{DN056544;6} 1 CASE NO. SACV11-00006-JVS (RNBX) NOTICE OF MOTION AND MOTION DISMISS COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AKERMAN SENTERFITT LLP 725 S. FIGUEROA STREET, SUITE 3800 LOS ANGELES, CALIFORNIA 90017 TEL.: (213) 688-9500 – FAX: (213) 627-6342 AKERMAN SENTERFITT LLP TODD A. BOOCK (SBN 181933) Email: [email protected]IMRAN HAYAT (SBN 224458) Email: [email protected]725 South Figueroa Street, 38th Floor Los Angeles, California 90017-5433 Telephone: (213) 688-9500 Facsimile: (213) 627-6342 AKERMAN SENTERFITT LLP JUSTIN D. BALSER (SBN 213478) Email: [email protected]VICTORIA E. EDWARDS (SBN 269305) Email: [email protected]511 Sixteenth Street, Suite 420 Denver, Colorado 80202 Telephone: (303) 260-7712 Facsimile: (303) 260-7714 Attorneys for Defendants AURORA LOAN SERVICES LLC and DEUTSCHE BANK TRUST COMPANY AMERICAS, as trustee for Residential Accredit Loans, Inc. Mortgage Asset-Backed Pass-Through Certificates, Series 2007- QH9 incorrectly named as DEUTSCHE BANK NATIONAL TRUST COMPANY AMERICAS UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA – SOUTHERN DIVISION EDDIE YAU and GLORIA YAU, on behalf of themselves and all others similarly situated, Plaintiffs, v. DEUTSCHE BANK NATIONAL TRUST COMPANY AMERICAS, and AURORA LOAN SERVICES LLC, Inclusive, Defendants. Case No. SACV11-00006-JVS (RNBx) Assigned to the Hon. James V. Selna NOTICE OF MOTION AND MOTION BY DEFENDANTS TO DISMISS PLAINTIFFS’ COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES Documents Filed Herewith: 1. Request for Judicial Notice 2. Proposed Order (Lodged) Hearing Date: Date: February 28, 2011 Time: 1:30 p.m. Ctrm.: 10C Complaint Filed: January 3, 2011 Trial Date: None Case 8:11-cv-00006-JVS -RNB Document 35 Filed 01/25/11 Page 1 of 34 Page ID #:759
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{DN056544;6} 1 CASE NO. SACV11-00006-JVS (RNBX)NOTICE OF MOTION AND MOTION DISMISS COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES
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AKERMAN SENTERFITT LLP TODD A. BOOCK (SBN 181933) Email: [email protected] IMRAN HAYAT (SBN 224458) Email: [email protected] 725 South Figueroa Street, 38th Floor Los Angeles, California 90017-5433 Telephone: (213) 688-9500 Facsimile: (213) 627-6342 AKERMAN SENTERFITT LLP JUSTIN D. BALSER (SBN 213478) Email: [email protected] VICTORIA E. EDWARDS (SBN 269305) Email: [email protected] 511 Sixteenth Street, Suite 420 Denver, Colorado 80202 Telephone: (303) 260-7712 Facsimile: (303) 260-7714 Attorneys for Defendants AURORA LOAN SERVICES LLC and DEUTSCHE BANK TRUST COMPANY AMERICAS, as trustee for Residential Accredit Loans, Inc. Mortgage Asset-Backed Pass-Through Certificates, Series 2007- QH9 incorrectly named as DEUTSCHE BANK NATIONAL TRUST COMPANY AMERICAS
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA – SOUTHERN DIVISION
EDDIE YAU and GLORIA YAU, on behalf of themselves and all others similarly situated, Plaintiffs, v. DEUTSCHE BANK NATIONAL TRUST COMPANY AMERICAS, and AURORA LOAN SERVICES LLC, Inclusive, Defendants.
Case No. SACV11-00006-JVS (RNBx) Assigned to the Hon. James V. Selna NOTICE OF MOTION AND MOTION BY DEFENDANTS TO DISMISS PLAINTIFFS’ COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES Documents Filed Herewith: 1. Request for Judicial Notice 2. Proposed Order (Lodged) Hearing Date: Date: February 28, 2011 Time: 1:30 p.m. Ctrm.: 10C Complaint Filed: January 3, 2011 Trial Date: None
Case 8:11-cv-00006-JVS -RNB Document 35 Filed 01/25/11 Page 1 of 34 Page ID #:759
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TO ALL PARTIES AND TO THEIR ATTORNEYS OF RECORD:
PLEASE TAKE NOTICE THAT on February 28, 2011, at 1:30 p.m., or as
soon thereafter as counsel may be heard, in Courtroom 10C of the above-entitled Court
located at 411 West Fourth Street, Santa Ana, California, defendants Aurora Loan
Services LLC (Aurora) and Deutsche Bank Trust Company Americas, as trustee for
Residential Accredit Loans, Inc. Mortgage Asset–Backed Pass-through Certificates,
Series 2007-QH9, incorrectly named as Deutsche Bank National Trust Company
Americas (Deutsche Bank), will and hereby do move this Court to dismiss plaintiffs’
complaint, with prejudice.
This motion is made pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure, and is based on the ground that plaintiffs fail to state a claim upon which
relief may be granted and the complaint is barred as a matter of law against Aurora and
Deutsche Bank. Further, Deutsche Bank moves to dismiss plaintiffs' complaint for lack
of standing.
