Court Opinion

ID: 3066187
Source: CourtListenerOpinion
Date Created: 2015-10-14 23:02:12.840764+00
Date Added: 2024-06-11T11:49:49.021212
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

DAVID MERRITT; SALMA MERRITT,            No. 09-17678
             Plaintiffs-Appellants,
                                           D.C. No.
                 v.                     5:09-cv-01179-
                                              JW
COUNTRYWIDE FINANCIAL
CORPORATION, a Delaware
corporation; COUNTRYWIDE HOME              OPINION
LOANS, INC., a New York
corporation; ANGELO MOZILO, an
individual; MICHAEL COLYER, an
individual; DAVID SAMBOL, an
individual; BANK OF AMERICA, NA;
KEN LEWIS, an individual; JOHN
BENSON,
               Defendants-Appellees.

      Appeal from the United States District Court
        for the Northern District of California
        James Ware, District Judge, Presiding

               Argued and Submitted
     November 9, 2012—San Francisco, California

                  Filed July 16, 2014
2        MERRITT V. COUNTRYWIDE FINANCIAL CORP.

Before: Andrew J. Kleinfeld and Marsha S. Berzon, Circuit
      Judges, and William E. Smith, District Judge.*

                    Opinion by Judge Berzon;
                    Dissent by Judge Kleinfeld

                           SUMMARY**

        Truth in Lending Act / Real Estate Settlement
                       Practices Act

    The panel reversed in part and vacated in part the district
court’s dismissal pursuant to Federal Rule of Civil Procedure
12(b)(6) of an action under the Truth in Lending Act and the
Real Estate Settlement Practices Act against Countrywide
Financial Corporation and various other defendants involved
in the plaintiffs’ residential mortgage.

    The panel reversed the district court’s dismissal of the
plaintiffs’ TILA rescission claim for failure either to tender
the rescindable value of their loan prior to filing suit or to
allege ability to tender its value in their complaint. Declining
to extend Yamamoto v. Bank of New York, 329 F.3d 1167 (9th
Cir. 2003), the panel held that an allegation of tender or
ability to tender is not required. The panel held that only at
the summary judgment stage may a court order the statutory

    *
  The Honorable William E. Smith, District Judge for the U.S. District
Court the District of Rhode Island, sitting by designation.
  **
     This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
       MERRITT V. COUNTRYWIDE FINANCIAL CORP.               3

sequence altered and require tender before rescission, and
then only on a case-by-case basis, once the creditor has
established a potentially viable defense.

     The panel vacated the district court’s dismissal of the
plaintiffs’ claims under § 8 of RESPA, which prohibits
kickbacks and unearned fees, as barred by the one-year
statute of limitations. The panel held that although the
RESPA statutory limitations period ordinarily runs from the
date of the alleged RESPA violation, the doctrine of equitable
tolling may, in appropriate circumstances, suspend the
limitations period until the borrower discovers or had
reasonable opportunity to discover the violation. The panel
declined to address two issues of first impression:
(1) whether, while straight overcharges are not actionable
under RESPA § 8(b), markups for services provided by a
third party are actionable; and (2) whether an inflated
appraisal qualifies as a “thing of value” under RESPA § 8(a).

    Dissenting, Judge Kleinfeld wrote that the dismissal with
prejudice should stand because the complaint failed to
comply with the “short and plain statement” requirement of
Fed. R. Civ. P. 8(a)(2).

                        COUNSEL

Jacob N. Foster (argued), Kasowitz, Benson, Torres &
Friedman LLP, San Francisco, California, for Plaintiffs-
Appellants.

James Goldberg (argued) and Stephanie A. Blazewicz, Bryan
Cave LLP, San Francisco, California; Douglas E. Winter and
Angela Buenaventura, Bryan Cave LLP, Washington D.C.,
4      MERRITT V. COUNTRYWIDE FINANCIAL CORP.

for Defendants-Appellees Countrywide Home Loans, Inc.,
Countrywide Financial Corporation, Bank of America
Corporation, Michael Coyler, David Sambol, and Kenneth
Lewis.

Charles Elder and Caleb Bartel, Irell & Manella LLP, Los
Angeles, California, for Defendant-Appellee Angelo Mozilo.

Susan H. Handelman, Ropers, Majeski, Kohn & Bently,
Redwood City, California, for Defendant-Appellee John
Benson.

                        OPINION

BERZON, Circuit Judge:

    Once again, we address issues arising from Countrywide
Financial Corporation’s residential lending business during
the period shortly before novel practices by lenders resulted
in widespread distress in the housing markets. See, e.g.,
Balderas v. Countrywide Bank, N.A., 664 F.3d 787 (9th Cir.
2011); Cervantes v. Countrywide Home Loans, Inc., 656 F.3d
1034 (9th Cir. 2011). David Merritt and Salma Merritt (“the
Merritts”) sued Countrywide Financial Corporation and
various other defendants (collectively “Countrywide” or
“CHL”) involved in their residential mortgage, alleging
violations of numerous federal statutes. The district court
         MERRITT V. COUNTRYWIDE FINANCIAL CORP.                            5

dismissed the claims pleaded, with prejudice.1 This appeal
followed.

    We consider in this opinion two issues raised by that
dismissal: (1) whether the district court properly dismissed
the Merritts’ Truth in Lending Act (“TILA”) rescission claim
because they did not tender the rescindable value of their loan
prior to filing suit or allege ability to tender its value in their
complaint; and (2) whether the Merritts’ claims under Section
8 of the Real Estate Settlement Practices Act (“RESPA”) may
proceed, including whether the RESPA limitations period, 12
U.S.C. § 2614, may be equitably tolled.2

              Factual & Procedural Background

    In March 2006, the Merritts took out both an adjustable-
rate mortgage3 and a home equity line of credit (“HELOC”)

  1
    The district court dismissed the claims not on Rule 8 grounds but on
the merits for failure to state a claim upon which relief may be granted,
pursuant to Rule 12(b)(6). The dissent suggests we affirm on the basis of
Rule 8(a)(2). The enforcement of Rule 8 rests within the district court’s
discretion, and defendants do not raise any Rule 8(a)(2) questions before
us. Under these circumstances, it would be improper for us to affirm on
Rule 8 grounds. See Gillibeau v. City of Richmond, 417 F.2d 426, 431 (9th
Cir. 1969).
     2
    We address the Merritts’ other claims, and the parties’ motions for
judicial notice, in a memorandum disposition issued concurrently with his
opinion.
 3
   As is generally true in California, the legal instrument for the Merritts’
home loan was a deed of trust and not, technically speaking, a mortgage.
See Siegel v. Am. Savings & Loan Ass’n, 258 Cal. Rptr. 746, 747 (Cal. Ct.
App. 1989) (defining a deed of trust); 27 Cal. Jur. 3d Deeds of Trust § 1
(2011) (same); Cal. Civ. Code § 2920(b) (distinguishing mortgage from
6        MERRITT V. COUNTRYWIDE FINANCIAL CORP.

with Countrywide on a home they purchased in Sunnyvale,
California.4 Initially, the Merritts’ Countrywide agent had
told them, “I can pretty much guaranty you that we can get
you in your new home for $1800 per month and possibly
even as low as $1,500.” Three days before closing, however,
the agent told the Merritts that he had completed their loan
package and that their monthly payments would be $4,400 a
month for the first five years: $3,200 for the mortgage, plus
$1,200 for the HELOC. When the Merritts balked, the agent
replied that “the market had shifted” since his initial
estimates. He told the Merritts that the $4,400 monthly
payment was “the lowest that you’ll find anywhere,” and if
they did not close right away, they would lose their good-
faith deposit. He did not disclose that the $4,400/month figure
was based on a temporary, “teaser” interest rate rather than a
fixed rate, and that the Merritts’ monthly payments would be
much higher once the teaser rate expired. The Merritts would
not have accepted the loan if they had understood the terms.

