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holding that, under C.E. Pope Equity Trust, the general rule that a pro se trustee may not represent a trust does not apply where the trustee is the sole beneficiary of the trust and is thus the "actual beneficial owner of the claims being asserted"
Summary of this case from Hsbc Bank Usa, National Association v. MohannaOpinion
No. 2:10-cv-02799 LKK KJN PS
11-30-2012
DENNLY R. BECKER, et al., Plaintiffs, v. WELLS FARGO BANK, NA, INC. et al., Defendants.
ORDER
Presently before the court is defendants' Motion to Dismiss (the "Motion") plaintiff's third amended pleading as modified by order of the court (Third Am. Compl., Dkt. No. 98; Order dated Aug. 22, 2012, Dkt. No. 115 at 15-17). (Mot. to Dismiss, Dkt. No. 125.) Plaintiff filed a written opposition to the pending motion. (Opp'n, Dkt. No. 131.) Defendants filed reply briefing in support of the pending motion. (Reply, Dkt. No. 134.)
This action proceeds before this court pursuant to Eastern District of California Local Rule 302(c)(21) and 28 U.S.C. § 636(b)(1). Although there are technically two plaintiffs in this case, an individual plaintiff and a trust controlled by him, the court uses the singular "plaintiff" in this order. Plaintiff proceeds without counsel in this action.
The motion to dismiss came on for hearing on November 15, 2012. (Minutes, Dkt. No. 135.) Attorney David Newman appeared on behalf of defendants. Plaintiff appeared on his own behalf. The undersigned has fully considered the moving papers and appropriate portions of the record and, for the reasons that follow, denies the Motion. The court also requires the parties to file a joint status report as addressed herein.
I. BACKGROUND
Generally, this case involves plaintiff's loans and attempted loan modifications relating to several of plaintiff's pieces of real property, and plaintiff's default on some of those loans. Plaintiff sued the banks or other entities that made, acquired, serviced, or refused to modify the loans, and which ultimately attempted to foreclose on some of the properties. Plaintiff's 113-page First Amended Complaint alleged the following claims for relief against defendants: (1) fraud; (2) violation of the Consumer Legal Remedies Act, Cal. Civ. Code §§ 1750 et seq.; (3) violation of the Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq.; (4) false advertising, Cal. Bus. & Prof. Code §§ 17500 et seq.; (5) violation of California Civil Code § 2943; (6) wrongful foreclosure proceedings; (7) quiet title; (8) unfair debt collection practices under state and federal law; (9) Racketeer Influenced and Corrupt Organizations ("RICO") violations, 18 U.S.C. §§ 1961 et seq.; and (10) negligent misrepresentation and negligence. (See First Am. Compl. at 56-103, Dkt. No. 19.)
Defendants previously filed a motion to dismiss with respect to plaintiff's original pleading. (Mot. to Dismiss, Dkt. No. 11.) On August 1, 2011, the court adopted findings and recommendations filed by the undersigned and dismissed some of plaintiff's claims with leave to amend and others with prejudice. (See Order, Aug. 1, 2011, Dkt. No. 58.) The court dismissed plaintiff's wrongful foreclosure and quiet title claims with prejudice on the grounds that those claims were preempted by the Home Owners Loan Act ("HOLA"), 12 U.S.C. §§ 1461 et seq. (See Order and Findings and Recommendations, Mar. 22, 2011, at 27-32, Dkt. No. 49, adopted by Order, Aug. 1, 2011, at 2, 7.) The court also construed plaintiff's objections to the undersigned's findings and recommendations as a motion for reconsideration and denied it insofar as it challenged the dismissal of the wrongful foreclosure and quiet title claims. (See Order, Aug. 1, 2011, at 2.) In its August 1, 2011 order, the court further explained the relevant HOLA preemption analysis. (Id. at 2-4.)
Remaining unsatisfied with the court's ruling, plaintiff sought reconsideration of the order addressing plaintiff's first motion for reconsideration, arguing that the court committed "clear error" in its analysis of HOLA preemption (Dkt. No. 59). After considering supplemental briefing, the court denied plaintiff's motion for reconsideration of the denial of plaintiff's first motion for reconsideration. (Order, Mar. 29, 2012, Dkt. No. 87.)
Meanwhile, plaintiff filed a Second Amended Complaint and later filed a motion for leave to file a Third Amended Complaint (Dkt. No. 89) before the court could resolve defendants' motion to dismiss the Second Amended Complaint. The undersigned denied plaintiff's motion for leave to amend without prejudice based on the deficiencies in the proposed Third Amended Complaint. The undersigned then granted plaintiff leave to file another motion for leave to amend, and held the motion to dismiss the Second Amended Complaint in abeyance pending resolution of the motion for leave to amend. (Order, May 14, 2012, Dkt. No. 92; see also Order, Oct. 17, 2011, Dkt. No. 80.) On June 19, 2012, plaintiff filed another motion for leave to file a Third Amended Complaint and a revised, proposed Third Amended Complaint (Dkt. Nos. 97-98). Plaintiff's proposed Third Amended Complaint included claims for "Preempted/Unlawful Foreclosure" and "Improper Foreclosure Process" that challenge defendants' right to foreclose on plaintiff's properties. (See Proposed Third Am. Compl. ¶¶ 73-89, Dkt. No. 98.)
Notably, plaintiff's first proposed Third Amended Complaint—which had ballooned to 140 pages and from ten claims to eighteen claims—included claims entitled "Preempted/Unlawful Foreclosure" and "Improper Foreclosure Process" that again challenge defendants' right to foreclose on three of plaintiff's properties. (See Proposed Third Am. Compl. ¶¶ 374-94, Dkt. Nos. 89, 89-2.)
The undersigned issued Findings and Recommendations recommending that plaintiff's motion for leave to amend (Dkt. No. 97) be granted in part and denied in part, and that plaintiff be granted leave to pursue some of his amended claims but not others. (Order, Aug. 22, 2012, Dkt. No. 115 at 15-17.)
Plaintiff's "wrongful foreclosure" and "quiet title" claims were not among those the undersigned recommended that plaintiff be given leave to pursue. (Id.)
The United States District Judge adopted the undersigned's Findings and Recommendations on September 19, 2012. (Dkt. No. 123). On September 29, 2012, defendants moved to dismiss plaintiff's Third Amended Complaint (Third Am. Compl., Dkt. No. 125) as modified by the Order issued August 22, 2012 (Dkt. No. 115 at 15-17), and that motion is addressed herein.
II. LEGAL STANDARDS
A motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the sufficiency of the pleadings set forth in the complaint. Vega v. JPMorgan Chase Bank, N.A., 654 F. Supp. 2d 1104, 1109 (E.D. Cal. 2009). Under the "notice pleading" standard of the Federal Rules of Civil Procedure, a plaintiff's complaint must provide, in part, a "short and plain statement" of plaintiff's claims showing entitlement to relief. Fed. R. Civ. P. 8(a)(2); see also Paulsen v. CNF, Inc., 559 F.3d 1061, 1071 (9th Cir. 2009), cert. denied, 130 S. Ct. 1053 (2010). "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, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.
