Dodds v. BAC Home Loan Servicing, LP et al
Filing
21
ORDER: GRANTING BOFA's MOTION TO DISMISS COMPLAINT 9 ; (2) DISMISSING WITH PREJUDICE PLAINTIFF'S TILA RESCISSION AND INJUNCTIVE RELIEF CLAIMS; (3) DISMISSING WITHOUT PREJUDICE ALL OTHER CLAIMS; AND (4) GRANTING PLAINTIFF LEAVE TO AMEND THE COMPLAINT. ~ "...Complaint is DISMISSED...with leave to amend the Complaint no later than 60 days from the filing of this Order...." Signed by JUDGE DAVID ALAN EZRA on 4/19/2011. [Order follows hearing held 4/18/2011 re: Motio n to Dismiss 9 . Minutes-docket entry no. 20 ] (afc) 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
RICHARD D. DODDS,
)
)
Plaintiff,
)
)
vs.
)
)
BAC HOME LOANS SERVICING, )
LP; BANK OF AMERICA fka
)
COUNTRYWIDE HOME LOANS, )
INC., and DOES 1 through 20
)
inclusive,
)
)
Defendants.
)
_____________________________ )
CV. NO. 10-00371 DAE KSC
ORDER: (1) GRANTING BOFA’S MOTION TO DISMISS COMPLAINT; (2)
DISMISSING WITH PREJUDICE PLAINTIFF’S TILA RESCISSION AND
INJUNCTIVE RELIEF CLAIMS; (3) DISMISSING WITHOUT PREJUDICE
ALL OTHER CLAIMS; AND (4) GRANTING PLAINTIFF
LEAVE TO AMEND THE COMPLAINT
On April 18, 2011, the Court heard Defendant Bank of America FKA
Countrywide Home Loans, Inc. (“BofA”)’s Motion to Dismiss. Dexter K. Kaiama,
Esq., appeared at the hearing on behalf of Plaintiff; Patricia J. McHenry, Esq.,
appeared at the hearing on behalf of BofA. After reviewing the supporting and
opposing memoranda, the Court GRANTS BofA’s Motion to Dismiss
Complaint. (Doc. # 9.) Plaintiff’s TILA rescission claim and claim for injunctive
relief are DISMISSED WITH PREJUDICE. All other claims are DISMISSED
WITHOUT PREJUDICE, and the Court GRANTS Plaintiff leave to amend the
Complaint.
BACKGROUND
On July 2, 2010, Plaintiff Richard D. Dodds (“Plaintiff”) filed a
Complaint against Defendants BAC Home Loan Servicing, LP (“BAC”), BofA.1,
and Does 1 through 20 (collectively, “Defendants”) alleging that Plaintiff had been
lured into a predatory mortgage loan. (“Compl.,” Doc # 1.) Specifically,
Plaintiff’s Complaint alleges Counts: (Count I) violations of the Truth in Lending
Act (“TILA”) entitling Plaintiff to rescission of the mortgage and recoupment of
expenses (id. ¶¶ 42–54); (Count II) violations of TILA entitling Plaintiff to loan
damages (id. ¶¶ 55–56); (Count III) violations of the Real Estate Settlement
Procedures Act (“RESPA”) (id. ¶¶ 57–60); (Count IV) unfair or deceptive acts or
1
Defendant BofA argues that Plaintiff has erroneously sued BofA “on the
mistaken belief that it is the same entity as Countrywide,” because BofA and
Countrywide are two distinct entities. (Mot. at 5–7.) If Plaintiff chooses to amend
his Complaint, the Court instructs Plaintiff to correct any deficiencies in naming
defendants, both in the caption and body of any amended complaint. Furthermore,
Plaintiff must plead specific causes of action against the proper defendants,
alleging facts related to those causes of action and those defendants.
2
practices (“UDAP”) (id. ¶¶ 61–72); (Count V) fraud (id. ¶¶ 73–81); (Count VI)
civil conspiracy (id. ¶¶ 82–86); (Count VII) aiding and abetting (id. ¶¶ 87–91);
(Count VIII) injunctive relief for lack of standing (id. ¶¶ 92–100); (Count IX)
improper restrictions resulting from securitization leaving note and mortgage
unenforceable (id. ¶¶ 101–108); (Count X) wrongful conversion of note mortgagor never consented to securitization (id. ¶¶ 109–115); and (Count XI)
fraudulent concealment entitling Plaintiff to tolling of the statute of limitations (id.
