Opinion
NO. CIV. S-11-372 LKK/GGH.
June 30, 2011
ORDER
INTRODUCTION
This case is one more of the many cases arising from a home foreclosure. According to the First Amended Complaint, defendant Wells Fargo Bank violated the Truth in Lending Act, 15 U.S.C. §§ 1601, et seq., in connection with two loans it extended to plaintiffs. Those loans were secured by plaintiffs' property, and eventually went into default. The property was subsequently foreclosed upon and sold at auction.
The Truth in Lending Act ("TILA" or "the Act"), was enacted "to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit. . . ." 15 U.S.C. § 1601(a). The Federal Reserve Board is charged with implementing the Act. 15 U.S.C. § 1604(a); Household Credit Services, Inc. V. Pfenning, 541 U.S. 232 (2004). The Board has done so through rules promulgated as "Regulation Z," 12 C.F.R. Part 226, setting forth specific disclosures that must be made in credit transactions. Hauk v. JP Morgan Chase Bank USA, 552 F.3d 1114, 1118 (9th Cir. 2009) ("TILA entrusts the Federal Reserve Board with implementation of the Act, and the agency has imposed 'even more precise' disclosure requirements via Regulation Z").
For the reasons set forth below, the court will dismiss the TILA claim because: (i) the claim for damages is barred by the one-year limitations period set forth in 15 U.S.C. § 1640(e); and (ii) the claim for rescission is barred by the three-year statute of repose set forth in 15 U.S.C. § 1635(f). With no federal claims remaining, the court will issue an Order To Show Cause why the state claims should not be remanded to state court pursuant to 28 U.S.C. § 1367(c)(3).
I. BACKGROUND
A. Factual Background
As part of its motion to dismiss, defendant submitted a request for judicial notice pursuant to Fed.R.Evid. 201, containing eleven (11) exhibits. See Dkt. No. 18 (referring back to the original Request for Judicial Notice, Dkt. No. 10). Defendant accordingly asks the court to look beyond the complaint's allegations.
A court may "'take judicial notice of matters of public record outside the pleadings,'" and consider them for purposes of the motion to dismiss. Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988), quoting MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986). The matters considered should be "generally known," or "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(f); U.S. v. Camp, 723 F.2d 741, 744 (9th Cir. 1984) (taking judicial notice of a public record, "verifiable with certainty").
Indeed, in a Rule 12(b)(6) motion, the court may reject allegations of the complaint that contradict matters properly subject to judicial notice or by exhibit. Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001), citing Mullis v. United States Bankr. Ct., 828 F.2d 1385, 1388 (9th Cir. 1987).
Having reviewed the exhibits, the court takes judicial notice of the following: (i) Exhibit A (Dkt. No. 10-1), which includes a Deed of Trust securing a $555,000 adjustable rate loan from Wells Fargo Bank to the plaintiffs, executed October 24, 2005; (ii) Exhibit B (Dkt. No. 10-3), which includes a Deed of Trust (With Future Advance Clause), securing a $111,000 loan (or line of credit) from Wells Fargo Bank to plaintiffs, executed January 20, 2006; and (iii) Exhibit C (Dkt. No. 10-44), which includes two documents, each entitled "Notice of Default and Election To Sell Under Deed of Trust," in respect to the two above-referenced loans, dated September 10, 2009.
The documents in these exhibits purport to be recorded in the official records of Solano County. Plaintiffs have not disputed that the documents are what defendant says they are, that they are authentic, or that Exhibits A and B were signed by plaintiffs. See Daniels-Hall v. National Educ. Ass'n, 629 F.3d 992, 998-999 (9th Cir. 2010) (taking judicial notice where neither party disputed the accuracy of the information). Defendant's remaining exhibits are not necessary to the court's decision and are not further considered.
1. The Loans at Issue
On or about October 24, 2005, Wells Fargo Bank extended a $555,000 variable rate refinancing loan (the "Primary Loan") to plaintiffs. First Amended Complaint ("FAC") ¶ 28 Exh. A (Dkt. No. 13); RfJN Exh. A. The loan was secured by a Deed of Trust against plaintiffs' home ("the property"). RfJN Exh. A. This loan was made after a Wells Fargo representative contacted plaintiffs about extending this loan to them. FAC ¶ 34. The representative indicated that plaintiffs were properly qualified for the loan, FAC ¶ 17, even though Wells Fargo did not verify plaintiffs' financial situation. FAC ¶ 35. Instead, Wells Fargo "qualified" plaintiffs "with disregard to the obvious [financial] limitations of the Plaintiffs," including their limited equity in the home, their age, expected income and obligations and employment status. FAC ¶ 25.
