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finding that TARP's mandate from the Secretary of the Treasury to financial institutions to perform all reasonable duties was insufficient to support a claim under 42 U.S.C. section 1983
Summary of this case from Yadav-Ranjan v. Quality Loan Serv. Corp.Opinion
Case No.: 11-CV-04300-LHK
06-22-2012
FRANK OLIVER and ANDREA OLIVER, Plaintiffs, v. U.S. BANK, N.A.; DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.; and DSL SERVICE COMPANY, Defendants.
ORDER DENYING FDIC'S MOTION
TO DISMISS; GRANTING U.S. BANK'S
MOTION TO DISMISS
On October 3, 2011, Defendants U.S. Bank National Association ("U.S. Bank") as Successor in Interest to the Federal Deposit Insurance Corporation ("FDIC") as Receiver of Downey Savings and Loan Association, F.A. ("Downey"), and DSL Service Company ("DSL") (collectively, "Defendants"), filed a motion to dismiss Plaintiffs' complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) . ECF No. 6 ("U.S. Bank's Mot."). Pursuant to the Civil Local Rule 7-3, Plaintiffs' opposition was required to be filed by October 17, 2011. However, Plaintiff did not file an opposition until October 27, 2011. ECF No. 11. On November 3, 2011, Defendants filed a reply. ECF No. 14. On November 22, 2011, the case was reassigned from Magistrate Judge Grewal to the undersigned judge. ECF No. 18.
On December 22, 2011, the FDIC, as Receiver for Downey, filed a separate motion to dismiss Plaintiffs' complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) or, in the alternative, for summary judgment pursuant to Federal Rule of Civil Procedure 56. ECF No. 20. Plaintiffs did not oppose the FDIC's motion. See ECF No. 25. However, the FDIC is not a party to this action, and the FDIC has not moved to substitute itself as a party in interest for Downey pursuant to Federal Rule of Civil Procedure 25(c). Fed. R. Civ. P. 25(c) ("If an interest is transferred, the action may be continued by or against the original party unless the court, on motion, orders the transferee to be substituted in the action or joined with the original party. The motion must be served as provided in Rule 25(a)(3).") (emphasis added). Thus, as a non-party, the FDIC does not have standing to bring this motion. Accordingly, the FDIC's motion is DENIED without prejudice.
Pursuant to Civil Local Rule 7-1(b), the Court finds U.S. Bank's motion appropriate for determination without oral argument. Accordingly, the Defendants' motion to dismiss hearing and case management conference set for June 28, 2012, are hereby VACATED. Having considered the parties' briefing and the relevant law, the Court GRANTS U.S. Bank's motion to dismiss for the reasons explained below.
I. Factual History
This action arises out of a residential mortgage transaction. In 1999, Plaintiffs obtained a loan from Downey (the "Loan"), and purchased their home located at 1101 McBain Avenue, Campbell, California (the "Property"). Compl. ¶ 34. On or about December 23, 2005, Plaintiffs refinanced their loan with Downey, obtaining a new loan in the amount of $637,500.00 (the "Refinanced Loan"). Compl. ¶ 38; M-S Decl. Ex. 1. The Refinanced Loan listed DSL as the "Trustee" and Downey as the "Lender." M-S Decl. Ex. 1, at1-2. The Refinanced Loan was secured by a deed of trust ("DoT") recorded in the Santa Clara County Recorder's Office on January 6, 2006. Id. at 1.
In connection with U.S. Bank's motion, Defendants request that the Court take judicial notice of the following documents: (1) Deed of Trust, signed by Plaintiffs and dated December 23, 2005, recorded in the official records of Santa Clara County as Document No. 8769290 on January 13, 2006 (Declaration of Eunice Majam-Simpson ("M-S Decl.") Ex. 1); (2) Notice of Default and Election to Sell Under Deed of Trust, recorded in the official records of Santa Clara County as Document No. 20688722 on April 26, 2010 (M-S Decl. Ex. 2); (3) Notice of Trustee's Sale, recorded in the official records of Santa Clara County as Document No. 20794575 on July 28, 2010 (M-S Decl. Ex. 3). See ECF No. 6-1. Although a district court generally may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion without converting the 12(b)(6) motion to a summary judgment motion, there are two exceptions. First, the Court may take judicial notice of documents referenced in the Complaint, "if the documents' authenticity is not contested and the plaintiff's complaint necessarily relies on them." Lee v. City of L.A., 250 F.3d 668, 688-89 (9th Cir. 2001). Second, the Court may take judicial notice of "matters in the public record" under Federal Rule of Evidence 201(b). Id. A matter may be judicially noticed if it is either "generally known within the trial court's territorial jurisdiction" or "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). Here, Exhibits 1 through 3 are documents referenced in the complaint, as well as records filed with the county recorder, of which courts routinely take judicial notice. See, e.g., Liebelt v. Quality Loan Serv. Corp., No. 09-cv-05867, 2011 WL 741056, at *6 n.2 (N.D. Cal. Feb. 24, 2011) ; Reynolds v. Applegate, No. C 10-04427, 2011 WL 560757, at *1 n.2 (N.D. Cal. Feb.14, 2011); Giordano v. Wachovia Mortg., FSB, No. 10-cv-04661, 2010 WL 5148428, at *1 n.2 (N.D. Cal. Dec.14, 2011). Although Plaintiff argues that judicial notice is improper under California law, the Court finds that Exhibits 1 through 3 may properly be judicially noticed under federal law, which governs here, and accordingly GRANTS Defendants' request as to these exhibits. For the same reasons, the Court also takes judicial notice of the FDIC's Determination of Insufficient Assets to Satisfy Claims Against Financial Institution in Receivership, 75 Fed. Reg. 45,114 (Aug. 2, 2010).
On November 21, 2008, the Office of Thrift Supervision ("OTS") closed Downey and appointed the FDIC as receiver for Downey. Compl. ¶ 43; see also Determination of Insufficient Assets To Satisfy Claims Against Financial Institution in Receivership ("FDIC Determination"), 75 Fed. Reg. 45,114, 45,114 (Aug. 2, 2010). On November 21, 2008, the FDIC facilitated a transaction whereby U.S. Bank acquired Downey's deposits and most of Downey's assets. Compl. ¶ 67; FDIC Determination, 75 Fed. Reg. at 45,114. According to the complaint, U.S. Bank acquired "servicing rights . . . regarding the pools of [Downey] assets." See Compl. ¶ 68. The FDIC determined that the assets of Downey were insufficient "to make any distribution to general unsecured claims," and therefore that "such claims will recover nothing and have no value." FDIC Determination, 75 Fed. Reg. at 45,114 (citing 12 U.S.C. § 1821(d)(11)(A)); see also Compl. ¶ 43.
By 2008, "Plaintiff [sic] was experiencing the economic challenges felt throughout the country. He was living in a property that was underwater and he could no longer keep his mortgage payment current." Compl. ¶ 45. Sometime in early 2010, Plaintiffs defaulted on the Refinanced Loan. Compl. ¶ 36; M-S Decl. Ex. 2. In March 2009, Plaintiffs contacted U.S. Bank in an attempt to obtain a modification of their Refinanced Loan. Compl. ¶¶ 46-49. On or about April 23, 2010, Plaintiffs received a notice of default, which was recorded in the Santa Clara County Recorder's Office on April 26, 2010. Compl. ¶ 77; M-S Decl. Ex. 2. On or about July 27, 2010, Plaintiffs received a notice of trustee's sale, which was recorded in the Santa Clara County Recorder's Office on July 28, 2010. Compl. ¶¶ 47-48; see also M-S Decl. Ex. 3.
On August 30, 2011, Plaintiffs, proceeding pro se, filed the instant complaint. ECF No. 1. The complaint alleges fifteen claims, seven of which arise under federal law. Id. The first six claims allege that various California statutes violate the United States Constitution. Compl. 3, 20, 108. Claim 9 alleges unfair debt collection practices and predatory lending under, inter alia, the Federal Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692, et seq.; the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617, and the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601, et seq. Compl. ¶¶ 169, 187.
The Court notes that Plaintiffs' complaint is nearly identical to the complaint in Dodd v. Fed. Home Loan Mortg. Corp., CIV S-11-1603 JAM, 2011 WL 6370032 (E.D. Cal. Dec. 19, 2011), which the Magistrate Judge recommended be dismissed in its entirety. The plaintiffs in Dodd subsequently filed for bankruptcy, and the matter was eventually dismissed on that ground.
Although the complaint alleges sixteen "causes of action," there is no fourteenth cause of action. The Court refers to Plaintiffs' causes of action as "claims," and follows the numbering in the complaint.
Claim 9 also alleges violations of California's Rosenthal Fair Debt Collection Act, Cal. Civ. Code §§ 1788, et seq. and Cal. Fin. Code §§ 22340, 33560(c), as discussed below.
Plaintiffs also allege the following state law claims: (7) injunctive relief under Cal. Bus. & Prof. Code § 17203; (8) accounting; (9) unfair debt collection practices and predatory lending under California's Rosenthal Fair Debt Collection Act, Cal. Civ. Code §§ 1788, et seq. and Cal. Fin. Code §§ 22340, 33560(c); (10) declaration that no valid contract exists; (11) slander of title; (12) fraud or negligent misrepresentation; (13) quiet title; (15) breach of contract; and (16) negligence.
Claim 15 alleges that Plaintiffs are beneficiaries of the Home Affordable Modification Program ("HAMP") Servicer Agreement between the U.S. Treasury Department and Downey, which Downey allegedly breached by not following the HAMP Guidelines. Compl. ¶ 234. "In October 2008, Congress passed the Emergency Economic Stabilization Act ("EESA") to help restore stability to the financial system and to preserve homeownership. 12 U.S.C. § 5201 (2008). The EESA also established the Troubled Asset Relief Program ("TARP"), which was intended to reduce foreclosures. 12 U.S.C. §§ 5211, 5225 (2008). Under TARP, the Treasury Department established HAMP, a voluntary program to encourage lenders to modify mortgages and prevent defaults and foreclosures." Gutierrez v. PNC Mortg., 10-CV-01770-AJB-RBB, 2012 WL 1033063, at *12 (S.D. Cal. Mar. 26, 2012). This Court has previously held that state-law contract claims alleging violations of HAMP Guidelines do not create federal question jurisdiction. See De Long v. Bank of Am., N.A., 11-CV-06388-LHK, 2012 WL 1498868, at *4 (N.D. Cal. Apr. 27, 2012). Accordingly, this Court does not have original federal question jurisdiction over Claim 15 in Plaintiffs' complaint. Id.
II. Legal Standards
A. Federal Rule of Civil Procedure 8
Rule 8 states that a civil complaint "must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Supreme Court has interpreted the "short and plain statement" requirement to mean that the complaint must provide "the defendant [with] fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957).
B. 12(b)(6) Motion to Dismiss for Failure to State a Claim
A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In considering whether the complaint is sufficient to state a claim, the Court must accept as true all of the factual allegations contained in the complaint. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). In addition, pro se pleadings are liberally construed. See Haines v. Kerner, 404 U.S. 519, 520-21, 92 S. Ct. 594, 595-96 (1972); Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). However, the Court need not accept as true "allegations that contradict matters properly subject to judicial notice or by exhibit" or "allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (citation omitted). While a complaint need not allege detailed factual allegations, it "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 129 S. Ct. at 1949 (quoting Bell Atl. Corp., 550 U.S. at 570). A claim is facially plausible when it "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.
As the Ninth Circuit has stated, "[a] claim may be dismissed under Rule 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." Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 969 (9th Cir. 2010) (en banc) (citing Huynh v. Chase Manhattan Bank, 465 F.3d 992, 997 (9th Cir. 2006)), cert. denied, 131 S. Ct. 3055 (2011). A "complaint cannot be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts that would establish the timeliness of the claim." Id. (internal citations and quotations omitted).
C. Leave to Amend
If a court grants a motion to dismiss, leave to amend should be granted unless the pleading could not possibly be cured by the allegation of other facts. Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000). A court "may exercise its discretion to deny leave to amend due to 'undue delay, bad faith or dilatory motive on part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party . . . , [and] futility of amendment.'" Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892-93 (9th Cir. 2010) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)); see also Abagninin v. AMVAC Chem. Corp., 545 F.3d 733, 742 (9th Cir. 2008) (repeated failure to cure deficiencies by previous amendment sufficient to deny leave to amend).
III. Analysis
As discussed below, the Court dismisses Plaintiffs' federal claims under the U.S. Constitution, FDCPA, RESPA, and TILA without prejudice. The Court addresses each of these claims in turn. The Court declines to exercise supplemental jurisdiction over Plaintiffs' state law claims.
A. Constitutionality of California Statutes
As stated above, Plaintiffs' first six claims allege that various California statutes violate the United States Constitution. Compl. ¶¶ 3, 20, 108. Specifically, Claims 1, 5, and 6 allege that Cal. Civ. Code §§ 2924-2924(l), which partly comprise the framework of non-judicial foreclosure procedures, are unconstitutional. Compl. ¶¶ 96, 132, 134, 137-38, 142, 144-46, 148-49. Claim 2 seeks a declaration that "the customs, practices, and policies administered and enforced in the California Courts are unconstitutional and offensive to the principles of due process of law." Compl. ¶ 113. Finally, Claims 3 and 4 allege that Cal. Civ. Code § 1714.10 violates the U.S. Constitution. Compl. ¶¶ 119, 123-24, 127.
U.S. Bank argues that Plaintiffs' first six claims fail because: (1) the Court lacks jurisdiction to entertain a constitutional challenge that is not brought under 42 U.S.C. § 1983; (2) Plaintiffs failed to comply with Civil Local Rule 3-8(b); (3) Defendants did not act under color of law; (4) Plaintiffs' claims are time barred; (5) Claims 1, 5 and 6 under Cal. Civ. Code §§ 2924-2924(l) fail as a matter of law; (6) Claim 2 for declaratory relief fails as a matter law; and (7) Claims 3 and 4 under Cal. Civ. Code § 1714.1 fail as a matter of law. U.S. Bank's Mot. 3-11.
As stated below, Plaintiffs did raise 42 U.S.C. § 1983 claims. The Court agrees with Defendants that Plaintiffs' constitutional claims under 42 U.S.C. § 1983 fail for failure to allege that Defendants acted under color of state law. Accordingly, after satisfying itself of its own jurisdiction, the Court need not reach Defendants' other arguments.
1. Jurisdiction Under 42 U.S.C. § 1983
Defendants are correct that "a plaintiff may not sue a state defendant directly under the Constitution where section 1983 provides a remedy, even if that remedy is not available to the plaintiff." Martinez v. City of L.A., 141 F.3d 1373, 1382-83 (9th Cir. 1998). However, liberally construed, Plaintiffs' complaint adequately invokes this Court's jurisdiction for their constitutional claims under 28 U.S.C. § 1983. Paragraph 1 of the Complaint states: "This court has plenary jurisdiction over the present dispute and all parties pursuant to 28 U.S.C. § 1331 in that the claims alleged therein arise under the laws of the United States, including but not limited to 42 U.S.C. §§ 1981, 1982, 1983, and 1988(a)." Compl. ¶ 1 (emphasis added). Thus, Plaintiffs' complaint, liberally construed, does assert 42 U.S.C. § 1983 as a basis for this Court's jurisdiction. See Gordon v. City of Oakland, 09-CV-05794-WHA, 2010 WL 1463578, at *2 (N.D. Cal. Apr. 13, 2010) (citing Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990)). Accordingly, the Court has subject matter jurisdiction to entertain Plaintiffs' claims under 42 U.S.C. § 1983.
2. Whether Defendants Acted Under Color of Law
To state a claim under 42 U.S.C. § 1983, a plaintiff must allege that: (1) the defendant violated a right secured by the United States Constitution or the laws of the United States; and (2) the defendant did so acting under color of state law. West v. Atkins, 487 U.S. 42, 48 (1988). Defendants argue that Plaintiffs fail to adequately allege that Defendants were acting under color of state law. "A person acts under color of state law only when exercising power possessed by virtue of state law and made possible only because the wrongdoer is clothed with the authority of state law." Polk County v. Dodson, 454 U.S. 312, 317-18 (1981).
In their opposition brief, Plaintiffs appear to argue that Defendants are acting under color of federal law. Opp'n 5 (citing 12 U.S.C. § 5211). Indeed, Plaintiffs' complaint states, "[t]he conduct of banks in pursuit of non-judicial foreclosures must be done under the authority of the federal charter which is the 'law of the United States' and therefore 'under color of federal law.'" Compl. ¶ 114. However, Plaintiffs fail to allege which Defendants here were acting under federal law for which claim. Furthermore, Plaintiffs' complaint states: "The 'Emergency Economic Stabilization Act of 2008' Title I established the Troubled Assets Relief Program which provided for the purchases of troubled assets. Financial institutions were designated as financial agents of the Federal Government and shall perform all such reasonable duties related to this Act as financial agents of the Federal Government as may be required." Compl. ¶ 27. Plaintiffs are correct that TARP authorized the Secretary of the Treasury to "designat[e] financial institutions as financial agents of the Federal Government" and mandate such financial institutions to "perform all reasonable duties related to this Act as financial agents of the Federal Government." 12 U.S.C. § 5211. However, Plaintiffs' complaint does not allege that the Secretary of the Treasury designated any of these Defendants financial agents of the Federal Government. Moreover, Paragraph 27 of the complaint fails to allege that any of the Defendants here were acting under color of state law, as required to state a claim under 42 U.S.C. § 1983.
In Bivens v. Six Unknown Named Agents, 403 U.S. 388, 392-97 (1971), the United States Supreme Court allowed in some circumstances a private right of action implied from the Constitution itself for alleged constitutional violations by federal officials. However, even if the Court were to construe this claim as a Bivens claim, rather than a section 1983 claim, such a Bivens claim would also fail. As the Ninth Circuit has explained, Bivens created an implied right of action against federal officials for tortious deprivations of constitutional rights. Bruns v. Nat 'l Credit Union Admin., 122 F.3d 1251, 1255 (9th Cir. 1997). This implied right of action does not extend to suits directly against a federal agency. Id. (holding that plaintiff could not assert Fifth Amendment due process claim against an agency because "an individual may not bring a Bivens claim for damages directly against a federal agency") (citing FDIC v. Meyer, 510 U.S. 471, 478 (1994)). Accordingly, Plaintiffs cannot assert Bivens claims against these Defendants, even if they were acting as federal agencies.
Moreover, the Court has reviewed Plaintiffs' complaint and does not find sufficient allegations to support Plaintiffs' argument that Defendants were acting under color of state law. Claim 1 of Plaintiffs' complaint states that Defendants "[c]onduct[ed] non-judicial foreclosure sales . . . under color of laws which effectively preclude contests to title and standing." Compl. ¶ 100. Plaintiffs further allege that "the civil rights of mortgagors . . . are being severely infringed under color of California law and in particular the judicial norms which apply to the conduct and resolution of standing to foreclose on real-estate notes. . . ." Compl. ¶ 105. Similarly, Claim 2 asserts that the "consistent pro-mortgagee results" in California courts are "all under color of law [and] in violation of the First, Fifth, Ninth and Fourteenth Amendments to the Constitution." Compl. ¶ 111. However, the Ninth Circuit has held that a private entity's use of a state's non-judicial foreclosure procedures does not constitute state action for purposes of Section 1983. See Apao v. Bank of N.Y., 324 F.3d 1091, 1095 (9th Cir. 2003), cert. denied, 540 U.S. 948 (2003); see also Harper v. Fed. Land Bank of Spokane, 878 F.2d 1172, 1178 (9th Cir. 1989) ("Furthermore, the fact that a state permits the use of foreclosure procedures and subsequent sheriff sales as the execution of a judgment is not sufficient to constitute state action."); Schucker v. Rockwood, 846 F.2d 1202, 1205 (9th Cir. 1988) ("Invoking state legal procedures does not constitute 'joint participation' or 'conspiracy' with state officials sufficient to satisfy section 1983's state action requirement."). Accordingly, Claims 1 through 6 under § 1983 are dismissed without prejudice for failure to adequately allege that Defendants acted under color of law. However, because it is not clear that amendment would be futile, Claims 1 through 6 are dismissed with leave to amend.
The Court advises Plaintiffs to sign up for an appointment with the Federal Legal Assistance Self-Help Center ("FLASH") at the San Jose Courthouse, before filing an amended complaint. The telephone number for FLASH is (408) 297-1480. Plaintiffs should address not only the deficiencies identified in this Order, but also all other deficiencies raised in Defendants' motions to dismiss. Moreover, if Plaintiffs wish to amend their claims asserting that California laws are unconstitutional, they must comply with Civil Local Rule 3-8(b), which states: "In any action in which the constitutionality of a state statute is questioned and neither the state nor an agency, officer or employee of the state is a party, counsel raising the question must file notice of such claim with the assigned Judge (or, if no assignment has been made, the Chief Judge) and serve a copy of such notice on the State Attorney General. The notice must identify the statute and describe the basis for the claim that it is unconstitutional. The party must file the notice with a certificate of service pursuant to Civil L.R. 5-6." Failure to comply with Civil Local Rule 3-8(b), prior to filing the amended complaint, will subject these claims to dismissal.
B. Unfair Debt Collection Practices and Predatory Lending
Plaintiffs' ninth claim alleges that Defendants have violated provisions of FDCPA, and that Defendants have engaged in predatory lending in violation of RESPA and TILA. Compl. ¶¶ 169, 187, 189, 190. Defendants move to dismiss these claims, arguing that: (1) the claims are time barred; (2) Defendants are not debt collectors; and (3) Plaintiffs fail to allege any facts in support of a TILA claim. Mot. 14-15. The Court agrees for the reasons explained below.
1. Federal Fair Debt Collection Practices Act
The purpose of the FDCPA is to "prohibit debt collectors from engaging in unfair and deceptive practices in the collection of consumer debts, and to require debtors to act fairly into entering into and honoring such debts." See 15 U.S.C. § 1692. Further, the FDCPA applies only to a "debt collector," defined as "a person who uses any instrumentality of interstate commerce or the mail 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. The definition explicitly excludes creditors, as well as loan originators or assignees who obtained the right to collect on a loan when it was not in default. 15 U.S.C. § 1692a(4), § 1692a(6)(A) or (B), § 1692a(ii) and (iii). However, courts within this Circuit have concluded that a non-judicial foreclosure does not constitute "debt collection" as defined by the statute. See, e.g., Tang v. Cal. Reconveyance Co., No. 10-cv-03333-LHK, 2010 WL 5387837, at *4 (N.D. Cal. Dec. 22, 2010) ("[T]o the extent their FDCPA claims are based on the initiation of a foreclosure proceeding, Plaintiffs fail to state a claim."); Deissner v. Mortg. Elec. Registration Sys., 618 F. Supp. 2d 1184, 1189 (D. Ariz. 2009) ("[T]he activity of foreclosing on [a] property pursuant to a deed of trust is not collection of a debt within the meaning of the FDCPA.") (internal quotations omitted), aff'd, 384 F. App'x 609 (9th Cir. June 17, 2010); Landayan v. Wash. Mut. Bank, No. C 09-0916 RMW, 2009 WL 3047238, at *3 (N.D. Cal. Sept. 18, 2009) ("A claim cannot arise under FDCPA based upon the lender enforcing its security interest under the subject deed of a trust because foreclosing on a mortgage does not constitute an attempt to collect a debt for purposes of the FDCPA.").
Because non-judicial foreclosure does not constitute "debt collection" as defined by the FDCPA, further amendment of Plaintiffs' FDCPA claim would be futile. Accordingly, Plaintiffs' FDCPA claim is dismissed with prejudice.
Although the statute of limitations for a FDCPA claim is one year from the date on which the violation occurs, 15 U.S.C. § 1692k(d), the Court need not reach whether Plaintiffs' claim under FDCPA is time barred because the claim fails for failure to allege that Defendants are "debt collectors" covered by the Act.
2. RESPA
Plaintiffs allege that defendants are subject to RESPA and "placed loans for the purpose of unlawfully increasing and otherwise obtaining yield spread fees, excess charges, and amounts in excess of what would have been lawfully earned." Compl. ¶ 189. Plaintiffs allege the lenders acted either individually or jointly as servicers of their loan and violated the requirements of 12 U.S.C. § 2605(b) "in that the servicing contract and duties were transferred and hypothecated without required notice." Id. ¶ 190. Plaintiffs contend these violations require rescission and or cancellation of their loan and return of all funds received by U.S. Bank or its predecessor, Wells Fargo, N.A. Id. ¶ 191.
RESPA creates a private right of action for only three types of wrongful acts: (1) payment of a kickback and unearned fees for real estate settlement services, 12 U.S.C. § 2607(a), (b); (2) requiring a buyer to use a title insurer selected by the seller, 12 U.S.C. § 2608(b); and (3) the failure by a loan servicer to give proper notice of a transfer of servicing rights or to respond to a qualified written request for information about a loan, 12 U.S.C. § 2605(f). Patague v. Wells Fargo Bank, N.A., No. 10-CV-03460-SBA, 2010 WL 4695480, at *3 (N.D. Cal. Nov. 8, 2010). Claims brought under § 2607 or 2608 are subject to a one-year statute of limitation, while claims under § 2605 are governed by a three-year statute of limitations, which commence to run when the violation occurs. 12 U.S.C. § 2614.
Plaintiffs' RESPA claim fails on several grounds. First, to the extent Plaintiffs' RESPA claim is based on payment of unearned fees under section 2607, this claim is time-barred by the 1- year statute of limitations. Any unearned fees occurred at the time the Refinanced Loan closed in December 2005. Thus, the statute of limitations ran on Plaintiffs' claim under section 2607 in December 2006. Given that Plaintiffs did not file their complaint until August 30, 2011, more than four years late, Plaintiffs' claim under section 2607 is time-barred.
Moreover, although Plaintiffs allege that "Defendants . . . placed loans for the purpose of unlawfully increasing or otherwise obtaining yield spread fees and sums in excess of what would have been lawfully earned," Compl. ¶ 189, "[n]o per se rule exists in applying RESPA . . . to [yield spread fees]." Bjustrom v. Trust One Mortgage Corp., 322 F.3d 1201, 1208 (9th Cir. 2003). Instead, a court must conduct a loan-specific analysis of whether the total mortgage broker compensation was reasonable. See id. The single allegation quoted above is insufficient to state a RESPA claim that the yield spread fees charged to Plaintiffs were unreasonable since Plaintiffs fail to allege what services were performed by Defendants, when they were performed, and what fees, if any, were charged by Defendants for those services. See Bjustrom, 322 F.3d at 1208.
Plaintiffs also fail to state a claim under § 2605. Section 2605(b) provides that "[e]ach servicer of any federally related mortgage shall notify the borrower in writing of any assignment, sale or transfer of the servicing of the loan to any other person." 12 U.S.C. § 2605(b). Plaintiffs' complaint fails to allege any facts regarding the alleged transfer of the servicing contract, including when the transfer occurred and to whom the contract was transferred. Nor does it allege that plaintiff suffered "any actual damages . . . as a result of the failure" to provide notice, or any "pattern or practice of noncompliance." 12 U.S.C. § 2605(f)(1).
Accordingly, Plaintiffs' RESPA claim against Defendants is dismissed. However, because it is not clear that amendment would be futile, the dismissal of Plaintiffs' RESPA claim is with leave to amend.
3. TILA
Under TILA, Plaintiffs seek rescission and cancellation of the loan and the return of all funds received by Defendants. Id. ¶ 191.
TILA requires, among other things, disclosure of finance charges and the annual percentage rate. See 15 U.S.C. § 1638(a); 12 C.F.R. § 226.18 ("Regulation Z"). Lenders must provide borrowers with clear and accurate disclosures, including two copies of a notice of a right to rescission. 15 U.S.C. § 1635. Violation of TILA provides borrowers with two potential forms of relief: rescission and monetary damages. See 15 U.S.C. §§ 1635, 1640. If a lender fails to disclose material information required by TILA, a borrower has a right to rescind within three years of consummation of the loan. See King v. California, 784 F.2d 910, 913 (9th Cir. 1986). The three-year period for a TILA rescission claim is not subject to equitable tolling. See Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998). In addition, a borrower has a right to monetary damages within one year of consummation of the loan. Id. at 915. However, "the doctrine of equitable tolling may, in the appropriate circumstances, suspend the limitations period until the borrower discovers or had reasonable opportunity to discover the fraud or nondisclosures that form the basis of the TILA [damages] action." See id. at 915.
Plaintiffs' TILA allegations are insufficient under Rule 8. Plaintiffs allege that Defendants violated TILA by failing "to validate and otherwise make a full accounting and required disclosures as to the true finance charges and fees;" by improperly retaining funds belonging to plaintiff; and by failing to disclose the ownership status of his loan. Compl. ¶ 187. Plaintiffs' TILA claim must be dismissed because it does not allege which provision of TILA was violated by which Defendant, nor do Plaintiffs allege how each Defendant violated TILA. See Tang v. Cal. Reconveyance Co., 10-CV-03333-LHK, 2010 WL 5387837, at *5 (N.D. Cal. Dec. 22, 2010). The Complaint must "meet some minimum threshold in providing a defendant with notice of what it is that it allegedly did wrong." Brazil v. U.S. Dep't of Navy, 66 F.3d 193, 199 (9th Cir. 1995). Plaintiffs have not met that minimum threshold here.
Moreover, even if these factual allegations were sufficient to state a plausible claim under TILA, any such claim would be time-barred by the applicable statute of limitations. Plaintiffs' right to rescission is time barred. See 15 U.S.C. § 1635(f). Because the loan documents indicate that the loan was signed in December 2005, and Plaintiffs did not file this case until August 2011, over five years later, it is apparent from the face of the Plaintiffs' complaint that their TILA rescission claim is time-barred. Accordingly, Plaintiffs' TILA claim for rescission is DISMISSED WITH PREJUDICE.
Damages claims under TILA have a one-year statute of limitations that runs from the date the loan documents are signed. 15 U.S.C. § 1640(e). Therefore, absent tolling, Plaintiffs' TILA damages claims expired in December 2006. Equitable tolling of TILA damages claims can extend the one-year limitations period, but such tolling is only available if "despite all due diligence, a plaintiff is unable to obtain vital information bearing on the existence of his claim." Santa Maria v. Pac. Bell, 202 F.3d 1170, 1178 (9th Cir. 2000), overruled on different grounds by Socop-Gonzalez v. INS, 272 F.3d 1176, 1194 (9th Cir. 2000). The complaint alleges in conclusory fashion that: "[a]ny applicable statutes of limitations have been tolled by the Defendants' continuing, knowing, and active concealment of the facts alleged herein. Despite exercising reasonable diligence, Plaintiff could not have discovered, did not discover, and was prevented from discovering, the wrongdoing complained of herein." Compl. ¶ 15. However, Plaintiffs have not alleged facts sufficient to establish that they acted with diligence to discover the basis of their TILA claims, which should have been apparent at the time the loan documents were signed. Plaintiffs' TILA damages claim is therefore dismissed. However, because it is not clear that amendment would be futile, the dismissal of Plaintiffs' TILA damages claim is with leave to amend.
C. Supplemental Jurisdiction
As discussed above, the Court dismisses the FDCPA and TILA rescission claims with prejudice and other federal claims against Defendants without prejudice. As here, where the Court "has dismissed all claims over which it has original jurisdiction," the Court "may decline to exercise supplemental jurisdiction" over Plaintiffs' state law claims. See 28 U.S.C. § 1367(c). The Ninth Circuit has held that this provision gives federal courts discretion either to retain or to dismiss a case after all federal claims have been dismissed. Albingia Versicherungs AG v. Schenker Int'l, 344 F.3d 931, 937-38 (9th Cir. 2003). When determining whether to retain supplemental jurisdiction, the Court is guided by the values "of economy, convenience, fairness, and comity." Acri v. Varian Assocs., 114 F.3d 999, 1001 (9th Cir.1997) (en banc) (quoting Allen v. City of L.A., 92 F.3d 842, 846 (9th Cir. 1996)) (internal quotation marks omitted). Nonetheless, "in the usual case in which all federal-law claims are eliminated before trial, the balance of factors . . . will point toward declining to exercise jurisdiction over the remaining state-law claims." Exec. Software N. Am. v. U.S. Dist. Court, 24 F.3d 1545, 1553 n. 4 (9th Cir. 1994) (emphasis omitted) (quoting Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350, n.7 (1988)) (internal quotation marks omitted).
Exercising supplemental jurisdiction would neither promote judicial economy nor convenience to the parties because the case has not progressed beyond the pleadings. Aside from ruling on this motion to dismiss, the Court has not considered any dispositive motions in this case. Moreover, the parties have not engaged in any discovery to date, despite the fact that this case was filed on August 30, 2011. See ECF No. 163, at 2. Moreover, "[n]eedless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law." United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966). Thus, having considered the relevant factors pursuant to 28 U.S.C. § 1367(c)(3), the Court DECLINES to exercise supplemental jurisdiction over Plaintiffs' state law claims at this time. Accordingly, Plaintiffs' state law claims are dismissed without prejudice.
IV. Conclusion
For the foregoing reasons, the Court DENIES FDIC's motion to dismiss and GRANTS U.S. Bank's motion to dismiss as follows:
1. Plaintiffs' federal constitutional claims (Claims 1-6) are DISMISSED WITHOUT PREJUDICE. If Plaintiffs seek to amend and reassert these claims they must comply with Civil Local Rule 3-8(b) prior to filing an amended complaint.
2. Plaintiffs' FDCPA claim is DISMISSED WITH PREJUDICE.
3. Plaintiffs' RESPA claim is DISMISSED WITHOUT PREJUDICE.
4. Plaintiffs' TILA rescission claim is DISMISSED WITH PREJUDICE.
5. Plaintiffs' TILA damages claim is DISMISSED WITHOUT PREJUDICE.
6. Plaintiffs' state law claims are DISMISSED WITHOUT PREJUDICE.
7. Plaintiffs may file an amended complaint within 21 days of the date of this Order. Failure to meet this deadline will result in a dismissal with prejudice. Plaintiffs may not add any new claims or parties without first obtaining leave from the Court or a stipulation from Defendants.
IT IS SO ORDERED.
_________________________
LUCY H. KOH
United States District Judge