Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_15-cv-00620/USCOURTS-cand-5_15-cv-00620-8/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 18:1962 Racketeering (RICO) Act

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

VICTOR P. GIOTTA, et al.,

Plaintiffs,

v.

OCWEN FINANCIAL CORPORATION, et 

al.,

Defendants.

Case No. 15-cv-00620-BLF 

ORDER GRANTING DEFENDANTS’

JOINT MOTION TO DISMISS SECOND 

AMENDED COMPLAINT WITHOUT 

LEAVE TO AMEND; AND DISMISSING 

ACTION WITH PREJUDICE

[RE: ECF 84]

Plaintiffs Victor and Loralee Giotta allege that Defendants, a group of companies in the 

mortgage industry and one of their key executives, participated in a scheme to prey on 

homeowners who were in actual or imminent default on their mortgages. According to Plaintiffs, 

one of the companies acquired distressed mortgages and assigned the loan servicing rights on 

those mortgages to another company. The second company hired a third company to obtain 

property inspections and broker price opinions (“BPOs”) at inflated fees which were billed 

through to the homeowners. In some cases multiple inspections and BPOs were performed in 

order to run up unnecessary fees. The homeowners were not informed that the fees for the 

inspections and BPOs were inflated or, in some cases, unnecessary. Plaintiffs sue on their own 

behalf and as representatives of a putative class of homeowners. 

The scheme described by Plaintiffs is extremely troubling, particularly as Plaintiffs’

allegations are bolstered by prior consent orders entered against Defendants in other jurisdictions. 

However, Plaintiffs in this case have failed to allege facts that are sufficient to make out a viable 

claim for relief. Having previously identified numerous pleading defects which have not been 

cured by amendment, and having received no indication that Plaintiffs could cure those defects if 

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granted further leave to amend, the Court GRANTS Defendants’ joint motion to dismiss the

second amended complaint (“SAC”) without leave to amend and DISMISSES the action with 

prejudice. 

I. BACKGROUND

The underlying facts of this case are well-known to the parties and need not be repeated in 

full here. In brief, Plaintiffs claim that Defendant William C. Erbey orchestrated an “abusive, 

predatory and illegal home mortgage loan servicing business” by means of his control over 

Defendant Ocwen Financial Corporation (“Ocwen Financial”), Defendant Ocwen Loan Servicing, 

LLC (“Ocwen Servicing”), Defendant Altisource Solutions, Inc. (“Altisource”), and Altisource’s 

parent, nonparty Altisource Portfolio Solutions, S.A. (“Altisource Parent”). SAC ¶ 1. According 

to Plaintiffs, Ocwen Financial purchased the servicing rights to subprime mortgages that were in 

default or likely to enter default status. Id. ¶ 2. Ocwen Financial then gave Ocwen Servicing the 

right to service the mortgages. Id. As the mortgage servicer, Ocwen Servicing charged 

homeowners fees for property inspections and broker price opinions (“BPOs”). Id. ¶¶ 2, 9-10.

Ocwen Financial “spun off” Altisource Parent and Altisource, and then Ocwen Servicing hired 

Altisource to provide BPOs on serviced loans. Id. ¶ 3. Altisource Parent paid “kickbacks” to 

Ocwen Financial, and Altisource “upcharged” Ocwen Servicing for BPOs, which upcharges were 

passed through to the homeowners. Id. ¶¶ 3, 10. It appears that Plaintiffs use the term “upcharge” 

to indicate circumstances in which Altisource charged Ocwen Servicing more than Altisource’s 

own cost to obtain the BPO. Id. ¶ 10. Plaintiffs do not allege that Ocwen Servicing charged 

homeowners more than it paid Altisource, but rather that Ocwen Servicing passed Altisource’s 

upcharges through to homeowners. Id.; see also Hrg. Trans. 53:6-16, ECF 102 (clarifying that 

Plaintiffs do not allege a markup by Ocwen Servicing). 

Plaintiffs assert that under the above arrangement, Ocwen Servicing overcharged Plaintiffs 

and putative class members for mortgage services in three ways: (1) Ocwen Servicing sent form 

letters to homeowners which were accompanied by a schedule of fees indicating that property 

inspections would be performed at no charge (“no charge letters”), but later Ocwen Servicing 

charged for property inspections; (2) Ocwen Servicing passed through to homeowners the 

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upcharged fees that Ocwen Servicing paid Altisource for BPOs; and (3) Ocwen Servicing 

“double-dipped” by charging homeowners for contemporaneous property inspections and BPOs 

even though a BPO renders a property inspection redundant and unnecessary. SAC ¶¶ 9-13. 

