Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-01661/USCOURTS-caed-2_09-cv-01661-4/pdf.json

Nature of Suit Code: 140
Nature of Suit: Negotiable Instruments
Cause of Action: 15:1601 Truth in Lending

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This matter is deemed to be suitable for decision without oral *

argument. E.D. Cal. R. 230(g).

Defendants Howard Rudolph and Kathi Aldridge filed a notice of 1

joinder on October 22, 2009, seeking to join in Option One and H & R

Block’s dismissal motion. The propriety of Rudolph and Aldridge’s

(continued...)

1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

SHERRI A. KEMP, )

)

Plaintiff, ) 2:09-cv-01661-GEB-DAD

)

v. ) ORDER GRANTING AND DENYING IN

) PART DEFENDANTS’ MOTIONS TO 

AMERICAN HOME MORTGAGE SERVICING, ) DISMISS AND DECLINING TO 

INC.; OPTION ONE MORTGAGE ) EXERCISE SUPPLEMENTAL

CORPORATION; H&R BLOCK MORTGAGE ) JURISDICTION OVER PLAINTIFF’S

CORPORATION; HOWARD RUDOLPH and ) STATE CLAIMS*

KATHI ALDRIDGE, )

)

Defendants. )

)

On September 21, 2009, Defendant American Home Mortgage

Servicing, Inc. (“AHMSI”) filed a motion under Federal Rule of Civil

Procedure 12(b)(6)(“Rule 12(b)(6)”) to dismiss Plaintiff’s first

amended complaint. (Docket No. 16.) On October 14, 2009, Defendants

Sand Corporation f/k/a Option One Mortgage Corporation (“Option One”)

and H & R Block Mortgage Corporation (“H & R Block”) also filed a

motion under Rule 12(b)(6) seeking an order dismissing Plaintiff’s

first amended complaint, or alternatively, an order compelling a more

definite statement under Federal Rule of Civil Procedure 12(e). 

(Docket No. 25.)1

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(...continued) 1

notice of joinder need not be addressed since the Court declines to

exercise supplemental jurisdiction over the state law claims alleged

against these defendants.

2

I. LEGAL STANDARD

A motion under Federal Rule of Civil Procedure 12(b)(6)

(“Rule 12(b)(6)”) “challenges a complaint’s compliance with . . .

pleading requirements.” Champlaie v. BAC Home Loans Servicing, LP,

No. S-09-1316 LKK/DAD, 2009 WL 3429622, at *1 (E.D. Cal. Oct. 22,

2009). A pleading must contain “a short and plain statement of the

claim showing that the pleader is entitled to relief . . . .” Fed. R.

Civ. P. 8(a)(2). The complaint must “give the defendant fair notice

of what the [plaintiff’s] claim is and the grounds upon which relief

rests . . . .” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555

(2007). Further, “[a] pleading that offers labels and conclusions or

a formulaic recitation of the elements of a cause of action will not

do. Nor does a complaint suffice if it tenders naked assertions

devoid of further factual enhancement.” Ashcroft v. Iqbal, 129 S. Ct.

1937, 1949 (2009). 

To avoid dismissal, the plaintiff must allege “only enough

facts to state a claim to relief that is plausible on its face.” 

Twombly, 550 U.S. at 547. “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.” Iqbal, 129 S. Ct. at 1949. Plausibility, however, requires

more than “a sheer possibility that a defendant has acted unlawfully.” 

Id. “When a complaint pleads facts that are merely consistent with a

defendant’s liability, it stops short of the line between possibility

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and plausibility of entitlement to relief.” Id. (quotations and

citation omitted).

In evaluating a dismissal motion under Rule 12(b)(6), the

court “accept[s] as true all facts alleged in the complaint, and

draw[s] all reasonable inferences in favor of the plaintiff.” Al-Kidd

v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009). However, neither

conclusory statements nor legal conclusions are entitled to a

presumption of truth. See Iqbal, 129 S. Ct. at 1949-50.

All parties request that judicial notice be taken of two

documents: (1) a Deed of Trust, recorded on July 24, 2006; and (2) an

assignment of the Deed of Trust. Plaintiff also requests that

judicial notice be taken of three other documents: (1) a copy of the

qualified written request (“QWR”) Plaintiff sent to AHMSI on April 17,

2009; (2) a copy of a mortgage statement sent by AHMSI to Plaintiff

demanding payment; and (3) a copy of the loan servicing notice sent to

Plaintiff on July 14, 2006. Option One and H & R Block also attached

two exhibits to their motion to dismiss: (1) a Truth in Lending

Disclosure Statement; and (2) Notices of Right to Cancel. 

