Hayter et al v. PHH Mortgage Corporation

Filing 49

ORDER by Judge Laurel Beeler granting 44 Motion to Dismiss. The court grants the defendant's motion. The plaintiffs' intrusion-upon-seclusion claim is dismissed with leave to amend. The plaintiffs have 28 days from the date of this o rder to amend their intrusion claim. If they do not, then the dismissal will be with prejudice. The plaintiffs have also "stipulate[d] to the dismissal of" their wrongful-foreclosure claim. (ECF No. 46 at 2.) That claim is dismissed. (lblc3S, COURT STAFF) (Filed on 7/19/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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San Francisco Division
JONATHAN HAYTER, et al.,

United States District Court
Northern District of California

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v.

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INTRODUCTION

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This dispute concerns the modification of a residential-mortgage loan. Plaintiffs Jonathan and
Sandryna Hayter sought that modification from their mortgage lender, defendant PHH Mortgage
Corporation, in 2012. Over the next year, PHH sent the Hayters letters related to that modification.
These letters told the plaintiffs that, until modification was complete, their house might still be
foreclosed upon. The plaintiffs now claim that, among other things, these letters constitute an
actionable ―intrusion upon seclusion.‖ The defendant moves to dismiss that claim under Federal
Rule of Civil Procedure 12(b)(6). (ECF No. 44.)1

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[Re: ECF No. 44]

Defendant.

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ORDER GRANTING MOTION TO
DISMISS

PHH MORTGAGE CORPORATION,

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Case No. 15-cv-03332-LB

Plaintiffs,

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The parties have consented to magistrate jurisdiction. (ECF Nos. 4, 9.) This motion can be
decided without oral argument. See Civil L.R. 7-1(b). The defendant‘s analysis throughout is

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Record citations refer to material in the Electronic Case File (―ECF‖); pinpoint citations are to the
ECF-generated page numbers at the top of documents.
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ORDER (No.15-cv-03332-LB)

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accurate and persuasive and the court mostly agrees with it. The court grants the defendant‘s

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motion and dismisses the intrusion claim with leave to amend.

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STATEMENT

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The plaintiffs own residential property in Brentwood, California.2 Their mortgage loan on that

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property is held by defendant PHH Mortgage Corporation.3 In 2012, facing financial hardship, the

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plaintiffs applied to PHH for a loan modification.4 The plaintiffs claim that, in processing that

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request, PHH acted in ways that constitute the tort of ―invasion of privacy by intrusion upon

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seclusion.‖5
The plaintiffs focus mainly on letters that PHH sent them in processing their modification

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United States District Court
Northern District of California

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request. They argue that these letters were actionably intrusive mostly because they ―repeatedly

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and unlawfully threatened to foreclose‖ on the plaintiffs‘ home unless the plaintiffs accepted and

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began paying under a modified loan.6 For example, the plaintiffs allege that in one such letter PHH

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wrote: ―Please understand that all collection/foreclosure activity initiated will continue until the

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holder of your mortgage approves your request for a . . . [modification] and may require the first

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payment be received.‖7 Another letter allegedly told the plaintiffs that, ―to suspend foreclosure

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proceeding[s],‖ they had to accept and start paying under the modified loan‘s ―trial period plan.‖8

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With this same letter, the plaintiffs say, ―PHH misrepresented that ‗suspension of foreclosure

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proceedings is not guaranteed . . . .‘‖9 The plaintiffs do not allege that, apart from repeatedly

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―threaten[ing] foreclosure,‖ the letters were in any other way obnoxious. They do not allege that

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See 1st Am. Compl. (―FAC‖) – ECF No. 42 at 2 (¶ 4).

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Id. at 2 (¶ 5).

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Id. at 2 (¶¶ 7). The FAC never says whether the plaintiffs actually fell behind on their original loan
payments; that is the implication, but, strictly speaking, the FAC never expressly says this.

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Id. at 6-8 (20-28). The plaintiffs make other claims that are not involved in this analysis.(Id. at 8-12.)

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See, e.g., ECF No. 46 at 6 (quoting FAC – ECF No. 42 at 3 [¶ 9].)

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FAC – ECF No. 42 at 3 (¶ 9).

