Cootey et al v. Countrywide Home Loans, Inc. et al

Filing 33

ORDER (1) GRANTING IN PART DEFENDANTS COUNTRYWIDE HOME LOANS, INC., AND BANK OF AMERICA, N.A.S MOTION TO DISMISS PLAINTIFFS FIRST AMENDED COMPLAINT; AND (2) DECLINING SUPPLEMENTAL JURISDICTION OVER REMAINING STATE LAW CLAIMS re 27 . Signed by JUDGE J. MICHAEL SEABRIGHT on 10/12/11. (gls, )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
TIMOTHY A. COOTEY and
DELORES A. COOTEY,

)
)
)
Plaintiffs,
)
)
vs.
)
)
COUNTRYWIDE HOME LOANS,
)
INC. n/k/a BANK OF AMERICA
)
CORPORATION; BAC HOME
)
LOANS SERVICING, LP; ISLAND
)
MORTGAGE SOURCE; JOHN DOES )
1-10; JANE ROES 1-10; DOE
)
CORPORATIONS, PARTNERSHIPS )
AND OTHER ENTITIES 1-10,
)
)
Defendants.
)
________________________________ )

CIVIL NO. 11-00152 JMS/KSC
ORDER (1) GRANTING IN PART
DEFENDANTS COUNTRYWIDE
HOME LOANS, INC. AND BANK
OF AMERICA, N.A.’S MOTION
TO DISMISS PLAINTIFFS’ FIRST
AMENDED COMPLAINT; AND
(2) DECLINING SUPPLEMENTAL
JURISDICTION OVER
REMAINING STATE LAW
CLAIMS

ORDER (1) GRANTING IN PART DEFENDANTS COUNTRYWIDE
HOME LOANS, INC. AND BANK OF AMERICA, N.A.’S MOTION TO
DISMISS PLAINTIFFS’ FIRST AMENDED COMPLAINT; AND
(2) DECLINING SUPPLEMENTAL JURISDICTION OVER REMAINING
STATE LAW CLAIMS
I. INTRODUCTION
On March 9, 2011, Plaintiffs Timothy A. and Delores A. Cootey
(“Plaintiffs”) filed this action alleging claims against Defendants Countrywide
Home Loans, Inc. (“Countrywide”) and BAC Home Loans Servicing, LP (“BAC”)
for violations of the Truth in Lending Act (“TILA”), the Real Estate Settlement
Procedures Act of 1974 (“RESPA”), the Fair Credit Reporting Act (“FCRA”), the

Equal Credit Opportunity Act (“ECOA”), and various state law claims stemming
from a mortgage transaction concerning real property located at 64-212 Puu Pulehu
Loop, Kamuela, Hawaii 96743 (the “subject property”). Upon a Motion to
Dismiss by Defendants, the court dismissed the Complaint with leave to amend,
resulting in Plaintiffs filing a First Amended Complaint (“FAC”). The FAC asserts
claims against Countrywide, BAC, and Plaintiffs’ mortgage broker, Island
Mortgage Source (“Island”).
Currently before the court is Countrywide and BAC’s (“Moving
Defendants”) Motion to Dismiss the FAC, in which they argue that Plaintiffs have
failed to correct the deficiencies of their pleading and the FAC fails to state a
cognizable claim. For the reasons set forth below, the court GRANTS the Motion
in part as to Plaintiffs’ federal claims, and declines jurisdiction over the remaining
state law claims.
II. BACKGROUND
A.

Factual Background
As alleged in the FAC, in December 2007, Plaintiffs met with Island

seeking assistance in refinancing the subject property. FAC ¶¶ 11-12. Plaintiffs
were ultimately offered, and accepted, a mortgage loan with Countrywide in the
amount of $331,500 with a thirty-year, fixed-interest rate of 6.125%. Id. ¶¶ 13-16.

2

Closing occurred on January 2, 2008.1 Id. ¶ 17.
The FAC asserts that in offering and consummating this loan
transaction, both Countrywide and Island committed various misdeeds.
Specifically, Island allegedly never provided Plaintiffs a broker’s agreement
explaining its costs and fees, id. ¶ 37, and Countrywide allegedly (1) did not
properly verify Plaintiffs’ income or employment as required by generally accepted
underwriting principles; (2) violated its fiduciary duty to Plaintiffs by ignoring that
Plaintiffs would be paying more than eight times what they should be paying for
housing expenses; and (3) failed to disclose that it intended to securitize and
transfer, sell, or assign the note and/or mortgage. Id. ¶¶ 24, 28, 41. The FAC
further asserts that both Island and Countrywide (1) overstated Plaintiffs’ income
on the loan application to qualify them for a loan they would not otherwise qualify
for; (2) used a “stated income stated assets [sic]” loan, even though Timothy
Cootey was employed; (3) rushed Plaintiffs through signing all the documents and
deprived Plaintiffs the opportunity to review the documents and/or ask questions;
(4) failed to have a notary present; (5) did not explain the loan terms or that
Plaintiffs could compare the loan terms to other loans; (6) charged Plaintiffs