In considering a motion to dismiss for failure to state a claim, the court accepts all of the facts alleged in the complaint as true and construes them in the light most favorable to the plaintiff. Corrie v. Caterpillar, 503 F.3d 974, 977 (9th Cir. 2007). The court is "not, however, required to accept as true conclusory allegations that are contradicted by documents referred to in the complaint, and [the court does] not necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Paulsen, 559 F.3d at 1071 (citations and quotation marks omitted). The court must construe a pro se pleading liberally to determine if it states a claim and, prior to dismissal, tell a plaintiff of deficiencies in his complaint and give plaintiff an opportunity to cure them if it appears at all possible that the plaintiff can correct the defect. See Lopez v. Smith, 203 F.3d 1122, 1130-31 (9th Cir. 2000) (en banc); accord Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990) (stating that "pro se pleadings are liberally construed, particularly where civil rights claims are involved"); see also Hebbe v. Pliler, 627 F.3d 338, 342 & n.7 (9th Cir. 2010) (stating that courts continue to construe pro se filings liberally even when evaluating them under the standard announced in Iqbal).
In ruling on a motion to dismiss filed pursuant to Rule 12(b)(6), the court "may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice." Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 899 (9th Cir. 2007) (citation and quotation marks omitted). Although the court may not consider a memorandum in opposition to a defendant's motion to dismiss to determine the propriety of a Rule 12(b)(6) motion, see Schneider v. Cal. Dep't of Corr., 151 F.3d 1194, 1197 n.1 (9th Cir. 1998), it may consider allegations raised in opposition papers in deciding whether to grant leave to amend, see, e.g., Broam v. Bogan, 320 F.3d 1023, 1026 n.2 (9th Cir. 2003).
III. DISCUSSION
A. The Trust
Defendants argue that plaintiff cannot represent The Becker Trust Dated March 25, 1991 (the "Trust") in this action because he is not a licensed attorney. (Mot. to Dismiss at 2.) While defendants cite authorities on the subject of non-attorneys representing trusts, defendants do not discuss whether plaintiff might be a "beneficial owner" of the Trust such that he may represent the Trust in this case.
The general rule in federal litigation is that a non-attorney can represent himself on his own behalf. See 28 U.S.C. § 1654 (stating that "[i]n all courts of the United States the parties may plead and conduct their own cases . . . ."); C.E. Pope Equity Trust v. United States, 818 F.2d 696, 697 (9th Cir. 1987). Although an individual has the right to represent himself, however, an individual does not have the right to appear on behalf of anyone other than himself. C.E. Pope Equity Trust, 818 F.2d at 697 (citing Russell v. United States, 308 F.2d 78, 79 (9th Cir. 1962)); see also Knoefler v. United Bank of Bismark, 20 F.3d 347, 348 (8th Cir. 1994) (citing C.E. Pope Equity Trust and holding that pro se purported trustees had no right to represent trusts).
Further, pursuant to this court's local rules, "[a] corporation or other entity may appear only by an attorney." E.D. Local Rule 183(a) (emphasis added). The rule requiring entity defendants to appear only through counsel applies to trusts. C.E. Pope Equity Trust, 828 F.2d at 698 (holding that even a party's status as trustee does not include the right to present pro se arguments in federal court, and while Federal Rule of Civil Procedure 17(a) authorizes a trustee of an express trust to sue on behalf of the trust without joining the trust beneficiaries, it does not authorize the trustee to proceed pro se); see also Alpha Land Co. v. Little, 238 F.R.D. 497, 502 (E.D. Cal. 2006) ("a trust can only be represented by an attorney in federal court") (emphasis in original) (citing C.E. Pope Equity Trust, 828 F.2d at 697 and 28 U.S.C. § 1654).
The court in C.E. Pope Equity Trust held that, while a trustee cannot appear pro se on the trust's behalf, there is an exception to that general rule: an individual who is the trust's "beneficial owner" may appear pro se on the trust's behalf. C.E. Pope Equity Trust, 818 F.2d at 697-98 (quoting 28 U.S.C. § 1654). The court explained,
Here the record does not identify the Trusts' beneficiaries. Because Stradley is not the actual beneficial owner of the claims being asserted by the Trusts (so far as one can tell from the record), he cannot be viewed as a 'party' conducting his 'own case personally' within the meaning of Section 1654.Id. (emphasis in original); Simon v. Hartford Life, Inc., 546 F.3d 661, 664 (9th Cir. 2008) (where pro se party conceded that he was alleged to be representing is his employer benefit plan, court held that "[b]ecause [he] is not the actual beneficial owner of the claims being asserted" he could not be "viewed as a 'party' conducting his 'own case personally'"); accord Alpha Land Co., 238 F.R.D. at 502 ("Although individuals who are parties to an action may appear in propria persona, this exception applies only to individuals who are asserting their own personal rights or interests").)
Here, plaintiff purports to bring this case on his own behalf and behalf of his Trust. (Third Am. Compl. at 1-2.) During the hearing, plaintiff stated on the record that he was in fact the Trust's sole beneficial owner. Accordingly, unlike the pro se trustee in C.E. Pope Equity Trust, plaintiff has confirmed on the record that he is indeed the actual beneficial owner of the claims being asserted on the Trust's behalf in this case, see C.E. Pope Equity Trust, 818 F.2d at 697-98, and therefore defendants have not shown that the Trust must be dismissed from this action at this time.
During the hearing, counsel for defendants stated that, in a prior motion to dismiss, defendants had raised the issue of plaintiff improperly representing the Trust. A review of the court's docket reflects that defendants did make mention of the issue in one sentence and without citation to authorities in a prior motion to dismiss that was denied as moot upon plaintiff's filing an amended pleading. (Mot. to Dismiss filed Oct. 27, 2010, Dkt. No. 11 at 1 ("Incidentally, it appears that some or all of these properties are owned by a trust presumably controlled by Mr. Becker; to the extent that is the case, a trust can not represent itself in court."); Order entered Nov. 12, 2012, Dkt. No. 15 (denying motion as moot given plaintiff's filing of amended pleading).) However, defendants failed to re-raise the issue in their subsequent motion to dismiss. (Mot. to Dismiss filed Jan. 13, 2011, Dkt. No. 26.)
B. Fraud
Defendants argue that plaintiff's fraud claim fails because plaintiff has not alleged material misrepresentations of fact and has not alleged his reasonable reliance upon such misrepresentations. (Mot. to Dismiss at 3-4.) These arguments are not well-taken.
Plaintiff alleges that defendants told him his loans "would be" modified if he took certain steps, such as supplying additional documentation, and that in reliance on these statements he proceeded with withdrawing monies from his IRA prematurely, among other things. (Third Am. Compl. ¶¶ 17 ("modification would be processed quickly"); 19 ("$2000 would make the difference" in his obtaining a modification); 24 ("Ms. Vasquez said this [lowered payment] was acceptable to Wachovia"); 27 ("Saris said plaintiff would quickly receive loan modifications"); 28(a) ("he said plaintiff would get the modifications"); 28(c) ("Saris stated the Wachovia computer showed that plaintiff would be quickly given loan modifications"); 28(d)-(f) (alleging defendants made multiple misrepresentations to plaintiff that his documentation had "not been received" when it actually had been received, that he had "withdrawn" his modification requests when he had not actually withdrawn them, that his modification requests were "closed because of missing documentation or information" when he actually had supplied such documentation and information, and that his modification request "fell out of the system because of missing documentation" that was not actually missing from defendants' system); 32 (alleging a lowered credit score resulted from defendants' purposefully delaying plaintiff's loan modification process); 33-37 (alleging that defendants' agent "Teo" told plaintiff to make monthly withdrawals from his retirement account to qualify for the modification, and alleging that plaintiff actually made such withdrawals in reliance on the representation).)
