John C. Manos v. The Wolf Firm, A Law Corporation et al
Filing
45
MINUTES (IN CHAMBERS) ORDER (1) DENYING PLAINTIFFS MOTION FOR REMAND (Doc. #28 ); AND (2) GRANTING DEFENDANT JP MORGAN CHASE BANKS MOTION TO DISMISS AS TO FOURTH CAUSE OF ACTION (Doc. #20 ); AND DECLINING TO RULE ON MOTIONS TO DISMISS STATE CLAIMS by Judge Josephine L. Staton. For the reasons stated above, the Court DENIES Manos' Motion to Remand and GRANTS the Chase Defendants' Motion to Dismiss as to Manos' Fourth Cause of Action for violation of the FDCPA. Manos may amend his complaint only as to this cause of action and only to the extent he can do so consistent with his obligations under Federal Rule of Civil Procedure 11. Any amended complaint must be filed with twenty-one (21) days of this Order. If no amended complaint is filed within twenty-one days, the Court will decline to exercise supplemental jurisdiction over the state law claims and will remand to state court. (see document for details). (dro)
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
Present: Honorable JOSEPHINE L. STATON, UNITED STATES DISTRICT JUDGE
Terry Guerrero
Deputy Clerk
ATTORNEYS PRESENT FOR PLAINTIFF:
Not Present
N/A
Court Reporter
ATTORNEYS PRESENT FOR DEFENDANT:
Not Present
PROCEEDINGS: (IN CHAMBERS) ORDER (1) DENYING PLAINTIFF’S
MOTION FOR REMAND (Doc. 28); AND (2) GRANTING
DEFENDANT JP MORGAN CHASE BANK’S MOTION TO
DISMISS AS TO FOURTH CAUSE OF ACTION (Doc. 20);
AND DECLINING TO RULE ON MOTIONS TO DISMISS
STATE CLAIMS.
Before the Court is a Motion to Remand filed by Plaintiff John C. Manos. (Mot.,
Doc. 28). Defendants Chase Home Finance-TX, JPMorgan Chase Bank, N.A., and
WaMu Asset Acceptance Corp. (“the Chase Defendants”) opposed, and Manos replied.
(Opp., Doc. 36; Reply, Doc. 39.) Also before the Court are three Motions to Dismiss 1
filed by the Chase Defendants (Doc. 20), Defendant the Wolf Firm (Doc. 17), and
Defendant Select Portfolio Servicing, Inc. (Doc. 14). Manos opposed each of these
motions. (Opp. to Chase MTD, Doc. 32; Opp to Wolf Firm MTD, Doc. 30; Opp. to
Select Portfolio MTD, Doc. 31.) The Chase Defendants, the Wolf Firm, and Select
Portfolio each replied. (Chase Reply, Doc. 37; Wolf Firm Reply, Doc. 34; Select
Portfolio Reply, Doc. 35.) Having read and considered the papers and having heard oral
1
Five of seven defendants move to dismiss the lawsuit; the Court refers to these
defendants collectively as the Moving Defendants. The two other defendants, RCO Legal, P.S.,
formerly known as Routh, Crabtree & Olson P.S., and Northwest Trustee Services, Inc., did not
file a timely response to the Third Amended Complaint pursuant to Federal Rule of Civil
Procedure 81(c)(2)(C), and the clerk entered default against them on February 6, 2018. (Doc.
24.)
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CIVIL MINUTES – GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
argument, the Court DENIES Manos’ Motion to Remand and GRANTS the Chase
Defendants’ Motion to Dismiss as to Manos’ fourth cause of action, for violation of the
Fair Debt Collection Practices Act.
I. BACKGROUND
A. Factual Background
This case arises from the foreclosure of Manos’s property in Agoura Hills,
California. Manos purchased the property in 1994, and subsequently improved it. (TAC
¶ 66, Doc. 1-1.) To finance the improvements, Manos refinanced the property a number
of times. (Id.) Most relevant to this lawsuit are a refinance loan in the amount of
$650,000 and a home equity line of credit in the amount of $1,000,000, made on May 10,
2007 by Washington Mutual Bank. (Id. ¶ 70.) Manos alleges that the $650,000 loan was
a refinancing transaction that should have “paid off and discharged” all prior liens,
“including but not limited to . . . 26 October 1999, 26 October 2004, and 10 November
2004 recorded deeds of trust.” (Id. ¶ 72.) He alleges that through a series of transactions,
the loans were sold to the “WaMu Mortgage Pass-Through Certificates Series 2007-HY7
Trust” with “WaMu Asset as the depositor; La Salle Bank National Association as the
QSPE trustee; Christiana Bank and Trust Company as Delaware Trustee; and
[Washington Mutual Bank] as the Servicer.” (Id. ¶ 75.) From July 2007 through July
2009, Manos received monthly mortgage statements and made monthly payments to
Washington Mutual Bank and JPMorgan following its acquisition of Washington Mutual
Bank. (Id. ¶ 82.) Between November 2010 and May 2011, Manos failed to make some
monthly payments on time and was assessed late fees and other fees. (Id. ¶ 83.) Manos
alleges that JPMorgan “failed to properly credit” some of his payments and “imposed an
escrow and advanced payments for taxes and force-placed insurance.” (Id.) Manos
continued to make payments from June 2011 through May 2012, but did not bring his
accounts current. (Id. ¶ 84.)
