Opinion
No. 2:13-cv-02006-MCE-AC
12-18-2013
ANGELLA S. WEBB, individually, on behalf of all others similarly situated, and on behalf of the general public, Plaintiff, v. BANK OF AMERICA, N.A., and DOES 1 through 20, inclusive, Defendants.
MEMORANDUM AND ORDER
Through this action, Plaintiff Angella S. Webb ("Plaintiff") seeks relief from Defendant Bank of America, N.A. ("Defendant") for violations of federal and state law arising from the foreclosure proceedings instituted against Plaintiff's real property. Specifically, Plaintiff alleges the following claims: (1) breach of contract; (2) violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692; (3) violations of the Rosenthal Fair Debt Collection Practices Act ("Rosenthal Act"), Cal. Civ. Code § 1788; and (4) unlawful, unfair, and fraudulent business practices, Cal. Bus. & Prof. Code § 17200. Compl., Sept. 25, 2013, ECF No. 1. Presently before the Court is Defendant's Motion to Dismiss for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6) ("Motion"). Mot., Nov. 8, 2013, ECF No. 11. Plaintiff filed a timely opposition. Opp'n, Dec. 5, 2012, ECF No. 13. For the reasons set forth below, Defendant's Motion is granted in part and denied in part.
All further references to "Rule" or "Rules" are to the Federal Rules of Civil Procedure unless otherwise noted.
Because oral argument would not be of material assistance, the Court ordered this matter submitted on the briefs. E.D. Cal. Local R. 230(g).
BACKGROUND
The following recitation of facts is taken, sometimes verbatim, from Plaintiff's Complaint. ECF No. 1.
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A. Individual Allegations
Plaintiff purchased her home, located at 5600 Broadway, Sacramento, California, in 2002. In 2006, Plaintiff refinanced her mortgage with Countrywide. Plaintiff's loan servicing was later transferred to Defendant. Around July 2009, Plaintiff fell behind on her mortgage payments, and in September of 2009, she applied to Defendant for a mortgage modification. Defendant declined to offer Plaintiff a modification, and around December 2011, Defendant transferred the loan servicing to Specialized Loan Servicing, LLC ("SLS"). Thereafter, Plaintiff applied for a mortgage modification with SLS. SLS offered Plaintiff a trial mortgage modification in March 2012. The trial modification would run from March to May 2012, and required monthly payments of $1,213.97. Plaintiff made the three monthly payments. In June 2012, SLS offered Plaintiff a permanent mortgage modification ("Modification Agreement"). The Modification Agreement, which became effective June 27, 2012, reduced Plaintiff's interest rate to 2.000%; changed the maturity date of the loan to December 31, 2036; made Plaintiff's principal and interest payments $1,047.80 per month; and Plaintiff's loan balance increased from $258,469.00 to $346,007.81. Plaintiff accepted the Modification Agreement, and continued to make all payments owed to SLS through July 2013. Plaintiff states that, with escrow included, the full monthly payments started at $1,416.23 due to a back-owed amount of escrow in August, September, October, November, and December 2012. Then, in February 2013, the full monthly payment was reduced to $1,268.98 because the escrow arrearage had been paid off.
In July 2013, SLS informed Plaintiff that servicing of her mortgage would be transferred to Defendant, effective July 16, 2013, and thus all future mortgage payments would be made to Bank of America. On July 25, 2013, Plaintiff contacted Defendant regarding this transfer, and requested information about future payments. Several of Defendant's representatives informed Plaintiff that she did not have an account with Bank of America and her house was in foreclosure proceedings. Finally, Plaintiff spoke with Defendant's representative "Francis" who stated that she would research Plaintiff's concerns. Throughout the rest of July, Plaintiff spoke with numerous representatives of Defendant, all of whom informed Plaintiff that they could not provide her with information about the transfer. Then, in late July, Plaintiff received a letter from Defendant, stating that as of July 16, 2013, Plaintiff's loan would have a new loan number, and payments must be made to Defendant. That letter stated the proper payment amount of $1,268.98. In a separate letter, Defendant stated that Plaintiff owed a total of $343,805.65 as of July 22, 2013, although the correct amount as of that date was $339,776.09.
