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Rinegard-Guirma v. Bank of America, N.A.

United States District Court, Ninth Circuit

November 1, 2013



PAUL PAPAK, Magistrate Judge.

Plaintiff Natache D. Rinegard-Guirma filed this action against defendant Bank of America, NA ("Bank of America") alleging a violation of the Truth in Lending Act ("TILA"). Now before the court are Bank of America's motion to dismiss (#186) and motion for leave to file a motion to designate plaintiff as a vexatious litigant ("motion for leave") (#212). As discussed below, the motion to dismiss and motion for leave are granted.


The parties are familiar with the facts of this case, and I need not repeat them in detail. At issue in the present motion is plaintiff's allegation that Litton Loan Servicing LP ("Litton"), the servicer for her Joan, failed to properly respond to her June 10, 2010 request for the name, address, and telephone number of the owner of her Joan. Fifth Amend. Compl., #179, ¶¶ 47-48. Plaintiff alleges that Litton was the agent of Bank of America when it failed to properly respond and that Bank of America is liable for Litton's alleged violation of TILA. Id. ¶¶ 50, 56.

On October 10, 2012, Bank of America filed the motion to dismiss, arguing that plaintiff's claim is "precluded by a recent opinion of the Ninth Circuit Court of Appeals"- Gale v. First Franklin Loan Services, 701 F.3d 1240 (9th Cir. 2012). Br. in Support of Motion to Dismiss, #187, at 2. On November 16, 2012, plaintiff filed a resistance (#196). On November 29, 2012, Bank of America filed a reply (#197). On December 20, 2012, the court stayed the motion to dismiss while the parties engaged in settlement negotiations. Minutes of Proceedings, #200. On September 3, 2013, Bank of America filed a motion, alerting the court that settlement negotiations were unsuccessful, requesting that the court rule on the pending motion to dismiss, and further requesting that, in the event the court grants the motion to dismiss, the court permit Bank of America to file a motion to designate plaintiff as a vexatious litigant before the court directs the clerk to enter judgment. On that same date, plaintiff filed a status report, confirming that the parties' settlement negotiations were unproductive and joining Bank of America's request that the court lift the stay. On September 6, 2013, the court lifted the stay. The motions are fully submitted and ready for decision.


To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, a complaint must contain factual allegations sufficient to "raise a right to relief above the speculative level." Bell All. Corp. v. Twombly, 550 U.S. 544, 555 (2007). To raise a right to relief above the speculative level, "[t]he pleading must contain something more... than... a statement of facts that merely creates a suspicion [of] a legally cognizable right of action.'" Id. (alterations in original) (citation omitted). Instead, "for a complaint to survive a motion to dismiss, the non-conclusory factual content, ' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009), citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In ruling on a Rule 12(b)(6) motion to dismiss, a court must take the complaint's allegations of material fact as true and construe them in the light most favorable to the nonmoving party. Keams v. Tempe Tech. Inst., Inc., 39 F.3d 222, 224 (9th Cir. 1994). Moreover, the "court may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice." Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007).


In support of its motion to dismiss, Bank of America argues that the court must dismiss plaintiff's TILA claim for two reasons: (1) under the Ninth Circuit's decision in Gale, 15 U.S.C. § 1641 (f)(2) only imposes a duty to respond on servicers who are also assignees of the loan, not on servicers like Litton who are not assignees; and (2) since Litton did not violate§ 1641(f)(2), Bank of America cannot be held vicariously liable for Litton's conduct under 15 U.S.C. § 1640(a). Plaintiff's three-page response brief argues that Gale is distinguishable and, in any case, policy concerns warrant holding Bank of America liable for Litton's failure to respond fully and accurately to plaintiff's inquiry.

While the Ninth Circuit in Gale provided the construction of 15 U.S.C. § 1641(f)(2) advanced here by Bank of America, I am concerned that Gale's ultimate conclusion appears to undermine the purposes of TILA as a consumer-protection statute, negate part of Congress's 2009 amendments to TILA that were intended to provide a private right of action against lenders for all servicers' failure to respond to borrowers' inquiries about the owners of their loans, and create a gaping loophole allowing lenders to hide their identities from consumers. However, since Gale is currently the law of this circuit, this court must apply it and dismiss plaintiff's claim.

