Opinion
No. 2:13-cv-01215 JAM-KJN
2013-09-20
DAVID KIRSTEN, Plaintiff, v. OCWEN LOAN SERVICING, LLC, a Delaware limited liability company, and DOES 1 through 20, Inclusive, Defendants.
ORDER GRANTING DEFENDANT'S
MOTION TO DISMISS
This matter is before the Court on Defendant Ocwen Loan Servicing, LLC's ("Defendant") Motion to Dismiss Plaintiff's complaint (Doc. #5). Plaintiff David Kirsten ("Plaintiff") opposes the motion (Doc. #7) and Defendant replied (Doc. #10). For the reasons set forth below, Defendant's motion is GRANTED.
This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for August 21, 2013.
I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND
Plaintiff originally filed this action on May 6, 2013, in San Joaquin County Superior Court against Defendant (Doc. #1). Defendant removed this action to this Court on June 17, 2013 and filed its motion to dismiss on July 1, 2013 (Doc. #5). In the complaint, Plaintiff alleges three causes of action against Defendant: (1) slander of title; (2) defamation; and (3) unfair credit reporting. Id. ¶¶ 36-51.
In or about December 2007, Plaintiff obtained a mortgage loan from Taylor, Bean & Whitaker Mortgage Corp. ("TBW") to purchase a property in Lodi, California ("Property"). Id. ¶ 5. Plaintiff alleges that he timely made all payments on his loan. Id. ¶ 6. In 2009, Plaintiff alleges that TBW filed for bankruptcy, which disrupted TBW's processing of customer's loan payments. Id. ¶ 7. Even though Plaintiff allegedly made all his payments, TBW failed to timely receive and post his payments for August 2009 and September 2009. Id.
In 2009, Cenlar Agency, Inc. ("Cenlar") allegedly began servicing Plaintiff's loan. Id. ¶ 8. On or about December 8, 2009, Cenlar allegedly sent a Notice of Default to Plaintiff and his tenant at the Property. Id. ¶ 9. Plaintiff responded to Cenlar and provided documentation to show that the payments were made. Id. ¶ 10. Cenlar allegedly acknowledged in a letter that Plaintiff made the payments. Id. Cenlar allegedly sent another Notice of Default on or about July 6, 2010, which Plaintiff disputed and Cenlar again acknowledged that Plaintiff made the payments. Id. ¶¶ 11-12.
In or about 2010, Defendant allegedly became the loan servicer. Id. ¶ 13. Defendant allegedly asserted that Plaintiff was in default on the loan because it did not have a record of his August and September 2009 payments. Id. ¶ 15. Plaintiff allegedly responded and provided documentation again. Id. On February 23, 2011, Defendant allegedly sent Plaintiff a letter acknowledging the payments. Id. ¶ 19.
One month later, Defendant allegedly reported the loan "past due" because it did not have record of the August and September 2009 payments. Id. ¶¶ 20-21. As a result, Defendant declared Plaintiff delinquent on the loan, improperly assessed late fees and other charges, recorded one or more Notice of Default, and falsely reported negative information about him to credit reporting agencies. Id. ¶ 23. Plaintiff attempted to resolve this problem but Defendant allegedly did not cooperate. Id. ¶¶ 25-26.
Plaintiff allegedly paid the delinquent amount. Id. ¶ 26. On or about April 16, 2012, Defendant recorded a "Rescission of Notice of Default and Election to Sell under Deed of Trust," which stopped the foreclosure. Id.
II. OPINION
A. Legal Standard
A party may move to dismiss an action for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). To survive a motion to dismiss a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 556 U.S. 662, 570 (2007). In considering a motion to dismiss, a district court must accept all the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). "First, to be entitled to the presumption of truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause of action, but must sufficiently allege underlying facts to give fair notice and enable the opposing party to defend itself effectively." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011), cert. denied, 132 S. Ct. 2101, 182 L. Ed. 2d 882 (U.S. 2012). "Second, the factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation." Id. Assertions that are mere "legal conclusions" are therefore not entitled to the presumption of truth. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555). Dismissal is appropriate when a plaintiff fails to state a claim supportable by a cognizable legal theory. Balistreri v. Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990).
Upon granting a motion to dismiss for failure to state a claim, a court has discretion to allow leave to amend the complaint pursuant to Federal Rule of Civil Procedure 15(a). "Dismissal with prejudice and without leave to amend is not appropriate unless it is clear . . . that the complaint could not be saved by amendment." Eminence Capital, L.L.C. v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).
B. Judicial Notice
Defendant requests judicial notice of the deed of trust, notice of default, assignment of the deed of trust, substitution of trustee, and rescission of notice of default. Request for Judicial Notice ("RJN"), Doc. #6, at 2. These documents are appropriate for judicial notice because they are public records and are "not subject to reasonable dispute." Fed. R. Evid. 201(b).
