Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-02464/USCOURTS-caed-2_09-cv-02464-0/pdf.json

Parties Involved:
Lisa Gates
Plaintiff
Wachovia Mortgage, FSB
Defendant

Document Text:

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1 Because oral argument will not be of material

assistance, the court orders this matter submitted on the briefs.

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

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

LISA GATES,

NO. 2:09-cv-02464-FCD/EFB

Plaintiff,

v. MEMORANDUM AND ORDER

WACHOVIA MORTGAGE, FSB,

Defendant.

____________________________/

----oo0oo----

This matter is before the court on the motion of defendant

Wachovia Mortgage, FSB (“Wachovia”) to dismiss plaintiff Lisa

Gates’s (“plaintiff”) First Amended Complaint (“FAC”) pursuant to

Federal Rule of Civil Procedure 12(b)(6). Plaintiff opposes the

motion. For the reasons set forth below,1 defendant’s motion to

dismiss is GRANTED in part and DENIED in part.

 /////

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2

BACKGROUND

Plaintiff brought this action against Wachovia for conduct

arising out of a mortgage loan (the “Loan”). On February 25,

2006, plaintiff obtained the Loan from World Savings Bank, FSB,

who subsequently changed its name to Wachovia Mortgage, FSB, on

December 31, 2007. (Req. for Judicial Notice (“RFJN”) ¶ 1.) 

Plaintiff secured the loan by a deed of trust on plaintiff’s

current residence, 6232 Channel Islands Lane, Roseville,

California. (FAC ¶¶ 9, 11.) 

Plaintiff alleges that Wachovia failed to provide her with

the proper copies of the Notice of Right to Cancel at the time of

signing as required by the Federal Truth in Lending Act (“TILA”),

giving plaintiff up to three years to rescind the loan. (Id. ¶¶

26-30.) On January 15, 2009, plaintiff sent a letter to

Wachovia, which she alleges was a Qualified Written Request

(“QWR”) under the Real Estate Settlement Procedures Act

(“RESPA”), 12 U.S.C. § 2601 et seq., and a valid rescission under

TILA. (FAC ¶ 24.) Plaintiff’s letter offered to settle the

matter with Wachovia by modifying the existing terms, but stated

that the failure to reach an agreement would result in

plaintiff’s rescission of the Loan. (FAC Pl.’s Ex. B.) 

Plaintiff contends that Wachovia further violated TILA by failing

to respond to this letter. (FAC ¶ 42.)

Plaintiff originally filed this action against Wells Fargo

Bank on April 17, 2009, but amended her complaint on July 24,

2009 to remove Wells Fargo Bank and name her actual lender,

Wachovia. In her FAC, plaintiff asserts claims for 1) violation

of TILA, 15 U.S.C. §§ 1601 et seq., 2) violation of RESPA, 12

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3

U.S.C. §§ 2601 et seq., and 3) violation of the Rosenthal Fair

Debt Collection Practices Act (“RFDCPA”), Cal. Civil Code §§ 1788

et seq. Wachovia moves to dismiss plaintiff’s FAC for failure to

state cognizable claims. 

STANDARDS

Under Federal Rule of Civil Procedure 8(a), a pleading must

contain “a short and plain statement of the claim showing that

the pleader is entitled to relief.” See Ashcroft v. Iqbal, 129

S. Ct. 1937, 1949 (2009). Under notice pleading in federal

court, the complaint must “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) (internal quotations

omitted). “This simplified notice pleading standard relies on

liberal discovery rules and summary judgment motions to define

disputed facts and issues and to dispose of unmeritorious

claims.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002).

On a motion to dismiss, the factual allegations of the

complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319,

322 (1972). The court is bound to give plaintiff the benefit of

every reasonable inference to be drawn from the “well-pleaded”

allegations of the complaint. Retail Clerks Int’l Ass’n v.

Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not

allege “‘specific facts’ beyond those necessary to state his

claim and the grounds showing entitlement to relief.” Twombly,

550 U.S. at 570. “A claim has facial plausibility when the

plaintiff pleads factual content that allows the court to draw

the reasonable inference that the defendant is liable for the

misconduct alleged.” Iqbal, 129 S. Ct. at 1949. 

