Phillips v. Bank of America Corporation

Filing 24

Order by Hon. Edward J. Davila granting 15 Motion to Dismiss with leave to amend. (ejdlc2, COURT STAFF) (Filed on 10/11/2011)

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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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LA COBY PHILLIPS,
Plaintiff,

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v.
BANK OF AMERICA CORP,
Defendant.

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Case No.: 5:10-CV-04561 EJD
ORDER GRANTING MOTION TO
DISMISS WITH LEAVE TO AMEND
(Re: Docket No. 15)

Plaintiff La Coby Phillips (“Phillips”) brings suit under two counts: (1) for failure to
respond to a Qualified Written Request (“QWR”) under the Real Estate Settlement Procedures Act
(“RESPA”), 12 U.S.C. § 2605; and (2) based on that purported RESPA violation, for “unfair
business practices” under the California Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code
§ 17200. Defendant Bank of America Corporation Corp. (“Bank of America”) moves pursuant to

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Federal Rule of Civil Procedure 12(b)(6) to dismiss for failure to state a claim upon which relief
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can be granted. Phillips filed a written opposition to the motion but failed to appear at oral
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argument on October 7, 2011. For the reasons set forth below, Bank of America’s motion to

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dismiss is GRANTED WITH LEAVE TO AMEND.
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Case No.: 5:10-CV-04561 EJD
ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

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I. BACKGROUND
A. Procedural History

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On December 9, 2009, Phillips filed his original complaint against Bank of America in the

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Santa Clara County Superior Court alleging four claims for relief: violation of RESPA for failure

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to respond to a purported QWR dated October 22, 2009; breach of implied covenant of good faith

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and fair dealing; unfair business practices; and breach of fiduciary duty. Bank of America removed

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that action to federal court on January 28, 2010, and then moved to dismiss on February 4, 2010.

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On April 9, 2010, the Honorable Jeremy Fogel granted Bank of America’s motion to dismiss

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Phillips’ federal claim under RESPA without leave to amend, and remanded Phillips’ state based

United States District Court
For the Northern District of California

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claims. See April 9, 2010 Order Granting Defendant’s Motion to Dismiss and Remanding

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Act to State Court in La Coby Phillips v. Bank of America, Case Number 10-CV-0400-JF (“April

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9, 2010 Order”). In the April 9, 2010 Order, Judge Fogel ruled that Phillips failed to state a claim

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for a violation of RESPA because Phillips’ October 22, 2009 communication to Bank of America:

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(1) was not a valid QWR since it related solely to origination documents, and not to “servicing” of

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the loan as required under RESPA; (2) did not allege any “servicing errors” as required by RESPA;

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and (3) did not allege any actual damages other than “an amount to be determined at trial.” See

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April 9, 2010 Order at 5-6.

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On remand, Bank of America demurred to each cause of action, and in the alternative,

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moved to strike the RESPA claim. Phillips’ counsel did not file an opposition to that motion, nor

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did Phillips’ counsel appear at the September 9, 2010 demurrer hearing at the Santa Clara County

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Superior Court. At that hearing, the Superior Court ruled from the bench that it was granting Bank

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of America’s motion to strike the RESPA claim and was sustaining the demurrer to other three

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claims.

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Phillips’ counsel, without informing counsel for Bank of America or the Superior Court

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Judge deciding the demurrer motion at the September 9, 2010 hearing, filed a First Amended

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Complaint (“FAC”) on September 8, 2010 with only two claims. Although Judge Fogel’s April 9,

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2010 Order dismissed Phillips’ RESPA claim without leave to amend, Phillips’ FAC included a

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Case No.: 5:10-CV-04561 EJD
ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

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RESPA claim based on: (1) the same October 22, 2009 communication already dismissed; and (2)

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a second QWR allegedly sent on May 17, 2010, during the pendency of the litigation. The FAC

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also included a claim under the California UCL, wholly derivative of Phillips’ RESPA claim.

