Becker et al v. Wells Fargo Bank, NA, Inc. et al

Filing 115

FINDINGS and RECOMMENDATIONS signed by Magistrate Judge Kendall J. Newman on 8/21/12 RECOMMENDING that the Plaintiff's 97 Motion for Leave to Amend be granted in part and denied in part and that the 98 Proposed Third Amended Complaint be dee med the operative complaint; the Defendants be ordered to file an answer within 14 days; the defendants' request for involuntary dismissal be denied and that the 71 Motion to Dismiss Second Amended Complaint be denied as moot. Motions referred to Judge Lawrence K. Karlton. Objections due within 14 days. (Manzer, C)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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DENNLY R. BECKER, et al.,

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Plaintiffs,

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No. 2:10-cv-02799 LKK KJN PS

v.
WELLS FARGO BANK, NA, INC.,
et al.,

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Defendants.
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FINDINGS AND RECOMMENDATIONS
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Presently before the court is plaintiff’s1 motion for leave to file his most recently

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lodged proposed Third Amended Complaint (Dkt. No. 97-98).2 The court heard this matter on its

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August 9, 2012 civil law and motion calendar. Plaintiff, who is proceeding without counsel,

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appeared and represented himself. Attorney David M. Newman appeared via telephone on behalf

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of defendants.

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Although there are technically two plaintiffs in this case, an individual plaintiff and a trust
controlled by him, the court uses the singular “plaintiff” in these proposed findings and
recommendations.

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This case proceeds before the undersigned pursuant to Eastern District of California Local
Rule 302(c)(21) and 28 U.S.C. § 636(b)(1). On February 27, 2012, plaintiff filed another case in this
court, Becker v. Wells Fargo Bank, N.A., No. 2:12-cv-00501 KJM CKD PS (E.D. Cal.). No notice
of related case has been filed in the case pending before the undersigned.
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The undersigned has fully considered the parties’ briefs, oral arguments, and

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appropriate portions of the record and, for the reasons that follow, recommends that plaintiff’s

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motion for leave to amend be granted in part, and that plaintiff’s proposed Third Amended

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Complaint be deemed filed as narrowed herein.

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I.

BACKGROUND

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This tortured, foreclosure-related case has been pending in this court since

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October 2010, and the pleadings are still not yet closed. Although plaintiff and defendants share

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the blame for the delays in this case moving forward, all parties represented at the hearing that

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they would like to see this case move forward.

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Defendants removed this case to federal court on October 15, 2010, and filed a

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motion to dismiss the complaint shortly thereafter. In response, plaintiff filed a motion for leave

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to amend his complaint. The court denied plaintiff’s motion because plaintiff was already

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entitled to amend his complaint as a matter of course pursuant to Federal Rule of Civil Procedure

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15(a)(1)(B); the court permitted plaintiff to file his First Amended Complaint. (See Order,

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Nov. 12, 2010, at 2, Dkt. No. 15.)

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Plaintiff filed a timely First Amended Complaint, and defendants filed a motion to

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dismiss in January 2011. Although there was substantial delay in resolving the motion caused by

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the filing of ancillary motions, proceedings related to the issuance of a preliminary injunction,

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and the ordering of supplemental briefing in regards to defendants’ motion to dismiss, on

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August 1, 2012, the district judge presiding over this case, United States Senior District Judge

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Lawrence K. Karlton, adopted the undersigned’s findings and recommendations and partially

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granted defendants’ motion to dismiss the First Amended Complaint. (Order & Findings &

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Recommendations, Mar. 22, 2011, Dkt. No. 49, adopted by Order, Aug. 1, 2011, Dkt. No. 58.)

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Judge Karlton also construed plaintiff’s objections to the findings and recommendations as a

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motion for reconsideration, and granted that motion in a very limited respect. (Order, Aug. 1,

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2011, at 2.)
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At bottom, following resolution of the findings and recommendations and

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plaintiff’s motion for reconsideration, plaintiff was granted leave to file a Second Amended

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Complaint that included claims of:

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(1) fraud;

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(2) violation of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof.

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Code §§ 17200 et seq.;

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(3) unfair debt collection under federal law and California law;

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(4) civil violation of the Racketeer Influenced and Corrupt Organizations

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(“RICO”) Act, 18 U.S.C. § 1962;

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(5) negligence and negligent misrepresentation insofar as those claims arose “from

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defendants’ alleged representations during the loan modification application

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process”;

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(6) “breach of contract insofar as such claim may arise from defendants’ alleged

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foreclosure activities during the forbearance period stated within the Forbearance

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Agreement, and/or insofar as such claim may arise from an oral contract for a loan

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modification resulting from representations made to plaintiff during the loan

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modification process”; and

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(7) violation of the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2605 et

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seq.

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(Order & Findings & Recommendations, Mar. 22, 2011, at 26, 44, adopted by Order, Aug. 1,

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2011, at 7.) Plaintiff was granted leave to “remedy [these] deficient claims in accordance with

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the terms of [the] order.” (Order & Findings & Recommendations, Mar. 22, 2011, at 2.) In

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regards to plaintiff’s motion for reconsideration, plaintiff was “granted leave to add new facts in

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support of his [Real Estate Settlement Procedures Act] claim.” (Order, Aug. 1, 2012, at 7.) The

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court dismissed with prejudice plaintiff’s claims for: violation of the Consumers Legal Remedies

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Act (“CLRA”), false advertising, violation of California Civil Code § 2943, wrongful
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foreclosure, quiet title, negligence and negligent misrepresentation insofar as plaintiff’s

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negligence and negligent misrepresentation claims arose “implicitly or explicitly from the

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Forbearance Agreement.” (Order & Findings & Recommendations, Mar. 22, 2011, at 44,

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adopted by Order, Aug. 1, 2011, at 7.)3

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Plaintiff filed a Second Amended Complaint (Dkt. No. 60), which materially

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failed to comply with the court’s orders regarding the scope of leave to amend. Plaintiff alleged

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22 claims for relief and re-pled claims that had already been dismissed with prejudice. However,

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the court subsequently struck the 138-page Second Amended Complaint pursuant to the parties’

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stipulation. (Order, Sept. 8, 2011, Dkt. No. 67.) In approving the parties’ stipulation and

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permitting the filing of a revised Second Amended Complaint, the court cautioned plaintiff as

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follows:
The Second Amended Complaint must comply with Judge Karlton’s Order
of August 1, 2011 (Dkt. No. 58) and the Findings and Recommendations
(Dkt. No. 49) adopted in full therein. Any nonconforming portion(s) of the
Second Amended Complaint may be subject to a Motion to Strike and/or
may be stricken sua sponte. If plaintiff files a Second Amended Complaint
that does not substantially comply with the applicable Order (Dkt. No. 58)
and Findings and Recommendations (Dkt. No. 49) adopted in full therein,
plaintiff may be subject to sanctions, including the potential dismissal of
his case, for failure to comply with order(s) of the court.

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(Id. at 1-2 (emphasis in original).) The court also cited numerous legal authorities relevant to the

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question of sanctions, including dismissal, for failing to follow the court’s order. (Id. at 2 n.1.)

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Plaintiff filed his revised Second Amended Complaint on September 12, 2011,

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which alleged eight claims for relief and appears to have largely conformed to the scope of the

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leave granted by the court (Dkt. No. 68). However, on September 30, 2011, before defendants

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could respond to the Second Amended Complaint, plaintiff filed a motion for leave to amend and

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a proposed Third Amended Complaint (Dkt. No. 70).

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Judge Karlton later denied plaintiff’s motion for reconsideration of Judge Karlton’s order
partially granting and partially denying plaintiff’s first motion for reconsideration. (Order, Mar. 29,
2012, Dkt. No. 87.)
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On October 3, 2011, defendants filed a motion to dismiss plaintiff’s Second

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Amended Complaint (Dkt. No. 71). As a result of the competing motions for leave to file a

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Third Amended Complaint and to dismiss the Second Amended Complaint, and the possibility

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that plaintiff’s motion for leave to amend might ultimately moot the motion to dismiss in whole

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or part, the court ordered that plaintiff’s motion for leave to amend would be heard first and that

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the motion to dismiss the Second Amended Complaint would be held in abeyance, subject to

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being re-noticed if necessary. (Order, Oct. 17, 2011, at 3-4, Dkt. No. 80.)

