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Barbara Waldrup v. Countrywide Financial Corporation

United States District Court, C.D. California

April 14, 2014

BARBARA WALDRUP
v.
COUNTRYWIDE FINANCIAL CORPORATION; ET AL

Mark Pifko, Roland Tellis, Attorneys Present for Plaintiff.

Douglas Thompson Attorneys Present for Defendants.

CIVIL MINUTES - GENERAL

CHRISTINA A. SNYDER, District Judge.

Proceedings: MOTION TO DISMISS PLAINTIFF'S COMPLAINT (Dkt. 14, filed January 24, 2014)

I. INTRODUCTION

On November 27, 2013, plaintiff Barbara Waldrup filed this putative class action against defendants Countrywide Financial Corporation ("CFC"), Countrywide Home Loans ("CHL"), Countrywide Bank, N.A. ("Countrywide"), Bank of America Corporation ("BOA"), LandSafe, Inc., and LandSafe Appraisal, Inc (collectively, "LandSafe"). Plaintiff asserts claims for (1) violation of California's Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq., (2) violation of the Racketeer Influence and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c), (3) conspiracy to violate RICO, 18 U.S.C. § 1962(d), (4) fraud, and (5) unjust enrichment. Plaintiff seeks to assert claims on behalf of the following proposed class:

All residents of the United States of America who, during the period January 1, 2003 through December 31, 2008, obtained an appraisal from LandSafe in connection with a loan originated by Countrywide.

Compl. ¶ 60.

On January 24, 2014, defendants filed a motion to dismiss the complaint. On February 28, 2014, plaintiff opposed the motion, and on March 14, 2014, defendants replied. On April 14, 2014, the Court held a hearing. After considering the parties' arguments, the Court finds and concludes as follows.

II. BACKGROUND

Plaintiff Barbara Waldrup is a citizen of Texas. Compl. ¶ 13. In 2004, plaintiff obtained a loan from Countrywide to purchase a home. Plaintiff alleges that, as part of this loan transaction, Countrywide required her to procure an appraisal of the property being purchased. Countrywide directed plaintiff to get that appraisal from LandSafe, which charged plaintiff $400 for the appraisal. Id . ¶ 53. Later, in 2007, plaintiff refinanced her home for a second time through Countrywide.[1] Countrywide again required plaintiff to seek an appraisal from LandSafe. Plaintiff paid $320 for this second appraisal. Id . ¶ 54.

Plaintiff alleges that these two appraisals were worthless. Rather than supplying plaintiff with an accurate valuation of her property, LandSafe inflated the value of the property in order to ensure that the loans would be approved. Plaintiff alleges that LandSafe performed these inflated appraisals at the behest of Countrywide, which in the mid-2000s sought to originate as many mortgages as possible to fill demand. Id . ¶ 41. Because a loan could not go forward if the property securing the loan was insufficiently valuable, Countrywide thus attempted to loosen appraisal standards in order to remove an impediment to rapid loan origination. Id . To this end, plaintiff alleges that Countrywide "developed an affiliation" with LandSafe, which served as a captive appraiser that would deliver the inflated appraisals Countrywide needed to justify its loans. Id . ¶ 42. Plaintiff asserts that LandSafe inflated the two appraisals it sold to her in 2004 and 2007 as part of this scheme to assist Countrywide in originating as many loans as possible.

Plaintiff contends that the details of Countrywide's scheme to procure inflated appraisals first came to light as the result of a whistleblower who was employed by LandSafe between 2004 and 2008. Id . ¶¶ 43-44. On May 13, 2009, this whistleblower, an individual named Kyle Lagow, filed a sealed qui tam complaint against Countrywide, BOA, LandSafe and others pursuant to the False Claims Act, 31 U.S.C. § 3729, et seq. Id . ¶ 43. Lagow's whistleblower complaint revealed the alleged relationship between Countrywide and LandSafe, and the resultant inflation of appraisal values. Lagow's complaint included allegations that LandSafe officers instructed appraisal managers that "LandSafe appraisers were there to help facilitate a Countrywide loan closing." Id . ¶ 49. Plaintiff asserts that the Countrywide scheme was not exposed until the Lagow complaint was first unsealed in May 2012. Id . ¶ 43.

III. LEGAL STANDARD

A. Motion to Dismiss

A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in a complaint. "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds' of his entitlement 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 Corp. v. Twombly , 550 U.S. ...


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