Rodenhurst et al v. Bank of America et al
Filing
54
ORDER GRANTING 42 DEFENDANTS' BANK OF AMERICA, HSBC BANK USA, N.A., AND BAC HOME LOANS SERVICING, LP'S MOTION TO DISMISS PLAINTIFFS' SECOND AMENDED COMPLAINT: "On the basis of the foregoing, Defendants Bank of America, former ly known as Countrywide Home Loans Inc., HSBC Bank USA, N.A., and BAC Home Loans Servicing, LP's Motion to Dismiss Plaintiffs' Second Amended Complaint, filed on May 12, 2011, is HEREBY GRANTED. The claims against Defendants Bank of America , formerly known as Countrywide Home Loans Inc., HSBC Bank USA, N.A., and BAC Home Loans Servicing, LP are DISMISSED WITH PREJUDICE. IT IS SO ORDERED." Signed by District JUDGE LESLIE E. KOBAYASHI on September 30, 2011. (bbb, )< hr>CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
LUCKIE L. RODENHURST and
ROXANNE CRAIG-RODENHURST,,
)
)
)
Plaintiffs,
)
)
vs.
)
)
BANK OF AMERICA FKA
)
COUNTRYWIDE HOMES LOANS,
)
INC., BAC HOME LOANS
)
SERVICING, LP, MORTGAGE
)
ELECTRONIC REGISTRATION
)
SYSTEMS, INC., and DOES 1
)
through 20 inclusive,,
)
)
Defendants.
)
_____________________________ )
CIVIL NO. 10-00167 LEK-BMK
ORDER GRANTING DEFENDANTS’ BANK OF AMERICA,
HSBC BANK USA, N.A., AND BAC HOME LOANS SERVICING, LP’S
MOTION TO DISMISS PLAINTIFFS’ SECOND AMENDED COMPLAINT
Before the Court is Defendants Bank of America,
formerly known as Countrywide Home Loans Inc. (“BOA”), HSBC Bank
USA, N.A. (“HSBC”), and BAC Home Loans Servicing, LP’s (“BAC,”
all collectively “Defendants”) Motion to Dismiss Plaintiffs’
Second Amended Complaint (“Motion”), filed on May 12, 2011.1
1
Plaintiffs also named DB Structured Products, Inc. (“DB”)
and ACE Securities Corp. (“ACE”) as defendants in their Second
Amended Complaint. As of the date of this order, Plaintiffs have
not served DB or ACE and neither has made an appearance in this
matter. This Motion is not addressed to DB or ACE, and the Court
takes no action with respect to these unserved defendants. The
Court notes that more than 120 days – the time allowed for
service under Fed. R. Civ. P. 4(m) – have passed since the Second
Amended Complaint was filed on April 20, 2011. The Court will
refer to moving defendants BOA, HSBC, and BAC as “Defendants” in
(continued...)
Plaintiffs Luckie L. Rodenhurst and Roxanne Craig-Rodenhurst
(collectively “Plaintiffs”) filed their memorandum in opposition
on August 5, 2011, and Defendants filed their reply on August 15,
2011.
This matter came on for hearing on August 29, 2011.
Appearing on behalf of Defendants were Amanda Jones, Esq., and
Patricia McHenry, Esq., and appearing on behalf of Plaintiffs was
Robin Horner, Esq.
After careful consideration of the Motion,
supporting and opposing memoranda, and the arguments of counsel,
Defendants’ Motion is HEREBY GRANTED for the reasons set forth
below.
BACKGROUND
I.
Factual and Procedural Background
This is the second time the parties have been before
the Court on a motion to dismiss filed by Defendants.
On
February 23, 2011, the Court entered an order granting in part
and denying in part Defendant BOA’s Motion to Dismiss Plaintiffs’
First Amended Complaint, filed December 13, 2011 (“February 23,
2011 Order”), as follows:
1.
Counts I and II (Truth in Lending Act, 15 U.S.C. § 1601 et
seq. (“TILA”) claims), and III (Real Estate Settlement
Procedures Act, 12 U.S.C. § 2601 et seq. (“RESPA”) claim)
were DISMISSED WITH PREJUDICE;
2.
Counts IV (unfair or deceptive acts or practices (“UDAP”)),
V (fraud), VI (civil conspiracy), VII (aiding and abetting),
IX (improper securitization) and X (conversion) were
1
(...continued)
this order.
2
DISMISSED WITHOUT PREJUDICE.
3.
Plaintiffs were granted leave to file a Second Amended
Complaint, by April 20, 2011, pleading causes of action
against the proper defendants and corporate entities, and
under the proper theories.
[See February 23, 2011 Order at 30.]
Plaintiffs filed their Second Amended Complaint on
April 20, 2011.
[Dkt. no. 41.]
The Second Amended Complaint,
like the First Amended Complaint, alleges that Plaintiffs entered
into a loan transaction with Countrywide Home Loans, Inc.
(“Countrywide”) to refinance a loan on their property located at
46-263 Auna Street, Kaneohe, Hawai‘i (“Property”).
Amended Complaint at ¶¶ 12, 19.]
[Second
Plaintiffs allege that their
loan application information was “changed by the local loan
officer and/or INDCAP Independent Capital, Inc. (“Indcap”) and/or
Mr. Sterling Ing or others from Countrywide,” and Plaintiffs’
incomes were grossly inflated.
[Id. at ¶ 17.]
The “local loan
officer, together with Indcap, . . . and/or [Countrywide]” placed
Plaintiffs in an adjustable rate mortgage, without disclosing
this information, or providing Plaintiffs with a completed,
signed and dated copy of the loan application.
19.]
[Id. at ¶¶ 18-
Neither the local loan officer, Incap, Mr. Ing, nor
Countrywide are named as defendants.
Plaintiffs executed a promissory note dated March 23,
2007, and claim that they signed the loan agreement without an
explanation of its terms or an opportunity to review the
documents.
They also claim that they signed the loan agreement
3
in the absence of a public notary.
[Id. at ¶¶ 21-27.]
Plaintiffs experienced financial distress, and defaulted on the
loans.
Defendants initiated non-judicial foreclosure
proceedings, and the Property was sold at auction to HSBC.
[Id.
at ¶¶ 38-46.]