This motion is based upon this notice, the attached memorandum of points and
authorities, and upon all papers and documents on file herein, the Court’s files
concerning this action, together with those facts and documents of which the parties
request judicial notice and/or matters which judicial notice is proper, as well as any oral
argument that may be presented at the time of the hearing.
Pursuant to Local Rule 7-3, counsel for defendants discussed the basis of this
motion with plaintiffs’ counsel via email on January 23, 2011. Counsel for defendants
also provided a copy of its motion to dismiss to plaintiffs' counsel prior to filing it.
Plaintiffs' counsel responded that she would "re-title" certain causes of action, to which
defendants' counsel responded that it was not the title of the claims but the substance of
the claims that were subject to dismissal.
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Dated: January 25, 2011 Respectfully submitted,
AKERMAN SENTERFITT LLP
By: /s/ Justin D. Balser JUSTIN D. BALSER TODD A. BOOCK VICTORIA E. EDWARDS
IMRAN HAYAT Attorneys for Defendants
AURORA LOAN SERVICES LLC and DEUTSCHE BANK TRUST COMPANY AMERICAS, as trustee for Residential Accredit Loans, Inc. Mortgage Asset-Backed Pass-Through Certificates, Series 2007-QH9
Case 8:11-cv-00006-JVS -RNB Document 35 Filed 01/25/11 Page 3 of 34 Page ID #:761
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TABLE OF CONTENTS I. INTRODUCTION................................................................................................1 II. FACTUAL BACKGROUND ..............................................................................2 III. LEGAL STANDARD ..........................................................................................2 IV. ARGUMENT........................................................................................................3
A. Plaintiffs’ Allegations at Most Relate Solely to Deutsche Bank in Its Capacity as Trustee for the RALI 2007-QH9 Trust and Even Then, it is not a Party to Any Agreement Alleged in the Complaint..........................3
B. HOLA Preemption Bars Some Claims Against Aurora ............................5 C. No Breach of the Trial HAMP Agreement (First Cause of Action)..........7
1. The Complaint Does Not Plead the Elements....................................8 2. There is No Private Right of Action Under HAMP...........................9
D. The Yaus Are Not Third Party Beneficiaries (Second Cause of Action) 10 E. No Specific Performance (Third Cause of Action)..................................14 F. No Unjust Enrichment (Fourth Cause of Action) ....................................15 G. No Unfair Competition Law Claim (Fifth Cause of Action)...................16 H. No Fraudulent Concealment (Sixth Cause of Action) .............................18 I. No Fraudulent Inducement (Seventh Cause of Action)...........................20 J. No Fraud and Deceit (Eighth Cause of Action).......................................21 K. No Declaratory or Injunctive Relief (Ninth Cause of Action).................22 L. No Declaratory Relief (Tenth Cause of Action) ......................................23 M. No Constructive Trust (Eleventh Cause of Action).................................23 N. Plaintiffs Failed To Assert Any Basis For Class Treatment or a Class
Action .......................................................................................................23 V. CONCLUSION ..................................................................................................26
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TABLE OF AUTHORITIES Cases Aleem v. Bank of Am., N.A.,
No. EDCV 09-1812 VAP, 2010 WL 532330 (C.D. Cal. Feb. 9, 2010) ..................16 AmChem Prods., Inc. v. Windsor,
521 U.S. 591 (1997) .................................................................................................24 Andrade v. Wachovia Mortgage, FSB,
No. 09 CV 0377 JM (WMc), 2009 WL 1111182 (S.D. Cal. April 21, 2009)...........6 Ashcroft v. Iqbal,
20 Cal.4th 163 (1999) ..............................................................................................16 City of San Jose v. Superior Court,
12 Cal.3d 447 (1974) ...............................................................................................25 Conference of Fed. Sav. & Loan Ass'ns v. Stein,
604 F.2d 1256 (9th Cir. 1979)....................................................................................6 Cooper v. Pickett,
137 F.3d 616 (9th Cir. 1997)....................................................................................19 County of Santa Clara v. Astra, USA Inc.,
588 F.3d 1237 (9th Cir. 2009)..................................................................................12 Doniger v. Pac. Nw. Bell Inc.,
564 F.2d 1304 (9th Cir 1977)...................................................................................24 Escobedo v. Countrywide Home Loans, Inc.,
No. 09cv1557, 2009 WL 4981618 (S.D. Cal Dec. 15, 2009)..................................12 Fid. Fed. Sav. & Loan Ass'n v. de la Cuesta,
458 U.S. 141 (1982) ...................................................................................................6 Gibbons v. Interbank Funding Group,
208 F.R.D. 278 (N.D. Cal. 2002).............................................................................25 Gil v. Bank of Am., Nat'l Ass'n,
Case 8:11-cv-00006-JVS -RNB Document 35 Filed 01/25/11 Page 5 of 34 Page ID #:763
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138 Cal.App.4th 1371 (2006) ..................................................................................19 Glass v. United States,
258 F.3d 1349 (Fed. Cir. 2001)................................................................................12 Golden West Baseball Co. v. City of Anaheim,
No. 1:10cv01484 OWW DLB, 2010 WL 5059673 (E.D. Cal. Dec. 6, 2010)...........9 Hoffman v. Bank of Am.,
No. C 10-2171 SI, 2010 WL 2635773 (N.D. Cal. June 30, 2010) ............................2 Ingalsbe v. Bank of Am., N.A.,
No 1:10-cv-1665, 2010 WL 5279839 (E.D. Cal. Dec. 13, 2010)..............................9 Jogani v. Superior Court,
165 Cal. App. 4th 901 (2008) ..................................................................................15 Kamp v. Aurora Loan Servs. LLC,
No. SACV 09-00844, 2009 WL 3177636 (C.D. Cal. Oct. 1, 2009)........................14 Khoury v. Maly’s of Cal.,
14 Cal.App.4th 612 (1993) ......................................................................................17 Klamath Water User Protective Ass'n v. Patterson,
204 F.3d 1206 (9th Cir. 2000)..................................................................................11 La Mar v. H&B Novelty & Loan Co.,
