United States District Court, C.D. California
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
D. WRIGHT, II, UNITED STATES DISTRICT JUDGE
November 20, 2017, Plaintiffs Hector Sanchez and Brenda
Duarte filed a Complaint against Defendants Quality Loan
Servicing Corp., Quality Loan Service Corporation (together,
“Quality”), and Quantum Servicing
Corporation (“Quantum”), alleging
violations of the Equal Credit Opportunity Act, 15 U.S.C.
§ 1691, and the Civil Rights Act of 1991, 42 U.S.C.
§ 1981, along with four state law claims. (See
generally Compl., ECF No. 1.) Plaintiffs later filed
a First Amended Complaint, which Quantum now moves to dismiss
in its entirety. (First Am. Compl. (“FAC”), ECF
No. 14.; Mot. 2, ECF No. 27.) For the reasons discussed
below, the Court GRANTS Defendants'
Motion to Dismiss.
2005, Plaintiffs applied for a mortgage loan with First
Magnus Financial (“First Magnus”) in the amount
of $412, 000. (FAC ¶ 19, ECF No. 14.) First Magnus
approved the mortgage, and the loan was secured by a deed of
trust on Plaintiffs' family home in Long Beach,
California (the “Property”). (FAC ¶ 2.)
Plaintiffs later refinanced the Property with American
Brokers Conduit (“ABC”), receiving a new loan in
the amount of $472, 000. (FAC ¶ 20.) In 2007, First
Magnus and ABC were identified by the Federal Reserve as
subprime lenders involved in predatory loans. (FAC ¶ 2.)
2010, ABC assigned Plaintiffs' loan to Defendants Quality
and Quantum. (FAC ¶ 2.) The balance on the loan at the
time of assignment was $472, 200. (FAC ¶ 21.) Quality
and Quantum acted together as lender and servicer for
Plaintiffs' loan. (FAC ¶ 3.)
are Hispanic, and Defendants knew this to be the case. (FAC
¶ 7.) Since 2005, Hispanics, as a group, have lost a
disproportionate share of their family wealth compared to
non-Hispanic whites. (FAC ¶ 8.) Plaintiffs themselves
lost over 60% of their income between 2005 and 2007. (FAC
¶ 9.) From 2008 to 2011, Plaintiffs “slowly began
to recover” their income. (FAC ¶ 9.)
Plaintiffs continued to struggle financially throughout this
period. (FAC ¶¶ 9-10.) By 2011, “they had one
or more children, and had to account for those
expenses.” (FAC ¶ 9.) Several times
between 2010 and 2012, Plaintiffs informed Defendants of
their financial struggles, and Plaintiffs made numerous
requests for a modification of the mortgage loan. (FAC
¶¶ 10, 22, 32.) Defendants denied these loan
modification requests, in contravention of best practices
suggested by the Office of the Comptroller of the Currency.
(FAC ¶¶ 24, 34.) In fact, Defendants rarely, if
ever, granted the type of loan modification that would allow
severely distressed borrowers to remain in their homes;
instead, Defendants “maneuver[ed] homeowners toward
default, foreclosure, eviction, and money judgments.”
(FAC ¶ 25.) As part of their collection efforts,
Defendants have filed lawsuits against Latinos in Los Angeles
County and Orange County Superior Courts for similar
delinquent mortgages. (FAC ¶ 24.)
do not specify in their First Amended Complaint exactly when
Plaintiffs defaulted on their loan. (See generally
FAC.) In 2012, Defendants moved to foreclose on the loan.
(FAC ¶ 22.) In 2011, rates of foreclosure among Hispanic
home loan borrowers were higher than rates of foreclosure
among non-Hispanic White borrowers. (FAC ¶ 33.)
Plaintiffs were ultimately evicted from the Property. (FAC
foreclosure, Defendants reported Plaintiffs' loan
delinquency to the credit reporting agencies. (FAC
¶¶ 22, 26, 39, 49, 56, 71.) The First Amended
Complaint is ambiguous as to when or how often Defendants
reported Plaintiffs' delinquency. Portions of the
Complaint seem to indicate that Defendants reported
Plaintiffs' delinquency just once, and thereafter merely
failed to subsequently advise the agencies that the
underlying loan was predatory. (FAC ¶¶ 26, 39.)
