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dismissing negligent misrepresentation claim where plaintiff failed to plead any facts indicating that "defendant went beyond the typical role of a money lender"
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CASE NO. ED CV 11-00800 MMM (DTBx)
01-11-2012
PHILIP SETTLE; ELISABETH SETTLE, as individuals; Plaintiffs, v. WORLD SAVINGS BANK, F.S.B., WACHOVIA MORTGAGE, F.S.B., WELLS FARGO BANK, N.A., and DOES 1-10, inclusive, Defendants.
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS
On March 30, 2011, Philip and Elisabeth Settle ("the Settles") filed this action in San Bernardino Superior Court. On May 20, 2010, Wells Fargo Bank, N.A.("Wells Fargo") removed the action, invoking the court's diversity jurisdiction. Wells Fargo moved to dismiss the complaint on June 6, 2011. Plaintiffs opposed defendant's motion on August 27, 2011, and on August 31, 2011, defendant filed a reply.
Notice of Removal ("Removal"), Docket No. 1 (May 20, 2011), Exh. A ("Complaint").
According to defendant's motion to dismiss, Wells Fargo Bank, N.A. is the successor by merger with Wells Fargo Bank Southwest N.A., formerly known as Wachovia Mortgage F.S.B., formerly known as World Savings Bank F.S.B. (See Defendant's Motion to Dismiss, Docket No. 6 (June 6, 2011) ("Motion") at 2; Request for Judicial Notice by Defendant In Support of Motion to Dismiss ("RJN"), Exh. E.) Although the initial complaint listed World Savings Bank, F.S.B., Wachovia Mortgage, F.S.B., and Wells Fargo Bank, N.A. as separate defendants, the court treats them as a single party - Wells Fargo.
Removal at 2.
Motion.
Plaintiffs' Opposition Motion to Motion to Dismiss Complaint by Defendant ("Opp."), Docket No. 13 (Aug. 27, 2011).
Reply In Support of Motion to Dismiss Complaint by Defendant ("Reply"), Docket No. 14 (Aug. 31, 2011).
I. FACTUAL BACKGROUND
On December 15, 2007, the Settles obtained a mortgage loan from World Savings Bank, F.S.B. ("World Savings"); to effectuate the transaction, the Settles executed a note and deed of trust on property in Rancho Cucamonga. Wells Fargo is the successor to World Savings, and Wachovia Mortgage F.S.B. ("Wachovia") has been the servicer of the loan. In or about August 2009, the Settles applied for a loan modification from Wachovia's Loss Mitigation Department because they had encountered financial difficulties. In November 2009, Wachovia informed the Settles that their loan modification was "under review" and "would be completed in the near future." The Settles allege that they were not placed in a Trial Payment Plan under the "Making Homes Affordable Program," and that they continued to make mortgage payments.
Complaint, ¶ 9.
Id.
Id. ¶ 10.
Id. ¶¶ 11-13.
Id. ¶ 14.
Id.
The Settles contend that between approximately December 24, 2009 and March 11, 2010, they contacted Wachovia numerous times, and spoke with several representatives about incomplete or missing documents and the status of their loan modification application. They assert that some of the allegedly missing documents were already in Wachovia's possession, although they needed to submit others to complete their file. They also assert that throughout this period, they continued to make payments on their mortgage loan.
Id. ¶¶ 15-22.
The Settles allege that "[b]y June 16, 2010," they called Wachovia and spoke with April Cadena, who stated that all documentation for the loan modification was complete except for a final appraisal; she purportedly told the Settles that the appraisal had been ordered on approximately June 8, 2010, and that it was scheduled to be completed in one week. On or about July 2, 2010, the Settles again called Wachovia and were told by Evelyn Fernandez, a Wachovia representative, that the appraisal had been completed on June 22, 2010, and that the file was going to be sent to the underwriting department for review.
Id. ¶¶ 23-24.
Id. ¶ 25.
"By July 12, 2010," the Settles were purportedly contacted by Xavier San Miguel, who advised that their file was complete and was currently in a negotiator's possession. The Settles contend that, when they did not hear from Wachovia for more than a month, they called and spoke with Chad Pettif in the Loss Mitigation Department. He allegedly said that the Settles' account was being reviewed by the underwriting department. Given their financial situation, the Settles were no longer able to make timely mortgage payments as of August 2010.
Id. ¶ 26. While the complaint does not identify Mr. San Miguel's business affiliation, he was presumably a Wachovia representative.
Id. ¶ 27.
Id. ¶ 28.
In October 2010, Wachovia informed the Settles that they were not qualified for a loan modification and suggested that they re-apply. In response to the denial, the Settles sent a letter requesting an explanation. In or about November 2010, the Settles purportedly received a letter from Wachovia that did not explain the denial and that identified Wells Fargo as the beneficiary of the mortgage note.
Id. ¶ 29.
Id. ¶ 30.
Id. ¶ 31.
The Settles contend that due to the diminution in value of their home, a modified mortgage payment of approximately 31% of their gross monthly income would have resulted in a positive "net present value," as stated in California Civil Code § 2923.6. They note that a foreclosure, by contrast, would result in a loss for Wells Fargo. The Settles allege that they are still experiencing financial hardship and "are at risk of a Notice of Default."
Id. ¶ 32.
Id. ¶ 33.
They plead five claims: (1) negligent misrepresentation of fact; (2) concealment or suppression of fact; (3) two claims for unlawful, unfair, or fraudulent business acts or practices in violation of Business & Professions Code § 17200 et seq.; and (4) negligence. Wells Fargo seeks dismissal of the complaint under Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiffs filed untimely opposition, to which defendants replied.
Motion to Dismiss Complaint ("MTD"), Docket No. 6 (Jun. 6. 2011).
Opposition to Motion to Dismiss ("Opp."), Docket No. 13 (Aug. 27, 2011); Reply ISO Motion to Dismiss ("Reply"), Docket No. 14 (Aug. 31, 2011).
II. DISCUSSION
A. Plaintiffs' Failure to File Timely Opposition
Local Rule 7-12 provides that "[t]he failure to file any required paper, or the failure to file it within the deadline, may be deemed consent to the granting or denial of the motion." CA CD L.R. 7-12. Plaintiffs filed their opposition to defendant's motion to dismiss on August 27, 2011, five days after the August 22, 2011 deadline set forth in the Local Rules. Plaintiffs' counsel states that the late filing was due to a "mistaken belief that . . . opposition was in fact filed. . . ." Because plaintiffs failed to oppose defendant's motion by the deadline, the court could, under Rule 7-12, grant the motion on this basis alone. Defendant requests that the court disregard the opposition and dismiss the complaint with prejudice due to plaintiffs' untimely filing. The court declines to do so, and exercises its discretion under Local Rule 7-12 to consider the arguments made in the opposition.
Local Rule 7-9 requires that all opposition papers be filed at least 21 days prior to the hearing date. CA CD L.R. 7-9.