¶¶ 116–117).2
On January 7, 2005, Plaintiff entered into a loan transaction with
Defendants to refinance his property, which was secured by a mortgage recorded
on January 31, 2005, in the Bureau of Conveyances. (Id. ¶¶ 15, 18.) The real
2
Plaintiff’s Complaint also states that it was “filed for an action pursuant to
the Credit Repair Organizations Act (hereinafter “CROA”), 15 U.S.C. Section
1679 et seq. . . .” (Compl. ¶ 3.) Plaintiff does not, however, include a CROA
claim in any of the Counts named in the Complaint. First, Plaintiff’s CROA
“claim” states no facts or details, and such conclusory allegations, without more,
are insufficient to state a claim upon which relief may be granted.
See Iqbal, 129 S. Ct. at 1949. Moreover, pursuant to 15 U.S.C. § 1679a(3), CROA
applies to credit-repair organizations. Defendants are not credit-repair
organizations under the CROA definition, and Plaintiff does not allege anywhere in
the Complaint that his interactions with Defendants involve credit-repair. As such,
Plaintiff’s CROA claim fails to state a claim upon which relief may be granted.
3
property at issue in this loan transaction is designated as TMK (1) 9-1-094-1100000 located at 91-552 Maohaka Place, Ewa Beach, Hawai`i, 96706 (“Subject
Property”). (Compl. ¶ 15.)
Plaintiff claims that he is an inexperienced and unsophisticated party
in matters of mortgage and loan financing, that Defendants inflated Plaintiff’s
“Stated Income” in his loan application, and otherwise failed to make required
disclosures to Plaintiff such that Plaintiff was “lured into accepting, and executing
a mortgage and note directly resulting in financial benefits to Defendants . . . [and]
to the great financial detriment of [Plaintiff] and substantially increasing the
likelihood that [Plaintiff] would default on the mortgage and note.” (Id. ¶¶ 15, 26,
30.) Specifically, Plaintiff contends that he was not provided, amongst other
things, two copies of the Notice of Right to Cancel, the signed mortgage and note,
the HUD-1 Disclosure Statement, and a signed copy of the written “Truth-inLending Disclosure Statement.” (Id. ¶¶ 36–39.)
On December 10, 2010, Defendant BofA filed a Motion to Dismiss
(“Motion”) for failure to state a claim upon which relief can be granted. (“Mot.,”
Doc. # 9.) On January 28, 2011, Plaintiff filed a Memorandum in Opposition to
BofA’s Motion to Dismiss (“Opposition”). (Opp’n, Doc. # 16.) On March 7,
4
2011, BofA filed a Response in Support of their Motion (“Reply”). (Reply, Doc.
# 17.)
STANDARD OF REVIEW
I.
Federal Rule of Civil Procedure 12(b)(6)
Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure
(“Rule”), a motion to dismiss will be granted where the plaintiff fails to state a
claim upon which relief can be granted. Review is limited to the contents of the
complaint. See Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir.
1994). A complaint may be dismissed as a matter of law for one of two reasons:
“(1) lack of a cognizable legal theory, or (2) insufficient facts under a cognizable
legal claim.” Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir.
1984) (citation omitted). Allegations of fact in the complaint must be taken as true
and construed in the light most favorable to the plaintiff. See Livid Holdings Ltd.
v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005).
A complaint need not include detailed facts to survive a Rule 12(b)(6)
motion to dismiss. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56 (2007).
In providing grounds for relief, however, a plaintiff must do more than recite the
formulaic elements of a cause of action. See id. at 556–57; see also McGlinchy v.
Shell Chem. Co., 845 F.2d 802, 810 (9th Cir. 1988) (“[C]onclusory allegations
5
without more are insufficient to defeat a motion to dismiss for failure to state a
claim.”) (citation omitted). “The tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal conclusions,” and
courts “are not bound to accept as true a legal conclusion couched as a factual
allegation.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotations
and citations omitted). Thus, “bare assertions amounting to nothing more than a
formulaic recitation of the elements” of a claim “are not entitled to an assumption
of truth.” Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (“[T]he
non-conclusory ‘factual content,’ and reasonable inferences from that content,
must be plausibly suggestive of a claim entitling the plaintiff to relief.”) (internal
quotations and citations omitted).
A court looks at whether the facts in the complaint sufficiently state a
“plausible” ground for relief. See Twombly, 550 U.S. at 570. A plaintiff must
include enough facts to raise a reasonable expectation that discovery will reveal
evidence and may not just provide a speculation of a right to relief. Id. at 586.
When a complaint fails to adequately state a claim, such deficiency should be
“exposed at the point of minimum expenditure of time and money by the parties
and the court.” Id. at 558 (citation omitted). If a court dismisses the complaint or
6
portions thereof, it must consider whether to grant leave to amend. Lopez v.
Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (finding that leave to amend should be
granted “if it appears at all possible that the plaintiff can correct the defect”)
(internal quotations and citations omitted).
II.
Federal Rule of Civil Procedure 9(b)
Federal Rule of Civil Procedure 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). Under Ninth Circuit law, “Rule 9(b)
requires particularized allegations of the circumstances constituting fraud.” In re
GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547–48 (9th Cir. 1994) (en banc),
superseded on other grounds by 15 U.S.C. § 78u-4.