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4

Nevertheless, the court “need not assume the truth of legal

conclusions cast in the form of factual allegations.” United

States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th

Cir. 1986). While Rule 8(a) does not require detailed factual

allegations, “it demands more than an unadorned, the defendantunlawfully-harmed-me accusation.” Iqbal, 129 S. Ct. at 1949. A

pleading is insufficient if it offers mere “labels and

conclusions” or “a formulaic recitation of the elements of a

cause of action.” Id. at 1950 (“Threadbare recitals of the

elements of a cause of action, supported by mere conclusory

statements, do not suffice.”); Twombly, 550 U.S. at 555. 

Moreover, it is inappropriate to assume that the plaintiff “can

prove facts which it has not alleged or that the defendants have

violated the . . . laws in ways that have not been alleged.” 

Associated Gen. Contractors of Cal., Inc. v. Cal. State Council

of Carpenters, 459 U.S. 519, 526 (1983). 

Ultimately, the court may not dismiss a complaint in which

the plaintiff has alleged “enough facts to state a claim to

relief that is plausible on its face.” Iqbal, 129 S. Ct. at 1949

(citing Bell Atl. Corp., 550 U.S. at 570). Only where a

plaintiff has failed to “nudge [his or her] claims across the

line from conceivable to plausible,” is the complaint properly

dismissed. Id. at 1952. While the plausibility requirement is

not akin to a probability requirement, it demands more than “a

sheer possibility that a defendant has acted unlawfully.” Id. at

1949. This plausibility inquiry is “a context-specific task that

requires the reviewing court to draw on its judicial experience

and common sense.” Id. at 1950.

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5

In ruling upon a motion to dismiss, the court may consider

only the complaint, any exhibits thereto, and matters which may

be judicially noticed pursuant to Federal Rule of Evidence 201. 

See Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir.

1988); Isuzu Motors Ltd. v. Consumers Union of U.S., Inc., 12 F.

Supp. 2d 1035, 1042 (C.D. Cal. 1998). 

ANALYSIS

A. Wachovia’s Exhibits

In ruling upon a motion to dismiss, the court may consider

matters which may be judicially noticed pursuant to Federal Rule

of Evidence 201. See Mir, 844 F.2d at 649; Isuzu Motors Ltd., 12

F. Supp. 2d at 1042. Rule 201 permits a court to take judicial

notice of an adjudicative fact “not subject to reasonable

dispute” because the fact is either “(1) generally known within

the territorial jurisdiction of the trial court or (2) capable of

accurate and ready determination by resort to sources whose

accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). 

The court can take judicial notice of matters of public record,

such as pleadings in another action and records and reports of

administrative bodies. See Emrich v. Touche Ross & Co., 846 F.2d

1190, 1198 (9th Cir. 1988). 

“Even if a document is not attached to a complaint, it may

be incorporated by reference into a complaint if the plaintiff

refers extensively to the document or the document forms the

basis of the plaintiff’s claim.” United States v. Ritchie, 342

F.3d 903, 908 (9th Cir. 2003). “The defendant may offer such a

document, and the district court may treat such a document as

part of the complaint, and thus may assume that its contents are

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2 Defendant also requested judicial notice of various

documents that prove its name was changed from World Savings

Bank, FSB, on or about December 31, 2007. (RFJN ¶ 2.) The court

also considers these documents for the purpose of this motion. 

6

true for purposes of a motion to dismiss under Rule 12(b)(6).” 

Id. The policy concern underlying the rule is to prevent

plaintiffs “from surviving a Rule 12(b)(6) motion by deliberately

omitting references to documents upon which their claims are

based.” Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998). 

Plaintiff’s complaint alleges several causes of action that

are premised on Wachovia’s failure to provide the disclosures and

number of copies of the Notice of Right to Cancel. (FAC ¶¶ 26-

30.) Defendant requests judicial notice of the Notice of Right

to Cancel signed by Plaintiff and referenced at paragraphs 26-30

and 48 of the FAC. Plaintiff has not opposed the request. 