Declaration of James R. Galliver in Support of Plaintiffs' Opposition to Defendant's Motion to Dismiss Complain, Docket No. 13 (Aug. 27, 2011), ¶ 3.
Notice of Non-Receipt of Opposition to Motion to Dismiss ("Non-Receipt"), Docket No. 12 (Aug. 26, 2011); Reply at 2.
B. Defendant's Request for Judicial Notice
With its motion to dismiss, Wells Fargo filed a request asking that the court take judicial notice of documents allegedly related to plaintiffs' claims. In deciding a Rule 12(b)(6) motion, the court generally looks only to the face of the complaint and documents attached thereto. Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir. 2002); Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n. 19 (9th Cir. 1990). It may, however, consider documents that are incorporated by reference but not physically attached to the complaint if they are central to plaintiff's claim and no party questions their authenticity. See Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006) (in ruling on a motion to dismiss, "[a] court may consider evidence on which the complaint 'necessarily relies' if: (1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion," citing Branch v. Tunnell, 14 F.3d 449, 453-54 (9th Cir. 1994), overruled on other grounds, Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002)); Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1141 n. 5 (9th Cir. 2003); Chambers v. Time Warner, Inc., 282 F.3d 147, 153 n. 3 (2d Cir. 2002)); see also Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007) ("Review is generally limited to the contents of the complaint, but a court can consider a document on which the complaint relies if the document is central to the plaintiff's claim, and no party questions the authenticity of the document," citing Warren, 328 F.3d at 1141 n. 5); Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) ("If the documents are not physically attached to the complaint, they may be considered if the documents' 'authenticity . . . is not contested' and 'the plaintiff's complaint necessarily relies' on them," citing Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998)); In re Silicon Graphics Inc. Securities Litigation, 183 F.3d 970, 986 (9th Cir. 1999) ("[The incorporation by reference doctrine] permits a district court to consider documents 'whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiff's] pleading,'" quoting Branch, 14 F.3d at 454), abrogated on other grounds, Tellabs, Inc. v. Makor Issues & Rights, 551 U.S. 308,(2007).
The court takes judicial notice of the documents proffered by defendant. The first of these documents is a Deed of Trust dated December 15, 2005, which was signed by plaintiff Elisabeth Settle and recorded in the official records of the San Bernardino County Recorder's Office on December 20, 2005 as Document No. 2005-0961473. "Judicial notice is appropriate for records and 'reports of administrative bodies.'" United States v. 14.02 Acres of Land More or Less in Fresno County, 547 F.3d 943, 955 (9th Cir. 2008) (quoting Interstate Natural Gas Co. v. Southern California Gas Co., 209 F.2d 380, 385 (9th Cir. 1954)). The Deed of Trust is a document recorded by the San Bernardino County Recorder's Office. Defendant has provided a reference number for the document, showing that it was in fact recorded by the county recorder's office; this demonstrates that the document is a public record. See Fimbres v. Chapel Mortgage Corp., No. 09-CV-0886-IEG (POR), 2009 WL 4163332, *3 (S.D. Cal. Nov. 20, 2009) (taking judicial notice of a deed of trust, notice of default, notice of trustee's sale, assignment of deed of trust, and substitution of trustee as each was a public record); Angulo v. Countrywide Home Loans, Inc., No. 1:09-CV-877-AWI-SMS, 2009 WL 3427179, *3 n. 3 (E.D. Cal. Oct. 26, 2009) ("The Deed of Trust and Notice of Default are matters of public record. As such, this court may consider these foreclosure documents"); Distor v. U.S. Bank NA, No. C 09-02086 SI, 2009 WL 3429700, *2 (N.D. Cal. Oct. 22, 2009) (finding that a deed of trust, notice of default and election to sell under deed of trust, and notice of trustee's sale were matters of public record and thus proper subjects of judicial notice); Hutson v. American Home Mortgage Servicing, Inc., No. C 09-1951 PJH, 2009 WL 3353312, *3-4 (N.D. Cal. Oct. 16, 2009) (taking judicial notice of a deed of trust, notice of default and election to sell under deed of trust, notice of trustee's sale, and trustee's deed of sale, as the documents had been recorded by the Contra Costa County Recorder's Office); Heuslein v. Chase Bank U.S.A., N.A., No. 09-CV-1292-IEG (RBB), 2009 WL 3157484, *3 (S.D. Cal. Sept. 24, 2009) (taking judicial notice of a deed of trust, notice of default and election to sell under deed of trust, and notice of trustee's sale that had been recorded in the San Diego County Recorder's Office); Velazquez v. GMAC Mortgage Corp., 605 F.Supp.2d 1049, 1057-58 (C.D. Cal. 2008) (taking judicial notice of documents recorded by the Los Angeles County Recorder's Office, including deeds of trust).
RJN, Exh. A.
Defendant also requests that the court take judicial notice of the following documents: (1) a Certificate of Corporate Existence dated April 21, 2006, from the Office of Thrift Supervision, Department of the Treasury ("OTS"), stating that World Savings Bank, FSB was chartered as a federal savings bank; (2) a letter dated November 19, 2007, from OTS granting World Savings Bank, FSB's request to change its name to Wachovia Mortgage, FSB; (3) Wachovia's charter, dated December 31, 2007, which reflects in Section 4 that it is subject to the Home Owners' Loan Act ("HOLA") and OTS supervision; (4) an Official Certification of the Comptroller of the Currency stating that effective November 2, 2009, Wachovia became Wells Fargo Bank Southwest, N.A., which then merged into Wells Fargo Bank, N.A.; and (5) a printout from the website of the Federal Deposit Insurance Corporation ("FDIC") dated September 2, 2010, which shows the history of World Savings Bank, FSB preceding its eventual merger into Wells Fargo.
RJN, Exh. B.
RJN, Exh. C.
RJN, Exh. D.
RJN, Exh. E.
RJN, Exh. F.