In their pleadings, plaintiffs must include the time, place, and nature
of the alleged fraud; “mere conclusory allegations of fraud are insufficient” to
satisfy this requirement. Id. at 1548 (quoting Moore v. Kayport Package Express,
Inc., 885 F.2d 531, 540 (9th Cir. 1989)). “[T]he circumstances constituting the
alleged fraud [must] ‘be specific enough to give defendants notice of the particular
misconduct . . . so that they can defend against the charge and not just deny that
they have done anything wrong.’” Kearns v. Ford Motor Co., 567 F.3d 1120,
7
1124 (9th Cir. 2009) (quoting Bly-Magee v. California, 236 F.3d 10104, 1019 (9th
Cir. 2001)); see also Moore, 885 F.2d at 540 (finding that Rule 9(b) requires a
plaintiff to attribute particular fraudulent statements or acts to individual
defendants). However, “[m]alice, intent, knowledge, and other conditions of a
person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b); see also In re
GlenFed, Inc. Sec. Litig., 42 F.3d at 1547 (“We conclude that plaintiffs may aver
scienter . . . simply by saying that scienter existed.”); Walling v. Beverly Enter.,
476 F.2d 393, 397 (9th Cir. 1973) (finding 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) for failure to state
a claim. 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 the issue of “whether a
plaintiff will ultimately prevail but whether the claimant is entitled to offer
evidence to support the claims.” Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)
overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984).
8
DISCUSSION
For the reasons set forth below, the Court concludes that Defendants’
Motion to Dismiss should be granted.3 The Court also grants Plaintiff leave to
amend his Complaint.
I.
Counts I–IV, XI: TILA, RESPA, UDAP, Fraudulent Concealment
Counts I–IV and XI allege violations of TILA, RESPA, UDAP, and
fraudulent concealment, respectively. In his Opposition, Plaintiff concedes that he
“will not oppose arguments advanced by BofA as to Counts 1–4 and 11 of his
Complaint.” (Opp’n at 4.) The Court will address these arguments in turn.
A.
Count I: Truth in Lending Act Violations: Loan Rescission and
Recoupment; Count II: Truth in Lending Act Violations: Loan
Damages
In Count I of the Complaint, Plaintiff alleges that he is entitled to
rescission of the loan and recoupment4 under TILA, 15 U.S.C. § 1601, et. seq. In
Count II, Plaintiff alleges that he is entitled to damages under TILA pursuant to 15
U.S.C. § 1640.
3
Contrary to Plaintiff’s contention (Opp’n at 10), his participation in the
Court’s triage program does not affect whether the Court may consider BofA’s
Motion to Dismiss at this time.
4
Although Plaintiff’s claim for recoupment is brought under Count I for
rescission, 15 U.S.C. § 1640(a) provides for damages, not rescission, thus the
Court will discuss Plaintiff’s recoupment argument after his claim for damages.
9
i.
Rescission Under 15 U.S.C. § 1635
Section 1635(a), TILA’s so-called buyer’s remorse provision, gives
borrowers three business days to rescind the loan agreement without penalty. 15
U.S.C. § 1635(a); Semar v. Platte Valley Fed. Sav. & Loan Ass’n, 791 F.2d 699,
701 (9th Cir. 1986) (citing 15 U.S.C. § 1635(a)). To invoke this provision, the
loan must be a consumer loan using the borrower’s principal dwelling as security.
15 U.S.C. § 1635(a). If the lender fails to deliver certain forms or disclose
important terms accurately, Section 1635(f) gives the borrower the right to rescind
until “three years after the consummation of the transaction or . . . the sale of the
property, whichever occurs first.” 15 U.S.C. § 1635(f); see also King v. California,
784 F.2d 910, 913 (9th Cir. 1986). Here, Plaintiff entered into the loan transaction
on January 7, 2005, and initiated the instant lawsuit on July 2, 2010. More than
three years elapsed between the consummation of the loan and Plaintiff’s
invocation of his right to rescind. Therefore, Plaintiff’s claim is barred by the
statute of limitations.
Plaintiff alleges that, based on the fraudulent concealment of the terms
of his loan, he is entitled to equitable tolling by extending the time in which he
may bring rescission or other claims against Defendants. (Compl. ¶ 117.)
Plaintiff’s argument fails because equitable tolling does not apply to rescission
10
under TILA. Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998) (holding that
Ҥ 1635(f) completely extinguishes the right of rescission at the end of the 3-year
period”); see also Miguel v. Country Funding Corp., 309 F.3d 1161, 1164 (9th Cir.