1

The court previously took judicial notice of the mortgage, which is dated December 31,
2007. See Cootey v. Countrywide Home Loans, Inc. et al., 2011 WL 2441707, at *1 (D. Haw.
June 14, 2011). Whether closing occurred on December 31, 2007 or January 2, 2008 does not
affect the reasoning of this Order.
3

excessive broker and lender fees; and (7) failed to provide signed and dated copies
of the loan application, the initial and/or final truth in lending statement, the good
faith estimate, the final HUD-1 settlement statement, the servicing transfer
disclosure, and Gramm-Leach-Bliley disclosures. Id. ¶¶ 19-22, 30-36, 38-39.
The FAC asserts that Plaintiffs “have reason to believe their loan was
sold, transferred, or assigned, improperly to undisclosed 3rd parties.” Id. ¶ 42.
Although not clearly alleged in the FAC, it appears that Plaintiffs believe BOA
and/or BAC became a subsequent purchaser, assignee, or transferee of the note
and/or mortgage, because the FAC asserts that BOA purchased Countrywide’s
stock. Id. ¶¶ 74-75.
In late 2008, Timothy Cootey suffered a heart attack, and on October
26, 2009, he advised BOA that he was working only part time. Id. ¶¶ 45-46.
Plaintiffs therefore requested a loan modification, for which they were approved.
Id. ¶¶ 47, 49. Plaintiffs made their loan payments on time, but in 2010, BAC
and/or BOA incorrectly asserted that they had missed payments. Id. ¶¶ 50-59.
When Delores Cootey contacted BOA and/or BAC in September 2010 seeking the
payment coupon for that month, she was informed that foreclosure proceedings had
already commenced. Id. ¶¶ 58-59. Plaintiffs nonetheless continued to make their
payments, and received conflicting information from BOA and/or BAC during the

4

various calls Plaintiffs made to straighten out the payment issue. Id. ¶¶ 60-67.
BOA and/or BAC returned Plaintiffs’ cashier’s checks for their
November and December 2010 payments and filed a Notice of Intent to Foreclose
on December 17, 2010. Id. ¶ 68. The FAC further asserts that BAC issued the
Notice of Intent to Foreclose without establishing that it had the power to
foreclose. Id. ¶ 70.
B.

Procedural Background
On March 9, 2011, Plaintiffs filed this action. The Complaint

mirrored several complaints Plaintiffs’ counsel, Robin Horner, has filed in several
other actions, and Defendants filed a Motion seeking to dismiss the Complaint on
the same grounds that the court had previously dismissed those other complaints.
As a result, on June 14, 2011, the court granted the Motion to Dismiss, with leave
for Plaintiffs to file their FAC (the “June 14 Order”). Cootey v. Countrywide
Home Loans, Inc., 2011 WL 2441707 (D. Haw. June 14, 2011).
On July 12, 2011, Plaintiffs filed their FAC, alleging claims titled
(1) Violations of TILA, RESPA, and ECOA (Count I); (2) Fraudulent
Misrepresentation (Count II); (3) Breach of Fiduciary Duty (Count III); (4) Unjust
Enrichment (Count IV); (5) Mistake (Count V); (6) Unfair and Deceptive Acts or
Practices (Count VI); (7) Breach of Contract (Count VII); (8) Negligent and/or

5

Intentional Infliction of Emotional Distress (“NIED” and/or “IIED”) (Count VIII);
(9) Violation of Gramm-Leach-Bliley Act (Count IX); and (10) Quiet Title (Count
X).
On July 26, 2011, Moving Defendants filed their Motion to Dismiss.
Plaintiffs filed an Opposition on September 19, 2011, and Defendants filed a Reply
on September 26, 2011. A hearing was held on October 11, 2011.
III. STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss
a claim for “failure to state a claim upon which relief can be granted[.]”
“To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Weber v. Dep’t of Veterans
Affairs, 521 F.3d 1061, 1065 (9th Cir. 2008). This tenet -- that the court must
accept as true all of the allegations contained in the complaint -- “is inapplicable to
legal conclusions.” Iqbal, 129 S. Ct. at 1949. Accordingly, “[t]hreadbare recitals
of the elements of a cause of action, supported by mere conclusory statements, do
not suffice.” Id. (citing Twombly, 550 U.S. at 555). Rather, “[a] claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw

6

the reasonable inference that the defendant is liable for the misconduct alleged.”
Id. (citing Twombly, 550 U.S. at 556). 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.
The court may dismiss a complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6) on its own motion. See Omar v. Sea-Land Serv., Inc., 813 F.2d
986, 991 (9th Cir. 1987) (“A trial court may dismiss a claim sua sponte under
[Rule] 12(b)(6). Such a dismissal may be made without notice where the claimant
cannot possibly win relief.”); Ricotta v. California, 4 F. Supp. 2d 961, 968 n.7
(S.D. Cal. 1998) (“The Court can dismiss a claim sua sponte for a Defendant who
has not filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6).”); see also Baker
v. Director, U.S. Parole Comm’n, 916 F.2d 725, 727 (D.C. Cir. 1990) (holding that
a district court may dismiss cases sua sponte pursuant to Rule 12(b)(6) without
notice where plaintiff could not prevail on complaint as alleged).
IV. DISCUSSION
Moving Defendants argue that each of Plaintiffs’ claims should be
dismissed for failure to state a cognizable claim. The court first addresses
Plaintiffs’ federal claims, and, finding that Plaintiffs’ federal claims must be
dismissed, addresses the issue of supplemental jurisdiction.

7

A.

Federal Claims2
1.

Violation of TILA (Count I)
The FAC asserts that Defendants violated TILA “by failing to make

most if not all of the required disclosures, and accurately disclose the interest rate
in violation of 12 C.F.R. § 226.18(d)(1).” FAC ¶ 79(a). This TILA claim for
damages3 fails for at least two reasons.
First, as to Island, TILA sets forth disclosure requirements for
“creditors” only, which does not include mortgage brokers and servicers. See 15
U.S.C. § 1602(f); Cetto v. LaSalle Bank Nat’l Ass’n, 518 F.3d 263, 271 (4th Cir.
2008) (affirming dismissal because a mortgage broker was not a “creditor” as
defined by 15 U.S.C. § 1602(f))); Viernes v. Executive Mortg., Inc., 372 F. Supp.
2d 576, 581-82 (D. Haw. 2004) (holding that a mortgage broker and one of its
officers were not creditors under TILA). Thus, Plaintiffs cannot assert a TILA

2

In addition to the claims addressed below, Plaintiffs’ Opposition asserts that Count I
includes additional claims for violations of federal law. See, e.g., Pls.’ Opp’n at 12 (asserting
that Count I “properly cites the specific RESPA, TILA, ECOA, FRCA, FACTA, and CROA
provisions that are violated by Defendants”). Plaintiffs are mistaken; the only allegations of
violations of federal law contained in Count I are for TILA, RESPA, and ECOA. The court
therefore limits its analysis to those claims that are actually alleged in the FAC.
The FAC also included a claim for violation of the Gramm-Leach-Bliley Financial
Modernization Act (Count IX), yet Plaintiffs assert that they are “voluntarily dismissing” this
claim. The court therefore GRANTS Moving Defendants’ Motion as to Count IX.
3

In dismissing the Complaint, the court did not grant Plaintiffs leave to state a TILA
rescission claim, and the court construes Plaintiffs’ allegations as asserting a TILA damages
claim only.
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claim against Island.
Second, as to Moving Defendants, this claim is time-barred. As the
court previously explained in its June 14, 2011 Order, any claim for damages under
TILA must be brought “within one year from the date of the occurrence of the
violation.” 15 U.S.C. § 1640(e). For violations of TILA’s disclosure
requirements, this one-year period begins to run “when the plaintiffs executed their
loan documents, because they could have discovered the alleged disclosure
violations and discrepancies at that time.” Cervantes v. Countrywide Home Loans,
Inc., --- F.3d ----, 2011 WL 3911031, at *8 (9th Cir. Sept. 7, 2011) (citing 15
U.S.C. § 1640(e)); see also King v. California, 784 F.2d 910, 915 (9th Cir. 1986)
(stating that the limitations period begins to run from the date of consummation of
the loan).
Plaintiffs entered into the mortgage transaction on January 2, 2008,
and did not bring this action until over three years later on March 9, 2011.
Accordingly, on the face of the FAC, Plaintiffs’ TILA damages claim appears
time-barred unless Plaintiffs can demonstrate that equitable tolling and/or equitable
estoppel applies to toll the statute of limitations.
Equitable tolling applies “where, despite all due diligence, the party
invoking equitable tolling is unable to obtain vital information bearing on the

9

existence of the claim.” Cervantes, 2011 WL 3911031, at *8 (quoting SocopGonzalez v. I.N.S., 272 F.3d 1176, 1193 (9th Cir. 2001)); King, 784 F.2d at 915
(“[T]he doctrine of equitable tolling may, in the appropriate circumstances,
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.”). In comparison, “[e]quitable estoppel ‘halts the statute of limitations
when there is active conduct by a defendant, above and beyond the wrongdoing
upon which the plaintiff’s claim is filed, to prevent the plaintiff from suing in
time.’” Cervantes, 2011 WL 3911031, at *9 (quoting Guerrero v. Gates, 442 F.3d
697, 706 (9th Cir. 2006)); see also Lukovsky v. Cnty. of San Francisco, 535 F.3d
1044, 1052 (9th Cir. 2008) (“The primary problem with plaintiffs’ argument is that
their alleged basis for equitable estoppel is the same as their cause of action. As
we have previously explained, the plaintiff must point to some fraudulent
concealment, some active conduct by the defendant ‘above and beyond the
wrongdoing upon which the plaintiff’s claim is filed, to prevent the plaintiff from
suing in time.’” (citation omitted)).
Although the FAC asserts three separate facts as supporting tolling of
the statute of limitations, none of them supports application of either doctrine. For
example, the FAC asserts that equitable tolling applies because Plaintiffs “are

