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Peralta v. Countrywide Home Loans

November 16, 2009

DOROTHY PERALTA, STEVEN S. BIGVERDI AND JAMES MOSCOSO, ON BEHALF OF THEMSELVES AND OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
COUNTRYWIDE HOME LOANS, INC., F/K/A AMERICA'S WHOLESALE LENDER, COUNTRYWIDE HOME LOANS, INC., AND COUNTRYWIDE BANK, FSB; AND DOES 1 THROUGH 200, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Phyllis J. Hamilton United States District Judge

ORDER DENYING MOTION TO REMAND AND TO STRIKE AND GRANTING MOTION TO TRANSFER

The motion of plaintiffs Dorothy Peralta, Steven S. Bigverdi, and James Moscoso ("plaintiffs") to remand this action to state court and to strike certain portions of defendant's evidence, and the motion of defendants Countrywide Home Loans and Countrywide Bank (collectively "defendant") to transfer this case to the Central District of California ("Central District") and motion to dismiss the complaint, came on for hearing before this court on November 4, 2009. Defendant appeared by its counsel Brooks R. Brown and Robert B. Bader, and plaintiffs appeared by their counsel Gerson Smoger. Having read the parties' papers and carefully considered their arguments and the relevant legal authority, and good cause appearing, the court hereby DENIES the motion to remand and the motion to strike, GRANTS the motion to transfer, and declines to reach the motion to dismiss for the reasons stated at the hearing and as set forth below.

BACKGROUND

On June 2, 2009, plaintiffs filed a civil action and putative class action in Superior Court of the State of California for the County of Alameda, Dorothy Peralta et al. v. Countrywide Home Loans, Inc. et al., Case No. RG 09455493. Plaintiffs filed an amended complaint on June 18, 2009. On July 17, 2009, defendant removed the case to this court, asserting both diversity jurisdiction under the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d), and federal question jurisdiction. Plaintiffs filed a motion to remand on August 12, 2009, and an amended motion to remand on August 14, 2009. On September 1, 2009, defendant filed a motion to dismiss, and a motion to transfer. On September 10, 2009, defendant filed an amended motion to dismiss. Plaintiffs filed a motion to strike on October 14, 2009. On October 26, 2009, plaintiffs filed an emergency ex parte application for order granting leave to take jurisdictional discovery and to continue the hearing on pending motions to allow completion of jurisdictional discovery pertaining to the status of defendant's alleged merger with Bank of America ("BANA"). Plaintiffs then filed a motion for an order shortening time to hear that motion on October 29, 2009.

Plaintiffs allege the following causes of action: (1) fraudulent omissions; (2) violation of California Business and Professions Code section 17200; (3) breach of contract; and (4) tortious breach of the covenant of good faith and fair dealing. Plaintiffs request actual, compensatory, consequential, and punitive damages, as well as restitution, restitutionary disgorgement of all profits, prejudgment interest and attorneys' fees.

The First Amended Complaint ("FAC") challenges the sale of "payment option" loans - loans where the borrower has the option in the early years of the loan of making less than a fully-amortizing monthly payment. Plaintiffs allege that defendant, a federally-chartered savings association, deceptively originated and sold option ARM loans without making the requisite disclosures. Plaintiffs allege that defendant's loan documents promised a low, fixed "teaser" interest rate, FAC ¶¶ 17-19, 21-23, 25, but that in reality, the interest rate surreptitiously increased almost immediately after the loans were signed, FAC ¶¶ 25-26, 28-30. Plaintiffs contend that the loan documents indicated that their monthly payments would be applied to "principal and interest" and that negative amortization would not occur. FAC ¶¶ 63-65, 105. However, plaintiffs allege that defendant breached this agreement by failing to apply their payments to the principal, FAC ¶¶ 66-68, 107, resulting in guaranteed negative amortization for plaintiffs and other class members who entered into defendant's option ARM loans, FAC ¶¶ 28, 30, 67-68. Moreover, plaintiffs allege that even upon discovery of these facts, class members could not escape from the loans due to harsh exit penalties. FAC ¶¶ 24, 26, 104.

Plaintiffs claim that as a result of defendant's conduct, plaintiffs and tens of thousands of class members "lost hundreds of thousands if not millions of dollars of equity in their homes." FAC ¶ 100.

DISCUSSION

A. Legal Standard

1. Motion to Remand

In determining whether removal jurisdiction exists, courts construe their jurisdiction narrowly, against removal. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941). Defendant, as the removing party, bears the burden of demonstrating that removal jurisdiction is proper, and "[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (creating a "strong presumption against removal jurisdiction") (citations omitted). Thus, a court should resolve all ambiguity in favor of remand to state court. Id.

CAFA vests district courts with original jurisdiction of any civil action in which the amount in controversy exceeds $5,000,000 and in which the aggregate number of proposed plaintiffs is 100 or greater, and any member of the plaintiff class is a citizen of a state different from any defendant. See 28 U.S.C. § 1332(d).*fn1 Like in other removal cases, under CAFA, the burden of establishing removal jurisdiction remains on the proponent of federal jurisdiction. See Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 686 (9th Cir. 2006) ("[CAFA] does not alter the longstanding rule that the party seeking federal jurisdiction on removal bears the burden of establishing that jurisdiction"); see also Gaus, 980 F.2d at 566 (defendant must show whether it is "more likely than not" that the jurisdictional requirements are met).

2. Motion to Transfer

The court may, for the convenience of parties, witnesses and in the interest of justice, transfer an action to another district where the action might have been brought. 28 U.S.C. § 1404(a). A motion under section 1404(a) must first show that the transferee district is one where the action might have been brought. Id. The movant must demonstrate that the alternate district would have subject matter jurisdiction, personal jurisdiction, and proper venue. Hoffman v. Blaski, 363 U.S. 335, 343-44 (1960). If the transferee district is one in which the action might have been brought, the court then assesses various factors related to convenience and the interest of justice. See Jones v. GNC Franchising, Inc., 211 F.3d 495, 498-99 (9th Cir. 2000). Since the court may not order a partial transfer, the convenience and justice analysis is only relevant if claims against a party have been severed. See Wyndham, 398 F.2d at 618.

3. Motion to Strike

Rule 12(f) permits a court to "strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). "Under the express language of [Rule 12(f)], only pleadings are subject to motions to strike."

Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). Rule 7(a) limits the definition of "pleadings" to complaints, third-party complaints, answers, and replies to answers. Fed. R. Civ. P. 7(a); see Yount v. Regents University, Inc., 2009 WL 995596, at *11-12 (D. Ariz. 2009) (slip copy) (denying motion to strike affidavit because an affidavit is not a pleading (citing Fed. R. Civ. P. 7(a), 12(f)); Utley v. Continental Divide Outfitters, 2009 WL 631465, at *2 (D. Idaho Mar. 10, 2009) (Rule 12(f) cannot be used to strike an affidavit). Moreover, motions to strike are generally disfavored. Lipsky v. Commonwealth United Corp., 551 F.2d 887, 893 (2nd Cir. 1976) ("In deciding whether to strike a Rule 12(f) motion on the ground that the matter is impertinent and immaterial, it is settled that the motion will be denied, unless it can be shown that no evidence in support of the allegation would be admissible.").

B. Motion to Remand

1. Diversity Jurisdiction Under CAFA

As previously stated, CAFA vests district courts with original jurisdiction of any civil action in which the amount of controversy exceeds $5,000,000 and in which the aggregate number of proposed plaintiffs is 100 or greater, and any member of the plaintiff class is a citizen ...


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