    The home’s owner falsely represented himself throughout
the process as the selling agent. As the sale approached, he
spoke with the Merritts’ Countrywide agent about getting the
home appraised. The seller stated that he had found an
appraiser who would provide an inflated appraisal of

deed of trust for certain purposes under California state law). We refer to
the Merritts’ home loan throughout this opinion as a mortgage, because
that is how the parties have referred to it in their pleadings and briefs, and
the precise financing instrument is not legally material to the issues
addressed in this opinion.
    4
   Because we are evaluating a district court’s dismissal pursuant to Rule
12(b)(6), we take the facts from the Merritts’ complaint and assume that
they are true. See Cervantes v. United States, 330 F.3d 1186, 1187 (9th
Cir. 2003).
       MERRITT V. COUNTRYWIDE FINANCIAL CORP.              7

$739,000, above the home’s actual value of about $690,000,
so as to justify a higher sale price. The Countrywide agent
responded that he preferred to select the appraiser himself,
but that since Countrywide had used the seller’s
recommended appraiser before, he would agree to using him
for this sale. The Countrywide agent, the seller, and the
appraiser spoke over the phone, and the appraiser agreed to
provide a $739,000 appraisal before having reviewed the
property. The Merritts allege that Countrywide maintained a
company practice of encouraging agents to select appraisers
who would provide inflated appraisals, so as to increase the
total amounts financed and thereby maximize Countrywide’s
profits.

    On the date of closing, a Countrywide representative
arrived at the Merritts’ home with loan documents and said,
“I will not have time to wait for you to read any of the
documents, but just need you to sign these and if you have
any questions or concerns afterwards, you can contact your
loan agent.” The Merritts signed the documents, but between
the small print and “confusing language,” did not understand
the documents provided. The Countrywide representative did
not give the Merritts copies of the signed documents to keep,
only form notices of their right to rescind. The spaces where
the lender would ordinarily fill in the relevant dates and
deadlines on the form notices were left blank. The Merritts
similarly were given a form for TILA disclosures, but with
the spaces left blank for the annual percentage rate, finance
charge, amount financed, total of payments, schedule of
payments, and variable interest rate.

   The day after the closing, the Merritts called their
Countrywide agent and asked him to clarify the terms of their
mortgage. The agent assured them that he would send them
8      MERRITT V. COUNTRYWIDE FINANCIAL CORP.

further documentation but never did. He also promised that
they could refinance their mortgage at a lower interest rate
after a year of on-time payments.

    Over the next three years, the Merritts repeatedly
requested from Countrywide the completed disclosures, to no
avail. Meanwhile, Countrywide continued to send the
Merritts monthly billing statements that did not disclose that
the “minimum payment due” would only be applied to
interest, and that they should pay more if they wanted to
begin paying down the principal.

    In 2009, Countrywide sent the Merritts the loan
documents that they had been requesting for three years. By
then, the Merritts had made about $200,000 in payments to
Countrywide. The Merritts consulted with lawyers, who told
them that they had been victims of “predatory lending.” They
had their loan materials audited by an underwriter, who told
them that he had identified numerous violations of state and
federal law, including TILA, in the documentation provided
by Countrywide.

    Meanwhile, in August 2008, the Merritts suffered a loss
of income that made them unable to afford their monthly
payments. They repeatedly asked Countrywide to refinance
or modify their mortgage into a conventional loan, but
Countrywide refused.

    In February 2009, the Merritts notified Countrywide that
they wished to rescind their loan. Countrywide did not
respond to the rescission request, instead offering to modify
         MERRITT V. COUNTRYWIDE FINANCIAL CORP.                            9

the loan. The modified loan offered was one the Merritts still
could not afford.5

    The Merritts filed this case pro se on March 18, 2009 and
shortly thereafter amended the complaint.6 Countrywide
moved to dismiss the complaint in its entirety. The district
court granted the motion, with prejudice. As relevant to the
issues in this opinion, the district court dismissed the
Merritts’ claim for rescission under TILA because the
Merritts did not tender the value of their HELOC to
Countrywide before filing suit, and dismissed their claims
under Section 8 of RESPA as time-barred.

    This appeal followed. We appointed pro bono counsel to
represent the Merritts before this court.

                               Discussion

A. TILA rescission

    TILA provides two remedies for loan disclosure
violations — rescission and civil damages, each governed by
separate statutory procedures.7 Under TILA, an obligor has

 5
   Countrywide had, in the meantime, been acquired by Bank of America.
The Merritts’ loan was eventually sold to Wells Fargo.
     6
    We refer to the amended complaint throughout simply as “the
complaint.”
 7
   Plaintiffs’ TILA claims relate solely to their home-equity line of credit,
or “HELOC.” TILA does not apply to residential mortgages used to
finance the initial acquisition or construction of a dwelling. See 15 U.S.C.
§§ 1635(e)(1) & 1602(x). Countrywide presents for the first time on
appeal the argument that plaintiffs’ HELOC falls within this residential
10      MERRITT V. COUNTRYWIDE FINANCIAL CORP.

the “right to rescind . . . until midnight of the third business
day following the consummation of the transaction or the
delivery of the information and rescission forms required
under this section . . . whichever is later.” 15 U.S.C.
§ 1635(a). Regardless of whether the required information
and forms have been delivered, “[the] obligor’s right of
rescission shall expire three years after the date of
consummation of the transaction or upon the sale of the
property.” Id. § 1635(f).

    The TILA rescission provisions set out the following
sequence of events for pursuing rescission: First, the obligor
must notify the creditor of his intention to rescind, id.
§ 1635(a); then, within 20 days after receipt of notice of
rescission, the creditor must return to the obligor any security
interest, id. § 1635(b); and lastly, “[u]pon the performance of
the creditor’s obligations under this section [i.e., upon return
of the security interest], the obligor shall tender the property
to the creditor.” Id. These procedures “shall apply except
when otherwise ordered by a court.” Id.

    Notably, “[t]he sequence of rescission and tender set forth
in § 1635(b) is a reordering of the common law rules
governing rescission.” Williams v. Homestake Mortg. Co.,
968 F.2d 1137, 1140 (11th Cir. 1992) (citing 17A Am. Jur. 2d
Contracts § 590, at 600–01 (1991)). Specifically, “[a]lthough
tender of consideration received is an equitable prerequisite
to rescission, the requirement was abolished by the Truth in
Lending Act.” Palmer v. Wilson, 502 F.2d 860, 861 (9th Cir.
1974). “Under § 1635(b),” consequently,

mortgage exception. Because this argument was not previously raised in
the district court, we do not address it here.
       MERRITT V. COUNTRYWIDE FINANCIAL CORP.              11

       all that the consumer need do is notify the
       creditor of his intent to rescind. The
       agreement is then automatically rescinded and
       the creditor must, ordinarily, tender first.
       Thus, rescission under § 1635 places the
       consumer in a much stronger bargaining
       position than he enjoys under the traditional
       rules of rescission.

Williams, 968 F.2d at 1140 (internal quotation marks and
alteration omitted). By reversing the traditional sequence for
common law rescission claims, TILA “shift[s] significant
leverage to consumers,” consistent with the statute’s general
consumer-protective goals. Lea Krivinskas Shepard, It’s All
About the Principal: Preserving Consumers’ Right of
Rescission under the Truth in Lending Act, 89 N. C. L. Rev.
171, 188 (2010).