489 F.2d 461 (9th Cir. 1973).......................................................................................4 Lee v. U.S. Bank, N.A.,
No. C 10-1434, 2010 WL 2635777 (N.D.Cal. June 30, 2010) ................................18 Levine v. Blue Shield of Cal.,
189 Cal. App. 4th 1117 (2010) ................................................................................15 Livid Holdings, Ltd. v. Salomon Smith Barney, Inc.,
416 F.3d 940 (9th Cir. 2005)......................................................................................3 Lujan v. Defenders of Wildlife,
504 U.S. 555, 112 S.Ct 2130, 119 L.Ed.2d 351 (1992).............................................3 Mabry v. Superior Court,
Smith v. Cent. Ariz. Water Conservation Dist., 418 F.3d 1028 (9th Cir. 2005)..................................................................................11
Spelos v. BAC Home Loans Servicing, L.P., No. 10-11503, 2010 WL 5174510 (D. Mass. Dec. 14, 2010) .................................14
Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001)......................................................................................3
State Farm Bank, FSB v. Reardon, 539 F.3d 336 (6th Cir. 2008)......................................................................................5
Vida v. OneWest Bank, F.S.B., No. 10-987, 2010 WL 5148473 (D. Or. Dec. 13, 2010)..........................................10
Villa v. Wells Fargo Bank, N.A.,
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2010 WL 935680 (S.D. Cal. March 15, 2010).........................................................14 W. Mining Council v. Watt,
643 F.2d 618 (9th Cir. 1981)......................................................................................3 Walker v. Countrywide Home Loans,
98 Cal. App. 4th 1158 (2002) ..................................................................................17 Wall Street Network, Ltd. v. New York Times Co.,
164 Cal. App. 4th 1171 (2008) ..................................................................................7 Watters v. Wachovia Bank, N.A.,
550 U.S. 1, 127 S.Ct. 1559 (2007).............................................................................5 Weiner v. Klais & Co.,
108 F.3d 86 (6th Cir. 1997)......................................................................................22 Wells Fargo Bank v. Small,
No. S-08-2168, 2009 WL 2777770 (E.D. Cal., Aug. 27, 2009) ................................7 Williams v. Geithner,
No. 09-1959, 2009 WL 3757380 (D. Minn. Nov. 9, 2009).....................................11 Ziner v. Accuflux Research Inst., Inc.,
253 F.3d 1180 (9th Cir. 2001)..................................................................................24 Statutes 12 C.F.R. § 559.2............................................................................................................5 12 C.F.R. § 559.3(n)(1)...................................................................................................5 12 C.F.R. § 560.2............................................................................................................6 12 C.F.R. § 560.2(a) .......................................................................................................6 12 C.F.R. § 560.2(b)(1)-(13)...........................................................................................6 12 U.S.C. § 1461.............................................................................................................6 12 U.S.C. § 1464.............................................................................................................6 12 U.S.C. § 5201...........................................................................................................10 12 U.S.C. § 5201(2) ......................................................................................................10 Business & Professions Code § 17204 .........................................................................17 Business & Professions Code §17200 ..........................................................................16 Civil Code § 2224 .........................................................................................................16 Civil Code § 2923.5 ........................................................................................................1 Code of Civil Procedure § 580d ...................................................................................21 Code of Civil Procedure § 726 ...............................................................................17, 18 Rules Fed. R. Civ. P. 12(b)(6) ..............................................................................................2, 3 Fed. R. Civ. P. 23(a) .....................................................................................................23 Fed. R. Civ. P. 23(b ......................................................................................................24 Fed. R. Civ. P. 9(b) .......................................................................................................19
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MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION
Plaintiffs bring this purported class action lawsuit premised on the Home
Affordable Modification Program (HAMP). All of their claims are based on HAMP and
the contention they were denied a HAMP modification. However, the overwhelming
consensus amongst federal courts around the country is no right of action exists for
borrowers under HAMP. All claims should be dismissed no matter who is the plaintiff.
First and foremost, Deutsche Bank, in relation to the Yaus loan, is merely the
trustee of the RALI 2007-QH9 securitization. Plaintiffs fail to make this critical
distinction between that and Deutsche Bank in its individual corporate capacity. No
claims can be had against the latter as plaintiffs lack standing to sue the corporate entity.
Plaintiffs allege Aurora and Deutsche Bank committed wrongdoing because they
denied plaintiffs a HAMP modification. This is a common fundamental
misunderstanding of how HAMP works. Plaintiffs operate under the incorrect premise
that HAMP, or any alleged violation thereof, provides for a private right of action—it
does not. Plaintiffs are not intended beneficiaries under the HAMP servicer agreements
between Aurora and FNMA/Freddie Mac.
Plaintiffs introduce allegations about credit default swaps claiming it bears
relationship to the loan owner or servicer being made whole upon a borrower’s default.
This allegation is nonsensical. Credit default swaps are not relevant.
This action must also be dismissed because it is not suitable for class treatment.
