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Ajay and Tanuja Pradhan, Individuals, Maya Bali, An Individual v. Citibank

January 10, 2011


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


Defendants Citibank, N.A. and CitiMortgage, Inc. move to dismiss Plaintiffs Ajay Pradhan, Tanuja Pradhan, and Maya Bali's First Amended Class Action Complaint (Dkt. No. 11, "FAC").*fn1

See Dkt. No. 27 ("Mot."). Plaintiffs failed to file either an opposition brief or a statement of non-21 opposition in violation of Civil Local Rule 7-3.*fn2 Pursuant to Civil Local Rule 7-1(b), the Court 22 deems this motion suitable for decision without oral argument. After considering Defendants' 23 arguments and the relevant authorities, this Court hereby GRANTS Defendants' motion to dismiss Plaintiffs' FAC and VACATES both the motion hearing set for January 13, 2011 on this matter and 25 the Case Management Conference set to follow the motion hearing.


Plaintiffs allege that Defendants engaged in a predatory lending scheme. FAC ¶¶ 47-52.*fn3

According to Plaintiffs, Defendants, through deceptive and fraudulent practices, sought to maximize their profits by selling risky and costly loans to homeowners without informing those homeowners of the terms and risks of those loans. Id. ¶¶ 47-62. Plaintiffs allege that these risky loan products include, among other examples, subprime mortgages, adjustable rate mortgages, piggy-backed home equity lines of credit, prepayment penalties, and interest-only loans. Id. ¶ 28.

In addition, Plaintiffs claim that Defendants used deceptive marketing and high-pressure sales techniques to push these loan products on consumers despite numerous complaints by borrowers that they did not understand their loan terms. Id. ¶¶ 47-50. Plaintiffs claim that Defendants deceptively sold these products because of the profits available from the sale of these loans on the secondary market. Id. ¶¶ 51-62. In addition to these general allegations, Plaintiffs make specific allegations regarding their involvement with Defendants.

Ajay and Tanuja Pradhan

Ajay and Tanuja Pradhan originally purchased their home, financed with a mortgage from Defendants, in 2007. Id. ¶ 30. The mortgage required interest-only payments and had a fixed interest rate for one year, after which the interest rate became adjustable. Id. When the fixed rate was set to expire, the Pradhans looked to refinance. Id. ¶ 31. They first approached a private credit union and paid for initial appraisals and broker fees in order to obtain a better mortgage. Id.

Defendants then phoned the Pradhans and informed the couple that Defendants could offer them a fixed rate mortgage at a lower payment. Id. ¶ 32. Following the advice of Defendants' loan officer, the Pradhans abandoned their credit union loan application. Id. After further review, however, Defendants found that the Pradhans did not qualify for a refinance because their property value had not increased. Id. ¶ 33. At the time of this finding, the Pradhans' loan rate had already increased, adjusting to the prevailing high market rates. Id.

Defendants subsequently sold the Pradhans two loan products. Id. ¶ 34. The first was a five-year fixed then adjustable rate mortgage with interest-only payments for the first five years.

Id. The second was a home equity line of credit ("HELOC") with a forced cash-out at closing. Id.

Since obtaining these loans, the Pradhans have been unable to refinance again. Id. ¶ 37. Moreover, by purchasing the HELOC loan, the Pradhans lost the $200,000 worth of equity they had in their home. Id. According to the Pradhans, they are now facing the reality of short selling or losing their home. Id.

Maya Bali

Maya Bali purchased a home with her now deceased husband in 2007. Id. ¶ 38. In 2008, after Bali decided to refinance her home loan, Defendants contacted her by phone. Id. Defendants informed Bali that she could obtain a lower interest rate and lower monthly payments by refinancing with Defendants. Id. After beginning the loan application, Bali's husband passed away. Id. ¶¶ 39-40. Bali filled out a new loan application for a one-year fixed then adjustable rate mortgage with interest-only payments for five years. Id. ¶ 41. 13

According to Bali, the loan officer inflated her income in order to ensure that she still qualified for the loan. Id. ¶ 42. Bali claims that her 2006 tax returns show an annual income of $31,317.96 or a monthly income of $2,609.83. Id. ¶ 42. On her loan application, however, Bali alleges that the loan officer inflated her income to show that she earned $6,500 a month as a cashier at Burger King. Id. ¶ 42.

Bali claims that at no time before submission did Defendants provide her copies of the loan origination agreement or required upfront disclosures. Id. ¶ 44. In addition, Bali alleges that Defendants did not provide her full disclosure of her predictable monthly mortgage payments or 21 the total amount the financing for her home would cost. Id. ¶ 45. Bali claims that her monthly 22 mortgage payments, plus tax and insurance, totaled $2,891.29, two hundred dollars more than her 23 monthly income. Id. ¶ 44. Bali alleges that as a result of Defendants' actions, she is in imminent 24 danger of losing her home. Id. ¶ 46. 25

Based on these and other allegations contained in the FAC, Plaintiffs claim that Defendants 26 violated several federal and state statutes, including: (1) 18 U.S.C. §§ 1961-1968 (Racketeer 27 Influenced and Corrupt Organizations Act ("RICO")); (2) 15 U.S.C. § 1601, et seq. (Truth in 28 Lending Act ("TILA")); (3) California Business and Professions Code § 17500; and (4) California Business and Professions Code § 17200. Plaintiffs also claim that Defendants' actions constitute a 2 breach of the implied covenant of good faith and fair dealing. 3

Defendants move this Court pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 9(b) to dismiss Plaintiffs' complaint in its entirety. Mot. 1. In addition, Defendants 5 request this Court to take judicial notice of four exhibits filed in connection with their motion to 6 dismiss. See Dkt. No. 28 ("RJN"). 7