Taking plaintiff's well-pleaded allegations as true, as the court must at this procedural posture, plaintiff has alleged material misrepresentations of fact with respect to the requested loan modifications, his reliance on defendants' representations thereon, and resulting damages in the form of, among other things, premature withdrawals from his IRA accounts resulting in loss of tax-deferred income. Plaintiff alleges that he materially changed his behavior, i.e., that he made such withdrawals in actual reliance upon defendants' representations. (Id. ¶¶ 31-32, 37.) Accordingly, defendants' motion is denied in this regard.
Defendants also argue that plaintiff was ultimately told just "weeks" after the alleged misrepresentations that his loans would not be modified, such that he could not have incurred "any real damage." (Mot. to Dismiss at 4.) This argument is not well-taken. Whether plaintiff actually ultimately suffered the damages he alleges is not the issue at this procedural posture.
Defendants also argue that plaintiff fails to allege an "intent to deceive." (Mot. to Dismiss at 5.) This argument is not well-taken. For instance, plaintiff alleges that defendants knew they had received certain documents from plaintiff, as reflected by defendants' internal computer tracking programs, and yet purposefully told him that no such documents had been received. (Third Am. Comp. ¶¶ 28(d)-(e), 29, 55.) Plaintiff also alleges defendants acted with the intent to "extract[] money from the plaintiff upon threat of seizing his property." (Id. ¶ 6.) Taking well-pleaded allegations in plaintiff's favor, as the court must do at this procedural posture, the undersigned cannot conclude that plaintiff has failed to adequately allege defendants' intent to defraud.
Defendants also argue that plaintiff's "fraud claim is barred by the statute of frauds." (Mot. to Dismiss at 7.) Defendants appear to argue that because no valid oral agreement to modify loans could have been legally created given that plaintiff's deed of trust contained a provision requiring modifications to be in writing, then no fraud could have possibly occurred. (Id.) Defendants support this argument by citing to cases where promises to modify a loan were held to not amount to enforceable contracts to complete a modification. (Id. (citing cases).) Defendants' argument is not well-taken. The undersigned rejected this same argument in his previous findings and recommendations (Dkt. No. 49 at 16), as adopted in the Order of the assigned United States District Judge (Dkt. No. 58). Here again, defendants do not cite any authorities holding that a fraud claim must be dismissed as a matter of law if the allegedly fraudulent statement could not have created a valid contract. In short, defendants' arguments blur the distinctions between the breach, creation, and/or modification of a valid contract and the intentional tort of fraud, and defendants have not demonstrated that a fraud claim cannot be maintained as a matter of law here.
Defendants have not shown that plaintiff's fraud claim is defectively alleged, so defendants' motion is denied with respect to plaintiff's fraud claim.
C. Promissory Estoppel
Defendants argue that plaintiff's claim for promissory estoppel is deficient because plaintiff failed to allege an "intent to deceive." (Mot. to Dismiss at 8.) Defendants argue that plaintiff did not allege that defendants' agent, Mr. Saris, "intended not to perform" his promise that plaintiff's loans would be modified upon receipt of certain documents. (Id.) Defendants argue that plaintiff's claim fails because he has not alleged that the intent to deceive existed "at the time" of the allegedly false statements. (Id.)
However, as described above, plaintiff alleges that defendants' agents — including Mr. Saris, Ms. Vasquez, "Teo," "Margie," and other representatives — knew defendants had received certain documents from plaintiff as reflected by defendants' internal computer tracking programs, and yet purposefully told him that no such documents had been received. (Third Am. Comp. ¶¶ 24, 27-29.) In addition to the allegations of various alleged misrepresentations that plaintiff "would" receive a loan modification, and the alleged misrepresentations that plaintiff's documents had never been received, plaintiff also alleges that defendants' agents acted with the intent to "extract[] money from the plaintiff upon threat of seizing his property" during the modification discussions. (Id. ¶ 6.) Taking well-pleaded allegations in plaintiff's favor, as the court must do at this procedural posture, the undersigned cannot conclude that plaintiff has failed to adequately allege defendants' intent to deceive.
Defendants also argue that plaintiff failed to allege that defendants "induced him to enter into a contract," which defendants argue renders the promissory estoppel claim defective. (Mot. to Dismiss at 9.) The argument is not well-taken. Defendants cite to Lazar v. Superior Court, 12 Cal. 4th 631, 638-39 (1996), as the sole authority in support of this argument. However, Lazar does not stand for the proposition that promissory estoppel claims must include allegations of a fraudulently-induced contract in order to surpass the pleading stage. Instead, the court in Lazar noted that "[a]n action for promissory fraud may lie where a defendant fraudulently induces the plaintiff to enter into a contract." Lazar, 12 Cal. 4th at 638 (emphasis added). That a promissory fraud claim "may lie" where a contract is fraudulently induced does not mean, as defendants suggest, that all promissory fraud claims require the existence of fraudulently-induced contracts, or that promissory fraud claims fail as a matter of law when there are no allegations of a fraudulently-induced contract. In any event, plaintiff has alleged a potentially fraudulently-induced contract, namely, the Forbearance Agreement, which plaintiff alleges he signed in part due to reliance on defendants' agents' alleged representations that his loans would be modified thereafter. (Third Am. Compl. ¶ 42 ("Plaintiff had been working with defendants for about eight months to obtain a Shelborne permanent loan modification. The written Forbearance Agreement provided by the defendants appeared to represent the culmination of those efforts.").)
Accordingly, defendants have not shown that plaintiff's promissory estoppel claim is defectively alleged as a matter of law, so defendants' motion is denied in this regard.
D. RESPA
Defendants argue that plaintiff's Real Estate Settlement Procedures Act ("RESPA") claim is fatally defective because plaintiff has not alleged having suffered "actual damages" in the form of "pecuniary loss" resulting from defendants' alleged failure to respond to plaintiff's "Qualified Written Requests" ("QWRs") pursuant to 12 U.S.C. § 2605(e). (Mot. to Dismiss at 9 (citing Molina v. Washington Mut. Bank, No. 09-CV-00894-IEG (AJB), 2010 WL 431439, at *7 (S.D. Cal. Jan. 29, 2010) (unpublished) (dismissing RESPA claim because plaintiffs only conclusorily alleged the requisite "pecuniary loss" and did not allege actually having sent QWRs to defendant); Lemieux v. Litton Loan Serv., LP, No. 2:09-cv-02816 JAM EFB, 2009 WL 5206641, at *3 (E.D. Cal. Dec. 22, 2009) (unpublished) (dismissing RESPA claim for failure to allege "actual" damages and failure to allege having sent QWRs to defendant); Garcia v. Wachovia Mortgage Corp., 676 F. Supp. 2d 895 (C.D. Cal. 2009) (dismissing RESPA claim without prejudice for failure to allege actual damages).)
