Quintero v. Wells Fargo Bank, N.A. Successor by Merger to Wachovia Mortgage, FSB formerly known as World Savings Bank, FSB

Filing 18

ORDER by Magistrate Judge Jacqueline Scott Corley granting in part and denying in part 11 Motion to Dismiss (ahm, COURT STAFF) (Filed on 1/17/2014)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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Northern District of California

United States District Court

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ROBERTO QUINTERO,

ORDER GRANTING IN PART AND
DENYING IN PART WELLS
FARGO’S MOTION TO DISMISS

Plaintiff,

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Case No.: C-13-04937 JSC

v.

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WELLS FARGO BANK, N.A., et al.,
Defendants.

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Now pending before the Court in this mortgage foreclosure case is Defendant Wells Fargo’s

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motion to dismiss the Complaint. (Dkt. No. 11.) After carefully considering the parties’ submissions,

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and having had the benefit or oral argument on January 16, 2014, the Court GRANTS the motion in

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part and DENIES the motion in part.

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ALLEGATIONS OF THE COMPLAINT
In 2006, Plaintiff refinanced his mortgage loan for the property located at 190 Beach Park

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Blvd., Foster City, California with World Savings Bank. On May 6, 2010, Wachovia Mortgage,

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formerly known as World Savings Bank, caused to be recorded a notice of default. A few months

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later, Plaintiff paid $23,677.67 to reinstate his loan. The May 6 notice of default was thereafter

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rescinded on July 22, 2010.

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On August 26, 2011, Wells Fargo, the successor in interest, caused to be recorded a second

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notice of default. The declaration of due diligence attached to the notice was executed on May 5,

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2010. A few months later, Plaintiff contacted Wells Fargo and requested a loan modification. The

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loan modification process with Wells Fargo continued from that time into 2013, with Wells Fargo

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requesting various documents from Plaintiff that were apparently missing from Plaintiff’s loan

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modification application.

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On April 2, 2013, Plaintiff received a letter from Wells Fargo informing him that his

Northern District of California

application was denied. The proposed modification payment was calculated using $12,030.69 as

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United States District Court

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Plaintiff’s gross monthly income. “Plaintiff appealed the decision, which was confirmed in May

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2013. Noticing that the calculation used in the modification application had the incorrect gross

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monthly income, Plaintiff wrote a letter to Wells Fargo on May 22, 2013 stating that his income ha[d]

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changed.” (Dkt. No. 1 ¶ 19.)

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Approximately a month later, Plaintiff submitted another modification application with “the

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correct gross monthly income” of about $7,400, as well as all other requested documents. (Id. at ¶

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20.) After submitting the new application, Plaintiff unsuccessfully attempted to contact his “so-

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called” single point of contract, Monique Vera, to discuss his application. (Id. at ¶ 21.) Plaintiff left

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her many messages to return his calls, but Ms. Vera never answered or returned his calls.

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Not hearing a response from Ms. Vera, Plaintiff spoke with another Wells Fargo

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representative, who verified that Wells Fargo had received the modification application. The

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representative also told Plaintiff that Ms. Vera was his single point of contact and that she would get

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back to him with the result of the modification application.

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In September 2013, Plaintiff received a notice of trustee’s sale, though he had yet to receive
the decision regarding his new modification application.
LEGAL STANDARD

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A Rule 12(b)(6) motion challenges the sufficiency of a complaint as failing to allege “enough

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facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,

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570 (2007). A facial plausibility standard is not a “probability requirement” but mandates “more than

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a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

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(internal quotations and citations omitted). For purposes of ruling on a Rule 12(b)(6) motion, the

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court “accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light

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most favorable to the non-moving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d

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1025, 1031 (9th Cir. 2008). “[D]ismissal may be based on either a lack of a cognizable legal theory

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or the absence of sufficient facts alleged under a cognizable legal theory.” Johnson v. Riverside

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Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008) (internal quotations and citations omitted); see

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also Neitzke v. Williams, 490 U.S. 319, 326 (1989) (“Rule 12(b)(6) authorizes a court to dismiss a

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claim on the basis of a dispositive issue of law”).