Plaintiff has attached a "Deeds History" to the complaint, as permitted by Fed.R.Civ.P. 10(c).
For purposes of this Rule 12(b)(6) motion only, the court will describe the allegations of the complaint assuming them to be true.
In certain circumstances, Regulation Z prohibits lenders from extending credit "without regard to the consumer's repayment ability as of consummation. . . ." 12 C.F.R. §§ 226.34(a) 226.35(b)(1).
In February 2006, plaintiffs took out an additional $111,000 loan ("Home Equity Line of Credit") from Wells Fargo, also secured by a Deed of Trust against their home (the "Secondary Loan"). FAC ¶¶ 30 Exh. A; RfJN Exh. B.
The complaint refers to the loans collectively as the Subject Loan, with an outstanding balance of $667,000.
The Primary Loan carried an initial interest rate of 5.625%, which lasted for five years. RfJN Exh. A. Thereafter the rate could change every twelve (12) months. FAC ¶ 28; RfJN Exh. A. The Wells Fargo representative promised plaintiffs that they could refinance the note in five years "with no problems." FAC ¶ 34.
In extending both loans, Wells Fargo failed to clearly and conspicuously make the following disclosures: (1) "how much and how soon the interest rate and monthly payment would increase after the teaser rate expired;" (2) "whether stated monthly payments included amounts due for insurance and taxes;" and (3) "closing costs and fees." FAC ¶ 19. Wells Fargo failed entirely to disclose "the true costs and risks associated with refinancing after the interest rate adjusted." FAC ¶ 19.
Regulation Z requires full disclosure — including a specific format for the disclosure — of the circumstances under which the rate could change. 12 C.F.R. § 226.18(s).
Regulation Z requires disclosure of the amount financed, and an itemization of that amount. 12 C.F.R. § 226.18(b) (c).
Regulation Z requires disclosure of all non-exempt finance charges. 12 C.F.R. § 226.18(d).
Regulation Z sets forth the required interest rate disclosures for variable rate loans. 12 C.F.R. § 226.19(b).
2. Subsequent Events
After the loan was extended, plaintiffs' loan payments were not properly credited to their account. At some unspecified point, plaintiffs suffered a "financial hardship," and stopped making payments on the loan. FAC ¶ 36. In August 2008, plaintiffs applied to Wells Fargo for a "loan modification." FAC ¶ 40. Plaintiffs applied again in February 2009, this time using a "professional intermediary." FAC ¶ 43. In late 2009, Wells Fargo "officially denied" plaintiffs a loan modification. FAC ¶ 42. "[R]oughly five years" after obtaining the loans, plaintiffs talked to defendant's representative about refinancing. FAC ¶ 38. Defendant's representative "flatly refused to refinance." FAC ¶ 38.
Regulation Z prohibits the failure to timely credit the borrower's payments to the loan account, 12 C.F.R. § 226.36(c)(i).
On or about September 10, 2009, Notices of Default were recorded on the property. FAC ¶ 44. Each Notice of Default stated that the properties would be sold to satisfy the loan obligations. RfJN Exhibit C. On or about December 11, 2009, "a Notice of Trustee's Sale was recorded in the office of [the] Solano County Recorder" in respect to the property. FAC ¶ 45. The Notice stated the Trustee's intention "to sell the Subject Property at public auction" on August 6, 2010. Id.
In early 2010, plaintiffs apparently made another application for a loan modification, which was denied in July 2010. FAC ¶¶ 46 47. On August 5, 2010, plaintiffs filed a Chapter 13 bankruptcy petition. FAC ¶ 50. The sale nevertheless proceeded on August 6, 2010, the property was sold to US Bank National Association, and that entity held title to the property as of the date the FAC was filed. FAC ¶ 51-53.
Defendant has submitted documents in its Request for Judicial Notice which it says disproves these last allegations. It is not necessary to resolve this issue here, and the court does not do so.