Accordingly, because the loan documents form the basis of the

relevant causes of action, the court considers them for the

purpose of defendant’s motion to dismiss.2

B. TILA

Plaintiff’s first claim for relief alleges that defendant

Wachovia violated TILA (1) by failing to provide the required

disclosures to plaintiff at the time of closing, and (2) by

failing to respond to plaintiff’s letter of “rescission.” (FAC

¶¶ 26-30, 41-42.) Wachovia moves to dismiss the claim, arguing,

inter alia, that (1) plaintiff rescission claim is time barred,

and (2) plaintiff’s letter was not a valid rescission. (Def.’s

Mot. to Dismiss (“MTD”), filed Oct. 14, 2009, 1:28-2:2; Def.’s

Reply to Opp’n to MTD (“Def.’s Reply”), filed Jan. 29, 2010, 4:5-

28, 5:1-3.)

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TILA “has the broad purpose of promoting ‘the informed use

of credit’ by assuring ‘meaningful disclosure of credit terms' to

consumers.” Ford Motor Credit Co. v. Milhollin, 444 U.S. 555,

560 (1980) (quoting 15 U.S.C. § 1601). The statute “requires

creditors to provide borrowers with clear and accurate

disclosures of terms dealing with things like finance charges,

annual percentage rates of interest, and the borrower's rights.”

Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998). A loan

disclosure violation under TILA triggers two potential remedies

for a borrower: rescission, 15 U.S.C. § 1635, and damages, 15

U.S.C. § 1640. Plaintiff seeks to rescind the Loan and obtain

damages pursuant to § 1640(a)(2).

1. Rescission Under TILA

In the present action, plaintiff alleges that Wachovia did

not provide her with the required notice of her right to rescind

in violation of 15 U.S.C. § 1635(a). (FAC ¶ 39.) Wachovia moves

to dismiss, arguing that plaintiff’s rescission claim is barred

by TILA’s three-year statute of limitations. (MTD 2:4.) In

response, plaintiff asserts that defendant’s failure to respond

to her notice of rescission extended the three-year statute of

limitations. (Pl.’s Opp’n to MTD, filed Jan. 11, 2010, 4:11.)

In a consumer credit transaction where the creditor acquires

a security interest in the borrower's principal dwelling, TILA

provides the borrower with “a three-day cooling-off period within

which [he or she] may, for any reason or for no reason, rescind”

the transaction. McKenna v. First Horizon Home Loan Corp., 475

F.3d 418, 421 (1st Cir. 2007) (citing 15 U.S.C. § 1635). A

creditor must “clearly and conspicuously disclose” this right to

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the borrower along with “appropriate forms for the [borrower] to

exercise his right to rescind.” 15 U.S.C. 1635(a).

If a creditor fails to provide the borrower with the

required notice of the right to rescind, the borrower has three

years from the date of consummation to rescind the transaction. 

Id. § 1635(f); 12 C.F.R. § 226.23(a)(3) (“If the required notice

or material disclosures are not delivered, the right to rescind

shall expire 3 years after consummation.”). The borrower's right

to rescind, moreover, applies equally against the original

creditor and subsequent assignees. 15 U.S.C. § 1641(c); see

Boles v. Merscorp, Inc., No. 08-1989, 2008 WL 5225866, at *3

(C.D. Cal. Dec. 12, 2008) (“Where the loan has been assigned, the

borrower still maintains the right to ‘rescind against an

assignee to the full extent it would be able to rescind against

the original creditor.’” (quoting Rowland v. Novus Fin. Corp.,

949 F. Supp. 1447, 1458 (D. Haw. 1996))).

However, if the borrower files his or her suit over three

years from the date of a loan's consummation, a court is

powerless to grant rescission. Miguel, 309 F.3d at 1164

(“[S]ection 1635(f) represents an ‘absolute limitation on

rescission actions’ which bars any claims filed more than three

years after the consummation of the transaction.” (quoting King

v. California, 784 F.2d 910, 913 (9th Cir. 1986)); accord Beach,

523 U.S. at 412 (“[Section] 1635(f) completely extinguishes the

right of rescission at the end of the 3-year period.”). If a

borrower exercises her right to rescind within the three-year

limitation period, such action only entitles the borrower to

damages, not rescission. Cazares v. Household Fin. Corp., No. CV

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04-6887 DSF, 2005 U.S. Dist. LEXIS 39222, at *24-25 (C.D. Cal.

