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Rothman v. U.S. Bank National Association

United States District Court, N.D. California

October 3, 2014



MAXINE M. CHESNEY, District Judge.

Before the Court is defendant U.S. Bank National Association's ("U.S. Bank") motion to dismiss, filed June 26, 2014, by which U.S. Bank seeks dismissal of plaintiff Marshal Rothman's ("Rothman") Third Amended Complaint ("3AC"). Rothman has filed opposition, to which U.S. Bank has replied.

Having read and considered the papers filed in support of and in opposition to the motion, the Court deems the matter suitable for determination on the parties' respective written submissions, and hereby rules as follows.[1]


On February 21, 2007, Rothman, a real estate developer, purchased a house at 18 Sheridan Court in Mill Valley, California ("the Property") and entered into a mortgage in the amount of $2, 802, 500.00 with Downey Savings and Loan Association. F.A. ("Downey"). (See 3AC ¶¶ 1, 6, 12.) Rothman's mortgage and note subsequently were assigned to U.S. Bank. (See 3AC ¶ 13.)

"In or around May 2011, " Rothman submitted a loan modification application to U.S. Bank. (Id. ¶ 14.) In February 2012, having received no response, Rothman "became delinquent on his mortgage payments" in an effort to cause U.S. Bank to "respond to his loan modification application in a more timely fashion." (See id. ¶ 15.) After approximately two months, in April 2012, U.S. Bank informed Rothman of its intent to foreclose upon the Property and appointed one of its employees, Christopher Parrish ("Parrish"), to be Rothman's "point of contact" with the bank. (See id. ¶¶ 16-17.)

"On or around April 11, 2012, " Parrish informed Rothman he should "not worry" about the bank's threat to foreclose because foreclosure proceedings "took a long time" and because Rothman had a pending loan modification application. (Id. ¶ 18.) Approximately four months later, "on or around August 28, 2012, " Rothman called U.S. Bank's foreclosure department and spoke with an employee named Maria Carlos ("Carlos"). (See id. ¶ 23.) Carlos was a "specialist in U.S. Bank's[3] foreclosure department dealing with reinstatement of delinquent mortgages, " and "[a]s part of her normal job functions, she had access to U.S. Bank's records that purportedly showed that [Rothman] had missed several monthly escrow payments." (Id. ¶¶ 33-34.) Rothman asked Carlos "what amount he needed to pay to cure his delinquent mortgage balance and reinstate his loan." (Id. ¶ 23.) Carlos told Rothman that "paying $74, 643.23 would make him current on his mortgage and halt the foreclosure proceedings." (Id. ¶ 24.) Several days later, Rothman paid $74, 643.23 to U.S. Bank. (Id. ¶ 25.)

At the time of his conversation with Carlos, Rothman believed he was current on his property insurance and property taxes, which payments were made by U.S. Bank on his behalf out of monies paid by him into his escrow account. (Id. ¶¶ 28-29.) Shortly after said conversation, however, on September 4, 2012, Rothman received a letter from U.S. Bank, stating that "in order to reinstate his mortgage, he needed to make a payment of $53, 031.69 for missed monthly payments and $4, 993.61 for late charges" (id. ¶ 37), which additional amounts constituted "escrow' charges levied by U.S. Bank on [Rothman] that were supposed to be used by U.S. Bank to pay for the property insurance and taxes on the Real Property" (id. ¶ 27).

When Rothman learned his $74, 643.23 payment had not cured his indebtedness, he asked Parrish for an explanation. (Id. ¶¶ 37-39.) Parrish told Rothman he would look into the matter, and Rothman waited for him to respond. (Id. ¶¶ 39-40). Having received no response by December 2012, Rothman called Parrish, who "still had no useful information to clarify to Rothman as to what happened." (Id. ¶ 43.) Rothman thereafter asked Parrish to have U.S. Bank provide him with "a full accounting of his mortgage account so that he could determine why his $74, 643.23 payment did not bring his mortgage current and so he could pay off what he legitimately owed to U.S. Bank in order to reinstate his mortgage." (Id. ¶ 44.) U.S. Bank failed to generate the requested accounting. (Id. ¶ 48.) Rothman offered to resume making his monthly mortgage payments while he awaited the accounting, but U.S. Bank rejected his offer and told him it would not accept any "partial payments." (Id. ¶ 49.)

"On or around April 16, 2013, " after "numerous requests and phone calls by [Rothman] to... Parrish, " U.S. Bank sent Rothman a document called a "Customer Activity Statement" (id. ¶ 50), which Rothman, despite his efforts to obtain an explanation from Parrish, could not comprehend (id. ¶¶ 52-53).

