Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_06-cv-03327/USCOURTS-cand-5_06-cv-03327-10/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1331 Fed. Question

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United States District Court

For the Northern District of California

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1

 Plaintiffs filed an opposition to the motion to dismiss on July 6, 2007. The court does not in

this order address the motion to dismiss. 

ORDER DENYING PLAINTIFFS' REQUEST FOR DISCOVERY AND CONTINUANCE OF HEARING ON DEFENDANTS'

MOTION TO DISMISS—No. C-06-03327 RMW

SPT

United States District Court

For the Northern District of California

E-FILED on 7/10/07

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

ARMANDO AND ALINDA MARTINEZ, on

behalf of themselves and a class of others

similarly situated,

Plaintiffs,

v.

WELLS FARGO BANK, N.A.; WELLS

FARGO HOME MORTGAGE, INC.; WELLS

FARGO FINANCIAL SERVICES, INC.; and

WELLS FARGO REAL ESTATE TAX

SERVICES, LLC,

Defendants.

No. C-06-03327 RMW

ORDER DENYING PLAINTIFFS' REQUEST

FOR DISCOVERY AND CONTINUANCE

OF HEARING ON DEFENDANTS' MOTION

TO DISMISS

[Re Docket No. 58]

On June 7, 2007 defendants Wells Fargo Bank, N.A., Wells Fargo Home Mortgage, Inc.,

Wells Fargo Financial Services, Inc., and Wells Fargo Real Estate Tax Services, LLC (collectively,

"Wells") filed a motion to dismiss counts two through four of plaintiffs' second amended complaint

("SAC"). Plaintiffs Armando and Alinda Martinez (together, the "Martinez's") filed a request to

obtain discovery in order to oppose Wells's motion.1

 Plaintiffs also seek a continuance of the July

Case 5:06-cv-03327-RMW Document 63 Filed 07/10/07 Page 1 of 5
United States District Court

For the Northern District of California

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2

 Specifically, plaintiffs seek to depose defendants and make document requests about Wells's

decision making process for settlement fees and costs incurred in providing settlement services for

the period from January 1, 1998 through the present. See Pls.' Mot. Discovery, Ex. A. 

ORDER DENYING PLAINTIFFS' REQUEST FOR DISCOVERY AND CONTINUANCE OF HEARING ON DEFENDANTS'

MOTION TO DISMISS—No. C-06-03327 RMW

SPT 2

27, 2007 hearing for defendants' motion to dismiss pending completion of the requested discovery. 

Wells opposes plaintiffs' request. The court has read the moving and responding papers and

considered the arguments of counsel. For the reasons set forth below, the court DENIES plaintiffs'

request for discovery and continuance of the hearing on defendants' motion to dismiss pending

discovery. 

At the June 1, 2007 case management conference, the court set the hearing date for

defendants' motion to dismiss for July 27, 2007 and stayed discovery as to any factual issue. The

parties dispute whether this court, by staying fact discovery in this action at the CMC, barred

plaintiffs from requesting discovery in order to oppose defendants' motion to dismiss. The parties

agree that at the CMC plaintiffs requested and the court considered the idea of permitting discovery

at this stage of the proceeding. Defendants argue that, by staying discovery, the court essentially

concluded that discovery was not appropriate prior to the resolution of defendants' motion to

dismiss. Defendants submit that if discovery is needed, plaintiffs should simply explain why in their

opposition to the motion and the court can decide the motion on the arguments presented. Plaintiffs,

on the other hand, contend that although the court decided to stay discovery, plaintiffs are not

otherwise barred from making a request for discovery in order to oppose defendants' motion. 

According to plaintiffs, such discovery would put the issue of preemption "to rest once and for all"

and may yield information that is central to other aspects of the case.

As defendants argue, "the purpose of [Fed. R. Civ. P.] 12(b)(6) is to enable defendants to

challenge the legal sufficiency of complaints without subjecting themselves to discovery." See

Rutman Wine Co. v. E. & J. Gallo Winery, 829 F.2d 729, 738 (9th Cir. 1987) (citation omitted). A

motion pursuant to Fed. R. Civ. P. 12(b)(6) may be treated as one for summary judgment if matters

outside the pleadings are presented for the court's consideration. However, this is not the case here.2

Case 5:06-cv-03327-RMW Document 63 Filed 07/10/07 Page 2 of 5
United States District Court

For the Northern District of California

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3

 Section 7.4002 provides that a national bank "may charge its customers non-interest charges

and fees, including deposit account service charges" and that the determination of such charges and

fees are "business decisions to be made by each bank, in its discretion, according to sound banking

judgment and safe and sound banking principles." A national bank is deemed to establish such

charges and fees in accordance with safe and sound banking principles if "the bank employs a

decision-making process through which it considers the following factors:"

(i) The cost incurred by the bank in providing the service;

(ii) The deterrence of misuse by customers of banking services;

(iii) The enhancement of the competitive position of the bank in accordance with the

bank's business plan and marketing strategy; and

ORDER DENYING PLAINTIFFS' REQUEST FOR DISCOVERY AND CONTINUANCE OF HEARING ON DEFENDANTS'

MOTION TO DISMISS—No. C-06-03327 RMW

SPT 3

Plaintiffs support their request by arguing that the issue of whether the National Bank Act

preempts their Cal. Bus. and Prof. Code Section 17200 claims is a factual inquiry and, therefore,

defendants' motion to dismiss such claims on the basis that they are preempted cannot be resolved

prior to discovery. Plaintiffs contend that the court's March 30, 2007 Order Granting Motion to

Dismiss Counts Two through Six of First Amended Complaint ("March 30, 2007 Order") "found

that conflict preemption under 12 C.F.R. § 7.4002 may exist if Wells Fargo met certain factual

requirements." Pls.' Mot. Discovery at 1:13-14. Therefore, plaintiffs submit, they need limited

discovery to address this specific factual issue. 

Plaintiffs read the court's March 30, 2007 Order too broadly. The court did not hold that the

issue of conflict preemption turned on whether defendants meet certain factual requirements. In the

March 30, 2007 Order, this court concluded that there is no field preemption by the National Bank

Act, but that there is conflict preemption. See Mar. 30, 2007 Order at 10:15-19 (citing Wells Fargo

Bank N.A. v. Boutris, 419 F.3d 949, 963 (9th Cir. 2005) (holding that "states may regulate national

banks where 'doing so does not prevent or significantly interfere with the national bank's exercise of

its powers'") (citation omitted)). Specifically, the court held that the National Bank Act granted

national banks the express power to engage in real estate lending and that specific regulations issued

by the Office of the Comptroller of the Currency ("OCC") authorized national banks to charge noninterest charges and fees. Therefore, plaintiffs' § 17200 claims, which allege that defendants' noninterest charges and fees in connection with its real estate lending operations violate § 17200, were

preempted under the principle of conflict preemption. See Mar. 30, 2007 Order at 10:20-12:15. 

Although the court also discussed that the OCC regulations set forth in 12 C.F.R. § 7.40023

Case 5:06-cv-03327-RMW Document 63 Filed 07/10/07 Page 3 of 5
United States District Court

For the Northern District of California

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(iv) The maintenance of the safety and soundness of the institution.

12 C.F.R. § 7.4002(b)(2). 

ORDER DENYING PLAINTIFFS' REQUEST FOR DISCOVERY AND CONTINUANCE OF HEARING ON DEFENDANTS'

MOTION TO DISMISS—No. C-06-03327 RMW

SPT 4

provide that a bank is deemed to have established non-interest charges and fees in accordance with

safe and sound banking principles if it employs a decision-making process through which it

considers certain factors, the court did not hold that the application of conflict preemption turned on

whether a bank has complied with these factors. As defendants argues, these factors are merely

guidelines provided by the OCC to banks setting forth the criteria a bank should consider in setting

non-interest charges and fees. 

Accordingly, the court concludes that discovery is not warranted for the purpose of opposing

defendants' motion to dismiss. See Rutman Wine Co., 829 F.2d at 738 (holding that "if the

allegations of the complaint fail to establish the requisite elements of the cause of action, our

requiring costly and time consuming discovery and trial work would represent an abdication of our

judicial responsibility") (internal quotation marks and citation omitted). 

ORDER

For the foregoing reasons, the court DENIES plaintiffs' request for discovery and

continuance of the hearing on defendants' motion to dismiss pending discovery.

DATED: 7/10/07

RONALD M. WHYTE

United States District Judge

Case 5:06-cv-03327-RMW Document 63 Filed 07/10/07 Page 4 of 5
United States District Court

For the Northern District of California

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ORDER DENYING PLAINTIFFS' REQUEST FOR DISCOVERY AND CONTINUANCE OF HEARING ON DEFENDANTS'

MOTION TO DISMISS—No. C-06-03327 RMW

SPT 5

Notice of this document has been electronically sent to:

Counsel for Plaintiffs:

Jacquetta Bardacos jbardacos@packard.com

Ronald D. Packard rdpackard@packard.com

Von G. Packard vpackard@packard.com

Timothy G. Blood timb@lerachlaw.com 

Counsel for Defendants:

Robert Bader rbader@goodwinprocter.com 

William F. Sheehan wsheehan@goodwinprocter.com 

Counsel are responsible for distributing copies of this document to co-counsel that have not

registered for e-filing under the court's CM/ECF program.

Dated: 7/10/07 SPT

Chambers of Judge Whyte

Case 5:06-cv-03327-RMW Document 63 Filed 07/10/07 Page 5 of 5