The OTS letter authorizing World Savings Bank's name change, Wachovia's charter, and the government certificates are proper subjects of judicial notice. See FED.R.EVID. 201(b) (stating that "[a] judicially noticed fact must be one not subject to reasonable dispute in that it is . . . capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned"); see also McCall v. Scott, 239 F.3d 808, 814 n. 3 (6th Cir. 2001) ("[W]e take judicial notice of the Restated Certificate of Incorporation"); Gens v. Wachovia Mortgage Corp., No. CV10-01073 JF (HRL), 2010 WL 1924777, *2 (N.D. Cal. May 12, 2010) ("The letter issued by the Office of Thrift Supervision, Department of the Treasury, approving WSB's request to "amend the savings bank's charter and bylaws [and] to change its name to Wachovia Mortgage, FSB . . ." will be judicially noticed as it "is capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned," citing FED.R.EVID. 201(b)(2)); Biggins v. Wells Fargo & Co., 266 F.R.D. 399, 408 (N.D. Cal. 2009) ("Finally, Aurora asks that the Court take judicial notice of, inter alia, an Order from the Office of Thrift Supervision ("OTS") approving the application to establish operating subsidiaries, which identifies Aurora as an operating subsidiary of a federal savings association. That order is available on the OTS website, and Plaintiffs have not disputed its authenticity. Accordingly, the Court takes judicial notice of that document"); McMichael v. United States Filter Corp., No. EDCA 99-182VAP, 2001 WL 418981, *8 (C.D. Cal. Feb. 23, 2001) (taking judicial notice of a certificate of incorporation filed in Delaware); Redding v. Freeman Products, Inc., No. 94 C 398, 1995 WL 410922, *2 (N.D. Ill. July 10, 1995) (taking judicial notice of certificates of good standing filed with the Illinois Secretary of State); In re Teledyne Defense Contracting Derivative Litig., 849 F.Supp. 1369, 1383 (C.D. Cal. 1993) (stating that "[p]laintiffs' claim for negligent breach of fiduciary duty against the Directors is barred by the Corporation's Certificate of Incorporation (of which this Court may take judicial notice)"). As plaintiffs have not objected to defendants' request, the court will consider these documents in evaluating defendants' motion.
Courts have also taken judicial notice of the contents of government websites. See Lemperle v. Washington Mut. Bank, No. 10cv1550-MMA(POR), 2010 WL 3958729, *3 (Oct. 7, 2010) ("[I]nformation on the Department of the Treasury and the FDIC's official websites is judicially noticeable"); see also Laborer's Pension Fund v. Blackmore Sewer Const., Inc., 298 F.3d 600, 607-8 (7th Cir.2002) (taking judicial notice of information on FDIC's official website); Peruta v. Country of San Diego, 678 F.Supp.2d 1046, 1054 n. 8 (S.D. Cal. 2010) (stating that the court could take judicial notice of documents appearing on governmental website). As plaintiffs have not disputed the authenticity of the documents on the FDIC's website that defendant references, the court will consider that information as well.
C. Legal Standard Governing Motions To Dismiss Under Rule 12(b)(6)
A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaint. A Rule 12(b)(6) dismissal is proper only where there is either a "lack of a cognizable legal theory," or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). The court must accept all factual allegations pleaded in the complaint as true, and construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996); Mier v. Owens, 57 F.3d 747, 750 (9th Cir. 1995).
The court need not, however, accept as true unreasonable inferences or conclusory legal allegations cast in the form of factual allegations. See Bell Atlantic Corp. v. Twombly, 540 U.S. 544, 553-56 (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 his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do"). Thus, a plaintiff's complaint must "contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' . . . A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009); see also Twombly, 550 U.S. at 545 ("Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)" (citations omitted)); Moss v. United States Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) ("[F]or a complaint to survive a motion to dismiss, the non-conclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief," citing Iqbal and Twombly).
D. Whether Plaintiffs' First Cause of Action States a Claim for Negligent Misrepresentation
1. Whether Plaintiffs Adequately Pled Negligent Misrepresentation with Particularity under Rule 9(b)
"It is well-settled in the Ninth Circuit that misrepresentation claims are a species of fraud, which must meet Rule 9(b)'s particularity requirement." Meridian Project Sys., Inc. v. Hardin Constr. Co., 404 F.Supp.2d 1214, 1219 (E.D. Cal. 2005); see also Glenn Holly Entm't, Inc. v. Tektronix, Inc., 100 F.Supp.2d 1086, 1093 (C.D. Cal. 1999) ("Claims for fraud and negligent misrepresentation must meet the heightened pleading requirements of Rule 9(b)"); U.S. Concord, Inc. v. Harris Graphics Corp., 757 F.Supp.1053, 1058 (N.D. Cal. 1991) ("Defendant further asserts that the negligent misrepresentation claim fails to satisfy Rule 9(b)'s particularity requirements. The point is well-taken. Since the claim is based upon the same flawed allegations of misrepresentation as the fraud count, it, too, fails for lack of specificity"); see also Lorenz v. Sauer, 807 F.2d 1509, 1511-12 (9th Cir. 1987) ("Under California law, negligent misrepresentation is a species of actual fraud," citing Gold v. Los Angeles Democratic League, 49 Cal.App.3d 365, 373-74 (1975)).
Under Rule 9(b), fraud allegations must include the "time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations." See Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (citing Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)); see also Schreiber Distributing Co. v. Serv-Well Furniture Co., Inc., 806 F.2d 1393, 1401 (9th Cir. 1986) ("[T]he pleader must state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation"); Miscellaneous Serv. Workers Local # 427 v. Philco-Ford Corp., 661 F.2d 776, 782 (9th Cir. 1981) (holding that Rule 9(b) requires a pleader to set forth the "time, place and specific content of the false representations as well as the identities of the parties to the misrepresentation"); Dielsi v. Falk, 916 F.Supp.985, 995 n. 12 (C.D. Cal. 1996) ("The fraud complaint should generally set out the time, place, and content of alleged misrepresentations, who made the statements, [and] why they were false, as well as set forth specific facts to show the defendant's knowledge of material falsity," citing In re GlenFed Securities Litig., 42 F.3d 1541, 1547-58 (9th Cir. 1994)); see also Ackerman v. Northwestern Mut. Life Ins. Co., 172 F.3d 467, 469 (7th Cir. 1969) ("By requiring the plaintiff to allege the who, what, where, and when of the alleged fraud, the rule requires the plaintiff to conduct a precomplaint investigation in sufficient depth to assure that the charge of fraud is responsible and supported, rather than defamatory and extortionate").
Defendant contends that plaintiffs' claim for negligent misrepresentation should be dismissed because it does not plead fraud with particularity as required by Rule 9(b). Plaintiffs argue that they have satisfied Rule 9(b) because they plead "specific dates, times, names of the Wells Fargo representative, and what Wells Fargo represented."
Opp. at 4-5. To state a claim for negligent misrepresentation, plaintiffs must allege (1) a misrepresentation of a past or existing material fact, (2) made without reasonable grounds for believing it to be true, (3) and with intent to induce another's reliance on the fact misrepresented, as well as (4) the fact that they were ignorant of the truth and justifiably relied on the misrepresentation, and (5) suffered damages. B.L.M. v. Sabo & Deitsch, 55 Cal.App.4th 823, 834 (1997). See also Glenn K. Jackson Inc. v. Roe, 273 F.3d 1192, 1201 n. 2 (9th Cir. 2001) ("The elements of negligent misrepresentation include: (1) misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the misrepresentation, (4) ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed, and (5) resulting damage"); Firoozye v. Earthlink Network, 153 F.Supp.2d 1115, 1128 (N.D. Cal. 2001) ("The elements for a claim for negligent misrepresentation are similar [to the elements for fraud]; the plaintiff must show that the defendant made a misrepresentation without reasonable grounds for believing it to be true and that the representation was intended to induce the plaintiff to take some action in reliance upon it").
Plaintiffs allege a series of dates on which they purportedly communicated with defendant. While they assert that many of these communications occurred "approximately" on or "on or about" a particular date, they also allege that certain communications had been made "by" a particular date. Plaintiffs allege, for example, that "by June 16, 2010," they were informed by April Cadena that Wachovia had received all documentation necessary to consideration of their loan modification application. They also contend that "by July 12, 2010," Xavier San Miguel contacted them to confirm that their file was complete. These allegations do not make clear whether the referenced communications took place on June 16 and July 12, 2010, or on some earlier date. Plaintiffs also assert that "[o]ver the course of the pr[eceding] 90 days [following March 11, 2011], Wachovia made contradictory requests for information;" they do not, however, provide specific dates or facts regarding the nature of Wachovia's requests or how they were contradictory.
Complaint, ¶ 22.
Even were the dates plaintiffs allege sufficiently specific, the complaint fails to state with particularity the nature of the false misrepresentations defendant purportedly made. Plaintiffs allege that defendant made the following statements between November 2009 and November 2010: (1) that plaintiffs' application for a modification was "under review and would be completed in the near future"; (2) that certain documents were missing or needed to complete plaintiffs' file, some of which plaintiffs contend had already sent and were in defendant's possession; (3) that all documents had been received and only an appraisal was needed; (4) that the appraisal was complete and plaintiffs' file would be sent to the underwriting department for review; (5) that plaintiffs did not qualify for a loan modification; and (6) that Wells Fargo was now the beneficiary of the mortgage note.
Plaintiffs assert that these representations were false because "[t]he true facts were that no matter the situation of Plaintiffs, Wachovia would not offer to modify Plaintiffs' loan on account of Wachovia's policy of undue delay." Plaintiffs do not explain, however, how Wachovia's purported policy of delay shows that the representations allegedly made were false. Because plaintiffs have not adequately pled the who, what, where and when of defendant's purported fraud, and have not sufficiently alleged why certain representations were false, they have failed to satisfy Rule 9(b)'s exacting pleading standard. Their negligent misrepresentation claim must therefore be dismissed. See Glen Holly Entertainment, Inc. v. Tektronix, Inc., 100 F.Supp.2d 1086, 1094 (C.D. Cal. 1999) ("The Ninth Circuit requires, '[t]o allege fraud with particularity, a plaintiff must set forth more than the neutral facts necessary to identify the transaction. The plaintiff must set forth what is false or misleading about a statement, and why it is false,'" citing GlenFed, 42 F.3d at 1548)); see also Kearns v. Ford Motor Co., 567 F.3d 1120, 1126 (9th Cir. 2009) (affirming the dismissal of plaintiff's complaint alleging fraudulent misrepresentations because plaintiff "failed to articulate the who, what, when, where, and how of the misconduct alleged", with the result that his pleading did "not satisfy the requirement of Rule 9(b) that 'a party must state with particularity the circumstances constituting fraud. . .'").
Id., ¶ 38.
2. Whether Plaintiffs Must Show That Defendants Owed Them a Duty of Care to Plead a Negligent Misrepresentation Claim
Plaintiffs assert that they need not show that defendant owed them a duty of care to plead a negligent misrepresentation claim. This assertion, however, is incorrect, as it is well established that the existence of a duty of care is necessary to support a negligent misrepresentation claim. Alfus v. Pyramid Technology Corp., 745 F.Supp. 1511, 1523 (N.D. Cal. 1990) ("Liability for negligent misrepresentation may attach only where plaintiff establishes that defendants breached a duty owed to him"); Ravins v. Alvarez, No. CV 01-4003 NM (MANx), 2001 WL 36168862, *2 (N.D. Cal. Aug. 31, 2001) ("To state a claim for negligent misrepresentation, the defendant must have a duty to exercise reasonable care in giving the information"); In re Wyse Technology Securities Litigation, 744 F.Supp. 207, 208 (N.D. Cal. 1990) ("Defendants correctly argue that liability for negligent misrepresentation may attach only where plaintiffs establish that defendants breached a duty owed to them").
Opp. at 4.
Numerous cases have characterized a loan modification as a traditional money lending activity, warranting application of the rule articulated in Nymark v. Heart Fed. Savings & Loan Assn., 231 Cal.App.3d 1089 (1991), that a financial institution in general owes no duty of care to a borrower. See id. at 1096 ("However, as a general rule, a financial institution owes no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money"); Sullivan v. JP Morgan Chase Bank, NA, 725 F.Supp.2d 1087, 1094 (E.D. Cal. 2010) (citing Nymark and holding that "[p]laintiffs have provided no authority to support their argument that lenders owe borrowers a duty of care not to misinform them about the loan modification process"); see also Argueta v. JP Morgan Chase, No. CIV. 2:11-441 WBS GGH, 2011 WL 2619060, *5 (E.D. Cal. June 30, 2011) (citing Nymark and stating that "Plaintiff's allegations about the loan modification application process are insufficient to plausibly suggest that defendants owed plaintiff a duty of care."); Becker v. Wells Fargo Bank, N.A., Inc., No. 2:10-cv-02799 LKK KJN PS, 2011 WL 1103439, at *23 (E.D.Cal. Mar.22, 2011) (citing Nymark for the proposition that allegations concerning loan modification application process did not give rise to a duty on the part of the lender); Coppes v. Wachovia Mortg. Corp., No. 2:10-cv-01689-GEB-DAD, 2011 WL 1402878, *7 (E.D. Cal. Apr. 13, 2011) ("Plaintiff has not alleged 'special circumstances' plausibly suggesting Wachovia owed her a duty of care [during the loan modification process] because it 'actively participate[d] in the financed enterprise beyond the domain of the usual money lender.' [Nymark, 231 Cal.App.3d at 1096.] Therefore, this [negligence] claim is dismissed"); Dooms v. Federal Home Loan Mortg. Corp., No. CV F 11-0352 LJO DLB, 2011 WL 1303272, *9 (E.D. Cal. Mar. 31, 2011) (citing Nymark and stating that "[t]he moving defendants are correct that a negligence claim based on their roles as lender and loan servicer fails in the absence of a duty to forego foreclosure or to provide a loan modification. The complaint lacks facts to support an actionable duty to impose on the moving defendants. 'No such duty exists' for a lender 'to determine the borrower's ability to repay the loan . . . . The lender's efforts to determine the creditworthiness and ability to repay by a borrower are for the lender's protection, not the borrower's,'" citing Renteria v. United States, 452 F.Supp.2d 910, 922-23 (D. Ariz. 2006)); DeLeon v. Wells Fargo Bank N.A., No. 10-CV-01390-LHK, 2011 WL 311376 (N.D. Cal. Jan. 28, 2011) ("Because Plaintiffs still have not alleged any participation beyond that of the usual money lender [in the loan modification process], they cannot state a negligence claim against Wells Fargo"); but see Ansanelli v. JP Morgan Chase Bank, N.A., No. C 10-03892 WHA, 2011 WL 1134451, *7 (N.D. Cal. Mar. 28, 2011) (citing Nymark and finding that a lender defendant owed a duty to plaintiff because defendant went "beyond the domain of a usual money lender" by going "beyond its role as a silent lender and loan servicer to offer an opportunity to plaintiffs for loan modification and to engage with them concerning the trial period plan").