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The hearing on plaintiff’s motion for leave to amend and file a Third Amended
Complaint was subsequently vacated due to plaintiff’s then-pending second motion for

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reconsideration, which could have also affected the scope of any further leave to amend. (See

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Order, Oct. 28, 2011, at 2-3, Dkt. No. 83.) The court ordered that: “Following the complete

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resolution of plaintiff’s Motion for Reconsideration (Dkt. No. 59), and depending on how that

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motion is resolved, if plaintiff wishes to proceed with his Motion to Amend (Dkt. No. 70),

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plaintiff may re-notice that Motion and set a new hearing date or file a different motion to

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amend.” (Order, Oct. 28, 2011, at 3.)

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After Judge Karlton denied plaintiff’s motion for reconsideration (Order, Mar. 29,

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2012), and the court reminded plaintiff that he had not yet re-noticed his motion for leave to

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amend (Order, Apr. 25, 2012, Dkt. No. 88), plaintiff filed another motion for leave to amend that

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attached plaintiff’s revised proposed Third Amended Complaint (Dkt. No. 89), which constituted

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plaintiff’s second version of the proposed Third Amended Complaint. The court denied

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plaintiff’s motion for leave to amend without prejudice on the grounds that the prolix, 140-page

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proposed Third Amended Complaint violated Federal Rule of Civil Procedure 8(a). (See Order,

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May 15, 2012, at 2-3, Dkt. No. 92.) The court provided plaintiff with 45 days to file a motion for

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leave to amend and advised, but did not require, plaintiff to shorten his Third Amended

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Complaint to under 50 pages. (Id. at 3.)

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On June 19, 2012, plaintiff filed the motion for leave to amend that is pending

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before the court. Plaintiff’s further revised proposed Third Amended Complaint (Dkt.

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No. 98)—i.e., plaintiff’s third version of the proposed Third Amended Complaint—is 50 pages

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long and alleges the following 13 claims: (1) fraud; (2) “promissory estopple [sic]”; (3) violation

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of RESPA, 12 U.S.C. §§ 2605 et seq.; (4) violations of 12 C.F.R. § 560.101 and California Civil

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Code § 2923.6; (5) “preempted/ unlawful foreclosure”; (6) “improper foreclosure process”;

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(7) defamation; (8) negligence and negligent misrepresentation; (9) violation of RICO; (10)

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Intentional Infliction of Emotional Distress; (11) “elder abuse”; (12) violation of the federal

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Truth In Lending Act, 15 U.S.C. §§ 1601 et seq.; and (13) violation of California’s UCL. (See

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Proposed Third Am. Compl. at 1.)

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II.

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LEGAL STANDARDS
Federal Rule of Civil Procedure 15(a) addresses amendments to pleadings before

trial and, in relevant part, provides:
(a) Amendments Before Trial.
(1) Amending as a Matter of Course. A party may amend its
pleading once as a matter of course within:

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(A) 21 days after serving it, or
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(B) if the pleading is one to which a responsive pleading is
required, 21 days after service of a responsive pleading or
21 days after service of a motion under Rule 12(b), (e), or
(f), whichever is earlier.
(2) Other Amendments. In all other cases, a party may amend its
pleading only with the opposing party’s written consent or the
court’s leave. The court should freely give leave when justice so
requires.

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Rule 15(a)(2), which applies here, provides that leave to amend should be freely

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given “when justice so requires,” and the Ninth Circuit Court of Appeals has stated that “requests

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for leave should be granted with ‘extreme liberality.’” Moss v. U.S. Secret Serv., 572 F.3d 962,

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972 (9th Cir. 2009) (citation omitted). However, the Court of Appeals has also cautioned that
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“liberality in granting leave to amend is subject to several limitations,” which include “undue

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prejudice to the opposing party, bad faith by the movant, futility, and undue delay.” Cafasso v.

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Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1058 (9th Cir. 2011) (citations and quotation marks

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omitted); accord AmerisourceBergen Corp. v. Dialysist West, Inc., 465 F.3d 946, 951 (9th Cir.

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2006).4 It has also advised that a “district court’s discretion to deny leave to amend is

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particularly broad where plaintiff has previously amended the complaint.” Cafasso, 637 F.3d at

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1058 (citations and quotation marks omitted).

