1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

LISA MCCARTHY,

Plaintiff,

v.

SERVIS ONE, INC., et al.,

Defendants.

Case No. 17-cv-00900-WHO 

ORDER GRANTING MOTION TO 

DISMISS

Re: Dkt. No. 17

Plaintiff Lisa McCarthy challenges mortgage foreclosure proceedings that have been 

undertaken by defendants Servis One, Inc. dba BSI Financial Services (“BSI”), as the relevant 

mortgage loan servicer; Christiana Trust, as the Beneficiary of the trust holding the deed of trust 

on her residence; and Western Progressive, LLC., (“Western”), as the trustee to the deed of trust 

on her residence. McCarthy alleges causes of action against defendants for: (i) violation of 

California Civ. Code § 2923.6; (ii) Negligence; (iii) Fraud; (iv) Negligent Misrepresentation; (v) 

Unfair Competition under Cal. Bus. & Prof. Code § 17200; (vi) and Injunctive Relief under Cal. 

Civ. Code § 2924.12.

Defendants move to dismiss. Pursuant to Civil Local Rule 7-1(b), this matter is

appropriate for resolution without oral argument and the April 12, 2017 hearing is VACATED.

McCarthy fails to allege sufficient facts to support her claims with respect to the processing of her 

2016 loan modification application. Her Complaint is DISMISSED with leave to amend. 

BACKGROUND

I. PLAINTIFF’S LOAN AND ATTEMPTS AT MODIFICATION

In 2008, McCarthy obtained a $720,000 mortgage loan secured by a deed of trust on her 

residence (“Property”). On November 26, 2014, a notice of default was recorded by defendant 

Western Progressive and on April 3, 2015 a Notice of Trustee’s Sale recorded. Complaint ¶ 15, 
2

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

Ex. A; Declaration of Tara Spangler [Dkt. No. 1-2] at ECF pg. 101, ¶ 6, Ex. 4.1 The parties went 

back and forth with the loan modification process through 2015, with denials based, variously and 

at different times, on defendants’ assertion that McCarthy’s paperwork was incomplete, that 

McCarthy did not reside in the Property (because it was listed on her tax returns as a rental 

property), and, ultimately, in September 2015 that McCarthy simply “did not qualify.” Spangler 

Decl. ¶ 11.

The Property was foreclosed upon in October 2015. Spangler Decl. ¶ 14. In response, 

McCarthy filed her first complaint in Alameda County Superior Court, alleging causes of action 

under Civ. Code § 2923.6, promissory estoppel, and quiet title. Compl. ¶ 19; Spangler Decl. ¶ 15, 

Ex. 12. That case was settled by the parties. Compl. ¶ 19. In January 2016, the foreclosure was 

rescinded and McCarthy dismissed her first lawsuit, releasing her claims against defendants. 

Spangler Decl. ¶ 16.

On February 9, 2016, Western Progressive issued a new Notice of Trustee’s Sale, and that 

notice was recorded on February 23, 2016. Spangler Decl. ¶ 18, Ex. 15; Complaint ¶ 20, Ex. B. 

On March 8, 2016, McCarthy filed a Chapter 13 petition in the United States Bankruptcy Court 

for the Northern District of California. Spangler Decl. ¶ 20. On April 4, 2016, pursuant to 

McCarthy’s motion, the parties were referred to the Bankruptcy Court’s Mortgage Modification 

Mediation Program (MMMP), and the parties engaged in a “loss mitigation” evaluation process 

under that Program. Spangler Decl. ¶ 22. On April 5, 2016, McCarthy filed a new loan 

modification request with BSI. Declaration of Lisa McCarthy [Dkt. No. 6] ¶ 10.

On June 22, 2016, BSI acknowledged the receipt of the loan modification package but 

asked for additional information (which McCarthy claims BSI already had or was seeking for the 

first time). Compl. ¶¶ 22-23; Spangler Decl. ¶ 22. On June 23, 2016, McCarthy was notified that 

she was not eligible for a HAMP modification because the entity on whose behalf BSI serviced 

 

1 On this motion I will not rely on evidence defendants submitted in connection with the TRO 

proceedings unless that evidence is subject to judicial notice as a public record or incorporated by 

reference by allegations in the Complaint. 
3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

the loan (Christiana Trust) was not a participant. Spangler Decl. ¶ 23, Ex. 18.2 Following an 

initial denial for incompleteness, the allegedly missing information was received by BSI in July 

2016, and BSI confirmed it possessed a completed application for its review. Complaint ¶ 25; 

Spangler Decl. ¶¶ 24-28.