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United States District Court

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Even under the liberal pleading standard of Federal Rule of Civil Procedure 8(a)(2), under

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which a party is only required to make “a short and plain statement of the claim showing that the

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pleader is entitled to relief,” a “pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation

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of the elements of a cause of action will not do.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S.

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at 555.) “[C]onclusory allegations of law and unwarranted inferences are insufficient to defeat a

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motion to dismiss.” Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004); see also Starr v. Baca,

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652 F.3d 1202, 1216 (9th Cir. 2011) (“[A]llegations in a complaint or counterclaim may not simply

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recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to

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give fair notice and to enable the opposing party to defend itself effectively.”). The court must be able

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to “draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556

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U.S. at 663. “Determining whether a complaint states a plausible claim for relief ... [is] a context-

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specific task that requires the reviewing court to draw on its judicial experience and common sense.”

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Id. at 663-64.

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If a Rule 12(b)(6) motion is granted, the “court should grant leave to amend even if no request

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to amend the pleading was made, unless it determines that the pleading could not possibly be cured by

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the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (internal

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quotation marks and citations omitted).

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//

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DISCUSSION

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Plaintiff alleges the following four causes of action against Wells Fargo: 1) violation of former

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California Civil Code § 2923.5; 2) violation of California Civil Code § 2923.6; 3) violation of

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California Civil Code § 2923.7; and 4) violation of California Business & Professions Code § 17200.

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A.

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Wells Fargo’s Unauthorized Filing of a Second Motion to Dismiss
Plaintiff objects to Wells Fargo’s filing of a second motion to dismiss while its first motion to

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dismiss was pending before the Court. Civil Local Rule 7-7(e) allows for withdrawal of a motion, but

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only if such withdrawal is made “[w]ithin the time for filing and serving the reply.” Wells Fargo’s

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withdrawal of its first motion to dismiss was made six days after its reply was due, and thus the

Northern District of California

withdrawal was improper. The Court, however, will excuse the late withdrawal and decide the second

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motion to dismiss given that there will be no prejudice to Plaintiff from doing so. The two motions do

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not materially differ and Plaintiff has fully responded to the second motion.

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B.

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HOLA Preemption
Wells Fargo moves to dismiss Plaintiff’s claims for violation of California’s non-judicial

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foreclosure laws as preempted under the Home Owners’ Loan Act (“HOLA”). As discussed below,

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the Court concludes that Plaintiff’s Section 2923.5 claim is not preempted. Further, as discussed at

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oral argument, the Court orders supplemental briefing concerning HOLA preemption of Plaintiff’s

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Sections 2923.6 and 2923.7 claims.

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1.

Background law

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Congress enacted HOLA “to charter savings associations under federal law, at a time when

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record numbers of homes were in default and a staggering number of state-chartered savings

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associations were insolvent.” See Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1004 (9th Cir.

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2008). HOLA and the Office of Thrift Supervision (“OTS”) regulations that interpret it were a

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“radical and comprehensive response to the inadequacies of the existing state system” and “so

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pervasive as to leave no room for state regulatory control.” Id. (internal quotation marks omitted).

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The OTS regulations explain that OTS “occupies the entire field of lending regulation for federal

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savings associations,” and establish a framework for determining whether a state law is preempted.

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See 12 C.F.R. § 560.2(a), (b).

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OTS enumerates certain types of state laws that are preempted, including “state laws

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purporting to impose requirements regarding . . . [p]rocessing, origination, servicing, sale or purchase

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of, or investment or participation in, mortgages.” 12 C.F.R. § 560.2(b)(10). If the state law—“as

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applied”—is one of the enumerated types, “the analysis will end there; the law is preempted.” Silvas,

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514 F.3d at 1005. If it is not, then the court is to determine “whether the law affects lending.” Id.