In August 2012, a “subservicing agent” of JPMorgan coded the mortgage as in
default. (Id. ¶ 85.) Manos alleges that in order to do so, the unnamed subservicing agent
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
“prepared and recorded a bogus assignment of deed of trust in order to fabricate standing
to foreclose in the name of JP Morgan.” (Id. ¶ 86.) The loan was referred to the Wolf
Firm, with a direction that the foreclosure be conducted in the name of the Trustee of the
2007 HY7 Trust. (Id. ¶ 88.)
On December 26, 2012, the Wolf Firm sent a letter to Manos regarding
foreclosure of the property. (Id. ¶ 90.) Because the Wolf Firm was “neither the creditor
nor the trustee” of the loan at the time it sent the letter, Manos alleges that the Wolf Firm
“was acting solely as an attorney-debt collector and default servicer hired by JP Morgan.”
(Id.) Manos further alleges that on January 18, 2013, the Wolf Firm prepared a
“substitution of trustee form and appointed itself as the substituted trustee.” (Id. ¶ 91.) In
February 2013, the Wolf Firm recorded a Notice of Default with an inflated past due
amount, and in July recorded a Notice of Trustee sale for August 1, 2013 to satisfy an
estimated unpaid balance of $705,469.51. (Id. ¶¶ 93-94.)
Manos alleges that the Defendants then “devised a series of fictitious acts and
fraudulent schemes to proceed with the foreclosure” upon their realization that the
property was “still encumbered by the 10 November 2004 senior lien in favor of Chase
Manhattan Mortgage Bank, USA.” (Id. ¶ 95.) Ultimately the property was sold at a
foreclosure sale. (Id. ¶ 104.)
Manos received a letter from JPMorgan in February 2014 asserting that the home
equity line of credit lien had been extinguished by the senior lien holder Select Portfolio,
and that it was “currently working with foreclosure counsel to obtain the surplus from the
first lien.” (Id. ¶ 108.) In November 2014, an attorney for non-party Tara Borelli, whose
connection to this lawsuit is not explained in the complaint, received an email from a
representative of the Wolf Firm stating that the property had been sold for $1,345,000,
$742,496.73 of which was used to pay the debt to the first trust deed holder and
$601,841.33 of which was disbursed to the junior lien holder. (Id. ¶ 109.) Ms. Borelli’s
attorney received an email in December 2014 from the Wolf Firm indicating that a check
in the amount of $601,841.33 had been issued and cashed to JPMorgan. (Id. ¶ 110.)
JPMorgan allegedly informed Manos that it had received only $1,841.33 from the Wolf
Firm. (Id. ¶ 111.) Manos alleges that JPMorgan referred the home equity line of credit
for collection and recovery by Defendant RCO. (Id. ¶ 112.)
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____________________________________________________________________________
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
B. 2013 State Court Proceedings
On October 2, 2013, Manos filed a complaint in Los Angeles County Superior
Court against, amongst, other defendants, JPMorgan Chase Bank, N.A., Chase Banks
USA, N.A., and Select Portfolio Servicing, Inc. 2 (State Court Complaint, RJN Ex 1,
Doc. 15-1 at 2.) The underlying facts include allegations that the impending foreclosure
sale was improper because the defendants relied upon a fraudulent assignment and
therefore could not demonstrate complete chain of title to show contractual authority to
conduct the sale. (State Court Complaint ¶ 38.) The complaint sought declaratory relief
that “Defendants, individually and/or jointly and severally, are not the present holder in
due course or beneficiaries of the subject note and DOT” and therefore “are not the real
parties in interest, do not have standing, and are not entitled to accelerate the maturity of
any secured obligation and sell the subject property.” (Id. ¶ 58.) The complaint also
sought injunctive relief and to quiet title, and brought claims for unfair business practices,
breach of implied covenant of good faith and fair dealing, fraud, negligence, and
violation of state recordation laws. (See generally State Court Complaint.) On its face,
the complaint brought each claim against all defendants.