On August 1, 2013, Plaintiff made an electronic payment in the amount of $1,268.98—the fully monthly payment required under the Modification Agreement. On August 6, 2013, Plaintiff contact Defendant to ensure that Defendant had received her payment. Plaintiff spoke to a representative who informed her that Defendant had no records from SLS, and requested that Plaintiff send proof of her loan modification via fax. Plaintiff sent all of the modification documents, and proof of the payments she made for the prior year. On August 13, 2013, Plaintiff contacted Defendant to ensure the documents were received. A different representative of Defendant informed Plaintiff that the documents were received, and that the error was being corrected. This representative stated that he would call Plaintiff the next morning to update her, but failed to do so.
The following day, Plaintiff discovered that her August mortgage payment had been returned. Plaintiff called Defendant and spoke to yet another representative, who informed Plaintiff that the error was being corrected, but resolution of the issue could take up to thirty days. This representative also informed Plaintiff that her payment had been returned because it was a "partial payment," as the mortgage payment amount was $2,109.90. As set forth above, Plaintiff's payment amount, pursuant to the Modification Agreement, had been reduced from $2,109.90.
Despite Plaintiff's timely payment of each payment due under her modified loan, Defendant now treats Plaintiff's loan as if it was in default. Defendant has also engaged in a number of collection communications with Plaintiff, demanding payments not actually owed under the Modification Agreement.
B. Class Allegations
Plaintiff proposes a class ("the Class") comprised of all California residents who, since 2009, were offered, accepted, and performed under the terms of permanent loan modifications, which modifications Defendant later failed to honor after transfer from another services. Plaintiff states that the Class is so numerous that joinder of all members individually, in one action or otherwise, is impractical. Plaintiff also states that there are questions of law and fact that are common to the class, which predominate over questions affecting only individual class members. These questions include: (1) whether Defendant breached its promises and contracts to permanently modify loans; (2) whether Defendant falsely denied the very existence of the loan modifications; (3) whether Defendant's conduct constituted a violation of the FDCPA and/or the Rosenthal Act; and (4) whether Defendant's conduct was illegal or unfair. Judicial determination of these common issues would be more efficient and economical as a class action than individual determinations.
Plaintiff states that she is willing to undertake the responsibilities of acting in a representative capacity on behalf of the Class, and will fairly and adequately protect the Class's interests. Plaintiff further states she has no interest that directly conflicts with the interests of the Class, and that she has retained counsel experienced in class action litigation to vigorously protect the rights of the Class.
Finally, Plaintiff states that her claims are typical of the Class, as she was deceived and damaged by Defendant's conduct.
STANDARD
On a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336,337-38 (9th Cir. 1996). Rule 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief" in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual allegations. However, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. (internal citations and quotations omitted). A court is not required to accept as true a "legal conclusion couched as a factual allegation." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) (quoting Twombly, 550 U.S. at 555). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555 (citing 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) (stating that the pleading must contain something more than "a statement of facts that merely creates a suspicion [of] a legally cognizable right of action.")).
Furthermore, "Rule 8(a)(2) . . . requires a showing, rather than a blanket assertion, of entitlement to relief." Twombly, 550 U.S. at 556 n.3 (internal citations and quotations omitted). Thus, "[w]ithout some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirements of providing not only 'fair notice' of the nature of the claim, but also 'grounds' on which the claim rests." Id. (citing 5 Charles Alan Wright & Arthur R. Miller, supra, at § 1202). A pleading must contain "only enough facts to state a claim to relief that is plausible on its face." Id. at 570. If the "plaintiffs . . . have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed." Id. However, "[a] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and 'that a recovery is very remote and unlikely.'" Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
A court granting a motion to dismiss a complaint must then decide whether to grant leave to amend. Leave to amend should be "freely given" where there is no "undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment . . . ." Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to be considered when deciding whether to grant leave to amend). Not all of these factors merit equal weight. Rather, "the consideration of prejudice to the opposing party . . . carries the greatest weight." Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 185 (9th Cir. 1987)). Dismissal without leave to amend is proper only if it is clear that "the complaint could not be saved by any amendment." Intri-Plex Techs. v. Crest Group, Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 1006, 1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989) ("Leave need not be granted where the amendment of the complaint . . . constitutes an exercise in futility . . . .")).