2005) (citing 15 U.S.C. § 1640(a); Belini v. Wash. Mut. Bank, FA,

412 F.3d 17 (1st Cir. 2005)). But see Santos v. Countrywide Home

Loans, No. 1:09-CV-00912-AWI-SM, 2009 WL 2500710, at *3-5 (E.D.

Cal. August 14, 2009) (finding that, if creditor does not

properly respond to notice of rescission provided by borrower

within limitations period, borrower could file suit after threeyear period of repose).

Here, plaintiff’s allegation that Wachovia did not provide

her with the required notice gave her three years from the

consummation of her loan to seek rescission. Plaintiff

consummated the loan with Wachovia on February 25, 2006, and

filed the present action on April 17, 2009. (FAC ¶ 12; MTD 2:4-

6.) Because plaintiff filed her Complaint over three years from

the date of consummation, the court is without jurisdiction to

consider her claim for rescission under TILA. See Miguel, 309

F.3d at 1164 (noting that congressionally imposed time limits

“deprive courts of jurisdiction” when plaintiffs fail to seek

rescission within three-year period). 

Further, the court declines to grant plaintiff leave to

amend. While leave to amend should be freely given pursuant to

Federal Rule of Civil Procedure 15, the court is not required to

allow futile amendments. Klamath-Lake Pharm. Ass’n v. Klamath

Med. Serv. Bureau, 701 F.2d 1276, 1293 (9th Cir. 1983). Here,

amendment of the complaint with respect to plaintiff’s rescission

claim would be futile under the governing law described above,

and plaintiff does not provide any other facts which could

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3 The court also notes that plaintiff’s failure to plead

the ability to tender payment is sufficient grounds for dismissal

of her rescission claim. The Ninth Circuit has held that

rescission under TILA “should be conditioned on repayment of the

amounts advanced by the lender.” Yamamoto v. Bank of N.Y., 329

F.3d 1167, 1170 (9th Cir. 2003). District courts in this circuit

have dismissed rescission claims under TILA at the pleading stage

based upon the plaintiff’s failure to allege an ability to tender

loan proceeds. See, e.g., Ibarra v. Plaza Home Mortgage, No.

08-CV-01707-H, 2009 U.S. Dist. LEXIS 80581, at *22 (S.D. Cal.

Sept. 4, 2009). Neither plaintiff’s complaint, nor her subsequent

filings, present any evidence that would allow the court to make

a reasonable inference that she once had or currently has the

ability to tender. 

10

plausibly give rise to such a claim against Wachovia. See Iqbal,

129 S. Ct. at 1949. 

Accordingly, Wachovia’s motion to dismiss plaintiff’s first

claim for rescission under TILA is GRANTED without leave to

amend.3

2. Damages Under TILA

Plaintiff also seeks damages under TILA for Wachovia’s

failure to respond to a letter from plaintiff dated January 15,

2009, which she alleges was notice of her intent to rescind. 

Wachovia contends that plaintiff’s claim is subject to dismissal

because plaintiff’s letter did not give rise to an obligation to

rescind. Specifically, Wachovia argues that because plaintiff

did not express her wish to rescind “clearly and unequivocally,”

she “failed to trigger any obligation under TILA for Wachovia to

carry out a rescission.” (Id. 4:10-11, 5:1-2.)

When a creditor fails to provide the borrower with the

required notice of the right to rescind, the borrower has three

years from the date of consummation to rescind the transaction. 

12 C.F.R. § 226.23(a)(3). To exercise the right to rescind, a

borrower must “notify the creditor of the rescission by mail,

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telegram or other means of written communication.” Id. §

226.23(a)(2). Notice is deemed effective “when mailed, when

filed for telegraphic transmission or, if sent by other means,

when delivered to the creditor's designated place of business.” 

