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Strugala v. Flagstar Bank

United States District Court, N.D. California, San Jose Division

September 1, 2017




         Plaintiff Lisa Strugala alleges that she was injured because Defendant Flagstar Bank, FSB provided erroneous tax documents regarding her mortgage interest payments. Flagstar moves to dismiss on the grounds that Strugala lacks Article III standing. Flagstar's motion will be GRANTED IN PART AND DENIED IN PART.

         I. BACKGROUND

         Strugala obtained a home mortgage loan from Flagstar in 2007.[1] First Am. Compl. (“FAC”) ¶¶ 24-25, Dkt. No. 18. Under the terms of the mortgage, Strugala's monthly payments were less than the monthly interest due, with the remainder added to the loan principal. Id. ¶¶ 3-5, 25.

         Under 26 U.S.C. § 6050H, a lender must issue an annual Form 1098 stating the amount of mortgage interest that a borrower paid during the year. Strugala alleges that in the tax years before 2011, Flagstar issued Forms 1098 that erroneously included both (1) the amount of interest borrowers actually paid and (2) the amount of interest that was deferred and added to the principal. Id. ¶¶ 1, 7. She alleges that in 2011, Flagstar stopped reporting deferred interest on Forms 1098 and “tr[ied] to make up for its prior over-reporting of interest by under-reporting consumers' interest payments in later years.” Id. ¶ 17.

         Strugala sold her home in 2012 and used the proceeds to pay roughly $63, 000 in deferred interest to Flagstar. Id. ¶¶ 35-40. However, despite her requests, Flagstar did not issue a Form 1098 to her for 2012. Id. As a result, Strugala alleges that Flagstar over-reported her interest payments for 2007-2011 and underreported her interest payments in 2012. Id. ¶¶ 38-41.

         As discussed below, Strugala alleges that she suffered injuries from Flagstar's over-reporting and subsequent under-reporting. Flagstar moved to dismiss (Dkt. No. 55), and this Court stayed the action and referred the matter to the IRS under the primary jurisdiction doctrine to determine whether Flagstar's reporting practices complied with 26 U.S.C. § 6050H and its related regulations (Dkt. No. 69). This Court required Strugala to submit a report every six months describing the status of her IRS proceedings. On May 30, 2017, Strugala filed a report indicating that the IRS had accepted her amended 2012 tax return (among other developments). Dkt. No. 81. On June 21, 2017, this Court lifted the stay solely to permit Flagstar to file a motion addressing Strugala's Article III standing. Dkt. No. 84. Flagstar now moves to dismiss under Fed.R.Civ.P. 12(b)(1). Def.'s Mot. to Dismiss (“MTD”), Dkt. No. 85.


         A. Rule 12(b)(1)

         Dismissal under Fed.R.Civ.P. 12(b)(1) is appropriate if the complaint fails to allege facts sufficient to establish subject-matter jurisdiction. Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039 n.2 (9th Cir. 2003). The Court “is not restricted to the face of the pleadings, but may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction.” McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988). The nonmoving party bears the burden of establishing jurisdiction. Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010).

         B. Article III Standing

         To have standing, a plaintiff must have “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016). The plaintiff bears the burden of proving these elements. Id.

         The plaintiff's injury must be “particularized” and “concrete.” Id. at 1548. To be particularized, it “must affect the plaintiff in a personal and individual way.” Id. To be concrete, it must be real, not abstract. Id. at 1548-49. A concrete injury can be tangible or intangible. Id. A statutory violation alone is not enough; the plaintiff must also allege a concrete harm. Id. at 1549 (a plaintiff cannot “allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirements of Article III”).

         If the plaintiff lacks Article III standing, then the case must be dismissed for lack of subject-matter jurisdiction. Steel Co. v. Citizens for a ...

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