ANALYSIS
Defendant moves to dismiss Plaintiff's second cause of action for violation of the FDCPA, third cause of action for violation of the Rosenthal Act, and portions of Plaintiff's fourth cause of action alleging unlawful and fraudulent business activity in violation of California's Business and Professions Code § 17200 ("UCL"). Each claim is discussed in turn, below.
A. Fair Debt Collection Practices Act
Plaintiff's second cause of action alleges Defendant violated the FDCPA by collecting debts, or attempting to collect debts, in false, deceptive, or misleading ways, and by using unfair and unconscionable means. Compl. at 10. Defendant moves to dismiss this claim on the grounds that Defendant is not a debt collector within the meaning of the FDCPA, and the monies owed by Plaintiff are not "debts" within the meaning of the statute. The FDCPA was enacted "to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." 15 U.S.C. § 1692(e). To effectuate this purpose, the FDCPA "prohibits a 'debt collector' from making false or misleading representations and from engaging in various abusive and unfair practices. To be held liable for violation of the FDCPA, a defendant must—as a threshold requirement—fall within the Act's definition of "debt collector." Izenberg v. ETS Servs., LLC, 589 F. Supp. 2d 1193, 1198-99 (C.D. Cal. 2008) (citing Heintz v. Jenkins, 514 U.S. 291, 294 (1995); Romine v. Diversified Collection Servs., 155 F.3d 1142, 1146 (9th Cir. 1998)).
Under the FDCPA, a debt collector is "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6). "While the Ninth Circuit has not specifically addressed whether mortgagees and their assignees are 'debt collectors' under the FDCPA, courts within this Circuit," including this one, "have recognized that a debt collector does not include the consumer's creditors, a mortgage servicing company, or an assignee of a debt, as long as the debt was not in default at the time it was assigned." Brashears v. Bank of Am. Home Loans, No. CV 12-6760 FMO (JCGx), 2013 WL 5741832, *4 (C.D. Cal. Oct. 22, 2013) (listing numerous cases from Central, Northern, Southern, and Eastern Districts of California); Tina v. Countrywide Home Loans, Inc., 2008 WL 4790906 at *7 n.2 (S.D. Cal. Oct.30, 2008) (holding that "Countrywide is not a 'debt collector' as defined under the FDCPA" because "the . . . FDCPA defines 'debt collector" as one who collects consumer debts owed to another. Countrywide's conduct was directed to collecting its own debts.").
Accordingly, Plaintiff has failed to allege that Defendant is a "debt collector" within the meaning of the FDCPA, and therefore has failed to state a claim for relief under that statute. Defendant's motion to dismiss this cause of action is therefore granted.
B. Rosenthal Act
Plaintiff's third cause of action alleges violations of the Rosenthal Act. Defendant moves to dismiss this claim on the sole ground that it is not a "debt collector" under the Rosenthal Act. Mot. at 14. Defendant contends that "Plaintiff's claim under the Rosenthal Act fails with her FDCPA claim," as there is "substantial overlap between the provisions of the Rosenthal Act and the FDCPA . . . ." Id.
The purpose of the Rosenthal Act is "to prohibit debt collectors from engaging in unfair or deceptive acts or practices in the collection of consumer debts and to require debtors to act fairly in entering into and honoring such debts." Cal. Civ. Code § 1788.1(b). To achieve this end, the Rosenthal Act "prohibits a host of unfair and oppressive methods of collecting debt, but to be liable . . . a defendant must fall under its definition of 'debt collector.'" Izenberg, 589 F. Supp. 2d at 1199.
The Rosenthal Act defines "debt" as "money, property, or their equivalent which is due or owing or alleged to be due or owing from a natural person to another person." Cal. Civ. Code § 1788.2(d). The Rosenthal Act defines a "debt collector" as "any person who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection." Id. § 1788.2(c). "A debt collector violates the act, e.g., when it engages in threats, use of profane language, or harassment; when it places telephone calls without disclosing the caller's identity; when it communicates to a third party that a debtor has engaged in conduct, other than failure to pay a consumer debt, that the debt collector knows or has reason to believe will defame the debtor; and when it makes a false representation hat a consumer debt may be increased by the addition of fees or other charges if such fees or charges may not be lawfully added to the existing debt." Walters v. Fidelity Mortg. of Cal., 730 F. Supp. 2d 1185, 1203 (E.D. Cal. 2010) (citing Cal. Civ. Code §§ 1788.10; 1788.11(a), (b), (e); 1788.13(e)).