Plaintiffs allege the following causes of action: (1)
Count I (RESPA violations); (2) Count II (fraudulent
misrepresentation); (3) Count III (breach of fiduciary duty);
(4) Count IV (unjust enrichment); (5) Count V (civil conspiracy);
(6) Count VI (violation of Hawaii Bureau of Conveyance
regulations); (7) Count VII (mistake) ; (8) “Count XII”
(unconscionability); (9) “Count XIII” (UDAP); (10) Count IX
(failure to act in good faith); (11) Count X (breach of
contract”); (12) Count XI (negligent and/or intentional
infliction of emotional distress); (13) a second “Count XII”
(violation of Gramm-Leach-Bliley Act); and (14) a second “Count
XIII” (violation of the State constitutional right of privacy).2
II.
Motion to Dismiss
Defendants asks the Court to dismiss all claims against
them with prejudice.
The Motion argues that the Second Amended
Complaint disregards the Court’s February 23, 2011 Order and
attempts to prolong this litigation by adding unauthorized and
frivolous claims and continuing to make vague assertions.
2
Among
Plaintiffs’ Counts are not numbered sequentially; there
are multiple Counts labeled “Count XII” and “Count XIII,” and no
Count VIII.
4
other problems, the Second Amended Complaint:
(1) Adds several new parties and claims that
the Court did not authorize and that Plaintiffs
did not seek leave to add, including resurrecting
claims that were in the original complaint but
were eliminated from the FAC;
(2) Asserts claims for alleged violations of
state and federal provisions even though those
provisions do not authorize private causes of
action (e.g., Hawaii Bureau of Conveyance
regulations (Count VI) and the Gramm-Leach-Bliley
Act (Count XII);
(3) Re-asserts a claim under the Real Estate
Settlement Procedures Act that the Court
previously dismissed with prejudice;
(4) Fails to correct the pleading
deficiencies for claims that were previously
asserted and dismissed because Plaintiffs’
allegations were vague and conclusory;
(5) Fails to correct the improper naming of
“Bank of America fka Countrywide Home Loans, Inc.”
as a defendant even though Plaintiffs were told
“Bank of America” is not a legal entity and the
Court instructed Plaintiffs that they “must plead
their causes of action against the proper
defendants and corporate entities.”
[Motion at 2-3.]
A.
“Bank of America”
Defendants first argue that “Bank of America,” as
named, is not a legal entity capable of being sued.
[Mem. in
Supp. of Motion at 5 (citing Duarte v. Bank of America, No.
10-00372, 2011 WL 1399127, at *3 (D. Haw. Apr. 12, 2011) (“‘Bank
of America’ is a trade name, not a legal entity, and therefore
cannot be sued.”)).]
Despite the case law and this Court’s
instruction, Plaintiffs again name “Bank of America fka
Countrywide Home Loans, Inc.” as a defendant, and Defendants
5
argue that all claims against this non-existent entity should be
dismissed because: (1) it is incapable of being sued; and (2)
Plaintiffs had notice and an opportunity to cure this pleading
defect, but did not do so.
[Id. at 6.]
Further, any claims
asserted based on alleged wrongs by Countrywide should be
dismissed because the Second Amended Complaint fails to allege
sufficient facts to support a derivative theory of liability.
[Id. at 7.]
B.
Unauthorized Claims
Defendants next argue that Counts I, III, IV, VI, VII,
XII (unconscionability), IX, X, XI, XII (Gramm-Leach-Bliley Act),
and XIII (right to privacy) should be dismissed or stricken
because the Court’s February 23, 2011 Order did not authorize
Plaintiffs to file these claims and Plaintiffs have not sought
leave to add new claims.
In any event, these unauthorized claims
fail to state plausible claims.
C.
[Id. at 7-8.]
Authorized Claims
The Court allowed Plaintiffs to amend their claims for
fraud, conspiracy, and UDAP, but the Second Amended Complaint
fails to cure the earlier deficiencies, according to Defendants.
Plaintiffs fail to plead fraud (Count II) and civil conspiracy
(Count V) with particularity as required by Fed. R. Civ. P. 9(b),
and their UDAP claim (Count XIII) fails to state a claim against
Defendants based on Countrywide’s alleged conduct.
31.]
III. Memorandum in Opposition
6
[Id. at 28-
Plaintiffs’ memorandum in opposition argues that they
properly named Defendants in their Second Amended Complaint.
The
Notice of Intention to Foreclose Under Power of Sale filed by
HSBC listed its address as “C/O Bank of America fka Countrywide
Home Loans, Inc.”
[Mem. in Opp. at 3 (citing Exh. F to
Defendants’ Motion).]
Plaintiffs argue that they should be
allowed to bring claims against “Bank of America fka Countrywide
Home Loans, Inc.”
[Id. at 4.]
Plaintiffs assert that their Second Amended Complaint
sets forth sufficient factual allegations to survive the Motion,
and “identifies many unlawful actions, wrongful acts, omissions,
nondisclosures, concealment of material facts, by the Defendants
and its employees, agents, transferees, successors, and assigns.”
[Id.]
Plaintiffs also argue that they should be allowed to
conduct discovery and amend their complaint again because of
unspecified fraudulent conduct and a conspiracy perpetrated by
Defendants.
[Id. at 6.]
Plaintiffs attach a proposed Third
Amended Complaint, but do not otherwise address the arguments
made by Defendants in their memorandum in support of the Motion.
IV.
Reply
In their reply, Defendants argue that, with the
exception of their argument that they have sufficiently pled
fraud, Plaintiffs did not dispute any of the legal analysis or
argument presented in the Motion in their memorandum in
opposition, and have conceded these claims.
7
[Reply at 1.]
A.
“Bank of America”
That HSBC referred to “Bank of America” by its trade
name for purposes of identifying HSBC’s address does not
transform a trade name into a legal entity capable of being sued.
Defendants argue that Plaintiffs have no legitimate excuse for
failing to name an appropriate legal entity in light of the
Court’s previous ruling.
B.
[Id. at 2.]
Failure to Address Defendants’ Arguments
Defendants state that Plaintiffs failed to address the
following arguments raised by the Motion:
• Count I (RESPA claim) fails because Plaintiffs
did not send their purported qualified written
request to the loan servicer, the request did not
seek information relating to servicing, and
Plaintiffs did not allege damages. Motion at 42-1
at 9-12.