Elsewhere, Plaintiffs allege that Defendants made
“annual” reports of Plaintiffs' delinquency.
(FAC ¶ 71.) Plaintiffs further allege that Defendants
“continued” to report Plaintiffs' delinquency
until either 2016 or 2017. (FAC ¶¶ 22, 49, 56.)
November 2, 2017, Plaintiffs filed their initial Complaint in
federal court, bringing two causes of action under federal
law and four causes of action under California state law.
(ECF No. 1.) Plaintiffs subsequently filed a First Amended
Complaint on January 15, 2018. (ECF No. 14.) On February 26,
2018, Quantum moved to dismiss the First Amended Complaint in
its entirety. (ECF No. 27.) Quality has yet to appear in this
case. Both Plaintiffs and Quantum have submitted briefs in
support of their respective positions, and the Motion is ripe
for determination. (ECF Nos. 27, 30, 33.)
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) tests the sufficiency of a complaint. Navarro v.
Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is
proper if the complaint “lacks a cognizable legal
theory or sufficient facts to support a cognizable legal
theory.” Mendiondo v. Centinela Hosp. Med.
Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008).
ruling on a motion to dismiss under Rule 12(b)(6), the court
assumes all factual allegations in the complaint to be true,
viewing those allegations in the light most favorable to the
nonmoving party. Thompson v. Davis, 295 F.3d 890,
896 (9th Cir. 2002); Cahill v. Liberty Mut. Ins.
Co., 80 F.3d 336, 337-38 (9th Cir. 1996). While a
plaintiff need not give “detailed factual allegations,
” the plaintiff must plead sufficient facts that, if
true, “raise a right to relief above the speculative
level.” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 555 (2007). Moreover, a court need not
“accept as true allegations that are merely conclusory,
unwarranted deductions of fact, or unreasonable
inferences.” Sprewell v. Golden State
Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Ultimately,
“[t]he claim must be sufficiently plausible that
‘it is not unfair to require the opposing party to be
subjected to the expense of discovery and continued
litigation.'” Mora v. U.S. Bank, No. CV
15-02436 DDP (AJWx), 2015 WL 4537218, at *2 (C.D. Cal July
27, 2015) (quoting Starr v. Baca, 652 F.3d 1202,
1216 (9th Cir. 2011)). If a court determines that a complaint
fails to state a claim, the court should grant leave to amend
unless it determines that amendment could not possibly cure
the complaint's deficiencies. Steckman v. Hart
Brewing, Inc., 143 F.3d 1293, 1296 (9th Cir. 1998);
reasons discussed below, the Court finds that Plaintiffs fail
to state a claim for relief. Plaintiffs' First and Second
Causes of Action are time-barred, and Plaintiffs' Third,
Fourth, Fifth, and Sixth Causes of Action fail on the merits.
Material outside the Complaint
a court “may not consider any material beyond the
pleadings in ruling on a Rule 12(b)(6) motion.”
United States v. Corinthian Colls., 655 F.3d 984,
998 (9th Cir. 2011). However, courts in the Ninth Circuit
ruling on 12(b)(6) motions may consider: (1) material that
was “properly submitted as part of the complaint,
” Hal Roach Studios, Inc. v. Richard Feiner &
Co., 896 F.2d 1542, 1555, n.19 (9th Cir. 1989); (2)
materials whose authenticity is not questioned and on which
the Plaintiff's complaint necessarily relies, Lee v.
City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001),
and (3) judicially noticed matters of public record,
id. at 688-89.
Quantum and Plaintiffs ask the Court to consider certain
materials outside the four corners of the Complaint.
