Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_10-cv-01723/USCOURTS-cand-5_10-cv-01723-1/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1442 Petition for Removal

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 This disposition is not designated for publication in the official reports. 

Case Number CV 10-01723 JF (HRL)

ORDER GRANTING MOTION TO DISMISS AND REMANDING TO STATE COURT

(JFEX2)

**E-Filed 7/22/2010**

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

JOHN WRIGHT, 

 Plaintiff,

 v.

BANK OF AMERICA, N.A., a Delaware

corporations, BANK OF AMERICA HOME

LOAN FINANCING, LP, a Texas limited

partnership, f/k/a Countrywide Financial

Corporation, COUNTRYWIDE FINANCIAL

CORP., a Delaware corporation, COUNTRYWIDE

HOME LOANS, INC., a New York corporation,

and DOES 1 through 15, inclusive,

 Defendants.

Case Number CV 10-01723 JF (HRL)

ORDER1 GRANTING MOTION TO

DISMISS AND REMANDING

ACTION TO STATE COURT

[re doc. no. 5]

Defendants Bank of America, N.A. (“Bank of America”); Bank of America Home Loan

Financing, LP (“BAC Home Loan”); and Countrywide Home Loans, Inc. (“Countrywide

Home”) move to dismiss Plaintiff’s complaint pursuant to Fed. R. Civ. P. 12(b)(6). The Court

has considered the moving and responding papers and the oral arguments of counsel presented at

Case 5:10-cv-01723-JF Document 18 Filed 07/22/10 Page 1 of 9
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2

 Although Countrywide Financial Corp. (“Countrywide Financial”) has not joined in the

instant motion to dismiss, this disposition applies to all parties.

3

 At various points in this order, Bank of America and BAC Home Loan are to referred to

collectively as “BOA,” and Countrywide Financial and Countrywide Home are referred to

collectively as “Countrywide.” 

2

Case Number CV 10-01723 JF (HRL)

ORDER GRANTING MOTION TO DISMISS AND REMANDING TO STATE COURT

(JFEX2)

the hearing on July 16, 2010. For the reasons discussed below, the motion to dismiss will be

granted with respect to Plaintiff’s sole federal claim, and the remaining claims will be remanded

to the Santa Clara Superior Court.2

I. BACKGROUND

A. Factual Allegations

On or about August 16, 2004, Plaintiff John Wright purchased a home for $700,000.

(Compl. ¶ 14.) Plaintiff obtained two loans from Countrywide3 (Compl. ¶ 14.) The first loan was

a 30-year loan fixed in the amount of $400,000 loan with an interest rate of 6.5%. (Compl. ¶

14.) The second loan was a $300,000 home equity line of credit (“HELOC”) with an interest rate

of 7.75%. (Compl. ¶ 14.) 

On or about June 1, 2005, Plaintiff refinanced the first loan, obtaining an adjustable rate

loan with an interest rate of 8.5% rate from Countrywide. (Compl. ¶ 16.) He alleges that he

relied upon Countrywide’s encouragement and reputation in choosing to refinance. (Compl. ¶

16.) However, in January 2007, Plaintiff became skeptical about his adjustable rate loan and

decided to refinance with another fixed-rate loan. (Compl. ¶ 17.) He asserts that a Countrywide

agent advised him to delay refinancing, and it was not until June 2007 that Countrywide allowed

him to commence the refinancing process. (Compl. ¶ 19, 21.) On or about June 21, 2007,

Countrywide refinanced the first loan at a 30-year fixed rate of 6.5%. (Compl. ¶ 28.) Plaintiff

asserts that had Countrywide not delayed the refinancing, he would have received a lower fixed

rate. (Compl. ¶ 29.) 

On July 1, 2008, Bank of America acquired Countrywide. (Compl.¶ 5.) In October of

2008, Plaintiff attempted to modify his HELOC. (Compl. ¶ 30.) On November 18, 2008,

Case 5:10-cv-01723-JF Document 18 Filed 07/22/10 Page 2 of 9
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Case Number CV 10-01723 JF (HRL)

ORDER GRANTING MOTION TO DISMISS AND REMANDING TO STATE COURT

(JFEX2)

Plaintiff received a loan modification contract from Countrywide. (Compl. ¶ 31.) Plaintiff

alleges that Countrywide gave him thirty days to sign the contract despite his expressed concern

that he did not understand the entire contract (Compl. ¶ 31-32). He signed the contract on

December 20, 2008. (Compl. ¶ 33.) He claims he did so because he feared losing the loan

modification, and because of Countrywide’s insistence that he sign the contract without fully

understanding it. (Compl. ¶ 32.) The contract reduced Plaintiff’s payments on the HELOC by

$61.71 per month. (Compl. ¶ 34.) 