Based upon these alleged overcharges, Plaintiffs assert the following claims: (1) violation 

of the “unlawful” prong of California’s Unfair Competition Law (“UCL”), (2) violation of the 

“fraudulent” prong of California’s UCL; (3) violation of the “unfair” prong of California’s UCL; 

(4) fraud; (5) violation of the federal Fair Debt Collection Practices Act (“FDCPA”); (6) violation 

of California’s Rosenthal Fair Debt Collection Practices Act (“RFDCPA”); and (7) violation of the 

Racketeer Influenced and Corrupt Organizations Act (“RICO”). 

Defendants have filed a joint motion to dismiss the SAC under Federal Rule of Civil 

procedure 12(b)(6) for failure to state a claim upon which relief may be granted. The Court has 

considered the motion, opposition, reply, documents of which the Court may take judicial notice 

or that may be considered under the incorporation by reference doctrine, and the oral argument 

presented at the hearing on June 9, 2016.

 II. LEGAL STANDARD

“A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a 

claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’” Conservation 

Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 

729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts 

as true all well-pled factual allegations and construes them in the light most favorable to the 

plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the 

Court need not “accept as true allegations that contradict matters properly subject to judicial 

notice” or “allegations that are merely conclusory, unwarranted deductions of fact, or 

unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) 

(internal quotation marks and citations omitted). While a complaint need not contain detailed 

factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to 

relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. 

Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the 

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court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

 III. DISCUSSION

The SAC alleges the same claims that were alleged in the first amended complaint 

(“FAC”) but in a completely different sequence. Defendants’ current motion to dismiss addresses 

the claims in yet another sequence that matches neither the SAC nor the earlier FAC. Because one 

of the Court’s tasks in evaluating Defendants’ current motion is to determine whether Plaintiffs 

have cured the defects noted in the Court’s prior order dismissing the FAC, the Court finds it most 

convenient to address the claims in the same sequence that they were addressed in the prior order 

and FAC. 

A. Notice-and-Cure Provision

As it did in its prior order, the Court first addresses Defendants’ argument that all claims 

are barred by Plaintiffs’ failure to comply with the notice-and-cure provision contained in their 

Deed of Trust, which was recorded by the Santa Clara County Recorder on January 31, 2007, and 

is attached as Exhibit 2 to the SAC. 

The notice-and-cure provision provides as follows:

Neither Borrower nor Lender may commence, join, or be joined to any judicial 

action (as either an individual litigant or the member of a class) that arises from the 

other party’s actions pursuant to this Security Instrument or that alleges that the 

other party has breached any provision of, or any duty owed by reason of, this 

Security Instrument, until such Borrower or Lender has notified the other party 

(with such notice given in compliance with the requirements of Section 15) of such 

alleged breach and afforded the other party hereto a reasonable period after the 

giving of such notice to take corrective action.

Deed of Trust ¶ 20, SAC Exh. 2, ECF 78-2. 

Plaintiffs have not alleged compliance with this provision, nor have they represented that 

they complied. In the last round of motions, the Ocwen Defendants argued that Plaintiffs’ failure 

to comply constituted a bar to all of the claims alleged in the FAC. The Court rejected that

argument, noting that on its face the provision is limited to actions between the borrower and the 

lender and concluding that Defendants had not shown that the provision should be extended to the 

loan servicer. Order issued 12/11/15 at 10-12, ECF 74. Defendants now reassert the argument 

based upon a written loan modification that was recorded by the Santa Clara County Recorder on 

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April 4, 2012 but was not presented to the Court in the last round of motions. See Loan 

Modification, MTD Exh. 3, ECF 84-3.1 The loan modification provides that “Borrower 

acknowledges that ‘Lender’ is the legal holder and the owner, or agent/servicer for the legal 

holder and owner, of the Note and Security Instrument.” Loan Modification at p.1 (emphasis 

added). The Loan Modification also provides that:

As amended hereby, the provisions of the Note and Security Instrument shall 

continue in full force and effect, and the Borrower acknowledges and reaffirms 

Borrower’s liability to “Lender” thereunder. In the event of any inconsistency 

between this Agreement and the terms of the Note and Security Instrument, this 

Agreement shall govern.

Loan Modification ¶ 9 (emphasis added). Defendants argue that the language expressly defining 

“Lender” to include the servicer suggests that the parties always understood the term “Lender” to 

include servicer, both when they executed the referenced Security Instrument – here, the Deed of 

Trust – and later when they executed the Loan Modification. Defendants also argue that even if 

there were a conflict between the way the term “Lender” is used in the Deed of Trust and the way 

the term is used in the Loan Modification, the above language makes clear that the Loan 

Modification controls.

