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Lucore v. Zeff

United States District Court, S.D. California

February 26, 2018



          Hon. Janis L. Sammartino, United States District Judge

         Presently before the Court are Defendants Michael D. Zeff and Rosenthal, Withem & Zeff's (“Zeff Defendants”) Motion to Dismiss Plaintiffs' Third Amended Complaint, (“Zeff MTD, ” ECF No. 76), and Defendant Nationstar Mortgage LLC's Motion to Dismiss Plaintiffs' Third Amended Complaint, (“Nationstar MTD, ” ECF No. 75). Also before the Court are Plaintiffs Steven H. Lucore and Judy L. Lucore's Opposition[1] to (“Lucore Opp'n, ” ECF No. 86), and Defendants Replies in Support of, (ECF Nos. 82, 87), the respective Motions to Dismiss. Additionally, the Zeff Defendants filed a Request for Judicial Notice, (ECF Nos. 76-1, 76-2); Plaintiffs also filed a Request for Judicial Notice, (ECF No. 85). Finally, Plaintiffs filed a Motion to Amend Complaint to Add a Cause of Action, (“MTN, ” ECF No. 73). Defendants filed Oppositions to, (ECF Nos. 77, 78), and Plaintiffs filed a Reply in Support of, (ECF No. 80) the Motion to Amend.

         The Court vacated hearings for the two Motions to Dismiss and Plaintiff's Motion to Amend and took these matters under submission without oral argument pursuant to Civil Local Rule 7.1(d)(1). (ECF Nos. 83, 88.) Having considered the parties' arguments and the law, the Court GRANTS the Zeff Defendants' MTD (ECF No. 76), GRANTS Defendant Nationstar's MTD (ECF No. 75), DISMISSES WITH PREJUDICE Plaintiffs' TAC, (ECF No. 71), DENIES AS MOOT the Zeff Defendants' RJN (ECF Nos. 76-1, 76-2) and DENIES AS MOOT Plaintiffs' RJN, (ECF No. 85). Additionally, the Court DENIES Plaintiffs' Motion to Amend, (ECF No. 73).


         On January 6, 2009, “Plaintiffs rescinded a mortgage loan” encumbering a residential property located at 11132 Summit Avenue, Santee, CA 92071 (the “Property”). (TAC ¶ 8.) BAC Home Loans Servicing, LLC was the original lender-creditor. (Id. ¶ 10.) U.S. Bank claimed to have been assigned the debt on September 14, 2010, (id. ¶ 11). U.S. Bank is not a party to this action. Plaintiff alleges that U.S. Bank purchased the Property at a trustee's sale on August 18, 2011, (id. ¶ 11), and U.S. Bank pursued two post-foreclosure evictions in state court against Plaintiffs, which resulted in dismissal both times because the trial court allegedly found that U.S. Bank lacked standing to pursue its claim, (id. ¶ 12). On or about April 3, 2015, the Zeff Defendants, who are counsel representing U.S. Bank, sent a letter to Plaintiffs threatening to take further legal action against Plaintiffs' property. (Id.) The Zeff Defendants then filed an unlawful detainer action in state court, which was subsequently dismissed because U.S. Bank allegedly lacked duly perfected title to the Property. (Id. ¶ 16.) Meanwhile, since August 21, 2015, Defendant Nationstar has threatened to sell the Property because the property in question is on the website and Nationstar is listed as the seller of the property. (Id. ¶ 18.)

         Plaintiffs filed a complaint in federal court against the Zeff Defendants on April 24, 2015, alleging various violations of the Fair Debt Collection Practices Act (“FDCPA”). (See generally ECF No. 1.) After the Zeff Defendants filed a motion to dismiss, (ECF No. 5), Plaintiffs moved to amend their complaint to add Defendant Nationstar, (ECF No. 11). Plaintiffs filed their First Amended Complaint (“FAC”) on November 24, 2015, alleging three causes of action under the FDCPA against both Nationstar and Zeff Defendants. (See generally FAC, ECF No. 19.) The Court dismissed without prejudice Plaintiffs' FAC on June 3, 2016, and Plaintiffs filed their Second Amended Complaint (“SAC”) on June 16, 2016. The Court again dismissed without prejudice Plaintiffs' SAC, (“Prior Order, ” ECF No. 70). Plaintiffs filed their TAC on March 14, 2017, which resulted in the present Motions.


         I. Legal Standard

         Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the defense that the complaint “fail[s] to state a claim upon which relief can be granted, ” generally referred to as a motion to dismiss. The Court evaluates whether a complaint states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil Procedure 8(a), which requires a “short and plain statement of the claim showing that the pleader is entitled to relief.” Although Rule 8 “does not require ‘detailed factual allegations, ' . . . it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, “a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do.” Twombly, 550 U.S. at 555 (alteration in original). “Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Iqbal, 556 U.S. at 678 (alteration in original) (quoting Twombly, 550 U.S. at 557).

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. at 570); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible when the facts pled “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). That is not to say that the claim must be probable, but there must be “more than a sheer possibility that a defendant has acted unlawfully.” Id. (citing Twombly, 550 U.S. at 556). “[F]acts that are ‘merely consistent with' a defendant's liability” fall short of a plausible entitlement to relief. Id. (quoting Twombly, 550 U.S. at 557). Further, the Court need not accept as true “legal conclusions” contained in the complaint. Id. at 678-79 (citing Twombly, 550 U.S. at 555). This review requires “context-specific” analysis involving the Court's “judicial experience and common sense.” Id. at 679. “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged- but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Id. (quoting Fed.R.Civ.P. 8(a)(2)).