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Id. at 4 (¶ 11).

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Id.

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ORDER (No.15-cv-03332-LB)

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the defendant called them or visited their home. They do not allege that the defendant contacted

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third parties regarding their loan.10
Both in the intrusion-upon-seclusion claim, and in other independent claims (not involved in

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this analysis), the plaintiffs contend that, in handling their modification request, PHH violated

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provisions of California‘s Homeowner Bill of Rights (―HBOR‖).11

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GOVERNING LAW

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1. Rule 12(b)(6)
A court may dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) when it does

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not contain enough facts to state a claim to relief that is plausible on its face. See Bell Atl. Corp. v.

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United States District Court
Northern District of California

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Twombly, 550 U.S. 544, 570 (2007). ―A claim has facial plausibility when the plaintiff pleads

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factual content that allows the court to draw the reasonable inference that the defendant is liable

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for the misconduct alleged.‖ Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). ―The plausibility

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standard is not akin to a ‗probability requirement,‘ but it asks for more than a sheer possibility that

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a defendant has acted unlawfully.‖ Id. (quoting Twombly, 550 U.S. at 557.). ―While a complaint

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attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a

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plaintiff‘s obligation to provide the ‗grounds‘ of his ‗entitle[ment] to relief‘ requires more than

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labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.

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Factual allegations must be enough to raise a right to relief above the speculative level.‖ Twombly,

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550 U.S. at 555 (internal citations and parentheticals omitted).
In considering a motion to dismiss, a court must accept all of the plaintiff's allegations as true

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and construe them in the light most favorable to the plaintiff. See id. at 550; Erickson v. Pardus,

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551 U.S. 89, 93-94 (2007); Vasquez v. Los Angeles County, 487 F.3d 1246, 1249 (9th Cir. 2007).

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For these last three points, see id., passim.

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For allegations related to the intrusion claim, see id. at 5, 7 (¶¶ 13-15, 23).

ORDER (No.15-cv-03332-LB)

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2. Invasion of Privacy by Intrusion Upon Seclusion
In California law, the claim for intrusion upon seclusion ―has two elements: (1) intrusion into a

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private place, conversation or matter, (2) in a manner highly offensive to a reasonable person.‖

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Shulman v. Group W. Prods., Inc. 18 Cal. 4th 200, 232 (1998). The first question is thus ―whether

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defendants intentionally intruded, physically or otherwise, upon the seclusion of another.‖ See id.

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(quotation omitted). ―[T]o prove actionable intrusion, the plaintiff must show the defendant

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penetrated some zone of physical or sensory privacy surrounding, or obtained unwanted access to

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data about, the plaintiff.‖ Id. The intrusion must be intentional. E.g., Varnado v. Midland Funding,

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LLC, 43 F. Supp. 3d 985, 992 (N.D. Cal. 2014). In determining the ―offensiveness‖ of a
challenged intrusion, courts consider, among other things, ―the degree of the intrusion, the context,

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Northern District of California

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conduct and circumstances surrounding the intrusion as well as the intruder‘s motives and

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objectives, the setting into which he intrudes, and the expectations of those whose privacy is

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invaded.‖ Deteresa v. Am. Broad. Cos., 121 F.3d 460, 465 (9th Cir. 1997) (quoting Hill v. Nat’l

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Collegiate Athletic Ass’n, 7 Cal. 4th 1, 26 (1994). ―The tort is proven only if the plaintiff had an

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objectively reasonable expectation of seclusion or solitude in the place, conversation or data

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source.‖ Shulman, 18 Cal. 4th at 232; accord, e.g., Taus v. Loftus, 40 Cal. 4th 683, 730 (2007),

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overruled on other grounds by Oasis W. Realty, LLC v. Goldman, 51 Cal. 4th 811 (2011).

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ANALYSIS

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1. Intrusion
The court declines to decide whether, on the first head of the governing analysis, PHH‘s letters

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constituted an actionable ―intrusion.‖ Even if they did, on the FAC‘s allegations, the plaintiffs

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could not have had a ―reasonable expectation of privacy‖ that made PHH‘s letters ―highly

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offensive.‖ See infra, Part 2.