10

unsophisticated borrowers,” FAC ¶ 84, yet such fact does not suggest that
Plaintiffs could not have learned of their claims through the exercise of due
diligence and/or that circumstances beyond their control prevented them from
learning of the TILA violations. See, e.g., Cervantes, 2011 WL 3911031, at *8
(rejecting equitable tolling argument because “the plaintiffs have not alleged
circumstances beyond their control that prevented them [from learning of the TILA
violations]”); Meyer v. Ameriquest Mortg. Co., 342 F.3d 899, 902-03 (9th Cir.
2003) (rejecting argument for equitable tolling of the TILA claim because plaintiff
was in full possession of all loan documents and did not allege any actions that
would have prevented discovery of the alleged TILA violations); Perez v. Wells
Fargo Bank, N.A., 2011 WL 3809808, at *14 (N.D. Cal. Aug. 29, 2011) (rejecting
that lack of sophistication tolls the statute of limitations); Carnero v. Washington
Mut., 2010 WL 4916419, at *3 (N.D. Cal. Nov. 22, 2010) (same); see also Guinto
v. Wells Fargo Bank, 2011 WL 2618893, at *6 (E.D. Cal. June 30, 2011) (similar).
The FAC also asserts that the statute of limitations should be tolled
because “Island, [Countrywide], BAC/BOA hid and concealed their wrongful
conduct, including, but not limited to failing to make important disclosures,
selling/assigning/transferring Cooteys’ loan to undisclosed 3rd parties.” FAC
¶ 84. This allegation appears to be directed to an equitable estoppel argument, but

11

for equitable estoppel to apply, “the plaintiff must point to some fraudulent
concealment, some active conduct by the defendant ‘above and beyond the
wrongdoing upon which the plaintiff’s claim is filed, to prevent the plaintiff from
suing in time.’” Lukovsky, 535 F.3d at 1052 (citation omitted). This allegation is
insufficient on its face and the FAC includes no allegations that Moving
Defendants concealed any particular information necessary for Plaintiffs to
discover the alleged TILA violations, or indeed made any “misrepresentation and
concealment of facts [that] is ‘above and beyond the wrongdoing’ that forms the
basis for [their] TILA [claim].” See Cervantes, 2011 WL 3911031, at *9;
Robertson v. Bank of Am., NA, 2011 WL 1231003, at *3 (N.D. Cal Apr. 1, 2011)
(rejecting equitable estoppel argument where “the FAC is devoid of facts
demonstrating that Defendant actively concealed its purported TILA violations
[and] Plaintiff does nothing more than restate her fraud and TILA claims”); Jacob
v. Aurora Loan Servs., 2010 WL 2673128, at *3 (N.D. Cal. July 2, 2010)
(“Plaintiff cannot rely on the same factual allegations to show that Defendants
violated federal statutes and to toll the limitations periods that apply to those
statutes. Otherwise, equitable tolling would apply in every case where a plaintiff
alleges violations of TILA . . . and the statutes of limitations would be
meaningless.”); Garcia v. Wachovia Mortg. Corp., 676 F. Supp. 2d 895, 906 (C.D.

12

Cal. 2009) (“[T]he mere existence of TILA violations and lack of disclosure does
not itself equitably toll the statute of limitations.”).
The FAC also asserts that the statute of limitations should be tolled
because “Island and [Countrywide] charg[ed] excessive fees at the time of loan
origination.” FAC ¶ 84. Whether Countrywide and/or Island charged excessive
fees, however, is wholly irrelevant to whether the statute of limitations should be
tolled.
Finally, in Opposition to the Motion to Dismiss, Plaintiffs argue that
they were tricked into waiting to bring a legal action because they were given a
trial modification of their mortgage loan. Pls.’ Opp’n at 15. Plaintiffs do not
include this allegation in their FAC and such fact, even if alleged, does not explain
why Plaintiffs could not have brought this claim sooner. Such allegation would
also fail on the alternative basis that TILA damages claim was already untimely at
the time they sought modification -- the trial loan modification occurred in October
2009, when the one-year statute of limitations had already run.
In sum, because Plaintiffs’ TILA damages claim is time-barred, the
court GRANTS Defendants’ Motion to Dismiss this claim. As to whether
Plaintiffs should be granted another opportunity to correct the deficiencies of the
FAC, the court finds that granting leave would be futile. See Ascon Props., Inc. v.