    At the same time, consumer protection is not the only
goal of statutory rescission under TILA; “another goal of
§ 1635(b) is to return the parties most nearly to the position
they held prior to entering into the transaction.” Williams,
968 F.2d at 1140. Balancing the two goals, the case law
construing TILA has long recognized courts’ equitable power
to modify the statutory rescission process. See id. at 1140;
Palmer, 502 F.2d at 862. Congress confirmed this equitable
role for courts overseeing TILA rescission proceedings when
it amended TILA in 1980 to clarify that the § 1635(b)
sequence of procedures “shall apply except when otherwise
ordered by a court.” See Truth in Lending Simplification and
Reform Act, Pub. L. No. 96-221, § 612(a)(4), 94 Stat. 175
(1980), codified at 15 U.S.C. § 1635(b).
12     MERRITT V. COUNTRYWIDE FINANCIAL CORP.

     Invoking this permission, the district court dismissed the
Merritts’ TILA rescission claim because their complaint did
not “allege that they tendered the Home Equity Line of Credit
or its reasonable value to CHL or Bank of America when they
sought rescission.” In so ruling at the pleading stage, the
district court erred.

    In accordance with the statutory provision that courts may
order an alteration of the sequence of events otherwise
prescribed by the TILA rescission provision, see id., we have
held that district courts may, if warranted by the
circumstances of the particular case, require the obligor to
provide evidence of ability to tender as a condition for denial
of a summary judgment motion advanced by the creditor. See
Yamamoto v. Bank of New York, 329 F.3d 1167, 1171–73 (9th
Cir. 2003). Yamamoto concluded that where “it is clear from
the evidence that the borrower lacks capacity to pay back
what she has received (less interest, finance charges, etc.), the
court does not lack discretion to do before trial what it could
do after,” i.e., refuse to enforce rescission. Id. at 1173. In so
ruling, Yamamoto relied on earlier cases which had permitted
judges after a resolution of the TILA claim on the merits to
condition rescission on tender. Palmer, one of those earlier
cases, had instructed courts considering such a condition to
take into account “the equities present in a particular case, as
well as consideration of the legislative policy of full
disclosure that underlies [TILA] and the remedial-penal
nature of the private enforcement provisions of the Act.” Id.
at 1171 (quoting Palmer, 502 F.2d at 862); see also LaGrone
v. Johnson, 534 F.2d 1360, 1362 (9th Cir. 1976) (holding that
court should condition rescission on tender where TILA
violations “were not egregious and the equities heavily favor
the creditors”).
         MERRITT V. COUNTRYWIDE FINANCIAL CORP.                            13

    Like some other district courts in this circuit, the district
court in this case extended Yamamoto to require that plaintiffs
plead ability to tender in their complaint. See Botelho v. U.S.
Bank, N.A., 692 F. Supp. 2d 1174, 1180 (N.D. Cal. 2010)
(collecting cases). We reject this extension.

     As Botelho noted, Yamamoto “was decided in the
procedural context of summary judgment, when the district
court was in a position to consider a full range of evidence in
deciding whether to condition rescission on tender.” Id. at
1180. Without such evidentiary development, a district court
is in no position to evaluate equitable considerations of the
sort identified in Yamamoto and its predecessors. The equities
to be considered, Yamamoto noted, might include the nature
of the TILA violations (such as whether they were or were
not egregious); whether the obligor had gone into bankruptcy;
and the borrower’s ability to repay the proceeds (including,
perhaps, whether that ability to repay was itself dependent
upon a rescission order because without such an order, the
obligor could not refinance or sell the property). 329 F.3d at
1171, 1173. “Whether the call is correct must be determined
on a case-by-case basis, in light of the record adduced.” Id. at
1173. In making the call, the court may consider evidence
such as affidavits and deposition testimony or may hold an
evidentiary hearing. See Palmer, 502 F.2d at 862. To
prescribe the pleading of ability to tender in every TILA
rescission case would be inconsistent with this evidence-
grounded, case-by-case approach.8

  8
    Indeed, even in a common-law equitable rescission action where the
plaintiff is required to tender first, the plaintiff need not necessarily plead
ability to tender in the complaint. See 1 Dan B. Dobbs, Law of Remedies:
Damages—Equity—Restitution § 4.8, at 463 (2d ed. 1993).
14     MERRITT V. COUNTRYWIDE FINANCIAL CORP.

    Further, our approach better comports with the TILA
statutory text, which prescribes an enforcement sequence
except when “otherwise ordered by a court.” 15 U.S.C.
§ 1635(b). If all obligors had to allege ability to tender
payment when seeking rescission and so allege in a complaint
for enforcement of the rescission obligation, then (1) the
requirement of doing so would no longer be an exception, and
(2) the requirement would not be “otherwise ordered by a
court,” as a complaint initiates suit before any court order
issues.

    Moreover, Yamamoto recognized that if a creditor
acquiesces at the outset in the notice of rescission, “then the
transaction [is] rescinded automatically, thereby causing the
security interests to become void and triggering the sequence
of events laid out in subsections (d)(2) and (d)(3) [of
Regulation Z, 12 C.F.R. § 226.23, which implements
15 U.S.C. § 1635(b)].” 329 F.3d at 1172. Yamamoto’s
holding allowing district courts to vary that sequence was
targeted at situations in which the creditor “produce[s]
evidence sufficient to create a triable issue of fact about
compliance with TILA’s disclosure requirements.” Id. Where
no such evidence (or viable legal argument) is produced, then
the situation is legally indistinguishable for judicial remedy
purposes from one in which the creditor initially acquiesced
in the rescission; that is what should have happened in the
absence of a tenable defense. Automatically to require tender
in the pleadings before any colorable defense has been
presented would encourage creditors to refuse to honor
indisputably valid rescission requests, because doing so
would allow the security interest to remain in place absent
tender. The result would be to allow creditors to vary the
statutory sequence simply through intransigence.
       MERRITT V. COUNTRYWIDE FINANCIAL CORP.               15

     In addition, in many cases, it will be impossible for the
parties or the court to know at the outset whether a borrower
asserting her TILA rescission rights will ultimately be able to
return the loan proceeds as required by the statute. That
ability may depend upon the merits of her TILA rescission
claim or on other claims related to the same loan transaction.
See, e.g., Prince v. U.S. Bank Nat’l Ass’n, 2009 WL 2998141,
at *5 (S.D. Ala. Sept. 14, 2009) (denying creditor’s motion to
dismiss as based on “mere speculation” that plaintiffs would
be unable to tender, and indicating that court would address
the proper sequences for implementing the rescission, if
necessary, only after resolving the rescission claim on the
merits). For instance, if a TILA rescission claim is
meritorious and the creditor relinquishes its security interest
in the property upon notice of rescission as required by the
default § 1635(b) sequence, the obligor may then be able to
refinance or sell the property and thereby repay the original
lender. Cf. Burrows v. Orchid Island TRS, LLC, 2008 WL
744735, at *6 (C.D. Cal. Mar. 18, 2008) (declining to require
pleading of tender where the court inferred that borrower
would be able to tender by selling or refinancing the property
if rescission was found to be appropriate); Williams v. Saxon
Mortg. Co., 2008 WL 45739, at *6 n.10 (S.D. Ala. Jan. 2,
2008) (declining to condition rescission on tender as was
done in Yamamoto, because it was not clear that borrower
would not be able to refinance the loan). Or her complaint
may allege damages claims arising from the same loan
transaction, the proceeds of which, if successful, could then
be used to satisfy her TILA tender obligation. See Shepard,
supra, at 205 & n.200, 210.