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ORDER (No.15-cv-03332-LB)

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2. Highly Offensive Conduct & Reasonable Expectation of Privacy

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2.1 The Letters’ Foreclosure “Threats”

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Consider first the content of the letters. Consider, in particular, their ―threats‖ that, if a

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modification was not completed, the plaintiffs could still face foreclosure. In one example of a

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statement that the plaintiffs challenge as tortiously ―threatening,‖ PHH allegedly wrote: ――Please

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understand that all collection/foreclosure activity initiated will continue until the holder of your

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mortgage approves your request for a‖ modification ―and may require the first payment be

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received.‖ (FAC – ECF No. 42 at 3 [¶ 9].) Other challenged statements are basically similar,

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warning the plaintiffs that, unless a loan modification was accepted, and possibly until payments

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were made under that modified loan, foreclosure remained possible. (See id. at 4 [¶ 11].)

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Northern District of California

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These statements are not themselves objectively offensive. They read like prudent warnings

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about the circumstances facing the plaintiffs. They read even like the cautionary statements that

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regulations often make mandatory. Furthermore, these warnings — that, failing a successful loan

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modification, foreclosure might yet come — cannot alone quicken an intrusion claim. One could

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easily imagine the lawsuit that challenged lenders‘ not making such statements in this context. The

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law will not consciously write a rule that whipsaws actors in a ―Damned if you do, damned if you

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don‘t‖ bind. If ―threats to foreclose‖ can support an intrusion claim — as, indeed, they can, see,

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e.g., Inzerillo v. Green Tree Financing, LLC, 2014 WL 134715 (N.D. Cal. Apr. 3, 2014); Rowland

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v. Bank of Am., N.A., 2014 WL 992005 (N.D. Cal. Mar. 12, 2014) — then the surrounding

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circumstances, the other facts that augment and themselves partly constitute intrusion, must be

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different from what they are here. The letters in this case were not themselves ―highly offensive.‖

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They do not themselves suggest that PHH had a ―motive[]‖ or ―objective[]‖ other than accurately

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reminding the plaintiffs that foreclosure remained possible. See Deteresa, 121 F.3d at 465 (quoting

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Hill, 7 Cal. 4th at 26) (alleged intruder‘s ―motives and objectives‖ affect ―offensiveness‖ analysis).

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2.2 The Context in Which the Letters Rest

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The letters are still less objectionable when viewed in context. The plaintiffs recognize that, in

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determining whether an alleged intrusion is actionably offensive, ―actions must be evaluated in the
ORDER (No.15-cv-03332-LB)

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context, conduct[,] and circumstances surrounding the intrusion.‖ (ECF No. 46 at 9); accord

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Deteresa, 121 F.3d at 465 (quoted in McFaul v. Bank of Am., N.A., 2014 WL 232601, * 4 n. 28

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(N.D. Cal. Jan. 21, 2014)). Here, as a matter of law, given the context and surrounding

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circumstances, it cannot be said that PHH‘s letters were tortiously intrusive. This may be the

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central part of this analysis. First, the plaintiffs initiated contact with PHH. They sought a loan

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modification and PHH sent the challenged letters in the course of working through that

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modification. Moreover, PHH did not contact the plaintiffs other than through the letters. The

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defendant did not call the plaintiffs by phone; it did not visit their property. Neither did PHH

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contact, or threaten to contact, third parties about the plaintiffs‘ situation. The FAC makes no such

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United States District Court
Northern District of California

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allegations.
The court thinks that, in this context, letters were the least intrusive method that PHH could

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have used to contact the plaintiffs. If this route was barred to PHH, then it is hard to imagine how

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the lender could have communicated with the plaintiffs, how it could have processed the loan

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modification that the plaintiffs had asked for. The letters were unobjectionable save for their (dry

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and accurate) caution that foreclosure remained a possibility. That possibility was undoubtedly

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something that the plaintiffs did not like being reminded of. But, given the ―context, conduct[,]

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and circumstances surrounding‖ the letters, the foreclosure warnings did not make the letters

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―highly offensive‖ within the meaning of this doctrine.

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2.3 Other Alleged Statutory Violations

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The intrusion claim also points to other alleged statutory violations, other ways in which PHH

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supposedly mishandled the plaintiffs‘ loan-modification application, and so violated HBOR, to

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make the correspondence actionably intrusive. (FAC – ECF No. 42 at 3-5 [¶¶ 9-11, 13-15].) The

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plaintiffs take the same approach in their briefing. (See ECF 46 at 10.) Their intrusion claim thus

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alleges that, by recording foreclosure-related notices, PHH engaged in impermissible ―dual

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tracking.‖ (See FAC – ECF No. 42 at 3-4 [¶¶ 9-10].) It also alleges that PHH failed to meet

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HBOR‘s ―single point of contact‖ requirements and otherwise violated HBOR. (Id. at 5 [¶¶ 13-

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15].) It is not entirely clear how all these claimed infractions are meant to be embodied in the
ORDER (No.15-cv-03332-LB)

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challenged letters — or by themselves to constitute actionable intrusion (the latter being a different

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line of approach that the plaintiffs do not explicate).

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These allegations of additional statutory failures do not make the letters tortiously intrusive. At

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least, they do not in the context of this case. These things may constitute other violations in their

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own right. (The plaintiffs cite the alleged HBOR violations in their independent claims for

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negligence, negligent training and supervision, and under California‘s Unfair Competition Law.

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[Id. at 9-12 (¶¶ 35-45, 50-52)].) And, in some cases, it will be relevant to note the ways in which

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objectively offensive conduct violates laws other than the intrusion-upon-seclusion doctrine. But,

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in these circumstances, as described above, when the challenged communications were initiated by
the plaintiffs and were in no other way offensive — when no independent facts (as opposed to

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Northern District of California

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other, loosely related, alleged legal consequences) impugn the correspondence — the plaintiffs

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cannot jury-rig an intrusion claim by tacking on other alleged statutory failures. That would be a

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kind of bootstrapping and raw conjuring.

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3. Analogies

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The plaintiffs point to four cases to support their intrusion claim. They mainly argue that, in

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these cases, ―threats of foreclosure‖ were deemed ―evidence of intrusion.‖ (See ECF No. 46 at 4-5,

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9-10.) The court shares the defendant‘s assessment of these cases. (See ECF No. 4-7.) They are all

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significantly different from this case. They all involved either actual, physical intrusions, unlike

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this case, or behavior that was much more egregious than anything alleged here. None of these

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cases suggests that the present plaintiffs‘ intrusion claim is minimally viable.

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This court‘s decision in Rowland v. JPMorgan Chase Bank, N.A., 2014 WL 992005 (N.D. Cal.

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Mar. 12, 2014) is too different from this case to support the plaintiffs‘ position. There, the

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plaintiffs were ―timely‖ on their payments, so that the defendant bank sought to collect amounts

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that were not owed. See id. at *1-*3, *12. The bank persisted in this for at least 20 months. See id.

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at *3. During that time, it made ―repeated collection calls,‖ as well as ―upsetting home visits,‖ and

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―[a]t least one . . . collection agent exhibited bullying behavior toward‖ the plaintiff. Id. at *2, *11.

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No similar conduct is alleged here.
ORDER (No.15-cv-03332-LB)

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The defendant in McFaul v. Bank of Am., N.A., 2014 WL 232601 (N.D. Cal. Jan. 21, 2014)

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attempted collection and foreclosure after the subject loan was fully paid off. See id. at *1 and n. 8,

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*4. That may already be enough to effectively separate McFaul from this case. Furthermore, and

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unlike this case, the McFaul defendant visited the plaintiff‘s home 39 times, and made over 100

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phone calls across three years to collect the non-existent debt. Id. at *4. That is nothing like this

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case.

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The decision in Inzerillo v. Green Tree Servicing, LLC, 2014 WL 1347175 (N.D. Cal. Apr. 3,

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2014), lends the plaintiffs no effective support. The Inzerillo defendant wrongly had the plaintiff‘s

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mother‘s name on the subject debt; called the plaintiff‘s mother concerning the debt; called the
plaintiff ―at least 6 times a day and at all hours‖; threatened to and, on three occasions, did call the

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Northern District of California

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plaintiff‘s tenant ―regarding [the plaintiff‘s] mortgage.‖ Id. at *1. No such conduct is alleged here.