C. Discussion
1. Unfair Credit Reporting Claim
Defendant argues that Plaintiff's unfair credit reporting claim is in essence a claim under the Fair Credit Reporting Act ("FCRA") and moves to dismiss Plaintiff's claim because he failed to adequately allege the claim, there is no private cause of action, and the claim is time barred. Plaintiff argues that his claim for unfair reporting arises under the FCRA and California Civil Code Section 1785.25(a) ("Section 1785.25(a)"). Plaintiff also argues that both claims are adequately alleged and not time barred.
a. Failure to State a Claim under the FCRA
Defendant argues that the FCRA claim fails because Plaintiff failed to allege that he first gave written notice of a dispute to the credit reporting agencies ("CRAs") and that he failed to allege that Defendant knew or should have known that the information was false. Plaintiff argues that the degree with which a plaintiff must plead notification to state a claim under FRCA varies and he requests the Court to either leave this issue to be determined by discovery or allow him leave to amend.
Title 15 U.S.C. § 1681s-2(b) outlines the duties of a furnisher of information after receiving notice of a dispute. While a private right of action is permitted for a violation of the § 1681s-2(b) duties, those duties "arise only after the furnisher receives notice of dispute from a CRA; notice of a dispute received directly from the consumer does not trigger furnishers' duties under subsection (b)." Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1154 (9th Cir. 2009) (citing Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d 1057, 1059 (9th Cir. 2002)).
Here, Plaintiff has alleged that he, "through his attorney, demanded that [Defendant] notify each of the credit reporting agencies . . . that the negative information . . . is false and request that they withdraw such information from his credit report." Compl. ¶ 28. He also alleges that he repeatedly informed Defendant that the information was false and demanded Defendant retract the information. Id. ¶ 49. Based on these allegations, Plaintiff alleges that he notified Defendant, the furnisher of the credit information, of his dispute directly, but does not allege that he reported his dispute to a CRA. Therefore, Plaintiff has failed to allege the requisite notification to state a claim under the FCRA.
Accordingly, the Court dismisses Plaintiff's FCRA claim. The Court addresses Defendant's other two arguments to determine whether leave to amend should be granted.
b. Private Right of Action
Defendant contends that Plaintiff's FCRA claims must be dismissed without leave to amend because there is no private right of action under 15 U.S.C. § 1682s-2(a). Section 1681s-2(a) sets forth the duty for furnishers of information to provide accurate information to a CRA. 15 U.S.C. § 1681s-2(a). In his complaint, Plaintiff does not specify which provision of the FCRA governs his allegations, but clarifies in his opposition that his claims are limited to § 1681s-2(b). Opp. at 14. As mentioned above, a private right action exists under § 1681s-2(b). Therefore, because Plaintiff's claim is under § 1681s-2(b) and not § 1681s-2(a), the Court finds that Plaintiff may bring his FCRA claim.
c. Statute of Limitations FCRA
Defendant also argues that Plaintiff's FCRA claim must be dismissed without leave to amend because Plaintiff discovered the purported violation in or about 2010 and filed this action in 2013 more than 3 years after the discovery of the purported violation. Plaintiff argues that the claim should not be dismissed because dismissal can be granted "only if the assertion of the complaint, read with the required liberality, would not permit the plaintiff to prove the statute had been tolled." Opp. at 14 (citing Cervantes v. City of San Diego, 5 F.3d 1273, 1275 (9th Cir. 1993)).
A claim under FCRA may be brought "no[] later than the earlier of (1) 2 years after the date of discovery by the plaintiff of the violation that is the basis for such liability; or (2) 5 years after the date on which the violation that is the basis for such liability occurs." 15 U.S.C. § 1681p. "The date on which liability arises depends on which provision was allegedly violated." Forester v. Pennsylvania Higher Educ. Assistance Agency, SACV 09-0930DOCRNBX, 2009 WL 3710517, at *3 (C.D. Cal. Oct. 30, 2009) (quoting Acton v. Bank One Corp., 293 F. Supp. 2d 1092, 1097 (D. Ariz. 2003)). A § 1681s-2(b) violation "is triggered only after the consumer notifies the CRA, and the CRA then notifies the furnisher of credit." Id. (citing Nelson v. Equifax Information Services, LLC, 522 F. Supp. 2d 1222, 1231 (C.D. Cal. 2007)). Because Plaintiff has not alleged that he notified a CRA or when the notification occurred, the Court cannot determine at this time whether the claim is time barred.