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(internal quotation marks omitted). If it does, the law is presumed to be preempted, subject to the

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exceptions of section 560.2(c). Id. That section provides:

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(c) State laws that are not preempted. State laws of the following types are not
preempted to the extent that they only incidentally affect the lending operations of
Federal savings associations or are otherwise consistent with the purposes of
paragraph (a) of this section:

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(1) Contract and commercial law;
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(2) Real property law;

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(3) Homestead laws specified in 12 U.S.C. § 1462a(f);

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(4) Tort law;

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(5) Criminal law; and

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(6) Any other law that OTS, upon review, finds:

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(i) Furthers a vital state interest; and

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(ii) Either has only an incidental effect on lending operations or is not otherwise
contrary to the purposes expressed in paragraph (a) of this section.

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12 C.F.R. § 560.2(c). Courts are to focus not on the nature of the cause of action, but on the

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“functional effect upon lending operations of maintaining the cause of action.” See Naulty v.

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GreenPoint Mortg. Funding, Inc., 2009 WL 2870620, at *4 (N.D. Cal. Sept. 3, 2009). “Any doubt

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should be resolved in favor of preemption.” Silvas, 514 F.3d at 1005.

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Following the mortgage crisis, Congress altered significantly the preemption landscape. The

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Dodd–Frank Wall Street Reform Act and Consumer Protection Act of 2010 (“Dodd-Frank”), 12

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U.S.C. § 5412, provides that HOLA no longer occupies the field in any area of state law and that

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preemption under HOLA is governed by the conflict preemption standards applicable to national

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banks. See Haggarty v. Wells Fargo Bank, N.A., 2012 WL 4742815, at *3 n.2 (N.D. Cal. Oct. 3,

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2012). The parties do not discuss Dodd-Frank and the impact, if any, it may have on the preemption

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analysis in this case. The Court notes that while the majority of the wrongful conduct alleged in the

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Complaint occurred after July 2011—the latest Dodd-Frank took effect—the underlying loan at issue

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is Plaintiff’s 2006 refinance. Other courts have looked to the date of loan origination in determining

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whether to apply Dodd-Frank’s new preemption standard. See, e.g., Henning v. Wachovia Mortg.,

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FSB, --- F.Supp.2d ----, 2013 WL 5229837, at *5 (D.Mass. Sept. 17, 2013) (“Because the loans at

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issue originated before either date, [] the appropriate preemption standard to apply to Henning’s

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claims is that extant prior to the effective date of Dodd–Frank.”); Brown v. Wells Fargo Bank, N.A.,

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869 F. Supp. 2d 51, 56 (D.D.C. 2012) (“Because the Act was passed after plaintiff received the loan at

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issue, the changes are not relevant to the issues before the Court.”). The Court, however, questions

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the utility of using the date of loan origination in a case, such as this, where there are no loan

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origination issues and the matter concerns compliance with post-Dodd-Frank foreclosure laws, such

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as California’s Homeowners’ Bill of Rights (“HBOR”). For the purposes of this Order, which, for the

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reasons discussed below, examines only whether HOLA preempts former Section 2923.5, the Court

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assumes field preemption applies.

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2.

Application to Plaintiff’s claims
a.

Section 2923.5

While Wells Fargo is correct that there are numerous courts in California that have found

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claims under former Section 2923.5 preempted under HOLA, this Court, which has never directly

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addressed the question, disagrees with those courts. Rather, this Court joins the minority of other

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courts that have found that Section 2923.5 claims are not preempted by HOLA. See Osorio v. Wells

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Fargo Bank, 2012 WL 1909335, at *1-2 (N.D. Cal. May 24, 2012).

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Pursuant to the first step of the Silvas preemption analysis, Wells Fargo’s written submissions

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do not clearly identify which paragraphs of Section 560.2(b) preempt Plaintiff’s Section 2923.5 claim.