I do, however, briefly review the court's prior discussion of this TILA issue. In the April 2, 2012 opinion and order, the court addressed at length Bank of America's arguments that, because it was not a loan servicer, it had no obligation under § 1641 (f)(2) and that it could not be held vicariously liable for a servicer's failure to adhere to § 1641 (f)(2).[1] Opinion and Order, #159, at 15-21. This court implicitly accepted that Bank of America was not a servicer but disagreed that Bank of America could not be held vicariously liable for its servicer's violation of § 1641 (f)(2). The court explained:

The most articulate decision supporting [plaintiff's position that vicarious liability exists] is Davis v. Greenpoint Mortg. Funding, Inc., No. 1:09-CV-2719-CC-LTW, 2011 WL 7070221, (N.D.Ga. Mar. 1, 2011), adopted in part, rejected in part on other grounds, 2011 WL 7070222 (N.D.Ga. Sept. 19, 2011). There, the court observed that Congress amended TILA in 2009 to create a private right of action against creditors for a violation of Section 1641(f)(2). See 15 U.S.C. § 1640(a) (establishing liability of "any creditor who fails to comply with any requirement imposed under this part, including any requirement under... [Section 1641 (f) or 1641(g)]"). This amendment was motivated both by Congress' general desire to provide a private right of action enforcing § 1641 (f)(2) to "protect homeowners from harms associated with nondisclosures" and to allay concerns raised by an emblematic TILA case where a servicer's failure to reveal the identity of the current holder of a borrower's loan prevented the borrower from bringing a timely TILA rescission claim. Davis, 2011 WL 7070221, at *3. Because TILA does not contain any provisions allowing a consumer to bring a civil action against a servicer for a violation of Section 1641(f)(2), the Davis court observed "the private right of action that Section 1640(a) creates [against a creditor] would be meaningless, unless agency principles permit a creditor to be held liable for Section 1641 (f)(2) violations committed by its servicer." Id. at *4. Thus, "to avoid rendering Section 1640(a) superfluous, " the Davis court concluded that "agency principles apply, and creditors may be held vicariously liable for the Section 1641(f)(2) violations of their servicers." Id. (citing a similar holding in Consumer Solutions Reo, LLC v. Hillery, 2010 U.S. Dist. LEXIS 37857, at *9-17 (N.D. Cal. Mar. 24, 2010) where the district court applied agency principles to § 1641(f)(2), extrapolating from the decisions of other courts that have assumed TILA incorporated common law agency theory to effectuate its purpose as a remedial consumer protection statute).
On the other hand, the best example of a decision endorsing Bank of America's position is Holcomb v. Fed Home Loan Mortg. Corp., 2011 WL 5080324, at *6-7 (S.D. Fla. Oct. 26, 2011), which criticized the approach taken by Consumer Solutions because it conflicted with TILA's imposition of the separate duty on new creditor assignees of a loan to notify borrowers in writing of the loan's transfer. See 15 U.S.C. § 1641(g). The Holcomb court acknowledged the "disastrous effects" of a servicer's failure to disclose on a borrower's TILA rights and the "alarming" difficulties in enforcing§ 1641(f)(2) without accompanying vicarious liability of creditors. Id. Nevertheless, the court concluded that it "cannot say that Congress intended to make creditors and assignees liable under§ 1641(f)(2)" and expressed concerns that expanding liability to creditors would encourage borrowers to make "improperly motivated requests for information" and thereby "convert TILA from a shield protecting consumers into a sword allowing them to strike lenders who have followed the statute and its regulations as closely as logic permits." Id. (internal quotations and citations omitted).
I find the Davis court's approach more persuasive. First, Holcomb is suspect because it completely ignores the language and effect of the 2009 TILA amendments, which bear directly on a creditor's liability under Section 1641 (f). [Moreover], although only a handful of courts have addressed this issue, the trend is towards recognizing creditor liability for servicer's violations of § 1641 (f). Just a few weeks ago, a soon-to-be-published Florida district court opinion grappling with this precise topic extensively examined both Davis and Holcomb, eventually following the approach taken by. Davis. Khan v. Bank of N.Y. Mellon, No. 12-60128-CIV-DIMITROULEAS, ___ F.Supp.2d ___, 2012 WL 1003509, at *2-6 (S.D. Fla. Mar. 19, 2012) ("the Court is persuaded that Congress meant to extend agency principles to creditors or make creditors liable under § 1641 (f)(2) by intentionally inserting the private right of action for violations of § 1641(f)(2) into § 1640(a), a remedy section that provides for civil liability against creditors.").[2]) Although the Florida court acknowledged the difficulties of the statutory language and the dearth of interpretive authority, it emphasized the ...

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