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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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 GORDON MCMAHON, an individual; No. 2:16-cv-1459-JAM-KJN 12 Plaintiff, 13 ORDER GRANTING DEFENDANT JPMORGAN CHASE BANK’S MOTION TO DISMISS v. 14 15 16 JPMORGAN CHASE BANK, N.A.; SELECT PORTFOLIO SERVICING, INC.; and DOES 1 through 20 inclusive, 17 Defendants. 18 Plaintiff Gordon McMahon (“McMahon”) sued Defendants Select 19 20 Portfolio Servicing (“SPS”) and JPMorgan Chase Bank (“Chase”) 21 seeking to save his home from foreclosure. 22 moves to dismiss McMahon’s First Amended Complaint (“FAC”) with 23 prejudice. 24 45. 1 ECF No. 43. ECF No. 1. McMahon opposes the motion. Chase ECF No. 25 26 27 28 1 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. 1 1 I. 2 3 FACTS The Court takes the facts alleged by McMahon as true for purposes of this motion. 4 McMahon obtained a mortgage loan in 2005. FAC ¶ 1. The 5 interest rate and monthly payment increased about two years 6 later. 7 Id. 8 9 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 10 ¶ 42. 11 called Karen Hyman—his “Customer Assistance Specialist” at 12 Chase—several times in January 2013, but she never returned his 13 calls. 14 Request (“QWR”). 15 response” to the QWR two months later. 16 filed a Request for Mortgage Assistance (“RMA”) with Chase in 17 March 2013. 18 application. 19 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 20 servicing of the loan to SPS effective June 1, 2013. 21 According to McMahon, SPS was Chase’s “subservicer” on McMahon’s 22 account. 23 FAC ¶ 49. FAC ¶ 88. McMahon brings seven claims against Chase: (1) violation of 24 the Homeowners Bill of Rights (“HBOR”) at California Civil Code 25 Section 2924.12, (2) violation of the Equal Credit Opportunity 26 Act (“ECOA”) at 15 U.S.C. § 1691(d)(1), (3) violation of the 27 Real Estate Settlement Procedures Act (“RESPA”) at 12 U.S.C. 28 § 2605(e), (4) violation of Regulation X at 12 C.F.R. 2 1 Section 1024.41, (5) violation of Regulation X at 12 C.F.R. 2 Sections 1024.35, 1024.36, (6) negligence, and (7) violation of 3 California Business and Professions Code Section 17200. 4 5 6 II. A. 7 8 9 10 11 OPINION Analysis 1. 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 12 “bring an action for injunctive relief to enjoin a material 13 violation of Section 2923.55, 2923.6, . . . or 2924.17” if “a 14 trustee’s deed of sale has not been recorded.” 15 2924.12(a)(1). 16 Cal. Civ. Chase argues McMahon cannot seek injunctive relief against 17 it because Chase no longer services McMahon’s loan. 18 McMahon counters that he can seek injunctive relief against 19 Chase because “Chase remains directly involved as a master 20 servicer.” 21 liability” or “secondary liability under . . . agency, joint 22 venture, and/or aiding and abetting.” 23 Opp’n at 6. Mot. at 3. McMahon contends Chase has “direct Id. at 5. This same “master servicer” argument was at issue in 24 Cooksey v. Select Portfolio Servicing, 2014 WL 4662015, at *6 25 (E.D. Cal Sept. 8, 2014). 26 plaintiffs needed to plead facts to support their allegations 27 that Bank of America—the alleged master servicer—aided and 28 abetted or was in a joint venture with SPS. In Cooksey, the court stated the 3 Id. The Cookseys’ 1 allegations against Bank of America as to aiding and abetting of 2 SPS closely resemble McMahon’s allegations against Chase here. 3 Compare id. (citing Complaint ¶¶ 9-10) with FAC ¶¶ 11-12. 4 The Cooksey court stated: 5 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. 6 7 8 9 10 11 12 13 14 15 16 17 18 Cooksey, 2014 WL 4662015, at *6. 19 claim against Bank of America. 