On January 29, 2014, the State Court sustained the demurrer of Select Portfolio,
JPMorgan, and defendant California Reconveyance Company. (RJN Ex 3, Doc. 15-5 at
3.) The court held as follows: “a borrower has no standing to challenge the securitization
of a loan, and no tender was alleged or offered;” “[t]here is no basis for declaratory (1st
cause of action) or injunctive relief (3rd cause of action); “[t]rustee sale has been
completed and quiet title (2nd cause of action) is not appropriate; “[t]here is no fiduciary
duty between a lender and borrower;” there is no basis for the remaining causes of action.
(Id.) The court sustained the demurrer without leave to amend.
Manos appealed the state court judgment, alleging that the trial court erred in
denying him leave to amend. (RJN Ex. 5, Doc. 15-7 at 2, 6.) His appeal contended that
2
The Court takes judicial notice of the state court docket in this matter. It takes notice of
the existence of the pleadings, but not of the truth of the allegations therein.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
he could add allegations that his home was sold and he suffered damages in an amount
that offset the balance due on the loan, so he should be able to add claims for violation of
the California Homeowner Bill of Rights, breach of contract, and wrongful foreclosure.
(Id. at 6-7.) The appeals court upheld the denial of leave to amend because “Manos’
proposed amendments do not state claims against the defendants.” (Id. at 7.)
Specifically, the appeals court held that Manos’s claims of violations of the Homeowner
Bill of Rights “rest[ed] entirely on Manos’ allegation that the defendants lacked authority
to foreclose under the deed of trust.” (Id. at 9.) Because he did not “allege or propose to
allege that he was a party to the assignment of his loan to the securitized Trust,” he
lacked standing to challenge the validity of the assignment pursuant to Jenkins v.
JPMorgan Chase Bank, N.A., 216 Cal. App. 4th 497 (2013). The appeals court found
that Manos’ proposed breach of contract and wrongful foreclosure claims would fail as a
matter of law due to the same deficiency. (Id. at 11-12.) No further appeals were taken.
C. 2016 State Court Proceedings
On November 7, 2016, Manos brought the current action in Orange County
Superior Court, including causes of action for (1) quasi-contract and/or tort for unjust
enrichment; (2) breach of contract; (3) implied covenant of good faith and fair dealings;
(4) unfair business practices; and (5) declaratory and injunctive relief. (Notice of
Removal Ex. 7, Doc. 1-7.) On July 7, 2017, the court sustained Select Portfolio’s
demurrer to the original Complaint and took judicial notice of the prior state court and
appeals court decisions. (RJN Ex. 6, Doc. 15-8 at 3.) Manos then amended his
complaint. On October 12, 2017, the state court sustained the demurrers of defendant
RCO, Northwest, the Chase Defendants, the Wolf Firm, and Select Portfolio to Manos’
First Amended Complaint, granting leave to amend as to two causes of action and
striking one cause of action because it was added to the FAC without leave of court.
(Notice of Removal Ex. 7, Doc. 1-25 at 122.) As to arguments that res judicata barred
the action, the court held that “no moving party ha[d] requested judicial notice of any
documents which would support their res judicata arguments; thus, this argument thus
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CIVIL MINUTES – GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
[sic] raises issues outside of the pleadings, which are not properly considered on
demurrer.” (Id. at 126.)
Manos filed a Second Amended Complaint. (Notice of Removal Ex. 7, Doc. 1-27
at 9.) He then moved to file a “third amended and supplemental” complaint. (Id. at 144.)
In part, Manos stated that he had recently opted out of a class in Terry v. JP Morgan, a
class action alleging violations of fair debt collection laws, and wished to assert those
Terry opt-out claims as “supplemental claims” to the action. (Notice of Removal Ex. 7,
Doc. 1-28 at 23.) A “third amended and supplemental complaint,” including a claim for
violation of the federal Fair Debt Collection Practices Act, was attached to the motion.
(Id. at 78.) JPMorgan opposed the motion. (Notice of Removal Ex. 7, Doc. 1-29 at 1.)
The court ruled that it would not entertain both a second amended complaint and a third
amended and supplemental complaint. (Notice of Removal Ex. 7, Doc. 1-31 at 6.) It
granted leave to file a third complaint, “[a]ssuming that plaintiff John Manos elects to
dismiss all representative claims in this action” and “on the condition that plaintiff is to
file a third amended complaint with all causes of action in his second amended complaint
and proposed third amended complaint and proposed third amended supplemental
complaint being set forth in a single third amended complaint.” (Id.)
