Hagan v. United States National Bank et al
Filing
41
ORDER GRANTING DEFENDANTS' 10 MOTION TO DISMISS AND DENYING PLAINTIFF'S 32 MOTION FOR RECONSIDERATION. Signed by JUDGE DERRICK K. WATSON on 10/27/2014. ~ ...the Court grants the defendants' motion to d ismiss and denies Hagan's motion for reconsideration. The Clerk of Court is directed to close the case. (ecs, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications receiv ed 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 Modified on 10/27/2014: text and WO (ecs, ).
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI`I
JEFFREY G. HAGAN,
CIVIL NO. 14-00215 DKW-KSC
Plaintiff,
vs.
UNITED STATES NATIONAL
BANK, et al.,
ORDER GRANTING
DEFENDANTS’ MOTION TO
DISMISS AND DENYING
PLAINTIFF’S MOTION FOR
RECONSIDERATION
Defendants.
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS AND
DENYING PLAINTIFF’S MOTION FOR RECONSIDERATION
Hagan asserts a variety of federal and Hawai‘i state law violations by the
lenders and servicers of the mortgage on his home. He initiated this action after
U.S. Bank initiated a foreclosure proceeding in state court. Because the Court
could only potentially have federal question subject matter jurisdiction over
Hagan’s complaint and because Hagan fails to state a claim under any of his
federal claims, the Court dismisses the federal claims and declines to exercise
supplemental jurisdiction over Hagan’s state law claims.
BACKGROUND
U.S. Bank initiated a foreclosure action on Hagan’s home on April 22, 2013
in the Circuit Court of the Third Circuit, State of Hawai‘i. Apparently in response
to the foreclosure proceedings, Hagan initiated this action on May 5, 20141 against
U.S. Bank and the other named defendants herein, asserting eighteen causes of
action—six arising under federal law, and the remaining claims arising under state
law. Relevant here, Hagan asserts the following federal claims: violation of U.S.
securities law, 15 U.S.C. § 77q(a)(2), (3) (Fourth Cause of Action); violation of the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C.
§§ 1961–1968 (Seventh Cause of Action); violation of the Real Estate Settlement
Procedures Act (“RESPA”), 12 U.S.C. § 2605 (Thirteenth Cause of Action);
violation of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1640 (Fifteenth Cause
of Action); and violations of the Fair Debt Collections Practices Act (“FDCPA”),
15 U.S.C. § 1692 (Sixth and Sixteenth Causes of Action). As Hagan explains in
his complaint, the purposes of this action are to:
a. determine the real owner of the note and mortgage, and thus the
real party in interest;
b. ascertain what monetary consideration was exchanged for each
transfer of the note and/or mortgage;
c. devise a judicially supervised reasonable and equitable resolution
and modification of []his home loan to prevent catastrophic
financial injury, emotional harm and disruption to Plaintiff and his
family;
d. examine and evaluate in this court of law that state and federal
laws have been violated by the parties and their affiliates who have
attempted foreclosure;
1
On May 14, 2014, Hagan also filed a “Notice of Removal” in the state court action. Hagan,
however, did not file any notice of removal in this Court, and, as further discussed below, no
such removal ever occurred.
2
e. determine what fiscal remuneration for Plaintiff and remonstration
against Defendants is warranted as a result of the foregoing.
Complaint ¶ 36.
Defendants move to dismiss the complaint, or alternatively, for a stay
pending resolution of the foreclosure matter in state court. The Court verbally
granted the motion to dismiss at the hearing on September 12, 2014, but indicated
it would issue a written order explaining its decision. Dkt. No. 31. Before that
written order could issue, Hagan moved for reconsideration of the Court’s verbal
order granting defendants’ motion to dismiss. The Court therefore addresses in
this order both the motion to dismiss and Hagan’s motion for reconsideration.
STANDARD OF REVIEW
Rule 12(b)(6) permits a motion to dismiss for failure to state a claim upon
which relief can be granted. Pursuant to Ashcroft v. Iqbal, “[t]o 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.’” 555 U.S. 662, 678 (2009)
(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 570 (2007)). “[T]he tenet
that a court must accept as true all of the allegations contained in a complaint is
inapplicable to legal conclusions.” Id. 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).
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A successful motion for reconsideration must set forth facts or law of a
strongly convincing nature to induce the court to reverse its prior decision. Na
Mamo O ‘Aha ‘Ino v. Galiher, 60 F. Supp. 2d 1058, 1059 (D. Haw. 1999). The
three reasons generally recognized as justifying reconsideration are: (1) an
intervening change in controlling law; (2) the availability of new evidence; and (3)
the need to correct clear error or prevent manifest injustice. Mustafa v. Clark
County Sch. Dist., 157 F.3d 1169, 1178–79 (9th Cir. 1998).
Mere disagreement with a previous order is an insufficient basis for
reconsideration. See Leong v. Hilton Hotels Corp., 689 F. Supp. 1572 (D. Haw.
1988). Furthermore, reconsideration may not be based on evidence and legal
arguments that could have been presented at the time of the challenged decision.
See Kona Enter., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000);
Hawaii Stevedores, Inc. v. HT&T Co., 363 F. Supp. 2d 1253, 1269 (D. Haw.
2005); All Hawaii Tours, Corp. v. Polynesian Cultural Ctr., 116 F.R.D. 645, 649–
50 (D. Haw. 1987), rev’d on other grounds, 855 F.2d 860 (9th Cir. 1988).
“Whether or not to grant reconsideration is committed to the sound discretion of
the court.” Navajo Nation v. Confederated Tribes and Bands of the Yakama Indian
Nation, 331 F.3d 1041, 1046 (9th Cir. 2003).
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DISCUSSION
Initially, the Court will address Hagan’s contention that he removed the
foreclosure action from state court to this Court and that the foreclosure action and
this action are one and the same. Although Hagan filed a notice of removal of the
foreclosure action in state court, he never filed a notice of removal in this Court.
Proper removal procedure requires that:
[a] defendant or defendants desiring to remove any civil action from a
State court shall file in the district court of the United States for the
district and division within which such action is pending a notice of
removal . . . containing a short and plain statement of the grounds for
removal, together with a copy of all process, pleadings, and orders
served upon such defendant or defendants in such action.
28 U.S.C. § 1446(a) (emphasis added); see Wright & Miller, Federal Practice and
Procedure, § 3736 (“[R]emoval is effected by the defendant taking three
procedural steps: filing a notice of removal in the federal court, filing a copy of this
notice in the state court, and giving prompt written notice to all adverse parties.”).
Having failed to follow the requisite removal procedures, Hagan did not remove
anything from state court.
Even if Hagan had followed proper removal procedure, the removal would
not have been valid. U.S. Bank’s foreclosure action is based solely on state law.
Because this Court is one of limited jurisdiction, the only jurisdictional basis for
removal of the foreclosure action (because it is based solely on state law) to this
Court would be under diversity of citizenship jurisdiction pursuant to 28 U.S.C.
5
§ 1332(a). However, diversity of citizenship cases “may not be removed if any of
the . . . defendants [in the state court action] is a citizen of the State in which such
action is brought.” 28 U.S.C. § 1441(b)(2). Hagan is a citizen of Hawai‘i and
therefore could not remove the foreclosure action to this Court.
Accordingly, the state foreclosure action is not and could not be before this
Court. What is before this Court is Hagan’s complaint, filed on May 5, 2014,
which asserts eighteen causes of action. Defendants contend that the only basis for
this Court’s subject matter jurisdiction over Hagan’s complaint could be federal
question jurisdiction pursuant to 28 U.S.C. § 1331. The complaint, however,
asserts jurisdiction arising both under diversity of citizenship and federal question
jurisdiction. Complaint ¶¶ 1–4.
Diversity jurisdiction applies “where the matter in controversy exceeds the
sum or value of $75,000, exclusive of interest and costs, and is between . . .
citizens of different States.” 28 U.S.C. § 1332(a)(1). In order to establish diversity
jurisdiction, Hagan must establish complete diversity of the parties. See Morris v.
Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001) (explaining that
§ 1332(a) “requires complete diversity of citizenship; each of the plaintiffs must be
a citizen of a different state than each of the defendants”). That is, the complaint
must allege facts sufficient to establish diversity of citizenship between Hagan, a
citizen of Hawai‘i, and each of the defendants. When determining diversity
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jurisdiction, a corporation is considered a citizen of both the state in which it is
incorporated and the state in which it has its principal place of business. 28 U.S.C.
§ 1332(c)(1).
Although some of the defendants are not citizens of Hawai‘i, the complaint
alleges that RCO Hawaii LLC is “domiciled in and/or incorporated in . . .