    For all these reasons, any requirement that all TILA
rescission plaintiffs allege ability to tender cannot be
reconciled with the statute, Yamamoto’s holdings, and
16     MERRITT V. COUNTRYWIDE FINANCIAL CORP.

Yamamoto’s underpinnings. Any suggestion that such a
pleading requirement may apply in some cases but not others
fares no better, for two reasons:

    First, requiring a subset of TILA rescission plaintiffs to
plead tender would effectively impose a special pleading
requirement upon those plaintiffs, without any advance notice
as to who those plaintiffs are. After Ashcroft v. Iqbal,
556 U.S. 662 (2009), as before, “Rule 8(a)’s simplified
pleading standard applies to all civil actions, with [only]
limited exceptions.” Swierkiewicz v. Sorema N.A., 534 U.S.
506, 513 (2002) (emphasis added); see Starr v. Baca, 652
F.3d 1202, 1215–16 (9th Cir. 2011) (discussing how to
reconcile Iqbal and Swierkiewicz). Under this standard, a
plaintiff need only plead “sufficient allegations of underlying
facts to give fair notice and to enable the opposing party to
defend itself effectively,” and “the factual allegations that are
taken as true must plausibly suggest an entitlement to relief.”
Starr, 652 F.3d at 1216. There is no authority for altering the
pleading requirements for a given statutory claim for some
plaintiffs making that claim and not for others.

    Second, there would be no principled way to determine
which plaintiffs should be required to plead tender in the
complaint. Yamamoto and its predecessors indicate that major
factors as to whether to require tender in advance of
rescission are the strength of any defense to rescission and the
egregiousness of any TILA violation. Neither of these
considerations can be evaluated before the creditor advances
its defense, factually and legally. Nor do we see how the
other “case-by-case” considerations pertinent under
Yamamoto can be set out in such a way as to notify TILA
plaintiffs in advance of any special, heightened pleading
requirements applicable to them in particular.
       MERRITT V. COUNTRYWIDE FINANCIAL CORP.               17

    For all these reasons, we hold that plaintiffs can state a
claim for rescission under TILA without pleading that they
have tendered, or that they have the ability to tender, the
value of their loan. Only at the summary judgment stage may
a court order the statutory sequence altered and require tender
before rescission — and then only on a “case-by-case basis,”
Yamamoto, 329 F.3d at 1173, once the creditor has
established a potentially viable defense.

    In light of this holding, we reverse the district court’s
Rule 12(b)(6) dismissal of the Merritts’ TILA rescission
claim and remand for further proceedings on that claim.

B. The RESPA Section 8 claims

    Congress enacted RESPA in 1974 in response to abusive
practices that inflate the cost of real estate transactions.
12 U.S.C. § 2601(a); see Sosa v. Chase Manhattan Mortg.
Corp., 348 F.3d 979, 981 (11th Cir. 2003). Section 8 of
RESPA prohibits kickbacks and unearned fees and may be
enforced criminally or civilly. 12 U.S.C. § 2607. Civil actions
under this section must be brought within one year of the
alleged violation. Id. § 2614. The district court dismissed the
Merritts’ claims under Section 8 of RESPA as “barred by the
one-year statute of limitations because Plaintiffs filed suit
nearly three years after closing on their loan.” The district
court held that “the [RESPA] limitations period begins to run
as of the date of the closing,” and did not address whether the
statute might have been equitably tolled to the date in 2009
when the Merritts allege that they actually received their loan
documents.

   There is no direct precedent in this court on the RESPA
equitable tolling issue, although we have held that the closely
18      MERRITT V. COUNTRYWIDE FINANCIAL CORP.

similar TILA limitations period provision may be equitably
tolled. See King v. California, 784 F.2d 910, 914–15 (9th Cir.
1986). Before proceeding to the question whether we should
reach the same conclusion as to tolling under RESPA as we
did under TILA, we first consider whether we should
pretermit that issue by affirming on a separate ground.

     1. Plaintiffs’ RESPA Section 8 claims

    We may affirm a dismissal on any properly preserved
ground supported in the record. Johnson v. Riverside
Healthcare Sys., LP, 534 F.3d 1116, 1121 (9th Cir. 2008);
Papa v. United States, 281 F.3d 1004, 1009 (9th Cir. 2002).
However, we are not required to do so, “and as a prudential
matter can properly remand to the district court” rather than
“decide ab initio issues that the district court has not had an
opportunity to consider and that present questions of first
impression in our circuit.” Badea v. Cox, 931 F.2d 573, 575
n.2 (9th Cir. 1991) (internal quotation marks omitted).

    After considering the two RESPA Section 8 claims
briefly, we have determined, as we shall explain shortly, that
each raises fairly complex legal questions of first impression
in this circuit neither decided by the district court nor fully
briefed before this court. We therefore conclude that
prudence counsels against addressing those claims on the
merits in advance of any district court decision on them.

    Plaintiffs alleged two theories of liability under Section 8
of RESPA, which we address in turn.
       MERRITT V. COUNTRYWIDE FINANCIAL CORP.                 19

        a. Section 8(b)

    RESPA Section 8(b) prohibits the “giv[ing] . . . [of] any
portion, split, or percentage of any charge made or received
for the rendering of a real estate settlement service . . . other
than for services actually performed.” 12 U.S.C. § 2607(b).
The Merritts allege that defendants violated Section 8(b) by
“charg[ing] [them] . . . cost[s] for copying, insurance and
other costs associated with the loan, which cost Defendants
significantly less,” thereby “pass[ing] on charges which falls
within the definition of ‘markups’ and were charges not
actually earned for any service.”

    A case closely similar, but not identical, to this one as to
the RESPA Section 8 “markup” issue, Martinez v. Wells
Fargo Home Mortg., Inc., 598 F.3d 549, 553 (9th Cir. 2010),
held that RESPA Section 8(b) “prohibits only the practice of
giving or accepting money where no service whatsoever is
performed in exchange for that money” (emphasis added).
“By negative implication, Section 8(b) cannot be read to
prohibit charging fees, excessive or otherwise, when those
fees are for services that were actually performed.” Id. at
553–54.

    The plaintiffs in Martinez did not press a third-party
“markup” theory on appeal — that is, a theory that depended
on the provision of services by a party other than by the
defendant who charged the fee and collected it from the
consumer. See id. at 552 n.2. The Merritts, therefore, urge us
to distinguish Martinez and follow the Second Circuit’s
decision in Kruse v. Wells Fargo Home Mortg., Inc., 383 F.3d
49 (2d Cir. 2004). Kruse held that while straight overcharges
are not actionable under Section 8(b), markups for services
provided by a third party are actionable. Id. at 58–62.
20      MERRITT V. COUNTRYWIDE FINANCIAL CORP.

    The circuits are divided on the third-party markup issue
under RESPA. In holding that third-party markups were
actionable under Section 8(b), Kruse held that the statute
itself was ambiguous and therefore deferred to a HUD policy
statement interpreting the provision to prohibit markups. See
Kruse, 383 F.3d at 57. Santiago v. GMAC Mortg. Corp., Inc.,
417 F.3d 384, 388–89 (3d Cir. 2005), like Kruse, held that
markups are actionable under Section 8(b), although it relied
on the statutory language as unambiguous, rather than on an
agency interpretation of an ambiguous statute. In contrast,
several circuits have held or strongly implied that third-party
markups are not actionable under RESPA Section 8(b). See
Freeman v. Quicken Loans, Inc., 626 F.3d 799, 804 (5th Cir.
2010) (“RESPA is an anti-kickback statute, not an anti-price
gouging statute”); Haug v. Bank of Am., N.A., 317 F.3d 832,
836 (8th Cir. 2003) (holding that charging plaintiffs more for
third-party services than defendant paid for them, “standing
alone, does not violate Section 8(b) of RESPA”); Boulware
v. Crossland Mortg. Corp., 291 F.3d 261, 266, 268 (4th Cir.
2002) (“§ 8(b) requires fee-splitting or a kickback”;
“Congress chose to leave markups . . . to the free market”);
Krzalic v. Republic Title Co., 314 F.3d 875, 881 (7th Cir.
2002) (holding that markups are not actionable under
RESPA, which “is not a price-control statute”).9

    This question, which raises complicated issues of
statutory interpretation and administrative law of first
impression in this circuit, was not addressed by the district
court and only minimally briefed before this court. We
therefore decline to decide the question in the first instance
on appeal.

