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Kris Kaszuba, et al v. Octfcu Fidelity National Default Mortgage Co. LLC and Services

August 12, 2011


The opinion of the court was delivered by: Hon. Dana M. Sabraw United States District Judge


Pending before the Court is a motion to dismiss Plaintiffs' Complaint by Defendants OCTFCU Mortgage Co. LLC ("OCTFCU") and Schools First Federal Credit Union ("SFFCU") under Federal Rule of Civil Procedure 12(b)(1) and (b)(6). (Doc. 47.) For the following reasons, the motion is granted in part and denied in part.


This case involves a loan obtained by Plaintiffs on or about September 28, 2005, which is secured by a Deed of Trust on their property. (Complaint at ¶ 10.) The loan was funded by OCTFCU, a former affiliate of SFFCU. (Id.) Plaintiffs eventually defaulted on the loan and received a Notice of Default on July 16, 2010. (Id. at ¶ 14.) The Notice of Default also included a Substitution of Trustee substituting in Defendant Fidelity National Default Services ("Fidelity") as the Trustee. The Substitution of Trustee was signed on October 21, 2010 by SFFCU, as successor in interest to OCTFCU. (Id. at ¶ 15.) However, it was notarized on October 19, 2010. (Id.) A Notice of Sale was posted on the front of the complex in which Plaintiffs' property is located on January 11, 2011 by Fidelity, although it was dated January 13, 2011. (Id.) A foreclosure sale was scheduled for February 4, 2011. (Id. at 1.)

On January 21, 2011, Plaintiffs filed a Complaint against Defendants Fidelity, OCTFCU, and SFFCU. (Doc. 1.) The Complaint sets forth eight claims for relief: (1) unfair and deceptive practices,

(2) negligence, (3) breach of fiduciary duties, (4) fraud, (5) predatory lending practices, (6) to set aside and vacate the trustee's sale, (7) rescission of the Deed of Trust, and (8) application for a temporary restraining order ("TRO"). On January 24, 2011, the Court issued an Order denying Plaintiffs' application for a TRO. (Doc. 2.) On February 2, 2011, Plaintiffs filed an amended motion for a TRO and preliminary injunction, seeking this Court's order enjoining the foreclosure sale. (Doc. 4.) The Court issued an Order on February 4, 2011 granting Plaintiffs' amended motion for a TRO and ordering Defendants to show cause, on or before February 8, 2011, why a preliminary injunction should not be issued enjoining Defendants from taking such actions until the termination of this case. (Doc. 5.) The Court scheduled a hearing on Plaintiffs' motion for a preliminary injunction for February 10, 2011. Plaintiffs appeared at the hearing, but Defendants did not. The Court issued an Order granting Plaintiffs' motion for a preliminary injunction on February 10, 2011. (Doc. 16.)

On March 14, 2011, upon request by Plaintiffs, the Clerk entered default as to each of the Defendants. (Doc. 23.) OCTFCU and SFFCU filed a motion to set aside entry of default on April 4, 2011, which the Court granted on June 17, 2011. (Docs. 27, 46.) OCTFCU and SFFCU filed the instant motion to dismiss on June 17, 2011. (Doc. 47.) Plaintiffs filed an Opposition and Defendants filed a Reply. (Docs. 50, 52.)


A. Rule 12(b)(1) Motion

As an initial matter, OCTFCU and SFFCU move to dismiss Plaintiffs' Complaint on the basis that the Court lacks subject matter jurisdiction over the action. Defendants argue there are no claims in the Complaint which arise under federal law and the parties are not of diverse citizenship because, at a minimum, Plaintiffs and OCTFCU are both citizens of California. See 28 U.S.C. § 1332. Plaintiffs state in their Complaint that the Court has jurisdiction pursuant to the Truth in Lending Act ("TILA"), the Real Estate Settlement Procedures Act ("RESPA"), and the Fair Debt Collection Practices Act ("FDCPA"), although the Complaint itself does not explicitly state claims for relief under these statutes. (See Complaint at 2.) The Complaint does, however, state Defendants engaged in acts contrary to state and federal law and attaches the notice provided to Plaintiffs by Defendants pursuant to the FDCPA. (See id. at ¶ 33.) The Court liberally construes pro se Plaintiffs' Complaint as stating sufficient claims arising under federal law to sustain this Court's subject matter jurisdiction over the action. Accordingly, Defendants' motion to dismiss on this basis is denied.

B. Rule 12(b)(6) Motion

1. Legal Standard

A party may move to dismiss a claim under Rule 12(b)(6) if the claimant fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). The Federal Rules require a pleading to include a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Supreme Court, however, recently established a more stringent standard of review for pleadings in the context of 12(b)(6) motions to dismiss. See Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). To survive a motion to dismiss under this new standard, "a complaint 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 Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). "Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950 (citing ...

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