Id. If a creditor then refuses to cancel the loan, the borrower

has one year from the refusal to file suit for damages pursuant

to 15 U.S.C. § 1640. Miguel, 309 F.3d at 1165 (citing 15 U.S.C.

§ 1640(e)).

Here, plaintiff sent a letter to Wachovia on January 15,

2009, less than three years from the date of consummation,

February 25, 2006. (FAC ¶¶ 24-30; Pl.’s Ex. B.) In her letter,

plaintiff stated that Wachovia violated TILA by not providing her

with proper notice, and that she believed she had the right to

rescind. (Pl.’s Ex. B at 3.) Plaintiff’s letter offered to

“settle [the] rescission issue with WACHOVIA,” and proceeded to

set forth a list of modified terms for Wachovia’s consideration. 

(Id.) After listing the modified terms, plaintiff’s letter

stated the following: “Of course, we would be interested in a

reasonable counter proposal. If you reject our settlement or we

do not come to a resolution, by this letter, as instructed in the

attached document by Ms. Gates, Ms. Gates hereby rescinds the

above referenced loan.” (Id.) (emphasis in original). When

Wachovia failed to respond to plaintiff, she filed this action

almost three months later on April 17, 2009.

By filing a claim for damages less than one year after

sending the letter, plaintiff has filed within the statutory time

limit. Despite Wachovia’s contention that it had “no obligation

to rescind in response to [plaintiff’s] letter” (Def.’s Reply

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4:8-9), the plain language of the letter communicated plaintiff’s

desire to rescind if Wachovia was unwilling to modify the terms. 

Wachovia’s failure to respond to the letter was tantamount to a

rejection of the terms, and plaintiff’s letter therefore served

as a valid notice of rescission within the requisite time period

under 15 U.S.C. § 1635(f). Neither TILA nor 12 C.F.R. §

226.23(a)(2) sets forth any technical requirements that govern

the language a consumer must use when requesting a rescission. 

Wachovia cites no authority stating that a notice of rescission

under TILA must be “clear and unequivocal.” Therefore,

plaintiff's FAC sufficiently alleges a claim for damages pursuant

to 15 U.S.C. § 1640. 

Accordingly, defendant’s motion to dismiss plaintiff’s claim

for damages under TILA is DENIED. 

B. RESPA Violation

Plaintiff’s second claim for relief alleges that Wachovia

violated 12 U.S.C. § 2605 by failing to provide a written

explanation in response to plaintiff’s letter dated January 15,

2009, which she claims was a valid QWR. (FAC ¶¶ 72-73.) 

Wachovia moves to dismiss this claim, inter alia, on the basis

that the plaintiff has failed to plead actual damages as required

by RESPA. (MTD 6:16-17.)

Section 2605 of RESPA requires a loan servicer to provide

disclosures relating to the assignment, sale, or transfer of loan

servicing to a potential or actual borrower: (1) at the time of

the loan application, and (2) at the time of transfer. 12 U.S.C.

§ 2605. The loan servicer also has a duty to respond to a

borrower’s inquiry or “qualified written request.” Id. §

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2605(e). 

A claim for a RESPA violation cannot survive a motion to

dismiss when the plaintiff does not plead facts showing how the

plaintiff suffered actual harm due to the defendant’s failure to

respond to a QWR. See Benham v. Aurora Loan Servs., No.

C-09-2059 SC, 2009 U.S. Dist. LEXIS 91287, at *10-11 (N.D. Cal.

Oct. 1, 2009); Singh v. Wash. Mut. Bank, No. C-09-2771 MMC, 2009

U.S. Dist. LEXIS 73315, at *16 (N.D. Cal. Aug. 19, 2009). While

courts interpret this requirement liberally, the plaintiff must

at least allege what the plaintiff lost or how the plaintiff

suffered actual harm. See Yulaeva v. Greenpoint Mortgage

Funding, Inc., No. CIV. S-09-1504 LKK, 2009 U.S. Dist. LEXIS

79094, at *44 (E.D. Cal. Sept. 3, 2009) (holding that plaintiff’s

claim was sufficient to survive motion to dismiss because

plaintiff alleged that she was made to pay referral fee that

RESPA prohibited); Hutchinson v. Del. Sav. Bank, FSB, 410 F.

