Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_19-cv-00376/USCOURTS-caed-2_19-cv-00376-2/pdf.json

Parties Involved:
Frank Corral
Plaintiff
Mr. Cooper
Defendant
Nationstar Mortgage, LLC
Defendant

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

FRANK CORRAL, individually, and on 

behalf of other members of the general 

public similarly situated,

Plaintiff,

v.

NATIONSTAR MORTGAGE, LLC dba 

MR. COOPER, and DOES 1-10, 

inclusive,

Defendant.

No. 2:19-cv-00376-MCE-CKD

MEMORANDUM AND ORDER

Through the present lawsuit, Plaintiff Frank Corral (“Plaintiff”) seeks relief from 

his mortgage service provider, Defendant Nationstar Mortgage, LLC dba Mr. Cooper 

(“Defendant”) on grounds that Defendant’s loan handling violated various laws, including 

the federal Electronics Funds Transfer Act, 15 U.S.C. §§ 1693, et seq. (“EFTA”) as well 

as three California statutory provisions, including its False Advertising Law, Cal. 

Business & Professions Code §§ 17500, et seq. (“FAL”), Unfair Competition Law, Cal. 

Business & Professions Code §§ 17200, et seq (“UCL”) and Consumer Legal Remedies 

Act, Cal. Civ. Code §§ 1770, et seq. (“CLRA”). Plaintiff alleges that Defendant made 

charges against his bank account in amounts which exceeded the written authorization 

for electronic fund transfers he provided. According to Plaintiff’s First Amended 

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Complaint (“FAC”), which also purports to bring class claims on behalf of similarly 

situated borrowers, Defendant misled consumers into purchasing tax-payment services 

by misrepresenting that such ancillary services, offered to supplement traditional 

mortgage servicing payments, would allow consumers to take no further action in paying 

property taxes directly, with Defendant instead making the necessary tax payments.

Plaintiff goes on to aver that when Defendant failed to pay enough taxes, it withdrew 

additional funds that he did not authorize.

Presently before the Court is Defendant’s Motion to Dismiss Plaintiff’s FAC for 

failure to state a viable claim under Federal Rule of Civil Procedure 12(b)(6), which is 

fully briefed. (ECF Nos. 11, 14 and 15). For the reasons set forth below, Defendant’s 

Motion is GRANTED and Plaintiff’s EFTA, UCL, and FAL claims are DISMISSED with 

leave to amend. Plaintiff’s CLRA claim is DISMISSED without leave to amend.1

BACKGROUND2

According to the FAC, Plaintiff bought a home and financed it by obtaining a 

mortgage from Defendant Nationstar. FAC at ¶ 19. In connection with the mortgage, 

Nationstar offered to provide ancillary services, which included the payment of not only 

the monthly mortgage, but also “a portion of the property taxes owed.” Id. at ¶ 31. 

Defendant represented that this would be effectuated through the automatic withdrawal 

of one monthly payment, which included both the mortgage payment and property taxes. 

Id. at ¶ 20. Plaintiff consequently authorized an automatic recurring transfer in the 

amount of $1,772.70, which was supposed to be the monthly mortgage payment and 

$260.00 for property taxes. Id. at ¶ 21-22.

 

1 The Court recognizes that Defendant’s Motion also seeks to dismiss or strike Plaintiff’s UCL and 

FAL claims to the extent they are pled on a class-wide basis on behalf of non-California residents. 

Because the Court finds that Plaintiff’s claims more fundamentally fail on an individual basis, it need not 

determine whether he can assert those claims for others and declines to do so at this juncture.

2 The following recitation of facts is taken, sometimes verbatim, from Plaintiff’s First Amended 

Complaint. ECF No. 11.

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The first amount charged to Plaintiff’s checking account under this arrangement

was $1,778.70 in or around May of 2017. Id. at ¶ 23. The next month, Defendant 

debited Plaintiff’s account in the amount of $1,500, and that payment amount continued 

to be made for about a year. Id. at ¶ 24. In June of 2018, however, Defendant charged 

$2,100.00 against Plaintiff’s account. Id. at ¶ 25.

After the above-described June 2018 payment, Plaintiff contacted Defendant to 

inquire about the larger debit figure. Id. at ¶ 26. Defendant stated that the additional 

funds were withdrawn to cover fees and penalties resulting from the fact that property 

taxes remained owing. Id. Plaintiff argues that he never authorized Defendant in 

charging amounts exceeding $1,772.70. Id. at ¶ 27.

Plaintiff asserts that this activity violated EFTA and its surrounding provisions, 

including, but not limited to, 12 C.F.R. §§ 1005.7, 1005.8, and 1005.9. Compl. ¶ 29. 