2002) (citing Beach and holding that Ҥ 1635(f) is a statute of repose, depriving the
courts of subject matter jurisdiction when a § 1635 claim is brought outside the
three-year limitation period”); King, 784 F.2d at 913 (characterizing Section
1635(f) as a “three-year absolute limitation” on Section 1635 rescission actions).
As such, Plaintiff’s TILA rescission claim is barred by the statute of limitations.
ii.
Damages Under 15 U.S.C. § 1640
In addition to rescission, TILA authorizes civil liability in the form of
actual damages, statutory damages, costs, and attorneys fees. 15 U.S.C. § 1640.
Pursuant to Section 1640(e), there is a one-year statute of limitations for civil
liability claims under TILA. Id. § 1640(e). The limitations period generally runs
from the date of consummation of the transaction. King, 784 F.2d at 915. Here, as
stated above, Plaintiff entered into the loan transaction on January 7, 2005 and
initiated the present lawsuit on July 2, 2010. As such, more than one year elapsed
between the consummation of the loan and the filing of the instant action.
Therefore, Plaintiff’s claim is barred by the statute of limitations unless equitable
tolling applies.
11
As a general matter, “[e]quitable tolling may be applied if, despite all
due diligence, a plaintiff is unable to obtain vital information bearing on the
existence of his claim.” Santa Maria v. Pac. Bell, 202 F.3d 1170, 1178 (9th Cir.
2000); see also O’Donnell v. Vencor, Inc., 465 F.3d 1063, 1068 (9th Cir. 2006)
(“Equitable tolling is generally applied in situations ‘where the claimant has
actively pursued his judicial remedies by filing a defective pleading during the
statutory period, or where the complainant has been induced or tricked by his
adversary’s misconduct into allowing the filing deadline to pass.’” (quoting Irwin
v. Dep’t of Veterans Affairs, 498 U.S. 89, 96 (1990))). In a TILA damages action
specifically, equitable tolling may suspend the limitations period “until the
borrower discovers or had reasonable opportunity to discover the fraud or
nondisclosures that form the basis of the TILA action.” King, 784 F.2d at 915.
However, when a plaintiff fails to allege facts demonstrating that the plaintiff could
not have discovered the purported TILA violation with reasonable diligence,
dismissal is appropriate and equitable tolling will not apply. See Meyer v.
Ameriquest Mortg. Co., 342 F.3d 899, 902 (9th Cir. 2003) (refusing to apply
equitable tolling for failure to make required disclosures under TILA when the
plaintiff was in full possession of all loan documents and did not allege fraudulent
concealment or any other action that would have prevented discovery of the
12
violation); Hubbard v. Fidelity Fed. Bank, 91 F.3d 75, 79 (9th Cir. 1996) (holding
that the plaintiff was not entitled to equitable tolling of her TILA claim because
“nothing prevented [the plaintiff] from comparing the loan contract, Fidelity’s
initial disclosures, and TILA’s statutory and regulatory requirements”).
In this case, Plaintiff alleges that Defendants violated TILA by failing
to provide Plaintiff with a copy of the written “Truth-in-Lending Disclosure
Statement.” (Compl. ¶ 39.) As in Meyer and Hubbard, Plaintiff fails to allege any
facts to demonstrate that equitable tolling applies. Plaintiff’s assertion that
Defendants “fraudulently misrepresented” (id. ¶ 116) and “fraudulent[ly]
conceal[ed]” (id. ¶ 117) the terms of Plaintiff’s mortgage is conclusory and does
not justify application of equitable tolling.5 Although elsewhere in the complaint
Plaintiff offers examples of Defendants’ alleged deceptive acts (id. ¶ 65) and fraud
(id. ¶¶ 74–78), Plaintiff offers no explanation for why he was unable to discover
the TILA violations within the one-year statutory period. These facts without more
are insufficient for Plaintiff to invoke the doctrine of equitable tolling. As such,
Plaintiff’s TILA damages claim is barred by the statute of limitations.
5
Plaintiff’s argument in support of equitable tolling is actually made under
Count XI: Fraudulent Concealment – Tolling of Statute. However, the Court
considered these arguments when determining whether equitable tolling should
apply under TILA.
13
iii.
Recoupment Under 15 U.S.C. § 1640
“[R]ecoupment is in the nature of a defense arising out of some
feature of the transaction upon which the plaintiff’s action is founded.” Bull v.
United States, 295 U.S. 247, 262 (1935). The Supreme Court has confirmed that
recoupment of damage claims survive TILA’s one-year statute of limitations.
Beach, 523 U.S. at 418. However, to circumvent the statute of limitations, the
recoupment claim must be asserted as a “defense” in an “action to collect a debt.”