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Bank of America, again, removed the action to federal court based on federal question

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subject matter jurisdiction over the new RESPA claim on October 8, 2010, and then moved to

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dismiss on October 14, 2010. On January 14, 2011, the Honorable Lucy H. Koh granted Bank of

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America’s motion to dismiss Phillips’ FAC in its entirety with leave to amend. See Jan. 1, 2011

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Order Granting Def.’s Mot. To Dismiss With Leave To Amend, ECF No. 12 (“January 14, 2011

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Order”). In the January 14, 2011 Order, Judge Koh ruled that Phillips failed to state a claim for a

United States District Court
For the Northern District of California

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violation of RESPA because (1) Phillips’ October 22, 2009 communication cannot serve as the

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basis for RESPA claim because Judge Fogel’s April 9, 2010 Order dismissed that claim without

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leave to amend; (2) Phillips’ May 17, 2010 communication to Bank of America did not allege that

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Bank of America was his loan servicer; and (3) Phillips had not alleged actual damages that flowed

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from Bank of America’s failure to respond to the May 17, 2010 communication. Judge Koh also

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held that the May 17, 2010 communications contained some servicing-related questions and thus

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rejected Bank of America’s argument that the May 17, 2010 communication is not a QWR. Judge

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Koh ruled that Phillips failed to state a claim for a violation of the UCL because the UCL claim

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was predicated upon the insufficiently pleaded RESPA violation. On February 13, 2010, Phillips

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filed a Second Amended Complaint (“SAC”). Phillips’ SAC is at issue in this motion.

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B. Factual Background

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Phillips’ SAC alleges that he is an individual that owns the property at 7051 Livery Lane,

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San Jose, California. SAC ¶ 1. Phillips alleges that Bank of America is a “mortgage lender” and

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“the servicer of [Phillips’] loan in question” and is “engaged in wrongful acts under the rubric of

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unfair business practices.” Id. at ¶¶ 7-8. Phillips further alleges that, on October 22, 2009, “a

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request was made for specific loan origination documents,” but these documents have not been

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received. Id. at ¶ 9. Finally, Phillips alleges that, on May 17, 2010, “Qualified Written Request was

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made,” which Bank of America has not acknowledged or responded to in any way. Id. at ¶ 10.

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Phillips indicates that the October 22, 2009 request is attached as Exhibit A and that the May 17,
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Case No.: 5:10-CV-04561 EJD
ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

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2010 communication is attached as Exhibit B, but no exhibits are attached to the SAC. These

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documents, however, were attached as Exhibit A and B to the FAC.
Phillips alleges that Bank of America’s RESPA violation caused damage to Phillips “by

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continuing to negatively report his account to major credit bureaus despite the fact that he has

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submitted a [QWR]. This has caused increased interest rates in [Phillips’] other credit accounts.”

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Id. at ¶ 13. Phillips also alleges that the RESPA violation caused him “emotional stress” since he

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“has basically been in limbo waiting for answers to specific questions raised in his QWR.” Id. at ¶

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14.

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United States District Court
For the Northern District of California

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II. LEGAL STANDARDS
A. Motion to Dismiss
Dismissal under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim is

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“proper only where there is no cognizable legal theory or an absence of sufficient facts alleged to

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support a cognizable legal theory.” Shroyer v. New Cingular Wireless Services, Inc., 606 F.3d 658,

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664 (9th Cir. 2010) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). In considering

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whether the complaint is sufficient to state a claim, the court must accept as true all of the factual

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allegations contained in the complaint. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). However,

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the court need not accept as true “allegations that contradict matters properly subject to judicial

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notice or by exhibit” or “allegations that are merely conclusory, unwarranted deductions of fact, or

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unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). While

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a complaint need not allege detailed factual allegations, it “must contain sufficient factual matter,

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accepted as true, to “‘state a claim to relief that is plausible on its face.’” Iqbal, 129 S.Ct. at 1949

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(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible

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when it “allows the court to draw the reasonable inference that the defendant is liable for the

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misconduct alleged.” Iqbal, 129 S.Ct. at 1949.

