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Hackett v. Wells Fargo Bank, N.A.

United States District Court, C.D. California

March 5, 2018


          Present: The Honorable CHRISTINA A. SNYDER


         Proceedings: DEFENDANT'S MOTION TO DISMISS (Dkt. 11, filed January 22, 2018)


         On October 6, 2017, plaintiffs Walter H. Hackett, III and Lorinda D. Hackett filed the instant action against defendants Wells Fargo Bank, N.A. (“defendant”), and Does 1 through 10 inclusive. Dkt. 1 (“Compl.”). The gravamen of the complaint is that Wells Fargo failed to properly review plaintiffs' requests for loan modifications. Plaintiffs assert claims for (1) violations of the Equal Credit Opportunity Act, 15 U.S.C. § 1691(d)(1); (2) violations of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605(f), 12 C.F.R. §§ 1024.41, 1024.35, 1024.36; (3) negligence in violation of Cal. Civ. Code § 1714; and (4) unfair business practices in violation of Cal. Bus. & Prof. Code § 17200. See Compl.

         On January 22, 2018, Wells Fargo filed a motion to dismiss, dkt. 11 (“Motion”), and a request for judicial notice of plaintiffs' deed of trust and the docket in plaintiffs' Chapter 13 case, dkt. 12.[1] On February 12, 2018, plaintiffs filed an opposition, dkt. 15 (“Opp'n”), in addition to objections to Wells Fargo's request for judicial notice, dkt. 16 (“Objection”). On February 20, 2018, Wells Fargo filed a reply.[2] Dkt. 18 (“Reply”). On March 2, 2018, plaintiffs filed a response to Wells Fargo's reply.[3] Dkt. 19 (“Response”).

         On March 5, 2018, the Court held oral argument. Having carefully considered the parties' arguments, the Court finds and concludes as follows.


         Plaintiffs allege the following facts.

         Plaintiffs maintain their principal and family residence at the real property located at 3316 East Hiltonia Drive, West Covina, California 91792 (the “Subject Property”). Compl ¶¶ 6-7. Wells Fargo is the current servicer of plaintiffs' mortgage with respect to the Subject Property. Id. ¶ 8.

         Plaintiffs obtained a loan (“Subject Loan”) with respect to the Subject Property.[4]Beginning in the summer of 2006, plaintiffs allege that W. Hackett was “summarily terminated” by his employer and thereafter sought various types of work as a banking consultant and as an attorney. Id. ¶ 26. Due to a significant reduction in income, plaintiffs sought bankruptcy protection and filed a Chapter 13 petition in July 2010. Id. Plaintiffs' petition was dismissed. Id. ¶ 29. Plaintiff filed a second Chapter 13 petition in the fall of 2010-which was also dismissed-and plaintiff filed a third and final Chapter 13 petition in May 2012. Id.

         Plaintiffs assert that they contacted Wells Fargo in 2013 and requested review for a loan modification. Id. ¶ 34. Wells Fargo offered plaintiffs a temporary modification, but plaintiffs informed them telephonically and in writing that they would need the loan to be permanently modified in order to keep the loan current. Id.

         In January 2013, plaintiffs allegedly sought a permanent modification of the subject loan with assistance from their bankruptcy attorney. Id. ¶ 35. Wells Fargo allegedly failed to respond in writing within thirty days after receipt of the application. Id. In a letter dated October 3, 2013, plaintiffs allege that Wells Fargo advised plaintiffs that its investor would not permit permanent modification of loans. Id. ¶ 36. Plaintiffs believe that this representation is false, and that there is no investor restriction on loan modification. Id.

         In a separate October 3, 2013 letter, Wells Fargo allegedly offered a “Forbearance Agreement, ” which called for three payments of $1, 543.77 beginning November 14, 2013. Id. ¶ 37. Plaintiffs executed this agreement and allege that they made all payments in accordance with the Forbearance Agreement. Id. In April 2014, Wells Fargo allegedly offered a six-month temporary loan modification, and plaintiffs allege that they made timely payments. Id. ¶ 38.

         In June 2015, plaintiffs again requested a permanent loan modification because W. Hackett allegedly suffered brain damage and was unable to work as an attorney or as a banker. Id. ¶ 39. In July 2015, plaintiffs submitted all information requested by Wells Fargo to determine whether they qualified for a loan modification-yet plaintiffs allege that Wells Fargo failed to respond. Id. ¶ 40. Furthermore, plaintiffs allege that Wells Fargo failed to evaluate and make a determination of plaintiffs' loan modification applications-or, “applications for credit” as defined by 15 U.S.C. section 1691a(d)- within 30 calendar days. Id. ¶¶ 56-58, 76.

