McMahon v. JPMorgan Chase Bank, N.A. et al

Filing 54

ORDER signed by District Judge John A. Mendez on 5/30/17. The Court GRANTS Chase's Motion to Dismiss McMahon's FAC WITH PREJUDICE 43 . Additionally, the Court's Order re Filing Requirements limits reply memoranda in Motions to Dis miss to five pages. Order re Filing Requirements at 1, 6/27/16, ECF No. 5- 2. Violating the Order requires the offending counsel to pay $50.00 per page over the page limit to the Clerk of Court. Id. The Court also does not consider arguments made past the page limit. Id. Chase's reply brief exceeded the page limit by three pages. Chase's counsel must pay $150.00 no later than five days from this Order's date. (Mena-Sanchez, L)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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GORDON MCMAHON, an
individual;

No.

2:16-cv-1459-JAM-KJN

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Plaintiff,
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ORDER GRANTING DEFENDANT
JPMORGAN CHASE BANK’S MOTION TO
DISMISS

v.
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JPMORGAN CHASE BANK, N.A.;
SELECT PORTFOLIO SERVICING,
INC.; and DOES 1 through 20
inclusive,

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Defendants.

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Plaintiff Gordon McMahon (“McMahon”) sued Defendants Select

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Portfolio Servicing (“SPS”) and JPMorgan Chase Bank (“Chase”)

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seeking to save his home from foreclosure.

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moves to dismiss McMahon’s First Amended Complaint (“FAC”) with

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prejudice.

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45. 1

ECF No. 43.

ECF No. 1.

McMahon opposes the motion.

Chase

ECF No.

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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was
scheduled for May 16, 2017.
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I.

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FACTS

The Court takes the facts alleged by McMahon as true for
purposes of this motion.

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McMahon obtained a mortgage loan in 2005.

FAC ¶ 1.

The

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interest rate and monthly payment increased about two years

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later.

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Id.

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Id.

By late 2007, McMahon could not pay his mortgage.

Chase began servicing McMahon’s loan in September 2011.
FAC ¶ 38.

Chase scheduled a foreclosure for April 2013.

FAC

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¶ 42.

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called Karen Hyman—his “Customer Assistance Specialist” at

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Chase—several times in January 2013, but she never returned his

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calls.

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Request (“QWR”).

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response” to the QWR two months later.

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filed a Request for Mortgage Assistance (“RMA”) with Chase in

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March 2013.

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application.

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To explore options to avoid the foreclosure, McMahon

FAC ¶ 43.

McMahon then sent Chase a Qualified Written
FAC ¶ 44.

FAC ¶ 46.

Chase “provided an incomplete
FAC ¶ 45.

McMahon then

Chase did not respond to McMahon’s

Id.

Two months later, Chase informed McMahon it would transfer

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servicing of the loan to SPS effective June 1, 2013.

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According to McMahon, SPS was Chase’s “subservicer” on McMahon’s

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account.

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FAC ¶ 49.

FAC ¶ 88.

McMahon brings seven claims against Chase: (1) violation of

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the Homeowners Bill of Rights (“HBOR”) at California Civil Code

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Section 2924.12, (2) violation of the Equal Credit Opportunity

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Act (“ECOA”) at 15 U.S.C. § 1691(d)(1), (3) violation of the

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Real Estate Settlement Procedures Act (“RESPA”) at 12 U.S.C.

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§ 2605(e), (4) violation of Regulation X at 12 C.F.R.
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Section 1024.41, (5) violation of Regulation X at 12 C.F.R.

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Sections 1024.35, 1024.36, (6) negligence, and (7) violation of

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California Business and Professions Code Section 17200.

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II.
A.

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OPINION

Analysis
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First Claim: HBOR

McMahon asks the Court to grant him “injunctive relief for
material violations of California Civil Code sections 2923.55,
2923.6, and 2924.17.”

FAC ¶ 118.

California Civil Code Section 2924.12 permits a borrower to

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“bring an action for injunctive relief to enjoin a material

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violation of Section 2923.55, 2923.6, . . . or 2924.17” if “a

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trustee’s deed of sale has not been recorded.”

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2924.12(a)(1).

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Cal. Civ.

Chase argues McMahon cannot seek injunctive relief against

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it because Chase no longer services McMahon’s loan.

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McMahon counters that he can seek injunctive relief against

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Chase because “Chase remains directly involved as a master

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servicer.”

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liability” or “secondary liability under . . . agency, joint

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venture, and/or aiding and abetting.”

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Opp’n at 6.

Mot. at 3.

McMahon contends Chase has “direct

Id. at 5.

This same “master servicer” argument was at issue in

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Cooksey v. Select Portfolio Servicing, 2014 WL 4662015, at *6

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(E.D. Cal Sept. 8, 2014).

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plaintiffs needed to plead facts to support their allegations

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that Bank of America—the alleged master servicer—aided and

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abetted or was in a joint venture with SPS.

In Cooksey, the court stated the

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Id.

The Cookseys’

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allegations against Bank of America as to aiding and abetting of

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SPS closely resemble McMahon’s allegations against Chase here.

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Compare id. (citing Complaint ¶¶ 9-10) with FAC ¶¶ 11-12.

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The Cooksey court stated:

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In California, “liability for aiding and abetting
depends on proof the defendant had actual knowledge of
the specific primary wrong the defendant assisted.”
Casey v. U.S. Bank Nat’l Ass’n, 127 Cal. App. 4th
1138, 1145 (2005). In addition, “‘[t]here are three
basic elements of a joint venture: the members must
have joint control over the venture (even though they
may delegate it), they must share the profits of the
undertaking, and the members must each have an
ownership interest in the enterprise.’” Jeld–Wen,
Inc. v. Sup. Ct., 131 Cal. App. 4th 853, 872 (2005)
(quoting Orosco v. Sun–Diamond Corp., 51 Cal. App. 4th
1659, 1666 (1997)). Each of these theories must be
supported by sufficient facts to show either BANA’s
knowledge of SPS’s HBOR violations or BANA’s profitsharing, joint control and ownership of the
undertaking. Fields v. Wise Media, LLC, No. C 12–
05160-WHA, 2013 WL 5340490, at *3–4 (N.D. Cal. Sep.24,
2013); Uecker v. Wells Fargo Capital Fin. (In re
Mortg. Fund ′08 LLC), Bankruptcy Case No. 11–49803
RLE, Adv. Proc. No. 12–4137 RLE, 2014 WL 543685, at *6
(Bankr. N.D. Cal. Feb.11, 2014). As defendant points
out, the complaint is devoid of factual support for
plaintiffs' conclusory claims.

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Cooksey, 2014 WL 4662015, at *6.

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claim against Bank of America.

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The court dismissed the HBOR
Id.

McMahon—citing paragraphs 11, 12, and 13 of his FAC—argues

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he pled agency, joint venture, and aiding and abetting.

Opp’n

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at 6.

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defendants had an agency or joint venture relationship and they

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“aided and abetted” each other.

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paragraphs McMahon cites, and the FAC as a whole, lack

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sufficient facts to support aiding and abetting or a joint

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venture relationship between Chase and SPS.

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McMahon’s FAC lacks “factual support for plaintiff’s conclusory

But these paragraphs merely conclusively state the

See FAC ¶¶ 11-13.

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The

As in Cooksey,

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claims.”

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McMahon’s HBOR claim.

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complaint, and he has given no indication that he can supplement

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his FAC with additional facts sufficiently showing that Chase

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aided and abetted or had an agency relationship with SPS.

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Court therefore finds granting McMahon leave to amend is futile,

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and dismisses the first claim with prejudice.

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The Court therefore grants Chase’s motion to dismiss

2.

McMahon has already amended his

The

Second Claim: ECOA

McMahon brings his second claim under 15 U.S.C.

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§ 1691(d)(1), which states “[w]ithin thirty days . . . after

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receipt of a completed application for credit, a creditor shall

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notify the applicant of its action on the application.”

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U.S.C. § 1691(d)(1).

