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Lyshorn v. J.P. Morgan Chase Bank, N.A.

United States District Court, Ninth Circuit

November 1, 2013

ROBERT LYSHORN, et al., Plaintiffs,
v.
J.P. MORGAN CHASE BANK, N.A., et al., Defendants.

ORDER REGARDING MOTION TO DISMISS SECOND AMENDED COMPLAINT

JEFFREY S. WHITE, District Judge.

Now before the Court for consideration is the motion to dismiss the second amended complaint ("SAC") filed by defendant J.P. Morgan Chase Bank, N.A. ("Chase"). The Court finds this motion is suitable for disposition without oral argument. See N.D. Civ. L.R. 7-1(b). Accordingly, the Court VACATES the hearing scheduled for November 8, 2013. Having carefully reviewed the parties' papers and considered their arguments and the relevant legal authority, and good cause appearing, the Court grants Chase's motion to dismiss.[1]

BACKGROUND

Plaintiffs Robert Lyshorn and Andrea Lyshorn ("Plaintiffs") purchased the property at 1432 Audubon Street in Montara, California 94037 (the "Property") in January 2007 and obtained a mortgage for $1, 872, 500 from BNC Mortgage, Inc. ("BNC"). ("SAC, ¶¶ 9-10.) Shortly thereafter, Chase acquired the loan and/or acquired the rights to service the loan. ( Id., ¶ 11.)

Beginning in August of 2009, Plaintiffs had difficulty making their monthly mortgage payments and began to make payments every six weeks. ( Id., ¶ 13.) Needing assistance, Plaintiffs contacted Chase to determine what options were available to them regarding their mortgage payments. ( Id., ¶ 14.) An authorized Chase representative told Andrea Lyshorn that "in order to be considered for, and obtain, a permanent loan modification, Plaintiffs had to be at least four months behind in their monthly payments." ( Id., ¶ 15.) At that time, Plaintiffs had not yet missed four payments. "The Chase representative directed Plaintiffs to stop making their monthly payments in order to fall behind by the requisite four months in order to qualify for the loan modification process and obtain a permanent loan modification." ( Id. )

Chase representatives asked Plaintiffs to submit documentation in support of their modification application numerous times. ( Id., ¶¶ 16, 18, 20, 22, 25, 26, 27, 29, 32, 36, 37, 38, 40.) Plaintiffs provided the requested documents to Chase. ( Id., ¶¶ 17, 19, 21, 28, 30, 31, 35, 39.) On January 21, 2011, Plaintiffs received a letter from Chase denying Plaintiffs a loan modification through the Home Affordable Modification Program ("HAMP") because they did not provide all of the requested documents. ( Id., ¶ 23.)

On August 5, 2011, Plaintiffs received a notice of default and an assignment of a deed of trust from California Reconveyance Company. ( Id., ¶ 33.) On December 6, 2011, Plaintiffs received a letter from Chase stating that they were denied a loan modification because they had not submitted the required documents in time. ( Id., ¶ 41.) On December 19, 2011, Plaintiffs received a letter from Chase entitled "Foreclosure Alternatives" stating that their loan modification had been denied. ( Id., ¶ 42.) On March 12, 2012, Chase informed Plaintiffs that the servicing of their loan had been transferred to Ocwen Financial Corporation. ( Id., ¶ 43.) Based upon these allegations, Plaintiffs bring claims for fraud, negligent misrepresentation, intentional infliction of emotional distress ("IIED"), and violation of California Business and Professions Code section 17200 ("Section 17200").

Under their fraud claim, Plaintiffs allege that Chase representatives falsely represented to Plaintiffs that Chase repeatedly required the same documentation for the modification process. ( Id., ¶ 53.) According to Plaintiffs, Chase never intended to modify their loan and instead created a scheme whereby Chase repeatedly required additional documentation in order to be considered for a loan modification. ( Id., ¶ 56.) Chase knew that Plaintiffs' original principal loan balance exceeded the maximum amount for a permanent modification under HAMP, but still attempted to modify Plaintiffs' loan under HAMP. ( Id., ¶ 59.) Chase's misrepresentations were designed to create an insurmountable default to enable defendants to wrongfully foreclose on the Property and strip Plaintiffs of any equity they had accumulated. ( Id., ¶ 60.) In support of their claim for negligent misrepresentation, Plaintiffs allege that Chase's representatives may have honestly believed that their representations were true, but that Chase had no reasonable grounds for believing their representations were true when they made them. ( Id., ¶ 67.) Plaintiffs incorporate this allegation into their IIED claim. ( Id., ¶ 75.) Plaintiffs allege that Chase's "conduct in causing Plaintiffs to continually re-submit their financial documents under the guise of modifying their loan without any intention of actually doing any modification was outrageous." ( Id., ¶ 76.)

The Court will address additional facts as necessary in the remainder of this order.

ANALYSIS

A. Applicable Legal Standard on Motion to Dismiss.

A motion to dismiss is proper under Federal Rule of Civil Procedure 12(b)(6) where the pleadings fail to state a claim upon which relief can be granted. The Court's "inquiry is limited to the allegations in the complaint, which are accepted as true and construed in the light most favorable to the plaintiff." Lazy Y Ranch LTD v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008). Even under the liberal pleading standard of Federal Rule of Civil Procedure 8(a)(2), "a plaintiff's obligation to provide the grounds' of his entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 555 (2007) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)).

Pursuant to Twombly, a plaintiff must not merely allege conduct that is conceivable but must instead allege "enough facts to state a claim to relief that is plausible on its face." Id. 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." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556). If the allegations are insufficient to state a claim, a court should grant leave to amend, unless amendment would be futile. See, e.g., Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990); Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 246-47 (9th Cir. 1990).

In addition, when a plaintiff alleges fraud, Federal Rule of Civil Procedure 9(b) ("Rule 9(b)") requires the plaintiff to state with particularity the circumstances constituting fraud, including the "who, what, when, where, and how'" of the charged misconduct. See United States ex rel Ebeid v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010) (quoting Vess v. Ciba Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003)); United States ex rel. Lee v. Smithkline Beacham, Inc., 245 F.3d 1048, 1051 (9th Cir. 2001) ("Complaints brought under the FCA must fulfill the requirements of Rule 9(b).") "[T]he plaintiff ...


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