Richard Ramos v. San Bernardino Associated Governments et al

NOTICE OF MOTION AND MOTION to Dismiss Plaintiff's Complaint Pursuant to Fed.R.Civ.Proc. 12

C.D. Cal.January 19, 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 – 1 – NOTICE OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF’S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e Jesse L. Miller (State Bar No. 183229) Email: jessemiller@reedsmith.com James M. Neudecker (State Bar No. 221657) Email: jneudecker@reedsmith.com REED SMITH LLP 101 Second Street, Suite 1800 San Francisco, CA 94105-3659 Telephone: (415) 543-8700 Facsimile: (415) 391 8269 Attorneys for Defendant San Bernardino Associated Governments UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA RICHARD RAMOS, On Behalf of Himself and All Others Similarly Situated, Plaintiff, vs. SAN BERNARDINO ASSOCIATED GOVERNMENTS and RENOVATE AMERICA, INC., Defendants. Case No. 5:16-cv-02491-AB (KKx) Before the Honorable André Birotte Jr. NOTICE OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT PURSUANT TO FED. R. CIV. PROC. 12(B)(6) Hearing Date: April 3, 2017 Hearing Time: 10:00 a.m. Location: Courtroom 7B Filed Concurrently With: 1. Memorandum of Points & Authorities; 2. Request for Judicial Notice; 3. Joinder to Renovate’s Motion; 4. Proposed Order Granting Motion Case 5:16-cv-02491-AB-KK Document 33 Filed 01/19/17 Page 1 of 2 Page ID #:341 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 – NOTICE OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE THAT on Monday, April 3, 2017 at 10:00 a.m. in Courtroom 7B of the United States District Court for the Central District of California, located at 350 West First Street, Los Angeles, CA 90012, Defendant San Bernardino Associated Governments (“SANBAG”) will move for an order dismissing Plaintiff Richard Ramos’ Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). SANBAG’s Motion is made on the grounds that: (1) Section 1612(b) of the federal Truth-In-Lending Act (“TILA”) exempts governmental entities, such as SANBAG, from monetary liability under TILA and the Home Ownership Equity Protection Act (“HOEPA”), and that Plaintiff has not sought, and cannot obtain, injunctive relief against SANBAG under TILA or HOEPA; and (2) Property Assessed Clean Energy (“PACE”) assessments are tax assessments, not “consumer credit transactions,” and therefore, are not subject to TILA or HOEPA. SANBAG’s Motion is based on this Notice, the accompanying Memorandum of Points and Authorities, SANBAG’s Request for Judicial Notice and exhibits attached thereto, SANBAG’s Joinder to certain portions of Defendant Renovate America, Inc.’s Motion to Dismiss, and such other matters as the Court may choose to consider at the hearing on SANBAG’s Motion. This Motion is made following the conference of counsel pursuant to Local Rule 7-3, which took place on December 30, 2016 and January 10, 2017. DATED: January 19, 2017 REED SMITH LLP By: /s/ James M. Neudecker Jesse L. Miller James M. Neudecker Attorneys for Defendant San Bernardino Associated Governments Case 5:16-cv-02491-AB-KK Document 33 Filed 01/19/17 Page 2 of 2 Page ID #:342 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 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF’S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e Jesse L. Miller (State Bar No. 183229) Email: jessemiller@reedsmith.com James M. Neudecker (State Bar No. 221657) Email: jneudecker@reedsmith.com REED SMITH LLP 101 Second Street, Suite 1800 San Francisco, CA 94105-3659 Telephone: (415) 543-8700 Facsimile: (415) 391 8269 Attorneys for Defendant San Bernardino Associated Governments UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA RICHARD RAMOS, On Behalf of Himself and All Others Similarly Situated, Plaintiff, vs. SAN BERNARDINO ASSOCIATED GOVERNMENTS and RENOVATE AMERICA, INC., Defendants. Case No. 5:16-cv-02491-AB (KKx) Before the Honorable André Birotte Jr. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT PURSUANT TO FED. R. CIV. PROC. 12(B)(6) Hearing Date: April 3, 2017 Hearing Time: 10:00 a.m. Location: Courtroom 7B Filed Concurrently With: 1. Notice of Motion; 2. Request for Judicial Notice; 3. Joinder to Renovate’s Motion; 4. Proposed Order Granting Motion Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 1 of 28 Page ID #:343 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e TABLE OF CONTENTS Page I. INTRODUCTION ............................................................................................... 1 II. FACTUAL BACKGROUND ............................................................................. 5 A. California Carefully Crafted The Nation’s Largest PACE Initiative As A Tax Assessment Program ................................................. 5 B. PACE Programs Have Been Enacted Nationwide And Have Always Been Understood To Be Tax Assessments, Not Mortgage Loans ........................................................................................ 8 C. Plaintiff’s Complaint ................................................................................. 9 III. LEGAL ANALYSIS ......................................................................................... 10 A. Motion to Dismiss Standard .................................................................... 10 B. The Court Should Dismiss Plaintiff’s Claims Against SANBAG Because Governmental Entities Are Immune From Monetary Liability Under TILA .............................................................................. 11 1. Plaintiff’s Request For Undefined “Injunctive Relief” Does Not Save His Claim ............................................................. 14 2. Plaintiff’s Cause Of Action For Conspiracy Does Not Save His Claim ............................................................................. 17 C. The Court Should Dismiss Plaintiff’s Claims Against SANBAG Because PACE Assessments Are Not Consumer Credit Transactions To Which TILA Applies.................................................... 18 D. The Court Should Deny Leave To Amend ............................................. 20 IV. CONCLUSION ................................................................................................. 20 Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 2 of 28 Page ID #:344 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e TABLE OF AUTHORITIES Page(s) Cases Arizona v. Atchison, T. & S. F. R. Co., 656 F.2d 398 (9th Cir. 1981) ................................................................................... 20 Ashcroft v. Iqbal, 556 U.S. 662 (2009)................................................................................................. 10 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)................................................................................................. 10 Caster v. United States, 77 B.R. 8 (Bankr. E.D. Pa 1987) ............................................................................. 13 Christ v. Beneficial Corp., 547 F.3d 1292 (11th Cir. 2008) ............................................................................... 15 County of Sonoma v. Fed. Hous. Fin. Agency, 710 F.3d 987 (9th Cir. 2013) ..................................................................................... 6 Cousins v. Lockyer, 568 F.3d 1063 (9th Cir. 2009) ................................................................................. 10 In re Currency Conversion Fee Antitrust Litig., 265 F.Supp.2d 385 (S.D. N.Y. 2003) ...................................................................... 17 Federal Deposit Ins. Corp. v. Hughes Dev. Co., 684 F.Supp.616 (D. Minn. 1988)............................................................................. 11 Ford Motor Co. v. Milhollin, 444 U.S. 555 (1980)................................................................................................. 19 Fullmer v. JPMorgan Chase Bank, N.A., 2010 WL 95206 (E.D. Cal. 2010) ........................................................................... 15 In re Gillespie, 110 B.R. 742 (Bankr. E.D. Pa 1990) ................................................................. 12, 13 Grady v. FDIC, 2014 WL 1364932 (D. Ariz. Mar. 26, 2014) ........................................................... 