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Section 1691(d)(6) states:

For purposes of this subsection, the term “adverse
action” means a denial or revocation of credit, a
change in the terms of an existing credit arrangement,
or a refusal to grant credit in substantially the
amount or on substantially the terms requested. Such
term does not include a refusal to extend additional
credit under an existing credit arrangement where the
applicant is delinquent or otherwise in default, or
where such additional credit would exceed a previously
established credit limit.

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15 U.S.C. § 1691(d)(6) (emphasis added).
The Court stated in its previous order that SPS did not have

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to comply with the ECOA’s thirty-day notice requirement under

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§ 1691(d)(1) because McMahon had already defaulted on his

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mortgage when he applied to modify his loan.

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26, 2017, ECF No. 44.

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Order at 7, Apr.

The Court, however, has reconsidered its position on that

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issue in light of Vasquez v. Bank of America, N.A., 2014 WL

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1614764, at *3 (N.D. Cal. Apr. 22, 2014) (“Vasquez II”) and
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MacDonald v. Wells Fargo Bank N.A, 2015 WL 1886000, at *3 (N.D.

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Cal. Apr. 24, 2015). ECF No. 53. In MacDonald, the court stated

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that “Section 1691(d)(1) does not contain the words ‘adverse

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action.’ Therefore, on its face, Section 1691(d)(6)’s exclusion

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for applicants that are ‘delinquent or otherwise in default’

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would appear to impact only the entitlement to a statement of

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reasons upon denial, not a determination on an application within

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thirty days.”

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further stated that few courts have discussed “whether the

MacDonald, 2015 WL 188600, at *3.

MacDonald

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exceptions to the definition of ‘adverse action’ in Section

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1691(d)(6) apply to the word “action” as used in Section

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1691(d)(1) . . . [but] [a]t least two courts have found that

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applicants are entitled to a determination on their application

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with[in] thirty days whether or not they defaulted on their

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existing loan obligations.”

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that the servicer failed to give the borrower notice of their

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action within thirty days of receiving the completed application

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“is sufficient to state a claim under § 1691(d)(1), even though

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Plaintiffs were in [default] at the time.”

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Similarly, the Vasquez II court held the plaintiff need not show

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she was not in default to proceed on a § 1691(d)(1) claim.

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Vasquez II, 2014 WL 1614764, at *3.

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Id.

MacDonald held an allegation

Id. at *4.

The Court therefore does not dismiss McMahon’s ECOA claim

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solely because McMahon defaulted on his mortgage before applying

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to modify his loan and proceeds to Chase’s arguments for

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dismissing McMahon’s ECOA claim.

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Chase first argues the “ECOA is an anti-discrimination
statute, and Plaintiff has not alleged any manner of
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discrimination.”

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Circuit have found “the [ECOA’s] notice provisions to give rise

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to a cause of action even with no accompanying claims of

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discrimination.”

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v. Pac. Capital Bank, N.A., 753 F. Supp. 2d 1034, 1042 (N.D. Cal.

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2010); Vasquez, 2013 WL 6001924, at *11).

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Mot. at 4.

But district courts in the Ninth

Cooksey, 2014 WL 4662015, at *4 (citing Errico

Chase next argues McMahon has not actually alleged his ECOA

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claim against Chase, but only SPS.

Mot. at 5.

Chase is correct:

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McMahon alleges in his FAC under the second claim that he

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“provided SPS with a completed application for credit on March

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21, 2014 and January 13, 2015.”

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allege he ever submitted a completed application for credit to

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Chase.

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occurred after Chase transferred the servicing of the loan to

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SPS.

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violations to Chase.

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dismiss McMahon’s second claim with prejudice.

McMahon does not

McMahon’s allegations as to his second claim also

As discussed above, the Court cannot impute SPS’s

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FAC ¶ 126.

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Thus, the Court grants Chase’s motion to

Third, Fourth, and Fifth Claims: RESPA

McMahon alleges Chase violated various subsections of

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§ 2605 of the RESPA.

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§ 2605 has a three year statute of limitations.

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§ 2614.

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FAC at 21-25.