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III.

DISCUSSION

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The undersigned recommends that plaintiff’s motion for leave to amend be

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granted in part and denied in part. The undersigned addresses the claims raised in the third

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version of the proposed Third Amended Complaint below.

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However, before addressing plaintiff’s most recent proposed amendment, the

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undersigned notes that in opposing plaintiff’s motion, defendants devoted a substantial portion of

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their brief to their request that plaintiff’s case be involuntarily dismissed pursuant to Federal Rule

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of Civil Procedure 41(b) on the basis of plaintiff’s failure to follow the court’s orders by filing a

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Second Amended Complaint that did not comply with the leave given to plaintiff. (Def.’s Opp’n

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at 5-8.) The undersigned recommends that defendants’ request that the court involuntarily

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dismiss this case be denied. First, defendants did not file a noticed motion to dismiss on such

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grounds and, therefore, defendants’ request is not properly before the court. Second, although

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there is an arguable basis for such a motion, dismissal is at present simply too harsh a sanction.

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See Ferdik v. Bonzelet, 963 F.2d 1258, 1260 (9th Cir. 1992) (stating that “dismissal is a harsh

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penalty and, therefore, it should only be imposed in extreme circumstances”). Moreover, the

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public policy in favor of hearing cases on the merits presently favors denying defendants’

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In terms of evaluating undue delay, courts inquire as to “whether the moving party knew
or should have known the facts and theories raised by the amendment in the original pleading.”
AmerisourceBergen Corp., 465 F.3d at 953 (citation and quotation marks omitted).
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request.5

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Turning to the proposed amendment, the undersigned addresses plaintiff’s

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proposed claims in turn. First, the undersigned recommends that plaintiff be granted leave to

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amend in regards to his claims of fraud and “promissory estopple [sic].” Plaintiff was granted

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leave to amend his fraud claims premised on representations regarding the modification of

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plaintiff’s loans when his First Amended Complaint was dismissed, and plaintiff’s revised

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allegations of fraud are consistent with the leave granted. (See Prop. Third Am. Compl. ¶¶ 27-

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46.) Defendants do not argue otherwise in their opposition brief. Additionally, plaintiff’s

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“promissory estoppel” claim, which alleges that plaintiff withdrew funds from his retirement

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account in reliance on defendants’ agent’s representations that such withdrawal would lead to a

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loan modification, is in effect a claim of “promissory fraud.”6 (See id. ¶¶ 48-57.) Although

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plaintiff was not specifically granted leave to allege a claim of promissory fraud, plaintiff simply

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separated his existing allegations of promissory fraud from his other allegations of fraud for the

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sake of clarity. Plaintiff was granted leave to amend what was in essence a promissory fraud

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claim, and he now alleges promissory fraud as a separate claim. (Compare Order & Findings &

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Recommendations, Mar. 22, 2011, at 19-20, with Prop. Third Am. Compl. ¶¶ 27-46.)

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Accordingly, the undersigned recommends that plaintiff be granted leave to amend with respect

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to his fraud and promissory fraud claims, which are identified as his first and second claims for

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relief.

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The undersigned notes that defendants’ counsel did not argue in favor of involuntary
dismissal at the hearing. Instead, after the court announced a tentative ruling at the outset of the
hearing, defendants’ counsel stated that he found the proposed disposition of plaintiff’s motion for
leave to amend to be satisfactory.

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The California Supreme Court has described a claim for “promissory fraud” as “a
subspecies of the action for fraud and deceit.” Lazar v. Superior Court, 12 Cal. 4th 631, 638, 909
P.2d 981, 985 (1996); see also Cal. Civ. Code § 1710(4) (defining deceit as, in part, “[a] promise,
made without any intention of performing it”). Thus, “[a]n action for promissory fraud may lie
where a defendant fraudulently induces the plaintiff to enter into a contract.” Lazar,12 Cal. 4th at
638, 909 P.2d at 985.
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Second, the undersigned recommends that plaintiff’s motion for leave to amend

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be granted with respect to plaintiff’s RESPA claim, his proposed third claim for relief. Plaintiff

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was granted leave to amend his RESPA claim on the basis of existing and new facts. (Order,

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Aug. 1, 2012, at 7.) Plaintiff amended his RESPA claim and alleged additional facts. (See Prop.