Manos filed a Third Amended Complaint on December 26, 2017, against
defendants the Wolf Firm, RCO Legal, P.S. formerly known as Routh, Crabtree & Olsen
P.S., Northwest Trustee Services, Inc., JPMorgan Chase Bank N.A., Chase Home
Finance-TX, Select Portfolio, WaMu Asset Acceptance Corp., and Does 2-10. 3 (TAC,
Doc. 1-1.) The TAC brought the following claims:
1) Quasi-contract and/or tort claim for unjust enrichment against the Chase
Defendants, Select Portfolio, the Wolf Firm, RCO and Northwest;
2) Interference with contract against the Chase Defendants, Select Portfolio,
RCO, and Northwest;
3
JPMorgan Chase Bank brings its motions, oppositions, and replies “for itself and as
successor by merger to Chase Home Finance, LLC (sued incorrectly as Chase Home FinanceTX”) . . . and WaMu Asset Acceptance Corp. This Order shall refer to these three defendants
collectively as “the Chase Defendants.”
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
3) Violation of the Rosenthal Fair Debt Collection Practices Act (RFDCPA),
California Civil Code section 1788, against the Chase Defendants, RCO, and
Northwest;
4) Violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C.
section 1692, against the Chase Defendants, RCO, and Northwest;
5) Violation of California Business & Professions Code section 17200 (UCL),
against the Chase Defendants, RCO, and Northwest; and
6) Declaratory judgment as to all defendants.
Defendants filed a Notice of Removal in this action on January 24, 2018. (Doc.
1.)
Manos now moves to remand, and defendants Chase (on behalf of JPMorgan
Chase Bank, N.A. and WaMu Asset Acceptance Corp.), Select Portfolio, and the Wolf
Firm move to dismiss.
II.
LEGAL STANDARD
A. Motion to Remand
“A defendant may remove an action to federal court based on federal question
jurisdiction or diversity jurisdiction.” Hunter v. Philip Morris USA, 582 F.3d 1039, 1042
(9th Cir. 2009). A defendant must file its notice of removal of a civil action “within 30
days after receipt by the defendant, through service or otherwise, of a copy of the initial
pleading setting forth the claim for relief upon which such action or proceeding is based.”
28 U.S.C. § 1446(b). However, “if the case stated by the initial pleading is not
removable, a notice of removal may be filed within 30 days after receipt by the
defendant, through service or otherwise, of a copy of an amended pleading, motion, order
or other paper from which it may first be ascertained that the case is one which is or has
become removable.” 28 U.S.C. § 1446(c)(3).
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
B. Motion to Dismiss
In deciding a motion to dismiss under Rule 12(b)(6), courts must accept as true all
“well-pleaded factual allegations” in a complaint. Ashcroft v. Iqbal, 556 U.S. 662, 679
(2009). Furthermore, courts must draw all reasonable inferences in the light most
favorable to the non-moving party. See Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992,
998 (9th Cir. 2010). However, “courts ‘are not bound to accept as true a legal conclusion
couched as a factual allegation.’” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). The complaint must contain
“sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on
its face.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “A claim has
facial plausibility when the pleaded factual content allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing
Twombly, 550 U.S. at 556). Although a complaint “does not need detailed factual
allegations,” the “[f]actual allegations must be enough to raise a right to relief above the
speculative level . . . .” Twombly, 550 U.S. at 555. Thus, a complaint must (1) “contain
sufficient allegations of underlying facts to give fair notice and to enable the opposing
party to defend itself effectively[,]” and (2) “plausibly suggest an entitlement to relief,
such that it is not unfair to require the opposing party to be subjected to the expense of
discovery and continued litigation.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).
In ruling on a 12(b)(6) motion, a court may “consider certain materials—
documents attached to the complaint, documents incorporated by reference in the
complaint, or matters of judicial notice—without converting the motion to dismiss into a
motion for summary judgment.” Gerritsen v. Warner Bros. Entm’t, Inc., 112 F. Supp. 3d
1011 (C.D. Cal. 2015) (quoting United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir.
2003) (internal quotation marks omitted)).
III.
DISCUSSION
The Court first addresses Manos’ Motion to Remand before turning to the merits
of the Motions to Dismiss.
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CIVIL MINUTES – GENERAL
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____________________________________________________________________________
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
A. Motion to Remand
The parties agree that there is no diversity in this action; accordingly, federal
jurisdiction is based solely upon the federal question raised by Manos’ FDCPA claim
first brought in his TAC. According to Manos, there are three events prior to his filing of
the TAC that triggered the 30-day clock for a defendant to remove: 1) an email on
October 31, 2017 from Manos’ counsel informing opposing counsel of their intent to add
federal claims to the complaint; 2) Manos’ November 8, 2017 Motion for Leave to File
Third Amended and Supplemental Complaint, to which the proposed complaint was
attached; and 3) the state court’s December 14, 2017 ruling granting leave to amend.