A RESPA claim based on
12 U.S.C.

McMahon sued Chase on June 27, 2016, more than three years

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after Chase transferred the servicing of the loan to SPS.

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FAC ¶ 49.

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any claims against Chase for Chase’s conduct while servicing

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McMahon’s loan.

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See

The three year statute of limitations therefore bars

McMahon concedes he sued Chase after the statute of
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limitations expired, but argues the Court should toll the

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statute of limitations because McMahon did not know Chase

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remained the master servicer on the loan until June 2015.

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at 11.

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Opp’n

To justify equitable tolling on a RESPA claim, a plaintiff

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must plead facts showing he “could not have discovered the

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alleged RESPA violations by exercising due diligence.”

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v. CTX Mortg. Co., LLC, No. 2:11-cv-00752-GEB-GGH, 2012 WL

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662456, at *5 (E.D. Cal. Feb. 28, 2012) (quoting Quiroz v.

Klepac

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Countrywide Bank, N.A., No. CV 09-5855, 2009 WL 3849909, at *6

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(C.D. Cal. Nov. 16, 2009)).

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Chase remained the alleged master servicer on the loan, but

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rather when McMahon discovered Chase violated RESPA.

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does not plead any facts in his FAC which explain why he did not

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discover, or why he could not have discovered, Chase’s alleged

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RESPA violations in 2013.

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McMahon’s RESPA claims against Chase for violations that

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occurred while Chase serviced McMahon’s loan.

It matters not when McMahon learned

McMahon

The statute of limitations thus bars

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McMahon also argues he can hold Chase liable for SPS’s

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RESPA violations (which the statute of limitations does not

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bar).

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hold a master servicer vicariously liable for the subservicer’s

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violations of the law.

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master servicer aided or abetted or was in joint venture with

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the subservicer.

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has not done so here.

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Opp’n at 12-13.

As discussed above, the court cannot

Instead, a plaintiff must show the

See Cooksey, 2014 WL 4662015, at *6.

McMahon

The Court grants Chase’s motion to dismiss McMahon’s third,
fourth, and fifth claims with prejudice.
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Chase raised the

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statute of limitations argument in the motion to dismiss it

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filed before McMahon filed his FAC, thus putting McMahon on

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notice he needed to plead facts to support equitable tolling

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when he filed his FAC.

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2017, ECF No. 21.

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amend futile.

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4.

See Mot. to Dismiss at 7, 12, Jan. 17,

The Court therefore finds granting leave to

Sixth Claim: Negligence

McMahon alleges Chase negligently handled his loan
modification applications.

FAC at 26-27.

Chase argues the

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statute of limitations for negligence claims bars McMahon’s

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claim.

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Mot. at 6.

McMahon brings his negligence claim under California Civil

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Code section 1741, California’s general negligence statute.

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¶ 158.

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“[a]n action upon a liability created by statute, other than a

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penalty or forfeiture,” is three years.

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§ 338(a).

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FAC

Under California law, the statute of limitations for

Cal. Civ. P. Code

Chase stopped servicing McMahon’s loan more than three

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years before McMahon sued Chase.

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negligence thus bars any claim against Chase for a violation

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that occurred during Chase’s loan servicing period.

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not pled facts to support tolling the statute of limitations or

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holding Chase liable for any of SPS’s violations after Chase

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transferred servicing to SPS.

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McMahon’s negligence claim against Chase with prejudice.

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5.

The statute of limitations for

McMahon has

The Court therefore dismisses

Seventh Claim: Unfair Competition Law

McMahon alleges Chase violated California Business and
Professions Code Section 17200 (“the UCL”).
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FAC at 27-28.

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Under the UCL, unfair competition includes “any unlawful,

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unfair, or fraudulent business act or practice.”

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Prof. Code § 17200.

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a.

Cal. Bus. &

Unlawful Prong

An “unlawful” practice includes all business practices

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“forbidden by law.”

Herrejon v. Ocwen Loan Servicing, LLC, 980

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F. Supp. 2d 1186, 1206 (E.D. Cal. Nov. 1, 2013).

