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Neighborhood Assistance Corporation of America, A California v. First One Lending Corporation

May 15, 2012

NEIGHBORHOOD ASSISTANCE CORPORATION OF AMERICA, A CALIFORNIA CORPORATION, PLAINTIFF,
v.
FIRST ONE LENDING CORPORATION, A CALIFORNIA CORPORATION, JOHN VESCERA, AN INDIVIDUAL, AND DOES 1-10. DEFENDANTS.



The opinion of the court was delivered by: David O. Carter United States District Judge

O

ORDER:

(1)DENYING DEFENDANTS' MOTION TO DISMISS (DKT. 8)

(2)GRANTING PLAINTIFF'S MOTION FOR PRELIMINATION INJUNCTION (DKT. 13)

Before the Court are two motions: (1) a Motion to Dismiss filed by Defendants First One Lending Corporation ("First One") and John Vescera ("Vescera") (Dkt. 8); and (2) a Motion for Preliminary Injunction (Dkt. 13) filed by Plaintiff Neighborhood Assistance Corporation of America ("Plaintiff" or "NACA").

The Court first addresses the Motion to Dismiss, which the Court finds is a matter appropriate for decision without oral argument and DENIES the Motion. See Fed R. Civ. P. 78; Local R. 7-15. The Court next addresses the Motion for Preliminary Injunction and, after considering all the moving papers and oral argument, the Court GRANTS the Motion.

I.Statement of Facts

The gravamen of Plaintiff's Complaint is that Defendants First One Lending Corporation and John Vescera (collectively, "Defendants") cheat desperate homeowners facing foreclosure by charging these victims one to two thousand dollars each based on false and misleading statements that Defendants provide mortgage modification services when, in fact, these services are provided to the public free of charge by Plaintiff, which is a non-profit community advocacy organization. The following summarizes the: (1) allegations in the Complaint and its attached documents, which are the only documents upon which the Court relies in resolving the Motion to Dismiss; and (2) other evidence on which the Court relies, in addition to the Complaint and its attached documents, in resolving the Motion for Preliminary Injunction.

a.Plaintiff's non-profit mission and reputation

i.Complaint's allegations

The Complaint alleges that, since 1994, Plaintiff Neighborhood Assistance Corporation of America is a not-for-profit corporation doing business under the trade name "NACA," and that it has developed a national reputation as a loan originator and advocate for low and moderate income homeowners. See Compl.¶¶ 8-12. In 2008, responding to the onset of the national mortgage crisis, NACA expanded its services to include assisting homeowners saddled with unaffordable mortgage payments and facing foreclosure of their homes. Id.

ii.Additional evidence in the Motion for Preliminary Injunction

Plaintiff's declaration and exhibits reiterates the information listed above and states that Plaintiff provides mortgage-related housing assistance to primarily low and moderate income families in more than twenty-five states and the District of Columbia. Exum Decl. in Support of Mot. for Preliminary Injunction ("Exum Decl.") ¶ 2. Prior to 2008, the primary services NACA provided were loan origination services, which NACA continues to provide in partnership with Bank of America and Citibank. Id. ¶ 3.

b.Plaintiff's registered and unregistered marks

i.Complaint's allegations

Plaintiff has two valid registered servicemarks in the word "NACA" that were deemed incontestable by the U.S. Patent and Trademark Office in 2009. Compl. ¶ 9.

Plaintiff has a program called the "Home Save Program" that assists homeowners saddled with unaffordable mortgage payments. See id. ¶¶ 13-16. Plaintiff has invested significant resources into promoting this program. See id.

One of the means by which Plaintiff promotes the program is through events called "Save-the-Dream" events, which are held in large meeting spaces throughout the country. See id.

ii.Additional evidence in the Motion for Preliminary Injunction

Plaintiff's declaration and exhibits reiterate the above information. Exum Decl. ¶ 2.

c.Defendants First One and Vescera and their relationship with NMAC and NMHC

i.Complaint's allegations

The Complaint alleges that Defendant Vescera is Defendant First One's CEO, President and sole director. Compl. ¶ 22. First One allegedly has done, and is currently doing business, under a variety of different names, including National Mortgage Help Center ("NMHC") and National Mortgage Assistance Center ("NMAC"). Id. ¶ 18.

ii.Additional evidence in the Motion for Preliminary Injunction

The information above is reiterated in Plaintiffs' declarations and exhibits. (McNamara Decl., Exs. C, D.). In addition, the evidence shows that First One's promotional materials expressly state that "[t]he NMHC Program is through First One" and "National Mortgage Help Center is a program of First One." Ahrendt Decl. Ex. A at 7; McNamara Decl. Ex. E at 52. First One's business address as the address for the National Mortgage Help Center: "National Mortgage Help Center / 31831 Camino Capistrano Suite 300B / San Juan Capistrano, Ca 92675." Id., Ex. E at 54; Ex. E at 47, 48, 51, 53, 56; Exs. F, G, H.