Distinct factual and numerous individualized issues predominate over any of the
common legal issues the potential class claimants share. In the words of Chief Justice
Sills of the Fourth District Court of Appeals in Santa Ana, "how in the world would a
court certify a class?"1 1 See Mabry v. Superior Court, 185 Cal.App.4th 208, 236 (2010). There the Court was presented with a similar purported "class" and held that a statute—Civil Code § 2923.5—was incapable of class treatment due to the overwhelming individualized circumstances that class treatment was impractical. The same is true here. This assumes plaintiffs could even overcome the overwhelming case law throughout the
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For these and other reasons described below, this case should be dismissed with
prejudice.
II. FACTUAL BACKGROUND
On July 6, 2007, plaintiff Mr. Yau refinanced his prior mortgage loan with a
$608,000 loan (Loan) from Homecomings Financial, LLC. (Request for Judicial Notice
(RJN), Ex. 1; Compl. ¶ 82.) Aurora services the Loan. (Compl. ¶¶ 37, 85.) The Yaus
began having financial difficulties in 2008, and sought loss mitigation assistance in 2008
and 2009. (Id. ¶¶ 87-95.) On September 24, 2009, Aurora offered Mr. Yau a HAMP
trial plan. (Id. Ex. 3.) On March 6, 2010, Mr. Yau was denied a permanent HAMP loan
modification because of “excessive forbearance,” i.e., at that time Mr. Yau’s financial
situation was such that Aurora could not “create an affordable payment equal to 31%” of
the Yau’s reported monthly gross income “without changing the terms [of the Loan]
beyond the requirements of the program.” (Id. Ex. 5.) As is clear from Exhibit 5
attached to plaintiffs’ complaint, the Yaus were never “enrolled in the HAMP program”
because they did not qualify for HAMP at that time. (Id. ¶ 37.)
As of April 7, 2010, the Yaus were $27,291.92 behind on their monthly mortgage
payments. (Id. Ex. 6 at 3.) Aurora made further attempts at helping the Yaus avoid
foreclosure by offering them a Special Forbearance Agreement. (Id. Ex. 6.) While the
Yaus were making payments under this forbearance agreement, the Yaus re-applied for a
HAMP plan. (Id. ¶¶ 120, 129.) They then brought this suit.
III. LEGAL STANDARD
“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 v. Twombly, 550 U.S. 544, 127 S. Ct. 1955,
1964-65 (2007). “[F]actual allegations must be enough to raise a right to relief above
the speculative level.” Id. at 1965. In considering a motion pursuant to Federal Rules of
federal courts that borrowers have no right of action under HAMP. See Hoffman v. Bank of Am., No. C 10-2171 SI, 2010 WL 2635773, at *5 (N.D. Cal. June 30, 2010).
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Civil Procedure 12(b)(6), a court need not accept as true unreasonable inferences or
conclusory legal allegations cast in the form of factual allegations. See Sprewell v.
Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); W. Mining Council v. Watt,
643 F.2d 618, 624 (9th Cir. 1981).
In a recent decision, the Supreme Court reviewed the standard for a pre-answer
motion to dismiss. Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009). The Supreme Court in
Iqbal clarified that “[i]n order for a complaint to survive a 12(b)(6) motion, it must state
a claim for relief that is plausible on its face.” Petrie v. Elec. Game Card Inc., No.
Section 560.2(b) lists various categories of state laws preempted by OTS
regulations. They include:
(9) Disclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents and laws requiring creditors to supply copies of credit reports to borrowers or applicants;
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(10) Processing, origination, servicing, sale or purchase of, or investment or participation in, mortgages." [emphasis added]
Here, the Yaus explicitly rely on state laws to claim Aurora should have made
certain disclosures and serviced their Loan differently. To allow such claims would
subject a federally-regulated entity, Aurora, to state law requirements in direct
contradiction of Congress's intent. Courts have repeatedly held HOLA preempts state
laws that relate to the servicing of a loan or that would mandate a national savings
association (or its subsidiary) to make particular disclosures. See Camacho v. Wachovia
plaintiff sued his servicer for breach of a HAMP trial plan. Because HAMP is a national
program with national standards, the relevant terms were identical to those in the Yaus'
trial plan. (Compare id. at *4 with Compl. Ex. 3.) Although the plaintiff in Grill, like
the Yaus here, alleged he qualified for a HAMP modification and had complied with the
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agreement, the Court held he had failed to state a viable claim for breach of contract.
Judge Damrell reasoned as follows:
Accordingly, Exhibit C makes clear that providing the requested documents was simply a part of the application process, which plaintiff was willing to complete in the hope that BAC would modify his loan. Under the language of Exhibit C, a binding modification would not result unless and until BAC determined that plaintiff complied with the requirements. If BAC so determined, then it would send plaintiff a modification agreement, including a new monthly payment amount, which both plaintiff and defendant would execute.
Plaintiff has not alleged or provided exhibits (1) that BAC determined plaintiff had met the requirements or (2) that BAC sent plaintiff a loan modification with a new monthly payment that was then executed by both plaintiff and BAC. As such, no binding contract has been alleged and BAC's motion to dismiss plaintiff's breach of contract claim is GRANTED with leave to amend. Id. at *4. The same conclusion is inescapable here. Aurora and the Yaus never reached a
meeting of the minds as to a final loan modification agreement. While the Yaus allege
they “and the Class w[ere] eligible for HAMP” (Compl. ¶ 78), the clear words of the
HAMP trial plan at Ex. 3 clearly suggest otherwise. “On a motion to dismiss, the court
need not accept allegations as true if they are contradicted by documents before the
court….[W]hen a written instrument is attached to the pleading and properly
incorporated therein by reference, the court may examine the exhibit and treat the
pleader's allegations of its legal effect as surplusage.” Grill, 2011 WL 127891, at *3.