The Court finds Defendants’ position to be consistent with the applicable principles of 

contract interpretation. The Deed of Trust provides that it “shall be governed by federal law and 

the law of the jurisdiction in which the Property is located.” Deed of Trust ¶ 16. The Loan 

Modification does not specify what contract law applies, but no party suggests that it would be 

anything other than federal law or the law of the forum state, California.2 Federal law provides 

that contracts are to be interpreted according to their plain language “with the understanding that 

 

1

The Court takes judicial notice of the Loan Modification as a matter of public record. See Reyn’s 

Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (“We may take judicial 

notice of court filings and other matters of public record.”).

2

Plaintiffs assert both federal question jurisdiction and diversity jurisdiction in this case. SAC ¶ 

23. A federal court sitting in diversity applies the forum state’s choice-of-law principles to 

determine the substantive law applicable to interpretation of a contract. Welles v. Turner Entm’t 

Co., 503 F.3d 728, 738 (9th Cir. 2007). In California, absent a choice of law by the parties, a 

contract is interpreted under the law of the place of performance or, if it does not indicate the place 

of performance, under the law of the place of creation. Id. Applying this test, California law 

governs interpretation of the Loan Modification.

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the common or normal meaning of language will be given to the words of a contract unless 

circumstances show that in a particular case a special meaning should be attached to it.” Simonoff 

v. Expedia, Inc., 643 F.3d 1202, 1205 (9th Cir. 2011) (internal quotation marks and citations 

omitted). Similarly, under California law, “[i]f contractual language is clear and explicit, it 

governs.” Bank of the West v. Sup. Ct., 2 Cal. 4th 1254, 1264 (1992). The Loan Modification 

could not be clearer that the term “Lender” includes the “servicer” and that the Loan Modification 

controls in the event of any conflict between the Loan Modification and the Deed of Trust.

Plaintiffs argue that the Loan Modification cannot be read in this manner because it is 

expressly limited to extending Plaintiffs’ repayment term. Plaintiffs claim that their interpretation 

is supported by the following language of the Loan Modification:

It is the intention of the parties that all liens and security interests described in the 

Security Instrument are hereby renewed and extended (if the Maturity Date of the 

original Note has been extended) until the indebtedness evidenced by the Note and 

this Agreement has been paid-in-full. “Lender” and Borrower acknowledge and 

agree that such renewal, amendment, modification, rearrangement or extension (if 

applicable) shall in no manner affect or impair the Note or liens and security 

interests security same, the purpose of this Agreement being simply to modify, 

amend rearrange or extend (if applicable) the time and the manner of payment of 

the Note and indebtedness evidenced thereby, and to carry forward all liens and 

security interests securing the Note, which are expressly acknowledged by 

Borrower to be valid and subsisting, and in full force and effect so as to fully secure 

the payment of the Note.

Loan Modification ¶ 7 (emphasis added). 

In the Court’s view, Plaintiffs read this language too broadly. While the cited paragraph 

does state that the purpose of the Loan Modification is to modify the terms of Plaintiffs’ payment 

on the Note, nothing in the paragraph suggests that the term “Lender,” which appears in quotation 

marks throughout the Loan Modification and thus clearly is a term of art, is intended to have a 

different meaning in the Loan Modification than in the Note and Deed of Trust. Plaintiffs have 

not cited, and the Court has not discovered, any cases holding that the same contract term may 

have different meanings in a loan modification agreement and in the original loan documents.

Because the term “lender” as used in the notice-and-cure provision includes the “servicer,” 

the notice-and-cure provision applies to Defendant Ocwen Servicing. Next, the Court must 

determine which claims, if any, are barred by Plaintiffs’ failure to give Ocwen Servicing notice of 

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their claims against it and an opportunity to cure. The Ninth Circuit has not addressed whether a 

notice-and-cure provision such as this one applies only to contract claims or also to statutory and 

common law tort claims such as those alleged by Plaintiffs. District courts have gone both ways 

on the issue. 

This Court concludes that all of Plaintiffs’ claims fall squarely within the ambit of the 

notice-and-cure provision. All of the claims arise from the property inspections and BPOs 

obtained by Ocwen Servicing and charged to Plaintiffs pursuant to the terms of the Deed of Trust. 