Accordingly, for the reasons mentioned above, the Court grants Defendant's motion to dismiss Plaintiff's FCRA claim. However, because Plaintiff may be able to allege that he notified a CRA pursuant to § 1681s-2(b) within the statute of limitations, the Court grants Plaintiff leave to amend.
d. California Civil Code § 1785.25(a)
Plaintiff argues that his unfair credit reporting claim is also under the California Consumer Credit Reporting Act ("CCRA"), specifically Section 1785.25(a). Plaintiff does not specify in the complaint that his claim is under the CCRA. Nevertheless, Defendant argues that this claim is untimely.
Section 1785.25(a) provides that "[a] person shall not furnish information on a specific transaction or experience to any consumer credit reporting agency if the person knows or should know the information is incomplete or inaccurate." Cal. Civ. Code § 1785.25(a). Plaintiff states that the statute of limitations for claims under Section 1785.25(a) is three years pursuant to California Civil Procedure Code Section 338(a). Opp. at 13. However, claims under the CCRA are governed by California Civil Code Section 1785, which provides that a claim brought under the CCRA must be filed within two years after a plaintiff knows or should have known of the violation but no more than seven years after the earliest violation. Cal. Civ. Code § 1785.33. In addition, when "a defendant has materially and willfully misrepresented any information required under this chapter to be disclosed to a consumer, . . . the action may be brought at any time within two years after the discovery by the consumer of the misrepresentation." Id.
Plaintiff alleges that at "various times in 2010, 2011, 2012, and 2013, [Defendant] reported to the credit reporting agencies . . . negative credit information about plaintiff." Compl. ¶ 47. Defendant argues that Plaintiff should have filed this claim in 2012, or at the latest February 23, 2013, two years after the latest letter Plaintiff purportedly received from Defendant acknowledging that Plaintiff made all of his payments, but Plaintiff filed passed the statute of limitations. Reply at 9. However, according to the allegations, Defendant furnished information to CRAs several times with the earliest alleged violation being in 2010 and the latest in 2013. Because Plaintiff filed his claim on May 6, 2013, only transmissions of information before May 6, 2011, are time barred.
Therefore, the Court finds that the alleged violations that occurred in 2010 are time barred, but the alleged violations in 2012 and 2013 are not. Because it is unclear when the alleged violations occurred in 2011, the Court cannot determine whether they are time barred at this time. Therefore, the Court grants Defendant's motion to dismiss Plaintiff's Section 1785.25(a). The Court grants Plaintiff leave to amend to clarify his Section 1785.25(a) claim and to specify when in 2011 Defendant furnished the information to CRAs.
2. Slander of Title
Defendant argues that Plaintiff's claim for slander of title fails because the recorded documents are privileged publications, and because Plaintiff has failed to alleged facts that he suffered pecuniary damages.
For a slander of title claim, Plaintiff must allege the following four elements: (1) a publication, (2) which is without privilege or justification, (3) which is false, and (4) which causes direct and immediate pecuniary loss. Manhattan Loft, LLC v. Mercury Liquors, Inc., 173 Cal.App.4th 1040, 1051 (2009) (citing Howard v. Schaniel, 113 Cal.App.3d 256, 263-264 (1980)).
a. Privilege
Defendant argues that Plaintiff has not sufficiently pled the second element, that is, that the publication was done "without privilege or justification." Under California Civil Code Section 2924(d), privilege extends to the "mailing, publication, and delivery of notices as required by this section" and to the "[p]erformance of the procedures set forth in this article." Cal. Civ. Code § 2924(d). Thus, the filing of a notice of default in a nonjudicial foreclosure is privileged, except when published with malice. Barrionuevo v. Chase Bank, N.A., C-12-0572 EMC, 2013 WL 4103606, at *5 (N.D. Cal. Aug. 12, 2013). Malice requires "that the publication was motivated by hatred or ill will towards the plaintiff or by a showing that the defendant lacked reasonable grounds for belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff's rights." Kachlon v. Markowitz, 168 Cal.App.4th 316, 336 (2008) (citations and internal quotations omitted).
Because Plaintiff premises his claim on the recording of the notice of default (Compl. ¶ 31), which is a privileged publication under Section 2924, Plaintiff must allege that the recording was made with malice. In his opposition, Plaintiff relies on two cases: Sumner Hill Homeowners' Assn., Inc. v. Rio Mesa Holdings, LLC, 205 Cal.App.4th 999, 1030 (2012), review denied (July 18, 2012), as modified on denial of reh'g (May 30, 2012), and Gudger v. Manton, 21 Cal. 2d at 545 (1943). In Sumner Hill, the Court noted that "slander or disparagement of title occurs when a person, without a privilege to do so, publishes a false statement that disparages title to property and causes the owner thereof some special pecuniary loss or damage." 205 Cal.App.4th 999, 1030 (citation and internal quotation marks omitted). Plaintiff also relies on Gudger, for the proposition that an "express finding of lack of good faith, or of actual malice. . . would destroy the privilege or justification here discussed." Gudger, 21 Cal. 2d at 546. Based on Sumner Hill and Gudger, Plaintiff argues that he can overcome the privilege by alleging lack of good faith or actual malice.
