Soriano v. Countrywide Homes Loans, Inc. et al

Filing 100

ORDER Addressing Additional Pretrial Issues. Signed by Judge Lucy H. Koh on 5/10/2011. (lhklc2, COURT STAFF) (Filed on 5/10/2011)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

United States District Court
For the Northern District of California

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NORLITO SORIANO,
Plaintiff,
v.
COUNTRYWIDE HOME LOANS, INC.,
SOLIDHOMES FUNDING, MANUEL
CHAVEZ, MARK FLORES, SOLIDHOMES
ENTERPRENEURS, INC., BANK OF
AMERICA CORP., AND DOES 5-100,
Defendants.

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Case No.: 09-CV-02415-LHK

ORDER ADDRESSING ADDITIONAL
PRETRIAL ISSUES

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Plaintiff’s claims for violation of the Real Estate Settlement Procedures Act (“RESPA”, 12

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U.S.C. § 2601 et seq.) and violation of California’s Unfair Competition Law (“UCL,” Bus. & Prof.

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Code § 17200 et seq.) have survived summary judgment. See Dkt. No. 59, April 11, 2011 Order.

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Trial in this case is set for June 6, 2011, and a pretrial conference was held on May 4, 2011. The

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parties have been ordered to attend a settlement conference with the Honorable Ronald Whyte on

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May 11, 2011. At the pretrial conference, the parties raised a number of issues relating to the

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scope of the case and the matters to be decided at trial, and asked that the Court reconsider issues

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decided in its May 4, 2011 Order Addressing Various Pretrial Issues. The Court addresses those

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issues here. The Court assumes familiarity with the statement of facts and background set forth in

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its Order on summary judgment, and does not restate them here.

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Case No.: 09-CV-02415-LHK
ORDER ADDRESSING ADDITIONAL PRETRIAL ISSUES

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I.

UCL Claim Based on Time-Barred TILA Claim
At the pretrial conference, counsel for Defendants submitted additional authority in support

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of their argument that Plaintiff should not be permitted to base his UCL claim on a time-barred

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Truth in Lending Act (“TILA,” 15 U.S.C. § 1601 et seq.) claim. The Court previously held that the

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UCL was not preempted by TILA based on the UCL’s longer statute of limitations. Defendants

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have cited several cases holding otherwise. See Zlotnik v. U.S. Bancorp, 2009 WL 5178030 at *3

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(N.D. Cal. Dec. 22, 2009); Jordan v. Paul, 745 F. Supp. 2d 1084, 1098 (N. D. Cal. 2010).

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However, the Court finds the authority cited in the May 4, 2010 Order more persuasive. The cases

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cited by the Court hold that there is no conflict preemption of state laws by TILA if the state laws

United States District Court
For the Northern District of California

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provide additional consumer protection. See May 4, 2010 Order at 2 (citing Romero v.

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Countrywide Bank, N.A., 740 F. Supp. 2d 1129, 1150 (N.D. Cal. 2010); Plascencia v. Lending 1st

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Mortg., 583 F. Supp. 2d 1090, 1099 (N.D. Cal. 2008). Conflict preemption applies “when

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compliance with both federal and state regulations is a physical impossibility, or when state law

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stands as an obstacle to the accomplishment and execution of the full purposes and objectives of

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Congress . . . .” See Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1004 (9th Cir. 2008). The

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Court concludes that because the more generous statute of limitations for UCL claims based on

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TILA violations does not make compliance with TILA impossible, or create an obstacle in

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accomplishing TILA’s purposes, there is no conflict preemption of the UCL by TILA based on the

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UCL’s longer statute of limitations. See Quezada v. Loan Ctr. of Cal., Inc., No. CIV. 08-177 WBS

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KJM, 2008 U.S. Dist. LEXIS 96479 at *11-12 (E.D. Cal. Nov. 24, 2008). Accordingly, the Court

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declines to alter its previous Order which clarified that Plaintiff may proceed with his UCL claim

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on the basis of the alleged TILA violation.

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II.

Jury Demand

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In the May 4, 2011 Order, the Court held that “when attorney’s fees are claimed as

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damages, the issue of what fees to award is properly decided by a jury,” and denied Defendants’

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motion to strike Plaintiff’s jury demand regarding his RESPA claim. The parties were permitted

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one page of additional briefing to address this issue. Defendants argue that because the parties

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have stipulated to the amount of attorney’s fees in question, there is no issue for a jury to decide.
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Case No.: 09-CV-02415-LHK
ORDER ADDRESSING ADDITIONAL PRETRIAL ISSUES

Plaintiff responds that a jury must still decide whether Defendants are liable for having violated

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RESPA. Somewhat confusingly, Plaintiff states that he “claims $570” but that “[t]he parties have

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not stipulated to this fact.” Plaintiff’s Suppl. Br. re Jury Demand (Dkt. No. 97). The Court finds

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that the parties have stipulated to the fact that Plaintiff’s claimed attorney’s fees incurred as a direct

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result of the alleged RESPA violation are $570, as indicated in the Joint Pretrial Statement at 3 and

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4. However, the Defendants have cited no authority for the proposition that because the damages

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value is set, there is no longer a jury right. Whether or not the value of damages is stipulated, the

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finder of fact must decide whether or not Defendants have violated RESPA. If Plaintiff insists on

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having a jury decide this issue, it appears he is entitled to do so. As the Court previously noted, the

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United States District Court
For the Northern District of California

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nature of the claim, including the remedy sought, determines whether the question goes to a jury or

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not. SEC v. Rind, 991 F.2d 1486, 1493 (9th Cir. 1993) (internal citations and quotations omitted).

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However, Defendants have cited no authority for their contention that because the amount of

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damages is not in dispute, the jury trial right is extinguished. Accordingly, the Court declines to

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revise its previous order denying Defendants’ motion to strike Plaintiff’s jury demand. As

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previously held, the jury trial right attaches only to Plaintiff’s RESPA claim and not to his UCL

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claim.

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III.

Available Remedies for Plaintiff’s TILA-Based UCL Claim

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Defendants moved for summary judgment of Plaintiff’s UCL claim, arguing in part that

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“CHL is entitled to judgment as a matter of law on Plaintiff’s RESPA and TILA claims. Thus,

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CHL is also entitled to judgment as a matter of law on Plaintiff’s UCL claim, as there is no

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evidence of any unlawful practice.” The Court granted summary judgment of Plaintiff’s TILA

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claim as time-barred, but has clarified its Order to state that Plaintiff’s untimely TILA claim may

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serve as a basis for a UCL claim.1 However, the Court has asked the parties for authority regarding

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Defendants argue in a footnote in their supplemental briefing that Plaintiff’s Fourth Amended
Complaint (4AC) does not assert TILA as a basis for his UCL claim. See 4AC at 7-8. While this
is true, it appears that the Court as well as Defendants have assumed for some time that Plaintiff’s
UCL claim was asserted on the basis of TILA. See Feb. 5, 2010 Order at 7, Motion for Summary
Judgment (Dkt. No. 49) at 17. As a result, the Court will continue to interpret Plaintiff’s third
claim under the UCL to be based on his alleged TILA violation.
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Case No.: 09-CV-02415-LHK
ORDER ADDRESSING ADDITIONAL PRETRIAL ISSUES

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what remedies are available for a UCL violation based on a TILA violation. Both parties have

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briefed this issue.

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Plaintiff argues that he is entitled to “restitution for the differential between $711.54

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payment and imposed higher P&I payments (and interest thereon), which sum total to

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approximately $40,000.00 . . . reduction in his inflated loan balance caused by the excessive

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mortgage bills . . . [and] an injunction to enforce the promised ‘certified’ $711.54 payment, and 30-

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year balloon payment.” The Court disagrees. As Defendants point out, Plaintiff’s proposed

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“restitution” and “injunction” seek reformation of the loan agreement between the parties. Plaintiff

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attempts to tie this to the alleged TILA violation by arguing that the Court should essentially

United States District Court
For the Northern District of California

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enforce the “terms” reflected on the “Balloon Payment Disclosure” in place of the terms stated in

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all of the other disclosures and the loan agreement itself. However, Plaintiff has not stated a claim

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for breach of contract or a basis for reforming the loan agreement. Plaintiff initially attempted to

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state a claim for breach of contract (which might entitle him to reformation of the contract), but this

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claim was dismissed by the Superior Court for the County of Santa Clara before removal of this

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action. In dismissing the claim, Judge Cabrinha held that “Countrywide cannot be liable for breach

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of contract for increasing the interest rate above the initial one-percent rate because the note

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specifically provides for an increase after January 1, 2007.” See Dkt. No. 1, Ex. 12 at 2. Likewise,

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this Court has held that “[t]he loan documents in evidence show that pursuant to the terms of the

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Note, CHL was entitled to change Plaintiff’s interest rate.” The Court agrees with the Defendants

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that Plaintiff is not entitled to reformation of his loan agreement as a remedy for the alleged UCL

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violation. See Perrone v. General Motors Acceptance Corp., 232 F.3d 433, 438-39 (5th Cir. 2000)

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(finding that TILA does not provide a remedy for breach of contract).

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In order to claim restitution, Plaintiff must show that he has an “ownership interest” in the

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money he seeks to recover from Defendants. See Korea Supply Co. v. Lockheed Martin Corp., 29

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Cal. 4th 1134, 1152 (2003). But Plaintiff has no such ownership interest in the mortgage payments

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made thus far, because Defendants were entitled to raise Plaintiff’s interest rate and to charge him

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accordingly. Therefore, the Court concludes that Plaintiff is not entitled to the remedies he claims

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for violation of TILA. Should this case progress to trial, the Court will decide the issue of what, if
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Case No.: 09-CV-02415-LHK
ORDER ADDRESSING ADDITIONAL PRETRIAL ISSUES

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any, remedies are available provided that Plaintiff prevails in establishing that a TILA violation

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occurred. It is Plaintiff’s burden to identify to what restitution or injunctive relief he is entitled as a

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remedy for the alleged violation. So far, he has failed to do so. Plaintiff is cautioned that on the

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record presently before the Court, it appears likely that Plaintiff is entitled to no monetary recovery

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based on the alleged TILA and UCL violations.
Finally, Defendants note that contrary to Plaintiff’s argument at the pretrial conference,

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Plaintiff is not entitled to attorney’s fees relating to his UCL claim. See People ex rel. City of

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Santa Monica v. Gabriel, 186 Cal. App. 4th 882, 891 (2010) (“The UCL does not authorize an

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award of attorney fees. No exception exists for UCL actions predicated on a statute that authorizes

United States District Court
For the Northern District of California

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such an award.”).
IV.

Conclusion
To summarize the above holdings, the Court concludes that a) Plaintiff may proceed with

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the alleged TILA violation as an additional basis for his UCL claim even though the TILA

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damages claim itself is time-barred; b) Plaintiff is entitled to a jury trial regarding his RESPA claim

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only; and c) Plaintiff may not claim reformation of his loan agreement as a remedy for the alleged

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UCL violation, nor may Plaintiff claim attorney’s fees associated with bringing his UCL claim.

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IT IS SO ORDERED.

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Dated: May 9, 2011

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_________________________________
LUCY H. KOH
United States District Judge

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Case No.: 09-CV-02415-LHK
ORDER ADDRESSING ADDITIONAL PRETRIAL ISSUES