(MTR at 8.) Manos argues that based on any of these three communications or filings,
the January 24, 2018 removal is untimely. (Id.) Manos further contends that the Chase
Defendants waived their right to removal by challenging the merits of the FDCPA claim
in its opposition to his Motion for Leave. (Id. at 12.) The Court concludes that each of
these arguments is unavailing.
California courts are in agreement that where a defendant removes a complaint
based upon amendments to that complaint, the 30-day removal clock starts to run no
earlier than when a court grants leave to amend. See, e.g., Torres v. Chevron U.S.A. Inc.,
04-cv-2523-SBA, 2004 WL 2348274, at *2 (N.D. Cal. Oct. 18, 2004); Brewer v. Hatton,
No. 17-CV-02900-JSC, 2017 WL 3635824, at *1 (N.D. Cal. Aug. 24, 2017). Manos
cites no California authority that would support that either counsel’s October email or the
November filing of the Motion for Leave would trigger the 30-day clock, and the Court is
persuaded that neither action constitutes “other paper” sufficient to trigger the removal
deadline.
Moreover, the Court concludes that the removal clock does not start to run until
the proposed amended pleading becomes operative; that is, the proposed amended
complaint must be filed before the clock begins to run. See Desmond v. BankAmerica
Corp., 120 F. Supp. 2d 1201, 1204 (holding that “removal jurisdiction based on an
amended pleading arises only after the subsequent pleading becomes operative”). In
instances where a court’s grant of a motion for leave to file an amended complaint
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
functions to make that proposed complaint operative—for instance, where the order
granting leave also deems a proposed pleading filed—then the granting of the motion for
leave also functions to make the complaint operative and effective. Courts have found
removal improper where defendants have removed prior to the actual filing of an
amended pleading. See, e.g., Lion Raisins, Inc. v. Fanucchi, 788 F. Supp. 2d 1167, 1174
(E.D. Cal. 2011); Jones v. G2 Secure Staff, LLC, No. 17-cv-00061-SJO (SS), 2017 WL
877293, at *2-3 (C.D. Cal. Mar. 6, 2017) (holding that the proposed complaint did not
constitute “other paper”). In this case, the grant of leave to amend was explicitly
conditioned on Manos submitting a new amended complaint that combined the issues
addressed in both the Second Amended and proposed Third Amended and Supplemental
Complaint. Thus, the complaint did not become operative until Manos actually filed it on
December 26, 2017—starting the 30-day removal clock. Accordingly, the January 24,
2018 removal was timely.
Because the case did not become removable until December 26, 2017, the Chase
Defendants’ actions in opposing the Motion for Leave on substantive grounds do not act
as a waiver of their right to remove. See Resolution Tr. Corp. v. Bayside Developers, 43
F.3d 1230, 1240 (9th Cir. 1994). The Chase Defendants cannot possibly have waived a
right to remove when such right did not exist.
Accordingly, Manos’ Motion to Remand is DENIED.
B. Motion to Dismiss
The majority of Manos’ claims sound in state law; the Court’s jurisdiction is
premised on a single federal question, that of whether the Chase Defendants and
defaulting Defendants RCO and Northwest violated the FDCPA. The Court will consider
this claim first.
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CIVIL MINUTES – GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
1. Res Judicata
All three Motions to Dismiss assert that res judicata bars this entire action. (Chase
Mem., Doc. 20 at 15-18; Select Portfolio Mem., Doc. 14-1 at 11-14; Wolf Firm Mem.,
Doc. 17-1 at 15-17.) Of the Moving Defendants, the FDCPA claim implicates only the
Chase Defendants.
“A federal court is required under 28 U.S.C. § 1738 to look to the preclusion law
of the state court that rendered the earlier judgment or judgments to determine whether
subsequent federal litigation is precluded.” Kougasian v. TMSL, Inc., 359 F.3d 1136,
1143 (9th Cir. 2004). Under California law, “[r]es judicata or claim preclusion precludes
the relitigation of a cause of action that previously was adjudicated in another proceeding
between the same parties or parties in privity with them.” Fed’n of Hillside and Canyon
Assocs. v. City of L.A., 126 Cal. App. 4th 1180, 1202 (2004). “Res judicata applies if
(1) the decision in the prior proceeding is final and on the merits; (2) the present
proceeding is on the same cause of action as the prior proceeding; and (3) the parties in
the present proceeding or parties in privity with them were parties to the prior
proceeding.” Id. “Res judicata bars the litigation not only of issues that were actually
litigated but also issues that could have been litigated.” Id.