Plaintiff alleges that defendants' failures to respond to his QWRs caused him not to pay off his loan balances. Plaintiff alleges that he distrusted defendants given: (1) their alleged misrepresentations during protracted loan modification discussions, and (2) their alleged failures to respond to his QWRs with confirmation of the full extent of defendants' "interests in the property." (Third Am. Compl. ¶ 62 ("Given the malice and deceit by the defendants in the previous transactions, it was an unacceptable risk to pay the six properties off unless plaintiff could pay them off completely and totally remove defendants' interests in the property.").) The combination of these factors allegedly caused plaintiff to so distrust defendants that he chose not to pay the balances of his loans and instead chose to "continue to make interest payments he otherwise would not have made." (Id.)
It is not at all clear that plaintiff's choosing to remain subject to interest payments — payments that he was already obligated to make — should be considered "actual" damages resulting from allegedly unanswered QWRs. However, none of defendants' cited authorities address damages similar to plaintiff's. (Mot. to Dismiss at 9-10 (citing cases).) Defendants' cited authorities do not state that refraining from paying the balance of loans and continuing to make interest payments cannot, as a matter of law, amount to a form of "actual" damages. Moreover, defendants have not meaningfully analogized to the authorities they broadly cite. Defendants have not explained how the plaintiffs in those cases framed their damages similar to the way plaintiff frames his. This lack of analysis thwarts defendants' argument, given that with RESPA claims, "courts have interpreted this requirement [to plead pecuniary loss] liberally." Yulaeva v. Greenpoint Mortg. Funding, Inc., No. CIV. S-09-1504 LKK/KJM, 2009 WL 2880393, at *15 (E.D. Cal. Sept. 9, 2009) (unpublished). For instance, plaintiffs have been able to plead such a loss by claiming that they had suffered negative credit ratings as a result of violations of RESPA. Allen v. United Financial Mortg. Corp., 660 F. Supp. 2d 1089, 1097 (N.D. Cal. 2009). Accordingly, defendants have not shown that plaintiff has failed to adequately allege "actual" resulting damages, at least for purposes of surpassing the pleading stage.
Defendants also challenge the allegation that they engaged in a "pattern or practice of non-compliance" with RESPA. (Mot. to Dismiss at 10.) Defendants argue that plaintiff only conclusorily alleges a "pattern" of non-compliance. (Id. (citing cases).) However, while he uses the word "pattern," plaintiff also alleges that defendants failed to respond to several different QWRs sent on different dates and regarding several different properties. (Third Am. Compl. ¶¶ 58-64.) Defendants have not cited authorities for the proposition that several allegedly-ignored QWRs sent on different dates regarding several properties belonging to one plaintiff cannot constitute a "pattern" as a matter of law. Taking the allegations in the light most favorable to plaintiff, defendants have not shown that these multiple alleged failures to respond cannot reasonably be considered a "pattern."
Defendants have not shown that plaintiff's RESPA claim is defectively alleged as a matter of law, so defendants' motion is denied in this regard.
E. Defamation
Under California law, "[t]he elements of a defamation claim are (1) a publication that is (2) false, (3) defamatory, (4) unprivileged, and (5) has a natural tendency to injure or causes special damage." Wong v. Tai Jing, 189 Cal. App. 4th 1354, 1369 (2010).
Plaintiff's defamation claim is based on defendants' repeated violations of a preliminary injunction enjoining them from proceeding with foreclosures upon plaintiff's properties. (Third Am. Compl. ¶¶ 90-100 (citing Order Granting Prelim. Inj., Dkt. No. 21).) Plaintiff alleges that, on different occasions, defendants posted Notices of Sale on two of his properties in violation of the preliminary injunction issued previously in this case. (Id.)
Defendants argue that the defamation claim fails because plaintiff does not allege that defendants made statements or posted the Notices of Sale with "malicious intent" or an intent to "injure or harass" plaintiff. (Mot. to Dismiss at 10-11 (citing Lesperance v. North Am. Aviation, Inc., 217 Cal. App. 2d 336, 348 (1963) (where plaintiff alleged defamation in connection with information his former employer passed to his potential employers, the court analyzed the communications as subject to the privilege codified in California Civil Code § 47 and clarified that the pleading must allege "malice" to destroy that privilege, ultimately holding that conclusory allegations and a lack of "facts showing that malice existed on the part of defendant" rendered plaintiff's claim defective at pleading stage).)
Defendants' argument regarding a lack of "malice" allegations is not well-taken. California courts do not generally impose a "malice" element when analyzing defamation claims. See 5 Witkin, Summary 10th (2005) Torts, § 529, p. 782 ("[M]alice or actual ill will is not an element of defamation. It is relevant in only two situations: (a) It must, as in other tort actions, be shown in order to obtain punitive damages; (b) lack of malice must be shown by a defendant whose defense is qualified privilege.") (emphasis added). In cases involving a private figure plaintiff, a defamation claim may be supported by evidence of mere "negligence" with respect to the truth or falsity of the defamatory statement. See Khawar v. Globe Int'l, Inc., 19 Cal. 4th 254, 274 (1998) (a private figure plaintiff need not "prove actual malice to recover damages for actual injury caused by publication of a defamatory falsehood."). Defendants' suggestion that "malice" is an element of a defamation claim appears to have been drawn from distinguishable cases involving privileged communications under Civil Code § 47 (i.e., communications between a former employer and a potential employer). Unlike the Lesperance case, this case does not clearly implicate the qualified privilege codified in California Civil Code § 47. If defendants contend that this statute applies to their alleged communications, they have not explained why they believe the alleged communications fit within the scope of the statute. Lesperance, 217 Cal. App. 2d at 348. In broadly citing authorities applying California Civil Code § 47, defendants end up arguing that the pleading fails to include allegations required to override a privilege that they have not shown applies in the first place.
In any case, even if a qualified privilege were to apply to the alleged communications in this case, "malice" sufficient to overcome the privilege can take the form of "hatred or ill will," and can also take the form of "reckless disregard for the publication's truth." Family Home and Finance Center, Inc. v. Fed. Home Loan Mortg. Corp., 525 F.3d 822, 826-27 (9th Cir. 2008). Plaintiff has plausibly alleged that defendants acted recklessly by posting Notices of Sale on his properties in violation of an express court order. (Third Am. Compl. ¶¶ 91-100.) Accordingly, defendants have not compellingly shown that plaintiff's pleading fails to state a defamation claim at this procedural posture.
Defendants also argue that, because the posted Notices of Sale accurately reflected the amounts plaintiff owes on his loans, plaintiff cannot properly allege the "falsity" element of a defamation claim. (Mot. to Dismiss at 11.) Defendants argue that plaintiff has "not pled that the statement[s] were actually false." (Id.) Contrary to defendants' suggestion, plaintiff has alleged that "the statements in the NOS [Notice of Sale] are false or seriously in doubt." (Third Am. Compl. ¶¶ 96-98.) To the extent the defendants argue that the debt amounts described in the erroneously posted Notices were indeed accurate, the actual truth of these statements is not before the court at this posture and is instead a matter for summary judgment. Moreover, plaintiff's defamation claim appears grounded in the communicative conduct of allegedly improper posting of the Notices of Sale (Third Am. Compl. ¶¶ 91-100), and defendants have not cited authorities suggesting that the improper posting of a Notice of Sale in violation of a court order cannot, as a matter of law, serve as the basis for a defamation claim.