As Defendant points out, Mot. at 15, "[n]umerous courts within the Ninth Circuit," including this Court, "have concluded that foreclosure pursuant to a deed of trust is not the collection of a debt within the meaning of the [Rosenthal Act]," Grill v. BAC Home Loans Serv. LP, No. 10-CV-03057-FCD/GGH, 2011 WL 127891 at *19 (E.D. Cal. Jan. 14, 2011) (citing six California district court cases for this proposition) (internal citations omitted). However, "a number of courts have recognized [that] the definition of 'debt collector' is broader under the Rosenthal Act than it is under the FDCPA, as the latter excludes creditors collecting on their own debts." Reyes v. Wells Fargo Bank, N.A., No. C-10-01667 JCS, 2011 WL 30759, *19 (N.D. Cal. Jan. 3, 2011). Thus, while "numerous courts have held that the mere allegation that a defendant foreclosed on a deed of trust does not implicate the Rosenthal Act[,] [w]here the claim arises out of debt collection activities [beyond the scope of the ordinary foreclosure process,' . . . a remedy may be available under the Rosenthal Act." Id. (citations omitted). Citing to Reyes, the Ninth Circuit recently stated:
Wells Fargo conceded it is a debt collector under the meaning of the Rosenthal Act. Wells Fargo contends, however, that it was not engaged in debt collection activities when it offered the TPP with its concomitant demand for trial payments. The district court, while dismissing the claim on other grounds, correctly recognized that Wells Fargo was engaged in debt collection. The TPP was more than an information circulation. This is the same conclusion reached by other district courts.Corvello v. Wells Fargo Bank, N.A., 728 F.3d 878, 885 (9th Cir. Aug. 8, 2013) (citing In re Bank of Am. Home Affordable Modification Program (HAMP) Contract Litig., No. 10-MD-02193-RWZ, 2011 WL 2637222, at *6 (D. Mass. July 6, 2011); Reyes, 2011 WL 30759, at *20) (applying Rosenthal Act in context of bank's collection activities concerning a HAMP mortgage modification). Accordingly, the Court departs from its prior orders, and finds that Defendant is not categorically excluded as a "debt collector" under the Rosenthal Act.
The Court thus turns to whether Plaintiff has alleged facts showing that Defendant is a "debt collector" under the Rosenthal Act sufficient to survive Defendant's Motion. Plaintiff alleges that Defendant regularly sent mortgage bills to Plaintiff and Plaintiff made her mortgage payments to Defendant. Compl. at 11. Plaintiff also alleges that Defendant made demands for payment by sending letters, making telephone calls, and made other attempts to collect mortgage payments. Indeed, the gravamen of Plaintiff's Complaint is that Defendant engaged in a pattern of improper conduct in the course of servicing her loan, including telling Plaintiff that she is in default when she is not, which may ultimately lead to foreclosure on her home.
The Rosenthal Act's "definition of 'debt collector' broadly encompasses 'any person' who regularly engages in debt collection." Walters, 730 F. Supp. 2d at 1203 (quoting Cal. Civ. Code § 1788.2(c)). Plaintiff's allegations are sufficient to show that Defendant is a debt collector as that term is defined by the Rosenthal Act, and to show that Defendant's debt collection activities fall outside of the normal foreclosure process, as is required to proceed with a cause of action under the Rosenthal Act.
Accordingly, Defendant's motion to dismiss this cause of action is DENIED.
C. Unfair Competition Law
Plaintiffs' fourth cause of action asserts that Defendant violated California's Unfair Competition Law ("UCL"). Cal. Bus. & Prof. Code §§ 17200-17210. Section 17200 defines unfair competition as "any unlawful, unfair or fraudulent business act or practice." This section establishes a private right of action to remedy such unfair competition. See Webb v. Smart Document Solutions, LLC, 499 F.3d 1078, 1082 (9th Cir. 2007). Section 17200 establishes three separate varieties of unfair competition: acts or practices which are unlawful, or unfair, or fraudulent. Cal-Tech Commc'ns., Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). Defendant moves to dismiss the portions of Plaintiff's fourth cause of action that allege unlawful and fraudulent business practices.