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“unlawful” UCL claim dependent on the underlying allegations.

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Vargas v. JP Morgan Chase Bank, N.A., 30 F. Supp. 3d 945, 952

This makes an

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(C.D. Cal. 2014).

If unable to state a claim for the underlying

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offense, the plaintiff cannot state a claim under the UCL’s

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“unlawful” prong.

Id. at 952-53.

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McMahon has not stated a claim against Chase for any

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underlying offense, so he cannot succeed on the UCL’s unlawful

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prong.

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claim on Chase’s alleged RESPA violation in January 2013 because

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the UCL has a four year statute of limitations.

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But McMahon is wrong: the UCL’s four year statute of limitations

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applies only where the underlying offense violates state law.

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Beaver v. Tarsadia Hotels, 978 F. Supp. 2d 1124, 1156 (S.D. Cal.

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2013).

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federal law’s statute of limitations—not the UCL’s—applies.

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Because the RESPA is a federal statute to which is own three

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year statute of limitations applies, McMahon cannot base his UCL

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claim on Chase violating RESPA in January 2013.

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McMahon argues, however, that he can base his unlawful

Opp’n at 15.

When the underlying offense violates federal law, the

b.

Id.

Unfair Prong

McMahon also argues he states an “unfair” claim against
Chase “for its failures to respond to his applications for loan
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modification in 2013.”

Opp’n at 15.

A business practice is “unfair” under the UCL “if either

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(1) it is tethered to [a] specific constitutional, statutory, or

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regulatory provision, or (2) its harm to consumers outweighs its

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utility.”

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(N.D. Cal. Mar. 31, 2014); see also Rubio v. Capital One Bank,

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613 F.3d 1195, 1204 (9th Cir. 2010).

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argue that Chase’s failure to respond to a loan application is

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“tethered to [a] specific constitutional, statutory, or

MacDonald v. Ford Motor Co., 2014 WL 1340339, at *9

McMahon does not allege or

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regulatory provision,” or that harm to Chase’s consumers caused

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by that failure outweighs its utility.

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McMahon argues he states an “unfair” claim because his case

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resembles Oskoui v. JPMorgan Chase Bank, N.A., 851 F.3d 851 (9th

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Cir. 2017).

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from its conduct here.

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the plaintiff on a loan modification plan for which she did not

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even qualify.

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stated:

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Opp’n at 15.

But Chase’s conduct in Oskoui differs

In Oskoui, Chase accepted payments from

Oskoui, 851 F.3d at 857.

The Oskoui court

Chase's left hand sought payments from Plaintiff
pursuant to a plan designed to give her an opportunity
to modify her loan while, notwithstanding Plaintiff's
payment in accordance with that plan, Chase's right
hand continued all along with foreclosure proceedings
and both hands should have known from the start that
Plaintiff's loan would not be eligible for
modification in any event—the Court can conceive of
such allegations stating a section 17200 claim.

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Id. (emphasis in original).

Here, Chase never modified

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McMahon’s loan and McMahon never started making payments under a

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modification plan.

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foreclosure sale.

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manner it did in Oskoui and McMahon’s reliance on that case is

Chase also did not proceed with a
Accordingly, Chase did not act in the same

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misplaced.

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brought against Chase with prejudice.

The Court dismisses McMahon’s seventh claim as

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III.

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ORDER

For the above reasons, the Court GRANTS Chase’s motion to
dismiss McMahon’s FAC WITH PREJUDICE.

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Additionally, the Court’s Order re Filing Requirements

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limits reply memoranda in motions to dismiss to five pages.

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Order re Filing Requirements at 1, Jun. 27, 2016, ECF No. 5-2.

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Violating the Order requires the offending counsel to pay $50.00

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per page over the page limit to the Clerk of Court.

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Court also does not consider arguments made past the page limit.

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Id.

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Chase’s counsel must pay $150.00 no later than five days from

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this Order’s date.

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Id.

The

Chase’s reply brief exceeded the page limit by three pages.

IT IS SO ORDERED.
Dated: May 30, 2017

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