Therefore, no contract was breached.
2. There is No Private Right of Action Under HAMP
Because the breach of contract claim is effectively one alleging a breach of
HAMP, it cannot go forward because the law is clear that there is no private right of
action under HAMP. See, e.g., Ingalsbe v. Bank of Am., N.A., No 1:10-cv-1665, 2010
WL 5279839, at *5 (E.D. Cal. Dec. 13, 2010) (collecting cases and stating that the
"consensus among district courts in the Ninth Circuit is that there is no private right of
action under HAMP"); Hernandez v. HomeEq Servicing, No. 1:10cv01484 OWW DLB,
2010 WL 5059673, at *2-3 (E.D. Cal. Dec. 6, 2010); Hammonds v. Aurora Loan Servs.
2009 WL 2880232, at *4 (N.D. Cal. 2009) (applying reasonable particularity standard to
UCL claim in federal court). A plaintiff must have suffered personal injury-in-fact and
lost money or property as a result of the illegal act. See Bus. & Prof. Code, § 17204.
California's unfair competition statutes establish three forms of unfair
competition: (1) unlawful, (2) unfair, or (3) deceptive or fraudulent. See Cel-Tech
Comm. 20 Cal.4th at 180. A business practice is “unlawful” if it is “forbidden by law.”
Walker v. Countrywide Home Loans, 98 Cal.App.4th 1158, 1169 (2002). A business
practice is unfair within the meaning of the UCL if it violates established public policy
or if it is immoral, unethical, oppressive, or unscrupulous and causes injury to consumers
that outweigh its benefits. See id. at 1170. To show a business practice is deceptive, a
plaintiff must show members of the public are likely to be deceived. See id. at 1170.
The cut-and-paste allegations of this UCL claim fail to state any basis for relief.
Plaintiffs allege "defendants"—without distinguishing between Aurora and Deutsche
Bank—have a pattern and practice of (a) applying payment to late charges and fees in
violation of HAMP, (b) "padding the loan" with unnecessary charges, (c) demanding
post default payments while "keeping them in foreclosure", (d) refusing to provide
permanent loan modifications to borrowers in HAMP plans whose loans were covered
by CDS or insurance, (e) refusing to give HAMP modifications to borrowers who were
not in default, (f) breaching contracts, (g) sending false letters about special forbearance
agreements, (h) falsely representing that the HAMP program may allow borrowers to
modify their loans, (i) violating the "Security First Rule" of Code of Civil Procedure §
726, and (j) violating laws related to foreclosure prevention, deficiency judgments, and
the rights of contracting parties. (Compl. ¶ 180). There are, for all practical purposes,
no allegations of fact in the complaint related to any of these claims. Certainly, there are
none related to the Yaus. The complaint does not identify what payments were
misapplied, nor what rule of HAMP such an application violated. It does not explain
what fees were padded, nor why Aurora could not accept payments under the HAMP
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trial plan without dismissing the foreclosure. The fact is many borrowers have modified
loans, with Aurora, through HAMP, as is a matter of public record. (RJN Ex. 6.)2
Plaintiffs do not offer any factual allegations to support their contention that Aurora (or
Deutsche Bank) systematically violates HAMP provisions. This falls short of the
Twombly/Iqbal pleading standard, and far short of the "reasonable particularity" standard
applicable to UCL claims.
The complaint tries to give a veneer of legal specificity to some of its allegations
by citing Code of Civil Procedure § 726 and California's anti-deficiency laws. (Compl.
¶ 180(j)-(k).) Section 726 is an election-of-remedies statute, which provides that a
creditor must foreclose a security interest before bringing an action against the obligor of
a secured debt, and that by suing without foreclosing, the creditor elects a remedy other
than foreclosure. See id.; In re Madigan, 122 B.R. 103, 105 (B.A.P. 9th Cir. 1991).
Here, neither Aurora nor Deutsche Bank has sued the Yaus. The law simply does not
apply. The contention that deficiency judgments are unavailable is true but irrelevant.
Finally, to the extent the UCL claim is based on Aurora's obligation to take
particular actions in servicing the loan, or its failure to disclose certain facts, it is
preempted. See Section IV(A), supra, of this memorandum. It is well-settled that UCL
claims are preempted by HOLA when applying the UCL would function as a state law
regulation on a national savings association's mortgage lending or servicing activities.
E.g., Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1004 (9th Cir. 2008); Lee v. U.S.
Bank, N.A., No. C 10-1434, 2010 WL 2635777, at *8-9 (N.D. Cal. June 30, 2010).
The fifth cause of action should be dismissed.
H. No Fraudulent Concealment (Sixth Cause of Action)
The sixth cause of action contends defendants fraudulently concealed material
facts. This allegation is both ill-conceived as to the elements and improperly vague.
2 This report is prepared and published by the federal Making Home Affordable program. It can be found at http://www.makinghomeaffordable.gov, and is subject to judicial notice as a document from a government agency website.
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Under California law, the elements of common law fraud are "misrepresentation,
knowledge of its falsity, intent to defraud, justifiable reliance, and resulting damages."
Gil v. Bank of Am., Nat'l Ass'n, 138 Cal.App.4th 1371, 1381 (2006). Fraudulent
concealment is substantially the same as fraudulent misrepresentation except it involves
the non-disclosure of pertinent information, rather than an affirmative misrepresentation.