13

Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989) (providing that the court’s
discretion to deny leave to amend is “particularly broad where plaintiff has
previously amended the complaint”). The court has already explained in detail
once what Plaintiffs must allege to assert equitable tolling and although Plaintiffs
attempted to address this issue in their FAC, the facts alleged, even if pled in more
detail, could not establish equitable tolling. Further, during the October 11, 2011
hearing, Plaintiff’s counsel conceded that if the court dismissed the federal claims,
any further attempt to amend would be futile. This dismissal is with prejudice.
2.

Violation of RESPA (Count I)
The FAC asserts that all Defendants “violated § 2605 of RESPA by

failing to the loan servicing agreement [sic], and notice to Cooteys of any such sale
of their loan, at the time of such sale,” and “violated § 2607 [ ] by charging
excessive fees for real estate settlement services, which amount to ‘kickbacks.’”
FAC ¶¶ 81-82. These allegations are insufficient to assert a RESPA claim.
As an initial matter, Plaintiffs’ RESPA claim is pled in the most vague
terms such that the court (and the Defendants) cannot determine what each
Defendant allegedly did that forms the RESPA claim. The June 14, 2011 Order
had previously found that the Complaint must be dismissed because it fails to make
“any particular allegations as to any specific Defendant [and therefore] fails to state

14

a claim that is plausible on its face as to any Defendant.” Cootey, 2011 WL
2441707, at *3. Plaintiffs failed to correct this pleading deficiency in asserting
their RESPA claim. Rather, the FAC asserts that all Defendants violated §§ 2605
and 2607, without any regard to the fact that each Defendant had different roles in
the loan transaction. By failing (once again) to make factual allegations as to each
particular Defendant, Plaintiffs have failed to state a claim.
Second, all of FAC’s allegations of RESPA violations fail because
Plaintiffs have not alleged any actual damages. Pursuant to 12 U.S.C.
§ 2605(f)(1), Plaintiffs have a burden to plead and demonstrate they have suffered
damages. Specifically, § 2605(f)(1) provides:
Whoever fails to comply with any provision of this
section shall be liable to the borrower for each such
failure in the following amounts:
(1) Individuals
In the case of any action by an individual, an
amount equal to the sum of -(A) any actual damages to the borrower as a result
of the failure; and
(B) any additional damages, as the court may
allow, in the case of a pattern or practice of
noncompliance with the requirements of this section, in
an amount not to exceed $1,000.
Because damages are a necessary element of a RESPA claim, failure to plead
damages is fatal to a RESPA claim. See, e.g., Esoimeme v. Wells Fargo Bank,
2011 WL 3875881, at *14 (E.D. Cal. Sept. 1, 2011) (dismissing claim where the
15

plaintiff failed to “allege any pecuniary loss from defendant’s alleged failure to
respond to the QWR”); Soriano v. Countrywide Home Loans, Inc., 2011 WL
1362077, at *6 (N.D. Cal. Apr. 11, 2011) (reasoning that “even if a RESPA
violation exists, Plaintiff must show that the losses alleged are causally related to
the RESPA violation itself to state a valid claim under RESPA”); Shepherd v. Am.
Home Mortg. Servs., 2009 WL 4505925, at *3 (E.D. Cal. Nov. 20, 2009)
(“[A]lleging a breach of RESPA duties alone does not state a claim under RESPA.
Plaintiff must, at a minimum, also allege that the breach resulted in actual
damages.” (quoting Hutchinson v. Del. Sav. Bank FSB, 410 F. Supp. 2d 374, 383
(D. N.J. 2006))).
The FAC alleges only that Defendants are liable to Plaintiffs for
damages, see FAC ¶ 82, yet fails to allege that Plaintiffs suffered any actual
damages as a result of the alleged RESPA violations. See Shepherd, 2009 WL
4505925, at *3. Further, although the FAC asserts that Defendants are liable for
Plaintiffs’ attorneys’ fees, such allegation does meet this requirement -- the FAC
includes no allegations explaining how the RESPA violations caused Plaintiffs to
incur attorneys’ fees and in any event attorneys’ fees are not “actual damages” as
contemplated by § 2605(f)(1) and instead are separately enumerated as recoverable
losses in § 2605(f)(3). See, e.g., Luciw v. Bank of Am., N.A., 2010 WL 3958715, at