On February 17, 2009, unhappy with the result of the modification of the HELOC,

Plaintiff retained legal services in order to obtain another modification. (Compl. ¶ 36.) In April

2009, Bank of America consolidated and changed the Countrywide entities to BAC Home Loan.

(Compl. ¶ 5.) Between March and July 2009, Plaintiff did not pay his mortgage payments

because of financial hardship. (Compl. ¶ 48.) Plaintiff alleges that beginning in July 2009, BOA

called him to request payment on the HELOC. He also claims that BOA refused to provide a

loan modification as long as Plaintiff’s present counsel represented him. (Compl. ¶ 49-50.) 

Plaintiff alleges that in July 2009, BOA offered him a Home Affordable Modification

Trial Period Plan (“Trial Period Plan”) that promised a modification of the HELOC provided that

Plaintiff complied with all of his obligations under the Plan (Compl. ¶ 52.) The Trial Period Plan

allegedly required Plaintiff to make three payments of $3,306.67 to BOA, with payments due on

the first of each month beginning on August 2, 2009. (Compl. ¶ 53.) The Trial Period Plan was

to be effective from August 2009 to October 2009. (Compl. ¶ 53.) The Plan also required

Plaintiff to submit a hardship application, a signed copy of his most recent tax returns, and proof

of income. (Compl. ¶ 53.) Plaintiff alleges that despite his sending all of the required documents 

and making timely payments under the Trial Period Plan, BOA sent him a notice of intent to

accelerate on the HELOC on July 21, 2009. (Compl. ¶ 55-56.)

On or about October 23, 2009, shortly before the end of the trial period, BOA notified

Plaintiff that it could not locate his hardship application. (Compl. ¶ 58.) Plaintiff alleges that he

re-sent the document by fax and certified mail, and that he called BOA to provide tracking

Case 5:10-cv-01723-JF Document 18 Filed 07/22/10 Page 3 of 9
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Case Number CV 10-01723 JF (HRL)

ORDER GRANTING MOTION TO DISMISS AND REMANDING TO STATE COURT

(JFEX2)

numbers and to follow up on the loan process. On October 31, 2009, Plaintiff was notified by

BOA that his tax return and proof of income were missing. (Compl. ¶ 61.) Plaintiff alleges that

he faxed and sent these documents by certified mail. (Compl. ¶ 62.) On November 13, 2009,

Plaintiff received a letter from BOA informing him it still had not received his documents, but

that it would extend the trial period to December 2009 so that the documents could be

resubmitted. (Compl. ¶ 63.) Plaintiff contacted BOA on or about November 19, 2009 and again

was told to resubmit all of the documents. Plaintiff resubmitted the documents, but he did not

make any additional payments beyond the term of the Trial Period Plan. (Compl. ¶ 64-65.) 

On February 16, 2010, BOA sent Plaintiff a letter refusing a loan modification and

requesting a lump sum payment of $40,000 to avoid foreclosure proceedings. (Compl. ¶ 66.) 

Plaintiff alleges that when he spoke with BOA agents, they told him to disregard the notice and

that he was qualified for a loan modification. (Compl. ¶ 67.) 

On or about April 21, 2009, BOA and Countrywide entered into a Home Affordable

Modification Program (“HAMP”) contract, each as a participating servicer with Fannie Mae and

the United States Treasury. The HAMP contract required participating servicers to review all

eligible borrowers and make modifications available to qualified borrowers.

B. Procedural History

On March 18, 2010, Plaintiff filed suit in the Santa Clara Superior Court against Bank of

America, BAC Home Loan, Countrywide Home, and Countrywide Financial. He asserts six

claims for relief: (1) breach of the HAMP contract against all Defendants; (2) breach of contract

against BOA; (3) breach of the implied covenant of good faith and fair dealing against BOA; (4)

promissory estoppel against BOA; (5) intentional infliction of emotional distress against all

Defendants; and (6) violation of the California Business and Professions code §§ 17200, et seq.

for unfair competition against all Defendants. On April 22, 2010, Defendants removed the action

to this Court, and on April 29, 2010, Bank of America, BAC Home Loan, and Countrywide

Home moved to dismiss. 

Case 5:10-cv-01723-JF Document 18 Filed 07/22/10 Page 4 of 9
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Case Number CV 10-01723 JF (HRL)

ORDER GRANTING MOTION TO DISMISS AND REMANDING TO STATE COURT

(JFEX2)

II. MOTION TO DISMISS

A. Legal Standards

“Dismissal under Rule 12(b)(6) is appropriate only where 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). For purposes of a motion to

dismiss, "all allegations of material fact are taken as true and construed in the light most

favorable to the nonmoving party.” Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.

1996). However, “the tenet that a court must accept as true all of the allegations contained in a

complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009).

Thus, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed

factual allegations, a plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’

requires more than labels and conclusions, and a formulaic recitation of the elements of a cause

of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Only a complaint

that states “a plausible claim for relief survives a motion to dismiss.” Iqbal, 129 S. Ct. at 1950. 