• Count III (breach of fiduciary duty) fails
because lenders do not owe fiduciary duties to
borrowers unless a special relationship exists
(which was not pled). Id. at 13-14.
• Count IV (unjust enrichment) fails because the
SAC did not allege facts showing Plaintiffs
conveyed a benefit upon the Defendants. Id. at
14-15.
• Count V (violation of Bureau of Conveyance
regulations) fails because, among other reasons, a
failure to record does not create a cognizable
claim. Id. at 15-19.
• Count XII (unconscionability) fails because
unconscionability is not an affirmative claim for
relief, but rather is a defense. Id. at 20-21.
• Count IX (failure to act in good faith) fails
because the covenant of good faith and fair
dealing is not an independent cause of action.
Id. at 21-22.
8
• Count XII (Gramm-Leach-Bliley Act) fails because
there is no private cause of action for alleged
violations of the GLBA. Id. at 25.
• Count XIII (constitutional right to privacy)
fails because no state action is involved. Id. at
26-27.
[Id. at 7-8.]
By failing to address these arguments, Defendants
assert that Plaintiffs have abandoned these causes of action,
thereby requiring dismissal.
C.
[Id. at 8.]
Fraud and Conspiracy Claims
Defendants argue the fraud claim must be dismissed
because there are no allegations that these Defendants made any
representations.
Defendants argue they cannot be liable for
fraud merely because they are allegedly assignees.
Moreover,
Plaintiffs’ fraud allegations do not satisfy Rule 9(b) because
they lump all Defendants together.
[Id. at 9-10.]
With respect to the civil conspiracy claim, Plaintiffs
allege only the elements of the claim and not specific facts
showing that they are entitled to relief.
Further, none of the
Defendants was involved with the consummation of Plaintiffs’
loan, and, therefore, they cannot have been involved with any
conspiracy therein.
Nor is there any underlying alleged fraud in
the post-consummation activities, making it impossible to
maintain a derivative conspiracy claim.
[Id. at 11-12.]
STANDARDS
I.
Federal Rule of Civil Procedure 12(b)(6)
Fed. R. Civ. P. 12(b)(6) permits a motion to dismiss a
claim for “failure to state a claim upon which relief can be
9
granted[.]”
Under Rule 12(b)(6), review is generally
limited to the contents of the complaint.
Sprewell v. Golden State Warriors, 266 F.3d 979,
988 (9th Cir. 2001). If matters outside the
pleadings are considered, the Rule 12(b)(6) motion
is treated as one for summary judgment. See Keams
v. Tempe Tech. Inst., Inc., 110 F.3d 44, 46 (9th
Cir. 1997); Anderson v. Angelone, 86 F.3d 932, 934
(9th Cir. 1996). However, courts may “consider
certain materials-documents attached to the
complaint, documents incorporated by reference in
the complaint, or matters of judicial
notice-without converting the motion to dismiss
into a motion for summary judgment.” United
States v. Ritchie, 342 F.3d 903, 908 (9th Cir.
2003).
On a Rule 12(b)(6) motion to dismiss, all
allegations of material fact are taken as true and
construed in the light most favorable to the
nonmoving party. Fed’n of African Am. Contractors
v. City of Oakland, 96 F.3d 1204, 1207 (9th Cir.
1996). To survive a motion to dismiss, a
complaint must contain sufficient factual matter
to “state a claim to relief that is plausible on
its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929
(2007). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the
court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937,
1949, 173 L. Ed. 2d 868 (2009). “Threadbare
recitals of the elements of a cause of action,
supported by mere conclusory statements, do not
suffice.” Id. (citing Twombly, 550 U.S. at 554,
127 S. Ct. 1955).
Hawaii Motorsports Inv., Inc. v. Clayton Group Servs., Inc., 693
F. Supp. 2d 1192, 1195-96 (D. Hawai`i 2010).
This Court, however, notes that the tenet that the
court must accept as true all of the allegations contained in the
complaint – “is inapplicable to legal conclusions.”
10
Iqbal, 129
S. Ct. at 1949.
Factual allegations that only permit the court
to infer “the mere possibility of misconduct” do not show that
the pleader is entitled to relief.
Id. at 1950.
“Dismissal without leave to amend is improper unless it
is clear that the complaint could not be saved by any amendment.”
Harris v. Amgen, Inc., 573 F.3d 728, 737 (9th Cir. 2009)
(citation and quotation marks omitted).
II.
Federal Rule of Civil Procedure 9(b)
Fed. R. Civ. P. 9(b) requires that “[i]n alleging fraud
or mistake, a party must state with particularity the
circumstances constituting fraud or mistake.”
Rule 9(b) requires
that a party make particularized allegations of the circumstances
constituting fraud.
See Sanford v. MemberWorks, Inc., 625 F.3d
550, 557-58 (9th Cir. 2010).
In order to sufficiently plead a fraud claim, the
plaintiffs “must allege the time, place, and content of the
fraudulent representation; conclusory allegations do not
suffice.”
Shroyer v. New Cingular Wireless Servs., Inc., 622
F.3d 1035, 1042 (9th Cir. 2010) (citation omitted).
“Malice,
intent, knowledge, and other conditions of a person’s mind may be
alleged generally.”
Fed. R. Civ. P. 9(b); see also Odom v.
Microsoft Corp., 486 F.3d 541, 554 (9th Cir. 2007) (en banc)
(“[T]he state of mind - or scienter - of the defendants may be
alleged generally.” (citation omitted)); Walling v. Beverly
11
Enters., 476 F.2d 393, 397 (9th Cir. 1973) (stating that Rule
9(b) “only requires the identification of the circumstances
constituting fraud so that the defendant can prepare an adequate
answer from the allegations” (citations omitted)).
A motion to dismiss for failure to plead with
particularity is “the functional equivalent of a motion to
dismiss under Rule 12(b)(6)[.]”
Vess v. Ciba-Geigy Corp. USA,
317 F.3d 1097, 1107 (9th Cir. 2003).
In considering a motion to
dismiss, the court is not deciding whether a claimant will
ultimately prevail but rather whether the claimant is entitled to
offer evidence to support the claims asserted.