         The Court will grant leave to amend unless it determines that no modified contention “consistent with the challenged pleading . . . [will] cure the deficiency.” DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schriber Distrib. Co. v. Serv- Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)).

         II. Analysis

         Plaintiffs assert three causes of action against Defendants: (1) violation of 15 U.S.C. §§ 1692e(5) & 1692e(10), (2) violation of 15 U.S.C. § 1692e(2)(A), and (3) violation of 15 U.S.C. § 1692f(1). (See generally TAC.) Defendants argue that Plaintiffs fail to allege that Defendants are debt collectors under the FDCPA, [2] (see Zeff MTD 9-12; Nationstar MTD 13-14), which would preclude any recovery under FDCPA. See 15 U.S.C. § 1692(e). Plaintiffs disagree. (See Lucore Opp'n 9-12.) Defendants also argue Plaintiffs' claims are barred by res judicata.[3] In its Prior Order, the Court found Defendants were not debt collectors and admonished Plaintiffs to allege facts to support its contention that Defendants were debt collectors under FDCPA. (Prior Order 8.) It is to this discussion that the Court now turns.

         A. Definition of Debt Collector Under FDCPA

         The FDCPA was enacted “to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.” 15 U.S.C. § 1692(e). As relevant to the statute, “[t]he term ‘debt collector' means any person who . . . [is] in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” § 1692a(6). The statute also provides a narrower definition of debt collector: “For the purpose of section 1692f(6) of this title, [debt collector] includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests.Id. (emphasis added). Plaintiffs allege that both Nationstar and the Zeff Defendants are debt collectors for purposes of the FDCPA, (see TAC ¶¶ 21-23), but do not allege a violation of § 1692f(6).

         In its Prior Order the Court noted that the Ninth Circuit had yet to address whether foreclosure proceedings constitute “debt collection” within the ambit of the FDCPA. (Prior Order 5-6 (quoting Cruz v. Nationwide Reconveyance, LLC, No. 15-CV-2082-GPC-NLS, 2016 WL 127585, at *4 & n.3 (S.D. Cal. Jan. 11, 2016); and O'Connor v. Nationstar Mortg., LLC, No. 13-CV-05874 NC, 2014 WL 1779338, at *5 (N.D. Cal. May 5, 2014).) The Ninth Circuit has since answered that question. In Vien-Phuong Thi Ho v. ReconTrust Co., 858 F.3d 568, 570 (9th Cir.), cert. denied, ___ S.Ct. ___, 2017 WL 3621103 (2017), the issue before the Ninth Circuit was whether the trustee of a California deed of trust is a debt collector under the FDCPA. There, the plaintiff bought a house with a loan secured by a deed of trust. Id. After the plaintiff missed several loan payments, the defendant initiated a non-judicial foreclosure by recording a notice of default and sent the notice to the plaintiff along with warnings to pay the outstanding balance on the loan or face non-judicial foreclosure and auctioning of the property. Id.

         The Ninth Circuit affirmed the holding of Hulse v. Ocwen Federal Bank, 195 F.Supp.2d 1188, 1204 (D. Or. 2002), which held that “foreclosing on a trust deed is an entirely different path than collecting funds from a debtor.” Vien-Phuong Thi Ho, 858 F.3d at 572 (quotation marks omitted). The court distinguished between a person attempting to enforce his or her rights through a non-judicial foreclosure and attempting to collect money. Id. at 571. In support of this conclusion, the court reasoned that the definition of debt collector in section 1692a(6) distinguishes between entities that collect debts owed and a narrower definition of debt collector, which “also includes” entities whose principal business purpose is “the enforcement of security interests.” See Id. at 572-73 (citing §§ 1692a(6), 1692f(6)). Thus, “an entity does not become a general ‘debt collector' if its ‘only role in the debt collection process is the enforcement of a security interest.'” Id. at 573 (citing Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373, 378 (4th Cir. 2006); and Glazer v. Chase Home Fin. LLC, 704 F.3d 453, 464 (6th Cir. 2013)). In applying its holding, the court decided that a non-judicial foreclosure was the enforcement of a security interest and not the collection of a monetary debt. Therefore, the “right to ‘enforce' the security interest necessarily implies the right to send the required notices; to hold otherwise would divorce the notices from their context.” Id. This Court's legal standard in its prior order is in accord with Vien-Phuong Thi Ho. (See, e.g., Prior Order 6 (quoting Hulse, 195 F.Supp.2d at 1204).)

         Here, Plaintiffs allege violations of sections 1692e(5), 1692e(10), 1692e(2)(A), and 1692f(1), but not section 1692f(6). Therefore, the broader definition of debt collector applies. See 15 U.S.C. § 1692a(6). In determining the definition of debt collector, the relevant inquiry is whether the actions by Defendants are enforcing a security interest or collecting a monetary debt. The Court embarked on this inquiry in both its prior orders. (See ECF Nos. 38, 70.) As before, Plaintiffs allege that the Zeff Defendants sent a letter threatening eviction proceedings, (TAC ¶ 14), and filed an unlawful detainer action against Plaintiffs, (id. ¬∂ 16). Plaintiffs also claim ‚ÄúDefendant Nationstar has misrepresented the character and status of the debt and threatened to take action it had no legal right ...

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