The plausibility analysis is “context-specific” and is guided by the Court’s “judicial

experience and common sense,” id., and is limited to the face of the complaint and matters

judicially noticeable, MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986); N.

Star Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 581 (9th Cir. 1983). Leave to amend must be

granted unless it is clear that the complaint's deficiencies cannot be cured by amendment. Lucas

v. Dep’t. of Corrs., 66 F.3d 245, 248 (9th Cir. 1995).

In assessing whether to grant leave to amend, the Court also considers “the presence or

absence of undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies by

previous amendments, undue prejudice to the opposing party[,] and futility of the proposed

amendment.” Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1052 (9th Cir. 2001) (quoting

Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 538 (9th Cir. 1989)). When amendment

would be futile, dismissal may be ordered with prejudice. Dumas v. Kipp, 90 F.3d 386, 393 (9th

Cir. 1996). 

Case 5:10-cv-01723-JF Document 18 Filed 07/22/10 Page 5 of 9
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Case Number CV 10-01723 JF (HRL)

ORDER GRANTING MOTION TO DISMISS AND REMANDING TO STATE COURT

(JFEX2)

B. Federal Claim for Breach of HAMP Contract (Claim 1)

Plaintiff asserts that he is a third-party beneficiary to the HAMP contract between

Defendants and Fannie Mae. The HAMP contract requires servicers to review all eligible

borrowers and to provide a loan modification to qualified borrowers in compliance with the

HAMP contract and guidelines. Home Affordable Modification Program Guidelines (Mar. 4,

2009), http://www.financialstability.gov/roadtostability/homeowner.html (hereinafter “HAMP

Guidelines”). The HAMP Guidelines include several requirements: (1) the loan to be modified

must be a first-lien mortgage originated on or before January 1, 2009; (2) the loan must be

delinquent or default must be imminent; (3) the borrower must have a monthly mortgage

payment greater than thirty-one percent of his monthly income; and (4) the borrower must be

able to document a financial hardship. See also Williams v. Geithner, No. 09-1959, 2009 WL

3757380 (D. Minn. Nov. 9, 2009) (outlining the HAMP program). Defendants argue that even if

they did breach its HAMP contract with Fannie Mae, Plaintiff is not a third-party beneficiary of

the contract and lacks standing to assert a HAMP-based breach of contract claim. The Court

agrees. 

 “Federal law controls the interpretation of a contract entered pursuant to federal law

when the United States is a party [under the contract]. For guidance, we look to general

principles for interpreting contracts. Before a third-party can recover under a contract, it must

show that the contract was made for its direct benefit-that is an intended beneficiary of the

contract.” Klamath Water Users Protective Ass’n v. Patterson, 204 F.3d 1206, 1210 (9th Cir.

2000) (internal citations omitted). An intended beneficiary need not be named or identified

specifically in a contract, but he “must fall within a class clearly intended by the parties to

benefit from the contract.” Id. at 1211. One way to determine such intent is to inquire whether

the beneficiary would be reasonable in relying on the promise as manifesting an intention to

confer a right on him. Restatement (Second) of Contracts § 302(2)(1)(b) (1979) (“Restatement”).

In the absence of such an intent, the beneficiary is simply an “incidental beneficiary” with no

independent claim. Id. at § 302.

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Case Number CV 10-01723 JF (HRL)

ORDER GRANTING MOTION TO DISMISS AND REMANDING TO STATE COURT

(JFEX2)

The Ninth Circuit observed in Klamath that “[p]arties that benefit from a government

contract are generally assumed to be incidental beneficiaries, and may not enforce the contract

absent a clear intent to the contrary. ‘Government contracts often benefit the public, but

individual members of the public are treated as incidental beneficiaries unless a different

intention is manifested.” 204 F.3d at 1211. See Restatement § 313(2). Additionally, clear intent

is not shown simply by pointing to “a contract's recitation of interested constituencies, vague,

hortatory pronouncements, statements of purpose, explicit reference to a third-party or even a

showing that the contract ‘operates to the third-parties’ benefit and was entered into with them in

mind.” County of Santa Clara v. Astra USA, Inc., 588 F.3d 1237, 1244 (9th Cir. 2009) (internal

quotations and citations omitted).