See SAC ¶¶ 31, 40; Deed of Trust ¶ 9. Consequently, all of the claims “arise[] from the other 

party’s actions pursuant to this Security Instrument.” Deed of Trust ¶ 20. Under the plain 

language of the Deed of Trust, then, Plaintiffs were required to comply with the notice-and-cure 

provision before filing suit on those claims. This conclusion is consistent with the holding of 

Johnson v. Countrywide Home Loans, Inc., in which the district court applied an identical noticeand-cure provision to bar claims brought under TILA, RESPA, the FDCPA, the FCRA on the 

basis that “all of Plaintiff’s allegations arise from actions taken pursuant to the Deed of Trust.” 

Johnson v. Countrywide Home Loans, Inc., No. 1:10cv1018, 2010 WL 5138392, at *2 (E.D. Va. 

Dec. 10, 2010) (emphasis in original).

Defendants direct the Court’s attention to Cirino v. Bank of America, N.A., No. cv 13-8829 

PSG (MRWx), 2014 WL 9894432 (C.D. Cal. Oct. 1, 2014), which addressed the scope of a choice 

of law provision in a deed of trust rather than a notice-and-cure provision. The court held that to 

the extent the plaintiff’s state law claims could be said to “arise out of” the deed of trust, they were 

subject to the choice of law provision. Id. at *11. As relevant here, the court applied that test to 

the plaintiff’s California UCL claims asserting that he had been charged unreasonable and 

unnecessary property inspection fees and had been misled into believing that the fees were 

authorized under the deed of trust. Id. The court held that those claims did arise out of the deed of 

trust and in fact were “inextricably intertwined” with the terms of the deed of trust. Id. The court 

therefore concluded that the claims were subject to the choice of law provision specifying 

application of Mississippi law, and thus could not be asserted under California’s UCL. Id. at 11-

12. While Cirino is not directly on point, the Court agrees with Defendants that it supports the 

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conclusion that the claims asserted by Plaintiffs arise out of the Deed of Trust or, more precisely, 

Ocwen Servicing’s actions pursuant to the Deed of Trust.

Plaintiffs cite three district court decisions which declined to apply identical or nearly 

identical notice and cure provisions to bar non-contract claims. See Schmidt v. Wells Fargo Home 

Mtg., No. 3:11-CV-059, 2011 WL 1597658 (E.D. Va. Apr. 26, 2011); Beyer v. Countrywide Home 

Loans Servicing LP, C07-1512MJP, 2008 WL 1791506 (W.D. Wash. Apr. 18, 2008); Gerber v. 

First Horizon Home Loans Corp., No. C05-cv-1554P, 2006 WL 581082 (W.D. Wash. Mar. 8, 

2006). For the reasons discussed below, none of these cases persuades the Court that the noticeand-cure provision in Plaintiffs’ Deed of Trust should be so limited here. 

In Schmidt, the court found that the notice-and-cure provision did not apply to the 

plaintiffs’ claims, because the plaintiffs had sued only the loan servicer and the court determined 

that the notice-and-cure provision was limited to claims against the lender. Schmidt, 2011 WL 

1597658, at *3. As discussed above, this Court has determined that, based on the Loan 

Modification, the notice-and-cure provision in Plaintiffs’ Deed of Trust applies to Plaintiffs’ 

claims against the loan servicer. Consequently, Schmidt is factually distinguishable. The Schmidt

court did note that “several courts have acknowledged that identical notice-and-cure provisions do 

not extend to claims based on deceptive business practices,” but it did not analyze the issue 

further. Id. In both Beyer and Gerber, the courts declined to apply notice-and-cure provisions to 

non-contract claims based upon express determinations that the claims at issue did “not arise from 

the mortgage contract,” Beyer, 2008 WL 1791506, at *4, and existed “independent of any contract 

between the parties,” Gerber, 2006 WL 581082, at *3. In the present case, this Court has 

determined that all of Plaintiffs’ claims are grounded in Ocwen Servicing’s conduct taken 

pursuant to the Deed of Trust. The Court thus does not find Beyer or Gerber to be persuasive.

In Kim v. Shellpoint Partners, LLC, a recent case cited by neither party, the court declined 

to apply what appears to have been an identical notice-and-cure provision to the plaintiff’s TILA 

claim on the basis that “TILA duties are statutory, and do not arise under or out of the deed of 

trust.” Kim v. Shellpoint Partners, LLC, No. 15cv611-LAB (BLM), 2016 WL 1241541, at *7 

(S.D. Cal. Mar. 30, 2016). The Kim court recognized that limiting the notice-and-cure provision

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in this manner presented a “close” question. Id. However, the court devoted only two sentences 

to the analysis of that question and did not address the language of the provision compelling notice 

and opportunity to cure with respect to claims that arise from the other party’s actions pursuant to

the deed of trust. Id. In this Court’s view, that language encompasses not only claims arising 

directly under or out of the Deed of Trust, but also claims arising from actions taken pursuant to 

authority granted by the Deed of Trust. 