Twombly, 550 U.S.
at 563 n.8 (citation omitted).
DISCUSSION
I.
Pleading Defects as to Defendant “Bank of America”
The Court previously held that the First Amended
Complaint failed to state a claim against BOA because the
original lender was Countrywide Home Loans, not BOA, where
Plaintiffs alleged only that BOA is “FKA COUNTRYWIDE HOME LOANS,
INC.” and that Countrywide is “now known as BOA.”
[February 23,
2011 Order at 28 (quoting First Amended Complaint ¶¶ 2, 13).]
The Second Amended Complaint, like the First Amended Complaint,
nowhere alleges any other relationship between Countrywide and
BOA.
As the Court noted previously, other courts have dismissed
claims against BOA where BOA was named solely because of
12
allegations that it was the parent company of Countrywide.
See,
e.g., Jones v. Countrywide Home Loans, Inc., No. 09 C 4313, 2010
WL 551418, at *3 (N.D. Ill. Feb. 11, 2010) (“As a general rule, a
parent company and its subsidiary are ‘two separate entities and
the acts of one cannot be attributed to the other.’” (quoting
Cent. States, Se. & Sw. Areas Pension Fund v. Reimer Express
World Corp., 230 F.3d 934, 944 (7th Cir. 2000))); see also Araki
v. Bank of Am., Civ. No. 10-00103 JMS/KSC, 2010 WL 5625970, at *5
n.5 (D. Hawai‘i Dec. 14, 2010) (“That the mortgagee’s address is
‘c/o Bank of America fka Countrywide Home Loans, Inc.’ does not
mean that it is a properly-named Defendant.” (emphasis in
original)).
Plaintiffs’ Second Amended Complaint makes no effort
to cure the deficiencies noted by the Court with respect to BOA.
Further, “Bank of America” is a trade name, not a legal
entity that is capable of being sued.
See, e.g., Duarte v. Bank
of Amer., No. 10-00372 JMS/BMK, 2011 WL 1399127, at *3 (D.
Hawai‘i Apr. 12, 2011) (“‘Bank of America’ is a trade name, not a
legal entity, and therefore cannot be sued.”).
The Court therefore DISMISSES the claims against BOA
WITH PREJUDICE.
See Araki, 2010 WL 5625970, at *7 (dismissing
claims against “Bank of America fka Countrywide Home Loans, Inc.”
with prejudice due to Plaintiffs’ failure to cure pleading
deficiencies).
II.
Unauthorized Claims in Second Amended Complaint
The Court’s February 23, 2011 Order granted Plaintiffs
leave to file a Second Amended Complaint with specific
13
instructions on how to cure various deficiencies, but did not
grant Plaintiffs leave to file entirely new claims against new
parties, or to refile claims that were dismissed with prejudice.
Nevertheless, Plaintiffs’ Second Amended Complaint restates
claims that were dismissed with prejudice, as well as entirely
new claims not authorized by the previous order.
Plaintiffs have not sought reconsideration of the
Court’s February 23, 2011 Order, and have not set forth any
existing law or non-frivolous argument for extending, modifying,
or reversing law or for establishing new law with respect to
their claims.
The Court first notes that Plaintiffs provided no
authority allowing for the refiling of a claim that has been
dismissed with prejudice.3
Second, to the extent Plaintiffs
added new claims without leave of Court, such claims are not
permitted and are dismissed.
See DeLeon v. Wells Fargo, Bank,
N.A., No. 10-CV-01390-LHK, 2010 WL 4285006, at *3 (N.D. Cal. Oct.
22, 2010) (“[W]here leave to amend is given to cure deficiencies
in certain specified claims, courts have agreed that new claims
alleged for the first time in the amended pleading should be
dismissed or stricken.”).
The Court addresses each Count in turn.
3
Black’s Law Dictionary defines “dismissed with prejudice”
as “removed from the court’s docket in such a way that the
plaintiff is foreclosed from filing a suit again on the same
claim or claims.” Black’s Law Dictionary 537 (9th ed. 2009); see
also id. at 1740 (defining “with prejudice” as “[w]ith loss of
all rights; in a way that finally disposes of a party’s claim and
bars any future action on that claim”).
14
A.
Count I (RESPA)
First, the Court’s February 23, 2011 Order dismissed
Plaintiffs’ RESPA claim with prejudice.
at 17-19.]
[February 23, 2011 Order
Second, to the extent Plaintiffs allege additional
RESPA violations under a different provision, § 2605(e), they
fail to state a claim.
Plaintiffs allege that they sent a Qualified Written
Request (“QWR”) to HSBC and that “Defendants” failed to resolve
the issues raised in the QWR within sixty business days.
Amended Complaint at ¶¶ 66-67.]
obligations on loan servicers.
[Second
Section 2605(e) imposes
12 U.S.C. § 2605(e)(1)(A) (“If
any servicer of a federally related mortgage loan receives a
qualified written request from the borrower . . . for information
relating to the servicing of such loan, the servicer shall
provide a written response acknowledging receipt of the
correspondence within 20 days[.]”).
loan and not the servicer.
HSBC was the owner of the
Because the QWR letter was not sent
to the servicer, the § 2605(e) obligations were never triggered.
In light of these deficiencies, and Plaintiffs’ failure
to address the merits of Defendants’ Motion, Count I is DISMISSED
WITH PREJUDICE.
B.
Count III (Breach of Fiduciary Duty)
Without leave of Court, Plaintiffs added a claim for
“breach of fiduciary duty,” alleging that Defendants were
“fiduciaries” because they provided mortgage loan services and a
loan program to Plaintiffs that was not suited for Plaintiffs.
15
[Second Amended Complaint at ¶¶ 79-80.]
Plaintiffs claim they
“placed their trust and confidence” in Defendants.
[Id. at
¶ 80.]
Lenders typically do not owe fiduciary duties to their
borrowers.
Enriquez v. Countrywide Home Loans, FSB, Civil No.
10–00405 LEK–RLP, 2011 WL 3861402, at *21 (D. Hawai‘i Aug. 31,
2011) (“Lenders generally owe no fiduciary duties to their
borrowers.” (citation omitted)).