Based on the overwhelming weight of authority, plaintiffs must plead facts indicating that defendant went beyond the typical role of a money lender to plead a negligent misrepresentation claim. Here, plaintiffs have failed to plead any facts that address this requirement. Consequently, plaintiffs' claim fails on this basis as well.
This failure to plead duty defeats all of plaintiffs' negligence-related claims, as discussed infra.
E. Whether Plaintiffs' Second Cause of Action States a Claim for Concealment or Suppression of Fact
Plaintiffs' second cause of action states a claim for concealment of fact, which the court construes as a claim for fraudulent concealment under California law. In California, a plaintiff alleging fraudulent concealment must plead five elements: "'(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.'" Kaldenbach v. Mutual of Omaha Life Ins. Co., 178 Cal.App.4th 830, 850 (2009) (quoting Roddenberry v. Roddenberry, 44 Cal.App.4th 634, 665-66 (1996)).
Claims for fraudulent concealment, like other fraud claims, are subject to Rule 9(b) and must be pled with specificity. See Gabriel Technologies Corporation v. Qualcomm Inc, No. 08 CV 01992 MMA (POR), 2010 WL 3259739, *4 (S.D. Cal. Aug. 13, 2010) ("Plaintiffs argue the Court's prior orders 'do not discuss or even mention a fraudulent concealment claim.' The Court disagrees . . . . As a whole, Plaintiffs' allegations failed [ ] to satisfy the pleading requirements of Rule 9(b)"); Velasquez v. Chase Home Finance LLC, No. C 10-01641 SI., 2010 WL 3211905, *6 (N.D. Cal. Aug. 12, 2010) ("Here, plaintiff's fraud claims do not meet the heightened Rule 9(b) pleading standard. With respect to fraudulent concealment, plaintiff alleges only that defendants concealed material facts to make plaintiff believe his real estate investment was secure and did not inform plaintiff that the real estate bubble was about to explode. Plaintiff does not allege when the concealment took place or when each of the defendants allegedly knew that the real estate bubble was about to burst"); Gomez v. Calpacific Mortg. Consultants, Inc., No. 09-CV-2926-IEG (CAB), 2010 WL 2610666, *3 (S.D. Cal. June 29, 2010) ("Under Plaintiff's separate cause of action for fraudulent concealment, she alleges E*Trade 'fraudulently concealed the true cost of the loan by providing false documents and statements . . . .' These claims are not pled with particularity. First, Plaintiff alleges E*Trade inflated her income by 'using an income of $11,900.00 on the loan application,' yet fails to allege what she stated her actual income to be. Thus, [plaintiff] fails to sufficiently allege why the representation was false. Because Plaintiff's allegations of . . . fraudulent concealment do not satisfy Rule 9(b), these causes of action are dismissed"); Baba v. Hewlett-Packard Co., No. C 09-05946 RS, 2010 WL 2486353, *2 (N.D. Cal. June 16, 2010) ("Rule 9(b)'s heightened pleading requirements apply to claims for violations of CLRA and UCL where the claims are based on fraudulent conduct, such as . . . misstatements and fraudulent concealment").
Plaintiffs allege that defendant's conduct misled plaintiffs because the "reasonable conclusion . . . was that their modification package would actually be thoroughly reviewed for a modification and they would be offered a modification if they fit within applicable guidelines." They assert that defendant "concealed from [them] that [the] file would not be diligently reviewed." These allegations plead that defendant owed a duty because plaintiffs "reasonabl[y] conclu[ded]" it did. This is not an appropriate basis upon which to find a legal duty. Additionally, plaintiffs do not allege facts demonstrating that their file was not "diligently reviewed." The only fact alleged that might support such a claim is the length of time it took defendant to make a decision on the loan modification. The complaint does not plead that defendant represented that the loan modification process would take a particular amount of time, however, nor any facts regarding the general period of time such a review consumes.
Complaint, ¶ 45.
Id. ¶ 46.
Plaintiffs also do not allege facts that would support a finding that defendant had a duty to disclose the matters allegedly concealed. As noted, it is the general rule[ that] 'a financial institution owes no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money.'" Velasquez, 2010 WL 3211905 at *5 (quoting Nymark, 231 Cal.App.3d at 1096); see also Gonzalez v. First Franklin Loan Services, No. 1:09-CV-00941 AWI-GSA, 2010 WL 144862, *8 (E.D. Cal. Jan. 11, 2010) (same); Hendrickson v. Popular Mortg. Servicing, Inc., No. C 09-00472 CW, 2009 WL 3299799, *4 (N.D. Cal. Oct. 13, 2009) ("A claim for negligent misrepresentation does not require scienter or intent to defraud; rather, to establish fraud through non-disclosure or concealment of facts, it is necessary to show that the defendant 'was under a legal duty to disclose them,'" citing Lingsch v. Savage, 213 Cal.App.2d 729, 735 (1963), and Buckland v. Threshold Enterprises, Ltd., 155 Cal.App.4th 798, 807 (2007)); Nymark, 231 Cal.App.3d at 1092 ("[A] financial institution acting within the scope of its conventional activities as a lender of money owes no duty of care to a borrower in preparing an appraisal of the security for a loan when the purpose of the appraisal simply is to protect the lender by satisfying it that the collateral provides adequate security for the loan"). Here, the court has found that the complaint includes no allegations indicating that defendant acted outside the scope of its typical activities as a money lender.
Plaintiffs attempt to cure this deficiency in their pleading by arguing that defendant's supposed failure to disclose all facts was misleading. Plaintiffs, however, fail to identify the facts defendant purportedly should have disclosed. Instead, they assert in conclusory fashion that defendant did not disclose its failure to "diligently review" the Settles' loan modification application; there is, as noted, no factual support for this allegation. Plaintiffs also allege that defendant failed to disclose that it would take more than a year to determine whether they were entitled to a loan modification; once again, however, they plead no facts suggesting that defendant knew or should have known that the review process would take this long, or that the delay was unwarranted.
Opp. at 5.
Because plaintiffs failed to plead facts that would support a finding that defendant owed them a legal duty in connection with their loan modification application, and because they failed to allege with particularity defendant's purported failure to disclose, their fraudulent concealment claim must be dismissed.
