United States District Court, N.D. California
ORDER GRANTING MOTION TO DISMISS
PHYLLIS J. HAMILTON, District Judge.
Before the court is defendant JP Morgan Chase Bank's motion to dismiss plaintiffs' second amended complaint ("SAC"). The court finds the matter suitable for disposition without a hearing, and hereby rules as follows.
This mortgage case arises out of plaintiffs' attempts to obtain a loan modification. Plaintiffs Lester and Linda Lesavoy ("plaintiffs") allege that they purchased their home in January 2006, became unable to pay their mortgage, and defaulted in November 2008. See SAC, ¶¶ 13, 15. Later that same month, plaintiffs submitted a loan modification application to defendant JP Morgan Chase Bank, N.A. ("defendant" or "Chase"). Id., ¶ 16. Chase confirmed that all documents had been received, and told plaintiffs to contact Chase every four to six weeks for updates on their application. Id.
Over the course of the next few months, plaintiffs were asked to re-submit their modification application documents on multiple occasions. SAC, ¶¶ 19, 21. In August 2009, plaintiffs filed for bankruptcy. Id., ¶ 24. After the bankruptcy, plaintiffs were again repeatedly asked to re-submit their modification application documents. SAC, ¶¶ 25, 30, 36, 42, 43, 47.
In August 2011, Chase informed plaintiffs that their loan modification application was denied. SAC, ¶ 49. Plaintiffs then hired an attorney, and re-applied for a loan modification on September 13, 2011. Id., ¶ 50. Just over two weeks later, plaintiffs were told that they were ineligible for a modification. Id., ¶ 52. Plaintiffs admit that they did not re-apply for a modification at that time, but a Chase customer service specialist continued to communicate with them, and in February 2012, plaintiffs were told that their file was being processed and no additional documents were needed. Id., ¶¶ 53, 55. Plaintiffs were asked for updated documents in September 2012, but were told that no additional documents were needed in November 2012 and in January 2013. Id., ¶¶ 59-61, 63. In April 2013, plaintiffs were again asked to update their documents, and on April 23, 2013, plaintiffs' modification application was denied. Id., ¶¶ 66-67.
After the April 2013 denial, plaintiffs were told that they could re-apply for a modification if they had a change in financial circumstances. SAC, ¶ 68. Because Mr. Lesavoy had recently received a pay raise, plaintiffs did indeed re-apply for a modification in August 2013. Id., ¶¶ 68, 70. In January 2014, Chase told plaintiffs that their application was complete, and in February 2014, plaintiffs' application was denied. Id., ¶¶ 74-75.
In the February 2014 denial letter, Chase stated that plaintiffs' home was valued at $1, 300, 000, which rendered it ineligible for a loan modification. SAC, ¶ 75. Plaintiffs insist that the actual value of their home is $1, 050, 000, and that Chase "recklessly, if not purposefully, valu[ed] the Lesavoys' property at an artificial amount that disqualified the Lesavoys for loan modification." Id., ¶ 78. Plaintiffs also attach to their complaint a declaration from a former Chase employee, stating that Chase would routinely close out applications to modify loans exceeding $1 million, just to "clear up the backlog, " without actually reviewing the applications. Id., ¶ 81.
Plaintiffs filed suit against Chase in state court on April 7, 2014, and the case was removed to this court on May 14, 2014. Plaintiffs filed a first amended complaint after removal, which was dismissed with leave to amend on November 12, 2014. The court found that the FAC did "not adequately explain the facts surrounding their loan modification applications and does not adequately explain which facts underlie each asserted cause of action, " and ordered plaintiffs to "explain which transactions give rise to each asserted cause of action." Plaintiffs were specifically instructed to "set forth (1) the number of loan modification applications submitted to defendant, (2) the dates on which the loan modification applications were submitted, (3) whether plaintiffs received a response to each application, and if so, what the response was, and (4) which loan modification applications allegedly defendant mishandled and how it mishandled them." See Dkt. 36.
Plaintiffs filed the operative SAC on December 3, 2014, asserting three causes of action: (1) negligence, (2) violation of the Equal Credit Opportunity Act ("ECOA"), which requires a creditor to notify an applicant of its action on a credit application within 30 days, and (3) violation of California Business & Professions Code § 17200. The negligence claim appears to be based on all conduct alleged in the SAC, but the ECOA claim is expressly limited to the three loan modification applications submitted in May 2011, September 2011, and August 2013. Chase now moves to dismiss all three claims.
A. Legal Standard
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests for the legal sufficiency of the claims alleged in the complaint. Ileto v. Glock, Inc. , 349 F.3d 1191, 1199-1200 (9th Cir. 2003). Review is limited to the contents of the complaint. Allarcom Pay Television, Ltd. v. Gen. Instrument Corp. , 69 F.3d 381, 385 (9th Cir. 1995). To survive a motion to dismiss for failure to state a claim, a complaint generally must satisfy only the minimal notice pleading requirements of Federal Rule of Civil Procedure 8, which requires that a complaint include a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2).
A complaint may be dismissed under Rule 12(b)(6) for failure to state a claim if the plaintiff fails to state a cognizable legal theory, or has not alleged sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1990). The court is to "accept all factual allegations in the complaint as true and construe the pleadings in the light most favorable to ...