See Marketing West, Inc. v. Sanyo Fisher (USA) Corp., 6 Cal.App.4th 603, 612 (1992).
To properly allege fraud, a plaintiff must state facts in support with particularity.
The pertinent rule reads, "[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). The
particularity requirement of Rule 9(b) is designed to "give defendants notice of the
particular misconduct which is alleged to constitute the fraud charged so that they can
defend against the charge and not just deny that they have done anything wrong."
Neubronner v. Milken, 6 F.3d 666, 671 (9th Cir. 1993). To be sufficient, a plaintiff
should allege the time, place and manner of the alleged fraudulent activities. See Moore
v. Kayport Package Express, Inc., 885 F.2d 531, 540 (9th Cir. 1989); see also Cooper v.
Pickett, 137 F.3d 616, 627 (9th Cir. 1997) (fraud allegations should include the "who,
what, where, when and how"). Generally, the complaint must attribute particular
fraudulent statements or acts to individual defendants. See Moore, 885 F.2d at 540.
Where, as here, the plaintiff alleges only corporate fraud, the plaintiff "should include
the misrepresentations themselves with particularity and, where possible, the roles of the
individual defendants in the misrepresentations." Id. at 540.
The sixth claim alleges Aurora and Deutsche Bank concealed that Deutsche Bank
was the owner of the loan, that the loans were covered by CDS and that some loans
would fail the NPV test due to CDS and insurance. (Compl. ¶ 186(l)-(n).) This does
not state a claim for relief because one can only fraudulently conceal a fact when he is
under an obligation to disclose it. See Marketing West, Inc., 6 Cal. App. 4th at 613.
Here there was no such obligation. Indeed the allegation is frivolous because the deed of
trust itself explains the loan may be sold without notice to plaintiffs. (RJN Ex. 1 ¶ 20).
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The complaint does not identify any obligation by each defendant to disclose to
the Yaus that Deutsche Bank owned the loan. In fact, it claims a trust did. Even if it
could identify one, it does not provide any explanation about how the failure to identify
Deutsche Bank caused the Yaus to take any action to their detriment. Similarly, the
Yaus cannot show defendants had to disclose that the loan were "covered" by CDS, nor
how the NPV test would be calculated for any given loan.
These allegations also ignore the essential elements of a fraud claim. The Yaus
have not shown how they relied to their detriment on any concealment of facts. After
defaulting on loan payments, all the Yaus did was sign a HAMP trial plan through which
they made payments to Aurora on the Loan. As discussed above, the Yaus were already
obligated to make those payments, so they suffered no legally cognizable harm by
making payments on the Loan.
Finally, this claim is preempted against Aurora under HOLA because California
state law cannot mandate that Aurora make any particular disclosures about a loan. The
Truth-in-Lending Act would also serve to preempt any state law claims requiring
additional loan disclosures to borrowers. See 15 U.S.C. § 1610.
Fraudulent concealment claims on this theory must be dismissed as preempted.
I. No Fraudulent Inducement (Seventh Cause of Action)
The seventh cause of action, although labeled a fraud claim, is in substance
another claim for breach of the HAMP contract. The Yaus claim they were
fraudulently-induced to enter into the HAMP trial plan, and then the April 2010 special
forbearance agreement, by a false promise that it would lead to a permanent
modification. (Compl. ¶¶ 201-204.) The words of the HAMP agreement and special
forbearance agreement contradict any such allegation.
The Yaus argue that to be entitled to a modification, they simply had to make the
payments as required. (Id. ¶ 204.) As discussed in section IV(C)(1), the HAMP
agreement is crystal clear that it does not guarantee a loan modification to any borrower.
(See Compl. Ex. 3.) The HAMP agreement also requires that documentation about a
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borrower's finances be provided; simply making plan payments is not the only
requirement to progress to a final modification. (See id.)
Plaintiffs' claim of fraudulent inducement is even more misguided when one
considers the terms of the April 2010 special forbearance agreement. That document
explicitly states, "At the expiration date, a portion of the Arrearage will still be
outstanding. Because payment of the Plan payments will not cure the Arrearage,
Customer's account will remain delinquent. Upon the Expiration Date, Customer must
cure the Arrearage through a full reinstatement, payment in full, loan modification
agreement, or other loan workout option[.]" (Compl. Ex. 6, attachment A, ¶ B.) Failure
to cure the arrearage, the document warned, could lead to foreclosure. (Id.) Given these
explicit warnings that no modification was assured, the Yaus cannot claim they
reasonably relied on a promise to modify their loans in either the HAMP trial plan or
special forbearance agreement.
In addition, for the reasons explained in sections IV(C)(2), supra, to allow this so-
called "fraud" claim, which is really a breach of contract allegation, in connection with
the HAMP trial plan would effectively allow a private right of action under that law.
One cannot create a style breach of HAMP agreement claim as common law allegations.
See Vida, 2010 WL 5148473, at *5. The seventh cause of action should be dismissed.
J. No Fraud and Deceit (Eighth Cause of Action)
The eighth cause of action claims Aurora and Deutsche Bank fraudulently induced
the Yaus to make payments after the foreclosure process had begun. (Compl. ¶ 213.) It
conflates two different concepts, and it certainly fails to state a viable fraud cause of
action. The complaint does not specify why it believes the Yaus did not have to make
any payments after the notice of default was filed. It appears, based on the reference to
anti-deficiency law, (see id. ¶ 180), the Yaus believe that if they had responded to the
notice of default by never paying another penny on the loan, there is nothing Deutsche
Bank or Aurora could do to compel them. That is true enough, as the anti-deficiency
statute, Code of Civil Procedure § 580d, would prohibit a first-lien creditor from
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obtaining an enforceable judgment for the mortgage debt against the Yaus. This is not
the same however as extinguishing the obligation. The Yaus still owe the money, at
least in theory. California courts have recognized that a moral debt may persist. It even
has a legal effect in the context of quiet title actions, as that form of equitable relief has
been denied to debtors even when the underlying debt was no longer enforceable. See
Mix v. Sodd, 126 Cal. App. 3d 386, 390 (1981).