Prior to turning to the merits of the res judicata defense, the Court addresses
Manos’ contention that the “law of the case” doctrine precludes this Court from
considering the issue. According to Manos, because the state court denied a demurrer
asserting res judicata because it “raise[d] issues outside of the pleadings, which are not
properly considered on demurrer,” the Court may not revisit the issue. (See, e.g., Opp. to
Wolf MTD, Doc. 30 at 10.) This argument is unavailing for two reasons. First, it is not
clear that the state court’s ruling as to the applicability of res judicata was on the merits;
the ruling invokes a procedural defect in its ability to consider the argument. Second,
even if the state court’s ruling were on the merits, it would not prevent this Court from
now considering the argument post-removal. The Ninth Circuit’s “law of the case”
doctrine refers to subsequent proceedings following the law of the case “established in a
previous appellate decision.” Bollinger v. Oregon, 172 Fed. Appx. 770, 771 (9th Cir.
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CIVIL MINUTES – GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
2006). This is not the case here, and the Court may properly consider the merits of prior
state court holdings. Id.; see also Preseau v. Prudential Inc. Co. of America, 591 F.2d
74, 80 (9th Cir. 1979) (holding that a “federal court, within its discretion and for ‘cogent’
reasons, could grant summary judgment notwithstanding the earlier denial by the state
court”). The Court will therefore analyze the res judicata arguments on their merits.
a. Final Decision on the Merits
First, the decision in the state proceeding is final and on the merits. California law
states “that the finality required to invoke the preclusive bar of res judicata is not
achieved until an appeal from the trial court judgment has been exhausted.” Merritt v.
City of Sunnyvale, 15-cv-02775-EJD, 2016 WL 8716247 at (N.D Cal. Sept. 16. 2016)
(quoting Franklin & Franklin v. 7-Eleven Owners for Fair Franchising, 85 Cal. App. 4th
1168, 1174 (2000)). The appeals court issued its decision on November 9, 2015. Neither
party explicitly states whether the appeals court decision was appealed to the Supreme
Court, but the deadline to do so pursuant to California Rule of Court 8.500 has passed.
Moreover, the decisions of both the trial and appeals court went to the merits of Manos’
argument; both found that his claims were precluded as a matter of law. See Palomar
Mobilehome Park Ass’n v. City of San Marcos, 989 F.2d 362, 364 (9th Cir. 1993)
(holding that “a judgment entered after the sustaining of a general demurrer is a judgment
on the merits and, to the extent that it adjudicates that the facts alleged do not establish a
cause of action, it will bar a second action on the same facts”). Accordingly, the first
prong of res judicata is met.
b. Identity of Claims
Next, the Court considers whether the present proceeding is on the same cause of
action as the prior proceeding. Under California law, “[t]wo proceedings are on the same
cause of action if they are based on the same ‘primary right.’” Fed’n of Hillside and
Canyon Assocs., 126 Cal. App. 4th at 1202 (citation omitted). “The plaintiff's primary
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
right is the right to be free from a particular injury, regardless of the legal theory on
which liability for the injury is based.” Id. (citation omitted). “The scope of the primary
right therefore depends on how the injury is defined. A cause of action comprises the
plaintiff's primary right, the defendant's corresponding primary duty, and the defendant’s
wrongful act in breach of that duty.” Id. “An injury is defined in part by reference to the
set of facts, or transaction, from which the injury arose.” Id. at 1203. “The most salient
characteristic of a primary right is that it is indivisible: the violation of but a single
primary right gives rise to a single cause of action.” Crowley v. Katleman, 8 Cal. 4th
666, 681 (1994) (quoting Slater v. Blackwood, 15 Cal. 3d 791, 795 (1975)). Thus, even if
the “plaintiff pleads different theories of recovery, seeks different forms of relief and/or
adds new facts supporting recovery” in a subsequent action, “the same primary right is
[still] at stake” as long as the “two actions involve the same injury to the plaintiff and the
same wrong by the defendant.” San Diego Police Officers Ass’n v. San Diego City
Employees Retirement Sys., 568 F.3d 725, 734 (9th Cir. 2009) (quoting Eichman v.
Fotomat Corp., 147 Cal. App. 3d 1170, 1174 (1983)).
Manos describes the dispute as follows:
“Plaintiff faults the named Defendants (1) for not complying with the
applicable statutory provisions of the California non-judicial foreclosure
statutory scheme; (2) creating new and additional debt without proper
disclosures and authority; (3) converting the surplus from the foreclosure sale
proceeds for their own financial benefit; (4) conducting a collusive and
fraudulent foreclosure; and (5) attempting to collect a deficiency in the
amount of $402,060.00 plus interest accruing on the Home Equity Plus
mortgage loan.