 9
   The Eleventh Circuit has reserved whether a third-party markup theory
might be viable under RESPA Section 8(b). See Sosa, 348 F.3d at 982–84.
       MERRITT V. COUNTRYWIDE FINANCIAL CORP.                  21

        b. Section 8(a)

    Section 8(a) prohibits the “giv[ing] . . . [of] any fee,
kickback, or thing of value pursuant to any agreement or
understanding, oral or otherwise, that business incident to or
a part of a real estate settlement service involving a federally
related mortgage loan shall be referred to any person.”
12 U.S.C. § 2607(a). Plaintiffs’ theory of Section 8(a)
liability is that Countrywide referred appraisal business to the
appraiser, Benson, in exchange for a “thing of value,”
namely, an inflated appraisal.

    At oral argument, defendants disputed the facts
underlying the Section 8(a) claim. Specifically, defendants
argued that the Merritts have admitted that the appraisal
referral was made “before [they] first contacted
Countrywide.” These factual claims rely on documents that
were not before the district court, and in any event, are
unavailing in light of this court’s duty to accept the plaintiffs’
allegations as true at the pleading stage of the litigation.
Contrary to defendants’ representation at oral argument, the
operative complaint alleges that the Merritts were in contact
with their Countrywide agent as early as February 2006, and
that the agent and the appraiser were in contact in early
March. To the extent that there are possible inconsistencies in
the timeline alleged in the complaint, the district court as well
as this court must construe the complaint in the light most
favorable to the plaintiffs and grant leave to amend if any
defects could be cured. See Lucas v. Dep’t of Corr., 66 F.3d
245, 248 (9th Cir. 1995) (per curiam) (pro se complaints
should be dismissed without leave to amend only if it is clear
that deficiencies could not be cured by amendment).
22      MERRITT V. COUNTRYWIDE FINANCIAL CORP.

    Countrywide also argued in its brief that the Merritts’
Section 8(a) claim cannot survive dismissal because the
statute only provides for liability “to the person or persons
charged for the settlement service involved in the violation,”
12 U.S.C. § 2607(d)(2), and the Merritts did not allege that
they were charged for the appraisal. However, this failing
could be cured if the Merritts were granted leave to amend
the complaint to allege that, as they contend in their reply
brief, they paid the appraiser directly.

    A more complicated question is whether an inflated
appraisal would qualify as a “thing of value” as that term is
defined for RESPA purposes. The answer is not self-evident,
the parties briefed this question only in passing, and the
district court did not decide it. Moreover, the determination
of this question may depend on factual development as to the
precise structure of the agreement and the sequence of events.
We therefore do not decide this question in the first instance
either. We conclude only that we are not prepared to affirm
at this juncture on the ground that the inflated appraisal was
not a “thing of value” for RESPA purposes, and so must
reach the limitations issue.

     2. Equitable tolling

    The district court dismissed the Merritts’ claims under
Section 8 of RESPA as “barred by the one-year statute of
limitations because Plaintiffs filed suit nearly three years after
closing on their loan,” and, although the issue was raised, did
not consider whether the statute might have been equitably
tolled to the date in 2009 when the Merritts allege that they
actually received their loan documents. Only at that time, the
Merritts allege, did they learn about the markups charged, as
well as key information about their loan that could help to tip
       MERRITT V. COUNTRYWIDE FINANCIAL CORP.               23

them off to the appraisal kickback scheme, including that the
individual they thought had been the home’s selling agent
was actually also its owner.

   The pertinent RESPA limitations provision states:

       Jurisdiction of courts; limitations. Any
       action pursuant to the provisions . . . of this
       title may be brought in the United States
       district court or in any other court of
       competent jurisdiction, for the district in
       which the property involved is located, or
       where the violation is alleged to have
       occurred, within . . . 1 year in the case of a
       violation of section 2607 . . . of this title from
       the date of the occurrence of the violation
       ....

12 U.S.C. § 2614.

    We have not previously decided whether the RESPA
statutory limitations period may be equitably tolled. King did,
however, address a closely similar question concerning the
TILA limitations period. King, 784 F.2d 910. King held that
the TILA limitations period was subject to equitable tolling.
Id. at 195. We reach the same conclusion here with regard to
the RESPA limitations period.

   There has, however, been considerable development since
King in the general principles governing the availability of
equitable tolling of statutory limitations periods.
Consequently, we conduct a somewhat more extensive
analysis of the pertinent considerations than did King, albeit
with the same result.
24     MERRITT V. COUNTRYWIDE FINANCIAL CORP.

     Our departure point under post-King case law is the
proposition that “[t]ime requirements in lawsuits between
private litigants are customarily subject to ‘equitable
tolling.’” Irwin v. Dep’t of Veterans Affairs, 498 U.S. 89, 95
(1990) (citing Hallstrom v. Tillamook Cnty., 493 U.S. 20, 27
(1989)). To determine whether the RESPA limitations period
falls within that customary rule, we must first determine
whether it is jurisdictional; courts “[have] no authority to
create equitable exceptions to jurisdictional requirements.”
Bowles v. Russell, 551 U.S. 205, 214 (2007). If the RESPA
limitations period is non-jurisdictional, we must assess
whether Congress has clearly precluded equitable tolling. See
United States v. Brockamp, 519 U.S. 347, 350 (1997).

       a. The RESPA limitations period is not jurisdictional

    In a series of recent cases, the Supreme Court has
“pressed a strict[] distinction between truly jurisdictional
rules, which govern ‘a court’s adjudicatory authority,’ and
nonjurisdictional ‘claim-processing rules,’ which do not.”
Gonzalez v. Thaler, 132 S. Ct. 641, 648 (2012) (quoting
Kontrick v. Ryan, 540 U.S. 443, 454–55 (2004)). In doing so,
the Court has clarified that “the term ‘jurisdictional’ properly
applies only to prescriptions delineating the classes of cases
(subject-matter jurisdiction) and the persons (personal
jurisdiction) implicating [the court’s adjudicatory] authority.”
Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 160–61 (2010)
(emphasis added) (internal quotation marks omitted).
Moreover, a rule is “jurisdictional” only if “Congress has
‘clearly state[d]’ that the rule is jurisdictional.” Sebelius v.
Auburn Reg’l Med. Ctr., 133 S. Ct. 817, 824 (2013) (quoting
Arbaugh v. Y & H Corp., 546 U.S. 500, 515–516 (2006)
(alteration in original)). To determine whether Congress
clearly intended a statutory restriction to be jurisdictional,
       MERRITT V. COUNTRYWIDE FINANCIAL CORP.                 25

courts review factors such as the statute’s language, “context,
and relevant historical treatment.” Reed Elsevier, 559 U.S. at
166. Applying this test, the Court has repeatedly held that
“filing deadlines ordinarily are not jurisdictional; indeed, [the
Court has] described them as ‘quintessential claim-processing
rules.’” Sebelius, 133 S. Ct. at 825 (quoting Henderson ex rel.
Henderson v. Shinseki, 131 S. Ct. 1197, 1203 (2011)). With
these precepts in mind, we proceed to examine the relevant
factors.