15 U.S.C. § 1640(e). Some courts have held that for a recoupment claim to survive
a motion to dismiss, the plaintiff must show the following: “(1) the TILA violation
and the debt are products of the same transaction; (2) the debtor asserts the claim
as a defense; and (3) the main action is timely.” Moor v. Travelers Ins. Co., 784
F.2d 632, 634 (5th Cir. 1986) (citing In re Smith, 737 F.2d 1549, 1553 (11th Cir.
1984)); Agustin v. PNC Fin. Servs. Grp., --- F. Supp. 2d ----, 2010 WL 1507975, at
*18 n.2 (D. Haw. Apr. 15, 2010).
Plaintiff claims that he may “assert the TILA disclosure violations
described herein as a recoupment in the amount of $2,000.00 and is entitled to a
credit in that amount with regard to their tender obligation, if any, under TILA.”
(Compl. ¶ 54.) Nowhere does Plaintiff assert TILA recoupment as a defense, nor
14
does Plaintiff point to any “action to collect a debt.” Instead, the relevant action in
the instant case is a foreclosure auction sale, not an “action to collect a debt.”
District courts within this circuit have held that a nonjudicial
foreclosure is not an “action to collect a debt” within the meaning of Section
1640(e). Ortiz v. Accredited Home Lenders, Inc., 639 F. Supp. 2d 1159, 1165
(S.D. Cal. 2009) (holding that nonjudicial foreclosures are not “actions” as
contemplated by TILA because “actions” refer to judicial proceedings).6
Additionally, Plaintiff’s conclusory statement that he is asserting the
TILA violations as “claims and defenses” is insufficient to prove as much.
6
In reaching the conclusion that a nonjudicial foreclosure is not an “action”
that survives TILA’s statute of limitations, the court in Ortiz reviewed the wording
of TILA as well as California state law. Ortiz, 639 F. Supp. 2d at 1165. With
regard to TILA, the court concluded the Section 1640(e) itself defines an “action”
as a court proceeding because it states “‘[a]ny action . . . may be brought in any
United States district court, or in any other court of competent jurisdiction.’” Id.
(quoting 15 U.S.C. § 1640(e)). The court also examined California state law,
which indicates that an “action” to recover a debt secured by a mortgage on real
property results in a judgment from the court directing the sale of the property and
distributing the resulting funds. Id. Similarly, Hawaii Revised Statute Section
667-1 provides that a “foreclosure by action” occurs when the circuit court assesses
the amount due on a mortgage and renders judgment for the amount awarded.
Haw. Rev. Stat. § 667-1. Conversely, a “foreclosure under power of sale,” or
nonjudicial foreclosure, occurs when the mortgagee forecloses pursuant to the
power of sale contained in the mortgage. Id. § 667-5. Thus, in Hawaii, a
foreclosure by “action” requires a judicial proceeding whereas a nonjudicial
foreclosure does not. The Ortiz court’s reasoning clearly applies to the instant
case, and the Court finds that a nonjudicial foreclosure is not an “action to collect a
debt” within the meaning of Section 1640(e).
15
(Compl. ¶ 54.) In Ortiz, after the lender filed notice of a nonjudicial foreclosure,
but before the sale took place, the plaintiff initiated a lawsuit alleging TILA
violations and attempting to assert a recoupment defense. 639 F. Supp. 2d at 1165.
On these facts, the court concluded that “‘[w]hen the debtor hales the creditor into
court, the claim by the debtor is affirmative rather than defensive.’” Id. (quoting
Moor, 784 F.2d at 634). In this case, there is no evidence that Defendants have
initiated any sort of court proceeding against Plaintiff. Plaintiff’s affirmative use
of his claim for recoupment is improper and not within the scope of the TILA
exception, which permits recoupment as a defensive claim only. As such,
Plaintiff’s TILA recoupment claim fails.
B.
Real Estate Settlement Procedures Act Violations
Count III of the Complaint alleges that Defendants violated RESPA
by failing to provide Plaintiff with a timely signed and dated Good Faith Estimate,
as required by RESPA. (Compl. ¶¶ 57–60.)
First, RESPA imposes either a one-year or a three-year statute of
limitations depending on the violation alleged. 12 U.S.C. § 2614 (proscribing a
one-year statute of limitations for violations of Sections 2607 and 2608 and a
three-year statute of limitations for violations of Section 2605). Because Plaintiff’s
alleged RESPA claim arose out of the loan origination, which occurred more than
16
three years before Plaintiff filed the instant action, Plaintiff’s claim is barred by the
statute of limitations. As discussed above, Plaintiff is not entitled to equitable
tolling because he has failed to allege specific facts showing why he could not
bring his suit within the limitations period.
Second, BofA asserts that Plaintiff’s RESPA claim fails to state a
claim because RESPA does not provide for a private right of action when
defendant fails to provide a good faith estimate. (Mot. at 7–8.) Accordingly,
Plaintiff’s RESPA claims would fail even if they were not barred by the statute of
limitations because the alleged disclosure violations do not give rise to a private
right of action. See Collins v. FMHA-USDA, 105 F.3d 1366, 1368 (11th Cir.