Accordingly, the Court GRANTS Defendants’ motion to dismiss as to Ocwen Servicing.

Ocwen Servicing is the only Defendant alleged to have communicated or interacted 

directly with Plaintiffs. The remaining Defendants are alleged to be liable as Ocwen Servicing’s 

co-conspirators. See SAC ¶ 8 (“Ocwen Financial, Erbey and Altisource [ ] have been named for 

their active roles in this complex mortgage scheme, including their actions in conspiring with and 

aiding and abetting Ocwen Servicing’s conduct.”). “[A]ider and abettor liability requires actual 

commission of the underlying tort.” Harrison Ventures, LLC v. Alta Mira Treatment Ctr., LLC, 

No. C 10-00188 RS, 2010 WL 1929566, at *5 (N.D. Cal. May 12, 2010). Because Plaintiffs’ 

claims against Ocwen Servicing are subject to dismissal, so too are their claims against the 

remaining Defendants.

Plaintiffs argue that even if the Court finds their claims against Ocwen Servicing to be 

barred by the notice-and-cure provision, their claims against Ocwen Financial, Altisource and 

Erbey are not barred. Plaintiffs quote Ward v. Apple Inc. for the proposition that “[i]t has long 

been the rule that it is not necessary for all joint tortfeasors to be named as defendants in a single 

lawsuit.” Ward v. Apple Inc., 791 F.3d 1041, 1048 (9th Cir. 2015) (internal quotation marks and 

citation omitted). In Ward, the plaintiffs alleged an antitrust action against Apple based upon 

Apple’s exclusivity agreement with an alleged nonparty co-conspirator to provide voice and data 

services for Apple’s iPhone. The district court dismissed the action under Federal Rule of Civil 

Procedure 19 for failure to join the co-conspirator as a required party. The Ninth Circuit reversed, 

holding that because antitrust co-conspirators are jointly and severally liable for all damages 

caused by the conspiracy, “an absent antitrust co-conspirator generally will not be a required 

party.” Id. at 1049. That holding is not relevant to the present case, in which the question is not 

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whether Plaintiffs may pursue a viable claim against one of two joint tortfeasors without naming 

the other, but whether Plaintiffs may pursue conspiracy/aiding and abetting claims when no 

underlying tort has been established. 

The Court therefore GRANTS the motion to dismiss as to Ocwen Financial, Altisource, 

and Erbey. 

B. Defendants’ Other Arguments

Even if the notice-and-cure provision were not dispositive of Plaintiffs’ claims, the Court 

would dismiss the claims on other grounds. While it need not address those grounds in light of its 

determination regarding the effect of the notice-and-cure provision, the Court highlights some of 

the other pleading defects that are fatal to Plaintiffs claims for the sake of completeness. 

1. RICO (Claim 7)

Claim 7 alleges both a substantive RICO claim and a RICO conspiracy claim Defendants. 

a. Substantive RICO Claim

The elements of a substantive civil RICO claim are: “(1) conduct (2) of an enterprise 

(3) through a pattern (4) of racketeering activity (known as predicate acts) (5) causing injury to the 

plaintiff’s business or property.” Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996) (internal 

quotation marks and citation omitted). 

Plaintiffs allege predicate acts of mail and wire fraud. Where a civil RICO claim is based 

upon mail or wire fraud, those fraudulent acts must be alleged with the particularity required by 

Federal Rule of Civil Procedure 9(b). Lancaster Cmty. Hosp. v. Antelope Valley Hosp. Dist., 940 

F.2d 397, 405 (9th Cir. 1991); Schreiber Distrib. Co. v. Serv-Well Furniture Co., Inc., 806 F.2d 

1393, 1400-01 (9th Cir. 1986). “Federal Rule of Civil Procedure 9(b) requires a pleader of fraud 

to detail with particularity the time, place, and manner of each act of fraud, plus the role of each 

defendant in each scheme.” Lancaster Cmty. Hosp., 940 F.2d at 405 (citing Fed. R. Civ. P. 9(b)). 

