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Seema Khan, An Individual v. World Savings Bank

January 14, 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 dismiss Plaintiff Seema Khan's Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) and to strike portions of the Complaint pursuant to Rule 12(f). Plaintiff, who is represented by counsel, did not oppose either motion.*fn1 Pursuant to Civil Local Rule 7-1(b), the Court finds that this motion is appropriate for determination without oral argument. Having considered the 22 submissions of the parties and the relevant law, the Court GRANTS Defendant's motion to dismiss with leave to amend in part, and DENIES as moot the motion to strike. Accordingly, the motion hearing and case management conference previously scheduled for January 20, 2011 are vacated.


This action arises out of a mortgage transaction involving property located at 122 Thorn Grove Place, Germantown, Maryland. Compl. -¶ 1. Plaintiff Seema Khan originally brought suit in state court on August 18, 2010, and Defendant Wells Fargo removed the case to federal court on September 23, 2010. The Complaint in this case contains general allegations about Defendant's loan origination practices and provides very few facts specific to Plaintiff or to the mortgage at issue. Indeed, with the exception of the Complaint's first paragraph, which identifies Seema Khan 8 as an individual residing in Maryland, the Complaint in this case appears to be identical to a complaint filed by the same attorney, apparently on behalf of the same Plaintiff, concerning a different mortgage on a property located in San Jose, California. See Compl., Khan v. World Savings Bank, No. 10-CV-04057 (N.D. Cal. Sept. 9, 2010).

Documents submitted by Defendant Wells Fargo, and properly subject to judicial notice,*fn2 establish that on December 5, 2005, Plaintiff Seema Khan and her husband Ahmed Danish Afroz entered into an adjustable rate mortgage with World Savings Bank, FSB, now Wells Fargo, NA, in the amount of $216,000. Def. Wells Fargo's Req. for Judicial Notice in Supp. of Amended Mot. to 16 Mortgage Note was secured by a Deed of Trust on Plaintiff's property at 12215 Thorn Grove Place 18 in Germantown, Maryland. RJN Ex. B at 11. While the Complaint alleges that Defendant's loan United States District Court For the Northern District of California Dismiss and Strike Portions of the Compl. ("RJN"), Ex. A at 4; Ex. B at 11. The Adjustable Rate origination practices induced Plaintiff to accept a risky loan product, Compl. -¶ 20, and that Defendant should have known that Plaintiff's loan might result in foreclosure, Compl. -¶-¶ 21-22, it is unclear whether Defendant has actually attempted to foreclose on the property.

Estate Settlement Procedures Act of 1974 ("RESPA"), 12 U.S.C. -§ 2601 et seq.; (3) violation of the Truth in Lending Act ("TILA"), U.S.C. -§ 1601 et seq., and its implementing regulation, Plaintiff's Complaint asserts six claims for relief: (1) violation of the California Unfair Competition Law ("UCL"), Cal. Bus. & Profs. Code -§ 17200 et seq.; (2) violation of the Real C.F.R. -§ 226; (4) fraud; (5) fraud in the inducement; and (6) unfair business practices. Defendant 9 now moves to dismiss the Complaint pursuant to Federal Rule 12(b)(6) on grounds that Plaintiff's claims are time-barred, preempted by federal law, or fail to allege facts sufficient to state a plausible claim for relief. Defendant also moves to strike portions of the Complaint on grounds United States District Court For the Northern District of California that Plaintiff is not legally entitled to certain damages claims and has failed to plead facts sufficient 13 to demonstrate an entitlement to other damages claims. As the Court agrees that the Complaint must be dismissed pursuant to Rule 12(b)(6), the Court does not reach the motion to strike and will 15 deny it as moot. sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In considering whether the complaint is sufficient to state a claim, the court must accept as true all of the factual allegations contained in the complaint. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). However, the court need not accept as true "allegations that contradict matters properly subject to judicial notice or by exhibit" or "allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." St. Clare v. Gilead Scis., Inc. (In re Gilead Scis. Sec. Litig.), 536 F.3d 049, 1055 (9th Cir. 2008). While a complaint need not allege detailed factual allegations, it "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 129 S.Ct. at 1949 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949.

II.Legal Standard

A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal of Federal Rule of Civil Procedure 9(b). Under the federal rules, a plaintiff alleging fraud "must state with particularity the circumstances constituting fraud." Fed. R. Civ. Pro. 9(b). To satisfy this standard, the allegations must be "specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong." Semegen v. Weidner, 780 F.2d 727, Additionally, claims sounding in fraud are subject to the heightened pleading requirements731 (9th Cir. 1985). Thus, claims sounding in fraud must allege "an account of the time, place, and 8 specific content of the false representations as well as the identities of the parties to the 9 misrepresentations." Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007). could not possibly be cured by the allegation of other facts. Lopez v. Smith, 203 F.3d 1122, 1130(9th Cir. 2000).

Owner's Loan Act ("HOLA"), 12 U.S.C. -§ 1461 et seq.*fn3 Federal savings associations, including federal savings banks, are subject to HOLA and regulated by the Office of Thrift Supervision As a national bank, Defendant Wells Fargo is not itself subject to HOLA or regulated by OTS. See Bank of America v. City and County of San Francisco, 309 F.3d 551, 561-62 (9th Cir. 2002) If a court grants a motion to dismiss, leave to amend should be granted unless the pleadingUnited States District Court For the Northern District of California


A.HOLA Preemption of State Law Claims

Defendant argues that each of Plaintiff's state law claims is preempted by the Home ("OTS"). 12 U.S.C. -§ 1464; Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1005 (9th Cir. 2008).

(describing regulation of national banks by the National Bank Act and the Office of the Comptroller of Currency). However, Plaintiff's loan originated with World Savings Bank, which was a federal savings bank subject to HOLA and OTS regulations, RJN Ex. C, and Plaintiff's allegations focus solely on actions taken by World Savings Bank during the origination of Mortgage, FSB, remaining under the regulatory authority of OTS and subject to HOLA. RJN Ex.

Fargo itself is not subject to HOLA and OTS regulations, HOLA nonetheless applies to this action 9 because Plaintiff's loan originated with a federal savings bank and was therefore subject to the 10 requirements set forth in HOLA and OTS regulations. See Lopez v. Wachovia Mortg., No. C 10- Plaintiff's loan. See Compl. -¶-¶ 36-59. World Savings Bank later changed its name to Wachovia D-E. Wachovia Mortgage is now a division of Wells Fargo. RJN Ex. F-G. Thus, although Wells 01645, 2010 WL 2836823, at *2 (N.D. Cal. July 19, 2010) (finding that although Wells Fargo is aUnited States District CourtFor the Northern District of California 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).

preemption. The Ninth Circuit has described HOLA and OTS regulations as a "radical and 16 comprehensive response to the inadequacies of the existing state system." Silvas, 514 F.3d at 1004 1979), aff'd, 445 U.S. 921 (1980)). In its role as principal regulator of federal savings associations, OTS promulgated an express field preemption regulation codified at 12 C.F.R. -§ 560.2. The 20 regulation states that "OTS hereby occupies the entire field of lending regulation for federal 21 savings associations." 12 C.F.R. -§ 560.2(a). The effect of this regulation is to leave virtually "no 22 room for state regulatory ...

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