Accordingly, defendants have not shown that plaintiff's defamation claim is defectively alleged as a matter of law, and defendants' motion is denied with respect to that claim.
F. Negligence And Negligent Infliction Of Emotional Distress
Under California law, "[t]he elements of negligence are: (1) defendant's obligation to conform to a certain standard of conduct for the protection of others against unreasonable risks (duty); (2) failure to conform to that standard (breach of the duty); (3) a reasonably close connection between the defendant's conduct and resulting injuries (proximate cause); and (4) actual loss (damages)." Corales v. Bennett, 567 F.3d 554, 572 (9th Cir. 2009) (citing McGarry v. Sax, 158 Cal. App. 4th 983, 994).
Plaintiff frames his claim as both for "negligence" and for "negligent infliction of emotional distress." (Third Am. Compl. at 28.) However, the California Supreme Court has clarified that "there is no independent tort of negligent infliction of emotional distress." Potter v. Firestone Tire & Rubber Co., 6 Cal. 4th 965, 984 (1993); Chaconas v. JP Morgan Chase Bank, 713 F. Supp. 2d 1180, 1186-88 (S.D. Cal. 2010) (citing Potter and other cases). In any event, a claim for emotional distress damages arising from negligence has the same elements as a claim for negligence. Lawson v. Management Activities, Inc., 69 Cal. App. 4th 652, 655-57 (1999).
In granting plaintiff's motion for leave to file the Third Amended Complaint, the court limited plaintiff's negligence claim to two bases: (1) the alleged negligence during the loan modification process; and (2) the alleged negligence concerning defendants' improper posting Notices of Sale. Defendants argue that plaintiff cannot state either claim because he has not sufficiently alleged defendants' "duty of care." (Mot. to Dismiss at 11.) "The question of the existence of a legal duty of care . . . presents a question of law which is to be determined by the courts alone." First Interstate Bank of Ariz., N.A. v. Murphy, Weir & Butler, 210 F.3d 983, 987 (9th Cir. 2000). "Absent the existence of duty . . . there can be no breach and no negligence." Nichols v. Keller, 15 Cal. App. 4th 1672, 1683 (1993).
Defendants argue that, as conventional lenders, they lack a duty of care to borrowers like plaintiff. (Mot. to Dismiss at 11-12.) The court's prior order partially granted defendants' motion to dismiss claims of "negligence" due to plaintiff's failure to plead a "special relationship" going beyond the traditional lender-borrower relationship. (Order, Dkt. No. 49 at 37.) The court granted leave to amend so plaintiff could plead a "special relationship" supporting his negligence claims. (Id.)
"Under California law, a lender does not owe a borrower or third party any duties beyond those expressed in the loan agreement, except[] those imposed due to special circumstance." Resolution Trust Corp. v. BVS Dev., 42 F.3d 1206, 1214 (9th Cir. 1994) (citing Nymark v. Heart Fed. Sav. & Loan Ass'n, 231 Cal. App. 3d 1089, 1096 (1991)). Special circumstances triggering a duty may arise when a lender actively participates in the financed enterprise. See Nymark, 231 Cal. App. 3d at 1096; Wagner v. Benson, 101 Cal. App. 3d 27, 35 (1980); Sohal v. Fed. Home Loan Mortg. Corp., No. C 11-01941 JSW, 2011 WL 3842195, at *8-9 (N.D. Cal. Aug. 30, 2011) (unpublished) (dismissing plaintiffs' negligence claim where plaintiffs did "not allege that [defendant banks] acted negligently in connection with the loan modification process" and where plaintiffs alleged only that defendant banks participated in Home Affordable Modification Program ("HAMP"), which was not itself sufficient to allege that the bank had "gone beyond its usual role of a money lender."). A lender may also be secondarily liable through the actions of a mortgage broker with fiduciary duty to the borrower-client, if there is an agency relationship between the lender and the broker. See Plata v. Long Beach Mortg. Co., No. C 05-02746 JF, 2005 WL 3417375, at *7-9 (N.D. Cal. Dec. 13, 2005) (unpublished).
The court in Nymark did not hold, however, that the "general rule" that a lender lacks a duty of care to a borrower is an absolute rule with out exceptions. Nymark, 231 Cal. App. 3d at 1085-96 (describing the "general" rule and noting exceptions, such as when a lender "actively participates" in a financed enterprise with the borrower); Garcia v. Ocwen Loan Serv., LLC, No. C 10-0290 PVT, 2010 WL 1881098, at *2 (N.D. Cal. May 10, 2010) (unpublished) ("Nymark does not stand for the proposition that a lender never owes a duty of care to a borrower.") (emphasis in Garcia) (holding that Nymark requires application of a six-factor test to determine whether a duty of care exists between lenders and borrowers).
With respect to loan modification negotiations like those alleged here, "[n]umerous cases have characterized a loan modification as a traditional money lending activity" that does not give rise to a duty of care. Armstrong v. Chevy Chase Bank, FSB, No. 5:11-cv-05664 EJD, 2012 WL 4747165, at *4 (N.D. Cal. Oct. 3, 2012) (unpublished) (citing Settle v. World Sav. Bank, F.S.B., No. ED CV 11-00800 MMM, 2012 WL 1026103, at *7-9 (C.D. Cal. Jan.11, 2012) (unpublished); Johnston v. Ally Fin. Inc., No. 11-CV-0998-H BLM, 2011 U.S. Dist. LEXIS 83298, at *10, 2011 WL 3241850 (S.D. Cal. July 29, 2011) (unpublished) ("In addition, loan modification is an activity that is intimately tied to Defendant's lending role.") (internal quotations omitted)). Defendants cite to similar authorities for the proposition that negligence claims cannot arise from arms-length loan modification negotiations. (Mot. to Dismiss at 12-15 (citing cases, including Dooms v. Fed. Home Loan Mortg. Corp., No. CV F 11-0352 LJO DLB, 2011 WL 1232989, at *11-13 (E.D. Cal. 2011) (unpublished) (dismissing negligence claim because lender had no duty to "process" borrower's modification application and cease foreclosure proceedings because the complaint depicted only an "arms-length transaction, nothing more.").)
