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Kirkeby v. JPMorgan Chase Bank, N.A.

United States District Court, S.D. California

September 3, 2014

ANASTASIA KIRKEBY, Plaintiff,
v.
JPMORGAN CHASE BANK, N.A.; CALIFORNIA RECONVEYANCE COMPANY; and FIDELITY NATIONAL FINANCIAL, INC., Defendants.

ORDER

WILLIAM Q. HAYES, District Judge.

The matters before the Court are the Motion to Dismiss Plaintiff's Fifth Amended Complaint filed by Defendants Chase and CRC (ECF No. 57), the Ex Parte Motion to Amend and File Sixth Amended Complaint filed by Plaintiff (ECF No. 58), and the Ex Parte Motion for Miscellaneous Relief and for Imposition of Rule 11 Sanctions filed by Plaintiff (ECF No. 60).

I. Background

On February 15, 2013, Plaintiff Anastasia Kirkeby, proceeding pro se, initiated this action by filing a Complaint against JP Morgan Chase Bank, N.A. ("Chase") and California Reconveyance Company ("CRC"), alleging various state law claims related to the foreclosure of a deed of trust secured with the real property located at 30651 Camino de Las Lomas, Escondido, California 92026. (ECF No. 1). On March 10, 2014, Plaintiff filed the Fifth Amended Complaint, which is the operative pleading, adding Fidelity National Financial, Inc. ("FNF") as a defendant.[1] (ECF No. 55).

On March 25, 2014, Defendants Chase and CRC ("Defendants") filed the Motion to Dismiss Plaintiff's Fifth Amended Complaint ("Motion to Dismiss") with an accompanying request for judicial notice. (ECF No. 57). On April 17, 2014, Plaintiff filed the Ex Parte Motion for Leave to Amend and File Sixth Amended Complaint ("Motion for Leave to Amend") and an opposition to the Motion to Dismiss. (ECF No. 58). On April 21, 2014, Defendants filed a reply to the Motion to Dismiss and an opposition to the Motion for Leave to Amend. (ECF No. 59). On May 13, 2014, Plaintiff filed the Ex Parte Motion for Miscellaneous Relief and for Imposition of Rule 11 Sanctions ("Motion for Sanctions") and a reply in support of the Motion for Leave to Amend. (ECF No. 60). On May 30, 2014, Defendants filed an opposition to the Motion for Sanctions. (ECF No. 63). On June 9, 2014, Plaintiff filed a sur-reply to the Motion to Dismiss, a sur-reply to the Motion for Leave to Amend, and a reply to the Motion for Sanctions. (ECF No. 65). On June 12, 2014, Plaintiff filed a sur-reply to the Motion for Sanctions. (ECF No. 67).

II. Allegations of the Fifth Amended Complaint ("Fifth AC")

When Plaintiff fell behind on mortgage payments, Chase, the loan servicer of Plaintiff's mortgage, CRC, and FNF engaged in "financial racketeering" by charging "marked-up" fees for default-related services. (ECF No. 55 at 4-5). Defendants marked up fees as much as 100%, charged fees that were "unnecessary and clearly inappropriate, " and formed "various enterprises... designed to disguise through conversion the hidden marked-up fees." Id. at 5-6. Taking advantage of borrowers' inability to choose their loan servicers, Defendants "formed enterprises with their respective subsidiaries and affiliates." Id. at 6.

The marked-up fees charged to Plaintiff were in violation of the mortgage agreement because only fees that are "reasonable' or appropriate' to protect the note holder's and/or investor's interest in the property" are authorized under the agreement." Id. at 7. Defendants were aware of the impropriety of marked-up fees, and Defendants fraudulently concealed the marked-up fees as "Other Charges, " "Other Fees, " "Miscellaneous Fees, " or "Corporate Advances." Id. Defendants would also represent that the unauthorized fees were in fact authorized by the mortgage. Id. at 19. As loan servicers, Defendants do not profit from interest and only profit from charging servicing-related fees. Id. at 8-9.

Chase used a loan servicing software program created by Chase and FNF, known as Fidelity MSP, "designed to manage the modification application process and places accounts in-default like Plaintiffs' account and assesses fees, according to a protocol designed by the executives at Defendant Chase and The Fidelity MSP software." Id. at 10. Fidelity MSP would "automatically implement decisions about how to manage borrowers' accounts, " which was "[b]ased on parameters inputted into these programs." Id. Chase charged borrowers for property inspection fees, even when property inspections were unnecessary under the circumstances, by simply allowing the computers to order the default-related services and charge the fees "without human intervention." Id. at 14. Defendants removed certain fees from generated account statements to conceal the charging of legally prohibited fees. Id. at 11.

Defendants ordered default-related services from their subsidiaries who would obtain services from third-party vendors. The third-party vendors charged Defendants for their services, and Defendants marked-up the charges on borrowers' accounts. For example, Chase would charge defaulting borrowers Broker's Price Opinions ("BPOs") of $95 to $135 when the actual cost was $50 or less. Id. at 13.

As a result of these practices, Plaintiff is unable to become current on her loan. Her monthly payments are first applied to these fees before they are applied to principal and interest. Id. at 15. Plaintiff would not have paid these fees if she had known of their true nature. Id. at 19.

The Fifth AC asserts claims for: (1) fraud; (2) violation of California Business and Professions Code §§ 17200 et seq.; (3) violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c); (4) violation of RICO, 18 U.S.C. § 1962(d); and (5) unjust enrichment. The Fifth AC seeks compensatory damages, restitution and disgorgement, treble damages, declaratory and injunctive relief, an order that Defendants engage in corrective advertising, interest, attorneys' fees, and costs.

III. Motion to Dismiss (ECF No. 57)

Defendants move to dismiss all of Plaintiff's claims for failure to state a claim. In opposition, Plaintiff does not address any of Defendants' specific contentions. Plaintiff generally contends that she has "met the standards.... as set forth in Federal Rules of Civil Procedure 8(a) & 9(b)" and that "Chase is on notice and capable of giving a responsive answer as their motion to dismiss includes multiple arguments and responses to Plaintiff's FAC." (ECF No. 58 at 4, 8). Plaintiff also contends that the Fifth AC has sufficiently alleged "negligence and liability against Defendants JP Morgan Chase and California Reconveyance" on agency and respondeat superior theories. Id. at 8-10. In reply, Defendants contend that Plaintiff's Fifth AC should be dismissed for filing an opposition four days late and failing to address Defendants' substantive arguments regarding each of her claims. In sur-reply, Plaintiff asserts that Defendants "erroneously offered up settlement in order to distract Plaintiff and intentionally cause Plaintiff's delay in opposing Defendants' Motion to Dismiss." (ECF No. 60 at 7-8).

A. Legal Standard

Federal Rule of Civil Procedure 12(b)(6) permits dismissal for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). "A pleading that states a claim for relief must contain... a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory. See Balistreri v. Pac. Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).

"[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 Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Fed.R.Civ.P. 8(a)). "To 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.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting 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. (citation omitted). "[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citation omitted). "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. at 679.

Claims sounding in fraud or mistake must additionally comply with the heightened pleading requirements of Federal Rule of Civil Procedure 9(b), which requires that a complaint "must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). Rule 9(b) "requires... an account of the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations." Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (quotation omitted); see also Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, ...


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