Plaintiff alleges that Defendant's conduct "was intentional, wrongful, malicious and despicable and carried out with a willful and conscious disregard for plaintiff's rights." Compl. ¶ 35. In addition, throughout the complaint, Plaintiff alleges that Defendant failed to investigate or view the file and documents relating to Plaintiff's loan from the previous servicers prior to recording the notice of default and that Defendant knew Plaintiff was not in default because Plaintiff received a letter acknowledging that Plaintiff's payments were received and applied to his loan. See Compl. ¶¶ 17, 19.
Defendant argues that Plaintiff failed to provide the correspondence as evidence and even if these allegations are true, it shows mere negligence and it is insufficient to establish the malice requirement. Reply at 4. Although Plaintiff did not provide copies of the correspondence, he is not required to provide evidence to oppose a motion to dismiss because generally, the Court may not consider any material beyond the pleadings in ruling on a motion to dismiss under Federal Rules of Civil Procedure without converting it to a motion for summary judgment. See Fed. R. Civ. P. 12(d) ("If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.")
Therefore, accepting Plaintiff's allegations as true for the purposes of this motion, Plaintiff has alleged that Defendant filed a notice of default even though it knew Plaintiff was not in default. These allegations are sufficient to establish malice. See e.g., Cerezo v. Wells Fargo Bank, N.A., 13-1540 PSG, 2013 WL 4029274, at *6 (N.D. Cal. Aug. 6, 2013)(holding that the plaintiff's allegation that defendant knew that it did not have the requisite interest to initiate foreclosure amounted to reckless disregard of the truth); Albano v. Cal-W. Reconveyance Corp., 4:12-CV-4018 KAW, 2012 WL 5389922, at *9 (N.D. Cal. Nov. 5, 2012) (holding that plaintiff's allegation that defendant knew that a third party was not the beneficiary for the deed trust was sufficient to defeat a motion to dismiss).
b. Damages
Defendant argues that Plaintiff has also failed to allege that he suffered pecuniary damages as a result of the publication of these documents—the fourth element of a slander of title claim. Plaintiff argues that the false publication caused him damages.
"'Pecuniary loss' is an essential element of a slander of title cause of action." Manhattan Loft, LLC v. Mercury Liquors, Inc., 173 Cal.App.4th 1040, 1057 (2009). Pecuniary loss is restricted to "(a) the pecuniary loss that results directly and immediately from the effect of the conduct of third persons, including impairment of vendibility or value caused by disparagement, and (b) the expense of measures reasonably necessary to counteract the publication, including litigation to remove the doubt cast upon vendibility or value by disparagement." Ghuman v. Wells Fargo Bank, N.A., 1:12-CV-00902-AWI, 2013 WL 552097, at *4 (E.D. Cal. Feb. 13, 2013) (emphasis omitted)(quoting Restatement (Second) of Torts § 633 (1977)).
Here, Plaintiff has alleged that "all of this had a significant adverse [effect] on Mr. Kirsten's credit and caused him substantial damage." Compl. ¶ 23. However, this allegation is conclusory. Plaintiff has failed to allege sufficient facts to show he suffered a monetary loss because of the publication of the notice of default, such as a reduction of the value of the property.
Accordingly, the Court dismisses Plaintiff's slander of title cause of action. The Court grants Plaintiff leave to amend because Plaintiff may be able to allege a pecuniary loss.
3. Defamation
Defendant moves to dismiss Plaintiff's defamation claim because federal law preempts this claim and because it is time barred. Plaintiff disagrees, arguing that his defamation claim is not preempted or time barred because the claim is brought under California Civil Code Section 1785.25(a). Opp. at 12-13.
In the complaint, Plaintiff does not specify that he brings his defamation claim under Section 1785.25(a). However, in his opposition, Plaintiff requests leave to amend to refer to the statute to avoid preemption of this claim. Opp. at 12. If Plaintiff's claim is a Section 1785.25(a) claim, then it is duplicative of Plaintiff's unfair credit reporting claim discussed above and would be unnecessary. Accordingly, the Court grants Defendant's motion to dismiss Plaintiff's defamation claim. The Court will, however grant Plaintiff leave to amend in order to try to properly plead this cause of action. The Court need not address Defendant's arguments that Plaintiff's defamation claim is time barred and preempted at this time.
III. ORDER
For the reasons set forth above, Defendant's Motion to Dismiss is GRANTED WITH LEAVE TO AMEND. Plaintiff must file his Amended Complaint or notice of dismissal within twenty (20) days from the date of this Order. Defendant shall file its responsive pleading within twenty (20) days thereafter.
IT IS SO ORDERED.
________
JOHN A. MENDEZ,
UNITED STATES DISTRICT JUDGE