F. Whether Plaintiffs' Third and Fourth Causes of Action State Claims for Unfair Business Practices
Plaintiffs' third cause of action alleges unfair business practices in violation of California's Unfair Competition Law, California Business and Professions Code § 17200 et seq. ("UCL"). Plaintiffs cannot sue Wells Fargo under the UCL, however, because such claims are preempted by the Home Owner's Loan Act ("HOLA"), 12 U.S.C. § 1461 et seq., and regulations promulgated thereunder by the Office of Thrift Supervision ("OTS").
Federal law preempts state law in three circumstances: (1) when Congress expressly states that it does; (2) when federal regulation of a particular field is so pervasive as to make reasonable the inference that Congress left no room for states to supplement it; or (3) when state law actually conflicts with federal law. See, e.g., Bank of America v. City and County of San Francisco, 309 F.3d 551, 558 (9th Cir. 2002).
"HOLA was enacted in 1933 as a result of congressional dissatisfaction with state law and practice in financing home construction." The statute granted OTS "broad regulatory authority over thrift institutions." Spears v. Washington Mutual, Inc., No. C-08-00868 RMW, 2009 WL 605835, *5 (N.D. Cal. Mar. 9, 2009) (citing Conference of Federal Savings and Loan Associations v. Stein, 604 F.2d 1256, 1257-58 (9th Cir. 1979), and Silvas v. E*Trade Mortgage Corp., 514 F.3d 1001 (9th Cir. 2008)). OTS promulgated a regulation explicitly occupying the field of lending regulation for federal savings associations. Id. This provision, 12 C.F.R. § 560.2, states in pertinent part:
"To enhance safety and soundness and to enable federal savings associations to conduct their operations in accordance with best practices (by efficiently delivering low-cost credit to the public free from undue regulatory duplication and burden), OTS hereby occupies the entire field of lending regulation for federal savings associations. OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation." 12 C.F.R. § 560.2(a).Section 560.2(b) enumerates thirteen types of laws states are preempted from enacting, including laws governing loan-related fees; disclosure and advertising; escrow accounts; processing, origination, servicing, sale or purchase of, or investment or participation in, mortgages; disbursements and repayments; and access to and use of credit reports.
The Ninth Circuit has outlined the procedure to be used in evaluating whether the OTS regulations preempt a state law as follows:
"When analyzing the status of state laws under § 560.2, the first step will be to determine whether the type of law in question is listed in paragraph (b). If so, the analysis will end there; the law is preempted. If the law is not covered by paragraph (b), the next question is whether the law affects lending. If it does, then, in accordance with paragraph (a), the presumption arises that the law is preempted. This presumption can be reversed only if the law can clearly be shown to fit within the confines of paragraph (c). For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption." Silvas, 514 F.3d at 1005 (quoting OTS Final Rule, 61 Fed.Reg. 50951, 50966-67
(Sept. 30, 1996)).
Wachovia is a federally chartered savings association. Section 4 of Wachovia's Charter states that Wachovia is subject to HOLA and OTS. Plaintiffs allege that defendant violated Business & Professions Code § 17200 by (1) having a "'policy' of referring borrowers to various departments, providing inconsistent information[; (2)] ordering numerous appraisals only to stall and claim the previous appraisals [are] "too outdated"[; (3)] providing no justification or explanation [for] denying borrowers . . . relief"; (4) making an "arbitrary decision" to deny plaintiffs a loan modification because "a modified mortgage payment of approximately 31% of their gross monthly income, which is the industry standard, would result in a positive "net present value" when compared to foreclosure"; and (5) maintaining "guidelines [that] are not in line with applicable industry standards or that Wachovia's decision to deny plaintiffs relief was arbitrary and capricious."
RJN, Exh. B (Deed of Trust) states that the "'Lender" [is] World Savings Bank, FSB . . . . Lender is a federally chartered savings bank"); RJN, Exh. C (Letter from OTS) (confirming that World Savings' name change to Wachovia Mortgage, FSB).
RJN, Exh. D (Charter).
Complaint, ¶ 59.
Id. ¶ 63.
Id. ¶ 64.
As can be seen, all of the allegations supporting plaintiffs' UCL claim concern Wachovia's "processing, origination, servicing, sale or purchase of, or investment or participation in, mortgages" - i.e., matters that are explicitly listed in 12 C.F.R. § 560.2(b)(10). As a result, the claim is preempted by HOLA and the OTR regulations. See, e.g., Silvas, 514 F.3d at 1006 ("Here, Appellants allege that E*TRADE violated UCL § 17500 by including false information on its website and in every media advertisement to the California public. Because this claim is entirely based on E*TRADE's disclosures and advertising, it falls within the specific type of law listed in § 560.2(b)(9). Therefore, the preemption analysis ends. UCL § 17500 as applied in this case is preempted by federal law"); id. ("In addition, Appellants' claim under UCL § 17200 alleges that the lock-in fee itself is unlawful. That allegation triggers a separate section of paragraph (b). Section 560.2(b)(5) specifically preempts state laws purporting to impose requirements on loan related fees. . . . Because the UCL § 17200 claim, as applied, is a type of state law listed in paragraph (b) . . . the preemption analysis ends there" (citation omitted)); Spears, 2009 WL 605835 at *6 ("Indeed, plaintiffs' theory of the case, that lenders and appraisers conspired to inflate appraisals in order to increase mortgage resale prices, demonstrates the importance and interrelationship of impartial appraisals to mortgage origination and servicing. . . . The court therefore finds that plaintiffs' UCL and CLRA claims, as applied, relate to the processing and origination of, and participation in, mortgages, and are thus preempted under § 560.2(b)(10)" (citations omitted)).
On July 21, 2011, however, oversight of savings and loan holding companies was transferred from the OTS to the Office of the Comptroller of the Currency pursuant to the Dodd-Frank Wall Street Reform Act and Consumer Protection Act of 2010. See 12 U.S.C. § 5412. "The Dodd-Frank Act provides that HOLA does not occupy the field in any area of state law and that preemption is governed by the standards applicable to national banks." Davis v. World Savings Bank, FSB, ___ F.Supp.2d ___, 2011 WL 3796170, *12 (D.D.C. Aug. 29, 2011); see also PL 111-203, 2010 HR 4173 § 1046 ("Any determination by a court or by the Director or any successor officer or agency regarding the relation of State law to a provision of this chapter or any regulation or order prescribed under this chapter shall be made in accordance with the laws and legal standards applicable to national banks regarding the preemption of State law. . . . Notwithstanding the authorities granted under sections 4 and 5, this Act does not occupy the field in any area of State law").
Courts have agreed that the statute does not apply retroactively, but have disagreed as to whether July 21, 2010 (the date the bill was passed) or July 21, 2011 (the date the bill took effect) is the relevant date for determining whether the new or old preemption analysis applies. In Copeland-Turner v. Wells Fargo Bank, 800 F.Supp.2d 1132 (D. Or. 2011), the court held that the act became effective on July 21, 2010, when the bill was passed, and that claims alleging conduct before that date were not subject to Dodd-Frank. Id. at 1137. In support of this contention, the court cites section 1043 of the statute, which provides:
"This title, and regulations, orders, guidance, and interpretations prescribed, issued, or established by the Bureau, shall not be construed to alter or affect the applicability of any regulation, order, guidance, or interpretation prescribed, issued, and established by the Comptroller of the Currency or the Director of the Office of Thrift Supervision regarding the applicability of State law under Federal banking law to any contract entered into on or before the date of enactment of this Act, by national banks, Federal savings associations, or subsidiaries thereof that are regulated and supervised by the Comptroller of the Currency or the Director of the Office of Thrift Supervision, respectively." Id. (quoting PL 111-203, 2010 HR 4173).In Davis, however, the court concluded, that the new preemption analysis applied only to conduct occurring on or after July 21, 2011, when the regulation of savings and loan holding companies was transferred to the Comptroller of the Currency. Davis, 2011 WL 3796170 at *12 n. 5 ("Congress did not direct retroactive application of the new regulation, and the Dodd-Frank Act provided that section 1465 of Title 12 was enacted and amended effective on the transfer date, i.e. July 21, 2011"); see also Molosky v. Washington Mut., Inc., ___ F.3d ___, 2011 WL 6415344, *11 n. 1 (6th Cir. Dec. 22, 2011) ("Passage of the Dodd-Frank Act has changed both the type of preemption applicable under HOLA and the identity of the agency that oversees federal savings and loan associations. See 12 U.S.C. §§ 1465(a), 5412(b). These provisions came into effect on July 21, 2011, and have no retroactive effect with regard to the issues in this appeal"); Williams v. Wells Fargo Bank N.A., No. 11-21233-CIV, 2011 WL 4901346, *7 n.6 (S.D. Fla. October 14, 2011) ("The claims involved in the present action arose prior to July 21, 2011; accordingly, they are analyzed under the preemption rules in effect prior to the changes imposed by the Dodd-Frank Act").
The Davis court based its conclusion that July 21, 2011 was the date on which preemption analysis changed on section 1048 of the statute, which provides that "this subtitle [including the new preemption statute] shall become effective on the designated transfer date."
The court finds the reasoning of the Copeland-Turner court more persuasive, and accordingly concludes that claims involving contracts formed before July 21, 2010 are subject to the preemption regime in place before Dodd-Frank. Section 1043 of the statute specifically states that contracts formed prior to the passage of Dodd-Frank will be governed by the rules and regulations in place prior to its enactment. See Arthur E. Wilmarth, Jr., The Dodd-Frank Act's Expansion of State Authority to Protect Consumers of Financial Services, 36 J. CORPORATION LAW 893, 940 (Summer 2011) ("As explained in the Senate committee report, Section 1043 is intended to 'provide stability to existing contracts' by preserving the applicability of OCC and OTS preemptive rulings to contracts that were made before the enactment date of Dodd-Frank. There would have been no reason for Congress to enact Section 1043 if Congress had intended to allow existing OCC and OTS preemption rules to apply to new consumer financial agreements that are made after July 21, 2010. Thus, apart from . . . the continued application of the OCC's existing preemption rules to contracts made by national banks and federal thrifts before July 22, 2010, the OCC's preemption rules will not be valid after July 21, 2011, unless they are brought into full compliance with the new preemption standards and requirements established by Section 5136C"); Matthew Dyckman, Matthew S. Yoon, and John P. Holahan, Financial Regulatory Reform--the Dodd-frank Act Rolls Back Federal Preemption, 64 CONSUMER FIN. L.Q. REP. 129, 275 (Summer/Fall 2010) ("Although the Dodd-Frank Act contains a savings clause which grandfathers contracts which are entered into by national banks, federal thrifts, and their subsidiaries prior to the effective date of the new legislation, any new business will be subject to a long period of uncertainty, as long relied-on precedent is extinguished and new standards are forged"); Richard P. Hackett and Frank H. Bishop, Jr., Summary of the Consumer Financial Protection Act of 2010, 64 CONSUMER FIN. L.Q. REP. 295, 296 (Winter 2010) ("National bank or federal thrift contracts entered into on or before enactment of the CFPA that rely upon the more expansive preemption regulations of the Office of the Comptroller of the Currency (OCC) or the Office of Thrift Supervision (OTS) are preserved, but parties to contracts entered into after the enactment of the Dodd-Frank Act may no longer rely on such guidance with repose").
Section 1048 states the date on which the new preemption provisions of Dodd-Frank become "effective." Section 4 of the act explains the reason for such a provision. It states that "[e]xcept as otherwise specifically provided in this Act or the amendments made by this Act, this Act and such amendments shall take effect 1 day after the date of enactment of this Act." PL 111-203, 2010 HR 4173 § 4. One day after enactment was July 21, 2010. Section 1048 is a specific provision that sets an effective date different than July 21, 2010 for the preemption amendments. It does not address whether the amendment that takes effect on that date applies to contracts formed prior to enactment of the statute. It merely states the date on which any new laws and regulations will become effective.
Reading sections 1043 and 1048 of the statute in tandem, and attempting to give effect to both provisions, see In re Catapult Entertainment, Inc., 165 F.3d 747 (9th Cir. 1999) ("We agree with Catapult that a court should interpret a statute, if possible, so as to minimize discord among related provisions," citing 2A Norman J. Singer, SUTHERLAND STATUTORY CONSTRUCTION § 46.06 (5th ed. 1992) ("A statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant, and so that one section will not destroy another unless the provision is the result of obvious mistake or error")), the court concludes that the statute is properly interpreted to provide that claims related to contracts formed prior to the enactment of Dodd-Frank are subject to the preemption analysis in effect at that time.
Plaintiffs entered into loan agreements with defendants long before the Dodd-Frank Act was enacted. In fact, the only factual allegations in the complaint that concern events after the statute's enactment involve defendants' final denial of plaintiffs' request for a loan modification. Consequently, the court concludes that their UCL claims are preempted.
Even were this not the case, the court has previously found that plaintiffs' allegations of fraud, which form the basis for their claim under UCL's fraudulent prong just as they do plaintiffs' negligent misrepresentation and fraudulent concealment claims, fail under Rule 9(b). Plaintiffs' claim that defendants' decision to deny them a loan modification without explanation fails under the UCL's "unfair" prong, since a borrower has no entitlement to a loan modification. Cf. Nool v. HomeQ Servicing, 653 F.Supp.2d 1047, 1052 (E.D. Cal. 2009) ("[T]he language of [California Civil Code § 2923.6(b)] belies the imposition of any duty to engage in loan modification discussions, as the provision merely expresses legislative 'intent' that the mortgagee, beneficiary, or authorized agent offer the borrower a loan modification if doing so is consistent with its authority"); Farner v. Countrywide Home Loans, No. 08cv2193 BTM(AJB), 2009 WL 189025, at *2 (S.D. Cal. Jan. 26, 2009) ("[N]othing in Cal. Civ.Code § 2923.6 imposes a duty on servicers of loans to modify the terms of loans or creates a private right of action for borrowers"). "[A]n 'unfair' business practice occurs when it offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers." People v. Casa Blanca Convalescent Homes, 159 Cal. App. 3d 509, 530 (1984). Because there is no entitlement to a loan modification, the failure to agree to provide one does not violate established policy. Not is it immoral, unethical, oppressive, or unscrupulous.
