The opinion of the court was delivered by: Honorablelarryalanburns United States District Judge
ORDER ON DEFENDANTS' MOTIONS TO DISMISS
Perhaps mindful of the burden that the avalanche of (mostly losing) foreclosure cases has been on this Court's civil docket in recent years, and eager to assure the Court that this case isn't one of them, Banayan opens his complaint with an encouraging disclaimer: "This is not a suit by a borrower to prevent a foreclosure sale after the borrower borrowed more money from the lender than he could afford to repay, and then defaulted on the Loan." (FAC ¶ 2.)
Banayan is a homeowner, and the Defendants are major players in the mortgage industry. Banayan's claims arise out of a home loan and subsequent foreclosure proceedings, and they are the usual ones: breach of contract, quiet title, rescission, fraud, violations of the Real Estate Settlement Procedures Act and Truth in Lending Act, and so forth. And at 126 pages, 418 paragraphs, and 22 claims thick, Banayan's complaint, with its running commentary of grievances and corresponding lack of focus, reads exactly like a suit brought by a borrower to prevent a foreclosure sale. In any event, now before the Court are the Defendants' motions to dismiss Banayan's complaint for failure to state a claim.
Banayan has owned a home in La Jolla since 1994, and on January 3, 2007, he borrowed $3,412,500 from IndyMac to refinance and extensively remodel it. Banayan owed about $1.5 million on his home at the time, so presumably he intended to spend almost $2 million on his remodel. His loan payments were divided into two phases-a two-year "Construction Phase" during which he'd pay only interest on disbursed funds for remodeling work, and a thirty-year "Permanent Phase" during which he'd pay back principal as well. (See FAC ¶¶ 56--61.)
This case only involves the Construction Phase. Banayan's core grievance is that during the second year of the Construction Phase, IndyMac didn't disburse remodeling funds quickly enough when he requested them, and just generally engaged in obstructionist tactics and predatory accounting that stalled Banayan's remodeling efforts and resulted in excess interest and other charges. At the end of it all, Banayan was accused of defaulting on his loan and foreclosure proceedings were initiated by OneWest*fn1 - even though, he claims, remodeling work "was 98% complete and there were sufficient funds left to complete the project." (FAC ¶ 71bb.) The Court won't catalog Banayan's particular grievances. His complaint does almost too good a job of that, and not in a way that allows for a simple summary. (See FAC ¶¶ 73--237.)
A 12(b)(6) motion to dismiss for failure to state a claim challenges the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In considering such a motion, the Court accepts all allegations of material fact as true and construes them in the light most favorable to Banayan. Cedars-Sinai Med. Ctr. v. Nat'l League of Postmasters of U.S., 497 F.3d 972, 975 (9th Cir. 2007). To defeat a 12(b)(6) motion, a complaint's factual allegations needn't be detailed; they must simply be sufficient to "raise a right to relief above the speculative level . . . ." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, "some threshold of plausibility must be crossed at the outset" before a case can go forward. Id. at 558 (internal quotations omitted). 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." Ashcroft v. Iqbal, 556 U.S. ----, 129 S.Ct. 1937, 1949 (2009). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id.
While the Court must draw all reasonable inferences in Banayan's favor, it need not "necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (internal quotations omitted). In fact, the Court does not need to accept any legal conclusions as true. Iqbal, 129 S.Ct. at 1949. A complaint does not suffice "if it tenders naked assertions devoid of further factual enhancement." Id. (internal quotations omitted). Nor does it suffice if it contains a merely formulaic recitation of the elements of a cause of action. Twombly, 550 U.S. at 555.
Banayan originally filed this case in California Superior Court in San Diego. OneWest removed it because Banayan alleged violations of the Real Estate Settlement Procedures Act, the Truth in Lending Act, the Fair Debt Collection Practices Act, and RICO, which gave rise to subject matter jurisdiction under 28 U.S.C. § 1331 and supplemental jurisdiction under 28 U.S.C. § 1367. (Dkt. No. 1 at ¶¶ 5--7.) There is no alleged basis for diversity jurisdiction in this case, and the Court is well within its discretion to dismiss a case for lack of jurisdiction when all federal claims have been dismissed and only state law claims over which it has supplemental jurisdiction remain. United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966); Noyes v. Kelly Svcs., 488 F.3d 1163, 1173 (9th Cir. 2007); Acri v. Varian, 114 F.3d 999, 1000 (9th Cir. 1997); 28 U.S.C. § 1367(c). That would certainly be the Court's inclination here, which is why it will address Banayan's federal claims first.*fn2
T.D. Service filed a notice of default against Banayan on September 29, 2010. (FAC Ex. 10.) That is the only reason it is a Defendant in this case. As a substituted trustee merely retained to process a non-judicial foreclosure, it had nothing to do with making the underlying loan or processing the disbursements that are at the core of Banayan's claims against OneWest. Banayan's RICO claim against T.D. is his only claim against the company that arises under federal law.
RICO is a criminal statute. It prohibits four activities. See 18 U.S.C. §§ 1962(a)-(d). Banayan's civil RICO claim alleges that T.D. has engaged in two of those activities, namely those prohibited by §§ 1962(c) and 1962(d):
(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs ...