Soriano v. Countrywide Homes Loans, Inc. et al

Filing 94

ORDER by Judge Lucy H. Koh granting 60 Ex Parte Application; denying 63 Ex Parte Application; denying 65 Motion to Strike. (lhklc2, COURT STAFF) (Filed on 5/4/2011)

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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 VARIOUS
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 will be held on May 4, 2011.

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

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

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the scope of the case and the matters to be decided at trial. The Court addresses those issues here.

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The Court assumes familiarity with the statement of facts and background set forth in its Order on

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summary judgment, and does not restate them here.

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

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I.

Plaintiff’s Request for Reconsideration Regarding Emotional Distress Damages
Plaintiff asks the Court for reconsideration of its Order granting summary judgment to CHL

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on Plaintiff’s claim for emotional distress damages arising from the asserted RESPA violation.

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Plaintiff did not file a timely opposition to the summary judgment motion. After the time for

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filling an opposition had passed, Plaintiff requested leave to file a late opposition, which the Court

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granted. In opposing the motion for summary adjudication of the damages available based on his

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RESPA claim, Plaintiff argued that “[i]f Defendants had properly corrected the loan servicing

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error, [Plaintiff] would not have incurred increased mortgage payments . . . [Plaintiff] remains

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liable for . . . emotional distress, $250,000.00.” Opp’n to Summary Judgment Motion (Dkt. 55) at

United States District Court
For the Northern District of California

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14. Thus, Plaintiff did not argue that any emotional distress damages were due to the alleged

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RESPA violation by itself, but instead claimed emotional distress damages due to the increase in

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his mortgage payments. See Dkt. No. 54. In the summary judgment Order, the Court held that

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“Plaintiff cannot claim that the insufficient response to the QWR [Qualified Written Request], in

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and of itself, caused his loan payments to rise, directly caused his emotional distress resulting from

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the rising charges, or directly damaged his credit. Plaintiff has failed to introduce any evidence to

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show that ‘some colorable relationship between his injury and the actions or omissions that

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allegedly violated RESPA’ exists.” April 11, 2011 Order at 23-27 (citing Allen v. United Fin.

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Mortg. Corp., No. 09-2507 SC, 2010 U.S. Dist. LEXIS 26503 at *14 (N.D. Cal. Feb. 3, 2011). The

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Court concluded that the only disputed fact Plaintiff had identified regarding available damages for

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his RESPA claim was whether he was entitled to the attorney’s fees he incurred when his attorney

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followed up with CHL after CHL failed to respond to the September 20, 2007 QWR.

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Now, Plaintiff argues that the Court should reconsider its summary judgment Order to allow

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Plaintiff to claim emotional distress damages resulting from the alleged RESPA violation. As

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described above, Plaintiff did not raise this argument or Plaintiff’s supporting evidence in

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Plaintiff’s opposition to summary adjudication of his available RESPA damages. Instead, Plaintiff

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waited until after the Court issued its Order on summary judgment to identify evidence that,

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according to Plaintiff, supports a claim for emotional distress arising from the alleged RESPA

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violation. “A motion for reconsideration ‘may not be used to raise arguments or present evidence
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Case No.: 09-CV-02415-LHK
ORDER ADDRESSING VARIOUS PRETRIAL ISSUES

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for the first time when they could reasonably have been raised earlier in the litigation.’” Marlyn

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Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 880 (9th Cir. 2009).
The Court notes that whether Plaintiff may claim emotional distress as “actual damage”

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resulting from a RESPA violation is an unresolved issue. See Ramanujam v. Reunion Mortg., Inc.,

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No. 5:09-cv-03030-JF, 2011 U.S. Dist. LEXIS 10672 at *14-*16 (N.D. Cal. Feb. 3, 2011) (holding

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that “damages for inconvenience and emotional and mental distress are not pecuniary damages that

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can support a claim under RESPA”); but see Moon v. GMAC Mortg. Corp., No. C08-969Z, 2009

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U.S. Dist. LEXIS 91933 at *14-*15 (W.D. Wash. Oct. 2, 2009) (finding that emotional distress

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damages are available as actual damages under RESPA). However, the Court need not resolve this

United States District Court
For the Northern District of California

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issue now. In opposing CHL’s motion for summary adjudication of the damages available to

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Plaintiff for his asserted RESPA violation, Plaintiff did not argue that he sustained emotional

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distress damages directly from the alleged RESPA violation, and he did not cite the evidence he

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now cites in support of this claim. Rather, he argued (as he has done consistently in litigating this

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case thus far) that his emotional distress resulted directly from the increase in his loan charges.

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Therefore, Plaintiff may not raise this argument now. Marlyn, 571 F.3d at 880. Accordingly,

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Plaintiff’s motion for reconsideration or clarification of the Summary Judgment Order is DENIED.

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As previously ordered, Plaintiff’s actual damages for the asserted RESPA violation are limited to

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the attorney’s fees directly associated with obtaining a response to the QWR.

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II.

Plaintiff’s Request Regarding TILA Violation as Predicate Unlawful Act under
California’s Unfair Competition Law

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In its summary judgment motion, CHL argued that the Court should grant summary

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judgment of Plaintiff’s UCL claim because it was based on claims for violations of RESPA and the

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Truth in Lending Act (“TILA,” 15 U.S.C. § 1601 et seq.) which were themselves subject to

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summary judgment. The Court found that Plaintiff’s TILA damages claim was time-barred and

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therefore granted summary judgment for CHL as to that claim, but found that the UCL claim could

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go forward on the basis of the alleged RESPA violation. See April 11, 2011 Order at 12-13.

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Plaintiff has now asked the Court to clarify whether the UCL claim may proceed on the basis of the

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TILA claim, despite the fact that the TILA claim itself is time-barred. Plaintiff cites several
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Case No.: 09-CV-02415-LHK
ORDER ADDRESSING VARIOUS PRETRIAL ISSUES

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decisions from judges in the Northern District of California which find that a UCL claim may be

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based on an otherwise time-barred TILA claim, because this does not trigger preemption under

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TILA. See Romero v. Countrywide Bank, N.A., 740 F. Supp. 2d 1129, 1150 (N.D. Cal. 2010);

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Plascencia v. Lending 1st Mortg., 583 F. Supp. 2d 1090, 1099 (N.D. Cal. 2008) (“[T]he fact that

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the UCL allows a claim to be brought within four years . . . simply provides an additional level of

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protection for consumers.”). These decisions distinguish Ninth Circuit authority which holds that

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“certain types of UCL claims premised on alleged TILA violations are preempted by HOLA [the

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Home Owners Loan Act].” Romero, 740 F. Supp. 2d at 1148; See Silvas v. E*Trade Mortg. Corp.,

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514 F.3d 1001, 1006 (9th Cir. 2008). It appears that the weight of authority supports Plaintiff’s

United States District Court
For the Northern District of California

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argument that there is no preemption of UCL claims based on time-barred TILA claims outside the

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context of HOLA. The parties did not address this precise issue in the briefing on the summary

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judgment motion. Because it appears that Plaintiff is entitled to proceed with his TILA claim as a

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predicate for his UCL claim, the Court hereby clarifies its previous Order to state that he may do

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so.
CHL argued in its motion to dismiss that Plaintiff could not proceed with a TILA claim

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against CHL, because “no violation was apparent on the face of the disclosure statement.” Mot. for

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Summary Judgment (Dkt. 49) at 16.1 However, an assignee may be held liable for a TILA

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violation when the TILA violation is “apparent on the face of the disclosure,” meaning that it “can

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be determined to be incomplete or inaccurate by a comparison among the disclosure statement, any

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itemization of the amount financed, the note, or any other disclosure of disbursement.” 15 U.S.C. §

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1641(a)(1). As described above, Plaintiff has introduced evidence of at least one inconsistent

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disclosure made when his loan originated. “[A]t least three circuit courts have held that TILA

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prohibits conflicting or inconsistent disclosures, including situations in which the inconsistency

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arises from statements in multiple documents.” Romero, 740 F. Supp. 2d at 1137 (citing decisions

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from the Third, Seventh and Eleventh Circuits) (internal citations omitted). Therefore, the Court

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The Court did not previously address this issue as it believed the issue was mooted by its finding
that the TILA claim was time-barred.
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Case No.: 09-CV-02415-LHK
ORDER ADDRESSING VARIOUS PRETRIAL ISSUES

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finds that there is a sufficient dispute of fact as to the underlying TILA violation to permit

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Plaintiff’s UCL claim predicated on the TILA violation to proceed to trial.
In response to the Court’s request, Plaintiff submitted a statement of the remedies he seeks

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under the UCL. Plaintiff indicates that he intends to claim what he describes as “restitutionary”

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relief of the increased loan payments, interest, and increased loan principal resulting in the increase

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of the interest rate from the initial rate of 1%, as well as “injunctive” relief against CHL to prevent

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it from continuing to charge him the increased rate. The Court would appreciate briefing by CHL

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regarding whether Plaintiff is entitled to either remedy under the UCL. CHL shall submit such

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briefing by Friday, May 6, 2011.

United States District Court
For the Northern District of California

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III.