The standard “arms-length
business relationship” generally applies unless there is a
special relationship that transforms the lender’s role into that
of a fiduciary.
Giles v. GMAC, 494 F.3d 865, 883 (9th Cir.
2007); see also Pension Trust Fund for Operating Eng’rs v.
Federal Ins. Co., 307 F.3d 944, 954 (9th Cir. 2002) (explaining
that “[t]he lender-borrower relationship . . . is normally an
arms-length transaction”).
There are no factual allegations
indicating that Plaintiffs had a special relationship with
Defendants that would give rise to a fiduciary duty.
In light of these deficiencies, and Plaintiffs’ failure
to address the merits of Defendants’ Motion, Count III is
DISMISSED WITH PREJUDICE.
C.
Count IV (Unjust Enrichment)
Without leave of Court, Plaintiffs added a claim for
unjust enrichment, alleging that Countrywide had various
obligations to Plaintiffs and that Defendants should not be
permitted to retain the benefits of Countrywide’s actions.
[Second Amended Complaint ¶¶ 84-85.]
16
Plaintiffs fail to allege
that they conferred any benefit on Defendants, and that retention
of that benefit would be unjust.
See Wadsworth v. KSL Grant
Wailea Resort, Inc., Civ. No. 08–00527 ACK–LEK, 2010 WL 5146521,
at * 11 (D. Hawai‘i Dec. 10, 2010) (Explaining that “there are
two required elements of an unjust enrichment claim.
First, a
plaintiff must show that he or she has conferred a benefit upon
the defendant and second, that the retention of that benefit was
unjust.”).
In light of these deficiencies, and Plaintiffs’ failure
to address the merits of Defendants’ Motion, Count IV is
DISMISSED WITH PREJUDICE.
D.
Count VI (Bureau of Conveyances Violations)
Without leave of Court, Plaintiffs added a claim for
“Violation of Hawaii Bureau of Conveyances Regulations,” alleging
that HSBC improperly initiated non-judicial foreclosure
proceedings and did not file documents with the Bureau of
Conveyances.
[Second Amended Complaint at ¶¶ 86-101.]
Although
unclear, to the extent Plaintiffs attempt to allege violations of
the Hawai‘i Administrative Rules or other statutes governing the
Bureau of Conveyances, they fail to state a claim.
The Court first notes that Plaintiffs do not provide
any authority for bringing such a claim, but leave it up to the
Court to determine the legal source of their claims.
The Court
has reviewed the relevant statutes and rules governing the Bureau
of Conveyances, and has located no authority requiring
recordation here or providing a cause of action for the alleged
17
violations.
See Haw. Rev. Stat. § 502-1 et seq.
A failure to
record a conveyance is relevant only with respect to subsequent
bona fide purchasers.
See Haw. Rev. Stat. § 502-1 (providing
that unrecorded conveyances are “void as against any subsequent
purchaser, lessee, or mortgagee, in good faith and for a valuable
consideration, not having actual notice of the conveyance of the
same real estate, any portion thereof, or interest therein, whose
conveyance is first duly recorded”).
Further, the Hawai‘i
Administrative Rules pertaining to the special mortgage recording
fee (“SMRF”) do not create a cause of action, Haw. Admin. R. §§
16-178-1 to -5, and the SMRF applies only to recorded mortgages
that increase the stated principal amount of the debt.
Id. §
16-178-2.
As Defendants state in their Motion, Plaintiffs are not
subsequent bona fide purchasers, and the SMRF regulations are not
applicable because Plaintiffs do not allege that any of the
transfers of the mortgage increased the stated principal of the
loan.
In light of these deficiencies, and Plaintiffs’ failure
to address the merits of Defendants’ Motion, Count VI is
DISMISSED WITH PREJUDICE.
E.
Count VII (Mistake)
Without leave of Court, Plaintiffs added a claim for
“mistake,” alleging that “the loan transaction was entered into
upon mutual mistake,” which entitles Plaintiffs to rescission of
the note and mortgage and reimbursement of all monies paid.
18
[Second Amended Complaint at ¶ 104.]
Rule 9(b) requires that
“[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.”
Fed. R. Civ. P. 9(b).
Plaintiffs’ claim does not include the
time, place, and nature of the alleged mistake, but contains a
single conclusory statement that is not entitled to any weight.
In light of these deficiencies, and Plaintiffs’ failure
to address the merits of Defendants’ Motion, Count VII is
DISMISSED WITH PREJUDICE.
F.
Count XII (Unconscionability)
Without leave of Court, Plaintiffs added a claim for
“unconscionability,” alleging that the terms of the notes and
mortgages are unconscionable because Plaintiffs did not
understand the nature of the transaction or its true terms and
Countrywide had superior bargaining power.
[Second Amended
Complaint at ¶¶ 106-09.]
“Unconscionability” is generally a defense to
the enforcement of a contract, and is not a proper
claim for affirmative relief. See, e.g., Gaitan
v. Mortg. Elec. Registration Sys., 2009 WL
3244729, at *13 (C.D. Cal. Oct. 5, 2009)
(“Unconscionability may be raised as a defense in
a contract claim, or as a legal argument in
support of some other claim, but it does not
constitute a claim on its own.”); Carey v. Lincoln
Loan Co., 125 P.3d 814, 829 (Or. App. 2005)
(“[U]nconscionability is not a basis for a
separate claim for relief.”); see also Barnard v.
Home Depot U.S.A., Inc., 2006 WL 3063430, at *3
n.3 (W.D. Tex. Oct. 27, 2006) (citing numerous
cases for the proposition that neither the common
law or the UCC allows affirmative relief for
unconscionability).
19
To the extent unconscionability can be
addressed affirmatively as part of a
different-that is, independent-cause of action,
such a claim “is asserted to prevent the
enforcement of a contract whose terms are
unconscionable.” Skaggs v. HSBC Bank USA, N.A.,
2010 WL 5390127, at *3 (D. Haw. Dec. 22, 2010)
(emphasis in original). Skaggs dismissed a
“claim” for unconscionability because it
challenged only conduct such as “obtaining
mortgages under false pretenses and by charging
Plaintiff inflated and unnecessary charges,” and
“failing to give Plaintiff required documents in a
timely manner,” and not any specific contractual
term. Id.
