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Kerry K. Long v. Deutsche Bank National

October 24, 2011


The opinion of the court was delivered by: J. Michael Seabright United States District Judge



On June 29, 2010, Plaintiff Kerry K. Long ("Plaintiff") filed this action alleging claims against Defendants Deutsche Bank National Trust Company, as Trustee for Soundview Home Loan Trust 2006 WF-1 ("Deutsche Bank"), and Wells Fargo Bank ("Wells Fargo") (collectively, "Defendants") asserting federal and state law claims stemming from a mortgage transaction concerning real property located at 15-144, 31st Avenue, Keeau, Hawaii 96749 (the "subject property").

After this court granted in part and denied in part Defendants' Motion for Judgment on the Pleadings with leave to amend, see Long v. Deutsche Bank Nat'l Trust Co., 2011 WL 2650219 (D. Haw. July 5, 2011), Plaintiff filed a First Amended Complaint ("FAC"). Currently before the court is Defendants' Motion to Dismiss the FAC, in which they argue that the FAC fails to state a cognizable claim. Based on the following, the court GRANTS Defendants' Motion to Dismiss the FAC.


A. Factual Background

As alleged in the FAC, in June 2006, Plaintiff sought to purchase the subject property and therefore applied for a thirty-year fixed rate mortgage loan for $416,000 with Wells Fargo. Doc. No. 47, FAC ¶¶ 17-19. In the loan application process, Wells Fargo allegedly (1) completed the application without providing or showing Plaintiff a copy; (2) failed to explain the contents of the application to Plaintiff; (3) concealed from Plaintiff that it had significantly overstated Plaintiff's income to increase his chance of qualifying for a loan he would not ordinarily qualify for; and (4) concealed that the loan was unaffordable once the payments were amortized over the life of the loan. Id. ¶¶ 20-25. Plaintiff never knowingly signed the loan application that overstated his income, and had answered all of Wells Fargo's questions and provided all requested documents. Id. ¶¶ 26-27.

Wells Fargo and Plaintiff ultimately entered into a loan on or about July 5, 2006. Id. ¶ 34; see also Defs.' Ex. A.*fn1 In entering into the loan, Wells Fargo allegedly (1) failed to verify Plaintiff's income and employment and otherwise use due diligence to verify that Plaintiff qualified for the loan;

(2) offered Plaintiff a stated income loan even though Plaintiff was employed;

(3) did not explain to Plaintiff that he could compare loan terms or purchase down the interest rate of the loan; (4) failed to provide Plaintiff a myriad of required documents including, among other things, a good faith estimate, a final HUD-1 Settlement Statement, the Servicing Disclosure Statement, and the Notice of Assignment, Sale or Transfer of Servicing Rights; (5) did not disclose and/or concealed from Plaintiff material terms of the loan including the interest rate, the adjustable interest rate, the actual anticipated interest, the fees and costs of the loan, and his right to rescind the loan; (6) failed to give Plaintiff a reasonable time to read and understand the loan documents; and (7) failed to disclose that it intended to transfer, sell, or assign the note and mortgage to other lenders. Doc. No. 47, FAC ¶¶ 29-38.

Although the FAC does not explain Deutsche Bank's role in this transaction, the FAC states that "[Deutsche Bank] alleges it was subsequently assigned the note and mortgage," and that it had a duty to verify Plaintiff's income and employment when purchasing the loan from Wells Fargo. Id. ¶¶ 13, 29.

B. Procedural Background

On June 29, 2010, Plaintiff filed his Complaint. On July 26, 2011, the court granted in part and denied in part Defendants' Motion for Judgment on the Pleadings (the "July 26, 2011 Order"), see Long, 2011 WL 2650219. As a result, on July 26, 2011, Plaintiff filed his FAC. The FAC asserts claims against Defendants entitled (1) Violations of Real Estate Settlement Procedures Act (Count I); (2) Violation of Fair Credit Reporting Act (Count II); (3) Fraudulent Misrepresentation (Count III); (4) Breach of Fiduciary Duty (Count IV); (5) Unjust Enrichment (Count V); (6) Civil Conspiracy and Aiding and Abetting (Count VI); (7) Complaint to Quiet Title (Count VII); (8) Misrepresentation as to the Status of Defendants to Conduct Business in the State of Hawaii and Otherwise Enforce Any Alleged Note and/or Mortgage (Count VIII); (9) Violation of Fair Debt Collection Practices (Count IX); (10) Unconscionability (Count X); (11) Unfair and Deceptive Acts or Practices (Count XI); (12) Failure to Act Consistent with the Implied Duty of Good Faith and Fair Dealing (Count XII); (13) Negligent and/or Intentional Infliction of Emotional Distress (Count XIII); (14) Violation of the Gramm-Leach-Bliley Act (Count XIV); and (15) Violation of the Hawaii Constitutional Right of Privacy (Count XV).

On August 9, 2011, Defendants filed their Motion to Dismiss. Plaintiff filed an Opposition on October 3, 2011,*fn2 and Defendants filed a Reply on October 11, 2011. A hearing was held on October 17, 2011.


A. Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss a claim for "failure to state a claim upon which relief can be granted[.]"

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Weber v. Dep't of Veterans Affairs, 521 F.3d 1061, 1065 (9th Cir. 2008). This tenet -- that the court must accept as true all of the allegations contained in the complaint -- "is inapplicable to legal conclusions." Iqbal, 129 S. Ct. at 1949. Accordingly, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 555). Rather, "[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 556). Factual allegations that only permit the court to infer "the mere possibility of misconduct" do not show that the pleader is entitled to relief. Id. at 1950.

B. Federal Rule of Civil Procedure 9(b)

Federal Rule of Civil Procedure 9(b) requires that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." "Rule 9(b) requires particularized allegations of the circumstances constituting fraud." In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547-48 (9th Cir. 1994) (en banc), superseded on other grounds by 15 U.S.C. § 78u-4.

In their pleadings, Plaintiffs must include the time, place, and nature of the alleged fraud; "mere conclusory allegations of fraud are insufficient" to satisfy this requirement. Id. (citation and quotation signals omitted). Where there are multiple defendants, Plaintiffs cannot "lump multiple defendants together" and instead must "differentiate their allegations [between defendants]." Destfino v. Kennedy, 630 F.3d 952, 958 (9th Cir. 2011) (citation omitted). However, "[m]alice, intent, knowledge, and other condition of mind of a person may be averred generally." Fed. R. Civ. P. 9(b); see also In re GlenFed, Inc. Sec. Litig, 42 F.3d at 1547 ("We conclude that plaintiffs may aver scienter . . . simply by saying that scienter existed."); Walling v. Beverly Enter., 476 F.2d 393, 397 (9th Cir. 1973) (Rule 9(b) "only requires the identification of the circumstances constituting fraud so that the defendant can prepare an adequate answer from the allegations."

(citations omitted)).

A motion to dismiss for failure to plead with particularity is the functional equivalent of a motion to dismiss under Fed. R. Civ. P. 12(b)(6). Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003). In considering a motion to dismiss, the court is not deciding the issue of "whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Harlow v. Fitzgerald, 457 U.S. 800 (1982).


Defendants seek dismissal of all Counts of the FAC for failure to state a claim upon which relief can be granted. The court addresses each Count of the FAC in turn.

A. Violations of the Real Estate Settlement Procedures Act (Count I)

The FAC asserts that Wells Fargo violated the Real Estate Settlement Procedures Act ("RESPA"), by "accepting charges for rendering of real estate services which were in fact charges for other than services actually performed" in violation of 12 U.S.C. § 2607, Doc. No. 47, FAC ¶ 41, and by failing to timely and promptly notify Plaintiff of the "assignment or sale or transfer of the alleged note and/or mortgage for the subject property" in violation of 12 U.S.C. § 2605. Id.

¶ 45. The FAC further asserts that both Wells Fargo and Deutsche Bank violated 12 U.S.C. § 2605(e) by failing to respond to Plaintiff's request for Defendants to "resolve servicing issues." Id. ¶ 43. Plaintiff's RESPA claim fails for several reasons.

1. Failure to Allege Damages

All of the FAC's allegations of RESPA violations fail because Plaintiff has not alleged any actual damages. Pursuant to 12 U.S.C. § 2605(f)(1), Plaintiff has a burden to plead and demonstrate he has suffered damages. Specifically, § 2605(f)(1) provides:

Whoever fails to comply with any provision of this section shall be liable to the borrower for each such failure in the following amounts:

(1) Individuals

In the case of any action by an individual, an

amount equal to the sum of --

(A) any actual damages to the borrower as a result of the failure; and

(B) any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not to exceed $1,000.

Because damages are a necessary element of a RESPA claim, failure to plead damages is fatal to a RESPA claim. See, e.g., Esoimeme v. Wells Fargo Bank, 2011 WL 3875881, at *14 (E.D. Cal. Sept. 1, 2011) (dismissing claim where the plaintiff failed to "allege any pecuniary loss from defendant's alleged failure to respond to the QWR"); Soriano v. Countrywide Home Loans, Inc., 2011 WL 1362077, at *6 (N.D. Cal. Apr. 11, 2011) (reasoning that "even if a RESPA violation exists, Plaintiff must show that the losses alleged are causally related to the RESPA violation itself to state a valid claim under RESPA"); Shepherd v. Am. Home Mortg. Servs., 2009 WL 4505925, at *3 (E.D. Cal. Nov. 20, 2009) ("[A]lleging a breach of RESPA duties alone does not state a claim under RESPA. Plaintiff must, at a minimum, also allege that the breach resulted in actual damages." (quoting Hutchinson v. Del. Sav. Bank FSB, 410 F. Supp. 2d 374, 383

(D. N.J. 2006))).

Although the FAC alleges in general that Defendants are liable to Plaintiff for damages, see Doc. No. 47, FAC ¶¶ 42, 44, 46, it fails to allege that Plaintiff suffered any actual damages as a result of the alleged RESPA violations. See Shepherd, 2009 WL 4505925, at *3. Further, the FAC's assertion that Plaintiff was forced to hire counsel, see Doc. No. 47, FAC ¶ 46, does meet this requirement -- attorneys' fees are not "actual damages" as contemplated by § 2605(f)(1) and instead are separately enumerated as recoverable losses in § 2605(f)(3). See, e.g., Luciw v. Bank of Am., N.A., 2010 WL 3958715, at *5 (N.D. Cal. Oct. 7, 2010) ("[A]ttorneys' fees typically are not considered 'actual damages,' and other district courts have rejected similar arguments."); Allen v. United Fin. Mortg. Corp., 660 F. Supp. 2d 1089, 1097 (N.D. Cal. 2009) (concluding that attorneys fees' are not a "pecuniary loss" sufficient for purposes of 12 U.S.C. § 2605(f)(1)). On this basis alone, Plaintiff's RESPA claim fails.

In opposition, Plaintiff asserts that he seeks "actual damages paid in fighting a fraudulent and deceptive foreclosure." Doc. No. 62, Pl.'s Opp'n at 3. No such allegations are included in the FAC, and even if included, such allegations would not establish damages caused as a result of RESPA violations -- Plaintiff fails to explain how any RESPA violation would cause foreclosure of the subject property. In sum, Plaintiff has failed to allege a necessary element of his RESPA claims.

2. 12 U.S.C. § 2607

Plaintiff's claim that Wells Fargo violated 12 U.S.C. § 2607 by "accepting charges for rendering of real estate services which were in fact charges for other than services actually performed," Doc. No. 47, FAC ¶ 41, fails for two reasons.

First, Plaintiff has failed to state a plausible violation of § 2607, which prohibits the acceptance of "any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person." In other words, a RESPA violation occurs when a party receives a fee for providing a referral regarding a mortgage loan. No such allegations are included the FAC.

Second, as the court previously explained in its July 5, 2011 Order, § 2607 is subject to a one-year statute of limitations, which starts at the date of the violation. See Long, 2011 WL 2650219, at *5 (quoting 12 U.S.C. § 2614). Any alleged illegal kickback was received during the consummation of the loan, and the FAC fails to allege any facts suggesting that equitable tolling might apply. Plaintiff's RESPA claim for violation of § 2607 is untimely.

3. Failure to Notify Plaintiff of Transfer of Note and Mortgage

The FAC's assertion that Wells Fargo failed to timely and promptly notify Plaintiff of the "assignment or sale or transfer of the alleged note and/or mortgage for the subject property," Doc. No. 47, FAC ¶ 45, does not constitute a RESPA violation. RESPA governs the notice requirements where loan servicing is assigned, sold, or transferred, see 12 U.S.C. § 2605, but does not govern notice requirements where a note or mortgage is transferred. Plaintiff cannot base a RESPA violation on this allegation.

In opposition, although not clear, Plaintiff apparently asserts that he is alleging a violation of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1641(g), which provides:

[N]ot later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer, including (A) the identity, address, telephone number of the new creditor; (B) the date of transfer; (C) how to reach an agent or party having authority to act on behalf of the new creditor;

(D) the location of the place where transfer of ownership of the debt is recorded; and (E) any other relevant information regarding the new creditor.

Regardless of whether Plaintiff could have potentially asserted a violation of TILA, the FAC does not include this allegation. Further, Plaintiff included a TILA claim in his original Complaint, which was dismissed with leave to amend. See Long, 2011 WL 2650219, at *4. The July 5, 2011 Order expressly warned Plaintiff that "[a]ny cause of action that was raised in the original Complaint is waived if it is not raised in the ...

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