B. Procedural History
Plaintiffs initially filed suit in state court on December 6, 2010, almost five (5) years after they obtained the last loan from Wells Fargo on which the lawsuit is based. The complaint asserted a federal Truth in Lending Act claim, and state law claims against Wells Fargo Bank ("Wells Fargo"), JPMorgan Chase Bank and Bank of America. JPMorgan Chase Bank was dismissed without prejudice in the state court on February 7, 2011.
On February 9, 2011, Wells Fargo removed the case to federal court, pursuant to 28 U.S.C. § 1441(b). On March 17, 2011, plaintiffs filed their First Amended Complaint in this court, which named only Wells Fargo as a defendant. Wells Fargo moved to dismiss the First Amended Complaint on March 31, 2011.
Plaintiffs also allege claims under the California Business and Professions Code (Section 17200, et seq.), as well as what appear to be state law claims for fraud, breach of the implied covenant of good faith and fair dealing, conversion, breach of fiduciary duty, breach of loan contracts, negligence, predatory lending, misrepresentation, wrongful disclosure, quiet title, and declaratory relief.
Among other bases for dismissal, Wells Fargo asserts that the TILA damages claim was barred by the applicable one-year statute of limitations set forth at 15 U.S.C. § 1640(e), and that the rescission claim was barred by the three-year period set forth at 15 U.S.C. § 1635(f). Plaintiffs argue that equitable tolling prevents the complaint from being time-barred.
II. ANALYSIS
The Truth in Lending Act provides a private right of action for damages against a creditor "who fails to comply" with any of its requirements. 15 U.S.C. § 1640(a). It also provides a rescission remedy in some circumstances. 15 U.S.C. § 1635(f).
However, the Act also imposes a one year statute of limitations for civil damages claims. 15 U.S.C. § 1640(e). The limitations period "runs from the date of consummation of the transaction."King v. California, 784 F.2d 910, 915 (9th Cir. 1986). And it creates a three-year statute of repose for the rescission remedy. 15 U.S.C. § 1635(f).
"Any action under this section may be brought . . . within one year from the date of the occurrence of the violation." 15 U.S.C. § 1640.
"An obligor's right of rescission shall expire three years after the date of consummation of the transaction." 15 U.S.C. § 1635.
A. Failure To State a Claim
Defendant half-heartedly argues that plaintiffs have failed to state a claim for relief under TILA, stating: "it is wholly inadequate for the Guintos to allege merely that they 'relied on statements by the Defendants to their detriment,'" and noting that TILA is a "'complex law with different kinds of disclosure requirements.'" It is true that the First Amended Complaint is not a model of clear and concise pleading. To the contrary, the complaint scatters allegations throughout its "Factual" section with little apparent concern for chronology or clarity. Plaintiffs then incorporate all of these allegations wholesale into to TILA claim, without setting forth which facts apply to the TILA claim, nor which parts of TILA are implicated by those allegations.
It is doubtful that this "Where's Waldo?" manner of pleading could satisfy the "short and plain statement" requirement of Fed.R.Civ.P. 8(a). However, the one thing about the complaint that is plain and clear on its face, is that it was filed nearly five years after the facts alleged took place. If the complaint is in fact time-barred, judicial economy counsels against requiring plaintiff to plead more sensibly, or hunting down the relevant allegations of the complaint and matching them up to relevant TILA provisions.
B. The TILA Claims Are Time-Barred
1. Standard for a Motion to Dismiss Based on the Statute of Limitations
A claim may be dismissed under Fed.R.Civ.P. 12(b)(6) on the ground that it is barred by the applicable statute of limitations only when "the running of the statute is apparent on the face of the complaint." Huynh v. Chase Manhattan Bank, 465 F.3d 992, 997 (9th Cir. 2006).Von Saher v. Norton Simon Museum of Art, 592 F.3d 954, 969 (9th Cir. 2010).
In making the above determinations, the court considers the complaint "in its entirety," as well as "documents incorporated into the complaint by reference, and matters of which a court may take judicial notice." TellLabs, Inc. v. Makor Issues Rights, Ltd., 551 U.S. 308, 322-23 (2007).
Because the statute of limitations is an affirmative defense, however, its invocation in the context of a motion to dismiss raises specific concerns, especially where, as here, the plaintiff raises an equitable tolling argument. Champlaie v. BAC Home Loans Servicing, LP, 706 F. Supp.2d 1029, 1052-1053 (E.D. Cal. 2009). If the face of the complaint demonstrates that the limitations period has run, but that period is subject to equitable tolling, a dismissal motion generally cannot be granted. "Generally, the applicability of equitable tolling depends on matters outside the pleadings, so it is rarely appropriate to grant a Rule 12(b)(6) motion to dismiss . . . if equitable tolling is at issue." Huynh v. Chase Manhattan Bank, 465 F.3d 992, 1003-04 (9th Cir. 2006) (citing Supermail Cargo, Inc. v. United States, 68 F.3d 1204, 1206 (9th Cir. 1995)). Indeed, the motion must be denied if "the complaint, liberally construed in light of our 'notice pleading' system, adequately alleges facts showing the potential applicability of the equitable tolling doctrine." Cervantes v. City of San Diego, 5 F.3d 1273, 1277 (9th Cir. 1993); see also, Morales v. City of Los Angeles, 214 F.3d 1151, 1153 (9th Cir. 2000).
Because equitable tolling turns on matters outside of the pleadings, the Supreme Court's recent decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S., 129 S. Ct. 1937 (2009) which concerned the requirements of Fed.R.Civ.P. 8, do not provide a reason to revisit this rule. Although the Ninth Circuit has not discussed the rule sinceTwombly was decided, this and other courts have continued to follow it. See, e.g., Champlaie, 706 F. Supp.2d at 1052-53;Mendoza v. Wilmington Finance, 2011 WL 2182914 at *3 (N.D. Cal. June 6, 2011); Wende v. Countrywide Home Loans, Inc. 2011 WL 1002193 at *3 (S.D. Cal. March 21, 2011); Nava v. VirtualBank, 2008 WL 2873406, 2008 U.S. Dist. LEXIS 72819 (E.D. Cal. July 16, 2008) (Damrell, J).
1. The Lawsuit Was Filed Five Years After the Alleged Violations Occurred.
According to the complaint and matters subject to Judicial Notice, defendants extended loans to plaintiffs no later than October 24, 2005 and January or February 2006. FAC ¶ 28 (Primary Loan); Exhibit B (Dkt No. 10-3) (Secondary Loan). Plaintiffs first filed suit in state court in December 2010, nearly five (5) years after the second loan was extended, and well outside the limitations period.
Plaintiff argues that the complaint is not time-barred because the "ramifications" of defendant's alleged TILA violation — the plaintiff's alleged loss of their home through a Trustee Sale — did not occur until August 6, 2010, less than one year before the complaint was filed. This argument fails because the one-year TILA limitations period commences on the date of the violation. 15 U.S.C. 1640(e). Plaintiffs cite no authority, and the court is aware of none, for the proposition that the limitations period commences on the date of the "final ramification" of a TILA violation.
Unless the commencement of the limitations period can be suspended or "tolled" until December 2009 therefore, the TILA claims are barred by the statute of limitations.
2. Equitable Tolling of the TILA One-Year Limitations Period.
The Section 1640(e) one-year limitations period is subject to "equitable tolling" in appropriate circumstances. King v. California, 784 F.2d at 915. This tolling is appropriate where the plaintiff had an "excusable ignorance" of the limitations period, and no prejudice will result to defendant. See Naton v. Bank of California, 649 F.2d 691 (9th Cir. 1981). When equitable tolling applies, the limitations period is suspended "until the borrower discovers or had reasonable opportunity to discover the fraud or nondisclosures that form the basis of the TILA action."King v. California, 784 F.2d at 915; see also, Hubbard v. Fidelity Federal Bank, 91 F.3d 75, 79 (9th Cir. 1996) (rejecting tolling argument because "nothing prevented Hubbard from comparing the loan contract, Fidelity's initial disclosures, and TILA's statutory and regulatory requirements").
The Ninth Circuit has held (in non-TILA cases) that dismissal was appropriate where "it [was] clear that [plaintiffs] have had the information necessary to bring suit . . . for many years," and plaintiffs did not argue that "extraordinary circumstances beyond [their] control made it impossible to file the claims on time." Lien Huynh, 465 F.3d at 1004. Conversely, dismissal was inappropriate where plaintiff alleged both "that it did not discover" the defendant's alleged wrongdoing until soon before the claim was filed and that plaintiff's "failure to discover the [wrongdoing] earlier was not due to [plaintiff's] lack of diligence, but rather to the [defendant]'s deliberate failure to provide [plaintiff] with accurate information." Supermail Cargo, 68 F.3d at 1208; see also Cervantes, 5 F.3d at 1277 (reversing dismissal).
Here, the First Amended Complaint contains no allegations acknowledging the existence of a statute of limitations problem, nor any allegations specifically raising the possibility of equitable tolling. Nevertheless, plaintiffs' opposition brief argues that the limitations period should be equitably tolled.
a. Alleged Misrepresentations and failure to credit payments.
The issue of tolling is at least touched upon by two sets of allegations in the complaint, namely the allegations that defendant made misrepresentations to plaintiffs and that defendant failed to properly credit plaintiffs' payments to their account. The allegations are that defendant's representative "promised that in five years, Plaintiffs could refinance again 'with no problems;'" defendant indicated that plaintiffs were qualified for the loan when they were not; defendant made the loan without considering plaintiffs' ability to repay; and defendant didn't credit plaintiffs' payments to their account.
Even assuming that each of these allegations is true, they are not supported by any allegations or inferences that plaintiffs did not discover these things despite their due diligence. To the contrary, the complaint shows that plaintiffs were unable to make their loan payments by 2008. In this context, due diligence means that plaintiffs were at that point required to investigate to find out why they could no longer afford the loan they were told they were qualified for, and which would be easily refinanced. And, by September 10, 2010, a Notice of Default was placed on their loan, giving them clear notice that they were behind on their payments. That would be the time that due diligence required plaintiffs to check to make sure that all their payments had been credited to their account. Nothing in the complaint, or even their opposition brief, indicates that they ever did so.
In other words, if plaintiffs thought they had an affordable loan, whose terms they could meet, then they were on notice that they were mistaken — or had been lied to — when, in 2008, they defaulted on the loan.
Finally, there is the representative's promise that plaintiffs could refinance after five years. Plaintiff's problem here is that they had reason to know that they were not going to get the refinancing, at the latest, when defendant filed a Notice of Default against them in September 2009. Therefore, even if the statement was a falsehood actionable under TILA, plaintiffs knew it was false more than a year before they filed suit. Through the exercise of due diligence, they would have discovered the alleged TILA violation when they could no longer make the required payments, or when they were forced to apply for a loan modification, or when the modification request was denied, or at the latest, when defendant filed a Notice of Default against their home on September 10, 2009 for failure to make required payments.
In fact, if defendant lied to plaintiffs about being able to refinance, plaintiffs had all the facts they needed to know it was false in 2009, when they had already defaulted on their loan, and they were denied a loan modification. FAC ¶ 38.
The complaint does not appear even to allege that the promise was false. According to plaintiffs, the Wells Fargo representative promised that refinancing could occur in five years. Plaintiffs allege that they applied for a loan "modification" after only three years, in 2008, after they were already in default. They also allege that they applied for a refinancing after five years, long after they had stopped making their payments. An alleged statement that plaintiffs would be able to refinance in five years cannot reasonably be construed to be a statement that they would be able to get a loan "modification" in three years, or to refinance after five, even after they have defaulted on their loan.
b. New allegations.
Plaintiffs now put forth the following new allegations, none of which can be found in, or inferred from, the complaint: "the Plaintiffs' primary language is Tagalog, and the bank never provided a translator to help explain the financial technicalities of the Subject Loan;" "Earlier discovery of the harm was unreasonable because Plaintiffs were unsophisticated consumers who relied on the expert representation of Defendant;" "Defendant encouraged borrowers not to worry about most loan terms." Under the applicable standard, the complaint must be dismissed — given the limitations bar apparent on the face of the complaint — unless the basis for equitable tolling can be discerned from the complaint. Accordingly, none of these new allegations can save the complaint.
Even if this were alleged in the complaint, it would not be a basis for tolling the limitations period, at least not as it is asserted here. Plaintiffs now claim that Tagalog is their "primary" language, but they fail to assert that they do not understand English. The case Galindo v. Financo Financial, Inc., 2008 WL 4452344 (N.D. Cal. 2008), an unpublished order cited by plaintiffs, does not support their tolling argument. In Galindo, the borrower could not read the loan documents she had signed, and instead relied on the lender's oral representation that the loan was at a fixed rate. It was not until the rate actually changed that the borrower became aware that she had been deceived, and would have to pay a higher rate than had been disclosed to her. The borrower filed her TILA action within one year of realizing that her new rate was not what she had been told it would be.
In this case, the complaint indicates that plaintiffs' interest rate had not changed by the time plaintiffs stopped making payments and defaulted. According to the complaint itself, the plaintiffs' introductory rate would not change for five (5) years, until October 2010. The complaint does not allege that the rate changed notwithstanding this provision. Accordingly, plaintiffs had all the information they needed about how much their payments were, as soon as their first payment was due, whether or not they could read the loan documents.
The assertion is not a basis for tolling the limitations period in any event. The TILA statute, by its nature, protects unsophisticated borrowers. Yet, the Congress in its wisdom, knowing that it would cut off unsophisticated borrowers from an otherwise meritorious damages claim, imposed a limitations period of one year. Plaintiffs, in essence are asking this court to overrule the will of the Congress, and to do so without providing the court with any reason for such an extraordinary action. The court will not do so.
This also gets plaintiffs nowhere. This brand-new assertion seems to concede that plaintiffs did receive some disclosures, but indicates that they didn't know about the disclosures they had been given because defendant told them not to look. There is nothing in the complaint or any case law identified by plaintiffs or known to this court, that indicates that this decision to turn a blind eye was reasonable or sufficed to toll a statutory period of limitations.
c. Insufficient allegations
Plaintiffs also recycle in their opposition briefs the following allegations as reasons for tolling the limitations period: "the complaint alleges that Plaintiffs were never given any of the required TILA disclosures;" "Defendant failed to explain and/or disclose in a meaningful manner the terms and conditions of their loan products;" and defendant "provided incomplete or confusing information" about the loans. These are simply conclusory allegations of TILA violations. They do not amount to an argument for equitable tolling.
In addition, they are at least partly belied by the Trust Deeds themselves (of which this court has taken judicial notice), both of which bear plaintiffs' signatures, and both of which clearly set forth at least some of the disclosures which plaintiffs say they never received.
B. The Three-Year Statute of Repose for Rescission Claims.
TILA provides a right of rescission under certain circumstances, 15 U.S.C. § 1635(a), and allows three years to bring the claim, 15 U.S.C. § 1635(f). Plaintiffs here seek "rescission," FAC at 26 ¶ 6, but do not specify if they seek it under TILA or under state law. If they intend to bring it under TILA, they are barred by the three-year statute of repose, 15 U.S.C. 1635(f), even if the rescission remedy applies to the types of loans plaintiffs received. The three-year period is a statute of repose, and not subject to equitable tolling. After the three-year period, the right of rescission itself is completely extinguished, and the district court is divested of jurisdiction over the claim. Miguel v. Country Funding Corp., 309 F.3d 1161, 1164-1165 (9th Cir. 2002), citing Beach v. Ocwen Federal Bank, 523 U.S. 410 (1998).
It appears that the right of rescission does apply to the loans at issue here. It is true that rescission does not extend to "residential mortgage transactions," 15 U.S.C. § 1635(e)(1),Champlaie v. BAC Home Loans Servicing, LP, 706 F. Supp.2d at 1042. However, a "residential mortgage transaction" is one for the "acquisition or initial construction of a home." 15 U.S.C. § 1602(w). The $555,000 loan at issue here is alleged to be a "refinancing" by Wells Fargo of a World Savings loan, not a loan to buy or build a home. The $111,000 loan is alleged to be a home equity loan on that same property, and thus not a loan to buy or build a home. Since there is no "residential mortgage transaction" here, the rescission remedy appears to be available.
Because the lawsuit here was first filed well after the three-year period, there is no existing claim for rescission under TILA.
III. CONCLUSION
For the reasons set forth above, the Truth in Lending claims are dismissed for failure to state a claim. The damages claim is barred by the one-year statute of limitations set forth at 15 U.S.C. § 1640(e), and the rescission claim is barred by the three-year statute of repose set forth at 15 U.S.C. § 1635(f).
Plaintiffs are Ordered to Show Cause why this court should not decline to exercise supplemental jurisdiction over their state law claims, pursuant to 28 U.S.C.A. § 1367(c)(3).
Defendant Wells Fargo has asserted diversity jurisdiction as an "alternative" basis for removal, citing 28 U.S.C. §§ 1332 and 1441(b), and stating that it is a citizen of South Dakota. Dkt. No. 1 ("Notice of Removal"). In their responses to the OSC, the parties should address whether diversity jurisdiction exists in light of 28 U.S.C. § 1348 and Wachovia Bank v. Schmidt, 546 U.S. 303 (2006).