However, at least some district courts have held that a duty of care can arise in connection with a lender's "processing [a] loan modification application" depending on the lender's alleged conduct in the modification process. See Garcia, 2010 WL 1881098, at *3 (finding that a lender owed a duty of care to a borrower-client in processing the borrower's loan modification application, because "by asking Plaintiff to submit supporting documentation, Defendant undertook the activity of processing Plaintiff's loan modification request. Having undertaken that task, it owed Plaintiff a duty to exercise ordinary care in carrying out the task."). Similarly, some courts have found a "duty" to be sufficiently alleged in connection with a lender's obligations arising from a "modification plan" between the lender and the borrower, or from ongoing modification negotiations rife with delays, lost documents, and representations that a modification would be given. See Ansanelli v. JP Morgan Chase Bank, N.A., No. C 10-03892 WHA, 2011 WL 1134451, at *7 (N.D. Cal. March 28, 2011) (unpublished) (denying motion to dismiss given that "the complaint alleges that defendant went beyond its role as a silent lender and loan servicer to offer an opportunity to plaintiffs for loan modification and to engage with them concerning the trial period plan. [T]his is precisely 'beyond the domain of a usual money lender.' Plaintiffs' allegations constitute sufficient active participation to create a duty of care to plaintiffs to support a claim for negligence."); Crilley v. Bank of Am., N.A., Civil No. 12-00081 LEK-BMK, 2012 WL 1492413, at * 9-11 (D. Haw. April 26, 2012) (unpublished) (denying motion to dismiss because plaintiffs "have pled sufficient facts to support a finding that Defendant went beyond its conventional role as a loan servicer by soliciting Plaintiffs to apply for a loan modification and by engaging with them for several months" regarding the modification).
The undersigned notes that although the Garcia case was cited in the court's prior analysis of plaintiff's negligence claim, see Order, Dkt No. 39 at 48, defendants did not attempt to distinguish the Garcia case and did not address it in their pending motion.
At least for pleading stage purposes, given that the undersigned must take all well-pleaded allegations as true and in the light most favorable to the plaintiff, defendants' minimal application of cited cases to the particular facts of this case is not sufficient to show plaintiff's negligence claims are deficient as a matter of law. Defendants have neither addressed cases like Garcia and Crilley, nor compellingly distinguished Ansanelli, all of which involved loan modification negotiations or applications and lenders' alleged misconduct in connection therewith, such as long delays, lost documents, and alleged representations to the borrower similar to those plaintiff alleges here. See Ansanelli, 2011 WL 1134451, at *l; Crilley, 2012 WL 1492413, at *9-11; Garcia, 2010 WL 1881098, at *3. Accordingly, defendants have not shown plaintiff's negligence claims to be subject to dismissal as a matter of law at the pleading stage.
Defendants do cite to Ansanelli and attempt to distinguish it. (Mot. to Dismiss at 14 n.4.) Defendants are correct that plaintiff in the instant action is not a position identical to that of the plaintiffs in Ansanelli: the Ansanellis were in a trial loan modification plan with a promise of a permanent modification if they made all of the payments under the trial plan on time. See Ansanelli, 2011 WL 1134451, at *1. The undersigned, however, does not read Ansanelli as concluding that engaging the plaintiffs in a trial loan modification plan is the only way in a defendant can exceed its conventional role as "a silent lender and loan servicer." Id. at *7.
G. RICO
Plaintiff alleges that defendants violated 18 U.S.C. §§ 1962 et seq., the Racketeer Influenced and Corrupt Organization Act ("RICO") in connection with representations made within the modification application process. (Third Am. Compl. ¶¶ 119-27.)
The elements of a civil RICO claim are as follows: "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as 'predicate acts') (5) causing injury to plaintiff's 'business or property.'" Living Designs, Inc. v. E.I. Dupont de Nemours and Co., 431 F.3d 353, 361 (9th Cir. 2005) (quoting Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996); citing 18 U.S.C. §§ 1964(c), 1962(c); see also Sanford v. MemberWorks, Inc., 625 F.3d 550, 557 (9th Cir. 2010) (quoting Odom v. Microsoft Corp., 486 F.3d 541, 547 (9th Cir. 2007) (en banc)); Forsyth v. Humana, Inc., 114 F.3d 1467, 1481 (9th Cir. 1997). "Racketeering activity" is any act indictable under the provisions of 18 U.S.C. § 1961, and includes the predicate acts of mail fraud, wire fraud, and obstruction of justice. Forsyth, 114 F.3d at 1481; Sanford, 625 F.3d at 557-58. "Wire or mail fraud consists of the following elements: (1) formation of a scheme or artifice to defraud; (2) use of the United States mails or wires, or causing such a use, in furtherance of the scheme; and (3) specific intent to deceive or defraud." Sanford, 625 F.3d at 557-58 (citing Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1400 (9th Cir. 1986)).
"Congress enacted RICO to combat organized crime, not to provide a federal cause of action and treble damages for personal injuries." Chaset v. Fleer/Skybox Int'l, LP, 300 F.3d 1083, 1087 (9th Cir. 2002) (internal quotation marks omitted). Therefore, a RICO plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property by reason of the conduct constituting the violation. Id. (citing cases). Moreover, the defendant's violation of § 1962 must be the proximate cause of plaintiff's injury. Id.
A RICO claim must be pleaded with particularity. Izenberg v. ETS Serv., LLC, 589 F. Supp. 2d 1193, 1202 (C.D. Cal. 2008). A plaintiff must also plead that defendants' violation was both the "but for" and proximate cause of a concrete financial injury. Izenberg, 589 F. Supp. 2d at 1201 ("Prospective injuries . . . do not satisfy RICO's concrete financial injury requirement.").
Defendants cite Izenberg for the proposition that, "[i]n a case involving a foreclosure of a mortgage on real property, in order to establish a concrete financial injury a plaintiff must allege he will pay a greater amount than is in fact owed on his mortgage." (Mot. to Dismiss at 16 (citing Izenberg, 589 F. Supp. 2d at 1204).) However, Izenberg does not support that proposition. Instead, the court in Izenberg stated that
Plaintiffs allege that they have 'been damaged in having to hire attorneys before bringing this action and [in] bring[ing] this action . . . and will have to incur attorneys['] fees to stop the wrongful acts' of defendants. Plaintiffs also allege that, due to defendants' actions, their property may be subject to improper foreclosure in the future, and they may have to pay greater amounts than are in fact owed on their mortgage. Neither of these allegations suffices to establish a concrete financial injury.Izenberg, 589 F. Supp. 2d at 1204. Contrary to defendants' suggestion, then, Izenberg does not stand for the proposition that a plaintiff must allege he will pay an amount greater than his mortgage amount in order to state a claim for pleading purposes. Instead, Izenberg stands for the proposition that it is insufficient to allege the mere potential that damages "may" exceed what is owed on one's mortgage. See id.
Defendants argue that: (1) RICO "does not apply to transactions involving residential mortgages"; (2) that plaintiff has not identified any "predicate acts;" (3) that plaintiff has not alleged predicate acts with "particularity;" (4) that plaintiff has not plead a "pattern" of racketeering activity; (5) that plaintiff has not alleged the existence of a "RICO enterprise;" and (6) that plaintiff has not alleged that defendants' conduct was the "but for" and proximate cause of a "concrete financial injury." (Mot. to Dismiss at 15-16.)
The undersigned has doubts about the viability of plaintiff's RICO claim. However, at this posture, defendants have not compellingly supported their arguments for dismissal of that claim. First, defendants cite no authorities supporting the broad proposition that RICO "does not apply to transactions involving residential mortgages" (Mot. to Dismiss at 15), and the undersigned therefore declines to accept that argument.
