Tilley v. Seterus, Inc. et al

MOTION to Dismiss for Failure to State a Claim

S.D. Cal.July 28, 2016

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 NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S COMPLAINT PURSUANT TO FED. R. CIV. P. 12(B)(6) BY DEFENDANTS SETERUS, INC. AND FEDERAL NATIONAL MORTGAGE ASSOCIATION 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 Abraham J. Colman (SBN 146933) Email: acolman@reedsmith.com Raffi Kassabian (SBN 260358) Email: rkassabian@reedsmith.com REED SMITH LLP 355 South Grand Avenue Suite 2900 Los Angeles, CA 90071-1514 Telephone: +1 213 457 8000 Facsimile: +1 213 457 8080 Attorneys for Defendants Seterus, Inc. and Federal National Mortgage Association. IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA JOHN W. TILLEY, Plaintiff, vs. SETERUS, INC.; FEDERAL NATIONAL MORTGAGE ASSOCIATION; OCWEN LOAN SERVICING, LLC; and DOES 1 through 50, inclusive, Defendants. Case No.: 3:16-cv-01858-LAB-BGS DEFENDANTS’ NOTICE AND MOTION TO DISMISS COMPLAINT Date: October 3, 2016 Time: 11:15 a.m. Place: Courtroom 14A Compl. Filed: June 20, 2016 [Filed concurrently with Defendants’ Memorandum of Points and Authorities in Support of Motion to Dismiss] Honorable Larry Alan Burns Case 3:16-cv-01858-LAB-BGS Document 3 Filed 07/28/16 Page 1 of 2 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 MOTION AND MOTION TO DISMISS PLAINTIFF’S COMPLAINT PURSUANT TO FED. R. CIV. P. 12(B)(6) BY DEFENDANTS SETERUS, INC. AND FEDERAL NATIONAL MORTGAGE ASSOCIATION 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 PLAINTIFF AND HIS ATTORNEY OF RECORD: PLEASE TAKE NOTICE that on October 3, 2016 at 11:15 a.m. in Courtroom 14A of the above-entitled Court, located at 333 West Broadway, Suite 1410, San Diego, CA 92101, Defendants Seterus, Inc. (“Seterus”) and Federal National Mortgage Association (“Fannie Mae”) (together, “Defendants”) will and hereby do move to dismiss the Complaint filed in this action against Defendants by Plaintiff John W. Tilley (“Plaintiff”), and to each claim asserted therein against Defendants. This Motion to Dismiss is brought pursuant to Fed. R. Civ. P., Rule 12(b)(6) for failure to state any claim upon which relief can be granted and for such other relief as this Court may deem just. By this Motion, Defendants seek an Order from the Court granting the following relief: 1. Dismissing Plaintiff’s Complaint in its entirety, with prejudice, because Plaintiff has failed to state a claim against Defendants for which relief may be granted. 2. Entering judgment for the Defendants. 3. Expunging any Lis Pendens recorded on the real property identified as 2466 Skylark Dr., Oceanside, California 92054. Defendants’ Motion is based upon this Notice of Motion, the Memorandum of Points and Authorities attached hereto, the operative Complaint and pleadings on file with the Court in this matter, and any other evidence or oral argument as the Court may consider in connection with this Motion to Dismiss. DATED: July 28, 2016 REED SMITH LLP By: s/ Raffi Kassabian Abraham J. Colman Raffi Kassabian Attorneys for Defendants Seterus, Inc. and Federal National Mortgage Association Case 3:16-cv-01858-LAB-BGS Document 3 Filed 07/28/16 Page 2 of 2 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 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e Abraham J. Colman (SBN 146933) Email: acolman@reedsmith.com Raffi Kassabian (SBN 260358) Email: rkassabian@reedsmith.com REED SMITH LLP 355 South Grand Avenue Suite 2900 Los Angeles, CA 90071-1514 Telephone: +1 213 457 8000 Facsimile: +1 213 457 8080 Attorneys for Defendants Seterus, Inc. and Federal National Mortgage Association. IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA JOHN W. TILLEY, Plaintiff, vs. SETERUS, INC.; FEDERAL NATIONAL MORTGAGE ASSOCIATION; OCWEN LOAN SERVICING, LLC; and DOES 1 through 50, inclusive, Defendants. Case No.: 3:16-cv-01858-LAB-BGS DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS Date: October 3, 2016 Time: 11:15 a.m. Place: Courtroom 14A Compl. Filed: June 20, 2016 [Filed concurrently with Defendants’ Notice and Motion to Dismiss] Honorable Larry Alan Burns Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 1 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e TABLE OF CONTENTS Page I. INTRODUCTION ................................................................................................ 1 II. FACTUAL ALLEGATIONS AND PROCEDURAL HISTORY ....................... 2 III. LEGAL STANDARD .......................................................................................... 4 IV. LEGAL ARGUMENT ......................................................................................... 5 A. Plaintiff Fails to State Any Actionable Claim for HBOR Violations. ....... 5 1. Plaintiff lacks standing to bring a claim under Section 2923.6(a)-(b). ................................................................................... 5 2. Plaintiff fails to state an actionable claim under Section 2924.18. ............................................................................................ 6 3. Plaintiff fails to state an actionable claim under Section 2923.7. ... 7 B. Plaintiff’s UCL Claim Fails Because He Lacks Standing and Alleges No Wrongdoing. ......................................................................................... 7 1. Plaintiff Lacks Standing to Assert a Claim Under the UCL. .......... 7 2. Plaintiff Fails to Allege any Wrongful Conduct. ............................. 8 C. Plaintiff Fails to State an Actionable Claim for Breach of the Implied Covenant. .................................................................................................... 9 1. Plaintiff’s claim fails to the extent that it sounds in contract. ......... 9 2. Plaintiff’s claim fails to the extent that it sounds in tort. ............... 11 D. Plaintiff Fails to State Actionable Claims for Negligence and NIED. .... 12 1. Plaintiff does not sufficiently allege the existence of any duty of care. ................................................................................................ 13 2. Defendants did not breach any duty or cause Plaintiff any damages. ......................................................................................... 15 E. Plaintiff Fails to State an Actionable Claim for Breach of the ECOA. ... 16 F. Plaintiff’s Claims for Declaratory and Injunctive Relief Fail. ................. 17 V. CONCLUSION .................................................................................................. 18 Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 2 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e TABLE OF AUTHORITIES Page(s) Cases 1231 Euclid Homeowners Ass’n v. State Farm Fire & Cas. Co., 135 Cal. App. 4th 1008 (2006) ................................................................................ 10 Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal.App.4th 941 (2014) .............................................................................. 14, 15 Argueta v. JPMorgan Chase Bank, N.A., No. 11-CV-441, 2011 WL 2619060 (E.D. Cal. June 30, 2011) .............................. 