1997) (noting that neither the legislative history nor the statutory text reveals
congressional intent to create a private right of action for violations of Section
2604(c), failure to provide the initial good faith estimate); Pressman v. Meridian
Mortg. Co., 334 F. Supp. 2d 1236, 1242 n.4 (D. Haw. 2004); Rosal v. First Fed.
Bank of California, 671 F. Supp. 2d 1111, 1125 (N.D. Cal. 2009) (holding that
there is no private right of action for disclosure violations under either Section
2603 or Section 2604); Delino v. Platinum Cmty. Bank, 628 F. Supp. 2d 1226,
1232–33 (S.D. Cal. 2009) (citing Collins and dismissing the plaintiff’s RESPA
17
claim on the ground that no private right of action exists for failure to provide an
initial good faith estimate).
As such, Plaintiff’s RESPA claim is barred by the statute of
limitations, and fails to state a claim.
C.
Count IV: Unfair or Deceptive Acts or Practices
Plaintiff claims that Defendants engaged in unfair or deceptive acts
and practices (“UDAP”) in violation of HRS §§ 480-2(a) and 481A-3. (Compl.
¶ 64.) HRS § 480-2(a) prohibits “[u]nfair methods of competition and unfair or
deceptive acts or practices in the conduct of any trade or commerce . . . .” HRS
§ 481A-3 similarly prohibits “deceptive trade practice[s].” Plaintiff contends that
Defendants violated the aforementioned statutes by: (1) targeting financially
unsophisticated and otherwise vulnerable consumers for inappropriate credit
products; (2) failing to adequately disclose the true costs and risks of the subject
loan and its inappropriateness for Plaintiff; (3) making a refinance loan that
resulted in little net economic benefit to Plaintiff with the primary objective of
generating fees; (4) making the loan based on the value of the collateral, without
regard to Plaintiff’s ability to repay the loan; (5) failing to provide Plaintiff with a
timely Good Faith Estimate “GFE”; and (6) attempting to deprive Plaintiff of his
legal right to cancel the loan. (Compl. ¶ 65.)
18
BofA argues that Plaintiff’s claims based on HRS Chapter 480 are
subject to a four-year statute of limitations, and are thus barred. (Mot. at 21–22.)
Under HRS 480-24(a), “any action to enforce a cause of action arising under this
chapter shall be barred unless commenced within four years after the cause of
action accrues . . . .” HRS § 480-24(a). Furthermore, the statute of limitations
period starts to run upon the occurrence of Defendants’ alleged violation. See
McDevitt v. Guenther, 522 F. Supp. 2d 1272, 1289–90 (D. Haw. 2007).
In the instant case, the first five out of Defendants’ six alleged UDAP
violations all occurred at the time the loan was consummated. See (Compl. ¶ 65.)
Furthermore, Plaintiff asserts that Defendants’ TILA violations, which also
allegedly occurred at the time the loan was consummated, constitute UDAP
violations as well. (Id. ¶ 66.) Plaintiff’s loan was consummated on January 7,
2005, and Plaintiff filed his Complaint on July 2, 2010. Thus, the four-year statute
of limitations has passed for Plaintiff to bring any UDAP claims arising out of acts
that occurred at loan consummation. Thus, Plaintiff’s first through fifth UDAP
claims and UDAP claims based on TILA all fail.
Plaintiff’s sixth UDAP claim, that Defendants attempted to deprive
Plaintiff of his legal right to cancel the loan, contains insufficient facts to satisfy
Rule 8 pleading requirements. Plaintiff’s vague allegation contains insufficient
19
factual detail to meet the Rule 8 pleading standard, and to survive a motion to
dismiss, a complaint must “contain sufficient factual matter, accepted as true, to
state a claim that is plausible on its face.” Iqbal, 129 S. Ct. at 1949. Plaintiff does
not allege any acts committed by Defendants to prevent Plaintiff from exercising
his right to cancel the loan, when such acts were committed, or by whom. As such,
Plaintiff’s sixth UDAP allegation fails as well.
D.
Count XI: Fraudulent Concealment
In Count XI of the Complaint, Plaintiff contends that Defendants
fraudulently misrepresented and concealed the terms of Plaintiff’s loan. (Compl.
¶¶ 116–117.) To the extent Plaintiff makes these allegations to invoke equitable
tolling, the Court addressed this supra in Section A(ii) regarding TILA damages.
To the extent Plaintiff makes these allegations to try and prove fraud, the Court
discusses this in Section II below, and concludes that Plaintiff has failed to plead
sufficient facts to show fraud under the heightened Rule 9 pleading standard for
fraud. As such, Count XI of Plaintiff’s Complaint for fraudulent concealment fails.
