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Conder v. Home Savings of America

June 14, 2010


The opinion of the court was delivered by: Andrew J. Guilford United States District Judge


This case, like many others before this Court, involves the sale of an option adjustable-rate mortgage loan. Plaintiff John Conder ("Plaintiff") filed a Fourth Amended Class Action Complaint ("4AC"). Defendant Home Savings of America ("Defendant" or "HSA") moves for partial dismissal of Plaintiff's claims ("Motion to Dismiss") and to strike certain allegations ("Motion to Strike"). After reviewing the papers and arguments submitted by the parties, the Court GRANTS the Motion to Dismiss and DENIES the Motion to Strike as moot.


The following factual allegations are taken from Plaintiff's TAC, and as it must for this Motion, the Court assumes them to be true.

Plaintiff refinanced his existing home loan on October 13, 2006, by purchasing an Option Adjustable Rate Mortgage ("Option ARM") loan from Defendant. (4AC ¶ 3.)

According to the loan documents Defendant gave Plaintiff, the loan featured a fixed "teaser" interest rate of 1.25% and a low payment rate for the first several years of the loan term. (4AC ¶ 26.) The Truth in Lending Disclosure Statement that Defendant gave Plaintiff included a payment schedule with monthly payments based on that 1.25% interest rate for the first several years of the loan term, while referencing a much higher APR. (4AC ¶ 26.) Although the required payment stayed low, Plaintiff's interest rate went up after the first month. (SAC ¶¶ 26-27.) As a result, Plaintiff's payments were not applied to his principal, and he experienced negative amortization on his home loan. (SAC ¶ 27.)

Plaintiff's First Amended Complaint ("FAC") was brought against Defendant. In the FAC, Plaintiff brought four claims, based on breach of contract; fraudulent omissions; violations of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200, et seq.; and violations of the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601, et seq. On March 31, 2009, this Court granted in part and denied in part Defendant's motion to dismiss Plaintiff's FAC ("March 31 2009 Order," Docket Entry 64). In the March 31 Order, the Court denied Defendant's motion to dismiss the breach of contract claim, but granted the motion as to the claims for fraudulent concealment, UCL, and TILA. The Court gave Plaintiff leave to amend his complaint.

Plaintiff then filed a Second Amended Complaint ("SAC"), adding Aurora Loan Services ("ALS") as a Defendant. Plaintiff brought four claims in the SAC, numbered as follows: (1) Violations of TILA, against HSA; (2) breach of contract, against all Defendants; (3) fraudulent omissions, brought against HSA; and (4) unfair competition in violation of UCL, against all Defendants. Defendants filed partial motions to dismiss the SAC. This Court granted the motions, and found that the "the deficiencies of the SAC cannot be cured by further amendment, with the possible exception of the TILA claim relating to the equitable tolling doctrine." (January 27, 2010 Amended Order Granting Defendants' Motions to Dismiss, Docket Entry 119 ("January 27, 2010 Order"), 10:19-22.) Except for the TILA claim, HSA's motion was granted without leave to amend. ALS's motion was granted in its entirety, and ALS is no longer a party.

Plaintiff then filed a Third Amended Complaint ("TAC"). Soon after, the parties stipulated that Plaintiff could file the 4AC, and Plaintiff did so. In the 4AC, Plaintiff asserts two claims, numbered as follows: (1) TILA violations; and (2) breach of contract. Defendant once again moves to dismiss Plaintiff's TILA violations claim.


Plaintiff filed objections to Defendant's appendix. The Court did not rely on the documents provided in Defendant's appendix, so the objections are OVERRULED as moot.


Acourt should dismiss a complaint when its allegations fail to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). A complaint need only include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "'[D]etailed factual allegations' are not required." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (May 18, 2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007)). The Court must accept as true all factual allegations in the complaint and must draw all reasonable inferences from those allegations, construing the complaint in the light most favorable to the plaintiff. Westlands Water Dist. v. Firebaugh Canal, 10 F.3d 667, 670 (9th Cir. 1993).

But the complaint must allege "sufficient factual matter, accepted as true, to 'state a claim that is plausible on its face.'" Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1940 (citing Twombly, 550 U.S. at 556). A court should not accept "threadbare recitals of a cause of action's elements, supported by mere conclusory statements," Iqbal, 129 S.Ct. at 1940, or "allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Dismissal without ...

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