“Mail and wire fraud can be premised on either a non-disclosure or an affirmative 

misrepresentation.” Eller v. EquiTrust Life Ins. Co., 778 F.3d 1089, 1092 (9th Cir. 2015). “A 

non-disclosure, however, can support a fraud charge only when there exists an independent duty 

that has been breached by the person so charged.” Eller, 778 F.3d at 1092 (internal quotation 

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marks and citation omitted). “Absent an independent duty, such as a fiduciary duty or an explicit 

statutory duty, failure to disclose cannot be the basis of a [RICO] fraudulent scheme.” Id. (internal 

quotation marks and citation omitted). In general, no fiduciary relationship exists between a 

mortgagee and the loan servicer. See Monreal v. GMAC Mortg., LLC, 948 F. Supp. 2d 1069, 1078 

(S.D. Cal. 2013).3

This Court dismissed the RICO claim as alleged in the FAC for failure to allege an 

affirmative misrepresentation or a duty to disclose. Plaintiffs have failed to cure that defect in 

their SAC. Plaintiffs have clarified that their RICO claim is not based upon Ocwen Servicing’s 

“no charge letters” or alleged “double dipping,” but is based only on Ocwen Servicing’s failure to 

disclose (or concealment, as Plaintiffs would have it) that Altisource added an upcharge – that is, 

charged Ocwen Servicing more than its bare cost – which Ocwen Servicing passed through to the 

Plaintiffs. However, Plaintiffs have not identified any legal basis for an assertion that Ocwen 

Servicing had a duty to determine the breakdown of the BPO fee Altisource was charging it and 

disclose to homeowners what portion of that fee was Altisource’s own cost and what portion was 

profit to Altisource. 

The Court is not persuaded that Plaintiffs may rely on the 2013 CFPB Consent Order as a 

basis for RICO liability. Plaintiffs have not cited, and the Court has not discovered, any case in 

which the CFPB Consent Order was held to establish a disclosure duty for purposes of a RICO 

claim. The Ford Motor case relied upon by Plaintiffs is distinguishable, as it involved Ford Motor 

Company’s fraudulent concealment of its failure to divest itself of certain assets in compliance 

 

3

Plaintiffs assert that “concealment” of a material fact, as distinct from nondisclosure, also may 

support a RICO claim. The Supreme Court case cited for this proposition, Neder v. United States, 

addressed the issue of whether a misrepresentation or concealment asserted as a basis of a RICO 

claim must be a misrepresentation or concealment of a material fact. Neder v. United States, 527 

U.S. 1, 21 (1999). The case did not draw the distinction between nondisclosure and concealment 

argued by Plaintiffs. Similarly, the Ninth Circuit case that Plaintiffs assert recognized 

concealment as a separate basis for mail and wire fraud is a criminal case that upheld the trial 

court’s jury instruction distinguishing “between acts of concealment done in furtherance of the 

main criminal objectives of the conspiracy, and acts of concealment done after these central 

objectives have been attained, for the purpose only of covering up after the crime.” United States 

v. Stinson, 647 F.3d 1196, 1215 (9th Cir. 2011). Finally, Plaintiffs rely heavily on a Fourth Circuit 

case, United States v. Colton, 231 F.3d 890, 899 (4th Cir. 2000). This Court cites and relies on 

recent Ninth Circuit authority for the elements of a civil RICO claim.

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with a final judgment in an antitrust action brought by the United States Justice Department. Ford 

Motor Co. v. Summit Motor Prods., Inc., 930 F.2d 277 (3rd Cir. 1991). The case did not address 

the question of whether a consent order (or other judicial order) creates a duty to disclose that may 

form the basis of a RICO wire fraud or mail fraud claim.

Plaintiffs similarly have failed to establish a duty to disclose based upon two cited 

provisions of the Code of Federal Regulations – 12 C.F.R. § 1024.35(b)(5) and 12 C.F.R. § 

1026.41(d)(2)(ii) – neither of which imposes such a duty.

The Court notes that Plaintiffs devote significant argument to cases that the Court 

considered and distinguished in its prior order, most notably Weiner v. Ocwen Financial, No. 

2:14-cv-02597-MCE-DAD, 2015 WL 4599427 (E.D. Cal. July 29, 2015), and Bias v. Wells Fargo 

& Co., 942 F. Supp. 2d 915, 937 (N.D. Cal. 2013). The Court notes that while Plaintiffs now 

allege specifically that they were charged BPO fees in excess of prevailing market rates, as did the 

plaintiffs in Weiner, the Weiner decision is still distinguishable because the deed of trust in that 

case expressly prohibited the defendant from obtaining reimbursement for “marked up fees 

designed to make a profit” whereas the Deed of Trust in the present case contains no such 

restriction.

Plaintiffs’ failure to allege a duty to disclose the breakdown of Altisource’s BPO fee is 

fatal to their RICO claim.

b. RICO Conspiracy Claim

A failure to plead a substantive RICO violation is fatal to a RICO conspiracy claim. 