For all of the above discussed reasons, Plaintiff’s claims for Counts
I–IV and XI fail to survive this Motion. Additionally, Plaintiff conceded, in his
Opposition, that he does not contest Defendants’ Motion for dismissal of these
counts. Accordingly, the Court GRANTS BofA’s Motion to Dismiss as to Counts
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I–IV and XI. Plaintiff’s TILA rescission claim is barred by the statute of
limitations as a matter of law, and is thus DISMISSED WITH PREJUDICE.
II.
Count V: Fraud; Count XI: Fraudulent Concealment
In Count V, Plaintiff claims that Defendants falsely represented the
costs and risks of Plaintiff’s loan, its inappropriateness for Plaintiff, the amount of
Plaintiff’s income on the loan application, the nature of the documents Plaintiff
was told to sign, and their knowledge as to the aforementioned falsities, thereby
committing fraud. (Compl. ¶¶ 74–77.) BofA argues that “Plaintiff’s broad
allegations fall far short of meeting the FRCP Rule 9(b) requirement . . . .” (Mot.
at 22.) Additionally, BofA points out in its Reply, that Plaintiff’s Opposition fails
to respond to BofA’s arguments that Plaintiff’s fraud claims are insufficiently pled.
(Reply at 4.)
The Court finds that Plaintiff’s allegations are insufficient to meet his
burden under the more rigorous pleading requirements of Rule 9 that apply to
allegations of fraud or mistake. See Fed. R. Civ. P. 9(b) (requiring a party to state
with particularity the circumstances constituting fraud or mistake). The claim must
“be accompanied by the ‘who, what, when, where, and how’ of the misconduct
charged.” Kearns v. Ford Motor Co., 567 F.3d 1120 (9th Cir. 2009) (internal
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citation and quotations omitted). A plaintiff “must state the time, place and
specific content of the false representations as well as the identities of
the parties to the misrepresentation.” Alan Neuman Productions, Inc. v. Albright,
862 F.2d 1388, 1393 (9th Cir. 1988).
Here, Plaintiff fails to plead the time and place of any alleged fraud
and he also does not specify what role each defendant played in the alleged
misconduct. Instead, Plaintiff broadly attributes the allegedly false statements to
all Defendants generally, without specifying when, where, and by who the false
statements were made. Furthermore, Plaintiff’s statement that “Defendants
fraudulently misrepresented the terms of [Plaintiff’s] loan and mortgage,” is a legal
conclusions entitled to no weight (Compl. ¶ 116); See Iqbal, 129 S. Ct. at 1949.
Accordingly, the Court GRANTS BofA’s Motion to Dismiss as to
Count V and Count XI.
III.
Count VI: Civil Conspiracy; Count VII: Aiding and Abetting
Count VI of Plaintiff’s Complaint claims that Defendants entered into
an agreement to accomplish something unlawful, and Count VII alleges that
Defendants aided and abetted each other in the engagement of those wrongful acts.
(Id. ¶¶ 83, 89.) Defendants claim that Plaintiff has not sufficiently pled claims for
22
civil conspiracy or aiding and abetting because both claims are not independent
causes of action, but derivative of another claim. (Mot. at 8–11.)
Plaintiff’s allegations are insufficiently pled under the Rule 8 pleading
requirements. Civil conspiracy and aiding and abetting are not independent causes
of action in Hawaii, but theories of potential liability that are derivative of other
wrongs. See e.g. Weinberg v. Mauch, 890 P.2d 277, 286 (Haw. 1995). First,
Plaintiff has not clearly alleged an underlying claim on which his civil conspiracy
and aiding and abetting claims are based. Moreover, to the extent that Plaintiff’s
claims appear to be based on alleged fraudulent activity, as discussed above,
Plaintiff’s Complaint fails to state a claim for fraud. Additionally, Plaintiff has not
rebutted Defendants’ contention that the instant claims appear to be based on fraud,
and has not made any other argument in defense of these claims. For all these
reasons, Plaintiff’s civil conspiracy and aiding and abetting claims do not survive
the instant Motion.
Accordingly, the Court GRANTS BofA’s Motion to Dismiss as to
Counts VI and VII.
IV.
Count VIII: Injunctive Relief – Lack of Standing
In Count VIII of the Complaint, Plaintiff asserts that “[t]his is an
action for emergency and permanent injunctive relief seeking to restrain
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Defendants [] from seeking a non-judicial sale upon the subject property during the
pendency of this action.” (Compl. ¶ 93.) This allegation is based on the fact that
Defendants lack standing to foreclose upon the Subject Property. (Id.
¶¶ 94–95, 98, 100.)