         Plaintiffs allege that they sent a request for information (“RFI”) to Wells Fargo on January 29, 2016, that Wells Fargo received the request on February 1, 2016, and that in a February 5, 2016 letter, Wells Fargo “failed to acknowledge receipt” of the RFI. Id. ¶¶ 41-43, 86. In the RFI, plaintiffs allegedly requested the documents that Wells Fargo relied on in reaching its determination that no error occurred in its denial of plaintiffs' request for a loan modification. Id. ¶ 86. On February 15, 2016, Wells Fargo allegedly responded to plaintiffs' RFI, yet plaintiffs assert that it failed to provide a complete response and failed to provide answers concerning investor restrictions preventing loan modification within thirty days of plaintiffs' RFI. Id. ¶¶ 45-46, 87-88. In an October 2016 letter, Wells Fargo allegedly stated that it needed additional time. Id. ¶ 48.

         Plaintiffs allege that they have been attempting to obtain a fair review for loan modification from defendants for almost four years, yet Wells Fargo has reacted with “disdain, inaction, obfuscation, and apathy.” Id. ¶ 49.


         A motion pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims asserted in a complaint. Under this Rule, a district court properly dismisses a claim if “there is a ‘lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.' ” Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) (quoting Balisteri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988)). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). “[F]actual allegations must be enough to raise a right to relief above the speculative level.” Id.

         In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all material allegations in the complaint, as well as all reasonable inferences to be drawn from them. Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be read in the light most favorable to the nonmoving party. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). However, “a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); see Moss v. United States Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (“[F]or a complaint to survive a motion to dismiss, the non-conclusory ‘factual content, ' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.”). Ultimately, “[d]etermining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.

         As a general rule, leave to amend a complaint which has been dismissed should be freely granted. Fed.R.Civ.P. 15(a). This policy is applied with “extreme liberality.” Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990); Moss v. Secret Serv., 572 F.3d 962, 972 (9th Cir. 2009). However, leave to amend may be denied when “the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000).


         Wells Fargo contends that plaintiffs' claims should be dismissed with prejudice, as no state or federal law affords plaintiff any relief to “second-guess” Wells Fargo's business decisions. Motion at 1.

         A. Plaintiffs' Claims for Violation of 15 U.S.C § 1691(d)(1)

         Plaintiffs allege that they provided Wells Fargo with completed loan modification applications in January 2013 and July 2015, and that Wells Fargo failed to evaluate plaintiffs' applications and failed to respond to plaintiffs in writing within 30 calendar days in violation of the Equal Credit Opportunity Act (“ECOA”). Compl. ¶¶ 57-58.

         Wells Fargo argues that plaintiff's claim under ECOA fails because the claim is (1) time-barred and (2) plaintiffs fail to demonstrate eligibility for ECOA protection because they fail to allege the essential elements of a discrimination claim under ECOA.[5] Id. at 2.

         ECOA “makes it illegal ‘for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction...on the basis of race, color, religion, national origin, sex or marital status or age.' ” Schlegel v. Wells Fargo Bank, 720 F.3d 1204, 1210 (9th Cir. 2013) (quoting 15 U.S.C. § 1691(a)(1)). As relevant here, ECOA requires that when a creditor takes adverse action, “[w]ithin thirty days … after receipt of a completed application for credit, [6] a creditor shall notify the applicant of its action on the application.” 15 U.S.C. § 1691(d)(1). Moreover, “[e]ach applicant against whom adverse action is taken shall be entitled to a statement of reasons for such action from the creditor.” 15 U.S.C. § 1691(d)(2). An “adverse action” is a “denial or revocation of credit, a change in the terms of existing credit arrangement, or a refusal to grant credit in substantially the amount or on substantially the terms requested. Such term does not include a refusal to extend additional credit under an existing credit arrangement where the applicant is delinquent or otherwise in default ….” 15 U.S.C. § 1691(d)(6). When a creditor fails to give the required notice of taking an adverse action, the applicant may sue for a violation of ECOA. Schlegel, 720 F.3d at 1210.

         Plaintiffs argue that they are bringing a notice claim-not a discrimination claim- under ECOA. Opp'n at 5. The Court observes that numerous district courts have found that failure to comply with ECOA's notice provisions gives rise to a distinct notice claim under the statute. See Errico v. Pac. Capital Bank, N.A., 753 F.Supp.2d 1034, 1042 (N.D. Cal. 2010) (citing Dufay v. Bank of America, 94 F.3d 561 (9th Cir. 1996)); Vasquez v. Bank of Am., N.A., No. 13-CV-02902-JST, 2013 WL 6001924, at *11 (N.D. Cal. Nov. 12, 2013) (“The Federal Reserve regulations implementing ECOA appear to have two distinct requirements: a bar on discrimination in lending and ...

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