            i. Language

    By its terms, § 2614 provides that any RESPA Section 8
action “may be brought . . . within 1 year . . . from the date of
the occurrence of the violation.” 12 U.S.C. § 2614 (emphasis
added). This non-mandatory language is far more permissive
than several limitations provisions that have been held
amenable to equitable tolling. For example, the limitations
provision held to be non-jurisdictional and tollable in
Henderson, 131 S. Ct. at 1204, stated that a claimant “shall
file . . . within 120 days” (emphasis added). If not all
“mandatory prescriptions, however emphatic, are . . . properly
typed jurisdictional,” Henderson, 131 S. Ct. at 1205
(emphasis added) (internal quotation marks omitted), then the
use of permissive, non-mandatory language such as RESPA’s
“may file” language weighs considerably against a finding
that the limitations period is jurisdictional.

            ii. Statutory placement

    In examining whether or not a rule is jurisdictional, a few
of the Supreme Court’s recent cases have assigned some
significance to whether the rule is “located in a jurisdiction-
granting provision.” Reed Elsevier, 559 U.S. at 166; see also
26     MERRITT V. COUNTRYWIDE FINANCIAL CORP.

Henderson, 131 S. Ct. 1205; Payne v. Peninsula Sch. Dist.,
653 F.3d 863, 870–71 (9th Cir. 2011) (en banc), overruled in
part on other grounds by Albino v. Baca, 747 F.3d 1162 (9th
Cir. 2014). Countrywide primarily relied upon this factor to
support its argument against equitable tolling, citing the D.C.
Circuit’s holding that “the [RESPA] time limitation is a
jurisdictional prerequisite to suit and as such not subject to
equitable tolling.” Hardin v. City Title & Escrow Co.,
797 F.2d 1037, 1038 (D.C. Cir. 1986). To reach its
conclusion, Hardin relied upon the placement of the RESPA
time limitation in “the same sentence” that, in Hardin’s
characterization, “creates federal and state court jurisdiction”
under RESPA, and upon the subtitle of the section,
“Jurisdiction of Courts.” See id. at 1039.

    In light of Supreme Court cases decided since Hardin, we
cannot agree with the D.C. Circuit that the RESPA time
limitation is placed in a sentence that “creates federal and
state court jurisdiction.” It is true that the provision appears
under the heading “Jurisdiction of courts; limitations.” But,
as the Supreme Court has noted in recent years, “jurisdiction”
has “many, too many meanings.” Arbaugh, 546 U.S. at 510.
In particular, use of the word “jurisdiction” does not make a
provision “jurisdiction-granting.” Reed Elsevier so indicated,
rejecting the argument that the “presence of the word
‘jurisdiction’” in a provision renders the entire provision
jurisdictional. 559 U.S. at 163. Moreover, “[a] requirement
we would otherwise classify as nonjurisdictional . . . does not
become jurisdictional simply because it is placed in a section
of a statute that also contains jurisdictional provisions.”
Sebelius, 133 S. Ct. at 825 (citing Gonzalez, 132 S. Ct. at
651–52). “Mere proximity will not turn a rule that speaks in
nonjurisdictional terms into a jurisdictional hurdle.”
Gonzalez, 132 S. Ct. 651.
       MERRITT V. COUNTRYWIDE FINANCIAL CORP.                27

     Here, although the RESPA limitations period appears in
a provision that references the court’s “jurisdiction,” the
section, read as a whole, is not a “jurisdiction-granting
provision.” Reed Elsevier, 559 U.S. at 166 (emphasis added).
The provision’s reference to “United States district court[s]
. . . [and] other court[s] of competent jurisdiction” implies,
instead, that the source of the referenced courts’ “competent
jurisdiction” lies elsewhere. And that is in fact the case with
regard to federal district courts, which have jurisdiction to
hear claims “arising under” RESPA because it is a “law[]
. . .of the United States.” See 28 U.S.C. § 1331. Other than
providing for a limitations period, then, the RESPA provision
at 12 U.S.C. § 2614 simply clarifies that, when determining
in which court of competent jurisdiction they will file their
claim, RESPA litigants have a choice of venue: either “the
district in which the property involved is located,” or, if it
differs, “where the violation is alleged to have occurred.”
12 U.S.C. § 2614.

           iii. Historical treatment

    In some statutory contexts, there is a venerable, consistent
line of Supreme Court cases construing whether a particular
limitations provision is jurisdictional. See, e.g., Bowles,
551 U.S. at 210–13; John R. Sand & Gravel Co. v. United
States, 552 U.S. 130, 137–39 (2008). Here we have no such
historical guidance, as the Supreme Court has not addressed
whether RESPA’s limitations period is jurisdictional, nor has
our court. In the absence of Supreme Court precedents the
case for deference to historical guidance is much weaker here
than in cases such as Bowles, 551 U.S. 205.

    We do, however, have pertinent established law in this
circuit, namely King, 784 F.2d 910; see also Ramadan v.
28      MERRITT V. COUNTRYWIDE FINANCIAL CORP.

Chase Manhattan Corp., 156 F.3d 499, 501–05 (3d Cir.
1998) (following King’s holding as to TILA). King is
precedent in this circuit, and is persuasive authority in this
case.

    King construed TILA’s similarly worded limitations
period, and held it amenable to equitable tolling. The TILA
limitations provision is as follows:

         (e) Jurisdiction of courts; limitations on
         actions; State attorney general enforcement

         Except as provided in the subsequent
         sentence, any action under this section may be
         brought in any United States district court, or
         in any other court of competent jurisdiction,
         within one year from the date of the
         occurrence of the violation . . . .

15 U.S.C. § 1640(e). Like the RESPA limitations period,
then, the parallel TILA provision appears in the same
sentence as a reference to “jurisdiction” and under the
heading “Jurisdiction of courts; limitations on actions.”10

 10
    There is one distinction. The TILA limitations provision, as passed by
Congress, appeared as one subsection in a section headed “Civil liability.”
See Consumer Credit Protection Act, Pub. L. 90-321, § 130(e), 82 Stat.
146, 157 (1968). The subheading “Jurisdiction of courts” was added in the
codification process. In contrast, the RESPA limitations provision, as
passed by Congress, appeared under the heading “Jurisdiction of Courts.”
See Real Estate Settlement Procedures Act of 1974, Pub. L. 93-534, § 16,
88 Stat. 1724, 1731 (1974). We do not ascribe significance to this
distinction for present purposes. Whatever its origin, the heading just
identifies a subject matter; it does not identify the subsection as
jurisdiction-creating.
        MERRITT V. COUNTRYWIDE FINANCIAL CORP.                      29

    King was decided without the benefit of the Supreme
Court’s recent admonitions against “profligate use” of the
term “jurisdiction[al].” Payne, 653 F.3d at 868 (internal
quotation marks omitted); see Arbaugh, 546 U.S. at 510. But
King necessarily relied upon an understanding that the TILA
limitations period was non-jurisdictional; otherwise, King
could not have held the limitations period contained in the
subsection subject to equitable tolling. Reflecting that
understanding of King, the Seventh Circuit, in Lawyers Title
Insurance Corp. v. Dearborn Title Corp., 118 F.3d 1157 (7th
Cir. 1997), relied in part upon King’s reasoning when it
expressly declined to follow the D.C. Circuit’s contrary
holding in Hardin. Lawyers Title held, instead, that the
RESPA limitations period is not jurisdictional and may be
equitably tolled. See Lawyers Title, 118 F.3d at 1166–67.11

      Countrywide argues that Judge Posner’s opinion for the
court in Lawyers Title is not persuasive, because it relies upon
the premise that federal limitations periods “are universally
. . . nonjurisdictional” unless they involve “actions against the
United States.” Id. at 1166 (quoting Cent. States, Se. & Sw.
Areas Pension Fund v. Navco, 3 F.3d 167, 173 (7th Cir.
1993)). The Supreme Court’s more recent equitable tolling
jurisprudence indicates that the line is not quite so bright. For
example, in Bowles, the Court held that “time limits for filing
a notice of appeal are jurisdictional in nature.” 551 U.S. at
206.