Plaintiff brings these EFTA claims, as well as his UCL, FAL, and CLRA claims, both 

individually and on behalf of similarly situated class members. 

STANDARD

On a motion to dismiss for failure to state a claim under Federal Rule of Civil 

Procedure 12(b)(6), all allegations of material fact must be accepted 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). Rule 8(a)(2) requires only “a short and plain 

statement of the claim showing that the pleader is entitled to relief” in order to “give the 

defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Bell 

Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 

47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require 

detailed factual allegations. However, “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.” Id. (internal citations and 

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quotations omitted). A court is not required to accept as true a “legal conclusion 

couched as a factual allegation.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) 

(quoting Twombly, 550 U.S. at 555). “Factual allegations must be enough to raise a right 

to relief above the speculative level.” Twombly, 550 U.S. at 555 (citing 5 Charles Alan 

Wright & Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) (stating 

that the pleading must contain something more than “a statement of facts that merely 

creates a suspicion [of] a legally cognizable right of action.”)). 

Furthermore, “Rule 8(a)(2) . . . requires a showing, rather than a blanket 

assertion, of entitlement to relief.” Twombly, 550 U.S. at 556 n.3 (internal citations and 

quotations omitted). Thus, “[w]ithout some factual allegation in the complaint, it is hard 

to see how a claimant could satisfy the requirements of providing not only ‘fair notice’ of 

the nature of the claim, but also ‘grounds’ on which the claim rests.” Id. (citing 5 Charles 

Alan Wright & Arthur R. Miller, supra, at § 1202). A pleading must contain “only enough 

facts to state a claim to relief that is plausible on its face.” Id. at 570. If the “plaintiffs . . . 

have not nudged their claims across the line from conceivable to plausible, their 

complaint must be dismissed.” Id. However, “[a] well-pleaded complaint may proceed 

even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a 

recovery is very remote and unlikely.’” Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 

232, 236 (1974)).

A court granting a motion to dismiss a complaint must then decide whether to 

grant leave to amend. Leave to amend should be “freely given” where there is no 

“undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice 

to the opposing party by virtue of allowance of the amendment, [or] futility of the 

amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. 

Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to 

be considered when deciding whether to grant leave to amend). Not all of these factors 

merit equal weight. Rather, “the consideration of prejudice to the opposing party . . . 

carries the greatest weight.” Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 

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185 (9th Cir. 1987)). Dismissal without leave to amend is proper only if it is clear that 

“the complaint could not be saved by any amendment.” Intri-Plex Techs. v. Crest Group, 

Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 1006, 

1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 

1989) (“Leave need not be granted where the amendment of the complaint . . . 

constitutes an exercise in futility . . . .”)).

ANALYSIS

A. Plaintiff’s EFTA Claim Fails To State A Viable Cause Of Action.

The crux of Plaintiff’s EFTA claim is that Defendant withdrew amounts from his 

bank account that he did not authorize. The EFTA allows for “preauthorized electronic 

fund transfer[s] from a consumer’s account,” so long as there is authorization by the 

consumer in writing. 15 U.S.C. § 1693e(a). A preauthorized transfer “may vary in 

amount,” and the “payee shall, prior to each transfer, provide reasonable advance notice 

to the consumer... of the amount to be transferred and the scheduled date of transfer.”

15 U.S.C. § 1693e(b). Once notified, the consumer can stop a changed payment by 

notifying the payee orally or in writing up to three business days prior to the scheduled 

date of the transfer. 15 U.S.C. § 1693(a).

Defendant takes issue with Plaintiff’s assertion that it violated the EFTA by 

making a $2,100.00 transfer in June of 2018 that exceeded the $1,772.70 amount 

Plaintiff claims he authorized. Defendant points to two documents3 executed in 

connection with Plaintiff’s mortgage in support of that argument. In the Court’s view,

those documents are indeed dispositive in showing that since the parties contemplated 

preauthorized transfers that could vary in amount, no EFTA violation has been identified.

///

 

3 Defendant requests judicial notice, pursuant to Federal Rule of Evidence 201, as to both those 

documents, attached as Exhibits A and B to the Decl. of A. J. Loll. That request was unopposed and is 

accordingly GRANTED.

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First, Plaintiff executed a Deed of Trust on August 24, 2016 that required Plaintiff 

to pay “Funds for Escrow Items.” See Deed of Trust, Ex. A. to the Decl. of A. J. Loll, 

ECF No. 12-2. The Deed of Trust explicitly states that the amounts of the Funds for 

Escrow Items, which include tax payments, will be determined by the lender “on the 

basis of current data and reasonable estimates of expenditures of future Escrow Items.” 