Second, defendants argue that plaintiff has identified no "predicate acts," but as plaintiff states in his opposition (Opp'n at 22-23), plaintiff has alleged several different instances of misrepresentations by defendants' agents in the loan modification negotiation process. He also alleges that some of these alleged misrepresentations were made via U.S. mail and amounted to mail fraud. (Third Am. Compl. ¶¶ 119-27.) Defendants have not cited authorities stating that allegedly fraudulent misrepresentations made via U.S. mail and during protracted loan modification negotiations cannot serve as "predicate acts" for a RICO claim as a matter of law.
Defendants broadly cite to the Sedima case for the proposition that "[p]laintiff has not alleged the existence of a RICO enterprise and has not identified predicate acts allegedly committed by Wells Fargo." (Mot. to Dismiss at 15 (citing Sedima, S.P.R.L v. Imrex Co., 473 U.S. 479, 496 (1985).) On the undersigned's review of Sedima, however, that case does not address whether a lender can ever be a "RICO enterprise" or whether specific alleged misrepresentations made during loan modification negotiations can ever serve as "predicate acts" supporting a RICO claim. As noted above, plaintiff alleges that misrepresentations were made to him via U.S. mail and phone and that these were the alleged "predicate acts" supporting his RICO claim. (Third Am. Compl. ¶¶ 119-27; Opp'n at 22-23.)
Defendants also broadly cite to the Sanchez case for the proposition that "the predicate acts of racketeering activity simply do not exist" in this case. (Mot. to Dismiss at 15 (citing Sanchez v. American Brokers Conduit, No. 5:10-cv-01291-JHN-FMOX, 2011 WL 164634, at *2-3 (C.D. Cal. Jan. 14, 2011) (unpublished) (dismissing RICO claim because the pleading was "devoid of any concrete factual allegations" and was conclusory, and thus did not state any "predicate acts").) On the undersigned's review of Sanchez, however, like Sedima, that case does not address whether multiple alleged misrepresentations made via mail and phone during loan modification negotiations can ever serve as "predicate acts" supporting a RICO claim. Accordingly, defendants have not compellingly shown that the misrepresentations alleged in the Third Amended Complaint cannot amount to "predicate acts" for purposes of a RICO claim.
The undersigned notes that plaintiff's RICO claim centers on defendants' alleged fraudulent misrepresentations during the modification and foreclosure processes, and fraud in and of itself is not a predicate offense under RICO. Ohlendorf v. Am. Brokers Conduit, No. CIV. S-11-293 LKK/EFB, 2012 WL 718682, at *11 (E.D. Cal. March 5, 2012) (unpublished) (citing Tilley v. Ampro Mortg., No. 2:11-cv-1134, 2011 WL 5921415, at *12 (E.D. Cal. Nov. 28, 2011) (unpublished)). However, unlike the cases of Ohlendorf and Tilley, in the instant case plaintiff has specifically identified certain telephone and mail communications that he contends amounts to "wire fraud" and "mail fraud" initiated by defendants (Third Am. Compl. ¶¶ 119-127), and such fraud could potentially be a "predicate act" under RICO. Sanford, 625 F.3d at 557-58 (wire and mail fraud can be "predicate acts"). Again, while the undersigned has doubts about the ultimate viability of plaintiff's RICO claim, at this procedural posture defendants have not met their burden of showing the claim to be defectively alleged.
Third, as defendants correctly note, fraud claims underlying a RICO allegation must be pleaded with particularity. (Mot. to Dismiss at 15 (citing Edwards v. Marin Park, Inc., 356 F.3d 1058, 1065-66 (9th Cir. 2004) (explaining Rule 9(b)'s requirement that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity" applies to civil RICO fraud claims.")) Defendants suggest dismissal of the RICO claim due to a lack of particularity in plaintiff's allegations. However, as discussed above herein with respect to plaintiff's fraud claim, defendants have not compellingly shown that plaintiff's fraud claim lacks the requisite particularity. Defendants did not specify which allegations forming the basis of the claim require further detail, and instead broadly state that the claim as a whole "fail[s] to meet the particularity requirement." (Mot. to Dismiss at 15.) Defendants challenged plaintiff's fraud claim in several respects, urging: the absence of an alleged misrepresentation, the absence of alleged reasonable reliance, and the absence of alleged resulting damage. (Mot. to Dismiss at 3-7.) The undersigned rejected those challenges for reasons stated above. To the extent defendants seek to challenge the sufficiency of plaintiff's fraud claim in ways other than these, defendants have not compellingly presented such challenges to the court. A blanket statement that plaintiff's claim "fail[s] to meet the particularity requirement" does not suffice. (Mot. to Dismiss at 15.)
Fourth, as to whether a "pattern" of racketeering activity has been alleged, plaintiff has alleged multiple misrepresentations in the loan modification negotiation process, and defendants have not cited authorities supporting the proposition that, as a matter of law, such misrepresentations cannot amount to a "pattern" of activities in the RICO context. Defendants have not thus far shown that the alleged series of misrepresentations regarding plaintiff's allegedly promised modification cannot, as a matter of law, constitute "a pattern" of fraudulent representations supporting a RICO claim. While the undersigned has doubts about the ultimate viability of plaintiff's RICO claim, at this procedural posture defendants have not met their burden of showing the claim to be defectively alleged.
A "'pattern' . . . requires at least two acts of racketeering activity." 18 U.S.C. § 1961(5).
Fifth, defendants argue that lenders are not "RICO enterprises," but cite no authorities holding that lenders can never fit the definition of a "RICO enterprise" as a matter of law. See 18 U.S.C. § 1961(4) (an enterprise for RICO purposes is "any individual, partnership, corporation, association, or other legal entity . . ."). "An enterprise is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit." Izenberg, 589 F. Supp. 2d at 1202 (internal quotation marks omitted). Here, plaintiff alleges that defendants made fraudulent misrepresentations in the context of loan modification negotiations. (Third Am. Compl. ¶¶ 119-127.) Plaintiff alleges the existence of an "ongoing organization . . . [that] function[s] as a continuing unit" see Odom, 486 F.3d at 551, as he has alleged "Wachovia Mortgage and Wells Fargo Bank, N.A. continue in business as legal entities" that "merged" into each other and "function as a continuing unit." (Third Am. Compl. ¶ 121.) While the undersigned has doubts about the ultimate viability of plaintiff's RICO claim and about the legal validity of plaintiff's contention that Wachovia and Wells Fargo truly function as a "continuing unit" for RICO purposes, defendants have not squarely addressed this issue and therefore have not compellingly shown that plaintiff has failed to adequately allege a RICO "enterprise."
Sixth, defendants argue that plaintiff fails to allege that defendants' conduct was the "but for" and proximate cause of a "concrete financial injury" (Mot. to Dismiss at 15-16), but as plaintiff notes in his opposition, plaintiff has alleged both. Plaintiff has alleged that he made premature withdrawals from his IRA account, in reliance on defendants' representations during the loan modification negotiations (including alleged misrepresentations made via U.S. mail), and that he suffered financial injury as a result. (Third Am. Compl. ¶¶ 32, 37, 124.)
Given that defendants have not yet compellingly shown that plaintiff's RICO claim is subject to dismissal at this time, the undersigned denies defendants' motion to dismiss in this regard.