17 Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 3 of 28 Page ID #:345 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e Hardy v. Vial, 48 Cal.2d 577 (1957) ............................................................................................... 17 Hofstetter v. Chase Home Fin., LLC, 2011 WL 1225900 (N.D. Cal. 2011) ....................................................................... 15 Kasket v. Chase Manhattan Mortgage Corp., 695 So.2d 431 (Fla. 1997) ....................................................................................... 11 Kimel v. Florida Bd. of Regents, 528 U.S. 62 (2000) ................................................................................................... 16 McMartin v. Children’s Institute Intl., 212 Cal.App.3d 1393 (1989) ................................................................................... 17 Mitchell v. Major Federal Savings & Loan Ass’n, 687 F.Supp. 1664 (S.D. Ohio 1987) ........................................................................ 13 Moore v. United States Dept. of Agriculture, 55 F.3d 991 (5th Cir. 1995) ..................................................................................... 16 Mullis v. U.S. Bankr. Ct., 828 F.2d 1385 (9th Cir. 1987) ................................................................................. 10 Personal Watercraft Coalition v. Marin Bd. of Supervisors, 100 Cal.App.4th 129 (2002) .................................................................................... 19 Reeder v. HSBC USA, Inc., 2009 WL 4788488 (N.D. Ill. Dec. 8, 2009) ............................................................ 15 Schreiber Distributing Co. v. Serv-Well Furniture Co., Inc., 806 F.2d 1393 (9th Cir. 1986) ................................................................................. 20 Schulken v. Washington Mut. Bank, Henderson, NV, 2011 WL 2940293 (N.D. Cal. 2011) ....................................................................... 15 Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001) ................................................................................... 10 United States v. Hemmons, 774 F.Supp. 346 (E.D. PA 1991) ......................................................................... 3, 12 United States v. Petroff-Kline, 557 F.3d 285 (6th Cir. 2009) ............................................................................. 12, 13 Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 4 of 28 Page ID #:346 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e Volovnick v. Benzel-Busch Motor Corp., 2010 WL 3629819 (S.D.N.Y. July 29, 2010) .......................................................... 15 Watkinson v. MortgageIT, Inc., 2010 WL 2196083 (S.D. Cal. 2010) ........................................................................ 15 Whitton v. Security One Lending, Inc., et al., 2015 WL 10892069 (Jan. 28, 2015, N.D. Ga 2015) ......................................... 11, 16 Statutes 15 U.S.C. § 1602(bb) .................................................................................................... 18 15 U.S.C. § 1602(cc)(5) ................................................................................................ 18 15 U.S.C. § 1602(f) ....................................................................................................... 18 15 U.S.C. § 1612(b) ............................................................................................... passim 15 U.S.C. § 1639b(c) .................................................................................................... 18 15 U.S.C. § 1639c(a) .................................................................................................... 18 15 U.S.C. § 1639c(c) .................................................................................................... 18 15 U.S.C. § 1639c(e) .................................................................................................... 18 15 U.S.C. § 1640 ........................................................................................................... 11 15 U.S.C. § 1640(f) ....................................................................................................... 19 Cal. Gov’t Code § 6052 ................................................................................................ 14 Cal. Gov’t Code § 6500 ................................................................................................ 14 Cal. Gov’t Code § 6500.1 ............................................................................................. 14 Cal. Gov’t Code § 6507 ................................................................................................ 14 Cal. Sts. & High. Code § 5898.10 ................................................................................ 19 Cal. Sts. & High. Code § 5898.12 ................................................................................ 19 Cal. Sts. & High. Code § 5898.15 .................................................................................. 7 Cal. Sts. & High. Code § 5898.16 .................................................................................. 7 Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 5 of 28 Page ID #:347 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e Cal. Sts. & High. Code § 5898.20 .................................................................................. 6 Cal. Sts. & High. Code § 5898.28 .................................................................................. 6 Cal. Sts. & High. Code § 5898.30 ............................................................................ 7, 19 Cal. Sts. & High. Code § 8500 ....................................................................................... 6 Fla. Stat. § 163.08(3) ...................................................................................................... 8 Regulations 12 C.F.R. § 1026.2, Supp. I, Cmt. (2)(a)(14)(1.2) ........................................................ 19 Other Authorities Cal. Const. art. XVI, §6 ................................................................................................ 19 Contractual Assessments: Energy Efficiency Improvements, Cal. Assem. Bill No. 811 (2007-2008 Reg. Sess.) ..................................................................... 5, 6 FHFA Statement on Certain Energy Retrofit Loan Programs (July 6, 2010) .......................................................................................................................... 8 Laurie S. Goodman et al., PACE Loans: Does Sale Value Reflect Improvements? J. of Structured Fin.,Winter 2016 .................................................... 6 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 ......................... 8 Mortgage Bankers Association, FHA’s Property Assessed Clean Energy Guidance: Preliminary MBA Analysis ...................................................................... 9 PACE Preservation and Consumer Protection Act, Assembly Bill No. 2693 (2015-2016 Reg. Sess.) ..................................................................................... 7 PACENation, PACE Market Data – Residential PACE, http://pacenation.us/pace-market-data/ ...................................................................... 2 PACENation, PACE Programs Near You, http://pacenation.us/pace- programs/ ................................................................................................................... 8 President Obama Endorses PACE Financing, YOUTUBE (Jul. 29, 2016), https://www.youtube.com/watch?v=MnWwKrZtd1I .................................... 1 Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 6 of 28 Page ID #:348 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e The White House, FACT SHEET: Obama Administration Announces Clean Energy Savings for All Americans Initiative (July 19, 2016) ......................... 