Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

Seema Khan v. World Savings Bank


January 11, 2010


The opinion of the court was delivered by: Lucy H. Koh United States District Judge

United States District Court For the Northern District of California


This action was originally filed in the Superior Court for the County of Santa Clara on August 2, 2010. See Notice of Removal (Dkt. No. 1) at Ex. A (Complaint). In the Complaint, Plaintiff alleges that Defendant World Savings Bank, FSB violated federal and California law in connection with a residential mortgage transaction. On September 9, 2010, Defendant Wells Fargo Bank, N.A.*fn1 removed the action to this Court. Id. Wells Fargo then filed Motions to Dismiss and Strike the Complaint on September 16, 2010. See Dkt. Nos. 6 and 7. These Motions were originally set for hearing on November 2, 2010. This date was vacated when the case was reassigned. Id. As a result, the oppositions to these motions were due on October 12, 2010, pursuant to Civil Local Rule 7-3. Plaintiff's counsel did not timely file an opposition or a statement of non-opposition, as required by Local Rule 7-3(b), in response to either Motion. On October 28, 2010, this matter was reassigned to the undersigned per the Defendant's declination to proceed before a Magistrate Judge. Pursuant to Civil Local Rule 7-1(b), the Court finds that this matter may be decided without oral argument. Accordingly, the hearing and case management conference currently scheduled for January 27, 2011 is hereby VACATED.

Because this request did not comply with various rules governing withdrawal of counsel, the Court denied this request and ordered that if Plaintiff's counsel wished to withdraw, he move to do so pursuant to Civil Local Rule 11-5(b). See Dkt. No. 16.

On November 2, 2010, Plaintiff's counsel filed a proposed "Consent Order Granting Substitution of Attorney," attempting to substitute his client as pro se counsel. See Dkt. No. 12.

On November 3, 2010, the Defendant filed an Amended Motion to Dismiss and Motion to Strike. See Dkt. Nos. 13 and 14. On November 18, the Court ordered that the Plaintiff file an opposition, or statement of non-opposition, to the Amended Motion to Dismiss by December 13, 2010. See Dkt. No. 18. Counsel was warned that repeated failure to follow the Civil Local Rules, including filing statements of non-opposition as required by Civil Local Rule 7-3(b), could lead to the imposition of sanctions. Id. at 1, n.1. As of today, January 11, 2011, the Plaintiff has filed no opposition or statement of non-opposition to either the Motion to Dismiss or the Motion to Strike.

Based on the papers filed herein, the Court GRANTS the Motion to Dismiss. The Motion to Strike 17 is therefore moot, and the Court does not consider it. Because it appears that Plaintiff's counsel 18 has abandoned this case without having formally withdrawn, the Court considers that Plaintiff is 19 proceeding pro se. Accordingly, the Court grants Plaintiff leave to amend the complaint to state a 20 claim. Any amended complaint must be filed within 30 days of the date of this order. Any 21 failure to file an amended complaint within 30 days will result in a dismissal with prejudice.

In addition, the Court finds that Plaintiff's counsel's repeated failure to follow the local 23 rules and this Court's Orders are likely sanctionable conduct. The Court hereby orders Plaintiff's 24 counsel to show cause why he should not be sanctioned for the following: 1) failure to comply 25 with Civil Local Rules and the California Rules of Professional Conduct, as outlined in the Court's Order of November 3, 2010 (Dkt. No. 16); 2) failure to follow Civil Local Rule 7-3(b) and file an 27 opposition or statement of non-opposition to the first Motions to Dismiss and Strike (Dkt. Nos. 6 28 and 7) by the deadline of October 12, 2010, set by the original hearing date of November 2, 2010; 3) failure to follow this Court's Order of November 18, 2010 and to file an opposition, or statement 2 of non-opposition, to the Amended Motion to Dismiss (Dkt. No. 13); 4) failure to follow Civil Strike by January 6, 2011; 5) additional failure to follow Civil Local Rule 7-3(b) in other matters 5 brought before this Court. See Jones v. PNC Bank, N.A., Case No. 10-cv-01077-LHK, 2010 U.S. No. 10-cv-04305 (N.D. Cal. filed September 23, 2010) (opposition or statement of non-opposition to Motions to Dismiss and Strike due on December 30, 2010 based on hearing date of January 20, LEXIS 59750 at *3 (N.D. Cal. June 16, 2010) (noting Plaintiff's counsel's failure to file an opposition to a Motion to Dismiss). Plaintiff's counsel's response to the Order to Show Cause is due February 17, 2011. The Court hereby sets a hearing date of March 17, 2011 at 1:30 p.m. for a hearing on the Order to Show Cause.