16

*5 (N.D. Cal. Oct. 7, 2010) (“[A]ttorneys’ fees typically are not considered ‘actual
damages,’ and other district courts have rejected similar arguments.”); Allen v.
United Fin. Mortg. Corp., 660 F. Supp. 2d 1089, 1097 (N.D. Cal. 2009)
(concluding that attorneys fees’ are not a “pecuniary loss” sufficient for purposes
of 12 U.S.C. § 2605(f)(1)). On this basis alone, Plaintiffs’ RESPA claim fails.
Third, as to Plaintiffs’ assertion that Defendants violated § 2605, the
court previously explained to Plaintiffs that § 2605 governs the notice requirements
where loan servicing is assigned, sold, or transferred. See Cootey, 2011 WL
2441707, at *6 n.4 (citing 12 U.S.C. § 2605). Indeed, the June 14, 2011 Order
dismissed Plaintiffs’ original RESPA claim because the Complaint “include[d] no
allegations that appear to state violations of RESPA.” Id. at *6. Plaintiffs failed to
correct this deficiency in the FAC.
Specifically, the FAC’s allegation that all Defendants “violated
§ 2605 of RESPA by failing to the loan servicing agreement [sic], and notice to
Cooteys of any such sale of their loan, at the time of such sale,” -- beyond being
nonsensical -- leaves unclear whether Plaintiffs are asserting that one or more of
the Defendants failed to give Plaintiffs proper notice of a change in loan servicing
(a violation of 12 U.S.C. § 2605), or that one of more of the Defendants failed to
notify Plaintiffs when the loan was transferred to another creditor (a possible

17

violation of TILA’s 15 U.S.C. § 1641(g)). Regardless of which claim Plaintiffs
meant to assert, the allegations are so vague that the FAC fails to state a claim that
is plausible on its face -- the FAC leaves completely unanswered who failed to
make these disclosures and when the omissions took place. To the extent Plaintiffs
intended to assert a violation of § 2605, the FAC fails to assert who serviced the
loan, when a change in servicing occurred, and who took over the servicing. To
the extent Plaintiffs intended to assert a claim for violation of 15 U.S.C. § 1641(g),
the FAC fails to explain when any transfer occurred and what each Defendant’s
role was in that transfer.
Finally, Plaintiffs’ allegation regarding excessive fees likewise fails.
RESPA prohibits the acceptance of “any fee, kickback, or thing of value pursuant
to any agreement or understanding, oral or otherwise, that business incident to or a
part of a real estate settlement service involving a federally related mortgage loan
shall be referred to any person.” 12 U.S.C. § 2607. In other words, a RESPA
violation occurs when a party receives a fee for providing a referral regarding a
mortgage loan. The FAC, however, includes no allegations that any Defendant
paid or received anything for a referral regarding Plaintiffs’ mortgage loan.
Rather, the FAC asserts only that Defendants charged “excessive fees” and such
allegation, on its own, does not suggest that those fees were somehow connected

18

with a referral. See, e.g., Medrano v. Flagstar Bank, FSB, 2011 WL 781945, at *4
(C.D. Cal. Mar. 1, 2011) (dismissing RESPA claim because “[a]lthough RESPA
does provide a private cause of action for the payment of kickbacks and unearned
fees in the course of real estate settlement services, Plaintiffs fail to allege facts to
show that the commission paid to Exodus (Plaintiffs’ broker) or closing costs paid
to Protofund (Plaintiff’s lender) were ‘unearned fees’”); Khan v. World Savings
Bank, FSB, 2011 WL 133030, at *6 (N.D. Cal. Jan. 14, 2011) (dismissing RESPA
claim because, among other reasons, “there is no allegation that the alleged
‘kickbacks, fees, or other things of value’ had any relationship to the referral of
loan-related business or the real estate settlement process such that they would be
covered by RESPA”).
Further, as to Moving Defendants,4 Plaintiffs’ RESPA claim for
violation of § 2607 is time-barred on its face. As the court previously explained in
its June 14, 2011 Order, the statute of limitations for violation of § 2607 is one
year from the date of the violation, see 12 U.S.C. § 2614, but may be subject to

4

The court considers the statute of limitations argument as it applies to Moving
Defendants only -- a statute of limitations argument is an affirmative defense that a defendant
has the burden of raising and establishing. See, e.g., Radford v. Wells Fargo Bank, 2011 WL
1833020, at *7 (D. Haw. May 13, 2011). Island has not appeared and therefore had not met its
burden to raise this affirmative defense. See Caniadido v. Countrywide Bank, FSB, 2011 WL
2470640, at *8 (D. Haw. June 20, 2011) (“As the limitations period is a matter on which a
defendant bears the burden, this court does not here sua sponte dismiss the damage claim against
[the unserved defendant] on statute of limitations grounds.”).
19