(Opp. to Wolf Firm MTD, Doc. 31 at 6.) In short, Manos complains of wrongful
foreclosure: the parties who foreclosed upon his property did not have authority to do so,
and they did not engage in proper accounting of the proceeds of the sale. Manos also
complains of improper attempts to collect a deficiency judgment post-foreclosure.
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____________________________________________________________________________
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
In the instant lawsuit, Manos alleges that the Chase Defendants violated federal
regulations on debt collection practices. To the extent that these allegations go directly to
whether the Chase Defendants had the power to foreclose upon and collect proceeds from
the foreclosure sale, the Court concludes that such allegations implicate the same primary
right as the 2013 action. (TAC ¶ 249.) Manos’ arguments as to attempts to collect an
alleged debt after the foreclosure sale was complete, however, relate to a different
primary right, that of Manos to receive statutorily proper communications about alleged
remaining debt. (TAC ¶¶ 253-256.) Accordingly, the Court concludes that the third
prong of res judicata is not met as to Manos’ allegations of improper attempts to collect a
deficiency judgment.
This analysis applies equally to defaulting Defendants RCO and Northwest. As to
Manos’ debt collection claims, he alleges that RCO and Northwest violated these laws in
part by sending a foreclosure notice that “falsely stated that a debt . . . was owed to the
creditor, JP Morgan” with knowledge that JPMorgan was not a lender, note holder, or
creditor, and by distributing moneys obtained from the foreclosure sale to JPMorgan.
(TAC ¶ 244A-B D-F.) These allegations relating to the power to conduct a foreclosure
sale and collect and distribute the proceeds are barred by res judicata. The single factual
allegation remaining against RCO and Northwest is Manos’ allegation that RCO and/or
Northwest have begun a foreclosure proceeding, per Manos’ credit report. (TAC ¶¶ 244
G-H, 251, 255.)
c. Identity of Parties
Finally, the court considers whether the parties in the second suit are the same
parties or parties in privity with those in the first suit. It is undisputed that Manos was the
plaintiff in the 2013 action, and the Chase Defendants were defendants. This element of
res judicata is plainly met as to the Chase Defendants.
RCO and Northwest were not parties to the 2013 state action. However, because
Manos was a party to that action, the requirement of identity of parties is still met. The
relevant inquiry is whether “the party against whom res judicata is asserted was a party
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
to, or in privity with, a party to the prior adjudication.” Reyes v. Kenosian & Miele, LLP,
619 F. Supp. 2d 796, 809 (N.D. Cal. 2008) (emphasis added). See also Bernhard v. Bank
of America Nat. Trust & Savings Ass’n, 19 Cal. 2d 807, 813 (1942). Accordingly, the
third prong of res judicata is also met as to the defaulting Defendants.
d. Conclusion as to Res Judicata
For the reasons explained above, the Court concludes that res judicata bars Manos’
FDCPA claims to the extent it seeks to readjudicate the issue of wrongful foreclosure and
distribution of profits. He may litigate only his allegations regarding improper attempts
to collect a deficiency judgment.
2. 12(b)(6) Motion
The Chase Defendants move to dismiss the FDCPA allegations for failure to state
a claim. Specifically, they assert that (1) the Chase Defendants are not debt collectors;
(2) Manos does not have standing to pursue the claims; and (3) the allegations do not
plausibly show any violation of law. (Chase MTD at 20-26.)
“The FDCPA subjects ‘debt collectors’ to civil damages for engaging in certain
abusive practices while attempting to collect debts.” Ho v. ReconTrust Co. N.A., 858 F.3d
568, 571 (9th Cir. 2017) (citing 15 U.S.C. §§ 1692d–f, 1692k). “The FDCPA imposes
liability only when an entity is attempting to collect debt.” Id. (citing 15 U.S.C. §
1692(e)).
Manos alleges specifically that the Chase Defendants violated 15 U.S.C. section
1692e(2)(A), which prohibits, “in connection with the collection of any debt,” a false
representation of “the character, amount, or legal status of any debt.” (TAC ¶ 252.) He
also alleges that they violated 15 U.S.C. section 1692f(6)’s prohibition on “[t]aking or
threatening to take any nonjudicial action to effect disposition or disablement of
property.” (Id. ¶ 254-255.) The facts Manos uses to support these claims, however, do
not state a plausible claim that the identified communications were in connection with the
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____________________________________________________________________________
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
collection of debt. Manos proffers a letter from Chase, dated July 3, 2014, that responds
to an inquiry from Manos himself. (TAC Ex. B, Doc. 1-1 at 83.) The letter includes
Chase’s statement of details of the account, including the unpaid principal balance and
accrued interest, and states that Chase’s “understanding is that this loan is a valid and
legally enforceable financial obligation with Chase.” (Id.) The letter also notes that the
amount stated is “not a payoff quote.” Manos concludes, based on this letter, that it was
“an attempt to force Plaintiff to remit monies towards the debt.” (TAC ¶ 244C.) Even
considering the Ninth Circuit’s “least sophisticated debtor” standard, the contents of this
letter do not plausibly state any violation of the FDCPA. See Wade v. Regional Credit
Ass’n, 87 F.3d 1098, 1100 (9th Cir. 1996). The letter is informational and responds to an
inquiry from Manos himself. The statement that the loan is “valid and legally
enforceable” is not accompanied by a request for payment, nor any quote for payment.