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If the court concludes that the complaint should be dismissed, it must then decide whether

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to grant leave to amend. “[A] district court should grant leave to amend even if no request to

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

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Case No.: 5:10-CV-04561 EJD
ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

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by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (quoting Doe

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v. United States, 58 F.3d 494, 497 (9th Cir. 1995)).

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B. Documents Considered by the Court

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A court may take judicial notice of facts that are not subject to reasonable dispute and are
either: (1) generally known within the territorial jurisdiction of the trial court; or (2) capable of

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accurate and ready determination by resort to resources whose accuracy cannot be reasonably

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questioned. Fed. R. Evid. 201(b). The court may consider, under the incorporation by reference

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doctrine, documents that are connected to the loan transaction at issue. For purposes of ruling on a

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motion to dismiss under Rule 12(b)(6), the pleadings are deemed to include “documents whose

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United States District Court
For the Northern District of California

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contents are alleged in a complaint and whose authenticity no party questions, but which are not

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physically attached to the pleading.” See Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998).

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The court may also take judicial notice of matters of public record, including prior federal and state

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court proceedings. See Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001); see also

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Dawson v. Mahoney, 451 F.3d 550, 551 (9th Cir. 2006) (allowing for judicial notice in federal

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court of state court orders and proceedings).

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Here, the court takes judicial notice of: (1) Phillips’ Deed of Trust, which was recorded in

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the Office of the Santa Clara County Recorder on September 20, 2006; (2) Phillips’ original

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Complaint filed in Santa Clara Superior Court bearing the case name La Coby Phillips v. Bank of

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America Corp., et al., Case Number 100CV158953; (3) a copy of the court docket in La Coby

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Phillips v. Bank of America Corp., Case Number 5:10-cv-00400-JF in the Northern District of

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California; (4) Judge Fogel’s prior April 9, 2010 Order granting Bank of America’s

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motion to dismiss Plaintiff’s federal claim under RESPA and remanding state-based claims; and

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(5) the Demurrer Transcript in the Santa Clara County Superior Court reflecting that Bank of

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America’s demurrer was sustained.

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III. DISCUSSION
A. The RESPA Claim
RESPA provides that anyone who violates RESPA shall be liable for actual damages to an
individual who brings an action. See 12 U.S.C. § 2605(f)(1). “Although this section does not
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Case No.: 5:10-CV-04561 EJD
ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

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explicitly set this out as a pleading standard, a number of courts have read the statute as requiring a

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showing of pecuniary damages in order to state a claim.” Allen v. United Fin. Mortg. Corp., 660 F.

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Supp. 2d 1089, 1097 (N.D. Cal. 2009) (citing Hutchinson v. Del. Sav. Bank FSB, 410 F. Supp. 2d

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374, 383 (D.N.J.2006) (stating that “alleging a breach of RESPA duties alone does not state a claim

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under RESPA. Phillips must, at a minimum, also allege that the breach resulted in actual

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damages.”) Bank of America contends that Phillips has failed to state a RESPA claim with respect

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to the May 17, 2010 alleged QWR because Phillips has failed to allege cognizable harm or any

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harm that resulted from Bank of America’s failure to respond. 1
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In opposition to the motion, Phillips argues that he has alleged pecuniary damage, citing to

United States District Court
For the Northern District of California

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an excerpt from the May 17, 2010 letter stating that “abuses have . . . “[i]ncreased the amounts of

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monthly payments . . . the principal balance owe[d] . . . [and] escrow payments” among other

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harms. Neither the SAC nor the letter itself, which was not attached to the SAC, alleges that these

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harms resulted from Bank of America’s failure to respond to the May 17, 2010 letter.

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Additionally, it is unclear how Phillips could allege that damages that were listed in the May 17,

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2010 letter resulted from Bank of America’s failure to respond to that same letter.