BofA argues that the count fails because injunctive relief is a remedy
that does not create an independent cause of action. (Mot. at 11.) In his
Opposition, Plaintiff does not dispute BofA’s contention, but instead argues, for
the first time, that Mortgage Electronic Registration Systems (“MERS”) had no
authority to transfer the note. (Opp’n at 8–10.) First, Plaintiff may not raise new
arguments in his Opposition for the first time, thus any argument relating to MERS
and its role in the assignment of the loan, must be disregarded.
As for the claims stated in Count VIII, Plaintiff’s request for
injunctive relief appears to be dependent on and derivative of Plaintiff’s other
claims, and not a standalone claim. Because the Court finds that all of Plaintiff’s
claims should be dismissed, and because Plaintiff fails to allege any facts showing
that he is entitled to this equitable remedy, the Court finds that Plaintiff’s claim for
injunctive relief should be dismissed as well.
Moreover, Plaintiff’s Complaint states only that Defendants “are not
the real party in interest and are not authorized to bring a foreclosure against”
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Plaintiff. (Compl. ¶ 94.) Such conclusory allegations are insufficient to state a
claim upon which relief may be granted. See Iqbal, 129 S. Ct. at 1949.
Accordingly, the Court GRANTS BofA’s Motion to Dismiss as to
Count VIII and DISMISSES WITH PREJUDICE Plaintiff’s claim for injunctive
relief without leave to amend. If injunctive relief is proper, it will be because
Plaintiff prevails, or has met the necessary test for such relief under Rule 65 of the
Federal Rules of Civil Procedure, on an independent cause of action.
V.
Count IX: Improper Restrictions Resulting from Securitization Leaves Note
and Mortgage Unenforceable; Count X: Wrongful Conversion of Note –
Mortgagor Never Consented to Securitization
In Count IX of the Complaint, Plaintiff contends that improper
restrictions resulting from securitization of the mortgage leaves the note and
mortgage unenforceable, and that Plaintiff was neither informed of nor asked to
consent to the securitization of the mortgage. (Compl. ¶¶ 107–108.) In Count X of
the Complaint, Plaintiff contends that securitization converted the mortgage,
rendering it null, void and unenforceable, and that Defendants have no authority to
foreclose upon the property. (Compl. ¶¶ 110, 115.)
Despite Plaintiff’s laundry list of allegations, the Court is entirely
unclear as to what cause of action Plaintiff is bringing this claim under. Plaintiff
fails to cite any relevant statute or law under which Defendants’ alleged behavior is
25
prohibited. Although FRCP Rule 8 requires only that a complaint include a “short
and plain statement of the claim showing that the pleader is entitled to relief,” the
complaint must sufficiently put Defendants on fair notice of the claim asserted and
the ground upon which it rests. Fed. R. Civ. P. 8. Defendants, nor the Court, are
required to speculate as to which provisions Plaintiff is suing under or how
Defendants violated such provisions. Vague allegations containing mere labels
and conclusions are insufficient to survive a motion to dismiss. See Twombly, 550
U.S. at 555. As such, Plaintiff’s claims in Counts IX and X fail.
Accordingly, the Court GRANTS BofA’s Motion to Dismiss as to
Counts IX and X.
VI.
Leave to Amend
The Court recognizes that it may be possible for Plaintiff to state a
claim if provided the opportunity to amend his Complaint. Accordingly, the
Complaint is DISMISSED as against all Defendants in this action with leave to
amend the Complaint no later than 60 days from the filing of this Order, with the
exception of Plaintiff’s TILA rescission claim and claim for injunctive relief,
which have been dismissed with prejudice as a matter of law. Failure to file an
amended complaint and to cure the pleading deficiencies will result in dismissal of
this action with prejudice. Plaintiff is advised that the amended complaint must
26
clearly state how each of the named defendants have injured him, and it must also
clearly identify the statutory provisions under which Plaintiff’s claims are brought.
CONCLUSION
For the reasons stated above, the Court GRANTS BofA’s Motion to
Dismiss Complaint. (Doc. # 9.) Plaintiff’s TILA rescission claim and claim for
injunctive relief are DISMISSED WITH PREJUDICE. All other claims are
DISMISSED WITHOUT PREJUDICE, and the Court GRANTS Plaintiff leave to
amend the Complaint.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, April 19, 2011.
_____________________________
David Alan Ezra
United States District Judge
Dodds v. BAC Home Loan Servicing LP, et al., Cv. No. 10-00371 DAE BMK;
ORDER: (1) GRANTING BOFA’S MOTION TO DISMISS COMPLAINT; (2)
DISMISSING WITH PREJUDICE PLAINTIFF’S TILA RESCISSION AND
INJUNCTIVE RELIEF CLAIMS; (3) DISMISSING WITHOUT PREJUDICE ALL
OTHER CLAIMS; AND (4) GRANTING PLAINTIFF LEAVE TO AMEND THE
COMPLAINT
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