And Manos himself alleges that he has not been served with any judicial foreclosure
complaint as of the date of his TAC. (TAC ¶ 299.) The Court agrees with the Chase
Defendants that the facts alleged do not plausibly show that it was “trying to collect a
debt.” (Chase MTD Reply at 11.)
Manos also alleges that the Chase Defendants have violated section 1692f(6) by
reporting to a credit agency that foreclosure proceedings had started. (TAC ¶ 255.)
Manos points to an Experian credit report dated April 3, 2017, which includes
information for a Chase account indicating that it was last updated on July 29, 2014.
(TAC Ex. C., Doc. 1-1 at 85-86.) The report lists the account as “closed” and payment
status as “foreclosure proceeding started.” (Id. at 86.) The Court concludes that this
information on Manos’ credit report does not plausibly allege that Chase was engaged in
debt collection or otherwise threatening a negative action. Manos has not alleged facts to
plausibly support a claim that Chase was engaged in “debt collecting.” See Santoro v.
CTC Foreclosure Service, 12 Fed. Appx. 476, 480 (9th Cir. 2001) (upholding district
court’s 12(b)(6) dismissal and not reaching issue of whether defendant was a debt
collector because “the conduct, as alleged, does not constitute ‘debt collecting’”).
Manos’ allegations against RCO and Northwest are based on the same factual
premise as those against the Chase Defendants, and the Court’s conclusion that those
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
allegations are insufficient applies equally to RCO and Northwest. Manos also alleges
that the loan has been referred to RCO for collection and recovery. (TAC ¶ 301.) Manos
then refers to the notice he received in the Terry class action, which makes clear that the
defendants in that suit deny the factual allegations and that the court has not ruled on the
merits of the case. (TAC Ex. K.) At best, Manos’ reliance on this document is a legal
conclusion, and in any event would not suffice to plausibly state a claim for FDCPA
liability in this litigation. The Court therefore DISMISSES Manos’ fourth cause of
action, for violation of the FDCPA, for failure to state a claim as to all three Defendants.
Manos is granted leave to amend as to this cause of action only.
The remaining causes of action sound in state law. A “district court may exercise
supplemental jurisdictional over state law claims ‘so long as [they are] part of the same
case or controversy as the federal claim.” Lombana v. Green Tree Servicing, LLC, No.
LA CV 14-8330 JCG, 2016 WL 4967641, at *3 (C.D. Cal. Sept. 15, 2016) (quoting
Trustees of Constr. Indus. & Laborers Health & Welfare Trust v. Desert Valley
Landscape & Maint., Inc., 333 F.3d 923, 925 (9th Cir. 2003)). If, however, “the federal
claims that served as the basis for subject matter jurisdiction are eliminated, the district
court has discretion to decline to exercises its supplemental jurisdiction and to remand the
remaining state law claims to state court.” Perez v. Wells Fargo Bank, N.A., 929 F. Supp.
2d 988, 1001 (N.D. Cal. 2013) (citing 28 U.S.C. § 1367(a)). The Court concludes that
judicial economy, convenience, fairness, and comity dictate that it should decide these
issues of state law only if Manos can sufficiently plead a violation of the FDCPA on the
part of the Chase Defendants.
IV.
CONCLUSION
For the reasons stated above, the Court DENIES Manos’ Motion to Remand and
GRANTS the Chase Defendants’ Motion to Dismiss as to Manos’ Fourth Cause of
Action for violation of the FDCPA. Manos may amend his complaint only as to this
cause of action and only to the extent he can do so consistent with his obligations under
Federal Rule of Civil Procedure 11. Any amended complaint must be filed with twenty______________________________________________________________________________
CIVIL MINUTES – GENERAL
17
____________________________________________________________________________
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. 8:18-cv-138-JLS-JDE
Title: John C. Manos v. The Wolf Firm, A Law Corporation et al.
Date: April 09, 2018
one (21) days of this Order. If no amended complaint is filed within twenty-one days,
the Court will decline to exercise supplemental jurisdiction over the state law claims and
will remand to state court.
Initials of Preparer: tg
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