Consequently, the UCL claims must be dismissed.
In their late-filed opposition, plaintiffs argue that their claims are not preempted by HOLA, citing three cases: (1) Barela v. Downey Savings & Loan Ass'n, F.A., No. CV 09-3757 AHM (PLAx), 2009 WL 2578889 (C.D. Cal. Aug. 18, 2009); (2) Bolden v. KB Home, 618 F.Supp.2d 1196 (C.D. Cal. 2008); and (3) Gibson v. World Saving and Loan Ass'n, 103 Cal.App.4th 1291 (2002). (Opp. at 3.) All three decisions are clearly distinguishable. The plaintiffs in Barela alleged only state law tort claims for concealment, fraud, and negligence; they did not proceed under the UCL. Barela, 2009 WL 2578889 at *2. The court concluded that the state law tort claims that had been alleged were not completely preempted by HOLA such that they should be considered federal claims for purposes of removal jurisdiction. Id. That holding is inapposite here.
In Bolden, the court held that HOLA did not preempt state law claims related to real estate appraisal standards because such claims did not fall within HOLA's preemptive scope. 618 F. Supp. 2d at 1205. Here, plaintiffs' claims concern the mortgage activities of a federal savings association; such claims are clearly preempted by HOLA. Curcio v. Wachovia Mortg. Corp., No. 09-CV-1498-IEG (NLS), 2009 WL 3320499, *6 (S.D. Cal. Oct. 14, 2009) ("In short, each state cause of action is premised upon allegations regarding Defendant's lending obligations, including: terms of credit; disclosure; and processing, origination, and servicing of mortgages. These activities are matters committed by Congress to regulation by a federal agency. Accordingly, the Court finds Plaintiff's state causes of action are expressly preempted by 12 C.F.R. § 560.2(b)" (citations omitted)).
Finally, Gibson held that claims under the Business and Professions Code were not preempted by HOLA. (Id. at 1300-1302.) As a state law case, it is only persuasive, not binding, authority. Gibson, moreover, preceded and is contrary to the Ninth Circuit's decision in Silvas, which the court is obligated to apply. In Silvas, the court held that, "[b]ecause the UCL § 17200 claim, as applied, is a type of state law listed in paragraph (b) [of 12 C.F.R. § 560.2, . . . ]the preemption analysis ends there. Appellants' claim under UCL § 17200 is preempted." Silvas, 514 F.3d at 1006.
G. Whether Plaintiffs' Fifth Cause of Action States a Claim for Negligence
Plaintiffs also assert a negligence claim against defendant. To prove negligence under California law, a plaintiff must plead and prove: "(1) defendant's legal duty of care toward plaintiff, (2) defendant's breach of that duty, (3) damage or injury to plaintiff, and (4) a causal relationship between defendant's negligence and plaintiff's damages." Palm v. United States, 835 F.Supp. 512, 520 (N.D. Cal. 1993); see also Krawitz v. Rusch, 209 Cal.App.3d 957, 963 (1989) ("For a negligence cause of action, the plaintiff must allege a duty, a breach of that duty, and injury to the plaintiff as a proximate result of that breach"); Peter W. v. San Francisco Unified Sch. Dist., 60 Cal.App.3d 814, 820 (1976) ("According to the familiar California formula, the allegations requisite to a cause of action for negligence are (1) facts showing a duty of care in the defendant, (2) negligence constituting a breach of the duty, and (3) injury to the plaintiff as a proximate result").
The complaint alleges that "[i]n accepting plaintiff's application, Wachovia created an obligation to conform to a standard of conduct for the protection of others against unreasonable risks." Wachovia allegedly breached this duty "by failing to diligently review plaintiffs' application and give plaintiffs reasonable time to make alternate arrangements to avoid foreclosure." As discussed, in California, "a lender owes no duty of care to the [borrowers] in approving their loan. Liability to a borrower for negligence arises only when the lender 'actively participates' in the financed enterprise 'beyond the domain of the usual money lender.'" Spencer v. DHI Morg. Co., Ltd., 642 F.Supp.2d 1153, 1161 (E.D. Cal. 2009) (citing Wagner v. Benson, 101 Cal.App.3d 27, 34 (1980)). "[A]s a general rule, a financial institution owes no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money." Nymark., 231 Cal.App.at 1096. Plaintiffs' complaint does not contain any allegations that would support a finding that defendant acted beyond the role of a lender. Consequently, the court grants defendant's motion to dismiss plaintiffs' fifth cause of action for negligence.
Id. ¶ 68.
Id. ¶ 70.
Plaintiffs argue that the six-factor test applied in Connor v. Great Western Sav. & Loan Assn., 69 Cal.2d 850 (1968), should be used to determine if "a financial institution owes a duty of care to a borrower-client." (Opp. at 8.) Connor is inapposite. There, the court employed a six-factor test to determine "whether in a specific case the defendant will be held liable to a third person not in privity. . . ." Id. at 865. This case does not allege third party liability. Moreover, applying Connor would run contrary to the weight of authority, which rejects the notion that a lender owes a duty to a borrower if it does not exceed its role in a typical lending relationship.
Plaintiffs also argue that the "good Samaritan rule" creates a duty. (Opp. at 10.) As support, plaintiffs cite Artiglio v. Corning, Inc., 18 Cal.4th 604, 612-13 (1998), which addressed the negligent performance of an undertaking that resulted in physical harm to the other. See REST. 2D TORTS § 324A. Plaintiffs have pled no facts suggesting that anyone was physically injured by defendant's conduct. Consequently, this argument fails.
III. CONCLUSION
For the reasons stated, the court grants defendant's motion to dismiss in its entirety. Plaintiffs' first, second, and fifth causes of action are dismissed without prejudice; the third and fourth causes of action are dismissed with prejudice. See Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995) ("'[A] district court should grant leave to amend . . . unless it determines that the pleading could not possibly be cured by the allegation of other facts,'" quoting Cook, Perkiss & Liehe v. N. Cal. Collection Serv., 911 F.2d 242, 247 (9th Cir. 1990)). Plaintiffs may file an amended complaint realleging their first, second and fifth causes of action within twenty (20) days of the date of this order. DATED: January 11, 2012
/s/_________
MARGARET M. MORROW
UNITED STATES DISTRICT JUDGE