1. Unlawful Business Practices
In proscribing "unlawful business practices, section 17200 'borrows' violations of other laws and treats them as unlawful practices that [section 17200] makes independently actionable." Durrell v. Sharp Healthcare, 108 Cal. App. 4th 1350, 1361 (2010). Thus, "unlawful" practices are practices "forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulation, or court-made." Saunders v. Sup. Ct., 27 Cal. App. 4th 832, 838-39 (1994) (citing People v. McKale, 25 Cal.3d 626, 632 (1979)). To state a cause of action based on an "unlawful" business act or practice under the UCL, a plaintiff must allege facts sufficient to show a violation of some underlying law. McKale, 25 Cal.3d at 635.
Defendant contends that Plaintiff's cause of action for unlawful business practices fails because it is premised on Plaintiff's causes of action under the FDCPA and the Rosenthal Act, which Defendant asserts must also fail. However, as set forth above, although Plaintiff's FDCPA cause of action is dismissed for failure to state a claim, Plaintiff's cause of action for violation of the Rosenthal Act survives. See supra. Accordingly, Plaintiff's cause of action for unlawful business practices also survives to the extent it is derivative of the Rosenthal Act cause of action. By the same token, however, Plaintiff's cause of action for unlawful business practices based on violations of the FDCPA fails.
2. Fraudulent Business Practices
A cause of action for fraudulent business acts under section 17200 is distinct from a common law fraud claim. Under section 17200, a plaintiff does not need to show reliance to state a claim for fraudulent business acts. Klein v. Earth Elements, 59 Cal. App. 4th 965, 970 (1997). A plaintiff need only allege that the public is likely to be deceived by the alleged business acts. Id. However, all claims alleging fraudulent business practices under section 17200 are subject to the heightened pleading standard of Rule 9(b). See, e.g., Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). To meet the heightened pleading standard of Rule 9(b), a plaintiff must plead facts as to the "who, what, when, where, and how" of the alleged fraud. Id. (quoting Vess v. Ciba-Geiby Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003)).
Defendant contends that Plaintiff's claim for fraudulent business practices fails "because Plaintiff pleads no fraudulent conduct to sustain" the claim. Mot. at 17. Defendant is correct that Plaintiff's fraud allegations do not meet the heightened pleading standard of Rule 9(b). As Defendant points out, Plaintiff makes only a "passing mention" of fraud in the Complaint. Moreover, Plaintiff does not appear to challenge the motion to dismiss as to this portion of the claim. Because Plaintiff fails to meet the pleading standard for the allegedly fraudulent conduct, Defendant's motion to dismiss the "fraudulent" prong of Plaintiff's UCL cause of action is granted.
CONCLUSION
For the reasons set forth above, Defendant's Motion to Dismiss, ECF No. 11, is GRANTED IN PART and DENIED IN PART. Specifically, IT IS HEREBY ORDERED THAT:
1. Defendant's Motion to Dismiss Plaintiff's second cause of action is GRANTED with leave to amend;
2. Defendant's Motion to Dismiss Plaintiff's third cause of action is DENIED;
3. Defendant's Motion to Dismiss Plaintiff's fourth cause of action is DENIED as to Plaintiff's claim for "unlawful" business practices based on violations of the Rosenthal Act, GRANTED with leave to amend as to Plaintiff's claim for "unlawful" business practices based on violations of the FDCPA, and GRANTED with leave to amend as to Plaintiff's claim for "fraudulent" business practices.
Not later than thirty (30) days following the date this Memorandum and Order is electronically filed, Plaintiff may (but is not required to) file an amended complaint. If no amended complaint is filed within said thirty (30) day period, without further notice to the parties, the causes of action dismissed by virtue of this Memorandum and Order will be dismissed with prejudice.
IT IS SO ORDERED.
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MORRISON C. ENGLAND, JR. CHIEF JUDGE
UNITED STATES DISTRICT COURT