Id. at 5. This language on its face appears to recognize that the lender’s reasonable 

estimates may necessarily vary. That assessment is underscored by provisions in the 

Deed of Trust directing how either surpluses or deficiencies in the escrow accounts are 

to be handled. With respect to shortages, the Deed of Trust spells out that the borrower

must pay “the amount necessary to make up any deficiency” over not more than 12 

monthly payments if at any time the funds in escrow are insufficient to cover payments 

for taxes and other items. Id. According to Defendant, this shows that the parties 

contemplated payments in variable amounts, and the Court agrees.

The second mortgage document relied on by Defendant makes this conclusion 

even more clear. In addition to the Deed of Trust, Plaintiff also executed an AutoPay 

Acknowledgment and Agreement (“AutoPay Agreement”), which specifically authorizes

Defendant “to initiate automatic recurring debit entries once per month” for monthly 

payment and escrow fees in amounts that “may vary with changes to [the borrower’s] 

escrow payments.” Loll Decl., Ex. B. Consequently, not only does the Deed of Trust 

require Plaintiff to make up any deficiency of the funds held in escrow, the AutoPay 

Agreement further recognizes that Plaintiff’s total monthly payments may change 

accordingly. A borrower who preauthorizes periodic payments, where his agreement 

provides that those payments may vary, cannot contend that the increase was 

unauthorized. See Herrera v. Landers, 2012 WL 5936467 at *4 (N.D. Ill. Nov. 27, 2012).

Plaintiff contends that conclusion is unjustified because he was not given the 

requisite advance notice of the increased charge. See Pl.’s Opp’n to Mot. Dismiss (“Pl.’s 

Opp’n”), ECF No. 14 at 6:17-18. The FAC fails to make any such claim, however, and 

alleges only that Plaintiff did not authorize the debit of any amount exceeding $1,772.70. 

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In addition, Defendant, for its part, claims that advance notice was in fact sent on 

May 24, 2018. See Def.’s Mot. to Dismiss (“Def.’s Mot.”) at 6 n. 3. Because Plaintiff’s 

FAC as currently constituted fails to state a viable EFTA claim, Plaintiff’s Third Cause of 

Action is accordingly DISMISSED with leave to amend. 

B. Plaintiff’s Fraud-Based Claims Also Fail.

Defendant also alleges that Plaintiff’s claims under the FAL, the UCL, and the 

CLRA, respectively, fail to state any viable claim with the requisite particularity under any

of those statutory provisions. The FAL prohibits public use of untrue or misleading 

statements or advertising in order to deceive the public. Cal. Bus. & Prof. Code § 17500. 

Under the UCL, “unfair competition shall mean and include any unlawful, unfair or 

fraudulent business act or practice and unfair, deceptive, untrue, or misleading 

advertising...” Cal. Bus. & Prof. Code § 17200. Finally, the CLRA’s stated objective is 

“to protect consumers against unfair and deceptive business practices and to provide 

efficient and economical procedures to secure such protection,” with the statute to be 

“liberally construed and applied to promote [those’ underlying purposes.” Cal. Civ. Code 

§ 1760. Consequently, all three causes of action sound in fraud, and, according to 

Defendant, should be dismissed for failure to comply with Federal Rule of Civil 

Procedure 9(b). 

“In alleging fraud or mistake, a party must state with particularity the 

circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). See Dyson, Inc. v. 

Vacuum, LLC, 2010 WL 11595882, at *4 (C.D. Cal. July 19, 2010) (dismissing UCL and 

FAL causes of action based on misrepresentations and false advertising for not following 

the pleading requirements of 9(b)). The three purposes of Rule 9(b) are to put the 

defendant on notice of the alleged wrongdoing, to protect individuals whose reputations 

would be harmed as a result of fraud charges, and to avoid substantial social and 

economic costs to the court and parties. Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 

(9th Cir. 2009) (citing In re Stac Elecs. Ec. Litig., 89 F.3d 1399, 1405 (9th Cir. 1996)).

///

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Plaintiff argues that the Complaint fulfills these heightened pleading requirements 

because the claims are specific enough to put the defendants on notice of their alleged 

wrongdoing. Pl.’s Opp’n at 9:16-18. Fraud-based allegations must, however, “be 

‘specific enough to give defendants notice of the particular misconduct... so that they 

can defend against the charge and not just deny that they have done anything wrong.’”

Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001) (quoting Neubrunner v. 

Milken, 6 F.3d 666, 671 (9th Cir. 2001). The Plaintiff must plead the “who, what, when, 

where, why, and how, of the conduct charged.” Kearns, 567 F.3d. at 1126.

