In re Hero Loan Litigation

NOTICE OF MOTION AND MOTION to Dismiss First Amended Complaint

C.D. Cal.March 8, 2017

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ACTIVE/89702874.1 THOMAS M. HEFFERON (pro hac vice) thefferon@goodwinprocter.com MATTHEW S. SHELDON (pro hac vice) msheldon@goodwinprocter.com GOODWIN PROCTER LLP 901 New York Avenue NW Washington, DC 20001 Tel.: 202.346.4000 Fax.: 202.346.4444 STEVEN A. ELLIS (SBN 171742) sellis@goodwinprocter.com MOLLY K. MADDEN (SBN 281483) mmadden@goodwinprocter.com GOODWIN PROCTER LLP 601 S Figueroa Street, 41st Floor Los Angeles, CA 90017 Tel.: 213.426.2500 Fax.: 213.623.1673 Attorneys for Defendant: RENOVATE AMERICA, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION IN RE HERO LOAN LITIGATION Lead Case No. 5:16-cv- 02478-AB-KK NOTICE OF MOTION AND MOTION OF RENOVATE AMERICA, INC. TO DISMISS THE FIRST AMENDED COMPLAINT Date: April 17, 2017 Time: 10:00 a.m. Courtroom: 7B Judge: Hon. André Birotte Jr. 350 W. 1st Street Los Angeles, CA 90012 Filed Concurrently with: 1. Memorandum of Points and Authorities; 2. Joinder in Motion to Dismiss and Request for Judicial Notice of SANBAG; 3. Proposed Order This Document Relates to: Ramos v. San Bernardino Associated Governments, et al., Case No. 5:16- cv-02491-AB-KK Case 5:16-cv-02478-AB-KK Document 60 Filed 03/08/17 Page 1 of 3 Page ID #:836 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ACTIVE/89702874.1 1 TO ALL PARTIES AND THEIR COUNSEL OF RECORD: PLEASE TAKE NOTICE that on Monday, April 17, 2017 at 10:00 a.m., or as soon thereafter as the matter may be heard in Courtroom 7B of the United States District Court located at 350 West 1st Street, Los Angeles, California 90012, defendant Renovate America, Inc. (“Renovate America”) will and hereby does move this Court for an order dismissing the first amended complaint (“FAC”) filed in this action by plaintiff Richard Ramos (“Ramos”), and each purported claim set forth therein against Renovate America, with prejudice (“Motion”). Renovate America moves to dismiss the FAC on the grounds that Ramos does not state any valid claim against Renovate America in the FAC. Specifically, the FAC does not state a valid claim against Renovate America for conspiracy to violate the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq. (“TILA”) or the Home Ownership and Equity Protection Act, 15 U.S.C. § 1639 (“HOEPA”); for aiding and abetting defendant San Bernardino Associated Governments’ (“SANBAG”) alleged violations of TILA and HOEPA; for violations of TILA mortgage originator rules; or for violations of California’s Unfair Competition Law, Cal. Bus & Prof. Code §§ 17200 et seq. (“UCL” or “Section 17200”). See Fed. R. Civ. P. 12(b)(6); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554-56 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Renovate America also incorporates, by reference, the arguments made by co-defendant SANBAG in its separately filed motion to dismiss, and Renovate America requests dismissal on those grounds as well. This Motion is based upon this Notice of Motion and Motion, the Memorandum of Points and Authorities in support thereof, Renovate America’s Joinder in the Motion to Dismiss and Request for Judicial Notice of SANBAG filed concurrently herewith, the records, pleadings, and documents on file in this action, and such further and additional evidence and argument as may be presented at or before the time of hearing on this Motion. Case 5:16-cv-02478-AB-KK Document 60 Filed 03/08/17 Page 2 of 3 Page ID #:837 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ACTIVE/89702874.1 2 This Motion is made following the conference of counsel pursuant to L.R. 7- 3, which took place on January 10, 2017, the sufficiency of which was reconfirmed by counsel for Ramos on February 22, 2017. Respectfully submitted, Dated: March 8, 2017 By: /s/ Matthew S. Sheldon THOMAS M. HEFFERON (pro hac vice) thefferon@goodwinprocter.com STEVEN A. ELLIS sellis@goodwinprocter.com MATTHEW S. SHELDON (pro hac vice) msheldon@goodwinprocter.com MOLLY K. MADDEN mmadden@goodwinprocter.com GOODWIN PROCTER LLP Attorneys for Defendant: RENOVATE AMERICA, INC. Case 5:16-cv-02478-AB-KK Document 60 Filed 03/08/17 Page 3 of 3 Page ID #:838 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 THOMAS M. HEFFERON (pro hac vice) thefferon@goodwinprocter.com MATTHEW S. SHELDON (pro hac vice) msheldon@goodwinprocter.com GOODWIN PROCTER LLP 901 New York Avenue NW Washington, DC 20001 Tel.: 202.346.4000 Fax.: 202.346.4444 STEVEN A. ELLIS (SBN 171742) sellis@goodwinprocter.com MOLLY K. MADDEN (SBN 281483) mmadden@goodwinprocter.com GOODWIN PROCTER LLP 601 S. Figueroa Street, 41st Floor Los Angeles, CA 90017 Tel.: 213.426.2500 Fax.: 213.623.1673 Attorneys for Defendant: RENOVATE AMERICA, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION IN RE HERO LOAN LITIGATION Lead Case No. 5:16-cv- 02478-AB-KK MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION OF RENOVATE AMERICA, INC. TO DISMISS THE FIRST AMENDED COMPLAINT Date: April 17, 2017 Time: 10:00 a.m. Courtroom: 7B Judge: Hon. André Birotte Jr. 350 W. 1st Street Los Angeles, CA 90012 Filed Concurrently with: 1. Notice of Motion and Motion; 2. Joinder in Motion to Dismiss and Request for Judicial Notice of SANBAG; 3. Proposed Order This Document Relates to: Ramos v. San Bernardino Associated Governments, et al., Case No. 5:16- cv-02491-AB-KK Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 1 of 33 Page ID #:839 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i TABLE OF CONTENTS Page BACKGROUND ......................................................................................................... 3 Ramos’ PACE Assessment Contract ........................................................................... 3 Ramos’ Shifting Legal Claims ..................................................................................... 5 ARGUMENT ............................................................................................................... 6 I. The TILA and HOEPA Counts Fail as a Matter of Law. .................................. 6 A. PACE Assessments Are Not Regulated By TILA or HOEPA. .............. 6 1. PACE Assessments Are Not “Credit.” ......................................... 7 a. The Regulations and Official Staff Interpretation of TILA and HOEPA Exclude Tax Assessments from “Credit.” .............................................................................. 7 b. The Staff Interpretation Is Not “Demonstrably Irrational”— It Is Irrational To Presume Congress Would Silently Infringe on the State Property Tax Assessment Process. ........................................................... 9 c. The Staff Interpretation Creates a Good Faith Defense. ............................................................................ 11 2. PACE Assessments Are Not “Consumer Credit.”...................... 12 3. PACE Assessments Are Not “Residential Mortgage Loans.”.... 13 B. Counts Three and Four Also Fail Because There Is No Secondary Liability for Violations of TILA or HOEPA. ....................................... 14 C. Count Five Also Fails Because “Steering” Is Not Plead. ..................... 15 II. Ramos’ UCL Claims Should be Dismissed. ................................................... 17 A. The Two Unlawful Prong Claims Fail as a Matter of Law. ................. 17 1. Count Seven Must Be Dismissed. .............................................. 17 2. Count Eight Must be Dismissed. ................................................ 18 a. This Claim Is Barred by the CLL’s Statute of limitations. ........................................................................ 18 b. The CLL Does Not Apply to PACE Tax Assessments. ... 18 c. A CLL Violation Is Not Plead Against Renovate America. ........................................................................... 19 Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 2 of 33 Page ID #:840 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ii B. Count Six Must Be Dismissed. ............................................................. 20 1. Renovate America Is Not A Proper Defendant. ......................... 20 2. The Claim For “Unfair” Conduct Must Be Dismissed. .............. 20 3. The Claim For “Fraudulent” Conduct Must Be Dismissed. ....... 24 4. California Law Does Not Allow Count Six. ............................... 24 CONCLUSION .......................................................................................................... 25 Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 3 of 33 Page ID #:841 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 iii TABLE OF AUTHORITIES Page(s) Federal Cases Abel v. KeyBank USA, N.A., 2003 WL 26132935 (N.D. Ohio Sept. 24, 2003) .................................................... 15 Altman v. PNC Mortg., 850 F. Supp. 2d 1057 (E.D. Cal. 2012) ............................................................. 18, 19 Alvarez v. Chevron Corp., 656 F.3d 925 (9th Cir. 2011) ................................................................................... 25 ANR Pipeline Co. v. Lafaver, 150 F.3d 1178 (10th Cir. 1998) ................................................................................. 9 Arizona v. Atchison, T. & S. F. R. Co., 656 F.2d 398 (9th Cir. 1981) ..................................................................................... 9 Baldwin v. Laurel Ford Lincoln-Mercury, Inc., 32 F. Supp. 2d 894 (S.D. Miss. 1998) ..................................................................... 11 Billings v. Propel Fin. Servs., L.L.C., 821 F.3d 608 (5th Cir. 2016) ............................................................................... 8, 13 Bond v. United States, 134 S. Ct. 2077 (2014) ............................................................................................... 9 Boris v. Wal-Mart Stores, Inc., 35 F. Supp. 3d 1163 (C.D. Cal. 2014) ..................................................................... 20 Charles v. Kraus Co., 572 F.2d 544 (5th Cir. 1978) ................................................................................... 