(Def.'s Req. Jud. Notice Ex. 1 at 5, ECF No. 27-2; FAC
Ex.1, Ex. 2; Decl. of Herbert N. Wiggins (“Wiggins
Decl.”) Ex. 1, ECF No. 32-1.) The Court first considers
Quantum's Requests for Judicial Notice
asks the Court to judicially notice that the Property was
sold at a non-judicial foreclosure sale on February 27,
2012. (Def.'s Req. Jud. Notice Ex. 1 at 6.)
Judicial notice is appropriate when the fact to be noticed
“is not subject to reasonable dispute because it . . .
can be accurately and readily determined from sources whose
accuracy cannot reasonably be questioned.” Fed.R.Civ.P.
201(b)(2); see also Lee, 250 F.3d at 689
(recognizing that a court may take judicial notice of facts
in the public record). If a party requests judicial notice of
a fact and supplies the Court with the necessary information,
the Court must take judicial notice of the fact. Fed.R.Civ.P.
source of the date of the foreclosure sale of the Property is
the Trustee's Deed Upon Sale, which is filed at the Los
Angeles County Recorder's Office. (Def.'s Req. Jud.
Notice Ex. 1.) The Court finds that the accuracy of official
records in the County Recorder's Office cannot reasonably
be questioned, and therefore finds that the date of the
foreclosure sale is beyond reasonable dispute. See Snyder
v. HSBC Bank, USA, N.A., 913 F.Supp.2d 755, 768 (D.
Ariz. 2012) (taking judicial notice of a publicly-recorded
Trustees' Deed Upon Sale, where defendants provided the
court a complete copy and plaintiffs did not object to the
request). Moreover, Plaintiffs have not objected to the
accuracy of this date. (See generally Opp'n, ECF
No. 30.) Therefore, the Court takes judicial notice of the
fact that the Property was sold at a non-judicial foreclosure
sale on February 27, 2012.
also asks the Court to judicially notice the results of an
online search of Los Angeles County Superior Court records
for two case numbers that appear in the First Amended
Complaint. (See Def.'s Req. Jud. Notice Exs. 2,
3; FAC ¶ 12(D).) The Court has no need to rely on the
contents of the results of these two searches, and the Court
therefore declines to address whether these documents are
subject to judicial notice.
Plaintiffs' Materials in Support of the Complaint
present several materials to the Court in support of their
claim for relief. First, Plaintiffs present three studies.
Two are attached to the Complaint. (FAC Ex.1, Ex. 2.) The
third is attached to a declaration submitted by
Plaintiffs' attorney in support of Plaintiffs'
Opposition to the Motion to Dismiss. (Wiggins Decl. Ex. 1.)
Plaintiffs also present a property profile for the Property
that is the subject of this dispute. (Pls.' Req. Jud.
Notice Ex. 1, ECF No. 31-1.)
Court need not rely upon any of these documents in ruling on
this motion, because Plaintiffs set forth the statistics that
purportedly support their claim in their First Amended
Complaint. (See FAC ¶¶ 3, 8, 9, 23, 27,
30, 31.) Because the Complaint itself contains the relevant
data, the Court has no need to go beyond the four corners of
the Complaint to consider the studies themselves. With
regards to the property profile, Plaintiffs' Complaint
neither relies on nor refers to any of the events or dates
listed in the property profile, with the exception of the
date of the foreclosure sale itself, which the Court
judicially notices. Therefore, the Court likewise has no need
to refer to or make use of any of the dates or events in the
the Court will not rely on any of these documents in ruling
on this Motion, the Court declines to address whether these
documents are subject to judicial notice.
Plaintiffs' ECOA Claim Is Time-Barred
first allege a series of violations of the Equal Credit
Opportunity Act (“ECOA”), relating to
Defendants' 2012 foreclosure of Plaintiffs' home
loan. However, an action under the ECOA must be filed within
five years of the date of the alleged violation. 15 U.S.C.