14 Armstrong v. Chevy Chase Bank, FSB, 2012 WL 4747165 (N.D. Ca. Oct. 3, 2012) ............................................................ 14 Ashcroft v. Iqbal, 556 U.S. 662 (2009)..................................................................................... 4, 6, 7, 15 Auerbach v. Great W. Bank, 74 Cal. App. 4th 1172 (1999) .................................................................................. 16 Balistreri v. Pacifica Police Dep’t., 901 F.2d 696 (9th Cir. 1988) ..................................................................................... 4 Batt v. City & Council of San Francisco, 155 Cal. App. 4th 65 (2007) .................................................................................... 17 Becker v. Bank of New York Mellon, 2016 WL 2743497 (E.D. Cal. May 11, 2016) ......................................................... 10 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)............................................................................................... 4, 5 Biakanja v. Irving, 49 Cal.2d 647 (1958) ............................................................................................... 14 Brittain v. IndyMac Bank FSB, No. C-09-2953 SC, 2009 WL 2997394 (N.D. Cal. Sept. 16, 2009) ................. 17, 18 Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163 (1999) ............................................................................................... 8 Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 3 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e Chabner v. United Omaha Life Ins. Co., 225 F.3d 1042 (9th Cir. 2000) ................................................................................... 8 City of Cotati v. Cashman, 29 Cal. 4th 69 (2002) ............................................................................................... 18 Cnty. of Del Norte v. City of Crescent City, 71 Cal. App. 4th 965 (1999) .................................................................................... 17 Coppes v. Wachovia Mortg. Corp., No. 2:10-cv-01689, 2011 WL 1402878 (E.D. Cal. Apr. 13, 2011) ....................... 14 DeLeon v. Wells Fargo Bank, N.A., No. 10-CV-01390, 2010 WL 4285006 (N.D. Cal. Oct. 22, 2010) ........................ 14 Epstein v. Wash. Energy Co., 83 F.3d 1136 (9th Cir. 1996) ..................................................................................... 5 Ess v. Eskaton Properties, Inc., 97 Cal. App. 4th 120 (2002) .................................................................................... 13 Gaitan v. MERS, 2009 WL 3244729 (C.D. Cal. 2009) ......................................................................... 8 Guz v. Bechtel Nat’l, Inc., 24 Cal. 4th 317 (2000) ............................................................................................... 9 Hafiz v. Greenpoint Mortg. Funding, No. C 09-01729, 2009 WL 2137393 (N.D. Cal. Jul. 15, 2009) .............................. 17 Khoury v. Maly’s of California, 14 Cal. App. 4th 612 (1993) ...................................................................................... 8 Lueras v. BAC Home Loans Servicing, LP, 221 Cal.App.4th 49 (2013) ...................................................................................... 13 Martone v. Burgess, No. 08-2379, 2008 WL 3916022 (N.D. Cal. Aug. 25, 2008) ............................ 17, 18 McCann v. Lucky Money, Inc., 129 Cal. App. 4th 1382 (2005) ................................................................................ 13 McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784 (2008) ........................................................................ 10 Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 4 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e Merrill v. Navegar, Inc., 26 Cal. 4th 465 (2001) ............................................................................................. 13 Nymark v. Heart Fed. Sav. & Loan Ass’n, 231 Cal. App. 3d 1089 (1991) ..................................................................... 11, 13, 14 Ottolini v. Bank of Amer., N.A., No. 11-CV- 2011, WL 3652501 (N.D. Cal. Aug. 19, 2011) ................................... 14 Pantoja v. Countrywide Home Loans, Inc., 640 F.Supp. 2d 1177 (N.D. Cal. 2009) ...................................................................... 5 Pasadena Live, LLC v. City of Pasadena, 114 Cal. App. 4th 1089 (2004) .................................................................................. 9 Peter W. v. San Francisco Unified School Dist., 60 Cal. App. 3d 814 (1976) ..................................................................................... 13 Premo v. Grigg, 237 Cal. App. 2d 192 (1965) ............................................................................. 13, 14 R&B Auto Ctr., Inc. v. Farmers Group, Inc., 140 Cal. App. 4th 327 (2006) .................................................................................... 8 Ragland v. U.S. Bank Nat. Assn., 209 Cal. App. 4d 182, 207 (2012) ........................................................................... 14 Ragland v. U.S. Bank National Assn., 209 Cal.App.4th 182 (2012) .................................................................................... 16 Ratcliff Architects v. Vanir Constr. Mgmt., 88 Cal. App. 4th 595 (2001) .............................................................................. 17, 18 Reynoso v. Paul Fin., LLC, 2009 WL 3833298 (N.D. Cal. Nov. 16, 2009) ........................................................ 13 Scripps Clinic v. Super. Ct., 108 Cal. App. 4th 917 (2003) .................................................................................... 8 Sullivan v. JPMorgan Chase Bank, N.A., 725 F. Supp .2d 1087, 1094 (E.D. Cal. 2010) (Burrell, J.) ..................................... 14 In re Tobacco II Cases, 46 Cal. 4th at 312 ....................................................................................................... 8 Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 5 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e Valenzuela v. Am. Home Mortg. Inv. Trust 2005-2, 2009 WL 839930 (E.D. Cal. Mar. 30, 2009) ....................................... 11, 12 Wagner v. Benson, 101 Cal. App. 3d 27 (1980) ..................................................................................... 13 Statutes 15 U.S.C. § 1691 ........................................................................................................... 16 15 U.S.C. § 1691(a)(1) .................................................................................................. 17 Cal. Bus. & Prof. Code § 17200 ..................................................................................... 1 Cal. Bus. & Prof. Code § 17204 ..................................................................................... 7 Cal. Civ. Code § 1511 ......................................................................................... 9, 10, 11 Cal. Civ. Code § 1512 ......................................................................................... 