Therefore, it is simply wrong for the Yaus to claim they had no "continuing
obligation" to pay under the loan after foreclosure began. See Reyes v. Wells Fargo
Bank, N.A., 2011 WL 30759, at *18. Because the money they paid was owed, this claim
also fails for reasons similar to the other fraud claims, the absence of reasonable reliance
causing legally-cognizable damages. Similarly, it fails to allege any actual
misrepresentations, since Aurora never promised, in either the HAMP trial plan or
special forbearance agreement, that mere payment of the plan payments would lead to a
loan modification. The eighth cause of action should be dismissed.
K. No Declaratory or Injunctive Relief (Ninth Cause of Action)
The ninth cause of action is an absurd claim that defendants cannot foreclose as to
Gloria Yau. declaratory relief is not an independent claim; rather, it is a form of relief.
See Gomez v. Wachovia Mortg. Corp., No. 09-2111, 2010 WL 291817, at *2 (N.D.
Cal. 2010) (citing Weiner v. Klais & Co., 108 F.3d 86, 92 (6th Cir. 1997). A plaintiff
is entitled to declaratory relief only after he or she establishes an actual claim. See
Avirez Ltd. v. Resolution Trust Co., 876 F. Supp. 1125, 1143 (C.D. Cal. 1995). This
“cause of action” also fails because injunctive relief is not an independent cause of
action. See Bellomi v. Countrywide Fin. Corp., No. 09-cv-3431, 2009 WL
3680500, at *2 (N.D. Cal. Oct. 30, 2009).
The other problem with the ninth cause of action is that it is substantively wrong.
Here, both Eddie Yau and Gloria Yau were trustors on the deed of trust and are therefore
bound by its terms. (RJN Ex. 1.) It is immaterial that Gloria Yau did not sign the note.
There has been a default on the obligation underlying the security instrument she signed,
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meaning the foreclosure remedy of the deed of trust is available to the beneficiary. The
so-called ninth cause of action cannot withstand this motion to dismiss.
L. No Declaratory Relief (Tenth Cause of Action)
The tenth cause of action re-states the allegations of the first two contract causes
of action, in the form of a request for declaratory relief. The Yaus cannot show an
entitlement to such relief for the reasons set forth in sections IV(C)-(D), supra.
M. No Constructive Trust (Eleventh Cause of Action)
The last cause of action seeks a constructive trust. Civil Code § 2224 provides:
"One who gains a thing by fraud, accident, mistake, undue influence, the violation of a
trust, or other wrongful act, is, unless he or she has some other and better right thereto,
an involuntary trustee of the thing gained, for the benefit of the person who would
otherwise have had it." To impose a constructive trust there must be: (1) a res (property
or some interest in property); (2) the right of the complaining party to that res; and (3) a
wrongful acquisition or detention of the res by another party. See Campbell v. Superior
Court, 132 Cal. App. 4th 904, 920 (2005).
Plaintiffs claim defendants are holding proceeds from CDS. (Compl. ¶ 234.)
Even if that is true, the complaint does not even try to allege facts showing how the Yaus
have a right to such funds; any CDS were private-party contracts that did not involve the
Yaus. The only thing any defendant has received from the Yaus is payments under the
note, HAMP trial plan, or special forbearance agreement. Defendants had a right to
receive such payments, and indeed to receive more than the Yaus actually paid. That is
why they now face foreclosure. Plaintiffs completely fail to set forth this claim.
N. Plaintiffs Failed To Assert Any Basis For Class Treatment or a Class Action
Plaintiffs, without any foundation, conclude the putative class action meets the
requirements of Fed. R. Civ. P. 23(b)(2) and 23(b)(3). It does not. Nor have plaintiffs
satisfied Local Rule 23-2.2.
As the parties seeking to establish a class, plaintiffs bear the burden of
demonstrating they have met all of the requirements of Fed. R. Civ. P. 23(a) and at least
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one of the requirements of Fed. R. Civ. P. 23(b). See Ziner v. Accuflux Research Inst.,
Inc., 253 F.3d 1180, 1186 (9th Cir. 2001). Fed. R. Civ. P. 23(a) states four threshold
requirements applicable to all class actions (1) numerosity (a class so large that joinder is
impracticable); (2) commonality (questions of law or fact common to the entire class);
typicality (the named plaintiffs'' claims are typical of the entire class); and (4) adequacy
of representation (the named Plaintiff can adequately and fairly protect the interests of
the entire class). See AmChem Prods., Inc. v. Windsor, 521 U.S. 591, 613 (1997).
Plaintiffs must provide facts to satisfy these requirements, and "[m]ere repetition of the
language of the Rule is inadequate." Doniger v. Pac. Nw. Bell Inc., 564 F.2d 1304, 1309
(9th Cir 1977) (cited authority omitted). In addition to the explicit requirements set out
by Rule 23(a), the class definition must set forth a class which is ascertainable and
clearly identifiable.