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Virtually all courts that have found Section 2923.5 preempted have done so based on the conclusion

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that it “falls squarely within the scope of HOLA’s Section 560.2(b)(10), which deals with the

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‘[p]rocessing, origination, servicing, sale or purchase of, or investment or participation in,

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mortgages.’” Ngoc Nguyen v. Wells Fargo Bank, N.A., 749 F. Supp. 2d 1022, 1033, 2010 WL

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4348127, at *10 (N.D. Cal. Oct. 27, 2010); see also Williams v. Wells Fargo Bank, NA, 2013 WL

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2047000, at *3-4 (C.D. Cal. May 13, 2013) (following Nguyen and noting that it is perhaps the “most

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compelling” case that has found Section 2923.5 preempted). This conclusion, and the basis of

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authority used by subsequent courts, appears to trace back to Murillo v. Aurora Loan Servs., LLC,

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2009 WL 2160579, at *4 (N.D. Cal. July 17, 2009), where the court stated simply: “As applied,

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Plaintiffs’ § 2923.5 claim concerns the processing and servicing of Plaintiffs’ mortgage. As such, the

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Court finds that Plaintiffs’ 2923.5 claim is preempted under HOLA.” However, neither Wells Fargo

Northern District of California

nor the cases upon which it relies ever explain why Section 2923.5’s requirements fall within

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Paragraph 10.

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This Court concludes that Plaintiff’s Section 2923.5 claim does not fall within Paragraph 10.

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As relevant here, former Section 2923.5 provides that “a mortgagee, trustee, beneficiary, or authorized

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agent may not file a notice of default . . . until 30 days after initial contact is made as required by

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paragraph (2) or 30 days after satisfying the due diligence requirements as described in subdivision

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(g).” Cal. Civ. Code § 2923.5(a)(1). Under paragraph (2), the authorized agent must contact the

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borrower in person or by telephone “in order to assess the borrower’s financial situation and explore

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options for the borrower to avoid foreclosure.” Cal. Civ. Code § 2923.5(a)(2). Under subdivision (g),

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“a notice of default may be filed . . . when a mortgagee, beneficiary, or authorized agent has not

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contacted a borrower as required by paragraph (2) of subdivision (a) provided that the failure to

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contact the borrower occurred despite the due diligence of the mortgagee, beneficiary, or authorized

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agent.” Cal. Civ. Code § 2923.5(g). “Due diligence” entails attempting to contact the borrower by

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mail and phone a specified number of times. Id. In essence, these requirements are prerequisites to

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an entity’s use of California’s non-judicial foreclosure procedure. As the Osorio court persuasively

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reasoned, once an entity avails itself of California’s non-judicial foreclosure laws, it cannot simply

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pick-and-choose which of those laws’ requirements it will follow:

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A lender’s ability to resort to non-judicial foreclosure in this state arises from the fact
that the California Legislature has enacted laws permitting the use of deeds of trust
containing the power of sale and setting out the procedure for such foreclosures—it is

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not a lender’s right in many states, and certainly does not derive from HOLA. A lender
cannot on the one hand rely on California law as the foundation for its right to conduct
a non-judicial foreclosure, while on the other hand ignore any restrictions or
procedural requirements that are part of that process under California law.

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Osorio, 2012 WL 1909335, at *2.
Further, the Court fails to see how Plaintiff’s Section 2923.5 claim imposes requirements on

mortgages.” 12 C.F.R. § 560.2(b)(10)—unless simply putting any restriction on how and when an

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entity may foreclose is considered imposing a requirement on those actions, a position no authority

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supports. As interpreted by the California Court of Appeals in Mabry v. Superior Court, 185 Cal.