Phillips v. Bank of Am., Civil No. 10-00551 JMS-KSC, 2011 WL
240813, at *12 (D. Hawai‘i Jan 21, 2011) (footnote omitted).
Further,
In Skaggs, this court noted in dicta that “at
least one Hawaii court has addressed
unconscionability when raised as a claim seeking
rescission.” 2010 WL 5390127, at *3 n.2 (citing
Thompson v. AIG Haw. Ins. Co., 111 Haw. 413, 142
P.3d 277 (2006)). The court did not mean to
suggest that an affirmative claim for
“unconscionability” without more is a proper cause
of action. Even in Thompson, the operative
complaint did not assert a separate count for
rescission or unconscionability. See Thompson,
111 Haw. at 417, 142 P.3d at 281 (indicating the
specific counts were for negligence, fraud, breach
of duty, and unfair and deceptive trade practices
under HRS 480-2). In Thompson, the remedy of
rescission was based on an independent claim.
Similarly, a remedy for an unconscionable contract
may be possible; a standalone claim asserting only
“unconscionability,” however, is improper. See,
e.g., Gaitan v. Mortg. Elec. Registration Sys.,
2009 WL 3244729, at *13 (C.D. Cal. Oct. 5, 2009).
Id. at *12 n.9.
In light of these deficiencies, and Plaintiffs’ failure
to address the merits of Defendants’ Motion, Count XII
20
(unconscionability) is DISMISSED WITH PREJUDICE.
G.
Count IX (Failure to Act in Good Faith)
Without leave of Court, Plaintiffs added a claim for
“failure to act in good faith,” alleging that Countrywide owed
Plaintiffs a duty of good faith, but failed to deal with them in
good faith and in a fair manner.
122-26.]
[Second Amended Complaint at ¶¶
Defendants note that it is not clear whether Plaintiffs
are attempting to assert a tort claim for bad faith or are
alleging that Defendants violated the implied covenant of good
faith and fair dealing.
[Mem. in Supp. of Motion at 21.]
In any
event, the Court finds that Plaintiffs fail to state a claim.
This district court has characterized similar
claims as attempts to allege claims for the tort
of bad faith. See, e.g., Phillips, 2011 WL
240813, at *5 (citing Best Place v. Penn Am. Ins.
Co., 82 Haw. 120, 128, 920 P.2d 334, 342 (1996)
(adopting tort of bad faith for breach of implied
covenant of good faith and fair dealing in an
insurance contract)).
“In Best Place, the Hawaii Supreme Court
noted that although Hawaii law imposes a duty
of good faith and fair dealing in all
contracts, whether a breach of this duty will
give rise to a bad faith tort cause of action
depends on the duties inherent in a
particular type of contract.” Jou v. Nat’l
Interstate Ins. Co. of Haw., 114 Haw. 122,
129, 157 P.3d 561, 568 (Haw. App. 2007)
(citing Best Place, 82 Haw. at 129, 920 P.2d
at 334). “The court concluded that special
characteristics distinguished insurance
contracts from other contracts and justified
the recognition of a bad faith tort cause of
action for the insured in the context of
first- and third-party insurance contracts.”
Id. (citing Best Place, 82 Haw. at 131–32,
920 P.2d at 345–46). Indeed, “the Hawaii
Supreme Court emphasized that the tort of bad
faith, as adopted in Best Place, requires a
21
contractual relationship between an insurer
and an insured.” Id. (citing Simmons v. Puu,
105 Haw. 112, 120, 94 P.3d 667, 675 (2004)).
Moreover, although commercial contracts
for “sale of goods” also contain an
obligation of good faith in their performance
and enforcement, this obligation does not
create an independent cause of action. See
Stoebner Motors, Inc. v. Automobili
Lamborghini S.P.A., 459 F. Supp. 2d 1028,
1037–38 (D. Haw. 2006).
Id. at *5–6 (alterations in original).
Enriquez v. Countrywide Home Loans, FSB, Civil No. 10–00405
LEK–RLP, 2011 WL 3861402, at *23-24 (D. Hawai‘i Aug. 31, 2011).
In light of these deficiencies, and Plaintiffs’ failure
to address the merits of Defendants’ Motion, Count IX is
DISMISSED WITH PREJUDICE.
H.
Count X (Breach of Contract)
Without leave of Court, Plaintiffs added a claim for
“breach of contract,” alleging that Defendants breached the
“mortgage contract” by: a) failing to properly publish and serve
notice; 2) failing to properly identify the mortgagee/holder in
due course/investor; 3) failing to require no more than ten
percent down as payment; 4) allowing a “credit bid”, and 5)
improperly assessing the fair market value of the Property.
[Second Amended Complaint at ¶ 130.]
Plaintiffs fail to
identify: (1) the contract at issue; (2) the parties to the
contract; (3) whether Plaintiffs performed under the contract;
(4) the particular provision of the contract allegedly violated;
(5) when and how Defendants allegedly breached the contract; or
22
(6) how Plaintiffs were injured.
See Otani v. State Farm Fire &
Cas. Co., 927 F. Supp. 1330, 1335 (D. Hawai‘i 1996) (“In breach
of contract actions, . . . the complaint must, at minimum, cite
the contractual provision allegedly violated.
Generalized
allegations of a contractual breach are not sufficient.”).
In light of these deficiencies, and Plaintiffs’ failure
to address the merits of Defendants’ Motion, Count X is DISMISSED
WITH PREJUDICE.
I.
Count XI (Negligent and/or Intentional Infliction of
Emotional Distress)
Without leave of Court, Plaintiffs added a claim for
infliction of emotional distress, alleging that Defendants
breached their duties “by causing Plaintiffs to suffer sever
physical, mental and emotional stress, resulting in physical and
other injuries[.]”
[Second Amended Complaint at ¶ 134.]
Plaintiffs’ conclusory statements fail to sufficiently alleged
negligent and/or intentional infliction of emotional distress
(“NIED” and “IIED” respectively).