§ 1691e(f). Plaintiffs filed their complaint on November
2, 2017. (ECF No. 1.) Therefore, an action for any violation
that occurred before November 2, 2012 is time-barred.
non-judicial foreclosure sale of the home took place on
February 27, 2012. See supra Section IV.A.1. Because
the foreclosure sale occurred outside ECOA's period of
limitations, any ECOA claim arising from the foreclosure sale
itself is time-barred. For the same reason, any legal claim
on an ECOA violation occurring before the foreclosure sale is
the only acts of Defendants that fall within the ECOA's
five-year period of limitations are the annual reports of
Plaintiffs' default that Defendants made to the credit
bureaus. (FAC ¶ 71.) The Court finds two bases on which
to conclude that these annual reports do not violate the
provisions of the ECOA.
ECOA provides that “[i]t shall be unlawful for any
creditor to discriminate against any applicant, with respect
to any aspect of a credit transaction . . . on the basis of
race.” 15 U.S.C. § 1691(a)(1). “The ECOA
allows for a cause of action for either overtly
discriminatory policies or facially neutral policies that
have a discriminatory effect.” Mora, 2015 WL
4537218 at *6; see also Taylor v. Accredited Home
Lenders, Inc., 580 F.Supp.2d 1062, 1067 (S.D. Cal. 2008)
(confirming that disparate impact claims are allowable under
the ECOA). Plaintiffs in this case have elected the latter
option, alleging and pursuing a disparate impact theory of
discrimination. (FAC ¶¶ 27, 35, 37, 46.) To show
disparate impact, an ECOA plaintiff “must plead (1) the
existence of outwardly neutral practices; (2) a significantly
adverse or disproportionate impact on persons of a particular
type produced by the defendant's facially neutral acts or
practices; and (3) facts demonstrating a causal connection
between the specific challenged practice or policy and the
alleged disparate impact.” Hernandez v. Sutter W.
Capital, No. C 09-03658 CRB, 2010 WL 3385046, at *3
(N.D. Cal Aug. 26, 2010). The Court finds that
Defendants' actions in the five years preceding
Plaintiffs' filing of their Complaint fail to provide the
basis for a disparate impact claim on all three counts.
in pleading the existence of outwardly neutral practices, a
plaintiff must point to a “specific, identified . . .
practice or selection criterion.” Ramirez v.
GreenPoint Mortg. Funding, Inc., 633 F.Supp.2d 922, 927
(N.D. Cal. 2008) (quoting Stout v. Potter, 276 F.3d
1118, 1121 (9th Cir. 2002)). Thus, a plaintiff alleging
disparate impact “generally cannot attack an overall
decisionmaking process . . . but must instead identify the
particular element or practice within the process that causes
an adverse impact.” Stout, 276 F.3d at 1125.
While Plaintiffs do allege that Defendants reported
Plaintiffs' delinquency to the credit reporting agencies
“as part of their collection process, ”
Plaintiffs fail to allege any facts relating to a specific
practice, policy, or selection criterion that Defendants
followed in preparing and sending reports to the credit
reporting agencies. (FAC ¶ 39 (emphasis in original).)
a series of specific, bilateral transactions concerning a
lender and a single borrower, without more, cannot provide a
basis for disparate-impact liability. Disparate impact
liability generally rests on the notion that a class
of people has been disparately impacted by a defendant's
policies, and, as such, a lender must have applied its policy
to many individual borrowers both inside and outside the
class in order for a plaintiff to be able to conduct a
disparate impact analysis in the first place. See Barrett
v. H & R Block, Inc., 652 F.Supp.2d 104, 110
(“[A] plaintiff must demonstrate that it is the
application of a specific or particular . . . practice that
has created the disparate impact under attack.”)
(quoting Wards Cove Packing Co., Inc. v. Atonio, 490
U.S. 642, 657 (1989)). Disregarding events falling outside
ECOA's period of limitations, Plaintiffs have alleged
that Defendants made annual credit reports, but they fail to
allege that Defendants made annual reports about anyone
other than Plaintiffs. (FAC ¶ 71.) Plaintiffs
allege no facts or data that show that Defendants maintained
a policy and applied that policy to several customers, and
therefore, Plaintiffs have not alleged the kind of
“specific or particular” policy necessary to
conduct a disparate impact analysis. Wards ...