In Klamath, the Ninth Circuit concluded that a contract between a dam operator and the

United States was “entered into with the irrigators in mind,” but that the contract showed no

intention on the part of the contracting parties to grant the irrigators enforceable rights. 204 F.3d

at 1211-12. “[T]o allow the irrigators third-party beneficiary status would open the door to all

users receiving a benefit from the Project achieving similar status, a result not intended by the

Contract.” Id. at 1212. The HAMP contract between Defendants and Fannie Mae obviously was

entered into with the intent of aiding home-loan borrowers, but it is equally obvious that the

contact does not secure an enforceable right for non-parties. A loan modification is never

guaranteed. At most, the Guidelines guarantee only that an eligible borrower will be evaluated

for a loan modification. See HAMP Guidelines. It is also clear that the right to such evaluation is

enforceable only through an administrative process: 

[B]orrowers denied a loan modification can contact the Homeowner's

HOPE Hotline and speak with a trained housing counselor regarding

the HAMP program. If the counselor believes that the borrower's

application was improperly denied, the counselor can refer the

concern to the servicer's senior-level management. If that

senior-level official cannot resolve the issue, the counselor can

further escalate the case to a designated team at Fannie Mae whose

responsibility includes resolving individual and systemic problems.

In addition, to monitor participating servicers' compliance with the

HAMP, Freddie Mac, at the direction of Treasury, instituted a

second-look process in which it audits a sample of loan modification

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Case Number CV 10-01723 JF (HRL)

ORDER GRANTING MOTION TO DISMISS AND REMANDING TO STATE COURT

(JFEX2)

applications that have been denied to minimize the likelihood that

borrower applications are overlooked or inadvertently denied. . . .

Secretary of the Treasury issued S[upplemental] D[irective] 09-06

which requires, in part, servicers to furnish Treasury and Fannie Mae

with the specific reason for denial.

Williams, 2009 WL 3757380, at *3. 

Plaintiff directs the Court’s attention to Reyes v. Saxon Mortgage Services, Inc., No. 09-

1366, 2009 U.S. Dist. LEXIS 125235, at *6 (S.D. Cal. Nov. 5, 2009), in which the plaintiff was

permitted to proceed with a HAMP breach of contract claim under a third-party beneficiary

theory. However, as the court observed in Marks v. Bank of America, No. 10-8039, 2010 U.S.

Dist. LEXIS 61489, at *11 (D. Ariz. June 22, 2010), Reyes is distinguishable. Like the

defendant in Marks, Defendants here are not obligated to modify Plaintiff’s loan but to evaluate

it. Indeed, Plaintiff asserts explicitly that his claim is based upon the Defendants “refusing to

evaluate his. . . loan for modification. . . .” (Compl. ¶ 71.) As in Marks, the HAMP contract

“does not grant [p]laintiff the right to enforce the provisions of the agreement. Because

[d]efendant was not required to admit or deny [p]laintiff’s loan, only to consider, [p]laintiff

could not have. . . reasonably believed that [d]efendant was obligated to modify her loan.” 

Marks, 2010 U.S. Dist. LEXIS 61489, at * 11 (emphasis in original). See also Escobedo v.

Countrywide Home Loans, Inc., No. 09-1557, 20099 U.S. Dist. LEXIS 117017, at *6 (“A

qualified borrower would not be reasonable in relying on the Agreement as manifesting an

intention to confer a right on him or her because the Agreement does not require Countrywide

modify eligible loans.”). The Court concludes that Plaintiff is an incidental beneficiary and may

not assert a third-party beneficiary claim for breach of the HAMP contract. Nor does it appear

that this defect could be cured by amendment.

C. Supplemental Jurisdiction

Plaintiff’s HAMP claim provides the sole basis for federal question jurisdiction. While

federal courts may exercise supplemental jurisdiction over state-law claims “that are so related to

claims in the action within [the court’s] original jurisdiction that they form part of the same case

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Case Number CV 10-01723 JF (HRL)

ORDER GRANTING MOTION TO DISMISS AND REMANDING TO STATE COURT

(JFEX2)

or controversy under Article III of the United States Constitution,” 28 U.S.C. § 1367(a), a court

may decline to exercise supplemental jurisdiction where it “has dismissed all claims over which

it has original jurisdiction,” id. § 1367(c)(3). Indeed, unless “considerations of judicial

economy, convenience[,] and fairness to litigants” weigh in favor of the exercise of supplemental

jurisdiction, “a federal court should hesitate to exercise jurisdiction over state claims.” United

Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966); see also Carnegie-Mellon Univ. v. Cohill,

484 U.S. 343, 350 (1988) (“[A] federal court should consider and weigh in each case, and at

every stage of the litigation, the values of judicial economy, convenience, fairness, and

comity.”). The Court declines to exercise its supplemental jurisdiction here and will remand the

action to the state court on its own motion. 

IV. ORDER

Good cause therefor appearing, Defendants’ motion to dismiss Plaintiff’s HAMP claim is

GRANTED, without leave to amend. All remaining claims are remanded to the Santa Clara

Superior Court for further proceedings.

IT IS SO ORDERED.

DATED: 7/22/2010 __________________________________

JEREMY FOGEL

United States District Judge

Case 5:10-cv-01723-JF Document 18 Filed 07/22/10 Page 9 of 9