  11
     Two other circuits have reserved the question of whether RESPA’s
limitations period may be equitably tolled. See Egerer v. Woodland
Realty, Inc., 556 F.3d 415, 424 n.18 (6th Cir. 2009); Snow v. First Am.
Title Ins. Co., 332 F.3d 356, 361 n.7 (5th Cir. 2003).
30     MERRITT V. COUNTRYWIDE FINANCIAL CORP.

    But Irwin, decided before Lawyers Title, began from a
similar premise — that “time requirements in lawsuits
between private litigants are customarily subject to ‘equitable
tolling.’” Irwin, 498 U.S. at 95. The difference between the
“universally” adverb in Lawyers Title, 118 F.3d at 1166, and
the “customarily” adverb in Irwin, 489 U.S. at 95, appears to
reflect hyperbole in the former, but not a difference in
fundamental concept. In contrast, Hardin applied the sort of
rigidly formalistic jurisdictional analysis that the Supreme
Court’s recent cases have eschewed.

    All of these factors point towards a conclusion that the
RESPA limitations period does not “implicat[e] [the district
court’s adjudicatory] authority,” Reed Elsevier, 559 U.S. at
161, but, instead, is an ordinary “filing deadline,” a
“quintessential claim-processing rule[].” See Sebelius, 133 S.
Ct. at 825. We so conclude.

       b. The presumption of equitable tolling applies

     As the RESPA limitations period is not jurisdictional,
RESPA claims are presumptively amenable to equitable
tolling, see Irwin, 489 U.S. at 95, unless Congress has clearly
indicated otherwise. There is no such indication in the statute.

    Many of the considerations on which we relied as to the
jurisdictional issue, particularly the permissive language used
in the limitations provision, also help to negate any clear
barrier to equitable tolling. In addition, we are guided by the
analysis in King, 784 F.2d 910, which applied an approach
with respect to equitable tolling generally consistent with the
recent cases. King’s logic with regard to the TILA limitation
period applies equally to the parallel RESPA provision.
       MERRITT V. COUNTRYWIDE FINANCIAL CORP.                31

    King began by asking “whether tolling the statute in
certain situations [would] effectuate the congressional
purpose” of the statute, always “our basic inquiry” when
determining whether a limitations period may be equitably
tolled. Id. at 914–15. Because TILA is a broadly remedial
consumer-protection statute, King reasoned, “an inflexible
rule that bars suit one year after consummation [of the loan]”
would be “inconsistent with legislative intent.” Id. at 914.
King also recognized, however, that Congress did not intend
to expose lenders “to a prolonged and unforeseeable
liability.” Id. King therefore struck the balance between
consumer protection and predictable liability by holding that
the TILA limitations period could, “in the appropriate
circumstances,” be equitably tolled, but only “until the
borrower discovers or had reasonable opportunity to discover
the fraud or nondisclosures that form the basis of the TILA
action.” Id. at 915.

    As we have recently recognized, RESPA is, like TILA,
“intended . . . to serve consumer-protection purposes.”
Medrano v. Flagstar Bank, FSB, 704 F.3d 661, 665 (9th Cir.
2012). Consistent with those purposes, we have concluded
that “RESPA’s provisions relating to loan servicing
procedures should be construed liberally to serve the statute’s
remedial purpose.” Id. at 665–66 (internal quotation marks
omitted). By the same token, “tolling the statute [of
limitations] in certain situations [would] effectuate the
congressional purpose” of protecting consumers. King,
784 F.2d at 915. There may be situations in which a
consumer is unable to file suit within the statutory limitations
period precisely because of a real estate service provider’s
obfuscation or failure to disclose.
32     MERRITT V. COUNTRYWIDE FINANCIAL CORP.

    We hold, therefore, that although the limitations period in
12 U.S.C. § 2614 ordinarily runs from the date of the alleged
RESPA violation, “the doctrine of equitable tolling may, in
the appropriate circumstances, suspend the limitations period
until the borrower discovers or had reasonable opportunity to
discover” the violation. King, 784 F.2d at 915. Just as for
TILA claims, district courts may evaluate RESPA claims
case-by-case “to determine if the general rule would be unjust
or frustrate the purpose of the Act and adjust the limitations
period accordingly.” Id.

                             * * *

    The district court dismissed plaintiffs’ RESPA Section 8
claims as time-barred, holding that “the [RESPA] limitations
period begins to run as of the date of closing,” and thereby
assuming that the period could not be equitably tolled. Rather
than “decide ab initio issues that the district court has not had
an opportunity to consider and that present questions of first
impression in our circuit,” Badea, 931 F.2d at 575 n.2, we
decline, for the reasons explained, to affirm the dismissal of
the Merritts’ Section 8 claims on alternate grounds. Instead,
we reach the issue that was the basis for dismissal, failure to
comply with the statutory limitations period. In light of our
holding today regarding equitable tolling, we vacate the
dismissal of the Section 8 claims on limitations grounds and
remand for reconsideration. On remand, the district court may
consider such evidence as it deems appropriate to determine
on what date the Merritts discovered or had reasonable
opportunity to discover the alleged Section 8 violations and
whether they filed their complaint within a year of that date.
If the district court determines that the plaintiffs’ RESPA
Section 8 claims are not time-barred, it should permit
substantive amendment of the claims upon an appropriate
           MERRITT V. COUNTRYWIDE FINANCIAL CORP.                        33

request and continue with further proceedings consistent with
this opinion. See Lucas, 66 F.3d at 248 (“Unless it is
absolutely clear that no amendment can cure the defect . . . a
pro se litigant is entitled to notice of the complaint’s
deficiencies and an opportunity to amend.”).

                              Conclusion

    We reverse the district court’s dismissal of plaintiffs’
TILA rescission claim and remand for further proceedings on
that claim. As to plaintiffs’ RESPA Section 8 claims, we
vacate the dismissal and remand to the district court for
further consideration in accordance with this opinion.

  REVERSED IN PART, VACATED IN PART, AND
REMANDED FOR FURTHER PROCEEDINGS.

KLEINFELD, Senior Circuit Judge, dissenting:

       I respectfully dissent.

    We review a 12(b)(6) dismissal de novo,1 and can affirm
on any ground, regardless of whether the district court relied
on it.2

  1
      Edwards v. Marin Park, Inc., 356 F.3d 1058, 1061 (9th Cir. 2004).
 2
    Janicki Logging Co. v. Mateer, 42 F.3d 561, 564 (9th Cir. 1994). The
majority cites dicta in Gillibeau v. City of Richmond, 417 F.2d 426, 431
(9th Cir. 1969), a 1969 case, for the proposition that we should not, in the
first instance, affirm a dismissal on Rule 8 grounds where the district court
did not act upon the Rule 8 motions. On the other hand, we said, possibly
in dicta, but possibly in holding, in a 1988 case, Sparling v. Hoffman
34         MERRITT V. COUNTRYWIDE FINANCIAL CORP.

    This complaint violated Federal Rule of Civil Procedure
8(a)(2). The Rule requires a “short and plain statement of the
claim showing that the pleader is entitled to relief.”3 We are
indulgent with pro se complaints, but even for them, there are
limits.