A defendant can move to dismiss a complaint under Rule 12(b)(1) for lack of standing. See Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010) ("Because 10 standing and ripeness pertain to federal courts' subject matter jurisdiction, they are properly raised in a Rule 12(b)(1) motion to dismiss.") (citations omitted). "On a motion to dismiss for lack of standing, a district court must accept as true all material allegations in the complaint, and must 13 construe the complaint in the non-movant's favor." Id. at 1121 (citing Bernhardt v. County of Los Angeles, 279 F.3d 862, 867 (9th Cir. 2002)). 15

A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of a complaint. See Ileto v. Glock Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003). "To survive a motion to dismiss, a 17 complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is 18 plausible on its face.'" Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 19 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 127 S. Ct. 1955, 167 L. Ed. 20 2d 929 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that 21 allows the court to draw the reasonable inference that the defendant is liable for the misconduct 22 alleged." Caviness v. Horizon Cmty. Learning Ctr., Inc., 590 F.3d 806, 812 (9th Cir. 2010) 23 (quoting Iqbal, 129 S. Ct. at 1949) (internal quotation marks omitted). When the facts alleged do 24 not nudge a plaintiff's claim "across the line from conceivable to plausible," the court should 25 dismiss the complaint. See Twombly, 550 U.S. at 570, 127 S. Ct. 1955. "Determining whether a 26 complaint states a plausible claim for relief" is "a context-specific task that requires the reviewing 27 court to draw on its judicial experience and common sense." Iqbal, 129 S. Ct. at 1950 (citation 28 omitted).

Even if Plaintiff's FAC fails to state a claim on which relief can be granted, "a district court 2 should grant leave to amend even if no request to amend the pleading was made, unless it 3 determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. 4 Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en banc) (citations and quotations omitted); see also 5 Balistreri v. Pacifica Police Dept., 901 F.2d 696,701 (9th Cir. 1990).


Defendants move to dismiss Plaintiffs' entire complaint under Rule 12(b)(1) and move to 8 dismiss each of Plaintiffs' individual claims under Rule 12(b)(6). In addition, Defendants argue 9 that this Court should dismiss Plaintiffs' claim pursuant to Federal Rule of Civil Procedure 41(b).

A. Rule 12(b)(1) Motion

Defendants first argue that because none of the Plaintiffs have constitutional standing to maintain this action against CitiMortgage or Citibank, this Court should dismiss Plaintiffs' FAC 13 under Rule 12(b)(1). 14

The "irreducible constitutional minimum of standing contains three elements." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S. Ct. 2130, 2136, 119 L. Ed. 2d 351 (1992). These 16 elements are: (1) "the plaintiff must have suffered an injury in fact" that is both "concrete and 17 particularized" and "actual or imminent, not conjectural or hypothetical"; (2) "there must be a 18 causal connection between the injury and the conduct complained of"; and (3) "it must be likely, as 19 opposed to merely speculative, that the injury will be redressed by a favorable decision." Id. at 20 560-61, 112 S. Ct. 2130 (citations, quotations, and quotation marks omitted). Plaintiffs have the 21 burden of establishing these elements. Id. at 561, 112 S. Ct. 2130 (citations omitted). "At the 22 pleading stage, general factual allegations of injury resulting from the defendant's conduct may 23 suffice, for on a motion to dismiss we presume that general allegations embrace those specific facts 24 that are necessary to support the claim." Id., 112 S. Ct. 2130 (citation, alterations, and quotation 25 marks omitted). 26

Defendants claim that Plaintiffs have failed to allege enough facts to satisfy the first two elements. Mot. 5. In arguing that Plaintiffs have failed to suffer an injury in fact, Defendants point 28 out that the Pradhans have not alleged that they are in default on their loans, unable to make their loan payments, or facing foreclosure. Id. at 7. Defendants also claim that Bali does not allege that 2 she is in default on her loan or is facing foreclosure. Id. 3

Even though Defendants correctly point out that Plaintiffs have yet to suffer every possible injury that could result from Defendants' alleged conduct, Defendants' argument fails to appreciate 5 both the fully-materialized injuries that the Pradhans have allegedly suffered and the imminent 6 harm that Bali alleges she will soon suffer. As alleged in the FAC, the Pradhans lost all the 7 accumulated equity in their home when they refinanced their home mortgage with Defendants. In 8 addition, the Pradhans claim that after refinancing their home with Defendants, they must pay off 9 two loans-the adjustable rate mortgage and the HELOC-instead of the single mortgage payment 10 they originally had. According to the FAC, this situation occurred after Defendants allegedly convinced the Pradhans to abandon a pending loan application with a credit union and fraudulently induced them into these expensive loans. According to the facts contained in the FAC, Bali is in 13 imminent danger of losing her home as a result of the loan that Defendants allegedly sold her using 14 fraudulent means. This danger is realistically imminent given that Bali's monthly loan payment is 15 two hundred dollars more than her monthly income. 16

These actual and imminent injuries are concrete and particular. Simply because they may 17 yet become more serious does not make them hypothetical or conjectural in nature. Thus, they are 18 properly considered injuries in fact. 19

Defendants also argue that Plaintiffs' complaint does not allege any injury traceable to CitiMortgage or Citibank. Id. at 5. In their complaint, the Plaintiffs allege that the Defendants 21 engaged in several different practices that constitute predatory lending. Defendants argue that 22 because Plaintiffs do not claim to have been affected by all of these practices, the Plaintiffs lack 23 standing to maintain this action. Id. at 6. Defendants further argue that the doctrine of standing 24 prohibits one party from asserting another party's rights and that a class representative cannot 25 litigate a claim against a defendant whom the representative could not sue individually. Id. ...

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