United States District Court, S.D. California
(1) GRANTING IN PART DEFENDANT'S MOTION TO DISMISS; AND (2) STAYING THE CASE [ECF 11]
CYNTHIA BASHANT, District Judge.
On July 24, 2014, Plaintiff Adriana Rovai brought a prospective class action against Select Portfolio Servicing, Inc. ECF 1. The Complaint alleges eight causes of action: seven purportedly under state law, one a "violation of 26 U.S.C. § 6050H". Plaintiff claims federal question jurisdiction under 28 U.S.C. §§ 1331, 2201, 2022. Compl. ¶ 33. Additionally, she claims jurisdiction under the Class Action Fairness Act, 28 U.S.C. §§ 1332(a) and (d). Id.
On December 12, 2014, Defendant brought a motion to dismiss the Complaint. ECF 11. For the following reasons, the Court GRANTS IN PART the motion. The Court DISMISSES with prejudice Plaintiff's eighth cause of action and STAYS the remaining claims pending a determination by the Internal Revenue Service ("IRS").
I. Dismissing 26 U.S.C. § 6050H Cause of Action
Defendant seeks to dismiss Plaintiff's eighth claim, brought under 26 U.S.C. § 6050H, because that statute provides no private right of action.
To begin, 26 U.S.C. § 6050H requires companies that have received mortgage interest in excess of $600 from a debtor to provide a mortgage interest statement (or an IRS Form 1098) to that debtor. Defendant correctly states that there is no expressly created private cause of action. Plaintiff asks the Court to imply a private remedy under § 6050H, citing Cort v. Ash, 422 U.S. 66, 78 (1975).
Cort uses a four-factor test to determine whether a statute implicitly includes a private cause of action:
First, is the plaintiff one of the class for whose especial benefit the statute was enacted-that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?
Cort, 422 U.S. at 78.
Under later cases, courts have emphasized that the "key inquiry is whether Congress intended to provide the plaintiff with a private right of action." First Pac. Bancorp, Inc. v. Helfer, 224 F.3d 1117, 1121 (9th Cir. 2000). Some courts have gone so far as to opine that Cort has been "effectively overruled." Thompson v. Thompson, 484 U.S. 174, 188 (1988) (O'Connor, J. and Scalia, J., concurring). In any case, the Ninth Circuit has determined that the four-factor test is helpful in determining the legislature's intent. Helfer, 224 F.3d at 1121.
Statutes similar to 26 U.S.C. § 6050H that create private rights of action do so explicitly. For example, § 18(a) of the Securities Exchange Act of 1934 (1934 Act), 48 Stat. 897, as amended, 15 U.S.C. § 78q(a), "creates a private cause of action against persons, such as accountants, who make or cause to be made' materially misleading statements in any reports or other documents filed with the Commission, although the cause of action is limited to persons who, in reliance on the statements, purchased or sold a security whose price was affected by the statements." Touche Ross & Co. v. Redington, 442 U.S. 560, 572 (1979) (quoting 15 U.S.C. § 78r(a)). In Touche Ross, the Supreme Court found no private cause of action for statutes "that simply require certain regulated businesses to keep records and file periodic reports to enable the relevant governmental authorities to perform their regulatory functions" without explicit language creating a private right. Id. at 569.
Generally, "[s]tatutes that focus on the person regulated rather than the individuals protected create no implication of an intent to confer rights on a particular class of persons.'" Alexander v. Sandoval, 532 U.S. 275, 289 (2001) (quoting California v. Sierra Club, 451 U.S. 287, 294 (1981)). Because 26 U.S.C. § 6050H does not explicitly create a private cause of action and focuses on the person regulated, the Court is reticent to imply a private right. See Sandoval, 532 U.S. at 287 ("Raising up causes of action where a statute has not created them may be a proper function for common-law courts, but not for federal tribunals." Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 365 (1991) (Scalia, J., concurring in part and concurring in judgment).). Requiring a mortgagor to provide its Form 1098s to the mortgagee, in addition to the IRS, permits a mortgagee to stay apprised of the accruing tax burden and benefit, but it does not follow that this entitles a mortgagee to private recourse under the statute.
Lastly, other courts addressing this statute have considered this issue and declined to read 26 U.S.C. 6050H as creating a private cause of action. See Barbieri v. Wells Fargo & Co., No. CIV.A. 09-3196, 2014 WL 7330461, at *9 (E.D. Pa. Dec. 22, 2014). It is possible that the 1098 forms, if inaccurate, are challengeable with the IRS or under a common law theory, but 26 U.S.C. § 6050H does not itself create a private cause of action against the mortgagor. Accordingly, the Court ...