NMAC's website is almost identical to NMHC's website and they share the same telephone number. See McNamara Decl. Exs. B, C.

d.Defendants' statements suggesting an association between First One and Plaintiff

i.Complaint's allegations

The Complaint alleges that Defendants First One and Vescera, from May 2009 through the present, have used words, terms, names, devices and false and misleading representations of facts that are intended to and do in fact cause confusion as to First One's association with Plaintiff. See generally, Compl. ¶¶ 24-36. The Complaint specifically alleges that First One's marketing and promotional materials include several false or misleading statements as part of Defendants' scheme to create the false impression that First One is affiliated with Plaintiff, including the following representations that:

 First One is "a member of NAHCA." Id. ¶ 31n, Ex. H (emphasis added).  "First One coordinates each client's financial analysis submission to the Home Save Program of the Neighborhood Assistance Network of HUD Housing Counselors to assist you with your lender to achieve a result. HUD (Dept. of Housing and Urban Development) Housing Counseling assistance is provided at no-charge and is not contingent on you hiring First One for any other service." Id., ¶ 32b, Ex. I (emphasis added).  First One (operating as NMHC or NMAC) has been "Helping to Save the American

Dream since 1995." Id. ¶¶ 27d, 28 (emphasis added).  First One (operating as NMHC or NMAC) is a nonprofit organization that educates the general public. See id. ¶¶ 27c, 28b.  First One (operating as NMHC or NMAC) has a "national network of foreclosure prevention specialists" that will negotiate directly with the homeowner's bank to obtain lower monthly payments through a "Mortgage Modification Plan." Id., ¶¶ 27b,28a.  falsely imply that First One is approved by HUD for counseling and mortgage modification services. See id., ¶¶ 27d, 28.  First One has relationships with "all major lenders & loan servicers." Id. ¶ 31d.

 "Actual Modifications" were purportedly obtained through First One's "National

Mortgage Help Center Program." Id. ¶ 31e.  First One is "a Housing Counseling Public Benefit Corporation," with the purpose of expanding "affordable housing opportunities to the public," and providing "housing counseling services" and assistance to "homeowners to avoid default and foreclosures." Id. ¶ 31f, Ex. D.  First One has already contacted the relevant lender. See id. ¶ 31j, Ex. D.  First One does not share, give, sell or transfer any personal information about its customers. See id. ¶ 31m, Ex. G.  First One offers "free-of-charge housing counseling to assist consumers in making informed and reasonable decisions with respect to their housing goals and provide assistance in resolving their housing problems" and that First One communicates directly with the homeowner's lender. See id. ¶ 32a, Ex. I.

ii.Additional evidence in the Motion for Preliminary Injunction

Plaintiff's declarations reiterate the allegations in the complaint and its exhibits match several of the exhibits attached to the complaint. This evidence shows that First One advertises and promotes itself through radio, television, websites and direct mailings. Id.; see also Declaration of LaTosha Martin-Alexis in Support of Motion for Preliminary Injunction ("Martin-Alexis Decl.") ¶ 2; Declaration of Cindy Barber in Support of Motion for Preliminary Injunction ("Barber Decl.") ¶ 2; Declaration of Steve Cooney in Support of Motion for Preliminary Injunction ("Cooney Decl.") ¶ 2.

Plaintiff has included five declarations from First One's customers, all of which follow a similar narrative of consumer confusion. For brevity's sake, the Court repeats only one here. Mark Arvizu lives in Chatsworth, California. Declaration of Mark Arvizu in Support of Motion for Preliminary Injunction ("Arvizu Decl.") ¶ 1. In early 2011, Mr. Arvizu learned about NACA from a co-worker as a possible resource for a mortgage modification. Id. ¶ 2. Shortly after that, Mr. Arvizu saw a billboard for what he thought was NACA. Id. He called the telephone number on the billboard, believing he was calling NACA, and spoke to Stacey or Gina at First One, who assured Mr. Arvizu that he could obtain a loan modification. Id. Mr. Arvizu then received a "Welcome Letter" and other promotional material from First One in the mail. Id. ¶ 3. Based in part on statements in the promotional material, Mr. Arvizu believed that First One was affiliated with NACA. Id. In August and September 2011, Mr. Arvizu sent First One the paperwork it had requested as well as $1,850. Id. Contrary to his expectations, First One never contacted his lender. Id. ¶ 5. Instead, on September 29, 2011, First One sent Mr. Arvizu a letter that reinforced his belief that First One was affiliated with NACA and which stated that his financial analysis had been submitted to his "Housing Counselor of the Neighborhood Assistance Network of HUD Housing Counselors." Id. ¶ 6, Ex. A. The letter included a NACA identification number, a password, and directions to check the status online at NACA's website, www.naca.com. Id. Mr. Arvizu was unable to log on to NACA's website, so after some time, he went to NACA's office, where he learned for the first time that First One was not affiliated with NACA. Id. ¶ 7.

e.Defendants' conduct towards its customers and bad reputation

i.Complaint's allegations

The Complaint alleges that, contrary to First One's representation, First One does not in fact provide any free-of-charge housing counseling or assistance in communicating with lenders. See Compl. ¶ 33. Rather, First One charges consumers typically $1,450 or $1,850 and then uses their personal and financial information-that it promised not to share with third parties- to register a NACA account for the homeowner through NACA's website. See id. ¶¶ 33-35.