Hawaii/California/Oregon/Washington” and that RCO’s address is “900 Fort Street
Mall, Suite 800, Honolulu Hawai‘i 96813.” Complaint at page 5 ¶ 1, page 7. The
allegation that RCO Hawaii LLC is domiciled or incorporated in Hawai‘i is fatal to
diversity jurisdiction, even if RCO is also simultaneously a citizen of other states.
On the face of the pleading, Hagan and RCO share the same citizenship. Thus, the
complaint fails to establish diversity jurisdiction.
Consequently, the only possible basis for this Court’s subject matter
jurisdiction over Hagan’s complaint is federal question jurisdiction. As discussed
below, however, Hagan fails to state a viable federal claim. Consequently, those
claims are dismissed and the Court, in weighing the applicable factors, declines to
exercise supplemental jurisdiction over Hagan’s state law claims. Dismissal of the
federal claims is discussed below.
I.
Motion to Dismiss
Hagan’s claim for violation of securities laws (Fourth Cause of Action) fails
to state a claim because “no private right of action lies under section 17(a) [(15
7
U.S.C. § 77q(a))],” the provision on which Hagan bases his securities claim. See
In re Washington Pub. Power Supply Sys. Sec. Litig., 823 F.2d 1349, 1358 (9th
Cir. 1987). Further, even if there were a private right of action, Hagan would not
have standing to assert a claim under this provision. “[A] mortgagee does not
qualify . . . as a purchaser, seller, or offeree of a security.” Maixner v. BAC Home
Loans Servicing, LP, 2011 WL 7153929, at *8 (D. Or. Oct. 26, 2011). Therefore,
Hagan does not state a cognizable claim for securities violations.
Hagan’s RICO claim (Seventh Cause of Action) fails to state a claim
because Hagan is unable to plead it with the requisite specificity. Rule 9(b) applies
to Hagan’s RICO claim and “requires that [Hagan] state the time, place, and
specific content of the false representations as well as the identities of the parties to
the misrepresentation.” Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 541
(9th Cir. 1989). However, Hagan stated in his brief and at the hearing on
Defendants’ motion that he did not have the information to support his claim and
that he hoped to obtain that information through later discovery. “The
requirements of Rule 9(b) are designed to prohibit a plaintiff from unilaterally
imposing upon the court, the parties and society enormous social and economic
costs absent some factual basis.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir.
1985). Without anything more than Hagan’s “hope” that information supporting
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the RICO claim could be obtained at a later point, the RICO claim must be
dismissed.
Hagan’s RESPA claim (Thirteenth Cause of Action) also fails to state a
claim because it fails to allege actual damages. Under RESPA, violators may be
liable to the borrower for “any actual damages to the borrower as a result of the
failure . . . .” 12 U.S.C. § 2605(f)(1). “‘[A] number of courts have read th[is]
statute as requiring a showing of pecuniary damages in order to state a claim.’”
Rymal v. Bank of Am., 2011 WL 6100979, at *5 (D. Haw. Dec. 6, 2011) (quoting
Shepherd v. Am. Home Mortg. Servs., Inc., 2009 WL 4505925, at *3 (E.D. Cal.
Nov. 20, 2009)). In Rymal, the “Plaintiff’s assertion that she had difficulty
locating the real party in interest to mitigate losses or discuss ‘work out options’
d[id] not adequately constitute actual damages,” and thus the Court dismissed the
RESPA claim. That same rule directs dismissal of Hagan’s RESPA claim here.
See Solan v. Everhome Mortg. Co., 2011 WL 456013, at *3 (S.D. Cal. Feb. 3,
2011) (dismissing a RESPA claim where the plaintiff provided “only conclusory
allegations as to how she was damaged by the alleged failure to fully respond to
the QWR”).
Hagan’s TILA claim (Fifteenth Cause of Action) fails to state a claim
because it is barred by the statute of limitations. Damages (both statutory and
actual damages) are recoverable under TILA for violations of its disclosure
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requirements. 15 U.S.C. § 1640(a). However, section 1640(e) imposes a 1-year
statute of limitations on claims for damages. That 1-year period typically “runs
from the date of consummation of the transaction . . . .” King v. State of
California, 784 F.2d 910, 915 (9th Cir. 1986). Further, the 1-year period applies to
both actual and statutory damages. See Vietor v. Commonwealth Land Title, 2010
WL 545856, at *3 (N.D. Cal. Feb. 11, 2010); In re Wentz, 393 B.R. 545, 553 (S.D.
Ohio 2008). Here, although Hagan’s mortgage was executed on October 21, 2005,
he did not initiate this action until May 5, 2014. In other words, Hagan initiated
this action over seven years after the statute of limitations for his TILA damages
claim had run.2
Finally, Hagan’s FDCPA claims (Sixth and Sixteenth Causes of Action) fail
because the defendants are not “debt collectors” within the meaning of the FDCPA
by virtue of their attempts to foreclose on the property. “Since a transfer in interest
is the aim of a foreclosure, and not a collection of debt, the foreclosure proceeding
is not a debt collection action under the FDCPA.” Hanaway v. JPMorgan Chase
Bank, 2011 WL 672559, at *4 (C.D. Cal. Feb. 15, 2011). Consequently, “[t]o the
extent [Hagan’s] FDCPA claim is based on the foreclosure proceedings, the claim
fails as a matter of law.” Kitamura v. AOAO of Lihue Townhouse, 2013 WL
2
Even assuming, as Hagan argues, that the October 12, 2009 forbearance plan agreement was a
new loan that triggered a new TILA limitations period, the statute of limitations would have run
on October 12, 2010, still more than 3 years before Hagan initiated this action.
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1398058, at *4 (D. Haw. Mar. 29, 2013); see Hulse v. Ocwen Fed. Bank, 195 F.
Supp. 2d 1188, 1204 (D. Or. 2002) (holding that merely foreclosing on a property
pursuant to the deed of trust without collecting debt does not fall within the terms
of the FDCPA.). To the extent that Hagan is alleging other conduct not related to
foreclosure, the Court dismisses his FDCPA claims pursuant to Fed. R. Civ. P. 8(a)
because Hagan does not include sufficient factual allegations to support any other
theory of an FDCPA violation.
Having dismissed the only federal claims that could support federal subject
matter jurisdiction, this Court may decline to exercise supplemental jurisdiction
over the remaining state law claims in the complaint. 28 U.S.C. § 1367(c). “[A]
federal court should consider and weigh in each case, and at every stage of the
litigation, the values of judicial economy, convenience, fairness, and comity in
order to decide whether to exercise jurisdiction over a case brought in that court
involving pendent state-law claims.” Carnegie-Mellon University v. Cohill, 484
U.S. 343, 350 (1988). “[I]f the federal claims are dismissed before trial, even
though not insubstantial in a jurisdictional sense, the state claims should be
dismissed as well.” United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726
(1966). The Supreme Court has clarified that this does not require mandatory
dismissal when federal claims are dismissed, but “in the usual case in which all
federal-law claims are eliminated before trial, the balance of factors to be
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considered under the pendent jurisdiction doctrine—judicial economy,
convenience, fairness, and comity—will point toward declining to exercise
jurisdiction over the remaining state-law claims.” Carnegie-Mellon, 484 U.S. at
350 n.7.
The Court does not reach the question of whether Hagan’s state law claims
state a claim for purposes of Fed. R. Civ. P. 12(b)(6). Instead, the Court concludes
here that the factors of judicial economy, convenience, fairness, and comity
balance in favor of declining supplemental jurisdiction over Hagan’s remaining
state claims. Accordingly, those claims are also dismissed.
II.
Motion for Reconsideration
Following the Court’s September 2014 verbal ruling at the hearing that
granted defendants’ motion to dismiss, Hagan filed a motion for reconsideration.
Dkt. No. 32. Hagan asserts that his opposition brief and his sur-reply3 provide the
Court with the grounds to deny the motion to dismiss. Hagan has not shown an
intervening change in controlling law, the availability of new evidence, or the need
to correct clear error or prevent manifest injustice. See Mustafa v. Clark County
Sch. Dist., 157 F.3d 1169, 1178–79 (9th Cir. 1998). Accordingly, the Court denies
the motion for reconsideration.
3
At the hearing, the Court struck the sur-reply because Hagan did not obtain leave to file any
supplemental brief, in contravention of the Court’s local rules of practice. See L.R. 7.4.
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CONCLUSION
For the foregoing reasons, the Court grants the defendants’ motion to
dismiss and denies Hagan’s motion for reconsideration. The Clerk of Court is
directed to close the case.
IT IS SO ORDERED.
DATED: October 27, 2014 at Honolulu, Hawai‘i.
Hagan v. United States National Bank, et al.; CV 14-00215 DKW/KSC; ORDER
GRANTING DEFENDANTS’ MOTION TO DISMISS AND DENYING
PLAINTIFF’S MOTION FOR RECONSIDERATION
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