The following month, on May 16, 2013, U.S. Bank recorded a Notice of Default against the Property. (Id. ¶ 61.) On May 22, 2013, Rothman "had his attorneys issue a qualified written request ["QWR"] to U.S. Bank pursuant to the federal Real Estate Settlement Practices Act ["RESPA"]" (id. ¶ 57); see 12 U.S.C. § 2605(e) (setting forth "[d]uty of loan servicer to respond to borrower inquiries"). U.S. Bank responded to Rothman's QWR but did not "provide the itemized statements that [Rothman] asked for... [or] a statement explaining the reasons as to why it felt its records correctly reflected that [Rothman] had not reinstated his mortgage." (Id. ¶ 59.)

"Throughout 2013, " American Credit, a "credit cleaning service" Rothman hired, "contacted the major credit reporting agencies and U.S. Bank... to inform them that U.S. Bank had incorrectly reported to the various credit agencies that [Rothman] was delinquent on his mortgage, given (1) [Rothman] should have been allowed to reinstate his loan following his payment of $74, 642.23 and (2) if [Rothman] was still delinquent, then U.S. Bank was solely responsible for not allowing [Rothman] to cure that delinquency by delaying in providing him accurate information as to his total indebtedness." (Id. ¶¶ 115-16.) In those same contacts, American Credit also stated "that U.S. Bank had incorrectly reported to the various credit agencies that [Rothman] was late on his mortgage payments given that U.S. Bank had rejected [his] offer to resume making those monthly mortgage payments." (Id. ¶ 117.) "[T]he major credit reporting agencies investigated and determined that [Rothman's] dispute was colorable and contacted U.S. Bank regarding this dispute" (id. ¶ 118), but U.S. Bank thereafter "failed to report the results of its internal investigation as to [Rothman's] claims to the various credit reporting agencies" (id. ¶ 119).

On March 26, 2014, Rothman, in "[f]rustrat[ion], " issued a cashier's check to U.S. Bank in the amount of $393, 995.78, the amount U.S. Bank, on March 3, and March 19, 2014, had "confirmed" to Rothman would reinstate his mortgage if paid by March 28, 2014. (Id. ¶¶ 65-67.) That same date, however, U.S. Bank recorded a Notice of Trustee's Sale on the Property. (Id. ¶ 68.) On March 28, 2014, Rothman contacted U.S. Bank and was informed his mortgage had been reinstated (id. ¶ 69), and by April 9, 2014, the Notice of Default had been cancelled (id. ¶ 71). Nevertheless, on April 17, 2014, a "U.S. Bank employee" called Rothman and informed him that he was again delinquent. (Id. ¶ 72.)

U.S. Bank's recording of the Notice of Default "severely damaged" Rothman's credit rating, thus impacting his business, which "is dependent upon his good credit score and easy access to capital and debt." (Id. ¶¶ 61-62.) U.S. Bank's recording of the Notice of Trustee's Sale "further damaged" Rothman's credit score. (Id. ¶ 68.) As a result of his damaged credit score, Rothman could no longer obtain financing at interest rates customarily offered to him and instead was "forced to take hard money' loans carrying exorbitant interest rates, " which "will result in him paying hundreds of thousands of dollars in interest charges that he would not have had to pay under his prior credit score." (Id. ¶ 62.)

In his 3AC, Rothman asserts the following nine causes of action: (1) "Negligent Misrepresentation - Cal. Civ. Code § 1710.2"; (2) "Breach of Contract"; (3) "Breach of the Implied Covenant of Good Faith and Fair Dealing"; (4) "RESPA-12 U.S.C. §§ 2601, et seq."; (5) "Promissory Estoppel"; (6) "Fair Credit Reporting Act - 15 U.S.C. 1681s-2(b)"; (7) "California Credit Reporting Agencies Act - Cal. Civ. Code § 1785.25(a)"; (8) "Fraud - Cal. Civ. Code §§ 1709 et seq."; and (9) "Cal. Bus. & Prof. Code §§ 17200, et seq."

By the instant motion, U.S. Bank argues Rothman fails to adequately plead his First, Fourth, Sixth, Eighth, and Ninth Causes of Action.[4]

Legal Standard

Dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. See Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1990). Rule 8(a)(2), however, "requires only a short and plain statement of the claim showing that the pleader is entitled to relief.'" See Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555 (2007) (quoting Fed.R.Civ.P. 8(a)(2)). Consequently, "a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations." See id. Nonetheless, "a plaintiff's obligation to provide the grounds of his entitlement to relief ...

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