While, “as a general rule, a district court may not consider

materials not originally included in the pleadings in deciding a Rule

12 motion . . . it may take judicial notice of matters of public

record and may consider them without converting a Rule 12 motion into

one for summary judgment.” U.S. v. 14.02 Acres of Land More or Less

in Fresno County, 547 F.3d 943, 955 (9th Cir. 2008)(quotations and

citations omitted). However, to take judicial notice of a fact, it

must be either “generally known within the territorial jurisdiction of

the trial court” or “capable of accurate and ready determination by

resort to sources whose accuracy cannot reasonably be questioned.” 

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Fed. R. Evid. 201(b). The Deed of Trust and the assignment of the

Deed of Trust are publically recorded documents of which judicial

notice may properly be taken. The other documents submitted by

Plaintiff, however, are not appropriate for judicial notice since they

are not publicly recorded or otherwise easily verifiable. 

However, under the doctrine of “incorporation by reference,”

a court may consider “documents, whose contents are alleged in a

complaint and whose authenticity no party questions, but which are not

physically attached to plaintiff’s pleading.” Knievel v. ESPN, 393

F.3d 1068, 1076 (9th Cir. 2005)(quotations and citations omitted). 

The purpose of this doctrine is to “prevent plaintiffs from surviving

a Rule 12(b)(6) motion by deliberately omitting documents upon which

their claims are based . . . .” Swartz v. KPMG LLP, 476 F.3d 756, 763

(9th Cir. 2007). Plaintiff’s first amended complaint refers to the

QWR it sent to AMHSI as well as the Truth in Lending Disclosure and

Notice of Right to Cancel documents. (First Amended Compl. (“FAC”) ¶¶

26, 30, 37, 55, 80.) Since no party has questioned the authenticity

of these three documents, they may be considered under the

incorporation by reference doctrine without converting Plaintiff’s

motion into one for summary judgment. Plaintiff, however, has not

demonstrated that the other two documents - the mortgage statement

sent by AHMSI and a copy of the loan servicing notice sent to

Plaintiff - may properly be considered on a dismissal motion. These

two documents, are therefore, disregarded.

II. FACTUAL AND PROCEDURAL BACKGROUND

On or about July 13, 2006, Plaintiff obtained a mortgage

loan from H & R Block for the amount of two hundred fifty five

thousand dollars. (Request for Judicial Notice Ex. 1.) The loan was

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secured by a Deed of Trust on the property located at 167 Creekside

Circle in Sacramento, California. (Id.) The Deed of Trust identifies

Premier Trust Deed Services, Inc. as the trustee and H & R Block as

the lender. (Id.)

Plaintiff alleges that in July 2006, Kathi Aldridge

represented to Plaintiff that “she was the loan officer for Defendant

H & R [Block], and solicited her to refinance her residence.” (FAC ¶

20.) Plaintiff’s claims stem from her allegations that Aldridge

induced her into purchasing an allegedly unaffordable loan through

misrepresentations, non-disclosure, and fraudulent conduct. 

Specifically, Plaintiff alleges that “Aldridge advised Plaintiff that

she could get her the ‘best deal’ and the ‘best interest rates’

available on the market” and if the loan ever became unaffordable, she

would be able to refinance. (Id. ¶¶ 21, 25.) Further, Plaintiff

alleges that Aldridge “fraudulently overstated” Plaintiff’s income on

her loan application. (Id. ¶ 23-24.)

Plaintiff filed her initial complaint in this federal

district court on June 15, 2009. AHMSI filed a motion to dismiss on

August 7, 2009 that was mooted by Plaintiff’s filing of an amended

complaint on August 28, 2009. Plaintiff’s first amended complaint

alleges nine claims under state and federal law against five

defendants.

III. DISCUSSION

A. Plaintiff’s Federal Claims

1. Truth In Lending Act

Option One and H & R Block argue Plaintiff’s claim under the

Truth in Lending Act (“TILA”) is untimely and should be dismissed. 

Plaintiff’s opposition states that “Plaintiff will be dismissing,

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without prejudice, Moving Defendants from this cause of action.” 

(Opp’n to Option One and H & R Block’s Mot. to Dismiss (“MTD”) 5:24-

25.) Therefore, Plaintiff’s TILA claim against H & R Block is

dismissed.

2. Real Estate Settlement Procedures Act

Option One and H & R Block argue Plaintiff’s RESPA claim

alleged against H & R Block under the Real Estate Settlement

Procedures Act (“RESPA”) should be dismissed since it lacks sufficient

factual allegations to state a claim. Plaintiff states in her

opposition that she “will be dismissing, without prejudice, the Moving

Defendants from this cause of action.” (Opp’n to Option One and H & R

Block’s MTD 10:7-8.) Therefore, Plaintiff’s RESPA claim alleged

against H & R Block is dismissed.