As this district court has
previously ruled with respect to the same formulaic claims
brought by Plaintiffs’ counsel, Mr. Horner:
A plaintiff may recover for NIED “where a
reasonable [person], normally constituted, would
be unable to adequately cope with the mental
stress engendered by the circumstances of the
case.” Doe Parents No. 1 v. State, 58 P.3d 545,
580 (Haw. 2002) (citations and quotations
omitted). An NIED claim “is nothing more than a
negligence claim in which the alleged actual
injury is wholly psychic and is analyzed utilizing
ordinary negligence principles.” Id. (citations
and quotations omitted). To maintain a NIED
claim, the Hawaii Supreme Court has held that a
23
person must allege “some predicate injury either
to property or to another person in order himself
or herself to recover for negligently inflicted
emotional distress.” Id. at 580 (citations
omitted); see also Kaho‘ohanohano v. Dep’t of
Human Servs., 178 P.3d 538, 582–83 (Haw. 2008).
As such, “an NIED claimant must establish,
incident to his or her burden of proving actual
injury (i.e., the fourth element of a generic
negligence claim), that someone was physically
injured by the defendant’s conduct, be it the
plaintiff himself or herself or someone else.”
Doe Parents, 58 P.3d at 580–81 (citations
omitted).
Here, Plaintiff has not alleged a predicate
injury or threat of immediate injury either to
herself or to someone else. Rather, Plaintiff
supports her NIED claim by providing a formulaic
recitation of the elements of the claim,
conclusory allegations, and generalized facts, all
of which are entitled to no weight on a motion to
dismiss. See Iqbal, 129 S. Ct. at 1949.
“Under Hawaii law, the elements of IIED are
‘(1) that the act allegedly causing the harm was
intentional or reckless, (2) that the act was
outrageous, and (3) that the act caused (4)
extreme emotional distress to another.’” Enoka v.
AIG Haw. Ins. Co., 128 P.3d 850, 872 (Haw. 2006)
(quoting Hac v. Univ. of Haw., 73 P .3d 46, 60–61
(Haw. 2003)). The Hawaii Supreme Court defines
the term outrageous as conduct “‘without just
cause or excuse and beyond all bounds of
decency.’” Enoka, 128 P.3d at 872 (quoting Lee v.
Aiu, 936 P.2d 655, 670 n.12 (Haw. 1997)).
“Moreover, ‘extreme emotional distress’
constitutes, inter alia, mental suffering, mental
anguish, nervous shock, and other ‘highly
unpleasant mental reactions.’” Id. (quoting Hac,
73 P.3d at 60).
Plaintiff again fails to allege any specific
facts to support an inference that Defendants
acted in an intentional or reckless manner or that
they engaged in outrageous conduct. Furthermore,
Plaintiff’s assertion that Defendants caused her
to suffer severe mental and emotional distress is
a legal conclusion, not entitled to be assumed
true when ruling on a motion to dismiss. See
Iqbal, 129 S. Ct. at 1949. Plaintiffs’ conclusory
24
allegations are once again insufficient to state a
claim for relief.
Rymal v. Bank of Amer., CV. No. 10–00280 DAE–BMK, 2011 WL
1361441, at *10-11 (D. Hawai‘i Apr. 11, 2011).
In light of these deficiencies, and Plaintiffs’ failure
to address the merits of Defendants’ Motion, Count XI is
DISMISSED WITH PREJUDICE.
J.
Count XII (Violation of Gramm-Leach-Bliley Act)
Without leave of Court, Plaintiffs added a claim for
violation of the Gramm-Leach-Bliley Act, by failing to provide
Plaintiffs with privacy notices.
139.]
[Second Amended Complaint at ¶
At the hearing on the Motion, Plaintiffs’ counsel
acknowledged that there is no private cause of action for
violation of this statute.
In light of these deficiencies, and Plaintiffs’
concession that they fail to state a claim, Count XII (Violation
of Gramm-Leach-Bliley Act) is DISMISSED WITH PREJUDICE.
25
K.
Count XIII (Violation of the Hawaii Constitutional
Right of Privacy)
Without leave of Court, Plaintiffs added a claim for
violation of the Hawai‘i State Constitution’s right of privacy.
[Second Amended Complaint at ¶¶ 144-48.]
Plaintiffs, however, do
not allege any state action or explain how the private conduct
alleged in this case amounts to a redressable constitutional
violation.
See, e.g., Leong v. Hilton Hotels Corp., 698 F. Supp.
1496, 1503 (D. Hawai‘i 1988) (“the provisions of the Hawaii State
Constitution apply only to state action, not private action”).
In light of these deficiencies, and Plaintiffs’ failure
to address the merits of Defendants’ Motion, Count XIII
(Violation of the Hawaii Constitutional Right of Privacy) is
DISMISSED WITH PREJUDICE.
III. Previously Asserted Counts Fail to State Claims
The Court previously dismissed without prejudice
Plaintiffs’ claims for fraud, civil conspiracy, and UDAP for
failure to state a claim.
Plaintiffs’ realleged claims fail to
cure the deficiencies identified in the Court’s February 23,
20011 Order and are dismissed with prejudice, as set forth below.
A.
Count II (Fraudulent Misrepresentation)
In its February 23, 2011 Order, the Court ruled as
follows with respect to Plaintiffs’ fraud claim:
Plaintiffs’ general averments of alleged fraud
fail to identify “the who, what, when, where, and
how” of the purported misconduct. See Kearns v.
Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir.
2009) (internal quotation marks omitted). The
allegations in the First Amended Complaint merely
26
restate the basic elements of a fraud claim, and
fail to assert “particularized allegations of the
circumstances constituting fraud” such as the
time, place, and nature of the alleged fraud, and
how each Defendant participated in the fraud. See
In re GlenFed, Inc., 42 F.3d at 1547-48. Indeed,
the First Amended Complaint leaves completely
unanswered precisely what actions each Defendant
took that form the basis of a fraud claim. See
Moore v. Kayport Package Express, Inc., 885 F.2d
531, 540 (9th Cir. 1989) (stating that Rule 9(b)
requires a plaintiff to attribute particular
fraudulent statements or acts to individual
defendants).
Further, the First Amended Complaint fails to
allege grounds for derivative liability against
Defendants. See, e.g., Stoudt v. Alta Fin.
Mortg., Civ. No. 08-2643, 2009 WL 661924, at *2
(E.D. Pa. Mar. 10, 2009) (stating that fraud
claims are “inappropriate to assert against an
assignee where there are no allegations that the
assignee had any contact with the mortgagor or
made any representations to the mortgagor and the
factual basis for the claims occurred prior to
assignment of the mortgage loan”).