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App. 4th 208, 232 (2010), Section 2923.5’s requirements are “narrowly construed in order to avoid

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Northern District of California

“[p]rocessing, origination, servicing, sale or purchase of, or investment or participation in,

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crossing the line from state foreclosure law into federally preempted loan servicing.” Thus, Section

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2923.5’s mandates to “assess” the borrower’s financial situation and “explore” alternatives to

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foreclosure are “simple” and do not require the lender to provide a loan modification, to consider a

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whole new loan application, or to take detailed loan application information over the phone or in

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person. Mabry, 185 Cal. App. 4th at 231-32. Finally, as noted in Ortiz v. Wells Fargo Bank, N.A.,

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2011 WL 4952979, at *3 (N.D. Cal. May 27, 2011), “there is no mention of the process of foreclosure

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[in Paragraph 10], which as a California court has observed, ‘has traditionally been a matter of state

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real property law.’” (Quoting Mabry, 185 Cal. App. 4th at 230).

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At the hearing, Wells Fargo also identified Paragraph 4 as a basis for preemption. That
paragraph preempts state laws purporting to impose requirements regarding:
The terms of credit, including amortization of loans and the deferral and capitalization
of interest and adjustments to the interest rate, balance, payments due, or term to
maturity of the loan, including the circumstances under which a loan may be called
due and payable upon the passage of time or a specified event external to the loan;

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12 C.F.R. § 560.2(b)(4). The Court disagrees with Wells Fargo that simply because former Section

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2923.5 requires the foreclosing entity to contact the borrower and “explore” alternatives to foreclosure

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that Section 2923.5 can be classified as a law imposing requirements regarding “adjustments to . . .

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payments due.” The law requires no adjustment to payments due, and requiring a simple contact with

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the borrower before filing a notice of default is an innocuous prerequisite to exercising the California-

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conferred power of non-judicial foreclosure.

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Turning to the second Silvas step, a presumption of preemption will arise if the state law

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“affects” lending. Silvas, 514 F.3d at 100. Although Wells Fargo does not address the second Silvas

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step, the Court will address it briefly here. As noted in Ortiz, “[w]hether state laws governing the

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foreclosure process are seen as ‘affecting’ lending depends on how broadly that term is construed.”

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2011 WL 4952979, at *3. Because Section 2923.5, at least as applied in this case, does not in any

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way inhibit lenders from extending credit, “it is far from self-evident that even a presumption of

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preemption should arise.” Id.

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Even assuming that the law affects lending, the third Silvas step requires examining whether

Northern District of California

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the state law nonetheless is not preempted because it 1) is one of the listed type of state laws in

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subsection (c) that only incidentally affect lending operations, or 2) is “otherwise consistent with the

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purposes” of the preemption provisions of Section 560.2(a). See Silvas, 514 F.3d at 1005; 12 C.F.R. §

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560.2(c). Subsection (c) specifically lists “contract law” and “real property law” as types of laws that

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are not preempted to the extent they only incidentally affect lending operations. Section 2923.5 is

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arguably properly characterized as both types of laws. See Ortiz, 2011 WL 4952979, at *3 n.2

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(“California’s statutes regulating foreclosure, codified in the state’s Civil Code, are properly

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characterized as ‘contract law,’ because they govern the permissibility of power of sale provisions in

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deeds of trust, and likely also fall within ‘real property law.’”). Further, to the extent Section 2923.5

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affects lending, the Court fails to see how such an effect would be more than incidental. Section

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2923.5 as applied in this case is also not preempted because it is otherwise consistent with the

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purposes of subsection (a):

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OTS is authorized to promulgate regulations that preempt state laws affecting the
operations of federal savings associations when deemed appropriate to facilitate the
safe and sound operation of federal savings associations, to enable federal savings
associations to conduct their operations in accordance with the best practices of thrift
institutions in the United States, or to further other purposes of the HOLA. To enhance
safety and soundness and to enable federal savings associations to conduct their
operations in accordance with best practices (by efficiently delivering low-cost credit
to the public free from undue regulatory duplication and burden), OTS hereby
occupies the entire field of lending regulation for federal savings associations. OTS

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intends to give federal savings associations maximum flexibility to exercise their
lending powers in accordance with a uniform federal scheme of regulation.

