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Hayes v. Wells Fargo Bank, N.A.

United States District Court, S.D. California

July 3, 2014

MICHELLE HAYES, on behalf of herself and all others similarly situated, Plaintiff,
WELLS FARGO BANK, N.A. doing business as WELLS FARGO HOME MORTGAGE, INC., Defendant.


M. JAMES LORENZ, District Judge.

Pending before the Court is Defendant Wells Fargo Bank, N.A.'s ("WF") motion to dismiss motion or strike. ( MTD [Doc. 14].) The motion is fully briefed. ( Opp'n [Doc. 19]; Reply [Doc. 25].) The Court found this motion suitable for determination on the papers submitted and without oral argument under Civil Local Rule 7.1(d)(1). ( Order re: Oral Argument [Doc. 29].) For the following reasons, WF's motion is GRANTED WITH PREJUDICE.


According to the First Amended Complaint, "Plaintiff [Michelle Hayes] purchased her home in 2001 and took out a mortgage with Wells Fargo[1]." ( FAC ¶ 18.) In December 2010, Hayes called WF and expressed interest in a loan modification. ( Id. ¶ 19.) WF told Hayes that "in order to be considered for a modification, she was required to set up an escrow account for her mortgage." ( Id. ¶ 20.) Hayes complied and created an escrow account. ( Id. ¶ 21.)

WF began sending "monthly statements requesting payment that included an escrow amount to be impounded of $0.01 or $0.02." ( FAC ¶ 22.) On December 15, 2010, WF began making disbursements from the escrow account for county taxes and hazard insurance. ( Id. ¶ 23.) On January 17, 2011, WF began making deposits into Hayes's escrow account. ( Id. ¶ 24.) Hayes continued to make her payments, including the $0.01 or $0.02 escrow amount through June 2012. ( Id. ¶ 25.)

In April 2012, Hayes received an "Initial Escrow Account Disclosure Statement" which informed her that "she had a $21, 241.10 shortage in her escrow account and that her monthly loan payment was increasing from $2, 898.79 to $5, 284.88 as a result." ( FAC ¶ 26-27.) In August 2012, Hayes received an "Annual Escrow Account Disclosure Statement" from WF, indicating that her account was still $21, 241.10 deficient, but that "her monthly payments were being lowered to $3, 868.01." ( Id. ¶ 28.) Both the initial and annual statements reflected anticipated a $7, 392.06 yearly disbursement amount for taxes, but neither statement reflected anticipated insurance disbursements, despite the fact that WF "made a hazard insurance disbursement in [sic] February 4, 2011 for $2, 135.81 and again on February 27, 2012 for $1, 990.99." ( Id. ¶ 29.) "From the time Plaintiff began making escrow payments in January 2011, through November 2012, Plaintiff accumulated a negative balance of $22, 221." ( Id. ¶ 30.) On January 11, 2013, WF sent Hayes a "Notice of Intent to Foreclose." ( Id. ¶ 31.)

On August 1, 2013, Hayes filed her First Amended Complaint, alleging violations of California's Unfair Competition Law ("UCL") and the Consumer Legal Remedies Act ("CLRA") on behalf of the following putative class:

All consumers in the United States and its territories whose home mortgage loans are or were serviced by Wells Fargo and where Wells Fargo failed to conduct an initial escrow account analysis as defined in 24 C.F.R. § 3500.17 prior to opening an escrow account (the "Class").

( FAC ¶ 32.) The gravamen of Hayes's claims is that WF improperly and intentionally set up her escrow account so that she would incur a large negative escrow balance. Hayes claims that WF's "failure to maintain the escrow accounts of Plaintiff and the Class in compliance with the Real Estate Settlement Procedures Act, 24 C.F.R. § 3500 et seq. ("RESPA") is unlawful and constitutes violations of the UCL." ( Id. ¶ 43.) She also claims that WF violated and continues to violate the CLRA by "[r]epresenting that [sic] [escrow account has]... characteristics... [or] benefits... which they do not have..." and by "representing that [the modification] confers... rights... or obligations which it does not have or involve..." ( Id. ¶ 53.)

On October 9, 2013, WF moved to dismiss this action, or alternatively, to strike portions of the First Amended Complaint. ( MTD 4-22.) WF argues that both of Hayes's claims are preempted by the Home Owners' Loan Act ("HOLA"). ( Id. 4-15.) WF also maintains that Hayes lacks standing to bring a UCL claim because she "has not and cannot allege" that WF caused her economic injury. ( Id. 15-19.) In addition, WF claims that Hayes's CLRA cause of action fails because that statute does not apply to "mortgage loans, or to any ancillary services provided in connection with mortgage loans such as escrow accounts." ( Id. 19-21.) Alternatively, WF suggests that the Court should strike Hayes's "prayer for recovery of damages under the UCL" because the remedies afforded under the UCL are limited to injunctive relief and restitution. ( Id. 22.)

In her opposition, Hayes only argues against dismissal with respect to her UCL claim. She indicates that she is "voluntarily dismissing Count II, which asserted a claim under the [CLRA]." ( Opp'n 1 n. 2.) In light of this, her CLRA claim is DISMISSED WITH PREJUDICE.


The court must dismiss a cause of action for failure to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The court must accept all allegations of material fact as true and construe them in light most favorable to the nonmoving party. Cedars-Sinai Med. Ctr. v. Natal League of Postmasters of U.S., 497 F.3d 972, 975 (9th Cir. 2007). Material allegations, even if doubtful in fact, are assumed to be true. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, the court 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 quotation marks omitted). In fact, the court does not need to accept any legal conclusions as true. Ashcroft v. Iqbal, 556 U.S. 662, ___, 129 S.Ct. 1937, 1949 (2009)

"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." Twombly, 550 U.S. at 555 (internal citations omitted). Instead, the allegations in the complaint "must be enough to raise a right to relief above the speculative level." Id. Thus, "[t]o survive a motion to dismiss, 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 (citing 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. "The plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that ...

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