Defendants’ Motion to Strike Plaintiffs’ Demand for Jury Trial
CHL moves to strike Plaintiff’s jury demand, on the basis that Plaintiff is limited to

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equitable relief. CHL argues that there is no jury trial right when the remedies sought are

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equitable. “Two issues are to be addressed in determining whether the right of trial by jury

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attaches to a statutory claim. First, we must compare the statutory action to 18th-century actions

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brought in the courts of England prior to the merger of the courts of law and equity. Second, we

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must examine the remedy sought and determine whether it is legal or equitable in nature. The

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second inquiry is more important.” SEC v. Rind, 991 F.2d 1486, 1493 (9th Cir. 1993) (internal

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citations and quotations omitted). As CHL notes, there is no obvious corollary between 18th-

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century actions and the RESPA and TILA violations asserted here, so the Court moves to the

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second question of whether the remedies sought are legal or equitable.

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First, Plaintiff concedes that he is not entitled to a jury trial on his UCL claim, because such

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a claim is limited to equitable remedies. This is correct. “[T]here is no right to a jury trial in a

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section 17200 lawsuit.” Hodge v. Superior Court, 145 Cal. App. 4th 278, 285 (2006). Plaintiff

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argues that he is entitled to a jury on the question of emotional distress damages resulting from the

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alleged RESPA violation, but the Court has denied Plaintiff’s request for reconsideration of its

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order limiting his REPSA damages to the attorney’s fees associated with obtaining a response to

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the QWR. Therefore, emotional distress damages are not available to Plaintiff as damages for the

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alleged RESPA violation, and do not provide a right to a jury trial.
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Case No.: 09-CV-02415-LHK
ORDER ADDRESSING VARIOUS PRETRIAL ISSUES

Plaintiff also argues that because attorney’s fees are the “actual damages” available to him

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under RESPA, a jury must decide what attorney’s fees are reasonable as this constitutes damages.

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Defendants cite authority holding that generally, awarding attorney’s fees is an equitable

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determination to be decided by the court rather than by the jury. See, e.g., Schmidt v. Zazzara, 544

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F.2d 412, 414 (9th Cir. 1976) (awarding attorney’s fees “is part of the historic equity jurisdiction of

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the federal courts.”) (internal citation and quotation omitted). However, when attorney’s fees are

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part of a party’s claimed damages, they may be determined by a jury. See

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Fed. Agric. Mortg. Corp. v. It’s a Jungle Out There, Inc., No. C 03-3721 BZ, 2006 U.S. Dist.

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LEXIS 31648 at *8 (N.D. Cal. May 9, 2006) (“plaintiff’s attorneys’ fees in this case are part of its

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United States District Court
For the Northern District of California

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damages and should have been resolved by the jury”), citing Fed. R. Civ. P. 54(d)(2)(a) (“[a] claim

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for attorney’s fees and related nontaxable expenses must be made by motion unless the substantive

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law requires those fees to be proved at trial as an element of damages.”). Therefore, although

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Plaintiff cited no authority in support of his argument, Plaintiff appears to be correct that when

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attorney’s fees are claimed as damages, the issue of what fees to award is properly decided by a

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jury.
Finally, Plaintiff argues that because he has asserted claims for punitive damages, that issue

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must go to a jury. Plaintiff cites no authority for his argument that punitive damages are available

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under any of his remaining claims. Defendants cite several decisions by district courts outside this

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district holding that because neither TILA nor RESPA authorize punitive damages, none are

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available under these statutes. See Pelayo v. Home Capital Funding, No. 08-CV-2030 IEG, 2009

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U.S. Dist. LEXIS 44453 at *24 (S.D. Cal. May 22, 2009); Catalfamo v. Countrywide Home Loan,

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No. CV F 08-1117 LJO TAG, 2008 U.S. Dist. LEXIS 84058 at *13-14 (E.D. Cal. Sept. 3, 2008).

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The Court finds these cases persuasive and concludes that Plaintiff may not recover punitive

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damages under his RESPA or TILA claims. Likewise, punitive damages (and damages of any

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kind) are not available to Plaintiff under the UCL. In re Wal-Mart Stores, Inc., 505 F. Supp. 2d

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609, 620 (N.D. Cal. 2007) (“Indeed, it is settled law that punitive damages are not available under

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section 17200.”) (citing Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1148

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(2003).
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Case No.: 09-CV-02415-LHK
ORDER ADDRESSING VARIOUS PRETRIAL ISSUES

Accordingly, the Court finds that Plaintiff is entitled to a jury trial of his RESPA claim

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only.
IV.

Conclusion
To summarize the above holdings, the Court concludes that a) Plaintiff is not entitled to

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claim emotional distress damages as a remedy for the alleged RESPA violation because he waived

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this argument; b) Plaintiff may proceed with the alleged TILA violation as an additional basis for

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his UCL claim even though the TILA damages claim itself is time-barred; and c) Plaintiff is

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entitled to a jury trial regarding his RESPA claim only.

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IT IS SO ORDERED.

United States District Court
For the Northern District of California

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Dated: May 4, 2011

_________________________________
LUCY H. KOH
United States District Judge

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