Then, First One sends the homeowner a letter stating that the financial analysis has been submitted to the homeowner's "Housing Counselor of the Neighborhood Assistance Network of HUD Housing Counselors to assist you with your lender in achieving a result." Id. ¶¶ 35, Ex. J. The letter advises the homeowner to call the "housing counselor assigned to your file to schedule a counseling appointment" and provides Plaintiff's telephone number. See id. The letter also advises the homeowner that he or she has been "assigned" a NACA member number and password. See id. The letter further advises that the homeowner's loan modification status can be checked online at www.naca.com (Plaintiff's website), and instructs the homeowner to "click on 'Web-File' icon and log in." Id. Finally, the letter states: "Please contact your assigned housing counselor as soon as possible and have your member number, password and the financial analysis package included with this letter handy." Id.

Because of these activities, California's Department of Real Estate ("DRE") allegedly sent a cease and desist order to First One. On May 4, 2011, the DRE issued an order requiring First One to desist and refrain from charging, demanding, claiming, collecting and/or receiving advanced fees, "in any form, and under any conditions, with respect to the performance of loan modification or any other form of mortgage loan forbearance services in connection with loans on residential property containing four or fewer dwelling units." Id. ¶¶ 5, 21.

ii.Additional evidence in the Motion for Preliminary Injunction

Plaintiff's declarations reiterate the allegations in the complaint. In addition, the evidence shows that, after sending customers the letter instructing them to log onto Plaintiff's website, First One absolves itself from all responsibility for working with the homeowners' lender. If complaints are made First One takes the position that it only provides documentation services and that NACA "provides the free of charge assistance phase of the service." (Martin-Alexis Decl., Ex. C.)

Furthermore, the evidence shows that First One's websites also include the following allegedly false and misleading statements that:

 "Only State approved attorneys may legally modify your loan with your lender."

McNamara Decl., Ex. C.  Tell consumers not to give information to other websites, like NACA's website:

"Do not give out your information with other Websites." Id. Exs. C, D.

First One's promotional materials include a page of "Frequently Asked Questions," that include the following allegedly false and misleading statements:

 "First One is a Housing Counselor Public Benefit Corporation, offering free-of-charge housing counseling to assist consumers in making informed and reasonable decisions with respect to their housing goals and provide assistance in resolving their housing problems. First One coordinates each homeowner's financial analysis submission to the Home Save Program of the Neighborhood Assistance Network of HUD Housing Counselors to assist you with your lender to achieve a result. [¶] HUD (Dept. of Housing and Urban Development) Housing Counseling assistance is provided at no-charge and is not contingent on you hiring First One for any other service." Id.  "Based on the information you provided during your free initial consultation, a

Housing Analysis determined that you are pre-qualified for either the HAMP (Home Affordable Modification Program) or your lender's Traditional mortgage revision guidelines." Id. (emphasis in original).  "Homeowners who have benefited from our services have received mortgage payment reductions that bring their mortgage payment debt ratio to within 31% or their gross income. Mortgage principal balance reductions have also been achieved and are possible when your current mortgage balance exceeds the value of your home." Id.

First One further represents that its staff is "comprised of case managers, loan processors, and housing counselors working on your behalf," and that it provides "housing counseling to assist consumers in making informed and reasonable decisions with the respect to their housing goals and provide assistance in resolving their housing problems." Id. First One also claims that it "does not share, give, sell or transfer any personal information about its customers." Id..

f.Harm to consumers and to Plaintiff

i.Complaint's allegations

The Complaint alleges that over 240 homeowners have fallen for First One's scheme and that the scheme is not only likely to cause confusion, but has in fact caused actual confusion as to an affiliation, connection or association between First One and Plaintiff. See id. ¶¶ 37-43, 48. First One employees have on at least two occasions responded to customer claimants by falsely stating or implying that First One is affiliated with Plaintiff. See id. ¶¶ 38-42. Finally, the Complaint alleges that Plaintiff has been and will continue to be harmed by Defendants' false and misleading representations of affiliation. See id. ¶¶ 45, 51-52, 55-57.

ii.Additional evidence in the Motion for Preliminary Injunction

Plaintiff's declarations from five consumers further substantiate the ...


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