20 The court dismissed the HBOR Id. McMahon—citing paragraphs 11, 12, and 13 of his FAC—argues 21 he pled agency, joint venture, and aiding and abetting. Opp’n 22 at 6. 23 defendants had an agency or joint venture relationship and they 24 “aided and abetted” each other. 25 paragraphs McMahon cites, and the FAC as a whole, lack 26 sufficient facts to support aiding and abetting or a joint 27 venture relationship between Chase and SPS. 28 McMahon’s FAC lacks “factual support for plaintiff’s conclusory But these paragraphs merely conclusively state the See FAC ¶¶ 11-13. 4 The As in Cooksey, 1 claims.” 2 McMahon’s HBOR claim. 3 complaint, and he has given no indication that he can supplement 4 his FAC with additional facts sufficiently showing that Chase 5 aided and abetted or had an agency relationship with SPS. 6 Court therefore finds granting McMahon leave to amend is futile, 7 and dismisses the first claim with prejudice. 8 9 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. 10 § 1691(d)(1), which states “[w]ithin thirty days . . . after 11 receipt of a completed application for credit, a creditor shall 12 notify the applicant of its action on the application.” 13 U.S.C. § 1691(d)(1). 14 15 16 17 18 15 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. 19 20 21 15 U.S.C. § 1691(d)(6) (emphasis added). The Court stated in its previous order that SPS did not have 22 to comply with the ECOA’s thirty-day notice requirement under 23 § 1691(d)(1) because McMahon had already defaulted on his 24 mortgage when he applied to modify his loan. 25 26, 2017, ECF No. 44. 26 Order at 7, Apr. The Court, however, has reconsidered its position on that 27 issue in light of Vasquez v. Bank of America, N.A., 2014 WL 28 1614764, at *3 (N.D. Cal. Apr. 22, 2014) (“Vasquez II”) and 5 1 MacDonald v. Wells Fargo Bank N.A, 2015 WL 1886000, at *3 (N.D. 2 Cal. Apr. 24, 2015). ECF No. 53. In MacDonald, the court stated 3 that “Section 1691(d)(1) does not contain the words ‘adverse 4 action.’ Therefore, on its face, Section 1691(d)(6)’s exclusion 5 for applicants that are ‘delinquent or otherwise in default’ 6 would appear to impact only the entitlement to a statement of 7 reasons upon denial, not a determination on an application within 8 thirty days.” 9 further stated that few courts have discussed “whether the MacDonald, 2015 WL 188600, at *3. MacDonald 10 exceptions to the definition of ‘adverse action’ in Section 11 1691(d)(6) apply to the word “action” as used in Section 12 1691(d)(1) . . . [but] [a]t least two courts have found that 13 applicants are entitled to a determination on their application 14 with[in] thirty days whether or not they defaulted on their 15 existing loan obligations.” 16 that the servicer failed to give the borrower notice of their 17 action within thirty days of receiving the completed application 18 “is sufficient to state a claim under § 1691(d)(1), even though 19 Plaintiffs were in [default] at the time.” 20 Similarly, the Vasquez II court held the plaintiff need not show 21 she was not in default to proceed on a § 1691(d)(1) claim. 22 Vasquez II, 2014 WL 1614764, at *3. 23 Id. MacDonald held an allegation Id. at *4. The Court therefore does not dismiss McMahon’s ECOA claim 24 solely because McMahon defaulted on his mortgage before applying 25 to modify his loan and proceeds to Chase’s arguments for 26 dismissing McMahon’s ECOA claim. 27 28 Chase first argues the “ECOA is an anti-discrimination statute, and Plaintiff has not alleged any manner of 6 1 discrimination.” 2 Circuit have found “the [ECOA’s] notice provisions to give rise 3 to a cause of action even with no accompanying claims of 4 discrimination.” 5 v. Pac. Capital Bank, N.A., 753 F. Supp. 2d 1034, 1042 (N.D. Cal. 6 2010); Vasquez, 2013 WL 6001924, at *11). 7 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 8 claim against Chase, but only SPS. Mot. at 5. Chase is correct: 9 McMahon alleges in his FAC under the second claim that he 10 “provided SPS with a completed application for credit on March 11 21, 2014 and January 13, 2015.” 12 allege he ever submitted a completed application for credit to 13 Chase. 14 occurred after Chase transferred the servicing of the loan to 15 SPS. 16 violations to Chase. 17 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 18 19 FAC ¶ 126. 3. Thus, the Court grants Chase’s motion to Third, Fourth, and Fifth Claims: RESPA McMahon alleges Chase violated various subsections of 20 § 2605 of the RESPA. 21 § 2605 has a three year statute of limitations. 22 § 2614. 23 FAC at 21-25. A RESPA claim based on 12 U.S.C. McMahon sued Chase on June 27, 2016, more than three years 24 after Chase transferred the servicing of the loan to SPS. 25 FAC ¶ 49. 26 any claims against Chase for Chase’s conduct while servicing 27 McMahon’s loan. 28 See The three year statute of limitations therefore bars McMahon concedes he sued Chase after the statute of 7 1 limitations expired, but argues the Court should toll the 2 statute of limitations because McMahon did not know Chase 3 remained the master servicer on the loan until June 2015. 4 at 11. 5 Opp’n To justify equitable tolling on a RESPA claim, a plaintiff 6 must plead facts showing he “could not have discovered the 7 alleged RESPA violations by exercising due diligence.” 8 v. CTX Mortg. Co., LLC, No. 2:11-cv-00752-GEB-GGH, 2012 WL 9 662456, at *5 (E.D. Cal. Feb. 28, 2012) (quoting Quiroz v. Klepac 10 Countrywide Bank, N.A., No. CV 09-5855, 2009 WL 3849909, at *6 11 (C.D. Cal. Nov. 16, 2009)). 12 Chase remained the alleged master servicer on the loan, but 13 rather when McMahon discovered Chase violated RESPA. 14 does not plead any facts in his FAC which explain why he did not 15 discover, or why he could not have discovered, Chase’s alleged 16 RESPA violations in 2013. 17 McMahon’s RESPA claims against Chase for violations that 18 occurred while Chase serviced McMahon’s loan. It matters not when McMahon learned McMahon The statute of limitations thus bars 19 McMahon also argues he can hold Chase liable for SPS’s 20 RESPA violations (which the statute of limitations does not 21 bar). 22 hold a master servicer vicariously liable for the subservicer’s 23 violations of the law. 24 master servicer aided or abetted or was in joint venture with 25 the subservicer. 26 has not done so here. 27 28 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. 8 Chase raised the 1 statute of limitations argument in the motion to dismiss it 2 filed before McMahon filed his FAC, thus putting McMahon on 3 notice he needed to plead facts to support equitable tolling 4 when he filed his FAC. 5 2017, ECF No. 21. 6 amend futile. 7 8 9 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 10 statute of limitations for negligence claims bars McMahon’s 11 claim. 12 Mot. at 6. McMahon brings his negligence claim under California Civil 13 Code section 1741, California’s general negligence statute. 14 ¶ 158. 15 “[a]n action upon a liability created by statute, other than a 16 penalty or forfeiture,” is three years. 17 § 338(a). 18 FAC Under California law, the statute of limitations for Cal. Civ. P. Code Chase stopped servicing McMahon’s loan more than three 19 years before McMahon sued Chase. 20 negligence thus bars any claim against Chase for a violation 21 that occurred during Chase’s loan servicing period. 22 not pled facts to support tolling the statute of limitations or 23 holding Chase liable for any of SPS’s violations after Chase 24 transferred servicing to SPS. 25 McMahon’s negligence claim against Chase with prejudice. 26 27 28 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”). 9 FAC at 27-28. 1 Under the UCL, unfair competition includes “any unlawful, 2 unfair, or fraudulent business act or practice.” 3 Prof. Code § 17200. 4 5 a. Cal. Bus. & Unlawful Prong An “unlawful” practice includes all business practices 6 “forbidden by law.” Herrejon v. Ocwen Loan Servicing, LLC, 980 7 F. Supp. 2d 1186, 1206 (E.D. Cal. Nov. 1, 2013). 8 “unlawful” UCL claim dependent on the underlying allegations. 9 Vargas v. JP Morgan Chase Bank, N.A., 30 F. Supp. 3d 945, 952 This makes an 10 (C.D. Cal. 2014). If unable to state a claim for the underlying 11 offense, the plaintiff cannot state a claim under the UCL’s 12 “unlawful” prong. Id. at 952-53. 13 McMahon has not stated a claim against Chase for any 14 underlying offense, so he cannot succeed on the UCL’s unlawful 15 prong. 16 claim on Chase’s alleged RESPA violation in January 2013 because 17 the UCL has a four year statute of limitations. 18 But McMahon is wrong: the UCL’s four year statute of limitations 19 applies only where the underlying offense violates state law. 20 Beaver v. Tarsadia Hotels, 978 F. Supp. 2d 1124, 1156 (S.D. Cal. 21 2013). 22 federal law’s statute of limitations—not the UCL’s—applies. 23 Because the RESPA is a federal statute to which is own three 24 year statute of limitations applies, McMahon cannot base his UCL 25 claim on Chase violating RESPA in January 2013. 26 27 28 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 10 1 2 modification in 2013.” Opp’n at 15. A business practice is “unfair” under the UCL “if either 3 (1) it is tethered to [a] specific constitutional, statutory, or 4 regulatory provision, or (2) its harm to consumers outweighs its 5 utility.” 6 (N.D. Cal. Mar. 31, 2014); see also Rubio v. Capital One Bank, 7 613 F.3d 1195, 1204 (9th Cir. 2010). 8 argue that Chase’s failure to respond to a loan application is 9 “tethered to [a] specific constitutional, statutory, or MacDonald v. Ford Motor Co., 2014 WL 1340339, at *9 McMahon does not allege or 10 regulatory provision,” or that harm to Chase’s consumers caused 11 by that failure outweighs its utility. 12 McMahon argues he states an “unfair” claim because his case 13 resembles Oskoui v. JPMorgan Chase Bank, N.A., 851 F.3d 851 (9th 14 Cir. 2017). 15 from its conduct here. 16 the plaintiff on a loan modification plan for which she did not 17 even qualify. 18 stated: 19 20 21 22 23 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. 24 Id. (emphasis in original). Here, Chase never modified 25 McMahon’s loan and McMahon never started making payments under a 26 modification plan. 27 foreclosure sale. 28 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 11 1 misplaced. 2 brought against Chase with prejudice. The Court dismisses McMahon’s seventh claim as 3 4 III. 5 6 ORDER For the above reasons, the Court GRANTS Chase’s motion to dismiss McMahon’s FAC WITH PREJUDICE. 7 Additionally, the Court’s Order re Filing Requirements 8 limits reply memoranda in motions to dismiss to five pages. 9 Order re Filing Requirements at 1, Jun. 27, 2016, ECF No. 5-2. 10 Violating the Order requires the offending counsel to pay $50.00 11 per page over the page limit to the Clerk of Court. 12 Court also does not consider arguments made past the page limit. 13 Id. 14 Chase’s counsel must pay $150.00 no later than five days from 15 this Order’s date. 16 17 Id. The Chase’s reply brief exceeded the page limit by three pages. IT IS SO ORDERED. Dated: May 30, 2017 18 19 20 21 22 23 24 25 26 27 28 12

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