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Third Am. Compl. ¶¶ 58-64.) Accordingly, the undersigned recommends that the court grant

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plaintiff’s motion for leave to amend his RESPA claim.

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Third, the undersigned recommends that plaintiff’s motion for leave to amend be

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denied insofar as plaintiff seeks to add claims for alleged violations of 12 C.F.R. § 560.101 and

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California Civil Code § 2923.6.7 At bottom, plaintiff was not granted leave to allege such claims

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when the court dismissed plaintiff’s First Amended Complaint. Additionally, plaintiff has not

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argued any persuasive basis for leave to add these claims in his moving papers. Similarly, the

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facts alleged in support of this new claim appear to have been available to plaintiff when he filed

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Relevant to plaintiff’s purported claim, 12 C.F.R. §§ 560.101(a)-(b)(1)(i) require savings
associations to adopt and maintain written policies establishing limits and standards for extensions
of credit secured by real estate liens, which must be consistent with “safe and sound banking
practices.” In regards to California Civil Code § 2923.6, that code section provides:

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(a) The Legislature finds and declares that any duty servicers may have to
maximize net present value under their pooling and servicing agreements is
owed to all parties in a loan pool, or to all investors under a pooling and
servicing agreement, not to any particular party in the loan pool or investor
under a polling and servicing agreement, and that a servicer acts in the best
interests of all parties to the loan pool or investors in the pooling and
servicing agreement if it agrees to or implements a loan modification or
workout plan for which both of the following apply:
(1) The loan is in payment default, or payment default is reasonably
foreseeable.

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(2) Anticipated recovery under the loan modification or workout plan
exceeds the anticipated recovery through foreclosure on a net present value
basis.

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(b) It is the intent of the Legislature that the mortgagee, beneficiary, or
authorized agent offer the borrower a loan modification or workout plan if
such a modification or plan is consistent with its contractual or other
authority.
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his First Amended Complaint, and plaintiff has not explained why he delayed until now to add

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such a claim. Moreover, in terms of the futility of the proposed amendment, California Civil

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Code § 2923.6 does not create a private right of action. See, e.g., Rodriguez v. JP Morgan Chase

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& Co., 809 F. Supp. 2d 1291, 1296 (S.D. Cal. 2011) (dismissing a plaintiff’s claim premised on

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California Civil Code § 2923.6 because “Section 2923.6 does not require loan servicers to

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modify loans, and it does not create a private right of action for borrowers”); see also Yulaeva v.

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Greenpoint Mortgage Funding, Inc., No. CIV. S-09-1504 LKK/KJM, 2009 WL 2880393, at *11

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n.13 (E.D. Cal. Sept. 3, 2009) (unpublished) (noting that California Civil Code § 2923.6 only

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imposes a duty on members of a loan pool to one another, not to borrowers). Accordingly, the

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undersigned recommends that plaintiff be denied leave to add his proposed fourth claim for relief

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premised on alleged violations of 12 C.F.R. § 560.101 and California Civil Code § 2923.6.

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Fourth, the undersigned recommends that plaintiff be denied leave to add his

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proposed fifth and sixth claims for “preempted/unlawful foreclosure” and “improper foreclosure

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process,” respectively. Plaintiff’s claims for wrongful foreclosure and quiet title were dismissed

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with prejudice, and the court denied plaintiff’s motions for reconsideration in this regard. Yet

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plaintiff persists in pursuing these claims by attempting to end-run the court’s orders. Although

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plaintiff purports to premise these claims, in part, on newly acquired handwriting analyses that

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allegedly evidence “robosigning” of foreclosure-related documents, plaintiff’s claims for

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“preempted/unlawful foreclosure” and “improper foreclosure process” are in reality re-packaged

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claims for wrongful foreclosure designed to avoid the court’s prior orders dismissing that claim

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with prejudice. Indeed, plaintiff’s wrongful foreclosure claim alleged in the First Amended

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Complaint included allegations concerning “robosigning.” (See First Am. Compl. ¶ 298.)

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Accordingly, the court should not grant plaintiff leave to add these two claims.