Howard v. America Online, Inc., 208 F.3d 741, 751 (9th Cir. 2000). Because Plaintiffs fail to 

plead a substantive RICO violation, they likewise fail to plead a RICO conspiracy claim.

2. FDCPA and RFDCPA (Claims 5 and 6)

Claims 5 and 6 allege claims under the FDCPA and RFDCPA, respectively, against Ocwen 

Servicing and Erbey. These claims are based upon Plaintiffs’ allegations that Ocwen Servicing 

and Erbey collected property inspection fees and BPO fees that they were not legally entitled to 

collect. SAC ¶¶ 219, 229. 

To establish liability under either the FDCPA or the RFDCPA, a plaintiff must show that 

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the defendant was a debt collector or engaged in debt collection activity. Hunt v. Wells Fargo 

Bank, N.A., No. 2:13-cv-02435-MCE-KJN, 2014 WL 1028391, at *4-5 (E.D. Cal. Mar. 17, 2014). 

Under the FDCPA, the term “debt collector” means “[1] any person who uses any instrumentality 

of interstate commerce or the mails in any business the principal purpose of which is the collection 

of any debts, or [2] who regularly collects or attempts to collect, directly or indirectly, debts owed 

or due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6). The RFDCPA defines “debt 

collector” as “any person who, in the ordinary course of business, regularly, on behalf of himself 

or herself or others, engages in debt collection.” Cal. Civ. Code § 1788.2(c). Critical to both 

definitions of the term is the notion that a debt collector is one who directly or indirectly engages 

in collection activity. Erbey is not alleged to have taken any actions individually to collect 

property inspection fees or BPO fees. Plaintiffs argue that Erbey personally signed the “no charge 

letter” representing that property inspections would be done at no charge. However, no signature 

appears on that letter – Erbey’s name is merely printed at the bottom. No Charge Letter, SAC 

Exh. 3, ECF 78-3. Moreover, the fact that Erbey’s name appears on the letter containing 

information that no charge would be made for property inspections does not suggest that he 

personally took action to collect a debt from Plaintiffs.

In addition, Plaintiffs have not alleged facts showing that Ocwen Servicing or Erbey 

collected property inspection fees or BPO fees that they were not legally authorized to collect. 

The Deed of Trust expressly authorizes Ocwen Servicing to collect property inspection and BPO 

fees. Plaintiffs argue that despite this express authorization, Ocwen Servicing was not entitled to 

collect property inspection fees because the “no charge letter” stated that property inspections 

would be free; was not entitled to “double dip” by charging for contemporaneous property 

inspections and BPOs; and was not entitled to pass through Altisource’s upcharge without 

obtaining a breakdown of Altisource’s cost and profit and disclosing that to Plaintiffs. With 

respect to the “no charge letter,” the schedule of fees stated expressly that “All fees and amounts 

are subject to change without prior notice. Additional fees and amounts may apply depending on 

your specific request and the status of your loan.” No Charge Letter, SAC Exh. 3, ECF 78-3. 

Plaintiffs have cited no authority that a schedule of fees containing this type of disclaimer 

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precludes Ocwen Servicing from later charging a fee for property inspections. Similarly, Plaintiffs 

offer no authority for the proposition that Ocwen Servicing could not obtain both a property 

inspection and a BPO, other than Plaintiffs’ own opinion that it was unnecessary to obtain both. 

Finally, Plaintiffs offer no authority for the proposition that Ocwen Servicing’s disclosure of the 

amount of the BPO fee that it paid Altisource and recouped from Plaintiffs was inadequate 

because Ocwen Servicing did not also obtain and disclose Altisource’s breakdown of its cost and 

profit.

3. UCL Unlawful, Fraudulent, and Unfair Prongs (Claims 1, 2, and 3)

Claims 1, 2, and 3 allege violations of the UCL’s unlawful, fraudulent, and unfair prongs, 

respectively. See California Business & Professions Code § 17200 (prohibiting an individual or 

entity from engaging in an “unlawful, unfair or fraudulent business act or practice”). “Because the 

statute is written in the disjunctive, it is violated where a defendant’s act or practice violates any of 

the foregoing prongs.” Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1168 (9th Cir. 2012).

a. Unlawful

“By proscribing any unlawful business practice, section 17200 borrows violations of other 

laws and treats them as unlawful practices that the unfair competition law makes independently 

actionable.” Chabner v. United of Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir. 2000) 