equitable tolling. See Cootey, 2011 WL 2441707, at *6. In Plaintiffs’ case, any
alleged “kickback” occurred when the loan was consummated. As stated above for
Plaintiffs’ TILA damages claim, Plaintiffs brought this action well past the oneyear statute of limitations and the FAC fails to include sufficient allegations that
would trigger tolling. Plaintiffs’ § 2607 claim as against Moving Defendants is
untimely.
The court therefore DISMISSES Plaintiffs’ RESPA claim. As to
whether Plaintiffs should be granted leave to amend, the June 14, 2011 Order
previously instructed Plaintiffs that they must plead facts as to each Defendant, set
forth specific factual and legal allegations, and link the allegations to the particular
statutory violations. See Cootey, 2011 WL 2441707, at *3-4. The FAC shows no
signs of trying to comply with these instructions. Instead, the FAC lumps
Defendants together and fails to explain how each Defendant participated in the
alleged RESPA violations. Further, in their Opposition, Plaintiffs offer no proffer
of how they could amend the RESPA claim to state a viable claim, and Plaintiffs’
counsel conceded at the October 11, 2011 hearing that any further effort to amend
would be futile. The court therefore finds that granting leave to amend under these
circumstances would be futile. See Ascon Props., 866 F.2d at 1160; see also
Destfino v. Reiswig, 630 F.3d 952, 958 (9th Cir. 2011) (concluding that district

20

court acted in its discretion in not granting leave to amend where the plaintiffs
failed to correct deficiencies previously outlined by the court); Kendall v. Visa
U.S.A., Inc., 518 F.3d 1042, 1051-52 (9th Cir. 2008) (concluding that amendment
would be futile where plaintiffs already filed an Amended Complaint containing
the same defects as their original complaint and failed to state what additional facts
they would plead if given leave to amend, or what additional discovery they would
conduct to discover such facts). This dismissal is without leave to amend.
3.

Violation of ECOA (Count I)
The FAC asserts that Defendants violated ECOA “by failing to deliver

to Cooteys a signed and dated loan application.” FAC ¶ 79(b). This allegation
fails to assert an ECOA violation.
ECOA makes it illegal for creditors5 to “discriminate against any
applicant, with respect to any aspect of a credit transaction . . . on the basis of race,
color, religion, national origin, sex or marital status, or age . . . .” 15 U.S.C.
§ 1691(a)(1). ECOA further provides that “[e]ach creditor shall promptly furnish
an applicant, upon written request by the applicant made within a reasonable
5

Unlike TILA, which does not apply to mortgage brokers, see supra, the definition of
“creditor” in ECOA is broad enough that it might encompass mortgage brokers. See 15 U.S.C.
§ 1691a(e) (defining “creditor” as “any person who regularly extends, renews, or continues
credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or
any assignee of an original creditor who participates in the decision to extend, renew, or continue
credit”).
21

period of time of the application, a copy of the appraisal report used in connection
with the applicant’s application for a loan that is or would have been secured by a
lien on residential real property.” 15 U.S.C. § 1691(e). The Regulations in turn
outline various obligations of creditors regarding, among other things, requests for
information, evaluation of applications, extensions of credit, furnishing of credit
information, and providing appraisal reports. See 12 C.F.R. §§ 202.5-202.13. To
state a claim for violation of this provision, a plaintiff must “allege that she was an
‘applicant’ and that the defendants treated her less favorably because of her race.”
Estate of Davis v. Wells Fargo Bank, 633 F.3d 529, 538 (7th Cir. 2011); Chiang v.
Veneman, 385 F.3d 256, 259 (3rd Cir. 2004); Mays v. Buckeye Rural Elec. Co-op.,
Inc., 277 F.3d 873, 877 (6th Cir. 2002).
The FAC’s assertion that Defendants “fail[ed] to deliver to Cooteys a
signed and dated loan application” see FAC ¶ 79(b), simply does not suggest that
Plaintiffs were discriminated against in applying for a loan or that Defendants
otherwise violated ECOA in any manner. Further, Plaintiffs do not cite, and this
court is not aware of, any ECOA provision that creates a cause of action for a
creditor’s failure to deliver a signed and dated loan application. On this basis
alone, this claim fails.
Further, as to Moving Defendants, this claim is time-barred. A claim
22

for violation of ECOA must be brought no later than two years “from the date of
occurrence of the violation,” 15 U.S.C. § 1691e(f), but equitable tolling may apply
under certain circumstances. See Hafiz v. Greenpoint Mortg. Funding, Inc., 652 F.
Supp. 2d 1039, 1045 (N.D. Cal. 2009). As explained above for Plaintiffs’ TILA
claim, Plaintiffs have failed to allege sufficient facts to suggest that the statute of
limitations may be tolled.
The court therefore DISMISSES Plaintiffs’ ECOA claim. This
dismissal is without leave to amend. The court has already given Plaintiffs one
opportunity to amend their pleadings to assert an ECOA claim and their FAC came
no closer to asserting such claim. The court therefore finds that granting leave to
amend would be futile. This dismissal is with prejudice.
B.

Supplemental Jurisdiction
Given the court’s dismissal of the federal claims, the remaining claims

are state law claims over which the court has only supplemental jurisdiction (there
is no basis in the FAC for diversity jurisdiction given that both Plaintiffs and Island
are citizens of Hawaii). Under 28 U.S.C. § 1367(c)(3), “district courts may decline
to exercise supplemental jurisdiction . . . if . . . the district court has dismissed all
claims over which it has original jurisdiction[.]” “[W]hen deciding whether to
exercise supplemental jurisdiction, ‘a federal court should consider and weigh in
23

each case, and at every stage of the litigation, the values of judicial economy,
convenience, fairness, and comity.’” City of Chicago v. Int’l Coll. of Surgeons,
522 U.S. 156, 173 (1997) (quoting Carnegie–Mellon Univ. v. Cohill, 484 U.S. 343,
350 (1988)); Acri v. Varian Assocs., Inc., 114 F.3d 999, 1001 (9th Cir. 1997) (en
banc).
Because state courts have the primary responsibility for developing
and applying state law, “the values of judicial economy, convenience, fairness and
comity” do not favor retaining jurisdiction in this case. See Acri, 114 F.3d at 1001
(providing that “in the usual case in which all federal-law claims are eliminated
before trial, the balance of factors will point towards declining to exercise
jurisdiction over the remaining state-law claims” (quoting Carnegie-Mellon Univ.,
484 U.S. at 350 n. 7)); Curiel v. Barclays Capital Real Estate Inc., 2010 WL
729499, at *1 (E.D. Cal. Mar. 2, 2010) (reasoning that “primary responsibility for
developing and applying state law rests with the state courts” and -- after
dismissing TILA and RESPA claims -- declining to exercise supplemental
jurisdiction over state law claims for negligence, breach of fiduciary duty, fraud,
breach of contract, breach of the implied covenant of good faith and fair dealing,
wrongful foreclosure, and California Civil Code sections); Anderson v.
Countrywide Fin., 2009 WL 3368444, at *5 (E.D. Cal. Oct. 16, 2009) (finding that
24

“the Gibbs values do not favor continued exercise of supplemental jurisdiction”
after resolving TILA and RESPA claims).
Accordingly, as this court similarly found in Liu v. Wells Fargo Home
Mortg. Inc., 2011 WL 1362101, at *6-7 (D. Haw. Apr. 8, 2011), the court declines
to continue exercising supplemental jurisdiction over the state law claims alleged
in the FAC. The claims are matters for state courts. Moreover, judicial economy
does not favor retaining jurisdiction. The action in this court has not proceeded
past the initial pleading stages -- Defendants have yet to file an Answer and the
court has not resolved any substantive matters. See Otto v. Heckler, 802 F.2d 337,
338 (9th Cir. 1986) (“[T]he district court, of course, has the discretion to determine
whether its investment of judicial energy justifies retention of jurisdiction or if it
should more properly dismiss the claims without prejudice.”); Castaneda v. Saxon
Mortg. Servs., 2010 WL 2303246, at *1 (E.D. Cal. June 7, 2010) (declining to
exercise supplemental jurisdiction and reasoning, in part, that “while it has been
over a year since plaintiffs filed their original Complaint in federal court, the case
has yet to progress beyond the motion to dismiss stage”); Pica v. Wachovia Mortg.,
2010 WL 2555634, at *1 (E.D. Cal. June 21, 2010) (“Since this lawsuit has not
proceeded past the pleading stage, continued exercise of supplemental jurisdiction
over the state law claims serves no efficiency interest.”) (quotation marks and
25

citation omitted).6
In short, judicial economy, convenience, fairness, and comity weigh in
favor of declining jurisdiction over Plaintiffs’ state law claims.
V. CONCLUSION
Based on the above, the court GRANTS in part Moving Defendants’
Motion to Dismiss as to Count I of the FAC. This dismissal is as to all Defendants.
There being no other federal claims and no other basis for federal jurisdiction, the
court declines to assert supplemental jurisdiction over the remaining state law
claims. The state law claims are dismissed without prejudice. The Clerk of Court
is directed to terminate this action.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, October 12, 2011.

/s/ J. Michael Seabright
_____________________________
J. Michael Seabright
United States District Judge

Cootey et al. v. Countrywide Home Loans, Inc., et al., Civ. No. 11-00152 JMS/KSC, Order
(1) Granting in Part Defendants Countrywide Home Loans, Inc. and Bank of America, N.A.’s
Motion to Dismiss Plaintiffs’ First Amended Complaint; and (2) Declining Supplemental
Jurisdiction over Remaining State Law Claims

6

28 U.S.C. § 1367(d) provides that “[t]he period of limitations for any claim asserted
under subsection (a), and for any other claim in the same action that is voluntarily dismissed at
the same time as or after the dismissal of the claim under subsection (a), shall be tolled while the
claim is pending and for a period of 30 days after it is dismissed unless State law provides for a
longer tolling period.”
26