AHMSI also seeks dismissal of Plaintiff’s RESPA claim

alleged against it, arguing the claim lacks sufficient factual

allegations. Plaintiff alleges in this claim that a letter she sent

to AHMSI is a QWR under RESPA, and that “AHMSI violated RESPA, 12

U.S.C. §2605(e)(2), by failing and refusing to provide a proper

written explanation or response to Plaintiff’s QWR.” (FAC ¶ 80.)

Plaintiff attaches to her opposition brief the QWR she alleges she

sent to AHMSI, and she argues this letter is a valid QWR.

RESPA requires that loan servicers provide a timely written

response to a QWR from a borrower. 12 U.S.C. § 2605(e)(1),(2). Not

every communication from a borrower constitutes a QWR. Rather, a QWR

is defined as “a written correspondence, other than on a payment

coupon or other payment medium supplied by the servicer, that -- (i)

includes, or otherwise enables the servicer to identify, the name and

account of the borrower; and (ii) includes a statement of the reasons

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for the belief of the borrower, to the extent applicable, that the

account is in error or provides sufficient detail to the servicer

regarding other information sought by the borrower.” 12 U.S.C. §

2605(e)(1)(B).

The letter attached to Plaintiff’s opposition identifies

Plaintiff’s name and her account number. The letter also requests

copies of certain documents and poses questions categorized as

“service related questions,” “suspense/unapplied account questions,”

and “late fee questions.” 

AHMSI argues in its reply brief that “Plaintiff fails to

attach a copy of the alleged QWR . . . and fails to allege the full

contents of the alleged QWR.” However, the letter is attached to

Plaintiff’s opposition brief, and AHMSI has not challenged the

authenticity of the letter, or responded to Plaintiff’s argument that

the letter satisfies the requirements of Section 2605(e)(1)(B). 

Therefore, AHMSI’s motion to dismiss Plaintiff’s RESPA claim in which

Plaintiff alleges AHMSI failed to respond to Plaintiff’s QWR is

denied.

AHMSI also seeks dismissal of the portion of Plaintiff’s

RESPA claim in which she alleges that “Defendants have engaged in a

pattern or practice of non-compliance with the requirements of the

mortgage servicer provisions of RESPA as set forth in § 2605.” This

allegation is conclusory and a “naked assertion[]” which is

insufficient to state a viable RESPA claim. Iqbal, 129 S. Ct. at 1949

(quotations omitted). Therefore, this portion of AHMSI’s motion to

dismiss is granted.

//

//

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B. Supplemental Jurisdiction Over Plaintiff’s State Law Claims

Plaintiff’s first amended complaint also alleges seven

claims under state law: negligence, breach of fiduciary duty, fraud,

breach of contract, breach of the implied covenant of good faith and

fair dealing and violations of California’s Rosenthal Act and Business

& Professions Code § 17200 et seq. Plaintiff alleges the federal

court has pendent jurisdiction over these claims. (FAC ¶ 1.)

“[P]endent jurisdiction is a doctrine of discretion, not of

plaintiff’s right.” United Mine Workers of Am. v. Gibbs, 383 U.S.

715, 726 (1966). District courts have discretion to sua sponte

consider whether to continue exercising supplemental jurisdiction over

pendent state law claims. Acri v. Varian Assocs., Inc., 114 F.3d 999,

1000 (9th Cir. 1997)(en banc). Since Plaintiff’s RESPA claims are her

sole remaining federal claims, the court sua sponte considers whether

Plaintiff’s state claims substantially predominate over her RESPA

allegations and should therefore be dismissed under 28 U.S.C. §

1367(c)(2)(“section 1367(c)(2)”), which authorizes a district court to

decline to exercise supplemental jurisdiction when pendent state

claims “substantially predominate[] over the claim . . . over which

the district court has original jurisdiction.” 

Where “the state issues substantially predominate, whether

in terms of proof, of the scope of the issues raised, or of the

comprehensiveness of the remedy sought, the state claims may be

dismissed without prejudice and left for resolution to state

tribunals.” Gibbs, 383 U.S. at 727. “Generally, a district court

will find substantial predomination where a state claim constitutes

the real body of a case, to which the federal claim is only an

appendage - only where permitting litigation of all claims in the

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district court can adequately be described as allowing a federal tail

to wag what is in substance a state dog.” De Asencio v. Tyson Foods,

Inc., 342 F.3d 301, 309 (3d Cir. 2003)(quoting Borough of W. Mifflin

v. Lancaster, 45 F.3d 780, 789 (3d Cir. 1995)). As soon as the

“nature of [a plaintiff's] proofs and the relative importance of [a

plaintiff's] claims” becomes apparent, the federal court need not

“tolerate a litigant's effort to impose upon it what is in effect only

a state law case.” Gibbs 383 U.S. at 727. Further, as in any other

case applying section 1367(c), “a federal court should consider and

weigh . . . the values of judicial economy, convenience, fairness, and

comity.” City of Chicago v. Int’l College of Surgeons, 522 U.S. 156,

173 (1997)(quotations and citations omitted); see also Borough of W.

Mifflin, 45 F.3d at 789 (stating that “[g]iven the origin of the

‘substantially predominate’ standard, a district court's analysis

under § 1367(c)(2) should track the Supreme Court's explication of

that standard in Gibbs”). 

 Plaintiff’s state law claims center on his allegations that

defendant Aldridge, through alleged misrepresentations and nondisclosures, improperly induced Plaintiff into purchasing a loan she

could not afford. Plaintiff’s state law claims, therefore, largely

concern Aldridge’s conduct prior to, at, or immediately after the

closing of Plaintiff’s loan transaction in July 2006. Only

Plaintiff’s Rosenthal Act claim, which alleges that AHMSI and H & R

Block engaged in improper debt collection tactics, involves conduct

occurring after the execution of Plaintiff’s loan.

In contrast, Plaintiff’s RESPA claim concerns her

allegations that AHMSI failed to respond to a purported QWR which

Plaintiff mailed in April 2009, and that AHMSI did not comply with the

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Section 2605(a) requires that a lender disclose to the 2

borrower, at the time of the loan application, “whether the servicing of

the loan may be assigned, sold, or transferred to any other person at

any time while the loan is outstanding.” However, Plaintiff has not

alleged that AHMSI was the original lender for his loan, and therefore,

the requirements of Section 2605(a) appear inapplicable to Plaintiff’s

RESPA claim alleged against AHMSI. Plaintiff’s opposition confirms this

characterization, arguing that “AHMSI failed to disclose to Plaintiff

that it obtained servicing rights to her loan . . . .” (Opp’n to AHMSI

MTD 14:28-15:1.)

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disclosure requirements of section 2605, which require, in pertinent

part, that a loan servicer provide written notice to a borrower of

“any assignment, sale or transfer of the servicing of [the borrower’s]

loan . . . .” 12 U.S.C. § 2605(b).2

Therefore, “in terms of proof” and “the scope of the issues

raised” Plaintiff’s state law claims substantially predominate over

her RESPA allegations. Plaintiff’s RESPA claims have little, if any,

factual overlap with her state claims. The state claims will be

determined by each defendant’s conduct before, at, and immediately

after the closing of Plaintiff’s loan. In contrast, Plaintiff’s RESPA

claims will be determined by AHMSI’s much later alleged failure to

respond to Plaintiff’s QWR or to provide certain notices. Therefore,

there is no “common nucleus of operative fact” between Plaintiff’s

RESPA claims and her allegations under state law. Further,

Plaintiff’s remaining RESPA claims are alleged against only AHMSI,

whereas her state law claims are alleged against five different

defendants, and will involve a broader scope of discovery. 

 The principle of comity also weighs in favor of dismissing

Plaintiff’s state law claims. “Needless decisions of state law should

be avoided” since state courts should have the primary responsibility

of applying and developing state law. Gibbs 383 U.S. at 727. 

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Further, Plaintiff’s ability to litigate her state claims

does not appear to be precluded by dismissal under section 1367(c)(2)

since 28 U.S.C. 1367(d) discusses the statute of limitations period

for dismissed state claims.

Since Plaintiff’s state claims substantially predominate

over her federal RESPA claims and principles of comity and fairness

weigh in favor of dismissal, the court declines to exercise

supplemental jurisdiction over Plaintiff’s state law claims under

section 1367(c)(2).

IV. CONCLUSION

For the stated reasons, the court declines to exercise

supplemental jurisdiction over Plaintiff’s state claims. Therefore, 

Plaintiff’s state claims are dismissed from this action without

prejudice. Further, Option One and H & R Block’s motion to dismiss

Plaintiff’s TILA claim and RESPA claim alleged against H & R is

granted. Defendant AHMSI’s motion to dismiss Plaintiff’s RESPA claims

alleged against it is granted and denied in part. Plaintiff, however,

is granted leave to amend the dismissed portion of her RESPA claims

alleged against AHMSI. Any amended complaint addressing Plaintiff’s

RESPA claims against AHMSI shall be filed within fourteen (14) days of

the date on which this order is filed.

Dated: February 2, 2010

 

GARLAND E. BURRELL, JR.

United States District Judge

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