    The Merritt complaint is neither “short” nor “plain.” It is
68 pages long, 398 paragraphs. Nor were they deprived of
opportunities to clarify what their claims were. Though they
call the complaint their “Second Amended Complaint,” the
truth is that it is their fifth version. They got leave to file this
version of their complaint by filing a motion explaining that
the amendments would be “clarifications,” along with a
“stipulation” to which Countrywide did not stipulate. The
leave to amend they thus obtained mooted out Countrywide’s
pending motion to dismiss, so it was not adjudicated. The
plaintiffs then filed their amended complaint which was
materially different from the one submitted to the district
court with their motion for leave to amend. Far from
“clarifying” their previous complaints, this new complaint

Construction Co., 864 F.2d 635, 640 (9th Cir. 1988), that even if the
pleading did state a claim upon which relief could be granted, “the
complaint would be deficient under Rule 8(a) of the Federal Rules of Civil
Procedure which requires ‘a short and plain statement of the claim
showing that the pleader is entitled to relief.’” In the case before us, the
court noted that the Merritts’ second amended complaint was “mostly
unintelligible.” The district court further noted that the Merritts’
allegations and claims purported to be “made, at least in part,
‘hypothetically.’” It took note of the defendant’s motion to dismiss under
Rule 8, but treated it as moot, because of the dismissal for failure to state
a claim under Rule 12. I think we should affirm on Rule 8 grounds, and
may, under Sparling.
  3
      Fed. R. Civ. P. 8(a)(2).
        MERRITT V. COUNTRYWIDE FINANCIAL CORP.                       35

added an additional 69 paragraphs, 16 pages, and yet another
cause of action.

    We have articulated five factors for evaluating whether a
plaintiff should be given leave to amend: “(1) bad faith,
(2) undue delay, (3) prejudice to the opposing party,
(4) futility of amendment; and (5) whether plaintiff has
previously amended his complaint.”4 We have held that the
“district court’s discretion to deny leave to amend is
particularly broad where plaintiff has previously amended the
complaint.”5 Here, the Merritts have submitted five different
complaints to the district court. Further amendment would
unduly prejudice the defendants. The defendants have
responded to two of the Merritts’ five prolix,
incomprehensible complaints, doubtless at great expense for
their own lawyers. Defendants have filed numerous motions
addressing those complaints, for violation of Rule 8,
misrepresentations, failure to state claims upon which relief
may be granted, and lack of appropriate service. That is a lot
of wasted money. Plaintiffs imposed this unfair prejudice on
defendants by their vague prolixity and multiple filings.

    The Merritts’ most recent amendments made their
complaint even more prolix, and less “short and plain.”
Countrywide’s combined motion to strike and dismiss placed
the Merritts on notice that their complaint failed to comply
with Rule 8, but they made no attempt to bring their
complaint into compliance with the rules. Because of this

  4
   Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990)
(emphasis added).
  5
    Id. (quoting Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149,
1160 (9th Cir. 1989)).
36       MERRITT V. COUNTRYWIDE FINANCIAL CORP.

history, dismissal with prejudice was justified. Although
dismissal with prejudice for failure to comply with the rules
requires consideration of less drastic alternatives,6 here there
were none, as it did not appear that plaintiffs were prepared,
even after five tries, to make a short and plain statement of
claims for which they were entitled to relief. Their misleading
stipulation had already burdened Countrywide with the need
to brief a second motion to dismiss. Allowing the Merritts a
sixth attempt to plainly state their claims would be too
prejudicial to the defendants to be a fair alternative under
these circumstances.

     The majority opinion does a heroic job of stating claims
clearly on behalf of the Merritts. But plaintiffs did not state
them. It is not fair to defendants to perform these legal
services for plaintiffs, even pro se plaintiffs, where the
plaintiffs do not evidently have good claims. “Prolix,
confusing complaints such as the ones plaintiffs filed in this
case impose unfair burdens on litigants and judges. As a
practical matter, the judge and opposing counsel, in order to
perform their responsibilities, cannot use a complaint such as
the one plaintiffs filed, and must prepare outlines to
determine who is being sued for what. Defendants are then
put at risk that their outline differs from the judge’s, that
plaintiffs will surprise them with something new at trial
which they reasonably did not understand to be in the case at
all, and that res judicata effects of settlement or judgment will
be different from what they reasonably expected. [T]he rights

 6
   See, e.g., Nevijel v. N. Coast Life Ins. Co., 651 F.2d 671, 674 (9th Cir.
1981).
           MERRITT V. COUNTRYWIDE FINANCIAL CORP.                          37

of the defendants to be free from costly and harassing
litigation must be considered.”7

    If plaintiffs had what looked like a strong claim that ought
to be adjudicated on the merits, judicial creation of a
complaint for them might not be so unfairly prejudicial.8 But
they do not. What they appear to be saying in their 398-
paragraph complaint is that they bought a $729,000 house,
and borrowed $739,000 for it, because the seller lowballed
them into thinking they were going to get the house for
$719,000. They seem to be saying that Countrywide’s agent
persuaded them to lie, which they did, in their loan
application, such as by saying that Mrs. Merritt was
employed when she was actually receiving disability
payments (later terminated). And they seem to be saying that
because they were minorities they were offered a more ample
adjustable rate mortgage instead of a less ample fixed rate
mortgage loan than they would otherwise be entitled to.

    Were we limited to 12(b)(6) dismissal, we would have to
assume for purposes of decision that the plausible factual
statements (but not the legal conclusions and editorializing
rhetoric) in the complaint were true.9 We are not so limited

  7
    McHenry v. Renne, 84 F.3d 1172, 1179–80 (9th Cir. 1996) (internal
quotation marks omitted) (alteration in original).
 8
   See, e.g., Von Poppenheim v. Portland Boxing & Wrestling Comm’n,
442 F.2d 1047, 1052 n.4 (9th Cir. 1971) (“Since harshness is a key
consideration in the district judge’s exercise of discretion, it is appropriate
that he consider the strength of a plaintiff’s case if such information is
available to him before determining whether dismissal with prejudice is
appropriate.”).
  9
      Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012).
38      MERRITT V. COUNTRYWIDE FINANCIAL CORP.

under Rule 8 analysis, which I suggest ought to be applied.
Under Rule 12 analysis, some of the claims are plausible at
least in part. Obviously, if Countrywide did not properly
provide the loan papers to the Merritts, a claim if timely
could be made. Tender of the full amount received is not in
all circumstances a sine qua non for a pleading claiming
rescission, though some sort of equitable judgment requiring
tender must be made if rescission is granted, to assure that the
plaintiff does not get to keep what it bought and also get all
the money back.10

    It is hard to say whether plaintiffs even seek a rescission
remedy that could be allowed. The prayer in their complaint
seeks a return of all the money they have “invested in their
property,” plus compensatory damages, plus $2,000,000 in
punitive damages, plus a “prime loan at current market rates”
(far lower than the housing bubble interest rates that prevailed
when they bought their $729,000 house), or for them to be
able to walk away with the reimbursements and damages.
Their appellate brief is more modest, but was not before the
district court.

    Their pleading seems to say that they have been living in
a $729,000 house for what is now almost six years without
paying anything toward the price. If they got past their Rule
8 problems, and their Rule 12 problems, their equities appear
to be weak. The Merritts have had five chances to state this
claim. Prejudice and futility counsel against giving them a
sixth try. We ought to let the dismissal with prejudice stand.

 10
    See Yamamoto v. Bank of New York, 329 F.3d 1167, 1171, 1173 (9th
Cir. 2003).