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Fifth, the undersigned recommends that plaintiff be granted leave to add his newly

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alleged defamation claim, identified as the seventh claim for relief. Plaintiff alleges that he was

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defamed by defendants when, in violation of the court’s preliminary injunction in this case (Dkt.
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No. 21), defendants posted a notice of trustee’s sale at two of plaintiff’s properties and published

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notices of sale in newspapers. (See Prop. Third Am. Compl. ¶¶ 90-100.) Plaintiff’s defamation

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claim is premised on events in this case that transpired after commencement of the action and are

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essentially part of the same set of operative facts as plaintiff’s other claims, and plaintiff did not

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delay in raising this claim.

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Sixth, the undersigned recommends that plaintiff be permitted to amend his

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negligence and negligent misrepresentation claims in part. The court previously granted plaintiff

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leave to amend his claims of negligence and negligent misrepresentation insofar as those claims

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arose “from defendants’ alleged representations during the loan modification application

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process.” In his most recent proposed Third Amended Complaint, plaintiff premises his

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combined negligence and negligent misrepresentation claim on four broad categories of conduct:

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(a) defendants’ conduct in connection with the loan modification process (Third Am. Compl.

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¶¶ 104-107); (b) defendants’ attempted foreclosure of plaintiff’s property, which plaintiff labels

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“Preempted Foreclosure” (id. ¶¶ 108-110); (c) defendants’ negligent acts of noticing a trustee’s

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sale of two of plaintiff’s properties in violation of the court’s preliminary injunction (id. ¶¶ 111-

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13); and (d) defendants’ alleged use of use “robosigning,” which plaintiff’s labels as “Improper

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Foreclosure Process” (id. ¶¶ 114-118).

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In short, plaintiff should be granted leave to amend to state a claim for negligence

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and negligent misrepresentation insofar as that claim is premised on conduct relating to the loan

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modification process and the trustee sales noticed in violation of the court’s preliminary

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injunction. Plaintiff was expressly granted leave to amend this claim insofar as the loan

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modification process was concerned, and the injunction-related allegations arose mid-litigation.

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However, the rest of plaintiff’s claim consists of plaintiff’s “preempted foreclosure” and

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“improper foreclosure process” claims for which leave should not be granted. Accordingly,

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plaintiff’s negligence and negligent misrepresentation claim should be narrowed and should

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exclude plaintiff’s allegations pertaining to “Preempted Foreclosure” and “Improper Foreclosure
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Process.”

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Seventh, the undersigned recommends that plaintiff’s motion for leave to amend

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be partially granted insofar as his RICO claim is concerned. The court previously granted

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plaintiff leave to amend his RICO claim “based upon his allegations of fraudulent statements

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made in connection with the loan modification process.” (Order & Findings &

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Recommendations, Mar. 22, 2011, at 36.) To the extent that plaintiff has attempted to amend his

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pleading in that regard, plaintiff’s RICO claim in his proposed Third Amended Complaint should

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be retained. (Third Am. Compl. ¶¶ 124-27.) However, plaintiff’s most recent RICO claim

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includes plaintiff’s claims based on “robosigning” (id. ¶¶ 128-37). Plaintiff’s claim should not

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be permitted to proceed insofar as it relies on “robosigning” allegations because it exceeds the

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leave previously granted and is yet another attempted end-run around the court’s dismissal of

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plaintiff’s wrongful foreclosure claim.

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Eighth, the undersigned recommends that plaintiff’s motion for leave to amend be

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partially granted in regards to plaintiff’s new claim of intentional infliction of emotional distress

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(“IIED”). Plaintiff’s IIED claim includes two aspects: (1) allegations pertaining to the loan

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modification process (Prop. Third Am. Compl. ¶¶ 140-43); and (2) allegations pertaining to

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defendants’ posting of notices of trustee’s sales in violation of the court’s preliminary injunction

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(id. ¶¶ 144-48). As to the loan modification-related allegations, the undersigned recommends

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that plaintiff’s motion be denied because plaintiff knew or should have known of those facts

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when he filed his First Amended Complaint but chose not to pursue an IIED claim at that time.

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Plaintiff has not explained his delay in raising such a claim. However, plaintiff should be

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granted leave to amend to add allegations of IIED in relation to defendants’ violation of the

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preliminary injunction, for the same reasons stated above in regards to plaintiff’s defamation

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claim.