BSI contends that it informed McCarthy in an August 23, 2016 letter that its “review of 

your financial and other information indicates that although you may have a hardship, you do not 

qualify for a loan modification.” Spangler Decl. ¶ 29, Ex. 21. At oral argument on the TRO, 

McCarthy’s counsel insisted that McCarthy did not receive the August 23, 2016 letter. In any 

event, neither McCarthy nor BSI dispute that McCarthy appealed that denial on September 22, 

2016.3 After McCarthy submitted additional information to BSI through her bankruptcy counsel, 

BSI denied the appeal on November 28, 2016. Spangler Decl. ¶ 32. McCarthy admits that she 

received the November 28, 2016 denial of her appeal. Complaint ¶ 34.

On September 26, 2016, the parties participated in the Bankruptcy Court’s MMMP 

mediation with a third-party neutral mediator. According to defendants, the mediation was not 

successful because McCarthy did not qualify for a modification. The final amended plan was not 

confirmed and the bankruptcy case was dismissed on January 3, 2017.

II. PROCEDURAL BACKGROUND

Defendants scheduled a trustee’s sale for the Property on January 26, 2017. On January 

20, 2017, McCarthy filed this case in Alameda County Superior Court.4 The case was removed to 

 

2

Plaintiff received a materially similar letter dated October 7, 2015. Complaint ¶ 31, Ex. F. 

Plaintiff argues in her Complaint that these representations were false because BSI participates in 

HAMP. Complaint ¶¶ 31-32. BSI’s position – as explained in the TRO briefings – is that the 

letters refer to the trustee Beneficiary (here, Christiana Trust) who does not participate in HAMP. 

Dkt. No. 8 at 4. Additionally, according to the Bankruptcy Court’s docket, plaintiff’s bankruptcy 

counsel acknowledged being told that BSI does not provide for HAMP modifications, and 

informed the Bankruptcy Court that only the “conventional” loan modification request was still 

pending. Request for Judicial Notice [Dkt. No. 1-3] ECF pg. 221.

3 During oral argument on the TRO, plaintiff’s counsel explained his belief that the 

communications between BSI and plaintiff during this timeframe were “oral,” and made to 

plaintiff’s bankruptcy counsel and not to plaintiff directly.

4

There were a number of preliminary proceedings that took place in Superior Court prior to the 

case being removed to federal court, as detailed in my March 7, 2017 Order. 
4

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

this Court on February 22, 2017, and McCarthy applied for a Temporary Restraining Order to 

prevent the scheduled foreclosure sale. Dkt. No. 7. On March 7, 2017, I denied the application 

for a TRO and the foreclosure sale proceeded. Dkt. No. 20 (“March 2017 Order”). Defendants 

now move to dismiss.

In her Complaint, McCarthy alleges that the conduct of BSI and the other defendants – in 

elongating the loan modification process by asking for documents already produced and 

continually asking for additional documents as well as misrepresenting the grounds on which 

McCarthy was allegedly not qualified for a modification – meant that McCarthy was not provided 

a meaningful opportunity to save the Property from foreclosure. Compl. ¶¶ 39-40. She also 

asserts that defendants are “obliged” to complete a review of her completed application and 

determine whether or not she is entitled to a modification under California’s Homeowners Bill of 

Rights (“HBOR,” Cal. Civ. Code § 2923.6(c)). Id. ¶ 41.

More specifically, she alleges that defendants violated HBOR by: (i) “dual tracking” the 

mortgage modification and foreclosure processes, Compl. ¶¶ 47-48; and (ii) failing to conduct a 

good faith review of her completed loan modification request and appeal, which were denied on 

the basis of “fraud and pretext.” Id. ¶ 49. McCarthy contends that defendants were negligent 

because they did not “competently and professionally” handle her loan modification application 

and appeal. Id. ¶¶ 56-57. Her fraud claim is based upon the BSI’s representation that BSI 

participated in the Making Home Affordable loan modification process (“HAMP”), when in 

reality BSI did not participate and intended to deny McCarthy’s application on that basis. Id. ¶¶ 

62-67. She also alleges negligent misrepresentation based on: (i) BSI’s false representation that it 

participated in HAMP and/or that BSI was not authorized to modify McCarthy’s loan under 

HAMP; and (ii) BSI’s determination that the Property was not McCarthy’s residence, and her loan 

modification was denied as a result. Id. ¶¶ 70-74. Finally, she alleges that the conduct described

above was unlawful, fraudulent, and unfair in violation of California’s Unfair Competition Law 

(“UCL,” Cal. Bus. & Prof. Code § 17200).

LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint 
5

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

if it fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to 

dismiss, the plaintiff must allege “enough facts to state a claim to relief that is plausible on its 

face.” See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible 

when the plaintiff pleads facts that “allow the court to draw the reasonable inference that the 

defendant is liable for the misconduct alleged.” See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(citation omitted). There must be “more than a sheer possibility that a defendant has acted 

unlawfully.” Id. While courts do not require “heightened fact pleading of specifics,” a plaintiff 

must allege facts sufficient to “raise a right to relief above the speculative level.” See Twombly, 

550 U.S. at 555, 570. 

In deciding whether the plaintiff has stated a claim upon which relief can be granted, the 

Court accepts the plaintiff’s allegations as true and draws all reasonable inferences in favor of the 

plaintiff. See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). However, the court 

is not required to accept as true “allegations that are merely conclusory, unwarranted deductions of 

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

2008).

If the court dismisses the complaint, it “should grant leave to amend even if no request to 

amend the pleading was made, unless it determines that the pleading could not possibly be cured 

by the allegation of other facts.” See Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). In 

making this determination, the court should consider factors such as “the presence or absence of 

undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies by previous 

amendments, undue prejudice to the opposing party and futility of the proposed amendment.” See 

Moore v. Kayport Package Express, 885 F.2d 531, 538 (9th Cir.1989).

DISCUSSION

I. HBOR CLAIM

McCarthy asserts a claim for violation of the California Homeowners Bill of Rights, Cal. 

Code Civ. Proc. § 2923.6. Defendants initially move to dismiss her HBOR claim to the extent it is 

based on allegations regarding the 2015 foreclosure proceedings that were settled and dismissed 

by the parties in January 2016 on the grounds of res judicata and because any violations were 
6

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

remedied. Mot. 4-7. In her Opposition, McCarthy clarifies that she does not assert any HBOR 

claims based on conduct that occurred prior to the January 2016 settlement and that the allegations 

regarding conduct before that point in time were only included in the Complaint as evidence of 

defendants’ “bad faith.” Oppo. 3. 

Defendants also challenge McCarthy’s standing to assert a HBOR claim, as she was in 

bankruptcy proceedings during some part of the time she was seeking a loan modification from 

defendants. Mot. 7.5 In denying the TRO, I found that she had standing under HBOR to pursue 

her dual-tracking claim (the claim asserted in support of her TRO application ) because the

relevant Notice of Default and the Notice of Trustee’s Sale were recorded prior to the bankruptcy 

case being filed and the January 26, 2017 trustee’s sale was set for after the bankruptcy case was 

closed. Dkt. No. 20 at 11-12. However, the focus of McCarthy’s claims has changed. 

 McCarthy’s HBOR claim now centers on the allegations that the request for additional 

documents from BSI in June 2016 was in bad faith and that she never received a written denial of 

her 2016 loan modification application. As to the June 2016 demand for additional documents--

McCarthy’s claim arose while she was in bankruptcy proceedings; therefore, it cannot form a basis 

for her HBOR claim. See March 2017 Order at 11 (“the appropriate focus is whether a HBOR 

violation occurred either prior to the filing of the bankruptcy case or after the bankruptcy case was 

dismissed, and whether bankruptcy proceedings are ongoing.”). As to the claim that she never 

received a written denial letter, and therefore never received full consideration for her loan 

modification in violation of HBOR--based on McCarthy’s allegation, there is an ongoing problem 

(no denial letter) that extends beyond the termination of her bankruptcy proceedings in January 

2017. Accordinly, section 2920.5(c)(2)(C) does not preclude a HBOR claim based on that discrete 

theory.

That said, defendants also argue that the HBOR claim must be dismissed because 

McCarthy has not alleged a “material violation” of HBOR. See, e.g., Foote v. Wells Fargo Bank, 

 

5 HBOR’s definition of a “borrower” under Cal. Civ. Code § 2920.5(c)(2)(C) excludes an 

individual who has filed a bankruptcy petition where “the bankruptcy court has not entered an 

order closing or dismissing the bankruptcy case.” See March 2017 Order at 11.
7

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

N.A., No. 15-CV-04465-EMC, 2016 WL 2851627, at *3 (N.D. Cal. May 16, 2016) (“for Plaintiff's 

action to survive, then, she must allege an HBOR violation that is ‘material.’”). She counters that 

defendants failed to provide her with “a sensible, good faith, written denial of the loan 

modification application. She is entitled to this much under the code. See Cal. Civ. Code 

§2923.6(c).” Opp. 3 (emphasis in original). 