9, 10, 11 Cal. Civ. Code § 2923.6 ...................................................................................... 1, 5, 6, 7 Cal. Civ. Code § 2923.6(a) ............................................................................................. 5 Cal. Civ. Code § 2923.6(b) ............................................................................................. 5 Cal. Civ. Code § 2923.7 .......................................................................................... 1, 5, 7 Cal. Civ. Code § 2924.18 ........................................................................................ 1, 5, 6 Cal. Civ. Code § 2924.18(a) ........................................................................................... 6 Cal. Civ. Code § 2924.18(d) ........................................................................................... 6 Cal. Civ. Proc. Code § 1060 ......................................................................................... 17 Other Authorities 1 B.E. Witkin, Summary of California Law, Contracts § 798 (10th ed. 2005) .......................................................................................................................... 9 Fed. R. Civ. P. 8 .............................................................................................................. 4 Fed. R. Civ. P. 8(a)(2) ..................................................................................................... 4 Fed. R. Civ. P. 12(b)(6) .................................................................................................. 4 Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 6 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS I. INTRODUCTION Though Plaintiff John W. Tilley (“Plaintiff”) concedes that he could not remain current on his home mortgage loan; though he does not contest his undisputed default on his loan; and though he concedes that he has never repaid their debt, Plaintiff nonetheless brings his Complaint (“Compl.”) against Defendants Seterus, Inc. (“Seterus”) and Federal National Mortgage Association (“Fannie Mae”) (together, “Defendants”), wherein he alleges a myriad of factually unsupported claims based on alleged violations of the California Homeowners Bill of Rights (“HBOR”). However, this transparent attempt to stall foreclosure proceedings and force Defendants to provide him with a loan modification ignores the reality that Seterus is not required to modify any loan, and that, even if it was, Plaintiff has not alleged any facts showing that Seterus failed to comply with HBOR. In fact, the Complaint fails to sufficiently plead any of the requisite facts necessary to establish that HBOR protections even apply to his modification attempts. Therefore, Plaintiff fails to state any actionable HBOR claim. Since Plaintiff’s Complaint relies entirely upon this failed HBOR claim, each of his remaining claims against Defendants necessarily fail as well. Thus, the Motion should be granted for this reason alone. Regardless, Plaintiff also fails to state any other actionable claim against Defendants because:  The First Cause of Action fails because Plaintiff has no standing to assert a claim for violations of HBOR Section 2923.6, Plaintiff has not sufficiently pled that he submitted a “complete” loan modification application to Nationstar as required to trigger protections under HBOR Section 2924.18, and Plaintiff fails to sufficiently plead that his Single Point of Contact (“SPOC”) violated HBOR Section 2923.7;  Plaintiff lacks standing to bring his Second Cause of Action for violations of the Bus. & Prof. Code section 17200 (“UCL”) and he fails to allege any wrongful conduct; Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 7 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e  Plaintiff’s Third Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing (“Implied Covenant”) fails because Plaintiff does not sufficiently plead the existence of any breach of any contract by Defendants, or any duty giving rise to a claim for tortious breach;  Plaintiff’s Fourth Cause of Action for Negligence and Fifth Cause of Action for Negligent Infliction of Emotional Distress (“NIED”) do not allege the existence of a duty owed by Defendants, much less a breach or resulting damages;  Plaintiff’s Sixth Cause of Action fails because Plaintiff fails to plead that he is part of class protected by the federal Equal Credit Opportunity Act (“ECOA”); and  Plaintiff is not entitled to the Declaratory or Injunctive Relief he seeks in the Seventh and Eighth Causes of Action, respectively, because he fails to sufficiently allege the existence of an actual controversy or any material violation of HBOR Accordingly, Defendants respectfully request that this Court grant the Motion and dismiss the Complaint in its entirety with prejudice. Judgment should be entered for Seterus and Fannie Mae, and any lis pendens on the incident real property should be expunged. II. FACTUAL ALLEGATIONS AND PROCEDURAL HISTORY On July 27, 2005, Plaintiff obtained a $225,000.00 mortgage loan (“Note”) secured by a Deed of Trust (“DOT”)1 recorded on the real property located at 2466 Skylark Dr., Oceanside, California 92054 (the “Property”). Compl. ¶¶ 1, 12. The DOT identifies non-party American Brokers Conduit (“ABC”) as the lender, and non- party Old Republic Title Company (“Old Republic”) as the trustee. Id. ¶ 12. On May 28, 2009 all beneficial interest in the DOT to was transferred to ABC via an Assignment recorded on the Property. See Compl. ¶ 14. Thereafter, ABC assigned all of its interest in the DOT to Ocwen on December 20, 2013. See Compl. ¶ 19. On May 20, 2015, Ocwen’s interest in the DOT was allegedly assigned to Fannie Mae. See Compl. ¶ 28. Plaintiff also alleges that Ocwen is the former servicer of the Loan, 1 Defendants will reference the Note and the DOT together as “the Loan.” Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 8 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e and that it transferred servicing rights to Seterus at some unspecified time. See Compl. ¶¶ 15, 22. Plaintiff concedes that, because of “financial hardship as a result of the ongoing recession,” he contacted Ocwen “to explore any and all available options to get caught up with his mortgage payments.” Compl. ¶15. Notably, Plaintiff does not allege when this contact occurred. He contends, however, that he stopped making Loan payments so that he could acquire a modification. Id. ¶ 16. While Plaintiff alleges that he ultimately accepted a loan modification from Ocwen [id. ¶¶ 18, 20], he does not allege when this transaction occurred, nor does he attach a copy of the purported loan modification agreement. Nonetheless, he alleges that Ocwen rejected Plaintiff’s Loan payments and transferred servicing rights to Seterus. Id. ¶¶ 20-22. Plaintiff does not allege when any of his contact with Ocwen occurred. Similarly, Plaintiff does not specify when any of his ensuing contact with Seterus occurred. Instead, Plaintiff vaguely alleges that he “immediately” contacted Seterus about the Loan, at which time he was allegedly informed that “he had no