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Ninth, the undersigned recommends that plaintiff’s motion be denied in regards to
plaintiff’s “elder abuse” claim (see Prop. Third Am. Compl. ¶¶ 149-58). Plaintiff was not
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granted leave to add such a claim, and plaintiff’s moving papers do not substantiate why he

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should be permitted to add such a claim nearly two years into this litigation. Moreover,

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plaintiff’s elder abuse claim is premised on factual allegations known to plaintiff when he filed

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his First Amended Complaint, and plaintiff has not explained his delay in pursuing such a claim.

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Tenth, plaintiff’s proposed Third Amended Complaint includes a new, lengthy,

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multi-headed claim that defendants violated the federal Truth In Lending Act, 15 U.S.C. §§ 1601

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et seq., which dramatically seeks to expand the scope of this lawsuit. (See Prop. Third Am.

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Compl. ¶¶ 159-93.) The undersigned recommends that plaintiff’s motion for leave to add this

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TILA claim be denied for three reasons. As an initial matter, plaintiff was not granted leave to

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add a TILA claim when the court resolved defendants’ motion to dismiss the First Amended

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Complaint.

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More importantly, plaintiff unreasonably delayed in raising his TILA claim. In

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attempting to mitigate his delay, plaintiff alleges that he is entitled to equitable tolling because he

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only found out about the availability of such a TILA claim in mid-January 2012, after having a

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discussion with his neighbor about his neighbor’s lawsuit. (See Prop. Third Am. Compl. ¶ 191.)

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Plaintiff essentially decided to add a TILA claim after reviewing his own loan documents

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alongside his neighbor’s class action lawsuit. (Id.) At the hearing, plaintiff argued, rather

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unbelievably, that “no reasonable person” could have known of the viability of such a TILA

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claim without first reading his neighbor’s class action complaint. In reality, it readily appears

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that plaintiff just happened to learn about additional claims to allege against defendants after

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talking to a neighbor. Plaintiff failed to raise this claim in his First Amended Complaint and

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other proposed amended complaints, and plaintiff’s explanation of his delay in bringing such a

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claim demonstrates a lack of diligence up to this point in the proceedings. Accordingly, the

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undersigned recommends that plaintiff be denied leave to add his TILA claim at this point in the

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litigation.

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Furthermore, the undersigned recommends that plaintiff be denied leave to add his

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TILA claim on the additional ground that such an amendment would be futile. Plaintiff seeks

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damages in connection with his TILA claim, and that claim is predicated on the alleged failure to

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provide certain required disclosures in loan documents. (See Prop. Third Am. Compl. ¶¶ 161,

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193.) Because plaintiff only seeks civil damages, a one-year limitation period applies to

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plaintiff’s TILA claim and began to run on the date of the consummated loan transactions.8 See

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15 U.S.C. § 1640(e); King v. State of California, 784 F.2d 910, 915 (9th Cir. 1986) (holding that

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the limitations period stated in 15 U.S.C. § 1640(e) “runs from the date of consummation of the

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transaction”). It is undisputed that the loan transactions at issue were consummated earlier than

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September 15, 2009, one year prior to the date plaintiff originally filed his lawsuit in state court.

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(See Notice of Removal, Ex. A; see also First Am. Compl. ¶ 23 (alleging that by March 2008,

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plaintiff owned 18 properties, 16 of which were investment properties).) Critically, the Ninth

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Circuit Court of Appeals has held that it applies equitable tolling “in situations where, despite all

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due diligence, the party invoking equitable tolling is unable to obtain vital information bearing on

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the existence of the claim.” Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1045

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(9th Cir. 2011) (emphasis added). Plaintiff has not shown that he was unable to learn of “vital

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information” bearing on his TILA claim “despite all due diligence.” Instead, plaintiff has shown

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little diligence in regards to his TILA claim, raising such a claim only after a chance conversation

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with a neighbor in January 2012. Accordingly, plaintiff’s TILA claim, which relies on equitable

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tolling, is futile.

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Finally, plaintiff seeks to amend his unfair competition claim, and premises that

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claim on all of the claims for relief addressed above. (See Prop. Third Am. Compl. ¶¶ 194-206.)