The first problem with her theory is that it is not expressly included in her Complaint as a 

basis for her HBOR claim.6 Even if it were alleged, given facts of which I can take judicial notice, 

it does not state a material violation of HBOR. As I recognized in denying the application for a 

TRO:

The record also shows that plaintiff’s bankruptcy counsel, who was 

representing plaintiff in the Bankruptcy Court’s Mortgage 

Modification Mediation Program, was aware of the denial and 

appealed it, and indeed submitted additional documents to BSI to 

consider on the appeal. See N.D.C.A. Bankruptcy Court Case No. 

16-40613, Dkt. No 46 (asking for an extension of time to complete 

the MMMP program, because “BSI denied debtor’s application. 

Debtor appealed the decision and BSI requested additional 

documents which were not considered in its review of the 

application. Those documents were submitted through the portal and 

are currently under submission.”).

March 2017 Order at 13. McCarthy does not provide any authority to support an argument that 

where a denial has been made (whether oral or written) and the plaintiff nonetheless appeals that 

denial, the plaintiff states a claim for a material violation of HBOR. Here, the records from the 

bankruptcy court show that McCarthy’s bankruptcy counsel was not only aware of the denial but 

that she submitted additional documents for BSI to consider in support of McCarthy’s appeal. 

McCarthy admits that she personally received written notice of the subsequent denial of the 

appeal. Compl. ¶ 34. Given the record and McCarthy’s admissions, she cannot state a HBOR 

claim based solely on her contention that she did not personally receive a copy of the August 2016 

denial letter. McCarthy’s HBOR claim is DISMISSED with leave to amend.

 

6

 Failure to provide a written denial is included as a ground under the negligence claim, where she 

alleges that “BSI negligently failed to provide Plaintiff a written denial of the loan modification 

application, at such a time when Defendant BSI should have afforded Plaintiff an opportunity to 

appeal.” Compl. ¶ 57i. But plaintiff does not dispute that she was somehow notified of the denial 

because she invoked her appeal rights and appealed (although her appeal was allegedly not 

“thoroughly reviewed”). Id. ¶¶ 34, 49.
8

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

II. NEGLIGENCE AND NEGLIGENT MISREPRESENTATION

In order to state a claim for negligence, a plaintiff must allege “(1) the defendant owed the 

plaintiff a duty of care, (2) the defendant breached that duty, and (3) the breach proximately 

caused the plaintiff's damages or injuries.” Lueras v. BAC Home Loans Servicing, LP, 221 Cal. 

App. 4th 49, 62 (4th D.C.A. 2013). McCarthy alleges defendants BSI and the Christiana Trust 

negligently: (i) failed to follow industry loan modification standards; (ii) failed to uphold 

misrepresentations of BSI’s loss mitigation department; (iii) failed to process McCarthy’s 

documentation with requisite care; (iv) failed to provide McCarthy a response to her completed 

loan modification application; (v) sought to collect late fees while her loan modification was 

pending; (vi) did not provide a written denial at the time when BSI should have afforded 

McCarthy the right to appeal; (vii) negligently determined that McCarthy did not reside in her 

Property; (viii) determined McCarthy was not qualified for a loan modification when she was 

qualified; and (ix) gave McCarthy conflicting reasons for her loan modification denial. Compl. ¶ 

57. But these allegations do not plausibly show that defendants breached a duty of care.

A. Duty of Care

Defendants rely on Lueras to argue that in California loan servicers do not owe a general 

duty of care to mortgagees in the context of loan modification proceedings. Id. at 67. In Lueras, 

the court limited the duties of a loan servicer to “not make material misrepresentations about the 

status of an application for a loan modification or about the date, time, or status of a foreclosure 

sale.” Id. at 68. McCarthy relies on Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal. App. 

4th 941 (1st D.C.A. 2014), where the court more broadly concluded that loan servicers are 

“required to exercise reasonable care in their dealings with borrowers seeking a loan 

modification.” Id. at 949. In Alvarez, the plaintiff alleged that defendants failed to exercise 

reasonable case in the processing of his loan modification by “failing to process the applications in 

a timely manner, dual tracking and losing documents,” and the court concluded those allegations 

were sufficient to state a negligent-loan modification application handing claim. Id. at 951. 

Defendants point to subsequent cases from this Court that have limited the broad duty 

recognized in Alvarez or decided to follow Lueras. See, e.g., Galang v. Wells Fargo Bank, N.A.,
9

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

No. 16-CV-03468-HSG, 2017 WL 1210021, at *4 (N.D. Cal. Apr. 3, 2017) (relying on an 

unpublished 9th Circuit decision to conclude that “lenders do not owe borrowers a duty of care to 

process a loan modification application within a particular time frame”); Vethody v. Nat'l Default 

Servs. Corp., No. 16-CV-04713-HRL, 2016 WL 7451666, at *5 (N.D. Cal. Dec. 28, 2016) (court 

was “persuaded that lenders owe no duty of care to offer or approve loan modification applications 

under ordinary circumstances and absent ‘additional facts to support a duty of care’”); Morton v. 

Wells Fargo Bank, N.A., No. 16-CV-05833-HRL, 2016 WL 7117041, at *5 (N.D. Cal. Dec. 7, 

2016).7 But I and most other judges in this District have followed Alvarez; in the absence of 

contrary authority from the California Supreme Court, I will do so again. See Clinton v. Select 

Portfolio Servicing, Inc., No. 2:16-CV-02228-WHO, 2016 WL 7034895, at *4 (E.D. Cal. Dec. 2, 

2016); see also Powell v. Wells Fargo Home Mortg., No. 14-CV-04248-MEJ, 2017 WL 840346, 

at *9 (N.D. Cal. Mar. 3, 2017) (following Alvarez); Kaar v. Wells Fargo Bank, N.A., No. C 16-

01290 WHA, 2016 WL 3068396, at *4 (N.D. Cal. June 1, 2016) (same).8 BSI owed a duty of care 

to McCarthy in processing her loan modification application.

B. Breach and Injury

BSI argues that even if a duty exists, McCarthy has not alleged facts showing that BSI 

breached its duty. I agree. While the Complaint lists a number of “acts of negligence,” there are 

 

7 Defendants also rely on Graham v. Wells Fargo Bank, N.A., No. 3:15-CV-04220-JD, 2017 WL 

86013, at *3 (N.D. Cal. Jan. 10, 2017), to argue that Alvarez should be limited to situations where 

loan servicers “voluntarily” undertake a loan modification review in contrast to situations (as in 

Graham) where the institution was contractually required under a settlement agreement to 

undertake the loan modification review. However, defendants do not argue that the 2016 

settlement agreement between the parties to this case contractually required further loan 

modification reviews. 

8

The finding of a duty in this case is supported by application of the Biakanja factors. In 

Biakanja v. Irving, 49 Cal.2d 647 (1958), the California Supreme Court explained that whether a 

duty arises depends on: (1) the extent to which the transaction was intended to affect the plaintiff, 

(2) the foreseeability of harm to the plaintiff, (3) the degree of certainty that the plaintiff suffered 

injury, (4) the closeness of the connection between the defendant’s conduct and the injury 

suffered, (5) the moral blame attached to the defendant's conduct, and (6) the policy of preventing 

future harm. Here, the loan modification was intended to benefit McCarthy, and due to the privity 

of the relationship between McCarthy and BSI, McCarthy was unable to seek a loan modification 

in other settings while her application was pending with BSI. It was foreseeable that she would be 

harmed as a result of alleged misrepresentations or an inaccurate determination of her complete 

application by BSI.
10

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

insufficient facts alleged to support any of the alleged acts. 

In Paragraph 57.a., McCarthy alleges that BSI “negligently failed to abide by industrystandard loan modification duties.” But nowhere in the Complaint does she identify what 

standards were violated in the processing of her 2016 application. She asserts that BSI negligently 

failed to process sensitive financial information, but alleges no facts in support concerning the 

2016 application. Id. ¶ 57c. She contends that defendants’ employees made false representations, 

but alleges no facts in support regarding the processing of her 2016 application.9 Id., ¶ 57b. She 

states that defendants failed “to process” her loan application and failed to rectify unidentified 

“issues” created by that failure, but pleads no facts in support. Id. ¶¶ 57d., 57e. She asserts that 

BSI negligently sought to collect late fees while her loan modification application was pending, 

but alleges no facts about fees. Id. ¶ 57h. She contends that defendants failed to provide “a 

written response” to her application, but fails to allege facts showing how that failure could have 

damaged her when she appealed that denial and admits that BSI considered that appeal. Id., ¶¶

57g., 57i. She says that defendants negligently determined she did not reside in her Property, but 

fails to allege any facts that BSI relied on that determination to deny her 2016 loan modification 

application.10 Id. ¶ 57j. She asserts that BSI negligently determined she did not qualify for a loan 

modification when she did, but alleges no facts showing that her financial situation at the relevant 

time in 2016 qualified her for a modification. Id. ¶ 57k. Finally, she contends that BSI 

negligently advised McCarthy that her loan modification was denied for conflicting reasons, but 

alleges no facts in support of that assertion as to her 2016 application. Id. ¶ 57l. 

Defendants point out that on the TRO record – which is not fully before me on this motion 

to dismiss – I preliminarily concluded that McCarthy had been given a full and fair loan 

 

9 McCarthy cannot rely on representations made with respect to her 2015 loan modification 

application because those claims were released in her January 2016 settlement.

10 As noted in my March 2017 Order, the evidence submitted by BSI in conjunction with its 

opposition to the TRO suggests that in 2015 BSI eventually acknowledged that McCarthy did 

reside at the Property and denied the modification based on financial considerations. March 2017 

Order at 3-4 n.2. I do not consider that TRO evidence in ruling on this motion to dismiss, but it 

should be relevant to plaintiff’s determination as to whether to attempt to amend.
11

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

modification review. March 2017 Order at 13. That record is not before me on this motion and 

McCarthy has not had an opportunity to attempt to plead facts to cure the deficiencies I have 

identified. Therefore, I will dismiss McCarthy’s negligence and negligent misrepresentation 

claims with leave to amend.11

III. FRAUD-BASED CLAIMS

Defendants move to dismiss McCarthy’s fraud and negligent misrepresentation claims for 

failure to allege them with specificity as required under Rule 9(b). In her Complaint, McCarthy 

relies on the following misrepresentations to support these claims: (i) BSI is a participant in the 

Making Home Affordable Program; (ii) BSI determined that the Property was not her principal 

residence; (iii) BSI’s determination that the Property was not her principal residence was the only 

reason for her loan modification disqualification; and (4) BSI is not authorized to modify her loan 

under the Making Home Affordable Program. Compl. ¶¶ 62, 70; Oppo. 7-8. 

However, with respect to the “principal residence” representations, McCarthy does not 

allege facts showing that any such representations were made or conveyed to her in connection 

with her 2016 application. In her Opposition, McCarthy does not discuss the misrepresentation 

claims based on her HAMP allegations; her Complaint alleges that such representations were 

made in 2015. Compare Oppo. 7-8 with Compl. ¶¶ 31, 32. 

As with her negligent misrepresentation claims dismissed above, I dismiss McCarthy’s 

fraud claims with leave to amend.12

IV. UCL

Defendants move to dismiss McCarthy’s UCL claims, arguing that because she has failed 

to adequately allege any illegal or fraudulent conduct, her pendent-UCL claims should be 

 

11 I need not reach the issue of damages, but if plaintiff chooses to amend these claims, she will 

need to state facts plausibly showing how the negligent acts caused her injury. E.g., that she 

qualified for a modification, that she detrimentally relied on misrepresentations causing her a 

specific injury not otherwise caused by her default on the mortgage in the first instance, etc.

12 As with the negligence-based claims, if plaintiff amends her fraud-based claims, she will need 

to plead facts showing how she was damaged as a result of the fraud, which she currently fails to 

do.
12

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

dismissed as well. In her Complaint, McCarthy rests her UCL claims on allegations of BSI’s 

“pattern and practice” of unlawful, fraudulent, and unfair conduct related to the servicing of her 

mortgage. Compl. ¶ 78. She specifically identifies the misleading HAMP representations (alleged 

to have been made in 2015) and BSI’s failures to follow HBOR that do not state any cause of 

action. Accordingly, as she has failed to state a claim under HBOR and cannot base her any claim 

on the 2015 HAMP representations, her UCL claims are dismissed with leave to amend.13

CONCLUSION

For the foregoing reasons, McCarthy’s complaint is dismissed. If she can state facts curing 

the deficiencies I have identified, she must do so within twenty (20) days of the date of this Order.

IT IS SO ORDERED.

Dated: April 10, 2017

William H. Orrick

United States District Judge

 

13 I need not address plaintiffs “claim” for an injunction under Cal. Civ. Code § 2924.12. That 

provision provides for a public right of action to seek either an injunction or damages for 

violations of other provisions of HBOR, including § 2923.6. As plaintiff has failed to state a 

claim for relief under § 2923.6, she has no right to a remedy under § 2924.12 on the current 

Complaint.