2 Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 7 of 28 Page ID #:349 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e I. INTRODUCTION Congress passed the Truth-In-Lending Act (“TILA”) to require banks and other commercial lenders to provide certain disclosures to consumer borrowers. In this case, however, plaintiff Richard Ramos seeks to erroneously extend TILA to hamper a beneficial clean energy government tax program. Because TILA does not permit Plaintiff’s novel legal theory, the Court should dismiss Defendant San Bernardino Associated Governments (“SANBAG”). Property Assessed Clean Energy (“PACE”) assessment programs have been developed by states like California, with federal encouragement, to assist homeowners in paying for the costs of energy-efficient improvements through the property tax system. The programs advance the twin public policy goals of: (1) increasing energy efficiency and reducing fossil fuel emissions to benefit the community at-large, and (2) expanding access to these types of home improvements to homeowners who otherwise might not be able to afford them. PACE programs allow homeowners to fund the cost of certain eligible energy-efficient improvements, like airtight windows, solar panels or efficient water heaters, if their local governments have elected to participate in a PACE program. If approved, the cost of the improvements is paid for on behalf of the homeowner and the local government levies a tax assessment on the property so the cost is re-paid through property taxes over a number of years that approaches, but never exceeds the useful life of the improvements, which improves affordability and access. The utility savings realized by PACE participants is a key part of the programs. As President Obama has explained: “Here’s how it works. If you make the switch to solar, you can now install solar panels or retrofit your home to make it more energy efficient at no upfront costs, all by paying for them through the future savings on your energy bills.” President Obama Endorses PACE Financing, YOUTUBE (Jul. 29, 2016), https://www.youtube.com/watch?v=MnWwKrZtd1I. Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 8 of 28 Page ID #:350 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e PACE programs have had a tremendous economic and environmental impact not just in California, but across the country. Since 2010, over 130,000 homeowners have received PACE energy-efficient improvements, creating more than 29,000 jobs and preventing millions of tons of pollution and carbon emissions from being released into the atmosphere. See PACENation, PACE Market Data – Residential PACE, http://pacenation.us/pace-market-data/. Because PACE programs provide homeowners the opportunity to obtain home improvements at no upfront cost, PACE programs “unlock alternative sources of capital for low- and moderate- income Americans and veterans to scale up solar, promote energy and water efficiency retrofits, and create more resilient homes, leading to reduced energy bills, more empowered consumers, and cleaner communities.” The White House, FACT SHEET: Obama Administration Announces Clean Energy Savings for All Americans Initiative (July 19, 2016). One of the reasons PACE programs have been recognized as good public policy by California and so many other states is that they correct a market failure; without PACE’s provision of an “alternative source of capital” many homeowners would be unable to afford the upfront costs of, and the high payments associated with, improvements their properties require. Despite its particular benefits for certain underserved groups, PACE programs help “ensur[e] that every American family can choose to go solar and to cut their energy bills.” Id. (emphasis added). SANBAG is one such governmental entity that elected to participate in California’s PACE program. Defendant Renovate America, Inc. (“Renovate”) partners with governmental entities, including SANBAG, to market, originate and administer PACE programs. Renovate’s PACE program is known as its Home Energy Renovation Opportunity (“HERO”) Program. Plaintiff Richard Ramos asserts, on behalf of himself and a purported class of similarly situated persons, that SANBAG and Renovate conspired to, and did, violate certain provisions of the federal Truth in Lending Act (“TILA”), including a specific Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 9 of 28 Page ID #:351 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e provision of TILA known as the Home Ownership Equity Protection Act (“HOEPA”) (Plaintiff asserts additional state-law claims against Renovate, but not SANBAG). Plaintiff alleges that Defendants violated TILA and HOEPA by, among other things, entering into the assessment contracts without regard to the homeowner’s ability to pay, charging improper “prepayment penalties,” failing to include various disclosures in the assessment contracts, and improperly calculating interest and fees. To be clear: SANBAG squarely denies Plaintiff’s allegations; SANBAG implemented the HERO program to benefit its residents, not to harm them. At this point, however, Plaintiff’s factual allegations are immaterial. Plaintiff’s claims against SANBAG fail as a matter of law for two fundamental reasons. First, Section 1612(b) of TILA provides that no “civil or criminal penalty” may be imposed upon the United States or any agency thereof, “or upon any State or political subdivision thereof, or any agency of any State or political subdivision.” 15 U.S.C. § 1612(b). Courts interpreting Section 1612(b) have uniformly held that governmental entities’ immunity from “civil penalties” encompasses all forms of monetary relief available under TILA, i.e. actual damages, statutory damages and attorneys’ fees and costs. SANBAG is a governmental Joint Powers Authority, which by law, is a State agency. Since the only relief Plaintiff seeks against SANBAG is monetary, Plaintiff’s entire Complaint must be dismissed under Rule 12(b)(6). As aptly put by one district court that has explained why the Section 1612(b) governmental immunity against monetary relief claims compelled dismissal of a purported TILA action on the pleadings: “There is, simply put, no set of facts which would entitle [claimants] to recover the relief they have requested. Even if the [claimants’] allegations were true, and the TILA had been violated, [claimants] would not be entitled to recover monetary damages from [the government entity] to compensate for the violation . . . .” See United States v. Hemmons, 774 F.Supp. 346, 348 (E.D. PA 1991). Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 10 of 28 Page ID #:352 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e The fact that Plaintiff’s Complaint contains a request for undefined “injunctive relief” and a cause of action for “conspiracy to violate TILA and HOEPA” does not save the Complaint. The majority of courts to consider whether injunctive relief is available under TILA – including numerous district courts within California – have concluded that injunctive relief is not available. Moreover, even if TILA might permit injunctive relief under some circumstances against private parties, the Court should not read into the statute a right to injunctive relief against governmental entities, given that Section 1612(b) shows Congress’ intent generally to extend immunity to governmental entities. And in any event, the only causes of action under which Plaintiff seeks injunctive relief – for violation of California Business and Professions Code § 17200 and violation of California Financial Code § 4970 – are asserted only against Renovate, not SANBAG. Plaintiff’s cause of action for conspiracy to violate TILA and HOEPA likewise fails. No such cause of action exists, and even if it did, the law is clear that a Plaintiff cannot sidestep statutory immunity (such as SANBAG has under TILA) by asserting a cause of action for “conspiracy to violate” the very statute to which the defendant is immune. In short, Plaintiff’s entire claim against SANBAG fails as a matter of law because TILA expressly precludes the relief Plaintiff seeks against SANBAG. Second, PACE assessments are not covered by TILA or HOEPA. TILA and HOEPA apply only to “consumer credit transactions.” The Consumer Financial Protection Bureau’s (“CFPB”) official interpretations of TILA, which are controlling unless “demonstrably irrational,” expressly exclude tax liens and tax assessments from the definition of consumer “credit.” Here, not only is it not “demonstrably irrational” to exclude tax assessments from the definition of credit, it makes perfect sense. PACE assessments do not fit the plain definition of “credit” under TILA. Moreover, the assessments are against the property; there is no personal obligation on the homeowner to repay. Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 11 of 28 Page ID #:353 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e In addition, the California Constitution prohibits the legislature from authorizing the giving or lending of credit to private persons, so in enacting PACE legislation, the California legislature must have concluded that PACE assessments do not constitute loans or debt as a matter of law. There is also nothing in TILA to suggest that Congress intended to regulate a traditional state function like property taxes. In short, PACE assessments are tax assessments, not “consumer credit transactions” governed by TILA or HOEPA. As a result, Plaintiff’s claims against SANBAG fail for that independent reason as well. To reiterate, even if TILA or HOEPA applied to the PACE program, and even if SANBAG were not immune from claims for monetary relief under TILA, SANBAG would deny that it (or Renovate) violated TILA or HOEPA in any way, shape or form. But the Court need not reach the “merits” of that dispute. Plaintiff’s lawsuit fails at the outset as a matter of law because the relief Plaintiff seeks from SANBAG is expressly prohibited by Section 1612(b), and independently, because PACE assessments are tax assessments, not “consumer credit transactions” covered by TILA and HOEPA. The Court should dismiss Plaintiff’s Complaint, with prejudice. II. FACTUAL BACKGROUND A. California Carefully Crafted The Nation’s Largest PACE Initiative As A Tax Assessment Program In July 2008, the California Legislature enacted Assembly Bill (“AB”) 811 to authorize local governments to establish PACE programs. See Contractual Assessments: Energy Efficiency Improvements, Cal. Assem. Bill No. 811 (2007-2008 Reg. Sess.). AB 811 amended part of the Improvement Act of 1911 (“1911 Improvement Act”), which for over a century has allowed cities, counties, and other municipal governments to recoup the cost of public improvements through tax assessments levied upon those parcels of real property that have been particularly benefitted. See id. (amending Chapter 29 of Part 3 of the 1911 Improvement Act, Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 12 of 28 Page ID #:354 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e codified at Cal. Sts. & High. Code § 5898.10 et seq. (“Contractual Assessments”)). In AB 811, the Legislature found that “the promotion of energy efficiency improvements” served a critical public purpose and was “necessary to address the issue of global climate change.” Id. § 2. The Legislature also found that the “upfront cost” of making energy efficient improvements “prevents many property owners from making those improvements.” Id. The Legislature thus determined that “[t]o make those improvements more affordable and to promote the installation of those improvements, it is necessary to authorize an alternative procedure for authorizing assessments to finance the cost of energy efficiency improvements.”1 Id. AB 811 established the PACE program to work through California’s existing system for issuing bonds and repaying them through tax assessments.2 The authorizing statute allows a city, county, or public agency to adopt a resolution allowing PACE assessment contracts to be issued within a certain area. Cal. Sts. & High. Code § 5898.20. A homeowner in that designated area can then identify an energy-efficient improvement they need – such as the installation of a high-efficiency heat pump or water conservation system – then identify a licensed contractor, and apply to the participating government entity for approval. If approved, the cost of the improvements is financed through the sale of bonds issued in accordance with the Improvement Bond Act of 1915. See Cal. Sts. & High. Code § 5898.28; Cal. Sts. & High. Code §§ 8500 et seq. (the “1915 Bond Act”); see also County of Sonoma v. Fed. Hous. Fin. Agency, 710 F.3d 987, 990 (9th Cir. 2013). In order to repay the bond, a tax assessment is imposed on the property, and the assessment is collected in the same manner as any other tax assessment under the 1911 Improvement Act; the homeowner pays a portion of the assessment twice each year “in the same manner and at the same 1 AB 811 was passed as an “urgency statute” because the Legislature found that it was “necessary that this act take effect immediately” in order “to begin to experience the effects of these contractual assessments, such as saving millions of kilowatthours.” Id. § 7. 2 See Laurie S. Goodman et al., PACE Loans: Does Sale Value Reflect Improvements? J. of Structured Fin.,Winter 2016, at 1, 2. Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 13 of 28 Page ID #:355 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e time as the general taxes of the city or county on real property.” Cal. Sts. & High. Code § 5898.30. Importantly, PACE assessments are inherently tax assessments, not consumer loans. Unlike consumer loans, there is no promissory note or personal debt instrument that accompanies the tax assessment; there is no right to accelerate the entire amount of the assessment in response to a missed payment; and there is no right of personal or other form of recourse against a homeowner who has an assessment levied on her property. Instead, the assessment runs with the land, is collected along with all applicable property taxes, and is enforced in the same manner as property taxes. Id. The State of California carefully legislated the structure of PACE tax assessments and the Legislature continues to adjust PACE program requirements. In addition to underwriting requirements that PACE participants must adhere to in the original PACE statute, the Legislature has recently enacted new disclosure requirements, effective January 1, 2017, that all participating PACE programs must follow. Id. § 5898.15; PACE Preservation and Consumer Protection Act, Assembly Bill No. 2693 (2015-2016 Reg. Sess.) codified at Cal. Sts. & High. Code § 5898.16. These requirements include disclosure rules concerning the total product cost of the improvement, all financing costs, and the amount of interest the homeowner will pay over the life of the assessment. Further, the California Alternative Energy and Advanced Transportation Financing Authority (“CAEATFA”), was established as a new regulator specifically charged with overseeing aspects of California PACE programs. California was the first state to implement PACE assessment programs and has had immense success with the programs since their creation. California has twelve (12) separate PACE programs—including the HERO Program in which SANBAG participates—which in total have over 400 participating counties, cities, and other Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 14 of 28 Page ID #:356 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e local entities.3 Over 70,000 California homeowners have obtained energy-efficient renovations to their homes through PACE programs, with estimated savings of “9.1 billion kWh of energy, 3.4 billion gallons of water, and $2.5 billion in homeowners’ utility bills.”4 PACE programs are also estimated to create “more than 13,000 California jobs and over $2 billion in completed projects.”5 B. PACE Programs Have Been Enacted Nationwide And Have Always Been Understood To Be Tax Assessments, Not Mortgage Loans Legislation authorizing PACE programs has now been enacted by thirty-three (33) other states and the District of Columbia.6 And, as in California, these states have implemented the PACE assessment programs through their property tax system. E.g., Fla. Stat. § 163.08(3) (“A local government may levy non-ad valorem assessments to fund qualifying improvements.”). As PACE programs have gained popularity among homeowners and state and local governments across the nation, many government entities, policy makers, and industry groups have taken note, and have all agreed: PACE tax assessments are not regulated in the same way as mortgage loans because they are not mortgage loans. For example, the Federal Housing Finance Agency (“FHFA”), the regulator and conservator of Fannie Mae and Freddie Mac, determined that “Truth-in-Lending Act and other consumer protections” do not apply to PACE contracts because they are not mortgage loans. See FHFA, FHFA Statement on Certain Energy Retrofit Loan Programs (July 6, 2010). Former Chair of the Federal Reserve Ben Bernanke, the leading lending trade organization, the Mortgage Bankers Association, and at least seventeen consumer organizations have reached the same conclusion. See Letter from 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 Id. 5 Id. 6 See PACENation, PACE Programs Near You, http://pacenation.us/pace-programs/ (last visited Jan. 13, 2017). Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 15 of 28 Page ID #:357 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e Ben Bernanke to Congressman Edwin G. Perlmutter (Oct. 1, 2010) (“These consumer protections under TILA may not be triggered by all PACE programs because some municipalities may fund the programs through tax assessments that may not be extensions of credit covered by TILA.”); Mortgage Bankers Association, FHA’s Property Assessed Clean Energy Guidance: Preliminary MBA Analysis (“[PACE’s] status as an assessment means that it is not subject to the Consumer Financial Protection Bureau’s (CFPB) Ability-to-Repay and disclosure requirements for mortgage loans.”); Letter from Action, Inc., et al. to Department of Energy (Oct. 18, 2016) (“when governments permit PACE loans to run through the tax assessment system, PACE lenders avoid” compliance with TILA and other mortgage lending regulations). C. Plaintiff’s Complaint Plaintiff asserts four causes of action against SANBAG: (1) violations of TILA (see Complaint, ¶ ¶ 140-170); (2) violations of HOEPA (see Complaint, ¶ ¶ 171-197); (3) conspiracy to violate TILA and HOEPA (see Complaint ¶ ¶ 198-207); and (4) violations of TILA’s mortgage originator rules (see Complaint, ¶ ¶ 208-215). Plaintiff’s fifth cause of action – for violation of California’s Covered Loan Law, California Financial Code § 4970, et seq. – is asserted only against Renovate. See Complaint, ¶ ¶ 216-240. Plaintiff’s sixth cause of action – for violation of California Business and Professions Code § § 17200, et seq. – is also asserted only against Renovate. See Complaint, ¶ ¶ 241-254. This gist of Plaintiff’s Complaint is that Defendants conspired to, and did, violate TILA and HOEPA by, among other things, entering into the assessment contracts without regard to the homeowner’s ability to pay, charging improper “prepayment penalties,” failing to include necessary disclosures in the assessment contracts, and improperly calculating interest and fees. Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 16 of 28 Page ID #:358 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e Plaintiff’s claims against Renovate for violation of California Business and Professions Code § 17200 and California’s Covered Loan Law are the only claims with respect to which Plaintiff seeks injunctive relief. See Complaint, ¶ 240 (“Additionally, Plaintiff and all other Subclass members are entitled to an injunction to reform the terms of their Assessment Contracts to prohibit Defendant Renovate America from engaging in the conduct described above”); ¶ 254 (“Plaintiff and the Class seek to enjoin Defendant Renovate America from engaging in these wrongful practices, as alleged herein, in the future”). With respect to Plaintiff’s four claims against SANBAG, Plaintiff seeks only monetary relief. See Complaint, ¶¶ 169-170; 196; 206-207; 215. III. LEGAL ANALYSIS A. Motion to Dismiss Standard Because the Court is undoubtedly familiar with the standards governing motions to dismiss under Rule 12(b)(6), SANBAG will not set forth those standards in great detail here. However, in light of the manner in which Plaintiff drafted his Complaint, it is worth noting two particularly apt principles, namely: that while the Court must generally accept all factual allegations pleaded in a complaint as true (Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009)), the Court need not accept as true unreasonable inferences or conclusory legal allegations couched in the form of factual allegations. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Mere conclusory statements in a complaint—such as “‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action’”—are insufficient to state a claim. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). Further, the court is not required to accept as true allegations contradicted by judicially noticed facts. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001) (citing Mullis v. U.S. Bankr. Ct., 828 F.2d 1385, 1388 (9th Cir. 1987)). Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 17 of 28 Page ID #:359 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e B. The Court Should Dismiss Plaintiff’s Claims Against SANBAG Because Governmental Entities Are Immune From Monetary Liability Under TILA As noted above, with respect to Plaintiff’s four claims against SANBAG, Plaintiff seeks only monetary relief. See Complaint, ¶¶ 169-170; 196; 206-207; 215. Thus, Plaintiff’s claims against SANBAG under TILA and HOEPA fail for a simple, fundamental reason: governmental entities – like SANBAG – are exempt from monetary liability for TILA violations. 15 U.S.C. § 1612(b) provides: “(b) Inapplicability of Federal civil or criminal penalties to Federal, state and local agencies. No civil or criminal penalty provided under this subchapter for any violation thereof may be imposed upon the United States or any department or agency thereof, or upon any State or political subdivision thereof, or any agency of any State or political subdivision.”7 Cases interpreting §1612(b) make two points abundantly clear. First, that §1612(b)’s prohibition on “civil penalties” against governmental entities encompasses all forms of monetary relief available under TILA.8 See Kasket v. Chase Manhattan Mortgage Corp., 695 So.2d 431, 435 (Fla. 1997) (“Section 1640 damages, however, constitute a civil penalty. [citations omitted]. Therefore, under section 1612(b), which exempts governmental agencies from any civil or criminal penalty under TILA, liability for section 1640 damages could not be imposed on the [Resolution Trust Corporation]”); see also Federal Deposit Ins. Corp. v. Hughes Dev. Co., 684 F.Supp.616, 622 (D. Minn. 1988) (“The § 1640 damages clearly constitute a civil penalty within the meaning of § 1612(b) . . . this Court finds that Congress intended governmental agencies, such as the FDIC, to be exempt from TILA claims for § 1640 civil damages”); Whitton v. Security One Lending, Inc., et al., 2015 WL 10892069 at 7 The subchapter referenced in 15 U.S.C. § 1612(b) is Subchapter 1 (“Consumer Credit Cost Disclosure”) of Chapter 41 (“Consumer Credit Protection”) of Title 15 of the United States Code (“Commerce and Trade”). Subchapter 1 encompasses 15 U.S.C. § § 1601-1667f, and thus, covers every TILA and HOEPA violation alleged in Plaintiff’s Complaint. 8 Monetary relief under TILA consists of actual damages, statutory damages, and attorney fees and costs. 15 U.S.C. § 1640. Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 18 of 28 Page ID #:360 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e fn 5 (Jan. 28, 2015, N.D. Ga 2015) (“However, damages, attorney’s fees and costs are civil penalties as to which recovery from HUD is barred due to sovereign immunity. [citations omitted].”). Second, cases have held that Section 1612(b) means precisely what is says, i.e. that governmental entities are immune from monetary liability under TILA. For example, in United States v. Hemmons, 774 F.Supp. 346, 348 (E.D. PA 1991), a bank assigned its rights under a confession of judgment to the United States Department of Housing and Urban Development (“HUD”). After failing to work out a repayment plan with the defaulted borrowers, HUD filed suit to recover the outstanding balance of the loan. Id. The borrowers counterclaimed based on alleged violations of TILA. Id. In dismissing the borrowers’ counterclaims, the Court explained: “There is, simply put, no set of facts which would entitle the defendants to recover the relief they have requested. Even if the defendants’ allegations were true, and the TILA had been violated, the defendants would not be entitled to recover monetary damages from HUD to compensate for the violation . . . . ‘1612(b) exempts HUD, like any other political subdivision, from monetary liability for TILA violations.’ While the defendants may have stated a claim under the TILA, the express provisions of the statute deprive the court of the power to grant the requested relief.” Id. at 348 (quoting In re Gillespie, 110 B.R. 742, 747 (Bankr. E.D. Pa 1990). Similarly, in United States v. Petroff-Kline, 557 F.3d 285, 288 (6th Cir. 2009), the United States Department of Health and Human Services (“HHS”) brought an action to collect the amount of indebtedness stemming from a student loan. HHS and the borrower filed cross-motions for summary judgment. The borrower’s summary judgment motion argued that alleged TILA violations provided a “recoupment” defense to the government’s collection action. In affirming the district court’s order granting the government’s motion for summary judgment and denying the borrower’s, the Sixth Circuit explained that: Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 19 of 28 Page ID #:361 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e “Indeed, the government has another string to its bow. Even if Petroff-Kline had been able to establish actual damages from the TILA violation, she could not recoup that amount from the Government in any event. Under TILA §1612(b) the Government is immune from any civil or criminal penalties for violation of its provisions. That immunity extends to attempted recoupments such as the one that Petroff-Kline seeks here. [citations omitted].” Id. at 297. See also Caster v. United States, 77 B.R. 8 (Bankr. E.D. Pa 1987) (holding that even if HUD violated TILA, no reduction in claim was allowable under 15 U.S.C. § 1612(b)); In re Gillespie, 110 B.R. 742, 747 (Bankr. E.D. Pa 1990) (noting that § 1612(b) “exempts HUD, like any other political subdivision, from monetary liability for TILA violations”); Mitchell v. Major Federal Savings & Loan Ass’n, 687 F.Supp. 1664 (S.D. Ohio 1987) (“[Federal Savings and Loan Insurance Corporation] is an agency of the United States, and the City [of Cincinnati] is a political subdivision of the State of Ohio as set forth in 15 U.S.C. 1612(b). As such, neither the City nor FSLIC is subject to civil penalty for violations of the Truth-In-Lending Act pursuant to 1612(b)”). In short, the law is clear: under 15 U.S.C. § 1612(b), governmental entities are immune from monetary liability under TILA. SANBAG thinks it is unlikely Plaintiff will argue SANBAG is not a governmental entity. Indeed, Plaintiff seems to concede the point in his Complaint. See, e.g., Complaint ¶ 11 (“Defendant SANBAG is a joint exercise of powers authority, the members of which include, numerous cities in San Bernardino County and San Bernardino County itself”); ¶ 13 (California law “authorizes a legislative body, such as Defendant SANBAG . . .”); ¶ 27 (“Defendant Renovate America was formed in 2008 to work with local governments to implement residential PACE programs”). Although SANBAG does not anticipate its status as a public agency will be a point of contention, to make its legal status perfectly clear: SANBAG is a Joint Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 20 of 28 Page ID #:362 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e Powers Authority (“JPA”) established pursuant to California Government Code § 6500, et seq. – the “Joint Powers Act.” Cal. Gov. Code § 6500.1. Essentially, under the Joint Powers Act, two or more public agencies may agree to create a separate agency to exercise any power common to the contracting parties. Id. at § 6052; 6503.5. In SANBAG’s case, the County of San Bernardino and 24 incorporated cities within San Bernardino County, each of which are political subdivisions of the State, formed SANBAG. For purposes of Plaintiff’s TILA complaint, the key point about the nature of JPAs is that while a JPA is considered an entity separate from the public agencies that agreed to create it, the JPA itself is also considered a public agency. Id. at 6507 (“For purposes of this article, the agency is a public entity separate from the parties to the agreement”) (emphasis added); § 6500 (“As used in this article, ‘public agency’ includes, but is not limited to, the federal government or any federal department or agency, this state, another state or any state department or agency, a county . . . city . . . or any joint powers authority formed pursuant to this article by any of these agencies”). In short, just like its member entities, SANBAG is itself an “agency of the political subdivision[s]” of the State under 15 U.S.C. § 1612(b). As such, the result is clear: Plaintiff’s Complaint against SANBAG fails as a matter of law. 1. Plaintiff’s Request For Undefined “Injunctive Relief” Does Not Save His Claim SANBAG anticipates that Plaintiff will raise two arguments in response to 15 U.S.C. § 1612(b)’s clear mandate. First, Plaintiff may argue that his claim against SANBAG may proceed because, although Section 1612(b) clearly immunizes governmental entities from monetary liability under TILA, it does not expressly preclude injunctive relief against governmental entities. This argument fails to two reasons. Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 21 of 28 Page ID #:363 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e First, most courts, including numerous district courts within California, have held that injunctive relief is not available under TILA generally. As the Eleventh Circuit explained in Christ v. Beneficial Corp., 547 F.3d 1292, 1296 (11th Cir. 2008): “because we do not expect Congress to ‘expressly preclude’ remedies, we do not read TILA to confer upon private litigants an implied right to an injunction or other equitable relief such as restitution or disgorgement.” See also Schulken v. Washington Mut. Bank, Henderson, NV, 2011 WL 2940293 at *8 (N.D. Cal. 2011) (“in light of TILA’s ‘comprehensive statutory scheme of remedies,’ including designation of the FTC [and now the CFPB] as the primary TILA enforcement agency, the Eleventh Circuit’s conclusion that Congress intentionally limited the remedies available to private parties bringing TILA claims gains support”); Watkinson v. MortgageIT, Inc., 2010 WL 2196083 at *11 (S.D. Cal. 2010) (injunctive and equitable relief not remedies available under TILA); Fullmer v. JPMorgan Chase Bank, N.A., 2010 WL 95206 at *9 (E.D. Cal. 2010) (“Injunctive relief is not a remedy provided in [TILA] and should not be read into it”).9 Moreover, even if TILA might permit injunctive relief under some circumstances against private parties, the Court should not read into the statute a right to injunctive relief against governmental entities that is not set forth in express language. This is particularly true since the immunity from monetary relief that Congress provided in Section 1612(b) shows its intent generally to extend immunity to governmental entities. Indeed, several courts have noted that Section 1612(b) 9 Some district courts have held to the contrary. See Hofstetter v. Chase Home Fin., LLC, 2011 WL 1225900 at *10 (N.D. Cal. 2011) (accepting argument for injunctive relief). But given the weight of authority holding that injunctive relief is not available under TILA, SANBAG respectfully urges the Court to apply the prevailing analysis and hold injunctive relief is not available under TILA. See also Volovnick v. Benzel-Busch Motor Corp., 2010 WL 3629819 at *9 (S.D. N.Y. July 29, 2010) (declining to read injunctive relief into TILA and recognizing that trend among courts is to consider TILA’s stated remedies for actual damages, costs, statutory damages and attorneys’ fees exclusive remedies available under statute); Reeder v. HSBC USA, Inc., 2009 WL 4788488 at *9 (N.D. Ill. Dec. 8, 2009) (dismissing TILA class claim: “[T]o the extent that Plaintiffs do seek injunctive relief, the Eleventh Circuit’s recent opinion in [Christ] explains why such relief is not available to private litigants under TILA.”). Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 22 of 28 Page ID #:364 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e evinces Congress’ intent to memorialize governmental entities’ sovereign immunity. Moore v. United States Dept. of Agriculture, 55 F.3d 991, 994 (5th Cir. 1995) (“Yet Congress also expressly preserved the United States’ sovereign immunity against TILA claims”); Whitton, 2015 WL 10892069 at fn 5 (N.D. Ga 2015) (“However, damages, attorney’s fees and costs are civil penalties as to which recovery from HUD is barred due to sovereign immunity. [citations omitted].”). Since the only intent Congress expressed in TILA with regard to governmental entities was to provide immunity, it would be illogical to infer from Congress’s failure to mention injunctive relief at all in TILA that Congress affirmatively intended to allow injunctive relief against a governmental entity. Kimel v. Florida Bd. of Regents, 528 U.S. 62, 73 (2000) (“Congress may abrogate the States’ constitutionally secured immunity from suit in federal court only by making its intention unmistakably clear in the language of the statute [citations omitted]”). Second, even if the Court determines injunctive relief is available under some circumstances under TILA, Plaintiff has not sought injunctive relief against SANBAG. Plaintiff’s Prayer for Relief contains a single line that he is seeking, among other remedies, undefined “injunctive relief.” Complaint at 40:14. But the only causes of action that contain a request for injunctive relief are Plaintiff’s fifth cause of action for violation of California’s Covered Loan Law, and Plaintiff’s Sixth cause of action for violation of California Business and Professions Code § § 17200, et seq. See Complaint, ¶ ¶ 240, 254. Those causes of action, however, are asserted only against Renovate. Thus, Plaintiff is not seeking injunctive relief against SANBAG, and therefore, even if injunctive relief were available under TILA (and again, SANBAG contends that it is not, particularly as to governmental entities), that availability does not save Plaintiff’s Complaint. Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 23 of 28 Page ID #:365 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e 2. Plaintiff’s Cause Of Action For Conspiracy Does Not Save His Claim Plaintiff may also argue that his claim survives notwithstanding 15 U.S.C. § 1612(b) because, in addition to claims for alleged violations of TILA and HOEPA, from which SANBAG is immune, Plaintiff asserts a claim against SANBAG (and Renovate) for “conspiracy to violate TILA and HOEPA.” See Complaint, ¶ ¶ 86-195. Plaintiff may argue that “conspiracy” is a cause of action unique from violations of TILA and HOEPA themselves, and that Section 1612(b) does not apply. That argument also fails. No cause of action for “conspiracy” to violate TILA actually exists. In re Currency Conversion Fee Antitrust Litig., 265 F.Supp.2d 385, 432-433 (S.D. N.Y. 2003) (“Since TILA’s statutory text does not provide for conspiracy or aiding and abetting claims, and the legislative history supports that conclusion, claims for conspiracy or aiding and abetting cannot stand”); Grady v. FDIC, 2014 WL 1364932 at *7 (D. Ariz. Mar. 26, 2014) (“Thus, based on the plain language of the statute there is no claim for conspiracy or aiding and abetting under TILA”) (quoting In re Currency Conversion Fee). Moreover, even if a cause of action for conspiracy to violate TILA and HOEPA existed, such a claim cannot be asserted against SANBAG. As explained above, governmental entities, such as SANBAG, are immune from monetary liability under Section 1612(b) of TILA, and Plaintiff has not, and cannot, seek injunctive relief against SANBAG. It is axiomatic that a defendant cannot be liable for a “conspiracy” to commit an underlying wrong from which the defendant is immune. McMartin v. Children's Institute Intl., 212 Cal.App.3d 1393, 1406 (1989) (“A conspiracy cannot be alleged as a tort separate from the underlying wrong it is organized to achieve. As long as the underlying wrongs are subject to privilege, defendants cannot be held liable for a conspiracy to commit those wrongs. Acting in concert with others does not destroy the immunity of defendants.”) (citations omitted); Hardy v. Vial, 48 Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 24 of 28 Page ID #:366 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e Cal.2d 577, 583-84 (1957) (“The fact that the school defendants sought to attain their objective by acting in concert with other persons cannot properly be treated as destroying the immunity which they would have if each of them had acted individually and independently of any other person to secure the same result. The underlying theory of absolute immunity is equally applicable whether the employee acts by himself or with others who are not immune.”). C. The Court Should Dismiss Plaintiff’s Claims Against SANBAG Because PACE Assessments Are Not Consumer Credit Transactions To Which TILA Applies Plaintiff’s Complaint fails for a second, independent reason. Namely, that PACE assessments are not “consumer credit transactions” subject to TILA and HOEPA. It is SANBAG’s understanding that Renovate is filing a motion to dismiss premised largely on that argument, so for the sake of brevity, SANBAG intends to file a Joinder to that portion of Renovate’s Motion to Dismiss rather than set forth the entirety of that argument here. For this brief, SANBAG will simply note the key points of that argument. Specifically: By the statute’s express terms, the provisions of TILA and HOEPA under which Plaintiff sues apply only to “consumer credit transactions.” See 15 U.S.C. § § 1639c(a); 1639c(c); 1639c(e); 1639b(c) (all applying to “residential mortgage loans”); § 1602(cc)(5) (defining residential mortgage as “any consumer credit transaction that is secured by a mortgage, deed of trust, or other equivalent consensual security interest”); § 1602(bb) (restricting “high cost mortgages” under HOEPA to “consumer credit transactions”). TILA defines “credit” as “the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.” See 15 U.S.C. § 1602(f). The Consumer Financial Protection Bureau’s official staff interpretations of TILA expressly exclude “tax liens” and “tax assessments” from the definition of Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 25 of 28 Page ID #:367 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e consumer “credit.” 12 C.F.R. § 1026.2, Supp. I, Cmt. (2)(a)(14)(1.2). The CFPB’s official staff interpretations are controlling unless “demonstrably irrational”. Ford Motor Co. v. Milhollin, 444 U.S. 555, 565 (1980).10 Here, not only is it not “demonstrably irrational” to exclude tax assessments from the definition of credit, it makes perfect sense. PACE assessments are tax assessments under California law. Cal. Sts. & High. Code § 5898.10 (“This chapter provides an alternative procedure for authorizing assessments to finance any work which may be done pursuant to this division”) (emphasis added). Moreover, like property tax assessments, PACE assessments are obligations imposed on the property, not the homeowner, and are collected “in the same manner and at the same time as the general taxes of the city or county on real property.” Cal. Sts. & High. Code § § 5898.12, 5898.30. Moreover, the California Constitution prohibits the legislature from authorizing the giving or lending of credit to private persons. Cal. Const. art. XVI, §6 (“The Legislature shall have no power to give or to lend, or to authorize the giving or lending, of the credit of the State, or of any county, city and county, city, township or other political corporation or subdivision of the State now existing, or that may be hereafter established, in aid of or to any person, association, or corporation, whether municipal or otherwise, or to pledge the credit thereof . . . .”). Thus, in enacting PACE legislation, the California legislature must have concluded that PACE assessments do not constitute loans or debt as a matter of law. The PACE legislation should be so construed to avoid doubts as to its constitutionality. Personal Watercraft Coalition v. Marin Bd. of Supervisors, 100 Cal.App.4th 129, 137 (2002) (“courts will 10 It is also worth noting that, even if an official staff interpretation is found not binding, purported creditors are afforded protection from civil liability for “any act done or omitted in good faith in conformity with any rule, regulation, or interpretation thereof by the Bureau [of Consumer Financial Protection] or in conformity with any interpretation or approval by an official or employee of the Federal Reserve System duly authorized by the Bureau to issue such interpretations or approvals . . . .” 