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In dismissing plaintiff’s UCL claim stated in the First Amended Complaint, the court addressed

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Nothing in the most recently proposed Third Amended Complaint suggests that plaintiff
seeks a rescission remedy, to which an absolute, three-year statue of repose would apply. See
McOmie-Gray v. Bank of Am. Home Loans, 667 F.3d 1325, 1329 (9th Cir. 2012).
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plaintiff’s claim insofar as it was premised on plaintiff’s allegations of fraud in the loan

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modification process. (See Order & Findings & Recommendations, Mar. 22, 2011, at 22-24 &

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n.6.) However, the court did not resolve whether any of plaintiff’s other claims could support the

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UCL claim, except that it explained that those claims that were dismissed with prejudice could

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not form the basis of the UCL claim. (Id. at 24 n.6.) Consistent with the court’s prior ruling, the

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undersigned recommends that plaintiff’s claim premised on California’s UCL be permitted to

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proceed to the extent he is granted leave to amend his other claims.

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IV.

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CONCLUSION
For the foregoing reasons, IT IS HEREBY RECOMMENDED that:
1.

Plaintiff’s motion for leave to amend (Dkt. No. 97) be granted in part and

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denied in part, and that, specifically, plaintiff be granted leave to pursue the following, narrowed

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claims alleged in the proposed Third Amended Complaint (Dkt. No. 98):

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a.

Plaintiff’s first claim for relief, alleging fraud;

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b.

Plaintiff’s second claim for relief, alleging promissory fraud, albeit

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labeled as a claim for “promissory estopple [sic]”;
c.

Plaintiff third claim for relief, alleging violations of the Real Estate

Settlement Procedures Act, 12 U.S.C. §§ 2605 et seq.;

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d.

Plaintiff’s seventh claim for relief, alleging defamation;

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e.

Plaintiff’s eighth claim for relief, alleging negligence and negligent

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misrepresentation claims only insofar as that combined claim concerns: (i) defendants’ alleged

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representations during the loan modification application process, and (ii) defendants’ negligent

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acts of noticing a trustee’s sale of two of plaintiff’s properties in violation of the court’s

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preliminary injunction;

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f.

Plaintiff’s ninth claim for relief, alleging violations of the

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Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962, based upon allegations

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of fraudulent statements made in connection with the loan modification process;
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g.

Plaintiff’s tenth claim for relief, alleging intentional infliction of

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emotional distress only insofar as it relates to defendants’ violation of the preliminary injunction

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in this case; and

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h.

Plaintiff’s thirteenth claim for relief, alleging violations of

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California’s Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq., be permitted to

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proceed to the extent that plaintiff is granted leave to amend his other claims

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2.

Plaintiff’s motion for leave to amend be denied in all other respects.

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3.

Plaintiff’s proposed Third Amended Complaint found at docket entry 98

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be deemed the operative complaint, as narrowed above.

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4.

Defendants be ordered to file an answer or other response to plaintiff’s

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Third Amended Complaint within 14 days of the resolution of these proposed findings and

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recommendations.9

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5.

6.

Defendants’ motion to dismiss the Second Amended Complaint (Dkt.

denied.

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Defendants’ request for the involuntary dismissal of plaintiff’s case be

No. 71) be denied as moot.

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These findings and recommendations are submitted to the United States District

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Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within fourteen

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days after being served with these findings and recommendations, any party may file written

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objections with the court and serve a copy on all parties. Id.; see also E. Dist. Local Rule 304(b).

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Such a document should be captioned “Objections to Magistrate Judge’s Findings and

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Recommendations.” Any response to the objections shall be filed with the court and served on

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all parties within fourteen days after service of the objections. E. Dist. Local Rule 304(d).

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At the hearing, defendants’ counsel suggested that defendants would file an answer to
move this case along. While the undersigned has stated a desire to move this case forward, of course
defendants are not precluded from filing a motion to dismiss the Third Amended Complaint
consistent with the Federal Rules of Civil Procedure.
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Failure to file objections within the specified time may waive the right to appeal the District

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Court’s order. Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d

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1153, 1156-57 (9th Cir. 1991).

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IT IS SO RECOMMENDED.
DATED: August 21, 2012

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_____________________________________
KENDALL J. NEWMAN
UNITED STATES MAGISTRATE JUDGE

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