Plaintiff’s argument is not well taken. Plaintiff has failed to allege facts sufficient 

to comply with the heightened pleading requirements pursuant to Rule 9(b) because he

has not identified a specific person who made the alleged misrepresentations, explained

if the misrepresentations were oral or written, nor specified in what method the purported 

misrepresentations were conveyed, how many misrepresentations were made, or when

they occurred. See Kearns, 567 F.3d at 1125 (dismissing CLRA and UCL claims 

because the plaintiff did not allege the specific circumstances surrounding the alleged 

misrepresentations, including what the advertisements or other material specifically 

stated, when he was exposed to the advertisements or which he found to be material, 

and which advertisement he specifically relied upon in buying the product). 

Consequently, Plaintiff has failed to plead his fraud-based claims with particularity, as 

required by Rule 9(b),

4 and Plaintiff’s fraud-based claims must be dismissed.

C. Plaintiff Cannot State A Viable CLRA Claim In Any Event.

Under the CLRA, “goods” are defined as “tangible chattels bought or leased for 

use primarily for personal, family, or household purposes...” Cal. Civ. Code § 1761(a).

“Services” is defined as “work, labor, and services for other than a commercial or 

business use, including services furnished in with the sale or repair of goods.” Cal. Civ. 

Code § 1761(b). The parties agree that a mortgage is not a “good” under the CLRA. 

 

4 Since these claims are dismissed due to particularity, the Court declines to address Defendant’s 

additional argument that said claims are also precluded because Plaintiff has an adequate remedy at law. 

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Def.’s Reply, ECF No. 15, at 7. See Reynoso v. Paul Fin., LLC, 2009 WL 3833298, *9 

(N.D. Cal. Nov. 16, 2009) (holding that the definition of “goods” includes only tangible 

chattels).

Plaintiff asserts that ancillary services in conjunction with a mortgage loan

nonetheless constitute “services” under the CLRA’s definition, and accordingly alleges

the escrow account at issue here is covered by the statute. The cases hold otherwise. 

Mortgage servicing “does not bring a [mortgage] loan within the scope of the CLRA and 

that statute’s definition of services.” Becker v. Wells Fargo Bank, N.A., Inc., 2011 WL 

1103439, at *13 (E.D. Cal. Mar. 22, 2011) (citing to the California Supreme Court’s 

decision in Fairbanks v. Superior Court, 46 Cal. 4th 56, 92 (2009) which held that CLRA 

claims “challenging mortgage loan servicing” because mortgage “loans are intangible 

goods and the ancillary services provided in the sale of intangible goods do not bring 

these goods within the coverage of the CLRA.”). 

Plaintiff tries to distinguish that argument by taking the position that ancillary 

services like escrow accounts for property taxes and insurance are actually independent 

from the underlying mortgage itself, unlike the loan modification considered in other 

cases. This contention is also unpersuasive because Plaintiff has failed to offer any 

legal support or rationale for this assertion. Moreover, as Defendant points out, because 

the CLRA does not apply to mortgage servicing generally, the specific nature of 

mortgage servicing and how it relates to the loan makes no difference. See Becker

2011 WL 1103439, at *13 (dismissing the plaintiff’s claims because mortgage loan 

modification is not a “service” under the CLRA); see also Jamison v. Bank of Am., N.A., 

194 F. Supp. 3d 1022, 1032 (E.D. Cal. 2016) (stating that the majority of district courts 

have routinely held that mortgage servicing does not fall under the CLRA.) Therefore, 

Plaintiff’s CLRA claim is DISMISSED without leave to amend because ancillary services 

to a mortgage loan like the escrow accounts at issue herein do not fall under the CLRA’s 

purview.

////

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CONCLUSION

For the reasons set forth above, Defendant’s Motion to Dismiss (ECF No. 12) is 

GRANTED. Leave to amend will be permitted as to Plaintiff’s Third Cause of Action, for 

violation of the EFTA. Since the Court concludes that Plaintiff’s fraud-based claims fail

to comply with the particularity requirements of Fed. R. Civ. P. 9(b), leave to amend will 

also be permitted as Plaintiff’s First and Second Causes of Action, which allege 

violations of the FAL and the UCL. Because the mortgage servicing at issue in this 

matter cannot qualify as a “good” or “service” entitled to protection under the CLRA, no 

further amendment will be permitted as to the Fourth Cause of Action because the Court 

does not believe that the deficiencies of that claim can be rectified. 

Not later than twenty (20) days following the date this Order is electronically filed, 

Plaintiff may (but is not required to) file an amended complaint for the causes of action 

described above. If no amended complaint is timely filed, the causes of action dismissed 

by virtue of this Order will be deemed dismissed without leave to amend upon no further 

notice to the parties.

IT IS SO ORDERED.

Dated: February 18, 2020

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