11 Cnty of Sonoma v. FHFA, 710 F.3d 987 (9th Cir. 2013) ................................................................................... 19 In re Currency Conversion Fee Antitrust Litig., 265 F. Supp. 2d 385 (S.D.N.Y. 2003) ..................................................................... 15 Davis v. HSBC Bank Nevada N.A., 691 F.3d 1152 (9th Cir. 2012) ................................................................................. 24 DeLeon v. Wells Fargo Bank, N.A., 729 F. Supp. 2d 1119 (N.D. Cal. 2010) ................................................................... 18 Ford Motor Credit Co. v. Milhollin, 444 U.S. 555 (1980)........................................................................................... 7, 8, 9 Freeman v. DirecTV, Inc., 457 F.3d 1001 (9th Cir. 2006) ................................................................................. 15 Golden v. Sound Inpatient Phys. Med. Grp., Inc., 93 F. Supp. 3d 1171, 1179 (E.D. Cal. 2015) ........................................................... 17 Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 4 of 33 Page ID #:842 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 iv Grady v. FDIC, 2014 WL 1364932 (D. Ariz. Mar. 26, 2014) ........................................................... 15 Hauk v. JP Morgan Chase Bank USA, 552 F.3d 1114 (9th Cir. 2009) ............................................................................. 8, 25 Household Credit Servs., Inc. v. Pfennig, 541 U.S. 232 (2004)............................................................................................. 8, 11 INS v. St. Cyr, 533 U.S. 289 (2001)................................................................................................. 13 Johnson v. Wells Fargo Home Mortg., Inc., 635 F.3d 401 (9th Cir. 2011) ..................................................................................... 8 Jordan v. Paul Fin., LLC, 745 F. Supp. 2d 1084 (N.D. Cal. 2010) ................................................................... 18 Kearns v. Ford Motor Co., 567 F.3d 1120 (9th Cir. 2009) ................................................................................. 24 Kohl v. Am. Home Shield Corp., 2011 WL 3739506 (S.D. Cal. Aug. 24, 2011) ......................................................... 18 In re Mortg. Elec. Registration Sys., Inc., 754 F.3d 772 (9th Cir. 2014) ................................................................................... 15 Nat’l Rural Telecomms. Co-op. v. DirecTV, Inc., 319 F. Supp. 2d 1059 (C.D. Cal. 2003) ................................................................... 17 In re New Invs., Inc, 840 F.3d 1137 (9th Cir. 2016) ................................................................................. 12 Olivera v. Am. Home Mortg. Serv., Inc., 689 F. Supp. 2d 1218 (N.D. Cal. 2010) ..................................................................... 8 Oregon Laborers-Emp’rs Health & Welfare Trust Fund v. Philip Morris Inc., 185 F.3d 957 (9th Cir. 1999) ................................................................................... 15 Pfennig v. Household Credit Servs., Inc., 295 F.3d 522 (6th Cir. 2002) ................................................................................... 11 Reagen v. Aurora Loan Servs., Inc., 2009 WL 3789997 (E.D. Cal. Nov. 10, 2009) .......................................................... 8 Slipak v. Bank of Am., N.A., 2011 WL 5526445 (E.D. Cal. Nov. 14, 2011) ........................................................ 18 Valdez v. Am.'s Wholesale Lender, 2009 WL 5114305 (N.D. Cal. Dec. 18, 2009) ........................................................ 11 Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003) ................................................................................. 24 Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 5 of 33 Page ID #:843 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 v Weiner v. Bank of King of Prussia, 358 F. Supp. 684 (E.D. Pa. 1973) ............................................................................ 15 Zenith Radio Corp. v. United States, 437 U.S. 443 (1978)................................................................................................... 7 California Cases Alliance Mortg. Co. v. Rothwell, 10 Cal. 4th 1226 (1995) ........................................................................................... 14 Aviel v. Ng, 161 Cal. App. 4th 809 (2008) .................................................................................. 19 Bank of Italy v. Bentley, 217 Cal. 644 (1933) ................................................................................................. 19 Beach v. Von Detten, 139 Cal. 462 (1903) ................................................................................................. 13 Byars v. SCME Mortg. Bankers, Inc., 109 Cal. App. 4th 1134 (2003) ................................................................................ 25 Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163 (1999) ................................................................................. 20, 21, 24 Crusader Ins. Co. v. Scottsdale Ins. Co., 54 Cal. App. 4th 121 (1997) ...................................................................................... 1 Cty. of Huntington Beach v. Super. Ct., 78 Cal. App. 3d 333 (1978) ..................................................................................... 13 Lazar v. Hertz Corp., 69 Cal. App. 4th 1494 (1999) .................................................................................... 1 Samura v. Kaiser Found. Health Plan, 17 Cal. App. 4th 1284 (1993) .................................................................................. 21 In re SANBAG Energy Efficiency & Water Conservation Program, No. CIVDS 1305664 (Cal. Sup. Ct. San Bernardino Cnty. Aug. 26, 2013) .......................................................................................................................... 8 Shvarts v. Budget Grp., 81 Cal. App. 4th 1153 (2000) .................................................................................. 23 In re Tobacco II Cases, 46 Cal. 4th 298 (2009) ............................................................................................. 24 Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 6 of 33 Page ID #:844 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 vi Federal Statutes 12 U.S.C. § 5512 ............................................................................................................. 8 15 U.S.C. § 1602 ........................................................................................... 6, 12, 13, 16 15 U.S.C. § 1604 ............................................................................................................. 7 15 U.S.C. § 1612 ............................................................................................................. 9 15 U.S.C. § 1639 ............................................................................................. 6, 9, 16, 17 15 U.S.C. § 1640 ................................................................................................. 2, 11, 15 Pub. L. No. 111-203, 124 Stat. 2107 (2010) .................................................................. 6 California Statutes Bus. & Prof. Code §§ 17200 et seq. ............................................................................... 2 Bus. & Prof. Code § 17203 ..................................................................................... 17, 20 Civ. Code § 1788.2 ....................................................................................................... 13 Code Civ. Proc. § 340 ................................................................................................... 18 Fin. Code §§ 4970 et seq. ...................................................................................... passim Gov’t Code §§ 53311 et seq. ........................................................................................ 11 Rev. & Tax. Code § 2617 ............................................................................................. 11 Rev. & Tax. Code § 2618 ............................................................................................. 11 Sts. & High. Code § 5101 ............................................................................................. 10 Sts. & High. Code § 5898.12 ........................................................................................ 12 Sts. & High. Code § 5898.28 .................................................................................. 10, 22 Sts. & High. Code § 5898.30 ...................................................................... 12, 14, 19, 23 Sts. & High. Code § 8650 ............................................................................................. 23 Sts. & High. Code § 8651.5 .......................................................................................... 10 Sts. & High. Code § 8680 ............................................................................................. 23 Sts. & High. Code § 8681 ............................................................................................. 23 Sts. & High. Code § 8700 ............................................................................................. 23 Sts. & High. Code § 8701 ............................................................................................. 14 Sts. & High. Code § 10100 ........................................................................................... 10 Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 7 of 33 Page ID #:845 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 vii Rules Fed. R. Civ. P. 9(b) ....................................................................................................... 24 Regulations 12 C.F.R. Pt. 1026 cmt. 32(d)(8)(iii) ............................................................................ 10 12 C.F.R. Pt. 1026, Supp. I, cmt. 2(a)(14)-1(ii) ......................................................... 