other alternative but to reapply for a modification.” Compl. ¶ 23. He does not specify when, but he alleges that he submitted a loan modification application to Seterus. Id. ¶ 24. The purported timeline of Plaintiff’s modification attempts remains murky, for though Plaintiff alleges that “Seterus greatly delayed Plaintiff’s modification review,” thereby preventing him from reinstating the Loan [id. ¶ 31], he does not allege when his modification attempts with Seterus began and ended. Similarly, though Plaintiff contends that his SPOC was “uncommunicative” during the modification process [id. ¶ 30], Plaintiff nonetheless concedes that he spoke to representatives about his modification [id. ¶ 29] during its pendency; that he was advised that his application was “incomplete for missing documents [id. ¶ 26],” and, ultimately, that his modification application was denied [id. ¶ 34]. With Plaintiff unable to cure his default, the Notice of Default and Election to Sell Under Deed of Trust (“NOD”) was recorded on the Property on December 2, Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 9 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e 2015. See Compl. ¶ 32. Thus, Plaintiff alleges that Seterus “dual tracked” the Property. Though Plaintiff concedes that Seterus: (1) advised him “he had no alternative but to reapply for a modification [id.¶23];” and (2) denied his modification application [id. ¶ 34], he nonetheless alleges that Defendants failed to review his financial situation or advise him of loss mitigation options before recording the NOD. Id. ¶ 36. Regardless, Plaintiff does not allege that he has ever sought any other foreclosure avoidance, nor has does he allege that he either has repaid his debt or come current on the Loan. See Compl., generally. Consequently, Notice of Trustee’s Sale (“NTS”) was recorded on the Property on May 26, 2016. See Compl. ¶ 35. Nevertheless, to date, no foreclosure sale has taken place. III. LEGAL STANDARD A motion to dismiss brought pursuant to Rule 12(b)(6) tests the legal sufficiency of the complaint to determine whether there is a “lack of cognizable legal theory,” or “the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t., 901 F.2d 696, 699 (9th Cir. 1988). Rule 8(a)(2) requires that a pleading stating a claim for relief contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. Proc. 8. The function of this pleading requirement is to “give the defendant fair notice of what the ... claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of her ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. A complaint does not “suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557). “Factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. “All allegations of material fact are taken as true and construed in the light most favorable to plaintiff. Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 10 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e However, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim.” Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996); see also Twombly, 550 U.S. at 555. IV. LEGAL ARGUMENT A. Plaintiff Fails to State Any Actionable Claim for HBOR Violations. Plaintiff alleges that Defendants violated HBOR - specifically, Civil Code sections 2923.6 (“Section 2923.6”); 2924.18 (“Section 2924.18”); and 2923.7 (“Section 2923.7”) because Seterus allegedly failed to provide him with a “’meaningful’ opportunity to be considered for any and all options available to avoid foreclosure,” or “a single point of contact” with knowledge of the Loan “and direct access to decision makers.” See Compl. ¶¶ 43-52. However, Plaintiff fails to sufficiently allege facts: (1) establishing that HBOR applies to his Loan; (2) suggesting that his modification application was “complete” as defined by the statute; or (3) any other facts necessary to state their myriad HBOR claims. The First Cause of Action should be dismissed with prejudice. 1. Plaintiff lacks standing to bring a claim under Section 2923.6(a)-(b). First, Plaintiff alleges that Defendants violated a purported obligation under Sections 2923.6(a)-(b) to “act in the best interests of all parties to the loan pool or investors in the pooling and servicing agreement if it agrees to or implements a loan modification or workout plan….” Compl. ¶ 45. However, Plaintiff has no standing to bring this claim. On the contrary, Section 2923.6 “does not create a cause of action for Plaintiff[s].” See Pantoja v. Countrywide Home Loans, Inc., 640 F.Supp. 2d 1177, 1187-88 (N.D. Cal. 2009). Indeed, Section 2923.6(a) “applies only to servicers and parties in a loan pool,” and Section 2923.6(b) “does not impose any duty on [lenders or servicers].” Id. at 1188. Since Seterus “do[es] not owe Plaintiff a statutory duty under this section, Plaintiff has no cause of action.” Id. Accordingly, this Court should dismiss Plaintiff’s HBOR claim to the extent it relies on Sections 2923.6(a)- (b). See, e.g., Compl. ¶¶ 45-46. Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 11 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e 2. Plaintiff fails to state an actionable claim under Section 2924.18. Second, Plaintiff contends that Defendants violated Section 2924.18 by “commencing or continuing the foreclosure process” without first “offering Plaintiff any assistance regarding how to avoid foreclosure.” See Compl. ¶¶ 47-48. However, Plaintiff admits that, before the NOD was recorded, Seterus had already informed him that “he had no other alternative but to reapply for a modification.” See Compl. ¶ 23. Further, Section 2924.18 is only applicable once “a borrower submits a complete application for a first lien loan modification….” See Cal. Civ. Code § 2924.18(a). Notably, Section 2924.18(d) states that “an application shall be deemed ‘complete’ when a borrower has supplied the mortgage servicer with all documents required by the mortgage servicer within the reasonable timeframes specified by the mortgage servicer.” Id. § 2923.6(h) (emphasis added). Though Plaintiff alleges that he resubmitted “all requested documents into Seterus and continued to await a resolution [Compl. ¶ 27],” Plaintiff does not sufficiently allege when this response to Seterus’s request for missing modification application documents occurred. Indeed, Plaintiff alleges that the NOD was recorded “while he was under loan modification review [id. ¶ 33],” but he does not allege whether his modification application was complete at that time. On the other hand, he concedes that he “received notification that he had been denied a loan modification” before the NTS was recorded on the Property. See id. ¶¶ 34-35. Since Plaintiff has not sufficiently alleged the timing of events in the modification process, he has not sufficiently pled that Seterus “commenced” or “continued” the foreclosure process without: (1) informing him that he had no other alternative but to reapply for modification; and (2) denied his modification. Accordingly, Plaintiff’s legal conclusion that Seterus “dual tracked” him into foreclosure is unfounded. This Court need not accept such vague, conclusory, and “‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal, 556 U.S. 662, 678 (quoting Twombly, 550 U.S. at 557). This Court should dismiss Plaintiff’s HBOR claim to the extent it relies on Section 2924.18. See, e.g., Compl. ¶¶47-49. Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 12 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e 3. Plaintiff fails to state an actionable claim under Section 2923.7. Finally, Plaintiff similarly fails to state a claim for violation of Section 2923.7. See Compl. ¶¶ 29-30; 50-51. Indeed, Plaintiff merely alleges that his SPOC representatives “failed to offer adequate assistance to Plaintiff including further instructions and status updates regarding an application for assistance.” Id. ¶ 51. This Court need not accept such vague, conclusory, and “‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal, 556 U.S. 662, 678 (quoting Twombly, 550 U.S. at 557). Indeed, the vague “facts” alleged in support of these claim are inadequate. See, e.g., Compl. ¶ 23 (admitting that Seterus informed him that he had no other alternative but to reapply for a modification); ¶ 25 (vaguely stating that he “reach[ed] out to Seterus for status updates”); ¶ 26 (admitting that Seterus informed him that his application was incomplete); ¶ 29 (vaguely claiming that he received “conflicting answers to questions and inaccurate status updates”); and ¶ 34 (admitting that Plaintiff “received notification that he had been denied a loan modification.”). This Court should dismiss the First Cause of Action in its entirety with prejudice. B. Plaintiff’s UCL Claim Fails Because He Lacks Standing and Alleges No Wrongdoing. Plaintiff’s Second Cause of Action for violation of the UCL is based on the same flawed theory that Defendants violated HBOR, making the hollow claim that allegations related to his attempt to modify his Loan somehow apply to the public at large. Compl. ¶¶ 56-57 (basing UCL claim on his failed Section 2923.6 HBOR claim). However, Plaintiff not only lacks standing to bring this claim, he fails to support it with any facts. His UCL claim should be dismissed with prejudice. 1. Plaintiff Lacks Standing to Assert a Claim Under the UCL. As a threshold matter, Plaintiff’s UCL claim fails as a matter of law because he does not assert facts showing that he has standing to bring the claim. To have standing, Plaintiff must allege that he has “suffered injury in fact and have lost money or property” as a result of the alleged unfair practices by Defendant. Bus. & Prof. Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 13 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e Code §17204; see R&B Auto Ctr., Inc. v. Farmers Group, Inc., 140 Cal. App. 4th 327, 360 (2006). Here, Plaintiff alleges only that he has been charged “foreclosure fees and costs” that he has not paid, and which related to a foreclosure sale that has not taken place. Compl. ¶¶ 58-59. In fact, Plaintiff concedes that he still resides at the Property, even though he does not contest his default. See Compl. ¶¶ 1, 66. Because he lacks standing to assert his UCL claim, Plaintiff fails to state a claim upon which relief may be granted. 2. Plaintiff Fails to Allege any Wrongful Conduct. Plaintiff also fails to allege any wrongful conduct. Under the “unlawful” prong, the UCL incorporates other laws and treats violations of those laws as unlawful business practices independently actionable under state law. Chabner v. United Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir. 2000). Under a “fraud” theory, a plaintiff must show that “members of the public are likely to be ‘deceived’” by the defendant’s practices. In re Tobacco II Cases, 46 Cal. 4th at 312 (citing Kasky v. Nike, Inc., 27 Cal.4th 939, 951 (2002)). “Unfair” conduct in UCL actions must be violative of a public policy “tethered to specific constitutional, statutory, or regulatory provisions.” Scripps Clinic v. Super. Ct., 108 Cal. App. 4th 917, 940 (2003); Cel- Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 185 (1999). Moreover, “A plaintiff alleging unfair business practices [under the UCL] must state with reasonable particularity the facts supporting the statutory elements of the violation.” Khoury v. Maly’s of California, 14 Cal. App. 4th 612, 617 (1993) (emphasis added). Finally, if a plaintiff has not stated a claim for the predicate acts upon which he bases his UCL claim, the UCL claim also must be dismissed. See Gaitan v. MERS, 2009 WL 3244729, at *7 (C.D. Cal. 2009). Here, Plaintiff fails to plead a claim for relief under any of the UCL prongs. As explained herein, all of Plaintiff’s causes of action fail as a matter of law. See Part IV.A-F. Plaintiff’s allegations do not plead facts, let alone specific facts, to prove violation of other laws that would satisfy the “unlawful” prong. Moreover, Plaintiff Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 14 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e fails to sufficiently state that Defendants’ acts and practices are likely to deceive members of the public such that he cannot satisfy the “fraud” prong. Finally, Plaintiff fails to allege that Defendants’ actions violated any public policy, or state any facts in support to satisfy the “unfair” prong. See Compl. ¶ 57 (tying the UCL claim to HBOR) and Part IV.A, supra (establishing the failure of Plaintiff’s HBOR claims). With no predicate act or specific facts to support it, Plaintiff’s UCL claim fails to plead a single instance of “unfair, unlawful or fraudulent” business practices. Accordingly, Plaintiff’s UCL claim should be dismissed in its entirety with prejudice. C. Plaintiff Fails to State an Actionable Claim for Breach of the Implied Covenant. In his Third Cause of Action, Plaintiff alleges that Defendants breached “the covenant of good faith and fair dealing implied in every contract” by “refusing to provide Plaintiff any meaningful assistance and then impairing his ability to get current on [the] Loan….” See Compl. ¶¶ 63-64. Plaintiff further alleges that Defendants somehow “induced” and “coerced” Plaintiff into failing to perform his loan obligations under the Deed of Trust, thereby releasing him from his Loan obligations pursuant to Sections 1511 and 1512. Id. ¶ 67. Thus, he seeks unspecified damages “according to proof at trial.” Id. ¶ 68. Nevertheless, Plaintiff’s allegations are insufficient to support a claim for breach of the Implied Covenant, as he fails to allege the necessary breach of a contractual term by Defendants. 1. Plaintiff’s claim fails to the extent that it sounds in contract. The Implied Covenant ensures that neither party will do anything to deprive the other party of the benefits of the contract. 