[February 23, 2011 Order at 23-24.]
In their Second Amended Complaint, Plaintiffs continue
to lump Defendants together, and again fail to identify the who,
what, when, where and how of the misconduct alleged.
For
example, Plaintiffs allege that “Defendants knowingly and
intentionally concealed material information, including . . . the
material terms of the loan[.]”
70.]
[Second Amended Complaint at ¶
These vague allegations do not satisfy Rule 9(b)’s
particularity requirement.
Further, Plaintiffs again fail to
allege any representations by BOA, HSBC, or BAC.
In light of
these deficiencies, and Plaintiffs’ repeated failure to cure the
lack of particularity in their fraud claim, Count II is DISMISSED
27
WITH PREJUDICE.
B.
Count V (Conspiracy)
In their Second Amended Complaint, Plaintiffs allege
that “Defendants agreed, between and among themselves, to engage
in actions and a course of conduct designed to further an illegal
act or accomplish a legal act by unlawful means, and to commit
one of (sic) more overt acts in furtherance of the conspiracy to
defraud Plaintiffs.”
[Id. at ¶ 90.]
As in their First Amended
Complaint, Plaintiffs have merely recited the elements of a
conspiracy claim, rather than specific facts.
Further, to the
extent these claims relate to alleged fraudulent conduct by
Defendants, Plaintiffs again fail to plead the circumstances of
fraud with the required particularity.
In light of these
deficiencies, and Plaintiffs’ repeated failure to cure the lack
of particularity in their derivative conspiracy claim, Count V is
DISMISSED WITH PREJUDICE.
To the extent Plaintiffs seek further discovery in
order to support their fraud and conspiracy claims, the Court
DENIES such request.
This case was filed on March 23, 2010, and
Plaintiffs have filed three complaints.
Plaintiffs’ repeated
failure to file a complaint that satisfies Rules 8 and 9 does not
warrant further opportunities to increase litigation costs and
delay in this matter.
C.
Count XIII (UDAP)
In dismissing Plaintiffs’ previous UDAP claim, the
Court explained that, because it was not the originating lender,
28
BOA could not “be liable under Haw. Rev. Stat. § 480-2 for the
unfair and deceptive acts and practices that may have occurred
during the consummation of the loan.”
at 19-20.]
[February 23, 2011 Order
The Court also explained that “[t]o the extent
Plaintiffs argue that [BOA] is an assignee, their claims fail
nonetheless because § 480-2 liability does not attach merely
because one is an assignee.”
[Id. at 20 (citing cases)].
The
Court notes that the same deficiencies are present in the Second
Amended Complaint.
Plaintiffs again argue that Defendants are
liable as “successors and assigns of Countrywide.”
Amended Complaint at ¶ 116.]
[Second
In light of these deficiencies, and
Plaintiffs’ repeated failure to cure their UDAP claim, Count XIII
(UDAP) is DISMISSED WITH PREJUDICE.
IV.
Summary
Plaintiffs have amended their claims in this matter
twice already.
Plaintiffs’ most recent amendment seemingly
disregarded the Courts’ February 23, 2011 Order instructing
Plaintiffs how to cure the deficiencies in their claims.
At the
hearing on the Motion, Plaintiffs’ counsel, Mr. Horner,
acknowledged that several of the claims should not have been
refiled.
This Court, and others within this district, have
repeatedly admonished Plaintiffs’ counsel to adhere to the rules
and decisions of court when filing claims.4
4
In light of
Mr. Horner has been warned and sanctioned by several of
the judges in this district for failing to follow rules and Court
orders. See, e.g., Rey v. Countrywide Home Loans, Inc., Civil
(continued...)
29
Plaintiffs’ repeated failure to follow the Court’s directions,
and counsel’s failure to provide any compelling explanation for
such failure, the Court DISMISSES the claims against Defendants
WITH PREJUDICE.
CONCLUSION
On the basis of the foregoing, Defendants Bank of
America, formerly known as Countrywide Home Loans Inc., HSBC Bank
USA, N.A., and BAC Home Loans Servicing, LP’s Motion to Dismiss
Plaintiffs’ Second Amended Complaint, filed on May 12, 2011, is
HEREBY GRANTED.
The claims against Defendants Bank of America,
formerly known as Countrywide Home Loans Inc., HSBC Bank USA,
N.A., and BAC Home Loans Servicing, LP are DISMISSED WITH
PREJUDICE.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, September 30, 2011.
4
(...continued)
No. 11–00142 JMS/KSC, 2011 WL 4103704 (D. Hawai‘i Sept. 13, 2011)
(sanctioning counsel for filing frivolous claims for
unconscionability, failure to act in good faith, negligent and/or
intentional infliction of emotional distress, injunctive relief,
RESPA (to the extent based on the consummation of the loan), and
TILA damages and rescission); Enriquez v. Aurora Loan Servs.,
LLC, Civ. No. 10–00281 SOM/KSC, 2011 WL 1103808 (D. Hawai‘i Mar.
22, 2011) (sanctioning counsel for failure to file timely
memorandum in opposition). See also, Cootey v. Countrywide Home
Loans, Inc., Civil No. 11–00152 JMS/KSC, 2011 WL 2441707, at *3
(D. Hawai‘i June 14, 2011) (listing cases that have dismissed a
similar complaint brought by Mr. Horner, and warning that “these
deficient complaints result in a waste of parties’ and this
court’s resources, and Plaintiffs’ counsel must be mindful of his
duty to bring claims that are ‘warranted by existing law or by a
nonfrivolous argument for extending, modifying, or reversing
existing law or for establishing new law.’” (quoting Fed. R. Civ.
P. 11(b)(2))).
30
/S/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
LUCKIE L. RODENHURST, ET AL. V. BANK OF AMERICA, ET AL; CIVIL NO.
10-00167 LEK-BMK; ORDER GRANTING DEFENDANTS’ BANK OF AMERICA,
HSBC BANK USA, N.A., AND BAC HOME LOANS SERVICING, LP’S MOTION TO
DISMISS PLAINTIFFS’ SECOND AMENDED COMPLAINT
31
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