2, 7 12 C.F.R. Pt. 1026, Supp. I, cmt. 2(a)(25)-2 ................................................................ 14 12 C.F.R. Pt. 1026, Supp. I, cmt. 36(e)(1)-3 ................................................................ 16 12 C.F.R. § 1026.1 .......................................................................................................... 6 12 C.F.R. § 1026.2 .................................................................................................. 13, 14 12 C.F.R. § 1026.36 ...................................................................................................... 16 75 Fed. Reg. 57,252 (Sept. 20, 2010) ............................................................................. 8 Other Authorities City of Newport Beach, Underground Utilities Assessment Districts: A Step-by-Step Guide .................................................................................................. 10 Letter from California Congressional Delegation to California State Assembly Members (June 8, 2016), http://alcl.assembly.ca.gov/sites/ alcl.assembly.ca.gov/files/Congressional%20PACE%20Letter.pdf ......................... 3 Webster’s Third New International Dictionary 769 (1986) ......................................... 14 Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 8 of 33 Page ID #:846 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 In 2008, the California Legislature was the first in a growing tide of states to establish a Property Assessed Clean Energy (“PACE”) program, a property tax assessment program that allows homeowners to enter into individual property tax assessment contracts with participating government entities to pay for, inter alia, energy- and water-efficient home improvements. PACE is a landmark program, lauded by the State of California and the outgoing Obama Administration, among many others, because it empowers communities to use the local tax assessment and municipal bonding process to fund environmentally-important improvements to local homes. The program has now given tens of thousands of California homeowners the benefit of decreased utility costs, and hundreds of California communities the benefits of saved energy and water use. In 2014, Richard Ramos (“Ramos”) requested a PACE tax assessment contract to make energy efficient improvements to his home. San Bernardino Associated Governments (“SANBAG”) agreed to and did fund the improvements by levying a property tax assessment against the home through its PACE program. But now Ramos has sued SANBAG (for injunctive relief only), claiming the assessment was a “consumer credit transaction,” whose terms either did not comply with, or were not disclosed as required by the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq. (“TILA”); and a subpart of TILA, the Home Ownership and Equity Protection Act, 15 U.S.C. § 1639 (“HOEPA”).1 In addition to suing SANBAG, Ramos alleges that Renovate America, Inc. (“Renovate America,” and collectively with SANBAG, “Defendants”) helps administer SANBAG’s PACE program—implemented as the Home Energy Renovation Opportunity (“HERO”) Program—and is therefore liable for “conspiring” to violate those statutes and “aiding and abetting” those statutory violations, as well as 1 Ramos’ counsel has also filed two related actions, both pending before this Court with staggered motion to dismiss briefing schedules: Loya v. Western Riverside Council of Governments, et al., No. 5:16-cv-02478-AB-KK and Richardson v. Los Angeles County, et al., No. 2:16-cv-08943-AB-KK. Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 9 of 33 Page ID #:847 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 for violations of TILA’s mortgage originator rules, and for various derivative violations of the Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq. (“UCL”). Relatedly, under the UCL, Ramos challenges various contractual aspects of the assessment and asserts a UCL claim predicated on alleged violations of California’s mini-HOEPA statute, the Covered Loan Law, Cal. Fin. Code §§ 4970 et seq. (“CLL”). These claims are all legally defective, and the First Amended Complaint (“FAC”) should be dismissed with prejudice. Ramos’ claims rest entirely on the fallacy that the property tax assessment was a “consumer credit transaction” under TILA. This is wrong. The Consumer Financial Protection Bureau (“CFPB”), the federal regulator tasked with interpreting both TILA and its subpart, HOEPA, has adopted authoritative definitions establishing that “[t]ax liens” and “tax assessments” “are not considered credit” for purposes of those laws. 12 C.F.R. Pt. 1026, Supp. I, cmt. 2(a)(14)-1(ii). Moreover, even without that clear mandate, SANBAG did not extend “consumer credit” to Ramos because, among other reasons, the tax assessment was against the property, not Ramos personally, and there was no corresponding promissory note or other personal obligation on Ramos to repay it. As SANBAG notes in its separate brief, other federal regulators, the Chairman of the Federal Reserve, and even advocates who have criticized the PACE program (for unrelated reasons), all agree that these lending laws are not implicated by PACE.2 Even if the CFPB’s statutory interpretation were incorrect (which it is not), the federal claims must still be dismissed under TILA’s and HOEPA’s exemption for liability because Defendants relied in good faith on an existing statutory interpretation. See 15 U.S.C. § 1640(f). 2 See Mem. In Support Of Motion of SANBAG to Dismiss the FAC. Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 10 of 33 Page ID #:848 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 Ramos’ federal claims suffer from other fatal defects, and his state claims fail for related and independent reasons. All of the insufficiencies of the claims are discussed below, and in the companion motion to dismiss filed today by SANBAG. BACKGROUND SANBAG’s brief in support of its motion to dismiss provides to the Court, on behalf of both Defendants, important background on the PACE tax assessment program that is central to Ramos’ claims. That description, which Renovate America adopts, discusses how the State of California authorized PACE so as to empower local governments to use the property tax assessment system to assist homeowners in paying for the costs of energy-efficient improvements. The program serves the vital public policy goal of protecting local environments by reducing energy and water use. Over 70,000 Californians have participated in this innovative program, saving themselves and the public billions—“9.1 billion kWh of energy, 3.4 billion gallons of water, and $2.5 billion in homeowners’ utility bills.”3 It achieves those savings by using a voluntary tax assessment against the home to pay for the improvements, by agreement of the owner after robust disclosures and after the home improvements are performed and after the owner agrees the work is complete. RAMOS’ PACE ASSESSMENT CONTRACT4 In 2014, Ramos, who lives at 27381 Fisher St., in Highland (“Fisher Property”), became one of those roughly 70,000 individuals who took advantage of the opportunity to improve the energy efficiency of their home through the PACE program. After obtaining a quote of $20,977.10 from a licensed contractor, PowerStar Home Energy Solutions, for upgraded roofing, FAC ¶¶ 58-59; see also SANBAG’s Request for Judicial Notice (“RJN”), Exs. 2 & 3 (Assessment Contract & Contractor 3 See Letter from California Congressional Delegation to California State Assembly Members (June 8, 2016), http://alcl.assembly.ca.gov/sites/alcl.assembly.ca.gov/files/ Congressional%20PACE%20Letter.pdf. 4 Renovate America does not admit the truth of any of Ramos’ allegations and Renovate America in all respects denies his legal claims for relief. Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 11 of 33 Page ID #:849 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 Attachment Invoice)5, Ramos submitted an application to fund the improvements through a tax assessment using SANBAG’s HERO Program. FAC ¶ 60; see also RJN, Ex. 1 (Application). Ramos’ Application described in detail the HERO Program’s qualification requirements and assessment terms, as well as, inter alia, requirements concerning his credit history, prior tax and mortgage payment history, the Fisher Property’s value, and the amount of equity he had in the property. RJN, Ex. 1, p. 1. The Application form also fully disclosed to Ramos, in standard type and easily-understandable language, the details regarding how repayment would work through the tax assessment process, including the applicable interest and fees. Id. pp. 2-3. The Application form also explained that the assessment would be a lien on the property, senior to all other past and future private liens, including mortgages and deeds of trust. Id. p. 1. On June 3, 2014, Ramos signed a “SANBAG HERO Program Assessment Contract,” (“Assessment Contract”), which, like the Application, also described the details of the HERO Program and the tax assessment repayment process. FAC ¶ 77; RJN, Ex. 2, (Assessment Contract).6 The Assessment Contract contained an exhibit listing the desired home improvements to the Fisher Property and another exhibit providing specific details on the Assessment Contract’s financial terms, including the maximum disbursement amount, the interest rate, the interest accruing before Ramos’ first payment, the estimated Annual Percentage Rate, a complete annual repayment schedule by tax year, and the total administrative, recording, and annual assessment fees. RJN, Ex. 2, (Assessment Contract, Exs. A & B). SANBAG accepted and counter-signed the Assessment Contract on June 6, 2014. Id.; FAC ¶ 77. 5 The FAC references, and entirely relies on, Ramos’ HERO assessment contract documents without attaching them. They are subject to SANBAG’s RJN. 6 Ramos also received at least three other disclosures on June 3, 2014, each of which further disclosed details of the HERO program and the funding and assessment process, including Ramos’ right to cancel within three (3) business days of signing the Assessment Contract. RJN, Exs. 6-8. Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 12 of 33 Page ID #:850 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 The work commenced immediately and, on June 16, 2014, Ramos executed a completion certificate, acknowledging that all of the improvements to his home had been completed; this allowed his contractor to receive payment in full from the HERO Program. FAC ¶ 81; RJN, Ex. 4. On June 19, 2014, Ramos received a “HERO Final Payment Summary,” which detailed the improvements, the total project cost, the total amount financed for the project, and the repayment schedule. RJN, Ex. 5. After the contractor was paid on Ramos’ behalf, on June 27, 2014, SANBAG recorded a Notice of Assessment against the Fisher Property, in the principal amount of $22,798.12— which included the contract amount and certain interest and costs. FAC ¶¶ 83-84; RJN, Ex. 9. Under the assessment, the sum of about $1,400 would come due twice a year, at the time the taxes also came due. RJN, Ex. 9. RAMOS’ SHIFTING LEGAL CLAIMS Ramos’ FAC dramatically scales back the legal claims from his original complaint. Counts One-Two in the original complaint were direct causes of action under TILA and HOEPA for money damages against both Renovate America and SANBAG. In light of Renovate America’s initial motion to dismiss (Dkt. No. 32), Ramos has withdrawn those claims against Renovate America conceding they were defective. Instead, the FAC now brings those direct TILA and HOEPA claims against only SANBAG (Count One and Two), and only for injunctive relief. As to Renovate America, Ramos pursues only indirect, secondary liability theories for the alleged TILA/HOEPA violations: a conspiracy claim (Count Three) and an aiding and abetting claim (Count Four). The only TILA-related claim plead against both SANBAG and Renovate America is Count Five, which alleges Defendants both violated a specific TILA rule applicable to “mortgage originators.” Ramos also asserts three UCL causes of action against Renovate America only. In Count Six, Ramos brings an “unfair and fraudulent” UCL claim, alleging the assessments involved the imposition and collection of “secret” or excessive interest, Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 13 of 33 Page ID #:851 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 costs and administrative fees, as well as improper amortization calculations, prepayment penalties, payment crediting, and estimated annual percentage rate (“APR”) calculations. Counts Seven and Eight are both brought under the UCL’s “unlawful” prong, the former based on the TILA and HOEPA statutes implicated in Counts Three-Five, and the latter based on alleged violations of the CLL.7 ARGUMENT I. THE TILA AND HOEPA COUNTS FAIL AS A MATTER OF LAW. A. PACE ASSESSMENTS ARE NOT REGULATED BY TILA OR HOEPA. Six of the causes of action in this matter fail because TILA and HOEPA do not apply to PACE tax assessments (Counts One-Five and Seven). For Counts One and Five, Ramos invokes TILA provisions that each apply only to “residential mortgage loans.”8 That phrase is defined in TILA as “any consumer credit transaction that is secured by a mortgage, deed of trust, or other equivalent consensual security interest.” 15 U.S.C. § 1602(cc)(5) (emphasis added). For Count Two, Ramos invokes HOEPA § 1639, which only applies to “high-cost mortgages” and that term is similarly restricted to “consumer credit transactions.” See FAC ¶ 165; 15 U.S.C. § 1602(bb).9 For all relevant purposes, “credit” is defined as a “right granted by a creditor to a debtor to defer payment of debt,” and “consumer” is a “natural person” “to whom credit is offered or extended.” 15 U.S.C. § 1602(f), (i). Counts Three (conspiracy), Four (aiding and abetting), and Seven (UCL “unlawful” 7 Notably, the prior stand-alone CLL claim in the original complaint has been abandoned, presumably because Renovate America’s initial motion to dismiss showed it to be time-barred; Ramos now apparently seeks an end-run around this time-bar by invoking the UCL, which has a longer limitations period. 8 See FAC ¶¶ 152-58, 193-96 (citing 15 U.S.C. §§ 1639c(a), 1639c(c), 1639c(e), and 1639b(c)). 9 Unless otherwise overridden, TILA’s terms, definitions, and restrictions all apply to HOEPA too. 15 U.S.C. § 1602(a). And, the CFPB has confirmed that TILA and HOEPA both only apply to transactions involving “credit.” 12 C.F.R. § 1026.1(c). Additionally, though the text of § 1639(a)(1) states that it applies to mortgages “referred to in section 1602(aa),” this is a drafting error due to the July 21, 2010 amendments, which moved the definition of high cost mortgages from § 1602(aa) to § 1602(bb). See Pub. L. No. 111-203, 124 Stat. 2107 (2010). Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 14 of 33 Page ID #:852 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 prong) all depend on the TILA or HOEPA provisions cited in Counts One, Two, and Five having been violated. But applying the defined terms above spells the end of Ramos’ federal causes of action (Counts One-Five), as well as the dependent UCL claim in Count Seven. 1. PACE Assessments Are Not “Credit.” The first dispositive shortcoming is that PACE assessment transactions do not qualify as “credit” under TILA, and thus the Fisher Property assessment was not a “consumer credit transaction” under either TILA or HOEPA. a. The Regulations and Official Staff Interpretation of TILA and HOEPA Exclude Tax Assessments from “Credit.” Congress has delegated to the CFPB extensive authority to administer TILA and interpret its provisions, including determining whether the statute’s requirements apply to “all or any class of transactions, as in the judgment of the Bureau [is] necessary or proper to effectuate the purposes of this subchapter.” 15 U.S.C. § 1604(a). Exercising this broad authority, the CFPB has issued a regulatory definition unequivocally stating that “[t]ax liens” and “tax assessments” “are not considered credit for purposes of the regulation.” 12 C.F.R. Pt. 1026 Supp. I, cmt. 2(a)(14)-1(ii). This interpretation is dispositive under administrative deference principles that the Supreme Court and Ninth Circuit have recognized are particularly applicable to interpretations of TILA. The U.S. Supreme Court has long recognized that “[w]hen faced with a problem of statutory construction, this Court shows great deference to the interpretation given the statute by the officers or agency charged with its administration.” Zenith Radio Corp. v. United States, 437 U.S. 443, 450 (1978). With respect to TILA, Congress has given the CFPB unusually broad authority, including the ability to interpret the statute as not applying to “all or any class of transactions.” 15 U.S.C. § 1604(a). Applying TILA in particular, the Supreme Court has adopted a high deference standard: “[u]nless demonstrably irrational, . . . staff opinions construing [TILA] or Regulation [Z] should be dispositive.” Ford Motor Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 15 of 33 Page ID #:853 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8 Credit Co. v. Milhollin, 444 U.S. 555, 565-66 (1980). This is because “‘Congress has specifically designated the [Federal Reserve Board] as the primary source for interpretation and application of truth-in-lending law.’” Household Credit Servs., Inc. v. Pfennig, 541 U.S. 232, 238 (2004) (quoting, Ford, 444 U.S. at 566). See also Ford, 444 U.S. at 565 (TILA “deference is especially appropriate.”). That designation and deference remain equally applicable to the current TILA regulator, the CFPB.10 The Ninth Circuit has put a finer point on it: lower courts must follow official TILA staff interpretations where they are “directly applicable.” Johnson v. Wells Fargo Home Mortg., Inc., 635 F.3d 401, 417-18 (9th Cir. 2011) (“[W]e find the staff interpretations dispositive. One part of the Commentary is directly applicable”).11 Here, PACE property tax assessments such as Ramos’ clearly qualify as “tax assessments” under California law.12 Ramos’ PACE assessment therefore does not constitute “credit” under TILA or HOEPA due to the “dispositive” and “directly applicable” TILA Commentary. This is an obvious result, which other courts have endorsed. See Billings v. Propel Fin. Servs., L.L.C., 821 F.3d 608, 611 (5th Cir. 2016) (“It is undisputed that tax obligations (and the tax liens resulting therefrom) imposed by a taxing authority are not ‘debt’ for purposes of TILA . . . .”). Ramos’ claims in Counts One-Five and Seven therefore fail as a matter of law, and should be dismissed. 10 The Dodd-Frank Act shifted rulemaking and interpretive authority under TILA to the CFPB from the Federal Reserve Board, effective July 21, 2011. 12 U.S.C. § 5512; 75 Fed. Reg. 57,252 (Sept. 20, 2010). 11 See also, Hauk v. JP Morgan Chase Bank USA, 552 F.3d 1114, 1118 (9th Cir. 2009) (“Courts must defer to the decisions of [TILA’s regulator]”); Olivera v. Am. Home Mortg. Serv., Inc., 689 F. Supp. 2d 1218, 1221 (N.D. Cal. 2010); Reagen v. Aurora Loan Servs., Inc., 2009 WL 3789997, at *6 (E.D. Cal. Nov. 10, 2009). 12 Indeed, there have also been bond validation proceedings in which California state courts have determined that the bonds are valid and that these transactions are tax assessments. See, e.g., Validation Judgment at 4, In re SANBAG Energy Efficiency & Water Conservation Program, No. CIVDS 1305664 (Cal. Sup. Ct. San Bernardino Cnty. Aug. 26, 2013). Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 16 of 33 Page ID #:854 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9 b. The Staff Interpretation Is Not “Demonstrably Irrational”— It Is Irrational To Presume Congress Would Silently Infringe on the State Property Tax Assessment Process. Given the special deference the Supreme Court has directed courts to give to the CFPB’s interpretations of TILA, to overcome the CFPB’s interpretation, Ramos would have to show the interpretation was “demonstrably irrational.” Ford, 444 U.S. at 565. That is certainly not the case here, as the CFPB’s conclusion is the most rational one given the statute and the surrounding circumstances. If Congress had intended through TILA to intrude on a traditional state functions, like property tax assessments, it would have done so explicitly. The Supreme Court has recognized the “well-established principle that ‘it is incumbent upon federal courts to be certain of Congress’ intent before finding that federal law overrides’ the ‘usual constitutional balance of federal and state powers.’” Bond v. United States, 134 S. Ct. 2077, 2089 (2014) (quoting Gregory v. Ashcroft, 501 U.S. 452, 460 (1991)). This canon applies when one interpretation would touch upon “areas of traditional state responsibility.” Id. Those areas certainly include the administration of the property tax and assessment systems in California. Arizona v. Atchison, T. & S. F. R. Co., 656 F.2d 398, 408 (9th Cir. 1981) (property taxes are “an integral part of a state’s governmental activities”); accord ANR Pipeline Co. v. Lafaver, 150 F.3d 1178, 1193 (10th Cir. 1998) (“a state’s interests in the integrity of its property tax system lie at the core of the state’s sovereignty”). Here, there is no indication either in the text of TILA or in its legislative history that Congress intended to include property tax assessments as “consumer credit transactions.” See generally Legislative History of the Consumer Credit Protection Act, Pub. L. No. 90-321, 82 Stat. 146 (1968). Indeed, the only indication that could be found in the law is to the contrary, in that Congress expressly exempted local governments from any civil TILA liability. 15 U.S.C. § 1612(b); see also 15 U.S.C. § 1639c(a)(1) (recognizing Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 17 of 33 Page ID #:855 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10 difference between a “loan,” on the one hand, and “taxes” and “assessments,” on the other hand); 12 C.F.R. Pt. 1026 cmt. 32(d)(8)(iii) (same). Yet Ramos’ suit would intrude on the tax assessment laws and procedures in all of California. Ramos would have this Court overlay a large variety of substantive and procedural requirements of TILA and HOEPA on how SANBAG—and the rest of the State—participate in the PACE program and, indeed, otherwise use tax assessments in the public interest. There is nothing unusual about a property owner requesting government financed improvements that result in a special tax or property assessment.13 Under Ramos’ TILA theory, in all such instances, governmental bodies might be treated as lenders, and interest and payment requirements applicable to loans potentially could conflict with or even override well-established requirements and protections applicable to local taxes and tax collection systems; civil and criminal remedies in lending laws also would suddenly be potentially-available. Any of these developments would pose substantial restrictions on the exercise of a local government’s sovereign powers. For example, Ramos claims that his Assessment Contract contains unlawful prepayment penalties, and he presumably seeks to prohibit them. FAC ¶¶ 149, 156. The “prepayment penalties” Ramos complains of, however, are due to the way California finances public improvements—like PACE improvements—through the issuance of bonds, which are subject to a premium if redeemed early under California’s 100-year old Bond Act. Cal. Sts. & High. Code § 8651.5.14 Further, Ramos also alleges that the Defendants violated HOEPA because the assessment 13 Examples of such property owner-requested assessments include neighborhood improvements (Cal. Sts. & High. Code § 5101(b)) and placing electric utilities underground (Id. § 10100). See also, e.g., City of Newport Beach, Underground Utilities Assessment Districts: A Step-by-Step Guide (“Most underground utility assessment districts are formed at the request of the local property owners.”). 14 The complained-of “prepayment penalty” matches exactly with the statutory requirements for bonds that are redeemed early. Compare FAC ¶ 76 (alleging the “prepayment penalty” was 5% in first year and declined over time), with Cal. Sts. & High. Code § 8651.5 (mandating 5% bond “redemption premium” and authority to reduce premium over time); Cal. Sts. & High. Code § 5898.28(d) (authorizing PACE redemption premium). Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 18 of 33 Page ID #:856 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 contract imposed a “late payment charge” of 10%, in excess of the 4% allowed under HOEPA. FAC ¶ 173. But the 10% “late payment charge” Ramos attacks is the generally-applicable penalty assessed against all delinquent property taxes in California. See Cal. Rev. & Tax. Code §§ 2617-18.15 The CFPB’s unequivocal determination that local assessments fall outside of TILA’s (and HOEPA’s) ambit makes good sense, and avoids these unintended and dangerous implications. It certainly is not irrational. c. The Staff Interpretation Creates a Good Faith Defense. Even if this Court were to conclude that the CFPB’s official staff interpretation is not directly dispositive, it should still dismiss Ramos’ TILA and HOEPA causes of action. In authorizing private causes of action under these laws, Congress included a safe harbor provision that exempts a defendant from liability for “any act done or omitted in good faith in conformity with any rule, regulation, or interpretation thereof.” 15 U.S.C. § 1640(f). This defense applies in full to Staff Commentary. See Valdez v. Am.’s Wholesale Lender, 2009 WL 5114305, at *3 (N.D. Cal. Dec. 18, 2009). Here, because the Commentary on its face exempts tax assessments from the ambit of TILA and HOEPA, Defendants are entitled to the absolute safe harbor defense accorded under Section 1640(f). See, e.g., Pfennig v. Household Credit Servs., Inc., 295 F.3d 522, 532-33 (6th Cir. 2002), rev’d on other grounds, 541 U.S. 232 (2004) (applying Section 1640(f) defense as a matter of law where Regulation Z plainly excluded the subject charge from disclosure rules); Charles v. Kraus Co., 572 F.2d 544, 549 (5th Cir. 1978) (affirming judgment for creditor because of good-faith defense under TILA section 1640(f)); Baldwin v. Laurel Ford Lincoln-Mercury, Inc., 32 F. Supp. 2d 894, 906 (S.D. Miss. 1998) (same; official staff interpretation). 15 The ramifications of Ramos’ approach could reach even further, far beyond PACE assessments. If the requirements of TILA and HOEPA were imposed in the way that Ramos suggests, they could also apply to all publicly-financed improvements, like streets, sewer systems, and other basic infrastructure, as well as schools, parks, and libraries, financed through special assessments levied in accordance with the Mello- Roos Community Facilities Act of 1982 (“Mello-Roos Act”), Cal. Gov’t Code §§ 53311 et seq. Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 19 of 33 Page ID #:857 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12 2. PACE Assessments Are Not “Consumer Credit.” For PACE tax assessments to qualify as “consumer credit transactions” they must be considered not only “credit,” but “consumer credit.” But that interpretation is also foreclosed by the statutory definitions. For a transaction to involve consumer “credit” under TILA, it must “defer payment of a debt” to “a creditor from a debtor.” 15 U.S.C. § 1602(f). In turn, a debtor must be a “consumer”—a “natural person” to whom credit is extended. Id. § 1602(i). But there is no personal “debt” here owed by a “natural person.” Like all property tax assessments, PACE property tax assessments are obligations imposed on the property—not the property owner—and are collected “in the same manner and at the same time as the general taxes of the city or county on real property.” See Cal. Sts. & High. Code §§ 5898.12, 5898.30. Although any property could be subject to a tax foreclosure for non-payment of taxes, for PACE assessments, there is no personal right of recourse against the property owner, which Ramos’ own Assessment Contract makes clear. Instead, a PACE assessment runs with the land itself, not with the landowner. See, e.g., RJN, Ex. 2 (Assessment Contract, § 6); FAC ¶¶ 15, 31, 153, 168. Further, default on a PACE assessment does not allow the local government to accelerate the entire assessment amount owed, unlike acceleration terms applicable to traditional “debts.” Compare Cal. Sts. & High. Code § 5898.30, with In re New Investments, Inc, 840 F.3d 1137, 1138 (9th Cir. 2016). Under the plain application of TILA’s express provisions (which definitions apply to HOEPA as well), PACE tax assessments do not qualify as “consumer credit.”16 The conclusion is bolstered further by Congress’ choice to define “credit” as the deferring of payment of a “debt.” Because “debt” is not defined in TILA, California 16 When a PACE assessment is recorded it becomes part of the property tax levy and collection system. In California, homeowners must pay their entire property tax bill; they cannot selectively pay line items. Failure to pay the property tax bills in their entirety exposes homeowners to the traditional property tax enforcement process, but there is no independent basis to proceed on the PACE line item alone or to enforce the PACE assessment apart from the traditional property tax collection mechanism. Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 20 of 33 Page ID #:858 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13 state law governs the definition of the term. 12 C.F.R. § 1026.2(b)(3) (“Unless defined . . . words used [in TILA] have the meanings given to them by state law or contract”); see also Billings, 821 F.3d at 610. California law generally defines “debt” as money owed by a “natural person to another person.” See, e.g., Cal. Civ. Code § 1788.2(d). Notably in contrast, a tax assessment lien on a property does not constitute a personal debt owed by a consumer. City of Huntington Beach v. Super. Ct., 78 Cal. App. 3d 333, 340 (1978). The conclusion that PACE assessments are not “consumer credit” is also supported by the fact the California Constitution prohibits the California Legislature from authorizing local governments to offer loans or “credit” to any “person.” Cal. Const. art. XVI § 6. Since “it must be presumed that [the Legislature] has considered and discussed the constitutionality of all measures passed by it,” it is certainly appropriate to assume that the Legislature must have concluded that PACE property tax assessments do not constitute loans or “debt” to homeowners as a matter of California law. Beach v. Von Detten, 139 Cal. 462, 465 (1903); see also INS v. St. Cyr, 533 U.S. 289, 299-300 (2001) (courts are “obligated to construe the statute to avoid [constitutional] problems.”). 