disregard several of Defendants’ arguments, including their contention that Plaintiff
acquiesced to Defendant Wells Fargo Bank’s interpretation of the Promissory Note. See Plaintiff’s Objections to
Req. for Judicial Notice at 5–6 [Doc. # 24]. These belated counter-arguments do not change the Court’s conclusion
that Plaintiff waived or abandoned any challenge to these aspects of Defendants’ MTD. See C.D. Cal. L.R. 7-2
(emphasis added) (“Each opposing party shall[] . . . not later than twenty-one (21) days before the date designated
for the hearing of the motion . . . serve upon all other parties and file with the Clerk . . . a brief but complete
memorandum which shall contain a statement of all the reasons in opposition thereto and the points and authorities
upon which the opposing party will rely . . . .”); C.D. Cal. L.R. 7-12 (emphasis added) (“The failure to file any
required document, or the failure to file it within the deadline, may be deemed consent to the granting or denial of
the motion . . . .”).
Moreover, construing Plaintiff’s opposition broadly, it does address whether the failure to adhere to the title and
telephone number requirement was a “highly material breach of contract and a material non-compliance with a
condition precedent.” See Opp’n at 14. Nonetheless, Plaintiff does not respond to Defendants’ other arguments
concerning the appropriate interpretation of the Promissory Note, including their textual analysis of its provisions.
See Opp’n at 1–18.

CV-90

CIVIL MINUTES—GENERAL

Initials of Deputy Clerk KT

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No.

CV 16-9650-DMG (KSx)

Date

September 12, 2017

Title Linda Moravec Varga v. Wells Fargo Bank, N.A., et al.

Page

14 of 14

3. The Court DENIES Defendants’ Request for Judicial Notice as MOOT;
4. The Court GRANTS Defendants’ MTD as to all claims, with leave to amend;
5. By no later than 21 days from the date of this Order, Plaintiff shall file an amended
complaint or notify Defendants that she does not intend to amend; and
6. Defendants shall file their response within 21 days from the date of service of an
amended complaint.
IT IS SO ORDERED.

CV-90

CIVIL MINUTES—GENERAL

Initials of Deputy Clerk KT