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Phillips further argues that the SAC alleges actual damage resulting from Bank of

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America’s continued reporting to credit agencies after receiving the QWR, and this reporting

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“caused increased interest rates in his other credit accounts.” SAC ¶ 13. Section 2605(e)(3) of

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RESPA requires that for a 60-day period after receiving a QWR relating to a dispute regarding the

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borrower’s payments, a servicer may not provide any consumer reporting agency with information

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about any overdue payment that is owed by the borrower and that relates to that period or to the

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QWR. Without further factual allegations showing that Phillips had other loans pending on which

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he paid higher interest, the assertion that Bank of America’s continued reporting “caused increased

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interest rates in his other credit accounts” is not sufficient to nudge his claims across the line from

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As noted above, the court has previously held that the October 22, 2009 letter cannot provide a
basis for Phillips’ RESPA claim because Judge Fogel dismissed that claim without leave to amend.
See April 9, 2010 Order at 5:26-28. Accordingly, similar to Judge Koh’s January 14, 211 Order,
this Order addresses only the May 17, 2010 communication.
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conceivable to plausible. 2 Furthermore, neither in Phillips’ opposition nor at oral argument, for

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which he failed to appear, did Phillips identify any overdue payment that related to his May 17,

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2010 letter. The court has reviewed the May 17, 2010 letter and found no such overdue payment

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identified therein. Thus Phillips has failed to allege facts that establish Bank of America had any

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obligation to cease reporting to credit agencies. Phillips has therefore failed to plead facts sufficient

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to state a plausible claim that he was damaged by credit reporting prohibited by RESPA

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Finally, Phillips argues that the SAC alleges that Bank of America’s failure to respond

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resulted in emotional stress. “The Ninth Circuit has not decided whether emotional distress can

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constitute ‘actual damages’ for purposes of § 2605(f), and cases are split.” Skaggs v. HSBC Bank

United States District Court
For the Northern District of California

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USA, N.A., CIV. 10-00247 JMS, 2011 WL 3861373 (D. Haw. Aug. 31, 2011); see, e.g.,

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Hutchinson, 410 F. Supp. 2d at 383, n. 14 (“It is unclear whether ‘actual damages' under RESPA

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encompasses emotional distress. The district courts are split and no Court of Appeals has addressed

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the issue.”) (citing cases). At least one court in this District has found that “damages for

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inconvenience and emotional and mental distress are not pecuniary damages that can support a

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claim under RESPA.” Ramanujam v. Reunion Mortgage, Inc., 5:09-CV-03030-JF/HRL, 2011 WL

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446047, at *5 (N.D. Cal. Feb. 3, 2011). Other caselaw, however, indicates that “[c]ourts in the

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Ninth Circuit have interpreted the pecuniary loss requirement liberally; several have considered an

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averment of emotional harm sufficient to recover actual damages under RESPA.” Lawther v.

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Onewest Bank, C 10-0054 RS, 2010 WL 4936797, at *7 (N.D. Cal. Nov. 30, 2010) (citing

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Apodaca v. HSBC Bank USA, No. 10-0307, 2010 WL 1734 945, at *3-4 (S.D.Cal. Apr. 7, 2010));

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see also, Joern v. Ocwen Loan Servicing, LLC, CV-10-0134-JLQ, 2010 WL 3516907, at *3 (E.D.

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Wash. Sept. 2, 2010) (“the majority of courts consistently found that RESPA's actual damages

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provision includes recovery for emotional distress”); Moon v. GMAC Mortg. Corp., C08-969Z,

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2009 WL 3185596, at *5 (W.D. Wash. Oct. 2, 2009) (“RESPA permits recovery of emotional

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distress damages.”)

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See Kariguddaiah v. Wells Fargo Bank, N.A., C 09-5716 MHP, 2010 WL 2650492, at *7 (N.D.
Cal. July 1, 2010).
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ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

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The court need not adopt either position. Here, even assuming Phillip suffered emotional

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distress and such distress can suffice as “actual damages” under § 2605(f), Phillips has not alleged

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facts sufficient to state a plausible claim that he suffered emotional distress as a result of Bank of

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America’s alleged RESPA violation. For example, the SAC does not state whether Phillips’

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emotional distress resulted from Bank of America’s failure to respond to a servicing-related inquiry

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or to Phillips’ other inquiries, which are not related to loan servicing, in the May 17, 2010 letter.

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He attests that he “suffers from emotional stress as a result of [Bank of America’s] non-compliance

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with the RESPA statute since he has basically been in limbo waiting for answers to the specific

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questions raised in his QWR.” SAC ¶ 14. Although the May 17, 2010 letter “does include at least

United States District Court
For the Northern District of California

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some information relating to servicing of the loan and does provide specific detail as to some of the

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servicing information sought,” it also “seek[s] much additional information beyond the servicing of

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the loan.” January 14, 2011 Order at 6:25-7:6. The 13-page single-spaced “letter does not identify

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any specific servicing error and . . . most of the letter does not relate to loan servicing at all.” Id. at

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6:22-24. Thus, Phillips has not alleged facts sufficient to establish that it is plausible, rather than

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merely possible, that the distress resulted from Bank of America’s failure to provide “information

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relating to the servicing of such loan” required under RESPA. 12 U.S.C.A. § 2605 (West); see

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Skaggs, 2011 WL 3861373, at *16 (granting summary judgment for defendant because “the

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distress was not a result of a failure to give ‘servicing information’—instead, it was a result of ‘not

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being able to get a straight answer as to who was the owner of my mortgage,’ which is information

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not required under RESPA.”)

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Accordingly, Bank of America’s motion to dismiss for failure to allege actual damages is

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granted. The court does not, at this time, determine that the pleading could not possibly be cured by

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the allegation of other facts. Thus, Phillips is granted leave to amend. In any amended complaint,

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Phillips must identify, with specificity, the exact damages that flowed from Bank of America’s

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failure to respond to the May 17, 2010 letter.

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B. The UCL Claim

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The January 14, 2011 Order dismissed the UCL claim in the FAC because it was predicated
upon the insufficiently-pleaded RESPA claim. The court has again dismissed the RESPA claim as
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ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

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insufficiently pleaded in the SAC. Phillips’ opposition to the motion to dismiss the UCL claim in

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the SAC is identical to his opposition to the motion to dismiss the UCL claim in the FAC, and the

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court therefore reaches the same result.
The UCL prohibits any “unlawful, unfair or fraudulent business practices.” See Cel-Tech

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Commc'ns, Inc. v Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). “By proscribing ‘any

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unlawful’ business practice, [the UCL] ‘borrows’ violations of other laws and treats them as

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unlawful practices that the unfair competition law makes independently actionable.’” See Chabner

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v. United of Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir. 2000) (quoting Cel-Tech, 20 Cal.

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4th at 180). Phillips claims that Bank of America violated the UCL based on the predicate RESPA

United States District Court
For the Northern District of California

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violation.
As discussed above, Phillips’ RESPA claim will be dismissed with leave to amend.

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Accordingly, Phillips has failed to state a UCL claim predicated upon a RESPA violation and

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Bank of America’s motion to dismiss the UCL is granted with leave to amend.

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IV. CONCLUSION
For the reasons described above, Bank of America’s motion to dismiss is GRANTED

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WITH LEAVE TO AMEND. Phillips shall file an amended complaint, if any, within 30 days of

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this Order to cure the deficiencies identified herein. Phillips may not add new claims or parties

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without seeking leave of the court pursuant to Federal Rule of Civil Procedure 15. Failure to timely

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amend will result in dismissal of Phillips’ claims with prejudice.

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Dated:
_________________________________
EDWARD J. DAVILA
United States District Judge

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Case No.: 5:10-CV-04561 EJD
ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND