Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_12-cv-02502/USCOURTS-caed-2_12-cv-02502-0/pdf.json

Parties Involved:
Bank of America Corporation
Defendant
Bank of America, N.A.
Defendant
Antonio Esquivel
Plaintiff
Beatriz Esquivel
Plaintiff

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

ANTONIO ESQUIVEL and BEATRIZ

ESQUIVEL, individually, on

behalf of all others similarly

situated, and on behalf of the

general public,

 Plaintiffs,

 v.

BANK OF AMERICA, N.A.; BANK OF

AMERICA CORPORATION; and Does 1

through 10, inclusive,

 Defendants.

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2:12-cv-02502-GEB-KJN

ORDER GRANTING MOTION TO

DISMISS FEDERAL CLAIM WITH

PREJUDICE AND DISMISSING

REMAINING STATE CLAIMS UNDER

28 U.S.C. § 1367(c)

Defendants seek dismissal of all claims in Plaintiffs’

complaint, arguing under Federal Rule of Civil Procedure 12(b)(6) that

the allegations are insufficient to constitute viable claims.

Plaintiffs’ complaint is comprised of a federal claim alleged under the

Federal Debt Collection Practices Act (“FDCPA”) and several state

claims. Since subject matter jurisdiction is premised solely on

Plaintiffs’ FDCPA claim, the portion of the motion challenging the

sufficiency of this claim is addressed first.

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I. FDCPA CLAIM

Plaintiffs allege in their complaint that “Bank of America is 

[liable to Plaintiffs as a] ‘debt collector’ within the meaning of [the

FDCPA because] Bank of America made demands for [a mortgage] payment

after default . . . .” (Compl. ¶ 61, ECF No. 1.) Plaintiffs also allege

that “Defendant Bank of America, N.A., the current servicer of [their]

mortgage, . . . is a wholly owned subsidiary of Bank of America

Corporation, and successor by merger to BAC Home Loans Servicing LP.”

(Id. at ¶ 8.) 

Plaintiffs include in their opposition brief the following

facts concerning the merger, of which judicial notice is taken as

Plaintiffs’ request: “the merger of BAC Home Loans Servicing, [LP] into

defendant Bank of America, N.A., [was] effective July 1, 2011.” (Pls.’

Req. Judicial Notice 2:7–9, ECF No. 22.) 

Plaintiffs also include in their opposition brief the

following proposed amendments to their complaint, which are treated as

judicial admissions: 

[T]o the extent Plaintiffs are required to

expressly allege Bank of America, N.A. acquired the

debt after default, and have failed to do so,

Plaintiffs can easily amend to make that allegation

. . . Plaintiffs respectfully request that they be

permitted to amend their complaint to allege: “1)

that Plaintiffs defaulted at some time before June

2011; 2) that BAC Home Loans Servicing, LP was

their servicer when they defaulted; and 3) that

Bank of America, N.A. became their mortgage loan

servicer and began its debt collection activity

only after the loan was already in default.” 

(Opp’n Mot. Dismiss 15:14–20, ECF No. 21 (emphasis added)); Am. Title

Ins. Co. v. Lacelaw Corp., 861 F.2d 224, 226–27 (9th Cir. 1988) (holding 

“that statements of fact contained in a brief may be considered

admissions of the party in the discretion of the district court.”); see

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also Maloney v. Scottsdale Ins. Co., 256 F. App’x 29, 31–32 & n.3 (9th

Cir. 2007) (affirming district court dismissal of a complaint under Rule

12(b)(6) reasoning that plaintiffs’ “allegation of imperfect

self-defense constitute[d] a judicial admission” and stating that

“[j]udicial admissions apply only to factual statements, not statements

of law.”).

Defendants argue, inter alia, since BAC Home Loans Servicing,

LP merged into Defendants, Defendants are BAC Home Loans Servicing, LP’s

successor-in-interest, and consequently Defendants obtained Plaintiffs’

debt before Plaintiffs’ defaulted on the debt. Defendants contend

therefore, they are not “debt collectors” under the FDCPA. 

Plaintiffs counter that because the merger occurred after

Plaintiffs’ defaulted on the subject debt, “Bank of America, N.A.

acquired the debt after default,” and therefore, Bank of America, N.A.

is within the FDCPA’s definition of “debt collector.” (Opp’n 15:13–14.)

Plaintiffs also state: “At the time the [Plaintiffs] defaulted, their

loan was in fact serviced by BAC Home Loans Servicing, LP.” (Id. at

15:9-10.) Defendant replies: “Just as BAC [Home Loans] is not a ‘debt

collector’ under the FDCPA . . . , neither is its successor by merger,

B[ank of] A[merica,] NA,” a debt collector. (Reply 3:18–20, ECF No.

28.) 

The FDCPA explicitly states certain persons are not considered

“debt collectors” including: “any person collecting or attempting to

collect any debt owed or due or asserted to be owed or due another to

the extent such activity . . . (iii) concerns a debt which was not in

default at the time it was obtained by such person.” 15 U.S.C.

§ 1692a(6)(F)(iii) (emphasis added). “Although the statute does not

define ‘obtained,’ at least one circuit court has held that when a

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defendant company acquires a debt though its merger with a previous

creditor of the plaintiff rather than via a specific assignment, the

debt was not ‘obtained’ while it was in default; thus, the defendant

company was not a debt collector under the FDCPA.” Dues v. Capital One,

NA, No. 11-CV-11808, 2011 WL 3799762, at *4 (E.D. Mich. Aug. 8, 2011)

(citing Brown v. Morris, 243 F. App’x 31, 34 (5th Cir. 2007), report and

recommendation adopted in full, No. 11-CV-11808, 2011 WL 3799712 (E.D.

Mich. Aug. 29, 2011).

This reasoning is persuasive and is adopted. Therefore, since

Bank of America, N.A. “obtained” the debt when its predecessor in

interest, BAC Home Loans Servicing, LP, obtained the debt, neither

Defendant is a ‘debt collector’ under the FDCPA. See Meyer v.

Citimortgage, Inc., No. 11-13432, 2012 WL 511995, at *7 (E.D. Mich. Feb.

16, 2012) (“[Defendant] is the successor by merger to . . . the

originating lender and mortgagee, and therefore it is impossible for the

loan to have been in default at the time [defendant] received its

interest.”) Casas v. Wells Fargo Bank, N.A., No. 5:12-cv-01742-EJD, 2012

WL 5877641, at *4 (N.D. Cal. Nov. 20, 2012) (dismissing FDCPA claim

because “[a]s World Savings Bank, FSB’s successor-in-interest, Defendant

. . . . cannot be considered a ‘debt collector’ under the FDCPA.”);

Caraang v. PNC Mortg., 795 F. Supp. 2d 1098, 1123 (D. Haw. 2011)

(dismissing FDCPA claim “because [defendant] acquired Plaintiffs’ Note

and Mortgage by merging with NCB, not through assignment.”), aff’d on

separate grounds, 481 F. App’x 362 (9th Cir. 2012); Centennial Bank v.

Noah Grp., LLC, 755 F. Supp. 2d 1256, 1260 (S.D. Fla. 2010) (dismissing

FDCPA claim sua sponte because “Centennial Bank is not a ‘debt

collector’—it arguably originated the debt as a merged entity with

Marine Bank . . . . [T]he FDCPA does not apply to this case.”). Since

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neither Defendant is a “debt collector” within the meaning of the FDCPA,

Plaintiffs’ FDCPA claim will be dismissed. 

Defendants argue dismissal should be with prejudice.

Plaintiffs counter that they should be given leave to amend based on

proposed factual allegations in their opposition brief which they intend

to include in an amended complaint. However, Plaintiffs’ proposed

amendment disregards the significance of the merger, and evinces that

Plaintiffs cannot cure the defect in their FDCPA claim through

amendment. Therefore, Plaintiffs’ FDCPA claim is dismissed with

prejudice. Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995)

(“Futility of amendment can, by itself, justify the denial of . . .

leave to amend.”); Cervantes v. Countrywide Home Loans, Inc., 656 F.3d

1034, 1041 (9th Cir. 2011) (stating a “district court may dismiss

without leave where a plaintiff’s proposed amendments would fail to cure

the pleading deficiencies and amendment would be futile.”).

II. SUPPLEMENTAL JURISDICTION

In light of the dismissal of the sole federal claim, the Court

may sua sponte decide whether to continue exercising supplemental

jurisdiction over Plaintiffs’ state claims. 28 U.S.C. § 1367(c). Under

28 U.S.C. § 1367(c)(3), a district court “may decline to exercise

supplemental jurisdiction over [state] claim[s]” when “the district

court has dismissed all claims over which it has original jurisdiction.”

“While discretion to decline . . . supplemental jurisdiction over state

law claims is triggered by the presence of one of the conditions in

§ 1367(c), it is informed by the . . . values of economy, convenience,

fairness and comity” as delineated by the Supreme Court in United Mine

Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966). Acri v. Varian

Assocs., Inc., 114 F.3d 999, 1001 (9th Cir. 1997).

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Judicial economy does not favor continuing to exercise

supplemental jurisdiction, since the court has not considered the state

claims. See Otto v. Heckler, 802 F.2d 337, 338 (9th Cir. 1986) (“[T]he

district court, of course, has the discretion to determine whether its

investment of judicial energy justifies retention of jurisdiction or if

it should more properly dismiss the claims without prejudice.” (citation

omitted)). Nor do the comity and fairness factors weigh in favor of

exercising supplemental jurisdiction since “[n]eedless decisions of

state law should be avoided both as a matter of comity and to promote

justice between the parties, by procuring for them a surer-footed

reading of applicable law.” Gibbs, 383 U.S. at 726; accord Nishimoto v.

Federman-Bachrach & Assocs., 903 F.2d 709, 715 (9th Cir. 1990) (“In a

case in which all federal law claims are eliminated before trial, the

balance of these factors will generally point toward declining to

exercise jurisdiction over the remaining state law claims.”). 

Therefore, Plaintiffs’ state claims are dismissed without prejudice

under 28 U.S.C. § 1367(c)(3) on the date on which this order is filed.

III. CONCLUSION 

For the stated reasons, judgment shall be entered on

Plaintiffs’ Federal Debt Collection Practices Act claim in favor of

Defendants, and this action shall be closed.

Dated: February 21, 2013

 

GARLAND E. BURRELL, JR.

Senior United States District Judge

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