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12 C.F.R. § 560.2(a). Section 2923.5 does not otherwise disrupt Wells Fargo’s use of best practices in

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the mortgage foreclosure context since there is no federal or nationally-uniform standard for creating

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and enforcing security interests in real property; rather, Wells Fargo’s power of non-judicial

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foreclosure is a creation of California law that exists only because California created it. See Osorio,

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2012 WL 1909335, at *2 (“Were it not for the fact that California chose to permit non-judicial

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foreclosures in the first place, the lender would not have that power.”).
Wells Fargo’s motion to dismiss Plaintiff’s Section 2923.5 claim based on HOLA preemption

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is accordingly DENIED.

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United States District Court

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b.

Claims under the Homeowners’ Bill of Rights

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Wells Fargo also argues that Plaintiff’s claims under the recently enacted Homeowners’ Bill of

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Rights (“HBOR”) are preempted by 12 C.F.R. § 560.2(b)(4) and (10). While the Court acknowledges

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Wells Fargo’s arguments—particularly the noticeable increase in an entity’s substantive and

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procedural requirements under HBOR prior to conducting a foreclosure—and recognizes that other

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courts have found HBOR claims preempted by HOLA, see, e.g., Marquez v. Wells Fargo Bank, N.A.,

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2013 WL 5141689, at *5 (N.D. Cal. Sept. 13, 2013), the briefing before the Court does not adequately

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address the issues. Specifically, and as discussed at the hearing, the parties have not addressed

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whether the post-Dodd-Frank conflict preemption analysis, rather than the pre-Dodd-Frank field

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preemption analysis, applies to Plaintiff’s HBOR claims. And, if the conflict preemption analysis

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applies, whether the HBOR claims are preempted under the narrower standard. At the hearing, Wells

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Fargo represented that it wished to provide a fuller briefing of the preemption issue. In light of this

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representation, the Court DENIES, without prejudice, Wells Fargo’s motion to dismiss Plaintiff’s

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HBOR claims.

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C.

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Violation of Section 2923.5
Because the Court concludes that former Section 2923.5 is not preempted, the Court will

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address whether Plaintiff otherwise states a claim for violation of that statute. As noted above, former

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Section 2923.5 provides that “a mortgagee, trustee, beneficiary, or authorized agent may not file a

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notice of default . . . until 30 days after initial contact is made as required by paragraph (2) or 30 days

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after satisfying the due diligence requirements as described in subdivision (g).” Cal. Civ. Code §

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2923.5(a)(1). Under paragraph (2), the authorized agent must contact the borrower in person or by

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telephone to discuss the borrower’s financial situation and assess whether there is a way to avoid

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foreclosure. Cal. Civ. Code § 2923.5(a)(2). Under subdivision (g), “a notice of default may be filed .

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. . when a mortgagee, beneficiary, or authorized agent has not contacted a borrower as required by

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paragraph (2) of subdivision (a) provided that the failure to contact the borrower occurred despite the

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due diligence of the mortgagee, beneficiary, or authorized agent.” Cal. Civ. Code § 2923.5(g).

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Plaintiff alleges that Wells Fargo violated Section 2923.5 by filing the August 26, 2011 notice

Northern District of California

of default without first contacting or completing the due diligence requirements in subsection (g).

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United States District Court

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These allegations are sufficient to state a claim under Section 2923.5. The Court notes, however, that

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the only relief under Section 2923.5 is a postponement of the foreclosure sale so that Wells Fargo may

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comply with the statute. See Mabry v. Superior Court, 185 Cal. App. 4th 208, 214 (2010). Thus,

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Plaintiff’s request for damages, which is made in addition to his request for a postponement of the

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foreclosure sale, is not available. The Court accordingly DENIES Wells Fargo’s motion to dismiss

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the claim, but GRANTS the motion to the extent Plaintiff alleges a right to damages. 1
Wells Fargo’s arguments to the contrary ignore Plaintiff’s allegations. Specifically, Wells

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Fargo’s assertion that the May 5, 2010 declaration attached to the 2011 notice of default satisfies

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former Section 2923.5 ignores that Plaintiff alleges that that declaration was used to support Wells

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Fargo’s Section 2923.5 compliance in regards to the May 6, 2010 notice of default. (Dkt. No. 1 ¶¶ 10,

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30.) Because Plaintiff alleges that he paid $23,677.67 to reinstate his loan following the 2010 notice

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of default, Plaintiff’s subsequent default on his loan for the second time required Wells Fargo to

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complete former Section 2923.5’s requirements anew prior to filing the 2011 notice of default. The

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Complaint adequately alleges that it did not do so.