Supp. 2d 374, 383 (D.N.J. 2006) (holding that plaintiffs

adequately pled actual damages when they alleged that they

suffered “negative credit ratings on their credit reports [and]

the inability to obtain and borrow another mortgage loan and

other financing”). 

Here, plaintiff’s FAC does nothing more than claim that

Wachovia failed to acknowledge plaintiff’s alleged QWR. (FAC ¶

72.) This information, alone, is insufficient to demonstrate

that plaintiff suffered actual damages as a result of defendant’s

failure to respond to the alleged QWR. Therefore, plaintiff has 

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4 Because plaintiff failure to allege actual damages is

dispositive, the court need not address the issue of whether

plaintiff’s letter qualifies as a valid QWR.

14

not sufficiently pled facts showing a cognizable RESPA

violation.4

Accordingly, Wachovia’s motion to dismiss plaintiff’s second

claim for relief for violations of RESPA is GRANTED.

C. RFDCPA Violation

Plaintiff’s third claim for relief alleges a violation of

California’s Rosenthal Fair Debt Collection Practices Act

(“RFDCPA”). (FAC ¶¶ 75-80.) Wachovia moves to dismiss this

claim on the ground that it lacks the factual allegations

necessary to survive a motion to dismiss. (MTD 6:27.)

The RFDCPA precludes a debt collector from collecting or

attempting to collect from a debtor on a consumer debt in a

threatening or harassing manner. See Cal. Civ. Code § 1788 et

seq. (West 2010). Specifically, the RFDCPA prohibits threats,

obscenity, misleading or false communications, and overreaching. 

Id. §§ 1788.10-.12, 1788.14-.16. However, “foreclosing on [a]

property pursuant to a deed of trust is not the collection of a

debt within the meaning of the FDCPA.” Izenberg v. ETS Servs.,

LLC, 589 F. Supp. 1193, 1199 (C.D. Cal. 2008) (quoting Ines v.

Countrywide Home Loans, 2008 WL 4791863, at *2 (S.D. Cal. Nov. 3,

2008)). Nor does foreclosure meet the requirements of a debt

collection within the meaning of the RDFCPA. Id.

Plaintiff alleges that Wachovia repeatedly contacted her in

an attempt to collect the debt, and that such contact amounted to

a “willful disregard” for plaintiff’s rights. (Compl. ¶¶ 77-78.) 

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While the federal rules contemplate a short and plain statement

of the factual basis for a plaintiff’s claims, the allegations

must be sufficiently pled (1) to allow the court to determine

whether the conduct violates the statute, and (2) to enable

defendants to respond. See Iqbal, 129 S. Ct. at 1950; Twombly,

550 U.S. at 555. Plaintiff’s assertion that Wachovia “repeatedly

called” plaintiff does not by itself constitute a violation of

the RFDCPA. See Fullmer, 2010 WL 95206, at *7.

Accordingly, Wachovia’s motion to dismiss plaintiff’s third

claim for relief for violations of the RFDCPA is GRANTED.

CONCLUSION

For the foregoing reasons, Wachovia’s motion to dismiss is

GRANTED in part and DENIED in part. Plaintiff’s claim for

rescission under TILA is dismissed without leave to amend. As to

all other dismissed claims, plaintiff is granted fifteen (15)

days from the date of this order to file a second amended

complaint in accordance with this order. Defendant is granted

thirty (30) days from the date of service of plaintiff’s second

amended complaint to file a response thereto.

IT IS SO ORDERED. 

DATED: February 19, 2010

 

FRANK C. DAMRELL, JR.

UNITED STATES DISTRICT JUDGE

Case 2:09-cv-02464-KJM-EFB Document 18 Filed 02/19/10 Page 15 of 15