Plaintiffs have failed to allege any of these elements, nor can they because of the
inherently individualized and unique circumstances of each borrower. Plaintiffs, and
other possible plaintiffs, do not share typical situations. “The purpose of the typicality
requirement is to assure that the interest of the named representative aligns with the
interests of the class.” Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992)
(cited authority omitted). “‘Typicality refers to the nature of the claim or defense of the
class representative, and not to the specific facts from which it arose or the relief
sought.’” Id. (quoted authority omitted). The test “‘is whether other members have the
same or similar injury, whether the action is based on conduct which is not unique to the
named plaintiffs, and whether other class members have been injured by the same course
of conduct.’” Id. (quoted authority omitted).
Plaintiffs’ class is defined by borrowers who negotiated different loan terms,
defaulted for different reasons, and purportedly were HAMP-eligible but were denied
modifications. Even if one were to ignore all the other issues and solely address the
HAMP issue as the Yaus do, they still fail to meet the typicality requirement. Some may
have vacated their properties, while others may only want a modification. Still others
Case 8:11-cv-00006-JVS -RNB Document 35 Filed 01/25/11 Page 32 of 34 Page ID #:790
{DN056544;6} 25 CASE NO. SACV11-00006-JVS (RNBX)NOTICE OF MOTION AND MOTION DISMISS COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES
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may have qualified for a HAMP trial plan and failed to make payments thereunder.
They are no longer eligible. The possible scenarios are endless. The Yaus have been
offered a HAMP trial plan and, assuming they accept and comply in all respects with the
plan, the Yaus’ loan could and would be modified under HAMP. The Yaus could then
no longer serve as class action representatives because they would not be found to have
suffered injuries similar to the purported class. See, e.g., Doninger v. Pacific Northwest
where a putative class representative is subject to unique defenses which threaten to
become the focus of the litigation.” Hanon, 976 F.2d at 508.
Here, the harm, if any, to each plaintiff from allegedly not receiving a HAMP
modification would have to be litigated individually.3 Plaintiffs concede so, enumerating
32 categories within each borrowers’ individual loan scenario that must be assessed.
(Compl. ¶¶ 139a-139ee.) Individual issues would overwhelm the sole common question.
To determine how each potential plaintiff's rights were actually affected by an
alleged failure to be given a HAMP modification, the Court would need to delve into
countless possible, individual fact patterns. For example:
• As a threshold matter, each plaintiff would need to show he or she was eligible for HAMP;
• Then a plaintiff would need to show he or she applied for HAMP;
• Even if a plaintiff were able to show he or she was eligible for and applied for HAMP, the next fact issue to be decided would be whether he or should could have qualified for HAMP or any loan modification or other non-foreclosure option. Again, without this showing, a plaintiff could not show any harm based on an alleged failure to provide him or her with a loan workout or modification. This showing, of course, is highly fact-specific, and such fact issues would be too onerous to litigate in one class-action suit.
3 Class actions are not permitted in cases where diverse factual issues predominate over common questions of law. See Grosz v. Boeing Co., 136 Fed. Appx. 960, 962, 2005 WL 1515070, at *1 (9th Cir. 2005); Gibbons v. Interbank Funding Group, 208 F.R.D. 278, 287 (N.D. Cal. 2002); Brown v. Regents of Univ. of California, 151 Cal.App.3d 982, 988-989 (1984); see City of San Jose v. Superior Court, 12 Cal.3d 447, 459 (1974) ("[A] class action cannot be maintained where each member's right to recover depends on facts peculiar to his case ....").
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• Next, to determine the harm caused by Aurora or Deutsche Bank’s alleged wrongful conduct here, the Court would need to determine on a case-by-case basis which of the possible non-foreclosure options each specific plaintiff may have also sought before applying for HAMP. The harm would certainly be different for each individual. These are individual, varying fact questions.
• Then, each plaintiff would need to show that they complied in all respects with the HAMP trial plan, and that their oral representation of income matched the documented income they provided, if they provided any at all. This too requires a case-by-case review of each plaintiff's financial information, which would need to occur before the plaintiffs in these categories could even claim to have suffered any injury. This case-by-case review would be impracticable in a class-action suit.
• Also, each plaintiff would need to show that the net present value test performed under HAMP was improper or incorrect. Of course, this is not only individualized to the person but also to the property.
Moreover, the reasons for HAMP denial are endless. For example, denials could
have been due to excessive forbearance, net present value failure, change in financial
circumstances after the trial plan, and many others. To determine what (if any) harm
any specific borrower may have suffered so as to be in a position to seek any relief from
Aurora or Deutsche Bank, the Court would need to entertain, and then rule based on
countless fact scenarios. Because individual issues predominate, this case is simply not
suitable for class treatment and plaintiffs should not be able to treat it as such.
V. CONCLUSION
For the reasons set forth above, Aurora and Deutsche Bank respectfully request
the Court grant their motion to dismiss, with prejudice.
Dated: January 25, 2011 Respectfully submitted,
AKERMAN SENTERFITT LLP
By: /s/ Justin D. Balser JUSTIN D. BALSER TODD A. BOOCK VICTORIA E. EDWARDS
IMRAN HAYAT Attorneys for Defendants
AURORA LOAN SERVICES LLC and DEUTSCHE BANK TRUST COMPANY AMERICAS, as trustee for Residential Accredit Loans, Inc. Mortgage Asset-Backed Pass-Through Certificates, Series 2007-QH9
Case 8:11-cv-00006-JVS -RNB Document 35 Filed 01/25/11 Page 34 of 34 Page ID #:792
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