H. Intentional Infliction Of Emotional Distress
"The elements of a cause of action for intentional infliction of emotional distress are: (1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard for the probability of causing, emotional distress; (2) the plaintiff's suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant's outrageous conduct. Das v. WMC Mortg. Corp., 831 F. Supp. 2d 1147, 1165 (N.D. Cal. 2011) (citing Cervantez v. J.C. Penney Co., 24 Cal. 3d 579, 593 (1979)). "For [c]onduct to be outrageous, [it] must be so extreme as to exceed all bounds of that usually tolerated in a civilized community." Id.
Defendants argue that plaintiff has not alleged the sort of "outrageous" conduct required to state a claim for intentional infliction of emotional distress. (Mot. to Dismiss at 16- 17.)
Defendants argue for the first time in their Reply briefing that plaintiff cannot obtain "damages for 'emotional distress'" because plaintiff suffered only "financial harm." (Reply at 6 (citing cases).) Because defendants did not raise this argument in their moving papers, the undersigned does not reach it. However, the undersigned notes that in additional to his financial losses plaintiff has alleged suffering "anguish, nervousness, grief, anxiety, worry, and humiliation" and "loss of sleep, mental anguish, loss of confidence in himself, and prolonged worry" in connection with this claim (Third Am. Compl. ¶¶ 139, 142, 145-46), and defendants' Reply does not address these allegations in any way.
The misrepresentations plaintiff alleges in the context of ongoing loan modification negotiations — namely, that plaintiff "would be" given a modification quickly if he followed certain instructions (Third Am. Compl. ¶¶ 140-43) — do not appear to rise to the level of conduct "so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community." See Cochran v. Cochran, 65 Cal. App. 4th 488, 496 (1998). However, it is unclear whether the same is true with respect to allegations that defendants posted Notices of Trustee's Sales in violation of a court order. (Third Am. Compl. ¶¶ 144-48.)
Defendants list several district court cases to support their argument that plaintiff's allegations cannot serve as the basis for an "intentional infliction of emotional distress" claim. (Mot. to Dismiss at 17 (citing cases).) On the undersigned's review, however, the cited cases either do not involve a lender's alleged misconduct during loan modification attempts or do not otherwise clearly apply to the particular facts of the instant case. E.g. Das, 831 F. Supp. 2d at 1165-66 (holding that lenders were not liable to borrowers for intentional infliction of emotional distress allegedly arising from initiation of foreclosure proceedings, but so holding because the plaintiff did not allege that the particular moving defendant actually "participated in the initiation of foreclosure proceedings" giving rise to the claim, not because such a claim cannot be stated as a matter of law); Enriquez v. Countrywide Home Loans, FSB, 814 F. Supp. 2d 1042, 1070 (D. Haw. 2011) (dismissing emotional distress claim arising from denied request to modify an allegedly predatory original loan, but dismissing with leave to amend, because it "would arguably be possible" to add facts to state such a claim); Goodwin v. Exec. Tr. Servs., LLC, 680 F. Supp. 2d 1244, 1255-56 (D. Nev. 2010) (dismissing claims arising from alleged predatory lending and misrepresentation of original loan terms, not involving allegations of misconduct during loan modification process); Vawter v. Quality Loan Serv. Corp. of Washington, 707 F. Supp. 2d 1115 (W.D. Wash. 2010) (where plaintiffs alleged only that defendants "failed to provide any meaningful response to their attempts to obtain a loan modification," the court dismissed the claim for intentional infliction of emotional distress because the defendants' "alleged inaction" was not sufficient to state a claim). Further, defendants did not meaningfully analogize to any of these authorities, and as plaintiff correctly notes, none of the authorities involve a lender improperly posting Notices of Trustee's Sales in violation of a court order. (Opp'n at 24.)
The undersigned thus cannot find at this procedural posture that such allegations do not constitute "outrageous conduct" as a matter of law. While the undersigned has doubts about the ultimate viability of plaintiff's "intentional infliction" claim, at this procedural posture defendants have not compellingly shown that such claim warrants dismissal.
I. Unfair Competition Law
Defendants argue that plaintiff's Unfair Competition Law ("UCL") claim under California Business and Professions Code §§ 17200 et seq. fails because it "relies on defective claims." (Mot. to Dismiss at 18-19 (citing cases).) Defendants thus argue that the UCL claim fails insofar as plaintiff's other claims fail.
For the same reasons discussed in the undersigned's prior order (Order, Dkt. No. 49 at 24), plaintiff's UCL claim is premised on alleged fraud and negligence. As described above herein, defendants have not shown these claims to be defectively pleaded. Accordingly, defendants' motion is denied in this regard.
J. HOLA Preemption Of State Law Claims
Defendants argue that plaintiff's "state law" claims are preempted by HOLA, an argument previously addressed at length in the undersigned's prior order partially granting defendants' motion to dismiss. (Order, Dkt. No. 49.) Defendants do not clarify which "state law" claims they attack, opting instead to argue that all "servicing" claims and "loan modification" claims are preempted. (Mot. to Dismiss at 21.) This broad tact leaves it to the court to attempt to define which allegations should be taken together and treated as forming "servicing" and/or "modification" claims, and this is no simple task. In any case, the undersigned has addressed defendants' HOLA arguments already (Order, Dkt. No. 49), and as defendants do not appear to be making significantly different arguments on the issue, the undersigned denies defendants' motion in this regard.
IV. CONCLUSION
Accordingly, IT IS HEREBY ORDERED that
1. Defendants' Motion to Dismiss (Dkt. No. 125) is denied.
2. Pursuant to Federal Rule of Civil Procedure 12(a)(4)(A), within fourteen (14) days of the entry of this order, defendants shall file an answer to plaintiff's Third Amended Complaint as modified by order of the court (Third Am. Compl., Dkt. No. 98; Order dated Aug. 22, 2012, Dkt. No. 115 at 15-17).
3. Within thirty (30) days of the entry of this order, the parties shall file a Joint Status Report. The Joint Status Report shall briefly describe the case and address the following:
If the parties are unable to file such report jointly, the parties shall file separate reports with explanations as to why a joint report was not possible.
a. Service of process;
b. Possible joinder of additional parties;
c. Any further amendment of the pleadings;
d. Jurisdiction and venue;
e. Anticipated motions and their scheduling;
f. The report required by Federal Rule of Civil Procedure 26 outlining the proposed discovery plan and its scheduling, including disclosure of expert witnesses;
g. Future proceedings, including setting appropriate cut-off dates for discovery and law and motion, and the scheduling of a pretrial conference and trial;
h. Special procedures, if any;
i. Estimated trial time;
j. Modifications of standard pretrial procedures due to the simplicity or complexity of the proceedings.
k. Whether the case is related to any other cases, including bankruptcy;
l. Whether a settlement conference should be scheduled;
m. If they have not already so stipulated, whether counsel will stipulate to the magistrate judge assigned to this matter acting as settlement judge and waiving disqualification by virtue of his so acting, or whether they prefer to have a settlement conference conducted before another judge;
n. Any other matters that may add to the just and expeditious disposition of this matter.
IT IS SO ORDERED.
___________
KENDALL J. NEWMAN
UNITED STATES MAGISTRATE JUDGE