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Wells Fargo argues that Plaintiff is also barred from the injunctive relief he seeks because he has
not alleged a valid tender. (See Dkt. No. 11 at 20.) The Court rejects this argument as the only
authority Wells Fargo cites concerns a plaintiff’s requirement to allege tender when seeking to set
aside a sale. As both parties acknowledge, the property in question here has not yet been sold so there
is no sale to set aside.
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While the Court is aware that Plaintiff and Wells Fargo, following the 2011 notice of default,

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have engaged in rather lengthy efforts to help Plaintiff avoid foreclosure—the exact purpose of

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Section 2923.5’s notification requirements—Wells Fargo cites no authority for the proposition that

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such communication subsequent to the filing of a notice of default excuses a party’s violation of

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Section 2923.5. Further, Wells Fargo has cited no case where a court has required a plaintiff to allege

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prejudice as an element of a Section 2923.5 claim. Wells Fargo’s purported authority is not on point

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because those cases concerned either a plaintiff’s attempt to use a procedural irregularity to set aside a

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foreclosure sale, see Knapp v. Doherty, 123 Cal. App. 4th 76, 93-94 (2004) (requiring showing of

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prejudice from failure to timely serve notice of sale where plaintiff sought to set aside a foreclosure

Northern District of California

sale); see also Davenport v. Litton Loan Servicing, 725 F. Supp. 2d 862, 877 (N.D. Cal. 2010)

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United States District Court

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(“When attacking a non-judicial foreclosure sale, a borrower must overcome a presumption of

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propriety. She may do this by proving an improper procedure occurred and by demonstrating

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resulting prejudice.” (citations omitted)), or involved negligence claims, see Lawther v. OneWest

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Bank, 2010 WL 4936797, at *5 (N.D. Cal. Nov. 30, 2010) (holding that “a mode of analysis that

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focuses on prejudice is particularly useful” where plaintiff alleged a negligence per se claim based on

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a theory that defendants were required to adhere to the statutory requirements of California Civil Code

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Sections 2924 and 2934a).

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D.

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Violation of Section 17200
The UCL broadly prohibits “any unlawful, unfair or fraudulent business act or practice.” Cal.

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Bus. & Prof. Code §§ 17200 et seq. By proscribing any “unlawful” business practice, the UCL

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“borrows violations” of other state and federal laws and makes them independently actionable. Cel-

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Tech Commc’n, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). A practice may “be

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deemed unfair or deceptive” under the UCL “even if it is not unlawful.” Id. An unfair business

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practice is “one that either offends an established public policy or is immoral, unethical, oppressive,

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unscrupulous, or substantially injurious to consumers.” McDonald v. Coldwell Banker, 543 F.3d

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498, 506 (9th Cir. 2008) (internal quotation marks omitted). Whether a business practice is unfair

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“involves an examination of that practice’s impact on its alleged victim, balanced against the

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reasons, justifications and motives of the alleged wrongdoer.” Family Home & Fin. Ctr., Inc. v. Fed.

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1

Home Loan Mortg. Corp., 525 F.3d 822, 826 (9th Cir. 2008). “An employer’s business practices

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concerning its employees” are within the scope of the prohibition against unfair competition.

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Wilkinson v. Times Mirror Corp., 215 Cal. App. 3d 1034, 1052 (1989). “What constitutes ‘unfair

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competition’ or ‘unfair or fraudulent business practice’ under any given set of circumstances is a

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question of fact . . . .” People v. McKale, 25 Cal. 3d 626, 635 (1979).

requires a showing that members of the public ‘are likely to be deceived.’” Olsen v. Breeze, 48 Cal.

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App. 4th 608, 618 (1996). Although fraud is not a necessary element of a claim under the UCL,

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where a plaintiff “allege[s] a unified course of fraudulent conduct and rel[ies] entirely on that course

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of conduct as the basis of that claim[,] . . . the claim is said to be ‘grounded in fraud’ or to ‘sound in

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Northern District of California

“‘Fraudulent,’ as used in the statute, does not refer to the common law tort of fraud but only

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United States District Court

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fraud,’ and the pleading . . . as a whole must satisfy the particularity requirement of Rule 9(b)” of the

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Federal Rules of Civil Procedure. Kearns v. Ford Motor, Co., 567 F.3d 1120, 1125 (9th Cir. 2009).

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To satisfy Rule 9(b), the plaintiff must include “the who, what, when, where, and how” of the fraud.

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Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). “The plaintiff must set forth

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what is false or misleading about a statement, and why it is false.” Decker v. GlenFed, Inc., 42 F.3d

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1541, 1548 (9th Cir. 1994). A claim for fraud must be “specific enough to give defendants notice of

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the particular misconduct which is alleged to constitute the fraud charged so that they can defend

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against the charge and not just deny that they have done anything wrong.” Semegen v. Weidner, 780

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F.2d 727, 731 (9th Cir. 1985).

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Plaintiff’s Section 17200 claim is tethered to his three other claims in this action. Because

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Plaintiff’s claim under former Section 2923.5 is the only claim that remains at issue on this motion,

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the Court will address Plaintiff’s UCL claim pursuant to that statute only.

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Even if Wells Fargo’s alleged misconduct pursuant to Section 2923.5 is “unlawful” under the

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UCL, Plaintiff lacks standing to pursue his claim. To establish standing under the UCL, a plaintiff

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must “(1) establish a loss or deprivation of money sufficient to qualify as injury in fact, i.e., economic

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injury, and (2) show that the economic injury was the result of, i.e., caused by, the unfair business

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practice . . . that is the gravamen of the claim.” Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 337

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(2011). Plaintiff has not alleged any economic injury that was caused by Wells Fargo’s alleged

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1

failure to abide by former Section 2923.5. Indeed, although the notice of default was filed in 2011,

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the parties have been in contact regarding alternatives to foreclosure for much of that time. That

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Plaintiff did not qualify for loan relief from his default is not the result of Wells Fargo’s failure to

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contact him before filing the notice of default. Wells Fargo’s motion to dismiss Plaintiff’s UCL claim

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is GRANTED to the extent the claim is based on a violation of former Section 2923.5.

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CONCLUSION

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Based on the foregoing, the Court DENIES Wells Fargo’s motion to dismiss Plaintiff’s

right to damages under former Section 2923.5. In addition, the Court GRANTS Wells Fargo’s motion

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to dismiss Plaintiff’s UCL claim to the extent it is based on a violation of Section 2923.5. Finally, in

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Northern District of California

Section 2923.5 claim, with the exception that it GRANTS the motion to the extent Plaintiff alleges a

9

United States District Court

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light of Wells Fargo’s desire to provide a complete presentation of the preemption issue, the Court

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DENIES, without prejudice, Wells Fargo’s motion to dismiss Plaintiff’s HBOR claims as well as

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Plaintiff’s claim under Section 17200 based on HBOR violations. Upon the filing of the amended

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complaint, Wells Fargo may file a new motion to dismiss which addresses preemption of the HBOR

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claims as well as any other 12(b)(6) issues.

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Plaintiff shall file his amended complaint within 10 days of the date of this Order.

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IT IS SO ORDERED.

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Dated: January 17, 2014
_________________________________
JACQUELINE SCOTT CORLEY
UNITED STATES MAGISTRATE JUDGE

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