(internal quotation marks and citation omitted). Plaintiffs base their UCL claim under the 

unlawful prong on asserted violations of the FDCPA, the RFDCPA, the CFPB Consent Order, and 

the Dodd-Frank Wall Street Reform and Consumer Protection Act. SAC ¶ 167. For the reasons 

discussed herein, Plaintiffs have failed to alleged violations of the FDCPA, RFDCPA, or the 

CFPB Consent Order. The Dodd-Frank Act prohibits “a covered person or service provider from 

committing or engaging in an unfair, deceptive, or abusive act or practice under Federal law in 

connection with any transaction with a consumer for a consumer financial product or service, or 

the offering of a consumer financial product or service.” 12 U.S.C. § 5531(a). Plaintiffs have not 

alleged facts showing that the fees charged in this case were unfair, deceptive, or abusive.

b. Fraud

“A business practice is fraudulent under the UCL if members of the public are likely to be 

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deceived.” Davis, 691 F.3d at 1169. Allegations of fraud under § 17200 must satisfy the 

heightened pleading standard of Federal Rule of Civil Procedure 9(b). Kearns v. Ford Motor Co., 

567 F.3d 1120, 1125 (9th Cir. 2009). Rule 9(b) requires that “a party must state with particularity 

the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). “‘Averments of fraud must be 

accompanied by the who, what, when, where, and how of the misconduct charged.’” Kearns, 567 

F.3d at 1124 (quoting Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003)). As 

discussed at length above in the context of the RICO claim, Plaintiffs assert fraudulent 

concealment in this case but they do not allege facts showing that Defendants had a duty to 

disclose or that the fees charged to Plaintiffs were unlawful or unfair. 

c. Unfair

Plaintiffs allege that Defendants’ conduct in charging inflated and duplicative fees was 

unfair. SAC ¶ 189. However, Plaintiffs have not alleged facts or presented legal authority 

showing that the “no charge letter,” pass-through of Altisource’s alleged upcharge, and practice of 

obtaining both property inspections and BPOs within a short period of time were unfair.

4. Fraud (Claim 4)

Claim 4 alleges fraud based upon the “no charge letter,” pass-through of Altisource’s 

alleged upcharge, and practice of “double-dipping,” that is, obtaining both property inspections 

and BPOs within a short period of time. As discussed in the context of the RICO claim and UCL 

fraud prong claim, Plaintiffs have not alleged facts showing that any of the alleged conduct 

constituted actionable fraud.

C. Leave to Amend

In deciding whether to grant leave to amend, the Court must consider the factors set forth 

by the Supreme Court in Foman v. Davis, 371 U.S. 178 (1962), and discussed at length by the 

Ninth Circuit in Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2009). A district 

court ordinarily must grant leave to amend unless one or more of the Foman factors is present: 

(1) undue delay, (2) bad faith or dilatory motive, (3) repeated failure to cure deficiencies by 

amendment, (4) undue prejudice to the opposing party, and (5) futility of amendment. Eminence 

Capital, 316 F.3d at 1052. “[I]t is the consideration of prejudice to the opposing party that carries 

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the greatest weight.” Id. However a strong showing with respect to one of the other factors may 

warrant denial of leave to amend. Id.

There is no suggestion in the record of undue delay, bad faith, or dilatory motive on the 

part of Plaintiffs. However, Plaintiffs have twice amended their pleading, once with the benefit of 

the Court’s prior dismissal order, and they still have not alleged a viable claim. The defects in the 

pleading are defects in Plaintiffs’ theories, not a dearth of facts to support what might otherwise be 

viable theories. Based upon the Court’s conclusions that Plaintiffs’ theories are not viable, any 

further amendment likely would be futile. 

The Court notes that after submission of the present motion, Plaintiffs sought leave to 

supplement their opposition with a letter they recently had received from Ocwen Servicing, stating 

that an overcharge in the amount of $3.50 had been discovered and would be reimbursed to 

Plaintiffs by waiver of other fees due. See Pls.’ Admin. Motion, ECF 95. The Court denied 

Plaintiffs’ request to supplement their opposition, but indicated that it would consider the letter in 

determining whether to grant further leave to amend. Order issued 7/7/2016, ECF 101. The letter 

does not provide a basis for granting leave to amend, as the fact that Ocwen Servicing has 

admitted to an overcharge, which it has agreed to reimburse, does not support any of Plaintiffs’ 

claims.

Accordingly, the Court will not grant Plaintiffs a further opportunity to amend.

IV. ORDER

(1) Defendants’ motion to dismiss is GRANTED without leave to amend; and

(2) The action is DISMISSED with prejudice.

Dated: August 24, 2016

 ______________________________________

BETH LABSON FREEMAN

United States District Judge

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