3. PACE Assessments Are Not “Residential Mortgage Loans.” Even if they could be “credit” or “consumer credit transactions,” PACE property tax assessments are still not subject to TILA or HOEPA because assessments are not within the narrower set of loans covered by the TILA and HOEPA sections at issue in Counts One-Five (and, by incorporation, Count Seven); those statutory sections only apply to a transaction “that is secured by a mortgage, deed of trust, or other equivalent consensual security interest.” 15 U.S.C. § 1602(cc)(5) (defining “residential mortgage loan”). SANBAG’s assessment on the Fisher Property is not within this definition because it was not secured by a mortgage, or a deed of trust, or by another “equivalent consensual security interest.” Id. (emphasis added). Rather, the tax assessment created a lien that arose as a matter of California law pursuant to Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 21 of 33 Page ID #:859 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14 the government’s taxation powers and effectuated by the Recorded Notice of Assessment made by SANBAG, which is used to enforce property taxes and assessments. FAC ¶¶ 83-86. See Cal. Sts. & High. Code §§ 5898.30, 8701. Tax liens are not even similar to mortgages and deeds of trust, let alone equivalent. See Alliance Mortg. Co. v. Rothwell, 10 Cal. 4th 1226, 1235 (1995) (mortgages and deeds of trust are private, contractual instruments that secure repayment of a promissory note). See Webster’s Third New International Dictionary 769 (1986) (defining equivalent as “corresponding or virtually identical”). This conclusion is supported by Regulation Z, which defines a “security interest” as “an interest in property that secures performance of a consumer credit obligation and that is recognized by state or Federal law.” 12 C.F.R. § 1026.2(a)(25). But Regulation Z specifically excludes from that general definition “an interest that arises solely by operation of law.” Id.; see also id. Pt. 1026, Supp. I, cmt. 2(a)(25)-2. Since the tax assessment is not “secured by a consensual security interest” that is “equivalent” to a mortgage or deed of trust, Counts One-Five (and Seven) fail as a matter of law, and should, therefore, be dismissed. B. COUNTS THREE AND FOUR ALSO FAIL BECAUSE THERE IS NO SECONDARY LIABILITY FOR VIOLATIONS OF TILA OR HOEPA. The FAC now concedes that Renovate America is not a “creditor” for purposes of TILA and HOEPA and thus cannot be sued directly for any alleged TILA/HOEPA violations.17 But Ramos attempts an end-run around this black letter law by alleging Renovate America conspired with SANBAG to violate TILA/HOEPA (Count Three) and aided and abetted SANBAG with TILA/HOEPA violations (Count Four). The Court should reject this ploy for two independent reasons. First, as noted above, the underlying TILA and HOEPA claims on which these claims depend fail, so Counts 17 The original complaint previously alleged that Renovate America was a “creditor,” (Doc. 1-2 ¶ 156), but after Renovate America established in its motion to dismiss that it did not meet the TILA definition of “creditor” (Doc. 32-1 at 13:21-15:23), Ramos deleted this allegation from the FAC. Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 22 of 33 Page ID #:860 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15 Three and Four also fail. Oregon Laborers-Emp’rs Health & Welfare Trust Fund v. Philip Morris Inc., 185 F.3d 957, 969 (9th Cir. 1999) (where no underlying violation, there is no claim for conspiracy); In re Mortg. Elec. Registration Sys., Inc., 754 F.3d 772, 786 (9th Cir. 2014) (same for aiding and abetting). Second, the claims are also defective because neither statute recognizes a claim for secondary liability. Congress knows how to impose secondary liability under a statute if it wants to, and uses specific language when it does so; when there is no such language, the courts must conclude that secondary liability theories (like conspiracy and aiding and abetting) are not cognizable. Freeman v. DirecTV, Inc., 457 F.3d 1001, 1006 (9th Cir. 2006) (rejecting attempt to impose secondary liability for conspiracy and aiding and abetting under the Electronic Communications Privacy Act; citing Cent. Bank of Denver N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 177 (1994)). This rule precludes Ramos’ attempt to sue Renovate America for civil conspiracy or aiding and abetting under TILA and HOEPA. Nothing in the text of TILA or HOEPA creates a cause of action for conspiracy or aiding and abetting. To the contrary, the statutes expressly limit the scope of potential defendants to a “creditor who fails to comply with any requirement imposed under this part.” 15 U.S.C. § 1640(a). And “[n]othing in either TILA’s text or legislative history supports a claim for aiding and abetting or conspiracy,” or any other form of secondary liability. Grady v. FDIC, 2014 WL 1364932, at *7 (D. Ariz. Mar. 26, 2014); see also, e.g., In re Currency Conversion Fee Antitrust Litig., 265 F. Supp. 2d 385, 431 (S.D.N.Y. 2003); Abel v. KeyBank USA, N.A., 2003 WL 26132935, at *14 (N.D. Ohio Sept. 24, 2003); Weiner v. Bank of King of Prussia, 358 F. Supp. 684, 692-94 (E.D. Pa. 1973). Counts Three-Four should be dismissed. C. COUNT FIVE ALSO FAILS BECAUSE “STEERING” IS NOT PLEAD. Count Five, for violations of the TILA mortgage originator rules, fails for all the same reasons described above in Section I.A. TILA mortgage originator rules are Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 23 of 33 Page ID #:861 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16 not applicable because those rules only apply to “residential mortgage loans” that are “consumer credit transactions,” and PACE transactions are neither. 15 U.S.C. §§ 1602(cc)(2), (5). Beyond that, Count Five also must be dismissed because it is based on a fundamental misunderstanding of the cited statutory provision. Ramos alleges that “[p]ursuant to TILA § 1639b(c)(3), mortgage originators are prohibited from steering any consumer to a residential mortgage loan that the consumer lacks a reasonable ability to repay or has predatory characteristics,” and that Defendants allegedly are liable for having committed such “steering.” FAC ¶¶ 194-97. But there is no legal basis for this conclusory claim because Defendants are not plead to have “steered” Ramos in any particular fashion, let alone in a legally-prohibited manner. TILA Section 1639b(c) only created a “prohibition on steering incentives,” by banning compensation that varies based on the terms of a loan. 15 U.S.C. § 1639b(c)(1). As part of the ban, the CFPB is given the authority—in subsection (3), the provision cited by Ramos—to promulgate regulations and enact more particular prohibitions on this type of “steering.” 15 U.S.C. § 1639b(c)(3). And the CFPB has done so in Regulation Z, providing in relevant part that one cannot “steer” a customer to a transaction “based on the fact that the originator will receive greater compensation” for that transaction than in other available transactions, unless the steered-to transaction “is in the consumer’s interest.” 12 C.F.R. § 1026.36(e) (emphasis added). Steering would thus occur, for example, if a consumer qualified for alternative loans with different interest rates, and the loan originator directed the consumer towards the higher-rate loan for the sole purpose of obtaining a higher sales commission for himself. Id. Pt. 1026, Supp. I, cmt. 36(e)(1)-3. Based on this, Ramos’ Count Five fails on the law for two reasons. First, there is no cause of action under the sole cited provision (§ 1639b(c)(3)); it merely delegates to the CFPB the duty to “prescribe regulations” on steering. Second, and equally fatal, TILA and Regulation Z nowhere prohibit “steering” in the abstract. Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 24 of 33 Page ID #:862 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 17 Instead, they prohibit steering when implemented for the purpose of maximizing an originator’s compensation. Here, Ramos does not allege any facts to fit within the restriction and so his claim fails. See FAC ¶¶ 191-97. II. RAMOS’ UCL CLAIMS SHOULD BE DISMISSED. A. THE TWO UNLAWFUL PRONG CLAIMS FAIL AS A MATTER OF LAW. UCL claims can be stated under one of three prongs of the statute, which proscribes certain unlawful, unfair or deceptive acts and practices. Cal. Bus. & Prof. Code § 17203. Two of Ramos’ claims are brought under the “unlawful” prong (Counts Seven and Eight). To state a claim under the UCL’s “unlawful” prong, Ramos must plead that Renovate America violated another law. Nat’l Rural Telecomms. Co-op. v. DirecTV, Inc., 319 F. Supp. 2d 1059 (C.D. Cal. 2003). “Where a plaintiff cannot state a claim under the ‘borrowed’ law, [he] cannot state a UCL claim either.” Golden v. Sound Inpatient Phys. Med. Grp., Inc., 93 F. Supp. 3d 1171, 1179 (E.D. Cal. 2015). Here, Ramos bring Count Seven against Renovate America only, predicated on alleged violations of TILA’s mortgage originator rules (15 U.S.C. § 1639b(c)(3)), and apparently also on Ramos’ conspiracy and aiding and abetting claims in Counts Three and Four. Ramos also brings Count Eight against Renovate America only, predicated on alleged violations of the CLL. FAC ¶¶ 224-27. Ramos cannot state a claim for violations of any of these predicate statues so his UCL “unlawful” claims fail. 1. Count Seven Must Be Dismissed. Ramos’ “unlawful” claim in Count Seven is entirely derivative of other irredeemable causes of action in Counts Three-Five.18 Because Counts Three-Five fail for the reasons stated above, Count Seven necessarily also fails. 