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Corral v. Bank of America, N.A.

United States District Court, N.D. California

July 29, 2016

ESPERANZA CORRAL, et al., Plaintiffs,
BANK OF AMERICA, N.A., et al., Defendants.




         Plaintiffs Esperanza Corral and Diana Balgas brought the instant action against Defendants Countrywide Home Loans, Nationstar Mortgage LLC, and Wells Fargo Bank, N.A., alleging that Defendants discriminated against Plaintiffs in rejecting their “attempt[s] to satisfactorily modify their loans, instead offering them unsustainably high modification rates and terms.” Docket No. 36 (First Amended Complaint) (FAC) at ¶ 15. Plaintiffs believe that Defendants discriminated against them on the basis of sexual orientation, gender, and race. Id. at ¶ 16. Based on these actions, Plaintiffs have brought six causes of action: (1) discrimination in violation of the Fair Housing Act (FHA); (2) discrimination in violation of the Equal Opportunity Credit Act (EOCA); (3) discrimination in violation of California's Fair Employment and Housing Act (FEHA); (4) violation of California's Unfair Competition Law (UCL); (5) discrimination in violation of California's Unruh Civil Rights Act; and (6) violation of California's Homeowner Bill of Rights (HBOR). Id. at 5-9. Defendants now move to dismiss the complaint with prejudice. Docket No. 46 (Mot.).

         Defendants' motion came on for hearing before this Court on July 21, 2016. For the reasons stated below, the Court GRANTS Defendants' motion to dismiss, but without prejudice.


         Plaintiffs are “a lesbian couple of Latina descent, ” who own five properties in Alameda County, California. FAC at ¶ 14. Plaintiffs allege that beginning in 2009 and until the present, they “made numerous attempts to retain sustainable loan modifications for their properties.” Id. at ¶ 15. However, Defendants “inexplicably rejected the Plaintiffs' every attempt to satisfactorily modify their loans, instead offering them unsustainably high modification rates and terms.” Id. These terms included “higher payments than Plaintiffs we remaking under their original loans or slightly lower rates with severe compound interest charges and impossibly large balloon payments.” Id. at ¶ 16. Plaintiffs believe that Defendants did this because Plaintiffs “are 'different, ' specifically, because of their sexual orientation, gender[, ] and race.” Id. at ¶ 17. “Countrywide Home Loans in particular discriminated against them on the basis of their being Latinas.” Id. at ¶ 21. Plaintiffs provide no examples of discriminatory behavior or specific reasons why they believe Defendants were discriminating against them, beyond their belief that Defendants' loan modification approval rates and loan home mortgage refinancing rates were not as favorable as they would be for heterosexual and white couples. Id. at ¶¶ 22-26.[1]

         Plaintiffs also allege that Nationstar and Wells Fargo violated their rights under California's HBOR by failing to assign a single point of contact for a loan modification on their primary residence. Id. at ¶ 18. Plaintiffs allege that around February 2015, Nationstar assigned Gi-Hahn El-Bourini to oversee their loan modification process but never contacted Plaintiffs, despite Plaintiffs making almost 75 calls and voicemail messages trying to get in contact with her. Id. at ¶ 19. Instead, Plaintiffs dealt with customer service representatives who were unfamiliar with their case and had no authority to make decisions in regard to their loan modification. Id. While Plaintiffs were told by these representatives that their information would be passed on to Ms. El-Bourini, they allege that the information was not passed on. Id. at ¶ 20.

         Plaintiffs then filed the instant suit in February 2016.[2] Docket No. 1. Plaintiffs also moved for a temporary restraining order (TRO) to enjoin Defendants from foreclosing on their residential home. Docket No. 2. The Court denied the TRO application, on the grounds that: (1) Plaintiffs failed to notify opposing counsel of the TRO application; (2) Plaintiffs had failed to show a likelihood of success because they made only limited allegations of discrimination based on race and sexual discrimination, without providing specific facts or instances or explaining which of the Defendants engaged in the alleged discriminatory behavior; and (3) Plaintiffs failed to allege facts demonstrating disparate treatment, such as their qualifications for a loan. Docket No. 7 at 2. In March 2016, Plaintiffs filed another complaint in Alameda County Superior Court, also alleging that Defendants discriminated in providing them loan modifications. Case No. 16-cv-2215, Docket No. 1-1. Plaintiffs' state complaint was separately removed by both Defendants and JP Morgan Chase. See Case No. 16-cv-2235, Docket No. 1. After the cases were assigned to this Court, the three cases were consolidated. Docket No. 29. Plaintiffs subsequently filed an amended complaint and dismissed Bank of America and Chase as defendants on May 26, 2016, and dismissed Countrywide as a defendant on June 6, 2016. Docket Nos. 37, 40.


         A. Standard of Review

         Defendants move for a dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6). Rule 12(b)(6) allows for dismissal based on a failure to state a claim for relief. A motion to dismiss based on this rule essentially challenges the legal sufficiency of the claims alleged. See Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). In considering a Rule 12(b)(6) motion, a court must take all allegations of material fact as true and construe them in the light most favorable to the nonmoving party, although “conclusory allegations of law and unwarranted inferences are insufficient to avoid a Rule 12(b)(6) dismissal.” Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). While “a complaint need not contain detailed factual allegations . . . it must plead 'enough facts to state a claim of relief that is plausible on its face.'” Weber v. Dep’t of Veterans Affairs, 521 F.3d 1061, 1065 (9th Cir. 2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see also Twombly, 550 U.S. at 556. However, “[t]he plausibility standard is not akin to a 'probability requirement, ' but it asks for more than sheer possibility that a defendant acted unlawfully.” Iqbal, 556 U.S. at 678.

         B. Disparate Impact Claims

         In their first through third causes of action, Plaintiffs assert a “disparate impact” theory of discrimination based on race, sexual orientation, and gender during the loan modification process, in violation of the FHA, EOCA, and FEHA. FAC at ¶¶ 30-50, Docket No. 50 (Opp.) at 7. In order to bring a disparate impact claim, the plaintiff must allege: “(1) the occurrence of a certain outwardly neutral practices, and (2) a significantly adverse or disproportionate impact on persons of a particular type produced by the defendant's facially neutral acts or practices.” Gamble v. City of Escondido, 104 F.3d 300, 306 (9th Cir. 1996).

         The Court dismisses these claims. Plaintiffs have failed to identify any “outwardly neutral policy” which has a disparate impact. Compare with Merritt v. Countrywide Financial Corp., Case No. 09-cv-1179-BLF, 2015 U.S. Dist. LEXIS 125284, at *61 (N.D. Cal. Sept. 17, 2015) (dismissing claim for failure to identify a specific policy that was causally linked to the alleged disparate); Canatella v. Castro, Case No. 13-cv-5937-HSG, 2015 U.S. Dist. LEXIS 136515, at *13-14 (N.D. Cal. Oct. 6, 2015) (dismissing disparate impact claim where the plaintiff “makes no effort to allege facts sufficient to show that RMS had a policy or practice that has a significant disparate impact based on marriage status or gender); Vega v. Am. Home Mortg. Servicing, Inc., No. CV-10-02087-PHX-NVW, 2011 U.S. Dist. LEXIS 65841, at *6-7 (D. Ariz. June 20, 2011) (same). Instead, they only make general statements such as: (1) “On information and belief, the loan modification approval rates for heterosexual and white, non-Hispanic couples are higher than those of same-sex couples and couples of Hispanic and Latin American descent, ” and (2) “On ...

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