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Inzerillo is too different to serve the plaintiffs as an effective analogy.

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Finally, the plaintiffs observe that a ―single phone call‖ was held to be sufficiently intrusive in

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Diaz v. D.L. Recovery Corp., 486 F. Supp. 2d 474 (E.D. Pa. 2007). That is slightly inaccurate;

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Diaz involved two phone calls. More significant, those calls involved offensive behavior that goes

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well beyond anything that the FAC alleges here. For example, the Diaz plaintiff did not owe the

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debt in question; apparently, it belonged to her (perhaps former) boyfriend. See id. at 475. The

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collection agents who called her claimed that they had a ―Summons for over $100,000‖ against her

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and that she faced the ―imminent confiscation‖ of her property. Id. at 475-76. The initial callers

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would not give their names or other information, but told the Diaz plaintiff that only a certain

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lawyer could halt the confiscation. Id. When she called this lawyer, he was roundly abusive. He

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insisted that she give him her checking account number; told her that, if she did not, her ―baby

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[would] sleep on the floor tonight‖; asked her whether she was ―ashamed‖; told her that her

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boyfriend had ―five other girlfriends‖; and suggested that she should be ―afraid of getting AIDS.‖

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Id. at 476. The conduct of the collection agents in Diaz was thus objectively highly offensive,

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extortive, and (as the Diaz court wrote) ―outrageous.‖ Id. at 480. It was vastly more egregious than

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anything alleged here.

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ORDER (No.15-cv-03332-LB)

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4. Conclusion

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The court holds that, in these circumstances, the plaintiffs could not have had an ―objectively

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reasonable expectation of privacy‖ such that PHH‘s letters could be considered ―highly offensive

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to a reasonable person.‖ See Shulman, 18 Cal. 4th at 232. If they did, then every lender who, in

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considering a loan-modification request, accurately reminds a defaulting mortgage-loan borrower

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that foreclosure remains possible, but does not otherwise engage in objectively offensive conduct

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— then by that dry reminder every such lender will have committed a prima facie tort. The court

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does not see how that can be the law.

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United States District Court
Northern District of California

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5. Leave to Amend
The defendants argue that the dismissal should be without leave to amend. (ECF No. 44 at 3.)

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They contend that the plaintiffs ―cannot truthfully amend [the FAC] to cure [its] defects.‖ (Id.) The

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court disagrees. The material before it does not permit the court to conclude that the plaintiffs

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―could not possibly‖ cure their FAC by alleging other facts. The court does not know the universe

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of relevant facts. Nothing in the FAC‘s allegations, or in the governing law, rules out the

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possibility that the plaintiffs know other facts, not yet alleged, that would save their intrusion

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claim. The court is thus dismissing the intrusion-upon-seclusion claim with leave to amend. See,

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e.g., Dauven v. U.S. Bancorp., 2014 WL 2949329, *1 (D. Or. June 30, 2014) (―[T]he Ninth Circuit

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has made clear that when a plaintiff fails to state a claim, ‗[l]eave to amend should be granted

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unless the pleading ―could not possibly be cured by the allegation of other facts . . . .‖‘‖) (citing

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Alcala v. Rios, 434 F. App‘ x 668, 670 (9th Cir. 2011) (quoting in turn Ramirez v. Galaza, 334 F.3d

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850, 861 (9th Cir. 2003)).

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ORDER (No.15-cv-03332-LB)

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CONCLUSION

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The court grants the defendant‘s motion. The plaintiffs‘ intrusion-upon-seclusion claim is

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dismissed with leave to amend. The plaintiffs have 28 days from the date of this order to amend

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their intrusion claim. If they do not, then the dismissal will be with prejudice.

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The plaintiffs have also ―stipulate[d] to the dismissal of‖ their wrongful-foreclosure claim.
(ECF No. 46 at 2.) That claim is dismissed.

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This disposes of ECF No. 44.

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IT IS SO ORDERED.

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Dated: July 19, 2016
______________________________________
LAUREL BEELER
United States Magistrate Judge

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United States District Court
Northern District of California

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ORDER (No.15-cv-03332-LB)

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