15 U.S.C. § 1640(f). TILA’s safe-harbor provision provides yet another defense to Plaintiff’s Complaint. Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 26 of 28 Page ID #:368 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e construe statutes in a manner that removes doubts as to constitutionality.”). There is also nothing in TILA to suggest that Congress intended to regulate a traditional state function like property taxes. 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”). In short, PACE assessments are tax assessments, not “consumer credit transactions” governed by TILA or HOEPA. As a result, Plaintiff’s claims against SANBAG fail for that independent reason as well. D. The Court Should Deny Leave To Amend SANBAG acknowledges that leave to amend is routinely granted. Here, however, the Court should deny leave to amend. Leave to amend should be denied if “allegation(s) of other facts consistent with the challenged pleading could not possibly cure the deficiency.” Schreiber Distributing Co. v. Serv-Well Furniture Co., Inc., 806 F.2d 1393, 1401 (9th Cir. 1986). No amount of additional factual allegations could possibly cure Plaintiff’s Complaint. SANBAG’s immunity from monetary relief under Section 1612(b), the unavailability of injunctive relief against SANBAG, and the inapplicability of TILA and HOEPA to PACE assessment contracts, are purely legal issues. No amount of “re-drafting” will allow Plaintiff to state a claim against SANBAG. IV. CONCLUSION Section 1612(b) of TILA exempts governmental entities, like SANBAG, from monetary liability under TILA. Since monetary relief is the only relief Plaintiff can, or does, seek against SANBAG, Plaintiff’s Complaint fails as a matter of law. Moreover, even if SANBAG were not immune, and it is, the fact remains that TILA is not applicable to the PACE assessments that are the subject of Plaintiff’s lawsuit. The Court should dismiss Plaintiff’s Complaint against SANBAG. Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 27 of 28 Page ID #:369 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 – MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e DATED: January 19, 2017 REED SMITH LLP By: /s/ James M. Neudecker Jesse L. Miller James M. Neudecker Attorneys for Defendant San Bernardino Associated Governments Case 5:16-cv-02491-AB-KK Document 33-1 Filed 01/19/17 Page 28 of 28 Page ID #:370 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 – [PROPOSED] ORDER GRANTING DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF’S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e Jesse L. Miller (State Bar No. 183229) Email: jessemiller@reedsmith.com James M. Neudecker (State Bar No. 221657) Email: jneudecker@reedsmith.com REED SMITH LLP 101 Second Street, Suite 1800 San Francisco, CA 94105-3659 Telephone: (415) 543-8700 Facsimile: (415) 391 8269 Attorneys for Defendant San Bernardino Associated Governments UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA RICHARD RAMOS, On Behalf of Himself and All Others Similarly Situated, Plaintiff, vs. SAN BERNARDINO ASSOCIATED GOVERNMENTS and RENOVATE AMERICA, INC., Defendants. Case No. 5:16-cv-02491-AB (KKx) Before the Honorable André Birotte Jr. [PROPOSED] ORDER GRANTING DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT PURSUANT TO FED. R. CIV. PROC. 12(B)(6) Hearing Date: April 3, 2017 Hearing Time: 10:00 a.m. Location: Courtroom 7B Filed Concurrently With: 1. Notice of Motion; 2. Memorandum of Points & Authorities; 3. Request for Judicial Notice; 4. Joinder to Renovate’s Motion Case 5:16-cv-02491-AB-KK Document 33-2 Filed 01/19/17 Page 1 of 3 Page ID #:371 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 – [PROPOSED] ORDER GRANTING DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e On January 19, 2017, Defendant San Bernardino Associated Governments (“SANBAG”) filed a Motion to Dismiss Plaintiff Richard Ramos’ Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). After consideration of the briefs and arguments submitted in support of, and opposition to, SANBAG’s Motion to Dismiss, the Court hereby GRANTS SANBAG’s Motion to Dismiss. The Court grants SANBAG’s Motion to Dismiss for two reasons. First, Section 1612(b) of the Truth-in-Lending Act (“TILA”) provides that no “civil or criminal penalty” may be imposed upon the United States or any agency thereof, “or upon any State or political subdivision thereof, or any agency of any State or political subdivision.” 15 U.S.C. § 1612(b). Under Section 1612(b), governmental entities, such as SANBAG, are immune from all forms of monetary relief available under TILA and the Home Ownership Equity Protection Act (“HOEPA”). See, e.g., United States v. Hemmons, 774 F.Supp. 346, 348 (E.D. PA 1991); United States v. Petroff- Kline, 557 F.3d 285, 288 (6th Cir. 2009). Further, although Section 1612(b) does not expressly preclude injunctive relief against governmental entities, Plaintiff has not sought injunctive relief against SANBAG. Moreover, even if injunctive relief is available in some instances against private parties, given Congress’ clear intent to immunize governmental entities under Section 1612(b) generally, the Court declines to read into TILA a right to injunctive relief against governmental entities that is not set forth in the statute’s express language. The Court grants SANBAG’s Motion to Dismiss for a second, independent reason. Namely, that the Property Assessed Clean Energy (“PACE”) assessments that are the subject of Plaintiff’s Complaint, are tax assessments, not consumer credit transactions, and therefore, are not subject to TILA or HOEPA. The Consumer Financial Protection Bureau’s (“CFPB”) official staff interpretations of TILA expressly exclude “tax liens” and “tax assessments” from the definition of consumer “credit.” 12 C.F.R. § 1026.2, Supp. I, Cmt. (2)(a)(14)(1.2). The CFPB’s official staff Case 5:16-cv-02491-AB-KK Document 33-2 Filed 01/19/17 Page 2 of 3 Page ID #:372 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 – [PROPOSED] ORDER GRANTING DEFENDANT SAN BERNARDINO ASSOCIATED GOVERNMENTS’ MOTION TO DISMISS PLAINTIFF'S COMPLAINT R EE D S M IT H L LP A li m ite d lia bi lit y pa rtn er sh ip fo rm ed in th e St at e of D el aw ar e interpretations are controlling unless “demonstrably irrational”. Ford Motor Co. v. Milhollin, 444 U.S. 555, 565 (1980). Here, the CFPB’s interpretation is not demonstrably irrational. California law expressly defines the PACE assessments as assessments. Cal. Sts. & High. Code § 5898.10 (“This chapter provides an alternative procedure for authorizing assessments to finance any work which may be done pursuant to this division”) (emphasis added). Moreover, like property tax assessments, PACE assessments are obligations imposed on the property, not the homeowner, and are collected “in the same manner and at the same time as the general taxes of the city or county on real property.” Cal. Sts. & High. Code § § 5898.12, 5898.30. In addition, the California Constitution prohibits the legislature from authorizing the giving or lending of credit to private persons. Cal. Const. art. XVI, §6. Thus, in enacting PACE legislation, the California legislature must have concluded that PACE assessments do not constitute loans or debt as a matter of law. Accordingly, SANBAG’s Motion to Dismiss is granted, and Plaintiff’s Complaint is dismissed, with prejudice. DATED: _____________. The Honorable André Birotte Jr. Case 5:16-cv-02491-AB-KK Document 33-2 Filed 01/19/17 Page 3 of 3 Page ID #:373