This action arises out of a mortgage transaction. However, the Complaint provides such scarce detail about the transaction at issue that the Court must rely primarily on documents submitted by Defendant to determine even basic information including the date the transaction occurred, the parties to the transaction, and the amount of the loan. See Defendant's Request for United States government officials working in their official capacities, the Court finds that they are "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned" and therefore takes judicial notice of them. See Corrie v. Caterpillar, Local Rule 7-3(b) and file an opposition or statement of non-opposition to the Amended Motion to Dist. LEXIS 92866 at *7-*8 (N.D. Cal. Aug. 20, 2010); Khan v. World Savings Bank, FSB, Case 2010; none filed); Huerta v. Ocwen Loan Servicing, LLC, No. 09-cv-05822, 2010 U.S. Dist.


Judicial Notice ("RJN"), Ex. A ("Note"), Ex. B ("Deed of Trust").*fn2 According to the Note and the 20 Deed of Trust, on November 8, 2007, Plaintiff Seema Khan*fn3 entered a loan to purchase real 2 property located at 3072 Silverland Drive, San Jose, California, 95135-2005 ("the Property"). See 3 Note at 1. The Deed of Trust identifies Plaintiff and Ahmed D. Afroz, her husband, as the 4 borrowers, and World Savings Bank, FSB as the lender. Id. Ahmed Afroz is not a named party in 5 the instant action. The note provided $660,000 to Plaintiff, and the Deed of Trust granted Complaint states in several places that Defendants "knew or should have known" that entering the Defendant a security interest in the Property. See Note at 1; Deed of Trust at 2. Although the Note would put Plaintiff at risk of foreclosure, neither party has submitted information indicating that the Property has been foreclosed upon.

chartered savings association or Federal savings bank. See RJN Ex. C (Letter from OTS dated April 21, 2006). World Savings Bank changed its name to Wachovia Mortgage, FSB in December, 13 Bank, N.A. Id. 15

California Business & Professions Code § 17200 et seq. (Unfair Competition Law or UCL); (2) 17 violation of the Real Estate Settlement Procedures Act of 1974 (RESPA), 12 U.S.C. § 2601 et seq.; 18 (3) violation of the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq., and its implementing 19 regulation, 12 C.F.R. § 226; (4) fraud; (5) fraud in the inducement; and (6) unfair business practices. Defendant has moved to dismiss on various grounds, including that all of Plaintiff's California law claims are preempted by the Home Owner's Loan Act (HOLA), and that Plaintiff has failed to plead sufficient facts to state claims under any of the asserted causes of action.

it fails to state a claim upon which relief can be granted. To survive a motion to dismiss, the World Savings Bank FSB, the entity that originated Plaintiff's mortgage, was a federally 2007. See RJN, Ex. F. In November, 2009, Wachovia Mortgage FSB merged with Wells Fargo

In Plaintiff's Complaint, she alleges the following claims for relief: (1) violation of


Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if 503 F.3d 974, 978 (9th Cir. 2007) (taking judicial notice of a government publication); Fed. R. Evid. 201(b).

plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. 2 Corp. v. Twombly, 550 U.S. 544, 570 (2007). This "facial plausibility" standard requires the 3 plaintiff to allege facts that add up to "more than a sheer possibility that a defendant has acted 4 unlawfully." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). In deciding whether the plaintiff has 5 stated a claim, the Court must assume the plaintiff's allegations are true and draw all reasonable 6 inferences in the plaintiff's favor. Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987).

However, the court is not required to accept as true "allegations that are merely conclusory, 8 unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 9 F.3d 1049, 1055 (9th Cir. 2008). Leave to amend must be granted unless it is clear that the 10 complaint's deficiencies cannot be cured by amendment. Lucas v. Dep't. of Corrections, 66 F.3d

HOLA applies to this action. Federal savings associations, including federal savings banks, are 16 subject to HOLA and regulated by the OTS. 12 U.S.C. § 1464; Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1005 (9th Cir. 2008). Although Wells Fargo is a federally chartered bank not subject to HOLA, Plaintiff's loan originated with World Savings Bank, which was a federal savings bank subject to HOLA and OTS regulations. RJN Ex. C. World Savings Bank later 20 changed its name to Wachovia Mortgage, FSB. RJN Ex. F. Wachovia Mortgage is now a division of Wells Fargo. Id. Thus, although Wells Fargo itself is not subject to HOLA and OTS regulations, this action is nonetheless governed by HOLA because Plaintiff's loan originated with a federal savings bank and was therefore subject to the requirements set forth in HOLA and OTS regulations. See Lopez v. Wachovia Mortg., 2010 U.S. Dist. LEXIS 72439, at *6 (N.D. Cal. July 19, 2010) (finding that although Wells Fargo is a federally chartered national bank, the action is governed by HOLA because the loan originated with World Savings Bank, which was regulated by OTS and subject to HOLA).

245, 248 (9th Cir. 1995).


a. HOLA Preemption

Before addressing Defendant's preemption arguments, the Court must determine whether 2 preemption. The Ninth Circuit has described HOLA and OTS regulations as a "radical and 3 comprehensive response to the inadequacies of the existing state system." Silvas, 514 F.3d at 1004 4 1979), aff'd, 445 U.S. 921 (1980)). In its role as principal regulator of federal savings associations, Since this action is governed by HOLA, the Court next must consider the scope of HOLA

(quoting Conference of Fed. Sav. & Loan Ass'ns v. Stein, 604 F.2d 1256, 1257, 1260 (9th Cir. 5

OTS promulgated an express field preemption regulation codified at 12 C.F.R. § 560.2. The 7 regulation states that "OTS hereby occupies the entire field of lending regulation for federal 8 savings associations." 12 C.F.R. § 560.2(a). The effect of this regulation is to leave virtually "no 9 room for state regulatory control." Silvas, 514 F.3d at 1004 (quoting Conference of Fed. Sav., 604 10 F.2d at 1257, 1260).

OTS regulations provide guidance on determining whether a state law is preempted.

Section 560.2(b) provides a nonexclusive list of the types of state laws preempted by the 13 regulation. This list includes "state laws purporting to impose requirements regarding . . . (4) the 14 terms of credit, including amortization of loans . . . (5) loan-related fees . . . (9) Disclosure and 15 advertising, including laws requiring specific statements, information, or other content to be 16 included in credit application forms, credit solicitations, billing statements, credit contracts, or 17 other credit-related documents and laws requiring creditors to supply copies of credit reports to 18 borrowers or applicants . . . (10) processing, origination, servicing, sale or purchase of, or 19 investment or participating in, mortgages . . . ." 12 C.F.R. § 560.2(b)(9). OTS further instructs that 20 the first step in a preemption analysis is to determine whether the state law at issue is of a type 21 listed in paragraph (b). Silvas, 514 F.3d at 1005. In doing so, the Court does "not look merely to the abstract nature of the cause of action allegedly preempted but rather to the functional effect upon lending operations of maintaining the cause of action." Naulty v. GreenPoint Mortg.

2, 2009). If an application of the state law to the activities of the federal savings bank would "impose requirements" regarding the lending activities listed in paragraph (b), then the analysis 27 ends there; the law is preempted. Silvas, 514 F.3d at 1005. Paragraph (c), which lists certain state 28 Funding, Inc., Nos. C 09-1542, C 09-1545, 2009 U.S. Dist. LEXIS 79250, at *12 (N.D. Cal. Sept. 25 laws that are not necessarily preempted, comes into play only if the state law is not covered by 2 paragraph (b). Id. 3

Defendant argues that Plaintiff's first, fourth, fifth, and sixth claims are preempted by HOLA. The Court considers these claims in turn.

7 statements." Plaintiff's allegations are, for the most part, quite vague. She states that Defendant's 8 misleading and untrue statements addressed "the terms and payment obligations, including 9 statements of the duration of the original payment, duration and amount of the interest rate, and 10 statements obfuscating the risks of loan . . . the prepayment penalty . . . that the home value would continue to rise and that Plaintiff could refinance quickly . . . [and that Defendant] did not make any payments of kickbacks . . . in violation of RESPA." Because this claim is entirely based on 13

i. Claim 1: California Business and Professions Code § 17200 et seq.

In her UCL claim, Plaintiff alleges that Defendant made "untrue and misleading

Defendant's disclosures regarding the terms and risks of the loan, it falls within the specific type of 14 preempted state laws listed in § 560.2(b)(9). Silvas, 514 F.3d at 1006 (noting that OTS issued a 15 Legal Opinion letter stating that an Indiana law simply incorporating federal disclosure 16 requirements was preempted by HOLA, and that this Legal Opinion must be given "controlling 17 weight" pursuant to Auer v. Robbins, 519 U.S. 452, 461 (1997)). See also, e.g., Newsom v. 18

HOLA preempted fraud claim alleging that defendant failed to provide disclosures required by 20

2d 1226, 1237-38 (E.D. Cal. 2010) (finding that HOLA preempted fraud claim alleging that 22 defendant made material false representations regarding plaintiffs' loan). Therefore, under the 23 approach put forth by OTS and adopted by the Ninth Circuit, the preemption analysis ends, and 24

Plaintiff's UCL claim is preempted and dismissed. Plaintiff may amend this claim if she can state 25 a non-preempted basis for it. 26

28 statements Defendant allegedly made in connection with the loan transaction. The Complaint Countrywide Home Loans, Inc., 714 F. Supp. 2d 1000, 1006-08 (N.D. Cal. 2010) (finding that 19 TILA, and misrepresented interest rates and fees); Amaral v. Wachovia Mortg. Corp., 692 F. Supp. 21

ii. Claim 4: Fraud

Like Plaintiff's UCL claim, her fraud claim is based on vaguely-asserted false or misleading alleges that the Defendant "represented to Plaintiff that all the statements made to him in the 2 origination of the RML [residential mortgage loan] were true and that the value of the Subject 3

Defendant(s) "represented themselves as loan experts and represented their employees or third 5 parties such as the appraiser as experts in the field." Compl. ¶ 50. These allegations are so vague 6 that it is difficult to tell exactly what statements Plaintiff bases her fraud claim on, but as best the 7

Property which supported the loan was also true." Compl. ¶ 48. Plaintiff further alleges that 4

Court can tell, this claim appears to depend on the basic allegation that Defendant failed to make 8 required disclosures, or falsely advertised its own expertise or that of third parties. Accordingly, 9 these statements appear to fall squarely within the preempted "disclosure and advertising" 10 categories of 12 C.F.R. § 560.2(b)(9). Therefore, pursuant to the analysis in the preceding section,

Plaintiff's fraud claim is preempted by HOLA and is thus dismissed. Plaintiff may amend this claim if she can state a non-preempted basis for it. 13

15 includ[ing] but . . . not limited to statements about the increase of value of the property, the ease 16 that refinancing would occur, the monthly payments and interest rate." Compl. ¶ 54. As with 17

Plaintiff's fraud claim, all of the alleged bases of the fraud in the inducement claim relate to 18 disclosures made during origination of a mortgage loan, and, pursuant to the analysis above, are 19 preempted by HOLA. Thus, Plaintiff's fraud in the inducement claim is dismissed. Plaintiff may 20 amend this claim if she can state a non-preempted basis for it. 21

23 order to allow for a larger loan to maximize Defendants profits. Further, Defendants false 24 promises and statements were designed to unfairly prejudice Plaintiff and profit from Plaintiff's 25 loss." Compl. ¶ 59. Like the UCL, fraud, and fraud in the inducement claims, these allegations fall 26 within the preempted categories from 12 C.F.R. § 560.2(b), including "processing, origination, 27 servicing, sale or purchase of, or investment or participating in, mortgages." Grant v. Aurora Loan 28

iii. Claim 5: Fraud in the Inducement

The Complaint alleges that the Defendant "made a series of fraudulent promises . . .

iv. Claim 6: Unfair Business Practices

Plaintiff's sixth claim alleges that Defendant "artificially rais[ed] the value of the home in Servs., No. CV 09-08174- MMM, 2010 U.S. Dist. LEXIS 98034 at *45-*47 (C.D. Cal. Sept. 10, 2010) (finding unfair practices claim based on allegedly inaccurate appraisals preempted by 2

HOLA, and citing additional cases in accord). Accordingly, Plaintiff's unfair business practices 3 claim is dismissed. Plaintiff may amend this claim if she can state a non-preempted basis for it. 4


Plaintiff's second cause of action cites no specific RESPA provision allegedly violated.

She alleges RESPA was violated by a) statements regarding the terms and payment obligations, 7 including statements of the duration of the original payment, duration and amount of the interest 8 rate and b) statements regarding the prepayment penalty, including that the loan had no prepayment 9 penalty, or that the prepayment penalty could be easily waved by making payments of kickbacks, 10 fees or other "things of value." Compl. ¶¶ 42-43. In paragraph 14 of the Complaint, Plaintiff 11 alleges that RESPA was violated by kickbacks in violation of "Section 8" of RESPA.

13 legal conclusions can provide the complaint's framework, they must be supported by factual 14 allegations." Iqbal, 129 S.Ct. at 1940 (2009). Plaintiff's pleadings, stated without specificity and 15 in the alternative, are so vague that they deprive the Defendant the opportunity to respond to them. 16

RESPA claim is dismissed with leave to amend. 18

"Repayment Ability;" b) failing to clearly and conspicuously disclose key provisions of Plaintiff's 22 mortgage, including the eventually reset interest rate, specific loan terms, and the total dollar 23 amount the mortgage would cost over time. Compl. ¶ 45. In order to satisfy Rule 8, Plaintiff must 24 identify what specific sections of TILA she claims were violated, and by what specific actions of 25

Defendant. Like her RESPA claim, Plaintiff's TILA claim is simply too vague and conclusory to 26 meet Rule 8's requirements. Accordingly, this claim is dismissed with leave to amend. 27 28

In order to satisfy Rule 8, the Plaintiff must provide more than legal conclusions. "While

The Court need not accept such allegations as true. Iqbal, 129 S.Ct. at 1950. Accordingly, the 17


Like the rest of Plaintiff's claims, her TILA claim is supported only by legal conclusions.

Plaintiff alleges that Defendant violated TILA by a) failing to inspect her current and expected 21


Plaintiff has failed to state a claim on any of the causes of action advanced in the Complaint. Plaintiff's UCL claim (claim 1), fraud claim (claim 4), fraud in the inducement claim 4 (claim 5) and unfair business practices claim (claim 6) are dismissed because they are preempted 5 by HOLA. Plaintiff may amend the Complaint to state these claims on a non-preempted basis, if 6 she can. The RESPA claim (claim 2) and TILA claim (claim 3) are dismissed with leave to amend. 7

The Court did not reach a number of arguments raised by Defendant's motions because it was not 8 necessary to do so in order to decide these motions. However, if Plaintiff chooses to file an 9 amended complaint, she should carefully consider and address the deficiencies raised by Defendant 10 in its motions to dismiss and to strike.

Plaintiff may file an amended complaint within 30 days of the date of this Order. If Plaintiff fails to do so, this matter will be dismissed with prejudice.


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.