1 B.E. Witkin, Summary of California Law, Contracts § 798 (10th ed. 2005). Yet, the Implied Covenant is limited to “assuring compliance with the express terms of the contract.” Pasadena Live, LLC v. City of Pasadena, 114 Cal. App. 4th 1089, 1093-94 (2004) (emphasis added). It does not impose additional obligations on the parties. Guz v. Bechtel Nat’l, Inc., 24 Cal. 4th 317, 349-50 (2000). Moreover, “the implied covenant is a supplement to an existing Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 15 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e contract, and . . . does not require parties to negotiate in good faith prior to any agreement.” McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784, 799 (2008). Thus, there can be no breach of the Implied Covenant where there is no breach of contract. 1231 Euclid Homeowners Ass’n v. State Farm Fire & Cas. Co., 135 Cal. App. 4th 1008 (2006). Here, Plaintiff fails to identify any conduct by Defendants that could be construed as a violation of the Implied Covenant. See generally Complaint. Specifically, Plaintiff does not identify an actual breach of any contractual term from any alleged agreement by Defendants, nor does he allege any activity by Defendants that deprived him of the benefit of any bargain. Rather, Plaintiff is attempting to place blame on Defendants for his own inevitable breach of the DOT as a result of his failure to make his mortgage payments. See Compl. ¶ 15 (admitting he “began experiencing financial hardship” during the recession) and ¶ 16 (conceding that he deliberately fell behind on his Loan payments). Moreover, Plaintiff cannot allege Defendants breached the implied covenant by failing to give him a loan modification because Defendants had no contractual duty to provide him with loss mitigation assistance2. Simply put, because Plaintiff has not alleged the breach of any contract by Defendants, there can be no breach of the implied covenant of good faith and fair dealing. 1231 Euclid Homeowners Ass’n, 135 Cal. App. 4th 1008, 1020. Furthermore, Plaintiff cannot invoke Sections 1511 or 1512 because these statutes “simply codify the common law defenses to failure to perform under a contractual obligation, and would only conceivably apply if defendants actually prevented plaintiff from meeting his contractual obligations” in a manner that “render[ed] performance impossible.” See Becker v. Bank of New York Mellon, 2016 WL 2743497, at *5 (E.D. Cal. May 11, 2016) (finding a similar claim “unavailing” and a theory that “the loan and its security were extinguished” as being “plainly without merit.”). Here, while Plaintiff 2 Instead, Plaintiff merely points towards “Defendant’s [sic] negligence in responding to [his] requests for assistance” to support his claim. Id. ¶ 66. However, Plaintiff has not adequately pled negligence; since Defendants owed Plaintiff no duty. See Part IV.D, infra. Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 16 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e contends that Defendants “coerced Plaintiff into missing payments” during the loan modification review period [Compl. ¶ 67], he does not support this allegation with any facts. On the contrary, while Plaintiff pleads that Ocwen advised him to stop making payments so that he would qualify for a modification [id. ¶ 16], he makes no such allegation against Seterus or Fannie Mae. His claim fails. Regardless, even if Defendants instructed Plaintiff to skip payments (and they did not), Plaintiff has not pled any facts indicating that Defendants made it “impossible” for Plaintiff to make the payments he was obligated to make under the Deed of Trust. For one thing, Plaintiff does not allege why he has not brought the Loan current (thereby avoiding a foreclosure sale that has not yet occurred) since Seterus denied his modification. See, e.g., id. ¶ 33. On the other hand, Plaintiff cannot bring a claim under Sections 1511-12 that Defendants made it “impossible” for him to modify loan payments when he cannot allege that the DOT contractually requires that Defendant modify the Loan, and when Plaintiff admits that Seterus denied his modification application. Id. Accordingly, the Third Cause of Action fails to state an actionable claim for breach of the Implied Covenant. It should be dismissed in its entirety with prejudice. 2. Plaintiff’s claim fails to the extent that it sounds in tort. Alternatively, to the extent that Plaintiff’s Implied Covenant claim sounds it tort, it also fails to state an actionable claim against Defendants. See, e.g., Compl. ¶ 66 (alleging that “Defendants’ negligence” led to a breach). “Indeed, “[g]enerally, no cause of action for the tortious breach of the implied covenant of good faith and fair dealing can arise unless the parties are in a ‘special relationship’ with ‘fiduciary characteristics.’” Valenzuela v. Am. Home Mortg. Inv. Trust 2005-2, 2009 WL 839930, at *65 (E.D. Cal. Mar. 30, 2009). However, “a commercial loan transaction does not create such a special relationship.” Id. at *78; see also Nymark v. Heart Fed. Sav. & Loan Ass’n, 231 Cal. App. 3d 1089, 1093 n.1 (1991) (“[t]he relationship between a lending institution and its borrower-client is not fiduciary in nature”). See also Part IV.D, infra. Accordingly, an Implied Covenant tort action is not available to Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 17 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e parties in an ordinary commercial relationship, where the parties only deal at arms’ length. Valenzuela, 2009 WL 839930, at *77-78 (“A claim for tortious breach of contract does not lie under California law in the absence of a special relationship with fiduciary characteristics. California case law is clear that a commercial loan transaction does not create such a special relationship.”). This Court should dismiss the Third Cause of Action in its entirety with prejudice. D. Plaintiff Fails to State Actionable Claims for Negligence and NIED. In his Fourth Cause of Action for negligence, Plaintiff alleges that Defendants negligently reviewed Plaintiff for foreclosure prevention assistance. See, e.g., Compl. ¶¶ 78-79. Plaintiff contends that Defendants breached a duty of care to “exercise reasonable care and skill to maintain proper and accurate loan records and to discharge and fulfill the other incidents attendant to the maintenance, accounting, and servicing of loan records [id. ¶ 71],” which they allegedly breached by “signing inaccurate and invalid written instruments concerning [the Loan], falsifying loan documents, misleading Plaintiff, and promising there would be no foreclosure attempt of the [Property] [id. ¶ 80].” Thus - though no foreclosure has taken place - Plaintiff alleges that he has experienced “monetary loss, severe emotional stress at the loss [the Property], loss of home equity, and more.” Id. ¶ 83. Similarly, in his Fifth Cause of Action for NIED, Plaintiff brings the conclusory allegation that, “Defendants negligently inflicted emotional distress upon him.” Compl. ¶ 86. In an effort to bolster his boilerplate claim, he also concludes that he “has directly suffered serious emotional distress” as a result of Defendants’ purportedly wrongful foreclosure of the Property. Compl. ¶¶ 88-89. However, each claim fails to state because Plaintiff does not sufficiently allege facts imposing a duty of care on Defendants, let alone breach or damages. A negligence cause of action has four requisite elements: “(1) the duty of the defendant with respect to the injured person’s injury; (2) the violation of that duty; (3) the causal relation between the defendant’s conduct and the injury suffered; and (4) the Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 18 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e plaintiff’s loss, i.e., damages.” Premo v. Grigg, 237 Cal. App. 2d 192, 195 (1965). Plaintiffs must allege the existence of a legal duty to state a cause of action for negligence. Merrill v. Navegar, Inc., 26 Cal. 4th 465, 500 (2001). Accordingly, a complaint that lacks facts to show that a duty of care was owed is fatally defective. Peter W. v. San Francisco Unified School Dist., 60 Cal. App. 3d 814, 820 (1976). Notably, negligent infliction of emotional distress is not an independent tort; “it is the tort of negligence to which the traditional elements of duty, breach of duty, causation, and damages apply.” Ess v. Eskaton Properties, Inc., 97 Cal. App. 4th 120, 126 (2002). Thus, a plaintiff must allege a valid legal duty of care to support his claim as to each defendant. See Reynoso v. Paul Fin., LLC, Slip Copy, 2009 WL 3833298, at *12 (N.D. Cal. Nov. 16, 2009). 1. Plaintiff does not sufficiently allege the existence of any duty of care. Plaintiff’s negligence claims both fail on their face because Plaintiff does not allege facts demonstrating the existence of a duty of care owed by Defendants. As a general rule, a lending institution does not owe any duty of care to a borrower where the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money. Nymark v. Heart Fed. Sav. & Loan Ass’n, 231 Cal. App. 3d 1089, 1095-96 (1991). 3 Neither do trustees owe a duty of care under a deed of trust. McCann v. Lucky Money, Inc., 129 Cal. App. 4th 1382, 1398 (2005) (“Just as a panda is not a true bear, a trustee of a deed of trust is not a true trustee.”). Similarly, an overwhelming amount of courts have found that loan modification activities are within a bank’s conventional role as mere lender of money and therefore do not give rise to any duty. See Lueras v. BAC Home Loans Servicing, LP, 221 Cal.App.4th 49, 67 (2013) (“We conclude a loan modification is the 3 See also Wagner v. Benson, 101 Cal. App. 3d 27, 35 (1980) (finding that lender owes no duty of care to borrower in connection with the approval of the loan absent some suggestion that the lender was actively involved in the business venture beyond merely lending money). Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 19 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e renegotiation of loan terms, which falls squarely within the scope of a lending institution’s conventional role as a lender of money.”). 4 Though Plaintiff concedes that a duty of care does not usually exist in a loan servicing context [Compl. ¶ 78], he nonetheless contends that a duty arose “when Plaintiff and Defendants were negotiating foreclosure options [id. ¶ 76].” Pointing towards the 6- factor test established in Biakanja v. Irving, 49 Cal.2d 647, 650 (1958), 5 Plaintiff contends that the Biankanja factors weigh in favor of imposing a duty of care on Defendants in this instance. See Compl. ¶¶ 73-74, 78-79. However, “[w]hether a duty of care exists is a question of law to be determined on a case-by-case basis.” Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal.App.4th 941 (2014). Unlike Alvarez, the Biankanja factors do not weigh in favor of imposing a duty of care on Defendants here. First, Plaintiff’s injury is uncertain-the Property has not been sold. Moreover, Plaintiff’s conclusory allegations of damages are not sufficient, as he does not claim the loss of a single dollar due to Defendants’ alleged actions in allegedly denying Plaintiff modification review rather than his own uncontested default. See Premo v. Grigg, 237 Cal. App. 2d 192, 195 (1965). Second, there is no “close connection” between Defendants’ alleged conduct and any injury allegedly suffered by Plaintiff. Plaintiff contends that had Defendants acted differently, Plaintiff would have “known the true facts” that he would not 4 See, also, Ragland v. U.S. Bank Nat. Assn., 209 Cal. App. 4d 182, 207 (2012); see also Armstrong v. Chevy Chase Bank, FSB, 2012 WL 4747165 (N.D. Ca. Oct. 3, 2012); See, e.g., Ottolini v. Bank of Amer., N.A., No. 11-CV- 2011, WL 3652501, at *7 (N.D. Cal. Aug. 19, 2011); see also Argueta v. JPMorgan Chase Bank, N.A., No. 11-CV-441, 2011 WL 2619060, at *5 (E.D. Cal. June 30, 2011); DeLeon v. Wells Fargo Bank, N.A., No. 10-CV- 01390, 2010 WL 4285006, at *4 (N.D. Cal. Oct. 22, 2010); Sullivan v. JPMorgan Chase Bank, N.A., 725 F. Supp .2d 1087, 1094 (E.D. Cal. 2010) (Burrell, J.); Coppes v. Wachovia Mortg. Corp., No. 2:10-cv-01689, 2011 WL 1402878, at *7 (E.D. Cal. Apr. 13, 2011). 5 The six-part test, as established by Biankanja consists of the following non-exhaustive factors: [1] the extent to which the transaction was intended to affect the Plaintiff, [2] the foreseeability of harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant’s conduct and the injury suffered, [5] the moral blame attached to the defendant’s conduct, and [6] the policy of preventing harm. Nymark v. Heart Fed. Sav. & Loan Assn., 231 Cal. App. 3d, 1089, 1098 (Ct. App. 1991). Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 20 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e receive a modification and “pursued other available legal remedies to protect their [sic] interests.” Compl. ¶ 82. However, this conclusory allegation is not supported by anything other than Plaintiff’s bare assertions. Plaintiff’s allegations demonstrate the modification was necessary due to Plaintiff’s inability to make his Loan payments. Compare id. ¶ 15 (“Plaintiff…began experiencing financial hardship…[and contacted Ocwen] to explore any and all available options to get caught up with his mortgage payments.”) with Alvarez, 228 Cal.App.4th 941, 946 (2014), citing Lueras, supra, (“If the modification was necessary due to the borrower’s inability to repay the loan, the borrower’s harm, suffered from the denial of a loan modification, would not be closely connected to the lender’s conduct.”). Third, Plaintiff does not allege any facts suggesting that Defendants created Plaintiff’s need for a modification. Compare id. ¶ 14 (“Plaintiff began experience financial hardship as a result of the ongoing recession.”) with Alvarez, 228 Cal.App.4th 941, 946 (2014), citing Lueras, supra, (“If the lender did not place the borrower in a position creating a need for a loan modification, then no moral blame would be attached to the lender’s conduct.”). Thus, Plaintiff’s reliance on the Biankanja factors does not support his claim, and his negligence- based Counts should be dismissed with prejudice. 