United States District Court, C.D. California
Roland Tellis, Attorneys Present for Plaintiff.
Doug Thompson, Attorneys Present for Defendants.
CIVIL MINUTES - GENERAL O'
CHRISTINA A. SNYDER, District Judge.
Proceedings: MOTION TO DISMISS PLAINTIFF'S THIRD AMENDED COMPLAINT (Dkt. 47, filed November 12, 2014)
On November 27, 2013, plaintiff Barbara Waldrup filed this putative class action against defendants Countrywide Financial Corporation ("CFC"), Countrywide Home Loans, Inc. ("CHL"), Countrywide Bank, N.A. ("BANA"), Bank of America Corporation ("BAC"), LandSafe, Inc. ("LSI"), and LandSafe Appraisal, Inc ("LSA"). The operative third amended complaint ("TAC") asserts claims for (1) violation of California's Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq., ("UCL"); (2) violation of the Racketeer Influenced 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 asserts 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.
TAC IT 83.
Defendants previously moved to dismiss plaintiff's original complaint, first amended complaint, and second amended complaint ("SAC"). By order dated October 6, 2014, the Court denied defendants' motion to dismiss plaintiff's UCL and unjust enrichment claims, but granted defendants' motion to dismiss plaintiff's RICO and common law fraud claims. Dkt. 45. In so doing, the Court found that plaintiff had not pled her claims sounding in fraud with the particularity required by Rule 9(b), but granted plaintiff leave to amend her complaint. Id. at 7-8.
Consistent with the Court's October 6, 2014 order, plaintiff filed her TAC on October 27, 2014. Dkt. 46. Defendants filed a motion to dismiss the TAC on November 12, 2014, as well as a request for judicial notice. Dkts. 47, 48. Plaintiff filed oppositions to both the motion to dismiss and the request for judicial notice on December 15, 2014, dkts. 49, 50, and defendants replied on December 22, 2014, dkt. 51. The Court held a hearing on January 5, 2015. Having carefully considered the parties' arguments, the Court finds and concludes as follows.
Plaintiff Barbara Waldrup is a citizen of Texas. TAC ¶15. In 2004, plaintiff applied for a loan from CHL to purchase a home, dealing primarily with CHL loan officer Shawna Oakley. Id . ¶ 58. Plaintiff alleges that, as part of this loan transaction, CHL required her to procure an appraisal of the property being purchased, and directed plaintiff to obtain that appraisal from LSA, which charged plaintiff $400 for the appraisal. Id . ¶¶ 59-64. In 2007, plaintiff applied to refinance her loan through CHL, this time dealing primarily with two other, named loan officers. Id . ¶ 68. CHL again required plaintiff to seek an appraisal from LSA, CHL's "sole approved' appraisal vendor." Id . ¶ 69. Plaintiff paid $320 for this second appraisal. Id . ¶ 70. Plaintiff identifies the LSA appraisers with whom she dealt in 2004 and 2007 as Barry Johnson and David K. Dotson, respectively. Id . ¶¶ 63, 71,
Plaintiff alleges that these two appraisals were not performed in accordance with the Uniform Standards of Professional Appraisal Practice ("USPAP") and other applicable regulations and laws. See Id . ¶ 77. Instead, the appraisals were "reports of a predetermined value that favored Countrywide's cause of rapidly closing loans." Id . ¶ 78. Plaintiff alleges that LSA performed these "inflated" and "predetermined" appraisals at the behest of CHL, which in the mid-2000s sought to originate as many mortgages as possible to fill demand. Id . ¶¶ 45-48. Because a loan could not be made unless it was justified by the appraised value of the property, plaintiff alleges that CHL loosened applicable appraisal standards. Id . To this end, plaintiff alleges that CHL "developed an affiliation" with LSA, which served as a captive appraiser that would deliver the appraisals CHL needed to justify its loans. Id . ¶ 48. Specifically, plaintiff alleges that through LSA,
Countrywide [i.e., CHL and its related entities] could (1) use its market size to pressure appraisers to disregard the appraisal independence' requirements and permit Countrywide to rapidly close a loan; (2) punish appraisers who refused to play ball'; and (3) use fraudulent appraisal reviews' to revise legitimate appraisals to arrive at values needed to close a loan.
Id. Plaintiff asserts that LSA performed 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 appraisals first came to light as the result of a whistleblower who was employed by LSI between 2004 and 2008. Id . ¶ 49. On May 13, 2009, this whistleblower filed a sealed qui tam complaint against Countrywide entities, BOA, LandSafe entities and others pursuant to the False Claims Act, 31 U.S.C. § 3729, et seq. Id . The whistleblower complaint revealed the alleged relationship between the Countrywide entities and LandSafe entities, as well as the resultant inflation of appraisal values. Among other allegations, the complaint alleged that LandSafe officers instructed appraisal managers that "LandSafe appraisers were there to help ...