18 As noted above, Ramos has abandoned the prior theory that Renovate America is directly liable for TILA/HOEPA violations. The UCL claim in Count Seven does not appear to be based on the direct TILA/HOEPA claims in Counts One-Two. Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 25 of 33 Page ID #:863 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18 2. Count Eight Must be Dismissed. a. This Claim Is Barred by the CLL’s Statute of limitations. Ramos’ Count Eight is predicated entirely on alleged violations of the CLL. Even if the CLL applied here (which it does not), any direct suit under the CLL by Ramos would be time-barred—the UCL cannot be used to escape this time bar. Claims under the CLL are subject to a one-year statute of limitations period, which accrues upon consummation of the transaction. Cal. Code Civ. Proc. § 340. See Altman v. PNC Mortg., 850 F. Supp. 2d 1057, 1081-82 (E.D. Cal. 2012); DeLeon v. Wells Fargo Bank, N.A., 729 F. Supp. 2d 1119, 1127-28 (N.D. Cal. 2010); Slipak v. Bank of Am., N.A., 2011 WL 5526445, at *8 (E.D. Cal. Nov. 14, 2011). Ramos entered the Assessment Contract in June 2014. FAC ¶ 77. Taking that as the relevant date, any CLL claim Ramos might have had would have expired two years later in June 2016. However, Ramos did not file this action until November 2016. Ramos is prohibited from circumventing the CLL’s statute of limitations by bringing his claim under the guise of the UCL and its longer four year limitations period. See Jordan v. Paul Fin., LLC, 745 F. Supp. 2d 1084, 1098 (N.D. Cal. 2010); see also Kohl v. Am. Home Shield Corp., 2011 WL 3739506, at *4 (S.D. Cal. Aug. 24, 2011). His UCL claim predicated on the CLL is time-barred and should be dismissed with prejudice. b. The CLL Does Not Apply to PACE Tax Assessments. Apart from the time-bar, this claim fails for the more basic reason that the CLL does not even apply to PACE property tax assessments, and therefore cannot serve as the basis for a UCL claim. The CLL regulates only “covered loans,” which the statute (Cal. Fin. Code § 4970(b)), defines as meeting each of three requirements: (1) it is a “consumer loan;” (2) it is a “mortgage or deed of trust” within the so-called conforming loan limit set by Fannie Mae;19 and (3) the price charged the consumer 19 “Consumer loan” is, in relevant part, a “consumer credit transaction that is secured by real property located in [California] used [] as the principal dwelling of the consumer . . . .” Cal. Fin. Code § 4970(d). A conforming loan is, essentially, a loan that is not a jumbo loan, as set by the Federal Housing Finance Authority. Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 26 of 33 Page ID #:864 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19 must exceed certain numerical thresholds, measured by either an interest rate test or upfront-cost test. See, e.g., Altman v. PNC Mortg., 850 F. Supp. 2d 1057, 1081 (E.D. Cal. 2012). Even if the first and third parts of the CLL test for coverage could be met, Ramos’ PACE assessment transaction fails the second part of the statutory test—it did not involve a “mortgage or deed of trust.” While “mortgage” and “deed of trust” are not defined in the CLL, each is well understood as describing loans where the voluntarily-granted private security instrument is given by a debtor in real property, to back up the debtor’s personal repayment obligation contained in an associated promissory note. E.g., Bank of Italy v. Bentley, 217 Cal. 644 (1933); Aviel v. Ng, 161 Cal. App. 4th 809, 815-16 (2008). In contrast, participation in a PACE program for making energy-efficient improvements results in a tax assessment by the government against the improved property, with a statutory lien that is enforced through the property tax system and no associated personal liability on the property owner. Cal. Sts. & High. Code § 5898.30. A PACE assessment lien even has priority over any mortgage or deed of trust or other private lien. See id.; County of Sonoma v. FHFA, 710 F.3d 987, 990 (9th Cir. 2013). Thus, Ramos’ assessment was not a “mortgage” or a “deed of trust,” and consequently the CLL cannot serve as a predicate for Ramos’ UCL “unlawful” claim. c. A CLL Violation Is Not Plead Against Renovate America. Finally, even if the CLL did apply and did not contain a one year time-bar, Ramos fails to plead sufficient facts to show that Renovate America is liable for alleged failure to comply with the statute. The CLL can apply only to those who “originate” the covered loan, a term defined as “to arrange, negotiate, or make a consumer loan.” Cal. Fin. Code § 4970(h). Eschewing any argument as to two-thirds of the test, Ramos alleges that Renovate America qualifies as an originator only “because Renovate America arranged the HERO Loans.” FAC ¶ 226. But putting aside the truth (which is contested) of that general statement about “HERO Loans,” there are no allegations at all that Renovate America arranged Ramos’ transaction. Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 27 of 33 Page ID #:865 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20 Without more, there is no factual basis for the claim that Renovate America is liable under the CLL, and therefore Ramos’ derivative “unlawful” UCL claim in Count Eight fails. B. COUNT SIX MUST BE DISMISSED. Ramos frames Count Six as a claim for violation of both the “unfair” and “fraudulent” prongs of the UCL, essentially that certain of the conduct was either fraudulent or unfair. But Ramos’ allegations fail to satisfy either prong. 1. Renovate America Is Not A Proper Defendant. Count Six, asserted against Renovate America only, rests entirely on alleged improper disclosures at the closing of the transaction, charging Ramos excessive amounts, and failing to apply payments timely. FAC ¶ 239. But Renovate America is not the right party to sue based on those allegations because it is not the “person who engages, has engaged, or proposes to engage in unfair competition.” Cal. Bus. & Prof. Code § 17203. Renovate America is not a party to the Assessment Contract; Renovate America is not the governmental body that made the disclosures and assessed the property; Renovate America is not alleged to have imposed the charges; and it is not the entity alleged to have credited Ramos’ tax payments to the PACE assessment. FAC ¶¶ 77, 102-31; RJN, Ex. 2. As Renovate America is not the “person” that engaged in the alleged misconduct, it cannot be liable under the UCL. 2. The Claim For “Unfair” Conduct Must Be Dismissed. Ramos cannot rely on the “unfair” prong because he has failed to identify any legislatively declared public policy undermined by the alleged conduct. See Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). This District, following Cel-Tech, “‘require[s] that the public policy which is a predicate to the action must be “tethered” to specific constitutional, statutory or regulatory provisions.’” Boris v. Wal-Mart Stores, Inc., 35 F. Supp. 3d 1163, 1171 (C.D. Cal. 2014) (quoting Durell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1366 (2010)). To plead “unfairness,” then, Ramos must call out a law or regulation that the supposed Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 28 of 33 Page ID #:866 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 21 conduct frustrates, and plead how it does so, rather than simply complain that something happened that he thinks was not fair. The “unfair” prong of the UCL “does not give the courts a general license to review the fairness of contracts.” Samura v. Kaiser Found. Health Plan, 17 Cal. App. 4th 1284, 1299 n. 6 (1993). Ramos points to six particular “unfair and deceptive business practices” that he alleges were “substantially likely to mislead the public: (i) “secretly charging [] double interest;” (ii) “secretly charging [] double administrative fees;” (iii) “secretly failing to credit payments when made;” (iv) “improperly amortizing;” (v) “secretly overcharging recording fees;” and (vi) “improperly calculating the APRs disclosed.” FAC ¶ 201. Initially—even if Ramos plead allegations to support that Renovate America took these actions—this kind of general allegation of deception is insufficient because it is not “tethered to a constitutional or statutory provision or regulation.” Cel-Tech. 20 Cal. 4th at 185. Further, the alleged conduct (which Renovate America denies) cannot support a UCL cause of action in light of the cited documents themselves—for all six acts, Ramos attempts to use the words “secret” or “improper” to hide that these are all just grievances about the terms of his PACE Assessment Contract with SANBAG. But disliking a fully-disclosed contract term does not make that term unfair, nor could the UCL be invoked to review such terms. Samura, 17 Cal. App. 4th at 1299 n. 6. “Double Interest.” Ramos’ allegations about “double interest,” although confusingly worded, appear to be two separate complaints: (i) the start date for interest accruing was described differently between Ramos’ Application and the Assessment Contract (FAC ¶¶ 102-04; RJN, Exs. 1 & 2); and (ii) the Assessment Contract charged “interest on interest” (FAC ¶ 108). As to the date discrepancy complaint, the allegation fails because Ramos does not allege that the two dates were different. He also does not explain how, if they were different, the result was that interest was charged for the longer period of time. Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 29 of 33 Page ID #:867 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 22 Ramos’ contention that he was deceptively charged “interest on interest” is equally baseless. The Application disclosed that accrued, i.e. unpaid, interest before Ramos’ first payment would be added to the assessment amount and that interest would be charged on that total amount. RJN, Ex. 1 (“Interest Before First Payment”) & (“Interest Rate. You will be charged a fixed interest rate on your total financed amount.”) (emphasis added). Ramos may now dislike capitalized interest, but it is authorized by PACE legislation (see, e.g., Cal. Sts. & High. Code § 5898.28(a)), is standard in the municipal bond industry, and Ramos elected to pay for his home improvements through the PACE program. There is nothing deceptive about disclosing and following a practice that is authorized by statute. “Double Administrative Fees.” Ramos’ second contention—alleging “double administrative fees”—fails for the same reason: it is nothing more than a complaint that his administrative fee was part of the assessment amount, rather than separate from it, and that interest was charged on the entire amount. This, again, is contemplated by PACE legislation (see, e.g., Cal. Sts. & High. Code § 5898.28(a) (bond proceeds to be used to “fund the administrative fee”)) and was disclosed in his Assessment Contract. See, e.g. RJN, Ex. 1 (Application) (“Program Administration Fee. [. . .] This fee will be added to the assessment amount.”). Crediting of Payments and Improper Amortization. Ramos complains that the HERO program was deceptive because he made payments on his property assessment that were not immediately credited. As an initial matter, Ramos’ theory that this was “deceptive” is unsupported, as Ramos points to nothing where he was told something to the contrary about how his tax payments would be applied. His critique about the crediting of payments is also contrary to law, and, in particular, the way tax assessments and bonds work under California’s 1911 Improvement Act and 1915 Bond Act. In accordance with these Acts, PACE interest payments are credited twice a year, on March 2 and September 2, while principal payments are credited once a year, on September 2, as that is the only way to pay bondholders. See Cal. Sts. & Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 30 of 33 Page ID #:868 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 23 High. Code §§ 5898.28(c), 5898.30, 8650, 8680-81. Any funds received through the taxing process earlier than one of those payment dates are held in trust and credited to bondholders when permitted. Cal. Sts. & High. Code § 8700. Performing an act in accordance with a state statute cannot be considered unfair. Shvarts v. Budget Grp., 81 Cal. App. 4th 1153, 1158-60 (2000). His amortization complaint fails for similar reasons. The amortization method used was fully disclosed to him, he does not contend he was told the calculation would be done a different way, and the amortization method was a function of the California bond and tax assessment process. There is no other way to amortize PACE assessments, as the 1915 Bond Act provides for only one principal payment per year. Cal. Sts. & High. Code § 8650.20 “Overcharging Recording Fees.” Ramos’ complaint that it was deceptive to charge an approximate recording fee is baseless, as Ramos admits that the Application explicitly disclosed that a recording fee of “approximately” $95.00 would be charged and added to the assessment amount and he does not allege anything different was said. FAC ¶ 126; RJN, Ex. 1. There was nothing “secret” about this charge. “Improper Calculation of Estimated APRs.” Ramos’ complaints regarding APR calculations are vaguely plead, but appear to be nothing more than continued complaints about capitalized interest. Although difficult to discern, his concern appears to be about the treatment of “prepaid and capitalized interest” with respect to the APR. If this is really the complaint, then it fails for the same reasons stated above, including that there is no allegation it was disclosed to Ramos that APR would be calculated in a different method than the one used. Moreover, Ramos does not claim there is only one universally-accepted way to calculate APR, that the term “APR” necessarily connotes a particular method that was not followed, or even which method he suggests should be adopted. So, in addition to lacking an allegation of deception, 20 The amortization method used was fully disclosed. See Schedule of Estimated Maximum Annual Assessment Installments. RJN, Ex. 2 (see Ex. B thereto). Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 31 of 33 Page ID #:869 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 24 Ramos’ claim here fails because it is unclear, poorly plead, and not capable of stating a claim for relief. 3. The Claim For “Fraudulent” Conduct Must Be Dismissed. Ramos’ attempt to invoke the UCL’s “fraudulent” prong fails for two reasons. First, and dispositively, it relies only on the six allegedly “deceptive” acts shown in the preceding Section of this brief not to meet that standard. Second, Ramos does not meet the pleading standard for describing actionable fraudulent conduct necessary to sustain this claim. A “fraudulent” business practice under the UCL is one in which members of the affected public are likely to be deceived, In re Tobacco II Cases, 46 Cal. 4th 298, 312 (2009), and the heightened pleading standard of Federal Rule of Civil Procedure 9(b) applies. Davis v. HSBC Bank Nevada N.A., 691 F.3d 1152, 1169 (9th Cir. 2012); Kearns v. Ford Motor Co., 567 F.3d 1120, 1125-27 (9th Cir. 2009). “Averments of fraud must be accompanied by ‘the who, what, when, where, and how’ of the misconduct charged” and allegations regarding what is false or misleading and why it is false. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). The FAC does not meet this standard. Ramos has failed to identify any specific business practice of Renovate America that is likely to deceive the public, or to explain how any such business practice is false or misleading (particularly as Renovate America is not a creditor yet the conduct Ramos singles out relates to making disclosures, charging costs, and applying payments). See, e.g., FAC ¶¶ 102- 33, 201. Absent specific factual allegations as to Renovate America, Ramos has not plead a viable claim under the UCL’s “fraudulent” prong. 4. California Law Does Not Allow Count Six. The conduct challenged in Count Six also falls within the UCL’s safe harbor for conduct that is authorized by statute. See Cel-Tech, 20 Cal. 4th at 184 (“courts may not use the [UCL] to condemn actions the Legislature permits”). Here, as detailed above, Ramos is arguing that certain things are unfair and deceptive when the Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 32 of 33 Page ID #:870 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 25 California Legislature has made the contrary judgment that PACE property tax assessments should be arranged through traditional assessment approaches and funded through traditional municipal bonds, through the 1911 Improvement Act and the 1915 Bond Act. See, e.g., Alvarez v. Chevron Corp., 656 F.3d 925, 933 (9th Cir. 2011); Hauk v. JP Morgan Chase Bank USA, 552 F.3d 1114, 1122 (9th Cir. 2009). It cannot be unfair or deceptive for Renovate America to have done so. See, e.g., Byars v. SCME Mortg. Bankers, Inc., 109 Cal. App. 4th 1134, 1149 (2003).21 CONCLUSION This Court should dismiss the FAC without leave to amend. Respectfully submitted, Dated: March 8, 2017 By: /s/ Matthew S. Sheldon THOMAS M. HEFFERON (pro hac vice) thefferon@goodwinprocter.com STEVEN A. ELLIS sellis@goodwinprocter.com MATTHEW S. SHELDON (pro hac vice) msheldon@goodwinprocter.com MOLLY K. MADDEN mmadden@goodwinprocter.com GOODWIN PROCTER LLP Attorneys for Defendant: RENOVATE AMERICA, INC. 21 Moreover, judicial intervention in complex areas of state economic policy is inappropriate. Lazar v. Hertz Corp., 69 Cal. App. 4th 1494, 1509 (1999) (“It is the Legislature’s function, not ours, to determine the wisdom of economic policy.”); Crusader Ins. Co. v. Scottsdale Ins. Co., 54 Cal. App. 4th 121, 138 (1997) (dismissing UCL claim; “[t]here is no need or justification for the courts to interfere with the Legislature’s efforts to mold and implement public policy in this area”). Case 5:16-cv-02478-AB-KK Document 60-1 Filed 03/08/17 Page 33 of 33 Page ID #:871 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ACTIVE/89703445.1 THOMAS M. HEFFERON (pro hac vice) thefferon@goodwinprocter.com MATTHEW S. SHELDON (pro hac vice) msheldon@goodwinprocter.com GOODWIN PROCTER LLP 901 New York Avenue NW Washington, DC 20001 Tel.: 202.346.4000 Fax.: 202.346.4444 STEVEN A. ELLIS (SBN 171742) sellis@goodwinprocter.com MOLLY K. MADDEN (SBN 281483) mmadden@goodwinprocter.com GOODWIN PROCTER LLP 601 S Figueroa Street, 41st Floor Los Angeles, CA 90017 Tel.: 213.426.2500 Fax.: 213.623.1673 Attorneys for Defendant: RENOVATE AMERICA, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION IN RE HERO LOAN LITIGATION Lead Case No. 5:16-cv- 02478-AB-KK [PROPOSED] ORDER GRANTING MOTION OF RENOVATE AMERICA, INC. TO DISMISS THE FIRST AMENDED COMPLAINT Date: April 17, 2017 Time: 10:00 a.m. Courtroom: 7B Judge: Hon. André Birotte Jr. 350 W. 1st Street Los Angeles, CA 90012 Filed Concurrently with: 1. Notice of Motion and Motion; 2. Memorandum of Points and Authorities; 3. Joinder in Motion to Dismiss and Request for Judicial Notice of SANBAG This Document Relates to: Ramos v. San Bernardino Associated Governments, et al. Case No. 5:16- cv-02491-AB-KK Case 5:16-cv-02478-AB-KK Document 60-2 Filed 03/08/17 Page 1 of 2 Page ID #:872 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ACTIVE/89703445.1 1 [PROPOSED] ORDER GRANTING MOTION TO DISMISS The Court, having read and considered the Motion of RENOVATE AMERICA, INC. (“Renovate America”) to Dismiss the First Amended Complaint of Plaintiff RICHARD RAMOS (“Motion to Dismiss”), and having heard the arguments of counsel, HEREBY ORDERS as follows: The Court GRANTS Renovate America’s Motion to Dismiss in its entirety under Federal Rule of Civil Procedure 12(b)(6). Accordingly, the First Amended Complaint is hereby DISMISSED in its entirety without leave to amend. IT IS SO ORDERED. Dated: ___________________, 2017 HON. ANDRÉ BIROTTE JR. UNITED STATES DISTRICT JUDGE Case 5:16-cv-02478-AB-KK Document 60-2 Filed 03/08/17 Page 2 of 2 Page ID #:873