2. Defendants did not breach any duty or cause Plaintiff any damages. To the extent this Court is inclined to impose a duty of care on Defendants, Plaintiff’s causes of action for negligence and NIED still fail because Plaintiff does sufficiently allege facts demonstrating that Defendants breached any duty. Instead, Plaintiff makes the boilerplate conclusion that Defendants breached their duty by allegedly signing inaccurate written instruments, falsifying loan documents, “misleading Plaintiff,” and “promising there would be no foreclosure attempt on [the Property].” Compl. ¶ 80. However, Plaintiff’s allegations are wholly conclusory and factually unsupported. This Court need not accept such vague, conclusory, and “‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal, 556 U.S. 662, 678 (quoting Twombly, 550 U.S. at 557). In addition, bank advice directly related to loan modification, is within the scope of a conventional role as a lender, and does not Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 21 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e support a lender duty in negligence or NIED. Ragland v. U.S. Bank National Assn., 209 Cal.App.4th 182, 207 (2012). This claim should be dismissed in its entirety with prejudice. Similarly, if Plaintiff adequately alleged a breach - which he does not - his claim nonetheless fails, for he does not allege any damages caused by Defendants. See generally Complaint. For example, Plaintiff has not pled any facts demonstrating that he was qualified to receive and would have received a loan modification had his applications been reviewed as he demands. See generally Complaint. In addition, Plaintiff does not sufficiently plead how the alleged delay in the loan modification process deprived him of the opportunity to seek relief elsewhere, as he does not allege any facts suggesting that Defendants prevented Plaintiff from obtaining a refinance, selling the Property, or seeking any other alternatives. See generally Compl. Plaintiff also fails to plead how he has been damaged by any purported “severe emotional stress” or how he has lost the Property or home equity when the Property has not been sold. Compl. ¶¶ 85. Finally, to the extent Plaintiff alleges that he was damaged by incurring excess arrears and fees (which he does not allege that he ever paid), his claim fails because payments made pursuant to a valid promissory note do not constitute damages. See Auerbach v. Great W. Bank, 74 Cal. App. 4th 1172, 1185 (1999). Altogether, Plaintiff’s negligence-based claims are inadequately pled. This Court should dismiss the Fourth and Fifth Causes of Action in their entirety and with prejudice. E. Plaintiff Fails to State an Actionable Claim for Breach of the ECOA. In the Sixth Cause of Action, Plaintiff alleges that Defendants violated section 1002.9 of the ECOA because they allegedly failed to respond to Plaintiff’s loan modification application within thirty days. See Compl. ¶¶ 92-95. Thus, he seeks statutory and punitive damages. Id.¶ 96. The ECOA, codified at 15 U.S.C. § 1691, et seq., provides that it is “unlawful for any creditor to discriminate against any applicant with respect to any aspect of a credit transaction -- on the basis of race, color, religion, Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 22 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e national origin, sex or marital status, or age.” 15 U.S.C. § 1691(a)(1) 6 . Here, however, Plaintiff does not allege that Defendants discriminated against Plaintiff based on his membership within any protected class. Accordingly, his claim cannot stand. This Court should dismiss the Sixth Cause of Action in its entirety with prejudice. F. Plaintiff’s Claims for Declaratory and Injunctive Relief Fail. Finally, the Seventh Cause of Action for Declaratory Relief [Compl. ¶¶ 98-102] and Eighth Cause of Action for Injunctive Relief [id. ¶¶ 103-107] should both be dismissed with prejudice because both declaratory and injunctive relief are remedies, not independent causes of action. See Batt v. City & Council of San Francisco, 155 Cal. App. 4th 65, 82 (2007) (declaratory relief is a remedy, and not a cause of action), and Martone v. Burgess, No. 08-2379, 2008 WL 3916022, at *4 (N.D. Cal. Aug. 25, 2008) (“[I]njunctive relief is a remedy, not a cause of action, and thus it must be tethered to some independent legal duty owed by the defendant to the plaintiff.”); see also Cnty. of Del Norte v. City of Crescent City, 71 Cal. App. 4th 965, 973 (1999) (“[a] permanent injunction is an equitable remedy, not a cause of action, and thus it is attendant to an underlying cause of action”). Regardless, even if Plaintiff can bring independent claims for declaratory and injunctive relief, such relief is unwarranted. First, declaratory relief is proper only where there exists an “actual controversy relating to the legal rights and duties of the respective parties.” Code Civ. Proc.§ 1060; see also Ratcliff Architects v. Vanir Constr. Mgmt., 88 Cal. App. 4th 595, 607 (2001) (concluding that a claim for declaratory relief must fail as a matter of law because plaintiff failed to state a claim sufficient to recover on any other cause of action); Brittain v. IndyMac Bank FSB, No. C-09-2953 SC, 2009 WL 2997394, at *5 (N.D. Cal. Sept. 16, 2009). Courts emphasize that the “fundamental basis of declaratory relief is the existence of an 6 Additionally, “[t]he ECOA was implemented to ensure that applicants have an equal opportunity to obtain credit.” Hafiz v. Greenpoint Mortg. Funding, No. C 09-01729, 2009 WL 2137393, at *4 (N.D. Cal. Jul. 15, 2009) (emph. in original). Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 23 of 24 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 - DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS R E E D S M IT H L L P A l im it ed l ia b il it y p ar tn er sh ip f o rm ed i n t h e S ta te o f D el aw ar e actual, present controversy over a proper subject.” City of Cotati v. Cashman, 29 Cal. 4th 69, 79 (2002). When a declaratory relief action merely duplicates other untenable causes of action, it should be dismissed at the pleading stage. See Ratcliff Architects, 99 Cal. App. 4th at 607; Brittain, 2009 WL 2997394, at *5. Here, for all of the reasons discussed herein, Plaintiff fails to allege a viable claim and cannot allege an “actual controversy.” See, e.g., Compl ¶ 100 (repeating HBOR claim)]. His claim for declaratory relief should be dismissed at the pleadings stage. Meanwhile, since Plaintiff fails to state any claim upon which relief may be granted anywhere in the Complaint [see Part IV.A-E, supra], he fails to “tether” his claim for injunctive relief to “some independent legal duty owed by [Defendants] to [Plaintiff].” Martone, No. 08-2379, 2008 WL 3916022, at *4. This Court should dismiss the Seventh and Eighth Causes of Action in their entirety and with prejudice. V. CONCLUSION For the foregoing reasons, Defendants respectfully request that this Court grant the Motion and dismiss Complaint in its entirety with prejudice. Judgment should be entered for Seterus and Fannie Mae, and any Lis Pendens on the incident real property should be expunged. DATED: July 28, 2016 REED SMITH LLP By: s/ Raffi Kassabian Abraham J. Colman Raffi Kassabian Attorneys for Defendants Seterus, Inc. and Federal National Mortgage Association Case 3:16-cv-01858-LAB-BGS Document 3-1 Filed 07/28/16 Page 24 of 24 Case 3:16-cv-01858-LAB-BGS Document 3-2 Filed 07/28/16 Page 1 of 1